Everest Group's Q3 2025: Contradictions Emerge on Insurance Ratios, Reinsurance Pricing, and Capital Returns

Date of Call: October 28, 2025

Financials Results

• Revenue: $4.4B gross written premium, down ~1% YOY (1.2% decrease in constant dollars excluding prior-year reinstatement premiums)
• Operating Margin: $316M operating income, compared with $630M prior year (difference largely attributable to reserve strengthening/ADC)

Guidance:

• Established $1.2B ADC covering North America insurance accident years 2024 and prior with $200M Everest co-participation; expects ~$122M premium paid on closing (Q4).
• Expect pretax nonoperating charge of $250M–$350M recognized over 2025–2026 related to renewal rights transfer.
• ADC and reserve transfers will lower net investment income by ~ $60M per year for several years.
• Expect capital to be released over time with intent to resume meaningful share repurchases; continue disciplined underwriting into 1/1/26 renewals.

Business Commentary:

• Strategic Business Focus and Restructuring:
• Everest Group, Ltd. announced the strengthening of its core Reinsurance business and a shift to Wholesale & Specialty Insurance operations.
• The company is exiting the global retail insurance sector and has established a comprehensive adverse development cover for its North American insurance division.

• The strategic focus aims to allocate capital more effectively towards businesses with clear competitive advantage and strong economic performance.

• Insurance Reserve Management:

• Everest increased its casualty reserves by $478 million net, or 12.4 points on the combined ratio, reflecting a conservative approach to loss picks.

• The reserve strengthening was part of a broader plan to address historical casualty reserve issues and ensure future stability.

• Reinsurance Business Performance:

• Reinsurance gross written premium for the quarter was $3.2 billion, down 2% year-over-year, with a combined ratio improvement to 87%.

• The improvement was driven by lower catastrophe losses and favorable prior year development, reflecting disciplined cycle management and portfolio mix adjustments.

• Capital Management and Shareholder Returns:

• Everest announced plans for meaningful share repurchases, viewing capital repatriation and share buybacks as attractive opportunities due to the company's strong balance sheet and lower growth cycle environment.
• The company expects capital liberation from the transaction with AIG and the ADC to further enhance shareholder returns in the future.

Sentiment Analysis:

Overall Tone: Positive

• Management framed actions as positioning Everest "as a more agile and profitable company" and said core engines (Reinsurance; Wholesale & Specialty) are "performing well." CEO: "moving to a position of significant excess capital" and CFO: share repurchases viewed "very attractively."

Q&A:

• Question from Meyer Shields (Keefe, Bruyette, & Woods): What is the catastrophe load for the specialty (retained) insurance business for 2025/2026?
  Response: Mark: Cat load for the specialty business is de minimis—very modest and low relative to the overall insurance division.

• Question from Meyer Shields (Keefe, Bruyette, & Woods): Any estimate of capital liberation from transferring $2B of retail gross written premium (renewal rights transfer to AIG)?
  Response: Mark: Capital release will be substantial but is a timing story—benefits will become more visible in back half of 2026 as runoff and reserve runoff occur.

• Question from Joshua Shanker (BofA Securities): How should investors frame appetite for returning capital/share repurchases over 1–2 years given stock trading below book?
  Response: Mark: Share buybacks are attractive; expect at least the H1 activity level as a floor and anticipate transactions will unlock additional capital for repurchases over time.

• Question from Joshua Shanker (BofA Securities): When did the company conclude Everest was not the appropriate owner for much of retail risk and should we worry about 2025 reserves from recent underwriting?
  Response: Jim: Re-underwriting (1‑Renewal Strategy) completed July 2025; ~80% of 2025 adverse development came from policies eliminated during remediation, supporting decision and reducing concern about go‑forward '25 reserves.

• Question from Charles Peters (Raymond James): Why are you confident casualty reserves in the Reinsurance book will hold and not spill over like Insurance casualty?
  Response: Jim: Reinsurance and Insurance are materially different portfolios—reinsurance is a top‑quartile book with disciplined underwriting, so there's no basis to expect similar poor performance.

• Question from Charles Peters (Raymond James): How are you thinking about property reinsurance pricing and growth into 2026 given a potentially light year and rising PMLs?
  Response: Jim: Market remains favorable despite potential ~10% price softening at renewals; still attractive to write selectively and will cut back where returns aren't adequate.

• Question from Taylor Scott (Barclays): How was the $1.2B ADC size determined (e.g., tail protection / standard deviations)?
  Response: Jim/Mark: ADC was sized as meaningful reserve margin over a $5.4B subject pool to create finality; viewed as broad/strong protection rather than targeting a specific percentile on a curve.

• Question from Taylor Scott (Barclays): For the retained Insurance (Wholesale & Specialty), is the implied combined ratio (~95%) already reflecting conservatism or should additional conservatism be expected?
  Response: Jim: Expect conservatism to remain; a conservative expectation is the lower half of the 90s combined ratio and mix management (less U.S. casualty exposure) will influence results.

• Question from Andrew Andersen (Jefferies): Did you complete reserve studies across segments this quarter and what drove movement in casualty reinsurance?
  Response: Mark: Reserve studies for Reinsurance are complete (only immaterial exceptions); casualty development subsided – minor items versus last year and overall trends are stabilizing.

• Question from Andrew Andersen (Jefferies): What is your view on casualty reinsurance pricing and go‑forward growth?
  Response: Jim: Participation mainly via quota share—rates remain favorable versus trend, underwriting quality among clients is intact, and growth will be disciplined with attention to ceding commission alignment.

• Question from Brian Meredith (UBS): You mentioned diversification—what do you mean and will you pursue it rather than stick with Reinsurance and Wholesale & Specialty?
  Response: Jim: Always evaluating opportunities but only where capital is remunerated at acceptable risk, with clear competitive advantage; primary focus remains scaling Reinsurance and Wholesale & Specialty (including Asia and specialties).

• Question from Brian Meredith (UBS): How did reinsurers arrive at the ADC attachment and why no loss corridor?
  Response: Jim: Collaborative, rigorous process with Longtail Re and fronting rated carriers; strengthening carried reserves enabled attachment at the chosen ultimate without a loss corridor to provide certainty.

• Question from David Motemaden (Evercore ISI): Can you elaborate on the casualty reinsurance reserve development this quarter and trends observed?
  Response: Mark: Development has largely subsided; a few older years impacted by select cedents but overall adequacy and stabilizing trends give confidence in current loss picks.

• Question from David Motemaden (Evercore ISI): How large was the gross change on the Casualty Re side?
  Response: Mark: Very small—only a few percentage points on the base.

• Question from Ryan Tunis (Cantor Fitzgerald): How should we think about ROE trajectory given lost premium, lower investment income, cost reductions and capital actions?
  Response: Jim: Expect mid‑teens ROE over the cycle; near‑term '26 may be slightly below but multiple levers (including capital deployment/buybacks and portfolio actions) should support attractive ROE longer term.

• Question from Ryan Tunis (Cantor Fitzgerald): Why a renewal‑rights transfer to AIG rather than an outright sale?
  Response: Jim: Renewal rights transaction was the most efficient way to effect strategic focus, retain key legal entities supporting retained businesses, and transact quickly with the right partner while addressing the back book via ADC.

• Question from Hristian Getsov (Wells Fargo): Does the exit of retail change plans to increase international primary exposure, and will growth be organic or via M&A?
  Response: Jim: Divestment will blunt short‑term international retail growth by design; focus is on organic, capital‑efficient growth in Wholesale & Specialty, with selective bolt‑on M&A possible if it meets strict criteria.

• Question from Hristian Getsov (Wells Fargo): Pricing outlook for 1/1 renewals and appetite to pursue new cat business now that remediation is done?
  Response: Jim: Consensus is modest price reductions (~10%); business largely still well priced—Everest will be selective and capital availability is not the primary constraint on cat appetite.

• Question from Tracy Benguigui (Wolfe Research): Was the $539M casualty reserve strengthening effectively a loss corridor to enable the ADC, and would Longtail have attached at a lower level?
  Response: Jim: Won't speculate on Longtail's alternatives; Everest applied an actuarial process to set ultimates and the strengthened carried reserves allowed attachment at that ultimate, providing finality.

• Question from Tracy Benguigui (Wolfe Research): Why transact with Longtail Re (non‑rated) and what is the fronting structure?
  Response: Jim/Mark: Process run by Gallagher Re was comprehensive; deal uses two rated fronting carriers (State National and MS Transverse) so Everest does not take Longtail counterparty credit risk directly—Longtail sits behind with collateral arrangements.

Contradiction Point 1

Insurance Segment Combined Ratio and Loss Picks

It highlights differing perspectives on the level of conservatism applied to loss picks in the insurance segment, which could impact financial performance expectations and risk management strategies.

Is there additional conservatism that should be applied to the 95% combined ratio for the specialty business in the insurance segment, given the current conservatism in loss picks? - Meyer Shields (Keefe, Bruyette, & Woods, Research Division)

2025Q3: The 95% combined ratio is a conservative estimate, reflecting the need for prudence in loss picks, especially with U.S. casualty exposure. - Mark Kociancic(CFO)

Will the 6-point increase in the underlying insurance loss ratio persist given the anticipated shift to international and shorter-tail lines? - Andrew E. Andersen (Jefferies LLC)

2025Q2: The risk margin is necessary due to loss trend uncertainties. - Mark Kociancic(CFO)

Contradiction Point 2

Casualty Reinsurance Pricing Environment and Growth

It involves differing views on the pricing environment and growth prospects for casualty reinsurance, which are crucial for understanding the company's risk appetite and revenue generation strategy.

What is the current pricing environment in casualty reinsurance, and what is your outlook for growth? - Andrew Andersen (Jefferies LLC, Research Division)

2025Q3: Casualty reinsurance pricing remains stable, with rates above trend. - James Williamson(CEO)

Why is the Insurance segment, particularly larger accounts, experiencing increased pricing pressure? - Charles Gregory Peters (Raymond James & Associates, Inc.)

2025Q2: The property market remains competitive due to strong prior pricing. - James Williamson(CEO)

Contradiction Point 3

Capital Management and Shareholder Returns

It involves the company's approach to capital management and shareholder returns, which are critical for investor expectations and strategic decision-making.

Does management plan to commit to share buybacks over the next 1-2 years, and how should we assess the appetite for returning capital to shareholders? - Joshua Shanker (BofA Securities, Research Division)

2025Q3: Share buybacks are viewed attractively, especially considering the stock's trading discount to book value. The company plans ongoing buybacks, with a floor set by past buyback trends, and expectations of capital releases from the transaction will enhance the ability to repurchase shares. - Mark Kociancic(CFO)

How should we assess your capital allocation between growth and repurchases? - Alex Scott (Barclays)

2025Q1: We have capacity for both growth and share buybacks. We're comfortable with the current buyback amount of $200 million and anticipate continuing meaningful buybacks throughout 2025. - Mark Kociancic(CFO)

Contradiction Point 4

Insurance Segment Strategy and Performance

It involves the company's strategy and performance in the insurance segment, which is crucial for understanding the company's operational focus and financial results.

Regarding the insurance segment, is additional conservatism needed on top of the 95% combined ratio for the specialty business, considering the existing conservatism in loss picks? - Meyer Shields (Keefe, Bruyette, & Woods, Research Division)

2025Q3: The need for conservatism in loss picks, especially in U.S. casualty exposure, is managed carefully to align with the portfolio mix, and will affect the insurance portfolio positively. - Mark Kociancic(CFO)

How do you reconcile moderate cat pricing pressure with your growth goals, particularly in the excess of loss market? - Gregory Peters (Raymond James & Associates, Inc., Research Division)

2025Q1: Our strategy is to continue deploying capacity to best clients. Property cat in reinsurance is still very attractive, with expected returns sustaining our willingness to deploy capital. - James Williamson(CEO, President & Director)

Contradiction Point 5

Casualty Insurance Portfolio Management

It involves the company's approach to managing its casualty insurance portfolio, which affects reserve actions and loss picks, impacting financial performance and risk management.

Given current loss pick conservatism, is additional conservatism needed on top of the 95% combined ratio for the specialty insurance business? - Meyer Shields (Keefe, Bruyette, & Woods, Research Division)

2025Q3: The 95% combined ratio is a conservative estimate, reflecting the need for prudence in loss picks, especially with U.S. casualty exposure. - Mark Kociancic(CFO)

How will business mix changes affect the Insurance segment's loss ratio progress? - Meyer Shields (Keefe, Bruyette, & Woods)

2024Q4: Prudence in reserve actions and loss picks will continue in 2025. Business mix is shifting, positively impacting total loss ratio. The attritional loss ratio for insurance takes into account strengthening, with a focus on underwriting discipline and rate adequacy. - Jim Williamson(CEO)