Everest adds to reserves, ringfences liabilities and shuts primary commercial unit
Everest Group has taken another significant reserve hit on its primary casualty portfolio and will exit its primary retail commercial insurance business, drawing a line under a decade-long diversification effort into the segment.
Everest wrote yet another $478 million in net reserve boosters in Q3, adding 12.4 ratio points to the group combined ratio to secure a Q3 underwriting loss. Primary insurance was at an eye-opening 138.1% for the quarter.
Reserves included $361 million in US casualty “driven by elevated loss experience in excess casualty and US liability,” focused on 2022 to 2024, a year in which the restructuring of casualty writing was already said to have been advanced.
The decade-long foray into primary commercial, highlighted by a 2023 rebranding from Everest Re to Everest Group, is over.
“The go-forward Everest is a more focused, higher-return enterprise, anchored in reinsurance and wholesale & specialty insurance,” CEO Jim Williamson (pictured) said in the Q3 earnings statement.
Everest is selling the renewal rights to its full retail commercial primary business and backstopping the remainder of its book.
AIG will purchase renewal rights on an estimated $2 billion in renewal premium from Everest’s US, UK, European, and APAC commercial retail insurance businesses. The transition should begin as soon as Q4.
Everest did not say explicitly what happens to the staff it had on hand to write and renew that book, but did admit a $250 to $350 million in likely restructuring charges to be recognised starting in 2025 and running into 2026.
The existing book gets backstopped by $1.2 billion in gross limit of adverse development cover against the North American exposures, thanks to Stone Ridge's Longtail Re. The $1.2 billion cover runs in two layers above the $5.4 billion in reserves already in place, with a co-participation at both layers for Everest.
It is not a sudden turn of events and Everest is no stranger to massive reserving. It had written a heady $2 billion in gross reserves against casualty to close the 2024 accounts. Board room departures, including then CEO Juan Andrade, roughly coincided with the news.
In the third quarter just completed, Everest Group ended up shrinking on the top line, where casualty remains broadly an anathema. Then Everest watched all trace of its low-cat quarter and reasonable attritional losses wiped away by the latest mass of reserves.
The top line shrinkage, perhaps counter-intuitively, was traced to the reinsurance segment. Gross written premiums of $3.2 billion were down 1.7% year on year, balancing a 10.2% increase in property cat excess of loss (XOL) and a 24.3% increase in non-cat property XOL against a 16.3% decrease in casualty pro-rata and a 10.2% decrease in casualty XOL, all adjusted for reinstatement premiums.
Reinsurance margins improved on the drop-off in cat load to 1.6 ratio points in Q3, 2025 from 9.1 points in the prior year period. That neatly swept a three point deterioration in attritional under the rug, leaving the segment combined ratio at a very reasonable 86.4%. The pre-tax underwriting income tally for reinsurance came in at $376 million.
The primary segment, where wholesale and specialty will live on, remains the money-loser with the commercial business still in the tally. The combined ratio rose to 138.1%, a 41.2 point rise on an already-tight prior year period. The reserving gave 38.5 of those added ratio points.
But gross written premiums in the segment rose, up 2.7% on a comparable basis (constant dollar basis and excluding reinstatement premiums), to approximately $1.1 billion.
Everest claimed double-digit growth in specialty lines and accident and health, offset by reductions in “certain casualty lines” as part of the prior restructuring goal to clean house within a single set of policy renewals.
“We continued to strategically shape the portfolio,” management said. “We executed on our strategy to improve the business mix and portfolio quality of our North American business, while our international business continued its strong growth trajectory.”
Net investment income of $540 million removed the red ink after the $130 million group underwriting loss and, after tax and other deductibles, left Everest with $255 million in Q3 net profits, roughly half of the prior year period’s take.
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