Everest records record result as reinsurance jumps
Everest Group produced record annual results as the Bermuda-based re/insurer recorded a 62% increase in net income in the fourth quarter.
The result was driven by strong reinsurance results as the reinsurance underwriting profit rose 92% to $556 million.
Gross written premium in reinsurance grew 21.9% on a constant dollar basis and excluding reinstatement premiums to nearly $2.89 billion.
Growth was said to be “broad-based across geographies and lines,” including 39.2% growth in property pro-rata, 23.3% growth in property catastrophe XoL, and 45.2% growth in non-cat property XoL after adjustment for reinstatement premiums.
“Pricing increases and a flight to quality continue globally,” management said. Q4 pricing momentum remained “robust,” management said, citing cat pricing up over 45% amid improved terms & conditions.
Gross premiums in primary insurance grew 11.6% to $1.4 billion in constant dollars, with management crediting “a diversified mix of property and specialty lines,” partially offset by lower written premiums in monoline workers' compensation and financial lines.
Further down the P&L, net investment income nearly doubled on what management considered strong fixed income and alternative investment returns and the group preliminarily recognised a $578 million tax benefit from realized deferred taxes accrued following changes in the Bermuda tax law.
By the bottom line, net income rose 62% year on year to $804 million.
“Everest's strong fourth quarter performance capped off an exceptional 2023, delivering record annual results in underwriting income, net investment income, operating income, net income, and cash flow from operations. We executed on our strategic objectives, while delivering an operating ROE of over 23% and a total shareholder return of over 26% for the full year," said Juan C. Andrade, Everest President and CEO.
"2023 was the most profitable year in our history. The Everest of today is a stronger and more sophisticated company. We are delivering leading financial returns and we are on track to achieve the targets we set out at our most recent Investor Day.
“The strength and flexibility of our business was apparent in the fourth quarter as we continued to generate leading returns and further solidified our balance sheet. Everest has entered 2024 stronger and better positioned to take advantage of market opportunities in both franchises. This is evidenced by another well-executed and outstanding January 1 reinsurance renewal and improved primary pricing, generating excellent outcomes for our global portfolio.
“Looking ahead, we remain focused on achieving our strategic plan goals, with significant momentum across both businesses, and an exceptional team driving even greater value for our shareholders."
However, Everest recorded a 33.4% decline in fourth quarter underwriting profits, chiefly the result of $392 million in new reserves against primary insurance casualty lines from the much-maligned accidents years of 2016-2019.
Management attributed that negative prior year development to “our proactive approach to casualty line reserves, which are impacted by well-defined social inflation factors, focused on accident years 2016 to 2019.”
Those added reserves, rendering a 40.8% unfavourable PYD ratio in the quarter, pushed the primary insurance segment to a $311 million underwriting loss. Other loss and cost ratios were largely flat against the prior year period.
Everest moved to offset those losses with $397 million in reserve releases in its larger segment of reinsurance, driven by “a combination of well-seasoned mortgage and short-tail lines.”
Everest also recorded a $578 million deferred tax asset due to the introduction of the Bermuda Corporate income Tax Act, which was passed last year and comes into effect in 2025.
The company said: “On December 27, 2023, the Government of Bermuda enacted the Corporate Income Tax Act 2023, which will apply a 15% corporate income tax to certain Bermuda businesses in fiscal years beginning on or after January 1, 2025.
“The act includes a provision referred to as the economic transition adjustment, which is intended to provide a fair and equitable transition into the tax regime, and results in a deferred tax benefit for the Company.
“Pursuant to this legislation, the Company has estimated a $578 million net deferred tax asset as of December 31, 2023. This amount could be subject to change.”
