Executive Summary / Key Takeaways

• Everest Group is strategically reshaping its portfolio, aggressively shedding underperforming U.S. casualty business while leaning into profitable property, specialty, and international insurance lines to enhance risk-adjusted returns and build a more resilient book.
• Despite an elevated combined ratio in Q1 2025 driven by significant catastrophe and aviation losses, underlying performance shows progress in attritional loss ratios (excluding major events) and strong execution in renewals, particularly in property reinsurance.
• The company maintains a robust capital position and strong liquidity, supporting opportunistic share repurchases ($200 million in Q1 2025) and dividend payments, signaling confidence in future earnings power despite near-term volatility.
• Management is targeting a significant improvement in the Insurance segment's combined ratio, aiming for 90-92% in the second half of 2025, driven by portfolio mix shift, increased scale, and expense leverage from international expansion.
• Key risks include ongoing social inflation in U.S. casualty, potential impacts from regulatory changes (Bermuda tax), and catastrophe volatility, which the company is actively mitigating through underwriting actions, prudent reserving, and diversification.

Setting the Stage: A Global Underwriter's Strategic Evolution

Everest Group, Ltd. stands as a seasoned global underwriting leader, leveraging a history spanning approximately 50 years to provide reinsurance and insurance solutions across property, casualty, and specialty lines worldwide. Operating through distinct Reinsurance and Insurance segments, the company's overarching strategy centers on maximizing risk-adjusted returns, disciplined cycle and portfolio management, and maintaining capital efficiency to drive long-term shareholder value. This strategic framework is particularly critical in the highly competitive and dynamic global insurance and reinsurance markets.

The competitive landscape is populated by large, diversified players like Chubb Limited (CB), American International Group (AIG), Berkshire Hathaway (BRK.B), and Munich Re (MURGY), alongside smaller, agile competitors and disruptive insurtechs. While Everest holds an estimated 4-5% aggregate market share in primary markets, trailing larger rivals like Chubb (5-7%) and AIG (6-8%), its strategy emphasizes targeted growth in profitable niches and geographies rather than sheer market share dominance. Everest differentiates itself through geographic agility, evidenced by its strategic expansion into new international markets like Mexico, Colombia, Australia, and Italy, often enabling faster market entry than some larger, more bureaucratic competitors. Furthermore, the company aims for cost leadership in certain specialty lines, leveraging streamlined operations. However, Everest faces challenges relative to some peers, including technological gaps (lacking the publicly detailed AI-driven underwriting or faster claims processing systems reported by some rivals) and historical profitability volatility, highlighted by a net loss in 2024 compared to the profitable performance of many competitors.

Everest's approach to technology, while not centered on a single product moat, is foundational to its underwriting and risk management strategy. The company emphasizes robust internal modeling capabilities, a focus on data quality, and investments in systems and automation to support its global platform and enhance efficiency, particularly in its expanding international operations. This analytical rigor, combined with actuarial science, business expertise, and management judgment, informs its reserving practices and risk selection. While specific quantifiable performance metrics for its internal technology compared to competitors are not detailed, the strategic intent is clear: to enable better risk assessment, improve operational efficiency, and support disciplined growth. This contrasts with competitors like Munich Re, which highlights its advanced analytics for risk modeling, or Chubb and AIG, which point to digital tools for faster processing and underwriting. Everest's technological focus appears more geared towards enhancing core underwriting and operational processes rather than developing distinct, market-facing tech products.

The company's historical journey, including leadership transitions and responses to market challenges, has shaped its current strategic posture. Recent years have seen a deliberate effort under prior leadership to diversify and expand globally. More recently, under new leadership, there has been a sharpened focus on addressing underperforming areas, notably through significant reserve strengthening in Q4 2024 related to U.S. casualty exposures and aggressive portfolio remediation. These actions, while impacting short-term results, are presented as necessary steps to fortify the balance sheet and position the company for more consistent profitability aligned with its strategic objectives.

Performance and Strategy Execution: Navigating a Volatile Environment

Everest Group's financial performance in the first quarter of 2025 reflects the impact of significant industry events alongside the ongoing execution of its strategic initiatives. Total revenues increased by 3.1% to $4.26 billion compared to Q1 2024, primarily driven by a 5.5% increase in premiums earned to $3.85 billion. This growth in earned premium outpaced the slight decrease in gross written premiums (-0.5% to $4.39 billion), largely due to the timing difference between when premiums are written and earned.

However, the quarter's results were significantly impacted by elevated losses. Incurred losses and loss adjustment expenses surged by 29.4% to $2.89 billion. This increase was primarily attributable to higher current year catastrophe losses ($534 million in Q1 2025 vs. $85 million in Q1 2024), driven by the 2025 Southern California wildfires ($512 million) and the Myanmar earthquake ($22 million). Additionally, current year attritional losses increased by $208 million, including $83 million related to the Washington D.C. aviation accident, reflecting both specific large losses and the impact of increased underlying exposures from earned premium growth. These elevated losses resulted in a combined ratio of 102.7% for Q1 2025, a notable increase from 88.8% in Q1 2024. The loss ratio component alone rose by 13.8 points to 75.1%. Net income for the quarter decreased significantly to $210 million, down from $733 million in Q1 2024, primarily due to these financial component fluctuations.

Analyzing segment performance provides deeper insight into the strategic execution:

• Reinsurance: The segment saw a modest 1.4% increase in gross written premiums to $3.22 billion in Q1 2025, driven by growth in property catastrophe excess of loss and property pro rata business. Net written premiums, however, decreased by 4.5% to $2.81 billion, mainly due to higher cessions to Mt. Logan Re. Premiums earned increased by 6.5% to $2.91 billion. Despite the earned premium growth, the segment's underwriting gain decreased significantly to $96 million (from $347 million in Q1 2024) due to higher incurred losses and LAE, resulting in a combined ratio of 103.3% (up from 87.3%). Management highlighted continued strong performance and attractive returns in property lines, while intentionally shrinking the casualty pro rata book (down almost 22% in Q1 GWP) due to abundant capacity and sticky ceding commissions that do not meet return thresholds. The segment's attritional loss ratio was 76.5%, though management noted it was 59.8% excluding the aviation loss, reflecting disciplined underwriting with conservative risk margins.
• Insurance: Gross written premiums decreased slightly by 1.3% to $1.15 billion in Q1 2025, with net written premiums remaining relatively flat at $896 million. Premiums earned increased by 4.9% to $913 million. The segment reported an underwriting gain of $5 million (down from $71 million in Q1 2024), resulting in a combined ratio of 100.5% (up from 91.9%). This performance reflects the ongoing remediation of the U.S. casualty portfolio, which offset growth in property/short tail and other specialty business. Management reported that 50% of casualty written premium with renewal dates in Q1 was not renewed, demonstrating aggressive underwriting action. Despite this, casualty rate increases averaged approximately 20% across key lines, exceeding loss trend assumptions. The international insurance business continues to develop in line with expectations, showing strong growth in key markets (U.K., Europe, Asia) at attractive loss ratios and turning a modest profit despite continued investment. The segment's attritional loss ratio was 70.1%, or 67.9% excluding the aviation loss.
• Other: This segment, comprising primarily run-off business, saw significant decreases in premiums earned (-37.2% to $33 million) and gross written premiums (-63.8% to $28 million), reflecting its non-core nature post the sale of the sports and leisure business. Its contribution to group results is expected to be de minimis going forward.

From a liquidity and capital perspective, Everest maintains a strong position. Total investments and cash increased by 2.6% to $42.63 billion at March 31, 2025, primarily driven by net purchases of fixed maturities. Shareholders' equity grew by $264 million to $14.14 billion, supported by net income, unrealized appreciation on investments, and foreign currency translation adjustments, despite share repurchases and dividends. Book value per share increased by 2.9% to $332.39. Operating cash flows were positive at $928 million in Q1 2025, though lower than Q1 2024 ($1.1 billion), reflecting higher catastrophe loss payments ($317 million vs. $229 million).

The company holds $4.5 billion in cash and short-term investments and $1.1 billion in short-term fixed maturities, providing ample liquidity. Everest Re's FHLBNY membership offers additional borrowing capacity of approximately $3.1 billion, with $1 billion currently drawn for a spread trade. The company actively manages its capital, repurchasing 574,000 shares for $200 million in Q1 2025 and paying $85 million in dividends, consistent with its commitment to shareholder value and opportunistic capital management.

Net debt leverage stood at a manageable 15.4%.

Outlook and Risk Assessment: Balancing Opportunity and Challenge

Management's outlook for Everest Group is characterized by a continued focus on disciplined underwriting, strategic portfolio optimization, and leveraging its strong capital position. A key target is the improvement of the Insurance segment's combined ratio, with management expecting a quarterly run rate of 93-94% for the remainder of 2024 and targeting the 90-92% range in the second half of 2025. This improvement is expected to be driven by the ongoing positive shift in portfolio mix towards shorter-tail and specialty lines, increasing scale (particularly from international expansion), and improved expense leverage as earned premiums catch up to prior investments. The international business is expected to continue its double-digit growth trajectory, with the company focusing on deepening its presence in the 12 markets it currently operates in during 2025, rather than opening new ones.

In the Reinsurance segment, while moderate property cat pricing pressure is anticipated for the remainder of 2025, management sees ample opportunities to deploy capital at attractive expected returns. They specifically expect property catastrophe pricing in North America and Europe to firm heading into the January 1, 2025 renewals, despite earlier expectations of potential decreases, citing recent catastrophe activity as a reminder of the need for pricing discipline. The outlook for the casualty reinsurance market remains cautious, with expectations that the book will continue shrinking unless the environment changes, particularly regarding sticky ceding commissions.

Capital management remains a priority, with the company expecting to continue meaningful share repurchases throughout 2025, assuming normal catastrophe activity. The attractive valuation and strong capital position support this strategy, alongside the regular dividend payments. The company's working range for the operating income tax rate in 2025 is estimated at 17-18%, reflecting the new Bermuda corporate income tax.

Despite the positive outlook in core areas, Everest faces pertinent risks. Catastrophe volatility remains a significant factor, as demonstrated by the impact of the Southern California wildfires and aviation loss on Q1 results. The company actively manages this through diversification, reinsurance, and maintaining a resilient cat book designed to absorb losses. Social inflation and legal system abuse, particularly affecting U.S. casualty lines, continue to pose challenges, necessitating the aggressive remediation and prudent loss picking underway in the Insurance segment. While management is comfortable with the current reserve position and is adding significant risk margins to 2025 picks, reserve adequacy remains an inherent risk in the industry. Regulatory changes, such as the new Bermuda corporate income tax and potential impacts from OECD guidance on deferred tax assets, introduce uncertainty regarding future tax liabilities. Competition across segments could also pressure pricing and growth opportunities. Everest addresses these risks through its disciplined underwriting, focus on risk-adjusted returns, diversified platform, and robust capital management framework.

Conclusion

Everest Group's investment thesis is currently defined by a strategic pivot towards greater underwriting discipline and portfolio optimization in response to challenging market dynamics, particularly within U.S. casualty lines. While the first quarter of 2025 highlighted the inherent volatility of the insurance and reinsurance business through elevated catastrophe and large attritional losses, the underlying narrative points to a company actively reshaping its book for enhanced profitability and resilience. The aggressive remediation of underperforming casualty exposures, coupled with targeted growth in attractive property, specialty, and international markets, forms the core of this strategy.

With a strong capital base, robust liquidity, and a commitment to opportunistic capital management, Everest is positioned to navigate near-term headwinds. The clear targets set for the Insurance segment's combined ratio signal management's confidence in the trajectory of the business. As the company continues to execute on its plan, leveraging its lead market position in reinsurance and building scale in its international insurance operations, the focus remains on generating industry-leading financial returns over the cycle. While risks such as social inflation and catastrophe events persist, Everest's disciplined approach to underwriting, reserving, and capital allocation provides a foundation for the investment thesis centered on long-term value creation through a more balanced and profitable global portfolio.