Everest Re Group Ltd. (NYSE:RE) Q1 2018 Earnings Conference Call Transcript

Apr 26, 2018 • 10:30 am ET


Everest Re Group Ltd. (NYSE:RE) Q1 2018 Earnings Conference Call Transcript


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Good day, and welcome to the Everest Re Group First Quarter 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Beth Farrell, Vice President of Investor Relations. Ma'am, please go ahead.

Beth Farrell

Thank you, Travis. Good morning, and welcome to Everest Re Group's First Quarter 2018 Earnings Conference Call. On the call with me today are Dom Addesso, the company's President and Chief Executive Officer; Craig Howie, Chief Financial Officer; John Doucette, President and CEO of Reinsurance Operations; and Jon Zaffino, President and CEO of Insurance Operations.

Before we begin, I will preface our comments by noting that our SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that statements made during today's call, which are forward-looking in nature, such as statements about projections, estimates, expectations and the like, are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investors should consider in connection with such statements.

Now let me turn the call over to Dom.

Dom Addesso

Thanks, Beth. Good morning, and welcome to the call this morning. As noted in the published financials, the core attritional results of the company continue to be quite favorable. And despite the prior year cats recorded this quarter, the operating ROE of 10.5% is quite strong. Our reinsurance book produced a $96 million underwriting profit in the quarter, and our insurance franchise more than doubled its underwriting profit to $12.5 million for the quarter. This reflects a continuing diversification effort into classes of business that have adequate margins. With respect to the Reinsurance segment, the underwriting profit is a consequence of improving margins in our property book, which I will get back to in a minute, but also expanded writings in casualty, mortgage and structured products.

While mortgage and structured products have generally had excellent margins, we are finding the general casualty market is now firming, perhaps in part due to less than expected improvement in company's margins on property business. However, more prominent in the casualty market is the demand side. As underwriting income in primary markets has been under pressure due to property results, buyers have become more attuned to reducing volatility generally across their entire portfolio, driving more demand for casualty and whole account solutions. Industry consolidation oddly plays apart in that, due to large buyers needing capacity and quality markets that can support them. With respect to the property market, in general, the renewal season for reinsurance offered up better terms, but was somewhat below our expectation. This resulted in us reducing our participation in certain areas. However, our first quarter premiums were above the prior year, due to rate and select new opportunities.

These two factors, of course, lead to increased margin per dollar of PML year-over-year. April is a key renewal for the Japan and Asian markets, which saw a slight improvement in