Everest Group, Ltd. (EG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial health with a focus on profitable growth, strategic capital deployment, and a disciplined approach to M&A. The company is leveraging its market position for favorable pricing and has plans for significant share buybacks, indicating confidence in future performance. Despite some uncertainties in reinsurance pricing, particularly in Florida, the overall sentiment is positive due to the company's strategic focus and robust capital management.
Key Financial Performance
Gross Written Premiums $4.3 billion, down 8.6% year-over-year in constant dollars, primarily due to the sale of the commercial retail business and deliberate underwriting actions in U.S. casualty lines.
Net Investment Income $562 million, up significantly from the prior year, driven by growth in the fixed income portfolio and strong performance from limited partnerships.
Combined Ratio 98.4%, including $216 million of catastrophe losses and $122 million of ADC premium. Excluding these impacts, the attritional combined ratio was 89.9%, reflecting improved loss experience and focus on margin development.
Operating Return on Equity (ROE) 12.4% for the year, supported by strategic actions like the adverse development cover and portfolio reshaping.
Total Shareholder Return (TSR) 13.1% for the year, attributed to operational improvements and capital management strategies.
Net Operating Income $549 million for the quarter, reflecting contributions from underwriting and investment portfolio.
Attritional Loss Ratio 60.2% for the quarter, improved by 3.7 points year-over-year due to better loss experience and prudent loss picks in U.S. casualty lines.
Book Value Per Share $379.83 at year-end, an improvement of 20.1% from the prior year-end, adjusted for dividends.
Share Repurchases $400 million in Q4 and $800 million for the full year, reflecting a focus on capital return to shareholders.
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Operating Highlights
Specialty Book Development: The specialty book has grown to approximately $2 billion in premium, with an attritional loss ratio in the mid-80s.
Global Wholesale and Specialty Platform: Gross written premium for the Global Wholesale and Specialty business was $3.6 billion at year-end 2025, including $1.2 billion in facultative business.
Asia Expansion: Attractive opportunities in Asia, including a new India branch, are being pursued.
Global Reinsurance Renewals: Bound over $6.3 billion of premium at January 1, 2026, with a slight decrease of under 1% compared to expiring premiums.
Reserve Risk Reduction: Implemented a $1.2 billion adverse development cover to reduce reserve risk.
Portfolio Reshaping: Exited the commercial retail insurance business, selling renewal rights to AIG for $426 million.
Investment Income Growth: Net investment income increased to $562 million, driven by growth in the fixed income portfolio and strong performance from limited partnerships.
Management Team Strengthening: Several new executives joined in critical roles to enhance management capabilities.
Share Repurchases: Repurchased $400 million of shares in Q4 2025 and an additional $100 million in January 2026, prioritizing share buybacks as a use of excess capital.
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Risk or Challenges
Market Conditions: Market conditions softened across many lines in the January 1 reinsurance renewals, with property catastrophe rates down an average of 10% globally. This could impact profitability and revenue.
Regulatory and Legal Risks: Ongoing challenges posed by the abuse of the U.S. legal system, particularly in U.S. liability lines, create an elevated risk environment and uncertainty in loss picks.
Strategic Execution Risks: The divestiture of the commercial retail insurance business to AIG creates short-term pressure on the group expense ratio and restructuring charges of approximately $150 million are expected in 2026.
Supply Chain and Operational Risks: Transitioning the commercial retail insurance portfolio to AIG involves operational complexities and potential disruptions.
Economic Uncertainties: Declining rates in property insurance, down 11%, could affect revenue and profitability despite remaining above required technical price.
Catastrophe Losses: Catastrophe losses contributed 5.6 points to the group combined ratio, driven by events like Hurricane Melissa and other midsized global events.
Investment Risks: Operating cash flow was negative $398 million in Q4, primarily due to the consideration paid for the adverse development cover, which could impact liquidity.
Competitive Pressures: Selective capacity deployment and reduced exposure to less profitable deals indicate competitive pressures in the reinsurance market.
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Guidance & Outlook
Market Conditions and Pricing: Market conditions softened across many lines in the January 1 reinsurance renewals, with property catastrophe rates down an average of 10% globally. However, terms and conditions largely held, indicating underlying market discipline. North American casualty pricing continues to exceed average loss trends, with increases in GL, auto, and umbrella excess lines, in some cases, as much as 20%. Property rates declined by 11% but remain above required technical price.
Reinsurance Portfolio Adjustments: The company deliberately resized its casualty portfolio, reducing over $1.2 billion in premium since January 2024. Total property limit deployed decreased modestly by 2% for the first time since 2022. Capacity deployment was selective, retaining over 95% of in-force premium with top-tier accounts while reducing exposure to less profitable deals.
Growth Opportunities: Attractive opportunities are identified in Asia, including the new India branch, and in targeted specialty lines. The global development of data centers, energy capacity, and infrastructure investments is expected to propel and diversify the specialty book, which is now approximately $2 billion in premium with an attritional loss ratio in the mid-80s.
Global Wholesale and Specialty Platform: The platform is expected to generate reasonable underwriting profits with additional mix improvement anticipated to increase profitability over the course of 2026. The business is positioned to become a more significant share of Everest's earnings mix over time.
Capital Management: The company plans to prioritize share repurchases as a use of excess capital, with $400 million repurchased in Q4 2025 and an additional $100 million in January 2026. A quarterly floor of $200 million for share repurchases is set for 2026, with a willingness to exceed this amount depending on conditions.
Restructuring and Expense Management: Approximately $150 million of restructuring charges are expected throughout 2026 due to the exit from the commercial retail insurance business. This includes $80 million in real estate-related costs anticipated in Q4 2026. The company expects the other segment to run at a combined ratio above 110% in 2026, driven by higher expenses during the transition.
Reserve and Loss Picks: Elevated loss picks will be maintained in 2026 for U.S. liability lines due to environmental uncertainty. Rate increases are expected to remain in excess of loss trends for U.S. casualty lines, which will represent a smaller portion of premium writings in 2026.
Investment Income: Net investment income is expected to remain strong, supported by higher assets under management and alternative asset returns. The current new money yield is approximately 4.7%, with a short asset duration of 3.4 years and an average credit rating of AA-.
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Shareholder Return Plan
Dividend per share: $8 per share year-to-date
Share repurchase in Q4: 1.2 million shares amounting to approximately $400 million at an average share price of $320.59 per share
Share repurchase for full year 2025: 2.4 million shares amounting to approximately $800 million at an average share price of $333 per share
Share repurchase in January 2026: $100 million of common shares
Future share repurchase plan: Plan to continue share buybacks in Q1 and in 2026 as a whole, with a quarterly floor of $200 million for common share repurchases and willingness to exceed this amount, conditions permitting.
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Key Q&A
Q:What is the expected expense ratio for the Global Wholesale and Specialty (GW&S) business in the future?
A:The expense ratio for GW&S is expected to be significantly lower than the current insurance segment, starting at 12%-13% and improving over time as the business scales and becomes more efficient. It is expected to settle into a more mature level by 2027.
Q:What is the outlook for reinsurance pricing in the June renewal season?
A:Reinsurance pricing is expected to be similar to the January 1 renewal, with rates on property catastrophe down 10%-15%. Florida may see slightly more downward pressure due to reinsurance capacity dependence and reforms in the state.
Q:How does the rate adequacy in 2026 compare to 2022 for property catastrophe?
A:Rate adequacy and return on capital for property catastrophe are better in 2026 compared to 2022. Structural changes in program crafting, such as the removal of aggregates and lowdown covers, have improved returns.
Q:What is the company's approach to capital deployment and buybacks in 2026?
A:The company has a strong capital position and plans to continue ramping up buybacks, especially given the discounted share price. Excess capital from the renewal rights transaction and profitability will support this strategy.
Q:What is the company's stance on additional retroactive reinsurance transactions?
A:The company is not planning additional ADCs for reserve certainty but is open to leveraging transactions to manage and free up capital, particularly for the growing 'other' segment.
Q:What is the expected combined ratio for the Global Wholesale and Specialty unit?
A:The combined ratio for the GW&S unit is expected to stabilize in 2026 at a mid-90s level on an all-in basis.
Q:What is the outlook for property premium underwriting in 2026 compared to 2025?
A:Growth in total property premium is expected to subside in 2026. The company is taking some chips off the table while ensuring programs meet hurdle rates, with a focus on maintaining rate adequacy and profitability.
Q:What is the company's long-term view on the insurance segment's size and profitability?
A:The company prioritizes underwriting profits and strong returns on capital over growth in size. It aims to remain relevant in the market by focusing on areas of expertise and profitability.
Q:What is the company's view on catastrophe losses in 2025 and expectations for 2026?
A:The company views 2025 as a 'new normal' year for catastrophe losses, with industry losses around $110-$130 billion. It expects consistent catastrophe load in 2026, with some reduction in earned premium due to the retail insurance divestiture.
Q:What is the company's approach to M&A in the current cycle?
A:The company has a high bar for M&A, prioritizing share buybacks due to their high return on capital. Any M&A would be small, low-risk, and aligned with existing strategy, adding capabilities or distribution.
Q:What is the company's strategy for property pro rata reinsurance in 2026?
A:The company has a strong property pro rata portfolio and will continue to evaluate opportunities, with a bias towards commercial and E&S lines rather than homeowners.
Q:What enabled the company to show a better differential in property cat pricing compared to the market?
A:The company leveraged its market position to achieve a 10% rate decrease compared to the market's low teens, with broad-based opportunities globally.
Q:What is the expected expense ratio for 2026, and how will stranded overhead from the renewal rights deal be managed?
A:The expense ratio is expected to trend from the higher end of 6%-7% to the lower end of 6% by year-end. Stranded overhead from the renewal rights deal, initially in the low $400 million range, will diminish significantly throughout the year.
Q:Were there any material changes in casualty reinsurance reserves in Q4 2025?
A:No material changes were reported. The company feels confident about its reinsurance reserves, particularly in shorter tail lines.
Q:What is the company's approach to capital management in 2026?
A:The company plans to emphasize buybacks, given the attractive return profile, and will unlock additional capital as benefits from the renewal rights transaction materialize.
Q:What is the reason for lower PMLs to equity at January 1, 2026?
A:The reduction is due to taking chips off the table for less profitable deals and increased ceding of premium and PML to third-party investors through Mt. Logan.
Q:What caused elevated insurance attritional loss ratios in Q4 2025?
A:The elevated loss ratios were due to multiple unrelated large energy losses, such as explosions at refineries, and not related to social inflation.
Q:What is the company's strategy for the specialty reinsurance book?
A:The specialty reinsurance book, with $2 billion in premium and an attritional combined ratio in the mid-80s, has been grown meaningfully and remains a strong performer.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on how Florida's reinsurance pricing dynamics would play out, stating only that it may be down slightly more than the January 1 renewal. Additionally, they did not provide a point estimate for property premium underwriting changes in Q1 2026 compared to Q1 2025, citing variability in premium recognition from 2025.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADC
AIG
Insurance segment
Jan
Mt
Specialty Insurance
VP
Wholesale Specialty
addition
capital Everest
case
charge exit
consideration
development cover
discipline reinsurance
divestiture
energy
exit insurance
expense line
impact
insurance business
insurance loss
insurance renewal
layer development
liability line
market insurance
moment
onetime
platform
point increase
price share
reinsurance insurance
renewal right
right transaction
role
share price
share repurchase
step
underwriting discipline
underwriting result
EG Transcript
Everest Group, Ltd. (EG) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call highlights strong financial health with a focus on profitable growth, strategic capital deployment, and a disciplined approach to M&A. The company is leveraging its market position for favorable pricing and has plans for significant share buybacks, indicating confidence in future performance. Despite some uncertainties in reinsurance pricing, particularly in Florida, the overall sentiment is positive due to the company's strategic focus and robust capital management.
Everest Group, Ltd. (EG) Q3 2025 Earnings Call Transcript
Positive10-28
The earnings call reflects strong financial metrics with record investment income and strategic growth in reinsurance and specialty insurance. Despite some areas of decline, such as casualty premiums, the company is optimizing its portfolio, expecting growth in several lines, and maintaining attractive risk-adjusted returns. The Q&A indicates confidence in reserve management and strategic divestments, with plans for capital repatriation. Share repurchases and a favorable investment outlook further support a positive sentiment. However, cautious guidance and a competitive market temper expectations, suggesting moderate stock price appreciation.
Everest Group, Ltd. (EG) Q2 2025 Earnings Call Transcript
Unknown7-31
The earnings call summary reveals mixed signals. The financial performance and product development updates are generally positive, with strong international growth and share repurchases. However, the combined ratio indicates ongoing pressure from losses, and there are concerns about expense ratios and the impact of tariffs. The Q&A section did not provide clear answers on critical issues, such as tariff impacts and expense improvements. The lack of clarity and mixed results suggest a neutral sentiment, with no strong catalysts for significant stock movement.
Everest Group, Ltd. (EG) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call presents mixed signals. Financial performance shows increased losses and flat premium growth, but net investment income is strong. The Q&A reveals potential growth in Florida and specialty lines, but competitive pressures and management's reluctance to provide guidance raise concerns. Share repurchases are positive, but the attritional loss ratios and catastrophe impacts are negative. Overall, the sentiment is neutral, with no strong indicators for significant stock price movement.
EG Slides
EG Report
Frequently Asked Questions
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