Everest Re reports 21% premium growth, small profit despite Covid-19

Global insurance and reinsurance group Everest Re has significantly grown its underwriting book in the first-quarter of the year, reporting 21% growth in net premiums written in a quarter marred by Covid-19 pandemic related losses but in which it still managed to report a profit.

Everest Re reported $16.6 million of net income for the first-quarter of 2020, down considerbaly on the prior years $354.6 million.

The reason for the dip is the already announced $150 million hit from Covid-19 pandemic related losses, plus higher realised and unrealised losses across its investment portfolio also driven by the pandemic related financial market volatility that has been seen.

Catastrophe loss activity was relatively low for the quarter, coming out at $30 million after any benefits from reinsurance and tax.

The main catastrophe loss activity that Everest Re found itself exposed to was losses caused by the Australian wildfires, Australian East Coast storms and the Nashville, U.S. tornadoes.

There’s every chance that Everest Re’s third-party capital backed collateralised reinsurance sidecar-like vehicle Mt. Logan Re Ltd. may have taken its share of the first-quarter natural catastrophe activity, but it’s unlikely to have been significant.

The reinsurer still managed to report an underwriting profit, with its combined ratio coming out at 98.6% for the first quarter of 2020 compared with 88.7% for the first quarter of 2019.

Excluding catastrophe losses, reinstatement premiums paid and a 7.4% loss ratio hit from the Covid-19 pandemic, the comparable combined ratios are 89.9% for the first quarter of 2020 and 87.4% for the first quarter of 2019.

Like many other global insurance and reinsurance players, Everest Re has been taking advantage of the improvement in rates and returns by growing its underwriting book.

Juan C. Andrade, President and Chief Executive Officer of the company explained, “Everest wrote nearly $2.6 billion in gross written premiums for the quarter, an increase of 21% as compared to a year ago. Our Reinsurance segment grew 16% while the Insurance segment was up 33%. These results continue to demonstrate the value of the Everest franchise to our broker partners and customers.”

The growing premiums and higher rates of return for risks underwritten will also be benefiting the portfolios of risk in the third-party capitalised Mt. Logan Re Ltd. vehicle, with its 2020 portfolio likely having higher return-potential for its investors.

Andrade also commented on the loss activity and Covid-19 impacts, providing more granularity in how they broke down for the quarter, “Our combined ratio for the quarter was 98.6%, which includes $150 million in net pre-tax IBNR losses related to the Covid-19 pandemic (91.2% combined ratio excluding these losses). The IBNR loss is attributed $110 million to Reinsurance and $40 million to Insurance. Excluding catastrophe and pandemic IBNR, the underlying combined ratio was 89.9%, 87.7% for Reinsurance and 95.6% for Insurance, highlighting the underlying strength and sustainable profitability of the franchise.”

Finally, commenting on business activity at Everest Re under the shadow of the pandemic, CEO Andrade said, “Everest continues to do its part by successfully operating remotely to serve all of our customers and stakeholders without interruption. Our diversified global platform with its broad mix of products, distribution and geography is an important source of stable capacity to our broker partners and customers. Our capital position remains a source of strength, with high quality invested assets, significant liquidity and low financial leverage. Our well-diversified investment portfolio is resilient, and we have taken additional steps to reposition it by moving up in credit quality and further reducing equity exposure.

“Above all it is the ingenuity, perseverance and dedication of our employees during these unique times that allows us to operate our business without interruption. Despite the impacts of the pandemic, Everest remains profitable and resilient with a strong capital base.”