Everest Reinsurance Group Aktie

Good day, everyone, and welcome to the Everest Group Limited First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded.

At this time, I'd like to turn the floor over to Mr. Matt Rohrmann, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you, Jamie. Good morning, everyone, and welcome to the Everest Group Limited First Quarter 2026 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We are also joined by other members of the Everest management team.

Before we begin, I will preface the comments by noting that today's call will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and future results are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management will also be referring to certain non-GAAP financial measures. Available explanations, reconciliations to GAAP can be found in the earnings release, investor presentation and financial supplement on our Investor Relations website.

With that, I'll turn the call over to Jim.

Thanks, Matt, and good morning, everyone. This is the first quarter reporting under the new segment structure we previously announced, and the early read is consistent with what we committed to, a more focused, more profitable, more capital-efficient Everest. Both core businesses contributed meaningful underwriting income, investment income remained a durable earnings engine, and we accelerated capital return to shareholders. There is more work to do, but the quarter offers clear evidence of the strength in our lead market reinsurance treaty franchise and that the strategic reset within our new Global Wholesale & Specialty segment is beginning to take hold in the numbers.

Group operating income for the quarter was $648 million, producing a net operating return on equity of 16.7%, and an annualized total shareholder return of 16.1%. This performance was delivered despite a more challenging market environment. The combined ratio was 91.2% with $130 million of pretax catastrophe losses net of recoveries and reinstatement premium, including a $58 million provision for the conflict in Iran. Excluding the legacy segment, the combined ratio for the quarter was 89.3%.

Net investment income was $567 million supported by fixed income portfolio growth and strong limited partnership returns. Gross written premium was $3.6 billion, down year-over-year 18%, largely due to the completed exit of our commercial retail insurance business and continued runoff of legacy U.S. casualty exposures. Excluding the impact of divestitures and deliberate runoff, underlying premium declined 6.4%. Consistent with the strategy we laid out in October, we will continue to prioritize profitability and shareholder return over top line volume, and Q1 is a clear example of that philosophy at work.

Treaty Reinsurance delivered an excellent quarter, generating $315 million of underwriting income on an 87.2% combined ratio. Gross written premium was $2.7 billion, down 8.9% year-over-year, driven primarily by continued casualty discipline, and selective reductions where pricing or structure did not meet our return thresholds.

Since January 2024, we have reduced casualty premium by more than $1.2 billion. Over that same window, the portfolio has rotated meaningfully towards short tail and specialty lines, where we continue to see opportunities for attractive risk-adjusted returns. The April 1 renewal reflected the market conditions we anticipated on the last call.

Property Catastrophe pricing continued to soften with rate down 13% on our book globally. However, terms and conditions held, attachment points held and structural discipline remained intact. Our lead market position and preferred counterparty status allowed us to shape signings towards the most attractive deals. Bound premium at 4/1 decreased 14.6% versus expiring but expected returns on the written portfolio remain above our thresholds.

Looking to the midyear renewals, we see continued competitive conditions. Florida will be an interesting dynamic with strong demand by cedants and meaningful tort reform benefits that we are clearly seeing in our data. We will continue to deploy capacity where the math works and pull back where it does not.

Mt. Logan continues to build momentum with assets under management now exceeding $2.6 billion. Our pipeline of investor interest is strong across multiple strategies, and Logan is playing an increasingly important role in our overall capital model, supporting underwriting capacity and enhancing our return on capital.

Turning to the Global Wholesale & Specialty segment. As a reminder, this business includes our London market operation, U.S. wholesale, Global fac and a number of specialty groups with deep expertise in their respective markets. This is the first quarter printed results for the go-forward platform, a 96.8% combined ratio on $793 million of gross written premium, producing $23 million of underwriting income. Premium was up modestly year-over-year, driven by growth in specialty lines and Accident & Health, partially offset by continued reductions in U.S. casualty, especially in our facultative business.

A word on how to read the results. Underlying attritional loss performance in the quarter was strong, improving 3.8 points to 58.9%. This was achieved by repositioning the portfolio into higher-margin lines and by underwriting improvements in each of our portfolios. Rate achievement in key U.S. lines, including GL, umbrella excess, auto liability remains strong.

The operating expense ratio at 12.6% continues to reflect a drag tied to mix, and modestly lower underwriting leverage, which we expect to improve as we scale the business over time.

The team is executing a clear plan, sharpening underwriting, driving operating leverage and concentrating on the Specialty & Wholesale segments where Everest has genuine competitive advantage. Meanwhile, the transition of our retail business to AIG is progressing as planned, and we continue to expect meaningful capital release from this transaction to become visible in the back half of 2026.

Moving to reserves. We completed our customary Q1 reserve assessments across the group. The overall reserve position remains robust, especially in reinsurance, with favorable development in the quarter of $33 million, driven primarily by short-tail lines. Consistent with our expectations following the comprehensive actions we took in 2025, there were no material movements in U.S. Casualty. Our approach to current year loss picks remains prudent across both businesses and in every line, particularly in U.S. Casualty, where we continue to build risk margin.

Now a word on capital. In the quarter, we repurchased $331 million of shares at an average price of $330. We also repurchased an additional $100 million in April. Effective this quarter, we are raising the quarterly floor on share repurchases from $200 million to $300 million, absent major external dislocation. This reflects our continued conviction that Everest share price today does not accurately reflect either the current value or the true earnings power of the company. And as we have demonstrated in the past 2 quarters, we have a willingness and ability to exceed the floor repurchase amount.

Stepping back, this quarter shows what the new Everest can produce; focused businesses centered on markets where we have a right to win; disciplined underwriting, deploying capital only where return expectations are clearly above our threshold; a strong balance sheet underpinned by prudent loss picks and reserve practices and a growing third-party capital base and a clear capital return trajectory.

While this quarter is a meaningful step in our journey, we are not declaring victory. Market conditions are more competitive than a year ago. The legal environment in the U.S. remains hostile, and we will have to continue earning our results, deal-by-deal, renewal-by-renewal, quarter-by-quarter. But Everest is better positioned today than it has been in years, and the team has confidence in where we are taking this company.

Before I turn it over to Mark, let me take a moment to thank him for his service as our CFO over the last 5 years. He has been an important partner to me as we've moved Everest to a stronger position. On behalf of the entire Everest Board and management team, I want to wish him the best of luck in his retirement.

Over to you, Mark.

Thank you, Jim, and good morning, everyone. Everest delivered a strong first quarter, building upon the momentum of -- from the strategic actions taken in the prior year as both underwriting income of $316 million and net investment income of $567 million drove operating earnings per share of $16.08. This resulted in net income of $653 million and an annualized total shareholder return of 16.1%.

Now turning to our group results. Everest reported first quarter gross written premiums of $3.6 billion, representing an 18.5% decrease in constant dollars while excluding reinstatement premiums from the prior year quarter. When excluding our Legacy segment, which now includes our commercial retail insurance business, gross written premiums decreased 6.4%. Combined ratio improved to 91.2% for the quarter, net favorable prior year development of $33 million from well-seasoned property reserves in our Reinsurance Treaty segment contributed a 90 basis point benefit to the combined ratio.

Catastrophe losses contributed 3.6 points to the group combined ratio, largely driven by a $58 million provision for the Iran war and several other weather-related events globally. The group attritional loss ratio improved 2.8 points to 59.4% in the quarter. Aviation losses contributed approximately 2 points to the prior year first quarter attritional loss ratio. When excluding this, the improvement was driven by improved expected loss experience and a lower proportion of Retail Casualty premium.

The commission ratio increased to 23.1% in the quarter. With the increase driven by mix, the underwriting-related expense ratio improved 10 basis points to 6%. In the other income and expense line, we recognized a net expense of $81 million associated with the sale of the commercial retail insurance renewal rights to AIG in the quarter as well as expenses associated with the sale of other primary operations, principally Canada.

As I previously noted, we expect there will be approximately $150 million of restructuring charges throughout 2026 associated with our exit from the commercial retail insurance business and we still expect some elevated real estate-related costs in the fourth quarter, which we expect to mitigate through subleasing opportunities. And these costs will be reflected in our other income and expense line within operating income and will not impact the combined ratio.

Moving to reinsurance treaty. Gross written premiums decreased 8.5% in constant dollars versus the prior year quarter when adjusting for reinstatement premiums during the quarter. Property growth of 1% in the quarter when excluding reinstatement premiums was largely driven by a 9.4% increase in property cat XOL, and this was more than offset by targeted decreases of 23.9% in casualty pro rata and 13.3% in casualty XOL. The combined ratio improved to 87.2% in the first quarter of 2026. The quarter benefited from a relatively lighter amount of catastrophe losses, which contributed 3.7 points to the combined ratio versus 19.7 points in the prior year first quarter.

Favorable prior year reserve development contributed 1.4 points to the improvement. The attritional loss ratio decreased 270 basis points to 56.7%, largely due to aviation losses in the prior year first quarter. And consistent with prior quarters, mix benefits were balanced by our proactive approach to embedding prudence into our U.S. casualty loss picks.

And moving to Global Wholesale & Specialty. Gross premiums written increased 1.6% in constant dollars to $793 million. Growth in accident and health, professional liability and other specialty was more than offset by decreases in property lines and reduced writings in casualty lines. Combined ratio was 96.8% in the quarter and included 4.2 points of catastrophe losses versus 3.1 points in the prior year first quarter. Cat losses in the quarter were largely driven by losses associated with the Iran war as well as U.S. winter storm activity. And while it's early, we believe mix benefits from our actions to shift the portfolio towards short-tail lines and to strengthen the quality of the portfolio are driving improved loss experience. These actions contributed a 3.8 points improvement in our attritional loss ratio to 58.9%, while we continue to set prudent loss picks.

The underwriting-related expense ratio was 12.6% with the increase driven by reduced casualty earned premium and the commission ratio increased 1.6 points to 21.2%, with the increase largely driven by mix.

Now moving to our legacy segment. The segment generated a modest drag to group results, largely due to higher ceded premiums as well as a modest increase in property loss activity. We continue to expect the segment to run at a combined ratio above a 110% combined ratio for fiscal year 2026, driven primarily by higher expenses as we transition the commercial retail insurance book to AIG.

Now moving to reserves. While we are seeing early evidence that our remediation actions are leading to improved underwriting results in our U.S. liability insurance portfolio, we will continue to maintain elevated loss picks as we did in 2025. While rates in U.S. casualty lines continue to increase, there remains uncertainty in loss cost trends, and we expect these lines to continue to represent a smaller percentage of our overall mix.

Moving on to investments. Net investment income increased to $567 million for the quarter, largely driven by strong alternative asset returns, which generated $156 million of net investment income in the quarter versus $55 million in the prior year quarter. Overall, our book yield remained stable at 4.5%, which is consistent with our current new money yield, and we continue to have a short asset duration of approximately 3.5 years, and the fixed income portfolio benefits from an average credit rating of AA-.

Our operating income tax rate was 11.7% in the first quarter 2026, which was below our working assumption of 17% to 18% for the full year. And this was driven by a onetime benefit from the takedown of an accrual of U.K. Pillar II tax due to the U.K. updating its tax laws in the first quarter to conform with the most recent OECD guidance on global minimum tax. Operating cash flow for the quarter of $649 million decreased from $928 million in the prior year first quarter, and shareholders' equity ended the quarter at $15.3 billion or $15.7 billion when excluding $369 million of net unrealized depreciation on available-for-sale fixed income securities.

Book value per share, excluding unrealized depreciation on available-for-sale fixed income securities ended the quarter at $393.02, an improvement of 4% from year-end 2025 when adjusted for dividends of $2 per share. In the first quarter, we repurchased approximately 1 million shares amounting to approximately $331 million at an average share price of $330.01 per share.

When factoring in, the lower growth environment for the industry in combination with the strategic actions announced last year and the sale of our Canadian retail insurance operations, we would expect an elevated payout ratio for 2026, assuming a relatively normal level of catastrophe activity and other risk factors. As Jim mentioned, we now expect $300 million to be a quarterly floor for common share repurchases in 2026.

Lastly, I wanted to take a moment to acknowledge that this will be my last earnings call for Everest, and the company has gone through a period of meaningful transformation over the years, and I'm particularly proud of being able to be a part of the accomplishments to set Everest on its trajectory. I'm confident that Everest is in a strong position to deliver attractive results. And on a personal note, it has been a privilege to work with my Everest colleagues and the many fine people within the P&C industry over the years. And with that, I'll turn the call back over to Matt.

Thank you, Mark. Jamie, we are now ready to open the line for questions. [Operator Instructions] Jamie, over to you.

[Operator Instructions] Our first question today comes from Andrew Andersen from Jefferies.

Into Florida renewals, how much incremental demand are you seeing at an industry level? And how are you considering Everest deployment there just given some tort reform benefits, but also considering the current pricing market?

Sure, Andrew. Thanks for the question. I mean, look, I'm not going to quantify the demand forecast, but I do think there's some pretty strong tailwinds in terms of clients looking to procure more limit. We have, as you probably know, a preferred position in the Florida market. I think we are a lead reinsurer for all of the best local underwriters.

Obviously, the renewal is very much still in flight. It's early days, but so far, we're actually reasonably optimistic about where things will land. And I think you should expect us to be pretty consistent in terms of capacity deployment, assuming that rates move in a reasonable direction. I do think we are seeing, as I indicated in my prepared remarks, very strong statistical evidence that the tort reforms have worked, which obviously is a great positive given where our book is.

And on casualty reinsurance, still seeing some premium declines there, but are you seeing any improvement in terms that could warrant reengagement down the line? Or is that line still not at the return hurdles you would like to see?

Well, to step back, I think the way I would frame this is our view of casualty pro rata, particularly given what's happening in the U.S. tort environment, is that we want to continue to partner with our best cedants who have a firm beat on how to underwrite in a fairly adverse environment, whose claims expertise, data analytics are world-class. And we're going to continue to do that.

Now what that has meant for us is that we've had to reduce total premium levels over $1.2 billion in the last 2 years. And I think that's just an indication of the level of discipline we're bringing to the equation. I think what we would need to see for that trend line to significantly reverse would be, first of all, ceding commissions on casualty pro rata remain quite elevated. I think that needs to change. And I also think you need to see some sort of normalization in the U.S. legal environment. So obviously, we're prepared to pivot when conditions warrant. But right now, I feel really good about how we're positioned.

Our next question comes from Elyse Greenspan from Wells Fargo.

My first question is on the Global Wholesale and Specialty segment. The attritional was 92.6% in the quarter. I know you guys highlighted, right, just an elevated expense level to start in the segment. But I'm just thinking away from just the expense comment, would you highlight anything one-off in the quarter just when we think about the margin profile of that segment from here?

Sure, Elyse. Thanks for the question. A couple of things. First, while I do think there's drag in the expense ratio, we're starting from a pretty decent spot. And I think we have some clear strategies in place that will help us to manage that. But that's going to happen over time. So that will be something that we're working on for a while.

There were really no one-offs in the quarter. What I would tell you is what's critical to laddering up this attritional loss ratio that drives that combined is the things that I talked about in my prepared remarks. The team has done an excellent job positioning the portfolio in terms of its mix, and that's something that we're going to continue to focus on.

And then the quality of the underwriting really across lines of business has been very strong. And so again, over time, I think those things can inure to our benefit. At the same time, it's a very complex primary insurance market, as you know. We have a lot of rate movement in multiple directions across lines of business. And so we'll just navigate it very carefully and make sure that we're printing very prudent loss picks in each of the quarters that we print going forward.

And then my second question, we've seen industry losses come up for the Baltimore bridge event. I just wanted to get a sense of your thoughts there and just how you're thinking about Everest's exposure.

Sure. Yes. So when the loss first occurred, I think a lot of people were sort of settling into about $1 billion industry loss range, if memory serves. We had, as you may recall, put up a pretty prudent initial reserve of $70 million. Like you, we're gathering information regarding the settlements that are occurring around that loss. Those seem to indicate that we'll be looking at a larger overall industry loss level, but we're still very much assessing that. And what I would suggest based on just sort of early indications, if they prove to be correct, we could be looking at a few tens of millions of dollars of incremental loss reserve needed, which would flow through in a future quarter, whether that's Q2, Q3, we'll see through our prior year development line.

Our next question comes from Meyer Shields from Keefe, Bruyette & Woods.

I also had a question on Global Wholesale and Specialty. I was hoping you could update us on the amount of casualty talent that you have relative to what you would want. I understand that the market is challenging for all the reasons that you laid out. But I just want to get a sense as to your assessment of whether the current underwriting team is all intact or whether we should anticipate incremental hires?

Yes. Thanks for the question, Meyer. I feel -- one of the things I feel just exceptionally good about across really all of Global Wholesale & Specialty and certainly reinsurance and the rest of the company is the quality of the talent that we have. if you sort of rewind the clock, remember, we started the remediation process in North America Casualty a couple of years ago. We made significant changes and I would say, upgrades to that team. We've had a chance to continue [indiscernible] on that in the meantime. And so when I look at the team on the field today, whether it's in our Evolution business, our U.S. programs business or other parts of the group where we're writing U.S. casualty, I think we have best-in-class talent.

Now we are investing in Wholesale & Specialty across a number of dimensions. Technology would be an area where, particularly with the retail divestiture, we now have more resources to devote to the Global Wholesale Specialty business. So we're investing in tech. And we are also selectively hiring, but I really view that as an augmentation as opposed to needing to rebuild teams. We're in a really good spot talent-wise.

Okay. Great. That's very helpful. And then second question, obviously, for some specialty lines exposed to the Iran conflict, there have been meaningful rate increases. I was hoping you could talk to how Everest is responding to that.

Yes, absolutely. I mean we're an active underwriter in the region. We have a very robust reinsurance operation centered on the Middle East. And we also obviously underwrite a number of specialty coverages out of our London market operation in both businesses. And so as these events occur, there will be rate movement and our teams are very nimble, and they will be leaning in where they see appropriate risk-adjusted returns to both securing those rate increases and potentially deploying more capacity.

Now as you can imagine, at this moment, given the level of uncertainty around where the conflict is going to go, we're being very judicious on what we're writing, but I would expect it to inure to the benefit of the portfolios in terms of rate movement.

Our next question comes from Josh Shanker from Bank of America.

First of all, just congratulations to Mark on his retirement. Wish him the best in all your endeavors. Quickly, you have a new floor setting of a minimum $300 million repurchase per quarter. Historically, we've seen reinsurance companies slow the roll a little bit around the early summer period in anticipation of the outcome of the hurricane season. Do you expect a programmatic purchase? Or will you just be continuing to buy at the same pace regardless of where we are in the calendar?

Josh, it's Mark. Yes, thanks for the kind remarks. Regarding the share buyback, I expect more of a programmatic approach throughout the year and with possible augmentation later in the year, just depending on how cat season plays out and as well as the development of the release of capital stemming from the legacy operation reserve runoff. So I think you'll see potentially more buybacks later in the year as well.

And notably, there was $33 million of favorable development in the quarter on the going-forward businesses. If I go back and look at Everest results for most of the past, there's always been almost no volatility in the reserves. 0 is the most [ common result ] in any quarter. This is always a little confusing. There's always new information, obviously, that you get about your reserves. But the truth is, I understand it. We just don't know what the future claims payments are going to be.

With the portfolio throwing off PYD in this quarter, does it signal a change in how you're thinking about conveying your -- what new information comes into the actuaries -- and also, given Mark, your retirement and Elias is not having joined yet, why is this happening now?

Well, it started last year. I think in the second quarter, we had some favorable PYD, also offset a bit through Russia, Ukraine adjustments. But in general, we made a point a year ago that the reserves in property, which is where this is coming from, are really well seasoned and significant enough where we felt comfortable to start releasing it.

So we feel very good about the level of embedded margin in the reinsurance property reserves, especially given the seasoning. We're going to play it, I think, close to the vest in terms of casualty, given the loss trend uncertainty, be prudent there. But there's a really nice embedded margin, I would say, on the property side that I think is available going forward.

And if you'll indulge me one quick other one. The legacy segment will be small enough in 2027 that won't need to be disclosed anymore? Or is that getting ahead of myself?

Probably getting ahead of yourself. Look, the reserves will still be meaningful. The P&L, I would expect to be smaller simply because the net earned premium will have essentially become de minimis. But we set up this segment a couple of years ago under the nomenclature of calling it the other segment because we did have a few pieces in there, asbestos environmental plus a specialty program through Ryan Specialty.

So I expect some level of -- much smaller levels of premium as this year progresses and still something in '27. I doubt it will go away, but it will definitely be much smaller.

Our next question comes from Michael Zaremski from BMO Capital Markets.

Good to see a cleaner print. Just curious on the move kind of increased PMLs and kind of move into short-tail lines. Is it fair for us to kind of bump up our cat loads a bit as we think about '26?

Mike, it's Mark. I think the cat load percentage back when we did the Investor Day in '23, we were saying approximately 7%-ish. We're in that same ZIP code today, you've obviously got a higher load for the reinsurance segment and a lower one for the global wholesale and specialty. It's a lot more diversified the portfolio in terms of the zonal PMLs and the risk that we're taking. And I think that it's something that will mechanically potentially increase a bit as the legacy premium diminishes and really depending on the growth environment for the company going forward as you've seen premium reductions year-over-year in some of the lines. So mechanically, it could have a slight increase given the fact that we still find property, property cat very attractive, and we are diminishing some of our casualty exposure.

Yes. And Mike, this is Jim. The only thing I would add, I think Mark's explanation is spot on. There is that mechanical reality just driven, frankly, more by what we're doing with casualty than anything happening in property. When I look at the actual net PMLs, though, and I know you don't have the 4 ones, but what I'm seeing is our net PMLs across, I think, just about every peak zone, maybe with 1 or 2 exceptions, are coming down now, just given the portfolio management we're doing in the market. So -- and that -- I think all other things being equal, that would continue to occur certainly during the course of 2026.

Got it. That's helpful. And then just switching gears to capital management. Mark, you today mentioned expect maybe higher capital management in the back of the year. But I think you just mentioned the AIG transaction, but I believe you also sold the Canadian property for a very nice multiple. So I think is it fair for us to kind of put a small placeholder for some capital return from that transaction as well in the back half of the year, if that closes this year?

Yes. I think it will be a component. Clearly, the transaction still has to settle. That's probably 6 months away, and we'll see how that gets handled at the end of the year, but it will be accretive to that discussion for sure.

Our next question comes from David Motemaden from Evercore ISI.

Mark, I also want to extend my congratulations on your retirement. I guess maybe just quickly, Jim, on -- just hoping to get a little bit more texture on your expectations for the 6/1 midyear and midyear renewals. Just -- I know you spoke about property cat pricing continue to soften, down 13% globally at 4/1. Maybe you could split that out between U.S. and internationally and how you're thinking about both pricing and terms in midyear.

Yes. So thanks for the question, David. Just let's cover 4/1 and then we can pivot into 6/1. On 4/1, look, I think pricing similar North America to international. Obviously, you had some really big international renewals -- and in particular, you had a lot of drag from a pricing perspective from the Japanese renewal where I think pricing levels were very robust. It's been a loss-free market for a while. And so you saw a little bit of a sharper takedown in that market. And then the other one I would call out as sort of anomalous is in India, which is becoming a much more meaningful reinsurance market where everybody decided to get into India. We've had a very nice book of business in that country with terrific cadence for a number of years. Unlike, I think, frankly, most carriers in that market, we make a fair bit of money providing that coverage and pricing was down sharply at 4/1, and we substantially cut our book of business in response to that.

So that's certainly affecting the rate view. And the one thing I would sort of add before I get into 6/1 is each of these renewals is so different. 1/1, 4/1, very different renewal structure for the reasons I just cited and then 6/1, obviously, very much centered on Florida. In terms of what to expect for Florida, a couple of things to note. First of all, I do want to certainly give our reinsurance team an enormous amount of credit for how they executed in 2025 because that sets up the story. I think we had a very clear beat on the fact that 2025 pricing was well above our thresholds of expected return, and we leaned into that and grew meaningfully. And I think that was exactly the right thing to do at the time, and you see that playing through in our Q1 cat growth rates ex reinstatement premiums being pretty solid.

I think for this 6/1, what we're seeing is rates are definitely going to be coming off. I think there's a fair degree of rationality among underwriters regarding the exposure because it's a peak zone for a reason. It's the peak zone. And so I think that will put a bit of a floor under things. I think terms and conditions will look good.

The vast majority of our deals in Florida are on a nonconcurrent basis, and we're advantaged that way. So I think that will advantage us. And it's early days though. I mean we've worked on whether it's 25% or 1/3 roughly of our renewals are sort of getting some indications on them. So very early. But I would expect rates to come off, maybe in the mid-teens zone. Time will tell. And I think we'll have an opportunity to do quite well. It may include taking a few chips off the table. But overall, feeling really good.

Got it. That's very helpful. And then maybe just for my follow-up. Mark, the underwriting expense ratio, 6% here this quarter. I mean that's pretty much where you guys had said you were expecting to be exiting the year. So should we be thinking about maybe a little bit lower on like continuing at this level? How should we be thinking about next year as well? Are we talking about this getting into like the low 5s just as you guys work on some of the expense efficiencies to help offset some of the top line pressure?

I think the 6% to 7% range we talked about is still in order. A lot of different moving parts. So let me put some of those on the table. We're still benefiting materially in the first half of the year from net earned premium stemming on the commercial retail runoff that we have. So that's helping to absorb some of that expense load. I think you've also -- you're seeing in the industry and for us, reduced premium writings this first part of the year. And if that continues, that will also put a damper somewhat on the net earned premium development, which will mechanically increase the ratio. However, we're obviously aware of all this. We run fairly lean or efficiently, I'd say, on the corporate side.

I think there's attention -- good attention on the corporate expense load of the company to manage it in a disciplined fashion as we exit the retail and navigate whatever the premium environment is going forward. But I still think on a relative basis, we'll keep our expense advantage that we have. It's just that number could move, but not that much. I don't think it's going to be something that's problematic. I just wouldn't be prepared to say you're going to be under 6 for any meaningful period of time in the next year.

Our next question comes from Alex Scott from Barclays.

First one I had is on the reinsurance reserves. It sounded like development was not favorable this quarter. I just wanted to check to see if you could give us any color on was there any unfavorable if you look specifically at casualty? And I mean, from the commentary or in the presentation, it sounded like short tail is doing well. So I'm just trying to understand if there's some level of offset to the positive commentary being made about short tails or the property comments you made on the call that we need to consider.

No, it's doing well, Alex. No problem in Q1. We feel good about the loss picks. We took an even more prudent approach, I'd say, with the 2026 loss picks for casualty pro rata. So feeling good about that. We did the review last year. The roll forwards continue every quarter. We've got our reserve studies coming in the summer. The cedant data that we're getting is pretty much in line with our expectations, and we're seeing good strength from other lines of business outside of casualty pro rata. So for now, it's steady as she goes.

Got it. Very helpful. And then just on the investment portfolio, can you talk at all about any exposure you have to private credit, whether it's in your alts portfolio or your fixed maturities?

Yes, sure. So we do have private credit exposure. It's roughly 7% of our assets under management, roughly $45 billion of AUM in the company. It's something we've had for a meaningful chunk of time. A lot of diversified-type holdings that we have. Direct lending, I'd say, slightly more than half, a lot of first lien secured loans attached to it as well. Software, pretty much on the smaller side. I'd say it's probably 15% of that overall 7 that I'm mentioning, but it's performing well. We're not seeing anything meaningful in terms of impairments or watch list exposure. We're not adding to it, but we're quite comfortable with where we are right now.

And our next question comes from Tracy Benguigui from Wolfe Research.

You said you're in your early days with respect to the Florida renewal season. And I heard yesterday from one of your competitors that they placed half so far. So I just wanted to talk about the cadence of this renewal season. If tort reform is making the market more attractive, do you think renewal discussions will wrap up earlier just go around than you typically see? And what does that mean for pricing trajectory? Like is it better to get in sooner?

Sure, Tracy. I mean I think every renewal season is the renewal season when we say we're going to get things done earlier in a more orderly fashion. It hasn't happened yet, but hope spring's eternal. Look, I think we are a -- as I said, we're a lead market in the Florida market. We have preferred client relationships. The renewal is well underway. And again, I think conditions overall will be fairly strong given the dynamic of, yes, there is tort reform, which makes it more attractive, but there's also increased demand. And you always have to remember, it's a peak zone for a reason.

And I think underwriters across the industry are well attuned to the risks involved in underwriting Florida property. And then as I would just remind everybody, just to repeat something I said earlier, north of 80% of our deals in the Florida market are with nonconcurrent terms, which I think puts us in a terrific position.

Very good. And as property is becoming more meaningful in your book, are you deemphasized -- and as you're deemphasizing casualty, taking a step back. For prudence, have you made any material changes in your cat modeling process like adding additional loads? Or is it more a status quo?

Sure. I would say that our cat modeling capability is second to none in the industry, and it's a core competitive advantage of ours. So we're always enhancing our cat models. We have a fully dedicated team of PhDs, math experts, seismologists, vulcanologists, you name it, on staff who are always incorporating the best scientific research, whether it's trends around climate change, views of the legal environment, et cetera. So we always want to be on the cutting edge of where we are on modeling. And again, I think that's a core advantage of ours.

Our next question comes from Yaron Kinar from Mizuho.

First, congratulations, Mark, on the retirement. A couple of questions. One, and I apologize for asking you, Jim, to pull out the crystal ball here. But I think you said that property cat rates remain above adequate at this point. So assuming that we have like a normal hurricane season this year, at what point would you think that the industry inflects back to flat or even property cat rates increasing?

Sure. It's a good question, and my crystal ball is out of order at the moment on that dimension, Yaron. I mean, look, here's what I would say. The first thing, and I know others have said this over the last few days, but while rates are coming down, there is also this underlying sort of floor of discipline that's occurring as well, which really gets reflected in terms and conditions, attachment points are very strong, which tells me that underwriters are alive to the risks that we're taking, and they're allowing rates to fall because pricing is above the levels they think they need to achieve in order to earn a reasonable return for the risk.

I think there's probably still -- there's still some room, but our view and the communication we're having with our clients is we've been a consistent supplier of cat capacity. We're a lead market. We want to get paid reasonable levels. And our view is that pricing shouldn't continue to fall. So we'll just have to see how it plays out. I think one thing that I take away from some of what I've heard in the market over the last few days from others is that you do see the lead markets taking chips off the table. And I think that's a very good sign that the market will find a reasonable resting place from which we then can have sort of a normal market cycle.

And I've said pretty consistently since the January 2023 renewal that it's my view that, that renewal was a reset around which you would see a market oscillation. And I think that's playing out. And it will be up to the lead underwriters to sustain their discipline if -- when we're talking about the January 1 '27 renewal and beyond to ensure that, that is, in fact, what comes to pass.

That's very helpful. And then my second question is, can you size the earned premium base associated with the Iran loss provision? The reason I ask this is I just want to make sure that as we think about underlying loss ratios that we have the right base here to model into the future.

I mean I can give you some indications. But one thing to keep in mind is a lot of the covers that are going to get affected are global in nature, especially a lot of the covers coming out of the London market. So how much of that premium is attributable to that particular region is really an impossible game.

What I would tell you is if you look at our Middle East reinsurance business, meaning we have a team that's an exceptional team that's been writing in that region for a long time. And they write 4 clients based in the Middle East. That business alone is in the neighborhood of $300 million a year in gross premium. So the reinsurance loss that we've pegged for Iran is $40 million. So it gives you an idea. It's a meaningful kind of a cat number against the $300 million, but not outsized. For the rest of it, again, it would be sort of impossible to attribute an actual market size to. But I think a $57 million provision, which we feel is quite prudent given where the conflict is at the moment relative to a global diversified insurance and reinsurance business is a pretty modest number.

And our next question is Ryan Tunis from Cantor.

First off, congrats to Mark. Jim, I wanted to go back to the attritional loss ratio in Global Specialty, the 58.9% and make sure I'm thinking about this right. On the pro formas, that's like more than 4 points lower than what you did in 2025, which seems like quite a bit. Is that just lowering a loss pick just based on just a brand-new view of profitability? Or just help me wrap my mind around that just a little bit better.

Sure, Ryan. Happy to unpack that. I think there's a number of things happening. The first thing to keep in mind is that we have shifted the mix pretty meaningfully over that time. And some of it you see when you look at it by line, if you look at, for example, in the quarter, the growth of our specialty businesses has a pretty meaningful impact on that number.

I think then even beneath that, there's dramatic changes to the underlying portfolio. So for example, if you go back a couple of years to our U.S. wholesale business, we might have been writing a fair proportion of open -- what I would call open market E&S casualty business. Just submissions are coming in, you're writing excess umbrella, often lead umbrellas. Loss ratios on those are very elevated. I mean we've moved almost entirely away from that kind of business.

What are we writing today? Well, we have experts that we've built that great team. I got a question earlier about the team we built. they're writing, for example, new risks around data centers. We have deep expertise in the area. We have a specialized product. It's still casualty. But if you look at the liability profile, we might be writing an umbrella limit, a $5 million limit that might have used to be a $10 million. It's not lead anymore. We're farther up in the tower.

Pricing is dramatically better. I mean those things do start to inure to your benefit in the loss pick. And I can tell you, we've been incredibly conservative in how we've reflected any of that in the number. But it's been so dramatic that I do think it justifies some movement, and that's how you get to the number where we are now.

Now I do want to reiterate and maybe expand a little bit on something I said earlier in terms of where does this go from here? I feel good about the picks. Mix is really going to make a meaningful difference. And when you're in an environment where you have pricing moving in all directions, so property pricing is coming down in the core market, but casualty pricing is accelerating in a number of areas. We've got a bunch of specialty businesses. I think the relative growth of those businesses could move that average loss pick up or down and still result in really terrific overall results. So just be aware that there's some of that going on.

Got it. And then I guess just for modeling purposes, just thinking about how the invested asset base moves this year is just a little bit weird with the AIG runoff. I mean is there any rough rule of thumb on how we -- how you guys are thinking about growth there relative to the decline in premiums that's coming from losing that retail business?

Yes. Ryan, it's Mark. I would expect it to be more marginal AUM growth. So part of it, to your point, is the reduction in the retail business. You've got a -- at least in the first quarter, diminishing gross written premium also being somewhat of a headwind. And you're seeing us emphasize buybacks, which is clearly a good thing, but a drain on AUM. So the other side of it, we'll see how the reserve paydowns progress, particularly in the Legacy segment, that will be something that also impacts it. So I would probably go with more of a flat to marginally -- marginal growth in that area. But it's dependent on all these factors on a quarterly basis.

And with that, ladies and gentlemen, we'll be concluding today's question-and-answer session as well as today's conference call. We do thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Rohrmann, Senior Vice President, Head of Investor Relations. Please go ahead.

Thanks, Drew. Good morning, everyone, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We're also joined by other members of the Everest management team.

Before we begin, I'll preface the comments by noting that on today's call, we will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and future results are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management may also refer to certain non-GAAP financial measures. Available explanations and reconciliations to GAAP can be found in the earnings release, investor presentation and financial supplement on our website. With that, I'll turn the call over to Jim.

Thanks, Matt, and good morning, everyone. Before getting into the quarter, let me provide a brief summary of the strategic steps we took in 2025. During the course of the year, we simplified the company, reduced reserve risk, reshaped the portfolio and strengthened the balance sheet. Despite reserving actions and costs associated with implementing our $1.2 billion adverse development cover and the divestiture of our commercial retail business, we generated an operating ROE of 12.4% and a TSR of 13.1%. We also made significant strides in strengthening the management team with several new world-class executives joining us in critical roles.

Today, Everest is better positioned to drive improved performance and consistent returns. We have more work to do, and the entire Everest team is focused squarely on the rigorous execution of our business plan to ensure we achieve our financial and strategic objectives. Turning to the quarter. Gross written premiums were $4.3 billion, down year-over-year, driven primarily by the sale of the commercial retail business and deliberate underwriting actions in both businesses, particularly in U.S. casualty lines. Net investment income was $562 million, up meaningfully from prior year, driven by growth in the fixed income portfolio and strong performance from limited partnerships. Investment income continues to be a durable contributor to earnings.

The combined ratio for the quarter was 98.4%, including $216 million of catastrophe losses and $122 million of ADC premium. Excluding those impacts, the attritional combined ratio was 89.9%, reflecting the underlying strength of the book and our focus on margin development. Now for our segment results. Our fourth quarter reporting is consistent with prior quarters with operating results presented for reinsurance and insurance. Mark will provide details regarding future segmentation. The reinsurance business performed well in the quarter with strong underwriting discipline applied consistently across geographies and lines. The division generated $255 million of underwriting income in the quarter. Our ongoing portfolio discipline in reinsurance is the driver of our strong underlying performance.

For example, since we began deliberately resizing our casualty portfolio in January of 2024, we have come off over $1.2 billion in premium. This same discipline carried into the January 1 reinsurance renewals. As expected, market conditions softened across many lines in the Jan 1 renewals with property cat rates down an average of 10% globally while remaining above our required technical price. As has been the case in past renewals, our preferred market position allowed us to shape our signings to maximize expected profitability. We bound over $6.3 billion of premium at Jan 1, down just under 1% over expiring. Terms and conditions and attachment points largely held, which is a sign of underlying market discipline.

Total property limit deployed decreased for the first time since 2022 with a modest 2% reduction. Capacity deployment was selective. We retained over 95% of our in-force premium with our top-tier accounts while deliberately reducing exposure to less profitable deals. We continue to see attractive opportunities in Asia, including in our new India branch as well as in targeted specialty lines. The global development of data centers, supporting energy capacity and other infrastructure investments has helped propel and diversify the development of our specialty book, which is now approximately $2 billion in premium with an attritional loss ratio in the mid-80s.

Our Mt. Logan third-party capital business is also performing well with over $2.5 billion of AUM as of January 1. We have an excellent pipeline of investor interest in Mt. Logan across multiple lines of business, and I would expect Logan to assume a more prominent role in our capital mix over time. Overall, the Everest Reinsurance team once again did an excellent job navigating a more challenging market. Moving to insurance. As I discussed during our Q3 earnings call, we completed our one renewal casualty remediation in North America as planned and are seeing indications those efforts are improving book performance. In addition, in October, we sold the renewal rights to our European, U.S. and Asian commercial retail insurance businesses to AIG for a total consideration of $426 million, including the transition services agreement.

Since then, we have been working closely with AIG to transition that portfolio. Pricing in the insurance book remained strong in Q4. North American casualty pricing continues to exceed average loss trend with GL, auto and umbrella excess increasing, in some cases, as much as 20%. This was somewhat offset by declining rates in property, which were down 11%, but remain above required technical price. While the retail divestiture will create modest short-term pressure on our group expense ratio, we expect it to subside in coming quarters back to levels where we've historically operated. I think it's worth spending a moment to outline the scope and strategy of our global Wholesale and Specialty platform. This business competes in attractive markets where the capabilities needed for success closely align with our reinsurance treaty business.

Both businesses require expertise-driven underwriting discipline, limited but strong distribution relationships, dynamic capital management and strong supporting claims and technology capabilities. This focus will allow us to further sharpen our execution and efficiency to benefit our clients and shareholders. At year-end 2025, gross written premium for our go-forward Global Wholesale and Specialty business was $3.6 billion, including $1.2 billion in facultative, which we have reported in this and prior years as part of our reinsurance business. Also included in this business is Syndicate 2786 in our London market business, Evolution, our U.S. E&S platform, U.S. programs and a range of specialty underwriting units in areas like marine, aviation, political risk, surety and Accident and Health.

These businesses are relatively mature with established underwriting franchises and proven risk selection. The platform is positioned to generate reasonable underwriting profits even as we select more prudent loss picks going forward. We expect additional mix improvement to increase underwriting profitability over the course of 2026. Since announcing our retail divestiture in October, we've quickly assembled the go-forward management team of Global Wholesale Specialty, now led by segment CEO, Jason Keen. Jason has deep experience running profitable specialty insurance businesses around the world, and he's already positioning Global Wholesale and Specialty for improved performance. We expect this business to become a more significant share of Everest's earnings mix over time.

Finally, a word on reserves and capital management. As Mark will share in more detail in a moment, we've completed all our reserve studies for the year. In reinsurance, we believe the overall division position is robust, driven by short tail and specialty lines. In insurance, we believe prudent loss picks in the most recent accident years, coupled with our previous actions and the cover provided by our ADC, dramatically improved and stabilized our overall position despite the ongoing challenges posed by the abuse of the U.S. legal system. And I'll end with capital management. To speak plainly, Everest stock price does not reflect the value of our firm, either in terms of current book value or the strong potential earnings of the company going forward. As long as that's the case, we will prioritize share repurchases as a use of excess capital. In Q4, we repurchased $400 million of shares and a further $100 million in January of 2026. And with that, I'll turn the call over to Mark.

Thank you, Jim, and good morning, everyone. As Jim mentioned, 2025 was a transformational year at Everest. We took significant steps to improve the return profile of our business and strengthen our balance sheet, while at the same time, returning capital to shareholders. Everest delivered a solid fourth quarter, generating $549 million of net operating income, an operating return on equity of 14.2% and an annualized total shareholder return of 13.1%. Our results this quarter reflect the strength of the contributions from both underwriting and our investment portfolio. There are several onetime moving parts that include the premium cost associated with the adverse development cover, the sale of the renewal rights to our commercial retail insurance business and the preliminary onetime charge associated with the exit of that business. And I'll discuss each of these items in detail in a few minutes.

Starting with group results. Everest reported fourth quarter gross written premiums of $4.3 billion, representing an 8.6% decrease in constant dollars, while excluding reinstatement premiums from the prior year quarter. This was largely driven by targeted reductions in U.S. casualty lines as well as the impact of our announced exit of the commercial retail insurance business. The combined ratio was 98.4% for the quarter, and this includes approximately $122 million or 3.2 points on the group combined ratio from premium consideration Everest paid for the second layer of the adverse development cover we announced in the quarter.

The premium consideration was split between $105 million in the Insurance segment underwriting results with the remaining $17 million in the other segment and is recorded in the prior year loss expense line of the financials. Catastrophe losses contributed 5.6 points to the group combined ratio, largely driven by Hurricane Melissa and other midsized events globally. The group attritional loss ratio improved 3.7 points to 60.2% in the quarter, largely driven by improved loss experience while we continue our prudent approach to setting initial loss picks in U.S. casualty lines. The attritional combined ratio improved 1.7 points to 89.9% when excluding the impact of $68 million in profit commissions related to prior year loss reserve releases in mortgage lines from fourth quarter 2024.

The commission ratio improved to 22.4% in the quarter, while the underwriting-related expense ratio increased 1 point to 7.2%, and the increase was primarily driven by lower casualty net earned premium growth and several onetime costs in our insurance business, which I'll speak to shortly. In the other income line, we recognized a net benefit of $127.3 million associated with the sale of the commercial retail insurance renewal rights to AIG in the quarter. And this consists of $289 million of revenues and fees, offset by charges of $162 million. As I previously noted, we expect there will be approximately $150 million of restructuring charges throughout 2026 associated with our exit from the commercial retail insurance business.

And this includes approximately $80 million of real estate-related costs that we expect to incur in the fourth quarter of 2026, which we'll look to mitigate where possible. These costs will be reflected in our other income and expense line within operating income and will not impact the combined ratio. In our Other segment, we expect approximately a $10 million monthly net expense benefit from AIG in each of the first 9 months of the year. Net earned premium associated with the commercial retail insurance business will continue to earn through the other segment before diminishing to a small amount around year-end. Given these dynamics, the combined ratio will likely fluctuate during the year as earned premium rolls off and general expenses diminish throughout the year.

We expect the other segment to run at a combined ratio above 110% in 2026, driven primarily by higher expenses as we transition the commercial retail insurance book to AIG. Moving to reinsurance. Gross written premiums decreased 3.6% in constant dollars versus the prior year quarter when adjusting for reinstatement premiums during the quarter, and we grew 10.1% in property cat XOL when excluding reinstatement premiums and continued to expand in Global Specialty lines while remaining disciplined in casualty lines. The combined ratio increased 80 basis points from the prior year to 91.2%. The attritional combined ratio increased 90 basis points to 84.6% when excluding the impact of $68 million in profit commissions associated with favorable mortgage reserve development from the prior year fourth quarter.

And moving to Insurance. Gross premiums written decreased 20.1% in constant dollars to $1.1 billion. Growth in Accident & Health and other specialty was more than offset by the lower retention and new business in our commercial retail business as a result of the announced renewal rights transaction in October. The underwriting-related expense ratio was 21.5%, with the increase driven by reduced casualty earned premium growth as well as onetime restructuring impacts that contributed 1.2 points to the increase relating primarily to accelerated IT project depreciation. The commission ratio increased 1.5 points to 14.1%, with the increase largely driven by mix. The attritional loss ratio improved to 68.6% this quarter, while at the same time, we remain disciplined in our approach to setting and sustaining prudent loss picks in our U.S. casualty lines portfolio, given the elevated risk environment due to social inflation.

There were several large energy losses in the market that impacted our wholesale business in Q4, leading to an elevated insurance attritional loss ratio. In addition to the premium consideration for the second layer of the adverse development cover, this led to an elevated combined ratio in our go-forward global Wholesale and Specialty Insurance business in the quarter. Now moving to our other segment with the announcement of the renewal rights transaction of our commercial retail insurance business, we will report 3 segments beginning in 2026. Our treaty reinsurance business, our global Wholesale and Specialty Insurance business, which includes facultative business and our other segment, which will encompass the exited commercial retail business.

We expect to disseminate the historical resegmentation following the filing of the 2025 Form 10-K. Now moving to reserves. All material reserve studies were completed during the third quarter, and our fourth quarter reserve roll forwards and review process yielded immaterial net movements for the 3 segments. Overall, we continue to see evidence of improved underwriting results in our insurance U.S. liability lines from the remediation process. We continue to maintain elevated loss picks in 2026 for U.S. liability lines as we did in 2025, given the uncertainty of the environment. Rate remains in excess of loss trend for U.S. casualty lines, and we expect that U.S. casualty lines will continue to represent a smaller portion of our reinsurance and insurance premium writings in 2026 year-over-year. Moving on to investments. Net investment income increased to $562 million for the quarter, and this was driven by higher assets under management and strong alternative asset returns, which generated $125 million of net investment income in the quarter versus $41 million in the prior year quarter.

Overall, our book yield remained flat at 4.5%, and our current new money yield is approximately 4.7%. We continue to have a short asset duration of approximately 3.4 years and the fixed income portfolio benefits from an average credit rating of AA-. For the fourth quarter of 2025, our operating income tax rate was 19.7%, which was above our working assumption of 17% to 18% for the year due to higher income associated with the proceeds from the renewal rights transaction, and the full year operating effective tax rate was 16.3%. Operating cash flow for the quarter of negative $398 million decreased from $780 million in the prior year fourth quarter, primarily driven by the consideration paid for the adverse development cover in the quarter.

Shareholders' equity ended the quarter at $15.5 billion. Book value per share ended the quarter at $379.83, an improvement of 20.1% from year-end 2024 when adjusted for dividends of $8 per share year-to-date. In the fourth quarter, we repurchased 1.2 million shares, amounting to approximately $400 million at an average share price of $320.59 per share. For the full year, we repurchased 2.4 million shares, amounting to approximately $800 million at an average share price of $333 per share. Looking ahead to 2026, we repurchased an additional $100 million of common shares this past January, and we continue to view share repurchases very attractively and plan to continue share buybacks in Q1 and in 2026 as a whole, given the return profile of our businesses and the expected capital release from the renewal rights transaction that will be unlocked over time.

As mentioned on the third quarter call, we consider $200 million as a quarterly floor for common share repurchases and expect to have a willingness to exceed this amount, conditions permitting, as you saw in the fourth quarter. And with that, I'll turn the call back over to Matt.

Thanks, Mark. Drew, we're now ready to open the line for questions [Operator Instructions].

[Operator Instructions] The first question comes from Gregory Peters with Raymond James.

So I want to focus on the expense ratio. And I know you called out that it's going to be higher as you work through some of the restructuring initiatives. in '26. But what's the final destination if you look forward for the global Wholesale and Specialty business when we think about the expense ratio? And there's the 2 pieces, right, the commission and then the other underwriting expense. Just wondering what that kind of looks like going forward.

Greg, it's Mark here. So let me unpack this a bit for you. I think for the -- let me just speak to the group first. A bit elevated as a result of moving parts we have here with the retail insurance transaction. So 6% to 7% is what we expect for the year. I think ultimately, that has to be on the lower end of 6% as we enter into 2027. With respect to Global Wholesale and Specialty, we'll get into that more when we have the resegmentation in the -- probably in March or late February when we release the resegmentation statements to the market via 8-K.

I do think the expense ratio for GW&S will be significantly lower than the current insurance segment, and that's still going to be lower end of double digits. You're probably going to be in the 12%, 13% type percent to start. And I believe that, that will improve over time as we benefit from scaling the businesses and becoming a bit more efficient. So I would expect that to move during 2026 and then settle into 2027 into a more mature level.

Perfect. And then just stepping back, a lot of breathless rhetoric in the marketplace about price action in reinsurance. And it feels like when we go into the June renewal season that there could be further pressure on reinsurance pricing. So if you could just provide us some perspective on how you think that might change the portfolio. And I noticed in your comments, Jim, you said it's still -- you're still getting rate adequacy where you choose to participate. And I'm just wondering if you anticipate changing your approach in different layers as the market continues to evolve.

Yes. Thanks for the question. I mean I think, first of all, as a general expectation, given what we saw at Jan 1 from a supply-demand perspective, I would sort of expect the rest of this year to be similar to the 1/1 renewal with rates on property cat down in that, whatever, 10% to 15% range that various folks are reporting. I think that's a reasonable expectation. Florida will be an interesting dynamic. I mean there is a clear dependence on reinsurance capacity to serve that market, which I think will help buoy the demand side of the equation. At the same time, it's pretty clear to us now in our data, and I think we've been quite conservative about this, that the reforms in Florida are working, and we're seeing it clearly playing out in our data, and I think others will be as well. So I'm not going to give you a point estimate on how those 2 factors intersect other than to say I think there could be some reasons to suspect it may be down a little bit more than what we saw at 1/1.

And then in terms of the return estimates of the business, it's above where we sort of require the return on capital for property cat to be to continue to write the business at scale. We feel good about that. We haven't really changed our layer approach much. I think if you dissect our PMLs, you might see a little bit of upward movement in the lower return periods. That's really an inflationary factor more than us trading down in the stack. We like our positioning. We tend to play what I'd sort of call in the middle of most U&L programs. We usually avoid the really remote tail positions because we don't feel like we get paid enough. And then further down, you get too close to loss. So I think we're in a good spot. I don't really suspect we'll change it much as we go forward.

Next question comes from Alex Scott with Barclays.

Could you comment a bit just about rate adequacy and how it compares to 2022, I think, is an interesting conversation. When you consider those expectations for rate through the rest of the year, where does that kind of shake you out relative to '22? Do you still find the market attractive to grow? How should we think about how you'll shift your market share in property cat in particular, as this unfolds?

Yes. Good question, Alex. Look, I would say that from a rate adequacy perspective, return on capital, we -- I like property cat better today than I would have in 2022. And certainly, you saw us cutting back in '22 pretty meaningfully, which I think was the right move, particularly in light of the cat losses that occurred toward the end of that year. And then in addition to rate, what's also really critical to keep in mind is structurally how programs are crafted today is much more advantageous, I think, to the reinsurance market relative to program structures like aggregates, the lowdown covers are gone. We're not participating in those. So feeling much better about returns given where we sit right now.

In terms of market share view, I think you've hopefully heard me say repeatedly, that's just not something we think a whole lot about. We look to place ourselves on the right programs, the right clients, shift the book as the economics shift. But if I were to step back from all that, I would sort of assume, and I think you heard my comments in the prepared remarks about what we did at Jan 1, we did take a little bit of capacity off the table. I wouldn't necessarily be surprised if that's a theme for 2026. And if others are willing to write more at lower prices, then our -- I guess, our absolute market share would decline slightly. But it's really on the margins and the profit-generating capacity of the book we're writing now, I think, is very favorable.

Got it. And then next on capital deployment. You obviously have ramped up the buybacks. Could you talk about your capital position currently, how you're thinking about it? And just as you're potentially pulling a little bit of capacity off the table, what will that mean for how you approach buybacks in '26?

Capital position is very strong right now. So you've got several impacts to your point. So first of all is we want to keep, obviously, the A+ financial strength rating of the company, execute the strategic plan. I suspect this will be a lower growth type year versus previous years in the marketplace. So there will be less pressure to support significant growth. And given the profitability expectations, ROE, I expect to generate significant levels of net income this year.

So these are all positives for creating even more excess capital. Combine that with what I would consider to be expected capital releases in the back half of the year as a result of the renewal rights transaction. I think that adds even more excess capital for repatriation purposes. And then you can get into where are we? We're trading at a discount to book. So it's very attractive no matter what to do the buybacks. And you saw us step on the gas in Q4. We'll continue that Q1. And for the rest of '26, we continue to see that as very attractive and probably the best use of excess capital in 2026.

The next question comes from Meyer Shields with KBW.

I want to follow up on the capital question. Basically, hoping you can describe your openness to additional retroactive reinsurance transactions for the future other segment and maybe a sense as to how much capital is currently supporting reserves that will be in that segment once you've resegmented everything?

Sure, Meyer. Thanks for the question. I would think about it this way. The ADC, obviously, that we executed in 2025 was about creating certainty around reserves. And I think that's something that I put in the done column. So not really looking at additional ADCs for that purpose. But at the same time, I think particularly given the growth of the other segment with the runoff of the retail business, I think there could be interesting opportunities for us to leverage transactions as a way of managing and freeing up capital.

The reserve balance in the other segment is going to grow meaningfully, obviously, with the resegmentation. And so we have now a dedicated CEO of our runoff business, and I know that he's actively looking at ways to optimize the capital stack of that unit. And so I wouldn't be surprised if we find creative ways to further optimize the way we're using our capital to support that runoff.

Just to add to the capital question on reserves, Meyer. So I think we've got or will have approximately $1 billion supporting the bulk of those reserves. And I would expect it to start to diminish most likely in H2 as the renewal rights transaction matures and we start to run off the earned premium that you'll see in the other segment in Q1 and Q2, it will start to approach a much smaller number, plus the paydowns on the reserves will start to release that capital. So I think we'll get meaningful portions of that in the back half of the year, first part of next year. And then there's a good chunk of those reserves that are longer tail in nature. So that $1 billion or thereabouts will take some time to fully run off several years given the nature of casualty, but there should be a nice slug from essentially July 1 this year into next year that frees up.

Okay. That's very helpful. Second question, I'm just unclear. In the slide deck where you talked about the ambitions for the Global Specialty and Wholesale -- or Global Wholesale and Specialty unit, it talks about a high 90s attritional combined ratio going to mid-90s. Is the mid-90s an attritional number or an all-in number?

Yes, that would be -- I mean, I would think about it as that business sort of stabilizes in 2026 as being sort of an all-in view. Now it's not a heavy cat business. So the gap between attritional and total combined ratio is certainly nowhere near what you would expect out of our reinsurance business. But I would think about that as an all-in number.

And part of that shift, Meyer, is mix of business composition in GWS. You will see more short-tail emphasis in the premium composition in 2026 versus some of the historical results. And I think when we get to the resegmentation discussions next month, we'll put more color into this when we discuss it.

The next question comes from Josh Shanker with Bank of America.

I want to follow up a little on Alex's question. January 1 renewals is really a discussion for the next conference call, but we can see a little bit with PMLs, you gave us your January 1 PML disclosure, and they are down as a percentage of equity as capital is up, which means that you're taking less risk. Can you opine a little bit on how we might think about property premium underwritings in 1Q versus 1Q '25? If your exposure is down, maybe premium is down a good bit as well?

Yes, sure, Josh. I mean I think I wouldn't be surprised if you start to see the growth that we've had over the last couple of years in total property premium begin to subside. Now you got to keep in mind, our Q1 print is going to include a lot of recognition of premium that was written in 2025, and we had a lot of growth in the middle of the year in particular. So I'm not going to give you a point expectation around up, down or sideways around that. What I would say is in terms of total risk, I think we're getting paid really well. Program structures are good. Rate levels remain above adequacy. We're taking some chips off the table really around the margins as we evaluate programs to ensure they're all hitting our hurdle rates. And I expect that to continue during the course of 2026.

And shifting gears to the insurance section segment. If we think 3 years into the future, how big of an insurance underwriter is Everest? And is that a business where Everest can consistently be profitable at a smaller size?

Yes. I think, Josh, I think if this industry has learned one lesson, not just in our own experience, but many, many others, is setting growth objectives, long-term growth objectives, size is not the way to measure these businesses. Bottom line profit is the way to measure these businesses. And my expectations for that business in '26 and in every year going forward is that it makes underwriting profits and strong returns on capital. Now that said, we are a relatively modest sized player in a very large pool.

And I think we have a great management team. We've got great products. We're well represented among our distribution partners. I think the divestiture of retail further strengthens us with many of our distribution partners. And so there's going to be a lot of opportunity, and we'll certainly take advantage of it. But I'll reiterate, just so we're all crystal clear, that will be viewed through the lens of how do we drive underwriting income growth, not how do we create a bigger top line. I do think we could be quite relevant. But again, always harkening back to that bottom line result is the measure that matters.

In a few core lines or will you have an expansive appetite?

Well, I think -- I mean, I think we have a reasonably broad appetite. We have a lot of capability. As I described, we've got our London market business, our U.S. E&S business, highly specialized underwriting units in a variety of segments. So I think we're broad that way. But if you look underneath the covers, in each of the areas we're choosing to underwrite, we have a lot of depth and capability. So I would characterize it as across the entire business, lots of variety, but in our individual underwrites, it's quite [indiscernible] and deep.

And we would rather write more risks in areas we really understand and try to find ways to write new different risks. And some of the examples I cited earlier, for example, take our U.S. E&S business. We have a really nice expertise in construction and engineering. And that's an area where we're leaning in. We're taking advantage of all of the development you're seeing around data centers, energy, infrastructure. And so I'd rather go deeper on that and get really honed as opposed to find new greenfields to conquer.

The next question comes from Michael Zaremski with BMO.

I guess my first question just around the catastrophes. Just thinking very high level, if this year was somewhat of a below average cat year, maybe disagree with that, at about $800 or so million of cats, and we'll see how that develops. Would a normal year be kind of like double that level? Or just trying to get a sense, I think the cat level was a little bit higher than expected in 4Q. So I just want to understand, given all the mix positioning, if we should kind of be toggling up the absolute cats by a very material amount for just kind of normal '26 or '27.

Yes, Mike, I think using the word normal with respect to cats is always a challenge. I think if you look at the total loss content in the industry, and there's a variety of estimates out there, 2025 was sort of what I would call an expected. It's the new normal year. You had -- and I've seen a variety of estimates, but a lot of them coalesce around $110 billion, $120 billion, $130 billion of industry loss. I call that a pretty hefty cat loss year, and I think that's pretty normal these days. So I think our cat performance kind of made sense given that backdrop.

And I don't really think of Q4 as elevated for us. I think if you look globally, I think a lot of times, we over-index the United States, and we didn't have a landfalling hurricane in the U.S. in the fourth quarter. But there were a lot of things going on around the world. We're a lead cat underwriter in Latin America and the Caribbean region. We had a cat 5 hurricane roll through the Caribbean. We had major storms and hail in Australia, flooding in Southeast Asia. So a lot of things happened in the fourth quarter. When I look at our market share relative to those events and the profitability of the underlying books that we're taking those risks, I feel really good about all that.

So I wouldn't expect any sort of dramatic change in our approach to the cat load as we go forward other than to say the one thing to always keep in mind is as we've divested retail insurance, there's earned premium associated with that, that goes away. So you get a little bit of a movement in the denominator. But I think the numerator is relatively consistent year-over-year.

Okay. That's great color. Maybe just switching gears to capital management. I think you guys have been clear that at this valuation level, buybacks will continue to be the main source of capital contribution for shareholders. But I guess given the top line is shrinking, unless we're doing the math wrong, it appears -- including with the money you're going to get from AIG and et cetera, it appears that you guys can do billions more buyback than the consensus is estimating at least starting in the back half of the year. So maybe more of a comment, but -- than a question, but maybe it would help if you eventually decided to kind of maybe give us a little bit more guidance specifically on buybacks as the year progresses to the extent valuation remains lower, hopefully doesn't.

Yes. I think, look, there are several points that you made that I think are very good fundamentals for increasing buybacks. I certainly don't think a normal payout ratio of the 40% to 50% range is applicable for 2026 environment. I think that you're going to see something more elevated, particularly with the discounted share price and the general lack of intensity coming from the growth in the business. So for me, those are great backdrops to promote even more buyback. And we'll communicate more when we have more. There's still significant risk out there. You've got the wind season. You've got -- obviously, you've got standard risks like reserves, regulatory, potential opportunities, growth, et cetera. But I think the fundamental baseline is that, yes, there will be elevated capital management with all of the fundamentals we see right now, and we'll just take it one quarter at a time and try to increase the level of value that we're providing to shareholders as we buy back.

The next question comes from Brian Meredith with UBS.

Jim, I'm just curious, we're seeing a lot of M&A happening right now in the P&C industry, and it's pretty typical for this part of the cycle. Is that something that you're thinking about to maybe bolster your global -- or your specialty businesses, parts you can add on? And clearly, you've got the excess capital to do it right now.

Sure, Brian. Thanks for the question. Look, I think the first thing you have to keep in mind is where we left the last question, which is right now, we have a very compelling return on capital available to us with de minimis risk, which is repurchasing our own shares. And so anything we would do on an inorganic basis would have to compete with that value proposition, and that's a pretty high bar. That said, if the right thing became available and it made sense and it really advanced our strategic goals, it's certainly an option.

We certainly have the firepower to do it. And we have a team now that has expertise from prior companies executing a variety of M&A transactions and doing it well and most importantly, understands how to do integration. But if you were to see us do something, I think I could safely characterize whatever it might be is small. It would have to be on our existing strategy path. We're not going to go off and do something that's in new markets, and it would be relatively low risk, and it would have to add some capabilities, some distribution, a platform that would be too difficult to build on our own. So it's a very, very high bar.

Great. That's helpful. And then I guess second question, just back on the reinsurance business. Thinking about 2026 here and kind of what's going on with property cat. Property pro rata, what's kind of the appetite there? Do you think that maybe expands a little bit here as a percentage of the overall mix, just particularly given Florida and some of the attractive homeowners returns you're seeing there now?

Yes. We've had a really great run in property pro rata. Our team has done an outstanding job of selecting the right clients. Those programs, I think, are very well structured in terms of event limits that help to really minimize the amount of property cat exposure you need to take relative to available profit. So that's all working toward the good.

I think -- the thing we keep an eye on, obviously, is underlying rates in the property insurance market are starting to come down. And so you'll see us be very thoughtful. I think that's playing through in our numbers now. We were down very, very slightly year-over-year in property pro rata. So we like the portfolio. If additional opportunities present themselves, we could certainly lean into them. I'd say right now that we do have a little bit of bias to commercial and a little bit of bias to E&S. So I wouldn't necessarily expect a huge expansion into homeowners, and we'll see how the year plays out.

The next question comes from Elyse Greenspan with Wells Fargo.

My first question, I wanted to spend more time on some of the color you provided around January 1. So you said that price was -- in property cat, sorry, price was down 10%. But your book, I believe, you said was down 1%. Can you just comment, I guess, what enabled you, I guess, to show a good differential versus the market? And then where did you see those better opportunities to drive that to put your book only down 1%? Was that in the U.S., Europe? Just trying to get some additional context there.

Sure. Elyse, let me just make sure I clarify the numbers that we're using. So the minus 10% is that was our book, our rate change. So we were down 10 points of rate, 1 point of premium. So if you look at our total GWP -- and by the way, that's not just property cat, that's for all lines of business, including pro rata, specialty, which we saw some great opportunities, casualty, et cetera. The total book premium, book premium was down 1%. And then we slightly reduced our total deployed property cat capacity in response to the 10% decrease. Now I think based on what I'm hearing from certainly some of the broker indices, maybe some of our esteemed competitors who have reported, I still think our 10% is a good number.

I think we outmaneuvered, frankly, the market to sort of control it. I think a lot of people are more in the low teens. And I think that's a testament to our market position. I think if we look at where property cat pricing is right now, there's a lot of attractive opportunity around the world. Clearly, I think the U.S., particularly Southeast U.S. is the best priced peak zone, but there's good business to be had around the world, and we were active pursuing those opportunities globally. So there was really no one region where we said, okay, we want to double down here because of where it's priced relative to others. It's a pretty broad-based opportunity.

And my second one, I guess, I just want to, I guess, cross reference some of the data points you guys gave on the new insurance segment and just make sure the -- I guess, the right sound bite is out there. Because I think in the prepared remarks, you guys had mentioned that it's $2 billion in premium, the specialty book with an attritional loss ratio in the mid-80s. And then I think the slides mentioned an attritional combined ratio in the mid-90s. I would think the expense ratio differential would be greater than 10% -- so I'm just trying to tie those points and maybe that specialty attritional was not a loss, but a combined ratio. If you could just help me there.

Sure. Sure, Elyse. Yes. So the $2 billion -- when I was talking about specialty, the $2 billion specialty book, that's our reinsurance specialty book. And that's an attritional combined in the mid-80s. It's been an excellent business for us. We've grown that meaningfully. That's different than our Global Wholesale and Specialty business, our insurance business going forward, which is -- if you look at where it would have landed in 2025, it's $3.6 billion in premium, $1.2 billion facultative -- of that is facultative. And we would expect that for a whole year basis of 2026 to sort of fall in that mid-90s range and an all-in basis. So hopefully, that squares the circle for you in terms of the numbers.

The next question comes from David Motemaden with Evercore ISI.

I had a question just on the OpEx expense ratio, the 6% to 7% mark that you had called out that you expect for the year. And I guess it's going to work down to 6%, I think you said by the end of the year. I was hoping you could just size for us the stranded overhead associated with the renewal rights deal. And I know you guys have a restructuring program out there, too. But just so we can sort of think about the dollar amount of stranded overhead associated with that deal and then just sort of track that throughout the course of the year as you guys whittle that down?

David, I think -- so a few points I want to put on the table here. I think we're going to be on the elevated side of 6% to 7% at the beginning of the year. I think it will trend downwards towards the lower end of 6%. I don't think it will be 6.0%, for example. Clearly, there's got to be a transition of the renewal rights to AIG throughout 2026, and we're planning for that. We'll obviously have commensurate corporate expenses with the remaining business. And the costs associated with the exited retail insurance business will eventually diminish significantly throughout the year as the business is transitioned over to AIG. So that type of expense load last year would have been in the low $400 million range. So I would expect that to diminish significantly throughout the year as we transition on a quarterly basis to AIG.

What are we going to be left with by the end of the year? I would estimate we would be somewhere closer to the $50 million type range, maybe a bit above. But the real issue is we're going to have an other segment or a legacy type segment for a significant period of time. There will be an associated run rate general expense with that, which will become clearer towards the back half of the year. And the expense reduction for the retail insurance unit, I think, is also subject to making sure, first of all, that we fulfill our obligations on the renewal rights transfer and that we properly treat the employees, et cetera, that are exiting the company over time. So a lot of moving parts here, but we have a clear set of objectives that we're trying to achieve in 2026.

Great. I appreciate that detail. And maybe just one other one. So it sounded like there were immaterial net movements on the reserve side. I see the $2 million favorable in reinsurance, so I wanted to focus there. Anything -- any other changes around the casualty reinsurance reserves in the fourth quarter that you guys want to call out from like a gross basis that maybe were offset by releases elsewhere?

No, nothing material. The bulk of the work was done in Q3. We feel -- I think Jim alluded to this in his prepared remarks, very good about the reinsurance reserves in terms of embedded margin that we see, particularly in shorter tail lines. So we believe we have still a very meaningful amount and an increased amount year-over-year. Feel good about casualty. So yes, we're adequate right now.

The next question comes from Ryan Tunis with Cantor.

Just one for me. Just on capital management, listening to your remarks, it does sound like you think that there might be some excess and that could potentially be deployable at some point in time. But should we be thinking about any drawdown of that excess as more of a '27, '28 event? Or could that potentially be something that we do later on in '26?

I think later in '26 is certainly on the table. We have to see how the claims pay out, for example, making sure that the renewal rights are transferred the way we believe they will be in 2026 and then making sure that capital is fungible for buyback, all solvable problems. And obviously, whatever events that may impact us during the year can be handled within our existing capital stack. But you saw what we did in the fourth quarter. I think we were quite committed to buybacks given the fundamentals. From my standpoint, I see a strong commitment to buybacks. As Jim alluded to, it's a very attractive return profile for the company. You'll see us emphasize that Q1 and for the remainder of the year. And as soon as we can -- we feel better about unlocking some of those expected benefits on the transaction, for example, that will be a natural place to look. We'll go right after the buyback.

The next question comes from Tracy Benguigui with Wolfe Research.

I have a follow-up on the lower PMLs to equity at 1/1. Was that just a consequence of deliberately reducing the exposure to less profitable deals that you mentioned? Or are you looking to improve capital efficiency like lowering your PML to equity targets?

Sure, Tracy. Happy to unpack that for you. I mean the first thing to keep in mind, and this is critical, we have plenty of capital to fuel whatever cat underwriting we'd like to do. It's really a function of the market opportunities we're seeing. And so you -- and certainly mentioned this regarding the January 1 renewal, we did start to take some chips off the table, while the overall available return in property cat remains comfortably above sort of our target.

Individual deals, given the rate decreases, sometimes don't meet our standards, and that's why we're cutting back a bit there. The other thing that's happening under the covers is, as I mentioned in my prepared remarks, we've also had some really nice fundraising in Mt. Logan. So there's a little bit of a hedging component to it as well, where we're ceding a little bit more premium and hence, PML to third-party investors, which we find attractive, and it certainly helps to boost our returns. And I think as a rough estimate for what's going to happen over the next year, I think those themes will continue to play out on both sides.

Okay. Great. You also, I think, made a comment that social inflation drove several large energy losses in your wholesale business that led to elevated insurance attritional loss ratio in the quarter. Was that more episodic? Or do you see these pressures persisting over having a longer-lasting impact on your attritional loss ratios? I'm just trying to square some of your earlier comments about insurance casualty pricing ahead of loss trend.

Yes. So the -- I want to separate -- there are really 2 separate items. Social inflation is a persistent reality in the U.S. casualty market across both divisions. It's something we've spent a lot of time assessing, understanding we underwrite against that reality, which is why we've reduced our casualty book in both divisions. That's separate from Mark's comment regarding energy losses in the fourth quarter, which were not casualty losses.

Those are just -- we just happen to have as will happen in our industry, we just had a little spike of multiple unrelated, mostly refining losses where you had large explosions at refineries. Thankfully, that seems to be one area of our business that doesn't have social inflation in it. So 2 unrelated factors that happened to be mentioned in the same part of the script.

This concludes the question-and-answer session and the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Everest Group Limited Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Matt Rohrmann, Head of Investor Relations. Please go ahead.

Thank you, Betsy. Good morning, everyone, and welcome to the Everest Group Limited Third Quarter of 2025 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We're also joined by other members of the Everest management team.

Before we begin, I'll preface the comments by noting that today's call will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and future results are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management may also refer to certain non-GAAP financial measures. Available explanations and reconciliations to GAAP can be found in our earnings press release, investor presentation and financial supplement on our website.

With that, I'll turn the call over to Jim.

Thanks, Matt, and good morning, everyone. Since becoming CEO of Everest 9 months ago, I've been focused on resolving the legacy issues surrounding our U.S. insurance casualty book, evaluating how and where capital is allocated in the group and assessing the results, opportunities and challenges facing each of our businesses.

Yesterday, we announced 2 strategic actions that position Everest as a more agile and profitable company with greater capital flexibility to invest in developing the group and return capital to shareholders. First, we are exiting global retail insurance. The teams running that business have done an exceptional job improving performance over the last 2 years. At the same time, it's clear to me the ongoing investments required in that business and the capital needed to support it are better placed than Everest's other opportunities.

Second, we have established a comprehensive adverse development cover for our North America insurance division covering reserves for accident years 2024 and prior. With $1.2 billion of gross limit attaching at a strengthened carried reserve level, this cover will help ensure the results of prior poor underwriting decisions no longer overshadow our strong current performance.

Long-term prospects in our core Reinsurance business and in the Wholesale & Specialty insurance operations we're retaining are excellent. I'll continue to set a simple standard for the businesses we operate. Capital deployed must be properly remunerated at acceptable levels of risk. We will operate in businesses with clear competitive advantage, strong economics and a well-defined forward path. This standard will be applied as we continue to develop our operations and evaluate opportunities to further diversify the company.

Turning now to performance in the quarter. Group gross written premium was $4.4 billion, down 1% from last year, largely reflecting targeted re-underwriting in Insurance and careful portfolio mix management in Reinsurance. Our combined ratio for the quarter was 103.4%. Excluding prior year development and net cat losses, the attritional combined ratio was 89.6%, demonstrating the strength of our underlying book. Operating income was $316 million compared with $630 million last year, the difference almost entirely attributable to the reserve adjustment I mentioned earlier.

Our Reinsurance business continued to perform exceptionally well in the quarter. Gross written premium of $3.2 billion was down 2% year-over-year, reflecting disciplined cycle management. The combined ratio was 87%, improving year-over-year, driven by lower cat losses and favorable prior year development. Reinsurance reserves are in a strong position. Portfolio mix in Reinsurance continues to develop favorably with property and other short-tail lines increasing by almost 5% year-over-year, while casualty and financial lines decreased by over 10%. This reflects our consistent strategy of reducing exposure to U.S. casualty in the face of persistent legal system abuse.

I would also highlight the strong performance of our Global Specialties business, which produced almost $500 million of gross written premium and over $100 million of underwriting income in the quarter. We're investing in this business and expect it to deliver top and bottom line growth in the coming quarters and years.

Market conditions in the Reinsurance business, particularly in our cat-exposed lines, should remain favorable through the January 1, 2026, renewal. While market capacity is increasing, Everest is a preferred partner, and we see no barriers to continued attractive capital deployment in this market. Make no mistake, though, where deals do not offer attractive and appropriate returns, we will cut back.

Moving to Insurance. The team's execution of our 1-Renewal Strategy remediated the North America casualty book in record time. We're maintaining pricing momentum, improving risk selection and exiting underperforming accounts, all of which position the go-forward Insurance portfolio for increased profitability. In the quarter, 45% of our U.S. casualty business did not renew. We believe AIG is ideally positioned to maximize the value of this portfolio going forward, and we were pleased to conclude our renewal rights transaction with such a close partner.

We're now reorganizing our insurance operation to focus on our global wholesale and specialty insurance capabilities and expertise. This is a strategic move that directly aligns Everest with the evolving needs of the market. Historically, our go-forward wholesale and specialty businesses outperformed our retail business by approximately 10 combined ratio points. Year-to-date, total written premium was approximately $1.7 billion. The long-term profitability and growth outlooks for the market segments we're focused on are excellent, while Everest's current share is measured in basis points. I'll have more to say about that business in future quarters.

To summarize, I would characterize this past quarter as one of action and clarity. We've confronted our legacy casualty issues head on, optimized the portfolio and positioned Everest for a new chapter. Our core business engines, Reinsurance as well as Wholesale & Specialty insurance are performing well. Our balance sheet is strong and generating meaningful net investment income. Our capital is flexible, and we're moving to a position of significant excess capital to deploy. And our team remains intensely focused on disciplined execution.

Before I hand it over to Mark, I want to thank my Everest colleagues around the world. These past months have required both focus and resolve, and our team has handled them with the utmost professionalism and integrity. We're all driving toward a unified goal of a more nimble, resilient and profitable enterprise.

And with that, I'll turn the call over to Mark.

Thank you, Jim, and good morning, everyone. The transformative actions we announced this quarter helped drive certainty into Everest's insurance reserve adequacy and position the company to focus on well-developed and more profitable lines of business. We expect these moves to yield improved returns on capital for Everest and value creation for shareholders.

As Jim mentioned earlier, we sold the renewal rights of our U.S., U.K., European and Asia Pacific commercial retail insurance business to AIG. These businesses collectively total approximately $2 billion in gross written premiums. The transaction will result in meaningful total value to Everest and significant capital will be released over time. We expect to take a pretax nonoperating charge in the range of $250 million to $350 million associated with the transaction with the charge being recognized over 2025 and 2026. The transaction meaningfully streamlines Everest's operating model and bolsters our focus on core Reinsurance and Specialty & Wholesale Insurance businesses.

We took further action to fortify our U.S. casualty reserves, strengthening reserves by $478 million on a net basis or 12.4 points on the combined ratio. This was split between the insurance and other segments and follows the acceleration of our global reserve studies into the third quarter. We also entered into an adverse development cover, providing $1.2 billion of gross limit with Everest having co-participation of $200 million. The ADC covers $5.4 billion of North American insurance subject reserves for accident years 2024 and prior with an effective date of October 1, 2025. Everest will be transferring $1.25 billion of in-the-money reserves. As a result, we expect net investment income to be lower by approximately $60 million per year over the next several years. And we will be paying approximately $122 million of premium upon closing of the transaction, which is expected to be in the fourth quarter.

Starting with group results. Everest reported gross written premiums of $4.4 billion, representing a 1.2% decrease in constant dollars, while excluding reinstatement premiums from the prior year quarter. The combined ratio was 103.4% for the quarter, reflecting the net reserve strengthening I mentioned a few moments ago. The Reinsurance business had favorable reserve development of $29 million, and this was more than offset by reserve strengthening of $361 million in our Insurance segment and $146 million in our Other segment.

The quarter benefited from relatively light catastrophe losses, which contributed 1.3 points to the group combined ratio. The group attritional loss ratio increased 1.4 points to 59.9% in the quarter, with the increase largely driven by our conservative approach to setting initial loss picks in U.S. casualty lines. The attritional combined ratio increased 3 points to 88.8% when excluding the impact of $34 million in profit commissions related to prior year loss reserve releases in mortgage lines, largely due to contingent commissions also associated with our mortgage lines business.

Moving to Reinsurance. Gross written premiums decreased 1.7% in constant dollars when adjusting for reinstatement premiums during the quarter. Consistent with prior quarters, we exhibited solid growth in property and specialty lines while remaining disciplined in casualty lines. The combined ratio improved 4.8 points from the prior year to 87%. The improvement was largely driven by lower catastrophe losses, which amounted to $45 million or 1.6 points on the combined ratio versus 9.1 points on the combined ratio in the prior year quarter.

Net favorable prior year development also contributed 1 point to the improvement. Our reinsurance reserve studies yielded minor development in casualty lines with continued strength in property, mortgage and international lines. Overall, we believe we are continuing to build upon our embedded reserve margins. The attritional loss ratio increased 60 basis points to 57.5% as we proactively embedded conservatism into our U.S. casualty loss picks. The attritional combined ratio increased 180 basis points to 85.3% when excluding the impact of $34 million in profit commissions associated with mortgage -- favorable mortgage reserve development.

And moving to Insurance. Gross premiums written increased 2.7% in constant dollars to $1.1 billion. Strong growth in Other Specialty and Accident & Health was largely offset by the aggressive actions we are taking in U.S. casualty lines. The underwriting-related expense ratio was 19%, with the increase driven by reduced casualty earned premium growth from our 1-Renewal Strategy. The attritional loss ratio increased to 67% this quarter, reflecting our disciplined approach to setting and sustaining prudent loss picks in our U.S. casualty lines portfolio, given the elevated risk environment due to social inflation.

As I mentioned earlier, we strengthened our insurance reserves in the quarter, largely driven by U.S. casualty lines in accident years 2022 through 2024. And this was due to an acceleration of large loss activity, particularly in excess casualty and management liability and higher frequency in general liability and management liability, resulting in more conservative assumptions. We believe that increased prudence in loss development factors in 2025 loss picks in conjunction with the ADC transaction we entered into will help us turn the page on the U.S. casualty reserving issues experienced over the past several years. Reserve strengthening in the Other segment was largely driven by U.S. casualty lines, primarily the sports and leisure business. Most other segment reserves are also covered in the ADC, excluding asbestos, amongst other minor items.

Moving on to investments. Net investment income increased to $540 million for the quarter, and this was driven by higher assets under management and strong alternative asset returns, which generated $112 million of net investment income in the quarter versus $72 million in the prior year quarter. Overall, our book yield decreased slightly to 4.5% given the large component of non-U.S. dollar assets. Our current new money yield is approximately 4.8%, and we continue to have a short asset duration of approximately 3.4 years and the fixed income portfolio benefits from an average credit rating of AA-.

For the third quarter of 2025, our operating income tax rate was 9.4%, which was below our working assumption of 17% to 18% for the year due to the jurisdictional mix of profits in the quarter and a $23 million onetime benefit from our 2024 U.S. tax filing. Shareholders' equity ended the quarter at $15.4 billion or $15.5 billion, excluding $87 million of net unrealized depreciation on available-for-sale fixed income securities. Book value per share ended the quarter at $366.22, an improvement of 15.2% from year-end 2024. When adjusted for dividends of $6 per share year-to-date.

We will also realign our reporting segments beginning in Q1 2026 and communicate that once it's finalized in the coming weeks. We did not repurchase any shares in the quarter. However, we continue to view share repurchases as an attractive opportunity to deploy capital, and we expect to resume meaningful share repurchases going forward.

With that, I will turn the call back over to Matt.

Thanks, Mark. Betsy, we're now ready to open the line for questions. [Operator Instructions]

[Operator Instructions] The first question today comes from Josh Shanker with Bank of America. The first question comes from Meyer Shields.

May I come in, too?

Yes. Josh, we hear you.

It's -- it's actually, Meyer, but I'm glad you can hear me.

Yes. So doing some very quick math on the 10 percentage point differential on -- between the specialty and the retail business in insurance, it suggests that it's running at a 95% combined ratio, excluding cat. I was hoping you can get a sense as to what the cat load is for the specialty business, whether 2025 or 2026?

Meyer, it's quite modest actually, almost de minimis, definitely very low relative to the overall insurance division burden that we currently have.

Okay. Fantastic. And when I look at the transferred reserves and the fact that $2 billion of insurance gross written premiums is going to be non-renewed one way or the other. Is there any way of ballparking what that ultimately means in terms of capital liberation?

So Meyer, just I want to make sure I understand your question. So the $2 billion of retail business that we transferred to AIG and any other nonrenewal of subject premium over the renewal, you're interested in the capital release from that? Is that accurate?

Yes, that's exactly right.

Yes. So there's multiple components to that. We do expect it to be substantial over time. The -- let me just put a few things on the table because I think it's more of a timing issue than anything else. So the renewal process will take place, broadly speaking, over the coming 12 months. So over that time, we will benefit from nonrenewing that premium on our own paper, and we will start to reduce the capital intensity associated with the premium itself. In the meantime, we will have meaningful net earned premium continue to show up in our P&L from 2025 writings, as you would expect. And that will be accompanied with traditional P&L items, so commission expense, loss expense, G&A, et cetera. And so those loss reserves will also attract some capital charge over that time.

In addition to that, we will have the existing set of reserves which have been enhanced by roughly $0.5 billion of casualty reserves running off over time, and that will release capital as well. However, we do have as a result of the extra $0.5 billion charge principally in casualty, a significantly higher level of casualty reserves, which means we'll have less diversification benefit in the coming few quarters of that reserve runoff. So I would expect capital relief from this transaction, the remediation, the runoff, et cetera, to become more visible in the back half of '26, but we certainly see it coming.

The next question comes from Josh Shanker with Bank of America.

There's a lot of moving parts in the announcement. There's the ADC, there's the renewal rights transfer. Obviously, there's the charge related. The one thing that hasn't been announced is a plan of what to do with capital. I think investors might have felt some comfort if there was some announcement that we plan a large repurchase or there was a commitment from management to want to own the shares here. The stock is trading below book, how should we frame the appetite for returning capital to shareholders over the 1-, 2-year period?

So Josh, it's Mark. We obviously view capital repatriation, share buybacks very attractively for the several of the points you mentioned. Clearly, trading at a discount to book makes it attractive. We're in a lower growth period of the cycle. And so as we're generating returns, we certainly foresee meaningful retained earnings accumulation. I would say that the kind of activity that you saw in the first half of the year this year would represent a floor on buybacks as we pursue Q4 and then into 2026. And to my earlier point to Meyer, we do expect the transactions that we've entered into to unlock more capital for that purpose over time.

All right. And then trying to understand the sort of chronology. Obviously, a little less than a year ago, there was a plan for a 1-year renewal and obviously, the decision that Everest is not the appropriate owner for a lot of its retail risk. When did the company come to understand that? And of the underwriting that had done in like the past 6 months, do we have any concerns that Everest wasn't the right underwriter for that risk and we need to worry about '25 reserves?

Yes, Josh. So let me start by talking a little bit about the re-underwriting process and where we are in that process, and then I'll come on to the timing of the decisions around the go-forward business. So just to refresh memories, I took on leadership of the Insurance business last year 2024 at the sort of end of the spring. We had really ramped up the remediation process that you've seen play out that we've called the 1-Renewal Strategy in July of '24, meaning it essentially began to complete itself in July of '25 and with a little bit of tail into the third quarter. And so that re-underwriting is complete. There is no further re-underwriting of the casualty book other than normal portfolio management that is required as we go forward.

One statistic that I will share with you, and this is going to be relevant to how you think about the '25 loss picks. But if you look at the development that we've observed in 2025 that led us to an additional strengthening of our back book reserves, 80% of that development in U.S. casualty came from policies that were eliminated from our portfolio during the course of the remediation. And I think that's a good early indicator that we were over the right target that we dealt with the remediation decisively and that the go-forward portfolio will perform extremely well. Now that said, we've still booked it at very, very prudent loss picks. We're not taking credit for any of that, but we do expect it to play out.

And then to the broader question you asked, which I think is an important one, and I'm going to spend a couple of minutes on it, if you'll indulge me. In terms of how we got to the decision and the chronology of getting to the decision around the go-forward portfolio, that was a comprehensive process. It was not driven by what we observed in the reserves. It was a process that was led by the management team, included a number of outside strategic advisers and ultimately included our Board of Directors in a very thorough process. And the purpose of that process was to determine what are our best opportunities to drive shareholder value and compounded book value per share growth over time period.

We didn't bring any biases into that process around businesses we had built, businesses that we otherwise liked, et cetera. It was purely a strategic review to get at those critical answers. And during the course of that process, as I shared in my opening comments, it became really clear to me, to the rest of the management team, to our advisers and to our Board that our best opportunities are in our Reinsurance business, which is a leading -- market-leading franchise and in our Wholesale & Specialty Insurance operations, which perform at a very high level, which allow us to very nimbly manage the market cycle, which require much less investment in terms of people and technology and therefore, have less execution risk. And we talked a little bit about the performance gap in the combined ratio.

And so therefore, the decision was to focus on those businesses. And as a result, we determined that it was best to exit retail insurance, and that's how we got to the transaction that we announced yesterday. But that gives you a comprehensive sense of how these things play together.

The next question comes from Gregory Peters with Raymond James.

So one of the questions that seems to pop up on a recurring basis as you've cleaned up your insurance operation casualty reserves is the potential risk of spillover into the reinsurance book on your casualty business. And since you've completed your full year reserve review a little early, maybe you can give us some perspective on why you're confident your -- the casualty reserves inside your reinsurance business are going to hold up.

Yes, Greg, I certainly understand the question, but I think I would really begin by resetting the premise because these are 2 very different portfolios. And one of the things I've been really honest about during the course of this process is where our insurance casualty book performed on a historical basis. And I would characterize it bluntly as squarely in the bottom quartile of performance in our industry. And whether you -- whether I observe our own results, if you talk to brokers who have a fair bit of data, industry observers, there is a huge distinction in performance between bottom quartile underwriters and top quartile underwriters.

And I think that's played out over all market cycles in all lines of business. So we were bottom quartile. Now we fixed that. And I think over time, that portfolio is going to perform really well, and I think will be an asset to our partner, AIG, as they take it on. So that's one point.

The other is I would not expect, based on the fact that we write a top quartile reinsurance portfolio, there's no basis to expect that portfolio to perform in the same way that a bottom quartile portfolio would perform. Now yes, it's subject to the same issues around social inflation and things of this nature. But the top quartile underwriters, they were consistently doing what we've done over the last year in insurance, which is very closely managed limits, ensure that you're getting top pricing for the exposures you're taking, carefully selecting classes of business to write, leaning on loss-sensitive features to align interest with your clients. All of those things that we've talked about as part of the remediation. That's what our reinsurance clients have consistently done throughout the cycle. And so there's just no reason to expect those portfolios to operate in a similar fashion over time.

And then can we just talk about property reinsurance pricing conditions going forward, considering the light year, I noted in your presentation that your PMLs are inching upwards and that you grew your property cat and non-cat reinsurance business in the quarter. How are you thinking about that business in the '26 period of time, considering what looks to be like a lot of pricing pressure?

Yes. Well, first of all, I would characterize it in general as still a very favorable environment. And one of the points that I made on the last quarter's call was that if you didn't know that prices had corrected up by 50% at 1/1/23 and you just looked at the rate level that's currently persisting in the market and compared it to prior historical rate levels, let's say, in the 20 teens, you would say this is a great cat market and people should be writing it. And I think that's true.

And I think that's why you're seeing the competition. People recognize that it's well priced and they want to write it. Prices will likely come down. There are various estimates if you believe, let's say, a 10% expectation of price decreases at 1/1. I still think that means that property cat is well priced. And so I think it's still a risk that we will be looking to take. Now as I said in my prepared remarks, when the market moves down 10%, that's going to mean there's going to be some clients where we view the pricing and we don't think it's adequate, and we'll adjust accordingly.

In terms of the non-cat or the pro rata growth you saw in the quarter, that was really -- that's more of the flow-through of growth that's occurred over the last couple of years as we've leaned into that market correction. We've been very selective in terms of where we're growing that portfolio and with which cedents. And so I feel very, very good about that book.

The one thing I do want to just say, though, and I think this is important, when people talk about a light year, nothing we're going to do at 1/1/26 or in any renewal has anything to do with the fact that it was a light year. First of all, I didn't feel that light. We started with a major wildfire. We've got a Cat-5 hurricane churning in the Caribbean right now. We don't react to one good year and say, well, we're going to do one thing or the other based on that. We're making long-term bets based on where we see the pricing trajectory of the business. And you will not see us be afraid when the time comes, if it comes, to begin pulling back, taking ships off the table if we're not getting paid appropriately for the risks that we're being asked to bear.

The next question comes from Alex Scott with Barclays.

I wanted to come back to the ADC and just see if you could talk a bit about how you thought about sizing the $1.2 billion gross protection. I mean, can you characterize that in terms of like standard deviations away from your point estimate and that kind of thing, just so we can get a sense for how protected this is?

Yes, Alex, good question. Let me start with a little bit of the philosophy or the strategy behind it before we get into the actual ADC numbers. What we wanted to do was to put the issues of our historical casualty reserve challenges behind us. And you've seen this management team, I think, be pretty focused on making that happen and obviously have taken a couple of actions to do that. Obviously, the reserve strengthening that you saw in the quarter was all about getting ultimately to an ADC that would create finality around those issues. This is something we don't want to have to talk about again.

So in terms of sizing it, one of the things I would think about is we've talked about reserve margin in the past, and we talked about hundreds of millions of dollars of reserve margin. I would think about the ADC as $1.2 billion of reserve margin. It's about ensuring that -- again, that we create that finality. And so it's less about, well, I need to be at a certain percentage of the actuarial best estimate or a certain standard deviation. It's more about putting this out in the tail so that people don't have to worry about it anymore. So that's really what drove it more than trying to land anywhere on a particular curve.

Alex, I would add a couple of points to Jim's commentary. So the subject matter reserve pool is approximately $5.4 billion. So when you take into context the $1.2 billion of cover on top of that, that is very substantial. So if you think about a distribution to the point you were making, I would call that quite broad, quite strong, certainly more than a traditional range of an ACE and certainly nothing that we would expect to blow through, to be quite frank with you, given the overwhelming nature of it. So the underlying reserve base is also somewhat diversified with other lines of business. So the casualty reserves, I would say, are the ones that are currently in focus from a risk perspective. And so this $1.2 billion can really be seen, I think, as to Jim's point, finality on the subject for us.

Got it. Very helpful. Follow-up question is on the insurance segment, you commented a bit about the profitability of what you're retaining versus what's going in the renewal rights. You also mentioned several times just the conservatism that you're now embedding into loss picks. And so I just wanted to make sure I'm understanding the 2 things correctly. I mean if it's sort of -- I think Meyer mentioned 95% and you didn't correct them on the go forward, is there any kind of conservatism that needs to be thought of layered on top of that for a while before you kind of get to that level? Or is that where it's running right now even with the conservatism that you feel like you're embedding now?

Yes, Alex. Look, I would say one of the reasons I didn't correct the 95% is we don't give forward guidance. But I'd say we have tried to create some clarity here by indicating this business performs well. I'd say the lower half of the 90s is a reasonable way of thinking about a conservative approach to booking that business. Given where we've come from, we want to make sure that we are being prudent in the loss picks. And so the way I'm talking about it assumes that we're going to keep some conservatism.

The other key point to keep in mind, though, is if you think about the Wholesale & Specialty business on a go-forward basis, the share of that business that's U.S. casualty exposed is something that we're managing very closely. And so the need for conservatism gets affected, obviously, by the mix of the portfolio you're writing, and that's certainly within our control. So I think you can see us print some very solid current period results while also being conservative in the picks, which to me is the best combination.

The next question comes from Andrew Andersen with Jefferies.

Hear your comments on the difference between the reinsurance casualty and insurance casualty, but I think you did mention some movement on casualty reinsurance this quarter. Could you just expand a bit on what that was? And I just want to confirm, this was effectively the reserve study for the year across both segments? Or is there still some studies in the fourth quarter?

No. Reinsurance is complete in terms of the reserve studies. There might be a couple of very small ones, but they'd be immaterial to this. Clearly, we did all the casualty studies, very minor puts and takes, nowhere close to the magnitude of what we had last year. Feeling very good about it, and it's fully reflected in our Q3 figures.

Okay. And on just growth, I suppose if you don't have that favorable view of -- on primary casualty, that somewhat reflects your reinsurance casualty growth. But that line has been coming in for a while. What are you kind of seeing in the pricing environment on casualty reinsurance and your go-forward view there for growth?

Yes. I mean the main way that we participate in the casualty reinsurance market is on a quota share basis. And so the real price that we keep an eye on is rate relative to the trend line. I think that's been a pretty favorable story really for the last year plus. I don't really see that changing. It's compressed a little bit, but you still see -- our clients are still keeping rate in excess of trend across those casualty lines. I don't -- I haven't seen any evidence of the quality of underwriting slipping, certainly not among our clients where we've seen that, that those are folks that are no longer our clients.

And then the last piece I would say is there has been a persistent stickiness to ceding commissions that I don't think is really all that smart on the part of the reinsurance industry. And so you've seen us act maybe a little counter to what some others are doing insofar as if we're going to take these risks, we want to make sure that the alignment of interest is there and that we're not overpaying for the business. So I don't really see that changing.

So I think it's sort of status quo. I think there's plenty of good quality casualty reinsurance to write, maybe not as much as we would like, but plenty for us to focus on, plenty of great clients to participate with. And so I think we're kind of in a -- I think we're at the right level now. And from here, it's just the usual portfolio management work that we are always doing.

The next question comes from Brian Meredith with UBS.

Jim, first question, I think in your prepared comments, you talked about looking for ways to diversify the company more. Can you maybe elaborate a little bit on that? And why is that important? And why not just kind of stick with your kind of core competencies here right now in Reinsurance and Wholesale & Specialty businesses?

Sure, Brian. Yes. I mean, look, what I -- I wouldn't read too much into that comment. We're always looking at opportunities. When we talk about diversification, I would always apply the clear priorities that I signaled or the standard that I set in my prepared remarks, which is if we're going to deploy capital anywhere, it's got to get remunerated at acceptable levels of risk. It's got to be in businesses where we see clear competitive advantage, where the economics are good, where the path forward around execution is strong.

And so look, it's a big world. We participate, I think, meaningfully in a number of markets. We're still underweight in a lot of places. And you've heard me talk about them in the past. In the specialties, obviously, and I mentioned our reinsurance specialty performance, $500 million of premium in the quarter, over $100 million of profit. It's a terrific business, lots of room to grow there, which creates diversification because you're not -- that's not property cat, that's not core U.S. casualty. We're still underweight in Asia. The team out there in Reinsurance has done a phenomenal job of growing that business. I think we can continue to play that out over time.

We have -- we're organizing now around Global Wholesale & Specialty in a way that we haven't before. We've named Jason Keen, who was the co-CEO of our International Insurance business as CEO of that new division. He will definitely find interesting opportunities to grow again over time. And so that's really what I'm referring to. And we evaluate those very carefully. And I think you can certainly feel confident that we've set a clear standard on how we're going to think about those opportunities as we move forward.

Great. That's helpful. And then second question, just back on the ADC. I'm just curious, any way you can provide maybe some details on how you think the ADC reinsurers arrived at the attachment point? I mean I look at the adverse development you had in your insurance, it's about 2x your risk margin at year-end 2024 and 1x on the other segment.

Yes. I mean one thing that I would point out is I was really, really glad that we were able to do this transaction with Longtail Re, which I'm sure you're familiar with that team and Mike Sapnar. Those are super credible underwriters. They did an excellent job evaluating the portfolio. And so it's -- I would describe it as more of a collaborative process than anything else.

Obviously, one of the features of this ADC that I think is really critical to focus on is the fact that there is no loss corridor. And clearly, establishing a stronger reserve base is, I think, a precursor to getting $1.2 billion of gross limit on top of your carry position without a loss corridor. And so that was an important characteristic of how we brought all this together. And I think that was important to us because it now creates certainty and people now understand that '24 and prior North America insurance development, if there is any, which we set our ultimates hoping that there's not. But if there is any, it will be covered under the ADC.

And so that's sort of the process they go through. It's a very rigorous process, a collaborative one. And I think it got to economics that will be very, very good for Longtail Re, but are also quite reasonable from Everest perspective.

The next question comes from David Motemaden with Evercore ISI.

I had a question just on the casualty reinsurance reserves. Mark, you had mentioned there was some minor development there in the quarter that was offset by some of the shorter tail releases. I was wondering if you could just elaborate a little bit on what happened exactly there and some of the trends you're observing on the casualty reserves.

Yes. A couple of comments. I would say it's definitely subsided. You're looking at a few older years that were getting impacted from a few cedents. We're seeing good signs of adequacy overall. And when I compare it to the trends we saw last year or the previous year '23 or '24, really didn't see the same level of development that we saw there, particularly when we were bridging the data. So we felt quite comfortable with what we were seeing and the ability to offset it.

I think the other point that I would make is -- so I mean, it's all U.S. casualty based. There was nothing else from an international basis that was concerning us at all. It's obviously something we're focused on because it is so much in the spotlight with social inflation. So we do a lot of individual cedent reviews as we look at the data. But the other point that I made in my script is the overall strength of the reinsurance segment and the embedded margin that we believe we're building in there. We continue to see very favorable signs of adding embedded margin, waiting for it to season and then releasing it when it's ready.

Got it. And the gross change on the Casualty Re side, is that something you could size for us?

A few percentage points, very small on the base. So definitely on the low end.

Got it. And then just quickly, I think just staying on the Casualty Re reserves. I think when we had the reserve update at the end of last year, there was $180 million of risk margin in that book, and you guys had said it was at the upper part of the actuarial best estimate range. I was wondering, has that improved? Is that in the 90th percentile now? I guess, how big is the risk margin? Has that stayed the same? Any sort of detail on those metrics would be helpful.

Yes. I want to make sure I understand which segment you're referring to. Was it -- sorry, was it Reinsurance or Insurance?

Yes, the casualty -- on the Casualty Re side.

On the Casualty Re side, yes. So we're definitely comfortable with it. I think what we did last year, the concept of the risk margin that we put into the management best estimate was really to deal with uncertainties that we foresaw from a management perspective relative to the actuarial central estimate. And so as we observe the data coming in, the loss experience and how broad-based it was, we could see that, that uncertainty really wasn't crystallized into a loss experience that was more in line with our expectations.

And so the point that I would make is that the uncertainty on the higher end is not something that we see today. We're quite comfortable with the loss development factors that we put into our Q3 studies. We're benefiting from this extra data. We're seeing stabilizing trends. The loss picks are in a good spot. It's something we've also taken the time out of prudence to strengthen in the current year 2025. So from a Reinsurance perspective, we're in a good spot.

The next question comes from Ryan Tunis with Cantor.

Just, I guess, Jim, kind of a broad question on just the ROE trajectory. At the beginning of the year, you thought the ROE was x, I don't know, call it, 14%, 15%. Just thinking through the moving parts on what that is now. I mean we're losing $2 billion of insurance premium, $60 million of investment income, but obviously, we're getting some costs out and some elevated capital management. So I'm just wondering how you're thinking about the ROE profile of this company.

Yes, Ryan, thanks for the question. It's good to hear from you. Let me step back a little bit and paint a little bit of the broader picture and then get into the specifics of your question just in terms of the moving parts around the specific transaction and what it will mean for the group. The first thing I would say is, as you'd appreciate, there's an embedded cost that is included in the P&L that's now going to be transferred, which involves, obviously, employee costs, technology, et cetera. We have a very clear strategy around how we rationalize that in 2026.

And as Mark indicated earlier, we're still expecting and just on simple math and accounting, a fairly robust amount of earned premium to flow through our P&L from the portfolio that we're selling in 2026 as it runs down. And so I think the -- on a very rough justice basis, the rundown of the cost and the rundown of the earned premium are moving in the same direction. Not to say there won't be some drag at certain points or things we'll have to manage. But I'm pretty confident we'll get to a good place around that. And so as we sort of exit the transaction and get the business rightsized, I don't expect that to be a long-term headwind for the group as you get out past 2026.

The other thing I would say is, obviously, you have a market cycle that is -- it's doing what market cycles do. It's ebbing and flowing. And right now, particularly in short-tail lines, you see a little bit of a takedown both in the primary market and in reinsurance around property pricing, et cetera. But as I indicated in earlier questions, I still think it's very attractive.

And so are we still sort of in the mid-teens level of ROE for -- over the cycle? Yes. Are we at a part of the cycle in '26 where maybe it's just slightly below that? Maybe. But lots of levers for us to pull, not least of them will be capital management actions, as Mark indicated, to manage that over time in a really attractive way.

Got it. And then just a follow-up on the decision to do the renewal rights deal. Are you describing -- I guess, first of all, I was a little bit surprised that it doesn't sound like there's any overlap on the retail business and the remediation you did. So seems reasonably clean from a reserve standpoint and it's a sub-100% combined ratio business. So why do the renewal rights deal rather than pursue sale opportunities?

Yes. Yes. So fair question. So first of all, just to reiterate some things I said earlier, the decision around -- the strategic decision that I made in conjunction with the management team, our advisers and the Board was about focusing on our core reinsurance business and these really attractive Wholesale & Specialty businesses. That's the real primary decision that got made. And so the decision to exit retail insurance is a byproduct of that.

And then the question becomes, once you've gotten there, what is the most effective way to create that. And I think from the perspective of a few factors played into why a renewal rights transaction. Well, one, the reality is we're going to need to and we have dealt with the back book of reserves from the ADC, but it's just not a practical thing to try to transfer that at this point. A number of legal entities that support the retail business are also really important to the Wholesale & Specialty businesses that we're persisting. That's important.

And then ultimately, we got to a place where we had the right partner to work with to get this deal done effectively quickly with a lot of certainty. And there's also, obviously, the needs of your partner you got to think about. So all those things aligned. And ultimately, it was really clear to me that a renewal rights transaction was the most efficient way to effectuate the strategic priorities that we had set during this process of focusing on our Reinsurance and Wholesale & Specialty Insurance businesses.

The next question comes from Hristian Getsov with Wells Fargo.

In the past, you've spoken about increasing the international component of the primary insurance book. I guess with all the moving pieces, particularly around the renewal rights and the new focus on the Wholesale & Specialty side, is there any change in that game plan? And then I guess, sticking to that, is there enough runway for you guys to grow that business organically? Or can M&A be a bigger part of the story moving forward?

Sure, Hristian. Let me take the questions in turn. So the growth in international, obviously, that was largely a retail strategy, although we also have a terrific wholesale business in our Everest Global Markets, which is our London market business. And I want to be really clear about something important. And I think this is true both on the international side as well as North America post the remediation, there was nothing wrong with the books of business. And there was nothing wrong with the way the teams were executing their strategies. They were getting good results.

But the question that we confronted strategically is what is the best use of our capital and our investments going forward. And clearly, as I've said a number of times, the opportunity in Reinsurance and in Wholesale & Specialty Insurance for us at this point in our evolution is just a much stronger proposition than continuing to invest in retail. So yes, the decision to divest the retail business will blunt the international growth in the short term, but it's for strategic reasons that we've spent a lot of time explaining today.

So in terms of the business going forward, and particularly that Wholesale & Specialty business, which I said -- as I've said, we've now reorganized into a single business under great leadership. I do think there will be growth opportunities. We're supremely focused on bottom line results. But as market conditions allow, I think there is organic growth that we can pursue. I will stress probably being very repetitive at this point, but we can pursue those growth opportunities organically with far fewer investments in people and infrastructure than is required in the retail business, which I think is attractive for us.

And then could M&A be part of the plan? I think that's possible. But we've been pretty consistent on this point, which is if we do something like that in Wholesale & Specialty, it's going to be about bolting on capabilities that are attractive, that are consumable, that have modest execution risk. Those are the sorts of characteristics that I think would you would want to think about if we were to do any M&A in the Wholesale & Specialty space.

Got it. And then how are you thinking about pricing at the 1/1 renewals, just given what we know through hurricane season to date? And does the ADC and renewal rights sell, does that increase your appetite for you to go and get new business now that you're done through the 1-Renewal Strategy and you're getting a bunch of capital alleviation over the next 12 months?

Yes. So in terms of the pricing outlook, I think the market consensus is prices are going to come off a bit, probably in the range of 10%, depending on who you believe. I think the business is still well priced if that happens in terms of expected return. Now having said that, I would not expect us to look to significantly grow from that point when prices are coming down, I think it's more about being very selective. Capital constraints were never an issue as we've expanded the book. And we had excess capital before this transaction. We have more of it now. That is not a factor in determining how much cat we're going to write. It's really more about the underlying dynamics of the cat market and how it compares to other opportunities to deploy capital.

The next question comes from Tracy Benguigui with Wolfe Research.

Just some clarification on your comment, there was no loss corridor. I mean, I see that in the schematic. But I just assumed that the $539 million of casualty reserve strengthening would have been your loss corridor have you not taken those actions. So I'm just wondering, did Longtail Re come in and say, I will attach $5.4 billion, so you have to fill in the gap? Or would they have done the deal at a lower attachment?

Well, yes, Tracy, I'm not going to speculate on what they might have done. But what I would say is it was a collaborative process in terms of arriving at the structure of this deal, and we were sharing a lot of information, a lot of transparency was taking place. But remember, this is fundamentally driven by an appropriate actuarial process within Everest to arrive at what we think the ultimate loss ratios are going to be. And I think -- and again, I'm not going to speak for Longtail, but I think anyone looking at the approach that we've taken to those reserves would say, we believe in the ultimates, and I think that's the real takeaway here.

Those are the right ultimate loss ratios given everything that's occurred in the external environment and the underwriting issues that we've had. And so therefore, we can attach at that ultimate. And I think that speaks volumes about how people are feeling about what's going to happen next in terms of those ultimate loss ratios holding from here.

Got it. And I'm just curious how wide of a search did you conduct? This is not a knock on Longtail Re, but just doing a deal with a non-rated reinsurer piqued my interest given the capital discussion on this call. I mean, there's less relief given higher counterparty credit risk.

Yes. So just one thing in terms of the deal features, and then I'll come into the process. We are facing off against 2 rated fronting carriers as part of the transaction. So we're not taking credit risk to Longtail Re. We have rated balance sheets, very strongly rated balance sheets facing us as fronts in the transaction. So it's a good question and something we thought carefully about.

We ran a very comprehensive process. We use Gallagher Re as our broker in the process. They were -- and if you know their casualty team is world-class. They did a very comprehensive search. We worked with a number of parties. But -- what I really liked about Longtail is a couple of things. One, we have a pre-existing relationship with Stoneridge Asset Management through Mount Logan. They've been very steadfast partners of ours. So that was a feature. And I think there's a lot of our companies do together today and can do together going forward.

And then I have enormous respect for Mike Sapnar personally, and I think he's a fantastic underwriter and his -- frankly, his seal of approval on all this was important to me. So I think this outcome is just fantastic for Everest, and I think it will prove to be a really good trade for Longtail as well.

Okay. So you said there were 2 fronting companies. It's like retrocession. Like if you could just share a little bit more detail behind that.

Yes. So the deal, the transaction, the $1.2 billion gross limit is split into 2 layers. The first layer is fronted by State National. The second layer is fronted by MS Transverse. Longtail sits behind those 2 carriers and has collateral arrangements, et cetera. But we face off, we are ceding to those 2 rated balance sheets.

Yes. Tracy, it's worth pointing out we have an 8-K with all the details on the ADC. I think we issued it yesterday. So certainly, you can get that structure from there.

This concludes our question-and-answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Everest Group Limited Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

Now I would like to turn the conference over to your host today, Matthew Rohrmann, Senior Vice President and Head of HR. Please go ahead.

Thank you, Keith. Good morning, everyone, and welcome to the Everest Group Limited Second Quarter of 2025 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We're also joined by other members of the Everest management team.

Before we begin, I'll preface the comments by noting that today's call will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and similar are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management may also refer to certain non-GAAP financial measures. Available explanations and reconciliations to GAAP can be found in the earnings press release, investor presentation and financial supplement on our website.

With that, I'll turn the call over to Jim.

Thanks, Matt, and good morning, everyone. Everest delivered a strong second quarter. Contributions from underwriting and investments drove net operating income of $734 million and an annualized operating ROE of nearly 20%. Our results underscore the strength and resilience of our platform. Underwriting profit totaled $385 million on a combined ratio of $90.4 million. This reflected light cat experience and $39 million of favorable prior year development in our reinsurance attritional property book. We maintained prudent loss picks across our portfolio with a 60.1% loss ratio.

Gross written premium declined slightly year-over-year. Reinsurance GWP rose 1.1%, while insurance declined 3.1%. Growth excluding deliberate U.S. casualty portfolio actions in both divisions was 11% and 7%, respectively. Net investment income was strong at $532 million, supported by favorable private equity performance.

Moving on to Reinsurance, which delivered an excellent quarter, generating $436 million in underwriting profit, up $133 million from prior year. The combined ratio was 85.6%, reflecting improvements in our business mix and minimal catastrophe losses. Reserve releases improved the combined ratio by 1.3 points in the quarter while losses associated with the recent U.K. court aviation ruling added 3.2 points. Improved mix drove a 30 basis point reduction in both the attritional loss ratio and attritional combined ratio to 56.7% and 84.1%, respectively. We continue to grow in property with premiums up about 8% over prior year. Property cat XOL grew over 15% and property pro rata north of 8% as risk-adjusted returns remain attractive.

Our differentiated access to clients affords Everest, high-quality opportunities despite rising competition. Casualty premiums declined 7.3%, while our casualty pro rata book was down 15% as we reduced targeted exposures. Primary Casualty rates are rising, but the persistent level of ceding commissions and continued legal system of use inform our conservative approach. We continue to see attractive opportunities in our global specialty platform, particularly in engineering, renewable energy and our world-class Parametric business.

Turning to midyear renewals. Property cat rate change met our expectations and risk-adjusted returns for our cat portfolio remain attractive. Importantly, terms and conditions are holding. Property cat rate for our portfolio was essentially flat at 6.1% as the vast majority of our signings were done at preferential rate and terms. We're also beginning to see the benefits of Florida tort reform, which has not been factored into our pricing.

Market conditions at [ 7/1 ] largely follow the trends seen throughout the year. We continue to reshape the portfolio, expanding in U.S. property, in Asia and in Latin America, while reducing our U.S. exposed casualty business. We have shed approximately $800 million of casualty pro rata business since the beginning of 2024. Our superior execution and deep relationships position Everest to optimize our share in attractive programs with [indiscernible], in many cases, with favorable economics. In short, our reinsurance business is well positioned to deliver regardless of the external environment.

Moving on to insurance, where we are rapidly reshaping our portfolio. The division recorded an underwriting loss of $18 million with a combined ratio of 102% and an attritional loss ratio of 68.7%. Results reflect ongoing prudent loss picks, particularly in casualty, as we continue to build our risk margin, lower earned premium, coupled with investments in our global platform led to a higher expense ratio. Gross written premium declined approximately 3% year-over-year driven by our 1 renewal strategy in North American Casualty, which will be completed in the third quarter. Casualty premiums decreased 27% in the quarter. 47% of casualty business in the quarter was not renewed. This was partially offset by strong rate increases, which averaged 16% for the casualty business we retained, led by excess umbrella and commercial auto, each increasing in the high teens.

Importantly, rate exceeded expected loss trend across commercial auto, general liability and umbrella lines. It's early, but we're already seeing results from our actions to improve the quality of our casualty portfolio. In the quarter, 88% of retail Casualty gross written premiums had loss sensitive structures and 86% was in our best classes of business.

Make no mistake, Everest Insurance is open for business to write well-priced and well-structured casualty accounts. Premium growth across all lines, excluding Casualty, was 7% globally, with strength in specialty Accident & Health and across our international business. Specialty in A&H grew 40% and 24% year-over-year, respectively. In property, global premiums increased 5% with 21% international growth, offsetting a 2% decline in North America. While still attractive, the primary property market is increasingly competitive, especially in North America large accounts. Nonetheless, our long-term investments in talent and systems give us runway for disciplined growth.

Our wholesale platform, Everest Evolution continues to capitalize on opportunities in the E&S market. We have expanded industry specialization and new offerings, driving growth in targeted higher-margin segments of the market. Our international insurance business is progressing well, with a 23% growth rate this quarter and improving margins. We're making investments in key capabilities to support the business at scale. International is profitable with the more mature operations like U.K. wholesale and European retail achieving low 90s combined ratios this quarter.

Moving to reserves. We continue to build risk margin in the current accident year. In reinsurance, we recognized favorable development in well-seasoned property lines. In insurance, we remain consistent with our booked position. Mark will provide additional commentary on reserves and our recently published global loss triangles.

Now turning to capital management, which remains a strategic priority for Everest. In the second quarter, we repurchased $200 million worth of shares. Year-to-date, we have returned $400 million to shareholders in the form of buybacks, repurchasing approximately 1.2 million shares.

In closing, I'm encouraged by our progress and strong performance this quarter. Reinsurance continues to produce excellent results in insurance, the expertise and capabilities we've built in property and specialty lines globally are proving beneficial. Our renewal strategy in U.S. casualty has already improved the quality of the portfolio, which we believe will result in more consistent profitability over time.

Looking ahead, we remain focused on executing across both businesses, managing the cycle with discipline, and building long-term value for shareholders. With that, I'll turn the call over to Mark.

Thank you, Jim, and good morning, everyone. Everest delivered a strong second quarter, generating $734 million of net operating income, an operating return on equity of 19.6% and an annualized total shareholder return of 14.8%. Our results this quarter reflect strong contributions from both underwriting and our investment portfolio.

Starting with group results. Everest reported gross written premiums of $4.7 billion, representing a 0.7% decrease in constant dollars and excluding reinstatement premiums. As Jim mentioned, the combined ratio was 90.4% for the quarter, and these strong results were driven by relatively light catastrophe losses and favorable prior year reserve development from well-seasoned attritional property reinsurance reserves, representing a 1 point benefit to the combined ratio. This was partially offset by aviation-related losses associated with the U.K. court ruling, which contributed 2.5 points to the group combined ratio. The group attritional loss ratio increased 1.3 points to 60.1% in the quarter.

Moving to reinsurance. Gross written premiums increased 1.6% in constant dollars when adjusting for reinstatement premiums during the quarter. Consistent with prior quarters, solid growth in property and specialty lines were partially offset by continued discipline in casualty lines. The combined ratio was 85.6%, an improvement of 3.3 points from the prior year. Favorable prior year development contributed 1.3 points to the improvement.

Catastrophe losses were de minimis this quarter, while the prior year quarter included $120 million or 5 points on the combined ratio. The aviation losses associated with the Russia-Ukraine war of $98 million added 3.2 points to the reinsurance combined ratio. And we included these in a separate line item, as you would have seen in our earnings release and financial supplement.

There were $14 million of reinstatement premiums associated with the aviation losses, bringing the net loss to $84 million.

Moving to insurance, gross premiums written decreased 3.3% in constant dollars to $1.4 billion. Strong growth in other specialty and Accident & Health was more than offset by the aggressive actions we are taking in U.S. casualty lines, centered around our one renewal strategy. As a result, Specialty Casualty gross written premiums fell to 22.2% of the Insurance segment mix, a decrease of over 7 points from the prior year quarter.

The attritional loss ratio increased to 68.7% this quarter, reflecting our disciplined approach to setting and sustaining prudent loss picks as we build risk margin in our U.S. casualty lines given the elevated risk environment. The 2024 global loss triangles we posted to our website in late June reflect the decisive reserving actions taken at year-end, and we also enhanced the level of disclosure by adding detail and commentary to each line of business, and we plan to continue enhancing our disclosures moving forward and provide additional information around our reserve position.

Our Q2 U.S. casualty loss development is consistent with our expectations, and social inflation dynamics persist at levels that are within our assumptions. While it is still early, we believe the conservatism we are applying to our loss picks in conjunction with our underwriting actions and improved portfolio quality is building risk margin in our portfolio. Overall, the reserve position of our insurance division is adequate.

The underwriting related expense ratio was 18.9%, with the increase driven by slower casualty earned premium growth from our 1-Renewal strategy as well as the continued investment in our global platform.

In the Other segment, the quarter includes a $20 million loss provision for our intellectual property business, which is in runoff, and the segment's combined ratio was also impacted by catastrophe losses of $10 million.

Moving on. Net investment income increased to $532 million for the quarter, driven by higher assets under management and alternative assets generated $110 million of net investment income in the quarter and benefited from strong returns in private equity investments. Overall, our book yield decreased slightly to 4.6% and as foreign currency bonds with lower yields become a larger proportion of our portfolio. While our reinvestment rate remains north of 5%, we continue to have a short asset duration of approximately 3.4 years, and the fixed income portfolio benefits from an average credit rating of AA-.

For the second quarter of 2025, our operating income tax rate was 16.4%, which was just below our working assumption of 17% to 18% for the year. Shareholders' equity ended the quarter at $15 billion or $15.3 billion when excluding $252 million of net unrealized depreciation on available for sale fixed income securities.

Book value per share ended the quarter at $358.8, an improvement of 12.1% from year-end 2024 when adjusted for dividends of $4 per share year-to-date. We continue to view share repurchases attractively as we repurchased 581,000 shares in the quarter, amounting to $200 million or an average of $344.30 per share, and we expect to take a tempered approach in the third quarter given wind season. And all other things being equal, we expect to look to resume the pace of share repurchases in the fourth quarter and into 2026.

And with that, I'll turn the call back over to Matt.

Thanks, Mark. Operator, we're now ready to open the line for questions. We do ask you limit your questions to 1 question plus 1 follow-up, then rejoin the queue for any additional questions. Keith, over to you.

[Operator Instructions] And the first question comes from Andrew Andersen with Jefferies.

The underlying loss ratio insurance about 69% and if we look at year-over-year about 6-point increase, which is essentially the risk margin put in place, over the next kind of 1 to 2 years, should we think of that 6% staying in place, but perhaps there's some benefit on mix shift to international and short tail?

Andrew, it's Mark. I think the approach that we want to take on this, there's a few pieces to unpack here. So obviously, we're committed to a risk margin given the uncertainty [indiscernible]. I think 2025 is a little heavier than we might see in the future, given the runoff of the older unremediated portfolio stemming from essentially Q3 last year. Having said that, we're going to make sure that the data is supporting any conclusions that lead us to reduce the need for elevated loss picks, including that risk margin. I do think the mix of business will provide a meaningful impact in the overall loss ratio as it evolves and the net earned premium begins to grow in.

And to your point, the combination of the international business that we're writing and the increase in short tail lines here in North America are going to be the principal drivers of that. And I would also point to the fact that the percentage of casualty is -- has been reduced almost 7 points to a little over 22% in the second quarter's composition. So you can see that trend starting in place. The [indiscernible] will take a while to catch up, but that's kind of the overall view.

And then on the expense, I think I heard you say some international investments. Were they maybe a little bit lumpier this quarter? And perhaps you could just talk about how you're thinking about the pace of international investments in insurance?

Yes, it's a bit lumpier. International is growing at a faster pace than North America. So proportionately becomes a larger component of the combined ratio I think the key thing to look at with the expense ratio evolution in insurance is really our ability to leverage the infrastructure that we've built and continue to build in terms of premium evolution. It's really scaling that premium and the commensurate net earned premium that is going to cause that ratio to diminish over time.

And the next question comes from Alex Scott with Barclays.

I wanted to ask about the Accident & Health growth. Certainly, in some areas of A&H stop loss, I think it's a harder market. And so maybe there's a good opportunity there. On the other hand, I think some of the health insurers have been experience in medical cost inflation is pressuring their businesses. So I'm just interested if you could provide a little more color on what you're doing there. Any nuances to the way you're approaching that market and growing just given a little more uncertainty for loss cost trend?

Sure, Alex. Good question. Look, we like the Accident & Health business. We have significantly diminished the health portion of A&H for us. We really should say accident and we are growing our accident business, both in the U.S. and in our international business at a strong clip. The type of business we're writing, things like business travel accident, where companies are procuring coverage for executives who are traveling around the world, participant accident where you have various groups who want accident cover for -- could be things like sports participation, nonprofit organizations, et cetera. And so that's the kind of premium we're putting on the books. That tends to be very consistent performing. You're talking about very low severity, more of a frequency business. and the performance of that portfolio for us has been strong, which is why we're leaning into it.

Got it. Follow-up question, I guess, just on reinsurance and the renewals. Can you talk a bit more about what you saw in terms of the terms and conditions and the competitive environment on that front? And just how you're seeing the trade-off between the growth and returns you can get versus capital return? And pretty attractive stock price to be buying that?

Sure. Look, if you look at both the June 1 and July 1 renewals, our big midyear renewals, I think it's a pretty consistent story. So it -- at June 1, we had obviously the Florida renewal, as I indicated in my prepared remarks, overall pricing was flat, and generally, terms and conditions are not moving, which I think is a terrific sign and speaks to the underlying discipline in the property cat market. And I think my expectation is certainly that that's going to sustain itself. And then with respect to [ 7/1 ], obviously, you have a much more diverse renewal with a number of markets around the world, having significant renewal dates. Their rates down slightly. But again, terms and conditions hold.

So you just see this very consistent view that says that discipline in the market is going to be sustained. And again, it informs our expectations as we go forward. And that's why we grew at the [indiscernible] renewal. And in the pockets of the [indiscernible] renewal that we really liked, we also were able to deploy more capacity at really attractive margins.

In terms of the trade-off between capital return and growth into the property cat market, I mean the most important thing to note is we're doing both, and we have the capital strength to do both. I will say, though, that if you look at the expected return from property cat pretty much everywhere in the world and certainly in our peak zones like Southeast Windstorm or California earthquake and a bunch of the Japan, et cetera. The ROEs are still very, very strong, and I think would even exceed the attractiveness of repurchase. So that's why we're continuing the strategy of pursuing both actions.

The next question comes from Gregory Peters with Raymond James.

I'm going to focus my first question on just the continuation on the pricing commentary. Listening to the broker calls and some of the other companies that have reported so far, we're hearing of pricing -- more pricing pressure than it seems to be that you're conveying that happened in your renewal. Maybe -- maybe it's more -- maybe it's more focused on the facultative market as opposed to the treaty market, but maybe you can just unpack why we're hearing about more pricing pressure, specifically on the 7/1-Renewals than maybe you're talking to us about?

Sure, Greg. I mean -- well, first of all, just to sort of contrast the 61 and the 7/1-Renewal, I would say rate at the 61-Renewal for Everest book was flat. The July renewal was down marginally, so call it in the 5% to 10% range. And again, you have a much more diverse set of renewals that are happening at [indiscernible], which is so Florida focused. And so -- and again, I think that's pretty consistent with what we've seen. The fact that the 6/1 renewal, the fact that we write the vast majority of our programs at nonconcurrent terms, whether that's pricing, terms, conditions, et cetera, certainly speaks to part of that.

I think it also has a lot to do with the choices that individual underwriters are making. If you're trying to position your cat portfolio at the very high layers, which is more risk remote, where you're competing with cat bond capacity, you probably are seeing more price pressure. We feel like we're in a sweet spot. We're away from the attritional losses. We're a lead market, and so we're getting to drive a lot of the underwriting action that's happening on the programs we're participating in. And so we're not feeling the degree of price competition that maybe some brokers are speaking to.

And then lastly, I think your instinct is right, which is they're dealing with a very broad set of data. It crosses treaty. They could absolutely be speaking about facultative individual risk is more competitive than treaty in my view. And then, of course, retail insurance is more competitive still. So that, I would imagine, explain some of the difference.

Yes. Just using the same format on the insurance segment, I think your business mix skews to the larger side of the market versus the small and midsized market. And in insurance, we're hearing and seeing some pressure on rate there. I understand you're 1-Renewal position on casualty, I see the growth in Accident Health. Just trying to help -- if you could just help us sort of understand the moving pieces against what we feel like is increasing price competition in the larger end of the insurance segment?

Yes. Well, first of all, that's right. The larger end of the market in retail insurance for property is definitely more competitive. Now similar to comments I would make about treaty property on the reinsurance side. One of the reasons it's more competitive is because it corrected so strongly to the upside over the last several years that you've got significant embedded margin in those programs, and that's going to attract competition. So it's important, in my mind, to distinguish between what rate change is doing and then where you think you are relative to adequacy. And we still feel like a lot of these programs are above what we consider adequate pricing to take risk.

But we are growing more selective. And you saw in the numbers that I described in my prepared remarks, are North America insurance -- property insurance business is more in a flat to down slightly mode at this point as we grow more selective. Now you look globally, and particularly in the international markets, slightly different competitive dynamic and also more of what I would call sort of upper middle market accounts. And we're seeing, again, very adequate pricing, and we're leaning into that and growing. And so we continue to feel like the property market is very attractive. And then to your broader point, there are a lot of other parts of this market where we see attractive opportunities. We certainly talked about Accident & Health. I think our global specialties, and this is both a reinsurance and insurance comment.

We're growing strongly in areas like engineering and marine and our Parametric book. there's an energy transition taking place that we all know about that's providing terrific opportunities. So plenty of things for us to do in terms of deploying capital at very attractive returns.

And the next question comes from Josh Shanker with Bank of America.

I want to continue on the theme of, I guess, maybe not pricing, but cat a little bit. So PMLs were up in the quarter. They're up year-over-year. I think that's possible to say that maybe you could have and should have deployed more capital at risk a year ago, but hindsight 50-50 or 20-20. Can you talk a little about your desire to increase your PMLs into what some people are describing as softening markets?

Yes, Josh. Look, I think the first thing, just in terms of the premise of your question, we talk about softening. One of the things I'd like to remind folks about is that if -- if we were sitting at a price level that we experienced that this industry experienced in 2017, '18, '19 and then suddenly rates corrected to where they are now, we would call it one of the greatest hard markets in living memory. Rates are very strong in property cat. And I have absolutely no problem deploying incremental capacity for our best clients on well-structured accounts at the rates that we're receiving today and the rates, frankly, that I expect to be receiving next year. It's just simply -- these accounts are simply very, very well priced.

In terms of the specific PMLs, it's always about risk and reward. And yes, we have increased net PMLs, but that's because of the pricing dynamics that I described and the attractive return profile that's available to us. It makes sense to take the risks we're taking. And we still remain well within the sort of risk guidelines that we've talked about every quarter with respect to earnings and capital at risk. So feeling good about that.

Just to break down the PML increase, some of that is certainly growth in our gross book in both divisions. And then we continue to optimize our hedging in terms of where we're purchasing our cap ons really focusing on managing tail exposures, offset somewhat by growth in assets under management in our Mt. Logan platform, which is doing a terrific job of raising funds. So, when you balance all that out, I think we're making an excellent trade, and it's one that I expect to continue to play out in the coming renewal periods.

By extension, is it wrong to say that maybe last year, you should have put more capital to work in PMLs and you're leaning into something that you've identified as an opportunity that was actually there last year. And two, the only other thing on the P&L, the PMLs currently are higher, I think, they were after the Katrina peak. I'm just wondering, look, the system is very different at Everest. But I mean you're talking about how hard the market is, maybe scout and say, this is the real opportunity because a lot of you will say, "Oh, things are soft at this point in time right now, and you're actually deploying more capital, it looks like than you would have as a percentage of equity been 15 years ago?

Yes, Josh, I hate to repeat myself, but I think anyone that's describing the current cat environment is soft is not well informed. It is not soft. It may be softer than it was a year ago, rates have come down, whether that's 5, 10 points. But again, compared to where rates would have been -- and you can look at any of the broker rate indexes to prove this point out. They're up massively over where they were in the 20 [indiscernible]. This remains a very hard market. I'm not going to do the forensic accounting on where we were back in 2005, et cetera. But we think the risk/reward trade-off that's available to us today is pretty clear, and it speaks to the idea that we can deploy this capital and get rewarded for it.

In terms of what we did last year, I mean, I don't see a lot of value in the retrospective other than to say, we're looking to -- where we want to grow on programs, we do it in a very disciplined fashion. You also have to reflect on the fact that clients, they don't always accept their markets doubling or tripling their line size in any given renewal. Some of these things you do have to work up over time, and we're certainly seeing that play out.

And the next question comes from Brian Meredith with UBS.

Just two of them here. One just following on the P&L a little bit here, Jim. It looks like that where you did see some meaningful increase in exposure was hanging in to 120 and 150 year, particularly for the Southeast. Is it that you were kind of writing below the FHCF? Is that where the opportunities were. And is that also why maybe a rate that you guide was maybe better than the market because it's clearly where rate is probably better, down low. And then also, should we expect potentially more susceptibility to call it, lower-sized hurricanes here this season?

Sure, Brian. Look, the first thing I really just have to sort of reset the question a little bit insofar as I don't consider 120 or 150 down low. And if you go back to the pre 2023 rate correction download would have been a 1 in 3, 1 in 4 maybe 1 in 5. So I feel like when you're trading at a 120 to 150, you're in the heart of these CAP programs. And I do think it -- the fact that that's where we've been very consistently playing by the way, over the last couple of years. The fact that, that's our sweet spot certainly helped a bit on the rate change side because you're really seeing maximum competition in the more risk remote layers and especially where you start talking about competing with the cat bond -- cat bond players.

So I just -- I really don't see that as download. And it's really consistent. It has nothing to do with sort of external factors. It's where we see the best risk-adjusted returns for these programs that we're participating on.

Makes sense. And then just pivot over to the insurance segment. Just [indiscernible], were there any changes? Or have you made any changes as far as the build-out of the, call it, European or international insurance kind of business. I mean we're still seeing it obviously. But any changes under your leadership? And when you think and where are we in that process? I know that can be quite expensive to build out an international insurance operation.

Yes. So the first comment I would make, Brian, is I really -- I'm just so incredibly proud of the team that's building that business. And if you think about an organic build over a period of really just sort of 3 to 4 years, and getting a business to well north of $1 billion in premium, rapidly pushing $2 billion. And now turning an underwriting profit, I think that's a remarkable achievement. Many have tried, very few have succeeded, and we have certainly done that. In terms of the approach, there's consistency. I think one of the changes that we did make after became CEO was to really just double down on the markets where we were already competing. And I think we are now represented, whether it's in Continental Europe and the U.K. market in a couple of key markets in Latin America, or in the major broking centers in Asia. We have the geographic footprint that we need, and we're really just -- let's really focus on going deeper where we already have market access. And that's beginning to really pay off.

And you'll start to see it as the expense leverage gets into a better spot as the earned premium sort of catches up to the growth that we've been seeing. But the strategy, which is to be a lead market, to be a multinational market, to focus on large and specialty commercial risk, that has remained consistent and it's producing for us.

And the next question comes from Meyer Shields with Keefe, Bruyette, & Woods.

I want to start with the reinsurance segment, specifically of the reserve releases. You talked about the book of business being well seasoned property. And given the tail typically associated with property, is it reasonable to assume that unless there's some sort of inflection in loss trends that this sort of reserve release is sustainable as more of your reserves enter that well season stage?

Meyer, I think your premise is correct. Obviously, we've got to see that play out, but we're taking the approach of making sure that -- those reserves are well seasoned. We're obviously just taking a fraction. We do think we've got very significant embedded margin in the reinsurance division as a whole. I think you've seen that demonstrated the last couple of years with meaningful reserve releases in multiple lines led by property. So right now, we feel very confident. It's been a consistent driver of margin in the business, and it's something that we see all things being equal, after it seasons being released into the quarterly P&L.

Okay. Fantastic. That's good to hear. On the International segment, if you -- can you talk about, I guess, the books exposure to deflation outside of the United States as a result of U.S. tariffs? I mean on the premium on the loss side?

Yes. Meyer, I mean, it's a fair question. I mean, deflation on the loss side, living in a highly inflationary environment, particularly here in U.S. casualty. I'd almost welcome some deflation. It would be a -- it would be a pleasant alternative. In terms of tariff activity and the [indiscernible] facts on the business, I mean, obviously, we monitor it. But at the end of the day, if you look at where we are international, we are barely beginning to scratch the surface of the markets we're competing in. And so in terms of a headwind in opportunity and revenue, it's not on my radar really. I mean we're focused on delivering a better value proposition to clients that resonates with them. And if we do that, we gain market share irrespective of any kind of turbulence in the external environment.

And then obviously, the piece when it comes to tariffs, the piece we do watch closely is loss cost trend here in the U.S., and we've seen no indication that at least so far that the tariffs have contributed to any sort of uptick in loss costs.

The next question comes from Michael Zaremski with BMO Capital Markets.

Follow-up on the expense ratio tick up. I believe the commentary for Mark and you all has been that we should be thinking about operating leverage. So once, I guess the 1-Renewal strategy concludes we should start seeing some improvement -- in terms of the casualty growth, nonrenewal strategy, once that's over, is would that book start growing at kind of low doubles because that's where pricing is? Or how do we think about kind of juxtaposing the growth versus the expense ratio over the coming year?

Sure, Mike. Well, first of all, just in terms of where the casualty book is going to go and the opportunities we see in insurance, as we indicated, we will complete the casualty remediation in the third quarter. And I will just comment, I've done a number of book cleanup activities in my career, and I have never seen a remediation process executed this aggressively or with this much precision. We literally -- and I don't want to replay the whole history because I know you guys have been following it closely, but we literally developed action plans for each and every one of our casualty accounts. And in the entire year that we've been working away at this. I can count on one hand the number of times that our planned activity or planned actions did not take place. So it's just exceptional and will wrap up very shortly.

So look, after remediation is done, if you think about the other parts of the book, I talked a lot about them in my prepared remarks, whether it's our specialty businesses, and that's in North America and an international comment, accident and health, really accident as the prior questions as we discussed. Property, shorttail lines, marine, all growing very strongly. Casualty in international markets is growing today. It's not offsetting the actions we're taking in North America, but it's growing very nicely. And I expect all of those things to continue.

And then as I -- again, as I said in my prepared remarks, we're open for business and casualty. We spend a lot of time engaging risk managers from some of the leading companies here in the U.S. on their casualty programs. We want to write those deals when they're well priced and well structured. And so I would not be opposed to the idea that at some point the casualty book starts growing again. It obviously also has a lot of rate momentum. But we're only going to do that where the pricing, the terms, the conditions, the quality of the underwriting and the underlying risk meets our conditions. It's -- we're not here focused on producing a top line growth outcome. It's about building the right portfolio that's sustainable and profitable. And I see an awful lot of things happening in the business that indicate we'll be able to do that.

Okay. Got it. That's helpful. My follow-up is just on the London Court decision. Is this now behind us? Or is there still some limit or, I guess, potential for movement there? And I guess also just you guys added a lot of risk margin on the casualty side. Was this not contemplated when you took the actions earlier this year to kind of add to the [indiscernible] issue?

Yes. So with respect to the first part of your question, our view is barring any -- totally unexpected shift in future legal decisions. This is done and dusted for us. We took a very conservative approach to selecting the number that we posted in the quarter. And now it's behind us as far as I'm concerned.

Look, as we said when the Russian invasion of the Ukraine took place and Russia sees these aircraft, we did not have enough information at that point to make an informed decision about the ultimate loss from the aviation seizure because there were so many legal issues related to it and in terms of the coverage that would ultimately be applied. And that's why we have not posted a reserve for it until we got that clarity through this court decision. So it really bears no relation to any of the reserve actions that we took last year.

And the next question comes from Dave Motemaden with Evercore ISI.

Just had a question on the attritional loss ratio in the reinsurance business. So I did see, obviously, the releases there on the property side. You mentioned mix shift and that was driving the 30 basis points improvement there. Did you make any changes to your forward view of the loss picks on that property business as well as the -- just given the releases that you experienced?

No, David. We've been pretty consistent in our view on property. And when we talk about property loss picks and particularly in property cat, we take a very prudent perspective and prudent approach in terms of selecting an attritional loss ratio that can sustain sort of any movement in sensing loss activity. So that's been really a consistent approach for us over time.

In terms of the loss pick in the quarter, the other thing I would point out, because you did see that 30 basis point improvement related to mix is the earned premium mix of reinsurance will take some time to catch up to the written mix, net written mix between property and casualty. So I still think there's some juice in terms of the mix dynamic with our attritional loss pick.

Got it. Yes. Understood on that. And then just another question just on the growth in property on the reinsurance side. We're hearing a little bit more on -- from some broker reports a little bit more appetite to write aggregates. Just wondering what your view is on that and if you guys deployed any capacity in aggregate covers more so at midyear than you did in the past?

So we're not really deploying capacity around aggregates. I think -- look, first of all, some people are going to do that, and that's their choice. I still think there's a bid ask spread between what clients would be willing to pay for most aggregate structures and then what responsible reinsurers would charge for those structures. So I just don't see there being a lot of trading that makes any sense.

I do think over time, there's obviously a lot of thought going into how do you create -- how do you start solving some of the risk management problems of our clients. In my view, it's not going to look anything like the aggregates of old, where you could just have this runaway side ways loss activity, but we're certainly very open to working with our clients to try to solve their problems.

And the next question comes from Elyse Greenspan with Wells Fargo.

My first question is on workers' comp. I was hoping to get more color on what you're seeing in the comp market in California. I know another insurer had flagged a huge uptick in cumulative trauma comp claims in the state. And then also, can you confirm how much of your book, your workers' comp focus in California today? And do you intend to keep pulling back there?

Sure, Elyse. First of all, before I get to California, just a broader comment. I mean we're all waiting for the workers' comp market to begin recovering and I think there's enough indication that it needs to start doing that in terms of the fact that rates have come off so consistently, we did see actually a rate uptick in our own portfolio in the quarter, which is certainly a positive thing to be seen.

In terms of California, it is a much smaller portion of our book than it was a year ago. And it's something where we did have a specialized underwriting unit that was focused on California comp. And essentially, we've stopped really focusing on that. With that specialized unit, we've run that piece down. And so we're only writing California comp when it's part of a broader portfolio. And I don't expect that to change.

Okay. And then my second question is a clarification going back to just the Russia, Ukraine increase you guys took in the quarter. What percent of [indiscernible] have notified you of their losses at this point? And how many have made on private settlements? Because I believe brokers have noted that a lot of the claims have resolved with private settlements?

Yes. I mean that's certainly been a widespread reality. I think -- look, the key thing for us is we've been in direct contact with our [indiscernible] over the course of this process, which by the time we finally got legal clarity around how losses would be adjudicated. We have plenty of information to develop a loss that we have a high degree of confidence in. So whether they've actually tendered a loss or not, we have a beat on where this thing is going, which is why I feel really comfortable with the number we put up.

And the next question comes from Andrew Kligerman with TD Cowen.

few clarifications. I'm looking at your insurance segment, other underwriting expenses at 18.5% year-to-date versus 16.8% in the prior period. And Jim, you talked a little bit about going deeper in the international regions where you are. I look at that 18.5% versus your peers, and it looks like there might be 2, maybe 4, 5 points of potential improvement there. Maybe you could help frame the outlook for that as that business as you get through 1-Renewal and potentially start growing from. Where could that ratio go?

Yes, Andrew, I agree with the idea that as we reach scale in these markets, we should certainly be in a much better spot than '18, 5-year to date or 18.9% in the quarter. Just the one thing I do want to table set for you a little bit in terms of how I think about this. Obviously, expenses are important. Our overall group expense ratio, I think, is best-in-class. Our reinsurance expense ratio is world leading. So clearly, we understand how to be thoughtful about expenses and manage that line item very carefully.

At the same time, there are 2 really important things happening that are driving what you're seeing printed. Number one, when it comes to the North America remediation, as I've articulated a number of times, we are not slowing down. I'm not worrying about top line, where if it makes sense to run off an account, we do it, we don't sit there and think, well, this is going to pressure the expense ratio. And as I said, that's going to complete in the third quarter. And to your point, will become less of a headwind relative to expense rate as we put that behind us.

And then the other and very much the other side of this coin, our international business is performing extremely well. It has a world-class loss ratio. And we want to fuel the growth of that business. Yes, we're going deeper in the markets where we already are and that will help us in terms of expenses because we don't have to open new operations in lots of different countries. But we're still hiring a lot of people. We're still investing in technology. We're still out there marketing ourselves to drive that growth.

So you've got 2, to me, really, really sensible courses of action that both will tend in the short term to put upward pressure on the expense ratio. But then over time, as Mark indicated earlier, we're very confident that we're going to get into a better spot as we go forward. Hopefully, that helps.

Yes, that helps. And then maybe just 2 just follow-up clarifications. A&H and insurance and your property cat business, just the returns. Just curious with the A&H book, what particular regions you're big in right now? And what type of return on capital you're seeing there? And Jim, by one of your comments earlier on the property cat business saying it was more attractive than return -- repurchasing shares. I would think that implies like north of a 25% return on capital. Is that right for the property cat reinsurance?

Yes. So let me -- let me start where you ended. Absolutely, it means north of 25% for property cat. And I think in some of the peak zones, whether it's Southeast Wind or [indiscernible], et cetera, you're looking well higher than that. And I think, by the way, that's true of just about every cat market around the world. I'm a little more thoughtful or careful about European win, but pretty much everything else is well north of that kind of number. And hence, our interest in continuing to write the business, and it's also why a number of times during today's call, you've heard me push back on any notion that this is a soft market. Yes, rates are going down, but it's still outstanding.

In terms of Accident & Health and really all of our businesses, I think one thing that I can assure you is if we're growing something, it means the expected return meets or exceeds our threshold, which for the group, we've talked about mid-teens total shareholder return over the cycle, et cetera. So I expect the accident business to be healthily above that. And we write that business. It's still mainly a North America business, but we have a terrific emerging international business that's led out of London. The team there is doing a great job, a lot of growth, particularly in Europe, and increasingly in Asia. So I think there's tons of headroom in that business.

And again, it's a business I know well from multiple carriers, and it's a low volatility business that can just deliver some really excellent returns as a gain scale.

Thanks for the helpful insight.

And the next question comes from Katie Sakys with Autonomous Research.

I wanted to follow up on the discussion of the reserve release in the Reinsurance segment. I think at least in recent years, we have become accustomed to really only seeing changes in your reserve assumptions at the end of the year. So I guess I was curious as to whether we can expect to see a more common cadence to attritional property reserve releases and then sort of tagging on to that, interesting to see that the reserve release on the reinsurance property lines wasn't quite enough to offset the charge on the Russian aviation losses. Any additional color that you can give for us on that?

Well, I think, as I said before, we do want to get into a quarterly cadence on development, obviously, where we can. Clearly, the data has to be there to support it. We feel real good about the margins that we have and the expected margins within the Reinsurance segment as a whole. So very confident about it.

In the past, we've waited somewhat to be a little more conservative in terms of the emergence, but we're just taking a portion here of older property that well seasoned. Now Russia, Ukraine, that's totally independent. That's something that we said back in 2022 when it was originally set up that was undefined. We didn't have the ability to make a provision for it given the uncertainties associated with it. So the concept of offsetting the two, just doesn't answer the equation. We really look at these things independently.

Having said that, and I'll reiterate a comment I made earlier, we do feel very confident in the embedded margin that we foresee in the reinsurance segment. So this is, I think, the beginning of a more normal cadence to your point.

Got it. And then shifting to some of the premium growth figures. A very significant reacceleration in financial lines reinsurance growth this quarter, great to see. Could you give us a little bit more detail on your outlook for the line going forward over the next 12 to 18 months? And if you expect to continue to grow at a similar clip?

Sure, Katie. Just in terms of maybe a little reminder for everybody on what's in there. For the most -- it's not financial lines, the way you might think of the insurance business, D&O, et cetera. It's credit-exposed lines for the most part. And in particular, our mortgage business is in that segment. And you had a couple of meaningful mortgage transactions that contributed to that growth in the quarter.

In terms of where we see the mortgage business right now, rate levels in the mortgage reinsurance market have been under quite a bit of pressure. And so we're being very cautious in that particular line. So I'm not going to give you any forward guidance, but I wouldn't necessarily expect that what you saw this quarter in the Financial Lines segment and reinsurance would be a normal pace for the foreseeable future.

Thank you. And that concludes the question-and-answer session as well as the event. Thank you so much for attending today's presentation. You may now disconnect your lines.