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Everest hit with $400mn Q4 reserve charge, $146mn in combined pandemic and cat losses

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Everest is expecting to take a $400mn reserve charge when it reports fourth quarter results next month, in addition to recording $70mn in pre-tax catastrophe losses and $76mn in pandemic claims, the Bermuda-based reinsurer said on Monday.

The increase in reserves all stem from the company’s reinsurance division, mostly from general liability, professional lines and auto liability losses, and for the 2015-2018 accident years. Non-cat property lines are also included in the figure, driven by “a few large losses” from aggregate programs in the 2017-2019 accident years.

The charge comes at the end of Everest’s CEO Juan Andrade’s first year leading the (re)insurer.

Andrade commented: “The decisive reserving actions we are announcing today recognize the social inflation trends affecting the overall US casualty market and enhance our already strong balance sheet.”

“We have proactively acted on the affected portfolios and we have confidence in our in-force book. We are bullish about our future and the earnings generating power of our franchise," he continued.

“Everest continues to benefit from excellent financial strength and strong enterprise risk management. The fundamentals of our business are strong.”

He concluded that the company is “well positioned” to succeed in any market, pointing to its growth and improved underlying results.

Everest’s fourth quarter catastrophe losses were tied to hurricanes Delta, Zeta, Eta and Iota, and the Queensland Australia hailstorm, and included $60mn coming from its reinsurance segment.

Covid-19 claims are mostly from third-party lines in the quarter and are in addition to the $435mn in pandemic losses the company reported through the first three quarters of 2020. About $56mn of the pandemic losses stemmed from the reinsurance division compared with $20mn in the insurance division.

Everest said on Monday that of the company’s current $511mn pandemic loss provision, about 80% of the total is made up of incurred but not reported claims reserves.

Operating income for the year will total between $275mn and $325mn, down from $872mn in 2019.

The company reports full-year and fourth-quarter results on February 8, after markets close.

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