Everest Group Q3 2026 Earnings Call Transcript

Everest Group (NYSE:EG) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Everest Group reported a year-to-date annualized total shareholder return of 14.2%, with significant reserve strengthening, particularly in casualty lines, and a focus on maintaining a conservative balance sheet.

Operating earnings per share were $7.62, driven by disciplined underwriting and record net investment income, with gross written premiums totaling $3.7 billion, reflecting a strategic focus on bottom-line results.

The company expects competitive market conditions in upcoming renewals but sees opportunities for capital deployment in global specialty and financial risk portfolios while maintaining a disciplined approach.

In capital management, $550 million was returned to shareholders in the quarter, with share repurchases remaining a priority as Everest emphasizes proactive capital management.

Management expressed confidence in the conservative positioning of reserves, highlighting an increase in the actuarial central estimate and a margin above it, aiming to reduce future reserve volatility.

Full Transcript

OPERATOR

Welcome to the Everest Group third quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded.

I would now like to turn the conference over to Matthew Rohrman, Senior Vice President, Head of Investor Relations. Please go ahead.

Matthew Rohrman (Senior Vice President, Head of Investor Relations)

Thank you, Drew. Good morning everyone and welcome to the Everest Group third quarter of 2026 earnings conference call. The Everest executives leading today’s call are Jim Williamson, President and CEO, and Elias Haibiab, 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. Please note that forward-looking statements, including estimates, projections and forecasts of future results are subject to the risks, uncertainties and assumptions noted in Everest SEC filings. Management will also be referring 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 investor relations website. With that, I’ll turn the call over to Jim.

Jim Williamson (President and Chief Executive Officer)

Thanks, Matt. Good morning everyone. Everest has generated a year-to-date annualized total shareholder return of 14.2% while executing on several initiatives focused on generating shareholder value and positioning the company for its next chapter. I’ve said that Everest would do whatever was necessary to ensure the strength and sustainability of our balance sheet. This quarter, we prudently strengthened our casualty reserves and reinsurance while not taking full credit for favorable development in short-tail lines.

As a result, our reserve position is now over $850 million above our more conservative actuarial central estimates. Further demonstrating this commitment, our annual long-tail reserve studies were more robust than ever. Both Elias and Katie Bratica, our new Group Chief Actuary, materially enhanced our reserving process, applying more conservative assumptions while giving little to no credit for the significant underwriting actions we’ve taken unless clearly evident in our data.

Elias will provide more details. Moving on to third quarter results. Our strategy is centered around strengthening our core underwriting businesses while managing the cycle with relentless discipline. Operating earnings per share of $7.62 were driven by disciplined attritional underwriting across our core businesses, record net investment income and accelerated capital return. Our core businesses delivered $3.7 billion in gross written premium, a modest year-over-year decrease reflecting our disciplined approach.

As I’ve said, prioritizing bottom line results over top line production is imperative, especially when we’re seeing more signs of irresponsible behavior in the market. Over the past several years we have significantly repositioned the casualty portfolios across both core businesses, balanced our mix and improved risk quality. We prudently raised our casualty loss picks at the beginning of this year. Coupled with the significant underwriting actions we’ve implemented, our current accident year loss picks remain conservative.

Now turning to the segments, our reinsurance treaty team continues to do an excellent job managing the cycle across all markets. We continue to decrease our exposure to U.S. casualty lines and selectively reduce business where rates were not adequate. This resulted in about a 6% decrease in gross written premium year over year on a constant dollar basis and excluding reinstatement premiums, casualty lines were down by 18% while property premiums decreased slightly as growth in property pro rata was offset by decreases in our CAT and non-cat XOL portfolios.

We continue to see growth opportunities in our global specialty and financial risk portfolios where risk-adjusted returns remain attractive. Growth in the quarter was led by a variety of specialty lines. The increase in the combined ratio in the quarter largely reflects the casualty reserve strengthening I mentioned as well as pre-tax catastrophe losses of $277 million net of estimated recoveries and reinstatement premiums, primarily associated with the Colombia earthquake, events in the Middle East, and a number of smaller European and Canadian losses.

At the same time, the underlying portfolio’s performance remains solid as evidenced by the attritional loss ratio improving to 56.3% in the quarter. Looking ahead to the 1127 renewals, we expect market conditions to remain competitive. Everest is well known in the industry as a top-tier lead market sought after by high quality cedents looking for long standing partnerships. Despite expected competition, we continue to see opportunities for attractive capital deployment.

That said, we remain disciplined where deals don’t meet our return thresholds. We’ll adjust our participation accordingly. Turning to the global wholesale and specialty segment which delivered another solid performance despite rate headwinds in short-tail lines. Our strategy to expand the portfolio in specialty lines and targeted international markets remains consistent while continuing to deliver margin expansion. Gross written premium increased over 3% year over year. We grew double digits internationally with broad-based growth across financial lines, marine and a number of specialty classes, partially offset by aviation.

While rate across our portfolio increased modestly, it continues to vary by line. More importantly, the areas of our business we are expanding are rate adequate. The attritional loss ratio improved 90 basis points year over year to 60%. This is a result of the team’s disciplined risk selection and portfolio management driving improved loss experience. The combined ratio was 97.3%, prudently positioned at the high end of our expected range in the mid to high 90s for the full year.

This included pre-tax catastrophe losses of $25 million net of estimated recoveries, primarily resulting from the Colombia earthquake and midsize losses in the Middle East. Now a word on capital management. We accelerated capital return to shareholders to approximately $550 million in the quarter inclusive of dividends, bringing the year-to-date total to over $1.4 billion. Share repurchases continue to be a top priority for capital deployment as we approach year end and head into 2027. Over the last two years we have transformed Everest.

As we move forward, I couldn’t be more optimistic in the strategy we’re executing across our core businesses as Everest embarks on its next chapter, one that I believe will consistently generate value for shareholders, led by disciplined and proactive capital management and balance sheet strength. And with that, I’ll turn the call over to Elias.

Elias

Thank you, Jim, and good morning, everyone. The third quarter financial results reflect our continued focused execution on our strategic priorities. We grew book value per share, excluding unrealized gains and losses on the available-for-sale fixed maturity portfolio, to $414, which grew both on a year-over-year basis as well as sequentially. This is despite higher CAT losses and reserve strengthening in our reinsurance business. Before unpacking this quarter’s results, let me first touch on reserves. First, as Jim said, Katie and I performed in-depth reviews of all material reserve studies for the quarter, which included all material long tail lines. Second, we followed a very robust process. We thoroughly vetted and refreshed all material actuarial assumptions and methodologies with added conservatism. This included expected loss ratios and loss development factors across all years, and we responded more promptly to credible emerging trends.

We improved line-of-business segmentation within our reserve studies to better reflect performance and mix. While we’ve taken meaningful underwriting actions in recent years, we did not make any adjustments for these actions unless definitively evident in the data. While there’s evidence of accelerated case reserving in casualty based on our enhanced claims analytics, we did not make any adjustments for this deliberate action in our core businesses.

As I stated last quarter, our philosophy is to book our reserves at management’s best estimates, which we expect to be above the actuarial central estimates. The actions we’ve taken this quarter have moved our reserves to a more conservative position and have meaningfully increased the differential between management’s best estimates over the actuarial central estimates. This differential increased to over $850 million as of September 30th. This further strengthens our balance sheet as well as reduces the potential for future reserve volatility.

Now turning to the reserve movements in the quarter, we reported overall net unfavorable development of $268 million, driven largely by casualty reinsurance reserve strengthening. While loss emergence in short tail lines continues to be favorable, we held back the majority of the favorable development as we look to enhance our conservative position in reinsurance treaty. We strengthened gross casualty reserves in the quarter by approximately $600 million, which is on top of the $200 million of strengthening in the second quarter in U.S. casualty.

The vast majority of the development was in underwriting years ’20, ’22, and prior, where we added conservatism to each underwriting year. In addition, we also rolled that experience forward into the more recent underwriting years. Turning to our insurance businesses, the bifurcation of our reserve studies into separate studies for each of Global Wholesale and Specialty and Legacy resulted in de minimis net overall reserve movement with no meaningful change to reserves subject to the ADC. As a result, we continue to have approximately $1 billion of net limit remaining under the ADC. More importantly, the reserve study confirmed our view that the underwriting actions we took over the past few years have been beneficial and the Global Wholesale and Specialty business is performing as expected.

Finally, the reserve studies resulted in no change to our 2026 loss as they were previously set more conservatively. Now turning to the third quarter group results, Everest generated after-tax net operating earnings per share of $7.62. This was largely driven by attritional underwriting income, record net investment income, and strong share repurchases. Moving to our core businesses, gross written premiums were $3.7 billion, down approximately 4% on a comparable basis year over year, largely driven by our underwriting discipline. In casualty lines, the attritional loss ratio was 57.2%, a decrease versus the prior year reflecting improved loss experience and mix.

Pre-tax CAT losses were $302 million net of estimated recoveries and reinstatement premiums in the quarter, largely driven by the events Jim mentioned. The expense ratio increased to 5.2%, largely reflecting the impact of lower net earned premium. Now moving on to our reinsurance treaty business. Gross written premiums were $2.7 billion, down approximately 6% on a comparable basis year over year, largely driven by our underwriting discipline in casualty lines. To a lesser extent, rate softening in property. The combined ratio included 11.3 points of net adverse prior year development and 12.8 points of CAT losses. The attritional loss ratio improved to 56.3%, reflecting improved loss experience.

Now moving to our Global Wholesale and Specialty business, where we’re focused on improving underwriting margins as we pursue profitable growth in targeted lines and geographies. While the combined ratio increased to 97.3% due to CAT losses, the attritional loss ratio improved by 90 basis points to 60% as a result of the underwriting actions we’ve been taking and improving mix of business. Pre-tax CAT losses, net of estimated recoveries and reinstatement premiums, contributed three and a half points to the combined ratio versus 80 basis points in the prior-year quarter.

The underwriting-related expense ratio increased to 12 points, largely driven by lower earned premium volume. We continue to expect this business to deliver combined ratios in the mid to high 90s in the near term. Now moving to our Legacy segment, we continue to manage the transition of our commercial retail insurance business to AIG, which remains on track. As expected, the segment generated a modest earnings drag on the group underwriting results in the third quarter. At the same time, we continue to proactively manage claims down as efficiently as possible.

Moving on to investments, net investment income set a new quarterly record of $634 million. This was largely driven by strong performance from the private equity portfolio, which generated $144 million of income in the quarter. Overall, our book yield increased to 4.6% in the quarter, which is below our current new money yield of approximately 5.1%. The portfolio’s average credit quality remains at AA-. Turning to capital management, in the third quarter we repurchased approximately 1.3 million shares amounting to $474 million at an average share price of $374 per share. Since the beginning of 2025, our share count has been reduced by approximately 13%, and when including our quarterly dividend, we returned approximately $550 million to shareholders this quarter. Over the last four quarters, our payout ratio has been approximately 92%. Looking ahead, while we continue to view share repurchases of $300 million as our quarterly floor, we expect to exceed that amount when appropriate, given the strength of our balance sheet and earnings generation.

In summary, Everest continues to create momentum through the execution of our strategic objectives of disciplined underwriting and proactive capital management while taking the necessary steps to maintain a strong balance sheet. And with that, I’ll turn the call back over to Matt for Q&A.

Matthew Rohrman (Senior Vice President, Head of Investor Relations)

Thanks, Elias. Drew, we’re now ready to open the line for questions. We do ask you please limit your questions to one question plus one follow-up, and rejoin the queue for additional questions. Drew, over to you. Thanks.

OPERATOR

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you’re using a speakerphone, please pick up your set before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Alex Scott with Barclays.

Please go ahead.

Alex Scott (Analyst)

Hey, good morning. First, what I have for you is just for Elias, and I’d be interested if you provide some additional commentary on your confidence in the process and really your confidence that you’ve got it to a place that would be more typical for this point in the cycle, kind of coming out of a hard market, and maybe relative to industry peers. And if you think this can be a clearing event.

Elias

Hey, thanks, Alex. So listen, I’m going to answer in three parts. Your question, part one is what did we try to accomplish with this reserve review? And our motivation was to increase the conservatism on the balance sheet and to position us to be able to bring more stability to our reserves going forward and reduce risk of further what’s called reserve volatility. And I think we’ve accomplished that with the exercise we just went in. Second, I’ll talk about the process we did. And, you know, this was Katie and my first go-around since we’ve joined the company to go through it. And I think we went through a pretty robust and thorough process around it. You know, we reviewed all the lines that were scheduled for the quarter, which includes all the major long tail lines, and we went through all the key assumptions and, you know, we thoroughly vetted them, challenged them, and refreshed them.

And that includes things like loss trends, loss development factors, you know, tail factors, expected loss ratios, as well as expanding the actuarial methodologies that are considered. We did increase the segmentation to get a more accurate view on performance and mix in the business. And we enhanced the claims analytics and the feedback loop relative to it. So with that, I think from a process perspective, we went through a pretty robust process this quarter.

The third element on conservatism, and this also links to some of the things I said in the second quarter earnings call—things we’re considering—you know, one is where we saw loss emergence in the older accident years, we didn’t just react to it then. You know, we kind of rolled it forward into the more recent accident years. You know, second, you know, there’s been a lot of underwriting actions in the last few years. We do see it kind of emerging in the, you know, if you look at ’26, but we decided unless it’s in the data, we didn’t make any adjustments.

So there were no explicit adjustments made for any of the underwriting actions. We’ll wait till it emerges in the data before reflecting it. Second, I would say we’ve done some work—we’ve done work from a claims analytics perspective that shows evidence in the insurance side of the house about case reserve strengthening in casualty. We see indications of it in the data from a number of our cdc. That being said, we did not make any adjustment for it in the reserving on our, you know, for our core businesses.

The other thing I would say is when you looked at the short lines, there’s been a significant amount of favorable loss emergence on the short tail lines. We released a smaller portion of it this quarter. The majority of the favorable emergence we’re seeing on short tail lines, we held back. And as a result of this work, I believe we’ve moved our actuarial central estimate up to a more conservative position from where it was before. At the same time, the differential between where we’re booking our reserves and the actuarial central estimate—we also increased that differential, and it’s over $850 million as of the end of September.

And I think this is one of the highest it’s been, as far as I could tell at the company. With respect to ’26, you know, we applied the same approach and judgments. We had the higher loss picks entering into this year and, you know, we didn’t see, given the emergence we’re seeing and the results of the actuarial work, any need to make any changes to ’26. ’26 continues to be prudent.

Alex Scott (Analyst)

That’s all really helpful. Second question I had is as you’re looking at 1:1 renewals, any commentary you can provide there and is there any need for additional underwriting actions just coming away from all the work you’ve done?

Jim Williamson (President and Chief Executive Officer)

Yeah, Alex, look, obviously a topic that’s been widely discussed over the last few weeks. I mean, our expectation on 1:1, and particularly as it relates to cat renewals in peak zones is it’ll be another competitive renewal. You know, you’re looking at some additional rate decreases. Obviously our view, as I’ve stated in prior calls, is that current rate levels continue to deliver a very strong expected return. And which is why we continue to deploy capital.

But as rates compress, more and more of the programs we look at will be, you know, will look a little less favorable. And we respond very quickly to that. And you saw that certainly in this quarter’s results where our CAT XOL written premium decreased in a reasonable way. And I wouldn’t be surprised if we continue to get more selective as we go into 27. Where we’re really focused from an underwriting perspective is a few things. Number one, best in class cedents. And we’ve been very consistent on putting our capital to work with people that we think have a, have a sort of differentiated expertise in what they’re writing. The second would be terms and conditions. I mean, I know we like to talk about rate because it’s easy to measure, but the most recent hard market delivered substantial improvements in terms and conditions.

In many cases for Everest, those happened in a non concurrent fashion and we’ve been able to sustain those despite recent rate decreases. And our outlook is that we’ll sustain the vast majority of that as we head into 2027. And then obviously, you know, the work that we do around portfolio optimization and shifting capital from lower return to higher return opportunities, you’re going to see all that play out. I’m really confident that our reinsurance team, notwithstanding some of the competitiveness we’ve seen, will deliver an excellent portfolio for us to enjoy in 2027.

Thank you.

OPERATOR

Thank you. The next question comes from Andrew Anderson with Jefferies. Please go ahead.

Andrew Anderson (Analyst)

Hey, good morning. You had described the favorable, some short term emergence as significant, but you only released a small portion there. What prevents you from recognizing more of that favorability today?

Elias

Hey Andrew, it’s Elias. We had the ability to release more of it. We chose not to. And that’s kind of ties to our objective of this reserve study is kind of increasing the conservative position on the balance sheet and to kind of position us to reduce future reserve volatility risk. So it was a management decision not to release more.

Andrew Anderson (Analyst)

Okay. And maybe, maybe bigger picture. With the book shrinking in several areas and market conditions becoming more competitive, how do you ensure the underwriting discipline today doesn’t come at the expense of market relevance or your ability to re accelerate growth over time?

Jim Williamson (President and Chief Executive Officer)

Yeah, sure. Look, we’ve proven over multiple cycles that we can effectively prune exposures when we think the economic terms available are below our standards and then re accelerate into the hard market. In fact, I would take you back to the 2023 hardening. In the year prior to that, we substantially cut our cat book. What allowed us to re accelerate is core to Everest value proposition, which is we are an incredibly nimble organization. We’re very lean.

We have empowered leaders in each of the regions who have deep customer relationships. We tend to participate given our, you know, our depth and breadth of expertise across many lines of business. We’re a top tier market and we’re welcomed on the reinsurance panels of all the lead market underwriters. And I, I think that they will be more than willing to find more room for Everest when the time comes and that’s frankly when they’ll need our capacity most.

So we deliver a real service to our clients in that fashion. There’s nothing about what we’re doing now that even gets close to the idea of changing our relevance or the quality of our value proposition.

Andrew Anderson (Analyst)

Thank you. Got it.

OPERATOR

Thank you. The next question comes from Meyer Shields with KBW. Please go ahead.

Meyer Shields (Analyst)

Great, thanks. So one, I guess process question, Elias or Jim, are you open to maybe updating the year end global loss triangles for the strengthening that you’ve done so far this year? So we can take a look at that, maybe substantiate your confidence in the reserves?

Elias

Hey Meir, it’s Elias. We’ll take it under consideration. You know, our process was to release it after we’re done with all the reserves for the year. There’s still some more studies in the fourth quarter. Even though we covered all the material ones from a long tail line perspective this quarter. We’ll take it under consideration.

Meyer Shields (Analyst)

And then Jim, just going back to 1:1, I was hoping you could talk about how the casualty reinsurance environment is looking from your perspective.

Jim Williamson (President and Chief Executive Officer)

Yeah, Meyer, look, I think this is a frustratingly consistent message to what I’ve said over the last many number. The fact is, our view of casualty reinsurance is a fairly bearish one and I would attribute to a number of things. One, the underlying environment remains very challenging and that’s driven by social inflation and legal system abuse in the U.S. the plaintiffs bar has not let up on their on their aggression in that space. And while there is some, I think very encouraging signs that states are beginning to wake up to how destructive this process has been to the US economy, it’s still pretty limited.

So the underlying environment isn’t great. Rate, while I think in a number of areas continues to stay abreast of loss trend. I am starting to see more competition, which I think is problematic and I think for a lot of new entrants in particular into the primary liability space, I think they’re kidding themselves a little bit around the idea that the industry has somehow achieved excellent rate adequacy in that space and that it’s a place to make a lot of money.

We just don’t see it that way. And then lastly, seating commissions are stubbornly high and I think are not justified by the underlying performance, which is why you certainly saw in this quarter’s results our written premium for casualty pro rata was down by 18%. And we will continue to critically evaluate that portfolio. Now the good news, I would say is given all the work we’ve done in casualty, we’re down to a core portfolio of really exceptional underwriters where we have a lot of confidence in what they’re doing. And so we can be, I think, selective and have a lot of confidence in the performance of the existing portfolio. But I certainly don’t see us going out from here and trying to regrow that portfolio until conditions improve materially.

Meyer Shields (Analyst)

Okay, that’s very helpful, thank you.

Jim Williamson (President and Chief Executive Officer)

You got it.

OPERATOR

Thank you. The next question comes from C. Gregory Peters with Raymond James. Please go ahead.

C. Gregory Peters (Analyst)

Hey, good morning. I guess, you know, when I lays are focusing on the reinsurance piece, you spent a lot of time talking about the casualty side but we also know that the property side is under intense competitive pressures. Can you talk about, you know, when you think about next year, how you think the portfolio within reinsurance might change or what, you know, what the headwinds might be to growth and then sort of map that in with how your views on PMLs look.

Jim Williamson (President and Chief Executive Officer)

Sure, yeah. I mean, look, I think if you piece together the last few questions right. Property on the cat side is going to be challenging. We are fortunate in that we write the majority of our cat XOL business on a non concurrent basis and I think we’re shielded from some of the competitive pressures. But it’s certainly a reality casualty. You know, we just talked about and I think on a broad basis, you know, it’s sort of a status quo situation. What I will say though is, you know, I made and I made this comment in my prepared remarks.

We’re still seeing a lot of really interesting places to deploy capital and it’s occurring more in International markets and more in our specialty business. And those tend to be higher margin, very high quality portfolios. We’ve delivered a lot of expertise into the market. We are a lead, if not the lead global engineering market. We have a renewable energy vertical that we stood up, that’s performing exceptionally well, that offers differentiated value to clients.

We have a high performing parametrics business. And you can kind of go down the line now from a pure volume perspective, Greg, you know, those subsegments are not going to overtake, you know, property pro rata or casualty pro rata premiums. But I’m not worried about that. And we don’t really get focused on the top line. It’s how are we delivering margin. And so I do see some sustained margin development in those, in those parts of the business as respects pmls.

And we’ve certainly seen it in our net pmls over the last few quarters. Those will more likely than not continue to retract slightly as this market cycle plays itself out. And again, you know, I don’t get too worried about that either. It frees up capital and we have options for deploying that capital. And as we said in the last few calls, that priority for that capital redeployment will be to return it to our shareholders. So it’s not necessarily a bad thing that we’re being a little more selective and taking some chips off the table from a PML perspective.

Yeah, sure. No, it’s a great question. First of all, I think we are in a really good spot with Global Wholesale and Specialty. And while we’ve spent a lot of time talking about reinsurance reserves on this call, we’re in an equally conservative position on how we’re thinking about our loss picks in that business. And all of the indicators are showing that we’re developing incremental reserve strength and margin in that business. So those are very good signs.

As respects growth, look, we came out of last year after we divested retail. We doubled down on our Global Wholesale and Specialty strategy. That business has really come together under Jason Keen’s leadership in a great way in terms of its operation, its cohesion across geographies and across lines of business. And we’re now starting to see the benefits of that. Where you’re seeing growth, though, you really need to look under the covers to see where it’s coming from. So, for example, in casualty, this is not open market excess casualty for any and every class of business in the U.S. This is targeted growth mainly internationally and in particular in lines of business or areas of the market where we have distinct product expertise and capabilities. So, for example, in the area of construction, where you’re seeing a global boom in data centers, in manufacturing, we have specific products and underwriting expertise.

We’re delivering that to the market and you’re seeing growth. The other piece of the casualty story is rate, and we are continuing to drive rate into the market. So with a stable set of, even with stable exposures, you would expect to see growth. And I think that same story plays out in financial lines and then in the specialty markets, which has been the really core area of our focus, very much driving growth in our London market business and increasingly in the U.S. in those specialties. And those again are areas where rates are adequate. We have a differentiated position in the market. We’re highly valued as a trading partner, which is why we could see growth. And so for GWS overall, very modest growth in the quarter.

But as you unpack it, what you’re seeing is a lot of very strong portfolio management. In areas where we see more competition like fac casualty, we’re decreasing meaningfully. In areas like specialty and particularly in London where there’s still lots of great opportunity, we’re growing even faster and we’ll continue to manage that dynamic through the coming quarters without a whole lot of concern about what it means for the top line. This is all about driving the right margin outcome and I think you’ll continue to see that.

OPERATOR

Thank you. The next question comes from Josh Schenker with Bank of America. Please go ahead.

Josh Schenker (Analyst)

Yeah, thank you very much for taking my question. I guess this is for Elias and it’s about process on the reserves. If over the last two quarters you had not made any changes into your casualty reserves, but you had released $550 million of short-tailed lines, would that be a process that people should say we’ve gotten more accurate in our short-tail reserving or that there was a cushion in the reserves that we had at the beginning of the year that we don’t have anymore?

I’m trying to weigh. Yes, certainly the casualty reserves have gotten more conservative, but how should we feel about the reserving on the short-tailed side where you’ve released a lot of reserves to offset that?

Elias

Hey, Josh, it’s Elias. Good question. What I would tell you is, what it tells you is there is prudence on the property and the short-tail lines from the beginning. And, you know, with the favorable loss emergence, it demonstrates the prudence and the strong underwriting in that. That being said, you know, when I said, you know, we have a margin over our actuarial central estimate of 850 million, that’s coming from both long-tail and short-tail lines.

But a bigger proportion is coming from the short-tail lines. So while we may have released 500 million year to date on short-tail lines, we still have a hefty redundancy within our short-tail line reserves and I feel comfortable with that. And one of the things that manufactures short-tail reserve releases is short-tail losses. Since 2Q25 to present, we really haven’t had much cat activity.

Josh Schenker (Analyst)

At what point in the way that you’re doing the reserves can enough quarters pass without any major property losses to say, look, we’re still conservative, we just don’t have the loss reserves up because we haven’t had the losses?

Jim Williamson (President and Chief Executive Officer)

Yeah, Josh, it’s Jim. Let me add a little bit of flavor on this because I think when you unpack the details, particularly within reinsurance and in our property pro rata book, a lot has happened over the last few years to reduce the amount of volatility that book contains. So this is very much an attritional loss ratio story when it comes to a lot of the short-tail property reserves. Now that’s not to say that it’s not influenced by cat activity.

It certainly is, but not nearly to the degree I think you’re implying. And then lastly, I would say, and I would ask Elias to weigh in here as well, having said all that, we’re also seeing that same strength in our cat book. And, you know, when cat events occur, as you saw in this quarter, we’re booking those very, very prudently. We don’t need an event-free quarter to have strong performance in our cat reserves. That’s just not the linkage you should be drawing. But I don’t know, Elias, anything you’d add to that?

Elias

I think you covered that. The one thing I would say is, you know, in terms of cats, you know, we did have some movement on cat reserves, some releases. It’s more from the traditional side this quarter. But when we look at individual cats, you got to look at the facts and circumstances of each cat to evaluate if it’s matured or not. So some events, you know, you may have to wait a couple of years, some events less. It depends on the facts and circumstances of those individual events.

Josh Schenker (Analyst)

Thank you for all the answers. Appreciated.

Jim Williamson (President and Chief Executive Officer)

You got it.

OPERATOR

Thank you. The next question comes from Roland Mayer with RBC Capital Markets. Please go ahead.

Roland Mayer (Analyst at RBC Capital Markets)

Hi. Thank you for taking my questions. As you went through the review process, did you identify any incremental portfolios of business that no longer meet your return thresholds, need to either be non-renewed or divested?

Jim Williamson (President and Chief Executive Officer)

Yeah, sure. No. Good question. No, not really. I mean, we’ve had a firm bead on the performance of a number of these portfolios and I would say in reinsurance you’ve certainly seen that play out over the last several quarters. Casualty, which again is the subject of a lot of the conversation today, we’ve been reducing consistently over the last couple of years on the order of magnitude of billions of dollars of reduction in written premium. So we clearly were ahead of that.

We saw it in the underwriting and so feel good about where that portfolio is and reduced it further, obviously, as you saw in the third quarter. In GWS, in a similar way, Jason and his team, I think, took a very critical eye of all those portfolios and, you know, overall feel excellent about where we’re positioned. There have been spots. You know, a recent one that I would cite is transactional liability. We didn’t need a reserve study to tell us that that market was in a bad spot and we’ve, you know, we moved away from it. So I think our portfolio management in some ways has been well ahead of these reserve outputs.

And that means that we’re now in a position where, as far as the in-force book is concerned, we feel great. And I would sort of, as a last comment, as a proof point of that, you know, you referenced back to Elias’s comments on the current accident-year loss picks. We didn’t feel a need to move them. If we were discovering new things about our in-force portfolio, we certainly would be moving those picks and that’s just not the case.

Elias

Yeah, I agree with what Jim said. You know, I don’t know if there were any surprises coming out of those reserve studies. I kind of referred to my comments earlier responding to Alex. What drove a big part of the 600 million in strengthening on casualty is increasing prudence because we want to position ourselves to reduce risk of future reserve volatility. So that drove a lot of our decision making in how we position the balance sheet to contribute to more stable reserves going forward.

Recognizing, like, listen, there’s still some uncertainty with social inflation, but we feel much more comfortable with where we are today as a result of the actions we took.

Roland Mayer (Analyst at RBC Capital Markets)

Thank you, that’s super helpful. And then for my follow-up on the AIG renewal portfolio, can you maybe walk through any capital that’s locked up as those liabilities run off, how long is the tail, and is it incremental to the current buyback?

Elias

So on the nonrenewal part, you know, on the new business, you know, there’s not capital that’s being consumed. There’s capital on the portfolio that we have on our balance sheet. You know, the average duration is maybe three to four years on that for it to release itself, but it’s going to depend on the speed and if there’s opportunities to accelerate it. The other thing I just, since we’re talking about the AIG renewal rights deal, just want to remind people is we were getting a TSA payment from AIG, about 30 million a month, to cover expenses.

That one expired at the end of the third quarter, so we won’t be having that credit in the fourth quarter.

Roland Mayer (Analyst at RBC Capital Markets)

Helpful. Thank you so much.

OPERATOR

Thank you. The next question comes from Chris Hartwell with Autonomous. Please go ahead.

Chris Hartwell (Analyst at Autonomous)

Oh, good morning. Apologies to come back again to the reserve question, but wondering if you could maybe talk to, I guess, the split between IBNR and case reserves in terms of what’s really driven the action there. And I guess there’s a part B to that. Where do you think you are in sort of the broader range of sort of best estimate now? I don’t know whether you think about that in terms of confidence intervals, but I’d be interested to know where you sort of, if you think you really are at the maximum you can be there.

Elias

Hi, Chris. Thank you. So in terms of the IBNR versus case reserves, definitely increased the proportion of reserves that are IBNR. And with respect to the range, you know, what I could tell you right now is we definitely moved up within the range where, you know, we’re above our central estimate on that. You know, we have a margin of over 850 million. Most of that margin sits within our reinsurance business, and that’s what gives us confidence with, you know, what we did about contributing to more stable reserves and reducing future reserve volatility.

Chris Hartwell (Analyst at Autonomous)

Okay, thank you. And just to sort of come back, and I think it really sort of touches on one of the earlier questions. But if we’re thinking about, I guess, management confidence and conservatism within reserving, obviously the timing of releases to some extent is within your gift. And so how should we think about, particularly on this short-tail question, how should we think about the future emergence? I mean, if we look at what’s effectively been held back on the shorter-tail lines, I mean, could we expect, could we expect 100 million a quarter of reserve release in an ordinary period?

I don’t know. I wonder if you could just sort of help me think about future reserve releases.

Elias

No. Happy. You know, our philosophy is, you know, we want to book our loss picks conservatively and allow the lines to mature and position us in a position where we’re more likely to be releasing reserves than needing to strengthen it in the short term. We are going to continue to be prudent and maintain conservatism on our balance sheets. So not sure if there will be net favorable reserve releases in the immediate future, but our philosophy is to maintain a strong balance sheet, conservative loss picks, and as they mature, we’ll release reserves.

OPERATOR

Thank you. The next question comes from Michael Siremski with BMO Capital Markets. Please go ahead.

Michael Siremski (Analyst)

Hey, thanks. Good morning. Maybe you can shed light on the rating agencies, and I know you’ve talked in the past about the importance of the rating agencies. I know there’s, I believe, a negative outlook. So just does today’s actions have any influence on the thought process there, the rating over time? Thanks.

Jim Williamson (President and Chief Executive Officer)

Yeah, happy to, Mike. What I would say is if you look at the three rating agencies and why they have us on negative outlook, it has nothing to do with the strength of the balance sheet or the solvency of the company. We have a very strong balance sheet. From there they see the franchise value in the company. Historically, what put us on negative outlook has been the volatility around reserves. As I said, we think the actions we’ve done this quarter contribute to more stable reserves and lower reserve volatility going forward.

That should be a positive. As normal operating procedure, we briefed the rating agencies in advance of this earnings call. And our earnings results, excluding the reserves—I’m not going to speak for them—but we think the actions we’ve done have positioned us to address some of the concerns they’ve had.

Michael Siremski (Analyst)

Got it. That’s helpful, Elias. And I guess just switching gears to the cat load. Loud and clear about what you said about PMLs going forward, but just want to make sure—looking at the cat load this quarter versus consensus, a good bit higher. Should we be penciling in a bit more cats in 3Q on a go-forward basis? Maybe you shifted appetite to less non-hurricane geographies? Thanks.

Jim Williamson (President and Chief Executive Officer)

Yeah, Mike, as I’ve said on maybe some past calls, you got to be careful about any one quarter of cat activity because it’s obviously purely driven by events. And it’s been interesting to hear people describe Q as a light cat quarter. There was a lot of stuff happening in the world, and it’s tagging a lot of global insurance and reinsurance companies. So I wouldn’t draw any conclusions from this quarter in terms of the future load. What I would say is, given my earlier comments, I would expect PMLs, all things equal, to decrease marginally as we get into next year. That tends to reduce your cat load. Having said that, remember the cat load is the expected cat loss, but you got to divide by total earned premium, and that’s all earned premium including casualty. So the denominator could get smaller as we manage the cycle, and so we’ll see where the actual percentage load comes out.

But I don’t expect any material shifts. We manage within a pretty reasonable range around the total amount of volatility we want in the group. And I would also take you back to a slide we put in our investor presentation every quarter on our earnings and capital at risk. You see we’ve managed that within a pretty confined box and have been able to take advantage of the market within that box. I don’t see us doing anything dramatically different next year.

Thank you.

OPERATOR

Thank you. The next question comes from Yaron Kinnar with Mizuho. Please go ahead.

Yaron Kinnar (Analyst)

Thank you. Good morning. Just going back to the commentary that the Accident Year ’26 loss picks are showing to be prudent and don’t need additional strengthening even as prior years, including the more recent years, did. Would you say that the prior year reserves have now reset at the prudence level and margins that you built into 2026?

Elias

What I would say, Yaron, is across all years right now we have our loss picks in a prudent position. We did strengthen all the prior years within casualty, but for ’26 it was already set at the more conservative level where we started the year, and part of our redundancy of the over $850 million is coming—a small piece is coming—from underwriting year ’26. So we didn’t feel there’s a need to do more on ’26.

Yaron Kinnar (Analyst)

Okay. And then I think you’d said that there’s some additional reserve review to come. The fourth quarter, would that include the financial lines reserve?

Elias

No, the financial lines was largely done this quarter. Fourth quarter would be parts of the international insurance business as well as cyber, a couple smaller lines.

Yaron Kinnar (Analyst)

Okay. And the reserve strengthening in casualty—was there anything also in financial lines?

Elias

There was. In total on casualty, that lumps professional lines—that’s how we report it externally. So there were some elements of professional lines that we did strengthen in the 577. If you unpack the 577, Yaron, about two-thirds of it is coming from North America casualty, and it’s heavy to your traditional casualty pro rata, some elements in Casualty XL, and the rest was kind of more mixed globally.

Yaron Kinnar (Analyst)

Thank you very much.

OPERATOR

Thank you. The next question comes from Brian Meredith with UBS. Please go ahead.

Brian Meredith (Analyst)

Yeah, thanks, Jim. And Elias, I’m just curious, during the whole reserving process, was there any consideration of an ADC cover on the casualty re book? And is that something you may consider in the future just to, you know, give maybe the investors a little more confidence?

Jim Williamson (President and Chief Executive Officer)

Sure. I mean, look, Brian, it’s—you know, and I think I’ve made this comment in the past—we look at all options for managing both capital and our reserves. And we certainly feel that the ADC we put in place for our insurance business was prudent and gives us a lot of flexibility. Freedom, obviously, is going to free up capital. So would we consider it? Would we look at it? We could, I think, if conditions were right. What I would reiterate though is, given everything Elias has described about what he and Katie and their teams did with our reinsurance reserves, I feel exceptionally confident in where we’ve landed. And so, if I were to think about my decision tree on any potential transactions, it would have to deliver meaningful capital relief benefits for us to be, I think, really interested. But, you know, we do from time to time evaluate these things.

Brian Meredith (Analyst)

Great, that’s really helpful. And then second question, I’m just curious: we’re hearing more and more about business moving from the wholesale E&S markets to the retail markets. I’m wondering if you’re observing that in your global wholesale business and what impact it potentially has on your business.

Jim Williamson (President and Chief Executive Officer)

Sure. I mean, look, I think the industry data would suggest there’s a little bit of movement. But one of the things that I think is important to understand is there’s been a structural shift of business from admitted markets to E&S. And while there may be some oscillation around that new, much higher level, no part of me expects there to be the traditional—15, 20 years ago—where it would wash from one bucket to the next based on the market cycle.

That is just not happening. There is no way the admitted market could reconsume the risk that’s been relocated into E&S. I would say for our own business, for Evolution in the US where we write our US E&S book, we have relatively tiny market share. We’ve got great products, we’ve got fantastic leadership. For us, it’s about getting our fair share. And so even if the overall pie shrinks marginally, it’s not going to change our opportunity one iota. There’s plenty of good business for us to be writing in that space.

Matthew Rohrman (Senior Vice President, Head of Investor Relations)

Thank you. I’m going to jump in, guys—one minute to clarify something. On the TSA payments with AIG, I may have said $30 million a month. It’s really $30 million a quarter.

OPERATOR

Thank you. The next question comes from David Montsmayden with Evercore. Please go ahead.

David Montsmayden (Analyst)

Hey, thanks. Good morning. Just had another question for Elias on the casualty reserves. Could you unpack how much of that $850 million risk margin is on the casualty reinsurance business and how we should think about that going forward? Is that a buffer that can absorb additional adverse development or increases above the central estimate?

Elias

Hey, David. It’s Elias. So if I unpack the $850 million, the majority of it sits on the reinsurance balance sheet and a smaller piece of it sits within our GWNF business. But the vast majority of it ties to reinsurance. Within reinsurance, that covers both the long-tail lines as well as the short-tail lines. The short-tail lines are a bigger proportion. But on the casualty side itself, we are booked above the central estimate, and that’s part of the conservatism we brought to our decision making this quarter.

David Montsmayden (Analyst)

Got it. Okay. And I guess, in the past, I think at the end of 2024, you guys had talked about $180 million of a risk margin that was embedded in the casualty re reserve. So I guess this number is all-in. You had said some of the short-tail. Could you just clarify more specifically with casualty re, how much of a margin is there as a percentage of the reserve base?

Elias

Yeah, well, let me take a step back. First, our actuarial central estimate has moved up, and it’s more conservative than where we were before. So within that actuarial central estimate, there’s more conservatism. We didn’t give credit to underwriting action we didn’t see in the data. We didn’t give credit to the potential for case reserve strengthening—we know it’s happening in our book. We’ve made investments on claims handling and, as a result, that accelerates the setting up of case reserves and improves the adequacy of case reserves.

We see some of that data also coming through from some of our cedents, but we did not make any adjustment for that, as well as we built conservatism by building in conservatism in the older accident years and rolling it forward. So you got to start, David, with thinking the actuarial central estimate is more conservative than where we’ve been. To me, there’s some margin inherent as a result within our actuarial central estimate. And then, on top of that, we booked in excess of that. So you’ve got implicit margins in the central estimate as well as on top of it. And that would get us more comfortable with where we are and comfortable that we’ve reduced the potential for future reserve volatility.

David Montsmayden (Analyst)

Okay. And maybe just quickly on that—the actuarial central estimate—how much has that moved up now versus the end of 2025 and the end of 2024?

Elias

So I can’t speak to the end of ’24. But the central estimate moved up by a few hundred million this quarter. And on top of it, if you look since I’ve been here, the margin on top of the central estimate also moved up by a few hundred million.

OPERATOR

Thank you. Thank you. The next question comes from Matthew Heimerman with Citi. Please go ahead.

Matthew Heimerman (Analyst at Citi)

Thanks for squeezing me in. I guess just one quick one—I’ll follow up on my others—but on the legacy segment, if my math is right, it looks like that’s paying down like $500 million per quarter. I was just curious whether or not that was representative of the numbers you have internally and just trying to tie that back to capital freeing up on that book of business.

Elias

Yeah. What you’re seeing is it is coming down, and what’s paying down is the short-tail lines within that book more than the long-tail lines, which is what you would expect. It’s paying down in line with our expectations within that book. We haven’t seen anything different than what our expectations are. We expect both to pay down over time. You’re just seeing it’s faster on the short-tail lines than the long-tail lines. Duration on the overall book today is about three to four years.

OPERATOR

Thank you. The next question comes from Elise Greenspan with Wells Fargo. Please go ahead.

Elise Greenspan (Analyst)

Hi. Thanks. My first question is on the reinsurance segment. You guys have been trending from an underlying combined ratio basis just around 85 so far this year. It sounds like your commentary on the reinsurance market is both property and casualty will be more competitive next year. So do you expect that underlying combined ratio that’s been within range of 85—would you expect that to trend up in ’27 based on how you guys see the market today?

Jim Williamson (President and Chief Executive Officer)

Sure, I would think about it in terms of a couple of countervailing trends. One, as you point out, things are getting a little more competitive and, all things equal, that tends to put upward pressure on your underlying combined. And as you’ve heard, I think abundantly today, we’re not playing any games with the loss picks. We intend to keep them in a conservative spot, and so that would certainly support that trend. The countervailing pieces, though, that we’ll have to keep an eye on are, as I said earlier, a lot of really interesting places to deploy capacity, particularly in our specialty businesses. Those tend to be very high-performing businesses. I think that will be quite favorable. And then there’s just an earned premium mix reality with the ramp-up of the Annapurna vehicle. That will reduce the amount of casualty earned premium, which obviously sits at a higher attritional combined.

So those things will mix together and come up with a result. I’m not going to predict what that will be, but just give you some sense of how to think about it.

Elise Greenspan (Analyst)

Thanks. And then my second question, going back to the actual estimate versus the risk margin. So you said you’re 850 above that actual estimate, and I think you said the actual estimate went up by a few hundred million. What was the 850 million above the best estimate—what was that before this reserve charge?

Elias

Yeah. So if I look at where we were at the end of June, we’ve moved probably like 300 million up since June.

Elise Greenspan (Analyst)

So both moved up about 300 million.

Elias

No, the margin over the ACE moved up 300 million, and we moved the ACE up by a few hundred million.

Elise Greenspan (Analyst)

Okay, got it. Thank you. Thank you.

Jim Williamson (President and Chief Executive Officer)

You know, Elise, if I could just come over the top on that. What I take away from that, I think what’s important to understand is, notwithstanding what we’ve observed in the back book, we are building reserve strength continuously. That’s been a reality now for a number of quarters. And so I think that’s a very favorable trend line given where we’re at.

Elise Greenspan (Analyst)

Thank you.

OPERATOR

Thank you. The next question comes from Tracy Bengigi with Wolfe Research. Please go ahead.

Tracy Bengigi (Analyst)

Thank you. Just going back to the recent discussion, Elias, you said that you took the ACE baseline up and then added a risk margin on top. I always assumed that the MBE was where you had subjectivity and ACE was from an external actuarial perspective. So to be sure, who’s moving up the ACE? Is that Everest or a third-party actuary?

Elias

So the actuarial central estimate is the indications we get from our reserving actuaries. That’s based on their judgment. It was the work that Katie and I, with our reserving actuarial team and getting feedback from underwriting and claims, that went into our judgments. What moved up the ACE is the stuff I referenced before about refreshing tail factors, loss development patterns, expected loss ratio selections. So all that increased it. And then over and above that, we made the judgment from a management perspective where we want to be booked.

Part of it is we decided not to release the short-tail development that we could have released, as well as booking our casualty over and above our actuarial central estimate.

Tracy Bengigi (Analyst)

Okay, so it sounds like your ACE was internal. Would that risk margin have been different compared to a third-party actuarial ACE?

Elias

Listen, you bring three actuaries in a room, you’ll get three very different opinions. I think the work our internal reserving actuaries did this quarter was pretty robust. And we have our auditors; they do their own work independently. From what I understand, they found our work to be reasonable.

Tracy Bengigi (Analyst)

Okay, heads up. My next question is pretty technical, so please bear with me. You have 2.4 billion of debt that’s about to lose its BMA and S&P capital treatment. I recognize that you sound optimistic on exceeding your 300 million buyback floor, and it’s also quite remarkable that S&P at least still thinks you have substantial AA capital despite losing this credit. So my question is, given how low the coupons are on that legacy debt, is it fair to assume that you wouldn’t refinance it?

And is it also practical to just amend the indenture language to make them explicitly contractually subordinate to operating companies so you could keep the capital credit without having to recap at higher rates? Do you think the BMA would be on board with that?

Elias

Let me address that. One, from an S&P perspective, as they said in their notice, even by not giving us capital credit for the debt, we had this excess over what their threshold is, and that speaks to the strength of our balance sheet. Second, we are having constructive discussions with our regulators. There’s multiple options around how we get that debt to be compliant, and most of these options don’t involve us having to reset the coupons, and we could protect where we are, pretty much.

So I’m not worried about it. We’ll get this sorted out, and I don’t think there’s going to be a punitive outcome coming out of it. But the thing I’ll take you back to, Tracy, is we have a strong balance sheet, and where we land on the debt does not change that.

Tracy Bengigi (Analyst)

Thank you.

OPERATOR

Thank you. The last question today will come from Ryan Tunis with Cantor. Please go ahead.

Ryan Tunis (Analyst)

Thanks. I guess first question, ignoring the 850 margin, how much movement was there from these actions on the actuarial central estimate?

Elias

Hey, Ryan, as I mentioned earlier, our actuarial central estimate moved by a few hundred million dollars. That’s reflecting the extra prudence we baked into it. If I go back to my commentary on the approximately 600 million in reserve strengthening on casualty, the biggest driver behind it is we wanted to be in a more conservative position to reduce reserve risk volatility going forward and provide more stability around our reserve. So we were more conservative with how we set our actuarial assumptions around casualty, and we went through a pretty robust process.

At the same time, we decided—and we had the ability to offset it—we decided not to fully offset it, and we held back most of the favorable loss emergence on short-tail lines.

Ryan Tunis (Analyst)

So just thinking about the premium reduction in casualty that’s still happening on the reinsurance side. I guess what I’m struggling with is, presumably, that’s premium that you could have gotten rid of a year ago and you’re just choosing to get rid of it now. So it feels like you might be seeing something. How do you square that with the comments about the prudence and the 2026 loss picks?

Jim Williamson (President and Chief Executive Officer)

Sure. Yeah. Ryan, look, I think one thing to keep in mind is when you see even written premium flowing through our financials in the third quarter, that is premium we got rid of in the past—last year and certainly at 1/1. And what I would really indicate is this is an evolving environment. I mean, if anybody sitting out there is thinking that social inflation was a thing that happened and stopped happening, you’re thinking about it the wrong way.

So we reevaluate, ground up, every quota share—every casualty quota share transaction that we do every year. It’s an actuarial and an underwriting exercise, a lot of analytics, and our perspective on any given deal could change. It could change because we see some movement in the underlying results from the cedent. It could change because they’ve changed their mix in a way that we don’t like. We have extremely robust analytics around the underlying portfolio composition and how it reflects in our results, and the team responds to those factors. The ceding commission could be going up, and we respond to that.

So it’s really a combination of things that results in our underwriting decisions. And I think all of those things are inuring to the benefit of the loss pick, not putting pressure on the loss pick. I think those are underwriting actions that, as Elias has indicated a few times, we’re not taking credit for. But I do think those will prove to be good guys for us over time.

OPERATOR

Excellent. Thank you. This concludes our question and answer session and the Everest Group Limited third quarter 2026 earnings conference call. Thank you for attending today’s presentation. You may now disconnect.

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