Everest Reinsurance Group Stock

Welcome to the Everest Group Limited Third Quarter 2026 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.

Thank you, Drew. Good morning, everyone, and welcome to Everest Group Limited Third Quarter of 2026 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Elias Habayeb, 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's 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.

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

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 Katy Bradica, 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 the Global specialty lines. The increase in the combined ratio in the quarter largely reflects the Casualty reserve strengthening I mentioned as well as pretax 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 1/1/27 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 & 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 pretax catastrophe losses of $25 million net of estimated recoveries, primarily resulting from the Colombia earthquake and midsized 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 2 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 underwriting, proactive capital management and balance sheet strength.

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

Thank you, Jim, and good morning, everyone. The third quarter financial results reflects 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, Katy 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 30. 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 2022 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 & 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 & Specialty business is performing as expected. Finally, the reserve studies resulted in no change to our 2026 loss picks 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. Pretax 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 to 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 & 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 an improving mix of business. Pretax cat losses net of estimated recoveries and reinstatement premiums contributed 3.5 points to the combined ratio, versus 80 basis points in the prior year quarter. The underwriting-related expense ratio increased to 12.6%, 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've 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 4 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.

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

[Operator Instructions] The first question comes from Alex Scott with Barclays.

First, what I have for you is just -- for Elias. I'd be interested in if you could 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 maybe relative to industry peers. And if you think this can be a clearing event?

Thanks, Alex. So listen, let me -- I'm going to answer it in 3 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 -- which is 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 this was Katy 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. 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 we thoroughly vetted them, challenged them and refreshed them.

And that includes things like loss trends, loss development factors, 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. One is where we saw loss emergence in the older accident years. We didn't just react to it then. We kind of rolled it forward into the more recent accident years.

Second, there's been a lot of underwriting actions in the last few years. We do see it kind of emerging in the -- if you look at '26, but we decided, unless it's in the data, we didn't make any adjustments. So there was no explicit adjustments made for any of the underwriting actions. We'll wait until it emerges in the data before reflecting it.

Second, I would say, on -- 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 cedents. That being said, we did not make any adjustment for it in the reserving on our -- for our core businesses.

The other thing I would say is when you look at the short-tail line, there's been a significant amount of favorable loss emergence on the short-tail line. 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, that, we applied the same approach and judgments. We had the higher loss picks entering into this year. And 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.

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?

Yes. Alex, look, obviously, it's 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 and peak zones, is it will be another competitive renewal. 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 -- 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 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 nonconcurrent 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, 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.

The next question comes from Andrew Andersen with Jefferies.

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?

Andrew, it's Elias. We had the ability to release more of it. We chose not to. And that 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.

Okay. And 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 reaccelerate growth over time?

Yes, 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 reaccelerate 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 reaccelerate 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 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 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.

The next question comes from Meyer Shields with KBW.

For one, I guess, process question, Elias or Jim. Are you open to maybe updating the year-end global loss signals 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?

Meyer, it's Elias. We'll take it under consideration. 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.

Okay. 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?

Yes, Meyer. Look, I think this is a frustratingly consistent message to what I've said over the last many number of calls. 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 aggression in that space. And while there is some very encouraging signs that states are beginning to wake up to how destructive this process has been to the U.S. 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, ceding 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.

The next question comes from C. Gregory Peters with Raymond James.

I guess when I -- laser-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, when you think about next year, how you think the portfolio within Reinsurance might change or what the headwinds might be to growth? And then sort of map that in with what -- how your views on PMLs look?

Sure. Yes. 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 nonconcurrent basis. And I think we're shielded from some of the competitive pressures, but it's certainly a reality.

Casualty, we just talked about. And I think on a broad basis, it's sort of the status quo situation.

What I will say though is -- 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 performing -- high-performing parametric business, and you can kind of go down the line.

Now from a pure volume perspective, Greg, those subsegments are not going to overtake 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 parts of the business.

As respect to 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, 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.

Great. That makes sense. And you sort of teased this and you spoke about it in your comments, but pivoting to the wholesale and specialty business. If we just look at some of the increases in growth that you're seeing in Casualty, financial lines and specialty, maybe you could just spend a second and just tell us where the opportunity -- what you're seeing and the opportunities there? Because those growth rates are pretty impressive.

Yes, sure. No, it's a great question. First of all, I think we are in a really spot with Global Wholesale & Specialty. And I'll certainly -- while we've spent a lot of time talking about the insurance 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 respect to growth, look, we came out of last year after we divested retail, we doubled down on our Global Wholesale & 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. 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 and manufacturing, we have specific products, 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 training partner, which is why we could see growth.

And so for GW&S 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 [indiscernible] Casualty, we're decreasing meaningfully in areas like specialty and particularly in London where 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.

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

Yes. I guess this is for Elias, it's about process on the reserves. If over the last 2 quarters you have not made any changes in to your Casualty reserves, but you had released $550 million of short-tail lines, would that be a process that people should say we've gotten a bit 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 -- yes, certainly the Casualty reserves have gotten more conservative, but how should we feel about the reserving on the short-tail side where you've released a lot of reserves to offset that?

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 with the favorable loss emergence, it demonstrates the prudence and the strong underwriting in that.

That being said, when I said we have a margin over our actuarial central estimate of $850 million, that's coming from both the 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 2Q '25 to present, we really haven't had much cat activity. 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?

Yes, 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 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 -- that's not the linkage you should be drawing. But I don't know, Elias, anything you'd add to that?

I think you covered it. The one thing I would say is in terms of cats, we did have some movement on cat reserves, some net releases, it's more from the attritional 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 may have to wait a couple of years, some event, less. It depends on the facts and circumstances of those individual events.

The next question comes from Rowland Mayor with RBC Capital Markets.

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?

Yes. 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 certainly see 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 GW&S, in a similar way, Jason and his team, I think, took a very critical eye of all those portfolios. And overall, feel excellent about where we're positioned. There have been spots. 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 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 to the last comment, as a proof point of that, you referenced back to Elias' comments on the current accident year loss picks, we didn't feel a need to move them. If we were discovering new, new things about our in-force portfolio, we certainly would be moving those picks, and that's just not the case.

Yes. I agree with what Jim said. I don't know if there were any surprises coming out of those reserve studies. I kind of, Rowland, 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 kind of a lot of our decision-making and how we position the balance sheet and 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.

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?

So on the nonrenewal part, on the new business, there's not capital that's being consumed. There's capital on the portfolio that we have on our balance sheet. There's the -- the average duration is maybe 3 to 4 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'd just, since we're talking about the AIG renewal rights deal, I 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.

The next question comes from Chris Hartwell with Autonomous.

Apologies to come back again to the reserve question, but I was 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 -- as 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.

Chris, thank you. So in terms of the IBNR versus case reserves, we've definitely increased the proportion of reserves that are IBNR. And with respect to the range, what I could tell you right now is we definitely moved up within the range. We're above our central estimate on that. 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 what we did about contributing to more stable reserves and reducing future reserve volatility.

Okay. 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, and obviously, the timing of releases to some extent is within your gift. And so how should we think about, particularly on this sort of -- 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 short-tail lines, I mean, 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.

No, happy -- our philosophy is we want to book our loss picks conservatively and allow the line 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 sheet. So I'm 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.

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

Maybe you can shed light on kind of the rating agencies. 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?

Yes. Happy to, Mike. What I would say is like if you look at the 3 rating agencies and why they have us a 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 of the company. Historically, what put us on negative outlook, it has been the volatility around reserves. As I said, we think the actions we've done this quarter contributes to more stable reserves and lower reserve volatility going forward. That should be a positive. We, as normal operating procedures, we brief 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 with the actions we've done has positioned us in a position to address some of the concerns they've had.

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 kind of want to make sure looking at the cat load this quarter versus consensus, a good bit higher. So is there -- should we be penciling in a bit more cat in 3Q on a go-forward basis? Just maybe you shifted appetite to kind of less non-hurricane areas, geographies?

Yes, Mike. As I've said on maybe some past calls, you got to be careful about any 1 quarter's cat activity because it's obviously purely driven by events. And it's been interesting to hear people describe Q3 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. I mean 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. And 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.

The next question comes from Yaron Kinar with Mizuho.

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 year, did. Would you say that the prior year reserves have now reset at the prudence level in margins that you built into 2026?

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 a 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.

Okay. And then I think you'd said that there's some additional reserve review to come in the fourth quarter. Would that include the financial lines reserves?

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

Okay. And the reserve strengthening in Casualty, was there anything also in financial lines?

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 million. If you unpack the $577 million, Yaron, about 2/3 of it is coming from North America casualty and it's heavy to your kind of traditional Casualty Pro-Rata, some elements in Casualty XOL, and the rest was kind of more mixed globally.

The next question comes from Brian Meredith with UBS.

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

Sure. I mean, look, Brian, it's -- 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'd 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 Katy 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 we do from time to time evaluate these things.

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 that potentially has on your business?

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 it's 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 U.S., where we write our U.S. E&S book, we are -- 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.

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 $30 million a quarter.

The next question comes from David Motemaden with Evercore.

Just had another question for Elias on the Casualty reserves. Could you just 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 we should think about that can absorb additional adverse development or increases above the central estimate?

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 GW&S 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.

Got it. Okay. So that -- I guess, yes, I guess I'm just sort of thinking in the past, I think at the end of 2024, you guys had talked about $180 million -- I think it was $180 million of risk margin that was embedded in the Casualty Re reserves. So I guess this number is all in. You had said some of the short-tail. So I guess could you just clarify maybe just more like specifically with Casualty Re, how much of a margin is there as a percentage of the reserve base?

Yes. Well, let me take a step back. So 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 accelerated setting up case reserves and improve 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 adjustments for that. As well as we build conservatism by building 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. So 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's what gets us to be more comfortable with where we are and comfortable that we've reduced the potential for future reserve volatility.

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

So I can't speak to the end of '24, but the central estimate moved up in a few hundred million this quarter. And 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.

The next question comes from Matthew Heimermann with Citi.

I guess just one quick one, I'll follow up on my others. But just on the Legacy segment, if my math is right, it looks like that's paying down like $500 million per quarter. I just was 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.

Yes. What you're seeing is -- it is coming down and what you're seeing, 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 expectation is.

Okay. Is that -- should we expect that if that's mostly short-tail, that long-tail will pick up and kind of keep that level of paid losses similar? Or will that degrade over time as the short-tail pays out?

We expect both to pay down over time. You're just seeing fast around the short-tail lines than the long-tail line. Duration on the overall book today is about 3 to 4 years.

The next question comes from Elyse Greenspan with Wells Fargo.

My first question is on the -- sorry, the Reinsurance segment. So you guys have been trending, from an underlying combined ratio basis, right, just around 85 so far this year, right? It sounds like your commentary on the reinsurance market is really both property and Casualty will be more competitive next year. So do you expect that underlying combined ratio, right, that's kind of been within range of 85, do you expect that to trend up in '27 based on how you guys see the market today?

Sure, Elyse. 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 so 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 is, as I said earlier, a lot of really interesting places to deploy capacity, particularly in our specialty businesses. Those are -- 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 the results. I'm not going to predict what that will be, but just give you some sense of how to think about it.

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

Yes. So if I look at it where we were at the end of June, we've moved in like probably like $300 million up since June.

So both moved up about $300 million?

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

Okay. Got it.

And Elyse, if I could just come over the top on that, just 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.

The next question comes from Tracy Benguigui with Wolfe Research.

Just going back to the recent discussion, Elias, you said that you took the ACE base line 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 is moving up the ACE, is that Everest or a third-party actuary?

So the actuarial central estimate is the indications we get from our reserving actuaries. So that's based on their judgment from that. And so it was the work that Katy and I, with our reserving actuarial team, and kind of getting feedback from underwriting and claims that kind of went into our judgments. And what moved up the -- our ACE is the stuff I referenced before about refreshing sales 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. And 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.

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

So listen, you bring 3 actuaries in the room, you'll get 3 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. And from what I understand is they found our work to be reasonable.

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 will be on board with that?

So let me address that. So 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.

The second, on -- 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.

The last question today will come from Ryan Tunis with Cantor.

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

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. So if I unpack -- 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 that 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.

Just thinking about -- when I look at 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. So I'm just curious, like how you square that with the comments about prudence in the 2026 loss picks?

Sure. Yes, Ryan, look, I think one thing to keep in mind is when you see written -- 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's sitting out there thinking that social inflation was a thing that happened and stopped happening, that 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 to an actuarial and an underwriting exercise, a lot of the 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 so the team response to those factors. The cedent commission could be going up, and we respond to that.

So it's really a combination of things that result 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.

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.

Good day, and welcome to the Everest Limited -- or Everest Group Limited Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

Please note that today's event is being recorded.

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

Thank you, Chris. Good morning, everyone, and welcome to Everest Group Limited second quarter of 2026 earnings conference call. Everest executives leading today's call are Jim Williamson, President and CEO; and Elias Habayeb, 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. Please note that forward-looking statements include estimates, projections and forecasts of future results and are subject to the risks, uncertainties and assumptions noted in Everest's 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.

Thank you, Matt. Good morning, everyone. Everest posted another strong quarter with significant earnings and capital generation. Meaningful contributions from underwriting and investment income produced operating income of $585 million. Annualized after-tax net operating ROE was 14.9%. Annualized total shareholder return was 16.8%. And we grew book value per share, excluding unrealized gains and losses, by 12% year-over-year.

The results in this quarter further show the strength of the more focused Everest we have built. The benefits of the actions we are taking to improve portfolio quality, strengthen underwriting performance and allocate capital to the most attractive opportunities available to us are emerging in our numbers. Our strategy is built around developing our core businesses while managing the cycle with relentless discipline. We are upgrading critical capabilities, [ optimizing ] the balance sheet and accelerating the return of capital to shareholders. This quarter's results are further proof that the execution of this strategy is working.

Our core businesses, Treaty Reinsurance and Global Wholesale & Specialty, generated underwriting income of $317 million on a combined ratio of 90%. As I have said before, we continue to focus on underwriting discipline and rate adequacy while prioritizing bottom line results over top line production, especially in this environment.

Our core businesses delivered $3.7 billion in gross written premium, a modest year-over-year decline driven by deliberate underwriting choices. Our Reinsurance Treaty team delivered another excellent quarter, leveraging the depth and breadth of our platform as competitive advantages to effectively navigate a softening property market. Our discipline focused on profitability delivered a combined ratio of 88.5% and underwriting income of $283 million.

As we decisively manage the cycle, we have continued to decrease our exposure to U.S. casualty lines and selectively reduced business where pricing or structure did not meet our return thresholds. This resulted in approximately a 9% decrease in gross written premium year-over-year on a constant dollar basis and excluding reinstatement premiums.

Casualty lines were down by 19%, while property premiums were relatively flat as growth in property pro rata was offset by decreases in our cat book.

We continued our targeted expansion in specialty lines globally where risk-adjusted returns remain attractive. Our strategy of building deep underwriting capabilities in specific segments allows us to capture emerging opportunities like data centers as well as new markets within construction and renewable energy.

In each of the 2026 renewals, the Everest team has been able to maximize shares on the most attractive deals while reducing or exiting programs below our return thresholds. This is only possible because of the strength of our global underwriting platform and our well-honed distribution management capabilities. While property pricing in the market was down in the range of 15% to 20% at both 6/1 and 7/1, pricing on our property cat portfolio between both renewal periods finished down approximately 10%. Despite rate pressure, terms and conditions are largely holding and attachment points remain relatively stable. Looking ahead to the 1/1/27 renewals, we expect conditions to remain competitive absent large cat losses or other external shocks.

Our third-party capital platform, Mt. Logan Capital Management, has approximately $3.4 billion of AUM as of July 1, up 89% from the beginning of 2025. A major contributor to this growth is the launch of our casualty and specialty reinsurance sidecar, Annapurna Re. Annapurna provides Everest with an additional lever to facilitate opportunistic growth, generate fee income and enhance capital flexibility. This is just another example of the work we are doing to optimize our balance sheet and, at the same time, enhance ROE potential over time.

Turning to the Global Wholesale & Specialty segment, results were strong. Our strategy to expand the portfolio in specialty lines and targeted international markets while delivering margin expansion continues to gain momentum. Gross written premium was roughly flat year-over-year as growth in niche specialty lines and international business was offset by deliberate reductions in U.S. property and casualty. We grew double digits internationally, with broad-based growth across financial lines, marine, political violence as well as in select specialty property markets.

Rate across our portfolio was flat as double-digit rate declines in property were offset by rate increases in casualty lines. More importantly, the areas of our business we are expanding continue to be rate adequate.

The significant underwriting actions we have taken in recent years continue to pay dividends with both the additional -- attritional loss and combined ratios improving year-over-year. This is a result of the team's disciplined risk selection and portfolio management.

Now a word on capital management. Since I became CEO in January of 2025, Everest has deployed $1.5 billion towards share repurchases, resulting in a reduction of over 10% of our shares outstanding. Share repurchases remain a top priority for capital allocation, and our commitment to disciplined capital management was again evident in this quarter's results. This speaks to our continued conviction in the strength of our balance sheet and that Everest's share price does not accurately represent the true value and earnings power of the company.

Our goal is simple: to grow book value per share consistently. We're doing that through disciplined underwriting and capital stewardship, and this quarter provides convincing evidence of our approach. We are not, however, declaring victory. I am seeing more signs of irresponsible underwriting in the market. The U.S. tort environment, despite some recent reforms, is corrosive to a well-functioning economy and is putting pressure on industry reserves. And the world is experiencing unprecedented levels of risk across multiple domains, with little sign of that risk being reflected in insurance and reinsurance prices.

But today's Everest is up to these challenges. We have a deep bench of talented people across our organization, robust and growing analytical and technology capabilities, and superb relationships and distribution. Our intent is to strengthen our company no matter what part of the cycle we're facing.

Let me end by welcoming Elias to the team as our new CFO. Elias is a seasoned finance executive with over 30 years of experience leading several global finance organizations in the insurance and financial services industry. We're excited to have him on board.

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

Thank you, Jim, and good morning, everyone. The second quarter results reflect the momentum we're creating by executing on our strategic priorities to create shareholder value. We believe the combination of delivering compounding book value per share growth, driven by disciplined underwriting and prudent capital management, is the best way to generate that value.

Before unpacking this quarter's results, I'd like to highlight 2 changes we're making to our external reporting. First, beginning with this quarter, we will be providing consolidated financial results for what we will now refer to as our core businesses, consisting of Reinsurance Treaty and Global Wholesale & Specialty. These businesses represent the future of Everest. And with this additional disclosure, we're providing you with added transparency into the earnings power of the go-forward business. This excludes the legacy segment, which, as we have noted in previous quarters, will become an immaterial contributor to earnings as the portfolio runs off.

Second, beginning in the third quarter, we will make some revisions to our definition of after-tax net operating income to better align our definition with industry peers. We will exclude onetime expenses as well as gains and losses associated with acquisition, divestiture and restructuring activities as well as the asymmetric accounting for the ADC. These refinements will improve transparency and period-over-period comparability of Everest's operating results. We're previewing these changes this quarter and have provided the preliminary recast of the historical results under the revised definition in the back of our financial supplement.

Now turning to the second quarter Group results. Everest grew book value per share, excluding unrealized gains and losses, by 12% over the past year to roughly $408, and produced an after-tax net operating EPS of $14.85 by delivering an underwriting profit of approximately $300 million and net investment income of over $500 million, while returning over $470 million to shareholders between share repurchases and dividends.

Moving to our core businesses. We are focused on producing consistent underwriting profitability supported by a strong balance sheet to deliver on our total shareholder return goals. The core businesses delivered strong underwriting profits in the quarter of $317 million. Gross premiums were $3.7 billion, lower than the prior-year quarter by approximately 7% on a comparable basis, reflecting our underwriting discipline and actions to improve the portfolio mix. The core combined ratio was 90%, inclusive of $85 million in catastrophe losses net of estimated recoveries and reinstatement premiums, largely driven by the conflict in the Middle East and several weather-related events globally.

There was no net prior year loss development. The attritional loss ratio was 57.8%, relatively consistent with the prior year. The expense ratio increased to 5.1%, reflecting the impact of lower net earned premium as well as modestly higher expenses driven in part by timing as well as investments we're making in the business to improve our competitive positioning and operating efficiency.

In our Reinsurance Treaty business, we continued to capitalize on our lead market position to achieve differentiated rate and terms as we proactively improved the mix and shortened the duration of the portfolio while navigating the current market cycle.

In terms of underwriting profitability, the combined ratio was 88.5%, a year-over-year increase of 360 basis points, mostly driven by higher catastrophe losses on a comparable basis. The attritional loss ratio increased 140 basis points to 57.1%, largely due to higher weather-related non-cat losses. Excluding these losses, the attritional loss ratio would have been 54.4%, a 130 basis points year-over-year improvement driven by mix and improved loss experience.

Turning to Annapurna Re, our recently announced casualty and specialty site car. Annapurna Re provides Everest with additional portfolio management and financial optionality. We expect to cede roughly $200 million of premium a quarter over the next 3 years to Annapurna Re. We also expect the transaction to be modestly accretive to overall underwriting income and ROE over time while resulting in lower net investment income.

Now moving to our Global Wholesale & Specialty business, where we are focused on improving underwriting margins as we pursue profitable growth in targeted lines and geographies. While the combined ratio was in line with the prior-year quarter at 95.2%, the attritional loss ratio improved 390 basis points to 60.6% as a result of the underwriting actions we've been taking and an improving business mix. Catastrophe losses net of estimated recoveries and reinstatement premiums contributed 1.4 points to the combined ratio, while the prior-year quarter's experience was de minimis.

The underwriting-related expense ratio increased to 12.6%, largely driven by timing, mix and investments in the underwriting platforms. While underwriting profitability was strong this quarter, 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 with roughly $250 million of net premiums left to be earned in the second half of the year. We're also focused on proactively managing the runoff book through claims optimizations and expense discipline that will unlock the capital that supports the portfolio. As expected, in the second quarter, the segment generated a modest drag on the Group underwriting results.

Turning to reserves. As Jim noted, I recently joined the company, along with our new Group Chief Actuary, Katie Bradica. Katie and I worked together in the past, and I think very highly of her skills. I'd like to touch on our process and philosophy before providing the highlights of the quarter.

On process. We followed a prudent quarterly reserving review where we responded proactively to emerging credible data even if the annual studies had not been completed. Our philosophy is to maintain management's best estimates above the actuarial central estimate and embed conservatism in our loss picks. Finally, the annual reserve studies for most of our long-tail lines, including Reinsurance Treaty business, are scheduled to be completed later in the third quarter, and Katie and I will be heavily involved in that process.

Now turning to the results for this quarter. We had no net development on prior year loss reserves. Short-tail lines continued to develop favorably. This was offset by the increase in the industry loss estimate on the Baltimore bridge collapse matter as well as some strengthening in casualty reflecting our cautious outlook. Lastly, we expect to publish our global loss triangles during this upcoming month. You will see enhanced disclosure like additional lines of business triangles and more commentary within each of our 3 reporting segments.

Moving on to investments. We continue to maintain a high-quality and diversified investment portfolio. Net investment income was $523 million for the quarter, modestly lower year-over-year due to lower alternative investment returns. Overall, our book yield in the quarter remained stable at 4.5%, which is below our current new money yield which is closer to 5%.

Turning to capital management. Our philosophy is to deploy capital towards opportunities that maximize shareholder returns, balancing growing the franchise value of the company while providing an attractive return to our shareholders. Given current market conditions and our attractive valuation, repurchasing shares is a top allocation priority. In the second quarter, we repurchased approximately 1.2 million shares, amounting to $395 million, at an average share price of $342 per share. This translated into an 81% payout rate for the quarter and an approximately 77% for the past 3 quarters.

Looking ahead, while we continue to view share repurchases of $300 million as a quarterly floor, we expect to exceed that amount when appropriate given the strength of our balance sheet and earnings generation. As Jim said, we have strong conviction that Everest's current share price does not reflect the true value of the company, and we have confidence in the strength of our balance sheet.

And with that, I'll turn the call back over to Matt for Q&A.

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

[Operator Instructions] And today's first question comes from Alex Scott with Barclays.

So I was listening to the commentary about the involvement, Elias and the new Chief Actuary and the review process. I think when you have that kind of turnover, it makes people nervous around the reserve quality. But I also heard your comments about having confidence in the strength of the balance sheet. So I just wanted to see if you could opine on what gives you the confidence to say now ahead of that review that you have confidence in the strength of the balance sheet.

Alex, it's Elias. So I've been here for a quarter, and I will tell you, I believe our balance sheet is strong. I look at the strength of the balance sheet, looking at capital adequacy, liquidity, leverage, the overall risk profile of the balance sheet. So looking at all that, I believe we've got a strong balance sheet that gives me conviction that we would be able to deliver on share repurchases in excess of $300 million going forward.

In terms of the reserves, as I reflected in my commentary with Katie and I being new, we decided to react now to what we're seeing in the data and not to wait until the reserve studies are done next quarter. And that's what's reflected in our numbers this quarter.

Understood. And I guess as a follow-up, could you talk about your interest and how you balance the price versus reward for looking at things like loss transfers to the Reinsurance business to more fully put this part of the conversation around Everest with that?

[indiscernible] and things like that? I just want to make sure we're clear on the question.

Yes. Just thinking about potential loss transfer of ADCs, sort of similar to what you've done with some of the primary legacy product.

Sure, Alex. I would answer the question in a number of ways. One, in terms of our overall hedging strategy, you've seen us evolve that over time. We've developed our third-party capital strategy with Mt. Logan and that gives us a tremendous amount of support on a go-forward basis in our reinsurance business. That's our main method of transferring risk to third parties. We also opportunistically purchase a retro, but we do that very sparingly, usually in niche areas. I would cite aviation, cyber as 2 areas where we've purchased some retro.

And then in terms of the back book, look, I mean I think we're very open to strategies, like what we did last year with the ADC, that can enhance our capital position and help us to manage risk. And we look at those things across both businesses on an ongoing basis. If something becomes attractive, you would certainly -- you would see us willing to engage in such transactions, and there are some things that we look at from time to time. I think our focus there is really more on the legacy business and how we accelerate the realization of capital from that portfolio. That would be the area of most focus for us.

And the next question comes from Gregory Peters with Raymond James.

I wanted to step back in go to your comments on Reinsurance Treaty. Some moving pieces from the top line and you talked about pricing on property being down. It seems like you're getting maybe some better terms in some of the horror stories we're hearing in the marketplace. But I want to go back and just have you reframe -- provide a little bit more detail on what you're seeing on pricing in the various lines of business, please.

Sure. Yes, happy to do that, Greg. And I'll start with property cat, obviously, that's where the market gets a ton of focus. And we did see rates come down in the more recent renewals. As I indicated, we've seen market pricing move in the 15% to 20% range. We've done quite a bit better in our own portfolio.

And first, let me just spend a moment on how we're able to do that. It's a combination of things. Number one, we talk about the strength of our platform. What that really translates into is we have industry-leading underwriters in all of our regions, on the ground, enabled with underwriting authority, who can execute deals with cedents who we have very deep relationships with. So it gives us a lot of flexibility to position our capacity at those places in the program where we see the best return opportunity.

And the way that played out in the midyear renewals is we did shift around our participation on programs quite a bit. We actually moved a little bit more remote from loss, so our average attachment point increased slightly. We were very careful about which programs we decided to deploy to. In some cases where we saw attractive rates, attractive terms and conditions, we deployed more capacity. And then in other areas, as you can imagine, we had to pull back. And that's how we achieved that 10% reduction.

And my view of property cat rates at this point is they're still in such a place that it allows us to get a return, an expected return that's above sort of our threshold for continuing to write that business. And so that -- I think that makes us feel pretty good.

When you look at sort of our portfolio like property pro rata, where we did grow in the quarter, one thing I would opine there, particularly against the backdrop of declining property rates, that growth was driven by very specific deals. I wouldn't envision as you're thinking about that portfolio, just general market, commercial and personal property, these tend to be more specific deals. A lot of it's in our international markets, and some of it is around whole account quota shares with very strategic partners, some of its growth in Latin America and Asia. So we're being very selective there. And again, while there is a declining rate, I still think very adequately priced.

And then in the long-tail lines, this is an area, I think, that is going to require very careful management. Rates are up. They have been up consistently, and we're seeing that in both our businesses. But we still remain fairly conservative in our approach to that business. So it really does come down to more than just rate change. You have to have conviction on where loss trends are going, and I think there's a lot of uncertainty there.

So to sort of summarize all that and to reiterate a comment I made in my prepared remarks, where we're putting capital to work, particularly in the areas, the niche specialty areas that we're growing, we have a lot of conviction that rates are at or above adequate levels. And it allows us to continue to write the business with an expectation of strong profitability.

Thanks for that detail. Just a follow-up, Jim, because we're now in hurricane season for North America and we're watching the moving pieces move around in Reinsurance Treaty, how should we be thinking about PMLs for hurricanes and cat activity in the second half of '26 and how it might manifest itself if it occurs with your changing exposures?

Yes. I think a feature of the way we've managed this cycle, and you see it in our printed results, is our PMLs have been coming -- our net PMLs have been coming down. Some of that is related to actions we're taking on the gross portfolio. More of it is related to the expansion of, in particular, Mt. Logan. And so we are very careful about our aggregation, particularly in the Southeast, but really in all of our parallel zones around the world. And I feel like our total risk profile is in a really good spot relative to the economics of the trades that we're making. So I think we're getting paid adequately and I also think we're managing our total exposure in a way that is a little more conservative than you might have seen us be a year ago.

And our next question comes from Andrew Andersen with Jefferies.

As this new casualty sidecar becomes larger, should we think about the underlying reinsurance accident, your loss ratio perhaps trending a bit lower given retained mix to a short tail? Or do you anticipate redeploying that capacity perhaps into other lines that maybe have a higher expected loss ratio, but still good attractive returns?

Yes. Let me provide a little bit of perspective on this. And by the way, what I'm about to say, I think, applies to both of our businesses and the way we think about management of loss picks going forward. The first thing, Andrew, to keep in mind is we're starting in a great place. And again, that applies to both businesses, meaning we've built a lot of prudence into our loss picks. We have not taken credit for much of the underwriting work that we've done in the businesses. And so we're in a position where, I think, unlike some folks in the market, we don't have to chase loss trend in our picks. We start from a position of strength.

And then as you look at the go-forward outlook, there's really sort of 2 forces, 2 trends that we got to manage. The first is the market. And I think about that like gravity. It's going to exert pressure on all underwriting companies. And for the most part, with the exception really of U.S. casualty and some very specific specialty areas, prices are coming down.

But then there's our actions and what we do within the company, within our portfolios to defy that gravity. I'd say what you're seeing from us is, one, really strong portfolio management activities, and that's playing out across all of our lines of business in both divisions, where we're walking away from business that is not properly priced. But we're leaning in where it is, and where things are good, we're willing to grow.

We've built a strategy where we're moving our mix to parts of the market where you do see strong margin and we have durable advantage, meaning we have a product differentiation, we have expert underwriters who deliver something very special into the market that our clients value. We have analytical capabilities that support that underwriting. That's going to sustain our advantage and sustain our profitability irrespective of what the market is doing.

And then there are actions like Annapurna. And so yes, you might see, obviously, that will deliver a benefit to the Reinsurance division in terms of its attritional, and we'll be thoughtful about that. And it gives you an opportunity both to sustained margin as markets soften, but also build up your prudence in your loss picks.

And then the last point I'd make on our business and where it's positioned is, remember, we're a highly diversified underwriter. And so we have the ability to manage the market cycle and deploy capital in markets around the world. It gives us a tremendous advantage. So you net all that together, I think for now, things are sort of a wash in the near term in terms of where the loss picks would be heading. And again, that comment applies to both divisions. And it's something we'll manage very carefully as the cycle unfolds.

Andrew, if I may add. So taking what Jim said, I think the way to think about, at least in the near term, from an attritional loss ratio for the Treaty business, is you should be thinking about it in the mid-50s. And on Global Wholesale & Specialty, it's like where we reported this quarter, I think we'd expect to be in the same neighborhood as where we were this quarter.

Great. And just with the session for the sidecar of roughly $200 million a quarter, could you maybe just provide a bit color on how you determine what casualty you see to the sidecar and what you retain on your own balance sheet?

Yes. I mean it was -- obviously, these processes of assembling these sidecars are a negotiation. And so it's really about aligning the appetite of Everest to cede business and the appetite of our capital partners to provide the capacity. Like the rest of what we do in Mt. Logan though, a key theme of our strategies around third-party capital management is alignment of interest, meaning we're not cherrypicking deals to go into the sidecar. These are quota share structures that take a predefined sliver of everything we write. So our experience is the same experience as our capital providers will receive and vice versa. And we think that's the most sustainable and aligned way to build these structures.

And the next question is from Meyer Shields with Keith, Bruyette & Woods.

Elias, I was hoping you can give a little bit more color. When you talk about reacting to casualty reserves in the second quarter results, which segment is that? Which accident years? And maybe what is the reaction to?

Meyer, it's Elias. Yes, happy to. But let me first go back to a couple of comments I made in my opening comments. Like the process we went through this quarter, I believe we went through a pretty prudent process. And we decided to react to data we're seeing today. We were not going to wait until the third quarter for the reserve studies to be done.

If I unpack reserves for the quarter, there's 3 things that we tackled this quarter. One, on the shorter lines, continue to develop very favorably. We did recognize some favorability on the more mature year, but we're still sitting on a pretty meaningful margin there. Second, we did increase our reserves for the Baltimore bridge matter, and we increased it by about $55 million. So that brings us to the industry loss estimate of about $2.8 billion to $3 billion. And third, to where you were asking about, Meyer, around casualty, the 2 data points we saw and that we decided to react to is, one, loss trends continued to be elevated. Now they're still relatively [ stable since ] the last reserve studies, but they continue to be elevated, in part reflecting the environment that Jim mentioned during his opening comments.

The second thing is we continue to see loss emergence in the older accident years, and we decided to react not just to the accident years where the loss emergence is coming in higher than expectations, but we decided to reflect it across most accident years to try to keep ahead of it. Now what we did not factor in or react to this quarter in the data is any underwriting action we've taken that hasn't yet shown up in our numbers, any of the tort reforms we've not given any credit to. And at the same time, we know that in our insurance book, we have a claims acceleration. We hear from our cedents, some of them, that there's claims acceleration in their book. That wasn't reflected in anything we've done this quarter.

So the takeaways this quarter, that's what we really reacted to. The bulk of it was in the North America casualty book on the Treaty side. And we feel like we reacted to what we know now. The reserve studies are ongoing and will be done next quarter.

Okay. That's very helpful. Is there -- second question, is there a way of maybe ballparking the impact of the Middle East conflict on premium volumes?

Yes. Look, I think overall, it is actually on the Global Wholesale & Specialty side creating opportunities in so far as you are seeing a reaction in terms of rates, particularly around areas like political violence and marine, and we see that as an opportunity. We are obviously an active underwriter in the region. We've taken a very conservative approach during the conflict. But I think on balance, Meyer, I would view it as a potential opportunity more than anything else.

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

Maybe just -- I noticed this in the past, just we get asked a lot by investors, just on the catastrophe load guidance. Some of your peers are talking about kind of towards the higher end of the range given kind of where pricing is going and kind of keeping limits flat or higher. Any change in the cat load guidance? I'm not sure if some of the retro or Annapurna flows into cat at all.

Mike, it's Elias. No, Annapurna is on the casualty and specialty side. The guidance I'd give you from a cat loading is roughly 8 points on the Treaty side and roughly about 4 points on Global Wholesale & Specialty.

Okay. Perfect. And maybe moving to an attritional loss ratio question on the Wholesale & Specialty. Great to see 4 points of improvement, also kind of heard some of your guidance or thought process comments. But is there -- just so we understand the improvement, is there a bridge you can kind of talk about that caused the improvement? Is it all mix of business? Or are other things going on that are -- you'd like to make us aware of?

Yes, Mike, it's Elias again. I would say a couple of things driving. One is mix. The other one is improved loss experience. Now even with the improvement of about 350, 400 basis points year-on-year, we did not change our prudence on the long-tail lines. We're maintaining our prudence on the long-tail lines. It's really mix and improved loss experience on the other businesses that's playing out.

Got it. In terms of the enhanced disclosure, it would be great if you all could provide kind of disclosure that looks a little bit more like the statutory disclosure where we can kind of see the prudence via that kind of the IBNR levels by business line and vintage. Just a comment.

And Mike, you're referencing the GLTs, I assume, which we've certainly taken that into account.

And the next question comes from Brian Meredith with UBS.

Jim, just curious, given the continued move here to more property business in your reinsurance, should we be expecting more of this volatility in excess non-cat weather, kind of like you reported and called out this quarter in your results? And below normal also.

Yes, I wouldn't necessarily say that you should expect more volatility there, because a couple of things. One, we have a long track record in the products that drove the loss in this particular quarter. They performed extremely well. You do, from time to time, get these pops. But if you look at our overall exposure to non-cat weather, and in particular areas like severe convective storm, we've managed that down over time. And so I think you sort of net those things together, and I'd say that I really view this quarter's loss as kind of an anomalous loss. Not that it couldn't recur, but it shouldn't raise an expectation that we're going to see more of that going forward.

Makes sense. And Jim, just curious, your thoughts, you obviously have a new alternative capital facility, it's great, but we're seeing a lot of this kind of in the industry. What do you think the impact has been in the reinsurance marketplace, call it mid-year renewals and as we look into 2027, from this increased capital coming into the industry from an alternative capital? I know, I just remember back prior to 2020 and how this alternative capital really depressed returns, at least in the property side of the business. And now we've got this new kind of casualty part coming in.

Yes. It's a fair question. I mean I think one piece of context, Brian, that's always important to keep in mind is if you zoom out and you look at the total capitalization of the industry and the part that's played by third-party capital, it's still relatively within range of where it's been over the last few years. Yes, it's increasing, but really on the margins. And so that would be one point.

I think a lot of the experience we're having right now in terms of price trajectory is just the fact that people have made a fair bit of money on -- in a variety of markets in reinsurance over the last few years. Underwriters have done well, and they're looking to put that -- the capital you've created through that process to work, and so you're seeing increased competition.

My hope is that people have learned from the last time that third-party capital really leaned into reinsurance. And I do think that's a fair hope to have. I think we're seeing a lot of increased sophistication from third-party capital providers. Certainly, we work only with partners who fully understand the risks that we are taking. And as I said earlier, we try to create tremendous alignment with our capital providers in that way.

So I guess my view, if I were to summarize it, is, yes, it's going to apply some marginal competitive pressure because supply of capital goes up. It's a supply and demand equation. But I think it's happening against the backdrop of a fair bit of discipline. And so I don't expect a major dislocation at this point.

Our next question is from David Motemaden with Evercore ISI.

Elias, you had sized the Baltimore Bridge impact on the reserves. I was wondering if you could also just let us know what the reserve increase was in dollar terms on the casualty side. And is that something that was only a slice to the book where you reacted to information? Is that something that we should extrapolate? Any sort of color there would be helpful.

David, it's Elias. Yes. So on the North America casualty side, where the bulk of where the strengthening we took, it was just under $200 million. So if you think about the total reserves, that's a small percent of the total reserves.

The second thing I would say is while the loss emergence was in the older accident years, we decided to kind of reflect that across most accident years, so it's really spread across because we spread -- we kind of reflected what we saw in the older accident years across most accident years. And this is really in the North American casualty book where we took the adjustment.

Got it. Sorry, I don't know if someone else is chiming in there. But on the just also, just in response to that, was there any change to the loss pick on the casualty side? And maybe just as a gut check, within the mid-50s attritional loss ratio within Reinsurance that you were talking about, is -- where are you picking casualty within that?

So going through the data, at this point, we decided there's no need to make any adjustments to the casualty 2026 loss picks. We feel they're prudent. And so given we reacted to what we know right now, but we're going through the reserve study, which will be done later in the third quarter.

And the next question comes from Matthew Heimermann with Citi.

I think most of my questions have been answered, but just curious if, with the change in the portfolio, we should expect any lag changes -- excuse me, with any changes in the underwriting portfolio and the mix, if we should expect a natural shortening of the duration on the investment portfolio side just as we contemplate reinvestment rates and the like?

And Matthew, I think you're asking about the investment portfolio. And our investment strategy is liability-driven. And so we will align the duration of the asset side to what we see happening on the liability side. And right now, the duration on the asset side is about 3.5 years, and we try to maintain that duration. The ALM duration is pretty tight between the 2.

And our next question is from Elyse Greenspan with Wells Fargo.

My first question, I guess, is going back to the capital discussion, Elias, I think you said, right, that there's going to be some capital bringing up from the legacy book. So if could you just remind us of the numbers there? And then could that be additive to that $300 million floor when we think about capital return in the back half?

Elyse, it's Elias. Yes, happy to answer the question. So we've got over $1 billion of capital sitting behind legacy. That amount will free up over time as the reserves and legacy come down. And from a capital management perspective, we look at our distributable capital in total. Most of our capital will come through the earnings of the company. The company has really strong earnings generation. And then any capital that gets freed up through legacy runoff or other means gets factored.

And listen, we believe, given the strength of the balance sheet, the strength of the earnings generation of the company, we have the capacity to buy more than $300 million per quarter when appropriate. And that's what gives us the conviction that we expect to come in to be buying more than $300 million a quarter. You saw the first quarter at $330 million, the second quarter we're at almost $400 million. So I quoted in my opening comments an 81% payout ratio for the quarter and just shy of 80% for the last 3 quarters. So you could see kind of the acceleration and the commitment on our end to deliver an attractive return by buying back more shares. And as we look forward, we expect to maintain that same discipline going forward.

And then my follow-up, I wanted to go back to just, I guess, some of the commentary you said on the casualty book. It sounds like, right, that $200 million reserve increase was right on the North America casualty reinsurance side. So can you just -- I think you said in response to another question, you guys didn't move current year loss trend assumptions this quarter. Can you give us a sense of where the current casualty loss trends are today, just to give extra comfort why you were moving prior years and, obviously, see the strength in the current accident year?

Yes. Happy to, Elyse. And our loss trends on casualty have been relatively stable since the last reserve study. And it varies by line within casualty between high single digits to low double digits, is where our trends are. And that's not inconsistent to what I think we've been seeing from some of our other peers' report.

And the next question is from Tracy Benguigui with Wolfe Research.

Welcome, Elias. A follow-up on Annapurna Re. The $200 million of premiums you plan to cede per quarter, I appreciate there's no cherry picking. The mechanism is a quota share. But I'm curious, is the idea, let's say, for example, rather than cut casualty XOL by 1/4, why not give that to Annapurna through a quota share? Or should we actually expect more casualty reinsurance reduction on a net basis going forward?

Yes. Tracy, listen, the way we think about it, first of all, and this is a crucial statement that I want to make sure we're all aligned around, is we start with gross underwriting. And so we're not going to put business on the books unless we're confident that we understand it, we've underwritten it, we can predict its performance over time and we feel good about it. And so that's where it begins. And certainly, over time you've seen us withdraw from a number of casualty deals and a fair bit of business over $1 billion over the last few quarters as a result of that gross underwriting discipline.

We've now agreed to cede a portion of that business to this vehicle on a quota share basis, as I mentioned. And so what does that mean for our net? Well, I would say, in the immediate term, it means our net retention of casualty will go down. We're not going to stretch to go find more growth as a result of this transaction. And at the same -- and then what it would also, obviously, it helps us to move the mix, helps to provide some capital flexibility. So a lot of benefits inuring to us through that transaction. But we don't change our underwriting logic based on the availability of third-party capital. It's just not how we run the company.

Excellent. And then going back to your midyear renewal comments that the market saw property down 15% to 20% while Everest was down 10%. I'd like to better understand how you achieved better pricing. Did you change rates where in the tower you played or is the nuance difference in terms and conditions or offering multi-peril protection, not just wind? Or is the difference where you play geographically?

Yes. So a couple of points. One, when we talk about these numbers, these are on a risk-adjusted basis. So if we change the program and add more coverage, that would increase the risk. And so you don't get a pass when you do those sorts of things.

How do we achieve it? It's a few things. One, nonconcurrent terms are a big part of it. And in particular, almost all programs that we write in Florida are on a nonconcurrent basis. And so the market can be doing one thing and we may be doing something else, and that puts us at a tremendous advantage in that marketplace.

And then more broadly what I would say is our property teams, and this is true in every geography around the world, are incredibly astute at determining where they want to participate in programs. So we definitely will adjust where in the tower we sit based on the availability of margin pricing and risk. And we saw a fair bit of shifting around of our participations, which is why I indicated in the quarter our average attachment point on a return period basis increased.

So we did not come down in the tower to achieve better or higher rates. We actually went up a little bit. And we will move then capacity across clients based on where we see risk-adjusted rates going. And so there's no question, in the most recent renewals, we deployed more capacity with clients, we saw healthy risk-adjusted economics and moved capacity away from programs that weren't as well price restructured. And all of that allows us to sort of defy the gravity of where the market is heading.

And this does conclude today's question-and-answer session as well as today's conference call. Thank you for attending today's presentation, and you may now disconnect.

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.