Juan C Andrade
President and Chief Executive Officer at Everest Re Group
Good morning, everyone. Thank you for joining us today. Everest is off to a strong start in 2022 with first quarter results to reflect our relentless focus on profitability and margin expansion. Excellent performance across our underwriting businesses and investments contributed to a $406 million in net operating income and a 16.2% annualized operating ROE. Our discipline and resilience stand out in a challenging and complex environment. We are a source of strength and stability in unprecedented times. The world is facing historic volatility with the effects of the pandemic, compounded by a web of macroeconomic, geopolitical and societal issues. Adding to this, our climate-driven industry catastrophe losses. The first three months of 2022 were active with estimated economic losses over $30 billion and insured losses over $14 billion. Significant events occurred in the quarter in Western and Central Europe, Australia, Japan and the United States. The historically quiet first quarter has not been quiet for the past six years. According to the National Oceanic and Atmospheric Administration, January, February and March of 2022 were each in the top 10 warmest months in the official observed record dating back to 1880. Amplifying these challenges is the brutal Russian innovation of the Ukraine and the upheaval, death and destruction facing the Ukrainian people. It is heartbreaking to witness the inhumanity and the cruelty that is unfolding in Europe.
This more destabilizes global economic systems in financial markets and threatens democracy, peace and decades-long efforts towards shared prosperity. Everest stands in solidarity with the Ukrainian people. As underwriters, the protection and stability we provide has never been more important. This turbulent time is when our unwavering focus on consistent, disciplined execution is most important. Our focus was evident across our underwriting businesses in the first quarter. Both performed well and continue to lead with expanding margins and highly relevant diverse risk solutions across lines and geographies. In the Insurance business, our focus on delivering profitable growth, expanding margins and best-in-class products and services advanced our mission to be the market's global diversified insurer of choice. In Reinsurance, we strengthened our global leadership position and maintain a laser focus on diversification, reducing volatility and maximizing profit. This deliberate honing of our portfolio is an ongoing strategy we successfully applied to the April one renewal. We brought the same discipline to our investments, which continued to perform well in the quarter. Our portfolio is diversified and well positioned for the current rising interest rate environment. During the quarter, we continue to embed technology in our underwriting processes and to increase our capabilities, productivity and efficiency. Our momentum is powered by the extraordinary efforts of our people. They are the bedrock of our inclusive culture, and they drive our success. As we announced last week, we lost a very special colleague with the passing of Don Mango, our Chief Risk Officer and Chief Actuary.
Don was a legend in our industry and at Everest. I had the privilege of working with him to evolve our enterprise risk management framework to what it is today. He's going to be greatly missed by all of us. To carry Don's vision forward, we have appointed Ari Moskowitz as Everest Group Chief Risk Officer. Ari is an accomplished leader with deep actuarial expertise. In his former role as our Reinsurance Chief Operations Officer and Chief Pricing Actuary, Ari played a key role in integrating risk discipline across the business and embedding it into everything we do. He has also helped to advance our culture of diversity, equity and inclusion as a founding member of our DEI Council. I look forward to working with Ari to continue advancing our risk management agenda. Let's turn to our financial results for the first quarter of 2022, beginning with our group results. In the first quarter, we delivered $406 million in operating income with a 16.2% annualized operating ROE. This includes over $235 million in underwriting income, a significant improvement over prior year and $243 million in net investment income. Our combined ratio of 91.6% is a 6.5-point improvement over last year. The attritional combined ratio was 87.4% and our attritional loss ratio was 60%, a 70 basis point improvement over prior year. We also posted a competitive operating expense ratio of 5.8%. Rate continued to outpace expected loss trend in the first quarter, and our margins continued to expand. In addition to rate, we are also benefiting from additional premium on lines of business with inflation-sensitive exposure basis, such as general liability, property and workers' compensation.
And we also continued to benefit from intentional underwriting actions to manage limits and granular segmentation of our portfolio to ensure we are writing the most profitable business. Our focus on profitability and expanding margins is clear. We grew gross written premiums by 9%, 15% in our Insurance division and 6% in Reinsurance. This growth was solid and broadly diversified in both of our underwriting divisions. Diversification allows us to target higher-margin opportunities in each geography and line of business. We are not reliant on one geography or aligned to drive our growth and profitability. With regard to the Russian invasion of the Ukraine, the war is an ongoing and evolving event. There are significant uncertainties regarding actual and potential losses and on whether how coverage would apply. We have completed a detailed coverage review of our businesses, and we have limited exposure to this war. To date, we have received only one loss notice for a de minimis amount. Based on what we know at this point in time, we expect that any potential financial loss to Everest as a result of these events, would be a manageable earnings item. But due to the high degree of uncertainty around both exposure and coverage, a reasonable estimation of potential loss is not credible at this time. We are continuing to work with our brokers and seasoned partners to assess any potential exposure. In sum, our group results in the first quarter were strong and created meaningful momentum for the year ahead. The combination of our financial strength, capital position, outstanding market reputation, global offering and deep relationships uniquely positions Everest to capitalize on market opportunities. Let's turn now to our Reinsurance results. In the first quarter, we grew gross written premiums by 6%. Growth was strong in Casualty and financial lines globally, particularly Casualty pro rata, which continues to be supported by strong underlying rate in underwriting and increased Everest participation on tradings. This is offset by deliberate and targeted reductions in our Property catastrophe exposed business as we further reduce the volatility in our portfolio.
These actions resulted in significantly improved economics. The combined ratio was 91.4%, a 6.1-point improvement from last year and includes $110 million of pretax catastrophe losses net of Reinsurance and reinstatement premiums from the Australia floods, European storms and tornadoes in the U.S. Our attritional combined ratio was 86.2%, including an attritional loss ratio of 58.9%, which is a 60 basis point improvement over last year's first quarter. Additionally, our expense ratio was 2.4% during the quarter. This continues to be a strategic advantage for Everest. We achieved excellent underwriting profit of $177 million. Driving this result is our priority of maximizing profit while managing volatility. We successfully executed on the strategy during the January one renewal season and continued to make meaningful progress throughout the first quarter. Specifically, we continued to grow our targeted classes of business and geographies. Our international treaty business grew by over 22% in the quarter. We expect this to become a bigger share of our business over time. Global facultative grew by 10%. We are making targeted investments to expand our facultative capabilities around the world, including industry-leading talent to our team. Those investments are already paying off. Casualty grew globally with our pro rata book up 48% year-over-year, and our Casualty extra load book was up 8%. We continue to be measured and selective in our Property lines, and specifically in cat exposed profit. In the quarter, those lines decreased year-over-year, and we further honed our portfolio to maximize expected profit while reducing volatility. We continued the strategy during the 4/1 renewal. In Property, total written premium limits, exposed AAL and our PMLs were all reduced and expected profit in dollars increased.
This resulted in more profit for less exposure. By any account, that's an outstanding trade. We also achieved growth in our Casualty book with higher participation alongside some of the industry's best primary underwriters. We expect conditions for upcoming Reinsurance renewals to offer targeted opportunities for Everest to deploy capacity at superior margins. We move forward with the underwriting discipline and expertise to write in profitable markets and we have the tools, talent and capital solutions to fuel continued profitability. Now let's turn to our Insurance division. We continued our thoughtful, intentional long-term build of the Insurance franchise with an absolute focus on underwriting profitability. Our combined ratio of 91.9% was excellent, representing an 8-point improvement from last year. The attritional combined ratio of 90.9% improved 130 basis points from a year ago and includes an attritional loss ratio of 63.1%, a 120 basis point improvement from prior year. These improvements resulted in strong underwriting profitability of $59 million in the first quarter, a new record for the quarter. Our focus on profitability and margin expansion is clear. We have improved the attritional combined ratio by over five points since the end of 2019. We also delivered robust and diversified growth in the quarter, up 15%, with gross written premiums once again over $1 billion. It's important to note that excluding strategic and intentional underwriting actions taken this quarter to reduce volatility and optimize the portfolio, our growth rate is higher at 25%. As we have said, Everest Insurance remains a long-term growth mode, but we will reduce exposures where it makes sense as we continually reshape the portfolio to maximize profitability. Growth in the first quarter reflects our relevance in the commercial insurance market and was driven by exposure increases, rate, strong renewal retention and new business across our core segments, lines and geographies, most notably across our long-tail lines. In the quarter, we achieved a rate increase of 9%, excluding workers' compensation and a total increase of 6% in our core P&C portfolio. Notably, financial lines were up 15%, umbrella excess was up 10% and commercial auto was up 9%. Rate continues to exceed expected loss trend across all lines with the exception of monoline guaranteed cost workers' compensation, which now represents only 7% of our portfolio in the quarter. We made excellent progress against our objectives for the Insurance business, and we remain vigilant in driving and improving margins as we scale this business. There's a significant runway ahead of us to grow profitably in the global P&C market, and we're capitalizing on it. As we strategically expand our offering, we continue to build out our global platform from underwriting to claims. This includes leveraging key technology and analytics to improve productivity, speed and accuracy and enhance the customer experience.
We are finding new ways to innovate with improved structures and new offerings directly addressing gaps in the market. We continue to diversify and deepen our relationships with distribution partners globally. We are infusing analytics to take a more quantitative and metrics-based approach to sales that brings the entirety of Everest to customers where, how and when they need us. As our first quarter performance shows, we've built the runway to advance our objectives, supported by our profitable underwriting operations, investments, market relevance, strong balance sheet and our values-based culture, all powered by a world-class global team. I am fully confident in Everest's ability to create exceptional value and deliver returns for our shareholders. As I said at the top of the call, more than ever, the world needs a partner it can depend on with the breadth of experience, capabilities and dedication Everest brings to the market. In times of uncertainty, we are a source of strength and stability for our customers, shareholders, colleagues and the global community. Now I will turn the call over to Mark Kociancic to take us through the financials in more detail. Mark?
