Dominic Adesso, President and Chief Executive Officer (CEO) of Everest Re, has said that the company has experienced an increase in demand for reinsurance from larger primary insurers, driven by increased mergers and acquisitions (M&A) activity in the sector.
Everest Re has also seen cedants increasingly turn to reinsurance solutions to reduce the volatility of their portfolios as property results have put increasing pressure on underwriting incomes and primary markets.
Speaking during the company’s first-quarter 2018 results call, Adesso explained: “Industry consolidation oddly plays a part in that due to large buyers needing capacity and quality markets that can support that.”
Asked whether Everest Re sees any opportunities in industry consolidation, CEO of the Reinsurance division, John Doucette, added: “The fact that there is a lot of M&A activity and discussion, we think does present opportunities for us, particularly on the reinsurance side.“
Everest Re’s reinsurance book produced a $96 million underwriting profit in Q1 2018, and increased gross written premiums (GWP) of $1.4 billion, up 22% from Q1 2017.
Doucette attributed this growth to increased M&A activity among large primary insurers, who buy from companies like Everest Re due to its “strong balance sheet” and the fact that it “writes P&C lines of business all over the world”.
He claimed that, due to rising M&A activity, “their capacity demands are increasing and we’re seeing some of the large global insurers buying more and buying more in the casualty and professional lines.”
Global M&A activity in the re/insurance industry has grown steadily over recent years and is expected to accelerate in the future, with particularly high-profile deals seen recently as AIG acquired Validus in January and AXA purchased XL Group in March.
Everest Re’s GWP also grew 21% from last year to $1.9 billion at Q1 2018, driven by both rate increases and higher volumes of pro-rata contracts across operations in the U.S, Middle East and Africa, Latin America, and Europe.
However, Everest Re reported first quarter net income of just $210 million, compared with $292 million at Q1 2017, largely due to $100 million of loss emanating from the California wildfires in its U.S operations.
These losses also caused the company’s loss ratio to rise by 9.8 points, and its group combined ratio reached 93.3%, compared to 86% at Q1 2017.
