By Chris Munro

Jan 27 - (The Insurer) - Everest Group has confirmed its fourth quarter and full-year 2024 earnings will include $1.5bn of unfavorable development of prior-year loss reserves and a further $229mn of current accident year strengthening.

Combined, Everest’s full-year and fourth quarter 2024 reserve strengthening amounts to over $1.7bn.

The Bermudian company made the disclosures shortly after markets closed on Monday as the company pre-announced select figures from its Q4 and full-year 2024 earnings print.

In the update, Everest said its insurance division strengthened its prior-year US casualty reserves by $1.1bn and also increased its current accident year losses in US casualty lines by $206mn, totalling $1.3bn for the full year and fourth quarter 2024.

“The reserve strengthening was driven by a combination of social inflation and portfolio concentrations in certain US casualty lines classes,” Everest said.

In its reinsurance division, Everest strengthened its prior-year US casualty reserves by $684mn for the full year and fourth quarter 2024.

Its reinsurance reserve strengthening “was fully offset by favorable development of well-seasoned reserves in property and mortgage lines”, Everest said.

In the after-hours update, Everest said it has formed a new “other” segment within its business.

This other operation comprises certain sports and leisure lines – tied to the EverSports MGU operation the company sold to Ryan Specialty in October last year – and also run-off asbestos and environmental exposures, as well as certain other discontinued insurance programs and coverage classes.

Unfavorable development in this newly minted other segment totalled $425mn for both Q4 and full-year 2024.

While Everest was expected to announce that it had boosted its reserves in its fourth quarter and full-year 2024 earnings announcement, the extent of it may come as a surprise.

BofA Securities analyst Josh Shanker had in an earnings preview predicted that Everest would bolster its reserves after the (re)insurer completed a “deep dive” into its prior year numbers. However, the analyst had forecast Everest’s Q4 reserve charge would reach up to $1.4bn.

KBW’s Meyer Shields said that he expected Everest to record “a meaningful reserve charge to fully address reserve adequacy questions”.

Alongside the reserve strengthening, Everest revealed it expects to report full-year 2024 net operating income of $1.2bn to $1.3bn, and net income of between $1.3bn and $1.4bn.

In the earning preannouncement, newly appointed Everest president and CEO Jim Williamson said the company’s “decisive actions this quarter follow a comprehensive reserve review”.

“As a result of these actions, our casualty reserves are positioned with a risk margin above the actuarial central estimate,” he added.

“The company has significantly fortified its US casualty reserves, while taking aggressive underwriting action in certain classes exposed to social inflation, bolstering talent, and investing in our platform.

“We believe these actions strengthen our balance sheet and put Everest on a clear trajectory towards generating attractive returns throughout the cycle,” Williamson declared.

Alongside the reserving update, Everest announced its new target objective to deliver a mid-teens total shareholder return over the cycle.

Everest also said it will no longer be providing detailed forward guidance.