Earnings Call Transcript
Everest Group, Ltd. (EG)
Earnings Call Transcript - EG Q2 2021
Operator, Operator
Welcome to the Everest Re Group Earnings Conference Call. All participants are currently in listen-only mode. Following the presentations, there will be a question-and-answer session. I would now like to turn the call over to Jon Levenson, Head of Investor Relations.
Jon Levenson, Head of Investor Relations
Good morning, and welcome to the Everest Re Group Limited 2021 first quarter earnings conference call. The Everest Executives leading today's call are Juan Andrade, President and Chief Executive Officer; Mark Kociancic, Executive Vice President and Chief Financial Officer. We are also joined by other members of the Everest management team. Before we begin, I will preface the comments on today's call by noting that Everest SEC filings include extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections and similar are subject to the risks, uncertainties and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I turn the call over to Juan Andrade.
Juan Andrade, CEO
Thank you, John. Good morning everyone, and thank you for joining the call. Everest delivered an outstanding second quarter with strong growth and excellent underwriting and investment performance. We set multiple records for our company on both the top and bottom lines. These results serve as the foundation for our exceptional net income result of over $1 billion through the first half of 2021 and are another important step towards achieving our three year strategic plan objectives and the delivery of superior results to our shareholders. Everest achieved an annualized total shareholder return of 22.5% through the first half of 2021 while exceeding our three year strategic plan target of 13%. We capitalized on market opportunities to expand our franchises in both reinsurance and insurance driven by relentless execution and the strength of our value proposition to our clients and brokers. Disciplined underwriting drove strong profitability in both reinsurance and insurance, and our investment return was a quarterly record for the company. The standout performance this quarter demonstrates the progress we have made in executing our strategy and the quality of Everest's diversified earnings. As I discussed at our Investor Day in June, our strategy has three building blocks. First is building our underwriting franchises. We are growing our Specialty P&C Insurance platform while expanding its margins. We are solidifying our leadership position in global P&C reinsurance while also growing and diversifying this business. Our investment portfolio is a core tool to generate solid returns and we're optimizing the portfolio while sharpening our strategy. Second, we continuously pursue operational excellence, starting with underwriting discipline, supported by a system of management oversight and checks and balances beyond underwriting. We are transforming the operating model of the company to achieve greater scalability over time. We are also optimizing capital within our underwriting and investment portfolios. Capital is valued and respected. We are using the most efficient sources of underwriting capital from the capital markets including the ILS investors. In our industry, those who execute best win. We're leveraging our flat agile organization to deliver best-in-class service and risk solutions to our brokers and customers. They routinely cite our responsiveness and capabilities as a key reason why they choose to do more business with Everest. Finally, ESG principles are at the core of Everest. This includes focusing on the culture of our company. Culture is one of our key differentiators and it is one of the reasons we can attract and keep top talent. Our culture fuels our success by helping our team be the best it can possibly be. We're investing in the talent of the organization as well as the diversity of our team. At Everest, we have three drivers of earnings. The first driver is about building a high-quality specialty commercial P&C insurance platform with underwriting excellence and a compelling value proposition. We are embedding data and analytics across the organization, enabling more effective pricing and decision-making, meaning we make better underwriting decisions at improved loss ratios. We are improving our claims outcomes while delivering excellent service to our clients. We're focusing our distribution efforts to be more sales and results oriented. Our second driver of earnings is our leading global P&C reinsurance platform. We enjoyed a leading market position of a fully scaled platform and we are focused on continuing to grow and optimize our reinsurance business. We are executing an underwriting transformation by improving operational oversight, governance and controls. Our Reinsurance Division is entrepreneurial and nimble. We will maintain it within a framework of pricing, reserving and process discipline. We're further diversifying into higher margin opportunities. And finally, we're expanding our risk financing by further partnering with capital markets and ILS investors. The third core driver of earnings is the investment portfolio. We have a high-quality portfolio and we're focused on the efficient use of capital. The successful execution of our strategies in all three drivers of earnings is clearly evident in our results. I will now discuss our Group Reinsurance and Insurance First Quarter 2021 results. Starting with the Group results, we grew gross written premiums by 35% and net written premiums by 39%. Our growth was broad and diversified, stemming from increased exposures and new business opportunities as the US economy recovers, continued double-digit rate increases, expanded shares on attractive renewals, and strong renewal retention. The combined ratio was 89.3% and an eight-point improvement year-over-year. The attritional combined ratio was 87.6%, almost a full point better than the prior year with both segments expanding margins. We generated $274 million in underwriting profit compared to $51 million in the second quarter last year. Underwriting profitability remains at the core of everything we do. Net investment income was simply outstanding at $407 million compared to $38 million in the prior year's second quarter. These strong operating results led to a net income for the quarter of $680 million, resulting in an annualized return on equity of over 28%. Gross written premiums in reinsurance were up 40% over the second quarter of 2020. We are pleased with the ongoing execution of our 2021 plan. This growth was broad-based in the areas we discussed during our Investor Day as attractive. We achieved this growth while also coming off or reducing shares in less attractive business. We drove continued targeted growth in property CAT while lowering our PMLs in peak zones, thus reducing expected volatility and improving risk-adjusted economics. Much of our growth came from our core trading partners that are looking to grow with Everest because of our strong ratings and balance sheet, significant capacity, and the ability to write across all lines. The attritional combined ratio ex-COVID-19 pandemic impacts was 86.1 for the quarter, a 60 basis point improvement year-over-year, resulting from our continued focus on loss and expense management. We see risk-adjusted returns expanding in almost all treaties and classes of business globally. We're also benefiting from investments in data and analytics. As you can see in our results, our focused actions improve the quality and profitability of the book. We are writing a more balanced portfolio with improved economics at an appropriate level of risk. We have achieved improved portfolio economics across all of our 2021 property renewal dates. We improved in every dimension; we increased top line, increased margin, and achieved higher ROEs. In casualty and professional lines, primary rate increases continue to outpace expected loss trends. Jim Williamson is available to provide additional details during the Q&A. Our insurance division continued its strong performance with excellent growth and underwriting results. We continued to expand margins as we execute our strategy. We wrote over $1 billion in gross written premiums for the first time in a quarter. This represents 25 percent growth year-over-year or 30% growth excluding workers' compensation. This growth is driven by disciplined cycle management, new business opportunities, continued double-digit rate increases, and strong renewal retention on existing business. We're also starting to see a steady improvement in overall economic activity. The growth was well diversified, targeting classes of business where market conditions are prime for profitable growth, including specialty casualty, professional liability, property, transactional liability, and trade credit and political risk. We are pleased with this diversification as it is a core tenet of our strategy. We also delivered strong underwriting results with a 93.5% combined ratio, a 10-point improvement over the same period last year, which was impacted by COVID. The underlying performance was also excellent with a 92.1 attritional combined ratio, a 1.6% improvement over last year and almost 4 points better than the second quarter of 2019. Renewal rate increases continued to exceed our expectations for loss trends of 14% in the quarter excluding workers' compensation and up 11% including workers' compensation. Rate increases were led by excess casualty up 22%, property up 16%, financial lines up 14%, and general liability up 9%. We are building a diversified portfolio, steering our mix towards product lines with better rate adequacy and higher long-term margins. We also continued to manage average limits deployed to mitigate volatility. We are pleased with the progress we have made and the strategic direction; granular portfolio management should continue to positively impact our results going forward. We continue to thoughtfully manage the workers' compensation line, which now represents 10% of our second quarter premiums, down from 14% year-over-year. While this line remains profitable, we have pared back monoline guaranteed cost writings and shifted to more loss-sensitive, loss-ratable business where we share more risk with our customers with more focus on risk mitigation. Workers' compensation is an area of expertise at Everest and we're monitoring market conditions closely for potential opportunities, but these efforts illustrate our disciplined cycle management. Lastly, our strong position in both the E&S and retail channels continues to give us access to a wide range of opportunities. Michael Karmilowicz is available to provide additional details during the Q&A. In summary, Everest had an outstanding second quarter with strong growth and exceptional underwriting and investment performance. We have a vibrant and well-diversified reinsurance and insurance business with experienced leadership and underwriting teams providing industry-leading solutions to our customers. We have significant momentum as we continue to execute our strategic plan. The company has excellent financial strength, top talent, and a prudent capital management philosophy. We are focused on sustained profitable growth, a more diversified, targeted, and deliberate mix of business, and superior risk-adjusted returns. We believe the relentless and disciplined execution of our strategy will result in maximizing shareholder returns. I am confident in Everest's future and our ability to deliver on our commitments to customers and shareholders. Now, let me turn the call over to Mark Kociancic for additional details on the financials.
Mark Kociancic, CFO
Thank you, Juan, and good morning everyone. Everest reported excellent results for the second quarter of 2021 with robust premium growth, excellent underwriting results, and truly outstanding investment returns. I'll provide more detail on these points over the next few minutes. In the second quarter of 2021, Everest reported gross written premium of $3.2 billion, representing 35% growth over the same quarter a year ago. By segment, reinsurance grew 40% to $2.1 billion, and Insurance reported its first-ever $1 billion topline quarter, representing 25% growth year-over-year. Turning to net income for the second quarter, Everest reported net income of $680 million, resulting in an annualized return on equity of 28%. We also reported net operating income of $587 million, equal to operating earnings of $14.63 per share and an annualized operating return on equity of 24.5%. All three of our earnings engines provided meaningful contributions, with significant underwriting income from both our reinsurance and insurance franchises capped off by net investment income of $407 million, a record quarterly net investment income result. The underwriting income during the quarter was $274 million, reflecting Everest's disciplined execution of our strategy to grow and expand margins. The combined ratio was 89.3% for the quarter compared to 97.5% last year. Catastrophe losses during the quarter, of $45 million or pre-tax and net of reinsurance and reinstatement premiums, were $35 million in the reinsurance segment and $10 million in the insurance segment, representing additional IBNR provisions for winter storm, Uri. The Reinsurance segment cat loss includes a provision for minor events and preliminary IBNR for the European convective storms of late June. Finally, I know we have not added to our COVID-19 incurred loss provision which remains at $511 million, with the vast majority remaining as IBNR. Second quarter results continue to reflect the impact of our underwriting and portfolio management initiatives. Our underlying attritional profitability remained strong during the second quarter, excluding the catastrophe losses, reinstatement premiums, prior year development, and COVID-19 pandemic impact. The attritional loss ratio for the group was 60.3% in the second quarter of 2021 compared to 60% in the second quarter of 2020. The year-to-date attritional loss ratio for the group was 60.5% compared with 60.7% a year ago. The attritional combined ratio for the Group was 87.6% for the second quarter compared to 88.5% for the second quarter of 2020, representing a 0.9 point improvement. The year-to-date attritional combined ratio for the Group was 87.4%, compared with 89.1% a year ago, representing a 1.7 point improvement. For our insurance division, the attritional loss ratio improved to 64.2% in the second quarter of 2021 compared with 65.1% year-over-year. The attritional combined ratio for insurance improved to 92.1% as compared to 93.7% for the same period of time. Our US Insurance business, which makes up the majority of our insurance business overall, continues to run very well with an attritional combined ratio in the high '80s. For reinsurance, the second quarter 2021 attritional loss ratio was 59.1% compared with 58.2% a year ago. The increase was due to a mix of business shift and more prudent initial loss picks. The attritional combined ratio was 86.1% for the second quarter, down from 86.7% for the second quarter of 2020. The group commission ratio of 21.8% for the second quarter of 2021 was down 100 basis points from 22.8% reported in Q2 2020, largely due to changes in the composition of our business mix. The expense ratio remained low over 5.5% for the quarter as compared with 5.8% reported a year ago, and the expense ratio continues to benefit from our continued focus on expense management and the increased scale and efficiency of our operating model. For the second quarter, investment income had an exceptional result of $407 million as compared to $38 million for Q2 2020. Alternative investments accounted for $266 million of income during the second quarter, largely due to increases in the reported net asset values of our diversified limited partnership investments, and as a reminder, we report our LP income one quarter in arrears. In 2020, the market and the world were starting to experience the impact of COVID-19, while so far in 2021 results continue to benefit from economic and financial markets recovery. Invested assets at the end of the second quarter totaled $27.1 billion compared to $21.6 billion at the end of Q2 2020 and $25.5 billion at year-end 2020. Approximately 80% of our invested assets are comprised of a well-diversified high credit quality bond portfolio with a duration of 3.6 years. The remaining investments are allocated to equities and other investment assets, which include private equity investments, cash, and short-term investments. Our effective tax rate on operating income for the second quarter of 2021 was 9.3% and 10.6% on net income, this was a favorable variance versus our estimated tax rate of approximately 11% based on the geographic distribution of income. For the first six months of 2021, Everest generated a record $1.6 billion of operating cash flow compared to $1.1 billion for the first half of 2020, reflecting the strength of our premium growth year-over-year. Our balance sheet remains very strong with a capital structure that allows for the efficient deployment of capital and ample capacity to continue to execute on market opportunities. Shareholders' equity was $10.4 billion at the end of the second quarter 2021 compared with $9.7 billion at year-end 2020. We repurchased $16.8 million of shares in the quarter. Our debt leverage ratio is 13.3% or approximately 15.5%, inclusive of our $310 million short-term loans from the Federal Home Loan Bank. Book value per share was $260.32 at the end of the second quarter compared with $241.57 at the end of Q1 2021, reflecting dividend-adjusted growth of 8.4%, and I'll close with one final number. The total shareholder return or TSR target that we detailed in our Investor Day a few weeks ago. Recall that TSR is defined as the annual growth in book value per share, excluding unrealized gains and losses on fixed maturity investments, plus dividends per share. For the year to date, the TSR number is 22.5% annualized. And with that, I'll now turn it back to John.
Jon Levenson, Head of Investor Relations
Thanks, Mark. Operator, we are now ready to open the line for questions. We do ask that you please limit your questions to two, or one question plus one follow-up, and then rejoin the queue if you have any remaining questions.
Operator, Operator
Your first question comes from Elyse Greenspan from Wells Fargo. Your line is open, please ask your question.
Elyse Greenspan, Analyst
Hi, thanks, good morning. My first question was on the reinsurance underlying loss ratio. So, you guys mentioned that the increase in the quarter reflects business mix and more prudent loss picks. I was hoping to just get some more color there. And then how should we think about the loss ratio kind of trending forward from here.
Juan Andrade, CEO
Yes, thanks. Elyse. This is Juan. So let me start out with that, and then I'll ask Jim Williamson to add some additional color specific to your question on the loss ratio. Now, I would start off by saying that reinsurance reported a very strong 86.1 attritional combined ratio in the quarter and 85.8 year to date, and we achieved it through underwriting discipline, strong market conditions, and prudent loss picks selection. You've heard us talk about our strategy and the disciplines we're implementing that are squarely focused on continuing to drive world-class margins. But with that, let me ask Jim to give you some additional color on what drove the loss ratio.
Jim Williamson, Manager
Yes, sure. And thanks for the question. Elyse, the first thing I would say, and this is very consistent with the way we've described our value proposition and our strength in the market, is that we're very nimble in this market. We have portfolios and markets around the world across many lines of business and we look to trade into those various areas to maximize our total economic returns, and that was certainly the case in the second quarter. You see it terms of some of our line of business growth where areas like pro-rata casualty were up 64%, just incredible results. We saw a lot of great opportunities to expand participation with some of our core partners and we took advantage of that. Conversely, Property CAT excess of loss, which is a line of business that you have a big appetite for, it's a very attractive line that grew at 17%. So, that's an excellent result but obviously lower growth, and that's aligned with a very low attritional loss ratio. So, mix is absolutely going to play a factor there and it's going to bounce around from quarter to quarter depending on where we see opportunities emerging in the market. So those trades are a very successful outcome for our company. The next piece around loss picks is we set very prudent loss picks, and in particular, if you think about the environment we're trading in with inflation, social inflation, and the reopening from COVID, there's a lot of uncertainty in the market, particularly in some of the longer-tail lines like casualty pro-rata where we're growing. Our view is we really need to see the results of rate change and the results of underwriting actions by our systems to play through and mature in our book. And so you will expect that as we see those results come through we'll certainly be sharing those results, but it will take time given the nature of our business for that to prove itself.
Juan Andrade, CEO
Elyse, if I could jump back and add a couple of quick things. One, I think we recognize that by growing casualty pro-rata, we're also seeing lower volatility than from the growth in Property CAT excess of loss. But also keep in mind, what's going on in the environment. This goes directly to your question on expected margin. We are confident based on all our metrics that we're looking at that we are building future expected margin not only in reinsurance but also in insurance. We're still seeing rates exceeding expected loss cost. From my prepared remarks, you heard about the improvement in economics that we have seen across the board in our renewals last year and this year, particularly in reinsurance. We're basically increasing our margins while lowering our exposure. And again, I point you to the fact that an 85 combined ratio for the year on an attritional basis for reinsurance is excellent.
Elyse Greenspan, Analyst
That's helpful. And then, my second question is on capital at your Investor Day in June you pointed to wanting to increase your leverage as you work on your three-year financial plan. So as we think about the leverage going up, I just want to get a better sense of timing. As you think about adding to your leverage and as part of the answer to that question, would you consider adding to leverage to support capital return via potential share repurchases, or would it just be coinciding with when you thought you needed more capital to support the strong premium growth?
Mark Kociancic, CFO
Hi Elyse, it's Mark. Just a couple of points on that. The primary focus of the capital structure is really to support the organic growth of the business, so we'd look at it in the context of supporting the growth and also from an opportunistic point of view of taking advantage of good market conditions to issue that type of debt. I do foresee that happening over the course of this three-year plan; I think it makes a lot of sense. Having said that, we are still committed to active capital management, so that includes share buybacks, but that would be, what I would call a secondary consideration. It doesn't mean we can't do it simultaneously, but the first part is really all about franchise expansion through organic growth.
Elyse Greenspan, Analyst
Okay, thanks for the color.
Operator, Operator
Your next question comes from the line of Michael Phillips from Morgan Stanley, your line is open, please ask your question.
Michael Phillips, Analyst
Thanks, good morning. I wanted to start with comp Juan, I heard your comments in the opening on how you're making some changes in comp and more loss-sensitive accounts. But I guess there's been a lot of talk of maybe we're starting to see a change in pricing there. I'm not so sure if that's materializing for you guys. I hope you can give some color on specifically on California. If you back out the COVID impact of California, it looks like the current accident years are still trending pretty well, a pretty good margin there. So, I guess I'm curious what you're seeing there and if that's the case, should we expect to see a turn in the market, especially for your accounts that others are talking about.
Juan Andrade, CEO
Yes, Mike. Thanks for the question and I'll give you some additional color and ask Mike to also jump in. I start by agreeing with you; I mean, our comp business is still very profitable, and I stated that also in our prepared remarks. But we are mindful of how we deploy capital, and we do see that pricing has flattened in workers' compensation at this point. Actually, in June, we saw it go positive for the first time, so we're looking at that closely to see if that's a hardening of things to come. And, as I mentioned in my prepared remarks, we'd like the comp business. But we're also smart about how we deploy capital, and we're seeing frankly better return opportunities right now in other lines of business, which I highlighted in my remarks, where we're seeing significant rates across the board. But we are starting to see not only the flattening but again, I would point to the fact that in June, we also started to see a positive rate across the board. But let me ask Mike Karmilowicz to give you some additional color.
Mike Karmilowicz, Manager
Sure. Thanks, Juan. And thanks for the question. Yes. As Juan mentioned, this is a perfect example for cycle management and actually really fully focusing on where we see opportunity, and we are starting to see that stabilize across the country, particularly in California. For the first time, we think we're starting to see some pockets in green shoots and with exposure both coming on. We are encouraged by where it's going, and ultimately, we think that we will be prepared to take advantage of that. You also see our slowing down ultimately in our comp, as far as the first quarter over second quarter. We're starting to see some changes there. So we feel that there is going to be some change in the marketplace, particularly in California. Keep in mind too with California some of the reports that just came out from some of the organizations around underlying costs, we've noticed too that some of the overall costs that are associated such as reforms on pharmaceuticals and other different areas California has performed actually better from a loss cost perspective than some of these things. So, we think that by the end of the year and on to next year, Mike, we'll see some of the benefits starting to accrue to us, and you'll see us go after the business if that opportunity presents itself.
Michael Phillips, Analyst
Okay, great. Thanks, guys, thanks for all the details there. Second question, should we expect to see any uptick on the insurance side on the amount of business you want to write? So just net to gross premiums we expect to see that to tick up over the next year.
Mike Karmilowicz, Manager
Sorry, Mike. You cut out. Can you repeat the question? I'm sorry. Is this better? Can you hear me okay?
Michael Phillips, Analyst
Yes. Okay, good. Insurance net to gross premiums, we expect to see that to tick up over the next year or so.
Mike Karmilowicz, Manager
We have started many segments over the years and have been building this out organically. Therefore, we are particularly trying to protect ourselves with some reinsurance from the clients we work with. As we continue to gain scale, we will definitely see an increase in our net growth over time. As we take advantage of opportunities in the market, you will see this growth happening.
Juan Andrade, CEO
Yes, Mike, I would add that we're feeling very confident about the underlying book in the insurance division and particularly in this environment with better pricing and better terms, I think you can expect to see some of that going forward.
Michael Phillips, Analyst
Okay, perfect. Thank you, guys.
Operator, Operator
Your next question comes from the line of Josh Shanker from Bank of America. Your line is open, please ask your question.
Josh Shanker, Analyst
Yes, thank you. Two questions on reinsurance, and without naming names. When you're growing as fast as you're growing, you need to be taking share from somebody else. Who are the market participants? Again, without naming names but giving us a sense of what the market looks like that is allowing you to take so much market share?
Juan Andrade, CEO
Yes. Sure, Josh. I appreciate the question. So what I would say is, and we've been very consistent about this, we trade with a fairly select number of core partners, and that's what's really driving our growth, whether it's in property casualty in markets in the US or around the world. We are absolutely a preferred market for our clients; we're preferred because we're nimble, because we're creative, and because we distribute authority to our teams. They make decisions, they move quickly, and we're benefiting from all of those things. In this environment, I think for cedents who are sophisticated about their buying, they are absolutely looking to trade up in terms of the quality of their partners and we benefit from that. What we're seeing on programs around the world is we are getting increased signings with our core partners because of our broad capabilities, and we are also able to trade into deals with core partners that we may not have been on before. Obviously, as they introduce new programs into the market, we're able to participate there as well. We find this to be a very favorable competitive environment that way.
Josh Shanker, Analyst
And the second question, if you talk to a number of competitors in the marketplace, they tend to say that the litigation environment is still coming up from the pandemic. The frequency of reported losses is lower than it should be, but everyone's reserving for it with, I'd say, that will accelerate as things sort of return to normal to some extent. As a reinsurer, obviously, you're one step away from that, and you're relying on the reporting of your students to help you frame your own losses. How does the complex litigation environment inform how you are thinking about your loss picks at this point and preparing for that future?
Juan Andrade, CEO
Yes, that's a very key point to make, and it's an important trend. I think folks who expected some of the downturn in frequency of some of these losses during the period of COVID who thought that that would continue, I think that's a significant mistake. Our view has never been that we should react to that temporary environment, so we've held our loss pick study which is sort of where we started the Q&A today. That prudence really puts us in a strong position, as things start to unwind, and you do see a little bit more activity in terms of litigation and things of that nature. We don't have to react the other way either. So that prudence and consistency benefit us when you see these very short-term changes in loss trend. We have to really be picking our losses for the long-term trends that we're experiencing, and those trends have not ceased just because of the temporary slowdown due to COVID.
Mark Kociancic, CFO
No, look, I mean, in terms of the reinsurance business, to the point that you made in your question the lag of reporting in terms of hard data, it's certainly too early to tell, but obviously we're in constant communication with our cedents. I would say folks are starting to see some of the results of the reopening. We're certainly seeing it in areas like auto for example, but that's in the realm of anecdote at this point, Josh.
Juan Andrade, CEO
And, Josh, I would say this is Juan. I would give you some color on the primary side where you are starting to see frequency come back to more normalized levels, particularly around commercial auto, general liability, etc. This goes back to the theory that we have since last year, which is the shutdowns and the lockdowns in the COVID pandemic did lead to a temporary change in frequency patterns, maybe even severity patterns. But that's not going to be a steady state; I think you will see normalized frequency and normalized severity come back.
Josh Shanker, Analyst
Thanks for the answers.
Juan Andrade, CEO
Thanks, Josh.
Operator, Operator
Your next question comes from the line of Meyer Shields from KBW. Your line is open, please ask your question.
Meyer Shields, Analyst
Great, thank you. Good morning. I'm asking this question not so much on the reserving side but from the underwriting side, the property pro-rata book is growing. What we've seen recently is obviously enormous volatility and loss trends for property lines. Can you give us a sense in terms of how rapidly your cedents can respond to higher property losses with their pricing and underwriting?
Juan Andrade, CEO
Yes, thanks for the question, Meyer. What I would say is, you really have to break it down into its components, and I think there are some areas, particularly in the commercial lines, which is really where our book is focused, they can respond pretty quickly. It's a combination of obviously rate, which we're seeing very strongly in the market, it's a combination of terms, conditions, attachment points, limits. Our cedents, and because we do partner with very high quality primary underwriters, they are absolutely aggressively addressing changing conditions in the underlying property market. I think it actually happens reasonably quickly. Again, I hate to sound like a broken record on this, which is why we do maintain prudency in our loss picks because some of these things take time to unfold. We want to make sure that they get proven out. The other piece that's important when we think about our own profitability in property pro-rata is obviously loss picks are critical, but we also look at things like ceding commissions, and so we've seen improvements in terms there that allows us to get to a place where the overall economics are very attractive and which is why we're willing to grow the line.
Meyer Shields, Analyst
Okay, that's helpful. And my next question is on ceding commissions. Are you seeing the same success in casualty that you are in property with regard to, I guess, declining ceding commissions?
Juan Andrade, CEO
Well, it's obviously a very different market and you hear a lot of the market commentary, and you heard it from us regarding the rate changes that are happening in a lot of the casualty lines here in the US and around the world. To the extent that cedents believe they're creating margin, they're obviously going to be seeking increased ceding commissions. We've seen a little bit of that activity; it's very modest at this point. I think for cedents who think about their reinsurers as long-term partners, which really describes our core partners, the ones that we've grown with over the last couple of years, I think they're very balanced about that. While there is some upward pressure and you definitely see people seeking improved ceding commissions in the marketplace, it hasn't had a tremendous impact on our casualty business; we still see great opportunities to write new business and to expand lines in that market, and we expect that to continue.
Meyer Shields, Analyst
Perfect, thank you so much.
Operator, Operator
Your next question comes from Phil Stefano from Deutsche Bank. Please go ahead with your question.
Philip Stefano, Analyst
Yes, thanks, and good morning. I've focused more so on the insurance side of how I was hoping you could help give us an impression of what inning we're in regarding the business mix change benefit to the attritional loss ratio. Part of the question is that there has been a reticence to recognize the benefit of rate over trend in terms of conditions, etc., and I'm wondering if the attritional improvement slows down at some point once the business mix changes play out. But the recognition of the rate versus trend and other industry trends has not come through yet.
Juan Andrade, CEO
Yes, Phil, this is Juan, and good morning. Let me start by reminding you of last quarter's earnings call where we discussed the various strategies we are employing to enhance profitability and margins in our insurance division, as well as in reinsurance. It's not solely about the mix; it also involves detailed management of the portfolio, making difficult choices about which accounts to retain, where to pursue growth, and being intentional about shaping and expanding the portfolio. Looking back at our achievements in the insurance division over the past 18 months, the results are significant; we have successfully reduced the attritional combined ratio by around 6 points since the end of 2019. Much of this success can be attributed to decisive actions regarding the lines of business we choose to engage in. The case of workers' compensation that we previously discussed in response to Mike's question exemplifies this. This indicates that while we have been cautious in our loss estimates due to our perception of the current environment as temporary—shaped by COVID-19 and its associated frequency changes—there are numerous other factors, apart from the mix, that contribute to shaping the portfolio moving forward. Now, let me ask Mike Karm to provide you with some additional insights.
Mike Karmilowicz, Manager
Thanks, Juan. Yes. So I think the short answer is that we still think we're in the early innings. We started a lot of these businesses; we've seen obviously some of that improvement come through. Again, this is dependent on what's happening in the marketplace. So as you can see to see opportunity, and we see the opportunity to gain scale, I think you'll see some of this continue to play through over time. Again, we feel we're making great progress, but we're still in the early innings.
Juan Andrade, CEO
Phil, thank you. In the last comment I would make to that is, as I said in my prepared remarks, we are seeing rates very comfortably ahead of trend, particularly in insurance. So when you think about the expected margin that's being built in addition to the actions that I described on the underwriting side, I think that gives you a sense of where this could be going.
Mike Karmilowicz, Manager
And I think why it's a well, for the last thing I'd say is we continue to hold the line on the loss picks for good reason, because we recognize it over time. So I think you're seeing us do the prudent thing and do this with a long-term view.
Philip Stefano, Analyst
Thank you. I appreciate it. And so the second question, looking more on the capital management side of the house. Some of the commentary, or at least some of the commentary has been around the fact that, look, we can grow organically very quickly, but that doesn't mean we can't repurchase shares concurrently with that growth. We've seen some other Bermuda plays be a bit more active in the repurchase momentum just given where valuations are. Maybe you can help us think through uses of capital, given where valuations are and maybe to put it more bluntly, why is now not a good time to really step on the gas with repurchases just given where the stock is trading?
Mike Karmilowicz, Manager
Well, Phil, I mean it's a constant question for us because look, step one is always supporting the franchise expansion; we're in the best market in almost a generation here. So we are privileging that growth; you're seeing very strong top line growth in both segments, Reinsurance and Insurance. Having said that, capital management, we've been active. We could certainly be more active. I don't see any hesitation on our side to do that. I think you will see that in the future and we can complete both sides of that equation, grow strongly without any constraints and manage our capital even more efficiently.
Philip Stefano, Analyst
All right. Well, looking forward to seeing it. Thank you.
Juan Andrade, CEO
Thanks, Phil.
Operator, Operator
There are no further questions at this time. I will hand the call over to the management.
Juan Andrade, CEO
Great, thank you. Everest is a growing and leading global reinsurance and insurance company with a seasoned leadership team, broadly diversified earnings streams, and a clear strategy to drive growth and expand margins while reducing volatility. Our goal is simple: drive superior shareholder returns. We have the platform, the financial strength, the talent, the focus, and the commitment to succeed. Thank you for your time with us this quarter and for your support of our company.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.