Everest Group, Ltd. (EG) Earnings Call Transcript & Summary

Good morning, and welcome to the Everest Re Group Investor Day webcast. I'm Jon Levenson, Head of Investor Relations, and your host for today. This is our first ever Investor Day, and we are excited to be here and to have you joining us today. The Everest executive team members are all here with us to share the strategy and goals of the company through a combination of presentations and Q&A. Let me provide an overview of the day's agenda. Joe Taranto, Chairman of the Everest Board of Directors, will open the day with some brief comments; then Juan Andrade, Everest's Director, President and CEO, will start the formal presentations by detailing our vision, strategy and world-class team; Mark Kociancic, Chief Financial Officer, will then detail our financial plan and the road map to achieving our goals; Jim Williamson, Chief Operating Officer and Head of Reinsurance, will then explain the robust governance and risk management framework in place. We will then have an initial question-and-answer session followed by a quick break. From there, we will resume with detailed presentations from our business and investment leaders, followed by a wrap-up from Juan and a longer Q&A session. Just a quick explanation of the Q&A process. Anyone on the webcast today can ask a question that will reach our Investor Relations team. There is a tab on the webcast to e-mail your questions and our team will gather these for the Q&A sessions. Please send questions as soon as you have them to give us a few minutes to get this all organized. And also let us know if you would like to remain anonymous, although we ask for your details for our reference. With that, I am pleased to turn the day over to Joe Taranto, Director and Chairman of the Everest Board of Directors.

Thanks, Jon. Today, you are going to hear about our company's next chapter. I would like to begin by introducing our President and CEO, Juan Andrade, who, along with our executive team, is building on our proud history and engineering the changes that will position us for continued growth and success. After an extensive search, the Board of Directors was most gratified to appoint Juan as the new President and Chief Executive Officer of Everest. Juan is an extremely capable leader with energy, vision and close to 30 years of industry experience in addition to his prior public service career. He truly understands the details of our business, having led global organizations and successfully led underwriting, distribution and claims operations at major insurance companies including Chubb, The Hartford, Progressive and AIG. His broad experience and insights, together with his expertise in managing risk, are great assets for our company. Since his arrival 18 months ago, Juan has deepened our experienced management team and directed meaningful improvements in our underwriting, risk management, financial and operational processes, all of this amazingly while growing the company and leading it through the pandemic and the economic downturn. Juan also brings a truly global perspective and genuine understanding of the important societal roles that Everest can serve. The Board members and I have great faith in Juan's ability to lead Everest through the next chapter of its development. And we are incredibly excited about our future.

Thank you, Joe, for that introduction, and thank you all for joining us today. This is an exciting day for Everest as we get to showcase our go-forward strategy with our new management team firmly in place and present our first 3-year plan. I would like to start by highlighting the value creation opportunity that I saw in Everest as its new CEO 18 months ago and how we're transforming the company to be a top-performing investor and customer platform. This is a new chapter in our history and an exciting one. We have a clear plan to get there, and we're already moving in that direction. Let me start by talking about the strong foundations Everest has to provide the gateway into our new strategy in the future. First, Everest is a unique company with a successful 50-year operating history. We have an extensive track record of delivering value for our clients and for our shareholders. Our ability to consistently provide outstanding service and risk solutions to our clients serve as the cornerstones in building our Reinsurance and Insurance franchises throughout our history. This value proposition is what differentiates Everest in the marketplace and provides for sustainable long-term relationships with our clients. We will continue to focus on our clients and build on that success. Second, this is a platform with a unique potential for sustainable, profitable growth. We are a leading global reinsurance company that is well positioned to expand to meet market opportunities. And we have a differentiated specialty commercial insurance business with significant runway for profitable growth ahead. Third, Everest has a powerful and prudently managed balance sheet that has the strength to support our clients in their times of need, provide capacity for our organic growth objectives, and generate attractive earnings that will deliver leading returns to our investors. Fourth, I've had the privilege of handpicking an incredibly strong leadership team. They know what works in this business. And like me, they also recognize the tremendous opportunity before us at Everest. I'm going to talk more about the team in a moment. Fifth, at our core, we're an underwriting company. We are focused on delivering industry-leading underwriting returns. We are willing to take risk, but we must be paid appropriately for the risk that we take. If we cannot achieve our expected returns in a particular product line, we dynamically reallocate capital to more economically attractive products. And sixth, we are laser-focused on continuous improvement and operational excellence to drive results and best position our company to rapidly changing market conditions. This allows us to be nimble and react faster than our competitors to market opportunities. You will hear these words several times today. These are simple words, but they are powerful and a differentiator. They are what is allowing us to make the extensive number of changes that are driving meaningful improvement in operational performance across our entire company. Before we discuss our strategy, it's important to understand our philosophy and the underlying foundation that drives our actions. We have 7 guiding principles, and I want to take you through them. First, our objective is to deliver leading financial performance. Two, we're an underwriting company whose core competency is the assessment, underwriting, pricing and management of risk. Three, we are committed to building a broadly diversified company with competitive advantage and opportunistic responses to market dislocations. Four, we are focused on an investment strategy, which optimizes risk return, liquidity and asset liability management, providing support for and balance to our underwriting risk. Five, we are committed to an efficient cost base, a flat, responsive and entrepreneurial organization and the relentless pursuit of continuous operational excellence. Six, our plans are based on organic growth, but we will continuously assess opportunities to accelerate our strategy through acquisitions and partnerships. Seven, we're committed to investing in our people, in our culture and to building on ESG best practices in everything we do. We hold ourselves to the highest ethical standards. If I had to describe my priority in the first 18 months in this role, it was to pivot Everest toward the future. I joined a great company with untapped potential. What we needed was the focus and the strategy for this next evolution of our growth story. We needed to make changes that built on the success of the past and could support our future ambitions to excel in the next 50 years. This is what we have done. And today, we're going to tell you about where we're going. Building on strong foundations, we are creating an even brighter future for Everest that will deliver significant value for our stakeholders. So let me lay out for you what I want to spend the next few minutes talking about. First, I want to review where Everest is today. I will discuss how we're building on the excellent market positioning we enjoy in both our Insurance and Reinsurance businesses and how we will accelerate our Insurance division growth and its margins and further improve our Reinsurance division positioning and operating margins. Second, I will outline our strategic vision for how we will drive Everest forward. We have a clear and well-defined plan with key performance metrics to drive accountability and measure progress. Finally, I will address what this means for our shareholders. We firmly believe that our path forward will deliver improved returns with the ambition and the opportunity for further upside. We have a unique global P&C platform with a 50-year history. In 2020, we celebrated 25 years as a publicly traded company. That's saying something in today's market, particularly in a global reinsurance landscape that has seen extensive change over the past decade. Many of our reinsurance client relationships have been in place for over 40 years. In a relationship business, defined both by your capacity to pay claims and also a history of paying claims, our legacy is a critical asset that cannot be easily replicated. We are a growth company. As a group, we have delivered a 12% gross written premium CAGR over the past 5 years, and our high-growth Insurance division, delivered a nearly 16% CAGR. We were able to deliver this growth because of several key competitive advantages. Everest has a strong balance sheet. We have $9.7 billion in equity capital and low leverage with a 14.1% debt-to-capital ratio. And our financial strength is recognized by the rating agencies, with A+ equivalent financial strength ratings across the board. Everest has a diversified business model with 3 engines driving broadly diversified earnings: insurance, reinsurance and our investment portfolio. We benefit from our relentless focus on underwriting profitability, strong cash flows and a growing and well-managed investment portfolio. As I said earlier, we're a nimble and entrepreneurial organization that utilizes our efficient global structure and our low-cost expense base to our advantage as we construct our portfolios. This is ingrained in our DNA, and it's a significant competitive advantage. And finally, we will continue to effectively partner with capital markets investors, both through our Mt. Logan platform and as the largest issuer of cat bonds in our Kilimanjaro program. Our underwriting divisions are also well diversified by product line and geography. Each has generated double-digit CAGRs over the past 5 years with strong underlying underwriting performance. We have also taken steps to reduce volatility, strengthen our balance sheet, and grow in a thoughtful and sustained manner. This will serve us well as we seek to expand margins going forward. We also share a common culture and DNA as entrepreneurial problem solvers. We are excellent operators. We empower our people with underwriting authority at the local level, plus we provide rigorous oversight at the group level through a strong enterprise risk management framework. Most importantly, we deeply care about our customers, and we are a preferred partner with long-standing relationships. One of the most significant changes that I drove in the past year has been the selection of our new leadership team. As we have repositioned ourselves to build strong foundations for growth, we needed a management team able to implement the required changes and with the experience to drive this business forward and realize our ambitions and potential. We have formed that team. And they have already exceeded my expectations and how they work together and the meaningful impact they're making on the business. I have great confidence in their ability to help me take this business to the next level. You will hear from them during this event, but I would like to introduce them to you now. Mark Kociancic joined Everest in October of 2020 as the group Chief Financial Officer, a role he previously held at SCOR. Jim Williamson and I have worked together for over 15 years. He joined Everest from Chubb in October 2020 as the Group Chief Operating Officer, and is now also Head of Everest Reinsurance division. Mike Karmilowicz, our President and CEO of Insurance, has over 30 years' experience in the industry, and he joined the company in July 2015 from Zurich. His Chief Operating Officer, Mike Mulray, joined the company from General Electric at the same time. You will also hear from Chris Downey, our Chief Underwriting Officer for our Reinsurance division and CEO of Everest Re Bermuda. He brings extensive reinsurance experience. My first external hire was Seth Vance, our Chief Investment Officer. Seth joined Everest in September of 2019 as the Treasurer. His experience in asset management brings new insights to the management team. We have also assembled a great team with our functional leaders, some of whom will join us for the Q&A session. You can see them all on the slide, and they include both veterans of Everest and some of our newer additions. I am incredibly proud of this team and what they've already achieved and excited to be working alongside them to execute on our go-forward strategy. So let me talk more about strategy. The strategy has 3 building blocks. First is building our 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, and we are further growing and diversifying this business with higher-margin product lines. Also, our investment portfolio is a core tool for generating returns and we're optimizing the portfolio and sharpening our strategy. Second, we are very focused on the continuous pursuit of operational excellence. This starts with a laser focus on underwriting discipline through a system of greater management oversight and additional checks and balances. The operational excellence focus goes beyond underwriting. We are transforming the operating model of the company to achieve greater scalability over time. As we demonstrated during the pandemic, we have the capacity to be a digital-first company. We intend to push the paradigm of a technology-enabled, data-driven model throughout the organization. We will be investing in the future of Everest in an efficient and ROI-accretive manner. Also, we're utilizing a dynamic capital allocation model. We seek to optimize capital within our underwriting and investment portfolios as well as between underwriting and investments more broadly. Capital is valued and respected. We are utilizing the most efficient sources of underwriting capital across capital market investors including ILS. And as we generate capital beyond the needs of our organic growth strategy, we will return capital to shareholders. Finally, ESG principles are core to Everest. This includes focusing on the culture of our firm. Culture is one of our key differentiators. And it is 1 of the reasons we can attract and keep top talent. Our culture drives our success by helping our team be the best it can possibly be. We are focused on making sure that we invest in both the talent of the organization as well as the diversity of our team. This is personal to me. And you will see a concerted effort on diversity, equity and inclusion at our organization. We are also taking proactive measures to ensure we're responsible stewards of the environment in how we conduct our business. We're all working towards a goal of achieving a zero-emissions workplace across all of our offices by the year 2050. At Everest, in addition to our building blocks, we have 3 drivers of earnings. The first driver is about building a high-quality specialty commercial P&C insurer. Everest has built this business organically into a $3.2 billion gross written premium business today, but we believe we can more than double the size of the business profitably over time. Part of this will come from our extensive operational transformation, which has its foundation in driving underwriting excellence across the board. We're also integrating data and analytics across the organization. Everest is on a path to become a digital-first specialty P&C insurer. I have already talked about how we're investing in our technology infrastructure. One of its benefits is enabling us to more effectively price and assume risk for our clients. This means we make better underwriting decisions that lead to improved loss ratios. We're also improving our claims outcomes. As we scale the business, we are creating claims centers of excellence internally, resulting in superior loss and loss adjustment expenses while providing a superior service model for our clients. We're also focusing our distribution efforts to be more sales and results oriented. And we're also expanding our global footprint. With our strengthened executive leadership team, we have additional capabilities to manage and grow profitable commercial insurance business on a global scale. Mike Karmilowicz and Mike Mulray will provide further details on our insurance execution strategy. Our second driver of earnings is Everest Reinsurance platform, which is an industry-leading global P&C reinsurer. We enjoyed the leading market position of a fully scaled platform. And we will use 3 drivers to continue to grow and optimize our reinsurance platform. One, we're driving an underwriting transformation by improving operational oversight, governance and controls. Our Reinsurance division has a history of being entrepreneurial and nimble, and we will maintain it within a framework of pricing, reserving and process discipline. Two, we're further diversifying into higher-margin opportunities. For example, we see a continued path to grow our mortgage reinsurance book, and we see additional opportunities by partnering with key ceding clients. Three, we're expanding our risk financing by further partnering with ILS investors. Everest is currently the largest sponsor of cat bonds in the market via our Kilimanjaro cat bond program. Also, we have built an excellent ILS capital management business with Mt. Logan Re. And we will look to substantially grow the assets under management at Mt. Logan in partnership with our investors. So that's reinsurance. The third core driver of our earnings is the investment portfolio. We're maintaining a high quality and diverse portfolio, particularly for the portion backing our reserves. In the portfolio backing shareholder capital, we are focused on maximizing both risk-adjusted returns and returns on capital. We are investing our portfolio with an ESG mindset. We intend to make sure that the asset managers we work with reflect our ESG objectives throughout the portfolio. By relentlessly executing on this plan, we will profitably accelerate our top line growth in attractive markets. We will attain a combined ratio in the low 90s and we will increase our net investment income, while offsetting pressures of the low interest rate environment. In our industry, those who execute best win. To that end, I'm very focused on continuing to enhance our risk management framework and underwriting discipline. Everest has a great platform. And with the additional management talent, we are reinforcing the risk management culture. Don Mango is a key driver of success for us in these efforts. Don is a legend in the actuarial community. He's recognized by his peers. His track record speaks for itself, and I'm delighted to have him on our team. We're also improving the underwriting checks and balances. We need to make sure that there is excellent governance when we set underwriting limits and ensure that when we define our view of risk, that we stick to it. Tied to our checks and balances is developing and maintaining a single view of risk throughout the organization. Our senior executive team has a relentless focus on the measurement of risk, setting risk appetites and then maintaining discipline around their implementation. Finally, we will increase our investment in enterprise risk management and actuarial teams. It is critical that we have ERM and actuarial embedded in the fabric of what we do daily. To achieve our risk and underwriting objectives, we are also transforming our operating model. As I said previously, Everest is on a path to become a digital-first company. So the first step in our transformation is to surgically expand our technology investments throughout the underwriting businesses. However, when we make investments, we do so within the context of a clear, measured and well-understood return on investment framework. We're also improving our core processes. We want to make sure that we are as efficient as possible by leveraging process automation, technology and data and analytics throughout the organization. I'm excited to have both Anne Rocco and Terry Walker driving this forward. Anne is our Chief Transformation Officer and an experienced industry veteran. The business is already benefiting from her tremendous drive, experience and insights. Terry is our Chief Information Officer. He, too, has extensive experience in this industry and has been a vital component in enabling us to capitalize on the new technology in data and analytics. We're also investing in our claims organization. Claims is key to both managing loss and also improving the client experience. As we scale our primary insurance business, this becomes a critical component of our success. We are continuing to leverage our flat, agile organization. Our clients and broker partners regularly cite the ease of working with Everest and the expertise and partnership that our nimble and entrepreneurial organization brings to the table. We're also focused on maintaining a clear, disciplined capital allocation model. Mark will walk you through our framework shortly. Next, we are expanding our sources of underwriting capital. We are further optimizing our balance sheet capital structure, and we're expanding our utilization of ILS investor capital, particularly in our Mt. Logan vehicle. These collective efforts will improve our risk-adjusted operating margin while reducing volatility, create a proactive and scalable management model, and result in an optimized capital structure that allows for dynamic capital allocation to the highest value opportunities. As I mentioned already, our third strategic building block is about how we approach our business day in and day out and how we conduct ourselves according to our principles. Our people, our talent, and our culture are the most valuable asset at Everest. We intend to further invest in our current team and continue to attract leading industry talent every day. I believe a key driver of the attraction to Everest is our culture. As a financial services company that takes risks associated with climate change and a sizable investment portfolio, we are looking to embed climate science into our actions across the business. Also, as I said before, we are committed to diversity, equity and inclusion. We are making progress with actionable on-the-ground efforts. Now I would like to turn your attention to Dana Lodge, the CFO of our Insurance division, to provide more insight into our efforts around diversity, equity and inclusion.

Any organization has a competitive advantage when it fosters diversity and race, gender, sexual orientation, culture, views and perspectives. Diversity, equity and inclusion has always been fundamental to the way we behave and do business at Everest. I chair the Diversity, Equity and Inclusion Council. The mission of the council is to serve as the organization's conduit to senior management as we continue to enhance our commitment to diversity, equity and inclusion. We're focused on maintaining and enhancing our environment so that employees of all backgrounds, perspectives and experiences feel they can really bring their whole self to work and contribute to the success of the company without concern. Our council partners closely with human resources, senior leadership and the executive committee of the group to support initiatives throughout the company that promote diversity, representation, transparency and awareness. We've created 3 new employee resource groups, each focused on different colleagues, African-American/Black employees, LGBTQ+ employees, and Pan-Asian employees. These groups provide professional development and inclusive culture and drive awareness across the organization. In addition, our talent acquisition team is actively strengthening our strategic partnerships with several diverse organizations. We want to raise awareness of opportunities at Everest so that we can attract diverse talent and really help build future leaders. As we continue to evolve and grow as a company, we remain highly committed to investing the time and talent needed to foster a diverse and inclusive culture for our employees, our clients, and our customers.

That was great, Dana. At Everest, we have a singular focus for creating shareholder value, growing book value per share plus dividends per share. The equation for driving shareholder value is simple to describe but more difficult to execute. It encompasses the combination of underwriting income, investment income and prudent capital management. Our strategic plan will result in an annualized growth in book value per share plus dividends of at least 13% by 2023. Importantly, we are still in the early innings of our implementation. And as we continue to grow and execute our plan, we have ambitions to be a leader in terms of total shareholder value creation. In summary, our vision for Everest is clear, and it will drive exceptional outcomes for shareholders. We intend to profitably grow our insurance and reinsurance franchises by leveraging a solid foundation built over 50 years in the market. We will expand our opportunity set through accretive organic growth and we see an extensive runway of opportunities in front of us. Our entire organization is laser-focused on allocating capital and resources to the highest return alternatives. Risk management, discipline, and governance is core to everything we do. And we are transforming our model to a technology-enabled business that will allow for proactive management and operational excellence with more consistent results and lower volatility. In conclusion, we believe these actions will deliver superior financial performance through the cycle. My closing thought brings us right back to where I started, and that is about the opportunity ahead. We are forging a path forward that builds on our past and creates an even brighter future for our company and our shareholders. And with that, I'll turn the presentation over to Mark Kociancic to walk through our financials.

Good morning. I'm Mark Kociancic, Group Chief Financial Officer of Everest, and I'll be taking you through the financial road map of our 3-year strategic plan today. At Everest, we have only one financial target, maximizing total shareholder return as measured by book value per share and dividend per share growth. Our ultimate objective is to provide a leading book value per share performance versus our peer group. This 3-year plan gets us to at least the 13% level by the end of 2023, but we believe there's even further upside from that in the future. Currently, we see the company operating at approximately 11% total shareholder return on a normalized basis. And it's important to note that we look at this target, including a normalized catastrophe load and investment returns that remove one-off effects. Three areas are going to drive the uplift in the financial target: underwriting income; investment income; and capital management. We expect underwriting income improvement will be the largest uplift of the core drivers. Investments are a key engine and we will look to offset the impact of the low interest rate environment with a prudent strategy that enhances overall yields. Capital management is about efficient deployment of capital and the efficient structuring of our capital. As you can see from the slide, we've provided ranges for the key assumptions in this 3-year plan. We can operate at multiple points within these ranges and still achieve our financial target. Flexibility for agile decision-making for capital deployment and a dynamic business mix is essential. We need to be agile for whatever the market throws at us. We believe that we'll generate a gross written premium CAGR in the 10% to 15% range over the next 3 years. Our focus on portfolio management, cycle management, combined with the improved pricing cycle is expected to drive our combined ratio into the 91% to 93% range. Again, we will not grow for growth's sake. We will only grow accretively because we are focused on our financial target. We'll be enhancing the asset management strategy so that it's more capital efficient, provides enhanced investment income and is complementary to the underwriting plan. Investment returns provide another significant income stream, and they diversify our earnings and risk profile. Our working assumption over the plan is a return on invested assets in the range of 2.75% to 3.25%. This management team has a relentless focus on maximizing return on capital. I fully intend to promote an A+ equivalent financial strength rating, while adhering to a consistent, moderately high risk profile as defined by the rating agencies. We see our capital structure as an additional driver of shareholder value. The capital structure has flexibility with a long-term debt leverage range of 15% to 20%. Moving on to underwriting income. We have scalable platforms in both reinsurance and insurance that will drive our organic growth well into the future. With reinsurance, we have a leading franchise where we can compete with anyone. In insurance, we have a strong platform that is well positioned to grow and capture share in the U.S. and internationally. We'll generate economies of scale as we grow our premium base. And in particular, we'll be able to build internal centers of excellence within our insurance division, which will improve productivity. I fully expect accretive growth in both reinsurance and insurance. Expense discipline is an advantage versus our peers, and it's one that we're going to continue to focus upon. Having said that, we'll be investing more in technology, and that resource allocation process has a high degree of C-suite governance to ensure value and priority in the decision-making process. Relentless focus on measurement and a comprehensive planning process brings discipline and helps make decisions on cycle management, portfolio management and how we invest in our business. We're in a growth mode in this hard market, but a fundamental principle that we stress is the need to see competitive advantage within the near term in any line of business we launch or operate in. So let me focus on investment income. We look at our investments as a single portfolio with 2 strategies: a core strategy portfolio backing underwriting liabilities; and a total return strategy portfolio backing our shareholders' equity, driven by the combination of fixed income alternatives plus public and private equity. Our core portfolio strategy is defined by maintaining high credit quality, high liquidity, matching durations, all while maximizing portfolio yield. We've brought in strategic allocations to high-grade structured credit within our fixed income alternatives portfolio, and that will enhance yield. Private and public equity assets drive our total return strategy. We're also increasing our allocation of private equity buyout and secondary funds as we look to improve the total return and overall capital efficiency of these portfolios. Seth Vance, our Chief Investment Officer, will go into more detail later on in the investment section. A few words on our capital management framework. We look at capital management over the long term. We have a clear 5-step framework on the right side of the slide, and you can see the objectives on the left. Let me take you through them. First, we ensure adequate capital and liquidity to support an A+ equivalent financial strength rating. Second, we're focused on only funding accretive growth strategies. And by doing this, we create franchise value. Both the Board and management team are committed to attractive shareholder remuneration, which encompasses quarterly cash dividends and opportunistic share repurchases. And when we do return capital to shareholders, we will do so thoughtfully and in the most accretive manner. We will consider M&A if it accelerates our organic growth strategies, and we currently see a very attractive organic opportunity set in front of our businesses. So there will be a high bar for M&A in the current market. While we follow our capital framework, our actual capital allocation process is granular and dynamic, and it takes place throughout the year. Our resource allocation begins with our annual planning process. And this entails a highly detailed 1-year operating plan and an update to our multiyear strategy. This process sets the basis for our portfolio objectives and is aligned with our board risk tolerance and enterprise risk management framework. It results in the strategic allocation of capital between our core earnings engines of insurance, reinsurance and investments. Each quarter, executive management conduct reviews of each of our divisions and investment strategy. This allows us to reconfirm our assumptions and respond to changing market conditions. It is a critical exercise for our teams to make sure that we're on top of any loss trends that may drive updated pricing decisions and near-term portfolio modifications. Every day, our underwriting teams are making ground-up contract decisions, while our investment allocation decisions are under constant review from myself as CFO and our Chief Investment Officer. We have a sophisticated approach to creating underwriting capital, and we expect to continually optimize our underwriting capital structure over time. Here at Everest, we will continue to optimize our balance sheet capital between debt, equity and other hybrid structures as we grow and evolve. Mt. Logan is our third-party managed vehicle and we expect assets under management to increase significantly. This will be addressed by Jim Williamson later on, and we will continue to use ILWs opportunistically. Everest is also the largest cap bond issuer. We've built a portfolio that utilizes a laddered issuance approach so that we can maintain stable long-term capacity with the consistent price in a core piece of our risk management strategy. Everest benefits from a low cost of capital and a flexible capital structure. As I mentioned earlier, an A+ financial strength rating is key to the franchise. Not merely an expectation for investors or bondholders, it's also essential for clients. We're focused on lowering the cost of our underwriting capital where possible by debt or through alternative capital means. As we consider any future debt issuance, we'll utilize the following 4 issuance principles. We want long-dated tenors and laddered maturities. We want to attain regulatory and rating agency capital credit, all while accessing the lowest cost of capital and targeting a long-term debt leverage ratio of between 15% and 20%. We are focused on building a long-term capital structure in order to capture the growth opportunities ahead of us. Liquidity and cash flow generation are critical aspects for any strategic plan. As you can see on the slide, Everest has a very stable business model that consistently generates strong levels of cash flow. And this cash flow strength also protects the balance sheet. In times of financial market stress, we have the ability to leverage that strength of liquidity and take thoughtful strategic steps that maximize value for our stakeholders. As you can see from the bar graph, we maintained positive annual cash flows, even in heavy catastrophe years like 2017 and 2018. And in 2020, despite the impact of multiple natural catastrophe events and COVID-19, Everest generated nearly $3 billion of operating cash flow. While our cash flow profile is a key component to our overall liquidity, Everest has a thoughtful and robust liquidity management paradigm. We have the comfort to draw on a combination of 3 sources: First, our strong operating cash flows; second, our liquid asset portfolios; and third, our $1.6 billion Federal Home Loan Bank liquidity facility. This gives us confidence in our liquidity position. In addition to our liquidity paradigm, the other liquidity advantage we enjoy is our corporate structure, and this includes our flagship U.S. balance sheet, allowing Everest to optimize our collateral requirements across a range of clients. Our prudent management of PMLs minimizes the risk of short-term liquidity draws. And we also benefit from our high-quality reinsurance and significant levels of available collateral. Finally, our low debt leverage profile can be a source of contingent liquidity in the future if needed. Our global platform is highly efficient and unique to Everest. I want to take a few moments to explain why it's such a differentiator for us. As I mentioned earlier, our global legal entity structure has leading U.S. and Bermuda balance sheets, and that allows for a continuous optimization of our capital and risk in order to maximize returns. Our broader set of legal entities are based in jurisdictions with stable political, regulatory and legal systems. This means that we can be confident in our long-term operating capacity. We also have an asset portfolio that is focused on major global currencies. It's predominantly U.S. dollar-denominated with a mix of other G10 currencies. Let me sum up our financial road map. We have an attractive 3-year financial target of total shareholder return greater than 13%. But as I said at the start, it won't stop there. We, as a team, have much more ambition beyond this plan. We're working towards a low 90s combined ratio across the group, but we know things can change, and we always expect the unexpected. So we have multiple paths and strategies to achieve our target. I'm also anticipating double-digit premium growth each year of the plan. We'll enhance our risk-adjusted investment returns within our existing risk appetite by optimizing our investment portfolio to an efficient frontier centered on risk, return and capital efficiency. We'll actively manage our capital, and we have a clear capital management framework. I'll be focused on the efficient and productive deployment of that capital across all of our resources. We're in a great position. I'm excited about our prospects and our ability to deliver on this plan. We have a fully motivated team with 3 business engines operating on all cylinders. Our strategy provides substantial operating flexibility over this plan and into the future. All of this will drive meaningful value creation for our shareholders. And with that, I will turn it over to Jim Williamson to take you through our group risk section.

Thanks, Mark, and good morning, everyone. It's a pleasure to be with you virtually today. Hopefully, the next time we do this, we can be in the same room. I'm going to spend a few minutes giving you an overview of Everest's approach to managing risk. Many of the themes I'm going to talk about echo what Juan has said, and you'll hear them again when Mike Karmilowicz talks about the insurance business, and when I come back to talk about reinsurance. There's a reason for that. Risk is at the center of everything we do at Everest. We get paid to assess, underwrite, price and manage risk. Controlling risk is critical for our company, but we can't drive our business and create underwriting income without taking risk. Everest has built a layered interlocking approach to how we manage risk that goes from the very top of our company, right there with Juan, all the way to the point of underwriting on individual deals. It starts with clearly defined group risk tolerances for all the types of risk our company takes. Natural cat, credit, investments, to name a few of the big ones. We carefully assess those exposures, the economic returns of taking more or less risk in each area, the resources available to us to sustain hits, our hedging to define the limits on how much risk we want to take on. Those limits are set dynamically, but we don't cross those limits for the sake of a little extra underwriting income or a few basis points of yield. Next, we have a robust enterprise risk framework. That framework is where we capture, assess and monitor all the underwriting, financial and operational risks we take as a company. Here's 3 examples: social inflation; cyber, both in terms of our underwriting as well as the security of our own systems; and climate change. Each of these exposures are analyzed documented, monitored and mitigated wherever possible. Finally, and in some ways, most importantly, because it's where the rubber hits the road for an underwriting company, is our approach to underwriting risk governance. We translate all of our risk management guidance from the group to our individual underwriters. This includes defining our appetite, setting underwriting guidelines, implementing pricing models and benchmarks, and monitoring the development of our portfolio. I'll share one example of how these three capabilities interact to help drive our company. Take one of our most important risk exposures, Southeast windstorm. This is a risk exposure that creates a high reward opportunity but also with relatively high risk. We have to maintain a consistently prudent approach to exposing our balance sheet to this risk class. So beginning with our group risk tolerance, we set our total group risk tolerance for Southeast windstorm. We set an annual target using metrics like PML. And though we're always assessing and reviewing that target, it does not change from day to day. It's a ceiling. Everyone in the company knows what that ceiling is. And everyone in the company knows you respect the ceiling. We know how much of this exposure we want to take, given market conditions, our balance sheet and our approach to hedging. In our enterprise risk framework, there are many risks that could relate to Southeast windstorm, but one clearly stands out, climate change. I'm going to talk about climate change in more detail in a minute, but you can appreciate that it's a critical component to understanding the risk around Southeast wind. We are keeping climate change front and center in our risk framework. Its impact on loss costs, in our modeling and how it changes the dynamics of Southeast coastal storm damage. Finally, in our underwriting risk governance model, we're providing our underwriters with clear guidance and insights when they're taking on wind exposure in the Southeast. That includes clear underwriting guidelines about physical exposures we look to avoid, robust cat model output to help us compare the economics of various deals and other key quantitative indicators. So you can see how an overall risk threshold translates from setting group risk appetite, monitoring key related risks all the way to individual account decision-making. This allows us to drive our strategy and grow our underwriting income while keeping the overall risk profile of the company in control. We've been focused on transforming Everest's risk profile over the last several years, and I want to show you the results of those efforts. First, let me take a moment to explain this slide a little bit. It shows where the company's risk profile stood after the January 1 renewal season in each of the last 8 years. It goes without saying here that red is higher risk, green is lower, more sustainable risk levels. The vertical axis measures earnings at risk. Think of that like a 1-in-10-year measurement. The horizontal axis measures capital at risk, think more like 1 in 250. The farther you are from the intersection of those 2 axes, the more risk you're taking. We have clearly walked the company back from a risk profile that just did not make sense to this management team. If you go back to 2017 and 2018, for example, we had taken on a lot of cat risk, particularly Southeast windstorm to use our example from a moment ago, not just total risk, but how we were taking it made a big difference. We wrote a lot of cat ag programs for large global underwriters. Good stuff most of the time, but it's highly levered and has the potential for large losses. You can see the reaction to some major losses by our move away from that high-risk zone toward a trading range that's sustainable and appropriate for Everest. In both 2020 and 2021, we're able to drive meaningful top line and bottom line growth for the company, while also reducing the potential for outsized volatility. How do we do that? First, we are very careful about the types of deals we write. For example, while cat pricing is much more in favor today, we believe reinsurers still need more return in order to write meaningful amounts of cat aggregate. We've diversified our book. That means more sources of quality earnings and less reliance on a single peak cat zone. Finally, we work with the capital markets to expand our underwriting capacity. At the core of this is Mt. Logan where we partner with investors to strategically grow our market presence while minimizing retained risk to our balance sheet. Additionally, our cat bonds and the targeted use of ILWs and retro purchases provide consistent hedging capacity. I'm going to turn it over to Sharry Tibbitt, Deputy CUO of Reinsurance, to talk about how we balance risk taking and risk control in our business.

Everest is dynamic. We do have an appetite for cat risk, but we insist on superior economics. Over the last 2 years, we've been reducing volatility on our property cat business, where the economics did not meet our hurdles. At the same time, we were able to move some capacity to less volatile lines. This culling of the book wasn't done with a broad brush, but was very calculated. We've been a go-to-market for nat-cat property. And we saw some terrific opportunities over the last 12 to 18 months to deploy significant capacity on deals that had superior metrics. We're able to do this while still controlling the volatility with our dynamic hedging capabilities. Having the ability to respond quickly and provide meaningful capacity to our clients really sets us apart from our competitors. Everest has robust tools and a global pricing platform that steer a consistent appetite towards the best treaties and even specific layers within treaties in real time during our underwriting process. This allows for a continuous optimization of risk selection. We also leverage Everest's extensive historical claims data. In addition, we have our robust modeling insights. This includes research to keep us apprised of the evolving property landscape and incorporates the effects of climate change and urbanization.

As you heard from Sharry, we like cat risk. We just want our risk to be prudent, and we want to get paid appropriately, and we can strike that balance. Let's turn our attention to one of the most important risks facing the insurance and reinsurance industry, climate change. Climate change is real, and it's affecting our loss costs, not in some theoretical future, it's today. Staying ahead of the effects of climate change is mission critical for our company. And we have a broad, comprehensive approach to this issue. It starts with the science. We have experts within Everest who help inform how we model and price our business given the effect of climate change. I'm talking about reviewing academic papers and translating emerging insights into our underwriting models in a very granular way. This is not a simple issue of climate change equals big storms. Sometimes yes, but sometimes no. It affects frequency and severity, not always up in all parts of the world. Climate change is not as simple as just thinking about a 2-degree rise in temperatures. Sometimes, it's about increased rainfall, stronger winds, cooler temperatures where once the sun was always shining. It's not always moving in the same direction. It's dynamic, and it's a netting of effects where some perils get worse and some less so. The net result is more loss, and that's why the science is critical. Next is modeling. Let me give you another example. No underwriter in this company puts property risks on our books without the benefit of our robust models that include the effect of climate change on loss costs. Those models cannot be static. You build it once in 1987 and you don't worry about it again is simply not an option. We update them continuously as more information becomes available. Finally, is data. Like I said at the beginning, climate change is now. It's already in the data. We leverage our own data, information from our cedents and third-party data to build the most comprehensive view of how climate change is translating to losses. The bottom line is simple. Climate change is costing the industry money today. Everest is staying ahead of that curve through massive comprehensive efforts led by a bunch of outstanding people. Risk is at the core of everything we do here at Everest. We get paid to assess, underwrite, price and manage a wide variety of natural and man-made risks in markets around the world. We can do this and do it really, really well because we have a culture of risk assessment at all levels of the company. We are always crystal clear about our appetite, and we don't violate those limits in pursuit of a few extra dollars of premium. We have effectively reduced the volatility potential of the company. We will still have cat losses, but we have done a lot of hard work to make sure they're consistent with the company's risk appetite and resources. And we have deep risk management data and metrics. We have wired the company to keep our finger on the pulse of our risk taking. Let me now turn it over to Jon Levenson to begin the Q&A.

Welcome to the first Q&A session with Juan Andrade, Mark Kociancic and Jim Williamson. We'd like to thank our audience for your attention so far and the great questions that have been received. Let's start with some of these questions. First one for Juan. Juan, in terms of the go-forward top line growth, could you provide some explanation as to how Everest expects to reach those targets?

Yes, absolutely. Thank you, Jon, and I'll build on some of the comments that I made during my presentation as well. It really all starts with the platform and the foundation that we have at Everest, the financial strength to be able to support the growth ambitions that we're talking about today. In addition to that, it's about the people. It's about the quality team of underwriters that we have that do this job day in and day out. In addition to that, it's about our product capability, both in insurance and reinsurance, we have the product breadth around the world to be able to achieve these objectives. It's also about your distribution relationships, again, both in reinsurance and insurance. Some of these relationships go back over 40 years. We're also making significant inroads with our distribution partners on the primary side. That gives us tremendous opportunity to grow. And the last part that I would mention is the DNA. It's the fact that we're entrepreneurial problem solvers. That is what we're known by our broker partners. That is very important because we can resolve issues and identify problems very, very quickly. So that gives us a general foundation for that growth. In addition to that, it's the optimist and the significant opportunities that we have in front of us. If I look at the insurance division to begin with, we have relatively small market share. We're a $3.2 billion insurance company but in an $800 billion space. So for us, again, with the products, the people and the distribution, it's really only a question of continuing to scale and mature our business to be able to go after those opportunities. On the reinsurance side, we are a lead market. We are a go-to market for all reinsurance purchases around the world. But we also see opportunity in places like Europe, Canada, Latin America, Asia and in different products like mortgage and specialty casualty.

Great. Thanks very much. A second question. We've received this from a number of our -- of our attendees this morning. Looking at the improved combined ratio targets, similar question to the first, providing that range of 91% to 93%, can you share again some of the details on how Everest expects to get there? And also, there's a second question clarifying, is that just for the group? Or is that for both of the divisions as well?

Yes. Thank you, John. So I'll start with the second part of that question first. That 91% to 93% applies to the group and to both divisions at the same time. So it's for the entire organization, for the entire company. As far as how we get to those numbers, these are intentional purposeful actions that we're taking every day. This is a hard work of running an insurance company, of making sure that you're focused on appropriate assessment of risk, on the pricing of that risk, on the monitoring risk. A big part of this is loss-ratio improvement. We have deployed very good, very timely analytical tools that have given us incredible transparency into our portfolios that then help us make better decisions on how to craft, how to shift and how to better respond to changing market conditions. The other part of that is our efficiency. One of the key competitive advantages of our company is the expense ratio. And that is something that, as we continue to improve these numbers, as we continue to deliver results, we are continuing to focus on the expense side of things. We are investing in our company and technology and people, but it's also about prioritization of what you spend your money on, what's most accretively. So I would say the focus on those 2 areas: The loss-ratio from a pricing underwriting risk assessment data and analytics standpoint; from a claims standpoint, making sure that you're always paying the right amount; and number three, essentially, it's on the expense side of things as well, continuing to maintain that competitive advantage.

Yes. One thing I would maybe add to Juan's comments that I think is really important to understand is we went through a very rigorous process to build these plans before we put out these numbers. And what gives me tremendous confidence is we see a lot of different ways to get to our end objectives. We're not levering the entire plan on one set of initiatives. We've got a lot of irons in the fire that will help us to drive the numbers on the loss ratio on the expenses and also on the top line growth to the prior question. So there's just a lot of momentum and a lot of ways that we can get to our goals.

Great. Thanks, both. Another question that we received, and this 1 seems most appropriate for Mark. Mark, what's the timing of the possible increase in debt leverage to move closer to the 15% to 20% threshold? And a second part of that question is, how do you think about deploying this additional capital to be raised?

Well, I see that occurring over the course of the 3-year strategic plan that we have. It would obviously serve to lower the cost of capital and provide us with some long-term capital to sustain the growth that we're in right now. we're in a hard market. And so this is an excellent opportunity, I think, for us to grow the franchise. And that's really the first priority that we have, expanding our franchise profitably -- Our plan also includes several capital management actions, so we're committed to our dividend policy, the share buybacks. But overall, I would see us expanding our debt leverage somewhat over the course of our 3-year plan.

Great. And Mark, another question for you that's come in. You've explained total shareholder return as the key performance metric, and the question is, why not focus on some more common measures, for example, operating return on equity or growth in diluted book value per share?

We looked at several measures, as you suggest. But we thought that total shareholder return was really the most complete in terms of holding management accountable. So when you look at net income on the top line, that's virtually everything that management controls, whether it's on the investment income side, public private equity performance as well as the underwriting performance. And then you want to make sure that all of the capital is adequately remunerated. And so we're being held accountable in terms of allocating that capital and then managing the capital efficiently for shareholders. So whether it's through dividends, through buybacks, deployment, getting that cost of capital reduced as well. The only thing we exclude is really the unrealized gains and losses from the fixed income portfolio. Because in essence, we're holding those securities until maturity. And taking that kind of volatility from macro interest rate environment is really not relevant to the value proposition that we have.

Great. Thanks. Turning to Jim. There are some questions about risk based on your prepared comments. The first, given the discussion around climate change and the impact on Everest's business, -- Can you give us an example or 2 of how you've adjusted the models, risk appetite or other items to reflect this impact in your exposures in business?

Yes, sure. And it's a really important question, John. I think it starts with what I described earlier around how we do our modeling. Our team in our cat, what we call the cat brain, they're continuously assessing the things that I described earlier, which is the science, the data, both our own as well as from our cedents. And so that process of maturing those models and adjusting them for the impact of climate change, for the impact of urbanization and other factors that we see in the data is ongoing. And so that's happening literally every day. and that feeds directly into how our underwriters price property risk. So they're getting the benefit of all that modeling on a risk-by-risk basis. So I think that's probably one of the most important things we do. The second around appetite, I'd sort of break that into 2 pieces. On the property front, you saw me describe how we've walked the company back from a risk profile that was maybe outsized. And that's, I think, indicative of our reaction to climate change. And I think a view that says programs like these large aggregate programs for global underwriters, one of the things that climate change does is it makes it a whole lot easier to get into those aggregate programs through frequency of medium-sized losses, super severe losses, et cetera. And so we've really walked away from taking that kind of risk with some exceptions. And then the last piece I would just mention is this importance -- you heard it a little bit this morning. You're going to hear it a little bit more, I think, as we get it through the day. But our view on diversification is essential here. We want to have a lot of different ways of driving our economic outcomes, a lot of different ways of driving earnings, which includes definitely writing property, writing property cat, but also writing a lot of other lines of business that don't have the same exposure to climate change. So it's about putting all those pieces together so that we can get to our goals in a risk-adjusted way that makes sense for us and make sure that we're staying on top of those trends.

Great. And I think what's a reasonable follow-up, we've received this question as well. Given the description of the current risk profile and how that has come down from prior years, and with your discussion, how far up could this float if market conditions for the risk exposed, largely cat classes, continue?

Yes, yes, another important question. And what I would say unequivocally is we have no intention and no need to go back to the type of risk profile that you saw on that slide in the 2016, '17, '18 years. I mean that's just -- we just don't see the need to do that, frankly. And it's definitely outsized relative to our risk appetite. That said, what you'll also notice on that slide is when we walk back into a much more sustainable risk profile, we've sort of boxed out a trading range that we think makes sense for our company and that we can sustain over the market cycle. It will absolutely mean we're moving within that much more risk-adjusted range. And you saw it on the slide, the 2021 year after the 1/1 renewals was up slightly. But again, with a lot of prudence put into how we're taking risk. We're managing our total PMLs, our AALs, our exposures by zone to ensure that we're building a book of business that's profitable, but also sustainable. So yes, we're responding to market conditions, but only within a trading range that's sustainable for the company. And we think we can -- that we think that's durable. We can keep doing that. And then in areas where the market cycle is not as favorable, you certainly don't want to be taking more risk. So it's really the best of both worlds. We're in hard market cycle, you can drive growth without taking more risk and in soft market cycles, you don't want to.

Yes. And if I can add to that, John, as well. This is the whole concept of dynamic capital allocation that I spoke to earlier in my presentation, right? And it's not just within reinsurance, but it's also across insurance and reinsurance, right? It's the fact that we can identify, with the tools that we now have in place, what the better economic trades will be for our company and then decisively making that decision to make that trade. And so what Jim is saying is absolutely relevant. If we see property cat, we like it, if we can get paid for it, that's great. If the property cat terms and pricing are not what we want, we have plenty of other products, plenty of other geographies to be able to go after. And that's the beauty of this plan, and that's also going back to the original question around how do we achieve some of the growth targets.

And the constantly expanding diversification of our business model overall is just going to continue going forward as we grow in particular. The cat load that we have for the plan is roughly 6 to 7 points. And so we can trade in there, as Juan said, opportunistically. And I think the other key factor when you see the growth rates that we presented today, in particular, for insurance, we do expect it to grow more rapidly than reinsurance. And so you'll see the level -- relative share of cat inside our portfolio diminished naturally as we grow other non-cat lines going forwards.

Great. Thanks, all. And I think we have time for one more question. And we've had this question in a couple of different forms. But I think what it boils down to, for Juan and Mark particularly, you both mentioned in your prepared remarks the possibility of acquisitions. And I guess, given the current excess capital position and strategic growth goals, 2 questions. First of all, what type or types of M&A would make the most sense for Everest? And the second question would be timing.

Yes. So let me start with that and then have Mark join me with that answer as well. Look, I think there's a high bar for M&A in our company, particularly in the market that we're in right now. With the opportunities that we see ahead of us in both insurance and reinsurance, you bet on our team every day. You bet on Everest, for everything that I've said before, the team, the quality of the underwriting, the tools that we're putting in place, the relationships with our distribution, et cetera. That being said, if there are particular geographies, if there's particular product lines, where we do the math, we do the economic analysis, and we find that there's a better opportunity to grow faster in that area, that is where we might consider an M&A opportunity. Now the type of M&A that I would be thinking about would really be bolt-on type acquisitions, expansion in a geography, expansion into a particular product line, expansion into a particular technology that we don't have, et cetera. But it all would have to fit into the strategic framework that we're talking about today. It would have to be accretive to the company. And so that's how we tend to think about that.

Today, we've articulated, I think, a very clear strategy with well-defined financial target or risk appetite. And clearly, you can see there's a lot of runway for organic growth, as Juan and Jim have described. So the bar is pretty high for M&A. But the real, I think, financial aspect of an M&A question really stems from how fast or how quickly can it accelerate the development of Everest and its franchise relative to the organic strategic plan over the course of time. And so that'll be the key bar to overcome, assuming those opportunities arise.

Great. Thanks, and thanks to Juan, Mark and Jim. For the audience, this is the end of our first Q&A session. We'll follow this with a 15-minute break. And we'll return with presentations from the business unit leaders and our investment leaders as well. Thank you again for your attention this morning. [Break]

Good morning. I'm Mike Karmilowicz, President and CEO of Everest Insurance. This is a very exciting time for our insurance business, and I'm thrilled to have the opportunity to tell you about it, specifically our plans for growth and profitability. Let me start with our mission. We're going to be a world-class insurance company in every aspect of our business. What does this mean? For us, it's about our relentless pursuit to deliver top-tier performance, strong growth and industry-leading profitability. Our journey began 6 years ago. That was when we looked at our insurance business and saw an opportunity to organically build a specialty diversified insurance company by leveraging our financial strength, developing a more robust product set and better utilization of our global capabilities. Make no mistake, our ambitions are high and we have a great foundation that has positioned us well for success. In the last 5 years, we've doubled our gross written premium, reduced our attritional combined ratio by 5% and we adjusted our business mix, reducing our waiting on workers' comp to a more diverse mix of products with higher margins and greater returns. There are 3 levers which form the bedrock of our mission. First, our commitment to be a top-tier insurance company throughout the cycle. This means we're focused on the right products, systems with the right people. We spent much of the last 6 years working to restructure and align our businesses while bringing in the best talent. Today, we're in great shape and see tremendous opportunity in the market to deliver profitable growth. Second, the growth will be managed to ensure we protect and most importantly, increase our profitability with the combined ratio in the low 90s. We see significant headroom for organic growth, and we continue to demonstrate our ability to win profitable market share. Third and finally, we recognize the need to be market-leading in our systems and operations, so we will continue to invest prudently in automation to improve our processes, and the use of data analytics to drive more fact-based decisions, all designed to deliver the best customer experience. At Everest, our values are more than words. They are how we make decisions, how we treat our colleagues and customers and how we will execute and move our business forward. They are not imposed, but they are absorbed and are part of our DNA. Together, they truly differentiate us. As you can see from the value drivers on the page, I want to focus on our cornerstone, our culture. It starts and ends with culture. It's how we get things done. Let me share a customer story with you. We recently helped a customer through a challenging time by filling several gaps in coverage across multiple lines and geographies. Over 37 colleagues across numerous segments and functions were involved, helping deliver the Everest experience. They were long-time standing client of a competitor, so not only did we solve their problem, but we also did it with humility. We know we have to earn it every day, and it really resonated with the customer. It takes a village and Everest rose to the challenge. And that village is global. I'd like to introduce you to Linda Ryan, who heads up our business in Ireland and is responsible for our European operations.

Everest Insurance Ireland was set up in 2017 to continue the expansion of Everest global capabilities. We're based in Dublin with branch offices in the United Kingdom and the Netherlands, a structure that allows us to operate throughout the EU and the U.K.. We've built a team of hugely experienced and talented underwriters and insurance professionals, all of whom have a deep understanding of the market. Ireland is a great place space, our insurance operations outside of North America. It's a very well-regulated jurisdiction that's internationally recognized. We can write insurance on a freedom of services basis across the EEA. Our branch in London allows us to write business in the U.K.. We work with our customers outside of the EEA to provide tailored solutions, for example, in Australia and the Far East. Together with our Lloyd's of London syndicate we formed Everest Global Markets, a platform that allows us to offer customers worldwide capabilities.

So you can see how we are building up our international reach. Another strength of ours is our ability to be nimble. We empower our people to make decisions and solve problems faster. Solutions are found and new opportunities are seized. This happens every day. And along with our culture, it's what makes Everest great. One of the things I'm most proud about is our people. You heard from Juan talk about our bench strength, and that extends down through the ranks of the insurance business on many levels. Our talent is our oxygen, and we really have a great team who not only work collaboratively, but are all aligned and focused on driving the same vision and the same goals across the company. That's why we won the business in the example I just shared with you, it's why our customers choose Everest every day. It's who we are. But as good as the team is, they know that our values cannot be taken for granted. We have to work every day to protect them, particularly as the business grows. This is on the top of my priority list. The team was not built overnight. Starting in 2015 we began hiring and investing in talent. Since then, we've hired more than 900 colleagues around the globe. We remain committed and focused on hiring top talent that fits our culture and shares our values. Together, our talent will take this business forward. Which leads me to introduce my colleague and our Chief Operating Officer, Mike Mulray. Mike has worked in this industry for decades and is instrumental in helping us achieve our goals.

Thank you, Mike, and good morning, everyone. So what gives us confidence in our ability to successfully execute going forward? Well, as Mike mentioned, we are well positioned for the opportunity we see ahead of us. Over the past several years, our team has been deep into the journey of building out a world-class specialty insurance company. We've put into place many of the building blocks to achieve our ambition. We built a strong foundation with a balanced and diversified portfolio. We also developed new capabilities, transformed existing ones and instilled a culture of underwriting excellence across the entire organization. This foundation has enabled us to navigate through the environment, to deliver both growth and underwriting profit. And as you can see on the slide, we've made tremendous progress over the last 5 years across a number of key areas. We've expanded the depth and breadth of our product offering, including the infrastructure to support these capabilities. Many of these capabilities are powered by our InsurTech Innovation team, eIQ. Today, we're using machine learning to enhance fraud detection and workers' compensation claims. We're leveraging artificial intelligence to transform unstructured data in the underwriting process. And we're utilizing natural language processing to aggregate multiple data sources to augment our underwriting. These types of investments are core to our strategy and help drive continued improvement in our results. Another area of meaningful progress is how we've diversified and balanced our portfolio, which has enabled us to be more relevant to our insureds and broker partners and to also be more effectively managed through different market cycles. So what does good cycle management look like to Everest? Let me give you a couple of examples. So first is the action we took over the last year during the height of the pandemic, which brought with it great economic uncertainty. In response, we significantly reduced our exposure to heavy credit exposed lines such as trade credit and surety, while at the same time, we grew our property and casualty, excess and surplus lines business, still delivering about 15% of growth across the portfolio last year, a great outcome. Another example is in workers' compensation. We've been in this business for over 2 decades, and it's performed extremely well for us. However, over the past several years, in light of certain market dynamics, we've taken a number of steps to reposition our workers' compensation portfolio, significantly diversifying by geography, structure and class and ultimately reducing our concentration in this line of business. Now looking ahead, we'll continue to proactively steer the portfolio based on market conditions. And these are just 2 examples of what good cycle management looks like to us. Now as you can see, there's an enormous market opportunity in front of us. With our growing relevance in the commercial property and casualty space, there's plenty of runway for Everest. Looking at just the subset of the property and casualty market, we continue to hold a leading position in the rapidly growing $40-plus billion MGA space, an area we know well. This is a space we choose our partners very thoughtfully and are focused on a select few relationships with unique distribution capabilities, with those who align with our underwriting philosophy and culture. Now setting our eyes outside of North America, we're targeting local markets that need our breadth, expertise and financial strength. A recent example is in the Netherlands, where we just launched our newest international branch. We were attracted by the size of the market, the well-developed legal system and economic structure. And we see a meaningful amount of opportunity here and our team is executing in the early innings very well. We'll look to replicate this type of approach elsewhere in the near term. Now as I said, we've built out a broad suite of specialty insurance products and capabilities. While our product offering coverages are diverse, one thing they have in common is customer focus. We've designed our products and services to meet the specific needs of our distribution channels and customer segments which we play in. For instance, through our underwriting partner segment, we collaborate in the distribution partners both delegated underwriting relationships and digital trading platforms. We're able to focus on niche and hard-to-meet corners of the industry, which would otherwise be inefficient or costly to access directly. And more importantly, these relationships will be enhanced by our application programming interfaces, or APIs, that allow an efficient exchange of data. Let me give you another example. A meaningful part of our portfolio today is derived from the wholesale E&S channel. This is a market segment we understand extremely well, and where we continue to see significant opportunity due to the current market dislocation. Our E&S trading partners need real experts. They need speed and efficiency from their insurers. And our flat organizational structure, empowered decision-making and underwriting expertise position us perfectly to meet these needs. Finally, as a specialty insurer, we know the industries we serve well. We have subject matter underwriting and claims experts in a number of key sectors: From sports, leisure and entertainment, to hospitality and energy, to financial services, life sciences and construction and the list goes on. Our capabilities and expertise are well established. We're bringing the full power of the franchise to our clients and trading partners. And we will not rest. Our environment is dynamic and ever-changing. That is why our core competencies, expertise, discipline, customer focus, drive our success and why we're confident in our ability to execute. Now I'm going to turn it over to Marcus Cooper. Marcus leads our sales and distribution team here in North America, and he'll talk to us about some of the exciting initiatives that he's working on across the distribution landscape.

Our distribution strategy for insurance across North America is about evolution. That's a shift towards operating as a production-focused organization. That's an organization with a robust regional structure, a focus on broker engagement and key strategic partnerships aligning with the verticals where we excel or the product mix we want to build. To do that, we're leveraging a range of tools, internal, broker, customer, and we're supplementing these with third-party data sets to develop a market-leading digital distribution platform. This gives us insights from current and emerging market trends, and that allows us to identify opportunities based on our appetite and business mix. When I look at the opportunity to grow in the insurance space, there's a long runway ahead of us. Our underwriting expertise, our products, our services, our deep distribution relationships and our financial strength all contribute to driving sustained profitable growth. Most important of all, our strategy and everything that goes into it, are all about becoming even more customer-centric, providing complete insurance solutions that are attractive to the industries and segments where we choose to do business.

So you heard from Marcus, another example of great talent. As he explained, we are diversifying and deepening our relationships with our distribution partners across the globe. Our strategy allows us to take a more customer-centric approach to deliver solutions when it matters most. Our approach to growth means that we remain focused and vigilant on driving and improving our margins as we scale the business. We have 4 areas of focus: First, operating leverage, bringing all that Everest has to bear; second, effective portfolio management, we continue to manage our portfolios with diligence and rigor, making the necessary decisions when we see underperforming areas as well as identifying new areas of opportunity; third, using technology we believe vital to our success, more efficient processes, better use of data and analytics and better customer experiences are not simply nice to have, they are business imperatives; and lastly, our flat management structure allows us to be agile, and by empowering our people, we're able to make decisions and act quickly to deliver solutions to our customers. As I said at the start, we have a great business that is positioned for success with significant potential and one I'm very proud to lead. We have strong values and a deep and experienced bench of talent with a proven track record. There is tremendous runway in front of us. and we have the right people and the right strategy to win. Our ambitions and path are clear to deliver top-tier performance. We are very excited about the future at Everest and look forward to continuing our journey. Now I'd like to turn it over to Jim to talk about our reinsurance business.

Thanks, Mike. Everest Reinsurance has grown from a relatively small, mostly property cat underwriter, into a leading global reinsurer. We have a business platform that is agile. We can respond to changing market conditions and deploy capital where returns are strong. This business is also incredibly scalable. And we can quickly deploy more capacity, grow top line when conditions warranted without having to add significant costs. That means we can scale down just as quickly and not face the type of expense pressure many of our competitors have to deal with. You'll hear us talk about diversification a lot today. Reinsurance is a critical example of the benefits of diversification. We are not dependent on one line of business to drive our company. Over the last several years, we've diversified our writings. As I showed you earlier, we've taken PMLs down at a time when we've been growing our top line and increasing expected profits. We are building on a position of strength. When we say position of strength, we mean very clearly a well-defined value proposition that resonates with our brokers and our cedents. We are the preferred partner for many of our customers, not "a", "the". For Everest, that value proposition is clear and durable. There are 3 reasons why, let me share them. First, it begins with our local entrepreneurial business model. We put underwriters in local markets and empower them with the authority and tools to make decisions, partner with our brokers to make the right deals. Of course, some deals need a discussion with our senior executive team, but most deals are done locally by the people who are closest to the risk, our team of local experts. Second, we have an incredible breadth of capabilities we can deliver to our customers, lines of business, treaty structures, attachment points. We trade effectively across the entire market to solve the risk management needs of our customers. This makes us a more valuable partner and helps to deliver the benefits of diversification. Finally, our financial strength. Our balance sheet is strong. This gives our cedents confidence they can trade broadly with Everest, and we will always have the resources to meet our commitments. It also means we can put out meaningful line sizes for our global cedents. We have the firepower to lead strategic treaties. We can be an anchor reinsurer for our most important customers. At the core of how we execute is this deep bench of talent, seasoned credible reinsurance leaders sitting in our local markets, delivering the Everest franchise to our customers every day. I've taken the opportunity to talk with dozens of our leading brokers around the world. Their feedback is very consistent. Everest's team of global leaders are the best in the business: Capable, decisive, empowered to make decisions and get the job done. And this works both ways, the push and pull, if you will. Our reputation for doing great work in the market and having great people is also making Everest the top destination for reinsurance talent. I'll share a more recent example. In 2020, Artur Klinger joined Everest after a diverse and successful career in the business. Artur has told me that he came to Everest because he saw what we were doing and he wanted to be a part of it. He wanted to work with other great people. I'm really proud of our people and excited by what they're achieving. It's their talents and efforts that make Everest the company it is and will make us the company we are becoming. Let me move from people to places. Geographic diversification is an essential component of our strategy. Reinsurance capital may be global, but we still see important local dynamics driving pricing, terms, conditions and overall economics. The ability to shift our focus around the world based on market conditions is critical to maximizing returns. Everest has built deep benches of talent in key broking centers around the world. This gives us access to global, regional and local cedents. Today, we have cedents in 115 countries around the world. Through those relationships, we've built a diversified, high-quality portfolio. It's balanced. Almost half of our premium originates internationally. And we're actively seeking to grow our portfolio in markets around the world. One of those important growth markets is developing in Asia. Let's hear from Nitin Talwalkar, who runs our Asia business from Singapore. He'll share some insights about delivering the Everest value proposition at the point of sale.

Everest has an operation on the ground in Asia Pacific, and this gives us access to key markets in the region. Working in the same time zones, we can provide better same-day service to our clients and brokers. Our employees are from these markets and hence, we know the culture, we know the history and the language in order to transact. We have fully functional offices around the world with underwriting, actuarial claims and accounting expertise to service the needs of our local brokers and clients. With our local presence, we can respond to changing market conditions nimbly and deploy cover where we are getting best terms and conditions. One great example is a client who had reinsurance cover. But with a large storm coming through, they were concerned about whether there would be enough cover for a second storm. Within just a few hours, we provided different quotes, alternatives and solutions for the client to consider even before the international markets woke up. And within 24 hours, we had already bound the cover at terms and conditions, which were very attractive to Everest Re, but also provided tremendous value for the client. Due to the consistency in our offerings, clients and brokers have been loyal to Everest, which gives us a significant advantage over our competitors as many clients still prefer stability to a cheaper price. Being able to deploy significant A+ rated capacity gives Everest a seat at the table, where we may be able to influence price, drive changes to terms and conditions and also gives Everest the ability to lead programs globally.

You heard it from Nitin. Our model allows the team in Singapore to deliver Everest as a local company steeped in the Asia market. From people and places, let me turn to products. We're all living in a world that abounds with risk. The pandemic has only made that reality more obvious. Our customers are trying to navigate this landscape and grow their companies. We have the breadth of risk management tools and the appetite to meet them where they want to trade. The breadth, the financial strength and the underwriting acumen, everything I've shared with you over the last few minutes gives us a firm foundation on which we can build an even greater company. We're approaching this growth in 3 important ways. First, a focus on driving opportunistic growth in markets with attractive margins. We do not pursue top line for top line's sake. We do have the culture, platform and ambition to grow and grow meaningfully when conditions warrant. Second, continue to develop our third-party capital capabilities. At the center of this focus is Mt. Logan. We see significant upside to our Logan platform, and we believe we can grow assets under management, offer attractive economics to our investors and provide Everest greater capacity in the market without increasing retained risk. Third, data, analytics and innovation. We already have the world's best cap modeling team and tools. We're quickly building equally advanced analytics and contract assessment, risk management, reserving and performance monitoring. I can't perfectly predict the shape of the market cycle, but we're confident conditions will support strong growth at attractive margins for the foreseeable future. Our strategy is squarely focused on how we create value, the discipline to only write in profitable markets, the tools and capital solutions to fuel our growth. We have the ambition for this business. Let me turn it over to Chris Downey. Chris is the Chief Underwriting Officer for our reinsurance business and my right hand in running reinsurance. He'll walk you through the components of our go-forward strategy in more detail. Chris?

Thanks, Jim. The first driver in our reinsurance strategy is to profitably grow our book in the favorable market conditions we have in front of us. We're seeing strong opportunities in most lines of business and geographies. For example, in casualty, we're meaningfully growing our quota share book supported by the strong underlying rate improvements our core cedents are achieving. In property cat, we continue to see pricing improvements having just come off the successful June 1 renewal in Florida. In the facultative space, we've increased the overall division's booked by approximately 50% in each of the past 2 years. This growth has been broadly spread throughout the division. We expect the opportunity in pricing to remain strong into 2022, but we will still make the tough decisions to walk away from business when it's warranted. For example, this year, we significantly cut our U.S. crop portfolio because it was not hitting our hurdles. The risk environment faced by our cedents including the impacts of increased cat activity and social inflation is driving the sustained improvement in reinsurance underwriting conditions we see in front of us. Increased risk poses challenges to our company. However, we have a deep bench of experts in the fields of cat and risk modeling, underwriting and analytics. This enables us to translate this risk into tangible, high-margin business opportunities. Overall, our teams are executing with precision to maximize the economics of our book. This will mean top line expansion at increasing margins with limited increases in the company's risk profile. Now we'll hear from Melissa Ford, who heads up our Middle East and Africa portfolio, about how this translates into managing her portfolio on a day-to-day basis.

Everest has been a trusted reinsurance partner around the globe for almost 50 years. Our tenure and our high visibility in the markets where we operate has given us lasting credibility. We're well positioned to serve our non-U.S. clients and brokers through our offices in London, Bermuda, Miami, Sao Paulo, Singapore, Zurich, Dublin and Toronto. Everest's targeted efforts to establish and maintain relationships with trading partners throughout the world has provided us with a very broad opportunity set, yet it also makes us agile. We can shift our focus according to prevailing market trends, pricing terms and conditions, et cetera. We've developed an expansive toolbox, which enables us to write business across many product lines, including property, engineering, casualty, marine, surety and trade credit. And we can design deals using a combination of creative proportional and nonproportional reinsurance structures. So these broad capabilities are truly valued by our clients and make Everest more relevant. So having broad relationships with our clients spanning many lines of business, combined with the practice of deploying significant capacity, gives us added leverage to obtain preferential shares and pricing. I personally have been trading with some of the same clients and even with some of the same individuals in the Middle East and Africa for 25 years. Everest's continuity and stability as a business partner is truly desirable, particularly in emerging markets where new reinsurers enter and exit frequently. And when it comes to emerging economies, Everest's strategic development in areas with a growing middle class and low insurance penetration has us well positioned to pursue and seize opportunities when and where they emerge.

Thanks, Melissa. In all areas of the division, having a broad capability set across lines of business is critical. It enables us to shift the book based on market trends, pricing, terms and conditions, and makes us more relevant to our cedents and brokers. Moving on to the second driver of the reinsurance strategy, enhancing our third-party capital capabilities. These third-party capital structures put Everest at a distinct competitive advantage. With both Mt. Logan Re, our ILS management platform; and Kilimanjaro Re, our cat bond vehicle, we offer high-quality alternative investment returns to our partners. In exchange, we get access to efficient capital to support our growth. This provides meaningful capacity to our clients while managing the volatility in our book. We've built Mt. Logan into a close to $1 billion entity with a strong brand. We're committed to the platform and have ambitious plans to grow AUM. We are also the leading issuer of cat bonds in the world to our Kilimanjaro platform. This core capability allows us to extract strong economic returns from our property portfolios, while controlling the exposure to our capital. The third part of our Reinsurance division strategy is using technology to continually improve the results for our portfolio. I've been in the business for over 25 years, and the use of technology makes the way we work today almost unrecognizable compared to the past. Something that might have taken months 15 years ago, we can now do in a matter of hours. As a global leading reinsurer, we have a wealth of information that most of our competitors do not have access to. For example, we entered into over 13,000 deals last year alone. Core to the initiatives you see here is getting the most relevant data and analytics into the hands of the right people as efficiently as possible. The work we are doing will allow for a more robust decision-making process. It will further improve the margins in our business and ultimately will strengthen our competitive advantage. In the past several years, we have made great strides. Last year, we completed the final rollout of our global underwriting platform, Galaxy. This puts all of our underwriting departments under one system. This provides much cleaner, consistent data, more efficient processes and enables easier sharing of talent across departments. Looking forward, we're building out a data analytics platform across the whole of the enterprise. This will enable data-driven decision-making within the Reinsurance division. This will benefit every level of the organization from frontline underwriters to senior management. The digital reinsurance workbench we are developing will improve the efficiency of our underwriters. Rolling this out will link all of our underlying systems including underwriting, pricing, claims and document management. What this means for underwriters is the ability to have a complete view of their portfolio all in 1 place. This will increase the efficiency of the underwriters while again improving our data capture and accuracy. With that, let me pass you back to Jim.

Thanks, Chris. Our priority is running this business at a normalized low 90s combined ratio over the long term. That level of performance supports shareholder value creation and allows us to trade competitively in good markets. Sustaining that performance requires focus. We break that focus down into 5 areas. First, it's the daily grind of portfolio management, constantly responding to market signals to set appetite, pricing, terms, conditions, driving mix change, improving or exiting less profitable business, writing more where profits are healthy. Second, focusing our efforts on accretive growth opportunities in markets around the world. We're a market leader, but we have growth headroom in today's market. Third, nimble management of the underwriting cycle. We can't afford to wait for market shifts to show up in our historical results. We have the insights and expertise to anticipate market movement and the fortitude to act. Fourth, volatility management. You've heard it all day. We like taking risk, but only when we're getting paid. And we only take risks that are consistent with our balance sheet and our capital management priorities. Finally, our best-in-class expense ratio. It's not an easy discipline. But what we forego in hard markets, we don't have to carry in the soft ones. This is a daily exercise of prioritizing and doing more with less. We will invest in our business and take care of our people, and we will stay lean. We are incredibly bullish on our company and on the reinsurance business. We can grow, sustain and expand margins and control volatility. Our team has earned the position as the industry's preferred trading partner. To have exceptional talent leaning into strong relationships is a winning combination. We're trading locally on a global basis, delivering the value proposition where it matters most at the interaction among underwriter, broker and cedent. Mark shared with you earlier our confidence in our ability to grow reinsurance and to do it profitably. We have the ambition, and it's an ambition built on a whole lot of outstanding execution and thoughtful strategy, product breadth, underwriting discipline and exceptional balance sheet. Thank you. I will now turn it over to Seth Vance, Everest's Chief Investment Officer, who will talk to you about our investment strategy.

Good morning. My name is Seth Vance. I am the Chief Investment Officer at Everest. Today, I am grateful for the opportunity to speak with you, and we'll provide an insider's view of Everest's investment approach. As Juan mentioned earlier, our investment portfolio is an important component of our earnings at Everest. Given the nature of this earnings engine, we have adopted 6 guiding principles. These principles help ensure we stay true to the integrity of the group's risk appetite and the directive of our investment strategy. Our 6 principles are listed on the slide, 2 of which I would like to address immediately. First is diversification. Similar to our Insurance portfolios, diversification in the investment portfolio is very important to produce a stable income stream, achieve greater profitability, manage risk and reduce volatility. We exercise a disciplined approach to constructing and maintaining a diverse portfolio. Second is strong credit quality. Strong credit quality is a contributor to the portfolio's consistent performance. We have a very robust internal credit process and we ensure our portfolio maintains a AA-, A+ level of credit quality. As Juan noted in his opening comments, culture is very important to Everest, and our culture is consistent with responsible investing. I would like to highlight a few of the accomplishments to date in this space. First, we are a signatory to the UN-PRI and we have adopted their principles of responsible investing. I am happy to share we completed our first official reporting in March of 2021. Second, we no longer purchase bonds whose revenue from coal exceeds 25%. Finally, as you might expect, given the size of the Everest portfolio, we have numerous asset managers. We diligence each of them. We ensure a consistent investment philosophy, commitment and their ability to follow through. I am happy to report to you that 94% of our fixed income assets are currently managed by UN-PRI signatories. Managing a $25 billion portfolio is a significant responsibility, requiring expertise, prudence and integrity. The 1 portfolio, 2 investment strategies approach, which Mark explained earlier, is central to achieving our investment objectives. This approach defines a thoughtful, systematic process to delivering on the shareholder return objectives and ensuring stability and liquidity. Let's start with our core strategy. This strategy is comprised of investment-grade assets, sized and weighted to back our claims and reserves. The holdings in the core portfolio target our standard of match duration, high liquidity, solid credit quality and consistent stable income. The other part of our portfolio is our total return strategy, which includes alternative fixed income, public equity and private equity. This strategy is modeled, sized and managed to maximize our risk-adjusted returns, add diversification to the portfolio and efficiently utilize capital. You may ask how we divide the portfolio among these 2 strategies. We will accomplish this move organically, which combined with timely rebalancing, will allow us to seamlessly maintain our position on the efficient frontier. This path ensures a stable credit profile while exchanging a small amount of liquidity for enhanced returns. We expect this portfolio to deliver a return between 2.75% and 3.25% over the 3-year plan. Let's look closely at liquidity. The graphic illustrates 93% of the portfolio is either liquid or highly liquid. In addition, 12% to 13% of our portfolio converts to cash annually. This is due to maturities, interest payments and prepayments. These maturities are duration-matched to liabilities, which further ensures the timeliness of this liquidity. Combined these items with a substantial operating cash flows and other sources of contingent liquidity and the result is an exceptional capacity to manage liability side liquidity or even liability shock events. Let's look at the alternative fixed income strategy. Alternative fixed income plays a critical role in enhancing yields while maintaining strong credit quality. Approximately 1/3 of this portfolio is floating rate, which also provides a reasonable level of inflation protection. Given liabilities are already matched in the core portfolio, this portfolio has a limited degree of duration flexibility. The combination of duration and the nature of private markets combines to result in higher returns. We utilize structured rated investment alternatives, which allow us to maintain a strong credit profile while enhancing yield and efficiently utilizing capital. This alternative fixed income portfolio generates an approximate 200 basis points lift in yield as compared to investment-grade bonds of similar duration and credit quality. The second piece of our total return portfolio is made up of private equity and public equity. Private equity currently represents about 7% of our assets under management, and we intend to increase it to about 9%. We have done the due diligence and hard labor required to identify best-in-class managers, and we are prepared to make this move. Private equity has outperformed public equity for the last 15 years. It has reported volatility about 30% lower than public equity and increases the portfolio's diversity score. We invest using a disciplined vintage approach. Buyout, secondaries and co-invest are our primary focus, and we invest through proven Tier 1 managers. Given our size and strategy, you won't find us targeting the higher volatility cede capital, VC nor the lower-yielding leveraged products. We do expect double-digit returns in this asset class. Public equity currently represents about 5% of our assets under management. We generally take an indexed approach, especially with the large cap equity markets. In some cases, we do use proven active managers to generate alpha in the less liquid markets like small cap, mid-cap, EM or specific industry-focused areas. I believe smaller, less liquid markets, provide value-add opportunities for best-in-class managers. In less liquid markets, an individual asset selection and information advantages can translate into greater returns and alpha. Public equity also provides the advantage of liquidity, which can be accessed for numerous needs, including rebalancing or reallocation within the portfolio. In summary, investments is an important contributor to earnings. We adhere to the disciplined approach with the 6 defined guidelines. We invest in a single portfolio with 2 strategies: A core strategy backing our reserves and a total return strategy. The core strategy is strategically designed to be diverse, liquid and selected to generate stable income. Our total return strategy includes investing in alternative fixed income, public equity and private equity. This portfolio is designed to maximize risk-adjusted returns and add diversification. The combination of the core and total return strategies provides diversification, liquidity and represents a thoughtful stepwise approach to delivering on shareholder return objectives. At Everest, the investment portfolio is an important component of our earnings generating power. It will produce solid returns while seamlessly complementing our underwriting business. Thank you for your time. I will turn it back to Juan for final thoughts.

As I said at the start, and it bears repeating, we are forging a path forward that builds on our past and creates an even brighter future for our company and our shareholders. Everest is a unique franchise. We are 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 leading shareholder returns. We have the platform, the financial power, the talent, the focus and the commitment to succeed. Thank you for your time and for your interest in our company. I'll now hand it over to Jon to begin the Q&A.

Welcome back to the second Q&A session of the Everest Investor Day. We have the entire Everest executive management team assembled here and thank you to our audience for the many good questions that we've received. The first question, which we'll direct to Juan. Juan, how does the current rate environment factor into the growth plans as presented today?

Yes. Thanks, Jon. Great question. Look, we are forecasting anticipating that the current rate environment will last through 2022. But one thing that I would point out, though, is that rate is not at the cornerstone of our plan. Rate is certainly helpful. It's certainly helpful for margin improvement, et cetera. But what I would bring you back to is the growth that we have posted over the last several quarters has really been about 75% new business, increased shares on existing business as well as exposure growth that we've been seeing. Only roughly 25% of that really has been driven by rate, and that's across both Reinsurance and Insurance division. So again, while it's relevant, and we forecast that the current conditions will probably remain in place through 2022, it's not at the cornerstone of our plan.

Great. And if we could then ask the business leaders to provide some additional context on where they see the opportunities to grow. Maybe start with insurance, Mike Karmilowicz.

Thanks, Jon. So 6 years ago, we set out on a journey to build out obviously a world-class insurance franchise, really basically by delivering on a couple of things. We have the capability set, which I mentioned, a robust product set of 150 products, we have A+ paper, we have a global reach, and we have the best -- some of the best talent in the industry. So for us, it's about executing every day on that. Given what we've talked about, we have significant opportunity on market share because we're fit for purpose and there's a tremendous runway in front of us that we see across the globe. That said, if you think about 2 areas we're doing is one is scaling our business more effectively. We started to build out these franchise 6 years ago where we have 17 segments we've developed over the last couple of years that have only small market share and have a lot of headway to develop stuff. Secondly, we're also looking to build out and drive things geographically through expansion. We see you've identified a lot of areas, you've seen what we've done already with Lloyd's Ireland, Mike mentioned the Netherlands. We see, again, a lot of opportunity across many different geographies. So bringing that together, using all Everest has to bear, I think you'll see us deliver a really great outcome not just for the company, but for our customers as well.

Great. Thanks, Mike. And similarly, for Jim Williamson, thinking about reinsurance growth.

Sure. Yes, happy to get after that, Jon. I would take everybody back to the value proposition we described or that I described during my presentation, because that's really what fuels our growth. And it's really about having a culture and a business model where you have local experts making decisions who can engage our brokers that makes us a valued partner. We have a breadth of capability so that we can not only grow across a variety of products, but we can also solve risk management needs for our customers across that wide range. And then obviously, our financial capabilities and the fact that we could deploy significant capacity, be a lead reinsurer for our customers, I mean, those things ladder up to a value prop for a broker for a cedent that I think is world-class. And that puts us in a position to really select our opportunities in the market to grow. And as Chris had demonstrated during his presentation, you see there are a lot of those opportunities today. We have a lot of different ways to drive profitable, accretive growth, and that's what we're focused on.

Great. Another deeper-dive question following on the earlier Q&A session. In terms of the combined ratio targets, can the divisional leaders provide us with some context. I think we'll start with Mike Mulray of Insurance.

Sure. Thanks, Jon. So from our perspective, there's -- and Jim mentioned this earlier, in the earlier Q&A, there's a number of areas where we can expand margin. I'd highlight 3 or 4 of the key areas. First is to continue scaling. Mike mentioned that, but that's also going to drive operating leverage for a number of our businesses that are just getting to scale. So we see a tremendous amount of opportunity there. The second is mix. So we talked a little bit earlier in the presentation about cycle management. We've got a lot of products that we're working on, how we steer through different market cycles. So I think you're going to see continued improvement from the mix, and I highlighted some of that earlier. Then, the third piece is really a big part of what we're focused on as part of our initiatives right now, which is claims. How do we drive better claim outcomes? That's both a financial performance improvement, but it's also customer experience. I mean at the end of the day, that's the product they're buying from us, and we've got a significant amount of investment in the strat plan to help drive that. And then lastly, I would just add, rate continues to outpace trend, and that includes some upside as well. And look, candidly, you wrap around all that, that doesn't change what we do every day, day in and day out, which is driving underwriting actions and portfolio management because, as you heard earlier, we are an underwriting company. So that's another way we're going to continue to drive margin enhancement. And we've done that over the last few years, and you saw that in the earlier presentation. So we're going to just keep at it.

Great. And similarly for Reinsurance to Chris Downey.

Sure, Jon. We're obviously taking advantage of the current favorable market conditions in front of us, but that's not the only key to driving sustainable long-term margin improvement. Rate adequacy is critical. And we see across many lines that we're in, rate levels that we're very happy with, and we see that sticking around for a while. But another key is really the heavy investment we're making in data and analytics. That's really critical to allowing us to refine our portfolio, make sure we're moving capital to where we're seeing the returns the strongest, whether that's by geography, line of business, attachment point product. And with the financial strength that we have, with the long-term broad relationships we have with our cedents and our clients and our brokers, we have the ability to shape our portfolio to really take advantage of that and improve the economics in our returns.

Great. Thanks. We've gotten a number of questions, and this has been touched on a bit. But a follow-up for the business leaders. Loss cost trends and rate and how that's being taken into account in the plan and maybe start with Mike and Mike again.

Do you want to take that...

Yes, I'd be happy to take it again. I think it was touched on a little bit earlier, when Jim referenced in the earlier Q&A about the granularity of the ground-up business plan that we had built and how we're looking forward. So we factored into the way we're viewing the plan, both on rate trend, renewal retention, policies in force, how we had exposure. But as Juan mentioned earlier in the opening, our plans are not built on rates necessarily staying where they are today, right? So all these things are being factored in the way we're thinking. The other thing is why we -- from a robust process, we're always looking backwards to see what our analytics are telling us, but we're also anticipating things. We're trying to look forward and look -- peek around corners to make sure that we're factoring that into both loss cost expectations and the kind of rate that we need to drive to continue the profitability across the portfolio.

Great. Thanks, Mike. And similarly, to Jim?

Sure. Yes. And I would echo a lot of what Mike said in terms of the granularity with which we approached our planning process. We're definitely looking at every line of business, every geography, making sure we understand the trends driving loss costs. But I think what's important to understand, and it's crucial in Insurance and Reinsurance is rate is critical. Obviously, being in a good rate environment is very helpful, but it is not the only tool that we have to manage our business, and we don't sit around and wait for the market to deliver our results, right? So it's about portfolio management, it's about risk selection, it's about terms and conditions, attachment points, limits. All the things that we do every day to get a portfolio in place that can drive returns and be sustained, that's the core of how we run our business. And then, obviously, rate is helpful, and we would prefer to be in a positive rate environment, all things equal. But we don't wait for that to happen to get the results we want.

Okay. Great. Another question or series of questions we've had, and I think this is probably a good one back for Chris Downey. Looking at the reinsurance market, right, and with the ability of capital to continue to enter the market and not just NewCos, but ILS and other capital, it seems that rates continually remain under pressure versus some market expectations. How does Everest plan to increase profitability given this continuing dynamic?

Sure, Jon. Well, we've been operating in a highly capitalized industry for quite some time now. So the fact that new capital is coming in is not really a new dynamic that we're dealing with. Like I said before, our ability to see where the returns are, shift our capital to where we're getting the best returns, working with our cedents and our brokers to shape their portfolio is key. And the long-term relationship we have with those people allow us to make changes to our portfolio that other of the newer capital, smaller companies are not able to.

Great. A question back for the Insurance leaders, I think, for Mike Karmilowicz. Thinking about distribution, right? As the brokerage landscape continues to evolve seemingly every day, how would you comment on Everest Insurance size and scale and how you deal with the market?

Sure. So as you know, we've doubled our gross written premium over the last 5 years. What we've really done is taken all the things that Everest has to bear. By doing that, where I think Juan made the comment about taking the untapped potential of Everest, we're bringing that together today. So you heard from Marcus Cooper earlier talking about what we're doing on deepening the relationships we currently have. Also, expanding some of those relationships into other areas and more of that local presence. So you'll see us continue to expand. And we play in such other areas from retail to wholesale to the delegated authority, you're going to see us continue to gain more relevance and scale, not just here in the United States, but globally as well. So we're very excited because the runway, again, is tremendous for us. We have a lot of good people who are focused on bringing all of Everest together and basically delivering our customers the best experience.

Great. Thanks. We have a question or 2, and I think this is probably best directed to Anne Rocco and to Terry Walker. Given the discussions of operational and technology improvements during the presentations, can you give us some examples of how you're implementing this in the business?

Sure, Jon. I'll start and let Anne follow. We're very focused on automating and streamlining many aspects of our business processes with a very critical focus on underwriting and claims, our highest value, highest priority areas. For example, we're leveraging multiple advanced technologies like machine learning to automate the submission process, which is driving significant operational efficiency, providing underwriters with the ability to spend more time managing the business, working more closely with the brokers. So I do it as our practices are strong. They're emerging towards best-in-class. Recent years, we've received multiple awards for industry recognition associated with the capabilities that we've deployed.

Yes. And I think another good example goes back to what Mike Mulray was talking about and our focus on claims. We are centralizing and digitizing all of our claims correspondents and all of our first notice of loss intake. That allows us to put artificial intelligence and some sentiment analysis on to those portfolios to look at prospective severity and potential fraud. Then, we use additional automation to route it to where it's most effectively and efficiently handled in the organization. So that only gives Everest operational effectiveness but it helps to improve the loss costs, it helps to mitigate and reduce our loss adjustment expense. And really, it helps the customer experience because we're able to get back to them much more quickly with first contact, keep apprised of the status of the claim and ultimately pay those claims faster, quicker.

Thank you. And I think a follow-up first for Anne and then for Terry. Anne, there's a question or 2 about how is Everest transforming the way that we use data in our business?

Yes. Good question. So data and the insights that we're gleaning from the data to look at our portfolio, look at our prospective portfolio, look at risk and opportunity is really being put at the forefront of everything that we're doing. We have a sizable repository. And that's allowing us to look at our current portfolio, prospective risk, look at it globally. It also allows us to know our customers and those relationships better. So it's making it easier for cedents, brokers and customers to engage and transact with Everest. But I think the thing that's most exciting is all the model data. We're taking the model data, and we're really putting all those analytics right at the point of decisioning with our underwriters, with our claims adjusters. So we're taking those insights and making them very actionable. So I think that's pretty exciting for us.

Thank you. And a quick follow-up for Terry. We've had a question, how are we handling cyber risk from a first-party standpoint?

Sure. Sure. I mean, certainly, protecting the business from a cyber threat standpoint is a top of mind for us as it is for most organizations. We have a very strong formalized program in place that's been stood up for a couple of years at this point in time covering all aspects of the cyber landscape, ranging from policies to employee education, to accelerated rollout of advanced technologies, planning around how would we handle an incident if something occurred as well as our recovery planning. So a lot of activities that are taking place associated with that. In addition, we partner with a lot of leading-edge external firms to regularly test our capabilities, evaluate our capabilities. And then on a continuous basis, we're constantly looking at what are the emerging threats, trends, issues going on in the marketplace, comparing that against our program, adapting the program as appropriate against those emerging threats.

Great. Thank you. Question, I think, Juan I'll direct this one back to you. Can you provide an example of how the meaningful focus on DEI and culture has produced some real change at Everest?

Yes. No, look, this is something that's personal to me, but not only to me, I would say everyone on this executive management team very committed to making progress along this. Dana Lodge did a great job, I think, describing some of our high-level initiatives during the video presentation earlier today. But I can tell you that we have made tangible on-the-ground progress on all of this. And I would love for Gail to give some specifics on all of this.

Thanks, Juan. Our ability to attract, develop and retain diverse talent is very important part of our talent strategy. As an example, 61% of our recent promotions were to diverse employees. And in our early talent programs, 66% of the participants are diverse. We know that there is tremendous competition for talent in our industry. And the meaningful action that Everest is taking in this area is going to give us a big advantage. We are seeing real results as we continue to build a pipeline of diverse talent across the organization. It is critical to our success.

The last comment that I would add to that is that this is also critical to our culture. And this is something that we are committed to making ongoing and continuous progress throughout the organization.

Thanks. Question on ESG, and I think we'll direct this one to Sanjoy Mukherjee, Everest General Counsel. Sanjoy, clearly, Everest has made significant progress in ESG, third-party scores from -- have increased significantly in the past year. Can you give us some context on what's behind the improvement and where Everest plans to go from here?

Sure. Thanks, Jon. I mean, first of all, for us, ESG is a mindset founded in ethical principles that doing the right thing by our people, the -- our stakeholders and the communities within which we operate. I think of our ESG as the underlying ethos that underlies all the -- is the foundational ethos that underlies all that we do in Everest across all of our disciplines. The second element of ESG for us is communication. Communication is a key component of our ESG strategy. We spend a lot of time engaging extensively with our shareholders, our customers, regulators and the community leaders, listening to and addressing their concerns, while at the same time, we point out our accomplishments and our goals when it comes to diversity and inclusion, talent development, governance as well as underwriting with the respect for the environment, recognizing the realities of climate change and the associated risks with our -- to our global sustainability. You mentioned all the significant progress that we've made in the past 18 months in terms of our ESG disclosures and that's resulted in significant upgrades to our rating scores from MSCI, ISS and Glass Lewis. Our commitment to continue reporting under both the GRI and SASB frameworks has transformed us from a laggard in ESG reporting to being recognized as among the best in class by our shareholders. Going -- looking ahead, we will be reporting our progress in terms of our commitment to greenhouse gas emissions and tracking of carbon footprint, all in alignment with our TCFD reporting framework in 2022 as we strive to reach our goal of zero emissions workplace by 2050. I'd now like to ask, Seth, could you provide us with some insight on how ESG is being incorporated into our investment strategy?

Sure, Sanjoy. ESG is very important to us. And we're very careful about the investments we make in the ESG space. Specifically, we spent a lot of time ensuring they're consistent with our understanding of what qualifies as ESG. There are many investments being promoted in the marketplace today as ESG-friendly or green, which may not meet the stringent Everest criteria. One of the most important steps we've taken in this space is training our investment staff on how to evaluate ESG investments, specifically what to look for and how to analyze them. Additionally, we demand the same high returns from ESG investments that we demand from other things in our investment portfolio. And given the intense demand in the marketplace for these type of investments, you can imagine that this has made us become much more selective in what we invest in. Having said that, we have been successful. In fact, some of the most interesting investments we have in the developed world include clean energy, autonomous and electric vehicles and affordable housing. And in the emerging markets, probably the most interesting area is health care, and we also have some fintech as well.

Great. Thanks, both. Mark can't get away from some numbers questions. So there are a few for you here. One is that we hear about the high conviction from the management team on the execution and performance. Clearly, you've added some great people, new systems, et cetera. How much will this transformation cost? And how will it impact the expense ratio?

Well, we're focused very much on our financial target of profitability -- ultimate profitability and getting our combined ratios into a better spot. So I think as the business grows, we will be growing along with it in terms of our transformation capabilities and the evolution of our business. Ultimately, I see us kind of with 2 divisions here. We have Reinsurance and Insurance. Reinsurance operates with a very cost-effective general expense ratio. And we consider that to be competitive advantage for us, and we'll be focused on that continuously. So I don't see that focus changing. On the Insurance side, the model comes with a somewhat higher general expense ratio. And so, as we grow proportionately faster in Insurance, I could see the weighting of the 2 expense ratios changing somewhat, but all within this ultimate framework of achieving the financial target of the group.

Great. Thanks. And shifting from expenses, we've had a few questions on tax. Can you provide some comments on the current tax proposals, both in the U.S. and globally?

So I'll split that into 2 pieces. I think from a U.S. framework, the primary one that people have seen have been the corporate tax rate proposals of a 28% tax rate. And to some extent, you've got other aspects such as the GILTI tax and shield. Those, I think, would have a marginal impact on our global effective tax rate, probably 1 to 2 points at most depending on how these things play out over time. The global minimum tax, I think, is something that got a lot more headline press recently, but I don't think it's going to be an impact for us over the course of the 3-year plan. We're headquartered domiciled in Bermuda and Bermuda -- the Bermudian government has made very clear statements about their view of the global minimum tax.

Great. Thanks. And then a question on investments. In terms of the split between the portfolio allocation between how much supports the underwriting business and how much do you view as being linked to the total return strategy.

Yes. It's a fairly straightforward split. So in essence, the core strategy is -- has assets that are backstopping the underwriting liabilities of the company. So the reserves, the unearned premiums. And then the remaining investment assets are essentially part of the total return strategy, and that should be looked at really as the capital of the company.

Great. And Juan, I think appropriate for Juan, there's a question or 2 about management compensation and the alignment with this new strategic plan.

Yes, absolutely, Jon. There's great alignment between the targets that we're putting in front of all of you today and our own compensation. So even before these numbers were out, we had very tight alignment between our metrics as they relate to our annual operating plan. So we look at underwriting income, we look at operating income. We obviously look at growth and book value per share. We look at the total return metric that we just spoke about today. And we also have a component that is variable against our peers. And so, how do we -- how well do we do against our peers? So the bottom line is there's skin in the game here.

Terrific. And a bit of an open-ended question, and Juan, again, I think this is appropriate for you to start. Questions about, we're hearing a lot about the culture of the company, management structure, responsiveness and teamwork. It seems like it's all going very well. The question, I guess, is how can you maintain this culture and responsiveness as the company grows? And what does that mean for performance?

Absolutely. One of the commitments that we're making today is to keep the company nimble and entrepreneurial as we go forward. It's one of the reasons why we were so successful in the last 50 years, and it's what's going to drive us into the next 50. So for us, that's table stakes. Now the way we do that is through a very robust enterprise risk management framework and governance that keeps an eye on what we're doing, what we're writing and all the far reaches of the world that we operate but at the same time, is being able to be very clear on the underwriting authority that our local offices can get. So it's essentially a trust-but-verify model that you have within the company. And the data and analytics and the tools that we've recently put in place within our ERM framework give us a lot of transparency into what's going on in the world. At the end of the day, it's really about allowing our people to trade locally, develop those relationships, grow that business. But for us, here, to be able to have a pretty good sense of what we're writing so we can do what I said earlier today, which is dynamically allocate capital to the best economic opportunities that are out there. And because we are getting bigger, it doesn't mean we have to get bureaucratic. We got to maintain our agility and that's something that's easy to do for us.

Great. I would make a comment to say, when you think about talent, particularly culture, for us, it's endemic to who we are. So I talked about it earlier. Again, it's about really making sure from the ground up, this was something that was cultivated in our organization. So what's cultivated is honored, right? And for us, it's about taking that and developing that and driving the things we do. The one thing about the ability to be agile and nimble is our ability to power our people, which we've been doing very well. It helps with our customers as far as solving problems, but more importantly, it delivers when it matters most. So for us, all these things actually is all, again, what Everest has to bear.

Yes. I would add from a Reinsurance perspective, I mean, our business model is predicated on the culture that the company has developed. And as I showed in my presentation, right, we've grown a lot. So we've clearly demonstrated we could sustain the business model while also growing, getting bigger. And that business model starts with having local underwriters in local markets, working with brokers and cedents, empowered with authority. Yes, there's a risk management framework, as Juan mentioned that ensures that we're aligned to our appetite, and we're following good underwriting controls, but we want local teams making decisions. And we laddered the entire company up on that basis. So we can continue to grow. But we're not going to change that dynamic locally, which is what really allows our company to stay nimble, stay entrepreneurial, preserve the culture while still allowing us to scale.

Terrific. Well, we sort of reached the end of our time for this -- the second Q&A, and thanks to the management team. Let me turn it back over to Juan Andrade for any closing comments.

That's great. Thank you, Jon. And thank you to all of you for listening to our story today, for asking such great questions and more importantly, for your support of Everest as we go forward. We look forward to achieving all these profitable targets that we've laid out in front of you. And we look forward to additional discussion, the next time will be on July 29 through our second quarter's earnings call. So thank you.