Good day everyone. Welcome to the Second Quarter 2017 Earnings Call of Everest Re Group Limited. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Ms. Beth Farrell, Vice President of Investor Relation. Please go ahead.

Thank you. Good morning and welcome to Everest Re Group's second quarter 2017 earnings call. On the call with me today are Dom Addesso, the company's President and Chief Executive Officer; Craig Howie, Chief Financial Officer; John Doucette, President and CEO of Reinsurance Operations; and Jon Zaffino, President of North American Insurance Operations. Before we begin, I will preface our comments by noting that our SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that the statements made during today's call, which are forward-looking in nature, such as statements about projections, estimates, expectations and the like, are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investors should consider in connection with such statements. Now, let me turn the call over to Dom.

Thanks Beth and good morning to all. We're pleased to be able to report $246 million of net income for the quarter, which was $90 million above last year's second quarter. On a year-to-date basis, net income rose $210 million to $537 million. These results were primarily driven by excellent underwriting results of $130 million for the quarter and $313 million on a year-to-date basis, which includes $54 million of cat losses in the second quarter and $74 million in the six-month results. These results are improving year-over-year due to continued growth in premium, along with a lower combined ratio, due in part to lower catastrophe losses in the quarter. More important is the improvement evident in the Insurance segment, where we have an underwriting gain this year versus last. The attritional combined ratio for Insurance has now reached 93.6 for the quarter. The various growth and underwriting initiatives we have implemented are beginning to take hold. Overall premium is up $238 million or 17%, with growth coming from both Reinsurance and Insurance. However, on a percentage basis, Insurance is up 25%, while Reinsurance is up 14%. The growth in Insurance, which Jonathan will discuss in greater detail in a moment, is well diversified, coming from several new business units. We are extremely encouraged by the growth in all of our segments. In the Reinsurance businesses, while due to market condition, there are areas where we are contracting; there remains an array of opportunities in the credit and structured solution areas that are contributing to profitable growth. In addition, as John Doucette will cover in his report, proportional transactions, including crop reinsurance, are presenting profitable opportunities in today's market environment. The non-U.S. segments has also been a reasonable growth area for us more recently, as we have added resources there…

Thank you, Dom, and good morning, everyone. Everest had a solid quarter of earnings, with net income of $246 million, this compares to net income of $156 million for the second quarter of 2016. On a year-to-date basis, net income was $537 million compared to $327 million for the first half of 2016. The primary differences were unimproved underwriting result, higher capital gains, higher investment income, lower catastrophe losses, and lower foreign exchange losses compared to the first half of 2016. Net income included $50 million of net after-tax realized capital gains compared to $30 million of capital losses in the first half of 2016. After-tax operating income for the second quarter was $227 million compared to $134 million in 2016. Operating income year-to-date was $487 million compared to $357 million for the first six months of 2016. The overall underwriting gain for the group was $313 million for the first half compared to an underwriting gain of $234 million in the same period last year. All segments reported underwriting gains for both the quarter and on a year-to-date basis. The year-to-date combined ratio for the group was 88.3%, down from 90.7% reported in the first half of 2016, with lower catastrophe losses contributing to this favorable variance. In the second quarter of 2017, the group saw $54 million of current year catastrophe losses net of reinsurance. Of the total, $25 million related to wildfires in South Africa, $15 million related to U.S. storms in Colorado and $14 million related to floods in Peru. This compares with $124 million of catastrophes during the second quarter of 2016. On the year-to-date basis, catastrophe losses totaled $74 million compared to $134 million for the first half of 2016. Excluding the catastrophe losses, the current year additional combined ratio through the first six…

Thank you, Craig. Good morning. We are pleased to report another strong quarter with $126 million of reinsurance underwriting profit. The second quarter combined ratio improved to 87.4% from 89.9% in the second quarter 2016. The loss ratio improvement of 1.2 points to 60.2% was driven by lower catastrophe losses, offset by a 3.6-point increase in the attritional loss ratio. This was an anticipated outcome and was mainly due to the crop reinsurance book new this year as well as the increased property pro rata writings, offset by reduced attritional loss ratios on the international book. Total gross written premium for the second quarter was $1 billion, an increase of 14% compared to the prior Q2. This growth is due to several factors, but largely can be attributed to $54 million of crop premium associated with our strategic crop reinsurance relationship that resulted from the sale of Heartland last year. In our U.S. Reinsurance segment, second quarter gross written premium was up 17% to $475 million, driven by the new crop treaty and the impact of a large premium portfolio out in Q2 2016. The second quarter combined ratio in this segment was up eight points, primarily due to the waiting of crops and property pro rata earned premium in the quarter, with higher attritional loss ratios. While both lines have higher combined ratios, they maintained attractive ROEs due to their low capital consumption. The increased loss ratio was offset by a 1.5 point drop in the expense ratio, mainly due to lower contingent commission in the quarter. Our international Reinsurance segment second quarter gross written premium was $320 million, down 6% partly due to some large one-off deals with strategic clients written in the prior year. Net written premium for the quarter was down 3%, but up 7% on…

Thank you, John, and good morning. Our Global Specialty Insurance operations delivered a solid quarter of performance. The significantly transformed Everest Insurance platform continued to take shape, and the momentum we are generating in the market as a result, remains encouraging. The second quarter marks the highest level of quarterly gross written premium realized in our insurance operations history. The achievement of this milestone was a result of a highly diversified growth, generated from over 150 specialty products, despite no premium contribution from the now divested Heartland Crop portfolio. Importantly, this quarter build upon the underwriting profitability achieved in the first quarter of this year. Most notably, when compared to the second quarter of 2016, we achieved an excess of $30 million of improvement of underwriting profit. The many strategic actions executed upon since 2015 are beginning to take hold and evidence themselves in our results. Turning to the financial results for the quarter and year-to-date period, as in prior quarters, due to the divestiture of Heartland in late third quarter of 2016, I will discuss comparative results, excluding this business. For the second quarter of 2017, the Global Insurance operations produced $569 million in gross written premium, an increase of $164 million or 41% over second quarter of 2016, a tremendous result considering the challenging market conditions. On a year-to-date basis, we achieved $1 billion in gross written premium, again, another record performance. This represents growth of $240 million or 31% over the comparable period in 2016. Contributions were relatively balanced across most underwriting divisions. The significant addition of new products, which continued to gain scale, coupled with strong performance from our many existing product areas, namely accident and health in the quarter, contributed to this excellent result. This represents the 10th consecutive quarter of growth for our Global…

Thank you, John. Operator, we are ready to take questions at this time.

[Operator Instructions] We'll have our first question from Elyse Greenspan.

Hi good morning. My first question on the reinsurance growth, pretty strong growth again in the quarter. Last quarter, you guys have pointed to about high single-digits growth as the sustainable level that you saw at the time for the book. The second quarter was stronger than that, and I think part of that was probably due to the some of those property pro rata signings you pointed out. But how do you see -- I mean, the rest of the year trending just in terms of on the growth prospects of your Reinsurance business? Just based off how you so June and July renewals? And how you're thinking things through right now?

Elyse, this is Dom. I'll ask John to comment as well. As we mentioned and you mentioned, part of it was due to the shift to couple of new proportional deals which that earned premium and that will have an impact on the remainder of the year, so that will affect premium growth. And then also, crop the -- crop reinsurance transaction, which will also have similar impact on the remainder of the year. But absent that, the renewable seasons are pretty much over, other than we had in July 1. But again, most of the activities in the first half of the year in terms of renewals and new business opportunities. The growth areas for us though continued to be mortgage credit, structured solution and that's where -- absent the other items I just mentioned, that's where, frankly, the growth opportunities are and that our previous guidance on that in terms of growth. As you indicated, the high single-digit would still remain unless John has anything to add to that.

No, I agree.

Okay. And then in terms of the Insurance business, pretty strong growth and a lot of commentary that you guys gave. If the growth remains at 40%, do you think that based off of how you put it all together, that you could maintain an underlying margin in the low 90s? And one question I had, you did call out, Jon, convective storms of about two points, is that stuff that fell outside of your cat definition in the Q2? Meaning, the margin might have been better adjusting for that, I'm just trying to tie that together.

Yes, the two points that Jonathan referenced falls within the attritional number that he quoted. So, it's not -- in our vernacular, it's not a cat. There are cat events, but they don't get disclosed by us as a cat, where we quoted in our numbers as a catastrophe, it is in the attrition. And again, in terms of growth, I think we set for some time that we would anticipate an improvement in our attritional and we'll have those levels where we think it is sustainable. We have great diversification across the entire platform, so we're not dependent on any one line of business or any one product, which not unlike the reinsurance sector, enable us to increase our capacity or increase our appetite and those lines of business that we feel or giving us the requisite profit and return our capital, and deemphasize those class of business that are not. It doesn't mean we totally withdraw, but it allows us to shift our capacity around. So, several new business units and allows for greater diversity across the entire platform. Johnathan?

No. That's [Indiscernible]

Okay. And then one last question. Can you talk -- the losses in the quarter, you guys saw some losses in the South Africa and Peru, can you just talk about your exposure there? And what kind of returns are you getting in normalized years in both of those markets?

Good morning Elyse, Jon. So, we write a significant portion of our business outside the U.S. and have been strong in many countries around the world including those and we write -- in each of those countries, we have a strong franchise and an attractive book of business that we've been writing for many years. They would typically run in the 80s across the cycle. So, 80s combined ratio, it could go up or down based on cat activity.

Okay. Thank you very much.

Thank you, Elyse.

We'll go next to Kai Pan, Morgan Stanley.

Thank you and good morning. The first question is on -- follow- up on Insurance segment. The second quarter topline grows 41% ex-crop and margin improvement of 210 basis points, very impressive. I just wonder, you mentioned it's very competitive marketplace. Could you tell us a little more how exactly do you gain market share in the marketplace? And why, after improving your margin because I'm assuming if you grow very fast, you probably -- there are certain so-called, I don't know the terms, new business apparently apply to this line of business as well. Can you maintain the margin or even improve the margin going forward?

Kai, this is Dom. I don't necessarily agree with your assertion or assumption that growth comes -- with growth underwriting deterioration. As I just kind of described in response to Elyse's question, the diversification across many different product segments allows us to maintain our underwriting integrity and increase capacity to those lines of business getting adequate returns. We do think that we are improving our traditional, there still some improvement that we think we can garner particularly in the Property segment, remembering that the first half of the year. So, Property, as Jonathan pointed out, had a number of cat events, but also, as we described in non-cat events, adding two points of the attritional, and we anticipate that, as the year plays out, that we'll some improvement in those areas. So, we would certainly anticipate an improvement in combined ratio picture on the insurance side, again, coming from diversity, diversification most business unit, and products within those business units. And remembering that we are a specialty insurer, and we are not commercial. We're not into [Indiscernible] business or those areas that are subject to, in our views, some of the more competitive pressures in the marketplace.

I would just add to that Kai that there's really a couple of things here to remember. Number one is that we have doubled our underwriting staff over the last two years. So, we had a lot more boots on the ground, seeking profitable opportunities in the lines of business we have chosen. Secondly, we have launched literally dozens of products. So, to Dom's point about diversification across platform, it significant, it's coming from a number of different areas. To the point I tried to raise earlier, it's not -- growth is not linear across our platform, it's not all moving in lock step. There are several actions being taken still to try to drive a better attritional result. So, we're seeing now the effects of all those efforts that have happened over the last couple of years.

Thank you for the expanse answers. My second question on the Reinsurance side. You talked a little bit more about what caused the deterioration, 210 basis points, what are the moving parts? And you mentioned about the crop reinsurance, about property pro rata treaties. How much -- could you quantify how much each basically contributed to the year-over-year deterioration? And do you think that will be a normal stable run rate going forward?

Well, what the stable run rate. The attritional that we have on the reinsurance?

Yes, exactly. Yes.

Well, some of that is dependent upon what happens with future rate levels, right? And I don't know that we have all the details that could give you that. So, we do have some of it. So, growth in crop that have 4.6 point impact, we had -- some of the increase due to pro rata had an impact of approximately three points, so that will give you some indications on the attrition. That's what what's driving the higher attrition.

That's in the U.S. Reinsurance segment?

That's U.S., yes.

Okay, great. Last one--

On the international side, we had explained improvement in some of the operations there, Middle East, Africa, showing some improvement in the non-cat loss trend and that we had Bermuda site, we had an increased due to higher ERR on some of the treaty -- higher ERR picked on some of the treaties we've written. So, it varies across the entire portfolio. And the reason I kind of go through some of these in detail is reflect the fact that, it's what I said before, Everest has -- generally is an operational strategy, moves around various lines of businesses and I can't tell you necessarily what 1/1, for example, will bring us and we could change our portfolio again. So, it's little difficult to answer.

And Kai, this is John. Just to add a little bit color to that. And a lot of this is -- you also may be better to look at the year-to-date numbers as opposed to the quarter, because there's always going to be quarterly volatility just from large risk losses that happen, non-cat-cat events or weather losses that happen that that move these things around. So, we think the year-to-date attritional combined ratio is more reflective for the Reinsurance operation.

Great. Thank you so much. I probably back in the queue. Thank you.

Thank you, Kai.

We'll go next to Josh Shanker, Deutsche Bank.

Yes, good morning everyone. You guys have already surprised [ph] yourselves on expense ratio and expense management were not being much better than peers; to what extent you need to grow the Insurance business to be competitive from an expense management standpoint?

What do we need to grow the expense ratio to?

No, the overall volumes for your scale where you think you said that you cannot have a competitive run rate expense ratio better than peers?

Hi, Josh, this is Jon. I think we're there. Generally, I think--

You're there. You're there now.

We're there now. I mean, if you look at where we are year-to-date, I think that expense ratio compared to those who write the lines of business we do across the geographies we write them, I think it will stock up very, very well, in fact well above the pure average. Secondly, when you look at a lot of the activities that we have pursued, our investments have been all across our platform. We're equally excited about the investments we're making our claims department, our actuarial teams, technology, et cetera. So, I think we have a pretty good feel for the expenses that are coming into the system and against the earned premiums that we're forecasting. I think we feel pretty good about it.

Okay. And as you grow, obviously requires more capital, you're not buying back stock; you're using it to grow your business. Are you growing at the pace of excess capital generation or is that the limiting factor that you had more capital; you could grow faster or you growing faster than you're generating capital?

Our capital growth is kind of consistent with our premium growth. Our premium growth is -- we have sufficient capital for the growth that we've had for the first half of the year. If anything, our excess capital position has maybe just inched up a very little bit, but not enough to warrant that we would increase -- go back in terms of the short-term. We've purchased particularly at the levels that are stock of that today.

Okay. That's that. And thank you very much.

Thank you.

[Operator Instructions] We'll next to Mayor Shields, KBW.

Thanks. Good morning. Two really quick questions. One, is it fair to infer with U.S. Reinsurance that the movement to higher attachment point is limiting your exposure to what seems to have been really bad non-catastrophe weather?

Hi, Meyer, this is John. There's certainly some of that, that we -- and I think that you saw that last quarter as well, that some of the noise. So, in general, market losses of certain size are going to be more an Insurance loss than a Reinsurance loss. And I think, directionally, given what we've been doing with the book, it would mean that it would take larger, the real noteworthy headline cat losses and not just the things you see on TV with the good video images. It would really take larger ones to cause larger losses for us.

Okay. Thanks. And then broadly, I guess, this would be Insurance and Reinsurance. There's been a lot of commentary about sort of accelerating social inflation, are you seeing that? How are you booking that in your current accident effect [ph]?

I'll ask Craig to speak to that.

I'm sorry could you repeat the question?

Social inflation and its impact on our portfolio?

I think we always take a look at what the inflation is when we look at loss cost trend on the overall portfolio, Meyer. And we look at not only social inflation, but we look at everything that's going on claim inflation, social inflation. We look at the frequency and severity of the claims as they come through as well. But that's always part of our process as we go through picking our loss estimates.

And Meyer its John, just to add a little more. I think also there's no one simple one line answer to that. We have -- across the group, we have 300 IBNR groups in many lines of business, in many territories around it and what -- and how social inflation or claims inflation or other things like that are driving loss cost. It is dynamic, it varies. I would say though that we have spent a lot of time between feedback loops, between pricing actuaries and underwriters and reserving estuaries and the underwriting and pricing to make sure that we are thoughtful and how we think about that, and are able to respond to what we see as changing market condition.

And that's not something that's new to the industry. It's something that all companies have to deal with. And if you look at our reserving history, I think it demonstrates that we're properly taking those factors into account and establishing our reserve position.

Right. No, that's very helpful. I'm just -- I'm trying to get a handle on whether on the sort of simplistic trends or aggregate trends that we look at from the outside with anything material going on?

No, loss cost trend obviously have been rather tamed for a number of years. And it's a little tough to project when that social inflation for example kicks in, but general inflation, of course, has been relatively modest. Other than healthier trends, of course, which impacts [Indiscernible].

Okay. That's very helpful. Thank you very much.

Any -- I don't think we have any other questions on the call?

We'll go next to Kai Pan, Morgan Stanley.

Thank you for a couple of follow-ups. First one, there's on your Lloyd's business, recently there are some additional interest in the acquisition in the marketplace you're building your own, at this time, do you prefer build versus buy?

Across all of our businesses, that's our preference. It doesn't mean, however, that we wouldn't -- if something came across our desk that looked very strategic and could propel us to a different level more quickly and didn't have huge integration issues and/or legacy concerns, we would certainly consider it. And of course, if you're pointing to Lloyd's, but I would say that Lloyd's is a platform. It's not necessarily the entire strategy if you will. It's a platform that enables us to execute our Continental European strategy as well as outside of North America and Europe. And we can -- we have other areas that we are pursuing, our other platforms that we're considering again internal build that would enable us to move forward on those ventures.

Okay. Last one if I may for Craig, it's about tax rates. What's your normalized tax rate if you think about your budget level of catastrophe losses?

Well, we typically have looked at the range before Kai. When we look at our tax rate, we essentially go and we look at with and without catastrophe losses as you've heard us say in the past. So, last year for 2016, was a mild year for tax rates, but -- and we had a full year effective tax rate of about 10%. What I would say to you is, if we had no catastrophes in the year, in other words, more taxable income, that rate could go as high as up to 13%. But that would give you a relative range of where I would expect to be.

Okay, great. Well, thank you so much for your time and good luck.

All right.

Thank you, Kai.

That does conclude our question-and-answer session. I'll turn the conference back over to Mr. Addesso for any additional or closing remarks.

Again thank you very much. And thanks again to all for your participation this morning in the call and your questions. As we mentioned, the growth in the first half for us has been strong both Insurance and Reinsurance, but our first priority continues to be underwriting profit. That's why you see us continually optimizing our portfolio on the Reinsurance side, for example, as we change attachment points, increase pro rata, non-renewal certain layers, diversify into various regions, and rotate into other risk classes like mortgage, credit, or structured solutions. So, it is with an emphasis on an underwriting profit. In the Insurance segment, our underwriting strategy is a product specialty and diversification again, which is, as I said earlier, allows us to provide capacity to the most attractive areas and also clearly minimize the impact of any one line of business to the extent it reaches some difficulty. So, diversification and specialization remain cornerstone of what we do. And so for the reasons that I just mentioned, we remain optimistic that through the cycle, we can outperform the overall market. Again, thank you very much and I look forward to meeting with many of you in the weeks ahead. Have a good day.

That does conclude today's conference. Thank you for your participation. You may now disconnect.