Welcome to the Everest Re Group earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to turn the call over to Jon Levenson, Head of Investor Relations. Please go ahead, sir.
Good morning, and welcome to the Everest Re Group, Ltd. 2021 third quarter earnings conference call. The Everest executives leading today's call are Juan Andrade, President and Chief Executive Officer, Mark Kociancic, Executive Vice President and Chief Financial Officer. We are also joined by other members of the Everest management team. Before we begin, I will preface the comments on today's call by noting that Everest SEC filings include extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections, and similar are subject to the risks, uncertainties and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I turn the call over to Juan Andrade.
Thank you, Jon, and good morning, everyone. Thank you for joining us today. During the third quarter, Everest continued to make progress towards the strategic plan objectives detailed in the June Investor Day presentation. We achieved outstanding top-line growth across both our insurance and reinsurance businesses, continued to improve underlying profitability for our insurance segment, continued diversification of our reinsurance franchise, demonstrated strong expense discipline, delivered excellent investment income results, opportunistically reduced our cost of capital, and returned capital to our shareholders. We continue to execute our plans regardless of the external environment. Before I get into the results, I want to first acknowledge the human cost of the catastrophes in the quarter. For those people whose lives have been affected around the world by the wind, fire, floods, and earthquakes experienced in the quarter, these are life-changing events, and this is always top of mind for us at Everest.
As insurers and reinsurers, we are here as these communities work to rebuild, recover, and hopefully emerge even stronger. For Everest, this is when our ability to execute really matters. Turning to the results for the third quarter, the strength and resilience of our fundamentals continues to prove our strategy is working and our execution is on pace. As we shared during the June Investor Day, we measure our success against the three-year strategic plan with a simple goal, create value and drive meaningful shareholder returns over time. This starts by ensuring that our reinsurance and insurance businesses, supported by our investment portfolio, are doing exactly what we said they would do, drive forward momentum to fuel profitable growth. At our core, Everest is a growth company focused on sustained profitability with a well-diversified earnings stream.
Beginning with our insurance division, which delivered record-high quarterly top-line growth, marking the second consecutive quarter of over $1 billion in gross written premium and the lowest attritional combined ratio to date. We continue to prove our relevance in the market and our ability to execute. There's significant runway ahead of us to grow profitably, and we're capitalizing on it. We're well on our way to growing into the world-class specialty global insurer we've set out to be. Reinsurance delivered double-digit growth, and we continued to further diversify our book across lines and geographies around the world, a key part of our disciplined strategy to reduce volatility. This discipline was evident in the previously announced third quarter pre-tax net catastrophe losses of $635 million from Hurricane Ida and the July European floods, events totaling over $40 billion in industry-insured losses.
Everest is not immune to cat losses, but the cumulative, deliberate, and purposeful actions we have taken to reduce volatility have changed our company's risk profile. We have taken a disciplined approach to diversifying our book and reducing reliance on a single peak cat zone. For example, we have reduced our PMLs for Southeast Wind to almost half of what they were in 2017, from 11% to 5.9% of equity. We have scaled back our total property cat XOL premium, which comprises 17% of our total reinsurance premium today versus 26% at the end of 2017. Our book is better positioned and less volatile today than it was two years ago. We will continue to thoughtfully manage our risk profile to maximize returns. Turning to investments. Performance here was excellent.
We continue to optimize our portfolio and its earnings power as a key diversifier of our earnings. Prudent capital management is another important part of our strategy. Just after quarter end, we completed an opportunistic $1 billion debt raise at a 3.8% coupon. This is very efficient long-term capital. In addition, we continued to opportunistically repurchase shares throughout the quarter for a total of $200 million year- to- date. If the engines of our strategy are our core underwriting platforms supported by our investment portfolio, our transformation efforts focused on operational excellence and underwriting discipline are the fuel for those engines. During a quarter when the industry sustained meaningful losses from catastrophes, this discipline made a material difference in our financial outcome. It is about commitment to consistent execution and building a company for the long- term.
Throughout the third quarter, we saw the benefit of this commitment manifest in several ways. We continue to prove we can play offense in a favorable market to pivot and respond to changing market conditions. We're executing on a value proposition that continues to be well-received by our customer and broker partners. We have the talent and capabilities to deepen distribution relationships and diversify our presence in key markets around the world. We have established our purpose-driven culture as a differentiator. We also see it in the top industry talent who have joined Everest and who view the company as a great environment for development and opportunity. With that, let's dive into more detail around our results this quarter at the group and segment level. Beginning with our group results, growth in the third quarter continued to be strong and diversified across both of our businesses.
We grew gross written premiums by 25%, a barometer of our market relevance. The increase in premiums was a product of our ability to capitalize on improving economic conditions, driving exposure growth and new business opportunities, the favorable double-digit rate environment, and high renewal retention. The combined ratio of 112 includes $635 million of pre-tax net catastrophe losses from Hurricane Ida and the European floods during the quarter. The group attritional combined ratio of 87.9 reflects strong underlying profitability in insurance and our continued diversification and reinsurance, coupled with ongoing prudence in loss pick selection. Catastrophe losses during the third quarter resulted in an underwriting loss of $323 million. Net investment income for the quarter was again outstanding, up 25% to $293 million, and the expense ratio also improved this quarter.
The meaningful progress this quarter is not a sprint. It's about consistency day- by- day, quarter- by- quarter, being thoughtful and strategic about developing the portfolio, prudently managing expenses, and pursuing overall operational excellence. These actions all add up. The cumulative effect is evident in our year-to-date results, and a few are worth highlighting now. Year-to-date gross written premiums are up 24%. Our businesses continue to drive strong growth and momentum. We generated close to $1 billion in net income year- to- date. This is a testament to the earnings power of the company. Net investment income year- to- date has more than doubled from $420 million for the period last year to close to $1 billion today. Our expenses continue to improve, and the group attritional combined ratio is also trending better year- to- date.
Finally, for the nine months year- to- date, annualized total shareholder return on equity is over 13%. With that, I'd like to turn to the results in our reinsurance business. We had another excellent growth quarter in our reinsurance division, with gross written premiums up 19%. We strengthened the franchise through underwriting actions to create a more diversified, resilient, and lower volatility business. The growth was broad and diversified. Every geography and targeted line saw continued expansion in the quarter. The combined ratio of 115 includes the impact of third quarter pre-tax net catastrophe losses of $555 million from Hurricane Ida and the European floods. Our focused actions to de-risk our portfolio are reflected in these results. The share of our book exposed to cat losses has declined. Diversification is key because the severity and frequency of these events are a reality.
We see the impact of climate change in our data, and we take a proactive and scientific approach to how we model and underwrite for it. Our dedicated team of experts continuously assess the science and integrate its effect on loss costs into our models. This focus will continue to be a key part of our strategy. Our attritional combined ratio for the quarter was 87%, including an attritional loss ratio of 60%. Our attritional loss ratio reflects our deliberate and targeted shaping of our portfolio to maximize results. This includes a higher mix of pro rata structures and an improved balance of property and casualty exposures. These underwriting actions position Everest to benefit from the underlying rate increases and improving terms and conditions achieved by our core cedents in the primary market.
Combined with continued prudent loss picks, this results in a relatively higher attritional loss ratio, but with better long-term risk-adjusted returns on capital. As you know, the primary market has benefited from multiple quarters of strong rate improvement, a reduction in limits, and the strengthening of terms and conditions. Our strategy of focusing growth on core trading partners means we're benefiting from these effects alongside some of the industry's best underwriters, and we expect strong portfolio economics to emerge. Risk-adjusted return expectations are improving in every line and every geography. At the same time, we remain vigilant regarding market trends, including climate change, supply constraints, and social and material inflation. As a result, we continue to hold prudent loss picks. Finally, Mt. Logan Re continues to be an important part of our strategy, and we are thrilled to have brought in John Modin as its new leader.
Jim Williamson is available to provide additional details during the Q&A. Now for our insurance division. Performance continued to be strong, with exceptional growth and expanding underlying margins. In the third quarter, we wrote over $1 billion in gross written premium for the second quarter in a row and achieved the highest quarterly growth rate to date at 43%. The growth in insurance was fueled by a few factors. Number 1, we continue to seize opportunities from increasingly favorable economic conditions. Second, we continue to grow through new business and demonstrate our relevance to customers and brokers. Third, we're benefiting from strong retention rates. This, coupled with continued favorable double-digit rate increases, is creating the kind of opportunity Everest was built for and that we're poised to capitalize on. We maintain a strong focus on portfolio management as an important part of our strategy and driver of long-term profitability.
We continue to proactively position the company to play offense and react nimbly to market conditions by driving our business mix towards product lines with better rate adequacy and higher long-term margins. Renewal rate increases continue to exceed our expectations for loss trend, up 12% in the quarter, excluding workers' compensation, and up 8%, including workers' compensation, which now represents 12% of our overall portfolio with monoline comp down to only 7%. Rate increases were led by excess casualty, up 17%, and financial lines, up 14%. I've said it before, those who execute best in this business win, and the quality of growth in insurance and our focused discipline comes down to simply excellent execution. During the third quarter, we expanded attritional underwriting margins with improvements in loss and expense ratios.
This includes a 2 percentage point improvement in our attritional loss ratio of 62.9% and an improvement to 14% in the operating expense ratio. This resulted in the division's lowest attritional combined ratio to date at 90.3%, an almost four-point improvement over the same period last year. The underwriting loss of $17.2 million in the quarter was a result of the impact of pre-tax net catastrophe losses, including $80 million for Hurricane Ida. However, the year-to-date underwriting profitability shows the indicative strength of our portfolio and ability to execute. We have a long runway in front of us, and we're investing in the talent, the systems, and our worldwide capabilities to make us better, more efficient, and more relevant in the market. Mike Karmilowicz is available to provide additional details during the Q&A.
Reflecting on the progress we made against our long-term objectives, it is evident we're working with the right formula for success. Everest management team has the level of focus, deep expertise, and entrepreneurial approach to take us on our path forward and bring us even further. I am proud of the work we're doing, building on a strong, inclusive culture that is constantly delivering for our clients and for our partners, pushing the envelope in digital innovation and in our commitments as good corporate citizens. The opportunities are there, and Everest is well-positioned to seize them. Now, I will turn it over to Mark Kociancic to take us through the numbers in more detail. Mark?
Thank you, Juan, and good morning, everyone. Everest continued to make excellent progress executing its strategic plan and remains well on track to achieve its objectives. I'll discuss these topics in a few minutes, but first, a recap of the third quarter results. For the third quarter at 2021, Everest reported gross written premium of $3.5 billion, representing 25.3% growth over the same quarter a year ago. By segment, reinsurance grew 19.2% to $2.5 billion, and insurance once again reported gross written premium of $1 billion in the quarter, representing 43.2% year-over-year growth. Year- to- date, the group's gross written premium was $9.6 billion, up 24.4% compared with the $7.7 billion figure from the first nine months of 2020.
Turning to net income. Net income results for the quarter were impacted by the global cat events seen worldwide, particularly Hurricane Ida in the U.S. and European flooding in Germany and Belgium. As a result, for the third quarter, Everest reported a net loss of $73 million and a net operating loss of $53 million, equal to -$0.88 and -$0.34 per share, respectively. For the nine months ended September 30, Everest reported net income of $948 million and operating income of $795 million, equal to $23.72 and $19.87 per common share, respectively. Everest reported $635 million in net catastrophe losses during the quarter, as detailed in our October 14 earnings press release.
The manageable losses from these events are strong evidence of the material de-risking of the portfolio over the past few years that one described and as evidenced by our reduced PMLs. Importantly, these results were well within Everest's expectations from events of this magnitude and within our risk appetite. We also note that there is no prior period development in the cat losses this quarter. All are current accident quarter events. Beyond Ida and the European floods, there were a number of smaller events which did not breach the Everest cat event threshold of $10 million per event. Our practice for reserving for these smaller events is to include them in our attritional loss ratio estimates. As such, these events did not materially impact our Q3 attritional loss ratio selections.
I also note we have not added to our COVID-19 incurred loss provision, which remains at $511 million, with the vast majority remaining as IBNR. Third quarter results continued to reflect the impact of our underwriting and portfolio management initiatives. For the group, our underlying attritional profitability remained strong during the third quarter. Excluding the catastrophe losses, reinstatement premiums, prior year development, and COVID-19 pandemic impact, the attritional loss ratio for the group was 60.9% in the third quarter of 2021, compared with 59.3% in the third quarter of 2020. The year-to-date attritional loss ratio for the group was 60.6% compared with 60.2% a year ago, reflecting our overall mix of business shift to longer tail casualty lines.
The attritional combined ratio for the group was 87.9% for the third quarter, compared to 85.8% for the third quarter of 2020. Year- to- date, the attritional combined ratio for the group was 87.6% compared with 88% a year ago, as commission and expense ratio improvements offset the attritional loss ratio movement. For insurance, the attritional loss ratio improved 1.9 percentage points in the third quarter to 62.9% compared with 64.8% in 2020. The attritional combined ratio for insurance improved 3.9 points during Q3 to 90.3% as compared to 94.2% over the same period a year ago, given the favorable attritional loss ratio improvement and the reduced expense ratio.
Our U.S. insurance business, which makes up the majority of the book, continues to run very well with an attritional combined ratio in the high 80s. Turning to reinsurance, attritional losses in the reinsurance segment were largely driven by changes to the mix of business, notably proportionately more casualty premium, + 4.8% year-over-year. As a result, the third quarter 2021 attritional loss ratio was 60.2% compared with 57.5% a year ago. The attritional combined ratio for reinsurance was 87.1% compared with 83% for the third quarter of 2020.
The group's commission ratio of 21.2% for the third quarter was up 1 percentage point from 20.2% reported in Q3 2020, largely due to changes in the composition of our business mix with more pro rata property and casualty business, which has a higher commission ratio versus excess of loss. The group expense ratio was exceptional at 5.3% for the quarter and down a full point as compared with 6.3% a year ago. The expense ratio continues to benefit from our continued focus on expense management and the benefits of increased scale and efficiency from our operating model. For the third quarter, investment income once again produced an exceptional result of $293 million, as compared to $234 million for Q3 2020.
Alternative investments accounted for $170 million of income during the third quarter, largely due to increases in the reported net asset values of our diversified limited partnership investments driven by the continued economic and financial markets recovery. As a reminder, Everest reports limited partnership income one quarter in arrears, so the current quarter results are based on the valuations as of June 30. Invested assets at the end of the third quarter totaled $27.8 billion, compared with $27.1 billion at the end of the second quarter of 2021, and $25.5 billion at year-end 2020. Approximately 78% of our invested assets are comprised of a well-diversified, high credit quality bond portfolio with a duration of 3.3 years.
The remaining investments are allocated to equities and other invested assets, which include private equity investments, cash, and short-term investments. Our effective taxes on net income and operating income for the third quarter of 2021 were -16.2% and -21.4% respectively. The variance from our estimated tax rate of 11% for the year was largely due to the geographic distribution of income impacted this quarter by the catastrophe losses, which were primarily underwritten on our U.S. domiciled entities. For the first nine months of 2021, Everest generated $2.8 billion in operating cash flow compared to $2.2 billion for the first nine months of 2020, reflecting the strength of our premium growth year- over- year.
We also note that operating cash flow for the quarter was a record at approximately $1.2 billion. The Everest balance sheet remains exceptionally strong with ample capacity to continue to execute on market opportunities. Shareholders equity was just under $10 billion at the end of the third quarter, compared with $9.7 billion at year-end 2020. Our attractiveness as a counterparty was endorsed by the markets, as evidenced by the debt raise in early October. Everest issued $1 billion of 31-year senior notes at a very attractive coupon of 3 1/8, lowering our cost of capital over the long- term.
With this additional capital, Everest pro forma financial leverage at the end of Q3 is just above 20%, in line with our long-term target of 15%-20%, and we will manage our leverage within this range as we continue to optimize our capital structure through the course of the strategic plan. As with the offering from last year, we will deploy the proceeds into the business given the organic growth opportunities highlighted in our strategic plan and the current favorable underwriting environment. Everest repurchased 625,000 shares in the quarter for a total of $160 million. Year- to- date, the numbers are 791,000 shares and $200 million.
Quarter end book value per share was $253.40, compared with $260.32 at the end of the second quarter, resulting from $100 million in the change in unrealized gains and losses on the fixed income portfolio, driven by changes in interest rates, plus the quarterly net income result. I want to close with an update on our progress towards the Everest Total Shareholder Return or TSR target as detailed during our Investor Day. Through the third quarter of 2021, the TSR stands at 13.2% annualized on track to meet the three-year TSR target of at least 13%. The fundamentals of our long-term value creation plan remain strong based on the diversified set of earnings streams, reinsurance, insurance, and investments, along with an efficient capital structure.
We affirm our strategic plan assumptions and TSR target over the three-year timeframe as detailed in our June Investor Day. With that, I'll now turn it back to Juan.
Thanks, Mark. Operator, we are now ready to open the line for questions. We do ask that you please limit your questions to two or one question plus one follow-up, and then rejoin the queue if you have any remaining questions.
As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q and A roster. Your first question is from Elyse Greenspan with Wells Fargo.
Hi. Thanks. Good morning. My first question is on capital. We saw your capital return via buybacks pick up in the quarter. Can you just give us a sense of how we should think about repurchases from here? Is that dependent upon how market conditions evolve over the course of the next year? Then tying into that answer, can you just give us some commentary on how potential M&A would fit into any capital return decisions that you guys are making?
Thanks, Elyse. It's Mark speaking. We did have a pretty meaningful share buyback this quarter. That's pretty much par for the course. Given where we are with our strategic plan and the very strong growth assumptions that you see there, not much has changed. We're simply privileging organic growth as we develop our franchise with our capital. We see very good conditions in the market in both reinsurance and insurance. The capital management side is something we can do alongside that expansion. You'll continue to see share buybacks consistent with, you know, what we've done in the past moving forward, you know, as time moves on. Regarding the M&A-
Yeah. Let me address that, Elyse. This is Juan Andrade. Look, as I've said publicly before, M&A is certainly part of our toolkit. Now, we prefer to build our businesses organically, and we see great opportunities in the market right now to be able to do that, as evidenced by the growth rates that we have posted, not only this quarter, but really on a year-to-date basis. It is something that we look at, and if we find the right opportunity to advance our agenda and advance our business, we will certainly take a look at that. Our strategy remains primarily focused on growing our business organically.
Okay, thanks. My second question, on a written and earned basis in insurance, what's the gap versus loss trend right now? How much more does the book need to season before you would take down your loss pick?
Yeah. Elyse, this is Juan again. Look, I would say that, you know, we continue to see very strong double-digit rate momentum as we quoted in my remarks, +12% for the quarter. Essentially, every line of business right now, with the exception of workers' comp, is ahead of trend, and it has been for a number of quarters at this point in time. We expect that to continue. You know, the way we look at our reserving, and again, I think I've been pretty consistent about this since I started as the CEO here almost two years ago, is we're very disciplined. You know, as I mentioned in my remarks, you know, we are also cognizant of the external environment, whether it's social inflation, climate change, you know, CPI-type inflation and everything that's out there right now.
We do prefer to let things season over time before we take action and bring that down. However, you also saw in the insurance numbers this quarter the improvement that we made in the loss ratio, and again, this is consecutive to prior quarters as well. I would point to the fact, again, statements I've made in the past, that it's not only about rate, it's about all the management actions day-to-day in the portfolio, how we look at individual books of business, how we shape that portfolio, how we manage that, how we focus our attention or execution on lines of business that we believe have a higher potential for long-term margins. All of that is built into that.
Essentially, that is what you see reflected in the improvement in the loss ratio on an underlying basis for the insurance division.
Okay, that's helpful. Thanks for the color.
Sure, Elyse. Thank you.
Your next question is from Mike Zaremski with Wolfe Research.
Hey, great. Good morning. Maybe on the reinsurance segment first, please. Thanks for the commentary about the change in business mix. I guess just wanted to be clear. Should we be factoring in this kind of changing business mix in our as kind of a new baseline in our going forward in terms of kind of the higher attritional on some of the business you're putting on? It sounds like that's the read-through from the good commentary on the call so far.
Yeah. Thanks, Mike. Again, this is Juan Andrade. Let me start, and then I'll ask Jim Williamson to add some color. You know, to reiterate some of what I said in my prepared remarks, what you see happening in the reinsurance attritional ratio this quarter, loss ratio this quarter is really the result of deliberate actions that we're taking, right? Those are deliberate actions to accomplish really three things. Number 1 is to fully benefit from the strong market that we're seeing. You know, we're seeing rates in long-tail lines to be up, terms and conditions to have been improved, limits to have been shortened. As a result of that, we're growing in our pro-rata structures in casualty alongside some of the best underwriters in the primary market. You know, you see it in the supplement.
You know, our casualty pro-rata business was up 63% for the quarter. That's indicative of how we're playing offense and taking advantage of these market conditions there. The second thing for us that we're trying to accomplish is really this is part of our deliberate strategy to reduce volatility and diversify our book opportunistically into lines of business that we believe can deliver strong risk-adjusted returns. That's the other part that you're seeing there right now. It's us purposefully moving our book of business in a direction that we believe will give us long-term risk-adjusted returns on capital that are quite attractive.
The third part of it, and this is related to the answer that I just gave to Elyse, you know, again, as I've said from the beginning, we are a disciplined underwriting company, and we do maintain prudent loss picks in light of the external environment. What you are seeing is that, you know, particularly the long-tail lines will carry essentially higher loss picks than the short-tail lines. As we move that business over, this is the end result that you will see, but with an outcome that we expect to return at much better margins in the future while reducing the volatility of the company.
The bottom line is we feel very good about the portfolio that we're creating right now and the embedded margin that we're creating, and we also feel very good about this being able to achieve the targets that we laid out on Investor Day and that Mark just affirmed.
Yeah. Mike, this is Jim Williamson. The only thing I would add to what Juan had said, and really only to add some additional color, is, you know, we obviously are very close to our core cedents who are driving the really strong growth that we've had in areas like casualty pro rata. When you unpack their results in terms of what they're seeing from a rate change perspective, their ability to reduce limit profiles, to improve terms and conditions, these are not subtle changes. These will have a dramatic impact, obviously, on the quality of the book that we have today, and we're very excited about that. Our expectation is that those conditions will persist. We want to continue to partner with those core cedents as they move through this market.
The last thing I would add, obviously, is we remain very flexible, and where we see good, risk-adjusted returns, we're absolutely willing to shift our mix, quarter- to- quarter, year- to- year, and, we will, retain that flexibility as we move forward.
That's very helpful. Just one follow-up. With this business, since, you know, it sounds like it's gonna result in the near- term, and obviously, I don't want to be just focused on the near- term, but in a slightly higher attritional loss ratio, is it more capital efficient too, in that you can write more business versus the rest of the business? Or really should we just be thinking this is just better long-term business and eventually it'll probably come through over time in a better combined ratio in outer years?
Yeah, sure, Mike. This is Jim again. Look, it is something we keep a very close eye on. We have a very disciplined capital allocation process within the company. For every line, we're continuously referencing back to how various lines of business consume capital and our return on those lines. But this is not about trying to maximize top line. Well, it's not a strategy related to that. It's really about pursuing best risk-adjusted returns. In the market environment that we're moving in, we see a lot of excellent opportunity in the casualty lines. It's about the pursuit of good bottom-line performance, about good consistent results, about achieving our long-term strategic ambitions, and about managing the volatility of the group.
Those are really the decision factors that are driving, you know, the growth that we're seeing in casualty.
Yeah. Mike, I would just add to that. Look, this is part of when we talk about execution, this is a proof point, and this is exactly what we're talking about, that we identify an opportunity, we identify a core group of cedents that are driving this forward in a very positive way, and we see the economic benefit that can result for the company by partnering up with them. This is how we're driving our business forward.
Understood. Good color. One last follow-up. Given a lot of change in business mix and some new management team members, I think historically there's been more it looks like true-ups on reserves at the end of the year in Q4. You know, is that something we should be thinking about? Is there some type of kind of seasonality we should be thinking about as the back half of the year, the back quarter of the year?
Yeah. Mike, this is Jim again. Thanks for the question. One of the things that we've talked about in the past is the work we're doing to continuously improve our approach to reserving. One of the changes that we've made coming into this year is we've rebalanced our reserve study calendar to move away from having so much activity in the fourth quarter. Year- to- date, we've completed about half of the number of reserve studies that we plan on completing for the year. As we do every quarter, you know, we're reviewing the results of those studies and we'll continue to do that.
It's absolutely something we're changing over time, and I think you'll see us continue to make progress in the next year to create a more balanced level of activity across quarters.
Thank you.
Thanks, Mike.
Your next question is from Mike Phillips with Morgan Stanley.
Thanks. Good morning, everybody. Let me start first question on the ILS market. Anything you've seen there from fund managers in terms of just changing appetite to continue supply, given what's been a pretty tough last couple of years and certainly this quarter?
Yeah. Thanks, Mike. Let me start, and then I'll ask Mark Kociancic to add his point of view as well. Look, I think definitely what we're hearing from investors, particularly post Ida, and post the floods in Europe is, you know, basically a bit of a concern about the catastrophe activity that's out there in the industry. You've also seen the fact that some of that money has moved more towards the cat bond market and towards very much higher up in structures. And there's still appetite there. As a matter of fact, you know, we saw a lot of capacity and attractive pricing, again, at the higher levels and at the higher attachment points, etc .
I think in general terms, I would say you probably are seeing a little bit of concern right now in the ILS market with some of these investors. I would ask Mark to also add his perspective on this.
Yeah, it's clear we've had, you know, underwhelming performance, to say the least, over the last few years in terms of cat activity. The impact of climate change, I think, is something that is still trying to be understood by the market in general. You've had examples of trapped collateral, and so I'd say that's somewhat slowed the inflow, you know, based on this recent history that we've seen. You know, look, today's losses, I think make more loss pricing. I see this as kind of a cycle that will work its way out as information becomes clearer, terms become better, and the volatility starts to reduce as a result of that better information entering the models.
Mike, I would finish up by saying this also creates an opportunity for rated carriers like us. You know, the reality is there's gonna be a lot more demand for companies with the financial strength and the ratings like Everest to continue to write business going forward. While there has been maybe more of a muted concern that we're hearing, on the other hand, it also presents an opportunity for us on the front end.
Okay, thanks, guys. Appreciate that. My second and final question. Juan, you mentioned you're still seeing pretty good pricing in insurance ahead of loss trends. Can you say what you're assuming in casualty loss trends in your pricing?
Well, it's typically not something that we have disclosed publicly, but what I can tell you, Mike, is that we review this on a quarterly basis. I think as Jim was basically talking about, this is really part of the analysis that we do every day or every quarter. You know, we true this up for everything that we're seeing from the perspective of social inflation, that we see from the perspective of what we're seeing in wage inflation out there, etc , etc . We try to stay very much on top of that.
Okay. Thank you, Juan.
Your next question is from Ryan Tunis with Autonomous Research.
Hey, guys. Good morning. First question, just thinking about your guidance for 7% cat load. The average cat load over the past five years has been 15%.
I'm just curious, you know, why do you still think that that's a prudent best estimate?
Ryan, it's Mark answering here. Obviously, our cat budget and our cat planning exercise within the operating plan is modeled out based on expected losses. Clearly, there's been substantial volatility over several of the years, not all of them. Last year was a bit more modest, actually below plan. The 7% is how it works out mechanically between reinsurance and insurance. Having said that, we have taken our cat portfolio and reduced its risk profile over the years since essentially since Harvey, Irma, Maria back in 2017. That de-risking that we've taken has been quite conscious. Alternatively, the group, and I think you saw this highlighted during the Investor Day, is really expanding in other non-cat lines of business.
I would expect Everest going forward, whether it's reinsurance or insurance, to continue to de-emphasize cat as a significant driver of premium and profit. It's still a meaningful and attractive risk despite the volatility.
Got it. In reinsurance, it sounded like you didn't have to change your loss picks because of the, you know, the cats that didn't meet the $10 million threshold. Should we think about that as a more likely outcome in the fourth quarter, just given the pace of the activity we've seen year- to- date, is there risk that there could be some loss to change for Q based on weather activity?
I just wanna make sure I understand your question. Are you wondering if our Q3 events that were smaller in size are gonna bleed into Q4? Or are you questioning what's happening in Q4?
No, I mean, my understanding was that you guys have, like, a loss pick budget for those attritional-type losses. I was wondering if maybe you hadn't exceeded that yet, but maybe you were close to. That might not-
Oh, I get it.
That might not be-
Yeah. Yeah. Okay. Look, in Q3, there were several other cat events globally. They were relatively small for us. I highlighted in my opening remarks that, you know, our cat threshold is $10 million, and there were a few that fell underneath that. Those were easily absorbed into our Q3 attritional loss ratios. I don't expect any, you know, development from there going into Q4.
Got it. Just one other thing I was curious about is, you know, from a reinsurance perspective with property cat treaty, when you have a storm like Ida, I'm just looking for some perspective here. You know, how many treaty claims do you have? Is it that most of that loss is in, you know, five claims, or are we talking about 70 or 80 treaties or just directionally trying to understand, you know, when you get losses like this, how concentrated is that in individual cedents?
Yeah, Ryan, this is Jim Williamson. I mean, look, what I would say if you're talking about an event like Ida, you know, you're definitely gonna see losses across a large number of cedents. I think that's to be expected. Then, you know, a bit of an obvious statement, but, you know, really big cedents who have larger exposures will drive, you know, a meaningful portion of the total loss. But this was a pretty broad event, and particularly as it related to, you know, a major impact followed by, you know, a smaller flooding event. It's gonna, I think, you know, carry a fair number of cedents into, you know, loss activity.
Yeah. The one thing that I would add to that, Ryan, is, you know, think about the geographic scope of the storm, you know, making impact in Louisiana, extending through the Mid-Atlantic and going up into the Northeast, all the way along the way. This is Juan Andrade, by the way. So you're gonna have different actors, right? So you're gonna have some regional cedents, particularly in the Gulf States, and then you have some of the national carriers who are impacted both in the Southeast as well as the Mid-Atlantic and the Northeast as well. So I would say it's a mixture of that, basically.
Thanks, Juan.
Sure.
Your next question is from Meyer Shields with KBW.
Small question and one bigger picture. Small question is, did the attritional loss ratios in either reinsurance or insurance include any adjustments to the first half of the year?
Meyer, this is Jim Williamson. No, there were really no material adjustments related to activity that happened earlier in the year. It was really reflective of the third quarter activity.
Okay. Perfect. I know we're all sort of focused on cat, so I wanna ask this question in a slightly different way. With S&P sort of rumbling that they're going to possibly increase capital requirements for cat because the industry might be underestimating it, and given the apparently high possibility of, call it above average losses for the year, how important is it to the Everest strategy to write any property cat at all?
Let me address that, Meyer, because I think that's a fundamental question. Look, we are in the property cat business. We're also mindful that the external market conditions have changed over time, and they have changed for a number of reasons, right? You know, you clearly have the impact of climate change, as we've discussed, that has manifested. We certainly see the impact of the ILS market that basically, I think, has muted the size of the rate increases that you see post-events like Ida into that market. While we see it as an attractive line of business, we also see better returns in other lines of business going forward.
It's part and parcel of the reason why we have been on this de-risking journey that we have continued to talk about to essentially change the profile of our company. All of that is in our minds. You know, we are students of the environment. We are students of the science. We're also very disciplined in how we look at our portfolio and how we allocate capital between lines of business. This brings us full circle back to the question that Elyse and Mike Zaremski asked earlier in the call, right? It's one of the reasons why you see us basically growing in the casualty lines of business at this point in time. It's definitely part of the equation. It's definitely part of the strategy as we conceive our plan and we drive the company forward.
Okay. Understood. Thank you very much.
Sure, Meyer. Thank you.
Your next question is from Brian Meredith with UBS.
Thanks. A couple quick ones here. First one, I'm just curious, can you talk a little bit about how the current inflationary pressures that we're seeing, economically, you know, impact your business and does it influence your loss picks? On top of that, maybe add a little bit on your view of the total inflationary environment right now. Are you seeing any increase as courts reopen at all?
Yeah, sure. Let me address that, Brian, and then I'll invite both Mark and Jim to also add their points of view on it. Look, I think it's important to recognize what inflation means to the industry versus what we see in the CPI index and the headline news that's out there. I think it's undeniable that we are in a period of inflationary pressure from a purely CPI perspective. You see it in hard goods, you see the upsurge in demand, the restriction in supply that's going on up there, and you definitely see a part of that. It's manifested in used car values, in chips, in all of these things that are out there, basically. From our perspective, you know, we monitor from the asset and the liability side.
On the liability side of our balance sheet, we're specifically focused on wage inflation and also on healthcare inflation, the cost of medical care, basically. Those are critical things that we watch very carefully. Now, your question on how that translates into how we think about loss picks, etc , is excellent because that is part of the analysis that we do on a quarterly basis when we're looking at our loss picks, and frankly, when we're doing our bridging for future year plans and when we're doing our reserve studies, et c, and we try to build in those inflationary pressures into our numbers. It's one of the reasons why, you know, we keep pushing for pricing and why we believe that this pricing environment will continue for at least another year, if not longer, for the longer tail classes of businesses.
The other thing that's important to recognize is that also on the liability side, there are some mitigants in the book, right? If you think about exposure rated lines like general liability, workers' compensation, etc , those will rise also with the impact of inflation. There's some hedges that are built into that. The primary hedge for us is how we look at our loss picks and how we do the analysis on a quarterly basis. When we look at the asset side of the balance sheet, that's also how we position our portfolio to make sure that we're as fireproof as possible and why we maintain the liquidity that we do. Let me ask Mark to add some commentary on the asset side, and then I'll invite Jim Williamson to talk a little bit more on the liability side.
Yeah. Brian, it's Mark. Look, on the asset side, this is something we think about because it's unclear how permanent or transitory the inflationary pressure that we're seeing and is gonna be going forward. We've got our portfolio, the asset portfolio positioned such that we think it can react you know reasonably well versus a high inflation environment. There's a high degree of liquidity as well that augments you know the kind of cash demands that you would have in a high inflation scenario. We benefit from you know shorter term asset duration and a relatively short duration on the liability portfolio, plus a significant amount of assets exposed to equities or floating rate debt, which should be you know somewhat immunized in a high inflation environment.
The other piece that I'll add, maybe before Jim steps in, is we have stressed the liability portfolio for different inflation scenarios and to see how it would perform and our ability to absorb it. That's something we do in addition to, you know, the reserving side, the assumptions, etc , is to see how it can perform in different types of environments.
Yeah, Brian, this is Jim Williamson. I'll just address the second part of your question related to any bounce back that we may be seeing in our data related to the reopening of courts and frankly, the reopening and growth in the economy. I think there is a degree of bounce back occurring. We certainly see it in areas like liability frequencies. We see it in medical utilization. It's not a tremendous effect, but it's also, I think, feeds into the rationale for being very consistent in how we set loss picks and not over-responding to some of the good news that has come through in our data.
You wait for that to mature so that, you know, some of these transitory items like a bounce back in activity, you know, have time to play themselves out. That's very consistent with our approach around loss selection.
Makes sense. Thanks. My second question, one, you've talked about growing your insurance business internationally. I'm just curious, do you have the platform right now to actually, you know, really see some good growth there, or are there some areas that you need to expand either organically or inorganically?
Yeah. No, I think it's a little bit of both. You know, we are very focused right now on the next step of our journey on the primary side of our business. I think we've done a very nice job growing it in the U.S. specifically over time, and we see significant overseas opportunity, right? The reality is that, you know, the market is quite big, and it's also a diversifying opportunity. One of the things that you learn over time is that emerging markets and developed markets move at different rhythms. When developed economies are down, emerging economies are up, and it's a good diversifying hedge from that perspective, in addition to the insurance market opportunity that's out there.
You know, right now we have a company out of Ireland that allows us to do business in the continent of Europe. We have our Lloyd's Syndicate, and so we're able to utilize it as a platform for expansion in Europe and in the U.K. When you start thinking about expansion into Latin America and Asia, you are thinking more of a greenfield type opportunity at that point in time. Our plans are very much in motion right now to be able to grow that business organically. It also goes back to the question that I was asked earlier in the call as to how does M&A potentially fit into all of this. Our strategy is organic, as I said, but we're also mindful of any opportunities that may help to accelerate our progress as we move forward.
Makes sense. Thank you.
Sure. Thank you.
Your next question is from Joshua Shanker with Bank of America Securities.
Yeah, thank you very much for taking my question late in the call. Growth obviously is very large in the insurance segment, particularly professional lines and specialty. Every line of business grew, including workers' comp, which you cited as being slightly below trend, I guess, in terms of performance. Given what we're seeing, pricing, you know, certainly isn't up yet in workers' comp. Can you talk a little about the growth in workers' comp, which wasn't tremendous, but it was still growth in a pricing environment that may not be particularly favorable?
Sure, Josh. Thanks for the question. This is Mike Karmilowicz. Yeah, the growth in comp is. There's a big part of that, the exposure change that's coming from just the payrolls and obviously people going back to work. The other piece to keep in mind is a big part of our business that's been growing has been the loss ratable and loss sensitive business on the risk management side. We continue to do the same thing we talked about as being very disciplined around our monoline guaranteed cost comp. Again, most of that growth is just coming from specifically the overall exposure change.
Yeah. I think, Josh, what I would add to that, again, is keep in mind what we've said in the past. Not only have we deprioritized the growth in workers' compensation for what we've said and what you've pointed out in your question, but within workers' compensation, our focus has really been more on the loss ratable risk management type business where we can actually get better pricing than the monoline. That's one of the reasons why in my prepared remarks, I emphasized the fact that while comp overall is now down to only 12% of the portfolio, monoline is down to only 7% of the portfolio, right? It's important to understand that nuance within comp at the same time.
Thank you. This is maybe a bit cheeky, but you raised the debt and you had Ida and you bought back stock. I know you said that your preference is to grow organically. Can you talk about when you bought the stock in the quarter? I mean, maybe I'm trying to get a little sense of appetite more so. Was it after Ida? Was it before Ida? Was it after the capital raise? I guess I'm looking for a little color there.
Yeah, both before and after. At the beginning of the quarter and also in September. If I could just add, Josh. Sorry, it's Mark speaking. If I could just add a couple of points. We made it pretty clear during the Investor Day that we felt we could get a more efficient capital structure, and part of that is increasing the debt leverage of the company into a 15%-20% range. When you look at the kind of print that we got, the 3 1/8 coupon, that's very low long-term capital cost.
For us, the combination of, you know, issuing the debt and using that to fund future growth expansion is really a function of providing a lower cost of capital for that organic growth, in line with, I think, what is a more conventional capital structure with something closer to 20% debt leverage. I think the share buybacks, that's really, you know, look, a function of our confidence in our business. I wouldn't read too much else into it. The volatility that we had from the cats is something that we expect in this business. It was very much in our risk appetite. It never dissuaded us from any kind of capital management actions.
We move forward here with a lot of confidence, and that was one of the points I was trying to make towards the end of my monologue, you know, regarding the affirmation of our plan assumptions, the target and the path that we're on. We feel like there's an excellent opportunity in front of us. We're built for it, we're executing, and there's a lot of momentum.
Well, I appreciate all the clarity. Thank you very much.
Great. Thanks, Josh.
There are no further questions at this time. I will now turn the call back over to management for closing remarks.
Thank you all for your questions and the excellent discussion today. I'll wrap up today's call by reiterating our confidence in our ability to continue fueling profitable growth, seizing the opportunities before us, and advancing our strategy. The goals that we've outlined are ambitious, but we've already made material inroads on our path forward. We're making investments in our talent, our culture, and our capabilities because we believe those are the ones that will help us drive superior shareholder returns. I'm bullish about the future of Everest. Thank you for your time with us today and for your continued support of our company. I look forward to seeing you all again to discuss our fourth quarter and year-end results. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.