Stock Spotlight: Everest

FILMED IN JUNE 2025

C.T. Fitzpatrick favours Everest Group for its disciplined capital allocation and underwriting, seeing long-term value in this global insurance giant at the heart of a $4 trillion industry. 

Transcript

Everest Group is a leading insurance company. They provide reinsurance and also primary property and casualty insurance around the world. The company's primary policies are policies that you and I might have — a homeowner's policy, a policy for a business.

On the other hand, reinsurance is interesting. Reinsurance is insurance for insurance companies. You might think about the recent wildfire in California. If you're an insurance company based in California, and you have a lot of exposure to that one particular geography and that one particular risk, you might want to offload some of that risk by buying reinsurance to protect your downside.

Everest provides insurance to people and businesses, just like a regular insurance company, but also insurance to insurance companies, through the reinsurance subsidiary. Everest Group provides insurance, which allows businesses and people to reduce their risk.

You know, that sounds kind of mundane. It's kind of straightforward, but there's a huge economic impact. Businesses are able to take risk, create jobs, by insuring certain risk to their businesses. Also individuals who are able to do things like have homes at the beach, say, where a hurricane might come. It would be catastrophic to that person if their home was destroyed in a hurricane or an earthquake or a wildfire. But through reinsurance and insurance, they're able to enjoy a higher quality of life at a much lower cost with a lot less risk.

Insurance is an enormous market, and the areas in which Everest Group competes — the market is approximately $4 trillion dollars today. We estimate that that market is growing at an upper single-digit rate. As prices go up, we can see inflation around the world. And also as new types of insurance are developed, and people acquire more insurance as economies develop. So, it's an enormous market and growing at a very nice pace.

Insurance is an inherently cyclical market. Some companies are very disciplined in their underwriting and will write more aggressively when markets are hard — that is, pricing is good — and less aggressively when markets are soft, when pricing is not very good compared to the risk that you take. Everest Group is among those companies.

Many companies in the insurance business will write consistently through hard and soft markets, in order to have consistent earnings growth, and that leads to very poor shareholder outcomes.

Stated simply, Everest Group focuses on very good capital allocation decisions, which increases our value per share growth, even when earnings are not growing.