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EVEREST RE GROUP, LTD
TABLE OF CONTENTS
FORM 10-K
Page
PART I
Item 1.
1
Item 1A.
24
Item 1B.
37
Item 2.
37
Item 3.
37
Item 4.
38
PART II
Item 5.
38
Item 6.
40
Item 7.
41
Item 7A.
67
Item 8.
67
Item 9.
67
Item 9A.
68
Item 9B.
68
Item 9C.
68
PART III
Item 10.
68
Item 11.
69
Item 12.
69
Item 13.
69
Item 14.
69
PART IV
Item 15.
69
1
PART I
Unless otherwise indicated, all financial data in this document have been prepared using accounting principles
generally accepted in the United States of America (“GAAP”). As used in this document, “Group” means Everest
Re Group, Ltd.; “Holdings Ireland” means Everest Underwriting Group (Ireland) Limited; “Ireland Re” means
Everest Reinsurance Company (Ireland), dac, designated activity company; “Ireland Insurance” means Everest
Insurance (Ireland), dac, designated activity company, “Holdings” means Everest Reinsurance Holdings, Inc.;
“Everest Re” means Everest Reinsurance Company and its subsidiaries (unless the context otherwise requires);
and the “Company”, “we”, “us”, and “our” means Everest Re Group, Ltd. and its subsidiaries.
ITEM 1. BUSINESS
The Company.
Group, a Bermuda company, was established in 1999 as a wholly-owned subsidiary of Holdings. On February 24,
2000, a corporate restructuring was completed and Group became the new parent holding company of Holdings.
Holdings continues to be the holding company for the Company’s U.S. based operations. Holders of shares of
common stock of Holdings automatically became holders of the same number of common shares of Group.
Prior to the restructuring, Group had no significant assets or capitalization and had not engaged in any business
or prior activities other than in connection with the restructuring.
In connection with the February 24, 2000 restructuring, Group established a Bermuda-based reinsurance
subsidiary, Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”), which commenced business in the second half
of 2000. Group also formed Everest Global Services, Inc., a Delaware subsidiary, to perform administrative
functions for Group and its U.S. based and non-U.S. based subsidiaries.
On December 30, 2008, Group contributed Holdings to its Irish holding company, Holdings Ireland. Holdings
Ireland is a direct subsidiary of Group and was established to serve as a holding company for the U.S. and Irish
reinsurance and insurance subsidiaries. Effective July 1, 2016, the Company established a new Irish holding
company, Everest Dublin Insurance Holdings Limited (Ireland) (“Everest Dublin Holdings”) and contributed
Ireland Re to Everest Dublin Holdings.
Holdings, a Delaware corporation, was established in 1993 to serve as the parent holding company of Everest Re,
a Delaware property and casualty reinsurer formed in 1973. Until October 6, 1995, Holdings was an indirect
wholly-owned subsidiary of The Prudential Insurance Company of America (“The Prudential”). On October 6,
1995, The Prudential sold its entire interest in Holdings in an initial public offering.
The Company’s principal business, conducted through its operating segments, is the underwriting of reinsurance
and insurance in the U.S., Bermuda and international markets. The Company had gross written premiums, in
2022, of $14.0 billion with approximately 66.8% representing reinsurance and 33.2% representing insurance.
Shareholders’ equity at December 31, 2022 was $8.4 billion. The Company underwrites reinsurance both
through brokers and directly with ceding companies, giving it the flexibility to pursue business based on the
ceding company’s preferred reinsurance purchasing method. The Company underwrites insurance principally
through brokers, surplus lines brokers and general agent relationships. Group’s active operating subsidiaries are
each rated A+ (“Superior”) by A.M. Best Company (“A.M. Best”), a leading provider of insurer ratings that assigns
financial strength ratings to insurance companies based on their ability to meet their obligations to
policyholders.
2
Following is a summary of the Company’s principal operating subsidiaries:
●
Bermuda Re, a Bermuda insurance company and a direct subsidiary of Group, is registered in Bermuda as a
Class 4 insurer and long-term insurer and is authorized to write both reinsurance and insurance property
and casualty and life and annuity business. Bermuda Re’s UK branch writes property and casualty
reinsurance to the United Kingdom, China and European markets. At December 31, 2022, Bermuda Re had
shareholder’s equity of $2.7 billion.
●
Everest International Reinsurance, Ltd. (“Everest International”), a Bermuda insurance company and a direct
subsidiary of Group, is registered in Bermuda as a Class 4 insurer and is authorized to write property and
casualty business. All of Everest International’s business has inter-affiliate reinsurance assumed from
Everest Re, the UK branch of Bermuda Re, Ireland Re and Ireland Insurance . At December 31, 2022, Everest
International had shareholder’s equity of $1.0 billion.
●
Ireland Re, an Ireland reinsurance company and an indirect subsidiary of Group, is licensed to write non-life
reinsurance, both directly and through brokers, for the London and European markets.
●
Ireland Insurance, an Ireland insurance company and an indirect subsidiary of Group, is licensed to write
insurance for the European markets. In addition, Ireland Insurance is considered an approved/eligible alien
surplus lines insurer in the 50 states and the District of Columbia.
●
Everest Compañia de Seguros Generales Chile S.A., a Chile based insurance company, is licensed to write
insurance and reinsurance within Chile.
●
Everest Re, a Delaware reinsurance company and a direct subsidiary of Holdings, is a licensed property and
casualty insurer and/or reinsurer in all states, the District of Columbia, Puerto Rico and Guam and is
authorized to conduct reinsurance business in Canada, Singapore and Brazil. Everest Re underwrites
property and casualty reinsurance for insurance and reinsurance companies in the U.S. and international
markets. At December 31, 2022 Everest Re had statutory surplus of $5.6 billion.
●
Everest Insurance Company of Canada (“Everest Canada”), a Canadian insurance company and direct
subsidiary of Holdings Ireland, is licensed to write property and casualty insurance in all Canadian provinces.
●
Everest National Insurance Company (“Everest National”), a Delaware insurance company and a direct
subsidiary of Everest Re, is licensed in 50 states, the District of Columbia and Puerto Rico and is authorized
to write property and casualty insurance on an admitted basis in the jurisdictions in which it is licensed. The
majority of Everest National’s business is reinsured by its parent, Everest Re.
●
Everest Indemnity Insurance Company (“Everest Indemnity”), a Delaware insurance company and a direct
subsidiary of Everest Re, writes excess and surplus lines insurance business in the U.S. on a non-admitted
basis. Excess and surplus lines insurance is specialty property and liability coverage that an insurer not
licensed to write insurance in a particular jurisdiction is permitted to provide to insureds when the specific
specialty coverage is unavailable from admitted insurers. Everest Indemnity is a Delaware Domestic Surplus
Lines Insurer and is eligible to write business on a non-admitted basis in all other states, the District of
Columbia and Puerto Rico. The majority of Everest Indemnity’s business is reinsured by its parent, Everest
Re.
●
Everest Security Insurance Company (“Everest Security”), a Georgia insurance company and a direct
subsidiary of Everest Re, writes property and casualty insurance on an admitted basis in Georgia and
Alabama and is approved as an eligible surplus lines insurer in Delaware. The majority of Everest Security’s
business is reinsured by its parent, Everest Re.
3
●
Everest International Assurance, Ltd. (“Everest Assurance”), a Bermuda company and a direct subsidiary of
Holdings is registered in Bermuda as a Class 3A general business insurer and as a Class C long-term insurer.
Everest Assurance has made a one-time election under section 953(d) of the U.S. Internal Revenue Code to
be a U.S. income tax paying “Controlled Foreign Corporation.” By making this election, Everest Assurance is
authorized to write life rein surance and casualty reinsurance in both Bermuda and the U.S.
●
Everest Premier Insurance Company (“Everest Premier”), a Delaware insurance company and a direct
subsidiary of Everest Re, is licensed to write property and casualty insurance in all 50 states and the District
of Columbia.
●
Everest Denali Insurance Company (“Everest Denali”), a Delaware insurance company and a direct subsidiary
of Everest Re, is licensed to write property and casualty insurance in all 50 states and the District of
Columbia.
Reinsurance Industry Overview.
Reinsurance is an arrangement in which an insurance company, the reinsurer, agrees to indemnify another
insurance or reinsurance company, the ceding company, against all or a portion of the insurance risks
underwritten by the ceding company under one or more insurance contracts. Reinsurance can provide a ceding
company with several benefits, including a reduction in its net liability on individual risks or classes of risks,
catastrophe protection from large and/or multiple losses and/or a reduction in operating leverage as measured
by the ratio of net premiums and reserves to capital. Reinsurance also provides a ceding company with
additional underwriting capacity by permitting it to accept larger risks and write more business than would be
acceptable relative to the ceding company’s financial resources. Reinsurance does not discharge the ceding
company from its liability to policyholders; rather, it reimburses the ceding company for covered losses.
There are two basic types of reinsurance arrangements: treaty and facultative. Treaty reinsurance obligates the
ceding company to cede and the reinsurer to assume a specified portion of a type or category of risks insured by
the ceding company. Treaty reinsurers do not separately evaluate each of the individual risks assumed under
their treaties, instead, the reinsurer relies upon the pricing and underwriting decisions made by the ceding
company. In facultative reinsurance, the ceding company cedes and the reinsurer assumes all or part of the risk
under a single insurance contract. Facultative reinsurance is negotiated separately for each insurance contract
that is reinsured. Facultative reinsurance, when purchased by ceding companies, usually is intended to cover
individual risks not covered by their reinsurance treaties because of the dollar limits involved or because the risk
is unusual.
Both treaty and facultative reinsurance can be written on either a pro rata basis or an excess of loss basis. Under
pro rata reinsurance, the ceding company and the reinsurer share the premiums as well as the losses and
expenses in an agreed proportion. Under excess of loss reinsurance, the reinsurer indemnifies the ceding
company against all or a specified portion of losses and expenses in excess of a specified dollar amount, known
as the ceding company's retention or reinsurer's attachment point, generally subject to a negotiated reinsurance
contract limit.
In pro rata reinsurance, the reinsurer generally pays the ceding company a ceding commission. The ceding
commission generally is based on the ceding company’s cost of acquiring the business being reinsured
(commissions, premium taxes, assessments and miscellaneous administrative expense and may contain profit
sharing provisions, whereby the ceding commission is adjusted based on loss experience). Premiums paid by the
ceding company to a reinsurer for excess of loss reinsurance are not directly proportional to the premiums that
the ceding company receives because the reinsurer does not assume a proportionate risk. There is usually no
ceding commission on excess of loss reinsurance.
Reinsurers may purchase reinsurance to cover their own risk exposure. Reinsurance of a reinsurer's business is
called a retrocession. Reinsurance companies cede risks under retrocessional agreements to other reinsurers,
known as retrocessionaires, for reasons similar to those that cause insurers to purchase reinsurance: to reduce
4
net liability on individual or classes of risks, protect against catastrophic losses, stabilize financial ratios and
obtain additional underwriting capacity.
Reinsurance can be written through intermediaries, generally professional reinsurance brokers, or directly with
ceding companies. From a ceding company's perspective, the broker and the direct distribution channels have
advantages and disadvantages. A ceding company's decision to select one distribution channel over the other
will be influenced by its perception of such advantages and disadvantages relative to the reinsurance coverage
being placed.
Business Strategy.
The Company’s business strategy is to sustain its leadership position within targeted reinsurance and insurance
markets, provide effective management throughout the property and casualty underwriting cycle and thereby
achieve an attractive return for its shareholders. The Company’s underwriting strategies seek to capitalize on its
i) financial strength and capacity, ii) global franchise, iii) stable and experienced management team, iv)
diversified product and distribution offerings, v) underwriting expertise and disciplined approach, vi) efficient
and low-cost operating structure and vii) effective enterprise risk management practices.
The Company offers treaty and facultative reinsurance and admitted and non-admitted insurance. The
Company’s products include the full range of property and casualty reinsurance and insurance coverages,
including marine, aviation, surety, errors and omissions liability (“E&O”), directors’ and officers’ liability (“D&O”),
medical malpractice, mortgage reinsurance, other specialty lines, accident and health (“A&H”) and workers’
compensation.
The Company’s underwriting strategies emphasizes underwriting profitability over premium volume. Key
elements of this strategy include careful risk selection, appropriate pricing through strict underwriting discipline
and adjustment of the Company’s business mix in response to changing market conditions. The Company
focuses on reinsuring companies that effectively manage the underwriting cycle through proper analysis and
appropriate pricing of underlying risks and whose underwriting guidelines and performance are compatible with
its objectives.
The Company’s underwriting strategies emphasize flexibility and responsiveness to changing market conditions.
The Company believes that its existing strengths, including its broad underwriting expertise, global presence,
strong financial ratings and substantial capital, facilitate adjustments to its mix of business geographically, by line
of business and by type of coverage, allowing it to fully participate in market opportunities that provide the
greatest potential for underwriting profitability. The Company’s insurance operations complement these
strategies by accessing business that is not available on a reinsurance basis. The Company carefully monitors its
mix of business across all operations to avoid unacceptable geographic or other risk concentrations.
Marketing.
The Company writes business on a worldwide basis for many different customers and lines of business, thereby
obtaining a broad spread of risk. The Company is not substantially dependent on any single customer, small
group of customers, line of business or geographic area. For the 2022 calendar year, no single customer (ceding
company or insured) generated more than 3.7% of the Company’s gross written premiums. The Company
believes that a reduction of business from any one customer would not have a material adverse effect on its
future financial condition or results of operations.
Approximately 60.2%, 33.2% and 6.6% of the Company’s 2022 gross written premiums were written in the
broker reinsurance, insurance and direct reinsurance markets, respectively.
The broker reinsurance market consists of several substantial national and international brokers and a number
of smaller specialized brokers. Brokers do not have the authority to bind the Company with respect to
reinsurance agreements, nor does the Company commit in advance to accept any portion of a broker’s
submitted business. Reinsurance business from any ceding company, whether new or renewal is subject to
5
acceptance by the Company. Brokerage fees are generally paid by reinsurers. The Company’s ten largest
brokers accounted for an aggregate of approximately 52.7% of gross written premiums in 2022. The largest
broker, Marsh and McLennan, accounted for approximately 20.0% of gross written premiums. The second
largest broker, Aon, accounted for approximately 16.6% of gross written premiums. The Company believes that
a reduction of business assumed from any one broker would not have a material adverse effect on the Company.
The direct reinsurance market is an important distribution channel for reinsurance business written by the
Company. Direct placement of reinsurance enables the Company to access clients who prefer to place their
reinsurance directly with reinsurers based upon the reinsurer’s in-depth understanding of the ceding company’s
needs.
The Company’s insurance business mainly writes commercial property and casualty on an admitted and non-
admitted basis. The business is written through wholesale and retail brokers, surplus lines brokers and through
program administrators. In 2022, two program administrators accounted for approximately 12% of the
Company’s gross written premium in total and included multiple independent programs for each program
administrator with the largest representing 2% of the overall gross written premium.
The Company continually evaluates each business relationship, including the underwriting expertise and
experience brought to bear through the involved distribution channel, performs analyses to evaluate financial
security, monitors performance and adjusts underwriting decisions accordingly.
Segment Results.
The Company manages its reinsurance and insurance operations as autonomous units and key strategic
decisions are based on the aggregate operating results and projections for these segments of business.
The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business,
on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies.
Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore,
the United Kingdom and Switzerland. The Insurance operation writes property and casualty insurance directly
and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe,
Singapore and South America through its offices in the U.S., Canada, Chile, Singapore, United Kingdom, Ireland
and branches in the Netherlands, France, Germany and Spain.
These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk
management, control of aggregate catastrophe exposures, capital, investments and support operations.
Management generally monitors and evaluates the financial performance of these operating segments based
upon their underwriting results.
Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred,
commission and brokerage expenses and other underwriting expenses. We measure our underwriting results
using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which,
respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums
earned. For selected financial information regarding these segments, see ITEM 8, “Financial Statements and
Supplementary Data” - Note 17 of Notes to Consolidated Financial Statements and ITEM 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operation - Segment Results”.
6
Underwriting Operations.
The following five year table presents the distribution of the Company’s gross written premiums by its segments:
Reinsurance and Insurance. The premiums for each segment are further split between property and casualty
business and, for reinsurance business, between pro rata or excess of loss business:
Gross Written Premiums by Segment
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
2019
2018
Reinsurance
Property Pro Rata (1)
$
2,606
28.0%
$
2,843
31.4%
$
2,397
32.9%
$
1,974
31.1%
$
2,147
34.5%
Property Non-Catastrophe XOL
574
6.2%
625
6.9%
508
7.0%
443
7.0%
398
6.4%
Property Catastrophe XOL
1,422
15.3%
1,468
16.2%
1,277
17.5%
1,187
18.6%
1,313
21.1%
Casualty Pro Rata
2,654
28.5%
2,251
24.8%
1,527
21.0%
1,443
22.7%
1,172
18.8%
Casualty XOL
1,321
14.2%
1,267
14.0%
948
13.0%
730
11.5%
574
9.2%
Financial Lines
740
7.9%
612
6.8%
625
8.6%
578
9.1%
620
10.0%
Reinsurance Total (2)
$
9,316
100.0%
$
9,067
100.0%
$
7,282
100.0%
$
6,356
100.0%
$
6,225
100.0%
Insurance (3)
Accident and Health
$
501
10.8%
$
418
10.5%
$
370
11.6%
$
337
12.1%
$
286
12.7%
Specialty Casualty
1,622
35.0%
1,360
34.0%
1,005
31.4%
798
28.4%
588
25.9%
Other Specialty
324
7.0%
233
5.9%
169
5.3%
134
4.8%
94
4.2%
Professional Liability
821
17.7%
781
19.7%
542
16.9%
409
15.0%
304
13.8%
Property/Short Tail
855
18.4%
717
18.0%
605
18.9%
531
19.1%
447
19.9%
Workers' Compensation
513
11.1%
473
11.9%
510
15.9%
569
20.5%
531
23.6%
Insurance Total (2)
4,636
100.0%
3,982
100.0%
3,201
100.0%
2,778
100.0%
2,251
100.0%
Total Company (2)
$
13,952
100.0%
$
13,050
100.0%
$
10,482
100.0%
$
9,133
100.0%
$
8,475
100.0%
__________________
(1) For purposes of the presentation above, pro rata includes all insurance and reinsurance attaching to the first dollar of loss incurred by the ceding company.
(2) Certain totals and subtotals may not reconcile due to rounding.
(3) Certain reclassifications have been made to prior years’ amounts to conform to the 2022 presentation
(Some amounts may not reconcile due to rounding.)
Reinsurance Segment. In 2022, the Company’s Reinsurance segment wrote $9.3 billion of gross written
premiums. Reinsurance business written directly through the Company’s offices represented $8.4 billion or
90.2% of the segment’s premium and $914 million or 9.8% was written directly with ceding companies.
Property Pro Rata business, which accounted for 28.0% of reinsurance gross written premiums, contains
predominantly contracts providing coverage to cedents for property damage and related losses, which may
include business interruption and other non-property losses, resulting from natural or man-made perils arising
from their underlying portfolio of policies at an agreed upon percentage for both premium and loss.
Property Non-Catastrophe Excess of Loss (“XOL”) business, which accounted for 6.2% of reinsurance gross
written premiums, contains predominantly contracts providing coverage to cedents for a portion of property
damage and related losses, which may include business interruption and other non-property losses, resulting
from natural or man-made perils in excess of an agreed upon deductible up to a stated limit.
Property Catastrophe XOL business, which accounted for 15.3% of reinsurance gross written premiums, contains
predominantly contracts providing coverage to cedents for a portion of property damage and related losses,
which may include business interruption and other non-property losses, resulting from catastrophic losses, in
excess of an agreed upon deductible up to a stated limit. The main perils covered include hurricane, earthquake,
flood, convective storm and fire.
Casualty Pro Rata business, which accounted for 28.5% of reinsurance gross written premiums, contains
predominantly contracts providing coverage to cedents for losses arising from, but not limited to, general
liability, professional indemnity, product liability, workers' compensation, employers liability, aviation and auto
liability from their underlying portfolio of policies at an agreed upon percentage for both premium and loss.
7
Casualty XOL business, which accounted for 14.2% of reinsurance gross written premiums, contains
predominantly contracts providing coverage to cedents for losses arising from, but not limited to, general
liability, professional indemnity, product liability, workers' compensation, aviation and auto liability from their
underlying portfolio of policies in excess of an agreed upon deductible up to a stated limit.
Financial Lines business, which accounted for 7.9% of reinsurance gross written premiums, contains
predominantly contracts providing coverage to cedents for losses arising from political risk, credit, surety,
mortgage and alternative risk lines of business on both a pro rata and excess of loss basis.
Insurance Segment. In 2022, the Company’s Insurance segment wrote $4.6 billion of gross written premiums.
Accident and Health business, which accounted for 10.8% of Insurance gross written premiums, contains
Predominantly includes policies covering Participant Accident, Short-Term Medical, and Medical Stop-Loss
protection for employers with Self-funded medical plans.
Specialty Casualty business, which accounted for 35.0% of Insurance gross written premiums, predominantly
includes policies covering General Liability (Premises/Operations and Products), Auto Liability, and
Umbrella/Excess Liability.
Other Specialty business, which accounted for 7.0% of Insurance gross written premiums, predominantly
includes policies covering specialty areas including but not limited to Surety, Trade Credit & Political Risk,
Transactional Liability, Energy & Construction, and Aviation.
Professional Liability business, which accounted for 17.7% of Insurance gross written premiums, predominantly
includes policies covering Directors & Officers Liability, Errors & Omissions, Cyber Liability, and other ancillary
financial lines products.
Property/Short-Tail business, which accounted for 18.4% of Insurance gross written premiums, predominantly
includes policies covering Property, Inland Marine, and other short-tail lines.
Workers’ Compensation business, which accounted for 11.1% of Insurance gross written premiums,
predominantly includes policies covering Workers Compensation including both guaranteed cost and loss
sensitive product offerings.
Geographic Areas. The Company conducts its business in Bermuda, the U.S. and a number of foreign countries.
For select financial information about geographic areas, see ITEM 8, “Financial Statements and Supplementary
Data” - Note 17 of Notes to the Consolidated Financial Statements. Risks attendant to the foreign operations of
the Company parallel those attendant to the U.S. operations of the Company, with the primary exception of
foreign exchange risks. For more information about the risks, see ITEM 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Safe Harbor Disclosure”.
Underwriting.
One of the Company’s strategies is to "lead" as many of the reinsurance treaties it underwrites as possible. The
lead reinsurer on a treaty generally accepts one of the largest percentage shares of the treaty and is in the
strongest position to negotiate price, terms and conditions. The Company leads on approximately two-thirds of
its treaty reinsurance business as measured by premium. Management believes this strategy enables it to
obtain more favorable terms and conditions on the treaties on which it participates. When the Company does
not lead the treaty, it may still suggest changes to any aspect of the treaty. The Company may decline to
participate on a treaty based upon its assessment of all relevant factors.
The Company’s treaty underwriting process involves a team approach among the Company’s underwriters,
actuaries, modelling and claim staff. Treaties are reviewed for compliance with the Company’s general
underwriting standards and most larger treaties are subjected to detailed actuarial analysis. The actuarial
8
models used in such analyses are tailored in each case to the subject exposures and loss experience. The
Company does not separately evaluate each of the individual risks assumed under its treaties. The Company
does, however, evaluate the underwriting guidelines, data and other information of its ceding companies to
determine their adequacy prior to entering into a treaty. The Company may also conduct underwriting,
operational and claim audits at the offices of ceding companies to monitor adherence to underwriting
guidelines. Underwriting audits focus on the quality of the underwriting staff, pricing and risk selection and rate
monitoring over time. Claim audits may be performed in order to evaluate the client’s claims handling abilities
and practices.
The Company’s facultative underwriters operate within guidelines specifying acceptable types of risks, limits and
maximum risk exposures. Specified classes of large premium U.S. risks are referred to Everest Re’s New York
facultative headquarters for specific review before premium quotations are given to clients. In addition, the
Company’s guidelines require certain types of risks to be submitted for review because of their aggregate limits,
complexity or volatility, regardless of premium amount on the underlying contract. Non-U.S. risks exhibiting
similar characteristics are reviewed by senior managers within the involved operations.
In addition to its own underwriting staff, the Company’s insurance operations write property and casualty
coverages for homogeneous risks through select program managers. These programs are evaluated based upon
actuarial analysis and the program manager’s capabilities. The Company’s rates, forms and underwriting
guidelines are tailored to specific risk types. The Company’s underwriting, actuarial, claim and financial
functions work closely with its program managers to establish appropriate underwriting and processing
guidelines as well as appropriate performance monitoring mechanisms.
Risk Management of Underwriting and Reinsurance Arrangements
Underwriting Risk and Accumulation Controls.
Each segment and business unit manages its underwriting risk in
accordance with established guidelines. These guidelines place dollar limits on the amount of business that can
be written based on a variety of factors, including (re)insured company profile, line of business, geographic
location and risk hazards. In each case, the guidelines permit limited exceptions, which must be authorized by
the Company’s senior management. Management regularly reviews and revises these guidelines in response to
changes in business unit product offerings, market conditions, risk versus reward analyses and the Company’s
enterprise and underwriting risk management processes.
The operating results and financial condition of the Company can be adversely affected by catastrophe and other
large losses. The Company manages its exposure to catastrophes and other large losses by:
●
selective underwriting practices;
●
diversifying its risk portfolio by geographic area and by types and classes of business;
●
limiting its aggregate catastrophe loss exposure in any particular geographic zone and contiguous zones;
●
purchasing reinsurance and/or retrocessional protection to the extent that such coverage can be secured
cost-effectively. See “Reinsurance and Retrocession Arrangements”.
Like other insurance and reinsurance companies, the Company is exposed to multiple insured losses arising out
of a single occurrence, whether a natural event, such as a hurricane or an earthquake, or other catastrophe, such
as an explosion at a major factory. A large catastrophic event can be expected to generate insured losses to
multiple reinsurance treaties, facultative certificates and direct insurance policies across various lines of
business.
The Company focuses on potential losses that could result from any single event or series of events as part of its
evaluation and monitoring of its aggregate exposures to catastrophic events. Accordingly, the Company employs
9
various techniques to estimate the amount of loss it could sustain from any single catastrophic event or series of
events in various geographic areas. These techniques range from deterministic approaches, such as tracking
aggregate limits exposed in catastrophe-prone zones and applying reasonable damage factors, to modeled
approaches that attempt to scientifically measure catastrophe loss exposure using sophisticated Monte Carlo
simulation techniques that forecast frequency and severity of potential losses on a probabilistic basis.
No single computer model, or group of models, is currently capable of projecting the amount and probability of
loss in all global geographic regions in which the Company conducts business. In addition, the form, quality and
granularity of underwriting exposure data furnished by (re)insureds is not uniformly compatible with the data
requirements for the Company’s licensed models, which adds to the inherent imprecision in the potential loss
projections. Further, the results from multiple models and analytical methods must be combined to estimate
potential losses by and across business units. Also, while most models have been updated to incorporate claims
information from recent catastrophic events, catastrophe model projections are still inherently imprecise. In
addition, uncertainties with respect to future climatic patterns and cycles could add further uncertainty to loss
projections from models based on historical data.
Nevertheless, when combined with traditional risk management techniques and sound underwriting judgment,
catastrophe models are a useful tool for underwriters to price catastrophe exposed risks and for providing
management with quantitative analyses with which to monitor and manage catastrophic risk exposures by zone
and across zones for individual and multiple events.
Projected catastrophe losses are generally summarized in terms of the probable maximum loss (“PML”). The
Company defines PML as its anticipated loss, taking into account contract terms and limits, caused by a single
catastrophe affecting a broad contiguous geographic area, such as that caused by a hurricane or earthquake.
The PML will vary depending upon the modeled simulated losses and the make-up of the in force book of
business. The projected severity levels are described in terms of “return periods”, such as “100-year events” and
“250-year events”. For example, a 100-year PML is the estimated loss to the current in-force portfolio from a
single event which has a 1% probability of being exceeded in a twelve month period. In other words, it
corresponds to a 99% probability that the loss from a single event will fall below the indicated PML. It is
important to note that PMLs are estimates. Modeled events are hypothetical events produced by a stochastic
model. As a result, there can be no assurance that any actual event will align with the modeled event or that
actual losses from events similar to the modeled events will not vary materially from the modeled event PML.
From an enterprise risk management perspective, management sets limits on the levels of catastrophe loss
exposure the Company may underwrite. The limits are revised periodically based on a variety of factors,
including but not limited to the Company’s financial resources and expected earnings and risk/reward analyses
of the business being underwritten.
The Company may purchase reinsurance to cover specific business written or the potential accumulation or
aggregation of exposures across some or all of its operations. Reinsurance purchasing decisions consider both
the potential coverage and market conditions including the pricing, terms, conditions, availability and
collectability of coverage, with the aim of securing cost effective protection from financially secure
counterparties. The amount of reinsurance purchased has varied over time, reflecting the Company’s view of its
exposures and the cost of reinsurance.
Management estimates that the projected net economic loss from its largest 100-year event in a given zone
represents approximately 6.9% of its December 31, 2022 shareholders’ equity. Economic loss is the PML
exposure, net of third party reinsurance including catastrophe industry loss warranty cover, reduced by
estimated reinstatement premiums to renew coverage and estimated income taxes. The impact of income taxes
on the PML depends on the distribution of the losses by corporate entity, which is also affected by inter-affiliate
reinsurance. Management also monitors and controls its largest PMLs at multiple points along the loss
distribution curve, such as loss amounts at the 20, 50, 100, 250 and 500 year return periods. This process
10
enables management to identify and control exposure accumulations and to integrate such exposures into
enterprise risk, underwriting and capital management decisions.
The Company’s catastrophe loss projections, segmented by risk zones, are updated quarterly and reviewed as
part of a formal risk management review process. The table below reflects the Company’s PML exposure, net of
third party reinsurance including catas trophe industry loss warranty cover, at various return periods for its top
four zones/perils (as ranked by the largest 1 in 100 year economic loss) based on loss projection data as of
January 1, 2023:
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
143
$
619
$
842
$
1,326
$
1,762
Southeast U.S., Wind
486
677
878
1,094
1,224
Europe, Wind
176
388
585
855
979
Texas Wind
126
360
545
844
1,096
The projected net economic losses,
defined as PML exposures, net of third party reinsurance including
catastrophe industry loss warranty cover, reinstatement premiums and estimated income taxes, for the top four
zones/perils scheduled above are as follows :
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
114
$
440
$
580
$
846
$
1,242
Southeast U.S., Wind
302
423
515
643
764
Europe, Wind
138
286
423
620
708
Texas Wind
94
250
368
486
663
The Company believes that its methods of monitoring, analyzing and managing catastrophe exposures provide a
credible risk management framework, which is integrated with its enterprise risk management, underwriting and
capital management plans. However, there is much uncertainty and imprecision inherent in the catastrophe
models and the catastrophe loss estimation process generally. As a result, there can be no assurance that the
Company will not experience losses from individual events that exceed the PML or other return period
projections, perhaps by a material amount. Nor can there be assurance that the Company will not experience
events impacting multiple zones, or multiple severe events that could, in the aggregate, exceed the Company’s
PML expectations by a significant amount.
Terrorism Risk.
While the Company writes some reinsurance contracts covering terrorism, the Company’s risk
management philosophy is to limit the amount of exposure by geographic region, and to strictly manage
coverage for properties in areas that may be considered a target for terrorists. Providing terrorism coverage on
reinsurance contracts is negotiable, and many, but not all, treaties contain exclusions which limit much of this
risk. While many property insurance policies are required to offer coverage for terrorism, this coverage is often
not purchased. However, terrorism is typically covered by worker compensation policies. As a result, the
Company is exposed to losses from terrorism on both its reinsurance and its insurance book of business,
particularly its workers’ compensation and property policies. However, the insurance book generally does not
insure large corporations or corporate locations that represent large concentrations of risk.
The U.S. Terrorism Risk Insurance Program Reauthorization Act of 2019 provides some protection to the
insurance book of business. It also provides indirect protection to exposed reinsurance treaties. However, the
11
Company is still exposed to risk of loss from terrorism due to deductibles, co-pays and uncovered lines of
business.
Reinsurance and Retrocession Arrangements.
written or the potential accumulation or aggregation of exposures across some or all of its operations.
Reinsurance purchasing decisions consider both the potential coverage and market conditions including the
pricing, terms, conditions and availability of coverage, with the aim of securing cost effective protection. The
amount of reinsurance purchased has varied over time, reflecting the Company’s view of its exposures and the
cost of reinsurance. In recent years, the Company has increased its use of reinsurance offered through capital
market facilities.
The Company participates in “common account” retrocessional arrangements for certain reinsurance treaties
whereby a ceding company purchases reinsurance for the benefit of itself and its reinsurers under one or more
of its reinsurance treaties. Common account retrocessional arrangements reduce the effect of individual or
aggregate losses to all participating companies, including the ceding company, with respect to the involved
treaties.
All of the Company’s reinsurance and retrocessional agreements transfer significant reinsurance risk and
therefore, are accounted for as reinsurance in accordance with the Financial Accounting Standards Board
(“FASB”) guidance.
At December 31, 2022, the Company had $2.2 billion in reinsurance recoverables with respect to both paid and
unpaid losses ceded. Of this amount $520 million, or 23.2%, was recoverable from Mt. Logan Re collateralized
segregated accounts; $283 million, or 12.6%, was recoverable from Munich Reinsurance America, Inc. (“Munich
Re”) and $148 million, or 6.6%, was recoverable from Endurance Reinsurance Corporation of America
(“Endurance Re”). No other retrocessionaire accounted for more than 5% of our recoverables. Although
management carefully selects its reinsurers, the Company is subject to credit risk with respect to its reinsurance
because the ceding of risk to reinsurers does not relieve the Company of its liability to insureds or ceding
companies. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Financial Condition”.
Claims.
Insurance claims are managed by the Company’s professional Claims staff many of whom have insurance and
legal professional qualifications. Their responsibilities include reviewing initial loss reports, analyzing coverage
issues, evaluating and reserving claims, and paying settlements. When appropriate the Claims staff engage
external professional advisors such as Counsel, Loss Adjusters and Engineers to support the effective
management of claims. Claims are allocated to staff according to their expertise and experience and most
specialize in particular product segments and geographies. Some insurance claims are handled by third party
claims service providers who have limited authority and are subject to oversight by the Company’s professional
Claims staff. The Claims staff work closely with senior management, as well as underwriting, finance and
actuarial.
Reinsurance claims are managed by the Company’s professional claims staff whose responsibilities include
reviewing initial loss reports and coverage issues, monitoring claims handling activities of ceding companies,
establishing and adjusting proper case reserves and approving payment of claims. In addition to claims
assessment, processing and payment, the claims staff selectively conducts comprehensive claim audits of both
specific claims and overall claim procedures at the offices of selected ceding companies. Some insurance claims
are handled by third party claims service providers who have limited authority and are subject to oversight by
the Company’s professional claims staff.
The Company intensively manages its asbestos and environmental (“A&E”) exposures through a dedicated,
centrally managed claim staff with experienced claim and legal professionals who specialize in the handling of
such exposures. They actively manage each individual insured and reinsured account, responding to claim
12
developments with evaluations of the involved exposures and adjustment of reserves as appropriate. Specific or
general claim developments that may have material implications for the Company are regularly communicated
to senior management, actuarial, legal and financial areas. Senior management and claim management
personnel meet at least quarterly to review the Company’s overall reserve positions and make changes, if
appropriate. The Company continually reviews its internal processing, communications and analytics, seeking to
enhance the management of its A&E exposures, in particular in regard to changes in asbestos claims and
litigation.
Reserves for Unpaid Property and Casualty Losses and LAE.
Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss to the
insurer and the reinsurer and the payment of that loss by the insurer and subsequent payments to the insurer by
the reinsurer. To recognize liabilities for unpaid losses and LAE, insurers and reinsurers establish reserves, which
are balance sheet liabilities representing estimates of future amounts needed to pay reported and unreported
claims and related expenses for losses that have already occurred. Actual losses and LAE paid may deviate,
perhaps substantially, from such reserves. To the extent reserves prove to be insufficient to cover actual losses
and LAE after taking into account available reinsurance coverage, the Company would have to recognize such
reserve shortfalls and incur a charge to earnings, which could be material in the period such recognition takes
place. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Loss and LAE Reserves”.
As part of the reserving process, insurers and reinsurers evaluate historical data and trends and make judgments
as to the impact of various factors such as legislative and judicial developments that may affect future claim
amounts, changes in social and political attitudes that may increase loss exposures and inflationary and general
economic trends. While the reserving process is difficult and subjective for insurance companies, the inherent
uncertainties of estimating such reserves are even greater for the reinsurer, due primarily to the longer time
between the date of an occurrence and the reporting of any attendant claims to the reinsurer, the diversity of
development patterns among different types of reinsurance treaties or facultative contracts, the necessary
reliance on the ceding companies for information regarding reported claims and differing reserving practices
among ceding companies. In addition, trends that have affected development of liabilities in the past may not
necessarily occur or affect liability development in the same manner or to the same degree in the future. As a
result, actual losses and LAE may deviate, perhaps substantially, from estimates of reserves reflected in the
Company's consolidated financial statem ents.
The Company’s loss and LAE reserves represent management’s best estimate of the ultimate liability.
Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and
finance departments and culminates with the input of reserve committees. Each segment reserve committee
includes the participation of the relevant parties from actuarial, finance, claims and segment senior management
and has the responsibility for recommending and approving management’s best estimate. Reserves are further
reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of such process is to
determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability.
While there can be no assurance that these reserves will not need to be increased in the future, management
believes that the Company’s existing reserves and reserving methodologies reduce the likelihood that any such
increases would have a material adverse effect on the Company’s financial condition, results of operations or
cash flows. These statements regarding the Company’s loss reserves are forward looking statements within the
meaning of the U.S. federal securities laws and are intended to be covered by the safe harbor provisions
contained therein. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Safe Harbor Disclosure”.
Like many other property and casualty insurance and reinsurance companies, the Company has experienced loss
development for prior accident years, which has impacted losses and LAE reserves and caused corresponding
effects to income (loss) in the periods in which the adjustments were made. There can be no assurance that
adverse development from prior years will not occur in the future or that such adverse development will not
have a material adverse effect on net income (loss).
13
Since the Company has operations in many countries, part of the Company’s loss and LAE reserves are in foreign
currencies and translated to U.S. dollars for each reporting period. Fluctuations in the exchange rates for the
currencies, period over period, affect the U.S. dollar amount of outstanding reserves. The translation
adjustment eliminates the impact of the exchange fluctuations from the reserve re-estimates. For reconciliation
of beginning and ending reserves, see Note 3 of Notes to Consolidated Financial Statements.
Reserves for Asbestos and Environmental Loss and LAE.
At December 31, 2022, the Company’s gross reserves for A&E claims represented 1.3% of its total reserves. The
Company’s A&E liabilities stem from Mt. McKinley Insurance Company’s (“Mt. McKinley”) direct insurance
business and Everest Re’s assumed reinsurance business. Mt. McKinley was a former wholly-owned subsidiary
that was sold in 2015 to Clearwater Insurance Company (Clearwater”), a subsidiary of Fairfax Financial. Liabilities
related to Mt. McKinley’s direct business, which had been ceded to Bermuda Re previously, were retroceded to
an affiliate of Clearwater in July 2015, concurrent with the sale of Mt. McKinley to Clearwater.
Concurrently with the closing, the Company entered into a retrocession treaty with an affiliate of Clearwater.
Per the retrocession treaty, the Company retroceded 100% of the liabilities associated with certain Mt. McKinley
policies, which had been reinsured by Bermuda Re. As consideration for entering into the retrocession treaty,
Bermuda Re transferred cash of $140.3 million, an amount equal to the net loss reserves as of the closing date.
Of the $140.3 million of net loss reserves retroceded, $100.5 million were related to A&E business. The
maximum liability retroceded under the retrocession treaty will be $440.3 million, equal to the retrocession
payment plus $300.0 million. The Company will retain liability for any amounts exceeding the maximum liability
retroceded under the retrocession treaty.
On December 20, 2019, the retrocession treaty was amended and included a partial commutation. As a result of
this amendment and partial commutation, gross A&E reserves and correspondingly reinsurance receivable were
reduced by $43.4 million. In addition, the maximum liability permitted to be retroceded increased to $450.3
million.
Additional losses, including those relating to latent injuries and other exposures, which are as yet unrecognized,
the type or magnitude of which cannot be foreseen by either the Company or the industry, may emerge in the
future. Such future emergence could have material adverse effects on the Company’s future financial condition,
results of operations and cash flows.
There are significant uncertainties in estimating the amount of the Company’s potential losses from A&E claims
and ultimate values cannot be estimated using traditional reserving techniques. See ITEM 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Asbestos and Environmental
Exposures” and ITEM 8, “Financial Statements and Supplementary Data” – Note 3 of Notes to Consolidated
Financial Statements.
Future Policy Benefit Reserves.
The Company wrote a limited amount of life and annuity reinsurance in its Reinsurance segment. Future policy
benefit liabilities for annuities are reported at the accumulated fund balance of these contracts. Reserves for
those liabilities include mortality provisions with respect to life and annuity claims, both reported and
unreported. Actual experience in a particular period may be worse than assumed
experience and, consequently,
may adversely affect the Company’s operating results for that period. See ITEM 8, “Financial Statements and
Supplementary Data” - Note 1F and Note 3 of Notes to Consolidated Financial Statements.
Investments.
The board of directors of each of the Company’s operating subsidiaries is responsible for establishing investment
policy and guidelines and, together with senior management, for overseeing their execution.
14
The Company’s principal investment objectives are to ensure funds are available to meet its insurance and
reinsurance obligations and to maximize after-tax investment income while maintaining a high quality diversified
investment portfolio. Considering these objectives, the Company views its investment portfolio as having two
components: 1) the investments needed to satisfy outstanding liabilities (its core fixed maturities portfolio) and
2) investments funded by the Company’s shareholders’ equity.
For the portion needed to satisfy global outstanding liabilities, the Company generally invests in fixed maturities
with a high level of average credit quality. This global fixed maturity securities portfolio is largely managed on an
external basis by independent, professional investment managers using portfolio guidelines approved by the
Company.
Over the past several years, the Company has expanded the allocation of its investments funded by
shareholders’ equity to include: 1) publicly traded equity securities, 2) emerging market fixed maturities, as well
as individual holdings, 3) high yield fixed maturities, 4) bank and private loan securities, 5) private equity limited
partnership investments and 6) Company owned life insurance. The objective of this portfolio diversification is
to enhance the risk-adjusted total return of the investment portfolio by allocating a prudent portion of the
portfolio to higher return asset classes. The Company limits its allocation to these asset classes because of 1) the
potential for volatility in their values and 2) the impact of these investments on regulatory and rating agency
capital adequacy models. The Company uses investment managers experienced in these markets and adjusts its
allocation to these investments based upon market conditions.
The duration of an investment is based on the maturity of the security but also reflects the payment of interest
and the possibility of early prepayments. The Company’s fixed income investment guidelines include a general
duration guideline. This investment duration guideline is established and periodically revised by management,
which considers economic and business factors, as well as the Company’s average duration of potential
liabilities, which, at December 31, 2022, is estimated at approximately 3.8 years, based on the estimated payouts
of underwriting liabilities using standard duration calculations. The average duration of the fixed income
portfolio at December 31, 2022 and 2021 was 3.1 years and 3.2 years, respectively.
For each currency in which the Company has established substantial loss and LAE reserves, the Company seeks
to maintain invested assets denominated in such currency in an amount approximately equal to the estimated
liabilities. Approximately 42.7% of the Company’s consolidated reserves for losses and LAE and unearned
premiums represent amounts payable in foreign currencies.
The Company’s cash and invested assets totaled $29.9 billion at December 31, 2022, which consisted of 85.4%
fixed maturities, short term investments and cash, of which 93.2% were investment grade; 13.7% other invested
assets and 0.9% equity securities. The average maturity of fixed maturity securities was 4.6 years at December
31, 2022, and their overall average duration was 3.1 years.
As of December 31, 2022, the Company did not have any direct investments in commercial real estate or direct
commercial mortgages or securities of issuers that are experiencing cash flow difficulty to an extent that the
Company’s management believes could threaten the issuer’s ability to meet debt service payments, except
where an allowance for credit losses has been recognized.
The Company’s investment portfolio includes structured commercial mortgage-backed securities (“CMBS”) with
a book value of $1.0 billion and a fair val ue of $925.8 million. CMBS securities comprising more than 86.6% of
the December 31, 2022 fair value are rated AAA by S&P Global Ratings (“S&P”). Furthermore, all held CMBS
securities are rated investment grade by S&P.
15
The following table reflects investment results for the Company for the periods indicated:
December 31,
Pre-tax
Pre-tax
Pre-tax
Pre-tax
Realized Net
Unrealized Net
Average
Investment
Effective
Gains (Losses)
Gains (Losses)
(Dollars in millions)
Investments
Income
Yield
On Investments
On Investments
2022
$
29,788
$
830
2.79%
$
(455)
$
(2,225)
2021
27,606
1,165
4.22%
258
(542)
2020
23,253
643
2.76%
268
465
2019
19,632
647
3.30%
185
533
2018
18,426
581
3.15%
(127)
(251)
(1)
Average of the beginning and ending carrying values of investments and cash, less net funds held, future policy benefit reserve, and non-interest bearing
cash. Fixed maturities, available for sale and equity securities are carried at fair value. Fixed maturities, held to maturity securities are carried at
amortized cost net of the expected credit loss allowance.
(2)
After investment expenses, excluding realized net gains (losses) on investments.
(3)
Included in 2022, 2021, 2020, 2019 and 2018 are fair value re-measurements of $460 million, $236 million, $280 million, $167 million and ($67) million,
respectively. In addition, 2022 & 2021 includes ($33 million) and ($28 million) of expected credit losses.
(Some amounts may not reconcile due to rounding.)
The following table represents the credit quality distribution of the Company’s fixed maturities for the periods
indicated:
At December 31,
2022
2021
(Dollars in millions)
Fair Value/
Percent of
Fair Value/
Percent of
Rating Agency Credit Quality Distribution:
Amortized Cost
Total
Amortized Cost
Total
AAA
$
8,432
36.6%
$
7,111
31.8%
AA
2,886
12.5%
2,591
11.6%
A
6,268
27.2%
5,833
26.1%
BBB
3,768
16.3%
4,763
21.4%
BB
1,227
5.3%
1,204
5.4%
B
163
0.7%
325
1.5%
Rated below B
49
0.2%
57
0.3%
Other
283
1.2%
425
1.9%
Total
$
23,075
100.0%
$
22,308
100.0%
(Some amounts may not reconcile due to rounding.)
(1) Fixed maturities-available for sale are at fair value and fixed maturities-held to maturity are at amortized cost, net of allowances for credit losses
16
The following table summarizes fixed maturities by contractual maturity for the periods indicated:
At December 31,
2022
2021
Fair Value/
Percent of
Fair Value/
Percent of
(Dollars in millions)
Amortized Cost
Total
Amortized Cost
Total
Fixed maturity securities
Due in one year or less
$
1,319
5.7%
$
1,398
6.2%
Due after one year through five years
7,607
33.0%
7,155
32.1%
Due after five years through ten years
4,098
17.8%
5,101
22.9%
Due after ten years
1,299
5.6%
1,627
7.3%
Asset-backed securities
4,705
20.4%
3,582
16.1%
Mortgage-backed securities
4,029
17.5%
3,446
15.4%
Total fixed maturity securities
$
23,057
100.0%
$
22,308
100.0%
(Some amounts may not reconcile due to rounding.)
(1) The amortized cost and fair value of fixed maturity securities are shown by contractual maturity. Mortgage-backed securities are generally more likely to be
prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed
and asset-backed securities are shown separately.
Financial Strength Ratings.
The following table shows the current financial strength ratings of the Company’s operating subsidiaries as
reported by A.M. Best, S&P Global Ratings (“S&P”) and Moody’s. These ratings represent an independent
opinion of the financial strength, operating performance, business profile and ability to meet policyholder
obligations. The ratings are not intended to be an indication of the degree or lack of risk involved in a direct or
indirect equity investment or a recommendation to buy, sell or hold our securities. Additionally, rating
organizations may change their rating methodology, which could have a material impact on our financial
strength ratings.
All of the below-mentioned ratings are continually monitored and revised, if necessary, by each of the rating
agencies. The ratings presented in the following table were in effect as of January 31, 2023.
17
The Company believes that its ratings are important as they provide the Company’s customers and others with
an independent assessment of the Company’s financial strength using a rating scale that provides for relative
comparisons. Strong financial ratings are particularly important for reinsurance and insurance companies given
that customers rely on a company to pay covered losses well into the future. As a result, a highly rated company
is generally preferred.
Operating Subsidiary:
A.M. Best
S&P
Moody's
Everest Reinsurance Company
A+ (Superior)
A+ (Strong)
A1 (upper-medium)
Everest Reinsurance (Bermuda) Ltd.
A+ (Superior)
A+ (Strong)
A1 (upper-medium)
Everest Reinsurance Company (Ireland) dac
A+ (Superior)
A+ (Strong)
Not Rated
Everest National Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Indemnity Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Security Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest International Assurance, Ltd.
A+ (Superior)
A+ (Strong)
Not Rated
Everest Compañia de Seguros Generales Chile S.A.
A+ (Superior)
Not Rated
Not Rated
Everest Insurance Company of Canada
A+ (Superior)
A+ (Strong)
Not Rated
Everest International Reinsurance, Ltd.
A+ (Superior)
A+ (Strong)
Not Rated
Everest Denali Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Premier Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Insurance (Ireland), dac
A+ (Superior)
A+ (Strong)
Not Rated
A.M. Best states that the “A+” (“Superior”) rating is assigned to those companies which, in its opinion, have a
superior ability to meet their ongoing insurance policy and contract obligations based on A.M. Best’s
comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating
performance and business profile. A.M. Best affirmed these ratings on June 15, 2022. S&P states that the
“A+”/”A” ratings are assigned to those insurance companies which, in its opinion, have strong financial security
characteristics with respect to their ability to pay under its insurance policies and contracts in accordance with
their terms. S&P affirmed all ratings on May 27, 2022. Moody’s states that an “A1” rating is assigned to
companies that, in their opinion, offer upper-medium grade security and are subject to low credit risk. Moody’s
affirmed these ratings on June 17, 2022.
Subsidiaries other than Everest Reinsurance Co. and Everest Reinsurance (Bermuda) Ltd. may not be rated by
some or any rating agencies given that such ratings are not considered essential by the individual subsidiary’s
customers because of the limited nature of the subsidiary’s operations or because the subsidiaries are newly
established and have not yet been rated by the agencies.
Debt Ratings.
The following table shows the debt ratings by A.M. Best, S&P and Moody’s of the Holdings’ senior notes due
June 1, 2044, senior notes due October 15, 2050, senior notes due October 15, 2052 and long-term notes due
May 1, 2067 all of which are considered investment grade. Debt ratings are the rating agencies’ current
assessment of the credit worthiness of an obligor with respect to a specific obligation.
Instrument
A.M. Best
S&P
Moody's
Senior Notes due June 1, 2044
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2050
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2052
NR
A-
(Strong)
Baa1
(Medium Grade)
Long-Term Notes due May 1, 2067
bbb
(Adequate)
BBB
(Adequate)
Baa2
(Medium Grade)
18
Competition.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and
stronger profits followed by periods of abundant capacity, lower rates and constrained profitability.
Competition in the types of reinsurance and insurance business that we underwrite is based on many factors,
including the perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by
A.M. Best and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is
licensed or otherwise authorized, capacity and coverages offered, premiums charged, other terms and
conditions of the reinsurance and insurance business offered, services offered, speed of claims payment and
reputation and experience in lines written. Furthermore, the market impact from these competitive factors
related to reinsurance and insurance is generally not consistent across lines of business, domestic and
international geographical areas and distribution channels.
We compete in the U.S., Bermuda and international reinsurance and insurance markets with numerous global
competitors. Our competitors include independent reinsurance and insurance companies, subsidiaries or
affiliates of established worldwide insurance companies, reinsurance departments of certain insurance
companies, domestic and international underwriting operations, including underwriting syndicates at Lloyd’s of
London and certain government sponsored risk transfer vehicles. Some of these competitors have greater
financial resources than we do and have established long term and continuing business relationships, which can
be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance
business and the securitization of reinsurance and insurance risks through capital markets provide additional
sources of potential reinsurance and insurance capacity and competition.
Worldwide insurance and reinsurance market conditions historically have been competitive. Generally, there is
ample insurance and reinsurance capacity relative to demand, as well as additional capital from the capital
markets through insurance linked financial instruments. These financial instruments such as side cars,
catastrophe bonds and collateralized reinsurance funds, provided capital markets with access to insurance and
reinsurance risk exposure. The capital markets demand for these products is primarily driven by the desire to
achieve greater risk diversification and potentially higher returns on their investments. This competition
generally has a negative impact on rates, terms and conditions; however, the impact varies widely by market and
coverage. Based on recent competitive behaviors in the insurance and reinsurance industry, natural catastrophe
events and the macroeconomic backdrop, there has been some dislocation in the market which we expect to
have a positive impact on rates and terms and conditions, generally, though local market specificities can vary.
The increased frequency of catastrophe losses experienced throughout 2022 appears to be pressuring the
increase of rates. As business activity continues to regain strength after the pandemic and current
macroeconomic uncertainty, rates appear to be firming in most lines of business, particularly in the casualty lines
that had seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines
are experiencing modest rate increase, while some lines such as workers’ compensation were experiencing
softer market conditions. It is too early to tell what the impact on pricing conditions will be, but it is likely to
change depending on the line of business and geography.
Our capital position remains a source of strength, with high quality invested assets, significant liquidity and a low
operating expense ratio. Our diversified global platform with its broad mix of products, distribution and
geography is resilient.
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses
located in the Russian Federation and/or owned by Russian nationals by numerous countries, including the
United States. The significant political and economic uncertainty surrounding the war and associated sanctions
have impacted economic and investment markets both within Russia and around the world. The Company has
recorded $45 million of losses related to the Ukraine/Russia war during 2022.
19
Human Capital Management.
Our employees are essential to the success of our business, and so we strive to attract and retain a high standard
of insurance professionals to meet our business needs as well as the needs of our clients and customers. As of
February 1, 2023, the Company employed 2,428 persons. Management believes that employee relations are
good. None of the Company’s employees are subject to collective bargaining agreements, and the Company is
not aware of any current efforts to implement such agreements.
Everest is committed to providing our employees with an engaging and supportive environment so that
employees can develop personally and help us achieve success as an organization. We consider the ability to
attract, develop and retain a high caliber of insurance professionals to be critical to our success. Opportunities
for continued learning and talent development are provided to all employee levels. Employees are encouraged
to take ownership of their development by using the tools that the Company has made available to them -
including industry training, mentorships and personal development classes. Everest actively manages its
succession planning throughout our organization and strives to provide job growth and advancement
opportunities to internal talent, where possible.
Diversity and Inclusion.
Our strength and success derive from our diversity, and we are at our best when we embrace diverse views and
perspectives. Equality in opportunity, career development, compensation and respect for all individuals are
fundamental human rights that are at the forefront of our culture and promoted not only within our workplace
but also the global communities in which we operate. Our Board is committed to diversity within its structure as
well as emphasizing its importance in our senior executive leadership. We believe that diversity in gender, age,
ethnicity and skill set allows for dynamic and evolving perspectives in governance, strategy, corporate
responsibility, human rights and risk management.
Proactive diversity recruitment is an integral aspect of succession planning at both the board level and
throughout all levels in the organization. Our Talent Development team works with senior management to
identify women and persons of color across the Company as potential leaders. These individuals are provided
management and executive leadership training and education to enhance their skillsets and provide
opportunities for advancement. Indeed, our executive officers are measured on their forward-thinking diversity
initiatives as part of their annual performance evaluations. Such diversity at the most senior levels of our
organization reflects our commitment to identify and develop highly qualified women and individuals of color to
help lead our Company into the future.
The work of the DEI Council has helped enhance the employee experience for all our colleagues across the
organization worldwide. The council encourages continuous and open dialogue between executive and senior
management and traditionally underrepresented groups at all levels, without fear of reprisal or retaliation, to
identify areas of improvement and carry out the message of inclusion both inside and outside our organization.
The DEI council was instrumental in forming and supporting additional Employee Resource Groups (“ERGs”),
developing a Regional Representation network and leveraging specific Talent Development and Talent
Acquisition initiatives that will positively influence the composition of our workforce.
Regulatory Matters.
The Company and its insurance subsidiaries are subject to regulation under the insurance statutes of the various
jurisdictions in which they conduct business, including essentially all states of the U.S., Canada, Singapore, Brazil,
the United Kingdom, Ireland, Chile and Bermuda. These regulations vary from jurisdiction to jurisdiction and are
generally designed to protect ceding insurance companies and policyholders by regulating the Company’s
conduct of business, financial integrity and ability to meet its obligations. Many of these regulations require
reporting of information designed to allow insurance regulators to closely monitor the Company’s performance.
Insurance Holding Company Regulation. Under applicable U.S. laws and regulations, no person, corporation or
other entity may acquire a controlling interest in the Company, unless such person, corporation or entity has
obtained the prior approval for such acquisition from the insurance commissioners of Delaware and the other
20
states in which the Company’s insurance subsidiaries are domiciled or deemed domiciled, currently California
and Georgia. Under these laws, “control” is presumed when any person acquires, directly or indirectly, 10% or
more of the voting securities of an insurance company. To obtain the approval of any change in control, the
proposed acquirer must file an application with the relevant insurance commissioner disclosing, among other
things, the background of the acquirer and that of its directors and officers, the acquirer’s financial condition and
its proposed changes in the management and operations of the insurance company. U.S. state regulators also
require prior notice or regulatory approval of material inter-affiliate transactions within the holding company
structure.
The Insurance Companies Act of Canada requires prior approval by the Minister of Finance of anyone acquiring a
significant interest in an insurance company authorized to do business in Canada. In addition, the Company is
subject to regulation by the insurance regulators of other states and foreign jurisdictions in which it is authorized
to do business. Certain of these states and foreign jurisdictions impose regulations regulating the ability of any
person to acquire control of an insurance company authorized to do business in that jurisdiction without
appropriate regulatory approval similar to those described above.
Dividends.
Under Bermuda law, Group is prohibited from declaring or paying a dividend if such payment would
reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities and its issued
share capital and share premium (additional paid-in capital) accounts. Group’s ability to pay dividends and its
operating expenses is partially dependent upon dividends from its subsidiaries. The payment of dividends by
insurance subsidiaries is limited under Bermuda law as well as the laws of the various U.S. states in which
Group’s insurance and reinsurance subsidiaries are domiciled or deemed domiciled. The limitations are
generally based upon net income (loss) and compliance with applicable policyholders’ surplus or minimum
solvency and liquidity requirements as determined in accordance with the relevant statutory accounting
practices. Under Irish corporate and regulatory law, Holdings Ireland, Everest Dublin Holdings and their
subsidiaries are limited as to the dividends they can pay based on retained earnings and net income (loss) and/or
capital and minimum solvency requirements. As Holdings has outstanding debt obligations, it is dependent upon
dividends and other permissible payments from its operating subsidiaries to enable it to meet its debt and
operating expense obligations and to pay dividends.
Under Bermuda law, Bermuda Re, Everest International and Everest Assurance are unable to declare or make
payment of a dividend if they fail to meet their minimum solvency margin or minimum liquidity ratio. As long
term insurers, Bermuda Re and Everest Assurance are also unable to declare or pay a dividend to anyone who is
not a policyholder unless, after payment of the dividend, the value of the assets in their long term business fund,
as certified by their approved actuary, exceeds their liabilities for long term business by at least the $250,000
minimum solvency margin. Prior approval of the Bermuda Monetary Authority is required if Bermuda Re’s,
Everest International’s or Everest Assurance’s dividend payments would exceed 25% of their prior year end
statutory capital and surplus. At December 31, 2022, Bermuda Re, Everest International and Everest Assurance
exceeded their solvency and liquidity requirements.
The payment of dividends to Holdings by Everest Re is subject to limitations imposed by Delaware law.
Generally, Everest Re may only pay dividends out of its statutory earned surplus, which was $5.6 billion at
December 31, 2022, and only after it has given 10 days prior notice to the Delaware Insurance Commissioner.
During this 10-day period, the Commissioner may, by order, limit or disallow the payment of ordinary dividends
if the Commissioner finds the insurer to be presently or potentially in financial distress. Further, the maximum
amount of dividends that may be paid without the prior approval of the Delaware Insurance Commissioner in
any twelve month period is the greater of (1) 10% of the insurer’s statutory surplus as of the end of the prior
calendar year or (2) the insurer’s statutory net income (loss), not including realized capital gains (losses), for the
prior calendar year. Accordingly, the maximum amount that will be available for the payment of dividends by
Everest Re in 2023 without triggering the requirement for prior approval of regulatory authorities in connection
with a dividend is $555 million.
21
Insurance Regulation.
Bermuda Re and Everest International are not admitted to do business in any jurisdiction
in the U.S. These entities conduct their insurance business from their offices in Bermuda, and in the case of
Bermuda Re, its branch in the UK. Everest Assurance, by virtue of its one-time election under section 953(d) of
the U.S. Internal Revenue Code to be a U.S. income tax paying “Controlled Foreign Corporation”, is admitted to
do business in the U.S. and Bermuda. In Bermuda, Bermuda Re, Everest International, Everest Assurance and
Mt. Logan Re are regulated by the Insurance Act 1978 (as amended) and related regulations (the “Act”). The Act
establishes solvency and liquidity standards and auditing and reporting requirements and subjects Bermuda Re,
Everest International and Everest Assurance to the supervision, investigation and intervention powers of the
Bermuda Monetary Authority. Under the Act, Bermuda Re and Everest International, as Class 4 insurers, are
each required to maintain a principal office in Bermuda, to maintain a minimum of $100 million in statutory
capital and surplus, to have an independent auditor approved by the Bermuda Monetary Authority conduct an
annual audit and report on their respective statutory and U.S. GAAP financial statements and filings and to have
an appointed loss reserve specialist (also approved by the Bermuda Monetary Authority) review and report on
their respective loss reserves annually. Under the Act, Everest Assurance is licensed as a Class 3A insurer for
general business and as a Class C insurer for long-term business.
Bermuda Re is also registered under the Act as long term insurer and is thereby authorized to write life and
annuity business. As a long term insurer, Bermuda Re is required to maintain $250,000 in statutory capital
separate from their Class 4 minimum statutory capital and surplus, to maintain long term business funds, to
separately account for this business and to have an approved actuary prepare a certificate concerning their long
term business assets and liabilities to be filed annually. Bermuda Re’s operations in the United Kingdom and
worldwide are subject to regulation by the Prudential Regulation Authority (the “PRA”). The PRA imposes
solvency, capital adequacy, audit, financial reporting and other regulatory requirements on insurers transacting
business in the United Kingdom. Bermuda Re presently meets or exceeds all of the PRA’s solvency and capital
requirements.
U.S. domestic property and casualty insurers, including reinsurers, are subject to regulation by their state of
domicile and by those states in which they are licensed. The regulation of reinsurers is typically focused on
financial condition, investments, management and operation. The rates and policy terms of reinsurance
agreements are generally not subject to direct regulation by any governmental authority.
The operations of Everest Re’s foreign branch offices in Canada and Singapore are subject to regulation by the
insurance regulatory officials of those jurisdictions. Management believes that the Company is in compliance
with applicable laws and regulations pertaining to its business and operations.
Everest Indemnity, Everest National, Everest Security, Everest Denali and Everest Premier are subject to
regulations similar to the U.S. regulations applicable to Everest Re. In addition, these companies must comply
with substantial regulatory requirements in each state where they conduct business. These additional
requirements include, but are not limited to, rate and policy form requirements, requirements with regard to
licensing, agent appointments, participation in residual markets and claim handling procedures. These
regulations are primarily designed for the protection of policyholders.
The operations of Ireland Insurance and its branch offices in Netherlands, Germany, France and Spain are subject
to regulation by the insurance regulatory officials of those jurisdictions. Management believes that the
Company is in compliance with applicable laws and regulations pertaining to its business and operations.
Licenses.
Everest Re is a licensed property and casualty insurer and/or reinsurer in all states, the District of
Columbia, Puerto Rico and Guam. Such licensing enables U.S. domestic ceding company clients to take credit for
uncollateralized reinsurance receivables from Everest Re in their statutory financial statements.
Everest Re is licensed as a property and casualty reinsurer in Canada. It is also authorized to conduct reinsurance
business in Singapore and Brazil. Everest Re can also write reinsurance in other foreign countries. Because some
jurisdictions require a reinsurer to register in order to be an acceptable market for local insurers, Everest Re is
22
registered as a foreign insurer and/or reinsurer in the following countries: Bolivia, Brazil, Chile, China, Colombia,
Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, India, Mexico, Nicaragua, Panama, Paraguay,
the Philippines, Singapore and Venezuela.
Everest National is licensed in 50 states, the District of Columbia and Puerto Rico.
Everest Indemnity is a Delaware Domestic Surplus Lines Insurer and is eligible to write insurance on a surplus
lines basis in the 50 states, the District of Columbia and Puerto Rico.
Everest Security is licensed in Georgia and Alabama and is approved as an eligible surplus lines insurer in
Delaware.
Everest Denali is licensed in 50 states and the District of Columbia. Everest Premier is licensed in 50 states and
the District of Columbia.
Bermuda Re and Everest International are registered as Class 4 insurers in Bermuda, and Bermuda Re is also
registered as a long-term insurer in Bermuda. Bermuda Re is also registered as a certified reinsurer in New York
and Delaware and is registered as a reciprocal reinsurer in: Delaware; California; Massachusetts; Michigan;
Minnesota; New Hampshire; New York; Ohio and Texas. Bermuda Re is also an authorized reinsurer in the U.K.
and is also registered as a reinsurer in China.
Everest Assurance is registered as a Class 3A general business insurer in Bermuda and a Class C long-term insurer
in Bermuda. By virtue of its one-time election under section 953(d) of the U.S. Internal Revenue Code to be a
U.S. income tax paying “Controlled Foreign Corporation,” Everest Assurance may operate in both the U.S. and
Bermuda. Everest Assurance is also considered an approved/eligible alien surplus lines insurer in the 50 states
and the District of Columbia In addition, Everest Assurance can also write reinsurance in other foreign countries.
Because some jurisdictions require a reinsurer to register in order to be an acceptable market for local insurers ,
Everest Assurance is registered as a foreign insurer and/or reinsurance in the following countries: Bolivia,
Columbia, Chile, Ecuador, Guatemala, Mexico and Paraguay.
Ireland Re is licensed to write non-life reinsurance for the London and European markets.
Ireland Insurance is licensed to write insurance for the European markets. In addition, Ireland Insurance is
considered an approved/eligible alien surplus lines insurer in the 50 states and the District of Columbia
Everest Canada is licensed to write property and casualty insurance in Canada.
Everest Compañia de Seguros Generales Chile S.A. is an insurance corporation authorized by the general laws of
Chile.
Periodic Examinations.
Led by their state of domicile, U.S. insurance companies are subject to periodic financial
examination of their affairs, usually every three to five years. U.S. insurance companies are also subject to
examinations by the various state insurance departments where they are licensed concerning compliance with
applicable conduct of business regulations. In addition, foreign insurance companies and foreign branch offices
are subject to examination and review by regulators in their various jurisdictions. None of the reports of these
examinations or reviews contained any material findings or recommendations.
NAIC Risk-Based Capital Requirements. The U.S. National Association of Insurance Commissioners (“NAIC”) has
developed a formula to measure the statutory minimum amount of capital required for a property and casualty
insurance company to support its overall business operations in light of its size and risk profile. The major
categories of a company’s risk profile are its asset risk, credit risk, and underwriting risk. The standard is an
effort to anticipate insolvencies. This allows regulators to take actions that could limit the impact of these
insolvencies on policyholders.
23
Under the approved formula, a company’s adjusted statutory surplus (end of period surplus adjusted for items
not currently applicable to the Everest companies) is compared to its risk based capital (“RBC”). If this ratio is
above a minimum threshold, no action is necessary. Below this threshold are four distinct action levels at which
an insurer’s domiciliary state regulator can intervene with increasing degrees of authority over an insurer as the
ratio of adjusted surplus to RBC decreases. The mildest intervention requires an insurer to submit a plan of
appropriate corrective actions. The most severe action requires an insurer to be rehabilitated or liquidated.
Based on their financial positions at December 31, 2022, Everest Re, Everest National, Everest Indemnity, Everest
Security, Everest Denali and Everest Premier exceed the minimum thresholds.
Tax Matters.
The following summary of the taxation of the Company is based on current law. There can be no assurance that
legislative, judicial, or administrative changes will not be enacted that might materially affect this summary.
Bermuda.
Bermuda subsidiaries. Group and its Bermuda subsidiaries have received an undertaking from the Minister of
Finance in Bermuda that, in the event of any taxes being imposed, Group and its Bermuda subsidiaries will be
exempt from taxation in Bermuda until March 2035. Non-Bermuda branches of Bermuda subsidiaries are
subject to local taxes in the jurisdictions in which they operate.
United States. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The Internal
Revenue Service (“IRS”) and the United States Treasury Department (“U.S. Treasury”) have subsequently issued
both proposed and final regulations related to the new law. Management continues to monitor this guidance as
it is issued to determine the impact on the Company and acts if necessary. Group’s U.S. subsidiaries conduct
business in and are subject to taxation in the U.S. Non-U.S. branches of U.S. subsidiaries are subject to both local
taxation in the jurisdictions in which they operate and U.S. corporate income tax but are generally relieved from
double taxation through the use of foreign tax credits against their U.S. income tax liability. Should the U.S.
subsidiaries distribute current or accumulated earnings and profits in the form of dividends or otherwise, the
Company would be subject to withholding taxes. The cumulative amount that would be subject to U.S.
withholding tax, if distributed, is not practicable to compute. Group and its Bermuda subsidiaries believe that
they have operated and will continue to operate their businesses in a manner that will not cause them to
generate income treated as effectively connected with the conduct of a trade or business within the U.S. On this
basis, Group does not expect that it and its Bermuda subsidiaries will be required to pay U.S. corporate income
taxes other than withholding taxes on certain investment income and premium excise taxes. If Group or its
Bermuda subsidiaries were to become subject to U.S. income tax, there could be a material adverse effect on
the Company’s financial condition, results of operations and cash flows.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax
provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share
repurchase excise tax and do not expect the legislation to have a material impact on our results of operations. As
the IRS issues additional guidance, we will evaluate any impact to our consolidated financial statements.
United Kingdom. Bermuda Re’s UK branch, the Company’s Lloyd’s Syndicate and Ireland Insurance’s UK branch
conduct business in the UK and are subject to taxation in the UK. Bermuda Re believes that it has operated and
will continue to operate its Bermuda operation in a manner which will not cause them to be subject to UK
taxation. If Bermuda Re’s Bermuda operations were to become subject to UK income tax, there could be a
material adverse impact on the Company’s financial condition, results of operations and cash flow.
Ireland. Holdings Ireland, Everest Dublin Holdings, Ireland Re and Ireland Insurance conduct business in Ireland
and are subject to taxation in Ireland.
24
Switzerland. Ireland Re’s Zurich branch conducts business in Switzerland and is subject to taxation in
Switzerland.
Netherlands. Ireland Insurance’s Netherland branch conducts business in the Netherlands and is subject to
taxation in the Netherlands.
Germany: Ireland Insurance’s German branch conducts business in Germany and is subject to taxation in
Germany.
Spain: Ireland Insurance’s Spanish branch conducts business in Spain and is subject to taxation in Spain.
France: Ireland Insurance’s French branch conducts business in France and is subject to taxation in France.
Belgium: Ireland Insurance’s Belgium branch conducts business in Belgium and is subject to taxation in Belgium.
Singapore: Everest International Reinsurance Ltd’s Singapore branch conducts business in Singapore and is
subject to taxation in Singapore.
Chile: Everest Insurance Chile conducts business in Chile and is subject to taxation in Chile.
Available Information.
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
proxy statements and amendments to those reports are available free of charge through the Company’s internet
website at http://www.everestre.com as soon as reasonably practicable after such reports are electronically
filed with the Securities and Exchange Commission (the “SEC”).
ITEM 1A. RISK FACTORS
In addition to the other information provided in this report, the following risk factors should be considered when
evaluating an investment in our securities. If the circumstances contemplated by the individual risk factors
materialize, our business, financial condition and results of operations could be materially and adversely affected
and the trading price of our common shares could decline significantly.
25
RISKS RELATING TO OUR BUSINESS
Our results could be adversely affected by catastrophic events.
We are exposed to unpredictable catastrophic events, including weather-related and other natural catastrophes,
as well as acts of terrorism. The frequency and/or severity of catastrophic events may be impacted in the future
by the continued effects of climate change. Climate change and resulting changes in global temperatures,
weather patterns, and sea levels may both increase the frequency and severity of natural catastrophes and the
resulting losses in the future and impact our risk modeling assumptions. We cannot predict the impact that
changing climate conditions, if any, may have on our results of operations or our financial condition.
Additionally, we cannot predict how legal, regulatory and/or social responses to concerns around global climate
change and the resulting impact on various sectors of the economy may impact our business. Any material
reduction in our operating results caused by the occurrence of one or more catastrophes could inhibit our ability
to pay dividends or to meet our interest and principal payment obligations. By way of illustration, during the
past five calendar years, pre -tax catastrophe losses, net of reinsurance, were as follows:
Calendar year:
Pre-tax net catastrophe losses
(Dollars in millions)
2022
$
1,055
2021
1,135
2020
425
2019
576
2018
1,800
Our losses from future catastrophic events could exceed our projections.
We use projections of possible losses from future catastrophic events of varying types and magnitudes as a
strategic underwriting tool. We use these loss projections to estimate our potential catastrophe losses in certain
geographic areas and decide on the placement of retrocessional coverage or other actions to limit the extent of
potential losses in a given geographic area. These loss projections are approximations, reliant on a mix of
quantitative and qualitative processes, and actual losses may exceed the projections by a material amount,
resulting in a material adverse effect on our financial condition and results of operations.
26
If our loss reserves are inadequate to meet our actual losses, our net income would be reduced or we could incur
a loss.
We are required to maintain reserves to cover our estimated ultimate liability of losses and LAE for both
reported and unreported claims incurred. These reserves are only estimates of what we believe the settlement
and administration of claims will cost based on facts and circumstances known to us. In setting reserves for our
reinsurance liabilities, we rely on claim data supplied by our ceding companies and brokers and we employ
actuarial and statistical projections. The information received from our ceding companies is not always timely or
accurate, which can contribute to inaccuracies in our loss projections. Because of the uncertainties that
surround our estimates of loss and LAE reserves, we cannot be certain that ultimate losses and LAE payments
will not exceed our estimates. If our reserves are deficient, we would be required to increase loss reserves in the
period in which such deficiencies are identified which would cause a charge to our earnings and a reduction of
capital. During the past five calendar years, the reserve re-estimation process resulted in an increase to our pre-
tax net income in 2022, 2021 and 2019 and resulted in a decrease to our pre-tax net income in 2020 and 2018:
Calendar year:
Effect on pre-tax net income
(Dollars in millions)
2022
$
1
increase
2021
9
increase
2020
401
decrease
2019
64
increase
2018
387
decrease
The difficulty in estimating our reserves is significantly more challenging as it relates to reserving for potential
A&E liabilities. At year-end 2022, 1.3% of our gross reserves were comprised of A&E reserves. A&E liabilities are
especially hard to estimate for many reasons, including the long delays between exposure and manifestation of
any bodily injury or property damage, difficulty in identifying the source of the asbestos or environmental
contamination, long reporting delays and difficulty in properly allocating liability for the asbestos or
environmental damage. Legal tactics and judicial and legislative developments affecting the scope of insurers’
liability, which can be difficult to predict, also contribute to uncertainties in estimating reserves for A&E
liabilities.
The failure to accurately assess underwriting risk and establish adequate premium rates could reduce our net
income or result in a net loss.
Our success depends on our ability to accurately assess the risks associated with the businesses on which the risk
is retained. If we fail to accurately assess the risks we retain, we may fail to establish adequate premium rates to
cover our losses and LAE. This could reduce our net income and even result in a net loss.
In addition, losses may arise from events or exposures that are not anticipated when the coverage is priced. In
addition to unanticipated events, we also face the unanticipated expansion of our exposures, particularly in long-
tail liability lines. An example of this is the expansion over time of the scope of insurers’ legal liability within the
mass tort arena, particularly for A&E exposures discussed above.
Decreases in pricing for property and casualty reinsurance and insurance could reduce our net income.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. These cycles, as well as other factors that influence aggregate supply and demand for property and
casualty insurance and reinsurance products, are outside of our control. The supply of (re)insurance is driven by
prevailing prices and levels of capacity that may fluctuate in response to a number of factors including large
catastrophic losses and investment returns being realized in the insurance industry. Demand for (re)insurance is
influenced by underwriting results of insurers and insureds, including catastrophe losses, and prevailing general
27
economic conditions. If any of these factors were to result in a decline in the demand for (re)insurance or an
overall increase in (re)insurance capacity, our net income could decrease.
If rating agencies downgrade the ratings of our insurance subsidiaries, future prospects for growth and
profitability could be significantly and adversely affected.
Our active insurance company subsidiaries currently hold financial strength ratings assigned by third-party rating
agencies which assess and rate the claims paying ability and financial strength of insurers and reinsurers.
Financial strength ratings are used by cedents, agents and brokers to assess the financial strength and credit
quality of reinsurers and insurers. A downgrade or withdrawal of any of these ratings could adversely affect our
ability to market our reinsurance and insurance products, our ability to compete with other reinsurers and
insurers, and could have a material and adverse effect on our ability to write new business that in turn could
impact our profitability and operating results. In December 2021, S&P announced proposed changes to its rating
methodologies. The proposed changes have not been finalized, so the impact, if any, that these changes may
have on our financial strength ratings is unknown.
Consistent with market practice, much of our treaty reinsurance business allows the ceding company to
terminate the contract or seek collateralization of our obligations in the event of a rating downgrade below a
certain threshold. The termination provision would generally be triggered if a rating fell below A.M. Best’s A-
rating level. To a lesser extent, Everest Re also has modest exposure to reinsurance contracts that contain
provisions for obligatory funding of outstanding liabilities in the event of a rating agency downgrade. Those
provisions would also generally be triggered if Everest Re’s rating fell below A.M. Best’s A- rating level.
The failure of our insureds, intermediaries and reinsurers to satisfy their obligations to us could reduce our
income.
In accordance with industry practice, we have uncollateralized receivables from insureds, agents and brokers
and/or rely on agents and brokers to process our payments. We may not be able to collect amounts due from
insureds, agents and brokers, resulting in a reduction to net income.
We are subject to credit risk of reinsurers in connection with retrocessional arrangements because the transfer
of risk to a reinsurer does not relieve us of our liability to the insured. In addition, reinsurers may be unwilling to
pay us even though they are able to do so. The failure of one or more of our reinsurers to honor their
obligations to us in a timely fashion would impact our cash flow and reduce our net income and could cause us
to incur a significant loss.
If we are unable or choose not to purchase reinsurance and transfer risk to the reinsurance markets, our net
income could be reduced or we could incur a net loss in the event of unusual loss experience.
We are generally less reliant on the purchase of reinsurance than many of our competitors, in part because of
our strategic emphasis on underwriting discipline and management of the cycles inherent in our business. We
try to separate our risk taking process from our risk mitigation process in order to avoid developing too great a
reliance on reinsurance. With the expansion of the capital markets into insurance linked financial instruments,
we increased our use of capital market products for catastrophe reinsurance. In addition, we have increased
some of our quota share contracts with larger retrocessions. The percentage of business that we reinsure may
vary considerably from year to year, depending on our view of the relationship between cost and expected
benefit for the contract period.
2022
2021
2020
2019
2018
Percentage of ceded written premiums to gross written premiums
11.5%
12.3%
13.0%
14.3%
12.5%
28
Our industry is highly competitive and we may not be able to compete as successfully in the future.
Our industry is highly competitive and subject to pricing cycles that can be pronounced. We compete globally in
the United States, Bermuda and international reinsurance and insurance markets with numerous competitors.
Our competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of
established worldwide insurance companies, reinsurance departments of certain insurance companies and
domestic and international underwriting operations, including underwriting syndicates at Lloyd’s of London.
According to S&P, Everest ranks among the top ten global property & casualty reinsurance groups, where more
than two-thirds of the market share is concentrated. The worldwide net premium written by the Top 40 global
reinsurance groups for both life and non-life business was estimated to be $292 billion in 2022 according to data
compiled by S&P. In addition to competitors the entry of alternative capital market products and new company
formations provide additional sources of reinsurance and insurance capacity.
We are dependent on our key personnel.
Our success has been, and will continue to be, dependent on our ability to retain the services of our Chairman,
Joseph V. Taranto (age 73) and existing key executive officers and to attract and retain additional qualified
personnel in the future. The loss of the services of any key executive officer or the inability to hire and retain
other highly qualified personnel in the future could adversely affect our ability to conduct business. Generally,
we consider key executive officers to be those individuals who have the greatest influence in setting overall
policy and controlling operations: President and Chief Executive Officer, Juan C. Andrade (age 57); Executive
Vice President and Chief Financial Officer, Mark Kociancic (age 53), Executive Vice President, Group, Chief
Operating Officer and Head of Reinsurance Division, Jim Williamson (age 49), Executive Vice President, General
Counsel, Chief Compliance Officer and Secretary, Sanjoy Mukherjee (age 56) and Executive Vice President,
President and Chief Executive Officer of the Everest Insurance
®
employment contracts with all of our key officers, which contain automatic renewal provisions that provide for
the contracts to continue indefinitely unless sooner terminated in accordance with the contract or as otherwise
may be agreed.
Special considerations apply to our Bermuda operations. Under Bermuda law, non-Bermudians, other than
spouses of Bermudians and individuals holding permanent or working resident certificates, are not permitted to
engage in any gainful occupation in Bermuda without a work permit issued by the Bermuda government. A work
permit is only granted or extended if the employer can show that, after a proper public advertisement, no
Bermudian, spouse of a Bermudian or individual holding a permanent or working resident certificate is available
who meets the minimum standards reasonably required for the position. The Bermuda government places a six-
year term limit on individuals with work permits, subject to specified exemptions for persons deemed to be key
employees of businesses with a significant physical presence in Bermuda. Currently, all our Bermuda-based
professional employees who require work permits have been granted permits by the Bermuda government that
expire at various times between February 2024 and October 2027.
Our investment values and investment income could decline because they are exposed to interest rate, credit,
and market risks.
A significant portion of our investment portfolio consists of fixed income securities and smaller portions consist
of equity securities and other investments. The fair value of our invested assets and associated investment
income fluctuate depending on general economic and market conditions. For example, the fair value of our
predominant fixed income portfolio generally increases or decreases inversely to fluctuations in interest rates.
The fair value of our fixed income securities could also decrease as a result of a downturn in the business cycle
that causes the credit quality of such securities to deteriorate. The net investment income that we realize from
future investments in fixed income securities will generally increase or decrease with interest rates.
29
Interest rate fluctuations also can cause net investment income from fixed income investments that carry
prepayment risk, such as mortgage-backed and other asset-backed securities, to differ from the income
anticipated from those securities at the time of purchase. In addition, if issuers of individual investments are
unable to meet their obligations, investment income will be reduced and realized capital losses may arise.
The majority of our fixed income securities are classified as available for sale and temporary changes in the fair
value of these investments are reflected as changes to our shareholders’ equity. Our actively managed equity
security portfolios are fair valued and any changes in fair value are reflected as net realized capital gains or
losses. As a result, a decline in the value of our securities reduces our capital or could cause us to incur a loss.
As a part of our ongoing analysis of our investment portfolio, we are required to assess current expected credit
losses for all held-to-maturity securities and evaluate expected credit losses for available-for-sale securities
when fair value is below amortized cost, which considers reasonable and supportable forecasts of future
economic conditions in addition to information about past events and current conditions. This analysis requires a
high degree of judgment. Financial assets with similar risk characteristics and relevant historical loss information
are included in the development of an estimate of expected lifetime losses. Declines in relevant stock and other
financial markets and other factors impacting the value of our investments could result in an adverse effect on
our net income and other financial results
We have invested a portion of our investment portfolio in equity securities. The value of these assets fluctuates
with changes in the markets. In times of economic weakness, the fair value of these assets may decline, and may
negatively impact net income. We also invest in non-traditional investments which have different risk
characteristics than traditional fixed income and equity securities. These alternative investments are comprised
primarily of private equity limited partnerships. The changes in value and investment income/(loss) for these
partnerships may be more volatile than over-the-counter securities.
Prolonged and severe disruptions in the overall public and private debt and equity markets, such as occurred in
early 2020 related to the COVID-19 pandemic, could result in significant realized and unrealized losses in our
investment portfolio. There could also be disruption in individual market sectors, such as occurred in the energy
sector in recent years. Such declines in the financial markets could result in significant realized and unrealized
losses on investments and could have a material adverse impact on our results of operations, equity, business
and insurer financial strength and debt ratings.
We may experience foreign currency exchange losses that reduce our net income and capital levels.
Through our Bermuda and international operations, we conduct business in a variety of foreign (non-U.S.)
currencies, principally the Euro, the British pound, the Canadian dollar, and the Singapore dollar. Assets,
liabilities, revenues and expenses denominated in foreign currencies are exposed to changes in currency
exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations, especially relative to
the U.S. dollar, may materially impact our results and financial position. In 2022, we wrote approximately 25.8%
of our coverages in non-U.S. currencies; as of December 31, 2022, we maintained approximately 19.3% of our
investment portfolio in investments denominated in non-U.S. currencies.
We are subject to cybersecurity risks that could negatively impact our business operations.
We are dependent upon our information technology platform, including our processing systems, data and
electronic transmissions in our business operations. Security breaches could expose us to the loss or misuse of
our information, litigation and potential liability. In addition, cyber incidents that impact the availability,
reliability, speed, accuracy or other proper functioning of these systems could have a significant negative impact
on our operations and possibly our results. An incident could also result in a violation of applicable privacy and
other laws, damage our reputation, cause a loss of customers or give rise to monetary fines and other penalties,
which could be significant. Management is not aware of a cybersecurity incident that has had a material impact
on our operations.
30
The NAIC has adopted an Insurance Data Security Model Law, which, when adopted by the states will require
insurers, insurance producers and other entities required to be licensed under state insurance laws to comply
with certain requirements under state insurance laws, such as developing and maintaining a written information
security program, conducting risk assessments and overseeing the data security practices of third-party vendors.
In addition, certain state insurance regulators are developing or have developed regulations that may impose
regulatory requirements relating to cybersecurity on insurance and reinsurance companies (potentially including
insurance and reinsurance companies that are not domiciled, but are licensed, in the relevant state). For
example, the New York State Department of Financial Services has a regulation pertaining to cybersecurity for all
banking and insurance entities under its jurisdiction, which was effective as of March 1, 2017, which applies to
us. We cannot predict the impact these laws and regulations will have on our business, financial condition or
results of operations, but our insurance and reinsurance companies could incur additional costs resulting from
compliance with such laws and regulations.
RISKS RELATING TO REGULATION
Insurance laws and regulations restrict our ability to operate and any failure to comply with those laws and
regulations could have a material adverse effect on our business.
We are subject to extensive and increasing regulation under U.S., state and foreign insurance laws. These laws
limit the amount of dividends that can be paid to us by our operating subsidiaries, impose restrictions on the
amount and type of investments that we can hold, prescribe solvency, accounting and internal control standards
that must be met and maintained and require us to maintain reserves. These laws also require disclosure of
material inter-affiliate transactions and require prior approval of “extraordinary” transactions. Such
“extraordinary” transactions include declaring dividends from operating subsidiaries that exceed statutory
thresholds. These laws also generally require approval of changes of control of insurance companies. The
application of these laws could affect our liquidity and ability to pay dividends, interest and other payments on
securities, as applicable, and could restrict our ability to expand our business operations through acquisitions of
new insurance subsidiaries. We may not have or maintain all required licenses and approvals or fully comply
with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and
regulations. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory
requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on
some or all of our activities or monetarily penalize us. These types of actions could have a material adverse
effect on our business. To date, no material fine, penalty or restriction has been imposed on us for failure to
comply with any insurance law or regulation.
As a result of the previous dislocation of the financial markets, Congress and the previous Presidential
administration in the United States implemented changes in the way the financial services industry is regulated.
Some of these changes are also impacting the insurance industry. For example, the U.S. Treasury established the
Federal Insurance Office with the authority to monitor all aspects of the insurance sector, monitor the extent to
which traditionally underserved communities and consumers have access to affordable non-health insurance
products, to represent the United States on prudential aspects of international insurance matters, to assist with
administration of the Terrorism Risk Insurance Program and to advise on important national and international
insurance matters. In addition, several European regulatory bodies are in process of updating existing or
developing new capital adequacy directives for insurers and reinsurers. The future impact of such initiatives or
new initiatives from the current Government Administration, if any, on our operation, net income (loss) or
financial condition cannot be determined at this time.
Regulatory challenges in the United States could adversely affect the ability of Bermuda Re to conduct business.
Bermuda Re does not intend to be licensed or admitted as an insurer or reinsurer in any U.S. jurisdiction. Under
current law, Bermuda Re generally will be permitted to reinsure U.S. risks from its office in Bermuda without
obtaining those licenses. However, the insurance and reinsurance regulatory framework is subject to periodic
31
legislative review and revision. In the past, there have been congressional and other initiatives in the United
States regarding increased supervision and regulation of the insurance industry, including proposals to supervise
and regulate reinsurers domiciled outside the United States. If Bermuda Re were to become subject to any
insurance laws of the United States or any U.S. state at any time in the future, it might be required to post
deposits or maintain minimum surplus levels and might be prohibited from engaging in lines of business or from
writing some types of policies. Complying with those laws could have a material adverse effect on our ability to
conduct business in Bermuda and international markets.
Bermuda Re may need to be licensed or admitted in additional jurisdictions to develop its business.
As Bermuda Re’s business develops, it will monitor the need to obtain licenses in jurisdictions other than
Bermuda and the U.K., where it has an authorized branch, in order to comply with applicable law or to be able to
engage in additional insurance-related activities. In addition, Bermuda Re may be at a competitive disadvantage
in jurisdictions where it is not licensed or does not enjoy an exemption from licensing relative to competitors
that are so licensed or exempt from licensing. Bermuda Re may not be able to obtain any additional licenses
that it determines are necessary or desirable. Furthermore, the process of obtaining those licenses is often
costly and may take a long time.
Bermuda Re’s ability to write reinsurance may be severely limited if it is unable to arrange for security to back its
reinsurance.
Many jurisdictions do not permit insurance companies to take credit for reinsurance obtained from unlicensed
or non-admitted insurers on their statutory financial statements without appropriate security. Bermuda Re’s
reinsurance clients typically require it to post a letter of credit or enter into other security arrangements. If
Bermuda Re is unable to obtain or maintain a letter of credit facility on commercially acceptable terms or is
unable to arrange for other types of security, its ability to operate its business may be severely limited. If
Bermuda Re defaults on any letter of credit that it obtains, it may be required to prematurely liquidate a
substantial portion of its investment portfolio and other assets pledged as collateral.
RISKS RELATING TO GROUP’S SECURITIES
Because of our holding company structure, our ability to pay dividends, interest and principal is dependent on our
receipt of dividends, loan payments and other funds from our subsidiaries.
Group and Holdings are holding companies, each of whose most significant asset consists of the stock of its
operating subsidiaries. As a result, each of Group’s and Holdings’ ability to pay dividends, interest or other
payments on its securities in the future will depend on the earnings and cash flows of the operating subsidiaries
and the ability of the subsidiaries to pay dividends or to advance or repay funds to it. This ability is subject to
general economic, financial, competitive, regulatory and other factors beyond our control. Payment of dividends
and advances and repayments from some of the operating subsidiaries are regulated by U.S., state and foreign
insurance laws and regulatory restrictions, including minimum solvency and liquidity thresholds. Accordingly,
the operating subsidiaries may not be able to pay dividends or advance or repay funds to Group and Holdings in
the future, which could prevent us from paying dividends, interest or other payments on our securities.
Provisions in Group’s bye-laws could have an anti-takeover effect, which could diminish the value of its common
shares.
Group’s bye-laws contain provisions that could delay or prevent a change of control that a shareholder might
consider favorable. The effect of these provisions could be to prevent a shareholder from receiving the benefit
from any premium over the market price of our common shares offered by a bidder in a potential takeover.
Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions
may adversely affect the prevailing market price of our common shares if they are viewed as discouraging
takeover attempts in the future.
32
For example, Group’s bye-laws contain the following provisions that could have an anti-takeover effect:
●
the total voting power of any shareholder owning more than 9.9% of the common shares will be reduced to
9.9% of the total voting power of the common shares;
●
the board of directors may decline to register any transfer of common shares if it has reason to believe that
the transfer would result in:
i.)
any person that is not an investment company beneficially owning more than 5.0% of any class
of the issued and outstanding share capital of Group,
ii.)
any person holding controlled shares in excess of 9.9% of any class of the issued and
outstanding share capital of Group, or
iii.)
any adverse tax, regulatory or legal consequences to Group, any of its subsidiaries or any of its
shareholders;
●
Group also has the option to redeem or purchase all or part of a shareholder’s common shares to the extent
the board of directors determines it is necessary or advisable to avoid or cure any adverse or potential
adverse consequences if:
i.)
any person that is not an investment company beneficially owns more than 5.0% of any class of
the issued and outstanding share capital of Group,
ii.)
any person holds controlled shares in excess of 9.9% of any class of the issued and outstanding
share capital of Group, or
iii.)
share ownership by any person may result in adverse tax, regulatory or legal consequences to
Group, any of its subsidiaries or any other shareholder.
The Board of Directors has indicated that it will apply these bye-law provisions in such manner that “passive
institutional investors” will be treated similarly to investment companies. For this purpose, “passive institutional
investors” include all persons who are eligible, pursuant to Rule 13d-1(b)(1) under the U.S. Securities Exchange
Act of 1934, (“the Exchange Act”) to file a short-form statement on Schedule 13G, other than an insurance
company or any parent holding company or control person of an insurance company.
Applicable insurance laws may also have an anti-takeover effect.
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from
the insurance commissioner of the state where that insurance company is domiciled or deemed commercially
domiciled. Prior to granting approval of an application to acquire control of a domestic insurance company, a
state insurance commissioner will consider such factors as the financial strength of the applicant, the integrity
and competence of the applicant’s board of directors and executive officers, the acquiror’s plans for the future
operations of the insurance company and any anti-competitive results that may arise from the consummation of
the acquisition of control. Because any person who acquired control of Group would thereby acquire indirect
control of its insurance company subsidiaries in the U.S., the insurance change of control laws of Delaware,
California and Georgia would apply to such a transaction. This could have the effect of delaying or even
preventing such a change of control.
33
The ownership of common shares of Group by Everest Re Advisors, Ltd., a direct subsidiary of Group may have an
impact on securing approval of shareholder proposals that Group’s management supports.
As of December 31, 2022, Everest Re Advisors, Ltd. (Bermuda) owned 9,719,971 or 19.9% of the outstanding
common shares of Group. Under Group’s bye-laws, the total voting power of any shareholder owning more than
9.9% of the common shares is reduced to 9.9% of the total voting power of the common shares. Nevertheless,
Everest Re Advisors, Ltd., which is controlled by Group, has the ability to vote 9.9% of the total voting power of
Group’s common shares.
Investors in Group may have more difficulty in protecting their interests than investors in a U.S. corporation.
The Companies Act 1981 of Bermuda (the “Companies Act”), differs in material respects from the laws applicable
to U.S. corporations and their shareholders. The following is a summary of material differences between the
Companies Act, as modified in some instances by provisions of Group’s bye-laws, and Delaware corporate law
that could make it more difficult for investors in Group to protect their interests than investors in a U.S.
corporation. Because the following statements are summaries, they do not address all aspects of Bermuda law
that may be relevant to Group and its shareholders.
Alternate Directors. Group’s bye -laws provide, as permitted by Bermuda law, that each director may appoint an
alternate director, who shall have the power to attend and vote at any meeting of the board of directors or
committee at which that director is not personally present and to sign written consents in place of that director.
Delaware law permits a director to appoint another director as an alternate to attend any board committee
meeting. However, Delaware law does not provide for the designation of alternate directors with authority to
attend or vote at a meeting of the board of directors.
Committees of the Board of Directors. Group’s bye-laws provide, as permitted by Bermuda law, that the board
of directors may delegate any of its powers to committees that the board appoints, and those committees may
consist partly or entirely of non-directors. Delaware law allows the board of directors of a corporation to
delegate many of its powers to committees, but those committees may consist only of directors.
Interested Directors. Bermuda law and Group’s bye-laws provide that if a director has a personal interest in a
transaction to which the company is also a party and if the director discloses the nature of this personal interest
at the first opportunity, either at a meeting of directors or in writing to the directors, then the company will not
be able to declare the transaction void solely due to the existence of that personal interest and the director will
not be liable to the company for any profit realized from the transaction. In addition, after a director has made
the declaration of interest referred to above, he or she is allowed to be counted for purposes of determining
whether a quorum is present and to vote on a transaction in which he or she has an interest, unless disqualified
from doing so by the chairman of the relevant board meeting. Under Delaware law, an interested director could
be held liable for a transaction in which that director derived an improper personal benefit. Additionally, under
Delaware law, a corporation may be able to declare a transaction with an interested director to be void unless
one of the following conditions is fulfilled:
●
the material facts as to the interested director’s relationship or interests are disclosed or are known to the
board of directors and the board in good faith authorizes the transaction by the affirmative vote of a
majority of the disinterested directors;
●
the material facts are disclosed or are known to the shareholders entitled to vote on the transaction and the
transaction is specifically approved in good faith by the holders of a majority of the voting shares; or
●
the transaction is fair to the corporation as of the time it is authorized, approved or ratified.
Transactions with Significant Shareholders. As a Bermuda company, Group may enter into business transactions
with its significant shareholders, including asset sales, in which a significant shareholder receives, or could
34
receive, a financial benefit that is greater than that received, or to be received, by other shareholders with
prior approval from Group’s board of directors but without obtaining prior approval from the shareholders. In
the case of an amalgamation, in which two or more companies join together and continue as a single company, a
resolution of shareholders approved by a majority of at least 75% of the votes cast is required in addition to the
approval of the board of directors, except in the case of an amalgamation with and between wholly-owned
subsidiaries. If Group was a Delaware corporation, any business combination with an interested shareholder
(which, for this purpose, would include mergers and asset sales of greater than 10% of Group’s assets that would
otherwise be considered transactions in the ordinary course of business) within a period of three years from the
time the person became an interested shareholder would require prior approval from shareholders holding at
least 66 2/3% of Group’s outstanding common shares not owned by the interested shareholder, unless the
transaction qualified for one of the exemptions in the relevant Delaware statute or Group opted out of the
statute. For purposes of the Delaware statute, an “interested shareholder” is generally defined as a person who
together with that person’s affiliates and associates owns, or within the previous three years did own, 15% or
more of a corporation’s outstanding voting shares.
Takeovers. Under Bermuda law, if an acquiror makes an offer for shares of a company and, within four months
of the offer, the holders of not less than 90% of the shares that are the subject of the offer tender their shares,
the acquiror may give the nontendering shareholders notice requiring them to transfer their shares on the terms
of the offer. Within one month of receiving the notice, dissenting shareholders may apply to the court objecting
to the transfer. The burden is on the dissenting shareholders to show that the court should exercise its
discretion to enjoin the transfer. The court will be unlikely to do this unless there is evidence of fraud or bad
faith or collusion between the acquiror and the tendering shareholders aimed at unfairly forcing out minority
shareholders. Under another provision of Bermuda law, the holders of 95% of the shares of a company (the
“acquiring shareholders”) may give notice to the remaining shareholders requiring them to sell their shares on
the terms described in the notice. Within one month of receiving the notice, dissenting shareholders may apply
to the court for an appraisal of their shares. Within one month of the court’s appraisal, the acquiring
shareholders are entitled either to acquire all shares involved at the price fixed by the court or cancel the notice
given to the remaining shareholders. If shares were acquired under the notice at a price below the court’s
appraisal price, the acquiring shareholders must either pay the difference in price or cancel the notice and return
the shares thus acquired to the shareholder, who must then refund the purchase price. There are no
comparable provisions under Delaware law.
Inspection of Corporate Records. Members of the general public have the right to inspect the public documents
of Group available at the office of the Registrar of Companies and Group’s registered office, both in Bermuda.
These documents include the memorandum of association, which describes Group’s permitted purposes and
powers, any amendments to the memorandum of association and documents relating to any increase or
reduction in Group’s authorized share capital. Shareholders of Group have the additional right to inspect Group’s
bye-laws, minutes of general meetings of shareholders and audited financial statements that must be presented
to the annual general meeting of shareholders. The register of shareholders of Group also is open to inspection
by shareholders and to members of the public without charge. Group is required to maintain its share register at
its registered office in Bermuda. Group also maintains a branch register in the offices of its transfer agent in the
U.S., which is open for public inspection as required under the Companies Act. Group is required to keep at its
registered office a register of its directors and officers that is open for inspection by members of the public
without charge. However, Bermuda law does not provide a general right for shareholders to inspect or obtain
copies of any other corporate records. Under Delaware law, any shareholder may inspect or obtain copies of a
corporation’s shareholder list and its other books and records for any purpose reasonably related to that
person’s interest as a shareholder.
Shareholder’s Suits. The rights of shareholders under Bermuda law are not as extensive as the rights of
shareholders under legislation or judicial precedent in many U.S. jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would permit a shareholder to bring an
action in the name of Group to remedy a wrong done to Group where the act complained of is alleged to be
35
beyond the corporate power of Group or illegal or would result in the violation of Group’s memorandum of
association or bye-laws. Furthermore, the court would give consideration to acts that are alleged to constitute a
fraud against the minority shareholders or where an act requires the approval of a greater percentage of Group’s
shareholders than actually approved it. The winning party in an action of this type generally would be able to
recover a portion of attorneys’ fees incurred in connection with the action. Under Delaware law, class actions
and derivative actions generally are available to stockholders for breach of fiduciary duty, corporate waste and
actions not taken in accordance with applicable law. In these types of actions, the court has discretion to permit
the winning party to recover its attorneys’ fees.
Limitation of Liability of Directors and Officers. Group’s bye-laws provide that Group and its shareholders waive
all claims or rights of action that they might have, individually or in the right of the Company, against any
director or officer for any act or failure to act in the performance of that director’s or officer’s duties. However,
this waiver does not apply to claims or rights of action that arise out of fraud or dishonesty. This waiver may
have the effect of barring claims arising under U.S. federal securities laws. Under Delaware law, a corporation
may include in its certificate of incorporation provisions limiting the personal liability of its directors to the
corporation or its stockholders for monetary damages for many types of breach of fiduciary duty. However,
these provisions may not limit liability for any breach of the duty of loyalty, acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, the authorization of unlawful dividends, stock
repurchases or stock redemptions, or any transaction from which a director derived an improper personal
benefit. Moreover, Delaware provisions would not be likely to bar claims arising under U.S. federal securities
laws.
Indemnification of Directors and Officers. Group’s bye-laws provide that Group shall indemnify its directors or
officers to the full extent permitted by law against all actions, costs, charges, liabilities, loss, damage or expense
incurred or suffered by them by reason of any act done, concurred in or omitted in the conduct of Group’s
business or in the discharge of their duties. Under Bermuda law, this indemnification may not extend to any
matter involving fraud or dishonesty of which a director or officer may be guilty in relation to the company, as
determined in a final judgment or decree not subject to appeal. Under Delaware law, a corporation may
indemnify a director or officer who becomes a party to an action, suit or proceeding because of his position as a
director or officer if (1) the director or officer acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and (2) if the action or proceeding involves a criminal
offense, the director or officer had no reasonable cause to believe his or her conduct was unlawful.
Enforcement of Civil Liabilities. Group is organized under the laws of Bermuda. Some of its directors and officers
may reside outside the U.S. A substantial portion of our assets are or may be located in jurisdictions outside the
U.S. As a result, a person may not be able to affect service of process within the U.S. on directors and officers of
Group and those experts who reside outside the U.S. A person also may not be able to recover against them or
Group on judgments of U.S. courts or to obtain original judgments against them or Group in Bermuda courts,
including judgments predicated upon civil liability provisions of the U.S. federal securities laws.
Dividends. Bermuda law does not allow a company to declare or pay a dividend, or make a distribution out of
contributed surplus, if there are reasonable grounds for believing that the company, after the payment is made,
would be unable to pay its liabilities as they become due, or that the realizable value of the company’s assets
would be less, as a result of the payment, than the aggregate of its liabilities and its issued share capital and
share premium accounts. The share capital account represents the aggregate par value of issued shares, and the
share premium account represents the aggregate amount paid for issued shares over and above their par value.
Under Delaware law, subject to any restrictions contained in a company’s certificate of incorporation, a company
may pay dividends out of the surplus or, if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Surplus is the amount by which the net assets of a
corporation exceed its stated capital. Delaware law also provides that dividends may not be paid out of net
profits at any time when stated capital is less than the capital represented by the outstanding stock of all classes
having a preference upon the distribution of assets.
36
RISKS RELATING TO TAXATION
If international tax laws change, our net income may be impacted.
The Organization for Economic Co-operation and Development (“OECD”) and its member countries which
includes the U.S., have been focusing for an extended period on issues related to the taxation of multinational
corporations, such as the comprehensive plan set forth by the OECD to create an agreed set of international tax
rules for preventing base erosion and profit shifting. Recently they agreed upon a broad framework for
overhauling the taxation of multinational corporations that includes, among other things, profit reallocation
rules and a 15% global minimum corporate income tax rate. These proposals, if implemented, could have an
impact our net income and effective tax rate. Group and/or various Group companies may be subject to
additional income taxes, which would reduce our net income.
If U.S. tax law changes, our net income may be impacted.
The 2017 TCJA addressed what some members of Congress had expressed concern about for several years,
which was U.S. corporations moving their place of incorporation to low-tax jurisdictions to obtain a competitive
advantage over domestic corporations that are subject to the U.S. corporate income tax rate of 21%.
Specifically, it addressed their concern over a perceived competitive advantage that foreign -controlled insurers
and reinsurers may have had over U.S. controlled insurers and reinsurers resulting from the purchase of
reinsurance by U.S. insurers from affiliates operating in some foreign jurisdictions, including Bermuda. Such
affiliated reinsurance transactions may subject the U.S. ceding companies to a Base Erosion and Anti-abuse Tax
(“BEAT”) of 10% from 2019 to 2025 and 12.5% thereafter which may exceed its regular income tax. In addition,
new legislation as well as proposed and final regulations may further limit the ability of the Company to execute
alternative capital balancing transactions with unrelated parties. This would further impact our net income and
effective tax rate.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax
provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share
repurchase excise tax and do not expect the legislation to have a material impact on our results of operations. As
the IRS issues additional guidance, we will evaluate any impact to our consolidated financial statements.
Group and/or Bermuda Re may be subject to U.S. corporate income tax, which would reduce our net income.
Bermuda Re.
The income of Bermuda Re is a significant portion of our worldwide income from operations. We
have established guidelines for the conduct of our operations that are designed to ensure that Bermuda Re is
not engaged in the conduct of a trade or business in the U.S. Based on its compliance with those guidelines, we
believe that Bermuda Re should not be required to pay U.S. corporate income tax, other than withholding tax on
U.S. source dividend income. However, if the IRS were to successfully assert that Bermuda Re was engaged in a
U.S. trade or business, Bermuda Re would be required to pay U.S. corporate income tax on all of its income and
possibly the U.S. branch profits tax. However, if the IRS were to successfully assert that Bermuda Re was
engaged in a U.S. trade or business, we believe the U.S.-Bermuda tax treaty would preclude the IRS from taxing
Bermuda Re’s income except to the extent that its income was attributable to a U.S. permanent establishment
maintained by that subsidiary. We do not believe that Bermuda Re has a permanent establishment in the U.S. If
the IRS were to successfully assert that Bermuda Re did have income attributable to a permanent establishment
in the U.S., Bermuda Re would be subject to U.S. tax only on that income. This would reduce our net income.
Group.
We conduct our operations in a manner designed to minimize our U.S. tax exposures.
Based on our
compliance with guidelines designed to ensure that we generate only immaterial amounts, if any, of income that
is subject to the taxing jurisdiction of the U.S., we believe that we should be required to pay only immaterial
amounts, if any, of U.S. corporate income tax, other than withholding tax on U.S. source dividend income.
However, if the IRS successfully asserted that we had material amounts of income that was subject to the taxing
37
jurisdiction of the U.S., we would be required to pay U.S. corporate income tax on that income, and possibly the
U.S. branch profits tax. The imposition of such tax would reduce our net income. If Bermuda Re became subject
to U.S. income tax on its income, or if we became subject to U.S. income tax, our income could also be subject to
the U.S. branch profits tax. In that event, Group and Bermuda Re would be subject to taxation at a higher
combined effective rate than if they were organized as U.S. corporations. The combined effect of the 21% U.S.
corporate income tax rate and the 30% branch profits tax rate is a net tax rate of 44.7%. The imposition of these
taxes would reduce our net income.
Group and/or Bermuda Re may become subject to Bermuda tax, which would reduce our net income.
Group and Bermuda Re are not subject to income or profits tax, withholding tax or capital gains taxes in
Bermuda. Both companies have received an assurance from the Bermuda Minister of Finance under The
Exempted Undertakings Tax Protection Amendment Act of 2011 to the effect that if any legislation is enacted in
Bermuda that imposes any tax computed on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or inheritance tax, then that tax will not apply to us or to
any of our operations or our shares, debentures or other obligations until March 31, 2035. This assurance does
not prevent the application of any of those taxes to persons ordinarily resident in Bermuda and does not prevent
the imposition of any tax payable in accordance with the provisions of The Land Tax Act 1967 of Bermuda or
otherwise payable in relation to any land leased to Group or Bermuda Re.
Our net income will be reduced if U.S. excise and withholding taxes are increased.
Reinsurance and insurance premiums paid to Bermuda Re with respect to risks located in the U.S. are subject to
a U.S. federal excise tax of one percent. In addition, Bermuda Re is subject to federal excise tax on reinsurance
and insurance premiums with respect to risks located in the U.S. In addition, Bermuda Re is subject to
withholding tax on dividend income from U.S. sources. These taxes could increase, and other taxes could be
imposed in the future on Bermuda Re’s business, which would reduce our net income.
If U.S. tax law changes, our U.S. shareholders net income may be impacted.
U.S. shareholders. In January 2022, Treasury and the IRS released proposed regulations regarding the
determination and inclusion of related-person insurance income (RPII). The regulations, if finalized without
modifications, could cause RPII to be attributable to the Company’s U.S. shareholders prospectively and
therefore additional income tax. The imposition of such tax could reduce our U.S. shareholders return on
investment in the Company. Our U.S. shareholders net income and tax liabilities might be increased, reducing
their net income.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Everest Re’s corporate offices are located in approximately 321,500 square feet of leased office space in Warren,
New Jersey. Bermuda Re’s corporate offices are located in approximately 12,300 total square feet of leased
office space in Hamilton, Bermuda. The Company’s other 24 locations occupy a total of approximately 271,200
square feet, all of which are leased.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and
informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and
obligations under insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its
38
rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by
others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately
resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In
all such matters, the Company believes that its positions are legally and commercially reasonable. The Company
considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment
expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is
not a party to any other material litigation or arbitration.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information.
The common shares of Group trade on the New York Stock Exchange under the symbol, “RE”. The quarterly high
and low closing market prices of Group’s common shares for the periods indicated were:
2022
2021
High
Low
High
Low
First Quarter
$
304.72
$
267.35
$
255.97
$
211.08
Second Quarter
307.10
265.00
276.95
236.21
Third Quarter
285.67
245.79
273.68
236.68
Fourth Quarter
337.94
260.84
286.62
250.41
Number of Holders of Common Shares.
The number of record holders of common shares as of February 1, 2023 was 729. That number does not include
the beneficial owners of shares held in “street” name or held through participants in depositories, such as The
Depository Trust Company.
Dividend History and Restrictions.
The Board of Directors of the Company has an established policy of declaring regular quarterly cash dividends
and has paid a regular quarterly dividend in each quarter since the fourth quarter of 1995. The Company
declared and paid its quarterly cash dividend of $1.55 per share for the four quarters of 2021. The Company
declared and paid its quarterly cash dividend of $1.55 per share for the first quarter of 2022 and paid its
quarterly cash dividend of $1.65 per share for the remaining three quarters of 2022. On February 23, 2023, the
Company’s Board of Directors declared a dividend of $1.65 per share, payable on or before March 30, 2023 to
shareholders of record on March 16, 2023.
The declaration and payment of future dividends, if any, by the Company will be at the discretion of the Board of
Directors and will depend upon many factors, including the Company’s earnings, financial condition, business
needs and growth objectives, capital and surplus requirements of its operating subsidiaries, regulatory
restrictions, rating agency considerations and other factors. As an insurance holding company, the Company is
partially dependent on dividends and other permitted payments from its subsidiaries to pay cash dividends to its
shareholders. The payment of dividends to Group by Holdings and to Holdings by Everest Re is subject to
Delaware regulatory restrictions and the payment of dividends to Group by Bermuda Re is subject to Bermuda
insurance regulatory restrictions. See “Regulatory Matters – Dividends” and ITEM 8, “Financial Statements and
Supplementary Data” - Note 14 of Notes to Consolidated Financial Statements.
39
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
(a)
(b)
(c)
(d)
Maximum Number (or
Total Number of
Approximate Dollar
Shares (or Units)
Value) of Shares (or
Purchased as Part
Units) that May Yet
Total Number of
of Publicly
Be Purchased Under
Shares (or Units)
Average Price Paid
Announced Plans or
the Plans or
Period
Purchased
per Share (or Unit)
Programs
Programs (1)
January 1 - 31, 2022
—
$
—
—
1,470,181
February 1 - 28, 2022
44,455
$
299.5577
—
1,470,181
March 1 - 31, 2022
11,175
$
269.9151
5,000
1,465,181
April 1 - 30, 2022
—
$
—
—
1,465,181
May 1 - 31, 2022
1,601
$
276.8129
—
1,465,181
June 1 - 30, 2022
801
$
270.2875
—
1,465,181
July 1 - 31, 2022
—
$
—
—
1,465,181
August 1 - 31, 2022
128,764
$
252.6871
128,764
1,336,417
September 1 - 30, 2022
110,531
$
252.6578
105,007
1,231,410
October 1 - 31, 2022
2,502
$
256.7054
2,502
1,228,908
November 1 - 30, 2022
3,828
$
321.1994
—
1,228,908
December 1 - 31, 2022
—
$
—
—
1,228,908
Total
303,657
$
—
241,273
1,228,908
(1) On May 22, 2020, the Company’s executive committee of the Board of Directors approved an amendment to the share repurchase program
authorizing the Company and/or its subsidiary Holdings, to purchase up to a current aggregate of 32.0 million of the Company’s shares (recognizing that the
number of shares authorized for repurchase has been reduced by those shares that have already been purchased) in open market transactions, privately
negotiated transactions or both. As of December 31, 2022 the Company and/or its subsidiary Holdings have repurchased 30.8 million of the Company’s shares.
Recent Sales of Unregistered Securities.
None.
40
168.99
156.89
181.93
$0
$50
$100
$150
$200
$250
1/1/2017
1/1/2018
1/1/2019
1/1/2020
1/1/2021
1/1/2022
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Everest Re Group, Ltd., the S&P 500 Index
and the S&P Property & Casualty Insurance Index
Everest Re Group, Ltd.
S&P 500
S&P Property & Casualty Insurance
Performance Graph.
The following Performance Graph compares cumulative total shareholder returns on the Common Shares
(assuming reinvestment of dividends) from December 31, 2017 through December 31, 2022, with the cumulative
total return of the Standard & Poor’s 500 Index and the Standard & Poor’s Insurance (Property and Casualty)
Index.
12/17
12/18
12/19
12/20
12/21
12/22
Everest Re Group, Ltd.
100.00
100.73
131.11
113.99
136.61
168.99
S&P 500
100.00
95.62
125.72
148.85
191.58
156.89
S&P Property & Casualty Insurance
100.00
95.31
119.97
128.31
153.05
181.93
*$100 invested on 12/31/22 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
ITEM 6. SELECTED FINANCIAL DATA
Information for Item 6 is not required pursuant to General Instruction I(2) of Form 10-K.
41
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following is a discussion and analysis of our results of operations and financial condition for the years ended
December 31, 2022 and 2021. This discussion should be read in conjunction with the Consolidated Financial
Statements and related Notes, under ITEM 8 of this Form 10-K. Pursuant to the FAST Act Modernization and
Simplification of Regulation S-K, comparisons between 2020 and 2019 have been omitted from this Form 10-K
but can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in
Part II, Item 7 of our Form 10-K for the year ended December 31, 2020.
All comparisons in this discussion are to the corresponding prior year unless otherwise indicated.
Industry Conditions.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and
stronger profits followed by periods of abundant capacity, lower rates and constrained profitability.
Competition in the types of reinsurance and insurance business that we underwrite is based on many factors,
including the perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by
A.M. Best and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is
licensed or otherwise authorized, capacity and coverages offered, premiums charged, other terms and
conditions of the reinsurance and insurance business offered, services offered, speed of claims payment and
reputation and experience in lines written. Furthermore, the market impact from these competitive factors
related to reinsurance and insurance is generally not consistent across lines of business, domestic and
international geographical areas and distribution channels.
We compete in the U.S., Bermuda and international reinsurance and insurance markets with numerous global
competitors. Our competitors include independent reinsurance and insurance companies, subsidiaries or
affiliates of established worldwide insurance companies, reinsurance departments of certain insurance
companies, domestic and international underwriting operations, including underwriting syndicates at Lloyd’s of
London and certain government sponsored risk transfer vehicles. Some of these competitors have greater
financial resources than we do and have established long term and continuing business relationships, which can
be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance
business and recently, the securitization of reinsurance and insurance risks through capital markets provide
additional sources of potential reinsurance and insurance capacity and competition.
Worldwide insurance and reinsurance market conditions historically have been competitive. Generally, there is
ample insurance and reinsurance capacity relative to demand, as well as additional capital from the capital
markets through insurance linked financial instruments. These financial instruments such as side cars,
catastrophe bonds and collateralized reinsurance funds, provided capital markets with access to insurance and
reinsurance risk exposure. The capital markets demand for these products is primarily driven by the desire to
achieve greater risk diversification and potentially higher returns on their investments. This competition
generally has a negative impact on rates, terms and conditions; however, the impact varies widely by market and
coverage. Based on recent competitive behaviors in the insurance and reinsurance industry, natural catastrophe
events and the macroeconomic backdrop, there has been some dislocation in the market which we expect to
have a positive impact on rates and terms and conditions, generally, though local market specificities can vary.
The increased frequency of catastrophe losses experienced throughout 2022 appears to be pressuring the
increase of rates. As business activity continues to regain strength after the pandemic and current
macroeconomic uncertainty, rates appear to be firming in most lines of business, particularly in the casualty lines
that had seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines
are experiencing modest rate increase, while some lines such as workers’ compensation were experiencing
softer market conditions. It is too early to tell what the impact on pricing conditions will be, but it is likely to
change depending on the line of business and geography.
42
Our capital position remains a source of strength, with high quality invested assets, significant liquidity and a low
operating expense ratio. Our diversified global platform with its broad mix of products, distribution and
geography is resilient.
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses
located in the Russian Federation and/or owned by Russian nationals by numerous countries, including the
United States. The significant political and economic uncertainty surrounding the war and associated sanctions
have impacted economic and investment markets both within Russia and around the world. The Company has
recorded $45 million of losses related to the Ukraine/Russia war during 2022.
43
Financial Summary.
We monitor and evaluate our overall performance based upon financial results. The following table displays a
summary of the consolidated net income (loss), ratios and shareholders’ equity for the periods indicated.
Years Ended December 31,
Percentage Increase/(Decrease)
(Dollars in millions)
2022
2021
2020
2022/2021
2021/2020
Gross written premiums
$
13,952
$
13,050
$
10,482
6.9%
24.5%
Net written premiums
12,344
11,446
9,117
7.9%
25.5%
REVENUES:
Premiums earned
$
11,787
$
10,406
$
8,682
13.3%
19.9%
Net investment income
830
1,165
643
(28.8)%
81.3%
Net gains (losses) on investments
(455)
258
268
(276.4)%
-3.6%
Other income (expense)
(102)
37
7
NM
NM
Total revenues
12,060
11,866
9,598
1.6%
23.6%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
8,100
7,391
6,551
9.6%
12.8%
Commission, brokerage, taxes and fees
2,528
2,209
1,873
14.5%
17.9%
Other underwriting expenses
682
583
511
17.0%
14.0%
Corporate expenses
61
68
41
(10.1)%
65.0%
Interest, fees and bond issue cost amortization expense
101
70
36
43.9%
93.1%
Total claims and expenses
11,472
10,321
9,013
11.2%
14.5%
INCOME (LOSS) BEFORE TAXES
588
1,546
585
(62.0)%
164.1%
Income tax expense (benefit)
(9)
167
71
(105.3)%
133.9%
NET INCOME (LOSS)
$
597
$
1,379
$
514
(56.7)%
168.2%
RATIOS:
Point Change
Loss ratio
68.7%
71.0%
75.5%
(2.3)
(4.5)
Commission and brokerage ratio
21.4%
21.2%
21.6%
0.2
(0.4)
Other underwriting expense ratio
5.8%
5.6%
5.8%
0.2
(0.2)
Combined ratio
96.0%
97.8%
102.9%
(1.8)
(5.1)
At December 31,
Percentage Increase/(Decrease)
(Dollars in millions, except per share amounts)
2022
2021
2020
2022/2021
2021/2020
Balance sheet data:
Total investments and cash
$
29,872
$
29,673
$
25,462
0.7%
16.5%
Total assets
39,966
38,185
32,712
4.7%
16.7%
Loss and loss adjustment expense reserves
22,065
19,009
16,322
16.1%
16.5%
Total debt
3,084
3,089
1,910
(0.2)%
61.7%
Total liabilities
31,525
28,046
22,985
12.4%
22.0%
Shareholders' equity
8,441
10,139
9,726
(16.8)%
4.2%
Book value per share
215.54
258.21
243.25
(16.5)%
6.2%
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
44
Revenues.
Premiums. Gross written premiums increased by 6.9% to $14.0 billion in 2022, compared to $13.1 billion in
2021, reflecting a $653.4 million, or 16.4%, increase in our insurance business and a $248.8 million, or 2.7%,
increase in our reinsurance business. The increase in insurance premiums reflects growth across most lines of
business, particularly specialty casualty business and property/short tail business, driven by positive rate and
exposure increases, new business and strong renewal retention. The increase in reinsurance premiums was
primarily due to increases in casualty pro rata business and financial lines of business, partially offset by a decline
in property pro rata business. Net written premiums increased by 7.9% to $12.3 billion in 2022, compared to
$11.4 billion in 2021. The higher percentage increase in net written premiums compared to gross written
premiums was primarily due to a reduction in business ceded to the segregated accounts of Mt. Logan Re during
2022 compared to 2021. Premiums earned increased by 13.3% to $11.8 billion in 2022, compared to $10.4
billion in 2021. The change in premiums earned relative to net written premiums was primarily the result of
timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the
initiation of the coverage period. Accordingly, the significant increase in gross written premiums from pro rata
business during the latter half of 2021 contributed to the current year-to-date percentage increases in net
earned premiums.
Other Income (Expense). We recorded other expense of $102 million and other income of $37 million in 2022
and 2021, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates.
We recognized foreign currency exchange expense of $103 million in 2022 and foreign currency exchange
income of $28 million in 2021.
45
Claims and Expenses.
Incurred Losses and Loss Adjustment Expenses. The following table presents our incurred losses and loss
adjustment expenses (“LAE”) for the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
7,047
59.8%
$
(2)
—%
$
7,045
59.8%
Catastrophes
1,055
9.0%
—
—%
1,055
9.0%
Total segment
$
8,102
68.8%
$
(2)
—%
$
8,100
68.7%
2021
Attritional
$
6,265
60.2%
$
(9)
(0.1)%
$
6,256
60.1%
Catastrophes
1,135
10.9%
—
—%
1,135
10.9%
Total segment
$
7,400
71.1%
$
(9)
(0.1)%
$
7,391
71.0%
2020
Attritional
$
5,724
66.0%
$
401
4.7%
$
6,126
70.7%
Catastrophes
425
4.9%
—
—%
425
4.9%
Total segment
$
6,150
70.9%
$
401
4.7%
$
6,551
75.5%
Variance 2022/2021
Attritional
$
782
(0.4)
pts
$
7
0.1
pts
$
789
(0.3)
pts
Catastrophes
(80)
(1.9)
pts
—
—
pts
(80)
(1.9)
pts
Total segment
$
702
(2.3)
pts
$
7
0.1
pts
$
709
(2.2)
pts
Variance 2021/2020
Attritional
$
541
(5.8)
pts
$
(411)
(4.8)
pts
$
130
(10.6)
pts
Catastrophes
710
6.0
pts
—
—
pts
710
6.0
pts
Total segment
$
1,251
0.2
pts
$
(411)
(4.8)
pts
$
840
(4.6)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 9.6% to $8.1 billion in 2022, compared to $7.4 billion in 2021, primarily due
to an increase of $782 million in current year attritional losses, partially offset by a decrease of $80 million in
current year catastrophe losses. The increase in current year attritional losses was mainly due to the impact of
the increase in premiums earned and $45 million of attritional losses incurred due to the Ukraine/Russia war.
The current year catastrophe losses of $1.1 billion in 2022 related primarily to Hurricane Ian ($699 million), the
2022 Australia floods ($88 million), the 2022 Western Europe hailstorms ($69 million), the 2022 South Africa
flood ($50 million), the 2022 Western Europe Convective Storm ($35 million), Hurricane Fiona ($27 million), the
2022 European storms ($21 million) and the 2022 Canada derecho ($21 million), with the remaining losses
resulting from various storm events. The $1.1 billion of current year catastrophe losses in 2021 related primarily
to Hurricane Ida ($460 million), the Texas winter storms ($294 million), the European floods ($242 million), the
Canada drought loss ($80 million) and the Quad State tornadoes ($45 million) with the rest of the losses
emanating from the South Africa riots and the 2021 Australia floods.
Catastrophe losses and loss expenses typically have a material effect on our incurred losses and loss adjustment
expense results and can vary significantly from period to period. Losses from natural catastrophes contributed
9.0 percentage points to the combined ratio in 2022, compared with 10.9 percentage points in 2021. The
Company has up to $350.0 million of catastrophe bond protection (“CAT Bond”) that attaches at a $48.1 billion
PCS Industry loss threshold. This recovery would be recognized on a pro-rata basis up to a $63.8 billion PCS
Industry loss level. PCS’s current industry estimate of $47.4 million is below the attachment point. The potential
recovery under the CAT Bond is not included in the Company’s estimate for Hurricane Ian but would provide
significant downside protection should the industry loss estimate increase.
46
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by 14.5% to $2.5
billion for the year ended December 31, 2022 compared to $2.2 billion for the year ended December 31, 2021.
The increase was primarily due to the impact of the increases in premiums earned and changes in the mix of
business.
Other Underwriting Expenses. Other underwriting expenses were $682 million and $583 million in 2022 and
2021, respectively. The increase in other underwriting expenses was mainly due to the impact of the increase in
premiums earned as well as the continued build out of our insurance operations, including an expansion of the
international insurance platform.
Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to
segments, were $61 million and $68 million for the years ended December 31, 2022 and 2021, respectively. The
decrease from 2021 to 2022 was mainly due to a decrease in variable incentive compensation.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense
was $101 million and $70 million in 2022 and 2021, respectively. The increases were primarily due to the
issuance of $1.0 billion of senior notes in October 2021. Interest expense was also impacted by the movements
in the floating interest rate related to the long term subordinated notes, which is reset quarterly per the note
agreement. The floating rate was 6.99% as of December 31, 2022 compared to 2.54% as of December 31, 2021.
Income Tax Expense (Benefit). We had income tax benefit of $9 million and income tax expense of $167 million
in 2022 and 2021, respectively. Income tax expense is primarily a function of the geographic location of the
Company’s pre-tax income and the statutory tax rates in those jurisdictions. The effective tax rate (“ETR”) is
primarily affected by tax-exempt investment income, foreign tax credits and dividends. Variations in the ETR
generally result from changes in the relative levels of pre -tax income, including the impact of catastrophe losses
and net capital gains (losses), among jurisdictions with different tax rates.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax
provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share
repurchase excise tax and do not expect the legislation to have a material impact on our results of operations. As
the IRS issues additional guidance, we will evaluate any impact to our consolidated financial statements.
Net Income (Loss).
Our net income was $597 million and $1.4 billion in 2022 and 2021, respectively. The change was primarily
driven by the consolidated investment results explained below.
Ratios.
Our combined ratio decreased by 1.8 points to 96.0% in 2022, compared to 97.8% in 2021. The loss ratio
component decreased by 2.3 points in 2022 over the same period last year mainly due to a decline $80 million in
catastrophe losses. The commission and brokerage ratio components increased slightly to 21.4% in 2022
compared to 21.2% in 2021. The increase was mainly due to changes in the mix of business. The other
underwriting expense ratios increased slightly to 5.8% in 2022 compared to 5.6% in 2021. These increases were
mainly due to higher insurance operations costs.
Shareholders’ Equity.
Shareholders’ equity decreased by $1.7 billion to $8.4 billion at December 31, 2022 from $10.1 billion at
December 31, 2021, principally as a result of $1.9 billion of unrealized depreciation on available for sale fixed
maturity portfolio net of tax, $255 million of shareholder dividends, $77 million of net foreign currency
translation adjustments, and the repurchase of 241,273 common shares for $61 million, partially offset by $597
million of net income.
47
Consolidated Investment Results
Net Investment Income.
Net investment income decreased by 28.8% to $830 million in 2022 compared with net investment income of
$1.2 billion in 2021. The decrease was primarily the result of a decline of $490 million in limited partnership
income, partially offset by an additional $181 million of income from fixed maturity investments. The limited
partnership income primarily reflects decreases in their reported net asset values. As such, until these asset
values are monetized and the resultant income is distributed, they are subject to future increases or decreases in
the asset value, and the results may be volatile.
The following table shows the components of net investment income for the periods indicated.
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturities
$
742
$
561
$
542
Equity securities
16
17
19
Short-term investments and cash
28
1
5
Other invested assets
Limited partnerships
75
565
113
Other
29
63
2
Gross investment income before adjustments
890
1,208
681
Funds held interest income (expense)
2
12
13
Future policy benefit reserve income (expense)
—
(1)
(1)
Gross investment income
892
1,219
692
Investment expenses
(62)
(54)
(50)
Net investment income
$
830
$
1,165
$
643
(Some amounts may not reconcile due to rounding.)
The following tables show a comparison of various investment yields for the periods indicated.
2022
2021
2020
Annualized pre-tax yield on average cash and invested assets
2.7
%
4.4
%
2.9
%
Annualized after-tax yield on average cash and invested assets
2.3
%
3.8
%
2.5
%
Annualized return on invested assets
1.2
%
5.3
%
4.0
%
2022
2021
2020
Fixed income portfolio total return
(5.9)
%
0.5
%
6.3
%
Barclay's Capital - U.S. aggregate index
(13.0)
%
(1.5)
%
7.5
%
Common equity portfolio total return
(18.5)
%
19.0
%
26.7
%
S&P 500 index
(18.1)
%
28.7
%
18.4
%
Other invested asset portfolio total return
4.5
%
36.5
%
8.3
%
The pre -tax equivalent total return for the bond portfolio was approximately (5.9)% and 0.5%, respectively, in
2022 and 2021. The pre-tax equivalent return adjusts the yield on tax-exempt bonds to the fully taxable
equivalent.
Our fixed income and equity portfolios have different compositions than the benchmark indexes. Our fixed
income portfolios have a shorter duration because we align our investment portfolio with our liabilities. We also
hold foreign securities to match our foreign liabilities while the index is comprised of only U.S. securities. Our
equity portfolios reflect an emphasis on dividend yield and growth equities, while the index is comprised of the
largest 500 equities by market capitalization.
48
Net Realized Capital Gains (Losses).
The following table presents the composition of our net realized capital gains (losses) for the periods indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
Variance
Realized gains (losses) from dispositions:
$
40
$
72
$
80
$
(32)
$
(8)
(127)
(55)
(85)
(72)
27
(87)
17
(5)
(104)
19
165
42
37
123
5
(53)
(15)
(46)
(38)
32
112
28
(9)
85
37
18
10
8
8
2
(5)
(4)
(6)
(1)
2
13
6
2
7
4
—
—
1
—
(1)
—
—
—
—
—
—
—
1
—
(1)
Total net realized gains (losses) from dispositions:
223
124
126
99
(2)
(185)
(74)
(137)
(111)
63
38
50
(11)
(12)
61
Allowance for credit losses:
(33)
(28)
(2)
(5)
(26)
Gains (losses) from fair value adjustments:
—
—
2
—
(2)
(460)
236
279
(696)
(43)
Total
(460)
236
280
(696)
(45)
Total net gains (losses) on investments
$
(455)
$
258
$
268
$
(713)
$
(10)
(Some amounts may not reconcile due to rounding.)
Net gains (losses) on investments in 2022 primarily relate to net losses from fair value adjustments on equity
securities in the amount of $460 million as a result of equity market declines in 2022. In addition, we realized
$38 million of gains due to the disposition of investments and recorded an increase to the allowance for credit
losses of $33 million primarily related to our direct holdings of Russian corporate fixed maturity securities.
Segment Results.
The Company manages its reinsurance and insurance operations as autonomous units and key strategic
decisions are based on the aggregate operating results and projections for these segments of business.
The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business,
on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies.
Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore,
the United Kingdom and Switzerland. The Insurance operation writes property and casualty insurance directly
49
and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe,
Singapore and South America through its offices in the U.S., Canada, Chile, Singapore, the United Kingdom,
Ireland and branches located in the Netherlands, France, Germany and Spain.
These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk
management, control of aggregate catastrophe exposures, capital, investments and support operations.
Management generally monitors and evaluates the financial performance of these operating segments based
upon their underwriting results.
Underwriting results include earned premium less LAE incurred, commission and brokerage expenses and other
underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and
brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and
brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the
Company does not review and evaluate the financial results of its operating segments based upon balance sheet
data.
Our loss and LAE reserves are management’s best estimate of our ultimate liability for unpaid claims. We re-
evaluate our estimates on an ongoing basis, including all prior period reserves, taking into consideration all
available information, and in particular, recently reported loss claim experience and trends related to prior
periods. Such re-evaluations are recorded in incurred losses in the period in which re-evaluation is made.
The following discusses the underwriting results for each of our segments for the periods indicated.
Reinsurance.
The following table presents the underwriting results and ratios for the Reinsurance segment for the periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
9,316
$
9,067
$
7,282
$
249
2.7%
$
1,786
24.5%
Net written premiums
8,983
8,536
6,768
447
5.2%
1,768
26.1%
Premiums earned
$
8,663
$
7,758
$
6,466
$
905
11.7%
$
1,291
20.0%
Incurred losses and LAE
5,997
5,556
4,933
441
7.9%
623
12.6%
Commission and brokerage
2,134
1,855
1,552
279
15.1%
302
19.5%
Other underwriting expenses
218
199
176
19
9.6%
23
13.3%
Underwriting gain (loss)
$
313
$
147
$
(195)
$
166
112.6%
$
343
175.4%
Point Chg
Point Chg
Loss ratio
69.2%
71.6%
76.3%
(2.4)
(4.7)
Commission and brokerage ratio
24.6%
23.9%
24.0%
0.7
(0.1)
Other underwriting expense ratio
2.5%
2.6%
2.7%
(0.1)
(0.1)
Combined ratio
96.4%
98.1%
103.0%
(1.8)
(4.9)
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums. Gross written premiums increased by 2.7% to $9.3 billion in 2022 from $9.1 billion in 2021, primarily
due to increases in casualty pro rata business and financial lines of business, partially offset by a decline in
property pro rata business. Net written premiums increased by 5.2% to $9.0 billion in 2022 compared to $8.5
billion in 2021. The higher percentage increase in net written premiums compared to gross written premiums
50
mainly related to a reduction in business ceded to the segregated accounts of Mt. Logan Re in 2022 compared to
2021. Premiums earned increased by 11.7% to $8.7 billion in 2022, compared to $7.8 billion in 2021. The
change in premiums earned relative to net written premiums is primarily the result of timing; premiums are
earned ratably over the coverage period whereas written premiums are recorded at the initiation of the
coverage period. Accordingly, the significant increases in gross written premiums from pro rata business during
the latter half of 2021 contributed to the current year-to-date percentage increase in net earned premiums.
Incurred Losses and LAE.
The following table presents the incurred losses and LAE for the Reinsurance segment
for the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
5,070
58.5%
$
(2)
—%
$
5,067
58.5%
Catastrophes
930
10.7%
—
—%
930
10.7%
Total segment
$
6,000
69.2%
$
(2)
—%
$
5,997
69.2%
2021
Attritional
$
4,582
59.1%
$
(8)
(0.1)%
$
4,574
59.0%
Catastrophes
983
12.7%
—
—%
983
12.7%
Total segment
$
5,564
71.8%
$
(8)
(0.1)%
$
5,556
71.6%
2020
Attritional
$
4,180
64.6%
$
397
6.1%
$
4,576
70.7%
Catastrophes
357
5.5%
—
—%
357
5.5%
Total segment
$
4,537
70.1%
$
397
6.1%
$
4,933
76.3%
Variance 2022/2021
Attritional
$
488
(0.6)
pts
$
6
0.1
pts
$
494
(0.5)
pts
Catastrophes
(53)
(2.0)
pts
—
—
pts
(53)
(2.0)
pts
Total segment
$
435
(2.6)
pts
$
6
0.1
pts
$
441
(2.4)
pts
Variance 2021/2020
Attritional
$
402
(5.5)
pts
$
(405)
(6.2)
pts
$
(3)
(11.7)
pts
Catastrophes
626
7.2
pts
—
—
pts
626
7.2
pts
Total segment
$
1,028
1.7
pts
$
(405)
(6.2)
pts
$
623
(4.5)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses increased by 7.9% to $6.0 billion in 2022, compared to $5.6 billion in 2021. The increase was
primarily due to an increase of $488 million in current year attritional losses, partially offset by a decrease of $53
million in current year catastrophe losses. The increase in current year attritional losses was mainly related to
the impact of the increase in premiums earned and $45 million of attritional losses due to the Ukraine/Russia
war. The current year catastrophe losses of $930 million in 2022 related primarily to Hurricane Ian ($599
million), the 2022 Australia floods ($88 million), the Western Europe hailstorms ($69 million), the 2022 South
Africa flood ($50 million), the 2022 Western Europe Convective storm ($29 million), Hurricane Fiona ($22
million), the 2022 European storms ($21 million) and the 2022 Canada derecho ($21 million), with the remaining
losses resulting from various storm events. The $983 million of current year catastrophe losses in 2021 related
primarily to Hurricane Ida ($380 million), the Texas winter storms ($237 million), the European floods ($242
million), the Canada drought loss ($80 million) and the Quad state tornadoes ($30 million), with the rest of the
losses emanating from the 2021 South Africa riots and the 2021 Australia floods.
Segment Expenses. Commission and brokerage expense increased by 15.1% to $2.1 billion in 2022 compared to
$1.9 billion in 2021. The increase was mainly due to the impact of the increase in premiums earned and changes
51
in the mix of business. Segment other underwriting expenses increased to $218 million in 2022 from $199
million in 2021. The increase was mainly due to the increase in written premium attributable to the planned
expansion of the business.
Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
4,636
$
3,983
$
3,201
$
653
16.4%
$
782
24.4%
Net written premiums
3,361
2,910
2,349
451
15.5%
561
23.9%
Premiums earned
$
3,124
$
2,649
$
2,215
$
475
17.9%
$
434
19.6%
Incurred losses and LAE
2,103
1,835
1,617
268
14.6%
217
13.4%
Commission and brokerage
394
354
321
40
11.3%
33
10.4%
Other underwriting expenses
463
384
336
79
20.8%
48
14.3%
Underwriting gain (loss)
$
164
$
76
$
(58)
$
88
114.4%
$
135
230.7%
Point Chg
Point Chg
Loss ratio
67.3%
69.3%
73.0%
(2.0)
(3.7)
Commission and brokerage ratio
12.6%
13.4%
14.5%
(0.8)
(1.1)
Other underwriting expense ratio
14.8%
14.5%
15.1%
0.3
(0.6)
Combined ratio
94.8%
97.1%
102.6%
(2.5)
(5.5)
(Some amounts may not reconcile due to rounding.)
Premiums. Gross written premiums increased by 16.4% to $4.6 billion in 2022 compared to $4.0 billion in 2021.
The increase in insurance premiums reflects growth across most lines of business, particularly specialty casualty
and property/short tail business, driven by positive rate and exposure increases, new business and strong
renewal retention. Net written premiums increased by 15.5% to $3.4 billion in 2022 compared to $2.9 billion in
2021, which is consistent with the percentage change in gross written premiums. Premiums earned increased
17.9% to $3.1 million in 2022 compared to $2.6 billion in 2021. The change in premiums earned relative to net
written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written
premiums are recorded at the initiation of the coverage period. Accordingly, the significant increases in gross
written premiums during the latter half of 2021 contributed to the current year -to-date percentage increase in
net earned premiums.
52
Incurred Losses and LAE.
The following table presents the incurred losses and LAE for the Insurance segment for
the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,977
63.3%
$
1
—%
$
1,978
63.3%
Catastrophes
125
4.0%
—
—%
125
4.0%
Total segment
$
2,102
67.3%
$
1
—%
$
2,103
67.3%
2021
Attritional
$
1,684
63.6%
$
(1)
—%
$
1,682
63.6%
Catastrophes
153
5.8%
—
—%
153
5.8%
Total segment
$
1,836
69.4%
$
(1)
—%
$
1,835
69.3%
2020
Attritional
$
1,545
69.7%
$
5
0.2%
$
1,549
69.9%
Catastrophes
68
3.1%
—
—%
68
3.1%
Total segment
$
1,613
72.8%
$
5
0.2%
$
1,617
73.0%
Variance 2022/2021
Attritional
$
293
(0.3)
pts
$
1
—
pts
$
294
(0.3)
pts
Catastrophes
(28)
(1.8)
pts
—
—
pts
(28)
(1.8)
pts
Total segment
$
265
(2.1)
pts
$
1
—
pts
$
266
(2.0)
pts
Variance 2021/2020
Attritional
$
139
(6.1)
pts
$
(6)
(0.2)
pts
$
133
(6.3)
pts
Catastrophes
85
2.7
pts
—
—
pts
85
2.7
pts
Total segment
$
223
(3.4)
pts
$
(6)
(0.2)
pts
$
217
(3.7)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 14.6% to $2.1 billion in 2022 compared to $1.8 billion in 2021. The increase
was mainly due to an increase of $293 million in current year attritional losses, partially offset by a decrease in
current year catastrophe losses of $28 million. The increase in current year attritional losses was primarily due
to the impact of the increase in premiums earned. The current year catastrophe losses of $125 million primarily
related to Hurricane Ian ($99 million), with the remaining losses resulting from various storm events. The $153
million of current year catastrophe losses in 2021 related to Hurricane Ida ($80 million), the Texas winter storms
($58 million) and the Quad State tornadoes ($15 million).
Segment Expenses. Commission and brokerage increased by 11.3% to $394 million in 2022 compared to $354
million in 2021. Segment other underwriting expenses increased to $463 million in 2022 compared to $384
million in 2021. These increases were mainly due to the impact of the increase in premiums earned and
increased expenses related to the continued build out of the insurance business, including an expansion of the
international insurance platform.
Critical Accounting Estimates
The following is a summary of the critical accounting estimates related to accounting estimates that (1) require
management to make assumptions about highly uncertain matters and (2) could materially impact the
consolidated financial statements if management made different assumptions.
Loss and LAE Reserves. Our most critical accounting estimate is the determination of our loss and LAE reserves.
We maintain reserves equal to our estimated ultimate liability for losses and LAE for reported and unreported
53
claims for our insurance and reinsurance businesses. Because reserves are based on estimates of ultimate losses
and LAE by underwriting or accident year, we use a variety of statistical and actuarial techniques to monitor
reserve adequacy over time, evaluate new information as it becomes known and adjust reserves whenever an
adjustment appears warranted. We consider many factors when setting reserves including: (1) our exposure
base and projected ultimate premiums earned; (2) our expected loss ratios by product and class of business,
which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies and assumptions
which analyze our loss reporting and payment experience, reports from ceding companies and historical trends,
such as reserving patterns, loss payments and product mix; (4) current legal interpretations of coverage and
liability; and (5) economic conditions. Our insurance and reinsurance loss and LAE reserves represent
management’s best estimate of our ultimate liability. Actual losses and LAE ultimately paid may deviate, perhaps
substantially, from such reserves. Our net income (loss) will be impacted in a period in which the change in
estimated ultimate losses and LAE is recorded. See also ITEM 8, “Financial Statements and Supplementary Data”
- Note 1 of Notes to the Consolidated Financial Statements.
It is more difficult to accurately estimate loss reserves for reinsurance liabilities than for insurance liabilities. At
December 31, 2022, we had reinsurance reserves of $16.1 billion, of which $278 million were loss reserves for
A&E liabilities, and insurance loss reserves of $5.9 billion. A detailed discussion of additional considerations
related to A&E exposures follows later in this section.
The detailed data required to evaluate ultimate losses for our insurance business is accumulated from our
underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information received from
ceding companies. Ceding companies report losses to us in many forms dependent on the type of contract and
the agreed or contractual reporting requirements. Generally, proportional/quota share contracts require the
submission of a monthly/quarterly account, which includes premium and loss activity for the period with
corresponding reserves as established by the ceding company. This information is recorded into our records. For
certain proportional contracts, we may require a detailed loss report for claims that exceed a certain dollar
threshold or relate to a particular type of loss. Excess of loss and facultative contracts generally require
individual loss reporting with precautionary notices provided when a loss reaches a significant percentage of the
attachment point of the contract or when certain causes of loss or types of injury occur. Our experienced claims
staff handles individual loss reports and supporting claim information. Based on our evaluation of a claim, we
may establish additional case reserves (ACRs) in addition to the case reserves reported by the ceding company.
To ensure ceding companies are submitting required and accurate data, the Underwriting, Claim, Reinsurance
Accounting and Internal Audit departments of the Company perform various reviews of our ceding companies,
particularly larger ceding companies, including on-site audits of domestic ceding companies.
We sort both our reinsurance and insurance reserves into exposure groupings for actuarial analysis. We assign
our business to exposure groupings so that the underlying exposures have reasonably homogeneous loss
development characteristics and are large enough to facilitate credible estimation of ultimate losses. We
periodically review our exposure groupings and we may change our groupings over time as our business
changes. We currently use over 200 exposure groupings to develop our reserve estimates. One of the key
selection characteristics for the exposure groupings is the historical duration of the claims settlement process.
Business in which claims are reported and settled relatively quickly are commonly referred to as short tail lines,
principally property lines. Casualty claims tend to take longer to be reported and settled and casualty lines are
generally referred to as long tail lines. Our estimates of ultimate losses for shorter tail lines, with the exception
of loss estimates for large catastrophic events, generally exhibit less volatility than those for the longer tail lines.
We use similar actuarial methodologies, such as expected loss ratio, chain ladder reserving methods and
Bornhuetter-Ferguson, supplemented by judgment where appropriate, to estimate our ultimate losses and LAE
for each exposure group. Although we use similar actuarial methodologies for both short tail and long tail lines,
the faster reporting of experience for the short tail lines allows us to have greater confidence in our estimates of
ultimate losses for short tail lines at an earlier stage than for long tail lines. As a result, we utilize, as well,
exposure-based methods to estimate our ultimate losses for longer tail lines, especially for immature accident
years. For both short and long tail lines, we supplement these general approaches with analytically based
54
judgments. We cannot estimate losses from widespread catastrophic events, such as hurricanes and
earthquakes, using traditional actuarial methods. We estimate losses for these types of events based on
information derived from catastrophe models, quantitative and qualitative exposure analyses, reports and
communications from ceding companies and development patterns for historically similar events. Due to the
inherent uncertainty in estimating such losses, these estimates are subject to variability, which increases with
the severity and complexity of the underlying event.
Our key actuarial assumptions contain no explicit provisions for reserve uncertainty nor do we supplement the
actuarially determined reserves for uncertainty.
Our carried reserves at each reporting date are management’s best estimate of ultimate unpaid losses and LAE
at that date. We complete detailed reserve studies for each exposure group annually for our reinsurance and
insurance operations. The completed annual reinsurance reserve studies are “rolled forward” for each
accounting period until the subsequent reserve study is completed. Analyzing the roll-forward process involves
comparing actual reported losses to expected losses based on the most recent reserve study. We analyze
significant variances between actual and expected losses and also consider recent market, underwriting and
management criteria to determine management’s best estimate of ultimate unpaid losses and LAE.
Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and
finance departments and culminates with the input of reserve committees. Each segment reserve committee
includes the participation of the relevant parties from actuarial, finance, claims and segment senior management
and has the responsibility for recommending and approving management’s best estimate. Reserves are further
reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of such process is to
determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability. As
a result of these additional factors, in some instances the selected reserve level may be higher or lower than the
actuarial indicated estimate.
Given the inherent variability in our loss reserves, we have developed an estimated range of possible gross
reserve levels. A table of ranges by segment, accompanied by commentary on potential and historical
variability, is included in “Financial Condition - Loss and LAE Reserves”. The ranges are statistically developed
using the exposure groups used in the reserve estimation process and aggregated to the segment level. For each
exposure group, our actuaries calculate a range for each accident year based principally on two variables. The
first is the historical changes in losses and LAE incurred but not reported (“IBNR”) for each accident year over
time; the second is volatility of each accident year’s held reserves related to estimated ultimate losses, also over
time. Both are measured at various ages from the end of the accident year through the final payout of the year’s
losses. Ranges are developed for the exposure groups using statistical methods to adjust for diversification; the
ranges for the exposure groups are aggregated to the segment level, likewise, with an adjustment for
diversification. Our estimates of our reserve variability may not be comparable to those of other companies
because there are no consistently applied actuarial or accounting standards governing such presentations. Our
recorded reserves reflect our best point estimate of our liabilities and our actuarial methodologies focus on
developing such point estimates. We calculate the ranges subsequently, based on the historical variability of
such reserves.
Asbestos and Environmental Exposures. We continue to receive claims under expired insurance and reinsurance
contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous
substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or
remediation of environmental contamination or (b) bodily injury or property damage caused by the release of
hazardous substances into the land, air or water. Asbestos claims typically assert liability for bodily injury from
exposure to asbestos or for property damage resulting from asbestos or products containing asbestos.
Our reserves include an estimate of our ultimate liability for A&E claims. There are significant uncertainties
surrounding our estimates of our potential losses from A&E claims. Among the uncertainties are: (a) potentially
long waiting periods between exposure and manifestation of any bodily injury or property damage; (b) difficulty
in identifying sources of asbestos or environmental contamination; (c) difficulty in properly allocating
55
responsibility and/or liability for asbestos or environmental damage; (d) changes in underlying laws and judicial
interpretation of those laws; (e) the potential for an asbestos or environmental claim to involve many insurance
providers over many policy periods; (f) questions concerning interpretation and application of insurance and
reinsurance coverage; and (g) uncertainty regarding the number and identity of insureds with potential asbestos
or environmental exposure.
Due to the uncertainties discussed above, the ultimate losses attributable to A&E, and particularly asbestos, may
be subject to more variability than are non-A&E reserves and such variation could have a material adverse effect
on our financial condition, results of operations and/or cash flows. See also ITEM 8, “Financial Statements and
Supplementary Data” - Notes 1 and 3 of Notes to the Consolidated Financial Statements.
Reinsurance Recoverables. We have purchased reinsurance to reduce our exposure to adverse claim
experience, large claims and catastrophic loss occurrences. Our ceded reinsurance provides for recovery from
reinsurers of a portion of losses and loss expenses under certain circumstances. Such reinsurance does not
relieve us of our obligation to our policyholders. In the event our reinsurers are unable to meet their obligations
under these agreements or are able to successfully challenge losses ceded by us under the contracts, we will not
be able to realize the full value of the reinsurance recoverable balance. In some cases, we may hold full or
partial collateral for the receivable, including letters of credit, trust assets and cash. Additionally, creditworthy
foreign reinsurers of business written in the U.S., as well as capital markets’ reinsurance mechanisms, are
generally required to secure their obligations. We have established reserves for uncollectible balances based on
our assessment of the collectability of the outstanding balances. The allowance for uncollectible reinsurance
reflects management’s best estimate of reinsurance cessions that may be uncollectible in the future due to
reinsurers’ unwillingness or inability to pay. The allowance for uncollectible reinsurance comprises an allowance
and an allowance for disputed balances. Based on this analysis, the Company may adjust the allowance for
uncollectible reinsurance or charge off reinsurer balances that are determined to be uncollectible.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverable become
due, it is possible that future adjustments to the Company’s reinsurance recoverable, net of the allowance, could
be required, which could have a material adverse effect on the Company’s consolidated results of operations or
cash flows in a particular quarter or annual period.
The allowance is estimated as the amount of reinsurance recoverable exposed to loss multiplied by estimated
factors for the probability of default. The reinsurance recoverable exposed is the amount of reinsurance
recoverable net of collateral and other offsets, considering the nature of the collateral, potential future changes
in collateral values, and historical loss information for the type of collateral obtained. The probability of default
factors are historical insurer and reinsurer defaults for liabilities with similar durations to the reinsured liabilities
as estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of
economic outcomes. The Company's evaluation of the required allowance for reinsurance recoverable considers
the current economic environment as well as macroeconomic scenarios.
The Company records credit loss expenses related to reinsurance recoverable in Incurred losses and loss
adjustment expenses in the Company’s consolidated statements of operations and comprehensive income (loss).
Write-offs of reinsurance recoverable and any related allowance are recorded in the period in which the balance
is deemed uncollectible.
Premiums Written and Earned. Premiums written by us are earned ratably over the coverage periods of the
related insurance and reinsurance contracts. We establish unearned premium reserves to cover the unexpired
portion of each contract. Such reserves, for assumed reinsurance, are computed using pro rata methods based
on statistical data received from ceding companies. Premiums earned, and the related costs, which have not yet
been reported to us, are estimated and accrued. Because of the inherent lag in the reporting of written and
earned premiums by our ceding companies, we use standard accepted actuarial methodologies to estimate
earned but not reported premium at each financial reporting date. These earned but not reported premiums are
combined with reported earned premiums to comprise our total premiums earned for determination of our
56
incurred losses and loss and LAE reserves. Commission expense and incurred losses related to the change in
earned but not reported premium are included in current period company and segment financial results. See
also ITEM 8, “Financial Statements and Supplementary Data” - Note 1 of Notes to the Consolidated Financial
Statements.
The following table displays the estimated components of net earned but not reported premiums by segment for
the periods indicated.
At December 31,
(Dollars in millions)
2022
2021
2020
Reinsurance
$
2,255
$
2,055
$
1,774
Insurance
—
—
—
Total
$
2,255
$
2,055
$
1,774
(Some amounts may not reconcile due to rounding.)
Investment Valuation. Our fixed income investments are classified for accounting purposes as either available
for sale or held to maturity. The available for sale fixed maturity securities are carried at fair value and the held
to maturity fixed maturity portfolio is carried at amortized cost, net of current expected credit allowance on our
consolidated balance sheets. Our equity securities are all carried at fair value. Most securities we own are
traded on national exchanges where market values are readily available. Some of our commercial mortgage-
backed securities (“CMBS”) are valued using cash flow models and risk-adjusted discount rates. We hold some
privately placed securities, less than 10% of the portfolio, that are either valued by investment advisors or the
Company. In some instances, values provided by an investment advisor are supported with opinions from
qualified independent third parties. The Company has procedures in place to review the values received from its
investment advisors. At December 31, 2022 and 2021, our investment portfolio included $3.8 billion and $2.6
billion, respectively, of limited partnership investments whose values are reported pursuant to the equity
method of accounting. We carry these investments at values provided by the managements of the limited
partnerships and due to inherent reporting lags, the carrying values are based on values with “as of” dates from
one month to one quarter prior to our financial statement date.
At December 31, 2022, we had net unrealized losses on our available for sale fixed maturity securities, net of tax,
of $1.7 billion compared to net unrealized gains on our available for sale fixed maturity securities, net of tax, of
$239 million at December 31, 2021. Gains (losses) from market fluctuations on available for sale fixed maturity
securities at fair value are reflected as accumulated other comprehensive income (loss) in the consolidated
balance sheets. Market value declines for available for sale fixed income portfolio, which are considered credit
related, are reflected in our consolidated statements of operations and comprehensive income (loss), as realized
capital losses. We consider many factors when determining whether a market value decline is credit related,
including: (1) we have no intent to sell and, more likely than not, will not be required to sell prior to recovery,
(2) the length of time the market value has been below book value, (3) the credit strength of the issuer, (4) the
issuer’s market sector, (5) the length of time to maturity and (6) for asset-backed securities, changes in
prepayments, credit enhancements and underlying default rates. If management’s assessments change in the
future, we may ultimately record a realized loss after management originally concluded that the decline in value
was temporary.
Fixed maturity securities designated as held to maturity consist of debt securities for which the Company has
both the positive intent and ability to hold to maturity or redemption and are reported at amortized cost, net of
the current expected credit loss allowance. Interest income for fixed maturity securities held to maturity is
determined in the same manner as interest income for fixed maturity securities available for sale. The Company
evaluates fixed maturity securities classified as held to maturity for current expected credit losses utilizing risk
characteristics of each security, including credit rating, remaining time to maturity, adjusted for prepayment
considerations, and subordination level, and applying default and recovery rates, which include the
57
incorporation of historical credit loss experience and macroeconomic forecasts, to develop an estimate of
current expected credit losses.
See also ITEM 8, “Financial Statements and Supplementary Data” - Note 1 of Notes to the Consolidated Financial
Statements.
FINANCIAL CONDITION
Investments. Total investments were $28.5 billion at December 31, 2022, an increase of $241 million compared
to $28.2 billion at December 31, 2021. The rise in investments was primarily related to an increase in other
invested assets, partially offset by a decline in equity securities. The increase in other invested assets was due to
the inclusion of assets held for the implementation of a Company Owned Life Insurance (“COLI”) program in the
fourth quarter of 2022. A portion of the equity securities portfolio was sold in order to invest in the COLI assets
which accounted for the decline in equity securities.
The Company’s limited partnership investments are comprised of limited partnerships that invest in private
equity, private credit and private real estate. Generally, the limited partnerships are reported on a month or
quarter lag. We receive annual audited financial statements for all of the limited partnerships which are
prepared using fair value accounting in accordance with FASB guidance. For the quarterly reports, the Company
reviews the financial reports for any unusual changes in carrying value. If the Company becomes aware of a
significant decline in value during the lag reporting period, the loss will be recorded in the period in which the
Company identifies the decline.
The table below summarizes the composition and characteristics of our investment portfolio as of the dates
indicated.
At December 31,
2022
2021
Fixed income portfolio duration (years)
3.1
3.2
Fixed income composite credit quality
A+
A+
Reinsurance Recoverables .
Reinsurance recoverables for both paid and unpaid losses totaled $2.2 billion at December 31, 2022 and $2.1
billion at December 31, 2021. At December 31, 2022, $520 million, or 23.2%, was recoverable from Mt. Logan
Re collateralized segregated accounts; $283 million, or 12.6%, was recoverable from Munich Re and $148
million, or 6.6%, was recoverable from Endurance Re. No other retrocessionaire accounted for more than 5% of
our recoverables.
Loss and LAE Reserves.
Gross loss and LAE reserves totaled $22.1 billion and $19.0 billion at December 31, 2022
and 2021, respectively.
58
The following tables summarize gross outstanding loss and LAE reserves by segment, classified by case reserves
and IBNR reserves, for the periods indicated.
At December 31, 2022
Case
IBNR
Total
% of
(Dollars in millions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
6,045
$
9,818
$
15,862
71.9%
Insurance
1,863
4,062
5,925
26.9%
Total excluding A&E
7,908
13,880
21,787
98.7%
A&E
138
140
278
1.3%
Total including A&E
$
8,046
$
14,019
$
22,065
100.0%
(Some amounts may not reconcile due to rounding.)
At December 31, 2021
Case
IBNR
Total
% of
(Dollars in millions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
5,415
$
8,312
$
13,727
72.2%
Insurance
1,546
3,562
5,109
26.9%
Total excluding A&E
6,961
11,875
18,836
99.1%
A&E
164
10
174
0.9%
Total including A&E
$
7,125
$
11,885
$
19,009
100.0%
(Some amounts may not reconcile due to rounding.)
Changes in premiums earned and business mix, reserve re-estimations, catastrophe losses and changes in
catastrophe loss reserves and claim settlement activity all impact loss and LAE reserves by segment and in total.
Our carried loss and LAE reserves represent management’s best estimate of our ultimate liability for unpaid
claims. We continuously re-evaluate our reserves, including re-estimates of prior period reserves, taking into
consideration all available information and, in particular, newly reported loss and claim experience. Changes in
reserves resulting from such re-evaluations are reflected in incurred losses in the period when the re-evaluation
is made. Our analytical methods and processes operate at multiple levels including individual contracts,
groupings of like contracts, classes and lines of business, internal business units, segments, accident years, legal
entities, and in the aggregate. In order to set appropriate reserves, we make qualitative and quantitative
analyses and judgments at these various levels. We utilize actuarial science, business expertise and
management judgment in a manner intended to ensure the accuracy and consistency of our reserving practices.
Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and
finance departments and culminates with the input of reserve committees. Each segment reserve committee
includes the participation of the relevant parties from actuarial, finance, claims and segment senior management
and has the responsibility for recommending and approving management’s best estimate. Reserves are further
reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of such process is to
determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability.
Nevertheless, our reserves are estimates, which are subject to variation, which may be significant.
There can be no assurance that reserves for, and losses from, claim obligations will not increase in the future,
possibly by a material amount. However, we believe that our existing reserves and reserving methodologies
lessen the probability that any such increase would have a material adverse effect on our financial condition,
results of operations or cash flows.
We have included ranges for loss reserve estimates determined by our actuaries, which have been developed
through a combination of objective and subjective criteria. Our presentation of this information may not be
directly comparable to similar presentations of other companies as there are no consistently applied actuarial or
59
accounting standards governing such presentations. Our recorded reserves are an aggregation of our best point
estimates for approximately 200 reserve groups and reflect our best point estimate of our liabilities. Our
actuarial methodologies develop point estimates rather than ranges and the ranges are developed subsequently
based upon historical and prospective variability measures.
The following table below represents the reserve levels and ranges for each of our business segments for the
period indicated.
Outstanding Reserves and Ranges By Segment (1)
At December 31, 2022
As
Low
Low
High
High
(Dollars in millions)
Reported
Range %
Range
Range %
Range
Gross Reserves By Segment
Reinsurance
$
15,862
-7.4%
$
14,689
7.8%
$
17,095
Insurance
5,925
-9.9%
5,340
10.8%
6,565
Total Gross Reserves (excluding A&E)
21,787
-8.1%
20,029
8.6%
23,660
A&E (All Segments)
278
-22.9%
214
22.7%
341
Total Gross Reserves
$
22,065
-8.3%
20,243
8.8%
24,001
(Some amounts may not reconcile due to rounding.)
______________________________________________________
(1)
There can be no assurance that reserves will not ultimately exceed the indicated ranges requiring additional income (loss) statement expense.
Depending on the specific segment, the range derived for the loss reserves, excluding reserves for A&E
exposures, ranges from minus 7.4% to minus 9.9% for the low range and from plus 7.8% to plus 10.8% for the
high range. Both the higher and lower ranges are associated with the Insurance segment. The size of the range
is dependent upon the level of confidence associated with the reserve estimates. Within each range,
management’s best estimate of loss reserves is based upon the point estimate
derived by our actuaries in
detailed reserve studies. Such ranges are necessarily subjective due to the lack of generally accepted actuarial
standards with respect to their development. There can be no assurance that our claim obligations will not vary
outside of these ranges.
Additional losses, including those relating to latent injuries, and other exposures, which are as yet unrecognized,
the type or magnitude of which cannot be foreseen by us or the reinsurance and insurance industry generally,
may emerge in the future. Such future emergence, to the extent not covered by existing retrocessional
contracts, could have material adverse effects on our future financial condition, results of operations and cash
flows.
Asbestos and Environmental Exposures. A&E exposures represent a separate exposure group for monitoring and
evaluating reserve adequacy.
With respect to asbestos only, at December 31, 2022, we had net asbestos loss reserves of $233 million, or
90.5%, of total net A&E reserves, all of which was for assumed business.
See Note 3 of Notes to Consolidated Financial Statements for a summary of Asbestos and Environmental
Exposures.
Ultimate loss projections for A&E liabilities cannot be accomplished using standard actuarial techniques. We
believe that our A&E reserves represent management’s best estimate of the ultimate liability; however, there
can be no assurance that ultimate loss payments will not exceed such reserves, perhaps by a significant amount.
Industry analysts use the “survival ratio” to compare the A&E reserves among companies with such liabilities.
The survival ratio is typically calculated by dividing a company’s current net reserves by the three year average of
60
annual paid losses. Hence, the survival ratio equals the number of years that it would take to exhaust the
current reserves if future loss payments were to continue at historical levels. Using this measurement, our net
three year asbestos survival ratio was 6.9 years at December 31, 2022. These metrics can be skewed by
individual large settlements occurring in the prior three years and therefore, may not be indicative of the timing
of future payments.
LIQUIDITY AND CAPITAL RESOURCES
Capital. Shareholders’ equity at December 31, 2022 and December 31, 2021 was $8.4 billion and $10.1 billion,
respectively. Management’s objective in managing capital is to ensure its overall capital level, as well as the
capital levels of its operating subsidiaries, exceed the amounts required by regulators, the amount needed to
support our current financial strength ratings from rating agencies and our own economic capital models. The
Company’s capital has historically exceeded these benchmark levels.
Our two main operating companies Bermuda Re and Everest Re are regulated by the Bermuda Monetary
Authority (“BMA”) and the State of Delaware, Department of Insurance, respectively. Both regulatory bodies
have their own capital adequacy models based on statutory capital as opposed to GAAP basis equity. Failure to
meet the required statutory capital levels could result in various regulatory restrictions, including business
activity and the payment of dividends to their parent companies.
The regulatory targeted capital and the actual statutory capital for Bermuda Re and Everest Re were as follows:
Bermuda Re
(1)
Everest Re
(2)
At December 31,
At December 31,
(Dollars in millions)
2022
(3)
2021
2022
2021
Regulatory targeted capital
$
—
$
2,169
$
3,353
$
2,960
Actual capital
$
2,759
$
3,184
$
5,553
$
5,717
(1)
(2)
(3)
The 2022 BSCR calculation is not yet due to be completed; however, the Company anticipates that Bermuda Re's December 31, 2022 actual capital will exceed
the targeted capital level.
Our financial strength ratings as determined by A.M. Best, Moody’s and Standard & Poor’s are important as they
provide our customers and investors with an independent assessment of our financial strength using a rating
scale that provides for relative comparisons. We continue to possess significant financial flexibility and access to
debt and equity markets as a result of our financial strength, as evidenced by the financial strength ratings as
assigned by independent rating agencies. See also ITEM 1, Business – “Financial Strength Ratings”.
We maintain our own economic capital models to monitor and project our overall capital, as well as, the capital
at our operating subsidiaries. A key input to the economic models is projected income and this input is
continually compared to actual results, which may require a change in the capital strategy.
In 2022, we repurchased 241,273 shares for $61 million in the open market and paid $255 million in dividends.
During 2021, we repurchased 887,622 shares for $225 million in the open market and paid $247 million in
dividends. We may at times enter into a Rule 10b5-1 repurchase plan agreement to facilitate the repurchase of
shares. On May 22, 2020, our existing Board authorization to purchase up to 30 million of our shares was
amended to authorize the purchase of up to 32 million shares. As of December 31, 2022, we had repurchased
30.8 million shares under this authorization.
We repurchased $6 million of our long term subordinated notes during the third quarter of 2022 and recognized
a gain of $1 million on the repurchase. We may continue, from time to time, to seek to retire portions of our
outstanding debt securities through cash repurchases, in open-market purchases, privately negotiated
transactions or otherwise. Such repurchases, if any, will be subject to and depend on prevailing market
61
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any
such transactions, individually or in the aggregate, may be material.
On October 7, 2020, we issued an additional $1.0 billion of 30 year senior notes with an interest coupon rate of
3.5%. These senior notes will mature on October 15, 2050 and will pay interest semi-annually.
On October 4, 2021, we issued an additional $1.0 billion of 31 year senior notes with an interest coupon rate of
3.125%. These senior notes will mature on October 15, 2052 and will pay interest semi-annually.
Liquidity. Our liquidity requirements are generally met from positive cash flow from operations. Positive cash
flow results from reinsurance and insurance premiums being collected prior to disbursements for claims, which
disbursements generally take place over an extended period after the collection of premiums, sometimes a
period of many years. Collected premiums are generally invested, prior to their use in such disbursements, and
investment income provides additional funding for loss payments. Our net cash flows from operating activities
were $3.7 billion and $3.8 billion for the years ended December 31, 2022 and 2021, respectively. Additionally,
these cash flows reflected net catastrophe loss payments of $677 million and $834 million for the years ended
December 31, 2022 and 2021, respectively and net tax payments of $171 million and $98 million for the years
ended December 31, 2022 and 2021, respectively.
If disbursements for claims and benefits, policy acquisition costs and other operating expenses were to exceed
premium inflows, cash flow from reinsurance and insurance operations would be negative. The effect on cash
flow from insurance operations would be partially offset by cash flow from investment income. Additionally,
cash inflows from investment maturities - both short-term investments and longer term maturities are available
to supplement other operating cash flows. We do not expect to supplement negative insurance operations cash
flows from investment dispositions.
As the timing of payments for claims and benefits cannot be predicted with certainty, we maintain portfolios of
long term invested assets with varying maturities, along with short-term investments that provide additional
liquidity for payment of claims. At December 31, 2022 and December 31, 2021, we held cash and short -term
investments of $2.4 billion and $2.6 billion, respectively. Our short-term investments are generally readily
marketable and can be converted to cash. In addition to these cash and short-term investments, at December
31, 2022, we had $1.3 billion of available for sale fixed maturity securities maturing within one year or less, $7.5
billion maturing within one to five years and $5.3 billion maturing after five years. Our $281 million of equity
securities are comprised primarily of publicly traded securities that can be easily liquidated. We believe that
these fixed maturity and equity securities, in conjunction with the short -term investments and positive cash flow
from operations, provide ample sources of liquidity for the expected payment of losses in the near future. We
do not anticipate selling a significant amount of securities or using available credit facilities to pay losses and LAE
but have the ability to do so. Sales of securities might result in realized capital gains or losses. At December 31,
2022 we had $1.9 billion of net pre-tax unrealized depreciation related to available for sale fixed maturity
securities, comprised of $2.0 billion of pre-tax unrealized depreciation and $81 million of pre-tax unrealized
appreciation.
Management generally expects annual positive cash flow from operations, which reflects the strength of overall
pricing. However, given the recent set of catastrophic events, cash flow from operations may decline and could
become negative in the near term as significant claim payments are made related to the catastrophes. However,
as indicated above, the Company has ample liquidity to settle its catastrophe claims and/or any payments due
for its catastrophe bond program.
In addition to our cash flows from operations and liquid investments, we also have multiple active credit facilities
that provide commitments of up to $1.5 billion of collateralized standby letters of credit to support business
written by our Bermuda operating subsidiaries. In addition, the Company has the ability to request access to an
additional $440 million of uncommitted credit facilities, which would require approval from the applicable
62
lender. There is no guarantee the uncommitted capacity will be available to us on a future date. See Note 5 –
Credit Facilities for further details.
Exposure to Catastrophes. Like other insurance and reinsurance companies, we are exposed to multiple insured
losses arising out of a single occurrence, whether a natural event, such as a hurricane or an earthquake, or other
catastrophe, such as an explosion at a major factory. A large catastrophic event can be expected to generate
insured losses to multiple reinsurance treaties, facultative certificates and direct insurance policies across
various lines of business.
We focus on potential losses that could result from any single event, or series of events as part of our evaluation
and monitoring of our aggregate exposures to catastrophic events. Accordingly, we employ various techniques
to estimate the amount of loss we could sustain from any single catastrophic event or series of events in various
geographic areas. These techniques range from deterministic approaches, such as tracking aggregate limits
exposed in catastrophe-prone zones and applying reasonable damage factors, to modeled approaches that
attempt to scientifically measure catastrophe loss exposure using sophisticated Monte Carlo simulation
techniques that forecast frequency and severity of potential losses on a probabilistic basis.
No single computer model or group of models is currently capable of projecting the amount and probability of
loss in all global geographic regions in which we conduct business. In addition, the form, quality and granularity
of underwriting exposure data furnished by (re)insureds is not uniformly compatible with the data requirements
for our licensed models, which adds to the inherent imprecision in the potential loss projections. Further, the
results from multiple models and analytical methods must be combined to estimate potential losses by and
across business units. Also, while most models have been updated to incorporate claims information from
recent catastrophic events, catastrophe model projections are still inherently imprecise. In addition,
uncertainties with respect to future climatic patterns and cycles could add further uncertainty to loss projections
from models based on historical data.
Nevertheless, when combined with traditional risk management techniques and sound underwriting judgment,
catastrophe models are a useful tool for underwriters to price catastrophe exposed risks and for providing
management with quantitative analyses with which to monitor and manage catastrophic risk exposures by zone
and across zones for individual and multiple events.
Projected catastrophe losses are generally summarized in terms of the PML. We define PML as our anticipated
loss, taking into account contract terms and limits, caused by a single catastrophe affecting a broad contiguous
geographic area, such as that caused by a hurricane or earthquake. The PML will vary depending upon the
modeled simulated losses and the make-up of the in force book of business. The projected severity levels are
described in terms of “return periods”, such as “100-year events” and “250-year events”. For example, a 100-
year PML is the estimated loss to the current in-force portfolio from a single event which has a 1% probability of
being exceeded in a twelve month period. In other words, it corresponds to a 99% probability that the loss from
a single event will fall below the indicated PML. It is important to note that PMLs are estimates. Modeled
events are hypothetical events produced by a stochastic model. As a result, there can be no assurance that any
actual event will align with the modeled event or that actual losses from events similar to the modeled events
will not vary materially from the modeled event PML.
From an enterprise risk management perspective, management sets limits on the levels of catastrophe loss
exposure we may underwrite. The limits are revised periodically based on a variety of factors, including but not
limited to our financial resources and expected earnings and risk/reward analyses of the business being
underwritten.
Management estimates that the projected net economic loss from its largest 100-year event in a given zone is to
an Earthquake event affecting California which represents approximately 6.9% of its December 31, 2022
shareholders’ equity. Economic loss is the PML exposure, net of third party reinsurance including catastrophe
industry loss warranty cover, reduced by estimated reinstatement premiums to renew coverage and estimated
63
income taxes. The impact of income taxes on the PML depends on the distribution of the losses by corporate
entity, which is also affected by inter-affiliate reinsurance. Management also monitors and controls its largest
PMLs at multiple points along the loss distribution curve, such as loss amounts at the 20, 50, 100, 250, and 500
year return periods. This process enables management to identify and control exposure accumulations and to
integrate such exposures into enterprise risk, underwriting and capital management decisions.
Our catastrophe loss projections, segmented by risk zones, are updated quarterly and reviewed as part of a
formal risk management review process.
We believe that our greatest worldwide 1 in 100 year exposure to a single catastrophic event is to a hurricane
event affecting Southeast U.S., where we estimate we have a PML exposure, net of third party reinsurance
including catastrophe industry loss warranty cover, of $878 million. See also table under ITEM 1, “Business - Risk
Management of Underwriting and Retrocession Arrangements”.
If such a single catastrophe loss were to occur, management estimates that the net economic loss to us would be
approximately $515 million. The estimate involves multiple variables, including which Everest entity would
experience the loss, and as a result there can be no assurance that this amount would not be exceeded.
We may purchase reinsurance to cover specific business written or the potential accumulation or aggregation of
exposures across some or all of our operations. Reinsurance purchasing decisions consider both the potential
coverage and market conditions including the pricing, terms, conditions, availability and collectability of
coverage, with the aim of securing cost effective protection from financially secure counterparts. The amount of
reinsurance purchased has varied over time, reflecting our view of our exposures and the cost of reinsurance.
Information Technology. Everest’s information technology is a key component of its business operations.
Information technology systems and services are hosted at public and private cloud service providers across
multiple datacenters with processing performed at the office locations of our operating subsidiaries and
branches. We have implemented security procedures, and regularly assess and enhance our security protocols,
to ensure that our key business systems are protected, secured and backed up at off-site locations so that they
can be restored promptly if necessary. We have business continuity plans and disaster recovery plans along with
periodic testing of those plans to ensure we are capable of providing uninterrupted technology services in the
event of major systems outages with alternative secure datacenters available in case of broader outages.
Our business operations depend on the proper functioning and availability of our information technology
platform, which includes data processing and related electronic communications. We communicate
electronically internally and externally with our brokers, program managers, clients, third-party vendors,
regulators, and others. These communications and the data we handle may include personal, confidential or
proprietary information. We ensure that all our systems, data and electronic transmissions are appropriately
protected with the latest technology safeguards and meet regulatory standards.
Despite these safeguards, a significant cyber incident, including system failure, security breach and disruption by
malware or other damage could interrupt or delay our operations and possibly our results. This type of incident
may result in a violation of applicable data security, privacy, or other laws, damage our reputation, cause a loss
of customers or give rise to regulatory scrutiny as well as monetary fines and other penalties. Management is
not aware of a cybersecurity incident that has had a material impact on our operations.
64
Expected Cash Outflows. The following table shows our significant expected cash outflows for the period
indicated.
Payments due by period
Less than
More than
(Dollars in millions)
Total
1 year
1-3 years
3-5 years
5 years
Senior notes
$
2,400
$
—
$
—
$
—
$
2,400
Long term notes
219
—
—
—
219
Interest expense (1)
3,018
101
202
202
2,513
Operating lease agreements
187
21
38
32
95
Gross reserve for losses and LAE (2)
22,065
2,430
7,971
5,230
6,435
Total
$
28,409
$
3,071
$
8,211
$
5,464
$
11,662
(Some amounts may not reconcile due to rounding.)
(1)
Interest expense on long term notes is calculated at the variable floating rate of 6.99% as of December 31, 2022.
(2)
Loss and LAE reserves represent management’s best estimate of losses from claim and related settlement costs. Both the amounts and timing of such payments are
estimates, and the inherent variability of resolving claims as well as changes in market conditions make the timing of cash flows uncertain. Therefore, the ultimate
amount and timing of loss and LAE payments could differ from our estimates.
The cash outflows for senior notes and long term notes are the responsibility of Holdings. We strive to ensure
that we have sufficient cash flow, liquidity, investments and access to capital markets to satisfy these
obligations. Holdings generally depends upon dividends from Everest Re, its operating insurance subsidiary for
its funding, capital contributions from Group or access to the capital markets. Our various operating insurance
and reinsurance subsidiaries have sufficient cash flow, liquidity and investments to settle outstanding reserves
for losses and LAE. Management believes that we, and each of our entities, have sufficient financial resources or
ready access thereto, to meet all obligations.
Dividends.
During 2022 and 2021, we declared and paid common shareholder dividends of $255 million and $247 million,
respectively. As an insurance holding company, we are partially dependent on dividends and other permitted
payments from our subsidiaries to pay cash dividends to our shareholders. The payment of dividends to Group
by Holdings Ireland and Everest Dublin Holdings is subject to Irish corporate and regulatory restrictions; the
payment of dividends to Holdings Ireland by Holdings and to Holdings by Everest Re is subject to Delaware
regulatory restrictions; and the payment of dividends to Group by Bermuda Re, Everest International, Everest
Preferred International Holdings (“Preferred Holdings”), Everest Re Advisors Ltd. (“Advisors Re”) or Mt. Logan Re
is subject to Bermuda insurance regulatory restrictions. Management expects that, absent extraordinary
catastrophe losses, such restrictions should not affect Everest Re’s ability to declare and pay dividends sufficient
to support Holdings’ general corporate needs and that Holdings Ireland, Everest Dublin Holdings, Bermuda Re
and Everest International will have the ability to declare and pay dividends sufficient to support Group’s general
corporate needs. For the years ended December 31, 2022 and 2021, Everest Re paid $250 million and $0 million
of cash dividends to Holdings. For the years ended December 31, 2022 and 2021, Bermuda Re paid cash
dividends to Group of $430 million and $300 million, respectively; Everest International paid no cash dividends
to Group; Preferred Holdings paid cash dividends to Group of $46 million and $10 million, respectively; Advisors
Re paid cash dividends to Group of $0 million and $10 million, respectively; and Mt. Logan Re paid no cash
dividends to Group. See ITEM 1, “Business – Regulatory Matters – Dividends” and ITEM 8, “Financial Statements
and Supplementary Data” - Note 14 of Notes to Consolidated Financial Statements.
Market Sensitive Instruments.
The SEC’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial
statement disclosure requirements for derivative financial instruments, derivative commodity instruments and
other financial instruments (collectively, “market sensitive instruments”). We do not generally enter into market
sensitive instruments for trading purposes.
65
Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, fixed
maturity portfolio, while maintaining an adequate level of liquidity. Our mix of investments is adjusted
periodically, consistent with our current and projected operating results and market conditions. The fixed
maturity securities in the investment portfolio are comprised of non-trading securities. Additionally, we have
invested in equity securities.
The overall investment strategy considers the scope of present and anticipated Company operations. In
particular, estimates of the financial impact resulting from non-investment asset and liability transactions,
together with our capital structure and other factors, are used to develop a net liability analysis. This analysis
includes estimated payout characteristics for which our investments provide liquidity. This analysis is considered
in the development of specific investment strategies for asset allocation, duration and credit quality. The change
in overall market sensitive risk exposure principally reflects the asset changes that took place during the period.
Interest Rate Risk. Our $29.9 billion investment portfolio at December 31, 2022, is principally comprised of fixed
maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate
risk, and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The
overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by
changes in the dollar value of foreign currency denominated liabilities and their associated income statement
impact.
Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term
investments, from a change in market interest rates. In a declining interest rate environment, it includes
prepayment risk on the $4.0 billion of mortgage -backed securities in the $23.1 billion fixed maturity portfolio.
Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the
expected yield of the security.
The tables below display the potential impact of market value fluctuations and after-tax unrealized appreciation
on our fixed maturity portfolio (including $1.0 billion of short-term investments) for the period indicated based
on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal
entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To
generate appropriate price estimates on mortgage -backed securities, changes in prepayment expectations under
different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional
currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value
change under the various interest rate change scenarios.
Impact of Interest Rate Shift in Basis Points
At December 31, 2022
-200
-100
-
100
200
(Dollars in millions)
Total Fair Value
$
25,618
$
24,863
$
24,107
$
23,352
$
22,596
Fair Value Change from Base (%)
6.3%
3.1%
-%
(3.1)%
(6.3)%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,316
$
658
$
—
$
(658)
$
(1,316)
Impact of Interest Rate Shift in Basis Points
At December 31, 2021
-200
-100
-
100
200
(Dollars in millions)
Total Fair Value
$
24,973
$
24,230
$
23,487
$
22,744
$
22,001
Fair Value Change from Base (%)
6.3%
3.2%
-%
(3.2)%
(6.3)%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,294
$
647
$
—
$
(647)
$
(1,294)
66
We had $22.1 billion and $19.0 billion of gross reserves for losses and LAE as of December 31, 2022 and 2021,
respectively. These amounts are recorded at their nominal value, as opposed to present value, which would
reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time,
the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the
reserves decreases and, conversely, as interest rates decline, the present value increases. These movements are
the opposite of the interest rate impacts on the fair value of investments. While the difference between present
value and nominal value is not reflected in our financial statements, our financial results will include investment
income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations
have an expected duration of approximately 3.8 years, which is reasonably consistent with our fixed income
portfolio. If we were to discount our loss and LAE reserves, net of ceded reserves, the discount would be
approximately $3.6 billion resulting in a discounted reserve balance of approximately $16.4 billion, representing
approximately 67.9% of the value of the fixed maturity investment portfolio funds.
Equity Risk. Equity risk is the potential change in fair and/or market value of the common stock, preferred stock
and mutual fund portfolios arising from changing prices. Our equity investments consist of a diversified portfolio
of individual securities and mutual funds, which invest principally in high quality common and preferred stocks
that are traded on the major exchanges. The primary objective of the equity portfolio is to obtain greater total
return relative to our core bonds over time through market appreciation and income.
The tables below display the impact on fair/market value and after-tax change in fair/market value of a 10% and
20% change in equity prices up and down for the period indicated.
Impact of Percentage Change in Equity Fair/Market Values
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
225
$
253
$
281
$
309
$
337
After-tax Change in Fair Value
$
(46)
$
(23)
$
—
$
23
$
46
Impact of Percentage Change in Equity Fair/Market Values
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
1,461
$
1,643
$
1,826
$
2,009
$
2,191
After-tax Change in Fair Value
$
(290)
$
(145)
$
—
$
145
$
290
Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from
adverse changes in foreign currency exchange rates. Each of our non-U.S./Bermuda (“foreign”) operations
maintains capital in the currency of the country of its geographic location consistent with local regulatory
guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other
countries in which it operates. The primary foreign currency exposures for these foreign operations are the
Canadian Dollar, the Singapore Dollar, the British Pound Sterling and the Euro. We mitigate foreign exchange
exposure by generally matching the currency and duration of our assets to our corresponding operating
liabilities. In accordance with FASB guidance, the impact on the market value of available for sale fixed
maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as
part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in
relation to functional currency, on other assets and liabilities is reflected through net income as a component of
other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional
currency legal entities to the U.S. dollar. This translation amount is reported as a component of other
comprehensive income.
67
The tables below display the potential impact of a parallel and immediate 10% and 20% increase and decrease in
foreign exchange rates on the valuation of invested assets subject to foreign currency exposure for the periods
indicated. This analysis includes the after-tax impact of translation from transactional currency to functional
currency as well as the after-tax impact of translation from functional currency to the U.S. dollar reporting
currency.
Change in Foreign Exchange Rates in Percent
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax Foreign Exchange Exposure
$
(814)
$
(407)
$
—
$
407
$
814
Change in Foreign Exchange Rates in Percent
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax Foreign Exchange Exposure
$
(688)
$
(344)
$
—
$
303
$
606
Safe Harbor Disclosure.
This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We
intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements in the federal securities laws. In some cases, these statements can be identified by the use of
forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”,
“believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include
information regarding our reserves for losses and LAE, the impact of the Tax Cut and Jobs Act, the adequacy of
capital in relation to regulatory required capital, the adequacy of our provision for uncollectible balances,
estimates of our catastrophe exposure, the effects of catastrophic and pandemic events on our financial
statements, the ability of Everest Re, Holdings, Holdings Ireland, Dublin Holdings, Bermuda Re and Everest
International to pay dividends and the settlement costs of our specialized equity index put option contracts.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These
statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our
expectations. Important factors that could cause our actual events or results to be materially different from our
expectations include those discussed under the caption ITEM 1A, “Risk Factors”. We undertake no obligation to
update or revise publicly any forward-looking statements, whether as a result of new information, future events
or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Market Sensitive Instruments” in ITEM 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules
on page F-1 are filed as part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
68
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), our management,
including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal controls over financial
reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our financial statements for external purposes in
accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31,
2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in
Internal Control – Integrated Framework (2013)
. Based on our assessment
we concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on
those criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report, which appears herein.
Changes in Internal Control over Financial Reporting.
As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and
Chief Financial Officer, has evaluated our internal control over financial reporting to determine whether any
changes occurred during the fourth fiscal quarter covered by this annual report that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation,
there has been no such change during the fourth quarter.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Reference is made to the sections captioned “Information Concerning Nominees”, “Information Concerning
Continuing Directors and Executive Officers”, “Audit Committee”, “Nominating and Governance Committee”,
“Code of Ethics for CEO and Senior Financial Officers” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in our proxy statement for the 2023 Annual General Meeting of Shareholders, which will be filed
69
with the Commission within 120 days of the close of our fiscal year ended December 31, 2022 (the “Proxy
Statement”), which sections are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the sections captioned “Directors’ Compensation” and “Compensation of Executive
Officers” in the Proxy Statement, which are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
Reference is made to the sections captioned “Common Share Ownership by Directors and Executive Officers”,
“Principal Beneficial Owners of Common Shares” and “Securities Authorized for Issuance Under Equity
Compensation Plans” in the Proxy Statement, which are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Reference is made to the section captioned “Certain Transactions with Directors” in the Proxy Statement, which
is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Reference is made to the section captioned “Audit Committee Report” in the Proxy Statement, which is
incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements and Schedules.
The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules
on page F-1 are filed as part of this report.
Exhibits.
The exhibits listed on the accompanying Index to Exhibits on page E-1 are filed as part of this report except that
the certifications in Exhibit 32 are being furnished to the SEC, rather than filed with the SEC, as permitted under
applicable SEC rules.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 24,
2023.
EVEREST RE GROUP, LTD.
By:
/S/ JUAN C. ANDRADE
Juan C. Andrade
(President and Chief Executive Officer)
70
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ JUAN C. ANDRADE
President and Chief Executive Officer
(Principal Executive Officer)
February 24, 2023
Juan C. Andrade
/S/ MARK KOCIANCIC
Executive Vice President and Chief Financial
Officer
February 24, 2023
Mark Kociancic
/S/ ROBERT J. FREILING
Senior Vice President and Chief
February 24, 2023
Robert J. Freiling
Accounting Officer
/S/ JOSEPH V. TARANTO
Chairman
February 24, 2023
Joseph V. Taranto
/S/ JOHN J. AMORE
Director
February 24, 2023
John J. Amore
/S/ WILLIAM F. GALTNEY, JR.
Director
February 24, 2023
William F. Galtney, Jr.
/S/ JOHN A. GRAF
Director
February 24, 2023
John A. Graf
/S/ MERYL HARTZBAND
Director
February 24, 2023
Meryl Hartzband
/S/ GERALDINE LOSQUADRO
Director
February 24, 2023
Geraldine Losquadro
/S/ HAZEL McNEILAGE
Director
February 24, 2023
Hazel McNeilage
/S/ ROGER M. SINGER
Director
February 24, 2023
Roger M. Singer
71
INDEX TO EXHIBITS
Exhibit No.
2.
1
3.
1
3.
2
4.
1
4.
2
4.
3
4.
4
4.
5
*10.
1
*10.
2
*10.
3
*10.
4
72
*10.
5
10.
6
*10.
7
*10.
8
*10.
9
*10.
10
*10.
11
*10.
12
10.
13
*10.
14
*10.
15
10.
16
73
*10.
17
*10.
18
*10.
19
10.
20
*10.
21
*10.
22
10.
23
10.
24
10.
25
10.
26
*10.
27
10.
28
74
10.
29
10.
30
10.
31
10.
32
10.
33
10.
34
10.
35
10.
36
10.
37
10.
38
10.
39
75
10.
40
10.
41
10.
42
21.
1
23.
1
31.
1
31.
2
32.
1
101.
INS
XBRL Instance Document
101.
SCH
XBRL Taxonomy Extension Schema
101.
CAL
XBRL Taxonomy Extension Calculation Linkbase
101.
DEF
XBRL Taxonomy Extension Definition Linkbase
101.
LAB
XBRL Taxonomy Extension Label Linkbase
101.
PRE
XBRL Taxonomy Extension Presentation Linkbase
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Management contract or compensatory plan or arrangement.
F-1
EVEREST RE GROUP, LTD.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Registered Public Accounting Firm
)
F-2
21
F-5
F-6
F-7
F-8
F-9
Schedules
I
22
S-1
II
Condensed Financial Information of Registrant:
S-2
S-3
S-4
S-5
III
Supplementary Insurance Information As of and for the Years Ended
S-6
IV
S-7
Schedules other than those listed above are omitted for the reason that they are not applicable or the
information is otherwise contained in the Financial Statements.
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Everest Re Group, Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Everest Re Group, Ltd. and its subsidiaries
(the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and
comprehensive income (loss), of changes in shareholders' equity and of cash flows for each of the three years in
the period ended December 31, 2022, including the related notes and financial statement schedules listed in the
index appearing on page F-1 (collectively referred to as the “consolidated financial statements”). We also have
audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria
established in
Internal Control - Integrated Framework
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2022, based on
criteria established in
Internal Control - Integrated Framework
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in Management’s Report on Internal Control over Financial Reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
F-3
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the Reserve for Losses and Loss Adjustment Expenses
As described in Notes 1 and 3 to the consolidated financial statements, the Company maintains reserves equal to
the estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims for
both insurance and reinsurance businesses. The Company’s reserve for losses and loss adjustment expenses as
of December 31, 2022 was $22.1 billion. Reserves are based on estimates of ultimate losses and loss adjustment
expenses by underwriting or accident year. Management uses a variety of statistical and actuarial techniques to
monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves as
warranted. Management considers many factors when setting reserves including (i) exposure base and projected
ultimate premium; (ii) expected loss ratios by product and class of business, which are developed collaboratively
by underwriters and actuaries; (iii) actuarial methodologies and assumptions which analyze loss reporting and
payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss
payments and product mix; (iv) current legal interpretations of coverage and liability; and (v) economic
conditions.
The principal considerations for our determination that performing procedures relating to the valuation of the
reserve for losses and loss adjustment expenses is a critical audit matter are the significant judgment by
management when developing their estimate; this in turn led to a high degree of auditor subjectivity, judgment
and effort in performing procedures and evaluating the audit evidence relating to the methodologies and the
significant assumptions related to expected loss ratios and historical trends, such as reserving patterns, loss
payments and product mix, and the audit effort involved the use of professionals with specialized skill and
knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing the
effectiveness of controls relating to management’s valuation of the reserve for losses and loss adjustment
expenses, including controls over the selection of methodologies and development of significant assumptions.
These procedures also included, among others, testing the completeness and accuracy of data provided by
management and the involvement of professionals with specialized skill and knowledge to assist in performing
procedures for a sample of products and lines of business including: (i) evaluating management’s methodologies
and assumptions related to expected loss ratios and historical trends, such as, reserving patterns, loss payment
F-4
and product mix used for determining reserves for losses and loss adjustment expenses; and (ii) developing an
independent estimate of the reserve for losses and loss adjustment expenses and comparing the independent
estimate to management’s actuarially determined reserves.
February 24, 2023
We have served as the Company’s or its predecessor's auditor since 1996.
F-5
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars and share amounts in millions, except par value per share)
2022
2021
ASSETS:
Fixed maturities - available for sale, at fair value
$
$
(amortized cost: 2022, $
; 2021, $
, credit allowances: 2022, $
(54 )
; 2021, $
(30 )
)
Fixed maturities - held to maturity, at amortized cost
(fair value: 2022, $
, net of credit allowances: 2022, $
(
9
))
-
Equity securities, at fair value
Other invested assets
Short-term investments (cost: 2022, $
; 2021, $
)
Cash
Total investments and cash
Accrued investment income
Premiums receivable (net of credit allowances: 2022, $
(
29
); 2021, $
(
26
))
Reinsurance paid loss recoverables (net of credit allowances: 2021, $
(
23
); 2021, $
(
17
))
Reinsurance unpaid loss recoverables
Funds held by reinsureds
Deferred acquisition costs
Prepaid reinsurance premiums
Income tax asset, net
Other assets (net of credit allowances: 2022, $
(
5
); 2021, $
(
4
))
TOTAL ASSETS
$
$
LIABILITIES:
Reserve for losses and loss adjustment expenses
$
$
Future policy benefit reserve
Unearned premium reserve
Funds held under reinsurance treaties
Other net payable to reinsurers
Losses in course of payment
Senior notes
Long term notes
Borrowings from FHLB
Accrued interest on debt and borrowings
Unsettled securities payable
Other liabilities
Total liabilities
Commitments and contingencies (Note 15)
(nil)
(nil)
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
;
-
-
Common shares, par value: $
;
and (2021)
Additional paid-in capital
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $
(250 )
(1,996 )
Treasury shares, at cost:
(3,908 )
(3,847 )
Retained earnings
Total shareholders' equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
$
The accompanying notes are an integral part of the consolidated financial statements.
F-6
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31,
(Dollars in millions, except per share amounts)
2022
2021
2020
REVENUES:
Premiums earned
$
$
$
Net investment income
Net gains (losses) on investments:
Credit allowances on fixed maturity securities
(33 )
(28 )
(2 )
Gains (losses) from fair value adjustments
(460 )
Net realized gains (losses) from dispositions
(11 )
Total net realized capital gains (losses)
(455 )
Other income (expense)
(102 )
Total revenues
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
Commission, brokerage, taxes and fees
Other underwriting expenses
Corporate expenses
Interest, fees and bond issue cost amortization expense
Total claims and expenses
INCOME (LOSS) BEFORE TAXES
Income tax expense (benefit)
(9 )
NET INCOME (LOSS)
$
$
$
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
(2,037 )
(488 )
Reclassification adjustment for realized losses (gains) included in net income (loss)
(3 )
Total URA(D) on securities arising during the period
(1,948 )
(485 )
Foreign currency translation adjustments
(77 )
(62 )
Benefit plan actuarial net gain (loss) for the period
(6 )
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
Total benefit plan net gain (loss) for the period
Total other comprehensive income (loss), net of tax
(2,008 )
(523 )
COMPREHENSIVE INCOME (LOSS)
$
(1,411 )
$
$
EARNINGS PER COMMON SHARE:
Basic
$
$
$
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
F-7
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
Years Ended December 31,
(Dollars in millions, except dividends per share amounts)
2022
2021
2020
COMMON SHARES (shares outstanding):
Balance beginning of period
Issued during the period, net
Treasury shares acquired
-
(1 )
(1 )
Balance end of period
COMMON SHARES (par value):
Balance beginning of period
$
$
$
Issued during the period, net
-
-
-
Balance end of period
ADDITIONAL PAID-IN CAPITAL:
Balance beginning of period
Share-based compensation plans
Balance end of period
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance beginning of period
Net increase (decrease) during the period
(2,008 )
(523 )
Balance end of period
(1,996 )
RETAINED EARNINGS:
Balance beginning of period
Change to beginning balance due to adoption of Accounting Standards Update 2016-13
-
-
(4 )
Net income (loss)
Dividends declared ($
(255 )
(247 )
(249 )
Balance end of period
TREASURY SHARES AT COST:
Balance beginning of period
(3,847 )
(3,622 )
(3,422 )
Purchase of treasury shares
(61 )
(225 )
(200 )
Balance end of period
(3,908 )
(3,847 )
(3,622 )
TOTAL SHAREHOLDERS' EQUITY, END OF PERIOD
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
F-8
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable
(435 )
(649 )
(387 )
Decrease (increase) in funds held by reinsureds, net
(197 )
(151 )
(219 )
Decrease (increase) in reinsurance recoverables
(413 )
(125 )
(151 )
Decrease (increase) in income taxes
(181 )
Decrease (increase) in prepaid reinsurance premiums
(166 )
(128 )
Increase (decrease) in reserve for losses and loss adjustment expenses
Increase (decrease) in future policy benefit reserve
(7 )
(2 )
(5 )
Increase (decrease) in unearned premiums
Increase (decrease) in other net payable to reinsurers
(24 )
Increase (decrease) in losses in course of payment
(186 )
Change in equity adjustments in limited partnerships
(94 )
(613 )
(104 )
Distribution of limited partnership income
Change in other assets and liabilities, net
(291 )
(290 )
(99 )
Non-cash compensation expense
Amortization of bond premium (accrual of bond discount)
Net (gains) losses on investments
(258 )
(268 )
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called/repaid - available for sale
Proceeds from fixed maturities sold - available for sale
Proceeds from fixed maturities matured/called/repaid - held to maturity
-
-
Proceeds from equity securities sold
Distributions from other invested assets
Cost of fixed maturities acquired - available for sale
(7,344 )
(8,825 )
(7,189 )
Cost of fixed maturities acquired - held to maturity
(153 )
-
-
Cost of equity securities acquired
(1,003 )
(1,098 )
(637 )
Cost of other invested assets acquired
(1,547 )
(757 )
(557 )
Net change in short-term investments
(43 )
(718 )
Net change in unsettled securities transactions
(71 )
(203 )
Net cash provided by (used in) investing activities
(3,418 )
(3,869 )
(3,683 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation, net of expense
(17 )
(14 )
(14 )
Purchase of treasury shares
(61 )
(225 )
(200 )
Dividends paid to shareholders
(255 )
(247 )
(249 )
Proceeds from issuance of senior notes
-
Cost of debt repurchase
(6 )
-
(11 )
Net FHLB borrowings (repayments)
-
Cost of shares withheld on settlements of share-based compensation awards
(20 )
(17 )
(16 )
Net cash provided by (used in) financing activities
(359 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
Net increase (decrease) in cash
(42 )
(6 )
Cash, beginning of period
Cash, end of period
$
$
$
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)
$
$
$
(170 )
Interest paid
NON-CASH TRANSACTIONS:
Reclassification of specific investments from fixed maturity securities, available for sale
at fair value to fixed maturity securities, held to maturity at amortized cost net of credit allowances
$
$
-
$
-
The accompanying notes are an integral part of the consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2022, 2021 and 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business and Basis of Presentation.
Everest Re Group, Ltd. (“Group”), a Bermuda company, through its subsidiaries, principally provides reinsurance
and insurance in the U.S., Bermuda and international markets. As used in this document, “Company” means
Group and its subsidiaries.
The accompanying consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (“GAAP”). The statements include all of the
following domestic and foreign direct and indirect subsidiaries of Gro up: Everest International Reinsurance, Ltd.
(“Everest International”), Mt. Logan Insurance Managers, Ltd., Mt. Logan Management, Ltd., Everest
International Holdings (Bermuda), Ltd. (“International Holdings”), Everest Corporate Member Limited, Everest
Service Company (UK), Ltd., Everest Preferred International Holdings, Ltd. (“Preferred International”), Everest
Reinsurance (Bermuda), Ltd. (“Bermuda Re”), Everest Re Advisors, Ltd., Everest Advisors (UK), Ltd., Everest
Compañia de Seguros Generales Chile S.A. (“Everest Chile”), Everest Underwriting Group (Ireland), Limited
(“Holdings Ireland”), Everest Global Services, Inc. (“Global Services”), Everest Insurance Company of Canada
(“Everest Canada”), Premiere Insurance Underwriting Services (“Premiere”), Everest Dublin Insurance Holdings
Limited (Ireland) (“Everest Dublin Holdings”), Everest Insurance (Ireland), designated activity company (“Ireland
Insurance”), Everest Reinsurance Company (Ireland), designated activity company (“Ireland Re”), Everest
Reinsurance Holdings, Inc. (“Holdings”), Salus Systems, LLC (“Salus”), Everest International Assurance, Ltd.
(Bermuda) (“Everest Assurance”), Specialty Insurance Group, Inc. (“Specialty”), Specialty Insurance Group -
Leisure and Entertainment Risk Purchasing Group LLC (“Specialty RPG”), Mt. McKinley Managers, L.L.C., Everest
Specialty Underwriters Services, LLC, Everest Reinsurance Company (“Everest Re”), Everest National Insurance
Company (“Everest National”), Everest Reinsurance Company Ltda. (Brazil), Mt. Whitney Securities, Inc., Everest
Indemnity Insurance Company (“Everest Indemnity”), Everest Denali Insurance Company (“Everest Denali”),
Everest Premier Insurance Company (“Everest Premier”) and Everest Security Insurance Company (“Everest
Security”). All intercompany accounts and transactions have been eliminated. All amounts are reported in U.S.
dollars.
The Company consolidates the results of operations and financial position of all voting interest entities ("VOE")
in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the
Company is considered to be the primary beneficiary. The consolidation assessment, including the determination
as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each
entity.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and
liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate actual results could differ, possibly materially, from those estimates.
Certain reclassifications and format changes have been made to prior years’ amounts to conform to the 2022
presentation.
B. Investments and Cash.
Fixed maturity securities designated as available for sale reflect unrealized appreciation and depreciation, as a
result of change s in fair value during the period, in shareholders’ equity, net of income taxes in “accumulated
other comprehensive income (loss)” in the consolidated balance sheets. The Company reviews all of its fixed
F-10
maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of
review. The Company then assesses whether the decline in value is due to non-credit related or credit related
factors. In making its assessment, the Company evaluates the current market and interest rate environment as
well as specific issuer information. Generally, a change in a security’s value caused by a change in the market,
interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit
related decline in fair value. Non-credit related declines in fair value are recorded as unrealized losses in
accumulated other comprehensive income (loss). If the Company intends to sell the impaired security or is more
likely than not to be required to sell the security before an anticipated recovery in value, the Company records
the entire impairment in net gains (losses) on investments in the Company’s consolidated statements of
operations and comprehensive income (loss). If the Company determines that the decline is credit related and
the Company does not have the intent to sell the security; and it is more likely than not that the Company will
not have to sell the security before recovery of its cost basis, the Company establishes a credit allowance equal
to the estimated credit loss and is recorded in net gains (losses) on investments in the Company’s consolidated
statements of operations and comprehensive income (loss). The determination of credit related or non-credit
related impairment is first based on an assessment of qualitative factors, which may determine that a qualitative
analysis is sufficient to support the conclusion that the present value of expected cash flows equals or exceeds
the security’s amortized cost basis. However, if the qualitative assessment suggests a credit loss may exist, a
quantitative assessment is performed, and the amount of the allowance for a given security will generally be the
difference between a discounted cash flow model and the Company’s carrying value. The Company will adjust
the credit allowance account for future changes in credit loss estimates for a security and record this adjustment
through net gains (losses) on investments in the Company’s consolidated statements of operations and
comprehensive income (loss).
Fixed maturity securities designated as held to maturity consist of debt securities for which the Company has
both the positive intent and ability to hold to maturity or redemption and are reported at amortized cost, net of
the current expected credit loss allowance. Interest income for fixed maturity securities held to maturity is
determined in the same manner as interest income for fixed maturity securities available for sale. The Company
evaluates fixed maturity securities classified as held to maturity for current expected credit losses utilizing risk
characteristics of each security, including credit rating, remaining time to maturity, adjusted for prepayment
considerations, and subordination level, and applying default and recovery rates, which include the
incorporation of historical credit loss experience and macroeconomic forecasts, to develop an estimate of
current expected credit losses.
The Company does not create an allowance for uncollectible interest. If interest is not received when due, the
interest receivable is immediately reversed and no additional interest is accrued. If future interest is received
that has not been accrued, it is recorded as income at that time.
The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness
with respect to interest and/or principal payments, speed of repayments and any applicable credit
enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as
relevant information provided by rating agencies, investment advisors and analysts.
Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the
Company’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is
reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if
the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition
to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional
prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the
calculation of projected prepayments for pass-through security types.
For equity securities, the Company reflects changes in fair value as net gains (losses) on investments. Interest
income on all fixed maturities and dividend income on all equity securities are included as part of net investment
income in the consolidated statements of operations and comprehensive income (loss).
F-11
Short-term investments comprise securities due to mature within one year from the date of purchase and are
stated at cost, which appro ximates fair value.
Realized gains or losses on sales of investments are determined on the basis of identified cost. For some non-
publicly traded securities, market prices are determined through the use of pricing models that evaluate
securities relative to the U.S. Treasury yield curve, taking into account the issue type, credit quality, and cash
flow characteristics of each security. For other non-publicly traded securities, investment managers’ valuation
committees will estimate fair value and in many instances, these fair values are supported with opinions from
qualified independent third parties. All fair value estimates from investment managers are reviewed by the
Company for reasonableness. For publicly traded securities, fair value is based on quoted market prices or
valuation models that use observable market inputs. When a sector of the financial markets is inactive or
illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to
determine fair value.
Other invested assets include limited partnerships, company-owned life insurance, rabbi trusts and other
investments. Limited partnerships are accounted for under the equity method of accounting, which can be
recorded on a monthly or quarterly lag. Company-owned life insurance policies are carried at policy cash
surrender value and changes in the policy cash surrender value are included within net investment income.
Cash includes cash on hand. Restricted cash is included within cash in the consolidated balance sheets and
represents amounts held for the benefit of third parties that is legally or contractually restricted as to its
withdrawal or usage. Amounts include trust funds set up for the benefit of ceding companies.
C. Allowance for Premium Receivable and Reinsurance Recoverables .
The Company applies the Current Expected Credit Losses (CECL) methodology for estimating allowances for
credit losses. The Company evaluates the recoverability of its premiums and reinsurance recoverable balances
and establishes an allowance for estimated uncollectible amounts.
Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy
premiums, are primarily comprised of premiums due from policyholders/ cedants. Balances are considered past
due when amounts that have been billed are not collected within contractually stipulated time periods. For
these balances, the allowance is estimated based on recent historical credit loss and collection experience,
adjusted for current economic conditions and reasonable and supportable forecasts, when appropriate.
A portion of the Company's commercial lines business is written with large deductibles or under retrospectively-
rated plans. Under some commercial insurance contracts with a large deductible, the Company is obligated to
pay the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder
for the deductible amount. As such, the Company is subject to credit risk until reimbursement is made.
Retrospectively-rated policies are policies whereby the ultimate premium is adjusted based on actual losses
incurred. Although the premium adjustment feature of a retrospectively-rated policy substantially reduces
insurance risk for the Company, it presents credit risk to the Company. The Company’s results of operations
could be adversely affected if a significant portion of such policyholders failed to reimburse the Company for the
deductible amount or the amount of additional premium owed under retrospectively-rated policies. The
Company manages these credit risks through credit analysis, collateral requirements, and oversight. The
allowance for receivables for loss within a deductible and retrospectively-rated policy premiums is recorded
within other assets in the consolidated balance sheets. The allowance is estimated as the amount of the
receivable exposed to loss multiplied by estimated factors for probability of default. The probability of default is
assigned based on each policyholder's credit rating, or a rating is estimated if no external rating is available.
Credit ratings are reviewed and updated at least annually. The exposure amount is estimated net of collateral
and other offsets, considering the nature of the collateral, potential future changes in collateral values, and
historical loss information for the type of collateral obtained. The probability of default factors are historical
corporate defaults for receivables with similar durations estimated through multiple economic cycles. Credit
F-12
ratings are forward-looking and consider a variety of economic outcomes. The Company's evaluation of the
required allowance for receivables for loss within a deductible and retrospectively-rated policy premiums
considers the current economic environment as well as the probability -weighted macroeconomic scenarios.
The Company records total credit loss expenses related to premiums receivable in Other underwriting expenses
and records credit loss expenses related to deductibles in Incurred losses and loss adjustment expenses in the
Company’s consolidate d statements of operations and comprehensive income (loss).
The allowance for uncollectible reinsurance recoverable reflects management’s best estimate of reinsurance
cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The
allowance for uncollectible reinsurance recoverable comprises an allowance and an allowance for disputed
balances. Based on this analysis, the Company may adjust the allowance for uncollectible reinsurance
recoverable or charge off reinsurer balances that are determined to be uncollectible.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverable become
due, it is possible that future adjustments to the Company’s reinsurance recoverable, net of the allowance, could
be required, which could have a material adverse effect on the Company’s consolidated results of operations or
cash flows in a particular quarter or annual period.
The allowance is estimated as the amount of reinsurance recoverable exposed to loss multiplied by estimated
factors for the probability of default. The reinsurance recoverable exposed is the amount of reinsurance
recoverable net of collateral and other offsets, considering the nature of the collateral, potential future changes
in collateral values, and historical loss information for the type of collateral obtained. The probability of default
factors are historical insurer and reinsurer defaults for liabilities with similar durations to the reinsured liabilities
as estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of
economic outcomes. The Company's evaluation of the required allowance for reinsurance recoverable considers
the current economic environment as well as macroeconomic scenarios.
The Company records credit loss expenses related to reinsurance recoverable in Incurred losses and loss
adjustment expenses in the Company’s consolidated statements of operations and comprehensive income (loss).
Write-offs of reinsurance recoverable and any related allowance are recorded in the period in which the balance
is deemed uncollectible.
D. Deferred Acquisition Costs.
Acquisition costs, consisting principally of commissions and brokerage expenses and certain premium taxes and
fees incurred at the time a contract or policy is issued and that vary with and are directly related to the
Company’s reinsurance and insurance business, are deferred and amortized over the period in which the related
premiums are earned. Deferred acquisition costs are limited to their estimated realizable value by line of
business based on the related unearned premiums, anticipated claims and claim expenses and anticipated
investment income.
E. Reserve for Losses and Loss Adjustment Expenses.
The reserve for losses and loss adjustment expenses (“LAE”) is based on individual case estimates and reports
received from ceding companies. A provision is included for losses and LAE incurred but not reported (“IBNR”)
based on past experience. Provisions are also included for certain potential liabilities, including those relating to
asbestos and environmental (“A&E”) exposures, catastrophe exposures, COVID-19 and other exposures, for
which liabilities cannot be estimated using trad itional reserving techniques. See also Note 3. The reserves are
reviewed periodically and any changes in estimates are reflected in earnings in the period the adjustment is
made. The Company’s loss and LAE reserves represent management’s best estimate of the ultimate
liability. Loss and LAE reserves are presented gross of reinsurance recoverable and incurred losses and LAE are
presented net of reinsurance.
F-13
Accruals for commissions are established for reinsurance contracts that provide for the stated commission
percentage to increase or decrease based on the loss experience of the contract. Changes in estimates for such
arrangements are recorded as commission expense. Commission accruals for contracts with adjustable features
are estimated based on expected loss and LAE.
F. Future Policy Benefit Reserve.
Liabilities for future policy benefits on annuity policies are carried at their accumulated values. Reserves for
policy benefits include mortality claims in the process of settlement and IBNR claims. Actual experience in a
particular period may fluctuate from expected results.
G. Premium Revenues.
Written premiums are earned ratably over the periods of the related insurance and reinsurance
contracts. Unearned premium reserves are established relative to the unexpired contract period. For
reinsurance contracts, such reserves are established based upon reports received from ceding companies or
estimated using pro rata methods based on statistical data. Reinstatement premiums represent additional
premium recognized and earned at the time a loss event occurs and losses are recorded, most prevalently
catastrophe related, when limits have been depleted under the original reinsurance contract and additional
coverage is granted. The recognition of reinstatement premiums is based on estimates of loss and LAE, which
reflects management’s judgement. Written and earned premiums and the related costs, which have not yet
been reported to the Company, are estimated and accrued. Premiums are net of ceded reinsurance.
H. Prepaid Reinsurance Premiums.
Prepaid reinsurance premiums represent unearned premium reserves ceded to other reinsurers. Prepaid
reinsurance premiums for any foreign reinsurers comprising more than
% of the outstanding balance at
December 31, 2022 were secured either through collateralized trust arrangements, rights of offset or letters of
credit, thereby limiting the credit risk to the Company.
I. Income Taxes.
Holdings and its wholly owned subsidiaries file a consolidated U.S. federal income tax return. Foreign
subsidiaries and branches of subsidiaries file local tax returns as required. Group and subsidiaries not included in
Holdings’ consolidated tax return file separate company U.S. federal income tax returns as required. Deferred
income taxes have been recorded to recognize the tax effect of temporary differences between the financial
reporting and income tax bases of assets and liabilities, which arise because of differences between GAAP and
income tax accounting rules.
As an accounting policy, the Company has adopted the aggregate portfolio approach for releasing
disproportionate income tax effects from Accumulated Other Comprehensive Income.
J. Foreign Currency.
The Company transacts business in numerous currencies through business units located around the world. The
base transactional currency for each business unit is determined by the local currency used for most economic
activity in that area. Movements in exchange rates related to foreign currency denominated monetary assets
and liabilities at the business units between the original currency and the base currency are recorded through
the consolidated statements of operations and comprehensive income (loss) in other income (expense), except
for currency movements related to available for sale fixed maturities securities, which are excluded from net
income (loss) and accumulated in shareholders’ equity, net of deferred taxes.
The business units’ base currency financial statements are translated to U.S. dollars using the exchange rates at
the end of period for the balance sheets and the average exchange rates in effect for the reporting period for the
F-14
income statements. Gains and losses resulting from translating the foreign currency financial statements, net of
deferred income taxes, are excluded from net income loss and accumulated in shareholders’ equity.
K. Earnings Per Common Share.
Basic earnings per share are calculated by dividing net income by the weighted average number of common
shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if options granted
under various share-based compensation plans were exercised resulting in the issuance of common shares that
would participate in the earnings of the entity.
Net income (loss) per common share has been computed as per below, based upon weighted average common
basic and dilutive shares outstanding.
Years Ended December 31,
(Amounts in millions, except per share amounts)
2022
2021
2020
Net income (loss) per share:
Numerator
Net income (loss)
$
$
$
Less: dividends declared-common shares and nonvested common shares
(255 )
(247 )
(249 )
Undistributed earnings
Percentage allocated to common shareholders (1)
%
%
%
Add: dividends declared-common shareholders
Numerator for basic and diluted earnings per common share
$
$
$
Denominator
Denominator for basic earnings per weighted-average common shares
Effect of dilutive securities:
Options
-
-
-
Denominator for diluted earnings per adjusted weighted-average common shares
Per common share net income (loss)
Basic
$
$
$
Diluted
$
$
$
(1)
Basic weighted-average common shares outstanding
Basic weighted-average common shares outstanding and nonvested common shares expected to vest
Percentage allocated to common shareholders
%
%
%
(Some amounts may not reconcile due to rounding.)
There were
no
Options granted under share-based compensation plans have all expired as of September 19, 2022. There were
L. Segmentation.
The Company, through its subsidiaries, operates in
M. Share-Based Compensation.
Share-based compensation stock option, restricted share and performance share unit awards are fair valued at
the grant date and expensed over the vesting period of the award. The tax benefit on the recorded expense is
deferred until the time the award is exercised or vests (becomes unrestricted). See Note 16.
F-15
N. Application of Recently Issued Accounting Guidance.
The Company did not adopt any new accounting standards that had a material impact in 2022. The Company
assessed the adoption impacts of recently issued accounting standards by the Financial Accounting Standards
Board on the Company’s consolidated financial statements as well as material updates to previous assessments,
if any, from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no
accounting standards issued for the year ended December 31, 2022, that are expected to have a material impact
to Group.
2. INVESTMENTS
The tables below present the amortized cost, allowance for credit losses, gross unrealized
appreciation/(depreciation) and market value of fixed maturity securities - available for sale for the periods
indicated.
At December 31, 2022
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - available for sale:
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
-
$
$
(82 )
$
Obligations of U.S. states and political subdivisions
-
(32 )
Corporate securities
(45 )
(561 )
Asset-backed securities
-
(171 )
Mortgage-backed securities
Commercial
-
-
(105 )
Agency residential
-
(290 )
Non-agency residential
-
-
(1 )
Foreign government securities
-
(179 )
Foreign corporate securities
(10 )
(562 )
Total fixed maturity securities - available for sale
$
$
(54 )
$
$
(1,982 )
$
(Some amounts may not reconcile due to rounding.)
At December 31, 2021
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - available for sale:
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
-
$
$
(10 )
$
Obligations of U.S. states and political subdivisions
-
(1 )
Corporate securities
(19 )
(63 )
Asset-backed securities
(8 )
(12 )
Mortgage-backed securities
Commercial
-
(6 )
Agency residential
-
(19 )
Non-agency residential
-
-
-
Foreign government securities
-
(28 )
Foreign corporate securities
(3 )
(65 )
Total fixed maturity securities - available for sale
$
$
(30 )
$
$
(203 )
$
(Some amounts may not reconcile due to rounding.)
F-16
The following table shows amortized cost, allowance for credit losses, gross unrealized
appreciation/(depreciation) and fair value of fixed maturity securities held to maturity for the periods indicated:
At December 31, 2022
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - held to maturity:
Corporate securities
$
$
(2 )
$
-
$
(6 )
$
Asset-backed securities
(6 )
(15 )
Mortgage-backed securities
-
Commercial
-
-
-
Foreign corporate securities
(1 )
-
Total fixed maturity securities - held to maturity
$
$
(9 )
$
$
(22 )
$
(Some amounts may not reconcile due to rounding.)
The amortized cost and market value of fixed maturity securities available for sale are shown in the following
table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other
fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the
totals for mortgage-backed and asset-backed securities are shown separately.
At December 31, 2022
At December 31, 2021
Amortized
Fair
Amortized
Fair
(Dollars in millions)
Cost
Value
Cost
Value
Fixed maturity securities – available for sale:
$
$
$
$
Asset-backed securities
Mortgage-backed securities:
Commercial
Agency residential
Non-agency residential
Total fixed maturity securities -available for sale
$
$
$
$
(Some amounts may not reconcile due to rounding.)
The amortized cost and fair value of fixed maturity securities held to maturity are shown in the following table
by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed
maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals
for mortgage-backed and asset-backed securities are shown separately.
At December 31, 2022
Amortized
Fair
(Dollars in millions)
Cost
Value
Fixed maturity securities – held to maturity:
$
$
Asset-backed securities
Mortgage-backed securities:
Commercial
Total fixed maturity securities - held to maturity
$
$
(Some amounts may not reconcile due to rounding.)
During 2022, the Company re-designated a portion of its fixed maturity securities from its fixed maturity –
available for sale portfolio to its fixed maturity – held to maturity portfolio. The fair value of the securities
F-17
reclassified at the date of transfer was $
was subsequently recognized as the new amortized cost basis. As of the date of transfer, these securities had an
unrealized loss of $
sheet and will be amortized into income through an adjustment to the yields of the underlying securities over
the remaining life of the securities.
The Company evaluated fixed maturity securities classified as held to maturity for current expected credit losses
as of December 31, 2022 utilizing risk characteristics of each security, including credit rating, remaining time to
maturity, adjusted for prepayment considerations, and subordination level, and applying default and recovery
rates, which include the incorporation of historical credit loss experience and macroeconomic forecasts, to
develop an estimate of current expected credit losses. These fixed maturities classified as held to maturity are of
a high credit quality and are all rated investment grade as of December 31, 2022.
The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the
following sources for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Increase (decrease) during the period between the fair value and cost
of investments carried at fair value, and deferred taxes thereon:
Fixed maturity securities and short-term investments
$
(2,225 )
$
(542 )
Change in unrealized appreciation (depreciation), pre-tax
(2,225 )
(542 )
Deferred tax benefit (expense)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity
$
(1,948 )
$
(485 )
(Some amounts may not reconcile due to rounding.)
The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity
securities, by security type and contractual maturity, in each case subdivided according to length of time that
individual securities had been in a continuous unrealized loss position for the periods indicated.
Duration of Unrealized Loss at December 31, 2022 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale:
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
(31 )
$
$
(52 )
$
$
(82 )
Obligations of U.S. states and political subdivisions
(23 )
(9 )
(32 )
Corporate securities
(326 )
(234 )
(561 )
Asset-backed securities
(142 )
(29 )
(171 )
Mortgage-backed securities
Commercial
(90 )
(15 )
(105 )
Agency residential
(132 )
(158 )
(289 )
Non-agency residential
-
(1 )
-
Foreign government securities
(100 )
(79 )
(179 )
Foreign corporate securities
(372 )
(189 )
(561 )
Total
$
$
(1,217 )
$
$
(764 )
$
$
(1,982 )
Securities where an allowance for credit loss was recorded
-
-
-
-
Total fixed maturity securities - available for sale
$
$
(1,217 )
$
$
(764 )
$
$
(1,982 )
(Some amounts may not reconcile due to rounding.)
F-18
Duration of Unrealized Loss at December 31, 2022 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale:
Due in one year or less
$
$
(19 )
$
$
(7 )
$
$
(26 )
Due in one year through five years
(383 )
(209 )
(592 )
Due in five years through ten years
(360 )
(230 )
(590 )
Due after ten years
(91 )
(116 )
(207 )
Asset-backed securities
(142 )
(29 )
(171 )
Mortgage-backed securities
(222 )
(173 )
(395 )
Total
$
$
(1,217 )
$
$
(764 )
$
$
(1,982 )
Securities where an allowance for credi t loss was recorded
-
-
-
-
Total fixed maturity securities - available for sale
$
$
(1,217 )
$
$
(764 )
$
$
(1,982 )
(Some amounts may not reconcile due to rounding.)
The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at
December 31, 2022 were $
issuer (the United States government) whose securities comprised the largest unrealized loss position at
December 31, 2022, did not exceed
% of the overall market value of the Company’s fixed maturity securities.
The market value of the securities for the issuer with the second largest unrealized loss comprised less than
%
of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant
concentration of unrealized losses in any one market sector. The $
maturity securities that have been in an unrealized loss position for less than one year were generally comprised
of domestic and foreign corporate securities, asset-backed securities, agency residential mortgage-backed
securities and foreign government securities. Of these unrealized losses, $
that were rated investment grade by at least one nationally recognized statistical rating agency. The $
million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one
year related primarily to domestic and foreign corporate securities, agency residential mortgage-backed
securities and foreign government securities. Of these unrealized losses, $
that were rated investment grade by at least one nationally recognized statistical rating agency. In all instances,
there were no projected cash flow shortfalls to recover the full book value of the investments and the related
interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest
and principal payments.
The Company, given the size of its investment portfolio and capital position, does not have the intent to sell
these securities; and it is more likely than not that the Company will not have to sell the security before recovery
of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to
principal and interest payments.
F-19
The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity
securities, by security type and contractual maturity, in each case subdivided according to length of time that
individual securities had been in a continuous unrealized loss position for the periods indicated. The amounts
presented in the tables below include $
(0.4 )
depreciation as of December 31, 2021 related to fixed maturity securities for which the Company has recorded
an allowance for credit losses.
Duration of Unrealized Loss at December 31, 2021 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale:
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
(6 )
$
$
(4 )
$
$
(10 )
Obligations of U.S. states and political subdivisions
(1 )
-
(1 )
Corporate securities
(38 )
(24 )
(63 )
Asset-backed securities
(11 )
(1 )
(12 )
Mortgage-backed securities
Commercial
(3 )
(3 )
(6 )
Agency residential
(12 )
(7 )
(19 )
Non-agency residential
-
-
-
-
Foreign government securities
(10 )
(18 )
(28 )
Foreign corporate securities
(46 )
(18 )
(65 )
Total fixed maturity securities - available for sale
$
$
(128 )
$
$
(75 )
$
$
(203 )
(Some amounts may not reconcile due to rounding.)
Duration of Unrealized Loss at December 31, 2021 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale:
Due in one year or less
$
$
(2 )
$
$
(12 )
$
$
(14 )
Due in one year through five years
(35 )
(29 )
(64 )
Due in five years through ten years
(47 )
(22 )
(69 )
Due after ten years
(16 )
(3 )
(19 )
Asset-backed securities
(11 )
(1 )
(12 )
Mortgage-backed securities
(15 )
(10 )
(25 )
Total fixed maturity securities - available for sale
$
$
(128 )
$
$
(75 )
$
$
(203 )
(Some amounts may not reconcile due to rounding.)
The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at
December 31, 2021 were $
issuer (the United States government) whose securities comprised the largest unrealized loss position at
December 31, 2021, did not exceed
% of the overall market value of the Company’s fixed maturity securities.
The market value of the securities for the issuer with the second largest unrealized loss comprised less than
%
of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant
concentration of unrealized losses in any one market sector. The $
fixed maturity securities that have been in an unrealized loss position for less than one year were generally
comprised of domestic and foreign corporate securities, agency residential asset-backed securities and foreign
government securities. Of these unrealized losses, $
investment grade by at least one nationally recognized statistical rating agency. The $
losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily
to domestic and foreign corporate securities, foreign government securities and agency residential mortgage-
backed securities. Of these unrealized losses, $
grade by at least one nationally recognized statistical rating agency. In all instances, there were no projected
F-20
cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The
mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.
The components of net investment income are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturities
$
$
$
Equity securities
Short-term investments and cash
Other invested assets
Limited partnerships
Other
Gross investment income before adjustments
Funds held interest income (expense)
Future policy benefit reserve income (expense)
-
(1 )
(1 )
Gross investment income
Investment expenses
(62 )
(54 )
(50 )
Net investment income
$
$
$
(Some amounts may not reconcile due to rounding.)
The Company records results from limited partnership investments on the equity method of accounting with
changes in value reported through net investment income. The net investment income from limited
partnerships is dependent upon the Company’s share of the net asset values of interests underlying each limited
partnership. Due to the timing of receiving financial information from these partnerships, the results are
generally reported on a one month or quarter lag. If the Company determines there has been a significant
decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the
Company identifies the decline.
The Company had contractual commitments to invest up to an additional $
private placement loans at December 31, 2022. These commitments will be funded when called in accordance
with the partnership and loan agreements, which have investment periods that expire, unless extended, through
2026
.
During the fourth quarter of 2022, the Company entered into corporate -owned life insurance policies, which are
carried within other invested assets at policy cash surrender value of $
Variable Interest Entities
The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs
primarily as an investor through normal investment activities but also as an investment manager. A VIE is an
entity that either has investors that lack certain essential characteristics of a controlling financial interest, such
as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support
provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine
whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The
Company is deemed to have a controlling financial interest when it has both the ability to direct the activities
that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right
to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s
assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s
Consolidated Financial Statements. As of December 31, 2022 and 2021, the Company did
t hold any securities
for which it is the primary beneficiary.
The Company, through normal investment activities, makes passive investments in general and limited
partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined
it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic
performance of the investments. The Company’s maximum exposure to loss as of December 31, 2022 and 2021
F-21
is limited to the total carrying value of $
and limited partnerships and other alternative investments in Other Invested Assets in the Company's
Consolidated Balance Sheets. As of December 31, 2022, the Company has outstanding commitments totaling
$
during the commitment period to fund the purchase of new investments and partnership expenses. These
investments are generally of a passive nature in that the Company does not take an active role in management.
In addition, the Company makes passive investments in structured securities issued by VIEs for which the
Company is not the manager. These investments are included in asset-backed securities, which includes
collateralized loan obligations and are classified as fixed maturities. The Company has not provided financial or
other support with respect to these investments other than its original investment. For these investments, the
Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in
comparison to the principal amount of the structured securities issued by the VIEs, the level of credit
subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the
Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs.
The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s
investment.
The components of net realized capital gains (losses) are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturity securities:
Allowance for credit losses
$
(33 )
$
(28 )
$
(2 )
Net realized gains (losses) from dispositions
(87 )
(5 )
Gains (losses) from fair value adjustments
-
-
Equity securities:
Net realized gains (losses) from dispositions
(9 )
Gains (losses) from fair value adjustments
(460 )
Other invested assets
Short-term investments gain (loss)
-
-
Total net realized gains (losses) on investments
$
(455 )
$
$
(Some amounts may not reconcile due to rounding.)
The following tables provide a roll forward of the Company’s beginning and ending balance of allowance for
credit losses for the periods indicated:
F-22
Roll Forward of Allowance for Credit Losses
Twelve Months Ended December 31, 2022
Foreign
Corporate
Asset-Backed
Corporate
Securities
Securities
Securities
Total
(Dollars in millions)
Beginning Balance
$
(19 )
$
(8 )
$
(3 )
$
(30 )
Credit losses on securities where credit
losses were not previously recorded
(1)
(13 )
(6 )
(17 )
(35 )
Increases in allowance on previously
impaired securities
(20 )
-
(1 )
(21 )
Decreases in allowance on previously
impaired securities
-
-
-
-
Reduction in allowance due to disposals
Balance as of December 31
$
(46 )
$
(6 )
$
(11 )
$
(63 )
(Some amounts may not reconcile due to rounding.)
(1)
corporate securities, respectively.
Roll Forward of Allowance for Credit Losses
Twelve Months Ended December 31, 2021
Foreign
Corporate
Asset-Backed
Corporate
Securities
Securities
Securities
Total
(Dollars in millions)
Beginning Balance
$
(1 )
$
-
$
(1 )
$
(2 )
Credit losses on securities where credit
losses were not previously recorded
(21 )
(5 )
(2 )
(29 )
Increases in allowance on previously
impaired securities
(3 )
(3 )
-
(5 )
Decreases in allowance on previously
Reduction in allowance due to disposals
-
-
Balance as of December 31
$
(19 )
$
(8 )
$
(3 )
$
(30 )
(Some amounts may not reconcile due to rounding.)
The proceeds and split between gross gains and losses, from sales of fixed maturity securities - available for sale
and equity securities, are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Proceeds from sales of fixed maturity securities - available for sale
$
$
$
Gross gains from sales
Gross losses from sales
(127 )
(55 )
(85 )
Proceeds from sales of equity securities
$
$
$
Gross gains from sales
Gross losses from sales
(53 )
(15 )
(46 )
Securities with a carrying value amount of $
or governmental insurance departments in compliance with insurance laws.
F-23
3. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE
Reserves for losses and LAE.
The following table provides a roll forward of the Company’s beginning and ending reserve for losses and LAE is
summarized for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Gross reserves beginning of period
$
$
$
(1,946 )
(1,844 )
(1,641 )
Incurred related to:
(2 )
(9 )
Paid related to:
Foreign exchange/translation adjustment
(243 )
(89 )
Net reserves end of period
$
$
$
(Some amounts may not reconcile due to rounding.)
Current year incurred losses were $
Gross and net reserves increased in 2022, reflecting an increase in underlying exposure due to earned premium
growth, year over year, the impact of $
offset by decrease of $
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses
located in the Russian Federation and/or owned by Russian nationals by numerous countries, including the
United States. The significant political and economic uncertainty surrounding the war and associated sanctions
have impacted economic and investment markets both within Russia and around the world.
The increase in current year incurred losses from 2020 to 2021 was primarily related to an increase of $
million in current year catastrophe losses and an increase of $
increase in current year attritional losses was mainly due to the growth in premiums earned, partially mitigated
by $
Incurred prior years losses were $(
) million in 2022, ($
) million in 2021 and $
development on prior year reserves of ($
) million in 2022 is primarily driven by better than expected loss
emergence in workers’ compensation and surety lines of business, as well as attritional property. The favorable
development on prior year reserves of ($
) million in 2021 is primarily driven by a commutation and reserve
releases within the reinsurance segment. The increase for 2020 primarily related to higher ultimate loss
estimates for long-tail casualty business in the reinsurance segment for accident years 2015 to 2018, notably
general liability, professional lines, and auto liability. The reserve charge also includes actions on non-CAT
property lines, primarily for the 2017 to 2019 accident years and driven by a few large losses to aggregate
programs.
F-24
The following is information about incurred and paid claims development as of December 31, 2022, net of
reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR)
plus expected development on reported claims included within the net incurred claims amounts. Each of the
Company’s financial reporting segments has been disaggregated into casualty and property business. The
casualty and property segregation results in groups that have homogeneous loss development characteristics
and are large enough to represent credible trends. Generally, casualty claims take longer to be reported and
settled, resulting in longer payout patterns and increased volatility. Property claims on the other hand, tend to
be reported and settled quicker and therefore tend to exhibit less volatility. The property business is more
exposed to catastrophe losses, which can result in year over year fluctuations in incurred claims depending on
the frequency and severity of catastrophes claims in any one accident year.
The information about incurred and paid claims development for the years ended December 31, 2013 to
December 31, 2021 is presented as supplementary information.
The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impractical to provide
the information for the remaining groups. The reinsurance groups each include pro rata contracts for which
ceding companies provide only summary information via a bordereau. This summary information does not
include the number of reported claims underlying the paid and reported losses. Therefore, it is not possible to
provide this information. The Insurance Property group includes Accident & Health insurance business. This
business is written via a master contract and individual claim counts are not provided. This business represents
a significant enough portion of the business in the Insurance Property group so that including the number of
reported claims for the remaining business would distort any analytics performed on the group.
The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of
business. For example, a claim event with three claimants in the same line of business is a single claim.
However, a claim event with a single claimant that spans two lines of business contributes two claims.
The following tables present the ultimate loss and ALAE and the paid loss and ALAE, net of reinsurance for
casualty and property, as well as the average annual percentage payout of incurred claims by age, net of
reinsurance for each of our disclosed lines of business.
Reinsurance – Casualty Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Cumulative
Years Ended December 31,
Development
Number of
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Reported
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Claims
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
$
N/A
2014
N/A
2015
N/A
2016
N/A
2017
N/A
2018
N/A
2019
N/A
2020
N/A
2021
N/A
2022
N/A
$
(Some amounts may not reconcile due to rounding.)
F-25
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
2014
2015
2016
2017
2018
2019
2020
2021
2022
$
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Casualty
%
%
%
%
%
%
%
%
%
%
Reinsurance – Property Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Cumulative
Years Ended December 31,
Development
Number of
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Reported
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Claims
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
$
N/A
2014
N/A
2015
N/A
2016
N/A
2017
N/A
2018
N/A
2019
N/A
2020
N/A
2021
N/A
2022
N/A
$
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
2014
2015
2016
2017
2018
2019
2020
2021
2022
$
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Property
%
%
%
%
%
%
%
%
%
%
F-26
Insurance – Casualty Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Cumulative
Years Ended December 31,
Development
Number of
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Reported
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Claims
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
$
$
2014
2015
2016
2017
2018
2019
2020
2021
2022
$
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
2014
2015
2016
2017
2018
2019
2020
2021
2022
$
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Casualty
%
%
%
%
%
%
%
%
%
%
F-27
Insurance – Property Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Cumulative
Years Ended December 31,
Development
Number of
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Reported
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Claims
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
$
-
N/A
2014
N/A
2015
N/A
2016
-
N/A
2017
-
N/A
2018
N/A
2019
N/A
2020
N/A
2021
N/A
2022
N/A
$
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
$
$
$
$
$
$
$
$
$
2014
2015
2016
2017
2018
2019
2020
2021
2022
$
All outstanding liabilities prior to 2013, net of reinsurance
-
Liabilities for claims and claim adjustment expenses, net of reinsurance
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Property
%
%
%
%
%
%
%
%
%
%
F-28
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims
and Claim Adjustment Expenses
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim
adjustment expenses in the consolidated statement of financial position is as follows.
December 31, 2022
(Dollars in thousands)
Net outstanding liabilities
Reinsurance Casualty
$
Reinsurance Property
Insurance Casualty
Insurance Property
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance
Reinsurance recoverable on unpaid claims
Reinsurance Casualty
Reinsurance Property
Insurance Casualty
Insurance Property
Total reinsurance recoverable on unpaid claims
Insurance lines other than short-duration
-
Unallocated claims adjustment expenses
Other
Total gross liability for unpaid claims and claim adjustment expense
$
(Some amounts may not reconcile due to rounding.)
Reserving Methodology
The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense
(LAE) for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are
based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of
statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it
becomes known, and adjust reserves whenever an adjustment appears warranted. The Company considers
many factors when setting reserves including: (1) exposure base and projected ultimate premium; (2) expected
loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries;
(3) actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports
from ceding companies and historical trends, such as reserving patterns, loss payments, and product mix; (4)
current legal interpretations of coverage and liability; and (5) economic conditions. Management’s best
estimate is developed through collaboration with actuarial, underwriting, claims, legal and finance departments
and culminates with the input of reserve committees. Each segment reserve committee includes the
participation of the relevant parties from actuarial, finance, claims and segment senior management and has the
responsibility for recommending and approving management’s best estimate. Reserves are further reviewed by
Everest’s Chief Reserving Actuary and senior management. The objective of such process is to determine a
single best estimate viewed by management to be the best estimate of its ultimate loss liability. Actual loss and
LAE ultimately paid may deviate, perhaps substantially, from such reserves. Net income will be impacted in a
period in which the change in estimated ultimate loss and LAE is recorded.
F-29
The detailed data required to evaluate ultimate losses for the Company’s insurance business is accumulated
from its underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information
received from ceding companies. Ceding companies report losses in many forms depending on the type of
contract and the agreed or contractual reporting requirements. Generally, pro rata contracts require the
submission of a monthly/quarterly account, which includes premium and loss activity for the period with
corresponding reserves as established by the ceding company. This information is recorded in the Company’s
records. For certain pro rata contracts, the Company may require a detailed loss report for claims that exceed a
certain dollar threshold or relate to a particular type of loss. Excess of loss and facultative contracts generally
require individual loss reporting with precautionary notices provided when a loss reaches a significant
percentage of the attachment point of the contract or when certain causes of loss or types of injury
occur. Experienced claims staff handle individual loss reports and supporting claim information. Based on
evaluation of a claim, the Company may establish additional case reserves in addition to the case reserves
reported by the ceding company. To ensure ceding companies are submitting required and accurate data,
Everest’s Underwriting, Claim, Reinsurance Accounting, and Internal Audit Departments perform various reviews
of ceding companies, particularly larger ceding companies, including on-site audits.
The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial
analysis. The Company assigns business to exposure groupings so that the underlying exposures have
reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation
of ultimate losses. The Company periodically reviews its exposure groupings and may change groupings over
time as business changes. The Company currently uses approximately
reserve estimates. One of the key selection characteristics for the exposure groupings is the historical duration
of the claims settlement process. Business in which claims are reported and settled relatively quickly are
commonly referred to as short tail lines, principally property lines. Casualty claims tend to take longer to be
reported and settled and casualty lines are generally referred to as long tail lines. Estimates of ultimate losses for
shorter tail lines, with the exception of loss estimates for large catastrophic events, generally exhibit less
volatility than those for the longer tail lines.
The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder
methods, and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate
ultimate loss and LAE for each exposure group.
Expected Loss Ratio Method: The expected loss ratio method uses earned premium times an expected loss ratio
to calculate ultimate losses for a given underwriting or accident year. This method relies entirely on expectation
to project ultimate losses with no consideration given to actual losses. As such, it may be appropriate for an
immature underwriting or accident year where few, if any, losses have been reported or paid, but less
appropriate for a more mature year.
Chain Ladder Method: Chain ladder methods use a standard loss development triangle to project ultimate
losses. Age-to-age development factors are selected for each development period and combined to calculate
age-to-ultimate development factors which are then applied to paid or reported losses to project ultimate
losses. This method relies entirely on actual paid or reported losses to project ultimate losses. No other factors
such as changes in pricing or other expectations are taken into account. It is most appropriate for groups with
homogeneous, stable experience where past development patterns are expected to continue in the future. It is
least appropriate for groups which have changed significantly over time or which are more volatile.
Bornhuetter-Ferguson Method: The Bornhuetter -Ferguson method is a combination of the expected loss ratio
method and the chain ladder method. Ultimate losses are projected based partly on actual paid or reported
losses and partly on expectation. Incurred but not reported (IBNR) reserves are calculated using earned
premium, an a priori loss ratio, and selected age-to-age development factors and added to actual reported (paid)
losses to determine ultimate losses. It is more responsive to actual reported or paid development than the
F-30
expected loss ratio method but less responsive than the chain ladder method. The reliability of the method
depends on the accuracy of the selected a priori loss ratio.
Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting
of experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate
losses for short tail lines at an earlier stage than for long tail lines. As a result, the Company utilizes, as well,
exposure-based methods to estimate its ultimate losses for longer tail lines, especially for immature
underwriting or accident years. For both short and long tail lines, the Company supplements these general
approaches with analytically based judgments.
Key actuarial assumptions contain no explicit provisions for reserve uncertainty nor does the Company
supplement the actuarially determined reserves for uncertainty.
Carried reserves at each reporting date are the management’s best estimate of ultimate unpaid losses and LAE
at that date. The Company completes detailed reserve studies for each exposure group annually for both
reinsurance and insurance operations. The completed annual reserve studies are “rolled-forward” for each
accounting period until the subsequent reserve study is completed. Analyzing the roll-forward process involves
comparing actual reported losses to expected losses based on the most recent reserve study. The Company
analyzes significant variances between actual and expected losses and post adjustments to its reserves as
warranted.
Certain reserves, including losses from widespread catastrophic events and COVID -19 related losses, cannot be
estimated using traditional actuarial methods. These types of events are reserved for separately using a variety
of statistical and actuarial techniques. We estimate losses for these types of events based on information
derived from catastrophe models, quantitative and qualitative exposure analyses, reports and communications
from ceding companies and development patterns for historically similar events, where available.
The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries
and/or damages relating to or resulting from environmental pollution and hazardous substances, including
asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental
contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the
land, air or water. Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for
property damage resulting from asbestos or products containing asbestos.
The Company’s reserves include an estimate of the Company’s ultimate liability for A&E claims. The Company’s
A&E liabilities emanate from Mt. McKinley Insurance Company’s, a former wholly owned subsidiary that was
sold in 2015, direct insurance business and Everest Re’s assumed reinsurance business. All of the contracts of
insurance and reinsurance, under which the Company has received claims during the past three years, expired
more than
losses.
F-31
A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The
following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance
basis for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
2020
Gross basis:
Beginning of period reserves
$
$
$
Incurred losses
Paid losses
(42 )
(55 )
(40 )
End of period reserves
$
$
$
Net basis:
Beginning of period reserves
$
$
$
Incurred losses
-
(1 )
Paid losses
(37 )
(42 )
(30 )
End of period reserves
$
$
$
(Some amounts may not reconcile due to rounding.)
In 2015, the Company sold Mt. McKinley to Clearwater Insurance Company, a subsidiary of Fairfax Financial.
Concurrently with the closing, the Company entered into a retrocession treaty with an affiliate of Clearwater
Insurance Company. Per the retrocession treaty, the Company retroceded
% of the liabilities associated with
certain Mt. McKinley policies, which related entirely to A&E business and had been reinsured by Bermuda Re. As
consideration for entering into the retrocession treaty, Everest Re Bermuda transferred cash of $
amount equal to the net loss reserves as of the closing date. The maximum liability retroceded under the
retrocession treaty will be $
retain liability for any amounts exceeding the maximum liability retroceded under the retrocession treaty.
On December 20, 2019, the retrocession treaty was amended and included a partial commutation. As a result of
this amendment and partial commutation, gross A&E reserves and correspondingly reinsurance receivable were
reduced by $
In 2022 the Company posted additional A&E reserves of $
m, following a comprehensive actuarial reserving
review. This increase in reserves brings the Company A&E position in line with the overall industry survival
ratios.
Reinsurance Recoverables.
Reinsurance recoverables for both paid and unpaid losses totaled $
2022 and December 31, 2021, respectively. At December 31, 2022, $
%, was receivable from
Mt. Logan Re collateralized segregated accounts; $
%, was receivable from Munich
Reinsurance America, Inc. and $
%, was recoverable from Endurance Reinsurance Corporation
of America. No other retrocessionaire accounted for more than
% of our receivables.
F-32
Future Policy Benefit Reserve.
Activity in the reserve for future policy benefits is summarized for the periods indicated:
At December 31,
(Dollars in thousands)
2022
2021
2020
Balance at beginning of year
$
$
$
Liabilities assumed
-
-
-
Adjustments to reserves
(3 )
(1 )
Benefits paid in the current year
(4 )
(3 )
(4 )
Balance at end of year
$
$
$
(Some amounts may not reconcile due to rounding.)
4. FAIR VALUE
GAAP guidance regarding fair value measurements address how companies should measure fair value when they
are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a
common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the
measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value
measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or
liability. The level in the hierarchy within which a given fair value measurement falls is determined based on the
lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3
being the lowest priority.
The levels in the hierarchy are defined as follows:
Level 1: Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for
identical assets or liabilities in an active market;
Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument;
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company’s fixed maturity and equity securities are primarily managed by third party investment asset
managers. The investment asset managers managing publicly traded securities obtain prices from nationally
recognized pricing services. These services seek to utilize market data and observations in their evaluation
process. They use pricing applications that vary by asset class and incorporate available market information and
when fixed maturity securities do not trade on a daily basis the services will apply available information through
processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. In
addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and
interest rate scenarios for securities that have prepayment features.
The investment asset managers do not make any changes to prices received from either the pricing services or
the investment brokers. In addition, the investment asset managers have procedures in place to review the
reasonableness of the prices from the service providers and may request verification of the prices. The
Company also continually performs quantitative and qualitative analysis of prices, including but not limited to
initial and ongoing review of pricing methodologies, review of prices obtained from pricing services and third
party investment asset managers, review of pricing statistics and trends, and comparison of prices for certain
securities with a secondary price source for reasonableness. No material variances were noted during these
price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company
may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value.
F-33
At December 31, 2022, $
majority of these fixed maturities were valued by investment managers’ valuation committees and many of
these fair values were substantiated by valuations from independent third parties. The Company has procedures
in place to evaluate these independent third party valuations. At December 31, 2021, $
maturities, fair value were fair valued using unobservable inputs.
The Company internally manages a public equity portfolio which had a fair value at December 31, 2022 and
December 31, 2021 of $
collateralized loan obligations included in asset-backed securities which had a fair value of $
billion at December 31, 2022 and December 31, 2021, respectively. All prices for these securities were obtained
from publicly published sources or nationally recognized pricing vendors.
Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are
categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign
exchanges are categorized as Level 2 due to the added input of a foreign exchange conversion rate to determine
fair value. The Company uses foreign currency exchange rates published by nationally recognized sources.
Fixed maturity securities listed in the tables have been categorized as Level 2, since a particular security may not
have traded but the pricing services are able to use valuation models with observable market inputs such as
interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority.
For foreign government securities and foreign corporate securities, the fair values provided by the third party
pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange
rates from nationally recognized sources.
In addition to the valuations from investment managers, some of the fixed maturities with fair values
categorized as Level 3 result when prices are not available from the nationally recognized pricing services and
are derived using unobservable inputs. The Company will value the securities with unobservable inputs using
comparable market information or receive fair values from investment managers. The investment managers
may obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by
market makers or broker-dealers who are recognized as market participants in the markets in which they are
providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset
managers and the Company. If the broker quotes are for foreign denominated securities, the quotes are
converted to U.S. dollars using currency exchange rates from nationally recognized sources.
The composition and valuation inputs for the presented fixed maturities categories Level 1 and Level 2 are as
follows:
• U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily
comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted
prices, reported trades, quoted prices for similar issuances or benchmark yields;
• Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and
the fair values are based on observable market inputs such as quoted market prices, quoted prices for
similar securities, benchmark yields and credit spreads;
• Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair
values are based on observable market inputs such as quoted market prices, quoted prices for similar
securities, benchmark yields and credit spreads;
• Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted
prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using
observable inputs such as prepayment speeds, collateral performance and default spreads;
F-34
• Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair
values are based on observable market inputs such as quoted market prices, quoted prices for similar
securities and models with observable inputs such as benchmark yields and credit spreads and then, where
applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;
• Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values
are based on observable market inputs such as quoted market prices, quoted prices for similar securities
and models with observable inputs such as benchmark yields and credit spreads and then, where applicable,
converted to U.S. dollars using an exchange rate from a nationally recognized source.
The following table presents the fair value measurement levels for all assets and liabilities, which the Company
has recorded at fair value as of the periods indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
-
$
$
-
Obligations of U.S. States and political subdivisions
-
-
Corporate securities
-
Asset-backed securities
-
Mortgage-backed securities
Commercial
-
-
Agency residential
-
-
Non-agency residential
-
-
Foreign government securities
-
-
Foreign corporate securities
-
Total fixed maturities, available for sale
-
Equity securities, fair value
-
(Some amounts may not reconcile due to rounding.)
F-35
The following table presents the fair value measurement levels for all assets and liabilities, which the Company
has recorded at fair value as of the periods indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
$
-
$
$
-
Obligations of U.S. States and political subdivisions
-
-
Corporate securities
-
Asset-backed securities
-
Mortgage-backed securities
Commercial
-
-
Agency residential
-
-
Non-agency residential
-
-
Foreign government securities
-
-
Foreign corporate securities
-
Total fixed maturities, available for sale
-
Equity securities, fair value
-
(Some amounts may not reconcile due to rounding.)
In addition, $
balance sheets as of December 31, 2022 and 2021, respectively, are not included within the fair value hierarchy
tables as the assets are measured at net asset value (“NAV”) as a pract ical expedient to determine fair value.
The following table presents the activity under Level 3, fair value measurements using significant unobservable
inputs by asset type, for the periods indicated:
Total Fixed Maturities, Available for Sale
December 31, 2022
December 31, 2021
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
Securities
CMBS
Corporate
Total
Securities
Securities
Corporate
Total
Beginning balance fixed maturities
$
$
$
-
$
$
$
$
$
$
Total gains or (losses) (realized/unrealized)
Included in earnings
(10 )
-
-
-
(10 )
(12 )
(6 )
-
(18 )
Included in other comprehensive income (loss)
(35 )
-
(4 )
(36 )
(7 )
-
(2 )
Purchases, issuances and settlements
(45 )
Transfers in and/or (out) of Level 3
(35 )
(735 )
(6 )
(4 )
(779
-
-
-
-
Ending balance
$
$
$
-
$
$
$
$
$
$
The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains
or losses relating to assets still held
$
(23 )
$
$
-
$
-
$
(15 )
$
(16 )
$
(8 )
$
-
$
(24 )
(Some amounts may not reconcile due to rounding.)
The $
categories for the year ended December 31, 2022 related mainly to previously designated Level 3 securities that
the Company has reclassified from “fixed maturities – available for sale” to “fixed maturities – held to maturity”
during 2022. As “fixed maturities – held to maturity" are carried at amortized cost, net of credit allowances
F-36
rather than at fair value as “fixed maturities – available for sale”, these securities are no longer included within
the fair value hierarchy table or in the roll forward of Level 3 securities. The fair values of these securities are
determined in a similar manner as the Company’s fixed maturity securities available for sale as described above.
The fair values of these securities incorporate the use of significant unobservable inputs and therefore are
classified as Level 3 within the fair value hierarchy as of December 31, 2022.
There were
Financial Instruments Disclosed, But Not Reported, at Fair Value
Certain financial instruments disclosed, but not reported, at fair value are excluded from the fair value hierarchy
tables above. Fair values of fixed maturity securities held to maturity and senior notes can be found within Notes
2 and 6, respectively. Short-term investments are stated at cost, which approximates fair value. See Note 1.
5. CREDIT FACILITIES
The Company has multiple active letter of credit facilities for a total commitment of up to $
December 31, 2022, providing for the issuance of letters of credit. The Company also has additional
uncommitted letter of credit facilities of up to $
corresponding authorization from the applicable lender. There is no guarantee the uncommitted capacity will be
available to us on a future date. The following table presents the interest and fees incurred in connection with
these committed credit facilities for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Credit facility interest and fees incurred - Wells Fargo Bank
$
-
$
-
$
The terms and outstanding amounts for each facility are discussed below:
Group Credit Facility
Effective May 26, 2016, Group, Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”) and Everest International
Reinsurance, Ltd. (“Everest International”), both direct subsidiaries of Group, entered into a
, $
million senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22,
2012,
, $
facilities, which have similar terms, are referred to as the “2016 Group Credit Facility”. Wells Fargo Corporation
(“Wells Fargo Bank”) is the administrative agent for the 2016 Group Credit Facility.
Effective May 26, 2021, the term of the 2016 Group Credit Facility expired. The Company elected not to renew
this facility to allow for the replacement by other collateralized letter of credit facilities such as those described
below. As a result of the non-renewal in May 2021, letter of credit commitment/availability in the 2016 Group
Credit Facility as of December 21, 2021 was limited to the remaining $
force and which expired in 2022.
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Wells Fargo Bank Group Credit Facility
$
-
$
-
$
$
F-37
Bermuda Re Wells Fargo Bilateral Letter of Credit Facility
Effective February 23, 2021, Bermuda Re entered into a letter of credit issuance facility with Wells Fargo referred
to as the “2021 Bermuda Re Wells Fargo Bilateral Letter of Credit Facility.” The Bermuda Re Wells Fargo Bilateral
Letter of Credit Facility originally provided for the issuance of up to $
Effective May 5, 2021, the agreement was amended to provide for the issuance of up to $
letters of credit.
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Wells Fargo Bank Bilateral LOC Agreement
$
$
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Citibank Letter of Credit Facility
Effective August 9, 2021, Bermuda Re entered into a new letter of credit issuance facility with Citibank N.A.
which superseded the previous letter of credit issuance facility with Citibank that was effective December 31,
2020. Both of these are referred to as the “Bermuda Re Letter of Credit Facility”. The current Bermuda Re
Citibank Letter of Credit Facility provides for the committed issuance of up to $
credit. In addition, the facility provided for the uncommitted issuance of up to $
accessible via written request by the Company and corresponding authorization from Citibank N.A.
The following table summarizes the outstanding letters of credit for the periods indicated:
F-38
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Bermuda Re Citibank LOC Facility- Committed
$
$
$
$
02/28/2022
03/01/2022
Bermuda Re Citibank LOC Facility - Uncommitted
Total Citibank Bilateral Agreement
$
$
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Bayerische Landesbank Bilateral Secured Credit Facility
Effective August 27, 2021 Bermuda Re entered into a letter of credit issuance facility with Bayerische
Landesbank, an agreement referred to as the “Bermuda Re Bayerische Landesbank Bilateral Secured Credit
Facility”. The Bermuda Re Bayerische Landesbank Bilateral Secured Credit Facility provides for the committed
issuance of up to $
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Bayerische Landesbank Bilateral Secured Credit Facility
$
$
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Bayerische Landesbank Bilateral Unsecured Letter of Credit Facility
Effective December 30, 2022, Bermuda Re entered into a new additional letter of credit issuance facility with
Bayerische Landesbank, New York Branch, referred to as the “Bayerische Landesbank Bilateral Unsecured Letter
of Credit Facility”. The Bermuda Re Bayerische Landesbank Bilateral Unsecured Letter of Credit Facility provides
for the committed issuance of up to $
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
Bank
Commitment
In Use
Date of Expiry
Bayerische Landesbank Unsecured Bilateral LOC Agreement - Committed
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Lloyd’s Bank Credit Facility.
Effective October 8, 2021 Bermuda Re entered into a letter of credit issuance facility with Lloyd’s Bank Corporate
Markets PLC, an agreement referred to as the “Bermuda Re Lloyd’s Bank Credit Facility”. The Bermuda Re
Lloyd’s Bank Credit Facility provides for the committed issuance of up to $
and subject to credit approval a maximum total facility amount of $
F-39
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Bermuda Re Lloyd's Bank Credit Facility-Committed
$
$
$
$
Bermuda Re Lloyd's Bank Credit Facility-Uncommitted
-
-
Total Bermuda Re Lloyd's Bank Credit Facility
$
$
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Barclays Credit Facility
Effective November 3, 2021, Bermuda Re entered into a letter of credit issuance facility with Barclays Bank PLC,
an agreement referred to as the “Bermuda Re Barclays Credit Facility”. The Bermuda Re Barclays Credit Facility
provides for the committed issuance of up to $
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
At December 31, 2021
Bank
Commitment
In Use
Date of Expiry
Commitment
In Use
Date of Expiry
Bermuda Re Barclays Credit Facility
$
$
$
$
(Some amounts may not reconcile due to rounding.)
Bermuda Re Nordea Bank Letter of Credit Facility
Effective November 21, 2022, Bermuda Re entered into a letter of credit issuance facility with Nordea Bank ABP,
New York Branch, referred to as the “Nordea Bank Letter of Credit Facility”. The Bermuda Re Nordea Bank
Letter of Credit Facility provides for the committed issuance of up to $
and subject to credit approval, uncommitted issuance of $
$
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in millions)
At December 31, 2022
Bank
Commitment
In Use
Date of Expiry
Nordea Bank ABP, NY Unsecured LOC Facility - Committed
$
$
Nordea Bank ABP, NY Unsecured LOC Facility - Uncommitted
Total Nordea Bank ABP, NY LOC Facility
$
$
(Some amounts may not reconcile due to rounding.)
Federal Home Loan Bank Membership
Everest Re is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to
borrow up to
% of its statutory admitted assets. As of December 31, 2022, Everest Re had admitted assets of
approximately $
December 31, 2022, Everest Re has $
incurred interest expense of $
respectively. The FHLBNY membership agreement requires that
% of borrowed funds be used to acquire
additional membership stock.
F-40
6. SENIOR NOTES
The table below displays Holdings’ outstanding senior notes. Market value is based on quoted market prices,
but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.
December 31, 2022
December 31, 2021
Consolidated
Consolidated
Principal
Balance Sheet
Balance Sheet
(Dollars in millions)
Date Issued
Date Due
Amounts
Market Value
Amount
Market Value
% Senior notes
$
$
$
$
$
% Senior notes
% Senior notes
$
$
$
$
$
Interest expense incurred in connection with these senior notes is as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
Interest Paid
Payable Dates
2022
2021
2020
% Senior Notes
semi-annually
June 1/December 1
$
$
$
% Senior Notes
semi-annually
April 15/October 15
% Senior Notes
semi-annually
April 15/October 15
-
$
$
$
(Some amounts may not reconcile due to rounding.)
7. LONG-TERM SUBORDINATED NOTES
The table below displays Holdings’ outstanding fixed to floating rate long-term subordinated notes. Market
value is based on quoted market prices, but due to limited trading activity, these subordinated notes are
considered Level 2 in the fair value hierarchy.
Maturity Date
December 31, 2022
December 31, 2021
Original
Consolidated
Consolidated
Principal
Balance Sheet
Balance Sheet
(Dollars in millions)
Date Issued
Amount
Scheduled
Final
Amount
Market Value
Amount
Market Value
Long-term subordinated notes
$
$
$
$
$
During the fixed rate interest period from
, interest was at the annual rate of
%, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on
. During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the
3 month LIBOR plus
August 15 and November 15 of each year, subject to Holdings’ right to defer interest on
for up to
ten
quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for November 15, 2022
to February 14, 2023 is
%.
Holdings may redeem the long-term subordinated notes on or after May 15, 2017, in whole or in part at
% of
the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity
date and prior to
certain senior note holders and it mandates that Holdings receive proceeds from the sale of another
subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. The Company’s
% senior notes due on
,
% senior notes due on
% senior notes
due on
subordinated notes.
F-41
In 2009, the Company had reduced its outstanding amount of long-term subordinated notes through the
initiation of a cash tender offer for any and all of the long-term subordinated notes. In addition, the Company
repurchased and retired $
December 31, 2022. The Company realized a gain of $
Interest expense incurred in connection with these long-term subordinated notes is as follows for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Interest expense incurred
$
$
$
8. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS
Certain subsidiaries of Group have established trust agreements, which effectively use the Company’s
investments as collateral, as security for assumed losses payable to certain non-affiliated ceding companies. At
December 31, 2022, the total amount on deposit in trust accounts was $
of restricted cash. At December 31, 2021, the total amount on deposit in trust accounts was $
includes $
The Company reinsures some of its catastrophe exposures with the segregated accounts of Mt. Logan Re. Mt.
Logan Re is a Collateralized insurer registered in Bermuda and
% of the voting common shares are owned by
Group. Each segregated account invests predominantly in a diversified set of catastrophe exposures, diversified
by risk/peril and across different geographic regions globally.
The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re
segregated accounts and assumed by the Company from Mt. Logan Re segregated accounts.
Years Ended December 31,
Mt. Logan Re Segregated Accounts
2022
2021
2020
(Dollars in millions)
Ceded written premiums
Ceded earned premiums
Ceded losses and LAE
Assumed written premiums
Assumed earned premiums
Effective April 1, 2018, the Company entered into a retroactive reinsurance transaction with one of the Mt.
Logan Re segregated accounts to retrocede $
accident years
. As consideration for entering the agreement, the Company transferred cash
of $
agreement will be $
liability. The Company will retain liability for any amounts exceeding the maximum liability. Effective July 1,
2022, the Company has commuted this reinsurance agreement with Mt. Logan segregated account.
F-42
The Company entered into various collateralized reinsurance agreements with Kilimanjaro Re Limited
(“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe
reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and
earthquake events. The table below summarizes the various agreements.
(Dollars in millions)
Class
Description
Effective Date
Expiration
Date
Limit
Coverage Basis
Series 2018-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
$
Aggregate
Series 2018-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2019-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Occurrence
Series 2019-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2019-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Occurrence
Series 2019-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2021-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Occurrence
Series 2021-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2021-1 Class C-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2021-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Occurrence
Series 2021-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2021-1 Class C-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
Aggregate
Total available limit as of December 31, 2022
$
Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on
estimated industry level insured losses from covered events, as well as, the geographic location of the events.
The estimated industry level of insured losses is obtained from published estimates by an independent
recognized authority on insured property losses. Currently, none of the published insured loss estimates for
catastrophe events during the applicable covered periods of the various agreements have exceeded the single
event retentions or aggregate retentions under the terms of the agreements that would result in a recovery.
Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds
to unrelated, external investors. The proceeds from the issuance of the Notes listed below are held in
reinsurance trusts throughout the duration of the applicable reinsurance agreements and invested solely in U.S.
government money market funds with a rating of at least “AAAm” by Standard & Poor’s.
(Dollars in millions)
Note Series
Issue Date
Maturity Date
Amount
Series 2018-1 Class A-2
$
Series 2018-1 Class B-2
Series 2019-1 Class A-1
Series 2019-1 Class B-1
Series 2019-1 Class A-2
Series 2019-1 Class B-2
Series 2021-1 Class A-1
Series 2021-1 Class B-1
Series 2021-1 Class C-1
Series 2021-1 Class A-2
Series 2021-1 Class B-2
Series 2021-1 Class C-2
Series 2022-1 Class A
$
F-43
9. LEASES
The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary
course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on
a straight-line basis over the term of the lease. Most leases include an option to extend or renew the lease term.
The exercise of the renewal is at the Company’s discretion. The operating lease liability includes lease payments
related to options to extend or renew the lease term if the Company is reasonably certain of exercise those
options. The Company, in determining the present value of lease payments utilizes either the rate implicit in the
lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate
with terms of the underlying lease.
Supplemental information related to operating leases is as follows for the periods indicated:
Year Ended December 31,
(Dollars in thousands)
2022
2021
Lease expense incurred:
Operating lease cost
$
$
At December 31,
(Dollars in millions)
2022
2021
Operating lease right of use assets
$
$
Operating lease liabilities
Year Ended December 31,
(Dollars in millions)
2022
2021
Operating cash flows from operating leases
$
(20 )
$
(18 )
At December 31,
2022
2021
Weighted average remaining operating lease term
11.6 years
Weighted average discount rate on operating leases
%
%
Maturities of the existing lease liabilities are expected to occur as follows:
(Dollars in thousands)
2023
$
2024
2025
2026
2027
Thereafter
Undiscounted lease payments
Less: present value adjustment
Total operating lease liability
$
10. INCOME TAXES
Under Bermuda law, no income or capital gains taxes are imposed on Group and its Bermuda Subsidiaries. The
Minister of Finance of Bermuda has assured Group and its Bermuda subsidiaries that, pursuant to The Exempted
Undertakings Tax Protection Amendment Act of 2011, they will be exempt until 2035 from imposition of any
such taxes.
All of the income of Group's non-Bermuda subsidiaries is subject to the applicable federal, foreign, state, and
local taxes on corporations. Additionally, the income of the foreign branches of the Company's insurance
operating companies, in particular the UK branch of Bermuda Re, is subject to various rates of income tax.
Group's U.S. subsidiaries conduct business in and are subject to taxation in the U.S. Should the U.S. subsidiaries
F-44
distribute current or accumulated earnings and profits in the form of dividends or otherwise, the Company
would be subject to an accrual of
% U.S. withholding tax. Currently, however, no withholding tax has been
accrued with respect to such un-remitted earnings as management has no intention of remitting them. The
cumulative amount that would be subject to withholding tax, if distributed, is not practicable to compute. The
provision for income taxes in the consolidated statement of operations and comprehensive income (loss) has
been determined in accordance with the individual income of each entity and the respective applicable tax laws.
The provision reflects the permanent differences between financial and taxable income relevant to each entity.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, provided that
U.S. companies could carryback for five years net operating losses incurred in 2018, 2019 and/or 2020. This
beneficial tax provision in the CARES Act enabled the Company to carryback its significant 2018 net operating
losses to prior tax years with higher effective tax rates of
% versus
% in 2018 and later years. As a result, the
Company was able to record a net income tax benefit from the five-year carryback of $
federal income tax cash refunds of $
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax
provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share
repurchase excise tax and do not expect the legislation to have a material impact on our results of operations. As
the IRS issues additional guidance, we will evaluate any impact to our consolidated financial statements.
The significant components of the provision are as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Current tax expense (benefit):
U.S.
$
$
$
(108 )
Non-U.S.
Total current tax expense (benefit)
(105 )
Deferred tax expense (benefit):
U.S.
(90 )
Non-U.S.
-
(3 )
Total deferred tax expense (benefit)
(90 )
Total income tax expense (benefit)
$
(9 )
$
$
(Some amounts may not reconcile due to rounding.)
F-45
The weighted average expected tax provision has been calculated using the pre-tax income (loss) in each
jurisdiction multiplied by that jurisdiction's applicable statutory tax rate. Reconciliation of the difference
between the provision for income taxes and the expected tax provision at the weighted average tax rate for the
periods indicated is provided below:
Years Ended December 31,
2022
2021
2020
(Dollars in millions)
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
Underwriting gain (loss)
$
(81 )
$
$
(83 )
$
$
$
(278 )
Net investment income
Net realized capital gains (losses)
(426 )
(29 )
(8 )
Net derivative gain (loss)
-
-
-
-
Corporate expenses
(26 )
(35 )
(33 )
(34 )
(16 )
(25 )
Interest, fee and bond issue cost amortization expense
(101 )
-
(70 )
-
(36 )
(1 )
Other income (expense)
(6 )
(96 )
(15 )
Pre-tax income (loss)
$
(32 )
$
$
$
$
$
Expected tax provision at the applicable statutory rate(s)
(9 )
-
(10 )
Increase (decrease) in taxes resulting from:
Tax exempt income
(4 )
-
(4 )
-
(4 )
-
Dividend received deduction
(3 )
-
(1 )
-
(1 )
-
Proration
-
-
-
Affiliated preferred stock dividends
-
-
-
Creditable foreign premium tax
(11 )
-
(13 )
-
(12 )
-
Tax audit settlement
-
-
-
-
-
-
Share-based compensation tax benefits formerly in APIC
(3 )
-
(2 )
-
(3 )
-
Impact of CARES Act
-
-
-
-
(32 )
-
Valuation allowance
-
-
(10 )
-
Change in uncertain tax positions
-
-
-
-
-
-
Other
-
(5 )
Total income tax provision
$
(14 )
$
$
$
$
$
-
(Some amounts may not reconcile due to rounding.)
At December 31, 2022, 2021 and 2020, the Company had
The Company’s 2014 through 2018 U.S. Federal tax returns are under audit by the IRS. To date, the Company
has received a significant number of Information Document Requests (“IDRs”). However, the IRS has not issued
any Notice of Proposed Adjustments for these tax years. The Company had filed amended tax returns
requesting refunds for 2015 and 2016 for $
Tax years 2019, 2020 and 2021 are open for examination by the U.S. Federal income tax jurisdiction.
F-46
Deferred Income taxes reflect the tax effect of the temporary differences between the value of assets and
liabilities for financial statement purposes and such values are measured by the U.S. tax laws and
regulations. The principal items making up the net deferred income tax assets/(liabilities) are as follows for the
periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Deferred tax assets:
$
$
-
Total deferred tax assets
Deferred tax liabilities:
-
Total deferred tax liabilities
Net deferred tax assets
(25 )
(18 )
Total net deferred tax assets/(liabilities)
$
$
(Some amounts may not reconcile due to rounding.)
At December 31, 2022 and 2021, the Company had $
respectively. The VA is a result of our conclusion under US GAAP accounting principles that the UK, Netherlands,
Ireland, Chile, Switzerland, France, Germany, Singapore, and U.S. jurisdictions could not demonstrate that it was
more likely than not that the related deferred tax assets will be realized. This was primarily due to factors such
as cumulative losses in recent years related to COVID 19 and market conditions and the inability to demonstrate
overall profitability within the specific jurisdiction. During the year ended December 31, 2022, the Company
recorded an overall decrease in its VA of $
million do not expire. Tax effected Irish NOLs of $
begin to expire in
2028
. The remaining tax effected NOLs of $
expiring in 2027. Note that not all NOLs had a VA up against them.
At December 31, 2022, and 2021, the Company had $
(“FTC”) carryforwards, all related to the branch basket. The branch basket FTCs begin to expire in
2030
.
At December 31, 2022, $
available for sale fixed maturity securities. The unrealized losses on available for sale fixed maturity securities
were a result of market conditions, including rising interest rates. Ultimate realization of the deferred tax asset
F-47
depends on the Company’s ability and intent to hold the available for sale securities until they recover their
value or mature. As of December 31, 2022, based on all the available evidence, the Company has concluded that
the deferred tax asset related to the unrealized losses on the available for sale fixed maturity portfolio are, more
likely than not, expected to be realized.
The Company follows ASU 2016-09 in regard to the treatment of the tax effects of share -based compensation
transactions. ASU 2016-09 required that the income tax effects of restricted stock vestings and stock option
exercises resulting from the change in value of share -based compensation awards between the grant date and
settlement (vesting/exercise) date be recorded as part of income tax expense (benefit) within the consolidated
statements of operations and comprehensive income (loss). Per ASU 2016-09, the Company recorded excess tax
benefits of $
part of income tax expense (benefit) within the consolidated statements of operations and comprehensive
income (loss) in 2022, 2021 and, 2020, respectively.
ASU 2016-09 does not impact the accounting treatment of tax benefits related to dividends on restricted stock.
The tax benefits related to the payment of dividends on restricted stock have been recorded as part of additional
paid-in capital in the shareholders' equity section of the consolidated balance sheets in all years. The tax
benefits related to the payment of dividends on restricted stock were $
in 2022, 2021 and 2020, respectively.
For the year ended December 31, 2022, the Company considers our earnings within each jurisdiction to be
indefinitely reinvested. Should the subsidiaries distribute current or accumulated earnings and profits in the
form of dividends or otherwise, the Company would be subject to withholding taxes. The cumulative amount
that would be subject to withholding tax, if distributed, is not practicable to compute.
11. REINSURANCE
The Company utilizes reinsurance agreements to reduce its exposure to large claims and catastrophic loss
occurrences. These agreements provide for recovery from reinsurers of a portion of losses and LAE under
certain circumstances without relieving the Company of its underlying obligations to the policyholders. Losses
and LAE incurred and premiums earned are reported after deduction for reinsurance. In the event that one or
more of the reinsurers were unable to meet their obligations under these reinsurance agreements, the Company
would not realize the full value of the reinsurance recoverable balances. The Company's procedures include
carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and
regularly monitoring the financial condition and ratings of its reinsurers. Reinsurance recoverables include
balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance.
Reinsurance recoverables include an estimate of the amount of gross losses and loss adjustment expense
reserves that may be ceded under the terms of the reinsurance agreements, including incurred but not reported
unpaid losses. The Company’s estimate of losses and loss adjustment expense reserves ceded to reinsurers is
based on assumptions that are consistent with those used in establishing the gross reserves for amounts the
Company owes to its claimants. The Company estimates its ceded reinsurance receivable based on the terms of
any applicable facultative and treaty reinsurance, including an estimate of how incurred but not reported losses
will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance
recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses
and loss adjustment expenses. The Company may hold partial collateral, including letters of credit and funds
held, under these agreements. See also Note 1C, Note 3 and Note 8.
Balances are considered past due when amounts that have been billed are not collected within contractually
stipulated time periods, generally 30, 60 or 90 days. To manage reinsurer credit risk, a reinsurance security
review committee evaluates the credit standing, financial performance, management and operational quality of
each potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured,
including the expected liability payout duration, and establishes limits tiered by reinsurer credit rating.
F-48
Where its contracts permit, the Company secures future claim obligations with various forms of collateral or
other credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group
wide offsets.
See Note 1C for discussion of allowance on reinsurance recoverables.
Insurance companies, including reinsurers, are regulated and hold risk-based capital to mitigate the risk of loss
due to economic factors and other risks. Non-U.S. reinsurers are either subject to a capital regime substantively
equivalent to domestic insurers or we hold collateral to support collection of reinsurance receivable. As a result,
there is limited history of losses from insurer defaults.
Premiums written and earned and incurred losses and LAE are comprised of the following for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Written premiums:
Direct
$
$
$
Assumed
Ceded
(1,608 )
(1,604 )
(1,365 )
Net written premiums
$
$
$
Premiums earned:
Direct
$
$
$
Assumed
Ceded
(1,513 )
(1,498 )
(1,401 )
Net premiums earned
$
$
$
Incurred losses and LAE:
Direct
$
$
$
Assumed
Ceded
(988 )
(735 )
(754 )
Net incurred losses and LAE
$
$
$
12. OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the components of comprehensive income (loss) in the consolidated statements of
operations for the periods indicated:
Years Ended December 31,
2022
2021
2020
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on
securities - non-credit related
$
(2,332 )
$
$
(2,037 )
$
(548 )
$
$
(488 )
$
$
(40 )
$
Reclassification of net realized losses (gains) included in
net income (loss)
(18 )
(2 )
(6 )
(3 )
Foreign currency translation adjustments
(82 )
(77 )
(64 )
(62 )
(4 )
Benefit plan actuarial net gain (loss)
(4 )
(5 )
(7 )
(6 )
Reclassification of benefit plan liability amortization
included in net income (loss)
(1 )
(2 )
(2 )
Total other comprehensive income (loss)
$
(2,285 )
$
$
(2,008 )
$
(577 )
$
$
(523 )
$
$
(49 )
$
F-49
The following table presents details of the amounts reclassified from AOCI for the periods indicated:
Years Ended
December 31,
Affected line item within the statements of
AOCI component
2022
2021
operations and comprehensive income (loss)
(Dollars in millions)
URA(D) on securities
$
$
Other net realized capital gains (losses)
(18 )
(2 )
Income tax expense (benefit)
$
$
Net income (loss)
Benefit plan net gain (loss)
$
$
Other underwriting expenses
(1 )
(2 )
Income tax expense (benefit)
$
$
Net income (loss)
The following table presents the components of accumulated other comprehensive income (loss), net of tax, in
the consolidated balance sheets for the periods indicated:
Years Ended
December 31,
(Dollars in millions)
2022
2021
Beginning balance of URA (D) on securities
$
$
Current period change in URA(D) of investments - non-credit related
(1,948 )
(485 )
Ending balance of URA(D) on securities
(1,709 )
Beginning balance of foreign currency translation adjustments
(177 )
(115 )
Current period change in foreign currency translation adjustments
(77 )
(62 )
Ending balance of foreign currency translation adjustments
(254 )
(177 )
Beginning balance of benefit plan net gain (loss)
(50 )
(74 )
Current period change in benefit plan net gain (loss)
Ending balance of benefit plan net gain (loss)
(33 )
(50 )
Ending balance of accumulated other comprehensive income (loss)
$
(1,996 )
$
(Some amounts may not reconcile due to rounding.)
13. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans.
The Company maintains both qualified and non-qualified defined benefit pension plans for its U.S. employees
employed prior to April 1, 2010. Generally, the Company computes the benefits based on average earnings over
a period prescribed by the plans and credited length of service. The Company’s non-qualified defined benefit
pension plan provided compensating pension benefits for participants whose benefits have been curtailed under
the qualified plan due to Internal Revenue Code limitations. Effective January 1, 2018, participants of the
Company’s non-qualified defined benefit pension plan may no longer accrue additional service benefits.
Although not required to make contributions under IRS regulations, the following table summarizes the
Company’s contributions to the defined benefit pension plans for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Company contributions
$
$
$
F-50
The following table summarizes the Company’s pension expense for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Pension expense
$
(2 )
$
$
The following table summarizes the status of these defined benefit plans for U.S. employees for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
$
Service cost
Interest cost
Actuarial (gain)/loss
(115 )
(9 )
Curtailment
-
-
Benefits paid
(15 )
(12 )
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
(83 )
Actual contributions during the year
Administrative expenses paid
-
-
Benefits paid
(15 )
(12 )
Fair value of plan assets at end of year
Funded status at end of year
$
(6 )
$
(25 )
(Some amounts may not reconcile due to rounding.)
Amounts recognized in the consolidated balance sheets for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Other assets (due beyond one year)
$
$
-
Other liabilities (due within one year)
(1 )
(1 )
Other liabilities (due beyond one year)
(6 )
(24 )
Net amount recognized in the consolidated balance sheets
$
(6 )
$
(25 )
(Some amounts may not reconcile due to rounding.)
F-51
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income
(loss) for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Accumulated income (loss)
$
(56 )
$
(68 )
Accumulated other comprehensive income (loss)
$
(56 )
$
(68 )
(Some amounts may not reconcile due to rounding.)
Other changes in other comprehensive income (loss) for the periods indicated are as follows:
Years Ended December 31,
(Dollars in millions)
2022
2021
Other comprehensive income (loss) at December 31, prior year
$
(68 )
$
(92 )
Net gain (loss) arising during period
Recognition of amortizations in net periodic benefit cost:
Actuarial loss
Curtailment loss recognized
-
-
Other comprehensive income (loss) at December 31, current year
$
(56 )
$
(68 )
(Some amounts may not reconcile due to rounding.)
Net periodic benefit cost for U.S. employees included the following components for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Service cost
$
$
$
Interest cost
Expected return on assets
(25 )
(24 )
(21 )
Amortization of actuarial loss from earlier periods
Settlement
-
Net periodic benefit cost
$
(2 )
$
$
Other changes recognized in other comprehensive income (loss):
Other comprehensive income (loss) attributable to change from prior year
(12 )
(24 )
Total recognized in net periodic benefit cost and other
comprehensive income (loss)
$
(14 )
$
(21 )
(Some amounts may not reconcile due to rounding.)
The weighted average discount rates used to determine net periodic benefit cost for 2022, 2021 and 2020 were
%,
% and
%, respectively. The rate of compensation increase used to determine the net periodic
benefit cost for 2022, 2021 and 2020 was
%. The expected long-term rate of return on plan assets for 2022,
2021 and 2020 was
%,
% and
% respectively.
The weighted average discount rates used to determine the actuarial present value of the projected benefit
obligation for 2022, 2021 and 2020 were
%,
% and
%, respectively.
F-52
The following table summarizes the accumulated benefit obligation for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
$
$
Non-qualified Plan
Total
$
$
(Some amounts may not reconcile due to rounding.)
The following table displays the plans with projected benefit obligations in excess of plan assets for the periods
indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
Projected benefit obligation
$
$
Fair value of plan assets
Non-qualified Plan
Projected benefit obligation
$
$
Fair value of plan assets
-
-
The following table displays the plans with accumulated benefit obligations in excess of plan assets for the
periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
Accumulated benefit obligation
$
-
$
-
Fair value of plan assets
-
-
Non-qualified Plan
Accumulated benefit obligation
$
$
Fair value of plan assets
-
-
The following table displays the expected benefit payments in the periods indicated:
(Dollars in millions)
2023
$
2024
2025
2026
2027
Next 5 years
Plan assets consist of shares in investment trusts with
%,
%,
% and
% of the underlying assets consisting
of equity securities, fixed maturities, limited partnerships and cash, respectively. The Company manages the
qualified plan investments for U.S. employees. The assets in the plan consist of debt and equity mutual
funds. Due to the long term nature of the plan, the target asset allocation has historically been
% equities and
% bonds.
F-53
The following tables present the fair value measurement levels for the qualified plan assets at fair value for the
periods indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Short-term investments, which approximates fair value (a)
$
$
$
-
$
-
Mutual funds, fair value
Fixed income (b)
-
-
Equities (c)
-
-
Total
$
$
$
-
$
-
(Some amounts may not reconcile due to rounding.)
(a)
This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b)
This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately
% in U.S.
securities and
% in international securities.
(c)
This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with
common stock characteristics, such as rights and warrants, with approximately
% in U.S. equities and
% in international equities.
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Short-term investments, which approximates fair value (a)
$
$
$
-
$
-
Mutual funds, fair value
Fixed income (b)
-
-
Equities (c)
-
-
Total
$
$
$
-
$
-
(Some amounts may not reconcile due to rounding.)
(a)
This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b)
This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately
% in U.S.
securities and
% in international securities.
(c)
This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with
common stock characteristics, such as rights and warrants, with approximately
% in U.S. equities and
% in international equities.
In addition, $
at December 31, 2022 and 2021, respectively, are not included within the fair value hierarchy tables as the
assets are valued using the NAV practical expedient guidance within ASU 2015-07.
2021.
Defined Contribution Plans.
The Company also maintains both qualified and non-qualified defined contribution plans (“Savings Plan” and
“Non-Qualified Savings Plan”, respectively) covering U.S. employees. Under the plans, the Company contributes
F-54
up to a maximum
% of the participants’ compensation based on the contribution percentage of the
employee. The Non-Qualified Savings Plan provides compensating savings plan benefits for participants whose
benefits have been curtailed under the Savings Plan due to Internal Revenue Code limitations. In addition,
effective for new hires (and rehires) on or after April 1, 2010, the Company will contribute between
% and
%
of an employee’s earnings for each payroll period based on the employee’s age. These contributions will be
% vested after three years. The Company incurred expenses related to these plans of $
million and $
In addition, the Company maintains several defined contribution pension plans covering non-U.S.
employees. Each international office maintains a separate plan for the non-U.S. employees working in that
location. The Company contributes various amounts based on salary, age and/or years of service. In the current
year, the contributions as a percentage of salary for the international offices ranged from
% to
%. The
contributions are generally used to purchase pension benefits from local insurance providers. The Company
incurred expenses related to these plans of $
31, 2022, 2021 and 2020, respectively.
Post-Retirement Plan.
The Company sponsors a Retiree Health Plan for employees employed prior to April 1, 2010. This plan provides
healthcare benefits for eligible retired employees (and their eligible dependents), who have elected
coverage. The Company anticipates that most covered employees will become eligible for these benefits if they
retire while working for the Company. The cost of these benefits is shared with the retiree. The Company
accrues the post-retirement benefit expense during the period of the employee’s service. A medical cost trend
rate of
% in 2022 was assumed to decrease gradually to
% in 2030 and then remain at that level. The
Company incurred expenses of $
2021 and 2020, respectively.
The following table summarizes the status of this plan for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
$
Service cost
Interest cost
Amendments
-
-
Actuarial (gain)/loss
(10 )
(6 )
Benefits paid
-
-
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
-
-
Employer contributions
-
-
Benefits paid
-
-
Fair value of plan assets at end of year
-
-
Funded status at end of year
$
(21 )
$
(31 )
F-55
Amounts recognized in the consolidated balance sheets for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Other liabilities (due within one year)
$
(1 )
$
(1 )
Other liabilities (due beyond one year)
(21 )
(30 )
Net amount recognized in the consolidated balance sheets
$
(21 )
$
(31 )
(Some amounts may not reconcile due to rounding.)
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income
(loss) for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Accumulated income (loss)
$
$
Accumulated prior service credit (cost)
Accumulated other comprehensive income (loss)
$
$
Other changes in other comprehensive income (loss) for the periods indicated are as follows:
Years Ended December 31,
(Dollars in millions)
2022
2021
Other comprehensive income (loss) at December 31, prior year
$
$
(2 )
Net gain (loss) arising during period
Prior Service credit (cost) arising during period
-
-
Recognition of amortizations in net periodic benefit cost:
Actuarial loss (gain)
-
-
Prior service cost
-
(1 )
Other comprehensive income (loss) at December 31, current year
$
$
Net periodic benefit cost included the following components for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Service cost
$
$
$
Interest cost
Prior service credit recognition
-
(1 )
(1 )
Net gain recognition
-
-
-
Net periodic cost
$
$
$
Other changes recognized in other comprehensive income (loss):
Other comprehensive gain (loss) attributable to change from prior year
(10 )
(5 )
Total recognized in net periodic benefit cost and
other comprehensive income (loss)
$
(9 )
$
(4 )
(Some amounts may not reconcile due to rounding.)
The weighted average discount rates used to determine net periodic benefit cost for 2022, 2021 and 2020 were
%,
% and
%, respectively.
F-56
The weighted average discount rates used to determine the actuarial present value of the projected benefit
obligation at year end 2022, 2021 and 2020 were
%,
% and
%, respectively.
The following table displays the expected benefit payments in the years indicated:
(Dollars in millions)
2023
$
2024
2025
2026
2027
Next 5 years
14. DIVIDEND RESTRICTIONS AND STATUTORY FINANCIAL INFORMATION
Group and its operating subsidiaries are subject to various regulatory restrictions, including the amount of
dividends that may be paid and the level of capital that the operating entities must maintain. These regulatory
restrictions are based upon statut ory capital as opposed to GAAP basis equity or net assets. Group and one of its
primary operating subsidiaries, Bermuda Re, are regulated by Bermuda law and its other primary operating
subsidiary, Everest Re, is regulated by Delaware law. Bermuda Re is subject to the Bermuda Solvency Capital
Requirement (“BSCR”) administered by the Bermuda Monetary Authority (“BMA”) and Everest Re is subject to
the Risk-Based Capital Model (“RBC”) developed by the National Association of Insurance Commissioners
(“NAIC”). These models represent the aggregate regulatory restrictions on net assets and statutory capital and
surplus.
Dividend Restrictions.
Under Bermuda law, Group is prohibited from declaring or paying a dividend if such payment would reduce the
realizable value of its assets to an amount less than the aggregate value of its liabilities and its issued share
capital and share premium (additional paid-in capital) accounts. Group’s ability to pay dividends and its
operating expenses is dependent upon dividends from its subsidiaries.
Under Bermuda law, Bermuda Re is prohibited from declaring or making payment of a dividend if it fails to meet
its minimum solvency margin or minimum liquidity ratio. As a long-term insurer, Bermuda Re is also unable to
declare or pay a dividend to anyone who is not a policyholder unless, after payment of the dividend, the value of
the assets in their long-term business fund, as certified by their approved actuary, exceeds their liabilities for
long term business by at least the $
Prior approval of the BMA is required if Bermuda Re’s dividend payments would exceed
% of their prior year-
end total statutory capital and surplus.
Bermuda Re prepares its statutory financial statements in conformity with the accounting principles set forth in
Bermuda in The Insurance Act 1978, amendments thereto and related regulations. The statutory capital and
surplus of Bermuda Re was $
statutory net income of Bermuda Re was $
December 31, 2022, 2021 and 2020, respectively.
Delaware law provides that an insurance company which is a member of an insurance holding company system
and is domiciled in the state shall not pay dividends without giving prior notice to the Insurance Commissioner of
Delaware and may not pay dividends without the approval of the Insurance Commissioner if the value of the
proposed dividend, together with all other dividends and distributions made in the preceding
,
exceeds the greater of (1)
% of statutory surplus or (2) net income, not including realized capital gains, each as
reported in the prior year’s statutory annual statement. In addition, no dividend may be paid in excess of
F-57
unassigned earned surplus. At December 31, 2022, Everest Re has $
dividends in 2023 without the need for prior regulatory approval.
Everest Re prepares its statutory financial statements in accordance with accounting practices prescribed or
permitted by the NAIC and the Delaware Insurance Department. Prescribed statutory accounting practices are
set forth in the NAIC Accounting Practices and Procedures Manual. The capital and statutory surplus of Everest
Re was $
Everest Re was $
2020.
There are certain regulatory and contractual restrictions on the ability of Holdings’ operating subsidiaries to
transfer funds to Holdings in the form of cash dividends, loans or advances. The insurance laws of the State of
Delaware, where Holdings’ direct insurance subsidiaries are domiciled, require regulatory approval before those
subsidiaries can pay dividends or make loans or advances to Holdings that exceed certain statutory thresholds.
Capital Restrictions.
In Bermuda, Bermuda Re is subject to the BSCR administered by the BMA. No regulatory action is taken if an
insurer’s capital and surplus is equal to or in excess of their enhanced capital requirement determined by the
BSCR model. In addition, the BMA has established a target capital level for each insurer, which is
% of the
enhanced capital requirement.
In the United States, Everest Re is subject to the RBC developed by the NAIC which determines an authorized
control level risk-based capital. As long as the total adjusted capital is
% or more of the authorized control
level capital, no action is required by the Company.
The regulatory targeted capital and the actual statutory capital for Bermuda Re and Everest Re were as follows:
Bermuda Re
(1)
Everest Re
(2)
At December 31,
At December 31,
(Dollars in millions)
2022
(3)
2021
2022
2021
Regulatory targeted capital
$
-
$
$
$
Actual capital
$
$
$
$
(1)
Regulatory targeted capital represents the target capital level from the applicable year's BSCR calculation.
(2)
Regulatory targeted capital represents
% of the RBC authorized control level calculation for the applicable year.
(3)
The 2022 BSCR calculation is not yet due to be completed; however, the Company anticipates that Bermuda Re's December 31, 2022 actual capital will exceed the targeted capital
level.
15. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and
informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and
obligations under insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its
rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by
others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately
resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In
all such matters, the Company believes that its positions are legally and commercially reasonable. The Company
considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment
expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is
not a party to any other material litigation or arbitration.
The Company has entered into separate annuity agreements with The Prudential Insurance of America (“The
Prudential”) and an additional unaffiliated life insurance company in which the Company has either purchased
F-58
annuity contracts or become the assignee of annuity proceeds that are meant to settle claim payment
obligations in the future. In both instances, the Company would become contingently liable if either The
Prudential or the unaffiliated life insurance company were unable to make payments related to the respective
annuity contract.
The table below presents the estimated cost to replace all such annuities for which the Company was
contingently liable for the periods indicated:
At December 31,
(Dollars in thousands)
2022
2021
The Prudential
$
$
Unaffiliated life insurance company
16. SHARE-BASED COMPENSATION PLANS
The Company has a 2020 Stock Incentive Plan (“2020 Employee Plan”), a 2009 Non-Employee Director Stock
Option and Restricted Stock Plan (“2009 Director Plan”) and a 2003 Non-Employee Director Equity
Compensation Plan (“2003 Director Plan”).
The 2020 Employee Plan was established in June 2020. Under the 2020 Employee Plan,
shares have been authorized to be granted as non-qualified share options, share appreciation rights, restricted
share awards or performance share unit awards to officers and key employees of the Company. At December
31, 2022, there were
December 31, 2022, only non-qualified share options, restricted share awards and performance share unit
awards had been granted under the employee plans. Under the 2009 Director Plan,
been authorized to be granted as share options or restricted share awards to non-employee directors of the
Company. At December 31, 2022, there were
Director Plan. Under the 2003 Director Plan,
share options or share awards to non-employee directors of the Company. At December 31, 2022 there were
Options and restricted shares granted under the 2020 Employee Plan vest at the earliest of
% per year over
under the 2003 Director Plan generally vest at
% per year over
, unless an alternate vesting period
is authorized by the Board. Options and restricted shares granted under the 2009 Director Plan will vest as
provided in the award agreement. All options are exercisable at fair market value of the stock at the date of
grant and expire
Performance Share Unit awards granted under the 2020 Employee Plan will vest
% after
. The
Performance Share Unit awards represent the right to receive between
0
awarded depending upon performance in relation to certain metrics. The performance share unit valuation will
be based partly on growth in book value per share over the
peer companies. The remaining portion of the performance share valuation will be based upon operating return
on equity for each of the separate operating years within the vesting period.
For share options, restricted shares and performance share units granted under the 2020 Employee Plan, the
2009 Director Plan and the 2003 Director Plan, share-based compensation expense recognized in the
consolidated statements of operations and comprehensive income (loss) was $
million for the years ended December 31, 2022, 2021 and 2020, respectively. The corresponding income tax
benefit recorded in the consolidated statements of operations and comprehensive income (loss) for share-based
compensation was $
respectively.
F-59
For the year ended December 31, 2022, a total of
February 24, 2022, May 10, 2022, September 8, 2022 and November 10, 2022, with a fair value of $
,
$
, $
, $
units were awarded on February 23, 2022, with a fair value of $
granted during the year ended December 31, 2022. For share options granted during previous years, the fair
value per option was calculated on the date of the grant using the Black-Scholes option valuation model.
The Company recognizes, as an increase to additional paid-in capital, a realized income tax benefit from
dividends, charged to retained earnings and paid to employees on equity classified non-vested equity shares. In
addition, the amount recognized in additional paid-in capital for the realized income tax benefit from dividends
on those awards is included in the pool of excess tax benefits available to absorb tax deficiencies on share-based
payment awards. For the years ended December 31, 2022, 2021 and 2020, the Company recognized $
million, $
on restricted shares.
A summary of the option activity under the Company’s shareholder approved plans as of December 31, 2022,
2021 and 2020, and changes during the year then ended is presented in the following tables:
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
(Aggregate Intrinsic Value in millions)
Exercise
Contractual
Intrinsic
Options
Shares
Price/Share
Term
Value
Outstanding at January 1, 2022
$
Granted
-
Exercised
Forfeited/Cancelled/Expired
–
-
Outstanding at December 31, 2022
–
-
$
-
.
Exercisable at December 31, 2022
–
-
$
-
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
(Aggregate Intrinsic Value in millions; Shares in whole amounts)
Exercise
Contractual
Intrinsic
Options
Shares
Price/Share
Term
Value
Outstanding at January 1, 2021
$
Granted
-
-
Exercised
Forfeited/Cancelled/Expired
-
-
Outstanding at December 31, 2021
$
.
Exercisable at December 31, 2021
$
F-60
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
(Aggregate Intrinsic Value in millions; Shares in whole amounts)
Exercise
Contractual
Intrinsic
Options
Shares
Price/Share
Term
Value
Outstanding at January 1, 2020
$
Granted
-
-
Exercised
Forfeited/Cancelled/Expired
-
-
Outstanding at December 31, 2020
$
.
Exercisable at December 31, 2020
$
There have been
outstanding. The aggregate intrinsic value (market price less exercise price) of options exercised during the
years ended December 31, 2022, 2021 and 2020 was $
cash received from the exercised share options for the years ended December 31, 2022, 2021 and 2020 were $
million, $
ended December 31, 2022, 2021 and 2020 were $
The following table summarizes the status of the Company’s non-vested shares and changes for the periods
indicated:
Years Ended December 31,
2022
2021
2020
Weighted-
Weighted-
Weighted-
Average
Average
Average
Grant Date
Grant Date
Grant Date
Restricted (non-vested) Shares
Shares
Fair Value
Shares
Fair Value
Shares
Fair Value
Outstanding at January 1,
$
$
$
Granted
Vested
Forfeited
Outstanding at December 31,
As of December 31, 2022, there was $
share-based compensation expense. That cost is expected to be recognized over a weighted-average period of
$
years ended December 31, 2022, 2021 and 2020 were $
In addition to the 2020 Employee Plan, the 2009 Director Plan and the 2003 Director Plan, Group issued
common shares in 2022,
employee directors as compensation for their service as directors. These issuances had aggregate values of $
million, $
The Company acquired
,
million in 2022, 2021 and 2020, respectively, from employees who chose to pay required withholding taxes
and/or the exercise cost on option exercises or restricted share vestings by withholding shares.
F-61
The following table summarized the status of the Company’s non-vested performance share unit awards and
changes for the period indicated:
Years Ended December 31,
2022
2021
2020
Weighted-
Weighted-
Weighted-
Average
Average
Average
Grant Date
Grant Date
Grant Date
Performance Share Unit Awards
Shares
Fair Value
Shares
Fair Value
Shares
Fair Value
Outstanding at January 1,
$
-
$
-
$
-
Granted
Increase/(Decrease) on vesting units
due to performance
-
(800 )
-
(2,227 )
-
Vested
Forfeited
-
-
-
-
Outstanding at December 31,
-
-
-
The Company acquired
,
million in 2022, 2021 and 2020, respectively, from employees who chose to pay required withholding taxes on
performance shares units settlements by withholding shares.
17. SEGMENT REPORTING
The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business,
on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies.
Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore,
the United Kingdom and Switzerland. The Insurance operation writes property and casualty insurance directly
and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe,
Singapore and South America through its offices in the U.S., Canada, Chile, Singapore, the United Kingdom,
Ireland, and branches located in the Netherlands, France, Germany and Spain.
These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk
management, control of aggregate catastrophe exposures, capital, investments and support operations.
Management generally monitors and evaluates the financial performance of these operating segments based
upon their underwriting results.
Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred,
commission and brokerage expenses and other underwriting expenses. The Company measures its underwriting
results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which,
respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums
earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the
Company does not review and evaluate the financial results of its operating segments based upon balance sheet
data.
F-62
The following tables present the underwriting results for the operating segments for the periods indicated:
Year Ended December 31, 2022
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
$
$
Net written premiums
Premiums earned
$
$
$
Incurred losses and LAE
Commission and brokerage
Other underwriting expenses
Underwriting gain (loss)
$
$
$
Net investment income
Net realized capital gains (losses)
(455 )
Corporate expenses
(61 )
Interest, fee and bond issue cost amortization expense
(101 )
Other income (expense)
(102 )
Income (loss) before taxes
$
Year Ended December 31, 2021
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
$
$
Net written premiums
Premiums earned
$
$
$
Incurred losses and LAE
Commission and brokerage
Other underwriting expenses
Underwriting gain (loss)
$
$
$
Net investment income
Net realized capital gains (losses)
Corporate expenses
(68 )
Interest, fee and bond issue cost amortization expense
(70 )
Other income (expense)
Income (loss) before taxes
$
Year Ended December 31, 2020
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
$
$
Net written premiums
Premiums earned
$
$
$
Incurred losses and LAE
Commission and brokerage
Other underwriting expenses
Underwriting gain (loss)
$
(195 )
$
(58 )
$
(254 )
Net investment income
Net realized capital gains (losses)
Corporate expenses
(41 )
Interest, fee and bond issue cost amortization expense
(36 )
Other income (expense)
Income (loss) before taxes
$
F-63
The Company produces business in the U.S., Bermuda and internationally. The net income deriving from and
assets residing in the individual foreign countries in which the Company writes business are not identifiable in
the Company’s financial records. Based on gross written premium, the table below presents the largest country,
other than the U.S., in which the Company writes business, for the periods indicated:
Year Ended December 31,
(Dollars in millions)
2022
2021
2020
United Kingdom gross written premium
$
$
$
Approximately
%,
% and
% of the Company’s gross written premiums in 2022, 2021 and 2020,
respectively, were sourced through the Company’s largest intermediary.
18. SUBSEQUENT EVENTS
The Company has evaluated known recognized and non-recognized subsequent events. In February 2023, an
earthquake occurred which impacted the countries of Turkey and Syria. Due to the recentness of this event, the
Company is unable to estimate the magnitude of losses at this time. However, the Company anticipates that the
losses from this event will adversely impact its first quarter 2023 financial statements.
S-1
SCHEDULE I — SUMMARY OF INVESTMENTS —
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2022
Column A
Column B
Column C
Column D
Amount
Shown in
Market
Balance
(Dollars in millions)
Cost
Value
Sheet
Fixed maturities - available for sale
Bonds:
U.S. government and government agencies
$
$
$
State, municipalities and political subdivisions
Foreign government securities
Foreign corporate securities
Public utilities
All other corporate bonds
Mortgage - backed securities:
Commercial
Agency residential
Non-agency residential
Redeemable preferred stock
Total fixed maturities-available for sale
Fixed maturities - held to maturity
Bonds:
Foreign corporate securities
All other corporate bonds
Mortgage - backed securities:
Commercial
Total fixed maturities-held to maturity
Equity securities - at fair value (1)
Short-term investments
Other invested assets
Cash
Total investments and cash
$
$
$
(Some amounts may not reconcile due to rounding.)
(1) Original cost does not reflect fair value adjustments, which have been realized through the statements of operations and comprehensive income (loss).
S-2
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED BALANCE SHEETS
December 31,
(Dollars and share amounts in millions, except par value per share)
2022
2021
ASSETS:
Fixed maturities - available for sale
$
-
$
-
(amortized cost: 2022, $
0
; 2021, $
0
)
Other invested assets (cost: 2022, $
0
; 2021, $
)
-
Cash
Investment in subsidiaries, at equity in the underlying net assets
Accrued investment income
-
-
Receivable from subsidiaries
Other assets
TOTAL ASSETS
$
$
LIABILITIES:
Long term notes payable, affiliated
$
$
Due to subsidiaries
Other liabilities
(13 )
Total liabilities
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
;
-
-
Common shares, par value: $
;
(2022)
Additional paid-in capital
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of ($
) at 2022 and $
(1,996 )
Treasury shares, at cost;
(3,908 )
(3,847 )
Retained earnings
Total shareholders' equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
$
(Some amounts may not reconcile due to rounding.)
See notes to consolidated financial statements.
S-3
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
Years Ended December 31,
2022
2021
2020
(Dollars in thousands)
REVENUES:
Net investment income
$
-
$
-
$
Other income (expense)
-
-
Net income (loss) of subsidiaries
Total revenues
EXPENSES:
Interest expense - affiliated
Other expenses
Total expenses
INCOME (LOSS) BEFORE TAXES
NET INCOME (LOSS)
$
$
$
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
(2,037 )
(488 )
Reclassification adjustment for realized losses (gains) included in net income (loss)
(3 )
Total URA(D) on securities arising during the period
(1,948 )
(485 )
Foreign currency translation adjustments
(77 )
(62 )
Benefit plan actuarial net gain (loss) for the period
(6 )
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
Total benefit plan net gain (loss) for the period
Total other comprehensive income (loss), net of tax
(2,008 )
(523 )
COMPREHENSIVE INCOME (LOSS)
$
(1,411 )
$
$
(Some amounts may not reconcile due to rounding.)
See notes to consolidated financial statements.
S-4
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Dollars in millions, except share amounts)
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in retained (earnings) deficit of subsidiaries
(648 )
(1,416 )
(536 )
Cash dividends received from subsidiaries
Change in other assets and liabilities, net
(21 )
Increase (decrease) in due to/from affiliates
(9 )
Amortization of bond premium (accrual of bond discount)
-
-
-
Realized capital losses (gains)
-
-
-
Non-cash compensation expense
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Additional investment in subsidiaries
(824 )
(120 )
(138 )
Proceeds from fixed maturities matured/called - available for sale, at market value
-
-
Proceeds from fixed maturities sold - available for sale, at market value
-
-
Distribution from other invested assets
Cost of fixed maturities acquired - available for sale, at market value
-
-
-
Cost of other invested assets acquired
(26 )
(535 )
(801 )
Net change in short-term investments
-
-
-
Net cash provided by (used in) investing activities
(613 )
(48 )
(178 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net
Purchase of treasury shares
(61 )
(225 )
(200 )
Dividends paid to shareholders
(255 )
(247 )
(249 )
Proceeds from issuance (cost of repayment) of long term notes payable - affiliated
-
Net cash provided by (used in) financing activities
(245 )
(426 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
-
-
-
Net increase (decrease) in cash
(3 )
Cash, beginning of period
Cash, end of period
$
$
$
Non-Cash Transactions:
Dividend of
$
$
-
$
-
received by Group from Everest Preferred International Holdings
(“Preferred Holdings”), a direct subsidiary
Issuance of $
Holdings in exchange for
received by Group from Preferred Holdings
-
-
Capital contribution of
Group to Everest Re Advisors, Ltd.
-
-
(Some amounts may not reconcile due to rounding.)
See notes to consolidated financial statements.
S-5
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
1.)
The accompanying condensed financial information should be read in conjunction with the consolidated
financial statements and related Notes of Everest Re Group, Ltd. and its Subsidiaries.
2.)
Everest Re Group, Ltd. entered into a $
Company, an affiliated company, as of December 2019. The note will pay interest annually at a rate of
% and is scheduled to mature in December 2028. At December 31, 2022 and 2021, this transaction
was presented as a Long-Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re
Group, Ltd.
3.)
Everest Re Group, Ltd. entered into a $
Company, an affiliated company, as of August 2021. The note will pay interest annually at a rate of
%
and is scheduled to mature in August 2030. At December 31, 2022 and 2021, this transaction was
presented as a Long-Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re Group,
Ltd.
4.)
Everest Re Group, Ltd. entered into a $
Holdings, Inc., an affiliated company, as of June 2022. The note will pay interest annually at a rate of
%
and is scheduled to mature in June 2052. At December 31, 2022, this transaction was presented as a Long-
Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re Group, Ltd.
5.)
Everest Re Group, Ltd. entered into a $
Holdings, Inc., an affiliated company, as of December 2022. The note will pay interest annually at a rate of
% and is scheduled to mature in June 2052. At December 31, 2022, this transaction was presented as a
Long-Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re Group, Ltd.
6.)
Everest Re Group, Ltd. entered into a $
Reinsurance, an affiliated company, as of December 2022. The note will pay interest annually at a rate of
% and is scheduled to mature in December 2052. At December 31, 2022, this transaction was
presented as a Long-Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re Group,
Ltd.
7.)
Everest Re Group, Ltd. entered into a $
International Holdings, an affiliated company, as of December 2022. The note will pay interest annually at
a rate of
% and is scheduled to mature in December 2052. At December 31, 2022, this transaction was
presented as a Long-Term Note Payable – Affiliated in the Condensed Balance sheets of Everest Re Group,
Ltd.
8.)
Everest Re Group, Ltd. has invested funds in the segregated accounts of Mt. Logan Re, Ltd. (“Mt. Logan
Re”), an affiliated entity. On the Condensed Balance Sheets, investments in Mt. Logan Re valued at $
million and $
Assets. On the Condensed Statements of Operations, income (expense) of $
(0.9 )
(1.3 )
$(6.3) million for the years ended December 31, 2022, 2021 and 2020, respectively, have been recorded in
other income (expense).
S-6
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION
Column A
Column B
Column C
Column D
Column E
Column F
Column G
Column H
Column I
Column J
Reserve
Incurred
Segment
for Losses
Loss and
Amortization
Deferred
and Loss
Unearned
Net
Loss
of Deferred
Other
Net
Acquisition
Adjustment
Premium
Premiums
Investment
Adjustment
Acquisition
Operating
Written
(Dollars in millions)
Costs
Expenses
Reserves
Earned
Income
Expenses
Costs
Expenses
Premium
As of and Year Ended December 31, 2022
Reinsurance
$
$
$
$
$
$
$
$
$
Insurance
Total
$
$
$
$
$
$
$
$
$
As of and Year Ended December 31, 2021
Reinsurance
$
$
$
$
$
$
$
$
$
Insurance
Total
$
$
$
$
$
$
$
$
$
As of and Year Ended December 31, 2020
Reinsurance
$
$
$
$
$
$
$
$
$
Insurance
Total
$
$
$
$
$
$
$
$
$
(Some amounts may not reconcile due to rounding.)
S-7
SCHEDULE IV — REINSURANCE
Column A
Column B
Column C
Column D
Column E
Column F
Ceded to
Assumed
Gross
Other
Net
Assumed
(Dollars in millions)
Amount
Amount
to Net
December 31, 2022
Total property and liability insurance premiums earned
$
$
$
$
$
December 31, 2021
Total property and liability insurance premiums earned
$
$
$
$
$
December 31, 2020
Total property and liability insurance premiums earned
$
$
$
$
$