filings.toolsItem 15. EXHIBITS AND FINANCIAL STATEMENT
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Item 15. EXHIBITS AND FINANCIAL STATEMENT
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,
EVEREST RE GROUP,
LTD.
By:
/S/ JUAN C. ANDRADE
Juan C. Andrade
(President and Chief Executive
Officer)
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
INDEX TO EXHIBITS
Exhibit No.
Agreement and Plan of Merger among Everest Reinsurance Holdings, Inc., Everest Re Group,
Ltd. and Everest Re Merger Corporation, incorporated herein by reference to Exhibit 2.1 to the
Registration Statement on Form S-4 (No. 333-87361)
Memorandum of Association of Everest Re Group, Ltd., incorporated herein by reference to
Exhibit 3.1 to the Registration Statement on Form S-4 (No. 333-87361)
Bye-Laws of Everest Re Group, Ltd., incorporated herein by reference to exhibit 3.2 to the
Everest Re Group, Ltd., Quarterly Report for Form 10-Q for the quarter ended June 30, 2011 (the
Specimen Everest Re Group, Ltd. common share certificate, incorporated herein by reference to
Exhibit 4.1 of the Registration Statement on Form S-4 (No. 333-87361)
Indenture, dated March 14, 2000, between Everest Reinsurance Holdings, Inc. and The Chase
Manhattan Bank (now known as JPMorgan Chase Bank), as Trustee, incorporated herein by
reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on March 15, 2000
Fourth Supplemental Indenture relating to Holdings $400.0 million 4.868% Senior Notes due
June 1, 2044, dated June 5, 2014, between Holdings and The Bank of New York Mellon, as
Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc.
Form 8-K filed on June 5, 2014
Fifth Supplemental Indenture relating to Holdings $1.0 billion 3.5% Senior Notes due October
15, 2050, dated October 7, 2020, between Holdings and The Bank of New York Mellon, as
Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc.
Form 8-K filed on October 7, 2020
Sixth Supplemental Indenture relating to Holdings $1.0 billion 3.125% Senior Notes due October
15, 2052, dated October 4, 2021, between Holdings and The Bank of New York Mellon, as
Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc.
Form 8-K filed on October 4, 2021
*10.
Everest Re Group, Ltd. Annual Incentive Plan effective January 1, 1999, incorporated herein by
reference to Exhibit 10.1 to Everest Reinsurance Holdings, Inc. Annual Report on Form 10-K for
the year ended December 31, 1998 (the “1998 10-K”)
*10.
Everest Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan, incorporated
herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (No. 333-105483)
*10.
Form of Non-Qualified Stock Option Award Agreement under the Everest Re Group, Ltd. 2003
Non-Employee Director Equity Compensation Plan, incorporated herein by reference to Exhibit
10.47 to Everest Re Group, Ltd., Report on Form 10-K for the year ended December 31, 2004
*10.
Amendment of Everest Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan
adopted by shareholders at the annual general meeting on May 25, 2005, incorporated herein
by reference to Appendix B to the 2005 Proxy Statement filed on April 14, 2005
*10.
Form of Restricted Stock Award Agreement under the Everest Re Group, Ltd. 2003 Non-
Employee Director Equity Compensation Plan, incorporated by reference to Exhibit 10.1 to
Everest Re Group, Ltd. Form 8-K filed on September 22, 2005
Completion of Tender Offer relating to Everest Reinsurance Holdings, Inc. 6.60% Fixed to
Floating Rate Long Term Subordinated Notes (LoTSSM) dated March 19, 2009, incorporated
herein by reference to Exhibit 99.1 to Everest Re Group, Ltd. Form 8-K filed on March 31, 2009
*10.
Everest Re Group, Ltd. 2009 Stock Option and Restricted Stock Plan for Non-Employee Directors
incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. second quarter 2009
*10.
Everest Re Group, Ltd. 2010 Stock Incentive Plan for employees is incorporated herein by
reference to exhibit 10.2 to Everest Re Group, Ltd. Form S-8 filed on September 30, 2010
*10.
Amendment of Executive Performance Annual Incentive Plan adopted by shareholders at the
annual general meeting on May 18, 2011, incorporated herein by reference to Appendix B to
the 2011 Proxy Statement filed on April 15, 2011
*10.
Amendment of Everest Re Group, Ltd. 2010 Stock Incentive Plan adopted by shareholders at the
annual general meeting on May 13, 2015, incorporated herein by reference to Appendix A to
the 2015 Proxy Statement filed on April 10, 2015
*10.
Amendment of Everest Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan
adopted by shareholders at the annual general meeting on May 13, 2015, incorporated herein
by reference to Appendix B to the 2015 Proxy Statement filed on April 10, 2015
*10.
Employment agreement between Everest Global Services, Inc., Everest Reinsurance Holdings
Inc. and Dominic J. Addesso, dated December 4, 2015, incorporated herein by reference to
Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on December 8, 2015
Standby Letter of Credit, dated November 9, 2015, between Everest International Reinsurance,
Ltd. and Lloyds Bank, Plc. providing £175.0 million four year credit facility, incorporated herein
by reference to Exhibit 10.23 to Everest Re Group, Ltd. Annual Report on Form 10-K- for the year
ended December 31, 2015 filed on February 29, 2016
*10.
Amendment of employment agreement between Everest Global Services, Inc. and Sanjoy
Mukherjee, dated February 12, 2016, incorporated herein by reference to Exhibit 10.1 to
Everest Re Group, Ltd. Form 8-K filed on February 17, 2016
*10.
Employment agreement between Everest Global Services, Inc. and Craig Howie, dated April 7,
2016, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed
Credit Agreement, dated May 26, 2016, between Everest Re Group, Ltd., Everest Reinsurance
(Bermuda), Ltd. and Everest International Reinsurance, Ltd., certain lenders party thereto and
Wells Fargo Bank, N.A. as administrative agent, providing for an $800.0 million four year senior
credit facility, incorporated herein by reference to Exhibit 10.31 to Everest Re Group, Ltd. Form
10-Q filed on August 9, 2016. This new agreement replaces the June 22, 2012 four year, $800.0
million senior credit facility
*10.
Chairmanship agreement between Everest Re Group, Ltd. and Joseph V. Taranto, dated August
15, 2016 and effective January 1, 2017, incorporated herein by reference to Exhibit 10.1 to
Everest Re Group, Ltd. Form 8-K filed on August 16, 2016
*10.
Employment agreement between Everest Global Services, Inc., and John P. Doucette, dated
October 21, 2016, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd.
Form 8-K filed on October 26, 2016
*10.
Employment agreement between Everest Global Services, Inc., and Sanjoy Mukherjee, dated
January 3, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form
Amendment of Standby Letter of Credit, dated May 17, 2017, between Everest International
Reinsurance, Ltd. and Lloyds Bank, Plc. providing £145.0 million four year credit facility, herein
by reference to Exhibit 10.1 to Everest Re Group, Ltd., Form 10-Q filed on August 9, 2017
*10.
Employment agreement between Everest Re Group, Ltd., and Jonathan Zaffino dated
September 8, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd.
Form 8-K filed on September 12, 2017
*10.
Amendment of employment agreement between Everest Global Services, Inc., Everest Re
Group, Ltd., Everest Reinsurance Holdings Inc. and Dominic J. Addesso, dated November 20,
2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed
Bye-Law waiver agreement between Everest Re Group, Ltd., and BlackRock, Inc. dated
December 1, 2017, incorporated herein by reference to exhibit 10.1 to the Everest Re Group,
Ltd., Form 8-K filed on December 4, 2017
Amendment of Standby Letter of Credit, dated December 29, 2017, between Everest
Reinsurance (Bermuda), Ltd. and Citibank Europe plc providing $250.0 million four year credit
facility, incorporated herein by reference to exhibit 10.26 to the Everest Re Group, Ltd., Form
Amendment of Standby Letter of Credit, dated November 9, 2018, between Everest
International Reinsurance, Ltd. and Lloyds Bank, Plc. providing £30.0 million four year credit
facility, incorporated herein by reference to exhibit 10.33 to the Everest Re Group, Ltd., Form
Amendment of Committed Facility Letter, dated December 10, 2018, between Everest
Reinsurance (Bermuda), Ltd. and Citibank Europe plc providing $200.0 million annually,
incorporated herein by reference to exhibit 10.34 to the Everest Re Group, Ltd., Form 10-K filed
*10.
Employment agreement between Everest Re Group, Ltd. and Juan Andrade dated August 1,
2019, incorporated herein by reference to Exhibit 10.1 to Everest Re Group Ltd. Form 8-K filed
Amendment of Standby Letter of Credit, dated November 7, 2019, between Everest
International Reinsurance, Ltd. and Lloyds Bank, Plc. providing £47.0 million four year credit
facility, incorporated herein by reference to Exhibit 10.30 to the Everest Re Group, Ltd. Form 10-
Amendment of Committed Facility Letter, dated December 31, 2019, between Everest
Reinsurance (Bermuda), Ltd. and Citibank Europe plc providing $200.0 million annually,
incorporated herein by reference to Exhibit 10.31 to the Everest Re Group, Ltd. Form 10-K filed
Everest Re Group, Ltd. 2020 Stock Incentive Plan for employees is incorporated herein by
reference to Appendix A of the 2021 Proxy Statement filed on April 9, 2021
Amendment of Standby Letter of Credit, dated May 7, 2020 between Everest International
Reinsurance, Ltd. and Lloyds Bank, Plc. providing £52.175 million four year credit facility,
incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 10-Q filed on
Employment agreement between Everest Global Services, Inc. and Mark Kociancic, incorporated
herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on October 1, 2020
Employment agreement between Everest Global Services, Inc. and James Williamson,
incorporated herein by reference to Exhibit 10.2 to Everest Re Group, Ltd. Form 8-K filed on
Amendment of Committed Facility Letter, dated December 9, 2020 between Everest
Reinsurance (Bermuda), Ltd. and Citibank Europe plc providing $200.0 million annually,
incorporated herein by reference to Exhibit 10.34 to Everest Re Group, Ltd. Form 10-K filed on
Credit facility agreement dated February 23, 3021 between Everest Reinsurance (Bermuda), Ltd.
and Wells Fargo Bank, N.A. providing up to $50.0 million of committed credit facility,
incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 10-Q filed on
Amendment of Credit Facility agreement, dated May 5, 2021 between Everest Reinsurance
(Bermuda), Ltd. and Wells Fargo Bank, N.A. providing up to $500.0 million of committed credit
facility, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 10-Q
Credit Facility agreement, dated August 9, 2021 between Everest Reinsurance (Bermuda), Ltd.
and Citibank Europe plc providing up to $230.0 million committed credit facility and $140.0
million of additional uncommitted credit facility, incorporated herein by reference to Exhibit
10.1 to Everest Re Group, Ltd. Form 10-Q filed on November 4, 2021
Credit Facility agreement, dated August 27, 2021 between Everest Reinsurance (Bermuda), Ltd.
and Bayerische Landesbank providing up to $200.0 million of committed credit facility,
incorporated herein by reference to Exhibit 10.2 to Everest Re Group, Ltd. Form 10-Q filed on
Credit Facility agreement, dated October 8, 2021 between Everest Reinsurance (Bermuda), Ltd.
and Lloyd’s Bank Corporate Markets Plc providing up to $50.0 million of committed credit
facility, incorporated herein by reference to Exhibit 10.39 to Everest Re Group, Ltd. Form 10-K
Credit Facility agreement, dated November 3, 2021 between Everest Reinsurance (Bermuda),
Ltd. and Barclays Bank Plc providing up to $200.0 million of committed credit facility,
incorporated herein by reference to Exhibit 10.40 to Everest Re Group, Ltd. Form 10-K filed on
Credit Facility agreement, dated November 21, 2022 between Everest Reinsurance (Bermuda),
Ltd. and Nordea Bank ABP, New York Branch providing up to $200.0 million of committed credit
facility and $100.0 million of additional uncommitted credit facility, filed herewith
Amendment of Credit Facility agreement, dated December 30, 2022, between Everest
Reinsurance (Bermuda), Ltd. and Bayerische Landesbank, New York Branch, providing up to
$150.0 million of committed, unsecured credit facility, filed herewith
Subsidiaries of the registrant, filed herewith
Consent of PricewaterhouseCoopers LLP, filed herewith
Section 302 Certification of Juan C. Andrade, filed herewith
Section 302 Certification of Mark Kociancic, filed herewith
Section 906 Certification of Juan C. Andrade and Mark Kociancic, furnished herewith
INS
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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
(PCAOB FIRM ID
)
F-2
Consolidated Balance Sheets at December 31, 2022 and 20
F-5
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended
December 31, 2022, 2021 and 2020
F-6
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended
December 31, 2022, 2021 and 2020
F-7
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2022, 2021 and 2020
F-8
Notes to Consolidated Financial Statements
F-9
Schedules
I
Summary of Investments Other Than Investments in Related Parties at December 31, 20
S-1
II
Condensed Financial Information of Registrant:
Balance Sheets as of December 31, 2022 and 2021
S-2
Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020
S-3
Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
S-4
Notes to Condensed Financial Information
S-5
III
Supplementary Insurance Information
As of and for the Years
Ended
December 31, 2022, 2021 and 2020
S-6
IV
Reinsurance for the Years Ended December 31, 2022, 2021 and 2020
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
(2013) issued by the Committee of Sponsoring
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
(2013) issued by the COSO.
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.
/s/
PricewaterhouseCoopers LLP
New York, New York
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
$
22,236
$
22,308
(amortized cost: 2022, $
24,191
; 2021, $
22,064
, credit allowances: 2022, $
(54)
; 2021, $
(30)
)
Fixed maturities - held to maturity, at amortized cost
(fair value: 2022, $
, net of credit allowances: 2022, $
(
)
)
-
Equity securities, at fair value
1,826
Other invested assets
4,085
2,920
Short-term investments (cost: 2022, $
1,032
; 2021, $
1,178
)
1,032
1,178
Cash
1,398
1,441
Total investments and cash
29,872
29,673
Accrued investment income
Premiums receivable (net of credit allowances: 2022, $
(
)
; 2021, $
(
)
)
3,619
3,294
Reinsurance paid loss recoverables (net of credit allowances: 2021, $
(
)
; 2021, $
(
)
)
Reinsurance unpaid loss recoverables
2,105
1,946
Funds held by reinsureds
1,056
Deferred acquisition costs
Prepaid reinsurance premiums
Income tax asset, net
Other assets (net of credit allowances: 2022, $
(
)
; 2021, $
(
)
)
TOTAL ASSETS
$
39,966
$
38,185
LIABILITIES:
Reserve for losses and loss adjustment expenses
$
22,065
$
19,009
Future policy benefit reserve
Unearned premium reserve
5,147
4,610
Funds held under reinsurance treaties
Other net payable to reinsurers
Losses in course of payment
Senior notes
2,347
2,346
Long term notes
Borrowings from FHLB
Accrued interest on debt and borrowings
Unsettled securities payable
Other liabilities
Total liabilities
31,525
28,046
Commitments and contingencies (Note
(nil)
(nil)
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
0.01
;
50.0
shares authorized;
no
shares issued and outstanding
-
-
Common shares, par value: $
0.01
;
200.0
shares authorized; (2022)
69.9
and (2021)
69.8
outstanding before treasury shares
Additional paid-in capital
2,302
2,274
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $
(250)
at 2022 and $
at 2021
(1,996)
Treasury shares, at cost:
30.8
shares (2022) and
30.5
shares (2021)
(3,908)
(3,847)
Retained earnings
12,042
11,700
Total shareholders' equity
8,441
10,139
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
$
39,966
$
38,185
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
$
11,787
$
10,406
$
8,682
Net investment income
1,165
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
12,060
11,866
9,598
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
8,100
7,391
6,551
Commission, brokerage, taxes and fees
2,528
2,209
1,873
Other underwriting expenses
Corporate expenses
Interest, fees and bond issue cost amortization expense
Total claims and expenses
11,472
10,321
9,013
INCOME (LOSS) BEFORE TAXES
1,546
Income tax expense (benefit)
(9)
NET INCOME (LOSS)
$
$
1,379
$
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)
$
$
1,021
EARNINGS PER COMMON SHARE:
Basic
$
15.19
$
34.66
$
12.81
Diluted
15.19
34.62
12.78
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
2,274
2,245
2,220
Share-based compensation plans
Balance end of period
2,302
2,274
2,245
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
11,700
10,567
10,307
Change to beginning balance due to adoption of Accounting Standards Update 2016-13
-
-
(4)
Net income (loss)
1,379
Dividends declared ($
6.50
per share 2022, $
6.20
per share 2021 and $
6.20
per share 2020)
(255)
(247)
(249)
Balance end of period
12,042
11,700
10,567
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
$
8,441
$
10,139
$
9,726
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)
$
$
1,379
$
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
3,477
2,805
2,631
Increase (decrease) in future policy benefit
reserve
(7)
(2)
(5)
Increase (decrease) in unearned premiums
1,146
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
3,695
3,833
2,874
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities
matured/called/repaid - available
for sale
2,626
3,893
2,586
Proceeds from fixed maturities sold
- available for sale
1,403
1,916
1,951
Proceeds from fixed maturities
matured/called/repaid - held to
maturity
-
-
Proceeds from equity securities sold
2,217
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
1,441
Cash, end of period
$
1,398
$
1,441
$
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
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
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)
$
$
1,379
$
Less:
dividends declared-common shares and nonvested common shares
(255)
(247)
(249)
Undistributed earnings
1,132
Percentage allocated to common shareholders (1)
98.7
%
98.7
%
98.7
%
1,117
Add:
dividends declared-common shareholders
Numerator for basic and diluted earnings per common share
$
$
1,361
$
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
$
15.19
$
34.66
$
12.81
Diluted
$
15.19
$
34.62
$
12.78
(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
98.7
%
98.7
%
98.7
%
(Some amounts may not reconcile due to rounding.)
There were
no
options outstanding as of December 31, 2022.
Options granted
under share-based
compensation plans
have all
expired as
of September
19, 2022.
There were
no
anti-diluted options outstanding as
of December 31, 2021 and 2020, respectively.
L.
Segmentation.
The Company,
through its subsidiaries, operates
in
two
segments: Reinsurance and Insurance.
See also Note 17.
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.
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
$
1,334
$
-
$
$
(82)
$
1,257
Obligations of U.S. states and political subdivisions
-
(32)
Corporate securities
7,044
(45)
(561)
6,469
Asset-backed securities
4,229
-
(171)
4,063
Mortgage-backed securities
Commercial
1,023
-
-
(105)
Agency residential
3,382
-
(290)
3,099
Non-agency residential
-
-
(1)
Foreign government securities
1,586
-
(179)
1,415
Foreign corporate securities
5,143
(10)
(562)
4,596
Total fixed maturity securities - available for sale
$
24,191
$
(54)
$
$
(1,982)
$
22,236
(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
$
1,407
$
-
$
$
(10)
$
1,421
Obligations of U.S. states and political subdivisions
-
(1)
Corporate securities
7,444
(19)
(63)
7,557
Asset-backed securities
3,579
(8)
(12)
3,582
Mortgage-backed securities
Commercial
1,032
-
(6)
1,064
Agency residential
2,361
-
(19)
2,375
Non-agency residential
-
-
-
Foreign government securities
1,424
-
(28)
1,438
Foreign corporate securities
4,251
(3)
(65)
4,279
Total fixed maturity securities - available for sale
$
22,064
$
(30)
$
$
(203)
$
22,308
(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:
Due in one year or less
$
1,331
$
1,314
$
1,399
$
1,398
Due after one year through five years
8,131
7,546
7,075
7,154
Due after five years through ten years
4,636
4,057
5,004
5,101
Due after ten years
1,454
1,233
1,606
1,627
Asset-backed securities
4,229
4,063
3,579
3,582
Mortgage-backed securities:
Commercial
1,023
1,032
1,064
Agency residential
3,382
3,099
2,361
2,375
Non-agency residential
Total fixed maturity securities -available for sale
$
24,191
$
22,236
$
22,064
$
22,308
(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:
Due in one year or less
$
$
Due after one year through five years
Due after five years through ten years
Due after ten years
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 $
million, net
of allowance
for current
expected
credit losses,
which
was subsequently recognized
as the new amortized
cost basis.
As of the date of transfer,
these securities had an
unrealized
loss
of
$
million,
which
remained
in
accumulated
other
comprehensive
income
on
the
balance
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)
$
1,155
$
(82)
Obligations of U.S. states and
political subdivisions
(23)
(9)
(32)
Corporate securities
4,143
(326)
1,316
(234)
5,459
(561)
Asset-backed securities
3,204
(142)
(29)
3,661
(171)
Mortgage-backed securities
Commercial
(90)
(15)
(105)
Agency residential
1,905
(132)
(158)
2,776
(289)
Non-agency residential
-
(1)
-
Foreign government securities
(100)
(79)
1,306
(179)
Foreign corporate securities
3,264
(372)
(189)
4,117
(561)
Total
$
15,213
$
(1,217)
$
4,432
$
(764)
$
19,645
$
(1,982)
Securities where an allowance for credit
loss was recorded
-
-
-
-
Total fixed
maturity securities - available for
sale
$
15,215
$
(1,217)
$
4,432
$
(764)
$
19,647
$
(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)
$
1,029
$
(26)
Due in one year through five years
4,935
(383)
1,645
(209)
6,580
(592)
Due in five years through ten years
2,698
(360)
(230)
3,609
(590)
Due after ten years
(91)
(116)
1,080
(207)
Asset-backed securities
3,204
(142)
(29)
3,661
(171)
Mortgage-backed securities
2,715
(222)
(173)
3,687
(395)
Total
$
15,213
$
(1,217)
$
4,432
$
(764)
$
19,645
$
(1,982)
Securities where an allowance for credi
t
loss was recorded
-
-
-
-
Total fixed
maturity securities - available for
sale
$
15,215
$
(1,217)
$
4,432
$
(764)
$
19,647
$
(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 $
19.6
billion and $
2.0
billion, respectively.
The market value
of securities for the single
issuer
(the
United
States
government)
whose
securities
comprised
the
largest
unrealized
loss
position
at
December 31, 2022,
did not exceed
5.2
% 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
0.2
%
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 $
1.2
billion of unrealized
losses related to
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,
asset-backed
securities,
agency
residential
mortgage-backed
securities and
foreign
government
securities.
Of these
unrealized
losses, $
1.1
billion were
related
to securities
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, $
million were
related to
securities
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
$
million
of
market
value
and
$
(0.4)
million
of
gross
unrealized
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
2,133
(38)
(24)
2,605
(63)
Asset-backed securities
1,954
(11)
(1)
1,996
(12)
Mortgage-backed securities
Commercial
(3)
(3)
(6)
Agency residential
1,101
(12)
(7)
1,381
(19)
Non-agency residential
-
-
-
-
Foreign government securities
(10)
(18)
(28)
Foreign corporate securities
1,735
(46)
(18)
1,945
(65)
Total fixed
maturity securities - available for
sale
$
8,094
$
(128)
$
1,241
$
(75)
$
9,335
$
(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
2,165
(35)
(29)
2,612
(64)
Due in five years through ten years
1,728
(47)
(22)
1,972
(69)
Due after ten years
(16)
(3)
(19)
Asset-backed securities
1,954
(11)
(1)
1,996
(12)
Mortgage-backed securities
1,325
(15)
(10)
1,646
(25)
Total fixed
maturity securities - available for
sale
$
8,094
$
(128)
$
1,241
$
(75)
$
9,335
$
(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 $
9.3
billion and $
million, respectively.
The market value
of securities for the single
issuer
(the
United
States
government)
whose
securities
comprised
the
largest
unrealized
loss
position
at
December 31, 2021,
did not exceed
2.7
% 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
0.5
%
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
$
million
of
unrealized
losses
related
to
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,
$
million
were
related
to
securities
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,
foreign
government
securities
and
agency
residential
mortgage-
backed securities.
Of these
unrealized losses,
$
million were
related to
securities that
were rated
investment
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
1,208
Funds held interest income (expense)
Future policy benefit reserve income (expense)
-
(1)
(1)
Gross investment income
1,219
Investment expenses
(62)
(54)
(50)
Net investment income
$
$
1,165
$
(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
$
2.6
billion in limited partnerships
and
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 $
million as of December 31, 2022.
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
no
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 $
4.1
billion and
$
2.9
billion,
respectively,
which
are
included in
general
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
$
2.1
billion whereby the
Company is committed
to fund these investments
and may be called
by the partnership
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)
Credit losses recorded as of December 31,
2022 for HTM were $
million, $
million and $
million for Corporate, asset-backed
securities and foreign
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
$
1,403
$
1,916
$
1,951
Gross gains from sales
Gross losses from sales
(127)
(55)
(85)
Proceeds from sales of equity securities
$
2,217
$
$
Gross gains from sales
Gross losses from sales
(53)
(15)
(46)
Securities with a
carrying value
amount of
$
1.4
billion at
December 31, 2022
were on
deposit with various
state
or governmental insurance departments
in compliance with insurance laws.
F-23
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
$
19,009
$
16,322
$
13,531
Less reinsurance recoverables on unpaid losses
(1,946)
(1,844)
(1,641)
Net reserves beginning of period
17,063
14,478
11,891
Incurred related to:
Current year
8,102
7,400
6,149
Prior years
(2)
(9)
Total incurred losses and LAE
8,100
7,391
6,551
Paid related to:
Current year
1,220
2,491
2,046
Prior years
3,740
2,226
2,078
Total paid losses and LAE
4,960
4,717
4,124
Foreign exchange/translation adjustment
(243)
(89)
Net reserves end of period
19,960
17,063
14,478
Plus reinsurance recoverables on unpaid losses
2,105
1,946
1,844
Gross reserves end of period
$
22,065
$
19,009
$
16,322
(Some amounts may not reconcile due
to rounding.)
Current year
incurred losses
were $
8.1
billion, $
7.4
billion and
$
6.1
billion in
2022, 2021
and 2020, respectively.
Gross and
net reserves
increased in
2022, reflecting
an increase
in underlying
exposure due
to earned
premium
growth, year
over year,
the impact
of $
million of
incurred losses
related to
the Ukraine/Russia
war,
partially
offset by decrease of $
million in 2022 current year catastrophe
losses compared to 2021.
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 $
million in
current year
attritional losses.
The
increase in
current year
attritional losses
was mainly
due to
the growth
in premiums
earned, partially
mitigated
by $
million of losses related to COVID-19
in 2020 which did not recur in 2021.
Incurred prior years
losses were $(
) million in 2022, ($
) million in 2021 and $
million in 2020. The favorable
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
1,311
1,309
1,386
1,416
1,485
N/A
2019
1,683
1,748
1,751
1,775
N/A
2020
1,896
1,867
1,846
1,178
N/A
2021
2,454
2,449
1,829
N/A
2022
2,818
2,133
N/A
$
14,554
(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
$
5,754
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
9,715
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage
Payout of Incurred Loss by
Age, Net of Reinsurance (unaudited)
Years
Casualty
8.9
%
7.8
%
11.7
%
12.7
%
12.5
%
10.2
%
6.8
%
4.5
%
3.6
%
1.5
%
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
$
1,275
$
$
$
$
$
$
$
$
$
$
N/A
2014
1,343
1,181
1,030
N/A
2015
1,386
1,053
N/A
2016
1,695
1,518
1,554
1,548
1,526
1,527
1,523
N/A
2017
2,784
3,407
3,518
3,647
3,692
3,703
N/A
2018
2,611
2,486
2,488
2,426
2,379
N/A
2019
2,038
2,070
2,015
1,899
N/A
2020
2,408
2,481
2,425
N/A
2021
2,754
2,780
N/A
2022
3,257
1,898
N/A
$
20,594
(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
1,249
1,367
1,421
1,441
1,454
2017
2,180
2,744
3,130
3,332
3,426
2018
1,525
1,878
2,065
2,136
2019
1,185
1,505
1,667
2020
1,321
1,733
2021
1,534
2022
$
15,134
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
5,562
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage
Payout of Incurred Loss by
Age, Net of Reinsurance (unaudited)
Years
Property
27.2
%
31.8
%
16.1
%
8.8
%
4.0
%
2.0
%
0.9
%
0.3
%
0.1
%
0.1
%
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
$
$
$
$
$
$
$
$
$
$
$
$
22,031
2014
26,449
2015
29,020
2016
34,164
2017
38,344
2018
39,029
2019
42,006
2020
1,049
1,043
39,545
2021
1,189
1,246
44,274
2022
1,367
37,739
$
7,703
(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
$
4,003
All outstanding liabilities prior to 2013, net of reinsurance
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
3,828
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage
Payout of Incurred Loss by
Age, Net of Reinsurance (unaudited)
Years
Casualty
8.1
%
17.6
%
16.8
%
15.5
%
13.4
%
8.4
%
5.7
%
3.3
%
2.1
%
1.3
%
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
$
3,789
(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
$
3,223
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
Property
54.3
%
31.5
%
5.7
%
4.5
%
2.3
%
1.0
%
0.6
%
0.1
%
0.1
%
-
%
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
$
9,715
Reinsurance Property
5,562
Insurance Casualty
3,828
Insurance Property
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance
19,671
Reinsurance recoverable on unpaid claims
Reinsurance Casualty
Reinsurance Property
Insurance Casualty
1,220
Insurance Property
Total reinsurance recoverable
on unpaid claims
2,105
Insurance lines other than short-duration
-
Unallocated claims adjustment expenses
Other
Total gross liability for unpaid claims and claim adjustment expense
$
22,065
(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
exposure
groupings
to
develop
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
years
ago.
There
are
significant
uncertainties
surrounding
the
Company’s
reserves
for
its
A&E
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 $
million, an
amount
equal
to
the
net
loss
reserves
as
of
the
closing
date.
The
maximum
liability
retroceded
under
the
retrocession treaty
will be $
million, equal to
the retrocession
payment plus
$
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 $
million.
In addition, the maximum liability permitted to
be retroceded increased to
$
million.
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
$
2.2
billion and
$
2.1
billion at
December 31,
2022 and December
31, 2021,
respectively.
At December
31, 2022, $
million, or
23.2
%, was receivable
from
Mt.
Logan
Re
collateralized
segregated
accounts;
$
million,
or
12.6
%,
was
receivable
from
Munich
Reinsurance
America, Inc.
and $
million, or
6.6
%, 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.)
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
being
the
highest
priority
and
Level
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, $
1.7
billion of fixed maturities, fair
value were fair valued
using unobservable inputs.
The
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,
$
2.1
billion
of
fixed
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 $
million and
$
1.3
billion, respectively.
The Company
internally manages
a portfolio
of
collateralized
loan obligations
included in
asset-backed
securities which
had a
fair value
of $
2.6
billion and
$
2.0
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
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
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
$
1,257
$
-
$
1,257
$
-
Obligations of U.S. States and political subdivisions
-
-
Corporate securities
6,469
-
5,754
Asset-backed securities
4,063
-
3,069
Mortgage-backed securities
Commercial
-
-
Agency residential
3,099
-
3,099
-
Non-agency residential
-
-
Foreign government securities
1,415
-
1,415
-
Foreign corporate securities
4,596
-
4,579
Total fixed maturities, available for sale
22,236
-
20,511
1,725
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
$
1,421
$
-
$
1,421
$
-
Obligations of U.S. States and political subdivisions
-
-
Corporate securities
7,557
-
6,756
Asset-backed securities
3,582
-
2,330
1,251
Mortgage-backed securities
Commercial
1,064
-
1,064
-
Agency residential
2,375
-
2,375
-
Non-agency residential
-
-
Foreign government securities
1,438
-
1,438
-
Foreign corporate securities
4,279
-
4,262
Total fixed maturities, available for sale
22,308
-
20,240
2,068
Equity securities, fair value
1,826
1,742
-
(Some amounts may not reconcile due to rounding.)
In
addition,
$
million
and
$
million
of
investments
within
other
invested
assets
on
the
consolidated
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
$
$
1,251
$
-
$
$
2,068
$
$
$
$
1,330
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
(35)
(735)
(6)
(4)
(779)
-
-
-
-
Ending balance
$
$
$
-
$
$
1,725
$
$
1,251
$
$
2,068
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
at the reporting date
$
(23)
$
$
-
$
-
$
(15)
$
(16)
$
(8)
$
-
$
(24)
(Some amounts may not reconcile due to rounding.)
The $
million
shown
as transfers
in/(out)
of Level
3 and
reclassification
of securities
in/(out)
of investment
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
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
no
transfers of assets
in/(out) Level 3 during 2021.
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.
CREDIT FACILITIES
The
Company
has
multiple
active
letter
of
credit
facilities
for
a
total
commitment
of
up
to
$
1.5
billion
as
of
December
31,
2022,
providing
for
the
issuance
of
letters
of
credit.
The
Company
also
has
additional
uncommitted
letter
of
credit
facilities
of
up
to
$
million
which
may
be
accessible
via
written
request
and
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
five year
,
$
million senior credit
facility with
a syndicate
of lenders,
which amended and
restated
in its entirety
the June 22,
2012,
four year
,
$
million
senior
credit
facility.
Both
the
May
26,
2016
and
June
22,
2012
senior
credit
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
$
million of letters
of credit that
were in
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
$
-
$
-
$
$
12/30/2022
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
$
million
of
secured
letters
of
credit.
Effective
May 5, 2021,
the agreement
was amended to
provide for
the issuance of
up to $
million of secured
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
$
$
12/29/2023
$
$
12/30/2022
(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,
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
$
million of
secured letters
of
credit.
In
addition,
the
facility
provided
for
the
uncommitted
issuance
of
up
to
$
million,
which
may
be
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
$
$
1/21/2023
$
$
02/28/2022
2/28/2023
03/01/2022
3/1/2023
11/24/2022
8/15/2023
12/31/2022
9/23/2023
8/15/2023
12/31/2023
9/23/2023
Bermuda Re Citibank LOC Facility
- Uncommitted
12/31/2023
12/31/2022
12/30/2026
12/30/2025
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 $
million of secured 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
Bayerische Landesbank Bilateral Secured
Credit Facility
$
$
12/31/2023
$
$
12/31/2022
(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
$
million of unsecured letters of credit.
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
$
$
12/31/2023
(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
$
million of secured
letters
of credit,
and subject to credit approval a maximum
total facility amount
of $
million.
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
$
$
12/31/2023
$
$
12/31/2022
Bermuda Re Lloyd's Bank Credit Facility-Uncommitted
12/31/2023
-
-
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 $
million of secured 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
Bermuda Re Barclays Credit Facility
$
$
12/31/2023
$
$
12/31/2022
(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 $
million of unsecured
letters of
credit,
and
subject
to
credit
approval,
uncommitted
issuance
of
$
million
for
a
maximum
total
facility
amount
of
$
million.
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
$
$
12/31/2023
Nordea Bank ABP, NY Unsecured LOC Facility - Uncommitted
12/31/2023
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
$
22.4
billion
which
provides
borrowing
capacity
of
up
to
approximately
$
2.2
billion.
As
of
December
31, 2022,
Everest
Re has
$
million of
borrowings
outstanding,
which all
mature
in 2023.
Everest
incurred
interest
expense
of
$
million
and
$
million
for
the
years
ended
December
31,
2022
and
2021,
respectively.
The
FHLBNY
membership
agreement
requires
that
4.5
%
of
borrowed
funds
be
used
to
acquire
additional membership stock.
F-40
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
Amount
Market Value
Amount
Market Value
4.868
% Senior notes
6/5/2014
6/1/2044
$
$
$
$
$
3.5
% Senior notes
10/7/2020
10/15/2050
1,000
1,055
3.125
% Senior notes
10/4/2021
10/15/2052
1,000
$
2,400
$
2,347
$
1,647
$
2,346
$
2,542
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
4.868
% Senior Notes
semi-annually
June 1/December 1
$
$
$
3.5
% Senior Notes
semi-annually
April 15/October 15
3.125
% Senior Notes
semi-annually
April 15/October 15
-
$
$
$
(Some amounts may not reconcile due to rounding.)
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
4/26/2007
$
5/15/2037
5/1/2067
$
$
$
$
During the fixed
rate interest
period from
May 3, 2007
through
May 14, 2017
, interest
was at the
annual rate
of
6.6
%, payable semi-annually in arrears
on November 15 and May 15 of each year,
commencing on
November 15,
2007
.
During the floating rate
interest period from
May 15, 2017 through
maturity,
interest will be based
on the
month
LIBOR
plus
238.5
basis
points,
reset
quarterly,
payable
quarterly
in
arrears
on
February
15,
May
15,
August 15
and November
15 of
each year,
subject to
Holdings’ right
to defer
interest
on
one
or more
occasions
for up
to
ten
consecutive
years.
Deferred
interest
will accumulate
interest
at the
applicable rate
compounded
quarterly for
periods from and
including May 15,
The reset quarterly
interest rate
for November
15, 2022
to February 14, 2023 is
6.99
%.
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
May 1, 2047
is subject
to a
replacement
capital covenant.
This covenant
is for
the benefit
of
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
4.868
% senior
notes due
on
June 1, 2044
,
3.5
% senior
notes due
on
October 15, 2050
and
3.125
% senior
notes
due
on
October 15, 2052
are
the
Company’s
long-term
indebtedness
that
rank
senior
to
the
long-term
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
$
million
of
the
outstanding
long-term
subordinated
notes
for
the
year
ended
December 31, 2022.
The Company realized a gain
of $
million on the repurchases made during 2022.
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
$
$
$
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
$
2.4
billion, which
includes $
million
of restricted
cash.
At December
31, 2021, the
total amount
on deposit
in trust
accounts was
$
1.7
billion, which
includes $
million of restricted cash.
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
$
million
of
casualty
reserves
held
by
Bermuda
Re
related
to
accident years
2002
through
2015
.
As consideration
for entering
the agreement,
the Company
transferred
cash
of
$
million
to
the
Mt.
Logan
Re
segregated
account.
The
maximum
liability
to
be
retroceded
under
the
agreement
will
be
$
million.
The
Company
will
retain
liability
for
any
amounts
exceeding
the
maximum
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
4/30/2018
5/5/2023
$
Aggregate
Series 2018-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/30/2018
5/5/2023
Aggregate
Series 2019-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
12/12/2019
12/19/2023
Occurrence
Series 2019-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
12/12/2019
12/19/2023
Aggregate
Series 2019-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
12/12/2019
12/19/2024
Occurrence
Series 2019-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
12/12/2019
12/19/2024
Aggregate
Series 2021-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/21/2025
Occurrence
Series 2021-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/21/2025
Aggregate
Series 2021-1 Class C-1
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/21/2025
Aggregate
Series 2021-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/20/2026
Occurrence
Series 2021-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/20/2026
Aggregate
Series 2021-1 Class C-2
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
4/8/2021
4/20/2026
Aggregate
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake
Events
6/22/2022
6/22/2025
Aggregate
Total available limit as of
December 31, 2022
$
2,063
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
4/30/2018
5/5/2023
$
Series 2018-1 Class B-2
4/30/2018
5/5/2023
Series 2019-1 Class A-1
12/12/2019
12/19/2023
Series 2019-1 Class B-1
12/12/2019
12/19/2023
Series 2019-1 Class A-2
12/12/2019
12/19/2024
Series 2019-1 Class B-2
12/12/2019
12/19/2024
Series 2021-1 Class A-1
4/8/2021
4/21/2025
Series 2021-1 Class B-1
4/8/2021
4/21/2025
Series 2021-1 Class C-1
4/8/2021
4/21/2025
Series 2021-1 Class A-2
4/8/2021
4/20/2026
Series 2021-1 Class B-2
4/8/2021
4/20/2026
Series 2021-1 Class C-2
4/8/2021
4/20/2026
Series 2022-1 Class A
6/22/2022
6/22/2025
$
2,063
F-43
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
10.8
years
11.6 years
Weighted average discount rate on operating leases
4.08
%
4.08
%
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
$
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
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
$
million
and
obtain
federal income tax cash
refunds of $
million including interest in 2020.
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
no
uncertain tax positions.
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 $
million and $
million, respectively.
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:
Net unrealized investment losses
$
$
-
Loss reserves
Unearned premium reserves
Lease liability
Net operating loss carryforward
Unrealized foreign currency losses
Investment impairments
Net unrealized losses on benefit plans
Equity compensation
Uncollectible reinsurance reserves
Foreign tax credits
Other assets
Total deferred tax assets
Deferred tax liabilities:
Deferred acquisition costs
Partnership investments
Right of use asset
Depreciation
Net fair value income
Benefit plan asset
Net unrealized investment gains
-
Other liabilities
Total deferred tax liabilities
Net deferred tax assets
Less:
Valuation allowance
(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 $
million and
$
million of
Valuation
Allowance (“VA”),
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.
Tax
effected
UK
Net
Operating
Losses
(“NOLs”)
of
$
million do not
expire.
Tax
effected
Irish NOLs
of $
million do not
expire.
Tax
effected
Swiss NOLs
of $
million
begin to
expire
in
2028
.
The remaining
tax
effected
NOLs of
$
million arose
in various
jurisdictions and
begin
expiring in 2027.
Note that not all NOLs had a VA
up against them.
At December
31, 2022,
and 2021,
the Company
had $
million and
$
million respectively
of foreign
tax credit
(“FTC”) carryforwards, all related to
the branch basket.
The branch basket FTCs begin to
expire in
2030
.
At December 31, 2022, $
million of the Company’s
deferred tax asset
relates primarily to unrealized
losses on
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 $
million, $
million and $
million related
to restricted
stock vestings
and stock option
exercises
as
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 $
0.6
million, $
0.6
million and
$
0.6
million
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.
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,
or
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
$
4,602
$
3,988
$
3,218
Assumed
9,350
9,062
7,264
Ceded
(1,608)
(1,604)
(1,365)
Net written premiums
$
12,344
$
11,446
$
9,117
Premiums earned:
Direct
$
4,218
$
3,589
$
3,028
Assumed
9,082
8,315
7,055
Ceded
(1,513)
(1,498)
(1,401)
Net premiums earned
$
11,787
$
10,406
$
8,682
Incurred losses and LAE:
Direct
$
2,804
$
2,385
$
2,141
Assumed
6,285
5,741
5,164
Ceded
(988)
(735)
(754)
Net incurred losses and LAE
$
8,100
$
7,391
$
6,551
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.)
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
2.86
%,
2.55
% and
3.28
%, respectively.
The rate
of
compensation
increase
used
to
determine
the
net
periodic
benefit cost for
2022, 2021 and 2020
was
4.00
%.
The expected long-term
rate of return
on plan assets for
2022,
2021 and 2020 was
6.75
%,
7.00
% and
7.00
% respectively.
The
weighted
average
discount
rates
used
to
determine
the
actuarial
present
value
of
the
projected
benefit
obligation for 2022, 2021 and 2020 were
5.25
%,
2.86
% and
2.55
%, 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, $
1.5
million and $
2.6
million of investments
which were recorded
as part of the
qualified plan assets
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.
No
contributions
were made
to the
qualified pension
benefit plan
for the
years
ended December 31,
2022 and
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,
$
million and $
million for the years ended December 31,
2022, 2021 and 2020, respectively.
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
4.3
% to
39.5
%.
The
contributions
are
generally
used
to
purchase
pension
benefits
from
local
insurance
providers.
The
Company
incurred expenses
related to
these plans
of $
million, $
million and
$
million for
the years
ended December
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
7.00
% in
2022 was
assumed to
decrease gradually
to
4.75
% in
2030 and
then remain
at that
level.
The
Company
incurred
expenses
of
$
million,
$
million
and
$
million
for
the
years
ended
December
31,
2022,
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
2.86
%,
2.55
% and
3.28
%, 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
5.25
%,
2.86
% and
2.55
%, respectively.
The following table displays
the expected benefit payments
in the years indicated:
(Dollars in millions)
2023
$
2024
2025
2026
2027
Next 5 years
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 $
0.3
million minimum solvency margin.
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
$
2.8
billion
and
$
3.1
billion
at
December 31,
2022
and
2021,
respectively.
The
statutory
net
income
of
Bermuda
Re
was
$
million,
$
million
and
$
million
for
the
years
ended
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
twelve months
,
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
$
million
available
for
payment
of
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
$
5.6
billion and
$
5.8
billion at
December 31, 2022
and 2021,
respectively.
The statutory
net income
of
Everest
Re
was
$
million,
$
million
and
$
million
for
the
years
ended
December 31,
2022, 2021
and
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
$
-
$
2,169
$
3,353
$
2,960
Actual capital
$
2,759
$
3,184
$
5,553
$
5,717
(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.
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
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
Under
the
2020
Employee
Plan,
1,400,000
common
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
996,076
remaining shares
available to
be granted
under the 2020 Employee
Plan.
Through
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,
37,439
common shares have
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
34,957
remaining
shares available
to be
granted
under the
2009
Director
Plan.
Under
the
2003
Director
Plan,
500,000
common
shares
have
been
authorized
to
be granted
as
share
options
or share
awards
to
non-employee directors
of the
Company.
At
December 31,
2022 there
were
299,461
remaining shares available
to be granted under the 2003 Director
Plan.
Options
and restricted
shares
granted
under the
2020 Employee
Plan vest
at
the earliest
of
% per
year
over
five years
or in
accordance with
any applicable
employment agreement.
Options and
restricted shares
granted
under the 2003
Director Plan
generally vest
at
% per year
over
three years
, 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
ten years
after the date of grant.
Performance
Share
Unit
awards
granted
under
the
2020
Employee
Plan
will
vest
% after
three years
.
The
Performance
Share Unit
awards
represent the
right to
receive between
and
1.75
shares of
stock for
each unit
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
three year
vesting period,
compared to
designated
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,
$
million
and
$
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
$
million, $
million and $
million for the
years ended
December 31, 2022,
2021 and 2020,
respectively.
F-59
For the year
ended December 31,
2022, a total
of
203,598
restricted shares
were granted
on February
23, 2022,
February
24,
2022,
May
10,
2022,
September
8,
2022
and
November
10,
2022,
with
a
fair
value
of
$
301.535
,
$
287.9425
, $
280.98
, $
283.7225
and $
323.085
per share,
respectively.
Additionally,
18,340
performance
share
units
were
awarded
on
February
23,
2022,
with
a
fair
value
of
$
301.5350
per
unit.
No
share
options
were
granted
during
the
year
ended
December
31,
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
$
0.6
million, $
0.6
million and $
0.6
million, respectively,
of additional paid-in capital due to tax
benefits from dividends
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
49,028
$
88.52
Granted
-
-
Exercised
49,028
88.52
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
116,871
$
87.87
Granted
-
-
Exercised
67,843
87.39
Forfeited/Cancelled/Expired
-
-
Outstanding at December 31, 2021
49,028
88.52
0.2
$
.
Exercisable at December 31, 2021
49,028
88.52
0.2
$
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
170,704
$
87.18
Granted
-
-
Exercised
53,833
85.69
Forfeited/Cancelled/Expired
-
-
Outstanding at December 31, 2020
116,871
87.87
0.7
$
.
Exercisable at December 31, 2020
116,871
87.87
0.7
$
There have
been
no
share options
granted
in since
As of
December 31,
2022, there
are no
share options
outstanding.
The
aggregate
intrinsic
value
(market
price
less
exercise
price)
of
options
exercised
during
the
years ended
December 31, 2022,
2021 and 2020
was $
million, $
million and $
million, respectively.
The
cash received from
the exercised
share options for
the years ended
December 31, 2022, 2021
and 2020 were
$
million, $
million and $
million, respectively.
The tax
benefit realized
from the
options exercised
for the
years
ended December 31, 2022, 2021 and 2020 were $
million, $
million and $
million, respectively.
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,
496,094
$
247.76
483,427
$
246.60
495,137
$
228.02
Granted
203,598
300.38
213,901
243.51
200,929
269.86
Vested
162,579
246.41
158,735
238.67
175,413
220.88
Forfeited
57,483
262.28
42,499
247.02
37,226
246.20
Outstanding at December 31,
479,630
268.82
496,094
247.76
483,427
246.60
As of December
31, 2022,
there was
$
million of total
unrecognized compensation
cost related
to non-vested
share-based
compensation
expense.
That cost
is expected
to be
recognized
over a
weighted-average
period of
3.3
years.
The total
fair value
of shares
vested during
the years ended
December 31, 2022,
2021 and 2020,
was
$
million,
$
million
and
$
million,
respectively.
The
tax
benefit
realized
from
the
shares
vested
for
the
years ended December 31, 2022, 2021 and 2020 were
$
million, $
million and $
million, respectively.
In
addition
to
the
2020
Employee
Plan,
the
2009
Director
Plan
and
the
2003
Director
Plan,
Group
issued
common shares
in 2022,
common shares
in 2021
and
common
shares
in 2020
to
the Company’s
non-
employee directors
as compensation for
their service as directors.
These issuances had aggregate
values of $
0.2
million, $
0.1
million and $
0.1
million in 2022, 2021 and 2020.
The Company
acquired
69,833
,
79,308
and
66,289
common shares
at a
cost of
$
million, $
million and
$
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,
50,495
$
-
38,891
$
-
34,850
$
-
Granted
18,340
301.54
22,205
242.24
16,120
277.15
Increase/(Decrease) on vesting units
due to performance
3,028
-
(800)
-
(2,227)
-
Vested
15,919
274.37
9,801
242.24
6,157
277.15
Forfeited
1,083
-
-
-
3,695
-
Outstanding at December 31,
54,861
-
50,495
-
38,891
-
The Company
acquired
6,175
,
3,104
and
2,587
common
shares
at
a cost
of $
1.7
million,
$
0.8
million
and
$
0.7
million in
2022, 2021
and 2020,
respectively,
from employees
who chose
to pay
required
withholding taxes
on
performance shares units settlements
by withholding shares.
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
$
9,316
$
4,636
$
13,952
Net written premiums
8,983
3,361
12,344
Premiums earned
$
8,663
$
3,124
$
11,787
Incurred losses and LAE
5,997
2,103
8,100
Commission and brokerage
2,134
2,528
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
$
9,067
$
3,982
$
13,050
Net written premiums
8,536
2,910
11,446
Premiums earned
$
7,757
$
2,649
$
10,406
Incurred losses and LAE
5,556
1,835
7,391
Commission and brokerage
1,854
2,209
Other underwriting expenses
Underwriting gain (loss)
$
$
$
Net investment income
1,165
Net realized capital gains (losses)
Corporate expenses
(68)
Interest, fee and bond issue cost amortization expense
(70)
Other income (expense)
Income (loss) before taxes
$
1,546
Year Ended December 31, 2020
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
7,282
$
3,201
$
10,482
Net written premiums
6,768
2,349
9,117
Premiums earned
$
6,466
$
2,215
$
8,682
Incurred losses and LAE
4,933
1,617
6,551
Commission and brokerage
1,552
1,873
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
$
1,217
$
1,246
$
1,116
Approximately
20.0
%,
20.5
%
and
20.1
%
of
the
Company’s
gross
written
premiums
in
2022,
2021
and
2020,
respectively,
were sourced through the Company’s
largest intermediary.
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
$
1,334
$
1,257
$
1,257
State, municipalities and political subdivisions
Foreign government securities
1,586
1,415
1,415
Foreign corporate securities
5,143
4,596
4,596
Public utilities
All other corporate bonds
10,688
10,013
10,013
Mortgage - backed securities:
Commercial
1,023
Agency residential
3,382
3,099
3,099
Non-agency residential
Redeemable preferred stock
Total fixed maturities-available for sale
24,191
22,236
22,236
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
1,032
1,032
1,032
Other invested assets
4,085
4,085
4,085
Cash
1,398
1,398
1,398
Total investments and cash
$
31,807
$
29,853
$
29,872
(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, $
; 2021, $
)
Other invested assets (cost: 2022, $
; 2021, $
)
-
Cash
Investment in subsidiaries, at equity in the underlying net assets
11,116
10,353
Accrued investment income
-
-
Receivable from subsidiaries
Other assets
TOTAL ASSETS
$
11,192
$
10,628
LIABILITIES:
Long term notes payable, affiliated
$
2,738
$
Due to subsidiaries
Other liabilities
(13)
Total liabilities
2,751
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
0.01
;
50.0
shares authorized;
no
shares issued and outstanding
-
-
Common shares, par value: $
0.01
;
200.0
shares authorized;
(2022)
69.9
and (2021)
69.8
outstanding before treasury shares
Additional paid-in capital
2,302
2,274
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of ($
) at 2022 and $
at 2021
(1,996)
Treasury shares, at cost;
30.8
shares (2022) and
30.5
shares (2021)
(3,908)
(3,847)
Retained earnings
12,042
11,700
Total shareholders' equity
8,441
10,139
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
$
11,192
$
10,628
(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
1,416
Total revenues
1,416
EXPENSES:
Interest expense - affiliated
Other expenses
Total expenses
INCOME (LOSS) BEFORE TAXES
1,379
NET INCOME (LOSS)
$
$
1,379
$
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)
$
$
1,021
(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)
$
$
1,379
$
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
4,297,463
shares of Everest Re Group, Ltd. (“Group”) common stock
$
1,405
$
-
$
-
received by Group from Everest Preferred International Holdings
(“Preferred Holdings”), a direct subsidiary
Issuance of $
1,773
million promissory note payable by Group to Preferred
Holdings in exchange for
5,422,508
shares of Group common stock
received by Group from Preferred Holdings
1,773
-
-
Capital contribution of
9,719,971
shares of Group common stock provided from
Group to Everest Re Advisors, Ltd.
3,178
-
-
(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
$
million
long-term
note
agreement
with
Everest
Reinsurance
Company,
an
affiliated
company,
as
of
December
The
note
will
pay
interest
annually
at
a
rate
of
1.69
% and
is
scheduled
to
mature
in
December
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
$
million
long-term
note
agreement
with
Everest
Reinsurance
Company,
an affiliated
company,
as of August
The note
will pay
interest annually
at a rate
of
1.00
%
and
is
scheduled
to
mature
in
August
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
$
million
long-term-note
agreement
with
Everest
Reinsurance
Holdings, Inc., an affiliated company,
as of June 2022.
The note will pay interest
annually at a rate of
3.11
%
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
$
million
long-term
note
agreement
with
Everest
Reinsurance
Holdings, Inc., an
affiliated company,
as of December 2022.
The note will pay
interest annually
at a rate
of
4.34
% and is scheduled to mature in June
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
$
million
long-term
note
agreement
with
Everest
International
Reinsurance,
an affiliated
company,
as of
December 2022.
The note
will pay
interest
annually at
a rate
of
4.34
%
and
is
scheduled
to
mature
in
December
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
$
1.773
billion
long-term
note
agreement
with
Everest
Preferred
International Holdings,
an affiliated
company,
as of December
The note will
pay interest
annually at
a rate of
4.34
% 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 $
million as
of December
31, 2022 and
2021, respectively,
have been
recorded
within Other
Assets.
On the Condensed Statements
of Operations, income (expense)
of $
(0.9)
million, $
(1.3)
million and
$(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
$
$
16,140
$
2,894
$
8,663
$
$
5,997
$
2,134
$
$
8,983
Insurance
5,925
2,253
3,124
2,103
3,361
Total
$
$
22,065
$
5,147
$
11,787
$
$
8,100
$
2,528
$
$
12,344
As of and Year Ended December
31, 2021
Reinsurance
$
$
13,895
$
2,723
$
7,757
$
$
5,556
$
1,854
$
$
8,536
Insurance
5,114
1,887
2,649
1,835
2,910
Total
$
$
19,009
$
4,610
$
10,406
$
1,165
$
7,391
$
2,209
$
$
11,446
As of and Year Ended December
31, 2020
Reinsurance
$
$
12,023
$
1,995
$
6,466
$
$
4,933
$
1,552
$
$
6,768
Insurance
4,376
1,506
2,215
1,617
2,349
Total
$
$
16,399
$
3,501
$
8,682
$
$
6,551
$
1,873
$
$
9,117
(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
from Other
Net
Assumed
(Dollars in millions)
Amount
Companies
Companies
Amount
to Net
December 31, 2022
Total property and
liability insurance premiums earned
$
4,218
$
1,513
$
9,082
$
11,787
$
77.1%
December 31, 2021
Total property and
liability insurance premiums earned
$
3,589
$
1,498
$
8,315
$
10,406
$
79.9%
December 31, 2020
Total property and
liability insurance premiums earned
$
3,028
$
1,401
$
7,055
$
8,682
$
81.3%
Previous: Item 14. PRINCIPAL ACCOUNTANT