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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			☒						Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
									For the quarterly period ended March 31, 2023

									Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 1-15731

EVEREST RE GROUP, LTD.

(Exact name of registrant as specified in its charter)


Bermuda						98-0365432
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Seon Place – 4th Floor 141 Front Street PO Box HM 845 Hamilton Bermuda						HM 19
(Address of principal executive offices)						(Zip Code)

441-295-0006

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Class						Trading Symbol						Name of Exchange where Registered
Common Shares, $0.01 par value						RE						New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes			X						No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes			X						No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	X	Accelerated filer

Non-accelerated filer		Smaller reporting company

		Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


YES									NO			X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class																		Number of Shares Outstanding At May 1, 2023
Common Shares, $0.01 par value																		39,275,224

EVEREST RE GROUP, LTD

Table of Contents

Form 10-Q


		Page
	PART I

	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022 (unaudited)	2

	Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	3

	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	43

	PART II

	OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	44

Item 4.	Mine Safety Disclosures	44

Item 5.	Other Information	45

Item 6.	Exhibits	46

EVEREST RE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS


	March 31,		December 31,
(Dollars and share amounts in millions, except par value per share)	2023		2022
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at fair value (amortized cost: 2023, $25,247; 2022, $24,191, credit allowances: 2023, $(62); 2022, $(54))	$	23,560	$	22,236
Fixed maturities - held to maturity, at amortized cost (fair value: 2023, $814; 2022, $821, net of credit allowances: 2023, $(9); 2022, $(9))	825		839
Equity securities, at fair value	250		281
Other invested assets	4,156		4,085
Short-term investments	1,034		1,032
Cash	1,610		1,398
Total investments and cash	31,435		29,872
Accrued investment income	235		217
Premiums receivable (net of credit allowances: 2023, $(30); 2022, $(29))	3,922		3,619
Reinsurance paid loss recoverables (net of credit allowances: 2023, $(24); 2022, $(23))	182		136
Reinsurance unpaid loss recoverables	2,125		2,105
Funds held by reinsureds	1,071		1,056
Deferred acquisition costs	1,011		962
Prepaid reinsurance premiums	611		610
Income tax asset, net	387		459
Other assets (net of credit allowances: 2023, $(7); 2022, $(5))	860		930
TOTAL ASSETS	$	41,839	$	39,966

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	22,878	$	22,065
Future policy benefit reserve	29		29
Unearned premium reserve	5,418		5,147
Funds held under reinsurance treaties	10		13
Other net payable to reinsurers	618		567
Losses in course of payment	123		74
Senior notes	2,348		2,347
Long-term notes	218		218
Borrowings from FHLB	519		519
Accrued interest on debt and borrowings	41		19
Unsettled securities payable	201		1
Other liabilities	422		526
Total liabilities	32,825		31,525

Commitments and contingencies (Note 7)

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; (2023) 70.0 and (2022) 69.9 outstanding before treasury shares	1		1
Additional paid-in capital	2,295		2,302
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $(218) at 2023 and $(250) at 2022	(1,716)		(1,996)
Treasury shares, at cost; 30.8 shares (2023) and 30.8 shares (2022)	(3,908)		(3,908)
Retained earnings	12,342		12,042
Total shareholders' equity	9,014		8,441
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	41,839	$	39,966

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)


	Three Months Ended March 31,
(Dollars in millions, except per share amounts)	2023		2022
	(unaudited)
REVENUES:
Premiums earned	$	3,100	$	2,792
Net investment income	260		243
Net gains (losses) on investments:
Credit allowances on fixed maturity securities	(8)		(12)
Gains (losses) from fair value adjustments	4		(137)
Net realized gains (losses) from dispositions	8		(5)
Total net gains (losses) on investments	5		(154)
Other income (expense)	(79)		15
Total revenues	3,286		2,896

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses	1,966		1,790
Commission, brokerage, taxes and fees	661		605
Other underwriting expenses	200		161
Corporate expenses	19		14
Interest, fees and bond issue cost amortization expense	32		24
Total claims and expenses	2,878		2,594

INCOME (LOSS) BEFORE TAXES	408		302
Income tax expense (benefit)	43		4

NET INCOME (LOSS)	$	365	$	298

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period	246		(815)
Reclassification adjustment for realized losses (gains) included in net income (loss)	3		4
Total URA(D) on securities arising during the period	249		(811)

Foreign currency translation adjustments	31		(34)

Reclassification adjustment for amortization of net (gain) loss included in net income (loss)	—		1
Total benefit plan net gain (loss) for the period	—		1
Total other comprehensive income (loss), net of tax	280		(844)

COMPREHENSIVE INCOME (LOSS)	$	645	$	(547)

EARNINGS PER COMMON SHARE:
Basic	$	9.31	$	7.57
Diluted	9.31		7.56

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY


	Three Months Ended March 31,
(Dollars in millions, except dividends per share amounts)		2023		2022
	(unaudited)
COMMON SHARES (shares outstanding):
Balance beginning of period		39		39
Issued (redeemed) during the period, net		—		—
Treasury shares acquired		—		—
Balance end of period		39		39

COMMON SHARES (par value):
Balance beginning of period		$	1	$	1
Issued during the period, net		—		—
Balance end of period		1		1

ADDITIONAL PAID-IN CAPITAL:
Balance beginning of period		2,302		2,274
Share-based compensation plans		(7)		(3)
Balance end of period		2,295		2,272

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME TAXES:
Balance beginning of period		(1,996)		12
Net increase (decrease) during the period		280		(844)
Balance end of period		(1,716)		(833)

RETAINED EARNINGS:
Balance beginning of period		12,042		11,700
Net income (loss)		365		298
Dividends declared ($1.65 per share in 1Q2023 and $1.55 per share in 1Q2022)		(65)		(61)
Balance, end of period		12,342		11,936

TREASURY SHARES AT COST:
Balance beginning of period		(3,908)		(3,847)
Purchase of treasury shares		—		(1)
Balance end of period		(3,908)		(3,849)

TOTAL SHAREHOLDERS' EQUITY, END OF PERIOD		$	9,014	$	9,528

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	365	$	298
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable	(259)		(14)
Decrease (increase) in funds held by reinsureds, net	(17)		(67)
Decrease (increase) in reinsurance recoverables	7		(126)
Decrease (increase) in income taxes	41		1
Decrease (increase) in prepaid reinsurance premiums	28		(7)
Increase (decrease) in reserve for losses and loss adjustment expenses	681		632
Increase (decrease) in future policy benefit reserve	—		(1)
Increase (decrease) in unearned premiums	226		4
Increase (decrease) in other net payable to reinsurers	17		46
Increase (decrease) in losses in course of payment	47		(125)
Change in equity adjustments in limited partnerships	(5)		(98)
Distribution of limited partnership income	48		71
Change in other assets and liabilities, net	(121)		47
Non-cash compensation expense	12		12
Amortization of bond premium (accrual of bond discount)	(1)		19
Net (gains) losses on investments	(5)		154
Net cash provided by (used in) operating activities	1,064		846

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called/repaid - available for sale	562		849
Proceeds from fixed maturities sold - available for sale	72		419
Proceeds from fixed maturities matured/called/repaid - held to maturity	28		—
Proceeds from equity securities sold	46		90
Distributions from other invested assets	137		163
Cost of fixed maturities acquired - available for sale	(1,613)		(2,011)
Cost of fixed maturities acquired - held to maturity	(11)		—
Cost of equity securities acquired	(1)		(195)
Cost of other invested assets acquired	(242)		(137)
Net change in short-term investments	4		355
Net change in unsettled securities transactions	267		46
Net cash provided by (used in) investing activities	(752)		(421)

CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued (redeemed) during the period for share-based compensation, net of expense	(19)		(14)
Purchase of treasury shares	—		(1)
Dividends paid to shareholders	(65)		(61)
Cost of shares withheld on settlements of share-based compensation awards	(19)		(17)
Net cash provided by (used in) financing activities	(103)		(94)

EFFECT OF EXCHANGE RATE CHANGES ON CASH	3		6

Net increase (decrease) in cash	212		337
Cash, beginning of period	1,398		1,441
Cash, end of period	$	1,610	$	1,778

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	2	$	3
Interest paid	10		2

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three Months Ended March 31, 2023 and 2022

1. GENERAL

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.

2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), has been omitted since it is not required for interim reporting purposes. The December 31, 2022 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results for the three months ended March 31, 2023 and 2022 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2022, 2021 and 2020, included in the Company’s most recent Form 10-K filing.

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.

All intercompany accounts and transactions have been eliminated.

Application of Recently Issued Accounting Standard Changes.

The Company did not adopt any new accounting standards that had a material impact during the three months ended March 31, 2023. 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, 2022. There were no accounting standards issued in the three months ended March 31, 2023, that are expected to have a material impact to Group.

3. 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 March 31, 2023
(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Unrealized Appreciation		Unrealized Depreciation		Fair Value
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	1,323	$	—	$	5	$	(69)	$	1,259
Obligations of U.S. states and political subdivisions	424		—		2		(30)		396
Corporate securities	7,202		(55)		29		(497)		6,679
Asset-backed securities	4,567		—		5		(129)		4,443
Mortgage-backed securities
Commercial	1,075		—		1		(102)		974
Agency residential	3,690		—		19		(244)		3,465
Non-agency residential	5		—		—		(1)		4
Foreign government securities	1,616		—		8		(153)		1,471
Foreign corporate securities	5,345		(7)		22		(491)		4,869
Total fixed maturity securities - available for sale	$	25,247	$	(62)	$	91	$	(1,716)	$	23,560

(Some amounts may not reconcile due to rounding.)


	At December 31, 2022
(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Unrealized Appreciation		Unrealized Depreciation		Fair Value
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	1,334	$	—	$	6	$	(82)	$	1,257
Obligations of U.S. states and political subdivisions	444		—		2		(32)		413
Corporate securities	7,044		(45)		31		(561)		6,469
Asset-backed securities	4,229		—		5		(171)		4,063
Mortgage-backed securities
Commercial	1,023		—		—		(105)		919
Agency residential	3,382		—		7		(290)		3,099
Non-agency residential	5		—		—		(1)		4
Foreign government securities	1,586		—		8		(179)		1,415
Foreign corporate securities	5,143		(10)		23		(562)		4,596
Total fixed maturity securities - available for sale	$	24,191	$	(54)	$	81	$	(1,982)	$	22,236

(Some amounts may not reconcile due to rounding.)

The following tables show 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 March 31, 2023
(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Unrealized Appreciation		Unrealized Depreciation		Fair Value
Fixed maturity securities - held to maturity
Corporate securities	$	152	$	(2)	$	1	$	(3)	$	148
Asset-backed securities	640		(6)		1		(12)		624
Mortgage-backed securities
Commercial	14		—		—		—		14
Foreign corporate securities	28		(1)		2		—		29
Total fixed maturity securities - held to maturity	$	834	(9)		$	4	$	(15)	$	814

(Some amounts may not reconcile due to rounding.)


	At December 31, 2022
(Dollars in millions)	Amortized Cost		Allowance for Credit Losses		Unrealized Appreciation		Unrealized Depreciation		Fair Value
Fixed maturity securities - held to maturity
Corporate securities	$	152	$	(2)	$	—	$	(6)	$	144
Asset-backed securities	661		(6)		2		(15)		642
Mortgage-backed securities
Commercial	7		—		—		—		7
Foreign corporate securities	28		(1)		2		—		28
Total fixed maturity securities - held to maturity	$	848	$	(9)	$	3	$	(22)	$	821

(Some amounts may not reconcile due to rounding.)

The amortized cost and fair value of fixed maturity securities - available for sale are shown in the following table by contractual maturity. 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 March 31, 2023				At December 31, 2022
(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturity securities – available for sale
Due in one year or less	$	1,449	$	1,417	$	1,331	$	1,314
Due after one year through five years	8,385		7,877		8,131		7,546
Due after five years through ten years	4,548		4,072		4,636		4,057
Due after ten years	1,528		1,310		1,454		1,233
Asset-backed securities	4,567		4,443		4,229		4,063
Mortgage-backed securities
Commercial	1,075		974		1,023		919
Agency residential	3,690		3,465		3,382		3,099
Non-agency residential	5		4		5		4
Total fixed maturity securities - available for sale	$	25,247	$	23,560	$	24,191	$	22,236

(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. 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 March 31, 2023				At December 31, 2022
(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturity securities – held to maturity
Due in one year or less	$	5	$	5	$	5	$	5
Due after one year through five years	63		63		63		61
Due after five years through ten years	43		42		43		41
Due after ten years	68		67		68		65
Asset-backed securities	640		624		661		642
Mortgage-backed securities
Commercial	14		14		7		7
Total fixed maturity securities - held to maturity	$	834	$	814	$	848	$	821

(Some amounts may not reconcile due to rounding.)

During the third quarter of 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 reclassified at the date of transfer was $722 million, net of allowance for current expected credit losses, which was subsequently recognized as the new amortized cost basis. As of March 31, 2023, these securities had an unrealized loss

of $48 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 March 31, 2023 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 March 31, 2023.

The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the following sources for the periods indicated:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Increase (decrease) during the period between the fair value and cost of investments carried at fair value, and deferred taxes thereon:
Fixed maturity securities - available for sale and short-term investments	$	279	$	(927)
Change in unrealized appreciation (depreciation), pre-tax	279		(927)
Deferred tax benefit (expense)	(30)		116
Change in unrealized appreciation (depreciation), net of deferred taxes, included in shareholders’ equity	$	249	$	(811)

(Some amounts may not reconcile due to rounding.)

The tables below display the aggregate fair value and gross unrealized depreciation of fixed maturity securities - available for sale 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 March 31, 2023 By Security Type
	Less than 12 months				Greater than 12 months				Total
(Dollars in millions)	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	359	$	(10)	$	764	$	(59)	$	1,124	$	(69)
Obligations of U.S. states and political subdivisions	113		(6)		119		(22)		232		(28)
Corporate securities	2,358		(89)		3,177		(407)		5,536		(496)
Asset-backed securities	1,644		(37)		1,881		(92)		3,525		(129)
Mortgage-backed securities
Commercial	317		(20)		634		(82)		951		(102)
Agency residential	1,270		(49)		1,373		(195)		2,643		(244)
Non-agency residential	1		—		4		(1)		4		(1)
Foreign government securities	392		(17)		895		(136)		1,287		(153)
Foreign corporate securities	1,504		(67)		2,743		(425)		4,247		(492)
Total	$	7,958	$	(295)	$	11,590	$	(1,419)	$	19,548	$	(1,714)
Securities where an allowance for credit loss was recorded	3		(1)		—		(1)		3		(2)
Total fixed maturity securities - available for sale	$	7,961	$	(296)	$	11,591	$	(1,420)	$	19,551	$	(1,716)

(Some amounts may not reconcile due to rounding.)


	Duration of Unrealized Loss at March 31, 2023 By Maturity
	Less than 12 months				Greater than 12 months				Total
(Dollars in millions)	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
Fixed maturity securities - available for sale
Due in one year or less	$	849	$	(14)	$	285	$	(19)	$	1,134	$	(32)
Due in one year through five years	2,342		(86)		4,391		(436)		6,733		(523)
Due in five years through ten years	1,196		(66)		2,308		(422)		3,503		(489)
Due after ten years	339		(22)		715		(172)		1,055		(194)
Asset-backed securities	1,644		(37)		1,881		(92)		3,525		(129)
Mortgage-backed securities	1,588		(70)		2,010		(278)		3,598		(347)
Total	$	7,958	$	(295)	$	11,590	$	(1,419)	$	19,548	$	(1,714)
Securities where an allowance for credit loss was recorded	3		(1)		—		(1)		3		(2)
Total fixed maturity securities - available for sale	$	7,961	$	(296)	$	11,591	$	(1,420)	$	19,551	$	(1,716)

(Some amounts may not reconcile due to rounding.)

The aggregate fair value and gross unrealized losses related to fixed maturity securities - available for sale in an unrealized loss position at March 31, 2023 were $19.6 billion and $1.7 billion, respectively. The fair value of securities for the single issuer (the United States government), whose securities comprised the largest unrealized loss position at March 31, 2023, did not exceed 4.8% of the overall fair value of the Company’s fixed maturity securities available for sale. The fair value of the securities for the issuer with the second largest unrealized loss position at March 31, 2023, comprised less than 0.8% of the Company’s fixed maturity securities available for sale. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $296 million of unrealized losses related to fixed maturity securities - available for sale that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, agency residential and commercial mortgage-backed securities, asset-backed securities and foreign government securities. Of these unrealized losses, $263 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. The $1.4 billion of unrealized losses related to fixed maturity securities - available for sale in an unrealized loss position for more than one year related primarily to foreign and domestic corporate securities, agency residential mortgage-backed securities, foreign government securities and asset-backed securities. Of these unrealized losses, $1.3 billion were related to securities that were rated investment grade by at least one nationally recognized 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. Based upon the Company’s current evaluation of securities in an unrealized loss position as of March 31, 2023, the unrealized losses are due to changes in interest rates and non-issuer specific credit spreads and are not credit-related. In addition, the contractual terms of these securities do not permit these securities to be settled at a price less than their amortized cost.

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.


	Duration of Unrealized Loss at December 31, 2022 By Security Type
	Less than 12 months				Greater than 12 months				Total
(Dollars in millions)	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	668	$	(31)	$	487	$	(52)	$	1,155	$	(82)
Obligations of U.S. states and political subdivisions	235		(23)		27		(9)		261		(32)
Corporate securities	4,143		(326)		1,316		(234)		5,459		(561)
Asset-backed securities	3,204		(142)		456		(29)		3,661		(171)
Mortgage-backed securities
Commercial	806		(90)		101		(15)		907		(105)
Agency residential	1,905		(132)		870		(158)		2,776		(289)
Non-agency residential	4		—		1		(1)		4		—
Foreign government securities	985		(100)		321		(79)		1,306		(179)
Foreign corporate securities	3,264		(372)		853		(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	2		—		—		—		2		—
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.)


	Duration of Unrealized Loss at December 31, 2022 By Maturity
	Less than 12 months				Greater than 12 months				Total
(Dollars in millions)	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
Fixed maturity securities - available for sale
Due in one year or less	$	989	$	(19)	$	40	$	(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)		911		(230)		3,609		(590)
Due after ten years	672		(91)		408		(116)		1,080		(207)
Asset-backed securities	3,204		(142)		456		(29)		3,661		(171)
Mortgage-backed securities	2,715		(222)		972		(173)		3,687		(395)
Total	$	15,213	$	(1,217)	$	4,432	$	(764)	$	19,645	$	(1,982)
Securities where an allowance for credit loss was recorded	2		—		—		—		2		—
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 fair value and gross unrealized losses related to fixed maturity - available for sale investments in an unrealized loss position at December 31, 2022 were $19.6 billion and $2.0 billion, respectively. The fair 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 fair value of the Company’s fixed maturity securities - available for sale. The fair 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 - available for sale. 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 - available for sale 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 rating agency. The $764 million of unrealized losses related to fixed maturity securities - available for sale 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, $732 million were related to securities that were rated investment grade by at least one nationally recognized 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 components of net investment income are presented in the table below for the periods indicated:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Fixed maturities	$	247	$	148
Equity securities	1		4
Short-term investments and cash	17		—
Other invested assets
Limited partnerships	(15)		88
Other	22		12
Gross investment income before adjustments	272		253
Funds held interest income (expense)	—		4
Future policy benefit reserve income (expense)	—		—
Gross investment income	272		256
Investment expenses	(12)		(13)
Net investment income	$	260	$	243

(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 $2.7 billion in limited partnerships and private placement loan securities at March 31, 2023. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2027.

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 $954 million and $939 million as of March 31, 2023 and December 31, 2022, respectively.

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 March 31, 2023 and December 31, 2022, the Company did not 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 March 31, 2023 and December 31, 2022 is limited to the

total carrying value of $4.2 billion and $4.1 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 March 31, 2023, the Company has outstanding commitments totaling $2.2 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, available for sale. 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 gains (losses) on investments are presented in the table below for the periods indicated:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Fixed maturity securities
Allowance for credit losses	$	(8)	$	(12)
Net realized gains (losses) from dispositions	2		3
Equity securities, fair value
Net realized gains (losses) from dispositions	7		(12)
Gains (losses) from fair value adjustments	4		(137)
Other invested assets	—		4

Total net gains (losses) on investments	$	5	$	(154)

(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:


	Roll Forward of Allowance for Credit Losses - Fixed Maturities - Available for Sale
	Three Months Ended March 31, 2023
(Dollars in millions)	Corporate Securities		Foreign Corporate Securities		Total
Beginning Balance	$	(45)	$	(10)	$	(54)
Credit losses on securities where credit losses were not previously recorded	(12)		—		(12)
Increases in allowance on previously impaired securities	—		—		—
Decreases in allowance on previously impaired securities	—		—		—
Reduction in allowance due to disposals	2		3		5
Balance, end of period	$	(55)	$	(7)	$	(62)

(Some amounts may not reconcile due to rounding.)


	Roll Forward of Allowance for Credit Losses - Fixed Maturities - Held to Maturity
	Three Months Ended March 31, 2023
(Dollars in millions)	Corporate Securities		Asset-Backed Securities		Foreign Corporate Securities		Total
Beginning Balance	$	(2)	$	(6)	$	(1)	$	(9)
Credit losses on securities where credit losses were not previously recorded	—		—		—		—
Increases in allowance on previously impaired securities	—		—		—		—
Decreases in allowance on previously impaired securities	—		—		—		—
Reduction in allowance due to disposals	—		—		—		—
Balance, end of period	$	(2)	$	(6)	$	(1)	$	(9)

(Some amounts may not reconcile due to rounding.)


		Roll Forward of Allowance for Credit Losses - Fixed Maturities - Available for Sale
	Three Months Ended March 31, 2022
(Dollars in millions)		Corporate Securities		Asset-Backed Securities		Foreign Corporate Securities		Total
Beginning Balance		$	(19)	$	(8)	$	(3)	$	(30)
Credit losses on securities where credit losses were not previously recorded		(2)		—		(11)		(13)
Increases in allowance on previously impaired securities		—		—		—		—
Decreases in allowance on previously impaired securities		—		—		—		—
Reduction in allowance due to disposals		1		—		—		1
Balance, end of period		$	(20)	$	(8)	$	(14)	$	(42)

(Some amounts may not reconcile due to rounding.)

The proceeds and split between gross gains and losses from dispositions of fixed maturity and equity securities, are presented in the table below for the periods indicated:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Proceeds from sales of fixed maturity securities - available for sale	$	72	$	419
Gross gains from dispositions	11		20
Gross losses from dispositions	(9)		(17)

Proceeds from sales of equity securities	$	46	$	90
Gross gains from dispositions	7		4
Gross losses from dispositions	—		(15)

4. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE

Activity in the reserve for losses and loss adjustment expenses (“LAE”) is summarized for the periods indicated:


	Three Months Ended March 31,
	2023		2022
(Dollars in millions)
Gross reserves beginning of period	$	22,065	$	19,009
Less reinsurance recoverables on unpaid losses	(2,105)		(1,946)
Net reserves beginning of period	19,960		17,063

Incurred related to:
Current year	1,966		1,791
Prior years	—		(1)
Total incurred losses and LAE	1,966		1,790

Paid related to:
Current year	684		308
Prior years	641		919
Total paid losses and LAE	1,325		1,226

Foreign exchange/translation adjustment	152		(122)

Net reserves end of period	20,753		17,505
Plus reinsurance recoverables on unpaid losses	2,125		1,991
Gross reserves end of period	$	22,878	$	19,496

(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $2.0 billion and $1.8 billion for the three months ended March 31, 2023 and 2022, respectively. Gross and net reserves increased for the three months ended March 31, 2023, reflecting an increase in underlying exposure due to earned premium growth, year over year, and an increase of $175 million in 2023 current year attritional losses compared to 2022.

5. FAIR VALUE

GAAP guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.

The levels in the hierarchy are defined as follows:

Level 1: Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s fixed maturity and equity securities are primarily managed by third party investment asset managers. The investment asset managers managing publicly traded securities obtain prices from nationally recognized pricing services. These services seek to utilize market data and observations in their evaluation process. They use pricing

applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.

The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers. In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices. The Company also continually performs quantitative and qualitative analysis of prices, including but not limited to initial and ongoing review of pricing methodologies, review of prices obtained from pricing services and third party investment asset managers, review of pricing statistics and trends, and comparison of prices for certain securities with a secondary price source for reasonableness. No material variances were noted during these price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value. At March 31, 2023, $1.7 billion of fixed maturities 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, 2022, $1.7 billion of fixed maturities were fair valued using unobservable inputs.

The Company internally manages a portfolio of assets which had a fair value at March 31, 2023 and December 31, 2022 of $3.4 billion and $2.7 billion, respectively, primarily comprised of collateralized loan obligations included in asset-backed securities and US treasury fixed maturities. All prices for these securities were obtained from publicly published sources or nationally recognized pricing vendors.

Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as Level 2 due to the added input of a foreign exchange conversion rate to determine fair value. The Company uses foreign currency exchange rates published by nationally recognized sources.

Fixed maturity securities listed in the tables have been categorized as Level 2, since a particular security may not have traded but the pricing services are able to use valuation models with observable market inputs such as interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority. For foreign government securities and foreign corporate securities, the fair values provided by the third party pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

In addition to the valuations from investment managers, some of the fixed maturities with fair values categorized as Level 3 result when prices are not available from the nationally recognized pricing services and are derived using unobservable inputs. The Company will value the securities with unobservable inputs using comparable market information or receive fair values from investment managers. The investment managers may obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company. If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

The composition and valuation inputs for the presented fixed maturities categories Level 1 and Level 2 are as follows:

U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;
Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;
Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;
Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;
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 tables present 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
	March 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(Dollars in millions)
Assets:
Fixed maturities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	1,259	$	—	$	1,259	$	—
Obligations of U.S. States and political subdivisions	396		—		396		—
Corporate securities	6,679		—		5,970		709
Asset-backed securities	4,443		—		3,422		1,020
Mortgage-backed securities
Commercial	974		—		974		—
Agency residential	3,465		—		3,465		—
Non-agency residential	4		—		4		—
Foreign government securities	1,471		—		1,471		—
Foreign corporate securities	4,869		—		4,853		16
Total fixed maturities - available for sale	23,560		—		21,815		1,745

Equity securities, fair value	250		140		110		—

(Some amounts may not reconcile due to rounding.)


			Fair Value Measurement Using
(Dollars in millions)	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (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	413		—		413		—
Corporate securities	6,469		—		5,754		715
Asset-backed securities	4,063		—		3,069		994
Mortgage-backed securities
Commercial	919		—		919		—
Agency residential	3,099		—		3,099		—
Non-agency residential	4		—		4		—
Foreign government securities	1,415		—		1,415		—
Foreign corporate securities	4,596		—		4,579		16
Total fixed maturities - available for sale	22,236		—		20,511		1,725

Equity securities, fair value	281		132		150		—

(Some amounts may not reconcile due to rounding.)

In addition, $316 million and $292 million of investments within other invested assets on the consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively, are not included within the fair value hierarchy tables as the assets are measured at net asset value (“NAV”) as a practical expedient to determine fair value.

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs for fixed maturities available for sale, for the periods indicated:


		Total Fixed Maturities, Available for Sale
	Three Months Ended March 31, 2023
(Dollars in millions)		Corporate Securities		Asset-Backed Securities		Foreign Corporate		Total
Beginning balance fixed maturities		$	715	$	994	$	16	$	1,725
Total gains or (losses) (realized/unrealized)
Included in earnings		1		—		—		1
Included in other comprehensive income (loss)		(4)		18		—		14
Purchases, issuances and settlements		(3)		9		—		5
Transfers in/(out) of Level 3 and reclassification of securities in/(out) of investment categories		—		—		—		—
Ending balance		$	709	$	1,020	$	16	$	1,745

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		$	—	$	—	$	—	$	—

(Some amounts may not reconcile due to rounding.)


		Total Fixed Maturities, Available for Sale
	Three Months Ended March 31, 2022
(Dollars in millions)		Corporate Securities		Asset-Backed Securities		CMBS		Foreign Corporate		Total
Beginning balance fixed maturities		$	801	$	1,251	$	—	$	16	$	2,068
Total gains or (losses) (realized/unrealized)
Included in earnings		16		—		—		—		16
Included in other comprehensive income (loss)		(4)		(29)		—		—		(33)
Purchases, issuances and settlements		(98)		166		6		—		74
Transfers in/(out) of Level 3 and reclassification of securities in/(out) of investment categories		—		—		—		—		—
Ending balance		$	715	$	1,389	$	6	$	16	$	2,125

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		$	—	$	—	$	—	$	—	$	—

(Some amounts may not reconcile due to rounding.)

There were no transfers of assets in/(out) of Level 3 for the three months ended March 31, 2022.

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 3 and 11, respectively. Short-term investments are stated at cost, which approximates fair value.

6. 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.


	Three Months Ended March 31,
(Dollars in millions, except per share amounts)		2023			2022
Net income (loss) per share:
Numerator
Net income (loss)		$	365		$	298
Less: dividends declared-common shares and unvested common shares		(65)			(61)
Undistributed earnings		300			237
Percentage allocated to common shareholders (1)		98.7		%	98.7		%
		296			234
Add: dividends declared-common shareholders		64			60
Numerator for basic and diluted earnings per common share		$	360		$	294

Denominator
Denominator for basic earnings per weighted-average common shares		38.7			38.8
Effect of dilutive securities:
Options		—			—
Denominator for diluted earnings per adjusted weighted-average common shares		38.7			38.8

Per common share net income (loss)
Basic		$	9.31		$	7.57
Diluted		$	9.31		$	7.56

(1) Basic weighted-average common shares outstanding		38.7			38.8
Basic weighted-average common shares outstanding and unvested common shares expected to vest		39.2			39.3
Percentage allocated to common shareholders		98.7		%	98.7		%

(Some amounts may not reconcile due to rounding.)

There were no options outstanding as of March 31, 2023. Options granted under share-based compensation plans have all expired as of September 19, 2022.

7. 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 LAE.

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.

8. OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the components of comprehensive income (loss) in the consolidated statements of operations for the periods indicated:


	Three Months Ended March 31, 2023
(Dollars in millions)	Before Tax		Tax Effect		Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related	$	273	$	(27)	$	246
Reclassification of net realized losses (gains) included in net income (loss)	6		(3)		3
Foreign currency translation adjustments	33		(2)		31
Reclassification of benefit plan liability amortization included in net income (loss)	—		—		—
Total other comprehensive income (loss)	$	312	$	(32)	$	280


	Three Months Ended March 31, 2022
(Dollars in millions)	Before Tax		Tax Effect		Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related	$	(932)	$	117	$	(815)
Reclassification of net realized losses (gains) included in net income (loss)	5		(1)		4
Foreign currency translation adjustments	(35)		1		(34)
Reclassification of benefit plan liability amortization included in net income (loss)	1		—		1
Total other comprehensive income (loss)	$	(961)	$	117	$	(844)

The following table presents details of the amounts reclassified from AOCI for the periods indicated:


	Three Months Ended March 31,				Affected line item within the statements of operations and comprehensive income (loss)
AOCI component	2023		2022
(Dollars in millions)
URA(D) on securities	$	6	$	5		Other net realized capital gains (losses)
	(3)		(1)			Income tax expense (benefit)
	$	3	$	4		Net income (loss)

Benefit plan net gain (loss)	$	—	$	1		Other underwriting expenses
	—		—			Income tax expense (benefit)
	$	—	$	1		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:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Beginning balance of URA(D) on securities	$	(1,709)	$	239
Current period change in URA(D) of investments - non-credit related	249		(811)
Ending balance of URA(D) on securities	(1,460)		(572)

Beginning balance of foreign currency translation adjustments	(254)		(177)
Current period change in foreign currency translation adjustments	31		(34)
Ending balance of foreign currency translation adjustments	(223)		(212)

Beginning balance of benefit plan net gain (loss)	(33)		(50)
Current period change in benefit plan net gain (loss)	—		1
Ending balance of benefit plan net gain (loss)	(33)		(49)

Ending balance of accumulated other comprehensive income (loss)	$	(1,716)	$	(833)

(Some amounts may not reconcile due to rounding.)

9. CREDIT FACILITIES

The Company has multiple active letter of credit facilities for a total commitment of up to $1.5 billion as of March 31, 2023. The Company also has additional uncommitted letter of credit facilities of up to $440 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 terms and outstanding amounts for each facility are discussed below:

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 $50 million of secured letters of credit. Effective May 5, 2021, the agreement was amended to provide for the issuance of up to $500 million of secured letters of credit.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Wells Fargo Bank Bilateral LOC Agreement	$	500	$	445	12/29/2023	$	500	$	463	12/29/2023

(Some amounts may not reconcile due to rounding.)

Bermuda Re Citibank Letter of Credit Facility

Effective August 9, 2021, Bermuda Re entered into a new letter of credit issuance facility with Citibank N.A. which superseded the previous letter of credit issuance facility with Citibank that was effective December 31, 2020. Both of these are referred to as the “Bermuda Re Letter of Credit Facility”. The current Bermuda Re Citibank Letter of Credit Facility provides for the committed issuance of up to $230 million of secured letters of credit. In addition, the facility provided for the uncommitted issuance of up the $140 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:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Bermuda Re Citibank LOC Facility- Committed	$	230	$	1	8/15/2023	$	230	$	1	1/1/2023
	—		3		9/23/2023	—		4		2/28/2023


	—		217		12/31/2023	—		1		3/1/2023

	—		4		2/29/2024	—		1		8/15/2023
	—		1		3/1/2024	—		3		9/23/2023
	—		1		12/1/2024	—		212		12/31/2023
Bermuda Re Citibank LOC Facility - Uncommitted	140		106		12/31/2023	140		87		12/31/2023
	—		18		3/30/2027	—		18		12/30/2026
Total Citibank Bilateral Agreement	$	370	$	353		$	370	$	329

(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 $200 million of secured letters of credit.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Bayerische Landesbank Bilateral Secured Credit Facility	$	200	$	175	12/31/2023	$	200	$	183	12/31/2023

(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 $150 million of unsecured letters of credit.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Bayerische Landesbank Bilateral Unsecured LOC Agreement - Committed	$	150	$	150	12/31/2023	$	150	$	150	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 $50 million of secured letters of credit, and subject to credit approval a maximum total facility amount of $250 million.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Bermuda Re Lloyd's Bank Credit Facility-Committed	$	50	$	50	12/31/2023	$	50	$	50	12/31/2023
Bermuda Re Lloyd's Bank Credit Facility-Uncommitted	200		156		12/31/2023	200		136		45291
Total Bermuda Re Lloyd's Bank Credit Facility	$	250	$	206		$	250	$	186

(Some amounts may not reconcile due to rounding.)

Bermuda Re Barclays Bank 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 $200 million of secured letters of credit.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Bermuda Re Barclays Bilateral Letter of Credit Facility	$	200	$	179	12/31/2023	$	200	$	179	12/31/2023

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 $200 million of unsecured letters of credit, and subject to credit approval, uncommitted issuance of $100 million for a maximum total facility amount of $300 million.

The following table summarizes the outstanding letters of credit for the periods indicated:


(Dollars in millions)	At March 31, 2023					At December 31, 2022
Bank	Commitment		In Use		Date of Expiry	Commitment		In Use		Date of Expiry
Nordea Bank ABP, NY Unsecured LOC Facility - Committed	$	200	$	200	12/31/2023	$	200	$	50	12/31/2023
Nordea Bank ABP, NY Unsecured LOC Facility - Uncommitted	100		100		12/31/2023	100		100		12/31/2023
Total Nordea Bank ABP, NY LOC Facility	$	300	$	300		$	300	$	150

(Some amounts may not reconcile due to rounding.)

Federal Home Loan Bank Membership

Everest Reinsurance Company (“Everest Re”) is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of March 31, 2023, Everest Re had admitted assets of approximately $23.1 billion which provides borrowing capacity of up to approximately $2.3 billion. As of March 31, 2023, Everest Re has $519 million of borrowings outstanding, all of which expire in 2023. Everest Re incurred interest expense of $6 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively. The FHLBNY membership agreement requires that 4.5% of borrowed funds be used to acquire additional membership stock.

10. 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 March 31, 2023, the total

amount on deposit in trust accounts was $2.5 billion, which includes $202 million of restricted cash. At March 31, 2022, the total amount on deposit in trust accounts was $1.8 billion, which includes $365 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 100% 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.


	Three Months Ended March 31,
Mt. Logan Re Segregated Accounts		2023		2022
(Dollars in millions)
Ceded written premiums		$	53	$	50
Ceded earned premiums		46		50
Ceded losses and LAE		36		41

Assumed written premiums		1		1
Assumed earned premiums		1		1
Assumed losses and LAE		—		—

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	$	63	Aggregate
Series 2018-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/30/2018	5/5/2023	200		Aggregate
Series 2019-1 Class A-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2023	150		Occurrence
Series 2019-1 Class B-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2023	275		Aggregate
Series 2019-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2024	150		Occurrence
Series 2019-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2024	275		Aggregate
Series 2021-1 Class A-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025	150		Occurrence
Series 2021-1 Class B-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025	85		Aggregate
Series 2021-1 Class C-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025	85		Aggregate
Series 2021-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026	150		Occurrence
Series 2021-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026	90		Aggregate
Series 2021-1 Class C-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026	90		Aggregate
Series 2022-1 Class A	US, Canada, Puerto Rico – Named Storm and Earthquake Events	6/22/2022	6/22/2025	300		Aggregate
	Total available limit as of March 31, 2023			$	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. As of March 31, 2023, 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 catastrophe bonds 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. The catastrophe bonds’ issue date, maturity date and amount correspond to the reinsurance agreements listed above.

11. SENIOR NOTES

The table below displays Everest Reinsurance Holdings’ (“Holdings”) outstanding senior notes. Fair 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.


					March 31, 2023				December 31, 2022
(Dollars in millions)	Date Issued	Date Due	Principal Amounts		Consolidated Balance Sheet Amount		Fair Value		Consolidated Balance Sheet Amount		Fair Value
4.868% Senior notes	6/5/2014	6/1/2044	$	400	$	397	$	373	$	397	$	343
3.5% Senior notes	10/7/2020	10/15/2050	1,000		981		728		981		677
3.125% Senior notes	10/4/2021	10/15/2052	1,000		969		677		969		627
			$	2,400	$	2,348	$	1,778	$	2,347	$	1,647

(Some amounts may not reconcile due to rounding.)

Interest expense incurred in connection with these senior notes is as follows for the periods indicated:


			Three Months Ended March 31,
(Dollars in millions)	Interest Paid	Payable Dates		2023		2022
4.868% Senior notes	semi-annually	June 1/ December 1		$	5	$	5
3.5% Senior notes	semi-annually	April 15/October 15		9		9
3.125% Senior notes	semi-annually	April 15/October 15		8		8
				$	22	$	22

(Some amounts may not reconcile due to rounding.)

12. LONG-TERM SUBORDINATED NOTES

The table below displays Holdings’ outstanding fixed to floating rate long-term subordinated notes. Fair 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		March 31, 2023				December 31, 2022
(Dollars in millions)	Date Issued	Original Principal Amount		Scheduled	Final	Consolidated Balance Sheet Amount		Fair Value		Consolidated Balance Sheet Amount		Fair Value
Long-term subordinated notes	4/26/2007	$	400	5/15/2037	5/1/2067	$	218	$	197	$	218	$	187

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 3 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, 2017. The reset quarterly interest rate for February 15, 2023 to May 14, 2023 is 7.25%.

Holdings may redeem the long-term subordinated notes on or after May 15, 2017, in whole or in part at 100% 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.

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.

Interest expense incurred in connection with these long-term subordinated notes is as follows for the periods indicated:


	Three Months Ended March 31,
(Dollars in millions)		2023		2022
Interest expense incurred		$	4	$	2

13. 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.

The following tables present the underwriting results for the operating segments for the periods indicated:


	Three Months Ended March 31, 2023
(Dollars in millions)	Reinsurance		Insurance		Total
Gross written premiums	$	2,637	$	1,106	$	3,743
Net written premiums	2,454		875		3,329

Premiums earned	$	2,242	$	858	$	3,100
Incurred losses and LAE	1,411		555		1,966
Commission and brokerage	560		101		661
Other underwriting expenses	63		136		200
Underwriting gain (loss)	$	207	$	66	$	273

Net investment income					260
Net gains (losses) on investments					5
Corporate expenses					(19)
Interest, fee and bond issue cost amortization expense					(32)
Other income (expense)					(79)
Income (loss) before taxes					$	408

(Some amounts may not reconcile due to rounding.)


	Three Months Ended March 31, 2022
(Dollars in millions)	Reinsurance		Insurance		Total
Gross written premiums	$	2,186	$	1,001	$	3,186
Net written premiums	2,081		731		2,812

Premiums earned	$	2,066	$	726	$	2,792
Incurred losses and LAE	1,325		465		1,790
Commission and brokerage	514		91		605
Other underwriting expenses	50		111		161
Underwriting gain (loss)	$	177	$	59	$	235

Net investment income					243
Net gains (losses) on investments					(154)
Corporate expenses					(14)
Interest, fee and bond issue cost amortization expense					(24)
Other income (expense)					15
Income (loss) before taxes					$	302

(Some amounts may not reconcile due to rounding.)

14. SHARE-BASED COMPENSATION PLANS

For the three months ended March 31, 2023, a total of 174,171 restricted stock awards were granted on February 23, 2023, with a fair value of $382.385 per share. Also, 14,975 performance share unit awards were granted on February 23, 2023, with a fair value of $382.385 per share.

15. INCOME TAXES

The Company is domiciled in Bermuda and has subsidiaries and/or branches in Belgium, Canada, Chile, France, Germany, Ireland, the Netherlands, Singapore, Spain, Switzerland, the United Kingdom, and the United States. The Company’s Bermuda domiciled subsidiaries are exempt from income taxation under Bermuda law until 2035. The Company’s non-Bermudian subsidiaries and branches are subject to income taxation at varying rates in their respective domiciles.

The Company generally applies the estimated Annualized Effective Tax Rate (“AETR”) approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the AETR approach, the estimated annualized effective tax rate is applied to the interim year-to-date pre-tax income/(loss) to determine the income tax

expense or benefit for the year-to-date period. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual pre-tax income/(loss) and annualized effective tax rate.

16. SUBSEQUENT EVENTS

The Company has evaluated known recognized and non-recognized subsequent events. The Company does not have any subsequent events to report.

Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION