EDGAR 10-K Filing

Company CIK: 1095073
Filing Year: 2023
Filename: 1095073_10-K_2023_0001095073-23-000007.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
The Company.
Group, a Bermuda company,
was established in
1999 as a wholly-owned
subsidiary of Holdings.
On February 24,
2000, a corporate restructuring
was completed and Group
became the new parent holding company
of Holdings.
Holdings
continues
to
be the
holding
company
for
the Company’s
U.S.
based
operations.
Holders
of shares
of
common
stock
of
Holdings
automatically
became
holders
of
the
same
number
of
common
shares
of
Group.
Prior to the
restructuring, Group
had no significant
assets or capitalization
and had
not engaged
in any
business
or prior activities other than in connection with the restructuring.
In
connection
with
the
February
24,
restructuring,
Group
established
a
Bermuda-based
reinsurance
subsidiary,
Everest
Reinsurance (Bermuda),
Ltd. (“Bermuda
Re”), which
commenced business
in the
second half
of
2000.
Group
also
formed
Everest
Global
Services,
Inc.,
a
Delaware
subsidiary,
to
perform
administrative
functions for Group and its U.S. based
and non-U.S. based subsidiaries.
On
December
30,
2008,
Group
contributed
Holdings
to
its
Irish
holding
company,
Holdings
Ireland.
Holdings
Ireland is
a direct
subsidiary of
Group and
was established
to serve
as a
holding company
for the
U.S. and
Irish
reinsurance
and
insurance
subsidiaries.
Effective
July
1,
2016,
the
Company
established
a
new
Irish
holding
company,
Everest
Dublin
Insurance
Holdings
Limited
(Ireland)
(“Everest
Dublin
Holdings”)
and
contributed
Ireland Re to Everest
Dublin Holdings.
Holdings, a Delaware corporation,
was established in 1993 to serve
as the parent holding company
of Everest Re,
a
Delaware
property
and
casualty
reinsurer
formed
in
1973.
Until
October
6,
1995,
Holdings
was
an
indirect
wholly-owned
subsidiary
of
The
Prudential
Insurance
Company
of
America
(“The Prudential”).
On
October
6,
1995, The Prudential sold its entire interest
in Holdings in an initial public offering.
The Company’s
principal business, conducted
through its operating
segments, is the
underwriting of reinsurance
and
insurance
in
the
U.S.,
Bermuda
and
international
markets.
The
Company
had
gross
written
premiums,
in
2022,
of
$14.0
billion
with
approximately
66.8%
representing
reinsurance
and
33.2%
representing
insurance.
Shareholders’
equity
at
December
31,
was
$8.4
billion.
The
Company
underwrites
reinsurance
both
through
brokers
and
directly
with
ceding
companies,
giving
it
the
flexibility
to
pursue
business
based
on
the
ceding
company’s
preferred
reinsurance
purchasing
method.
The
Company
underwrites
insurance
principally
through brokers,
surplus lines brokers
and general agent
relationships.
Group’s
active operating
subsidiaries are
each rated A+ (“Superior”) by
A.M. Best Company (“A.M.
Best”), a leading provider of
insurer ratings that
assigns
financial
strength
ratings
to
insurance
companies
based
on
their
ability
to
meet
their
obligations
to
policyholders.
Following is a summary of the Company’s
principal operating subsidiaries:
●
Bermuda Re,
a Bermuda
insurance company
and a direct
subsidiary of
Group, is
registered in
Bermuda as
a
Class
insurer
and
long-term
insurer
and
is
authorized
to
write
both
reinsurance
and
insurance
property
and
casualty
and
life
and
annuity
business.
Bermuda
Re’s
UK
branch
writes
property
and
casualty
reinsurance to
the United
Kingdom,
China and European
markets.
At December
31, 2022,
Bermuda Re
had
shareholder’s equity of $2.7 billion.
●
Everest International
Reinsurance, Ltd.
(“Everest International”),
a Bermuda insurance company
and a direct
subsidiary
of Group,
is
registered
in
Bermuda
as
a
Class
4 insurer
and
is authorized
to
write
property
and
casualty
business.
All
of
Everest
International’s
business
has
inter-affiliate
reinsurance
assumed
from
Everest Re,
the UK branch
of Bermuda Re,
Ireland Re
and Ireland Insurance
.
At December 31,
2022, Everest
International had shareholder’s
equity of $1.0 billion.
●
Ireland Re,
an Ireland
reinsurance company
and an indirect
subsidiary of Group,
is licensed to
write non-life
reinsurance, both directly and through
brokers, for
the London and European markets.
●
Ireland
Insurance,
an
Ireland
insurance
company
and
an
indirect
subsidiary
of
Group,
is
licensed
to
write
insurance for
the European markets.
In addition, Ireland
Insurance is
considered an approved/eligible
alien
surplus lines insurer in the 50 states
and the District of Columbia.
●
Everest
Compañia
de
Seguros
Generales
Chile
S.A.,
a
Chile
based
insurance
company,
is
licensed
to
write
insurance and reinsurance
within Chile.
●
Everest
Re, a
Delaware reinsurance
company and
a direct
subsidiary of
Holdings, is
a licensed
property and
casualty
insurer
and/or
reinsurer
in
all
states,
the
District
of
Columbia,
Puerto
Rico
and
Guam
and
is
authorized
to
conduct
reinsurance
business
in
Canada,
Singapore
and
Brazil.
Everest
Re
underwrites
property
and
casualty
reinsurance
for
insurance
and
reinsurance
companies
in
the
U.S.
and
international
markets.
At December 31, 2022 Everest
Re had statutory surplus of $5.6 billion.
●
Everest
Insurance
Company
of
Canada
(“Everest
Canada”),
a
Canadian
insurance
company
and
direct
subsidiary of Holdings Ireland, is licensed to write property
and casualty insurance in all Canadian provinces.
●
Everest
National
Insurance
Company
(“Everest
National”),
a
Delaware
insurance
company
and
a
direct
subsidiary of
Everest
Re, is
licensed in
50 states,
the District
of Columbia
and Puerto
Rico and
is authorized
to write property and
casualty insurance on
an admitted basis in
the jurisdictions in which it is
licensed.
The
majority of Everest National’s
business is reinsured by its parent,
Everest Re.
●
Everest
Indemnity
Insurance
Company
(“Everest
Indemnity”), a
Delaware
insurance
company
and
a
direct
subsidiary
of Everest
Re,
writes
excess
and
surplus
lines
insurance
business
in
the
U.S.
on
a
non-admitted
basis.
Excess
and
surplus
lines
insurance
is
specialty
property
and
liability
coverage
that
an
insurer
not
licensed to
write insurance
in a
particular jurisdiction
is permitted
to provide
to insureds
when the
specific
specialty coverage
is unavailable
from admitted insurers.
Everest Indemnity
is a Delaware
Domestic Surplus
Lines
Insurer
and
is
eligible
to
write
business
on
a
non-admitted
basis
in
all
other
states,
the
District
of
Columbia and
Puerto Rico.
The majority
of Everest
Indemnity’s
business is
reinsured
by its
parent,
Everest
Re.
●
Everest
Security
Insurance
Company
(“Everest
Security”),
a
Georgia
insurance
company
and
a
direct
subsidiary
of
Everest
Re,
writes
property
and
casualty
insurance
on
an
admitted
basis
in
Georgia
and
Alabama and is
approved as
an eligible surplus
lines insurer in
Delaware.
The majority
of Everest
Security’s
business is reinsured by its parent,
Everest Re.
●
Everest
International
Assurance, Ltd.
(“Everest
Assurance”), a
Bermuda company
and a
direct subsidiary
of
Holdings is
registered
in Bermuda
as a
Class 3A
general business
insurer and
as a
Class C long-term
insurer.
Everest
Assurance has
made a one-time
election under
section 953(d)
of the
U.S. Internal
Revenue Code
to
be a U.S. income
tax paying
“Controlled Foreign
Corporation.”
By making this
election, Everest
Assurance is
authorized to write life rein
surance and casualty reinsurance
in both Bermuda and the U.S.
●
Everest
Premier
Insurance
Company
(“Everest
Premier”),
a
Delaware
insurance
company
and
a
direct
subsidiary of Everest
Re, is
licensed to write
property and
casualty insurance
in all 50
states and
the District
of Columbia.
●
Everest Denali Insurance
Company (“Everest
Denali”), a Delaware insurance company
and a direct subsidiary
of
Everest
Re,
is
licensed
to
write
property
and
casualty
insurance
in
all
states
and
the
District
of
Columbia.
Reinsurance Industry Overview.
Reinsurance
is
an
arrangement
in
which
an
insurance
company,
the
reinsurer,
agrees
to
indemnify
another
insurance
or
reinsurance
company,
the
ceding
company,
against
all
or
a
portion
of
the
insurance
risks
underwritten by
the ceding company
under one or
more insurance
contracts.
Reinsurance can
provide a
ceding
company
with
several
benefits,
including
a
reduction
in
its
net
liability
on
individual
risks
or
classes
of
risks,
catastrophe
protection from
large and/or
multiple losses
and/or a
reduction in
operating
leverage
as measured
by
the
ratio
of
net
premiums
and
reserves
to
capital.
Reinsurance
also
provides
a
ceding
company
with
additional
underwriting capacity
by
permitting
it to
accept larger
risks
and write
more business
than
would be
acceptable
relative
to
the
ceding
company’s
financial
resources.
Reinsurance
does
not
discharge
the
ceding
company from its liability to policyholders;
rather,
it reimburses the ceding company
for covered losses.
There are two basic
types of reinsurance
arrangements:
treaty and facultative.
Treaty
reinsurance obligates
the
ceding company to
cede and the reinsurer
to assume a specified
portion of a type or
category of risks
insured by
the
ceding
company.
Treaty
reinsurers
do
not separately
evaluate
each
of the
individual
risks
assumed
under
their
treaties,
instead,
the
reinsurer
relies
upon
the
pricing
and
underwriting
decisions
made
by
the
ceding
company.
In facultative
reinsurance, the
ceding company
cedes and the
reinsurer assumes
all or part of
the risk
under
a single
insurance
contract.
Facultative
reinsurance
is
negotiated
separately
for
each insurance
contract
that
is
reinsured.
Facultative
reinsurance,
when
purchased
by
ceding
companies,
usually
is
intended
to
cover
individual risks not
covered by their
reinsurance treaties
because of the dollar
limits involved or
because the risk
is unusual.
Both treaty and facultative
reinsurance can be written
on either a pro rata basis
or an excess of loss basis.
Under
pro
rata
reinsurance,
the
ceding
company
and
the
reinsurer
share
the
premiums
as
well
as
the
losses
and
expenses
in
an
agreed
proportion.
Under
excess
of
loss
reinsurance,
the
reinsurer
indemnifies
the
ceding
company against
all or
a specified
portion of
losses and
expenses in
excess of
a specified
dollar amount,
known
as the ceding company's
retention or reinsurer's
attachment point,
generally subject to a
negotiated reinsurance
contract limit.
In
pro
rata
reinsurance,
the
reinsurer
generally
pays
the
ceding
company
a
ceding
commission.
The
ceding
commission
generally
is
based
on
the
ceding
company’s
cost
of
acquiring
the
business
being
reinsured
(commissions,
premium
taxes,
assessments
and
miscellaneous
administrative
expense
and
may
contain
profit
sharing provisions, whereby
the ceding commission is adjusted
based on loss experience).
Premiums paid by the
ceding company
to a
reinsurer for
excess of
loss reinsurance
are not
directly proportional
to the
premiums that
the ceding
company
receives
because
the reinsurer
does not
assume a
proportionate
risk.
There is
usually
no
ceding commission on excess of loss
reinsurance.
Reinsurers
may purchase
reinsurance
to cover
their own
risk exposure.
Reinsurance
of a
reinsurer's
business is
called
a
retrocession.
Reinsurance
companies
cede risks
under
retrocessional
agreements
to
other reinsurers,
known as
retrocessionaires,
for reasons
similar to
those that
cause insurers
to purchase
reinsurance:
to reduce
net
liability
on
individual
or
classes
of
risks,
protect
against
catastrophic
losses,
stabilize
financial
ratios
and
obtain additional underwriting capacity.
Reinsurance
can be
written
through intermediaries,
generally
professional
reinsurance
brokers,
or directly
with
ceding companies.
From a
ceding company's
perspective,
the broker
and the
direct distribution
channels have
advantages
and disadvantages.
A ceding
company's
decision to
select one
distribution
channel over
the other
will be
influenced by
its perception
of such
advantages
and disadvantages
relative
to the
reinsurance
coverage
being placed.
Business Strategy.
The Company’s
business strategy
is to
sustain
its leadership
position within
targeted
reinsurance
and insurance
markets,
provide
effective
management
throughout
the
property
and
casualty
underwriting
cycle
and
thereby
achieve an attractive
return for
its shareholders.
The Company’s
underwriting strategies
seek to capitalize
on its
i)
financial
strength
and
capacity,
ii)
global
franchise,
iii)
stable
and
experienced
management
team,
iv)
diversified
product
and
distribution
offerings,
v)
underwriting
expertise
and
disciplined
approach,
vi)
efficient
and low-cost operating
structure and vii) effective
enterprise risk management practices.
The
Company
offers
treaty
and
facultative
reinsurance
and
admitted
and
non-admitted
insurance.
The
Company’s
products
include
the
full
range
of
property
and
casualty
reinsurance
and
insurance
coverages,
including marine, aviation,
surety,
errors and omissions
liability (“E&O”), directors’
and officers’ liability (“D&O”),
medical
malpractice,
mortgage
reinsurance,
other
specialty
lines,
accident
and
health
(“A&H”)
and
workers’
compensation.
The
Company’s
underwriting
strategies
emphasizes
underwriting
profitability
over
premium
volume.
Key
elements of this
strategy
include careful
risk selection,
appropriate pricing
through strict
underwriting discipline
and
adjustment
of
the
Company’s
business
mix
in
response
to
changing
market
conditions.
The
Company
focuses
on
reinsuring
companies
that
effectively
manage
the
underwriting
cycle
through
proper
analysis
and
appropriate pricing
of underlying risks
and whose underwriting
guidelines and performance
are compatible
with
its objectives.
The Company’s
underwriting strategies
emphasize flexibility
and responsiveness
to changing
market conditions.
The
Company
believes
that
its
existing
strengths,
including
its
broad
underwriting
expertise,
global
presence,
strong financial ratings and
substantial capital, facilitate
adjustments to its mix of business geographically,
by line
of
business
and
by
type
of
coverage,
allowing
it
to
fully
participate
in
market
opportunities
that
provide
the
greatest
potential
for
underwriting
profitability.
The
Company’s
insurance
operations
complement
these
strategies by
accessing business that
is not available
on a reinsurance
basis.
The Company carefully
monitors its
mix of business across all operations
to avoid unacceptable geographic
or other risk concentrations.
Marketing.
The Company
writes business
on a
worldwide basis
for many
different
customers
and lines
of business,
thereby
obtaining
a
broad
spread
of
risk.
The
Company
is
not
substantially
dependent
on
any
single
customer,
small
group of customers,
line of business
or geographic area.
For the 2022
calendar year,
no single customer
(ceding
company
or
insured)
generated
more
than
3.7%
of
the
Company’s
gross
written
premiums.
The
Company
believes
that
a
reduction
of
business
from
any
one
customer
would
not
have
a
material
adverse
effect
on
its
future financial condition or results of operations.
Approximately
60.2%,
33.2%
and
6.6%
of
the
Company’s
gross
written
premiums
were
written
in
the
broker reinsurance,
insurance and direct reinsurance
markets, respectively.
The broker
reinsurance
market
consists
of several
substantial
national
and international
brokers
and a
number
of
smaller
specialized
brokers.
Brokers
do
not
have
the
authority
to
bind
the
Company
with
respect
to
reinsurance
agreements,
nor
does
the
Company
commit
in
advance
to
accept
any
portion
of
a
broker’s
submitted
business.
Reinsurance
business
from
any
ceding
company,
whether
new
or
renewal
is
subject
to
acceptance
by
the
Company.
Brokerage
fees
are
generally
paid
by
reinsurers.
The
Company’s
ten
largest
brokers
accounted
for
an
aggregate
of
approximately
52.7%
of
gross
written
premiums
in
2022.
The
largest
broker,
Marsh
and
McLennan,
accounted
for
approximately
20.0%
of
gross
written
premiums.
The
second
largest broker,
Aon, accounted
for approximately
16.6% of gross
written premiums.
The Company
believes that
a reduction of business assumed from any one
broker would not have
a material adverse effect
on the Company.
The
direct
reinsurance
market
is
an
important
distribution
channel
for
reinsurance
business
written
by
the
Company.
Direct
placement
of
reinsurance
enables
the
Company
to
access
clients
who
prefer
to
place
their
reinsurance directly
with reinsurers
based upon the
reinsurer’s in-depth
understanding of
the ceding company’s
needs.
The
Company’s
insurance
business
mainly
writes
commercial
property
and
casualty
on
an
admitted
and
non-
admitted basis.
The business
is written
through wholesale
and retail
brokers,
surplus lines
brokers
and through
program
administrators.
In
2022,
two
program
administrators
accounted
for
approximately
12%
of
the
Company’s
gross
written
premium
in
total
and
included
multiple
independent
programs
for
each
program
administrator with the largest
representing 2% of the overall
gross written premium.
The
Company
continually
evaluates
each
business
relationship,
including
the
underwriting
expertise
and
experience
brought
to
bear
through
the
involved
distribution
channel,
performs
analyses
to
evaluate
financial
security, monitors
performance and adjusts underwriting decisions accordingly.
Segment Results.
The
Company
manages
its
reinsurance
and
insurance
operations
as
autonomous
units
and
key
strategic
decisions are based on the aggregate operating
results and projections for
these segments of business.
The Reinsurance
operation
writes worldwide
property
and casualty
reinsurance
and specialty
lines of
business,
on both
a treaty
and facultative
basis,
through
reinsurance
brokers,
as well
as directly
with ceding
companies.
Business is
written in
the U.S.,
Bermuda, and
Ireland offices,
as well as,
through branches
in Canada,
Singapore,
the United
Kingdom
and Switzerland.
The Insurance
operation
writes property
and casualty
insurance
directly
and
through
brokers,
surplus
lines
brokers
and
general
agents
within
the
U.S.,
Bermuda,
Canada,
Europe,
Singapore
and South
America through
its offices
in the
U.S.,
Canada, Chile,
Singapore,
United Kingdom,
Ireland
and branches in the Netherlands,
France, Germany and Spain.
These segments are
managed independently,
but conform
with corporate
guidelines with respect
to pricing, risk
management,
control
of
aggregate
catastrophe
exposures,
capital,
investments
and
support
operations.
Management
generally
monitors
and
evaluates
the
financial
performance
of
these
operating
segments
based
upon their underwriting results.
Underwriting
results
include
earned
premium
less
losses
and
loss
adjustment
expenses
(“LAE”)
incurred,
commission
and
brokerage
expenses
and
other
underwriting
expenses.
We
measure
our
underwriting
results
using
ratios,
in
particular
loss,
commission
and
brokerage
and
other
underwriting
expense
ratios,
which,
respectively,
divide incurred
losses, commissions
and brokerage
and other
underwriting expenses
by premiums
earned.
For
selected
financial
information
regarding
these
segments,
see
ITEM
8,
“Financial
Statements
and
Supplementary
Data”
-
Note
of
Notes
to
Consolidated
Financial
Statements
and
ITEM
7,
“Management’s
Discussion and Analysis of Financial Condition and Results
of Operation - Segment Results”.
Underwriting Operations.
The following five year
table presents the distribution
of the Company’s
gross written premiums
by its segments:
Reinsurance
and
Insurance.
The
premiums
for
each
segment
are
further
split
between
property
and
casualty
business and, for reinsurance business,
between pro rata or excess
of loss business:
Gross Written Premiums by Segment
Years Ended December 31,
(Dollars in millions)
Reinsurance
Property Pro Rata (1)
$
2,606
28.0%
$
2,843
31.4%
$
2,397
32.9%
$
1,974
31.1%
$
2,147
34.5%
Property Non-Catastrophe XOL
6.2%
6.9%
7.0%
7.0%
6.4%
Property Catastrophe XOL
1,422
15.3%
1,468
16.2%
1,277
17.5%
1,187
18.6%
1,313
21.1%
Casualty Pro Rata
2,654
28.5%
2,251
24.8%
1,527
21.0%
1,443
22.7%
1,172
18.8%
Casualty XOL
1,321
14.2%
1,267
14.0%
13.0%
11.5%
9.2%
Financial Lines
7.9%
6.8%
8.6%
9.1%
10.0%
Reinsurance Total (2)
$
9,316
100.0%
$
9,067
100.0%
$
7,282
100.0%
$
6,356
100.0%
$
6,225
100.0%
Insurance (3)
Accident and Health
$
10.8%
$
10.5%
$
11.6%
$
12.1%
$
12.7%
Specialty Casualty
1,622
35.0%
1,360
34.0%
1,005
31.4%
28.4%
25.9%
Other Specialty
7.0%
5.9%
5.3%
4.8%
4.2%
Professional Liability
17.7%
19.7%
16.9%
15.0%
13.8%
Property/Short Tail
18.4%
18.0%
18.9%
19.1%
19.9%
Workers' Compensation
11.1%
11.9%
15.9%
20.5%
23.6%
Insurance Total (2)
4,636
100.0%
3,982
100.0%
3,201
100.0%
2,778
100.0%
2,251
100.0%
Total Company (2)
$
13,952
100.0%
$
13,050
100.0%
$
10,482
100.0%
$
9,133
100.0%
$
8,475
100.0%
__________________
(1)
For purposes of the presentation above, pro rata includes all insurance and reinsurance
attaching to the first dollar of loss incurred by the ceding company.
(2)
Certain totals and subtotals may not reconcile due to rounding.
(3)
Certain reclassifications have been made to prior years’ amounts to conform to the 2022 presentation
(Some amounts may not reconcile due to rounding.)
Reinsurance
Segment.
In
2022,
the
Company’s
Reinsurance
segment
wrote
$9.3
billion
of
gross
written
premiums.
Reinsurance
business
written
directly
through
the
Company’s
offices
represented
$8.4
billion
or
90.2% of the segment’s premium and
$914 million or 9.8% was written directly with
ceding companies.
Property
Pro
Rata
business,
which
accounted
for
28.0%
of
reinsurance
gross
written
premiums,
contains
predominantly
contracts
providing
coverage
to
cedents
for
property
damage
and
related
losses,
which
may
include business
interruption
and other
non-property
losses, resulting
from natural
or man-made
perils arising
from their underlying portfolio of policies at an
agreed upon percentage for both
premium and loss.
Property
Non-Catastrophe
Excess
of
Loss
(“XOL”)
business,
which
accounted
for
6.2%
of
reinsurance
gross
written
premiums,
contains
predominantly
contracts
providing
coverage
to
cedents
for
a
portion
of
property
damage
and
related
losses,
which
may
include
business
interruption
and
other
non-property
losses,
resulting
from natural or man-made perils in excess
of an agreed upon deductible up to a stated
limit.
Property Catastrophe
XOL business, which
accounted for
15.3% of reinsurance
gross written
premiums, contains
predominantly
contracts
providing
coverage
to
cedents
for
a
portion
of
property
damage
and
related
losses,
which
may
include
business
interruption
and
other
non-property
losses,
resulting
from
catastrophic
losses,
in
excess of an agreed upon deductible
up to a stated limit.
The main perils covered include hurricane,
earthquake,
flood, convective storm and
fire.
Casualty
Pro
Rata
business,
which
accounted
for
28.5%
of
reinsurance
gross
written
premiums,
contains
predominantly
contracts
providing
coverage
to
cedents
for
losses
arising
from,
but
not
limited
to,
general
liability,
professional
indemnity,
product
liability,
workers'
compensation,
employers
liability,
aviation
and auto
liability from their underlying portfolio of policies
at an agreed upon percentage
for both premium and loss.
Casualty
XOL
business,
which
accounted
for
14.2%
of
reinsurance
gross
written
premiums,
contains
predominantly
contracts
providing
coverage
to
cedents
for
losses
arising
from,
but
not
limited
to,
general
liability,
professional
indemnity,
product
liability,
workers'
compensation,
aviation
and auto
liability
from
their
underlying portfolio of policies in excess
of an agreed upon deductible up to a stated
limit.
Financial
Lines
business,
which
accounted
for
7.9%
of
reinsurance
gross
written
premiums,
contains
predominantly
contracts
providing
coverage
to
cedents
for
losses
arising
from
political
risk,
credit,
surety,
mortgage and alternative risk lines of business
on both a pro rata and excess
of loss basis.
Insurance Segment.
In 2022, the Company’s Insurance
segment wrote $4.6 billion of gross written
premiums.
Accident
and
Health
business,
which
accounted
for
10.8%
of
Insurance
gross
written
premiums,
contains
Predominantly
includes
policies
covering
Participant
Accident,
Short-Term
Medical,
and
Medical
Stop-Loss
protection for employers
with Self-funded medical plans.
Specialty
Casualty
business,
which
accounted
for
35.0%
of
Insurance
gross
written
premiums,
predominantly
includes
policies
covering
General
Liability
(Premises/Operations
and
Products),
Auto
Liability,
and
Umbrella/Excess Liability.
Other
Specialty
business,
which
accounted
for
7.0%
of
Insurance
gross
written
premiums,
predominantly
includes
policies
covering
specialty
areas
including
but
not
limited
to
Surety,
Trade
Credit
&
Political
Risk,
Transactional
Liability, Energy
& Construction, and Aviation.
Professional
Liability business,
which accounted
for 17.7%
of Insurance
gross written
premiums,
predominantly
includes
policies
covering
Directors
&
Officers
Liability,
Errors
&
Omissions,
Cyber
Liability,
and
other
ancillary
financial lines products.
Property/Short-Tail
business,
which
accounted
for
18.4%
of
Insurance
gross
written
premiums,
predominantly
includes policies covering Property,
Inland Marine, and other short-tail lines.
Workers’
Compensation
business,
which
accounted
for
11.1%
of
Insurance
gross
written
premiums,
predominantly
includes
policies
covering
Workers
Compensation
including
both
guaranteed
cost
and
loss
sensitive product offerings.
Geographic Areas.
The Company
conducts its
business in
Bermuda, the
U.S. and
a number
of foreign
countries.
For
select financial
information
about
geographic
areas,
see ITEM
8, “Financial
Statements
and Supplementary
Data” -
Note 17 of Notes
to the Consolidated
Financial Statements.
Risks attendant
to the foreign
operations of
the
Company
parallel
those
attendant
to
the
U.S.
operations
of
the
Company,
with
the
primary
exception
of
foreign
exchange
risks.
For
more
information
about
the
risks,
see
ITEM
7,
“Management’s
Discussion
and
Analysis of Financial Condition and Results of Operations
- Safe Harbor Disclosure”.
Underwriting.
One of the
Company’s strategies
is to "lead"
as many
of the reinsurance
treaties it
underwrites as possible.
The
lead
reinsurer
on
a
treaty
generally
accepts
one
of
the
largest
percentage
shares
of
the
treaty
and
is
in
the
strongest
position to
negotiate price,
terms and
conditions.
The Company
leads on approximately
two-thirds of
its
treaty
reinsurance
business
as
measured
by
premium.
Management
believes
this
strategy
enables
it
to
obtain
more favorable
terms and
conditions on
the treaties
on which
it participates.
When the
Company does
not
lead
the
treaty,
it
may
still
suggest
changes
to
any
aspect
of
the
treaty.
The
Company
may
decline
to
participate on a treaty based upon
its assessment of all relevant factors.
The
Company’s
treaty
underwriting
process
involves
a
team
approach
among
the
Company’s
underwriters,
actuaries,
modelling
and
claim
staff.
Treaties
are
reviewed
for
compliance
with
the
Company’s
general
underwriting
standards
and
most
larger
treaties
are
subjected
to
detailed
actuarial
analysis.
The
actuarial
models
used
in
such
analyses
are
tailored
in
each
case
to
the
subject
exposures
and
loss
experience.
The
Company
does
not
separately
evaluate
each
of
the
individual
risks
assumed
under
its
treaties.
The
Company
does,
however,
evaluate
the
underwriting
guidelines,
data
and
other
information
of
its
ceding
companies
to
determine
their
adequacy
prior
to
entering
into
a
treaty.
The
Company
may
also
conduct
underwriting,
operational
and
claim
audits
at
the
offices
of
ceding
companies
to
monitor
adherence
to
underwriting
guidelines.
Underwriting audits focus
on the quality of
the underwriting staff,
pricing and risk
selection and rate
monitoring over
time.
Claim audits
may be
performed in
order to
evaluate
the client’s
claims handling
abilities
and practices.
The Company’s
facultative underwriters
operate within guidelines
specifying acceptable types
of risks, limits and
maximum
risk
exposures.
Specified
classes
of
large
premium
U.S.
risks
are
referred
to
Everest
Re’s
New
York
facultative
headquarters
for
specific
review
before
premium
quotations
are
given
to
clients.
In
addition,
the
Company’s guidelines
require certain
types of risks
to be submitted
for review
because of their
aggregate limits,
complexity
or
volatility,
regardless
of
premium
amount
on
the
underlying
contract.
Non-U.S.
risks
exhibiting
similar characteristics are reviewed
by senior managers within the involved
operations.
In
addition
to
its
own
underwriting
staff,
the
Company’s
insurance
operations
write
property
and
casualty
coverages for
homogeneous risks
through select program
managers.
These programs
are evaluated
based upon
actuarial
analysis
and
the
program
manager’s
capabilities.
The
Company’s
rates,
forms
and
underwriting
guidelines
are
tailored
to
specific
risk
types.
The
Company’s
underwriting,
actuarial,
claim
and
financial
functions
work
closely
with
its
program
managers
to
establish
appropriate
underwriting
and
processing
guidelines as well as appropriate performance
monitoring mechanisms.
Risk Management of Underwriting and Reinsurance
Arrangements
Underwriting Risk
and Accumulation
Controls.
Each segment
and business
unit manages
its underwriting
risk in
accordance with
established guidelines.
These guidelines
place dollar
limits on
the amount
of business
that can
be
written
based
on
a
variety
of
factors,
including
(re)insured
company
profile,
line
of
business,
geographic
location
and risk
hazards.
In each
case,
the guidelines
permit limited
exceptions,
which
must
be authorized
by
the Company’s
senior management.
Management regularly
reviews and
revises these
guidelines in
response to
changes
in
business
unit
product
offerings,
market
conditions,
risk
versus
reward
analyses
and
the
Company’s
enterprise and underwriting risk management processes.
The operating results and financial condition
of the Company can be adversely
affected by catastrophe
and other
large losses. The Company manages its
exposure to catastrophes
and other large losses by:
●
selective underwriting practices;
●
diversifying its risk portfolio by geographic
area and by types and classes of business;
●
limiting its aggregate catastrophe
loss exposure in any particular geographic
zone and contiguous zones;
●
purchasing
reinsurance
and/or
retrocessional
protection
to
the
extent
that
such
coverage
can
be
secured
cost-effectively.
See “Reinsurance and Retrocession
Arrangements”.
Like other
insurance
and reinsurance
companies, the
Company is
exposed to
multiple insured
losses arising
out
of a single occurrence, whether a natural
event, such as a hurricane or an earthquake,
or other catastrophe, such
as
an
explosion
at
a
major
factory.
A
large
catastrophic
event
can
be
expected
to
generate
insured
losses
to
multiple
reinsurance
treaties,
facultative
certificates
and
direct
insurance
policies
across
various
lines
of
business.
The Company focuses
on potential losses
that could result
from any single
event or series
of events as
part of its
evaluation and
monitoring of its aggregate
exposures to
catastrophic events.
Accordingly,
the Company employs
various techniques to
estimate the amount of
loss it could sustain
from any single catastrophic
event or series of
events
in
various
geographic
areas.
These
techniques
range
from
deterministic
approaches,
such
as
tracking
aggregate
limits
exposed
in
catastrophe-prone
zones
and
applying
reasonable
damage
factors,
to
modeled
approaches
that
attempt
to
scientifically
measure
catastrophe
loss
exposure
using
sophisticated
Monte
Carlo
simulation techniques that forecast
frequency and severity of potential losses
on a probabilistic basis.
No single computer
model, or
group of
models, is currently
capable of
projecting the
amount and
probability of
loss in
all global
geographic regions
in which
the Company
conducts business.
In addition,
the form,
quality and
granularity
of
underwriting
exposure
data
furnished
by
(re)insureds
is
not
uniformly
compatible
with
the
data
requirements
for
the
Company’s
licensed
models,
which adds
to
the inherent
imprecision
in the
potential
loss
projections.
Further,
the
results
from
multiple
models
and
analytical
methods
must
be
combined
to
estimate
potential losses
by and across
business units.
Also, while most
models have been
updated to incorporate
claims
information
from
recent
catastrophic
events,
catastrophe
model
projections
are
still
inherently
imprecise.
In
addition, uncertainties
with respect
to future
climatic patterns
and cycles
could add
further uncertainty
to loss
projections from models based on historical
data.
Nevertheless,
when combined
with traditional
risk management
techniques
and sound
underwriting judgment,
catastrophe
models
are
a
useful
tool
for
underwriters
to
price
catastrophe
exposed
risks
and
for
providing
management with
quantitative
analyses with
which to monitor
and manage
catastrophic
risk exposures
by zone
and across zones for individual and
multiple events.
Projected
catastrophe
losses
are
generally
summarized
in
terms
of
the
probable
maximum
loss
(“PML”).
The
Company
defines
PML
as its
anticipated
loss,
taking
into
account
contract
terms
and limits,
caused
by
a single
catastrophe
affecting
a
broad
contiguous
geographic
area,
such
as
that
caused
by
a
hurricane
or
earthquake.
The
PML
will
vary
depending
upon
the
modeled
simulated
losses
and
the
make-up
of
the
in
force
book
of
business.
The projected severity levels are
described in terms of “return periods”,
such as “100-year events” and
“250-year
events”.
For
example,
a 100-year
PML is
the estimated
loss
to
the current
in-force
portfolio
from
a
single
event
which
has
a
1%
probability
of
being
exceeded
in
a
twelve
month
period.
In
other
words,
it
corresponds
to
a
99%
probability
that
the
loss
from
a
single
event
will
fall
below
the
indicated
PML.
It
is
important
to note
that PMLs
are estimates.
Modeled events
are hypothetical
events
produced
by a
stochastic
model.
As a
result,
there
can
be no
assurance
that
any
actual event
will align
with the
modeled event
or that
actual losses from events similar to the
modeled events will not vary materially
from the modeled event PML.
From
an
enterprise
risk
management
perspective,
management
sets
limits
on
the
levels
of
catastrophe
loss
exposure
the
Company
may
underwrite.
The
limits
are
revised
periodically
based
on
a
variety
of
factors,
including but
not limited
to the
Company’s
financial resources
and expected
earnings and
risk/reward
analyses
of the business being underwritten.
The
Company
may
purchase
reinsurance
to
cover
specific
business
written
or
the
potential
accumulation
or
aggregation
of exposures
across some
or all
of its
operations.
Reinsurance
purchasing
decisions consider
both
the
potential
coverage
and
market
conditions
including
the
pricing,
terms,
conditions,
availability
and
collectability
of
coverage,
with
the
aim
of
securing
cost
effective
protection
from
financially
secure
counterparties. The
amount of reinsurance
purchased has
varied over
time, reflecting
the Company’s
view of its
exposures and the cost of reinsurance.
Management
estimates
that
the
projected
net
economic
loss
from
its
largest
100-year
event
in
a
given
zone
represents
approximately
6.9%
of
its
December
31,
shareholders’
equity.
Economic
loss
is
the
PML
exposure,
net
of
third
party
reinsurance
including
catastrophe
industry
loss
warranty
cover,
reduced
by
estimated reinstatement
premiums to renew coverage
and estimated income
taxes.
The impact of income taxes
on the PML depends
on the distribution
of the losses
by corporate
entity,
which is also
affected by
inter-affiliate
reinsurance.
Management
also
monitors
and
controls
its
largest
PMLs
at
multiple
points
along
the
loss
distribution
curve,
such
as
loss
amounts
at
the
20,
50,
100,
and
year
return
periods.
This
process
enables
management
to
identify
and
control
exposure
accumulations
and
to
integrate
such
exposures
into
enterprise risk, underwriting and capital management
decisions.
The Company’s
catastrophe
loss
projections,
segmented
by
risk
zones,
are
updated
quarterly
and
reviewed
as
part of a formal
risk management review
process.
The table below reflects
the Company’s
PML exposure, net
of
third
party reinsurance
including catas
trophe
industry
loss warranty
cover,
at various
return
periods for
its top
four
zones/perils
(as
ranked
by
the
largest
in
year
economic
loss)
based
on
loss
projection
data
as
of
January 1, 2023:
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
$
$
$
1,326
$
1,762
Southeast U.S., Wind
1,094
1,224
Europe, Wind
Texas Wind
1,096
The
projected
net
economic
losses,
defined
as
PML
exposures,
net
of
third
party
reinsurance
including
catastrophe
industry loss warranty
cover,
reinstatement
premiums and estimated
income taxes,
for the top
four
zones/perils scheduled above are as follows
:
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
$
$
$
$
1,242
Southeast U.S., Wind
Europe, Wind
Texas
Wind
The Company believes
that its methods
of monitoring, analyzing
and managing catastrophe
exposures provide
a
credible risk management framework,
which is integrated
with its enterprise risk management,
underwriting and
capital
management
plans.
However,
there
is
much
uncertainty
and
imprecision
inherent
in
the
catastrophe
models and
the catastrophe
loss estimation
process
generally.
As a
result,
there can
be no
assurance
that the
Company
will
not
experience
losses
from
individual
events
that
exceed
the
PML
or
other
return
period
projections,
perhaps
by a
material amount.
Nor can
there
be assurance
that the
Company
will not
experience
events impacting
multiple zones,
or multiple
severe
events that
could, in
the aggregate,
exceed
the Company’s
PML expectations by a significant
amount.
Terrorism
Risk.
While
the
Company
writes some
reinsurance
contracts
covering
terrorism,
the Company’s
risk
management
philosophy
is
to
limit
the
amount
of
exposure
by
geographic
region,
and
to
strictly
manage
coverage for
properties in
areas that
may be considered
a target
for terrorists.
Providing terrorism
coverage on
reinsurance
contracts
is negotiable,
and many,
but not
all, treaties
contain
exclusions
which limit
much of
this
risk.
While many
property insurance
policies are required
to offer
coverage
for terrorism,
this coverage
is often
not
purchased.
However,
terrorism
is
typically
covered
by
worker
compensation
policies.
As
a
result,
the
Company
is
exposed
to
losses
from
terrorism
on
both
its
reinsurance
and
its
insurance
book
of
business,
particularly
its workers’
compensation
and property
policies.
However,
the
insurance
book
generally
does
not
insure large corporations
or corporate locations that
represent large concentrations
of risk.
The
U.S.
Terrorism
Risk
Insurance
Program
Reauthorization
Act
of
provides
some
protection
to
the
insurance
book of
business.
It also
provides
indirect protection
to exposed
reinsurance
treaties.
However,
the
Company
is
still
exposed
to
risk
of
loss
from
terrorism
due
to
deductibles,
co-pays
and
uncovered
lines
of
business.
Reinsurance and Retrocession
Arrangements.
The Company may purchase reinsurance
to cover specific business
written
or
the
potential
accumulation
or
aggregation
of
exposures
across
some
or
all
of
its
operations.
Reinsurance
purchasing
decisions
consider
both
the
potential
coverage
and
market
conditions
including
the
pricing,
terms,
conditions
and
availability
of
coverage,
with
the
aim
of securing
cost
effective
protection.
The
amount of
reinsurance
purchased
has varied
over time,
reflecting the
Company’s
view of
its exposures
and the
cost
of reinsurance.
In recent
years,
the Company
has increased
its use
of reinsurance
offered
through
capital
market facilities.
The
Company
participates
in
“common
account”
retrocessional
arrangements
for
certain
reinsurance
treaties
whereby a
ceding company
purchases reinsurance
for the
benefit of
itself and
its reinsurers
under one
or more
of
its
reinsurance
treaties.
Common
account
retrocessional
arrangements
reduce
the
effect
of
individual
or
aggregate
losses
to
all
participating
companies,
including
the
ceding
company,
with
respect
to
the
involved
treaties.
All
of
the
Company’s
reinsurance
and
retrocessional
agreements
transfer
significant
reinsurance
risk
and
therefore,
are
accounted
for
as
reinsurance
in
accordance
with
the
Financial
Accounting
Standards
Board
(“FASB”) guidance.
At December
31, 2022,
the Company
had $2.2
billion in
reinsurance recoverables
with respect
to both
paid and
unpaid losses
ceded.
Of this
amount $520
million, or
23.2%, was
recoverable
from Mt.
Logan Re
collateralized
segregated
accounts;
$283 million,
or 12.6%,
was recoverable
from Munich
Reinsurance
America, Inc.
(“Munich
Re”)
and
$148
million,
or
6.6%,
was
recoverable
from
Endurance
Reinsurance
Corporation
of
America
(“Endurance
Re”).
No
other
retrocessionaire
accounted
for
more
than
5%
of
our
recoverables.
Although
management carefully
selects its
reinsurers, the
Company is
subject to credit
risk with respect
to its reinsurance
because
the
ceding
of
risk
to
reinsurers
does
not
relieve
the
Company
of
its
liability
to
insureds
or
ceding
companies.
See
ITEM
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations - Financial Condition”.
Claims.
Insurance
claims
are
managed
by
the
Company’s
professional
Claims
staff
many
of
whom
have
insurance
and
legal
professional
qualifications.
Their
responsibilities
include
reviewing
initial
loss
reports,
analyzing
coverage
issues,
evaluating
and
reserving
claims,
and
paying
settlements.
When
appropriate
the
Claims
staff
engage
external
professional
advisors
such
as
Counsel,
Loss
Adjusters
and
Engineers
to
support
the
effective
management
of
claims.
Claims
are
allocated
to
staff
according
to
their
expertise
and
experience
and
most
specialize
in
particular
product
segments
and
geographies.
Some
insurance
claims
are
handled
by
third
party
claims service
providers
who have
limited authority
and are
subject to
oversight
by the
Company’s
professional
Claims
staff.
The
Claims
staff
work
closely
with
senior
management,
as
well
as
underwriting,
finance
and
actuarial.
Reinsurance
claims
are
managed
by
the
Company’s
professional
claims
staff
whose
responsibilities
include
reviewing
initial
loss
reports
and
coverage
issues,
monitoring
claims
handling
activities
of
ceding
companies,
establishing
and
adjusting
proper
case
reserves
and
approving
payment
of
claims.
In
addition
to
claims
assessment,
processing
and payment,
the claims
staff
selectively
conducts
comprehensive
claim audits
of both
specific claims and
overall claim
procedures at
the offices of
selected ceding companies.
Some insurance
claims
are
handled
by
third
party
claims service
providers
who have
limited authority
and are
subject
to
oversight
by
the Company’s professional
claims staff.
The
Company
intensively
manages
its
asbestos
and
environmental
(“A&E”)
exposures
through
a
dedicated,
centrally
managed
claim staff
with
experienced
claim
and legal
professionals
who
specialize
in
the
handling
of
such
exposures.
They
actively
manage
each
individual
insured
and
reinsured
account,
responding
to
claim
developments with evaluations
of the involved exposures
and adjustment of reserves
as appropriate.
Specific or
general
claim developments
that may
have
material implications
for the
Company
are regularly
communicated
to
senior
management,
actuarial,
legal
and
financial
areas.
Senior
management
and
claim
management
personnel
meet
at
least
quarterly
to
review
the
Company’s
overall
reserve
positions
and
make
changes,
if
appropriate.
The Company continually
reviews its internal
processing, communications
and analytics, seeking to
enhance
the
management
of
its
A&E
exposures,
in
particular
in
regard
to
changes
in
asbestos
claims
and
litigation.
Reserves for Unpaid Property and Casualty Losses and
LAE.
Significant periods of time may elapse
between the occurrence of an insured
loss, the reporting of the loss to the
insurer and the reinsurer and
the payment of that loss by the insurer
and subsequent payments to
the insurer by
the reinsurer.
To
recognize liabilities
for unpaid losses and
LAE, insurers and
reinsurers establish
reserves, which
are
balance sheet
liabilities representing
estimates
of future
amounts
needed to
pay
reported
and unreported
claims
and
related
expenses
for
losses
that
have
already
occurred.
Actual
losses
and
LAE
paid
may
deviate,
perhaps substantially,
from such
reserves.
To
the extent
reserves prove
to be
insufficient to
cover actual
losses
and
LAE
after
taking
into
account
available
reinsurance
coverage,
the
Company
would
have
to
recognize
such
reserve
shortfalls
and incur
a charge
to
earnings,
which could
be material
in the
period such
recognition
takes
place.
See ITEM
7, “Management’s
Discussion and
Analysis of
Financial Condition
and Results
of Operations
-
Loss and LAE Reserves”.
As part of the reserving
process, insurers
and reinsurers
evaluate historical
data and trends
and make judgments
as
to
the
impact
of
various
factors
such
as
legislative
and
judicial
developments
that
may
affect
future
claim
amounts, changes
in social
and political
attitudes that
may increase
loss exposures
and inflationary
and general
economic
trends.
While
the
reserving
process
is
difficult
and
subjective
for
insurance
companies,
the
inherent
uncertainties
of
estimating
such
reserves
are
even
greater
for
the
reinsurer,
due
primarily
to
the
longer
time
between the
date
of an
occurrence and
the reporting
of any
attendant
claims to
the reinsurer,
the diversity
of
development
patterns
among
different
types
of
reinsurance
treaties
or
facultative
contracts,
the
necessary
reliance
on
the
ceding
companies
for
information
regarding
reported
claims
and
differing
reserving
practices
among ceding
companies.
In addition,
trends
that have
affected
development
of liabilities
in the
past
may
not
necessarily occur
or affect
liability development
in the
same manner
or to
the same
degree in
the future.
As a
result,
actual
losses
and
LAE
may
deviate,
perhaps
substantially,
from
estimates
of
reserves
reflected
in
the
Company's consolidated financial statem
ents.
The
Company’s
loss
and
LAE
reserves
represent
management’s
best
estimate
of
the
ultimate
liability.
Management’s
best estimate
is developed
through
collaboration
with actuarial,
underwriting, claims,
legal
and
finance
departments
and
culminates
with
the
input
of
reserve
committees.
Each
segment
reserve
committee
includes the participation of the relevant parties
from actuarial, finance, claims and segment senior management
and has
the responsibility
for recommending
and approving
management’s
best estimate.
Reserves are
further
reviewed
by
Everest’s
Chief
Reserving
Actuary
and
senior
management.
The
objective
of
such
process
is
to
determine
a
single
best
estimate
viewed
by
management
to
be
the
best
estimate
of
its
ultimate
loss
liability.
While there
can
be no
assurance
that
these reserves
will not
need to
be increased
in the
future,
management
believes that
the Company’s
existing reserves
and reserving
methodologies reduce
the likelihood
that any
such
increases
would
have
a
material
adverse
effect
on
the
Company’s
financial
condition,
results
of
operations
or
cash flows.
These statements
regarding the
Company’s
loss reserves
are forward
looking statements
within the
meaning
of
the
U.S.
federal
securities
laws
and
are
intended
to
be
covered
by
the
safe
harbor
provisions
contained
therein.
See
ITEM
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations - Safe Harbor Disclosure”.
Like many other
property and casualty
insurance and reinsurance
companies, the Company
has experienced loss
development
for
prior
accident
years,
which
has
impacted
losses
and
LAE
reserves
and
caused
corresponding
effects
to
income
(loss)
in
the
periods
in
which
the
adjustments
were
made.
There
can
be
no
assurance
that
adverse
development
from
prior
years
will
not
occur
in
the
future
or
that
such
adverse
development
will
not
have a material adverse
effect on net income (loss).
Since the Company
has operations
in many countries,
part of the Company’s
loss and LAE reserves
are in foreign
currencies
and
translated
to
U.S.
dollars
for
each
reporting
period.
Fluctuations
in
the
exchange
rates
for
the
currencies,
period
over
period,
affect
the
U.S.
dollar
amount
of
outstanding
reserves.
The
translation
adjustment eliminates
the impact of the
exchange fluctuations
from the reserve
re-estimates.
For reconciliation
of beginning and ending reserves, see Note 3 of Notes
to Consolidated Financial Statements.
Reserves for Asbestos and Environmental
Loss and LAE.
At December 31,
2022, the Company’s
gross reserves
for A&E claims
represented 1.3%
of its total
reserves.
The
Company’s
A&E
liabilities
stem
from
Mt.
McKinley
Insurance
Company’s
(“Mt.
McKinley”)
direct
insurance
business
and Everest
Re’s
assumed reinsurance
business.
Mt. McKinley
was a
former
wholly-owned subsidiary
that was sold in
2015 to Clearwater Insurance
Company (Clearwater”), a subsidiary
of Fairfax Financial.
Liabilities
related to
Mt. McKinley’s
direct business,
which had been
ceded to
Bermuda Re
previously,
were retroceded
to
an affiliate of Clearwater in July
2015, concurrent with the sale of Mt. McKinley to Clearwater.
Concurrently
with
the
closing,
the
Company
entered
into
a
retrocession
treaty
with
an
affiliate
of
Clearwater.
Per the retrocession
treaty,
the Company retroceded
100% of the liabilities
associated with certain
Mt. McKinley
policies,
which
had
been
reinsured
by
Bermuda
Re.
As
consideration
for
entering
into
the
retrocession
treaty,
Bermuda Re
transferred
cash of
$140.3 million,
an amount
equal to
the net
loss reserves
as of
the closing
date.
Of
the
$140.3
million
of
net
loss
reserves
retroceded,
$100.5
million
were
related
to
A&E
business.
The
maximum
liability
retroceded
under
the
retrocession
treaty
will
be
$440.3
million,
equal
to
the
retrocession
payment plus
$300.0 million.
The Company will
retain liability
for any
amounts exceeding
the maximum liability
retroceded under the retrocession
treaty.
On December 20, 2019, the retrocession
treaty was amended and
included a partial commutation.
As a result of
this amendment
and partial
commutation, gross
A&E reserves
and correspondingly
reinsurance receivable
were
reduced
by
$43.4
million.
In
addition,
the
maximum
liability
permitted
to
be
retroceded
increased
to
$450.3
million.
Additional losses,
including those relating
to latent
injuries and
other exposures,
which are as
yet unrecognized,
the type
or magnitude
of which
cannot be
foreseen by
either the
Company or
the industry,
may emerge
in the
future. Such
future emergence
could have
material adverse
effects on
the Company’s
future financial condition,
results of operations and cash flows.
There are
significant uncertainties
in estimating
the amount
of the
Company’s
potential losses
from A&E
claims
and
ultimate
values
cannot
be
estimated
using
traditional
reserving
techniques.
See
ITEM
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
-
Asbestos
and
Environmental
Exposures”
and
ITEM
8,
“Financial
Statements
and
Supplementary
Data”
-
Note
of
Notes
to
Consolidated
Financial Statements.
Future Policy Benefit Reserves.
The Company
wrote a
limited amount
of life
and annuity
reinsurance in
its Reinsurance
segment.
Future policy
benefit
liabilities
for
annuities
are
reported
at
the
accumulated
fund
balance
of these
contracts.
Reserves
for
those
liabilities
include
mortality
provisions
with
respect
to
life
and
annuity
claims,
both
reported
and
unreported. Actual
experience in a
particular period may
be worse than
assumed
experience and, consequently,
may
adversely
affect
the
Company’s
operating
results
for
that
period.
See
ITEM
8,
“Financial
Statements
and
Supplementary Data” - Note 1F and
Note 3 of Notes to Consolidated Financial Statements.
Investments.
The board of directors
of each of the Company’s
operating subsidiaries is
responsible for establishing
investment
policy and guidelines and, together with senior management,
for overseeing their execution.
The
Company’s
principal
investment
objectives
are
to
ensure
funds
are
available
to
meet
its
insurance
and
reinsurance obligations
and to maximize after-tax
investment income
while maintaining a high
quality diversified
investment
portfolio.
Considering
these objectives,
the
Company
views
its investment
portfolio
as having
two
components: 1)
the investments
needed to
satisfy outstanding
liabilities (its
core fixed
maturities portfolio)
and
2) investments funded by the Company’s
shareholders’ equity.
For the portion
needed to satisfy
global outstanding
liabilities, the Company
generally invests
in fixed maturities
with a high level of average
credit quality.
This global fixed maturity securities portfolio
is largely managed on an
external
basis
by
independent,
professional
investment
managers
using
portfolio
guidelines
approved
by
the
Company.
Over
the
past
several
years,
the
Company
has
expanded
the
allocation
of
its
investments
funded
by
shareholders’ equity
to include:
1) publicly traded
equity securities, 2) emerging
market fixed
maturities, as well
as individual holdings,
3) high yield
fixed maturities,
4) bank and
private loan
securities, 5) private
equity limited
partnership
investments
and 6)
Company
owned life
insurance.
The objective
of this
portfolio diversification
is
to
enhance
the
risk-adjusted
total
return
of
the
investment
portfolio
by
allocating
a
prudent
portion
of
the
portfolio to higher return asset
classes.
The Company limits its allocation to these
asset classes because of 1) the
potential
for
volatility
in
their
values
and
2)
the
impact
of
these
investments
on
regulatory
and
rating
agency
capital adequacy
models.
The Company uses
investment managers
experienced in these
markets and
adjusts its
allocation to these investments
based upon market conditions.
The duration
of an
investment
is based
on the
maturity of
the security
but also
reflects the
payment of
interest
and the
possibility of
early prepayments.
The Company’s
fixed income
investment
guidelines include
a general
duration
guideline.
This investment
duration
guideline is
established
and periodically
revised
by management,
which
considers
economic
and
business
factors,
as
well
as
the
Company’s
average
duration
of
potential
liabilities, which, at December 31, 2022, is estimated
at approximately 3.8 years,
based on the estimated payouts
of
underwriting
liabilities
using
standard
duration
calculations.
The
average
duration
of
the
fixed
income
portfolio at December 31, 2022
and 2021 was 3.1 years and 3.2 years,
respectively.
For each
currency in
which the
Company has
established
substantial
loss and
LAE reserves,
the Company
seeks
to maintain
invested
assets
denominated in
such currency
in an
amount approximately
equal to
the estimated
liabilities.
Approximately
42.7%
of
the
Company’s
consolidated
reserves
for
losses
and
LAE
and
unearned
premiums represent amounts
payable in foreign currencies.
The Company’s
cash and
invested
assets
totaled
$29.9 billion
at December
31, 2022,
which consisted
of 85.4%
fixed maturities,
short term investments
and cash, of which
93.2% were investment
grade; 13.7% other
invested
assets and
0.9% equity
securities.
The average
maturity of
fixed maturity
securities was
4.6 years
at December
31, 2022, and their overall average
duration was 3.1 years.
As of
December 31,
2022, the
Company did
not have
any direct
investments
in commercial
real estate
or direct
commercial
mortgages
or
securities
of
issuers
that
are
experiencing
cash
flow
difficulty
to
an
extent
that
the
Company’s
management
believes
could
threaten
the
issuer’s
ability
to
meet
debt
service
payments,
except
where an allowance for credit
losses has been recognized.
The Company’s
investment
portfolio includes
structured commercial
mortgage-backed
securities (“CMBS”)
with
a book
value of
$1.0 billion
and a
fair val
ue of
$925.8 million.
CMBS securities
comprising more
than 86.6%
of
the
December
31,
fair
value
are
rated
AAA
by
S&P
Global
Ratings
(“S&P”).
Furthermore,
all
held
CMBS
securities are rated investment
grade by S&P.
The following table reflects investment
results for the Company for
the periods indicated:
December 31,
Pre-tax
Pre-tax
Pre-tax
Pre-tax
Realized Net
Unrealized Net
Average
Investment
Effective
Gains (Losses)
Gains (Losses)
(Dollars in millions)
Investments
(1)
Income
(2)
Yield
On Investments
(3)
On Investments
$
29,788
$
2.79%
$
(455)
$
(2,225)
27,606
1,165
4.22%
(542)
23,253
2.76%
19,632
3.30%
18,426
3.15%
(127)
(251)
(1)
Average of
the beginning and
ending carrying values
of investments
and cash,
less net funds
held, future policy
benefit reserve,
and non-interest
bearing
cash.
Fixed
maturities,
available
for
sale
and
equity
securities
are
carried
at
fair
value.
Fixed
maturities,
held
to
maturity
securities
are
carried
at
amortized cost net of the expected
credit loss allowance.
(2)
After investment expenses,
excluding realized net gains
(losses) on investments.
(3)
Included in
2022, 2021,
2020, 2019
and 2018
are fair
value re-measurements
of $460
million, $236
million, $280
million,
$167 million
and ($67)
million,
respectively. In addition,
2022 & 2021 includes ($33 million) and ($28 million) of
expected credit losses.
(Some amounts may not reconcile due
to rounding.)
The following
table
represents
the credit
quality distribution
of the
Company’s
fixed
maturities
for
the periods
indicated:
At December 31,
(Dollars in millions)
Fair Value/
Percent of
Fair Value/
Percent of
Rating Agency Credit Quality Distribution:
Amortized Cost
(1)
Total
Amortized Cost
(1)
Total
AAA
$
8,432
36.6%
$
7,111
31.8%
AA
2,886
12.5%
2,591
11.6%
A
6,268
27.2%
5,833
26.1%
BBB
3,768
16.3%
4,763
21.4%
BB
1,227
5.3%
1,204
5.4%
B
0.7%
1.5%
Rated below B
0.2%
0.3%
Other
1.2%
1.9%
Total
$
23,075
100.0%
$
22,308
100.0%
(Some amounts may not reconcile due
to rounding.)
(1)
Fixed maturities-available for
sale are at fair value and fixed
maturities-held to maturity are at amortized
cost, net of allowances for
credit losses
The following table summarizes fixed
maturities by contractual maturity
for the periods indicated:
At December 31,
Fair Value/
Percent of
Fair Value/
Percent of
(Dollars in millions)
Amortized Cost
(1)
Total
Amortized Cost
(1)
Total
Fixed maturity securities
Due in one year or less
$
1,319
5.7%
$
1,398
6.2%
Due after one year through five years
7,607
33.0%
7,155
32.1%
Due after five years through ten years
4,098
17.8%
5,101
22.9%
Due after ten years
1,299
5.6%
1,627
7.3%
Asset-backed securities
4,705
20.4%
3,582
16.1%
Mortgage-backed securities
4,029
17.5%
3,446
15.4%
Total fixed
maturity securities
$
23,057
100.0%
$
22,308
100.0%
(Some amounts may not reconcile due
to rounding.)
(1) The amortized cost and fair value
of fixed maturity securities are shown
by contractual maturity.
Mortgage-backed securities
are generally more likely to
be
prepaid than other fixed maturity securities.
As the stated maturity of such securities
may not be indicative of actual maturities,
the totals for mortgage-backed
and asset-backed securities are shown
separately.
Financial Strength Ratings.
The
following
table
shows
the
current
financial
strength
ratings
of
the
Company’s
operating
subsidiaries
as
reported
by
A.M.
Best,
S&P
Global
Ratings
(“S&P”)
and
Moody’s.
These
ratings
represent
an
independent
opinion
of
the
financial
strength,
operating
performance,
business
profile
and
ability
to
meet
policyholder
obligations.
The ratings
are not
intended to
be an
indication of
the degree
or lack
of risk
involved
in a
direct or
indirect
equity
investment
or
a
recommendation
to
buy,
sell
or
hold
our
securities.
Additionally,
rating
organizations
may
change
their
rating
methodology,
which
could
have
a
material
impact
on
our
financial
strength ratings.
All
of
the
below-mentioned
ratings
are
continually
monitored
and
revised,
if
necessary,
by
each
of
the
rating
agencies.
The ratings presented in
the following table were in
effect as of January 31, 2023.
The Company
believes that
its ratings
are important
as they
provide the
Company’s
customers
and others
with
an
independent
assessment
of
the
Company’s
financial
strength
using
a
rating
scale
that
provides
for
relative
comparisons.
Strong financial
ratings are
particularly important
for reinsurance
and insurance
companies given
that customers
rely on a company
to pay covered
losses well into the future.
As a result, a highly rated
company
is generally preferred.
Operating Subsidiary:
A.M. Best
S&P
Moody's
Everest Reinsurance Company
A+ (Superior)
A+ (Strong)
A1 (upper-medium)
Everest Reinsurance (Bermuda) Ltd.
A+ (Superior)
A+ (Strong)
A1 (upper-medium)
Everest Reinsurance Company (Ireland) dac
A+ (Superior)
A+ (Strong)
Not Rated
Everest National Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Indemnity Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Security Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest International Assurance, Ltd.
A+ (Superior)
A+ (Strong)
Not Rated
Everest Compañia de Seguros Generales Chile S.A.
A+ (Superior)
Not Rated
Not Rated
Everest Insurance Company of Canada
A+ (Superior)
A+ (Strong)
Not Rated
Everest International Reinsurance,
Ltd.
A+ (Superior)
A+ (Strong)
Not Rated
Everest Denali Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Premier Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Insurance (Ireland), dac
A+ (Superior)
A+ (Strong)
Not Rated
A.M. Best
states
that
the
“A+”
(“Superior”) rating
is
assigned to
those
companies
which, in
its opinion,
have
a
superior
ability
to
meet
their
ongoing
insurance
policy
and
contract
obligations
based
on
A.M.
Best’s
comprehensive
quantitative
and
qualitative
evaluation
of
a
company’s
balance
sheet
strength,
operating
performance
and
business
profile.
A.M.
Best
affirmed
these
ratings
on
June
15,
2022.
S&P
states
that
the
“A+”/”A”
ratings
are assigned
to those
insurance companies
which, in
its opinion,
have strong
financial security
characteristics
with respect
to their
ability to
pay under
its insurance
policies and
contracts
in accordance
with
their
terms.
S&P
affirmed
all
ratings
on
May
27,
2022.
Moody’s
states
that
an
“A1”
rating
is
assigned
to
companies that, in
their opinion, offer
upper-medium grade
security and are
subject to low
credit risk.
Moody’s
affirmed these ratings on June 17, 2022.
Subsidiaries
other
than
Everest
Reinsurance
Co.
and
Everest
Reinsurance
(Bermuda)
Ltd.
may
not
be
rated
by
some
or
any
rating
agencies
given
that
such
ratings
are
not
considered
essential
by
the
individual
subsidiary’s
customers
because
of
the
limited
nature
of
the
subsidiary’s
operations
or
because
the
subsidiaries
are
newly
established and have not yet
been rated by the agencies.
Debt Ratings.
The
following
table
shows
the
debt
ratings
by
A.M.
Best,
S&P
and
Moody’s
of
the
Holdings’
senior
notes
due
June 1,
2044, senior
notes due
October
15, 2050,
senior notes
due October
15, 2052
and long-term
notes
due
May
1,
all
of
which
are
considered
investment
grade.
Debt
ratings
are
the
rating
agencies’
current
assessment of the credit worthiness of an
obligor with respect to a specific obligation.
Instrument
A.M. Best
S&P
Moody's
Senior Notes due June 1, 2044
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2050
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2052
NR
A-
(Strong)
Baa1
(Medium Grade)
Long-Term Notes due May
1, 2067
bbb
(Adequate)
BBB
(Adequate)
Baa2
(Medium Grade)
Competition.
The worldwide
reinsurance
and insurance
businesses
are highly
competitive,
as well
as cyclical
by
product
and
market.
As
such,
financial
results
tend
to
fluctuate
with
periods
of
constrained
availability,
higher
rates
and
stronger
profits
followed
by
periods
of
abundant
capacity,
lower
rates
and
constrained
profitability.
Competition
in
the
types
of reinsurance
and
insurance
business
that
we
underwrite
is
based
on
many
factors,
including the perceived overall
financial strength of
the reinsurer or insurer,
ratings of the reinsurer
or insurer by
A.M. Best
and/or
Standard
& Poor’s,
underwriting expertise,
the jurisdictions
where the
reinsurer
or insurer
is
licensed
or
otherwise
authorized,
capacity
and
coverages
offered,
premiums
charged,
other
terms
and
conditions
of
the
reinsurance
and
insurance
business
offered,
services
offered,
speed
of
claims
payment
and
reputation
and
experience
in
lines
written.
Furthermore,
the
market
impact
from
these
competitive
factors
related
to
reinsurance
and
insurance
is
generally
not
consistent
across
lines
of
business,
domestic
and
international geographical
areas and distribution channels.
We
compete
in
the
U.S.,
Bermuda
and
international
reinsurance
and
insurance
markets
with
numerous
global
competitors.
Our
competitors
include
independent
reinsurance
and
insurance
companies,
subsidiaries
or
affiliates
of
established
worldwide
insurance
companies,
reinsurance
departments
of
certain
insurance
companies, domestic
and international
underwriting operations,
including underwriting
syndicates
at Lloyd’s
of
London
and
certain
government
sponsored
risk
transfer
vehicles.
Some
of
these
competitors
have
greater
financial resources
than we do
and have
established long
term and continuing
business relationships,
which can
be
a
significant
competitive
advantage.
In
addition,
the
lack
of
strong
barriers
to
entry
into
the
reinsurance
business
and
the
securitization
of
reinsurance
and
insurance
risks
through
capital
markets
provide
additional
sources of potential reinsurance
and insurance capacity and competition.
Worldwide insurance
and reinsurance
market conditions
historically have
been competitive.
Generally,
there is
ample
insurance
and
reinsurance
capacity
relative
to
demand,
as
well
as
additional
capital
from
the
capital
markets
through
insurance
linked
financial
instruments.
These
financial
instruments
such
as
side
cars,
catastrophe
bonds and
collateralized
reinsurance
funds, provided
capital
markets
with access
to insurance
and
reinsurance
risk exposure.
The capital
markets
demand
for
these products
is primarily
driven
by
the desire
to
achieve
greater
risk
diversification
and
potentially
higher
returns
on
their
investments.
This
competition
generally has a negative impact
on rates, terms and conditions;
however,
the impact varies widely by market
and
coverage.
Based on recent competitive
behaviors in the
insurance and reinsurance
industry, natural
catastrophe
events
and
the
macroeconomic
backdrop,
there
has
been
some
dislocation
in
the
market
which
we
expect
to
have a positive impact on rates
and terms and conditions, generally,
though local market specificities can
vary.
The
increased
frequency
of
catastrophe
losses
experienced
throughout
appears
to
be
pressuring
the
increase
of
rates.
As
business
activity
continues
to
regain
strength
after
the
pandemic
and
current
macroeconomic uncertainty,
rates appear to be firming in
most lines of business, particularly in the casualty
lines
that had
seen significant
losses such
as excess
casualty and
directors’
and officers’
liability.
Other casualty
lines
are
experiencing
modest
rate
increase,
while
some
lines
such
as
workers’
compensation
were
experiencing
softer
market
conditions.
It
is
too
early
to
tell
what
the
impact
on
pricing
conditions
will
be,
but
it
is
likely
to
change depending on the line of business and geography.
Our capital position remains
a source of strength,
with high quality invested
assets, significant liquidity
and a low
operating
expense
ratio.
Our
diversified
global
platform
with
its
broad
mix
of
products,
distribution
and
geography is resilient.
The war in the
Ukraine is ongoing
and an evolving
event.
Economic and legal
sanctions have been
levied against
Russia,
specific
named
individuals
and
entities
connected
to
the
Russian
government,
as
well
as
businesses
located
in
the
Russian
Federation
and/or
owned
by
Russian
nationals
by
numerous
countries,
including
the
United States.
The significant
political and
economic uncertainty
surrounding the
war and
associated sanctions
have
impacted
economic and
investment
markets
both within
Russia and
around
the world.
The Company
has
recorded $45 million of losses related
to the Ukraine/Russia war during 2022.
Human Capital Management.
Our employees are essential to
the success of our business, and so we strive
to attract and retain
a high standard
of insurance
professionals
to meet
our business
needs as
well as
the needs
of our
clients and
customers.
As of
February
1,
2023,
the
Company
employed
2,428
persons.
Management
believes
that
employee
relations
are
good.
None of
the Company’s
employees
are
subject
to
collective
bargaining
agreements,
and the
Company
is
not aware of any current
efforts to implement such agreements.
Everest
is
committed
to
providing
our
employees
with
an
engaging
and
supportive
environment
so
that
employees
can
develop
personally
and
help
us
achieve
success
as
an
organization.
We
consider
the
ability
to
attract,
develop and
retain
a high
caliber of
insurance
professionals
to be
critical to
our success.
Opportunities
for continued
learning and
talent development
are provided
to all
employee levels.
Employees are
encouraged
to
take
ownership
of
their
development
by
using
the
tools
that
the
Company
has
made
available
to
them
-
including
industry
training,
mentorships
and
personal
development
classes.
Everest
actively
manages
its
succession
planning
throughout
our
organization
and
strives
to
provide
job
growth
and
advancement
opportunities to internal talent, where
possible.
Diversity and Inclusion.
Our strength
and success derive
from our diversity,
and we are
at our best
when we embrace
diverse views
and
perspectives.
Equality
in
opportunity,
career
development,
compensation
and
respect
for
all
individuals
are
fundamental human
rights that
are at
the forefront
of our
culture and
promoted not
only within
our workplace
but also the global
communities in which
we operate.
Our Board is
committed to
diversity within
its structure as
well as
emphasizing its
importance in
our senior
executive
leadership. We
believe that
diversity
in gender,
age,
ethnicity
and
skill
set
allows
for
dynamic
and
evolving
perspectives
in
governance,
strategy,
corporate
responsibility,
human rights and risk management.
Proactive
diversity
recruitment
is
an
integral
aspect
of
succession
planning
at
both
the
board
level
and
throughout
all
levels
in
the
organization.
Our
Talent
Development
team
works
with
senior
management
to
identify
women
and
persons
of color
across
the
Company
as
potential
leaders.
These
individuals
are
provided
management
and
executive
leadership
training
and
education
to
enhance
their
skillsets
and
provide
opportunities for
advancement.
Indeed, our
executive
officers are
measured on
their forward-thinking
diversity
initiatives
as
part
of
their
annual
performance
evaluations.
Such
diversity
at
the
most
senior
levels
of
our
organization
reflects our commitment
to identify and
develop highly qualified
women and individuals
of color to
help lead our Company into the future.
The
work
of
the
DEI
Council
has
helped
enhance
the
employee
experience
for
all
our
colleagues
across
the
organization
worldwide.
The
council
encourages
continuous
and
open
dialogue
between
executive
and
senior
management
and
traditionally
underrepresented
groups
at
all
levels,
without
fear
of
reprisal
or
retaliation,
to
identify areas
of improvement
and carry
out the
message of
inclusion both
inside and
outside our
organization.
The
DEI
council
was
instrumental
in
forming
and
supporting
additional
Employee
Resource
Groups
(“ERGs”),
developing
a
Regional
Representation
network
and
leveraging
specific
Talent
Development
and
Talent
Acquisition initiatives that will positively influence
the composition of our workforce.
Regulatory Matters.
The Company and
its insurance subsidiaries
are subject to
regulation under the
insurance statutes
of the various
jurisdictions in which they
conduct business, including
essentially all states
of the U.S., Canada,
Singapore, Brazil,
the United Kingdom,
Ireland, Chile and
Bermuda.
These regulations vary
from jurisdiction to
jurisdiction and are
generally
designed
to
protect
ceding
insurance
companies
and
policyholders
by
regulating
the
Company’s
conduct
of
business,
financial
integrity
and
ability
to
meet
its
obligations.
Many
of
these
regulations
require
reporting of information designed to
allow insurance regulators
to closely monitor the Company’s
performance.
Insurance
Holding Company
Regulation.
Under applicable
U.S. laws
and regulations,
no person,
corporation
or
other
entity
may
acquire
a
controlling
interest
in
the
Company,
unless
such
person,
corporation
or
entity
has
obtained
the prior
approval
for
such
acquisition
from
the insurance
commissioners
of Delaware
and
the
other
states
in
which
the
Company’s
insurance
subsidiaries
are
domiciled
or
deemed
domiciled,
currently
California
and Georgia.
Under these
laws, “control”
is presumed
when any
person acquires,
directly or
indirectly,
10% or
more
of
the
voting
securities
of
an
insurance
company.
To
obtain
the
approval
of
any
change
in
control,
the
proposed
acquirer
must
file
an
application
with
the
relevant
insurance
commissioner
disclosing,
among
other
things, the background of the acquirer and that
of its directors and officers, the
acquirer’s financial condition
and
its proposed
changes in
the management
and operations
of the
insurance
company.
U.S.
state
regulators
also
require
prior
notice
or
regulatory
approval
of
material
inter-affiliate
transactions
within
the
holding
company
structure.
The Insurance Companies Act
of Canada requires prior
approval by
the Minister of Finance of
anyone acquiring a
significant
interest
in an
insurance
company
authorized
to do
business
in Canada.
In addition,
the Company
is
subject to regulation by the insurance
regulators of other states
and foreign jurisdictions in which it is
authorized
to do
business.
Certain of
these states
and foreign
jurisdictions impose
regulations regulating
the ability
of any
person
to
acquire
control
of
an
insurance
company
authorized
to
do
business
in
that
jurisdiction
without
appropriate regulatory
approval similar to those described above.
Dividends.
Under Bermuda law,
Group is
prohibited from
declaring or paying
a dividend
if such payment
would
reduce the realizable
value of its
assets to an amount
less than the aggregate
value of its liabilities
and its issued
share
capital
and share
premium
(additional
paid-in
capital)
accounts.
Group’s
ability
to
pay
dividends
and its
operating
expenses
is
partially
dependent
upon
dividends
from
its
subsidiaries.
The
payment
of
dividends
by
insurance
subsidiaries
is
limited
under
Bermuda
law
as
well
as
the
laws
of
the
various
U.S.
states
in
which
Group’s
insurance
and
reinsurance
subsidiaries
are
domiciled
or
deemed
domiciled.
The
limitations
are
generally
based
upon
net
income
(loss)
and
compliance
with
applicable
policyholders’
surplus
or
minimum
solvency
and
liquidity
requirements
as
determined
in
accordance
with
the
relevant
statutory
accounting
practices.
Under
Irish
corporate
and
regulatory
law,
Holdings
Ireland,
Everest
Dublin
Holdings
and
their
subsidiaries are limited as to the dividends
they can pay based on retained earnings
and net income (loss) and/or
capital and minimum solvency requirements.
As Holdings has outstanding debt obligations,
it is dependent upon
dividends
and
other
permissible
payments
from
its
operating
subsidiaries
to
enable
it
to
meet
its
debt
and
operating expense obligations
and to pay dividends.
Under
Bermuda
law,
Bermuda
Re,
Everest
International
and
Everest
Assurance
are
unable
to
declare
or
make
payment
of a
dividend if
they
fail to
meet their
minimum solvency
margin or
minimum liquidity
ratio.
As long
term insurers,
Bermuda Re and
Everest Assurance
are also unable
to declare or
pay a dividend
to anyone
who is
not a policyholder unless, after
payment of the dividend,
the value of the assets in
their long term business fund,
as
certified by
their
approved
actuary,
exceeds
their
liabilities
for
long
term
business
by
at
least
the
$250,000
minimum
solvency
margin.
Prior
approval
of
the
Bermuda
Monetary
Authority
is
required
if
Bermuda
Re’s,
Everest
International’s
or
Everest
Assurance’s
dividend
payments
would
exceed
25%
of
their
prior
year
end
statutory
capital and
surplus.
At December
31, 2022,
Bermuda Re,
Everest
International and
Everest
Assurance
exceeded their solvency and liquidity
requirements.
The
payment
of
dividends
to
Holdings
by
Everest
Re
is
subject
to
limitations
imposed
by
Delaware
law.
Generally,
Everest
Re
may
only
pay
dividends
out
of
its
statutory
earned
surplus,
which
was
$5.6
billion
at
December
31, 2022,
and only
after
it
has
given
10 days
prior
notice to
the
Delaware
Insurance
Commissioner.
During this 10-day
period, the
Commissioner may,
by order,
limit or disallow
the payment
of ordinary
dividends
if the
Commissioner finds
the insurer
to be
presently
or potentially
in financial
distress.
Further,
the maximum
amount
of dividends
that
may
be paid
without
the
prior
approval
of the
Delaware
Insurance
Commissioner
in
any
twelve
month
period is
the
greater
of (1)
10% of
the
insurer’s
statutory
surplus
as of
the
end of
the
prior
calendar year
or (2) the
insurer’s statutory
net income (loss),
not including realized
capital gains
(losses), for
the
prior calendar
year.
Accordingly,
the maximum
amount
that
will be
available
for
the payment
of dividends
by
Everest
Re in
2023 without triggering
the requirement
for prior
approval of
regulatory authorities
in connection
with a dividend is $555 million.
Insurance Regulation.
Bermuda Re
and Everest
International are
not admitted
to do
business in any
jurisdiction
in
the
U.S.
These
entities
conduct
their
insurance
business
from
their
offices
in
Bermuda,
and
in
the
case
of
Bermuda Re,
its branch
in the UK.
Everest
Assurance, by
virtue of its
one-time election
under section
953(d) of
the U.S.
Internal Revenue
Code to
be a
U.S. income
tax paying
“Controlled Foreign
Corporation”,
is admitted
to
do
business
in the
U.S.
and
Bermuda.
In
Bermuda,
Bermuda
Re,
Everest
International,
Everest
Assurance
and
Mt. Logan Re are
regulated by the
Insurance Act 1978 (as
amended) and related
regulations (the “Act”).
The Act
establishes solvency
and liquidity
standards
and auditing
and reporting
requirements and
subjects Bermuda
Re,
Everest
International
and
Everest
Assurance
to
the
supervision,
investigation
and
intervention
powers
of
the
Bermuda
Monetary
Authority.
Under
the
Act,
Bermuda
Re
and
Everest
International,
as
Class
insurers,
are
each
required
to
maintain
a
principal
office
in
Bermuda,
to
maintain
a
minimum
of
$100
million
in
statutory
capital
and surplus,
to have
an independent
auditor approved
by the
Bermuda Monetary
Authority conduct
an
annual audit and
report on their
respective statutory
and U.S. GAAP
financial statements
and filings and
to have
an appointed
loss reserve
specialist (also
approved
by the
Bermuda Monetary
Authority) review
and report
on
their
respective
loss
reserves
annually.
Under
the
Act,
Everest
Assurance
is
licensed
as
a
Class
3A
insurer
for
general business and as a Class C insurer for
long-term business.
Bermuda
Re
is
also
registered
under
the
Act
as
long
term
insurer
and
is
thereby
authorized
to
write
life
and
annuity
business.
As
a
long
term
insurer,
Bermuda
Re
is
required
to
maintain
$250,000
in
statutory
capital
separate
from
their
Class
minimum
statutory
capital
and
surplus,
to
maintain
long
term
business
funds,
to
separately account
for this business
and to have
an approved
actuary prepare a
certificate concerning
their long
term
business
assets
and
liabilities
to
be
filed
annually.
Bermuda
Re’s
operations
in
the
United
Kingdom
and
worldwide
are
subject
to
regulation
by
the
Prudential
Regulation
Authority
(the
“PRA”).
The
PRA
imposes
solvency,
capital adequacy,
audit, financial
reporting and
other regulatory
requirements
on insurers
transacting
business
in the
United Kingdom.
Bermuda Re
presently
meets or
exceeds
all of
the PRA’s
solvency
and capital
requirements.
U.S.
domestic
property
and
casualty
insurers,
including
reinsurers,
are
subject
to
regulation
by
their
state
of
domicile
and
by
those
states
in
which
they
are
licensed.
The
regulation
of
reinsurers
is
typically
focused
on
financial
condition,
investments,
management
and
operation.
The
rates
and
policy
terms
of
reinsurance
agreements are generally not
subject to direct regulation by any
governmental authority.
The operations
of Everest
Re’s
foreign
branch
offices in
Canada
and Singapore
are subject
to regulation
by the
insurance
regulatory
officials
of
those
jurisdictions.
Management
believes
that
the
Company
is
in
compliance
with applicable laws and regulations
pertaining to its business and operations.
Everest
Indemnity,
Everest
National,
Everest
Security,
Everest
Denali
and
Everest
Premier
are
subject
to
regulations
similar to
the U.S.
regulations
applicable
to
Everest
Re.
In addition,
these companies
must
comply
with
substantial
regulatory
requirements
in
each
state
where
they
conduct
business.
These
additional
requirements
include,
but
are
not
limited
to,
rate
and
policy
form
requirements,
requirements
with
regard
to
licensing,
agent
appointments,
participation
in
residual
markets
and
claim
handling
procedures.
These
regulations are primarily designed for the protection
of policyholders.
The operations of Ireland Insurance
and its branch offices in Netherlands,
Germany, France
and Spain are subject
to
regulation
by
the
insurance
regulatory
officials
of
those
jurisdictions.
Management
believes
that
the
Company is in compliance with applicable laws
and regulations pertaining to its business
and operations.
Licenses.
Everest
Re
is
a
licensed
property
and
casualty
insurer
and/or
reinsurer
in
all
states,
the
District
of
Columbia, Puerto Rico and
Guam.
Such licensing enables U.S. domestic
ceding company clients
to take credit
for
uncollateralized reinsurance
receivables from Everest
Re in their statutory
financial statements.
Everest Re
is licensed as a property
and casualty reinsurer
in Canada. It is also
authorized to conduct
reinsurance
business in Singapore
and Brazil.
Everest Re
can also write
reinsurance in other
foreign countries.
Because some
jurisdictions
require
a reinsurer
to register
in order
to be
an acceptable
market
for local
insurers,
Everest
Re is
registered as
a foreign insurer
and/or reinsurer
in the following
countries:
Bolivia, Brazil, Chile,
China, Colombia,
Dominican
Republic,
Ecuador,
El
Salvador,
Guatemala,
Honduras,
India,
Mexico,
Nicaragua,
Panama,
Paraguay,
the Philippines, Singapore and Venezuela.
Everest National
is licensed in 50 states, the District of Columbia and
Puerto Rico.
Everest
Indemnity
is
a
Delaware
Domestic
Surplus
Lines
Insurer
and
is
eligible
to
write
insurance
on
a
surplus
lines basis in the 50 states, the District of Columbia
and Puerto Rico.
Everest
Security
is
licensed
in
Georgia
and
Alabama
and
is
approved
as
an
eligible
surplus
lines
insurer
in
Delaware.
Everest
Denali is
licensed in
50 states
and the
District of
Columbia.
Everest
Premier is
licensed in
50 states
and
the District of Columbia.
Bermuda
Re
and
Everest
International
are
registered
as
Class
insurers
in
Bermuda,
and
Bermuda
Re
is
also
registered as
a long-term insurer
in Bermuda.
Bermuda Re is
also registered
as a certified
reinsurer in New
York
and
Delaware
and
is
registered
as
a
reciprocal
reinsurer
in:
Delaware;
California;
Massachusetts;
Michigan;
Minnesota; New
Hampshire; New
York;
Ohio and
Texas.
Bermuda Re
is also
an authorized
reinsurer in
the U.K.
and is also registered as a reinsurer
in China.
Everest Assurance
is registered as a
Class 3A general business
insurer in Bermuda and a Class
C long-term insurer
in Bermuda.
By virtue
of its
one-time election
under section
953(d) of
the U.S.
Internal
Revenue
Code to
be a
U.S.
income
tax
paying
“Controlled
Foreign
Corporation,”
Everest
Assurance
may
operate
in
both
the U.S.
and
Bermuda. Everest
Assurance
is also
considered
an approved/eligible
alien
surplus
lines insurer
in the
50 states
and the District of Columbia
In addition, Everest
Assurance can also write reinsurance
in other foreign countries.
Because some jurisdictions
require a reinsurer
to register
in order to
be an acceptable
market for
local insurers
,
Everest
Assurance
is
registered
as
a
foreign
insurer
and/or
reinsurance
in
the
following
countries:
Bolivia,
Columbia, Chile, Ecuador,
Guatemala, Mexico and Paraguay.
Ireland Re is licensed to write non-life
reinsurance for the London
and European markets.
Ireland
Insurance
is
licensed
to
write
insurance
for
the
European
markets.
In
addition,
Ireland
Insurance
is
considered an approved/eligible
alien surplus lines insurer in the 50 states
and the District of Columbia
Everest Canada is licensed to
write property and casualty insurance
in Canada.
Everest
Compañia de Seguros
Generales Chile
S.A. is an
insurance corporation
authorized by
the general
laws of
Chile.
Periodic Examinations.
Led by their
state of
domicile, U.S.
insurance companies
are subject
to periodic financial
examination
of
their
affairs,
usually
every
three
to
five
years.
U.S.
insurance
companies
are
also
subject
to
examinations
by the
various
state
insurance
departments
where they
are
licensed concerning
compliance with
applicable conduct
of business
regulations.
In addition,
foreign insurance
companies and
foreign branch
offices
are subject
to examination
and review
by regulators
in their
various
jurisdictions.
None of
the reports
of these
examinations or reviews contained
any material findings or recommendations.
NAIC Risk-Based
Capital Requirements.
The U.S.
National
Association of
Insurance
Commissioners
(“NAIC”) has
developed a
formula to
measure the
statutory minimum
amount of
capital required
for a
property and
casualty
insurance
company
to
support
its
overall
business
operations
in
light
of
its
size
and
risk
profile.
The
major
categories
of
a
company’s
risk
profile
are
its
asset
risk,
credit
risk,
and
underwriting
risk.
The
standard
is
an
effort
to
anticipate
insolvencies.
This
allows
regulators
to
take
actions
that
could
limit
the
impact
of
these
insolvencies on policyholders.
Under the
approved
formula,
a company’s
adjusted
statutory
surplus (end
of period
surplus adjusted
for items
not currently
applicable
to
the Everest
companies)
is compared
to
its risk
based
capital
(“RBC”).
If this
ratio
is
above a minimum
threshold, no
action is necessary.
Below this threshold
are four distinct
action levels at
which
an insurer’s
domiciliary state
regulator can
intervene with
increasing degrees
of authority
over an insurer
as the
ratio
of
adjusted
surplus
to
RBC
decreases.
The
mildest
intervention
requires
an
insurer
to
submit
a
plan
of
appropriate corrective actions.
The most severe action requires
an insurer to be rehabilitated or
liquidated.
Based on their financial positions at December 31, 2022, Everest
Re, Everest National,
Everest Indemnity,
Everest
Security, Everest
Denali and Everest Premier exceed
the minimum thresholds.
Tax Matters.
The following summary
of the taxation
of the Company
is based on current
law.
There can be
no assurance that
legislative, judicial, or administrative
changes will not be enacted that might materially
affect this summary.
Bermuda.
Under Bermuda
law,
no income,
withholding or
capital
gains
taxes
are imposed
upon Group
and its
Bermuda
subsidiaries.
Group
and its
Bermuda
subsidiaries
have
received
an undertaking
from
the
Minister
of
Finance in
Bermuda
that,
in the
event
of any
taxes
being imposed,
Group
and its
Bermuda
subsidiaries
will be
exempt
from
taxation
in
Bermuda
until
March
2035.
Non-Bermuda
branches
of
Bermuda
subsidiaries
are
subject to local taxes in
the jurisdictions in which they operate.
United
States.
On
December
22,
2017,
the
Tax
Cuts
and
Jobs
Act
(“TCJA”)
was
signed
into
law.
The
Internal
Revenue Service
(“IRS”) and
the United
States
Treasury
Department (“U.S.
Treasury”)
have subsequently
issued
both proposed and
final regulations related
to the new law.
Management continues
to monitor this
guidance as
it
is
issued
to
determine
the
impact
on
the
Company
and
acts
if necessary.
Group’s
U.S.
subsidiaries
conduct
business in and are
subject to taxation
in the U.S. Non-U.S.
branches of U.S. subsidiaries
are subject to both
local
taxation in
the jurisdictions in which
they operate
and U.S. corporate
income tax but
are generally
relieved from
double
taxation
through
the
use
of
foreign
tax
credits
against
their
U.S.
income
tax
liability.
Should
the
U.S.
subsidiaries
distribute
current
or
accumulated
earnings
and
profits
in
the
form
of
dividends
or
otherwise,
the
Company
would
be
subject
to
withholding
taxes.
The
cumulative
amount
that
would
be
subject
to
U.S.
withholding
tax,
if distributed,
is not
practicable
to
compute.
Group
and its
Bermuda subsidiaries
believe
that
they
have
operated
and
will
continue
to
operate
their
businesses
in
a
manner
that
will
not
cause
them
to
generate income treated
as effectively connected
with the conduct of a trade or
business within the U.S.
On this
basis, Group
does not
expect that
it and
its Bermuda
subsidiaries will
be required
to pay
U.S. corporate
income
taxes
other
than
withholding
taxes
on
certain
investment
income
and
premium
excise
taxes.
If
Group
or
its
Bermuda
subsidiaries
were
to
become
subject
to
U.S.
income
tax,
there
could
be a
material
adverse
effect
on
the Company’s financial condition,
results of operations and cash flows.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”)
was enacted. We have
evaluated the tax
provisions of the IRA, the most significant of which are
the corporate alternative
minimum tax and the share
repurchase excise tax
and do not expect the legislation to have
a material impact on our results of operations.
As
the IRS issues additional guidance, we will evaluate
any impact to our consolidated
financial statements.
United Kingdom.
Bermuda Re’s
UK branch,
the Company’s
Lloyd’s
Syndicate and
Ireland Insurance’s
UK branch
conduct business
in the UK
and are subject
to taxation
in the UK.
Bermuda Re believes
that it has
operated and
will
continue
to
operate
its
Bermuda
operation
in
a
manner
which
will
not
cause
them
to
be
subject
to
UK
taxation.
If
Bermuda
Re’s
Bermuda
operations
were
to
become
subject
to
UK
income
tax,
there
could
be
a
material adverse impact on the Company’s
financial condition, results of operations
and cash flow.
Ireland.
Holdings Ireland,
Everest
Dublin Holdings,
Ireland Re
and Ireland
Insurance conduct
business in
Ireland
and are subject to taxation
in Ireland.
Switzerland.
Ireland
Re’s
Zurich
branch
conducts
business
in
Switzerland
and
is
subject
to
taxation
in
Switzerland.
Netherlands.
Ireland
Insurance’s
Netherland
branch
conducts
business
in
the
Netherlands
and
is
subject
to
taxation in the Netherlands.
Germany:
Ireland
Insurance’s
German
branch
conducts
business
in
Germany
and
is
subject
to
taxation
in
Germany.
Spain:
Ireland Insurance’s
Spanish branch conducts business in Spain and is subject
to taxation in Spain.
France:
Ireland Insurance’s
French branch conducts business in France
and is subject to taxation in France.
Belgium: Ireland Insurance’s
Belgium branch conducts business in Belgium and is subject
to taxation in Belgium.
Singapore:
Everest
International
Reinsurance
Ltd’s
Singapore
branch
conducts
business
in
Singapore
and
is
subject to taxation in Singapore.
Chile:
Everest Insurance
Chile conducts business in Chile and is subject to taxation
in Chile.
Available Information.
The Company’s
Annual
Reports
on Form
10-K, Quarterly
Reports
on
Form
10-Q, Current
Reports
on Form
8-K,
proxy statements
and amendments to those reports
are available free of charge
through the Company’s
internet
website
at
http://www.everestre.com
as
soon
as
reasonably
practicable
after
such
reports
are
electronically
filed with the Securities and Exchange Commission (the “SEC”).

---

ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
In addition to the other information
provided in this report,
the following risk factors
should be considered when
evaluating
an
investment
in
our
securities.
If
the
circumstances
contemplated
by
the
individual
risk
factors
materialize, our business, financial condition
and results of operations could
be materially and adversely affected
and the trading price of our common shares could
decline significantly.
RISKS RELATING TO
OUR BUSINESS
Our results could be adversely affected by catastrophic
events.
We are exposed
to unpredictable catastrophic
events, including weather-related
and other natural
catastrophes,
as well as acts of
terrorism.
The frequency and/or
severity of catastrophic
events may be
impacted in the future
by
the
continued
effects
of
climate
change.
Climate
change
and
resulting
changes
in
global
temperatures,
weather patterns,
and sea
levels may
both increase
the frequency
and severity
of natural
catastrophes
and the
resulting
losses
in
the
future
and
impact
our
risk
modeling
assumptions.
We
cannot
predict
the
impact
that
changing
climate
conditions,
if
any,
may
have
on
our
results
of
operations
or
our
financial
condition.
Additionally,
we cannot
predict how
legal, regulatory
and/or social
responses to
concerns around
global climate
change
and
the
resulting
impact
on
various
sectors
of
the
economy
may
impact
our
business.
Any
material
reduction in our operating
results caused by
the occurrence of one or
more catastrophes
could inhibit our ability
to
pay
dividends
or
to
meet our
interest
and
principal
payment
obligations.
By
way
of illustration,
during
the
past five calendar years, pre
-tax catastrophe
losses, net of reinsurance, were as follows:
Calendar year:
Pre-tax net catastrophe losses
(Dollars in millions)
$
1,055
1,135
1,800
Our losses from future catastrophic events
could exceed our projections.
We
use
projections
of
possible
losses
from
future
catastrophic
events
of
varying
types
and
magnitudes
as
a
strategic underwriting tool.
We use these loss projections
to estimate our potential
catastrophe losses
in certain
geographic areas
and decide
on the placement
of retrocessional
coverage or
other actions
to limit the
extent of
potential
losses
in
a
given
geographic
area.
These
loss
projections
are
approximations,
reliant
on
a
mix
of
quantitative
and
qualitative
processes,
and
actual
losses
may
exceed
the
projections
by
a
material
amount,
resulting in a material adverse effect
on our financial condition and results of operations.
If our loss
reserves are inadequate
to meet our
actual losses, our
net income
would be reduced
or we could
incur
a loss.
We
are
required
to
maintain
reserves
to
cover
our
estimated
ultimate
liability
of
losses
and
LAE
for
both
reported and
unreported claims
incurred.
These reserves
are only
estimates of
what we
believe the
settlement
and administration
of claims will
cost based
on facts and
circumstances known
to us.
In setting
reserves for
our
reinsurance
liabilities,
we
rely
on
claim
data
supplied
by
our
ceding
companies
and
brokers
and
we
employ
actuarial and statistical
projections.
The information received
from our ceding companies
is not always timely or
accurate,
which
can
contribute
to
inaccuracies
in
our
loss
projections.
Because
of
the
uncertainties
that
surround
our estimates
of loss
and LAE
reserves,
we
cannot
be certain
that
ultimate
losses
and LAE
payments
will not exceed our estimates.
If our reserves are deficient, we
would be required to increase
loss reserves in the
period in
which such
deficiencies are
identified which
would cause
a charge
to our
earnings and
a reduction
of
capital.
During the past five
calendar years,
the reserve re-estimation
process resulted in
an increase to our
pre-
tax net income in 2022, 2021 and 2019 and resulted
in a decrease to our pre-tax net income
in 2020 and 2018:
Calendar year:
Effect on pre-tax net income
(Dollars in millions)
$
increase
increase
decrease
increase
decrease
The difficulty
in
estimating
our
reserves
is significantly
more challenging
as
it
relates
to
reserving
for
potential
A&E liabilities.
At year-end 2022,
1.3% of our gross
reserves were comprised
of A&E reserves.
A&E liabilities are
especially hard
to estimate
for many
reasons, including
the long
delays between
exposure and
manifestation
of
any
bodily
injury
or
property
damage,
difficulty
in
identifying
the
source
of
the
asbestos
or
environmental
contamination,
long
reporting
delays
and
difficulty
in
properly
allocating
liability
for
the
asbestos
or
environmental
damage.
Legal
tactics
and judicial
and legislative
developments
affecting
the scope
of insurers’
liability,
which
can
be
difficult
to
predict,
also
contribute
to
uncertainties
in
estimating
reserves
for
A&E
liabilities.
The
failure
to
accurately
assess
underwriting
risk
and
establish
adequate
premium
rates
could
reduce
our
net
income or result in a net loss.
Our success depends on our ability to accurately
assess the risks associated with the businesses
on which the risk
is retained.
If we fail to accurately
assess the risks we retain, we may
fail to establish adequate
premium rates to
cover our losses and LAE.
This could reduce our net income and even result
in a net loss.
In addition,
losses may
arise from
events or
exposures that
are not
anticipated when
the coverage
is priced.
In
addition to unanticipated events,
we also face the unanticipated expansion
of our exposures, particularly in long-
tail liability lines.
An example
of this is the
expansion over time
of the scope
of insurers’
legal liability within
the
mass tort arena, particularly for A&E exposures
discussed above.
Decreases in pricing for property and casualty reinsurance
and insurance could reduce our net income.
The worldwide
reinsurance
and insurance
businesses
are highly
competitive,
as well
as cyclical
by
product
and
market.
These
cycles,
as
well
as
other
factors
that
influence
aggregate
supply
and
demand
for
property
and
casualty insurance
and reinsurance products,
are outside of our
control.
The supply of (re)insurance
is driven by
prevailing
prices
and
levels
of
capacity
that
may
fluctuate
in
response
to
a
number
of
factors
including
large
catastrophic
losses and investment
returns being
realized in
the insurance
industry.
Demand for
(re)insurance is
influenced by
underwriting results
of insurers
and insureds,
including catastrophe
losses, and
prevailing general
economic
conditions.
If
any
of
these
factors
were
to
result
in
a
decline
in
the
demand
for
(re)insurance
or
an
overall increase in (re)insurance
capacity, our
net income could decrease.
If
rating
agencies
downgrade
the
ratings
of
our
insurance
subsidiaries,
future
prospects
for
growth
and
profitability could be significantly and adversely
affected.
Our active insurance
company subsidiaries
currently hold financial
strength ratings
assigned by third-party rating
agencies
which
assess
and
rate
the
claims
paying
ability
and
financial
strength
of
insurers
and
reinsurers.
Financial
strength
ratings
are
used
by
cedents,
agents
and
brokers
to
assess
the
financial
strength
and
credit
quality of reinsurers
and insurers.
A downgrade
or withdrawal
of any
of these ratings
could adversely
affect our
ability
to
market
our
reinsurance
and
insurance
products,
our
ability
to
compete
with
other
reinsurers
and
insurers,
and
could
have
a
material
and
adverse
effect
on
our
ability
to
write
new
business
that
in
turn
could
impact our profitability and operating
results.
In December 2021, S&P announced proposed
changes to its rating
methodologies.
The
proposed
changes
have
not
been
finalized,
so
the
impact,
if
any,
that
these
changes
may
have on our financial strength
ratings is unknown.
Consistent
with
market
practice,
much
of
our
treaty
reinsurance
business
allows
the
ceding
company
to
terminate
the
contract
or
seek
collateralization
of our
obligations
in
the
event
of a
rating
downgrade
below
a
certain
threshold.
The termination
provision
would
generally
be triggered
if a
rating
fell
below
A.M. Best’s
A-
rating
level.
To
a
lesser
extent,
Everest
Re
also
has
modest
exposure
to
reinsurance
contracts
that
contain
provisions
for
obligatory
funding
of
outstanding
liabilities
in
the
event
of
a
rating
agency
downgrade.
Those
provisions would also generally
be triggered if Everest Re’s
rating fell below A.M. Best’s
A- rating level.
The
failure
of
our
insureds,
intermediaries
and
reinsurers
to
satisfy
their
obligations
to
us
could
reduce
our
income.
In
accordance
with
industry
practice,
we
have
uncollateralized
receivables
from
insureds,
agents
and
brokers
and/or rely
on agents
and brokers
to process
our payments.
We may
not be
able to
collect amounts
due from
insureds, agents and brokers,
resulting in a reduction to net income.
We are
subject to
credit risk
of reinsurers
in connection
with retrocessional
arrangements
because the
transfer
of risk to a
reinsurer does not
relieve us of
our liability to the insured.
In addition, reinsurers
may be unwilling
to
pay
us
even
though
they
are
able
to
do
so.
The
failure
of
one
or
more
of
our
reinsurers
to
honor
their
obligations
to us
in a
timely fashion
would impact
our cash
flow and
reduce our
net income
and could
cause us
to incur a significant loss.
If
we
are
unable
or
choose
not
to
purchase
reinsurance
and
transfer
risk
to
the
reinsurance
markets,
our
net
income could be reduced or we could incur a net
loss in the event of unusual loss experience.
We
are
generally
less reliant
on the
purchase
of reinsurance
than many
of our
competitors,
in part
because of
our strategic
emphasis on
underwriting discipline
and management
of the
cycles inherent
in our
business.
We
try to
separate
our risk
taking process
from our
risk mitigation
process in
order to
avoid developing
too great
a
reliance on
reinsurance.
With the
expansion
of the
capital
markets
into insurance
linked
financial instruments,
we
increased
our
use
of
capital
market
products
for
catastrophe
reinsurance.
In
addition,
we
have
increased
some of
our quota
share contracts
with larger
retrocessions.
The percentage
of business
that we
reinsure may
vary
considerably
from
year
to
year,
depending
on
our
view
of
the
relationship
between
cost
and
expected
benefit for the contract period.
Percentage of ceded written premiums to gross
written premiums
11.5%
12.3%
13.0%
14.3%
12.5%
Our industry is highly competitive and we may not be able
to compete as successfully in the future.
Our industry
is highly competitive
and subject
to pricing cycles
that can
be pronounced.
We compete
globally in
the
United
States,
Bermuda
and
international
reinsurance
and
insurance
markets
with
numerous
competitors.
Our
competitors
include
independent
reinsurance
and
insurance
companies,
subsidiaries
or
affiliates
of
established
worldwide
insurance
companies,
reinsurance
departments
of
certain
insurance
companies
and
domestic and international underwriting operations,
including underwriting syndicates at
Lloyd’s
of London.
According to
S&P,
Everest
ranks among
the top
ten global
property &
casualty reinsurance
groups,
where more
than two-thirds
of the
market share
is concentrated.
The worldwide
net premium
written by
the Top
40 global
reinsurance groups
for both life and
non-life business was
estimated to be
$292 billion in 2022 according
to data
compiled by
S&P.
In addition to
competitors the
entry of alternative
capital market
products and
new company
formations provide additional sources
of reinsurance and insurance capacity.
We are dependent on our key
personnel.
Our success
has been,
and will
continue to
be, dependent
on our
ability to
retain
the services
of our
Chairman,
Joseph
V.
Taranto
(age
73)
and
existing
key
executive
officers
and
to
attract
and
retain
additional
qualified
personnel
in the
future.
The loss
of the
services of
any
key
executive
officer or
the inability
to hire
and retain
other highly
qualified personnel
in the
future could
adversely
affect
our ability
to conduct
business.
Generally,
we
consider
key
executive
officers
to
be
those
individuals
who
have
the
greatest
influence
in
setting
overall
policy
and
controlling
operations:
President
and
Chief
Executive
Officer,
Juan
C.
Andrade
(age
57);
Executive
Vice
President
and
Chief
Financial
Officer,
Mark
Kociancic
(age
53),
Executive
Vice
President,
Group,
Chief
Operating
Officer and
Head of
Reinsurance
Division,
Jim Williamson
(age 49),
Executive
Vice President,
General
Counsel,
Chief
Compliance
Officer
and
Secretary,
Sanjoy
Mukherjee
(age
56)
and
Executive
Vice
President,
President
and
Chief
Executive
Officer
of
the
Everest
Insurance
®
Division,
Mike
Karmilowicz
(age
54).
We
have
employment contracts
with all
of our
key
officers,
which contain
automatic renewal
provisions
that provide
for
the contracts
to continue
indefinitely unless
sooner terminated
in accordance
with the contract
or as
otherwise
may be agreed.
Special
considerations
apply
to
our
Bermuda
operations.
Under
Bermuda
law,
non-Bermudians,
other
than
spouses of Bermudians
and individuals holding
permanent or working
resident certificates,
are not
permitted to
engage in any gainful occupation
in Bermuda without a work permit issued by the Bermuda
government.
A work
permit
is
only
granted
or
extended
if
the
employer
can
show
that,
after
a
proper
public
advertisement,
no
Bermudian, spouse
of a Bermudian
or individual holding
a permanent or
working resident
certificate is
available
who meets the minimum standards
reasonably required for
the position.
The Bermuda government places
a six-
year term
limit on individuals
with work
permits, subject
to specified
exemptions
for persons
deemed to be
key
employees
of
businesses
with
a
significant
physical
presence
in
Bermuda.
Currently,
all
our
Bermuda-based
professional
employees who
require work
permits have
been granted
permits by the
Bermuda government
that
expire at various times between
February 2024 and October 2027.
Our
investment
values
and
investment
income
could
decline
because
they
are
exposed
to
interest
rate,
credit,
and market risks.
A significant
portion of
our investment
portfolio consists
of fixed
income securities
and smaller
portions consist
of
equity
securities
and
other
investments.
The
fair
value
of
our
invested
assets
and
associated
investment
income
fluctuate
depending
on
general
economic
and
market
conditions.
For
example,
the
fair
value
of
our
predominant
fixed
income
portfolio
generally
increases
or decreases
inversely
to
fluctuations
in interest
rates.
The fair
value of
our fixed
income securities
could also
decrease as
a result
of a
downturn in
the business
cycle
that causes
the credit quality
of such securities
to deteriorate.
The net investment
income that
we realize
from
future investments in fixed
income securities will generally increase
or decrease with interest
rates.
Interest
rate
fluctuations
also
can
cause
net
investment
income
from
fixed
income
investments
that
carry
prepayment
risk,
such
as
mortgage-backed
and
other
asset-backed
securities,
to
differ
from
the
income
anticipated
from
those
securities
at
the
time
of
purchase.
In
addition,
if
issuers
of
individual
investments
are
unable to meet their obligations, investment
income will be reduced and realized capital
losses may arise.
The majority
of our
fixed income
securities are
classified as
available for
sale and
temporary
changes in
the fair
value
of these
investments
are reflected
as changes
to
our shareholders’
equity.
Our actively
managed
equity
security
portfolios
are
fair
valued
and
any
changes
in
fair
value
are
reflected
as
net
realized
capital
gains
or
losses.
As a result, a decline in the value of our securities reduces
our capital or could cause us to incur a loss.
As a
part of
our ongoing
analysis of
our investment
portfolio, we
are required
to assess
current expected
credit
losses
for
all
held-to-maturity
securities
and
evaluate
expected
credit
losses
for
available-for-sale
securities
when
fair
value
is
below
amortized
cost,
which
considers
reasonable
and
supportable
forecasts
of
future
economic conditions in addition to information
about past events and current
conditions. This analysis requires
a
high degree of
judgment. Financial assets
with similar risk characteristics
and relevant
historical loss
information
are included
in the development
of an estimate
of expected
lifetime losses.
Declines in relevant
stock and
other
financial markets
and other
factors
impacting the
value of
our investments
could result
in an
adverse
effect
on
our net income and
other financial results
We have
invested
a portion of
our investment
portfolio in
equity securities.
The value
of these assets
fluctuates
with changes in the markets.
In times of economic weakness,
the fair value of
these assets may decline,
and may
negatively
impact
net
income.
We
also
invest
in
non-traditional
investments
which
have
different
risk
characteristics
than traditional
fixed income
and equity
securities. These
alternative
investments
are comprised
primarily
of
private
equity
limited
partnerships.
The
changes
in
value
and
investment
income/(loss)
for
these
partnerships may be more volatile
than over-the-counter securities.
Prolonged and
severe disruptions
in the overall
public and
private debt
and equity
markets, such
as occurred
in
early
related
to
the
COVID-19
pandemic,
could
result
in
significant
realized
and
unrealized
losses
in
our
investment portfolio.
There could also
be disruption in individual
market sectors,
such as occurred in the
energy
sector in
recent years.
Such declines
in the
financial markets
could result
in significant
realized
and unrealized
losses
on investments
and could
have
a material
adverse
impact on
our results
of operations,
equity,
business
and insurer financial strength and
debt ratings.
We may experience
foreign currency exchange losses that
reduce our net income and capital levels.
Through
our
Bermuda
and
international
operations,
we
conduct
business
in
a
variety
of
foreign
(non-U.S.)
currencies,
principally
the
Euro,
the
British
pound,
the
Canadian
dollar,
and
the
Singapore
dollar.
Assets,
liabilities,
revenues
and
expenses
denominated
in
foreign
currencies
are
exposed
to
changes
in
currency
exchange
rates.
Our reporting
currency is
the U.S.
dollar,
and exchange
rate
fluctuations,
especially relative
to
the U.S. dollar,
may materially
impact our results and
financial position.
In 2022, we wrote
approximately
25.8%
of our
coverages
in non-U.S.
currencies;
as of
December
31,
2022,
we
maintained
approximately
19.3%
of our
investment portfolio in investments
denominated in non-U.S. currencies.
We are subject to cybersecurity risks
that could negatively impact our business operations.
We
are
dependent
upon
our
information
technology
platform,
including
our
processing
systems,
data
and
electronic transmissions
in our
business operations.
Security breaches
could expose
us to
the loss
or misuse
of
our
information,
litigation
and
potential
liability.
In
addition,
cyber
incidents
that
impact
the
availability,
reliability,
speed, accuracy or
other proper functioning
of these systems
could have a
significant negative
impact
on our
operations and
possibly our
results.
An incident
could also
result in
a violation
of applicable
privacy and
other laws, damage
our reputation,
cause a loss
of customers
or give rise to
monetary fines and
other penalties,
which could be
significant.
Management is not
aware of a
cybersecurity incident
that has had
a material impact
on our operations.
The NAIC
has
adopted
an
Insurance
Data
Security
Model
Law,
which,
when
adopted
by
the
states
will require
insurers,
insurance
producers
and
other
entities
required
to
be licensed
under
state
insurance
laws
to
comply
with certain requirements
under state
insurance laws, such
as developing and
maintaining a written
information
security program,
conducting risk assessments
and overseeing the
data
security practices of
third-party vendors.
In
addition,
certain
state
insurance
regulators
are
developing
or
have
developed
regulations
that
may
impose
regulatory requirements
relating to cybersecurity
on insurance and
reinsurance companies
(potentially including
insurance
and
reinsurance
companies
that
are
not
domiciled,
but
are
licensed,
in
the
relevant
state).
For
example, the New York
State Department of
Financial Services has a
regulation pertaining to
cybersecurity for all
banking and
insurance
entities under
its jurisdiction,
which was
effective
as of
March 1,
2017, which
applies to
us.
We
cannot
predict
the
impact these
laws
and regulations
will have
on our
business,
financial
condition
or
results
of operations,
but our
insurance
and reinsurance
companies
could
incur additional
costs
resulting
from
compliance with such laws and regulations.
RISKS RELATING TO
REGULATION
Insurance
laws
and
regulations
restrict
our
ability
to
operate
and
any
failure
to
comply
with
those
laws
and
regulations could have a material adverse effect on
our business.
We are
subject to
extensive
and increasing
regulation under
U.S., state
and foreign
insurance laws.
These laws
limit the
amount
of dividends
that
can
be paid
to
us
by
our operating
subsidiaries,
impose
restrictions
on
the
amount and type of
investments that
we can hold, prescribe
solvency,
accounting and internal
control standards
that
must
be
met
and
maintained
and
require
us
to
maintain
reserves.
These
laws
also
require
disclosure
of
material
inter-affiliate
transactions
and
require
prior
approval
of
“extraordinary”
transactions.
Such
“extraordinary”
transactions
include
declaring
dividends
from
operating
subsidiaries
that
exceed
statutory
thresholds.
These
laws
also
generally
require
approval
of
changes
of
control
of
insurance
companies.
The
application
of these
laws could
affect our
liquidity and
ability to
pay dividends,
interest
and other
payments on
securities, as
applicable, and
could restrict
our ability to
expand our
business operations
through acquisitions
of
new
insurance
subsidiaries.
We
may
not
have
or
maintain
all
required
licenses
and
approvals
or
fully
comply
with the wide variety of applicable laws and
regulations or the relevant authority’s
interpretation of the laws and
regulations.
If we do
not have
the requisite
licenses and
approvals
or do
not comply
with applicable
regulatory
requirements,
the
insurance
regulatory
authorities
could
preclude
or
temporarily
suspend
us
from
carrying
on
some
or
all
of
our
activities
or
monetarily
penalize
us.
These
types
of
actions
could
have
a
material
adverse
effect
on
our
business.
To
date,
no
material
fine, penalty
or
restriction
has been
imposed
on us
for
failure
to
comply with any insurance law or regulation.
As
a
result
of
the
previous
dislocation
of
the
financial
markets,
Congress
and
the
previous
Presidential
administration
in the United
States implemented
changes in
the way
the financial services
industry is
regulated.
Some of these changes are also impacting the insurance
industry.
For example, the U.S. Treasury
established the
Federal Insurance
Office with
the authority
to monitor all
aspects of the
insurance sector,
monitor the
extent to
which
traditionally
underserved
communities
and
consumers
have
access
to
affordable
non-health
insurance
products, to
represent the
United States
on prudential
aspects of international
insurance matters,
to assist
with
administration
of the
Terrorism
Risk
Insurance
Program
and
to
advise
on
important
national
and
international
insurance
matters.
In
addition,
several
European
regulatory
bodies
are
in
process
of
updating
existing
or
developing new
capital adequacy
directives for
insurers
and reinsurers.
The future
impact of
such initiatives
or
new
initiatives
from
the
current
Government
Administration,
if
any,
on
our
operation,
net
income
(loss)
or
financial condition cannot be determined at this
time.
Regulatory challenges in the United States
could adversely affect the ability of Bermuda Re to
conduct business.
Bermuda Re does
not intend to
be licensed or admitted
as an insurer or
reinsurer in any
U.S. jurisdiction.
Under
current
law,
Bermuda
Re
generally
will
be
permitted
to
reinsure
U.S.
risks
from
its
office
in
Bermuda
without
obtaining
those licenses.
However,
the
insurance
and reinsurance
regulatory
framework
is subject
to
periodic
legislative
review
and
revision.
In
the
past,
there
have
been
congressional
and
other
initiatives
in
the
United
States regarding
increased supervision
and regulation of
the insurance industry,
including proposals to
supervise
and
regulate
reinsurers
domiciled
outside
the
United
States.
If
Bermuda
Re
were
to
become
subject
to
any
insurance
laws
of
the
United
States
or
any
U.S.
state
at
any
time
in
the
future,
it
might
be
required
to
post
deposits or maintain
minimum surplus levels
and might be
prohibited from
engaging in lines
of business or
from
writing some types
of policies.
Complying with those
laws could
have a
material adverse
effect on
our ability to
conduct business in Bermuda and international
markets.
Bermuda Re may need to be licensed or admitted
in additional jurisdictions to develop its business.
As
Bermuda
Re’s
business
develops,
it
will
monitor
the
need
to
obtain
licenses
in
jurisdictions
other
than
Bermuda and the U.K., where
it has an authorized branch,
in order to comply with applicable
law or to be able to
engage in additional
insurance-related activities.
In addition, Bermuda Re
may be at
a competitive disadvantage
in
jurisdictions
where
it
is
not
licensed
or
does
not
enjoy
an
exemption
from
licensing
relative
to
competitors
that
are
so
licensed
or
exempt
from
licensing.
Bermuda
Re
may
not
be able
to
obtain
any
additional
licenses
that
it
determines
are
necessary
or
desirable.
Furthermore,
the
process
of
obtaining
those
licenses
is
often
costly and may take
a long time.
Bermuda Re’s
ability to write
reinsurance may be
severely limited if
it is unable to
arrange for security to
back its
reinsurance.
Many
jurisdictions
do not
permit insurance
companies
to take
credit
for reinsurance
obtained
from unlicensed
or
non-admitted
insurers
on
their
statutory
financial
statements
without
appropriate
security.
Bermuda
Re’s
reinsurance
clients
typically
require
it
to
post
a
letter
of
credit
or
enter
into
other
security
arrangements.
If
Bermuda
Re
is
unable
to
obtain
or
maintain
a
letter
of
credit
facility
on
commercially
acceptable
terms
or
is
unable
to
arrange
for
other
types
of
security,
its
ability
to
operate
its
business
may
be
severely
limited.
If
Bermuda
Re
defaults
on
any
letter
of
credit
that
it
obtains,
it
may
be
required
to
prematurely
liquidate
a
substantial portion of its investment
portfolio and other assets pledged as collateral.
RISKS RELATING TO
GROUP’S SECURITIES
Because of our holding company
structure, our ability to pay
dividends, interest and
principal is dependent on our
receipt of dividends, loan payments and other funds from our subsidiaries.
Group
and
Holdings
are
holding
companies,
each
of
whose
most
significant
asset
consists
of
the
stock
of
its
operating
subsidiaries.
As
a
result,
each
of
Group’s
and
Holdings’
ability
to
pay
dividends,
interest
or
other
payments on
its securities in
the future will
depend on the
earnings and cash
flows of the
operating subsidiaries
and the
ability of
the subsidiaries
to pay
dividends
or to
advance or
repay
funds to
it.
This ability
is subject
to
general economic, financial, competitive,
regulatory and other factors
beyond our control.
Payment of dividends
and advances
and repayments
from some
of the
operating
subsidiaries are
regulated
by U.S.,
state
and foreign
insurance
laws
and
regulatory
restrictions,
including
minimum
solvency
and
liquidity
thresholds.
Accordingly,
the operating
subsidiaries may
not be able to
pay dividends
or advance or
repay funds
to Group and
Holdings in
the future, which could prevent
us from paying dividends, interest
or other payments on our securities.
Provisions in
Group’s
bye-laws could
have an
anti-takeover
effect, which
could diminish
the value
of its
common
shares.
Group’s
bye-laws
contain
provisions
that
could
delay
or
prevent
a
change
of control
that
a
shareholder
might
consider favorable.
The effect
of these
provisions
could be
to prevent
a shareholder
from receiving
the benefit
from
any
premium
over
the
market
price
of
our
common
shares
offered
by
a
bidder
in
a
potential
takeover.
Even
in the
absence
of an
attempt
to
effect
a
change
in management
or
a
takeover
attempt,
these
provisions
may
adversely
affect
the
prevailing
market
price
of
our
common
shares
if
they
are
viewed
as
discouraging
takeover attempts
in the future.
For example, Group’s
bye-laws contain the
following provisions that could have
an anti-takeover effect:
●
the total voting
power of any
shareholder owning more
than 9.9% of the
common shares will
be reduced to
9.9% of the total voting power of the common shares;
●
the board of
directors may
decline to register
any transfer
of common shares
if it has reason
to believe that
the transfer would result
in:
i.)
any person that
is not an investment
company beneficially
owning more than 5.0%
of any class
of the issued and outstanding share capital
of Group,
ii.)
any
person
holding
controlled
shares
in
excess
of
9.9%
of
any
class
of
the
issued
and
outstanding share capital
of Group, or
iii.)
any adverse
tax, regulatory
or legal consequences
to Group, any
of its subsidiaries
or any of
its
shareholders;
●
Group also has the
option to redeem or purchase
all or part of a shareholder’s
common shares to
the extent
the
board
of
directors
determines
it
is
necessary
or
advisable
to
avoid
or
cure
any
adverse
or
potential
adverse consequences if:
i.)
any person that is not an investment
company beneficially owns more than
5.0% of any class of
the issued and outstanding share capital
of Group,
ii.)
any person
holds controlled shares
in excess of
9.9% of any class
of the issued and
outstanding
share capital of Group, or
iii.)
share ownership
by any
person may
result in
adverse tax,
regulatory or
legal consequences
to
Group, any of its subsidiaries or any
other shareholder.
The
Board
of
Directors
has
indicated
that
it
will
apply
these
bye-law
provisions
in
such
manner
that
“passive
institutional investors”
will be treated similarly
to investment
companies.
For this purpose, “passive
institutional
investors”
include all
persons who
are eligible,
pursuant
to Rule
13d-1(b)(1) under
the U.S.
Securities Exchange
Act
of
1934,
(“the
Exchange
Act”)
to
file
a
short-form
statement
on
Schedule
13G,
other
than
an
insurance
company or any parent
holding company or control person
of an insurance company.
Applicable insurance laws may also have an anti-takeover
effect.
Before a
person can
acquire control
of a U.S.
insurance company,
prior written
approval must
be obtained
from
the
insurance
commissioner
of the
state
where
that
insurance
company
is
domiciled
or
deemed
commercially
domiciled.
Prior
to
granting
approval
of an
application
to acquire
control
of a
domestic
insurance
company,
a
state
insurance
commissioner
will consider
such
factors
as the
financial strength
of the
applicant,
the integrity
and competence
of the
applicant’s
board of
directors
and executive
officers,
the acquiror’s
plans for
the future
operations of the insurance
company and any
anti-competitive results
that may arise from
the consummation of
the
acquisition
of control.
Because any
person
who acquired
control
of Group
would
thereby
acquire
indirect
control
of
its
insurance
company
subsidiaries
in
the
U.S.,
the
insurance
change
of
control
laws
of
Delaware,
California
and
Georgia
would
apply
to
such
a
transaction.
This
could
have
the
effect
of
delaying
or
even
preventing such a change of control.
The ownership of common
shares of Group by Everest
Re Advisors, Ltd.,
a direct subsidiary of Group
may have an
impact on securing approval of shareholder proposals that Group’s
management supports.
As
of
December
31,
2022,
Everest
Re
Advisors,
Ltd.
(Bermuda)
owned
9,719,971
or
19.9%
of
the
outstanding
common shares of Group.
Under Group’s
bye-laws, the total voting
power of any shareholder owning more
than
9.9% of the
common shares
is reduced
to 9.9%
of the
total voting
power of
the common
shares.
Nevertheless,
Everest
Re Advisors,
Ltd., which
is controlled
by Group,
has the ability
to vote
9.9% of the
total voting
power of
Group’s common
shares.
Investors in Group may have more difficulty in protecting
their interests than investors in
a U.S. corporation.
The Companies Act 1981 of Bermuda (the “Companies Act”), differs
in material respects from
the laws applicable
to
U.S.
corporations
and
their
shareholders.
The
following
is
a
summary
of
material
differences
between
the
Companies
Act,
as modified
in
some
instances
by
provisions
of Group’s
bye-laws,
and Delaware
corporate
law
that
could
make
it
more
difficult
for
investors
in
Group
to
protect
their
interests
than
investors
in
a
U.S.
corporation.
Because the
following statements
are summaries,
they do
not address
all aspects
of Bermuda
law
that may be relevant to
Group and its shareholders.
Alternate Directors.
Group’s bye
-laws provide,
as permitted by
Bermuda law,
that each director
may appoint
an
alternate
director,
who
shall
have
the
power
to
attend
and
vote
at
any
meeting
of
the
board
of
directors
or
committee at
which that director
is not personally
present and to
sign written consents
in place of that
director.
Delaware
law
permits
a
director
to
appoint
another
director
as
an
alternate
to
attend
any
board
committee
meeting.
However,
Delaware
law does
not provide
for the
designation
of alternate
directors
with authority
to
attend or vote at a meeting of
the board of directors.
Committees of
the Board
of Directors.
Group’s
bye-laws provide,
as permitted
by Bermuda
law,
that the
board
of directors
may delegate
any of
its powers
to committees
that the
board appoints,
and those
committees may
consist
partly
or
entirely
of
non-directors.
Delaware
law
allows
the
board
of
directors
of
a
corporation
to
delegate many of its powers
to committees, but those committees
may consist only of directors.
Interested
Directors.
Bermuda law
and Group’s
bye-laws
provide
that if
a director
has a
personal
interest
in a
transaction to
which the company
is also a party
and if the director
discloses the nature
of this personal
interest
at the first
opportunity,
either at a
meeting of directors
or in writing
to the directors,
then the company
will not
be able to
declare the transaction
void solely
due to the
existence of
that personal
interest and
the director
will
not be liable
to the company
for any
profit realized
from the
transaction.
In addition,
after a director
has made
the
declaration
of
interest
referred
to
above,
he
or
she
is
allowed
to
be
counted
for
purposes
of determining
whether a quorum
is present and
to vote
on a transaction
in which he
or she has
an interest,
unless disqualified
from doing so by
the chairman of the relevant
board meeting.
Under Delaware law,
an interested
director could
be held liable
for a
transaction in
which that
director derived
an improper
personal benefit.
Additionally,
under
Delaware
law,
a corporation
may be
able to
declare a
transaction
with an
interested
director to
be void
unless
one of the following conditions is fulfilled:
●
the material
facts as
to the
interested
director’s
relationship
or interests
are disclosed
or are
known to
the
board
of
directors
and
the
board
in
good
faith
authorizes
the
transaction
by
the
affirmative
vote
of
a
majority of the disinterested directors;
●
the material facts are
disclosed or are known to
the shareholders entitled to
vote on the transaction
and the
transaction is specifically approved
in good faith by the holders of a majority of the voting
shares; or
●
the transaction is fair to the corporation
as of the time it is authorized, approved or
ratified.
Transactions
with Significant Shareholders.
As a Bermuda company,
Group may
enter into business
transactions
with
its
significant
shareholders,
including
asset
sales,
in
which
a
significant
shareholder
receives,
or
could
receive,
a
financial
benefit
that
is
greater
than
that
received,
or
to
be
received,
by
other
shareholders
with
prior approval
from Group’s
board
of directors
but without
obtaining
prior approval
from the
shareholders.
In
the case of an amalgamation, in which
two or more companies join together
and continue as a single company,
a
resolution of
shareholders approved
by a majority
of at least
75% of the
votes cast
is required in
addition to the
approval
of
the
board
of
directors,
except
in
the
case
of
an
amalgamation
with
and
between
wholly-owned
subsidiaries.
If
Group
was
a
Delaware
corporation,
any
business
combination
with
an
interested
shareholder
(which, for this purpose, would include mergers
and asset sales of greater than
10% of Group’s
assets that would
otherwise be considered
transactions in
the ordinary course
of business) within
a period of three
years from
the
time the
person
became
an
interested
shareholder
would
require
prior
approval
from shareholders
holding
at
least
2/3%
of
Group’s
outstanding
common
shares
not
owned
by
the
interested
shareholder,
unless
the
transaction
qualified
for
one
of
the
exemptions
in
the
relevant
Delaware
statute
or
Group
opted
out
of
the
statute.
For purposes of the
Delaware statute,
an “interested
shareholder” is generally defined
as a person
who
together
with that
person’s
affiliates
and associates
owns, or
within the
previous
three
years
did own,
15% or
more of a corporation’s
outstanding voting shares.
Takeovers.
Under Bermuda law,
if an acquiror
makes an
offer for
shares of
a company
and, within
four months
of the
offer,
the holders
of not less
than 90%
of the
shares that
are the
subject of
the offer
tender their
shares,
the acquiror may
give the nontendering shareholders
notice requiring them to
transfer their shares
on the terms
of the offer.
Within one month
of receiving the notice,
dissenting shareholders
may apply to the
court objecting
to
the
transfer.
The
burden
is
on
the
dissenting
shareholders
to
show
that
the
court
should
exercise
its
discretion
to
enjoin the
transfer.
The court
will be
unlikely
to
do this
unless there
is evidence
of fraud
or bad
faith
or
collusion
between
the
acquiror
and
the
tendering
shareholders
aimed
at
unfairly
forcing
out
minority
shareholders.
Under
another
provision
of
Bermuda
law,
the
holders
of
95%
of
the
shares
of
a
company
(the
“acquiring
shareholders”)
may
give notice
to the
remaining
shareholders
requiring them
to sell
their shares
on
the terms described
in the notice.
Within one month
of receiving the
notice, dissenting
shareholders may
apply
to
the
court
for
an
appraisal
of
their
shares.
Within
one
month
of
the
court’s
appraisal,
the
acquiring
shareholders are
entitled either to
acquire all shares
involved at
the price fixed
by the court
or cancel the notice
given
to
the
remaining
shareholders.
If
shares
were
acquired
under
the
notice
at
a
price
below
the
court’s
appraisal price, the acquiring shareholders
must either pay the difference
in price or cancel the notice and return
the
shares
thus
acquired
to
the
shareholder,
who
must
then
refund
the
purchase
price.
There
are
no
comparable provisions under Delaware
law.
Inspection of Corporate
Records.
Members of the
general public
have the right
to inspect the public
documents
of Group
available
at
the office
of the
Registrar
of Companies
and Group’s
registered
office, both
in Bermuda.
These
documents
include
the
memorandum
of
association,
which
describes
Group’s
permitted
purposes
and
powers,
any
amendments
to
the
memorandum
of
association
and
documents
relating
to
any
increase
or
reduction in Group’s
authorized share capital. Shareholders
of Group have the additional right
to inspect Group’s
bye-laws, minutes
of general meetings
of shareholders
and audited financial
statements that
must be presented
to the annual
general meeting
of shareholders.
The register
of shareholders
of Group
also is open
to inspection
by shareholders and to members
of the public without charge.
Group is required to maintain
its share register at
its registered
office in Bermuda.
Group also maintains
a branch register
in the offices
of its transfer
agent in the
U.S., which
is open
for public
inspection as
required under
the Companies
Act.
Group is
required to
keep at
its
registered
office
a
register
of
its
directors
and
officers
that
is
open
for
inspection
by
members
of
the
public
without charge.
However,
Bermuda law
does not
provide
a general
right for
shareholders
to inspect
or obtain
copies of
any other
corporate
records.
Under Delaware
law,
any shareholder
may inspect
or obtain
copies of
a
corporation’s
shareholder
list
and
its
other
books
and
records
for
any
purpose
reasonably
related
to
that
person’s
interest as a shareholder.
Shareholder’s
Suits.
The
rights
of
shareholders
under
Bermuda
law
are
not
as
extensive
as
the
rights
of
shareholders
under
legislation
or
judicial
precedent
in
many
U.S.
jurisdictions.
Class
actions
and
derivative
actions
are
generally
not available
to
shareholders
under the
laws
of Bermuda.
However,
the Bermuda
courts
ordinarily would be expected to
follow English case law precedent,
which would permit a shareholder to bring
an
action
in
the
name
of
Group
to
remedy
a
wrong
done
to
Group
where
the
act
complained
of is
alleged
to
be
beyond
the
corporate
power
of
Group
or
illegal
or
would
result
in
the
violation
of
Group’s
memorandum
of
association or bye-laws.
Furthermore, the court would
give consideration
to acts that are
alleged to constitute
a
fraud against the minority shareholders
or where an act requires the approval
of a greater percentage of Group’s
shareholders
than actually
approved
it.
The winning
party in
an action
of this
type generally
would
be able
to
recover
a
portion
of attorneys’
fees
incurred
in
connection
with
the
action.
Under
Delaware
law,
class
actions
and derivative
actions generally
are available
to stockholders
for breach
of fiduciary
duty,
corporate
waste
and
actions not taken
in accordance with applicable
law.
In these types of actions,
the court has discretion
to permit
the winning party to recover its attorneys’
fees.
Limitation of
Liability of Directors
and Officers.
Group’s
bye-laws provide
that Group and
its shareholders
waive
all
claims
or
rights
of
action
that
they
might
have,
individually
or
in
the
right
of
the
Company,
against
any
director or
officer for any
act or failure
to act in
the performance of
that director’s
or officer’s duties.
However,
this waiver
does not
apply
to
claims or
rights
of action
that
arise out
of fraud
or dishonesty.
This waiver
may
have
the
effect
of barring
claims
arising
under U.S.
federal
securities
laws.
Under
Delaware
law,
a
corporation
may
include
in
its
certificate
of
incorporation
provisions
limiting
the
personal
liability
of
its
directors
to
the
corporation
or
its
stockholders
for
monetary
damages
for
many
types
of
breach
of
fiduciary
duty.
However,
these provisions may
not limit liability for any
breach of the duty of loyalty,
acts or omissions not in good
faith or
that involve
intentional misconduct
or a knowing
violation of law,
the authorization
of unlawful dividends,
stock
repurchases
or
stock
redemptions,
or
any
transaction
from
which
a
director
derived
an
improper
personal
benefit.
Moreover,
Delaware
provisions
would
not
be likely
to
bar
claims
arising
under
U.S.
federal
securities
laws.
Indemnification
of Directors
and Officers.
Group’s
bye-laws
provide
that Group
shall indemnify
its directors
or
officers to
the full extent
permitted by
law against
all actions,
costs, charges,
liabilities, loss, damage
or expense
incurred
or
suffered
by
them
by
reason
of
any
act
done,
concurred
in
or
omitted
in
the
conduct
of
Group’s
business
or
in
the
discharge
of
their
duties.
Under
Bermuda
law,
this
indemnification
may
not
extend
to
any
matter
involving
fraud
or dishonesty
of which
a director
or officer
may be
guilty in
relation to
the company,
as
determined
in
a
final
judgment
or
decree
not
subject
to
appeal.
Under
Delaware
law,
a
corporation
may
indemnify a director
or officer who
becomes a party
to an action,
suit or proceeding
because of his
position as a
director or officer if (1) the director or officer
acted in good faith and in a manner he reasonably
believed to be in
or
not
opposed
to
the
best
interests
of the
corporation
and (2)
if the
action
or
proceeding
involves
a criminal
offense, the director or officer had
no reasonable cause to believe his or her conduct
was unlawful.
Enforcement of Civil
Liabilities.
Group is organized
under the laws of Bermuda.
Some of its directors
and officers
may reside outside
the U.S.
A substantial portion
of our assets are
or may be
located in jurisdictions
outside the
U.S.
As a result, a
person may not
be able to affect
service of process within
the U.S. on directors
and officers of
Group and
those experts
who reside outside
the U.S.
A person
also may
not be able
to recover
against them
or
Group
on
judgments
of
U.S.
courts
or
to
obtain
original
judgments
against
them or
Group
in
Bermuda
courts,
including judgments predicated upon
civil liability provisions of the U.S. federal
securities laws.
Dividends.
Bermuda law
does not
allow a
company
to declare
or pay
a dividend,
or make
a distribution
out of
contributed surplus,
if there are
reasonable grounds
for believing that
the company,
after the payment
is made,
would
be unable
to
pay
its liabilities
as they
become due,
or that
the realizable
value
of the
company’s
assets
would
be
less,
as
a
result
of
the
payment,
than
the
aggregate
of
its
liabilities
and
its
issued
share
capital
and
share premium accounts.
The share capital account represents
the aggregate par value
of issued shares, and the
share premium
account represents
the aggregate
amount paid
for issued shares
over and above
their par value.
Under Delaware law,
subject to any restrictions
contained in a company’s
certificate of incorporation,
a company
may pay
dividends out
of the
surplus or,
if there
is no
surplus, out
of net
profits for
the fiscal
year in
which the
dividend
is
declared
and/or
the
preceding
fiscal
year.
Surplus
is
the
amount
by
which
the
net
assets
of
a
corporation
exceed
its
stated
capital.
Delaware
law
also
provides
that
dividends
may
not
be
paid
out
of
net
profits at any
time when stated
capital is less
than the capital represented
by the outstanding
stock of all
classes
having a preference upon
the distribution of assets.
RISKS RELATING TO
TAXATION
If international tax laws change, our net income
may be impacted.
The
Organization
for
Economic
Co-operation
and
Development
(“OECD”)
and
its
member
countries
which
includes the
U.S., have
been focusing
for an
extended
period on
issues related
to the
taxation
of multinational
corporations,
such as the
comprehensive plan
set forth
by the OECD to
create an
agreed set
of international
tax
rules
for
preventing
base
erosion
and
profit
shifting.
Recently
they
agreed
upon
a
broad
framework
for
overhauling
the
taxation
of
multinational
corporations
that
includes,
among
other
things,
profit
reallocation
rules
and
a
15%
global
minimum
corporate
income
tax
rate.
These
proposals,
if
implemented,
could
have
an
impact
our
net
income
and
effective
tax
rate.
Group
and/or
various
Group
companies
may
be
subject
to
additional income taxes, which
would reduce our net income.
If U.S. tax law changes, our net income
may be impacted.
The
TCJA
addressed
what
some
members
of
Congress
had
expressed
concern
about
for
several
years,
which was
U.S. corporations
moving their
place of
incorporation
to low-tax
jurisdictions to
obtain a
competitive
advantage
over
domestic
corporations
that
are
subject
to
the
U.S.
corporate
income
tax
rate
of
21%.
Specifically,
it addressed
their concern
over a
perceived
competitive
advantage
that foreign
-controlled
insurers
and
reinsurers
may
have
had
over
U.S.
controlled
insurers
and
reinsurers
resulting
from
the
purchase
of
reinsurance
by
U.S.
insurers
from
affiliates
operating
in
some
foreign
jurisdictions,
including
Bermuda.
Such
affiliated reinsurance
transactions
may subject
the U.S.
ceding companies
to a
Base Erosion
and Anti-abuse
Tax
(“BEAT”)
of 10% from
2019 to
2025 and 12.5%
thereafter which
may exceed
its regular
income tax.
In addition,
new legislation as
well as proposed
and final regulations
may further limit
the ability of the
Company to
execute
alternative
capital balancing
transactions
with unrelated
parties. This
would further
impact our
net income
and
effective tax rate.
On
August
16,
2022,
the
Inflation
Reduction
Act
of
(“IRA”)
was
enacted.
We
have
evaluated
the
tax
provisions
of
the
IRA,
the
most
significant
of
which
are
the
corporate
alternative
minimum
tax
and
the
share
repurchase excise tax
and do not expect the legislation to have
a material impact on our results of operations.
As
the IRS issues additional guidance, we will evaluate
any impact to our consolidated
financial statements.
Group and/or Bermuda Re may be subject to
U.S. corporate income tax, which
would reduce our net income.
Bermuda Re.
The income
of Bermuda Re
is a significant
portion of our
worldwide income
from operations.
We
have
established
guidelines
for
the
conduct
of our
operations
that
are
designed
to
ensure
that
Bermuda
Re
is
not engaged in
the conduct of
a trade or
business in the
U.S.
Based on its
compliance with
those guidelines, we
believe that Bermuda Re
should not be required
to pay U.S. corporate
income tax, other
than withholding tax
on
U.S. source
dividend income.
However,
if the IRS
were to
successfully assert
that Bermuda Re
was engaged
in a
U.S. trade
or business,
Bermuda Re would
be required
to pay
U.S. corporate
income tax
on all of
its income and
possibly
the
U.S.
branch
profits
tax.
However,
if
the
IRS
were
to
successfully
assert
that
Bermuda
Re
was
engaged in
a U.S.
trade or
business, we believe
the U.S.-Bermuda
tax treaty
would preclude
the IRS
from taxing
Bermuda Re’s
income except
to the
extent
that its
income was
attributable
to a
U.S. permanent
establishment
maintained by that
subsidiary.
We do not believe that
Bermuda Re has a permanent
establishment in the U.S.
If
the IRS were
to successfully
assert that
Bermuda Re did
have income attributable
to a permanent
establishment
in the U.S., Bermuda Re would be subject to
U.S. tax only on that income.
This would reduce our net income.
Group.
We
conduct
our
operations
in
a
manner
designed
to
minimize
our
U.S.
tax
exposures.
Based
on
our
compliance with guidelines designed
to ensure that we
generate only
immaterial amounts, if
any,
of income that
is
subject
to
the
taxing
jurisdiction
of
the
U.S.,
we
believe
that
we
should
be
required
to
pay
only
immaterial
amounts,
if
any,
of
U.S.
corporate
income
tax,
other
than
withholding
tax
on
U.S.
source
dividend
income.
However,
if the IRS
successfully asserted
that we had
material amounts
of income that
was subject to
the taxing
jurisdiction of the
U.S., we would
be required to
pay U.S. corporate
income tax on
that income, and
possibly the
U.S. branch profits
tax.
The imposition of such tax
would reduce our net income.
If Bermuda Re became
subject
to U.S. income tax
on its income, or if we became
subject to U.S. income tax,
our income could also be subject
to
the
U.S.
branch
profits
tax.
In
that
event,
Group
and
Bermuda
Re
would
be
subject
to
taxation
at
a
higher
combined effective
rate
than if
they were
organized
as U.S.
corporations.
The combined
effect of
the 21%
U.S.
corporate income tax
rate and the
30% branch profits tax
rate is a net tax
rate of 44.7%.
The imposition of these
taxes would reduce our net
income.
Group and/or Bermuda Re may become
subject to Bermuda tax, which would reduce our net
income.
Group
and
Bermuda
Re
are
not
subject
to
income
or
profits
tax,
withholding
tax
or
capital
gains
taxes
in
Bermuda.
Both
companies
have
received
an
assurance
from
the
Bermuda
Minister
of
Finance
under
The
Exempted Undertakings
Tax
Protection Amendment
Act of 2011
to the effect
that if any
legislation is
enacted in
Bermuda
that
imposes
any
tax
computed
on
profits
or
income,
or
computed
on
any
capital
asset,
gain
or
appreciation,
or any
tax
in the
nature
of estate
duty or
inheritance tax,
then that
tax
will not
apply to
us or
to
any of
our operations
or our shares,
debentures or
other obligations
until March
31, 2035.
This assurance
does
not prevent the application
of any of those taxes
to persons ordinarily resident
in Bermuda and does not prevent
the
imposition
of
any
tax
payable
in
accordance
with
the
provisions
of
The
Land
Tax
Act
of
Bermuda
or
otherwise payable in relation to
any land leased to Group or Bermuda Re.
Our net income will be reduced if U.S. excise
and withholding taxes are increased.
Reinsurance and
insurance premiums
paid to Bermuda
Re with respect
to risks
located in
the U.S. are
subject to
a U.S.
federal excise
tax of
one percent.
In addition,
Bermuda Re
is subject
to federal
excise tax
on reinsurance
and
insurance
premiums
with
respect
to
risks
located
in
the
U.S.
In
addition,
Bermuda
Re
is
subject
to
withholding
tax
on
dividend
income
from
U.S.
sources.
These
taxes
could
increase,
and
other
taxes
could
be
imposed in the future on Bermuda Re’s
business, which would reduce our net income.
If U.S. tax law changes, our U.S. shareholders net
income may be impacted.
U.S.
shareholders.
In
January
2022,
Treasury
and
the
IRS
released
proposed
regulations
regarding
the
determination
and
inclusion
of
related-person
insurance
income
(RPII).
The
regulations,
if
finalized
without
modifications,
could
cause
RPII
to
be
attributable
to
the
Company’s
U.S.
shareholders
prospectively
and
therefore
additional
income
tax.
The
imposition
of
such
tax
could
reduce
our
U.S.
shareholders
return
on
investment
in the
Company.
Our U.S.
shareholders
net income
and tax
liabilities might
be increased,
reducing
their net income.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED
STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
Everest Re’s
corporate offices are
located in approximately
321,500 square feet of
leased office space in Warren,
New
Jersey.
Bermuda
Re’s
corporate
offices
are
located
in
approximately
12,300
total
square
feet
of
leased
office space
in Hamilton,
Bermuda.
The Company’s
other 24
locations occupy
a total
of approximately
271,200
square feet, all of which are leased.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
In
the
ordinary
course
of
business,
the
Company
is
involved
in
lawsuits,
arbitrations
and
other
formal
and
informal
dispute
resolution
procedures,
the
outcomes
of
which
will
determine
the
Company’s
rights
and
obligations
under insurance
and reinsurance
agreements.
In some
disputes,
the Company
seeks
to
enforce
its
rights under an agreement or to
collect funds owing to it.
In other matters, the Company
is resisting attempts by
others
to
collect
funds
or
enforce
alleged
rights.
These
disputes
arise
from
time
to
time
and
are
ultimately
resolved through
both informal
and formal
means, including
negotiated resolution,
arbitration and
litigation.
In
all such matters,
the Company believes
that its positions
are legally and
commercially reasonable.
The Company
considers
the statuses
of these
proceedings
when determining
its reserves
for unpaid
loss and
loss adjustment
expenses.
Aside from litigation and arbitrations
related to these insurance and reinsurance
agreements, the Company is
not a party to any other material litigation
or arbitration.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
Not Applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
MARKET
FOR
REGISTRANT’S
COMMON
EQUITY,
RELATED
SHAREHOLDER
MATTERS
AND
ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information.
The common shares of Group
trade on the New York
Stock Exchange under
the symbol, “RE”.
The quarterly high
and low closing market prices of Group’s
common shares for the periods indicated
were:
High
Low
High
Low
First Quarter
$
304.72
$
267.35
$
255.97
$
211.08
Second Quarter
307.10
265.00
276.95
236.21
Third Quarter
285.67
245.79
273.68
236.68
Fourth Quarter
337.94
260.84
286.62
250.41
Number of Holders of Common Shares.
The number of record
holders of common
shares as of February
1, 2023 was 729.
That number does not
include
the beneficial
owners
of shares
held in
“street”
name or
held through
participants
in depositories,
such as
The
Depository Trust
Company.
Dividend History and Restrictions.
The Board
of Directors
of the
Company
has
an established
policy
of declaring
regular
quarterly
cash
dividends
and
has
paid
a
regular
quarterly
dividend
in
each
quarter
since
the
fourth
quarter
of
1995.
The
Company
declared
and
paid
its
quarterly
cash
dividend
of $1.55
per
share
for
the
four
quarters
of 2021.
The
Company
declared
and
paid
its
quarterly
cash
dividend
of
$1.55
per
share
for
the
first
quarter
of
and
paid
its
quarterly cash
dividend of $1.65
per share
for the
remaining three
quarters of
2022.
On February
23, 2023, the
Company’s
Board of
Directors
declared a
dividend of
$1.65 per
share,
payable
on or
before
March 30,
2023 to
shareholders of record on
March 16, 2023.
The declaration and payment
of future dividends, if any,
by the Company will be at
the discretion of the Board
of
Directors
and
will
depend
upon
many
factors,
including
the
Company’s
earnings,
financial
condition,
business
needs
and
growth
objectives,
capital
and
surplus
requirements
of
its
operating
subsidiaries,
regulatory
restrictions,
rating
agency considerations
and other
factors.
As an
insurance
holding company,
the Company
is
partially dependent on dividends
and other permitted payments
from its subsidiaries
to pay cash dividends
to its
shareholders.
The
payment
of
dividends
to
Group
by
Holdings
and
to
Holdings
by
Everest
Re
is
subject
to
Delaware
regulatory
restrictions
and the
payment
of dividends
to Group
by Bermuda
Re is
subject to
Bermuda
insurance
regulatory
restrictions.
See “Regulatory
Matters
- Dividends”
and ITEM
8, “Financial
Statements
and
Supplementary Data” - Note 14 of Notes
to Consolidated Financial Statements.
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
Issuer Purchases of Equity Securities
(a)
(b)
(c)
(d)
Maximum Number (or
Total Number of
Approximate Dollar
Shares (or Units)
Value) of Shares (or
Purchased as Part
Units) that May Yet
Total Number of
of Publicly
Be Purchased Under
Shares (or Units)
Average Price Paid
Announced Plans or
the Plans or
Period
Purchased
per Share (or Unit)
Programs
Programs (1)
January 1 - 31, 2022
-
$
-
-
1,470,181
February 1 - 28, 2022
44,455
$
299.5577
-
1,470,181
March 1 - 31, 2022
11,175
$
269.9151
5,000
1,465,181
April 1 - 30, 2022
-
$
-
-
1,465,181
May 1 - 31, 2022
1,601
$
276.8129
-
1,465,181
June 1 - 30, 2022
$
270.2875
-
1,465,181
July 1 - 31, 2022
-
$
-
-
1,465,181
August 1 - 31, 2022
128,764
$
252.6871
128,764
1,336,417
September 1 - 30, 2022
110,531
$
252.6578
105,007
1,231,410
October 1 - 31, 2022
2,502
$
256.7054
2,502
1,228,908
November 1 - 30, 2022
3,828
$
321.1994
-
1,228,908
December 1 - 31, 2022
-
$
-
-
1,228,908
Total
303,657
$
-
241,273
1,228,908
(1)
On
May
22,
2020,
the
Company’s
executive
committee
of
the
Board
of
Directors
approved
an
amendment
to
the
share
repurchase
program
authorizing the
Company
and/or its
subsidiary Holdings,
to purchase
up to
a current
aggregate
of 32.0
million of
the Company’s
shares (recognizing
that the
number
of
shares
authorized
for
repurchase
has
been
reduced
by
those
shares
that
have
already
been
purchased)
in
open
market
transactions,
privately
negotiated transactions or both.
As of December 31, 2022 the Company and/or
its subsidiary Holdings have repurchased
30.8 million of the Company’s shares.
Recent Sales of Unregistered
Securities.
None.
168.99
156.89
181.93
$0
$50
$100
$150
$200
$250
1/1/2017
1/1/2018
1/1/2019
1/1/2020
1/1/2021
1/1/2022
COMPARISON
OF 5 YEAR CUMULATIVE
TOTAL
RETURN*
Among Everest Re Group,
Ltd., the S&P 500 Index
and the S&P Property & Casualty Insurance
Index
Everest Re Group, Ltd.
S&P 500
S&P Property & Casualty Insurance
Performance Graph.
The
following
Performance
Graph
compares
cumulative
total
shareholder
returns
on
the
Common
Shares
(assuming reinvestment of
dividends) from December 31, 2017 through
December 31, 2022, with the cumulative
total
return
of
the
Standard
&
Poor’s
Index
and
the
Standard
&
Poor’s
Insurance
(Property
and
Casualty)
Index.
12/17
12/18
12/19
12/20
12/21
12/22
Everest Re Group, Ltd.
100.00
100.73
131.11
113.99
136.61
168.99
S&P 500
100.00
95.62
125.72
148.85
191.58
156.89
S&P Property & Casualty Insurance
100.00
95.31
119.97
128.31
153.05
181.93
*$100 invested on 12/31/22 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
SELECTED FINANCIAL DATA
Information for Item 6 is not
required pursuant to General
Instruction I(2) of Form 10-K.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATION
The following is
a discussion and analysis
of our results of
operations and financial
condition for the
years ended
December
31,
and
2021.
This
discussion
should
be
read
in
conjunction
with
the
Consolidated
Financial
Statements
and
related
Notes,
under
ITEM
of
this
Form
10-K.
Pursuant
to
the
FAST
Act
Modernization
and
Simplification
of Regulation
S-K, comparisons
between
2020 and
2019 have
been omitted
from this
Form 10-K
but can be
found in "Management's
Discussion and Analysis
of Financial Condition
and Results of
Operations" in
Part II, Item 7 of our Form 10-K for the
year ended December 31, 2020.
All comparisons in this discussion are to the corresponding
prior year unless otherwise indicated.
Industry Conditions.
The worldwide
reinsurance
and insurance
businesses
are highly
competitive,
as well
as cyclical
by
product
and
market.
As
such,
financial
results
tend
to
fluctuate
with
periods
of
constrained
availability,
higher
rates
and
stronger
profits
followed
by
periods
of
abundant
capacity,
lower
rates
and
constrained
profitability.
Competition
in
the
types
of reinsurance
and
insurance
business
that
we
underwrite
is
based
on
many
factors,
including the perceived overall
financial strength of
the reinsurer or insurer,
ratings of the reinsurer
or insurer by
A.M. Best
and/or
Standard
& Poor’s,
underwriting expertise,
the jurisdictions
where the
reinsurer
or insurer
is
licensed
or
otherwise
authorized,
capacity
and
coverages
offered,
premiums
charged,
other
terms
and
conditions
of
the
reinsurance
and
insurance
business
offered,
services
offered,
speed
of
claims
payment
and
reputation
and
experience
in
lines
written.
Furthermore,
the
market
impact
from
these
competitive
factors
related
to
reinsurance
and
insurance
is
generally
not
consistent
across
lines
of
business,
domestic
and
international geographical
areas and distribution channels.
We
compete
in
the
U.S.,
Bermuda
and
international
reinsurance
and
insurance
markets
with
numerous
global
competitors.
Our
competitors
include
independent
reinsurance
and
insurance
companies,
subsidiaries
or
affiliates
of
established
worldwide
insurance
companies,
reinsurance
departments
of
certain
insurance
companies, domestic
and international
underwriting operations,
including underwriting
syndicates
at Lloyd’s
of
London
and
certain
government
sponsored
risk
transfer
vehicles.
Some
of
these
competitors
have
greater
financial resources
than we do
and have
established long
term and continuing
business relationships,
which can
be
a
significant
competitive
advantage.
In
addition,
the
lack
of
strong
barriers
to
entry
into
the
reinsurance
business
and
recently,
the
securitization
of
reinsurance
and
insurance
risks
through
capital
markets
provide
additional sources of potential reinsurance
and insurance capacity and competition.
Worldwide insurance
and reinsurance
market conditions
historically have
been competitive.
Generally,
there is
ample
insurance
and
reinsurance
capacity
relative
to
demand,
as
well
as
additional
capital
from
the
capital
markets
through
insurance
linked
financial
instruments.
These
financial
instruments
such
as
side
cars,
catastrophe
bonds and
collateralized
reinsurance
funds, provided
capital
markets
with access
to insurance
and
reinsurance
risk exposure.
The capital
markets
demand for
these products
is
primarily driven
by the
desire to
achieve
greater
risk
diversification
and
potentially
higher
returns
on
their
investments.
This
competition
generally has a negative impact
on rates, terms and conditions;
however,
the impact varies widely by market
and
coverage.
Based on recent competitive
behaviors in the
insurance and reinsurance
industry, natural
catastrophe
events
and
the
macroeconomic
backdrop,
there
has
been
some
dislocation
in
the
market
which
we
expect
to
have a positive impact on rates
and terms and conditions, generally,
though local market specificities can
vary.
The
increased
frequency
of
catastrophe
losses
experienced
throughout
appears
to
be
pressuring
the
increase
of
rates.
As
business
activity
continues
to
regain
strength
after
the
pandemic
and
current
macroeconomic uncertainty,
rates appear to be firming in
most lines of business, particularly in the casualty
lines
that had
seen significant
losses such
as excess
casualty and
directors’
and officers’
liability.
Other casualty
lines
are
experiencing
modest
rate
increase,
while
some
lines
such
as
workers’
compensation
were
experiencing
softer
market
conditions.
It
is
too
early
to
tell
what
the
impact
on
pricing
conditions
will
be,
but
it
is
likely
to
change depending on the line of business and geography.
Our capital position remains
a source of strength,
with high quality invested
assets, significant liquidity
and a low
operating
expense
ratio.
Our
diversified
global
platform
with
its
broad
mix
of
products,
distribution
and
geography is resilient.
The war in the
Ukraine is ongoing
and an evolving
event.
Economic and legal
sanctions have been
levied against
Russia,
specific
named
individuals
and
entities
connected
to
the
Russian
government,
as
well
as
businesses
located
in
the
Russian
Federation
and/or
owned
by
Russian
nationals
by
numerous
countries,
including
the
United States.
The significant
political and
economic uncertainty
surrounding the
war and
associated sanctions
have
impacted
economic and
investment
markets
both within
Russia and
around
the world.
The Company
has
recorded $45 million of losses related
to the Ukraine/Russia war during 2022.
Financial Summary.
We monitor and evaluate
our overall performance based upon
financial results.
The following table displays a
summary of the consolidated
net income (loss), ratios and shareholders’
equity for the periods indicated.
Years Ended December 31,
Percentage Increase/(Decrease)
(Dollars in millions)
2022/2021
2021/2020
Gross written premiums
$
13,952
$
13,050
$
10,482
6.9%
24.5%
Net written premiums
12,344
11,446
9,117
7.9%
25.5%
REVENUES:
Premiums earned
$
11,787
$
10,406
$
8,682
13.3%
19.9%
Net investment income
1,165
(28.8)%
81.3%
Net gains (losses) on investments
(455)
(276.4)%
-3.6%
Other income (expense)
(102)
NM
NM
Total revenues
12,060
11,866
9,598
1.6%
23.6%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
8,100
7,391
6,551
9.6%
12.8%
Commission, brokerage, taxes
and fees
2,528
2,209
1,873
14.5%
17.9%
Other underwriting expenses
17.0%
14.0%
Corporate expenses
(10.1)%
65.0%
Interest, fees and bond issue
cost amortization expense
43.9%
93.1%
Total claims and expenses
11,472
10,321
9,013
11.2%
14.5%
INCOME (LOSS) BEFORE TAXES
1,546
(62.0)%
164.1%
Income tax expense (benefit)
(9)
(105.3)%
133.9%
NET INCOME (LOSS)
$
$
1,379
$
(56.7)%
168.2%
RATIOS:
Point Change
Loss ratio
68.7%
71.0%
75.5%
(2.3)
(4.5)
Commission and brokerage ratio
21.4%
21.2%
21.6%
0.2
(0.4)
Other underwriting expense ratio
5.8%
5.6%
5.8%
0.2
(0.2)
Combined ratio
96.0%
97.8%
102.9%
(1.8)
(5.1)
At December 31,
Percentage Increase/(Decrease)
(Dollars in millions, except per share amounts)
2022/2021
2021/2020
Balance sheet data:
Total investments
and cash
$
29,872
$
29,673
$
25,462
0.7%
16.5%
Total assets
39,966
38,185
32,712
4.7%
16.7%
Loss and loss adjustment expense reserves
22,065
19,009
16,322
16.1%
16.5%
Total debt
3,084
3,089
1,910
(0.2)%
61.7%
Total liabilities
31,525
28,046
22,985
12.4%
22.0%
Shareholders' equity
8,441
10,139
9,726
(16.8)%
4.2%
Book value per share
215.54
258.21
243.25
(16.5)%
6.2%
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
Revenues.
Premiums.
Gross
written
premiums
increased
by
6.9%
to
$14.0
billion
in
2022,
compared
to
$13.1
billion
in
2021,
reflecting
a
$653.4
million,
or
16.4%,
increase
in
our
insurance
business
and
a
$248.8
million,
or
2.7%,
increase
in our
reinsurance
business.
The increase
in insurance
premiums
reflects
growth
across
most lines
of
business,
particularly
specialty
casualty
business
and
property/short
tail
business,
driven
by
positive
rate
and
exposure
increases,
new
business
and
strong
renewal
retention.
The
increase
in
reinsurance
premiums
was
primarily due to increases in casualty pro
rata business and financial lines of business, partially offset
by a decline
in
property
pro
rata
business.
Net
written
premiums
increased
by
7.9% to
$12.3 billion
in
2022, compared
to
$11.4
billion
in
2021.
The
higher
percentage
increase
in
net
written
premiums
compared
to
gross
written
premiums was primarily
due to a reduction
in business ceded to
the segregated
accounts of Mt. Logan
Re during
compared
to
2021.
Premiums
earned
increased
by
13.3%
to
$11.8
billion
in
2022,
compared
to
$10.4
billion
in
2021.
The
change
in
premiums
earned
relative
to
net
written
premiums
was
primarily
the
result
of
timing; premiums
are
earned
ratably
over
the coverage
period whereas
written
premiums
are
recorded
at
the
initiation of
the coverage
period.
Accordingly,
the significant
increase in
gross written
premiums from
pro rata
business
during
the
latter
half
of
contributed
to
the
current
year-to-date
percentage
increases
in
net
earned premiums.
Other Income
(Expense).
We
recorded
other expense
of $102
million and
other income
of $37
million in
and 2021, respectively.
The changes were primarily
the result of fluctuations
in foreign currency exchange
rates.
We
recognized
foreign
currency
exchange
expense
of
$103
million
in
and
foreign
currency
exchange
income of $28 million in 2021.
Claims and Expenses.
Incurred
Losses
and
Loss
Adjustment
Expenses.
The
following
table
presents
our
incurred
losses
and
loss
adjustment expenses (“LAE”) for
the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
Attritional
$
7,047
59.8%
$
(2)
-%
$
7,045
59.8%
Catastrophes
1,055
9.0%
-
-%
1,055
9.0%
Total segment
$
8,102
68.8%
$
(2)
-%
$
8,100
68.7%
Attritional
$
6,265
60.2%
$
(9)
(0.1)%
$
6,256
60.1%
Catastrophes
1,135
10.9%
-
-%
1,135
10.9%
Total segment
$
7,400
71.1%
$
(9)
(0.1)%
$
7,391
71.0%
Attritional
$
5,724
66.0%
$
4.7%
$
6,126
70.7%
Catastrophes
4.9%
-
-%
4.9%
Total segment
$
6,150
70.9%
$
4.7%
$
6,551
75.5%
Variance 2022/2021
Attritional
$
(0.4)
pts
$
0.1
pts
$
(0.3)
pts
Catastrophes
(80)
(1.9)
pts
-
-
pts
(80)
(1.9)
pts
Total segment
$
(2.3)
pts
$
0.1
pts
$
(2.2)
pts
Variance 2021/2020
Attritional
$
(5.8)
pts
$
(411)
(4.8)
pts
$
(10.6)
pts
Catastrophes
6.0
pts
-
-
pts
6.0
pts
Total segment
$
1,251
0.2
pts
$
(411)
(4.8)
pts
$
(4.6)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE
increased by 9.6% to
$8.1 billion in 2022, compared
to $7.4 billion in 2021,
primarily due
to
an
increase
of $782
million
in
current
year
attritional
losses,
partially
offset
by
a
decrease
of $80
million
in
current year
catastrophe
losses.
The increase
in current
year attritional
losses was
mainly due
to the
impact of
the
increase
in
premiums
earned
and
$45 million
of attritional
losses
incurred
due
to
the
Ukraine/Russia
war.
The current
year catastrophe
losses of
$1.1 billion
in 2022
related primarily
to Hurricane
Ian ($699
million), the
Australia
floods
($88
million),
the
Western
Europe
hailstorms
($69
million),
the
South
Africa
flood ($50
million), the
2022 Western
Europe Convective
Storm ($35
million), Hurricane
Fiona ($27
million), the
European
storms
($21
million)
and
the
Canada
derecho
($21
million),
with
the
remaining
losses
resulting from various
storm events.
The $1.1 billion of current
year catastrophe
losses in 2021 related
primarily
to Hurricane
Ida ($460
million), the
Texas
winter storms
($294 million),
the European
floods ($242
million), the
Canada
drought
loss
($80
million)
and
the
Quad
State
tornadoes
($45
million)
with
the
rest
of
the
losses
emanating from the South Africa riots and
the 2021 Australia floods.
Catastrophe
losses and loss
expenses typically
have a
material effect
on our incurred
losses and loss
adjustment
expense results
and can
vary significantly
from period
to period.
Losses from
natural
catastrophes
contributed
9.0
percentage
points
to
the
combined
ratio
in
2022,
compared
with
10.9
percentage
points
in
2021.
The
Company has
up to
$350.0 million
of catastrophe
bond protection
(“CAT
Bond”) that
attaches
at a
$48.1 billion
PCS
Industry
loss
threshold.
This
recovery
would
be
recognized
on
a
pro-rata
basis
up
to
a
$63.8
billion
PCS
Industry loss level.
PCS’s current
industry estimate of $47.4 million
is below the attachment point.
The potential
recovery
under
the
CAT
Bond
is
not
included
in
the
Company’s
estimate
for
Hurricane
Ian
but
would
provide
significant downside protection should
the industry loss estimate increase.
Commission,
Brokerage,
Taxes
and
Fees.
Commission,
brokerage,
taxes
and
fees
increased
by
14.5%
to
$2.5
billion for
the year
ended December
31, 2022
compared
to $2.2
billion for
the year
ended December
31, 2021.
The
increase
was
primarily
due
to
the
impact
of
the
increases
in
premiums
earned
and
changes
in
the
mix
of
business.
Other
Underwriting
Expenses.
Other
underwriting
expenses
were
$682
million
and
$583
million
in
and
2021, respectively.
The increase in
other underwriting expenses
was mainly due to
the impact of the
increase in
premiums earned
as well
as the
continued build
out of
our insurance
operations,
including an
expansion of
the
international insurance platform.
Corporate
Expenses.
Corporate
expenses,
which
are
general
operating
expenses
that
are
not
allocated
to
segments, were $61
million and $68 million
for the years
ended December 31, 2022
and 2021, respectively.
The
decrease from 2021 to 2022 was mainly
due to a decrease in variable incentive compensation.
Interest,
Fees and
Bond Issue
Cost
Amortization
Expense.
Interest,
fees
and other
bond
amortization
expense
was
$101
million
and
$70
million
in
and
2021,
respectively.
The
increases
were
primarily
due
to
the
issuance of $1.0
billion of senior
notes in October
2021.
Interest expense
was also
impacted by the
movements
in the
floating
interest
rate
related
to
the long
term
subordinated
notes,
which is
reset
quarterly
per the
note
agreement.
The floating rate was
6.99% as of December 31, 2022 compared to 2.54% as of December 31,
2021.
Income Tax
Expense (Benefit).
We had
income tax
benefit of $9
million and income
tax expense
of $167 million
in
and
2021,
respectively.
Income
tax
expense
is
primarily
a
function
of
the
geographic
location
of
the
Company’s
pre-tax
income
and
the
statutory
tax
rates
in
those
jurisdictions.
The
effective
tax
rate
(“ETR”)
is
primarily
affected
by
tax-exempt
investment
income,
foreign
tax
credits
and
dividends.
Variations
in
the
ETR
generally result
from changes
in the relative
levels of pre
-tax income,
including the impact
of catastrophe
losses
and net capital gains (losses), among jurisdictions
with different tax rates.
On
August
16,
2022,
the
Inflation
Reduction
Act
of
(“IRA”)
was
enacted.
We
have
evaluated
the
tax
provisions
of
the
IRA,
the
most
significant
of
which
are
the
corporate
alternative
minimum
tax
and
the
share
repurchase excise tax
and do not expect the legislation to have
a material impact on our results of operations.
As
the IRS issues additional guidance, we will evaluate
any impact to our consolidated
financial statements.
Net Income (Loss).
Our
net
income
was
$597
million
and
$1.4
billion
in
and
2021,
respectively.
The
change
was
primarily
driven by the consolidated investment
results explained below.
Ratios.
Our
combined
ratio
decreased
by
1.8
points
to
96.0%
in
2022,
compared
to
97.8%
in
2021.
The
loss
ratio
component decreased by
2.3 points in 2022 over
the same period last year
mainly due to a decline $80 million
in
catastrophe
losses.
The
commission
and
brokerage
ratio
components
increased
slightly
to
21.4%
in
compared
to
21.2%
in
2021.
The
increase
was
mainly
due
to
changes
in
the
mix
of
business.
The
other
underwriting expense ratios
increased slightly
to 5.8% in
2022 compared
to 5.6% in
2021.
These increases
were
mainly due to higher insurance operations
costs.
Shareholders’ Equity.
Shareholders’
equity
decreased
by
$1.7
billion
to
$8.4
billion
at
December
31,
from
$10.1
billion
at
December
31,
2021,
principally
as
a
result
of $1.9
billion
of unrealized
depreciation
on
available
for
sale
fixed
maturity
portfolio
net
of
tax,
$255
million
of
shareholder
dividends,
$77
million
of
net
foreign
currency
translation adjustments,
and the repurchase
of 241,273 common
shares for
$61 million,
partially offset
by $597
million of net income.
Consolidated Investment
Results
Net Investment Income.
Net
investment
income
decreased
by
28.8% to
$830 million
in 2022
compared
with
net
investment
income
of
$1.2
billion
in
2021.
The
decrease
was
primarily
the
result
of
a
decline
of
$490
million
in
limited
partnership
income,
partially
offset
by
an
additional
$181
million
of
income
from
fixed
maturity
investments.
The
limited
partnership
income
primarily
reflects
decreases
in
their
reported
net
asset
values.
As
such,
until
these
asset
values are monetized and the
resultant income is distributed,
they are subject to future increases
or decreases in
the asset value, and the results may be volatile.
The following table shows the components
of net investment income for
the periods indicated.
Years Ended December 31,
(Dollars in millions)
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 following tables show a comparison
of various investment yields for
the periods indicated.
Annualized pre-tax yield on average cash and invested assets
2.7
%
4.4
%
2.9
%
Annualized after-tax yield on average cash and invested assets
2.3
%
3.8
%
2.5
%
Annualized return on invested assets
1.2
%
5.3
%
4.0
%
Fixed income portfolio total return
(5.9)
%
0.5
%
6.3
%
Barclay's Capital - U.S. aggregate index
(13.0)
%
(1.5)
%
7.5
%
Common equity portfolio total return
(18.5)
%
19.0
%
26.7
%
S&P 500 index
(18.1)
%
28.7
%
18.4
%
Other invested asset portfolio total return
4.5
%
36.5
%
8.3
%
The pre
-tax
equivalent
total
return
for
the
bond
portfolio
was
approximately
(5.9)%
and
0.5%,
respectively,
in
and
2021.
The
pre-tax
equivalent
return
adjusts
the
yield
on
tax-exempt
bonds
to
the
fully
taxable
equivalent.
Our
fixed
income
and
equity
portfolios
have
different
compositions
than
the
benchmark
indexes.
Our
fixed
income portfolios have
a shorter duration
because we align our investment
portfolio with our liabilities.
We also
hold
foreign
securities
to
match
our
foreign
liabilities
while
the
index
is
comprised
of
only
U.S.
securities.
Our
equity portfolios
reflect an
emphasis on
dividend yield
and growth
equities, while
the index
is comprised
of the
largest 500 equities by market
capitalization.
Net Realized Capital Gains (Losses).
The following table presents the composition
of our net realized capital gains
(losses) for the periods indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
Variance
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities - available for sale:
Gains
$
$
$
$
(32)
$
(8)
Losses
(127)
(55)
(85)
(72)
Total
(87)
(5)
(104)
Equity securities:
Gains
Losses
(53)
(15)
(46)
(38)
Total
(9)
Other Invested Assets
Gains
Losses
(5)
(4)
(6)
(1)
Total
Short Term Investments
Gains
-
-
-
(1)
Losses
-
-
-
-
-
Total
-
-
-
(1)
Total net realized gains (losses) from dispositions:
Gains
(2)
Losses
(185)
(74)
(137)
(111)
Total
(11)
(12)
Allowance for credit losses:
(33)
(28)
(2)
(5)
(26)
Gains (losses) from fair value adjustments:
Fixed maturities
-
-
-
(2)
Equity securities
(460)
(696)
(43)
Total
(460)
(696)
(45)
Total net gains (losses) on investments
$
(455)
$
$
$
(713)
$
(10)
(Some amounts may not reconcile due to rounding.)
Net
gains
(losses)
on
investments
in
primarily
relate
to
net
losses
from
fair
value
adjustments
on
equity
securities in
the amount
of $460
million as
a result
of equity
market
declines in
2022.
In addition,
we realized
$38 million
of gains
due to
the disposition
of investments
and recorded
an increase
to the
allowance for
credit
losses of $33 million primarily related to our direct
holdings of Russian corporate
fixed maturity securities.
Segment Results.
The
Company
manages
its
reinsurance
and
insurance
operations
as
autonomous
units
and
key
strategic
decisions are based on the aggregate operating
results and projections for
these segments of business.
The Reinsurance
operation
writes worldwide
property
and casualty
reinsurance
and specialty
lines of
business,
on both
a treaty
and facultative
basis,
through
reinsurance
brokers,
as well
as directly
with ceding
companies.
Business is
written in
the U.S.,
Bermuda, and
Ireland offices,
as well as,
through branches
in Canada,
Singapore,
the United
Kingdom
and Switzerland.
The Insurance
operation
writes property
and casualty
insurance
directly
and
through
brokers,
surplus
lines
brokers
and
general
agents
within
the
U.S.,
Bermuda,
Canada,
Europe,
Singapore
and
South
America
through
its
offices
in
the
U.S.,
Canada,
Chile,
Singapore,
the
United
Kingdom,
Ireland and branches located
in the Netherlands, France, Germany and Spain.
These segments are
managed independently,
but conform
with corporate
guidelines with respect
to pricing, risk
management,
control
of
aggregate
catastrophe
exposures,
capital,
investments
and
support
operations.
Management
generally
monitors
and
evaluates
the
financial
performance
of
these
operating
segments
based
upon their underwriting results.
Underwriting results
include earned
premium less
LAE incurred,
commission and
brokerage
expenses and
other
underwriting
expenses.
We
measure
our
underwriting
results
using
ratios,
in
particular
loss,
commission
and
brokerage
and other
underwriting expense
ratios,
which, respectively,
divide
incurred
losses,
commissions
and
brokerage and other
underwriting expenses by premiums earned.
The
Company
does
not
maintain
separate
balance
sheet
data
for
its
operating
segments.
Accordingly,
the
Company does not
review and evaluate
the financial results
of its operating
segments based upon
balance sheet
data.
Our
loss
and LAE
reserves
are
management’s
best
estimate
of our
ultimate
liability
for
unpaid
claims.
We
re-
evaluate
our
estimates
on
an
ongoing
basis,
including
all
prior
period
reserves,
taking
into
consideration
all
available
information,
and
in
particular,
recently
reported
loss
claim
experience
and
trends
related
to
prior
periods.
Such re-evaluations are recorded
in incurred losses in the period in which re-evaluation
is made.
The following discusses the underwriting results for
each of our segments for the periods indicated.
Reinsurance.
The
following
table
presents
the
underwriting
results
and
ratios
for
the
Reinsurance
segment
for
the
periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
Variance
% Change
Variance
% Change
Gross written premiums
$
9,316
$
9,067
$
7,282
$
2.7%
$
1,786
24.5%
Net written premiums
8,983
8,536
6,768
5.2%
1,768
26.1%
Premiums earned
$
8,663
$
7,758
$
6,466
$
11.7%
$
1,291
20.0%
Incurred losses and LAE
5,997
5,556
4,933
7.9%
12.6%
Commission and brokerage
2,134
1,855
1,552
15.1%
19.5%
Other underwriting expenses
9.6%
13.3%
Underwriting gain (loss)
$
$
$
(195)
$
112.6%
$
175.4%
Point Chg
Point Chg
Loss ratio
69.2%
71.6%
76.3%
(2.4)
(4.7)
Commission and brokerage ratio
24.6%
23.9%
24.0%
0.7
(0.1)
Other underwriting expense ratio
2.5%
2.6%
2.7%
(0.1)
(0.1)
Combined ratio
96.4%
98.1%
103.0%
(1.8)
(4.9)
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums.
Gross written
premiums increased by
2.7% to $9.3 billion
in 2022 from $9.1
billion in 2021, primarily
due
to
increases
in
casualty
pro
rata
business
and
financial
lines
of
business,
partially
offset
by
a
decline
in
property
pro rata
business.
Net written
premiums
increased
by 5.2%
to
$9.0 billion
in 2022
compared
to
$8.5
billion in
2021.
The higher
percentage
increase
in net
written
premiums
compared
to gross
written
premiums
mainly related to
a reduction in business ceded
to the segregated
accounts of Mt. Logan
Re in 2022 compared
to
2021.
Premiums
earned
increased
by
11.7%
to
$8.7
billion
in
2022,
compared
to
$7.8
billion
in
2021.
The
change
in
premiums
earned
relative
to
net
written
premiums
is
primarily
the
result
of
timing;
premiums
are
earned
ratably
over
the
coverage
period
whereas
written
premiums
are
recorded
at
the
initiation
of
the
coverage period.
Accordingly,
the significant
increases in
gross written
premiums from
pro rata
business during
the latter half of 2021 contributed
to the current year-to-date percentage
increase in net earned premiums.
Incurred Losses
and LAE.
The following table
presents the
incurred losses
and LAE for
the Reinsurance
segment
for the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
Attritional
$
5,070
58.5%
$
(2)
-%
$
5,067
58.5%
Catastrophes
10.7%
-
-%
10.7%
Total segment
$
6,000
69.2%
$
(2)
-%
$
5,997
69.2%
Attritional
$
4,582
59.1%
$
(8)
(0.1)%
$
4,574
59.0%
Catastrophes
12.7%
-
-%
12.7%
Total segment
$
5,564
71.8%
$
(8)
(0.1)%
$
5,556
71.6%
Attritional
$
4,180
64.6%
$
6.1%
$
4,576
70.7%
Catastrophes
5.5%
-
-%
5.5%
Total segment
$
4,537
70.1%
$
6.1%
$
4,933
76.3%
Variance 2022/2021
Attritional
$
(0.6)
pts
$
0.1
pts
$
(0.5)
pts
Catastrophes
(53)
(2.0)
pts
-
-
pts
(53)
(2.0)
pts
Total segment
$
(2.6)
pts
$
0.1
pts
$
(2.4)
pts
Variance 2021/2020
Attritional
$
(5.5)
pts
$
(405)
(6.2)
pts
$
(3)
(11.7)
pts
Catastrophes
7.2
pts
-
-
pts
7.2
pts
Total segment
$
1,028
1.7
pts
$
(405)
(6.2)
pts
$
(4.5)
pts
(Some amounts may not reconcile due to rounding.)
Incurred
losses
increased
by
7.9%
to
$6.0
billion
in
2022, compared
to
$5.6
billion
in
2021.
The
increase
was
primarily due to an increase
of $488 million in current
year attritional losses,
partially offset by a decrease
of $53
million in
current
year catastrophe
losses.
The increase
in current
year attritional
losses was
mainly related
to
the
impact
of the
increase
in
premiums
earned
and
$45 million
of attritional
losses
due to
the
Ukraine/Russia
war.
The
current
year
catastrophe
losses
of
$930
million
in
related
primarily
to
Hurricane
Ian
($599
million),
the
Australia
floods
($88
million),
the
Western
Europe
hailstorms
($69
million),
the
South
Africa
flood
($50
million),
the
Western
Europe
Convective
storm
($29
million),
Hurricane
Fiona
($22
million), the 2022 European
storms ($21 million)
and the 2022 Canada
derecho ($21 million),
with the remaining
losses resulting
from various
storm events.
The $983
million of
current year
catastrophe
losses in
2021 related
primarily
to
Hurricane
Ida
($380
million),
the
Texas
winter
storms
($237
million),
the
European
floods
($242
million), the
Canada drought
loss ($80
million) and
the Quad
state
tornadoes ($30
million), with
the rest
of the
losses emanating from the 2021 South Africa riots and
the 2021 Australia floods.
Segment Expenses.
Commission and
brokerage
expense increased
by 15.1% to
$2.1 billion in
2022 compared to
$1.9 billion in 2021.
The increase was mainly
due to the impact of the
increase in premiums earned
and changes
in
the
mix
of
business.
Segment
other
underwriting
expenses
increased
to
$218
million
in
from
$199
million
in
2021.
The
increase
was
mainly
due
to
the
increase
in
written
premium
attributable
to
the
planned
expansion of the business.
Insurance.
The
following
table
presents
the
underwriting
results
and
ratios
for
the
Insurance
segment
for
the
periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
Variance
% Change
Variance
% Change
Gross written premiums
$
4,636
$
3,983
$
3,201
$
16.4%
$
24.4%
Net written premiums
3,361
2,910
2,349
15.5%
23.9%
Premiums earned
$
3,124
$
2,649
$
2,215
$
17.9%
$
19.6%
Incurred losses and LAE
2,103
1,835
1,617
14.6%
13.4%
Commission and brokerage
11.3%
10.4%
Other underwriting expenses
20.8%
14.3%
Underwriting gain (loss)
$
$
$
(58)
$
114.4%
$
230.7%
Point Chg
Point Chg
Loss ratio
67.3%
69.3%
73.0%
(2.0)
(3.7)
Commission and brokerage ratio
12.6%
13.4%
14.5%
(0.8)
(1.1)
Other underwriting expense ratio
14.8%
14.5%
15.1%
0.3
(0.6)
Combined ratio
94.8%
97.1%
102.6%
(2.5)
(5.5)
(Some amounts may not reconcile due to rounding.)
Premiums.
Gross written
premiums increased
by 16.4% to
$4.6 billion in
2022 compared
to $4.0 billion
in 2021.
The increase
in insurance
premiums reflects
growth across
most lines
of business,
particularly specialty
casualty
and
property/short
tail
business,
driven
by
positive
rate
and
exposure
increases,
new
business
and
strong
renewal retention.
Net written
premiums increased
by 15.5% to
$3.4 billion in
2022 compared
to $2.9 billion
in
2021, which
is consistent
with the
percentage
change
in gross
written
premiums.
Premiums
earned increased
17.9% to
$3.1 million
in 2022
compared to
$2.6 billion
in 2021.
The change
in premiums
earned relative
to net
written premiums is the result
of timing; premiums are earned ratably
over the coverage
period whereas written
premiums
are
recorded
at
the
initiation
of the
coverage
period.
Accordingly,
the significant
increases
in gross
written premiums
during the
latter
half of
2021 contributed
to the
current year
-to-date
percentage
increase in
net earned premiums.
Incurred Losses and
LAE.
The following table presents
the incurred losses
and LAE for the Insurance
segment for
the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
Attritional
$
1,977
63.3%
$
-%
$
1,978
63.3%
Catastrophes
4.0%
-
-%
4.0%
Total segment
$
2,102
67.3%
$
-%
$
2,103
67.3%
Attritional
$
1,684
63.6%
$
(1)
-%
$
1,682
63.6%
Catastrophes
5.8%
-
-%
5.8%
Total segment
$
1,836
69.4%
$
(1)
-%
$
1,835
69.3%
Attritional
$
1,545
69.7%
$
0.2%
$
1,549
69.9%
Catastrophes
3.1%
-
-%
3.1%
Total segment
$
1,613
72.8%
$
0.2%
$
1,617
73.0%
Variance 2022/2021
Attritional
$
(0.3)
pts
$
-
pts
$
(0.3)
pts
Catastrophes
(28)
(1.8)
pts
-
-
pts
(28)
(1.8)
pts
Total segment
$
(2.1)
pts
$
-
pts
$
(2.0)
pts
Variance 2021/2020
Attritional
$
(6.1)
pts
$
(6)
(0.2)
pts
$
(6.3)
pts
Catastrophes
2.7
pts
-
-
pts
2.7
pts
Total segment
$
(3.4)
pts
$
(6)
(0.2)
pts
$
(3.7)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by
14.6% to $2.1 billion in 2022 compared to $1.8 billion
in 2021.
The increase
was mainly
due to
an increase
of $293
million in
current year
attritional
losses,
partially offset
by a
decrease in
current year
catastrophe
losses of
$28 million.
The increase
in current
year attritional
losses was
primarily due
to the impact
of the increase
in premiums earned.
The current year
catastrophe
losses of $125
million primarily
related to
Hurricane Ian
($99 million),
with the
remaining losses
resulting from
various storm
events.
The $153
million of current
year catastrophe
losses in 2021 related
to Hurricane Ida
($80 million), the Texas
winter storms
($58 million) and the Quad State tornadoes
($15 million).
Segment
Expenses.
Commission and
brokerage
increased by
11.3% to
$394 million
in 2022
compared
to
$354
million
in
2021.
Segment
other
underwriting
expenses
increased
to
$463
million
in
compared
to
$384
million
in
2021.
These
increases
were
mainly
due
to
the
impact
of
the
increase
in
premiums
earned
and
increased expenses
related
to the
continued
build out
of the
insurance
business, including
an expansion
of the
international insurance platform.
Critical Accounting Estimates
The following
is a
summary of
the critical
accounting estimates
related to
accounting estimates
that (1)
require
management
to
make
assumptions
about
highly
uncertain
matters
and
(2)
could
materially
impact
the
consolidated financial statements
if management made different
assumptions.
Loss and LAE
Reserves.
Our most critical
accounting estimate
is the determination
of our loss
and LAE reserves.
We
maintain
reserves
equal to
our estimated
ultimate
liability for
losses
and LAE
for
reported
and unreported
claims for our insurance and reinsurance
businesses.
Because reserves are based on estimates
of ultimate losses
and
LAE
by
underwriting
or
accident
year,
we
use
a
variety
of
statistical
and
actuarial
techniques
to
monitor
reserve
adequacy
over
time, evaluate
new information
as it
becomes known
and adjust
reserves
whenever
an
adjustment
appears
warranted.
We
consider
many
factors
when
setting
reserves
including:
(1)
our
exposure
base
and
projected
ultimate
premiums
earned;
(2)
our
expected
loss
ratios
by
product
and
class
of
business,
which are developed collaboratively
by underwriters and actuaries;
(3) actuarial methodologies and
assumptions
which analyze
our loss
reporting and
payment experience,
reports from
ceding companies
and historical
trends,
such
as
reserving
patterns,
loss
payments
and
product
mix;
(4)
current
legal
interpretations
of
coverage
and
liability;
and
(5)
economic
conditions.
Our
insurance
and
reinsurance
loss
and
LAE
reserves
represent
management’s best
estimate of our ultimate
liability. Actual
losses and LAE ultimately
paid may deviate,
perhaps
substantially,
from
such
reserves.
Our
net
income
(loss)
will
be
impacted
in
a
period
in
which
the
change
in
estimated ultimate losses
and LAE is recorded.
See also ITEM 8, “Financial Statements
and Supplementary Data”
- Note 1 of Notes to the Consolidated Financial
Statements.
It is more
difficult to
accurately
estimate loss
reserves for
reinsurance
liabilities than
for insurance
liabilities.
At
December 31,
2022, we
had reinsurance
reserves of
$16.1 billion,
of which
$278 million
were loss
reserves for
A&E
liabilities,
and
insurance
loss
reserves
of
$5.9
billion.
A
detailed
discussion
of
additional
considerations
related to A&E exposures
follows later in this section.
The
detailed
data
required
to
evaluate
ultimate
losses
for
our
insurance
business
is
accumulated
from
our
underwriting and claim systems.
Reserving for reinsurance
requires evaluation of loss
information received
from
ceding companies.
Ceding companies
report losses
to us
in many
forms dependent
on the type
of contract
and
the
agreed
or
contractual
reporting
requirements.
Generally,
proportional/quota
share
contracts
require
the
submission
of
a
monthly/quarterly
account,
which
includes
premium
and
loss
activity
for
the
period
with
corresponding reserves
as established by
the ceding company.
This information
is recorded into
our records.
For
certain
proportional
contracts,
we
may
require
a
detailed
loss
report
for
claims
that
exceed
a
certain
dollar
threshold
or
relate
to
a
particular
type
of
loss.
Excess
of
loss
and
facultative
contracts
generally
require
individual loss reporting
with precautionary notices
provided when a
loss reaches a
significant percentage
of the
attachment point
of the contract
or when certain causes
of loss or types
of injury occur.
Our experienced claims
staff
handles
individual
loss reports
and supporting
claim information.
Based on
our evaluation
of a
claim, we
may establish
additional case
reserves (ACRs)
in addition
to the
case reserves
reported by
the ceding
company.
To
ensure
ceding
companies
are
submitting
required
and accurate
data,
the
Underwriting,
Claim,
Reinsurance
Accounting
and Internal
Audit departments
of the
Company
perform various
reviews
of our
ceding companies,
particularly larger ceding companies, including
on-site audits of domestic ceding companies.
We sort
both our
reinsurance
and insurance
reserves into
exposure
groupings
for actuarial
analysis.
We assign
our
business
to
exposure
groupings
so
that
the
underlying
exposures
have
reasonably
homogeneous
loss
development
characteristics
and
are
large
enough
to
facilitate
credible
estimation
of
ultimate
losses.
We
periodically
review
our
exposure
groupings
and
we
may
change
our
groupings
over
time
as
our
business
changes.
We
currently
use
over
exposure
groupings
to
develop
our
reserve
estimates.
One
of
the
key
selection characteristics
for
the
exposure
groupings
is the
historical
duration
of the
claims
settlement
process.
Business in
which claims
are reported
and settled
relatively quickly
are commonly
referred
to as
short tail
lines,
principally property
lines.
Casualty claims
tend to
take
longer to
be reported
and settled
and casualty
lines are
generally referred
to as
long tail
lines.
Our estimates
of ultimate
losses for
shorter tail
lines, with
the exception
of loss estimates for large catastrophic
events,
generally exhibit less volatility
than those for the longer tail lines.
We
use
similar
actuarial
methodologies,
such
as
expected
loss
ratio,
chain
ladder
reserving
methods
and
Bornhuetter-Ferguson,
supplemented
by judgment
where appropriate,
to estimate
our ultimate
losses and
LAE
for each
exposure group.
Although we
use similar
actuarial methodologies
for both
short tail
and long
tail lines,
the faster reporting
of experience for
the short tail lines
allows us to
have greater confidence
in our estimates
of
ultimate
losses
for
short
tail
lines
at
an
earlier
stage
than
for
long
tail
lines.
As
a
result,
we
utilize,
as
well,
exposure-based
methods
to
estimate
our ultimate
losses
for
longer
tail
lines,
especially
for
immature
accident
years.
For
both
short
and
long
tail
lines,
we
supplement
these
general
approaches
with
analytically
based
judgments.
We
cannot
estimate
losses
from
widespread
catastrophic
events,
such
as
hurricanes
and
earthquakes,
using
traditional
actuarial
methods.
We
estimate
losses
for
these
types
of
events
based
on
information
derived
from
catastrophe
models,
quantitative
and
qualitative
exposure
analyses,
reports
and
communications
from
ceding
companies
and
development
patterns
for
historically
similar
events.
Due
to
the
inherent
uncertainty
in
estimating
such
losses,
these
estimates
are
subject
to
variability,
which
increases
with
the severity and complexity of the underlying event.
Our key
actuarial assumptions
contain
no explicit
provisions
for reserve
uncertainty
nor do
we supplement
the
actuarially determined reserves for uncertainty.
Our carried
reserves at
each reporting
date are
management’s
best estimate
of ultimate
unpaid losses
and LAE
at
that
date.
We
complete
detailed
reserve
studies
for
each exposure
group
annually
for our
reinsurance
and
insurance
operations.
The
completed
annual
reinsurance
reserve
studies
are
“rolled
forward”
for
each
accounting period
until the
subsequent reserve
study is
completed.
Analyzing the
roll-forward
process involves
comparing
actual
reported
losses
to
expected
losses
based
on
the
most
recent
reserve
study.
We
analyze
significant
variances
between
actual
and
expected
losses
and
also
consider
recent
market,
underwriting
and
management
criteria
to
determine
management’s
best
estimate
of
ultimate
unpaid
losses
and
LAE.
Management’s
best estimate
is developed
through
collaboration
with actuarial,
underwriting, claims,
legal
and
finance
departments
and
culminates
with
the
input
of
reserve
committees.
Each
segment
reserve
committee
includes the participation of the relevant parties
from actuarial, finance, claims and segment senior management
and has
the responsibility
for recommending
and approving
management’s
best estimate.
Reserves are
further
reviewed
by
Everest’s
Chief
Reserving
Actuary
and
senior
management.
The
objective
of
such
process
is
to
determine a single best
estimate viewed by
management to be
the best estimate
of its ultimate loss
liability.
As
a result of
these additional factors,
in some instances
the selected reserve
level may be
higher or lower than
the
actuarial indicated estimate.
Given
the
inherent
variability
in
our
loss
reserves,
we
have
developed
an
estimated
range
of
possible
gross
reserve
levels.
A
table
of
ranges
by
segment,
accompanied
by
commentary
on
potential
and
historical
variability,
is
included
in
“Financial
Condition
- Loss
and
LAE Reserves”.
The ranges
are
statistically
developed
using the exposure groups used in
the reserve estimation process
and aggregated to the segment
level.
For each
exposure
group,
our actuaries
calculate
a range
for each
accident year
based principally
on two
variables.
The
first
is
the
historical
changes
in
losses
and
LAE incurred
but not
reported
(“IBNR”)
for
each
accident
year
over
time; the second is
volatility of each
accident year’s
held reserves related
to estimated
ultimate losses, also
over
time.
Both are measured at various
ages from the end of the accident year through
the final payout of the year’s
losses.
Ranges are
developed for
the exposure
groups using
statistical
methods to
adjust for
diversification;
the
ranges
for
the
exposure
groups
are
aggregated
to
the
segment
level,
likewise,
with
an
adjustment
for
diversification.
Our
estimates
of
our
reserve
variability
may
not
be
comparable
to
those
of
other
companies
because there
are no
consistently
applied actuarial
or accounting
standards
governing such
presentations.
Our
recorded
reserves
reflect
our
best
point
estimate
of
our
liabilities
and
our
actuarial
methodologies
focus
on
developing
such
point
estimates.
We
calculate
the
ranges
subsequently,
based
on
the
historical
variability
of
such reserves.
Asbestos and Environmental
Exposures.
We continue to
receive claims under expired
insurance and reinsurance
contracts asserting
injuries and/or damages
relating to
or resulting
from environmental
pollution and hazardous
substances,
including
asbestos.
Environmental
claims
typically
assert
liability
for
(a)
the
mitigation
or
remediation
of environmental
contamination
or (b)
bodily injury
or property
damage
caused
by
the release
of
hazardous
substances
into the
land, air
or water.
Asbestos claims
typically assert
liability for
bodily injury
from
exposure to asbestos or for
property damage resulting from asbestos
or products containing asbestos.
Our
reserves
include
an
estimate
of
our
ultimate
liability
for
A&E
claims.
There
are
significant
uncertainties
surrounding our
estimates of
our potential
losses from
A&E claims.
Among the
uncertainties
are: (a)
potentially
long waiting periods
between exposure
and manifestation
of any
bodily injury or
property damage;
(b) difficulty
in
identifying
sources
of
asbestos
or
environmental
contamination;
(c)
difficulty
in
properly
allocating
responsibility
and/or liability
for asbestos
or environmental
damage; (d)
changes in
underlying laws
and judicial
interpretation
of those laws;
(e) the potential
for an
asbestos or
environmental
claim to involve
many insurance
providers
over
many
policy
periods;
(f)
questions
concerning
interpretation
and
application
of
insurance
and
reinsurance coverage;
and (g) uncertainty
regarding the
number and identity
of insureds with
potential asbestos
or environmental exposure.
Due to the uncertainties
discussed above, the ultimate
losses attributable to
A&E, and particularly asbestos,
may
be subject to more variability
than are non-A&E reserves
and such variation
could have a material
adverse effect
on our
financial condition,
results of
operations
and/or cash
flows.
See also
ITEM 8,
“Financial Statements
and
Supplementary Data” - Notes 1 and 3
of Notes to the Consolidated Financial Statements.
Reinsurance
Recoverables.
We
have
purchased
reinsurance
to
reduce
our
exposure
to
adverse
claim
experience,
large
claims
and catastrophic
loss
occurrences.
Our ceded
reinsurance
provides
for
recovery
from
reinsurers
of
a
portion
of
losses
and
loss
expenses
under
certain
circumstances.
Such
reinsurance
does
not
relieve us of our
obligation to
our policyholders.
In the event our
reinsurers are
unable to meet their obligations
under these agreements
or are able to successfully
challenge losses ceded by
us under the contracts,
we will not
be
able
to
realize
the
full
value
of
the
reinsurance
recoverable
balance.
In
some
cases,
we
may
hold
full
or
partial collateral
for the
receivable,
including letters
of credit,
trust assets
and cash.
Additionally,
creditworthy
foreign
reinsurers
of
business
written
in
the
U.S.,
as
well
as
capital
markets’
reinsurance
mechanisms,
are
generally required
to secure their
obligations.
We have
established reserves
for uncollectible balances
based on
our
assessment
of
the
collectability
of
the
outstanding
balances.
The
allowance
for
uncollectible
reinsurance
reflects
management’s
best
estimate
of
reinsurance
cessions
that
may
be
uncollectible
in
the
future
due
to
reinsurers’
unwillingness or
inability to pay.
The allowance for
uncollectible reinsurance
comprises an
allowance
and
an
allowance
for
disputed
balances.
Based
on
this
analysis,
the
Company
may
adjust
the
allowance
for
uncollectible reinsurance or charge
off reinsurer balances that are
determined to be uncollectible.
Due to the inherent
uncertainties as to
collection and the length
of time before reinsurance
recoverable become
due, it is possible that future adjustments
to the Company’s reinsurance
recoverable, net of the
allowance, could
be required,
which could
have a
material adverse
effect on
the Company’s
consolidated results
of operations
or
cash flows in a particular quarter or annual period.
The allowance
is
estimated
as
the
amount
of reinsurance
recoverable
exposed
to
loss multiplied
by
estimated
factors
for
the
probability
of
default.
The
reinsurance
recoverable
exposed
is
the
amount
of
reinsurance
recoverable
net of collateral
and other offsets,
considering the nature
of the collateral,
potential future
changes
in collateral
values, and
historical loss
information for
the type of
collateral obtained.
The probability
of default
factors are
historical insurer
and reinsurer
defaults for
liabilities with similar
durations to
the reinsured liabilities
as
estimated
through
multiple
economic
cycles.
Credit
ratings
are
forward-looking
and
consider
a
variety
of
economic outcomes.
The Company's
evaluation of
the required allowance
for reinsurance
recoverable
considers
the current economic environment
as well as macroeconomic scenarios.
The
Company
records
credit
loss
expenses
related
to
reinsurance
recoverable
in
Incurred
losses
and
loss
adjustment expenses in the Company’s
consolidated statements
of operations and comprehensive
income (loss).
Write-offs of
reinsurance recoverable
and any related
allowance are recorded
in the period in
which the balance
is deemed uncollectible.
Premiums
Written
and
Earned.
Premiums
written
by
us
are
earned
ratably
over
the
coverage
periods
of
the
related insurance
and reinsurance
contracts.
We
establish
unearned premium
reserves
to cover
the unexpired
portion of
each contract.
Such reserves,
for assumed
reinsurance,
are computed
using pro
rata
methods based
on statistical
data received from
ceding companies.
Premiums earned, and the
related costs,
which have not yet
been
reported
to
us,
are
estimated
and
accrued.
Because
of
the
inherent
lag
in
the
reporting
of
written
and
earned
premiums
by
our
ceding
companies,
we
use
standard
accepted
actuarial
methodologies
to
estimate
earned but not reported
premium at each financial reporting
date. These earned but
not reported premiums
are
combined
with
reported
earned
premiums
to
comprise
our
total
premiums
earned
for
determination
of
our
incurred
losses
and
loss
and
LAE
reserves.
Commission
expense
and
incurred
losses
related
to
the
change
in
earned
but
not
reported
premium are
included
in
current
period
company
and segment
financial
results.
See
also
ITEM
8,
“Financial
Statements
and
Supplementary
Data”
-
Note
of Notes
to
the
Consolidated
Financial
Statements.
The following table displays
the estimated components of net earned but
not reported premiums by segment for
the periods indicated.
At December 31,
(Dollars in millions)
Reinsurance
$
2,255
$
2,055
$
1,774
Insurance
-
-
-
Total
$
2,255
$
2,055
$
1,774
(Some amounts may not reconcile due to rounding.)
Investment
Valuation.
Our fixed
income
investments
are
classified for
accounting
purposes
as either
available
for sale
or held to
maturity.
The available
for sale
fixed maturity
securities are
carried at fair
value and
the held
to maturity fixed
maturity portfolio
is carried at
amortized cost,
net of current
expected credit
allowance on our
consolidated
balance
sheets.
Our
equity
securities
are
all
carried
at
fair
value.
Most
securities
we
own
are
traded
on
national
exchanges
where
market
values
are
readily
available.
Some
of
our
commercial
mortgage-
backed
securities (“CMBS”)
are valued
using cash
flow models
and risk-adjusted
discount rates.
We hold
some
privately
placed securities,
less than
10% of
the portfolio,
that
are
either valued
by investment
advisors
or the
Company.
In
some
instances,
values
provided
by
an
investment
advisor
are
supported
with
opinions
from
qualified independent third parties.
The Company has procedures
in place to review the values
received from its
investment
advisors.
At
December 31,
2022 and
2021, our
investment
portfolio
included
$3.8 billion
and $2.6
billion,
respectively,
of
limited
partnership
investments
whose
values
are
reported
pursuant
to
the
equity
method
of
accounting.
We
carry
these
investments
at
values
provided
by
the
managements
of
the
limited
partnerships and
due to inherent
reporting lags,
the carrying values
are based on
values with “as
of” dates from
one month to one quarter prior to our financial statement
date.
At December 31, 2022, we had
net unrealized losses on our available
for sale fixed maturity
securities, net of tax,
of $1.7 billion
compared to
net unrealized
gains on
our available
for sale
fixed maturity
securities, net
of tax,
of
$239 million
at December
31, 2021.
Gains (losses)
from market
fluctuations on
available for
sale fixed
maturity
securities
at
fair
value
are
reflected
as
accumulated
other
comprehensive
income
(loss)
in
the
consolidated
balance sheets.
Market
value declines
for available
for sale
fixed income
portfolio,
which are
considered credit
related, are reflected
in our consolidated
statements of operations
and comprehensive income
(loss), as realized
capital
losses.
We
consider
many
factors
when
determining
whether
a
market
value
decline
is
credit
related,
including:
(1) we
have no
intent
to sell
and, more
likely than
not, will
not be
required to
sell prior
to recovery,
(2) the
length of
time the
market
value has
been below
book value,
(3) the
credit strength
of the
issuer,
(4) the
issuer’s
market
sector,
(5)
the
length
of
time
to
maturity
and
(6)
for
asset-backed
securities,
changes
in
prepayments,
credit
enhancements
and
underlying
default
rates.
If management’s
assessments
change
in
the
future, we may
ultimately record
a realized loss
after management
originally concluded that
the decline in value
was temporary.
Fixed
maturity
securities
designated
as
held
to
maturity
consist
of
debt
securities
for
which
the
Company
has
both the positive
intent and ability
to hold to
maturity or redemption
and are reported
at amortized cost,
net of
the
current
expected
credit
loss
allowance.
Interest
income
for
fixed
maturity
securities
held
to
maturity
is
determined in the
same manner as interest
income for fixed
maturity securities available
for sale.
The Company
evaluates
fixed
maturity
securities
classified as
held to
maturity
for
current
expected
credit
losses
utilizing
risk
characteristics
of
each
security,
including
credit
rating,
remaining
time
to
maturity,
adjusted
for
prepayment
considerations,
and
subordination
level,
and
applying
default
and
recovery
rates,
which
include
the
incorporation
of
historical
credit
loss
experience
and
macroeconomic
forecasts,
to
develop
an
estimate
of
current expected credit losses.
See also ITEM 8, “Financial
Statements and
Supplementary Data”
- Note 1 of Notes
to the Consolidated
Financial
Statements.
FINANCIAL CONDITION
Investments.
Total
investments were
$28.5 billion at
December 31, 2022,
an increase
of $241 million
compared
to
$28.2
billion
at
December
31,
2021.
The
rise
in
investments
was
primarily
related
to
an
increase
in
other
invested assets, partially
offset by a decline in equity
securities.
The increase in other invested
assets was due to
the inclusion
of assets held
for the implementation
of a Company
Owned Life Insurance
(“COLI”) program
in the
fourth quarter
of 2022.
A portion of
the equity securities
portfolio was
sold in order
to invest
in the COLI
assets
which accounted for the decline in equity
securities.
The
Company’s
limited
partnership
investments
are
comprised
of
limited
partnerships
that
invest
in
private
equity,
private
credit
and
private
real
estate.
Generally,
the
limited
partnerships
are
reported
on
a
month
or
quarter
lag.
We
receive
annual
audited
financial
statements
for
all
of
the
limited
partnerships
which
are
prepared using
fair value accounting
in accordance with
FASB guidance.
For the quarterly
reports, the Company
reviews
the
financial
reports
for
any
unusual
changes
in
carrying
value.
If
the
Company
becomes
aware
of
a
significant
decline in
value during
the lag
reporting
period, the
loss will
be recorded
in the
period in
which the
Company identifies the decline.
The
table
below
summarizes
the
composition
and
characteristics
of
our
investment
portfolio
as
of
the
dates
indicated.
At December 31,
Fixed income portfolio duration (years)
3.1
3.2
Fixed income composite credit quality
A+
A+
Reinsurance Recoverables
.
Reinsurance
recoverables
for
both
paid
and
unpaid
losses
totaled
$2.2
billion
at
December
31,
and
$2.1
billion at
December 31,
2021.
At
December 31,
2022, $520
million, or
23.2%, was
recoverable
from Mt.
Logan
Re
collateralized
segregated
accounts;
$283
million,
or
12.6%,
was
recoverable
from
Munich
Re
and
$148
million, or 6.6%, was
recoverable
from Endurance
Re.
No other retrocessionaire
accounted for
more than 5% of
our recoverables.
Loss and LAE Reserves.
Gross loss and LAE reserves
totaled $22.1 billion and
$19.0 billion at December 31,
and 2021, respectively.
The following
tables summarize
gross outstanding
loss and
LAE reserves
by segment,
classified by
case reserves
and IBNR reserves, for the periods indicated.
At December 31, 2022
Case
IBNR
Total
% of
(Dollars in millions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
6,045
$
9,818
$
15,862
71.9%
Insurance
1,863
4,062
5,925
26.9%
Total excluding A&E
7,908
13,880
21,787
98.7%
A&E
1.3%
Total including A&E
$
8,046
$
14,019
$
22,065
100.0%
(Some amounts may not reconcile due to rounding.)
At December 31, 2021
Case
IBNR
Total
% of
(Dollars in millions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
5,415
$
8,312
$
13,727
72.2%
Insurance
1,546
3,562
5,109
26.9%
Total excluding A&E
6,961
11,875
18,836
99.1%
A&E
0.9%
Total including A&E
$
7,125
$
11,885
$
19,009
100.0%
(Some amounts may not reconcile due to rounding.)
Changes
in
premiums
earned
and
business
mix,
reserve
re-estimations,
catastrophe
losses
and
changes
in
catastrophe loss reserves
and claim settlement activity all impact loss and LAE
reserves by segment and in total.
Our
carried
loss
and
LAE
reserves
represent
management’s
best
estimate
of
our
ultimate
liability
for
unpaid
claims.
We
continuously
re-evaluate
our
reserves,
including
re-estimates
of
prior
period
reserves,
taking
into
consideration
all available
information and,
in particular,
newly reported
loss and
claim experience.
Changes in
reserves resulting
from such
re-evaluations are
reflected in
incurred losses
in the period
when the re-evaluation
is
made.
Our
analytical
methods
and
processes
operate
at
multiple
levels
including
individual
contracts,
groupings of
like contracts,
classes and
lines of business,
internal business
units, segments,
accident years,
legal
entities,
and
in
the
aggregate.
In
order
to
set
appropriate
reserves,
we
make
qualitative
and
quantitative
analyses
and
judgments
at
these
various
levels.
We
utilize
actuarial
science,
business
expertise
and
management judgment
in a manner
intended to
ensure the accuracy
and consistency
of our reserving
practices.
Management’s
best estimate
is developed
through
collaboration
with actuarial,
underwriting, claims,
legal
and
finance
departments
and
culminates
with
the
input
of
reserve
committees.
Each
segment
reserve
committee
includes the participation of the relevant parties
from actuarial, finance, claims and segment senior management
and has
the responsibility
for recommending
and approving
management’s
best estimate.
Reserves are
further
reviewed
by
Everest’s
Chief
Reserving
Actuary
and
senior
management.
The
objective
of
such
process
is
to
determine
a
single
best
estimate
viewed
by
management
to
be
the
best
estimate
of
its
ultimate
loss
liability.
Nevertheless, our reserves are estimates,
which are subject to variation,
which may be significant.
There
can
be no
assurance
that reserves
for,
and losses
from,
claim obligations
will not
increase
in the
future,
possibly
by
a
material
amount.
However,
we
believe
that
our
existing
reserves
and
reserving
methodologies
lessen
the
probability
that
any
such
increase
would
have
a
material
adverse
effect
on
our
financial
condition,
results of operations or cash flows.
We
have
included
ranges
for
loss
reserve
estimates
determined
by
our
actuaries,
which
have
been
developed
through
a
combination
of
objective
and
subjective
criteria.
Our
presentation
of
this
information
may
not
be
directly comparable
to similar presentations
of other companies
as there are
no consistently
applied actuarial or
accounting standards
governing such presentations.
Our recorded reserves
are an aggregation
of our best
point
estimates
for
approximately
reserve
groups
and
reflect
our
best
point
estimate
of
our
liabilities.
Our
actuarial methodologies develop
point estimates
rather than ranges
and the ranges
are developed subsequently
based upon historical and prospective
variability measures.
The
following
table
below
represents
the
reserve
levels
and
ranges
for
each
of
our
business
segments
for
the
period indicated.
Outstanding Reserves and Ranges By Segment (1)
At December 31, 2022
As
Low
Low
High
High
(Dollars in millions)
Reported
Range %
Range
Range %
Range
Gross Reserves By Segment
Reinsurance
$
15,862
-7.4%
$
14,689
7.8%
$
17,095
Insurance
5,925
-9.9%
5,340
10.8%
6,565
Total Gross Reserves (excluding A&E)
21,787
-8.1%
20,029
8.6%
23,660
A&E (All Segments)
-22.9%
22.7%
Total Gross Reserves
$
22,065
-8.3%
20,243
8.8%
24,001
(Some amounts may not reconcile due
to rounding.)
______________________________________________________
(1)
There can be no assurance that reserves
will not ultimately exceed the
indicated ranges requiring additional
income (loss) statement expense.
Depending
on
the
specific
segment,
the
range
derived
for
the
loss
reserves,
excluding
reserves
for
A&E
exposures,
ranges
from minus
7.4% to
minus 9.9%
for the
low range
and from
plus 7.8%
to plus
10.8% for
the
high range.
Both the higher
and lower ranges
are associated
with the Insurance
segment.
The size of
the range
is
dependent
upon
the
level
of
confidence
associated
with
the
reserve
estimates.
Within
each
range,
management’s
best
estimate
of
loss
reserves
is
based
upon
the
point
estimate
derived
by
our
actuaries
in
detailed reserve
studies.
Such ranges
are necessarily
subjective due
to the
lack of
generally
accepted actuarial
standards with
respect to their
development.
There can be
no assurance that
our claim obligations
will not vary
outside of these ranges.
Additional losses, including
those relating to
latent injuries, and
other exposures, which
are as yet
unrecognized,
the type
or magnitude
of which
cannot be
foreseen
by us
or the
reinsurance
and insurance
industry
generally,
may
emerge
in
the
future.
Such
future
emergence,
to
the
extent
not
covered
by
existing
retrocessional
contracts,
could have
material
adverse
effects
on our
future financial
condition,
results of
operations
and cash
flows.
Asbestos and Environmental
Exposures.
A&E exposures represent a separate
exposure group for monitoring
and
evaluating reserve adequacy.
With
respect
to
asbestos
only,
at
December
31,
2022,
we
had
net
asbestos
loss
reserves
of
$233
million,
or
90.5%, of total net A&E reserves, all of which was
for assumed business.
See
Note
of
Notes
to
Consolidated
Financial
Statements
for
a
summary
of
Asbestos
and
Environmental
Exposures.
Ultimate
loss
projections
for
A&E
liabilities
cannot
be
accomplished
using
standard
actuarial
techniques.
We
believe
that
our
A&E
reserves
represent
management’s
best
estimate
of the
ultimate
liability;
however,
there
can be no assurance that ultimate loss
payments will not exceed such reserves,
perhaps by a significant amount.
Industry
analysts
use
the
“survival
ratio”
to
compare
the
A&E
reserves
among
companies
with
such
liabilities.
The survival ratio is typically calculated
by dividing a company’s
current net reserves by the three year
average of
annual
paid
losses.
Hence,
the
survival
ratio
equals
the
number
of
years
that
it
would
take
to
exhaust
the
current reserves
if future
loss payments
were to
continue at
historical
levels.
Using this
measurement,
our net
three
year
asbestos
survival
ratio
was
6.9
years
at
December
31,
2022.
These
metrics
can
be
skewed
by
individual large settlements
occurring in the
prior three years
and therefore,
may not be
indicative of
the timing
of future payments.
LIQUIDITY AND CAPITAL RESOURCES
Capital.
Shareholders’
equity at
December 31,
2022 and
December 31,
2021 was
$8.4 billion
and $10.1
billion,
respectively.
Management’s
objective
in
managing
capital
is
to
ensure
its
overall
capital
level,
as
well
as
the
capital
levels
of
its
operating
subsidiaries,
exceed
the
amounts
required
by
regulators,
the
amount
needed
to
support
our current
financial strength
ratings
from rating
agencies and
our own
economic capital
models.
The
Company’s capital
has historically exceeded these benchmark
levels.
Our
two
main
operating
companies
Bermuda
Re
and
Everest
Re
are
regulated
by
the
Bermuda
Monetary
Authority
(“BMA”)
and
the
State
of
Delaware,
Department
of
Insurance,
respectively.
Both
regulatory
bodies
have their
own capital
adequacy models
based on
statutory capital
as opposed
to GAAP basis
equity.
Failure to
meet
the
required
statutory
capital
levels
could
result
in
various
regulatory
restrictions,
including
business
activity and the payment of dividends to
their parent companies.
The regulatory targeted
capital and the actual statutory
capital for Bermuda Re and Everest
Re were as follows:
Bermuda Re
(1)
Everest Re
(2)
At December 31,
At December 31,
(Dollars in millions)
(3)
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
200% 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.
Our financial strength
ratings as determined
by A.M. Best, Moody’s
and Standard & Poor’s
are important as
they
provide
our
customers
and
investors
with
an
independent
assessment
of
our
financial
strength
using
a
rating
scale that provides
for relative comparisons.
We continue
to possess significant
financial flexibility and
access to
debt
and
equity markets
as a
result
of our
financial
strength,
as evidenced
by
the
financial strength
ratings
as
assigned by independent rating agencies.
See also ITEM 1, Business - “Financial Strength Ratings”.
We maintain
our own economic
capital models
to monitor
and project
our overall
capital, as
well as, the
capital
at
our
operating
subsidiaries.
A
key
input
to
the
economic
models
is
projected
income
and
this
input
is
continually compared to actual results,
which may require a change in the capital
strategy.
In 2022,
we repurchased
241,273 shares
for $61
million in
the open
market
and paid
$255 million
in dividends.
During
2021,
we
repurchased
887,622
shares
for
$225
million
in
the
open
market
and
paid
$247
million
in
dividends.
We may
at times enter
into a
Rule 10b5-1 repurchase
plan agreement
to facilitate
the repurchase
of
shares.
On
May
22,
2020,
our
existing
Board
authorization
to
purchase
up
to
million
of
our
shares
was
amended to
authorize
the purchase
of up
to 32
million shares.
As of
December 31,
2022, we
had repurchased
30.8 million shares under this authorization.
We repurchased
$6 million of our
long term subordinated
notes during the
third quarter of
2022 and recognized
a gain
of $1
million on
the repurchase.
We
may continue,
from time
to time,
to
seek to
retire
portions of
our
outstanding
debt
securities
through
cash
repurchases,
in
open-market
purchases,
privately
negotiated
transactions
or
otherwise.
Such
repurchases,
if
any,
will
be
subject
to
and
depend
on
prevailing
market
conditions,
our
liquidity
requirements,
contractual
restrictions
and
other
factors.
The amounts
involved
in
any
such transactions, individually or in the aggregate,
may be material.
On October 7,
2020, we
issued
an additional
$1.0 billion of
30 year senior
notes with
an interest
coupon rate
of
3.5%.
These senior notes will mature on October
15, 2050 and will pay interest
semi-annually.
On October 4,
2021, we
issued an
additional $1.0
billion of 31
year senior
notes with
an interest
coupon rate
of
3.125%.
These senior notes will mature on October 15, 2052 and
will pay interest semi-annually.
Liquidity.
Our liquidity
requirements
are generally
met from
positive
cash flow
from operations.
Positive
cash
flow results
from reinsurance
and insurance
premiums being
collected prior
to disbursements
for claims,
which
disbursements
generally
take
place
over
an
extended
period
after
the
collection
of
premiums,
sometimes
a
period of many
years.
Collected premiums
are generally
invested,
prior to
their use in
such disbursements,
and
investment
income provides
additional funding
for loss
payments.
Our net
cash flows
from operating
activities
were $3.7
billion and
$3.8 billion
for the
years
ended December
31, 2022
and 2021,
respectively.
Additionally,
these cash
flows reflected
net catastrophe
loss payments
of $677
million and
$834 million
for the
years
ended
December 31,
and 2021,
respectively
and net
tax
payments
of $171
million and
$98 million
for the
years
ended December 31, 2022 and 2021, respectively.
If disbursements
for claims
and benefits,
policy acquisition
costs and
other operating
expenses
were to
exceed
premium inflows,
cash flow
from reinsurance
and insurance
operations
would be
negative.
The effect
on cash
flow
from
insurance
operations
would
be
partially
offset
by
cash
flow
from
investment
income.
Additionally,
cash inflows
from investment
maturities - both
short-term investments
and longer
term maturities
are available
to supplement other
operating cash
flows.
We do not
expect to supplement
negative insurance
operations cash
flows from investment dispositions.
As the
timing of
payments for
claims and
benefits cannot
be predicted
with certainty,
we maintain
portfolios of
long
term
invested
assets
with
varying
maturities,
along
with
short-term
investments
that
provide
additional
liquidity
for
payment
of claims.
At
December
31,
and
December
31,
2021,
we
held
cash
and short
-term
investments
of
$2.4
billion
and
$2.6
billion,
respectively.
Our
short-term
investments
are
generally
readily
marketable
and can
be converted
to cash.
In addition
to these
cash and
short-term investments,
at December
31, 2022, we had
$1.3 billion of
available for
sale fixed
maturity securities
maturing within one
year or less,
$7.5
billion maturing
within one
to
five years
and
$5.3 billion
maturing
after
five
years.
Our
$281 million
of
equity
securities
are
comprised
primarily
of
publicly
traded
securities
that
can
be
easily
liquidated.
We
believe
that
these fixed
maturity and equity securities,
in conjunction with the short
-term investments and
positive cash flow
from operations,
provide ample
sources of
liquidity for
the expected
payment
of losses
in the
near future.
We
do not anticipate selling
a significant amount
of securities or using available
credit facilities to
pay losses and LAE
but have
the ability to
do so.
Sales of securities
might result
in realized capital
gains or losses.
At December 31,
we
had
$1.9
billion
of
net
pre-tax
unrealized
depreciation
related
to
available
for
sale
fixed
maturity
securities,
comprised
of
$2.0
billion
of
pre-tax
unrealized
depreciation
and
$81
million
of
pre-tax
unrealized
appreciation.
Management generally
expects annual
positive cash
flow from operations,
which reflects
the strength
of overall
pricing.
However,
given the recent
set of catastrophic
events, cash
flow from operations
may decline
and could
become negative in the near term as
significant claim payments are
made related to the catastrophes.
However,
as indicated
above,
the Company
has ample
liquidity to
settle its
catastrophe
claims and/or
any
payments
due
for its catastrophe
bond program.
In addition to our cash flows from operations
and liquid investments, we also have
multiple active credit facilities
that
provide
commitments
of
up
to
$1.5
billion
of
collateralized
standby
letters
of
credit
to
support
business
written by
our Bermuda operating
subsidiaries.
In addition, the
Company has the
ability to request
access to an
additional
$440
million
of
uncommitted
credit
facilities,
which
would
require
approval
from
the
applicable
lender.
There is
no guarantee
the uncommitted
capacity will
be available
to us
on a
future date.
See Note
5 -
Credit Facilities for further details.
Exposure to
Catastrophes.
Like other insurance
and reinsurance
companies, we are
exposed to
multiple insured
losses arising out of a
single occurrence, whether a
natural event,
such as a hurricane
or an earthquake,
or other
catastrophe,
such
as
an
explosion
at
a
major
factory.
A
large
catastrophic
event
can
be
expected
to
generate
insured
losses
to
multiple
reinsurance
treaties,
facultative
certificates
and
direct
insurance
policies
across
various lines of business.
We focus on
potential losses that
could result from
any single event,
or series of events
as part of our evaluation
and monitoring
of our
aggregate
exposures
to
catastrophic
events.
Accordingly,
we employ
various
techniques
to estimate
the amount of
loss we could
sustain from
any single catastrophic
event or series
of events in
various
geographic
areas.
These
techniques
range
from
deterministic
approaches,
such
as
tracking
aggregate
limits
exposed
in
catastrophe-prone
zones
and
applying
reasonable
damage
factors,
to
modeled
approaches
that
attempt
to
scientifically
measure
catastrophe
loss
exposure
using
sophisticated
Monte
Carlo
simulation
techniques that forecast
frequency and severity of potential losses
on a probabilistic basis.
No single
computer
model or
group
of models
is currently
capable of
projecting
the amount
and probability
of
loss in
all global geographic
regions in
which we
conduct business.
In addition,
the form,
quality and
granularity
of underwriting exposure
data furnished
by (re)insureds
is not uniformly
compatible with the
data requirements
for
our
licensed
models,
which
adds
to
the
inherent
imprecision
in
the
potential
loss
projections.
Further,
the
results
from
multiple
models
and
analytical
methods
must
be
combined
to
estimate
potential
losses
by
and
across
business
units.
Also,
while
most
models
have
been
updated
to
incorporate
claims
information
from
recent
catastrophic
events,
catastrophe
model
projections
are
still
inherently
imprecise.
In
addition,
uncertainties with respect
to future climatic patterns
and cycles could add
further uncertainty to loss
projections
from models based on historical data.
Nevertheless,
when combined
with traditional
risk management
techniques
and sound
underwriting judgment,
catastrophe
models
are
a
useful
tool
for
underwriters
to
price
catastrophe
exposed
risks
and
for
providing
management with
quantitative
analyses with
which to monitor
and manage
catastrophic
risk exposures
by zone
and across zones for individual and
multiple events.
Projected catastrophe
losses are
generally summarized
in terms
of the
PML.
We define
PML as
our anticipated
loss, taking
into account
contract
terms and
limits, caused
by a
single catastrophe
affecting
a broad
contiguous
geographic
area,
such
as
that
caused
by
a
hurricane
or
earthquake.
The
PML
will
vary
depending
upon
the
modeled simulated
losses
and the
make-up
of the
in force
book
of business.
The projected
severity
levels
are
described
in
terms
of “return
periods”,
such
as
“100-year
events”
and
“250-year
events”.
For
example,
a
year PML is
the estimated loss
to the current
in-force portfolio
from a single
event which has
a 1% probability
of
being exceeded in
a twelve month
period.
In other words, it
corresponds to a
99% probability that
the loss from
a
single
event
will
fall
below
the
indicated
PML.
It
is
important
to
note
that
PMLs
are
estimates.
Modeled
events are
hypothetical events
produced by
a stochastic
model.
As a result,
there can be
no assurance
that any
actual event
will align
with the
modeled event
or that
actual losses
from events
similar to
the modeled
events
will not vary materially from the modeled event
PML.
From
an
enterprise
risk
management
perspective,
management
sets
limits
on
the
levels
of
catastrophe
loss
exposure we
may underwrite.
The limits are
revised periodically
based on a
variety of factors,
including but not
limited
to
our
financial
resources
and
expected
earnings
and
risk/reward
analyses
of
the
business
being
underwritten.
Management estimates
that the projected
net economic loss
from its largest
100-year event in
a given zone is
to
an
Earthquake
event
affecting
California
which
represents
approximately
6.9%
of
its
December
31,
shareholders’
equity.
Economic
loss
is the
PML
exposure,
net of
third
party
reinsurance
including
catastrophe
industry loss
warranty
cover,
reduced by
estimated
reinstatement
premiums
to renew
coverage
and estimated
income taxes.
The impact
of income
taxes
on the
PML depends
on the
distribution
of the
losses
by corporate
entity,
which is
also affected
by
inter-affiliate
reinsurance.
Management
also monitors
and controls
its largest
PMLs at
multiple points
along the
loss distribution
curve, such
as loss
amounts at
the 20,
50, 100,
250, and
year return
periods.
This process
enables management
to identify
and control
exposure
accumulations
and to
integrate such exposures
into enterprise risk, underwriting and capital
management decisions.
Our
catastrophe
loss
projections,
segmented
by
risk
zones,
are
updated
quarterly
and
reviewed
as
part
of
a
formal risk management review
process.
We
believe
that our
greatest
worldwide 1
in 100
year
exposure
to a
single catastrophic
event
is to
a hurricane
event
affecting
Southeast
U.S.,
where
we
estimate
we
have
a
PML
exposure,
net
of
third
party
reinsurance
including catastrophe
industry loss warranty
cover,
of $878 million. See also
table under ITEM
1, “Business -
Risk
Management of Underwriting and Retrocession
Arrangements”.
If such a single catastrophe
loss were to occur,
management estimates that
the net economic loss to us would be
approximately
$515
million.
The
estimate
involves
multiple
variables,
including
which
Everest
entity
would
experience the loss, and as a result there can be no
assurance that this amount would not be exceeded.
We may
purchase reinsurance
to cover specific
business written
or the potential
accumulation or aggregation
of
exposures
across
some or
all of
our operations.
Reinsurance
purchasing
decisions
consider
both
the
potential
coverage
and
market
conditions
including
the
pricing,
terms,
conditions,
availability
and
collectability
of
coverage, with the
aim of securing cost
effective protection
from financially secure counterparts.
The amount of
reinsurance purchased has varied
over
time, reflecting our view of our exposures
and the cost of reinsurance.
Information
Technology.
Everest’s
information
technology
is
a
key
component
of
its
business
operations.
Information
technology
systems
and
services
are
hosted
at
public
and
private
cloud
service
providers
across
multiple
datacenters
with
processing
performed
at
the
office
locations
of
our
operating
subsidiaries
and
branches.
We have
implemented security
procedures,
and regularly
assess and
enhance our
security protocols,
to ensure
that our
key business
systems
are protected,
secured and
backed up
at off-site
locations so
that they
can be restored
promptly if necessary.
We have business
continuity plans and disaster
recovery plans along with
periodic testing
of those
plans
to
ensure
we are
capable
of providing
uninterrupted
technology
services in
the
event of major systems
outages with alternative secure datacenters
available in case of broader outages.
Our
business
operations
depend
on
the
proper
functioning
and
availability
of
our
information
technology
platform,
which
includes
data
processing
and
related
electronic
communications.
We
communicate
electronically
internally
and
externally
with
our
brokers,
program
managers,
clients,
third-party
vendors,
regulators,
and
others.
These
communications
and
the
data
we
handle
may
include
personal,
confidential
or
proprietary
information.
We
ensure
that
all
our
systems,
data
and
electronic
transmissions
are
appropriately
protected with the latest technology
safeguards and meet regulatory
standards.
Despite these safeguards,
a significant cyber incident,
including system
failure, security
breach and disruption
by
malware or other
damage could
interrupt or delay
our operations
and possibly our
results.
This type of incident
may result
in a
violation of
applicable data
security,
privacy,
or other
laws, damage
our reputation,
cause a
loss
of customers
or give
rise to
regulatory
scrutiny
as well
as monetary
fines and
other penalties.
Management
is
not aware of a cybersecurity incident that
has had a material impact on our operations.
Expected
Cash
Outflows.
The
following
table
shows
our
significant
expected
cash
outflows
for
the
period
indicated.
Payments due by period
Less than
More than
(Dollars in millions)
Total
1 year
1-3 years
3-5 years
5 years
Senior notes
$
2,400
$
-
$
-
$
-
$
2,400
Long term notes
-
-
-
Interest expense (1)
3,018
2,513
Operating lease agreements
Gross reserve for losses and LAE (2)
22,065
2,430
7,971
5,230
6,435
Total
$
28,409
$
3,071
$
8,211
$
5,464
$
11,662
(Some amounts may not reconcile due to rounding.)
(1)
Interest expense on long term notes is calculated
at the variable floating rate of 6.99% as of
December 31, 2022.
(2)
Loss and LAE reserves
represent management’s
best estimate of
losses from claim
and related settlement
costs.
Both the amounts
and timing of such
payments are
estimates, and
the inherent
variability of
resolving claims as
well as
changes in
market conditions
make the
timing of
cash flows
uncertain.
Therefore,
the ultimate
amount and timing of loss and LAE payments could differ
from our estimates.
The cash
outflows for
senior notes
and long
term notes
are the
responsibility
of Holdings.
We
strive to
ensure
that
we
have
sufficient
cash
flow,
liquidity,
investments
and
access
to
capital
markets
to
satisfy
these
obligations.
Holdings generally
depends upon
dividends from
Everest
Re, its
operating
insurance
subsidiary for
its funding,
capital contributions
from Group
or access
to the
capital markets.
Our various
operating
insurance
and reinsurance
subsidiaries
have
sufficient
cash
flow,
liquidity
and investments
to settle
outstanding
reserves
for losses and LAE.
Management believes that
we, and each of our entities,
have sufficient financial
resources or
ready access thereto, to
meet all obligations.
Dividends.
During 2022
and 2021,
we declared
and paid
common shareholder
dividends
of $255
million and
$247 million,
respectively.
As
an insurance
holding
company,
we
are
partially
dependent
on dividends
and other
permitted
payments from
our subsidiaries
to pay
cash dividends
to our
shareholders.
The payment
of dividends
to Group
by
Holdings
Ireland
and
Everest
Dublin
Holdings
is
subject
to
Irish
corporate
and
regulatory
restrictions;
the
payment
of
dividends
to
Holdings
Ireland
by
Holdings
and
to
Holdings
by
Everest
Re
is
subject
to
Delaware
regulatory
restrictions;
and
the
payment
of
dividends
to
Group
by
Bermuda
Re,
Everest
International,
Everest
Preferred International
Holdings (“Preferred
Holdings”), Everest
Re Advisors Ltd.
(“Advisors
Re”) or Mt. Logan
Re
is
subject
to
Bermuda
insurance
regulatory
restrictions.
Management
expects
that,
absent
extraordinary
catastrophe
losses, such restrictions
should not affect
Everest Re’s
ability to declare
and pay
dividends sufficient
to
support
Holdings’
general
corporate
needs
and
that
Holdings
Ireland,
Everest
Dublin
Holdings,
Bermuda
Re
and Everest
International will
have the
ability to declare
and pay dividends
sufficient to
support Group’s
general
corporate needs.
For the years
ended December 31, 2022
and 2021, Everest
Re paid $250 million
and $0 million
of
cash
dividends
to
Holdings.
For
the
years
ended
December
31,
and
2021,
Bermuda
Re
paid
cash
dividends
to Group
of $430
million and
$300 million,
respectively;
Everest
International
paid no
cash dividends
to Group;
Preferred
Holdings paid
cash dividends
to Group
of $46 million
and $10 million,
respectively; Advisors
Re
paid
cash
dividends
to
Group
of
$0
million
and
$10
million,
respectively;
and
Mt.
Logan
Re
paid
no
cash
dividends to Group.
See ITEM 1, “Business
- Regulatory Matters
- Dividends” and ITEM 8,
“Financial Statements
and Supplementary Data” - Note 14 of Notes
to Consolidated Financial Statements.
Market Sensitive Instruments.
The SEC’s
Financial Reporting
Release
#48 requires
registrants
to clarify
and expand
upon the
existing
financial
statement
disclosure
requirements
for
derivative
financial
instruments,
derivative
commodity
instruments
and
other financial instruments (collectively,
“market sensitive
instruments”).
We do not generally
enter into market
sensitive instruments for trading
purposes.
Our
current
investment
strategy
seeks
to
maximize
after-tax
income
through
a
high
quality,
diversified,
fixed
maturity
portfolio,
while
maintaining
an
adequate
level
of
liquidity.
Our
mix
of
investments
is
adjusted
periodically,
consistent
with
our
current
and
projected
operating
results
and
market
conditions.
The
fixed
maturity
securities
in
the
investment
portfolio
are
comprised
of
non-trading
securities.
Additionally,
we
have
invested in equity securities.
The
overall
investment
strategy
considers
the
scope
of
present
and
anticipated
Company
operations.
In
particular,
estimates
of
the
financial
impact
resulting
from
non-investment
asset
and
liability
transactions,
together
with our
capital
structure
and other
factors,
are used
to
develop
a net
liability analysis.
This analysis
includes estimated payout
characteristics for
which our investments
provide liquidity.
This analysis is considered
in the development of specific investment
strategies for asset
allocation, duration and
credit quality.
The change
in overall market sensitive
risk exposure principally reflects
the asset changes that took place during the period.
Interest Rate
Risk.
Our $29.9 billion investment
portfolio at December
31, 2022, is principally
comprised of fixed
maturity
securities,
which
are
generally
subject
to
interest
rate
risk
and
some
foreign
currency
exchange
rate
risk, and some equity securities, which are subject to price
fluctuations and some foreign exchange
rate risk.
The
overall
economic
impact
of
the
foreign
exchange
risks
on
the
investment
portfolio
is
partially
mitigated
by
changes
in
the
dollar
value
of
foreign
currency
denominated
liabilities
and
their
associated
income
statement
impact.
Interest
rate
risk is
the potential
change in
value of
the fixed
maturity securities
portfolio,
including short-term
investments,
from
a
change
in
market
interest
rates.
In
a
declining
interest
rate
environment,
it
includes
prepayment
risk
on
the
$4.0 billion
of mortgage
-backed
securities
in
the
$23.1 billion
fixed
maturity
portfolio.
Prepayment risk results
from potential accelerated
principal payments that
shorten the average
life and thus
the
expected yield of the security.
The tables below
display the
potential impact
of market
value fluctuations
and after-tax
unrealized appreciation
on our
fixed maturity
portfolio (including
$1.0 billion
of short-term
investments)
for the
period indicated
based
on
upward
and
downward
parallel
and
immediate
and
basis
point
shifts
in
interest
rates.
For
legal
entities
with
a
U.S.
dollar
functional
currency,
this
modeling
was
performed
on
each
security
individually.
To
generate appropriate
price estimates on mortgage
-backed securities, changes in prepayment
expectations under
different interest
rate environments
were taken
into account.
For legal entities
with a non-U.S. dollar
functional
currency,
the effective
duration
of the
involved portfolio
of securities
was used
as a
proxy
for the
market
value
change under the various interest
rate change scenarios.
Impact of Interest Rate Shift in Basis Points
At December 31, 2022
-
(Dollars in millions)
Total Fair Value
$
25,618
$
24,863
$
24,107
$
23,352
$
22,596
Fair Value Change from Base (%)
6.3%
3.1%
-%
(3.1)%
(6.3)%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,316
$
$
-
$
(658)
$
(1,316)
Impact of Interest Rate Shift in Basis Points
At December 31, 2021
-
(Dollars in millions)
Total Fair Value
$
24,973
$
24,230
$
23,487
$
22,744
$
22,001
Fair Value Change from Base (%)
6.3%
3.2%
-%
(3.2)%
(6.3)%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,294
$
$
-
$
(647)
$
(1,294)
We
had $22.1
billion and
$19.0 billion
of gross
reserves for
losses and
LAE as
of December
31, 2022
and 2021,
respectively.
These
amounts
are
recorded
at
their
nominal
value,
as
opposed
to
present
value,
which
would
reflect a discount
adjustment to reflect the
time value of money.
Since losses are paid
out over a period of
time,
the present
value of
the reserves
is less
than the
nominal value.
As interest
rates
rise, the
present value
of the
reserves decreases and,
conversely,
as interest rates
decline, the present value
increases.
These movements are
the opposite of the interest
rate impacts on the
fair value of investments.
While the difference between
present
value and
nominal value
is not reflected
in our financial
statements, our
financial results
will include investment
income over
time from
the investment
portfolio until
the claims
are paid.
Our loss
and loss
reserve obligations
have
an
expected
duration
of
approximately
3.8
years,
which
is
reasonably
consistent
with
our
fixed
income
portfolio.
If
we
were
to
discount
our
loss
and
LAE
reserves,
net
of
ceded
reserves,
the
discount
would
be
approximately
$3.6 billion resulting
in a discounted
reserve balance
of approximately
$16.4 billion,
representing
approximately 67.9% of the value
of the fixed maturity investment
portfolio funds.
Equity Risk.
Equity risk is
the potential change
in fair and/or
market value
of the common
stock, preferred
stock
and mutual fund portfolios
arising from changing prices.
Our equity investments
consist of a diversified
portfolio
of individual
securities and
mutual funds,
which invest
principally in
high quality
common and
preferred
stocks
that are
traded on
the major exchanges.
The primary
objective of
the equity
portfolio is
to obtain
greater total
return relative to our core
bonds over time through market
appreciation and income.
The tables below display the impact on fair/market
value and after-tax change
in fair/market value
of a 10% and
20% change in equity prices up and down for the period indicated.
Impact of Percentage Change in Equity Fair/Market Values
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
$
$
$
$
After-tax Change in Fair Value
$
(46)
$
(23)
$
-
$
$
Impact of Percentage Change in Equity Fair/Market Values
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
1,461
$
1,643
$
1,826
$
2,009
$
2,191
After-tax Change in Fair Value
$
(290)
$
(145)
$
-
$
$
Foreign Currency
Risk.
Foreign currency
risk is the
potential change
in value,
income and
cash flow arising
from
adverse
changes
in
foreign
currency
exchange
rates.
Each
of
our
non-U.S./Bermuda
(“foreign”)
operations
maintains
capital
in
the
currency
of
the
country
of
its
geographic
location
consistent
with
local
regulatory
guidelines.
Each
foreign
operation
may
conduct
business in
its local
currency,
as well
as the
currency
of other
countries
in
which
it
operates.
The
primary
foreign
currency
exposures
for
these
foreign
operations
are
the
Canadian
Dollar,
the
Singapore
Dollar,
the
British
Pound
Sterling
and
the
Euro.
We
mitigate
foreign
exchange
exposure
by
generally
matching
the
currency
and
duration
of
our
assets
to
our
corresponding
operating
liabilities.
In
accordance
with
FASB
guidance,
the
impact
on
the
market
value
of
available
for
sale
fixed
maturities due
to changes
in foreign
currency exchange
rates,
in relation
to functional
currency,
is reflected
as
part of
other comprehensive
income.
Conversely,
the impact
of changes
in foreign
currency exchange
rates,
in
relation to functional
currency,
on other assets
and liabilities is
reflected through
net income as
a component
of
other income
(expense).
In addition,
we translate
the assets,
liabilities and income
of non-U.S.
dollar functional
currency
legal
entities
to
the
U.S.
dollar.
This
translation
amount
is
reported
as
a
component
of
other
comprehensive income.
The tables below display
the potential impact of a
parallel and immediate 10%
and 20% increase and decrease
in
foreign exchange
rates
on the
valuation
of invested
assets subject
to foreign
currency exposure
for the
periods
indicated.
This
analysis
includes
the
after-tax
impact
of
translation
from
transactional
currency
to
functional
currency
as
well
as
the
after-tax
impact
of
translation
from
functional
currency
to
the
U.S.
dollar
reporting
currency.
Change in Foreign Exchange Rates in Percent
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax
Foreign Exchange Exposure
$
(814)
$
(407)
$
-
$
$
Change in Foreign Exchange Rates in Percent
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax
Foreign Exchange Exposure
$
(688)
$
(344)
$
-
$
$
Safe Harbor Disclosure.
This
report
contains
forward-looking
statements
within
the
meaning
of
the
U.S.
federal
securities
laws.
We
intend
these
forward-looking
statements
to
be
covered
by
the
safe
harbor
provisions
for
forward-looking
statements
in
the
federal
securities
laws.
In
some
cases,
these
statements
can
be
identified
by
the
use
of
forward-looking
words
such
as
“may”,
“will”,
“should”,
“could”,
“anticipate”,
“estimate”,
“expect”,
“plan”,
“believe”,
“predict”,
“potential”
and
“intend”.
Forward-looking
statements
contained
in
this
report
include
information
regarding
our reserves
for losses
and LAE,
the impact
of the
Tax
Cut and
Jobs Act,
the adequacy
of
capital
in
relation
to
regulatory
required
capital,
the
adequacy
of
our
provision
for
uncollectible
balances,
estimates
of
our
catastrophe
exposure,
the
effects
of
catastrophic
and
pandemic
events
on
our
financial
statements,
the
ability
of
Everest
Re,
Holdings,
Holdings
Ireland,
Dublin
Holdings,
Bermuda
Re
and
Everest
International
to
pay
dividends
and
the
settlement
costs
of
our
specialized
equity
index
put
option
contracts.
Forward-looking
statements
only
reflect
our
expectations
and
are
not
guarantees
of
performance.
These
statements
involve risks,
uncertainties and
assumptions.
Actual events
or results may
differ materially
from our
expectations.
Important factors
that could cause
our actual events
or results to
be materially different
from our
expectations include
those discussed under
the caption ITEM
1A, “Risk Factors”.
We undertake
no obligation
to
update or revise
publicly any
forward-looking statements,
whether as a result
of new information,
future events
or otherwise.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
See “Market Sensitive Instruments”
in ITEM 7.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS
AND SUPPLEMENTARY
DATA
The financial
statements
and schedules
listed in
the accompanying
and Schedules
on page are filed as part of this report.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
As
required
by
Rule
13a-15(b)
of
the
Securities
Exchange
Act
of
(the
“Exchange
Act”), our
management,
including our Chief Executive Officer
and Chief Financial Officer,
has evaluated the effectiveness
of our disclosure
controls
and procedures
(as defined
in Rule
13a-15(e) under
the Exchange
Act).
Based on
that evaluation,
the
Chief
Executive
Officer
and
Chief
Financial
Officer
have
concluded
that
our disclosure
controls
and procedures
were effective as of the
end of the period covered by this annual report.
Management’s Report
on Internal Control Over Financial Reporting.
Our
management
is
responsible
for
establishing
and
maintaining
adequate
internal
controls
over
financial
reporting.
Our
internal
control
over
financial
reporting
is designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
our
financial
statements
for
external
purposes
in
accordance with generally accepted
accounting principles.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also, projections
of any evaluation
of effectiveness
to future periods
are subject to
the risk that
controls
may
become inadequate
because
of changes
in conditions,
or that
the degree
of compliance
with the
policies or procedures may deteriorate.
Management has
assessed the
effectiveness
of our
internal control
over financial
reporting as
of December
31,
2022.
In making this assessment, we used the
criteria set forth by the Committee
of Sponsoring Organizations
of
the Treadway
Commission (COSO)
in
Internal Control
- Integrated
Framework (2013)
.
Based on
our assessment
we concluded
that, as
of December
31, 2022,
our internal
control
over financial
reporting is
effective
based on
those criteria.
The effectiveness
of the
Company’s
internal control
over financial
reporting as
of December
31, 2022,
has been
audited
by
PricewaterhouseCoopers
LLP,
an
independent
registered
public
accounting
firm,
as
stated
in
their
report, which appears herein.
Changes in Internal Control over
Financial Reporting.
As required
by Rule
13a-15(d) of
the Exchange
Act, our
management, including
our Chief
Executive
Officer and
Chief
Financial
Officer,
has
evaluated
our
internal
control
over
financial
reporting
to
determine
whether
any
changes occurred during
the fourth
fiscal quarter covered
by this annual
report that have
materially affected,
or
are reasonably
likely to
materially affect,
our internal control
over financial reporting.
Based on that
evaluation,
there has been no such change during the fourth
quarter.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
Reference
is
made
to
the
sections
captioned
“Information
Concerning
Nominees”,
“Information
Concerning
Continuing
Directors
and
Executive
Officers”,
“Audit
Committee”,
“Nominating
and
Governance
Committee”,
“Code
of
Ethics
for
CEO
and
Senior
Financial
Officers”
and
“Section
16(a)
Beneficial
Ownership
Reporting
Compliance” in
our proxy
statement
for
the 2023
Annual
General
Meeting
of Shareholders,
which will
be filed
with
the
Commission
within
days
of
the
close
of
our
fiscal
year
ended
December
31,
(the
“Proxy
Statement”), which sections are incorporated
herein by reference.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
Reference
is
made
to
the
sections
captioned
“Directors’
Compensation”
and
“Compensation
of
Executive
Officers” in the Proxy Statement,
which are incorporated herein
by reference.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
SHAREHOLDER MATTERS
Reference
is
made to
the
sections
captioned
“Common
Share
Ownership
by
Directors
and
Executive
Officers”,
“Principal
Beneficial
Owners
of
Common
Shares”
and
“Securities
Authorized
for
Issuance
Under
Equity
Compensation Plans” in the Proxy Statement,
which are incorporated herein
by reference.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Reference
is made to
the section captioned
“Certain Transactions
with Directors”
in the Proxy
Statement, which
is incorporated herein by
reference.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
Reference is made to the section
captioned “Audit
Committee Report” in the Proxy Statement,
which is
incorporated herein by
reference.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
Financial Statements and Schedules.
The financial
statements
and schedules
listed in
the accompanying
and Schedules
on page 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.