UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.CD.C. 20549


FORM 10-K


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

For the fiscal year ended December 31, 2017


2020

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

Commission file number 1-14527


EVEREST REINSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware

(State or other jurisdiction

of incorporation or organization)

22-3263609

(I.R.S Employer

Identification No.)

477 Martinsville Road
Post Office Box 830
Liberty Corner,

100 Everest Way

Warren, New Jersey 07938-0830

07059

(908) 604-3000


(Address, including zip code, and telephone number, including area code, of registrant'sregistrant’s principal executive office)


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

Title of Each Class

Name of Each Exchange on Which Registered

4.868% Senior Notes Due 2044

3.50% Senior Notes Due 2050

NYSE

NYSE

6.60% Long Term Notes Due 2067

NYSE

Securities registered pursuant to Section 12(g) of the Act:  None

 NYSE 

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


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes

X

No


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.


Yes

No

X


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


Yes

X

No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes

X

No


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [   ]


Yes

X

No


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


Large accelerated filer

Accelerated filer

Non-accelerated filer

X

Smaller reporting company

(Do not check if smaller reporting company)

Emerging  growth company


Indicate by check mark if the registrant is an emerging growth company and has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act.


Yes

No

X


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


Yes

No

X

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.


Yes

No

X

The aggregate market value on June 30, 2017,2020, the last business day of the registrant'sregistrant’s most recently completed second quarter, of the voting stock held by non-affiliates of the registrant was zero.


At March 15, 2018,2021, the number of shares outstanding of the registrant common shares was 1,000, all of which are owned by Everest Underwriting Group (Ireland) Limited, a wholly-owned direct subsidiary of Everest Re Group, Ltd.


The Registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted by General Instruction I of Form 10-K.



EVEREST REINSURANCE HOLDINGS, INC.


Table of Contents

FORM 10-K



Page

PART I

Item 1.

Business

1

Item 1A.

Risk Factors

7

6

Item 1B.

Unresolved Staff Comments

13

Item 2.

Properties

13

14

Item 3.

Legal Proceedings

13

14

Item 4.

Mine Safety Disclosures

14

PART II

Item 5.

Market for Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

14

Item 6.

Selected Financial Data

14

15

Item 7.

Management's

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 8.

Financial Statements and Supplementary Data

31

32

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

31

32

Item 9A.

Controls and Procedures

31

32

Item 9B.

Other Information

32

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

32

33

Item 11.

Executive Compensation

32

33

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

32

33

Item 13.

Certain Relationships and Related Transactions, and Director Independence

33

Item 14.

Principal Accountant Fees and Services

33

PART IV

Item 15.

Exhibits and Financial Statement Schedules

34



PART I


Unless otherwise indicated, all financial data in this document have been prepared using accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”).  As used in this document, "Holdings"“Holdings” means Everest Reinsurance Holdings, Inc., a Delaware company and direct subsidiary of Everest Underwriting Group (Ireland) Limited ("(“Holdings Ireland"Ireland”); "Group"“Group” means Everest Re Group, Ltd. (Holdings Ireland'sIreland’s parent); "Bermuda Re"“Bermuda Re” means Everest Reinsurance (Bermuda), Ltd., a subsidiary of Group; "Everest Re"“Everest Re” means Everest Reinsurance Company and its subsidiaries, a subsidiary of Holdings (unless the context otherwise requires); and the "Company"“Company”, "we"“we”, "us"“us”, and "our"“our” means Holdings and its subsidiaries (unless the context otherwise requires).


ITEM 1.    BUSINESS

BUSINESS


The Company.

Holdings, a Delaware corporation, is a wholly-owned subsidiary of Holdings Ireland.  On December 30, 2008, Group contributed Holdings to its recently established Irish holding company, Holdings Ireland.  Holdings Ireland is a direct subsidiary of Group and serves as a holding company for the U.S. reinsurance and insurance subsidiaries.  Group is a Bermuda holding company whose common shares are publicly traded in the U.S. on the New York Stock Exchange under the symbol "RE"“RE”.  Group files an annual report on Form 10-K with the Securities and Exchange Commission (the "SEC"“SEC”) with respect to its consolidated operations, including Holdings.


The Company'sCompany’s principal business, conducted through its operating segments, is the underwriting of reinsurance and insurance in the U.S. and international markets. The Company had gross written premiums, in 2017,2020, of $5.8$8.0 billion, with approximately 68%66% representing reinsurance and 32%34% representing insurance.  Stockholder'sStockholder’s equity at December 31, 20172020 was $5.4$6.4 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'scompany’s preferred reinsurance purchasing method.  The Company underwrites insurance through brokers, surplus lines brokers and general agent relationships.  Holdings'Holdings’ active operating subsidiaries are each rated A+ ("Superior"(“Superior”) by A.M. Best Company ("(“A.M. Best"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'sCompany’s operating subsidiaries:

·Everest Re, a Delaware insurance 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.  Everest Re has engaged in reinsurance transactions with Bermuda Re, Everest International Reinsurance, Ltd. (“Everest International”), Mt. Logan Re, Ltd. (“Mt. Logan Re”) and Everest Insurance Company of Canada (“Everest Canada”), which are affiliated companies, primarily driven by enterprise risk and capital management considerations under which business is transacted at market rates and terms.  At December 31, 2020, Everest Re had statutory surplus of $5.3 billion.  

·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 Re, a Delaware insurance 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.  Everest Re has engaged in reinsurance transactions with Bermuda Re, Everest International Reinsurance, Ltd. ("Everest International"), Mt. Logan Re, Ltd. ("Mt. Logan Re") and Everest Insurance Company of Canada ("Everest Canada"), which are affiliated companies, primarily driven by enterprise risk and capital management considerations under which business is transacted at market rates and terms.  At December 31, 2017 Everest Re had statutory surplus of $3.4 billion.

·Everest National Insurance Company ("Everest National"), a Delaware insurance company and a direct subsidiary of Everest Re, is licensed in 50 states and the District of Columbia 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.

1



·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 licensed in Delaware 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.  The majority of Everest Security's business is reinsured by its parent, Everest Re.

·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 46 states and the District of Columbia.

·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 46 states and the District of Columbia.

·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 will be authorized to write life reinsurance and casualty reinsurance in both Bermuda and the U.S.

·Mt. McKinley Insurance Company ("Mt. McKinley"), a Delaware insurance company and a direct subsidiary of Holdings, was acquired by Holdings in September 2000 from The Prudential Insurance Company of America ("The Prudential").  In 1985, Mt. McKinley ceased writing new and renewal insurance and commenced a run-off operation to service claims arising from its previously written business.  Effective September 19, 2000, Mt. McKinley and Bermuda Re entered into a loss portfolio transfer reinsurance agreement, whereby Mt. McKinley transferred, for arm's length consideration, all of its net insurance exposures and reserves to Bermuda Re.  Effective July 13, 2015, the Company sold all of the outstanding shares of capital stock in Mt. McKinley to Clearwater Insurance Company.  The operating results of Mt. McKinley through July 13, 2015 are included within the Company's financial statements.

·Heartland Crop Insurance Company ("Heartland"), a Kansas based managing general agent and a direct subsidiary of Holdings, was acquired on January 2, 2011.  Heartland specializes in crop insurance, which is written mainly through Everest National.  Effective August 24, 2016, the Company sold Heartland to CGB Diversified Services, Inc. ("CGB").  The operating results of Heartland for the period owned are included within the Company's financial statements.

·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 licensed in Delaware 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 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 50 states and the District of Columbia.  The majority of Everest Denali’s business is reinsured by its parent, Everest Re.

·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 50 states and the District of Columbia.  The majority of Everest Premier’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 will be authorized to write life reinsurance and casualty reinsurance in both Bermuda and the U.S. 

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'scompany’s financial resources.  Reinsurance does not discharge the ceding company from its liability to policyholders; rather, it reimburses the ceding company for covered losses.

2

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.

2



In pro rata reinsurance, the reinsurer generally pays the ceding company a ceding commission.  The ceding commission generally is based on the ceding company'scompany’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'sCompany’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 stockholder.  The Company'sCompany’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'sCompany’s products include the full range of property and casualty reinsurance and insurance coverages, including marine, aviation, surety, errors and omissions liability ("(“E&O"&O”), directors'directors’ and officers'officers’ liability ("(“D&O"&O”), medical malpractice, other specialty lines, accident and health ("(“A&H"&H”) and workers'workers’ compensation.


3

The Company'sCompany’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'sCompany’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 pricing of underlying risks and whose underwriting guidelines and performance are compatible with its objectives.


The Company'sCompany’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 participate in those market opportunities that provide the greatest potential for underwriting profitability.  The Company'sCompany’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.


Commencing 2015, the Company initiated a strategic build out of its insurance platform through the investment in key leadership hires which in turn has brought significant underwriting talent and stronger direction in achieving its insurance program strategic goals of increased premium volume and improved underwriting results. Recent growth is coming from highly diversified areas including newly launched lines of business, as well as, product and geographic expansion in existing lines of business. The Company is building a world-class insurance platform capable of offering products across lines and geographies, complementing its leading global reinsurance franchise.

3



Capital Transactions.

The Company'sCompany’s business operations are in part dependent on its financial strength and financial strength ratings, and the market'smarket’s perception of its financial strength.  The Company's stockholder'sCompany stockholder’s equity was $5,412.7$6,414.3 million and $5,298.6$5,857.4 million at December 31, 20172020 and 2016,2019, respectively. The Company possesses significant financial flexibility with access to the debt markets and, through its ultimate parent, equity markets, as a result of its perceived financial strength, as evidenced by the financial strength ratings as assigned by independent rating agencies.  The Company'sCompany’s capital position remains strong, commensurate with its financial ratings and the Company has ample liquidity to meet its financial obligations for the foreseeable future.


4


Financial Strength Ratings.

The following table shows the current financial strength ratings of the Company'sCompany’s operating subsidiaries as reported by A.M. Best, Standard & Poor's Financial Services, LLC ("Standard & Poor's")Poor’s (S&P), and Moody's Investors Services, Inc. ("Moody's").Moody’s.  These ratings are based upon factors of concernrelevant to policyholders and shouldare not intended to be considered an indication of the degree or lack of risk involved in a direct or indirect equity investment in an insurance or reinsurance company.


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 30, 2018.


31, 2021. 

The Company believes that its ratings are important as they provide the Company'sCompany’s customers and its investorsothers with an independent assessment of the Company'sCompany’s financial strength using a rating scale that provides for relative comparisons.  Strong financial ratings are particularly important for reinsurance companies.  Cedingand insurance companies mustgiven that customers may rely on their reinsurersa company to pay covered losses well into the future.  As a result, a highly rated reinsurercompany is generally preferred.



Operating Subsidiary:

A.M. Best

Standard & Poor's

S&P

Moody's

Everest ReReinsurance Company

A+ (Superior)

A+ (Strong)

A1 (upper-medium)

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)

Not Rated

Not Rated

Everest International Assurance, Ltd.

A+ (Superior)

A

A+ (Strong)

Not Rated

Everest Denali Insurance Company

A+ (Superior)

A+ (Strong)

Not Rated

Not Rated

Everest Premier Insurance Company

A+ (Superior)

A+ (Strong)

Not Rated

Not Rated



A.M. Best states that the "A+" ("Superior"“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'sBest’s comprehensive quantitative and qualitative evaluation of a company'scompany’s balance sheet strength, operating performance and business profile.  A.M. Best affirmed these ratings on February 10, 2017. Standard & Poor'sMay 29, 2020. S&P states that the "A+"“A+”/"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.  Standard & Poor'sS&P issued a new rating to Everest Denali Insurance Co and Everest Premier Insurance Co of A+ (Strong), upgraded the rating of Everest International Assurance Ltd from A to A+ (Strong) and affirmed theseall other ratings on July 13, 2017.  Moody'sMay 29, 2020.  Moody’s states that an "A1"“A1” rating is assigned to companies that, in their opinion, offer upper-medium grade security and are subject to low credit risk.  Moody'sMoody’s affirmed these ratings on September 19, 2017.


June 5, 2020. 

Subsidiaries other than Everest Re may not be rated by some or any rating agencies because such ratings are not considered essential by the individual subsidiary'ssubsidiary’s customers or because of the limited nature of the subsidiary'ssubsidiary’s operations or because the subsidiaries are newly established and have not yet been rated by the agencies.

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Debt Ratings.

The following table shows the debt ratings by A.M. Best, Standard & Poor'sS&P and Moody'sMoody’s of the Holdings'Holdings’ senior notes due June 1, 2044, senior notes due October 15, 2050, and long termJunior Subordinated notes due May 1, 2067 bothall of which are considered investment grade.  Debt ratings are the rating agencies'agencies’ current assessment of the credit worthiness of an obligor with respect to a specific obligation.



A.M. Best

Standard & Poor's

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)

Long Term Notes

bbb

(Adequate)

BBB

(Adequate)

Baa2

(Medium Grade)



A debt rating of "a-" is assigned by A.M. Best where the issuer, in A.M. Best's opinion, has a strong ability to meet the terms of the obligation.  A.M. Best assigns a debt rating in the "bbb" range where the issuer, in A.M. Best's opinion, has adequate ability to meet the terms of the obligation but notes that the issue is more susceptible to changes in economic or other conditions.  Standard & Poor's assigns a debt rating in the "A" range to issuers that have strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in

5Competition.


higher-rated categories.  A debt rating in the "BBB" range is assigned by Standard & Poor's where the obligation exhibits adequate protection parameters although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.  According to Moody's, a debt rating of "Baa" is assigned to issues that are considered medium-grade obligations and subject to moderate credit risk and as such may possess certain speculative characteristics.

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,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.


The Company competes

We compete in the U.S. 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 the Company doeswe 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 continued to be very competitive, particularly in the property catastrophe and casualty reinsurance lines of business.historically have been competitive.  Generally, there was 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, provideprovided capital markets with access to insurance and reinsurance risk exposure.  The capital markets demand for these products iswas being primarily driven by the currenta low interest rate environment and the desire to achieve greater risk diversification and potentially higher returns on their investments.  This increased competition iswas generally having a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.


Rates tend

The industry continues to fluctuate by specific regiondeal with the impacts of a global pandemic, COVID-19.  Globally, many countries mandated that their citizens remain at home and products, particularly areas recently impacted by large catastrophic events.  There was an unprecedented seriesmany non-essential businesses have continued to be physically closed.  We activated our operational resiliency plan across our global footprint and all of catastrophesour critical operations are functioning effectively from remote locations.  We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

The pandemic has caused significant volatility in the third quarterglobal financial markets.  Interest rates plummeted, credit spreads widened and the equity markets lost value.  We saw our fixed maturity and equity portfolios decline in value resulting in unrealized investment losses in our March 31, 2020 financial statements.  However, the financial markets rebounded during the remaining quarters of 2017 with Hurricanes Harvey, Irma2020 and Maria, as well aswe recognized after-tax unrealized gains of $338.2 million in our financial statements for these three quarters.   Nevertheless, the lack of business activity may lead to an increase in bankruptcies and corresponding credit losses.

5


There will also be a negative impact on future industry underwriting results.  With the closing of non-essential businesses, there has been a significant earthquakedecline in Mexico City.  Additional catastrophe events occurredbusiness activity.  To the extent that premiums are based on business activity, there will be a decline in premium volume.  Incurred losses from the fourth quarter of 2017 with the wild fires in California and Hurricanes Nate and Ophelia.  The total industry losses for all of these events could exceed $100 billion.  This is the second consecutive year with higher than average catastrophe losses. During 2016, catastrophe losses included the Fort McMurray Canadian wildfire, Hurricane Matthew which affected a large area of the Caribbean and southeastern United States, storms and an earthquake in Ecuador.  There are industry reports that the catastrophe losses for 2016 reached their highest level in four years and the United States experienced the most loss events since 1980 and the highest total losses since 2012.  While the future impact on market conditions from these catastrophes cannotpandemic will be determined at this time, there was some firming in the markets impacted by the 2016 catastrophesduration of the event and as catastrophewill vary by line of business and geographical location.  For the full year 2020, our underwriting results include $154.8 million of estimated losses increasedrelated to the pandemic. 

Many regulators had issued moratoriums on the cancellation of policies for the non-payment of premiums and also on non-renewals. We are complying with the various regulatory requests for accommodations to policyholders during this difficult period.  The moratoriums combined with the forced closure of businesses may lead to an increase in 2017,uncollectible premium expense.

Prior to the pandemic, there iswas a growing industry consensus that there will be a generalwas some firming of the (re)insurance markets resultingrates for the areas impacted by the recent catastrophes.  The increased frequency of catastrophe losses in rate increases, not only for catastrophe exposures, but2020 appears to be further pressuring the increase of rates.  Rates also potentially for most other linesappear to be firming in some of business.

6


Commencing in 2015, the Company initiated a strategic build out of its insurance platform through the investment in key leadership hires which in turn has brought significant underwriting talent and stronger direction in achieving its insurance program strategic goals of increased premium volume and improved underwriting results.  Recent growth is coming from highly diversified areas including newly launchedcasualty lines of business, particularly in the casualty lines that had seen significant losses such as wellexcess casualty and directors’ and officers’ liability.  Other casualty lines are experiencing modest rate increase, while some lines such as productworkers’ compensation were experiencing softer market conditions. It is too early to tell what will be the impact on pricing conditions but it is likely to change depending on the line of business and geographic expansion in existing lines of business.  The Company is building a world-classgeography.

While we are unable to predict the full impact the pandemic will have on the insurance platform capable of offering products across lines and geographies, complementing our leading global reinsurance franchise.


Overall, the Company believes that given our size, strong ratings, distribution system, reputation, expertise and capital market vehicle activity the current marketplace conditions provide profit opportunities.  The Companyindustry as it continues to employhave a negative impact on the global economy, we are well positioned to continue to service our clients.  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 strategybroad mix of targeting business that offers the greatest profit potential, while maintaining balanceproducts, distribution and diversification in our overall portfolio.

geography is resilient.

Employees.

As of February 1, 2018,2021, the Company employed 9021,487 persons. Management believes that employee relations are good.  None of the Company'sCompany’s employees are subject to collective bargaining agreements, and the Company is not aware of any current efforts to implement such agreements.


Available Information.

The Company'sCompany’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge through the Company'sCompany’s internet website at http://www.everestregroup.com as soon as reasonably practicable after such reports are electronically filed with the SEC.



ITEM 1A.  RISK FACTORS


In addition to the other information provided in this report, the following risk factors should be considered when evaluating an investment in our securities.  If the circumstances contemplated by the individual risk factors materialize, our business, financial condition and results of operations could be materially and adversely affected and our ability to service our debt, our debt ratings and our ability to issue new debt could decline significantly.


RISKS RELATING TO OUR BUSINESS

Risks relating to our Business

Fluctuations in the financial markets could result in investment losses.


Prolonged and severe disruptions in the overall public debt and equity markets, such as occurred during 2008, or temporary disruption, as occurred in early 2020 related to the Covid-19 pandemic, could result in significant realized and unrealized losses in our investment portfolio. Although financial markets have significantly improved since 2008, they could deteriorate in the future. 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.

6



7



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.  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 catastrophe losses

(Dollars in millions)

 

 

2020

$

397.4

2019

 

573.7

2018

 

1,712.6

2017

 

941.4

2016

 

109.2



Calendar year: Pre-tax catastrophe losses
(Dollars in millions)   
2017 $941.4 
2016  109.2 
2015  31.9 
2014  18.2 
2013  76.6 


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 loss adjustment expenses ("LAE"(“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.  By way of illustration, during the past five calendar years, the reserve re-estimation process resulted in an increasea decrease to our pre-tax net income all years:in 2020, 2019 and 2018, and an increase for the years 2017 and 2016: 

Calendar year:

Effect on pre-tax net income

(Dollars in millions)

 

 

 

2020

$

200.3

decrease

2019

 

44.4

decrease

2018

 

558.8

decrease

2017

 

117.7

increase

2016

 

91.7

increase



Calendar year:   Effect on pre-tax net income
(Dollars in millions)     
2017 $117.7  increase
2016  91.7  increase
2015  6.5  increase
2014  39.2  decrease
2013  44.6  decrease


The difficulty in estimating our reserves is significantly more challenging as it relates to reserving for potential asbestos and environmental ("(“A&E"&E”) liabilities.  At December 31, 2017, 4.8%2020, 1.9% 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

7


allocating liability for the asbestos or environmental damage.  Legal tactics and judicial and legislative developments affecting the scope of insurers'insurers’ liability, which can be difficult to predict, also contribute to uncertainties in estimating reserves for A&E liabilities.

8


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'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. Our active subsidiaries that have been rated carry an "A+" ("Superior"“A+” (“Superior”) rating from A.M. Best. Everest Re, Everest National, Everest Indemnity and Everest IndemnityAssurance all hold an "A+" ("Strong"“A+” (“Strong”) rating from Standard & Poor'sPoor’s and Everest Assurance holds an "A" ("Strong"“A” (“Strong”) rating from this same agency.  Everest Re holds an "A1" ("“A1” (“upper-medium grade"grade”) rating from Moody's.Moody’s.  Financial strength ratings are used by client companies and agents and brokers that place the business as an important means of assessing the financial strength and quality of reinsurers. A downgrade or withdrawal of any of these ratings might adversely affect our ability to market our insurance products and could have a material and adverse effect on future prospects for growth and profitability.


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'sBest’s A- rating level, which is three levels below Everest Re'sRe’s current rating of A+. 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'sRe’s rating fell below A.M. Best'sBest’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.

8



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.

9



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. Historically, we generally purchased reinsurance from other third parties only when we expect a net benefit.  With the expansion of the capital markets into insurance linked financial instruments, we increased our use of capital market products for catastrophe reinsurance starting in 2014.  In addition, some of our quota share contracts with larger retrocessions were increased during 2014.have increased.  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.


We have entered into affiliated whole account quota share reinsurance agreements for 2002 through 2017 with Bermuda Re but we have decideddid not to renew the quota share reinsurance agreement with Bermuda Re as of December 31,after 2017.  We believe that the terms, conditions and pricing of the quota share agreements reflect arm'sarm’s length market conditions.  These affiliated reinsurance arrangements allow us to more effectively leverage our capital, expertise, distribution platform and market presence than our stand alone capital position would otherwise allow.

Percentage of ceded written premiums to gross written premiums

2020

 

2019

 

2018

 

2017

 

2016

Unaffiliated

14.9

%

 

16.7

%

 

14.7

%

 

14.6

%

 

13.6

%

Affiliated

1.7

%

 

1.4

%

 

8.7

%

 

38.4

%

 

45.9

%



Percentage of ceded written premiums to gross written premiums 2017 2016 2015 2014 2013
           
Unaffiliated 14.6% 13.6% 8.2% 9.3% 5.0%
Affiliated 38.4% 45.9% 49.9% 48.2% 47.3%


If we are unable to purchase affiliated or unaffiliated reinsurance in the future, we may have to reduce our premium volume and we may be more exposed to reductions in net income from large losses.


Our industry is highly competitive and we may not be able to compete 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, 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'sLloyd’s of London.


According to Standard & Poor's,Poor’s, Group ranks among the top ten global reinsurance groups, where  more than 70%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 $201$225.1 billion in 20162018 according to data compiled by Standard & Poor's.  The leaders in this market are Swiss Re, Munich Re, Hannover Rueck SE, Berkshire Hathaway Re, SCOR SE, RGA and syndicates at Lloyd's of London.  Some of these competitors have greater financial resources than we do and have established long term and continuing business relationships throughout the industry, which can be a significant competitive advantage.Poor’s. In addition the lack of strong barriers to entry into the reinsurance business andcompetitors, the entry of alternative capital market products and vehicles provide additional sources of reinsurance and insurance capacity and increased competition.


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 71) 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: Chairman, President and Chief Executive Officer, Dominic J. AddessoJuan C. Andrade (age 64)55),  Executive Vice President and Chief Financial Officer, Craig HowieMark Kociancic (age 54)51), Executive Vice President and Chief Operating Officer, Jim Williamson (age 47), Executive Vice President and Chief Executive Officer Reinsurance Division, John P. Doucette (age 52)55), Executive Vice President, General Counsel, Chief Compliance Officer and

9


Secretary, Sanjoy Mukherjee (age 51)54) and Executive Vice President, President and

10


Chief Executive Officer of the Everest Insurance® Division, Jonathan ZaffinoMike Karmilowicz (age 45)52). Through Group and its affiliates, weWe have employment contracts with Mr. Addesso, Mr. Howie, Mr. Doucette, Mr. Mukherjee and Mr. Zaffino,all of our key officers, which have been filedcontain automatic renewal provisions that provide for the contracts to continue indefinitely unless sooner terminated in accordance with the SEC and provide for terms of employment ending on December 31, 2019 for Mr. Addesso, April 1, 2019 for Mr. Howie, June 1, 2019 for Mr. Doucette, January 1, 2020 for Mr. Mukherjee and September 6, 2020 for Mr. Zaffino.

contract or as otherwise may be agreed.

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.  Both the fair market value of our invested assets and associated investment income fluctuate depending on general economic and market conditions.  For example, the fair market value of our predominant fixed income portfolio generally increases or decreases inversely to fluctuations in interest rates.  The market 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 market value of these investments are reflected as changes to our stockholder'sstockholder’s 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.


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.


The following table quantifies the portion of our investment portfolio that consists of fixed income securities, equity securities and investments that carry prepayment risk.

 

At

 

 

 

 

(Dollars in millions)

December 31, 2020

 

% of Total

Mortgage-backed securities

 

 

 

 

 

 

Commercial

$

550.1

 

 

3.5

%

Agency residential

 

965.1

 

 

6.1

%

Non-agency residential

 

3.2

 

 

-

%

Other asset-backed

 

2,474.2

 

 

15.6

%

Total asset-backed

 

3,992.6

 

 

25.1

%

Other fixed income

 

6,651.0

 

 

41.8

%

Total fixed income, at market value

 

10,643.6

 

 

66.9

%

Equity securities - at fair value

 

1,288.8

 

 

8.1

%

Other invested assets

 

1,094.9

 

 

6.9

%

Other invested assets, at fair value

 

1,796.5

 

 

11.3

%

Cash and short-term investments

 

1,086.4

 

 

6.8

%

Total investments and cash

$

15,910.2

 

 

100.0

%


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  At    
(Dollars in millions) December 31, 2017  % of Total 
Mortgage-backed securities      
Commercial $51.7   0.6%
Agency residential  113.3   1.3%
Non-agency residential  0.1   0.0%
Other asset-backed  138.0   1.5%
Total asset-backed  303.1   3.4%
Other fixed income  4,668.8   52.4%
Total fixed income, at market value  4,971.9   55.8%
Equity securities, at fair value  822.4   9.2%
Other invested assets, at market value  838.7   9.4%
Other invested assets, at fair value  1,807.5   20.3%
Cash and short-term investments  471.0   5.3%
Total investments and cash $8,911.5   100.0%


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We may experience foreign currency exchange losses that reduce our net income and capital levels.

Through our international operations, we conduct business in a variety of foreign (non-U.S.) currencies, principally 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 2017,2020, we wrote approximately 15.3%15.8% of our coverages in non-U.S. currencies; as of December 31, 2017,2020, we maintained approximately 10.5%8.6% of our investment portfolio in investments denominated in non-U.S. currencies. During 2017, 20162020, 2019 and 2015,2018, the impact on our quarterly pre-tax net income from exchange rate fluctuations ranged from a loss of $12.3$7.7 million to a gain of $15.4$5.2 million.


Changes in the method for determining LIBOR and the potential replacement of LIBOR may affect our cost of capital and net investment income.

On July 27, 2017, the UK Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021, which is expected to result in these widely used reference rates no longer being available.  Potential changes to LIBOR, as well as uncertainty related to such potential changes and the establishment of any alternative reference rates, may adversely affect the market for LIBOR-based securities and could adversely impact the interest rate on our long term subordinate notes.  In addition, the discontinuance of LIBOR or changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our investment portfolio. 

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 adopted a regulation pertaining to cybersecurity for all banking and insurance entities under its jurisdiction, 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. 

The continuing COVID-19 pandemic has adversely affected, and may materially and adversely affect, our results of operations, financial position and liquidity in the future.

The ongoing COVID-19 pandemic, including the related impact on the U.S. and global economies, has adversely affected our results of operations.  We expect the pandemic and its impact on our business to continue and potentially even worsen, but we cannot predict the magnitude or duration of its continued impact, particularly given the great uncertainties associated with COVID-19, including regarding the reopening of the U.S. and global economies and the recovery from its economic and other effects.  The full impact of COVID-19 on our results of operations, financial position and liquidity is not yet known, and likely will not be known for some time, but includes the following:

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RISKS RELATING TO REGULATION

Claim Losses Related to COVID-19 May Exceed Reserves:  We have established reserves for COVID-19-related losses.  Our reserves represent management’s best estimate of what the settlement and claims administration will cost for claims that have occurred, whether reported or unreported.  Given the great uncertainties associated with COVID-19 and its impact and the limited information upon which our current assumptions and assessments have been made, our preliminary reserves and the underlying estimated level of claim losses and costs arising from COVID-19 may materially change.

Adverse Legislative and Regulatory ActionLegislative and regulatory initiatives taken or which may be taken in response to COVID-19 may adversely affect us.  For example, our business may be subject to, certain initiatives, including, but not limited to: legislative and regulatory action that seeks to retroactively mandate coverage for losses which our insurance policies would not otherwise cover and which were not priced to cover; actions prohibiting us from cancelling insurance policies in accordance with our policy terms or non-renewing policies at their natural expiration; and/or orders to provide premium refunds, grant extended grace periods for premium payments, and provide extended time to pay past due premiums. Any such action would likely increase both our underwriting losses and our expenses and any legal challenges to any such action could take years to resolve.

Reduction in Premiums: The demand for insurance is significantly influenced by general economic conditions. Consequently, reduced economic activity relating to the COVID-19 pandemic is likely to decrease demand for our insurance products and services and negatively impact our premium volumes (and, in certain cases, may result in return of premiums due to a decrease in exposures). This may continue for an indefinite period, with the magnitude of the impact impossible to predict.

Investments:  Further disruptions in global financial markets due to the continuing impact of COVID-19 could cause us to incur additional unrealized and/or realized investment losses, including credit impairments in our fixed maturity portfolio.  In addition, the economic uncertainty resulting from COVID-19 may result in a decline in interest rates, which may negatively impact our future net investment income.

Credit Risk:  As credit risk is generally a function of the economy, we face greater credit risk from our policyholders, independent agents and brokers in connection with the payment and remittance of premiums as a result of the economic conditions caused by COVID-19.  Similarly, our credit risk related to the reimbursement of deductibles from policyholders and in connection with reinsurance recoverables has increased.

Operational Disruptions and Costs:  Our operations could be disrupted if key members of our senior management or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or other third party service providers are unable to continue to work because of illness, government directives or otherwise. In addition, our agents, brokers, suppliers and other third party service providers, which we rely on for key aspects of our operations, are subject to risks and uncertainties related to the COVID-19 pandemic, which may interfere with their ability to fulfill their respective commitments and responsibilities to us in a timely manner and in accordance with the agreed-upon terms.  In response to the COVID-19 pandemic, we have implemented remote working policies which have resulted in disruptions to our business routines, heightened risk to cybersecurity attacks and data security incidents and a greater dependency on internet and telecommunication access and capabilities.

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"“extraordinary” transactions.  Such "extraordinary"“extraordinary” transactions include declaring dividends from operating subsidiaries that exceed

12


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'sauthority’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 United States Department ofU.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 incoming Presidential administration,current Government Administration, if any, on our operation, net income (loss) or financial condition cannot be determined at this time.

12Risk Relating to our seCURITIES



RISK RELATING TO OUR 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.


We are a holding company, whose most significant asset consists of the stock of our operating subsidiaries.  As a result, our ability to pay dividends, interest or other payments on our 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 us.  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 us in the future, which could prevent us from paying dividends, interest or other payments on our securities.


RISK RELATING TO TAXATION

Risk Relating to taxation

If U.S. tax law changes, our net income may be impacted.


The recently enacted Tax Cut2017 TCJA addressed concerns by members of Congress regarding 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 tax rate of 21%. Specifically, it addressed their concern over a perceived competitive advantage that foreign-controlled insurers and Jobs Act ("TCJA") includes a provision for additional taxes onreinsurers may have had over U.S. controlled insurers and reinsurers resulting from the purchase of reinsurance transactions withby U.S. insurers from affiliates operating in foreign jurisdictions.jurisdictions, including Bermuda. Such affiliated reinsurance transactions are nowmay subject the U.S. ceding companies to a Base Erosion and Anti-abuse Tax ("BEAT"(“BEAT”) of 5% in 2018, 10% from 2019 to 2025 and 12.5% thereafter.thereafter which may exceed its regular income tax. In addition, it is anticipated that new regulations will be issued with respect to the BEAT.  These newproposed 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.



ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

13



None.


ITEM 2.    PROPERTIESPROPERTIES


As of December 2020, Everest Re'sRe has relocated its corporate offices are located into Warren, NJ with approximately 230,500321,500 square feet of leased office space in Liberty Corner, New Jersey.space. The Company'sCompany’s other eighteen18 locations occupy a total of approximately 168,876219,950 square feet, all of which are leased. Management believes that the above described office space is adequate for its current and anticipated needs.



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'sCompany’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.



13



ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.



PART II


ITEM 5.
            MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
            PURCHASES OF EQUITY SECURITIES

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holder of Common Stock.

As of December 31, 2017,2020, all of the Company'sCompany’s common stock was owned by Holdings Ireland and was not publicly traded.


Dividend History and Restrictions.

The Company did not pay any dividends in 2017, 20162020, 2019 and 2015.2018.  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'sCompany’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 dependent on dividends and other permitted payments from its subsidiaries to pay cash dividends to its stockholder.  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 $3,391.9$5,276.0 million at December 31, 2017,2020, 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 an insurer'sinsurer’s statutory surplus as of the end of the prior calendar year or (2) the insurer'sinsurer’s statutory net income, not including realized capital gains, for the prior calendar year.  The maximum amount that is available for the payment of dividends by Everest Re in 20172021 without prior regulatory approval is $339.2$592.1 million.


Recent Sales of Unregistered Securities.

None.

14



None.


ITEM 6.SELECTED FINANCIAL DATA


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



14



ITEM 7.    Management’s Discussion and Analysis of Financial Condition and Results of OperationMANAGEMENT'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.  It should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto presented under ITEM 8, "Financial“Financial Statements and Supplementary Data"Data”.


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,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. 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 continued to be very competitive, particularly in the property catastrophe and casualty reinsurance lines of business.historically have been competitive.  Generally, there was 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, provideprovided capital markets with access to insurance and reinsurance risk exposure.  The capital markets demand for these products iswas being primarily driven by the currenta low interest rate environment and the desire to achieve greater risk diversification and potentially higher returns on their investments.  This increased competition iswas generally having a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.


Rates tend

The industry continues to fluctuate by specific regiondeal with the impacts of a global pandemic, COVID-19.  Globally, many countries mandated that their citizens remain at home and products, particularly areas recently impacted by large catastrophic events.  There was an unprecedented seriesmany non-essential businesses have continued to be physically closed.  We activated our operational resiliency plan across our global footprint and all of catastrophesour critical operations are functioning effectively from remote locations.  We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

The pandemic has caused significant volatility in the third quarterglobal financial markets.  Interest rates plummeted, credit spreads widened and the equity markets lost value.  We saw our fixed maturity and equity portfolios decline in value resulting in unrealized investment losses in our March 31, 2020 financial statements.  However, the financial markets rebounded during the remaining quarters of 2017 with Hurricanes Harvey, Irma2020 and Maria, as well aswe recognized after-tax unrealized gains of $338.2 million in our financial statements for these three quarters.   Nevertheless, the lack of business activity may lead to an increase in bankruptcies and corresponding credit losses.

15


There will also be a negative impact on future industry underwriting results.  With the closing of non-essential businesses, there has been a significant earthquakedecline in Mexico City.  Additional catastrophe events occurredbusiness activity.  To the extent that premiums are based on business activity, there will be a decline in premium volume.  Incurred losses from the fourth quarter of 2017 with the wildfires in California and Hurricanes Nate and Ophelia.  The total industry losses for all of these events could exceed $100 billion.  This is the second consecutive year with higher than average catastrophe losses. During 2016, catastrophe losses included the Fort McMurray Canadian wildfire, Hurricane Matthew which affected a large area of the Caribbean and southeastern United States, storms and an earthquake in Ecuador.  There are industry reports that the catastrophe losses for 2016 reached their highest level in four years and the United States experienced the most loss events since 1980 and the highest total losses since 2012.  While the future impact on market conditions from these catastrophes cannotpandemic will be determined at this time, there was some firming in the markets impacted by the 2016 catastrophesduration of the event and as catastrophewill vary by line of business and geographical location.  For the full year 2020, our underwriting results include $154.8 million of estimated losses increasedrelated to the pandemic. 

Many regulators had issued moratoriums on the cancellation of policies for the non-payment of premiums and also on non-renewals. We are complying with the various regulatory requests for accommodations to policyholders during this difficult period.  The moratoriums combined with the forced closure of businesses may lead to an increase in 2017,uncollectible premium expense.

Prior to the pandemic, there iswas a growing industry consensus that there will be a generalwas some firming of the (re)insurance markets resultingrates for the areas impacted by the recent catastrophes.  The increased frequency of catastrophe losses in rate increases, not only for catastrophe exposures, but2020 appears to be further pressuring the increase of rates.  Rates also potentially for most other linesappear to be firming in some of business.


15


Commencing in 2015, we initiated a strategic build out of our insurance platform through the investment in key leadership hires which in turn has brought significant underwriting talent and stronger direction in achieving our insurance program strategic goals of increased premium volume and improved underwriting results.  Recent growth is coming from highly diversified areas including newly launchedcasualty 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 will be the impact on pricing conditions but it is likely to change depending on the line of business and geography.

While we are unable to predict the full impact the pandemic will have on the insurance industry as it continues to have a negative impact on the global economy, we are well as, product and geographic expansion in existing lines of business.  We are building a world-class insurance platform capable of offering products across lines and geographies, complementing our leading global reinsurance franchise.


Overall, we believe that given our size, strong ratings, distribution system, reputation, expertise and capital market vehicle activity the current marketplace conditions provide profit opportunities.  Wepositioned to continue to employservice our strategyclients.  Our capital position remains a source of targeting business that offers the greatest profit potential, while maintaining balancestrength, with high quality invested assets, significant liquidity and diversification in our overall portfolio.a low operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography is resilient.

16



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 stockholder'sstockholder’s equity for the periods indicated:

 

Years Ended December 31,

 

Percentage Increase/(Decrease)

(Dollars in millions)

2020

 

2019

 

2018

 

2020/2019

 

2019/2018

Gross written premiums

$

7,957.0

 

$

7,053.1

 

$

6,573.7

 

 

12.8%

 

7.3%

Net written premiums

 

6,638.7

 

 

5,774.9

 

 

5,031.9

 

 

15.0%

 

14.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

6,406.6

 

$

5,489.0

 

$

4,839.1

 

 

16.7%

 

13.4%

Net investment income

 

375.9

 

 

356.2

 

 

314.4

 

 

5.5%

 

13.3%

Net realized capital gains (losses)

 

49.8

 

 

419.4

 

 

(185.4)

 

 

-88.1%

 

NM

Other income (expense)

 

(14.6)

 

 

(1.6)

 

 

(9.6)

 

 

NM

 

-83.4%

Total revenues

 

6,817.7

 

 

6,263.0

 

 

4,958.5

 

 

8.9%

 

26.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CLAIMS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Incurred losses and loss adjustment expenses

 

4,608.1

 

 

3,829.1

 

 

4,811.0

 

 

20.3%

 

-20.4%

Commission, brokerage, taxes and fees

 

1,373.4

 

 

1,270.1

 

 

1,141.7

 

 

8.1%

 

11.2%

Other underwriting expenses

 

401.0

 

 

350.9

 

 

293.3

 

 

14.3%

 

19.6%

Corporate expense

 

16.0

 

 

13.1

 

 

11.0

 

 

22.4%

 

18.4%

Interest, fee and bond issue cost amortization expense

 

35.7

 

 

34.9

 

 

30.6

 

 

2.1%

 

14.1%

Total claims and expenses

 

6,434.2

 

 

5,498.1

 

 

6,287.7

 

 

17.0%

 

-12.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE TAXES

 

383.5

 

 

765.0

 

 

(1,329.2)

 

 

-49.9%

 

-157.5%

Income tax expense (benefit)

 

31.7

 

 

135.2

 

 

(367.0)

 

 

-76.6%

 

-136.8%

NET INCOME (LOSS)

$

351.9

 

$

629.7

 

$

(962.2)

 

 

-44.1%

 

-165.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RATIOS:

 

 

 

 

 

 

 

 

 

 

Point Change

Loss ratio

 

71.9%

 

 

69.8%

 

 

99.4%

 

 

2.1

 

(29.6)

Commission and brokerage ratio

 

21.4%

 

 

23.1%

 

 

23.6%

 

 

(1.7)

 

(0.5)

Other underwriting expense ratio

 

6.3%

 

 

6.4%

 

 

6.1%

 

 

(0.1)

 

0.3

Combined ratio

 

99.6%

 

 

99.3%

 

 

129.1%

 

 

0.3

 

(29.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

 

Percentage Increase/ (Decrease)

(Dollars in millions)

2020

 

2019

 

2018

 

2020/2019

 

2019/2018

Balance sheet data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments and cash

$

15,910.2

 

$

11,956.3

 

$

10,707.4

 

 

33.1%

 

11.7%

Total assets

 

23,717.1

 

 

19,706.2

 

 

18,680.3

 

 

20.4%

 

5.5%

Loss and loss adjustment expense reserves

 

11,655.0

 

 

10,209.5

 

 

10,167.0

 

 

14.2%

 

0.4%

Total debt

 

1,910.4

 

 

633.8

 

 

933.6

 

 

201.4%

 

-32.1%

Total liabilities

 

17,302.8

 

 

13,848.8

 

 

13,643.5

 

 

24.9%

 

1.5%

Stockholder's equity

 

6,414.3

 

 

5,857.4

 

 

5,036.8

 

 

9.5%

 

16.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding)

(NM, not meaningful)


17


  Years Ended December 31,  Percentage Increase/(Decrease) 
(Dollars in millions) 2017  2016  2015   2017/2016   2016/2015 
Gross written premiums $5,788.5  $5,063.7  $4,995.6   14.3%  1.4%
Net written premiums  2,723.8   2,048.1   2,093.3   33.0%  -2.2%
                     
REVENUES:                    
Premiums earned $1,949.6  $2,094.0  $2,143.8   -6.9%  -2.3%
Net investment income  286.3   264.8   273.3   8.1%  -3.1%
Net realized capital gains (losses)  161.6   (28.9)  50.3  NM   -157.5%
Other income (expense)  23.8   (10.5)  29.3  NM   -136.0%
Total revenues  2,421.2   2,319.4   2,496.6   4.4%  -7.1%
                     
CLAIMS AND EXPENSES:                    
Incurred losses and loss adjustment expenses  2,039.8   1,350.3   1,319.6   51.1%  2.3%
Commission, brokerage, taxes and fees  210.9   281.4   312.3   -25.1%  -9.9%
Other underwriting expenses  254.9   245.0   214.8   4.0%  14.0%
Corporate expense  7.4   8.3   7.2   -10.7%  15.3%
Interest, fee and bond issue cost amortization expense  31.2   35.4   35.4   -12.0%  0.0%
Total claims and expenses  2,544.1   1,920.4   1,889.3   32.5%  1.6%
                     
INCOME (LOSS) BEFORE TAXES  (123.0)  399.0   607.3   -130.8%  -34.3%
Income tax expense (benefit)  (201.2)  97.3   194.9  NM   -50.1%
NET INCOME (LOSS) $78.2  $301.6  $412.4   -74.1%  -26.9%
                     
RATIOS:             Point Change 
Loss ratio  104.6%  64.5%  61.6%  40.1   2.9 
Commission and brokerage ratio  10.8%  13.4%  14.6%  (2.6)  (1.2)
Other underwriting expense ratio  13.1%  11.7%  9.9%  1.4   1.8 
Combined ratio  128.5%  89.6%  86.1%  38.9   3.5 
                     
                     
  At December 31,  Percentage Increase/ (Decrease) 
(Dollars in millions)  2017   2016   2015   2017/2016   2016/2015 
Balance sheet data:                    
Total investments and cash $8,911.5  $9,842.7  $9,516.3   -9.5%  3.4%
Total assets  17,888.5   17,083.4   16,689.0   4.2%  2.4%
Loss and loss adjustment expense reserves  9,343.0   8,331.3   7,940.7   12.1%  4.9%
Total debt  633.4   633.2   633.0   0.0%  0.0%
Total liabilities  12,475.8   11,784.9   11,730.6   5.1%  0.5%
Stockholder's equity  5,412.7   5,298.6   4,958.3   2.2%  6.9%
                     
(Some amounts may not reconcile due to rounding)                    
(NM, not meaningful)                    



16Revenues.



Revenues.

Premiums.  Gross written premiums increased by 14.3%12.8% to $5,788.5$7,957.0 million in 2017,2020, compared to $5,063.7$7,053.1 million in 2016,2019, reflecting a $537.7$665.3 million, or 15.8%14.5%, increase in our reinsurance business and a $187.1$238.6 million, or 11.2%9.7%, increase in our insurance business. The increaserise in reinsurance premiums was mainly due to the new crop reinsurance transactions, increases in treaty property pro rata business, casualty excess of loss writings and financial linesproperty catastrophe excess of business and the influx of reinstatement premiums related to multiple catastrophe events in the third quarter.loss business. The rise in insurance premiums was primarilymainly due to increases in many lines ofspecialty casualty business, including property retail casualtybusiness and accident and health, partially offset by the impact of the sale of Heartland.professional liability business. Net written premiums increased by 33.0%15.0% to $2,723.8$6,638.7 million in 2017,2020, compared to $2,048.1$5,774.9 million in 2016.2019. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the impact of changes in affiliated quota share contracts, particularly the non-renewal of the quota share agreement between Everest Re and Bermuda Re as of December 31, 2017, which resulted in a $799.0 million increase to net written premiums in 2017.reinsurance contracts. Premiums earned decreasedincreased by 6.9%16.7% to $1,949.6$6,406.6 million in 2017,2020, compared to $2,094.0$5,489.0 million in 2016.2019. The change in premiums earned relative to net written premiums is partially due to the impact of the non-renewal of the quota share contract between Everest Re and Bermuda Re and is also the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.


Gross written premiums increased by 1.4%7.3% to $5,063.7$7,053.1 million in 2016,2019, compared to $4,995.6$6,573.7 million in 2015,2018, reflecting a $195.0$445.7 million, or 13.2%22.2%, increase in our insurance business partially offset byand a $127.0$33.7 million, or 3.6%0.7%, decreaseincrease in our reinsurance business. The rise in insurance premiums was primarily due to increases in mostmany lines of business, as we have focused on expanding the insurance operations.including casualty, energy and accident and health. The declineincrease in reinsurance premiums was mainly due to the increase in treaty casualty writings, partially offset by a decreasedecline in treaty property business, a decline in international premiums related to quota share agreements and a negative impact of $42.9 million from the year over year movement in foreign exchange rates.business. Net written premiums decreasedincreased by 2.2%14.8% to $2,048.1$5,774.9 million in 2016,2019, compared to $2,093.3$5,031.9 million in 2015.2018.  The declinedifference between the change in netgross written premiums compared to the increasechange in grossnet written premiums is primarily due to a higher levelthe impact of changes in affiliated reinsurance purchased on the insurance business.contracts. Premiums ceded to Bermuda Re in 2019 were $100.1 million compared with $572.6 million in 2018. Premiums earned decreasedincreased by 2.3%13.4% to $2,094.0$5,489.0 million in 2016,2019, compared to $2,143.8$4,839.1 million in 2015.2018. The change in premiums earned is consistent with the change inrelative to net written premiums.


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.

Net Investment Income.  Net investment income increased 8.1%5.5% to $286.3$375.9 million in 20172020 compared with net investment income of $264.8$356.2 million in 2016.2019.  Net pre-tax investment income as a percentage of average invested assets was 2.8% in 2020 and 3.2% in 2019.  The increase in income was primarily the result of higher income from our growing fixed maturity portfolio, offsetting the impact from the lower interest rate environment, and from our limited partnerships. 

Net investment income increased 13.3% to $356.2 million in 2019 compared with net investment income of $314.4 million in 2018. Net pre-tax investment income as a percentage of average invested assets was 3.2% in 2017, compared to 2.8% in 2016.both 2019 and 2018. The increasesincrease in income and yield in 2017 werewas primarily the result of higher income from our limited partnerships and higher income from the growing fixed incomematurity portfolio, partially offset by lower income from our limited partnerships and lower dividend income from our equity portfolio.


Net investment income decreased by 3.1% to $264.8 million in 2016 compared with net investment income of $273.3 million in 2015.  Net pre-tax investment income as a percentage of average invested assets was 2.8% in 2016 compared to 3.1% in 2015.  The decline in income and yield in 2016 compared to the prior year was primarily the result of dividends from affiliated investments.  In December 2015, the Company exchanged its investment in Parent's shares to convertible preferred stock of Everest Preferred International Holdings, Ltd. ("Preferred Holdings"), another affiliated entity.  Dividends from the convertible preferred stock in 2016 were $31.0 million compared to $38.9 million of dividends received from the Parent's shares in 2015.  In addition, there were lower reinvestment rates for the fixed income portfolios and lower dividends from equity securities, partially offset by higher income from our limited partnerships.

Net Realized Capital Gains (Losses).  Net realized capital gains were $161.6$49.8 million in 2017,2020 and $419.4 million in 2019 and net realized capital losses were $28.9 million in 2016 and net realized capital gains were $50.3$185.4 million in 2015.  2018.  The net realized capital gains of $161.6$49.8 million in 2020, were comprised of $158.591.9 million of gains from fair value re-measurements, partially offset by $40.6 million of losses from sales of investments and $1.6 million increase in allowances for credit loss. The net realized capital gains of $419.4 million in 2019, were comprised of $420.8 million of gains from fair value re-measurements, on equity securities and other invested assets and $9.118.2 million of gains from sales on our fixed maturity and equity portfolio, of investments, partially offset by $6.1 $19.6 million of other-than-temporary impairments.The net realized capital losses of $28.9$185.4 million in 20162018 were comprised of a realized capital loss of $$28.0 million from the sale of our Heartland subsidiary, $25.7 million of other-than-temporary impairments and $21.1 million of losses from sales on our fixed maturity and equity securities, partially offset by $45.9 million of gains from fair value re-measurements on fixed maturity securities, equity securities and other invested assets. The $50.3 million of net realized capital gains in 2015 were comprised of a $94.7 million gain on the sale of a subsidiary and $44.1 million of net gains from sales on our fixed maturity and equity securities, partially

17


offset by $78.8 million of other-than-temporary impairments and $9.6148.0 million of losses from fair value re-measurements, on equity securities$31.2 million of losses from sales of investments and other invested assets.

$6.2 million of other-than-temporary impairments.

Other Income (Expense).  We recorded other incomeexpense of $23.8$14.6 million $1.6 million and $9.6 million in 2017, other expense of $10.5 million in 20162020, 2019 and other income of $29.3 million in 2015.2018, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates.


Claims and Expenses.

Incurred Losses and Loss Adjustment Expenses.  The following table presents our incurred losses and loss adjustment expenses ("LAE"(“LAE”) for the periods indicated.

18



 

Total

 

Current

 

Ratio %/

 

Prior

 

Ratio %/

 

Total

 

Ratio %/

(Dollars in millions)

Year

 

Pt Change

 

Years

 

Pt Change

 

Incurred

 

Pt Change

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional (a)

$

3,997.2

 

62.4%

 

 

$

213.5

 

3.3%

 

 

$

4,210.8

 

65.7%

 

Catastrophes

 

410.6

 

6.4%

 

 

 

(13.2)

 

(0.2)%

 

 

 

397.4

 

6.2%

 

Total

$

4,407.8

 

68.8%

 

 

$

200.3

 

3.1%

 

 

$

4,608.1

 

71.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional (a)

$

3,271.4

 

59.6%

 

 

$

(16.0)

 

-0.3%

 

 

$

3,255.5

 

59.3%

 

Catastrophes

 

513.3

 

9.4%

 

 

 

60.3

 

1.1%

 

 

 

573.7

 

10.5%

 

Total

$

3,784.8

 

69.0%

 

 

$

44.4

 

0.8%

 

 

$

3,829.1

 

69.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional (a)

$

3,092.6

 

63.9%

 

 

$

5.8

 

0.1%

 

 

$

3,098.4

 

64.0%

 

Catastrophes

 

1,159.6

 

24.0%

 

 

 

553.0

 

11.4%

 

 

 

1,712.6

 

35.4%

 

Total

$

4,252.2

 

87.9%

 

 

$

558.8

 

11.5%

 

 

$

4,811.0

 

99.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2020/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional (a)

$

725.8

 

2.8

pts

 

$

229.5

 

3.6

pts

 

$

955.3

 

6.4

pts

Catastrophes

 

(102.7)

 

(3.0)

pts

 

 

(73.5)

 

(1.3)

pts

 

 

(176.3)

 

(4.3)

pts

Total

$

623.0

 

(0.2)

pts

 

$

155.9

 

2.3

pts

 

$

779.0

 

2.1

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2019/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional (a)

$

178.8

 

(4.3)

pts

 

$

(21.8)

 

(0.4)

pts

 

$

157.1

 

(4.7)

pts

Catastrophes

 

(646.3)

 

(14.6)

pts

 

 

(492.7)

 

(10.3)

pts

 

 

(1,138.9)

 

(24.9)

pts

Total

$

(467.4)

 

(18.9)

pts

 

$

(514.4)

 

(10.7)

pts

 

$

(981.9)

 

(29.6)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Attritional losses exclude catastrophe losses.

(Some amounts may not reconcile due to rounding.)


  Years Ended December 31,
  Current  Ratio %/ Prior  Ratio %/ Total  Ratio %/
(Dollars in millions) Year  Pt Change Years  Pt Change Incurred  Pt Change
2017
                             
Attritional (a) $1,200.6   61.5%  $(102.3)  -5.2%  $1,098.4   56.3% 
Catastrophes  956.9   49.1%   (15.5)  -0.8%   941.4   48.3% 
Total $2,157.5   110.6%  $(117.7)  -6.0%  $2,039.8   104.6% 
                                     
2016
                                   
Attritional (a) $1,287.2   61.5%  $(46.1)  -2.2%  $1,241.1   59.3% 
Catastrophes  154.8   7.4%   (45.6)  -2.2%   109.2   5.2% 
Total $1,442.0   68.9%  $(91.7)  -4.4%  $1,350.3   64.5% 
                                     
2015
                                   
Attritional (a) $1,282.9   59.8%  $4.7   0.3%  $1,287.6   60.1% 
Catastrophes  43.1   2.0%   (11.2)  -0.5%   31.9   1.5% 
Total $1,326.0   61.8%  $(6.5)  -0.2%  $1,319.6   61.6% 
                                     
Variance 2017/2016
                                   
Attritional (a) $(86.6)  - pts $(56.2)  (3.0)pts $(142.7)  (3.0)pts
Catastrophes  802.1   41.7 pts  30.1   1.4 pts  832.2   43.1 pts
Total $715.5   41.7 pts $(26.1)  (1.6)pts $689.5   40.1 pts
                                     
Variance 2016/2015
                                   
Attritional (a) $4.3   1.7 pts $(50.8)  (2.5)pts $(46.5)  (0.8)pts
Catastrophes  111.7   5.4 pts  (34.4)  (1.7)pts  77.3   3.7 pts
Total $116.0   7.1 pts $(85.2)  (4.2)pts $30.7   2.9 pts
                                     
(a) Attritional losses exclude catastrophe losses.                               
(Some amounts may not reconcile due to rounding.)                               


Incurred losses and LAE increased by 51.1%20.3% to $2,039.8$4,608.1 million in 20172020 compared to $1,350.3$3,829.1 million in 2016,2019, primarily due to an increase of $802.1$725.8 million in current year attritional losses, related to $154.8 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned and $229.5 million increase in  development on prior years attritional losses in 2020 compared to 2019. The increase in incurred losses was partially offset by a decrease of $102.7 million in current year catastrophe losses and less favorablea $73.5 million improvement in development on prior years catastrophe losses. The current year catastrophe losses of $30.1$410.6 million in 2020 related to Hurricane Laura ($115.0 million), the Northern California wildfires ($44.1 million), Hurricane Zeta ($36.5 million), Hurricane Sally ($31.4 million), the California Glass wildfire ($29.5 million), the Nashville tornadoes ($22.8 million), the Derecho storms ($20.5 million), Hurricane Isaias ($20.0 million), Hurricane Delta ($18.5 million), the Calgary storms in Canada ($17.4 million), Oregon wildfires ($17.0 million), the U.S. Civil Unrest ($14.5 million) the Queensland hailstorm ($10.0 million), the Australia East Coast storm ($6.8 million) and the 2020 Australia fires ($6.5 million). The current year catastrophe losses of $513.3 million in 2019 related to Typhoon Hagibis ($184.0 million), Hurricane Dorian ($161.0 million), Typhoon Faxai ($119.3 million), the Dallas tornadoes ($25.0 million), and the Townsville Monsoon in Australia ($24.0 million).

Incurred losses and LAE decreased by 20.4% to $3,829.1 million in 2019 compared to $4,811.0 million in 2018, primarily due to a decrease in current year catastrophe losses of $646.3 million and a decrease in unfavorable development on prior year catastrophe losses of $492.7 million mainly related to the development on Hurricanes Harvey, Irma and Maria and the California wildfires in 2017 compared to 2016.  These increases were2018. The decrease in losses was partially offset by a decreasean increase of $86.6$178.8 million ofon current year attritional losses mainly due to the impact of the declineincrease in premiums earned and an additional $56.2 million of favorable development on prior years attritional losses in 2017 compared to 2016.  The $102.3 million of favorable development on prior years attritional losses in 2017 was mainly comprised of $68.8 million of favorable development on reinsurance business related to property and short tail business in the United States, partially offset by $25.2 million of adverse development on A&E reserves and $33.5 million of favorable development on insurance business, mainly related to workers compensation business.earned. The current year catastrophe losses of $956.9 million in 2017 related to Hurricane Irma ($333.7 million), Hurricane Maria ($268.1 million), Hurricane Harvey ($235.8 million), the Northern California wildfires ($75.3 million), the South Africa Knysna fires ($9.6 million), the Mexico City earthquake ($9.3 million), Cyclone Debbie in Australia ($8.5 million), the Peru storms ($7.1 million), the 2017 US Midwest storms ($5.0 million) and the Southern California wildfires ($4.4 million). Current year catastrophe losses of $154.8$513.3 million in 2016 were related to Hurricane Matthew ($62.3 million), the Fort McMurray Canada wildfire ($26.6 million), the 2016 U.S. Storms ($25.7 million), the Ecuador earthquake ($11.6 million), the 2016 Taiwan earthquake ($7.5 million), the Tennessee wildfire ($7.3 million), the New Zealand earthquake ($6.9 million) and Hurricane Hermine ($6.8 million).2019 are outlined above. The

19


Incurred losses and LAE increased by 2.3% to $1,350.3 million in 2016 compared to $1,319.6 million in 2015, primarily due to an increase of $111.7 million in current year catastrophe losses, partially offset by higher favorable prior years attritional development of $50.8 million and higher favorable prior years

18



catastrophe development of $34.4 million in 2016 compared to 2015.  The $46.1 million of favorable prior years attritional loss development in 2016 was comprised of $142.6 million of favorable development in the reinsurance segments, partially offset by $96.5 million in the insurance segment.  The favorable development in the reinsurance segments is primarily due to property and short-tail business in the U.S., as well as, property business in Canada, Latin America, the Middle East and Africa, partially offset by $45.7 million of adverse development on A&E.  Part of the favorable development in the reinsurance segments related to the 2015 loss from the explosion at the Chinese port of Tianjin.  In 2015, this loss was originally estimated to be $21.6 million.  At December 31, 2016, this loss was projected to be $6.3 million resulting in $15.3 million of favorable development.  The adverse development in the insurance segment is primarily attributable to run-off construction liability and umbrella program business.  The $45.6 million of prior years' catastrophe development mainly related to the 2015 Chile earthquake, the 2011 Japan earthquake and the 2015 U.S. storms.  The current year catastrophe losses of $154.8$1,159.6 million in 2016 are outlined above.  Current year catastrophe losses were $43.1 million in 2015 and2018 related to the 2015 Chilean earthquakeHurricane Michael ($17.4443.5 million), Northern Chile stormsCamp wildfire ($9.6297.0 million), the 2015 US StormsWoolsey wildfire (151.0 million), Typhoon Jebi ($8.166.6 million), Hurricane Florence ($60.8 million), Cyclone Mekunu ($43.7 million), Typhoon Trami ($25.0 million), other 2018 California wildfires ($24.6 million), Australian hailstorm ($24.0 million), Japan Floods ($15.0 million) and the New South WalesU.S. winter storms ($8.08.4 million).

Commission, Brokerage, Taxes and Fees.  Commission, brokerage, taxes and fees deincreased by 25.1% to $210.9$1,373.4 million in 20172020 compared to $281.41,270.1 million in 2016.2019.  The decreaseincrease was primarilymainly due to the impact of the decreaseincreases in premiums earned the impact of higher reinstatement premiums in 2017 and the impact of changes in affiliated quota share contracts.


Commission, brokerage, taxes and fees decreased by 9.9% to $281.4 million in 2016 compared to $312.3 million in 2015.  This change was primarily due to the impact of the decrease in premiums earned, the impact of affiliated quota share agreements and the changes in the mix of business.

Commission, brokerage, taxes and fees increased to $1,270.1 million in 2019 compared to $1,141.7 million in 2018.  The increase was mainly due to changes in affiliated reinsurance agreements, increases in premiums earned and changes in the mix of business toward additional pro rata business.

Other Underwriting Expenses.  Other underwriting expenses were $254.9$401.0 million, $245.0$350.9 million and $214.8$293.3 million in 2017, 20162020, 2019 and 2015,2018, respectively.  The increase in other underwriting expenses between the years wasincreases were mainly due to the impact of increases in premium earned, costs incurred related to support the expansion of the insurance business.business and changes in affiliated reinsurance agreements. 


Corporate Expenses.  Corporate expenses, which are general operating expenses that are not allocated to segments, have remained consistent at $7.4were $16.0 million, $8.3$13.1 million and $7.2$11.0 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. The variances were mainly due to changes in variable compensation.


Interest, Fees and Bond Issue Cost Amortization Expense.  Interest, fees and other bond amortization expense were $31.2$35.7 million, $35.4$34.9 million and 35.4$30.6 million in 2017, 20162020, 2019 and 2015,2018, respectively.  The decreaseschanges in expense for 2017 waswere primarily due to the conversion ofmovements in the floating interest rate related to the long term subordinated notes, from a fixed rate of 6.6% to a floating rate, which is reset quarterly per the note agreement.  The floating rate was 3.8%2.6% as of December 31, 2017.2020.  The increase from 2019 to 2020 was also related to the interest expense incurred on the $1,000.0 million senior note issuance in October 2020.


Income Tax Expense (Benefit).  We The Company had an income tax expense of $31.7 million in 2020, an income tax expense of $135.2 million in 2019, and an income tax benefit of $201.2$367.0 million in 2017, which includes $123.1 million of2018. The TCJA impact was an income tax benefit related to the enactment of the TCJA, and income tax expense of $97.3$28.4 million and $194.9 million for December 31, 2016, and 2015, respectively.in 2018. Variations in income taxes generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net capital gains (losses) as well as changes in tax exempt investment income and creditable foreign taxes. The change in income tax expense (benefit) for 2017 compared to 2016 was primarily due to the significant catastropheincrease in incurred losses, including from COVID 19 reserves and a reserve charge from 2019 to 2020.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, provided that U.S. companies could carryback for five years net operating losses incurred in 2017.


The TCJA, which was enacted on December 22, 2017, caused2018, 2019 and/or 2020. This beneficial tax provision in the CARES Act enabled the Company to carryback its significant 2018 net operating losses to prior tax years with higher effective tax rates of 35% versus 21% in 2018 and later years. As a result, the Company was able to record a net income tax benefit from the five-year carryback of $123.1$32.5 million in 2017.  Thisand obtain federal income tax provision reflects the lower 21% tax expense/(benefit) to be realized by the Company under the TCJA upon the reversalcash refunds of the temporary differences$182.5 million including interest in its deferred tax inventory account versus the 35% tax expense/(benefit) that had been expected before the TCJA.  In 2018, the Company expects to record adjustments to the amount of tax benefit it recorded in 2017 with respect to the TCJA as estimated amounts are finalized.  The adjustments are not expected to be significant to the Company's results.

2020.

19


Net Income (Loss).

Our net income was $78.2 million, $301.6$351.9 million and $412.4$629.7 million in 2017, 20162020 and 2015, respectively.2019, respectively and our net loss was $962.2 million in 2018.  The changes were primarily driven by the financial component fluctuations explained above.

20



Ratios.

Our combined ratio increased by 38.90.3 points to 128.5% 99.6% in 2017,2020 compared to 89.6% 99.3% in 2016.2019.  The loss ratio componentscomponent increased 40.1by 2.1 points in 20172020 over the same period last year.  The changes wereyear mainly due to the increases in current year catastrophe losses.  The commission and brokerage ratio components decreased to 10.8% in 2017 from 13.4% in 2016.  The decrease reflects changes in the mix of business, the impact of affiliated quota share contracts and the impact from reinstatement premiums.  The other underwriting expense ratios increased to 13.1% in 2017 from 11.7% in 2016. The$229.5 million increase in 2017 was due to costs associated with the continued expansion of the insurance business, partially offset by lower variable compensation costs.


Our combined ratio increased by 3.5 points to 89.6% in 2016 compared to 86.1% in 2015.  The loss ratio component increased 2.9 points in 2016 over the same period last year. The change was mainly due to the increase in current year catastrophes in 2016 compared to 2015, partially offset by more favorable development on prior years attritional losses and prior years catastrophe$154.8 million of losses year over year.related to the Covid-19 pandemic in 2020. The commission and brokerage ratio componentscomponent decreased 1.2 points to 13.4% 21.4% in 2016 from 14.6% 2020 compared to 23.1% in 2015 due to the impact of2019, reflecting changes in affiliated quota sharereinsurance agreements and changes in the mix of business.  The other underwriting expense ratio components increased 1.8decreased slightly to 6.3% in 2020 from 6.4% in 2019. 

Our combined ratio decreased by 29.8 points to 99.3% in 2019 compared to 129.1% in 2018.  The loss ratio component decreased by 29.6 points in 20162019 over the same period last year mainly due to a lower loss ratio on current year catastrophe losses and less unfavorable development on prior years catastrophe losses in 2019 compared to 2018. The commission and brokerage ratio component decreased slightly to 23.1% in 2019 compared to 23.6% in 2018, reflecting changes in affiliated reinsurance agreements and changes in the mix of business.  The other underwriting expense ratio increased focus on the expansion of the insurance business.


slightly to 6.4% in 2019 from 6.1% in 2018.

Stockholder's Equity.

Stockholder's

Stockholder’s equity increased by $114.2$556.9 million to $5,412.7$6,414.3 million at December 31, 20172020 from $5,298.6$5,857.4 million at December 31, 2016,2019, principally as a result of $78.2$351.9 million of net income, $37.4 million of net foreign currency translation adjustments, $6.5 million of net benefit plan obligation adjustments and $0.3 million of share-based compensation transactions, partially offset by $8.2 million of net unrealized depreciation on investments, net of tax.


Stockholder's equity increased by $340.3 million to $5,298.6 million at December 31, 2016 from $4,958.3 million at December 31, 2015, principally as a result of $301.6 million of net income, $25.4$188.5 million of net unrealized appreciation on investments, net of tax, $12.8 million of share-based compensation transactions and $2.8$14.5 million of net foreign currency translation adjustments, partially offset by $2.4$0.9 million of cumulative adjustment from the adoption of ASU 2016-13, $0.7 million of net benefit plan obligation adjustments and $0.4 million of capital contributions

Stockholder’s equity increased by $820.6 million to $5,857.4 million at December 31, 2019 from $5,036.8 million at December 31, 2018, principally as a result of $629.7 million of net income, $180.6 million of net unrealized appreciation on investments, net of tax, $17.2 million of net foreign currency translation adjustments and $0.4 million of capital contributions, partially offset by $7.1 million of net benefit plan obligation adjustments.


Consolidated Investment Results


Net Investment Income.

Net investment income increased by 8.1%5.5% to $286.3$375.9 million in 20120207 compared to $264.8$356.2 million in 20120196.. The increase in 2017 were2020 was primarily due to an increase in limited partnership income and higher income from theour growing fixed maturity portfolio, offsetting the impact of the lower interest rate environment, and from our limited partnerships. 

Net investment income increased by 13.3% to $356.2 million in 2019 compared to $314.4 million in 2018. The increase in 2019 was primarily due to higher income from our growing fixed maturity portfolio, partially offset by lower income from our limited partnerships and lower dividend income from our equity portfolio.

21


Net investment income decreased by 3.1% to $264.8 million in 2016 compared to $273.3 million in 2015, primarily due to dividends from affiliated investments.  In December 2015, the Company exchanged its investment in Parent's shares to convertible preferred stock of Preferred Holdings, another affiliated entity.  Dividends from the convertible preferred stock in 2016 were $31.0 million compared to $38.9 million of dividends received from the Parent's shares in 2015.  In addition, there were lower reinvestment rates for the fixed income portfolios and lower dividends from equity securities, partially offset by higher income from our limited partnerships.


20


The following table shows the components of net investment income for the periods indicated:

 

Years Ended December 31,

(Dollars in millions)

2020

 

2019

 

2018

Fixed maturities

$

305.4

 

$

273.1

 

$

201.1

Equity securities

 

11.5

 

 

10.8

 

 

14.9

Short-term investments and cash

 

3.0

 

 

10.2

 

 

7.7

Other invested assets

 

 

 

 

 

 

 

 

Limited partnerships

 

48.9

 

 

43.3

 

 

61.6

Dividends from preferred shares of affiliate

 

31.0

 

 

31.0

 

 

31.0

Other

 

1.7

 

 

14.1

 

 

17.8

Gross investment income before adjustments

 

401.5

 

 

382.6

 

 

334.2

Funds held interest income (expense)

 

5.7

 

 

6.5

 

 

5.2

Interest income from Parent

 

5.2

 

 

0.2

 

 

4.1

Gross investment income

 

412.3

 

 

389.3

 

 

343.5

Investment expenses

 

(36.4)

 

 

(33.1)

 

 

(29.1)

Net investment income

$

375.9

 

$

356.2

 

$

314.4

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 



  Years Ended December 31, 
(Dollars in millions) 2017  2016  2015 
Fixed maturities $193.7  $182.1  $188.3 
Equity securities  25.9   32.3   34.4 
Short-term investments and cash  2.9   1.2   1.0 
Other invested assets            
Limited partnerships  36.6   25.2   19.6 
Dividends from Parent's shares  -   -   38.9 
Dividends from preferred shares of affiliate  31.0   31.0   - 
Other  6.7   1.0   1.8 
Gross investment income before adjustments  296.8   272.9   284.0 
Funds held interest income (expense)  5.0   6.1   5.6 
Interest income from Parent  4.3   4.3   4.3 
Gross investment income  306.0   283.3   293.9 
Investment expenses  (19.8)  (18.5)  (20.6)
Net investment income $286.3  $264.8  $273.3 
             
(Some amounts may not reconcile due to rounding.)            


The following table shows a comparison of various investment yields for the periods indicated:

 

2020

 

2019

 

2018

Imbedded pre-tax yield of cash and invested assets at December 31

3.1

%

 

3.5

%

 

3.5

%

Imbedded after-tax yield of cash and invested assets at December 31

2.5

%

 

2.8

%

 

2.8

%

 

 

 

 

 

 

 

 

 

Annualized pre-tax yield on average cash and invested assets

2.8

%

 

3.2

%

 

3.2

%

Annualized after-tax yield on average cash and invested assets

2.3

%

 

2.6

%

 

2.6

%


22


 201720162015
Imbedded pre-tax yield of cash and invested assets at December 313.4%2.9%2.9%
Imbedded after-tax yield of cash and invested assets at December 312.7%2.0%2.1%
    
Annualized pre-tax yield on average cash and invested assets3.2%2.8%3.1%
Annualized after-tax yield on average cash and invested assets2.2%2.0%2.2%



21


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,

 

2020/2019

 

2019/2018

(Dollars in millions)

2020

 

2019

 

2018

 

Variance

 

Variance

Gains (losses) from sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities, market value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

$

24.2

 

$

24.7

 

$

15.3

 

$

(0.5)

 

$

9.4

Losses

 

(56.8)

 

 

(17.1)

 

 

(14.4)

 

 

(39.7)

 

 

(2.7)

Total

 

(32.6)

 

 

7.6

 

 

0.9

 

 

(40.2)

 

 

6.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities, fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

 

 

 

0.4

 

 

 

 

(0.4)

 

 

0.4

Losses

 

(2.9)

 

 

 

 

(1.8)

 

 

(2.9)

 

 

1.8

Total

 

(2.9)

 

 

0.4

 

 

(1.8)

 

 

(3.3)

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities, fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

 

37.4

 

 

14.2

 

 

25.2

 

 

23.2

 

 

(11.0)

Losses

 

(45.3)

 

 

(10.1)

 

 

(57.3)

 

 

(35.2)

 

 

47.2

Total

 

(7.9)

 

 

4.1

 

 

(32.1)

 

 

(12.0)

 

 

36.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other invested assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

 

7.7

 

 

6.7

 

 

1.8

 

 

1.0

 

 

4.9

Losses

 

(6.0)

 

 

(0.7)

 

 

 

 

(5.3)

 

 

(0.7)

Total

 

1.7

 

 

6.0

 

 

1.8

 

 

(4.3)

 

 

4.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short Term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

 

1.1

 

 

0.2

 

 

 

 

0.9

 

 

0.2

 Losses 

 

 

 

 

 

 

 

 

 

Total

 

1.1

 

 

0.2

 

 

 

 

0.9

 

 

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net realized gains (losses) from sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains

 

70.4

 

 

46.3

 

 

42.3

 

 

24.1

 

 

4.0

Losses

 

(111.0)

 

 

(27.9)

 

 

(73.5)

 

 

(83.1)

 

 

45.6

Total

 

(40.6)

 

 

18.4

 

 

(31.2)

 

 

(59.0)

 

 

49.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowances for credit losses:

 

(1.6)

 

 

 

 

 

 

(1.6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other than temporary impairments:

 

 

 

(19.6)

 

 

(6.2)

 

 

19.6

 

 

(13.4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (losses) from fair value adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, fair value

 

1.9

 

 

1.8

 

 

1.5

 

 

0.1

 

 

0.3

Equity securities, fair value

 

276.1

 

 

153.7

 

 

(59.4)

 

 

122.4

 

 

213.1

Other invested assets, fair value

 

(186.1)

 

 

265.2

 

 

(90.1)

 

 

(451.3)

 

 

355.3

Total

 

91.9

 

 

420.7

 

 

(148.0)

 

 

(328.8)

 

 

568.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net realized gains (losses)

$

49.8

 

$

419.4

 

$

(185.4)

 

$

(369.6)

 

$

604.8

(Some amounts may not reconcile due to rounding.)


23



  Years Ended December 31,   2017/2016   2016/2015
(Dollars in millions) 2017  2016  2015  Variance  Variance 
Gains (losses) from sales:
                 
Fixed maturity securities, market value                 
Gains $31.3  $18.6  $10.9  $12.7  $7.7 
Losses  (28.9)  (25.6)  (47.2)  (3.3)  21.6 
Total  2.5   (7.0)  (36.3)  9.5   29.3 
                     
Fixed maturity securities, fair value                    
Gains  -   0.3   -   (0.3)  0.3 
Losses  -   (1.9)  -   1.9   (1.9)
Total  -   (1.6)  -   1.6   (1.6)
                     
Equity securities, fair value                    
Gains  23.2   16.2   26.1   7.0   (9.9)
Losses  (16.7)  (28.8)  (34.1)  12.1   5.3 
Total  6.6   (12.6)  (8.0)  19.2   (4.6)
                     
Other invested assets, fair value                    
Gains on exchange  0.1   -   88.4   0.1   (88.4)
Losses  -   -   -   -   - 
Total  0.1   -   88.4   0.1   (88.4)
                     
Total net realized gains (losses) from sales                    
Gains  54.6   35.1   125.4   19.5   (90.3)
Losses  (45.6)  (56.3)  (81.3)  10.7   25.0 
Total  9.1   (21.1)  44.1   30.2   (65.3)
                     
Gain (loss) on sale of subsidiary:
  -   (28.0)  94.7   28.0   (122.7)
                     
Other than temporary impairments:
  (6.1)  (25.7)  (78.8)  19.6   53.1 
                     
Gains (losses) from fair value adjustments:
                    
Fixed maturities, fair value  -   1.4   -   (1.4)  1.4 
Equity securities, fair value  117.7   51.1   (39.1)  66.6   90.2 
Other invested assets, fair value  40.8   (6.6)  29.5   47.4   (36.1)
Total  158.5   45.9   (9.6)  112.6   55.5 
                     
Total net realized gains (losses) $161.6  $(28.9) $50.3  $190.5  $(79.2)
                     
(Some amounts may not reconcile due to rounding.)                    


Net realized capital gains were $161.6$49.8 million in 2017,2020 and $419.4 million in 2019 and net realized capital losses were $28.9$185.4 million in 2016, and2018.  The net realized capital gains were $50.3of $49.8 million in 2015.  In 2017, we recorded 2020, were comprised of $158.591.9 million of gains from fair value re-measurements, on equity securities partially offset by $40.6 million of losses from sales of investments and other invested assets and$1.6 million increase in allowances for credit loss. The net realized capital gains of $419.4 million in 2019, were comprised of $9.1420.8 million of gains from fair value re-measurements, $18.2 million of gains from sales on our fixed maturity and equity securities, of investments, partially offset by $6.1 $19.6 million of other-than-temporary impairments.  In 2016, we recorded a realized capital loss of $28.0 million from the sale of our Heartland subsidiary, $25.7 million of other-than-temporary impairments and $21.1 million of The net realized capital losses of $185.4 million in 2018 were comprised of $148.0 million of losses from fair value re-measurements, $31.2 million of losses from sales of fixed maturityinvestments and equity securities, partially offset by $45.9 million of net realized capital gains due to fair value re-measurements on fixed maturity securities, equity securities and other invested assets.  In 2015, we recorded a $94.7 million gain on the sale of a subsidiary and $44.1 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $78.8$6.2 million of other-than-temporary impairments and $9.6 million of net realized capital losses due to fair value re-measurements on equity securities and other invested assets.  The fixed maturity and equity sales related primarily to adjusting the portfolios for overall market changes and individual credit shifts.


impairments.

22


Segment Results.

The U.S. Reinsurance operation writes property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and A&H business,  on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companiescompanies. Business is primarily withinwritten in the U.S. The International operation writes non-U.S. property and casualty reinsuranceas well as through Everest Re's branches in Canada Singapore and through offices in Brazil, Miami and New Jersey.Singapore. The Insurance operation writes property and casualty insurance directly, through brokers, surplus lines brokers and general agents mainly within the U.S.


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 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.


Our loss and LAE reserves are management'smanagement’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 the re-evaluation is made.


The following discusses the underwriting results for each of our segments for the periods indicated:

24



U.S.

Reinsurance.

The following table presents the underwriting results and ratios for the U.S. Reinsurance segment for the periods indicated.

 

Years Ended December 31,

 

2020/2019

 

2019/2018

(Dollars in millions)

2020

 

2019

 

2018

 

Variance

 

 

% Change

 

Variance

 

 

% Change

Gross written premiums

$

5,265.7

 

$

4,600.4

 

$

4,569.5

 

$

665.3

 

 

14.5%

 

$

30.9

 

 

0.7%

Net written premiums

 

4,632.3

 

 

3,923.8

 

 

3,519.7

 

 

708.5

 

 

18.1%

 

 

404.1

 

 

11.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

4,484.7

 

$

3,796.2

 

$

3,386.4

 

$

688.5

 

 

18.1%

 

$

409.8

 

 

12.1%

Incurred losses and LAE

 

3,209.2

 

 

2,692.7

 

 

3,811.7

 

 

516.5

 

 

19.2%

 

 

(1,119.0)

 

 

(29.4)%

Commission and brokerage

 

1,120.0

 

 

1,027.3

 

 

923.9

 

 

92.7

 

 

9.0%

 

 

103.4

 

 

11.2%

Other underwriting expenses

 

119.3

 

 

110.0

 

 

97.9

 

 

9.3

 

 

8.5%

 

 

12.1

 

 

12.4%

Underwriting gain (loss)

$

36.2

 

$

(33.9)

 

$

(1,447.2)

 

$

70.1

 

 

-207.0%

 

$

1,413.3

 

 

(97.7)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Point Chg

 

 

 

 

 

Point Chg

Loss ratio

 

71.6%

 

 

70.9%

 

 

112.6%

 

 

 

 

 

0.7

 

 

 

 

 

(41.7)

Commission and brokerage ratio

 

25.0%

 

 

27.1%

 

 

27.3%

 

 

 

 

 

(2.1)

 

 

 

 

 

(0.2)

Other underwriting expense ratio

 

2.6%

 

 

2.9%

 

 

2.8%

 

 

 

 

 

(0.3)

 

 

 

 

 

0.1

Combined ratio

 

99.2%

 

 

100.9%

 

 

142.7%

 

 

 

 

 

(1.7)

 

 

 

 

 

(41.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding)



  Years Ended December 31, 2017/2016      2016/2015    
(Dollars in millions) 2017  2016  2015  Variance  % Change  Variance  % Change 
Gross written premiums $2,593.1  $2,125.8  $2,147.9  $467.3   22.0% $(22.1)  -1.0%
Net written premiums  1,135.6   930.2   899.9   205.4   22.1%  30.3   3.4%
                             
Premiums earned $858.2  $990.1  $951.5  $(131.9)  -13.3% $38.6   4.1%
Incurred losses and LAE  912.1   554.1   413.3   358.0   64.6%  140.8   34.1%
Commission and brokerage  160.3   189.5   199.0   (29.2)  -15.4%  (9.5)  -4.8%
Other underwriting expenses  55.9   54.1   50.1   1.8   3.3%  4.0   8.0%
Underwriting gain (loss) $(270.2) $192.4  $289.1  $(462.5)  -240.5% $(96.7)  -33.4%
                             
                  Point Chg      Point Chg 
Loss ratio  106.3%  56.0%  43.4%      50.3       12.6 
Commission and brokerage ratio  18.7%  19.1%  20.9%      (0.4)      (1.8)
Other underwriting expense ratio  6.5%  5.5%  5.3%      1.0       0.2 
Combined ratio  131.5%  80.6%  69.6%      50.9       11.0 
                             
(Some amounts may not reconcile due to rounding)                            


Premiums.Gross written premiums increased by 22.0%14.5% to $2,593.1$5,265.7 million in2020 from $4,600.4 million in 20172019 from $2,125.8 million in 2016, primarily due to an increaseincreases in the new crop reinsuranceproperty pro rata business, an increase in treatycasualty excess of loss writings and property business, the influxcatastrophe excess of reinstatement premiums due to the catastrophe losses and an increase in mortgageloss business. Net written premiums increased by 22.1%18.1% to $1,135.6$4,632.3 million in2020 compared to $3,923,8 million in 20172019.  compared to $930.2 million in 2016, partially due to the changes in affiliated quota agreements including the non-renewal of the quota share agreement between Everest Re and Bermuda Re. Premiums earned decreased 13.3% to $858.2 million in 2017 compared to $990.1 million in 2016.  The change in premiums earned relative to net written premiums is partially due to the impact of the non-renewal of the quota share contract between

23

Everest Re and Bermuda Re and is also the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums decreased by 1.0% to $2,125.8 million in 2016 from $2,147.9 million in 2015, primarily due to a decrease in treaty property business, partially offset by an increase in treaty casualty business.  Net written premiums increased by 3.4% to $930.2 million in 2016 compared to $899.9 million in 2015. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the assumption of the crop business due to the sale of Heartland and a concurrent new crop reinsurance contract. Premiums earned increased 4.1% to $990.1 million in 2016 compared to $951.5 million in 2015.  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.

Incurred Losses and LAE.  The following table presents the incurred losses and LAE for the U.S. 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
2017
                             
Attritional $522.3   61.0%  $(80.4)  -9.4%  $441.9   51.6% 
Catastrophes  485.2   56.5%   (15.1)  -1.8%   470.2   54.7% 
Total segment $1,007.5   117.5%  $(95.5)  -11.2%  $912.1   106.3% 
                                     
2016
                                   
Attritional $555.5   56.1%  $(49.0)  -4.9%  $506.5   51.2% 
Catastrophes  67.0   6.8%   (19.5)  -2.0%   47.6   4.8% 
Total segment $622.5   62.9%  $(68.5)  -6.9%  $554.1   56.0% 
                                     
2015
                                   
Attritional $473.5   49.8%  $(63.7)  -6.8%  $409.8   43.0% 
Catastrophes  8.4   0.9%   (4.9)  -0.5%   3.5   0.4% 
Total segment $481.9   50.7%  $(68.6)  -7.2%  $413.3   43.4% 
                                     
Variance 2017/2016
                                   
Attritional $(33.2)  4.9 pts $(31.4)  (4.5)pts $(64.6)  0.4 pts
Catastrophes  418.2   49.7 pts  4.4   0.2 pts  422.6   49.9 pts
Total segment $385.0   54.6 pts $(27.0)  (4.3)pts $358.0   50.3 pts
                                     
Variance 2016/2015
                                   
Attritional $82.0   6.3 pts $14.7   1.9 pts $96.7   8.2 pts
Catastrophes  58.6   5.9 pts  (14.6)  (1.5)pts  44.1   4.4 pts
Total segment $140.6   12.2 pts $0.1   0.3 pts $140.8   12.6 pts
                                     
(Some amounts may not reconcile due to rounding.)                               


Incurred losses increased by 64.6% to $912.1 million in 2017 compared to $554.1 million in 2016, primarily due to an increase of $418.2 million in current year catastrophe losses, partially offset by $31.4 million of more favorable development on prior years attritional losses in 2017 compared to 2016.  The $80.4 million of favorable development on prior years attritional losses in 2017 was mainly related to property and short-tail business, partially offset by $25.2 million of adverse development on A&E reserves. The current year catastrophe losses of $485.2 million in 2017 related to Hurricane Irma ($200.5 million), Hurricane Harvey ($185.4 million), the Northern California wildfires ($73.6 million), Hurricane Maria ($20.8 million), the Southern California wildfires ($3.6 million) and the 2017 US Midwest storms ($2.6 million).  The current year catastrophe losses of $67.0 million in 2016 related to Hurricane Matthew ($43.1 million), the 2016 U.S. Storms ($10.2 million), the Tennessee wildfire ($7.3 million) and Hurricane Hermine ($6.7 million).

Incurred losses increased by 34.1% to $554.1 million in 2016 compared to $413.3 million in 2015, primarily due to an increase of $82.0 million in current year attritional losses, resulting mainly from the impact of the increase in premiums earned and impact of the new crop reinsurance contract effective upon the sale of Heartland, and an increase of $58.6 million in current year catastrophe losses.  The $49.0 million of favorable prior years attritional loss development in 2016 is primarily due to U.S. property and marine business, partially offset by $47.1 million of adverse development on A&E reserves.  There was also an
24

increase in favorable development of $14.6 million on prior years catastrophe losses in 2016 compared to 2015.  The $19.5 million of favorable development on prior years catastrophes in 2016 mainly related to the 2011 Japan earthquake ($10.3 million), the 2015 U.S. storms ($5.8 million) and the 2013 U.S. storms ($4.8 million).  The current year catastrophe losses of $67.0 million in 2016 are outlined above.  The $8.4 million of current year catastrophe losses in 2015 were mainly due to the 2015 US Storms ($8.2 million).

Segment Expenses.  Commission and brokerage decreased by 15.4% to $160.3 million in 2017 compared to $189.5  million in 2016.  The decrease is mainly due to the impact of the influx of reinstatement premiums in 2017, the impact of affiliated quota share contracts and changes in the mix of business.  Segment other underwriting expenses increased slightly to $55.9 million in 2017 from $54.1 million in 2016.

Commission and brokerage decreased by 4.8% to $189.5 million in 2016 compared to $199.0 million in 2015.  The decrease is mainly due to the impact of the new crop reinsurance contract effective upon the sale of Heartland, the impact of affiliated quota share contracts and changes in the mix of business. Segment other underwriting expenses increased to $54.1 million in 2016 from $50.1 million in 2015. The increase was primarily due to the impact of changes in the mix of business and higher compensation costs.

International.
The following table presents the underwriting results and ratios for the International segment for the periods indicated.


   Years Ended December 31, 2017/2016 2016/2015
(Dollars in millions) 2017  2016  2015  Variance  % Change  Variance  % Change 
Gross written premiums $1,339.5  $1,269.1  $1,374.0  $70.4   5.5% $(104.9)  -7.6%
Net written premiums  615.4   497.6   562.7   117.8   23.7%  (65.1)  -11.6%
                             
Premiums earned $502.3  $510.9  $581.2  $(8.6)  -1.7% $(70.3)  -12.1%
Incurred losses and LAE  622.8   207.6   394.8   415.2   200.0%  (187.2)  -47.4%
Commission and brokerage  101.9   111.5   121.2   (9.6)  -8.6%  (9.6)  -8.0%
Other underwriting expenses  36.3   34.3   34.3   2.0   5.9%  -   0.0%
Underwriting gain (loss) $(258.7) $157.5  $30.9  $(416.2) NM  $126.5  NM 
                             
                  Point Chg      Point Chg 
Loss ratio  124.0%  40.6%  67.9%      83.4       (27.3)
Commission and brokerage ratio  20.3%  21.8%  20.8%      (1.5)      1.0 
Other underwriting expense ratio  7.2%  6.8%  6.0%      0.4       0.8 
Combined ratio  151.5%  69.2%  94.7%      82.3       (25.5)
                             
(Some amounts may not reconcile due to rounding)                            
(NM, not meaningful)                            

Premiums.  Gross written premiums increased by 5.5% to $1,339.5 million in 2017 compared to $1,269.1 million in 2016, primarily due to increases in Middle East, African and Asian business and the positive impact of $22.0 million from the movement of foreign exchange rates, partially offset by a decline in Latin American business.  Net written premiums increased by 23.7% to $615.4 million in 2017 compared to $497.6 million in 2016.  The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of reinsurance related to quota share contracts, including the impact of the non-renewal of the quota share contract between Everest Re and Bermuda Re.  Premiums earned decreased 1.7% to $502.3 million in 2017 compared to $510.9 million in 2016.  The change in premiums earned relative to net written premiums is partially due to the impact of the non-renewal of the quota share contract between Everest Re and Bermuda Re and is also the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums decreased by 7.6% to $1,269.1 million in 2016 compared to $1,374.0 million in 2015, primarily due to declines in Latin American, Middle East and Asian business and the negative impact of $40.7 million from the movement of foreign exchange rates.  Net written premiums decreased by 11.6%
25

to $497.6 million in 2016 compared to $562.7 million in 2015.  The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of reinsurance related to the quota share contracts.  Premiums earned decreased 12.1% to $510.9 million in 2016 compared to $581.2 million in 2015.  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.

Incurred Losses and LAE. The following table presents the incurred losses and LAE for the International 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
2017
                             
Attritional $255.0   50.8%  $11.6   2.3%  $266.6   53.1% 
Catastrophes  357.2   71.1%   (1.0)  -0.2%   356.2   70.9% 
Total segment $612.2   121.9%  $10.6   2.1%  $622.8   124.0% 
                                     
2016
                                   
Attritional $261.5   51.2%  $(93.6)  -18.3%  $167.9   32.8% 
Catastrophes  65.5   12.8%   (25.8)  -5.1%   39.7   7.8% 
Total segment $327.0   64.0%  $(119.4)  -23.4%  $207.6   40.6% 
                                     
2015
                                   
Attritional $378.1   65.1%  $(11.4)  -2.1%  $366.7   63.0% 
Catastrophes  34.7   6.0%   (6.6)  -1.1%   28.1   4.9% 
Total segment $412.8   71.1%  $(18.0)  -3.2%  $394.8   67.9% 
                                     
Variance 2017/2016
                                   
Attritional $(6.5)  (0.4)pts $105.2   20.6 pts $98.7   20.3 pts
Catastrophes  291.7   58.3 pts  24.8   4.9 pts  316.5   63.1 pts
Total segment $285.2   57.9 pts $130.0   25.5 pts $415.2   83.4 pts
                                     
Variance 2016/2015
                                   
Attritional $(116.6)  (13.9)pts $(82.2)  (16.2)pts $(198.8)  (30.2)pts
Catastrophes  30.8   6.8 pts  (19.2)  (4.0)pts  11.6   2.9 pts
Total segment $(85.8)  (7.1)pts $(101.4)  (20.2)pts $(187.2)  (27.3)pts
                                     
(Some amounts may not reconcile due to rounding.)                               


Incurred losses and LAE increased by 200.0% to $622.8 million in 2017 compared to $207.6 million in 2016, primarily due to an increase of $291.7 million in current catastrophe losses, favorable development of $105.2 million on prior years attritional losses and $24.8 million on prior years catastrophe losses. The current year catastrophe losses of $357.2 million in 2017 related to Hurricane Maria ($238.6 million), Hurricane Irma ($79.2 million), the Mexico City earthquake ($10.2 million), the South Africa Knysna fires ($9.9 million), Cyclone Debbie in Australia ($8.4 million), the Peru storms ($7.4 million) and Hurricane Harvey ($3.4 million). The $65.5 million of current year catastrophe losses in 2016 were due to the Fort McMurray Canada wildfire ($24.9 million), Hurricane Matthew ($13.7 million), the Ecuador earthquake ($11.8 million), the 2016 Taiwan earthquake ($7.6 million) and the New Zealand earthquake ($6.9 million).

Incurred losses and LAE decreased by 47.4% to $207.6 million in 2016 compared to $394.8 million in 2015, primarily due to a decrease in current year attritional losses of $116.6 million, more favorable development on prior year attritional losses of $82.2 million and more favorable development of prior year catastrophe losses of $19.2 million, partially offset by an increase of $30.8 million in current year catastrophe losses.  The decrease in attritional losses related to lower losses on Canadian, Latin American, Middle Eastern and African business in 2016 and the impact of the decrease in premiums earned.  The $93.6 million of favorable development on prior years attritional losses was mainly related to property business.  The $65.5 million of current year catastrophe losses in 2016 are outlined aboveThe $34.7 million of current year catastrophe losses in 2015 were due to the 2015 Chilean earthquake ($17.4 million), Northern Chile storms ($9.6 million) and the New South Wales storms ($7.8 million).

26

Segment Expenses.  Commission and brokerage decreased 8.6% to $101.9 million in 2017 compared to $111.5 million in 2016.  The decrease was due to the impact of the decrease in premiums earned, the impact of affiliated quota share agreements and the changes in the mix of business. Segment other underwriting expenses increased slightly to $36.3 million in 2017 compared to $34.3 million in 2016.

Commission and brokerage decreased 8.0% to $111.5 million in 2016 compared to $121.2 million in 2015.  The year over year decrease was mainly due to the impact of the decrease in premiums earned.  Segment other underwriting expenses remained the same at $34.3 million in 2016 and 2015.

Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated.


  Years Ended December 31, 2017/2016 2016/2015
(Dollars in millions) 2017  2016  2015  Variance  % Change  Variance  % Change 
Gross written premiums $1,855.9  $1,668.8  $1,473.8  $187.1   11.2% $195.0   13.2%
Net written premiums  972.8   620.3   630.7   352.5   56.8%  (10.4)  -1.6%
                             
Premiums earned $589.1  $593.1  $611.1  $(4.0)  -0.7% $(18.0)  -2.9%
Incurred losses and LAE  504.9   588.6   511.5   (83.7)  -14.2%  77.1   15.1%
Commission and brokerage  (51.3)  (19.6)  (7.8)  (31.7)  162.0%  (11.8)  150.6%
Other underwriting expenses  162.7   156.6   130.4   6.1   3.9%  26.2   20.1%
Underwriting gain (loss) $(27.1) $(132.5) $(23.0) $105.4   -79.5% $(109.5) NM 
                             
                  Point Chg      Point Chg 
Loss ratio  85.7%  99.2%  83.7%      (13.5)      15.5 
Commission and brokerage ratio  -8.7%  -3.3%  -1.3%      (5.4)      (2.0)
Other underwriting expense ratio  27.6%  26.5%  21.3%      1.1       5.2 
Combined ratio  104.6%  122.3%  103.8%      (17.7)      18.5 
                             
(Some amounts may not reconcile due to rounding)                            
(NM, not meaningful)                            


Premiums. Gross written premiums increased by 11.2% to $1,855.9 million in 2017 compared to $1,668.8 million in 2016.  Excluding the impact of the sale of Heartland, which accounted for $230.4 million of gross written premiums in 2016, gross written premiums increased $417.4 million.  This increase was primarily driven by expansion of many lines of business, including retail casualty, retail property and accident and health.  Net written premiums increased by 56.8% to $972.8 million in 2017 compared to $620.3 million in 2016The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the impact of changes in affiliated quota share agreements, including the impact of the non-renewal of the quota share agreement between Everest Re and Bermuda Re.reinsurance contracts. Premiums earned decreased slightlyincreased 18.1% to $589.1$4,484.7 million in 2020 compared to $3,796.2 million in 20179 compared to $593.1 million in 2016. 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.

Gross written premiums increased by 13.2%0.7% to $1,668.8$4,600.4 million in2019 from $4,569.5 million in 2016 compared to $1,473.8 million in 20152018.  This increase was, primarily driven by expansion of various insurance lines of business anddue to an increase in accidenttreaty casualty writings and health business.mortgage business, partially offset by a decline in treaty property business, including lower reinstatement premiums. Net written premiums decreasedincreased by 1.6%11.5% to $620.3$3,923.8 million in 2016 2019 compared to $630.7$3,519.7 million in 20152018.  The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the transferimpact of the crop business to the U.S. Reinsurance segment as a result of the Heartland sale.changes in affiliated reinsurance contracts. Premiums earned decreased 2.9%increased 12.1% to $593.1$3,796.2 million in 20162019 compared to $611.1$3,386.4 million in 20152018The 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.

25



27


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

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

2,692.2

 

60.0%

 

 

$

187.3

 

4.2%

 

 

$

2,879.5

 

64.2%

 

Catastrophes

 

342.5

 

7.6%

 

 

 

(12.8)

 

(0.3)%

 

 

 

329.7

 

7.4%

 

Total segment

$

3,034.7

 

67.7%

 

 

$

174.5

 

3.9%

 

 

$

3,209.2

 

71.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

2,140.1

 

56.4%

 

 

$

(15.4)

 

(0.4)%

 

 

$

2,124.7

 

56.0%

 

Catastrophes

 

509.3

 

13.4%

 

 

 

58.7

 

1.5%

 

 

 

568.0

 

14.9%

 

Total segment

$

2,649.4

 

69.8%

 

 

$

43.3

 

1.1%

 

 

$

2,692.7

 

70.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

2,130.0

 

62.9%

 

 

$

5.8

 

0.2%

 

 

$

2,135.8

 

63.1%

 

Catastrophes

 

1,117.5

 

33.0%

 

 

 

558.4

 

16.5%

 

 

 

1,675.9

 

49.5%

 

Total segment

$

3,247.6

 

95.9%

 

 

$

564.2

 

16.7%

 

 

$

3,811.7

 

112.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2020/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

552.1

 

3.6

pts

 

$

202.7

 

4.6

pts

 

$

754.8

 

8.2

pts

Catastrophes

 

(166.8)

 

(5.8)

pts

 

 

(71.5)

 

(1.8)

pts

 

 

(238.3)

 

(7.5)

pts

Total segment

$

385.3

 

(2.1)

pts

 

$

131.2

 

2.8

pts

 

$

516.5

 

0.7

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2019/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

10.1

 

(6.5)

pts

 

$

(21.2)

 

(0.6)

pts

 

$

(11.1)

 

(7.1)

pts

Catastrophes

 

(608.2)

 

(19.6)

pts

 

 

(499.7)

 

(15.0)

pts

 

 

(1,107.9)

 

(34.6)

pts

Total segment

$

(598.2)

 

(26.1)

pts

 

$

(520.9)

 

(15.6)

pts

 

$

(1,119.0)

 

(41.7)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

Incurred losses increased by 19.2% to $3,209.2 million in 2020 compared to $2,692.7 millionin 2019. The increase was primarily due to an increase of $552.1 million in current year attritional losses, primarily related to $116.4 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned, as well as a $202.7 million increase in development on prior years attritional losses in 2020 compared to 2019. The increase in incurred losses was partially offset by a decline of $166.8 million in current year catastrophe losses and $71.5 million of improvement in development on prior years catastrophe losses in 2020 compared to 2019. The current year catastrophe losses of $342.5 million in 2020 primarily related to Hurricane Laura ($96.5 million), the Northern California wildfires ($44.1 million), the California Glass wildfire ($29.5 million), Hurricane Zeta ($28.5 million), Hurricane Isaias ($17.8 million), the Derecho storms ($17.5 million), the Nashville tornadoes ($17.3 million), Oregon wildfires ($17.0 million), Hurricane Delta ($16.5 million), Hurricane Sally ($15.5 million),  the Calgary storms in Canada ($14.9 million), the Queensland hailstorm ($10.0 million), the Australia East Coast storm ($6.8 million), the 2020 Australia fires ($6.5 million), and the U.S. Civil Unrest ($4.1 million). The current year catastrophe losses of $509.3 million in 2019 primarily related to Typhoon Hagibis ($184.0 million), Hurricane Dorian ($157.0 million), Typhoon Faxai ($119.3 million), the Dallas tornadoes ($25.0 million), and the Townsville Monsoon in Australia ($24.1 million).

Incurred losses decreased by 29.4% to $2,692.7 million in2019 compared to $3,811.7 millionin 2018.   The decrease was primarily due to a decline of $608.2 million in current year catastrophe losses and a $499.7 million decrease in development on prior year catastrophe losses in 2019 compared to 2018, primarily related to development on Hurricane Harvey, Irma and Maria and the 2017 California wildfires in 2018. The increases

26


in loss estimates in 2018 for Hurricane Harvey, Irma and Maria were mostly driven by re-opened claims reported in the second quarter of 2018 and loss inflation from higher than expected loss adjustment expenses and in particular, their impact on aggregate covers.  The current year catastrophe losses of $509.3 million in 2019 are outlined above. The current year catastrophe losses of $1,117.5 million in 2018 primarily related to Hurricane Michael ($419.5 million), Camp wildfire ($297.0 million), Woolsey wildfire ($151.0 million), Typhoon Jebi ($66.6 million), Hurricane Florence ($51.3 million), Cyclone Mekunu ($43.7 million), Typhoon Trami ($25.0 million), Australia hailstorm ($24.0 million), other 2018 California wildfires ($23.1 million), Japan Floods ($5.5 million), and the U.S. winter storms ($1.3 million).

Segment Expenses.  Commission and brokerage increased to $1,120.0 million in 2020 compared to $1,027.3 million in 2019. 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 $119.3 million in 2020 from $110.0 million in 2019, mainly due to the impact of the increase in premiums earned.

Commission and brokerage increased to $1,027.3 million in 2019 compared to $923.9 million in 2018The increase was mainly due to changes in affiliated reinsurance agreements, the impact of the increase in premiums earned and changes in the mix of business. Segment other underwriting expenses increased to $110.0 million in 2019 from $97.9 million in 2018, mainly due to the impact of changes in affiliated reinsurance contracts and the impact of the increases in premiums earned.

Insurance.

The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated.

 

Years Ended December 31,

 

2020/2019

 

2019/2018

(Dollars in millions)

2020

 

2019

 

2018

 

Variance

 

% Change

 

Variance

 

% Change

Gross written premiums

$

2,691.3

 

$

2,452.7

 

$

2,004.1

 

$

238.6

 

 

9.7%

 

$

448.6

 

 

22.4%

Net written premiums

 

2,006.4

 

 

1,851.2

 

 

1,512.2

 

 

155.2

 

 

8.4%

 

 

339.0

 

 

22.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

1,921.9

 

$

1,692.9

 

$

1,452.7

 

$

229.0

 

 

13.5%

 

$

240.2

 

 

16.5%

Incurred losses and LAE

 

1,399.0

 

 

1,136.4

 

 

999.3

 

 

262.7

 

 

23.1%

 

 

137.2

 

 

13.7%

Commission and brokerage

 

253.4

 

 

242.8

 

 

217.8

 

 

10.6

 

 

4.4%

 

 

25.0

 

 

11.5%

Other underwriting expenses

 

281.7

 

 

240.9

 

 

195.4

 

 

40.7

 

 

16.9%

 

 

45.4

 

 

23.2%

Underwriting gain (loss)

$

(12.2)

 

$

72.8

 

$

40.2

 

$

(84.9)

 

 

(116.7)%

 

$

32.7

 

 

81.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Point Chg

 

 

 

 

 

Point Chg

Loss ratio

 

72.8%

 

 

67.1%

 

 

68.8%

 

 

 

 

 

5.7

 

 

 

 

 

(1.7)

Commission and brokerage ratio

 

13.2%

 

 

14.3%

 

 

15.0%

 

 

 

 

 

(1.1)

 

 

 

 

 

(0.7)

Other underwriting expense ratio

 

14.6%

 

 

14.3%

 

 

13.4%

 

 

 

 

 

0.3

 

 

 

 

 

0.9

Combined ratio

 

100.6%

 

 

95.7%

 

 

97.2%

 

 

 

 

 

4.9

 

 

 

 

 

(1.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding)

(NM, not meaningful)

Premiums. Gross written premiums increased by 9.7% to $2,691.3 million in 2020 compared to $2,452.7 million in 2019.  This increase was related to increases in specialty casualty business, property business and professional liability business. Net written premiums increased by 8.4% to $2,006.4 million in 2020 compared to $1,851.2 million in 2019 which is consistent with the change in gross written premiums. Premiums earned increased 13.5% to $1,921.9 million in 2020 compared to $1,692.9 million in 2019. The change in premiums earned 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.

27


Gross written premiums increased by 22.4% to $2,452.7 million in 2019 compared to $2,004.1 million in 2018. This increase was related to most lines of business including casualty, energy and accident and health. Net written premiums increased by 22.4% to $1,851.2 million in 2019 compared to $1,512.2 million in 2018 which is consistent with the change in gross written premiums. Premiums earned increased 16.5% to $1,692.9 million in 2019 compared to $1,452.7 million in 2018. The change in premiums earned 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.

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

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,305.1

 

67.9%

 

 

$

26.3

 

1.4%

 

 

$

1,331.3

 

69.3%

 

Catastrophes

 

68.0

 

3.5%

 

 

 

(0.4)

 

(0.0)%

 

 

 

67.7

 

3.5%

 

Total segment

$

1,373.1

 

71.4%

 

 

$

25.9

 

1.3%

 

 

$

1,399.0

 

72.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,131.3

 

66.8%

 

 

$

(0.5)

 

—%

 

 

$

1,130.8

 

66.8%

 

Catastrophes

 

4.0

 

0.2%

 

 

 

1.7

 

0.1%

 

 

 

5.7

 

0.3%

 

Total segment

$

1,135.3

 

67.0%

 

 

$

1.2

 

0.1%

 

 

$

1,136.4

 

67.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

962.6

 

66.3%

 

 

$

 

—%

 

 

$

962.6

 

66.3%

 

Catastrophes

 

42.1

 

2.9%

 

 

 

(5.4)

 

(0.4)%

 

 

 

36.7

 

2.5%

 

Total segment

$

1,004.7

 

69.2%

 

 

$

(5.4)

 

(0.4)%

 

 

$

999.3

 

68.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2020/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

173.8

 

1.1

pts

 

$

26.8

 

1.4

pts

 

$

200.6

 

2.5

pts

Catastrophes

 

64.0

 

3.3

pts

 

 

(2.1)

 

(0.1)

pts

 

 

62.0

 

3.2

pts

Total segment

$

237.8

 

4.4

pts

 

$

24.7

 

1.2

pts

 

$

262.7

 

5.7

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2019/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

168.7

 

0.5

pts

 

$

(0.5)

 

pts

 

$

168.2

 

0.5

pts

Catastrophes

 

(38.1)

 

(2.7)

pts

 

 

7.1

 

0.5

pts

 

 

(31.0)

 

(2.2)

pts

Total segment

$

130.6

 

(2.2)

pts

 

$

6.6

 

0.5

pts

 

$

137.2

 

(1.7)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)



  Years Ended December 31,
  Current  Ratio %/   Prior  Ratio %/   Total  Ratio %/
(Dollars in millions) Year  Pt Change Years  Pt Change Incurred  Pt Change
2017
                             
Attritional $423.4   71.9%  $(33.5)  -5.7%  $389.9   66.2% 
Catastrophes  114.5   19.4%   0.6   0.1%   115.0   19.5% 
Total segment $537.9   91.3%  $(32.9)  -5.6%  $504.9   85.7% 
                                     
2016
                                   
Attritional $470.2   79.2%  $96.5   16.3%  $566.7   95.5% 
Catastrophes  22.2   3.7%   (0.3)  0.0%   21.9   3.7% 
Total segment $492.4   82.9%  $96.2   16.3%  $588.6   99.2% 
                                     
2015
                                   
Attritional $431.4   70.6%  $79.8   13.1%  $511.2   83.7% 
Catastrophes  -   0.0%   0.3   0.0%   0.3   0.0% 
Total segment $431.4   70.6%  $80.1   13.1%  $511.5   83.7% 
                                     
Variance 2017/2016
                                   
Attritional $(46.8)  (7.3)pts $(130.0)  (22.0)pts $(176.8)  (29.3)pts
Catastrophes  92.3   15.7 pts  0.9   0.1 pts  93.1   15.8 pts
Total segment $45.5   8.4 pts $(129.1)  (21.9)pts $(83.7)  (13.5)pts
                                     
Variance 2016/2015
                                   
Attritional $38.8   8.6 pts $16.7   3.2 pts $55.5   11.8 pts
Catastrophes  22.2   3.7 pts  (0.6)  - pts  21.6   3.7 pts
Total segment $61.0   12.3 pts $16.1   3.2 pts $77.1   15.5 pts
                                     
(Some amounts may not reconcile due to rounding.)                               


Incurred losses and LAE decreasedincreased by 14.2%23.1% to $504.9$1,399.0 million in 20172020 compared to $588.6$1,136.4 million in 20162019, , mainly due to $130.0an increase of $173.8 million in current year attritional losses, resulting from $38.4 million of more favorablelosses from the COVID-19 pandemic and the impact of the increase in premiums earned, an increase of $64.0 million in current year catastrophe losses and a $26.8 million increase in  development on prior years attritional losses in 2020 compared to 2019.The $68.0 million of current year catastrophe losses in 2020, primarily related to Hurricane Laura ($18.5 million), Hurricane Sally ($15.9 million), the U.S. Civil Unrest ($10.4 million), Hurricane Zeta ($8.0 million),  the Nashville tornadoes ($5.5 million), the Derecho storms ($3.0 million), the Calgary storms in Canada ($2.5 million), Hurricane Isaias ($2.2 million), and a decreaseHurricane Delta ($2.0 million).The current year catastrophe losses of $46.8$4.0 million in 2019 primarily related to Hurricane Dorian ($4.0 million).

28


Incurred losses and LAE increased by 13.7% to $1,136.4 million in 2019 compared to $999.3 million in 2018, mainly due to an increase of $168.7 million in current year attritional losses, resulting from the impact of the increase in premiums earned, partially offset by an increasea decrease of $92.3$38.1 million in current year catastrophe losses. The decrease in current year attritionalcatastrophe losses of $4.0 million in 2019 primarily related to changes in the mix of business and the impact of affiliated quota share agreements. The $33.5 million of favorable development on prior years attritional losses in 2017 mainly related to workers compensation business. Hurricane Dorian ($4.0 million). The current year catastrophe losses of $114.5$42.1 million in 20172018 primarily related to Hurricane IrmaMichael ($53.924.0 million), Hurricane HarveyFlorence ($47.0 million), Hurricane Maria ($8.79.5 million), the 2017 US MidwestU.S. winter storms ($2.47.1 million), the Northern and other 2018 California wildfires ($1.71.5 million).

Segment Expenses.Commission and the Southern California wildfires ($0.8 million).brokerage increased to $253.4 million The $22.2 million of current year catastrophe losses in 2016 were due to the U.S. storms ($15.0 million), Hurricane Matthew ($5.5 million) and the Fort McMurray Canada wildfire ($1.7 million).


Incurred losses and LAE increased by 15.1% to $588.6 million in 20162020 compared to $511.5$242.8 million in 2015,2019The increase was mainly due to an increase of $38.8 millionchanges in current year attritional losses, an increase of $22.2 million in current year catastrophe losses, an increase of $16.7 million in prior years' attritional losses mainly related to run-off construction liability and umbrella businessaffiliated reinsurance agreements and the impact of increaseincreases in premiums earned. The increase in current year attritional losses primarily relatedSegment other underwriting expenses increased to the impact of several non-catastrophic weather events, a slight deterioration in non-standard automobile business and growth in accident and health business, which tends to have a higher loss ratio.  The $22.2$281.7 million of current year catastrophe losses in 2016 are outlined above.  There were no current year catastrophe losses for the year ended December 31, 2015.

Segment Expenses.  Commission and brokerage decreased to ($51.3) million in 20172020 compared to ($19.6)$240.9 million in 2016.2019. The decrease wasincreases were mainly due to the impact of changesthe increases in the mix of businesspremiums earned and the impacts from affiliated quota share agreements.  Segment other underwriting expenses increased to $162.7 million in 2017 compared to $156.6 million in 2016.  The increase was primarily due to the impact of the increased expenses related to the continued build out of the insurance business.

28


Commission and brokerage decreasedincreased to ($19.6)$242.8 million in 20162019 compared to ($7.8)$217.8 million in 20152018The decreaseincrease was mainly due to changes in affiliated reinsurance agreements and the impact of increases in premiums earned. Segment other underwriting expenses increased to $240.9 million in 2019 compared to $195.4 million in 2018. The increases were mainly due to the impact of changesthe increases in the mix of businesspremiums earned and the impacts from affiliated quota share agreements.  Segment other underwriting expenses increased to $156.6 million in 2016 compared to $130.4 million in 2015. The increase was primarily due to increased expenses duerelated to the continued build out of ourthe insurance platform.business. 

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"“may”, "will"“will”, "should"“should”, "could"“could”, "anticipate"“anticipate”, "estimate"“estimate”, "expect"“expect”, "plan"“plan”, "believe"“believe”, "predict"“predict”, "potential"“potential” and "intend"“intend”. Forward-looking statements contained in this report include information regarding our reserves for losses and LAE, the impact of the TCJA, the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic and pandemic  events on our financial statements and the ability of our subsidiaries to pay dividends. 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"“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


Market Sensitive Instruments.

The SEC'sSEC’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“market sensitive instruments"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, taxable and tax-preferenced fixed maturity portfolio, while maintaining an adequate level of liquidity.  Our mix of taxable and tax-preferenced investments is adjusted periodically, consistent with our current and projected operating results, market conditions and our tax position.  The fixed maturity securities in the investment portfolio are comprised of non-trading available for sale securities.  Additionally, we have invested in equity securities.


securities, private equity and private placement loans. 

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.

29



Interest Rate Risk.  Our $8.9$15.9 billion investment portfolio, atDecember 31, 2017,2020, 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 $165.1$1,518.4 million of mortgage-backed securities in the $4,971.9$10,643.6 million fixed maturity portfolio.  Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.

29


The tablestable below displaydisplays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $241.5$707.9 million of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates.  For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually.  To generate appropriate price estimate on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account.  For legal entities with 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, 2020

(Dollars in millions)

-200

 

 

-100

 

 

O

 

 

100

 

 

200

 

Total Market/Fair Value

$

12,041.1

 

 

$

11,696.3

 

 

$

11,351.5

 

 

$

11,006.7

 

 

$

10,661.9

 

Market/Fair Value Change from Base (%)

 

6.1

%

 

 

3.0

%

 

 

-

%

 

 

-3.0

%

 

 

-6.1

%

Change in Unrealized Appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax from Base ($)

$

544.8

 

 

$

272.4

 

 

$

 

 

$

(272.4)

 

 

$

(544.8)

 


 

Impact of Interest Rate Shift in Basis Points

 

 

At December 31, 2019

 

(Dollars in millions)

-200

 

 

-100

 

 

O

 

 

100

 

 

200

 

Total Market/Fair Value

$

8,314.4

 

 

$

8,046.1

 

 

$

7,777.8

 

 

$

7,509.5

 

 

$

7,241.2

 

Market/Fair Value Change from Base (%)

 

6.9

%

 

 

3.4

%

 

 

-

%

 

 

-3.4

%

 

 

-6.9

%

Change in Unrealized Appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax from Base ($)

$

423.9

 

 

$

211.9

 

 

$

 

 

$

(211.9)

 

 

$

(423.9)

 


  Impact of Interest Rate Shift in Basis Points 
  At December 31, 2017 
(Dollars in millions)  -200   -100   0   100   200 
Total Market/Fair Value $5,524.8  $5,367.4  $5,213.4  $5,061.3  $4,910.9 
Market/Fair Value Change from Base (%)  6.0%  3.0%  0.0%  -2.9%  -5.8%
Change in Unrealized Appreciation                    
After-tax from Base ($) $202.4  $100.1  $-  $(98.9) $(196.6)

  Impact of Interest Rate Shift in Basis Points 
  At December 31, 2016 
(Dollars in millions)  -200   -100   0   100   200 
Total Market/Fair Value $6,630.2  $6,456.9  $6,276.8  $6,089.0  $5,900.4 
Market/Fair Value Change from Base (%)  5.6%  2.9%  0.0%  -3.0%  -6.0%
Change in Unrealized Appreciation                    
After-tax from Base ($) $229.7  $117.1  $-  $(122.0) $(244.6)


We had $9,343.0$11,654.9 million and $8,331.3$10,209.5 million of gross reserves for losses and LAE as of December 31, 20172020 and December 31, 2016,2019, 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 that is reasonably consistent with our fixed income portfolio.

30



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.  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 tablestable below displaydisplays 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 periods indicated.

 

Impact of Percentage Change in Equity Fair/Market Values

 

At December 31, 2020

(Dollars in millions)

-20%

 

-10%

 

0%

 

10%

 

20%

Fair/Market Value of the Equity Portfolio

$

1,031.0

 

$

1,159.9

 

$

1,288.8

 

$

1,417.6

 

$

1,546.5

After-tax Change in Fair/Market Value

 

(203.6)

 

 

(101.8)

 

 

 

 

101.8

 

 

203.6


 

Impact of Percentage Change in Equity Fair/Market Values

 

At December 31, 2019

(Dollars in millions)

-20%

 

-10%

 

0%

 

10%

 

20%

Fair/Market Value of the Equity Portfolio

$

611.2

 

$

687.6

 

$

764.0

 

$

840.5

 

$

916.9

After-tax Change in Fair/Market Value

 

(120.7)

 

 

(60.4)

 

 

 

 

60.4

 

 

120.7


  Impact of Percentage Change in Equity Fair/Market Values 
  At December 31, 2017 
(Dollars in millions)  -20%  -10%  0%  10%  20%
Fair/Market Value of the Equity Portfolio $657.9  $740.1  $822.4  $904.6  $986.9 
After-tax Change in Fair/Market Value  (106.9)  (53.5)  -   53.5   106.9 



  Impact of Percentage Change in Equity Fair/Market Values 
  At December 31, 2016 
(Dollars in millions)  -20%  -10%  0%  10%  20%
Fair/Market Value of the Equity Portfolio $710.2  $799.0  $887.8  $976.6  $1,065.4 
After-tax Change in Fair/Market Value  (115.4)  (57.7)  -   57.7   115.4 

30


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. ("foreign"(“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 Singapore and Canadian Dollars.  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, 2020

(Dollars in millions)

-20%

 

-10%

 

0%

 

10%

 

20%

Total After-tax Foreign Exchange Exposure

$

(162.3)

 

$

(81.1)

 

$

 

$

81.1

 

$

162.3

               


 

Change in Foreign Exchange Rates in Percent

 

At December 31, 2019

(Dollars in millions)

-20%

 

-10%

 

0%

 

10%

 

20%

Total After-tax Foreign Exchange Exposure

$

(159.4)

 

$

(79.7)

 

$

 

$

79.7

 

$

159.4

               


31

  Change in Foreign Exchange Rates in Percent 
  At December 31, 2017 
(Dollars in millions)  -20%  -10%  0%  10%  20%
Total After-tax Foreign Exchange Exposure $(131.8) $(65.9) $-  $65.9  $131.8 




  Change in Foreign Exchange Rates in Percent 
  At December 31, 2016 
(Dollars in millions) -20%  -10%  0%  10%  20%
Total After-tax Foreign Exchange Exposure $(130.8) $(65.4) $-  $65.4  $130.8 



ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules on page F-1 are filed as part of this report.



ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.



ITEM 9A.  CONTROLS AND PROCEDURES


Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.


31


Management'sManagement’s Annual 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, 2017.2020. 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, 2017,2020, our internal control over financial reporting is effective based on those criteria.


Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of the Company'sCompany’s registered public accounting firm regarding internal control over financial reporting. Management's report wasManagement’s internal controls are not subject to attestation by the Company'sCompany’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management'smanagement’s report in this annual report due to the Company'sCompany’s status as a non-accelerated filer.


Changes in Internal Control Over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated our internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  Based on that evaluation, there has been no such change during the fourth quarter.



ITEM 9B.  OTHER INFORMATION

None.

32



None.


PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


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



ITEM 11.  EXECUTIVE COMPENSATION


Information for Item 11 is not required pursuant to General Instruction I(2) of Form 10-K.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


Information for Item 12 is not required pursuant to General Instruction I(2) of Form 10-K.



32


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information for Item 13 is not required pursuant to General Instruction I(2) of Form 10-K.



ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES


The PricewaterhouseCoopers LLP (and its worldwide affiliates) fees incurred are as follows for the periods indicated:

(Dollars in thousands)

 

2020

 

2019

 (1) 

Audit Fees

 

$

3,406.1

 

$

3,519.7

 (2) 

Audit-Related Fees

 

 

133.7

 

 

181.6

 (3) 

Tax Fees

 

 

691.0

 

 

497.0

 (4) 

All Other Fees

 

 

17.0

 

 

17.5


(Dollars in thousands) 2017  2016 
 (1)Audit Fees $2,641.0  $2,092.3 
 (2)Audit-Related Fees  133.1   89.7 
 (3)Tax Fees  561.5   331.3 
 (4)All Other Fees  13.6   6.3 

Audit fees include the annual audit and quarterly financial statement reviews, subsidiary audits, and procedures required to be performed by the independent auditor to be able to form an opinion on our consolidated financial statements.  These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit or quarterly review.  Audit fees may also include statutory audits or financial audits for our subsidiaries or affiliates and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.


Audit-related fees include assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, including due diligence services pertaining to potential business acquisitions/dispositions, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "audit services"“audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rule making authorities; financial audits of employee benefit plans; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements.


Tax fees include tax compliance, tax planning and tax advice and is granted general pre-approval by Group'sGroup’s Audit Committee.


All other fees represent an accounting research subscription and software.


Under its Charter and the "Audit“Audit and Non-Audit Services Pre-Approval Policy"Policy” (the "Policy"“Policy”), the Audit Committee is required to pre-approve the audit and non-audit services to be performed by the independent auditors.  The Policy mandates specific approval by the Audit Committee for any service that has not received a

33


general pre-approval or that exceeds pre-approved cost levels or budgeted amounts. For both specific and general pre-approval, the Audit Committee considers whether such services are consistent with the SEC'sSEC’s rules on auditor independence.  The Audit Committee also considers whether the independent auditors are best positioned to provide the most effective and efficient service and whether the service might enhance the Company'sCompany’s ability to manage or control risk or improve audit quality.  The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services.  It may determine, for each fiscal year, the appropriate ratio between the total amount of  audit, audit-related and tax fees and a total amount of fees for certain permissible non-audit services classified below as "All“All Other Fees"Fees”.  All such factors are considered as a whole, and no one factor is determinative. The Audit Committee further considered whether the performance by PricewaterhouseCoopers LLP of the non-audit related services disclosed below is compatible with maintaining their independence.  The Audit Committee approved all of the audit-related fees, tax fees and all other fees for 20172020 and 2016.


2019.

33


PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


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.


Financial Statements and Schedules.

The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules on page F-1 are filed as part of this report.


34SIGNATURES


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 2018.

2021.



EVEREST REINSURANCE HOLDINGS, INC.

By:

/S/DOMINIC J. ADDESSO JUAN C. ANDRADE

Dominic J. Addesso

Juan C. Andrade

(Chairman, President and

    Chief Executive Officer)





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature

Title

Date

/S/ DOMINIC J. ADDESSOJUAN C. ANDRADE

Chairman, President and Chief Executive

Officer (Principal Executive Officer)

March 30, 20182021

Dominic J. Addesso

Juan C. Andrade

/S/ CRAIG HOWIEMARK KOCIANCIC

Executive Vice President and Chief Financial

Officer (Principal Financial Officer)

March 30, 20182021

Craig Howie

Mark Kociancic

/S/ KEITH T. SHOEMAKER

Comptroller (Principal Accounting Officer)

March 30, 20182021

Keith T. Shoemaker


34


INDEX TO EXHIBITS

Exhibit No.

E-1



35

INDEX TO EXHIBITS
    
Exhibit No.
    
 2.1Agreement and Plan of Merger among Everest Reinsurance Holdings, Inc., Everest Re Group, Ltd. and Everest Re Merger Corporation, incorporated herein by reference to Exhibit 2.1 to the Registration Statement on Form S-4 (No. 333-87361)
    
 3.1Certificate of Incorporation of Everest Reinsurance Holdings, Inc., incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (No. 333-05771)
    
 3.2By-Laws of Everest Reinsurance Holdings, Inc., incorporated herein by reference to Exhibit 3.2 to the Everest Reinsurance Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
    
 4.1Indenture, dated March 14, 2000, between Everest Reinsurance Holdings, Inc. and The Chase Manhattan Bank, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on March 15, 2000
    
 4.2Third Supplemental Indenture relating to Holdings 5.40% Senior Notes due October 15, 2014, dated as of October 12, 2004, among Holdings and JPMorgan Chase Bank, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on October 12, 2004
    
 4.3Fourth Supplemental Indenture relating to Holdings $400.0 million 4.868% Senior Notes due June 1, 2044, dated June 5 2014, between Holdings and the Bank of New York Mellon, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on June 5, 2014
    
 10.1
Completion of Tender Offer relating to Everest Reinsurance Holdings, Inc. 6.60% Fixed to Floating Rate Long Term Subordinated Notes (LoTSSM) dated March 19, 2009, incorporated herein by reference to Exhibit 99.1 to Everest Re Group, Ltd. Form 8-K filed on March 31, 2009
    
 *10.2Employment agreement between Everest Global Services, Inc., Everest Reinsurance Holdings, Inc. and Dominic J. Addesso, dated July 1, 2012, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on July 20, 2012
    
 *10.3Employment agreement between Everest Global Services, Inc., Everest Reinsurance Holdings Inc. and Dominic J. Addesso, dated December 4, 2015, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on December 8, 2015.
    
 *10.4Employment agreement between Everest National Insurance Company and Jonathan M. Zaffino, dated September 8, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on September 12, 2017.
    
 *10.5Amendment of employment agreement between Everest Global Services, Inc., Everest Re Group, Ltd., Everest Reinsurance Holdings Inc. and Dominic J. Addesso, dated November 20, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed November 20, 2017
    
 31.1Section 302 Certification of Dominic J. Addesso, filed herewith
    
 31.2Section 302 Certification of Craig Howie, filed herewith
    
 32.1Section 906 Certification of Dominic J. Addesso and Craig Howie, filed herewith
E-1


    
 101.

2.1

INSXBRL Instance Document

Agreement and Plan of Merger among Everest Reinsurance Holdings, Inc., Everest Re Group, Ltd. and Everest Re Merger Corporation, incorporated herein by reference to Exhibit 2.1 to the Registration Statement on Form S-4 (No. 333-87361)

    
 101.

3.1

SCHXBRL Taxonomy Extension Schema

Certificate of Incorporation of Everest Reinsurance Holdings, Inc., incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (No. 333-05771)

    
 101.

3.2

CALXBRL Taxonomy Extension Calculation Linkbase

By-Laws of Everest Reinsurance Holdings, Inc., incorporated herein by reference to Exhibit 3.2 to the Everest Reinsurance Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

    
 101.

4.1

DEFXBRL Taxonomy Extension Definition Linkbase

Indenture, dated March 14, 2000, between Everest Reinsurance Holdings, Inc. and The Chase Manhattan Bank, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on March 15, 2000.

    
 101.

4.2

LABXBRL Taxonomy Extension Label Linkbase

Fourth Supplemental Indenture relating to Holdings $400.0 million 4.868% Senior Notes due June 1, 2044, dated June 5 2014, between Holdings and the Bank of New York Mellon, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on July 5, 2014.

4.3

Fifth Supplemental Indenture relating to Holdings $1,000.0 million 3.50% Senior Notes due October 15, 2050, dated October 7, 2020, between Holdings and the Bank of New York Mellon, as Trustee, incorporated herein by reference to Exhibit 4.1 to Everest Reinsurance Holdings, Inc. Form 8-K filed on October 7, 2020.

10.1

Completion of Tender Offer relating to Everest Reinsurance Holdings, Inc. 6.60% Fixed to Floating Rate Long Term Subordinated Notes (LoTSSM) dated March 19, 2009, incorporated herein by reference to Exhibit 99.1 to Everest Re Group, Ltd. Form 8-K filed on March 31, 2009.

    
 101.

*10.2

PREXBRL Taxonomy Extension Presentation Linkbase

Employment agreement between Everest Global Services, Inc., Everest Reinsurance Holdings Inc. and Dominic J. Addesso, dated December 4, 2015, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on December 8, 2015.

    

*10.3

Employment agreement between Everest National Insurance Company and Jonathan M. Zaffino, dated September 8, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on September 12, 2017.

*10.4

Amendment of employment agreement between Everest Global Services, Inc., Everest Re Group, Ltd., Everest Reinsurance Holdings Inc. and Dominic J. Addesso, dated November 20, 2017, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed November 20, 2017.

*10.5

Employment agreement between Everest Re Group Ltd., Everest Global Services, Inc., Everest Reinsurance Holdings Inc. and Juan C Andrade, dated August 1, 2019, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed August 8, 2019.

*10.6

Employment agreement between Everest Global Services, Inc. and Mark Kociancic, incorporated herein by reference to Exhibit 10.1 to Everest Re Group, Ltd. Form 8-K filed on October 1, 2020

*10.7

Employment agreement between Everest Global Services, Inc. and James Williamson, incorporated herein by reference to Exhibit 10.2 to Everest Re Group, Ltd. Form 8-K filed on October 1, 2020

* E-Management contract or compensatory plan or arrangement.2



23.1

Consent of PricewaterhouseCoopers LLP, filed herewith

31.1

Section 302 Certification of Juan C. Andrade, filed herewith

31.2

Section 302 Certification of Mark Kociancic, filed herewith

32.1

Section 906 Certification of Juan C. Andrade and Mark Kociancic, filed herewith

101 INS

XBRL Instance Document

101 SCH

XBRL Taxonomy Extension Schema

101 CAL

XBRL Taxonomy Extension Calculation Linkbase

101 DEF

XBRL Taxonomy Extension Definition Linkbase

101 LAB

XBRL Taxonomy Extension Label Linkbase

101 PRE

XBRL Taxonomy Extension Presentation Linkbase

E-3



E-2


EVEREST REINSURANCE HOLDINGS, INC.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES



 

Pages

Report of Independent Registered Public Accounting Firm

F-2

   

Consolidated Balance Sheets at December 31, 20172020 and 20162019

F-3

F-4

   

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended

 
 

December 31, 2017, 20162020, 2019 and 20152018

F-4

F-5

   

Consolidated Statements of Changes in Stockholder'sStockholder’s Equity for the Years Ended

 
 

December 31, 2017, 20162020, 2019 and 20152018

F-5

F-6

   

Consolidated Statements of Cash Flows for the Years Ended

 
 

December 31, 2017, 20162020, 2019 and 20152018

F-6

F-7

   

Notes to Consolidated Financial Statements

F-7

F-8

   

Schedules

 
   

I

Summary of Investments Other Than Investments in Related Parties at December 31, 20172020

S-1

   

II

Condensed Financial Information of Registrant:

 
   
 

      Balance Sheets as of December 31, 20172020 and 20162019

S-2

   
 

      Statements of Operations for the Years Ended December 31, 2017, 20162020, 2019 and 20152018

S-3

   
 

      Statements of Cash Flows for the Years Ended December 31, 2017, 20162020, 2019 and 20152018

S-4

   
 

      Notes to Condensed Financial Information

S-5

   

III

Supplementary Insurance Information as of and for the Years Ended

 
 

      December 31, 2017, 20162020, 2019 and 20152018

S-6

   

IV

Reinsurance for the Years Ended December 31, 2017, 20162020, 2019 and 20152018

S-7

Schedules other than those listed above are omitted for the reason that they are not applicable or the information is otherwise contained in the Financial Statements.


F-1

Schedules other than those listed above are omitted for the reason that they are not applicable or the information is
otherwise contained in the Financial Statements.

F-1



Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder

 of Everest Reinsurance Holdings, Inc.:

Opinion on the Financial Statements


We have audited the accompanying consolidated financial statements, including the related notes and financial statement schedules,balance sheets of Everest Reinsurance Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholder's equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the "consolidated“consolidated financial statements"statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 2016,2019, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172020 in conformity with accounting principles generally accepted in the United States of America.


Basis for Opinion


These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.


Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the Reserve for Losses and Loss Adjustment Expenses

As described in Notes 1 and 3 to the consolidated financial statements, the Company maintains reserves equal to the estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims for both insurance and reinsurance businesses. The Company’s reserve for losses and loss adjustment expenses as of December 31, 2020 was $11.7 billion. Reserves are based on estimates of ultimate losses and loss adjustment expenses by underwriting or accident year. Management uses a variety of statistical and

F-2





actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves as warranted. Management considers many factors when setting reserves including (i) exposure base and projected ultimate premium; (ii) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (iii) actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss payments and product mix; (iv) current legal interpretations of coverage and liability; and (v) economic conditions.

The principal considerations for our determination that performing procedures relating to the valuation of the reserve for losses and loss adjustment expenses is a critical audit matter are the significant judgment by management when developing their estimate; this in turn led to a high degree of auditor subjectivity, judgment and effort in performing procedures and evaluating the audit evidence relating to the methodologies and the significant assumptions related to expected loss ratios and historical trends, such as reserving patterns, loss payments and product mix, and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s valuation of the reserve for losses and loss adjustment expenses, including controls over the selection of methodologies and development of significant assumptions. These procedures also included, among others, testing the completeness and accuracy of data provided by management and the involvement of professionals with specialized skill and knowledge to assist in performing procedures for a sample of products and lines of business including: (i) evaluating management’s methodologies and assumptions related to expected loss ratios and historical trends, such as, reserving patterns, loss payment and product mix used for determining reserves for losses and loss adjustment expenses; and (ii) developing an independent estimate of the reserve for losses and loss adjustment expenses and comparing the independent estimate to management’s actuarially determined reserves.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 30, 2018


2021

We have served as the Company'sCompany’s auditor since 1996.1996

.F-


3


F-2EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

December 31,

(Dollars in thousands, except share amounts and par value per share)

2020

 

2019

 

 

 

 

 

ASSETS:

 

 

 

 

 

Fixed maturities - available for sale, at market value

 (amortized cost: 2020, $10,248,650; 2019, $7,334,425 allowances for credit losses: 2020, $1,566; 2019, $0)

$

10,643,565

 

$

7,492,079

Fixed maturities - available for sale, at fair value

 

-

 

 

5,826

Equity securities, at fair value

 

1,288,767

 

 

764,049

Short-term investments (cost: 2020, $708,043; 2019, $279,824)

 

707,905

 

 

279,879

Other invested assets (cost: 2020, $1,094,933; 2019, $1,020,766)

 

1,094,933

 

 

1,020,766

Other invested assets, at fair value

 

1,796,479

 

 

1,982,582

Cash

 

378,518

 

 

411,122

Total investments and cash

 

15,910,167

 

 

11,956,303

Note Receivable - affiliated

 

300,000

 

 

300,000

Accrued investment income

 

80,196

 

 

54,383

Premiums receivable

 

1,591,980

 

 

1,337,344

Reinsurance receivables - unaffiliated

 

1,505,650

 

 

1,318,820

Reinsurance receivables - affiliated

 

2,701,655

 

 

3,125,269

Income taxes net recoverable

 

-

 

 

65,793

Funds held by reinsureds

 

267,599

 

 

228,297

Deferred acquisition costs

 

379,707

 

 

388,238

Prepaid reinsurance premiums

 

363,489

 

 

413,612

Other assets

 

616,640

 

 

518,127

TOTAL ASSETS

$

23,717,083

 

$

19,706,186

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Reserve for losses and loss adjustment expenses

$

11,654,950

 

$

10,209,519

Unearned premium reserve

 

2,385,174

 

 

2,198,932

Funds held under reinsurance treaties

 

46,894

 

 

41,233

Other net payable to reinsurers

 

277,390

 

 

267,367

Losses in course of payment

 

161,154

 

 

70,541

Income taxes net payable

 

192,877

 

 

-

Senior notes due 6/1/2044

 

397,194

 

 

397,074

Senior notes due 10/15/2050

 

979,524

 

 

-

Long term notes due 5/1/2067

 

223,674

 

 

236,758

Borrowings from FHLB

 

310,000

 

 

-

Accrued interest on debt and borrowings

 

10,460

 

 

2,878

Unsettled securities payable

 

206,693

 

 

25,230

Other liabilities

 

456,786

 

 

399,229

Total liabilities

 

17,302,770

 

 

13,848,761

 

 

 

 

 

 

Commitments and Contingencies (Note 15)

 

(nil)

 

 

(nil)

 

 

 

 

 

 

STOCKHOLDER'S EQUITY:

 

 

 

 

 

Common stock, par value: $0.01; 3,000 shares authorized;

 1,000 shares issued and outstanding (2020 and 2019)

 

-

 

 

-

Additional paid-in capital

 

1,101,092

 

 

1,100,678

Accumulated other comprehensive income (loss), net of deferred income

 tax expense (benefit) of $71,080 at 2020 and $16,997 at 2019

 

268,018

 

 

64,324

Retained earnings

 

5,045,203

 

 

4,692,423

Total stockholder's equity

 

6,414,313

 

 

5,857,425

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY

$

23,717,083

 

$

19,706,186

 

 

 

 

 

 

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

 

 

 

 

 

 


F-4


EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETSSTATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

 

 

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

6,406,576

 

$

5,489,035

 

$

4,839,058

Net investment income

 

375,906

 

 

356,211

 

 

314,381

Net realized capital gains (losses):

 

 

 

 

 

 

 

 

Credit allowances on fixed maturity securities

 

(1,566)

 

 

-

 

 

-

Other-than-temporary impairments on fixed

  maturity securities

 

-

 

 

(19,643)

 

 

(6,164)

Other net realized capital gains (losses)

 

51,370

 

 

439,010

 

 

(179,192)

Total net realized capital gains (losses)

 

49,804

 

 

419,367

 

 

(185,356)

Other income (expense)

 

(14,579)

 

 

(1,589)

 

 

(9,568)

Total revenues

 

6,817,707

 

 

6,263,024

 

 

4,958,515

 

 

 

 

 

 

 

 

 

CLAIMS AND EXPENSES:

 

 

 

 

 

 

 

 

Incurred losses and loss adjustment expenses

 

4,608,144

 

 

3,829,122

 

 

4,811,018

Commission, brokerage, taxes and fees

 

1,373,355

 

 

1,270,053

 

 

1,141,714

Other underwriting expenses 

 

401,033

 

 

350,901

 

 

293,347

Corporate expenses

 

15,985

 

 

13,063

 

 

11,034

Interest, fee and bond issue cost amortization expense

 

35,659

 

 

34,931

 

 

30,611

Total claims and expenses

 

6,434,176

 

 

5,498,070

 

 

6,287,724

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE TAXES

 

383,531

 

 

764,955

 

 

(1,329,209)

Income tax expense (benefit) 

 

31,658

 

 

135,228

 

 

(367,025)

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) 

$

351,873

 

$

629,727

 

$

(962,184)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Unrealized appreciation (depreciation) ("URA(D)")

  on securities arising during the period

 

163,080

 

 

175,482

 

 

(92,966)

Less: reclassification adjustment for realized

  losses (gains) included in net income (loss)

 

25,468

 

 

5,080

 

 

2,021

Total URA(D) on securities arising during

  the period

 

188,548

 

 

180,562

 

 

(90,945)

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

14,461

 

 

17,153

 

 

(36,431)

 

 

 

 

 

 

 

 

 

Benefit plan actuarial net gain (loss) for the period

 

(5,615)

 

 

(12,591)

 

 

(510)

Reclassification adjustment for amortization of net

  (gain) loss included in net income (loss)

 

6,300

 

 

5,453

 

 

5,021

Total benefit plan net gain (loss) for the period

 

685

 

 

(7,138)

 

 

4,511

Total other comprehensive income (loss), net of tax

 

203,694

 

 

190,577

 

 

(122,865)

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)  

$

555,567

 

$

820,304

 

$

(1,085,049)

 

 

 

 

 

 

 

 

 

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

 

 

 


F-5



  December 31, 
(Dollars in thousands, except par value per share) 2017  2016 
  (unaudited) 
ASSETS:      
Fixed maturities - available for sale, at market value $4,971,921  $5,970,496 
     (amortized cost: 2017, $4,927,622; 2016, $5,910,494)        
Equity securities - available for sale, at fair value  822,375   887,800 
Short-term investments  241,506   306,286 
Other invested assets (cost: 2017, $835,597; 2016, $613,680)  838,694   613,740 
Other invested assets, at fair value  1,807,473   1,766,626 
Cash  229,552   297,794 
         Total investments and cash  8,911,521   9,842,742 
Note receivable - affiliated  250,000   250,000 
Accrued investment income  35,376   45,323 
Premiums receivable  1,301,827   1,128,639 
Reinsurance receivables - unaffiliated  1,180,648   887,657 
Reinsurance receivables - affiliated  4,940,039   3,686,130 
Income Taxes  87,110   - 
Funds held by reinsureds  210,939   190,421 
Deferred acquisition costs  307,741   68,621 
Prepaid reinsurance premiums  346,708   781,384 
Other assets  316,603   202,519 
TOTAL ASSETS $17,888,512  $17,083,436 
         
LIABILITIES:        
Reserve for losses and loss adjustment expenses $9,343,028  $8,331,288 
Unearned premium reserve  1,607,622   1,312,386 
Funds held under reinsurance treaties  40,536   110,836 
Commission reserves  21,464   52,037 
Other net payable to reinsurers  491,299   815,298 
4.868% Senior notes due 6/1/2044  396,834   396,714 
6.6% Long term notes due 5/1/2067  236,561   236,462 
Accrued interest on debt and borrowings  2,727   3,537 
Income taxes  -   148,940 
Unsettled securities payable  25,338   27,121 
Other liabilities  310,380   350,264 
         Total liabilities  12,475,789   11,784,883 
         
Commitments and Contingencies (Note 15)        
         
STOCKHOLDER'S EQUITY:        
Common stock, par value: $0.01; 3,000 shares authorized;        
     1,000 shares issued and outstanding (2017 and 2016)  -   - 
Additional paid-in capital  387,841   387,567 
Accumulated other comprehensive income (loss), net of deferred income tax expense        
     (benefit) of ($299) at 2017 and ($19,549) at 2016  (942)  (36,315)
Retained earnings  5,025,824   4,947,301 
         Total stockholder's equity  5,412,723   5,298,553 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $17,888,512  $17,083,436 
         
The accompanying notes are an integral part of the consolidated financial statements.        



F-3


EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CHANGES IN STOCKHOLDER’S EQUITY

 

Years Ended December 31,

(Dollars in thousands, except share amounts)

2020

 

2019

 

2018

 

 

 

 

 

 

 

 

 

COMMON STOCK (shares outstanding):

 

 

 

 

 

 

 

 

Balance, January 1

 

1,000

 

 

1,000

 

 

1,000

Balance, December 31

 

1,000

 

 

1,000

 

 

1,000

 

 

 

 

 

 

 

 

 

ADDITIONAL PAID-IN CAPITAL:

 

 

 

 

 

 

 

 

Balance, January 1

$

1,100,678

 

$

1,100,315

 

$

387,841

Capital contribution from parent

 

-

 

 

-

 

 

712,253

Share-based compensation plans

 

414

 

 

363

 

 

221

Balance, December 31

 

1,101,092

 

 

1,100,678

 

 

1,100,315

 

 

 

 

 

 

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),

NET OF DEFERRED INCOME TAXES:

 

 

 

 

 

 

 

 

Balance, January 1

 

64,324

 

 

(126,254)

 

 

(942)

Change to beginning balance due to adoption of ASU 2016-01

 

-

 

 

-

 

 

(2,447)

Net increase (decrease) during the period

 

203,694

 

 

190,577

 

 

(122,865)

Balance, December 31

 

268,018

 

 

64,324

 

 

(126,254)

 

 

 

 

 

 

 

 

 

RETAINED EARNINGS:

 

 

 

 

 

 

 

 

Balance, January 1

 

4,692,423

 

 

4,062,696

 

 

5,022,433

Change to beginning balance due to adoption of ASU 2016-01

 

-

 

 

-

 

 

2,447

Change to beginning balance due to adoption of ASU 2016-13

 

907

 

 

-

 

 

-

Net income (loss)

 

351,873

 

 

629,727

 

 

(962,184)

Balance, December 31

 

5,045,203

 

 

4,692,423

 

 

4,062,696

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDER'S EQUITY, December 31

$

6,414,313

 

$

5,857,425

 

$

5,036,757

 

 

 

 

 

 

 

 

 

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

 

 

 

AND COMPREHENSIVE INCOME (LOSS)

F-6




  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
          
REVENUES:         
Premiums earned $1,949,595  $2,094,049  $2,143,760 
Net investment income  286,259   264,807   273,253 
Net realized capital gains (losses):            
Other-than-temporary impairments on fixed maturity securities  (6,077)  (25,679)  (78,833)
Other-than-temporary impairments on fixed maturity securities            
transferred to other comprehensive income (loss)  -   -   - 
Realized gain (loss) on sale of subsidiary  -   (28,032)  94,704 
Other net realized capital gains (losses)  167,630   24,770   34,464 
Total net realized capital gains (losses)  161,553   (28,941)  50,335 
Other income (expense)  23,750   (10,542)  29,256 
Total revenues  2,421,157   2,319,373   2,496,604 
             
CLAIMS AND EXPENSES:            
Incurred losses and loss adjustment expenses  2,039,751   1,350,280   1,319,561 
Commission, brokerage, taxes and fees  210,925   281,424   312,325 
Other underwriting expenses  254,886   244,966   214,819 
Corporate expenses  7,394   8,277   7,179 
Interest, fee and bond issue cost amortization expense  31,183   35,435   35,434 
Total claims and expenses  2,544,139   1,920,382   1,889,318 
             
INCOME (LOSS) BEFORE TAXES  (122,982)  398,991   607,286 
Income tax expense (benefit)  (201,180)  97,347   194,896 
             
NET INCOME (LOSS) $78,198  $301,644  $412,390 
             
Other comprehensive income (loss), net of tax:            
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period  (10,536)  4,114   (23,157)
Less: reclassification adjustment for realized losses (gains) included in net income (loss)  2,303   21,273   (817)
Total URA(D) on securities arising during the period  (8,233)  25,387   (23,974)
             
Foreign currency translation adjustments  37,427   2,849   (54,578)
             
Benefit plan actuarial net gain (loss) for the period  1,027   (7,488)  5,681 
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)  5,477   5,073   6,216 
Total benefit plan net gain (loss) for the period  6,504   (2,415)  11,897 
Total other comprehensive income (loss), net of tax  35,698   25,821   (66,655)
             
COMPREHENSIVE INCOME (LOSS) $113,896  $327,465  $345,735 
             
The accompanying notes are an integral part of the consolidated financial statements.            



F-4


EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'S EQUITY



  Years Ended December 31, 
(Dollars in thousands, except share amounts) 2017  2016  2015 
          
COMMON STOCK (shares outstanding):         
Balance, beginning of period  1,000   1,000   1,000 
Balance, end of period  1,000   1,000   1,000 
             
ADDITIONAL PAID-IN CAPITAL:            
Balance, beginning of period  387,567  $374,789  $362,293 
Share-based compensation plans  274   12,778   12,496 
Balance, end of period  387,841   387,567   374,789 
             
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),            
NET OF DEFERRED INCOME TAXES:            
Balance, beginning of period  (36,315)  (62,136)  4,519 
Net increase (decrease) during the period  35,698   25,821   (66,655)
Reclass due to early adoption of Accounting Standards Update 2018-02  (325)  -   - 
Balance, end of period  (942)  (36,315)  (62,136)
             
RETAINED EARNINGS:            
Balance, beginning of period  4,947,301   4,645,657   4,233,267 
Net income (loss)  78,198   301,644   412,390 
Reclass due to early adoption of Accounting Standards Update 2018-02  325   -   - 
Balance, end of period  5,025,824   4,947,301   4,645,657 
             
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $5,412,723  $5,298,553  $4,958,310 
             
The accompanying notes are an integral part of the consolidated financial statements.            

F-5

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss) 

$

351,873

 

$

629,727

 

$

(962,184)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Decrease (increase) in premiums receivable

 

(252,850)

 

 

(24,618)

 

 

(171,642)

Decrease (increase) in funds held by reinsureds, net

 

(33,519)

 

 

(57)

 

 

(20,963)

Decrease (increase) in reinsurance receivables

 

247,165

 

 

405,574

 

 

1,260,865

Decrease (increase) in income taxes

 

204,419

 

 

295,667

 

 

(292,728)

Decrease (increase) in prepaid reinsurance premiums

 

51,352

 

 

(84,181)

 

 

17,302

Increase (decrease) in reserve for losses and loss adjustment expenses

 

1,427,214

 

 

21,399

 

 

859,691

Increase (decrease) in unearned premiums

 

183,417

 

 

370,246

 

 

221,850

Increase (decrease) in other net payable to reinsurers

 

8,078

 

 

(50,560)

 

 

(173,810)

Increase (decrease) in losses in course of payment

 

90,044

 

 

113,306

 

 

66,148

Change in equity adjustments in limited partnerships

 

(39,880)

 

 

(45,843)

 

 

(70,494)

Distribution of limited partnership income

 

91,403

 

 

51,982

 

 

55,350

Change in other assets and liabilities, net

 

(84,902)

 

 

(60,250)

 

 

(143,047)

Non-cash compensation expense

 

32,217

 

 

27,421

 

 

13,863

Amortization of bond premium (accrual of bond discount)

 

13,926

 

 

4,308

 

 

3,735

Net realized capital (gains) losses

 

(49,804)

 

 

(419,367)

 

 

185,356

Net cash provided by (used in) operating activities

 

2,240,153

 

 

1,234,754

 

 

849,292

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from fixed maturities matured/called - available for sale, at market value

 

1,126,309

 

 

937,871

 

 

741,360

Proceeds from fixed maturities sold - available for sale, at market value

 

626,378

 

 

2,400,869

 

 

791,368

Proceeds from fixed maturities sold - available for sale, at fair value

 

4,907

 

 

2,917

 

 

1,751

Proceeds from equity securities sold - at fair value

 

375,112

 

 

283,707

 

 

1,029,920

Distributions from other invested assets

 

243,002

 

 

185,116

 

 

1,043,131

Cost of fixed maturities acquired - available for sale, at market value

 

(4,695,090)

 

 

(3,626,139)

 

 

(3,714,695)

Cost of fixed maturities acquired - available for sale, at fair value

 

-

 

 

(4,243)

 

 

(4,381)

Cost of equity securities acquired - at fair value

 

(625,694)

 

 

(325,546)

 

 

(702,221)

Cost of other invested assets acquired

 

(363,101)

 

 

(323,453)

 

 

(1,138,317)

Net change in short-term investments

 

(425,878)

 

 

(102,302)

 

 

193,623

Net change in unsettled securities transactions

 

200,070

 

 

(30,904)

 

 

55,967

Proceeds from repayment of long term note receivable, affiliated

 

-

 

 

(300,000)

 

 

250,000

Net cash provided by (used in) investing activities

 

(3,533,985)

 

 

(902,107)

 

 

(1,452,494)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Tax benefit from share-based compensation, net of expense

 

(31,803)

 

 

(27,059)

 

 

(11,195)

Capital contribution from parent

 

-

 

 

-

 

 

500,324

FHLB advances (repayments)

 

310,000

 

 

-

 

 

-

Cost of debt repurchase

 

(10,647)

 

 

-

 

 

-

Proceeds from issuance of senior notes

 

979,417

 

 

-

 

 

-

Proceeds from issuance (cost of repayment) of note payable-affiliated

 

-

 

 

(300,000)

 

 

300,000

Net cash provided by (used in) financing activities

 

1,246,967

 

 

(327,059)

 

 

789,129

 

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

14,261

 

 

1,012

 

 

(10,957)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

(32,604)

 

 

6,600

 

 

174,970

Cash, beginning of period

 

411,122

 

 

404,522

 

 

229,552

Cash, end of period

$

378,518

 

$

411,122

 

$

404,522

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid (recovered)

$

(173,056)

 

$

(160,748)

 

$

(73,669)

Interest paid

 

27,670

 

 

34,928

 

 

30,027

 

 

 

 

 

 

 

 

 

NON-CASH TRANSACTIONS

 

 

 

 

 

 

 

 

Equity value of non-cash capital contribution of affiliate from parent, net of cash held by affiliate

$

-

 

$

-

 

$

211,928

 

 

 

 

 

 

 

 

 

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


F-7



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
          
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income (loss) $78,198  $301,644  $412,390 
Adjustments to reconcile net income to net cash provided by operating activities:            
Decrease (increase) in premiums receivable  (170,234)  1,140   (49,602)
Decrease (increase) in funds held by reinsureds, net  (90,410)  (4,445)  4,737 
Decrease (increase) in reinsurance receivables  (731,292)  (112,797)  (465,761)
Decrease (increase) in income taxes  (250,118)  62,991   60,494 
Decrease (increase) in prepaid reinsurance premiums  436,571   (8,083)  30,985 
Increase (decrease) in reserve for losses and loss adjustment expenses  964,415   384,628   184,845 
Increase (decrease) in unearned premiums  291,108   (38,271)  (82,494)
Increase (decrease) in other net payable to reinsurers  (329,946)  (371,856)  195,936 
Increase (decrease) in losses in course of payment  (31,815)  (42,643)  (51,416)
Change in equity adjustments in limited partnerships  (35,749)  (24,486)  (18,144)
Distribution of limited partnership income  33,629   32,613   45,235 
Change in other assets and liabilities, net  (367,338)  15,148   13,349 
Non-cash compensation expense  10,212   9,481   8,025 
Amortization of bond premium (accrual of bond discount)  17,690   18,051   18,160 
Net realized capital (gains) losses  (161,553)  28,941   (50,335)
Net cash provided by (used in) operating activities  (336,632)  252,056   256,404 
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Proceeds from fixed maturities matured/called - available for sale, at market value  1,005,532   781,744   902,932 
Proceeds from fixed maturities sold - available for sale, at market value  1,676,203   704,191   544,955 
Proceeds from fixed maturities sold - available for sale, at fair value  -   5,837   1,824 
Proceeds from equity securities sold - available for sale, at market value  -   -   16 
Proceeds from equity securities sold - available for sale, at fair value  586,496   695,039   567,069 
Proceeds from sale of subsidiary (net of cash disposed)  -   47,721   3,934 
Distributions from other invested assets  2,327,206   1,756,484   51,494 
Cost of fixed maturities acquired - available for sale, at market value  (2,431,780)  (2,110,113)  (1,811,463)
Cost of fixed maturities acquired - available for sale, at fair value  -   (3,940)  (2,436)
Cost of equity securities acquired - available for sale, at fair value  (396,056)  (324,407)  (530,538)
Cost of other invested assets acquired  (2,546,289)  (1,928,119)  (93,728)
Net change in short-term investments  67,164   257,792   (6,145)
Net change in unsettled securities transactions  (40,530)  10,474   (23,447)
Net cash provided by (used in) investing activities  247,946   (107,297)  (395,533)
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
Tax benefit from share-based compensation, net of expense  (9,938)  3,298   4,472 
Net cash provided by (used in) financing activities  (9,938)  3,298   4,472 
             
EFFECT OF EXCHANGE RATE CHANGES ON CASH  30,382   (5,692)  (33,889)
             
Net increase (decrease) in cash  (68,242)  142,365   (168,546)
Cash, beginning of period  297,794   155,429   323,975 
Cash, end of period $229,552  $297,794  $155,429 
             
SUPPLEMENTAL CASH FLOW INFORMATION:            
Income taxes paid (recovered) $53,019  $31,018  $131,632 
Interest paid $31,775   35,217   35,217 
             
NON-CASH TRANSACTION:            
Transfer of fixed maturities, available for sale, at market value to Bermuda Re as part of $790,583  $-  $- 
settlement for loss portfolio transfer agreement as of 12/31/17            
Exchange of common shares of parent company, held as other invested assets at fair value, $-  $-  $1,773,214 
for preferred shares of an affiliated company, held as other invested assets at fair value            
             
The accompanying notes are an integral part of the consolidated financial statements.            


F-6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2017, 20162020, 2019 and 2015


2018

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


A.  Business and Basis of Presentation.

Everest Reinsurance Holdings, Inc. ("Holdings"(“Holdings”), a Delaware company and direct subsidiary of Everest Underwriting Group (Ireland) Limited ("(“Holdings Ireland"Ireland”), which is a direct subsidiary of Everest Re Group, Ltd. ("Group"(“Group”), through its subsidiaries, principally provides property and casualty reinsurance and insurance in the United States of America and internationally.  As used in this document, "Company"“Company” means Holdings and its subsidiaries.


The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”).  The statements include all of the following domestic and foreign direct and indirect subsidiaries of the Company:  Everest Reinsurance Company ("(“Everest Re"Re”), Everest Global Services, Inc. (“Global Services”), Everest National Insurance Company ("(“Everest National"National”), Everest Indemnity Insurance Company ("(“Everest Indemnity"Indemnity”), Everest Security Insurance Company ("(“Everest Security"Security”), Everest Reinsurance Company – Escritório de Representação No Brasil Ltda. ("(“Everest Brazil"Brazil”), Mt. Whitney Securities, Inc., Everest Denali Insurance Company ("(“Everest Denali"Denali”), Everest Premier Insurance Company ("(“Everest Premier"Premier”), Everest Specialty Underwriters Services, LLC, Heartland Crop Insurance, Inc. ("Heartland"), Everest International Assurance, Ltd. ("(“Everest Assurance"Assurance”), Specialty Insurance Group, Inc. ("Specialty"(“Specialty”), Specialty Insurance Group - Leisure and Entertainment Risk Purchasing Group LLC ("(“Specialty RPG"RPG”), Salus Systems (“Salus”) and Mt. McKinley Managers, L.L.C. and Mt. McKinley Insurance Company ("Mt. McKinley").  All amounts are reported in U.S. dollars.


During the thirdfourth quarter of 2016, the Company established Delaware domiciled property and casualty insurance subsidiaries, Everest Premier and Everest Denali, which are used in the continued expansion of the Insurance operations.


Effective August 24, 2016, the Company sold2018, Global Services was contributed to Holdings from its wholly-owned subsidiary, Heartland, a managing agent for crop insurance, to CGB Diversified Services, Inc. ("CGB").parent company, Holdings Ireland.  The operating results of Heartland through August 24, 2016Global Services for the fourth quarter of 2018 are included within the Company'sCompany’s consolidated financial statements.

Effective July 13, 2015, the Company sold all of the outstanding shares of capital stock of a wholly-owned subsidiary entity, Mt. McKinley, to Clearwater Insurance Company. The operating results of Mt. McKinley through July 13, 2015 are included within the Company's financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Ultimate actual results could differ, possibly materially, from those estimates.


All intercompany accounts and transactions have been eliminated.


Certain reclassifications and format changes have been made to prior years'years’ amounts to conform to the 20172020 presentation.


F-7


B.  Investments.

Fixed maturity investments available for sale, at market value, reflect unrealized appreciation and depreciation, as a result of temporary changes in market value during the period, in stockholder'sstockholder’s equity, net of income taxes in "accumulated“accumulated other comprehensive income (loss)" in the consolidated balance sheets.  Equity securities and other invested assets carried at fair value reflect fair value re-measurements as net realized capital gains and losses in the consolidated statements of operations and comprehensive income (loss).  The Company records changes in fair value for its fixed maturities-available for sale, at market value through stockholder's equity, net of taxes in accumulated other comprehensive income (loss)sheets, since cash flows from these investments will be primarily used to settle its reserve for losses and loss adjustment expense liabilities.  The Company anticipates holding these investments for an extended period as the cash flow from interest and maturities will fund the projected payout of these liabilities. The Company carriesreviews all of its equityfixed maturity, available for sale securities atwhose fair value excepthas fallen below their amortized cost at the time of review.  The Company then assesses whether the decline in value is due to non-credit related or credit related factors.  In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information.  Generally, a change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related decline in market value.  Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss).  If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).  If the Company determines that the decline is credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell

F-8


the security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).  The amount of the allowance for mutual fund investments whose underlying investments are compriseda given security will generally be the difference between a discounted cash flow model and the Company’s carrying value.  The fair value adjustment that is non-credit related is recorded as a component of fixed maturity securities. other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

For equity securities, available for sale, at fair value, the Company reflects changes in value as net realized capital gains and losses since these securities may be sold in the near term depending on financial market conditions.  Interest income on all fixed maturities and dividend income on all equity securities are included as part of net investment income in the consolidated statements of operations and comprehensive income (loss).  Unrealized losses on fixed maturities, which are deemed other-than-temporary and related to the credit quality of a security, are charged to net income (loss) as net realized capital losses.  Short-term investments are stated at cost, which approximates market value.  Realized gains or losses on sales of investments are determined on the basis of identified cost.  For some non-publicly traded securities, market prices are determined through the use of pricing models that evaluate securities relative to the U.S. Treasury yield curve, taking into account the issue type, credit quality, and cash flow characteristics of each security.  For other non-publicly traded securities, an investment manager'smanagers’ valuation committeecommittees will estimate fair value, and in many instances, these fair values are supported with opinions from qualified independent third parties.  For publicly traded securities, market value is based on quoted market prices or valuation models that use observable market inputs.  When a sector of the financial markets is inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value.  Retrospective adjustments are employed to recalculate the values of asset-backed securities.  Each acquisition lot is reviewed to recalculate the effective yield.  The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition.  Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities.  Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used to effect the calculation of projected and prepayments for pass-through security types.  Other invested assets includesinclude limited partnerships, rabbi trusts and, prior to July 1, 2018, a private placement liquidity sweep facility and rabbi trusts.facility. Cash contributions to and cash distributions from the sweep facility arewere reported gross in cash flows from investing activities in the consolidated statements of cash flows. Limited partnerships are accounted for under the equity method of accounting, which can be recorded on a monthly or quarterly lag.  Other invested assets, at fair value, are comprised of convertible preferred stock of Everest Preferred International Holdings, Ltd. ("(“Preferred Holdings"Holdings”), an affiliated entity.  The fair valuevalues of the Preferred Holdings convertible preferred stock at December 31, 20172020 and December 31, 20162019 were determined using a pricing model.


C.  UncollectibleAllowance for Receivable Balances.

Effective January 1, 2020, the Company adopted the Current Expected Credit Losses (CECL) methodology for estimating allowances for credit losses.  The Company provides reservesevaluates the recoverability of its premiums and reinsurance receivable balances and establishes an allowance for estimated uncollectible amounts.  Prior to the adoption of CECL, an allowance for doubtful accounts was estimated on the basis of periodic evaluations of balances due from third parties, considering historical collection experience, solvency and current economic conditions.

Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy premiums, are primarily comprised of premiums due from policyholders/ cedants.  Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods. For these balances, the allowance is estimated based on recent historical credit loss and collection experience, adjusted for current economic conditions and reasonable and supportable forecasts, when appropriate. In response to significant economic stress experienced as a result of the COVID-19 pandemic, during 2020, the Company increased the expected loss factors used to estimate the allowance based on collection experience during past moderate and severe recessions as well as experience during periods when we provided policyholders additional time to make premiums payments.

F-9


A portion of the Company's Commercial Lines business is written with large deductibles or under retrospectively-rated plans. Under some commercial insurance contracts with a large deductible, the Company is obligated to pay the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder for the deductible amount. As such, the Company is subject to credit risk until reimbursement is made. Retrospectively-rated policies are policies whereby the ultimate premium is adjusted based on actual losses incurred.  Although the premium adjustment feature of a retrospectively-rated policy substantially reduces insurance risk for the Company, it presents credit risk to the Company.  The Company’s results of operations could be adversely affected if a significant portion of such policyholders failed to reimburse the Company for the deductible amount or the amount of additional premium owed under retrospectively-rated policies. The Company manages these credit risks through credit analysis, collateral requirements, and oversight. The allowance for receivables for loss within a deductible and retrospectively-rated policy premiums is estimated as the amount of the receivable exposed to loss multiplied by estimated factors for probability of default. The probability of default is assigned based on each policyholder's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed and updated at least annually. The exposure amount is estimated net of collateral and other offsets, considering the nature of the collateral, potential future changes in collateral values, and historical loss information for the type of collateral obtained. The probability of default factors are historical corporate defaults for receivables with similar durations estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of economic outcomes. The Company's evaluation of the required allowance for receivables for loss within a deductible and retrospectively-rated policy premiums considers the current economic environment as well as the probability-weighted macroeconomic scenarios.

In response to significant economic stress experienced as a result of the COVID-19 pandemic, the Company increased the weight of both a moderate and severe recession scenario in our estimate of the allowance for loss within a deductible and retrospectively-rated policy premiums. The ultimate impact to the Company’s financial statements from the COVID-19 pandemic could vary significantly from our estimates depending on the duration and severity of the pandemic, the duration and severity of the economic downturn and the degree to which federal, state and local government actions to mitigate the economic impact of COVID-19 are effective.

The Company records total credit loss expenses related to premiums receivable in other underwriting expenses and records credit loss expenses related to deductibles through losses incurred

The allowance for uncollectible reinsurance recoverablereflects 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 premiuman 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.

The allowance is estimated as the amount of reinsurance receivable balances based on management's assessmentexposed to loss multiplied by estimated factors for the probability of default. The reinsurance receivable exposed is the amount of reinsurance receivable net of collateral and other offsets, considering the nature of the collectabilitycollateral, 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 outstanding balances.  Such reservesrequired allowance for reinsurance receivable considers the current economic environment as well as macroeconomic scenarios.

The Company expects the impact of the COVID-19 pandemic to reinsurers to be somewhat mitigated by their regulated capital and liquidity positions. The ultimate impact to the Company's financial statements could vary significantly from our estimates depending on the duration and severity of the pandemic, the duration and severity of the economic downturn and the degree to which federal, state and local government actions to mitigate the economic impact of COVID-19 are effective.

The Company records credit loss expenses related to reinsurance receivable in losses and loss adjustment expenses. Write-offs of reinsurance receivable and any related allowance are recorded in the period in which the balance is deemed uncollectible.

F-10


Allowances are presented in the table below for the periods indicated.

 

 

 

 

Years Ended December 31,

(Dollars in thousands)

 

 

 

2020

 

2019

Reinsurance receivables and premium receivables

 

 

 

$

33,370

 

$

25,163

         


  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Reinsurance recoverable and premium receivables $23,011  $23,011 

F-8



D.  Deferred Acquisition Costs.

Acquisition costs, consisting principally of commissions and brokerage expenses and certain premium taxes and fees incurred at the time a contract or policy is issued and that vary with and are directly related to the Company'sCompany’s reinsurance and insurance business, are deferred and amortized over the period in which the related premiums are earned.  Deferred acquisition costs are limited to their estimated realizable value by line of business based on the related unearned premiums, anticipated claims and claim expenses and anticipated investment income.  Deferred acquisition costs amortized to income are presented in the table below for the periods indicated.

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Deferred acquisition costs

$

1,373,355

 

$

1,270,053

 

$

1,141,714

         
  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Deferred acquisition costs $210,925  $281,424  $312,325 

E.  Reserve for Losses and Loss Adjustment Expenses.

The reserve for losses and loss adjustment expenses ("LAE"(“LAE”) is based on individual case estimates and reports received from ceding companies.  A provision is included for losses and LAE incurred but not reported ("IBNR"(“IBNR”) based on past experience.  A provision is also included for certain potential liabilities relating to asbestos and environmental ("(“A&E"&E”) exposures, for which liabilities cannot be estimated using traditional reserving techniques.  See also Note 3.  The reserves are reviewed periodically and any changes in estimates are reflected in earnings in the period the adjustment is made.  The Company'sCompany’s loss and LAE reserves represent management'smanagement’s best estimate of the ultimate liability.  Loss and LAE reserves are presented gross of reinsurance receivables and incurred losses and LAE are presented net of reinsurance.


Accruals for commissions are established for reinsurance contracts that provide for the stated commission percentage to increase or decrease based on the loss experience of the contract.  Changes in estimates for such arrangements are recorded as commission expense.  Commission accruals for contracts with adjustable features are estimated based on expected loss and LAE.


F.  Premium Revenues.Revenues.

Written premiums are earned ratably over the periods of the related insurance and reinsurance contracts.  Written premiums related to crop insurance are earned on a seasonal pattern, which is based upon the planting and harvesting periods of each crop season.  Unearned premium reserves are established relative to the unexpired contract period.  SuchFor reinsurance contracts, such reserves are established based upon reports received from ceding companies or estimated using pro rata methods based on statistical data.  Reinstatement premiums represent additional premium received on reinsurance coverages, most prevalently catastrophe related, when limits have been depleted under the original reinsurance contract and additional coverage is granted.  Written and earned premiums and the related costs, which have not yet been reported to the Company, are estimated and accrued.  Premiums are net of ceded reinsurance.


G.  Prepaid Reinsurance Premiums.

Prepaid reinsurance premiums represent unearned premium reserves ceded to other reinsurers.  Prepaid reinsurance premiums for any foreign reinsurers comprising more than 10%10% of the outstanding balance at December 31, 20172020 were collateralized either through collateralized trust arrangements, rights of offset or letters of credit, thereby limiting the credit risk to the Company.


H.  Income Taxes.

The Company and its wholly-ownedwholly owned subsidiaries file a consolidated U.S. Corporation Income Tax Return.  The Company'sCompany’s foreign subsidiaries and foreign branches of its USU.S. subsidiaries file country and local corporation income tax returns as required. Deferred U.S. federal and foreign income taxes have been recorded to

F-11


recognize the tax effect of temporary differences between the GAAP and income tax bases of assets and liabilities, which arise because of differences between the financial reporting and income tax rules.


As an accounting policy, the Company has adopted the aggregate portfolio approach for releasing disproportionate income tax effects from AOCI.

I.  Foreign Currency.

As a global entity, the Company transacts business in numerous currencies through business units located around the world.  The base transactional currency for each business unit is determined by the local currency used for most economic activity in that area.  Movements in exchange rates related to assets and liabilities at the business units between the original currency and the base currency are recorded through the consolidated statements of operations and comprehensive income (loss) in other income (expense), except

F-9

for currency movements related to available for sale investments, which are excluded from net income (loss) and accumulated in stockholder'sstockholder’s equity, net of deferred taxes.

The business units'units’ base currency financial statements are translated to U.S. dollars using the exchange rates at the end of period for the balance sheets and the average exchange rates in effect for the reporting period for the income statements.  Gains and losses resulting from translating the foreign currency financial statements, net of deferred income taxes, are excluded from net income loss and accumulated in stockholder'sstockholder’s equity.


J.  Segmentation.

The

With recent changes in executive management and organizational structure, the Company throughmanages its subsidiaries, operates in three segments: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.  Accordingly, effective January 1, 2020, the Company revised it reporting segments to Reinsurance Operations and Insurance Operations.  This replaces the previous reported segments of U.S. Reinsurance, International (reinsurance) and Insurance.  The prior year presented segment information has been reformatted to reflect this change. See also Note 17.


K.  Retroactive Reinsurance.

Premiums on ceded retroactive contracts are earned when written with a corresponding reinsurance recoverable established for the amount of reserves ceded.  The initial gain, if applicable, is deferred and amortized into income over an actuarially determined expected payout period.  Any future loss is recognized immediately and charged against earnings.


L. Application of Recently Issued Accounting Standard Changes.

Accounting for Deferred Taxes in Accumulated Other Comprehensive Income (AOCI).Taxes.  In February 2018, FASBDecember 2019, The Financial Accounting Standards Board (“FASB”) issued ASU 2018-02Accounting Standards Update (“ASU”) 2019-12, which outlinesprovides simplification of existing guidance for income taxes, including the removal of certain exceptions related to recognition of deferred tax liabilities on the treatment of trapped deferred taxes contained within AOCI on the consolidated balance sheets.  The new guidance allows the amount of trapped deferred taxes in AOCI, resulting from the change in the U.S. tax rate from 35% to 21% upon enactment of the Tax Cut and Jobs Act ("TCJA"), to be reclassed as part of retained earnings in the consolidated balance sheets.foreign subsidiaries. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, but early adoption is allowed.2020 and interim periods within that annual reporting period. The Company has decided to early adoptis currently evaluating the impact of the adoption of ASU 2019-12 on its financial statements.

Accounting for Cloud Computing Arrangement.  In August 2018, FASB issued ASU 2018-15, which outlines accounting for implementation costs of a cloud computing arrangement that is a service contract.  This guidance asrequires that implementation costs of a cloud computing arrangement that is a service contract must be capitalized and expensed in accordance with the existing provisions provided in Subtopic 350-40 regarding development of internal use software.  In addition, any capitalized implementation costs should be amortized over the term of the hosting arrangement.  The guidance is effective for annual reporting periods beginning after December 31, 2017.15, 2019 and interim periods within that annual reporting period.  The adoption has resulted inof ASU 2018-15 did not have a reclass of $325 thousand between AOCI and retained earnings, which is disclosed separately withinmaterial impact on the consolidated statement of changes in stockholder's equity.


Company’s financial statements.

Accounting for Impact on Income Taxes due to Tax Reform. ReformIn December 2017, the SEC issued Staff Accounting Bulletin ("SAB"(“SAB”) 118, which provides guidance on the application of FASB Accounting Standards Codification ("ASC"(“ASC”) Topic 740, Income Taxes, due to the enactment of TCJA.  SAB 118 became effective upon release.  The Company has adopted the provisions of SAB 118 with respect to measuring the tax effects for the modifications to the determination of tax basis loss reserves.  Because of uncertainty in how the Internal Revenue Service ("IRS") intends to implement the modifications and the necessary transition calculation, the Company has determined that a reasonable estimate cannot be determined and has followed the provisions of the tax laws that were in effect prior to the modifications. In 2018, the Company expects to recordrecorded adjustments to

F-12


the amount of tax expense it recorded in 2017 with respect to the TCJA as estimated amounts are finalized.  Further adjustments arewere finalized, which did not expected to have a material impact on the Company'sCompany’s financial statements.


Amortization of Bond Premium.In March 2017, FASB issued ASU 2017-08, which outlines guidance on the amortization period for premium on callable debt securities.  The new guidance requires that the premium on callable debt securities be amortized through the earliest call date rather than through the maturity date of the callable security.  The guidance is effective for annual and interim reporting periods beginning after December 15, 2019.  The Company does not expect the adoption of ASU 2017-08 todid not have a material impact on itsthe Company’s financial statements.


Presentation and Disclosure of Net Periodic Benefit Costs.  In March 2017, FASB issued ASU 2017-07 which outlines guidance on the presentation of net periodic costs of benefit plans.  The new guidance requires that the service cost component of net periodic benefit costs be reported within the same line item of the statements of operations as other compensation costs are reported.  Other components of net periodic benefit costs should be reported separately.  Footnote disclosure is required to state within which line items of the statements of operations the components are reported. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2017-07 to have a material impact on its financial statements.
F-10

Disclosure of Restricted Cash.  In November 2016, FASB issued ASU 2016-18 which outlines guidance on the presentation in the statements of cash flows of changes in restricted cash. The new guidance requires that the statements of cash flows should reflect all changes in cash, cash equivalents and restricted cash in total and not segregated individually.  The guidance is effective for annual and interim reporting periods beginning after December 15, 2017.  The Company does not expect the adoption of ASU 2016-18 to have a material impact on its financial statements.

Intra-Entity Asset Transfers.  In October 2016, FASB issued ASU 2016-16 which outlines guidance on the tax accounting for intra-entity asset sales and transfers, other than inventory.  The new guidance requires that reporting entities recognize tax expense from the intra-entity transfer of an asset in the seller's tax jurisdiction at the time of transfer and recognize any deferred tax asset in the buyer's tax jurisdiction at the time of transfer.  The guidance is effective for annual and interim reporting periods beginning after December 15, 2017.  The Company does not expect the adoption of ASU 2016-16 to have a material impact on its financial statements.

Valuation of Financial Instruments.In June 2016, FASB issued ASU 2016-13 (and has subsequently issued related guidance and amendments in ASU 2019-11 and ASU 2019-10 in November 2019) which outlinesoutline guidance on the valuation of and accounting for assets measured at amortized cost and available for sale debt securities.  The new guidance requires the carrying value of assets measured at amortized cost, will nowincluding reinsurance and premiums receivables to be presented as the net amount expected to be collected on the financial asset (amortized cost less an allowance for credit losses valuation account).  Available for saleThe allowance reflects expected credit losses of the financial asset which considers available information using a combination both historical information, current market conditions and reasonable and supportable forecasts. For available-for-sale debt securities, willthe guidance modified the previous other than temporary impairment model, now record credit losses throughrequiring an allowance for estimated credit related losses rather than a permanent impairment, which will be limited to the amount by which fair value is below amortized cost.  The guidance is effective for annual and interim reporting periods beginning after December 15, 2019.  The Company adopted the guidance effective January 1, 2020, on a modified retrospective basis.  The adoption resulted in a cumulative adjustment of $907 thousand in retained earnings, net of tax, which is currently evaluatingdisclosed separately within the impactConsolidated Statements of the adoption of ASU 2016-13 on its financial statements.


Stockholder’s Equity.

Leases.  In February 2016, FASB issued ASU 2016-02 (and subsequently issued ASU 2018-11 in July, 2018) which outlinesoutline new guidance on the accounting for leases.  The new guidance requires the recognition of lease assets and lease liabilities on the balance sheets for most leases that were previously deemed operating leases and required only lease expense presentation in the statements of operations.  The guidance is effective for annual and interim reporting periods beginning after December 15, 2018.  The Company is currently evaluatingadopted ASU 2016-02 effective January 1, 2019 and elected to utilize a cumulative-effect adjustment to the impactopening balance of retained earnings for the year of adoption.  Accordingly, the Company’s reporting for the comparative periods prior to adoption continue to be presented in the financial statements in accordance with previous lease accounting guidance.  The Company also elected to apply the package of practical expedients applicable to the Company in the updated guidance for transition for leases in effect at adoption.  The Company did not elect the hindsight practical expedient to determine the lease term of existing leases (e.g. The Company did not re-assess lease renewals, termination options nor purchase options in determining lease terms).  The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $60,325 thousand as part of other assets and a lease liability of $66,551 thousand as part of other liabilities in the consolidated balance sheet, as well as de-recognizing the liability for deferred rent that was required under the previous guidance.  The cumulative effect adjustment to the opening balance of retained earnings was zero. The adoption of ASU 2016-02the updated guidance did not have a material effect on its financial statements.


the Company’s results of operations or liquidity.

Recognition and Measurement of Financial Instruments.  InstrumentsIn January 2016, the FASB issued ASU 2016-01, which outlines revised guidance on the accounting for equity investments.  The new guidance states that all equity investments in unconsolidated entities will be measured at fair value, with the change in value being recorded through the income statement rather than being recorded within other comprehensive income.  The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017.  The Company does not expectadopted the guidance effective January 1, 2018.  The adoption of ASU 2016-01 to haveresulted in a material impact on its financial statements.


Disclosures about Short-Duration Contracts. In May 2015, the FASB issued ASU 2015-09, authoritative guidance regarding required disclosures associated with short duration insurance contracts.  The new disclosure requirements focus on information about initial claim estimatescumulative change adjustment of $2,447 thousand between AOCI and subsequent claim estimate adjustment, methodologies in estimating claims and the timing, frequency and severity of claims related to short duration insurance contracts. This guidanceretained earnings, which is effective for annual reporting periods beginning after December 15, 2015 and interim reporting periods beginning after December 15, 2016.  The Company implemented this guidance effective in the fourth quarter of 2016.

Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share.  In May 2015, the FASB issued ASU 2015-07, which removes the requirement to categorize,disclosed separately within the fair value hierarchy, investments for which fair values are estimated using the net asset value practical expedient provided by Accounting Standards Codification 820, Fair Value Measurement.  The updated guidance is effective for annual reporting periods beginning after December 15, 2015.  The Company implemented this guidance effectiveconsolidated statement of changes in the fourth quarter of 2016.  The adoption did not have a material impact on the Company's financial statements.
F-11shareholders equity.

Debt Issuance Costs. In April 2015, The FASB issued ASU 2015–03, authoritative guidance on the presentation of debt issuance costs.  This guidance requires that debt issuance costs be presented within the balance sheet as a reduction of the carrying value of the debt liability, rather than as a separate asset.  This guidance is effective for annual reporting periods beginning after December 15, 2015 and related interim reporting periods.  The Company implemented this guidance effective in the second quarter of 2016.  The adoption did not have a material impact on the Company's financial statements.

Consolidation. In February 2015, the FASB issued ASU 2015-02, authoritative guidance regarding consolidation of reporting entities.  The new guidance focuses on the required evaluation of whether certain legal entities should be consolidated.  This guidance is effective for annual and interim reporting periods beginning after December 15, 2015.  The adoption did not have a material impact on the Company's financial statements.

Revenue Recognition.  In May 2014, the FASB issued ASU 2014-09 which outlines revised guidance on the recognition of revenue arising from contracts with customers. The new guidance states that reporting entities should apply certain steps to determine when revenue should be recognized, based upon fulfillment of performance obligations to complete contracts. The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2014-09 to have a material impact on its financial statements.

Any issued guidance and pronouncements, other than those directly referencesreferenced above, are deemed by the Company to be either not applicable or immaterial to its financial statements.

F-13



2.  REVISIONS TO FINANCIAL STATEMENTS


In preparing its second quarter of 2017 financial statements,INVESTMENTS

Effective January 1, 2020, the Company altered its processing of ceding certain commissions and deferred acquisition costs under an affiliated quota share agreement.  In previous reporting periods, these expenses were ceded based upon a quarter lag.  In the second quarter of 2017, the quarter lag was eliminated and these expenses are now recorded on a current quarter basis.  Although management determined that the impact of the ceding lag was not material to prior period financial statements, the impact of eliminating the ceding lag would have significantly impacted results within the second quarter of 2017.  As a result, prior period balances have been revised in the applicable financial statements and corresponding footnotes to eliminate the impact ofadopted ASU 2016-13 which modified the previous recording lag.


Management assessed the materiality of this change within prior period financial statements based upon SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections.  In accordance with ASC 250, the prior period comparative financial statements that are presented herein have been revised.

F-12

The following tables present line itemsother than temporary impairment model for prior period financial statements that have been affected by the revision. For these line items, the tables detail the amounts as previously reported, the impact upon those line items due to the revision, and the amounts as currently revised within the financial statements.


CONSOLIDATED BALANCE SHEETS December 31, 2016  December 31, 2015 
  As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands, except par value per share)                  
ASSETS:                  
Deferred acquisition costs $73,924  $(5,303) $68,621  $92,651  $(6,249) $86,402 
TOTAL ASSETS $17,088,739  $(5,303) $17,083,436  $16,695,203  $(6,249) $16,688,954 
                         
LIABILITIES:                        
Other net payable to reinsurers $860,391  $(45,093) $815,298  $1,225,260  $(37,480) $1,187,780 
Income taxes  142,143   6,797   148,940   68,024   4,132   72,156 
         Total liabilities  11,823,179   (38,296)  11,784,883   11,763,992   (33,348)  11,730,644 
                         
STOCKHOLDERS EQUITY:                        
 Retained earnings  4,914,308   32,993   4,947,301   4,618,558   27,099   4,645,657 
         Total stockholder's equity  5,265,560   32,993   5,298,553   4,931,211   27,099   4,958,310 
 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $17,088,739  $(5,303) $17,083,436  $16,695,203  $(6,249) $16,688,954 

CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2016  Year Ended December 31, 2015 
AND COMPREHENSIVE INCOME (LOSS): As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CLAIMS AND EXPENSES:                  
Commission, brokerage, taxes and fees $289,982  $(8,558) $281,424  $315,069  $(2,744) $312,325 
Total claims and expenses  1,928,940   (8,558)  1,920,382   1,892,062   (2,744)  1,889,318 
                         
INCOME (LOSS) BEFORE TAXES  390,433   8,558   398,991   604,542   2,744   607,286 
Income tax expense (benefit)  94,683   2,664   97,347   191,889   3,007   194,896 
                         
NET INCOME (LOSS) $295,750  $5,894  $301,644  $412,653  $(263) $412,390 
                         
COMPREHENSIVE INCOME (LOSS) $321,571  $5,894  $327,465  $345,998  $(263) $345,735 

CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2014 
AND COMPREHENSIVE INCOME (LOSS): As Previously  Impact of    
  Reported  Revisions  As Revised 
(Dollars in thousands)         
CLAIMS AND EXPENSES:         
Commission, brokerage, taxes and fees $339,402  $(427) $338,975 
Total claims and expenses  1,930,749   (427)  1,930,322 
             
INCOME (LOSS) BEFORE TAXES  657,688   427   658,115 
Income tax expense (benefit)  203,562   1,125   204,687 
             
NET INCOME (LOSS) $454,126  $(698) $453,428 
             
COMPREHENSIVE INCOME (LOSS) $370,997  $(698) $370,299 



F-13

CONSOLIDATED STATEMENTS OF Year Ended December 31, 2016  Year Ended December 31, 2015 
CHANGES IN STOCKHOLDER'S EQUITY As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
                   
(Dollars in thousands, except share amounts)                  
RETAINED EARNINGS:                  
Balance, beginning of period $4,618,558  $27,099  $4,645,657  $4,205,905  $27,362  $4,233,267 
Net income (loss)  295,750   5,894   301,644   412,653   (263)  412,390 
Balance, end of period  4,914,308   32,993   4,947,301   4,618,558   27,099   4,645,657 
 TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $5,265,560  $32,993  $5,298,553  $4,931,211  $27,099  $4,958,310 

CONSOLIDATED STATEMENTS OF Year Ended December 31, 2014 
CHANGES IN STOCKHOLDER'S EQUITY As Previously  Impact of    
  Reported  Revisions  As Revised 
          
(Dollars in thousands, except share amounts)         
RETAINED EARNINGS:         
Balance, beginning of period $3,751,779  $28,060  $3,779,839 
Net income (loss)  454,126   (698)  453,428 
Balance, end of period  4,205,905   27,362   4,233,267 
 TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $4,572,717  $27,362  $4,600,079 

CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2016  Year Ended December 31, 2015 
  As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income (loss) $295,750  $5,894  $301,644  $412,653  $(263) $412,390 
Decrease (increase) in income taxes  60,325   2,666   62,991   57,487   3,007   60,494 
Increase (decrease) in other net payable to reinsurers  (364,242)  (7,614)  (371,856)  204,526   (8,590)  195,936 
Change in other assets and liabilities, net  16,090   (946)  15,144   7,499   5,846   13,345 

CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2014 
  As Previously  Impact of    
  Reported  Revisions  As Revised 
(Dollars in thousands)         
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income (loss) $454,126  $(698) $453,428 
Decrease (increase) in income taxes  68,206   1,125   69,331 
Increase (decrease) in other net payable to reinsurers  5,130   (3,216)  1,914 
Change in other assets and liabilities, net  81,388   2,789   84,177 

F-14

3.  INVESTMENTS

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale fixed maturity investments, carriedsecurities.  The guidance requires the Company to record allowances for credit losses for securities that are deemed to have valuation deterioration due to credit related factors.  The initial table below presents the amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and market value of fixed maturity securities at December 31, 2020 in accordance with ASU 2016-13 guidance. The second table presents the amortized cost, gross unrealized appreciation/(depreciation), market value and other-than-temporary impairments ("OTTI"(“OTTI”) in accumulated other comprehensive income ("AOCI") are as follows for the periods indicated:AOCI at December 31, 2019, in accordance with previously applicable guidance

 

At December 31, 2020

 

Amortized

 

Allowances for

 

Unrealized

 

Unrealized

 

Market

(Dollars in thousands)

Cost

 

Credit Loss

 

Appreciation

 

Depreciation

 

Value

Fixed maturity securities 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

  U.S. government agencies and corporations

$

659,957

 

$

-

 

$

22,032

 

$

-

 

$

681,989

Obligations of U.S. states and political

  subdivisions

 

543,646

 

 

-

 

 

34,655

 

 

(1,255)

 

 

577,046

Corporate securities

 

3,316,525

 

 

(1,205)

 

 

166,072

 

 

(31,480)

 

 

3,449,912

Asset-backed securities

 

2,450,807

 

 

-

 

 

28,585

 

 

(5,222)

 

 

2,474,170

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

512,388

 

 

-

 

 

37,875

 

 

(183)

 

 

550,080

Agency residential

 

937,166

 

 

-

 

 

28,630

 

 

(696)

 

 

965,100

Non-agency residential

 

3,164

 

 

-

 

 

2

 

 

(2)

 

 

3,164

Foreign government securities

 

694,132

 

 

-

 

 

51,317

 

 

(3,211)

 

 

742,238

Foreign corporate securities

 

1,130,865

 

 

(361)

 

 

73,265

 

 

(3,903)

 

 

1,199,866

Total fixed maturity securities

$

10,248,650

 

$

(1,566)

 

$

442,433

 

$

(45,952)

 

$

10,643,565

F-14



 

At December 31, 2019

 

Amortized

 

Unrealized

 

Unrealized

 

Market

 

OTTI in AOCI

(Dollars in thousands)

Cost

 

Appreciation

 

Depreciation

 

Value

 

(a)

Fixed maturity securities 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

  U.S. government agencies and corporations

$

768,374

 

$

10,128

 

$

(987)

 

$

777,515

 

$

-

Obligations of U.S. states and political

  subdivisions

 

506,347

 

 

29,651

 

 

(87)

 

 

535,911

 

 

-

Corporate securities

 

2,777,097

 

 

70,898

 

 

(26,438)

 

 

2,821,557

 

 

245

Asset-backed securities

 

761,607

 

 

5,659

 

 

(1,309)

 

 

765,957

 

 

-

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

311,961

 

 

17,242

 

 

(154)

 

 

329,049

 

 

-

Agency residential

 

625,612

 

 

19,395

 

 

(320)

 

 

644,687

 

 

-

Non-agency residential

 

1,638

 

 

-

 

 

-

 

 

1,638

 

 

-

Foreign government securities

 

646,149

 

 

18,908

 

 

(7,050)

 

 

658,007

 

 

27

Foreign corporate securities

 

935,640

 

 

31,257

 

 

(9,139)

 

 

957,758

 

 

333

Total fixed maturity securities

$

7,334,425

 

$

203,138

 

$

(45,484)

 

$

7,492,079

 

$

605


  At December 31, 2017 
  Amortized  Unrealized  Unrealized  Market  OTTI in AOCI 
(Dollars in thousands) Cost  Appreciation  Depreciation  Value  (a) 
Fixed maturity securities               
U.S. Treasury securities and obligations of               
U.S. government agencies and corporations $671,449  $658  $(7,594) $664,513  $- 
Obligations of U.S. states and political subdivisions  563,789   22,124   (444)  585,469   - 
Corporate securities  2,009,665   28,003   (13,459)  2,024,209   129 
Asset-backed securities  138,203   207   (386)  138,024   - 
Mortgage-backed securities                    
Commercial  52,121   115   (485)  51,751   - 
Agency residential  114,435   511   (1,658)  113,288   - 
Non-agency residential  51   7   -   58   - 
Foreign government securities  514,048   17,065   (7,493)  523,620   - 
Foreign corporate securities  863,861   20,121   (12,993)  870,989   377 
Total fixed maturity securities $4,927,622  $88,811  $(44,512) $4,971,921  $506 

  At December 31, 2016 
  Amortized  Unrealized  Unrealized  Market  OTTI in AOCI 
(Dollars in thousands) Cost  Appreciation  Depreciation  Value  (a) 
Fixed maturity securities               
U.S. Treasury securities and obligations of               
U.S. government agencies and corporations $693,005  $2,509  $(4,434) $691,080  $- 
Obligations of U.S. states and political subdivisions  723,938   18,016   (11,970)  729,984   - 
Corporate securities  2,119,324   50,665   (15,786)  2,154,203   4,868 
Asset-backed securities  136,826   330   (129)  137,027   - 
Mortgage-backed securities                    
Commercial  75,435   510   (452)  75,493   - 
Agency residential  721,772   2,365   (8,993)  715,144   - 
Non-agency residential  76   12   -   88   - 
Foreign government securities  495,572   22,088   (10,383)  507,277   - 
Foreign corporate securities  944,546   30,015   (14,361)  960,200   175 
Total fixed maturity securities $5,910,494  $126,510  $(66,508) $5,970,496  $5,043 

(a)  Represents the amount of OTTI recognized in AOCI.  Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.


F-15

The amortized cost and market value of fixed maturity securities are shown in the following tables by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.

 

At December 31, 2020

 

At December 31, 2019

 

Amortized

 

Market

 

Amortized

 

Market

(Dollars in thousands)

Cost

 

Value

 

Cost

 

Value

Fixed maturity securities – available for sale

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

658,561

 

$

659,622

 

$

569,506

 

$

563,730

Due after one year through five years

 

2,911,285

 

 

3,036,151

 

 

2,919,966

 

 

2,963,903

Due after five years through ten years

 

1,927,265

 

 

2,079,866

 

 

1,541,695

 

 

1,602,642

Due after ten years

 

848,014

 

 

875,412

 

 

602,440

 

 

620,473

Asset-backed securities

 

2,450,807

 

 

2,474,170

 

 

761,607

 

 

765,957

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

512,388

 

 

550,080

 

 

311,961

 

 

329,049

Agency residential

 

937,166

 

 

965,100

 

 

625,612

 

 

644,687

Non-agency residential

 

3,164

 

 

3,164

 

 

1,638

 

 

1,638

Total fixed maturity securities

$

10,248,650

 

$

10,643,565

 

$

7,334,425

 

$

7,492,079


F-15



  At December 31, 2017  At December 31, 2016 
  Amortized  Market  Amortized  Market 
(Dollars in thousands) Cost  Value  Cost  Value 
Fixed maturity securities – available for sale            
    Due in one year or less $319,858  $320,746  $394,401  $392,824 
    Due after one year through five years  2,601,898   2,595,237   2,925,786   2,955,325 
    Due after five years through ten years  1,051,431   1,069,617   879,762   894,166 
    Due after ten years  649,625   683,200   776,436   800,429 
Asset-backed securities  138,203   138,024   136,826   137,027 
Mortgage-backed securities                
Commercial  52,121   51,751   75,435   75,493 
Agency residential  114,435   113,288   721,772   715,144 
Non-agency residential  51   58   76   88 
Total fixed maturity securities $4,927,622  $4,971,921  $5,910,494  $5,970,496 


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

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

Increase (decrease) during the period between the market value and cost

  of investments carried at market value, and deferred taxes thereon:

 

 

 

 

 

Fixed maturity securities

$

238,634

 

$

228,953

Fixed maturity securities, other-than-temporary impairment

 

-

 

 

(546)

Change in unrealized appreciation (depreciation), pre-tax

 

238,634

 

 

228,408

Deferred tax benefit (expense)

 

(50,086)

 

 

(47,959)

Deferred tax benefit (expense), other-than-temporary impairment

 

-

 

 

115

Change in unrealized appreciation (depreciation),

  net of deferred taxes, included in stockholder's equity

$

188,548

 

$

180,562



  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Increase (decrease) during the period between the market value and cost      
of investments carried at market value, and deferred taxes thereon:      
Fixed maturity securities $(11,166) $33,883 
Fixed maturity securities, other-than-temporary impairment  (4,537)  5,113 
Other invested assets  3,037   60 
Change in unrealized  appreciation (depreciation), pre-tax  (12,666)  39,056 
Deferred tax benefit (expense)  2,845   (11,880)
Deferred tax benefit (expense), other-than-temporary impairment  1,588   (1,789)
Change in unrealized appreciation (depreciation),        
net of deferred taxes, included in stockholder's equity $(8,233) $25,387 

The Company frequently reviews all of its fixed maturity, available for sale securities for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized cost at the time of review.  The Company then assesses whether the decline in value is temporarydue to non-credit related or other-than-temporary.credit related factors.  In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information.  Generally, a change in a security'ssecurity’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute an other-than-temporarya credit impairment, but rather a temporarynon-credit related decline in market value.  TemporaryNon-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss).  If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).  If the Company determines that the decline is other-than-temporarycredit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the carrying value ofCompany establishes a credit allowance equal to the investment is written down to fair value.  The fair value adjustment that isestimated credit or foreign exchange relatedloss and is recorded in net realized capital gains (losses) in the Company'sCompany’s consolidated statements of operations and comprehensive income (loss).  The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value.  The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company'sCompany’s consolidated balance sheets. The Company'sCompany will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

The Company does not create an allowance for uncollectible interest.  If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time.

Prior to the adoption of ASU 2016-13 effective January 1, 2020, estimated credit losses were recorded as adjustments to the carrying value of the security and any subsequent improvement in market value were recorded through other comprehensive income.

The Company’s assessments are based on the issuers'issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.


F-16

Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company'sCompany’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.

F-16



The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

 

Duration of Unrealized Loss at December 31, 2020 By Security Type

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

Market

 

Unrealized

 

Market

 

Unrealized

 

Market

 

Unrealized

(Dollars in thousands)

Value

 

Depreciation

 

Value

 

Depreciation

 

Value

 

Depreciation

Fixed maturity securities -

  available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. states and

  political subdivisions

 

19,524

 

 

(999)

 

 

4,059

 

 

(256)

 

 

23,583

 

 

(1,255)

Corporate securities

 

240,601

 

 

(7,799)

 

 

188,853

 

 

(23,681)

 

 

429,454

 

 

(31,480)

Asset-backed securities

 

223,919

 

 

(4,573)

 

 

81,952

 

 

(649)

 

 

305,871

 

 

(5,222)

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

37,414

 

 

(182)

 

 

3,983

 

 

(1)

 

 

41,397

 

 

(183)

Agency residential

 

235,809

 

 

(682)

 

 

1,573

 

 

(14)

 

 

237,382

 

 

(696)

Non-agency residential

 

161

 

 

(2)

 

 

-

 

 

-

 

 

161

 

 

(2)

Foreign government securities

 

10,505

 

 

(373)

 

 

25,793

 

 

(2,838)

 

 

36,298

 

 

(3,211)

Foreign corporate securities

 

57,900

 

 

(2,182)

 

 

18,349

 

 

(1,721)

 

 

76,249

 

 

(3,903)

Total fixed maturity securities

$

825,833

 

$

(16,792)

 

$

324,562

 

$

(29,160)

 

$

1,150,395

 

$

(45,952)


 

Duration of Unrealized Loss at December 31, 2020 By Maturity

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

Market

 

Unrealized

 

Market

 

Unrealized

 

Market

 

Unrealized

(Dollars in thousands)

Value

 

Depreciation

 

Value

 

Depreciation

 

Value

 

Depreciation

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

28,802

 

$

(1,218)

 

$

34,555

 

$

(4,142)

 

$

63,357

 

$

(5,360)

Due in one year through five years

 

150,106

 

 

(5,828)

 

 

116,987

 

 

(4,783)

 

 

267,093

 

 

(10,611)

Due in five years through ten years

 

81,492

 

 

(1,634)

 

 

13,118

 

 

(435)

 

 

94,610

 

 

(2,069)

Due after ten years

 

68,130

 

 

(2,673)

 

 

72,394

 

 

(19,136)

 

 

140,524

 

 

(21,809)

Asset-backed securities

 

223,919

 

 

(4,573)

 

 

81,952

 

 

(649)

 

 

305,871

 

 

(5,222)

Mortgage-backed securities

 

273,384

 

 

(866)

 

 

5,556

 

 

(15)

 

 

278,940

 

 

(881)

Total fixed maturity securities

$

825,833

 

$

(16,792)

 

$

324,562

 

$

(29,160)

 

$

1,150,395

 

$

(45,952)


  Duration of Unrealized Loss at December 31, 2017 By Security Type 
  Less than 12 months  Greater than 12 months  Total 
     Gross     Gross     Gross 
     Unrealized     Unrealized     Unrealized 
(Dollars in thousands) Market Value  Depreciation  Market Value  Depreciation  Market Value  Depreciation 
Fixed maturity securities - available for sale                  
U.S. Treasury securities and obligations of                  
U.S. government agencies and corporations $446,963  $(2,921) $198,684  $(4,673) $645,647  $(7,594)
Obligations of U.S. states and political subdivisions  4,400   (27)  37,886   (417)  42,286   (444)
Corporate securities  455,431   (6,674)  216,715   (6,785)  672,146   (13,459)
Asset-backed securities  75,196   (328)  7,991   (58)  83,187   (386)
Mortgage-backed securities                        
Commercial  26,650   (264)  5,972   (221)  32,622   (485)
Agency residential  46,234   (322)  58,135   (1,336)  104,369   (1,658)
Foreign government securities  159,852   (1,567)  121,018   (5,926)  280,870   (7,493)
Foreign corporate securities  263,547   (4,590)  109,727   (8,403)  373,274   (12,993)
Total fixed maturity securities $1,478,273  $(16,693) $756,128  $(27,819) $2,234,401  $(44,512)

  Duration of Unrealized Loss at December 31, 2017 By Maturity 
  Less than 12 months  Greater than 12 months  Total 
     Gross     Gross     Gross 
     Unrealized     Unrealized     Unrealized 
(Dollars in thousands) Market Value  Depreciation  Market Value  Depreciation  Market Value  Depreciation 
Fixed maturity securities                  
Due in one year or less $102,939  $(498) $40,006  $(1,627) $142,945  $(2,125)
Due in one year through five years  973,217   (10,291)  488,945   (18,917)  1,462,162   (29,208)
Due in five years through ten years  189,103   (3,713)  116,136   (5,216)  305,239   (8,929)
Due after ten years  64,934   (1,277)  38,943   (444)  103,877   (1,721)
Asset-backed securities  75,196   (328)  7,991   (58)  83,187   (386)
Mortgage-backed securities  72,884   (586)  64,107   (1,557)  136,991   (2,143)
Total fixed maturity securities $1,478,273  $(16,693) $756,128  $(27,819) $2,234,401  $(44,512)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 20172020 were $2,234,401$1,150,395 thousand and $44,512$45,952 thousand, respectively.  The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2017,2020, did not exceed 13.0%0.2% of the overall market value of the Company's fixed maturity securities. The market value of securities for the issuer with the second largest unrealized loss comprised less than 0.9% of the company'sCompany’s fixed maturity securities.  In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $16,693$16,792 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities U.S. government agencies and corporations and foreign governmentas well as asset backed securities. Of these unrealized losses, $13,043$12,522 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $27,819$29,160 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily due to foreigndomestic and domesticforeign corporate securities and foreign government securities, U.S. government agencies and corporations and agency residential mortgage-backed securities. Of these unrealized losses $26,463$5,856 thousand were related to securities that were rated investment grade by at least one nationally recognized

F-17

statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations.  The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

F-17



The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis.  In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.


The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

 

Duration of Unrealized Loss at December 31, 2019 By Security Type

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

Market

 

Unrealized

 

Market

 

Unrealized

 

Market

 

Unrealized

(Dollars in thousands)

Value

 

Depreciation

 

Value

 

Depreciation

 

Value

 

Depreciation

Fixed maturity securities -

  available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and

  obligations of U.S. government

  agencies and corporations

$

8,997

 

$

(141)

 

$

203,780

 

$

(846)

 

$

212,777

 

$

(987)

Obligations of U.S. states and

  political subdivisions

 

4,600

 

 

(38)

 

 

4,518

 

 

(49)

 

 

9,118

 

 

(87)

Corporate securities

 

334,973

 

 

(5,186)

 

 

230,679

 

 

(21,252)

 

 

565,652

 

 

(26,438)

Asset-backed securities

 

159,695

 

 

(887)

 

 

76,351

 

 

(422)

 

 

236,046

 

 

(1,309)

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

13,083

 

 

(87)

 

 

16,374

 

 

(67)

 

 

29,457

 

 

(154)

Agency residential

 

19,019

 

 

(82)

 

 

17,147

 

 

(238)

 

 

36,166

 

 

(320)

Non-agency residential

 

-

 

 

-

 

 

690

 

 

-

 

 

690

 

 

-

Foreign government securities

 

113,256

 

 

(858)

 

 

109,953

 

 

(6,192)

 

 

223,209

 

 

(7,050)

Foreign corporate securities

 

105,551

 

 

(1,260)

 

 

121,710

 

 

(7,879)

 

 

227,261

 

 

(9,139)

Total fixed maturity securities

$

759,174

 

$

(8,539)

 

$

781,202

 

$

(36,945)

 

$

1,540,376

 

$

(45,484)


 

Duration of Unrealized Loss at December 31, 2019 By Maturity

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

Market

 

Unrealized

 

Market

 

Unrealized

 

Market

 

Unrealized

(Dollars in thousands)

Value

 

Depreciation

 

Value

 

Depreciation

 

Value

 

Depreciation

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

34,542

 

$

(1,067)

 

$

188,755

 

$

(6,411)

 

$

223,297

 

$

(7,478)

Due in one year through five years

 

226,521

 

 

(2,554)

 

 

357,728

 

 

(11,562)

 

 

584,249

 

 

(14,116)

Due in five years through ten years

 

251,967

 

 

(3,292)

 

 

43,129

 

 

(6,785)

 

 

295,096

 

 

(10,077)

Due after ten years

 

54,347

 

 

(570)

 

 

81,028

 

 

(11,460)

 

 

135,375

 

 

(12,030)

Asset-backed securities

 

159,695

 

 

(887)

 

 

76,351

 

 

(422)

 

 

236,046

 

 

(1,309)

Mortgage-backed securities

 

32,102

 

 

(169)

 

 

34,211

 

 

(305)

 

 

66,313

 

 

(474)

Total fixed maturity securities

$

759,174

 

$

(8,539)

 

$

781,202

 

$

(36,945)

 

$

1,540,376

 

$

(45,484)


  Duration of Unrealized Loss at December 31, 2016 By Security Type 
  Less than 12 months  Greater than 12 months  Total 
     Gross     Gross     Gross 
     Unrealized     Unrealized     Unrealized 
(Dollars in thousands) Market Value  Depreciation  Market Value  Depreciation  Market Value  Depreciation 
Fixed maturity securities - available for sale                  
U.S. Treasury securities and obligations of                  
U.S. government agencies and corporations $469,571  $(4,434) $-  $-  $469,571  $(4,434)
Obligations of U.S. states and political subdivisions  221,088   (11,486)  564   (484)  221,652   (11,970)
Corporate securities  431,757   (10,121)  118,172   (5,665)  549,929   (15,786)
Asset-backed securities  35,065   (122)  5,745   (7)  40,810   (129)
Mortgage-backed securities                        
Commercial  27,230   (391)  3,060   (61)  30,290   (452)
Agency residential  487,000   (6,320)  90,740   (2,673)  577,740   (8,993)
Foreign government securities  218,171   (2,713)  61,542   (7,670)  279,713   (10,383)
Foreign corporate securities  264,939   (4,950)  75,489   (9,411)  340,428   (14,361)
Total fixed maturity securities $2,154,821  $(40,537) $355,312  $(25,971) $2,510,133  $(66,508)

  Duration of Unrealized Loss at December 31, 2016 By Maturity 
  Less than 12 months  Greater than 12 months  Total 
     Gross     Gross     Gross 
     Unrealized     Unrealized     Unrealized 
(Dollars in thousands) Market Value  Depreciation  Market Value  Depreciation  Market Value  Depreciation 
Fixed maturity securities                  
Due in one year or less $111,926  $(322) $21,691  $(3,625) $133,617  $(3,947)
Due in one year through five years  1,015,066   (10,567)  190,960   (16,511)  1,206,026   (27,078)
Due in five years through ten years  243,082   (10,369)  41,371   (2,961)  284,453   (13,330)
Due after ten years  235,452   (12,446)  1,745   (133)  237,197   (12,579)
Asset-backed securities  35,065   (122)  5,745   (7)  40,810   (129)
Mortgage-backed securities  514,230   (6,711)  93,800   (2,734)  608,030   (9,445)
Total fixed maturity securities $2,154,821  $(40,537) $355,312  $(25,971) $2,510,133  $(66,508)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 20162019 were $2,510,133$1,540,376 thousand and $66,508$45,484 thousand, respectively.  The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2016,2019, did not exceed 1.0%0.2% of the overall market value of the Company'sCompany’s fixed maturity securities.  In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $40,537$8,539 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of obligations of U.S. states and political subdivisions, domestic and foreign corporate securities, agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $36,646$5,645 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency.  The $25,971$36,945 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities and foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses $22,882$16,976 thousand is attributablewere related to net unrealized foreign exchange losses, as the U.S. dollar has strengthened against other currencies.securities that were rated investment grade by at least

F-18


one nationally recognized statistical rating agency. There was no gross unrealized

F-18

depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations.  The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The components of net investment income are presented in the tables below for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Fixed maturities

$

305,399

 

$

273,122

 

$

201,108

Equity securities

 

11,466

 

 

10,782

 

 

14,909

Short-term investments and cash

 

2,978

 

 

10,231

 

 

7,715

Other invested assets

 

 

 

 

 

 

 

 

Limited partnerships

 

48,899

 

 

43,316

 

 

61,645

Dividends from preferred shares of affiliate

 

31,032

 

 

31,031

 

 

31,032

Other

 

1,699

 

 

14,117

 

 

17,825

Gross investment income before adjustments

 

401,473

 

 

382,599

 

 

334,234

Funds held interest income (expense)

 

5,705

 

 

6,459

 

 

5,188

Interest income from Parent

 

5,154

 

 

211

 

 

4,085

Gross investment income

 

412,332

 

 

389,269

 

 

343,507

Investment expenses

 

(36,426)

 

 

(33,058)

 

 

(29,126)

Net investment income

$

375,906

 

$

356,211

 

$

314,381

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Fixed maturities $193,676  $182,132  $188,300 
Equity securities  25,852   32,317   34,418 
Short-term investments and cash  2,870   1,234   964 
Other invested assets            
Limited partnerships  36,603   25,194   19,613 
Dividends from Parent's shares  -   -   38,880 
Dividends from preferred shares of affiliate  31,032   31,032   - 
Other  6,675   1,017   1,804 
Gross investment income before adjustments  296,708   272,926   283,979 
Funds held interest income (expense)  5,006   6,073   5,611 
Interest income from Parent  4,300   4,300   4,300 
Gross investment income  306,014   283,299   293,890 
Investment expenses  (19,755)  (18,492)  (20,637)
Net investment income $286,259  $264,807  $273,253 
             
(Some amounts may not reconcile due to rounding.)            

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag.  If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.


The Company had contractual commitments to invest up to an additional $318,213$1,187,996 thousand in limited partnerships and private placement loans at December 31, 2017.2020.  These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2023.


2026.

The Company's other invested assets at December 31, 2017 and December 31, 2016 included $131,998 thousand and $57,126 thousand, respectively, related toCompany participates in a private placement liquidity sweep facility.facility (“the facility”).  The primary purpose of the facility is to enhance the Company'sCompany’s return on its short-term investments and cash positions.  The facility invests in high quality, short-duration securities and permits daily liquidity.


The Company consolidates its participation in the facility. As of December 31, 2020, the market value of investments in the facility consolidated within the Company’s balance sheets was $223,815 thousand. 

Other invested assets, at fair value, as of December 31, 20172020 and December 31, 2016,2019, were comprised of preferred shares held in Preferred Holdings, an affiliated company.

F-19



F-19


The components of net realized capital gains (losses) are presented in the table below for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Fixed maturity securities, market value:

 

 

 

 

 

 

 

 

Allowances for credit losses

$

(1,566)

 

$

-

 

$

-

Other-than-temporary impairments

 

-

 

 

(19,643)

 

 

(6,164)

Gains (losses) from sales

 

(32,614)

 

 

7,571

 

 

933

Fixed maturity securities, fair value:

 

 

 

 

 

 

 

 

Gains (losses) from sales

 

(2,863)

 

 

355

 

 

(1,799)

Gains (losses) from fair value adjustments

 

1,944

 

 

1,808

 

 

1,506

Equity securities, fair value:

 

 

 

 

 

 

 

 

Gains (losses) from sales

 

(7,931)

 

 

4,144

 

 

(32,092)

Gains (losses) from fair value adjustments

 

276,093

 

 

153,728

 

 

(59,409)

Other invested assets

 

1,705

 

 

6,003

 

 

1,815

Other invested assets, fair value:

 

 

 

 

 

 

 

 

Gains (losses) from fair value adjustments

 

(186,102)

 

 

265,245

 

 

(90,136)

Short-term investment gains (losses)

 

1,138

 

 

156

 

 

(10)

Total net realized capital gains (losses)

$

49,804

 

$

419,367

 

$

(185,356)


 

 

Roll Forward of Allowance for Credit Losses

 

 

Twelve Months Ended December 31, 2020

 

 

 

 

 

Foreign

 

Foreign

 

 

 

 

 

Corporate

 

Government

 

Corporate

 

 

 

 

 

Securities

 

Securities

 

Securities

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

-

 

$

-

 

$

-

 

$

-

Credit losses on securities where credit

 

 

 

 

 

 

 

 

 

 

 

 

losses were not previously recorded

 

 

(21,829)

 

 

(70)

 

 

(561)

 

 

(22,460)

Increases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

 

(5,909)

 

 

-

 

 

(211)

 

 

(6,120)

Decreases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

 

1,824

 

 

-

 

 

282

 

 

2,106

Reduction in allowance due to disposals

 

 

24,709

 

 

70

 

 

129

 

 

24,908

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

$

(1,205)

 

$

-

 

$

(361)

 

$

(1,566)


  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Fixed maturity securities, market value:         
Other-than-temporary impairments $(6,077) $(25,679) $(78,833)
Gains (losses) from sales  2,473   (6,981)  (36,299)
Fixed maturity securities, fair value:            
Gains (losses) from sales  -   (1,586)  25 
Gains (losses) from fair value adjustments  -   1,381   (44)
Equity securities, market value:            
Gains (losses) from sales  -   -   1 
Equity securities, fair value:            
Gains (losses) from sales  6,556   (12,561)  (8,010)
Gains (losses) from fair value adjustments  117,695   51,077   (39,119)
Other invested assets  61   18   - 
Other invested assets, fair value:            
Gains (losses) from exchange  -   -   88,354 
Gains (losses) from fair value adjustments  40,846   (6,588)  29,549 
Gains (losses) on sale of subsidiary  -   (28,032)  94,704 
Short-term investment gains (losses)  (1)  10   7 
Total net realized capital gains (losses) $161,553  $(28,941) $50,335 

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) both fair value re-measurements, allowances for credit losses per ASU 2016-13 and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above.  The Company had no other-than-temporary impaired securities where the impairment had both a credit and non-credit component.

F-20



Effective August 24, 2016, the Company sold Heartland, its crop Managing General Agent to CGB.  The Company has recognized a pre-tax loss on the sale of Heartland of $28,032 thousand.

On July 13, 2015, the Company sold Mt. McKinley, a wholly-owned subsidiary of the Company to Clearwater Insurance Company, a Delaware domiciled insurance company.  The purchase price of $20,156 thousand was based upon the statutory book value of Mt. McKinley as of the closing date. The Company recognized a pre-tax realized gain of $94,704 thousand on the sale of Mt. McKinley.

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

 

 

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Proceeds from sales of fixed maturity securities

$

631,285

 

$

2,403,786

 

$

793,119

Gross gains from sales

 

24,177

 

 

25,076

 

 

15,349

Gross losses from sales

 

(59,654)

 

 

(17,150)

 

 

(16,215)

 

 

 

 

 

 

 

 

 

Proceeds from sales of equity securities

$

375,112

 

$

283,707

 

$

1,029,920

Gross gains from sales

 

37,403

 

 

14,270

 

 

25,160

Gross losses from sales

 

(45,334)

 

 

(10,126)

 

 

(57,252)



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Proceeds from sales of fixed maturity securities $1,676,203  $710,028  $546,779 
Gross gains from sales  31,328   18,907   10,935 
Gross losses from sales  (28,855)  (27,474)  (47,209)
             
Proceeds from sales of equity securities $586,496  $695,039  $567,085 
Gross gains from sales  23,214   16,223   26,136 
Gross losses from sales  (16,658)  (28,784)  (34,146)


Securities with a carrying value amount of $1,482,707$1,617,928 thousand at December 31, 2017,2020, were on deposit with various state or governmental insurance departments in compliance with insurance laws.


F-20


4.3.  RESERVES FOR LOSSES AND LAE

Reserves for losses and LAE.

Activity in the reserve for losses and LAE is summarized for the periods indicated:

   

At December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Gross reserves beginning of period

$

10,209,519

 

$

10,167,018

 

$

9,343,028

Less reinsurance recoverables

 

(4,215,348)

 

 

(4,697,543)

 

 

(5,727,268)

Net reserves beginning of period

 

5,994,171

 

 

5,469,475

 

 

3,615,760

 

 

 

 

 

 

 

 

 

Incurred related to:

 

 

 

 

 

 

 

 

Current year

 

4,407,795

 

 

3,784,771

 

 

4,252,220

Prior years

 

200,349

 

 

44,351

 

 

558,798

Total incurred losses and LAE

 

4,608,144

 

 

3,829,122

 

 

4,811,018

 

 

 

 

 

 

 

 

 

Paid related to:

 

 

 

 

 

 

 

 

Current year 

 

1,901,971

 

 

1,885,443

 

 

1,524,635

Prior years

 

1,020,761

 

 

1,431,336

 

 

1,408,256

Total paid losses and LAE

 

2,922,731

 

 

3,316,778

 

 

2,932,891

 

 

 

 

 

 

 

 

 

Foreign exchange/translation adjustment

 

23,892

 

 

12,352

 

 

(24,412)

 

 

 

 

 

 

 

 

 

Net reserves end of period

 

7,703,476

 

 

5,994,171

 

 

5,469,475

Plus reinsurance recoverables

 

3,951,474

 

 

4,215,348

 

 

4,697,543

Gross reserves end of period

$

11,654,950

 

$

10,209,519

 

$

10,167,018

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 



  At December 31, 
(Dollars in thousands) 2017  2016  2015 
Gross reserves at January 1 $8,331,288  $7,940,720  $7,843,856 
Less reinsurance recoverables  (4,199,791)  (3,875,073)  (3,702,782)
Net reserves at January 1  4,131,497   4,065,647   4,141,074 
             
Incurred related to:            
Current year  2,157,498   1,441,962   1,326,015 
Prior years  (117,747)  (91,682)  (6,454)
Total incurred losses and LAE  2,039,751   1,350,280   1,319,561 
             
Paid related to:            
Current year  1,607,601   400,489   357,819 
Prior years  957,933   892,207   946,337 
Total paid losses and LAE  2,565,534   1,292,696   1,304,156 
             
Foreign exchange/translation adjustment  10,046   8,266   (90,832)
             
Net reserves at December 31  3,615,760   4,131,497   4,065,647 
Plus reinsurance recoverables  5,727,268   4,199,791   3,875,073 
Gross reserves at December 31 $9,343,028  $8,331,288  $7,940,720 

Current year incurred losses were $2,157,498$4,407,795 thousand, $3,784,771 thousand and $4,252,220 thousand at December 31, 2017 compared to $1,441,962 thousand for 2016.2020, 2019 and 2018, respectively.  The increase in current year incurred losses in 2020 compared to 2019 was primarily due to $956,852$154,812 thousand of catastropheincurred losses incurred in the year ended December 31, 2017, mainly related to Hurricane Irma, Hurricane Maria, Hurricane Harvey and the California wildfires.  The $1,527,477 thousand increase in reinsurance recoverables from December 31, 2016 is primarily due to recoverables from these catastrophe lossesCOVID-19 as well as a loss portfolio transfer agreement with Everest Reinsurance (Bermuda), Ltd.  effective December 31, 2017. The loss portfolio transfer agreement also impacted current year paid losses by $1,000,000 thousand.


the impact of the increase in premiums earned.

Incurred prior years'years’ reserves decreasedincreased by $117,747$200,349 thousand, $91,682$44,351 thousand and 6,454$558,798 thousand for the years ended December 31, 2017, 2016in 2020, 2019 and 2015,2018 respectively.  The decreaseincrease for 2017 was attributable2020 primarily related to favorable developmenthigher ultimate loss estimates for long-tail casualty business in the reinsurance segments of $84,809 thousand relatedsegment for accident years 2015 to 2018, notably general liability, professional lines, and auto liability. The reserve charge also includes actions on non-CAT

F-21


property lines, primarily for the 2017 to property2019 accident years and short-tail business in the U.S., as well as favorabledriven by a few large losses to aggregate programs. 

The increase for 2019 was mainly due to adverse development on prior yearyears catastrophe losses, partially offset by $25,194losses.

The increase for 2018 was mainly due to $553,036 thousand of adverse development on A&E reserves. The insurance segment also experienced favorable development on prior year reserves of $32,938 thousand mainly on its workers compensation business, which is largely written in California.


The decrease for 2016 was attributableyears catastrophe losses, primarily related to favorable development in the reinsurance segments of $187,909 thousand related primarily to propertyHurricanes Harvey, Irma and short-tail business in the U.S., property business in Canada, Latin America, Middle East and Africa,Maria, as well as favorable developmentthe 2017 California wildfires.  The increase in loss estimates for Hurricanes Harvey, Irma and Maria was mostly driven by re-opened claims, loss inflation from higher than expected loss adjustment expenses and in particular, their impact on prior year catastrophe losses, partially offset by $45,668 thousand of adverse development on A&E reserves. Part of the favorable development in the reinsurance segment related to the 2015 loss from the explosion at the Chinese port of Tianjin. In 2015, this loss was originally estimated to be $21,566 thousands. At December 31, 2016, this loss was projected to be $6,261 thousands resulting in $15,305 thousands of favorable development in 2016. The net favorable development in the reinsurance segments was partially offset by $96,227 thousand of unfavorable development in the insurance segment primarily related to run-off construction liability and umbrella program business.

The decrease for 2015 was attributable to $86,540 thousand of favorable development in the reinsurance segments related to treaty casualty, treaty property and catastrophe reserves, partially offset by unfavorable development of $80,086 thousand in the insurance segment primarily related to construction liability and umbrella business.
F-21aggregate covers.

The following is information about incurred and paid claims development as of December 31, 2017,2020, net of reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR) plus expected development on reported claims included within the net incurred claims amounts.  Each of the Company'sCompany’s financial reporting segments has been disaggregated into casualty and property business.  The casualty and property segregation results in groups that have homogeneous loss development characteristics and are large enough to represent credible trends.  Generally, casualty claims take longer to be reported and settled, resulting in longer payout patterns and increased volatility.  Property claims on the other hand, tend to be reported and settled quicker and therefore tend to exhibit less volatility.  The property business is more exposed to catastrophe losses, which can result in year over year fluctuations in incurred claims depending on the frequency and severity of catastrophes claims in any one accident year.


The information about incurred and paid claims development for the years ended December 31, 2012 to December 31, 20162019 is presented as supplementary information.


These tables present sixnine years of incurred and paid claims development as it is impracticable to retrospectively create the tables for ten years.  For the reinsurance groups, for the years prior to 2012, the total of IBNR plus expected development on reported claims was not prepared on an accident year basis.  The Company calculated these IBNR amounts in the aggregate for each business unit in total as of prior year end points in time.  While business written in the United States would have been allocated to accident year for regulatory reporting purposes, business written outside of the United States would not have been similarly allocated.  Attempting to allocate the non-U.S. business IBNR reserves to accident year currently for older year end valuations would require making assumptions and estimates which may not be in line with assumptions that would have been made at the time.  A similar situation applies to insurance where the accumulation of the business lines reported in the regulatory filings are not consistent with the breakout of the tables presented below.  As a result of not being able to present the information prior to 2012, prospectively an additional year will be added to the tables each reporting year until a ten year table is presented.


The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impracticable to provide the information for the remaining groups.  The reinsurance groups each include pro rata contracts for which ceding companies provide only summary information via a bordereau.  This summary information does not include the number of reported claims underlying the paid and reported losses.  Therefore, it is not possible to provide this information.  The Insurance Property group includes Accident & Health insurance business.  This business is written via a master contract and individual claim counts are not provided.  This business represents a significant enough portion of the business in the Insurance Property group so that including the number of reported claims for the remaining business would distort any analytics performed on the group.


The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of business.  For example, a claim event with three claimants in the same line of business is a single claim.  However, a claim event with a single claimant that spans two lines of business contributes two claims.  Cessions under affiliated quota share agreements reduce net losses but do not impact claim counts.


F-22

The following tables present the incurred loss and ALAE and the paid loss and ALAE, net of reinsurance for casualty and property, as well as the average annual percentage payout of incurred claims by age, net of reinsurance for each of our disclosed lines of business.

F-22



U.S.

Reinsurance – Casualty Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IBNR Liabilities

 

 

 

 

 

Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance

 

Plus Expected

 

 

 

 

 

 Years Ended December 31,

 

Development

 

Cumulative

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

on Reported

 

Number of

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Claims

 

Reported Claims

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

374,581

 

$

268,305

 

$

175,657

 

$

183,055

 

$

189,967

 

$

192,489

 

$

192,489

 

$

192,489

 

$

192,489

 

5,251

 

N/A

2013

 

 

 

 

 

178,120

 

 

224,394

 

 

222,607

 

 

229,607

 

 

219,107

 

 

219,107

 

 

219,107

 

 

219,107

 

9,966

 

N/A

2014

 

 

 

 

 

 

 

 

255,906

 

 

235,921

 

 

258,526

 

 

230,089

 

 

230,089

 

 

230,089

 

 

230,089

 

14,699

 

N/A

2015

 

 

 

 

 

 

 

 

 

 

 

209,024

 

 

250,053

 

 

238,770

 

 

238,770

 

 

238,770

 

 

238,770

 

22,961

 

N/A

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242,764

 

 

240,268

 

 

240,268

 

 

240,268

 

 

240,268

 

53,538

 

N/A

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

198,615

 

 

204,376

 

 

204,376

 

 

204,376

 

52,439

 

N/A

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

776,194

 

 

760,762

 

 

807,055

 

256,591

 

N/A

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

981,818

 

 

1,029,966

 

577,799

 

N/A

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,031,905

 

701,538

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4,194,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


 

 

 

Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

 

 

 

Years Ended December 31,

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

13,409

 

$

30,203

 

$

60,838

 

$

95,914

 

$

121,840

 

$

126,832

 

$

153,361

 

$

155,900

 

$

160,352

2013

 

 

 

 

 

12,781

 

 

29,008

 

 

64,796

 

 

98,583

 

 

127,230

 

 

159,352

 

 

180,489

 

 

185,773

2014

 

 

 

 

 

 

 

 

15,040

 

 

35,248

 

 

76,829

 

 

107,438

 

 

144,211

 

 

176,451

 

 

185,767

2015

 

 

 

 

 

 

 

 

 

 

 

15,673

 

 

39,048

 

 

85,397

 

 

147,974

 

 

171,247

 

 

189,227

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,534

 

 

52,958

 

 

89,871

 

 

147,881

 

 

163,012

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,552

 

 

83,783

 

 

97,788

 

 

133,265

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121,180

 

 

201,861

 

 

301,050

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

155,949

 

 

251,999

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

136,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,707,054

All outstanding liabilities prior to 2012, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

434,553

Liabilities for claims and claim adjustment expenses, net of reinsurance

 

 

 

 

 

 

 

 

 

 

$

2,921,525

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 


 

 

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)

Years

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

Casualty

 

12.2

%

 

11.0

%

 

14.3

%

 

19.3

%

 

11.6

%

 

9.9

%

 

8.9

%

 

1.9

%

 

2.3

%

                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $249,691  $211,786  $140,589  $140,493  $147,015  $146,847   26,083   N/A 
2013      117,346   184,186   181,955   187,213   179,452   50,471   N/A 
2014          197,684   190,020   194,290   186,191   72,929   N/A 
2015              155,977   178,512   173,668   90,945   N/A 
2016                  171,585   173,645   119,179   N/A 
2017                      149,929   27,637   N/A 
                      $1,009,732         
                                 
(Some amounts may not reconcile due to rounding.)                             


F-23

  Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
  Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $2,547  $11,856  $25,239  $55,234  $77,028  $92,652 
2013      4,798   15,952   43,754   74,503   94,790 
2014          7,213   22,023   48,193   75,107 
2015              7,957   21,967   46,849 
2016                  7,454   25,128 
2017                      102,715 
                      $437,242 
All outstanding liabilities prior to 2012, net of reinsurance               763,940 
Liabilities for claims and claim adjustment expenses, net of reinsurance          $1,336,431 
                         
(Some amounts may not reconcile due to rounding.)                     

  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Casualty 13.1% 7.8% 13.4% 17.1% 12.9% 10.6%

F-23


U.S. Reinsurance – Property Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IBNR Liabilities

 

 

 

 

 

Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance

 

 

 

 

Plus Expected

 

 

 

 

 

 Years Ended December 31,

 

 

 

 

Development

 

Cumulative

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

on Reported

 

Number of

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Claims

 

Reported Claims

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

694,850

 

$

603,498

 

$

549,946

 

$

565,581

 

$

555,562

 

$

557,723

 

$

543,215

 

$

540,256

 

$

538,697

 

1,822

 

N/A

2013

 

 

 

 

 

409,477

 

 

309,139

 

 

267,409

 

 

228,629

 

 

228,071

 

 

227,969

 

 

227,969

 

 

227,969

 

853

 

N/A

2014

 

 

 

 

 

 

 

 

603,513

 

 

528,498

 

 

407,734

 

 

378,739

 

 

379,860

 

 

379,860

 

 

379,860

 

908

 

N/A

2015

 

 

 

 

 

 

 

 

 

 

 

561,942

 

 

373,099

 

 

347,758

 

 

347,758

 

 

347,758

 

 

347,758

 

2,305

 

N/A

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

639,055

 

 

665,589

 

 

665,904

 

 

662,060

 

 

660,691

 

6,623

 

N/A

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,291,894

 

 

1,876,143

 

 

2,044,656

 

 

2,138,415

 

12,396

 

N/A

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,261,663

 

 

2,150,440

 

 

2,140,579

 

57,122

 

N/A

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,784,412

 

 

1,790,026

 

340,939

 

N/A

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,903,989

 

927,203

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

10,127,985

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


 

 

 

Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

 

 

 

Years Ended December 31,

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

157,927

 

$

303,383

 

$

380,761

 

$

447,169

 

$

465,594

 

$

495,246

 

$

504,145

 

$

504,486

 

$

506,738

2013

 

 

 

 

 

139,086

 

 

169,750

 

 

183,757

 

 

199,224

 

 

208,135

 

 

214,946

 

 

217,457

 

 

222,290

2014

 

 

 

 

 

 

 

 

159,408

 

 

250,751

 

 

308,906

 

 

339,654

 

 

353,890

 

 

356,600

 

 

367,141

2015

 

 

 

 

 

 

 

 

 

 

 

161,844

 

 

241,406

 

 

296,128

 

 

313,689

 

 

318,938

 

 

332,022

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

238,620

 

 

502,419

 

 

603,988

 

 

627,130

 

 

649,604

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

791,142

 

 

1,577,892

 

 

1,992,968

 

 

2,122,476

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

501,315

 

 

1,402,713

 

 

1,731,440

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

701,324

 

 

1,084,988

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

562,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

7,578,843

All outstanding liabilities prior to 2012, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,682

Liabilities for claims and claim adjustment expenses, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,569,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 


 

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)

Years

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

Property

33.7

%

 

32.6

%

 

16.3

%

 

6.6

%

 

3.2

%

 

3.5

%

 

1.9

%

 

0.7

%

 

0.4

%

                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $582,480  $470,886  $376,541  $373,760  $364,758  $361,957   283   N/A 
2013      282,446   304,558   280,289   249,573   243,423   467   N/A 
2014          327,498   298,331   239,518   222,827   473   N/A 
2015              325,255   260,247   236,234   9,036   N/A 
2016                  424,195   372,282   54,584   N/A 
2017                      845,311   24,650   N/A 
                      $2,282,034         
                                 
(Some amounts may not reconcile due to rounding.)                             

     Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
     Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $130,188  $229,715  $287,323  $312,109  $324,606  $338,646 
2013      120,406   166,467   200,350   214,930   223,670 
2014          110,418   164,817   191,034   204,407 
2015              113,685   167,662   199,094 
2016                  157,228   254,315 
2017                      638,087 
                      $1,858,218 
All outstanding liabilities prior to 2012, net of reinsurance               50,232 
Liabilities for claims and claim adjustment expenses, net of reinsurance              $474,048 
                         
(Some amounts may not reconcile due to rounding.)                     

  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Property 55.7% 24.4% 14.0% 6.4% 3.5% 3.9%


F-24


International – Casualty Business


                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $126,700  $59,517  $38,593  $46,518  $48,276  $46,973   4,551   N/A 
2013      62,527   43,751   45,647   57,830   52,270   10,765   N/A 
2014          60,855   50,808   70,504   60,531   17,867   N/A 
2015              55,651   75,411   65,128   27,749   N/A 
2016                  72,919   71,357   42,937   N/A 
2017                      58,592   38,157   N/A 
                      $354,851         
                                 
(Some amounts may not reconcile due to rounding.)                             

  Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
  Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $7,412  $11,327  $17,537  $21,147  $24,530  $29,603 
2013      6,153   14,608   18,949   22,878   25,506 
2014          8,712   15,831   22,258   26,193 
2015              8,920   19,123   26,281 
2016                  11,159   19,917 
2017                      14,610 
                      $142,110 
All outstanding liabilities prior to 2012, net of reinsurance               81,593 
Liabilities for claims and claim adjustment expenses, net of reinsurance              $294,333 
                         
(Some amounts may not reconcile due to rounding.)                     

  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Casualty 16.1% 13.0% 10.7% 7.2% 6.1% 10.8%


F-25

International – Property Business


                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $274,427  $261,133  $213,598  $217,808  $212,116  $216,055   224   N/A 
2013      182,787   181,737   175,106   163,018   166,604   614   N/A 
2014          321,628   267,210   208,494   185,453   2,339   N/A 
2015              266,445   173,301   179,097   976   N/A 
2016                  200,573   223,771   48,657   N/A 
2017                      520,595   72,861   N/A 
                      $1,491,576         
                                 
(Some amounts may not reconcile due to rounding.)                             

  Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
  Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $86,473  $148,124  $182,018  $193,189  $197,721  $203,445 
2013      50,452   105,132   127,050   142,290   149,041 
2014          61,652   112,207   143,786   159,213 
2015              59,487   110,526   143,624 
2016                  59,620   117,693 
2017                      330,759 
                      $1,103,774 
All outstanding liabilities prior to 2012, net of reinsurance               55,445 
Liabilities for claims and claim adjustment expenses, net of reinsurance              $443,247 
                         
(Some amounts may not reconcile due to rounding.)         ��           



  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Property 43.5% 28.4% 16.1% 7.4% 2.9% 2.6%


F-26

Insurance – Casualty Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IBNR Liabilities

 

 

 

 

 

Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance

 

 

 

 

Plus Expected

 

 

 

 

 

 Years Ended December 31,

 

 

 

 

Development

 

Cumulative

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

on Reported

 

Number of

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Claims

 

Reported Claims

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

212,023

 

$

175,030

 

$

185,371

 

$

184,659

 

$

188,273

 

$

185,810

 

$

185,809

 

$

185,861

 

$

185,862

 

986

 

 15,780  

2013

 

 

 

 

 

256,187

 

 

228,227

 

 

230,748

 

 

224,724

 

 

194,739

 

 

194,748

 

 

194,914

 

 

194,914

 

1,283

 

 21,385  

2014

 

 

 

 

 

 

 

 

238,086

 

 

239,091

 

 

240,985

 

 

255,041

 

 

255,166

 

 

255,125

 

 

255,125

 

1,550

 

 25,221  

2015

 

 

 

 

 

 

 

 

 

 

 

259,243

 

 

259,563

 

 

278,217

 

 

278,217

 

 

278,388

 

 

278,388

 

1,028

 

 26,996  

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

352,060

 

 

276,960

 

 

279,684

 

 

281,780

 

 

281,771

 

1,944

 

 31,673  

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

304,361

 

 

238,006

 

 

238,187

 

 

237,491

 

2,293

 

 35,020  

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

645,825

 

 

645,109

 

 

665,436

 

219,887

 

 34,884  

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

768,845

 

 

757,958

 

355,225

 

 37,597  

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

819,368

 

562,143

 

 26,068  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,676,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

F-24



 

 

 

Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

 

 

 

Years Ended December 31,

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

15,688

 

$

55,230

 

$

84,408

 

$

116,622

 

$

133,279

 

$

147,011

 

$

154,412

 

$

168,867

 

$

170,944

2013

 

 

 

 

 

17,120

 

 

68,588

 

 

101,649

 

 

129,756

 

 

149,775

 

 

167,584

 

 

182,789

 

 

189,215

2014

 

 

 

 

 

 

 

 

20,377

 

 

71,918

 

 

114,199

 

 

143,893

 

 

229,001

 

 

229,608

 

 

250,490

2015

 

 

 

 

 

 

 

 

 

 

 

19,962

 

 

67,996

 

 

116,982

 

 

199,532

 

 

244,477

 

 

260,269

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,810

 

 

101,234

 

 

275,801

 

 

299,145

 

 

308,358

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,808

 

 

151,283

 

 

157,000

 

 

216,893

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63,229

 

 

189,299

 

 

271,737

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,612

 

 

216,483

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,963,148

All outstanding liabilities prior to 2012, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,931

Liabilities for claims and claim adjustment expenses, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,734,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 


 

 

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)

Years

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

Casualty

 

7.4

%

 

12.5

%

 

19.8

%

 

17.8

%

 

14.7

%

 

5.2

%

 

6.8

%

 

5.5

%

 

1.1

%

                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $212,122  $175,129  $185,458  $184,711  $188,326  $179,442   3,471   15,956 
2013      256,284   228,328   230,837   224,793   182,930   6,722   20,755 
2014          238,231   239,245   241,140   247,782   60,434   25,009 
2015              259,451   259,843   263,492   100,270   26,472 
2016                  355,423   343,273   211,847   30,384 
2017                      268,321   (67,464)  26,419 
                      $1,485,239         
                                 
(Some amounts may not reconcile due to rounding.)                             

  Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
  Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $15,692  $55,242  $84,429  $116,651  $133,314  $147,053 
2013      17,124   68,607   101,675   129,790   149,819 
2014          20,382   71,940   114,236   143,953 
2015              19,974   68,033   117,096 
2016                  24,815   101,292 
2017                      286,370 
                      $945,583 
All outstanding liabilities prior to 2012, net of reinsurance               330,473 
Liabilities for claims and claim adjustment expenses, net of reinsurance              $870,129 
                         
(Some amounts may not reconcile due to rounding.)                     



  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Casualty 25.9% 22.0% 17.6% 14.8% 10.1% 7.7%


F-27


Insurance – Property Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IBNR Liabilities

 

 

 

 

 

Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance

 

 

 

 

Plus Expected

 

 

 

 

 

 Years Ended December 31,

 

 

 

 

Development

 

Cumulative

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

on Reported

 

Number of

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Claims

 

Reported Claims

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

58,483

 

$

47,228

 

$

43,423

 

$

44,867

 

$

44,297

 

$

44,105

 

$

44,150

 

$

44,098

 

$

44,097

 

-

 

N/A

2013

 

 

 

 

 

64,493

 

 

56,351

 

 

52,176

 

 

52,866

 

 

52,677

 

 

52,668

 

 

52,502

 

 

52,443

 

2

 

N/A

2014

 

 

 

 

 

 

 

 

67,660

 

 

70,077

 

 

67,447

 

 

66,645

 

 

66,520

 

 

66,561

 

 

66,561

 

3

 

N/A

2015

 

 

 

 

 

 

 

 

 

 

 

81,137

 

 

75,673

 

 

75,830

 

 

75,787

 

 

75,616

 

 

75,666

 

8

 

N/A

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

143,279

 

 

169,791

 

 

165,078

 

 

164,045

 

 

164,144

 

67

 

N/A

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,638

 

 

293,577

 

 

297,588

 

 

299,199

 

229

 

N/A

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

376,805

 

 

373,389

 

 

377,079

 

339

 

N/A

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

337,993

 

 

349,750

 

514

 

N/A

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

546,870

 

232,975

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,975,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


 

 

 

Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

 

 

 

Years Ended December 31,

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

Accident Year

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

$

26,868

 

$

44,408

 

$

42,865

 

$

44,517

 

$

44,230

 

$

44,040

 

$

44,049

 

$

44,075

 

$

44,098

2013

 

 

 

 

 

35,201

 

 

54,220

 

 

52,588

 

 

52,849

 

 

52,474

 

 

52,459

 

 

52,467

 

 

52,441

2014

 

 

 

 

 

 

 

 

40,277

 

 

66,436

 

 

66,601

 

 

65,968

 

 

66,449

 

 

66,482

 

 

66,558

2015

 

 

 

 

 

 

 

 

 

 

 

45,422

 

 

70,398

 

 

75,168

 

 

75,192

 

 

75,049

 

 

75,240

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,264

 

 

153,120

 

 

169,134

 

 

164,445

 

 

163,274

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

161,592

 

 

293,417

 

 

282,607

 

 

296,805

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

236,430

 

 

342,828

 

 

368,756

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

218,339

 

 

337,091

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

263,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,667,642

All outstanding liabilities prior to 2012, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33

Liabilities for claims and claim adjustment expenses, net of reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

308,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


 

 

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)

Years

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

Property

 

55.7

%

 

36.8

%

 

3.0

%

 

1.5

%

 

1.6

%

 

1.3

%

 

0.1

%

 

-

%

 

0.1

%

                    At December 31, 2017 
                    Total of    
                    IBNR Liabilites    
  Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance  Plus Expected    
  Years Ended December 31,  Development  Cumulative 
  2012  2013  2014  2015  2016  2017  on Reported  Number of 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)     Claims  Reported Claims 
(Dollars in thousands)                        
2012 $58,377  $46,909  $43,553  $44,881  $44,312  $44,109   6   N/A 
2013      63,888   57,016   52,211   52,909   52,593   80   N/A 
2014          68,190   69,901   67,484   66,600   489   N/A 
2015              80,597   76,065   75,661   (685)  N/A 
2016                  151,956   157,316   (870)  N/A 
2017                      243,586   (8,456)  N/A 
                      $639,866         
                                 
(Some amounts may not reconcile due to rounding.)                             


F-25

  Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance 
  Years Ended December 31, 
  2012  2013  2014  2015  2016  2017 
Accident Year
 (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)    
(Dollars in thousands)                  
2012 $26,872  $44,422  $42,880  $44,531  $44,246  $44,055 
2013      35,211   54,260   52,632   52,892   52,516 
2014          40,292   66,466   66,633   66,003 
2015              45,462   70,460   75,245 
2016                  72,264   153,245 
2017                      185,862 
                      $576,927 
All outstanding liabilities prior to 2012, net of reinsurance               1,258 
Liabilities for claims and claim adjustment expenses, net of reinsurance              $64,198 
                         
(Some amounts may not reconcile due to rounding.)                     



  Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Years 1 2 3 4 5 6
Property 63.4% 42.6% 0.7% 0.8% -0.7% -0.4%



F-28


Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses

The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated statement of financial position is as follows.

 

At December 31,

 

2020

(Dollars in thousands)

 

 

Net outstanding liabilities

 

 

Reinsurance Casualty

$

2,921,525

Reinsurance Property

 

2,569,824

Insurance Casualty

 

1,734,095

Insurance Property

 

308,201

Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance

 

7,533,645

 

 

 

Reinsurance recoverable on unpaid claims

 

 

Reinsurance Casualty

 

1,163,264

Reinsurance Property

 

1,097,995

Insurance Casualty

 

1,505,962

Insurance Property

 

184,253

Total reinsurance recoverable on unpaid claims

 

3,951,474

 

 

 

Unallocated claims adjustment expenses

 

142,289

Other

 

27,542

 

 

169,831

 

 

 

Total gross liability for unpaid claims and claim adjustment expense

$

11,654,950

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 



  At December 31,
  2017
(Dollars in thousands)  
Net outstanding liabilities  
U.S. Reinsurance Casualty $1,336,431
U.S. Reinsurance Property  474,048
International Casualty  294,333
International Property  443,247
Insurance Casualty  870,129
Insurance Property  64,198
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance  3,482,386
    
Reinsurance recoverable on unpaid claims   
U.S. Reinsurance Casualty  1,069,721
U.S. Reinsurance Property  1,243,787
International Casualty  557,581
International Property  829,828
Insurance Casualty  1,705,312
Insurance Property  321,038
Total reinsurance recoverable on unpaid claims  5,727,267
    
Unallocated claims adjustment expenses  110,950
Other  22,425
   133,375
    
Total gross liability for unpaid claims and claim adjustment expense $9,343,028
    
(Some amounts may not reconcile due to rounding.)   


Reserving Methodology


The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense (LAE) for reported and unreported claims for our insurance and reinsurance businesses.  Because reserves are based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known, and adjust reserves whenever an adjustment appears warranted.  The Company considers many factors when setting reserves including:  (1) exposure base and projected ultimate premium; (2) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss payments, and product mix; (4) current legal interpretations of coverage and liability; and (5) economic conditions.  Insurance and reinsurance loss and LAE reserves represent the Company'sCompany’s best estimate of its ultimate liability.  Actual loss and LAE ultimately paid may deviate, perhaps substantially, from such reserves.  Net income (gain or loss) will be impacted in a period in which the change in estimated ultimate loss and LAE is recorded.


The detailed data required to evaluate ultimate losses for the Company'sCompany’s insurance business is accumulated from its underwriting and claim systems.  Reserving for reinsurance requires evaluation of loss information received from ceding companies.  Ceding companies report losses in many forms depending on the type of contract and the agreed or contractual reporting requirements.  Generally, pro rata contracts require the submission of a monthly/quarterly account, which includes premium and loss activity for the period with

F-26


F-29


corresponding reserves as established by the ceding company.  This information is recorded into the Company'sCompany’s records.  For certain pro rata contracts, the Company may require a detailed loss report for claims that exceed a certain dollar threshold or relate to a particular type of loss.  Excess of loss and facultative contracts generally require individual loss reporting with precautionary notices provided when a loss reaches a significant percentage of the attachment point of the contract or when certain causes of loss or types of injury occur.  Experienced claims staff handles individual loss reports and supporting claim information.  Based on evaluation of a claim, the Company may establish additional case reserves in addition to the case reserves reported by the ceding company.  To ensure ceding companies are submitting required and accurate data, Everest'sEverest’s Underwriting, Claim, Reinsurance Accounting, and Internal Audit Departments perform various reviews of ceding companies, particularly larger ceding companies, including on-site audits.

The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial analysis.  The Company assigns business to exposure groupings so that the underlying exposures have reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate losses.  The Company periodically reviews its exposure groupings and may change groupings over time as business changes.  The Company currently uses approximately 150200 exposure groupings to develop reserve estimates.  One of the key selection characteristics for the exposure groupings is the historical duration of the claims settlement process.  Business in which claims are reported and settled relatively quickly are commonly referred to as short tail lines, principally property lines.  On the other hand, casualty claims tend to take longer to be reported and settled and casualty lines are generally referred to as long tail lines. Estimates of ultimate losses for shorter tail lines, with the exception of loss estimates for large catastrophic events, generally exhibit less volatility than those for the longer tail lines.


The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder methods, and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate ultimate loss and LAE for each exposure group.


Expected Loss Ratio Method:  The expected loss ratio method uses earned premium times an expected loss ratio to calculate ultimate losses for a given underwriting or accident year.  This method relies entirely on expectation to project ultimate losses with no consideration given to actual losses.  As such, it may be appropriate for an immature underwriting or accident year where few, if any, losses have been reported or paid, but less appropriate for a more mature year.


Chain Ladder Method:  Chain ladder methods use a standard loss development triangle to project ultimate losses.  Age-to-age development factors are selected for each development period and combined to calculate age-to-ultimate development factors which are then applied to paid or reported losses to project ultimate losses.  This method relies entirely on actual paid or reported losses to project ultimate losses.  No other factors such as changes in pricing or other expectations are taken into account.  It is most appropriate for groups with homogeneous, stable experience where past development patterns are expected to continue in the future.  It is least appropriate for groups which have changed significantly over time or which are more volatile.


Bornhuetter-Ferguson Method:  The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the chain ladder method.  Ultimate losses are projected based partly on actual paid or reported losses and partly on expectation.  Incurred but not reported (IBNR) reserves are calculated using earned premium, an a priori loss ratio, and selected age-to-age development factors and added to actual reported (paid) losses to determine ultimate losses.  It is more responsive to actual reported or paid development than the expected loss ratio method but less responsive than the chain ladder method.  The reliability of the method depends on the accuracy of the selected a priori loss ratio.


Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting of experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate losses for short tail lines at an earlier stage than for long tail lines.  As a result, the Company utilizes, as well, exposure-based methods to estimate its ultimate losses for longer tail lines, especially for immature underwriting or accident years.  For both short and long tail lines, the Company supplements these general approaches with analytically based judgments.

F-27


F-30


Key actuarial assumptions contain no explicit provisions for reserve uncertainty nor does the Company supplement the actuarially determined reserves for uncertainty.


Carried reserves at each reporting date are the Company'sCompany’s best estimate of ultimate unpaid losses and LAE at that date.  The Company completes detailed reserve studies for each exposure group annually for both reinsurance and insurance operations.  The completed annual reserve studies are "rolled-forward"“rolled-forward” for each accounting period until the subsequent reserve study is completed.  Analyzing the roll-forward process involves comparing actual reported losses to expected losses based on the most recent reserve study.  The Company analyzes significant variances between actual and expected losses and post adjustments to its reserves as warranted.


Certain reserves, including losses from widespread catastrophic events and COVID-19 related losses, cannot be estimated using traditional actuarial methods. These types of events are reserved for separately using a variety of statistical and actuarial techniques. We estimate losses for these types of events based on information derived from catastrophe models, quantitative and qualitative exposure analyses, reports and communications from ceding companies and development patterns for historically similar events, where available.

The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos.  Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the land, air or water.  Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos.


The Company'sCompany’s reserves include an estimate of the Company'sCompany’s ultimate liability for A&E claims.  The Company'sCompany’s A&E liabilities emanate from direct insurance business and Everest Re'sRe’s assumed reinsurance business.  All of the contracts of insurance and reinsurance, under which the Company has received claims during the past three years, expired more than 20 years ago.  There are significant uncertainties surrounding the Company'sCompany’s reserves for its A&E losses.


A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy.  The following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance basis for the periods indicated:

 

At December 31,

(Dollars in thousands)

 

2020

 

 

2019

 

 

2018

Gross basis:

 

 

 

 

 

 

 

 

Beginning of period reserves

$

257,921

 

$

347,495

 

$

448,993

Incurred losses

 

1,540

 

 

2,071

 

 

(2,473)

Paid losses

 

(40,120)

 

 

(91,645)

 

 

(99,026)

End of period reserves

$

219,341

 

$

257,921

 

$

347,495

 

 

 

 

 

 

 

 

 

Net basis:

 

 

 

 

 

 

 

 

Beginning of period reserves

$

196,574

 

$

223,548

 

$

269,153

Incurred losses

 

(4,753)

 

 

-

 

 

-

Paid losses 

 

(24,382)

 

 

(26,974)

 

 

(45,605)

End of period reserves

$

167,439

 

$

196,574

 

$

223,548



  At December 31, 
(Dollars in thousands) 2017  2016  2015 
Gross basis:         
Beginning of period reserves $441,111  $433,117  $476,205 
Incurred losses  90,009   73,336   40,000 
Paid losses  (82,126)  (65,342)  (83,088)
End of period reserves $448,993  $441,111  $433,117 
             
Net basis:            
Beginning of period reserves $274,409  $276,540  $304,286 
Incurred losses  25,194   45,668   30,879 
Paid losses  (30,451)  (47,798)  (58,625)
End of period reserves $269,153  $274,409  $276,540 
             
(Some amounts may not reconcile due to rounding.)            
On July 13, 2015, the Company closed its agreement to sell all of the outstanding shares of capital stock of Mt. McKinley, a Delaware domiciled insurance company and wholly-owned subsidiary of the Company to Clearwater Insurance Company, a Delaware domiciled insurance company.  The purchase price of $20,156 thousand was based upon the statutory book value of Mt. McKinley as of the closing date. The Company recognized a pre-tax realized gain of $94,704 thousand on the sale of Mt. McKinley.

Reinsurance Receivables.Receivables.  Reinsurance receivables for both paid and unpaid losses totaled $6,120,687$4,207,305 thousand and $4,573,787$4,444,089 thousand at December 31, 20172020 and 2016,2019, respectively.  At December 31, 2017, $4,912,8002020, $2,687,497 thousand, or 80.3%63.9%, was receivable from Everest Reinsurance (Bermuda), Ltd. ("(“Bermuda Re"Re”), an affiliated entity, and is fully collateralized by a trust agreement and $310,415$349,447 thousand, or 5.18.3%, was

F-28


receivable from Mt. Logan Re Ltd. (Bermuda) (“Mt. Logan Re”) collateralized segregated accounts.  No other retrocessionaire accounted for more than 5%5% of reinsurance receivables.

F-31


5.4.  FAIR VALUE

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


The levels in the hierarchy are defined as follows:


Level 1:

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


Level 2:

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


Level 3:

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


The Company'sCompany’s fixed maturity and equity securities are primarily managed by third party investment asset managers.  The investment asset managers managing publicly traded securities obtain prices from nationally recognized pricing services.  These services seek to utilize market data and observations in their evaluation process.  They use pricing applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing.  In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.


In limited instances where prices are not provided by pricing services or in rare instances when a manager may not agree with the pricing service, price quotes on a non-binding basis are obtained from investment brokers. 

The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers.  In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices.  In addition, the Company continually performs analytical reviews of price changes and tests the prices on a random basis to an independent pricing source.  No material variances were noted during these price validation procedures.  In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value.  Due to the unavailability of prices for sixty-five private placement securities atAt December 31, 2017, the investment manager's valuation committee2020, $1,259,576 thousand of fixed maturities, market value were fair valued the sixty-five securities at $165,173 thousand. Ausing unobservable inputs.  The majority of the fixed maturities, market value, were valued by investment managers’ valuation committees and many of these fair values determined by the valuation committee arewere substantiated by valuations from independent third parties.  DueThe Company has procedures in place to the unavailability of prices for forty-two private placement securities atevaluate these independent third party valuations.  At December 31, 2016, the investment manager's valuation committee2019, $702,331 thousand of fixed maturities, market value and $5,826 thousand of fixed maturities, fair value were fair valued the forty-two securities at $86,536 thousand.


using unobservable inputs. 

The Company internally manages a public equity portfolio which had a fair value at December 31, 20172020 and December 31, 20162019 of $245,043$784,746 thousand and $133,755$170,888 thousand, respectively, and all prices were obtained from publicly published sources.


Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as levelLevel 1 since the quoted prices are directly observable.  Equity securities traded on foreign exchanges are categorized as levelLevel 2 due to the added input of a foreign exchange conversion rate to

F-32

determine fair or market value.  The Company uses foreign currency exchange rates published by nationally recognized sources.

F-29



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


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


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


·U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;

·Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

·Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

·Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;

·Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;

·Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

·U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;

·Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

·Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

·Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;

·Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;

·Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

Other invested assets, at fair value, waswere categorized as Level 3 at December 31, 20172020 and 2016,December 31, 2019, since it represented a privately placed convertible preferred stock issued by an affiliate. The stock was received in exchange for shares of the Company'sCompany’s parent.  The 25 year redeemable, convertible preferred stock with a 1.75%1.75% coupon is valued using a pricing model. The pricing model includes observable inputs such as the U.S. Treasury yield curve rate T note constant maturity 2010 year and the swap rate on the Company'sCompany’s June 1, 2044 4.868%, 4.868% senior notes, with adjustments to reflect the Company'sCompany’s own assumptions about the inputs that market participants would use in pricing the asset.

F-30


F-33


The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated:

 

 

 

 

Fair Value Measurement Using:

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

 

Identical

 

Observable

 

Unobservable

 

December 31,

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

2020

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, market value

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

  U.S. government agencies and corporations

$

681,989

 

$

-

 

$

681,989

 

$

-

Obligations of U.S. States and political subdivisions

 

577,046

 

 

-

 

 

577,046

 

 

-

Corporate securities

 

3,449,912

 

 

-

 

 

2,819,068

 

 

630,844

Asset-backed securities

 

2,474,170

 

 

-

 

 

1,851,137

 

 

623,033

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

550,080

 

 

-

 

 

550,080

 

 

-

Agency residential

 

965,100

 

 

-

 

 

965,100

 

 

-

Non-agency residential

 

3,164

 

 

-

 

 

3,164

 

 

-

Foreign government securities

 

742,238

 

 

-

 

 

742,238

 

 

-

Foreign corporate securities

 

1,199,866

 

 

-

 

 

1,194,167

 

 

5,699

Total fixed maturities, market value

 

10,643,565

 

 

-

 

 

9,383,989

 

 

1,259,576

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities, fair value

 

1,288,767

 

 

1,222,158

 

-

66,609

 

 

-

Other invested assets, fair value

 

1,796,479

 

 

-

 

 

-

 

 

1,796,479



     Fair Value Measurement Using: 
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
     Assets  Inputs  Inputs 
(Dollars in thousands) December 31, 2017  (Level 1)  (Level 2)  (Level 3) 
Assets:            
Fixed maturities, market value            
U.S. Treasury securities and obligations of            
U.S. government agencies and corporations $664,513  $-  $664,513  $- 
Obligations of U.S. States and political subdivisions  585,469   -   585,469   - 
Corporate securities  2,024,209   -   1,865,988   158,221 
Asset-backed securities  138,024   -   138,024   - 
Mortgage-backed securities                
Commercial  51,751   -   51,751   - 
Agency residential  113,288   -   113,288   - 
Non-agency residential  58   -   58   - 
Foreign government securities  523,620   -   523,620   - 
Foreign corporate securities  870,989   -   864,037   6,952 
Total fixed maturities, market value  4,971,921   -   4,806,748   165,173 
                 
Equity securities, fair value  822,375   800,542   21,833   - 
Other invested assets, fair value  1,807,473   -   -   1,807,473 

There were no transfers between Level 1 and Level 2 for the twelve months ended December 31, 2017.2020.

F-31



The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated:indicated.

 

 

 

 

Fair Value Measurement Using:

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

 

Identical

 

Observable

 

Unobservable

 

December 31,

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

2019

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, market value

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

  U.S. government agencies and corporations

$

777,515

 

$

-

 

$

777,515

 

$

-

Obligations of U.S. States and political subdivisions

 

535,911

 

 

-

 

 

535,911

 

 

-

Corporate securities

 

2,821,557

 

 

-

 

 

2,274,618

 

 

546,939

Asset-backed securities

 

765,957

 

 

-

 

 

612,316

 

 

153,641

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

329,049

 

 

-

 

 

329,049

 

 

-

Agency residential

 

644,687

 

 

-

 

 

644,687

 

 

-

Non-agency residential

 

1,638

 

 

-

 

 

1,638

 

 

-

Foreign government securities

 

658,007

 

 

-

 

 

658,007

 

 

-

Foreign corporate securities

 

957,758

 

 

-

 

 

956,007

 

 

1,751

Total fixed maturities, market value

 

7,492,079

 

 

-

 

 

6,789,748

 

 

702,331

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, fair value

 

5,826

 

 

-

 

 

-

 

 

5,826

Equity securities, fair value

 

764,049

 

 

719,548

 

 

44,501

 

 

-

Other invested assets, fair value

 

1,982,582

 

 

-

 

 

-

 

 

1,982,582

     Fair Value Measurement Using: 
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
     Assets  Inputs  Inputs 
(Dollars in thousands) December 31, 2016  (Level 1)  (Level 2)  (Level 3) 
Assets:            
Fixed maturities, market value            
U.S. Treasury securities and obligations of            
U.S. government agencies and corporations $691,080  $-  $691,080  $- 
Obligations of U.S. States and political subdivisions  729,984   -   729,984   - 
Corporate securities  2,154,203   -   2,089,006   65,197 
Asset-backed securities  137,027   -   137,027   - 
Mortgage-backed securities                
Commercial  75,493   -   75,493   - 
Agency residential  715,144   -   715,144   - 
Non-agency residential  88   -   88   - 
Foreign government securities  507,277   -   507,277   - 
Foreign corporate securities  960,200   -   957,662   2,538 
Total fixed maturities, market value  5,970,496   -   5,902,761   67,735 
                 
Equity securities, fair value  887,800   827,237   60,563   - 
Other invested assets, fair value  1,766,626   -   -   1,766,626 

F-34


In addition, $79,505$224,698 thousand and $18,801$209,578 thousand of investments within other invested assets on the consolidated balance sheets as of December 31, 20172020 and December 31, 2016,2019, respectively, are not included within the fair value hierarchy tables as the assets are valued using themeasured at NAV as a practical expedient guidance within ASU 2015-07.to determine fair value. 

F-32



The following table presentstables present the activity under Level 3, fair value measurements using significant unobservable inputs by asset type, for the periods indicated:

 

Total Fixed Maturities, Market Value

 

 December 31, 2020

 

December 31, 2019

 

Corporate

 

Asset

 

Foreign

 

 

 

Corporate

 

Asset

 

Foreign

 

 

 

(Dollars in thousands)

Securities

 

Backed Securities

 

Corporate

 

Total

 

Securities

 

Backed Securities

 

Corporate

 

Total

Beginning balance

$

546,939

 

$

153,641

 

$

1,751

 

$

702,331

 

$

376,250

 

$

-

 

$

7,744

 

$

383,994

Total gains or (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings

 

1,216

 

 

681

 

 

(125)

 

 

1,772

 

 

4,937

 

 

-

 

 

(12)

 

 

4,925

Included in other comprehensive

  income (loss)

 

(1,115)

 

 

11,678

 

 

147

 

 

10,710

 

 

(21)

 

 

3,632

 

 

(110)

 

 

3,501

Purchases, issuances and settlements

 

84,840

 

 

457,033

 

 

3,814

 

 

545,687

 

 

161,078

 

 

150,009

 

 

(5,871)

 

 

305,216

Transfers in and/or (out) of Level 3

 

(1,037)

 

 

-

 

 

113

 

 

(924)

 

 

4,695

 

 

-

 

 

-

 

 

4,695

Ending balance

$

630,843

 

$

623,033

 

$

5,700

 

$

1,259,576

 

$

546,939

 

$

153,641

 

$

1,751

 

$

702,331

The amount of total gains or losses for the

  period included in earnings (or changes in

  net assets) attributable to the change in

  unrealized gains or losses relating to

  assets still held at the reporting date

$

(539)

 

$

-

 

$

-

 

$

(539)

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Fixed Maturities, Fair Value

 

December 31, 2020

 

December 31, 2019

 

Foreign

 

 

 

Foreign

 

 

 

(Dollars in thousands)

Corporate

 

Total

 

Corporate

 

Total

Beginning balance fixed maturities at fair value

 

5,826

 

 

5,826

 

 

2,337

 

 

2,337

Total gains or (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

Included in earnings

 

(919)

 

 

(919)

 

 

2,163

 

 

2,163

Included in other comprehensive income (loss)

 

-

 

 

-

 

 

-

 

 

-

Purchases, issuances and settlements

 

(4,907)

 

 

(4,907)

 

 

1,326

 

 

1,326

Transfers in and/or (out) of Level 3

 

-

 

 

-

 

 

-

 

 

-

Ending balance

$

-

 

$

-

 

$

5,826

 

$

5,826

The amount of total gains or losses for the period

  included in earnings (or changes in net assets)

  attributable to the change in unrealized gains or

  losses relating to assets still held at the

  reporting date

$

-

 

$

-

 

$

1,796

 

$

1,796

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

 

 

  December 31, 2017  December 31, 2016 
  Corporate  Foreign     Corporate     Foreign    
(Dollars in thousands) Securities  Corporate  Total  Securities  CMBS  Corporate  Total 
Beginning balance $65,197  $2,538  $67,735  $3,933  $-  $1,593  $5,526 
Total gains or (losses) (realized/unrealized)                            
Included in earnings  1,654   356   2,010   100   -   (1,193)  (1,093)
Included in other comprehensive income (loss)  (991)  -   (991)  41   15   -   56 
Purchases, issuances and settlements  92,361   4,058   96,419   63,054   (40)  2,138   65,152 
Transfers in and/or (out) of Level 3  -   -   -   (1,931)  25   -   (1,906)
Ending balance $158,221  $6,952  $165,173  $65,197  $-  $2,538  $67,735 
                             
The amount of total gains or losses for the period included                            
in earnings (or changes in net assets) attributable to the                            
change in unrealized gains or losses relating to assets                            
still held at the reporting date $-  $-  $-  $-  $-  $-  $- 
                             
(Some amounts may not reconcile due to rounding.)                            

The net transfers to/(from) levelLevel 3, fair value measurements using significant unobservable inputs for fixed maturities, market value were $0 $(924) thousand and ($1,906)$4,695 thousand of investments primarily related to securities that were priced using single non-binding broker quotes as offor the years ended December 31, 2015.2020 and 2019, respectively. The securitiestransfers during 2020 were previously priced with investment managers and were subsequently priced usingby a recognized pricing service as of December 31, 20162020.  The transfers during 2019 were previously priced by a recognized pricing service and were classified as level 2subsequently priced using investment managers as of those dates.December 31, 2019. 

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by equity securities, for the periods indicated: 

F-33



 

December 31,

(Dollars in thousands)

2020

 

2019

Equity securities

 

 

 

 

 

Balance, beginning of period

$

-

 

$

-

Total (gains) or losses (realized/unrealized)

 

 

 

 

 

Included in earnings

 

-

 

 

-

Included in other comprehensive income (loss)

 

-

 

 

-

Purchases, issuances and settlements

 

9,877

 

 

-

Transfers in and/or (out) of Level 3

 

(9,877)

 

 

-

Balance, end of period

$

-

 

$

-

 

 

 

 

 

 

The amount of total gains or losses for the period included in earnings

 

 

 

 

 

(or changes in net assets) attributable to the change in unrealized

 

 

 

 

 

gains or losses relating to liabilities still held at the reporting date

$

-

 

$

-

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

The net transfers to/(from) Level 3, fair value measurements using significant unobservable inputs for equity securities, fair value were $(9,877) thousand for 2020 and $0 Thousand for 2019.  The transfers of ($9,877) thousand during 2020, were related to preferred stock in a private entity purchased during the second quarter of 2020 which was priced at cost originally and was subsequently priced based upon the book value of the underlying private entity  as of December 31, 2020.

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by other invested assets, for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

Other invested assets, fair value:

 

 

 

 

 

Beginning balance

$

1,982,582

 

$

1,717,336

Total gains or (losses) (realized/unrealized)

 

 

 

 

 

Included in earnings

 

(186,103)

 

 

265,246

Included in other comprehensive income (loss)

 

-

 

 

-

Purchases, issuances and settlements

 

-

 

 

-

Transfers in and/or (out) of Level 3

 

-

 

 

-

Ending balance

$

1,796,479

 

$

1,982,582

The amount of total gains or losses for the period

  included in earnings (or changes in net assets)

  attributable to the change in unrealized gains or

  losses relating to assets still held at the

  reporting date

$

-

 

$

-

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 


F-34


  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Other invested assets, fair value:      
Beginning balance $1,766,626  $1,773,214 
Total gains or (losses) (realized/unrealized)        
Included in earnings  40,846   (6,588)
Included in other comprehensive income (loss)  -   - 
Purchases, issuances and settlements  -   - 
Transfers in and/or (out) of Level 3  -   - 
Ending balance $1,807,473  $1,766,626 
         
The amount of total gains or losses for the period included in earnings        
(or changes in net assets) attributable to the change in unrealized        
gains or losses relating to assets still held at the reporting date $-  $- 
         
(Some amounts may not reconcile due to rounding.)        

F-355.  SENIOR NOTES


6.  SENIOR NOTES

The table below displays Holdings'Holdings’ outstanding senior notes.  Market value is based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.

 

 

 

 

 

 

 

December 31, 2020

 

December 31, 2019

 

 

 

 

 

 

 

Consolidated

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

Principal

 

Balance Sheet

 

Market

 

Balance Sheet

 

Market

(Dollars in thousands)

Date Issued

 

Date Due

 

Amounts

 

Amount

 

Value

 

Amount

 

Value

4.868% Senior notes

06/05/2014

 

06/01/2044

 

400,000

 

$

397,194

 

$

528,000

 

$

397,074

 

$

452,848

3.5% Senior notes

10/07/2020

 

10/15/2050

 

1,000,000

 

$

979,524

 

$

1,138,100

 

$

-

 

$

-



       December 31, 2017  December 31, 2016 
       Consolidated Balance     Consolidated Balance    
(Dollars in thousands)Date Issued Date Due Principal Amounts Sheet Amount  Market Value  Sheet Amount  Market Value 
4.868% Senior notes06/05/2014 06/01/2044  400,000 $396,834  $420,340  $396,714  $383,612 


On June 5, 2014, Holdings issued $400,000$400,000 thousand of 30 year senior notes at with an annual coupon rate of 4.868%, which will mature on June 1, 2044. Interest will be paid semi-annually on June 1 and December 1 of each year.


On October 7, 2020, Holdings issued $1,000,000 thousand of 30 year senior notes an interest coupon rate of 3.5% which will mature on October 15, 2050.  Interest will be paid semi-annually on April 15th and October 15th of each year.

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

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Interest expense incurred

$

19,472

 

$

19,472

 

$

19,472

10/15/2050 Senior Note

$

8,115

 

$

-

 

$

-



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Interest expense incurred $19,472  $19,472  $19,472 


7.

6.  LONG TERM SUBORDINATED NOTES


The table below displays Holdings'Holdings’ outstanding fixed to floating rate long term subordinated notes.  Market value is based on quoted market prices, but due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

December 31, 2019

 

 

 

Original

 

 

 

 

 

Consolidated

 

 

 

 

Consolidated

 

 

 

 

 

 

Principal

 

Maturity Date

 

 

 

Balance

 

Market

 

Balance

 

Market

(Dollars in thousands)

Date Issued

 

Amount

 

Scheduled

 

Final

 

Sheet Amount

 

Value

 

Sheet Amount

 

Value

Long term subordinated notes

04/26/2007

 

$

400,000

 

05/15/2037

 

05/01/2067

 

$

223,674

 

$

206,447

 

$

236,758

 

$

233,191

                     


      Maturity Date December 31, 2017  December 31, 2016 
    Original       Consolidated Balance     Consolidated Balance    
(Dollars in thousands)Date Issued Principal Amount  Scheduled Final Sheet Amount  Market Value  Sheet Amount  Market Value 
6.6% Long term subordinated notes04/26/2007 $400,000  05/15/2037 05/01/2067 $236,561  $233,072  $236,462  $204,636 


During the fixed rate interest period from May 3, 2007 through May 14, 2017, interest was at the annual rate of 6.6%, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2007.  During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the 3 month LIBOR plus 238.5 basis points, reset quarterly, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, subject to Holdings'Holdings’ right to defer interest on one or more occasions for up to ten consecutive years.  Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including AugustMay 15, 2017. The reset quarterly interest rate for November 16, 20172020 to February 15, 20182021 is 3.80%2.6%.


Holdings may redeem the long term subordinated notes on or after May 15, 2017, in whole or in part at 100%100% of the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant.  This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes.  Effective upon the maturity of the Company's 5.40%Company’s 5.40% senior notes on October 15, 2014, the Company's 4.868%Company’s 4.868% senior notes, due on June 1, 2044, have become the Company'sCompany’s long term indebtedness that ranks senior to the long term subordinated notes.

F-35



The Company repurchased and retired $13,183 thousand and $0 thousand of its outstanding long term subordinated notes during the years ended December, 2020 and 2019, respectively.  The Company realized a gain of $2,536 thousand and $0 thousand from the repurchase of the long term subordinated notes the years ended December, 2020 and 2019, respectively.

On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the 6.60%6.60% fixed to floating rate long term subordinated notes. Upon expiration of the tender offer, the Company had reduced its outstanding debt by $161,441 thousand.

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Interest expense incurred

$

7,645

 

$

11,587

 

$

10,926

         

F-367.  FEDERAL HOME LOAN BANK MEMBERSHIP


Interest expense incurred

Effective August 15, 2019, Everest Reinsurance Company (“Everest Re”) became a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to borrow up to 10% of its statutory admitted assets.  As of December 31, 2020, Everest Re had admitted assets of approximately $16,840,721 thousand which provides borrowing capacity of up to approximately $1,684,072 thousand.  During 2020, Everest Re borrowed $400,000 thousand under its FHLBNY capacity. The borrowings have interest payable at an interest rate of 0.35%.  As of December 31, 2020, $310,000 of these borrowings remain outstanding, with maturities in connection with these long term subordinated notes is as follows for the periods indicated:

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Interest expense incurred $11,498  $15,749  $15,749 
November and December 2021. The FHLBNY membership agreement requires that 4.5% of borrowed funds be used to acquire additional membership stock.

8.  COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS


A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re'sRe’s investments as collateral, as security for assumed losses payable to a non-affiliated ceding company.companies.  At December 31, 2017,2020, the total amount on deposit in the trust account was $678,154$886,148 thousand.


On April 24, 2014, the Company entered into two collateralized reinsurance agreements with Kilimanjaro Re Limited ("Kilimanjaro"(“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage.  These agreements are multi-year reinsurance contracts, which cover specified named storm and earthquake events.  The first agreement provides up to $250,000 thousand of reinsurance coverage from named storms in specified states of the Southeastern United States.  The second agreement provides up to $200,000 thousand of reinsurance coverage from named storms in specified states of the Southeast, Mid-Atlantic and Northeast regions of the United States and Puerto Rico as well as reinsurance coverage from earthquakes in specified states of the Southeast, Mid-Atlantic, Northeast and West regions of the United States, Puerto Rico and British Columbia.


  These reinsurance agreements expired in April 2018.

On November 18, 2014, the Company entered into a collateralized reinsurance agreement with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. This agreement is a multi-year reinsurance contract which covers specified earthquake events.  The agreement provides up to $500,000 thousand of reinsurance coverage from earthquakes in the United States, Puerto Rico and Canada.


These reinsurance agreements expired in November, 2019.

On December 1, 2015, the Company entered into two collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage.  These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first agreement provides up to $300,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.  The second agreement provides up to $325,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.


On April 13, 2017, the Company entered into six collateralized reinsurance agreements with Kilimanjaro to provide the Company with annual aggregate catastrophe reinsurance coverage.  The initial three agreements

F-36


are four year reinsurance contracts which cover named storm and earthquake events.  These agreements provide up to $225,000 thousand, $400,000 thousand and $325,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The subsequent three agreements are five year reinsurance contracts which cover named storm and earthquake events.  These agreements provide up to $50,000 thousand, $75,000 thousand and $175,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.


The $250,000 thousand and $200,000 thousand of collateralized reinsurance agreements that

On April 30, 2018, the Company entered into with Kilimanjaro on April 24, 2014 will expire in April, 2018.  As a result of the expiration of these April, 2014four collateralized reinsurance agreements the Company is currently evaluating whether to enter into additional collateralized reinsurance agreementswith Kilimanjaro to provide the Company with future catastrophe reinsurance coverage.  Any termsThese agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first two agreements are four year reinsurance contracts which provide up to $62,500 thousand and $200,000 thousand, respectively, of additionalannual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada.  The remaining two agreements are five year reinsurance contracts which provide up to $62,500 thousand and $200,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada.

On December 12, 2019, the Company entered into four collateralized reinsurance agreements will be disclosed oncewith Kilimanjaro to provide the Company with catastrophe reinsurance coverage.  These agreements have been finalized.


are multi-year reinsurance contracts which cover named storm and earthquake events.  The first two agreements are four year reinsurance contracts which provide up to $150,000 thousand and $275,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada.  The remaining two agreements are five year reinsurance contracts which provide up to $150,000 thousand and $275,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United State, Puerto Rico, the U.S. Virgin Islands and Canada.

Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events, as well as, the geographic location of the events.  The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses.  As of December 31, 2017,Currently, none of the published insured loss estimates for the 2017 catastrophe events during the applicable covered periods of the various agreements have exceeded the single event retentions

F-37

or aggregate retentions under the terms of the agreements that would result in a recovery.  In addition, the aggregation of the to date published insured loss estimates for the 2017 covered events have not exceeded the aggregated retentions for recovery.  However, if the published estimates for insured losses for the covered 2017 events increase, the aggregate losses may exceed the aggregate event retentions under the agreements, resulting in a recovery.

Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors.  On April 24, 2014, Kilimanjaro issued $450,000 thousand of notes ("(“Series 2014-1 Notes"Notes”). The $450,000 thousand of Series 2014-1 Notes were fully redeemed on April 30, 2018 and are no longer outstanding.  On November 18, 2014, Kilimanjaro issued $500,000 thousand of notes ("(“Series 2014-2 Notes"Notes”). The $500,000 thousand of Series 2014-2 Notes were fully redeemed in November 2019 and are no longer outstanding. On December 1, 2015, Kilimanjaro issued $625,000 thousand of notes ("(“Series 2015-1 Notes).  On April 13, 2017, Kilimanjaro issued $950,000 thousand of notes ("(“Series 2017-1 Notes) and $300,000 thousand of notes ("(“Series 2017-2 Notes). On April 30, 2018, Kilimanjaro issued $262,500 thousand of notes (“Series 2018-1 Notes”) and $262,500 thousand of notes (“Series 2018-2 Notes”). On December 12, 2019 Kilimanjaro issued $425,000 thousand of notes (“Series 2019-1 Notes”) and $425,000 thousand of notes (“Series 2019-2 Notes’”). The proceeds from the issuance of the Notes listed above are held in reinsurance trust throughout the duration of the applicable reinsurance agreements and invested solely in US government money market funds with a rating of at least "AAAm"“AAAm” by Standard & Poor's.


Poor’s. 

9.  OPERATING LEASE AGREEMENTS


LEASES

Effective January 1, 2019, the Company adopted ASU 2016-02 and ASU 2018-11 which outline new guidance on the accounting for leases.  The future minimum rental commitments, exclusiveCompany enters into lease agreements for real estate that is primarily used for office space in the ordinary course of cost escalation clauses, at December 31, 2017,business.  These leases are accounted for allas operating leases, whereby lease expense is recognized on a straight-line basis over the term of the Company'slease.  Most leases include an option to extend or renew the lease term.  The exercise of the renewal is at the Company’s discretion.  The

F-37


operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercise those options.  The Company, in determining the present value of lease payments utilizes either the rate implicit in the lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate with terms of the underlying lease.

Supplemental information related to operating leases with remaining non-cancelable terms in excess of one year areis as follows:

(Dollars in thousands)  
2018 $15,740
2019  16,026
2020  15,569
2021  6,718
2022  6,335
Thereafter  14,628
Net commitments $75,016
    
(Some amounts may not reconcile due to rounding.)   
All of these leases, the expiration terms of which range from 2018 to 2027, arefollows for the rentalperiods indicated:

 

Year Ended

 

December 31,

(Dollars in thousands)

2020

 

2019

Lease expense incurred:

 

 

 

 

 

Operating lease cost

$

29,822

 

$

21,471

 

At December 31,

(Dollars in thousands)

2020

 

2019

Operating lease right of use assets

$

139,835

 

$

152,978

Operating lease liabilities

 

155,144

 

 

160,387

 

Year Ended

 

December 31,

(Dollars in thousands)

2020

 

2019

Operating cash flows from operating leases

$

(18,411)

 

$

(17,617)

      

 

 

At December 31,

 

 

2020

 

2019

 

Weighted average remaining operating lease term

 

12.5 years

 

 

12.8 years

 

Weighted average discount rate on operating leases

 

4.02

%

 

3.91

%

Maturities of the existing lease liabilities are expected to occur as follows:

(Dollars in thousands)

 

 

 

 

 

2021

$

16,191

2022

 

18,623

2023

 

18,211

2024

 

18,217

2025

 

15,225

Thereafter

 

116,197

Undiscounted lease payments

 

202,664

Less:  present value adjustment

 

47,520

Total operating lease liability

$

155,144

On July 2, 2019, the Company entered into a lease agreement to relocate its U.S. corporate offices from Liberty Corner, New Jersey to Warren, New Jersey.  The new lease, which covers approximately 315,000 square feet of office space.  Rental expensespace, was $16,209effective October 1, 2019 and runs through 2036.  The initial base rent payment of the lease will be approximately $650 thousand $14,841per month or $7,800 thousand per year.  The Company relocated the existing operations and $14,145 thousand foremployees of the years endedLiberty Corner, New Jersey facility to the new corporate complex as of December 31, 2017, 2016 and 2015, respectively.2020.

F-38



10.  INCOME TAXES


All of the income of Holdings U.S. subsidiaries, including its foreign branches, is subject to the applicable federal, foreign, state and local income taxes on corporations.  The provision for income taxes in the consolidated statement of operations and comprehensive income (loss) has been determined by applying the respective tax laws to the income of each entity. 

The TCJACoronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on December 22, 2017 causedMarch 27, 2020, provided that U.S. companies could carryback for five years net operating losses incurred in 2018, 2019 and/or 2020. This beneficial tax provision in the CARES Act enabled the Company to carryback its significant 2018 net operating losses to prior tax years with higher effective tax rates of 35% versus 21% in 2018 and later years. As a result, the Company was able to record ana net income tax benefit from the five-year carryback of $123,143 thousand in 2017.  The$32.5 million and obtain federal income tax provision reflects the lower 21% tax expense/(benefit) to be realized by the Company under the TCJA upon the reversalcash refunds of the temporary differences$182.5 million including interest in its deferred tax inventory account versus the 35% tax expense/(benefit) that had been expected to be realized before the TCJA.  2020.

The significant components of the provision are as follows for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Current tax expense (benefit):

 

 

 

 

 

U.S.

$

(106,719)

 

$

(1,684)

 

$

(50,964)

Foreign

 

(11)

 

 

77

 

 

8

Total current tax expense (benefit)

 

(106,730)

 

 

(1,607)

 

 

(50,956)

Total deferred U.S. tax expense (benefit)

 

138,388

 

 

136,834

 

 

(316,069)

Total income tax expense (benefit)

$

31,658

 

$

135,228

 

$

(367,025)

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Current tax expense (benefit):         
U.S. $(123,083) $16,004  $55,354 
Foreign  221   12,682   30,373 
Total current tax expense (benefit)  (122,862)  28,686   85,727 
Total deferred U.S. tax expense (benefit)  (78,318)  68,661   109,169 
Total income tax expense (benefit) $(201,180) $97,347  $194,896 

F-38


A reconciliation of the total income tax provision using the statutory U.S. Federal Income tax rate to the Company'sCompany’s total income tax provision is as follows for the periodperiods indicated:

(Dollars in thousands)

2020

 

2019

 

2018

Expected income tax provision at the U.S. statutory tax rate

$

80,588

 

$

160,762

 

$

(279,216)

Increase (decrease) in taxes resulting from:

 

 

 

 

 

 

 

 

Tax exempt income

 

(3,598)

 

 

(3,680)

 

 

(3,824)

Dividend received deduction

 

(1,100)

 

 

(998)

 

 

(1,277)

Proration

 

1,049

 

 

1,050

 

 

1,150

Creditable foreign premium tax

 

(11,513)

 

 

(9,852)

 

 

(13,475)

Tax audit settlement

 

-

 

 

(1,576)

 

 

(2,060)

U.S. rate differential on carryback of net operation losses to PY

 

-

 

 

-

 

 

(43,734)

U.S. rate differential on deferred tax 2017 return to provision

 

-

 

 

-

 

 

(28,832)

Share based compensation tax benefits formerly in APIC

 

(2,612)

 

 

(2,987)

 

 

(1,450)

Impact of CARES Act

 

(32,500)

 

 

-

 

 

-

Change in uncertain tax positions

 

-

 

 

(8,434)

 

 

8,434

Other

 

1,345

 

 

942

 

 

(2,741)

Total income tax provision

$

31,658

 

$

135,228

 

$

(367,025)

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

F-39

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Expected income tax provision at the U.S. statutory tax rate $(43,044) $139,646  $212,548 
Increase (reduction) in taxes resulting from:            
Tax exempt income  (8,488)  (9,078)  (10,004)
Dividend received deduction  (4,063)  (4,335)  (4,851)
Proration  1,760   1,931   2,160 
Creditable foreign premium tax  (7,515)  (6,134)  (7,492)
Tax audit settlement  (11,565)  (19,204)  - 
Share based compensation tax benefits formerly in APIC  (3,308)  -   - 
Impact of U.S. tax reform  (123,143)  -   - 
Other  (1,814)  (5,479)  2,535 
Total income tax provision $(201,180) $97,347  $194,896 
             
(Some amounts may not reconcile due to rounding.)            

During 2016, the Internal Revenue Service ("IRS") completed its audit

A reconciliation of the Companybeginning and ending unrecognized tax benefits, for the 2009 through 2013periods indicated, is as follows:

(Dollars in thousands)

2020

 

2019

 

2018

Balance at January 1

$

-

 

$

8,434

 

$

-

Additions based on tax positions related to the current year

 

-

 

 

-

 

 

8,434

Additions for tax positions of prior years

 

-

 

 

-

 

 

-

Reductions for tax positions of prior years

 

-

 

 

(8,434)

 

 

-

Settlements with taxing authorities

 

-

 

 

-

 

 

-

Lapses of applicable statutes of limitations

 

-

 

 

-

 

 

-

Balance at December 31

$

-

 

$

-

 

$

8,434

At December 31, 2020, the Company’s unrecognized tax yearsbenefits, excluding interest and issued a final Revenue Agent Report ("RAR").   The RAR reflectedpenalties, that would impact the IRS owedeffective tax rate were $0 thousand. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At December 31, 2020, the Company a net refundaccrued $0 thousand for the five yearspayment of $44,241 thousand plus interest (net of $1,326 thousand.  the federal benefit) and penalties.  At December 31, 2020 and 2019, there were no accrued liabilities, respectively, for the payment of interest and penalties. 

The net refund due to the Company resulted primarily from the carryback of capital losses incurred in 2009 and 2010 to 2006 and 2007, from the conversion of foreign premium tax deductions into Foreign Tax Credits ("FTCs") and from increased utilization of such FTCs as well as the increased utilization of Alternative Minimum Tax ("AMT") credit carryforwards.  The gross refunds, by year, which were $5,000 thousand or greater, had to be reviewed and approved by IRS Joint Committee and were approved in July, 2017.  The Company received the expected tax refunds from the IRS in early 2018.


The company'sCompany’s 2014 and subsequent U.S. tax years are open to audit by the IRS.

In addition,2018, the IRS opened an audit of the 2014 tax year. To date, the Company subsequentlyhas received only one notice of proposed adjustment for an immaterial amount of tax. The Company proposed affirmative beneficial income tax return adjustments to the IRS at the start of the audit. Subsequent to the Company’s CARES Act net operating loss carryback, the Company expects a tax refund of $16,287 thousand of recaptured foreign tax credits related to the affirmative adjustments.

In 2019, the IRS opened an audit of the 2015 through 2017 tax years. To date, the Company has not received any Information Document Requests (“IDRs”) or notices of proposed adjustment. The Company had filed amended tax returns for 2006, 2007, 2008, the RAR years and 2014 and plans to file amended 2015 and 2016 for $1,519 thousand and $4,685 thousand respectively. 

During 2020, the IRS added 2018 to the audit and indicated that, subsequent to the CARES Act, it would audit tax returns for $29,385 thousand in additional net refunds plus interest.  These additional net refunds also result primarily fromyears 2014 – 2018 all together and conclude its audits simultaneously. To date, the conversion of foreign premium tax deductions into FTCs.

F-39

The Company has no reservenot received any IDRs or notices of proposed adjustment for uncertainthe 2018 tax positions.year.

F-40



Deferred income taxes reflect the tax effect of the temporary differences between the value of assets and liabilities for financial statement purposes and such values as measured by U.S. tax laws and regulations.  Under the TCJA, temporary differences at December 31, 2017, are now expected to reverse at a 21% tax rate whereas at December 31, 2016, such items were expected to reverse at a 35% tax rate. The principal items making up the net deferred income tax assets/(liabilities) are as follows for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Deferred tax assets:

 

 

 

 

 

Loss reserves

$

96,840

 

$

66,025

Unearned premium reserve

 

85,028

 

 

75,130

Foreign tax credits

 

46,109

 

 

186,706

Lease Liability

 

31,989

 

 

33,042

Net unrecognized losses on benefit plans

 

19,636

 

 

19,818

Equity compensation

 

6,749

 

 

7,229

Other tax credits

 

4,591

 

 

2,294

Uncollectible reinsurance reserve

 

3,142

 

 

3,142

Investment impairments

 

1,121

 

 

3,961

Net operating loss

 

684

 

 

19,027

Deferred expense

 

622

 

 

517

Unrealized foreign currency losses

 

597

 

 

7,958

Other assets

 

6,559

 

 

5,885

Total deferred tax assets

 

303,667

 

 

430,734

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

Net fair value income

 

277,525

 

 

266,850

Net unrealized investment gains

 

84,869

 

 

38,074

Deferred acquisition costs

 

79,994

 

 

81,931

Right of use asset

 

28,822

 

 

31,510

Partnership Investments

 

26,119

 

 

15,039

Bond market discount

 

2,257

 

 

1,466

Benefit plan asset

 

1,765

 

 

2,333

Other liabilities

 

5,056

 

 

3,796

Total deferred tax liabilities

 

506,407

 

 

440,999

 

 

 

 

 

 

Net deferred tax assets/(liabilities)

$

(202,740)

 

$

(10,265)

 

 

 

 

 

 

  At December 31, 
(Dollars in thousands) 2017  2016 
Deferred tax assets:      
Unearned premium reserve $55,034  $37,573 
Loss reserve  52,649   104,547 
Net unrecognized losses on benefit plans  19,120   35,271 
Foreign tax credits  15,913   - 
Benefit plan liability  10,417   14,576 
Uncollectible reinsurance reserve  3,320   5,534 
Deferred expenses  1,759   2,884 
Investment impairments  1,144   3,093 
Unrealized foreign currency losses  547   28,111 
Other assets  8,633   10,845 
Total deferred tax assets  168,536   242,434 
         
Deferred tax liabilities:        
Net fair value income  252,349   398,270 
Deferred acquisition costs  64,997   26,652 
Net unrealized investment gains  12,819   20,626 
Gain on tender of debt  3,287   10,958 
Partnership Investments  2,019   11,269 
Bond market discount  1,243   1,092 
Other liabilities  840   2,008 
Total deferred tax liabilities  337,554   470,875 
         
Net deferred tax assets/(liabilities) $(169,018) $(228,441)
         
(Some amounts may not reconcile due to rounding.)        
At

Due to the passage of the CARES Act in 2020, which allowed for a five-year carryback of NOLs, as of December 31, 2017,2020 the Company no longer has $15,913 thousand FTCs and no AMT credit carry forwards.  The FTCs expire ata Consolidated U.S. NOL carryforward.  Without the end of 2027. Management believes that it is more likely than not thatConsolidated U.S. NOL carryforward, the Company will realize allwas able to utilize a significant amount of U.S. Foreign Tax Credits (“FTCs”) in both 2019 and 2020.  As a result, its deferred tax assets.  Accordingly, no valuation allowance has been recordedFTC carryforwards were significantly reduced at December 31, 2020 to only $46,109 thousand.  The remaining FTC carryforwards expire between 2025 and 2030.

During 2018, the Company completed its accounting for the periods presented.


The Company has adoptedTCJA in accordance with SEC Staff Accounting Bulletin 118, including interpretation of the provisions of SAB 118 with respect to measuring the tax effects for the modifications to the determination of tax basis loss reserves enactedadditional guidance issued by the TCJA.  Modifications include the extension of long-tail payment patterns out 24 years,IRS and the use of an interest rate based upon the corporate bond yield curve.  The IRS is required to provide discount factors following these new parameters based upon industry loss payment data.  Because of uncertainty in how the Treasury/IRS intend to implement the modifications and the necessary transition calculation, the Company has determined that a reasonable estimate cannot be determined, and has followed the provisionsU.S. Department of the tax laws that were in effect prior to the modifications.

The Company has made a provisional estimatedTreasury, and recognized an income tax benefit of $28,411 thousand primarily related to the effects2017 tax return to tax provision true-up recorded in 2018.

Tax effected U.S. Separate Return Limitation Year NOLs of the TCJA on its' deferred tax inventory at December 31, 2017 of $123,143 thousand.  Any adjustments, if necessary, during the measurement period guidance outlined$684 thousand begin to expire in SAB 118 will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when such adjustments are determined.

2037.

F-40


Effective January 1, 2017, the Company adopted ASU 2016-09 which provided new guidance on the treatment of the tax effects of share basedshare-based compensation transactions.  ASU 2016-09 required that the income tax

F-41


effects of restricted stock vestings and stock options exercisedoption exercises resulting from the change in value of share based compensation awards between the grant date and settlement (vesting/exercising) date be recorded as part of income tax expense (benefit) within the consolidated statements of operations and comprehensive income (loss).  Per the new guidance, the Company recorded excess tax benefits of $3,308$2,612 thousand, $2,987 thousand and $1,450 thousand related to restricted stock vestings and stock option exercises as part of income tax expense (benefit) within the consolidated statements of operations and comprehensive income (loss) in 2017.


2020, 2019 and 2018, respectively.

In years prior to 2017, the Company recorded tax benefits related to restricted stock vestings and stock option exercises as part of additional paid-in capital in the stockholder'sstockholder’s equity section of the consolidated balance sheets. In 2016, the Company recorded excess tax benefits of $3,028 thousand related to restricted stock vestings and stock option exercises as part of additional paid-in capital.


The adoption of ASU 2016-09 did not impact the accounting treatment of tax benefits related to dividends on restricted stock.  The tax benefits related to the payment of dividends on restricted stock have been recorded as part of additional paid-in capital in the stockholder'sstockholder’s equity section of the consolidated balance sheets in all years.  The tax benefits related to the payment of dividends on restricted stock were $287$414 thousand, $363 thousand and $263$241 thousand in 20172020, 2019 and 20162018, respectively.

11.  REINSURANCE


The Company utilizes reinsurance agreements to reduce its exposure to large claims and catastrophic loss occurrences.  These agreements provide for recovery from reinsurers of a portion of losses and LAE under certain circumstances without relieving the Company of its underlying obligations to the policyholders.  Losses and LAE incurred and premiums earned are reported after deduction for reinsurance.  In the event that one or more of the reinsurers were unable to meet their obligations under these reinsurance agreements, the Company would not realize the full value of the reinsurance recoverable balances.  The Company's procedures include carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly monitoring the financial condition and ratings of its reinsurers. Reinsurance receivables include balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance receivables include an estimate of the amount of gross losses and loss adjustment expense reserves that may be ceded under the terms of the reinsurance agreements, including incurred but not reported unpaid losses. The Company’s estimate of losses and loss adjustment expense reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing the gross reserves for amounts the Company owes to its claimants. The Company estimates its ceded reinsurance receivable based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how incurred but not reported losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance receivables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses. The Company may hold partial collateral, including letters of credit and funds held, under these agreements.  See also Note 1C, Note 43 and Note 8.

Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods, generally 30, 60 or 90 days.  To manage reinsurer credit risk, a reinsurance security review committee evaluates the credit standing, financial performance, management and operational quality of each potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured, including the expected liability payout duration, and establishes limits tiered by reinsurer credit rating.

Where its contracts permit, the Company secures future claim obligations with various forms of collateral or other credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group wide offsets. 

The Company periodically evaluates the recoverability of its reinsurance receivable assets and establishes an allowance for uncollectible reinsurance. 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.

F-42



Due to the inherent uncertainties as to collection and the length of time before reinsurance receivable become due, it is possible that future adjustments to the Company’s reinsurance receivable, 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 receivable exposed to loss multiplied by estimated factors for the probability of default. The probability of default is assigned based on each reinsurer's credit rating, or a rating is estimated if no external rating is available.  Credit ratings are reviewed and updated at least annually. 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 receivable considers the current economic environment as well as macroeconomic scenarios.

Insurance companies, including reinsurers, are regulated and hold risk-based capital to mitigate the risk of loss due to economic factors and other risks. Non-U.S. reinsurers are either subject to a capital regime substantively equivalent to domestic insurers or we hold collateral to support collection of reinsurance receivable.  As a result, there is limited history of losses from insurer defaults.

The Company expects the impact of the COVID-19 pandemic to reinsurers to be somewhat mitigated by their regulated capital and liquidity positions. The ultimate impact to the Company's financial statements could vary significantly from our estimates depending on the duration and severity of the pandemic, the duration and severity of the economic downturn and the degree to which federal, state and local government actions to mitigate the economic impact of COVID-19 are effective.

The Company records credit loss expenses related to reinsurance receivable in losses and loss adjustment expenses. Write-offs of reinsurance receivable and any related allowance are recorded in the period in which the balance is deemed uncollectible. The allowance for the reinsurance receivables is $14,233 thousand and $12,836 thousand as of December 31, 2020 and 2019, respectively.

Premiums written and earned and incurred losses and LAE are comprised of the following for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Written premiums:

 

 

 

 

 

 

 

 

Direct

$

2,698,100

 

$

2,449,198

 

$

1,996,606

Assumed

 

5,258,938

 

 

4,603,866

 

 

4,577,070

Ceded

 

(1,318,338)

 

 

(1,278,115)

 

 

(1,541,814)

Net written premiums

$

6,638,700

 

$

5,774,949

 

$

5,031,862

 

 

 

 

 

 

 

 

 

Premiums earned:

 

 

 

 

 

 

 

 

Direct

$

2,591,613

 

$

2,255,388

 

$

1,903,576

Assumed

 

5,183,399

 

 

4,427,006

 

 

4,447,862

Ceded

 

(1,368,436)

 

 

(1,193,359)

 

 

(1,512,380)

Net premiums earned

$

6,406,576

 

$

5,489,035

 

$

4,839,058

 

 

 

 

 

 

 

 

 

Incurred losses and LAE:

 

 

 

 

 

 

 

 

Direct

$

1,784,616

 

$

1,401,251

 

$

1,182,399

Assumed

 

3,576,252

 

 

2,913,987

 

 

4,162,776

Ceded

 

(752,724)

 

 

(486,116)

 

 

(534,157)

Net incurred losses and LAE

$

4,608,144

 

$

3,829,122

 

$

4,811,018

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Written premiums:         
Direct $1,873,115  $1,699,204  $1,511,217 
Assumed  3,915,374   3,364,524   3,484,414 
Ceded  (3,064,645)  (3,015,606)  (2,902,348)
Net written premiums $2,723,844  $2,048,122  $2,093,283 
             
Premiums earned:            
Direct $1,655,023  $1,608,783  $1,439,795 
Assumed  3,842,836   3,492,598   3,637,484 
Ceded  (3,548,264)  (3,007,332)  (2,933,519)
Net premiums earned $1,949,595  $2,094,049  $2,143,760 
             
Incurred losses and LAE:            
Direct $1,196,323  $1,415,933  $1,235,012 
Assumed  3,108,753   1,674,342   1,728,661 
Ceded  (2,265,325)  (1,739,995)  (1,644,112)
Net incurred losses and LAE $2,039,751  $1,350,280  $1,319,561 

The Company has engaged in reinsurance transactions with Bermuda Re, Everest International Reinsurance, Ltd. ("(“Everest International"International”), Mt. Logan Re, Ltd. ("Mt. Logan Re"), Everest Insurance Company of Canada ("(“Everest Canada"Canada”) and Lloyd'sLloyd’s Syndicate 2786, which are affiliated companies primarily driven by enterprise risk and capital management considerations under which business is ceded at market rates and terms.

F-43


F-41


The table below represents affiliated quota share reinsurance agreements ("whole account quota share") for all new and renewal business for the indicated coverage period:

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Single

 

 

 

 

 

 

 

Percent

 

Assuming

 

 

 

Occurrence

 

Aggregate

 

Coverage Period

 

Ceding Company

 

Ceded

 

Company

 

Type of Business

 

Limit

 

Limit

 

01/01/2010-12/31/2010

 

Everest Re

 

44.0

%

 

Bermuda Re

 

property / casualty business

 

150,000

 

325,000

 

01/01/2011-12/31/2011

 

Everest Re

 

50.0

%

 

Bermuda Re

 

property / casualty business

 

150,000

 

300,000

 

01/01/2012-12/31/2014

 

Everest Re

 

50.0

%

 

Bermuda Re

 

property / casualty business

 

100,000

 

200,000

 

01/01/2015-12/31/2016

 

Everest Re

 

50.0

%

 

Bermuda Re

 

property / casualty business

 

162,500

 

325,000

 

01/01/2017-12/31/2017

 

Everest Re

 

60.0

%

 

Bermuda Re

 

property / casualty business

 

219,000

 

438,000

 

01/01/2010-12/31/2010

 

Everest Re- Canadian Branch

 

60.0

%

 

Bermuda Re

 

property business

 

350,000

(1)

-

 

01/01/2011-12/31/2011

 

Everest Re- Canadian Branch

 

60.0

%

 

Bermuda Re

 

property business

 

350,000

(1)

-

 

01/01/2012-12/31/2012

 

Everest Re- Canadian Branch

 

75.0

%

 

Bermuda Re

 

property / casualty business

 

206,250

(1)

412,500

(1)

01/01/2013-12/31/2013

 

Everest Re- Canadian Branch

 

75.0

%

 

Bermuda Re

 

property / casualty business

 

150,000

(1)

412,500

(1)

01/01/2014-12/31/2017

 

Everest Re- Canadian Branch

 

75.0

%

 

Bermuda Re

 

property / casualty business

 

262,500

(1)

412,500

(1)

01/01/2012-12/31/2017

 

Everest Canada

 

80.0

%

 

Everest Re-

  Canadian Branch

 

property business

 

-

 

-

 

01/01/2020-01/01/2021

 

Everest International Assurance

 

100.0

%

 

Bermuda Re

 

life business

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts shown are Canadian dollars.

 



(Dollars in thousands)             
    Percent Assuming   Single  Aggregate
Coverage Period Ceding Company Ceded Company Type of Business Occurrence Limit   Limit
              
01/01/2010-12/31/2010 Everest Re 44.0% Bermuda Re property / casualty business  150,000   325,000
              
01/01/2011-12/31/2011 Everest Re 50.0% Bermuda Re property / casualty business  150,000   300,000
              
01/01/2012-12/31/2014 Everest Re 50.0% Bermuda Re property / casualty business  100,000   200,000
              
01/01/2015-12/31/2016 Everest Re 50.0% Bermuda Re property / casualty business  162,500   325,000
              
01/01/2017-12/31/2017 Everest Re 60.0% Bermuda Re property / casualty business  219,000   438,000
              
01/01/2010-12/31/2010 Everest Re- Canadian Branch60.0% Bermuda Re property business  350,000
(1)
  -
01/01/2011-12/31/2011 Everest Re- Canadian Branch60.0% Bermuda Re property business  350,000
(1)
  -
01/01/2012-12/31/2012 Everest Re- Canadian Branch75.0% Bermuda Re property / casualty business  206,250
(1)
  412,500
01/01/2013-12/31/2013 Everest Re- Canadian Branch75.0% Bermuda Re property / casualty business  150,000
(1)
  412,500
01/01/2014-12/31/2017 Everest Re- Canadian Branch75.0% Bermuda Re property / casualty business  262,500
(1)
  412,500
              
01/01/2012-12/31/2017 Everest Canada 80.0% Everest Re- Canadian Branchproperty business  -   -
              
(1)  Amounts shown are Canadian dollars.
            


As

Effective January 1, 2018, Everest Re entered into a twelve month whole account aggregate stop loss reinsurance contract (“stop loss agreement”) with Bermuda Re.  The stop loss agreement provides coverage for ultimate net losses on applicable net earned premiums above a retention level, subject to certain other coverage limits and conditions.  The stop loss agreement has been renewed annually and was most recently renewed effective January 1, 2020. 

In addition, Everest Re entered into a property catastrophe excess of loss reinsurance contract with Bermuda Re, effective January 1, 2019.  The contract provided $100,000 thousand of reinsurance coverage for property catastrophe losses above certain attachment points. This contract was not renewed and expired as of December 31, 2017, the Company decided not to renew its quota share reinsurance agreements between Everest Re and Bermuda Re, between Everest Re-Canadian branch and Bermuda Re and between Everest Canada and the Everest Re-Canadian branch due to economic implications of the enactment of TCJA on December 22, 2017.


2019.

The table below represents loss portfolio transfer ("LPT"(“LPT”) reinsurance agreements whereby net insurance exposures and reserves were transferred to an affiliate.

(Dollars in thousands)

Effective

 

Transferring

 

Assuming

 

 

% of Business or

 

 

Covered Period

Date

 

Company

 

Company

 

 

Amount of Transfer

 

 

of Transfer

10/01/2001

 

Everest Re  (Belgium Branch)

 

Bermuda Re

 

 

100

%

 

 

All years

10/01/2008

 

Everest Re

 

Bermuda Re

 

$

747,022

 

 

 

01/01/2002-12/31/2007

12/31/2017

 

Everest Re

 

Bermuda Re

 

$

970,000

 

 

 

All years


(Dollars in thousands)            
              
Effective Transferring Assuming % of Business or Covered Period
Date Company Company Amount of Transfer of Transfer
              
09/19/2000 Mt. McKinley Bermuda Re  100% All years
10/01/2001 Everest Re  (Belgium Branch) Bermuda Re  100% All years
10/01/2008 Everest Re Bermuda Re $747,022  01/01/2002-12/31/2007
12/31/2017 Everest Re Bermuda Re $970,000  All years


On December 31, 2017, the Company entered into a LPT agreement with Bermuda Re.  The LPT agreement covers subject loss reserves of $3,070,383$2,336,242 thousand for accident years 2017 and prior.  As a result of the LPT agreement, the Company transferred $1,000,000$1,000,000 thousand of cash and fixed maturity securities and transferred $970,000$970,000 thousand of loss reserves to Bermuda Re.  As part of the LPT agreement, Bermuda Re will provide an additional $500,000$500,000 thousand of adverse development coverage on the subject loss reserves.

On July 13, 2015, the Company sold Mt. McKinley to Clearwater Insurance Company, a Delaware domiciled insurance company. As of that date, Mt. McKinley is no longer deemed an affiliated company or related party.
F-42

The following tables summarize the premiums and losses ceded by the Company to Bermuda Re and Everest International, respectively, and premiums and losses assumed by the Company from Everest Canada and Lloyd'sLloyd’s syndicate 2786 for the periods indicated:

 

 

Bermuda Re

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Ceded written premiums

$

131,341

 

$

100,084

 

$

572,620

Ceded earned premiums

 

131,574

 

 

101,681

 

 

586,120

Ceded losses and LAE

 

108,477

 

 

(51,686)

 

 

(49,955)

F-44



 

 

Everest International

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Ceded written premiums

$

-

 

$

-

 

$

-

Ceded earned premiums

 

-

 

 

-

 

 

-

Ceded losses and LAE

 

(503)

 

 

324

 

 

(753)


 

 

Everest Canada

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Assumed written premiums

$

1

 

$

-

 

$

-

Assumed earned premiums

 

(7)

 

 

-

 

 

-

Assumed losses and LAE

 

(2,102)

 

 

3,024

 

 

6,238

Bermuda Re
 Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Ceded written premiums $2,219,352  $2,324,314  $2,283,815 
Ceded earned premiums  2,796,939   2,353,801   2,316,096 
Ceded losses and LAE (a)  1,687,659   1,307,722   1,293,997 


 

 

Lloyd's Syndicate 2786

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Assumed written premiums

$

(3,592)

 

$

(11,470)

 

$

10,800

Assumed earned premiums

 

(3,375)

 

 

(18,650)

 

 

35,826

Assumed losses and LAE

 

(2,636)

 

 

8,355

 

 

27,550

Everest International
 Years Ended December 31,
(Dollars in thousands) 2017  2016  2015 
Ceded written premiums $10  $98  $395 
Ceded earned premiums  44   110   522 
Ceded losses and LAE  (990)  3,467   673 

Everest Canada
 Years Ended December 31,
(Dollars in thousands) 2017  2016  2015 
Assumed written premiums $25,871  $53,653  $39,819 
Assumed earned premiums  54,558   49,156   35,988 
Assumed losses and LAE  29,389   38,568   20,345 

Lloyd's Syndicate 2786
 Years Ended December 31,
(Dollars in thousands) 2017  2016  2015 
Assumed written premiums $35,607  $18,994  $- 
Assumed earned premiums  33,590   5,038   - 
Assumed losses and LAE  17,688   4,938   - 
(a) Ceded losses and LAE include the Mt. McKinley loss portfolio transfer that constitutes losses ceded under retroactive reinsurance and therefore, in accordance with FASB guidance, amortization of deferred gain on retroactive reinsurance is reflected in other income on the consolidated statements of operations and comprehensive income (loss). Upon the sale of Mt. McKinley, the value of the remaining deferred gain on retroactive reinsurance was included in the calculation of the realized gain on sale of subsidiary.

Everest Re sold net assets of its UK branch to Bermuda Re and provided Bermuda Re with a reserve indemnity agreement allowing for indemnity payments of up to 90% of ₤25.0 million of the excess of 2002 and prior reserves, provided that any recognition of profit from the reserves for 2002 and prior underwriting years is taken into account.

Effective February 27,

In 2013, Group established a new subsidiary, Mt. Logan Re, which is a Class 3 insurer based in Bermuda.  Effective July 1, 2013, Mt. Logan Re then established separate segregated accounts for its business activity, which will invest in a diversified set of catastrophe exposures.


The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re segregated accounts and assumed by the Company from Mt. Logan Re segregated accounts.

 

 

Mt. Logan Re Segregated Accounts

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Ceded written premiums

$

263,487

 

$

240,721

 

$

207,439

Ceded earned premiums

 

265,381

 

 

235,500

 

 

212,046

Ceded losses and LAE

 

175,087

 

 

171,900

 

 

234,471

Assumed written premiums

 

-

 

 

-

 

 

10,582

Assumed earned premiums

 

-

 

 

-

 

 

10,582

Assumed losses and LAE

 

-

 

 

-

 

 

-

Mt. Logan Re Segregated Accounts
 Years Ended December 31,
(Dollars in thousands) 2017  2016  2015 
Ceded written premiums $192,928  $160,091  $209,162 
Ceded earned premiums  192,573   155,010   201,416 
Ceded losses and LAE  283,511   38,739   40,753 
             
Assumed written premiums  11,984   14,563   15,421 
Assumed earned premiums  11,984   14,563   15,421 
Assumed losses and LAE  -   -   - 

F-43


12.  COMPREHENSIVE INCOME (LOSS)

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

 

Year Ended

 

Year Ended

 

Year Ended

(Dollars in thousands)

December 31, 2020

 

December 31, 2019

 

December 31, 2018

 

Before Tax

 

Tax Effect

 

Net of Tax

 

Before Tax

 

Tax Effect

 

Net of Tax

 

Before Tax

 

Tax Effect

 

Net of Tax

Unrealized appreciation (depreciation)

  ("URA(D)") on securities - temporary

$

206,159

 

 

(43,078)

 

$

163,080

 

$

222,884

 

 

(46,971)

 

$

175,913

 

$

(119,058)

 

$

25,582

 

$

(93,476)

URA(D) on securities - OTTI

 

-

 

 

-

 

 

-

 

 

(546)

 

 

115

 

 

(431)

 

 

645

 

 

(135)

 

 

510

Reclassification of net realized losses

  (gains) included in net income (loss)

 

32,475

 

 

(7,007)

 

 

25,468

 

 

6,068

 

 

(988)

 

 

5,080

 

 

3,416

 

 

(1,395)

 

 

2,021

Foreign currency translation adjustments

 

18,277

 

 

(3,815)

 

 

14,461

 

 

21,708

 

 

(4,555)

 

 

17,153

 

 

(46,136)

 

 

9,705

 

 

(36,431)

Benefit plan actuarial net gain (loss)

 

(7,107)

 

 

1,492

 

 

(5,615)

 

 

(15,938)

 

 

3,347

 

 

(12,591)

 

 

(646)

 

 

136

 

 

(510)

Reclassification of amortization of net gain

  (loss) included in net income (loss)

 

7,974

 

 

(1,674)

 

 

6,300

 

 

6,902

 

 

(1,449)

 

 

5,453

 

 

6,356

 

 

(1,335)

 

 

5,021

Total other comprehensive income (loss)

$

257,778

 

$

(54,082)

 

$

203,694

 

$

241,078

 

$

(50,501)

 

$

190,577

 

$

(155,423)

 

$

32,558

 

$

(122,865)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding)


F-45



  Years Ended December 31, 
  2017  2016  2015 
(Dollars in thousands) Before Tax  Tax Effect  Net of Tax  Before Tax  Tax Effect  Net of Tax  Before Tax  Tax Effect  Net of Tax 
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary $(11,672) $4,085  $(7,587) $1,302  $(512) $790  $(43,777) $14,337  $(29,440)
URA(D) on securities - OTTI  (4,537)  1,588   (2,949)  5,113   (1,789)  3,324   9,666   (3,383)  6,283 
Reclassification of net realized losses (gains) included in net income (loss)  3,543   (1,240)  2,303   32,642   (11,369)  21,273   (2,772)  1,955   (817)
Foreign currency translation adjustments  57,564   (20,137)  37,427   4,388   (1,539)  2,849   (83,966)  29,388   (54,578)
Benefit plan actuarial net gain (loss)  1,300   (273)  1,027   (11,520)  4,032   (7,488)  8,740   (3,059)  5,681 
Reclassification of amortization of net gain (loss) included in net income (loss)  8,426   (2,949)  5,477   7,805   (2,732)  5,073   9,563   (3,347)  6,216 
Total other comprehensive income (loss) $54,624  $(18,926) $35,698  $39,730  $(13,909) $25,821  $(102,546) $35,891  $(66,655)
                                     
(Some amounts may not reconcile due to rounding)                                    

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

 

 

 

Affected line item within the

 

Years Ended December 31,

 

statements of operations and

AOCI component

2020

 

2019

 

comprehensive income (loss)

(Dollars in thousands)

 

 

 

 

 

 

 

URA(D) on securities

$

32,475

 

$

6,068

 

Other net realized capital gains (losses)

 

 

(7,007)

 

 

(988)

 

Income tax expense (benefit)

 

$

25,468

 

$

5,080

 

Net income (loss)

Benefit plan net gain (loss)

$

7,974

 

$

6,902

 

Other underwriting expenses

 

 

(1,674)

 

 

(1,449)

 

Income tax expense (benefit)

 

$

6,300

 

$

5,453

 

Net income (loss)

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding)



  Years Ended December 31,  Affected line item within the statements of
AOCI component 2017  2016  operations and comprehensive income (loss)
(Dollars in thousands)          
URA(D) on securities $3,543  $32,642  Other net realized capital gains (losses)
   (1,240)  (11,369) Income tax expense (benefit)
  $2,303  $21,273  Net income (loss)
              
Benefit plan net gain (loss) $8,426  $7,805  Other underwriting expenses
   (2,949)  (2,732) Income tax expense (benefit)
  $5,477  $5,073  Net income (loss)
              
(Some amounts may not reconcile due to rounding)            


The following table presents the components of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)                   

2020

 

2019

Beginning balance of URA (D) on securities

$

124,612

 

$

(55,950)

Current period change in URA (D) of investments -  temporary

 

188,548

 

 

180,993

Current period change in URA (D) of investments -

  non-credit OTTI

 

-

 

 

(431)

Ending balance of URA (D) on securities

 

313,161

 

 

124,612

Beginning balance of foreign currency translation

  adjustments

 

14,267

 

 

(2,886)

Current period change in foreign currency translation

  adjustments

 

14,461

 

 

17,153

Ending balance of foreign currency translation

  adjustments

 

28,727

 

 

14,267

Beginning balance of benefit plan net gain (loss)

 

(74,556)

 

 

(67,418)

Current period change in benefit plan net gain (loss)

 

685

 

 

(7,138)

Ending balance of benefit plan net gain (loss)

 

(73,870)

 

 

(74,556)

Ending balance of accumulated other comprehensive

  income (loss)

$

268,018

 

$

64,324

  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
       
Beginning balance of URA (D) on securities $39,041  $13,654 
Current period change in URA (D) of investments - temporary  (5,284)  22,063 
Current period change in URA (D) of investments - non-credit OTTI  (2,949)  3,324 
Reclass due to early adoption of ASU 2018-02  6,634   - 
Ending balance of URA (D) on securities  37,442   39,041 
         
Beginning balance of foreign currency translation adjustments  (9,852)  (12,701)
Current period change in foreign currency translation adjustments  37,427   2,849 
Reclass due to early adoption of ASU 2018-02  5,970   - 
Ending balance of foreign currency translation adjustments  33,545   (9,852)
         
Beginning balance of benefit plan net gain (loss)  (65,504)  (63,089)
Current period change in benefit plan net gain (loss)  6,504   (2,415)
Reclass due to early adoption of ASU 2018-02  (12,929)  - 
Ending balance of benefit plan net gain (loss)  (71,929)  (65,504)
         
Ending balance of accumulated other comprehensive income (loss) $(942) $(36,315)

F-44


13.13.  EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans.

The Company maintains both qualified and non-qualified defined benefit pension plans for its U.S. employees employed prior to April 1, 2010.  Generally, the Company computes the benefits based on average earnings over a period prescribed by the plans and credited length of service.  The Company'sCompany’s non-qualified defined benefit pension plan effective from October 1995 through December 31, 2017, provided compensating pension benefits for participants whose benefits have been curtailed under the qualified plan due to Internal Revenue Code limitations.


  Effective January 1, 2018, participants of the Company’s non-qualified defined benefit pension plan may no longer accrue additional service benefits.

Although not required to make contributions under IRS regulations, the following table summarizes the Company'sCompany’s contributions to the defined benefit pension plans for the periods indicated:

F-46



 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Company contributions

$

6,825

 

$

4,750

 

$

77,743

         

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Company contributions $10,534  $30,821  $5,949 

The following table summarizes the Company'sCompany’s pension expense for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Pension expense

$

8,429

 

$

10,042

 

$

9,728

         
  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Pension expense $16,299  $17,188  $22,682 

The following table summarizes the status of these defined benefit plans for U.S. employees for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

Change in projected benefit obligation:

 

 

 

 

 

Benefit obligation at beginning of year

$

355,356

 

$

300,244

Service cost

 

9,522

 

 

8,255

Interest cost

 

10,112

 

 

11,712

Actuarial (gain)/loss

 

43,595

 

 

46,206

Curtailment

 

-

 

 

-

Benefits paid

 

(14,115)

 

 

(11,062)

Projected benefit obligation at end of year

 

404,471

 

 

355,356

 

 

 

 

 

 

Change in plan assets:

 

 

 

 

 

Fair value of plan assets at beginning of year

 

301,467

 

 

260,531

Actual return on plan assets

 

60,286

 

 

47,247

Actual contributions during the year

 

6,825

 

 

4,750

Benefits paid

 

(14,115)

 

 

(11,062)

Fair value of plan assets at end of year

 

354,464

 

 

301,467

 

 

 

 

 

 

Funded status at end of year

$

(50,007)

 

$

(53,889)

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Change in projected benefit obligation:      
Benefit obligation at beginning of year $281,853  $254,022 
Service cost  10,949   10,924 
Interest cost  10,034   9,485 
Actuarial (gain)/loss  24,679   12,155 
Curtailment  (6,209)  - 
Benefits paid  (5,104)  (4,733)
Projected benefit obligation at end of year  316,202   281,853 
         
Change in plan assets:        
Fair value of plan assets at beginning of year  171,506   135,087 
Actual return on plan assets  33,331   10,331 
Actual contributions during the year  10,534   30,821 
Benefits paid  (5,104)  (4,733)
Fair value of plan assets at end of year  210,267   171,506 
         
Funded status at end of year $(105,935) $(110,348)
         
(Some amounts may not reconcile due to rounding.)        

Amounts recognized in the consolidated balance sheets for the periods indicated:

F-47

  At December 31, 
(Dollars in thousands) 2017  2016 
Other assets (due beyond one year) $-  $- 
Other liabilities (due within one year)  (3,871)  (2,371)
Other liabilities (due beyond one year)  (102,065)  (107,977)
Net amount recognized in the consolidated balance sheets $(105,935) $(110,348)



 

At December 31,

(Dollars in thousands)

2020

 

2019

Other assets (due beyond one year)

$

-

 

$

-

Other liabilities (due within one year)

 

(2,197)

 

 

(7,362)

Other liabilities (due beyond one year)

 

(47,810)

 

 

(46,527)

Net amount recognized in the consolidated balance sheets

$

(50,007)

 

$

(53,889)

F-45


Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income (loss) for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Accumulated income (loss)

$

(91,979)

 

$

(97,466)

Accumulated other comprehensive income (loss)

$

(91,979)

 

$

(97,466)

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)



  At December 31, 
(Dollars in thousands) 2017  2016 
Prior service cost $-  $- 
Accumulated income (loss)  (86,788)  (96,965)
Accumulated other comprehensive income (loss) $(86,788) $(96,965)
         
(Some amounts may not reconcile due to rounding.)        


Other changes in other comprehensive income (loss) for the periods indicated are as follows:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

Other comprehensive income (loss) at December 31, prior year

$

(97,466)

 

$

(88,580)

Net gain (loss) arising during period

 

(4,090)

 

 

(16,927)

Recognition of amortizations in net periodic benefit cost:

 

 

 

 

 

Actuarial loss

 

9,576

 

 

8,042

Curtailment loss recognized

 

-

 

 

-

Other comprehensive income (loss) at December 31, current year

$

(91,979)

 

$

(97,466)

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Other comprehensive income (loss) at December 31, prior year $(96,965) $(91,920)
Net gain (loss) arising during period  (4,398)  (12,982)
Recognition of amortizations in net periodic benefit cost:        
Prior service cost  -   - 
Actuarial loss  8,366   7,937 
Curtailment loss recognized  6,209   - 
Other comprehensive income (loss) at December 31, current year $(86,788) $(96,965)
         
(Some amounts may not reconcile due to rounding.)        

Net periodic benefit cost for U.S. employees included the following components for the periods indicated:

F-48


 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Service cost

$

9,522

 

$

8,255

 

$

9,801

Interest cost

 

10,112

 

 

11,712

 

 

10,290

Expected return on assets

 

(20,781)

 

 

(17,968)

 

 

(17,202)

Amortization of actuarial loss from earlier periods

 

8,551

 

 

7,635

 

 

6,839

Settlement

 

1,025

 

 

408

 

 

-

Net periodic benefit cost

$

8,429

 

$

10,042

 

$

9,728

 

 

 

 

 

 

 

 

 

Other changes recognized in other comprehensive income (loss):

 

 

 

 

 

 

 

 

Other comprehensive income (loss) attributable to change from

   prior year

 

(5,486)

 

 

8,885

 

 

 

 

 

 

 

 

 

 

 

 

Total recognized in net periodic benefit cost and other

 

 

 

 

 

 

 

 

comprehensive income (loss)

$

2,943

 

$

18,927

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Service cost  10,949  $10,924  $12,511 
Interest cost  10,034   9,485   10,759 
Expected return on assets  (13,050)  (11,158)  (11,620)
Amortization of actuarial loss from earlier periods  8,366   7,937   9,243 
Amortization of unrecognized prior service cost  -   -   21 
Settlement  -   -   1,768 
Net periodic benefit cost $16,299  $17,188  $22,682 
             
Other changes recognized in other comprehensive income (loss):            
Other comprehensive income (loss) attributable to change from prior year  (10,177)  5,045     
             
Total recognized in net periodic benefit cost and other            
comprehensive income (loss) $6,122  $22,233     
             
(Some amounts may not reconcile due to rounding.)            

The estimated transition obligation, actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are $0$0 thousand, $6,899$7,709 thousand and $0$0 thousand, respectively.


The weighted average discount rates used to determine net periodic benefit cost for 2017, 20162020, 2019 and 20152018 were 4.16%3.28%, 4.38%4.27% and 4.00%3.62%, respectively.  The rate of compensation increase used to determine the net periodic benefit cost for 2017, 20162020, 2019 and 20152018 was 4.00%4.00%.  The expected long-term rate of return on plan assets was 7.00% for 2017, 20162020, 2019 and 2015 was 7.50% and was2018 based on expected portfolio returns and allocations.


The weighted average discount rates used to determine the actuarial present value of the projected benefit obligation for years end 2017, 20162020, 2019 and 20152018 were 3.62%2.55%, 4.16%3.28% and 4.38%4.27%, respectively.


F-46

The following table summarizes the accumulated benefit obligation for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Qualified Plan

$

336,027

 

$

288,328

Non-qualified Plan

 

16,258

 

 

21,642

Total

$

352,285

 

$

309,970

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)



  At December 31, 
(Dollars in thousands) 2017  2016 
Qualified Plan $245,430  $211,720 
Non-qualified Plan  24,482   21,123 
Total $269,912  $232,843 
         
(Some amounts may not reconcile due to rounding.)        

The following table displays the plans with projected benefit obligations in excess of plan assets for the periods indicated:

F-49


 

At December 31,

(Dollars in thousands)

2020

 

2019

Qualified Plan

 

 

 

 

 

Projected benefit obligation

$

388,213

 

$

333,715

Fair value of plan assets

 

354,464

 

 

301,467

Non-qualified Plan

 

 

 

 

 

Projected benefit obligation

$

16,258

 

$

21,642

Fair value of plan assets

 

-

 

 

-

  At December 31, 
(Dollars in thousands) 2017  2016 
Qualified Plan      
Projected benefit obligation $291,720  $254,320 
Fair value of plan assets  210,267   171,506 
Non-qualified Plan        
Projected benefit obligation $24,482  $27,534 
Fair value of plan assets  -   - 

The following table displays the plans with accumulated benefit obligations in excess of plan assets for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Qualified Plan

 

 

 

 

 

Accumulated benefit obligation

$

-

 

$

-

Fair value of plan assets

 

-

 

 

-

Non-qualified Plan

 

 

 

 

 

Accumulated benefit obligation

$

16,258

 

$

21,642

Fair value of plan assets

 

-

 

 

-

  At December 31, 
(Dollars in thousands) 2017  2016 
Qualified Plan      
Accumulated benefit obligation $245,430  $211,720 
Fair value of plan assets  210,267   171,506 
Non-qualified Plan        
Accumulated benefit obligation $24,482  $21,123 
Fair value of plan assets  -   - 
         
(N/A, not applicable)        


The following table displays the expected benefit payments in the periods indicated:

(Dollars in thousands)

 

2021

$

11,757

2022

 

12,220

2023

 

13,064

2024

 

14,100

2025

 

15,190

Next 5 years

 

90,808



(Dollars in thousands)  
2018 $10,205
2019  10,288
2020  12,452
2021  12,331
2022  12,132
Next 5 years  74,239


Plan assets consist of shares in investment trusts with 76%72%, 12%27%, 11%1% and 1%0% of the underlying assets consisting of equity securities, fixed maturities, limited partnerships and multi-strategy equity fund, fixed maturitiesfunds and cash, respectively.  The Company manages the qualified plan investments for U.S. employees.  The assets in the plan consist of debt and equity mutual funds.  Due to the long term nature of the plan, the target asset allocation has historically been 70%70% equities and 30%30% bonds.


F-47

The following tables present the fair value measurement levels for the qualified plan assets at fair value for the periods indicated:

F-50



 

 

 

Fair Value Measurement Using:

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

December 31,

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

2020

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Short-term investments, which approximates fair value (a)

$

1,204

 

$

1,204

 

$

-

 

$

-

Mutual funds, fair value

 

 

 

 

 

 

 

 

 

 

 

Fixed income (b)

 

93,609

 

 

93,609

 

 

-

 

 

-

Equities (c)

 

255,054

 

 

255,054

 

 

-

 

 

-

Total

$

349,867

 

$

349,867

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


     Fair Value Measurement Using: 
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
     Assets  Inputs  Inputs 
(Dollars in thousands) December 31, 2017  (Level 1)  (Level 2)  (Level 3) 
Assets:            
Short-term investments, which approximates fair value (a) $1,031  $1,031  $-  $- 
Mutual funds, fair value                
Fixed income (b)  23,361   23,361   -   - 
Equities (c)  159,578   159,578   -   - 
Total $183,970  $183,970  $-  $- 
                 
(Some amounts may not reconcile due to rounding.)                
(a)This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b)This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately 50% in U.S. securities and 50% in international securities.
(c)This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with common stock characteristics, such as rights and warrants, with approximately 90% in U.S. equities and 10% in international equities.

 (a)      This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.

(b)       This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately 70% in U.S. securities and 30% in international securities.

(c)       This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with common stock characteristics, such as rights and warrants, with approximately 50% in U.S. equities and 50% in international equities.

There were no transfers between Level 1 and Level 2 for the twelve months ended December 31, 2017.2020.

 

 

 

Fair Value Measurement Using:

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

December 31,

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

2019

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Short-term investments, which approximates fair value (a)

$

1,749

 

$

1,749

 

$

-

 

$

-

Mutual funds, fair value

 

 

 

 

 

 

 

 

 

 

 

Fixed income (b)

 

90,483

 

 

90,483

 

 

-

 

 

-

Equities (c)

 

188,884

 

 

188,884

 

 

-

 

 

-

Total

$

281,116

 

$

281,116

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 (a)      This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.

(b)       This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately 50% in U.S. securities and 50% in international securities.

(c)       This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with common stock characteristics, such as rights and warrants, with approximately 50% in U.S. equities and 50% in international equities.

F-51

     Fair Value Measurement Using: 
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
     Assets  Inputs  Inputs 
(Dollars in thousands) December 31, 2016  (Level 1)  (Level 2)  (Level 3) 
Assets:            
Short-term investments, which approximates fair value (a) $3,665  $3,665  $-  $- 
Mutual funds, fair value                
Fixed income (b)  21,445   21,445   -   - 
Equities (c)  122,213   122,213   -   - 
Total $147,323  $147,323  $-  $- 
                 
(Some amounts may not reconcile due to rounding.)                

(a)This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b)This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with approximately 50% in U.S. securities and 50% in international securities.
(c)This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock and securities with common stock characteristics, such as rights and warrants, with approximately 90% in U.S. equities and 10% in international equities.

In addition, $26,297$4,596 thousand and $24,183$20,351 thousand of investments which were recorded as part of the qualified plan assets at December 31, 20172020 and 2016,2019, respectively, are not included within the fair value hierarchy tables as the assets are valued using the NAV practical expedient guidance within ASU 2015-07.


The Company contributed $10,000 thousand and $30,000$0 thousand to the qualified pension benefit plan infor the years ended December 31, 20172020 and 2016, respectively.


2019.

F-48


Defined Contribution Plans.

The Company also maintains both qualified and non-qualified defined contribution plans ("(“Savings Plan"Plan” and "Non-Qualified“Non-Qualified Savings Plan"Plan”, respectively) covering U.S. employees.  Under the plans, the Company contributes up to a maximum 3%3% of the participants'participants’ compensation based on the contribution percentage of the employee.  The Non-Qualified Savings Plan provides compensating savings plan benefits for participants whose benefits have been curtailed under the Savings Plan due to Internal Revenue Code limitations.  In addition, effective for new hires (and rehires) on or after April 1, 2010, the Company will contribute between 3%3% and 8%8% of an employee'semployee’s earnings for each payroll period based on the employee'semployee’s age.  These contributions will be 100%100% vested after three years.


years.

The following table presents the Company'sCompany’s incurred expenses related to these plans for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Incurred expenses

$

14,386

 

$

10,794

 

$

9,301

         


  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Incurred expenses $7,167  $6,058  $5,468 


In addition, the Company maintains several defined contribution pension plans covering non-U.S. employees.  Each non-U.S. office (Brazil, Canada and Singapore) maintains a separate plan for the non-U.S. employees working in that location.  The Company contributes various amounts based on salary, age and/or years of service.  The contributions as a percentage of salary for the branch offices range from 6.3%7.9% to 9.9%8.8%.  The contributions are generally used to purchase pension benefits from local insurance providers. 

The following table presents the Company'sCompany’s incurred expenses related to these plans for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Incurred expenses

$

774

 

$

474

 

$

489

         
  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Incurred expenses $514  $494  $447 

Post-Retirement Plan.

The Company sponsors a Retiree Health Plan for employees employed prior to April 1, 2010.  This plan provides healthcare benefits for eligible retired employees (and their eligible dependents), who have elected coverage.  The Company anticipates that most covered employees will become eligible for these benefits if they retire while working for the Company.  The cost of these benefits is shared with the retiree.  The Company accrues the post-retirement benefit expense during the period of the employee'semployee’s service.


The following

A medical cost trend rates were used to determine net periodic cost:  a healthcare inflation rate for pre-Medicare claims of 7.5%6.75% in 20172020 was assumed to decrease gradually to 4.5%4.75% in 20292030 and then remain at that level; and a healthcare inflation rate for post-Medicare claims of 7.5% in 2017 was assumed to decrease gradually to 4.5% in 2029 and then remain at that level.

F-52


The following medical cost trend rates were used to determine benefit obligations:  a healthcare inflation rate for pre-Medicare claims of 7.3% in 2018 was assumed to decrease gradually to 4.5% in 2029 and then remain at that level; and a healthcare inflation rate for post-Medicare claims of 7.3% in 2018 was assumed to decrease gradually to 4.5% in 2029 and then remain at that level.

Changes in the assumed healthcare cost trend can have a significant effect on the amounts reported for the healthcare plans.  A one percent change in the rate would have the following effects on:
  Percentage  Percentage 
  Point Increase  Point Decrease 
(Dollars in thousands) ($ Impact)  ($ Impact) 
a.  Effect on total service and interest cost components $614  $(476)
b.  Effect on accumulated post-retirement benefit obligation  7,313   (5,674)



F-49


The following table presents the post-retirement benefit expenses for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Post-retirement benefit expenses

$

1,334

 

$

1,231

 

$

1,829

         
  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Post-retirement benefit expenses $2,814  $2,293  $3,280 

The following table summarizes the status of this plan for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Change in projected benefit obligation:

 

 

 

 

 

Benefit obligation at beginning of year

$

29,376

 

$

28,483

Service cost

 

1,066

 

 

983

Interest cost

 

845

 

 

980

Amendments

 

-

 

 

-

Actuarial (gain)/loss

 

4,042

 

 

(582)

Benefits paid

 

(232)

 

 

(488)

Benefit obligation at end of year

 

35,098

 

 

29,376

 

 

 

 

 

 

Change in plan assets:

 

 

 

 

 

Fair value of plan assets at beginning of year

 

-

 

 

-

Employer contributions

 

232

 

 

488

Benefits paid

 

(232)

 

 

(488)

Fair value of plan assets at end of year

 

-

 

 

-

 

 

 

 

 

 

Funded status at end of year

$

(35,098)

 

$

(29,376)

  At December 31, 
(Dollars in thousands) 2017  2016 
Change in projected benefit obligation:      
Benefit obligation at beginning of year $32,071  $31,687 
Service cost  1,570   1,418 
Interest cost  1,184   1,007 
Amendments  (3,526)  (794)
Actuarial (gain)/loss  4,038   (668)
Benefits paid  (619)  (579)
Benefit obligation at end of year  34,717   32,071 
         
Change in plan assets:        
Fair value of plan assets at beginning of year  -   - 
Employer contributions  619   579 
Benefits paid  (619)  (579)
Fair value of plan assets at end of year  -   - 
         
Funded status at end of year $(34,717) $(32,071)

Amounts recognized in the consolidated balance sheets for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

Other liabilities (due within one year)

$

(613)

 

$

(611)

Other liabilities (due beyond one year)

 

(34,484)

 

 

(28,764)

Net amount recognized in the consolidated balance sheets

$

(35,098)

 

$

(29,376)

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

  At December 31, 
(Dollars in thousands) 2017  2016 
Other liabilities (due within one year) $(655) $(614)
Other liabilities (due beyond one year)  (34,062)  (31,457)
Net amount recognized in the consolidated balance sheets $(34,717) $(32,071)
         
(Some amounts may not reconcile due to rounding.)        


Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income (loss) for the periods indicated:

F-53


 

At December 31,

(Dollars in thousands)

2020

 

2019

Accumulated income (loss)

$

(3,854)

 

$

188

Accumulated prior service credit (cost)

 

2,327

 

 

2,904

Accumulated other comprehensive income (loss)

$

(1,527)

 

$

3,092

  At December 31, 
(Dollars in thousands) 2017  2016 
Accumulated income (loss) $(8,317) $(4,471)
Accumulated prior service credit (cost)  4,057  $662 
Accumulated other comprehensive income (loss) $(4,260) $(3,809)

Other changes in other comprehensive income (loss) for the periods indicated are as follows:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

Other comprehensive income (loss) at December 31, prior year

$

3,092

 

$

3,242

Net gain (loss) arising during period

 

(4,042)

 

 

582

Prior Service credit (cost) arising during period

 

-

 

 

-

Recognition of amortizations in net periodic benefit cost:

 

 

 

 

 

Actuarial loss (gain)

 

-

 

 

(155)

Prior service cost

 

(577)

 

 

(577)

Other comprehensive income (loss) at December 31, current year

$

(1,527)

 

$

3,092

  Years Ended December 31, 
(Dollars in thousands) 2017  2016 
Other comprehensive income (loss) at December 31, prior year $(3,809) $(5,139)
Net gain (loss) arising during period  (4,038)  668 
Prior Service credit (cost) arising during period  3,526   794 
Recognition of amortizations in net periodic benefit cost:        
Actuarial loss (gain)  192   - 
Prior service cost  (131)  (132)
Other comprehensive income (loss) at December 31, current year $(4,260) $(3,809)


F-50


Net periodic benefit cost included the following components for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Service cost

$

1,066

 

$

983

 

$

1,312

Interest cost

 

845

 

 

980

 

 

999

Prior service credit recognition

 

(577)

 

 

(577)

 

 

(577)

Net gain recognition

 

-

 

 

(155)

 

 

94

Net periodic cost

$

1,334

 

$

1,231

 

$

1,829

 

 

 

 

 

 

 

 

 

Other changes recognized in other comprehensive income (loss):

 

 

 

 

 

 

 

 

Other comprehensive gain (loss) attributable to change from prior year

 

4,619

 

 

150

 

 

 

 

 

 

 

 

 

 

 

 

Total recognized in net periodic benefit cost and

 

 

 

 

 

 

 

 

other comprehensive income (loss)

$

5,953

 

$

1,381

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)



  Years Ended December 31,
(Dollars in thousands) 2017  2016  2015 
Service cost $1,570  $1,418  $1,794 
Interest cost  1,184   1,007   1,187 
Net loss recognition  (131)  (132)  300 
Net gain recognition  192   -   - 
Net periodic cost $2,814  $2,293  $3,280 
             
Other changes recognized in other comprehensive income (loss):            
Other comprehensive gain (loss) attributable to change from prior year  451   (1,330)    
             
Total recognized in net periodic benefit cost and            
other comprehensive income (loss) $3,265  $963     
             
(Some amounts may not reconcile due to rounding.)            


The estimated transition obligation, actuarial lossgain and prior service costcredit that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are $0 thousand, $543$46 thousand and ($577)$577 thousand, respectively.


The weighted average discount rates used to determine net periodic benefit cost for 2017, 20162020, 2019 and 20152018 were 4.16%3.28%, 4.38%4.27% and 4.00%3.62%, respectively.


The weighted average discount rates used to determine the actuarial present value of the projected benefit obligation at year end 2017, 20162020, 2019 and 20152018 were 3.62%2.55%, 4.16%3.28% and 4.38%4.27%, respectively.

F-54



The following table displays the expected benefit payments in the years indicated:

(Dollars in thousands)

 

 

2021

$

613

2022

 

715

2023

 

806

2024

 

851

2025

 

989

Next 5 years

 

6,955



(Dollars in thousands)  
2018 $655
2019  765
2020  877
2021  975
2022  1,156
Next 5 years  7,965

14.  DIVIDEND RESTRICTIONS AND STATUTORY FINANCIAL INFORMATION


Holdings and its operating subsidiaries are subject to various regulatory restrictions, including the amount of dividends that may be paid and the level of capital that the operating entities must maintain.  These regulatory restrictions are based upon statutory capital as opposed to GAAP basis equity or net assets.  Holdings'Holdings’ primary operating subsidiary, Everest Re, is regulated by Delaware law and is subject to the Risk-Based Capital Model ("RBC"(“RBC”) developed by the National Association of Insurance Commissioners ("NAIC"(“NAIC”).  This model represents the aggregate regulatory restrictions on net assets and statutory capital and surplus.


Dividend Restrictions.

Delaware law provides that an insurance company which is a member of an insurance holding company system and is domiciled in the state shall not pay dividends without giving prior notice to the Insurance Commissioner of Delaware and may not pay dividends without the approval of the Insurance Commissioner if the value of the proposed dividend, together with all other dividends and distributions made in the preceding twelve months, exceeds the greater of (1) 10%10% of statutory surplus or (2) net income, not including realized capital gains, each as reported in the prior year'syear’s statutory annual statement.  In addition, no dividend may be paid in excess of unassigned earned surplus.  At December 31, 2017,2020, Everest Re has $339,185$592,082 thousand available for payment of dividends in 20182021 without the need for prior regulatory approval.


F-51


Statutory Financial Information.

Everest Re prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by the NAIC and the Delaware Insurance Department.  Prescribed statutory accounting practices are set forth in the NAIC Accounting Practices and Procedures Manual.  The capital and statutory surplus of Everest Re was $3,391,852$5,276,003 thousand and $3,635,121$3,739,140 thousand at December 31, 20172020 and 2016,2019, respectively.  The statutory net income of Everest Re was $595,077 thousand and $363,034 thousand, for the years ended December 31, 2020 and 2019, respectively. The statutory net loss of Everest Re was $391,419 thousand$1,317,991 for the year ended December 31, 2017 and statutory income of Everest Re was, $523,547 thousand and $498,455 thousand for the years ended December 31,  2016 and 2015, respectively.


2018. 

There are certain regulatory and contractual restrictions on the ability of Holdings'Holdings’ operating subsidiaries to transfer funds to Holdings in the form of cash dividends, loans or advances.  The insurance laws of the State of Delaware, where Holdings'Holdings’ direct insurance subsidiaries are domiciled, require regulatory approval before those subsidiaries can pay dividends or make loans or advances to Holdings that exceed certain statutory thresholds.


Capital Restrictions.

In the United States, Everest Re is subject to the RBC developed by the NAIC which determines an authorized control level risk-based capital.  As long as the total adjusted capital is 200%200% or more of the authorized control level capital, no action is required by the Company.

F-55



Commencing in 2017, the regulatory targeted capital required by the State of Delaware, Department of Insurance was expanded to include a provision for catastrophe exposure.  This additional requirement added $759,762 thousand of regulatory targeted capital for Everest Re as of December 31, 2017.

The regulatory targeted capital and the actual statutory capital for Everest Re is as follows:

 

Everest Re (1)

 

At December 31,

(Dollars in thousands)

2020

 

2019

Regulatory targeted capital

$

2,489,772

 

$

2,001,226

Actual capital

$

5,276,003

 

$

3,739,140



  
Everest Re (1)
 
  At December 31, 
(Dollars in thousands) 2017  2016 
Regulatory targeted capital $2,076,892  $1,411,440 
Actual capital $3,391,852  $3,635,121 

(1)  Regulatory targeted capital represents 200%200% of the RBC authorized control level calculation for the applicable year.


15.  COMMITMENTS AND CONTINGENCIES


CONTINGENCIES

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company'sCompany’s rights and obligations under insurance and reinsurance agreements.  In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it.  In other matters, the Company is resisting attempts by others to collect funds or enforce alleged rights.  These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation.  In all such matters, the Company believes that its positions are legally and commercially reasonable.  The Company considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.


Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.


The Company has entered into separate annuity agreements with The Prudential Insurance Company of America ("(“The Prudential"Prudential”) and an additional unaffiliated life insurance company in which the Company has either purchased annuity contracts or become the assignee of annuity proceeds that are meant to settle claim payment obligations in the future. In both instances, the Company would become contingently liable if either The Prudential or the unaffiliated life insurance company were unable to make payments related to the respective annuity contact.


F-52

contract.

The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

 

At December 31,

(Dollars in thousands)

2020

 

2019

The Prudential

$

140,773

 

$

141,703

Unaffiliated life insurance company

 

35,128

 

 

35,082

  At December 31, 
(Dollars in thousands) 2017  2016 
The Prudential $144,618  $146,507 
Unaffiliated life insurance company $34,444  $33,860 

16.  RELATED-PARTY TRANSACTIONS


ParentGroup


Group entered into a $300,000 thousand long term note agreement with Everest Re as of December 17, 2019. The note will pay interest annually at a rate of 1.69% and is scheduled to mature in December, 2028. This transaction is presented as a Note Receivable – Affiliated in the Consolidated Balance Sheet of Holdings. The Company recognized interest income related to this long term note of $5,155 thousand and $211 thousand for years ended December 31, 2020 and 2019, respectively.

Group entered into a $250,000 thousand long term promissory note agreement with Holdings as of December 31, 2014.  The note will mature onwas repaid in December 31, 2023 and has an2018, including $4,085 thousand of interest rate of 1.72% that is payable annually.  This transaction is presented as a Note Receivable – Affiliated in the Consolidated Balance Sheets of Holdings.  Interest income in the amount of $4,300 thousand was recorded by Holdings for the year ended December 31, 2017 and December 31, 2016, respectively.income.

F-56



Group's

Group’s Board of Directors approved an amended share repurchase program authorizing Group and/or its subsidiary Holdings to purchase Group'sGroup’s common shares through open market transactions, privately negotiated transactions or both.  The table below represents the amendments to the share repurchase program for the common shares approved for repurchase.

Common Shares

 Authorized for

Shares

Amendment Date

 Repurchase

Authorized for

Amendment Date

Repurchase

(Dollars in thousands)

09/21/2004

5,000,000

09/

07/21/20042008

5,000,000

07/21/2008

02/24/2010

5,000,000

02/24/201022/2012

5,000,000

02/22/2012

05/15/2013

5,000,000

05/15/2013

11/19/2014

5,000,000

11/19/2014

05/22/2020

 5,000,000

2,000,000

 30,000,000

32,000,000



Holdings had purchased and held 9,719,971 Common Shares of Group, which were purchased in the open market between February 2007 and March 2011.


In December, 2015, Holdings transferred the 9,719,971 Common Shares of Group, which it held as other invested assets, at fair value, valued at $1,773,214 thousand, to Preferred Holdings, an affiliated entity and subsidiary of Group, in exchange for 1,773.214 preferred shares of Preferred Holdings with a $1,000 thousand par value and 1.75%1.75% annual dividend rate.  After the exchange, Holdings no longer holds any shares or has any ownership interest in Group.


Holdings has reported both its Parent shares andthe preferred shares in Preferred Holdings, as other invested assets, fair value, in the consolidated balance sheets with changes in fair value re-measurement recorded in net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss).  The following table presents the dividends received on the preferred shares of Preferred Holdings and on the Parent shares that are reported as net investment income in the consolidated statements of operations and comprehensive income (loss) for the period indicated.

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Dividends received on preferred stock of affiliate

$

31,032

 

$

31,032

 

$

31,032

         


  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Dividends received on Parent shares $-  $-  $38,880 
Dividends received on preferred stock of affiliate  31,032   31,032   - 


F-53


Affiliated Companies

Effective December 31, 2018, Holdings entered into a $300,000 thousand long-term promissory note agreement with Bermuda Re.  The note was repaid in May, 2019.  This transaction was presented as a Note Payable – Affiliated in the consolidated balance sheets of Holdings as of December 31, 2018. Interest expense in the amount of $0 thousand and $3,658  thousand was recorded by Holdings for the years ended December 2020 and 2019, respectively.

Effective October 1, 2018, Holdings Ireland made a capital contribution of Global Services, an affiliated entity, to Holdings.  Global Services had an equity value of $227,253 thousand at the time of contribution and that value is classified as additional paid in capital in the Company’s consolidated balance sheet as of December 31, 2018.

Everest Global Services, Inc. ("(“Global Services"Services”), an affiliate of Holdings, provides centralized management and home office services, through a management agreement, to Holdings and other affiliated companies within Holdings'Holdings’ consolidated structure.  Services provided by Everest Global include executive managerial services, legal services, actuarial services, accounting services, information technology services and others.

F-57



The following table presents the expenses incurred by Holdings from services provided by Everest Global for the periods indicated.

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Expenses incurred

$

124,486

 

$

107,851

 

$

81,346

         

  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Expenses incurred $91,927  $84,823  $81,122 

17.

17.  SEGMENT REPORTING


The U.S. Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and Accident and Health ("A&H") business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies primarily withincompanies.  Business is written in the U.S.  The International operation writes non-U.S. property and casualty reinsuranceUnited States as well as through Everest Re's branches in Canada Singapore and through offices in Brazil, Miami and New Jersey.Singapore.  The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents mainly within the U.S.


United States.

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 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.


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

Reinsurance

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Gross written premiums

$

5,265,698

   

$

4,600,373

 

$

4,569,582

Net written premiums

 

4,632,265

   

 

3,923,799

 

 

3,519,704

Premiums earned

$

4,484,693

   

$

3,796,136

 

$

3,386,386

Incurred losses and LAE

 

3,209,160

   

 

2,692,680

 

 

3,811,747

Commission and brokerage

 

1,119,966

   

 

1,027,286

 

 

923,902

Other underwriting expenses

 

119,320

   

 

110,032

 

 

97,927

Underwriting gain (loss)

$

36,247

   

$

(33,862)

 

$

(1,447,190)


Insurance

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Gross written premiums

$

2,691,340

   

$

2,452,691

 

$

2,004,093

Net written premiums

 

2,006,435

   

 

1,851,150

 

 

1,512,158

Premiums earned

$

1,921,883

   

$

1,692,899

 

$

1,452,672

Incurred losses and LAE

 

1,398,984

   

 

1,136,442

 

 

999,271

Commission and brokerage

 

253,389

   

 

242,767

 

 

217,812

Other underwriting expenses

 

281,713

   

 

240,869

 

 

195,420

Underwriting gain (loss)

$

(12,203)

   

$

72,821

 

$

40,169


F-58

U.S. Reinsurance
 Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Gross written premiums $2,593,063  $2,125,792  $2,147,893 
Net written premiums  1,135,604   930,178   899,918 
             
Premiums earned $858,155  $990,055  $951,457 
Incurred losses and LAE  912,124   554,100   413,292 
Commission and brokerage  160,311   189,495   198,983 
Other underwriting expenses  55,881   54,107   50,089 
Underwriting gain (loss) $(270,161) $192,353  $289,093 



F-54


International
 Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Gross written premiums $1,339,546  $1,269,125  $1,373,978 
Net written premiums  615,395   497,645   562,691 
             
Premiums earned $502,322  $510,915  $581,216 
Incurred losses and LAE  622,753   207,605   394,819 
Commission and brokerage  101,936   111,514   121,158 
Other underwriting expenses  36,291   34,254   34,303 
Underwriting gain (loss) $(258,658) $157,542  $30,936 

Insurance
 Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Gross written premiums $1,855,881  $1,668,811  $1,473,760 
Net written premiums  972,845   620,299   630,674 
             
Premiums earned $589,118  $593,079  $611,087 
Incurred losses and LAE  504,874   588,575   511,450 
Commission and brokerage  (51,322)  (19,585)  (7,816)
Other underwriting expenses  162,714   156,605   130,427 
Underwriting gain (loss) $(27,148) $(132,516) $(22,974)


The following table reconciles the underwriting results for the operating segments to income (loss) before taxes as reported in the consolidated statements of operations and comprehensive income (loss) for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Underwriting gain (loss)

$

24,044

   

$

38,959

 

$

(1,407,021)

Net investment income

 

375,906

   

 

356,211

 

 

314,381

Net realized capital gains (losses)

 

49,804

   

 

419,367

 

 

(185,356)

Corporate expense

 

(15,985)

   

 

(13,063)

 

 

(11,034)

Interest, fee and bond issue cost amortization expense

 

(35,659)

   

 

(34,931)

 

 

(30,611)

Other income (expense)

 

(14,579)

   

 

(1,589)

 

 

(9,568)

Income (loss) before taxes

$

383,531

   

$

764,955

 

$

(1,329,209)



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Underwriting gain (loss) $(555,967) $217,379  $297,055 
Net investment income  286,259   264,807   273,253 
Net realized capital gains (losses)  161,553   (28,941)  50,335 
Corporate expense  (7,394)  (8,277)  (7,179)
Interest, fee and bond issue cost amortization expense  (31,183)  (35,435)  (35,434)
Other income (expense)  23,750   (10,542)  29,256 
Income (loss) before taxes $(122,982) $398,991  $607,286 


The Company produces business in the U.S. and internationally.  The net income deriving from assets residing in the individual foreign countries in which the Company writes business are not identifiable in the Company'sCompany’s financial records.  Based on gross written premium, the table below presents the largest country, other than the U.S., in which the Company writes business, for the periods indicated:

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

Canada gross written premiums

$

320,665

 

$

214,594

 

$

173,530

         
  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
Canada gross written premiums $130,136  $124,612  $114,859 

No other country represented more than 5%5% of the Company'sCompany’s revenues.


Approximately 21.5%20.1%, 15.3%25.8% and 16.3%21.1% of the Company'sCompany’s gross written premiums in 2017, 20162020, 2019 and 2015,2018, respectively, were sourced through the Company'sCompany’s largest intermediary.


18. DISPOSITIONS

On August 24, 2016 the Company sold Heartland, its crop Managing General Agent to CGB for $49,000 thousand.  The sale agreement includes a provision for a long term strategic reinsurance relationship with CGB.  The Company has recognized an after-tax loss on the sale of Heartland of $12,942 thousand.  Under the terms of the reinsurance arrangement, there has not been a material fluctuation in the level of crop business, although it has been reflected as reinsurance rather than insurance.

F-55


On July 13, 2015, the Company closed its agreement to sell all of the outstanding shares of capital stock of Mt. McKinley, a Delaware domiciled insurance company and wholly-owned subsidiary of the Company to Clearwater Insurance Company, a Delaware domiciled insurance company.  The purchase price of $20,156 thousand was based upon the statutory book value of Mt. McKinley as of the closing date. The Company recognized a pre-tax realized gain of $94,704 thousand on the sale of Mt. McKinley.

19.18.  SUBSEQUENT EVENTS

The Company has evaluated known recognized and non-recognized subsequent events. TheIn February 2021, a severe winter storm impacted Texas and other southern states. Due to the recentness of this event, the Company does not have any subsequent eventsis unable to report.


20. estimate the amount of losses at this time. However, the Company anticipates that the losses from this event will adversely impact first quarter 2021 financial statements.

19.  UNAUDITED QUARTERLY FINANCIAL DATA


Summarized quarterly financial data for the periods indicated:

 

2020

(Dollars in thousands)

1st Quarter

 

2nd Quarter

 

3rd Quarter

 

4th Quarter

 

 

 

 

 

 

 

 

 

 

 

 

Operating data:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

$

1,974,965

 

$

1,838,247

 

$

2,064,961

 

$

2,078,865

Net written premiums

 

1,638,708

 

 

1,501,550

 

 

1,725,701

 

 

1,772,741

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

 

1,494,005

 

 

1,538,960

 

 

1,615,457

 

 

1,758,154

Net investment income

 

74,201

 

 

35,153

 

 

135,428

 

 

131,124

Net realized capital gains (losses)

 

256,867

 

 

(479,360)

 

 

115,193

 

 

157,104

Total claims and underwriting expenses

 

1,465,006

 

 

1,436,098

 

 

1,720,362

 

 

1,812,710

Net income (loss)

 

316,645

 

 

(270,593)

 

 

119,806

 

 

186,015

F-59



 

2019

(Dollars in thousands)

1st Quarter

 

2nd Quarter

 

3rd Quarter

 

4th Quarter

 

 

 

 

 

 

 

 

 

 

 

 

Operating data:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

$

1,684,882

 

$

1,688,038

 

$

1,890,002

 

$

1,790,142

Net written premiums

 

1,392,243

 

 

1,319,865

 

 

1,569,954

 

 

1,492,886

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

 

1,270,454

 

 

1,375,623

 

 

1,428,400

 

 

1,414,558

Net investment income

 

84,534

 

 

90,709

 

 

95,592

 

 

85,376

Net realized capital gains (losses)

 

135,056

 

 

142,563

 

 

112,542

 

 

29,206

Total claims and underwriting expenses

 

1,174,175

 

 

1,255,551

 

 

1,562,452

 

 

1,505,892

Net income (loss)

 

251,608

 

 

280,922

 

 

61,137

 

 

36,060


F-60

  2017 
(Dollars in thousands) 1st Quarter  2nd Quarter  3rd Quarter  4th Quarter 
             
Operating data:            
Gross written premiums $1,252,384  $1,335,574  $1,701,126  $1,499,405 
Net written premiums  448,836   417,912   570,760   1,286,337 
                 
Premiums earned  471,055   468,197   518,507   491,836 
Net investment income  60,849   71,900   73,417   80,093 
Net realized capital gains (losses)  117,768   (92,291)  228,489   (92,413)
Total claims and underwriting expenses  402,124   421,938   1,423,816   257,684 
Net income (loss)  169,178   35,658   (389,724)  263,086 



SCHEDULE I - SUMMARY OF INVESTMENTS -

 

 

 

 

 

 

 

 

OTHER THAN INVESTMENTS IN RELATED PARTIES

 

 

 

 

 

 

 

 

DECEMBER 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Column A

 

Column B

 

 

Column C

 

 

Column D

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

 

 

 

Shown in

 

 

 

 

 

Market

 

 

Balance

(Dollars in thousands)

 

Cost

 

 

Value

 

 

Sheet

Fixed maturities-available for sale

 

 

 

 

 

 

 

 

Bonds:

 

 

 

 

 

 

 

 

U.S. government and government agencies

$

659,957

 

$

681,989

 

$

681,989

State, municipalities and political subdivisions

 

543,646

 

 

577,046

 

 

577,046

Foreign government securities

 

694,132

 

 

742,238

 

 

742,238

Foreign corporate securities

 

1,130,865

 

 

1,199,866

 

 

1,199,866

Public utilities

 

113,206

 

 

120,749

 

 

120,749

All other corporate bonds

 

5,645,979

 

 

5,796,383

 

 

5,796,383

Mortgage - backed securities

 

   

 

 

   

 

 

   

Commercial

 

512,388

 

 

550,080

 

 

550,080

Agency residential

 

937,166

 

 

965,100

 

 

965,100

Non-agency residential

 

3,164

 

 

3,164

 

 

3,164

Redeemable preferred stock

 

8,147

 

 

6,950

 

 

6,950

Total fixed maturities-available for sale

 

10,248,650

 

 

10,643,565

 

 

10,643,565

Equity securities at fair value(1)

 

927,324

 

 

1,288,767

 

 

1,288,767

Short-term investments

 

708,043

 

 

707,905

 

 

707,905

Other invested assets

 

1,094,933

 

 

1,094,933

 

 

1,094,933

Other invested assets, at fair value (1)

 

1,773,214

 

 

1,796,479

 

 

1,796,479

Cash

 

378,518

 

 

378,518

 

 

378,518

Total investments and cash

$

15,130,682

 

$

15,910,167

 

$

15,910,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Original cost does not reflect adjustments, which have been realized through the statements of operations and comprehensive income.

S-1



  2016 
(Dollars in thousands) 1st Quarter  2nd Quarter  3rd Quarter  4th Quarter 
             
Operating data:            
Gross written premiums $1,129,904  $1,177,791  $1,505,923  $1,250,110 
Net written premiums  464,070   441,255   622,616   520,181 
                 
Premiums earned  481,925   488,855   556,653   566,616 
Net investment income  58,445   73,872   64,570   67,920 
Net realized capital gains (losses)  (66,377)  29,165   (50,063)  58,334 
Total claims and underwriting expenses  421,654   467,275   448,530   539,211 
Net income (loss)  40,990   69,372   76,303   114,979 

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

 

 

 

 

 

CONDENSED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

(Dollars in thousands, except share amounts and par value per share)

2020

 

2019

ASSETS:

 

 

 

 

 

Fixed maturities - available for sale, at market value

$

-

 

$

1,750

(amortized cost: 2020, $0; 2019, $1,750)

 

 

 

 

 

Equity securities - available for sale, at fair value

 

311,009

 

 

75,585

Other invested assets

 

146,968

 

 

56,909

Other invested assets, at fair value

 

1,796,479

 

 

1,982,582

Short-term investments

 

9,985

 

 

20,514

Cash

 

10,482

 

 

10,384

Total investments and cash

 

2,274,923

 

 

2,147,724

Investment in subsidiaries, at equity in the underlying net assets

 

6,115,130

 

 

4,580,852

Note receivable - affiliated

 

-

 

 

10,000

Accrued investment income

 

87

 

 

573

Advances to affiliates

 

165

 

 

(39)

Other assets

 

(104)

 

 

162

TOTAL ASSETS

$

8,390,201

 

$

6,739,272

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Senior notes due 6/1/2044

$

397,194

 

$

397,074

Senior notes due 10/15/2050

 

979,524

 

 

-

Long term notes due 5/1/2067

 

223,674

 

 

236,758

Accrued interest on debt and borrowings

 

10,388

 

 

2,878

Income taxes

 

362,393

 

 

243,062

Due to affiliates

 

1,835

 

 

1,016

Other liabilities

 

880

 

 

1,059

Total liabilities

$

1,975,888

 

$

881,847

 

 

 

 

 

 

STOCKHOLDER'S EQUITY:

 

 

 

 

 

Common stock, par value:  $0.01; 3,000 shares authorized;

 

 

 

 

 

1,000 shares issued and outstanding (2020 and 2019)

 

-

 

 

-

Additional paid-in capital

 

1,101,092

 

 

1,100,678

Accumulated other comprehensive income (loss), net of deferred income

 

 

 

 

 

tax expense (benefit) of $71,080 at 2020 and $16,997 at 2019

 

268,018

 

 

64,324

Retained earnings

 

5,045,203

 

 

4,692,423

Total stockholder's equity

 

6,414,313

 

 

5,857,425

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY

$

8,390,201

 

$

6,739,272

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 


S-2


In preparing its second quarter of 2017 financial statements, the Company altered its processing of ceding certain commissions and deferred acquisition costs under an affiliated quota share agreement.  In previous reporting periods, these expenses were ceded based upon a quarter lag.  In the second quarter of 2017, the quarter lag was eliminated and these expenses are now recorded on a current quarter basis.  Although management determined that the impact of the ceding lag was not material to prior period financial statements, the impact of eliminating the ceding lag would have significantly impacted results within the second quarter of 2017.  As a result, prior period balances have been revised in the applicable financial statements and corresponding footnotes to eliminate the impact of the previous recording lag.

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

 

 

 

 

 

 

 

 

CONDENSED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

(Dollars in thousands)

2020

 

2019

 

2018

REVENUES:

 

 

 

 

 

 

 

 

Net investment income

$

26,021

 

$

34,970

 

$

38,951

Net investment income - Affiliated

 

320

 

 

412

 

 

4,085

Net realized capital gains (losses)

 

(73,338)

 

 

274,110

 

 

(87,267)

Other income (expense)

 

3,105

 

 

524

 

 

(6,085)

Net income (loss) of subsidiaries

 

393,552

 

 

370,084

 

 

(906,211)

Total revenues

 

349,659

 

 

680,100

 

 

(956,527)

 

 

 

 

 

 

 

 

   

EXPENSES:

 

 

 

 

 

 

 

   

Interest expense

 

35,508

 

 

34,931

 

 

30,611

Corporate expense

 

9,392

 

 

6,810

 

 

6,337

Total expenses

 

44,900

 

 

41,741

 

 

36,948

 

 

 

 

 

 

 

 

   

INCOME (LOSS) BEFORE TAXES

 

304,760

 

 

638,359

 

 

(993,475)

Income tax expense (benefit)

 

(47,113)

 

 

8,632

 

 

(31,291)

 

 

 

 

 

 

 

 

   

NET INCOME (LOSS)

$

351,873

 

$

629,727

 

$

(962,184)

 

 

 

 

 

 

 

 

   

Other comprehensive income (loss), net of tax :

 

 

 

 

 

 

 

   

Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period

 

163,080

 

 

175,482

 

 

(92,966)

Less: reclassification adjustment for realized losses (gains) included in net income (loss)

 

25,468

 

 

5,080

 

 

2,021

Total URA(D) on securities arising during the period

 

188,548

 

 

180,562

 

 

(90,945)

 

 

 

 

 

 

 

 

   

Foreign currency translation adjustments

 

14,461

 

 

17,153

 

 

(36,431)

 

 

 

 

 

 

 

 

   

Benefit plan actuarial net gain (loss) for the period

 

(5,615)

 

 

(12,591)

 

 

(510)

Reclassification adjustment for amortization of net (gain) loss included in net income (loss)

 

6,300

 

 

5,453

 

 

5,021

Total benefit plan net gain (loss) for the period

 

685

 

 

(7,138)

 

 

4,511

Total other comprehensive income (loss), net of tax

 

203,694

 

 

190,577

 

 

(122,865)

 

 

 

 

 

 

 

 

   

COMPREHENSIVE INCOME (LOSS)  

$

555,567

 

$

820,304

 

$

(1,085,049)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 


S-3


Management assessed the materiality of this change within prior period financial statements based upon SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections.  In accordance with ASC 250, the prior period comparative financial statements that are presented herein have been revised.

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

 

 

 

 

 

 

 

 

 

 

CONDENSED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

(Dollars in thousands)

2020

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

351,873

 

$

629,727

 

$

(962,184)

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Equity in (earnings) deficit of subsidiaries

 

(393,552)

 

 

(370,084)

 

 

906,211

 

 

Dividends received from subsidiary

 

-

 

 

300,000

 

 

90,000

 

 

Increase (decrease) in income taxes

 

119,331

 

 

40,695

 

 

4,687

 

 

Change in equity adjustments in limited partnerships

 

8,491

 

 

2,468

 

 

(2,617)

 

 

Change in other assets and liabilities, net

 

20,179

 

 

(16,615)

 

 

(20,450)

 

 

Amortization of bond premium (accrual of bond discount)

 

63

 

 

13

 

 

370

 

 

Net realized capital losses (gains)

 

73,338

 

 

(274,110)

 

 

87,267

 

 

Net cash provided by (used in) operating activities

 

179,722

 

 

312,094

 

 

103,284

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Additional investment in subsidiaries

 

(949,464)

 

 

15,174

 

 

(1,383,659)

 

 

Proceeds from fixed maturities matured/called - available for sale, at market value

 

1,750

 

 

-

 

 

9,385

 

 

Proceeds from fixed maturities sold - available for sale, at market value

 

-

 

 

12,000

 

 

96,836

 

 

Proceeds from equity maturities sold - at fair value

 

61,883

 

 

18,905

 

 

182,552

 

 

Distributions from other invested assets

 

1,113,176

 

 

389,200

 

 

1,401,606

 

 

Cost of fixed maturities acquired - available for sale, at market value

 

-

 

 

-

 

 

(13,510)

 

 

Cost of equity securities acquired - at fair value

 

(184,542)

 

 

(32,597)

 

 

(39,449)

 

 

Cost of other invested assets acquired

 

(1,211,726)

 

 

(388,598)

 

 

(1,407,352)

 

 

Net change in short-term investments

 

10,529

 

 

(16,403)

 

 

396

 

 

Net change in unsettled securities transaction

 

-

 

 

-

 

 

(99)

 

 

Proceeds from repayment (cost of issuance) of note receivable, affiliated

 

10,000

 

 

(10,000)

 

 

250,000

 

 

Net cash provided by (used in) investing activities

 

(1,148,394)

 

 

(12,319)

 

 

(903,294)

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Capital contribution from parent

 

-

 

 

-

 

 

500,324

 

 

Proceeds from issuance of senior notes

 

979,417

 

 

-

 

 

-

 

 

Cost of debt repurchase

 

(10,647)

 

 

-

 

 

-

 

 

Proceeds from issuance (cost of repayment) for note payable, affiliated

 

-

 

 

(300,000)

 

 

300,000

 

 

Net cash provided by (used in) financing activities

 

968,770

 

 

(300,000)

 

 

800,324

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

98

 

 

(225)

 

 

314

 

 

Cash, beginning of period

 

10,384

 

 

10,609

 

 

10,295

 

 

Cash, end of period

$

10,482

 

$

10,384

 

$

10,609

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash financing transaction:

 

 

 

 

 

 

 

 

 

 

Equity value of non-cash capital contribution of affiliate from

 

 

 

 

 

 

 

 

 

 

parent, net of cash held by affiliate

$

-

 

$

-

 

$

211,928

 

 

Non-cash contribution from parent

 

-

 

 

-

 

 

221

 

 

Non-cash contribution to subsidiaries

 

-

 

 

-

 

 

(221)

 

 

See notes to consolidated financial statements.

 

 


S-4


F-56


The following tables present line items for prior period financial statements that have been affected by the revision. For these line items, the tables detail the amounts as previously reported, the impact upon those line items due to the revision, and the amounts as currently revised within the financial statements.


CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2017 
AND COMPREHENSIVE INCOME (LOSS): As Previously  Impact of    
  Reported  Revisions  As Revised 
(Dollars in thousands)         
CLAIMS AND EXPENSES:         
Commission, brokerage, taxes and fees $49,470  $3,037  $52,507 
Total claims and expenses  411,543   3,037   414,580 
             
INCOME (LOSS) BEFORE TAXES  247,984   (3,037)  244,947 
Income tax expense (benefit)  76,940   (1,171)  75,769 
             
NET INCOME (LOSS) $171,044  $(1,866) $169,178 
             
COMPREHENSIVE INCOME (LOSS) $182,587  $(1,866) $180,721 

CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended December 31, 2016  Three Months Ended September 30, 2016 
AND COMPREHENSIVE INCOME (LOSS): As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CLAIMS AND EXPENSES:                  
Commission, brokerage, taxes and fees $63,471  $(1,599) $61,872  $85,563  $(2,785) $82,778 
Total claims and expenses  551,765   (1,599)  550,166   462,009   (2,785)  459,224 
                         
INCOME (LOSS) BEFORE TAXES  141,369   1,599   142,968   95,943   2,785   98,728 
Income tax expense (benefit)  27,693   296   27,989   21,145   1,280   22,425 
                         
NET INCOME (LOSS) $113,676  $1,303  $114,979  $74,798  $1,505  $76,303 
                         
COMPREHENSIVE INCOME (LOSS) $22,012  $1,303  $23,315  $74,465  $1,505  $75,970 

CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30, 2016  Three Months Ended March 31, 2016 
AND COMPREHENSIVE INCOME (LOSS): As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CLAIMS AND EXPENSES:                  
Commission, brokerage, taxes and fees $72,126  $(1,717) $70,409  $68,822  $(2,457) $66,365 
Total claims and expenses  479,860   (1,717)  478,143   435,306   (2,457)  432,849 
                         
INCOME (LOSS) BEFORE TAXES  101,332   1,717   103,049   51,789   2,457   54,246 
Income tax expense (benefit)  32,982   695   33,677   12,863   393   13,256 
                         
NET INCOME (LOSS) $68,350  $1,022  $69,372  $38,926  $2,064  $40,990 
                         
COMPREHENSIVE INCOME (LOSS) $124,381  $1,022  $125,403  $100,713  $2,064  $102,777 

CONSOLIDATED STATEMENTS OF Three Months Ended March 31, 2017 
CHANGES IN STOCKHOLDER'S EQUITY As Previously  Impact of    
  Reported  Revisions  As Revised 
(Dollars in thousands, except share amounts)         
RETAINED EARNINGS:         
Balance, beginning of period $4,914,308  $32,993  $4,947,301 
Net income (loss)  171,044   (1,866)  169,178 
Balance, end of period  5,085,352   31,127   5,116,479 
 TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $5,448,217  $31,127  $5,479,344 

F-57

CONSOLIDATED STATEMENTS OF Three Months Ended December 31, 2016  Three Months Ended September 30, 2016 
CHANGES IN STOCKHOLDER'S EQUITY As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands, except share amounts)                  
RETAINED EARNINGS:                  
Balance, beginning of period $4,800,632  $31,690  $4,832,322  $4,725,834  $30,185  $4,756,019 
Net income (loss)  113,676   1,303   114,979   74,798   1,505   76,303 
Balance, end of period  4,914,308   32,993   4,947,301   4,800,632   31,690   4,832,322 
 TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $5,265,560  $32,993  $5,298,553  $5,240,955  $31,690  $5,272,645 

CONSOLIDATED STATEMENTS OF Three Months Ended June 30, 2016  Three Months Ended March 31, 2016 
CHANGES IN STOCKHOLDER'S EQUITY As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands, except share amounts)                  
RETAINED EARNINGS:                  
Balance, beginning of period $4,657,484  $29,163  $4,686,647  $4,618,558  $27,099  $4,645,657 
Net income (loss)  68,350   1,022   69,372   38,926   2,064   40,990 
Balance, end of period  4,725,834   30,185   4,756,019   4,657,484   29,163   4,686,647 
 TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $5,164,053  $30,185  $5,194,238  $5,036,717  $29,163  $5,065,880 

CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2017 
  As Previously  Impact of    
  Reported  Revisions  As Revised 
(Dollars in thousands)         
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income (loss) $171,044  $(1,866) $169,178 
Decrease (increase) in income taxes  75,304   (1,172)  74,132 
Increase (decrease) in other net payable to reinsurers  (30,525)  3,347   (27,178)
Change in other assets and liabilities, net  18,204   (309)  17,895 

CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, 2016  Three Months Ended September 30, 2016 
  As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income (loss) $113,676  $1,303  $114,979  $74,798  $1,505  $76,303 
Decrease (increase) in income taxes  27,046   298   27,344   25,089   1,279   26,368 
Increase (decrease) in other net payable to reinsurers  (154,982)  (850)  (155,832)  160,982   (3,653)  157,329 
Change in other assets and liabilities, net  141,045   (751)  140,294   (139,171)  869   (138,302)

CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended June 30, 2016  Three Months Ended March 31, 2016 
  As Previously  Impact of     As Previously  Impact of    
  Reported  Revisions  As Revised  Reported  Revisions  As Revised 
(Dollars in thousands)                  
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income (loss) $68,350  $1,022  $69,372  $38,926  $2,064  $40,990 
Decrease (increase) in income taxes  1,644   696   2,340   6,546   393   6,939 
Increase (decrease) in other net payable to reinsurers  (263,654)  (1,989)  (265,643)  (106,588)  (1,122)  (107,710)
Change in other assets and liabilities, net  (10,280)  271   (10,009)  24,496   (1,335)  23,161 
F-58

SCHEDULE I – SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2017




Column A Column B  Column C  Column D 
        Amount 
        Shown in 
     Market  Balance 
(Dollars in thousands) Cost  Value  Sheet 
Fixed maturities-available for sale         
Bonds:         
U.S. government and government agencies $671,449  $664,513  $664,513 
State, municipalities and political subdivisions  563,789   585,469   585,469 
Foreign government securities  514,048   523,620   523,620 
Foreign corporate securities  863,861   870,989   870,989 
Public utilities  52,712   52,860   52,860 
All other corporate bonds  2,093,124   2,107,350   2,107,350 
Mortgage - backed securities            
Commercial  52,121   51,751   51,751 
Agency residential  114,435   113,288   113,288 
Non-agency residential  51   58   58 
Redeemable preferred stock  2,032   2,023   2,023 
Total fixed maturities-available for sale  4,927,622   4,971,921   4,971,921 
Equity securities - available for sale, at fair value(1)
  592,816   822,375   822,375 
Short-term investments  241,506   241,506   241,506 
Other invested assets  835,597   838,694   838,694 
Other invested assets, at fair value (1)
  1,773,214   1,807,473   1,807,473 
Cash  229,552   229,552   229,552 
             
Total investments and cash $8,600,307  $8,911,521  $8,911,521 
             
(Some amounts may not reconcile due to rounding.)            
(1) Original cost does not reflect adjustments, which have been realized through the statements of operations and comprehensive income.


S-1

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED BALANCE SHEETS



  At December 31, 
(Dollars and share amounts in thousands, except par value per share) 2017  2016 
ASSETS:      
Fixed maturities - available for sale, at market value $108,010  $98,143 
(amortized cost: 2017, $109,008; 2016, $99,391)        
Equity securities - available for sale, at fair value  191,098   133,755 
Other invested assets  51,616   31,113 
Other invested assets, at fair value  1,807,473   1,766,626 
Short-term investments  4,507   13,013 
Cash  10,295   10,222 
Total investments and cash  2,172,999   2,052,872 
Investment in subsidiaries, at equity in the underlying net assets  3,842,806   3,931,264 
Note receivable - affiliated  250,000   250,000 
Accrued investment income  644   4,938 
Advances to affiliates  (72)  218 
Other assets  4,832   17,618 
TOTAL ASSETS $6,271,209  $6,256,910 
         
LIABILITIES:        
4.868% Senior notes due 6/1/2044 $396,834  $396,714 
6.6% Long term notes due 5/1/2067  236,561   236,462 
Accrued interest on debt and borrowings  2,727   3,537 
Income taxes  196,270   309,816 
Due to affiliates  25,475   9,705 
Other liabilities  619   2,123 
Total liabilities  858,486   958,357 
         
STOCKHOLDER'S EQUITY:        
Common stock, par value:  $0.01; 3,000 shares authorized;        
1,000 shares issued and outstanding (2017 and 2016)  -   - 
Additional paid-in capital  387,841   387,567 
Accumulated other comprehensive income (loss), net of deferred income        
tax expense (benefit) of ($299) at 2017 and ($19,549) at 2016  (942)  (36,315)
Retained earnings  5,025,824   4,947,301 
Total stockholder's equity  5,412,723   5,298,553 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $6,271,209  $6,256,910 
         
See notes to consolidated financial statements.        



S-2

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS




  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
REVENUES:         
Net investment income $34,813  $33,748  $40,441 
Net investment income - Affiliated  4,300   4,300   4,300 
Net realized capital gains (losses)  81,027   (12,635)  119,075 
Realized gain of sale of subsidiary  -   (28,032)  94,704 
Other income (expense)  (297)  (268)  (263)
Net income (loss) of subsidiaries  (124,269)  288,851   274,362 
Total revenues  (4,426)  285,964   532,619 
             
EXPENSES:            
Interest expense  31,183   35,435   35,434 
Corporate expense  5,233   6,713   5,251 
Total expenses  36,416   42,148   40,685 
             
INCOME (LOSS) BEFORE TAXES  (40,842)  243,816   491,934 
Income tax expense (benefit)  (119,040)  (57,828)  79,544 
             
NET INCOME (LOSS) $78,198  $301,644  $412,390 
             
Other comprehensive income (loss), net of tax :            
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period  (10,536)  4,114   (23,157)
Less: reclassification adjustment for realized losses (gains) included in net income (loss)  2,303   21,273   (817)
Total URA(D) on securities arising during the period  (8,233)  25,387   (23,974)
             
Foreign currency translation adjustments  37,427   2,849   (54,578)
             
Benefit plan actuarial net gain (loss) for the period  1,027   (7,488)  5,681 
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)  5,477   5,073   6,216 
Total benefit plan net gain (loss) for the period  6,504   (2,415)  11,897 
Total other comprehensive income (loss), net of tax  35,698   25,821   (66,655)
             
COMPREHENSIVE INCOME (LOSS) $113,896  $327,465  $345,735 
             
See notes to consolidated financial statements.            
S-3

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS



  Years Ended December 31, 
(Dollars in thousands) 2017  2016  2015 
          
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income (loss) $78,198  $301,644  $412,390 
Adjustments to reconcile net income to net cash provided by operating activities:            
Equity in (earnings) deficit of subsidiaries  124,269   (288,851)  (274,362)
Decrease (increase) in advances to affiliates  -   -   20,243 
Increase (decrease) in income taxes  (113,773)  (44,260)  1,082 
Change in equity adjustments in limited partnerships  (121)  (220)  - 
Change in other assets and liabilities, net  31,044   (2,187)  (6,872)
Amortization of bond premium (accrual of bond discount)  450   400   259 
Net realized capital losses (gains)  (81,027)  40,667   (119,075)
Net cash provided by (used in) operating activities  39,040   7,193   33,665 
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Additional investment in subsidiaries  741   (4,815)  (2,837)
Proceeds from fixed maturities matured/called - available for sale, at market value  6,612   5,244   2,972 
Proceeds from fixed maturities sold - available for sale, at market value  7,189   -   - 
Proceeds from equity maturities sold - available for sale, at fair value  37,634   23,777   43,402 
Proceeds from sale of subdisidiary (net of cash disposed)  -   47,721   3,934 
Distributions from other invested assets  132,064   93,959   - 
Cost of fixed maturities acquired - available for sale, at market value  (24,058)  (39,214)  (60,240)
Cost of equity securities acquired - available for sale, at fair value  (54,605)  (32,361)  (76,559)
Cost of other invest assets acquired  (152,446)  (121,806)  - 
Net change in short-term investments  8,506   24,789   54,588 
Net change in unsettled securities transaction  (604)  (497)  1,101 
Net cash provided by (used in) investing activities  (38,967)  (3,203)  (33,639)
             
Net increase (decrease) in cash  73   3,990   26 
Cash, beginning of period  10,222   6,232   6,206 
Cash, end of period $10,295  $10,222  $6,232 
             
Non-cash financing transaction:            
Non-cash contribution from parent $598  $12,778  $12,497 
Non-cash contribution to subsidiaries  (598)  (12,778)  (12,497)
             
             
NON-CASH TRANSACTION (2015):            
Exchange of common shares of parent company, held as other invested assets at fair value, $-  $-  $1,773,214 
for preferred shares of an affiliated company, held as other invested assets at fair value            
             
See notes to consolidated financial statements.            


S-4

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

NOTES TO CONDENSED FINANCIAL INFORMATION

1)    The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and related Notes of Everest Reinsurance Holdings, Inc. and its Subsidiaries.

2)    The Senior Notes and Long-Term Subordinated Notes presented in Notes 5 and 6 are direct obligations of the Registrant.

3)    Everest Re Group, Ltd., the parent company, entered into a $250,000 thousand long term promissory note agreement with Everest Reinsurance Holdings, Inc. as of December 31, 2014.  The note was scheduled to mature on December 31, 2023 but was repaid in December 2018.

4)    Effective December 31, 2018, Everest Reinsurance Holdings, Inc. entered into a $300,000 thousand long-term promissory note agreement with Everest Reinsurance (Bermuda) Ltd., an affiliated entity.  The note was scheduled to mature on December 31, 2023 but was repaid in May, 2019.

5)    Effective February 19, 2019, Everest Reinsurance Holdings, Inc. entered into a $10,000 thousand long term promissory note with Everest Indemnity Insurance Company, an affiliated entity. The note was scheduled to mature on February 19, 2049 but was repaid in September 2020.

6)    In December, 2015, Holdings transferred the 9,719,971 Common Shares of Group, which it held as other invested assets, at fair value, valued at $1,773,214 thousand, to Preferred Holdings, an affiliated entity and subsidiary of Group, in exchange for 1,773.214 preferred shares of Preferred Holdings with a $1,000 thousand par value and 1.75% annual dividend rate.  After the exchange, Holdings no longer holds any shares or has any ownership interest in Group.

S-5



EVEREST REINSURANCE HOLDINGS, INC.

SCHEDULE  III - SUPPLEMENTARY INSURANCE INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Column A

 

Column B

 

 

Column C

 

 

Column D

 

 

Column E

 

 

Column F

 

 

Column G

 

 

Column H

 

 

Column I

 

 

Column J

 

 

 

 

 

Reserve

 

 

 

 

 

 

 

 

 

 

 

Incurred

 

 

 

 

 

 

 

 

 

Segment

 

 

 

 

for Losses

 

 

 

 

 

 

 

 

 

 

 

Loss and

 

 

Amortization

 

 

 

 

 

 

 

 

Deferred

 

 

and Loss

 

 

Unearned

 

 

 

 

 

Net

 

 

Loss

 

 

of Deferred

 

 

Other

 

 

Net

 

 

Acquisition

 

 

Adjustment

 

 

Premium

 

 

Premiums

 

 

Investment

 

 

Adjustment

 

 

Acquisition

 

 

Operating

 

 

Written

(Dollars in thousands)

 

Costs

 

 

Expenses

 

 

Reserves

 

 

Earned

 

 

Income

 

 

Expenses

 

 

Costs

 

 

Expenses

 

 

Premium

As of and for the year ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reinsurance

$

169,346

 

$

7,896,076

 

$

1,127,815

 

$

4,484,693

 

$

254,671

 

$

3,209,160

 

$

1,119,966

 

$

119,320

 

$

4,632,265

Insurance

 

210,361

 

 

3,758,874

 

 

1,257,359

 

 

1,921,883

 

 

121,235

 

 

1,398,984

 

 

253,389

 

 

281,713

 

 

2,006,435

Total

$

379,707

 

$

11,654,950

 

$

2,385,174

 

$

6,406,576

 

$

375,906

 

$

4,608,144

 

$

1,373,355

 

$

401,033

 

$

6,638,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the year ended December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reinsurance

$

182,531

 

$

7,138,800

 

$

1,069,829

 

$

3,796,136

 

$

249,073

 

$

2,692,680

 

$

1,027,286

 

$

110,032

 

$

3,923,799

Insurance

 

205,707

 

 

3,070,719

 

 

1,129,103

 

 

1,692,899

 

 

107,138

 

 

1,136,442

 

 

242,767

 

 

240,869

 

 

1,851,150

Total

$

388,238

 

$

10,209,519

 

$

2,198,932

 

$

5,489,035

 

$

356,211

 

$

3,829,122

 

$

1,270,053

 

$

350,901

 

$

5,774,949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the year ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reinsurance

$

185,328

   

$

7,417,941

   

$

939,693

   

$

3,386,386

   

$

229,375

   

$

3,811,747

   

$

923,902

   

$

97,927

   

$

3,519,704

Insurance

 

168,302

   

 

2,749,077

   

 

887,175

   

 

1,452,672

   

 

85,006

   

 

999,271

   

 

217,812

   

 

195,420

   

 

1,512,158

Total

$

353,630

   

$

10,167,018

   

$

1,826,868

   

$

4,839,058

   

$

314,381

   

$

4,811,018

   

$

1,141,714

   

$

293,347

   

$

5,031,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)


S-6



SCHEDULE IV - REINSURANCE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Column A

 

Column B

 

 

Column C

 

 

Column D

 

 

Column E

 

 

Column F

 

 

 

 

 

Ceded to

 

 

Assumed

 

 

 

 

 

 

 

 

Gross

 

 

Other

 

 

from Other

 

 

Net

 

 

Assumed

(Dollars in thousands)

 

Amount

 

 

Companies

 

 

Companies

 

 

Amount

 

 

to Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total property and liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

insurance premiums earned

$

2,591,613

 

$

1,368,436

 

$

5,183,399

 

$

6,406,576

 

$

80.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total property and liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

insurance premiums earned

$

2,255,387

 

$

1,193,359

 

$

4,427,006

 

$

5,489,034

 

$

80.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total property and liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

insurance premiums earned

$

1,903,576

 

$

1,512,380

 

$

4,447,862

 

$

4,839,058

 

$

91.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



1)The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and related Notes of Everest Reinsurance Holdings, Inc. and its Subsidiaries.

2)The Senior Notes and Long-Term Subordinated Notes presented in Notes 6 and 7 are direct obligations of the Registrant.

3)Everest Re Group, Ltd., the parent company, entered into a $250,000 thousand long term promissory note agreement with Everest Reinsurance Holdings, Inc. as of December 31, 2014. The note will mature on December 31, 2023 and has an interest rate of 1.72% that will be paid annually.  This transaction is presented as a Note Receivable – Affiliated in the Condensed Balance Sheets of Everest Reinsurance Holdings, Inc.

4)In December, 2015, Holdings transferred the 9,719,971 Common Shares of Group, which it held as other invested assets, at fair value, valued at $1,773,214 thousand, to Preferred Holdings, an affiliated entity and subsidiary of Group, in exchange for 1,773.214 preferred shares of Preferred Holdings with a $1,000 thousand par value and 1.75% annual dividend rate.  After the exchange, Holdings no longer holds any shares or has any ownership interest in Group.

S-5S-


7

SCHEDULE III – SUPPLEMENTARY INSURANCE INFORMATION




Column A Column B  Column C  Column D  Column E  Column F  Column G  Column H  Column I  Column J 
     Reserve           Incurred          
 Geographic Area    for Losses           Loss and  Amortization       
  Deferred  and Loss  Unearned     Net  Loss  of Deferred  Other  Net 
  Acquisition  Adjustment  Premium  Premiums  Investment  Adjustment  Acquisition  Operating  Written 
 (Dollars in thousands) Costs  Expenses  Reserves  Earned  Income  Expenses  Costs  Expenses  Premium 
December 31, 2017                           
Domestic $260,706  $7,070,895  $1,352,987  $1,447,273  $253,852  $1,416,998  $108,989  $218,595  $2,108,449 
International  47,035   2,272,133   254,635   502,322   32,407   622,753   101,936   36,291   615,395 
Total $307,741  $9,343,028  $1,607,622  $1,949,595  $286,259  $2,039,751  $210,925  $254,886  $2,723,844 
                            ��        
December 31, 2016                                    
Domestic $44,301  $6,489,232  $1,054,832  $1,583,134  $231,748  $1,142,675  $169,910  $210,712  $1,550,477 
International  24,320   1,842,056   257,553   510,915   33,059   207,605   111,514   34,254   497,645 
Total $68,621  $8,331,288  $1,312,386  $2,094,049  $264,807  $1,350,280  $281,424  $244,966  $2,048,122 
                                     
December 31, 2015                                    
Domestic $61,807  $6,033,374  $1,059,530  $1,562,544  $239,072  $924,742  $191,167  $180,516  $1,530,592 
International  24,596   1,907,346   290,269   581,216   34,181   394,819   121,158   34,303   562,691 
Total $86,402  $7,940,720  $1,349,799  $2,143,760  $273,253  $1,319,561  $312,325  $214,819  $2,093,283 
                                     
(Some amounts may not reconcile due to rounding.)                                 




S-6

SCHEDULE IV – REINSURANCE




Column A Column B  Column C  Column D  Column E  Column F 
     Ceded to  Assumed       
  Gross  Other  from Other  Net  Assumed 
(Dollars in thousands) Amount  Companies  Companies  Amount  to Net 
                
December 31, 2017               
Total property and liability               
insurance premiums earned $1,655,023  $3,548,264  $3,842,836  $1,949,595   197.1%
                     
December 31, 2016                    
Total property and liability                    
insurance premiums earned $1,608,783  $3,007,332  $3,492,598  $2,094,049   166.8%
                     
December 31, 2015                    
Total property and liability                    
insurance premiums earned $1,439,795  $2,933,519  $3,637,484  $2,143,760   169.7%


S-7