UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED:
September 30, 2017
| | Commission file number:
1-14527
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X | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2023
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| 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 | | | | | | | | |
Delaware | | 22-3263609 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
477 Martinsville Road
Post Office Box 830
Liberty Corner, New Jersey 07938-0830 | | | | | | | | |
100 Everest Way Warren, New Jersey | | 07059 |
(Address of principal executive offices) | | (Zip Code) |
(908) 604-3000
(Address, including zip code, and telephoneRegistrant’s Telephone number, including area code,code)
of registrant's principal executive office)Not Applicable
(Former name, former address and former fiscal year, if changed since last report)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.
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 (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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.
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Large accelerated filer | | | Accelerated filer | |
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Non-accelerated filerFiler | X | | Smaller reporting company | |
(Do not check if smaller reporting company)
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| | | Emerging growth company | |
IndicateIf an 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.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date.
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| | Number of Shares Outstanding |
Class | | At NovemberAugust 1, 2017 2023 |
Common Shares, $0.01 par value | | 1,000 |
The Registrant meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H of Form 10-Q.
EVEREST REINSURANCE HOLDINGS, INC.
Table of Contents
Form 10-Q
Page
PART I
FINANCIAL INFORMATION
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Item 1. |
| Financial Statements | Page |
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| | December 31, 2016 (unaudited) | 1 |
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| | three and nine months ended September 30, 2017 and 2016 (unaudited) | 2 |
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| | nine months ended September 30, 2017 and 2016 (unaudited) | 3 |
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| | September 30, 2017 and 2016 (unaudited) | 4 |
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| | Management's | |
| | | Results of Operations | 34 |
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PART II
OTHER INFORMATION
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Item 1. | | Legal Proceedings | 51 |
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Item 1A. | | Risk Factors | 52 |
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| | Exhibits | 52 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| June 30, | | December 31, |
(Dollars in millions, except share amounts and par value per share) | 2023 | | 2022 |
| (unaudited) | | |
ASSETS: | | | |
Fixed maturities - available for sale, at fair value (amortized cost: 2023, $15,141; 2022, $13,699, credit allowances: 2023, $(57); 2022, $(46)) | $ | 14,202 | | | $ | 12,671 | |
Fixed maturities - held to maturity, at amortized cost (fair value: 2023, $771; 2022, $793, net of credit allowances: 2023, $(8); 2022, $(9)) | 788 | | | 811 | |
Equity securities, at fair value | 167 | | | 194 | |
Other invested assets | 2,853 | | | 2,754 | |
Other invested assets, at fair value | 1,474 | | | 1,472 | |
Short-term investments | 1,095 | | | 812 | |
Cash | 478 | | | 481 | |
Total investments and cash | 21,056 | | | 19,195 | |
Notes receivable - affiliated | — | | | 840 | |
Accrued investment income | 187 | | | 150 | |
Premiums receivable (net of credit allowances:2023, $(22); 2022, $(21)) | 2,084 | | | 1,721 | |
Reinsurance recoverables - unaffiliated (net of credit allowances:2023, $(21); 2022, $(21)) | 1,960 | | | 1,841 | |
Reinsurance recoverables - affiliated | 1,830 | | | 1,935 | |
Income tax asset, net | 201 | | | 288 | |
Funds held by reinsureds | 295 | | | 303 | |
Deferred acquisition costs | 530 | | | 499 | |
Prepaid reinsurance premiums | 522 | | | 463 | |
Other assets (net of credit allowances: 2023, $(7); 2022, $(5)) | 830 | | | 722 | |
TOTAL ASSETS | $ | 29,494 | | | $ | 27,957 | |
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LIABILITIES: | | | |
Reserve for losses and loss adjustment expenses | $ | 15,512 | | | $ | 14,977 | |
Unearned premium reserve | 3,497 | | | 3,177 | |
Funds held under reinsurance treaties | 55 | | | 43 | |
Amounts due to reinsurers | 509 | | | 436 | |
Losses in course of payment | 72 | | | 77 | |
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Senior notes | 2,348 | | | 2,347 | |
Long-term notes | 218 | | | 218 | |
Borrowings from FHLB | 519 | | | 519 | |
Accrued interest on debt and borrowings | 19 | | | 19 | |
Unsettled securities payable | 10 | | | 1 | |
Other liabilities | 446 | | | 489 | |
Total liabilities | 23,204 | | | 22,303 | |
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Commitments and Contingencies (Note 11) | | | |
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STOCKHOLDER'S EQUITY: | | | |
Common stock, par value: $0.01; 3,000 shares authorized; 1,000 shares issued and outstanding (2023 and 2022) | — | | | — | |
Additional paid-in capital | 1,102 | | | 1,102 | |
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $(202) at 2023 and $(225) at 2022 | (762) | | | (848) | |
Retained earnings | 5,950 | | | 5,400 | |
Total stockholder's equity | 6,290 | | | 5,654 | |
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | $ | 29,494 | | | $ | 27,957 | |
| | September 30, | | | December 31, | |
(Dollars in thousands, except par value per share) | | 2017 | | | 2016 | |
| | (unaudited) | |
ASSETS: | | | | | | |
Fixed maturities - available for sale, at market value | | $ | 6,039,361 | | | $ | 5,970,496 | |
(amortized cost: 2017, $5,974,256; 2016, $5,910,494) | | | | | | | | |
Equity securities - available for sale, at fair value | | | 998,071 | | | | 887,800 | |
Short-term investments | | | 229,999 | | | | 306,286 | |
Other invested assets (cost: 2017, $736,566; 2016, $613,680) | | | 739,486 | | | | 613,740 | |
Other invested assets, at fair value | | | 1,922,402 | | | | 1,766,626 | |
Cash | | | 302,331 | | | | 297,794 | |
Total investments and cash | | | 10,231,650 | | | | 9,842,742 | |
Note receivable - affiliated | | | 250,000 | | | | 250,000 | |
Accrued investment income | | | 45,575 | | | | 45,323 | |
Premiums receivable | | | 1,564,491 | | | | 1,128,639 | |
Reinsurance receivables - unaffiliated | | | 1,116,370 | | | | 887,657 | |
Reinsurance receivables - affiliated | | | 4,137,998 | | | | 3,686,130 | |
Funds held by reinsureds | | | 204,989 | | | | 190,421 | |
Deferred acquisition costs | | | 65,519 | | | | 68,621 | |
Prepaid reinsurance premiums | | | 1,115,344 | | | | 781,384 | |
Other assets | | | 411,425 | | | | 202,519 | |
TOTAL ASSETS | | $ | 19,143,361 | | | $ | 17,083,436 | |
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LIABILITIES: | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 9,969,148 | | | $ | 8,331,288 | |
Unearned premium reserve | | | 1,628,717 | | | | 1,312,386 | |
Funds held under reinsurance treaties | | | 125,463 | | | | 110,836 | |
Losses in the course of payment | | | 193,948 | | | | 82,915 | |
Commission reserves | | | 24,932 | | | | 52,037 | |
Other net payable to reinsurers | | | 1,158,259 | | | | 815,298 | |
4.868% Senior notes due 6/1/2044 | | | 396,804 | | | | 396,714 | |
6.6% Long term notes due 5/1/2067 | | | 236,536 | | | | 236,462 | |
Accrued interest on debt and borrowings | | | 7,564 | | | | 3,537 | |
Income taxes | | | (29,533 | ) | | | 148,940 | |
Unsettled securities payable | | | 39,660 | | | | 27,121 | |
Other liabilities | | | 224,219 | | | | 267,349 | |
Total liabilities | | | 13,975,717 | | | | 11,784,883 | |
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Commitments and Contingencies (Note 7) | | | | | | | | |
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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 | | | 387,772 | | | | 387,567 | |
Accumulated other comprehensive income (loss), net of deferred income tax expense | | | | | | | | |
(benefit) of $9,405 at 2017 and ($19,549) at 2016 | | | 17,459 | | | | (36,315 | ) |
Retained earnings | | | 4,762,413 | | | | 4,947,301 | |
Total stockholder's equity | | | 5,167,644 | | | | 5,298,553 | |
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | | $ | 19,143,361 | | | $ | 17,083,436 | |
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The accompanying notes are an integral part of the consolidated financial statements. | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| (unaudited) | | (unaudited) |
REVENUES: | | | | | | | |
Premiums earned | $ | 2,131 | | | $ | 1,954 | | | $ | 4,200 | | | $ | 3,783 | |
Net investment income | 242 | | | 176 | | | 432 | | | 333 | |
Total net gains (losses) on investments | (22) | | | (378) | | | — | | | (605) | |
Other income (expense) | (10) | | | — | | | (15) | | | (9) | |
Total revenues | 2,341 | | | 1,753 | | | 4,618 | | | 3,502 | |
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CLAIMS AND EXPENSES: | | | | | | | |
Incurred losses and loss adjustment expenses | 1,325 | | | 1,304 | | | 2,719 | | | 2,530 | |
Commission, brokerage, taxes and fees | 433 | | | 409 | | | 869 | | | 793 | |
Other underwriting expenses | 136 | | | 120 | | | 275 | | | 238 | |
Corporate expenses | 4 | | | 6 | | | 10 | | | 12 | |
Interest, fees and bond issue cost amortization expense | 33 | | | 24 | | | 65 | | | 48 | |
Total claims and expenses | 1,930 | | | 1,863 | | | 3,938 | | | 3,621 | |
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INCOME (LOSS) BEFORE TAXES | 411 | | | (110) | | | 679 | | | (119) | |
Income tax expense (benefit) | 81 | | | (25) | | | 130 | | | (35) | |
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NET INCOME (LOSS) | $ | 330 | | | $ | (86) | | | $ | 549 | | | $ | (85) | |
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Other comprehensive income (loss), net of tax: | | | | | | | |
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period | (44) | | | (411) | | | 68 | | | (805) | |
Less: reclassification adjustment for realized losses (gains) included in net income (loss) | 6 | | | 6 | | | 15 | | | 8 | |
Total URA(D) on securities arising during the period | (38) | | | (405) | | | 83 | | | (797) | |
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Foreign currency translation adjustments | (4) | | | (10) | | | 2 | | | (12) | |
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Reclassification adjustment for amortization of net (gain) loss included in net income (loss) | — | | | 1 | | | 1 | | | 2 | |
Total benefit plan net gain (loss) for the period | — | | | 1 | | | 1 | | | 2 | |
Total other comprehensive income (loss), net of tax | (42) | | | (414) | | | 86 | | | (807) | |
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COMPREHENSIVE INCOME (LOSS) | $ | 288 | | | $ | (500) | | | $ | 636 | | | $ | (892) | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | (unaudited) | | (unaudited) |
REVENUES: | | | | | | | | | | | | |
Premiums earned | | $ | 518,507 | | | $ | 556,653 | | | $ | 1,457,759 | | | $ | 1,527,433 | |
Net investment income | | | 73,417 | | | | 64,570 | | | | 206,166 | | | | 196,887 | |
Net realized capital gains (losses): | | | | | | | | | | | | | | | | |
Other-than-temporary impairments on fixed maturity securities | | | (1,473 | ) | | | (836 | ) | | | (4,179 | ) | | | (25,242 | ) |
Other-than-temporary impairments on fixed maturity securities | | | | | | | | | | | | | | | | |
transferred to other comprehensive income (loss) | | | - | | | | - | | | | - | | | | - | |
Realized gain(loss) on sale of subsidiary | | | - | | | | (28,032 | ) | | | - | | | | (28,032 | ) |
Other net realized capital gains (losses) | | | 229,962 | | | | (21,195 | ) | | | 258,145 | | | | (34,001 | ) |
Total net realized capital gains (losses) | | | 228,489 | | | | (50,063 | ) | | | 253,966 | | | | (87,275 | ) |
Other income (expense) | | | 1,486 | | | | (13,208 | ) | | | 21,996 | | | | (10,806 | ) |
Total revenues | | | 821,899 | | | | 557,952 | | | | 1,939,887 | | | | 1,626,239 | |
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CLAIMS AND EXPENSES: | | | | | | | | | | | | | | | | |
Incurred losses and loss adjustment expenses | | | 1,331,558 | | | | 301,603 | | | | 1,918,508 | | | | 936,201 | |
Commission, brokerage, taxes and fees | | | 34,545 | | | | 82,778 | | | | 147,565 | | | | 219,552 | |
Other underwriting expenses | | | 57,713 | | | | 64,149 | | | | 181,805 | | | | 181,706 | |
Corporate expenses | | | 1,132 | | | | 1,835 | | | | 6,241 | | | | 6,181 | |
Interest, fee and bond issue cost amortization expense | | | 7,161 | | | | 8,859 | | | | 23,974 | | | | 26,576 | |
Total claims and expenses | | | 1,432,109 | | | | 459,224 | | | | 2,278,093 | | | | 1,370,216 | |
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INCOME (LOSS) BEFORE TAXES | | | (610,210 | ) | | | 98,728 | | | | (338,206 | ) | | | 256,023 | |
Income tax expense (benefit) | | | (220,486 | ) | | | 22,425 | | | | (153,318 | ) | | | 69,358 | |
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NET INCOME (LOSS) | | $ | (389,724 | ) | | $ | 76,303 | | | $ | (184,888 | ) | | $ | 186,665 | |
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Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | | | | |
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period | | | 530 | | | | 3,808 | | | | 13,794 | | | | 62,672 | |
Less: reclassification adjustment for realized losses (gains) included in net income (loss) | | | (1,674 | ) | | | (2,767 | ) | | | (8,618 | ) | | | 23,085 | |
Total URA(D) on securities arising during the period | | | (1,144 | ) | | | 1,041 | | | | 5,176 | | | | 85,757 | |
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Foreign currency translation adjustments | | | 34,281 | | | | (2,642 | ) | | | 43,220 | | | | 27,779 | |
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Benefit plan actuarial net gain (loss) for the period | | | - | | | | - | | | | - | | | | - | |
Reclassification adjustment for amortization of net (gain) loss included in net income (loss) | | | 1,369 | | | | 1,268 | | | | 5,377 | | | | 3,949 | |
Total benefit plan net gain (loss) for the period | | | 1,369 | | | | 1,268 | | | | 5,377 | | | | 3,949 | |
Total other comprehensive income (loss), net of tax | | | 34,507 | | | | (333 | ) | | | 53,774 | | | | 117,485 | |
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COMPREHENSIVE INCOME (LOSS) | | $ | (355,217 | ) | | $ | 75,970 | | | $ | (131,114 | ) | | $ | 304,150 | |
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The accompanying notes are an integral part of the consolidated financial statements. | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'SSTOCKHOLDER’S EQUITY
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions, except share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
| (unaudited) | | (unaudited) |
COMMON STOCK (shares outstanding): | | | | | | | |
Balance, beginning of period | 1,000 | | 1,000 | | 1,000 | | 1,000 |
Balance, end of period | 1,000 | | 1,000 | | 1,000 | | 1,000 |
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ADDITIONAL PAID-IN CAPITAL: | | | | | | | |
Balance, beginning of period | $ | 1,102 | | | $ | 1,102 | | | $ | 1,102 | | | $ | 1,102 | |
Share-based compensation plans | — | | | — | | | — | | | — | |
Balance, end of period | 1,102 | | | 1,102 | | | 1,102 | | | 1,102 | |
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME TAXES: | | | | | | | |
Balance, beginning of period | (720) | | | (302) | | | (848) | | | 91 | |
Net increase (decrease) during the period | (42) | | | (414) | | | 86 | | | (807) | |
Balance, end of period | (762) | | | (716) | | | (762) | | | (716) | |
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RETAINED EARNINGS: | | | | | | | |
Balance, beginning of period | 5,620 | | | 5,846 | | | 5,400 | | | 5,845 | |
Net income (loss) | 330 | | | (86) | | | 549 | | | (85) | |
Balance, end of period | 5,950 | | | 5,760 | | | 5,950 | | | 5,760 | |
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TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | $ | 6,290 | | | $ | 6,146 | | | $ | 6,290 | | | $ | 6,146 | |
The accompanying notes are an integral part of the consolidated financial statements.
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands, except share amounts) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | (unaudited) | | (unaudited) |
COMMON STOCK (shares outstanding): | | | | | | | | | | | | |
Balance, beginning of period | | | 1,000 | | | | 1,000 | | | | 1,000 | | | | 1,000 | |
Balance, end of period | | | 1,000 | | | | 1,000 | | | | 1,000 | | | | 1,000 | |
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ADDITIONAL PAID-IN CAPITAL: | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 387,705 | | | $ | 382,537 | | | $ | 387,567 | | | $ | 374,789 | |
Share-based compensation plans | | | 67 | | | | 2,437 | | | | 205 | | | | 10,185 | |
Balance, end of period | | | 387,772 | | | | 384,974 | | | | 387,772 | | | | 384,974 | |
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), | | | | | | | | | | | | | | | | |
NET OF DEFERRED INCOME TAXES: | | | | | | | | | | | | | | | | |
Balance, beginning of period | | | (17,048 | ) | | | 55,682 | | | | (36,315 | ) | | | (62,136 | ) |
Net increase (decrease) during the period | | | 34,507 | | | | (333 | ) | | | 53,774 | | | | 117,485 | |
Balance, end of period | | | 17,459 | | | | 55,349 | | | | 17,459 | | | | 55,349 | |
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RETAINED EARNINGS: | | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 5,152,137 | | | | 4,756,019 | | | | 4,947,301 | | | | 4,645,657 | |
Net income (loss) | | | (389,724 | ) | | | 76,303 | | | | (184,888 | ) | | | 186,665 | |
Balance, end of period | | | 4,762,413 | | | | 4,832,322 | | | | 4,762,413 | | | | 4,832,322 | |
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TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | | $ | 5,167,644 | | | $ | 5,272,645 | | | $ | 5,167,644 | | | $ | 5,272,645 | |
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The accompanying notes are an integral part of the consolidated financial statements. | | | | | | | | | | | | | | | | |
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | |
| Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 |
| (unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income (loss) | $ | 549 | | | $ | (85) | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Decrease (increase) in premiums receivable | (363) | | | 10 | |
Decrease (increase) in funds held by reinsureds, net | 20 | | | (6) | |
Decrease (increase) in reinsurance recoverables | (4) | | | 105 | |
Decrease (increase) in income taxes | 65 | | | (139) | |
Decrease (increase) in prepaid reinsurance premiums | (57) | | | (44) | |
Increase (decrease) in reserve for losses and loss adjustment expenses | 526 | | | 637 | |
Increase (decrease) in unearned premiums | 319 | | | 51 | |
Increase (decrease) in amounts due to reinsurers | 70 | | | 35 | |
Increase (decrease) in losses in course of payment | (5) | | | (175) | |
Change in equity adjustments in limited partnerships | (21) | | | (110) | |
Distribution of limited partnership income | 23 | | | 49 | |
Change in other assets and liabilities, net | (215) | | | (19) | |
Non-cash compensation expense | 19 | | | 20 | |
Amortization of bond premium (accrual of bond discount) | (11) | | | 15 | |
Net (gains) losses on investments | — | | | 605 | |
Net cash provided by (used in) operating activities | 914 | | | 948 | |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Proceeds from fixed maturities matured/called/repaid - available for sale | 543 | | | 876 | |
Proceeds from fixed maturities sold - available for sale | 109 | | | 511 | |
Proceeds from fixed maturities matured/called/repaid - held to maturity | 43 | | | — | |
Proceeds from equity securities sold | 46 | | | 425 | |
Distributions from other invested assets | 60 | | | 99 | |
Cost of fixed maturities acquired - available for sale | (2,100) | | | (2,465) | |
Cost of fixed maturities acquired - held to maturity | (15) | | | (72) | |
Cost of equity securities acquired | (1) | | | (272) | |
Cost of other invested assets acquired | (161) | | | (153) | |
Net change in short-term investments | (269) | | | 465 | |
Net change in unsettled securities transactions | 13 | | | 29 | |
Proceeds from repayment (cost of issuance) of notes receivable - affiliated | 840 | | | (215) | |
Net cash provided by (used in) investing activities | (892) | | | (772) | |
| | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Tax benefit from share-based compensation, net of expense | (19) | | | (20) | |
| | | |
Net cash provided by (used in) financing activities | (19) | | | (20) | |
| | | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (6) | | | (12) | |
| | | |
Net increase (decrease) in cash | (3) | | | 144 | |
Cash, beginning of period | 481 | | | 699 | |
Cash, end of period | $ | 478 | | | $ | 844 | |
| | | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | |
Income taxes paid (recovered) | $ | 71 | | | $ | 104 | |
Interest paid | 64 | | | 48 | |
| | | |
| | | |
| | | |
| | Nine Months Ended | |
| | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | |
| | (unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Net income (loss) | | $ | (184,888 | ) | | $ | 186,665 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Decrease (increase) in premiums receivable | | | (432,477 | ) | | | (155,717 | ) |
Decrease (increase) in funds held by reinsureds, net | | | 415 | | | | (948 | ) |
Decrease (increase) in reinsurance receivables | | | (649,539 | ) | | | (120,745 | ) |
Decrease (increase) in income taxes | | | (206,857 | ) | | | 35,647 | |
Decrease (increase) in prepaid reinsurance premiums | | | (330,345 | ) | | | (94,400 | ) |
Increase (decrease) in reserve for losses and loss adjustment expenses | | | 1,579,394 | | | | 322,226 | |
Increase (decrease) in unearned premiums | | | 310,237 | | | | 94,847 | |
Increase (decrease) in other net payable to reinsurers | | | 336,582 | | | | (216,024 | ) |
Increase (decrease) in losses in course of payment | | | 110,669 | | | | 1,860 | |
Change in equity adjustments in limited partnerships | | | (20,415 | ) | | | (17,067 | ) |
Distribution of limited partnership income | | | 23,174 | | | | 31,739 | |
Change in other assets and liabilities, net | | | (88,583 | ) | | | (125,150 | ) |
Non-cash compensation expense | | | 7,675 | | | | 7,453 | |
Amortization of bond premium (accrual of bond discount) | | | 13,675 | | | | 13,754 | |
Amortization of underwriting discount on senior notes | | | 3 | | | | 3 | |
Net realized capital (gains) losses | | | (253,966 | ) | | | 87,275 | |
Net cash provided by (used in) operating activities | | | 214,754 | | | | 51,418 | |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Proceeds from fixed maturities matured/called - available for sale, at market value | | | 771,950 | | | | 572,224 | |
Proceeds from fixed maturities sold - available for sale, at market value | | | 1,063,126 | | | | 433,655 | |
Proceeds from fixed maturities sold - available for sale, at fair value | | | - | | | | 1,587 | |
Proceeds from equity securities sold - available for sale, at fair value | | | 302,407 | | | | 531,894 | |
Proceeds from sale of subsidiary (net of cash disposed) | | | - | | | | 47,721 | |
Distributions from other invested assets | | | 1,459,677 | | | | 1,119,428 | |
Cost of fixed maturities acquired - available for sale, at market value | | | (1,809,485 | ) | | | (1,516,092 | ) |
Cost of fixed maturities acquired - available for sale, at fair value | | | - | | | | (3,940 | ) |
Cost of equity securities acquired - available for sale, at fair value | | | (326,444 | ) | | | (253,041 | ) |
Cost of other invested assets acquired | | | (1,584,617 | ) | | | (1,299,682 | ) |
Net change in short-term investments | | | 79,509 | | | | 376,832 | |
Net change in unsettled securities transactions | | | (189,980 | ) | | | 40,771 | |
Net cash provided by (used in) investing activities | | | (233,857 | ) | | | 51,357 | |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Tax benefit from share-based compensation | | | (7,471 | ) | | | 2,732 | |
Net cash provided by (used in) financing activities | | | (7,471 | ) | | | 2,732 | |
| | | | | | | | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | | | 31,111 | | | | 24,242 | |
| | | | | | | | |
Net increase (decrease) in cash | | | 4,537 | | | | 129,749 | |
Cash, beginning of period | | | 297,794 | | | | 155,429 | |
Cash, end of period | | $ | 302,331 | | | $ | 285,178 | |
| | | | | | | | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | | |
Income taxes paid (recovered) | | $ | 53,273 | | | $ | 30,877 | |
Interest paid | | | 19,783 | | | | 17,608 | |
| | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements. | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the Three and NineSix Months Ended SeptemberJune 30, 20172023 and 20162022
1.GENERAL
As used in this document, "Holdings" means Everest Reinsurance Holdings, Inc. (“Holdings”), a Delaware company and direct subsidiary of Everest Underwriting Group (Ireland) Limited, ("Holdings Ireland"); "Group" means which is a direct subsidiary of Everest Re Group, Ltd. (Holdings Ireland's parent); "Bermuda Re"(“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” means Holdings and its subsidiaries. “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, and its subsidiaries (unless the context otherwise requires) and the "Company" means Holdings and its subsidiaries..
During the third quarter of 2016, the Company established domestic subsidiaries, Everest Premier Insurance Company ("Everest Premier") and Everest Denali Insurance Company ("Everest Denali"), which will be used in the continued expansion of the Insurance operations.
Effective August 24, 2016, the Company sold its wholly-owned subsidiary, Heartland Crop Insurance Company ("Heartland"), a managing agent for crop insurance, to CGB Diversified Services, Inc. ("CGB"). The operating results of Heartland for the period owned are included within the Company's financial statements.
2.BASIS OF PRESENTATION
The unaudited consolidated financial statements of the Company as of June 30, 2023 and December 31, 2022 and for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”), has been omitted since it is not required for interim reporting purposes. The December 31, 20162022 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2016, 20152022, 2021 and 20142020, included in the Company'sCompany’s most recent Form 10-K filing.
The Company consolidates the results of operations and financial position of all voting interest entities ("VOE") in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate actual results could differ, possibly materially, from those estimates.
All intercompany accounts and transactions have been eliminated.
Certain reclassifications and format changes have been made to prior years' amounts to conform to the 2017 presentation.
Application of Recently Issued Accounting Standard Changes.
AmortizationThe Company did not adopt any new accounting standards that had a material impact during the three and six months ended June 30, 2023. The Company assessed the adoption impacts of Bond Premium. In March 2017, FASBrecently issued ASU 2017-08 which outlines guidanceaccounting standards by the Financial Accounting Standards Board (“FASB”) on the amortization periodCompany’s consolidated financial statements as well as material updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for premium on callable debt securities. The new guidance requiresthe year ended December 31, 2022. There were no accounting standards issued in the six months ended June 30, 2023, 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 2017-08are expected to have a material impact on Holdings.
Application of Methods and Assumption Changes.
During 2023, the Company refined its financial statements.
Presentationpremium estimation methodology for its risk attaching reinsurance contracts within its Reinsurance Segment to continue to recognize gross written premium over the term of the treaty, albeit over a different pattern than what was previously used. The refined estimate resulted in an increase of gross written premium during the three and Disclosure of Net Periodic Benefit Costs. In March 2017, FASB issued ASU 2017-07 which outlines guidancesix months ended June 30, 2023 periods and has further aligned the estimation methodology across the reinsurance division globally. This change had no impact on the presentation of net periodic costs of benefit plans. The new guidance requires thattotal written premium to be recognized over the service cost component of net periodic benefit costs be reported within the same line itemterm 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 materialtreaty. There was no impact on its financial statements.
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 equivalentsnet earned premium 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 materialtherefore, no impact on its financial statements.income from continuing operations, net income, or any related per-share amounts.
Intra-Entity Asset Transfers. In October 2016, FASB issued ASU 2016-16 which outlines guidance on
3. INVESTMENTS
The tables below present 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 which outlines guidance on the valuation of and accounting for assets measured at amortized cost, and available for sale debt securities. The carrying value of assets measured at amortized cost will now be presented as the amount expected to be collected on the financial asset (amortized cost less an allowance for credit losses, valuation account). Availablegross unrealized appreciation/(depreciation) and fair value of fixed maturity securities - available for sale debt securities will now record credit losses through anfor the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At June 30, 2023 |
(Dollars in millions) | Amortized Cost | | Allowances for Credit Losses | | Unrealized Appreciation | | Unrealized Depreciation | | Fair Value |
Fixed maturity securities – available for sale | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 475 | | | $ | — | | | $ | — | | | $ | (37) | | | $ | 439 | |
Obligations of U.S. states and political subdivisions | 424 | | | — | | | 1 | | | (30) | | | 395 | |
Corporate securities | 4,552 | | | (55) | | | 21 | | | (309) | | | 4,209 | |
Asset-backed securities | 4,783 | | | — | | | 5 | | | (111) | | | 4,676 | |
Mortgage-backed securities | | | | | | | | | |
Commercial | 567 | | | — | | | — | | | (63) | | | 503 | |
Agency residential | 1,817 | | | — | | | 3 | | | (166) | | | 1,654 | |
Non-agency residential | 60 | | | — | | | — | | | (1) | | | 59 | |
Foreign government securities | 735 | | | — | | | 3 | | | (53) | | | 684 | |
Foreign corporate securities | 1,729 | | | (1) | | | 5 | | | (149) | | | 1,583 | |
Total fixed maturity securities - available for sale | $ | 15,141 | | | $ | (57) | | | $ | 37 | | | $ | (919) | | | $ | 14,202 | |
(Some amounts may not reconcile due to rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
(Dollars in millions) | Amortized Cost | | Allowances for Credit Losses | | Unrealized Appreciation | | Unrealized Depreciation | | Fair Value |
Fixed maturity securities – available for sale | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 575 | | | $ | — | | | $ | — | | | $ | (40) | | | $ | 535 | |
Obligations of U.S. states and political subdivisions | 444 | | | — | | | 2 | | | (32) | | | 413 | |
Corporate securities | 3,913 | | | (45) | | | 14 | | | (322) | | | 3,561 | |
Asset-backed securities | 4,111 | | | — | | | 5 | | | (165) | | | 3,951 | |
Mortgage-backed securities | | | | | | | | | |
Commercial | 569 | | | — | | | — | | | (59) | | | 509 | |
Agency residential | 1,792 | | | — | | | 3 | | | (167) | | | 1,628 | |
Non-agency residential | 3 | | | — | | | — | | | — | | | 3 | |
Foreign government securities | 696 | | | — | | | 2 | | | (61) | | | 637 | |
Foreign corporate securities | 1,597 | | | (1) | | | 4 | | | (167) | | | 1,433 | |
Total fixed maturity securities - available for sale | $ | 13,699 | | | $ | (46) | | | $ | 30 | | | $ | (1,013) | | | $ | 12,671 | |
(Some amounts may not reconcile due to rounding.)
The following tables show amortized cost, allowance for credit losses, which will be limited to the amount by whichgross unrealized appreciation/(depreciation) and fair value is below amortized cost. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its financial statements.
Leases. In February 2016, FASB issued ASU 2016-02 which outlines 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 evaluating the impact of the adoption of ASU 2016-02 on its financial statements.
Recognition and Measurement of Financial Instruments. In 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 measures 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 is currently evaluating the impact of the adoption of ASU 2016-01 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 estimates and subsequent claim estimate adjustment, methodologies in estimating claims and the timing, frequency and severity of claims related to short duration insurance contracts. This guidance 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, 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 adoption did not have a material impact on the Company's financial statements.
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. Based upon this guidance, the Company has determined that the separate segregated accounts associated with Mt. Logan Re should not be consolidated. The Company implemented the guidance effective January 1, 2016.
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 references above, are deemed by the Company to be either not applicable or immaterial to its financial statements.
3. REVISIONS TO FINANCIAL STATEMENTS
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.
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.
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 BALANCE SHEETS | | March 31, 2017 | |
| | As Previously | | | Impact of | | | | |
| | Reported | | | Revisions | | | As Revised | |
(Dollars in thousands, except par value per share) | | | | | | | | | |
ASSETS: | | | | | | | | | |
Deferred acquisition costs | | $ | 62,308 | | | $ | (4,994 | ) | | $ | 57,314 | |
TOTAL ASSETS | | $ | 17,587,840 | | | $ | (4,994 | ) | | $ | 17,582,846 | |
| | | | | | | | | | | | |
LIABILITIES: | | | | | | | | | | | | |
Other net payable to reinsurers | | $ | 832,307 | | | $ | (41,746 | ) | | $ | 790,561 | |
Income taxes | | | 223,629 | | | | 5,625 | | | | 229,254 | |
Total liabilities | | | 12,139,623 | | | | (36,121 | ) | | | 12,103,502 | |
| | | | | | | | | | | | |
STOCKHOLDERS EQUITY: | | | | | | | | | | | | |
Retained earnings | | | 5,085,352 | | | | 31,127 | | | | 5,116,479 | |
Total stockholder's equity | | | 5,448,217 | | | | 31,127 | | | | 5,479,344 | |
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | | $ | 17,587,840 | | | $ | (4,994 | ) | | $ | 17,582,846 | |
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 | | | Three Months Ended March 31, 2017 | |
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 | | $ | 339,402 | | | $ | (427 | ) | | $ | 338,975 | | | $ | 49,470 | | | $ | 3,037 | | | $ | 52,507 | |
Total claims and expenses | | | 1,930,749 | | | | (427 | ) | | | 1,930,322 | | | | 411,543 | | | | 3,037 | | | | 414,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | | | 657,688 | | | | 427 | | | | 658,115 | | | | 247,984 | | | | (3,037 | ) | | | 244,947 | |
Income tax expense (benefit) | | | 203,562 | | | | 1,125 | | | | 204,687 | | | | 76,940 | | | | (1,171 | ) | | | 75,769 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | 454,126 | | | $ | (698 | ) | | $ | 453,428 | | | $ | 171,044 | | | $ | (1,866 | ) | | $ | 169,178 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
COMPREHENSIVE INCOME (LOSS) | | $ | 370,997 | | | $ | (698 | ) | | $ | 370,299 | | | $ | 182,587 | | | $ | (1,866 | ) | | $ | 180,721 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | | Three Months Ended September 30, 2016 | | | Nine 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 | | $ | 85,563 | | | $ | (2,785 | ) | | $ | 82,778 | | | $ | 226,511 | | | $ | (6,959 | ) | | $ | 219,552 | |
Total claims and expenses | | | 462,009 | | | | (2,785 | ) | | | 459,224 | | | | 1,377,175 | | | | (6,959 | ) | | | 1,370,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | | | 95,943 | | | | 2,785 | | | | 98,728 | | | | 249,064 | | | | 6,959 | | | | 256,023 | |
Income tax expense (benefit) | | | 21,145 | | | | 1,280 | | | | 22,425 | | | | 66,990 | | | | 2,368 | | | | 69,358 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | 74,798 | | | $ | 1,505 | | | $ | 76,303 | | | $ | 182,074 | | | $ | 4,591 | | | $ | 186,665 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
COMPREHENSIVE INCOME (LOSS) | | $ | 74,465 | | | $ | 1,505 | | | $ | 75,970 | | | $ | 299,559 | | | $ | 4,591 | | | $ | 304,150 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | | Three Months Ended June 30, 2016 | | | Six Months Ended June 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 | | $ | 72,126 | | | $ | (1,717 | ) | | $ | 70,409 | | | $ | 140,948 | | | $ | (4,174 | ) | | $ | 136,774 | |
Total claims and expenses | | | 479,860 | | | | (1,717 | ) | | | 478,143 | | | | 915,166 | | | | (4,174 | ) | | | 910,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | | | 101,332 | | | | 1,717 | | | | 103,049 | | | | 153,121 | | | | 4,174 | | | | 157,295 | |
Income tax expense (benefit) | | | 32,982 | | | | 695 | | | | 33,677 | | | | 45,845 | | | | 1,088 | | | | 46,933 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | 68,350 | | | $ | 1,022 | | | $ | 69,372 | | | $ | 107,276 | | | $ | 3,086 | | | $ | 110,362 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
COMPREHENSIVE INCOME (LOSS) | | $ | 124,381 | | | $ | 1,022 | | | $ | 125,403 | | | $ | 225,094 | | | $ | 3,086 | | | $ | 228,180 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | | Three Months Ended March 31, 2016 | |
AND COMPREHENSIVE INCOME (LOSS): | | As Previously | | | Impact of | | | | |
| | Reported | | | Revisions | | | As Revised | |
(Dollars in thousands) | | | | | | | | | |
CLAIMS AND EXPENSES: | | | | | | | | | |
Commission, brokerage, taxes and fees | | $ | 68,822 | | | $ | (2,457 | ) | | $ | 66,365 | |
Total claims and expenses | | | 435,306 | | | | (2,457 | ) | | | 432,849 | |
| | | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | | | 51,789 | | | | 2,457 | | | | 54,246 | |
Income tax expense (benefit) | | | 12,863 | | | | 393 | | | | 13,256 | |
| | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | 38,926 | | | $ | 2,064 | | | $ | 40,990 | |
| | | | | | | | | | | | |
COMPREHENSIVE INCOME (LOSS) | | $ | 100,713 | | | $ | 2,064 | | | $ | 102,777 | |
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 | | | Three Months Ended March 31, 2017 | |
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 | | $ | 3,751,779 | | | $ | 28,060 | | | $ | 3,779,839 | | | $ | 4,914,308 | | | $ | 32,993 | | | $ | 4,947,301 | |
Net income (loss) | | | 454,126 | | | | (698 | ) | | | 453,428 | | | | 171,044 | | | | (1,866 | ) | | | 169,178 | |
Balance, end of period | | | 4,205,905 | | | | 27,362 | | | | 4,233,267 | | | | 5,085,352 | | | | 31,127 | | | | 5,116,479 | |
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | | $ | 4,572,717 | | | $ | 27,362 | | | $ | 4,600,079 | | | $ | 5,448,217 | | | $ | 31,127 | | | $ | 5,479,344 | |
CONSOLIDATED STATEMENTS OF | | Three Months Ended September 30, 2016 | | | Nine 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 | | $ | 4,725,834 | | | $ | 30,185 | | | $ | 4,756,019 | | | $ | 4,618,558 | | | $ | 27,099 | | | $ | 4,645,657 | |
Net income (loss) | | | 74,798 | | | | 1,505 | | | | 76,303 | | | | 182,074 | | | | 4,591 | | | | 186,665 | |
Balance, end of period | | | 4,800,632 | | | | 31,690 | | | | 4,832,322 | | | | 4,800,632 | | | | 31,690 | | | | 4,832,322 | |
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | | $ | 5,240,955 | | | $ | 31,690 | | | $ | 5,272,645 | | | $ | 5,240,955 | | | $ | 31,690 | | | $ | 5,272,645 | |
CONSOLIDATED STATEMENTS OF | | Three Months Ended June 30, 2016 | | | Six Months Ended June 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 | | $ | 4,657,484 | | | $ | 29,163 | | | $ | 4,686,647 | | | $ | 4,618,558 | | | $ | 27,099 | | | $ | 4,645,657 | |
Net income (loss) | | | 68,350 | | | | 1,022 | | | | 69,372 | | | | 107,276 | | | | 3,086 | | | | 110,362 | |
Balance, end of period | | | 4,725,834 | | | | 30,185 | | | | 4,756,019 | | | | 4,725,834 | | | | 30,185 | | | | 4,756,019 | |
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | | $ | 5,164,053 | | | $ | 30,185 | | | $ | 5,194,238 | | | $ | 5,164,053 | | | $ | 30,185 | | | $ | 5,194,238 | |
CONSOLIDATED STATEMENTS OF | | Three Months Ended March 31, 2016 | |
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 | | $ | 4,618,558 | | | $ | 27,099 | | | $ | 4,645,657 | |
Net income (loss) | | | 38,926 | | | | 2,064 | | | | 40,990 | |
Balance, end of period | | | 4,657,484 | | | | 29,163 | | | | 4,686,647 | |
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD | | $ | 5,036,717 | | | $ | 29,163 | | | $ | 5,065,880 | |
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 | | | Three Months Ended March 31, 2017 | |
| | 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) | | $ | 454,126 | | | $ | (698 | ) | | $ | 453,428 | | | $ | 171,044 | | | $ | (1,866 | ) | | $ | 169,178 | |
Decrease (increase) in income taxes | | | 68,206 | | | | 1,125 | | | | 69,331 | | | | 75,304 | | | | (1,172 | ) | | | 74,132 | |
Increase (decrease) in other net payable to reinsurers | | | 5,130 | | | | (3,216 | ) | | | 1,914 | | | | (30,525 | ) | | | 3,347 | | | | (27,178 | ) |
Change in other assets and liabilities, net | | | 81,388 | | | | 2,789 | | | | 84,177 | | | | 18,204 | | | | (309 | ) | | | 17,895 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | Nine Months Ended September 30, 2016 | | | Six Months Ended June 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) | | $ | 182,074 | | | $ | 4,591 | | | $ | 186,665 | | | $ | 107,276 | | | $ | 3,086 | | | $ | 110,362 | |
Decrease (increase) in income taxes | | | 33,279 | | | | 2,368 | | | | 35,647 | | | | 8,190 | | | | 1,089 | | | | 9,279 | |
Increase (decrease) in other net payable to reinsurers | | | (209,260 | ) | | | (6,764 | ) | | | (216,024 | ) | | | (370,242 | ) | | | (3,111 | ) | | | (373,353 | ) |
Change in other assets and liabilities, net | | | (124,955 | ) | | | (195 | ) | | | (125,150 | ) | | | 14,216 | | | | (1,064 | ) | | | 13,152 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | Three Months Ended March 31, 2016 | |
| | As Previously | | | Impact of | | | | |
| | Reported | | | Revisions | | | As Revised | |
(Dollars in thousands) | | | | | | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
Net income (loss) | | $ | 38,926 | | | $ | 2,064 | | | $ | 40,990 | |
Decrease (increase) in income taxes | | | 6,546 | | | | 393 | | | | 6,939 | |
Increase (decrease) in other net payable to reinsurers | | | (106,588 | ) | | | (1,122 | ) | | | (107,710 | ) |
Change in other assets and liabilities, net | | | 24,496 | | | | (1,335 | ) | | | 23,161 | |
4. INVESTMENTS
The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity equity security investments, carried at market value and other-than-temporary impairments ("OTTI") in accumulated other comprehensive income ("AOCI") are as followssecurities - held to maturity for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At June 30, 2023 |
(Dollars in millions) | Amortized Cost | | Allowances for Credit Loss | | Unrealized Appreciation | | Unrealized Depreciation | | Fair Value |
Fixed maturity securities – held to maturity | | | | | | | | | |
Corporate securities | $ | 152 | | | $ | (2) | | | $ | — | | | $ | (6) | | | $ | 144 | |
Asset-backed securities | 603 | | | (6) | | | 2 | | | (15) | | | 585 | |
Mortgage-backed securities | | | | | | | | | |
Commercial | 14 | | | — | | | — | | | — | | | 13 | |
Foreign corporate securities | 28 | | | (1) | | | 2 | | | — | | | 29 | |
Total fixed maturity securities - held to maturity | $ | 796 | | | $ | (8) | | | $ | 4 | | | $ | (21) | | | $ | 771 | |
| | At September 30, 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 | | $ | 657,018 | | | $ | 2,088 | | | $ | (3,220 | ) | | $ | 655,886 | | | $ | - | |
Obligations of U.S. states and political subdivisions | | | 652,525 | | | | 24,061 | | | | (4,744 | ) | | | 671,842 | | | | - | |
Corporate securities | | | 2,213,498 | | | | 38,058 | | | | (11,965 | ) | | | 2,239,591 | | | | 695 | |
Asset-backed securities | | | 153,400 | | | | 451 | | | | (62 | ) | | | 153,789 | | | | - | |
Mortgage-backed securities | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 59,311 | | | | 334 | | | | (622 | ) | | | 59,023 | | | | - | |
Agency residential | | | 683,178 | | | | 1,904 | | | | (7,252 | ) | | | 677,830 | | | | - | |
Non-agency residential | | | 55 | | | | 7 | | | | - | | | | 62 | | | | - | |
Foreign government securities | | | 520,431 | | | | 19,038 | | | | (7,996 | ) | | | 531,473 | | | | - | |
Foreign corporate securities | | | 1,034,840 | | | | 25,601 | | | | (10,576 | ) | | | 1,049,865 | | | | 374 | |
Total fixed maturity securities | | $ | 5,974,256 | | | $ | 111,542 | | | $ | (46,437 | ) | | $ | 6,039,361 | | | $ | 1,069 | |
(Some amounts may not reconcile due to rounding.)
| | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
(Dollars in millions) | Amortized Cost | | Allowances for Credit Loss | | Unrealized Appreciation | | Unrealized Depreciation | | Fair Value |
Fixed maturity securities – held to maturity | | | | | | | | | |
Corporate securities | $ | 152 | | | $ | (2) | | | $ | — | | | $ | (6) | | | $ | 144 | |
Asset-backed securities | 634 | | | (6) | | | 2 | | | (15) | | | 614 | |
Mortgage-backed securities | | | | | | | | | |
Commercial | 7 | | | — | | | — | | | — | | | 7 | |
Foreign corporate securities | 28 | | | (1) | | | 2 | | | — | | | 28 | |
Total fixed maturity securities - held to maturity | $ | 820 | | | $ | (9) | | | $ | 3 | | | $ | (22) | | | $ | 793 | |
(a) Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating(Some amounts may not reconcile due to changes in the value of such securities subsequent to the impairment measurement date.
rounding.)
The amortized cost and marketfair value of fixed maturity securities - available for sale are shown in the following tablestable 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 June 30, 2023 | | At December 31, 2022 |
(Dollars in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Fixed maturity securities – available for sale | | | | | | | |
Due in one year or less | $ | 830 | | | $ | 799 | | | $ | 581 | | | $ | 563 | |
Due after one year through five years | 3,673 | | | 3,429 | | | 3,684 | | | 3,429 | |
Due after five years through ten years | 2,007 | | | 1,809 | | | 2,003 | | | 1,760 | |
Due after ten years | 1,404 | | | 1,273 | | | 958 | | | 827 | |
Asset-backed securities | 4,783 | | | 4,676 | | | 4,111 | | | 3,951 | |
Mortgage-backed securities | | | | | | | |
Commercial | 567 | | | 503 | | | 569 | | | 509 | |
Agency residential | 1,817 | | | 1,654 | | | 1,792 | | | 1,628 | |
Non-agency residential | 60 | | | 59 | | | 3 | | | 3 | |
Total fixed maturity securities - available for sale | $ | 15,141 | | | $ | 14,202 | | | $ | 13,699 | | | $ | 12,671 | |
| | At September 30, 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 | | $ | 403,948 | | | $ | 405,602 | | | $ | 394,401 | | | $ | 392,824 | |
Due after one year through five years | | | 2,918,422 | | | | 2,931,495 | | | | 2,925,786 | | | | 2,955,325 | |
Due after five years through ten years | | | 1,024,154 | | | | 1,045,455 | | | | 879,762 | | | | 894,166 | |
Due after ten years | | | 731,788 | | | | 766,105 | | | | 776,436 | | | | 800,429 | |
Asset-backed securities | | | 153,400 | | | | 153,789 | | | | 136,826 | | | | 137,027 | |
Mortgage-backed securities | | | | | | | | | | | | | | | | |
Commercial | | | 59,311 | | | | 59,023 | | | | 75,435 | | | | 75,493 | |
Agency residential | | | 683,178 | | | | 677,830 | | | | 721,772 | | | | 715,144 | |
Non-agency residential | | | 55 | | | | 62 | | | | 76 | | | | 88 | |
Total fixed maturity securities | | $ | 5,974,256 | | | $ | 6,039,361 | | | $ | 5,910,494 | | | $ | 5,970,496 | |
(Some amounts may not reconcile due to rounding.)
The amortized cost and fair value of fixed maturity securities held to maturity - are shown in the following table by contractual maturity. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.
| | | | | | | | | | | | | | | | | | | | | | | |
| At June 30, 2023 | | At December 31, 2022 |
(Dollars in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Fixed maturity securities – held to maturity | | | | | | | |
Due in one year or less | $ | 5 | | | $ | 5 | | | $ | 5 | | | $ | 5 | |
Due after one year through five years | 64 | | | 61 | | | 63 | | | 61 | |
Due after five years through ten years | 44 | | | 41 | | | 43 | | | 41 | |
Due after ten years | 68 | | | 65 | | | 68 | | | 65 | |
Asset-backed securities | 603 | | | 585 | | | 634 | | | 614 | |
Mortgage-backed securities | | | | | | | |
Commercial | 14 | | | 13 | | | 7 | | | 7 | |
Total fixed maturity securities - held to maturity | $ | 796 | | | $ | 771 | | | $ | 820 | | | $ | 793 | |
(Some amounts may not reconcile due to rounding.)
During the third quarter of 2022, the Company re-designated a portion of its fixed maturity securities from its fixed maturity – available for sale portfolio to its fixed maturity – held to maturity portfolio. The fair value of the securities reclassified at the date of transfer was $722 million, net of allowance for current expected credit losses, which was subsequently recognized as the new amortized cost basis. As of June 30, 2023, these securities had an unrealized loss of $46 million, which remained in accumulated other comprehensive income (“AOCI”) on the balance sheet, and will be amortized into income through an adjustment to the yields of the underlying securities over the remaining life of the
securities. The fair values of these securities incorporate the use of significant unobservable inputs and therefore are classified as Level 3 within the fair value hierarchy.
The Company evaluated fixed maturity securities classified as held to maturity for current expected credit losses as of June 30, 2023 utilizing risk characteristics of each security, including credit rating, remaining time to maturity, adjusted for prepayment considerations, and subordination level, and applying default and recovery rates, which include the incorporation of historical credit loss experience and macroeconomic forecasts, to develop an estimate of current expected credit losses. These fixed maturities classified as held to maturity are of a high credit quality and are all rated investment grade as of June 30, 2023.
The changes in net unrealized appreciation (depreciation) for the Company'sCompany’s investments are derived from the following sources for the periods as indicated:follows:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 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 | | $ | (3,197 | ) | | $ | 4,047 | | | $ | 9,077 | | | $ | 127,736 | |
Fixed maturity securities, other-than-temporary impairment | | | (158 | ) | | | (2,444 | ) | | | (3,974 | ) | | | 4,199 | |
Other invested assets | | | 1,595 | | | | - | | | | 2,860 | | | | - | |
Change in unrealized appreciation (depreciation), pre-tax | | | (1,760 | ) | | | 1,603 | | | | 7,963 | | | | 131,935 | |
Deferred tax benefit (expense) | | | 561 | | | | (1,418 | ) | | | (4,178 | ) | | | (44,709 | ) |
Deferred tax benefit (expense), other-than-temporary impairment | | | 55 | | | | 856 | | | | 1,391 | | | | (1,469 | ) |
Change in unrealized appreciation (depreciation), | | | | | | | | | | | | | | | | |
net of deferred taxes, included in stockholder's equity | | $ | (1,144 | ) | | $ | 1,041 | | | $ | 5,176 | | | $ | 85,757 | |
12 | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Increase (decrease) during the period between the fair value and cost of investments carried at fair value, and deferred taxes thereon: | | | | | | | |
Fixed maturity securities - available for sale and short-term investments | $ | (49) | | | $ | (512) | | | $ | 105 | | | $ | (1,008) | |
Change in unrealized appreciation (depreciation), pre-tax | (49) | | | (512) | | | 105 | | | (1,008) | |
Deferred tax benefit (expense) | 10 | | | 107 | | | (22) | | | 211 | |
Change in unrealized appreciation (depreciation), net of deferred taxes, included in stockholder's equity | $ | (38) | | | $ | (405) | | | $ | 83 | | | $ | (797) | |
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 temporary or other-than-temporary. 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(Some amounts may not constitute an other-than-temporary impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company determines that the decline is other-than-temporary and the Company does not have the intentreconcile due 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 of the investment is written down to fair value. The fair value adjustment that is credit or foreign exchange related is recorded in net realized capital gains (losses) in the Company's consolidated statements of operations and comprehensive income (loss). 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's consolidated balance sheets. The Company's assessments are based on the issuers current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.
Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company's asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.
rounding.)
The tables below display the aggregate marketfair value and gross unrealized depreciation of fixed maturity and equity securities - available for sale, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Duration of Unrealized Loss at June 30, 2023 By Security Type |
| Less than 12 months | | Greater than 12 months | | Total |
(Dollars in millions) | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation |
Fixed maturity securities - available for sale | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 30 | | | $ | (1) | | | $ | 408 | | | $ | (36) | | | $ | 438 | | | $ | (37) | |
Obligations of U.S. states and political subdivisions | 77 | | | (1) | | | 199 | | | (29) | | | 276 | | | (30) | |
Corporate securities | 1,135 | | | (84) | | | 2,128 | | | (224) | | | 3,263 | | | (308) | |
Asset-backed securities | 1,058 | | | (23) | | | 2,426 | | | (88) | | | 3,484 | | | (111) | |
Mortgage-backed securities | | | | | | | | | | | |
Commercial | 17 | | | (1) | | | 480 | | | (62) | | | 497 | | | (63) | |
Agency residential | 319 | | | (5) | | | 1,166 | | | (160) | | | 1,485 | | | (166) | |
Non-agency residential | 57 | | | (1) | | | 3 | | | — | | | 59 | | | (1) | |
Foreign government securities | 108 | | | (2) | | | 484 | | | (51) | | | 591 | | | (53) | |
Foreign corporate securities | 293 | | | (9) | | | 1,112 | | | (140) | | | 1,405 | | | (149) | |
Total | 3,092 | | | (126) | | | 8,406 | | | (792) | | | 11,498 | | | (918) | |
Securities where an allowance for credit loss was recorded | — | | | — | | | — | | | (1) | | | 1 | | | (1) | |
Total fixed maturity securities - available for sale | $ | 3,093 | | | $ | (127) | | | $ | 8,406 | | | $ | (792) | | | $ | 11,499 | | | $ | (919) | |
| | Duration of Unrealized Loss at September 30, 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 | | $ | 239,038 | | | $ | (2,191 | ) | | $ | 37,447 | | | $ | (1,029 | ) | | $ | 276,485 | | | $ | (3,220 | ) |
Obligations of U.S. states and political subdivisions | | | 89,509 | | | | (2,104 | ) | | | 67,956 | | | | (2,640 | ) | | | 157,465 | | | | (4,744 | ) |
Corporate securities | | | 415,341 | | | | (6,124 | ) | | | 155,808 | | | | (5,841 | ) | | | 571,149 | | | | (11,965 | ) |
Asset-backed securities | | | 30,657 | | | | (55 | ) | | | 1,912 | | | | (7 | ) | | | 32,569 | | | | (62 | ) |
Mortgage-backed securities | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 31,221 | | | | (487 | ) | | | 3,803 | | | | (135 | ) | | | 35,024 | | | | (622 | ) |
Agency residential | | | 417,521 | | | | (4,374 | ) | | | 115,934 | | | | (2,878 | ) | | | 533,455 | | | | (7,252 | ) |
Non-agency residential | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Foreign government securities | | | 199,311 | | | | (4,486 | ) | | | 56,732 | | | | (3,510 | ) | | | 256,043 | | | | (7,996 | ) |
Foreign corporate securities | | | 254,015 | | | | (4,069 | ) | | | 89,121 | | | | (6,507 | ) | | | 343,136 | | | | (10,576 | ) |
Total fixed maturity securities | | $ | 1,676,613 | | | $ | (23,890 | ) | | $ | 528,713 | | | $ | (22,547 | ) | | $ | 2,205,326 | | | $ | (46,437 | ) |
(Some amounts may not reconcile due to rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Duration of Unrealized Loss at June 30, 2023 By Maturity |
| Less than 12 months | | Greater than 12 months | | Total |
(Dollars in millions) | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation |
Fixed maturity securities - available for sale | | | | | | | | | | | |
Due in one year or less | $ | 214 | | | $ | (3) | | | $ | 473 | | | $ | (15) | | | $ | 687 | | | $ | (18) | |
Due in one year through five years | 533 | | | (16) | | | 2,413 | | | (228) | | | 2,946 | | | (244) | |
Due in five years through ten years | 405 | | | (16) | | | 1,140 | | | (186) | | | 1,545 | | | (203) | |
Due after ten years | 491 | | | (60) | | | 304 | | | (52) | | | 795 | | | (112) | |
Asset-backed securities | 1,058 | | | (23) | | | 2,426 | | | (88) | | | 3,484 | | | (111) | |
Mortgage-backed securities | 393 | | | (7) | | | 1,649 | | | (223) | | | 2,041 | | | (230) | |
Total | 3,092 | | | (126) | | | 8,406 | | | (792) | | | 11,498 | | | (918) | |
Securities where an allowance for credit loss was recorded | — | | | — | | | — | | | (1) | | | 1 | | | (1) | |
Total fixed maturity securities - available for sale | $ | 3,093 | | | $ | (127) | | | $ | 8,406 | | | $ | (792) | | | $ | 11,499 | | | $ | (919) | |
| | Duration of Unrealized Loss at September 30, 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 | | $ | 127,207 | | | $ | (514 | ) | | $ | 16,129 | | | $ | (1,148 | ) | | $ | 143,336 | | | $ | (1,662 | ) |
Due in one year through five years | | | 741,570 | | | | (10,638 | ) | | | 246,865 | | | | (12,047 | ) | | | 988,435 | | | | (22,685 | ) |
Due in five years through ten years | | | 220,432 | | | | (5,290 | ) | | | 76,295 | | | | (3,682 | ) | | | 296,727 | | | | (8,972 | ) |
Due after ten years | | | 108,005 | | | | (2,532 | ) | | | 67,775 | | | | (2,650 | ) | | | 175,780 | | | | (5,182 | ) |
Asset-backed securities | | | 30,657 | | | | (55 | ) | | | 1,912 | | | | (7 | ) | | | 32,569 | | | | (62 | ) |
Mortgage-backed securities | | | 448,742 | | | | (4,861 | ) | | | 119,737 | | | | (3,013 | ) | | | 568,479 | | | | (7,874 | ) |
Total fixed maturity securities | | $ | 1,676,613 | | | $ | (23,890 | ) | | $ | 528,713 | | | $ | (22,547 | ) | | $ | 2,205,326 | | | $ | (46,437 | ) |
(Some amounts may not reconcile due to rounding.)
The aggregate marketfair value and gross unrealized losses related to investmentsfixed maturity securities - available for sale in an unrealized loss position at SeptemberJune 30, 20172023 were $2,205,326 thousand$11.5 billion and $46,437 thousand,$919 million, respectively. The marketfair value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at SeptemberJune 30, 2017, (the U.S. Government) did not exceed 4.6%2023, amounted to less than 3.1% of the overall marketfair value of the Company'sCompany’s fixed maturity securities.securities - available for sale. The fair value of the securities for the issuer with the second largest unrealized loss position at June 30, 2023 comprised less than 1.9% of the Company’s fixed maturity securities - available for sale. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $23,890 thousand$127 million of unrealized losses related to fixed maturity securities - available for sale that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, asset-backed securities and agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $20,072 thousand$98 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $22,547 thousand$792 million of unrealized losses related to fixed maturity securities - available for sale in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, agency residential and commercial mortgage-backed securities (“CMBS”), as well as foreign governmentasset-backed securities. Of these unrealized losses $20,240 thousand$738 million were related to securities that were rated investment grade by at least one nationally recognized 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.
Based upon the Company’s current evaluation of securities in an unrealized loss position as of June 30, 2023, the unrealized losses are due to changes in interest rates and non-issuer-specific credit spreads and are not credit related. In addition, the contractual terms of these securities do not permit these securities to be settled at a price less than their amortized cost.
The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.
The tables below display the aggregate marketfair value and gross unrealized depreciation of fixed maturity and equity securities - available for sale, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Duration of Unrealized Loss at December 31, 2022 By Security Type |
| Less than 12 months | | Greater than 12 months | | Total |
(Dollars in millions) | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation |
Fixed maturity securities - available for sale | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 290 | | | $ | (14) | | | $ | 245 | | | $ | (26) | | | $ | 535 | | | $ | (40) | |
Obligations of U.S. states and political subdivisions | 235 | | | (23) | | | 27 | | | (9) | | | 261 | | | (32) | |
Corporate securities | 2,138 | | | (175) | | | 841 | | | (146) | | | 2,979 | | | (321) | |
Asset-backed securities | 3,120 | | | (138) | | | 436 | | | (27) | | | 3,556 | | | (165) | |
Mortgage-backed securities | | | | | | | | | | | |
Commercial | 464 | | | (50) | | | 36 | | | (9) | | | 500 | | | (59) | |
Agency residential | 852 | | | (54) | | | 605 | | | (113) | | | 1,456 | | | (167) | |
Non-agency residential | 2 | | | — | | | 1 | | | — | | | 3 | | | — | |
Foreign government securities | 455 | | | (36) | | | 144 | | | (25) | | | 599 | | | (61) | |
Foreign corporate securities | 967 | | | (100) | | | 365 | | | (67) | | | 1,332 | | | (167) | |
Total | $ | 8,522 | | | $ | (591) | | | $ | 2,698 | | | $ | (421) | | | $ | 11,220 | | | $ | (1,012) | |
Securities where an allowance for credit loss was recorded | 2 | | | (1) | | | — | | | — | | | 2 | | | (1) | |
Total fixed maturity securities - available for sale | $ | 8,524 | | | $ | (591) | | | $ | 2,698 | | | $ | (421) | | | $ | 11,222 | | | $ | (1,013) | |
| | 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 | ) |
Non-agency residential | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
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 | ) |
(Some amounts may not reconcile due to rounding.)
| | Duration of Unrealized Loss at December 31, 2016 By Maturity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | | Greater than 12 months | | | Total | | | Duration of Unrealized Loss at December 31, 2022 By Maturity |
| | | | | Gross | | | | | | Gross | | | | | | Gross | | | Less than 12 months | | Greater than 12 months | | Total |
| | | | | Unrealized | | | | | | Unrealized | | | | | | Unrealized | | |
(Dollars in thousands) | | Market Value | | | Depreciation | | | Market Value | | | Depreciation | | | Market Value | | | Depreciation | | |
Fixed maturity securities | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | (Dollars in millions) | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation | | Fair Value | | Gross Unrealized Depreciation |
Fixed maturity securities - available for sale | | Fixed maturity securities - available for sale | | | | | | | | | | | |
Due in one year or less | | $ | 111,926 | | | $ | (322 | ) | | $ | 21,691 | | | $ | (3,625 | ) | | $ | 133,617 | | | $ | (3,947 | ) | Due in one year or less | $ | 463 | | | $ | (8) | | | $ | 29 | | | $ | (4) | | | $ | 491 | | | $ | (11) | |
Due in one year through five years | | | 1,015,066 | | | | (10,567 | ) | | | 190,960 | | | | (16,511 | ) | | | 1,206,026 | | | | (27,078 | ) | Due in one year through five years | 2,020 | | | (143) | | | 936 | | | (107) | | | 2,956 | | | (250) | |
Due in five years through ten years | | | 243,082 | | | | (10,369 | ) | | | 41,371 | | | | (2,961 | ) | | | 284,453 | | | | (13,330 | ) | Due in five years through ten years | 1,162 | | | (148) | | | 395 | | | (98) | | | 1,557 | | | (246) | |
Due after ten years | | | 235,452 | | | | (12,446 | ) | | | 1,745 | | | | (133 | ) | | | 237,197 | | | | (12,579 | ) | Due after ten years | 439 | | | (50) | | | 262 | | | (64) | | | 701 | | | (114) | |
Asset-backed securities | | | 35,065 | | | | (122 | ) | | | 5,745 | | | | (7 | ) | | | 40,810 | | | | (129 | ) | Asset-backed securities | 3,120 | | | (138) | | | 436 | | | (27) | | | 3,556 | | | (165) | |
Mortgage-backed securities | | | 514,230 | | | | (6,711 | ) | | | 93,800 | | | | (2,734 | ) | | | 608,030 | | | | (9,445 | ) | Mortgage-backed securities | 1,318 | | | (105) | | | 641 | | | (122) | | | 1,959 | | | (226) | |
Total fixed maturity securities | | $ | 2,154,821 | | | $ | (40,537 | ) | | $ | 355,312 | | | $ | (25,971 | ) | | $ | 2,510,133 | | | $ | (66,508 | ) | |
Total | | Total | $ | 8,522 | | | $ | (591) | | | $ | 2,698 | | | $ | (421) | | | $ | 11,220 | | | $ | (1,012) | |
Securities where an allowance for credit loss was recorded | | Securities where an allowance for credit loss was recorded | 2 | | | (1) | | | — | | | — | | | 2 | | | (1) | |
Total fixed maturity securities - available for sale | | Total fixed maturity securities - available for sale | $ | 8,524 | | | $ | (591) | | | $ | 2,698 | | | $ | (421) | | | $ | 11,222 | | | $ | (1,013) | |
(Some amounts may not reconcile due to rounding.)
The aggregate marketfair value and gross unrealized losses related to investmentsfixed maturity securities - available for sale in an unrealized loss position at December 31, 20162022 were $2,510,133 thousand$11.2 billion and $66,508 thousand,$1.0 billion, respectively. The marketfair value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2016, did not exceed 1.0%2022, amounted to less than 4.3% of the overall marketfair value of the Company'sCompany’s fixed maturity securities.securities - available for sale. The fair value of the securities for the issuer with the second largest unrealized loss comprised less than 0.6% of the Company’s fixed maturity securities - available for sale. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $40,537 thousand$591 million of unrealized losses related to fixed maturity securities - available for sale that have been in an unrealized loss position for less than one year were generally comprised of obligations of U.S. states and political subdivisions, domestic and foreign corporate securities, foreign government securities, asset-backed securities as well as commercial and agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $36,646 thousand$520 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $25,971 thousand$421 million of unrealized losses related to fixed maturity securities - available for sale in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities foreign government securities andas well as agency residential mortgage-backedmortgage-
backed securities. Of these unrealized losses $22,882 thousand is attributable to net unrealized foreign exchange losses, as the U.S. dollar has strengthened against other currencies. There was no gross unrealized depreciation for mortgage-backed securities$392 million were related to sub-prime and alt-A loans.securities that were rated investment grade by at least one nationally recognized rating agency. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.
The components of net investment income are presented in the tablestable below for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Fixed maturities | $ | 199 | | | $ | 116 | | | $ | 374 | | | $ | 210 | |
Equity securities | 1 | | | 5 | | | 2 | | | 9 | |
Short-term investments and cash | 16 | | | 1 | | | 27 | | | 1 | |
Other invested assets | | | | | | | |
Limited partnerships | 22 | | | 45 | | | (1) | | | 89 | |
Dividends from preferred shares of affiliate | 8 | | | 8 | | | 16 | | | 16 | |
Other | 6 | | | 14 | | | 27 | | | 26 | |
Gross investment income before adjustments | 252 | | | 188 | | | 444 | | | 350 | |
Funds held interest income (expense) | (1) | | | 1 | | | 1 | | | 3 | |
Interest income from Group | 3 | | | 2 | | | 7 | | | 4 | |
Gross investment income | 253 | | | 190 | | | 453 | | | 357 | |
Investment expenses | (11) | | | (14) | | | (21) | | | (24) | |
Net investment income | $ | 242 | | | $ | 176 | | | $ | 432 | | | $ | 333 | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Fixed maturities | | $ | 48,335 | | | $ | 44,810 | | | $ | 144,916 | | | $ | 134,931 | |
Equity securities | | | 6,267 | | | | 7,870 | | | | 19,385 | | | | 25,752 | |
Short-term investments and cash | | | 648 | | | | 296 | | | | 1,628 | | | | 851 | |
Other invested assets | | | | | | | | | | | | | | | | |
Limited partnerships | | | 11,878 | | | | 6,020 | | | | 20,632 | | | | 17,698 | |
Dividends from preferred shares of affiliate | | | 7,758 | | | | 7,758 | | | | 23,274 | | | | 23,274 | |
Other | | | 1,484 | | | | 522 | | | | 4,232 | | | | 339 | |
Gross investment income before adjustments | | | 76,370 | | | | 67,276 | | | | 214,067 | | | | 202,845 | |
Funds held interest income (expense) | | | 1,098 | | | | 1,090 | | | | 4,015 | | | | 4,718 | |
Interest income from Parent | | | 1,075 | | | | 1,075 | | | | 3,225 | | | | 3,225 | |
Gross investment income | | | 78,543 | | | | 69,441 | | | | 221,307 | | | | 210,788 | |
Investment expenses | | | (5,126 | ) | | | (4,871 | ) | | | (15,141 | ) | | | (13,901 | ) |
Net investment income | | $ | 73,417 | | | $ | 64,570 | | | $ | 206,166 | | | $ | 196,887 | |
| | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. The net investment income from limited partnerships is dependent upon the Company’s share of the net asset values (“NAVs”) of interests underlying each limited partnership. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.
The Company hadhas contractual commitments to invest up to an additional $348,144 thousand$925 million in limited partnerships and private placement loan securities at SeptemberJune 30, 2017.2023. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2023.2027.
During the fourth quarter of 2022, the Company entered into corporate-owned life insurance (“COLI”) policies, which are primarily invested in liquid credit, equity, and other assets, including alternative assets. The Company'sCOLI policies are carried within other invested assets at Septemberpolicy cash surrender value of $968 million and $939 million as of June 30, 20172023 and December 31, 2016 included $54,718 thousand and $57,126 thousand, respectively, related to2022, respectively.
The Company 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 June 30, 2023, the fair value of investments in the facility consolidated within the Company’s balance sheets was $449 million.
Other invested assets, at fair value, as of SeptemberJune 30, 20172023 and December 31, 2016,2022, were comprised of preferred shares held in Everest Preferred International Holdings, Ltd. (“Preferred Holdings”), a wholly-owned subsidiary of Group.
Variable Interest Entities
The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an affiliated company.investor through normal investment activities but also as an investment manager. A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling
financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Consolidated Financial Statements. As of June 30, 2023 and December 31, 2022, the Company did not hold any securities for which it is the primary beneficiary.
The Company, through normal investment activities, makes passive investments in general and limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of June 30, 2023 and December 31, 2022 is limited to the total carrying value of $2.9 billion and $2.8 billion, respectively, which are included in general and limited partnerships and other alternative investments in Other Invested Assets in the Company's Consolidated Balance Sheets. As of June 30, 2023, the Company has outstanding commitments totaling $871 million whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management.
In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in asset-backed securities, which includes collateralized loan obligations and are classified as fixed maturities. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, credit subordination that reduces the Company’s obligation to absorb losses or right to receive benefits or the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.
The components of net realized capital gains (losses) on investments are presented in the table below for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Fixed maturity securities | | | | | | | |
Allowances for credit losses | $ | — | | | $ | 2 | | | $ | (10) | | | $ | — | |
Net realized gains (losses) from dispositions | (7) | | | (10) | | | (9) | | | (15) | |
Equity securities, fair value | | | | | | | |
Net realized gains (losses) from dispositions | — | | | (30) | | | 7 | | | (38) | |
Gains (losses) from fair value adjustments | 8 | | | (186) | | | 11 | | | (317) | |
Other invested assets | — | | | 1 | | | — | | | 5 | |
Other invested assets, fair value | | | | | | | |
Gains (losses) from fair value adjustments | (23) | | | (155) | | | 1 | | | (239) | |
| | | | | | | |
Total net gains (losses) on investments | $ | (22) | | | $ | (378) | | | $ | — | | | $ | (605) | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Fixed maturity securities, market value: | | | | | | | | | | | | |
Other-than-temporary impairments | | $ | (1,473 | ) | | $ | (836 | ) | | $ | (4,179 | ) | | $ | (25,242 | ) |
Gains (losses) from sales | | | 3,842 | | | | 4,338 | | | | 16,814 | | | | (10,273 | ) |
Fixed maturity securities, fair value: | | | | | | | | | | | | | | | | |
Gain (losses) from sales | | | - | | | | (1 | ) | | | - | | | | (1,855 | ) |
Gains (losses) from fair value adjustments | | | - | | | | 42 | | | | - | | | | 1,381 | |
Equity securities, fair value: | | | | | | | | | | | | | | | | |
Gains (losses) from sales | | | (1,479 | ) | | | 5,452 | | | | 3,465 | | | | (10,134 | ) |
Gains (losses) from fair value adjustments | | | 29,645 | | | | 16,063 | | | | 82,006 | | | | 34,725 | |
Other invested assets | | | 85 | | | | - | | | | 84 | | | | - | |
Other invested assets, fair value: | | | | | | | | | | | | | | | | |
Gains (losses) from fair value adjustments | | | 197,869 | | | | (47,090 | ) | | | 155,775 | | | | (47,846 | ) |
Gain (loss) on sale of subsidiary | | | - | | | | (28,032 | ) | | | - | | | | (28,032 | ) |
Short-term investment gains (losses) | | | - | | | | 1 | | | | 1 | | | | 1 | |
Total net realized capital gains (losses) | | $ | 228,489 | | | $ | (50,063 | ) | | $ | 253,966 | | | $ | (87,275 | ) |
(Some amounts may not reconcile due to rounding.)
The Company recorded as net realized capital gains (losses) infollowing tables provide a roll forward of the consolidated statementsCompany’s beginning and ending balance of operations and comprehensive income (loss) both fair value re-measurements and write-downs inallowance for credit losses for the value of securities deemedperiods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roll Forward of Allowance for Credit Losses – Fixed Maturities - Available for Sale |
| Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
| Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total | | Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total |
(Dollars in millions) | | | | | | | | | | | | | | | |
Beginning balance | $ | (55) | | | $ | — | | | $ | (1) | | | $ | (56) | | | $ | (45) | | | $ | — | | | $ | (1) | | | $ | (46) | |
Credit losses on securities where credit losses were not previously recorded | (2) | | | — | | | — | | | (2) | | | (14) | | | — | | | — | | | (14) | |
Increases in allowance on previously impaired securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Decreases in allowance on previously impaired securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Reduction in allowance due to disposals | 1 | | | — | | | — | | | 1 | | | 4 | | | — | | | — | | | 4 | |
Balance, end of period | $ | (55) | | | $ | — | | | $ | (1) | | | $ | (57) | | | $ | (55) | | | $ | — | | | $ | (1) | | | $ | (57) | |
(Some amounts may not reconcile due to be impaired on an other-than-temporary basis 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.rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roll Forward of Allowance for Credit Losses – Fixed Maturities - Available for Sale |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
(Dollars in millions) | Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total | | Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total |
Beginning balance | $ | (20) | | | $ | (8) | | | $ | (1) | | | $ | (29) | | | $ | (19) | | | $ | (8) | | | $ | — | | | $ | (27) | |
Credit losses on securities where credit losses were not previously recorded | (5) | | | — | | | — | | | (5) | | | (7) | | | — | | | (1) | | | (8) | |
Increases in allowance on previously impaired securities | (1) | | | — | | | — | | | (1) | | | (1) | | | — | | | — | | | (1) | |
Decreases in allowance on previously impaired securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Reduction in allowance due to disposals | — | | | 8 | | | — | | | 8 | | | 1 | | | 8 | | | — | | | 9 | |
Balance, end of period | $ | (26) | | | $ | — | | | $ | (2) | | | $ | (27) | | | $ | (26) | | | $ | — | | | $ | (2) | | | $ | (27) | |
(Some amounts may not reconcile due to rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roll Forward of Allowance for Credit Losses – Fixed Maturities - Held to Maturity |
| Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
| Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total | | Corporate Securities | | Asset Backed Securities | | Foreign Corporate Securities | | Total |
(Dollars in millions) | | | | | | | | | | | | | | | |
Beginning balance | $ | (2) | | | $ | (6) | | | $ | (1) | | | $ | (9) | | | $ | (2) | | | $ | (6) | | | $ | (1) | | | $ | (9) | |
Credit losses on securities where credit losses were not previously recorded | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Increases in allowance on previously impaired securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Decreases in allowance on previously impaired securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Reduction in allowance due to disposals | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance, end of period | $ | (2) | | | $ | (6) | | | $ | (1) | | | $ | (8) | | | $ | (2) | | | $ | (6) | | | $ | (1) | | | $ | (8) | |
(Some amounts may not reconcile due to rounding.)
The proceeds and split between gross gains and losses from salesdispositions of fixed maturity and equity securities are presented in the table below for the periods indicated:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Proceeds from sales of fixed maturity securities | | $ | 410,636 | | | $ | 136,767 | | | $ | 1,063,126 | | | $ | 435,242 | |
Gross gains from sales | | | 7,931 | | | | 6,257 | | | | 23,674 | | | | 13,875 | |
Gross losses from sales | | | (4,089 | ) | | | (1,920 | ) | | | (6,860 | ) | | | (26,003 | ) |
| | | | | | | | | | | | | | | | |
Proceeds from sales of equity securities | | $ | 52,754 | | | $ | 109,914 | | | $ | 302,407 | | | $ | 531,894 | |
Gross gains from sales | | | 2,199 | | | | 6,874 | | | | 13,774 | | | | 13,509 | |
Gross losses from sales | | | (3,678 | ) | | | (1,422 | ) | | | (10,309 | ) | | | (23,643 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Proceeds from sales of fixed maturity securities - available for sale | $ | 59 | | | $ | 245 | | | $ | 109 | | | $ | 511 | |
Gross gains from dispositions | 1 | | | 3 | | | 4 | | | 6 | |
Gross losses from dispositions | (8) | | | (13) | | | (12) | | | (21) | |
| | | | | | | |
Proceeds from sales of equity securities | $ | — | | | $ | 343 | | | $ | 46 | | | $ | 425 | |
Gross gains from dispositions | — | | | 4 | | | 7 | | | 8 | |
Gross losses from dispositions | — | | | (34) | | | — | | | (46) | |
5. RESERVES FOR LOSSES AND LAE
Activity in the reserve for losses and LAE is summarized for the periods indicated:
| | Nine Months Ended | | | Twelve Months Ended | |
| | September 30, | | | At December 31, | |
(Dollars in thousands) | | 2017 | | | 2016 | |
Gross reserves at beginning of period | | $ | 8,331,288 | | | $ | 7,940,720 | |
Less reinsurance recoverables | | | (4,199,791 | ) | | | (3,875,073 | ) |
Net reserves at beginning of period | | | 4,131,497 | | | | 4,065,647 | |
| | | | | | | | |
Incurred related to: | | | | | | | | |
Current year | | | 1,918,055 | | | | 1,441,962 | |
Prior years | | | 453 | | | | (91,682 | ) |
Total incurred losses and LAE | | | 1,918,508 | | | | 1,350,280 | |
| | | | | | | | |
Paid related to: | | | | | | | | |
Current year | | | 441,480 | | | | 400,489 | |
Prior years | | | 547,176 | | | | 892,207 | |
Total paid losses and LAE | | | 988,656 | | | | 1,292,696 | |
| | | | | | | | |
Foreign exchange/translation adjustment | | | 19,084 | | | | 8,266 | |
| | | | | | | | |
Net reserves at end of period | | | 5,080,433 | | | | 4,131,497 | |
Plus reinsurance recoverables | | | 4,888,715 | | | | 4,199,791 | |
Gross reserves at end of period | | $ | 9,969,148 | | | $ | 8,331,288 | |
Current year incurred losses were $1,918,055 thousand for the nine months ended September 30, 2017 compared to $1,441,962 thousand for the full year 2016. The increase in current year incurred losses was primarily(Some amounts may not reconcile due to $1,039,295 thousand of catastrophe losses incurred in the nine months ended September 30, 2017, mainly related to Hurricane Irma, Hurricane Maria, Hurricane Harvey and the Mexico City earthquake. The $688,924 thousand increase in reinsurance recoverables from December 31, 2016 is primarily due to recoverables from these catastrophe losses.rounding.)
Incurred prior years' reserves increased by $453 thousand and decreased by $91,682 thousand for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. The decrease for the year ended December 31, 2016 was attributable to favorable development in the reinsurance segments of $187,909 thousand related primarily to property and short-tail business in the U.S., property business in Canada, Latin America, Middle East and Africa, as well as favorable development 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.
6.4. FAIR VALUE
GAAP guidance regarding fair value measurements addressaddresses 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 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 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: | 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, theThe Company also continually performs analytical reviewsquantitative and qualitative analysis of prices, including but not limited to initial and ongoing review of pricing methodologies, review of prices obtained from pricing services and third party investment asset managers, review of pricing statistics and trends, and comparison of prices for certain securities with a secondary price changes and tests the prices on a random basis to an independent pricing source.source for reasonableness. No material variances were noted during these price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value. DueAt June 30, 2023, $1.8 billion of fixed maturities were fair valued using unobservable inputs. The majority of these fixed maturities were valued by investment managers’ valuation committees and many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to the unavailability of prices for forty-eight private placement securities, the investment manager's valuation committee valued the forty-eight securities at $105,199 thousand at September 30, 2017. Due to the unavailability of prices for forty-two private placement securities, the investment manager's valuation committee valued the forty-two securities at $86,536 thousand atevaluate these independent third party valuations. At December 31, 2016.2022, $1.7 billion of fixed maturities were fair valued using unobservable inputs.
The Company internally manages a public equity portfolio of assets which had a fair value at SeptemberJune 30, 20172023 and December 31, 20162022 of $218,533 thousand$4.0 billion and $133,755 thousand,$2.7 billion, respectively, primarily comprised of collateralized loan obligations included in asset-backed securities, preferred stock and allU.S. treasury fixed maturities. All prices for these securities were obtained from publicallypublicly published sources.
sources or nationally recognized pricing vendors.
Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as 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 determine fair or market value. The Company uses foreign currency exchange rates published by nationally recognized sources.
All categories of fixedFixed 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 are 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.
TheIn addition to the valuations from investment managers, some of the fixed maturities with fair values categorized as levelLevel 3 result when prices are not available from the nationally recognized pricing services.services and are derived using unobservable inputs. The assetCompany will value the securities with unobservable inputs using comparable market information or receive fair values from investment managers. The investment managers will thenmay 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.
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. |
Other invested assets, at fair value was categorizedis based on observable market inputs such as Level 3 at September 30, 2017quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;
•Obligations of U.S. states and December 31, 2016, since it representedpolitical 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 privately placed convertible preferred stock issued bynationally 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 affiliate. The stock was received in exchange for shares of the Company's parent. The fair value of the preferred stock at September 30, 2017 and December 31, 2016 was determined usingrate from a pricing model.nationally recognized source.
The following table presentstables present the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the periodperiods indicated:
| | | | | Fair Value Measurement Using: | | | | | | | | | | | | | | | | | | | | | |
| | | | | Quoted Prices | | | | | | | | | Fair Value Measurement Using |
| | | | | in Active | | | Significant | | | | | |
| | | | | Markets for | | | Other | | | Significant | | |
| | | | | Identical | | | Observable | | | Unobservable | | |
| | | | | Assets | | | Inputs | | | Inputs | | |
(Dollars in thousands) | | September 30, 2017 | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |
(Dollars in millions) | | (Dollars in millions) | June 30, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | | | | | | Assets: | | | | | | | |
Fixed maturities, market value | | | | | | | | | | | | | |
U.S. Treasury securities and obligations of | | | | | | | | | | | | | |
U.S. government agencies and corporations | | $ | 655,886 | | | $ | - | | | $ | 655,886 | | | $ | - | | |
Obligations of U.S. States and political subdivisions | | | 671,842 | | | | - | | | | 671,842 | | | | - | | |
Fixed maturities - available for sale | | Fixed maturities - available for sale | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | | U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 439 | | | $ | — | | | $ | 439 | | | $ | — | |
Obligations of U.S. states and political subdivisions | | Obligations of U.S. states and political subdivisions | 395 | | | — | | | 395 | | | — | |
Corporate securities | | | 2,239,591 | | | | - | | | | 2,137,522 | | | | 102,069 | | Corporate securities | 4,209 | | | — | | | 3,498 | | | 711 | |
Asset-backed securities | | | 153,789 | | | | - | | | | 153,789 | | | | - | | Asset-backed securities | 4,676 | | | — | | | 3,561 | | | 1,115 | |
Mortgage-backed securities | | | | | | | | | | | | | | | | | Mortgage-backed securities | |
Commercial | | | 59,023 | | | | - | | | | 59,023 | | | | - | | Commercial | 503 | | | — | | | 503 | | | — | |
Agency residential | | | 677,830 | | | | - | | | | 677,830 | | | | - | | Agency residential | 1,654 | | | — | | | 1,654 | | | — | |
Non-agency residential | | | 62 | | | | - | | | | 62 | | | | - | | Non-agency residential | 59 | | | — | | | 59 | | | — | |
Foreign government securities | | | 531,473 | | | | - | | | | 531,473 | | | | - | | Foreign government securities | 684 | | | — | | | 684 | | | — | |
Foreign corporate securities | | | 1,049,865 | | | | - | | | | 1,046,734 | | | | 3,131 | | Foreign corporate securities | 1,583 | | | — | | | 1,567 | | | 16 | |
Total fixed maturities, market value | | | 6,039,361 | | | | - | | | | 5,934,161 | | | | 105,200 | | |
Total fixed maturities - available for sale | | Total fixed maturities - available for sale | 14,202 | | | — | | | 12,360 | | | 1,842 | |
| | | | | | | | | | | | | | | | | | |
Equity securities, fair value | | | 998,071 | | | | 951,679 | | | | 46,392 | | | | - | | Equity securities, fair value | 167 | | | 145 | | | 22 | | | — | |
Other invested assets, fair value | | | 1,922,402 | | | | - | | | | - | | | | 1,922,402 | | Other invested assets, fair value | 1,474 | | | — | | | — | | | 1,474 | |
There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2017.(Some amounts may not reconcile due to rounding.)
20 | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurement Using |
(Dollars in millions) | December 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Fixed maturities - available for sale | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies and corporations | $ | 535 | | | $ | — | | | $ | 535 | | | $ | — | |
Obligations of U.S. states and political subdivisions | 413 | | | — | | | 413 | | | — | |
Corporate securities | 3,561 | | | — | | | 2,846 | | | 715 | |
Asset-backed securities | 3,951 | | | — | | | 2,957 | | | 994 | |
Mortgage-backed securities | | | | | | | |
Commercial | 509 | | | — | | | 509 | | | — | |
Agency residential | 1,628 | | | — | | | 1,628 | | | — | |
Non-agency residential | 3 | | | — | | | 3 | | | — | |
Foreign government securities | 637 | | | — | | | 637 | | | — | |
Foreign corporate securities | 1,433 | | | — | | | 1,417 | | | 16 | |
Total fixed maturities - available for sale | 12,671 | | | — | | | 10,946 | | | 1,725 | |
| | | | | | | |
Equity securities, fair value | 194 | | | 132 | | | 63 | | | — | |
Other invested assets, fair value | 1,472 | | | — | | | — | | | 1,472 | |
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 | |
| | | | | 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 | |
(Some amounts may not reconcile due to rounding.)
In addition, $70,657 thousand$293 million and $18,801 thousand$292 million of investments within other invested assets on the consolidated balance sheets as of SeptemberJune 30, 20172023 and December 31, 2016,2022, 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.
The following table presentstables present the activity under Level 3, fair value measurements using significant unobservable inputs by asset type,for fixed maturities - available for sale, for the periods indicated:
| | Three Months Ended September 30, 2017 | | | Nine Months Ended September 30, 2017 | |
| | Corporate | | | Foreign | | | | | | Corporate | | | Foreign | | | | |
(Dollars in thousands) | | Securities | | | Corporate | | | Total | | | Securities | | | Corporate | | | Total | |
Beginning balance | | $ | 86,140 | | | $ | 3,151 | | | $ | 89,291 | | | $ | 65,197 | | | $ | 2,538 | | | $ | 67,735 | |
Total gains or (losses) (realized/unrealized) | | | | | | | | | | | | | | | | | | | | | | | | |
Included in earnings | | | 283 | | | | 210 | | | | 493 | | | | 1,208 | | | | 314 | | | | 1,522 | |
Included in other comprehensive income (loss) | | | 18 | | | | (230 | ) | | | (212 | ) | | | 161 | | | | (230 | ) | | | (69 | ) |
Purchases, issuances and settlements | | | 15,628 | | | | - | | | | 15,628 | | | | 35,503 | | | | 509 | | | | 36,012 | |
Transfers in and/or (out) of Level 3 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Ending balance | | $ | 102,069 | | | $ | 3,131 | | | $ | 105,200 | | | $ | 102,069 | | | $ | 3,131 | | | $ | 105,200 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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.) | | | | | | | | | | | | | | | | | | | | | | | | |
21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Fixed Maturities - Available for Sale |
| Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
(Dollars in millions) | Corporate Securities | | Asset Backed Securities | | | | Foreign Corporate | | Total | | Corporate Securities | | Asset Backed Securities | | | | Foreign Corporate | | Total |
Beginning balance of fixed maturities | $ | 709 | | | $ | 1,020 | | | | | $ | 16 | | | $ | 1,745 | | | $ | 715 | | | $ | 994 | | | | | $ | 16 | | | $ | 1,725 | |
Total gains or (losses) (realized/unrealized) | | | | | | | | | | | | | | | | | | | |
Included in earnings | 1 | | | — | | | | | — | | | 1 | | | 2 | | | — | | | | | — | | | 2 | |
Included in other comprehensive income (loss) | (2) | | | (8) | | | | | — | | | (9) | | | (6) | | | 10 | | | | | — | | | 4 | |
Purchases, issuances and settlements | 3 | | | 103 | | | | | — | | | 105 | | | — | | | 111 | | | | | — | | | 111 | |
Transfers in (out) of Level 3 and reclassification of securities in/(out) investment categories | — | | | — | | | | | — | | | — | | | — | | | — | | | | | — | | | — | |
Ending balance of fixed maturities | $ | 711 | | | $ | 1,115 | | | | | $ | 16 | | | $ | 1,842 | | | $ | 711 | | | $ | 1,115 | | | | | $ | 16 | | | $ | 1,842 | |
| | | | | | | | | | | | | | | | | | | |
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.) | | Three Months Ended September 30, 2016 | | | Nine Months Ended September 30, 2016 | |
| | Corporate | | | | | | Foreign | | | | | | Corporate | | | | | | Foreign | | | | |
(Dollars in thousands) | | Securities | | | CMBS | | | Corporate | | | Total | | | Securities | | | CMBS | | | Corporate | | | Total | |
Beginning balance | | $ | 32,410 | | | $ | - | | | $ | 2,021 | | | $ | 34,431 | | | $ | 3,933 | | | $ | - | | | $ | 1,593 | | | $ | 5,526 | |
Total gains or (losses) (realized/unrealized) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Included in earnings | | | (12 | ) | | | - | | | | 27 | | | | 15 | | | | (22 | ) | | | - | | | | (970 | ) | | | (992 | ) |
Included in other comprehensive income (loss) | | | (48 | ) | | | (34 | ) | | | (1,285 | ) | | | (1,367 | ) | | | (81 | ) | | | (34 | ) | | | 140 | | | | 25 | |
Purchases, issuances and settlements | | | 25,877 | | | | (40 | ) | | | 2,231 | | | | 28,068 | | | | 54,397 | | | | (40 | ) | | | 2,231 | | | | 56,588 | |
Transfers in and/or (out) of Level 3 | | | (1,932 | ) | | | 3,553 | | | | - | | | | 1,621 | | | | (1,932 | ) | | | 3,553 | | | | - | | | | 1,621 | |
Ending balance | | $ | 56,295 | | | $ | 3,479 | | | $ | 2,994 | | | $ | 62,768 | | | $ | 56,295 | | | $ | 3,479 | | | $ | 2,994 | | | $ | 62,768 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | (997 | ) | | $ | (997 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Fixed Maturities - Available for Sale |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
(Dollars in millions) | Corporate Securities | | Asset Backed Securities | | CMBS | | Foreign Corporate | | Total | | Corporate Securities | | Asset Backed Securities | | CMBS | | Foreign Corporate | | Total |
Beginning balance of fixed maturities | $ | 715 | | | $ | 1,389 | | | $ | 6 | | | $ | 16 | | | $ | 2,125 | | | $ | 730 | | | $ | 1,251 | | | $ | — | | | $ | 16 | | | $ | 1,997 | |
Total gains or (losses) (realized/unrealized) | | | | | | | | | | | | | | | | | | | |
Included in earnings | (5) | | | — | | | — | | | — | | | (4) | | | (3) | | | — | | | — | | | — | | | (3) | |
Included in other comprehensive income (loss) | (3) | | | (47) | | | — | | | (4) | | | (54) | | | (7) | | | (76) | | | — | | | (4) | | | (87) | |
Purchases, issuances and settlements | 28 | | | 62 | | | — | | | 8 | | | 97 | | | 15 | | | 228 | | | 6 | | | 8 | | | 256 | |
Transfers in (out) of Level 3 and reclassification of securities in/(out) investment categories | 128 | | | (148) | | | — | | | 20 | | | — | | | 128 | | | (148) | | | — | | | 20 | | | — | |
Ending balance of fixed maturities | $ | 862 | | | $ | 1,255 | | | $ | 6 | | | $ | 40 | | | $ | 2,163 | | | $ | 862 | | | $ | 1,255 | | | $ | 6 | | | $ | 40 | | | $ | 2,163 | |
| | | | | | | | | | | | | | | | | | | |
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 | $ | (5) | | | $ | 8 | | | $ | — | | | $ | — | | | $ | 2 | | | $ | (5) | | | $ | 8 | | | $ | — | | | $ | — | | | $ | 3 | |
The net(Some amounts may not reconcile due to rounding.)
There were no transfers to/(from) levelof assets in/(out) of Level 3 for the three and six months ended June 30, 2023 and 2022, respectively.
Financial Instruments Disclosed, But Not Reported, at Fair Value
Certain financial instruments disclosed, but not reported, at fair value measurements using significant unobservable inputs were $0 thousand and $1,621 thousand of investments forare excluded from the nine months ended September 30, 2017 and 2016, respectively. The $1,621 thousand of investments for the nine months ended September 30, 2016 related to the net impact of securities no longer priced by a recognized pricing service.
The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by other invested assets,hierarchy tables above. Fair values and valuation hierarchy of fixed maturity securities - held to maturity, senior notes and long-term subordinated notes can be found within Notes 3, 7 and 8, respectively. Fair values of long-term notes receivable from affiliates can be found within Note 13. Short-term investments are stated at cost, which approximates fair value.
5. RESERVES FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE
Activity in the reserve for losses and loss adjustment expenses (“LAE”) is summarized for the periods indicated:
| | | | | | | | | | | |
| Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 |
Gross reserves beginning of period | $ | 14,977 | | | $ | 13,121 | |
Less reinsurance recoverables on unpaid losses | (3,684) | | | (3,651) | |
Net reserves beginning of period | 11,294 | | | 9,470 | |
Incurred related to: | | | |
Current year | 2,720 | | | 2,521 | |
Prior years | (1) | | | 9 | |
Total incurred losses and LAE | 2,719 | | | 2,530 | |
Paid related to: | | | |
Current year | 937 | | | 775 | |
Prior years | 1,019 | | | 1,063 | |
Total paid losses and LAE | 1,956 | | | 1,838 | |
| | | |
Foreign exchange/translation adjustment | 15 | | | (17) | |
| | | |
Net reserves end of period | 12,072 | | | 10,145 | |
Plus reinsurance recoverables on unpaid losses | 3,440 | | | 3,593 | |
Gross reserves end of period | $ | 15,512 | | | $ | 13,738 | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Other invested assets, fair value: | | | | | | | | | | | | |
Beginning balance | | $ | 1,724,532 | | | $ | 1,772,458 | | | $ | 1,766,626 | | | $ | 1,773,214 | |
Total gains or (losses) (realized/unrealized) | | | | | | | | | | | | | | | | |
Included in earnings | | | 197,870 | | | | (47,090 | ) | | | 155,776 | | | | (47,846 | ) |
Included in other comprehensive income (loss) | | | - | | | | - | | | | - | | | | - | |
Purchases, issuances and settlements | | | - | | | | - | | | | - | | | | - | |
Transfers in and/or (out) of Level 3 | | | - | | | | - | | | | - | | | | - | |
Ending balance | | $ | 1,922,402 | | | $ | 1,725,367 | | | $ | 1,922,402 | | | $ | 1,725,367 | |
| | | | | | | | | | | | | | | | |
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.) | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
Current year incurred losses were $2.7 billion and $2.5 billion for the six months ended June 30, 2023 and 2022, respectively. Gross and net reserves increased for the six months ended June 30, 2023, reflecting an increase in underlying exposure due to earned premium growth year over year and the impact of a decrease of $24 million in current year catastrophe losses in 2023 compared to 2022. The Company has estimated and recognized $25 million of reinsurance recoveries related to Hurricane Ian.
6. SEGMENT REPORTING
The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies. Business is written in the United States and Bermuda as well as through branches in Canada and Singapore. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the United States and Bermuda.
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. The Company measures its underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, result from dividing incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.
The following tables present the underwriting results for the operating segments for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
(Dollars in millions) | Reinsurance | | Insurance | | Total | | Reinsurance | | Insurance | | Total |
Gross written premiums | $ | 1,791 | | | $ | 1,125 | | | $ | 2,915 | | | $ | 3,434 | | | $ | 1,977 | | | $ | 5,411 | |
Net written premiums | 1,580 | | | 816 | | | 2,396 | | | 2,953 | | | 1,506 | | | 4,459 | |
| | | | | | | | | | | |
Premiums earned | $ | 1,417 | | | $ | 714 | | | $ | 2,131 | | | $ | 2,784 | | | $ | 1,416 | | | $ | 4,200 | |
Incurred losses and LAE | 864 | | | 460 | | | 1,325 | | | 1,794 | | | 925 | | | 2,719 | |
Commission and brokerage | 363 | | | 70 | | | 433 | | | 724 | | | 145 | | | 869 | |
Other underwriting expenses | 36 | | | 100 | | | 136 | | | 75 | | | 200 | | | 275 | |
Underwriting gain (loss) | $ | 153 | | | $ | 84 | | | $ | 237 | | | $ | 191 | | | $ | 145 | | | $ | 336 | |
| | | | | | | | | | | |
Net investment income | | | | | 242 | | | | | | | 432 | |
Net gains (losses) on investments | | | | | (22) | | | | | | | — | |
Corporate expense | | | | | (4) | | | | | | | (10) | |
Interest, fee and bond issue cost amortization expense | | | | | (33) | | | | | | | (65) | |
Other income (expense) | | | | | (10) | | | | | | | (15) | |
Income (loss) before taxes | | | | | $ | 411 | | | | | | | $ | 679 | |
(Some amounts may not reconcile due to rounding)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
(Dollars in millions) | Reinsurance | | Insurance | | Total | | Reinsurance | | Insurance | | Total |
Gross written premiums | $ | 1,394 | | | $ | 1,043 | | | $ | 2,437 | | | $ | 2,774 | | | $ | 1,868 | | | $ | 4,642 | |
Net written premiums | 1,245 | | | 750 | | | 1,995 | | | 2,430 | | | 1,360 | | | 3,791 | |
| | | | | | | | | | | |
Premiums earned | $ | 1,295 | | | $ | 659 | | | $ | 1,954 | | | $ | 2,504 | | | $ | 1,279 | | | $ | 3,783 | |
Incurred losses and LAE | 875 | | | 429 | | | 1,304 | | | 1,696 | | | 834 | | | 2,530 | |
Commission and brokerage | 332 | | | 77 | | | 409 | | | 647 | | | 146 | | | 793 | |
Other underwriting expenses | 32 | | | 88 | | | 120 | | | 63 | | | 175 | | | 238 | |
Underwriting gain (loss) | $ | 55 | | | $ | 66 | | | $ | 121 | | | $ | 98 | | | $ | 124 | | | $ | 222 | |
| | | | | | | | | | | |
Net investment income | | | | | 176 | | | | | | | 333 | |
Net gains (losses) on investments | | | | | (378) | | | | | | | (605) | |
Corporate expense | | | | | (6) | | | | | | | (12) | |
Interest, fee and bond issue cost amortization expense | | | | | (24) | | | | | | | (48) | |
Other income (expense) | | | | | — | | | | | | | (9) | |
Income (loss) before taxes | | | | | $ | (110) | | | | | | | $ | (119) | |
(Some amounts may not reconcile due to rounding)
7. SENIOR NOTES
The table below displays Holdings’ outstanding senior notes. Fair value is based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | | December 31, 2022 |
(Dollars in millions) | Date Issued | | Date Due | | Principal Amounts | | Consolidated Balance Sheet Amount | | Fair Value | | Consolidated Balance Sheet Amount | | Fair Value |
4.868% Senior notes | 6/5/2014 | | 6/1/2044 | | 400 | | | $ | 397 | | | $ | 360 | | | $ | 397 | | | $ | 343 | |
3.5% Senior notes | 10/7/2020 | | 10/15/2050 | | 1,000 | | | 981 | | | 714 | | | 981 | | | 677 | |
3.125% Senior notes | 10/4/2021 | | 10/15/2052 | | 1,000 | | | 970 | | | 664 | | | 969 | | | 627 | |
| | | | | 2,400 | | | $ | 2,348 | | | $ | 1,738 | | | $ | 2,347 | | | $ | 1,647 | |
(Some amounts may not reconcile due to rounding.)
Interest expense incurred in connection with these senior notes is as follows for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | Interest Paid | | Payable Dates | | 2023 | | 2022 | | 2023 | | 2022 |
4.868% Senior notes | semi-annually | | June 1/December 1 | | $ | 5 | | | $ | 5 | | | $ | 10 | | | $ | 10 | |
3.5% Senior notes | semi-annually | | April 15/October 15 | | 9 | | | 9 | | | 18 | | | 18 | |
3.125% Senior notes | semi-annually | | April 15/October 15 | | 8 | | | 8 | | | 16 | | | 16 | |
| | | | | $ | 22 | | | $ | 22 | | | $ | 43 | | | $ | 43 | |
(Some amounts may not reconcile due to rounding.)
8. LONG-TERM SUBORDINATED NOTES
The table below displays Holdings’ outstanding fixed to floating rate long-term subordinated notes (“Subordinated Notes Issued 2007”). Fair value is based on quoted market prices, but due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | June 30, 2023 | | December 31, 2022 |
| | | Original Principal Amount | | Maturity Date | | Consolidated Balance Sheet Amount | | Fair Value | | Consolidated Balance Sheet Amount | | Fair Value |
(Dollars in millions) | Date Issued | | | Scheduled | | Final | | | | |
Long-term subordinated notes | 4/26/2007 | | $ | 400 | | | 5/15/2037 | | 5/1/2067 | | $ | 218 | | | $ | 187 | | | $ | 218 | | | $ | 187 | |
During the fixed rate interest period from May 3, 2007 through May 14, 2017, interest was at the annual rate of 6.6%, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2007. During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the 3 month LIBOR plus 238.5 basis points, reset quarterly, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, subject to Holdings’ right to defer interest on one or more occasions for up to ten consecutive years. Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for May 15, 2023 to August 14, 2023 is 7.71%. Following the cessation of LIBOR, for periods from and including August 15, 2023, interest will be based on three-month CME Term SOFR plus a spread.
Holdings may redeem the long-term subordinated notes on or after May 15, 2017, in whole or in part at 100% of the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant. This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. The Company’s 4.868% senior notes, due on June 1, 2044, 3.5% senior notes due on October 15, 2050 and 3.125% senior notes due on October 15, 2052 are the Company’s long-term indebtedness that rank senior to the long-term subordinated notes.
In 2009, the Company had reduced its outstanding amount of long-term subordinated notes through the initiation of a cash tender offer for any and all of the long-term subordinated notes.
Interest expense incurred in connection with these long-term subordinated notes is as follows for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Interest expense incurred | $ | 4 | | | $ | 2 | | | $ | 8 | | | $ | 3 | |
9. FEDERAL HOME LOAN BANK MEMBERSHIP
Everest Re is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of June 30, 2023, Everest Re had admitted assets of approximately $24 billion which provides borrowing capacity in excess of $2 billion. As of June 30, 2023, Everest Re has $519 million of borrowings outstanding, all of which expire in 2023. Everest Re incurred interest expense of $7 million and $0.8 million for the three months ended June 30, 2023 and 2022, respectively. Everest Re incurred interest expense of $13 million and $2 million for the six months ended June 30, 2023 and 2022, respectively. The FHLBNY membership agreement requires that 4.5% of borrowed funds be used to acquire additional membership stock.
10. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS
A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re’s investments as collateral, as security for assumed losses payable to non-affiliated ceding companies. At June 30, 2023, the total amount on deposit in the trust account was $717 million, which included $82 million of restricted cash. At June 30, 2022, the total amount on deposit in the trust account was $554 million, which included $187 million of restricted cash.
The Company entered into various collateralized reinsurance agreements with Kilimanjaro Re Limited (“Kilimanjaro”), a Bermuda-based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The table below summarizes the various agreements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | | | | | | | |
Class | | Description | | Effective Date | | Expiration Date | | Limit | | Coverage Basis |
Series 2019-1 Class A-1 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 12/12/2019 | | 12/19/2023 | | 150 | | | Occurrence |
Series 2019-1 Class B-1 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 12/12/2019 | | 12/19/2023 | | 275 | | | Aggregate |
Series 2019-1 Class A-2 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 12/12/2019 | | 12/19/2024 | | 150 | | | Occurrence |
Series 2019-1 Class B-2 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 12/12/2019 | | 12/19/2024 | | 275 | | | Aggregate |
Series 2021-1 Class A-1 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/21/2025 | | 150 | | | Occurrence |
Series 2021-1 Class B-1 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/21/2025 | | 85 | | | Aggregate |
Series 2021-1 Class C-1 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/21/2025 | | 85 | | | Aggregate |
Series 2021-1 Class A-2 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/20/2026 | | 150 | | | Occurrence |
Series 2021-1 Class B-2 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/20/2026 | | 90 | | | Aggregate |
Series 2021-1 Class C-2 | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 4/8/2021 | | 4/20/2026 | | 90 | | | Aggregate |
Series 2022-1 Class A | | US, Canada, Puerto Rico – Named Storm and Earthquake Events | | 6/22/2022 | | 6/25/2025 | | 300 | | | Aggregate |
| | Total available limit as of June 30, 2023 | | | | | | $ | 1,800 | | | |
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 June 30, 2023, the Company has up to $350 million of catastrophe bond protection (“CAT Bond”) that attaches at a $48.1 billion Property Claims Services (“PCS”) Industry loss threshold. This recovery would be recognized on a pro-rata basis up to a $63.8 billion PCS Industry loss level. PCS’s current industry estimate of $49.4 billion issued in July 2023 exceeds the attachment point. The recovery under the CAT Bond, included in the Company’s financial results, is currently estimated to be $25 million, subject to further revision of the industry loss estimate.
Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. The proceeds from the issuance of the catastrophe bonds are held in reinsurance trusts throughout the duration of the applicable reinsurance agreements and invested solely in U.S. government money market funds with a rating of at least “AAAm” by Standard & Poor’s. The catastrophe bonds’ issue date, maturity date and amount correspond to the reinsurance agreements listed above.
11. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company'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.
LAE.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.
The Company has entered into separate annuity agreements with The Prudential Insurance of America ("The Prudential") and an additional unaffiliated life insurance company in which the Company has either purchased 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.
The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:
| | At September 30, | | | At December 31, | |
(Dollars in thousands) | | 2017 | | | 2016 | |
The Prudential | | $ | 144,331 | | | $ | 146,507 | |
Unaffiliated life insurance company | | | 33,769 | | | | 33,860 | |
8.12. OTHER 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:
| | Three Months Ended September 30, 2017 | | | Nine Months Ended September 30, 2017 | |
(Dollars in thousands) | | Before Tax | | | Tax Effect | | | Net of Tax | | | Before Tax | | | Tax Effect | | | Net of Tax | |
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary | | $ | 852 | | | $ | (219 | ) | | $ | 633 | | | $ | 24,656 | | | $ | (8,279 | ) | | $ | 16,377 | |
URA(D) on securities - OTTI | | | (158 | ) | | | 55 | | | | (103 | ) | | | (3,974 | ) | | | 1,391 | | | | (2,583 | ) |
Reclassification of net realized losses (gains) included in net income (loss) | | | (2,454 | ) | | | 780 | | | | (1,674 | ) | | | (12,719 | ) | | | 4,101 | | | | (8,618 | ) |
Foreign currency translation adjustments | | | 52,740 | | | | (18,459 | ) | | | 34,281 | | | | 66,492 | | | | (23,272 | ) | | | 43,220 | |
Benefit plan actuarial net gain (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Reclassification of amortization of net gain (loss) included in net income (loss) | | | 2,107 | | | | (738 | ) | | | 1,369 | | | | 8,273 | | | | (2,896 | ) | | | 5,377 | |
Total other comprehensive income (loss) | | $ | 53,088 | | | $ | (18,581 | ) | | $ | 34,507 | | | $ | 82,729 | | | $ | (28,955 | ) | | $ | 53,774 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding) | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 | | | Nine Months Ended September 30, 2016 | |
(Dollars in thousands) | | Before Tax | | | Tax Effect | | | Net of Tax | | | Before Tax | | | Tax Effect | | | Net of Tax | |
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary | | $ | 8,305 | | | $ | (2,909 | ) | | $ | 5,396 | | | $ | 92,221 | | | $ | (32,279 | ) | | $ | 59,942 | |
URA(D) on securities - OTTI | | | (2,444 | ) | | | 856 | | | | (1,588 | ) | | | 4,199 | | | | (1,469 | ) | | | 2,730 | |
Reclassification of net realized losses (gains) included in net income (loss) | | | (4,258 | ) | | | 1,491 | | | | (2,767 | ) | | | 35,515 | | | | (12,430 | ) | | | 23,085 | |
Foreign currency translation adjustments | | | (4,066 | ) | | | 1,424 | | | | (2,642 | ) | | | 42,741 | | | | (14,962 | ) | | | 27,779 | |
Benefit plan actuarial net gain (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Reclassification of amortization of net gain (loss) included in net income (loss) | | | 1,951 | | | | (683 | ) | | | 1,268 | | | | 6,076 | | | | (2,127 | ) | | | 3,949 | |
Total other comprehensive income (loss) | | $ | (512 | ) | | $ | 179 | | | $ | (333 | ) | | $ | 180,752 | | | $ | (63,267 | ) | | $ | 117,485 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding) | | | | | | | | | | | | | | | | | | | | | | | | |
23 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
(Dollars in millions) | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax |
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related | $ | (56) | | | $ | 12 | | | $ | (44) | | | $ | 86 | | | $ | (18) | | | $ | 68 | |
Reclassification of net realized losses (gains) included in net income (loss) | 8 | | | (2) | | | 6 | | | 19 | | | (4) | | | 15 | |
Foreign currency translation adjustments | (5) | | | 1 | | | (4) | | | 3 | | | (1) | | | 2 | |
Reclassification of amortization of net gain (loss) included in net income (loss) | 1 | | | — | | | — | | | 1 | | | — | | | 1 | |
Total other comprehensive income (loss) | $ | (53) | | | $ | 11 | | | $ | (42) | | | $ | 109 | | | $ | (23) | | | $ | 86 | |
(Some amounts may not reconcile due to rounding) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
(Dollars in millions) | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax |
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related | $ | (520) | | | $ | 109 | | | $ | (411) | | | $ | (1,019) | | | $ | 213 | | | $ | (805) | |
Reclassification of net realized losses (gains) included in net income (loss) | 8 | | | (2) | | | 6 | | | 11 | | | (2) | | | 8 | |
Foreign currency translation adjustments | (12) | | | 3 | | | (10) | | | (15) | | | 3 | | | (12) | |
Reclassification of amortization of net gain (loss) included in net income (loss) | 1 | | | — | | | 1 | | | 2 | | | — | | | 2 | |
Total other comprehensive income (loss) | $ | (524) | | | $ | 110 | | | $ | (414) | | | $ | (1,021) | | | $ | 214 | | | $ | (807) | |
(Some amounts may not reconcile due to rounding)
The following table presents details of the amounts reclassified from AOCI for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | Affected line item within the statements of operations and comprehensive income (loss) |
AOCI component | | 2023 | | 2022 | | 2023 | | 2022 | |
(Dollars in millions) | | | | | | | | | | |
URA(D) on securities | | $ | 8 | | | $ | 8 | | | $ | 19 | | | $ | 11 | | | Other net gains (losses) on investments |
| | (2) | | | (2) | | | (4) | | | (2) | | | Income tax expense (benefit) |
| | $ | 6 | | | $ | 6 | | | $ | 15 | | | $ | 8 | | | Net income (loss) |
| | | | | | | | | | |
Benefit plan net gain (loss) | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 2 | | | Other underwriting expenses |
| | — | | | — | | | — | | | — | | | Income tax expense (benefit) |
| | $ | — | | | $ | 1 | | | $ | 1 | | | $ | 2 | | | Net income (loss) |
| | Three Months Ended | | | Nine Months Ended | | | |
| | September 30, | | | September 30, | | | Affected line item within the statements of |
AOCI component | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | operations and comprehensive income (loss) |
(Dollars in thousands) | | | | | | | | | | | | | | |
URA(D) on securities | | $ | (2,454 | ) | | $ | (4,258 | ) | | $ | (12,719 | ) | | $ | 35,515 | | | Other net realized capital gains (losses) |
| | | 780 | | | | 1,491 | | | | 4,101 | | | | (12,430 | ) | | Income tax expense (benefit) |
| | $ | (1,674 | ) | | $ | (2,767 | ) | | $ | (8,618 | ) | | $ | 23,085 | | | Net income (loss) |
| | | | | | | | | | | | | | | | | | |
Benefit plan net gain (loss) | | $ | 2,107 | | | $ | 1,951 | | | $ | 8,273 | | | $ | 6,076 | | | Other underwriting expenses |
| | | (738 | ) | | | (683 | ) | | | (2,896 | ) | | | (2,127 | ) | | Income tax expense (benefit) |
| | $ | 1,369 | | | $ | 1,268 | | | $ | 5,377 | | | $ | 3,949 | | | Net income (loss) |
| | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding) | | | | | | | | | | | | | | | | | | |
(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:
| | Nine Months Ended | | | Twelve Months Ended | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(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 | | | 7,759 | | | | 22,063 | | |
Current period change in URA (D) of investments - non-credit OTTI | | | (2,583 | ) | | | 3,324 | | |
Ending balance of URA (D) on securities | | | 44,218 | | | | 39,041 | | |
(Dollars in millions) | | (Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Beginning balance of URA(D) on securities | | Beginning balance of URA(D) on securities | $ | (695) | | | $ | (270) | | | $ | (816) | | | $ | 122 | |
Current period change in URA(D) of investments - non-credit related | | Current period change in URA(D) of investments - non-credit related | (38) | | | (405) | | | 83 | | | (797) | |
Ending balance of URA(D) on securities | | Ending balance of URA(D) on securities | (734) | | | (675) | | | (734) | | | (675) | |
| | | | | | | | | | | | | | | | |
Beginning balance of foreign currency translation adjustments | | | (9,852 | ) | | | (12,701 | ) | Beginning balance of foreign currency translation adjustments | 8 | | | 18 | | | 2 | | | 20 | |
Current period change in foreign currency translation adjustments | | | 43,220 | | | | 2,849 | | Current period change in foreign currency translation adjustments | (4) | | | (10) | | | 2 | | | (12) | |
Ending balance of foreign currency translation adjustments | | | 33,368 | | | | (9,852 | ) | Ending balance of foreign currency translation adjustments | 4 | | | 8 | | | 4 | | | 8 | |
| | | | | | | | | | | | | | | | |
Beginning balance of benefit plan net gain (loss) | | | (65,504 | ) | | | (63,089 | ) | Beginning balance of benefit plan net gain (loss) | (33) | | | (50) | | | (33) | | | (51) | |
Current period change in benefit plan net gain (loss) | | | 5,377 | | | | (2,415 | ) | Current period change in benefit plan net gain (loss) | — | | | 1 | | | 1 | | | 2 | |
Ending balance of benefit plan net gain (loss) | | | (60,127 | ) | | | (65,504 | ) | Ending balance of benefit plan net gain (loss) | (32) | | | (49) | | | (32) | | | (49) | |
| | | | | | | | | | | | | | | | |
Ending balance of accumulated other comprehensive income (loss) | | $ | 17,459 | | | $ | (36,315 | ) | Ending balance of accumulated other comprehensive income (loss) | $ | (762) | | | $ | (716) | | | $ | (762) | | | $ | (716) | |
9. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS(Some amounts may not reconcile due to rounding.)
A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re's investments as collateral, as security for assumed losses payable to a non-affiliated ceding company. At September 30, 2017, the total amount on deposit in the trust account was $659,548 thousand.13. RELATED-PARTY TRANSACTIONS
On April 24, 2014, the Company entered into two collateralized reinsurance agreements with Kilimanjaro Re Limited ("Kilimanjaro"), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover 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.
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.
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 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.
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 September 30, 2017, none of the published insured loss estimates for the 2017 catastrophe events have exceeded the single event 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 or if there are additional covered events during the remainder of 2017, 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"). On November 18, 2014, Kilimanjaro issued $500,000 thousand of notes ("Series 2014-2 Notes"). 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). 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" by Standard & Poor's.
10. SENIOR NOTES
The table below displays Holdings'long-term note agreements that Group entered into with Everest Re for the periods indicated. These transactions are presented as Notes Receivable – Affiliated in the Consolidated Balance Sheet of Holdings. All note agreements listed were repaid in full during the second quarter of 2023 and are no longer outstanding senior notes. Marketas of June 30, 2023. Fair value is based on quoted market prices, but due to limited trading activity,of these seniorlong-term notes areis considered Level 2 in the fair value hierarchy.
| | | | | | | | September 30, 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 notes | 06/05/2014 | | 06/01/2044 | | | 400,000 | | | $ | 396,804 | | | $ | 420,008 | | | $ | 396,714 | | | $ | 383,612 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | | December 31, 2022 |
(Dollars in millions) | Date Issued | | Date Due | | Principal Amounts | | Consolidated Balance Sheet Amount | | Fair Value | | Consolidated Balance Sheet Amount | | Fair Value |
1.69% Long-term Note | 12/17/2019 | | 12/17/2028 | | 300 | | | $ | — | | | $ | — | | | $ | 300 | | | $ | 242 | |
1.00% Long-term Note | 8/5/2021 | | 8/5/2030 | | 200 | | | — | | | — | | | 200 | | | 151 | |
3.11% Long-term Note | 6/14/2022 | | 6/14/2052 | | 215 | | | — | | | — | | | 215 | | | 171 | |
4.34%Long-term Note | 12/12/2022 | | 12/12/2052 | | 125 | | | — | | | — | | | 125 | | | 125 | |
| | | | | 840 | | | $ | — | | | $ | — | | | $ | 840 | | | $ | 689 | |
On June 5, 2014, Holdings issued $400,000 thousand of 30 year senior notes at 4.868%, which will mature on June 1, 2044. Interest will be paid semi-annually on June 1 and December 1 of each year.(Some amounts may not reconcile due to rounding)
Interest expense incurredincome recognized in connection with these seniorlong-term notes is as follows for the periods indicated:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Interest expense incurred | | $ | 4,868 | | | $ | 4,868 | | | $ | 14,604 | | | $ | 14,604 | |
11. LONG TERM SUBORDINATED NOTES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | Interest Received | | Receivable Dates | | 2023 | | 2022 | | 2023 | | 2022 |
1.69% Long-term Note | annually | | December 17 | | $ | 1 | | | $ | 1 | | | $ | 2 | | | $ | 3 | |
1.00% Long-term Note | annually | | August 5 | | — | | | 1 | | | 1 | | | 1 | |
3.11% Long-term Note | annually | | June 14 | | 1 | | | — | | | 3 | | | — | |
4.34% Long-term Note | annually | | December 12 | | 1 | | | — | | | 2 | | | — | |
| | | | | $ | 3 | | | $ | 2 | | | $ | 7 | | | $ | 4 | |
The table below displays Holdings' outstanding fixed to floating rate long term subordinated notes. Market value is based on quoted market prices, but(Some amounts may not reconcile due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.
| | | | | | Maturity Date | | September 30, 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 notes | 04/26/2007 | | $ | 400,000 | | | 05/15/2037 | | 05/01/2067 | | $ | 236,536 | | | $ | 221,380 | | | $ | 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' 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 August 15, 2017. The reset quarterly interest rate for November 15, 2017 to November 15, 2017 is 3.70%.
rounding)
Holdings may redeem the long term subordinated notes on or after May 15, 2017, in whole or in part at 100% of the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant. This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. Effective upon the maturity of the Company's 5.40% senior notes on October 15, 2014, the Company's 4.868% senior notes, due on June 1, 2044, have become the Company's long term indebtedness that ranks senior to the long term subordinated notes.
On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the 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.
Interest expense incurred in connection with these long term subordinated notes is as follows for the periods indicated:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Interest expense incurred | | $ | 2,240 | | | $ | 3,937 | | | $ | 9,210 | | | $ | 11,811 | |
12. SEGMENT REPORTING
The U.S. Reinsurance operation writes 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 within the U.S. The International operation writes non-U.S. property and casualty reinsurance through Everest Re's branches in Canada, Singapore and through offices in Brazil, Miami and New Jersey. The Insurance operation writes property and casualty insurance directly and 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 loss adjustment expenses ("LAE") incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.
The following tables present the underwriting results for the operating segments for the periods indicated:
| | Three Months Ended | | | Nine Months Ended | |
U.S. Reinsurance | | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Gross written premiums | | $ | 908,346 | | | $ | 654,770 | | | $ | 1,962,297 | | | $ | 1,597,006 | |
Net written premiums | | | 295,645 | | | | 327,242 | | | | 649,883 | | | | 711,700 | |
| | | | | | | | | | | | | | | | |
Premiums earned | | $ | 242,350 | | | $ | 249,203 | | | $ | 652,953 | | | $ | 709,064 | |
Incurred losses and LAE | | | 678,926 | | | | 137,245 | | | | 919,107 | | | | 363,567 | |
Commission and brokerage | | | 31,698 | | | | 48,107 | | | | 115,243 | | | | 147,968 | |
Other underwriting expenses | | | 12,094 | | | | 14,265 | | | | 40,623 | | | | 39,856 | |
Underwriting gain (loss) | | $ | (480,368 | ) | | $ | 49,586 | | | $ | (422,020 | ) | | $ | 157,673 | |
| | Three Months Ended | | | Nine Months Ended | |
International | | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Gross written premiums | | $ | 363,186 | | | $ | 353,195 | | | $ | 975,296 | | | $ | 939,851 | |
Net written premiums | | | 130,180 | | | | 141,295 | | | | 345,387 | | | | 353,449 | |
| | | | | | | | | | | | | | | | |
Premiums earned | | $ | 123,915 | | | $ | 128,358 | | | $ | 355,366 | | | $ | 372,816 | |
Incurred losses and LAE | | | 410,543 | | | | 41,830 | | | | 557,416 | | | | 206,672 | |
Commission and brokerage | | | 25,101 | | | | 30,193 | | | | 72,426 | | | | 82,443 | |
Other underwriting expenses | | | 8,241 | | | | 9,219 | | | | 26,293 | | | | 25,011 | |
Underwriting gain (loss) | | $ | (319,970 | ) | | $ | 47,116 | | | $ | (300,769 | ) | | $ | 58,690 | |
| | Three Months Ended | | | Nine Months Ended | |
Insurance | | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Gross written premiums | | $ | 429,593 | | | $ | 497,958 | | | $ | 1,351,491 | | | $ | 1,276,761 | |
Net written premiums | | | 144,935 | | | | 154,079 | | | | 442,237 | | | | 462,791 | |
| | | | | | | | | | | | | | | | |
Premiums earned | | $ | 152,242 | | | $ | 179,092 | | | $ | 449,440 | | | $ | 445,553 | |
Incurred losses and LAE | | | 242,089 | | | | 122,528 | | | | 441,985 | | | | 365,962 | |
Commission and brokerage | | | (22,254 | ) | | | 4,478 | | | | (40,104 | ) | | | (10,859 | ) |
Other underwriting expenses | | | 37,378 | | | | 40,665 | | | | 114,889 | | | | 116,839 | |
Underwriting gain (loss) | | $ | (104,971 | ) | | $ | 11,421 | | | $ | (67,330 | ) | | $ | (26,389 | ) |
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:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Underwriting gain (loss) | | $ | (905,309 | ) | | $ | 108,123 | | | $ | (790,119 | ) | | $ | 189,974 | |
Net investment income | | | 73,417 | | | | 64,570 | | | | 206,166 | | | | 196,887 | |
Net realized capital gains (losses) | | | 228,489 | | | | (50,063 | ) | | | 253,966 | | | | (87,275 | ) |
Corporate expense | | | (1,132 | ) | | | (1,835 | ) | | | (6,241 | ) | | | (6,181 | ) |
Interest, fee and bond issue cost amortization expense | | | (7,161 | ) | | | (8,859 | ) | | | (23,974 | ) | | | (26,576 | ) |
Other income (expense) | | | 1,486 | | | | (13,208 | ) | | | 21,996 | | | | (10,806 | ) |
Income (loss) before taxes | | $ | (610,210 | ) | | $ | 98,728 | | | $ | (338,206 | ) | | $ | 256,023 | |
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'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:
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Canada gross written premiums | | $ | 30,625 | | | $ | 35,856 | | | $ | 94,777 | | | $ | 94,072 | |
No other country represented more than 5% of the Company's revenues.
13. RELATED-PARTY TRANSACTIONS
Parent
Group entered into a $250,000 thousand long term promissory note agreement with Holdings as of December 31, 2014. The note will mature on December 31, 2023 and has an 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 $3,225 thousand and $3,225 thousand was recorded by Holdings for the nine months ended September 30, 2017, and September 30, 2016, respectively.
Group's Board of Directors approved an amended share repurchase program authorizing Group and/or its subsidiary Holdings to purchase Group'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 |
Amendment Date | | Repurchase |
(Dollars in thousands) | | |
| | |
09/21/2004 | | 5,000,000 |
07/21/2008 | | 5,000,000 |
02/24/2010 | | 5,000,000 |
02/22/2012 | | 5,000,000 |
05/15/2013 | | 5,000,000 |
11/19/2014 | | 5,000,000 |
| | 30,000,000 |
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 forholds 1,773.214 preferred shares of Preferred Holdings with a $1,000 thousand$1 million par value and 1.75% annual dividend rate. Holdings received these shares in December 2015 in exchange for previously held 9,719,971 common shares of Group. 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) on investments 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.indicated:
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | September 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | | |
(Dollars in millions) | | (Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Dividends received on preferred stock of affiliate | | $ | 7,758 | | | $ | 7,758 | | | $ | 23,274 | | | $ | 23,274 | | Dividends received on preferred stock of affiliate | $ | 8 | | | $ | 8 | | | $ | 16 | | | $ | 16 | |
Affiliated CompaniesAffiliates
The Company has engaged in reinsurance transactions with Bermuda Re, Everest Global Services, Inc. ("Global Services"Reinsurance Company (Ireland) dac (“Ireland Re”), an affiliateEverest Insurance (Ireland) dac (“Ireland Insurance”), Everest International Reinsurance Ltd. (“Everest International”), Everest Insurance Company of Holdings, provides centralized managementCanada (“Everest Canada”), Lloyd’s Syndicate 2786 and home office services, through a management agreement, to Holdings and otherMt. Logan Re, which are affiliated companies within Holdings' consolidated structure. Services providedprimarily driven by Everest Global include executive managerial services, legal services, actuarial services, accounting services, information technology servicesenterprise risk and others.
The following table presents the expenses incurred by Holdings from services provided by Everest Global for the periods indicated.
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Expenses incurred | | $ | 25,465 | | | $ | 21,242 | | | $ | 71,694 | | | $ | 62,701 | |
Affiliatescapital management considerations under which business is ceded at market rates and terms.
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 millions) | | | | | | | | | | | | |
Coverage Period | Ceding Company | | Percent Ceded | | Assuming Company | | Type of Business | | Single Occurrence Limit | | Aggregate Limit | |
01/01/2010-12/31/2010 | Everest Re | | 44.0 | % | | Bermuda Re | | property / casualty business | | 150 | | | 325 | | |
01/01/2011-12/31/2011 | Everest Re | | 50.0 | % | | Bermuda Re | | property / casualty business | | 150 | | | 300 | | |
01/01/2012-12/31/2014 | Everest Re | | 50.0 | % | | Bermuda Re | | property / casualty business | | 100 | | | 200 | | |
01/01/2015-12/31/2016 | Everest Re | | 50.0 | % | | Bermuda Re | | property / casualty business | | 163 | | | 325 | | |
01/01/2017-12/31/2017 | Everest Re | | 60.0 | % | | Bermuda Re | | property / casualty business | | 219 | | | 438 | | |
01/01/2010-12/31/2010 | Everest Re- Canadian Branch | | 60.0 | % | | Bermuda Re | | property business | | 350 | | (1) | — | | |
01/01/2011-12/31/2011 | Everest Re- Canadian Branch | | 60.0 | % | | Bermuda Re | | property business | | 350 | | (1) | — | | |
01/01/2012-12/31/2012 | Everest Re- Canadian Branch | | 75.0 | % | | Bermuda Re | | property / casualty business | | 206 | | (1) | 413 | | (1) |
01/01/2013-12/31/2013 | Everest Re- Canadian Branch | | 75.0 | % | | Bermuda Re | | property / casualty business | | 150 | | (1) | 413 | | (1) |
01/01/2014-12/31/2017 | Everest Re- Canadian Branch | | 75.0 | % | | Bermuda Re | | property / casualty business | | 263 | | (1) | 413 | | (1) |
01/01/2012-12/31/2017 | Everest Canada | | 80.0 | % | | Everest Re- Canadian Branch | | property business | | — | | | — | | |
01/01/2020 | Everest International Assurance | | 100.0 | % | | Bermuda Re | | life business | | — | | | — | | |
(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 | | 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 | | Everest Re- Canadian Branch | 75.0% | | Bermuda Re | | property / casualty business | | 262,500 | (1) | | 412,500 | (1) |
| | | | | | | | | | | | | | | |
01/01/2012 | | Everest Canada | | 80.0% | | Everest Re- Canadian Branch | property business | | - | | | - | |
| | | | | | | | | | | | | | | |
(1) Amounts shown are Canadian dollars. | | | | | | | | | | | | | |
(1)Amounts shown are Canadian dollars.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 was most recently renewed effective January 1, 2023.
Everest Re entered into a catastrophe excess of loss reinsurance contract with Bermuda Re (UK Branch), effective January 1, 2021 through December 31, 2021. The contract provides Bermuda Re (UK Branch) with up to £110 million of reinsurance coverage for each catastrophe occurrence above £29 million. Bermuda Re (UK Branch) paid Everest Re £4 million for this coverage. This contract was most recently renewed effective January 1, 2023.
Everest Re entered into a catastrophe excess of loss reinsurance contract with Ireland Re, effective February 1, 2023 through January 31, 2024. The contract provides Ireland Re with up to €121 million of reinsurance coverage for each catastrophe occurrence above €18 million. Ireland Re paid Everest Re €10 million for this coverage.
Everest Re entered into a catastrophe excess of loss reinsurance contract with Ireland Re, effective March 31, 2023 through January 31, 2024. The contract provides Ireland Re with up to €61 million of reinsurance coverage for each catastrophe occurrence above €139 million. Ireland Re paid Everest Re €2 million for this coverage.
The table below represents loss portfolio transfer (“LPT”) reinsurance agreements whereby net insurance exposures and reserves were transferred to an affiliate.
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 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) |
Effective Date | | Transferring Company | | Assuming Company | | % of Business or Amount of Transfer | | Covered Period of Transfer |
10/01/2001 | | Everest Re (Belgium Branch) | | Bermuda Re | | 100 | % | | All years |
10/01/2008 | | Everest Re | | Bermuda Re | | $ | 747 | | | 01/01/2002-12/31/2007 |
12/31/2017 | | Everest Re | | Bermuda Re | | $ | 970 | | | All years |
On July 13, 2015,December 31, 2017, the Company sold Mt. McKinleyentered into a LPT agreement with Bermuda Re. The LPT agreement covers subject loss reserves of $2.3 billion for accident years 2017 and prior. As a result of the LPT agreement, the Company transferred $1.0 billion of cash and fixed maturity securities and transferred $970 million of loss reserves to Clearwater Insurance Company, a Delaware domiciled insurance company.Bermuda Re. As part of the LPT agreement, Bermuda Re will provide an additional $500 million of adverse development coverage on the subject loss reserves. As of that date, Mt. McKinley is no longer deemed an affiliated company or related party.
June 30,
2023 and December 31, 2022, the Company has a reinsurance recoverable of $803 million and $804 million, respectively, recorded on its balance sheet due from Bermuda Re.The following tables summarize the significant premiums and losses ceded and assumed by the Company to Bermuda Re and Everest International, respectively, and premiums and losses assumed by the Company from Everest Canada and Lloyd's syndicate 2786 for the periods indicated:affiliated entities:
| | Three Months Ended | | | Nine Months Ended | |
Bermuda Re | | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Ceded written premiums | | $ | 911,866 | | | $ | 685,798 | | | $ | 2,228,538 | | | $ | 1,746,976 | |
Ceded earned premiums | | | 796,194 | | | | 585,993 | | | | 2,005,965 | | | | 1,718,295 | |
Ceded losses and LAE (a) | | | 650,460 | | | | 344,789 | | | | 1,379,164 | | | | 1,039,932 | |
| | Three Months Ended | | | Nine Months Ended | |
Everest International | | September 30, | | September 30, |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Ceded written premiums | | $ | 21 | | | $ | (5 | ) | | $ | (4 | ) | | $ | 26 | |
Ceded earned premiums | | | 38 | | | | (3 | ) | | | 13 | | | | 36 | |
Ceded losses and LAE | | | (13 | ) | | | 479 | | | | (631 | ) | | | 1,377 | |
| | Three Months Ended | | | Nine Months Ended | |
Everest Canada | | September 30, | | September 30, |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Assumed written premiums | | $ | 13,028 | | | $ | 12,667 | | | $ | 39,008 | | | $ | 39,094 | |
Assumed earned premiums | | | 13,464 | | | | 11,611 | | | | 38,201 | | | | 34,740 | |
Assumed losses and LAE | | | 7,448 | | | | 13,287 | | | | 21,418 | | | | 34,714 | |
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | | | | |
Lloyd's Syndicate 2786 | | September 30, | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | | |
Bermuda Re | | Bermuda Re | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | | (Dollars in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Ceded written premiums | | Ceded written premiums | | $ | 107 | | | $ | 91 | | | $ | 214 | | | $ | 184 | |
Ceded earned premiums | | Ceded earned premiums | | 107 | | | 91 | | | 213 | | | 184 | |
Ceded losses and LAE | | Ceded losses and LAE | | (5) | | | 3 | | | (9) | | | 1 | |
| Assumed written premiums | | $ | 15,984 | | | $ | 351 | | | $ | 34,069 | | | $ | 890 | | Assumed written premiums | | 4 | | | 1 | | | 4 | | | 3 | |
Assumed earned premiums | | | 15,042 | | | | 173 | | | | 31,766 | | | | 289 | | Assumed earned premiums | | 3 | | | 1 | | | 3 | | | 5 | |
Assumed losses and LAE | | | 7,893 | | | | - | | | | 16,157 | | | | - | | Assumed losses and LAE | | — | | | — | | | — | | | — | |
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. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ireland Re | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Assumed written premiums | | $ | 3 | | | $ | 2 | | | $ | 6 | | | $ | 4 | |
Assumed earned premiums | | 3 | | | 2 | | | 6 | | | 5 | |
Assumed losses and LAE | | 1 | | | — | | | 1 | | | 2 | |
Effective February 27, 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 established separate segregated accounts for its business activity, which will invest in a diversified set of catastrophe exposures. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ireland Insurance | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Assumed written premiums | | $ | 11 | | | $ | 2 | | | $ | 12 | | | $ | 4 | |
Assumed earned premiums | | 8 | | | 2 | | | 10 | | | 4 | |
Assumed losses and LAE | | 2 | | | (5) | | | 4 | | | 2 | |
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.accounts:
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | | | | |
Mt. Logan Re Segregated Accounts | | September 30, | | September 30, | Mt. Logan Re Segregated Accounts | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | | |
(Dollars in millions) | | (Dollars in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Ceded written premiums | | $ | 54,057 | | | $ | 57,911 | | | $ | 131,939 | | | $ | 128,292 | | Ceded written premiums | | $ | 40 | | | $ | 22 | | | $ | 82 | | | $ | 62 | |
Ceded earned premiums | | | 46,696 | | | | 44,548 | | | | 131,361 | | | | 118,776 | | Ceded earned premiums | | 44 | | | 29 | | | 82 | | | 72 | |
Ceded losses and LAE | | | 180,540 | | | | 7,420 | | | | 223,973 | | | | 32,750 | | Ceded losses and LAE | | 19 | | | 23 | | | 32 | | | 60 | |
| | | | | | | | | | | | | | | | | |
Assumed written premiums | | $ | 2,587 | | | $ | 5,032 | | | $ | 9,082 | | | $ | 11,666 | | |
Assumed earned premiums | | | 2,587 | | | | 5,032 | | | | 9,082 | | | | 11,666 | | |
Assumed losses and LAE | | | - | | | | - | | | | - | | | | - | | |
14.RETIREMENT BENEFITS
The Company maintains both qualified and non-qualified defined benefit pension plans and a retiree health plan for its U.S. employees employed prior to April 1, 2010.
Net periodic benefit cost for U.S. employees included the following components for the periods indicated:
Pension Benefits | | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Service cost | | $ | 2,737 | | | $ | 2,731 | | | $ | 9,335 | | | $ | 8,524 | |
Interest cost | | | 2,509 | | | | 2,371 | | | | 7,060 | | | | 7,093 | |
Expected return on plan assets | | | (3,263 | ) | | | (2,789 | ) | | | (9,572 | ) | | | (7,757 | ) |
Amortization of net (income) loss | | | 2,091 | | | | 1,984 | | | | 8,172 | | | | 6,012 | |
Net periodic benefit cost | | $ | 4,074 | | | $ | 4,297 | | | $ | 14,995 | | | $ | 13,872 | |
Other Benefits | | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Service cost | | $ | 392 | | | $ | 354 | | | $ | 1,273 | | | $ | 1,230 | |
Interest cost | | | 295 | | | | 252 | | | | 793 | | | | 844 | |
Amortization of prior service cost | | | (33 | ) | | | (33 | ) | | | (98 | ) | | | (33 | ) |
Amortization of net (income) loss | | | 48 | | | | - | | | | 199 | | | | 96 | |
Net periodic benefit cost | | $ | 703 | | | $ | 573 | | | $ | 2,167 | | | $ | 2,137 | |
| | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | |
The Company contributed $10,000 thousand to the qualified pension benefit plan for the three and nine months ended September 30, 2017. The Company contributed $30,000 thousand to the qualified pension benefit plan for the three and nine months ended September 30, 2016.
15.14. INCOME TAXES
The Company is domiciled in the United States and has subsidiaries domiciled within the United States with significant branches in Canada and Singapore. The Company'sCompany’s non-U.S. branches are subject to income taxation at varying rates in their respective domiciles.
The Company generally applies the estimated annual effective tax rate (“AETR”) approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the estimated annual effective tax rateAETR approach, the estimated annual effective tax rateAETR is applied to the interim year-to-date pre-tax income/loss(loss) to determine the income tax expense or benefit for the year-to-date period. If the annual effective tax rate approach produces a year-to-date tax benefit which exceeds the amount which is estimated to be recoverable for the full year, then the tax benefit for the interim reporting period will be limited as
prescribed under ASC 740-270 to the estimated recoverable based on the year-to-date result. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company'sCompany’s annual pre-tax income/loss(loss) and effective tax rate.AETR.
16. DISPOSITION
On August 24, 201616, 2022, 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 onInflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the sale of Heartland of $12,942 thousand. Under the termstax provisions of the reinsurance arrangement, there hasIRA, the most significant of which are the corporate alternative minimum tax and the share repurchase excise tax and do not beenexpect the legislation to have a material fluctuation inimpact on our results of operations. As the level of crop business, although it has been reflected as reinsurance rather than insurance.IRS issues additional guidance, we will evaluate any impact to our consolidated financial statements.
17.15. SUBSEQUENT EVENTS
The Company has evaluated known recognized and non-recognized subsequent events. In October 2017, Hurricane Nate impacted the Southern United States and Central America and Hurricane Ophelia impacted Ireland, the United Kingdom and Northern Europe. Also, in October 2017, a number of wildfires affected California. DueThe Company does not have any subsequent events to the recentness of these events, the Company is unable to estimate the amount of losses related to Hurricane Nate, Hurricane Ophelia or the California wildfires at this time. However, the Company anticipates that these events will adversely impact the fourth quarter 2017 financial results.report.
ITEM 2.MANAGEMENT'S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Industry Conditions.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and market. As such,a result, 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 termlong-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 insurancereinsurance and reinsuranceinsurance market conditions continued to be very competitive, particularly in the property catastrophe and casualty reinsurance lines of business.historically have been competitive. Generally, there wasis ample insurancereinsurance and reinsuranceinsurance capacity relative to demand, as well as additional capital from the capital markets through insurance linkedinsurance-linked financial instruments. These financial instruments such as side cars, catastrophe bonds and collateralized reinsurance funds, provide capital markets with access to insurancereinsurance and reinsuranceinsurance risk exposure. The capital markets demand for these products is being primarily driven by the current low interest rate environment and the desire to achieve greater risk diversification and potentially higher returns on their investments. This increased competition is generally havinghas a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.
Rates tend to fluctuate by specific region and products, particularly areas recently impacted by large catastrophic events. There was an unprecedented series of catastrophes Based on recent competitive behaviors in the third quarterreinsurance and insurance industry, natural catastrophe events and the macroeconomic backdrop, there has been dislocation in the market which has had a positive impact on rates and terms and conditions, generally, though specifics in local markets can vary.
Specifically, recent market conditions in property, particularly catastrophe excess of 2017loss, have resulted in rate increases. As a result of the rate increases, most of the lines within property have been affected. Other casualty lines have been experiencing modest rate increases, while some lines such as workers’ compensation and directors and officers liability have been experiencing softer market conditions. The impact on pricing conditions is likely to change depending on the line of business and geography.
Our capital position is a source of strength, with Hurricanes Harvey, Irmahigh-quality invested assets, significant liquidity and Maria,a low operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography is resilient.
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against Russia, specific named individuals and entities connected to the Russian government, as well as a significant earthquakebusinesses located in Mexico City. Additional catastrophe events occurredthe Russian Federation and/or owned by Russian nationals in October 2017 with Hurricanes Nate and Ophelia and the wild fires in California. 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 andnumerous countries, including the United States experiencedStates. The significant political and economic uncertainty surrounding the most loss events since 1980war and associated sanctions have impacted economic and investment markets both within Russia and around the highest total losses since 2012. While the future impact on market conditions from these catastrophes cannot be determined at this time, there was some firming in the markets impacted by the 2016 catastrophes and as catastrophe losses continue to increase in 2017, there is a growing industry consensus that there will be a general firming of the (re)insurance markets resulting in rate increases, not only for catastrophe exposures, but also potentially for most other lines of business.
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 launched lines of business, as well as, product and geographic expansion in existing lines of business. We are building a world-classworld.
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. We continue to employ our strategy of targeting business that offers the greatest profit potential, while maintaining balance and diversification in our overall portfolio.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Percentage Increase/ (Decrease) | | Six Months Ended June 30, | | Percentage Increase/ (Decrease) |
(Dollars in millions) | 2023 | | 2022 | | | 2023 | | 2022 | |
Gross written premiums | $ | 2,915 | | | $ | 2,437 | | | 19.6 | % | | $ | 5,411 | | | $ | 4,642 | | | 16.6 | % |
Net written premiums | 2,396 | | | 1,995 | | | 20.1 | % | | 4,459 | | | 3,791 | | | 17.6 | % |
| | | | | | | | | | | |
REVENUES: | | | | | | | | | | | |
Premiums earned | $ | 2,131 | | | $ | 1,954 | | | 9.0 | % | | $ | 4,200 | | | $ | 3,783 | | | 11.0 | % |
Net investment income | 242 | | | 176 | | | 37.3 | % | | 432 | | | 333 | | | 30.0 | % |
Net gains (losses) on investments | (22) | | | (378) | | | -94.2 | % | | — | | | (605) | | | NM |
Other income (expense) | (10) | | | — | | | NM | | (15) | | | (9) | | | 65.9 | % |
Total revenues | 2,341 | | | 1,753 | | | 33.5 | % | | 4,618 | | | 3,502 | | | 31.9 | % |
| | | | | | | | | | | |
CLAIMS AND EXPENSES: | | | | | | | | | | | |
Incurred losses and loss adjustment expenses | 1,325 | | | 1,304 | | | 1.6 | % | | 2,719 | | | 2,530 | | | 7.5 | % |
Commission, brokerage, taxes and fees | 433 | | | 409 | | | 5.9 | % | | 869 | | | 793 | | | 9.6 | % |
Other underwriting expenses | 136 | | | 120 | | | 13.1 | % | | 275 | | | 238 | | | 15.5 | % |
Corporate expenses | 4 | | | 6 | | | -36.3 | % | | 10 | | | 12 | | | -12.6 | % |
Interest, fees and bond issue cost amortization expense | 33 | | | 24 | | | 35.0 | % | | 65 | | | 48 | | | 34.0 | % |
Total claims and expenses | 1,930 | | | 1,863 | | | 3.6 | % | | 3,938 | | | 3,621 | | | 8.8 | % |
| | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | 411 | | | (110) | | | NM | | 679 | | | (119) | | | NM |
Income tax expense (benefit) | 81 | | | (25) | | | NM | | 130 | | | (35) | | | NM |
NET INCOME (LOSS) | $ | 330 | | | $ | (86) | | | NM | | $ | 549 | | | $ | (85) | | | NM |
| | | | | | | | | | | |
RATIOS: | | | | | Point Change | | | | | | Point Change |
Loss ratio | 62.2 | % | | 66.7 | % | | (4.6) | | | 64.7 | % | | 66.9 | % | | (2.1) | |
Commission and brokerage ratio | 20.3 | % | | 20.9 | % | | (0.6) | | | 20.7 | % | | 21.0 | % | | (0.3) | |
Other underwriting expense ratio | 6.4 | % | | 6.2 | % | | 0.2 | | | 6.5 | % | | 6.3 | % | | 0.3 | |
Combined ratio | 88.9 | % | | 93.8 | % | | (4.9) | | | 92.0 | % | | 94.1 | % | | (2.1) | |
| | Three Months Ended | | | Percentage | | | Nine Months Ended | | | Percentage | |
| | September 30, | | | Increase/ | | | September 30, | | | Increase/ | |
(Dollars in millions) | | 2017 | | | 2016 | | | (Decrease) | | | 2017 | | | 2016 | | | (Decrease) | |
Gross written premiums | | $ | 1,701.1 | | | $ | 1,505.9 | | | | 13.0 | % | | $ | 4,289.1 | | | $ | 3,813.6 | | | | 12.5 | % |
Net written premiums | | | 570.8 | | | | 622.6 | | | | -8.3 | % | | | 1,437.5 | | | | 1,527.9 | | | | -5.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
REVENUES: | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 518.5 | | | $ | 556.7 | | | | -6.9 | % | | $ | 1,457.8 | | | $ | 1,527.4 | | | | -4.6 | % |
Net investment income | | | 73.4 | | | | 64.6 | | | | 13.7 | % | | | 206.2 | | | | 196.9 | | | | 4.7 | % |
Net realized capital gains (losses) | | | 228.5 | | | | (50.1 | ) | | NM | | | 254.0 | | | | (87.3 | ) | | NM |
Other income (expense) | | | 1.5 | | | | (13.2 | ) | | | -111.3 | % | | | 22.0 | | | | (10.8 | ) | | NM |
Total revenues | | | 821.9 | | | | 558.0 | | | | 47.3 | % | | | 1,939.9 | | | | 1,626.2 | | | | 19.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
CLAIMS AND EXPENSES: | | | | | | | | | | | | | | | | | | | | | | | | |
Incurred losses and loss adjustment expenses | | | 1,331.6 | | | | 301.6 | | | NM | | | 1,918.5 | | | | 936.2 | | | | 104.9 | % |
Commission, brokerage, taxes and fees | | | 34.5 | | | | 82.8 | | | | -58.3 | % | | | 147.6 | | | | 219.6 | | | | -32.8 | % |
Other underwriting expenses | | | 57.7 | | | | 64.1 | | | | -10.0 | % | | | 181.8 | | | | 181.7 | | | | 0.1 | % |
Corporate expense | | | 1.1 | | | | 1.8 | | | | -38.3 | % | | | 6.2 | | | | 6.2 | | | | 1.0 | % |
Interest, fee and bond issue cost amortization expense | | | 7.2 | | | | 8.9 | | | | -19.2 | % | | | 24.0 | | | | 26.6 | | | | -9.8 | % |
Total claims and expenses | | | 1,432.1 | | | | 459.2 | | | | 211.9 | % | | | 2,278.1 | | | | 1,370.2 | | | | 66.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
INCOME (LOSS) BEFORE TAXES | | | (610.2 | ) | | | 98.7 | | | NM | | | (338.2 | ) | | | 256.0 | | | | -232.1 | % |
Income tax expense (benefit) | | | (220.5 | ) | | | 22.4 | | | NM | | | (153.3 | ) | | | 69.4 | | | NM |
NET INCOME (LOSS) | | $ | (389.7 | ) | | $ | 76.3 | | | NM | | $ | (184.9 | ) | | $ | 186.7 | | | | -199.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
RATIOS: | | | | | | | | | | Point Change | | | | | | | | | | | Point Change | |
Loss ratio | | | 256.8 | % | | | 54.2 | % | | | 202.6 | | | | 131.6 | % | | | 61.3 | % | | | 70.3 | |
Commission and brokerage ratio | | | 6.7 | % | | | 14.9 | % | | | (8.2 | ) | | | 10.1 | % | | | 14.4 | % | | | (4.3 | ) |
Other underwriting expense ratio | | | 11.1 | % | | | 11.5 | % | | | (0.4 | ) | | | 12.5 | % | | | 11.9 | % | | | 0.6 | |
Combined ratio | | | 274.6 | % | | | 80.6 | % | | | 194.0 | | | | 154.2 | % | | | 87.6 | % | | | 66.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | At | | | At | | | Percentage | |
| | | | | | | | | | | | | | September 30, | | | December 31, | | | Increase/ | |
(Dollars in millions) | | | | | | | | | | | | | | | 2017 | | | | 2016 | | | (Decrease) | |
Balance sheet data: | | | | | | | | | | | | | | | | | | | | | | | | |
Total investments and cash | | | | | | | | | | | | | | $ | 10,231.7 | | | $ | 9,842.7 | | | | 4.0 | % |
Total assets | | | | | | | | | | | | | | | 19,143.4 | | | | 17,083.4 | | | | 12.1 | % |
Loss and loss adjustment expense reserves | | | | | | | | | | | | | | | 9,969.1 | | | | 8,331.3 | | | | 19.7 | % |
Total debt | | | | | | | | | | | | | | | 633.3 | | | | 633.2 | | | | 0.0 | % |
Total liabilities | | | | | | | | | | | | | | | 13,975.7 | | | | 11,784.9 | | | | 18.6 | % |
Stockholder's equity | | | | | | | | | | | | | | | 5,167.6 | | | | 5,298.6 | | | | -2.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding) | | | | | | | | | | | | | | | | | | | | | | | | |
(NM, not meaningful) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| At June 30, | | At December 31, | | Percentage Increase/ (Decrease) |
(Dollars in millions) | 2023 | | 2022 | |
Balance sheet data: | | | | | |
Total investments and cash | $ | 21,056 | | | $ | 19,195 | | | 9.7 | % |
Total assets | 29,494 | | | 27,957 | | | 5.5 | % |
Loss and loss adjustment expense reserves | 15,512 | | | 14,977 | | | 3.6 | % |
Total debt | 3,085 | | | 3,084 | | | — | % |
Total liabilities | 23,204 | | | 22,303 | | | 4.0 | % |
Stockholder's equity | 6,290 | | | 5,654 | | | 11.2 | % |
35(NM, not meaningful)
(Some amounts may not reconcile due to rounding)Revenues.
Premiums. Gross written premiums increased by 13.0%19.6% to $1,701.1 million$2.9 billion for the three months ended September June 30, 2017,2023, compared to $1,505.9 million$2.4 billion for the three months ended September June 30, 2016,2022, reflecting a $263.6$397 million, or 26.1%28.5%, increase in our reinsurance business and a $68.4an $82 million, or 13.7%7.8%, decreaseincrease in our insurance business. The increase in reinsurance premiums was mainlyprimarily due to the new crop reinsurance transactions, increases in financialacross lines of business and the influx of reinstatement premiums related to multiple catastrophe events in the third quarter.business. The declineincrease in insurance premiums was primarily due
to the sale of Heartland Crop Insurance, Inc. ("Heartland") which accounted for $162.4 million of gross written premiumincreases in the third quarter of 2016. Excluding the impact of Heartland, insurance premiums rose by $94.0 million due to increased production in manyproperty/short tail business and other specialty lines of business, including retail casualty, surety and accident and health.business. Gross written premiums increased by 12.5%16.6% to $4,289.1 million$5.4 billion for the ninesix months ended September June 30, 2017,2023, compared to $3,813.6 million$4.6 billion for the ninesix months ended September June 30, 2016,2022, reflecting a $400.7$660 million, or 15.8%23.8%, increase in our reinsurance business and a $74.7$109 million, or 5.9%5.8%, increase in our insurance business. The increase in reinsurance premiums was mainly due to the new crop reinsurance transactions, increases in treaty property and financialacross all lines of business and the influx of reinstatement premiums related to multiple catastrophe events in the third quarter.business. The riseincrease in insurance premiums was primarily due toreflects increases in manyproperty/short tail business and other specialty lines of business, including retail casualty, accident and health and surety, partially offset by the impact of the sale of Heartland.business.
Net written premiums decreasedincreased by 8.3%20.1% to $570.8$2.4 billion for the three months ended June 30, 2023, compared to $2.0 billion for the three months ended June 30, 2022 and increased by 17.6% to $4.5 billion for the six months ended June 30, 2023, compared to $3.8 billion for the six months ended June 30, 2022. Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Premiums earned increased by 9.0% to $2.1 billion for the three months ended June 30, 2023, compared to $2.0 billion for the three months ended June 30, 2022 and increased by 11.0% to $4.2 billion for the six months ended June 30, 2023, compared to $3.8 billion for the six months ended June 30, 2022.
Other Income (Expense). We recorded other expense of $10 million and other income of $0.5 million for the three months ended September June 30, 2017, compared to $622.6 million for the three months ended September 30, 2016,2023 and decreased by 5.9% to $1,437.5 million for the nine months ended September 30, 2017, compared to $1,527.9 million for the nine months ended September 30, 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 mainly related to affiliated quota share contracts. Premiums earned decreased by 6.9% to $518.5 million for the three months ended September 30, 2017, compared to $556.7 million for the three months ended September 30, 2016 and decreased by 4.6% to $1,457.8 million for the nine months ended September 30, 2017, compared to $1,527.4 million for the nine months ended September 30, 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.
Net Investment Income.Net investment income increased 13.7% to $73.4 million for the three months ended September 30, 2017 compared with net investment income of $64.6 million for the three months ended September 30, 2016 and increased 4.7% to $206.2 million for the nine months ended September 30, 2017 compared with net investment income of $196.9 million for the nine months ended September 30, 2016. Net pre-tax investment income as a percentage of average invested assets was 3.0% for the three months ended September 30, 2017, compared to 2.7% for the three months ended September 30, 2016 and remained flat at 2.8% for the nine months ended September 30, 2017 and 2016. The increases in income for the three and nine months ended September 30, 2017 were primarily the result of higher income from our limited partnerships and higher income from the growing fixed income portfolio, partially offset by lower dividend income from our equity portfolio.
Net Realized Capital Gains (Losses). Net realized capital gains were $228.5 million and net realized capital losses were $50.1 million for the three months ended September 30, 2017 and 2016, respectively. The net realized capital gains of $228.5 million were comprised of $227.5 million of gains from fair value re-measurements on equity securities and other invested assets and $2.4 million of gains from sales on our fixed maturity and equity securities, partially offset by $1.5 million of other-than-temporary impairments. The net realized capital losses of $50.1 million for the three months ended September 30, 2016 were comprised of $30.9 million of losses from fair value re-measurements on fixed maturity securities, equity securities and other invested assets, net realized capital losses of $28.0 million from the sale of our Heartland subsidiary and $0.8 million of other-than-temporary impairments, partially offset by $9.6 million of gains from sales on our fixed maturity and equity securities.
Net realized capital gains were $254.0 million and net realized capital losses were $87.3 million for the nine months ended September 30, 2017 and 2016, respectively. The net realized capital gains of $254.0 million were comprised of $237.8 million of gains from fair value re-measurements on equity securities and other invested assets and $20.3 million of gains from sales on our fixed maturity and equity securities, partially offset by $4.2 million of other-than-temporary impairments. The net realized capital losses of $87.3 million for the nine months ended September 30, 2016 million were comprised of net realized capital losses of $28.0 million from the sale of our Heartland subsidiary, $25.2 million of other-than-temporary impairments, $22.4 million of losses from sales on our fixed maturity and equity securities and $11.7 million of losses from fair value re-measurements on fixed maturity securities, equity securities and other invested assets.
Other Income (Expense). We recorded other income of $1.5 million and $22.0 million for the three and nine months ended September 30, 2017,2022, respectively. We recorded other expense of $13.2$15 million and $10.8other expense of $9 million for the three and ninesix months ended SeptemberJune 30, 2016,2023 and 2022, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates.
Net Investment Income. Refer to Consolidated Investments Results Section below.
Net Gains (Losses) on Investments. Refer to Consolidated Investments Results Section below.
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.indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
(Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2023 | | | | | | | | | | | |
Attritional | $ | 1,297 | | | 60.9 | % | | $ | 1 | | | 0.1 | % | | $ | 1,299 | | | 61.0 | % |
Catastrophes | 19 | | | 0.9 | % | | 7 | | | 0.3 | % | | 26 | | | 1.2 | % |
Total | $ | 1,316 | | | 61.8 | % | | $ | 8 | | | 0.4 | % | | $ | 1,325 | | | 62.2 | % |
| | | | | | | | | | | |
2022 | | | | | | | | | | | |
Attritional | $ | 1,237 | | | 63.3 | % | | $ | — | | | — | % | | $ | 1,237 | | | 63.3 | % |
Catastrophes | 65 | | | 3.3 | % | | 2 | | | 0.1 | % | | 67 | | | 3.4 | % |
Total | $ | 1,302 | | | 66.6 | % | | $ | 2 | | | 0.1 | % | | $ | 1,304 | | | 66.7 | % |
| | | | | | | | | | | |
Variance 2023/2022 | | | | | | | | | | | |
Attritional | $ | 61 | | | (2.4) | pts | | $ | 1 | | | 0.1 | pts | | $ | 62 | | | (2.3) | pts |
Catastrophes | (46) | | | (2.4) | pts | | 5 | | | 0.2 | pts | | (41) | | | (2.2) | pts |
Total | $ | 15 | | | (4.8) | pts | | $ | 6 | | | 0.3 | pts | | $ | 21 | | | (4.6) | pts |
| | Three Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 325.6 | | | | 62.8 | % | | | $ | (0.9 | ) | | | -0.2 | % | | | $ | 324.7 | | | | 62.6 | % | |
Catastrophes | | | 1,007.8 | | | | 194.4 | % | | | | (0.9 | ) | | | -0.2 | % | | | | 1,006.9 | | | | 194.2 | % | |
Total | | $ | 1,333.4 | | | | 257.2 | % | | | $ | (1.8 | ) | | | -0.4 | % | | | $ | 1,331.6 | | | | 256.8 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 300.4 | | | | 54.0 | % | | | $ | 0.1 | | | | 0.0 | % | | | $ | 300.6 | | | | 54.0 | % | |
Catastrophes | | | 20.9 | | | | 3.8 | % | | | | (19.8 | ) | | | -3.6 | % | | | | 1.0 | | | | 0.2 | % | |
Total | | $ | 321.3 | | | | 57.8 | % | | | $ | (19.7 | ) | | | -3.6 | % | | | $ | 301.6 | | | | 54.2 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 25.2 | | | | 8.8 | | pts | | $ | (1.0 | ) | | | (0.2 | ) | pts | | $ | 24.1 | | | | 8.6 | | pts |
Catastrophes | | | 986.9 | | | | 190.6 | | pts | | | 18.9 | | | | 3.4 | | pts | | | 1,005.9 | | | | 194.0 | | pts |
Total | | $ | 1,012.1 | | | | 199.4 | | pts | | $ | 17.9 | | | | 3.2 | | pts | | $ | 1,030.0 | | | | 202.6 | | pts |
| | Nine Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 878.8 | | | | 60.3 | % | | | $ | 4.4 | | | | 0.3 | % | | | $ | 883.2 | | | | 60.6 | % | |
Catastrophes | | | 1,039.3 | | | | 71.3 | % | | | | (3.9 | ) | | | -0.3 | % | | | | 1,035.3 | | | | 71.0 | % | |
Total | | $ | 1,918.1 | | | | 131.6 | % | | | $ | 0.5 | | | | 0.0 | % | | | $ | 1,918.5 | | | | 131.6 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 894.7 | | | | 58.5 | % | | | $ | 0.9 | | | | 0.1 | % | | | $ | 895.6 | | | | 58.6 | % | |
Catastrophes | | | 77.6 | | | | 5.1 | % | | | | (37.0 | ) | | | -2.4 | % | | | | 40.6 | | | | 2.7 | % | |
Total | | $ | 972.3 | | | | 63.6 | % | | | $ | (36.1 | ) | | | -2.3 | % | | | $ | 936.2 | | | | 61.3 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | (15.9 | ) | | | 1.8 | | pts | | $ | 3.5 | | | | 0.2 | | pts | | $ | (12.4 | ) | | | 2.0 | | pts |
Catastrophes | | | 961.7 | | | | 66.2 | | pts | | | 33.1 | | | | 2.1 | | pts | | | 994.7 | | | | 68.3 | | pts |
Total | | $ | 945.8 | | | | 68.0 | | pts | | $ | 36.6 | | | | 2.3 | | pts | | $ | 982.3 | | | | 70.3 | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
(Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2023 | | | | | | | | | | | |
Attritional | $ | 2,598 | | | 61.9 | % | | $ | — | | | — | % | | $ | 2,598 | | | 61.9 | % |
Catastrophes | 122 | | | 2.9 | % | | — | | | — | % | | 121 | | | 2.9 | % |
Total | $ | 2,720 | | | 64.8 | % | | $ | (1) | | | — | % | | $ | 2,719 | | | 64.7 | % |
| | | | | | | | | | | |
2022 | | | | | | | | | | | |
Attritional | $ | 2,375 | | | 62.8 | % | | $ | — | | | — | % | | $ | 2,375 | | | 62.8 | % |
Catastrophes | 145 | | | 3.8 | % | | 9 | | | 0.2 | % | | 155 | | | 4.1 | % |
Total | $ | 2,521 | | | 66.6 | % | | $ | 9 | | | 0.2 | % | | $ | 2,530 | | | 66.9 | % |
| | | | | | | | | | | |
Variance 2023/2022 | | | | | | | | | | | |
Attritional | $ | 223 | | | (0.9) | pts | | $ | — | | | — | pts | | 222 | | | (0.9) | pts |
Catastrophes | (24) | | | (1.0) | pts | | (9) | | | (0.2) | pts | | (33) | | | (1.2) | pts |
Total | $ | 199 | | | (1.9) | pts | | $ | (10) | | | (0.3) | pts | | $ | 189 | | | (2.1) | pts |
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 1.6% to $1,331.6$1.3 billion for the three months ended June 30, 2023 compared to $1.3 billion for the three months ended June 30, 2022, primarily due to an increase of $61 million in current year attritional losses and a decrease of $46 million in current year catastrophe losses. The increase in current year attritional losses was mainly due to the impact of the increase in premiums earned. The current year catastrophe losses of $19 million for the three months ended SeptemberJune 30, 2017 compared2023 mainly related to $301.6the 2023 Turkey earthquakes ($18 million), Typhoon Mawar ($12 million), and the 2023 2nd quarter U.S. storms ($10 million), partially offset by $25 million of reinsurance recoveries related to Hurricane Ian. The current year catastrophe losses of $65 million for the three months ended SeptemberJune 30, 2016,2022 related to 2022 South Africa flood ($38 million), the 2022 Canada derecho ($16 million) and the 2022 2nd quarter U.S. storms ($12 million). Prior year incurred development of $8 million for the three months ended June 30, 2023 is primarily driven by unfavorable movement on prior year catastrophes.
Incurred losses and LAE increased by 7.5% to $2.7 billion for the six months ended June 30, 2023 compared to $2.5 billion for the six months ended June 30, 2022, primarily due to an increase of $986.9$223 million in current year attritional losses and a decrease of $24 million in current year catastrophe losses, anlosses. The increase in current year attritional losses of $25.2 million and $19.8 million of favorable development on prior years catastrophe losses in 2016, primarily related to the 2011 Japan earthquake, which did not recur in 2017. The increase in attritional losses was primarilymainly due to the impact of changesthe increase in affiliated quota share contractspremiums earned. The current year catastrophe losses of $122 million for the six months ended June 30, 2023 related to 2023 Turkey earthquakes ($83 million), the 2023 New Zealand storms ($42 million), Typhoon Mawar ($12 million), and the 2023 2nd quarter U.S. storms ($10 million), partially offset by $25 million of reinsurance recoveries related to Hurricane Ian. The current year catastrophe losses of $145 million for the six months ended June 30, 2022 primarily related to 2022 Australia floods ($71 million), 2022 South Africa flood ($38 million), the 2022 Canada derecho ($16 million), 2022 2nd quarter U.S. storms ($12 million), and the 2022 March U.S. storms ($9 million).
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased to $433 million for the three months ended June 30, 2023 compared to $409 million for the three months ended June 30, 2022. Commission, brokerage, taxes and fees increased to $869 million for the six months ended June 30, 2023 compared to $793 million for the six months ended June 30, 2022. The increases were mainly due to the impact of the increase in premiums earned and changes in the mix of business. The current year catastrophe losses of $1,007.8 million for the three months ended September 30, 2017 related
Other Underwriting Expenses. Other underwriting expenses increased to Hurricane Irma ($476.2 million), Hurricane Maria ($318.9 million), Hurricane Harvey ($180.7 million) and the Mexico City earthquake ($32.1 million). The current year catastrophe losses of $20.9$136 million for the three months ended SeptemberJune 30, 2016 were related to Hurricane Hermine ($6.8 million), 2016 U.S. Storms ($6.6 million), the Fort McMurray Canada wildfire ($5.0 million), the Taiwan earthquake ($2.3 million) and the Ecuador earthquake ($0.2 million).
Incurred losses and LAE increased by 104.9% to $1,918.5 million for the nine months ended September 30, 20172023 compared to $936.2 million for the nine months ended September 30, 2016, primarily due to an increase of $961.7 million in current year catastrophe losses and favorable development of $37.0 million on prior year catastrophe losses in 2016, primarily related to the 2011 Japan earthquake, which did not recur in 2017. The current year catastrophe losses of $1,039.3 million for the nine months ended September 30, 2017 related to Hurricane Irma ($476.2 million), Hurricane Maria ($318.9 million), Hurricane Harvey ($180.7 million), the Mexico City earthquake ($32.1 million), the South Africa Knysna fires ($10.0 million), Cyclone Debbie in Australia ($8.3 million), the Peru storms ($6.9 million) and the 2017 US Midwest storms ($6.2 million). The current year catastrophe losses of $77.6 million for the nine months ended September 30, 2016 were related to the Fort McMurray Canada wildfire ($26.9 million), the 2016 U.S. Storms ($24.9 million), the Ecuador earthquake ($11.6 million), the 2016 Taiwan earthquake ($7.5 million) and Hurricane Hermine ($6.8 million).
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees decreased by 58.3% to $34.5 million for the three months ended September 30, 2017 compared to $82.8$120 million for the three months ended SeptemberJune 30, 2016. Commission, brokerage, taxes and fees decreased by 32.8%2022. Other underwriting expenses increased to $147.6 million for the nine months ended September 30, 2017 compared to $219.6$275 million for the ninesix months ended SeptemberJune 30, 2016.2023 compared to $238 million for the six months ended June 30, 2022. The decreasesincreases were primarilymainly due to the impact of the decreaseincrease in premiums earned and costs incurred to support the impactexpansion of affiliated quota share contracts.the insurance business.
Other Underwriting Expenses. Other underwriting expenses were $57.7 million and $64.1 million for the three months ended September 30, 2017 and September 30, 2016, respectively. The decrease for the three month period was primarily due to lower variable compensation costs. Other underwriting expenses were flat at $181.8 million and $181.7 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.
Corporate Expenses.Corporate expenses, which are general operating expenses that are not allocated to segments, have decreased slightly to $1.1$4 million from $1.8 $6 million for the three months ended SeptemberJune 30, 20172023 and 2016,2022, respectively, and were flat at $6.2decreased to $10 million from $12 million for the ninesix months ended SeptemberJune 30, 20172023 and 2016,2022, respectively. The variances are mainly due to changes in variable incentive compensation expenses.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization were $7.2expense was $33 million and $8.9$24 million for the three months ended SeptemberJune 30, 2017 2023 and 2016,2022, respectively. Interest, fees and other bond amortization were $24.0expense was $65 million and $26.6$48 million for the ninesix months ended SeptemberJune 30, 2017 2023 and 2016,2022, respectively. The decreases in expense for both the three and nine month periodsincreases were primarilymainly due to higher interest costs on the conversionFHLBNY borrowing as a result of the long term subordinated notes from a fixedrising interest rate of 6.6%environment. Interest expense was also impacted by the movements in the floating interest rate related to a floating rate,the Company’s long-term Subordinated Notes Issued 2007, which is reset quarterly per the note agreement. The floating rate was 3.70%7.71% as of SeptemberJune 30, 2017.2023.
Income Tax Expense (Benefit). We had an income tax expense of $81 million and $130 million for the three and six months ended June 30, 2023, respectively. We had income tax benefit of $220.5$25 million and income tax expense of $22.4$35 million for the three and six months ended SeptemberJune 30, 2017 and 2016,2022, respectively. We had an income tax benefit of $153.3 million and income tax expense of $69.4 million for the nine months ended September 30, 2017 and 2016, respectively. IncomeIncome tax expense is primarily a function of the Company'sgeographic location of the Company’s pre-tax income and the statutory tax rates in those jurisdictions. The effective tax rate as(“ETR”) is primarily affected by tax-exempt investment income, and foreign tax credits and as calculated under the annualized effective tax rate ("AETR") method.dividends. Variations in income tax expensethe ETR generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses, foreign exchange gains (losses) and net capital gains (losses). However, if on investments, among jurisdictions with different tax rates.
On August 16, 2022, the AETR approach produces a year-to-date tax benefit which exceeds the amount which is estimated to be recoverable for the full year, thenInflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax benefit forprovisions of the interim reporting periodIRA, the most significant of which are the corporate alternative minimum tax and the share repurchase excise tax and do not expect the legislation to have a material impact on our results of operations. As the IRS issues additional guidance, we will be limited, as prescribed under ASC 740-270,evaluate any impact to the estimated tax recoverable based on the year-to-date result. The decrease in income tax expense for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 was primarily due to the significant catastrophe losses incurred during the third quarter of 2017.our consolidated financial statements.
Net Income (Loss).
Our net lossincome was $389.7$330 million and our net incomeloss was $76.3$86 million, for the three months ended SeptemberJune 30, 20172023 and 2016,2022, respectively. Our net income was $549 million and net loss was $184.9$85 million, and our net income was $186.7 million for the ninesix months ended SeptemberJune 30, 20172023 and 2016,2022 respectively. The changes were primarily driven by the financial component fluctuations explained above.
Ratios.
Our combined ratio increaseddecreased by 194.04.9 points to 274.6%88.9% for the three months ended SeptemberJune 30, 2017,2023, compared to 80.6%93.8% for the three months ended SeptemberJune 30, 2016,2022 and increaseddecreased by 66.62.1 points to 154.2%92.0% for the ninesix months ended SeptemberJune 30, 2017,2023 compared to 87.6%94.1% for the ninesix months ended SeptemberJune 30, 2016.2022. The loss ratio components increased 202.6 points and 70.3component decreased by 4.6 points for the three and nine months ended SeptemberJune 30, 2017, respectively,2023 over the samecorresponding period last year. The changes were mainlyyear primarily due to the increasesa decrease of $46 million in current year catastrophe losses.losses and lack of losses from the war in Ukraine in 2023. In the second quarter 2022, the Company established reserves of $45 million for losses from the war in the Ukraine. The loss ratio component decreased by 2.1 points for the six months ended June 30, 2023 over the corresponding period last year primarily due to a decrease of $24 million in current year catastrophe losses and no losses from the war in Ukraine in 2023. The commission and brokerage ratio components decreased slightly to 6.7% from 14.9%20.3% for the three months ended SeptemberJune 30, 2017 and 2016, respectively,2023 compared to 20.9% for the three months ended June 30, 2022 and decreased to 10.1% from 14.4%20.7% for the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively. The decreases reflect2023 compared to 21.0% for the six months ended June 30, 2022. These changes were mainly due to changes in the mix of business, the impact of affiliated quota share contracts and the impact from reinstatement premiums.business. The other underwriting expense ratios decreasedincreased to 11.1%6.4% from 11.5%6.2% for the three months ended SeptemberJune 30, 20172023 and 2016,2022, respectively, and increased to 12.5%6.5% from 11.9%6.3% for the ninesix months ended SeptemberJune 30, 20172023 and 2016,2022, respectively. The decrease in the three month period wasThese increases were mainly due to lower variable compensation costs. The increase in the nine month period was due toinsurance operations costs associated with the continued expansionbuild out of the insurance business, partially offsetplatform.
Stockholder’s Equity.
Stockholder’s equity increased by lower variable compensation costs.
Stockholder's Equity.
Stockholders' equity decreased by $130.9$636 million to $5,167.6 million $6.3 billion at SeptemberJune 30, 2017 2023 from $5,298.6 million$5.7 billion at December 31, 2016,2022, principally as a result of $184.9$549 million of net loss, partially offset by $43.2income, $83 million of net unrealized appreciation on investments, net of tax, and $2 million of net foreign currency translation adjustments, $5.4 million of net benefit plan obligation adjustments, $5.2 million of netadjustments. The movement in the unrealized depreciationappreciation on investments net of tax and $0.2 million of share-based compensation transactions.was driven by the change in interest rates on the Company’s fixed maturity - available for sale portfolio.
Consolidated Investment Results
Net Investment Income.
Net investment income increased by 13.7% to $73.4$242 million for the three months ended SeptemberJune 30, 20172023, compared to $64.6$176 million for the three months ended SeptemberJune 30, 2016.2022. Net investment income increased by 4.7% to $206.2$432 million for the ninesix months ended SeptemberJune 30, 20172023, compared to $196.9$333 million for the ninesix months ended SeptemberJune 30, 2016.2022. The increases for the three and nine month periods were primarily due tothe result of an increase in income from fixed maturity securities, partially offset by reductions in income from limited partnerships. The limited partnership income primarily reflects changes in their reported NAVs. Accordingly, until these asset values are monetized and higherthe resultant income fromis distributed, they are subject to future increases or decreases in the growing fixed income portfolio, partially offset by lower dividend income from our equity portfolio.NAV, and the results may be volatile.
The following table shows the components of net investment income for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Fixed maturities | $ | 199 | | | $ | 116 | | | $ | 374 | | | $ | 210 | |
Equity securities | 1 | | | 5 | | | 2 | | | 9 | |
Short-term investments and cash | 16 | | | 1 | | | 27 | | | 1 | |
Other invested assets | | | | | | | |
Limited partnerships | 22 | | | 45 | | | (1) | | | 89 | |
Dividends from preferred shares of affiliate | 8 | | | 8 | | | 16 | | | 16 | |
Other | 6 | | | 14 | | | 27 | | | 26 | |
Gross investment income before adjustments | 252 | | | 188 | | | 444 | | | 350 | |
Funds held interest income (expense) | (1) | | | 1 | | | 1 | | | 3 | |
Interest income from Group | 3 | | | 2 | | | 7 | | | 4 | |
Gross investment income | 253 | | | 190 | | | 453 | | | 357 | |
Investment expenses | (11) | | | (14) | | | (21) | | | (24) | |
Net investment income | $ | 242 | | | $ | 176 | | | $ | 432 | | | $ | 333 | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
(Dollars in millions) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Fixed maturities | | $ | 48.3 | | | $ | 44.8 | | | $ | 144.9 | | | $ | 134.9 | |
Equity securities | | | 6.3 | | | | 7.9 | | | | 19.4 | | | | 25.8 | |
Short-term investments and cash | | | 0.6 | | | | 0.3 | | | | 1.6 | | | | 0.9 | |
Other invested assets | | | | | | | | | | | | | | | | |
Limited partnerships | | | 11.8 | | | | 6.0 | | | | 20.6 | | | | 17.7 | |
Dividends from preferred shares of affiliate | | | 7.8 | | | | 7.8 | | | | 23.3 | | | | 23.3 | |
Other | | | 1.5 | | | | 0.5 | | | | 4.2 | | | | 0.3 | |
Gross investment income before adjustments | | | 76.4 | | | | 67.3 | | | | 214.1 | | | | 202.8 | |
Funds held interest income (expense) | | | 1.1 | | | | 1.1 | | | | 4.0 | | | | 4.7 | |
Interest income from Parent | | | 1.1 | | | | 1.1 | | | | 3.2 | | | | 3.2 | |
Gross investment income | | | 78.5 | | | | 69.5 | | | | 221.3 | | | | 210.8 | |
Investment expenses | | | (5.1 | ) | | | (4.9 | ) | | | (15.1 | ) | | | (13.9 | ) |
Net investment income | | $ | 73.4 | | | $ | 64.6 | | | $ | 206.2 | | | $ | 196.9 | |
| | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
The following tables showtable shows a comparison of various investment yields for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Annualized pre-tax yield on average cash and invested assets | 4.5 | % | | 3.6 | % | | 4.1 | % | | 3.5 | % |
Annualized after-tax yield on average cash and invested assets | 3.6 | % | | 2.9 | % | | 3.3 | % | | 2.8 | % |
| | At | | At |
| | September 30, | | December 31, |
| | 2017 | | 2016 |
Imbedded pre-tax yield of cash and invested assets at December 31 | | 3.1% | | 2.9% |
Imbedded after-tax yield of cash and invested assets at December 31 | | 2.1% | | 2.0% |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Annualized pre-tax yield on average cash and invested assets | 3.0% | | 2.7% | | 2.8% | | 2.8% |
Annualized after-tax yield on average cash and invested assets | 2.1% | | 1.9% | | 2.0% | | 1.9% |
Net Realized Capital Gains (Losses). on Investments.
The following table presents the composition of our net realized capital gains (losses) on investments for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | Variance | | 2023 | | 2022 | | Variance |
Realized gains (losses) from dispositions: | | | | | | | | | | | |
Fixed maturity securities - available for sale | | | | | | | | | | | |
Gains | $ | 1 | | | $ | 3 | | | $ | (2) | | | $ | 4 | | | $ | 6 | | | (3) | |
Losses | (8) | | | (13) | | | 5 | | | (12) | | | (21) | | | 9 | |
Total | (7) | | | (10) | | | 2 | | | (9) | | | (15) | | | 6 | |
| | | | | | | | | | | |
Equity securities | | | | | | | | | | | |
Gains | — | | | 4 | | | (4) | | | 7 | | | 8 | | | (1) | |
Losses | — | | | (34) | | | 34 | | | — | | | (46) | | | 46 | |
Total | — | | | (30) | | | 30 | | | 7 | | | (38) | | | 45 | |
| | | | | | | | | | | |
Other Invested Assets | | | | | | | | | | | |
Gains | — | | | 3 | | | (3) | | | — | | | 8 | | | (8) | |
Losses | — | | | (3) | | | 3 | | | — | | | (3) | | | 3 | |
Total | — | | | 1 | | | (1) | | | — | | | 5 | | | (5) | |
| | | | | | | | | | | |
Short-Term Investments | | | | | | | | | | | |
Gains | 1 | | | — | | | 1 | | | 1 | | | — | | | 1 | |
Losses | — | | | — | | | — | | | — | | | — | | | — | |
Total | — | | | — | | | — | | | — | | | — | | | 1 | |
| | | | | | | | | | | |
Total net realized gains (losses) from dispositions | | | | | | | | | | | |
Gains | 1 | | | 11 | | | (9) | | | 11 | | | 22 | | | (11) | |
Losses | (8) | | | (50) | | | 41 | | | (12) | | | (70) | | | 58 | |
Total | (7) | | | (39) | | | 32 | | | (1) | | | (49) | | | 47 | |
| | | | | | | | | | | |
Allowance for credit losses | — | | | 2 | | | (2) | | | (10) | | | — | | | (10) | |
| | | | | | | | | | | |
Gains (losses) from fair value adjustments | | | | | | | | | | | |
Equity securities | 8 | | | (186) | | | 194 | | | 11 | | | (317) | | | 328 | |
Other invested assets | (23) | | | (155) | | | 132 | | | 1 | | | (239) | | | 241 | |
Total | (15) | | | (341) | | | 326 | | | 12 | | | (556) | | | 568 | |
| | | | | | | | | | | |
Total net gains (losses) on investments | $ | (22) | | | $ | (378) | | | $ | 356 | | | $ | — | | | $ | (605) | | | $ | 605 | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(Dollars in millions) | | 2017 | | | 2016 | | | Variance | | | 2017 | | | 2016 | | | Variance | |
Gains (losses) from sales: | | | | | | | | | | | | | | | | | | |
Fixed maturity securities, market value | | | | | | | | | | | | | | | | | | |
Gains | | $ | 8.0 | | | $ | 6.3 | | | $ | 1.7 | | | $ | 23.7 | | | $ | 13.9 | | | $ | 9.8 | |
Losses | | | (4.1 | ) | | | (1.9 | ) | | | (2.2 | ) | | | (6.9 | ) | | | (24.1 | ) | | | 17.2 | |
Total | | | 3.9 | | | | 4.4 | | | | (0.5 | ) | | | 16.8 | | | | (10.3 | ) | | | 27.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturity securities, fair value | | | | | | | | | | | | | | | | | | | | | | | | |
Gains | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Losses | | | - | | | | - | | | | - | | | | - | | | | (1.9 | ) | | | 1.9 | |
Total | | | - | | | | - | | | | - | | | | - | | | | (1.9 | ) | | | 1.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity securities, fair value | | | | | | | | | | | | | | | | | | | | | | | | |
Gains | | | 2.2 | | | | 6.9 | | | | (4.7 | ) | | | 13.8 | | | | 13.5 | | | | 0.3 | |
Losses | | | (3.7 | ) | | | (1.4 | ) | | | (2.3 | ) | | | (10.3 | ) | | | (23.6 | ) | | | 13.3 | |
Total | | | (1.5 | ) | | | 5.5 | | | | (7.0 | ) | | | 3.5 | | | | (10.1 | ) | | | 13.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net realized gains (losses) from sales | | | | | | | | | | | | | | | | | | | | | | | | |
Gains | | | 10.2 | | | | 13.2 | | | | (3.0 | ) | | | 37.5 | | | | 27.4 | | | | 10.1 | |
Losses | | | (7.8 | ) | | | (3.4 | ) | | | (4.5 | ) | | | (17.2 | ) | | | (49.7 | ) | | | 32.5 | |
Total | | | 2.4 | | | | 9.6 | | | | (7.5 | ) | | | 20.3 | | | | (22.4 | ) | | | 42.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gain (losses) on sale of subsidiary: | | | - | | | | (28.0 | ) | | | 28.0 | | | | - | | | | (28.0 | ) | | | 28.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other than temporary impairments: | | | (1.5 | ) | | | (0.8 | ) | | | (0.7 | ) | | | (4.2 | ) | | | (25.2 | ) | | | 21.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gains (losses) from fair value adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturities, fair value | | | - | | | | 0.1 | | | | (0.1 | ) | | | - | | | | 1.4 | | | | (1.4 | ) |
Equity securities, fair value | | | 29.6 | | | | 16.0 | | | | 13.6 | | | | 82.0 | | | | 34.7 | | | | 47.3 | |
Other invested assets, fair value | | | 197.9 | | | | (47.0 | ) | | | 244.9 | | | | 155.8 | | | | (47.8 | ) | | | 203.6 | |
Total | | | 227.5 | | | | (30.9 | ) | | | 258.4 | | | | 237.8 | | | | (11.7 | ) | | | 249.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net realized gains (losses) | | $ | 228.5 | | | $ | (50.1 | ) | | $ | 278.6 | | | $ | 254.0 | | | $ | (87.3 | ) | | $ | 341.3 | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
Net realized capital gains were $228.5 million and net realized capital losses were $50.1 million for(losses) on investments during the three months ended SeptemberJune 30, 2017 and 2016, respectively. For2023 primarily related to net losses from fair value adjustments of $15 million as a result of market declines during the three months ended September 30, 2017second quarter of 2023. In addition, we recorded $227.5$7 million of net realized capitallosses from disposition of investments. There were no allowances for credit losses during the second quarter of 2023.
Net gains due(losses) on investments during the six months ended June 30, 2023 primarily related to net gains from fair value re-measurements onadjustments of $12 million as a result of equity securities and other invested assets and $2.4market increases during 2023, partially offset by $1 million of net realized capital gainslosses from salesdisposition of fixed maturityinvestments and equity securities, partially offset by $1.5$10 million of other-than-temporary impairments. For the three months ended September 30, 2016, we recorded $30.9 million of net realized capital losses due to fair value re-measurementscredit allowances on fixed maturity securities, equity securities and other invested assets, net realized capital losses of $28.0 million from the sale of our Heartland subsidiary and $0.8 million of other-than-temporary impairments, partially offset by $9.6 million of net realized capital gains from sales of fixed maturity and equity securities. The fixed maturity and equity sales for the three months ended September 30, 2017 and 2016 related primarily to adjusting the portfolios for overall market changes and individual credit shifts.
Net realized capital gains were $254.0 million and net realized capital losses were $87.3 million for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 we recorded $237.8 million of net realized capital gains due to fair value re-measurements on equity securities and other invested assets and $20.3 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $4.2 million of other-than-temporary impairments. For the nine months ended September 30, 2016, we recorded net realized capital losses of $28.0 million from the
sale of our Heartland subsidiary, $25.2 million of other-than-temporary impairments, $22.4 million of net realized capital losses from sales of fixed maturity and equity securities and $11.7 million of net realized capital losses due to fair value re-measurements on fixed maturity securities, equity securities and other invested assets. The fixed maturity and equity sales for the nine months ended September 30, 2017 and 2016 related primarily to adjusting the portfolios for overall market changes and individual credit shifts.
Segment Results.
The U.S.Company manages its reinsurance and insurance operations as autonomous units, and key strategic decisions are based on the aggregate operating results and projections for these segments of business.
The Reinsurance operation writes risks on a worldwide basis in 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 companies primarily withincompanies. We write reinsurance business from entities chartered in the U.S. The International operation writes non-U.S. propertyUnited States and casualty reinsuranceBermuda as well as through Everest Re's branches of those entities established 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 and Bermuda.
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, divideresult from dividing incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.
Our loss and LAE reserves are management'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.
Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and finance departments and culminates with the input of reserve committees. Each segment reserve committee includes the participation of the relevant parties from actuarial, finance, claims and segment senior management and has the responsibility for recommending and approving management’s best estimate. Reserves are further reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of such process is to determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability.
The following discusses the underwriting results for each of our segments for the periods indicated:
U.S. Reinsurance.
The following table presents the underwriting results and ratios for the U.S. Reinsurance segment for the periods indicated.indicated:
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(Dollars in millions) | | 2017 | | | 2016 | | | Variance | | | % Change | | | 2017 | | | 2016 | | | Variance | | | % Change | |
Gross written premiums | | $ | 908.3 | | | $ | 654.8 | | | $ | 253.6 | | | | 38.7 | % | | $ | 1,962.3 | | | $ | 1,597.0 | | | $ | 365.3 | | | | 22.9 | % |
Net written premiums | | | 295.6 | | | | 327.2 | | | | (31.6 | ) | | | -9.7 | % | | | 649.9 | | | | 711.7 | | | | (61.8 | ) | | | -8.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 242.4 | | | $ | 249.2 | | | $ | (6.9 | ) | | | -2.8 | % | | $ | 653.0 | | | $ | 709.1 | | | $ | (56.1 | ) | | | -7.9 | % |
Incurred losses and LAE | | | 678.9 | | | | 137.2 | | | | 541.7 | | | NM | | | 919.1 | | | | 363.6 | | | | 555.5 | | | | 152.8 | % |
Commission and brokerage | | | 31.7 | | | | 48.1 | | | | (16.4 | ) | | | -34.1 | % | | | 115.2 | | | | 148.0 | | | | (32.7 | ) | | | -22.1 | % |
Other underwriting expenses | | | 12.1 | | | | 14.3 | | | | (2.2 | ) | | | -15.2 | % | | | 40.6 | | | | 39.9 | | | | 0.8 | | | | 1.9 | % |
Underwriting gain (loss) | | $ | (480.4 | ) | | $ | 49.6 | | | $ | (530.0 | ) | | NM | | $ | (422.0 | ) | | $ | 157.7 | | | $ | (579.7 | ) | | | NM |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Point Chg | | | | | | | | | | | | | | | Point Chg | |
Loss ratio | | | 280.1 | % | | | 55.1 | % | | | | | | | 225.0 | | | | 140.8 | % | | | 51.3 | % | | | | | | | 89.5 | |
Commission and brokerage ratio | | | 13.1 | % | | | 19.3 | % | | | | | | | (6.2 | ) | | | 17.6 | % | | | 20.9 | % | | | | | | | (3.2 | ) |
Other underwriting ratio | | | 5.0 | % | | | 5.7 | % | | | | | | | (0.7 | ) | | | 6.2 | % | | | 5.6 | % | | | | | | | 0.6 | |
Combined ratio | | | 298.2 | % | | | 80.1 | % | | | | | | | 218.1 | | | | 164.6 | % | | | 77.8 | % | | | | | | | 86.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(NM, not meaningful) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
42 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | 2023 | | 2022 | | Variance | | % Change | | 2023 | | 2022 | | Variance | | % Change |
Gross written premiums | $ | 1,791 | | | $ | 1,394 | | | 397 | | | 28.5 | % | | $ | 3,434 | | | $ | 2,774 | | | $ | 660 | | | 23.8 | % |
Net written premiums | 1,580 | | | 1,245 | | | 335 | | | 26.9 | % | | 2,953 | | | 2,430 | | | 523 | | | 21.5 | % |
| | | | | | | | | | | | | | | |
Premiums earned | $ | 1,417 | | | $ | 1,295 | | | $ | 122 | | | 9.4 | % | | $ | 2,784 | | | $ | 2,504 | | | $ | 279 | | | 11.2 | % |
Incurred losses and LAE | 864 | | | 875 | | | (11) | | | (1.3) | % | | 1,794 | | | 1,696 | | | 98 | | | 5.8 | % |
Commission and brokerage | 363 | | | 332 | | | 31 | | | 9.4 | % | | 724 | | | 647 | | | 77 | | | 11.9 | % |
Other underwriting expenses | 36 | | | 32 | | | 4 | | | 11.7 | % | | 75 | | | 63 | | | 12 | | | 18.2 | % |
Underwriting gain (loss) | $ | 153 | | | $ | 55 | | | $ | 98 | | | NM | | $ | 191 | | | $ | 98 | | | $ | 93 | | | 95.7 | % |
| | | | | | | | | | | | | | | |
| | | | | | | Point Chg | | | | | | | | Point Chg |
Loss ratio | 61.0 | % | | 67.6 | % | | | | (6.6) | | | 64.4 | % | | 67.7 | % | | | | (3.3) | |
Commission and brokerage ratio | 25.6 | % | | 25.6 | % | | | | — | | | 26.0 | % | | 25.8 | % | | | | 0.2 | |
Other underwriting expense ratio | 2.6 | % | | 2.5 | % | | | | 0.1 | | | 2.7 | % | | 2.5 | % | | | | 0.2 | |
Combined ratio | 89.2 | % | | 95.7 | % | | | | (6.6) | | | 93.1 | % | | 96.1 | % | | | | (3.0) | |
(Some amounts may not reconcile due to rounding.)(NM, not meaningful)
Premiums.Gross written premiums increased by 38.7%28.5% to $908.3 million$1.8 billion for the three months ended SeptemberJune 30, 20172023 from $654.8 million$1.4 billion for the three months ended SeptemberJune 30, 2016,2022, primarily due to the new crop reinsurance business related to the saleincreases across all lines of Heartland and the influx of reinstatement premiums due to the catastrophe losses.business. Net written premiums decreasedincreased by 9.7%26.9% to $295.6 million$1.6 billion for the three months ended SeptemberJune 30, 20172023, compared to $327.2 million$1.2 billion for the
three months ended June 30, 2022, which is consistent with the percentage change in gross written premiums. Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Premiums earned increased by 9.4% to $1.4 billion for the three months ended SeptemberJune 30, 2016. The difference between the change in gross written premiums2023 compared to the change in net written premiums is primarily due to a varying utilization of reinsurance primarily related to the affiliated quota share contracts. Premiums earned decreased 2.8% to $242.4 million$1.3 billion for the three months ended SeptemberJune 30, 2017 compared to $249.2 million for the three months ended September 30, 2016. 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.2022.
Gross written premiums increased by 22.9%23.8% to $1,962.3 million$3.4 billion for the ninesix months ended SeptemberJune 30, 20172023 from $1,597.0 million$2.8 billion for the ninesix months ended SeptemberJune 30, 2016,2022 primarily due to the new crop reinsurancea decline in property pro rata business, partially offset by an increase in treaty casualty business and the influx of reinstatement premiums due to the catastrophe losses.pro rata business. Net written premiums decreasedincreased by 8.7%21.5% to $649.9 million$3.0 billion for the ninesix months ended SeptemberJune 30, 20172023, compared to $711.7 million$2.4 billion for the ninesix months ended SeptemberJune 30, 2016. The difference between2022, which is consistent with the change in gross written premiums. Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Premiums earned increased by 11.2% to $2.8 billion for the six months ended June 30, 2023, compared to the change in net written premiums is primarily due to a varying utilization of reinsurance primarily related to the affiliated quota share contracts. Premiums earned decreased 7.9% to $653.0 million$2.5 billion for the ninesix months ended SeptemberJune 30, 2017 compared to $709.1 million for the nine months ended September 30, 2016. 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.2022.
Incurred Losses and LAE.The following table presentstables present the incurred losses and LAE for the U.S. Reinsurance segment for the periods indicated.indicated:
| | Three Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ | | Three Months Ended June 30, |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change | (Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | | |
2023 | | 2023 | | | | | | | | | | | |
Attritional | | $ | 128.0 | | | | 52.8 | % | | | $ | (0.4 | ) | | | -0.2 | % | | | $ | 127.5 | | | | 52.6 | % | | Attritional | $ | 836 | | | 59.0 | % | | $ | 1 | | | 0.1 | % | | 838 | | | 59.1 | % |
Catastrophes | | | 551.6 | | | | 227.6 | % | | | | (0.2 | ) | | | -0.1 | % | | | | 551.4 | | | | 227.5 | % | | Catastrophes | 19 | | | 1.4 | % | | 7 | | | 0.5 | % | | 27 | | | 1.9 | % |
Total segment | | $ | 679.6 | | | | 280.4 | % | | | $ | (0.6 | ) | | | -0.3 | % | | | $ | 678.9 | | | | 280.1 | % | | |
Total Segment | | Total Segment | $ | 855 | | | 60.4 | % | | $ | 9 | | | 0.6 | % | | $ | 864 | | | 61.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | 2022 | |
Attritional | | $ | 129.8 | | | | 52.1 | % | | | $ | (1.0 | ) | | | -0.4 | % | | | $ | 128.8 | | | | 51.7 | % | | Attritional | $ | 813 | | | 62.8 | % | | $ | — | | | 0.0 | % | | 813 | | | 62.8 | % |
Catastrophes | | | 14.4 | | | | 5.8 | % | | | | (5.9 | ) | | | -2.4 | % | | | | 8.5 | | | | 3.4 | % | | Catastrophes | 60 | | | 4.6 | % | | 3 | | | 0.2 | % | | 63 | | | 4.8 | % |
Total segment | | $ | 144.2 | | | | 57.9 | % | | | $ | (6.9 | ) | | | -2.8 | % | | | $ | 137.2 | | | | 55.1 | % | | |
Total Segment | | Total Segment | $ | 873 | | | 67.4 | % | | $ | 3 | | | 0.2 | % | | $ | 875 | | | 67.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2023/2022 | | Variance 2023/2022 | |
Attritional | | $ | (1.8 | ) | | | 0.7 | | pts | | $ | 0.6 | | | | 0.2 | | pts | | $ | (1.3 | ) | | | 0.9 | | pts | Attritional | $ | 24 | | | (3.7) | pts | | $ | 1 | | | 0.1 | pts | | $ | 25 | | | (3.6) | pts |
Catastrophes | | | 537.2 | | | | 221.8 | | pts | | | 5.7 | | | | 2.3 | | pts | | | 542.9 | | | | 224.1 | | pts | Catastrophes | (41) | | | (3.3) | pts | | 5 | | | 0.3 | pts | | (36) | | | (3.0) | pts |
Total segment | | $ | 535.4 | | | | 222.5 | | pts | | $ | 6.3 | | | | 2.5 | | pts | | $ | 541.7 | | | | 225.0 | | pts | |
Total Segment | | Total Segment | $ | (17) | | | (7.0) | pts | | $ | 6 | | | 0.4 | pts | | $ | (11) | | | (6.6) | pts |
43(Some amounts may not reconcile due to rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
(Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2023 | | | | | | | | | | | |
Attritional | $ | 1,671 | | | 60.0 | % | | $ | 2 | | | 0.1 | % | | 1,673 | | | 60.1 | % |
Catastrophes | 120 | | | 4.3 | % | | 1 | | | — | % | | 121 | | | 4.3 | % |
Total Segment | $ | 1,791 | | | 64.3 | % | | $ | 3 | | | 0.1 | % | | $ | 1,794 | | | 64.4 | % |
| | | | | | | | | | | |
2022 | | | | | | | | | | | |
Attritional | $ | 1,550 | | | 61.9 | % | | $ | — | | | — | % | | 1,551 | | | 61.9 | % |
Catastrophes | 135 | | | 5.4 | % | | 10 | | | 0.4 | % | | 145 | | | 5.8 | % |
Total Segment | $ | 1,686 | | | 67.3 | % | | $ | 10 | | | 0.4 | % | | $ | 1,696 | | | 67.7 | % |
| | | | | | | | | | | |
Variance 2023/2022 | | | | | | | | | | | |
Attritional | $ | 120 | | | (1.9) | pts | | $ | 2 | | | 0.1 | pts | | $ | 122 | | | (1.8) | pts |
Catastrophes | $ | (15) | | | (1.1) | pts | | (9) | | | (0.4) | pts | | (24) | | | (1.4) | pts |
Total Segment | $ | 105 | | | (3.0) | pts | | $ | (7) | | | (0.3) | pts | | $ | 98 | | | (3.3) | pts |
| | Nine Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 374.8 | | | | 57.4 | % | | | $ | (4.7 | ) | | | -0.7 | % | | | $ | 370.0 | | | | 56.7 | % | |
Catastrophes | | | 553.2 | | | | 84.7 | % | | | | (4.1 | ) | | | -0.6 | % | | | | 549.1 | | | | 84.1 | % | |
Total segment | | $ | 928.0 | | | | 142.1 | % | | | $ | (8.8 | ) | | | -1.3 | % | | | $ | 919.1 | | | | 140.8 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 365.2 | | | | 51.6 | % | | | $ | (1.3 | ) | | | -0.2 | % | | | $ | 363.9 | | | | 51.4 | % | |
Catastrophes | | | 15.8 | | | | 2.2 | % | | | | (16.1 | ) | | | -2.3 | % | | | | (0.3 | ) | | | -0.1 | % | |
Total segment | | $ | 381.0 | | | | 53.8 | % | | | $ | (17.4 | ) | | | -2.5 | % | | | $ | 363.6 | | | | 51.3 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 9.6 | | | | 5.8 | | pts | | $ | (3.4 | ) | | | (0.5 | ) | pts | | $ | 6.1 | | | | 5.3 | | pts |
Catastrophes | | | 537.4 | | | | 82.5 | | pts | | | 12.0 | | | | 1.7 | | pts | | | 549.4 | | | | 84.2 | | pts |
Total segment | | $ | 547.0 | | | | 88.3 | | pts | | $ | 8.6 | | | | 1.2 | | pts | | $ | 555.5 | | | | 89.5 | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
Incurred losses increaseddecreased by 1.3% to $678.9$864 million for the three months ended SeptemberJune 30, 20172023, compared to $137.2$875 million for the three months ended SeptemberJune 30, 2016,2022. The decrease was primarily due to an increasea decrease of $537.2$41 million in current year catastrophe losses, partially offset by an increase of $24 million in current year attritional losses. The increase in current
year attritional losses was mainly related to the impact of the increase in premiums earned. The current year catastrophe losses of $551.6$19 million for the three months ended SeptemberJune 30, 20172023 related primarily to the 2023 Turkey earthquakes ($18 million), Typhoon Mawar ($12 million), and the 2023 2nd quarter U.S. storms ($10 million), partially offset by $25 million of reinsurance recoveries related to Hurricane Irma ($348.6 million), Hurricane Harvey ($128.5 million), Hurricane Maria ($74.0 million), and the Mexico City earthquake ($1.1 million). Ian. The $14.4$60 million of current year catastrophe losses for the three months ended SeptemberJune 30, 2016 were2022 related primarily to Hurricane Hermine2022 South Africa flood ($6.838 million), 2016 U.S. Stormsthe 2022 Canada derecho ($6.316 million) and the Fort McMurray Canada Wildfire2022 2nd quarter U.S. storms ($1.37 million). Prior year incurred development of $9 million for the three months ended June 30, 2023 is primarily driven by unfavorable movement on prior year catastrophes.
Incurred losses increased by 152.8%5.8% to $919.1 million$1.8 billion for the ninesix months ended SeptemberJune 30, 20172023, compared to $363.6 million$1.7 billion for the ninesix months ended SeptemberJune 30, 2016,2022. The increase was primarily due to an increasea decrease of $537.4$15 million in current year catastrophe losses favorable development of $16.1 million on prior years' catastrophe losses in 2016 which did not recur in 2017 and an increase of $9.6$120 million in current year attritional losses. The increase in current year attritional losses resultingwas mainly fromrelated to the impact of the new crop reinsurance contract. increase in premiums earned. The current year catastrophe losses of $553.2$120 million for the ninesix months ended SeptemberJune 30, 20172023 related primarily to Turkey earthquakes ($83 million), the 2023 New Zealand storms ($40 million), Typhoon Mawar ($12 million), and the 2023 2nd quarter U.S. storms ($10 million), partially offset by $25 million of reinsurance recoveries related to Hurricane Irma ($348.6 million), Hurricane Harvey ($128.5 million), Hurricane Maria ($74.0 million), the Mexico City earthquake ($1.1 million) and the 2017 U.S. Storms ($1.4 million). Ian. The $15.8$135 million of current year catastrophe losses for the ninesix months ended SeptemberJune 30, 2016 were2022 related primarily to Hurricane Hermine2022 Australia floods ($6.871 million), 2022 South Africa flood ($38 million), the 2022 Canada derecho ($16 million), 2022 2nd quarter U.S. storms ($7 million), and 2016the 2022 March U.S. Stormsstorms ($9.64 million).
Segment Expenses.Expenses. Commission and brokerage expenses decreasedexpense increased by 34.1%9.4% to $31.7$363 million for the three months ended SeptemberJune 30, 20172023, compared to $48.1$332 million for the three months ended SeptemberJune 30, 2016.2022. Commission and brokerage expenses decreasedexpense increased by 22.1%11.9% to $115.2$724 million for the ninesix months ended SeptemberJune 30, 20172023, compared to $148.0$647 million for the ninesix months ended SeptemberJune 30, 2016.2022. The decreases areincreases were mainly due to changes in the mix of business.
Segment other underwriting expenses increased to $36 million for the three months ended June 30, 2023 from $32 million for the three months ended June 30, 2022. Segment other underwriting expenses increased to $75 million for the six months ended June 30, 2023 from $63 million for the six months ended June 30, 2022. The increases were mainly due to the impact of the new crop reinsurance contract which generally has a lower expense ratio, the impact of affiliated quota share contracts and the impact of the decreaseincrease in premiums earned.
Segment other underwriting expenses decreased to $12.1 million for the three months ended September 30, 2017 from $14.3 million for the three months ended September 30, 2016. The decrease for the three month period was primarily due to lower variable compensation costs. Segment other underwriting expenses increased slightly to $40.6 million for the nine months ended September 30, 2017 from $39.9 million for the nine months ended September 30, 2016.
International.
The following table presents the underwriting results and ratios for the International segment for the periods indicated.
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(Dollars in millions) | | 2017 | | | 2016 | | | Variance | | | % Change | | | 2017 | | | 2016 | | | Variance | | | % Change | |
Gross written premiums | | $ | 363.2 | | | $ | 353.2 | | | $ | 10.0 | | | | 2.8 | % | | $ | 975.3 | | | $ | 939.9 | | | $ | 35.4 | | | | 3.8 | % |
Net written premiums | | | 130.2 | | | | 141.3 | | | | (11.1 | ) | | | -7.9 | % | | | 345.4 | | | | 353.4 | | | | (8.1 | ) | | | -2.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 123.9 | | | $ | 128.4 | | | $ | (4.4 | ) | | | -3.5 | % | | $ | 355.4 | | | $ | 372.8 | | | $ | (17.5 | ) | | | -4.7 | % |
Incurred losses and LAE | | | 410.5 | | | | 41.8 | | | | 368.7 | | | NM | | | 557.4 | | | | 206.7 | | | | 350.7 | | | | 169.7 | % |
Commission and brokerage | | | 25.1 | | | | 30.2 | | | | (5.1 | ) | | | -16.9 | % | | | 72.4 | | | | 82.4 | | | | (10.0 | ) | | | -12.2 | % |
Other underwriting expenses | | | 8.2 | | | | 9.2 | | | | (1.0 | ) | | | -10.6 | % | | | 26.3 | | | | 25.0 | | | | 1.3 | | | | 5.1 | % |
Underwriting gain (loss) | | $ | (320.0 | ) | | $ | 47.1 | | | $ | (367.1 | ) | | NM | | $ | (300.8 | ) | | $ | 58.7 | | | $ | (359.5 | ) | | NM |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Point Chg | | | | | | | | | | | | | | | Point Chg | |
Loss ratio | | | 331.3 | % | | | 32.6 | % | | | | | | | 298.7 | | | | 156.9 | % | | | 55.4 | % | | | | | | | 101.5 | |
Commission and brokerage ratio | | | 20.3 | % | | | 23.5 | % | | | | | | | (3.3 | ) | | | 20.4 | % | | | 22.1 | % | | | | | | | (1.7 | ) |
Other underwriting ratio | | | 6.6 | % | | | 7.2 | % | | | | | | | (0.6 | ) | | | 7.3 | % | | | 6.8 | % | | | | | | | 0.5 | |
Combined ratio | | | 358.2 | % | | | 63.3 | % | | | | | | | 294.9 | | | | 184.6 | % | | | 84.3 | % | | | | | | | 100.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(NM, not meaningful) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums. Gross written premiums increased by 2.8% to $363.2 million for the three months ended September 30, 2017 compared to $353.2 million for the three months ended September 30, 2016, primarily due to the increase in Middle East, African and Asian business, partially offset by a decline in Latin American business and a negative impact of $5.6 million from the movement of foreign exchange rates. Net written premiums decreased by 7.9% to $130.2 million for the three months ended September 30, 2017 compared to $141.3 million for the three months ended September 30, 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 the quota share contracts, including affiliated quota share contracts. Premiums earned decreased 3.5% to $123.9 million for the three months ended September 30, 2017 compared to $128.4 million for the three months ended September 30, 2016. 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.
Gross written premiums increased by 3.8% to $975.3 million for the nine months ended September 30, 2017 compared to $939.9 million for the nine months ended September 30, 2016, primarily due to increases in Middle East, African and Asian business and the positive impact of $17.7 million from the movement of foreign exchange rates. Net written premiums decreased by 2.3% to $345.4 million for the nine months ended September 30, 2017 compared to $353.4 million for the nine months ended September 30, 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 the quota share contracts, including affiliated quota share contracts. Premiums earned decreased 4.7% to $355.4 million for the nine months ended September 30, 2017 compared to $372.8 million for the nine months ended September 30, 2016. 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.
| | Three Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 64.0 | | | | 51.7 | % | | | $ | 0.7 | | | | 0.6 | % | | | $ | 64.7 | | | | 52.3 | % | |
Catastrophes | | | 346.6 | | | | 279.7 | % | | | | (0.8 | ) | | | -0.7 | % | | | | 345.8 | | | | 279.0 | % | |
Total segment | | $ | 410.6 | | | | 331.4 | % | | | $ | (0.1 | ) | | | -0.1 | % | | | $ | 410.5 | | | | 331.3 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 49.3 | | | | 38.4 | % | | | $ | - | | | | 0.0 | % | | | $ | 49.3 | | | | 38.4 | % | |
Catastrophes | | | 6.5 | | | | 5.1 | % | | | | (14.0 | ) | | | -10.9 | % | | | | (7.5 | ) | | | -5.8 | % | |
Total segment | | $ | 55.8 | | | | 43.5 | % | | | $ | (14.0 | ) | | | -10.9 | % | | | $ | 41.8 | | | | 32.6 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 14.7 | | | | 13.3 | | pts | | $ | 0.7 | | | | 0.6 | | pts | | $ | 15.4 | | | | 13.9 | | pts |
Catastrophes | | | 340.1 | | | | 274.6 | | pts | | | 13.2 | | | | 10.2 | | pts | | | 353.3 | | | | 284.8 | | pts |
Total segment | | $ | 354.8 | | | | 287.9 | | pts | | $ | 13.9 | | | | 10.8 | | pts | | $ | 368.7 | | | | 298.7 | | pts |
| | Nine Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 182.9 | | | | 51.5 | % | | | $ | 2.6 | | | | 0.7 | % | | | $ | 185.5 | | | | 52.2 | % | |
Catastrophes | | | 371.7 | | | | 104.6 | % | | | | 0.2 | | | | 0.1 | % | | | | 371.9 | | | | 104.7 | % | |
Total segment | | $ | 554.6 | | | | 156.1 | % | | | $ | 2.8 | | | | 0.8 | % | | | $ | 557.4 | | | | 156.9 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 185.6 | | | | 49.8 | % | | | $ | (3.4 | ) | | | -0.9 | % | | | $ | 182.3 | | | | 48.9 | % | |
Catastrophes | | | 45.2 | | | | 12.1 | % | | | | (20.8 | ) | | | -5.6 | % | | | | 24.4 | | | | 6.5 | % | |
Total segment | | $ | 230.8 | | | | 61.9 | % | | | $ | (24.1 | ) | | | -6.5 | % | | | $ | 206.7 | | | | 55.4 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | (2.7 | ) | | | 1.7 | | pts | | $ | 6.0 | | | | 1.6 | | pts | | $ | 3.2 | | | | 3.3 | | pts |
Catastrophes | | | 326.5 | | | | 92.5 | | pts | | | 21.0 | | | | 5.7 | | pts | | | 347.5 | | | | 98.2 | | pts |
Total segment | | $ | 323.8 | | | | 94.2 | | pts | | $ | 26.9 | | | | 7.3 | | pts | | $ | 350.7 | | | | 101.5 | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Incurred losses and LAE increased to $410.5 million for the three months ended September 30, 2017 compared to $41.8 million for the three months ended September 30, 2016, primarily due to an increase of $340.1 million in current year catastrophe losses, an increase of $14.7 million in current year attritional losses and $14.0 million of favorable development on prior year catastrophe losses in 2016, which did not recur in 2017. The current year catastrophe losses of $346.6 million for the three months ended September 30, 2017 related to Hurricane Maria ($236.2 million), Hurricane Irma ($77.5 million), the Mexico City earthquake ($31.1 million) and Hurricane Harvey ($1.4 million). The $6.5 million of current year catastrophe losses for the three months ended September 30, 2016 were related to the Fort McMurray Canada Wildfire ($3.7 million), the Taiwan earthquake ($2.3 million), 2016 U.S. Storms ($0.3 million) and the Ecuador earthquake ($0.2 million).
Incurred losses and LAE increased by 169.7% to $557.4 million for the nine months ended September 30, 2017 compared to $206.7 million for the nine months ended September 30, 2016, primarily due to an increase of $326.5 million in current catastrophe losses and $20.8 million of favorable development on prior year catastrophe losses in 2016 which did not recur in 2017. The current year catastrophe losses of $371.7 million for the nine months ended September 30, 2017 related to Hurricane Maria ($236.2 million), Hurricane Irma ($77.5 million), the Mexico City earthquake ($31.1 million), the South Africa Knysna fires ($10.1 million), Cyclone Debbie in Australia ($8.3 million), the Peru storms ($7.1 million) and Hurricane Harvey ($1.4 million). The $45.2 million of current year catastrophe losses for the nine months ended
September 30, 2016 were due to the Fort McMurray Canada wildfire ($25.4 million), the Ecuador earthquake ($11.8 million), the Taiwan earthquake ($7.6 million) and U.S. Storms ($0.3 million).
Segment Expenses. Commission and brokerage decreased 16.9% to $25.1 million for the three months ended September 30, 2017 compared to $30.2 million for the three months ended September 30, 2016. Commission and brokerage decreased 12.2% to $72.4 million for the nine months ended September 30, 2017 compared to $82.4 million for the nine months ended September 30, 2016. The decreases were due to the impact of the decreases in premiums earned, the impact of affiliated quota share agreements and changes in the mix of business.
Segment other underwriting expenses decreased to $8.2 million for the three months ended September 30, 2017 from $9.2 million for the three months ended September 30, 2016. The decrease for the three month period is primarily due to lower variable compensation costs. Segment other underwriting expenses increased slightly to $26.3 million for the nine months ended September 30, 2017 from $25.0 million for the nine months ended September 30, 2016.
Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated.
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(Dollars in millions) | | 2017 | | | 2016 | | | Variance | | | % Change | | | 2017 | | | 2016 | | | Variance | | | % Change | | (Dollars in millions) | 2023 | | 2022 | | Variance | | % Change | | 2023 | | 2022 | | Variance | | % Change |
Gross written premiums | | $ | 429.6 | | | $ | 498.0 | | | $ | (68.4 | ) | | | -13.7 | % | | $ | 1,351.5 | | | $ | 1,276.8 | | | $ | 74.7 | | | | 5.9 | % | Gross written premiums | $ | 1,125 | | | $ | 1,043 | | | $ | 82 | | | 7.8 | % | | $ | 1,977 | | | $ | 1,868 | | | $ | 109 | | | 5.8 | % |
Net written premiums | | | 144.9 | | | | 154.1 | | | | (9.1 | ) | | | -5.9 | % | | | 442.2 | | | | 462.8 | | | | (20.6 | ) | | | -4.4 | % | Net written premiums | 816 | | | 750 | | | 67 | | | 8.9 | % | | 1,506 | | | 1,360 | | | 145 | | | 10.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 152.2 | | | $ | 179.1 | | | $ | (26.9 | ) | | | -15.0 | % | | $ | 449.4 | | | $ | 445.6 | | | $ | 3.9 | | | | 0.9 | % | Premiums earned | $ | 714 | | | $ | 659 | | | $ | 55 | | | 8.3 | % | | $ | 1,416 | | | $ | 1,279 | | | $ | 137 | | | 10.7 | % |
Incurred losses and LAE | | | 242.1 | | | | 122.5 | | | | 119.6 | | | | 97.6 | % | | | 442.0 | | | | 366.0 | | | | 76.0 | | | | 20.8 | % | Incurred losses and LAE | 460 | | | 429 | | | 32 | | | 7.5 | % | | 925 | | | 834 | | | 92 | | | 11.0 | % |
Commission and brokerage | | | (22.3 | ) | | | 4.5 | | | | (26.7 | ) | | NM | | | (40.1 | ) | | | (10.9 | ) | | | (29.2 | ) | | NM | Commission and brokerage | 70 | | | 77 | | | (7) | | | (9.3) | % | | 145 | | | 146 | | | (1) | | | (0.6) | % |
Other underwriting expenses | | | 37.4 | | | | 40.7 | | | | (3.3 | ) | | | -8.1 | % | | | 114.9 | | | | 116.8 | | | | (2.0 | ) | | | -1.7 | % | Other underwriting expenses | 100 | | | 88 | | | 12 | | | 13.6 | % | | 200 | | | 175 | | | 25 | | | 14.6 | % |
Underwriting gain (loss) | | $ | (105.0 | ) | | $ | 11.4 | | | $ | (116.4 | ) | | NM | | $ | (67.3 | ) | | $ | (26.4 | ) | | $ | (40.9 | ) | | NM | Underwriting gain (loss) | $ | 84 | | | $ | 66 | | | $ | 18 | | | 27.0 | % | | $ | 145 | | | $ | 124 | | | $ | 21 | | | 16.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Point Chg | | | | | | | | | | | | | | | Point Chg | | | Point Chg | | Point Chg |
Loss ratio | | | 159.0 | % | | | 68.4 | % | | | | | | | 90.6 | | | | 98.3 | % | | | 82.1 | % | | | | | | | 16.2 | | Loss ratio | 64.5% | | 65.0% | | (0.5) | | 65.4% | | 65.2% | | 0.2 |
Commission and brokerage ratio | | | -14.6 | % | | | 2.5 | % | | | | | | | (17.1 | ) | | | -8.9 | % | | | -2.5 | % | | | | | | | (6.4 | ) | Commission and brokerage ratio | 9.7% | | 11.6% | | -1.9 | | 10.3% | | 11.4% | | (1.2) |
Other underwriting ratio | | | 24.5 | % | | | 22.7 | % | | | | | | | 1.8 | | | | 25.6 | % | | | 26.3 | % | | | | | | | (0.7 | ) | |
Other underwriting expense ratio | | Other underwriting expense ratio | 14.0% | | 13.3% | | 0.7 | | 14.1% | | 13.7% | | 0.5 |
Combined ratio | | | 168.9 | % | | | 93.6 | % | | | | | | | 75.3 | | | | 115.0 | % | | | 105.9 | % | | | | | | | 9.1 | | Combined ratio | 88.2% | | 90.0% | | (1.7) | | 89.7% | | 90.3% | | (0.5) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(NM, not meaningful) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)
Premiums.Gross written premiums decreasedincreased by 13.7%7.8% to $429.6$1.1 billion for the three months ended June 30, 2023, compared to $1.0 billion for the three months ended June 30, 2022. The increase in insurance premiums was primarily due to increases in property/short tail business and other specialty lines of business. Net written premiums increased by 8.9% to $816 million for the three months ended SeptemberJune 30, 20172023, compared to $498.0$750 million for the three months ended SeptemberJune 30, 2016. This decrease was primarily due2022. The higher percentage of net written premiums compared to the sale of Heartland, which accounted for $162.4 million of gross written premiums in the third quarter of 2016. Excluding the impact of Heartland, gross written premiums increased by $94.0 millionwas mainly due to business mix and higher production from manyretention in certain lines of business, including retail casualty, surety and accident and health. Net written premiums decreased by 5.9%business. Premiums earned increased 8.3% to $144.9$714 million for the three months ended SeptemberJune 30, 20172023, compared to $154.1$659 million for the three months ended SeptemberJune 30, 2016.2022.
Gross written premiums increased by 5.8% to $2.0 billion for the six months ended June 30, 2023, compared to $1.9 billion for the six months ended June 30, 2022. The difference betweenincrease in insurance premiums reflects increases in property/short tail business and other specialty lines of business. Net written premiums increased by 10.7% to $1.5 billion for the change in grosssix months ended June 30, 2023, compared to $1.4 billion for the six months ended June 30, 2022. The higher percentage of net written premiums compared to the change in netgross written premiums is primarilywas mainly due to the more conservative reinsurance position we have taken to support our expanded insurance business mix and the impacthigher retention in certain lines of affiliated quota share agreements.business. Premiums earned decreased 15.0%increased by 10.7% to $152.2 million$1.4 billion for the threesix months ended SeptemberJune 30, 20172023, compared to $179.1 million$1.3 billion for the threesix months ended SeptemberJune 30, 2016.2022. 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 5.9% to $1,351.5 million for the nine months ended September 30, 2017 compared to $1,276.8 million for the nine months ended September 30, 2016. Excluding the impact of the sale of Heartland, which accounted for $229.9 million of gross written premiums in the nine months
ended September 30, 2016, gross written premiums increased $304.6 million. This increase was primarily driven by expansion of many lines of business, including retail casualty, retail property, surety and accident and health. Net written premiums decreased by 4.4% to $442.2 million for the nine months ended September 30, 2017 compared to $462.8 million for the nine months ended September 30, 2016. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the more conservative reinsurance position we have taken to support our new business and the impact of affiliated quota share agreements. Premiums earned increased 0.9% to $449.4 million for the nine months ended September 30, 2017 compared to $445.6 million for the nine months ended September 30, 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.
Incurred Losses and LAE.The following table presentstables present the incurred losses and LAE for the Insurance segment for the periods indicated.
| | Three Months Ended September 30, |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 133.6 | | | | 87.7 | % | | | $ | (1.2 | ) | | | -0.8 | % | | | $ | 132.4 | | | | 86.9 | % | |
Catastrophes | | | 109.6 | | | | 72.0 | % | | | | 0.1 | | | | 0.1 | % | | | | 109.7 | | | | 72.1 | % | |
Total segment | | $ | 243.2 | | | | 159.7 | % | | | $ | (1.1 | ) | | | -0.7 | % | | | $ | 242.1 | | | | 159.0 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 121.4 | | | | 67.8 | % | | | $ | 1.1 | | | | 0.6 | % | | | $ | 122.5 | | | | 68.4 | % | |
Catastrophes | | | - | | | | 0.0 | % | | | | - | | | | 0.0 | % | | | | - | | | | 0.0 | % | |
Total segment | | $ | 121.4 | | | | 67.8 | % | | | $ | 1.1 | | | | 0.6 | % | | | $ | 122.5 | | | | 68.4 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Attritional | | $ | 12.2 | | | | 19.9 | | pts | | $ | (2.3 | ) | | | (1.4 | ) | pts | | $ | 9.9 | | | | 18.5 | | pts |
Catastrophes | | | 109.6 | | | | 72.0 | | pts | | | 0.1 | | | | 0.1 | | pts | | | 109.7 | | | | 72.1 | | pts |
Total segment | | $ | 121.8 | | | | 91.9 | | pts | | $ | (2.2 | ) | | | (1.3 | ) | pts | | $ | 119.6 | | | | 90.6 | | pts |
| | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Current | | | Ratio %/ | | Prior | | | Ratio %/ | | Total | | | Ratio %/ | | Three Months Ended June 30, |
(Dollars in millions) | | Year | | | Pt Change | | Years | | | Pt Change | | Incurred | | | Pt Change | (Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2017 | | | | | | | | | | | | | | | | | | | | | | |
2023 | | 2023 | | | | | | | | | | | |
Attritional | | $ | 321.2 | | | | 71.4 | % | | | $ | 6.5 | | | | 1.4 | % | | | $ | 327.7 | | | | 72.8 | % | | Attritional | $ | 461 | | | 64.6 | % | | $ | — | | | — | % | | 461 | | | 64.6 | % |
Catastrophes | | | 114.4 | | | | 25.5 | % | | | | (0.1 | ) | | | 0.0 | % | | | | 114.3 | | | | 25.5 | % | | Catastrophes | — | | | — | % | | — | | | (0.1) | % | | (1) | | | (0.1) | % |
Total segment | | $ | 435.6 | | | | 96.9 | % | | | $ | 6.4 | | | | 1.4 | % | | | $ | 442.0 | | | | 98.3 | % | | |
Total Segment | | Total Segment | $ | 461 | | | 64.6 | % | | $ | — | | | (0.1) | % | | $ | 460 | | | 64.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | 2022 | |
Attritional | | $ | 343.8 | | | | 77.1 | % | | | $ | 5.6 | | | | 1.3 | % | | | $ | 349.4 | | | | 78.4 | % | | Attritional | $ | 424 | | | 64.3 | % | | $ | — | | | — | % | | 424 | | | 64.3 | % |
Catastrophes | | | 16.7 | | | | 3.7 | % | | | | (0.2 | ) | | | 0.0 | % | | | | 16.5 | | | | 3.7 | % | | Catastrophes | 5 | | | 0.8 | % | | — | | | — | % | | 5 | | | 0.7 | % |
Total segment | | $ | 360.5 | | | | 80.8 | % | | | $ | 5.4 | | | | 1.3 | % | | | $ | 366.0 | | | | 82.1 | % | | |
Total Segment | | Total Segment | $ | 429 | | | 65.0 | % | | $ | — | | | — | % | | $ | 429 | | | 65.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2017/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Variance 2023/2022 | | Variance 2023/2022 | |
Attritional | | $ | (22.6 | ) | | | (5.7 | ) | pts | | $ | 0.9 | | | | 0.1 | | pts | | $ | (21.7 | ) | | | (5.6 | ) | pts | Attritional | $ | 37 | | | 0.3 | pts | | $ | — | | | — | pts | | $ | 37 | | | 0.3 | pts |
Catastrophes | | | 97.7 | | | | 21.8 | | pts | | | 0.1 | | | | - | | pts | | | 97.8 | | | | 21.8 | | pts | Catastrophes | (5) | | | (0.8) | pts | | — | | | — | pts | | (6) | | | (0.8) | pts |
Total segment | | $ | 75.1 | | | | 16.1 | | pts | | $ | 1.0 | | | | 0.1 | | pts | | $ | 76.0 | | | | 16.2 | | pts | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Some amounts may not reconcile due to rounding.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment | | Total Segment | $ | 32 | | | (0.5) | pts | | $ | — | | | — | pts | | $ | 32 | | | (0.5) | pts |
(Some amounts may not reconcile due to rounding.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
(Dollars in millions) | Current Year | | Ratio %/ Pt Change | | Prior Years | | Ratio %/ Pt Change | | Total Incurred | | Ratio %/ Pt Change |
2023 | | | | | | | | | | | |
Attritional | $ | 927 | | | 65.5 | % | | $ | (2) | | | (0.2) | % | | 925 | | | 65.3 | % |
Catastrophes | 1 | | | 0.1 | % | | (1) | | | (0.1) | % | | 1 | | | — | % |
Total Segment | $ | 929 | | | 65.6 | % | | $ | (3) | | | (0.3) | % | | $ | 925 | | | 65.4 | % |
| | | | | | | | | | | |
2022 | | | | | | | | | | | |
Attritional | $ | 825 | | | 64.5 | % | | $ | — | | | — | % | | 824 | | | 64.5 | % |
Catastrophes | 10 | | | 0.8 | % | | (1) | | | — | % | | 9 | | | 0.7 | % |
Total Segment | $ | 835 | | | 65.3 | % | | $ | (1) | | | -0.1 | % | | $ | 834 | | | 65.2 | % |
| | | | | | | | | | | |
Variance 2023/2022 | | | | | | | | | | | |
Attritional | $ | 103 | | | 1.0 | pts | | $ | (2) | | | (0.1) | pts | | 101 | | | 0.9 | pts |
Catastrophes | (9) | | | (0.7) | pts | | — | | | — | pts | | (9) | | | (0.7) | pts |
Total Segment | $ | 94 | | | 0.3 | pts | | $ | (2) | | | (0.2) | pts | | $ | 92 | | | 0.2 | pts |
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 97.6%7.5% to $242.1$460 million for the three months ended SeptemberJune 30, 20172023, compared to $122.5$429 million for the three months ended SeptemberJune 30, 2016,2022, mainly due to an increase of $109.6 million in current year catastrophe losses and an increase of $12.2$37 million in current year attritional losses. The current year catastrophe losses of $109.6 million for the three months ended September 30, 2017which is primarily related to Hurricane Harvey ($50.8 million), Hurricane Irma ($50.1 million) and Hurricane Maria ($8.7 million). a change in mix of business. There were no current year catastrophe losses for the three months ended SeptemberJune 30, 2016.
Incurred losses and LAE increased by 20.8% to $442.0 million for the nine months ended September 30, 2017 compared to $366.0 million for the nine months ended September 30, 2016, mainly due to an increase of $97.7 million in current catastrophe losses, partially offset by a decrease of $22.6 million in current year attritional losses.2023. The decrease in current year attritional losses primarily related to changes in the mix of business and the impact of affiliated quota share agreements. The current year catastrophe losses of $114.4 million for the nine months ended September 30, 2017 primarily related to Hurricane Harvey ($50.8 million), Hurricane Irma ($50.1 million), Hurricane Maria ($8.7 million) and the 2017 US Midwest Storms ($4.8 million). The $16.7$5 million of current year catastrophe losses for the ninethree months ended SeptemberJune 30, 2016 were2022, related to the 2022 2nd quarter U.S. storms.
Incurred losses and LAE increased by 11.0% to $925 million for the six months ended June 30, 2023 compared to $834 million for the six months ended June 30, 2022, mainly due to an increase of $103 million in current year attritional losses which is primarily related to a change in mix of business. The $1 million of current year catastrophe losses for the 2016six months ended June 30, 2023, related to the 2023 New Zealand storms. The $10 million of current year catastrophe losses for the six months ended June 30, 2022, related to the 2022 2nd quarter U.S. storms ($15.05 million) and the Fort McMurray Canada wildfire2022 March U.S. storms ($1.75 million).
Segment Expenses.Expenses. Commission and brokerage expenses decreased by 9.3% to ($22.3)$70 million for the three months ended SeptemberJune 30, 20172023 compared to $4.5$77 million for the three months ended SeptemberJune 30, 2016.2022. Commission and brokerage expenses decreased by 0.6% to ($40.1)$145 million for the ninesix months ended SeptemberJune 30, 20172023 compared to ($10.9)$146 million for the ninesix months ended SeptemberJune 30, 2016. The2022. These decreases were mainly due to changes in the mix of business.
Segment other underwriting expenses increased to $100 million for the three months ended June 30, 2023, compared to $88 million for the three months ended June 30, 2022. Segment other underwriting expenses increased to $200 million for the six months ended June 30, 2023, compared to $175 million for the six months ended June 30, 2022. These increases were mainly due to the impact of changesthe increase in premiums earned and increased expenses related to the continued build out of the insurance business.
LIQUIDITY AND CAPITAL RESOURCES
Capital.Stockholder’s equity at June 30, 2023 and December 31, 2022 was $6.3 billion and $5.7 billion, respectively.Management’s objective in managing capital is to ensure its overall capital level, as well as the capital levels of its operating subsidiaries, exceed the amounts required by regulators, the amount needed to support our current financial strength ratings from rating agencies and our own economic capital models.The Company’s capital has historically exceeded these benchmark levels.
Our main operating company, Everest Re, is regulated by the State of Delaware’s Department of Insurance. The regulatory body has its own capital adequacy models based on statutory capital as opposed to GAAP basis equity.Failure to meet the required statutory capital levels could result in various regulatory restrictions.
The regulatory targeted capital and the actual statutory capital for Everest Re was as follows:
| | | | | | | | | | | |
| Everest Re (1) |
| At December 31, |
(Dollars in millions) | 2022 | | 2021 |
Regulatory targeted capital | $ | 3,353 | | | $ | 2,960 | |
Actual capital | $ | 5,553 | | | $ | 5,717 | |
(1) Regulatory targeted capital represents 200% of the RBC authorized control level calculation for the applicable year.
Our financial strength ratings as determined by A.M. Best, Standard & Poor’s and Moody’s are important as they provide our customers and investors with an independent assessment of our financial strength using a rating scale that provides for relative comparisons.We continue to possess significant financial flexibility and access to debt and equity markets as a result of our financial strength, as evidenced by the financial strength ratings as assigned by independent rating agencies.
We maintain our own economic capital models to monitor and project our overall capital, as well as the capital at our operating subsidiaries.A key input to the economic models is projected income, and this input is continually compared to actual results, which may require a change in the mixcapital strategy.
We may continue, from time to time, to seek to retire portions of businessour outstanding debt securities through cash repurchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be subject to and depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the impactsaggregate, may be material.
Liquidity.Our liquidity requirements are generally met from affiliated quota share agreements.positive cash flow from operations.Positive cash flow results from reinsurance and insurance premiums being collected prior to disbursements for claims, which disbursements
Segment other underwriting expenses decreasedgenerally take place over an extended period after the collection of premiums, sometimes a period of many years.Collected premiums are generally invested, prior to $37.4their use in such disbursements, and investment income provides additional funding for loss payments. Our net cash flows from operating activities were $914 million and $948 million for the threesix months ended SeptemberJune 30, 2017 compared2023 and 2022, respectively.
If disbursements for losses and LAE, policy acquisition costs and other operating expenses were to $40.7exceed premium inflows, cash flow from reinsurance and insurance operations would be negative. The effect on cash flow from insurance operations would be partially offset by cash flow from investment income. Additionally, cash inflows from investment maturities of both short-term investments and longer-term maturities are available to supplement other operating cash flows. We do not expect to supplement negative insurance operations cash flows with investment dispositions.
As the timing of payments for losses and LAE cannot be predicted with certainty, we maintain portfolios of long-term invested assets with varying maturities, along with short-term investments that provide additional liquidity for payment of claims. At June 30, 2023 and December 31, 2022, we held cash and short-term investments of $1.6 billion and $1.3 billion, respectively. Our short-term investments are generally readily marketable and can be converted to cash. In addition to these cash and short-term investments, at June 30, 2023, we had $799 million of fixed maturity securities - available for sale maturing within one year or less, $3.4 billion maturing within one to five years and $3.1 billion maturing after five years. We believe that these fixed maturity securities, in conjunction with the short-term investments and positive cash flow from operations, provide ample sources of liquidity for the three months ended Septemberexpected payment of losses and LAE in the near future. We do not anticipate selling a significant amount of securities to pay losses and LAE. At June 30, 2016. Segment other underwriting expenses decreased2023, we had $882 million of net pre-tax unrealized depreciation related to $114.9fixed maturity - available for sale securities, comprised of $919 million of pre-tax unrealized depreciation and $37 million of pre-tax unrealized appreciation.
Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing.However, given the catastrophic events observed in recent periods, cash flow from operations may decline and could become negative in the near term as significant claim payments are made related to the catastrophes.However, as indicated above, the Company has ample liquidity to settle its catastrophe claims and/or any payments due for the nine months ended September 30, 2017 compared to $116.8 million for the nine months ended September 30, 2016. These decreases were mainly due to lower variable compensation costs.its catastrophe bond program.
Market Sensitive Instruments.
The SEC'sSecurities and Exchange Commission’s (“SEC”) 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.
The overall investment strategy considers the scope of present and anticipated Company operations. In particular, estimates of the financial impact resulting from non-investment asset and liability transactions, together with our capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated payout characteristics for which our investments provide liquidity. This analysis is considered in the development of specific investment strategies for asset allocation, duration and credit quality. The change in overall market sensitive risk exposure principally reflects the asset changes that took place during the period.
Interest Rate Risk.Risk. Our $10.2$21.1 billion investment portfolio at SeptemberJune 30, 2017,2023 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, itinterest rate risk includes prepayment risk on the $736.9 million$2.2 billion of mortgage-backed securities in the $6,039.4 million$15.0 billion fixed maturity portfolio.
Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.
The table below displays the potential impact of marketfair value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $230.0 million$1.1 billion of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price 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 marketfair value change under the various interest rate change scenarios.
| | | Impact of Interest Rate Shift in Basis Points | | | Impact of Interest Rate Shift in Basis Points At June 30, 2023 |
| | At September 30, 2017 | | | -200 | | -100 | | 0 | | 100 | | 200 |
(Dollars in millions) | | | -200 | | | | -100 | | | | 0 | | | | 100 | | | | 200 | | (Dollars in millions) | | | | | | | | | |
Total Market/Fair Value | | $ | 6,634.4 | | | $ | 6,454.2 | | | $ | 6,269.4 | | | $ | 6,077.2 | | | $ | 5,883.9 | | |
Market/Fair Value Change from Base (%) | | | 5.8 | % | | | 2.9 | % | | | 0.0 | % | | | -3.1 | % | | | -6.1 | % | |
Total Fair Value | | Total Fair Value | $ | 16,791 | | | $ | 16,438 | | | $ | 16,084 | | | $ | 15,731 | | | $ | 15,378 | |
Fair Value Change from Base (%) | | Fair Value Change from Base (%) | 4.4 | % | | 2.2 | % | | — | % | | (2.2) | % | | (4.4) | % |
Change in Unrealized Appreciation | | | | | | | | | | | | | | | | | | | | | Change in Unrealized Appreciation | |
After-tax from Base ($) | | $ | 237.3 | | | $ | 120.1 | | | $ | - | | | $ | (124.9 | ) | | $ | (250.6 | ) | After-tax from Base ($) | $ | 558 | | | $ | 279 | | | $ | — | | | $ | (279) | | | $ | (558) | |
We had $9,969.1 million$15.5 billion and $8,331.3 million$15.0 billion of gross reserves for losses and LAE as of SeptemberJune 30, 20172023 and December 31, 2016,2022, 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.
Equity Risk.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 table below displays the impact on fair/marketfair value and after-tax change in fair/marketfair value of a 10% and 20% change in equity prices up and down for the periods indicated.indicated:
| | Impact of Percentage Change in Equity Fair/Market Values | |
| | At September 30, 2017 | |
(Dollars in millions) | | | -20% | | | -10% | | | 0% | | | 10% | | | 20% |
Fair/Market Value of the Equity Portfolio | | $ | 798.5 | | | $ | 898.3 | | | $ | 998.1 | | | $ | 1,097.9 | | | $ | 1,197.7 | |
After-tax Change in Fair/Market Value | | | (129.7 | ) | | | (64.9 | ) | | | - | | | | 64.9 | | | | 129.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impact of Percentage Change in Equity Fair Values At June 30, 2023 |
(Dollars in millions) | -20% | | -10% | | 0% | | 10% | | 20% |
Fair Value of the Equity Portfolio | $ | 134 | | | $ | 150 | | | $ | 167 | | | $ | 184 | | | $ | 201 | |
After-tax Change in Fair Value | (26) | | | (13) | | | — | | | 13 | | | 26 | |
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 marketfair 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.
SAFE HARBOR DISCLOSURE
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 include:
•the effects of catastrophic and pandemic events on our financial statements;
•estimates of our catastrophe exposure;
•information regarding our reserves for losses and LAE, LAE;
•our failure to accurately assess underwriting risk;
•decreases in pricing for property and casualty reinsurance and insurance;
•our ability to maintain our financial strength ratings;
•the failure of our insured, intermediaries and reinsurers to satisfy their obligations;
•our inability or failure to purchase reinsurance;
•consolidation of competitors, customers and insurance and reinsurance brokers;
•the effect on our business of the highly competitive nature of our industry, including the effect of new entrants to, competing products for and consolidation in the (re)insurance industry;
•our ability to retain our key executive officers and to attract or retain the executives and employees necessary to manage our business;
•the performance of our investment portfolio;
•our ability to determine any impairments taken on our investments;
•foreign currency exchange rate fluctuations;
•the effect of cybersecurity risks, including technology breaches or failure, on our business;
•the CARES Act;
•the impact of the Tax Cut and Jobs Act; and
•the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic events on our financial statements and the ability of our subsidiariescapital in relation to pay dividends. regulatory required capital.
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” in the Company'sCompany’s most recent 10-K filing. 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Instruments. See "Market“Market Sensitive Instruments"Instruments” in PART I – ITEM 2.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")“Exchange Act”). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission'sSEC’s rules and forms. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter covered by this 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 quarter covered by this report.
PART IIII. OTHER INFORMATION
ITEM 1. 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.
LAE.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.
ITEM 1A. RISK FACTORS
No material changes.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit Index: | | | | | | | | |
| | Exhibit Index: |
Exhibit No.
| Description
| |
Exhibit No. | | Description |
31.1 | | |
31.1 | | | Juan C. Andrade |
| | |
31.2 | | | Mark Kociancic |
| | |
32.1 | | | Mark Kociancic |
| | |
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 Labels Linkbase | |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | |
| | |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Everest Reinsurance Holdings, Inc.
Signatures
Pursuant to the requirements 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.
| | | | | |
| Everest Reinsurance Holdings, Inc. | |
(Registrant) | (Registrant) |
| |
| /S/ MARK KOCIANCIC |
/S/ CRAIG HOWIE | Mark Kociancic |
Craig Howie | |
Executive Vice President and | |
| Chief Financial Officer | |
| | |
| (Duly Authorized Officer and Principal Financial Officer) |
| |
Dated: August 10, 2023 | |