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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
_X_
For the fiscal year ended
December 31, 2022
___
Commission file number
1-14527
EVEREST REINSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
22-3263609
(I.R.S Employer
Identification No.)
100 Everest Way
Warren
,
New Jersey
07059
908
)
604-3000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
4.868% Senior Notes Due 2044
NYSE
3.50% Senior Notes Due 2050
NYSE
3.125% Senior Notes Due 2052
NYSE
6.60% Long-Term Notes Due 2067
NYSE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
X
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requi rements for the past 90 days.
Yes
X
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Yes
X
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes
X
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
X
Smaller reporting company
Emerging growth company
Indicate by check mark if the registrant is an emerging growth company and has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange act.
Yes
No
X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes
No
X
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes
No
X
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
The aggregate market value on June 30, 2022, the last business day of the registrant’s most recently completed second quarter, of the voting stock held by non-affiliates of the registrant was
zero
.
At March 9, 2023, the number of shares outstanding of the registrant common shares was
1,000
, all of which are owned by Everest Underwriting Group (Ireland) Limited, a wholly-owned
direct subsidiary of Everest Re Group, Ltd.
The Registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted by General
Instruction I of Form 10-K.
EVEREST REINSURANCE HOLDINGS, INC.
Table of Contents
FORM 10-K
Page
PART I
Item 1.
1
Item 1A.
7
Item 1B.
13
Item 2.
13
Item 3.
13
Item 4.
13
PART II
Item 5.
13
Item 6.
14
Item 7.
14
Item 7A.
26
Item 8.
28
Item 9.
28
Item 9A.
29
Item 9B.
29
Item 9C.
ions
29
PART III
Item 10.
30
Item 11.
30
Item 12.
30
Item 13.
30
Item 14.
30
PART IV
Item 15.
31
1
PART I
Unless otherwise indicated, all financial data in this document have been prepared using accounting principles
generally accepted in the United States of America (“GAAP”). As used in this document, “Holdings” means Everest
Reinsurance Holdings, Inc., a Delaware company and direct subsidiary of Everest Underwriting Group (Ireland)
Limited (“Holdings Ireland”); “Group” means Everest Re Group, Ltd. (Holdings Ireland’s parent); “Bermuda Re”
means Everest Reinsurance (Bermuda), Ltd., a subsidiary of Group; “Everest Re” means Everest Reinsurance
Company and its subsidiaries, a subsidiary of Holdings (unless the context otherwise requires); and the “Company”,
“we”, “us”, and “our” means Holdings and its subsidiaries (unless the context otherwise requires).
ITEM 1. BUSINESS
The Company.
Holdings, a Delaware corporation, is a wholly-owned subsidiary of Holdings Ireland. On December 30, 2008, Group
contributed Holdings to its recently established Irish holding company, Holdings Ireland. Holdings Ireland is a
direct subsidiary of Group and serves as a holding company for the U.S. reinsurance and insurance subsidiaries.
Group is a Bermuda holding company whose common shares are publicly traded in the U.S. on the New York Stock
Exchange under the symbol “RE”. Group files an annual report on Form 10-K with the Securities and Exchange
Commission (the “SEC”) with respect to its consolidated operations, including Holdings.
The Company’s principal business, conducted through its operating segments, is the underwriting of reinsurance
and insurance in the U.S. and international markets. The Company had gross written premiums, in 2022, of $9.7
billion, with approximately 61% representing reinsurance and 39% representing insurance. Stockholder’s equity at
December 31, 2022 was $5.7 billion. The Company underwrites reinsurance both through brokers and directly with
ceding companies, giving it the flexibility to pursue business based on the ceding company’s preferred reinsurance
purchasing method. The Company underwrites insurance through brokers , surplus lines brokers and general agent
relationships. Holdings’ active operating subsidiaries are each rated A+ (“Superior”) by A.M. Best Company (“A.M.
Best”), a leading provider of insurer ratings that assigns financial strength ratings to insurance companies based on
their ability to meet their obligations to policyholders.
Following is a summary of the Company’s principal operating subsidiaries:
●
Everest Re, a Delaware insurance company and a direct subsidiary of Holdings, is a licensed property and
casualty insurer and/or reinsurer in all states, the District of Columbia, Puerto Rico and Guam and is
authorized to conduct reinsurance business in Canada, Singapore and Brazil. Everest Re underwrites property
and casualty reinsurance for insurance and reinsurance companies in the U.S. and international markets.
Everest Re has engaged in reinsurance transactions with Bermuda Re, Everest International Reinsurance, Ltd.
(“Everest International”), Mt. Logan Re, Ltd. (“Mt. Logan Re”) and Everest Insurance Company of Canada
(“Everest Canada”), which are affiliated companies, primarily driven by enterprise risk and capital
management considerations under which business is transacted at market rates and terms. At December 31,
2022, Everest Re had statutory surplus of $5.6 billion.
●
Everest National Insurance Company (“Everest National”), a Delaware insurance company and a direct
subsidiary of Everest Re, is licensed in 50 states, the District of Columbia and Puerto Rico and is authorized to
write property and casualty insurance on an admitted basis in the jurisdictions in which it is licensed. The
majority of Everest National’s business is reinsured by its parent, Everest Re.
2
●
Everest Indemnity Insurance Company (“Everest Indemnity”), a Delaware insurance company and a direct
subsidiary of Everest Re, writes excess and surplus lines insurance business in the U.S. on a non-admitted
basis. Excess and surplus lines insurance is specialty property and liability coverage that an insurer not licensed
to write insurance in a particular jurisdiction is permitted to provide to insureds when the specific specialty
coverage is unavailable from admitted insurers. Everest Indemnity is a Delaware Domestic Surplus Lines
Insurer and is eligible to write business on a non-admitted basis in all other states, the District of Columbia and
Puerto Rico. The majority of Everest Indemnity’s business is reinsured by its parent, Everest Re.
●
Everest Security Insurance Company (“Everest Security”), a Georgia insurance company and a direct subsidiary
of Everest Re, writes property and casualty insurance on an admitted basis in Georgia and Alabama and is
approved as an eligible surplus lines insurer in Delaware. The majority of Everest Security’s business is
reinsured by its parent, Everest Re.
●
Everest Denali Insurance Company (“Everest Denali”), a Delaware insurance company and a direct subsidiary
of Everest Re, is licensed to write property and casualty insurance in all 50 states and the District of Columbia.
The majority of Everest Denali’s business is reinsured by its parent, Everest Re.
●
Everest Premier Insurance Company (“Everest Premier”), a Delaware insurance company and a direct
subsidiary of Everest Re, is licensed to write property and casualty insurance in all 50 states and the District of
Columbia. The majority of Everest Premier’s business is reinsured by its parent, Everest Re.
●
Everest International Assurance, Ltd. (“Everest Assurance”), a Bermuda company and a direct subsidiary of
Holdings is registered in Bermuda as a Class 3A general business insurer and as a Class C long-term insurer.
Everest Assurance has made a one-time election under section 953(d) of the U.S. Internal Revenue Code to be
a U.S. income tax paying “Controlled Foreign Corporation.” By making this election, Everest Assurance is
authorized to write life reinsur ance and casualty reinsurance in both Bermuda and the U.S.
Reinsurance Industry Overview.
Reinsurance is an arrangement in which an insurance company, the reinsurer, agrees to indemnify another
insurance or reinsurance company, the ceding company, against all or a portion of the insurance risks underwritten
by the ceding company under one or more insurance contracts. Reinsurance can provide a ceding company with
several benefits, including a reduction in its net liability on individual risks or classes of risks, catastrophe
protection from large and/or multiple losses and/or a reduction in operating leverage as measured by the ratio of
net premiums and reserves to capital. Reinsurance also provides a ceding company with additional underwriting
capacity by permitting it to accept larger risks and write more business than would be acceptable relative to the
ceding company’s financial resources. Reinsurance does not discharge the ceding company from its liability to
policyholders; rather, it reimburses the ceding company for covered losses.
There are two basic types of reinsurance arrangements: treaty and facultative. Treaty reinsurance obligates the
ceding company to cede and the reinsurer to assume a specified portion of a type or category of risks insured by
the ceding company. Treaty reinsurers do not separately evaluate each of the individual risks assumed under their
treaties, instead, the reinsurer relies upon the pricing and underwriting decisions made by the ceding company. In
facultative reinsurance, the ceding company cedes and the reinsurer assumes all or part of the risk under a single
insurance contract. Facultative reinsurance is negotiated separately for each insurance contract that is reinsured.
Facultative reinsurance, when purchased by ceding companies, usually is intended to cover individual risks not
covered by their reinsurance treaties because of the dollar limits involved or because the risk is unusual.
Both treaty and facultative reinsurance can be written on either a pro rata basis or an excess of loss basis. Under
pro rata reinsurance, the ceding company and the reinsurer share the premiums as well as the losses and expenses
in an agreed proportion. Under excess of loss reinsurance, the reinsurer indemnifies the ceding company against
all or a specified portion of losses and expenses in excess of a specified dollar amount, known as the ceding
company's retention or reinsurer's attachment point, generally subject to a negotiated reinsurance contract limit.
3
In pro rata reinsurance, the reinsurer generally pays the ceding company a ceding commission. The ceding
commission generally is based on the ceding company’s cost of acquiring the business being reinsured
(commissions, premium taxes, assessments and miscellaneous administrative expense and may contain profit
sharing provisions, whereby the ceding commission is adjusted based on loss experience). Premiums paid by the
ceding company to a reinsurer for excess of loss reinsurance are not directly proportional to the premiums that the
ceding company receives because the reinsurer does not assume a proportionate risk. There is usually no ceding
commission on excess of loss reinsurance.
Reinsurers may purchase reinsurance to cover their own risk exposure. Reinsurance of a reinsurer's business is
called a retrocession. Reinsurance companies cede risks under retrocessional agreements to other reinsurers,
known as retrocessionaires, for reasons similar to those that cause insurers to purchase reinsurance: to reduce
net liability on individual or classes of risks, protect against catastrophic losses, stabilize financial ratios and obtain
additional underwriting capacity.
Reinsurance can be written through intermediaries, generally professional reinsurance brokers, or directly with
ceding companies. From a ceding company's perspective, the broker and the direct distribution channels have
advantages and disadvantages. A ceding company's decision to select one distribution channel over the other will
be influenced by its perception of such advantages and disadvantages relative to the reinsurance coverage being
placed.
Business Strategy.
The Company’s business strategy is to sustain its leadership position within targeted reinsurance and insurance
markets, provide effective management throughout the property and casualty underwriting cycle and thereby
achieve an attractive return for its stockholder. The Company’s underwriting strategies seek to capitalize on its i)
financial strength and capacity, ii) global franchise, iii) stable and experienced management team, iv) diversified
product and distribution offerings, v) underwriting expertise and disciplined approach, vi) efficient and low-cost
operating structure and vii) effective enterprise risk management practices.
The Company offers treaty and facultative reinsurance and admitted and non-admitted insurance. The Company’s
products include the full range of property and casualty reinsurance and insurance coverages, including marine,
aviation, surety, errors and omissions liability (“E&O”), directors’ and officers’ liability (“D&O”), medical
malpractice, mortgage reinsurance, other specialty lines, accident and health (“A&H”) and workers’ compensation.
The Company’s underwriting strategies emphasizes underwriting profitability over premium volume. Key elements
of this strategy include careful risk selection, appropriate pricing through strict underwriting discipline and
adjustment of the Company’s business mix in response to changing market conditions. The Company focuses on
reinsuring companies that effectively manage the underwriting cycle through proper analysis and appropriate
pricing of underlying risks and whose underwriting guidelines and performance are compatible with its objectives.
The Company’s underwriting strategies emphasize flexibility and responsiveness to changing market conditions.
The Company believes that its existing strengths, including its broad underwriting expertise, global presence,
strong financial ratings and substantial capital, facilitate adjustments to its mix of business geographically, by line
of business and by type of coverage, allowing it to fully participate in market opportunities that provide the
greatest potential for underwriting profitability. The Company’s insurance operations complement these
strategies by accessing business that is not available on a reinsurance basis. The Company carefully monitors its
mix of business across all operations to avoid unacceptable geographic or other risk concentrations.
4
Capital Transactions.
The Company’s business operations are in part dependent on its financial strength and financial strength ratings,
and the market’s perception of its financial strength . The Company stockholder’s equity was $5.7 billion and $7.0
billion at December 31, 2022 and 2021, respectively. The Company possesses significant financial flexibility with
access to the debt markets and, through its ultimate parent, equity markets, as a result of its perceived financial
strength, as evidenced by the financial strength ratings as assigned by independent rating agencies. The Company’s
capital position remains strong, commensurate with its financial ratings and the Company has ample liquidity to
meet its financial obligations for the foreseeable future.
Financial Strength Ratings.
The following table shows the current financial strength ratings of the Company’s operating subsidiaries as
reported by A.M. Best, S&P Global Ratings (“S&P”) and Moody’s. These ratings represent an independent opinion
of the financial strength, operating performance, business profile and ability to meet policyholder obligations. The
ratings are not intended to be an indication of the degree or lack of risk involved in a direct or indirect equity
investment or a recommendation to buy, sell or hold our securities. Additionally, rating organizations may change
their rating methodology, which could have a material impact on our financial strength ratings.
All of the below-mentioned ratings are continually monitored and revised, if necessary, by each of the rating
agencies. The ratings presented in the following table were in effect as of January 31, 2023.
The Company believes that its ratings are important as they provide the Company’s customers and others with an
independent assessment of the Company’s financial strength using a rating scale that provides for relative
comparisons. Strong financial ratings are particularly important for reinsurance and insurance companies given
that customers rely on a company to pay covered losses well into the future. As a result, a highly rated company is
generally preferred.
Operating Subsidiary:
A.M. Best
S&P
Moody's
Everest Reinsurance Company
A+ (Superior)
A+ (Strong)
A1 (upper-medium)
Everest National Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Indemnity Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Security Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest International Assurance, Ltd.
A+ (Superior)
A+ (Strong)
Not Rated
Everest Denali Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
Everest Premier Insurance Company
A+ (Superior)
A+ (Strong)
Not Rated
A.M. Best states that the “A+” (“Superior”) rating is assigned to those companies which, in its opinion, have a
superior ability to meet their ongoing insurance policy and contract obligations based on A.M. Best’s
comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating
performance and business profile. A.M. Best affirmed these ratings on June 15, 2022. S&P states that the
“A+”/”A” ratings are assigned to those insurance companies which, in its opinion, have strong financial security
characteristics with respect to their ability to pay under its insurance policies and contracts in accordance with
their terms. S&P affirmed all ratings on May 27, 2022. Moody’s states that an “A1” rating is assigned to
companies that, in their opinion, offer upper-medium grade security and are subject to low credit risk. Moody’s
affirmed these ratings on June 17, 2022.
Subsidiaries other than Everest Re may not be rated by some or any rating agencies because such ratings are not
considered essential by the individual subsidiary’s customers or because of the limited nature of the subsidiary’s
operations or because the subsidiaries are newly established and have not yet been rated by the agencies.
5
Debt Ratings.
The following table shows the debt ratings by A.M. Best, S&P and Moody’s of the Holdings’ senior notes due June
1, 2044, senior notes due October 15, 2050, senior notes due October 15, 2052, and long-term notes due May 1,
2067 all of which are considered investment grade. Debt ratings are the rating agencies’ current assessment of the
credit worthiness of an obligor with respect to a specific obligation.
Instrument
A.M. Best
S&P
Moody's
Senior Notes due June 1, 2044
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2050
a-
(Strong)
A-
(Strong)
Baa1
(Medium Grade)
Senior Notes due October 15, 2052
Not Rated
A-
(Strong)
Baa1
(Medium Grade)
Long-Term Notes due May 1, 2067
bbb
(Adequate)
BBB
(Adequate)
Baa2
(Medium Grade)
Competition.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and
stronger profits followed by periods of abundant capacity, lower rates and constrained profitability. Competition
in the types of reinsurance and insurance business that we underwrite is based on many factors, including the
perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by A.M. Best
and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is licensed or
otherwise authorized, capacity and coverages offered, premiums charged, other terms and conditions of the
reinsurance and insurance business offered, services offered, speed of claims payment and reputation and
experience in lines written. Furthermore, the market impact from these competitive factors related to reinsurance
and insurance is generally not consistent across lines of business, domestic and international geographical areas
and distribution channels.
We compete in the U.S. 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, and certain government sponsored risk transfer vehicles. Some of
these competitors have greater financial resources than we do and have established long-term and continuing
business relationships, which can be a significant competitive advantage. In addition, the lack of strong barriers to
entry into the reinsurance business and the securitization of reinsurance and insurance risks through capital
markets provide additional sources of potential reinsurance and insurance capacity and competition.
Worldwide insurance and reinsurance market conditions historically have been competitive. Generally, there is
ample insurance and reinsurance capacity relative to demand, as well as, additional capital from the capital
markets through insurance linked financial instruments. These financial instruments such as side cars, catastrophe
bonds and collateralized reinsurance funds, provided capital markets with access to insurance and reinsurance risk
exposure. The capital markets demand for these products is primarily driven by the desire to achieve greater risk
diversification and potentially higher returns on their investments. This competition generally has a negative
impact on rates, terms and conditions; however, the impact varies widely by market and coverage. Based on
recent competitive behaviors in the insurance and reinsurance industry, natural catastrophe events and the
macroeconomic backdrop, there has been some dislocation in the market which we expect to have a positive
impact on rates and terms and conditions generally, though local market specificities can vary.
The increased frequency of catastrophe losses experienced throughout 2022 appears to be pressuring the increase
of rates. As business activity continues to regain strength after the pandemic and current macroeconomic
uncertainty, rates also appear to be firming in most lines of business, particularly in the casualty lines that had
seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines are
experiencing modest rate increase, while some lines such as workers’ compensation were experiencing softer
market conditions. It is too early to tell what the impact on pricing conditions will be but it is likely to change
depending on the line of business and geography.
6
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses located
in the Russian Federation and/or owned by Russian nationals by numerous countries, including the United States.
The significant political and economic uncertainty surrounding the war and associated sanctions have impacted
economic and investment markets both within Russia and around the world. The Company has recorded $25
million of losses related to the Ukraine/Russia war during 2022.
Human Capital Management.
Our employees are essential to the success of our business, and so we strive to attract and retain a high standard
of insurance professionals to meet our business needs as well as the needs of our clients and customers. As of
February 1, 2023, the Company employed 1,933 persons. Management believes that employee relations are good.
None of the Company’s employees are subject to collective bargaining agreements, and the Company is not aware
of any current efforts to implement such agreements.
Everest is committed to providing our employees with an engaging and supportive environment so that employees
can develop personally and help us achieve success as an organization. We consider the ability to attract, develop
and retain a high caliber of insurance professionals to be critical to our success. Opportunities for continued
learning and talent development are provided to all employee levels. Employees are encouraged to take
ownership of their development by using the tools that the Company has made available to them including
industry training, mentorships and personal development classes. Everest actively manages succession planning
throughout our organization and strives to provide job growth and advancement opportunities to internal talent,
where possible.
Diversity and Inclusion.
Our strength and success derive from our diversity, and we are at our best when we embrace diverse views and
perspectives. Equality in opportunity, career development, compensation and respect for all individuals are
fundamental human rights that are at the forefront of our culture and promoted not only within our workplace but
also the global communities in which we operate. Our Board is committed to diversity within its structure as well
as emphasizing its importance in our senior executive leadership. We believe that diversity in gender, age,
ethnicity and skill set allows for dynamic and evolving perspectives in governance, strategy, corporate
responsibility, human rights and risk management.
Proactive diversity recruitment is an integral aspect of succession planning at both the board level and throughout
all levels in the organization. Our Talent Development team works with senior management to identify women
and persons of color across the Company as potential leaders. These individuals are provided management and
executive leadership training and education to enhance their skillsets and provide opportunities for advancement.
Indeed, our executive officers are measured on their forward-thinking diversity initiatives as part of their annual
performance evaluations. Such diversity at the most senior levels of our organization reflects our commitment to
identify and develop highly qualified women and individuals of color to help lead our Company into the future.
The work of the DEI Council has helped enhance the employee experience for all our colleagues across the
organization worldwide. The council encourages continuous and open dialogue between executive and senior
management and traditionally underrepresented groups at all levels, without fear of reprisal or retaliation, to
identify areas of improvement and carry out the message of inclusion both inside and outside our organization.
The DEI council was instrumental in forming and supporting additional Employee Resource Groups (“ERGs”),
developing a Regional Representation network and leveraging specific Talent Development and Talent Acquisition
initiatives that will positively influence the composition of our workforce.
7
Available Information.
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports are available free of charge through the Company’s internet website at
http://www.everestre group.com as soon as reasonably practicable after such reports are electronically filed with
the SEC.
ITEM 1A. RISK FACTORS
In addition to the other information provided in this report, the following risk factors should be considered when
evaluating an investment in our securities. If the circumstances contemplated by the individual risk factors
materialize, our business, financial condition and results of operations could be materially and adversely affected
and our ability to service our debt, our debt ratings and our ability to issue new debt could decline significantly.
RISKS RELATING TO OUR BUSINESS
Our results could be adversely affected by catastrophic events.
We are exposed to unpredictable catastrophic events, including weather -related and other natural catastrophes,
as well as acts of terrorism. The frequency and/or severity of catastrophic events may be impacted in the future by
the continued effects of climate change. Any material reduction in our operating results caused by the occurrence
of one or more catastrophes could inhibit our ability to pay dividends or to meet our interest and principal
payment obligations. By way of illustration, during the past five calendar years, pre -tax catastrophe losses, net of
reinsurance, were as follows:
Calendar year:
Pre-tax net catastrophe losses
(Dollars in millions)
2022
$
984
2021
940
2020
397
2019
574
2018
1,713
Our losses from future catastrophic events could exceed our projections.
We use projections of possible losses from future catastrophic events of varying types and magnitudes as a
strategic underwriting tool. We use these loss projections to estimate our potential catastrophe losses in certain
geographic areas and decide on the placement of retrocessional coverage or other actions to limit the extent of
potential losses in a given geographic area. These loss projections are approximations, reliant on a mix of
quantitative and qualitative processes, and actual losses may exceed the projections by a material amount,
resulting in a material adverse effect on our financial condition and results of operations.
If our loss reserves are inadequate to meet our actual losses, our net income would be reduced or we could incur a
loss.
We are required to maintain reserves to cover our estimated ultimate liability of losses and loss adjustment
expenses (“LAE”) for both reported and unreported claims incurred. These reserves are only estimates of what we
believe the settlement and administration of claims will cost based on facts and circumstances known to us. In
setting reserves for our reinsurance liabilities, we rely on claim data supplied by our ceding companies and brokers
and we employ actuarial and statistical projections. The information received from our ceding companies is not
always timely or accurate, which can contribute to inaccuracies in our loss projections. Because of the
uncertainties that surround our estimates of loss and LAE reserves, we cannot be certain that ultimate losses and
LAE payments will not exceed our estimates. If our reserves are deficient, we would be required to increase loss
8
reserves in the period in which such deficiencies are identified which would cause a charge to our earnings and a
reduction of capital. During the past five calendar years, the reserve re-estimation process resulted in a decrease
to our pre-tax net income in all five years:
Calendar year:
Effect on pre-tax net income
(Dollars in millions)
2022
$
8
decrease
2021
5
decrease
2020
200
decrease
2019
44
decrease
2018
559
decrease
The difficulty in estimating our reserves is significantly more challenging as it relates to reserving for potential
asbestos and environmental (“A&E”) liabilities. At December 31, 2022, 1.9% of our gross reserves were comprised
of A&E reserves. A&E liabilities are especially hard to estimate for many reasons, including the long delays
between exposure and manifestation of any bodily injury or property damage, difficulty in identifying the source of
the asbestos or environmental contamination, long reporting delays and difficulty in properly allocating liability for
the asbestos or environmental damage. Legal tactics and judicial and legislative developments affecting the scope
of insurers’ liability, which can be difficult to predict, also contribute to uncertainties in estimating reserves for
A&E liabilities.
The failure to accurately assess underwriting risk and establish adequate premium rates could reduce our net
income or result in a net loss.
Our success depends on our ability to accurately assess the risks associated with the businesses on which the risk is
retained. If we fail to accurately assess the risks we retain, we may fail to establish adequate premium rates to
cover our losses and LAE. This could reduce our net income and even result in a net loss.
In addition, losses may arise from events or exposures that are not anticipated when the coverage is priced. In
addition to unanticipated events, we also face the unanticipated expansion of our exposures, particularly in long-
tail liability lines. An example of this is the expansion over time of the scope of insurers’ legal liability within the
mass tort arena, particularly for A&E exposures discussed above.
Decreases in pricing for property and casualty reinsurance and insurance could reduce our net income.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. These cycles, as well as other factors that influence aggregate supply and demand for property and
casualty insurance and reinsurance products, are outside of our control. The supply of (re)insurance is driven by
prevailing prices and levels of capacity that may fluctuate in response to a number of factors including large
catastrophic losses and investment returns being realized in the insurance industry. Demand for (re)insurance is
influenced by underwriting results of insurers and insureds, including catastrophe losses, and prevailing general
economic conditions. If any of these factors were to result in a decline in the demand for (re)insurance or an
overall increase in (re)insurance capacity, our net income could decrease.
If rating agencies downgrade the ratings of our insurance subsidiaries, future prospects for growth and profitability
could be significantly and adversely affected.
Our active insurance company subsidiaries currently hold financial strength ratings assigned by third-party rating
agencies which assess and rate the claims paying ability and financial strength of insurers and reinsurers. Financial
strength ratings are used by cedents, agents and brokers to assess the financial strength and credit quality of
reinsurers and insurers. A downgrade or withdrawal of any of these ratings could adversely affect our ability to
market our reinsurance and insurance products, our ability to compete with other reinsurers and insurers, and
9
could have a material and adverse effect on our ability to write new business that in turn could impact our
profitability and operating results. In December 2021, S&P announced proposed changes to its rating
methodologies. The proposed changes have not been finalized, so the impact, if any, that these changes may have
on our financial strength ratings is unknown.
Consistent with market practice, much of our treaty reinsurance business allows the ceding company to terminate
the contract or seek collateralization of our obligations in the event of a rating downgrade below a certain
threshold. The termination provision would generally be triggered if a rating fell below A.M. Best’s A- rating level.
To a lesser extent, Everest Re also has modest exposure to reinsurance contracts that contain provisions for
obligatory funding of outstanding liabilities in the event of a rating agency downgrade. Those provisions would also
generally be triggered if Everest Re’s rating fell below A.M. Best’s A- rating level.
The failure of our insureds, intermediaries and reinsurers to satisfy their obligations to us could reduce our income.
In accordance with industry practice, we have uncollateralized receivables from insureds, agents and brokers
and/or rely on agents and brokers to process our payments. We may not be able to collect amounts due from
insureds, agents and brokers, resulting in a reduction to net income.
We are subject to credit risk of reinsurers in connection with retrocessional arrangements because the transfer of
risk to a reinsurer does not relieve us of our liability to the insured. In addition, reinsurers may be unwilling to pay
us even though they are able to do so. The failure of one or more of our reinsurers to honor their obligations to us
in a timely fashion would impact our cash flow and reduce our net income and could cause us to incur a significant
loss.
If we are unable or choose not to purchase reinsurance and transfer risk to the reinsurance markets, our net income
could be reduced or we could incur a net loss in the event of unusual loss experience.
We are generally less reliant on the purchase of reinsurance than many of our competitors, in part because of our
strategic emphasis on underwriting discipline and management of the cycles inherent in our business. We try to
separate our risk taking process from our risk mitigation process in order to avoid developing too great a reliance
on reinsurance. With the expansion of the capital markets into insurance linked financial instruments, we
increased our use of capital market products for catastrophe reinsurance. In addition, we have increased some of
our quota share contracts with larger retrocessions. The percentage of business that we reinsure may vary
considerably from year to year, depending on our view of the relationship between cost and expected benefit for
the contract period.
Percentage of ceded written premiums to gross written premiums
2022
2021
2020
2019
2018
Unaffiliated
13.2
%
14.3
%
14.9
%
16.7
%
14.7
%
Affiliated
3.8
%
4.9
%
1.7
%
1.4
%
8.7
%
Our industry is highly competitive and we may not be able to compete as successfully in the future.
Our industry is highly competitive and subject to pricing cycles that can be pronounced. We compete globally in
the United States, international reinsurance and insurance markets with numerous competitors. Our competitors
include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide
insurance companies, reinsurance departments of certain insurance companies and domestic and international
underwriting operations, including underwriting syndicates at Lloyd’s of London.
According to S&P, Group ranks among the top ten global reinsurance groups, where more than two-thirds of the
market share is concentrated. The worldwide net premium written by the Top 40 global reinsurance groups, for
both life and non-life business, was estimated to be $274 billion in 2020 according to data compiled by S&P. In
10
addition to competitors, the entry of alternative capital market products and vehicles provide additional sources of
reinsurance and insurance capacity.
We are dependent on our key personnel.
Our success has been, and will continue to be, dependent on our ability to retain the services of our existing key
executives and other key employees, and to attract and retain additional qualified personnel in the future. The loss
of the services of any key executive officer or the inability to hire and retain other highly qualified personnel in the
future, particularly those experienced in the property and casualty industry, could adversely affect our ability to
conduct business.
Our investment values and investment income could decline because they are exposed to interest rate, credit and
market risks.
A significant portion of our investment portfolio consists of fixed income securities and smaller portions consist of
equity securities and other investments. Both the fair value of our invested assets and associated investment
income fluctuate depending on general economic and market conditions. For example, the fair value of our
predominant fixed income portfolio generally increases or decreases inversely to fluctuations in interest rates. The
fair value of our fixed income securities could also decrease as a result of a downturn in the business cycle that
causes the credit quality of such securities to deteriorate. The net investment income that we realize from future
investments in fixed income securities will generally increase or decrease with interest rates.
Interest rate fluctuations also can cause net investment income from fixed income investments that carry
prepayment risk, such as mortgage-backed and other asset-backed securities, to differ from the income
anticipated from those securities at the time of purchase. In addition, if issuers of individual investments are
unable to meet their obligations, investment income will be reduced and realized capital losses may arise.
The majority of our fixed income securities are classified as available for sale and temporary changes in the fair
value of these investments are reflected as changes to our stockholder’s equity. Our actively managed equity
security portfolios are fair valued and any changes in fair value are reflected as net realized capital gains or losses.
As a result, a decline in the value of our securities reduces our capital or could cause us to incur a loss.
As a part of our ongoing analysis of our investment portfolio, we are required to assess current expected credit
losses for all held-to-maturity securities and evaluate expected credit losses for available -for-sale securities when
fair value is below amortized cost, which considers reasonable and supportable forecasts of future economic
conditions in addition to information about past events and current conditions. This analysis requires a high degree
of judgment. Financial assets with similar risk characteristics and relevant historical loss information are included in
the development of an estimate of expected lifetime losses. Declines in relevant stock and other financial markets
and other factors impacting the value of our investments could result in an adverse effect on our net income and
other financial results.
We have invested a portion of our investment portfolio in equity securities. The value of these assets fluctuates
with changes in the markets. In times of economic weakness, the fair value of these assets may decline, and may
negatively impact net income. We also invest in non-traditional investments which have different risk
characteristics than traditional fixed income and equity securities. These alternative investments are comprised
primarily of private equity limited partnerships. The changes in value and investment income/(loss) for these
partnerships may be more volatile than over-the-counter securities.
Prolonged and severe disruptions in the overall public and private debt and equity markets, such as occurred in
early 2020 related to the COVID-19 pandemic, could result in significant realized and unrealized losses in our
investment portfolio. There could also be disruption in individual market sectors, such as occurred in the energy
sector in recent years. Such declines in the financial markets could result in significant realized and unrealized
11
losses on investments and could have a material adverse impact on our results of operations, equity, business and
insurer financial strength and debt ratings.
We may experience foreign currency exchange losses that reduce our net income and capital levels.
Through our international operations, we conduct business in a variety of foreign (non-U.S.) currencies, principally
the Canadian dollar and the Singapore dollar. Assets, liabilities, revenues and expenses denominated in foreign
currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and
exchange rate fluctuations, especially relative to the U.S. dollar, may materially impact our results and financial
position. In 2022, we wrote approximately 15.2% of our coverages in non-U.S. currencies; as of December 31,
2022, we maintained approximately 8.8% of our investment portfolio in investments denominated in non-U.S.
currencies. During 2022, 2021 and 2020, the impact on our quarterly pre-tax net income from exchange rate
fluctuations ranged from a loss of $11 million to a gain of $11 million.
We are subject to cybersecurity risks that could negatively impact our business operations.
We are dependent upon our information technology platform, including our processing systems, data and
electronic transmissions in our business operations. Security breaches could expose us to the loss or misuse of our
information, litigation and potential liability. In addition, cyber incidents that impact the availability, reliability,
speed, accuracy or other proper functioning of these systems could have a significant negative impact on our
operations and possibly our results. An incident could also result in a violation of applicable privacy and other
laws, damage our reputation, cause a loss of customers or give rise to monetary fines and other penalties, which
could be significant. Management is not aware of a cybersecurity incident that has had a material impact on our
operations.
The NAIC has adopted an Insurance Data Security Model Law, which, when adopted by the states will require
insurers, insurance producers and other entities required to be licensed under state insurance laws to comply with
certain requirements under state insurance laws, such as developing and maintaining a written information
security program, conducting risk assessments and overseeing the data security practices of third -party vendors.
In addition, certain state insurance regulators are developing or have developed regulations that may impose
regulatory requirements relating to cybersecurity on insurance and reinsurance companies (potentially including
insurance and reinsurance companies that are not domiciled, but are licensed, in the relevant state). For example,
the New York State Department of Financial Services has a regulation pertaining to cybersecurity for all banking
and insurance entities under its jurisdiction, which was effective as of March 1, 2017, which applies to us. We
cannot predict the impact these laws and regulations will have on our business, financial condition or results of
operations, but our insurance and reinsurance companies could incur additional costs resulting from compliance
with such laws and regulations.
RISKS RELATING TO REGULATION
Insurance laws and regulations restrict our ability to operate and any failure to comply with those laws and
regulations could have a material adverse effect on our business.
We are subject to extensive and increasing regulation under U.S., state and foreign insurance laws. These laws
limit the amount of dividends that can be paid to us by our operating subsidiaries, impose restrictions on the
amount and type of investments that we can hold, prescribe solvency, accounting and internal control standards
that must be met and maintained and require us to maintain reserves. These laws also require disclosure of
material inter-affiliate transactions and require prior approval of “extraordinary” transactions. Such
“extraordinary” transactions include declaring dividends from operating subsidiaries that exceed statutory
thresholds. These laws also generally require approval of changes of control of insurance companies. The
application of these laws could affect our liquidity and ability to pay dividends, interest and other payments on
securities, as applicable, and could restrict our ability to expand our business operations through acquisitions of
new insurance subsidiaries. We may not have or maintain all required licenses and approvals or fully comply with
12
the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and
regulations. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory
requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on
some or all of our activities or monetarily penalize us. These types of actions could have a material adverse effect
on our business. To date, no material fine, penalty or restriction has been imposed on us for failure to comply with
any insurance law or regulation.
As a result of the previous dislocation of the financial markets, Congress and the previous Presidential
administration in the United States implemented changes in the way the financial services industry is regulated.
Some of these changes are also impacting the insurance industry. For example, the U.S. Treasury established the
Federal Insurance Office with the authority to monitor all aspects of the insurance sector, monitor the extent to
which traditionally underserved communities and consumers have access to affordable non-health insurance
products, to represent the United States on prudential aspects of international insurance matters, to assist with
administration of the Terrorism Risk Insurance Program and to advise on important national and international
insurance matters. In addition, several European regulatory bodies are in process of updating existing or
developing new capital adequacy directives for insurers and reinsurers. The future impact of such initiatives or
new initiatives from the current Government Administration, if any, on our operation, net income (loss) or
financial condition cannot be determined at this time.
RISK RELATING TO OUR SECURITIES
Because of our holding company structure, our ability to pay dividends, interest and principal is dependent on our
receipt of dividends, loan payments and other funds from our subsidiaries.
We are a holding company, whose most significant asset consists of the stock of our operating subsidiaries. As a
result, our ability to pay dividends, interest or other payments on our securities in the future will depend on the
earnings and cash flows of the operating subsidiaries and the ability of the subsidiaries to pay dividends or to
advance or repay funds to us. This ability is subject to general economic, financial, competitive, regulatory and
other factors beyond our control. Payment of dividends and advances and repayments from some of the operating
subsidiaries are regulated by U.S., state and foreign insurance laws and regulatory restrictions, including minimum
solvency and liquidity thresholds. Accordingly, the operating subsidiaries may not be able to pay dividends or
advance or repay funds to us in the future, which could prevent us from paying dividends, interest or other
payments on our securities.
RISK RELATING TO TAXATION
If U.S. tax law changes, our net income may be impacted.
The 2017 TCJA addressed what some members of Congress had expressed concern about for several years, which
was U.S. corporations moving their place of incorporation to low-tax jurisdictions to obtain a competitive
advantage over domestic corporations that are subject to the U.S. corporate income tax rate of 21%. Specifically, it
addressed their concern over a perceived competitive advantage that foreign-controlled insurers and reinsurers
may have had over U.S. controlled insurers and reinsurers resulting from the purchase of reinsurance by U.S.
insurers from affiliates operating in some foreign jurisdictions, including Bermuda. Such affiliated reinsurance
transactions may subject the U.S. ceding companies to a Base Erosion and Anti-abuse Tax (“BEAT”) of 10% from
2019 to 2025 and 12.5% thereafter which may exceed its regular income tax. In addition, new legislation as well as
proposed and final regulations may further limit the ability of the Company to execute alternative capital balancing
transactions with unrelated parties. This would further impact our net income and effective tax rate.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions
of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase
excise tax and do not expect the legislation to have a material impact on our results of operations. As the IRS issues
additional guidance, we will evaluate any impact to our consolidated financial statements.
13
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Everest Re’s corporate offices are located in approximately 321,500 square feet of leased office space in Warren,
New Jersey. The Company’s other 18 locations occupy a total of approximately 226,500 square feet, all of which
are leased.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal
dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under
insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its rights under an
agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect
funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both
informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the
Company believes that its positions are legally and commercially reasonable. The Company considers the statuses
of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a
party to any other material litigation or arbitration.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information and Holder of Common Stock.
As of December 31, 2022, all of the Company’s common stock was owned by Holdings Ireland and was not publicly
traded.
Dividend History and Restrictions.
The Company did not pay any dividend s in 2022, 2021 and 2020. The declaration and payment of future dividends,
if any, by the Company will be at the discretion of the Board of Directors and will depend upon many factors,
including the Company’s earnings, financial condition, business needs and growth objectives, capital and surplus
requirements of its operating subsidiaries, regulatory restrictions, rating agency considerations and other factors.
As an insurance holding company, the Company is dependent on dividends and other permitted payments from its
subsidiaries to pay cash dividends to its stockholder. The payment of dividends to Holdings by Everest Re is subject
to limitations imposed by Delaware law. Generally, Everest Re may only pay dividends out of its statutory earned
surplus, which was $5.6 billion at December 31, 2022, and only after it has given 10 days prior notice to the
Delaware Insurance Commissioner. During this 10-day period, the Commissioner may, by order, limit or disallow
the payment of ordinary dividends if the Commissioner finds the insurer to be presently or potentially in financial
distress. Further, the maximum amount of dividends that may be paid without the prior approval of the Delaware
Insurance Commissioner in any twelve month period is the greater of (1) 10% of an insurer’s statutory surplus as of
the end of the prior calendar year or (2) the insurer’s statutory net income, not including realized capital gains, for
14
the prior calendar year. The maximum amount that is available for the payment of dividends by Everest Re in 2023
without prior regulatory approval is $555 million.
Recent Sales of Unregistered Securities.
None.
ITEM 6. SELECTED FINANCIAL DATA
Information for Item 6 is not required pursuant to General Instruction I(2) of Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following is a discussion and analysis of our results of operations and financial condition. It should be read in
conjunction with the Consolidated Financial Statements and accompanying notes thereto presented under ITEM 8,
“Financial Statements and Supplementary Data”.
Industry Conditions.
The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and
market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and
stronger profits followed by periods of abundant capacity, lower rates and constrained profitability. Competition
in the types of reinsurance and insurance business that we underwrite is based on many factors, including the
perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by A.M. Best
and/or Standard & Poor’s, 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, and certain government sponsored risk transfer vehicles. Some of
these competitors have greater financial resources than we do and have established long-term and continuing
business relationships, which can be a significant competitive advantage. In addition, the lack of strong barriers to
entry into the reinsurance business and the securitization of reinsurance and insurance risks through capital
markets provide additional sources of potential reinsurance and insurance capacity and competition.
Worldwide insurance and reinsurance market conditions historically have been competitive. Generally, there is
ample insurance and reinsurance capacity relative to demand, as well as, additional capital from the capital
markets through insurance linked financial instruments. These financial instruments such as side cars, catastrophe
bonds and collateralized reinsurance funds, provided capital markets with access to insurance and reinsurance risk
exposure. The capital markets demand for these products is primarily driven by the desire to achieve greater risk
diversification and potentially higher returns on their investments. This competition generally has a negative
impact on rates, terms and conditions; however, the impact varies widely by market and coverage. Based on
recent competitive behaviors in the insurance and reinsurance industry, natural catastrophe events and the
macroeconomic backdrop, there has been some dislocation in the market which we expect to have a positive
impact on rates and terms and conditions generally, though local market specificities can vary.
The increased frequency of catastrophe losses experienced throughout 2022 appears to be pressuring the increase
of rates. As business activity continues to regain strength after the pandemic and current macroeconomic
15
uncertainty, rates also appear to be firming in most lines of business, particularly in the casualty lines that had
seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines are
experiencing modest rate increase, while some lines such as workers’ compensation were experiencing softer
market conditions. It is too early to tell what the impact on pricing conditions will be but it is likely to change
depending on the line of business and geography.
Our capital position remains a source of strength, with high quality invested assets, significant liquidity and a low
operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography
is resilient.
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses located
in the Russian Federation and/or owned by Russian nationals by numerous countries, including the United States.
The significant political and economic uncertainty surrounding the war and associated sanctions have impacted
economic and investment markets both within Russia and around the world. The Company has recorded $25
million of losses related to the Ukraine /Russia war during 2022.
16
Financial Summary.
We monitor and evaluate our overall performance based upon financial results. The following table displays a
summary of the consolidated net income (loss), ratios and stockholder’s equity for the periods indicated:
Years Ended December 31,
Percentage Increase/(Decrease)
(Dollars in millions)
2022
2021
2020
2022/2021
2021/2020
Gross written premiums
$
9,677
$
9,331
$
7,957
3.7%
17.3%
Net written premiums
8,032
7,719
6,639
4.0%
16.3%
REVENUES:
Premiums earned
$
7,876
$
7,179
$
6,407
9.7%
12.1%
Net investment income
638
745
376
-14.3%
98.2%
Net gains (losses) on investments
(982)
501
50
NM
NM
Other income (expense)
(6)
23
(15)
-123.7%
NM
Total revenues
7,526
8,448
6,818
-10.9%
23.9%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
5,823
5,387
4,608
8.1%
16.9%
Commission, brokerage, taxes and fees
1,632
1,513
1,373
7.9%
10.1%
Other underwriting expenses
501
454
401
10.5%
13.2%
Corporate expense
26
33
16
-22.9%
108.5%
Interest, fee and bond issue cost amortization
expense
101
70
36
44.3%
96.2%
Total claims and expenses
8,083
7,457
6,434
8.4%
15.9%
INCOME (LOSS) BEFORE TAXES
(557)
991
384
-156.1%
158.5%
Income tax expense (benefit)
(112)
192
32
-158.4%
NM
NET INCOME (LOSS)
$
(445)
$
800
$
352
-155.6%
127.3%
RATIOS:
Point Change
Loss ratio
73.9%
75.0%
71.9%
(1.1)
3.1
Commission and brokerage ratio
20.7%
21.1%
21.4%
(0.4)
(0.3)
Other underwriting expense ratio
6.4%
6.3%
6.3%
0.1
-
Combined ratio
101.0%
102.4%
99.6%
(1.4)
2.8
At December 31,
Percentage Increase/ (Decrease)
(Dollars in millions)
2022
2021
2020
2022/2021
2021/2020
Balance sheet data:
Total investments and cash
$
19,195
$
19,719
$
15,910
-2.7%
23.9%
Total assets
27,957
27,695
23,640
0.9%
17.2%
Loss and loss adjustment expense reserves
14,977
13,121
11,578
14.1%
13.3%
Total debt
3,084
3,089
1,910
-0.2%
61.7%
Total liabilities
22,303
20,657
17,226
8.0%
19.9%
Stockholder's equity
5,654
7,038
6,414
-19.7%
9.7%
(Some amounts may not reconcile due to rounding)
(NM, not meaningful)
Revenues.
Premiums. Gross written premiums increased by 3.7% to $9.7 billion in 2022, compared to $9.3 billion in 2021,
reflecting a $426 million, or 12.9%, increase in our insurance business and an $81 million, or 1.3%, decrease in our
17
reinsurance business. The increase in insurance premiums reflects growth across most lines of business,
particularly specialty casualty business and property/short tail business, driven by positive rate and exposure
increases, new business and strong renewal retention. The decrease in reinsurance premiums was mainly due to a
decline in property pro rata business. Net written premiums increased by 4.0% to $8.0 billion in 2022, compared to
$7.7 billion in 2021 which is consistent with the change in gross written premiums. Premiums earned increased by
9.7% to $7.9 billion in 2022, compared to $7.2 billion in 2021. The change in premiums earned relative to net
written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written
premiums are recorded at the initiation of the coverage period.
Other Income (Expense). We recorded other expense of $6 million and other income of $23 million in 2022 and
2021, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates.
Claims and Expenses.
Incurred Losses and Loss Adjustment Expenses. The following table presents our incurred losses and loss
adjustment expenses (“LAE”) for the periods indicated.
Total
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional (a)
$
4,828
61.3%
$
11
0.1%
$
4,839
61.4%
Catastrophes
987
12.5%
(4)
—%
983
12.5%
Total
$
5,815
73.8%
$
7
0.1%
$
5,823
73.9%
2021
Attritional (a)
$
4,439
61.8%
$
8
0.1%
$
4,447
61.9%
Catastrophes
943
13.1%
(3)
0.0%
940
13.1%
Total
$
5,382
74.9%
$
5
0.1%
$
5,387
75.0%
2020
Attritional (a)
$
3,997
62.4%
$
214
3.3%
$
4,211
65.7%
Catastrophes
411
6.4%
(13)
-0.2%
397
6.2%
Total
$
4,408
68.8%
$
200
3.1%
$
4,608
71.9%
Variance 2022/2021
Attritional (a)
$
389
(0.5)
pts
$
3
—
pts
$
392
(0.5)
pts
Catastrophes
44
(0.6)
pts
(1)
—
pts
43
(0.6)
pts
Total
$
433
(1.1)
pts
$
2
—
pts
$
436
(1.1)
pts
Variance 2021/2020
Attritional (a)
$
442
(0.6)
pts
$
(206)
(3.2)
pts
$
236
(3.8)
pts
Catastrophes
532
6.7
pts
10
0.2
pts
543
6.9
pts
Total
$
974
6.1
pts
$
(195)
(3.0)
pts
$
779
3.1
pts
(a) Attritional losses exclude catastrophe losses.
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 8.1% to $5.8 billion in 2022 compared to $5.4 billion in 2021, primarily due to
an increase of $389 million in current year attritional losses and an increase of $44 million in current year
catastrophe losses. The increase in current year attritional losses was mainly related to the impact of the increase
in premiums earned and $25 million of attritional losses incurred due to the Ukraine/Russia war. The current year
18
catastrophe losses of $987 million in 2022 related primarily to Hurricane Ian ($768 million), the 2022 Australia
floods ($75 million), the 2022 South Africa flood ($43 million), Hurricane Fiona ($27 million), and the 2022 Canada
derecho ($20 million), with the remaining losses resulting from various storm events. The current year catastrophe
losses of $943 million in 2021 primarily related to Hurricane Ida ($423 million), the Texas winter storms ($288
million), the European floods ($108 million), the Canada drought loss ($80 million) and the Quad State Tornadoes
($42 million), with the rest of the losses emanating from the 2021 Australia floods.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased to $1.6 billion in 2022
compared to $1.5 billion in 2021. The increase was mainly due to increases in premiums earned and changes in the
mix of business.
Other Underwriting Expenses. Other underwriting expenses were $501 million and $454 million in 2022 and 2021,
respectively. The increase in other underwriting expenses was mainly due to the continued build out of our
insurance operations, including an expansion of the international insurance platform.
Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to
segments, were $26 million and $33 million for the years ended December 31, 2022 and 2021, respectively. The
decrease from 2021 to 2022 was mainly due to a decrease in variable incentive compensation.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense
were $101 million and $70 million in 2022 and 2021, respectively. The increase in interest expense was primarily
due to the issuance of $1.0 billion of senior notes in October 2021. Interest expense was also impacted by the
movements in the floating interest rate related to the long-term subordinated notes, which is reset quarterly per
the note agreement. The floating rate was 6.99% as of December 31, 2022 compared to 2.54% as of December 31,
2021.
Income Tax Expense (Benefit). The Company had an income tax benefit of $112 million and income tax expense of
$192 million in 2022 and 2021, respectively. Variations in income taxes generally result from changes in the
relative levels of pre-tax income, including the impact of catastrophe losses and net gains (losses) on investments
as well as changes in tax exempt investment income and creditable foreign taxes. The change from income tax
expense to income tax benefit resulted primarily from increased fair value and capital losses as well as an increase
in catastrophe losses.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, provided that U.S.
companies could carryback for five years net operating losses incurred in 2018, 2019 and/or 2020. This beneficial
tax provision in the CARES Act enabled the Company to carryback its significant 2018 net operating losses to prior
tax years with higher effective tax rates of 35% versus 21% in 2018 and later years. As a result, the Company was
able to record a net income tax benefit from the five-year carryback of $33 million and obtain federal income tax
cash refunds of $183 million including interest in 2020.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions
of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase
excise tax and do not expect the legislation to have a material impact on our results of operations. As the IRS issues
additional guidance, we will evaluate any impact to our consolidated financial statements.
Net Income (Loss).
Our net loss was $445 million and net income was $800 million in 2022 and 20 21, respectively . The change was
primarily driven by the consolidated investment results explained below.
Ratios.
Our combined ratio decreased by 1.4 points to 101.0% in 2022 compared to 102.4% in 2021. The loss ratio
component decreased by 1.1 points in 2022 over the same period last year. The decline in the ratio was mainly due
to lower loss experience. Although both current year attritional and current year catastrophe losses were higher in
19
2022 than 2021, the rate of increase in the current year losses was lower than the rate of increase in earned
premiums resulting in a reduction of the overall loss ratio. The commission and brokerage ratio component
decreased to 20.7% in 2022 compared to 21.1% in 2021, reflecting changes in affiliated reinsurance agreements
and changes in the mix of business. The other underwriting expense ratio slightly increased to 6.4% in 2022 from
6.3% in 2021. The increase was mainly due to higher insurance operations costs.
Stockholder's Equity.
Stockholder’s equity decreased by $1.4 billion to $5.7 billion at December 31, 2022 from $7.0 billion at December
31, 2021, principally as a result of $445 million of net loss, $938 million of net unrealized depreciation on
investments, net of tax and $18 million of net foreign currency translation adjustments, partially offset by $17
million of net benefit plan obligation adjustments .
Consolidated Investment Results
Net Investment Income.
Net investment income decreased by 14.3% to $638 million in 2022 compared to $745 million in 2021. The
decrease was primarily the result of a decline of $249 million in limited partnership income, partially offset by an
additional $166 million of income from fixed maturity investments. The limited partnership income primarily
reflects decreases in their reported net asset values. As such, until these asset values are monetized and the
resultant income is distributed, they are subject to future increases or decreases in the asset value, and the results
may be volatile.
The following table shows the components of net investment income for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturities
$
510
$
344
$
305
Equity securities
16
15
11
Short-term investments and cash
16
1
3
Other invested assets
Limited partnerships
72
321
49
Dividends from preferred shares of affiliate
31
31
31
Other
30
63
2
Gross investment income before adjustments
675
775
401
Funds held interest income (expense)
6
8
6
Interest income from Parent
11
6
5
Gross investment income
691
788
412
Investment expenses
(52)
(43)
(36)
Net investment income
$
638
$
745
$
376
(Some amounts may not reconcile due to rounding.)
The following table shows a comparison of various investment yields for the periods indicated:
2022
2021
2020
Annualized pre-tax yield on average cash and invested assets
3.3
%
4.4
%
2.8
%
Annualized after-tax yield on average cash and invested assets
2.6
%
3.5
%
2.3
%
20
Net Gains (Losses) on Investments.
The following table presents the composition of our net gains (losses) on investments for the periods indicated:
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities, available for sale
Gains
$
9
$
33
$
24
$
(24)
$
9
Losses
(88)
(25)
(60)
(63)
35
Total
(79)
8
(36)
(87)
44
Equity securities
Gains
165
39
37
126
2
Losses
(48)
(15)
(45)
(33)
30
Total
117
24
(8)
93
32
Other invested assets
Gains
18
10
8
8
2
Losses
(5)
(4)
(6)
(1)
2
Total
13
6
2
7
4
Short Term Investments:
Gains
—
—
1
—
(1)
Losses
—
—
—
—
—
Total
—
—
1
—
(1)
Total net realized gains (losses) from dispositions
Gains
192
82
70
110
11
Losses
(141)
(43)
(111)
(98)
68
Total
51
39
(41)
12
79
Allowances for credit losses:
(27)
(26)
(2)
(1)
(24)
Gains (losses) from fair value adjustments:
Fixed maturities
—
—
2
—
(2)
Equity securities
(447)
254
276
(701)
(22)
Other invested assets
(559)
234
(186)
(793)
420
Total
(1,006)
488
92
(1,494)
396
Total net gains (losses) on investments
$
(982)
$
501
$
50
$
(1,483)
$
451
(Some amounts may not reconcile due to rounding.)
21
Net gains (losses) on investments during 2022 primarily relate to net losses from fair value adjustments on equity
securities of $447 million as a result of equity market declines in 2022, net losses of $559 million from fair value
adjustments on other invested assets, $51 million of net realized gains from disposition of investments and
$27 million of credit allowances on fixed maturity securities.
Segment Results.
The Company manages its reinsurance and insurance operations as autonomous units and key strategic decisions
are based on the aggregate operating results and projections for these segments of business.
The Reinsurance operation writes risks on a worldwide basis in 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 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.
These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk
management, control of aggregate catastrophe exposures, capital, investments and support operations.
Management generally monitors and evaluates the financial performance of these operating segments based upon
their underwriting results.
Underwriting results include earned premium less losses and LAE incurred, commission and brokerage expenses
and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission
and brokerage and other underwriting expense ratios, which respectively, divide incurred losses, commissions and
brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the
Company does not review and evaluate the financial results of its operating segments based upon balance sheet
data.
Our loss and LAE reserves are management’s best estimate of our ultimate liability for unpaid claims. We re-
evaluate our estimates on an ongoing basis, including all prior period reserves, taking into consideration all
available information and, in particular, recently reported loss claim experience and trends related to prior
periods. Such re-evaluations are recorded in incurred losses in the period in which 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:
22
Reinsurance.
The following table presents the underwriting results and ratios for the Reinsurance segment for the periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
5,948
$
6,028
$
5,266
$
(80)
(1.3)%
$
763
14.5%
Net written premiums
5,269
5,265
4,632
4
0.1%
632
13.7%
Premiums earned
$
5,212
$
4,949
$
4,485
$
263
5.3%
$
464
10.3%
Incurred losses and LAE
3,957
3,761
3,209
196
5.2%
552
17.2%
Commission and brokerage
1,326
1,250
1,120
76
6.1%
130
11.6%
Other underwriting expenses
139
143
119
(4)
(3.1)%
24
19.9%
Underwriting gain (loss)
$
(210)
$
(206)
$
36
$
(5)
2.2%
$
(242)
NM
Point Chg
Point Chg
Loss ratio
75.9%
76.0%
71.6%
(0.1)
4.4
Commission and brokerage ratio
25.4%
25.3%
25.0%
0.1
0.3
Other underwriting expense
ratio
2.7%
2.9%
2.6%
(0.2)
0.3
Combined ratio
104.0%
104.2%
99.2%
(0.2)
5.0
(Some amounts may not reconcile due to rounding)
Premiums. Gross written premiums decreased by 1.3% to $5.9 billion in 2022 from $6.0 billion in 2021, primarily
due to a decline in property pro rata business. Net written premiums remained flat at $5.3 billion in 2022 and
2021. The difference in the percentage change in gross written premiums compared to the percentage change in
net written premiums was primarily due to the reduction in business ceded to the segregated accounts of Mt.
Logan Re during 2022 compared to 2021. Premiums earned increased 5.3% to $5.2 billion in 2022 compared to
$4.9 billion in 2021. The change in premiums earned relative to net written premiums is the result of timing;
premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of
the coverage period.
23
Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Reinsurance segment for
the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
3,115
59.8%
$
(26)
(0.5)%
$
3,089
59.3%
Catastrophes
870
16.7%
(3)
(0.1)%
867
16.6%
Total segment
$
3,985
76.5%
$
(29)
(0.6)%
$
3,957
75.9%
2021
Attritional
$
3,004
60.7%
$
(32)
(0.6)%
$
2,972
60.1%
Catastrophes
792
16.0%
(3)
(0.1)%
789
15.9%
Total segment
$
3,796
76.7%
$
(35)
(0.7)%
$
3,761
76.0%
2020
Attritional
$
2,692
60.0%
$
187
4.2%
$
2,880
64.2%
Catastrophes
343
7.6%
(13)
(0.3)%
330
7.4%
Total segment
$
3,035
67.7%
$
174
3.9%
$
3,209
71.6%
Variance 2022/2021
Attritional
$
111
(0.9)
pts
$
6
0.1
pts
$
117
(0.8)
pts
Catastrophes
78
0.7
pts
—
—
pts
78
0.7
pts
Total segment
$
189
(0.2)
pts
$
6
0.1
pts
$
196
(0.1)
pts
Variance 2021/2020
Attritional
$
312
0.7
pts
$
(219)
(4.8)
pts
$
92
(4.1)
pts
Catastrophes
449
8.4
pts
10
0.2
pts
459
8.5
pts
Total segment
$
761
9.0
pts
$
(209)
(4.6)
pts
$
552
4.4
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses increased by 5.2% to $4.0 billion in 2022 compared to $3.8 billion in 2021. The increase was
primarily due to an increase of $111 million in current year attritional losses and an increase of $78 million in
current year catastrophe losses. The increase in current year attritional losses was primarily related to the impact
of the increase in premiums earned and $25 million of attritional losses incurred due to the Ukraine/Russia war.
The current year catastrophe losses of $870 million in 2022 related primarily to Hurricane Ian ($669 million), the
2022 Australia floods ($75 million), the 2022 South Africa flood ($43 million), Hurricane Fiona ($24 million), and the
2022 Canada derecho ($20 million), with the remaining losses resulting from various storm events. The current
year catastr ophe losses of $792 million in 2021 primarily related to Hurricane Ida ($345 million), the Texas winter
storms ($231 million), the European floods ($108 million), the Canada drought loss ($80 million) and the Quad
State Tornadoes ($27 million), with the rest of the losses emanating from the 2021 Australia floods.
Segment Expenses. Commission and brokerage increased to $1.33 billion in 2022 compared to $1.25 billion in
2021. The increase was due to the impact of the increase in premiums earned and changes in the mix of business.
Segment other underwriting expenses decreased slightly to $139 million in 2022 from $143 million in 2021.
24
Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods
indicated.
Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
3,729
$
3,303
$
2,691
$
426
12.9%
$
611
22.7%
Net written premiums
2,763
2,455
2,006
308
12.5%
448
22.3%
Premiums earned
$
2,664
$
2,230
$
1,922
$
434
19.5%
$
308
16.0%
Incurred losses and LAE
1,865
1,626
1,399
239
14.7%
227
16.2%
Commission and brokerage
306
262
253
44
16.8%
9
3.6%
Other underwriting expenses
363
311
282
52
16.7%
29
10.4%
Underwriting gain (loss)
$
130
$
31
$
(12)
$
99
NM
$
43
NM
Point Chg
Point Chg
Loss ratio
70.0%
72.9%
72.8%
(2.9)
0.1
Commission and brokerage ratio
11.5%
11.8%
13.2%
(0.3)
(1.4)
Other underwriting expense
ratio
13.6%
13.9%
14.6%
(0.3)
(0.7)
Combined ratio
95.1%
98.6%
100.6%
(3.5)
(2.0)
(Some amounts may not reconcile due to rounding)
(NM, not meaningful)
Premiums. Gross written premiums increased by 12.9% to $3.7 billion in 2022 compared to $3.3 billion in 2021.
The increase in insurance premiums reflects growth across most lines of business, particularly specialty casualty
business and property/short tail business, driven by positive rate and exposure increases, new business and strong
renewal retention. Net written premiums increased by 12.5% to $2.8 billion in 2022 compared to $2.5 billion in
2021 which is consistent with the change in gross written premiums. Premiums earned increased 19.5% to $2.7
billion in 2022 compared to $2.2 billion in 2021. The change in premiums earned is the result of timing; premiums
are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the
coverage period.
25
Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Insurance segment for
the periods indicated.
Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,712
64.3%
$
37
1.4%
$
1,749
65.7%
Catastrophes
117
4.4%
(1)
—%
116
4.4%
Total segment
$
1,829
68.7%
$
36
1.4%
$
1,865
70.0%
2021
Attritional
$
1,435
64.4%
$
40
1.8%
$
1,475
66.1%
Catastrophes
151
6.8%
—
—%
151
6.8%
Total segment
$
1,586
71.1%
$
40
1.8%
$
1,626
72.9%
2020
Attritional
$
1,305
67.9%
$
26
1.4%
$
1,331
69.3%
Catastrophes
68
3.5%
—
—%
68
3.5%
Total segment
$
1,373
71.4%
$
26
1.3%
$
1,399
72.8%
Variance 2022/2021
Attritional
$
277
(0.1)
pts
$
(3)
(0.4)
pts
$
274
(0.4)
pts
Catastrophes
(34)
(2.4)
pts
(1)
—
pts
(35)
(2.4)
pts
Total segment
$
243
(2.4)
pts
$
(4)
(0.4)
pts
$
239
(2.9)
pts
Variance 2021/2020
Attritional
$
130
(3.5)
pts
$
14
0.4
pts
$
144
(3.2)
pts
Catastrophes
83
3.3
pts
—
—
pts
83
3.3
pts
Total segment
$
213
(0.3)
pts
$
14
0.5
pts
$
227
0.1
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 14.7% to $1.9 billion in 2022 compared to $1.6 billion in 2021, mainly due to
an increase of $277 million of current year attritional losses, partially offset by a decrease of $34 million in current
year catastrophe losses . The rise in current year attritional losses was primarily due to the impact of the increase in
premiums earned. The current year catastrophe losses of $117 million in 2022 related primarily to Hurricane Ian
($99 million), with the remaining losses resulting from various storm events. The $151 million of current year
catastrophe losses in 2021, primarily related to Hurricane Ida ($78 million), the Texas winter storms ($58 million)
and the Quad State Tornadoes ($15 million).
Segment Expenses. Commission and brokerage increased to $306 million in 2022 compared to $262 million in
2021. Segment other underwriting expenses increased to $363 million in 2022 compared to $311 million in 2021.
The increases were mainly due to the impact of the increases in premiums earned and expenses related to the
continued build out of the insurance business.
SAFE HARBOR DISCLOSURE
This report contains forward -looking statements within the meaning of the U.S. federal securities laws. We intend
these forward -looking statements to be covered by the safe harbor provisions for forward-looking statements in
the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words
such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”, “believe”, “predict”,
26
“potential” and “intend”. Forward-looking statements contained in this report include information regarding our
reserves for losses and LAE, the impact of the TCJA, the adequacy of our provision for uncollectible balances,
estimates of our catastrophe exposure, the effects of catastrophic and pandemic events on our financial
statements and the ability of our subsidiaries to pay dividends. Forward-looking statements only reflect our
expectations and are not guarantees of performance. These statements involve risks, uncertainties and
assumptions. Actual events or results may differ materially from our expectations. Important factors that could
cause our actual events or results to be materially different from our expectations include those discussed under
the caption ITEM 1A, “Risk Factors”. We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Sensitive Instruments.
The SEC’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial
statement disclosure requirements for derivative financial instruments, derivative commodity instruments and
other financial instruments (collectively, “market sensitive instruments”). We do not generally enter into market
sensitive instruments for trading purposes.
Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, fixed
maturity portfolio, while maintaining an adequate level of liquidity. Our mix of 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 securities. Additionally, we have invested in equity securities.
The overall investment strategy considers the scope of present and anticipated Company operations. In particular,
estimates of the financial impact resulting from non-investment asset and liability transactions, together with our
capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated
payout characteristics for which our investments provide liquidity. This analysis is considered in the development
of specific investment strategies for asset allocation, duration and credit quality. The change in overall market
sensitive risk exposure principally reflects the asset changes that took place during the period.
Interest Rate Risk. Our $19.2 billion investment portfolio, at December 31, 2022, is principally comprised of fixed
maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk,
and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The overall
economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the
dollar value of foreign currency denominated liabilities and their associated income statement impact.
Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term
investments, from a change in market interest rates. In a declining interest rate environment, it includes
prepayment risk on the $2.1 billion of mortgage-backed securities in the $13.5 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.
27
The table below displays the potential impact of fair value fluctuations and after-tax unrealized appreciation on
our fixed maturity portfolio (including $812 million of short -term investments) for the period indicated based on
upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities
with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate
appropriate price estimate on mortgage-backed securities, changes in prepayment expectations under different
interest rate environments were taken into account. For legal entities with non-U.S. dollar functional currency, the
effective duration of the involved portfolio of securities was used as a proxy for the fair value change under the
various interest rate change scenarios.
Impact of Interest Rate Shift in Basis Points
At December 31, 2022
(Dollars in millions)
-200
-100
O
100
200
Total Fair Value
$
15,057
$
14,676
$
14,294
$
13,912
$
13,531
Fair Value Change from Base (%)
5.3
%
2.7
%
-
%
-2.7
%
-5.3
%
Change in Unrealized Appreciation
After-tax from Base ($)
$
603
$
302
$
—
$
(302)
$
(603)
Impact of Interest Rate Shift in Basis Points
At December 31, 2021
(Dollars in millions)
-200
-100
O
100
200
Total Fair Value
$
14,300
$
13,928
$
13,556
$
13,185
$
12,813
Fair Value Change from Base (%)
5.5
%
2.7
%
-
%
-2.7
%
-5.5
%
Change in Unrealized Appreciation
After-tax from Base ($)
$
587
$
294
$
—
$
(294)
$
(587)
We had $15.0 billion and $13.1 billion of gross reserves for losses and LAE as of December 31, 2022 and December
31, 2021, respectively. These amounts are recorded at their nominal value, as opposed to present value, which
would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of
time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of
the reserves decreases and, conversely, as interest rates decline, the present value increases. These movements
are the opposite of the interest rate impacts on the fair value of investments. While the difference between
present value and nominal value is not reflected in our financial statements, our financial results will include
investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve
obligations have an expected duration that is reasonably consistent with our fixed income portfolio.
Equity Risk. Equity risk is the potential change in fair 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 value and after-tax change in fair value of a 10% and 20% change in
equity prices up and down for the periods indicated .
Impact of Percentage Change in Equity Fair Values
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
156
$
175
$
194
$
214
$
233
After-tax Change in Fair Value
(31)
(15)
—
15
31
28
Impact of Percentage Change in Equity Fair Values
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
1,406
$
1,582
$
1,758
$
1,934
$
2,109
After-tax Change in Fair Value
(278)
(139)
—
139
278
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”) 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 fair value of available
for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is
reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange
rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a
component of other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar
functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other
comprehensive income.
The tables below display the potential impact of a parallel and immediate 10% and 20% increase and decrease in
foreign exchange rates on the valuation of invested assets subject to foreign currency exposure for the periods
indicated. This analysis includes the after-tax impact of translation from transactional currency to functional
currency as well as the after-tax impact of translation from functional currency to the U.S. dollar reporting
currency.
Change in Foreign Exchange Rates in Percent
At December 31, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax Foreign Exchange Exposure
$
(157)
$
(79)
$
—
$
79
$
157
Change in Foreign Exchange Rates in Percent
At December 31, 2021
(Dollars in millions)
-20%
-10%
0%
10%
20%
Total After-tax Foreign Exchange Exposure
$
(190)
$
(95)
$
—
$
95
$
190
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules on
page F-1 are filed as part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
29
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), our management,
including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this annual rep ort.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial
reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our financial statements for external purposes in
accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31,
2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in
Internal Control – Integrated Framework
concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on those
criteria.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s internal controls are not subject to attestation
by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission
that permit the Company to provide only management’s report in this annual report due to the Company’s status
as a non-accelerated filer.
Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and
Chief Financial Officer, has evaluated our internal control over financial reporting to determine whether any
changes occurred during the fourth fiscal quarter covered by this annual report that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation,
there has been no such change during the fourth quarter.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
30
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information for Item 10 is not required pursuant to General Instruction I(2) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information for Item 11 is not required pursuant to General Instruction I(2) of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information for Item 12 is not required pursuant to General Instruction I(2) of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information for Item 13 is not required pursuant to General Instruction I(2) of Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The PricewaterhouseCoopers LLP (and its worldwide affiliates) fees incurred are as follows for the periods
indicated:
(Dollars in millions)
2022
2021
Audit Fees
$
3.4
$
3.6
Audit-Related Fees
0.3
0.3
Tax Fees
0.7
0.6
All Other Fees
—
—
Audit fees include the annual audit and quarterly financial statement reviews, subsidiary audits, and procedures
required to be performed by the independent auditor to be able to form an opinion on our consolidated financial
statements. These other procedures include information systems and procedural reviews and testing performed in
order to understand and place reliance on the systems of internal control, and consultations relating to the audit
or quarterly review. Audit fees may also include statutory audits or financial audits for our subsidiaries or affiliates
and services associated with SEC registration statements, periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings.
Audit -related fees include assurance and related services that are reasonably related to the performance of the
audit or review of our financial statements, including due diligence services pertaining to potential business
acquisitions/dispositions, accounting consultations related to accounting, financial reporting or disclosure matters
not classified as “audit services”; assistance with understanding and implementing new accounting and financial
reporting guidance from rule making authorities; financial audits of employee benefit plans; agreed-upon or
expanded audit procedures related to accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements.
Tax fees include tax compliance, tax planning and tax advice and is granted general pre-approval by Group’s Audit
Committee.
All other fees represent an accounting research subscription and software.
31
Under its Charter and the “Audit and Non-Audit Services Pre-Approval Policy” (the “Policy”), the Audit Committee
is required to pre-approve the audit and non-audit services to be performed by the independent auditors. The
Policy mandates specific approval by the Audit Committee for any service that has not received a general pre-
approval or that exceeds pre-approved cost levels or budgeted amounts. For both specific and general pre-
approval, the Audit Committee considers whether such services are consistent with the SEC’s rules on auditor
independence. The Audit Committee also considers whether the independent auditors are best positioned to
provide the most effective and efficient service and whether the service might enhance the Company’s ability to
manage or control risk or improve audit quality. The Audit Committee is also mindful of the relationship between
fees for audit and non-audit services in deciding whether to pre-approve any such services. It may determine, for
each fiscal year, the appropriate ratio between the total amount of audit, audit -related and tax fees and a total
amount of fees for certain permissible non-audit services classified below as “All Other Fees”. All such factors are
considered as a whole, and no one factor is determinative. The Audit Committee further considered whether the
performance by PricewaterhouseCoopers LLP of the non-audit related services disclosed below is compatible with
maintaining their independence. The Audit Committee approved all of the audit-related fees, tax fees and all
other fees for 2022 and 2021.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
The exhibits listed on the accompanying Index to Exhibits on page E-1 are filed as part of this report except that the
certifications in Exhibit 32 are being furnished to the SEC, rather than filed with the SEC, as permitted under
applicable SEC rules.
Financial Statements and Schedules.
The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules on
page F-1 are filed as part of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 10, 2023.
EVEREST REINSURANCE HOLDINGS, INC.
By:
/S/ JUAN C. ANDRADE
Juan C. Andrade
(Chairman, President and
32
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ JUAN C. ANDRADE
President and Chief Executive Officer
(Principal Executive Officer)
March 10, 2023
Juan C. Andrade
/S/ MARK KOCIANCIC
Executive Vice President and Chief
Financial Officer
March 10, 2023
Mark Kociancic
/S/ ROBERT J. FREILING
Senior Vice President and Chief
Accounting Officer
March 10, 2023
Robert J. Freiling
E-1
INDEX TO EXHIBITS
Exhibit No.
2.1
3.1
3.2
4.1
4.2
4.3
4.4
Sixth
10.1
*10.2
*10.3
*10.4
*10.5
E-2
*10.6
*10.7
23.1
31.1
31.2
32.1
101 INS
XBRL Instance Document
101 SCH
XBRL Taxonomy Extension Schema
101 CAL
XBRL Taxonomy Extension Calculation Linkbase
101 DEF
XBRL Taxonomy Extension Definition Linkbase
101 LAB
XBRL Taxonomy Extension Label Linkbase
101 PRE
XBRL Taxonomy Extension Presentation Linkbase
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
F-1
EVEREST REINSURANCE HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
238
)
F-2
F-4
20
F-5
20
F-6
20
F-7
F-8
Schedules
I
S-1
II
Condensed Financial Information of Registrant:
S-2
20
S-3
20
S-4
S-5
III
20
S-6
IV
20
S-7
Schedules other than those listed above are omitted for the reason that they are not applicable or the information is otherwise contained in the Financial
Statements.
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of Everest Reinsurance Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Everest Reinsurance Holdings, Inc. and its
subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of
operations and comprehensive income (loss), of changes in stockholder's equity and of cash flows for each of the
three years in the period ended December 31, 2022, including the related notes and financial statement schedules
listed in the accompanying index appearing on page F-1 (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly , we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Valuation of the Reserve for Losses and Loss Adjustment Expenses
As described in Notes 1 and 3 to the consolidated financial statements, the Company maintains reserves equal to
the estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims for both
F-3
insurance and reinsurance businesses. The Company’s reserve for losses and loss adjustment expenses as of
December 31, 2022 was $15.0 billion. Reserves are based on estimates of ultimate losses and loss adjustment
expenses by underwriting or accident year. Management uses a variety of statistical and actuarial techniques to
monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves as
warranted. Management considers many factors when setting reserves including (i) exposure base and projected
ultimate premium; (ii) expected loss ratios by product and class of business, which are developed collaboratively
by underwriters and actuaries; (iii) actuarial methodologies and assumptions which analyze loss reporting and
payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss
payments and product mix; (iv) current legal interpretations of coverage and liability; and (v) economic conditions.
The principal considerations for our determination that performing procedures relating to the valuation of the
reserve for losses and loss adjustment expenses is a critical audit matter are the significant judgment by
management when developing their estimate; this in turn led to a high degree of auditor subjectivity, judgment
and effort in performing procedures and evaluating the audit evidence relating to the methodologies and the
significant assumptions related to expected loss ratios and historical trends, such as reserving patterns, loss
payments and product mix, and the audit effort involved the use of professionals with specialized skill and
knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness
of controls relating to management’s valuation of the reserve for losses and loss adjustment expenses, including
controls over the selection of methodologies and development of significant assumptions. These procedures also
included, among others, testing the completeness and accuracy of data provided by management and the
involvement of professionals with specialized skill and knowledge to assist in performing procedures for a sample
of products and lines of business including: (i) evaluating management’s methodologies and assumptions related
to expected loss ratios and historical trends, such as, reserving patterns, loss payment and product mix used for
determining reserves for losses and loss adjustment expenses; and (ii) developing an independent estimate of the
reserve for losses and loss adjustment expenses and comparing the independent estimate to management’s
actuarially determined reserves.
/s/
PricewaterhouseCoopers LLP
New York, New York
March 10, 2023
We have served as the Company’s auditor since 1996.
F-4
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in millions, except share amounts and par value per share)
2022
2021
ASSETS:
Fixed maturities - available for sale, at fair value
$
12,671
$
12,860
(amortized cost: 2022, $
13,699
; 2021, $
12,733
, credit allowances: 2022, $
(
46
); 2021, $
(
27
))
Fixed maturities - held to maturity, at amortized cost
(fair value: 2022, $
793
, net of credit allowances: 2022, $
(
9
))
811
-
Equity securities, at fair value
194
1,758
Other invested assets
2,754
1,675
Other invested assets, at fair value
1,472
2,031
Short-term investments (cost: 2022, $
812
; 2021, $
696
)
812
696
Cash
481
699
Total investments and cash
19,195
19,719
Notes receivable - affiliated
840
500
Accrued investment income
150
90
Premiums receivable (net of credit allowances: 2022, $
(
21
); 2021, $
(
18
))
1,721
1,720
Reinsurance recoverables - unaffiliated (net of credit allowances: 2022, $
(
21
); 2021, $
(
16
))
1,841
1,569
Reinsurance recoverables - affiliated
1,935
2,299
Income tax asset, net
288
-
Funds held by reinsureds
303
299
Deferred acquisition costs
499
472
Prepaid reinsurance premiums
463
431
Other assets (net of credit allowances: 2022, $
(
5
); 2021, $
(
4
))
722
596
TOTAL ASSETS
$
27,957
$
27,695
LIABILITIES:
Reserve for losses and loss adjustment expenses
$
14,977
$
13,121
Unearned premium reserve
3,177
2,993
Funds held under reinsurance treaties
43
48
Other net payable to reinsurers
436
392
Losses in course of payment
77
273
Income tax liability, net
-
246
Senior notes
2,347
2,346
Long-term notes
218
224
Borrowings from FHLB
519
519
Accrued interest on debt and borrowings
19
17
Unsettled securities payable
1
15
Other liabilities
489
463
Total liabilities
22,303
20,657
Commitments and Contingencies (Note 15)
(nil)
(nil)
STOCKHOLDER'S EQUITY:
Common stock, par value: $
0.01
;
3,000
1,000
-
-
Additional paid-in capital
1,102
1,102
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $
(225)
and $
24
(848)
91
Retained earnings
5,400
5,845
Total stockholder's equity
5,654
7,038
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
27,957
$
27,695
The accompanying notes are an integral part of the consolidated financial statements.
F-5
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
REVENUES:
Premiums earned
$
7,876
$
7,179
$
6,407
Net investment income
638
745
376
Net gains (losses) on investments:
Credit allowances on fixed maturity securities
(27)
(26)
(2)
Gains (losses) from fair value adjustments
(1,006)
488
92
Net realized gains (losses) from dispositions
51
39
(41)
Total net gains (losses) on investments
(982)
501
50
Other income (expense)
(6)
23
(15)
Total revenues
7,526
8,448
6,818
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
5,823
5,387
4,608
Commission, brokerage, taxes and fees
1,632
1,513
1,373
Other underwriting expenses
501
454
401
Corporate expenses
26
33
16
Interest, fee and bond issue cost amortization expense
101
70
36
Total claims and expenses
8,083
7,457
6,434
INCOME (LOSS) BEFORE TAXES
(557)
991
384
Income tax expense (benefit)
(112)
192
32
NET INCOME (LOSS)
$
(445)
$
800
$
352
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
(1,011)
(200)
163
Reclassification adjustment for realized losses (gains) included in net income (loss)
73
9
25
Total URA(D) on securities arising during the period
(938)
(191)
189
Foreign currency translation adjustments
(18)
(9)
14
Benefit plan actuarial net gain (loss) for the period
15
17
(6)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
2
6
6
Total benefit plan net gain (loss) for the period
17
23
1
Total other comprehensive income (loss), net of tax
(939)
(177)
204
COMPREHENSIVE INCOME (LOSS)
$
(1,384)
$
623
$
556
The accompanying notes are an integral part of the consolidated financial statements.
F-6
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER’S EQUITY
Years Ended December 31,
(Dollars in millions, except share amounts)
2022
2021
2020
COMMON STOCK (shares outstanding):
Balance, beginning of period
1,000
1,000
1,000
Balance, end of period
1,000
1,000
1,000
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period
$
1,102
$
1,101
$
1,101
Share-based compensation plans
-
-
-
Balance, end of period
1,102
1,102
1,101
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME
TAXES:
Balance, beginning of period
91
268
64
Net increase (decrease) during the period
(939)
(177)
204
Balance, end of period
(848)
91
268
RETAINED EARNINGS:
Balance, beginning of period
5,845
5,045
4,692
Change to beginning balance due to adoption of ASU 2016-13
-
-
1
Net income (loss)
(445)
800
352
Balance, end of period
5,400
5,845
5,045
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD
$
5,654
$
7,038
$
6,414
The accompanying notes are an integral part of the consolidated financial statements.
F-7
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(445)
$
800
$
352
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable
(3)
(128)
(253)
Decrease (increase) in funds held by reinsureds, net
(9)
(30)
(34)
Decrease (increase) in reinsurance recoverables
70
337
247
Decrease (increase) in income taxes
(286)
100
204
Decrease (increase) in prepaid reinsurance premiums
(36)
(68)
51
Increase (decrease) in reserve for losses and loss adjustment expenses
1,885
1,478
1,430
Increase (decrease) in unearned premiums
189
609
183
Increase (decrease) in other net payable to reinsurers
50
114
8
Increase (decrease) in losses in course of payment
(197)
111
90
Change in equity adjustments in limited partnerships
(90)
(368)
(40)
Distribution of limited partnership income
107
114
91
Change in other assets and liabilities, net
(130)
(10)
(88)
Non-cash compensation expense
37
36
32
Amortization of bond premium (accrual of bond discount)
22
31
14
Net (gains) losses on investments
982
(501)
(50)
Net cash provided by (used in) operating activities
2,146
2,625
2,240
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called/repaid - available for sale
1,399
2,330
1,126
Proceeds from fixed maturities sold - available for sale
2,645
961
631
Proceeds from fixed maturities matured/called/repaid - held to maturity
39
-
-
Proceeds from equity securities sold
2,203
862
375
Distributions from other invested assets
135
127
243
Cost of fixed maturities acquired - available for sale
(5,928)
(5,832)
(4,695)
Cost of fixed maturities acquired - held to maturity
(125)
-
-
Cost of equity securities acquired
(951)
(1,052)
(626)
Cost of other invested assets acquired
(1,241)
(430)
(363)
Net change in short-term investments
(113)
13
(426)
Net change in unsettled securities transactions
(52)
(206)
200
Proceeds from repayment (cost of issuance) of notes receivable - affiliated
(340)
(200)
-
Net cash provided by (used in) investing activities
(2,329)
(3,427)
(3,534)
CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation, net of expense
(37)
(36)
(32)
Net FHLB borrowings (repayments)
-
209
310
Cost of debt repurchase
(6)
-
(11)
Proceeds from issuance of senior notes
-
968
979
Net cash provided by (used in) financing activities
(43)
1,142
1,247
EFFECT OF EXCHANGE RATE CHANGES ON CASH
8
(18)
14
Net increase (decrease) in cash
(218)
321
(33)
Cash, beginning of period
699
379
411
Cash, end of period
$
481
$
699
$
379
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)
$
174
$
91
$
(173)
Interest paid
98
62
28
NON-CASH TRANSACTIONS
Reclassification of specific investments from fixed maturity securities, available for sale
at fair value to fixed maturity securities, held to maturity at amortized cost net of credit allowances
$
722
$
-
$
-
The accompanying notes are an integral part of the consolidated financial statements.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2022, 2021 and 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business and Basis of Presentation.
Everest Reinsurance Holdings, Inc. (“Holdings”), a Delaware company and direct subsidiary of Everest Underwriting
Group (Ireland) Limited (“Holdings Ireland”), which is a direct subsidiary of Everest Re Group, Ltd. (“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.
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). The statements include all of the following domestic
and foreign direct and indirect subsidiaries of the Company: Everest Reinsurance Company (“Everest Re”), Everest
Global Services, Inc. (“Global Services”), Everest National Insurance Company (“Everest National”), Everest
Indemnity Insurance Company (“Everest Indemnity”), Everest Security Insurance Company (“Everest Security”),
Everest Reinsurance Company – Escritório de Representação No Brasil Ltda. (“Everest Brazil”), Mt. Whitney
Securities, Inc., Everest Denali Insurance Company (“Everest Denali”), Everest Premier Insurance Company
(“Everest Premier”), Everest Specialty Underwriters Services, LLC, Everest International Assurance, Ltd. (“Everest
Assurance”), EverSports & Entertainment Insurance, Inc. (“Specialty”), Specialty Insurance Group - Leisure and
Entertainment Risk Purchasing Group LLC (“Specialty RPG”), Salus Systems (“Salus”) and Mt. McKinley Managers,
L.L.C. All intercompany accounts and transactions have been eliminated. All amounts are reported in U.S. dollars.
The Company consolidates the results of operations and financial position of all voting interest entities ("VOE") in
which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the
Company is considered to be the primary beneficiary. The consolidation assessment, including the determination
as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and
liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate actual results could differ, possibly materially, from those estimates.
Certain reclassifications and format changes have been made to prior years’ amounts to conform to the 2022
presentation.
Out of Period Adjustments
For the year ended December 31, 2021, the Company recorded out of period adjustments relating to prior years
that decreased net income by $46 million. The out of period adjustments are related to the accounting for certain
affiliated reinsurance agreements.
B. Investments and Cash.
Fixed maturity securities designated as available for sale reflect unrealized appreciation and depreciation, as a
result of changes in fair value during the period, in stockholder’s equity, net of income taxes in “accumulated other
comprehensive income (loss)” in the consolidated balance sheets. The Company reviews all of its fixed maturity,
available for sale securities whose fair value has fallen below their amortized cost at the time of review. The
Company then assesses whether the decline in value is due to non-credit related or credit related factors. In
making its assessment, the Company evaluates the current market and interest rate environment as well as
specific issuer information. Generally, a change in a security’s value caused by a change in the market, interest
rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related
F-9
decline in fair value. Non-credit related declines in fair value are recorded as unrealized losses in accumulated
other comprehensive income (loss). If the Company intends to sell the impaired security or is more likely than not
to be required to sell the security before an anticipated recovery in value, the Company records the entire
impairment in net gains (losses) on investments in the Company’s consolidated statements of operations and
comprehensive income (loss). If the Company determines that the decline is credit related and the Company does
not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the
security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit
loss and is recorded in net gains (losses) on investments in the Company’s consolidated statements of operations
and comprehensive income (loss). The determination of credit-related or non-credit-related impairment is first
based on an assessment of qualitative factors, which may determine that a qualitative analysis is sufficient to
support the conclusion that the present value of expected cash flows equals or exceeds the security’s amortized
cost basis. However, if the qualitative assessment suggests a credit loss may exist, a quantitative assessment is
performed, and the amount of the allowance for a given security will generally be the difference between a
discounted cash flow model and the Company’s carrying value. The Company will adjust the credit allowance
account for future changes in credit loss estimates for a security and record this adjustment through net gains
(losses) on investments in the Company’s consolidated statements of operations and comprehensive income (loss).
Fixed maturity securities designated as held to maturity consist of debt securities for which the Company has both
the positive intent and ability to hold to maturity or redemption and are reported at amortized cost, net of the
current expected credit loss allowance. Interest income for fixed maturity securities held to maturity is
determined in the same manner as interest income for fixed maturity securities available for sale. The Company
evaluates fixed maturity securities classified as held to maturity for current expected credit losses utilizing risk
characteristics of each security, including credit rating, remaining time to maturity, adjusted for prepayment
considerations, and subordination level, and applying default and recovery rates, which include the incorporation
of historical credit loss experience and macroeconomic forecasts, to develop an estimate of current expected
credit losses.
The Company does not create an allowance for uncollectible interest. If interest is not received when due, the
interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that
has not been accrued, it is recorded as income at that time.
The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness
with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements
or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant
information provided by rating agencies, investment advisors and analysts.
Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company’s
asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to
recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield
were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the
adjustment date are used to calculate the prepayment history for all applicable securities. Conditional
prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the
calculation of projected prepayments for pass-through security types.
For equity securities, the Company reflects changes in fair value as net gains (losses) on investments. Interest
income on all fixed maturities and dividend income on all equity securities are included as part of net investment
income in the consolidated statements of operations and comprehensive income (loss).
Short-term investments comprise securities due to mature within one year from the date of purchase and are
stated at cost, which approximates fair value.
Realized gains or losses on sales of investments are determined on the basis of identified cost. For some non-
publicly traded securities, market prices are determined through the use of pricing models that evaluate securities
F-10
relative to the U.S. Treasury yield curve, taking into account the issue type, credit quality, and cash flow
characteristics of each security. For other non-publicly traded securities, investment managers’ valuation
committees will estimate fair value, and in many instances, these fair values are supported with opinions from
qualified independent third parties. For publicly traded securities, fair value is based on quoted market prices or
valuation models that use observable market inputs. When a sector of the financial markets is inactive or illiquid,
the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine
fair value.
Other invested assets include limited partnerships, company-owned life insurance and rabbi trusts. Limited
partnerships are accounted for under the equity method of accounting, which can be recorded on a monthly or
quarterly lag. Company -owned life insurance policies are carried at policy cash surrender value and changes in the
policy cash surrender value are included within net investment income.
Other invested assets, at fair value, are comprised of convertible preferred stock of Everest Preferred International
Holdings, Ltd. (“Preferred Holdings”), an affiliated entity. The fair values of the Preferred Holdings convertible
preferred stock at December 31, 2022 and December 31, 2021 were determined using a pricing model.
Cash includes cash on hand. Restricted cash is included within cash in the consolidated balance sheets and
represents amounts held for the benefit of third parties that is legally or contractually restricted as to its
withdrawal or usage. Amounts include trust funds set up for the benefit of ceding companies.
C. Allowance for Premium Receivable and Reinsurance Recoverables.
The Company applies the Current Expected Credit Losses (CECL) methodology for estimating allowances for credit
losses. The Company evaluates the recoverability of its premiums and reinsurance recoverable balances and
establishes an allowance for estimated uncollectible amounts.
Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy
premiums, are primarily comprised of premiums due from policyholders/ cedants. Balances are considered past
due when amounts that have been billed are not collected within contractually stipulated time periods. For these
balances, the allowance is estimated based on recent historical credit loss and collection experience, adjusted for
current economic conditions and reasonable and supportable forecasts, when appropriate.
A portion of the Company's commercial lines business is written with large deductibles or under retrospectively-
rated plans. Under some commercial insurance contracts with a large deductible, the Company is obligated to pay
the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder for the
deductible amount. As such, the Company is subject to credit risk until reimbursement is made. Retrospectively-
rated policies are policies whereby the ultimate premium is adjusted based on actual losses incurred. Although the
premium adjustment feature of a retrospectively-rated policy substantially reduces insurance risk for the
Company, it presents credit risk to the Company. The Company’s results of operations could be adversely affected
if a significant portion of such policyholders failed to reimburse the Company for the deductible amount or the
amount of additional premium owed under retrospectively-rated policies. The Company manages these credit risks
through credit analysis, collateral requirements, and oversight. The allowance for receivables for loss within a
deductible and retrospectively-rated policy premiums is recorded within other assets in the consolidated balance
sheets. The allowance is estimated as the amount of the receivable exposed to loss multiplied by estimated factors
for probability of default. The probability of default is assigned based on each policyholder's credit rating, or a
rating is estimated if no external rating is available. Credit ratings are reviewed and updated at least annually. The
exposure amount is estimated net of collateral and other offsets, considering the nature of the collateral, potential
future changes in collateral values, and historical loss information for the type of collateral obtained. The
probability of default factors are historical corporate defaults for receivables with similar durations estimated
through multiple economic cycles. Credit ratings are forward-looking and consider a variety of economic
outcomes. The Company's evaluation of the required allowance for receivables for loss within a deductible and
retrospectively-rated policy premiums considers the current economic environment as well as the probability-
weighted macroeconomic scenarios.
F-11
The Company records total credit loss expenses related to premiums receivable in Other underwriting expenses
and records credit loss expenses related to deductibles in Incurred losses and loss adjustment expenses in the
Company’s consolidated statements of operations and comprehensive income (loss).
The allowance for uncollectible reinsurance recoverable reflects management’s best estimate of reinsurance
cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The allowance
for uncollectible reinsurance recoverable comprises an allowance and an allowance for disputed balances. Based
on this analysis, the Company may adjust the allowance for uncollectible reinsurance recoverable or charge off
reinsurer balances that are determined to be uncollectible.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverable become
due, it is possible that future adjustments to the Company’s reinsurance recoverable, net of the allowance, could
be required, which could have a material adverse effect on the Company’s consolidated results of operations or
cash flows in a particular quarter or annual period.
The allowance is estimated as the amount of reinsurance recoverable exposed to loss multiplied by estimated
factors for the probability of default. The reinsurance recoverable exposed is the amount of reinsurance
recoverable net of collateral and other offsets, considering the nature of the collateral, potential future changes in
collateral values, and historical loss information for the type of collateral obtained. The probability of default
factors are historical insurer and reinsurer defaults for liabilities with similar durations to the reinsured liabilities as
estimated through multiple economic cycles. Credit ratings are forward -looking and consider a variety of economic
outcomes. The Company's evaluation of the required allowance for reinsurance recoverable considers the current
economic environment as well as macroeconomic scenarios.
The Company records credit loss expenses related to reinsurance recoverable in Incurred losses and loss
adjustment expenses in the Company’s consolidated statements of operations and comprehensive income (loss).
Write-offs of reinsurance recoverable and any related allowance are recorded in the period in which the balance is
deemed uncollectible.
D. Deferred Acquisition Costs.
Acquisition costs, consisting principally of commissions and brokerage expenses and certain premium taxes and
fees incurred at the time a contract or policy is issued and that vary with and are directly related to the Company’s
reinsurance and insurance business, are deferred and amortized over the period in which the related premiums
are earned. Deferred acquisition costs are limited to their estimated realizable value by line of business based on
the related unearned premiums, anticipated claims and claim expenses and anticipated investment income.
E. Reserve for Losses and Loss Adjustment Expenses.
The reserve for losses and loss adjustment expenses (“LAE”) is based on individual case estimates and reports
received from ceding companies. A provision is included for losses and LAE incurred but not reported (“IBNR”)
based on past experience. Provisions are also included for certain potential liabilities, including those relating to
asbestos and environmental (“A&E”) exposures, catastrophe exposures, COVID-19 and other exposures, for which
liabilities cannot be estimated using traditional reserving techniques. See also Note 3. The reserves are reviewed
periodically and any changes in estimates are reflected in earnings in the period the adjustment is made. The
Company’s loss and LAE reserves represent management’s best estimate of the ultimate liability. Loss and LAE
reserves are presented gross of reinsurance recoverable and incurred losses and LAE are presented net of
reinsurance.
Accruals for commissions are established for reinsurance contracts that provide for the stated commission
percentage to increase or decrease based on the loss experience of the contract. Changes in estimates for such
arrangements are recorded as commission expense. Commission accruals for contracts with adjustable features
are estimated based on expected loss and LAE.
F-12
F. Premium Revenues.
Written premiums are earned ratably over the periods of the related insurance and reinsurance
contracts. Unearned premium reserves are established relative to the unexpired contract period. For reinsurance
contracts, such reserves are established based upon reports received from ceding companies or estimated using
pro rata methods based on statistical data. Reinstatement premiums represent additional premium recognized
and earned at the time a loss event occurs and losses are recorded, most prevalently catastrophe related, when
limits have been depleted under the original reinsurance contract and additional coverage is granted. The
recognition of reinstatement premiums is based on estimates of loss and LAE, which reflects management’s
judgement. Written and earned premiums and the related costs, which have not yet been reported to the
Company, are estimated and accrued. Premiums are net of ceded reinsurance.
G. Prepaid Reinsurance Premiums.
Prepaid reinsurance premiums represent unearned premium reserves ceded to other reinsurers. Prepaid
reinsurance premiums for any foreign reinsurers comprising more than
10
% of the outstanding balance at
December 31, 2022 were collateralized either through collateralized trust arrangements, rights of offset or letters
of credit, thereby limiting the credit risk to the Company.
H. Income Taxes.
The Company and its wholly owned subsidiaries file a consolidated U.S. Corporation Income Tax Return. The
Company’s foreign subsidiaries and foreign branches of its U.S. subsidiaries file country and local corporation
income tax returns as required. Deferred U.S. federal and foreign income taxes have been recorded to recognize
the tax effect of temporary differences between the GAAP and income tax bases of assets and liabilities, which
arise because of differences between the financial reporting and income tax rules.
As an accounting policy, the Company has adopted the aggregate portfolio approach for releasing disproportionate
income tax effects from Accumulated Other Comprehensive Income.
I. Foreign Currency.
The Company transacts business in numerous currencies through business units located around the world. The
base transactional currency for each business unit is determined by the local currency used for most economic
activity in that area. Movements in exchange rates related to foreign currency denominated monetary assets and
liabilities at the business units between the original currency and the base currency are recorded through the
consolidated statements of operations and comprehensive income (loss) in other income (expense), except for
currency movements related to available for sale fixed maturity securities, which are excluded from net income
(loss) and accumulated in stockholder’s equity, net of deferred taxes.
The business units’ base currency financial statements are translated to U.S. dollars using the exchange rates at the
end of period for the balance sheets and the average exchange rates in effect for the reporting period for the
income statements. Gains and losses resulting from translating the foreign currency financial statements, net of
deferred income taxes, are excluded from net income loss and accumulated in stockholder’s equity.
J. Segmentation.
The Company, through its subsidiaries, operates in
two
K. Retroactive Reinsurance.
Premiums on ceded retroactive contracts are earned when written with a corresponding reinsurance recoverable
established for the amount of reserves ceded. The initial gain, if applicable, is deferred and amortized into income
over an actuarially determined expected payout period. Any future loss is recognized immediately and charged
against earnings.
F-13
L. Application of Recently Issued Accounting Guidance.
The Company did not adopt any new accounting standards that had a material impact during the year ended
December 31, 2022. The Company assessed the adoption impacts of recently issued accounting standards by the
Financial Accounting Standards Board on the Company’s consolidated financial statements as well as material
updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021. There were no accounting standards issued during 2022 that are expected to have a material
impact to Holdings.
2. INVESTMENTS
The following tables show amortized cost, allowance for credit losses, gross unrealized appreciation, gross
unrealized depreciation and fair value of available for sale, fixed maturity securities available for sale as of the
dates indicated:
At December 31, 2022
Amortized
Allowances for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Loss
Appreciation
Depreciation
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.)
At December 31, 2021
Amortized
Allowances for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Loss
Appreciation
Depreciation
Value
Fixed maturity securities – available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
657
$
-
$
9
$
(3)
$
663
Obligations of U.S. states and political subdivisions
559
-
29
(1)
587
Corporate securities
4,036
(19)
89
(31)
4,075
Asset-backed securities
3,464
(8)
21
(11)
3,466
Mortgage-backed securities
Commercial
586
-
21
(4)
603
Agency residential
1,255
-
16
(10)
1,261
Non-agency residential
4
-
-
-
4
Foreign government securities
677
-
22
(7)
692
Foreign corporate securities
1,494
-
34
(18)
1,510
Total fixed maturity securities - available for sale
$
12,733
$
(27)
$
241
$
(86)
$
12,860
(Some amounts may not reconcile due to rounding.)
F-14
The following table shows amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation)
and fair value of fixed maturity securities held to maturity for the periods indicated:
At December 31, 2022
Amortized
Allowances for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Loss
Appreciation
Depreciation
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
(Some amounts may not reconcile due to rounding.)
The amortized cost and fair value of fixed maturity securities available for sale are shown in the following table by
contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity
securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for
mortgage-backed and asset-backed securities are shown separately.
At December 31, 2022
At December 31, 2021
Amortized
Fair
Amortized
Fair
(Dollars in millions)
Cost
Value
Cost
Value
Fixed maturity securities – available for sale
Due in one year or less
$
581
$
563
$
586
$
584
Due after one year through five years
3,684
3,429
3,488
3,527
Due after five years through ten years
2,003
1,760
2,260
2,310
Due after ten years
958
827
1,088
1,106
Asset-backed securities
4,111
3,951
3,464
3,466
Mortgage-backed securities
Commercial
569
509
586
603
Agency residential
1,792
1,628
1,255
1,261
Non-agency residential
3
3
4
4
Total fixed maturity securities - available for sale
$
13,699
$
12,671
$
12,733
$
12,860
(Some amounts may not reconcile due to rounding.)
The amortized cost and fair value of fixed maturity securities held to maturity are shown in the following table by
contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity
securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for
mortgage-backed and asset-backed securities are shown separately.
F-15
At December 31, 2022
Amortized
Fair
(Dollars in millions)
Cost
Value
Fixed maturity securities – held to maturity:
$
5
$
5
63
61
43
41
68
65
Asset-backed securities
634
614
Mortgage-backed securities
Commercial
7
7
Total fixed maturity securities - held to maturity
$
820
$
793
(Some amounts may not reconcile due to rounding.)
During 2022, the Company re-designated a portion of its fixed maturity securities from its fixed maturity –
available for sale portfolio to its fixed maturity – held to maturity portfolio. The fair value of the securities
reclassified at the date of transfer was $
722
subsequently recognized as the new amortized cost basis. As of the date of transfer, these securities had an
unrealized loss of $
53
and will be amortized into income through an adjustment to the yields of the underlying securities over the
remaining life of the securities.
The Company evaluated fixed maturity securities classified as held to maturity for current expected credit losses as
of December 31, 2022 utilizing risk characteristics of each security, including credit rating, remaining time to
maturity, adjusted for prepayment considerations, and subordination level, and applying default and recovery
rates, which include the incorporation of historical credit loss experience and macroeconomic forecasts, to develop
an estimate of current expected credit losses. These fixed maturities classified as held to maturity are of a high
credit quality and are all rated investment grade as of December 31, 2022.
The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the
following sources for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Increase (decrease) during the period between the fair value and cost
of investments carried at fair value, and deferred taxes thereon:
Fixed maturity securities - short term investments
$
(1,187)
$
(242)
Change in unrealized appreciation (depreciation), pre-tax
(1,187)
(242)
Deferred tax benefit (expense)
249
51
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in stockholder's equity
$
(938)
$
(191)
(Some amounts may not reconcile due to rounding.)
F-16
The tables below display the aggregate fair value and gross unrealized depreciation of fixed maturity securities
available for sale, by security type and contractual maturity, in each case subdivided according to length of time
that individual securities had been in a continuous unrealized loss position for the periods indicated.
Duration of Unrealized Loss at December 31, 2022 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in millions)
Value
Depreciation
Value
Depreciation
Value
Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
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)
(Some amounts may not reconcile due to rounding.)
Duration of Unrealized Loss at December 31, 2022 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in millions)
Value
Depreciation
Value
Depreciation
Value
Depreciation
Fixed maturity securities - available for sale
Due in one year or less
$
463
$
(8)
$
29
$
(4)
$
491
$
(11)
Due in one year through five years
2,020
(143)
936
(107)
2,956
(250)
Due in five years through ten years
1,162
(148)
395
(98)
1,557
(246)
Due after ten years
439
(50)
262
(64)
701
(114)
Asset-backed securities
3,120
(138)
436
(27)
3,556
(165)
Mortgage-backed securities
1,318
(105)
641
(122)
1,959
(226)
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)
(Some amounts may not reconcile due to rounding.)
The aggregate fair value and gross unrealized losses related to fixed maturity securities available for sale in an
unrealized loss position at December 31, 2022 were $
11.2
1.0
securities for the single issuer (the United States government) whose securities comprised the largest unrealized
loss position at December 31, 2022, did not exceed
4.3
% of the overall fair value of the Company’s fixed maturity
securities available for sale. The fair value of the securities for the issuer with the second largest unrealized loss
comprised less than
0.6
% of the Company’s fixed maturity securities. In addition, as indicated on the above table,
there was no significant concentration of unrealized losses in any one market sector. The $
591
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, foreign government
F-17
securities, asset-backed securities as well as commercial and agency residential mortgage-backed securities. Of
these unrealized losses, $
520
nationally recognized rating agency. The $
421
available for sale in an unrealized loss position for more than one year related primarily to domestic and foreign
corporate securities as well as agency residential mortgage backed securities. Of these unrealized losses $
392
million were related to securities that were rated investment grade by at least one nationally recognized rating
agency. In all instances, there were no projected cash flow shortfalls to recover the full book value of the
investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage
and are current on interest and principal payments. Based upon the Company’s current evaluation of securities in
an unrealized loss position as of December 31, 2022, 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 fair value and gross unrealized depreciation of fixed maturity securities
available for sale, by security type and contractual maturity, in each case subdivided according to length of time
that individual securities had been in a continuous unrealized loss position for the periods indicated. The amounts
presented in the tables below include $
16
0.4
) million of gross unrealized depreciation
as of December 31, 2021 related to fixed maturity securities available for sale for which the Company has recorded
an allowance for credit losses.
Duration of Unrealized Loss at December 31, 2021 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in millions)
Value
Depreciation
Value
Depreciation
Value
Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
$
267
$
(3)
$
-
$
-
$
267
$
(3)
Obligations of U.S. states and political subdivisions
51
(1)
3
-
54
(1)
Corporate securities
1,465
(25)
201
(6)
1,666
(31)
Asset-backed securities
1,891
(11)
38
-
1,929
(11)
Mortgage-backed securities
Commercial
139
(2)
35
(2)
174
(4)
Agency residential
699
(7)
168
(3)
867
(10)
Non-agency residential
1
-
-
-
2
-
Foreign government securities
200
(5)
15
(2)
215
(7)
Foreign corporate securities
677
(17)
33
(2)
710
(18)
Total fixed maturity securities - available for sale
$
5,390
$
(71)
$
492
$
(15)
$
5,882
$
(86)
(Some amounts may not reconcile due to rounding.)
F-18
Duration of Unrealized Loss at December 31, 2021 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in millions)
Value
Depreciation
Value
Depreciation
Value
Depreciation
Fixed maturity securities - available for sale
Due in one year or less
$
81
$
(2)
$
36
$
(4)
$
117
$
(6)
Due in one year through five years
1,209
(19)
154
(3)
1,364
(22)
Due in five years through ten years
853
(21)
34
(2)
887
(23)
Due after ten years
517
(10)
27
(1)
543
(11)
Asset-backed securities
1,891
(11)
38
-
1,929
(11)
Mortgage-backed securities
839
(9)
203
(5)
1,042
(14)
Total fixed maturity securities - available for sale
$
5,390
$
(71)
$
492
$
(15)
$
5,882
$
(86)
(Some amounts may not reconcile due to rounding.)
The aggregate fair value and gross unrealized losses related to investments in an unrealized loss position at
December 31, 2021 were $
5.9
86
(the United States government) whose securities comprised the largest unrealized loss position at December 31,
2021, did not exceed
2.1
% of the overall fair value of the Company’s fixed maturity securities available for sale. The
fair value of the securities for the issuer with the second largest unrealized loss comprised less than
0.4
% 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 $
71
to fixed maturity securities that have been in an unrealized loss position for less than one year were generally
comprised of domestic and foreign corporate securities, foreign government securities, asset backed securities and
agency residential mortgage backed securities. Of these unrealized losses, $
62
that were rated investment grade by at least one nationally recognized rating agency. The $
15
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 as well as agency residential mortgage-backed
securities. Of these unrealized losses $
12
least one nationally recognized rating agency. In all instances, there were no projected cash flow shortfalls to
recover the full book value of the investments and the related interest obligations. The mortgage -backed securities
still have excess credit coverage and are current on interest and principal payments.
The components of net investment income are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturities
$
510
$
344
$
305
Equity securities
16
15
11
Short-term investments and cash
16
1
3
Other invested assets
Limited partnerships
72
321
49
Dividends from preferred shares of affiliate
31
31
31
Other
30
63
2
Gross investment income before adjustments
675
774
401
Funds held interest income (expense)
6
8
6
Interest income from Parent
11
6
5
Gross investment income
691
788
412
Investment expenses
(52)
(43)
(36)
Net investment income
$
638
$
745
$
376
(Some amounts may not reconcile due to rounding.)
F-19
The Company records results from limited partnership investments on the equity method of accounting with
changes in value reported through net investment income. The net investment income from limited partnerships is
dependent upon the Company’s share of the net asset values of interests underlying each limited partnership. Due
to the timing of receiving financial information from these partnerships, the results are generally reported on a
one month or quarter lag. If the Company determines there has been a significant decline in value of a limited
partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.
The Company had contractual commitments to invest up to an additional $
927
private placement loans at December 31, 2022. These commitments will be funded when called in accordance with
the partnership and loan agreements, which have investment periods that expire, unless extended, through
2026
.
During the fourth quarter of 2022, the Company entered into corporate-owned life insurance policies, which are
carried within other invested assets at policy cash surrender value of $
939
The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of
the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility
invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its
participation in the facility. As of December 31, 2022, the fair value of investments in the facility consolidated
within the Company’s balance sheets was $
309
Other invested assets, at fair value, as of December 31, 2022 and December 31, 2021, 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 investor through normal investment activities but also as an investment manager. A VIE is an entity
that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple
majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by
other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the
Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is
deemed to have a controlling financial interest when it has both the ability to direct the activities that most
significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive
benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it
determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Consolidated
Financial Statements. As of December 31, 2022 and 2021, the Company did 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 December 31, 2022 and 2021 is
limited to the total carrying value of $
2.8
1.7
limited partnerships and other alternative investments in Other Invested Assets in the Company's Consolidated
Balance Sheets. As of December 31, 2022, the Company has outstanding commitments totaling $
857
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
F-20
is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal
amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the
Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the
activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure
to loss on these investments is limited to the amount of the Company’s investment.
The components of net gains (losses) on investments are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturity securities:
Allowances for credit losses
$
(27)
$
(26)
$
(2)
Net realized gains (losses) from dispositions
(79)
8
(36)
Gains (losses) from fair value adjustments
-
-
2
Equity securities:
Net realized gains (losses) from dispositions
116
24
(8)
Gains (losses) from fair value adjustments
(447)
254
276
Other invested assets
13
6
2
Other invested assets, fair value:
Gains (losses) from fair value adjustments
(558)
234
(186)
Short-term investment gains (losses)
-
-
1
Total net gains (losses) on investments
$
(982)
$
501
$
50
(Some amounts may not reconcile due to rounding.)
The following tables provide a roll forward of the Company’s beginning and ending balance of allowance for credit
losses for the periods indicated:
Roll Forward of Allowance for Credit Losses
Years Ended December 31, 2022
Asset
Foreign
Corporate
Backed
Corporate
Securities
Securities
Securities
Total
(Dollars in millions)
Balance, beginning of period
$
(19)
$
(8)
$
-
$
(27)
Credit losses on securities where credit
losses were not previously recorded
(13)
(6)
(2)
(21)
Increases in allowance on previously
impaired securities
(20)
-
-
(21)
Decreases in allowance on previously
impaired securities
-
-
-
-
Reduction in allowance due to disposals
6
8
-
14
Balance, end of period
$
(46)
$
(6)
$
(2)
$
(55)
(1) Credit losses recorded as of December 31, 2022 for fixed maturities – held to maturity were $
(
2
)(
6
)(
1
)and foreign corporate securities
(Some amounts may not reconcile due to rounding.)
F-21
Roll Forward of Allowance for Credit Losses
Years Ended December 31, 2021
Asset
Corporate
Backed
Securities
Securities
Total
(Dollars in millions)
Balance, beginning of period
$
(1)
$
-
$
(2)
Credit losses on securities where credit
losses were not previously recorded
(21)
(5)
(26)
Increases in allowance on previously
impaired securities
(3)
(3)
(5)
Decreases in allowance on previously
impaired securities
-
-
-
Reduction in allowance due to disposals
6
-
6
Balance, end of period
$
(19)
$
(8)
$
(27)
(Some amounts may not reconcile due to rounding.)
The proceeds and split between gross gains and losses from sales of fixed maturity securities - available for sale
and equity securities, are presented in the table below for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Proceeds from sales of fixed maturity securities - available for sale
$
2,645
$
961
$
631
Gross gains from dispositions
9
33
24
Gross losses from dispositions
(88)
(24)
(60)
Proceeds from sales of equity securities
$
2,203
$
862
$
375
Gross gains from dispositions
165
39
37
Gross losses from dispositions
(48)
(15)
(45)
Securities with a carrying value amount of $
1.4
governmental insurance departments in compliance with insurance laws.
F-22
3. RESERVES FOR LOSSES AND LAE
The following table provides a roll forward of the Company’s beginning and ending reserve for losses and LAE is
summarized for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
2020
Gross reserves beginning of period
$
13,121
$
11,578
$
10,129
Less reinsurance recoverables on unpaid losses
(3,651)
(3,951)
(4,215)
Net reserves beginning of period
9,470
7,627
5,914
Incurred related to:
Current year
5,815
5,382
4,408
Prior years
8
5
200
Total incurred losses and LAE
5,823
5,387
4,608
Paid related to:
Current year
1,097
2,374
1,902
Prior years
2,867
1,127
1,018
Total paid losses and LAE
3,964
3,501
2,920
Foreign exchange/translation adjustment
(35)
(42)
24
Net reserves end of period
11,294
9,470
7,627
Plus reinsurance recoverables on unpaid losses
3,684
3,651
3,951
Gross reserves end of period
$
14,977
$
13,121
$
11,578
(Some amounts may not reconcile due to rounding.)
Current year incurred losses were $
5.8
5.4
4.4
2021 and 2020, respectively. The increase in current year incurred losses in 2022 compared to 2021 primarily
related to an increase of $
44
389
year attritional losses. The increase in current year attritional losses was mainly due to the growth in premiums
earned and $
25
from 2020 to 2021 was primarily due to an increase of $
532
increase of $
442
reinsurance program with an affiliate . The increase in current year attritional losses was mainly due to the growth
in premiums earned and the previously mentioned $
155
The war in the Ukraine is ongoing and an evolving event. Economic and legal sanctions have been levied against
Russia, specific named individuals and entities connected to the Russian government, as well as businesses located
in the Russian Federation and/or owned by Russian nationals by numerous countries, including the United States.
The significant political and economic uncertainty surrounding the war and associated sanctions have impacted
economic and investment markets both within Russia and around the world. The Company has recorded $
25
million of incurred underwriting losses related to the Ukraine and Russia conflict for the year ended December 31,
2022.
Incurred prior years’ reserves increased by $
8
5
200
respectively. The 2022 prior year development was primarily due to $
113
reserves mitigated primarily by reserve releases from the reinsurance segment. The increase for 2021 related
mainly to increases in insurance casualty reserves. The increase for 2020 primarily related to higher ultimate loss
estimates for long-tail casualty business in the reinsurance segment for accident years 2015 to 2018, notably
general liability, professional lines, and auto liability.
F-23
The following is information about incurred and paid claims development as of December 31, 2022, net of
reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR) plus
expected development on reported claims included within the net incurred claims amounts. Each of the
Company’s financial reporting segments has been disaggregated into casualty and property business. The casualty
and property segregation results in groups that have homogeneous loss development characteristics and are large
enough to represent credible trends. Generally, casualty claims take longer to be reported and settled, resulting in
longer payout patterns and increased volatility. Property claims on the other hand, tend to be reported and
settled quicker and therefore tend to exhibit less volatility. The property business is more exposed to catastrophe
losses, which can result in year over year fluctuations in incurred claims depending on the frequency and severity
of catastrophes claims in any one accident year.
The information about incurred and paid claims development for the years ended December 31, 2013 to
December 31, 2021 is presented as supplementary information.
The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impractical to provide the
information for the remaining groups. The reinsurance groups each include pro rata contracts for which ceding
companies provide only summary information via a bordereau. This summary information does not include the
number of reported claims underlying the paid and reported losses. Therefore, it is not possible to provide this
information. The Insurance Property group includes Accident & Health insurance business. This business is written
via a master contract and individual claim counts are not provided. This business represents a significant enough
portion of the business in the Insurance Property group so that including the number of reported claims for the
remaining business would distort any analytics performed on the group.
The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of
business. For example, a claim event with three claimants in the same line of business is a single claim. However,
a claim event with a single claimant that spans two lines of business contributes two claims. Cessions under
affiliated quota share agreements reduce net losses but do not impact claim counts.
The following tables present the incurred loss and ALAE and the paid loss and ALAE, net of reinsurance for casualty
and property, as well as the average annual percentage payout of incurred claims by age, net of reinsurance for
each of our disclosed lines of business.
Reinsurance – Casualty Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Development
Cumulative
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Number of
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Reported
Claims
(Dollars in millions)
2013
$
176
$
222
$
220
$
226
$
215
$
215
$
215
$
215
$
215
$
215
-
N/A
2014
254
234
256
227
227
227
227
227
227
1
N/A
2015
208
249
236
236
236
236
236
236
5
N/A
2016
242
238
238
238
238
238
238
12
N/A
2017
198
203
203
203
203
203
23
N/A
2018
769
754
800
822
874
117
N/A
2019
971
1,019
1,020
1,035
363
N/A
2020
1,061
1,033
1,001
590
N/A
2021
1,345
1,338
899
N/A
2022
1,413
1,036
N/A
$
6,780
(Some amounts may not reconcile due to rounding.)
F-24
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
12
$
28
$
63
$
97
$
125
$
158
$
175
$
180
$
183
$
192
2014
15
34
76
106
143
173
182
186
208
2015
15
38
84
145
167
186
193
205
2016
17
53
87
143
159
185
206
2017
26
84
104
122
145
164
2018
119
194
300
402
466
2019
150
248
370
479
2020
137
227
329
2021
157
227
2022
116
$
2,592
All outstanding liabilities prior to 2013, net of reinsurance
204
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
4,392
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Casualty
11.3
%
9.1
%
12.6
%
13.5
%
9.6
%
11.3
%
5.9
%
3.2
%
5.5
%
4.2
%
F-25
Reinsurance – Property Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Development
Cumulative
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Number of
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Reported
Claims
(Dollars in millions)
2013
$
390
$
286
$
244
$
204
$
203
$
203
$
203
$
203
$
203
$
203
-
N/A
2014
588
508
385
356
357
357
357
357
357
-
N/A
2015
546
355
328
328
328
328
328
328
-
N/A
2016
625
647
647
643
642
642
642
1
N/A
2017
1,273
1,857
2,025
2,119
2,172
2,210
1
N/A
2018
2,222
2,111
2,101
2,049
2,019
4
N/A
2019
1,685
1,691
1,618
1,513
9
N/A
2020
1,862
1,905
1,845
82
N/A
2021
2,158
2,144
303
N/A
2022
2,563
1,448
N/A
$
13,824
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
128
$
152
$
163
$
177
$
185
$
191
$
195
$
196
$
197
$
199
2014
151
234
289
318
333
336
339
342
349
2015
155
227
279
294
299
304
309
319
2016
231
489
584
591
596
600
611
2017
781
1,542
1,900
2,022
2,118
2,195
2018
477
1,367
1,672
1,819
1,876
2019
670
1,037
1,279
1,398
2020
536
1,118
1,432
2021
638
1,293
2022
564
$
10,237
All outstanding liabilities prior to 2013, net of reinsurance
28
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
3,615
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Property
31.3
%
32.8
%
15.7
%
6.2
%
3.3
%
2.5
%
1.5
%
1.5
%
1.6
%
0.9
%
F-26
Insurance – Casualty Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Development
Cumulative
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Number of
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Reported
Claims
(Dollars in millions)
2013
$
256
$
228
$
230
$
224
$
194
$
194
$
195
$
195
$
195
$
195
1
21,078
2014
237
238
240
254
254
254
255
255
255
1
24,930
2015
258
258
277
277
277
265
265
269
3
26,455
2016
351
276
279
281
287
287
281
-
30,793
2017
304
237
237
237
236
232
-
34,648
2018
645
644
666
689
697
149
35,173
2019
768
755
794
813
168
39,110
2020
816
792
792
325
37,445
2021
1,112
1,112
595
42,574
2022
1,039
635
36,436
$
5,685
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
17
$
69
$
102
$
130
$
150
$
167
$
183
$
189
$
193
$
194
2014
20
72
114
144
229
229
250
253
254
2015
20
68
117
199
244
259
263
266
2016
25
101
275
299
308
313
318
2017
23
151
157
216
233
239
2018
63
189
271
383
435
2019
11
216
350
489
2020
81
209
340
2021
201
339
2022
221
$
3,097
All outstanding liabilities prior to 2013, net of reinsurance
19
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
2,607
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Casualty
12.0
%
20.5
%
18.4
%
17.3
%
11.8
%
3.6
%
4.6
%
1.7
%
1.2
%
0.6
%
F-27
Insurance – Property Business
At December 31, 2022
Total of
IBNR Liabilities
Ultimate Incurred Loss and Allocated Loss Adjustment Expenses, Net of reinsurance
Plus Expected
Development
Cumulative
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
on Reported
Number of
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Claims
Reported
Claims
(Dollars in millions)
2013
$
64
$
56
$
52
$
53
$
52
$
52
$
52
$
52
$
52
$
52
-
N/A
2014
67
70
67
66
66
66
66
66
66
-
N/A
2015
81
75
75
75
75
88
88
85
-
N/A
2016
142
169
164
163
158
158
165
-
N/A
2017
230
293
297
299
305
315
-
N/A
2018
376
372
377
377
383
-
N/A
2019
337
349
348
354
1
N/A
2020
509
509
503
14
N/A
2021
539
536
8
N/A
2022
699
242
N/A
$
3,158
(Some amounts may not reconcile due to rounding.)
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Years Ended December 31,
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Accident
Year
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Dollars in millions)
2013
$
35
$
54
$
52
$
53
$
52
$
52
$
52
$
52
$
52
$
52
2014
40
66
66
66
66
66
66
66
66
2015
45
70
75
75
75
76
76
76
2016
72
152
168
163
162
164
165
2017
161
293
282
296
312
315
2018
236
342
368
377
383
2019
218
336
350
353
2020
263
366
386
2021
360
506
2022
383
$
2,685
All outstanding liabilities prior to 2013, net of reinsurance
-
Liabilities for claims and claim adjustment expenses, net of reinsurance
$
473
(Some amounts may not reconcile due to rounding.)
Average Annual Percentage Payout of Incurred Loss by Age, Net of Reinsurance (unaudited)
Years
1
2
3
4
5
6
7
8
9
10
Property
57.4
%
34.0
%
3.5
%
1.5
%
1.9
%
0.9
%
0.2
%
0.4
%
0.1
%
0.1
%
F-28
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and
Claim Adjustment Expenses
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim
adjustment expenses in the consolidated statement of financial position is as follows.
At December 31,
2022
(Dollars in millions)
Net outstanding liabilities
Reinsurance Casualty
$
4,392
Reinsurance Property
3,615
Insurance Casualty
2,607
Insurance Property
473
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance
11,087
Reinsurance recoverable on unpaid claims
Reinsurance Casualty
980
Reinsurance Property
908
Insurance Casualty
1,626
Insurance Property
169
Total reinsurance recoverable on unpaid claims
3,684
Unallocated claims adjustment expenses
175
Other
32
207
Total gross liability for unpaid claims and claim adjustment expense
$
14,977
(Some amounts may not reconcile due to rounding.)
Reserving Methodology
The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense
(LAE) for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are
based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of
statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it
becomes known, and adjust reserves whenever an adjustment appears warranted. The Company considers many
factors when setting reserves including: (1) exposure base and projected ultimate premium; (2) expected loss
ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3)
actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports from
ceding companies and historical trends, such as reserving patterns, loss payments, and product mix; (4) current
legal interpretations of coverage and liability; and (5) economic conditions. Management’s best estimate is
developed through collaboration with actuarial, underwriting, claims, legal and finance departments and
culminates with the input of reserve committees. Each segment reserve committee includes the participation of
the relevant parties from actuarial, finance, claims and segment senior management and has the responsibility for
recommending and approving management’s best estimate. Reserves are further reviewed by Everest’s Chief
Reserving Actuary and senior management. The objective of such process is to determine a single best estimate
viewed by management to be the best estimate of its ultimate loss liability. Actual loss and LAE ultimately paid
may deviate, perhaps substantially, from such reserves. Net income will be impacted in a period in which the
change in estimated ultimate loss and LAE is recorded.
F-29
The detailed data required to evaluate ultimate losses for the Company’s insurance business is accumulated from
its underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information received
from ceding companies. Ceding companies report losses in many forms depending on the type of contract and the
agreed or contractual reporting requirements. Generally, pro rata contracts require the submission of a
monthly/quarterly account, which includes premium and loss activity for the period with corresponding reserves
as established by the ceding company. This information is recorded into the Company’s records. For certain pro
rata contracts, the Company may require a detailed loss report for claims that exceed a certain dollar threshold or
relate to a particular type of loss. Excess of loss and facultative contracts generally require individual loss reporting
with precautionary notices provided when a loss reaches a significant percentage of the attachment point of the
contract or when certain causes of loss or types of injury occur. Experienced claims staff handles individual loss
reports and supporting claim information. Based on evaluation of a claim, the Company may establish additional
case reserves in addition to the case reserves reported by the ceding company. To ensure ceding companies are
submitting required and accurate data, Everest’s Underwriting, Claim, Reinsurance Accounting, and Internal Audit
Departments perform various reviews of ceding companies, particularly larger ceding companies, including on-site
audits of domestic ceding companies.
The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial analysis.
The Company assigns business to exposure groupings so that the underlying exposures have reasonably
homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate
losses. The Company periodically reviews its exposure groupings and may change groupings over time as business
changes. The Company currently uses approximately
200
of the key selection characteristics for the exposure groupings is the historical duration of the claims settlement
process. Business in which claims are reported and settled relatively quickly are commonly referred to as short tail
lines, principally property lines. On the other hand, casualty claims tend to take longer to be reported and settled
and casualty lines are generally referred to as long tail lines. Estimates of ultimate losses for shorter tail lines, with
the exception of loss estimates for large catastrophic events, generally exhibit less volatility than those for the
longer tail lines.
The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder
methods, and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate
ultimate loss and LAE for each exposure group.
Expected Loss Ratio Method: The expected loss ratio method uses earned premium times an expected loss ratio to
calculate ultimate losses for a given underwriting or accident year. This method relies entirely on expectation to
project ultimate losses with no consideration given to actual losses. As such, it may be appropriate for an
immature underwriting or accident year where few, if any, losses have been reported or paid, but less appropriate
for a more mature year.
Chain Ladder Method: Chain ladder methods use a standard loss development triangle to project ultimate losses.
Age-to-age development factors are selected for each development period and combined to calculate age-to-
ultimate development factors which are then applied to paid or reported losses to project ultimate losses. This
method relies entirely on actual paid or reported losses to project ultimate losses. No other factors such as
changes in pricing or other expectations are taken into account. It is most appropriate for groups with
homogeneous, stable experience where past development patterns are expected to continue in the future. It is
least appropriate for groups which have changed significantly over time or which are more volatile.
Bornhuetter-Ferguson Method: The Bornhuetter-Ferguson method is a combination of the expected loss ratio
method and the chain ladder method. Ultimate losses are projected based partly on actual paid or reported losses
and partly on expectation. Incurred but not reported (IBNR) reserves are calculated using earned premium, an a
priori loss ratio, and selected age-to-age development factors and added to actual reported (paid) losses to
determine ultimate losses. It is more responsive to actual reported or paid development than the expected loss
ratio method but less responsive than the chain ladder method. The reliability of the method depends on the
accuracy of the selected a priori loss ratio.
F-30
Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting of
experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate losses
for short tail lines at an earlier stage than for long tail lines. As a result, the Company utilizes, as well, exposure-
based methods to estimate its ultimate losses for longer tail lines, especially for immature underwriting or accident
years. For both short and long tail lines, the Company supplements these general approaches with analytically
based judgments.
Key actuarial assumptions contain no explicit provisions for reserve uncertainty nor do we supplement the
actuarially determined reserves for uncertainty.
Carried reserves at each reporting date are the Company’s best estimate of ultimate unpaid losses and LAE at that
date. The Company completes detailed reserve studies for each exposure group annually for both reinsurance and
insurance operations. The completed annual reserve studies are “rolled-forward” for each accounting period until
the subsequent reserve study is completed. Analyzing the roll-forward process involves comparing actual reported
losses to expected losses based on the most recent reserve study. The Company analyzes significant variances
between actual and expected losses and post adjustments to its reserves as warranted.
Certain reserves, including losses from widespread catastrophic events and COVID-19 related losses, cannot be
estimated using traditional actuarial methods. These types of events are reserved for separately using a variety of
statistical and actuarial techniques. We estimate losses for these types of events based on information derived
from catastrophe models, quantitative and qualitative exposure analyses, reports and communications from
ceding companies and development patterns for historically similar events, where available.
The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries
and/or damages relating to or resulting from environmental pollution and hazardous substances, including
asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental
contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the
land, air or water. Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for
property damage resulting from asbestos or products containing asbestos.
The Company’s reserves include an estimate of the Company’s ultimate liability for A&E claims. The Company’s
A&E liabilities emanate from direct insurance business and Everest Re’s assumed reinsurance business. All of the
contracts of insurance and reinsurance, under which the Company has received claims during the past three years,
expired more than
20 years
A&E losses.
A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The
following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance
basis for the periods indicated:
F-31
At December 31,
(Dollars in millions)
2022
2021
2020
Gross basis:
Beginning of period reserves
$
175
$
219
$
258
Incurred losses
144
11
2
Paid losses
(42)
(55)
(40)
End of period reserves
$
278
$
175
$
219
Net basis:
Beginning of period reserves
$
128
$
167
$
197
Incurred losses
113
(3)
(5)
Paid losses
(32)
(36)
(24)
End of period reserves
$
210
$
128
$
167
Reinsurance Recoverables. Reinsurance recoverables for both paid and unpaid losses totaled $
3.8
3.9
billion at December 31, 2022 and 2021, respectively. At December 31, 2022, $
1.9
51.0
%, was receivable
from Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”), an affiliated entity, and is fully collateralized by a trust
agreement and $
378
10.0
%, was receivable from Mt. Logan Re Ltd. (Bermuda) (“Mt. Logan Re”)
collateralized segregated accounts. No other retrocessionaire accounted for more than
5
% of reinsurance
receivables.
4. FAIR VALUE
GAAP guidance regarding fair value measurements address how companies should measure fair value when they
are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common
definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date.
In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The
valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability. The level in the
hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is
significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.
The levels in the hierarchy are defined as follows:
Level 1: Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for
identical assets or liabilities in an active market;
Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument;
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair va lue measurement.
The Company’s fixed maturity and equity securities are primarily managed by third party investment asset
managers. The investment asset managers managing publicly traded securities obtain prices from nationally
recognized pricing services. These services seek to utilize market data and observations in their evaluation
process. They use pricing applications that vary by asset class and incorporate available market information and
when fixed maturity securities do not trade on a daily basis the services will apply available information through
processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. In
addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and
interest rate scenarios for securities that have prepayment features.
F-32
The investment asset managers do not make any changes to prices received from either the pricing services or the
investment brokers. In addition, the investment asset managers have procedures in place to review the
reasonableness of the prices from the service providers and may request verification of the prices. The Company
also continually performs quantitative and qualitative analysis of prices, including but not limited to initial and
ongoing review of pricing methodologies, review of prices obtained from pricing services and third party
investment asset managers, review of pricing statistics and trends, and comparison of prices for certain securities
with a secondary price source for reasonableness. No material variances were noted during these price validation
procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own
assumptions about future cash flows and risk-adjusted discount rates to determine fair value. At December 31,
2022, $
1.7
maturities were valued by investment managers’ valuation committees and many of these fair values were
substantiated by valuations from independent third parties. The Company has procedures in place to evaluate
these independent third party valuations. At December 31, 2021, $
2.0
using unobservable inputs.
The Company internally manages a public equity portfolio which had a fair value at December 31, 2022 and
December 31, 2021 of $
97
1.3
collateralized loan obligations included in asset-backed securities available for sale, which had a fair value of $
2.6
billion at December 31, 2022 and $
2.0
from publicly published sources or nationally recognized pricing vendors.
Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are
categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign
exchanges are categorized as Level 2 due to the added input of a foreign exchange conversion rate to determine
fair value. The Company uses foreign currency exchange rates published by a nationally recognized source.
Fixed maturity securities listed in the tables have been categorized as Level 2, since a particular security may not
have traded but the pricing services are able to use valuation models with observable market inputs such as
interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority.
For foreign government securities and foreign corporate securities, the fair values provided by the third party
pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange
rates from nationally recognized sources.
In addition to the valuations from investment managers, some of the fixed maturities with fair values categorized
as Level 3 result when prices are not available from the nationally recognized pricing services and are derived using
unobservable inputs. The Company will value the securities with unobservable inputs using comparable market
information or receive fair values from investment managers. The investment managers may obtain non-binding
price quotes for the securities from brokers. The single broker quotes are provided by market makers or broker-
dealers who are recognized as market participants in the markets in which they are providing the quotes. The
prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company.
If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency
exchange rates from nationally recognized sources .
The fixed maturities with fair values categorized as Level 3 result when prices are not available from the nationally
recognized pricing services.
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;
F-33
●
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, were categorized as Level 3 at December 31, 2022 and December 31, 2021,
since it represented a privately placed convertible preferred stock issued by an affiliate. The stock was received in
exchange for shares of the Company’s parent. The
25
1.75
%
coupon is valued using a pricing model. The pricing model includes observable inputs such as the U.S. Treasury
yield curve rate T note constant maturity
10
June 1, 2044
,
4.868
% senior
notes, with adjustments to reflect the Company’s own assumptions about the inputs that market participants
would use in pricing the asset.
F-34
The following table presents the fair value measurement levels for all assets, which the Company has recorded at
fair value as of the period indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(Dollars in millions)
2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
$
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
(Some amounts may not reconcile due to rounding.)
F-35
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(Dollars in millions)
2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
$
663
$
-
$
663
$
-
Obligations of U.S. states and political subdivisions
587
-
587
-
Corporate securities
4,075
-
3,345
730
Asset-backed securities
3,466
-
2,215
1,251
Mortgage-backed securities
Commercial
603
-
603
-
Agency residential
1,261
-
1,261
-
Non-agency residential
4
-
4
-
Foreign government securities
692
-
692
-
Foreign corporate securities
1,510
-
1,494
16
Total fixed maturities, available for sale
12,860
-
10,863
1,997
Equity securities, fair value
1,758
1,722
36
-
Other invested assets, fair value
2,031
-
-
2,031
(Some amounts may not reconcile due to rounding.)
In addition, $
292
287
sheets as of December 31, 2022 and December 31, 2021, respectively, are not included within the fair value
hierarchy tables as the assets are measured at net asset value (NAV) as a practical expedient to determine fair
value.
F-36
The following table presents the activity under Level 3, fair value measurements using significant unobservable
inputs for fixed maturities available for sale, for the periods indicated:
Total Fixed Maturities, Available for Sale
December 31, 2021
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
CMBS
Corporate
Total
Securities
Corporate
Total
Beginning balance fixed maturities
$
730
$
1,251
$
-
$
16
$
1,997
$
631
$
623
$
6
$
1,260
Total gains or (losses) (realized/unrealized)
Included in earnings
(24)
-
-
-
(24)
(12)
(6)
-
(18)
Included in other comprehensive income (loss)
3
(35)
-
(4)
(36)
4
(7)
-
(2)
Purchases, issuances and settlements
40
513
6
8
567
107
641
10
758
Transfers in (out) of Level 3 and
reclassification of securities in/(out)
investment categories
(35)
(735)
(6)
(4)
(779)
-
-
-
-
Ending balance
$
715
$
994
$
-
$
16
$
1,725
$
730
$
1,251
$
16
$
1,997
The amount of total gains or losses for the
$
(23)
$
8
$
-
$
-
$
(15)
$
(16)
$
(8)
$
-
$
(24)
(Some amounts may not reconcile due to rounding.)
The $
779
categories for the year ended December 31, 2022 relate mainly to previously designated Level 3 securities that
the Company has reclassified from “fixed maturities – available for sale” to “fixed maturities – held to
maturity” during 2022. As “fixed maturities – held to maturity" are carried at amortized cost, net of credit
allowances rather than at fair value as “fixed maturities – available for sale”, these securities are no longer
included within the fair value hierarchy table or in the roll forward of Level 3 securities. The fair values of these
securities are determined in a similar manner as the Company’s fixed maturity securities available for sale as
described above. The fair values of these securities incorporate the use of significant unobservable inputs and
therefore are classified as Level 3 within the fair value hierarchy as of December 31, 2022.
no
Financial Instruments Disclosed, But Not Reported, at Fair Value
Certain financial instruments disclosed, but not reported, at fair value are excluded from the fair value hierarchy
tables above. Fair values of fixed maturity securities held to maturity, senior notes and long-term subordinated
notes can be found within Notes 2, 5 and 6, respectively. Fair values of long-term notes receivable from affiliates
can be found within Note 16. Short-term investments are stated at cost, which approximates fair value. See Note
1.
F-37
5. 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.
December 31, 2022
December 31, 2021
Consolidated
Consolidated
Principal
Balance Sheet
Fair
Balance Sheet
Fair
(Dollars in millions)
Date Issued
Date Due
Amounts
Amount
Value
Amount
Value
4.868
% Senior notes
06/05/2014
06/01/2044
400
$
397
$
343
$
397
$
504
3.5
% Senior notes
10/07/2020
10/15/2050
1,000
981
677
980
1,055
3.125
% Senior notes
10/04/2021
10/15/2052
1,000
969
627
969
983
2,400
$
2,347
$
1,647
$
2,346
$
2,542
Interest expense incurred in connection with these senior notes is as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
Interest Paid
Payable Dates
2022
2021
2020
4.868
% Senior notes
semi-annually
June 1/December 1
$
19
$
19
$
19
3.5
% Senior notes
semi-annually
April 15/October 15
35
35
8
3.125
% Senior notes
semi-annually
April 15/October 15
32
8
-
$
86
$
62
$
28
6. LONG-TERM SUBORDINATED NOTES
The table below displays Holdings’ outstanding fixed to floating rate long-term subordinated notes. Fair value is
based on quoted market prices, but due to limited trading activity, these subordinated notes are considered Level
2 in the fair value hierarchy.
December 31, 2022
December 31, 2021
Original
Consolidated
Consolidated
Principal
Maturity Date
Balance
Fair
Balance
Fair
(Dollars in millions)
Date Issued
Amount
Scheduled
Final
Sheet Amount
Value
Sheet Amount
Value
Long-term subordinated notes
04/26/2007
$
400
05/15/2037
05/01/2067
$
218
$
187
$
224
$
216
During the fixed rate interest period from
May 3, 2007
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
August 15 and November 15 of each year, subject to Holdings’ right to defer interest on
one
up to
ten
quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for November 15, 202 2 to
February 14, 2023 is
6.99
%.
Holdings may redeem the long-term subordinated notes on or after
May 15, 2017
, in whole or in part at
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
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
3.125
% senior notes due on
October
15, 2052
In 2009, the Company had reduced its outstanding amount of long-term subordinated notes through the
initiation of a cash tender offer for any and all of the long-term subordinated notes. In addition, the Company
F-38
repurchased and retired $
6
31, 2022. The Company realized a gain of $
1
Interest expense incurred in connection with these long-term subordinated notes is as follows for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Interest expense incurred
$
9
$
6
$
8
7. 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 December 31, 2022, Everest Re had admitted assets of
approximately $
22.4
2.2
31, 2022, Everest Re has $
519
interest expense of $
4
1
FHLBNY membership agreement requires that
4.5
% of borrowed funds be used to acquire additional membership
stock.
8. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS
A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re’s
investments as collateral, as security for assumed losses payable to non-affiliated ceding companies. At December
31, 2022, the total amount on deposit in the trust account was $
705
21
restricted cash. At December 31, 2021, the total amount on deposit in the trust account was $
592
includes $
87
F-39
The Company entered into various collateralized reinsurance agreements with Kilimanjaro Re Limited
(“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance
coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake
events. The table below summarizes the various agreements:
(Dollars in millions)
Class
Description
Effective Date
Expiration Date
Limit
Coverage
Basis
Series 2018-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/30/2018
5/5/2023
$
63
Aggregate
Series 2018-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/30/2018
5/5/2023
200
Aggregate
Series 2019-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2023
150
Occurrence
Series 2019-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2023
275
Aggregate
Series 2019-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
150
Occurrence
Series 2019-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
275
Aggregate
Series 2021-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
150
Occurrence
Series 2021-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class C-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
150
Occurrence
Series 2021-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2021-1 Class C-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/22/2022
6/25/2025
300
Aggregate
Total available limit as of December 31, 2022
$
2,063
Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on
estimated industry level insured losses from covered events, as well as, the geographic location of the events. The
estimated industry level of insured losses is obtained from published estimates by an independent recognized
authority on insured property losses. Currently, none of the published insured loss estimates for catastrophe
events during the applicable covered periods of the various agreements have exceeded the single event retentions
or aggregate retentions under the terms of the agreements that would result in a recovery.
Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to
unrelated, external investors. The proceeds from the issuance of the Notes listed below are held in reinsurance
trusts throughout the duration of the applicable reinsurance agreements and invested solely in US government
money market funds with a rating of at least “AAAm” by Standard & Poor’s.
F-40
(Dollars in millions)
Note Series
Issue Date
Maturity Date
Amount
Series 2018-1 Class A-2
4/30/2018
5/5/2023
$
63
Series 2018-1 Class B-2
4/30/2018
5/5/2023
200
Series 2019-1 Class A-1
12/12/2019
12/19/2023
150
Series 2019-1 Class B-1
12/12/2019
12/19/2023
275
Series 2019-1 Class A-2
12/12/2019
12/19/2024
150
Series 2019-1 Class B-2
12/12/2019
12/19/2024
275
Series 2021-1 Class A-1
4/8/2021
4/21/2025
150
Series 2021-1 Class B-1
4/8/2021
4/21/2025
85
Series 2021-1 Class C-1
4/8/2021
4/21/2025
85
Series 2021-1 Class A-2
4/8/2021
4/20/2026
150
Series 2021-1 Class B-2
4/8/2021
4/20/2026
90
Series 2021-1 Class C-2
4/8/2021
4/20/2026
90
Series 2022-1 Class A
6/22/2022
6/25/2025
300
$
2,063
9. LEASES
The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary
course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a
straight-line basis over the term of the lease. Most leases include an option to extend or renew the lease term.
The exercise of the renewal is at the Company’s discretion. The operating lease liability includes lease payments
related to options to extend or renew the lease term if the Company is reasonably certain of exercise those
options. The Company, in determining the present value of lease payments utilizes either the rate implicit in the
lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate
with terms of the underlying lease.
Supplemental information related to operating leases is as follows for the periods indicated:
Year Ended
December 31,
(Dollars in millions)
2022
2021
Lease expense incurred:
Operating lease cost
$
25
$
24
At December 31,
(Dollars in millions)
2022
2021
Operating lease right of use assets
$
121
$
131
Operating lease liabilities
139
150
Year Ended
December 31,
(Dollars in millions)
2022
2021
Operating cash flows from operating leases
$
(18)
$
(16)
F-41
At December 31,
2022
2021
Weighted average remaining operating lease term
11.1
11.8
Weighted average discount rate on operating leases
4.00
%
4.00
%
Maturities of the existing lease liabilities are expected to occur as follows:
(Dollars in millions)
2023
$
19
2024
19
2025
16
2026
14
2027
14
Thereafter
90
Undiscounted lease payments
172
Less: present value adjustment
32
Total operating lease liability
$
139
10. INCOME TAXES
All of the income of Holdings U.S. subsidiaries, including its foreign branches, is subject to the applicable federal,
foreign, state, and local income taxes on corporations. The provision for income taxes in the consolidated
statement of operations and comprehensive income (loss) has been determined by applying the respective tax
laws to the income of each entity.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, provided that U.S.
companies could carryback for five years net operating losses incurred in 2018, 2019 and/or 2020. This beneficial
tax provision in the CARES Act enabled the Company to carryback its significant 2018 net operating losses to prior
tax years with higher effective tax rates of
35
% versus
21
% in 2018 and later years. As a result, the Company was
able to record a net income tax benefit from the five-year carryback of $
33
cash refunds of $
183
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions
of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase
excise tax and do not expect the legislation to have a material impact on our results of operations. As the IRS issues
additional guidance, we will evaluate any impact to our consolidated financial statements.
The significant components of the provision are as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Current tax expense (benefit):
U.S.
$
95
$
102
$
(106)
Foreign
-
-
-
Total current tax expense (benefit)
95
102
(106)
Total deferred U.S. tax expense (benefit)
(207)
90
138
Total income tax expense (benefit)
$
(112)
$
192
$
32
F-42
A reconciliation of the total income tax provision using the statutory U.S. Federal Income tax rate to the Company’s
total income tax provision is as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Expected income tax provision at the U.S. statutory tax rate
$
(117)
$
208
$
81
Increase (decrease) in taxes resulting from:
Tax exempt income
(4)
(4)
(4)
Dividend received deduction
(3)
(1)
(1)
Proration
1
1
1
Creditable foreign premium tax
(11)
(13)
(12)
Reserve adjustment
(19)
-
-
U.S. BEAT tax
22
-
-
Share based compensation
(3)
(2)
(3)
Impact of CARES Act
-
-
(33)
Prior year true up
16
-
(4)
Other
6
3
7
Total income tax provision
$
(112)
$
192
$
32
(Some amounts may not reconcile due to rounding.)
At December 31, 2022, 2021 and 2020, the Company had
no
The Company’s 2014 through 2018 U.S. tax years are under audit by the Internal Revenue Service (“IRS”). To date,
the Company has received a significant number of Information Document Requests. However, the IRS has not
issued any Notice of Proposed Adjustments for these tax years. The Company had filed amended tax returns
requesting refunds for 2015 and 2016 for $
2
5
Tax years 2019, 2020, and 2021 are open for examination by the IRS.
F-43
Deferred income taxes reflect the tax effect of the temporary differences between the value of assets and
liabilities for financial statement purposes and such values as measured by U.S. tax laws and regulations. The
principal items making up the net deferred income tax assets/(liabilities) are as follows for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Deferred tax assets:
Net unrealized investment losses
$
200
$
-
Loss reserves
154
130
Unearned premium reserve
114
108
Lease Liability
29
31
Unrealized foreign currency losses
24
4
Investment impairments
12
6
Net unrecognized losses on benefit plans
9
13
Equity compensation
7
7
Foreign tax credits
3
22
Other assets
12
12
Total deferred tax assets
564
333
Deferred tax liabilities:
Net fair value income
141
349
Deferred acquisition costs
105
99
Partnership Investments
56
57
Right of use asset
25
27
Depreciation
16
4
Bond market discount
5
3
Net unrealized investment gains
-
35
Other liabilities
6
5
Total deferred tax liabilities
354
579
Net deferred tax assets/(liabilities)
$
210
$
(246)
(Some amounts may not reconcile due to rounding.)
At December 31, 2022, and 2021, the Company had $
3
29
(“FTC”) carryforwards, all related to the branch basket. The branch basket FTCs begin to expire in
2030
.
Tax effected U.S. Separate Return Limitation Year Net Operating Losses (“NOLs”) of $
1
2037
.
At December 31, 2022, $
200
available for sale fixed maturity securities. The unrealized losses on available for sale fixed maturity securities were
a result of market conditions, including rising interest rates. Ultimate realization of the deferred tax asset depends
on the Company’s ability and intent to hold the available for sale securities until they recover their value or
mature. As of December 31, 2022, based on all the available evidence, the Company has concluded that the
deferred tax asset related to the unrealized losses on the available for sale fixed maturity portfolio are, more likely
than not, expect to be realized.
The Company follows ASU 2016-09 in regard to the treatment of the tax effects of share-based compensation
transactions. ASU 2016-09 required that the income tax effects of restricted stock vestings and stock option
exercises resulting from the change in value of share-based compensation awards between the grant date and
F-44
settlement (vesting/exercising) date be recorded as part of income tax expense (benefit) within the consolidated
statements of operations and comprehensive income (loss). Per ASU 2016-09, the Company recorded excess tax
benefits of $
3
2
3
part of income tax expense (benefit) within the consolidated statements of operations and comprehensive income
(loss) in 2022, 2021 and 2020, respectively.
ASU 2016-09 does not impact the accounting treatment of tax benefits related to dividends on restricted stock.
The tax benefits related to the payment of dividends on restricted stock have been recorded as part of additional
paid-in capital in the stockholder’s equity section of the consolidated balance sheets in all years. The tax benefits
related to the payment of dividends on restricted stock were $
0.4
0.4
0.4
2021 and 2020, respectively.
11. REINSURANCE
The Company utilizes reinsurance agreements to reduce its exposure to large claims and catastrophic loss
occurrences. These agreements provide for recovery from reinsurers of a portion of losses and LAE under certain
circumstances without relieving the Company of its underlying obligations to the policyholders. Losses and LAE
incurred and premiums earned are reported after deduction for reinsurance. In the event that one or more of the
reinsurers were unable to meet their obligations under these reinsurance agreements, the Company would not
realize the full value of the reinsurance recoverables balances. The Company's procedures include carefully
selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly
monitoring the financial condition and ratings of its reinsurers. Reinsurance recoverable include balances due from
reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance
recoverables include an estimate of the amount of gross losses and loss adjustment expense reserves that may be
ceded under the terms of the reinsurance agreements, including incurred but not reported unpaid losses. The
Company’s estimate of losses and loss adjustment expense reserves ceded to reinsurers is based on assumptions
that are consistent with those used in establishing the gross reserves for amounts the Company owes to its
claimants. The Company estimates its ceded reinsurance recoverable based on the terms of any applicable
facultative and treaty reinsurance, including an estimate of how incurred but not reported losses will ultimately be
ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance recoverables is subject
to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment
expenses. The Company may hold partial collateral, including letters of credit and funds held, under these
agreements. See also Note 1C, Note 3 and Note 8.
Balances are considered past due when amounts that have been billed are not collected within contractually
stipulated time periods, generally 30, 60 or 90 days. To manage reinsurer credit risk, a reinsurance security review
committee evaluates the credit standing, financial performance, management and operational quality of each
potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured, including the
expected liability payout duration, and establishes limits tiered by reinsurer credit rating.
Where its contracts permit, the Company secures future claim obligations with various forms of collateral or other
credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group wide
offsets.
See Note 1C for discussion of allowance on reinsurance recoverables.
Insurance companies, including reinsurers, are regulated and hold risk-based capital to mitigate the risk of loss due
to economic factors and other risks. Non-U.S. reinsurers are either subject to a capital regime substantively
equivalent to domestic insurers or we hold collateral to support collection of reinsurance receivable. As a result,
there is limited history of losses from insurer defaults.
F-45
Premiums written and earned and incurred losses and LAE are comprised of the following for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Written premiums:
Direct
$
3,701
$
3,300
$
2,698
Assumed
5,975
6,031
5,259
Ceded
(1,645)
(1,612)
(1,318)
Net written premiums
$
8,032
$
7,719
$
6,639
Premiums earned:
Direct
$
3,544
$
2,982
$
2,592
Assumed
5,945
5,741
5,183
Ceded
(1,613)
(1,544)
(1,368)
Net premiums earned
$
7,876
$
7,179
$
6,407
Incurred losses and LAE:
Direct
$
2,423
$
2,043
$
1,785
Assumed
4,107
3,872
3,576
Ceded
(708)
(528)
(753)
Net incurred losses and LAE
$
5,823
$
5,387
$
4,608
The Company has engaged in reinsurance transactions with Bermuda Re, Everest Reinsurance Company (Ireland)
dac (“Ireland Re”), Everest Insurance (Ireland) dac (“Ireland Insurance”), Everest International Reinsurance Ltd.
(“Everest International”), Everest Insurance Company of Canada (“Everest Canada”), Lloyd’s Syndicate 2786 and
Mt. Logan Re, which are affiliated companies primarily driven by enterprise risk and capital 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)
Single
Percent
Assuming
Occurrence
Aggregate
Coverage Period
Ceding Company
Ceded
Company
Type of Business
Limit
Limit
01/01/2010-12/31/2010
Everest Re
44.0
%
Bermuda Re
Property / Casualty Business
150
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
-
-
(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, 2022.
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 £
100
F-46
million of reinsurance coverage for each catastrophe occurrence above £
40
recently renewed effective January 1, 2022.
Everest Re entered into a catastrophe excess of loss reinsurance contract with Ireland Re, effective February 1,
2021 through January 31, 2022. The contract provides Ireland Re with up to €
145
for each catastrophe occurrence above €
16
1, 2022.
The table below represents loss portfolio transfer (“LPT”) reinsurance agreements whereby net insurance
exposures and reserves were transferred to an affiliate.
(Dollars in millions)
Effective
Transferring
Assuming
% of Business or
Covered Period
Date
Company
Company
Amount of Transfer
of Transfer
10/01/2001
Everest Re (Belgium Branch)
Bermuda Re
100
%
All years
10/01/2008
Everest Re
Bermuda Re
$
747
01/01/2002-12/31/2007
12/31/2017
Everest Re
Bermuda Re
$
970
All years
On December 31, 2017, the Company entered into a LPT agreement with Bermuda Re. The LPT agreement covers
subject loss reserves of $
2.3
Company transferred $
1.0
970
to Bermuda Re. As part of the LPT agreement, Bermuda Re will provide an additional $
500
development coverage on the subject loss reserves. As of December 31, 2022, and December 31, 2021, the
Company has a reinsurance recoverable of $
804
856
sheet due from Bermuda Re.
The following tables summarize the significant premiums and losses ceded and assumed by the Company in
transactions with affiliated entities for the periods indicated:
Bermuda Re
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Ceded written premiums
$
372
$
303
$
133
Ceded earned premiums
371
300
132
Ceded losses and LAE
(16)
(59)
110
Assumed written premiums
3
5
-
Assumed earned premiums
5
4
-
Ireland Re
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Assumed written premiums
$
10
$
16
$
-
Assumed earned premiums
10
15
-
Assumed losses and LAE
23
64
-
F-47
Ireland Insurance
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Assumed written premiums
$
9
$
9
$
5
Assumed earned premiums
8
6
4
Assumed losses and LAE
5
3
2
In 2013, Group established Mt. Logan Re, which is a Class 3 insurer based in Bermuda. Mt. Logan Re then
established separate segregated accounts for its business activity, which invest in a diversified set of catastrophe
exposures.
The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re
segregated accounts and assumed by the Company from Mt. Logan Re segregated accounts.
Mt. Logan Re Segregated Accounts
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Ceded written premiums
$
170
$
286
$
263
Ceded earned premiums
174
280
265
Ceded losses and LAE
150
194
175
12. COMPREHENSIVE INCOME (LOSS)
The following tables present the components of comprehensive income (loss) in the consolidated statements of
operations and comprehensive income (loss) for the periods indicated:
December 31, 2022
December 31, 2021
December 31, 2020
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Unrealized appreciation (depreciation)
$
(1,280)
269
$
(1,011)
$
(254)
53
$
(200)
$
206
(43)
$
163
Reclassification of net realized losses
93
(20)
73
12
(3)
9
32
(7)
25
Foreign currency translation adjustments
(23)
5
(18)
(11)
2
(9)
18
(4)
14
Benefit plan actuarial net gain (loss)
18
(4)
15
22
(5)
17
(7)
1
(6)
Reclassification of amortization of net gain (loss)
included in net income (loss)
3
(1)
2
8
(2)
6
8
(2)
6
Total other comprehensive income (loss)
$
(1,189)
$
249
$
(939)
$
(223)
$
47
$
(177)
$
258
$
(54)
$
204
(Some amounts may not reconcile due to rounding)
The following table presents details of the amounts reclassified from AOCI for the periods indicated:
Affected line item within the
Years Ended December 31,
statements of operations and
AOCI component
2022
2021
comprehensive income (loss)
(Dollars in millions)
URA(D) on securities
$
93
$
12
Other net realized capital gains (losses)
(20)
(3)
Income tax expense (benefit)
$
73
$
9
Net income (loss)
Benefit plan net gain (loss)
$
3
$
8
Other underwriting expenses
(1)
(2)
Income tax expense (benefit)
$
2
$
6
Net income (loss)
(Some amounts may not reconcile due to rounding)
F-48
The following table presents the components of accumulated other comprehensive income (loss), net of tax, in the
consolidated balance sheets for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Beginning balance of URA(D) on securities
$
122
$
313
Current period change in URA(D) of investments - temporary
(938)
(191)
Ending balance of URA(D) on securities
(816)
122
Beginning balance of foreign currency translation adjustments
20
29
Current period change in foreign currency translation adjustments
(18)
(9)
Ending balance of foreign currency translation adjustments
2
20
Beginning balance of benefit plan net gain (loss)
(50)
(74)
Current period change in benefit plan net gain (loss)
17
23
Ending balance of benefit plan net gain (loss)
(33)
(50)
Ending balance of accumulated other comprehensive income (loss)
$
(848)
$
91
(Some amounts may not reconcile due to rounding)
13. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans.
The Company maintains both qualified and non-qualified defined benefit pension plans for its U.S. employees
employed prior to April 1, 2010. Generally, the Company computes the benefits based on average earnings over a
period prescribed by the plans and credited length of service. The Company’s non-qualified defined benefit
pension plan provided compensating pension benefits for participants whose benefits have been curtailed under
the qualified plan due to Internal Revenue Code limitations. Effective January 1, 2018, participants of the
Company’s non-qualified defined benefit pension plan may no longer accrue additional service benefits.
Although not required to make contributions under IRS regulations, the following table summarizes the Company’s
contributions to the defined benefit pension plans for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Company contributions
$
6
$
4
$
7
The following table summarizes the Company’s pension expense for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Pension expense
$
(2)
$
3
$
8
F-49
The following table summarizes the status of these defined benefit plans for U.S. employees for the periods
indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
403
$
404
Service cost
9
11
Interest cost
10
8
Actuarial (gain)/loss
(115)
(9)
Curtailment
-
-
Benefits paid
(15)
(12)
Projected benefit obligation at end of year
291
403
Change in plan assets:
Fair value of plan assets at beginning of year
377
354
Actual return on plan assets
(83)
31
Actual contributions during the year
6
4
Benefits paid
(15)
(12)
Fair value of plan assets at end of year
285
377
Funded status at end of year
$
(6)
$
(25)
(Some amounts may not reconcile due to rounding.)
Amounts recognized in the consolidated balance sheets for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Other assets (due beyond one year)
$
1
$
-
Other liabilities (due within one year)
(1)
(1)
Other liabilities (due beyond one year)
(6)
(24)
Net amount recognized in the consolidated balance sheets
$
(6)
$
(25)
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income
(loss) for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Accumulated income (loss)
$
(56)
$
(68)
Accumulated other comprehensive income (loss)
$
(56)
$
(68)
(Some amounts may not reconcile due to rounding.)
F-50
Other changes in other comprehensive income (loss) for the periods indicated are as follows:
Years Ended December 31,
(Dollars in millions)
2022
2021
Other comprehensive income (loss) at December 31, prior year
$
(68)
$
(92)
Net gain (loss) arising during period
7
15
Recognition of amortizations in net periodic benefit cost:
Actuarial loss
4
9
Curtailment loss recognized
-
-
Other comprehensive income (loss) at December 31, current year
$
(56)
$
(68)
(Some amounts may not reconcile due to rounding.)
Net periodic benefit cost for U.S. employees included the following components for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Service cost
$
9
$
11
$
10
Interest cost
10
8
10
Expected return on assets
(25)
(24)
(21)
Amortization of actuarial loss from earlier periods
4
8
9
Settlement
1
-
1
Net periodic benefit cost
$
(2)
$
3
$
8
Other changes recognized in other comprehensive income (loss):
Other comprehensive income (loss) attributable to change from
(12)
(24)
Total recognized in net periodic benefit cost and other
comprehensive income (loss)
$
(14)
$
(21)
(Some amounts may not reconcile due to rounding.)
The weighted average discount rates used to determine net periodic benefit cost for 2022, 2021 and 2020 were
2.86
%,
2.55
% and
3.28
%, respectively. The rate of compensation increase used to determine the net periodic
benefit cost for 2022, 2021 and 2020 was
4.00
%. The expected long-term rate of return on plan assets for 2022,
2021 and 2020 was
6.75
%,
7.00
% and
7.00
% respectively.
The weighted average discount rates used to determine the actuarial present value of the projected benefit
obligation for 2022, 2021 and 2020 were
5.25
%,
2.86
% and
2.55
%, respectively.
The following table summarizes the accumulated benefit obligation for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
$
258
$
339
Non-qualified Plan
6
12
Total
$
264
$
352
(Some amounts may not reconcile due to rounding.)
F-51
The following table displays the plans with projected benefit obligations in excess of plan assets for the periods
indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
Projected benefit obligation
$
284
$
390
Fair value of plan assets
285
377
Non-qualified Plan
Projected benefit obligation
$
6
$
12
Fair value of plan assets
-
-
The following table displays the plans with accumulated benefit obligations in excess of plan assets for the periods
indicated:
At December 31,
(Dollars in millions)
2022
2021
Qualified Plan
Accumulated benefit obligation
$
-
$
-
Fair value of plan assets
-
-
Non-qualified Plan
Accumulated benefit obligation
6
12
Fair value of plan assets
$
-
$
-
The following table displays the expected benefit payments in the periods indicated:
(Dollars in millions)
2023
$
13
2024
14
2025
14
2026
15
2027
17
Next 5 years
100
Plan assets consist of shares in investment trusts with
74
%,
24
%,
1
% and
1
% of the underlying assets consisting of
equity securities, fixed maturities, limited partnerships and cash, respectively. The Company manages the
qualified plan investments for U.S. employees. The assets in the plan consist of debt and equity mutual
funds. Due to the long-term nature of the plan, the target asset allocation has historically been
70
% equities and
30
% bonds.
F-52
The following tables present the fair value measurement levels for the qualified plan assets at fair value for the
periods indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(Dollars in millions)
2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Short-term investments, which approximates fair value (a)
$
4
$
4
$
-
$
-
Mutual funds, fair value
Fixed income (b)
68
68
-
-
Equities (c)
211
211
-
-
Total
$
283
$
283
$
-
$
-
(Some amounts may not reconcile due to rounding.)
(a) This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b) This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with
approximately
70
% in U.S. securities and
30
% in international securities.
(c) This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock
and securities with common stock characteristics, such as rights and warrants, with approximately
50
% in U.S. equities and
50
% in international equities.
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(Dollars in millions)
2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Short-term investments, which approximates fair value (a)
$
3
$
3
$
-
$
-
Mutual funds, fair value
Fixed income (b)
85
85
-
-
Equities (c)
287
287
-
-
Total
$
375
$
375
$
-
$
-
(Some amounts may not reconcile due to rounding.)
(a) This category includes high quality, short-term money market instruments, which are issued and payable in U.S. dollars.
(b) This category includes fixed income funds, which invest in investment grade securities of corporations, governments and government agencies with
approximately
70
% in U.S. securities and
30
% in international securities.
(c) This category includes funds, which invest in small, mid and multi-cap equity securities including common stocks, securities convertible into common stock
and securities with common stock characteristics, such as rights and warrants, with approximately
50
% in U.S. equities and
50
% in international equities.
In addition, $
2
3
December 31, 2022 and 2021, respectively, are not included within the fair value hierarchy tables as the assets are
valued using the NAV practical expedient guidance within ASU 2015-07.
F-53
No
2021.
Defined Contribution Plans.
The Company also maintains both qualified and non-qualified defined contribution plans (“Savings Plan” and “Non-
Qualified Savings Plan”, respectively) covering U.S. employees. Under the plans, the Company contributes up to a
maximum
3
% of the participants’ compensation based on the contribution percentage of the employee. The Non-
Qualified Savings Plan provides compensating savings plan benefits for participants whose benefits have been
curtailed under the Savings Plan due to Internal Revenue Code limitations. In addition, effective for new hires (and
rehires) on or after April 1, 2010, the Company will contribute between
3
% and
8
% of an employee’s earnings for
each payroll period based on the employee’s age. These contributions will be
100
% vested after
three year
s. The
Company incurred expenses related to these plans of $
18
15
14
December 31, 2022, 2021 and 2020, respectively.
In addition, the Company maintains several defined contribution pension plans covering non-U.S. employees. Each
international office maintains a separate plan for the non-U.S. employees working in that location. The Company
contributes various amounts based on salary, age and/or years of service. In the current year, the contributions as
a percentage of salary for the international offices ranged from
7.8
% to
9.6
%. The contributions are generally used
to purchase pension benefits from local insurance providers. The Company incurred expenses related to these
plans of $
0.7
0.6
0.8
respectively.
Post-Retirement Plan.
The Company sponsors a Retiree Health Plan employees employed prior to April 1, 2010. This plan provides
��
forhealthcare benefits for eligible retired employees (and their eligible dependents), who have elected coverage. The
Company anticipates that most covered employees will become eligible for these benefits if they retire while
working for the Company. The cost of these benefits is shared with the retiree. The Company accrues the post-
retirement benefit expense during the period of the employee’s service. A medical cost trend rate of
7.00
% in 2022
was assumed to decrease gradually to
4.75
% in 2030 and then remain at that level. The Company incurred
expenses of $
1
1
1
respectively.
F-54
The following table summarizes the status of this plan for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
31
$
35
Service cost
1
1
Interest cost
1
1
Amendments
-
-
Actuarial (gain)/loss
(10)
(6)
Benefits paid
-
-
Benefit obligation at end of year
21
31
Change in plan assets:
Fair value of plan assets at beginning of year
-
-
Employer contributions
-
-
Benefits paid
-
-
Fair value of plan assets at end of year
-
-
Funded status at end of year
$
(21)
$
(31)
Amounts recognized in the consolidated balance sheets for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Other liabilities (due within one year)
$
(1)
$
(1)
Other liabilities (due beyond one year)
(21)
(30)
Net amount recognized in the consolidated balance sheets
$
(21)
$
(31)
(Some amounts may not reconcile due to rounding.)
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income
(loss) for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
Accumulated income (loss)
$
13
$
2
Accumulated prior service credit (cost)
1
2
Accumulated other comprehensive income (loss)
$
14
$
4
F-55
Other changes in other comprehensive income (loss) for the periods indicated are as follows:
Years Ended December 31,
(Dollars in millions)
2022
2021
Other comprehensive income (loss) at December 31, prior year
$
4
$
(2)
Net gain (loss) arising during period
10
6
Prior Service credit (cost) arising during period
-
-
Recognition of amortizations in net periodic benefit cost:
Actuarial loss (gain)
-
-
Prior service cost
-
(1)
Other comprehensive income (loss) at December 31, current year
$
14
$
4
Net periodic benefit cost included the following components for the periods indicated:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Service cost
$
1
$
1
$
1
Interest cost
1
1
1
Prior service credit recognition
-
(1)
(1)
Net gain recognition
-
-
-
Net periodic cost
$
1
$
1
$
1
Other changes recognized in other comprehensive income (loss):
Other comprehensive gain (loss) attributable to change from prior year
(10)
(5)
Total recognized in net periodic benefit cost and
other comprehensive income (loss)
$
(9)
$
(4)
(Some amounts may not reconcile due to rounding.)
The weighted average discount rates used to determine net periodic benefit cost for 2022, 2021 and 2020 were
2.86
%,
2.55
% and
3.28
%, respectively.
The weighted average discount rates used to determine the actuarial present value of the projected benefit
obligation at year end 2022, 2021 and 2020 were
5.25
%,
2.86
% and
2.55
%, respectively.
The following table displays the expected benefit payments in the years indicated:
(Dollars in millions)
2023
$
1
2024
1
2025
1
2026
1
2027
1
Next 5 years
7
14. DIVIDEND RESTRICTIONS AND STATUTORY FINANCIAL INFORMATION
Holdings and its operating subsidiaries are subject to various regulatory restrictions, including the amount of
dividends that may be paid and the level of capital that the operating entities must maintain. These regulatory
F-56
restrictions are based upon statutory capital as opposed to GAAP basis equity or net assets. Holdings’ primary
operating subsidiary, Everest Re, is regulated by Delaware law and is subject to the Risk-Based Capital Model
(“RBC”) developed by the National Association of Insurance Commissioners (“NAIC”). This model represents the
aggregate regulatory restrictions on net assets and statutory capital and surplus.
Dividend Restrictions.
Delaware law provides that an insurance company which is a member of an insurance holding company system
and is domiciled in the state shall not pay dividends without giving prior notice to the Insurance Commissioner of
Delaware and may not pay dividends without the approval of the Insurance Commissioner if the value of the
proposed dividend, together with all other dividends and distributions made in the preceding twelve months,
exceeds the greater of (1)
10
% of statutory surplus or (2) net income, not including realized capital gains, each as
reported in the prior year’s statutory annual statement. In addition, no dividend may be paid in excess of
unassigned earned surplus. At December 31, 2022, Everest Re has $
555
in 2023 without the need for prior regulatory approval.
Statutory Financial Information.
Everest Re prepares its statutory financial statements in accordance with accounting practices prescribed or
permitted by the NAIC and the Delaware Insurance Department. Prescribed statutory accounting practices are set
forth in the NAIC Accounting Practices and Procedures Manual. The capital and statutory surplus of Everest Re was
$
5.6
5.7
was $
294
264
595
respectively.
There are certain regulatory and contractual restrictions on the ability of Holdings’ operating subsidiaries to
transfer funds to Holdings in the form of cash dividends, loans or advances. The insurance laws of the State of
Delaware, where Holdings’ direct insurance subsidiaries are domiciled, require regulatory approval before those
subsidiaries can pay dividends or make loans or advances to Holdings that exceed certain statutory thresholds.
Capital Restrictions.
In the United States, Everest Re is subject to the RBC developed by the NAIC which determines an authorized
control level risk-based capital. As long as the total adjusted capital is
200
% or more of the authorized control
level capital, no action is required by the Company.
The regulatory targeted capital and the actual statutory capital for Everest Re is 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.
15. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal
dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under
insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its rights under an
agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect
funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both
informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the
F-57
Company believes that its positions are legally and commercially reasonable. The Company considers the statuses
of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a
party to any other material litigation or arbitration.
The Company has entered into separate annuity agreements with The Prudential Insurance Company of America
(“The Prudential”) 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
contract.
The table below presents the estimated cost to replace all such annuities for which the Company was contingently
liable for the periods indicated:
At December 31,
(Dollars in millions)
2022
2021
The Prudential
$
137
$
138
Unaffiliated life insurance company
34
35
16. RELATED-PARTY TRANSACTIONS
The table below displays 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. Fair value of these long-term notes is considered Level 2 in the fair value hierarchy.
December 31, 2022
December 31, 2021
Consolidated
Consolidated
Principal
Balance Sheet
Fair
Balance Sheet
Fair
(Dollars in millions)
Date Issued
Date Due
Amounts
Amount
Value
Amount
Value
1.69
% Long-term Note
12/17/2019
12/17/2028
300
$
300
$
242
$
300
$
264
1.00
% Long-term Note
08/05/2021
08/05/2030
200
200
151
200
165
3.11
% Long-term Note
06/14/2022
06/14/2052
215
215
171
-
-
4.34
% Long-term Note
12/12/2022
12/12/2052
125
125
125
-
-
840
$
840
$
689
$
500
$
429
Interest income recognized in connection with these long-term notes is as follows for the periods indicated:
Years Ended December 31,
(Dollars in millions)
Interest Received
Receivable Dates
2022
2021
2020
1.69
% Long-term Note
annually
December 17
$
5
$
5
$
5
1.00
% Long-term Note
annually
August 5
2
1
-
3.11
% Long-term Note
annually
June 14
4
-
-
$
11
$
6
$
5
(Some amounts may not reconcile due to rounding.)
F-58
Holdings holds
1,773.214
1
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 the preferred shares in Preferred Holdings, as other invested assets, fair value, in
the consolidated balance sheets with changes in fair value re -measurement recorded in net realized capital gains
(losses) in the consolidated statements of operations and comprehensive income (loss). The following table
presents the dividends received on the preferred shares of Preferred Holdings and on the Parent shares that are
reported as net investment income in the consolidated statements of operations and comprehensive income (loss)
for the periods indicated.
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Dividends received on preferred stock of affiliate
$
31
$
31
$
31
Affiliated Companies
Everest Global Services, Inc. (“Global Services”), an affiliate of Holdings, provides centralized management and
home office services, through a management agreement, to Holdings and other affiliated companies within
Holdings’ consolidated structure. Services provided by Everest Global include executive managerial services, legal
services, actuarial services, accounting services, information technology services and others.
The following table presents the expenses incurred by Holdings from services provided by Everest Global for the
periods indicated.
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Expenses incurred
$
204
$
133
$
124
17. 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 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.
These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk
management, control of aggregate catastrophe exposures, capital, investments and support operations.
Management generally monitors and evaluates the financial performance of these operating segments based upon
their underwriting results.
Underwriting results include earned premium less losses and LAE incurred, commission and brokerage expenses
and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission
and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and
brokerage and other underwriting expenses by premiums earned.
The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the
Company does not review and evaluate the financial results of its operating segments based upon balance sheet
data.
F-59
The following tables present the underwriting results for the operating segments for the periods indicated:
Year Ended December 31, 2022
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
5,948
$
3,729
$
9,677
Net written premiums
5,269
2,763
8,032
Premiums earned
$
5,212
$
2,664
$
7,876
Incurred losses and LAE
3,957
1,865
5,823
Commission and brokerage
1,326
306
1,632
Other underwriting expenses
139
363
501
Underwriting gain (loss)
$
(210)
$
130
$
(81)
Net investment income
638
Net gains (losses) on investments
(982)
Corporate expenses
(26)
Interest, fee and bond issue cost amortization expense
(101)
Other income (expense)
(6)
Income (loss) before taxes
$
(557)
Year Ended December 31, 2021
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
6,028
$
3,303
$
9,331
Net written premiums
5,265
2,455
7,719
Premiums earned
$
4,949
$
2,230
$
7,179
Incurred losses and LAE
3,761
1,626
5,387
Commission and brokerage
1,250
262
1,513
Other underwriting expenses
143
311
454
Underwriting gain (loss)
$
(206)
$
31
$
(175)
Net investment income
745
Net gains (losses) on investments
501
Corporate expenses
(33)
Interest, fee and bond issue cost amortization expense
(70)
Other income (expense)
23
Income (loss) before taxes
$
991
(Some amounts may not reconcile due to rounding.)
F-60
Year Ended December 31, 2020
(Dollars in millions)
Reinsurance
Insurance
Total
Gross written premiums
$
5,266
$
2,691
$
7,957
Net written premiums
4,632
2,006
6,639
Premiums earned
$
4,485
$
1,922
$
6,407
Incurred losses and LAE
3,209
1,399
4,608
Commission and brokerage
1,120
253
1,373
Other underwriting expenses
119
282
401
Underwriting gain (loss)
$
36
$
(12)
$
24
Net investment income
376
Net gains (losses) on investments
50
Corporate expenses
(16)
Interest, fee and bond issue cost amortization expense
(36)
Other income (expense)
(15)
Income (loss) before taxes
$
384
(Some amounts may not reconcile due to rounding.)
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:
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Canada gross written premiums
$
379
$
252
$
321
No other country represented more than
5
% of the Company’s revenues.
Approximately
17.6
%,
19.3
% and
20.1
% of the Company’s gross written premiums in 2022, 2021 and 2020,
respectively, were sourced through the Company’s largest intermediary.
18. SUBSEQUENT EVENTS
The Company has evaluated known recognized and non-recognized subsequent events. In February 2023, an
earthquake occurred which impacted the countries of Turkey and Syria. The Company is unable to estimate the
magnitude of losses at this time as this event has recently occurred. The Company will reflect the impact of this
event in its first quarter 2023 results..
S-1
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2022
Column A
Column B
Column C
Column D
Amount
Shown in
Market
Balance
(Dollars in millions)
Cost
Value
Sheet
Fixed maturities-available for sale
Bonds:
U.S. government and government agencies
$
575
$
535
$
535
State, municipalities and political subdivisions
444
413
413
Foreign government securities
696
637
637
Foreign corporate securities
1,597
1,433
1,433
Public utilities
85
79
79
All other corporate bonds
7,571
7,117
7,117
Mortgage - backed securities
Commercial
568
509
509
Agency residential
1,792
1,628
1,628
Non-agency residential
3
3
3
Redeemable preferred stock
368
316
316
Total fixed maturities-available for sale
13,699
12,671
12,671
Fixed maturities-held to maturity
Bonds:
Foreign corporate securities
28
28
27
All other corporate bonds
785
758
778
Mortgage - backed securities
Commercial
7
7
7
Total Fixed maturities-held to maturity
820
793
811
Equity securities at fair value(1)
159
194
194
Short-term investments
812
812
812
Other invested assets
2,754
2,754
2,754
Other invested assets, at fair value(1)
1,773
1,472
1,472
Cash
481
481
481
Total investments and cash
$
20,498
$
19,177
$
19,195
(Some amounts may not reconcile due to rounding.)
(1) Original cost does not reflect fair value adjustments, which have been realized through the statements of operations and comprehensive
income (loss).
S-2
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED BALANCE SHEETS
At December 31,
(Dollars in millions, except share amounts and par value per share)
2022
2021
ASSETS:
Fixed maturities - available for sale
$
-
$
147
(amortized cost: 2022, $
0
; 2021, $
148
)
Equity securities - at fair value
12
679
Other invested assets
194
242
Other invested assets, at fair value
1,472
2,031
Short-term investments
30
5
Cash
2
-
Total investments and cash
1,710
3,104
Investment in subsidiaries, at equity in the underlying net assets
5,496
6,371
Notes receivable - affiliated
1,170
470
Accrued investment income
12
5
Other assets
-
(2)
TOTAL ASSETS
$
8,388
$
9,948
LIABILITIES:
Senior notes
$
2,347
$
2,346
Long-term notes
218
224
Accrued interest on debt and borrowings
17
17
Income taxes
144
317
Due to affiliates
7
5
Total liabilities
$
2,734
$
2,910
STOCKHOLDER'S EQUITY:
Common stock, par value: $
0.01
;
3,000
1,000
-
-
Additional paid-in capital
1,102
1,102
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of $
(225)
24
(848)
91
Retained earnings
5,400
5,845
Total stockholder's equity
5,654
7,038
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
8,388
$
9,948
See notes to consolidated financial statements.
S-3
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
REVENUES:
Net investment income
$
47
$
39
$
(5)
Net investment income - Affiliated
57
34
31
Net gains (losses) on investments
(704)
329
(73)
Other income (expense)
(3)
-
3
Net income (loss) of subsidiaries
114
551
394
Total revenues
(488)
954
350
EXPENSES:
Interest expense
97
69
36
Corporate expense
10
18
9
Total expenses
107
86
45
INCOME (LOSS) BEFORE TAXES
(595)
867
305
Income tax expense (benefit)
(150)
68
(47)
NET INCOME (LOSS)
$
(445)
$
800
$
352
Other comprehensive income (loss), net of tax :
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during
the period
(1,011)
(200)
163
Less: reclassification adjustment for realized losses (gains) included in net
income (loss)
73
9
25
Total URA(D) on securities arising during the period
(938)
(191)
189
Foreign currency translation adjustments
(18)
(9)
14
Benefit plan actuarial net gain (loss) for the period
15
17
(6)
Reclassification adjustment for amortization of net (gain) loss included in net
income (loss)
2
6
6
Total benefit plan net gain (loss) for the period
17
23
1
Total other comprehensive income (loss), net of tax
(939)
(177)
204
COMPREHENSIVE INCOME (LOSS)
$
(1,384)
$
623
$
556
See notes to consolidated financial statements.
S-4
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Dollars in millions)
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(445)
$
800
$
352
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (earnings) deficit of subsidiaries
(114)
(551)
(394)
Dividends received from subsidiary
250
-
-
Increase (decrease) in income taxes
(173)
(45)
119
Change in equity adjustments in limited partnerships
(37)
(33)
8
Change in other assets and liabilities, net
(5)
40
20
Net realized capital losses (gains)
704
(329)
73
Net cash provided by (used in) operating activities
180
(118)
180
CASH FLOWS FROM INVESTING ACTIVITIES:
Additional investment in subsidiaries
(200)
88
(949)
Proceeds from fixed maturities matured/called/repaid - available for sale
-
-
2
Proceeds from fixed maturities sold - available for sale
244
-
-
Proceeds from equity maturities sold
652
243
62
Distributions from other invested assets
1,362
2,014
1,113
Cost of fixed maturities acquired - available for sale
(134)
(148)
-
Cost of equity securities acquired
(93)
(516)
(185)
Cost of other invested assets acquired
(1,278)
(2,076)
(1,212)
Net change in short-term investments
(24)
5
11
Proceeds from repayment (cost of issuance) of notes receivable - affiliated
(700)
(470)
10
Net cash provided by (used in) investing activities
(171)
(860)
(1,148)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes
-
968
979
Cost of debt repurchase
(6)
-
(11)
Net cash provided by (used in) financing activities
(6)
968
969
Net increase (decrease) in cash
2
(10)
-
Cash, beginning of period
-
10
10
Cash, end of period
$
2
$
-
$
10
See notes to consolidated financial statements.
S-5
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
1) The accompanying condensed financial information should be read in conjunction with the Consolidated
Financial Statements and related Notes of Everest Reinsurance Holdings, Inc. and its Subsidiaries.
2) The Senior Notes and Long-Term Subordinated Notes presented in Notes 5 and 6 are direct obligations of the
Registrant.
3) Effective December 2022, Everest Reinsurance Holdings, Inc. entered into a $
125
note with Everest Reinsurance Company, a subsidiary entity. The promissory note has an interest rate of
4.34
% payable annually and is scheduled to mature in June 2052.
4) Effective September 2022, Everest Reinsurance Holdings, Inc. entered into a $
560
note with Everest Reinsurance Company, a subsidiary entity. The promissory note has an interest rate of
3.35
% payable annually and is scheduled to mature in September 2052.
5) Effective June 2022, Everest Reinsurance Holdings, Inc. entered into a $
215
with Everest Re Group, Ltd., its parent entity. The promissory note has an interest rate of
3.11
% payable
annually and is scheduled to mature in June 2052.
6) Effective October 21, 2021, Everest Reinsurance Holdings, Inc. entered into a $
470
promissory note with Everest Reinsurance Company, a subsidiary entity. The promissory note has an interest
rate of
3.25
% payable annually and is scheduled to mature on October 21, 2051. Everest Reinsurance
Company has repaid $
200
270
million of the promissory note still outstanding as of December 31, 2022.
7) Effective February 2019, Everest Reinsurance Holdings, Inc. entered into a $
10
note with Everest Indemnity Insurance Company, an affiliated entity. The note was scheduled to mature in
February 2049 but was repaid in September 2020.
8) In December, 2015, Holdings transferred the
9,719,971
invested assets, at fair value, valued at $
1.8
Group, in exchange for
1,773.214
1
1.75
%
annual dividend rate. After the exchange, Holdings no longer holds any shares or has any ownership interest
in Group.
S-6
EVEREST REINSURANCE HOLDINGS, INC.
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
Column A
Column B
Column C
Column D
Column E
Column F
Column G
Column H
Column I
Column J
Reserve
Incurred
Segments
for Losses
Loss and
Amortization
Deferred
and Loss
Unearned
Net
Loss
of Deferred
Other
Net
Acquisition
Adjustment
Premium
Premiums
Investment
Adjustment
Acquisition
Operating
Written
(Dollars in millions)
Costs
Expenses
Reserves
Earned
Income
Expenses
Costs
Expenses
Premium
As of and for the year
ended December 31, 2022
Reinsurance
$
329
$
10,023
$
1,453
$
5,212
$
427
$
3,957
$
1,326
$
139
$
5,269
Insurance
170
4,954
1,725
2,664
211
1,865
306
363
2,763
Total
$
499
$
14,977
$
3,177
$
7,876
$
638
$
5,823
$
1,632
$
501
$
8,032
As of and for the year
ended December 31, 2021
Reinsurance
$
315
$
8,829
$
1,427
$
4,949
$
501
$
3,761
$
1,250
$
143
$
5,265
Insurance
157
4,292
1,566
2,230
244
1,626
262
311
2,455
Total
$
472
$
13,121
$
2,993
$
7,179
$
745
$
5,387
$
1,513
$
454
$
7,719
As of and for the year
ended December 31, 2020
Reinsurance
$
169
$
7,896
$
1,128
$
4,485
$
255
$
3,209
$
1,120
$
119
$
4,632
Insurance
210
3,682
1,257
1,922
121
1,399
253
282
2,006
Total
$
380
$
11,578
$
2,385
$
6,407
$
376
$
4,608
$
1,373
$
401
$
6,639
(Some amounts may not reconcile due to rounding.)
S-7
SCHEDULE IV - REINSURANCE
Column A
Column B
Column C
Column D
Column E
Column F
Ceded to
Assumed
Gross
Other
from Other
Net
Assumed
(Dollars in millions)
Amount
Companies
Companies
Amount
to Net
December 31, 2022
Total property and liability
insurance premiums earned
$
3,544
$
1,613
$
5,945
$
7,876
$
75.5%
December 31, 2021
Total property and liability
insurance premiums earned
$
2,982
$
1,544
$
5,741
$
7,179
$
80.0%
December 31, 2020
Total property and liability
insurance premiums earned
$
2,592
$
1,368
$
5,183
$
6,407
$
80.9%