# EVEREST GROUP, LTD. (EG) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from EVEREST GROUP, LTD.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1095073/000109507323000007/re-20221231.htm
Accession: 0001095073-23-000007
Filing date: 2023-02-24
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/EG/
All MD&A years: /company/EG/mda/
Previous year: /company/EG/mda/fy2021/ (FY 2021)
Next year: /company/EG/mda/fy2023/ (FY 2023)

ITEM 7.
 
MANAGEMENT’S
 
DISCUSSION
 
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF

OPERATION

The following is
 
a discussion and analysis
 
of our results of
 
operations and financial
 
condition for the
 
years ended

December
 
31,
 
2022
 
and
 
2021.
 
This
 
discussion
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
Consolidated
 
Financial

Statements
 
and
 
related
 
Notes,
 
under
 
ITEM
 
8
 
of
 
this
 
Form
 
10-K.
 
Pursuant
 
to
 
the
 
FAST
 
Act
 
Modernization
 
and

Simplification
 
of Regulation
 
S-K, comparisons
 
between
 
2020 and
 
2019 have
 
been omitted
 
from this
 
Form 10-K

but can be
 
found in "Management's
 
Discussion and Analysis
 
of Financial Condition
 
and Results of
 
Operations" in

Part II, Item 7 of our Form 10-K for the
 
year ended December 31, 2020.

All comparisons in this discussion are to the corresponding
 
prior year unless otherwise indicated.

Industry Conditions.

The worldwide
 
reinsurance
 
and insurance
 
businesses
 
are highly
 
competitive,
 
as well
 
as cyclical
 
by
 
product
 
and

market.
 
As
 
such,
 
financial
 
results
 
tend
 
to
 
fluctuate
 
with
 
periods
 
of
 
constrained
 
availability,
 
higher
 
rates
 
and

stronger
 
profits
 
followed
 
by
 
periods
 
of
 
abundant
 
capacity,
 
lower
 
rates
 
and
 
constrained
 
profitability.

Competition
 
in
 
the
 
types
 
of reinsurance
 
and
 
insurance
 
business
 
that
 
we
 
underwrite
 
is
 
based
 
on
 
many
 
factors,

including the perceived overall
 
financial strength of
 
the reinsurer or insurer,
 
ratings of the reinsurer
 
or insurer by

A.M. Best
 
and/or
 
Standard
 
& Poor’s,
 
underwriting expertise,
 
the jurisdictions
 
where the
 
reinsurer
 
or insurer
 
is

licensed
 
or
 
otherwise
 
authorized,
 
capacity
 
and
 
coverages
 
offered,
 
premiums
 
charged,
 
other
 
terms
 
and

conditions
 
of
 
the
 
reinsurance
 
and
 
insurance
 
business
 
offered,
 
services
 
offered,
 
speed
 
of
 
claims
 
payment
 
and

reputation
 
and
 
experience
 
in
 
lines
 
written.
 
Furthermore,
 
the
 
market
 
impact
 
from
 
these
 
competitive
 
factors

related
 
to
 
reinsurance
 
and
 
insurance
 
is
 
generally
 
not
 
consistent
 
across
 
lines
 
of
 
business,
 
domestic
 
and

international geographical
 
areas and distribution channels.

We
 
compete
 
in
 
the
 
U.S.,
 
Bermuda
 
and
 
international
 
reinsurance
 
and
 
insurance
 
markets
 
with
 
numerous
 
global

competitors.
 
Our
 
competitors
 
include
 
independent
 
reinsurance
 
and
 
insurance
 
companies,
 
subsidiaries
 
or

affiliates
 
of
 
established
 
worldwide
 
insurance
 
companies,
 
reinsurance
 
departments
 
of
 
certain
 
insurance

companies, domestic
 
and international
 
underwriting operations,
 
including underwriting
 
syndicates
 
at Lloyd’s
 
of

London
 
and
 
certain
 
government
 
sponsored
 
risk
 
transfer
 
vehicles.
 
Some
 
of
 
these
 
competitors
 
have
 
greater

financial resources
 
than we do
 
and have
 
established long
 
term and continuing
 
business relationships,
 
which can

be
 
a
 
significant
 
competitive
 
advantage.
 
In
 
addition,
 
the
 
lack
 
of
 
strong
 
barriers
 
to
 
entry
 
into
 
the
 
reinsurance

business
 
and
 
recently,
 
the
 
securitization
 
of
 
reinsurance
 
and
 
insurance
 
risks
 
through
 
capital
 
markets
 
provide

additional sources of potential reinsurance
 
and insurance capacity and competition.

Worldwide insurance
 
and reinsurance
 
market conditions
 
historically have
 
been competitive.
 
Generally,
 
there is

ample
 
insurance
 
and
 
reinsurance
 
capacity
 
relative
 
to
 
demand,
 
as
 
well
 
as
 
additional
 
capital
 
from
 
the
 
capital

markets
 
through
 
insurance
 
linked
 
financial
 
instruments.
 
These
 
financial
 
instruments
 
such
 
as
 
side
 
cars,

catastrophe
 
bonds and
 
collateralized
 
reinsurance
 
funds, provided
 
capital
 
markets
 
with access
 
to insurance
 
and

reinsurance
 
risk exposure.
 
The capital
 
markets
 
demand for
 
these products
 
is
 
primarily driven
 
by the
 
desire to

achieve
 
greater
 
risk
 
diversification
 
and
 
potentially
 
higher
 
returns
 
on
 
their
 
investments.
 
This
 
competition

generally has a negative impact
 
on rates, terms and conditions;
 
however,
 
the impact varies widely by market
 
and

coverage.
 
Based on recent competitive
 
behaviors in the
 
insurance and reinsurance
 
industry, natural
 
catastrophe

events
 
and
 
the
 
macroeconomic
 
backdrop,
 
there
 
has
 
been
 
some
 
dislocation
 
in
 
the
 
market
 
which
 
we
 
expect
 
to

have a positive impact on rates
 
and terms and conditions, generally,
 
though local market specificities can
 
vary.

The
 
increased
 
frequency
 
of
 
catastrophe
 
losses
 
experienced
 
throughout
 
2022
 
appears
 
to
 
be
 
pressuring
 
the

increase
 
of
 
rates.
 
As
 
business
 
activity
 
continues
 
to
 
regain
 
strength
 
after
 
the
 
pandemic
 
and
 
current

macroeconomic uncertainty,
 
rates appear to be firming in
 
most lines of business, particularly in the casualty
 
lines

that had
 
seen significant
 
losses such
 
as excess
 
casualty and
 
directors’
 
and officers’
 
liability.
 
Other casualty
 
lines

are
 
experiencing
 
modest
 
rate
 
increase,
 
while
 
some
 
lines
 
such
 
as
 
workers’
 
compensation
 
were
 
experiencing

softer
 
market
 
conditions.
 
It
 
is
 
too
 
early
 
to
 
tell
 
what
 
the
 
impact
 
on
 
pricing
 
conditions
 
will
 
be,
 
but
 
it
 
is
 
likely
 
to

change depending on the line of business and geography.

42

Our capital position remains
 
a source of strength,
 
with high quality invested
 
assets, significant liquidity
 
and a low

operating
 
expense
 
ratio.
 
Our
 
diversified
 
global
 
platform
 
with
 
its
 
broad
 
mix
 
of
 
products,
 
distribution
 
and

geography is resilient.

The war in the
 
Ukraine is ongoing
 
and an evolving
 
event.
 
Economic and legal
 
sanctions have been
 
levied against

Russia,
 
specific
 
named
 
individuals
 
and
 
entities
 
connected
 
to
 
the
 
Russian
 
government,
 
as
 
well
 
as
 
businesses

located
 
in
 
the
 
Russian
 
Federation
 
and/or
 
owned
 
by
 
Russian
 
nationals
 
by
 
numerous
 
countries,
 
including
 
the

United States.
 
The significant
 
political and
 
economic uncertainty
 
surrounding the
 
war and
 
associated sanctions

have
 
impacted
 
economic and
 
investment
 
markets
 
both within
 
Russia and
 
around
 
the world.
 
The Company
 
has

recorded $45 million of losses related
 
to the Ukraine/Russia war during 2022.

43

Financial Summary.

We monitor and evaluate
 
our overall performance based upon
 
financial results.
 
The following table displays a

summary of the consolidated
 
net income (loss), ratios and shareholders’
 
equity for the periods indicated.

Years Ended December 31,

Percentage Increase/(Decrease)

(Dollars in millions)

2022

2021

2020

2022/2021

2021/2020

Gross written premiums

$

13,952

$

13,050

$

10,482

6.9%

24.5%

Net written premiums

12,344

11,446

9,117

7.9%

25.5%

REVENUES:

Premiums earned

$

11,787

$

10,406

$

8,682

13.3%

19.9%

Net investment income

830

1,165

643

(28.8)%

81.3%

Net gains (losses) on investments

(455)

258

268

(276.4)%

-3.6%

Other income (expense)

(102)

37

7

NM

NM

Total revenues

12,060

11,866

9,598

1.6%

23.6%

CLAIMS AND EXPENSES:

Incurred losses and loss adjustment expenses

8,100

7,391

6,551

9.6%

12.8%

Commission, brokerage, taxes
 
and fees

2,528

2,209

1,873

14.5%

17.9%

Other underwriting expenses

682

583

511

17.0%

14.0%

Corporate expenses

61

68

41

(10.1)%

65.0%

Interest, fees and bond issue
 
cost amortization expense

101

70

36

43.9%

93.1%

Total claims and expenses

11,472

10,321

9,013

11.2%

14.5%

INCOME (LOSS) BEFORE TAXES

588

1,546

585

(62.0)%

164.1%

Income tax expense (benefit)

(9)

167

71

(105.3)%

133.9%

NET INCOME (LOSS)

$

597

$

1,379

$

514

(56.7)%

168.2%

RATIOS:

Point Change

Loss ratio

68.7%

71.0%

75.5%

(2.3)

(4.5)

Commission and brokerage ratio

21.4%

21.2%

21.6%

0.2

(0.4)

Other underwriting expense ratio

5.8%

5.6%

5.8%

0.2

(0.2)

Combined ratio

96.0%

97.8%

102.9%

(1.8)

(5.1)

At December 31,

Percentage Increase/(Decrease)

(Dollars in millions, except per share amounts)

2022

2021

2020

2022/2021

2021/2020

Balance sheet data:

Total investments
 
and cash

$

29,872

$

29,673

$

25,462

0.7%

16.5%

Total assets

39,966

38,185

32,712

4.7%

16.7%

Loss and loss adjustment expense reserves

22,065

19,009

16,322

16.1%

16.5%

Total debt

3,084

3,089

1,910

(0.2)%

61.7%

Total liabilities

31,525

28,046

22,985

12.4%

22.0%

Shareholders' equity

8,441

10,139

9,726

(16.8)%

4.2%

Book value per share

215.54

258.21

243.25

(16.5)%

6.2%

(NM, not meaningful)

(Some amounts may not reconcile due to rounding.)

44

Revenues.

Premiums.
 
Gross
 
written
 
premiums
 
increased
 
by
 
6.9%
 
to
 
$14.0
 
billion
 
in
 
2022,
 
compared
 
to
 
$13.1
 
billion
 
in

2021,
 
reflecting
 
a
 
$653.4
 
million,
 
or
 
16.4%,
 
increase
 
in
 
our
 
insurance
 
business
 
and
 
a
 
$248.8
 
million,
 
or
 
2.7%,

increase
 
in our
 
reinsurance
 
business.
 
The increase
 
in insurance
 
premiums
 
reflects
 
growth
 
across
 
most lines
 
of

business,
 
particularly
 
specialty
 
casualty
 
business
 
and
 
property/short
 
tail
 
business,
 
driven
 
by
 
positive
 
rate
 
and

exposure
 
increases,
 
new
 
business
 
and
 
strong
 
renewal
 
retention.
 
The
 
increase
 
in
 
reinsurance
 
premiums
 
was

primarily due to increases in casualty pro
 
rata business and financial lines of business, partially offset
 
by a decline

in
 
property
 
pro
 
rata
 
business.
 
Net
 
written
 
premiums
 
increased
 
by
 
7.9% to
 
$12.3 billion
 
in
 
2022, compared
 
to

$11.4
 
billion
 
in
 
2021.
 
The
 
higher
 
percentage
 
increase
 
in
 
net
 
written
 
premiums
 
compared
 
to
 
gross
 
written

premiums was primarily
 
due to a reduction
 
in business ceded to
 
the segregated
 
accounts of Mt. Logan
 
Re during

2022
 
compared
 
to
 
2021.
 
Premiums
 
earned
 
increased
 
by
 
13.3%
 
to
 
$11.8
 
billion
 
in
 
2022,
 
compared
 
to
 
$10.4

billion
 
in
 
2021.
 
The
 
change
 
in
 
premiums
 
earned
 
relative
 
to
 
net
 
written
 
premiums
 
was
 
primarily
 
the
 
result
 
of

timing; premiums
 
are
 
earned
 
ratably
 
over
 
the coverage
 
period whereas
 
written
 
premiums
 
are
 
recorded
 
at
 
the

initiation of
 
the coverage
 
period.
 
Accordingly,
 
the significant
 
increase in
 
gross written
 
premiums from
 
pro rata

business
 
during
 
the
 
latter
 
half
 
of
 
2021
 
contributed
 
to
 
the
 
current
 
year-to-date
 
percentage
 
increases
 
in
 
net

earned premiums.

Other Income
 
(Expense).
 
We
 
recorded
 
other expense
 
of $102
 
million and
 
other income
 
of $37
 
million in
 
2022

and 2021, respectively.
 
The changes were primarily
 
the result of fluctuations
 
in foreign currency exchange
 
rates.

We
 
recognized
 
foreign
 
currency
 
exchange
 
expense
 
of
 
$103
 
million
 
in
 
2022
 
and
 
foreign
 
currency
 
exchange

income of $28 million in 2021.

45

Claims and Expenses.

Incurred
 
Losses
 
and
 
Loss
 
Adjustment
 
Expenses.
 
The
 
following
 
table
 
presents
 
our
 
incurred
 
losses
 
and
 
loss

adjustment expenses (“LAE”) for
 
the periods indicated.

Years Ended December 31,

Current

Ratio %/

Prior

Ratio %/

Total

Ratio %/

(Dollars in millions)

Year

Pt Change

Years

Pt Change

Incurred

Pt Change

2022

Attritional

$

7,047

59.8%

$

(2)

—%

$

7,045

59.8%

Catastrophes

1,055

9.0%

—

—%

1,055

9.0%

Total segment

$

8,102

68.8%

$

(2)

—%

$

8,100

68.7%

2021

Attritional

$

6,265

60.2%

$

(9)

(0.1)%

$

6,256

60.1%

Catastrophes

1,135

10.9%

—

—%

1,135

10.9%

Total segment

$

7,400

71.1%

$

(9)

(0.1)%

$

7,391

71.0%

2020

Attritional

$

5,724

66.0%

$

401

4.7%

$

6,126

70.7%

Catastrophes

425

4.9%

—

—%

425

4.9%

Total segment

$

6,150

70.9%

$

401

4.7%

$

6,551

75.5%

Variance 2022/2021

Attritional

$

782

(0.4)

pts

$

7

0.1

pts

$

789

(0.3)

pts

Catastrophes

(80)

(1.9)

pts

—

—

pts

(80)

(1.9)

pts

Total segment

$

702

(2.3)

pts

$

7

0.1

pts

$

709

(2.2)

pts

Variance 2021/2020

Attritional

$

541

(5.8)

pts

$

(411)

(4.8)

pts

$

130

(10.6)

pts

Catastrophes

710

6.0

pts

—

—

pts

710

6.0

pts

Total segment

$

1,251

0.2

pts

$

(411)

(4.8)

pts

$

840

(4.6)

pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE
 
increased by 9.6% to
 
$8.1 billion in 2022, compared
 
to $7.4 billion in 2021,
 
primarily due

to
 
an
 
increase
 
of $782
 
million
 
in
 
current
 
year
 
attritional
 
losses,
 
partially
 
offset
 
by
 
a
 
decrease
 
of $80
 
million
 
in

current year
 
catastrophe
 
losses.
 
The increase
 
in current
 
year attritional
 
losses was
 
mainly due
 
to the
 
impact of

the
 
increase
 
in
 
premiums
 
earned
 
and
 
$45 million
 
of attritional
 
losses
 
incurred
 
due
 
to
 
the
 
Ukraine/Russia
 
war.

The current
 
year catastrophe
 
losses of
 
$1.1 billion
 
in 2022
 
related primarily
 
to Hurricane
 
Ian ($699
 
million), the

2022
 
Australia
 
floods
 
($88
 
million),
 
the
 
2022
 
Western
 
Europe
 
hailstorms
 
($69
 
million),
 
the
 
2022
 
South
 
Africa

flood ($50
 
million), the
 
2022 Western
 
Europe Convective
 
Storm ($35
 
million), Hurricane
 
Fiona ($27
 
million), the

2022
 
European
 
storms
 
($21
 
million)
 
and
 
the
 
2022
 
Canada
 
derecho
 
($21
 
million),
 
with
 
the
 
remaining
 
losses

resulting from various
 
storm events.
 
The $1.1 billion of current
 
year catastrophe
 
losses in 2021 related
 
primarily

to Hurricane
 
Ida ($460
 
million), the
 
Texas
 
winter storms
 
($294 million),
 
the European
 
floods ($242
 
million), the

Canada
 
drought
 
loss
 
($80
 
million)
 
and
 
the
 
Quad
 
State
 
tornadoes
 
($45
 
million)
 
with
 
the
 
rest
 
of
 
the
 
losses

emanating from the South Africa riots and
 
the 2021 Australia floods.

Catastrophe
 
losses and loss
 
expenses typically
 
have a
 
material effect
 
on our incurred
 
losses and loss
 
adjustment

expense results
 
and can
 
vary significantly
 
from period
 
to period.
 
Losses from
 
natural
 
catastrophes
 
contributed

9.0
 
percentage
 
points
 
to
 
the
 
combined
 
ratio
 
in
 
2022,
 
compared
 
with
 
10.9
 
percentage
 
points
 
in
 
2021.
 
The

Company has
 
up to
 
$350.0 million
 
of catastrophe
 
bond protection
 
(“CAT
 
Bond”) that
 
attaches
 
at a
 
$48.1 billion

PCS
 
Industry
 
loss
 
threshold.
 
This
 
recovery
 
would
 
be
 
recognized
 
on
 
a
 
pro-rata
 
basis
 
up
 
to
 
a
 
$63.8
 
billion
 
PCS

Industry loss level.
 
PCS’s current
 
industry estimate of $47.4 million
 
is below the attachment point.
 
The potential

recovery
 
under
 
the
 
CAT
 
Bond
 
is
 
not
 
included
 
in
 
the
 
Company’s
 
estimate
 
for
 
Hurricane
 
Ian
 
but
 
would
 
provide

significant downside protection should
 
the industry loss estimate increase.

46

Commission,
 
Brokerage,
 
Taxes
 
and
 
Fees.
 
Commission,
 
brokerage,
 
taxes
 
and
 
fees
 
increased
 
by
 
14.5%
 
to
 
$2.5

billion for
 
the year
 
ended December
 
31, 2022
 
compared
 
to $2.2
 
billion for
 
the year
 
ended December
 
31, 2021.

The
 
increase
 
was
 
primarily
 
due
 
to
 
the
 
impact
 
of
 
the
 
increases
 
in
 
premiums
 
earned
 
and
 
changes
 
in
 
the
 
mix
 
of

business.

Other
 
Underwriting
 
Expenses.
 
Other
 
underwriting
 
expenses
 
were
 
$682
 
million
 
and
 
$583
 
million
 
in
 
2022
 
and

2021, respectively.
 
The increase in
 
other underwriting expenses
 
was mainly due to
 
the impact of the
 
increase in

premiums earned
 
as well
 
as the
 
continued build
 
out of
 
our insurance
 
operations,
 
including an
 
expansion of
 
the

international insurance platform.

Corporate
 
Expenses.
 
Corporate
 
expenses,
 
which
 
are
 
general
 
operating
 
expenses
 
that
 
are
 
not
 
allocated
 
to

segments, were $61
 
million and $68 million
 
for the years
 
ended December 31, 2022
 
and 2021, respectively.
 
The

decrease from 2021 to 2022 was mainly
 
due to a decrease in variable incentive compensation.

Interest,
 
Fees and
 
Bond Issue
 
Cost
 
Amortization
 
Expense.
 
Interest,
 
fees
 
and other
 
bond
 
amortization
 
expense

was
 
$101
 
million
 
and
 
$70
 
million
 
in
 
2022
 
and
 
2021,
 
respectively.
 
The
 
increases
 
were
 
primarily
 
due
 
to
 
the

issuance of $1.0
 
billion of senior
 
notes in October
 
2021.
 
Interest expense
 
was also
 
impacted by the
 
movements

in the
 
floating
 
interest
 
rate
 
related
 
to
 
the long
 
term
 
subordinated
 
notes,
 
which is
 
reset
 
quarterly
 
per the
 
note

agreement.
 
The floating rate was
 
6.99% as of December 31, 2022 compared to 2.54% as of December 31,
 
2021.

Income Tax
 
Expense (Benefit).
 
We had
 
income tax
 
benefit of $9
 
million and income
 
tax expense
 
of $167 million

in
 
2022
 
and
 
2021,
 
respectively.
 
Income
 
tax
 
expense
 
is
 
primarily
 
a
 
function
 
of
 
the
 
geographic
 
location
 
of
 
the

Company’s
 
pre-tax
 
income
 
and
 
the
 
statutory
 
tax
 
rates
 
in
 
those
 
jurisdictions.
 
The
 
effective
 
tax
 
rate
 
(“ETR”)
 
is

primarily
 
affected
 
by
 
tax-exempt
 
investment
 
income,
 
foreign
 
tax
 
credits
 
and
 
dividends.
 
Variations
 
in
 
the
 
ETR

generally result
 
from changes
 
in the relative
 
levels of pre
 
-tax income,
 
including the impact
 
of catastrophe
 
losses

and net capital gains (losses), among jurisdictions
 
with different tax rates.

On
 
August
 
16,
 
2022,
 
the
 
Inflation
 
Reduction
 
Act
 
of
 
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
 
income
 
was
 
$597
 
million
 
and
 
$1.4
 
billion
 
in
 
2022
 
and
 
2021,
 
respectively.
 
The
 
change
 
was
 
primarily

driven by the consolidated investment
 
results explained below.

Ratios.

Our
 
combined
 
ratio
 
decreased
 
by
 
1.8
 
points
 
to
 
96.0%
 
in
 
2022,
 
compared
 
to
 
97.8%
 
in
 
2021.
 
The
 
loss
 
ratio

component decreased by
 
2.3 points in 2022 over
 
the same period last year
 
mainly due to a decline $80 million
 
in

catastrophe
 
losses.
 
The
 
commission
 
and
 
brokerage
 
ratio
 
components
 
increased
 
slightly
 
to
 
21.4%
 
in
 
2022

compared
 
to
 
21.2%
 
in
 
2021.
 
The
 
increase
 
was
 
mainly
 
due
 
to
 
changes
 
in
 
the
 
mix
 
of
 
business.
 
The
 
other

underwriting expense ratios
 
increased slightly
 
to 5.8% in
 
2022 compared
 
to 5.6% in
 
2021.
 
These increases
 
were

mainly due to higher insurance operations
 
costs.

Shareholders’ Equity.

Shareholders’
 
equity
 
decreased
 
by
 
$1.7
 
billion
 
to
 
$8.4
 
billion
 
at
 
December
 
31,
 
2022
 
from
 
$10.1
 
billion
 
at

December
 
31,
 
2021,
 
principally
 
as
 
a
 
result
 
of $1.9
 
billion
 
of unrealized
 
depreciation
 
on
 
available
 
for
 
sale
 
fixed

maturity
 
portfolio
 
net
 
of
 
tax,
 
$255
 
million
 
of
 
shareholder
 
dividends,
 
$77
 
million
 
of
 
net
 
foreign
 
currency

translation adjustments,
 
and the repurchase
 
of 241,273 common
 
shares for
 
$61 million,
 
partially offset
 
by $597

million of net income.

47

Consolidated Investment
 
Results

Net Investment Income.

Net
 
investment
 
income
 
decreased
 
by
 
28.8% to
 
$830 million
 
in 2022
 
compared
 
with
 
net
 
investment
 
income
 
of

$1.2
 
billion
 
in
 
2021.
 
The
 
decrease
 
was
 
primarily
 
the
 
result
 
of
 
a
 
decline
 
of
 
$490
 
million
 
in
 
limited
 
partnership

income,
 
partially
 
offset
 
by
 
an
 
additional
 
$181
 
million
 
of
 
income
 
from
 
fixed
 
maturity
 
investments.
 
The
 
limited

partnership
 
income
 
primarily
 
reflects
 
decreases
 
in
 
their
 
reported
 
net
 
asset
 
values.
 
As
 
such,
 
until
 
these
 
asset

values are monetized and the
 
resultant income is distributed,
 
they are subject to future increases
 
or decreases in

the asset value, and the results may be volatile.

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

Years Ended December 31,

(Dollars in millions)

2022

2021

2020

Fixed maturities

$

742

$

561

$

542

Equity securities

16

17

19

Short-term investments and cash

28

1

5

Other invested assets

Limited partnerships

75

565

113

Other

29

63

2

Gross investment income before adjustments

890

1,208

681

Funds held interest income (expense)

2

12

13

Future policy benefit reserve income (expense)

—

(1)

(1)

Gross investment income

892

1,219

692

Investment expenses

(62)

(54)

(50)

Net investment income

$

830

$

1,165

$

643

(Some amounts may not reconcile due to rounding.)

The following tables show a comparison
 
of various investment yields for
 
the periods indicated.

2022

2021

2020

Annualized pre-tax yield on average cash and invested assets

2.7

%

4.4

%

2.9

%

Annualized after-tax yield on average cash and invested assets

2.3

%

3.8

%

2.5

%

Annualized return on invested assets

1.2

%

5.3

%

4.0

%

2022

2021

2020

Fixed income portfolio total return

(5.9)

%

0.5

%

6.3

%

Barclay's Capital - U.S. aggregate index

(13.0)

%

(1.5)

%

7.5

%

Common equity portfolio total return

(18.5)

%

19.0

%

26.7

%

S&P 500 index

(18.1)

%

28.7

%

18.4

%

Other invested asset portfolio total return

4.5

%

36.5

%

8.3

%

The pre
 
-tax
 
equivalent
 
total
 
return
 
for
 
the
 
bond
 
portfolio
 
was
 
approximately
 
(5.9)%
 
and
 
0.5%,
 
respectively,
 
in

2022
 
and
 
2021.
 
The
 
pre-tax
 
equivalent
 
return
 
adjusts
 
the
 
yield
 
on
 
tax-exempt
 
bonds
 
to
 
the
 
fully
 
taxable

equivalent.

Our
 
fixed
 
income
 
and
 
equity
 
portfolios
 
have
 
different
 
compositions
 
than
 
the
 
benchmark
 
indexes.
 
Our
 
fixed

income portfolios have
 
a shorter duration
 
because we align our investment
 
portfolio with our liabilities.
 
We also

hold
 
foreign
 
securities
 
to
 
match
 
our
 
foreign
 
liabilities
 
while
 
the
 
index
 
is
 
comprised
 
of
 
only
 
U.S.
 
securities.
 
Our

equity portfolios
 
reflect an
 
emphasis on
 
dividend yield
 
and growth
 
equities, while
 
the index
 
is comprised
 
of the

largest 500 equities by market
 
capitalization.

48

Net Realized Capital Gains (Losses).

The following table presents the composition
 
of our net realized capital gains
 
(losses) for the periods indicated.

Years Ended December 31,

2022/2021

2021/2020

(Dollars in millions)

2022

2021

2020

Variance

Variance

Realized gains (losses) from dispositions:

Fixed maturity securities - available for sale:

Gains

$

40

$

72

$

80

$

(32)

$

(8)

Losses

(127)

(55)

(85)

(72)

27

Total

(87)

17

(5)

(104)

19

Equity securities:

Gains

165

42

37

123

5

Losses

(53)

(15)

(46)

(38)

32

Total

112

28

(9)

85

37

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

223

124

126

99

(2)

Losses

(185)

(74)

(137)

(111)

63

Total

38

50

(11)

(12)

61

Allowance for credit losses:

(33)

(28)

(2)

(5)

(26)

Gains (losses) from fair value adjustments:

Fixed maturities

—

—

2

—

(2)

Equity securities

(460)

236

279

(696)

(43)

Total

(460)

236

280

(696)

(45)

Total net gains (losses) on investments

$

(455)

$

258

$

268

$

(713)

$

(10)

(Some amounts may not reconcile due to rounding.)

Net
 
gains
 
(losses)
 
on
 
investments
 
in
 
2022
 
primarily
 
relate
 
to
 
net
 
losses
 
from
 
fair
 
value
 
adjustments
 
on
 
equity

securities in
 
the amount
 
of $460
 
million as
 
a result
 
of equity
 
market
 
declines in
 
2022.
 
In addition,
 
we realized

$38 million
 
of gains
 
due to
 
the disposition
 
of investments
 
and recorded
 
an increase
 
to the
 
allowance for
 
credit

losses of $33 million primarily related to our direct
 
holdings of Russian corporate
 
fixed maturity securities.

Segment Results.

The
 
Company
 
manages
 
its
 
reinsurance
 
and
 
insurance
 
operations
 
as
 
autonomous
 
units
 
and
 
key
 
strategic

decisions are based on the aggregate operating
 
results and projections for
 
these segments of business.

The Reinsurance
 
operation
 
writes worldwide
 
property
 
and casualty
 
reinsurance
 
and specialty
 
lines of
 
business,

on both
 
a treaty
 
and facultative
 
basis,
 
through
 
reinsurance
 
brokers,
 
as well
 
as directly
 
with ceding
 
companies.

Business is
 
written in
 
the U.S.,
 
Bermuda, and
 
Ireland offices,
 
as well as,
 
through branches
 
in Canada,
 
Singapore,

the United
 
Kingdom
 
and Switzerland.
 
The Insurance
 
operation
 
writes property
 
and casualty
 
insurance
 
directly

49

and
 
through
 
brokers,
 
surplus
 
lines
 
brokers
 
and
 
general
 
agents
 
within
 
the
 
U.S.,
 
Bermuda,
 
Canada,
 
Europe,

Singapore
 
and
 
South
 
America
 
through
 
its
 
offices
 
in
 
the
 
U.S.,
 
Canada,
 
Chile,
 
Singapore,
 
the
 
United
 
Kingdom,

Ireland and branches located
 
in the Netherlands, France, Germany and Spain.

These segments are
 
managed independently,
 
but conform
 
with corporate
 
guidelines with respect
 
to pricing, risk

management,
 
control
 
of
 
aggregate
 
catastrophe
 
exposures,
 
capital,
 
investments
 
and
 
support
 
operations.

Management
 
generally
 
monitors
 
and
 
evaluates
 
the
 
financial
 
performance
 
of
 
these
 
operating
 
segments
 
based

upon their underwriting results.

Underwriting results
 
include earned
 
premium less
 
LAE incurred,
 
commission and
 
brokerage
 
expenses and
 
other

underwriting
 
expenses.
 
We
 
measure
 
our
 
underwriting
 
results
 
using
 
ratios,
 
in
 
particular
 
loss,
 
commission
 
and

brokerage
 
and other
 
underwriting expense
 
ratios,
 
which, respectively,
 
divide
 
incurred
 
losses,
 
commissions
 
and

brokerage and other
 
underwriting expenses by premiums earned.

The
 
Company
 
does
 
not
 
maintain
 
separate
 
balance
 
sheet
 
data
 
for
 
its
 
operating
 
segments.
 
Accordingly,
 
the

Company does not
 
review and evaluate
 
the financial results
 
of its operating
 
segments based upon
 
balance sheet

data.

Our
 
loss
 
and LAE
 
reserves
 
are
 
management’s
 
best
 
estimate
 
of our
 
ultimate
 
liability
 
for
 
unpaid
 
claims.
 
We
 
re-

evaluate
 
our
 
estimates
 
on
 
an
 
ongoing
 
basis,
 
including
 
all
 
prior
 
period
 
reserves,
 
taking
 
into
 
consideration
 
all

available
 
information,
 
and
 
in
 
particular,
 
recently
 
reported
 
loss
 
claim
 
experience
 
and
 
trends
 
related
 
to
 
prior

periods.
 
Such re-evaluations are recorded
 
in incurred losses in the period in which re-evaluation
 
is made.

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

Reinsurance.

The
 
following
 
table
 
presents
 
the
 
underwriting
 
results
 
and
 
ratios
 
for
 
the
 
Reinsurance
 
segment
 
for
 
the
 
periods

indicated.

Years Ended December 31,

2022/2021

2021/2020

(Dollars in millions)

2022

2021

2020

Variance

% Change

Variance

% Change

Gross written premiums

$

9,316

$

9,067

$

7,282

$

249

2.7%

$

1,786

24.5%

Net written premiums

8,983

8,536

6,768

447

5.2%

1,768

26.1%

Premiums earned

$

8,663

$

7,758

$

6,466

$

905

11.7%

$

1,291

20.0%

Incurred losses and LAE

5,997

5,556

4,933

441

7.9%

623

12.6%

Commission and brokerage

2,134

1,855

1,552

279

15.1%

302

19.5%

Other underwriting expenses

218

199

176

19

9.6%

23

13.3%

Underwriting gain (loss)

$

313

$

147

$

(195)

$

166

112.6%

$

343

175.4%

Point Chg

Point Chg

Loss ratio

69.2%

71.6%

76.3%

(2.4)

(4.7)

Commission and brokerage ratio

24.6%

23.9%

24.0%

0.7

(0.1)

Other underwriting expense ratio

2.5%

2.6%

2.7%

(0.1)

(0.1)

Combined ratio

96.4%

98.1%

103.0%

(1.8)

(4.9)

(NM, not meaningful)

(Some amounts may not reconcile due to rounding.)

Premiums.
 
Gross written
 
premiums increased by
 
2.7% to $9.3 billion
 
in 2022 from $9.1
 
billion in 2021, primarily

due
 
to
 
increases
 
in
 
casualty
 
pro
 
rata
 
business
 
and
 
financial
 
lines
 
of
 
business,
 
partially
 
offset
 
by
 
a
 
decline
 
in

property
 
pro rata
 
business.
 
Net written
 
premiums
 
increased
 
by 5.2%
 
to
 
$9.0 billion
 
in 2022
 
compared
 
to
 
$8.5

billion in
 
2021.
 
The higher
 
percentage
 
increase
 
in net
 
written
 
premiums
 
compared
 
to gross
 
written
 
premiums

50

mainly related to
 
a reduction in business ceded
 
to the segregated
 
accounts of Mt. Logan
 
Re in 2022 compared
 
to

2021.
 
Premiums
 
earned
 
increased
 
by
 
11.7%
 
to
 
$8.7
 
billion
 
in
 
2022,
 
compared
 
to
 
$7.8
 
billion
 
in
 
2021.
 
The

change
 
in
 
premiums
 
earned
 
relative
 
to
 
net
 
written
 
premiums
 
is
 
primarily
 
the
 
result
 
of
 
timing;
 
premiums
 
are

earned
 
ratably
 
over
 
the
 
coverage
 
period
 
whereas
 
written
 
premiums
 
are
 
recorded
 
at
 
the
 
initiation
 
of
 
the

coverage period.
 
Accordingly,
 
the significant
 
increases in
 
gross written
 
premiums from
 
pro rata
 
business during

the latter half of 2021 contributed
 
to the current year-to-date percentage
 
increase in net earned premiums.

Incurred Losses
 
and LAE.

The following table
 
presents the
 
incurred losses
 
and LAE for
 
the Reinsurance
 
segment

for the periods indicated.

Years Ended December 31,

Current

Ratio %/

Prior

Ratio %/

Total

Ratio %/

(Dollars in millions)

Year

Pt Change

Years

Pt Change

Incurred

Pt Change

2022

Attritional

$

5,070

58.5%

$

(2)

—%

$

5,067

58.5%

Catastrophes

930

10.7%

—

—%

930

10.7%

Total segment

$

6,000

69.2%

$

(2)

—%

$

5,997

69.2%

2021

Attritional

$

4,582

59.1%

$

(8)

(0.1)%

$

4,574

59.0%

Catastrophes

983

12.7%

—

—%

983

12.7%

Total segment

$

5,564

71.8%

$

(8)

(0.1)%

$

5,556

71.6%

2020

Attritional

$

4,180

64.6%

$

397

6.1%

$

4,576

70.7%

Catastrophes

357

5.5%

—

—%

357

5.5%

Total segment

$

4,537

70.1%

$

397

6.1%

$

4,933

76.3%

Variance 2022/2021

Attritional

$

488

(0.6)

pts

$

6

0.1

pts

$

494

(0.5)

pts

Catastrophes

(53)

(2.0)

pts

—

—

pts

(53)

(2.0)

pts

Total segment

$

435

(2.6)

pts

$

6

0.1

pts

$

441

(2.4)

pts

Variance 2021/2020

Attritional

$

402

(5.5)

pts

$

(405)

(6.2)

pts

$

(3)

(11.7)

pts

Catastrophes

626

7.2

pts

—

—

pts

626

7.2

pts

Total segment

$

1,028

1.7

pts

$

(405)

(6.2)

pts

$

623

(4.5)

pts

(Some amounts may not reconcile due to rounding.)

Incurred
 
losses
 
increased
 
by
 
7.9%
 
to
 
$6.0
 
billion
 
in
 
2022, compared
 
to
 
$5.6
 
billion
 
in
 
2021.
 
The
 
increase
 
was

primarily due to an increase
 
of $488 million in current
 
year attritional losses,
 
partially offset by a decrease
 
of $53

million in
 
current
 
year catastrophe
 
losses.
 
The increase
 
in current
 
year attritional
 
losses was
 
mainly related
 
to

the
 
impact
 
of the
 
increase
 
in
 
premiums
 
earned
 
and
 
$45 million
 
of attritional
 
losses
 
due to
 
the
 
Ukraine/Russia

war.
 
The
 
current
 
year
 
catastrophe
 
losses
 
of
 
$930
 
million
 
in
 
2022
 
related
 
primarily
 
to
 
Hurricane
 
Ian
 
($599

million),
 
the
 
2022
 
Australia
 
floods
 
($88
 
million),
 
the
 
Western
 
Europe
 
hailstorms
 
($69
 
million),
 
the
 
2022
 
South

Africa
 
flood
 
($50
 
million),
 
the
 
2022
 
Western
 
Europe
 
Convective
 
storm
 
($29
 
million),
 
Hurricane
 
Fiona
 
($22

million), the 2022 European
 
storms ($21 million)
 
and the 2022 Canada
 
derecho ($21 million),
 
with the remaining

losses resulting
 
from various
 
storm events.
 
The $983
 
million of
 
current year
 
catastrophe
 
losses in
 
2021 related

primarily
 
to
 
Hurricane
 
Ida
 
($380
 
million),
 
the
 
Texas
 
winter
 
storms
 
($237
 
million),
 
the
 
European
 
floods
 
($242

million), the
 
Canada drought
 
loss ($80
 
million) and
 
the Quad
 
state
 
tornadoes ($30
 
million), with
 
the rest
 
of the

losses emanating from the 2021 South Africa riots and
 
the 2021 Australia floods.

Segment Expenses.
 
Commission and
 
brokerage
 
expense increased
 
by 15.1% to
 
$2.1 billion in
 
2022 compared to

$1.9 billion in 2021.
 
The increase was mainly
 
due to the impact of the
 
increase in premiums earned
 
and changes

51

in
 
the
 
mix
 
of
 
business.
 
Segment
 
other
 
underwriting
 
expenses
 
increased
 
to
 
$218
 
million
 
in
 
2022
 
from
 
$199

million
 
in
 
2021.
 
The
 
increase
 
was
 
mainly
 
due
 
to
 
the
 
increase
 
in
 
written
 
premium
 
attributable
 
to
 
the
 
planned

expansion of the business.

Insurance.

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

indicated.

Years Ended December 31,

2022/2021

2021/2020

(Dollars in millions)

2022

2021

2020

Variance

% Change

Variance

% Change

Gross written premiums

$

4,636

$

3,983

$

3,201

$

653

16.4%

$

782

24.4%

Net written premiums

3,361

2,910

2,349

451

15.5%

561

23.9%

Premiums earned

$

3,124

$

2,649

$

2,215

$

475

17.9%

$

434

19.6%

Incurred losses and LAE

2,103

1,835

1,617

268

14.6%

217

13.4%

Commission and brokerage

394

354

321

40

11.3%

33

10.4%

Other underwriting expenses

463

384

336

79

20.8%

48

14.3%

Underwriting gain (loss)

$

164

$

76

$

(58)

$

88

114.4%

$

135

230.7%

Point Chg

Point Chg

Loss ratio

67.3%

69.3%

73.0%

(2.0)

(3.7)

Commission and brokerage ratio

12.6%

13.4%

14.5%

(0.8)

(1.1)

Other underwriting expense ratio

14.8%

14.5%

15.1%

0.3

(0.6)

Combined ratio

94.8%

97.1%

102.6%

(2.5)

(5.5)

(Some amounts may not reconcile due to rounding.)

Premiums.
 
Gross written
 
premiums increased
 
by 16.4% to
 
$4.6 billion in
 
2022 compared
 
to $4.0 billion
 
in 2021.

The increase
 
in insurance
 
premiums reflects
 
growth across
 
most lines
 
of business,
 
particularly specialty
 
casualty

and
 
property/short
 
tail
 
business,
 
driven
 
by
 
positive
 
rate
 
and
 
exposure
 
increases,
 
new
 
business
 
and
 
strong

renewal retention.
 
Net written
 
premiums increased
 
by 15.5% to
 
$3.4 billion in
 
2022 compared
 
to $2.9 billion
 
in

2021, which
 
is consistent
 
with the
 
percentage
 
change
 
in gross
 
written
 
premiums.
 
Premiums
 
earned increased

17.9% to
 
$3.1 million
 
in 2022
 
compared to
 
$2.6 billion
 
in 2021.
 
The change
 
in premiums
 
earned relative
 
to net

written premiums is the result
 
of timing; premiums are earned ratably
 
over the coverage
 
period whereas written

premiums
 
are
 
recorded
 
at
 
the
 
initiation
 
of the
 
coverage
 
period.
 
Accordingly,
 
the significant
 
increases
 
in gross

written premiums
 
during the
 
latter
 
half of
 
2021 contributed
 
to the
 
current year
 
-to-date
 
percentage
 
increase in

net earned premiums.

52

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

$

1,977

63.3%

$

1

—%

$

1,978

63.3%

Catastrophes

125

4.0%

—

—%

125

4.0%

Total segment

$

2,102

67.3%

$

1

—%

$

2,103

67.3%

2021

Attritional

$

1,684

63.6%

$

(1)

—%

$

1,682

63.6%

Catastrophes

153

5.8%

—

—%

153

5.8%

Total segment

$

1,836

69.4%

$

(1)

—%

$

1,835

69.3%

2020

Attritional

$

1,545

69.7%

$

5

0.2%

$

1,549

69.9%

Catastrophes

68

3.1%

—

—%

68

3.1%

Total segment

$

1,613

72.8%

$

5

0.2%

$

1,617

73.0%

Variance 2022/2021

Attritional

$

293

(0.3)

pts

$

1

—

pts

$

294

(0.3)

pts

Catastrophes

(28)

(1.8)

pts

—

—

pts

(28)

(1.8)

pts

Total segment

$

265

(2.1)

pts

$

1

—

pts

$

266

(2.0)

pts

Variance 2021/2020

Attritional

$

139

(6.1)

pts

$

(6)

(0.2)

pts

$

133

(6.3)

pts

Catastrophes

85

2.7

pts

—

—

pts

85

2.7

pts

Total segment

$

223

(3.4)

pts

$

(6)

(0.2)

pts

$

217

(3.7)

pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by
 
14.6% to $2.1 billion in 2022 compared to $1.8 billion
 
in 2021.
 
The increase

was mainly
 
due to
 
an increase
 
of $293
 
million in
 
current year
 
attritional
 
losses,
 
partially offset
 
by a
 
decrease in

current year
 
catastrophe
 
losses of
 
$28 million.
 
The increase
 
in current
 
year attritional
 
losses was
 
primarily due

to the impact
 
of the increase
 
in premiums earned.
 
The current year
 
catastrophe
 
losses of $125
 
million primarily

related to
 
Hurricane Ian
 
($99 million),
 
with the
 
remaining losses
 
resulting from
 
various storm
 
events.
 
The $153

million of current
 
year catastrophe
 
losses in 2021 related
 
to Hurricane Ida
 
($80 million), the Texas
 
winter storms

($58 million) and the Quad State tornadoes
 
($15 million).

Segment
 
Expenses.
 
Commission and
 
brokerage
 
increased by
 
11.3% to
 
$394 million
 
in 2022
 
compared
 
to
 
$354

million
 
in
 
2021.
 
Segment
 
other
 
underwriting
 
expenses
 
increased
 
to
 
$463
 
million
 
in
 
2022
 
compared
 
to
 
$384

million
 
in
 
2021.
 
These
 
increases
 
were
 
mainly
 
due
 
to
 
the
 
impact
 
of
 
the
 
increase
 
in
 
premiums
 
earned
 
and

increased expenses
 
related
 
to the
 
continued
 
build out
 
of the
 
insurance
 
business, including
 
an expansion
 
of the

international insurance platform.

Critical Accounting Estimates

The following
 
is a
 
summary of
 
the critical
 
accounting estimates
 
related to
 
accounting estimates
 
that (1)
 
require

management
 
to
 
make
 
assumptions
 
about
 
highly
 
uncertain
 
matters
 
and
 
(2)
 
could
 
materially
 
impact
 
the

consolidated financial statements
 
if management made different
 
assumptions.

Loss and LAE
 
Reserves.
 
Our most critical
 
accounting estimate
 
is the determination
 
of our loss
 
and LAE reserves.

We
 
maintain
 
reserves
 
equal to
 
our estimated
 
ultimate
 
liability for
 
losses
 
and LAE
 
for
 
reported
 
and unreported

53

claims for our insurance and reinsurance
 
businesses.
 
Because reserves are based on estimates
 
of ultimate losses

and
 
LAE
 
by
 
underwriting
 
or
 
accident
 
year,
 
we
 
use
 
a
 
variety
 
of
 
statistical
 
and
 
actuarial
 
techniques
 
to
 
monitor

reserve
 
adequacy
 
over
 
time, evaluate
 
new information
 
as it
 
becomes known
 
and adjust
 
reserves
 
whenever
 
an

adjustment
 
appears
 
warranted.
 
We
 
consider
 
many
 
factors
 
when
 
setting
 
reserves
 
including:
 
(1)
 
our
 
exposure

base
 
and
 
projected
 
ultimate
 
premiums
 
earned;
 
(2)
 
our
 
expected
 
loss
 
ratios
 
by
 
product
 
and
 
class
 
of
 
business,

which are developed collaboratively
 
by underwriters and actuaries;
 
(3) actuarial methodologies and
 
assumptions

which analyze
 
our loss
 
reporting and
 
payment experience,
 
reports from
 
ceding companies
 
and historical
 
trends,

such
 
as
 
reserving
 
patterns,
 
loss
 
payments
 
and
 
product
 
mix;
 
(4)
 
current
 
legal
 
interpretations
 
of
 
coverage
 
and

liability;
 
and
 
(5)
 
economic
 
conditions.
 
Our
 
insurance
 
and
 
reinsurance
 
loss
 
and
 
LAE
 
reserves
 
represent

management’s best
 
estimate of our ultimate
 
liability. Actual
 
losses and LAE ultimately
 
paid may deviate,
 
perhaps

substantially,
 
from
 
such
 
reserves.
 
Our
 
net
 
income
 
(loss)
 
will
 
be
 
impacted
 
in
 
a
 
period
 
in
 
which
 
the
 
change
 
in

estimated ultimate losses
 
and LAE is recorded.
 
See also ITEM 8, “Financial Statements
 
and Supplementary Data”

- Note 1 of Notes to the Consolidated Financial
 
Statements.

It is more
 
difficult to
 
accurately
 
estimate loss
 
reserves for
 
reinsurance
 
liabilities than
 
for insurance
 
liabilities.
 
At

December 31,
 
2022, we
 
had reinsurance
 
reserves of
 
$16.1 billion,
 
of which
 
$278 million
 
were loss
 
reserves for

A&E
 
liabilities,
 
and
 
insurance
 
loss
 
reserves
 
of
 
$5.9
 
billion.
 
A
 
detailed
 
discussion
 
of
 
additional
 
considerations

related to A&E exposures
 
follows later in this section.

The
 
detailed
 
data
 
required
 
to
 
evaluate
 
ultimate
 
losses
 
for
 
our
 
insurance
 
business
 
is
 
accumulated
 
from
 
our

underwriting and claim systems.
 
Reserving for reinsurance
 
requires evaluation of loss
 
information received
 
from

ceding companies.
 
Ceding companies
 
report losses
 
to us
 
in many
 
forms dependent
 
on the type
 
of contract
 
and

the
 
agreed
 
or
 
contractual
 
reporting
 
requirements.
 
Generally,
 
proportional/quota
 
share
 
contracts
 
require
 
the

submission
 
of
 
a
 
monthly/quarterly
 
account,
 
which
 
includes
 
premium
 
and
 
loss
 
activity
 
for
 
the
 
period
 
with

corresponding reserves
 
as established by
 
the ceding company.
 
This information
 
is recorded into
 
our records.
 
For

certain
 
proportional
 
contracts,
 
we
 
may
 
require
 
a
 
detailed
 
loss
 
report
 
for
 
claims
 
that
 
exceed
 
a
 
certain
 
dollar

threshold
 
or
 
relate
 
to
 
a
 
particular
 
type
 
of
 
loss.
 
Excess
 
of
 
loss
 
and
 
facultative
 
contracts
 
generally
 
require

individual loss reporting
 
with precautionary notices
 
provided when a
 
loss reaches a
 
significant percentage
 
of the

attachment point
 
of the contract
 
or when certain causes
 
of loss or types
 
of injury occur.
 
Our experienced claims

staff
 
handles
 
individual
 
loss reports
 
and supporting
 
claim information.
 
Based on
 
our evaluation
 
of a
 
claim, we

may establish
 
additional case
 
reserves (ACRs)
 
in addition
 
to the
 
case reserves
 
reported by
 
the ceding
 
company.

To
 
ensure
 
ceding
 
companies
 
are
 
submitting
 
required
 
and accurate
 
data,
 
the
 
Underwriting,
 
Claim,
 
Reinsurance

Accounting
 
and Internal
 
Audit departments
 
of the
 
Company
 
perform various
 
reviews
 
of our
 
ceding companies,

particularly larger ceding companies, including
 
on-site audits of domestic ceding companies.

We sort
 
both our
 
reinsurance
 
and insurance
 
reserves into
 
exposure
 
groupings
 
for actuarial
 
analysis.
 
We assign

our
 
business
 
to
 
exposure
 
groupings
 
so
 
that
 
the
 
underlying
 
exposures
 
have
 
reasonably
 
homogeneous
 
loss

development
 
characteristics
 
and
 
are
 
large
 
enough
 
to
 
facilitate
 
credible
 
estimation
 
of
 
ultimate
 
losses.
 
We

periodically
 
review
 
our
 
exposure
 
groupings
 
and
 
we
 
may
 
change
 
our
 
groupings
 
over
 
time
 
as
 
our
 
business

changes.
 
We
 
currently
 
use
 
over
 
200
 
exposure
 
groupings
 
to
 
develop
 
our
 
reserve
 
estimates.
 
One
 
of
 
the
 
key

selection characteristics
 
for
 
the
 
exposure
 
groupings
 
is the
 
historical
 
duration
 
of the
 
claims
 
settlement
 
process.

Business in
 
which claims
 
are reported
 
and settled
 
relatively quickly
 
are commonly
 
referred
 
to as
 
short tail
 
lines,

principally property
 
lines.
 
Casualty claims
 
tend to
 
take
 
longer to
 
be reported
 
and settled
 
and casualty
 
lines are

generally referred
 
to as
 
long tail
 
lines.
 
Our estimates
 
of ultimate
 
losses for
 
shorter tail
 
lines, with
 
the exception

of loss estimates for large catastrophic
 
events,
 
generally exhibit less volatility
 
than those for the longer tail lines.

We
 
use
 
similar
 
actuarial
 
methodologies,
 
such
 
as
 
expected
 
loss
 
ratio,
 
chain
 
ladder
 
reserving
 
methods
 
and

Bornhuetter-Ferguson,
 
supplemented
 
by judgment
 
where appropriate,
 
to estimate
 
our ultimate
 
losses and
 
LAE

for each
 
exposure group.
 
Although we
 
use similar
 
actuarial methodologies
 
for both
 
short tail
 
and long
 
tail lines,

the faster reporting
 
of experience for
 
the short tail lines
 
allows us to
 
have greater confidence
 
in our estimates
 
of

ultimate
 
losses
 
for
 
short
 
tail
 
lines
 
at
 
an
 
earlier
 
stage
 
than
 
for
 
long
 
tail
 
lines.
 
As
 
a
 
result,
 
we
 
utilize,
 
as
 
well,

exposure-based
 
methods
 
to
 
estimate
 
our ultimate
 
losses
 
for
 
longer
 
tail
 
lines,
 
especially
 
for
 
immature
 
accident

years.
 
For
 
both
 
short
 
and
 
long
 
tail
 
lines,
 
we
 
supplement
 
these
 
general
 
approaches
 
with
 
analytically
 
based

54

judgments.
 
We
 
cannot
 
estimate
 
losses
 
from
 
widespread
 
catastrophic
 
events,
 
such
 
as
 
hurricanes
 
and

earthquakes,
 
using
 
traditional
 
actuarial
 
methods.
 
We
 
estimate
 
losses
 
for
 
these
 
types
 
of
 
events
 
based
 
on

information
 
derived
 
from
 
catastrophe
 
models,
 
quantitative
 
and
 
qualitative
 
exposure
 
analyses,
 
reports
 
and

communications
 
from
 
ceding
 
companies
 
and
 
development
 
patterns
 
for
 
historically
 
similar
 
events.
 
Due
 
to
 
the

inherent
 
uncertainty
 
in
 
estimating
 
such
 
losses,
 
these
 
estimates
 
are
 
subject
 
to
 
variability,
 
which
 
increases
 
with

the severity and complexity of the underlying event.

Our key
 
actuarial assumptions
 
contain
 
no explicit
 
provisions
 
for reserve
 
uncertainty
 
nor do
 
we supplement
 
the

actuarially determined reserves for uncertainty.

Our carried
 
reserves at
 
each reporting
 
date are
 
management’s
 
best estimate
 
of ultimate
 
unpaid losses
 
and LAE

at
 
that
 
date.
 
We
 
complete
 
detailed
 
reserve
 
studies
 
for
 
each exposure
 
group
 
annually
 
for our
 
reinsurance
 
and

insurance
 
operations.
 
The
 
completed
 
annual
 
reinsurance
 
reserve
 
studies
 
are
 
“rolled
 
forward”
 
for
 
each

accounting period
 
until the
 
subsequent reserve
 
study is
 
completed.
 
Analyzing the
 
roll-forward
 
process involves

comparing
 
actual
 
reported
 
losses
 
to
 
expected
 
losses
 
based
 
on
 
the
 
most
 
recent
 
reserve
 
study.
 
We
 
analyze

significant
 
variances
 
between
 
actual
 
and
 
expected
 
losses
 
and
 
also
 
consider
 
recent
 
market,
 
underwriting
 
and

management
 
criteria
 
to
 
determine
 
management’s
 
best
 
estimate
 
of
 
ultimate
 
unpaid
 
losses
 
and
 
LAE.

Management’s
 
best estimate
 
is developed
 
through
 
collaboration
 
with actuarial,
 
underwriting, claims,
 
legal
 
and

finance
 
departments
 
and
 
culminates
 
with
 
the
 
input
 
of
 
reserve
 
committees.
 
Each
 
segment
 
reserve
 
committee

includes the participation of the relevant parties
 
from actuarial, finance, claims and segment senior management

and has
 
the responsibility
 
for recommending
 
and approving
 
management’s
 
best estimate.
 
Reserves are
 
further

reviewed
 
by
 
Everest’s
 
Chief
 
Reserving
 
Actuary
 
and
 
senior
 
management.
 
The
 
objective
 
of
 
such
 
process
 
is
 
to

determine a single best
 
estimate viewed by
 
management to be
 
the best estimate
 
of its ultimate loss
 
liability.
 
As

a result of
 
these additional factors,
 
in some instances
 
the selected reserve
 
level may be
 
higher or lower than
 
the

actuarial indicated estimate.

Given
 
the
 
inherent
 
variability
 
in
 
our
 
loss
 
reserves,
 
we
 
have
 
developed
 
an
 
estimated
 
range
 
of
 
possible
 
gross

reserve
 
levels.
 
A
 
table
 
of
 
ranges
 
by
 
segment,
 
accompanied
 
by
 
commentary
 
on
 
potential
 
and
 
historical

variability,
 
is
 
included
 
in
 
“Financial
 
Condition
 
- Loss
 
and
 
LAE Reserves”.
 
The ranges
 
are
 
statistically
 
developed

using the exposure groups used in
 
the reserve estimation process
 
and aggregated to the segment
 
level.
 
For each

exposure
 
group,
 
our actuaries
 
calculate
 
a range
 
for each
 
accident year
 
based principally
 
on two
 
variables.
 
The

first
 
is
 
the
 
historical
 
changes
 
in
 
losses
 
and
 
LAE incurred
 
but not
 
reported
 
(“IBNR”)
 
for
 
each
 
accident
 
year
 
over

time; the second is
 
volatility of each
 
accident year’s
 
held reserves related
 
to estimated
 
ultimate losses, also
 
over

time.
 
Both are measured at various
 
ages from the end of the accident year through
 
the final payout of the year’s

losses.
 
Ranges are
 
developed for
 
the exposure
 
groups using
 
statistical
 
methods to
 
adjust for
 
diversification;
 
the

ranges
 
for
 
the
 
exposure
 
groups
 
are
 
aggregated
 
to
 
the
 
segment
 
level,
 
likewise,
 
with
 
an
 
adjustment
 
for

diversification.
 
Our
 
estimates
 
of
 
our
 
reserve
 
variability
 
may
 
not
 
be
 
comparable
 
to
 
those
 
of
 
other
 
companies

because there
 
are no
 
consistently
 
applied actuarial
 
or accounting
 
standards
 
governing such
 
presentations.
 
Our

recorded
 
reserves
 
reflect
 
our
 
best
 
point
 
estimate
 
of
 
our
 
liabilities
 
and
 
our
 
actuarial
 
methodologies
 
focus
 
on

developing
 
such
 
point
 
estimates.
 
We
 
calculate
 
the
 
ranges
 
subsequently,
 
based
 
on
 
the
 
historical
 
variability
 
of

such reserves.

Asbestos and Environmental
 
Exposures.
 
We continue to
 
receive claims under expired
 
insurance and reinsurance

contracts asserting
 
injuries and/or damages
 
relating to
 
or resulting
 
from environmental
 
pollution and hazardous

substances,
 
including
 
asbestos.
 
Environmental
 
claims
 
typically
 
assert
 
liability
 
for
 
(a)
 
the
 
mitigation
 
or

remediation
 
of environmental
 
contamination
 
or (b)
 
bodily injury
 
or property
 
damage
 
caused
 
by
 
the release
 
of

hazardous
 
substances
 
into the
 
land, air
 
or water.
 
Asbestos claims
 
typically assert
 
liability for
 
bodily injury
 
from

exposure to asbestos or for
 
property damage resulting from asbestos
 
or products containing asbestos.

Our
 
reserves
 
include
 
an
 
estimate
 
of
 
our
 
ultimate
 
liability
 
for
 
A&E
 
claims.
 
There
 
are
 
significant
 
uncertainties

surrounding our
 
estimates of
 
our potential
 
losses from
 
A&E claims.
 
Among the
 
uncertainties
 
are: (a)
 
potentially

long waiting periods
 
between exposure
 
and manifestation
 
of any
 
bodily injury or
 
property damage;
 
(b) difficulty

in
 
identifying
 
sources
 
of
 
asbestos
 
or
 
environmental
 
contamination;
 
(c)
 
difficulty
 
in
 
properly
 
allocating

55

responsibility
 
and/or liability
 
for asbestos
 
or environmental
 
damage; (d)
 
changes in
 
underlying laws
 
and judicial

interpretation
 
of those laws;
 
(e) the potential
 
for an
 
asbestos or
 
environmental
 
claim to involve
 
many insurance

providers
 
over
 
many
 
policy
 
periods;
 
(f)
 
questions
 
concerning
 
interpretation
 
and
 
application
 
of
 
insurance
 
and

reinsurance coverage;
 
and (g) uncertainty
 
regarding the
 
number and identity
 
of insureds with
 
potential asbestos

or environmental exposure.

Due to the uncertainties
 
discussed above, the ultimate
 
losses attributable to
 
A&E, and particularly asbestos,
 
may

be subject to more variability
 
than are non-A&E reserves
 
and such variation
 
could have a material
 
adverse effect

on our
 
financial condition,
 
results of
 
operations
 
and/or cash
 
flows.
 
See also
 
ITEM 8,
 
“Financial Statements
 
and

Supplementary Data” - Notes 1 and 3
 
of Notes to the Consolidated Financial Statements.

Reinsurance
 
Recoverables.
 
We
 
have
 
purchased
 
reinsurance
 
to
 
reduce
 
our
 
exposure
 
to
 
adverse
 
claim

experience,
 
large
 
claims
 
and catastrophic
 
loss
 
occurrences.
 
Our ceded
 
reinsurance
 
provides
 
for
 
recovery
 
from

reinsurers
 
of
 
a
 
portion
 
of
 
losses
 
and
 
loss
 
expenses
 
under
 
certain
 
circumstances.
 
Such
 
reinsurance
 
does
 
not

relieve us of our
 
obligation to
 
our policyholders.
 
In the event our
 
reinsurers are
 
unable to meet their obligations

under these agreements
 
or are able to successfully
 
challenge losses ceded by
 
us under the contracts,
 
we will not

be
 
able
 
to
 
realize
 
the
 
full
 
value
 
of
 
the
 
reinsurance
 
recoverable
 
balance.
 
In
 
some
 
cases,
 
we
 
may
 
hold
 
full
 
or

partial collateral
 
for the
 
receivable,
 
including letters
 
of credit,
 
trust assets
 
and cash.
 
Additionally,
 
creditworthy

foreign
 
reinsurers
 
of
 
business
 
written
 
in
 
the
 
U.S.,
 
as
 
well
 
as
 
capital
 
markets’
 
reinsurance
 
mechanisms,
 
are

generally required
 
to secure their
 
obligations.
 
We have
 
established reserves
 
for uncollectible balances
 
based on

our
 
assessment
 
of
 
the
 
collectability
 
of
 
the
 
outstanding
 
balances.
 
The
 
allowance
 
for
 
uncollectible
 
reinsurance

reflects
 
management’s
 
best
 
estimate
 
of
 
reinsurance
 
cessions
 
that
 
may
 
be
 
uncollectible
 
in
 
the
 
future
 
due
 
to

reinsurers’
 
unwillingness or
 
inability to pay.
 
The allowance for
 
uncollectible reinsurance
 
comprises an
 
allowance

and
 
an
 
allowance
 
for
 
disputed
 
balances.
 
Based
 
on
 
this
 
analysis,
 
the
 
Company
 
may
 
adjust
 
the
 
allowance
 
for

uncollectible reinsurance or charge
 
off reinsurer balances that are
 
determined to be uncollectible.

Due to the inherent
 
uncertainties as to
 
collection and the length
 
of time before reinsurance
 
recoverable become

due, it is possible that future adjustments
 
to the Company’s reinsurance
 
recoverable, net of the
 
allowance, could

be required,
 
which could
 
have a
 
material adverse
 
effect on
 
the Company’s
 
consolidated results
 
of operations
 
or

cash flows in a particular quarter or annual period.

The allowance
 
is
 
estimated
 
as
 
the
 
amount
 
of reinsurance
 
recoverable
 
exposed
 
to
 
loss multiplied
 
by
 
estimated

factors
 
for
 
the
 
probability
 
of
 
default.
 
The
 
reinsurance
 
recoverable
 
exposed
 
is
 
the
 
amount
 
of
 
reinsurance

recoverable
 
net of collateral
 
and other offsets,
 
considering the nature
 
of the collateral,
 
potential future
 
changes

in collateral
 
values, and
 
historical loss
 
information for
 
the type of
 
collateral obtained.
 
The probability
 
of default

factors are
 
historical insurer
 
and reinsurer
 
defaults for
 
liabilities with similar
 
durations to
 
the reinsured liabilities

as
 
estimated
 
through
 
multiple
 
economic
 
cycles.
 
Credit
 
ratings
 
are
 
forward-looking
 
and
 
consider
 
a
 
variety
 
of

economic outcomes.
 
The Company's
 
evaluation of
 
the required allowance
 
for reinsurance
 
recoverable
 
considers

the current economic environment
 
as well as macroeconomic scenarios.

The
 
Company
 
records
 
credit
 
loss
 
expenses
 
related
 
to
 
reinsurance
 
recoverable
 
in
 
Incurred
 
losses
 
and
 
loss

adjustment expenses in the Company’s
 
consolidated statements
 
of operations and comprehensive
 
income (loss).

Write-offs of
 
reinsurance recoverable
 
and any related
 
allowance are recorded
 
in the period in
 
which the balance

is deemed uncollectible.

Premiums
 
Written
 
and
 
Earned.
 
Premiums
 
written
 
by
 
us
 
are
 
earned
 
ratably
 
over
 
the
 
coverage
 
periods
 
of
 
the

related insurance
 
and reinsurance
 
contracts.
 
We
 
establish
 
unearned premium
 
reserves
 
to cover
 
the unexpired

portion of
 
each contract.
 
Such reserves,
 
for assumed
 
reinsurance,
 
are computed
 
using pro
 
rata
 
methods based

on statistical
 
data received from
 
ceding companies.
 
Premiums earned, and the
 
related costs,
 
which have not yet

been
 
reported
 
to
 
us,
 
are
 
estimated
 
and
 
accrued.
 
Because
 
of
 
the
 
inherent
 
lag
 
in
 
the
 
reporting
 
of
 
written
 
and

earned
 
premiums
 
by
 
our
 
ceding
 
companies,
 
we
 
use
 
standard
 
accepted
 
actuarial
 
methodologies
 
to
 
estimate

earned but not reported
 
premium at each financial reporting
 
date. These earned but
 
not reported premiums
 
are

combined
 
with
 
reported
 
earned
 
premiums
 
to
 
comprise
 
our
 
total
 
premiums
 
earned
 
for
 
determination
 
of
 
our

56

incurred
 
losses
 
and
 
loss
 
and
 
LAE
 
reserves.
 
Commission
 
expense
 
and
 
incurred
 
losses
 
related
 
to
 
the
 
change
 
in

earned
 
but
 
not
 
reported
 
premium are
 
included
 
in
 
current
 
period
 
company
 
and segment
 
financial
 
results.
 
See

also
 
ITEM
 
8,
 
“Financial
 
Statements
 
and
 
Supplementary
 
Data”
 
-
 
Note
 
1
 
of Notes
 
to
 
the
 
Consolidated
 
Financial

Statements.

The following table displays
 
the estimated components of net earned but
 
not reported premiums by segment for

the periods indicated.

At December 31,

(Dollars in millions)

2022

2021

2020

Reinsurance

$

2,255

$

2,055

$

1,774

Insurance

—

—

—

Total

$

2,255

$

2,055

$

1,774

(Some amounts may not reconcile due to rounding.)

Investment
 
Valuation.
 
Our fixed
 
income
 
investments
 
are
 
classified for
 
accounting
 
purposes
 
as either
 
available

for sale
 
or held to
 
maturity.
 
The available
 
for sale
 
fixed maturity
 
securities are
 
carried at fair
 
value and
 
the held

to maturity fixed
 
maturity portfolio
 
is carried at
 
amortized cost,
 
net of current
 
expected credit
 
allowance on our

consolidated
 
balance
 
sheets.
 
Our
 
equity
 
securities
 
are
 
all
 
carried
 
at
 
fair
 
value.
 
Most
 
securities
 
we
 
own
 
are

traded
 
on
 
national
 
exchanges
 
where
 
market
 
values
 
are
 
readily
 
available.
 
Some
 
of
 
our
 
commercial
 
mortgage-

backed
 
securities (“CMBS”)
 
are valued
 
using cash
 
flow models
 
and risk-adjusted
 
discount rates.
 
We hold
 
some

privately
 
placed securities,
 
less than
 
10% of
 
the portfolio,
 
that
 
are
 
either valued
 
by investment
 
advisors
 
or the

Company.
 
In
 
some
 
instances,
 
values
 
provided
 
by
 
an
 
investment
 
advisor
 
are
 
supported
 
with
 
opinions
 
from

qualified independent third parties.
 
The Company has procedures
 
in place to review the values
 
received from its

investment
 
advisors.
 
At
 
December 31,
 
2022 and
 
2021, our
 
investment
 
portfolio
 
included
 
$3.8 billion
 
and $2.6

billion,
 
respectively,
 
of
 
limited
 
partnership
 
investments
 
whose
 
values
 
are
 
reported
 
pursuant
 
to
 
the
 
equity

method
 
of
 
accounting.
 
We
 
carry
 
these
 
investments
 
at
 
values
 
provided
 
by
 
the
 
managements
 
of
 
the
 
limited

partnerships and
 
due to inherent
 
reporting lags,
 
the carrying values
 
are based on
 
values with “as
 
of” dates from

one month to one quarter prior to our financial statement
 
date.

At December 31, 2022, we had
 
net unrealized losses on our available
 
for sale fixed maturity
 
securities, net of tax,

of $1.7 billion
 
compared to
 
net unrealized
 
gains on
 
our available
 
for sale
 
fixed maturity
 
securities, net
 
of tax,
 
of

$239 million
 
at December
 
31, 2021.
 
Gains (losses)
 
from market
 
fluctuations on
 
available for
 
sale fixed
 
maturity

securities
 
at
 
fair
 
value
 
are
 
reflected
 
as
 
accumulated
 
other
 
comprehensive
 
income
 
(loss)
 
in
 
the
 
consolidated

balance sheets.
 
Market
 
value declines
 
for available
 
for sale
 
fixed income
 
portfolio,
 
which are
 
considered credit

related, are reflected
 
in our consolidated
 
statements of operations
 
and comprehensive income
 
(loss), as realized

capital
 
losses.
 
We
 
consider
 
many
 
factors
 
when
 
determining
 
whether
 
a
 
market
 
value
 
decline
 
is
 
credit
 
related,

including:
 
(1) we
 
have no
 
intent
 
to sell
 
and, more
 
likely than
 
not, will
 
not be
 
required to
 
sell prior
 
to recovery,

(2) the
 
length of
 
time the
 
market
 
value has
 
been below
 
book value,
 
(3) the
 
credit strength
 
of the
 
issuer,
 
(4) the

issuer’s
 
market
 
sector,
 
(5)
 
the
 
length
 
of
 
time
 
to
 
maturity
 
and
 
(6)
 
for
 
asset-backed
 
securities,
 
changes
 
in

prepayments,
 
credit
 
enhancements
 
and
 
underlying
 
default
 
rates.
 
If management’s
 
assessments
 
change
 
in
 
the

future, we may
 
ultimately record
 
a realized loss
 
after management
 
originally concluded that
 
the decline in value

was temporary.

Fixed
 
maturity
 
securities
 
designated
 
as
 
held
 
to
 
maturity
 
consist
 
of
 
debt
 
securities
 
for
 
which
 
the
 
Company
 
has

both the positive
 
intent and ability
 
to hold to
 
maturity or redemption
 
and are reported
 
at amortized cost,
 
net of

the
 
current
 
expected
 
credit
 
loss
 
allowance.
 
Interest
 
income
 
for
 
fixed
 
maturity
 
securities
 
held
 
to
 
maturity
 
is

determined in the
 
same manner as interest
 
income for fixed
 
maturity securities available
 
for sale.
 
The Company

evaluates
 
fixed
 
maturity
 
securities
 
classified as
 
held to
 
maturity
 
for
 
current
 
expected
 
credit
 
losses
 
utilizing
 
risk

characteristics
 
of
 
each
 
security,
 
including
 
credit
 
rating,
 
remaining
 
time
 
to
 
maturity,
 
adjusted
 
for
 
prepayment

considerations,
 
and
 
subordination
 
level,
 
and
 
applying
 
default
 
and
 
recovery
 
rates,
 
which
 
include
 
the

57

incorporation
 
of
 
historical
 
credit
 
loss
 
experience
 
and
 
macroeconomic
 
forecasts,
 
to
 
develop
 
an
 
estimate
 
of

current expected credit losses.

See also ITEM 8, “Financial
 
Statements and
 
Supplementary Data”
 
- Note 1 of Notes
 
to the Consolidated
 
Financial

Statements.

FINANCIAL CONDITION

Investments.
 
Total
 
investments were
 
$28.5 billion at
 
December 31, 2022,
 
an increase
 
of $241 million
 
compared

to
 
$28.2
 
billion
 
at
 
December
 
31,
 
2021.
 
The
 
rise
 
in
 
investments
 
was
 
primarily
 
related
 
to
 
an
 
increase
 
in
 
other

invested assets, partially
 
offset by a decline in equity
 
securities.
 
The increase in other invested
 
assets was due to

the inclusion
 
of assets held
 
for the implementation
 
of a Company
 
Owned Life Insurance
 
(“COLI”) program
 
in the

fourth quarter
 
of 2022.
 
A portion of
 
the equity securities
 
portfolio was
 
sold in order
 
to invest
 
in the COLI
 
assets

which accounted for the decline in equity
 
securities.

The
 
Company’s
 
limited
 
partnership
 
investments
 
are
 
comprised
 
of
 
limited
 
partnerships
 
that
 
invest
 
in
 
private

equity,
 
private
 
credit
 
and
 
private
 
real
 
estate.
 
Generally,
 
the
 
limited
 
partnerships
 
are
 
reported
 
on
 
a
 
month
 
or

quarter
 
lag.
 
We
 
receive
 
annual
 
audited
 
financial
 
statements
 
for
 
all
 
of
 
the
 
limited
 
partnerships
 
which
 
are

prepared using
 
fair value accounting
 
in accordance with
 
FASB guidance.
 
For the quarterly
 
reports, the Company

reviews
 
the
 
financial
 
reports
 
for
 
any
 
unusual
 
changes
 
in
 
carrying
 
value.
 
If
 
the
 
Company
 
becomes
 
aware
 
of
 
a

significant
 
decline in
 
value during
 
the lag
 
reporting
 
period, the
 
loss will
 
be recorded
 
in the
 
period in
 
which the

Company identifies the decline.

The
 
table
 
below
 
summarizes
 
the
 
composition
 
and
 
characteristics
 
of
 
our
 
investment
 
portfolio
 
as
 
of
 
the
 
dates

indicated.

At December 31,

2022

2021

Fixed income portfolio duration (years)

3.1

3.2

Fixed income composite credit quality

A+

A+

Reinsurance Recoverables
 
.

Reinsurance
 
recoverables
 
for
 
both
 
paid
 
and
 
unpaid
 
losses
 
totaled
 
$2.2
 
billion
 
at
 
December
 
31,
 
2022
 
and
 
$2.1

billion at
 
December 31,
 
2021.
 
At
 
December 31,
 
2022, $520
 
million, or
 
23.2%, was
 
recoverable
 
from Mt.
 
Logan

Re
 
collateralized
 
segregated
 
accounts;
 
$283
 
million,
 
or
 
12.6%,
 
was
 
recoverable
 
from
 
Munich
 
Re
 
and
 
$148

million, or 6.6%, was
 
recoverable
 
from Endurance
 
Re.
 
No other retrocessionaire
 
accounted for
 
more than 5% of

our recoverables.

Loss and LAE Reserves.

Gross loss and LAE reserves
 
totaled $22.1 billion and
 
$19.0 billion at December 31,
 
2022

and 2021, respectively.

58

The following
 
tables summarize
 
gross outstanding
 
loss and
 
LAE reserves
 
by segment,
 
classified by
 
case reserves

and IBNR reserves, for the periods indicated.

At December 31, 2022

Case

IBNR

Total

% of

(Dollars in millions)

Reserves

Reserves

Reserves

Total

Reinsurance

$

6,045

$

9,818

$

15,862

71.9%

Insurance

1,863

4,062

5,925

26.9%

Total excluding A&E

7,908

13,880

21,787

98.7%

A&E

138

140

278

1.3%

Total including A&E

$

8,046

$

14,019

$

22,065

100.0%

(Some amounts may not reconcile due to rounding.)

At December 31, 2021

Case

IBNR

Total

% of

(Dollars in millions)

Reserves

Reserves

Reserves

Total

Reinsurance

$

5,415

$

8,312

$

13,727

72.2%

Insurance

1,546

3,562

5,109

26.9%

Total excluding A&E

6,961

11,875

18,836

99.1%

A&E

164

10

174

0.9%

Total including A&E

$

7,125

$

11,885

$

19,009

100.0%

(Some amounts may not reconcile due to rounding.)

Changes
 
in
 
premiums
 
earned
 
and
 
business
 
mix,
 
reserve
 
re-estimations,
 
catastrophe
 
losses
 
and
 
changes
 
in

catastrophe loss reserves
 
and claim settlement activity all impact loss and LAE
 
reserves by segment and in total.

Our
 
carried
 
loss
 
and
 
LAE
 
reserves
 
represent
 
management’s
 
best
 
estimate
 
of
 
our
 
ultimate
 
liability
 
for
 
unpaid

claims.
 
We
 
continuously
 
re-evaluate
 
our
 
reserves,
 
including
 
re-estimates
 
of
 
prior
 
period
 
reserves,
 
taking
 
into

consideration
 
all available
 
information and,
 
in particular,
 
newly reported
 
loss and
 
claim experience.
 
Changes in

reserves resulting
 
from such
 
re-evaluations are
 
reflected in
 
incurred losses
 
in the period
 
when the re-evaluation

is
 
made.
 
Our
 
analytical
 
methods
 
and
 
processes
 
operate
 
at
 
multiple
 
levels
 
including
 
individual
 
contracts,

groupings of
 
like contracts,
 
classes and
 
lines of business,
 
internal business
 
units, segments,
 
accident years,
 
legal

entities,
 
and
 
in
 
the
 
aggregate.
 
In
 
order
 
to
 
set
 
appropriate
 
reserves,
 
we
 
make
 
qualitative
 
and
 
quantitative

analyses
 
and
 
judgments
 
at
 
these
 
various
 
levels.
 
We
 
utilize
 
actuarial
 
science,
 
business
 
expertise
 
and

management judgment
 
in a manner
 
intended to
 
ensure the accuracy
 
and consistency
 
of our reserving
 
practices.

Management’s
 
best estimate
 
is developed
 
through
 
collaboration
 
with actuarial,
 
underwriting, claims,
 
legal
 
and

finance
 
departments
 
and
 
culminates
 
with
 
the
 
input
 
of
 
reserve
 
committees.
 
Each
 
segment
 
reserve
 
committee

includes the participation of the relevant parties
 
from actuarial, finance, claims and segment senior management

and has
 
the responsibility
 
for recommending
 
and approving
 
management’s
 
best estimate.
 
Reserves are
 
further

reviewed
 
by
 
Everest’s
 
Chief
 
Reserving
 
Actuary
 
and
 
senior
 
management.
 
The
 
objective
 
of
 
such
 
process
 
is
 
to

determine
 
a
 
single
 
best
 
estimate
 
viewed
 
by
 
management
 
to
 
be
 
the
 
best
 
estimate
 
of
 
its
 
ultimate
 
loss
 
liability.

Nevertheless, our reserves are estimates,
 
which are subject to variation,
 
which may be significant.

There
 
can
 
be no
 
assurance
 
that reserves
 
for,
 
and losses
 
from,
 
claim obligations
 
will not
 
increase
 
in the
 
future,

possibly
 
by
 
a
 
material
 
amount.
 
However,
 
we
 
believe
 
that
 
our
 
existing
 
reserves
 
and
 
reserving
 
methodologies

lessen
 
the
 
probability
 
that
 
any
 
such
 
increase
 
would
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
financial
 
condition,

results of operations or cash flows.

We
 
have
 
included
 
ranges
 
for
 
loss
 
reserve
 
estimates
 
determined
 
by
 
our
 
actuaries,
 
which
 
have
 
been
 
developed

through
 
a
 
combination
 
of
 
objective
 
and
 
subjective
 
criteria.
 
Our
 
presentation
 
of
 
this
 
information
 
may
 
not
 
be

directly comparable
 
to similar presentations
 
of other companies
 
as there are
 
no consistently
 
applied actuarial or

59

accounting standards
 
governing such presentations.
 
Our recorded reserves
 
are an aggregation
 
of our best
 
point

estimates
 
for
 
approximately
 
200
 
reserve
 
groups
 
and
 
reflect
 
our
 
best
 
point
 
estimate
 
of
 
our
 
liabilities.
 
Our

actuarial methodologies develop
 
point estimates
 
rather than ranges
 
and the ranges
 
are developed subsequently

based upon historical and prospective
 
variability measures.

The
 
following
 
table
 
below
 
represents
 
the
 
reserve
 
levels
 
and
 
ranges
 
for
 
each
 
of
 
our
 
business
 
segments
 
for
 
the

period indicated.

Outstanding Reserves and Ranges By Segment (1)

At December 31, 2022

As

Low

Low

High

High

(Dollars in millions)

Reported

Range %

Range

Range %

Range

Gross Reserves By Segment

Reinsurance

$

15,862

-7.4%

$

14,689

7.8%

$

17,095

Insurance

5,925

-9.9%

5,340

10.8%

6,565

Total Gross Reserves (excluding A&E)

21,787

-8.1%

20,029

8.6%

23,660

A&E (All Segments)

278

-22.9%

214

22.7%

341

Total Gross Reserves

$

22,065

-8.3%

20,243

8.8%

24,001

(Some amounts may not reconcile due
 
to rounding.)

______________________________________________________

(1)

There can be no assurance that reserves
 
will not ultimately exceed the
 
indicated ranges requiring additional
 
income (loss) statement expense.

Depending
 
on
 
the
 
specific
 
segment,
 
the
 
range
 
derived
 
for
 
the
 
loss
 
reserves,
 
excluding
 
reserves
 
for
 
A&E

exposures,
 
ranges
 
from minus
 
7.4% to
 
minus 9.9%
 
for the
 
low range
 
and from
 
plus 7.8%
 
to plus
 
10.8% for
 
the

high range.
 
Both the higher
 
and lower ranges
 
are associated
 
with the Insurance
 
segment.
 
The size of
 
the range

is
 
dependent
 
upon
 
the
 
level
 
of
 
confidence
 
associated
 
with
 
the
 
reserve
 
estimates.
 
Within
 
each
 
range,

management’s
 
best
 
estimate
 
of
 
loss
 
reserves
 
is
 
based
 
upon
 
the
 
point
 
estimate

derived
 
by
 
our
 
actuaries
 
in

detailed reserve
 
studies.
 
Such ranges
 
are necessarily
 
subjective due
 
to the
 
lack of
 
generally
 
accepted actuarial

standards with
 
respect to their
 
development.
 
There can be
 
no assurance that
 
our claim obligations
 
will not vary

outside of these ranges.

Additional losses, including
 
those relating to
 
latent injuries, and
 
other exposures, which
 
are as yet
 
unrecognized,

the type
 
or magnitude
 
of which
 
cannot be
 
foreseen
 
by us
 
or the
 
reinsurance
 
and insurance
 
industry
 
generally,

may
 
emerge
 
in
 
the
 
future.
 
Such
 
future
 
emergence,
 
to
 
the
 
extent
 
not
 
covered
 
by
 
existing
 
retrocessional

contracts,
 
could have
 
material
 
adverse
 
effects
 
on our
 
future financial
 
condition,
 
results of
 
operations
 
and cash

flows.

Asbestos and Environmental
 
Exposures.
 
A&E exposures represent a separate
 
exposure group for monitoring
 
and

evaluating reserve adequacy.

With
 
respect
 
to
 
asbestos
 
only,
 
at
 
December
 
31,
 
2022,
 
we
 
had
 
net
 
asbestos
 
loss
 
reserves
 
of
 
$233
 
million,
 
or

90.5%, of total net A&E reserves, all of which was
 
for assumed business.

See
 
Note
 
3
 
of
 
Notes
 
to
 
Consolidated
 
Financial
 
Statements
 
for
 
a
 
summary
 
of
 
Asbestos
 
and
 
Environmental

Exposures.

Ultimate
 
loss
 
projections
 
for
 
A&E
 
liabilities
 
cannot
 
be
 
accomplished
 
using
 
standard
 
actuarial
 
techniques.
 
We

believe
 
that
 
our
 
A&E
 
reserves
 
represent
 
management’s
 
best
 
estimate
 
of the
 
ultimate
 
liability;
 
however,
 
there

can be no assurance that ultimate loss
 
payments will not exceed such reserves,
 
perhaps by a significant amount.

Industry
 
analysts
 
use
 
the
 
“survival
 
ratio”
 
to
 
compare
 
the
 
A&E
 
reserves
 
among
 
companies
 
with
 
such
 
liabilities.

The survival ratio is typically calculated
 
by dividing a company’s
 
current net reserves by the three year
 
average of

60

annual
 
paid
 
losses.
 
Hence,
 
the
 
survival
 
ratio
 
equals
 
the
 
number
 
of
 
years
 
that
 
it
 
would
 
take
 
to
 
exhaust
 
the

current reserves
 
if future
 
loss payments
 
were to
 
continue at
 
historical
 
levels.
 
Using this
 
measurement,
 
our net

three
 
year
 
asbestos
 
survival
 
ratio
 
was
 
6.9
 
years
 
at
 
December
 
31,
 
2022.
 
These
 
metrics
 
can
 
be
 
skewed
 
by

individual large settlements
 
occurring in the
 
prior three years
 
and therefore,
 
may not be
 
indicative of
 
the timing

of future payments.

LIQUIDITY AND CAPITAL RESOURCES

Capital.
 
Shareholders’
 
equity at
 
December 31,
 
2022 and
 
December 31,
 
2021 was
 
$8.4 billion
 
and $10.1
 
billion,

respectively.
 
Management’s
 
objective
 
in
 
managing
 
capital
 
is
 
to
 
ensure
 
its
 
overall
 
capital
 
level,
 
as
 
well
 
as
 
the

capital
 
levels
 
of
 
its
 
operating
 
subsidiaries,
 
exceed
 
the
 
amounts
 
required
 
by
 
regulators,
 
the
 
amount
 
needed
 
to

support
 
our current
 
financial strength
 
ratings
 
from rating
 
agencies and
 
our own
 
economic capital
 
models.
 
The

Company’s capital
 
has historically exceeded these benchmark
 
levels.

Our
 
two
 
main
 
operating
 
companies
 
Bermuda
 
Re
 
and
 
Everest
 
Re
 
are
 
regulated
 
by
 
the
 
Bermuda
 
Monetary

Authority
 
(“BMA”)
 
and
 
the
 
State
 
of
 
Delaware,
 
Department
 
of
 
Insurance,
 
respectively.
 
Both
 
regulatory
 
bodies

have their
 
own capital
 
adequacy models
 
based on
 
statutory capital
 
as opposed
 
to GAAP basis
 
equity.
 
Failure to

meet
 
the
 
required
 
statutory
 
capital
 
levels
 
could
 
result
 
in
 
various
 
regulatory
 
restrictions,
 
including
 
business

activity and the payment of dividends to
 
their parent companies.

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

Bermuda Re

(1)

Everest Re

(2)

At December 31,

At December 31,

(Dollars in millions)

2022

(3)

2021

2022

2021

Regulatory targeted capital

$

—

$

2,169

$

3,353

$

2,960

Actual capital

$

2,759

$

3,184

$

5,553

$

5,717

(1)

Regulatory targeted capital represents
 
the target capital level from
 
the applicable year's BSCR calculation.

(2)

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

(3)

The 2022 BSCR calculation is not
 
yet due to be completed;
 
however,
 
the Company anticipates that
 
Bermuda Re's December
 
31, 2022 actual capital will
 
exceed

the targeted capital level.

Our financial strength
 
ratings as determined
 
by A.M. Best, Moody’s
 
and Standard & Poor’s
 
are important as
 
they

provide
 
our
 
customers
 
and
 
investors
 
with
 
an
 
independent
 
assessment
 
of
 
our
 
financial
 
strength
 
using
 
a
 
rating

scale that provides
 
for relative comparisons.
 
We continue
 
to possess significant
 
financial flexibility and
 
access to

debt
 
and
 
equity markets
 
as a
 
result
 
of our
 
financial
 
strength,
 
as evidenced
 
by
 
the
 
financial strength
 
ratings
 
as

assigned by independent rating agencies.
 
See also ITEM 1, Business – “Financial Strength Ratings”.

We maintain
 
our own economic
 
capital models
 
to monitor
 
and project
 
our overall
 
capital, as
 
well as, the
 
capital

at
 
our
 
operating
 
subsidiaries.
 
A
 
key
 
input
 
to
 
the
 
economic
 
models
 
is
 
projected
 
income
 
and
 
this
 
input
 
is

continually compared to actual results,
 
which may require a change in the capital
 
strategy.

In 2022,
 
we repurchased
 
241,273 shares
 
for $61
 
million in
 
the open
 
market
 
and paid
 
$255 million
 
in dividends.

During
 
2021,
 
we
 
repurchased
 
887,622
 
shares
 
for
 
$225
 
million
 
in
 
the
 
open
 
market
 
and
 
paid
 
$247
 
million
 
in

dividends.
 
We may
 
at times enter
 
into a
 
Rule 10b5-1 repurchase
 
plan agreement
 
to facilitate
 
the repurchase
 
of

shares.
 
On
 
May
 
22,
 
2020,
 
our
 
existing
 
Board
 
authorization
 
to
 
purchase
 
up
 
to
 
30
 
million
 
of
 
our
 
shares
 
was

amended to
 
authorize
 
the purchase
 
of up
 
to 32
 
million shares.
 
As of
 
December 31,
 
2022, we
 
had repurchased

30.8 million shares under this authorization.

We repurchased
 
$6 million of our
 
long term subordinated
 
notes during the
 
third quarter of
 
2022 and recognized

a gain
 
of $1
 
million on
 
the repurchase.
 
We
 
may continue,
 
from time
 
to time,
 
to
 
seek to
 
retire
 
portions of
 
our

outstanding
 
debt
 
securities
 
through
 
cash
 
repurchases,
 
in
 
open-market
 
purchases,
 
privately
 
negotiated

transactions
 
or
 
otherwise.
 
Such
 
repurchases,
 
if
 
any,
 
will
 
be
 
subject
 
to
 
and
 
depend
 
on
 
prevailing
 
market

61

conditions,
 
our
 
liquidity
 
requirements,
 
contractual
 
restrictions
 
and
 
other
 
factors.
 
The amounts
 
involved
 
in
 
any

such transactions, individually or in the aggregate,
 
may be material.

On October 7,
 
2020, we
 
issued
 
an additional
 
$1.0 billion of
 
30 year senior
 
notes with
 
an interest
 
coupon rate
 
of

3.5%.
 
These senior notes will mature on October
 
15, 2050 and will pay interest
 
semi-annually.

On October 4,
 
2021, we
 
issued an
 
additional $1.0
 
billion of 31
 
year senior
 
notes with
 
an interest
 
coupon rate
 
of

3.125%.
 
These senior notes will mature on October 15, 2052 and
 
will pay interest semi-annually.

Liquidity.
 
Our liquidity
 
requirements
 
are generally
 
met from
 
positive
 
cash flow
 
from operations.
 
Positive
 
cash

flow results
 
from reinsurance
 
and insurance
 
premiums being
 
collected prior
 
to disbursements
 
for claims,
 
which

disbursements
 
generally
 
take
 
place
 
over
 
an
 
extended
 
period
 
after
 
the
 
collection
 
of
 
premiums,
 
sometimes
 
a

period of many
 
years.
 
Collected premiums
 
are generally
 
invested,
 
prior to
 
their use in
 
such disbursements,
 
and

investment
 
income provides
 
additional funding
 
for loss
 
payments.
 
Our net
 
cash flows
 
from operating
 
activities

were $3.7
 
billion and
 
$3.8 billion
 
for the
 
years
 
ended December
 
31, 2022
 
and 2021,
 
respectively.
 
Additionally,

these cash
 
flows reflected
 
net catastrophe
 
loss payments
 
of $677
 
million and
 
$834 million
 
for the
 
years
 
ended

December 31,
 
2022
 
and 2021,
 
respectively
 
and net
 
tax
 
payments
 
of $171
 
million and
 
$98 million
 
for the
 
years

ended December 31, 2022 and 2021, respectively.

If disbursements
 
for claims
 
and benefits,
 
policy acquisition
 
costs and
 
other operating
 
expenses
 
were to
 
exceed

premium inflows,
 
cash flow
 
from reinsurance
 
and insurance
 
operations
 
would be
 
negative.
 
The effect
 
on cash

flow
 
from
 
insurance
 
operations
 
would
 
be
 
partially
 
offset
 
by
 
cash
 
flow
 
from
 
investment
 
income.
 
Additionally,

cash inflows
 
from investment
 
maturities - both
 
short-term investments
 
and longer
 
term maturities
 
are available

to supplement other
 
operating cash
 
flows.
 
We do not
 
expect to supplement
 
negative insurance
 
operations cash

flows from investment dispositions.

As the
 
timing of
 
payments for
 
claims and
 
benefits cannot
 
be predicted
 
with certainty,
 
we maintain
 
portfolios of

long
 
term
 
invested
 
assets
 
with
 
varying
 
maturities,
 
along
 
with
 
short-term
 
investments
 
that
 
provide
 
additional

liquidity
 
for
 
payment
 
of claims.
 
At
 
December
 
31,
 
2022
 
and
 
December
 
31,
 
2021,
 
we
 
held
 
cash
 
and short
 
-term

investments
 
of
 
$2.4
 
billion
 
and
 
$2.6
 
billion,
 
respectively.
 
Our
 
short-term
 
investments
 
are
 
generally
 
readily

marketable
 
and can
 
be converted
 
to cash.
 
In addition
 
to these
 
cash and
 
short-term investments,
 
at December

31, 2022, we had
 
$1.3 billion of
 
available for
 
sale fixed
 
maturity securities
 
maturing within one
 
year or less,
 
$7.5

billion maturing
 
within one
 
to
 
five years
 
and
 
$5.3 billion
 
maturing
 
after
 
five
 
years.
 
Our
 
$281 million
 
of
 
equity

securities
 
are
 
comprised
 
primarily
 
of
 
publicly
 
traded
 
securities
 
that
 
can
 
be
 
easily
 
liquidated.
 
We
 
believe
 
that

these fixed
 
maturity and equity securities,
 
in conjunction with the short
 
-term investments and
 
positive cash flow

from operations,
 
provide ample
 
sources of
 
liquidity for
 
the expected
 
payment
 
of losses
 
in the
 
near future.
 
We

do not anticipate selling
 
a significant amount
 
of securities or using available
 
credit facilities to
 
pay losses and LAE

but have
 
the ability to
 
do so.
 
Sales of securities
 
might result
 
in realized capital
 
gains or losses.
 
At December 31,

2022
 
we
 
had
 
$1.9
 
billion
 
of
 
net
 
pre-tax
 
unrealized
 
depreciation
 
related
 
to
 
available
 
for
 
sale
 
fixed
 
maturity

securities,
 
comprised
 
of
 
$2.0
 
billion
 
of
 
pre-tax
 
unrealized
 
depreciation
 
and
 
$81
 
million
 
of
 
pre-tax
 
unrealized

appreciation.

Management generally
 
expects annual
 
positive cash
 
flow from operations,
 
which reflects
 
the strength
 
of overall

pricing.
 
However,
 
given the recent
 
set of catastrophic
 
events, cash
 
flow from operations
 
may decline
 
and could

become negative in the near term as
 
significant claim payments are
 
made related to the catastrophes.
 
However,

as indicated
 
above,
 
the Company
 
has ample
 
liquidity to
 
settle its
 
catastrophe
 
claims and/or
 
any
 
payments
 
due

for its catastrophe
 
bond program.

In addition to our cash flows from operations
 
and liquid investments, we also have
 
multiple active credit facilities

that
 
provide
 
commitments
 
of
 
up
 
to
 
$1.5
 
billion
 
of
 
collateralized
 
standby
 
letters
 
of
 
credit
 
to
 
support
 
business

written by
 
our Bermuda operating
 
subsidiaries.
 
In addition, the
 
Company has the
 
ability to request
 
access to an

additional
 
$440
 
million
 
of
 
uncommitted
 
credit
 
facilities,
 
which
 
would
 
require
 
approval
 
from
 
the
 
applicable

62

lender.
 
There is
 
no guarantee
 
the uncommitted
 
capacity will
 
be available
 
to us
 
on a
 
future date.
 
See Note
 
5 –

Credit Facilities for further details.

Exposure to
 
Catastrophes.
 
Like other insurance
 
and reinsurance
 
companies, we are
 
exposed to
 
multiple insured

losses arising out of a
 
single occurrence, whether a
 
natural event,
 
such as a hurricane
 
or an earthquake,
 
or other

catastrophe,
 
such
 
as
 
an
 
explosion
 
at
 
a
 
major
 
factory.
 
A
 
large
 
catastrophic
 
event
 
can
 
be
 
expected
 
to
 
generate

insured
 
losses
 
to
 
multiple
 
reinsurance
 
treaties,
 
facultative
 
certificates
 
and
 
direct
 
insurance
 
policies
 
across

various lines of business.

We focus on
 
potential losses that
 
could result from
 
any single event,
 
or series of events
 
as part of our evaluation

and monitoring
 
of our
 
aggregate
 
exposures
 
to
 
catastrophic
 
events.
 
Accordingly,
 
we employ
 
various
 
techniques

to estimate
 
the amount of
 
loss we could
 
sustain from
 
any single catastrophic
 
event or series
 
of events in
 
various

geographic
 
areas.
 
These
 
techniques
 
range
 
from
 
deterministic
 
approaches,
 
such
 
as
 
tracking
 
aggregate
 
limits

exposed
 
in
 
catastrophe-prone
 
zones
 
and
 
applying
 
reasonable
 
damage
 
factors,
 
to
 
modeled
 
approaches
 
that

attempt
 
to
 
scientifically
 
measure
 
catastrophe
 
loss
 
exposure
 
using
 
sophisticated
 
Monte
 
Carlo
 
simulation

techniques that forecast
 
frequency and severity of potential losses
 
on a probabilistic basis.

No single
 
computer
 
model or
 
group
 
of models
 
is currently
 
capable of
 
projecting
 
the amount
 
and probability
 
of

loss in
 
all global geographic
 
regions in
 
which we
 
conduct business.
 
In addition,
 
the form,
 
quality and
 
granularity

of underwriting exposure
 
data furnished
 
by (re)insureds
 
is not uniformly
 
compatible with the
 
data requirements

for
 
our
 
licensed
 
models,
 
which
 
adds
 
to
 
the
 
inherent
 
imprecision
 
in
 
the
 
potential
 
loss
 
projections.
 
Further,
 
the

results
 
from
 
multiple
 
models
 
and
 
analytical
 
methods
 
must
 
be
 
combined
 
to
 
estimate
 
potential
 
losses
 
by
 
and

across
 
business
 
units.
 
Also,
 
while
 
most
 
models
 
have
 
been
 
updated
 
to
 
incorporate
 
claims
 
information
 
from

recent
 
catastrophic
 
events,
 
catastrophe
 
model
 
projections
 
are
 
still
 
inherently
 
imprecise.
 
In
 
addition,

uncertainties with respect
 
to future climatic patterns
 
and cycles could add
 
further uncertainty to loss
 
projections

from models based on historical data.

Nevertheless,
 
when combined
 
with traditional
 
risk management
 
techniques
 
and sound
 
underwriting judgment,

catastrophe
 
models
 
are
 
a
 
useful
 
tool
 
for
 
underwriters
 
to
 
price
 
catastrophe
 
exposed
 
risks
 
and
 
for
 
providing

management with
 
quantitative
 
analyses with
 
which to monitor
 
and manage
 
catastrophic
 
risk exposures
 
by zone

and across zones for individual and
 
multiple events.

Projected catastrophe
 
losses are
 
generally summarized
 
in terms
 
of the
 
PML.
 
We define
 
PML as
 
our anticipated

loss, taking
 
into account
 
contract
 
terms and
 
limits, caused
 
by a
 
single catastrophe
 
affecting
 
a broad
 
contiguous

geographic
 
area,
 
such
 
as
 
that
 
caused
 
by
 
a
 
hurricane
 
or
 
earthquake.
 
The
 
PML
 
will
 
vary
 
depending
 
upon
 
the

modeled simulated
 
losses
 
and the
 
make-up
 
of the
 
in force
 
book
 
of business.
 
The projected
 
severity
 
levels
 
are

described
 
in
 
terms
 
of “return
 
periods”,
 
such
 
as
 
“100-year
 
events”
 
and
 
“250-year
 
events”.
 
For
 
example,
 
a
 
100-

year PML is
 
the estimated loss
 
to the current
 
in-force portfolio
 
from a single
 
event which has
 
a 1% probability
 
of

being exceeded in
 
a twelve month
 
period.
 
In other words, it
 
corresponds to a
 
99% probability that
 
the loss from

a
 
single
 
event
 
will
 
fall
 
below
 
the
 
indicated
 
PML.
 
It
 
is
 
important
 
to
 
note
 
that
 
PMLs
 
are
 
estimates.
 
Modeled

events are
 
hypothetical events
 
produced by
 
a stochastic
 
model.
 
As a result,
 
there can be
 
no assurance
 
that any

actual event
 
will align
 
with the
 
modeled event
 
or that
 
actual losses
 
from events
 
similar to
 
the modeled
 
events

will not vary materially from the modeled event
 
PML.

From
 
an
 
enterprise
 
risk
 
management
 
perspective,
 
management
 
sets
 
limits
 
on
 
the
 
levels
 
of
 
catastrophe
 
loss

exposure we
 
may underwrite.
 
The limits are
 
revised periodically
 
based on a
 
variety of factors,
 
including but not

limited
 
to
 
our
 
financial
 
resources
 
and
 
expected
 
earnings
 
and
 
risk/reward
 
analyses
 
of
 
the
 
business
 
being

underwritten.

Management estimates
 
that the projected
 
net economic loss
 
from its largest
 
100-year event in
 
a given zone is
 
to

an
 
Earthquake
 
event
 
affecting
 
California
 
which
 
represents
 
approximately
 
6.9%
 
of
 
its
 
December
 
31,
 
2022

shareholders’
 
equity.
 
Economic
 
loss
 
is the
 
PML
 
exposure,
 
net of
 
third
 
party
 
reinsurance
 
including
 
catastrophe

industry loss
 
warranty
 
cover,
 
reduced by
 
estimated
 
reinstatement
 
premiums
 
to renew
 
coverage
 
and estimated

63

income taxes.
 
The impact
 
of income
 
taxes
 
on the
 
PML depends
 
on the
 
distribution
 
of the
 
losses
 
by corporate

entity,
 
which is
 
also affected
 
by
 
inter-affiliate
 
reinsurance.
 
Management
 
also monitors
 
and controls
 
its largest

PMLs at
 
multiple points
 
along the
 
loss distribution
 
curve, such
 
as loss
 
amounts at
 
the 20,
 
50, 100,
 
250, and
 
500

year return
 
periods.
 
This process
 
enables management
 
to identify
 
and control
 
exposure
 
accumulations
 
and to

integrate such exposures
 
into enterprise risk, underwriting and capital
 
management decisions.

Our
 
catastrophe
 
loss
 
projections,
 
segmented
 
by
 
risk
 
zones,
 
are
 
updated
 
quarterly
 
and
 
reviewed
 
as
 
part
 
of
 
a

formal risk management review
 
process.

We
 
believe
 
that our
 
greatest
 
worldwide 1
 
in 100
 
year
 
exposure
 
to a
 
single catastrophic
 
event
 
is to
 
a hurricane

event
 
affecting
 
Southeast
 
U.S.,
 
where
 
we
 
estimate
 
we
 
have
 
a
 
PML
 
exposure,
 
net
 
of
 
third
 
party
 
reinsurance

including catastrophe
 
industry loss warranty
 
cover,
 
of $878 million. See also
 
table under ITEM
 
1, “Business -
 
Risk

Management of Underwriting and Retrocession
 
Arrangements”.

If such a single catastrophe
 
loss were to occur,
 
management estimates that
 
the net economic loss to us would be

approximately
 
$515
 
million.
 
The
 
estimate
 
involves
 
multiple
 
variables,
 
including
 
which
 
Everest
 
entity
 
would

experience the loss, and as a result there can be no
 
assurance that this amount would not be exceeded.

We may
 
purchase reinsurance
 
to cover specific
 
business written
 
or the potential
 
accumulation or aggregation
 
of

exposures
 
across
 
some or
 
all of
 
our operations.
 
Reinsurance
 
purchasing
 
decisions
 
consider
 
both
 
the
 
potential

coverage
 
and
 
market
 
conditions
 
including
 
the
 
pricing,
 
terms,
 
conditions,
 
availability
 
and
 
collectability
 
of

coverage, with the
 
aim of securing cost
 
effective protection
 
from financially secure counterparts.
 
The amount of

reinsurance purchased has varied
 
over
 
time, reflecting our view of our exposures
 
and the cost of reinsurance.

Information
 
Technology.
 
Everest’s
 
information
 
technology
 
is
 
a
 
key
 
component
 
of
 
its
 
business
 
operations.

Information
 
technology
 
systems
 
and
 
services
 
are
 
hosted
 
at
 
public
 
and
 
private
 
cloud
 
service
 
providers
 
across

multiple
 
datacenters
 
with
 
processing
 
performed
 
at
 
the
 
office
 
locations
 
of
 
our
 
operating
 
subsidiaries
 
and

branches.
 
We have
 
implemented security
 
procedures,
 
and regularly
 
assess and
 
enhance our
 
security protocols,

to ensure
 
that our
 
key business
 
systems
 
are protected,
 
secured and
 
backed up
 
at off-site
 
locations so
 
that they

can be restored
 
promptly if necessary.
 
We have business
 
continuity plans and disaster
 
recovery plans along with

periodic testing
 
of those
 
plans
 
to
 
ensure
 
we are
 
capable
 
of providing
 
uninterrupted
 
technology
 
services in
 
the

event of major systems
 
outages with alternative secure datacenters
 
available in case of broader outages.

Our
 
business
 
operations
 
depend
 
on
 
the
 
proper
 
functioning
 
and
 
availability
 
of
 
our
 
information
 
technology

platform,
 
which
 
includes
 
data
 
processing
 
and
 
related
 
electronic
 
communications.
 
We
 
communicate

electronically
 
internally
 
and
 
externally
 
with
 
our
 
brokers,
 
program
 
managers,
 
clients,
 
third-party
 
vendors,

regulators,
 
and
 
others.
 
These
 
communications
 
and
 
the
 
data
 
we
 
handle
 
may
 
include
 
personal,
 
confidential
 
or

proprietary
 
information.
 
We
 
ensure
 
that
 
all
 
our
 
systems,
 
data
 
and
 
electronic
 
transmissions
 
are
 
appropriately

protected with the latest technology
 
safeguards and meet regulatory
 
standards.

Despite these safeguards,
 
a significant cyber incident,
 
including system
 
failure, security
 
breach and disruption
 
by

malware or other
 
damage could
 
interrupt or delay
 
our operations
 
and possibly our
 
results.
 
This type of incident

may result
 
in a
 
violation of
 
applicable data
 
security,
 
privacy,
 
or other
 
laws, damage
 
our reputation,
 
cause a
 
loss

of customers
 
or give
 
rise to
 
regulatory
 
scrutiny
 
as well
 
as monetary
 
fines and
 
other penalties.
 
Management
 
is

not aware of a cybersecurity incident that
 
has had a material impact on our operations.

64

Expected
 
Cash
 
Outflows.
 
The
 
following
 
table
 
shows
 
our
 
significant
 
expected
 
cash
 
outflows
 
for
 
the
 
period

indicated.

Payments due by period

Less than

More than

(Dollars in millions)

Total

1 year

1-3 years

3-5 years

5 years

Senior notes

$

2,400

$

—

$

—

$

—

$

2,400

Long term notes

219

—

—

—

219

Interest expense (1)

3,018

101

202

202

2,513

Operating lease agreements

187

21

38

32

95

Gross reserve for losses and LAE (2)

22,065

2,430

7,971

5,230

6,435

Total

$

28,409

$

3,071

$

8,211

$

5,464

$

11,662

(Some amounts may not reconcile due to rounding.)

(1)

Interest expense on long term notes is calculated
 
at the variable floating rate of 6.99% as of
 
December 31, 2022.

(2)

Loss and LAE reserves
 
represent management’s
 
best estimate of
 
losses from claim
 
and related settlement
 
costs.
 
Both the amounts
 
and timing of such
 
payments are

estimates, and
 
the inherent
 
variability of
 
resolving claims as
 
well as
 
changes in
 
market conditions
 
make the
 
timing of
 
cash flows
 
uncertain.
 
Therefore,
 
the ultimate

amount and timing of loss and LAE payments could differ
 
from our estimates.

The cash
 
outflows for
 
senior notes
 
and long
 
term notes
 
are the
 
responsibility
 
of Holdings.
 
We
 
strive to
 
ensure

that
 
we
 
have
 
sufficient
 
cash
 
flow,
 
liquidity,
 
investments
 
and
 
access
 
to
 
capital
 
markets
 
to
 
satisfy
 
these

obligations.
 
Holdings generally
 
depends upon
 
dividends from
 
Everest
 
Re, its
 
operating
 
insurance
 
subsidiary for

its funding,
 
capital contributions
 
from Group
 
or access
 
to the
 
capital markets.
 
Our various
 
operating
 
insurance

and reinsurance
 
subsidiaries
 
have
 
sufficient
 
cash
 
flow,
 
liquidity
 
and investments
 
to settle
 
outstanding
 
reserves

for losses and LAE.
 
Management believes that
 
we, and each of our entities,
 
have sufficient financial
 
resources or

ready access thereto, to
 
meet all obligations.

Dividends.

During 2022
 
and 2021,
 
we declared
 
and paid
 
common shareholder
 
dividends
 
of $255
 
million and
 
$247 million,

respectively.
 
As
 
an insurance
 
holding
 
company,
 
we
 
are
 
partially
 
dependent
 
on dividends
 
and other
 
permitted

payments from
 
our subsidiaries
 
to pay
 
cash dividends
 
to our
 
shareholders.
 
The payment
 
of dividends
 
to Group

by
 
Holdings
 
Ireland
 
and
 
Everest
 
Dublin
 
Holdings
 
is
 
subject
 
to
 
Irish
 
corporate
 
and
 
regulatory
 
restrictions;
 
the

payment
 
of
 
dividends
 
to
 
Holdings
 
Ireland
 
by
 
Holdings
 
and
 
to
 
Holdings
 
by
 
Everest
 
Re
 
is
 
subject
 
to
 
Delaware

regulatory
 
restrictions;
 
and
 
the
 
payment
 
of
 
dividends
 
to
 
Group
 
by
 
Bermuda
 
Re,
 
Everest
 
International,
 
Everest

Preferred International
 
Holdings (“Preferred
 
Holdings”), Everest
 
Re Advisors Ltd.
 
(“Advisors
 
Re”) or Mt. Logan
 
Re

is
 
subject
 
to
 
Bermuda
 
insurance
 
regulatory
 
restrictions.
 
Management
 
expects
 
that,
 
absent
 
extraordinary

catastrophe
 
losses, such restrictions
 
should not affect
 
Everest Re’s
 
ability to declare
 
and pay
 
dividends sufficient

to
 
support
 
Holdings’
 
general
 
corporate
 
needs
 
and
 
that
 
Holdings
 
Ireland,
 
Everest
 
Dublin
 
Holdings,
 
Bermuda
 
Re

and Everest
 
International will
 
have the
 
ability to declare
 
and pay dividends
 
sufficient to
 
support Group’s
 
general

corporate needs.
 
For the years
 
ended December 31, 2022
 
and 2021, Everest
 
Re paid $250 million
 
and $0 million

of
 
cash
 
dividends
 
to
 
Holdings.
 
For
 
the
 
years
 
ended
 
December
 
31,
 
2022
 
and
 
2021,
 
Bermuda
 
Re
 
paid
 
cash

dividends
 
to Group
 
of $430
 
million and
 
$300 million,
 
respectively;
 
Everest
 
International
 
paid no
 
cash dividends

to Group;
 
Preferred
 
Holdings paid
 
cash dividends
 
to Group
 
of $46 million
 
and $10 million,
 
respectively; Advisors

Re
 
paid
 
cash
 
dividends
 
to
 
Group
 
of
 
$0
 
million
 
and
 
$10
 
million,
 
respectively;
 
and
 
Mt.
 
Logan
 
Re
 
paid
 
no
 
cash

dividends to Group.
 
See ITEM 1, “Business
 
– Regulatory Matters
 
– Dividends” and ITEM 8,
 
“Financial Statements

and Supplementary Data” - Note 14 of Notes
 
to Consolidated Financial Statements.

Market Sensitive Instruments.

The SEC’s
 
Financial Reporting
 
Release
 
#48 requires
 
registrants
 
to clarify
 
and expand
 
upon the
 
existing
 
financial

statement
 
disclosure
 
requirements
 
for
 
derivative
 
financial
 
instruments,
 
derivative
 
commodity
 
instruments
 
and

other financial instruments (collectively,
 
“market sensitive
 
instruments”).
 
We do not generally
 
enter into market

sensitive instruments for trading
 
purposes.

65

Our
 
current
 
investment
 
strategy
 
seeks
 
to
 
maximize
 
after-tax
 
income
 
through
 
a
 
high
 
quality,
 
diversified,
 
fixed

maturity
 
portfolio,
 
while
 
maintaining
 
an
 
adequate
 
level
 
of
 
liquidity.
 
Our
 
mix
 
of
 
investments
 
is
 
adjusted

periodically,
 
consistent
 
with
 
our
 
current
 
and
 
projected
 
operating
 
results
 
and
 
market
 
conditions.
 
The
 
fixed

maturity
 
securities
 
in
 
the
 
investment
 
portfolio
 
are
 
comprised
 
of
 
non-trading
 
securities.
 
Additionally,
 
we
 
have

invested in equity securities.

The
 
overall
 
investment
 
strategy
 
considers
 
the
 
scope
 
of
 
present
 
and
 
anticipated
 
Company
 
operations.
 
In

particular,
 
estimates
 
of
 
the
 
financial
 
impact
 
resulting
 
from
 
non-investment
 
asset
 
and
 
liability
 
transactions,

together
 
with our
 
capital
 
structure
 
and other
 
factors,
 
are used
 
to
 
develop
 
a net
 
liability analysis.
 
This analysis

includes estimated payout
 
characteristics for
 
which our investments
 
provide liquidity.
 
This analysis is considered

in the development of specific investment
 
strategies for asset
 
allocation, duration and
 
credit quality.
 
The change

in overall market sensitive
 
risk exposure principally reflects
 
the asset changes that took place during the period.

Interest Rate
 
Risk.
 
Our $29.9 billion investment
 
portfolio at December
 
31, 2022, is principally
 
comprised of fixed

maturity
 
securities,
 
which
 
are
 
generally
 
subject
 
to
 
interest
 
rate
 
risk
 
and
 
some
 
foreign
 
currency
 
exchange
 
rate

risk, and some equity securities, which are subject to price
 
fluctuations and some foreign exchange
 
rate risk.
 
The

overall
 
economic
 
impact
 
of
 
the
 
foreign
 
exchange
 
risks
 
on
 
the
 
investment
 
portfolio
 
is
 
partially
 
mitigated
 
by

changes
 
in
 
the
 
dollar
 
value
 
of
 
foreign
 
currency
 
denominated
 
liabilities
 
and
 
their
 
associated
 
income
 
statement

impact.

Interest
 
rate
 
risk is
 
the potential
 
change in
 
value of
 
the fixed
 
maturity securities
 
portfolio,
 
including short-term

investments,
 
from
 
a
 
change
 
in
 
market
 
interest
 
rates.
 
In
 
a
 
declining
 
interest
 
rate
 
environment,
 
it
 
includes

prepayment
 
risk
 
on
 
the
 
$4.0 billion
 
of mortgage
 
-backed
 
securities
 
in
 
the
 
$23.1 billion
 
fixed
 
maturity
 
portfolio.

Prepayment risk results
 
from potential accelerated
 
principal payments that
 
shorten the average
 
life and thus
 
the

expected yield of the security.

The tables below
 
display the
 
potential impact
 
of market
 
value fluctuations
 
and after-tax
 
unrealized appreciation

on our
 
fixed maturity
 
portfolio (including
 
$1.0 billion
 
of short-term
 
investments)
 
for the
 
period indicated
 
based

on
 
upward
 
and
 
downward
 
parallel
 
and
 
immediate
 
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 estimates on mortgage
 
-backed securities, changes in prepayment
 
expectations under

different interest
 
rate environments
 
were taken
 
into account.
 
For legal entities
 
with a non-U.S. dollar
 
functional

currency,
 
the effective
 
duration
 
of the
 
involved portfolio
 
of securities
 
was used
 
as a
 
proxy
 
for the
 
market
 
value

change under the various interest
 
rate change scenarios.

Impact of Interest Rate Shift in Basis Points

At December 31, 2022

-200

-100

-

100

200

(Dollars in millions)

Total Fair Value

$

25,618

$

24,863

$

24,107

$

23,352

$

22,596

Fair Value Change from Base (%)

6.3%

3.1%

-%

(3.1)%

(6.3)%

Change in Unrealized Appreciation

After-tax from Base ($)

$

1,316

$

658

$

—

$

(658)

$

(1,316)

Impact of Interest Rate Shift in Basis Points

At December 31, 2021

-200

-100

-

100

200

(Dollars in millions)

Total Fair Value

$

24,973

$

24,230

$

23,487

$

22,744

$

22,001

Fair Value Change from Base (%)

6.3%

3.2%

-%

(3.2)%

(6.3)%

Change in Unrealized Appreciation

After-tax from Base ($)

$

1,294

$

647

$

—

$

(647)

$

(1,294)

66

We
 
had $22.1
 
billion and
 
$19.0 billion
 
of gross
 
reserves for
 
losses and
 
LAE as
 
of December
 
31, 2022
 
and 2021,

respectively.
 
These
 
amounts
 
are
 
recorded
 
at
 
their
 
nominal
 
value,
 
as
 
opposed
 
to
 
present
 
value,
 
which
 
would

reflect a discount
 
adjustment to reflect the
 
time value of money.
 
Since losses are paid
 
out over a period of
 
time,

the present
 
value of
 
the reserves
 
is less
 
than the
 
nominal value.
 
As interest
 
rates
 
rise, the
 
present value
 
of the

reserves decreases and,
 
conversely,
 
as interest rates
 
decline, the present value
 
increases.
 
These movements are

the opposite of the interest
 
rate impacts on the
 
fair value of investments.
 
While the difference between
 
present

value and
 
nominal value
 
is not reflected
 
in our financial
 
statements, our
 
financial results
 
will include investment

income over
 
time from
 
the investment
 
portfolio until
 
the claims
 
are paid.
 
Our loss
 
and loss
 
reserve obligations

have
 
an
 
expected
 
duration
 
of
 
approximately
 
3.8
 
years,
 
which
 
is
 
reasonably
 
consistent
 
with
 
our
 
fixed
 
income

portfolio.
 
If
 
we
 
were
 
to
 
discount
 
our
 
loss
 
and
 
LAE
 
reserves,
 
net
 
of
 
ceded
 
reserves,
 
the
 
discount
 
would
 
be

approximately
 
$3.6 billion resulting
 
in a discounted
 
reserve balance
 
of approximately
 
$16.4 billion,
 
representing

approximately 67.9% of the value
 
of the fixed maturity investment
 
portfolio funds.

Equity Risk.
 
Equity risk is
 
the potential change
 
in fair and/or
 
market value
 
of the common
 
stock, preferred
 
stock

and mutual fund portfolios
 
arising from changing prices.
 
Our equity investments
 
consist of a diversified
 
portfolio

of individual
 
securities and
 
mutual funds,
 
which invest
 
principally in
 
high quality
 
common and
 
preferred
 
stocks

that are
 
traded on
 
the major exchanges.
 
The primary
 
objective of
 
the equity
 
portfolio is
 
to obtain
 
greater total

return relative to our core
 
bonds over time through market
 
appreciation and income.

The tables below display the impact on fair/market
 
value and after-tax change
 
in fair/market value
 
of a 10% and

20% change in equity prices up and down for the period indicated.

Impact of Percentage Change in Equity Fair/Market Values

At December 31, 2022

(Dollars in millions)

-20%

-10%

0%

10%

20%

Fair Value of the Equity Portfolio

$

225

$

253

$

281

$

309

$

337

After-tax Change in Fair Value

$

(46)

$

(23)

$

—

$

23

$

46

Impact of Percentage Change in Equity Fair/Market Values

At December 31, 2021

(Dollars in millions)

-20%

-10%

0%

10%

20%

Fair Value of the Equity Portfolio

$

1,461

$

1,643

$

1,826

$

2,009

$

2,191

After-tax Change in Fair Value

$

(290)

$

(145)

$

—

$

145

$

290

Foreign Currency
 
Risk.
 
Foreign currency
 
risk is the
 
potential change
 
in value,
 
income and
 
cash flow arising
 
from

adverse
 
changes
 
in
 
foreign
 
currency
 
exchange
 
rates.
 
Each
 
of
 
our
 
non-U.S./Bermuda
 
(“foreign”)
 
operations

maintains
 
capital
 
in
 
the
 
currency
 
of
 
the
 
country
 
of
 
its
 
geographic
 
location
 
consistent
 
with
 
local
 
regulatory

guidelines.
 
Each
 
foreign
 
operation
 
may
 
conduct
 
business in
 
its local
 
currency,
 
as well
 
as the
 
currency
 
of other

countries
 
in
 
which
 
it
 
operates.
 
The
 
primary
 
foreign
 
currency
 
exposures
 
for
 
these
 
foreign
 
operations
 
are
 
the

Canadian
 
Dollar,
 
the
 
Singapore
 
Dollar,
 
the
 
British
 
Pound
 
Sterling
 
and
 
the
 
Euro.
 
We
 
mitigate
 
foreign
 
exchange

exposure
 
by
 
generally
 
matching
 
the
 
currency
 
and
 
duration
 
of
 
our
 
assets
 
to
 
our
 
corresponding
 
operating

liabilities.
 
In
 
accordance
 
with
 
FASB
 
guidance,
 
the
 
impact
 
on
 
the
 
market
 
value
 
of
 
available
 
for
 
sale
 
fixed

maturities due
 
to changes
 
in foreign
 
currency exchange
 
rates,
 
in relation
 
to functional
 
currency,
 
is reflected
 
as

part of
 
other comprehensive
 
income.
 
Conversely,
 
the impact
 
of changes
 
in foreign
 
currency exchange
 
rates,
 
in

relation to functional
 
currency,
 
on other assets
 
and liabilities is
 
reflected through
 
net income as
 
a component
 
of

other income
 
(expense).
 
In addition,
 
we translate
 
the assets,
 
liabilities and income
 
of non-U.S.
 
dollar functional

currency
 
legal
 
entities
 
to
 
the
 
U.S.
 
dollar.
 
This
 
translation
 
amount
 
is
 
reported
 
as
 
a
 
component
 
of
 
other

comprehensive income.

67

The tables below display
 
the potential impact of a
 
parallel and immediate 10%
 
and 20% increase and decrease
 
in

foreign exchange
 
rates
 
on the
 
valuation
 
of invested
 
assets subject
 
to foreign
 
currency exposure
 
for the
 
periods

indicated.
 
This
 
analysis
 
includes
 
the
 
after-tax
 
impact
 
of
 
translation
 
from
 
transactional
 
currency
 
to
 
functional

currency
 
as
 
well
 
as
 
the
 
after-tax
 
impact
 
of
 
translation
 
from
 
functional
 
currency
 
to
 
the
 
U.S.
 
dollar
 
reporting

currency.

Change in Foreign Exchange Rates in Percent

At December 31, 2022

(Dollars in millions)

-20%

-10%

0%

10%

20%

Total After-tax
 
Foreign Exchange Exposure

$

(814)

$

(407)

$

—

$

407

$

814

Change in Foreign Exchange Rates in Percent

At December 31, 2021

(Dollars in millions)

-20%

-10%

0%

10%

20%

Total After-tax
 
Foreign Exchange Exposure

$

(688)

$

(344)

$

—

$

303

$

606

Safe Harbor Disclosure.

This
 
report
 
contains
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
the
 
U.S.
 
federal
 
securities
 
laws.
 
We

intend
 
these
 
forward-looking
 
statements
 
to
 
be
 
covered
 
by
 
the
 
safe
 
harbor
 
provisions
 
for
 
forward-looking

statements
 
in
 
the
 
federal
 
securities
 
laws.
 
In
 
some
 
cases,
 
these
 
statements
 
can
 
be
 
identified
 
by
 
the
 
use
 
of

forward-looking
 
words
 
such
 
as
 
“may”,
 
“will”,
 
“should”,
 
“could”,
 
“anticipate”,
 
“estimate”,
 
“expect”,
 
“plan”,

“believe”,
 
“predict”,
 
“potential”
 
and
 
“intend”.
 
Forward-looking
 
statements
 
contained
 
in
 
this
 
report
 
include

information
 
regarding
 
our reserves
 
for losses
 
and LAE,
 
the impact
 
of the
 
Tax
 
Cut and
 
Jobs Act,
 
the adequacy
 
of

capital
 
in
 
relation
 
to
 
regulatory
 
required
 
capital,
 
the
 
adequacy
 
of
 
our
 
provision
 
for
 
uncollectible
 
balances,

estimates
 
of
 
our
 
catastrophe
 
exposure,
 
the
 
effects
 
of
 
catastrophic
 
and
 
pandemic
 
events
 
on
 
our
 
financial

statements,
 
the
 
ability
 
of
 
Everest
 
Re,
 
Holdings,
 
Holdings
 
Ireland,
 
Dublin
 
Holdings,
 
Bermuda
 
Re
 
and
 
Everest

International
 
to
 
pay
 
dividends
 
and
 
the
 
settlement
 
costs
 
of
 
our
 
specialized
 
equity
 
index
 
put
 
option
 
contracts.

Forward-looking
 
statements
 
only
 
reflect
 
our
 
expectations
 
and
 
are
 
not
 
guarantees
 
of
 
performance.
 
These

statements
 
involve risks,
 
uncertainties and
 
assumptions.
 
Actual events
 
or results may
 
differ materially
 
from our

expectations.
 
Important factors
 
that could cause
 
our actual events
 
or results to
 
be materially different
 
from our

expectations include
 
those discussed under
 
the caption ITEM
 
1A, “Risk Factors”.
 
We undertake
 
no obligation
 
to

update or revise
 
publicly any
 
forward-looking statements,
 
whether as a result
 
of new information,
 
future events

or otherwise.