UNITED STATES

SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C.
20549

FORM
10-Q

_X_

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

For the quarterly period endedMarch 31,
September 30, 2022

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

Commission file number
1-15731

EVEREST RE GROUP, LTD.

(Exact name of registrant as specified in its charter)

Bermuda

98-0365432

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Bermuda
98-0365432
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Seon Place – 4th Floor

141 Front Street

PO Box HM 845

HamiltonHM

Hamilton
HM 19
,
Bermuda

441-295-0006

441
-
295-0006
(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive office)

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

Yes

X

No

Yes
X
No
Indicate by check mark
whether the registrant
has submitted electronically
every Interactive Data
File required to be
submitted pursuant
to Rule 405 of
Regulation S-T during the
preceding 12 months (or
for such shorter period
that the registrant
was required to
submit such
files).

Yes

X

No

Yes
X
No
Indicate by check mark
whether the registrant
is a large accelerated
filer, an
accelerated filer,
a non-accelerated filer,
a smaller reporting
company
or
an
emerging
growth
company.
See
the
definitions
of “large
“large
accelerated
filer,” “accelerated
“accelerated
filer,” “smaller
“smaller
reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

X

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Large Accelerated Filer
X
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
Indicate by
check mark
if the
registrant
is an
emerging growth
company
and has
elected not
to use
the extended
transition period
for
complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange act.

YES

NO

X

YES
NO
X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

YES

NO

X

YES
NO
X
Securities registered pursuant to Section 12(b) of the Act:

Class

Trading Symbol

Class
Trading Symbol
Name of Exchange where

Registered

Number of Shares Outstanding

At May 1, 2022

Common Shares, $0.01 par value

RE

New York Stock Exchange

39,437,963

Registered
Number of Shares Outstanding

At November 1, 2022
Common Shares, $0.01 par value
RE
New York Stock Exchange
39,165,034
EVEREST RE GROUP,
LTD

Table of Contents

Form 10-Q

Page
PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements
1
2
3
4
5
Item 2.
29
Item 3.
48
Item 4.
48
PART II

OTHER INFORMATION
Item 1.
48
Item 1A.
49
Item 2.

Item 3.
49
Item 4.
49
Item 5.
49
Item 6.
50

1
EVEREST RE GROUP,
LTD.

CONSOLIDATED

CONSOLIDATED BALANCE SHEETS

 

March 31,

 

December 31,

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

2022

 

2021

 

(unaudited)

 

 

 

ASSETS:

 

 

 

 

 

Fixed maturities - available for sale

$

21,998,415

 

$

22,308,272

(amortized cost: 2022, $22,693,029; 2021, $22,063,592, credit allowances: 2022, $(41,591); 2021, $(29,738))

 

 

 

 

 

Equity securities, at fair value

 

1,780,526

 

 

1,825,908

Short-term investments (cost: 2022, $823,889; 2021, $1,178,386)

 

823,875

 

 

1,178,337

Other invested assets

 

2,917,039

 

 

2,919,965

Cash

 

1,778,218

 

 

1,440,861

Total investments and cash

 

29,298,073

 

 

29,673,343

Accrued investment income

 

156,997

 

 

149,105

Premiums receivable

 

3,264,023

 

 

3,293,598

Reinsurance recoverables

 

2,101,641

 

 

2,053,354

Funds held by reinsureds

 

920,054

 

 

868,601

Deferred acquisition costs

 

842,739

 

 

872,289

Prepaid reinsurance premiums

 

496,632

 

 

515,445

Income taxes

 

117,609

 

 

2,381

Other assets

 

789,014

 

 

757,167

TOTAL ASSETS

$

37,986,782

 

$

38,185,283

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Reserve for losses and loss adjustment expenses

$

19,495,637

 

$

19,009,486

Future policy benefit reserve

 

34,523

 

 

35,669

Unearned premium reserve

 

4,571,705

 

 

4,609,634

Funds held under reinsurance treaties

 

4,732

 

 

18,391

Other net payable to reinsurers

 

464,000

 

 

449,723

Losses in course of payment

 

133,888

 

 

260,684

Senior notes

 

2,346,147

 

 

2,345,800

Long term notes

 

223,799

 

 

223,774

Borrowings from FHLB

 

519,000

 

 

519,000

Accrued interest on debt and borrowings

 

38,843

 

 

17,348

Unsettled securities payable

 

67,698

 

 

16,698

Other liabilities

 

559,181

 

 

539,896

Total liabilities

 

28,459,153

 

 

28,046,103

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

(nil)

 

 

(nil)

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

Preferred shares, par value: $0.01; 50,000 shares authorized;

 

 

 

 

 

0 shares issued and outstanding

 

-

 

 

-

Common shares, par value: $0.01; 200,000 shares authorized; (2022) 69,977

 

 

 

 

 

and (2021) 69,790 outstanding before treasury shares

 

700

 

 

698

Additional paid-in capital

 

2,271,890

 

 

2,274,431

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

 

 

 

 

 

tax expense (benefit) of $(89,926) at 2022 and $26,781 at 2021

 

(832,820)

 

 

11,523

Treasury shares, at cost; 30,529 shares (2022) and 30,524 shares (2021)

 

(3,848,630)

 

 

(3,847,308)

Retained earnings

 

11,936,489

 

 

11,699,836

Total shareholders' equity

 

9,527,629

 

 

10,139,180

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

37,986,782

 

$

38,185,283

 

 

 

 

 

 

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

1

September 30,
December 31,
(Dollars and share amounts in millions, except par value per share)
2022
2021
(unaudited)
ASSETS:
Fixed maturities - available for sale, at fair value
$
21,009
$
22,308
(amortized cost: 2022, $
23,204
; 2021, $
22,064
, credit allowances: 2022, $
(
38
)
; 2021, $
(
30
)
)
Fixed maturities - held to maturity, at amortized cost, net of credit allowances
(fair value: 2022, $
817
, credit allowances: 2022, $
(
9
)
)
837
-
Equity securities, at fair value
1,301
1,826
Short-term investments (cost: 2022, $
611
; 2021, $
1,178
)
611
1,178
Other invested assets
3,079
2,920
Cash
1,679
1,441
Total investments and cash
28,516
29,673
Accrued investment income
200
149
Premiums receivable
3,452
3,294
Reinsurance recoverables
2,240
2,053
Funds held by reinsureds
893
869
Deferred acquisition costs
867
872
Prepaid reinsurance premiums
556
515
Income taxes
544
2
Other assets
876
757
TOTAL
ASSETS
$
38,144
$
38,185
LIABILITIES:
Reserve for losses and loss adjustment expenses
$
21,222
$
19,009
Future policy benefit reserve
34
36
Unearned premium reserve
4,795
4,610
Funds held under reinsurance treaties
18
18
Other net payable to reinsurers
511
450
Losses in course of payment
110
261
Senior notes
2,347
2,346
Long term notes
218
224
Borrowings from FHLB
519
519
Accrued interest on debt and borrowings
39
17
Unsettled securities payable
134
17
Other liabilities
548
540
Total liabilities
30,495
28,046
Commitments and contingencies (Note 7)
(nil)
(nil)
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
0.01
;
50.0
shares authorized;
no
shares issued and outstanding
-
-
Common shares, par value: $
0.01
;
200.0
shares authorized; (2022)
69.9
and (2021)
69.8
outstanding before treasury shares
1
1
Additional paid-in capital
2,293
2,274
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of $
(269)
at 2022 and $
27
at 2021
(2,348)
12
Treasury shares, at cost;
30.8
shares (2022) and
30.5
shares (2021)
(3,907)
(3,847)
Retained earnings
11,610
11,700
Total shareholders' equity
7,649
10,139
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
38,144
$
38,185
The accompanying notes are an integral part of the consolidated
financial statements.
2
EVEREST RE GROUP,
LTD.

CONSOLIDATED

CONSOLIDATED STATEMENTS

OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

 

Three Months Ended

 

March 31,

(Dollars in thousands, except per share amounts)

2022

 

2021

 

(unaudited)

REVENUES:

 

 

 

 

 

Premiums earned

$

2,791,765

 

$

2,387,865

Net investment income

 

242,830

 

 

260,413

Net gains (losses) on investments:

 

 

 

 

 

Credit allowances on fixed maturity securities

 

(11,853)

 

 

(6,977)

Gains (losses) from fair value adjustments

 

(136,860)

 

 

29,056

Net realized gains (losses) from dispositions

 

(4,914)

 

 

16,823

Total net gains (losses) on investments

 

(153,627)

 

 

38,902

Other income (expense)

 

15,363

 

 

56,593

Total revenues

 

2,896,331

 

 

2,743,773

 

 

 

 

 

 

CLAIMS AND EXPENSES:

 

 

 

 

 

Incurred losses and loss adjustment expenses

 

1,789,863

 

 

1,711,419

Commission, brokerage, taxes and fees

 

605,230

 

 

489,011

Other underwriting expenses

 

161,293

 

 

142,231

Corporate expenses

 

14,020

 

 

12,378

Interest, fees and bond issue cost amortization expense

 

24,078

 

 

15,639

Total claims and expenses

 

2,594,484

 

 

2,370,678

 

 

 

 

 

 

INCOME (LOSS) BEFORE TAXES

 

301,847

 

 

373,095

Income tax expense (benefit)

 

4,096

 

 

31,233

 

 

 

 

 

 

NET INCOME (LOSS)

$

297,751

 

$

341,862

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

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

 

(815,177)

 

 

(288,615)

Reclassification adjustment for realized losses (gains) included in net income (loss)

 

4,178

 

 

(3,666)

Total URA(D) on securities arising during the period

 

(810,999)

 

 

(292,281)

 

 

 

 

 

 

Foreign currency translation adjustments

 

(34,102)

 

 

(9,582)

 

 

 

 

 

 

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

 

758

 

 

2,043

Total benefit plan net gain (loss) for the period

 

758

 

 

2,043

Total other comprehensive income (loss), net of tax

 

(844,343)

 

 

(299,820)

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

$

(546,592)

 

$

42,042

 

 

 

 

 

 

EARNINGS PER COMMON SHARE:

 

 

 

 

 

Basic

$

7.57

 

$

8.53

Diluted

 

7.56

 

 

8.52

 

 

 

 

 

 

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

2

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions, except per share amounts)
2022
2021
2022
2021
(unaudited)
(unaudited)
REVENUES:
Premiums earned
$
3,067
$
2,656
$
8,775
$
7,603
Net investment income
151
293
620
960
Net gains (losses) on investments:
Credit allowances on fixed maturity securities
(5)
(7)
(18)
(30)
Gains (losses) from fair value adjustments
(136)
(5)
(462)
128
Net realized gains (losses) from dispositions
12
8
(39)
41
Total net gains (losses) on investments
(129)
(4)
(519)
139
Other income (expense)
(16)
(20)
(71)
44
Total revenues
3,073
2,925
8,805
8,746
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
2,623
2,274
6,289
5,572
Commission, brokerage, taxes and fees
641
564
1,877
1,611
Other underwriting expenses
169
141
500
424
Corporate expenses
16
18
45
46
Interest, fees and bond issue cost amortization expense
25
16
74
47
Total claims and expenses
3,474
3,013
8,785
7,700
INCOME (LOSS) BEFORE TAXES
(401)
(88)
20
1,046
Income tax expense (benefit)
(82)
(14)
(81)
97
NET INCOME (LOSS)
$
(319)
$
(73)
$
101
$
948
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the
period
(712)
(100)
(2,260)
(304)
Reclassification adjustment for realized losses (gains) included in net income (loss)
41
(1)
61
(3)
Total URA(D) on securities arising during the period
(671)
(101)
(2,199)
(308)
Foreign currency translation adjustments
(101)
(54)
(163)
(29)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
1
2
2
6
Total benefit plan net gain (loss) for the period
1
2
2
6
Total other comprehensive income (loss), net of tax
(771)
(153)
(2,360)
(331)
COMPREHENSIVE INCOME (LOSS)
$
(1,090)
$
(227)
$
(2,259)
$
617
EARNINGS PER COMMON SHARE:
Basic
$
(8.22)
$
(1.88)
$
2.57
$
23.74
Diluted
(8.22)
(1.88)
2.57
23.72
The accompanying notes are an integral part of the consolidated
financial statements.
3
EVEREST RE GROUP,
LTD.

CONSOLIDATED

CONSOLIDATED STATEMENTS

OF

CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except share and dividends per share amounts)

2022

 

2021

 

(unaudited)

COMMON SHARES (shares outstanding):

 

 

 

 

 

Balance, January 1

 

39,266,633

 

 

39,983,481

Issued during the period, net

 

187,044

 

 

196,481

Treasury shares acquired

 

(5,000)

 

 

(97,462)

Balance, March 31

 

39,448,677

 

 

40,082,500

 

 

 

 

 

 

COMMON SHARES (par value):

 

 

 

 

 

Balance, January 1

$

698

 

$

696

Issued during the period, net

 

2

 

 

2

Balance, March 31

 

700

 

 

698

 

 

 

 

 

 

ADDITIONAL PAID-IN CAPITAL:

 

 

 

 

 

Balance, January 1

 

2,274,431

 

 

2,245,301

Share-based compensation plans

 

(2,541)

 

 

436

Balance, March 31

 

2,271,890

 

 

2,245,737

 

 

 

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),

 

 

 

 

 

NET OF DEFERRED INCOME TAXES:

 

 

 

 

 

Balance, January 1

 

11,523

 

 

534,899

Net increase (decrease) during the period

 

(844,343)

 

 

(299,820)

Balance, March 31

 

(832,820)

 

 

235,079

 

 

 

 

 

 

RETAINED EARNINGS:

 

 

 

 

 

Balance, January 1

 

11,699,836

 

 

10,567,452

Net income (loss)

 

297,751

 

 

341,862

Dividends declared ($1.55 per share 2022 and $1.55 per share 2021)

 

(61,097)

 

 

(62,228)

Balance, March 31

 

11,936,489

 

 

10,847,085

 

 

 

 

 

 

TREASURY SHARES AT COST:

 

 

 

 

 

Balance, January 1

 

(3,847,308)

 

 

(3,622,172)

Purchase of treasury shares

 

(1,322)

 

 

(23,545)

Balance, March 31

 

(3,848,630)

 

 

(3,645,717)

 

 

 

 

 

 

TOTAL SHAREHOLDERS' EQUITY, March 31

$

9,527,629

 

$

9,682,882

 

 

 

 

 

 

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

 

 

 

 

 

 

3

Three Months Ended

Nine Months Ended
September 30,
September 30,
(Dollars in millions, except dividends per share amounts)
2022
2021
2022
2021
(unaudited)
(unaudited)
COMMON SHARES (shares outstanding):
Balance beginning of period
39
40
39
40
Issued (redeemed) during the period, net
-
-
-
-
Treasury shares acquired
-
(1)
-
(1)
Balance end of period
39
39
39
39
COMMON SHARES (par value):
Balance beginning of period
$
1
$
1
$
1
$
1
Issued during the period, net
-
-
-
-
Balance end of period
1
1
1
1
ADDITIONAL PAID-IN CAPITAL:
Balance beginning of period
2,284
2,256
2,274
2,245
Share-based compensation plans
9
10
19
21
Balance end of period
2,293
2,266
2,293
2,266
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance beginning of period
(1,577)
357
12
535
Net increase (decrease) during the period
(771)
(153)
(2,360)
(331)
Balance end of period
(2,348)
204
(2,348)
204
RETAINED EARNINGS:
Balance beginning of period
11,994
11,465
11,700
10,567
Net income (loss)
(319)
(73)
101
948
Dividends declared ($
1.65
per share in 3Q 2022 and $
4.85

per share YTD
in 2022; $
1.55
per share in 3Q 2021 and $
4.65
per share YTD in 2021)
(65)
(61)
(191)
(186)
Balance, end of period
11,610
11,330
11,610
11,330
TREASURY SHARES AT COST:
Balance beginning of period
(3,849)
(3,662)
(3,847)
(3,622)
Purchase of treasury shares
(58)
(160)
(60)
(200)
Balance end of period
(3,907)
(3,822)
(3,907)
(3,822)
TOTAL
SHAREHOLDERS' EQUITY, END OF PERIOD
$
7,649
$
9,979
$
7,649
$
9,979
The accompanying notes are an integral part
of the consolidated financial statements.
4
EVEREST RE GROUP,
LTD.

CONSOLIDATED

CONSOLIDATED STATEMENTS

OF CASH FLOWS

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

 

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

$

297,751

 

$

341,862

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

 

 

 

 

 

Decrease (increase) in premiums receivable

 

(14,203)

 

 

(105,460)

Decrease (increase) in funds held by reinsureds, net

 

(67,033)

 

 

(25,584)

Decrease (increase) in reinsurance recoverables

 

(125,881)

 

 

(14,518)

Decrease (increase) in income taxes

 

1,251

 

 

24,908

Decrease (increase) in prepaid reinsurance premiums

 

(7,167)

 

 

(27,071)

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

 

632,398

 

 

655,070

Increase (decrease) in future policy benefit reserve

 

(1,146)

 

 

(162)

Increase (decrease) in unearned premiums

 

4,045

 

 

196,631

Increase (decrease) in other net payable to reinsurers

 

46,310

 

 

105,390

Increase (decrease) in losses in course of payment

 

(125,074)

 

 

11,980

Change in equity adjustments in limited partnerships

 

(97,831)

 

 

(116,767)

Distribution of limited partnership income

 

71,174

 

 

18,125

Change in other assets and liabilities, net

 

47,052

 

 

(149,480)

Non-cash compensation expense

 

11,912

 

 

11,021

Amortization of bond premium (accrual of bond discount)

 

19,254

 

 

17,323

Net (gains) losses on investments

 

153,627

 

 

(38,902)

Net cash provided by (used in) operating activities

 

846,439

 

 

904,366

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Proceeds from fixed maturities matured/called - available for sale

 

849,019

 

 

818,352

Proceeds from fixed maturities sold - available for sale

 

418,988

 

 

228,278

Proceeds from equity securities sold, at fair value

 

90,101

 

 

281,313

Distributions from other invested assets

 

162,719

 

 

52,211

Cost of fixed maturities acquired - available for sale

 

(2,010,859)

 

 

(1,776,730)

Cost of equity securities acquired, at fair value

 

(195,026)

 

 

(174,981)

Cost of other invested assets acquired

 

(137,430)

 

 

(98,939)

Net change in short-term investments

 

354,761

 

 

308,585

Net change in unsettled securities transactions

 

46,399

 

 

(93,610)

Net cash provided by (used in) investing activities

 

(421,328)

 

 

(455,521)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Common shares issued during the period for share-based compensation, net of expense

 

(14,450)

 

 

(10,583)

Purchase of treasury shares

 

(1,322)

 

 

(23,545)

Dividends paid to shareholders

 

(61,097)

 

 

(62,229)

Cost of shares withheld on settlements of share-based compensation awards

 

(16,692)

 

 

(12,507)

Net cash provided by (used in) financing activities

 

(93,561)

 

 

(108,864)

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

5,807

 

 

(8,972)

 

 

 

 

 

 

Net increase (decrease) in cash

 

337,357

 

 

331,009

Cash, beginning of period

 

1,440,861

 

 

801,651

Cash, end of period

$

1,778,218

 

$

1,132,660

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Income taxes paid (recovered)

$

2,681

 

$

6,417

Interest paid

 

2,210

 

 

1,880

 

 

 

 

 

 

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

 

 

 

 

 

4

Nine Months Ended
September 30,

(Dollars in millions)
2022
2021
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
101
$
948
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable
(405)
(737)
Decrease (increase) in funds held by reinsureds, net
(35)
(93)
Decrease (increase) in reinsurance recoverables
(662)
(231)
Decrease (increase) in income taxes
(249)
57
Decrease (increase) in prepaid reinsurance premiums
(194)
(147)
Increase (decrease) in reserve for losses and loss adjustment expenses
3,117
2,560
Increase (decrease) in future policy benefit reserve
(2)
(1)
Increase (decrease) in unearned premiums
435
928
Increase (decrease) in other net payable to reinsurers
242
199
Increase (decrease) in losses in course of payment
(150)
24
Change in equity adjustments in limited partnerships
(126)
(543)
Distribution of limited partnership income
139
106
Change in other assets and liabilities, net
(134)
(230)
Non-cash compensation expense
35
33
Amortization of bond premium (accrual of bond discount)
49
57
Net (gains) losses on investments
519
(139)
Net cash provided by (used in) operating activities
2,680
2,791
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called/repaid - available for sale
2,171
2,757
Proceeds from fixed maturities matured/called/repaid - held to maturity
18
-
Proceeds from fixed maturities sold - available for sale
1,177
883
Proceeds from equity securities sold, at fair value
1,030
579
Distributions from other invested assets
244
217
Cost of fixed maturities acquired - available for sale
(5,958)
(5,671)
Cost of fixed maturities acquired - held to maturity
(133)
-
Cost of equity securities acquired, at fair value
(960)
(508)
Cost of other invested assets acquired
(455)
(604)
Net change in short-term investments
568
423
Net change in unsettled securities transactions
102
(177)
Net cash provided by (used in) investing activities
(2,196)
(2,102)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued (redeemed) during the period for share-based compensation, net of expense
(16)
(12)
Purchase of treasury shares
(60)
(200)
Dividends paid to shareholders
(191)
(186)
Cost of debt repurchase
(6)
-
Cost of shares withheld on settlements of share-based compensation awards
(19)
(15)
Net cash provided by (used in) financing activities
(292)
(413)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
46
(9)
Net increase (decrease) in cash
238
267
Cash, beginning of period
1,441
802
Cash, end of period
$
1,679
$
1,068
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)
$
167
$
40
Interest paid
51
33
NON-CASH TRANSACTIONS:
Reclassification of specific investments from fixed maturity securities, available for sale
at fair value to fixed maturity securities, held to maturity at amortized cost net of credit allowances
$
722
$
-
The accompanying notes are an integral
part of the consolidated financial statements.
5
NOTES TO CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
(UNAUDITED)

For the Three and Nine Months Ended March 31,September
30, 2022 and 2021

1.
GENERAL

Everest
Re Group,
Ltd. (“Group”),
a Bermuda company,
through its
subsidiaries, principally
provides reinsurance
and
insurance
in
the
U.S.,
Bermuda
and
international
markets.
As
used
in
this
document, “Company”
“Company”
means
Group and its subsidiaries.

2.
BASIS OF PRESENTATION

The unaudited
consolidated
financial statements
of the
Company
as of March 31,
September
30, 2022
and December
31,
2021 and for the three
and nine months ended March 31,
September 30, 2022 and
2021 include all adjustments,
consisting
of
normal
recurring
accruals,
which,
in
the
opinion
of
management,
are
necessary
for
a
fair
statement
of
the
results
on
an
interim
basis.
Certain
financial
information,
which
is
normally
included
in
annual
financial
statements
prepared
in
accordance
with
accounting
principles
generally
accepted
in
the
United
States
of
America (“GAAP”),
has been
omitted since
it is
not required
for interim
reporting purposes.
The December
31,
2021
consolidated
balance
sheet
data
was
derived
from
audited
financial
statements
but
does
not
include
all
disclosures
required by
GAAP.
The results
for the
three and
nine months
ended March 31,September
30, 2022
and 2021
are
not
necessarily
indicative
of
the
results
for
a
full
year.
These
financial
statements
should
be
read
in
conjunction with the audited consolidated
financial statements and
notes thereto for
the years ended December
31, 2021, 2020 and 2019, included in the Company’s
most recent Form 10-K filing.

The Company
consolidates
the results
of operations
and financial
position of
all voting
interest
entities ("VOE")
in
which
the
Company
has
a controlling
financial
interest
and
all
variable
interest
entities
("VIE")
in
which
the
Company is considered to be the primary beneficiary.
The consolidation assessment, including
the determination
as
to
whether
an
entity
qualifies
as
a
VIE
or
VOE,
depends
on
the
facts
and
circumstances
surrounding
each
entity.

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

All intercompany accounts
and transactions have been eliminated.

Certain
reclassifications
and
format
changes
have
been
made
to
prior
years’
amounts
to
conform
to
the
2022
presentation.

Application of Recently Issued Accounting
Standard Changes.

The Company did
not adopt any
new accounting standards
that had a
material impact during
the three and
nine
months ended
September 30,
2022.
The Company
assessed the
adoption impacts
of recently
issued accounting
standards
by the
Financial Accounting
Standards
Board on
the Company’s
consolidated
financial statements
as
well as
material updates
to previous
assessments,
if any,
from the
Company’s
Annual Report
on Form
10-K for
the
year
ended
December
31,
2021.
There
were
no
accounting
standards
issued
in
the
nine
months
ended
September 30, 2022, that are expected to
have a material impact during the three months ended March 31, 2022. The Company assessed the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on the Company’s consolidated financial statements as well as material updates to previous assessments, if any, from Group.
Any
issued
guidance
and
pronouncements,
other
than
those
directly
referenced
above,
are
deemed
by
the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no new material accounting standards issued in the three months ended March 31, 2022, that impacted Group.

Any issued guidance and pronouncements, other than those directly referenced above, are deemed by the

Company to be either not applicable or immaterial to
its financial statements.

5

6
3.
INVESTMENTS

The
following
tables
show
amortized
cost,
allowance
for
credit
losses,
gross
unrealized
appreciation/(depreciation) and market fair
value of fixed maturity securities available
for sale as of the dates indicated:

 

 

At March 31, 2022

 

 

Amortized

 

Allowance for

 

Unrealized

 

Unrealized

 

Market

(Dollars in thousands)

Cost

 

Credit Losses

 

Appreciation

 

Depreciation

 

Value

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

$

1,387,723

 

$

-

 

$

9,506

 

$

(41,423)

 

$

1,355,806

 

Obligations of U.S. states and political subdivisions

 

560,375

 

 

(151)

 

 

9,538

 

 

(10,574)

 

 

559,188

 

Corporate securities

 

7,510,255

 

 

(20,049)

 

 

64,802

 

 

(263,958)

 

 

7,291,050

 

Asset-backed securities

 

4,046,636

 

 

(7,679)

 

 

13,228

 

 

(54,294)

 

 

3,997,891

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

1,021,013

 

 

-

 

 

2,762

 

 

(31,904)

 

 

991,871

 

Agency residential

 

2,387,754

 

 

-

 

 

5,354

 

 

(109,611)

 

 

2,283,497

 

Non-agency residential

 

5,759

 

 

-

 

 

-

 

 

(114)

 

 

5,645

 

Foreign government securities

 

1,414,589

 

 

-

 

 

16,763

 

 

(68,970)

 

 

1,362,382

 

Foreign corporate securities

 

4,358,925

 

 

(13,712)

 

 

31,776

 

 

(225,904)

 

 

4,151,085

Total fixed maturity securities

$

22,693,029

 

$

(41,591)

 

$

153,729

 

$

(806,752)

 

$

21,998,415

 

 

At December 31, 2021

 

 

Amortized

 

Allowance for

 

Unrealized

 

Unrealized

 

Market

(Dollars in thousands)

Cost

 

Credit Losses

 

Appreciation

 

Depreciation

 

Value

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

$

1,407,256

 

$

-

 

$

23,720

 

$

(10,358)

 

$

1,420,618

 

Obligations of U.S. states and political subdivisions

 

558,842

 

 

(151)

 

 

29,080

 

 

(1,150)

 

 

586,621

 

Corporate securities

 

7,443,535

 

 

(19,267)

 

 

195,210

 

 

(62,580)

 

 

7,556,898

 

Asset-backed securities

 

3,579,439

 

 

(7,679)

 

 

21,817

 

 

(11,848)

 

 

3,581,729

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

1,032,506

 

 

-

 

 

37,550

 

 

(5,690)

 

 

1,064,366

 

Agency residential

 

2,361,208

 

 

-

 

 

32,997

 

 

(18,873)

 

 

2,375,332

 

Non-agency residential

 

6,530

 

 

-

 

 

22

 

 

(16)

 

 

6,536

 

Foreign government securities

 

1,423,634

 

 

-

 

 

41,957

 

 

(28,079)

 

 

1,437,512

 

Foreign corporate securities

 

4,250,642

 

 

(2,641)

 

 

95,195

 

 

(64,536)

 

 

4,278,660

Total fixed maturity securities

$

22,063,592

 

$

(29,738)

 

$

477,548

 

$

(203,130)

 

$

22,308,272

The amortized cost

At September 30, 2022
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - available for sale
U.S. Treasury securities and market obligations of
U.S. government agencies and corporations
$
1,367
$
-
$
19
$
(79)
$
1,308
Obligations of U.S. states and political subdivisions
519
-
1
(38)
481
Corporate securities
7,010
(29)
69
(653)
6,397
Asset-backed securities
3,935
-
1
(164)
3,772
Mortgage-backed securities
Commercial
1,016
-
-
(108)
908
Agency residential
3,058
-
2
(337)
2,723
Non-agency residential
5
-
-
-
5
Foreign government securities
1,528
-
13
(205)
1,335
Foreign corporate securities
4,768
(9)
47
(726)
4,080
Total fixed maturity securities - available for sale
$
23,204
$
(38)
$
153
$
(2,310)
$
21,009
(Some amounts may not reconcile due to rounding.)
At December 31, 2021
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
1,407
$
-
$
24
$
(10)
$
1,421
Obligations of U.S. states and political subdivisions
559
-
29
(1)
587
Corporate securities
7,444
(19)
195
(63)
7,557
Asset-backed securities
3,579
(8)
22
(12)
3,582
Mortgage-backed securities
Commercial
1,033
-
38
(6)
1,064
Agency residential
2,361
-
33
(19)
2,375
Non-agency residential
7
-
-
-
7
Foreign government securities
1,424
-
42
(28)
1,438
Foreign corporate securities
4,251
(3)
95
(65)
4,279
Total fixed maturity securities - available for sale
$
22,064
$
(30)
$
478
$
(203)
$
22,308
(Some amounts may not reconcile due to rounding.)
The
following
tables
show
amortized
cost,
allowance
for
credit
losses,
gross
unrealized
appreciation/(depreciation) and fair
value of fixed maturity securities held to
maturity as of the dates indicated:
At September 30, 2022
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in millions)
Cost
Credit Losses
Appreciation
Depreciation
Value
Fixed maturity securities - held to maturity
Corporate securities
$
160
$
(2)
$
-
$
(11)
$
147
Asset-backed securities
653
(6)
1
(10)
639
Mortgage-backed securities
Commercial
6
-
-
-
6
Foreign corporate securities
28
(1)
-
(1)
26
Total fixed maturity securities - held to maturity
$
846
(9)
$
1
$
(21)
$
817
(Some amounts may not reconcile due to rounding.)
7
The amortized
cost and
fair value
of fixed
maturity securities
available for
sale are
shown in
the following
table
by
contractual
maturity.
Mortgage-backed
securities
are
generally
more
likely
to
be
prepaid
than
other
fixed
maturity securities. As the stated
maturity of such securities may not be indicative
of actual maturities, the totals
for mortgage-backed and
asset-backed securities
are shown separately.

 

At March 31, 2022

 

At December 31, 2021

 

Amortized

 

Market

 

Amortized

 

Market

(Dollars in thousands)

Cost

 

Value

 

Cost

 

Value

Fixed maturity securities – available for sale:

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

1,391,977

 

$

1,391,679

 

$

1,398,742

 

$

1,398,006

Due after one year through five years

 

7,302,421

 

 

7,112,007

 

 

7,075,077

 

 

7,154,468

Due after five years through ten years

 

4,896,715

 

 

4,673,737

 

 

5,003,792

 

 

5,100,672

Due after ten years

 

1,640,754

 

 

1,542,088

 

 

1,606,298

 

 

1,627,163

Asset-backed securities

 

4,046,636

 

 

3,997,891

 

 

3,579,439

 

 

3,581,729

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

1,021,013

 

 

991,871

 

 

1,032,506

 

 

1,064,366

Agency residential

 

2,387,754

 

 

2,283,497

 

 

2,361,208

 

 

2,375,332

Non-agency residential

 

5,759

 

 

5,645

 

 

6,530

 

 

6,536

Total fixed maturity securities

$

22,693,029

 

$

21,998,415

 

$

22,063,592

 

$

22,308,272

6

At September 30, 2022
At December 31, 2021
Amortized
Fair
Amortized
Fair
(Dollars in millions)
Cost
Value
Cost
Value
Fixed maturity securities – available for sale:
Due in one year or less
$
1,257
$
1,258
$
1,399
$
1,398
Due after one year through five years
7,875
7,216
7,075
7,154
Due after five years through ten years
4,603
3,938
5,004
5,101
Due after ten years
1,456
1,189
1,606
1,627
Asset-backed securities
3,935
3,772
3,579
3,582
Mortgage-backed securities:
Commercial
1,016
908
1,033
1,064
Agency residential
3,058
2,723
2,361
2,375
Non-agency residential
5
5
7
7
Total fixed maturity securities - available for sale
$
23,204
$
21,009
$
22,064
$
22,308
(Some amounts may not reconcile due to rounding.)
The amortized
cost and
fair value
of fixed
maturity securities
held to
maturity are
shown in
the following
table
by contractual maturity.
At September 30, 2022
Amortized
Fair
(Dollars in millions)
Cost
Value
Fixed maturity securities – held to maturity:
Due after one year through five years
$
61
$
58
Due after five years through ten years
46
41
Due after ten years
80
74
Asset-backed securities
653
639
Mortgage-backed securities:
Commercial
6
6
Total fixed
maturity securities - held to maturity
$
846
$
817
(Some amounts may not reconcile due
to rounding.)
During the
third
quarter
of 2022,
the Company
re-designated
a portion
of its
fixed
maturity
securities from
its
fixed maturity – available
for sale portfolio
to its fixed maturity
– held to maturity portfolio.
The fair value of the
securities
reclassified
at
the
date
of
transfer
was
$
722
million,
net
of
allowance
for
current
expected
credit
losses,
which
was
subsequently
recognized
as
the
new
amortized
cost
basis.
As of
the date
of transfer,
these
securities had an unrealized
loss of $
53
million, which remained in accumulated
other comprehensive income
on
the
balance
sheet
and
will
be
amortized
into
income
through
an
adjustment
to
the
yields
of
the
underlying
securities over the remaining life of the securities.
The Company evaluated
fixed maturity
securities classified as
held to maturity
for current
expected credit
losses
as of
September 30,
2022 utilizing
risk characteristics
of each security,
including credit
rating, remaining
time to
maturity,
adjusted
for
prepayment
considerations,
and
subordination
level,
and
applying
default
and
recovery
rates,
which
include
the
incorporation
of
historical
credit
loss
experience
and
macroeconomic
forecasts,
to
develop an estimate
of current expected
credit losses. These
fixed maturities classified
as held to maturity
are of
a high credit quality and are all rated
investment grade as of September
30, 2022.
8
The changes
in net
unrealized
appreciation
(depreciation)
for the
Company’s
investments
are derived
from the
following sources for the periods
indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

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

 

 

 

 

 

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

 

 

 

 

 

Fixed maturity securities and short-term investments

$

(927,407)

 

$

(322,708)

Change in unrealized appreciation (depreciation), pre-tax

 

(927,407)

 

 

(322,708)

Deferred tax benefit (expense)

 

116,408

 

 

40,427

Change in unrealized appreciation (depreciation),

 

 

 

 

 

net of deferred taxes, included in shareholders’ equity

$

(810,999)

 

$

(292,281)

The tables below display

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Increase (decrease) during the aggregate marketperiod between the fair value and gross unrealized depreciation cost
of fixedinvestments carried at fair value, and deferred taxes thereon:
Fixed maturity securities and short-term investments
$
(724)
$
(109)
$
(2,484)
$
(344)
Change in unrealized appreciation (depreciation), pre-tax
(724)
(109)
(2,484)
(344)
Deferred tax benefit (expense)
53
7
285
36
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity
$
(671)
$
(101)
$
(2,199)
$
(308)
(Some amounts may not reconcile due to rounding.)
The tables
below display
the aggregate
fair value
and gross
unrealized
depreciation
of fixed
maturity securities
available for
sale, by security
type and contractual
maturity,
in each case
subdivided according
to length
of time
that individual securities had been in a continuous unrealized
loss position for the periods indicated.

 

 

Duration of Unrealized Loss at March 31, 2022 By Security Type

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

(Dollars in thousands)

Market Value

 

Depreciation

 

Market Value

 

Depreciation

 

Market Value

 

Depreciation

Fixed maturity securities - available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

$

735,568

 

$

(31,508)

 

$

140,967

 

$

(9,915)

 

$

876,535

 

$

(41,423)

Obligations of U.S. states and political subdivisions

 

135,080

 

 

(8,844)

 

 

12,751

 

 

(1,683)

 

 

147,831

 

 

(10,527)

Corporate securities

 

3,552,799

 

 

(191,372)

 

 

804,526

 

 

(71,842)

 

 

4,357,325

 

 

(263,214)

Asset-backed securities

 

3,072,751

 

 

(51,294)

 

 

41,984

 

 

(3,000)

 

 

3,114,735

 

 

(54,294)

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

696,096

 

 

(29,358)

 

 

19,307

 

 

(2,546)

 

 

715,403

 

 

(31,904)

Agency residential

 

1,405,047

 

 

(67,884)

 

 

511,034

 

 

(41,727)

 

 

1,916,081

 

 

(109,611)

Non-agency residential

 

4,831

 

 

(102)

 

 

815

 

 

(12)

 

 

5,646

 

 

(114)

Foreign government securities

 

868,416

 

 

(37,826)

 

 

173,278

 

 

(31,144)

 

 

1,041,694

 

 

(68,970)

Foreign corporate securities

 

2,674,129

 

 

(177,921)

 

 

444,844

 

 

(47,682)

 

 

3,118,973

 

 

(225,603)

Total

$

13,144,717

 

$

(596,109)

 

$

2,149,506

 

$

(209,551)

 

$

15,294,223

 

$

(805,660)

Securities where an allowance for credit loss was recorded

 

18,830

 

 

(1,092)

 

 

-

 

 

-

 

 

18,830

 

 

(1,092)

Total fixed maturity securities

$

13,163,547

 

$

(597,201)

 

$

2,149,506

 

$

(209,551)

 

$

15,313,053

 

$

(806,752)

 

 

Duration of Unrealized Loss at March 31, 2022 By Maturity

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

(Dollars in thousands)

Market Value

 

Depreciation

 

Market Value

 

Depreciation

 

Market Value

 

Depreciation

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

170,052

 

$

(2,305)

 

$

105,909

 

$

(9,957)

 

$

275,961

 

$

(12,262)

Due in one year through five years

 

3,852,436

 

 

(164,170)

 

 

755,276

 

 

(55,787)

 

 

4,607,712

 

 

(219,957)

Due in five years through ten years

 

2,843,780

 

 

(178,654)

 

 

628,985

 

 

(82,375)

 

 

3,472,765

 

 

(261,029)

Due after ten years

 

1,099,724

 

 

(102,342)

 

 

86,196

 

 

(14,147)

 

 

1,185,920

 

 

(116,489)

Asset-backed securities

 

3,072,751

 

 

(51,294)

 

 

41,984

 

 

(3,000)

 

 

3,114,735

 

 

(54,294)

Mortgage-backed securities

 

2,105,974

 

 

(97,344)

 

 

531,156

 

 

(44,285)

 

 

2,637,130

 

 

(141,629)

Total

$

13,144,717

 

$

(596,109)

 

$

2,149,506

 

$

(209,551)

 

$

15,294,223

 

$

(805,660)

Securities where an allowance for credit loss was recorded

 

18,830

 

 

(1,092)

 

 

-

 

 

-

 

 

18,830

 

 

(1,092)

Total fixed maturity securities

$

13,163,547

 

$

(597,201)

 

$

2,149,506

 

$

(209,551)

 

$

15,313,053

 

$

(806,752)

7

Duration of Unrealized Loss at September
30, 2022 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for
sale
U.S. Treasury securities and
obligations of
U.S. government agencies and corporations
$
807
$
(47)
$
273
$
(32)
$
1,080
$
(79)
Obligations of U.S. states and
political subdivisions
326
(30)
25
(8)
351
(38)
Corporate securities
4,247
(447)
996
(189)
5,243
(636)
Asset-backed securities
2,827
(158)
55
(5)
2,882
(164)
Mortgage-backed securities
Commercial
877
(104)
27
(4)
904
(108)
Agency residential
2,086
(222)
588
(115)
2,674
(337)
Non-agency residential
3
-
2
-
5
-
Foreign government securities
971
(137)
250
(68)
1,221
(205)
Foreign corporate securities
2,792
(496)
808
(229)
3,600
(726)
Total
$
14,937
$
(1,640)
$
3,023
$
(651)
$
17,960
$
(2,291)
Securities where an allowance for credit
loss was recorded
23
(19)
-
-
23
(19)
Total fixed
maturity securities
$
14,960
$
(1,659)
$
3,023
$
(651)
$
17,983
$
(2,310)
(Some amounts may not reconcile due to rounding.)
9
Duration of Unrealized Loss at September
30, 2022 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities
- available for sale
Due in one year or less
$
895
$
(21)
$
59
$
(6)
$
954
$
(27)
Due in one year through five years
4,908
(502)
1,264
(204)
6,173
(706)
Due in five years through ten years
2,517
(459)
812
(239)
3,329
(697)
Due after ten years
823
(174)
217
(77)
1,040
(252)
Asset-backed securities
2,827
(158)
55
(5)
2,882
(164)
Mortgage-backed securities
2,967
(325)
616
(120)
3,583
(445)
Total
$
14,937
$
(1,640)
$
3,023
$
(651)
$
17,960
$
(2,291)
Securities where an allowance for credit
loss was recorded
23
(19)
-
-
23
(19)
Total fixed
maturity securities
$
14,960
$
(1,659)
$
3,023
$
(651)
$
17,983
$
(2,310)
(Some amounts may not reconcile due to rounding.)
The aggregate market
fair
value
and gross
unrealized
losses related
to investments
fixed
maturity
securities available
for
sale in
an
unrealized loss position
at March 31,September 30, 2022
were $15.3 $
18.0
billion and $806.8 million,$
2.3
billion, respectively.
The marketfair value
of
securities for the
single issuer (the United
States government)
whose securities comprised
the largest unrealized
loss
position
at
September 30,
2022,
did
not
exceed
5.2
%
of
the
overall
fair
value
of
the
Company’s
fixed
maturity
securities
available
for
sale.
The
fair
value
of
the
securities
for
the
issuer
with
the
second
largest
unrealized
loss
position
at
September 30,
2022,
comprised
less
than
0.9
%
of
the
Company’s
fixed
maturity
securities available
for sale.
In addition,
as indicated
on the
above table,
there was
no significant
concentration
of
unrealized
losses
in
any
one
market
sector.
The
$
1.7
billion
of
unrealized
losses
related
to
fixed
maturity
securities available
for
sale that
have
been in
an unrealized
loss position
for
less than
one year
were generally
comprised
of
foreign
and
domestic
corporate
securities,
agency
residential
and
commercial
mortgage-backed
securities,
asset-backed
securities
and
foreign
government
securities.
Of
these
unrealized
losses,
$
1.5
billion
were related
to securities
that were
rated investment
grade by
at March 31, 2022, did not exceed 4.0%least
one nationally
recognized rating
agency.
The $
651
million of
unrealized
losses related
to fixed
maturity securities
available
for sale
in an
unrealized
loss
position
for
more
than
one
year
related
primarily
to
foreign
and
domestic
corporate
securities,
agency
residential
mortgage-backed
securities
and
foreign
government
securities.
Of
these
unrealized
losses,
$
616
million were
related to
securities that
were rated
investment
grade by
at least
one nationally
recognized
rating
agency.
In
all
instances,
there
were
no
projected
cash
flow
shortfalls
to
recover
the overall market
full
book
value
of
the
investments
and
the
related
interest
obligations.
The
mortgage-backed
securities
still
have
excess
credit
coverage
and are
current on
interest
and principal
payments.
Based upon
the Company’s fixed maturity securities. The market value
current evaluation
of the
securities for the issuer with the second largest unrealized loss position at March 31, 2022, comprised less than 0.9% of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $597.2 million of unrealized losses related to fixed maturity securities that have been in
an unrealized
loss
position for less than one year were generally comprised of domestic and foreign corporate securities, agency residential mortgage-backed securities, asset-backed securities and foreign government securities. Of these unrealized losses, $551.4 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. The $209.6 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $201.8 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. Based upon the Company’s current evaluation of securities in an unrealized loss position
as of March 31,
September
30, 2022,
the
unrealized
losses
are
due
to
changes
in
interest
rates
and
non-issuer
specific
credit
spreads
and
are
not
credit-related.
In
addition,
the
contractual
terms of these securities do not permit these securities to be settled
at a price less than their amortized cost.

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

10
The tables
below display
the aggregate market
fair value
and gross
unrealized
depreciation
of fixed
maturity securities
available for
sale, by security
type and contractual
maturity,
in each case
subdivided according
to length
of time
that
individual
securities
had
been
in
a
continuous
unrealized
loss
position
for
the
periods
indicated.
The
amounts
presented
in
the
tables
below
include $15.7
$
16
million
of market
fair
value
and $(0.4)
$(
0.4
)
million
of
gross
unrealized
depreciation
as
of
December
31,
2021
related
to
fixed
maturity
securities
available
for
sale
for
which
the
Company has recorded an allowance
for credit losses.

 

 

Duration of Unrealized Loss at December 31, 2021 By Security Type

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

(Dollars in thousands)

Market Value

 

Depreciation

 

Market Value

 

Depreciation

 

Market Value

 

Depreciation

Fixed maturity securities - available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

$

504,168

 

$

(6,264)

 

$

91,735

 

$

(4,094)

 

$

595,903

 

$

(10,358)

Obligations of U.S. states and political subdivisions

 

51,094

 

 

(1,038)

 

 

2,558

 

 

(112)

 

 

53,652

 

 

(1,150)

Corporate securities

 

2,132,576

 

 

(38,316)

 

 

472,831

 

 

(24,264)

 

 

2,605,407

 

 

(62,580)

Asset-backed securities

 

1,954,079

 

 

(11,180)

 

 

41,823

 

 

(668)

 

 

1,995,902

 

 

(11,848)

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

221,852

 

 

(2,854)

 

 

40,496

 

 

(2,836)

 

 

262,348

 

 

(5,690)

Agency residential

 

1,101,215

 

 

(12,178)

 

 

279,697

 

 

(6,695)

 

 

1,380,912

 

 

(18,873)

Non-agency residential

 

2,320

 

 

(14)

 

 

156

 

 

(2)

 

 

2,476

 

 

(16)

Foreign government securities

 

392,447

 

 

(9,709)

 

 

100,673

 

 

(18,370)

 

 

493,120

 

 

(28,079)

Foreign corporate securities

 

1,734,510

 

 

(46,247)

 

 

210,722

 

 

(18,289)

 

 

1,945,232

 

 

(64,536)

Total fixed maturity securities

$

8,094,261

 

$

(127,800)

 

$

1,240,691

 

$

(75,330)

 

$

9,334,952

 

$

(203,130)

8

 

 

Duration of Unrealized Loss at December 31, 2021 By Maturity

 

Less than 12 months

 

Greater than 12 months

 

Total

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

(Dollars in thousands)

Market Value

 

Depreciation

 

Market Value

 

Depreciation

 

Market Value

 

Depreciation

Fixed maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

129,860

 

$

(2,415)

 

$

136,827

 

$

(11,832)

 

$

266,687

 

$

(14,247)

Due in one year through five years

 

2,165,467

 

 

(35,264)

 

 

446,247

 

 

(28,685)

 

 

2,611,714

 

 

(63,949)

Due in five years through ten years

 

1,727,823

 

 

(47,413)

 

 

244,454

 

 

(22,038)

 

 

1,972,277

 

 

(69,451)

Due after ten years

 

791,645

 

 

(16,482)

 

 

50,991

 

 

(2,574)

 

 

842,636

 

 

(19,056)

Asset-backed securities

 

1,954,079

 

 

(11,180)

 

 

41,823

 

 

(668)

 

 

1,995,902

 

 

(11,848)

Mortgage-backed securities

 

1,325,387

 

 

(15,046)

 

 

320,349

 

 

(9,533)

 

 

1,645,736

 

 

(24,579)

Total fixed maturity securities

$

8,094,261

 

$

(127,800)

 

$

1,240,691

 

$

(75,330)

 

$

9,334,952

 

$

(203,130)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position

Duration of Unrealized Loss at December
31, 2021 were $9.3 billionBy Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for
sale
U.S. Treasury securities and $203.1 million, respectively. The market value
obligations of
U.S. government agencies and corporations
$
504
$
(6)
$
92
$
(4)
$
596
$
(10)
Obligations of U.S. states and
political subdivisions
51
(1)
3
-
54
(1)
Corporate securities for the single issuer (the United States government) whose
2,133
(38)
473
(24)
2,605
(63)
Asset-backed securities comprised the largest unrealized loss position
1,954
(11)
42
(1)
1,996
(12)
Mortgage-backed securities
Commercial
222
(3)
40
(3)
262
(6)
Agency residential
1,101
(12)
280
(7)
1,381
(19)
Non-agency residential
2
-
-
-
2
-
Foreign government securities
392
(10)
101
(18)
493
(28)
Foreign corporate securities
1,735
(46)
211
(18)
1,945
(65)
Total fixed
maturity securities
$
8,094
$
(128)
$
1,241
$
(75)
$
9,335
$
(203)
(Some amounts may not reconcile due to rounding.)
Duration of Unrealized Loss at December
31, 2021 didBy Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in millions)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for
sale
Due in one year or less
$
130
$
(2)
$
137
$
(12)
$
267
$
(14)
Due in one year through five years
2,165
(35)
446
(29)
2,612
(64)
Due in five years through ten years
1,728
(47)
244
(22)
1,972
(69)
Due after ten years
792
(16)
51
(3)
843
(19)
Asset-backed securities
1,954
(11)
42
(1)
1,996
(12)
Mortgage-backed securities
1,325
(15)
320
(10)
1,646
(25)
Total fixed
maturity securities
$
8,094
$
(128)
$
1,241
$
(75)
$
9,335
$
(203)
(Some amounts may not reconcile due to rounding.)
The
aggregate
fair
value
and
gross
unrealized
losses
related
to
investments
in
an
unrealized
loss
position
at
December 31,
2021
were
$
9.3
billion
and
$
203
million,
respectively.
The
fair
value
of
securities
for
the
single
issuer
(the
United
States
government)
whose
securities
comprised
the
largest
unrealized
loss
position
at
December
31,
2021,
did
not
exceed 2.7%
2.7
%
of
the
overall market
fair
value
of
the
Company’s
fixed
maturity
securities
available for sale.
The fair value of the Company’s fixed maturity securities. The market value of the securities
for the issuer with the second
largest unrealized
loss comprised
less
than 0.5%
0.5
%
of
the
Company’s
fixed
maturity securities.
securities
available
for
sale.
In
addition,
as
indicated
on
the
above
table,
there
was
no
significant
concentration
of
unrealized
losses
in
any
one
market
sector.
The $127.8
$
128
million of unrealized
losses related
to fixed
maturity securities
available for
sale that
have been
in an unrealized
loss
position
for
less
than
one
year
were
generally
comprised
of
domestic
and
foreign
corporate
securities,
agency
residential
mortgage-backed
securities,
asset-backed
securities
and
foreign
government
securities.
Of
these unrealized
losses, $
116
million were related
to securities that
were rated
investment
grade by at
least one
nationally
recognized
rating
agency.
The
$
75
million
of
unrealized
losses
related
to
fixed
maturity
securities
available for
sale in an
unrealized loss
position for less more
than one year were generally comprised of domestic and foreign corporate securities, agency residential mortgage-backed securities, asset-backed securities and foreign government securities. Of these unrealized losses, $116.2 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. The $75.3 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year
related primarily
to domestic and
foreign
corporate securities,
foreign government
securities and agency
residential mortgage-backed
securities.
Of these
11
unrealized
losses, $72.3
$
72
million
were
related
to
securities
that
were
rated
investment
grade
by
at
least
one
nationally recognized
rating agency.
In all instances,
there were
no projected
cash flow shortfalls
to recover
the
full book value
of the investments
and the related
interest obligations.
The mortgage-backed
securities still have
excess credit coverage
and are current on interest
and principal payments.

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

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

Fixed maturities

$

148,226

 

$

140,916

Equity securities

 

4,146

 

 

4,838

Short-term investments and cash

 

159

 

 

180

Other invested assets:

 

 

 

 

 

Limited partnerships

 

88,437

 

 

114,333

Other

 

11,831

 

 

6,019

Gross investment income before adjustments

 

252,799

 

 

266,286

Funds held interest income (expense)

 

3,685

 

 

7,966

Future policy benefit reserve income (expense)

 

(222)

 

 

(291)

Gross investment income

 

256,262

 

 

273,961

Investment expenses

 

(13,432)

 

 

(13,548)

Net investment income

$

242,830

 

$

260,413

The Company records results from limited partnership

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Fixed maturities
$
186
$
134
$
503
$
423
Equity securities
6
4
15
12
Short-term investments on the equity method of accounting with changes in value reported through net investment income. The netand cash
5
-
12
1
Other invested assets:
Limited partnerships
(42)
139
94
493
Other
11
31
37
63
Gross investment income before adjustments
167
308
661
992
Funds held interest income (expense)
-
1
4
12
Future policy benefit reserve income (expense)
-
-
-
(1)
Gross investment income
167
309
665
1,004
Investment expenses
(15)
(16)
(45)
(44)
Net investment income
$
151
$
293
$
620
$
960
(Some amounts may not reconcile due to rounding.)
The
Company
records
results
from
limited
partnership
investments
on
the
equity
method
of
accounting
with
changes
in
value
reported
through
net
investment
income.
The
net
investment
income
from
limited
partnerships is dependent
upon the Company’s
share of the net asset
values of interests
underlying each limited partnership. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant

9

partnership.
Due

to
the
timing
of
receiving
financial
information
from
these
partnerships,
the
results
are

generally

reported
on
a
one
month
or
quarter
lag.
If
the
Company
determines
there
has
been
a
significant
decline in value
of a limited
partnership during
this lag period,
a loss will
be recorded
in the period
in which the
Company identifies the decline.

The Company had
contractual commitments
to invest
up to an additional $2.5
$
2.5
billion in limited partnerships
and
private
placement
loan
securities
at March 31,
September
30,
2022.
These
commitments
will
be
funded
when
called
in
accordance
with
the
partnership
and
loan
agreements,
which
have
investment
periods
that
expire,
unless
extended, through
2026
.

The Company
participates in
a private
placement liquidity
sweep facility (“
(“the facility”).
The primary purpose
of
the
facility
is
to
enhance
the
Company’s
return
on
its
short-term
investments
and
cash
positions.
The
facility
invests
in
high
quality,
short-duration
securities
and
permits
daily
liquidity.
The
Company
consolidates
its
participation in
the facility.
As of March 31,
September 30,
2022, the market
fair value
of investments
in the
facility consolidated
within the Company’s balance sheets
was $773.3 $
368
million.

Variable Interest
Entities

The
Company
is
engaged
with
various
special
purpose
entities
and
other
entities
that
are
deemed
to
be
VIEs
primarily
as
an
investor
through
normal
investment
activities
but
also
as
an
investment
manager.
A
VIE
is
an
entity that
either has
investors
that lack
certain essential
characteristics
of a
controlling
financial interest,
such
as simple
majority kick-out
rights, or
lacks sufficient
funds to
finance its
own activities
without financial
support
provided
by
other
entities.
The
Company
performs
ongoing
qualitative
assessments
of
its
VIEs
to
determine
whether the Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities but also as an investment manager. A VIE is an entity that either has investors that lack certain essential characteristics of
a controlling financial interest such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest
in the VIE and therefore
is the primary beneficiary.
The
Company
is
deemed to
have
a
controlling
financial
interest
when
it
has
both
the
ability to
direct
the
activities
that most
significantly impact
the economic
performance of
the VIE
and the
obligation to
absorb losses
or right
to
receive
benefits
from
the
VIE
that
could
potentially
be
significant
to
the
VIE.
Based
on
the
Company’s
assessment,
if it
determines
it
is
the
primary
beneficiary,
the
Company
consolidates
the
VIE
in
the
Company’s
12
Consolidated
Financial
Statements.
As
of March 31,
September
30,
2022
and
December 31,
2021,
the
Company
did not
no
t
hold any securities for which it is the primary
beneficiary.

The
Company,
through
normal
investment
activities,
makes
passive
investments
in
general
and
limited
partnerships
and other
alternative
investments.
For these
non-consolidated
VIEs, the
Company has
determined
it is not the
primary beneficiary as
it has no ability
to direct activities
that could significantly
affect the economic
performance
of
the
investments.
The
Company’s
maximum
exposure
to
loss
as
of March 31,
September
30,
2022
and
December 31, 2021
is limited
to the
total
carrying value
of $2.9 $
3.1
billion and $2.9
$
2.9
billion,
respectively,
which are
included in
general
and limited
partnerships
and other
alternative
investments
in Other
Invested
Assets
in the
Company's
Consolidated
Balance
Sheets.
As
of
September
30,
2022,
the
Company
has
outstanding
commitments
totaling
$
2.2
billion
whereby
the
Company
is
committed
to
fund
these
investments
and
may
be
called
by
the
partnership
during
the
commitment
period
to
fund
the
purchase
of
new
investments
and
partnership
expenses.
These investments
are generally
of March 31, 2022, a
passive nature
in that
the Company has outstanding commitments totaling $2.2 billion whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company
does not
take
an active role in management.

In
addition,
the
Company
makes
passive
investments
in
structured
securities
issued
by
VIEs
for
which
the
Company
is
not
the
manager.
These
investments
are
included
in
asset-backed
securities,
which
includes
collateralized loan
obligations and are
reported in fixed
maturities, available-for-sale. available-for
-sale and fixed maturities
held to
maturity.
The
Company
has
not
provided
financial
or
other
support
with
respect
to
these
investments
other
than its
original investment.
For these
investments,
the Company
determined
it is
not the
primary beneficiary
due
to
the
relative
size
of the
Company’s
investment
in
comparison
to
the principal
amount
of the
structured
securities issued by the
VIEs, the level of
credit subordination
which reduces the Company’s
obligation to absorb
losses
or
right
to
receive
benefits
and
the
Company’s
inability
to
direct
the
activities
that
most
significantly
impact the economic performance
of the VIEs.
The Company’s
maximum exposure
to loss on
these investments
is limited to the amount of the Company’s
investment.

10

The components of net gains (losses) on investments

are presented in the tables below for
the periods indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

 

2021

Fixed maturity securities, market value:

 

 

 

 

 

Allowance for credit losses

$

(11,853)

 

$

(6,977)

Net realized gains (losses) from dispositions

 

2,799

 

 

9,174

Equity securities, fair value:

 

 

 

 

 

Net realized gains (losses) from dispositions

 

(11,787)

 

 

6,238

Gains (losses) from fair value adjustments

 

(136,860)

 

 

29,056

Other invested assets

 

4,152

 

 

1,346

Short-term investments gain (loss)

 

(78)

 

 

66

Total net gains (losses) on investments

$

(153,627)

 

$

38,902

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

Roll Forward of Allowance for Credit Losses

 

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

Obligations of

 

 

 

 

 

 

 

 

 

 

U.S. States

 

Foreign

 

 

 

 

Corporate

 

Asset-Backed

 

and Political

 

Corporate

 

 

 

 

Securities

 

Securities

 

Subdivisions

 

Securities

 

Total

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

(19,267)

 

$

(7,679)

 

$

(151)

 

$

(2,641)

 

$

(29,738)

Credit losses on securities where credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

losses were not previously recorded

 

 

(1,929)

 

 

-

 

 

-

 

 

(11,184)

 

 

(13,113)

Increases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Decreases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Reduction in allowance due to disposals

 

 

1,147

 

 

-

 

 

-

 

 

113

 

 

1,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2022

 

$

(20,049)

 

$

(7,679)

 

$

(151)

 

$

(13,712)

 

$

(41,591)

 

Roll Forward of Allowance for Credit Losses

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

Foreign

 

Foreign

 

 

 

 

Corporate

 

Asset-Backed

 

Government

 

Corporate

 

 

 

 

Securities

 

Securities

 

Securities

 

Securities

 

Total

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

$

(1,220)

 

$

-

 

$

(22)

 

$

(503)

 

$

(1,745)

Credit losses on securities where credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

losses were not previously recorded

 

(2,383)

 

 

(4,915)

 

 

-

 

 

-

 

 

(7,298)

Increases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Decreases in allowance on previously

 

 

 

 

 

 

 

 

 

 

 

 

 

 

impaired securities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Reduction in allowance due to disposals

 

-

 

 

-

 

 

22

 

 

298

 

 

320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2021

$

(3,603)

 

$

(4,915)

 

$

-

 

$

(205)

 

$

(8,723)

11

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Fixed maturity securities:
Allowance for credit losses
$
(5)
$
(7)
$
(18)
$
(30)
Net realized gains (losses) from dispositions
(53)
6
(66)
25
Equity securities, fair value:
Net realized gains (losses) from dispositions
58
-
15
10
Gains (losses) from fair value adjustments
(136)
(5)
(462)
128
Other invested assets
6
2
11
6
Short-term investments gain (loss)
1
-
1
-
Total net gains (losses) on investments
$
(129)
$
(4)
$
(519)
$
139
(Some amounts may not reconcile due to rounding.)
13
Roll Forward of Allowance for Credit Losses – Fixed maturities
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Foreign
Foreign
Corporate
Asset-Backed
Corporate
Corporate
Asset-Backed
Corporate
Securities
Securities
Securities
Total
Securities
Securities
Securities
Total
(Dollars in millions)
Beginning Balance
$
(26)
$
-
$
(17)
$
(43)
$
(19)
$
(8)
$
(3)
$
(30)
Credit losses on securities where credit
losses were not previously recorded
(2)
(6)
(1)
(9)
(9)
(6)
(17)
(32)
Increases in allowance on previously
impaired securities
(3)
-
-
(3)
(4)
-
(1)
(4)
Decreases in allowance on previously
impaired securities
-
-
-
-
-
-
-
-
Reduction in allowance due to disposals
-
-
8
8
1
8
10
19
Balance as of September 30, 2022
$
(31)
$
(6)
$
(10)
$
(47)
$
(31)
$
(6)
$
(10)
$
(47)
(Some amounts may not reconcile due to rounding.)
Roll Forward of Allowance for Credit Losses – Fixed maturities
Three Months Ended September 30, 2021
Nine Months Ended September 30, 2021
Foreign
Foreign
Corporate
Asset-Backed
Corporate
Corporate
Asset-Backed
Corporate
Securities
Securities
Securities
Total
Securities
Securities
Securities
Total
(Dollars in millions)
Beginning Balance
$
(18)
$
(5)
$
(1)
$
(25)
$
(1)
$
-
$
(1)
$
(2)
Credit losses on securities where credit
losses were not previously recorded
(5)
-
-
(5)
(21)
(5)
(1)
(27)
Increases in allowance on previously
impaired securities
-
(3)
-
(3)
(2)
(3)
-
(5)
Decreases in allowance on previously
impaired securities
-
-
-
-
-
-
-
-
Reduction in allowance due to disposals
1
-
-
1
2
-
-
2
Balance as of September 30, 2021
$
(23)
(8)
$
(1)
$
(32)
$
(23)
$
(8)
$
(1)
$
(32)
(Some amounts may not reconcile due to rounding.)
The proceeds
and split
between gross
gains and
losses from
dispositions of
fixed maturity
and equity
securities,
are presented in the table below
for the periods indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

Proceeds from sales of fixed maturity securities

$

418,988

 

$

228,278

Gross gains from dispositions

 

20,122

 

 

14,864

Gross losses from dispositions

 

(17,324)

 

 

(5,690)

 

 

 

 

 

 

Proceeds from sales of equity securities

$

90,101

 

$

281,313

Gross gains from dispositions

 

3,508

 

 

12,304

Gross losses from dispositions

 

(15,294)

 

 

(6,066)

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Proceeds from sales of fixed maturity securities
$
405
$
283
$
1,177
$
883
Gross gains from dispositions
5
17
33
52
Gross losses from dispositions
(58)
(11)
(98)
(26)
Proceeds from sales of equity securities
$
592
$
104
$
1,030
$
579
Gross gains from dispositions
59
3
67
21
Gross losses from dispositions
(3)
(3)
(53)
(11)
14
4.
RESERVE FOR LOSSES, LAE AND FUTURE
POLICY BENEFIT RESERVE

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

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

Gross reserves beginning of period

$

19,009,486

 

$

16,322,143

Less reinsurance recoverables on unpaid losses

 

(1,946,365)

 

 

(1,843,691)

Net reserves beginning of period

 

17,063,121

 

 

14,478,452

 

 

 

 

 

 

Incurred related to:

 

 

 

 

 

Current year

 

1,790,798

 

 

1,713,253

Prior years

 

(935)

 

 

(1,834)

Total incurred losses and LAE

 

1,789,863

 

 

1,711,419

 

 

 

 

 

 

Paid related to:

 

 

 

 

 

Current year

 

307,661

 

 

215,302

Prior years

 

918,834

 

 

837,035

Total paid losses and LAE

 

1,226,495

 

 

1,052,337

 

 

 

 

 

 

Foreign exchange/translation adjustment

 

(121,934)

 

 

(5,841)

 

 

 

 

 

 

Net reserves end of period

 

17,504,555

 

 

15,131,694

Plus reinsurance recoverables on unpaid losses

 

1,991,082

 

 

1,882,112

Gross reserves end of period

$

19,495,637

 

$

17,013,806

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

Nine Months Ended
September 30,
(Dollars in millions)
2022
2021
Gross reserves beginning of period
$
19,009
$
16,322
Less reinsurance recoverables on unpaid losses
(1,946)
(1,844)
Net reserves beginning of period
17,063
14,478
Incurred related to:
Current year
6,291
5,578
Prior years
(2)
(6)
Total incurred losses were $1.8 billion and $1.7 LAE
6,289
5,572
Paid related to:
Current year
1,794
1,376
Prior years
1,841
1,803
Total paid losses and LAE
3,635
3,179
Foreign exchange/translation adjustment
(605)
(41)
Net reserves end of period
19,112
16,831
Plus reinsurance recoverables on unpaid losses
2,110
2,033
Gross reserves end of period
$
21,222
$
18,864
(Some amounts may not reconcile due
to rounding.)
Current
year
incurred
losses
were
$
6.3
billion
and $
5.6
billion
for
the three nine
months
ended March 31, September
30,
2022
and
2021,
respectively.
Gross
and
net
reserves
increased
for
the three
nine
months
ended March 31,
September
30,
2022,
reflecting an
increase in
underlying exposure
due to
earned premium
growth, partially offset by a reductionyear
over year,
the impact of $155.0
$
45
million of
incurred losses
related to
the Ukraine/Russia
war and
an increase
of $
30
million in
2022 current
year
catastrophe losses.

losses
compared to 2021.
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
incurred
underwriting
losses
related
to
the
Ukraine/Russia
war
for
the
nine
months
ended September 30, 2022.
5.
FAIR VALUE

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

12

lowest
level

input
that
is
significant
to
the
measurement,
with
Level
1
being
the
highest
priority
and
Level
3

lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.

15
The levels in the hierarchy
are defined as follows:

Level 1:
Inputs
to
the valuation
methodology
are
observable
inputs that
reflect unadjusted
quoted
prices for
identical assets or liabilities in an active market;

Level 2:
Inputs
to
the
valuation
methodology
include
quoted
prices
for
similar
assets
and
liabilities
in
active
markets,
and
inputs
that
are
observable
for
the
asset
or
liability,
either
directly
or
indirectly,
for
substantially the full term of the financial instrument;

Level 3:
Inputs to the valuation methodology are
unobservable and significant to the fair
value measurement.

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

The investment
asset managers
do not
make any
changes to
prices received
from either
the pricing
services or
the
investment
brokers.
In
addition,
the
investment
asset
managers
have
procedures
in
place
to
review
the
reasonableness
of
the
prices
from
the
service
providers
and
may
request
verification
of
the
prices.
The
Company
also
continually
performs
quantitative
and
qualitative
analysis
of prices,
including
but
not
limited
to
initial
and
ongoing
review
of
pricing
methodologies,
review
of
prices
obtained
from
pricing
services
and
third
party
investment
asset
managers,
review
of
pricing
statistics
and
trends,
and
comparison
of
prices
for
certain
securities
with
a
secondary
price
source
for
reasonableness.
No
material
variances
were
noted
during
these
price validation
procedures.
In limited
situations,
where financial
markets
are inactive
or illiquid,
the Company
may use
its own
assumptions
about future
cash flows
and risk-adjusted
discount
rates
to determine
fair value.
At March 31,September
30, 2022, $2.1 $
1.6
billion of fixed
maturities market value were
fair valued
using unobservable inputs.
The majority
of
these
fixed
maturities
were
valued
by
investment
managers’
valuation
committees
and
many
of
these
fair
values were
substantiated
by valuations
from independent
third parties.
The Company
has procedures
in place
to
evaluate
these
independent
third
party
valuations.
At
December
31,
2021,
$
2.1
billion
of
fixed
maturities
were fair valued using unobservable
inputs.
The majority of these fixed maturities were valued by investment managers’ valuation committees
Company
internally
manages
a
public
equity
portfolio
which
had
a
fair
value
at
September
30,
2022
and many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to evaluate these independent third party valuations. At December 31, 2021, $2.1 billion of fixed maturities, market value were fair valued using unobservable inputs.

The Company internally manages a public equity portfolio which had a fair value at March 31, 2022 and

December 31, 2021 of $1.4 $
1.2
billion and $1.3 $
1.3
billion, respectively.
During the fourth quarter of 2021,
the Company
began
to
internally
manage
a
portfolio
of
collateralized
loan
obligations
included
in
asset-backed
securities,
available for sale,
which had a fair value
of $2.1 $
2.4
billion and $2.0 $
2.0
billion at March 31,September
30, 2022 and December
31,
2021,
respectively.
All
prices
for
these
securities
were
obtained
from
publicly
published
sources
or
nationally
recognized pricing vendors.

Equity
securities
denominated
in
U.S.
currency
with
quoted
prices
in
active
markets
for
identical
assets
are
categorized
as
Level
1
since
the
quoted
prices
are
directly
observable.
Equity
securities
traded
on
foreign
exchanges are
categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as
Level 2 due
to the added input
of a foreign
exchange conversion
rate to determine
fair or market value.
The Company uses foreign currency exchange
rates published by nationally
recognized sources.

Fixed maturity
securities listed in
the tables have
been categorized
as Level 2, since
a particular security may
not have traded but the pricing services are able to use valuation models with observable market inputs such as

13

have
traded

but
the
pricing
services
are
able
to
use
valuation
models
with
observable
market
inputs
such
as

interest rate yield

curves and prices for similar fixed
maturity securities in terms of issuer,
maturity and seniority.
For
foreign
government
securities
and
foreign
corporate
securities,
the
fair
values
provided
by
the
third
party
pricing services
in local
currencies, and
where applicable,
are converted
to U.S.
dollars using
currency exchange
rates from nationally recognized
sources.
16
In
addition
to
the
valuations
from
investment
managers,
some
of
the
fixed
maturities
with
fair
values
categorized
as
Level
3 result
when
prices
are
not
available
from
the
nationally
recognized
pricing
services
and
are
derived
using
unobservable
inputs.
The
Company
will
value
the
securities
with
unobservable
inputs
using
comparable
market
information
or
receive
fair
values
from
investment
managers.
The
investment
managers
may obtain
non-binding price
quotes for
the fair values securities
from brokers.
The single
broker
quotes are
provided by
market
makers
or
broker-dealers
who
are
recognized
as
market
participants
in
the
markets
in
which
they
are
providing the quotes.
The prices received from
brokers are
reviewed for
reasonableness by the
third party pricing services in local currencies, asset
managers
and where applicable,
the
Company.
If
the
broker
quotes
are
for
foreign
denominated
securities,
the
quotes
are
converted to U.S. dollars
using currency exchange rates
from nationally recognized
sources.

In addition to

The composition
and
valuation
inputs
for
the valuations from investment managers, some
presented
fixed
maturities
categories
Level
1 and
Level
2
are
as
follows:
•
U.S.
Treasury
securities
and
obligations
of
U.S.
government
agencies
and
corporations
are
primarily
comprised
of the fixed maturities with fair values categorized as Level 3 result when prices are not available from the nationally recognized pricing services and are derived using unobservable inputs. The Company will value the securities with unobservable inputs using comparable market information or receive fair values from investment managers. The investment managers may obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset managers U.S.
Treasury
bonds
and the Company. If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

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

•U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the

fair
value
is based
on observable
market
inputs
such as
quoted
prices, reported trades, quoted
prices for similar issuances or benchmark yields;

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

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

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

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

•Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and

source.
17
The following
tables present
the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

14

The following tables present the fair value measurement

levels for
all assets
and liabilities,
which the
Company
has recorded at fair value (fair and market value)
as of the periods indicated:

 

 

 

 

 

Fair Value Measurement Using:

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

 

March 31, 2022

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, market value

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

 

$

1,355,806

 

$

-

 

$

1,355,806

 

$

-

Obligations of U.S. States and political subdivisions

 

 

559,188

 

 

-

 

 

559,188

 

 

-

Corporate securities

 

 

7,291,050

 

 

-

 

 

6,576,394

 

 

714,656

Asset-backed securities

 

 

3,997,891

 

 

-

 

 

2,609,200

 

 

1,388,691

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

991,871

 

 

-

 

 

985,981

 

 

5,890

Agency residential

 

 

2,283,497

 

 

-

 

 

2,283,497

 

 

-

Non-agency residential

 

 

5,645

 

 

-

 

 

5,645

 

 

-

Foreign government securities

 

 

1,362,382

 

 

-

 

 

1,362,382

 

 

-

Foreign corporate securities

 

 

4,151,085

 

 

-

 

 

4,135,159

 

 

15,926

Total fixed maturities, market value

 

 

21,998,415

 

 

-

 

 

19,873,252

 

 

2,125,163

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities, fair value

 

 

1,780,526

 

 

1,698,324

 

 

82,202

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement Using:

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

(Dollars in thousands)

 

December 31, 2021

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities, market value

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

 

$

1,420,618

 

$

-

 

$

1,420,618

 

$

-

Obligations of U.S. States and political subdivisions

 

 

586,621

 

 

-

 

 

586,621

 

 

-

Corporate securities

 

 

7,556,898

 

 

-

 

 

6,756,324

 

 

800,574

Asset-backed securities

 

 

3,581,729

 

 

-

 

 

2,330,448

 

 

1,251,281

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

1,064,366

 

 

-

 

 

1,064,366

 

 

-

Agency residential

 

 

2,375,332

 

 

-

 

 

2,375,332

 

 

-

Non-agency residential

 

 

6,536

 

 

-

 

 

6,536

 

 

-

Foreign government securities

 

 

1,437,512

 

 

-

 

 

1,437,512

 

 

-

Foreign corporate securities

 

 

4,278,660

 

 

-

 

 

4,262,645

 

 

16,015

Total fixed maturities, market value

 

 

22,308,272

 

 

-

 

 

20,240,402

 

 

2,067,870

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities, fair value

 

 

1,825,908

 

 

1,742,367

 

 

83,541

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement Using:

In addition, $299.6 million

Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
September 30, 2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and $286.6 millionobligations of investments within other invested assets on the consolidated balance sheets as
U.S. government agencies and corporations
$
1,308
$
-
$
1,308
$
-
Obligations of March 31, 2022U.S. States and political subdivisions
481
-
481
-
Corporate securities
6,397
-
5,678
719
Asset-backed securities
3,772
-
2,880
893
Mortgage-backed securities
Commercial
908
-
908
-
Agency residential
2,723
-
2,723
-
Non-agency residential
5
-
5
-
Foreign government securities
1,335
-
1,335
-
Foreign corporate securities
4,080
-
4,064
16
Total fixed maturities, available for sale
21,009
-
19,381
1,628
Equity securities, fair value
1,301
1,212
89
-
(Some amounts may not reconcile due to rounding.)
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
1,421
$
-
$
1,421
$
-
Obligations of U.S. States and political subdivisions
587
-
587
-
Corporate securities
7,557
-
6,756
801
Asset-backed securities
3,582
-
2,330
1,251
Mortgage-backed securities
Commercial
1,064
-
1,064
-
Agency residential
2,375
-
2,375
-
Non-agency residential
7
-
7
-
Foreign government securities
1,438
-
1,438
-
Foreign corporate securities
4,279
-
4,262
16
Total fixed maturities, available for sale
22,308
-
20,240
2,068
Equity securities, fair value
1,826
1,742
84
-
(Some amounts may not reconcile due to rounding.)
In
addition,
$
309
million
and
$
287
million
of
investments
within
other
invested
assets
on
the
consolidated
balance sheets
as of
September 30,
2022 and
December 31,
2021, respectively,
are not
included within
the fair
value hierarchy tables
as the assets are measured at NAV
as a practical expedient to determine fair
value.

15

18
The following
table presents
the activity
under Level
3, fair
value measurements
using significant
unobservable
inputs for fixed maturities available
for sale, for the periods indicated:

 

 

 

Total Fixed Maturities, Market Value

 

 

Three Months Ended March 31, 2022

 

Three Months Ended March 31, 2021

 

 

Corporate

 

Asset-Backed

 

 

 

 

Foreign

 

 

 

 

Corporate

 

Asset-Backed

 

Foreign

 

 

 

(Dollars in thousands)

 

Securities

 

Securities

 

CMBS

 

Corporate

 

Total

 

Securities

 

Securities

 

Corporate

 

Total

Beginning balance fixed maturities at market value

 

$

800,574

 

$

1,251,281

 

$

-

 

$

16,015

 

$

2,067,870

 

$

701,492

 

$

623,033

 

$

5,699

 

$

1,330,224

Total gains or (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

15,943

 

 

102

 

 

-

 

 

13

 

 

16,058

 

 

(1,789)

 

 

(4,168)

 

 

3

 

 

(5,954)

Included in other comprehensive income (loss)

 

 

(4,167)

 

 

(28,788)

 

 

(23)

 

 

(61)

 

 

(33,039)

 

 

2,836

 

 

(3,135)

 

 

49

 

 

(250)

Purchases, issuances and settlements

 

 

(97,694)

 

 

166,096

 

 

5,913

 

 

(41)

 

 

74,274

 

 

2,003

 

 

169,630

 

 

(153)

 

 

171,480

Transfers in and/or (out) of Level 3

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Ending balance

 

$

714,656

 

$

1,388,691

 

$

5,890

 

$

15,926

 

$

2,125,163

 

$

704,542

 

$

785,360

 

$

5,599

 

$

1,495,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The amount of total gains or losses for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

included in earnings (or changes in net assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to the change in unrealized gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or losses relating to assets still held

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at the reporting date

 

$

318

 

$

-

 

$

-

 

$

-

 

$

318

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

Total Fixed Maturities,
Available for Sale
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
Securities
CMBS
Corporate
Total
Securities
Securities
CMBS
Corporate
Total
Beginning balance fixed maturities
$
863
$
1,255
$
6
$
40
$
2,164
$
801
$
1,251
$
-
$
16
$
2,068
Total gains or (losses) (realized/unrealized)
Included in earnings
(2)
-
-
-
(2)
9
-
-
-
9
Included in other comprehensive income (loss)
(6)
65
-
-
59
(13)
(11)
-
(4)
(28)
Purchases, issuances and settlements
27
159
-
-
186
(43)
387
6
8
358
Transfers in/(out) of Level
3 and reclassification of
securities in/(out) of investment categories
(163)
(587)
(6)
(24)
(779)
(35)
(735)
(6)
(4)
(779)
Ending balance
$
719
$
893
$
-
$
16
$
1628
$
719
$
893
$
-
$
16
$
1628
The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains
or losses relating to assets still held
at the reporting date
$
(3)
$
-
$
-
$
-
$
(3)
$
(8)
$
8
$
-
$
-
$
-
(Some amounts may not reconcile due to rounding.)
Total Fixed Maturities,
Available for Sale
Three Months Ended September 30, 2021
Nine Months Ended September 30, 2021
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
Securities
Corporate
Total
Securities
Securities
Corporate
Total
Beginning balance fixed maturities
$
706
$
815
$
5
$
1,526
$
701
$
623
$
6
$
1,330
Total gains or (losses) (realized/unrealized)
Included in earnings
3
(3)
-
-
(12)
(7)
-
(19)
Included in other comprehensive income (loss)
(1)
-
-
(2)
6
4
-
10
Purchases, issuances and settlements
87
192
-
279
99
384
(1)
482
Transfers in/(out) of Level
3 and reclassification of
securities in/(out) of investment categories
-
-
-
-
-
-
-
-
Ending balance
$
794
$
1,004
$
5
$
1,803
$
794
$
1,004
$
5
$
1,803
The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains
or losses relating to assets still held
at the reporting date
$
1
$
(3)
$
-
$
(2)
$
(16)
$
(8)
$
-
$
(24)
(Some amounts may not reconcile due to rounding.)
The $
779
million
shown
as transfers
in/(out)
of Level
3 and
reclassification
of securities
in/(out)
of investment
categories
for
the
three
and
nine
months
ended
September
30,
2022
relate
mainly
to
previously
designated
Level
3
securities
that
the
Company
has
reclassified
from
“fixed
maturities
–
available
for
sale”
to
“fixed
maturities
–
held
to
maturity”
during
the
third
quarter
of
2022.
As
“fixed
maturities
–
held
to
maturity"
are
carried at
amortized
cost,
net
of credit
allowances
rather
than
at
fair
value
as “fixed
maturities
– available
for
sale”,
these securities are
no longer included
within the fair
value hierarchy
table or in
the rollforward
of Level 3
securities.
The
fair
values
of
these
securities
are
determined
in
a
similar
manner
as
the
Company’s
fixed
maturity securities available for
sale as described above. The fair values of these
securities incorporate the use of
significant
unobservable
inputs
and
therefore
are
classified
as
Level
3
within
the
fair
value
hierarchy
as
of
September 30, 2022.
19
6.
EARNINGS PER COMMON SHARE

Basic
earnings
per
share
are
calculated
by
dividing
net
income
by
the
weighted
average
number
of
common
shares outstanding.
Diluted earnings per
share reflect
the potential
dilution that
would occur if
options granted
under various
share-based compensation
plans were
exercised
resulting in
the issuance
of common
shares that
would participate in the earnings of the entity.

16

Net income

(loss) per
common share
has been
computed as
per below,
based upon
weighted average
common
basic and dilutive shares outstanding.

 

 

Three Months Ended

 

 

March 31,

(Dollars in thousands, except per share amounts)

2022

 

2021

Net income (loss) per share:

 

 

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

 

 

Net income (loss)

$

297,751

 

 

$

341,862

 

 

Less: dividends declared-common shares and unvested common shares

 

(61,097)

 

 

 

(62,229)

 

 

Undistributed earnings

 

236,653

 

 

 

279,633

 

 

Percentage allocated to common shareholders (1)

 

98.7

%

 

 

98.7

%

 

 

 

233,504

 

 

 

276,031

 

 

Add: dividends declared-common shareholders

 

60,282

 

 

 

61,415

 

 

Numerator for basic and diluted earnings per common share

$

293,785

 

 

$

337,446

 

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Denominator for basic earnings per weighted-average common shares

 

38,823

 

 

 

39,543

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Options

 

14

 

 

 

54

 

 

Denominator for diluted earnings per adjusted weighted-average common shares

 

38,837

 

 

 

39,597

 

 

 

 

 

 

 

 

 

 

 

Per common share net income (loss)

 

 

 

 

 

 

 

 

Basic

$

7.57

 

 

$

8.53

 

 

Diluted

$

7.56

 

 

$

8.52

 

 

 

 

 

 

 

 

 

 

(1)

Basic weighted-average common shares outstanding

 

38,823

 

 

 

39,543

 

 

Basic weighted-average common shares outstanding and unvested common shares expected to vest

 

39,347

 

 

 

40,059

 

 

Percentage allocated to common shareholders

 

98.7

%

 

 

98.7

%

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

There were 0 anti-diluted options

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions, except per share amounts)
2022
2021
2022
2021
Net income (loss) per share:
Numerator
Net income (loss)
$
(319)
$
(73)
$
101
$
948
Less:
dividends declared-common shares and unvested common shares
(65)
(61)
(191)
(186)
Undistributed earnings
(384)
(135)
(90)
763
Percentage allocated to common shareholders
(1)
100.0
%
100.0
%
98.7
%
98.7
%
(384)
(135)
(88)
752
Add:
dividends declared-common shareholders
65
61
188
183
Numerator for basic and diluted earnings per common share
$
(319)
$
(73)
$
100
$
936
Denominator
Denominator for basic earnings per weighted-average common shares
38.8
39.2
38.8
39.4
Effect of dilutive securities:
Options
-
-
-
-
Denominator for diluted earnings per adjusted weighted-average common shares
38.8
39.2
38.8
39.5
Per common share net income (loss)
Basic
$
(8.22)
$
(1.88)
$
2.57
$
23.74
Diluted
$
(8.22)
$
(1.88)
$
2.57
$
23.72
(1)
Basic weighted-average common shares outstanding
38.8
39.2
38.8
39.4
Basic weighted-average common shares outstanding and unvested common shares
expected to vest
38.8
39.2
39.4
39.9
Percentage allocated to common shareholders
100.0
%
100.0
%
98.7
%
98.7
%
(Some amounts may not reconcile due to rounding.)
There
were
no
material
anti-diluted
options
outstanding
for
the
three
and
nine
months
ended March 31,
September
30,
2022 and
2021.

All outstanding options

During the
three
months
ended September
30, 2022
and 2021,
the Company
did not
exclude
the
dividends
declared
to
unvested
common
shares
as
doing
so
would
have
an
anti-dilutive
effect
on
the
numerator for basic and diluted
earnings per common share.
Options granted under share-based
compensation plans expire on have all expired
as of
September 19, 2022.

2022
.

7.
COMMITMENTS AND CONTINGENCIES

In
the
ordinary
course
of
business,
the
Company
is
involved
in
lawsuits,
arbitrations
and
other
formal
and
informal
dispute
resolution
procedures,
the
outcomes
of
which
will
determine
the
Company’s
rights
and
obligations
under insurance
and reinsurance
agreements.
In the ordinary course of business, some
disputes,
the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements. In some disputes, the Company
seeks
to
enforce
its
rights under an agreement or to
collect funds owing to it.
In other matters, the Company
is resisting attempts by
others
to
collect
funds
or
enforce
alleged
rights.
These
disputes
arise
from
time
to
time
and
are
ultimately
resolved through
both informal
and formal
means, including
negotiated resolution,
arbitration and
litigation.
In
all such matters,
the Company believes
that its positions
are legally and
commercially reasonable.
The Company
20
considers
the statuses
of these
proceedings
when determining
its reserves
for unpaid
loss and
loss adjustment expenses.

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

The 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. To the best of our knowledge at this time, the Company has limited financial exposure related to the Russian invasion of the

17

Ukraine. However, given the ongoing nature of the war and the high degree of uncertainty around both exposures and coverage, a reasonable estimation of potential loss is not credible at this time.

8.

8. OTHER COMPREHENSIVE INCOME (LOSS)

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

 

Three Months Ended March 31, 2022

 

Three Months Ended March 31, 2021

(Dollars in thousands)

Before Tax

 

Tax Effect

 

Net of Tax

 

Before Tax

 

Tax Effect

 

Net of Tax

Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related

$

(932,309)

 

$

117,132

 

$

(815,177)

 

$

(329,166)

 

$

40,551

 

$

(288,615)

Reclassification of net realized losses (gains) included in net income (loss)

 

4,902

 

 

(724)

 

 

4,178

 

 

(3,542)

 

 

(124)

 

 

(3,666)

Foreign currency translation adjustments

 

(34,603)

 

 

501

 

 

(34,102)

 

 

(8,988)

 

 

(594)

 

 

(9,582)

Reclassification of benefit plan liability amortization included in net income (loss)

 

960

 

 

(202)

 

 

758

 

 

2,586

 

 

(543)

 

 

2,043

Total other comprehensive income (loss)

$

(961,050)

 

$

116,707

 

$

(844,343)

 

$

(339,110)

 

$

39,290

 

$

(299,820)

Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Unrealized appreciation (depreciation)
("URA(D)") on securities - non-
credit related
$
(776)
$
64
$
(712)
$
(2,557)
$
297
$
(2,260)
Reclassification of net realized
losses (gains) included in net income
(loss)
51
(10)
41
73
(12)
61
Foreign currency translation adjustments
(109)
8
(101)
(174)
11
(163)
Reclassification of benefit plan liability amortization
included in net
income (loss)
2
(1)
1
3
(1)
2
Total other comprehensive
income (loss)
$
(832)
$
61
$
(771)
$
(2,655)
$
295
$
(2,360)
Three Months Ended September 30, 2021
Nine Months Ended September 30, 2021
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
Unrealized appreciation (depreciation)
("URA(D)") on securities - non-
credit related
$
(108)
$
8
$
(100)
$
(343)
$
39
$
(304)
Reclassification of net realized
losses (gains) included in net income
(loss)
(1)
(1)
(1)
(1)
(2)
(3)
Foreign currency translation adjustments
(59)
5
(54)
(30)
1
(29)
Reclassification of benefit plan liability amortization
included in net
income (loss)
2
-
2
7
(2)
6
Total other comprehensive
income (loss)
$
(166)
$
12
$
(153)
$
(367)
$
36
$
(331)
The following table presents details
of the amounts reclassified from AOCI for
the periods indicated:

 

 

Three Months Ended

 

 

 

 

March 31,

 

Affected line item within the statements of

AOCI component

 

2022

 

2021

 

operations and comprehensive income (loss)

(Dollars in thousands)

 

 

 

 

 

 

 

 

URA(D) on securities

 

$

4,902

 

$

(3,542)

 

Other net realized capital gains (losses)

 

 

 

(724)

 

 

(124)

 

Income tax expense (benefit)

 

 

$

4,178

 

$

(3,666)

 

Net income (loss)

 

 

 

 

 

 

 

 

 

Benefit plan net gain (loss)

 

$

960

 

$

2,586

 

Other underwriting expenses

 

 

 

(202)

 

 

(543)

 

Income tax expense (benefit)

 

 

$

758

 

$

2,043

 

Net income (loss)

The following table presents

Three Months Ended
Nine Months Ended
September 30,
September 30,
Affected line item within the componentsstatements of accumulated other
AOCI component
2022
2021
2022
2021
operations and comprehensive income (loss),
(Dollars in millions)
URA(D) on securities
$
51
$
(1)
$
73
$
(1)
Other net realized capital gains (losses)
(10)
(1)
(12)
(2)
Income tax expense (benefit)
$
41
$
(1)
$
61
$
(3)
Net income (loss)
Benefit plan net gain (loss)
$
2
$
2
$
3
$
7
Other underwriting expenses
(1)
-
(1)
(2)
Income tax expense (benefit)
$
1
$
2
$
2
$
6
Net income (loss)
21
The following
table presents
the components
of accumulated
other comprehensive
income (loss),
net of
tax, in
the consolidated balance sheets for the periods
indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

Beginning balance of URA (D) on securities

$

239,397

 

$

724,159

Current period change in URA (D) of investments - non-credit related

 

(810,999)

 

 

(292,281)

Ending balance of URA (D) on securities

 

(571,602)

 

 

431,878

 

 

 

 

 

 

Beginning balance of foreign currency translation adjustments

 

(177,481)

 

 

(115,390)

Current period change in foreign currency translation adjustments

 

(34,102)

 

 

(9,582)

Ending balance of foreign currency translation adjustments

 

(211,583)

 

 

(124,972)

 

 

 

 

 

 

Beginning balance of benefit plan net gain (loss)

 

(50,392)

 

 

(73,870)

Current period change in benefit plan net gain (loss)

 

758

 

 

2,043

Ending balance of benefit plan net gain (loss)

 

(49,634)

 

 

(71,827)

 

 

 

 

 

 

Ending balance of accumulated other comprehensive income (loss)

$

(832,820)

 

$

235,079

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

18

Three Months Ended

Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Beginning balance of URA (D) on securities
$
(1,288)
$
518
$
239
$
724
Current period change in URA (D) of investments - non-credit related
(671)
(101)
(2,199)
(308)
Ending balance of URA (D) on securities
(1,959)
416
(1,959)
416
Beginning balance of foreign currency translation adjustments
(240)
(91)
(177)
(115)
Current period change in foreign currency translation adjustments
(101)
(54)
(163)
(29)
Ending balance of foreign currency translation adjustments
(341)
(144)
(341)
(144)
Beginning balance of benefit plan net gain (loss)
(49)
(70)
(50)
(74)
Current period change in benefit plan net gain (loss)
1
2
2
6
Ending balance of benefit plan net gain (loss)
(48)
(68)
(48)
(68)
Ending balance of accumulated other comprehensive income (loss)
$
(2,348)
$
204
$
(2,348)
$
204
(Some amounts may not reconcile due to rounding.)
9.
CREDIT FACILITIES

The
Company
has
multiple
active
letter
of
credit
facilities
for
a
total
commitment
of
up
to $1.2
$
1.2
billion
as
of March 31,
September
30,
2022.
The
Company
also
has
additional
uncommitted
letter
of
credit
facilities
of
up
to $340.0
$
340
million which may
be accessible via written
request and corresponding
authorization from
the applicable lender.
There is no guarantee the uncommitted
capacity will be available to us on a
future date.

The terms and outstanding amounts for
each facility are discussed below:

Group Credit Facility

Effective May 26, 2016, Group, Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”) and Everest International Reinsurance, Ltd. (“Everest International”), both direct subsidiaries of Group, entered into a five year, $800.0 million senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22, 2012, four year, $800.0 million senior credit facility. Both the May 26, 2016 and June 22, 2012 senior credit facilities, which have similar terms, are referred to as the “2016 Group Credit Facility”. Wells Fargo Corporation (“Wells Fargo Bank”) is the administrative agent for the 2016 Group Credit Facility.

Effective May 26, 2021, the term of the 2016 Group Credit Facility expired. The Company elected not to renew this facility to allow for the replacement by other collateralized letter of credit facilities such as those described below. As a result of the non-renewal in May 2021, letter of credit commitment/availability in the 2016 Group Credit Facility as of March 31, 2022 is limited only to the remaining $13.3 million of letters of credit currently in force and scheduled to expire in 2022. No additional letters of credit will be issued under the 2016 Group Credit Facility, and the facility will be dormant once the remaining letters of credit have expired. As of March 31, 2022, the Company was in compliance with all Group Credit Facility covenants.

The following table summarizes the outstanding letters of credit and/or borrowings for the periods indicated:

(Dollars in thousands)

 

 

 

 

At March 31, 2022

 

 

At December 31, 2021

Bank

 

 

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Wells Fargo Bank Group Credit Facility

 

 

 

$

13,319

 

$

13,319

 

12/30/2022

 

$

39,198

 

$

39,198

 

12/30/2022

Total Wells Fargo Bank Group Credit Facility

 

 

 

$

13,319

 

$

13,319

 

 

 

$

39,198

 

$

39,198

 

 

Bermuda Re Wells Fargo
Letter of Credit Facility

Effective February
23, 2021, Bermuda Re entered into
a letter of credit issuance facility
with Wells Fargo
referred
to as
the “2021
Bermuda Re
Wells
Fargo
Letter of
Credit Facility.”
The Bermuda
Re Wells
Fargo
Letter of
Credit
Facility
originally
provided
for
the
issuance
of
up
to $50.0
$
50
million
of
secured
letters
of
credit.
Effective
May
5,
2021, the agreement was amended to provide
for the issuance of up to $500.0 $
500
million of secured letters of credit.

The following table summarizes the
outstanding letters of credit
for the periods indicated:

(Dollars in thousands)

 

At March 31, 2022

 

At December 31, 2021

Bank

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Wells Fargo Bank Bilateral LOC Agreement

 

$

500,000

 

$

422,521

 

12/30/2022

 

$

500,000

 

$

351,497

 

12/30/2022

Total Wells Fargo Bank Bilateral LOC Agreement

 

$

500,000

 

$

422,521

 

 

 

$

500,000

 

$

351,497

 

 

(Dollars in millions)
At September 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Wells Fargo Bank Bilateral LOC Agreement
$
500
$
387
12/30/2022
$
500
$
351
12/30/2022
47
12/29/2023
-
Total Wells Fargo
Bank Bilateral LOC Agreement
$
500
$
435
$
500
$
351
(Some amounts may not reconcile due to rounding.)
Bermuda Re Citibank Letter of Credit Facility

Effective
August
9,
2021,
Bermuda
Re
entered
into
a
letter
of
credit
issuance
facility
with
Citibank
N.A.
which
superseded
the
previous
letter
of
credit
issuance
facility
with
Citibank
N.A.
that
was
effective
December
31,
2020.
Both
of
these
agreements
are
referred
to
as
the
“Bermuda
Re
Citibank
Letter
of
Credit
Facility”.
The
current Bermuda
Re entered into a new letterCitibank
Letter of credit
Credit Facility
provides
for the
committed issuance
of up
to $
230
million
of
secured
letters
of
credit.
In
addition,
the
facility with
provided
for
the
uncommitted
issuance
of
up
the
$
140
million,
which
may
be
accessible
via
written
request
by
the
Company
and
corresponding
authorization
from
Citibank N.A. which superseded the previous letter of credit issuance facility with Citibank N.A. that was effective December 31, 2020. Both of these agreements are referred to as the “Bermuda Re Citibank Letter of Credit Facility”. The current Bermuda Re Citibank Letter of Credit Facility provides for the committed issuance of up to $230.0 million

19

of secured letters of credit. In addition, the facility provided for the uncommitted issuance of up the $140.0 million, which may be accessible via written request by the Company and corresponding authorization from Citibank N.A.

22
The following table summarizes the
outstanding letters of credit
for the periods indicated:

(Dollars in thousands)

 

At March 31, 2022

 

At December 31, 2021

Bank

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Bermuda Re Citibank LOC Facility- Committed

 

$

230,000

 

$

425

 

12/16/22

 

$

230,000

 

$

4,425

 

02/28/22

 

 

 

 

 

 

218,377

 

12/31/22

 

 

 

 

 

925

 

03/01/22

 

 

 

 

 

 

473

 

01/21/23

 

 

 

 

 

1,264

 

11/24/22

 

 

 

 

 

 

4,425

 

02/28/23

 

 

 

 

 

423

 

12/16/22

 

 

 

 

 

 

1,088

 

03/01/23

 

 

 

 

 

146

 

12/20/22

 

 

 

 

 

 

990

 

08/15/23

 

 

 

 

 

216,622

 

12/31/22

 

 

 

 

 

 

1,240

 

09/23/23

 

 

 

 

 

473

 

01/21/23

 

 

 

 

 

 

147

 

12/20/23

 

 

 

 

 

985

 

08/15/23

 

 

 

 

 

 

–

 

 

 

 

 

 

 

1,234

 

09/23/23

Bermuda Re Citibank LOC Facility - Uncommitted

 

 

140,000

 

 

84,203

 

12/31/22

 

 

140,000

 

 

84,203

 

12/31/22

 

 

 

 

 

 

22,233

 

03/30/26

 

 

 

 

 

22,731

 

12/30/25

Total Citibank Bilateral Agreement

 

$

370,000

 

$

333,600

 

 

 

$

370,000

 

$

333,429

 

 

(Dollars in millions)
At September 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Bermuda Re Citibank LOC Facility-
Committed
$
230
$
201
12/31/2022
$
230
$
4
2/28/2022
1
1/21/2023
1
3/1/2022
4
2/28/2023
1
11/24/2022
1
3/1/2023
–
12/16/2022
3
9/23/2023
217
12/31/2022
–
12/20/2023
1
8/15/2023
6
12/31/2023
1
9/23/2023
Bermuda Re Citibank LOC Facility - Uncommitted
140
84
12/31/2022
140
84
12/31/2022
20
9/30/2026
23
12/30/2025
Total Citibank Bilateral Agreement
$
370
$
322
$
370
$
333
(Some amounts may not reconcile due to rounding.)
Bermuda Re Bayerische Landesbank
Credit Facility

Effective
August
27,
2021
Bermuda
Re
entered
into
a
letter
of
credit
issuance
facility
with
Bayerische
Landesbank,
an agreement
referred
to as
the “Bermuda
Re Bayerische
Landesbank
Bilateral
LOC
Facility”.
The
Bermuda
Re
Bayerische
Landesbank
Bilateral
LOC
Facility
provides
for
the
committed
issuance
of
up
to $200.0
$
200
million of secured letters of credit.

The following table summarizes the
outstanding letters of credit
for the periods indicated:

(Dollars in thousands)

 

At March 31, 2022

 

At December 31, 2021

Bank

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Bayerische Landesbank Bilateral LOC Agreement

 

$

200,000

 

$

156,197

 

12/31/2022

 

$

200,000

 

$

154,691

 

12/31/2022

Total Bayerische Landesbank Bilateral LOC Agreement

 

$

200,000

 

$

156,197

 

 

 

$

200,000

 

$

154,691

 

 

(Dollars in millions)
At September 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Bayerische Landesbank Bilateral LOC Agreement
$
200
$
153
12/31/2022
$
200
$
155
12/31/2022
Total Bayerische Landesbank Bilateral LOC Agreement
$
200
$
153
$
200
$
155
Bermuda Re Lloyd’s
Bank Credit Facility.

Effective October
8, 2021 Bermuda Re entered
into a letter of credit
issuance facility with Lloyd’s
Bank Corporate
Markets
PLC,
an
agreement
referred
to
as
the “Bermuda
“Bermuda
Re
Lloyd’s
Bank
Credit
Facility”.
The
Bermuda
Re
Lloyd’s
Bank Credit Facility”. The Bermuda Re Lloyd’s Bank Credit
Facility provides
for the
committed issuance
of up to $50.0
$
50
million of secured
letters
of credit,
and subject to credit approval a maximum
total facility amount
of $250.0 $
250
million.

The following table summarizes the
outstanding letters of credit
for the periods indicated:

(Dollars in thousands)

 

At March 31, 2022

 

At December 31, 2021

Bank

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Bermuda Re Lloyd's Bank Credit Facility-Committed

 

$

50,000

 

$

46,008

 

12/31/2022

 

$

50,000

 

$

46,008

 

12/31/2022

Bermuda Re Lloyd's Bank Credit Facility-Uncommitted

 

 

200,000

 

 

84,806

 

12/31/2022

 

 

-

 

 

-

 

 

Total Bermuda Re Lloyd's Bank Credit Facility

 

$

250,000

 

$

130,814

 

 

 

$

50,000

 

$

46,008

 

 

(Dollars in millions)
At September 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Bermuda Re Lloyd's Bank Credit Facility-Committed
$
50
$
46
12/31/2022
$
50
$
46
12/31/2022
Bermuda Re Lloyd's Bank Credit Facility-Uncommitted
200
85
12/31/2022
-
-
Total Bermuda Re Lloyd's Bank Credit Facility
$
250
$
131
$
50
$
46
Bermuda Re Barclays Bank Credit
Facility.

Effective
November 3,
2021 Bermuda
Re entered
into a
letter of
credit issuance
facility with
Barclays
Bank PLC,
an agreement
referred
to as
the “Bermuda
Re Barclays
Credit Facility”.
The Bermuda
Re Barclays
Credit Facility
provides for the committed issuance
of up to $200.0 $
200
million of secured letters of credit.

20

23
The following table summarizes the
outstanding letters of credit
for the periods indicated:

(Dollars in thousands)

 

At March 31, 2022

 

At December 31, 2021

Bank

 

Commitment

 

In Use

 

Date of Expiry

 

Commitment

 

In Use

 

Date of Expiry

Bermuda Re Barclays Bilateral Letter of Credit Facility

 

$

200,000

 

$

171,628

 

12/31/2022

 

$

200,000

 

$

186,299

 

12/31/2022

Total Bermuda Re Barclays Bilateral Letter of Credit Facility

 

$

200,000

 

$

171,628

 

 

 

$

200,000

 

$

186,299

 

 

(Dollars in millions)
At September 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Bermuda Re Barclays Bilateral Letter of Credit Facility
$
200
$
172
12/31/2022
$
200
$
186
12/31/2022
Total Bermuda Re Barclays Bilateral
Letter of Credit Facility
$
200
$
172
$
200
$
186
Federal Home Loan Bank Membership

Everest
Reinsurance
Company (“
(“Everest
Re”)
is
a
member
of
the
Federal
Home
Loan
Bank
of
New
York
(“FHLBNY”), which allows
Everest
Re to
borrow up
to 10%
10
% of its
statutory
admitted assets.
As of March 31, September
30,
2022, Everest
Re had
admitted assets
of approximately $20.4
$
22.0
billion which provides
borrowing capacity
of up to
approximately $2.0
$
2.2
billion.
As of March 31,
September 30,
2022, Everest
Re has $519.0
$
519
million of
borrowings
outstanding,
with
maturities
in
November
and
December,
2022,
and
interest
payable
at
interest
rates
between 0.53%
0.53
%
and 0.65%
0.65
%.
Everest
Re
incurred
interest
expense
of $0.7
$
0.8
million
and $0.3
$
0.3
million
for
the
three
months
ended March 31,
September
30,
2022
and
2021,
respectively.
Everest
Re
incurred
interest
expense
of
$
2.3
million
and
$
0.8
million
for
the
nine
months
ended
September
30,
2022
and
2021,
respectively.
The
FHLBNY
membership
agreement requires that 4.5%
4.5
% of borrowed funds be used to acquire additional
membership stock.

10.
COLLATERALIZED
REINSURANCE AND TRUST AGREEMENTS

Certain
subsidiaries
of
Group
have
established
trust
agreements,
which
effectively
use
the
Company’s
investments
as collateral,
as security
for assumed
losses payable
to certain
non-affiliated
ceding companies.
At March 31,
September 30,
2022, the total
amount on deposit
in trust accounts
was $1.8 billion.

$

2.2
billion, which includes
$
107
million
of restricted cash.
The Company
reinsures
some of
its catastrophe
exposures
with the
segregated
accounts
of Mt.
Logan
Re.
Mt.
Logan Re is
a Collateralized
insurer registered
in Bermuda and 100%
100
% of the voting
common shares
are owned by
Group.
Each segregated
account invests
predominantly in
a diversified
set of catastrophe
exposures, diversified
by risk/peril and across different
geographic regions globally.

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

 

 

 

Three Months Ended

 

 

 

March 31,

Mt. Logan Re Segregated Accounts

 

 

2022

 

 

2021

(Dollars in thousands)

 

 

 

 

 

 

Ceded written premiums

 

$

50,239

 

$

99,110

Ceded earned premiums

 

 

50,443

 

 

78,107

Ceded losses and LAE

 

 

40,620

 

 

80,843

 

 

 

 

 

 

 

Assumed written premiums

 

 

793

 

 

2,476

Assumed earned premiums

 

 

793

 

 

2,476

Assumed losses and LAE

 

 

-

 

 

-

Effective April 1, 2018, the Company entered into a retroactive reinsurance transaction with one of the

Three Months Ended
Nine Months Ended
September 30,
September 30,
Mt. Logan Re Segregated Accounts
2022
2021
2022
2021
(Dollars in millions)
Ceded written premiums
$
68
$
115
$
150
$
270
Ceded earned premiums
57
100
149
250
Ceded losses and LAE
99
170
161
282
Assumed written premiums
2
4
3
9
Assumed earned premiums
2
4
3
9
Assumed losses and LAE
-
-
-
-
Effective
April
1,
2018,
the
Company
entered
into
a
retroactive
reinsurance
transaction
with
one
of
the
Mt.
Logan
Re
segregated
accounts
to
retrocede $269.2
$
269
million
of
casualty
reserves
held
by
Bermuda
Re
related
to
accident years
2002
through 2015.
2015
.
As consideration
for entering
the agreement,
the Company
transferred
cash
of $252.0
$
252
million
to
the
Mt.
Logan
Re
segregated
account
with
a
maximum
liability
to
be
retroceded
under
the
agreement of
$
319
million.
The Company
will retain
liability for
any amounts
exceeding
the maximum
liability.
Effective
July 1,
2022, the
Company
has commuted
this reinsurance
agreement
with the
Mt. Logan Re
segregated account. The maximum liability to be retroceded under the agreement will be $319.0 million. The Company will retain liability for any amounts exceeding the maximum liability. As of March 31, 2022 and December 31, 2021, the Company has a reinsurance recoverable of $192.5 million and $206.1 million, respectively. In addition, the Company has a deferred gain liability of $14.4 million and $15.5 million as of March 31, 2022 and December 31, 2021, respectively, reported in other liabilities.

21

account.

24
The
Company
entered
into
various
collateralized
reinsurance
agreements
with
Kilimanjaro
Re
Limited
(“Kilimanjaro”),
a
Bermuda
based
special
purpose
reinsurer,
to
provide
the
Company
with
catastrophe
reinsurance
coverage.
These
agreements
are
multi-year
reinsurance
contracts
which
cover
named
storm
and
earthquake events.
The table below summarizes the various
agreements.

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Class

 

Description

 

Effective Date

 

Expiration Date

 

Limit

 

Coverage Basis

Series 2017-1 Class A-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/13/2017

 

4/13/2022

 

 

50,000

 

Aggregate

Series 2017-1 Class B-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/13/2017

 

4/13/2022

 

 

75,000

 

Aggregate

Series 2017-1 Class C-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/13/2017

 

4/13/2022

 

 

175,000

 

Aggregate

Series 2018-1 Class A-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/30/2018

 

5/6/2022

 

 

62,500

 

Aggregate

Series 2018-1 Class B-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/30/2018

 

5/6/2022

 

 

200,000

 

Aggregate

Series 2018-1 Class A-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/30/2018

 

5/5/2023

 

 

62,500

 

Aggregate

Series 2018-1 Class B-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/30/2018

 

5/5/2023

 

 

200,000

 

Aggregate

Series 2019-1 Class A-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

12/12/2019

 

12/19/2023

 

 

150,000

 

Occurrence

Series 2019-1 Class B-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

12/12/2019

 

12/19/2023

 

 

275,000

 

Aggregate

Series 2019-1 Class A-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

12/12/2019

 

12/19/2024

 

 

150,000

 

Occurrence

Series 2019-1 Class B-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

12/12/2019

 

12/19/2024

 

 

275,000

 

Aggregate

Series 2021-1 Class A-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/21/2025

 

 

150,000

 

Occurrence

Series 2021-1 Class B-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/21/2025

 

 

85,000

 

Aggregate

Series 2021-1 Class C-1

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/21/2025

 

 

85,000

 

Aggregate

Series 2021-1 Class A-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/20/2026

 

 

150,000

 

Occurrence

Series 2021-1 Class B-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/20/2026

 

 

90,000

 

Aggregate

Series 2021-1 Class C-2

 

US, Canada, Puerto Rico – Named Storm and Earthquake Events

 

4/8/2021

 

4/20/2026

 

 

90,000

 

Aggregate

 

 

Total available limit as of March 31, 2022

 

 

 

 

 

$

2,325,000

 

 

 Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events,

(Dollars in millions)
Class
Description
Effective Date
Expiration Date
Limit
Coverage Basis
Series 2018-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/30/2018
5/5/2023
$
63
Aggregate
Series 2018-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/30/2018
5/5/2023
200
Aggregate
Series 2019-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2023
150
Occurrence
Series 2019-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2023
275
Aggregate
Series 2019-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
150
Occurrence
Series 2019-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
275
Aggregate
Series 2021-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
150
Occurrence
Series 2021-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class C-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
150
Occurrence
Series 2021-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2021-1 Class C-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/22/2022
6/22/2025
300
Aggregate
Total available limit as of September 30, 2022
$
2,063
Recoveries
under
these
collateralized
reinsurance
agreements
with
Kilimanjaro
are
primarily
dependent
on
estimated
industry
level
insured
losses
from
covered
events,
as
well
as
the
geographic
location
of
the
events.
The
estimated
industry
level
of
insured
losses
is
obtained
from
published
estimates
by
an
independent
recognized
authority
on
insured
property
losses.
Currently,
none
of
the
published
insured
loss
estimates
for
catastrophe
events
during
the geographic location applicable
covered
periods
of the events. The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses. Currently, none of
various
agreements
have
exceeded
the published insured loss estimates for catastrophe events during the applicable covered periods of the various agreements have exceeded the
single
event retentions or aggregate
retentions under the terms of the agreements
that would result in a recovery.

22

25
Kilimanjaro
has
financed the
various
property
catastrophe
reinsurance
coverages
by
issuing catastrophe
bonds
to
unrelated,
external
investors.
The
proceeds
from
the
issuance
of
the
Notes
listed
below
are
held
in
reinsurance trusts
throughout the
duration of
the applicable reinsurance
agreements and
invested
solely in U.S.
government money market
funds with a rating of at least “AAAm”
“AAAm” by Standard
& Poor’s.

(Dollars in thousands)

 

 

 

 

 

 

 

Note Series

 

Issue Date

 

Maturity Date

 

Amount

Series 2017-1 Class A-2

 

4/13/2017

 

4/13/2022

 

$

50,000

Series 2017-1 Class B-2

 

4/13/2017

 

4/13/2022

 

 

75,000

Series 2017-1 Class C-2

 

4/13/2017

 

4/13/2022

 

 

175,000

Series 2018-1 Class A-1

 

4/30/2018

 

5/6/2022

 

 

62,500

Series 2018-1 Class B-1

 

4/30/2018

 

5/6/2022

 

 

200,000

Series 2018-1 Class A-2

 

4/30/2018

 

5/5/2023

 

 

62,500

Series 2018-1 Class B-2

 

4/30/2018

 

5/5/2023

 

 

200,000

Series 2019-1 Class A-1

 

12/12/2019

 

12/19/2023

 

 

150,000

Series 2019-1 Class B-1

 

12/12/2019

 

12/19/2023

 

 

275,000

Series 2019-1 Class A-2

 

12/12/2019

 

12/19/2024

 

 

150,000

Series 2019-1 Class B-2

 

12/12/2019

 

12/19/2024

 

 

275,000

Series 2021-1 Class A-1

 

4/8/2021

 

4/21/2025

 

 

150,000

Series 2021-1 Class B-1

 

4/8/2021

 

4/21/2025

 

 

85,000

Series 2021-1 Class C-1

 

4/8/2021

 

4/21/2025

 

 

85,000

Series 2021-1 Class A-2

 

4/8/2021

 

4/20/2026

 

 

150,000

Series 2021-1 Class B-2

 

4/8/2021

 

4/20/2026

 

 

90,000

Series 2021-1 Class C-2

 

4/8/2021

 

4/20/2026

 

 

90,000

 

 

 

 

 

 

$

2,325,000

(Dollars in millions)
Note Series
Issue Date
Maturity Date
Amount
Series 2018-1 Class A-2
4/30/2018
5/5/2023
$
63
Series 2018-1 Class B-2
4/30/2018
5/5/2023
200
Series 2019-1 Class A-1
12/12/2019
12/19/2023
150
Series 2019-1 Class B-1
12/12/2019
12/19/2023
275
Series 2019-1 Class A-2
12/12/2019
12/19/2024
150
Series 2019-1 Class B-2
12/12/2019
12/19/2024
275
Series 2021-1 Class A-1
4/8/2021
4/21/2025
150
Series 2021-1 Class B-1
4/8/2021
4/21/2025
85
Series 2021-1 Class C-1
4/8/2021
4/21/2025
85
Series 2021-1 Class A-2
4/8/2021
4/20/2026
150
Series 2021-1 Class B-2
4/8/2021
4/20/2026
90
Series 2021-1 Class C-2
4/8/2021
4/20/2026
90
Series 2022-1 Class A
6/22/2022
6/22/2025
300
$
2,063
11.
SENIOR NOTES

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

 

 

 

 

 

 

 

 

March 31, 2022

 

December 31, 2021

 

 

 

 

 

 

 

 

Consolidated Balance

 

 

 

 

Consolidated Balance

 

 

 

(Dollars in thousands)

Date Issued

 

Date Due

 

Principal Amounts

 

Sheet Amount

 

Market Value

 

Sheet Amount

 

Market Value

4.868% Senior notes

6/5/2014

 

6/1/2044

 

$

400,000

 

$

397,343

 

$

437,148

 

$

397,314

 

$

503,840

3.5% Senior notes

10/7/2020

 

10/15/2050

 

 

1,000,000

 

 

980,178

 

 

895,420

 

 

980,046

 

 

1,054,520

3.125% Senior notes

10/4/2021

 

10/15/2052

 

 

1,000,000

 

 

968,626

 

 

832,780

 

 

968,440

 

 

983,140

 

 

 

 

 

$

2,400,000

 

$

2,346,147

 

$

2,165,348

 

$

2,345,800

 

$

2,541,500

September 30, 2022
December 31, 2021
Principal
Consolidated Balance
Consolidated Balance
(Dollars in millions)
Date Issued
Date Due
Amounts
Sheet Amount
Fair Value
Sheet Amount
Fair Value
4.868
% Senior notes
6/5/2014
6/1/2044
$
400
$
397
$
339
$
397
$
504
3.5
% Senior notes
10/7/2020
10/15/2050
1,000
980
669
980
1,055
3.125
% Senior notes
10/4/2021
10/15/2052
1,000
969
627
969
983
$
2,400
$
2,347
$
1,635
$
2,346
$
2,542
Interest expense incurred in
connection with these senior notes is as follows
for the periods indicated:

 

Three Months Ended

 

March 31,

(Dollars In thousands

2022

 

2021

Interest expense incurred 4.868% Senior notes

$

4,868

 

$

4,868

Interest expense incurred 3.5% Senior notes

 

8,807

 

 

8,805

Interest expense incurred 3.125% Senior notes

 

7,913

 

 

-

 

$

21,588

 

$

13,673

23

Three Months Ended

Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Interest expense incurred
4.868
% Senior notes
$
5
$
5
$
15
$
15
Interest expense incurred
3.5
% Senior notes
9
9
26
26
Interest expense incurred
3.125
% Senior notes
8
-
24
-
$
22
$
14
$
65
$
41
26
12.
LONG TERM SUBORDINATED
NOTES

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

 

 

 

 

 

 

Maturity Date

 

March 31, 2022

 

December 31, 2021

 

 

 

Original

 

 

 

 

 

Consolidated Balance

 

Market

 

Consolidated Balance

 

Market

(Dollars in thousands)

Date Issued

 

Principal Amount

 

Scheduled

 

Final

 

Sheet Amount

 

Value

 

Sheet Amount

 

Value

Long term subordinated notes

4/26/2007

 

$

400,000

 

5/15/2037

 

5/1/2067

 

$

223,799

 

$

208,685

 

$

223,774

 

$

216,289

Maturity Date
September 30, 2022
December 31, 2021
Original
Consolidated Balance
Fair
Consolidated Balance
Fair
(Dollars in millions)
Date Issued
Principal Amount
Scheduled
Final
Sheet Amount
Value
Sheet Amount
Value
Long term subordinated notes
4/26/2007
$
400
5/15/2037
5/1/2067
$
218
$
179
$
224
$
216
During the fixed
rate interest
period from
May 3, 2007
through
May 14, 2017
, interest
was at the
annual rate
of 6.6%
6.6
%, payable semi-annually in arrears
on November 15 and May 15 of each year,
commencing on
November 15, 2007.
2007
.
During the floating rate
interest period from
May 15, 2017 through
maturity,
interest will be based
on the
3
month
LIBOR
plus
238.5
basis
points,
reset
quarterly,
payable
quarterly
in
arrears
on
February
15,
May
15,
August 15
and November
15 of
each year,
subject to
Holdings’ right
to defer
interest
on
one
or more
occasions
for up
to
ten
consecutive
years.
Deferred
interest
will accumulate
interest
at the
applicable rate
compounded
quarterly payable quarterly in arrears on February 15, for
periods from
and including
May 15,
2017.
The reset
quarterly interest
rate for
August 15, and November 15 of each year, subject to Holdings’ right to defer interest on 1 or more occasions for up to ten consecutive years. Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for February 16,
2022 to May 15,
November 14, 2022 is2.89%
5.29
%.

Holdings may redeem
the long term subordinated
notes on or after
May 15, 2017, in
whole or in part at 100%
100
% of
the principal amount
plus accrued and unpaid
interest; however,
redemption on or
after the scheduled
maturity
date and
prior to
May 1, 2047
is subject
to a
replacement
capital covenant.
This covenant
is for
the benefit
of
certain
senior
note
holders
and
it
mandates
that
Holdings
receive
proceeds
from
the
sale
of
another
subordinated
debt issue,
of at
least similar
size, before
it may
redeem the
subordinated
notes.
The Company’s 4.868%
4.868
% senior notes,
due on
June 1, 2044
,
3.5
% senior noted
due on
October 15, 2050
and
3.125
% senior notes
due
on
October 15, 2052
are
the
Company’s
long
term
indebtedness
that
rank
senior
to
the
long
term
subordinated notes.
In
2009,
the
Company
had
reduced
its
outstanding
amount
of
long
term
subordinated
notes
by
$
161
million
through the Company’s long term indebtedness that ranks senior to the long term subordinated notes.

On March 19, 2009, Group announced the commencement initiation

of a cash tender offer
for any and
all of the 6.60% fixed to floating rate long term
subordinated notes. Upon expiration of the tender offer, the Company had reduced its outstanding debt by $161.4 million.
In addition, during 2020,the
Company
repurchased
and
retired
$
13
million
of
the
long
term
subordinated
notes
in
2020.
During
the
third
quarter
of
2022,
the
Company
repurchased
and
retired
$
6
million
of
the
outstanding
long
term
subordinated
notes. The Company realized
a gain of $
1
million on the Company repurchased and retired $13.2 million of transaction.
Interest
expense
incurred
in
connection
with
these
long
term
subordinated
notes
is
as follows
for
the notes.

periods
indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Interest expense incurred in connection with these long term subordinated notes is as follows for the periods indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

Interest expense incurred

$

1,530

 

$

1,462

$

3
$
1
$
6
$
4
13.
SEGMENT REPORTING

The Reinsurance
operation
writes worldwide
property
and casualty
reinsurance
and specialty
lines of
business,
on both
a treaty
and facultative
basis,
through
reinsurance
brokers,
as well
as directly
with ceding
companies.
Business is
written in
the 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 with ceding companies. Business is written
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., Bermuda, and Ireland offices, as well as, through branches in
Canada, Chile,
Singapore, the
United Kingdom, and Switzerland. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe and South America through its offices in the U.S., Canada, Chile, United Kingdom,
Ireland
and a branch in the Netherlands.

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.
27
Management
generally
monitors
and
evaluates
the
financial
performance
of
these
operating
segments
based
upon their underwriting results.

24

Underwriting
results

include

Underwriting results include

earned
premium
less
losses
and
loss
adjustment
expenses
(“LAE”)
incurred,
commission and brokerage
expenses and other
underwriting expenses.
The Company measures
its underwriting
results using
ratios, in
particular loss,
commission and
brokerage
and other
underwriting expense
ratios, which,
respectively,
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 maintain separate balance sheet data for its operating segments. Accordingly, the Company does not
review and evaluate
the financial results
of its operating
segments based upon
balance sheet
data.

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

 

 

 

 

Reinsurance

Three Months Ended March 31, 2022

 

Three Months Ended March 31, 2021

(Dollars in thousands)

Reinsurance

 

Insurance

 

Total

 

Reinsurance

 

Insurance

 

Total

Gross written premiums

$

2,185,612

 

$

1,000,739

 

$

3,186,351

 

$

2,059,015

 

$

872,418

 

$

2,931,433

Net written premiums

 

2,081,449

 

 

730,564

 

 

2,812,013

 

 

1,912,950

 

 

640,987

 

 

2,553,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

2,066,254

 

$

725,511

 

$

2,791,765

 

$

1,777,452

 

$

610,413

 

$

2,387,865

Incurred losses and LAE

 

1,324,716

 

 

465,147

 

 

1,789,863

 

 

1,271,906

 

 

439,513

 

 

1,711,419

Commission and brokerage

 

514,243

 

 

90,987

 

 

605,230

 

 

408,724

 

 

80,287

 

 

489,011

Other underwriting expenses

 

50,453

 

 

110,840

 

 

161,293

 

 

51,996

 

 

90,235

 

 

142,231

Underwriting gain (loss)

$

176,842

 

$

58,537

 

$

235,379

 

$

44,826

 

$

378

 

$

45,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

242,830

 

 

 

 

 

 

 

 

260,413

Net gains (losses) on investments

 

 

 

 

 

 

 

(153,627)

 

 

 

 

 

 

 

 

38,902

Corporate expenses

 

 

 

 

 

 

 

(14,020)

 

 

 

 

 

 

 

 

(12,378)

Interest, fee and bond issue cost amortization expense

 

 

 

 

 

 

 

(24,078)

 

 

 

 

 

 

 

 

(15,639)

Other income (expense)

 

 

 

 

 

 

 

15,363

 

 

 

 

 

 

 

 

56,593

Income (loss) before taxes

 

 

 

 

 

 

$

301,847

 

 

 

 

 

 

 

$

373,095

Three Months Ended September 30, 2022

The Company produces business

Nine Months Ended September 30, 2022
(Dollars in millions)
Reinsurance
Insurance
Total
Reinsurance
Insurance
Total
Gross written premiums
$
2,551
$
1,129
$
3,680
$
6,938
$
3,376
$
10,313
Net written premiums
2,460
862
3,323
6,664
2,492
9,156
Premiums earned
$
2,245
$
822
$
3,067
$
6,451
$
2,324
$
8,775
Incurred losses and LAE
1,992
631
2,623
4,699
1,591
6,289
Commission and brokerage
537
104
641
1,582
295
1,877
Other underwriting expenses
54
115
169
156
344
500
Underwriting gain (loss)
$
(338)
$
(29)
$
(367)
$
14
$
95
$
109
Net investment income
151
620
Net gains (losses) on investments
(129)
(519)
Corporate expenses
(16)
(45)
Interest, fee and bond issue cost amortization expense
(25)
(74)
Other income (expense)
(16)
(71)
Income (loss) before taxes
$
(401)
$
20
(Some amounts may not reconcile due to rounding.)
Three Months Ended September 30, 2021
Nine Months Ended September 30, 2021
(Dollars in millions)
Reinsurance
Insurance
Total
Reinsurance
Insurance
Total
Gross written premiums
$
2,488
$
1,009
$
3,498
$
6,696
$
2,924
$
9,619
Net written premiums
2,293
733
3,026
6,266
2,123
8,389
Premiums earned
$
1,976
$
680
$
2,656
$
5,675
$
1,928
$
7,603
Incurred losses and LAE
1,766
508
2,274
4,206
1,366
5,572
Commission and brokerage
471
93
564
1,353
258
1,611
Other underwriting expenses
45
96
141
144
280
424
Underwriting gain (loss)
$
(306)
$
(17)
$
(323)
$
(29)
$
24
$
(5)
Net investment income
293
960
Net gains (losses) on investments
(4)
139
Corporate expenses
(18)
(46)
Interest, fee and bond issue cost amortization expense
(16)
(47)
Other income (expense)
(20)
44
Income (loss) before taxes
$
(88)
$
1,046
(Some amounts may not reconcile due to rounding.)
28
The
Company
produces
business
in
the
U.S.,
Bermuda
and
internationally.
The
net
income
deriving
from
and
assets
residing
in the
individual
foreign
countries
in which
the Company
writes
business
are
not identifiable
in
the Company’s
financial records.
Based on gross written
premium, the table below
presents the largest
country,
other than the U.S., in which the Company writes business,
for the periods indicated:

 

Three Months Ended

 

March 31,

(Dollars in thousands)

2022

 

2021

United Kingdom gross written premium

$

311,581

 

$

366,148

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

Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in thousands)
2022
2021
2022
2021
United Kingdom gross written premium
$
312
$
282
$
936
$
897
14.
SHARE-BASED COMPENSATION
PLANS

For
the
three
months
ended March 31,
September
30,
2022,
a
total
of 196,808
4,070
restricted
stock
awards
were granted: 187,760 and 9,048 restricted share awards were
granted
on February 23, 2022 and February 24,
September 8, 2022 with a fair value
of $301.535$283.72 per share.
For
the
nine
months
ended
September
30,
2022,
a
total
of
203,208
restricted
stock
awards
were
granted:
187,760
,
9,048
,
2,330
and
4,070
restricted share awards
were granted
on February 23, 2022, February
24, 2022,
May
10,
2022 and
September
8,
2022,
with
a
fair
value
of
$
301.54
per
share,
$
287.94
per
share,
$280.98
per
share and $287.9425 $
283.72
per share, respectively.
Additionally,
18,340
performance share unit
awards were granted
on
February 23, 2022, with a fair value of $301.535 $
301.54
per unit.

15.
INCOME TAXES

The
Company
is
domiciled
in
Bermuda
and
has significant
subsidiaries
and/or
branches
in
Canada,
Chile,
Ireland,
the Netherlands, Singapore, Switzerland, the United Kingdom, and the United States. The Company’s Bermuda domiciled subsidiaries are exempt from income taxation under Bermuda law until 2035. The Company’s

25

Netherlands,
Singapore,

Switzerland,
the
United
Kingdom,
and
the
United
States.
The
Company’s
Bermuda

non-Bermudian domiciled

subsidiaries
are
exempt
from
income
taxation
under
Bermuda
law
until
2035.
The
Company’s
non-
Bermudian
subsidiaries
and
branches
are
subject
to
income
taxation
at
varying
rates
in
their
respective
domiciles.

The Company generally
applies the estimated
Annualized Effective
Tax
Rate (“AETR”)
approach for
calculating its
tax
provision
for
interim
periods
as prescribed
by
ASC 740-270,
Interim
Reporting.
Under
the
AETR approach,
the
estimated
annualized
effective
tax
rate
is
applied
to
the
interim
year-to-date
pre-tax
income/(loss)
to
determine
the
income
tax
expense
or
benefit
for
the
year-to-date
period.
The
tax
expense
or
benefit
for
the
quarter represents
the estimated annualized effective tax rate is applied todifference
between the interim
year-to-date pre-tax income/(loss) to determine the income
tax expense
or benefit
for the year-to-date period. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the
current year-to-date year
-to-date
period less such
amount for
the immediately
preceding year-to-date
period.
Management considers
the impact
of all known events
in its estimation
of the Company’s
annual pre-tax
income/(loss) and annualized
effective tax rate.

rate.

16.
SUBSEQUENT EVENTS

The Company
has evaluated
known recognized
and non-recognized
subsequent events.
The Company
does not
have any subsequent
events to report.

26

29

ITEM 2.

MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATION

Industry Conditions.

The worldwide
reinsurance
and insurance
businesses
are highly
competitive,
as well
as cyclical
by
product
and
market.
As
such,
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 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
was ample
insurance and
reinsurance market conditions historically have been competitive. Generally, there was ample insurance and reinsurance
capacity relative
to demand,
as well
as additional
capital from
the capital
markets
through
insurance
linked
financial
instruments.
These
financial
instruments
such
as
side
cars,
catastrophe
bonds and
collateralized
reinsurance
funds, provided
capital
markets
with access
to insurance
and
reinsurance
risk exposure.
The capital
markets
demand for
these products
was being
primarily driven
by a
low
interest environment
and the desire to
achieve greater risk
diversification and
potentially higher returns
on their
investments.
This increased competition
was generally
having 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
activity,
natural
catastrophe
events
and
the
macroeconomic
backdrop,
there
has
been
some
dislocation
in
the
market
which
should
have
a
positive
impact
on
rates
and
terms
and
conditions,
generally,
though local market and coverage.

The industry continues to deal with the impacts of a global pandemic, COVID-19 and its subsequent variants. We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

Prior to the pandemic, there was a growing industry consensus that there was some firming of (re)insurance rates for the areas impacted by the recent catastrophes. specificities can

vary.
The increased
frequency of
catastrophe
losses that continued experienced
throughout 2021
and thus
far in
2022 appears
to be experienced
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 2022 and throughout 2021 appears to be further pressuring
most
lines
of
business,
particularly
in
the increase of rates. As business activity continues to regain strength, rates also appear to be firming in most lines of business, particularly in the
casualty lines
that had
seen significant
losses such
as excess
casualty and
directors’
and officers’
liability.
Other
casualty
lines
are
experiencing
modest
rate
increase,
while
some
lines
such
as
workers’
compensation
were
experiencing softer market
conditions. It is too early
to tell what the impact
on pricing conditions will be, but
it is
likely to change depending on the line of business
and geography.

While we
are unable
to predict
the full
impact the
pandemic will
have on
the insurance
industry as
it continues
to have
a negative
impact on the global
economy,
we are well
positioned to continue
to service our clients.
Our
capital
position
remains
a
source
of
strength,
with
high
quality
invested
assets,
significant
liquidity
and
a
low
operating
expense
ratio.
Our
diversified
global
platform
with
its
broad
mix
of
products,
distribution
and
geography is resilient.

27

30
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. To
The Company
has
recorded
$45
million
of
incurred
underwriting
losses
related
to
the best
Ukraine/Russia
war
as
of our knowledge at this time,
the Company has limited financial exposure related to the Russian invasion of the Ukraine. However, given the ongoing nature of the war and the high degree of uncertainty around both exposures and coverage, a reasonable estimation of potential loss is not credible at this time.

nine
months
ended September 30, 2022.
Financial Summary.

We
monitor and
evaluate
our overall
performance
based upon
financial results.
The following
table displays
a
summary of the consolidated net income (loss), ratios
and shareholders’ equity for the periods
indicated.

 

Three Months Ended

 

Percentage

 

March 31,

 

Increase/

(Dollars in millions)

2022

 

2021

 

(Decrease)

Gross written premiums

$

3,186.4

 

 

$

2,931.4

 

 

8.7

%

Net written premiums

 

2,812.0

 

 

 

2,553.9

 

 

10.1

%

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

2,791.8

 

 

$

2,387.9

 

 

16.9

%

Net investment income

 

242.8

 

 

 

260.4

 

 

-6.8

%

Net gains (losses) on investments

 

(153.6)

 

 

 

38.9

 

 

NM

 

Other income (expense)

 

15.4

 

 

 

56.6

 

 

-72.9

%

Total revenues

 

2,896.3

 

 

 

2,743.8

 

 

5.6

%

 

 

 

 

 

 

 

 

 

 

 

CLAIMS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

Incurred losses and loss adjustment expenses

 

1,789.9

 

 

 

1,711.4

 

 

4.6

%

Commission, brokerage, taxes and fees

 

605.2

 

 

 

489.0

 

 

23.8

%

Other underwriting expenses

 

161.3

 

 

 

142.2

 

 

13.4

%

Corporate expenses

 

14.0

 

 

 

12.4

 

 

12.9

%

Interest, fees and bond issue cost amortization expense

 

24.1

 

 

 

15.6

 

 

54.5

%

Total claims and expenses

 

2,594.5

 

 

 

2,370.7

 

 

9.5

%

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE TAXES

 

301.8

 

 

 

373.1

 

 

-19.1

%

Income tax expense (benefit)

 

4.1

 

 

 

31.2

 

 

-86.9

%

NET INCOME (LOSS)

$

297.8

 

 

$

341.9

 

 

-12.9

%

 

 

 

 

 

 

 

 

 

 

 

RATIOS:

 

 

 

 

 

 

 

 

Point Change

Loss ratio

 

64.1

%

 

 

71.7

%

 

(7.6)

 

Commission and brokerage ratio

 

21.7

%

 

 

20.5

%

 

1.2

 

Other underwriting expense ratio

 

5.8

%

 

 

5.9

%

 

(0.1)

 

Combined ratio

 

91.6

%

 

 

98.1

%

 

(6.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

Percentage

 

March 31,

 

December 31,

 

Increase/

(Dollars in millions, except per share amounts)

2022

 

2021

 

(Decrease)

Balance sheet data:

 

 

 

 

 

 

 

 

 

 

Total investments and cash

$

29,298.1

 

 

$

29,673.3

 

 

-1.3

%

Total assets

 

37,986.8

 

 

 

38,185.3

 

 

-0.5

%

Loss and loss adjustment expense reserves

 

19,495.6

 

 

 

19,009.5

 

 

2.6

%

Total debt

 

3,088.9

 

 

 

3,088.6

 

 

-

%

Total liabilities

 

28,459.2

 

 

 

28,046.1

 

 

1.5

%

Shareholders' equity

 

9,527.6

 

 

 

10,139.2

 

 

-6.0

%

Book value per share

 

241.52

 

 

 

258.21

 

 

-6.5

%

 

 

 

 

 

 

 

 

 

 

 

(NM, not meaningful)

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

28

Three Months Ended

Revenues.

Premiums.Percentage

Nine Months Ended
Percentage
September 30,
Increase/
September 30,
Increase/
(Dollars in millions)
2022
2021
(Decrease)
2022
2021
(Decrease)
Gross written premiums
$
3,680
$
3,498
5.2
%
$
10,313
$
9,619
7.2
%
Net written premiums
3,323
3,026
9.8
%
9,156
8,389
9.1
%
REVENUES:
Premiums earned
$
3,067
$
2,656
15.5
%
$
8,775
$
7,603
15.4
%
Net investment income
151
293
-48.3
%
620
960
-35.4
%
Net gains (losses) on investments
(129)
(4)
NM
(519)
139
NM
Other income (expense)
(16)
(20)
-20.0
(71)
44
NM
Total revenues
3,073
2,925
5.1
%
8,805
8,746
0.7
%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
2,623
2,274
15.3
%
6,289
5,572
12.9
%
Commission, brokerage, taxes
and fees
641
564
13.7
%
1,877
1,611
16.5
%
Other underwriting expenses
169
141
19.8
%
500
424
17.8
%
Corporate expenses
16
18
-11.9
%
45
46
-3.5
%
Interest, fees and bond issue
cost amortization expense
25
16
62.1
%
74
47
57.5
%
Total claims and expenses
3,474
3,013
15.3
%
8,785
7,700
14.1
%
INCOME (LOSS) BEFORE TAXES
(401)
(88)
NM
20
1,046
-98.1
%
Income tax expense (benefit)
(82)
(14)
NM
(81)
97
-183.8
%
NET INCOME (LOSS)
$
(319)
$
(73)
NM
$
101
$
948
-89.3
%
RATIOS:
Point
Change
Point
Change
Loss ratio
85.5
%
85.6
%
(0.1)
71.7
%
73.3
%
(1.6)
Commission and brokerage ratio
20.9
%
21.2
%
(0.3)
21.4
%
21.2
%
0.2
Other underwriting expense ratio
5.5
%
5.3
%
0.2
5.7
%
5.6
%
0.1
Combined ratio
112.0
%
112.2
%
(0.2)
98.8
%
100.1
%
(1.3)
At
At
Percentage
September 30,
December 31,
Increase/
(Dollars in millions, except per share amounts)
2022
2021
(Decrease)
Balance sheet data:
Total investments
and cash
$
28,516
$
29,673
-3.9
%
Total assets
38,144
38,185
-0.1
%
Loss and loss adjustment expense reserves
21,222
19,009
11.6
%
Total debt
3,084
3,089
-0.2
%
Total liabilities
30,495
28,046
8.7
%
Shareholders' equity
7,649
10,139
-24.6
%
Book value per share
195.27
258.21
-24.4
%
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
31
Revenues.
Premiums.
Gross written premiums
increased by 8.7%5.2% to $3.2
$3.7 billion in for the three
months ended March 31, September
30,
2022,
compared
to $2.9
$3.5
billion
for
the
three
months
ended March 31,
September
30,
2021,
reflecting
a $128.3
$120
million,
or 14.7%
11.9%, increase
in our
insurance business
and a $126.6
$62 million,
or 6.1%2.5%,
increase in
our reinsurance
business.
The
increase
in
insurance
premiums
reflects
growth
across
most
lines
of
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 casualty
excess of
loss business,
partially offset
by a
decline
in
property
pro
rata
business
and
property
casualty
excess
of
loss
business.
Gross
written
premiums
increased by
7.2% to
$10.3 billion
for the
nine months
ended September
30, 2022,
compared
to $9.6
billion for
the
nine
months
ended
September
30,
2021,
reflecting
a
$452
million,
or
15.5%,
increase
in
our
insurance
business and
a $242 million,
or 3.6%, increase
in our reinsurance
business.
The rise increase
in insurance
premiums
reflects
growth across
most lines
of 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 specialty casualty business and other specialty business. 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
9.8%
to
$3.3
billion
for
the
three
months
ended
September
30,
2022,
compared to
$3.0 billion
for the
three months
ended September
30, 2021.
Net written
premiums increased
by
9.1%
to
$9.2
billion
for
the
nine
months
ended
September
30,
2022,
compared
to
$8.4
billion
for
the
nine
months
ended
September
30,
2021.
The
higher
percentage
increases
in
net
written
premiums
compared
to
gross written
premiums were
primarily due
to a
reduction in
business ceded
to the
segregated
accounts
of Mt.
Logan Re during
the three and
nine months ended
September 30, 2022
compared to
the three and
nine months
ended
September
30,
2021.
Premiums
earned
increased
by
15.5% to
$3.1 billion
for
the
three
months
ended
September
30,
2022,
compared
to
$2.7
billion
for
the
three
months
ended
September
30,
2021.
Premiums
earned
increased
by
15.4%
to
$8.8
billion
for
the
nine
months
ended
September
30,
2022,
compared
to
$7.6
billion for the
nine months ended
September 30, 2021.
The changes
in premiums
earned relative
to net written
premiums
are
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
quarter
and year-to-date percentage
increases
in net earned premiums.
Other Income (Expense).
We recorded
other expense of $16
million and $20 million for
the three months
ended
September 30, 2022 and
2021, respectively.
We recorded
other expense of $71 million
and other income of $44
million for
the nine
months ended
September 30,
2022 and
2021, respectively.
The changes
were primarily
the
result of
fluctuations in
foreign currency
exchange
rates.
We recognized
foreign currency
exchange
expense of
$9
million
and
$17
million
for
the
three
months
ended
September
30,
2022
and
2021,
respectively.
We
recognized
foreign
currency
exchange
expense
of
$70
million
and
foreign
currency
exchange
income
of
$44
million for the nine months ended September
30, 2022 and 2021, respectively.
Net Investment Income.
Refer to Consolidated
Investments Results Section below.
Net Gains (Losses) on Investments.
Refer to Consolidated Investments
Results Section below.
32
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.
Three Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,783
58.1
%
$
-
-
%
$
1,783
58.1
%
Catastrophes
840
27.4
%
-
-
%
840
27.4
%
Total
$
2,623
85.5
%
$
-
-
%
$
2,623
85.5
%
2021
Attritional
$
1,581
59.5
%
$
(2)
-0.1
%
$
1,579
59.4
%
Catastrophes
695
26.2
%
-
-
%
695
26.2
%
Total
$
2,276
85.7
%
$
(2)
-0.1
%
$
2,274
85.6
%
Variance 2022/2021
Attritional
$
202
(1.4)
pts
$
2
0.1
pts
$
204
(1.3)
pts
Catastrophes
145
1.2
pts
-
-
pts
145
1.2
pts
Total
$
347
(0.2)
pts
$
2
0.1
pts
$
349
(0.1)
pts
Nine Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
5,251
59.8
%
$
(2)
-
%
5,249
59.8
%
Catastrophes
1,040
11.9
%
-
-
%
1,040
11.9
%
Total
$
6,291
71.7
%
$
(2)
-
%
$
6,289
71.7
%
2021
Attritional
$
4,568
60.1
%
$
(6)
-0.1
%
4,562
60.0
%
Catastrophes
1,010
13.3
%
-
-
%
1,010
13.3
%
Total
$
5,578
73.4
%
$
(6)
-0.1
%
$
5,572
73.3
%
Variance 2022/2021
Attritional
$
683
(0.3)
pts
$
4
0.1
pts
$
688
(0.2)
pts
Catastrophes
30
(1.4)
pts
-
-
pts
30
(1.4)
pts
Total
$
713
(1.7)
pts
$
4
0.1
pts
$
718
(1.6)
pts
(Some amounts may not reconcile due to rounding.)
Incurred
losses
and
LAE
increased
by
15.3%
to
$2.6
billion
for
the
three
months
ended
September
30,
2022,
compared to
$2.3 billion
for the
three months
ended September
30,
2021, primarily
due to
an increase
of $202
million in
current year
attritional
losses and
an increase
of $145
million in
current year
catastrophe
losses.
The
increase in current year
attritional losses
was mainly due to
the impact of the increase
in premiums earned.
The
current
year
catastrophe
losses
of
$840
million
for
the
three
months
ended
September
30,
2022
related
primarily
to
Hurricane
Ian
($700
million),
the
2022
Western
Europe
hailstorms
($75
million),
Hurricane
Fiona
($25
million),
Typhoon
Nanmadol
($20
million)
and
the
2022
Western
Europe
Convective
storm
($20
million).
The $695
million of
current year
catastrophe
losses for
the three
months ended
September 30,
2021
related to
Hurricane Ida ($463 million) and the European
floods ($232 million).
Incurred
losses
and
LAE
increased
by
12.9%
to
$6.3
billion
for
the
nine
months
ended
September
30,
2022,
compared
to $5.6
billion for
the nine
months
ended September
30, 2021,
primarily due
to an
increase of
$683
million in
current
year
attritional
losses and
an increase
of $30
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
$1.0 billion for
the nine months
ended September 30,
2022 related
primarily to Hurricane
Ian ($700 million),
the
2022
Australia
floods
($85
million),
the
2022
Western
Europe
hailstorms
($75
million),
the
2022
South
Africa
flood ($45
million), the
2022 Western
Europe Convective
Storm ($30
million), Hurricane
Fiona ($25
million), the
2022 European
storms
($21 million),
Typhoon
Nanmadol ($20
million), the
2022 Canada
derecho ($18
million),
33
the 2022
2
nd
quarter U.S.
storms
($12 million),
and the
2022 March
U.S. storms
($8 million).
The $1.0
billion of
current
year
catastrophe
losses for
the nine
months
ended
September
30, 2021
related
primarily to
Hurricane
Ida ($463 million), the Texas
winter storms ($285
million) and the European
floods ($242 million) with the rest
of
the losses emanating from the 2021 Australia
floods and Victoria Australia flooding.
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
27.4 percentage
points to
the combined
ratio
for the
three months
ended September
30, 2022,
compared with
26.2 percentage
points
in
the
same
period
of
2021, and
11.9 percentage
points
to
the
combined
ratio
for
the
nine months ended September
30, 2022, compared
with 13.3 percentage
points in the same period
of 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 $40.9 million
is below the attachment point.
The potential
recovery
under
the
CAT
Bond
is
not
included
in
the
Company’s
estimate
for
Hurricane
Ian
but
would
provide
significant downside protection should
the industry loss estimate increase.
Commission,
Brokerage,
Taxes
and
Fees.
Commission,
brokerage,
taxes
and
fees
increased
by
13.7%
to
$641
million for
the three
months ended
September 30,
2022, compared
to $564
million for
the three
months ended
September
30,
2021.
Commission,
brokerage,
taxes
and
fees
increased
by
16.5%
to
$1.9
billion
for
the
nine
months
ended September
30,
2022, compared
to
$1.6 billion
for
the nine
months
ended September
30, 2021.
The increases
were 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
$169
million
and
$141
million
for
the
three
months ended September
30, 2022 and
2021, respectively.
Other underwriting expenses
were $500 million
and
$424
million
for
the
nine
months
ended
September
30,
2022
and
2021,
respectively.
The
increases
in
other
underwriting
expenses
were
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,
remained
relatively
flat
at
$16
million
and
$18
million
for
the
three
months
ended
September
30,
2022 and
2021,
respectively,
and
$45 million
and
$46
million
for
the
nine
months
ended
September
30,
2022
and 2021, respectively.
Interest,
Fees and
Bond Issue
Cost
Amortization
Expense.
Interest,
fees
and other
bond
amortization
expense
was
$25
million
and
$16
million
for
the
three
months
ended
September
30,
2022
and
2021,
respectively.
Interest,
fees and
other bond
amortization expense
was $74
million and
$47 million
for the
nine months
ended
September 30,
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 5.29% as of September
30, 2022.
Income Tax
Expense (Benefit).
We had
income tax
benefit of
$82 million
and $14
million for
the three
months
ended September
30, 2022
and
2021, respectively.
We
had
income tax
benefit
of $81
million and
income
tax
expense
of
$97
million
for
the
nine
months
ended
September
30,
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
34
repurchase excise tax
and do not expect the legislation to have
a material impact on our results of operations.
As
the IRS issues additional guidance, we will evaluate
any impact to our consolidated
financial statements.
Net Income (Loss).
Our
net
loss
was
$319
million
and
$73
million
for
the
three
months
ended
September
30,
2022
and
2021,
respectively.
Our net income
was $101 million and
$948 million for
the nine months
ended September 30,
2022
and 2021,
respectively.
These changes
were primarily
driven by
the financial
component fluctuations
explained
above.
Ratios.
Our combined ratio
decreased slightly
by 0.2 points
to 112.0% for
the three months
ended September 30,
2022,
compared to
112.2%
for the
three months
ended September
30, 2021 and
decreased by
1.3 points
to 98.8% for
the
nine
months
ended
September
30,
2022,
compared
to
100.1%
for
the
nine
months
ended
September
30,
2021.
The
loss
ratio
component
decreased
slightly
by
0.1
points
for
the
three
months
ended
September
30,
2022 over the
same period last
year.
The loss ratio
component decreased
1.6 points for
the nine months
ended
September 30,
2022 over the
same period last
year due to
a lower loss
ratio on
current year
catastrophe
losses.
Although
current
year
catastrophe
losses
increased
by
$30
million,
earned
premium
increased
by
$1.2
billion
resulting
in a
lower
loss
ratio
related
to
catastrophe
losses.
The commission
and brokerage
ratio
components
decreased slightly
to 20.9%
for
the three
months
ended September
30, 2022
compared
to 21.2%
for the
three
months
ended
September
30,
2021
and
increased
to
21.4%
for
the
nine
months
ended
September
30,
2022
compared to 21.2%
for the nine
months ended September
30, 2021. These changes
were mainly due
to changes
in
the
mix
of
business.
The other
underwriting
expense
ratios
increased
to
5.5%
for
the
three
months
ended
September 30,
2022 compared
to 5.3%
for the
three months
ended September
30, 2021
and increased
slightly
to
5.7%
for
the
nine
months
ended
September
30,
2022
compared
to
5.6%
for
the
nine
months
ended
September 30, 2021.
These increases were mainly due to higher insurance
operations costs.
Shareholders’ Equity.
Shareholders’
equity
decreased
by
$2.5
billion
to
$7.6
billion
at
September
30,
2022
from
$10.1
billion
at
December 31,
2021, principally
as a
result of
$2.2 billion
of unrealized
depreciation
on fixed
maturity
portfolio
net of
tax,
$191 million
of shareholder
dividends,
$163 million
of net
foreign
currency translation
adjustments,
and
the
repurchase
of 238,771
common
shares
for
$60
million,
partially
offset
by
$101
million
of net
income,
$19 million of share
-based compensation
transactions and $2
million of net
benefit plan obligation
adjustments,
net of tax.
Consolidated Investment
Results
Net Investment Income.
Net
investment
income
decreased
by
48.3%
to
$151
million
for
the
three
months
ended
September
30,
2022
compared
with
net
investment
income
of $29
3
million
for
the
three
months
ended
September
30,
2021.
The
decrease for the three
months ended September
30, 2022 was primarily
the result of a decline
of $181 million in
limited
partnership
income,
partially
offset
by
an
additional
$52
million
of
income
from
fixed
maturity
investments.
Net investment
income decreased by
35.4% to $620 million
for the nine months
ended September
30,
2022
compared
with
investment
income
of
$960
million
for
the
nine
months
ended
September
30,
2021.
The
decrease
for
the
nine
months
ended
September
30,
2022
was
primarily
the
result
of
a
decline
of
$399
million in limited
partnership income,
partially offset
by an
additional $80
million of income
from fixed
maturity
investments.
The limited
partnership
income primarily
reflects
increases 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.
35
The following table shows the components
of net investment income for
the periods indicated.
Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in millions)
2022
2021
2022
2021
Fixed maturities
$
186
$
134
$
503
$
423
Equity securities
6
4
15
12
Short-term investments and cash
5
-
12
1
Other invested assets
Limited partnerships
(42)
139
94
493
Other
11
31
37
63
Gross investment income before adjustments
167
308
661
992
Funds held interest income (expense)
-
1
4
12
Future policy benefit reserve income (expense)
-
-
-
(1)
Gross investment income
167
309
665
1,004
Investment expenses
(15)
(16)
(45)
(44)
Net investment income
$
151
$
293
$
620
$
960
(Some amounts may not reconcile due to rounding.)
The following table shows a comparison
of various investment yields for
the periods indicated.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Annualized pre-tax yield on average cash and invested assets
2.0
%
4.4
%
2.8
%
5.0
%
Annualized after-tax yield on average cash and invested assets
1.7
%
3.8
%
2.4
%
4.4
%
Annualized return on invested assets
0.3
%
4.3
%
0.5
%
5.6
%
36
Net Gains (Losses) on Investments.
The following table presents the composition
of our net gains (losses) on investments
for the periods indicated.
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2022
2021
Variance
2022
2021
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities, available for sale:
Gains
$
5
$
17
$
(12)
$
33
$
52
$
(20)
Losses
(58)
(11)
(47)
(98)
(26)
(72)
Total
(53)
6
(59)
(66)
26
(92)
Equity securities, fair value:
Gains
60
3
57
67
21
46
Losses
(2)
(3)
1
(53)
(11)
(42)
Total
58
-
58
15
10
5
Other Invested Assets:
Gains
7
2
5
15
8
7
Losses
(1)
(1)
-
(4)
(2)
(2)
Total
6
2
4
11
6
5
Short Term Investments:
Gains
1
-
1
1
-
1
Losses
-
-
-
-
-
-
Total
1
-
1
1
-
1
Total net realized gains (losses) from dispositions:
Gains
73
22
51
116
81
35
Losses
(62)
(15)
(47)
(155)
(40)
(115)
Total
12
8
4
(40)
41
(81)
Allowance for credit losses:
(5)
(7)
2
(18)
(30)
12
Gains (losses) from fair value adjustments:
Equity securities, fair value
(136)
(5)
(131)
(462)
128
(590)
Total
(136)
(5)
(131)
(462)
128
(590)
Total net gains (losses) on investments
$
(129)
$
(4)
$
(125)
$
(519)
$
139
$
(658)
(Some amounts may not reconcile due to rounding.)
Net
gains
(losses)
on
investments
during
the
three
months
ended
September
30,
2022
primarily
relate
to
net
losses from fair value
adjustments on equity
securities in the amount of
$136 million as a result
of equity market
declines during
the third
quarter of
2022.
In addition,
we realized
$12 million
of gains
due to
the disposition
of
investments and recorded
an increase to the allowance for credit
losses of $5 million.
Net
gains
(losses)
on
investments
during
the
nine
months
ended
September
30,
2022
primarily
relate
to
net
losses from fair value
adjustments on equity
securities in the amount of
$462 million as a result
of equity market
declines
during
the
first
nine
months
of
2022.
In
addition,
we
realized
$40
million
of
losses
due
to
the
disposition
of investments
and recorded
an increase
to
the
allowance
for
credit
losses
of $18
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.
37
Business is
written in
the U.S.,
Bermuda, and
Ireland offices,
as well as,
through branches
in Canada,
Singapore,
the United
Kingdom
and Switzerland.
The Insurance
operation
writes property
and casualty
insurance
directly
and
through
brokers,
surplus
lines
brokers
and
general
agents
within
the
U.S.,
Bermuda,
Canada,
Europe,
Singapore
and
South
America
through
its
offices
in
the
U.S.,
Canada,
Chile,
Singapore,
the
United
Kingdom,
Ireland and a branch located in
the Netherlands.
These segments are
managed independently,
but conform
with corporate
guidelines with respect
to pricing, risk
management,
control
of
aggregate
catastrophe
exposures,
capital,
investments
and
support
operations.
Management
generally
monitors
and
evaluates
the
financial
performance
of
these
operating
segments
based
upon their underwriting results.
Underwriting
results
include
earned
premium
less
losses
and
loss
adjustment
expenses
(“LAE”)
incurred,
commission
and
brokerage
expenses
and
other
underwriting
expenses.
We
measure
our
underwriting
results
using
ratios,
in
particular
loss,
commission
and
brokerage
and
other
underwriting
expense
ratios,
which,
respectively,
divide incurred
losses, commissions
and brokerage
and other
underwriting expenses
by premiums
earned.
The
Company
does
not
maintain
separate
balance
sheet
data
for
its
operating
segments.
Accordingly,
the
Company does not
review and evaluate
the financial results
of its operating
segments based upon
balance sheet
data.
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-evalu
ation 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.
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
2,551
$
2,488
$
62
2.5
%
$
6,938
$
6,696
$
242
3.6
%
Net written premiums
2,460
2,293
167
7.3
%
6,664
6,266
398
6.4
%
Premiums earned
$
2,245
$
1,976
$
269
13.6
%
$
6,451
$
5,675
$
776
13.7
%
Incurred losses and LAE
1,992
1,766
226
12.8
%
4,699
4,206
493
11.7
%
Commission and brokerage
537
471
66
14.0
%
1,582
1,353
229
16.9
%
Other underwriting expenses
54
45
8
18.3
%
156
144
12
8.1
%
Underwriting gain (loss)
$
(338)
$
(306)
$
(32)
10.3
%
$
14
$
(29)
$
43
147.1
%
Point Chg
Point Chg
Loss ratio
88.7
%
89.4
%
(0.7)
72.8
%
74.1
%
(1.3)
Commission and brokerage ratio
23.9
%
23.8
%
0.1
24.5
%
23.8
%
0.7
Other underwriting expense ratio
2.4
%
2.3
%
0.1
2.4
%
2.5
%
(0.1)
Combined ratio
115.0
%
115.5
%
(0.5)
99.8
%
100.5
%
(0.7)
(NM, Not Meaningful)
(Some amounts may not reconcile due to rounding.)
38
Premiums.
Gross written premiums
increased by 10.1%2.5% to $2.8
$2.6 billion for the three
months ended March 31, September
30,
2022 from
$2.5 billion
for
the three
months
ended September
30,
2021, primarily
due
to
increases
in casualty
pro
rata
business
and
catastrophe
excess
of loss
business
due
to
additional
reinstatement
premiums,
partially
offset
by
a
decline
in
property
pro
rata
business
and
property
casualty
excess
of
loss
business.
Net
written
premiums increased
by 7.3%
to $2.5
billion for
the three
months ended
September 30,
2022 compared
to $2.6 $2.3
billion
for
the
three
months
ended
September
30,
2021.
The
higher
percentage
increase
in
net
written
premiums
compared
to
gross
written
premiums
mainly
related
to
a
reduction
in
business
ceded
to
the
segregated
accounts
of
Mt.
Logan
Re
in
the
three
months
ended
September
30,
2022
compared
to
the
three
months ended
September 30,
2021.
Premiums
earned increased
by 13.6%
to $2.3
billion for
the three
months
ended
September
30,
2022,
compared
to
$2.0
billion
for
the
three
months
ended
September
30,
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 quarter percentage
increase in net earned premiums.
Gross written
premiums increase
d
by 3.6%
to $6.9
billion for
the nine
months ended
September 30,
2022 from
$6.7
billion
for
the
nine
months
ended
September
30,
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
6.4% to
$6.7 billion
for
the nine
months
ended September
30,
2022 compared
to
$6.3
billion for the three nine
months ended March 31,September
30, 2021.
The higher percentage
increase in net
written premiums
compared to gross
written premiums mainly related
to a reduction in business
ceded to the segregated
accounts
of Mt. Logan
Re in the three
nine months
ended March 31, September 30,
2022 compared
to the three nine
months ended March 31,
September
30, 2021.
Premiums earned
increased by 16.9%
13.7% to $2.8
$6.5 billion
for the three
nine months
ended March 31,September
30, 2022,
compared
to $2.4
$5.7
billion
for
the three
nine
months
ended March 31,
September
30,
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 quarteryear-to-date percentage
increase in net earned premiums.

Other Income (Expense). We recorded other income of $15.4 million and $56.6 million for the three months ended March 31, 2022 and 2021, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates. We recognized foreign currency exchange income of $13.1 million and $51.8 million for the three months ended March 31, 2022 and 2021, respectively.

Net Investment Income. Refer to Consolidated Investments Results Section below.

Net Gains (Losses) on Investments. Refer to Consolidated Investments Results Section below.

Claims and Expenses.

39
Incurred Losses
and Loss Adjustment Expenses.LAE
.
The following
table presents our
the incurred
losses and loss adjustment expenses (“LAE”)
LAE for
the Reinsurance
segment
for the periods indicated.

 

Three Months Ended March 31,

 

Current

 

Ratio %/

 

Prior

 

Ratio %/

 

Total

 

Ratio %/

(Dollars in millions)

Year

 

Pt Change

 

Years

 

Pt Change

 

Incurred

 

Pt Change

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,675.8

 

60.0

%

 

$

(0.9)

 

-

%

 

 

1,674.9

 

60.0

%

Catastrophes

 

115.0

 

4.1

%

 

 

-

 

-

%

 

 

115.0

 

4.1

%

Total

$

1,790.8

 

64.1

%

 

$

(0.9)

 

-

%

 

$

1,789.9

 

64.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,443.3

 

60.4

%

 

$

(1.8)

 

-0.1

%

 

$

1,441.4

 

60.3

%

Catastrophes

 

270.0

 

11.3

%

 

 

-

 

-

%

 

 

270.0

 

11.3

%

Total

$

1,713.3

 

71.7

%

 

$

(1.8)

 

-0.1

%

 

$

1,711.4

 

71.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2022/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

232.5

 

(0.4)

pts

 

$

0.9

 

0.1

pts

 

$

233.5

 

(0.3)

pts

Catastrophes

 

(155.0)

 

(7.2)

pts

 

 

-

 

-

pts

 

 

(155.0)

 

(7.2)

pts

Total

$

77.5

 

(7.6)

pts

 

$

0.9

 

0.1

pts

 

$

78.5

 

(7.6)

pts

Three Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,262
56.2
%
$
-
-
%
1,262
56.2
%
Catastrophes
730
32.5
%
-
-
%
730
32.5
%
Total Segment
$
1,992
88.7
%
$
-
-
%
$
1,992
88.7
%
2021
Attritional
$
1,153
58.3
%
$
(2)
-0.1
%
1,151
58.2
%
Catastrophes
615
31.1
%
-
-
%
615
31.1
%
Total Segment
$
1,768
89.4
%
$
(2)
-0.1
%
$
1,766
89.4
%
Variance 2022/2021
Attritional
$
109
(2.1)
pts
$
2
0.1
pts
$
111
(2.1)
pts
Catastrophes
115
1.4
pts
-
-
pts
115
1.4
pts
Total Segment
$
224
(0.7)
pts
$
2
0.1
pts
$
226
(0.7)
pts
Nine Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
3,781
58.6
%
$
(2)
-
%
3,779
58.6
%
Catastrophes
920
14.3
%
-
-
%
920
14.3
%
Total Segment
$
4,701
72.9
%
$
(2)
-
%
$
4,699
72.8
%
2021
Attritional
$
3,339
58.8
%
$
(5)
-0.1
%
3,334
58.7
%
Catastrophes
873
15.4
%
-
-
%
873
15.4
%
Total Segment
$
4,211
74.2
%
$
(5)
-0.1
%
$
4,206
74.1
%
Variance 2022/2021
Attritional
$
443
(0.2)
pts
$
3
0.1
pts
$
445
(0.1)
pts
Catastrophes
48
(1.1)
pts
-
-
pts
48
(1.1)
pts
Total Segment
$
490
(1.3)
pts
$
3
0.1
pts
$
493
(1.3)
pts
Incurred losses and LAE increased
by 4.6% 12.8%
to $1.8$2.0 billion for
the three months
ended March 31,September 30, 2022,,
compared to $1.7
$1.8 billion
for the
three months
ended March 31, 2021,September
30, 2021.
The increase
was primarily
due to
an increase
of
$115 million in
current year
catastrophe
losses and an
increase of $232.5 $109
million in current
year attritional
losses.
The
increase
in
current
year
attritional
losses partially offset by a decline
was
mainly
related
to
the
impact
of $155.0 million
the
increase
in current year catastrophe losses. The increase in current year attritional losses was mainly due to the impact of the increase in
premiums
earned.
The current
year
catastrophe
losses
of $730
million
for
the
three
months
ended September
30,
2022
related
primarily
to
Hurricane
Ian
($600
million),
the
Western
Europe
hailstorms
($70
million),
Typhoon
Nanmadol
($20
million),
Hurricane
Fiona
($20
million)
and
the
2022
Western
Europe
Convective
storm
($20
million).
The $615
million of
current
year
catastrophe
losses of $115.0 million for
the three
months
ended March 31, 2022 September
30, 2021
related primarily to Hurricane Ida
($383 million) and the European floods ($232 million).
Incurred losses
increased by
11.7% to $4.7
billion for
the nine
months ended
September 30,
2022, compared
to
$4.2 billion
for
the nine
months
ended September
30, 2021.
The increase
was
primarily
due to
an increase
of
$443 million
in current
year attritional
losses and
an increase
of $48
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 $920 million for
the nine months
ended September 30,
2022 related primarily
to Hurricane Ian
($600 million),
the 2022 Australia
floods ($75.085 million), the
Western Europe
hailstorms ($70 million),
the 2022 South Africa
flood
($45 million), the 2022 European storms
Western
Europe Convective
storm ($30.030 million), and
the 2022 March U.S. European
storms ($10.021 million),
Typhoon
Nanmadol
($20
million),
Hurricane
Fiona
($20
million),
the
2022
Canada
derecho
($18
million),
the
2022
2
nd
quarter
U.S.
storms
($7
million)
and
the
2022
March
U.S.
storms
($4
million).
The $270.0
$873
million
of
current
year
catastrophe
losses for
the three nine
months

ended
September
30, 2021
related
primarily to
Hurricane

29

ended March 31, 2021 related to

40
Ida ($383 million), the Texas winter stormsEuropean
floods ($260.0242 million) and the Texas
winter storms ($228
million) with the rest of
the losses emanating from the 2021 Australia
floods ($10.0 million).

and the Victoria Australia flooding.

Segment
Expenses.
Commission
and
brokerage
expense
increased
by
14.0%
to
$537
million
for
the
three
months ended
September 30,
2022 compared
to $471
million for
the three
months ended
September 30,
2021.
Commission Brokerage, Taxes and Fees. Commission, brokerage taxes and fees
expense increased by 23.8%16.9% to $605.2 million
$1.6 billion for the three nine months
ended September 30,
2022 compared
to $1.4
billion for
the nine
months ended March 31, 2022, compared to $489.0 million for the three months ended March 31,
September 30,
2021.
The increase was primarily increases
were mainly
due
to the impact of the increases
in premiums earned and changes in the mix of business.

Other Underwriting Expenses.

Segment other underwriting
expenses increased
to $54 million
for the three
months ended
September 30, 2022
from
$45
million
for
the
three
months
ended
September
30,
2021.
Segment
other
underwriting
expenses
increased to $156
million for the nine
months ended September
30, 2022 from $144
million for the
nine months
ended September
30, 2021.
The increases
were 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.
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
1,129
$
1,009
$
120
11.9
%
$
3,376
$
2,924
$
452
15.5
%
Net written premiums
862
733
129
17.6
%
2,492
2,123
369
17.4
%
Premiums earned
$
822
$
680
$
142
20.9
%
$
2,324
$
1,928
$
396
20.6
%
Incurred losses and LAE
631
508
123
24.2
%
1,591
1,366
225
16.5
%
Commission and brokerage
104
93
11
12.0
%
295
258
37
14.3
%
Other underwriting expenses were $161.3
115
96
20
20.5
%
344
280
64
22.8
%
Underwriting gain (loss)
$
(29)
$
(17)
$
(12)
68.6
%
$
95
$
24
$
71
288.9
%
Point Chg
Point Chg
Loss ratio
76.8
%
74.7
%
2.1
68.4
%
70.8
%
(2.4)
Commission and brokerage ratio
12.7
%
13.7
%
-1.0
12.7
%
13.4
%
(0.7)
Other underwriting
expense ratio
14.0
%
14.1
%
-0.1
14.8
%
14.5
%
0.3
Combined ratio
103.5
%
102.5
%
1.0
95.9
%
98.7
%
(2.8)
(NM not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums.
Gross
written
premiums
increased by
11.9% to
$1.1 billion
for the
three
months
ended September
30, 2022
compared
to $1.0
billion for
the three
months
ended September
30,
2021.
The increase
in insurance
premiums
reflects
growth
across
most
lines
of
business
driven
by
positive
rate
and
exposure
increases,
new
business and
strong renewal
retention.
Net written
premiums increased
by 17.6%
to $862
million for
the three
months ended
September 30,
2022 compared
to $733
million for
the three
months ended
September 30,
2021.
The higher percentage increase
in net written premiums
compared to gross written
premiums was mainly due to
a
change
in
business
mix.
Premiums
earned
increased
20.9%
to
$822
million
for
the
three
months
ended
September 30,
2022 compared
to $680 million
for the
three months
ended September
30,
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
quarter percentage increase
in net earned premiums.
Gross
written
premiums
increased
by
15.5%
to
$3.4
billion
for
the
nine
months
ended
September
30,
2022
compared to
$2.9 billion
for the
nine months
ended September
30, 2021.
The increase
in insurance
premiums
reflects
growth across
most lines
of business
driven by
positive rate
and $142.2exposure
increases,
new business
and
41
strong
renewal retention.
Net written
premiums increased
by 17.4%
to $2.5
billion for
the nine
months ended
September
30,
2022
compared
to
$2.1
billion
for
the
nine
months
ended
September
30,
2021.
The
higher
percentage increase
in net
written
premiums compared
to gross
written premiums
was mainly
due to
a change
in
business
mix.
Premiums
earned
increased
20.6% to
$2.3
million
for
the
nine
months
ended
September
30,
2022 compared to
$1.9 billion for
the nine months
ended September 30,
2021.
The change in
premiums earned
relative to
net written
premiums
is the
result of
timing; premiums
are earned
ratably
over the
coverage
period
whereas
written
premiums
are
recorded
at
the
initiation
of
the
coverage
period.
Accordingly,
the
significant
increases
in
gross
written
premiums
during
the
latter
half
of
2021
contributed
to
the
current
year-to-date
percentage increase in net earned
premiums.
Incurred Losses and
LAE.
The following table presents
the incurred losses
and LAE for the Insurance
segment for
the periods indicated.
Three Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
521
63.4
%
$
-
-
%
521
63.4
%
Catastrophes
110
13.4
%
-
-
%
110
13.4
%
Total Segment
$
631
76.8
%
$
-
-
%
$
631
76.8
%
2021
Attritional
$
428
63.0
%
$
-
-
%
428
63.0
%
Catastrophes
80
11.8
%
-
-
%
80
11.8
%
Total Segment
$
508
74.7
%
$
-
-
%
$
508
74.7
%
Variance 2022/2021
Attritional
$
93
0.4
pts
$
-
-
pts
$
93
0.4
pts
Catastrophes
30
1.6
pts
-
-
pts
30
1.6
pts
Total Segment
$
123
2.1
pts
$
-
-
pts
$
123
2.1
pts
Nine Months Ended September 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,470
63.2
%
$
1
-
%
1,471
63.2
%
Catastrophes
120
5.2
%
-
-
%
120
5.2
%
Total Segment
$
1,590
68.4
%
$
1
-
%
$
1,591
68.4
%
2021
Attritional
$
1,229
63.8
%
$
(1)
-0.1
%
1,228
63.7
%
Catastrophes
138
7.1
%
-
-
%
138
7.1
%
Total Segment
$
1,366
70.9
%
$
(1)
-0.1
%
$
1,366
70.8
%
Variance 2022/2021
Attritional
$
241
(0.6)
pts
$
2
0.1
pts
$
242
(0.5)
pts
Catastrophes
(18)
(1.9)
pts
-
-
pts
(18)
(1.9)
pts
Total Segment
$
223
(2.5)
pts
$
2
0.1
pts
$
225
(2.4)
pts
(Some amounts may not reconcile due to rounding.)
Incurred
losses
and
LAE
increased
by
24.2%
to
$631
million
for
the
three
months
ended
September
30,
2022
compared to
$508 million for
the three
months ended
September 30,
2021.
The increase
was mainly
due to
an
increase of $93 million in
current year attritional
losses and an increase
in current year catastrophe
losses of $30
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
$110 million
related
to Hurricane
Ian ($100
million),
Hurricane
Fiona
($5
million)
and
the
Western
Europe
hailstorms
($5
million).
The
$80
million
of
current
year
catastrophe losses
for the three months ended March 31, 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 $14.0 million and $12.4 million for the three months ended March 31, 2022 and 2021, respectively. The increase was mainly due to higher compensation expenses from an increased staff count.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $24.1 million and $15.6 million for the three months ended March 31, 2022 and 2021, respectively. The increase was primarily due to the issuance of $1.0 billion of senior notes in October 2021. Interest expense was also impacted by the movements in the floating interest rate related to the long term subordinated notes, which is reset quarterly per the note agreement. The floating rate was 2.89% as of March 31, 2022.

Income Tax Expense (Benefit). We had income tax expense of $4.1 million and $31.2 million for the three months ended March 31, 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.

Net Income (Loss).

Our net income was $297.8 million and $341.9 million for the three months ended March 31, 2022 and 2021, respectively. These changes were primarily driven by the financial component fluctuations explained above.

Ratios.

Our combined ratio decreased by 6.5 points to 91.6% for the three months ended March 31, 2022, compared to 98.1% for the three months ended March 31, 2021. The loss ratio component decreased 7.6 points for the three months ended March 31, 2022 over the same period last year mainly due to a decline of $155.0 million in current year catastrophe losses. The commission and brokerage ratio components increased to 21.7% for the three months ended March 31, 2022 compared to 20.5% for the three months ended March 31, 2021 mainly due to changes in the mix of business. The other underwriting expense ratios decreased slightly to 5.8% for the three months ended March 31, 2022 compared to 5.9% for the three months ended March 31, 2021.

Shareholders’ Equity.

Shareholders’ equity decreased by $611.6 million to $9.5 billion at March 31, 2022 from $10.1 billion at December 31, 2021, principally as a result of $811.0 million of unrealized depreciation on fixed maturity portfolio net of tax, $61.1 million of shareholder dividends, $34.1 million of net foreign currency translation adjustments, $2.5 million of share-based compensation transactions and the repurchase of 5,000 common shares for $1.3 million, partially offset by $297.8 million of net income and $0.8 million of net benefit plan obligation adjustments, net of tax.

September

30,

Consolidated Investment Results

Net Investment Income.

Net investment income decreased by 6.8% to $242.8 billion for the three months ended March 31, 2022 compared with investment income of $260.4 million for the three months ended March 31, 2021. The decrease was primarily the result of a decline of $25.9 million in limited partnership income, partially offset by an additional $7.3 million of income from fixed maturity investments. The limited partnership income primarily reflects increases 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.

 

Three Months Ended

 

March 31,

(Dollars in millions)

2022

 

2021

Fixed maturities

$

148.2

 

$

140.9

Equity securities

 

4.1

 

 

4.8

Short-term investments and cash

 

0.2

 

 

0.2

Other invested assets

 

 

 

 

 

Limited partnerships

 

88.4

 

 

114.3

Other

 

11.8

 

 

6.0

Gross investment income before adjustments

 

252.8

 

 

266.3

Funds held interest income (expense)

 

3.7

 

 

8.0

Future policy benefit reserve income (expense)

 

(0.2)

 

 

(0.3)

Gross investment income

 

256.3

 

 

274.0

Investment expenses

 

(13.4)

 

 

(13.5)

Net investment income

$

242.8

 

$

260.4

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

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

 

Three Months Ended

 

March 31,

 

2022

 

2021

Annualized pre-tax yield on average cash and invested assets

3.3

%

 

4.2

%

Annualized after-tax yield on average cash and invested assets

2.9

%

 

3.7

%

Annualized return on invested assets

1.2

%

 

4.8

%

31

Net Gains (Losses) on Investments.

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

 

Three Months Ended March 31,

(Dollars in millions)

 

2022

 

 

2021

 

Variance

Realized gains (losses) from dispositions:

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

Gains

$

20.1

 

$

14.9

 

$

5.2

Losses

 

(17.3)

 

 

(5.7)

 

 

(11.6)

Total

 

2.8

 

 

9.2

 

 

(6.4)

 

 

 

 

 

 

 

 

 

Equity securities, fair value:

 

 

 

 

 

 

 

 

Gains

 

3.5

 

 

12.3

 

 

(8.8)

Losses

 

(15.3)

 

 

(6.1)

 

 

(9.2)

Total

 

(11.8)

 

 

6.2

 

 

(18.0)

 

 

 

 

 

 

 

 

 

Other Invested Assets:

 

 

 

 

 

 

 

 

Gains

 

4.5

 

 

1.4

 

 

3.1

Losses

 

(0.3)

 

 

(0.1)

 

 

(0.2)

Total

 

4.2

 

 

1.3

 

 

2.9

 

 

 

 

 

 

 

 

 

Short Term Investments:

 

 

 

 

 

 

 

 

Gains

 

-

 

 

0.1

 

 

(0.1)

Losses

 

(0.1)

 

 

-

 

 

(0.1)

Total

 

(0.1)

 

 

0.1

 

 

(0.2)

 

 

 

 

 

 

 

 

 

Total net realized gains (losses) from dispositions:

 

 

 

 

 

 

 

 

Gains

 

28.1

 

 

28.7

 

 

(0.6)

Losses

 

(33.0)

 

 

(11.9)

 

 

(21.1)

Total

 

(4.9)

 

 

16.8

 

 

(21.7)

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

(11.9)

 

 

(7.0)

 

 

(4.9)

 

 

 

 

 

 

 

 

 

Gains (losses) from fair value adjustments:

 

 

 

 

 

 

 

 

Equity securities, fair value

 

(136.9)

 

 

29.1

 

 

(166.0)

Total

 

(136.9)

 

 

29.1

 

 

(166.0)

 

 

 

 

 

 

 

 

 

Total net gains (losses) on investments

$

(153.6)

 

$

38.9

 

$

(192.5)

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

Net gains (losses) on investments during the three months ended March 31, 2022 primarily relate to net losses from fair value adjustments on equity securities in the amount of $136.9 million as a result of equity market declines during the first quarter of 2022. In addition, we recorded an increase to the allowance for credit losses during the three months ended March 31, 2022 in the amount of $11.9 million primarily related to our direct holdings of Russian corporate fixed maturity securities.

Segment Results.

The Company manages its reinsurance and insurance operations as autonomous units and key strategic decisions are based on the aggregate operating results and projections for these segments of business.

The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies. Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore, the United Kingdom and Switzerland. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe and South America through its offices in the U.S., Canada, Chile, the United Kingdom, Ireland and a branch located in the Netherlands.

32

These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk management, control of aggregate catastrophe exposures, capital, investments and support operations. Management generally monitors and evaluates the financial performance of these operating segments based upon their underwriting results.

Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.

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.

 

Three Months Ended March 31,

(Dollars in millions)

2022

 

2021

 

Variance

 

% Change

Gross written premiums

$

2,185.6

 

 

$

2,059.0

 

 

$

126.6

 

6.1

%

Net written premiums

 

2,081.4

 

 

 

1,913.0

 

 

 

168.5

 

8.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

2,066.3

 

 

$

1,777.5

 

 

$

288.8

 

16.2

%

Incurred losses and LAE

 

1,324.7

 

 

 

1,271.9

 

 

 

52.8

 

4.2

%

Commission and brokerage

 

514.2

 

 

 

408.7

 

 

 

105.5

 

25.8

%

Other underwriting expenses

 

50.5

 

 

 

52.0

 

 

 

(1.5)

 

-3.0

%

Underwriting gain (loss)

$

176.8

 

 

$

44.8

 

 

$

132.0

 

-294.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Point Chg

Loss ratio

 

64.1

%

 

 

71.6

%

 

 

 

 

(7.5)

 

Commission and brokerage ratio

 

24.9

%

 

 

23.0

%

 

 

 

 

1.9

 

Other underwriting expense ratio

 

2.4

%

 

 

2.9

%

 

 

 

 

(0.5)

 

Combined ratio

 

91.4

%

 

 

97.5

%

 

 

 

 

(6.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(NM, Not Meaningful)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

33

Premiums. Gross written premiums increased by 6.1% to $2.2 billion for the three months ended March 31, 2022 from $2.1 billion for the three months ended March 31, 2021, primarily due to increases in casualty pro rata business and financial lines of business. Net written premiums increased by 8.8% to $2.1 billion for the three months ended March 31, 2022 compared to $1.9 billion for the three months ended March 31, 2021. The higher percentage increase in net written premiums compared to gross written premiums mainly related to a reduction in business ceded to the segregated accounts of Mt. Logan Re in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Premiums earned increased by 16.2% to $2.1 billion for the three months ended March 31, 2022, compared to $1.8 billion for the three months ended March 31, 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 quarter 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.

 

Three Months Ended March 31,

 

Current

 

Ratio %/

 

Prior

 

Ratio %/

 

Total

 

Ratio %/

(Dollars in millions)

Year

 

Pt Change

 

Years

 

Pt Change

 

Incurred

 

Pt Change

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,216.3

 

58.9

%

 

$

(1.6)

 

-0.1

%

 

 

1,214.7

 

58.8

%

Catastrophes

 

110.0

 

5.3

%

 

 

-

 

-

%

 

 

110.0

 

5.3

%

Total Segment

$

1,326.3

 

64.2

%

 

$

(1.6)

 

-0.1

%

 

$

1,324.7

 

64.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

1,051.2

 

59.1

%

 

$

(1.8)

 

-0.1

%

 

 

1,049.4

 

59.0

%

Catastrophes

 

222.5

 

12.5

%

 

 

-

 

-

%

 

 

222.5

 

12.5

%

Total Segment

$

1,273.7

 

71.6

%

 

$

(1.8)

 

-0.1

%

 

$

1,271.9

 

71.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2022/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

165.1

 

(0.2)

pts

 

$

0.2

 

-

pts

 

$

165.3

 

(0.2)

pts

Catastrophes

 

(112.5)

 

(7.2)

pts

 

 

-

 

-

pts

 

 

(112.5)

 

(7.2)

pts

Total Segment

$

52.6

 

(7.4)

pts

 

$

0.2

 

-

pts

 

$

52.8

 

(7.5)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incurred losses increased by 4.2% to $1.32 billion for the three months ended March 31, 2022, compared to $1.27 billion for the three months ended March 31, 2021. The increase was primarily due to an increase of $165.1 million in current year attritional losses, partially offset by a decrease of $112.5 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. The current year catastrophe losses of $110.0 million for the three months ended March 31, 2022 related primarily to the 2022 Australia floods ($75.0 million), the 2022 European storms ($30.0 million), and the 2022 March U.S. storms ($5.0 million). The $222.5 million of current year catastrophe losses for the three months ended March 31, 2021 related to Hurricane Ida.

Incurred
losses
and
LAE
increased
by
16.5%
to
$1.6
billion
for
the Texas winter storms ($212.5 million) and
nine
months
ended
September
30,
2022
compared
to
$1.4 billion
for
the 2021 Australia floods ($10.0 million).

Segment Expenses. Commission and brokerage expense increased by 25.8% to $514.2 million for the three

nine
months
ended March 31, 2022 compared September
30,
2021.
The increase
was
mainly
due
to $408.7
an
42
increase
of
$241
millionfor the three months ended March 31, 2021.
in
current
year
attritional
losses,
partially
offset
by
a
decrease
in
current
year
catastrophe
losses of $18 million.
The increase in
current year
attritional losses
was mainlyprimarily due
to the impact of the increase in premiums earned and changes in the mix of business.

Segment other underwriting expenses decreased to $50.5 million for the three months ended March 31, 2022 from $52.0 million for the three months ended March 31, 2021. The decrease was mainly due to lower variable compensation expenses.

34

Insurance.

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

 

Three Months Ended March 31,

(Dollars in millions)

2022

 

2021

 

Variance

 

% Change

Gross written premiums

$

1,000.7

 

 

$

872.4

 

 

$

128.3

 

14.7

%

Net written premiums

 

730.6

 

 

 

641.0

 

 

 

89.6

 

14.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums earned

$

725.5

 

 

$

610.4

 

 

$

115.1

 

18.9

%

Incurred losses and LAE

 

465.1

 

 

 

439.5

 

 

 

25.6

 

5.8

%

Commission and brokerage

 

91.0

 

 

 

80.3

 

 

 

10.7

 

13.3

%

Other underwriting expenses

 

110.8

 

 

 

90.2

 

 

 

20.6

 

22.8

%

Underwriting gain (loss)

$

58.5

 

 

$

0.4

 

 

$

58.2

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Point Chg

Loss ratio

 

64.1

%

 

 

72.0

%

 

 

 

 

(7.9)

 

Commission and brokerage ratio

 

12.5

%

 

 

13.2

%

 

 

 

 

(0.7)

 

Other underwriting expense ratio

 

15.3

%

 

 

14.8

%

 

 

 

 

0.5

 

Combined ratio

 

91.9

%

 

 

99.9

%

 

 

 

 

(8.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(NM not meaningful)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 14.7% to $1.0 billion for the three months ended March 31, 2022 compared to $872.4 million for the three months ended March 31, 2021. This rise was primarily related to increases in specialty casualty business and other specialty business. Net written premiums increased by 14.0% to $730.6 million for the three months ended March 31, 2022 compared to $641.0 million for the three months ended March 31, 2021, which is consistent with the change in gross written premiums. Premiums earned increased 18.9% to $725.5 million for the three months ended March 31, 2022 compared to $610.4 million for the three months ended March 31, 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 quarter percentage increase in net earned premiums.

Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Insurance segment for the periods indicated.

 

Three Months Ended March 31,

 

Current

 

Ratio %/

 

Prior

 

Ratio %/

 

Total

 

Ratio %/

(Dollars in millions)

Year

 

Pt Change

 

Years

 

Pt Change

 

Incurred

 

Pt Change

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

459.5

 

63.3

%

 

$

0.7

 

0.1

%

 

 

460.1

 

63.4

%

Catastrophes

 

5.0

 

0.7

%

 

 

-

 

-

%

 

 

5.0

 

0.7

%

Total Segment

$

464.5

 

64.0

%

 

$

0.7

 

0.1

%

 

$

465.1

 

64.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

392.0

 

64.2

%

 

$

-

 

-

%

 

$

392.0

 

64.2

%

Catastrophes

 

47.5

 

7.8

%

 

 

-

 

-

%

 

 

47.5

 

7.8

%

Total Segment

$

439.5

 

72.0

%

 

$

-

 

-

%

 

$

439.5

 

72.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance 2022/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attritional

$

67.5

 

(0.9)

pts

 

$

0.7

 

0.1

pts

 

$

68.1

 

(0.8)

pts

Catastrophes

 

(42.5)

 

(7.1)

pts

 

 

-

 

-

pts

 

 

(42.5)

 

(7.1)

pts

Total Segment

$

25.0

 

(8.0)

pts

 

$

0.7

 

0.1

pts

 

$

25.6

 

(7.9)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incurred losses and LAE increased by 5.8% to $465.1 million for the three months ended March 31, 2022 compared to $439.5 million for the three months ended March 31, 2021. The increase was mainly due to an

35

increase of $67.5 million in current year attritional losses, partially offset by a decrease in current year catastrophe losses of $42.5 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 $5.0$120 million related to
Hurricane Ian
($100
million),
Hurricane
Fiona
($5
million),
the
Western
Europe
hailstorms
($5
million),
the
2022
March
U.S.
storms
($5
million)
and
the
2022
2
nd
quarter
U.S.
storms
($5
million).
The
$138
million
of
current
year
catastrophe losses
for the nine months
ended September 30, 2021
related to Hurricane
Ida ($80 million) and the
Texas
winter storms ($58 million).
Segment Expenses.
Commission and
brokerage
increased by
12.0% to $104
million for
the three
months ended
September 30, 2022 March U.S. storms. The $47.5compared
to $93 million of current year catastrophe losses for the
three months ended March 31, 2021 relatedSeptember
30, 2021.
Commission and
brokerage increased
by 14.3% to $295 million for
the Texas winter storms.

Segment Expenses. Commission and brokerage increased by 13.3% to $91.0 million for the threenine months ended March 31,September

30, 2022 compared to $80.3
$258
million for
the three nine
months ended March 31, 2021. The increase was
September 30,
2021.
These increases
were mainly
due to
the impact
of the increase
increases
in
premiums earned.

Segment other underwriting

earned
and
increased
expenses increased
related
to $110.8 million for
the three months ended March 31, 2022 compared to $90.2 million for
continued
build
out
of
the three months ended March 31, 2021. The increase was 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.

FINANCIAL CONDITION

Investments. Total investments

Segment
other
underwriting
expenses
increased
to
$115
million
for
the
three
months
ended
September
30,
2022 compared
to
$96 million
for
the
three
months
ended
September
30,
2021.
Segment
other
underwriting
expenses increased to $344 million for
the nine months ended September 30, 2022 compared
to $280 million for
the nine months
ended September 30,
2021.
These increases
were $27.5 billion at March 31, 2022, a decrease of $712.6 million compared mainly due
to $28.2 billion at December 31, 2021. This decrease was primarily related to declines in fixed maturity securities and short-term investments. Fixed maturity securities decreased due to decreases in fair values resulting from higher interest rates, partially offset by net purchases of securities. Short-term investments decreased as a result the impact
of the reinvestment of fundsincrease
s
in
premiums earned and increased
expenses related to
the settlement continued build out
of affiliated reinsurance agreements during the three months ended March 31, 2022.

The Company’s limited partnership investments are comprisedinsurance business,

including
an expansion of the international insurance
platform.
FINANCIAL CONDITION
Investments.
Total
investments
were $26.8
billion at
September 30,
2022, a
decrease of
$1.4 million
compared
to
$28.2
billion
at
December
31,
2021.
This
decrease
was
primarily
related
to
declines
in
fixed
maturity
securities,
equity securities
and short
-term investments.
Fixed
maturity
securities decreased
due to
declines in
fair
values
resulting
primarily
from
higher
interest
rates,
as
well
as
net
purchases
of
fixed
maturity
securities
during
the
period.
Equity
securities
decreased
due
to
declines
in
fair
values
due
to
diminished
market
performance as well as net sales of equity securities during
the period.
The
Company’s
limited
partnership
investments
are
comprised
of
limited
partnerships
that
invest
in
private
equities.
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
summarize
the
composition
and
characteristics
of
our
investment
portfolio
as
of
the
dates
indicated.
At
At
September 30, 2022
December 31, 2021
Fixed income portfolio as of the dates indicated.

 

At

 

At

 

March 31, 2022

 

December 31, 2021

Fixed income portfolio duration (years)

3.1

 

 

3.2

 

Fixed income composite credit quality

A+

 

 

A+

 

duration (years)

3.1
3.2
Fixed income composite credit quality
A+
A+
Reinsurance Recoverables.  

Recoverables

.
Reinsurance
recoverables
for both
paid and
unpaid losses
totaled $2.1 $2.2
billion and $2.1
$2.1 billion
at March 31, September
30,
2022 and December 31,
2021, respectively.
At March 31, September 30,
2022, $649.0$526 million, or 30.9%
23.5%, was receivable
from
Mt.
Logan
Re
collateralized
segregated
accounts; $224.1
$234
million,
or 10.7%
10.4%,
was
receivable
from
Munich
Reinsurance
America,
Inc. (“
(“Munich
Re”)
and $123.5
$140
million,
or 5.9%
6.3%
was
receivable
from
Endurance
Specialty
Holdings, Ltd. (“Endurance”).
No other retrocessionaire accountedaccoun
ted for more than 5% of our recoverables.

recoverables

.
43
Loss
and
LAE
Reserves.
Gross
loss
and
LAE
reserves
totaled $19.5
$21.2
billion
and $19.0
$19.0
billion
at March 31,
September
30,
2022 and December 31, 2021, respectively.

36

The following

tables summarize
gross outstanding
loss and
LAE reserves
by segment,
classified by
case reserves
and IBNR reserves, for the periods indicated.

 

At March 31, 2022

 

Case

 

IBNR

 

Total

 

% of

(Dollars in millions)

Reserves

 

Reserves

 

Reserves

 

Total

Reinsurance

$

5,639.4

 

$

8,480.4

 

$

14,119.8

 

72.4

%

Insurance

 

1,570.3

 

 

3,652.5

 

 

5,222.8

 

26.8

%

Total excluding A&E

 

7,209.6

 

 

12,132.9

 

 

19,342.5

 

99.2

%

A&E

 

148.4

 

 

4.8

 

 

153.1

 

0.8

%

Total including A&E

$

7,358.0

 

$

12,137.7

 

$

19,495.6

 

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

$

5,415.0

 

$

8,312.3

 

$

13,727.3

 

72.2

%

Insurance

 

1,546.2

 

 

3,562.4

 

 

5,108.6

 

26.9

%

Total excluding A&E

 

6,961.2

 

 

11,874.7

 

 

18,835.9

 

99.1

%

A&E

 

163.7

 

 

9.9

 

 

173.6

 

0.9

%

Total including A&E

$

7,124.8

 

$

11,884.7

 

$

19,009.5

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

 

 

 

 

 

 

Changes

At September 30, 2022
Case
IBNR
Total
% of
(Dollars in premiums earned and business mix, reserve re-estimations, catastrophe losses and changesmillions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
5,763
$
9,620
$
15,383
72.5
%
Insurance
1,728
3,973
5,701
26.9
%
Total excluding A&E
7,491
13,592
21,083
99.4
%
A&E
139
-
139
0.6
%
Total including A&E
$
7,630
$
13,592
$
21,222
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 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, legal entities,
and in the aggregate.
In
order to set appropriate
reserves, we make
qualitative and quantitative
analyses and judgments at
these various
levels.
Additionally,
the attribution
of reserves,
changes
in
reserves
and incurred
losses
among accident
years
requires
qualitative
and
quantitative
adjustments
and
allocations
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.
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.

37

44
Asbestos
and
Environmental
Exposures.
Asbestos
and
Environmental
(“A&E”)
exposures
represent
a
separate
exposure
group
for
monitoring
and
evaluating
reserve
adequacy.
The
following
table
summarizes
the
outstanding
loss
reserves
with
respect
to
A&E exposures represent
reserves
on
both
a separate exposure group
gross
and
net
of
retrocessions
basis
for monitoring and evaluating reserve adequacy. The following table summarizes
the outstanding loss reserves with respect to A&E reserves on both a gross and net of retrocessions basis for the
periods indicated.

 

At

 

At

 

March 31,

 

December 31,

(Dollars in millions)

2022

 

2021

Gross reserves

$

153.1

 

$

175.2

Ceded reserves

 

(17.5)

 

 

(19.0)

Net reserves

$

135.6

 

$

156.1

 

 

 

 

 

 

(Some amounts may not reconcile due to rounding.)

 

 

 

 

 

With respect

At
At
September 30,
December 31,
(Dollars in millions)
2022
2021
Gross reserves
$
139
$
175
Ceded reserves
(15)
(19)
Net reserves
$
124
$
156
(Some amounts may not reconcile due to rounding.)
With
respect
to
asbestos
only,
at March 31,
September
30,
2022,
we
had
net
asbestos
loss
reserves
of $135.8
$125
million,
or 100.2%
101.0%, of total net A&E reserves, all of which was
for assumed business.

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
“survival
ratio”
to
compare
the
A&E
reserves
among
companies
with
such
liabilities.
The survival ratio is typically calculated
by dividing a company’s
current net reserves by the three year
average of
annual
paid
losses.
Hence,
the
survival
ratio
equals
the
number
of
years
that
it
would
take
to
exhaust
the
current reserves
if future
loss payments
were to
continue at
historical
levels.
Using this
measurement,
our net
three
year
asbestos
survival
ratio
was 3.8
3.5
years
at March 31,
September
30,
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 March 31,
September 30,
2022 and
December 31,
2021 was $9.5
$7.6 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)

2021

 

2020

 

2021

 

2020

Regulatory targeted capital

$

2,169.3

 

$

1,923.2

 

$

2,960.0

 

$

2,489.8

Actual capital

$

3,184.1

 

$

2,930.3

 

$

5,717.1

 

$

5,276.0

Bermuda Re
(1)
Everest Re
(2)
At December 31,
At December 31,
(Dollars in millions)
2021
2020
2021
2020
Regulatory targeted capital
$
2,169
$
1,923
$
2,960
$
2,490
Actual capital
$
3,184
$
2,930
$
5,717
$
5,276
(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.

Our financial strength
ratings as determined
by A.M. Best, Standard
& Poor’s and
Moody’s are important
as they
provide
our
customers
and
investors
with
an
independent
assessment
of
our
financial
strength
using
a
rating
45
scale that provides
for relative comparisons.
We continue
to possess significant
financial flexibility and
access to

38

debt
and

debt and equity markets

as a
result
of our
financial
strength,
as evidenced
by
the
financial strength
ratings
as evidenced by the financial strength ratings as
assigned by independent rating agencies.

We maintain
our own
economic capital
models to
monitor and
project our
overall capital,
as well
as the
capital
at
our
operating
subsidiaries.
A
key
input
to
the
economic
models
is
projected
income
and
this
input
is
continually compared to actual results,
which may require a change in the capital
strategy.

On October 4, 2021, we issued $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.

During the
first quarter three
quarters
of 2022,
we repurchased 5,000
238,771 shares
for $1.3 $60
million in
the open
market
and
paid $61.1
$191
million
in
dividends
to
adjust
our
capital
position
and
enhance
long
term
expected
returns
to
our
shareholders.
In
2021,
we
repurchased
887,622
shares
for
$225
million
in
the
open
market
and
paid
$247
million in
dividends to
adjust our
capital position
and enhance
long term
expected
returns to
our shareholders. In 2021, we repurchased 887,622 shares for $225.1 million in the open market and paid $246.7 million in dividends to adjust our capital position and enhance long term expected returns to our shareholders.
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 March 31,
September 30,
2022, we
had repurchased 30.5
30.8 million
shares under this authorization.

We
also
repurchased
$6
million
of
our
long
term
subordinated
notes
during
the
third
quarter
of
2022
and
recognized
a
gain
of
$1
million
on
the
repurchase.
We
may
continue,
from
time
to
time,
to
seek
to
retire
portions
of
our
outstanding
debt
securities
through
cash
repurchases,
in
open-market
purchases,
privately
negotiated
transactions
or
otherwise.
Such
repurchases,
if
any,
will
be
subject
to
and
depend
on
prevailing
market
conditions,
our liquidity
requirements,
contractual
restrictions
and other
factors.
The amounts
involved
in any such transactions, individually or in the
aggregate, may be material.

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 $846.4
$2.7
billion
and
$2.8
billion
for
the
nine
months
ended
September
30,
2022
and
2021,
respectively.
Additionally,
these cash
flows reflected
net catastrophe
loss payments
of $534
million and $904.4
$526 million
for the
nine months
ended September
30, 2022
and 2021,
respectively
and net
tax
payments
of $167
million and
$40
million for the threenine months ended March 31,September
30, 2022 and 2021, respectively. Additionally, these cash flows reflected net catastrophe loss payments of $196.0 million and $173.6 million for the three months ended March 31, 2022 and 2021, respectively and net tax payments of $2.7 million and $6.4 million for the three months ended March 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
and
dispositions,
both
short-term
investments
and
longer
term
maturities are available to supplement
other operating cash flows.

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
September 30,
2022 and
December 31,
2021,
we
held cash
and short-term
investments
of
$2.3
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, that provide additional liquidity for payment of claims. At March 31, 2022 and December 31, 2021, we held cash and short-term investments of $2.6 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 March 31,September
30, 2022, we had $1.4
$1.3 billion of
available for
sale fixed
maturity securities
maturing within one
year or less, $7.1
$7.2
billion
maturing
within
one
to
five
years
and $6.2
$5.1
billion
maturing
after
five
years.
Our $1.8
$1.3
billion
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
46
do
not anticipate
selling
a significant
amount
of securities
to
pay
losses
and LAE
but have
the
ability
to
do so.
Sales of
securities might
result in
net gains
(losses)
on investments. investments
.
At March 31,September
30, 2022
we had $653.0 million of

$2.5 billion

39

of net
pre-tax

unrealized
depreciation
related
to
fixed
maturity
securities,
comprised
of
$2.3
billion
of
pre-tax

net pre-tax unrealized depreciation related to fixed maturity securities, comprised of $806.8 million of pre-tax unrealized depreciation and $153.7$153 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 claims.

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 $1.2
$1.2
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 $340.0
$340
million
of
uncommitted
credit
facilities,
which
would
require
approval
from
the
applicable
lender.
There is
no guarantee
the uncommitted
capacity will
be available
to us
on a
future date.
See Note
9 –
Credit Facilities for further details.

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
“market sensitive
instruments”).
We do not generally
enter into market
sensitive instruments for trading
purposes.

Our
current
investment
strategy
seeks
to
maximize
after-tax
income
through
a
high
quality,
diversified,
fixed
maturity
portfolio,
while
maintaining
an
adequate
level
of
liquidity.
Our
mix
of
investments
is
adjusted
periodically,
consistent
with
our
current
and
projected
operating
results
and
market
conditions.
The
fixed
maturity
securities
in
the
investment
portfolio
are
comprised
of
non-trading
available
for
sale
securities.
Additionally, we
have invested
in equity securities.

The
overall
investment
strategy
considers
the
scope
of
present
and
anticipated
Company
operations.
In
particular,
estimates
of
the
financial
impact
resulting
from
non-investment
asset
and
liability
transactions,
together
with our
capital
structure
and
other factors,
are used
to
develop
a net
liability analysis.
This analysis
includes estimated payout
characteristics for
which our investments
provide liquidity.
This analysis is considered
in the development of specific investment
strategies for asset
allocation, duration and
credit quality.
The change
in overall market sensitive
risk exposure principally reflects
the asset changes that took place during the period.

Interest
Rate
Risk.
Our $29.3
$28.6
billion
investment
portfolio,
at March 31,
September
30,
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 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 dollar potential
change in
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 $3.4
$3.6 billion
of mortgage-backed mortgage
-backed
securities
in
the $22.0
$21.0 billion
fixed
maturity
portfolio.
Prepayment risk results
from potential accelerated
principal payments that
shorten the average
life and thus
the
expected yield of the security.

The table
below displays
the potential
impact of market
fair value
fluctuations and
after-tax unrealized
appreciation on
our fixed maturity
portfolio (including $823.9
$611 million of short-termshort
-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
47
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 U.S.non-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

40

functional currency, the effective

duration of
the involved
portfolio of
securities was
used as a
proxy for
the market fair
value change
under
the various interest rate
change scenarios.

 

Impact of Interest Rate Shift in Basis Points

 

At March 31, 2022

 

-200

 

 

-100

 

0

 

 

100

 

200

(Dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Market/Fair Value

$

24,300.1

 

 

$

23,561.2

 

 

$

22,822.3

 

 

$

22,083.4

 

 

$

21,344.5

 

Market/Fair Value Change from Base (%)

 

6.5

%

 

 

3.2

%

 

 

0.0

%

 

 

(3.2)

%

 

 

(6.5)

%

Change in Unrealized Appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax from Base ($)

$

1,286.2

 

 

$

643.1

 

 

$

-

 

 

$

(643.1)

 

 

$

(1,286.2)

 

We had $19.5 billion and $19.0 billion

Impact of Interest Rate Shift in Basis Points
At September 30, 2022
-200
-100
0
100
200
(Dollars in millions)
Total Fair Value
$
25,586
$
24,861
$
24,135
$
23,410
$
22,684
Fair Value Change from Base (%)
6.0
%
3.0
%
0.0
%
(3.0)
%
(6.0)
%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,266
$
633
$
-
$
(633)
$
(1,266)
We
had
$21.2
billion
and
$19.0
billion
of
gross
reserves
for
losses
and
LAE
as
of March
September
30,
2022
and
December
31, 2022 and December 31,
2021,
respectively.
These amounts
are
recorded
at
their
nominal
value,
as
opposed
to
present
value, which
would reflect
a discount
adjustment to
reflect the
time value
of money.
Since losses
are paid
out
over a period
of time, the present
value of the reserves
is less than the nominal
value.
As interest
rates rise, the
present
value
of the
reserves
decreases
and,
conversely,
as interest
rates
decline, the
present
value
increases.
These
movements
are
the
opposite
of
the
interest
rate
impacts
on
the
fair
value
of
investments.
While
the
difference
between
present
value
and
nominal
value
is
not
reflected
in
our
financial
statements,
our
financial
results
will include
investment
income
over
time
from
the
investment
portfolio
until
the
claims
are
paid.
Our
loss
and
loss
reserve
obligations
have
an
expected
duration
of
approximately
3.7
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
$2.8
billion
resulting
in
a
discounted
reserve
balance
of
approximately
$16.3
billion,
representing
approximately
72.8%
of
the
value
of
the
fixed
maturity
investment
portfolio funds.
Equity
Risk.
Equity
risk is
the opposite potential
change
in
fair
value
of the interest rate impacts on the fair value
common
stock,
preferred
stock
and
mutual
fund
portfolios
arising
from
changing
prices.
Our
equity
investments
consist
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
a
diversified
portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration
of approximately 3.9 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 $1.6 billion resulting in a discounted reserve balance of approximately $15.9 billion, representing approximately 69.5% 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,
and
mutual
fund
investments
in
emerging
market
debt.
The
primary
objective
of the
equity
portfolio
is
to
obtain
greater
total
return
relative
to
our
core
bonds
over
time through
market appreciation and income.

The table
below displays
the impact on fair/market
fair value
and after-tax
change in fair/market
fair 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 March 31, 2022

(Dollars in millions)

-20%

 

-10%

 

0%

 

10%

 

20%

Fair/Market Value of the Equity Portfolio

$

1,424.4

 

$

1,602.5

 

$

1,780.5

 

$

1,958.6

 

$

2,136.6

After-tax Change in Fair/Market Value

$

(282.2)

 

$

(141.1)

 

$

-

 

$

141.1

 

$

282.2

Impact of Percentage Change in Equity Fair/Market Values
At September 30, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
1,041
$
1,171
$
1,301
$
1,431
$
1,561
After-tax Change in Fair Value
$
(206)
$
(103)
$
-
$
103
$
206
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 country
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 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
fair value
of available
for sale
fixed
maturities
due to changes in
foreign currency exchange
rates, in relation
to functional currency,
is reflected as part of
other
48
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. 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

41

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

Safe Harbor Disclosure.

This
report
contains
forward-looking
statements
within
the
meaning
of
the
U.S.
federal
securities
laws.
We
intend
these
forward-looking
statements
to
be
covered
by
the
safe
harbor
provisions
for
forward-looking
statements
in
the
federal
securities
laws.
In
some
cases,
these
statements
can
be
identified
by
the
use
of
forward-looking
words
such
as “may”
“may”, “will”
“will”, “should”
“should”, “could”
“could”, “anticipate”
“anticipate”, “estimate”
“estimate”, “expect”
“expect”, “plan”
“plan”, “believe”
“believe”, “predict”
“predict”, “potential”
“potential”
and “intend”
“intend”.
Forward-looking
statements
contained
in
this
report
include
information regarding
our reserves for losses and LAE,
the CARES Act, 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”
in the Company’s
most
recent
10-K
filing.
We
undertake
no
obligation
to
update
or
revise
publicly
any
forward-looking
statements,
whether as a result of new information,
future events or otherwise.



ITEM 3.

QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Market Risk Instruments.
See “Liquidity and Capital Resources - Market
Sensitive Instruments” in PART
I – ITEM 2.



2.

ITEM 4.

CONTROLS AND PROCEDURES

As
of
the
end
of
the
period
covered
by
this
report,
our
management
carried
out
an
evaluation,
with
the
participation
of
the
Chief
Executive
Officer
and
Chief
Financial
Officer,
of
the
effectiveness
of
our
disclosure
controls and
procedures (as
defined in Rule
13a-15(e) under the
Securities Exchange
Act of 1934 (the
(the “Exchange
Act”)).
Based
on
their
evaluation,
the
Chief
Executive
Officer
and
Chief
Financial
Officer
concluded
that
our
disclosure controls
and procedures are
effective to
ensure that
information required
to be disclosed
by us in the
reports that
it files
or submits
under the
Exchange Act
is recorded,
processed, summarized
and reported
within
the time periods specified in
Securities and Exchange
Commission’s
rules and forms.
Our management, with
the
participation
of
the
Chief
Executive
Officer
and
Chief
Financial
Officer,
also
conducted
an
evaluation
of
our
internal control
over financial reporting
to determine
whether any
changes occurred during
the quarter covered
by this report that have
materially affected,
or are reasonably
likely to materially
affect, our internal
control over
financial reporting.
Based on that
evaluation, there
has been no
such change during
the quarter covered
by this report.



report.

PART II

ITEM 1.

LEGAL PROCEEDINGS

In
the
ordinary
course
of
business,
the
Company
is
involved
in
lawsuits,
arbitrations
and
other
formal
and
informal
dispute
resolution
procedures,
the
outcomes
of
which
will
determine
the
Company’s
rights
and
49
obligations
under insurance
and reinsurance
agreements.
In the ordinary course of business, some
disputes,
the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements. In some disputes, the Company
seeks
to
enforce
its
rights under an agreement or to
collect funds owing to it.
In other matters, the Company
is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately

42

others
to

collect
funds
or
enforce
alleged
rights.
These
disputes
arise
from
time
to
time
and
are
ultimately

resolved through

both informal
and formal
means, including
negotiated resolution,
arbitration and
litigation.
In
all such matters,
the Company believes
that its positions
are legally and
commercially reasonable.
The Company
considers
the statuses
of these
proceedings
when determining
its reserves
for unpaid
loss and
loss adjustment
expenses.

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



ITEM 1A.

RISK FACTORS

No material changes.



ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS

Issuer Purchases of Equity Securities.

Issuer Purchases of Equity Securities

 

(a)

(b)

(c)

(d)

 

 

 

 

 

Maximum Number (or

 

 

 

 

Total Number of

Approximate Dollar

 

 

 

 

Shares (or Units)

Value) of Shares (or

 

 

 

 

Purchased as Part

Units) that May Yet

 

Total Number of

 

 

of Publicly

Be Purchased Under

 

Shares (or Units)

Average Price Paid

Announced Plans or

the Plans or

Period

Purchased

per Share (or Unit)

Programs

Programs (1)

January 1 - 31, 2022

-

$

-

-

1,470,181

February 1 - 28, 2022

44,455

$

299.5577

-

1,470,181

March 1 - 31, 2022

11,175

$

269.9151

5,000

1,465,181

Total

55,630

$

-

5,000

1,465,181

(1)On

Issuer Purchases of Equity Securities
(a)
(b)
(c)
(d)
Maximum Number (or
Total Number of
Approximate Dollar
Shares (or Units)
Value) of Shares (or
Purchased as Part
Units) that May 22, 2020, Yet
Total Number of
of Publicly
Be Purchased Under
Shares (or Units)
Average Price Paid
Announced Plans or
the Plans or
Period
Purchased
per Share (or Unit)
Programs
Programs (1)
July 1 - 31, 2022
-
$
-
-
1,465,181
August 1 - 31, 2022
128,764
$
252.6871
128,764
1,336,417
September 1 - 30, 2022
110,531
$
252.6578
105,007
1,231,410
Total
239,295
$
-
233,771
1,231,410
(1)
On
May
22,
2020,
the
Company’s
executive
committee
of
the
Board
of
Directors
approved
an
amendment
to
the
share
repurchase
program
authorizing the
Company
and/or its
subsidiary Holdings,
to purchase
up to
a current
aggregate
of 32.0
million of
the Company’s
shares (recognizing
that the
number
of
shares
authorized
for
repurchase
has
been
reduced
by
those
shares
that
have
already
been
purchased)
in
open
market
transactions,
privately
negotiated transactions or both.
Currently, the Company
and/or its subsidiary Holdings have repurchased 30.5
30.8 million of the Company’s shares.



ITEM 3.

DEFAULTS
UPON SENIOR SECURITIES

None.



None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.
ITEM 5.
OTHER INFORMATION
None.
50
ITEM 6.
EXHIBITS
Exhibit Index
Exhibit No.
Description
31.1
31.2
32.1
Section 906 Certification of Juan C. Andrade and 

Not applicable.



101.INS

ITEM 5.OTHER INFORMATION

None.



XBRL Instance Document

43

101.SCH

XBRL Taxonomy
Extension Schema
101.CAL
XBRL Taxonomy
Extension Calculation Linkbase
101.DEF
XBRL Taxonomy
Extension Definition Linkbase
101.LAB
XBRL Taxonomy
Extension Labels Linkbase
101.PRE
XBRL Taxonomy
Extension Presentation Linkbase
104
Cover Page Interactive
Data File (embedded within the Inline XBRL document)
51

ITEM 6.EXHIBITS

Exhibit Index

Exhibit No.

Description

31.1

Section 302 Certification of Juan C. Andrade

31.2

Section 302 Certification of Mark Kociancic

32.1

Section 906 Certification of Juan C. Andrade and Mark Kociancic

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Labels Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

44

Everest Re Group,

Ltd.

Signatures

Pursuant
to the
requirements
of the
Securities Exchange
Act of
1934, the
registrant
has duly
caused this
report
to be signed on its behalf by the undersigned thereunto
duly authorized.

Everest Re Group, Ltd.

(Registrant)

/S/ MARK KOCIANCIC

Mark Kociancic

Executive Vice President and

Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

Dated: May 5, 2022

45

Everest Re Group,
Ltd.
(Registrant)
/S/ MARK KOCIANCIC
Mark Kociancic
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Dated:
November 3, 2022