Everest Re 10Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C.

20549

FORM

10-Q

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

For the quarterly period ended

September 30, 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.)

Seon Place – 4th Floor

141 Front Street

PO Box HM 845

Hamilton

HM 19

Bermuda

441

295-0006

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive office)

Indicate

check

mark

whether

the

registrant:

(1)

has

filed

all

reports

required

filed

Section

15(d)

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

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

Indicate by check mark

whether the registrant

is a large accelerated

filer, an

accelerated filer,

a non-accelerated filer,

a smaller reporting

company

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“smaller

reporting

company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

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

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act).

YES

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

Class

Trading Symbol

Name of Exchange where

Registered

Number of Shares Outstanding

At November 1, 2022

Common Shares, $0.01 par value

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

Consolidated Balance Sheets as of September 30, 2022 (unaudited)

and December 31, 2021

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

three and nine months ended September 30, 2022 and 2021 (unaudited)

Consolidated Statements of Changes in Shareholders’ Equity for the three and nine

months ended September 30, 2022 and 2021 (unaudited)

Consolidated Statements of Cash Flows for the nine months ended

September 30, 2022 and 2021 (unaudited)

Notes to Consolidated Interim Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operation

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

EVEREST RE GROUP,

LTD.

CONSOLIDATED

BALANCE SHEETS

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, $

(

)

; 2021, $

(

)

Fixed maturities - held to maturity, at amortized cost, net of credit allowances

(fair value: 2022, $

817

, credit allowances: 2022, $

(

)

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

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

Unearned premium reserve

4,795

4,610

Funds held under reinsurance treaties

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

Accrued interest on debt and borrowings

Unsettled securities payable

134

Other liabilities

548

540

Total liabilities

30,495

28,046

Commitments and contingencies (Note 7)

(nil)

SHAREHOLDERS' EQUITY:

Preferred shares, par value: $

0.01

;

50.0

shares authorized;

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

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 $

at 2021

(2,348)

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.

EVEREST RE GROUP,

LTD.

CONSOLIDATED

STATEMENTS

OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions, except per share amounts)

2022

2021

2022

2021

(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

(39)

Total net gains (losses) on investments

(129)

(4)

(519)

139

Other income (expense)

(16)

(20)

(71)

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

Interest, fees and bond issue cost amortization expense

Total claims and expenses

3,474

3,013

8,785

7,700

INCOME (LOSS) BEFORE TAXES

(401)

(88)

1,046

Income tax expense (benefit)

(82)

(14)

(81)

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)

(1)

(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)

Total benefit plan net gain (loss) for the period

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.

EVEREST RE GROUP,

LTD.

CONSOLIDATED

STATEMENTS

CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions, except dividends per share amounts)

2022

2021

2022

2021

(unaudited)

COMMON SHARES (shares outstanding):

Balance beginning of period

Issued (redeemed) during the period, net

Treasury shares acquired

(1)

Balance end of period

COMMON SHARES (par value):

Balance beginning of period

Issued during the period, net

Balance end of period

ADDITIONAL PAID-IN CAPITAL:

Balance beginning of period

2,284

2,256

2,274

2,245

Share-based compensation plans

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

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.

EVEREST RE GROUP,

LTD.

CONSOLIDATED

STATEMENTS

OF CASH FLOWS

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)

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)

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

Amortization of bond premium (accrual of bond discount)

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

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

(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

Interest paid

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.

NOTES TO CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

For the Three and Nine Months Ended September

30, 2022 and 2021

GENERAL

Everest

Re Group,

Ltd. (“Group”),

a Bermuda company,

through its

subsidiaries, principally

provides reinsurance

and

insurance

the

U.S.,

Bermuda

and

international

markets.

used

this

document,

“Company”

means

Group and its subsidiaries.

BASIS OF PRESENTATION

The unaudited

consolidated

financial statements

of the

Company

as of

September

30, 2022

and December

31,

2021 and for the three

and nine months ended

September 30, 2022 and

2021 include all adjustments,

consisting

normal

recurring

accruals,

which,

the

opinion

management,

are

necessary

for

fair

statement

the

results

interim

basis.

Certain

financial

information,

which

normally

included

annual

financial

statements

prepared

accordance

with

accounting

principles

generally

accepted

the

United

States

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 September

30, 2022

and 2021

are

not

necessarily

indicative

the

results

for

full

year.

These

financial

statements

should

read

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")

which

the

Company

has

a controlling

financial

interest

and

all

variable

interest

entities

("VIE")

which

the

Company is considered to be the primary beneficiary.

The consolidation assessment, including

the determination

whether

entity

qualifies

VIE

VOE,

depends

the

facts

and

circumstances

surrounding

each

entity.

The preparation

of financial

statements

in conformity

with GAAP

requires

management

to make

estimates

and

assumptions

that

affect

the reported

amounts

of assets

and liabilities

(and disclosure

of contingent

assets

and

liabilities) at the date of the financial

statements and the reported

amounts of revenues and expenses

during the

reporting period.

Ultimate actual results could differ,

possibly materially,

from those estimates.

All intercompany accounts

and transactions have been eliminated.

Certain

reclassifications

and

format

changes

have

been

made

prior

years’

amounts

conform

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

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

accounting

standards

issued

the

nine

months

ended

September 30, 2022, that are expected to

have a material impact to Group.

Any

issued

guidance

and

pronouncements,

other

than

those

directly

referenced

above,

are

deemed

the

Company to be either not applicable or immaterial to

its financial statements.

INVESTMENTS

The

following

tables

show

amortized

cost,

allowance

for

credit

losses,

gross

unrealized

appreciation/(depreciation) and fair

value of fixed maturity securities available

for sale as of the dates indicated:

At September 30, 2022

Amortized

Allowance for

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

1,367

(79)

1,308

Obligations of U.S. states and political subdivisions

519

(38)

481

Corporate securities

7,010

(29)

(653)

6,397

Asset-backed securities

3,935

(164)

3,772

Mortgage-backed securities

Commercial

1,016

(108)

908

Agency residential

3,058

(337)

2,723

Non-agency residential

Foreign government securities

1,528

(205)

1,335

Foreign corporate securities

4,768

(9)

(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

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

(10)

1,421

Obligations of U.S. states and political subdivisions

559

(1)

587

Corporate securities

7,444

(19)

195

(63)

7,557

Asset-backed securities

3,579

(8)

(12)

3,582

Mortgage-backed securities

Commercial

1,033

(6)

1,064

Agency residential

2,361

(19)

2,375

Non-agency residential

Foreign government securities

1,424

(28)

1,438

Foreign corporate securities

4,251

(3)

(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

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)

(10)

639

Mortgage-backed securities

Commercial

Foreign corporate securities

(1)

Total fixed maturity securities - held to maturity

846

(9)

(21)

817

(Some amounts may not reconcile due to rounding.)

The amortized

cost and

fair value

of fixed

maturity securities

available for

sale are

shown in

the following

table

contractual

maturity.

Mortgage-backed

securities

are

generally

likely

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 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

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

Due after five years through ten years

Due after ten years

Asset-backed securities

653

639

Mortgage-backed securities:

Commercial

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

the

date

transfer

was

722

million,

net

allowance

for

current

expected

credit

losses,

which

was

subsequently

recognized

the

new

amortized

cost

basis.

As of

the date

of transfer,

these

securities had an unrealized

loss of $

million, which remained in accumulated

other comprehensive income

the

balance

sheet

and

will

amortized

into

income

through

adjustment

the

yields

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

historical

credit

loss

experience

and

macroeconomic

forecasts,

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.

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

Nine Months Ended

September 30,

(Dollars in millions)

2022

2021

2022

2021

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

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

Fixed maturity securities 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)

285

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 September

30, 2022 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

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)

(8)

351

(38)

Corporate securities

4,247

(447)

996

(189)

5,243

(636)

Asset-backed securities

2,827

(158)

(5)

2,882

(164)

Mortgage-backed securities

Commercial

877

(104)

(4)

904

(108)

Agency residential

2,086

(222)

588

(115)

2,674

(337)

Non-agency residential

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

(19)

Total fixed

maturity securities

14,960

(1,659)

3,023

(651)

17,983

(2,310)

(Some amounts may not reconcile due to rounding.)

Duration of Unrealized Loss at September

30, 2022 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

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)

(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)

(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

(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

fair

value

and gross

unrealized

losses related

fixed

maturity

securities available

for

sale in

unrealized loss position

at September 30, 2022

were $

18.0

billion and $

2.3

billion, respectively.

The fair value

securities for the

single issuer (the United

States government)

whose securities comprised

the largest unrealized

loss

position

September 30,

2022,

did

not

exceed

5.2

the

overall

fair

value

the

Company’s

fixed

maturity

securities

available

for

sale.

The

fair

value

the

securities

for

the

issuer

with

the

second

largest

unrealized

loss

position

September 30,

2022,

comprised

less

than

0.9

the

Company’s

fixed

maturity

securities available

for sale.

In addition,

as indicated

on the

above table,

there was

no significant

concentration

unrealized

losses

any

one

market

sector.

The

1.7

billion

unrealized

losses

fixed

maturity

securities available

for

sale that

have

been in

an unrealized

loss position

for

less than

one year

were generally

comprised

foreign

and

domestic

corporate

securities,

agency

residential

and

commercial

mortgage-backed

securities,

asset-backed

securities

and

foreign

government

securities.

these

unrealized

losses,

1.5

billion

were related

to securities

that were

rated investment

grade by

at 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

than

one

year

primarily

foreign

and

domestic

corporate

securities,

agency

residential

mortgage-backed

securities

and

foreign

government

securities.

these

unrealized

losses,

616

million were

related to

securities that

were rated

investment

grade by

at least

one nationally

recognized

rating

agency.

all

instances,

there

were

projected

cash

flow

shortfalls

recover

the

full

book

value

the

investments

and

the

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

securities in

an unrealized

loss

position

as of

September

30, 2022,

the

unrealized

losses

are

due

changes

interest

rates

and

non-issuer

specific

credit

spreads

and

are

not

credit-related.

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

its

investment

portfolio

and

capital

position,

does

not

have

the

intent

sell

these securities; and it is more

likely than not that

the Company will not have

to sell the security before

recovery

its

cost

basis.

addition,

all

securities

currently

unrealized

loss

position

are

current

with

respect

principal and interest payments.

The tables

below display

the aggregate

fair value

and gross

unrealized

depreciation

of fixed

maturity securities

available for

sale, by security

type and contractual

maturity,

in each case

subdivided according

to length

of time

that

individual

securities

had

been

continuous

unrealized

loss

position

for

the

periods

indicated.

The

amounts

presented

the

tables

below

include

million

fair

value

and

0.4

)

million

gross

unrealized

depreciation

December

31,

2021

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

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

504

(6)

(4)

596

(10)

Obligations of U.S. states and

political subdivisions

(1)

Corporate securities

2,133

(38)

473

(24)

2,605

(63)

Asset-backed securities

1,954

(11)

(1)

1,996

(12)

Mortgage-backed securities

Commercial

222

(3)

262

(6)

Agency residential

1,101

(12)

280

(7)

1,381

(19)

Non-agency residential

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 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

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)

(3)

843

(19)

Asset-backed securities

1,954

(11)

(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

investments

unrealized

loss

position

December 31,

2021

were

9.3

billion

and

203

million,

respectively.

The

fair

value

securities

for

the

single

issuer

(the

United

States

government)

whose

securities

comprised

the

largest

unrealized

loss

position

December

31,

2021,

did

not

exceed

2.7

the

overall

fair

value

the

Company’s

fixed

maturity

securities

available for sale.

The fair value of the securities

for the issuer with the second

largest unrealized

loss comprised

less

than

0.5

the

Company’s

fixed

maturity

securities

available

for

sale.

addition,

indicated

the

above

table,

there

was

significant

concentration

unrealized

losses

any

one

market

sector.

The

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

domestic

and

foreign

corporate

securities,

agency

residential

mortgage-backed

securities,

asset-backed

securities

and

foreign

government

securities.

these unrealized

losses, $

116

million were related

to securities that

were rated

investment

grade by at

least one

nationally

recognized

rating

agency.

The

million

unrealized

losses

fixed

maturity

securities

available for

sale in an

unrealized loss

position for more

than one year

related primarily

to domestic and

foreign

corporate securities,

foreign government

securities and agency

residential mortgage-backed

securities.

Of these

unrealized

losses,

million

were

securities

that

were

rated

investment

grade

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

Nine Months Ended

September 30,

(Dollars in millions)

2022

2021

2022

2021

Fixed maturities

186

134

503

423

Equity securities

Short-term investments and cash

Other invested assets:

Limited partnerships

(42)

139

493

Other

Gross investment income before adjustments

167

308

661

992

Funds held interest income (expense)

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

the

equity

method

accounting

with

changes

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

the

timing

receiving

financial

information

from

these

partnerships,

the

results

are

generally

reported

one

month

quarter

lag.

the

Company

determines

there

has

been

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

billion in limited partnerships

and

private

placement

loan

securities

September

30,

2022.

These

commitments

will

funded

when

called

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

the

facility

enhance

the

Company’s

return

its

short-term

investments

and

cash

positions.

The

facility

invests

high

quality,

short-duration

securities

and

permits

daily

liquidity.

The

Company

consolidates

its

participation in

the facility.

As of

September 30,

2022, the

fair value

of investments

in the

facility consolidated

within the Company’s balance sheets

was $

368

million.

Variable Interest

Entities

The

Company

engaged

with

various

special

purpose

entities

and

other

entities

that

are

deemed

VIEs

primarily

investor

through

normal

investment

activities

but

also

investment

manager.

VIE

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

other

entities.

The

Company

performs

ongoing

qualitative

assessments

its

VIEs

determine

whether the Company has

a controlling financial interest

in the VIE and therefore

is the primary beneficiary.

The

Company

deemed to

have

controlling

financial

interest

when

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

receive

benefits

from

the

VIE

that

could

potentially

significant

the

VIE.

Based

the

Company’s

assessment,

if it

determines

the

primary

beneficiary,

the

Company

consolidates

the

VIE

the

Company’s

Consolidated

Financial

Statements.

September

30,

2022

and

December 31,

2021,

the

Company

did

hold any securities for which it is the primary

beneficiary.

The

Company,

through

normal

investment

activities,

makes

passive

investments

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

the

investments.

The

Company’s

maximum

exposure

loss

September

30,

2022

and

December 31, 2021

is limited

to the

total

carrying value

of $

3.1

billion and

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.

September

30,

2022,

the

Company

has

outstanding

commitments

totaling

2.2

billion

whereby

the

Company

committed

fund

these

investments

and

may

called

the

partnership

during

the

commitment

period

fund

the

purchase

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.

addition,

the

Company

makes

passive

investments

structured

securities

issued

VIEs

for

which

the

Company

not

the

manager.

These

investments

are

included

asset-backed

securities,

which

includes

collateralized loan

obligations and are

reported in fixed

maturities, available-for

-sale and fixed maturities

held to

maturity.

The

Company

has

not

provided

financial

other

support

with

respect

these

investments

other

than its

original investment.

For these

investments,

the Company

determined

it is

not the

primary beneficiary

due

the

relative

size

of the

Company’s

investment

comparison

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

right

receive

benefits

and

the

Company’s

inability

direct

the

activities

that

most

significantly

impact the economic performance

of the VIEs.

The Company’s

maximum exposure

to loss on

these investments

is limited to the amount of the Company’s

investment.

The components of net gains (losses) on investments

are presented in the tables below for

the periods indicated:

Three Months Ended

Nine Months Ended

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)

(66)

Equity securities, fair value:

Net realized gains (losses) from dispositions

Gains (losses) from fair value adjustments

(136)

(5)

(462)

128

Other invested assets

Short-term investments gain (loss)

Total net gains (losses) on investments

(129)

(4)

(519)

139

(Some amounts may not reconcile due to rounding.)

Roll Forward of Allowance for Credit Losses – Fixed maturities

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Foreign

Corporate

Asset-Backed

Corporate

Asset-Backed

Corporate

Securities

Total

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)

(6)

(17)

(32)

Increases in allowance on previously

impaired securities

(3)

(4)

(1)

(4)

Decreases in allowance on previously

impaired securities

Reduction in allowance due to disposals

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

Corporate

Asset-Backed

Corporate

Asset-Backed

Corporate

Securities

Total

Securities

Total

(Dollars in millions)

Beginning Balance

(18)

(5)

(1)

(25)

(1)

(2)

Credit losses on securities where credit

losses were not previously recorded

(5)

(21)

(5)

(1)

(27)

Increases in allowance on previously

impaired securities

(3)

(2)

(3)

(5)

Decreases in allowance on previously

impaired securities

Reduction in allowance due to disposals

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

Nine Months Ended

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

Gross losses from dispositions

(58)

(11)

(98)

(26)

Proceeds from sales of equity securities

592

104

1,030

579

Gross gains from dispositions

Gross losses from dispositions

(3)

(53)

(11)

RESERVE FOR LOSSES, LAE AND FUTURE

POLICY BENEFIT RESERVE

Activity in the reserve for losses and LAE is summarized

for the periods indicated:

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 and 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 nine

months

ended September

30,

2022

and

2021,

respectively.

Gross

and

net

reserves

increased

for

the

nine

months

ended

September

30,

2022,

reflecting an

increase in

underlying exposure

due to

earned premium

growth, year

over year,

the impact of

million of

incurred losses

related to

the Ukraine/Russia

war and

an increase

of $

million in

2022 current

year

catastrophe 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

the

Russian

government,

well

businesses

located

the

Russian

Federation

and/or

owned

Russian

nationals

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

million

incurred

underwriting

losses

the

Ukraine/Russia

war

for

the

nine

months

ended September 30, 2022.

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

common

definition

of fair

value

be used

throughout

GAAP.

defines

fair

value

the

price that

would

received

sell an

asset

or paid

transfer

a liability

in an

orderly

fashion

between market

participants

at the

measurement

date.

addition,

establishes

three-level

valuation

hierarchy

for

the

disclosure

of fair

value

measurements.

The valuation

hierarchy

is based

on the

transparency

of inputs

the valuation

of an

asset or

liability.

The level in the

hierarchy within

which a given fair

value measurement

falls is determined

based on the

lowest

level

input

that

significant

the

measurement,

with

Level

being

the

highest

priority

and

Level

being the lowest priority.

The levels in the hierarchy

are defined as follows:

Level 1:

Inputs

the valuation

methodology

are

observable

inputs that

reflect unadjusted

quoted

prices for

identical assets or liabilities in an active market;

Level 2:

Inputs

the

valuation

methodology

include

quoted

prices

for

similar

assets

and

liabilities

active

markets,

and

inputs

that

are

observable

for

the

asset

liability,

either

directly

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

third

party

investment

asset

managers.

The

investment

asset

managers

managing

publicly

traded

securities

obtain

prices

from

nationally

recognized

pricing

services.

These

services

seek

utilize

market

data

and

observations

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

benchmark

curves,

benchmarking

securities,

sector

groupings

and

matrix

pricing.

addition,

they

use

model

processes,

such

the

Option

Adjusted

Spread

model

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.

addition,

the

investment

asset

managers

have

procedures

place

review

the

reasonableness

the

prices

from

the

service

providers

and

may

request

verification

the

prices.

The

Company

also

continually

performs

quantitative

and

qualitative

analysis

of prices,

including

but

not

limited

initial

and

ongoing

review

pricing

methodologies,

review

prices

obtained

from

pricing

services

and

third

party

investment

asset

managers,

review

pricing

statistics

and

trends,

and

comparison

prices

for

certain

securities

with

secondary

price

source

for

reasonableness.

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 September

30, 2022, $

1.6

billion of fixed

maturities were

fair valued

using unobservable inputs.

The majority

these

fixed

maturities

were

valued

investment

managers’

valuation

committees

and

many

these

fair

values were

substantiated

by valuations

from independent

third parties.

The Company

has procedures

in place

evaluate

these

independent

third

party

valuations.

December

31,

2021,

2.1

billion

fixed

maturities

were fair valued using unobservable

inputs.

The

Company

internally

manages

public

equity

portfolio

which

had

fair

value

September

30,

2022

and

December 31, 2021 of $

1.2

billion and $

1.3

billion, respectively.

During the fourth quarter of 2021,

the Company

began

internally

manage

portfolio

collateralized

loan

obligations

included

asset-backed

securities,

available for sale,

which had a fair value

of $

2.4

billion and $

2.0

billion at September

30, 2022 and December

31,

2021,

respectively.

All

prices

for

these

securities

were

obtained

from

publicly

published

sources

nationally

recognized pricing vendors.

Equity

securities

denominated

U.S.

currency

with

quoted

prices

active

markets

for

identical

assets

are

categorized

Level

since

the

quoted

prices

are

directly

observable.

Equity

securities

traded

foreign

exchanges are

categorized as

Level 2 due

to the added input

of a foreign

exchange conversion

rate to determine

fair value.

The Company uses foreign currency exchange

rates published by 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

use

valuation

models

with

observable

market

inputs

such

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

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.

addition

the

valuations

from

investment

managers,

some

the

fixed

maturities

with

fair

values

categorized

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

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

broker-dealers

who

are

recognized

market

participants

the

markets

which

they

are

providing the quotes.

The prices received from

brokers are

reviewed for

reasonableness by the

third party asset

managers

and

the

Company.

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

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	6th grade Good

Everest Re (EG) 10-Q2022 Q3 Quarterly report

Content analysis