EVEREST GROUP, LTD. - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
_
X
_
For the quarterly period ended
June 30, 2022
___
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 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
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Yes
X
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
NO
X
Securities registered pursuant to Section 12(b) of the Act:
Class
Trading Symbol
Name of Exchange where
Number of Shares Outstanding
At August 1, 2022
Common Shares, $0.01 par value
RE
New York Stock Exchange
39,410,456
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.
28
Item 3.
48
Item 4.
48
PART II
OTHER INFORMATION
Item 1.
48
Item 1A.
48
Item 2.
49
Item 3.
49
Item 4.
49
Item 5.
49
Item 6.
50
1
EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
June 30,
(Dollars and share amounts in thousands, except par value per share)
2022
2021
(unaudited)
ASSETS:
Fixed maturities - available for sale, at fair value
$
21,880,443
$
22,308,272
(amortized cost: 2022, $
23,408,417
; 2021, $
22,063,592
, credit allowances: 2022, $
(
42,714
); 2021, $
(
29,738
))
Fixed maturities - held to maturity, at amortized cost, net of credit allowances
(fair value: 2022, $
71,245
, credit allowances: 2022, $
(
366
))
71,390
-
Equity securities, at fair value
1,299,221
1,825,908
Short-term investments (cost: 2022, $
300,854
; 2021, $
1,178,386
)
300,840
1,178,337
Other invested assets
3,055,356
2,919,965
Cash
2,116,049
1,440,861
Total investments and cash
28,723,299
29,673,343
Accrued investment income
178,123
149,105
Premiums receivable
3,406,564
3,293,598
Reinsurance recoverables
2,096,968
2,053,354
Funds held by reinsureds
909,454
868,601
Deferred acquisition costs
836,496
872,289
Prepaid reinsurance premiums
562,550
515,445
Income taxes
336,646
2,381
Other assets
857,550
757,167
TOTAL ASSETS
$
37,907,650
$
38,185,283
LIABILITIES:
Reserve for losses and loss adjustment expenses
$
19,993,054
$
19,009,486
Future policy benefit reserve
33,580
35,669
Unearned premium reserve
4,681,010
4,609,634
Funds held under reinsurance treaties
12,658
18,391
Other net payable to reinsurers
492,556
449,723
Losses in course of payment
79,549
260,684
Senior notes
2,346,495
2,345,800
Long term notes
223,824
223,774
Borrowings from FHLB
519,000
519,000
Accrued interest on debt and borrowings
16,664
17,348
Unsettled securities payable
66,150
16,698
Other liabilities
590,244
539,896
Total liabilities
29,054,784
28,046,103
Commitments and contingencies (Note 7)
(nil)
(nil)
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $
0.01
;
50,000
no
-
-
Common shares, par value: $
0.01
;
200,000
69,947
and (2021)
69,790
700
698
Additional paid-in capital
2,283,513
2,274,431
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of $
(208,066)
26,781
(1,576,854)
11,523
Treasury shares, at cost;
30,529
30,524
(3,848,630)
(3,847,308)
Retained earnings
11,994,137
11,699,836
Total shareholders' equity
8,852,866
10,139,180
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
37,907,650
$
38,185,283
The accompanying notes are an integral part of the consolidated financial statements.
2
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in thousands, except per share amounts)
2022
2021
2022
2021
(unaudited)
(unaudited)
REVENUES:
Premiums earned
$
2,916,237
$
2,558,372
$
5,708,003
$
4,946,237
Net investment income
225,978
407,095
468,808
667,508
Net gains (losses) on investments:
Credit allowances on fixed maturity securities
(1,490)
(15,927)
(13,343)
(22,904)
Gains (losses) from fair value adjustments
(188,924)
103,525
(325,784)
132,581
Net realized gains (losses) from dispositions
(45,851)
16,511
(50,765)
33,334
Total net gains (losses) on investments
(236,265)
104,109
(389,892)
143,011
Other income (expense)
(71,337)
7,114
(55,977)
63,707
Total revenues
2,834,613
3,076,690
5,730,942
5,820,463
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
1,876,247
1,586,141
3,666,110
3,297,560
Commission, brokerage, taxes and fees
630,294
557,749
1,235,523
1,046,760
Other underwriting expenses
169,533
140,844
330,826
283,075
Corporate expenses
15,018
16,168
29,038
28,546
Interest, fees and bond issue cost amortization expense
24,398
15,607
48,476
31,246
Total claims and expenses
2,715,490
2,316,509
5,309,973
4,687,187
INCOME (LOSS) BEFORE TAXES
119,123
760,181
420,969
1,133,276
Income tax expense (benefit)
(3,507)
80,199
588
111,432
NET INCOME (LOSS)
$
122,630
$
679,982
$
420,381
$
1,021,844
Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period
(732,364)
84,171
(1,547,540)
(204,444)
Reclassification adjustment for realized losses (gains) included in net income (loss)
15,841
1,590
20,019
(2,076)
Total URA(D) on securities arising during the period
(716,523)
85,761
(1,527,521)
(206,520)
Foreign currency translation adjustments
(28,269)
34,295
(62,371)
24,713
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)
758
2,043
1,515
4,086
Total benefit plan net gain (loss) for the period
758
2,043
1,515
4,086
Total other comprehensive income (loss), net of tax
(744,034)
122,099
(1,588,377)
(177,721)
COMPREHENSIVE INCOME (LOSS)
$
(621,404)
$
802,081
$
(1,167,996)
$
844,123
EARNINGS PER COMMON SHARE:
Basic
$
3.11
$
16.97
$
10.67
$
25.50
Diluted
3.11
16.95
10.67
25.47
The accompanying notes are an integral part of the consolidated financial statements.
3
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in thousands, except share and dividends per share amounts)
2022
2021
2022
2021
(unaudited)
(unaudited)
COMMON SHARES (shares outstanding):
Balance beginning of period
39,448,677
40,082,500
39,266,633
39,983,481
Issued (redeemed) during the period, net
(30,923)
940
156,121
197,421
Treasury shares acquired
-
(68,100)
(5,000)
(165,562)
Balance end of period
39,417,754
40,015,340
39,417,754
40,015,340
COMMON SHARES (par value):
Balance beginning of period
$
700
$
698
$
698
$
696
Issued during the period, net
-
-
2
2
Balance end of period
700
698
700
698
ADDITIONAL PAID-IN CAPITAL:
Balance beginning of period
2,271,890
2,245,737
2,274,431
2,245,301
Share-based compensation plans
11,623
10,653
9,082
11,089
Balance end of period
2,283,513
2,256,390
2,283,513
2,256,390
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance beginning of period
(832,820)
235,079
11,523
534,899
Net increase (decrease) during the period
(744,034)
122,099
(1,588,377)
(177,721)
Balance end of period
(1,576,854)
357,178
(1,576,854)
357,178
RETAINED EARNINGS:
Balance beginning of period
11,936,489
10,847,086
11,699,836
10,567,452
Net income (loss)
122,630
679,982
420,381
1,021,844
Dividends declared ($
1.65
3.20
in 2022; $
1.55
3.10
(64,982)
(62,046)
(126,079)
(124,274)
Balance, end of period
11,994,137
11,465,022
11,994,137
11,465,022
TREASURY SHARES AT COST:
Balance beginning of period
(3,848,630)
(3,645,717)
(3,847,308)
(3,622,172)
Purchase of treasury shares
-
(16,782)
(1,322)
(40,327)
Balance end of period
(3,848,630)
(3,662,499)
(3,848,630)
(3,662,499)
TOTAL SHAREHOLDERS' EQUITY, END OF PERIOD
$
8,852,866
$
10,416,789
$
8,852,866
$
10,416,789
The accompanying notes are an integral part of the consolidated financial statements.
4
EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
(Dollars in thousands)
2022
2021
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
420,381
$
1,021,844
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable
(223,030)
(499,647)
Decrease (increase) in funds held by reinsureds, net
(51,451)
(79,485)
Decrease (increase) in reinsurance recoverables
(236,849)
15,836
Decrease (increase) in income taxes
(100,230)
76,452
Decrease (increase) in prepaid reinsurance premiums
(109,716)
(71,566)
Increase (decrease) in reserve for losses and loss adjustment expenses
1,360,076
1,139,879
Increase (decrease) in future policy benefit reserve
(2,089)
(1,226)
Increase (decrease) in unearned premiums
176,631
500,077
Increase (decrease) in other net payable to reinsurers
119,858
72,850
Increase (decrease) in losses in course of payment
(178,091)
70,653
Change in equity adjustments in limited partnerships
(156,868)
(377,120)
Distribution of limited partnership income
105,452
49,053
Change in other assets and liabilities, net
(11,031)
(206,994)
Non-cash compensation expense
23,919
22,439
Amortization of bond premium (accrual of bond discount)
35,052
37,928
Net (gains) losses on investments
389,892
(143,011)
Net cash provided by (used in) operating activities
1,561,906
1,627,962
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called/repaid - available for sale
1,661,128
1,897,536
Proceeds from fixed maturities matured/called/repaid - held to maturity
333
-
Proceeds from fixed maturities sold - available for sale
772,148
599,737
Proceeds from equity securities sold, at fair value
437,815
474,663
Distributions from other invested assets
204,790
112,398
Cost of fixed maturities acquired - available for sale
(4,070,949)
(3,949,973)
Cost of fixed maturities acquired - held to maturity
(72,061)
-
Cost of equity securities acquired, at fair value
(283,352)
(360,016)
Cost of other invested assets acquired
(307,525)
(309,691)
Net change in short-term investments
878,360
506,285
Net change in unsettled securities transactions
22,512
(103,527)
Net cash provided by (used in) investing activities
(756,801)
(1,132,588)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued (redeemed) during the period for share-based compensation, net of expense
(14,835)
(11,349)
Purchase of treasury shares
(1,322)
(40,328)
Dividends paid to shareholders
(126,079)
(124,274)
Cost of shares withheld on settlements of share-based compensation awards
(17,352)
(13,713)
Net cash provided by (used in) financing activities
(159,588)
(189,664)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
29,671
(1,016)
Net increase (decrease) in cash
675,188
304,694
Cash, beginning of period
1,440,861
801,651
Cash, end of period
$
2,116,049
$
1,106,345
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)
$
100,506
$
34,780
Interest paid
48,414
31,695
The accompanying notes are an integral part of the consolidated financial statements.
5
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended June 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” means
Group and its subsidiaries.
2. BASIS OF PRESENTATION
The unaudited consolidated financial statements of the Company as of June 30, 2022 and December 31, 2021
and for the three and six months ended June 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 six months ended June 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 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 six
months ended June 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 new material accounting standards issued in the six months
ended June 30, 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.
6
3. 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 June 30, 2022
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in thousands)
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
$
1,385,608
$
-
$
7,193
$
(54,571)
$
1,338,230
Obligations of U.S. states and political subdivisions
528,830
(151)
3,950
(24,348)
508,281
Corporate securities
7,505,558
(25,583)
31,650
(524,848)
6,986,777
Asset-backed securities
4,081,011
-
909
(183,241)
3,898,679
Mortgage-backed securities
Commercial
1,024,591
-
124
(72,820)
951,895
Agency residential
2,874,574
-
2,937
(186,656)
2,690,855
Non-agency residential
5,349
-
-
(208)
5,141
Foreign government securities
1,463,494
-
11,670
(115,421)
1,359,743
Foreign corporate securities
4,539,402
(16,980)
21,900
(403,480)
4,140,842
Total fixed maturity securities - available for sale
$
23,408,417
$
(42,714)
$
80,333
$
(1,565,593)
$
21,880,443
At December 31, 2021
Amortized
Allowance for
Unrealized
Unrealized
Fair
(Dollars in thousands)
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
$
1,407,256
$
-
$
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 - available for sale
$
22,063,592
$
(29,738)
$
477,548
$
(203,130)
$
22,308,272
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 June 30, 2022
At December 31, 2021
Amortized
Fair
Amortized
Fair
(Dollars in thousands)
Cost
Value
Cost
Value
Fixed maturity securities – available for sale:
$
1,261,875
$
1,263,628
$
1,398,742
$
1,398,006
7,565,293
7,187,705
7,075,077
7,154,468
4,746,315
4,285,866
5,003,792
5,100,672
1,849,409
1,596,674
1,606,298
1,627,163
Asset-backed securities
4,081,011
3,898,679
3,579,439
3,581,729
Mortgage-backed securities:
Commercial
1,024,591
951,895
1,032,506
1,064,366
Agency residential
2,874,574
2,690,855
2,361,208
2,375,332
Non-agency residential
5,349
5,141
6,530
6,536
Total fixed maturity securities
$
23,408,417
$
21,880,443
$
22,063,592
$
22,308,272
7
During the second quarter of 2022, the Company purchased fixed maturity securities classified as held to
maturity with an amortized cost of $
71.8
71.2
maturity securities held to maturity consist of debt securities for which the Company has both the positive intent
and ability to hold to maturity or redemption and are reported at amortized cost, net of the current expected
credit loss allowance. Interest income for fixed maturity securities held to maturity is determined in the same
manner as interest income for fixed maturity securities available for sale.
These fixed maturity securities held to maturity are comprised of asset-backed securities, with an amortized cost
of $
62.8
0.1
0.2
fair value of $
62.4
9.0
appreciation of $
0.0
0.1
8.8
2022. The contractual maturity of the corporate securities held to maturity is
5 years
stated maturity of asset-backed securities held to maturity may not be indicative of actual maturities.
The Company evaluated fixed maturity securities classified as held to maturity for current expected credit losses
as of June 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 June 30, 2022. The allowance for credit losses
expected to be recognized over the remaining life of the fixed maturity securities classified as held to maturity is
$
0.4
The changes in net unrealized appreciation (depreciation) for the Company’s available for sale and short-term
investments are derived from the following sources for the periods indicated:
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
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 - available for sale and short-term investments
$
(832,237)
$
97,127
$
(1,759,644)
$
(235,581)
Change in unrealized appreciation (depreciation), pre-tax
(832,237)
97,127
(1,759,644)
(235,581)
Deferred tax benefit (expense)
115,714
(11,366)
232,123
29,061
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity
$
(716,523)
$
85,761
$
(1,527,521)
$
(206,520)
8
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 June 30, 2022 By Security Type
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in thousands)
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
$
949,790
$
(39,469)
$
199,364
$
(15,102)
$
1,149,154
$
(54,571)
Obligations of U.S. states and political subdivisions
210,645
(21,935)
12,067
(2,366)
222,712
(24,301)
Corporate securities
4,911,170
(420,055)
779,916
(104,127)
5,691,086
(524,182)
Asset-backed securities
3,623,327
(180,189)
42,484
(3,052)
3,665,811
(183,241)
Mortgage-backed securities
Commercial
926,417
(69,573)
21,217
(3,247)
947,634
(72,820)
Agency residential
1,939,847
(116,105)
579,272
(70,551)
2,519,119
(186,656)
Non-agency residential
4,402
(188)
739
(20)
5,141
(208)
Foreign government securities
972,856
(73,986)
177,226
(41,435)
1,150,082
(115,421)
Foreign corporate securities
3,100,785
(329,255)
479,179
(73,849)
3,579,964
(403,104)
Total
$
16,639,239
$
(1,250,755)
$
2,291,464
$
(313,749)
$
18,930,703
$
(1,564,504)
Securities where an allowance for credit loss was recorded
7,213
(1,089)
-
-
7,213
(1,089)
Total fixed maturity securities
$
16,646,452
$
(1,251,844)
$
2,291,464
$
(313,749)
$
18,937,916
$
(1,565,593)
Duration of Unrealized Loss at June 30, 2022 By Maturity
Less than 12 months
Greater than 12 months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
(Dollars in thousands)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale
Due in one year or less
$
660,642
$
(4,878)
$
90,052
$
(7,477)
$
750,694
$
(12,355)
Due in one year through five years
5,163,545
(300,876)
818,035
(79,426)
5,981,580
(380,302)
Due in five years through ten years
3,087,307
(359,536)
598,581
(114,767)
3,685,888
(474,303)
Due after ten years
1,233,752
(219,410)
141,084
(35,209)
1,374,836
(254,619)
Asset-backed securities
3,623,327
(180,189)
42,484
(3,052)
3,665,811
(183,241)
Mortgage-backed securities
2,870,666
(185,866)
601,228
(73,818)
3,471,894
(259,684)
Total
$
16,639,239
$
(1,250,755)
$
2,291,464
$
(313,749)
$
18,930,703
$
(1,564,504)
Securities where an allowance for credit loss was recorded
7,213
(1,089)
-
-
7,213
(1,089)
Total fixed maturity securities
$
16,646,452
$
(1,251,844)
$
2,291,464
$
(313,749)
$
18,937,916
$
(1,565,593)
9
The aggregate fair value and gross unrealized losses related to fixed maturity securities available for sale in an
unrealized loss position at June 30, 2022 were $
18.9
1.6
securities for the single issuer (the United States government) whose securities comprised the largest unrealized
loss position at June 30, 2022, did not exceed
5.3
% of the overall fair value of the Company’s fixed maturity
securities available for sale. The fair value of the securities for the issuer with the second largest unrealized loss
position at June 30, 2022, comprised less than
1.3
% 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 $
1.3
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, U.S
government securities and foreign government securities. Of these unrealized losses, $
1.1
to securities that were rated investment grade by at least one nationally recognized rating agency. The $
313.7
million of unrealized losses related to fixed maturity securities available for sale in an unrealized loss position for
more than one year related primarily to domestic and foreign corporate securities, foreign government
securities, agency residential mortgage-backed securities and U.S. government securities. Of these unrealized
losses, $
300.6
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 June 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.
The tables below display the aggregate fair value and gross unrealized depreciation of fixed maturity securities
available for sale, by security type and contractual maturity, in each case subdivided according to length of time
that individual securities had been in a continuous unrealized loss position for the periods indicated. The
amounts presented in the tables below include $
15.7
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)
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
$
504,168
$
(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)
10
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)
Fair Value
Depreciation
Fair Value
Depreciation
Fair Value
Depreciation
Fixed maturity securities - available for sale
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 fair value and gross unrealized losses related to investments in an unrealized loss position at
December 31, 2021 were $
9.3
203.1
issuer (the United States government) whose securities comprised the largest unrealized loss position at
December 31, 2021, did not exceed
2.7
% of the overall fair value of the Company’s fixed maturity securities
available for sale. The fair value of the securities for the issuer with the second largest unrealized loss comprised
less than
0.5
% 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 $
127.8
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, $
116.2
one nationally recognized rating agency. The $
75.3
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, $
72.3
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
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
Fixed maturities
$
168,769
$
148,262
$
316,995
$
289,178
Equity securities
4,600
3,493
8,746
8,331
Short-term investments and cash
6,587
773
6,746
953
Other invested assets:
Limited partnerships
47,584
239,966
136,021
354,299
Other
13,991
25,855
25,822
31,874
Gross investment income before adjustments
241,531
418,349
494,330
684,635
Funds held interest income (expense)
772
3,287
4,457
11,253
Future policy benefit reserve income (expense)
(128)
(170)
(350)
(461)
Gross investment income
242,175
421,466
498,437
695,427
Investment expenses
(16,197)
(14,371)
(29,629)
(27,919)
Net investment income
$
225,978
$
407,095
$
468,808
$
667,508
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
11
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 $
2.4
private placement loan securities at June 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 June 30, 2022, the fair value of investments in the facility consolidated within
the Company’s balance sheets was $
377.7
Variable Interest Entities
The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs
primarily as an investor through normal investment activities but also as an investment manager. A VIE is an
entity that either has investors that lack certain essential characteristics of a controlling financial interest, such
as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support
provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine
whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The
Company is deemed to have a controlling financial interest when it has both the ability to direct the activities
that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right
to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s
assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s
Consolidated Financial Statements. As of June 30, 2022 and December 31, 2021, the Company did
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 June 30, 2022 and
December 31, 2021 is limited to the total carrying value of $
3.1
2.9
included in general and limited partnerships and other alternative investments in Other Invested Assets in the
Company's Consolidated Balance Sheets. As of June 30, 2022, the Company has outstanding commitments
totaling $
2.2
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 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.
12
The components of net gains (losses) on investments are presented in the tables below for the periods indicated:
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
Fixed maturity securities:
Allowance for credit losses
$
(1,490)
$
(15,927)
$
(13,343)
$
(22,904)
Net realized gains (losses) from dispositions
(15,560)
10,060
(12,761)
19,234
Equity securities, fair value:
Net realized gains (losses) from dispositions
(30,926)
3,755
(42,713)
9,993
Gains (losses) from fair value adjustments
(188,924)
103,525
(325,784)
132,581
Other invested assets
583
2,748
4,735
4,094
Short-term investments gain (loss)
52
(52)
(26)
13
Total net gains (losses) on investments
$
(236,265)
$
104,109
$
(389,892)
$
143,011
(Some amounts may not reconcile due to rounding.)
Roll Forward of Allowance for Credit Losses – Fixed maturities, available for sale
Three Months Ended June 30, 2022
Six Months Ended June 30, 2022
Obligations of
Obligations of
U.S. States
Foreign
U.S. States
Foreign
Corporate
Asset-Backed
and Political
Corporate
Corporate
Asset-Backed
and Political
Corporate
Securities
Securities
Subdivisions
Securities
Total
Securities
Securities
Subdivisions
Securities
Total
(Dollars in thousands)
Beginning Balance
$
(20,049)
$
(7,679)
$
(151)
$
(13,712)
$
(41,591)
$
(19,267)
$
(7,679)
$
(151)
$
(2,641)
$
(29,738)
Credit losses on securities where credit
losses were not previously recorded
(4,887)
-
-
(4,706)
(9,593)
(6,816)
-
-
(15,890)
(22,706)
Increases in allowance on previously
impaired securities
(654)
-
-
(732)
(1,386)
(654)
-
-
(732)
(1,386)
Decreases in allowance on previously
impaired securities
-
-
-
-
-
-
-
-
-
-
Reduction in allowance due to disposals
7
7,679
-
2,170
9,856
1,154
7,679
-
2,283
11,116
Balance as of June 30, 2022
$
(25,583)
$
-
$
(151)
$
(16,980)
$
(42,714)
$
(25,583)
$
-
$
(151)
$
(16,980)
$
(42,714)
Roll Forward of Allowance for Credit Losses – Fixed maturities, available for sale
Three Months Ended June 30, 2021
Six Months Ended June 30, 2021
Foreign
Foreign
Foreign
Corporate
Asset-Backed
Corporate
Corporate
Asset-Backed
Government
Corporate
Securities
Securities
Securities
Total
Securities
Securities
Securities
Securities
Total
(Dollars in thousands)
Beginning Balance
$
(3,603)
$
(4,915)
$
(205)
$
(8,723)
$
(1,220)
$
-
$
(22)
$
(503)
$
(1,745)
Credit losses on securities where credit
losses were not previously recorded
(13,537)
-
(1,055)
(14,592)
(15,920)
(4,915)
-
(1,055)
(21,890)
Increases in allowance on previously
impaired securities
(1,468)
-
-
(1,468)
(1,468)
-
-
-
(1,468)
Decreases in allowance on previously
impaired securities
-
-
-
-
-
-
-
-
-
Reduction in allowance due to disposals
133
-
-
133
133
-
22
298
453
Balance as of June 30, 2021
$
(18,475)
$
(4,915)
$
(1,260)
$
(24,650)
$
(18,475)
$
(4,915)
$
-
$
(1,260)
$
(24,650)
13
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
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
Proceeds from sales of fixed maturity securities, available for sale
$
353,160
$
371,459
$
772,148
$
599,737
Gross gains from dispositions
7,456
19,870
27,578
34,734
Gross losses from dispositions
(23,016)
(9,810)
(40,339)
(15,500)
Proceeds from sales of equity securities
$
347,714
$
193,350
$
437,815
$
474,663
Gross gains from dispositions
4,135
5,803
7,643
18,107
Gross losses from dispositions
(35,061)
(2,048)
(50,356)
(8,114)
4. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE
Activity in the reserve for losses and LAE is summarized for the periods indicated:
Six Months Ended
June 30,
(Dollars in thousands)
2022
2021
Gross reserves beginning of period
$
19,009,486
$
16,322,143
(1,946,365)
(1,843,691)
17,063,121
14,478,452
Incurred related to:
3,667,769
3,302,013
(1,659)
(4,453)
3,666,110
3,297,560
Paid related to:
978,599
710,677
1,483,844
1,399,579
2,462,443
2,110,256
Foreign exchange/translation adjustment
(259,484)
35,651
Net reserves end of period
18,007,304
15,701,407
1,985,750
1,862,760
$
19,993,054
$
17,564,167
(Some amounts may not reconcile due to rounding.)
Current year incurred losses were $
3.7
3.3
respectively. Gross and net reserves increased for the six months ended June 30, 2022, reflecting an increase in
underlying exposure due to premium growth and the impact of $
45.0
Ukraine/Russia war, partially offset by a reduction of $
115.0
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 $
45.0
months ended June 30, 2022.
14
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
liability. The level in the hierarchy within which a given fair value measurement falls is determined based on the
lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3
being the lowest priority.
The levels in the hierarchy are defined as follows:
Level 1: Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for
identical assets or liabilities in an active market;
Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument;
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair 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 June 30, 2022, $
2.2
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
fair valued using unobservable inputs.
The Company internally manages a public equity portfolio which had a fair value at June 30, 2022 and December
31, 2021 of $
896.9
1.3
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
2.0
respectively. All prices for these securities were obtained from publicly published sources or nationally
recognized pricing vendors.
15
Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are
categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign
exchanges are categorized as Level 2 due to the added input of a foreign exchange conversion rate to determine
fair value. The Company uses foreign currency exchange rates published by national ly 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
interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority.
For foreign government securities and foreign corporate securities, the fair values provided by the third party
pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange
rates from nationally recognized sources.
In addition to the valuations from investment managers, some of the fixed maturities with fair values
categorized as Level 3 result when prices are not available from the nationally recognized pricing services and
are derived using unobservable inputs. The Company will value the securities with unobservable inputs using
comparable market information or receive fair values from investment managers. The investment managers
may obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by
market makers or broker-dealers who are recognized as market participants in the markets in which they are
providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset
managers and the Company. If the broker quotes are for foreign denominated securities, the quotes are
converted to U.S. dollars using currency exchange rates from nationally recognized sources.
The composition and valuation inputs for the presented fixed maturities categories Level 1 and Level 2 are as
follows:
•
U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily
comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted
prices, reported trades, quoted prices for similar issuances or benchmark yields;
• Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and
the fair values are based on observable market inputs such as quoted market prices, quoted prices for
similar securities, benchmark yields and credit spreads;
•
Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair
values are based on observable market inputs such as quoted market prices, quoted prices for similar
securities, benchmark yields and credit spreads;
•
Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted
prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using
observable inputs such as prepayment speeds, collateral performance and default spreads;
•
Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair
values are based on observable market inputs such as quoted market prices, quoted prices for similar
securities and models with observable inputs such as benchmark yields and credit spreads and then, where
applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;
•
Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values
are based on observable market inputs such as quoted market prices, quoted prices for similar securities
and models with observable inputs such as benchmark yields and credit spreads and then, where applicable,
converted to U.S. dollars using an exchange rate from a nationally recognized source.
16
The following tables present the fair value measurement levels for all assets and liabilities, which the Company
has recorded at fair 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)
June 30, 2022
(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
$
1,338,230
$
-
$
1,338,230
$
-
Obligations of U.S. States and political subdivisions
508,281
-
508,281
-
Corporate securities
6,986,777
-
6,124,350
862,427
Asset-backed securities
3,898,679
-
2,643,282
1,255,397
Mortgage-backed securities
Commercial
951,895
-
946,204
5,691
Agency residential
2,690,855
-
2,690,855
-
Non-agency residential
5,141
-
5,141
-
Foreign government securities
1,359,743
-
1,359,743
-
Foreign corporate securities
4,140,842
-
4,100,881
39,961
Total fixed maturities, available for sale
21,880,443
-
19,716,967
2,163,476
Equity securities, fair value
1,299,221
1,226,921
72,300
-
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, available for sale
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, available for sale
22,308,272
-
20,240,402
2,067,870
Equity securities, fair value
1,825,908
1,742,367
83,541
-
In addition, $
297.2
286.6
balance sheets as of June 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.
17
The following table presents the activity under Level 3, fair value measurements using significant unobservable
inputs for fixed maturities available for sale, for the periods indicated:
Total Fixed Maturities, Available for Sale
Three Months Ended June 30, 2022
Six Months Ended June 30, 2022
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in thousands)
Securities
Securities
CMBS
Corporate
Total
Securities
Securities
CMBS
Corporate
Total
Beginning balance fixed maturities
$
714,656
$
1,388,691
$
5,890
$
15,926
$
2,125,163
$
800,574
$
1,251,281
$
-
$
16,015
$
2,067,870
Total gains or (losses) (realized/unrealized)
Included in earnings
(4,534)
35
-
16
(4,483)
11,409
137
-
29
11,575
Included in other comprehensive income (loss)
(3,003)
(47,202)
(199)
(3,747)
(54,151)
(7,170)
(75,990)
(222)
(3,808)
(87,190)
Purchases, issuances and settlements
27,750
61,565
-
7,632
96,947
(69,944)
227,661
5,913
7,591
171,221
Transfers in/(out) of Level 3 and reclassification of
securities in/(out) of investment categories
127,558
(147,692)
-
20,134
-
127,558
(147,692)
-
20,134
-
Ending balance
$
862,427
$
1,255,397
$
5,691
$
39,961
$
2,163,476
$
862,427
$
1,255,397
$
5,691
$
39,961
$
2,163,476
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
$
(5,261)
$
7,679
$
-
$
-
$
2,418
$
(4,943)
$
7,679
$
-
$
-
$
2,736
(Some amounts may not reconcile due to rounding.)
Total Fixed Maturities, Available for Sale
Three Months Ended June 30, 2021
Six Months Ended June 30, 2021
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in thousands)
Securities
Securities
Corporate
Total
Securities
Securities
Corporate
Total
Beginning balance fixed maturities
$
704,542
$
785,360
$
5,598
$
1,495,500
$
701,492
$
623,033
$
5,699
$
1,330,224
Total gains or (losses) (realized/unrealized)
Included in earnings
(13,761)
206
137
(13,418)
(15,550)
(3,962)
140
(19,372)
Included in other comprehensive income (loss)
4,582
7,610
(85)
12,107
7,418
4,475
(36)
11,857
Purchases, issuances and settlements
10,208
22,100
(763)
31,545
12,211
191,730
(916)
203,025
Transfers in/(out) of Level 3 and reclassification of
securities in/(out) of investment categories
-
-
-
-
-
-
-
-
Ending balance
$
705,571
$
815,276
$
4,887
$
1,525,734
$
705,571
$
815,276
$
4,887
$
1,525,734
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
$
(17,279)
$
(4,915)
$
-
$
(22,194)
$
(17,279)
$
(4,915)
$
-
$
(22,194)
(Some amounts may not reconcile due to rounding.)
The Company’s fixed maturity securities held to maturity are recorded at amortized cost, net of credit
allowances, with a carrying value of $
71.4
71.2
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 June 30, 2022.
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.
18
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
Six Months Ended
June 30,
June 30,
(Dollars in thousands, except per share amounts)
2022
2021
2022
2021
Net income (loss) per share:
Numerator
Net income (loss)
$
122,630
$
679,982
$
420,381
$
1,021,844
Less: dividends declared-common shares and unvested common shares
(64,982)
(62,045)
(126,079)
(124,274)
Undistributed earnings
57,648
617,937
294,302
897,570
Percentage allocated to common shareholders (1)
98.6
%
98.6
%
98.7
%
98.7
%
56,870
609,411
290,356
885,595
Add: dividends declared-common shareholders
64,184
61,245
124,466
122,659
Numerator for basic and diluted earnings per common share
$
121,054
$
670,656
$
414,822
$
1,008,254
Denominator
Denominator for basic earnings per weighted -average common shares
38,898
39,527
38,861
39,535
Effect of dilutive securities:
Options
-
41
7
48
Denominator for diluted earnings per adjusted weighted-average common shares
38,898
39,567
38,867
39,582
Per common share net income (loss)
Basic
$
3.11
$
16.97
$
10.67
$
25.50
Diluted
$
3.11
$
16.95
$
10.67
$
25.47
(1)
Basic weighted-average common shares outstanding
38,898
39,527
38,861
39,535
Basic weighted-average common shares outstanding and unvested common shares expected to vest
39,430
40,080
39,389
40,069
Percentage allocated to common shareholders
98.6
%
98.6
%
98.7
%
98.7
%
(Some amounts may not reconcile due to rounding.)
There were
no
All outstanding options granted under share-based compensation plans expire on
September 19, 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 some disputes, the Company seeks to enforce its
rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by
others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately
resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In
all such matters, the Company believes that its positions are legally and commercially reasonable. The Company
considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment
expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is
not a party to any other material litigation or arbitration.
19
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 June 30, 2022
Six Months Ended June 30, 2022
(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
$
(848,704)
$
116,340
$
(732,364)
$
(1,781,013)
$
233,473
$
(1,547,540)
Reclassification of net realized losses (gains) included in net income
(loss)
16,467
(626)
15,841
21,369
(1,350)
20,019
Foreign currency translation adjustments
(30,896)
2,627
(28,269)
(65,499)
3,128
(62,371)
Reclassification of benefit plan liability amortization included in net
income (loss)
959
(201)
758
1,919
(404)
1,515
Total other comprehensive income (loss)
$
(862,174)
$
118,140
$
(744,034)
$
(1,823,224)
$
234,847
$
(1,588,377)
Three Months Ended June 30, 2021
Six Months Ended June 30, 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
$
94,009
$
(9,838)
$
84,171
$
(235,157)
$
30,713
$
(204,444)
Reclassification of net realized losses (gains) included in net income
(loss)
3,118
(1,528)
1,590
(424)
(1,652)
(2,076)
Foreign currency translation adjustments
38,022
(3,727)
34,295
29,034
(4,321)
24,713
Reclassification of benefit plan liability amortization included in net
income (loss)
2,586
(543)
2,043
5,172
(1,086)
4,086
Total other comprehensive income (loss)
$
137,735
$
(15,636)
$
122,099
$
(201,375)
$
23,654
$
(177,721)
The following table presents details of the amounts reclassified from AOCI for the periods indicated:
Three Months Ended
Six Months Ended
June 30,
June 30,
Affected line item within the statements of
AOCI component
2022
2021
2022
2021
operations and comprehensive income (loss)
(Dollars in thousands)
URA(D) on securities
$
16,467
$
3,118
$
21,369
$
(424)
Other net realized capital gains (losses)
(626)
(1,528)
(1,350)
(1,652)
Income tax expense (benefit)
$
15,841
$
1,590
$
20,019
$
(2,076)
Net income (loss)
Benefit plan net gain (loss)
$
959
$
2,586
$
1,919
$
5,172
Other underwriting expenses
(201)
(543)
(404)
(1,086)
Income tax expense (benefit)
$
758
$
2,043
$
1,515
$
4,086
Net income (loss)
20
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
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
Beginning balance of URA (D) on securities
$
(571,602)
$
431,878
$
239,397
$
724,159
Current period change in URA (D) of investments - non-credit related
(716,523)
85,761
(1,527,521)
(206,520)
Ending balance of URA (D) on securities
(1,288,124)
517,639
(1,288,124)
517,639
Beginning balance of foreign currency translation adjustments
(211,583)
(124,972)
(177,481)
(115,390)
Current period change in foreign currency translation adjustments
(28,269)
34,295
(62,371)
24,713
Ending balance of foreign currency translation adjustments
(239,852)
(90,677)
(239,852)
(90,677)
Beginning balance of benefit plan net gain (loss)
(49,634)
(71,827)
(50,392)
(73,870)
Current period change in benefit plan net gain (loss)
758
2,043
1,515
4,086
Ending balance of benefit plan net gain (loss)
(48,877)
(69,784)
(48,877)
(69,784)
Ending balance of accumulated other comprehensive income (loss)
$
(1,576,854)
$
357,178
$
(1,576,854)
$
357,178
(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
30, 2022. The Company also has additional uncommitted letter of credit facilities of up to $
340.0
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
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 bi-lateral 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 was limited only to the letters of credit already issued. Those letters of credit were
subsequently cancelled from this facility and the facility is now fully matured. Prior to its maturity, 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 June 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Wells Fargo Bank Group Credit Facility
$
-
$
-
$
39,198
$
39,198
12/30/2022
Total Wells Fargo Bank Group Credit Facility
$
-
$
-
$
39,198
$
39,198
21
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
2021, the agreement was amended to provide for the issuance of up to $
500.0
credit.
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in thousands)
At June 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
$
500,000
$
435,413
12/30/2022
$
500,000
$
351,497
12/30/2022
Total Wells Fargo Bank Bilateral LOC Agreement
$
500,000
$
435,413
$
500,000
$
351,497
Bermuda Re Citibank Letter of Credit Facility
Effective August 9, 2021, Bermuda Re entered into a new 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 Citibank Letter of Credit Facility provides for the committed issuance of up to $
230.0
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.
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in thousands)
At June 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
$
230,000
$
419
12/16/22
$
230,000
$
4,425
02/28/22
208,340
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
1,097
03/01/23
146
12/20/22
975
08/15/23
216,622
12/31/22
1,222
09/23/23
473
01/21/23
145
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
21,671
03/30/26
22,731
12/30/25
Total Citibank Bilateral Agreement
$
370,000
$
322,970
$
370,000
$
333,429
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
million of secured letters of credit.
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in thousands)
At June 30, 2022
At December 31, 2021
Bank
Capacity
In Use
Date of Expiry
Capacity
In Use
Date of Expiry
Bayerische Landesbank Bilateral LOC Agreement
$
200,000
$
153,427
12/31/2022
$
200,000
$
154,691
12/31/2022
Total Bayerische Landesbank Bilateral LOC Agreement
$
200,000
$
153,427
$
200,000
$
154,691
22
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 Re Lloyd’s Bank Credit Facility”. The Bermuda Re
Lloyd’s Bank Credit Facility provides for the committed issuance of up to $
50.0
credit, and subject to credit approval a maximum total facility amount of $
250.0
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in thousands)
At June 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
$
50,000
$
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
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
The following table summarizes the outstanding letters of credit for the periods indicated:
(Dollars in thousands)
At June 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
$
200,000
$
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
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
% of its statutory admitted assets. As of June 30, 2022,
Everest Re had admitted assets of approximately $
20.8
approximately $
2.1
519.0
maturities in November and December, 2022, and interest payable at interest rates between
0.53
% and
0.65
%.
Everest Re incurred interest expense of $
0.8
0.3
and 2021, respectively. Everest Re incurred interest expense of $
1.5
0.6
ended June 30, 2022 and 2021, respectively. The FHLBNY membership agreement requires that
4.5
% of
borrowed funds be used to acquire additional membership stock.
10. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS
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
June 30, 2022, the total amount on deposit in trust accounts was $
2.0
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
% 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.
23
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
Six Months Ended
June 30,
June 30,
Mt. Logan Re Segregated Accounts
2022
2021
2022
2021
(Dollars in thousands)
Ceded written premiums
$
31,805
$
56,183
$
82,044
$
155,293
Ceded earned premiums
41,068
71,422
91,511
149,529
Ceded losses and LAE
21,097
31,052
61,717
111,895
Assumed written premiums
580
2,741
1,373
5,217
Assumed earned premiums
580
2,741
1,373
5,217
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
accident years
2002
2015
. As consideration for entering the agreement, the Company transferred cash
of $
252.0
agreement will be $
319.0
liability. As of June 30, 2022 and December 31, 2021, the Company has a reinsurance recoverable of $
181.2
million and $
206.1
14.2
and $
15.5
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 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
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/22/2022
6/22/2025
300,000
Aggregate
Total available limit as of June 30, 2022
$
2,062,500
Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on
estimated industry level insured losses from covered events, as well as the geographic location of the events.
The estimated industry level of insured losses is obtained from published estimates by an independent
recognized authority on insured property losses. Currently, none of the published insured loss estimates for
catastrophe events during the applicable covered periods of the various agreements have exceeded the single
event retentions or aggregate retentions under the terms of the agreements that would result in a recovery.
24
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” by Standard & Poor’s.
(Dollars in thousands)
Note Series
Issue Date
Maturity Date
Amount
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
Series 2022-1 Class A
6/22/2022
6/22/2025
300,000
$
2,062,500
11. SENIOR NOTES
The table below displays Everest Reinsurance Holdings’ (“Holdings”) outstanding senior notes. Fair value is
based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in
the fair value hierarchy.
June 30, 2022
December 31, 2021
Consolidated Balance
Consolidated Balance
(Dollars in thousands)
Date Issued
Date Due
Principal Amounts
Sheet Amount
Fair Value
Sheet Amount
Fair Value
4.868
% Senior notes
6/5/2014
6/1/2044
$
400,000
$
397,373
$
374,212
$
397,314
$
503,840
3.5
% Senior notes
10/7/2020
10/15/2050
1,000,000
980,310
769,220
980,046
1,054,520
3.125
% Senior notes
10/4/2021
10/15/2052
1,000,000
968,811
701,820
968,440
983,140
$
2,400,000
$
2,346,495
$
1,845,252
$
2,345,800
$
2,541,500
Interest expense incurred in connection with these senior notes is as follows for the periods indicated:
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars In thousands
2022
2021
2022
2021
Interest expense incurred
4.868
% Senior notes
$
4,868
$
4,868
$
9,736
$
9,736
Interest expense incurred
3.5
% Senior notes
8,807
8,805
17,614
17,610
Interest expense incurred
3.125
% Senior notes
7,827
-
15,741
-
$
21,502
$
13,673
$
43,090
$
27,346
25
12. LONG TERM SUBORDINATED NOTES
The table below displays Holdings’ outstanding fixed to floating rate long term subordinated notes. Fair value is
based on quoted market prices, but due to limited trading activity, these subordinated notes are considered
Level 2 in the fair value hierarchy.
Maturity Date
June 30, 2022
December 31, 2021
Original
Consolidated Balance
Fair
Consolidated Balance
Fair
(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
$
223,824
$
189,012
$
223,774
$
216,289
During the fixed rate interest period from
May 3, 2007
May 14, 2017
, interest was at the annual rate of
6.6
%, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on
November 15,
2007
. During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the
3 month LIBOR plus
238.5
August 15 and November 15 of each year, subject to Holdings’ right to defer interest on
one
for up to
ten
quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for May 16, 2022 to
August 14, 2022 is
3.80
%.
Holdings may redeem the long term subordinated notes on or after May 15, 2017, in whole or in part at
100
% of
the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity
date and prior to
May 1, 2047
certain senior note holders and it mandates that Holdings receive proceeds from the sale of another
subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. The Company’s
4.868
% senior notes, due on
June 1, 2044
,
3.5
% senior noted due on
October 15, 2050
3.125
% senior notes
due on
October 15, 2052
subordinated notes.
On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the
6.60
%
fixed to floating rate long term subordinated notes. Upon expiration of the tender offer, the Company had
reduced its outstanding debt by $
161.4
$
13.2
Interest expense incurred in connection with these long term subordinated notes is as follows for the periods
indicated:
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
Interest expense incurred
$
1,927
$
1,460
$
3,458
$
2,922
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
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, 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.
26
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. 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 review and evaluate the financial results of its operating segments based upon balance sheet
data.
The following tables present the underwriting results for the operating segments for the periods indicated:
Three Months Ended June 30, 2022
Six Months Ended June 30, 2022
(Dollars in thousands)
Reinsurance
Insurance
Total
Reinsurance
Insurance
Total
Gross written premiums
$
2,201,210
$
1,245,829
$
3,447,038
$
4,386,822
$
2,246,567
$
6,633,389
Net written premiums
2,122,221
899,242
3,021,464
4,203,670
1,629,806
5,833,477
Premiums earned
$
2,139,559
$
776,678
$
2,916,237
$
4,205,813
$
1,502,189
$
5,708,003
Incurred losses and LAE
1,382,104
494,143
1,876,247
2,706,820
959,290
3,666,110
Commission and brokerage
530,859
99,435
630,294
1,045,101
190,422
1,235,523
Other underwriting expenses
52,063
117,470
169,533
102,516
228,310
330,826
Underwriting gain (loss)
$
174,534
$
65,630
$
240,165
$
351,376
$
124,168
$
475,544
Net investment income
225,978
468,808
Net gains (losses) on investments
(236,265)
(389,892)
Corporate expenses
(15,018)
(29,038)
Interest, fee and bond issue cost amortization expense
(24,398)
(48,476)
Other income (expense)
(71,337)
(55,977)
Income (loss) before taxes
$
119,123
$
420,969
(Some amounts may not reconcile due to rounding.)
Three Months Ended June 30, 2021
Six Months Ended June 30, 2021
(Dollars in thousands)
Reinsurance
Insurance
Total
Reinsurance
Insurance
Total
Gross written premiums
$
2,148,235
$
1,041,905
$
3,190,140
$
4,207,250
$
1,914,323
$
6,121,573
Net written premiums
2,059,919
749,492
2,809,411
3,972,868
1,390,479
5,363,347
Premiums earned
$
1,920,801
$
637,571
$
2,558,372
$
3,698,253
$
1,247,984
$
4,946,237
Incurred losses and LAE
1,168,139
418,002
1,586,141
2,440,045
857,515
3,297,560
Commission and brokerage
473,258
84,490
557,749
881,982
164,777
1,046,760
Other underwriting expenses
47,065
93,779
140,844
99,061
184,014
283,075
Underwriting gain (loss)
$
232,339
$
41,300
$
273,639
$
277,165
$
41,678
$
318,843
Net investment income
407,095
667,508
Net gains (losses) on investments
104,109
143,011
Corporate expenses
(16,168)
(28,546)
Interest, fee and bond issue cost amortization expense
(15,607)
(31,246)
Other income (expense)
7,114
63,707
Income (loss) before taxes
$
760,181
$
1,133,276
(Some amounts may not reconcile due to rounding.)
27
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
Six Months Ended
June 30,
June 30,
(Dollars in thousands)
2022
2021
2022
2021
United Kingdom gross written premium
$
312,343
$
249,314
$
623,924
$
615,462
14. SHARE-BASED COMPENSATION PLANS
For the three months ended June 30, 2022, a total of
2,330
2022 with a fair value of $
280.98
For the six months ended June 30, 2022, a total of
199,138
187,760
,
9,048
2,330
2022, with a fair value of $
301.535
287.9425
280.98
Additionally,
18,340
$
301.535
15. INCOME TAXES
The Company is domiciled in Bermuda and has 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 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 difference between the year-to-date tax expense or benefit for the current year -to-date
period less such amount for the immediately preceding year-to-date period. Management considers the impact
of all known events in its estimation of the Company’s annual pre-tax income/(loss) and annualized effective tax
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.
28
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 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 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.
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. The increased frequency of catastrophe losses that
continued to be experienced in 2022 and throughout 2021 appears to be further pressuring 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.
29
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 $45.0 million of incurred underwriting losses related to the Ukraine/Russia war as of the three and six
months ended June 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
Six Months Ended
Percentage
June 30,
Increase/
June 30,
Increase/
(Dollars in millions)
2022
2021
(Decrease)
2022
2021
(Decrease)
Gross written premiums
$
3,447.0
$
3,190.1
8.1
%
$
6,633.4
$
6,121.6
8.4
%
Net written premiums
3,021.5
2,809.4
7.5
%
5,833.5
5,363.3
8.8
%
REVENUES:
Premiums earned
$
2,916.2
$
2,558.4
14.0
%
$
5,708.0
$
4,946.2
15.4
%
Net investment income
226.0
407.1
-44.5
%
468.8
667.5
-29.8
%
Net gains (losses) on investments
(236.3)
104.1
NM
(389.9)
143.0
NM
Other income (expense)
(71.3)
7.1
NM
(56.0)
63.7
-187.9
%
Total revenues
2,834.6
3,076.7
-7.9
%
5,730.9
5,820.5
-1.5
%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
1,876.2
1,586.1
18.3
%
3,666.1
3,297.6
11.2
%
Commission, brokerage, taxes and fees
630.3
557.7
13.0
%
1,235.5
1,046.8
18.0
%
Other underwriting expenses
169.5
140.8
20.4
%
330.8
283.1
16.9
%
Corporate expenses
15.0
16.2
-7.1
%
29.0
28.5
1.7
%
Interest, fees and bond issue cost amortization expense
24.4
15.6
56.3
%
48.5
31.2
55.1
%
Total claims and expenses
2,715.4
2,316.5
17.2
%
5,309.9
4,687.2
13.3
%
INCOME (LOSS) BEFORE TAXES
119.1
760.2
-84.3
%
421.0
1,133.3
-62.9
%
Income tax expense (benefit)
(3.5)
80.2
-104.4
%
0.6
111.4
-99.5
%
NET INCOME (LOSS)
$
122.6
$
680.0
-82.0
$
420.4
$
1,021.8
-58.9
%
RATIOS:
Point
Change
Point
Change
Loss ratio
64.3
%
62.0
%
2.3
64.2
%
66.7
%
(2.5)
Commission and brokerage ratio
21.6
%
21.8
%
(0.2)
21.6
%
21.2
%
0.4
Other underwriting expense ratio
5.8
%
5.5
%
0.3
5.8
%
5.7
%
0.1
Combined ratio
91.8
%
89.3
%
2.5
91.7
%
93.6
%
(1.9)
At
At
Percentage
June 30,
December 31,
Increase/
(Dollars in millions, except per share amounts)
2022
2021
(Decrease)
Balance sheet data:
Total investments and cash
$
28,723.3
$
29,673.3
-3.2
%
Total assets
37,907.7
38,185.3
-0.7
%
Loss and loss adjustment expense reserves
19,993.1
19,009.5
5.2
%
Total debt
3,089.3
3,088.6
-
%
Total liabilities
29,054.8
28,046.1
3.6
%
Shareholders' equity
8,852.9
10,139.2
-12.7
%
Book value per share
224.59
258.21
-13.0
%
(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)
30
Revenues.
Premiums. Gross written premiums increased by 8.1% to $3.4 billion for the three months ended June 30, 2022,
compared to $3.2 billion for the three months ended June 30, 2021, reflecting a $203.9 million, or 19.6%,
increase in our insurance business and a $53.0 million, or 2.5%, increase in our reinsurance business. The rise in
insurance premiums was primarily due to increases across all lines of business, notably specialty casualty
business, professional liability business and other specialty business. The increase in reinsurance premiums was
primarily due to increases in property catastrophe excess of loss business and casualty pro rata business,
partially offset by a decline in property pro rata business. Gross written premiums increased by 8.4% to $6.6
billion for the six months ended June 30, 2022, compared to $6.1 billion for the six months ended June 30, 2021,
reflecting a $332.2 million, or 17.4%, increase in our insurance business and a $179.6 million, or 4.3%, increase in
our reinsurance business. The rise in insurance premiums was primarily due to increases across all lines of
business, notably specialty casualty business, professional liability 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.
Net written premiums increased by 7.5% to $3.0 billion for the three months ended June 30, 2022, compared to
$2.8 billion for the three months ended June 30, 2021. Net written premiums increased by 8.8% to $5.8 billion
for the six months ended June 30, 2022, compared to $5.4 billion for the six months ended June 30, 2021. The
percentage increases in net written premiums are consistent with the percentage changes in gross written
premiums. Premiums earned increased by 14.0% to $2.9 billion for the three months ended June 30, 2022,
compared to $2.6 billion for the three months ended June 30, 2021. Premiums earned increased by 15.4% to
$5.7 billion for the six months ended June 30, 2022, compared to $4.9 billion for the six months ended June 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 $71.3 million and $56.0 million for the three and six
months ended June 30, 2022, respectively. We recorded other income of $7.1 million and $63.7 million for the
three and six months ended June 30, 2021, respectively. The changes were primarily the result of fluctuations in
foreign currency exchange rates. We recognized foreign currency exchange expense of $73.9 million and foreign
currency exchange income of $8.8 million for the three months ended June 30, 2022 and 2021, respectively. We
recognized foreign currency exchange expense of $60.8 million and foreign currency exchange income of $60.6
million for the six months ended June 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.
31
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 June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,792.0
61.4
%
$
(0.7)
-
%
$
1,791.2
61.4
%
Catastrophes
85.0
2.9
%
-
-
%
85.0
2.9
%
Total
$
1,877.0
64.3
%
$
(0.7)
-
%
$
1,876.2
64.3
%
2021
Attritional
$
1,543.8
60.3
%
$
(2.6)
-0.1
%
$
1,541.1
60.2
%
Catastrophes
45.0
1.8
%
-
-
%
45.0
1.8
%
Total
$
1,588.8
62.1
%
$
(2.6)
-0.1
%
$
1,586.1
62.0
%
Variance 2022/2021
Attritional
$
248.2
1.1
pts
$
1.9
0.1
pts
$
250.1
1.2
pts
Catastrophes
40.0
1.1
pts
-
-
pts
40.0
1.1
pts
Total
$
288.2
2.2
pts
$
1.9
0.1
pts
$
290.1
2.3
pts
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
3,467.8
60.8
%
$
(1.7)
-
%
3,466.1
60.8
%
Catastrophes
200.0
3.5
%
-
-
%
200.0
3.5
%
Total
$
3,667.8
64.3
%
$
(1.7)
-
%
$
3,666.1
64.2
%
2021
Attritional
$
2,987.0
60.4
%
$
(4.5)
-0.1
%
2,982.6
60.3
%
Catastrophes
315.0
6.4
%
-
-
%
315.0
6.4
%
Total
$
3,302.0
66.8
%
$
(4.5)
-0.1
%
$
3,297.6
66.7
%
Variance 2022/2021
Attritional
$
480.8
0.4
pts
$
2.8
0.1
pts
$
483.5
0.5
pts
Catastrophes
(115.0)
(2.9)
pts
-
-
pts
(115.0)
(2.9)
pts
Total
$
365.8
(2.5)
pts
$
2.8
0.1
pts
$
368.5
(2.5)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 18.3% to $1.9 billion for the three months ended June 30, 2022, compared
to $1.6 billion for the three months ended June 30, 2021, primarily due to an increase of $248.2 million in
current year attritional losses and an increase of $40.0 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 $45.0
million of attritional losses incurred due to the Ukraine/Russia war. The current year catastrophe losses of $85.0
million for the three months ended June 30, 2022 related primarily to the 2022 South Africa flood ($45.0
million), the 2022 Canada derecho ($18.0 million), the 2022 2
nd
Western Europe Convective storm ($10.0 million). The $45.0 million of current year catastrophe losses for the
three months ended June 30, 2021 related to Tropical Storm Claudette, the Texas winter storms, the 2021
Australia floods and the Europe Convective storms.
Incurred losses and LAE increased by 11.2% to $3.7 billion for the six months ended June 30, 2022, compared to
$3.3 billion for the six months ended June 30, 2021, primarily due to an increase of $480.8 million in current year
attritional losses, partially offset by a decline of $115.0 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 $45.0
million of attritional losses incurred due to the Ukraine/Russia war. The current year catastrophe losses of
$200.0 million for the six months ended June 30, 2022 related primarily to the 2022 Australia floods ($76.4
million), the 2022 South Africa flood ($45.0 million), the 2022 European storms ($30.0 million), the 2022 Canada
derecho ($18.0 million), the 2022 2
nd
32
Storm ($10.0 million) and the 2022 March U.S. storms ($8.6 million). The $315.0 million of current year
catastrophe losses for the six months ended June 30, 2021 related primarily to the Texas winter storms ($270.0
million) with the rest of the losses emanating from Tropical Storm Claudette, the 2021 Australia floods, Victoria
Australia flooding and the Europe Convective storms.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by 13.0% to $630.3
million for the three months ended June 30, 2022, compared to $557.7 million for the three months ended June
30, 2021. Commission, brokerage, taxes and fees increased by 18.0% to $1.2 billion for the six months ended
June 30, 2022, compared to $1.0 billion for the six months ended June 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 $169.5 million and $140.8 million for the
three months ended June 30, 2022 and 2021, respectively. Other underwriting expenses were $330.8 million
and $283.1 million for the six months ended June 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, were $15.0 million and $16.2 million for the three months ended June 30, 2022 and 2021,
respectively, and $29.0 million and $28.5 million for the six months ended June 30, 2022 and 2021, respectively.
The variances are mainly due to the changes in variable incentive compensative expenses.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense
was $24.4 million and $15.6 million for the three months ended June 30, 2022 and 2021, respectively. Interest,
fees and other bond amortization expense was $48.5 million and $31.2 million for the six months ended June 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 3.80% as
of June 30, 2022.
Income Tax Expense (Benefit). We had income tax benefit of $3.5 million and income tax expense of $80.2
million for the three months ended June 30, 2022 and 2021, respectively. We had income tax expense of $0.6
million and $111.4 million for the six months ended June 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.
Net Income (Loss).
Our net income was $122.6 million and $680.0 million for the three months ended June 30, 2022 and 2021,
respectively. Our net income was $420.4 million and $1.0 billion for the six months ended June 30, 2022 and
2021, respectively. These changes were primarily driven by the financial component fluctuations explained
above.
33
Ratios.
Our combined ratio increased by 2.5 points to 91.8% for the three months ended June 30, 2022, compared to
89.3% for the three months ended June 30, 2021 and decreased by 1.9 points to 91.7% for the six months ended
June 30, 2022, compared to 93.6% for the six months ended June 30, 2021. The loss ratio component increased
2.3 points for the three months ended June 30, 2022 over the same period last year mainly due to an increase of
$40.0 million in current year catastrophe losses and an increase of $45.0 million in current year attritional losses
due to the Ukraine/Russia war. The loss ratio component decreased 2.5 points for the six months ended June
30, 2022 over the same period last year mainly due to a decline of $115.0 million in current year catastrophe
losses, partially offset by an increase of $45.0 million in current year attritional losses due to the Ukraine/Russia
war. The commission and brokera ge ratio components decreased slightly to 21.6% for the three months ended
June 30, 2022 compared to 21.8% for the three months ended June 30, 2021 and increased to 21.6% for the six
months ended June 30, 2022 compared to 21.2% for the six months ended June 30, 2021. These changes were
mainly due to changes in the mix of business. The other underwriting expense ratios increased to 5.8% for the
three months ended June 30, 2022 compared to 5.5% for the three months ended June 30, 2021 and increased
slightly to 5.8% for the six months ended June 30, 2022 compared to 5.7% for the six months ended June 30,
2021. These increases were mainly due to higher insurance operations costs.
Shareholders’ Equity.
Shareholders’ equity decreased by $1.3 billion to $8.9 billion at June 30, 2022 from $10.1 billion at December 31,
2021, principally as a result of $1.5 billion of unrealized depreciation on fixed maturity portfolio net of tax,
$126.1 million of shareholde r dividends, $62.4 million of net foreign currency translation adjustments, and the
repurchase of 5,000 common shares for $1.3 million, partially offset by $420.4 million of net income, $9.1 million
of share-based compensation transactions and $1.5 million of net benefit plan obligation adjustments, net of
tax.
Consolidated Investment Results
Net Investment Income.
Net investment income decreased by 44.5% to $226.0 million for the three months ended June 30, 2022
compared with net investment income of $407.1 million for the three months ended June 30, 2021. The
decrease for the three months ended June 30, 2022 was primarily the result of a decline of $192.4 million in
limited partnership income, partially offset by an additional $20.5 million of income from fixed maturity
investments. Net investment income decreased by 29.8% to $468.8 million for the six months ended June 30,
2022 compared with investment income of $667.5 million for the six months ended June 30, 2021. The decrease
for the six months ended June 30, 2022 was primarily the result of a decline of $218.3 million in limited
partnership income, partially offset by an additional $27.8 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.
34
The following table shows the components of net investment income for the periods indicated.
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in millions)
2022
2021
2022
2021
Fixed maturities
$
168.8
$
148.3
$
317.0
$
289.2
Equity securities
4.6
3.5
8.7
8.3
Short-term investments and cash
6.6
0.7
6.7
1.0
Other invested assets
Limited partnerships
47.6
240.0
136.0
354.3
Other
14.0
25.9
25.8
31.9
Gross investment income before adjustments
241.5
418.3
494.3
684.6
Funds held interest income (expense)
0.8
3.3
4.5
11.3
Future policy benefit reserve income (expense)
(0.1)
(0.2)
(0.4)
(0.5)
Gross investment income
242.2
421.5
498.4
695.4
Investment expenses
(16.2)
(14.4)
(29.6)
(27.9)
Net investment income
$
226.0
$
407.1
$
468.8
$
667.5
(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
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Annualized pre-tax yield on average cash and invested assets
3.0
%
6.3
%
3.2
%
5.3
%
Annualized after-tax yield on average cash and invested assets
2.6
%
5.5
%
2.7
%
4.6
%
Annualized return on invested assets
-0.1
%
7.9
%
-0.5
%
6.3
%
35
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 June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
2022
2021
Variance
Realized gains (losses) from dispositions:
$
7.4
$
19.8
$
(12.4)
$
27.6
$
34.7
$
(7.1)
(23.0)
(9.8)
(13.2)
(40.3)
(15.5)
(24.8)
(15.6)
10.0
(25.6)
(12.8)
19.2
(32.0)
4.1
5.8
(1.7)
7.6
18.1
(10.5)
(35.1)
(2.0)
(33.1)
(50.4)
(8.1)
(42.3)
(30.9)
3.8
(34.7)
(42.7)
10.0
(52.7)
3.4
4.1
(0.8)
7.9
5.6
2.3
(2.8)
(1.4)
(1.4)
(3.1)
(1.5)
(1.6)
0.6
2.7
(2.1)
4.7
4.1
0.6
Total net realized gains (losses) from dispositions:
14.9
29.7
(14.8)
43.1
58.4
(15.4)
(60.8)
(13.2)
(47.6)
(93.8)
(25.1)
(68.7)
(45.9)
16.5
(62.3)
(50.8)
33.3
(84.1)
Allowance for credit losses:
(1.5)
(15.9)
14.4
(13.3)
(22.9)
9.6
Gains (losses) from fair value adjustments:
(188.9)
103.5
(292.4)
(325.8)
132.6
(458.4)
Total
(188.9)
103.5
(292.4)
(325.8)
132.6
(458.4)
Total net gains (losses) on investments
$
(236.3)
$
104.1
$
(340.3)
$
(389.9)
$
143.0
$
(532.9)
(Some amounts may not reconcile due to rounding.)
Net gains (losses) on investments during the three months ended June 30, 2022 primarily relate to net losses
from fair value adjustments on equity securities in the amount of $188.9 million as a result of equity market
declines during the second quarter of 2022. In addition, we realized $45.9 million of losses due to the
disposition of investments and recorded an increase to the allowance for credit losses of $1.5 million.
Net gains (losses) on investments during the six months ended June 30, 2022 primarily relate to net losses from
fair value adjustments on equity securities in the amount of $325.8 million as a result of equity market declines
during the first six months of 2022. In addition, we realized $50.8 million of losses due to the disposition of
investments and recorded an increase to the allowance for credit losses of $13.3 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,
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.
36
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 June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
2,201.2
$
2,148.2
$
53.0
2.5
%
$
4,386.8
$
4,207.3
$
179.6
4.3
%
Net written premiums
2,122.2
2,059.9
62.3
3.0
%
4,203.7
3,972.9
230.8
5.8
%
Premiums earned
$
2,139.6
$
1,920.8
$
218.8
11.4
%
$
4,205.8
$
3,698.3
$
507.6
13.7
%
Incurred losses and LAE
1,382.1
1,168.1
214.0
18.3
%
2,706.8
2,440.0
266.8
10.9
%
Commission and brokerage
530.9
473.3
57.6
12.2
%
1,045.1
882.0
163.1
18.5
%
Other underwriting expenses
52.1
47.1
5.0
10.6
%
102.5
99.1
3.4
3.5
%
Underwriting gain (loss)
$
174.5
$
232.3
$
(57.8)
-24.9
%
$
351.4
$
277.2
$
74.2
26.8
%
Point Chg
Point Chg
Loss ratio
64.6
%
60.8
%
3.8
64.4
%
66.0
%
(1.6)
Commission and brokerage ratio
24.8
%
24.6
%
0.2
24.8
%
23.8
%
1.0
Other underwriting expense ratio
2.4
%
2.5
%
(0.1)
2.4
%
2.7
%
(0.3)
Combined ratio
91.8
%
87.9
%
3.9
91.6
%
92.5
%
(0.9)
(NM, Not Meaningful)
(Some amounts may not reconcile due to rounding.)
37
Premiums. Gross written premiums increased by 2.5% to $2.2 billion for the three months ended June 30, 2022
from $2.1 billion for the three months ended June 30, 2021, primarily due to increases in property catastrophe
excess of loss business and casualty pro rata business , partially offset by a decline in property pro rata business.
Net written premiums increased by 3.0% to $2.12 billion for the three months ended June 30, 2022 compared to
$2.06 billion for the three months ended June 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 June 30, 2022 compared to the three months
ended June 30, 2021. Premiums earned increased by 11.4% to $2.1 billion for the three months ended June 30,
2022, compared to $1.9 billion for the three months ended June 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 increased by 4.3% to $4.4 billion for the six months ended June 30, 2022 from $4.2
billion for the six months ended June 30, 2021, primarily due to increases in casualty pro rata business and
financial lines of business. Net written premiums increased by 5.8% to $4.2 billion for the six months ended June
30, 2022 compared to $4.0 billion for the six months ended June 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 six months ended June 30, 2022 compared to the six months
ended June 30, 2021. Premiums earned increased by 13.7% to $4.2 billion for the six months ended June 30,
2022, compared to $3.7 billion for the six months ended June 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 year-to-date percentage increase in net earned premiums.
38
Incurred Losses and LAE
. The following table presents the incurred losses and LAE for the Reinsurance segment
for the periods indicated.
Three Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,302.8
60.9
%
$
(0.7)
-
%
1,302.1
60.9
%
Catastrophes
80.0
3.7
%
-
-
%
80.0
3.7
%
Total Segment
$
1,382.8
64.6
%
$
(0.7)
-
%
$
1,382.1
64.6
%
2021
Attritional
$
1,134.6
59.1
%
$
(1.4)
-0.1
%
1,133.1
59.0
%
Catastrophes
35.0
1.8
%
-
-
%
35.0
1.8
%
Total Segment
$
1,169.6
60.9
%
$
(1.4)
-0.1
%
$
1,168.1
60.8
%
Variance 2022/2021
Attritional
$
168.2
1.8
pts
$
0.7
0.1
pts
$
169.0
1.9
pts
Catastrophes
45.0
1.9
pts
-
-
pts
45.0
1.9
pts
Total Segment
$
213.2
3.7
pts
$
0.7
0.1
pts
$
214.0
3.8
pts
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
2,519.1
59.9
%
$
(2.3)
-0.1
%
2,516.8
59.9
%
Catastrophes
190.0
4.5
%
-
-
%
190.0
4.5
%
Total Segment
$
2,709.1
64.4
%
$
(2.3)
-0.1
%
$
2,706.8
64.4
%
2021
Attritional
$
2,185.8
59.1
%
$
(3.3)
-0.1
%
2,182.5
59.0
%
Catastrophes
257.5
7.0
%
-
-
%
257.5
7.0
%
Total Segment
$
2,443.3
66.1
%
$
(3.3)
-0.1
%
$
2,440.0
66.0
%
Variance 2022/2021
Attritional
$
333.3
0.8
pts
$
0.9
-
pts
$
334.2
0.8
pts
Catastrophes
(67.5)
(2.5)
pts
-
-
pts
(67.5)
(2.5)
pts
Total Segment
$
265.8
(1.7)
pts
$
0.9
-
pts
$
266.7
(1.6)
pts
Incurred losses increased by 18.3% to $1.4 billion for the three months ended June 30, 2022, compared to $1.2
billion for the three months ended June 30, 2021. The increase was primarily due to an increase of $168.2
million in current year attritional losses and an increase of $45.0 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 $45.0 million of attritional losses incurred due to the Ukraine/Russia war. The current year catastrophe
losses of $80.0 million for the three months ended June 30, 2022 related primarily to the 2022 South Africa flood
($45.0 million), the 2022 Canada derecho ($18.0 million), the 2022 Western Europe Convective storm ($10.0
million) and the 2022 2
nd
for the three months ended June 30, 2021 related primarily to Tropical Storm Claudette, the Victoria Australia
flooding and the Europe Convective storms.
Incurred losses increased by 10.9% to $2.7 billion for the six months ended June 30, 2022, compared to $2.4
billion for the six months ended June 30, 2021. The increase was primarily due to an increase of $333.3 million
in current year attritional losses, partially offset by a decrease of $67.5 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 and $45.0 million of attritional losses due to the Ukraine/Russia war. The current year catastrophe losses
of $190.0 million for the six months ended June 30, 2022 related primarily to the 2022 Australia floods ($76.4
million), the 2022 South Africa flood ($45.0 million), the 2022 European storms ($30.0 million), the 2022 Canada
derecho ($18.0 million), the 2022 Western Europe Convective storm ($10.0 million), the 2022 2
nd
storms ($7.0 million) and the 2022 March U.S. storms ($3.6 million). The $257.5 million of current year
catastrophe losses for the six months ended June 30, 2021 primarily related to the Texas winter storms ($212.5
39
million) with the rest of the losses emanating from Tropical Storm Claudette, the 2021 Australia floods, the
Victoria Australia flooding and the Europe Convective storms.
Segment Expenses. Commission and brokerage expense increased by 12.2% to $530.9 million for the three
months ended June 30, 2022 compared to $473.3 million for the three months ended June 30, 2021.
Commission and brokerage expense increased by 18.5% to $1.0 billion for the six months ended June 30, 2022
compared to $882.0 million for the six months ended June 30, 2021. The increases were mainly due to the
impact of the increases in premiums earned and changes in the mix of business.
Segment other underwriting expenses increased to $52.1 million for the three months ended June 30, 2022 from
$47.1 million for the three months ended June 30, 2021. Segment other underwriting expenses increased to
$102.5 million for the six months ended June 30, 2022 from $99.1 million for the six months ended June 30,
2021. The increases were mainly due to the impact of increases in premiums earned.
Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods
indicated.
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
1,245.8
$
1,041.9
$
203.9
19.6
%
$
2,246.7
$
1,914.3
$
332.2
17.4
%
Net written premiums
899.2
749.5
149.7
20.0
%
1,629.8
1,390.5
239.3
17.2
%
Premiums earned
$
776.7
$
637.6
$
139.1
21.8
%
$
1,502.2
$
1,248.0
$
254.2
20.4
%
Incurred losses and LAE
494.1
418.0
76.1
18.2
%
959.3
857.5
101.8
11.9
%
Commission and brokerage
99.4
84.5
14.9
17.7
%
190.4
164.8
25.6
15.6
%
Other underwriting expenses
117.5
93.8
23.7
25.3
%
228.3
184.0
44.3
24.1
%
Underwriting gain (loss)
$
65.6
$
41.3
$
24.3
58.9
%
$
124.2
$
41.7
$
82.5
197.9
%
Point Chg
Point Chg
Loss ratio
63.6
%
65.6
%
-2.0
63.9
%
68.7
%
(4.8)
Commission and brokerage ratio
12.8
%
13.3
%
-0.5
12.7
%
13.2
%
(0.5)
Other underwriting expense ratio
15.1
%
14.6
%
0.5
15.2
%
14.8
%
0.4
Combined ratio
91.5
%
93.5
%
-2.0
91.7
%
96.7
%
(4.9)
(NM not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums. Gross written premiums increased by 19.6% to $1.2 billion for the three months ended June 30, 2022
compared to $1.0 billion for the three months ended June 30, 2021. This rise was primarily related to increases
across all lines of business, notably specialty casualty business, professional liability business and other specialty
business. Net written premiums increased by 20.0% to $899.2 million for the three months ended June 30, 2022
compared to $749.5 million for the three months ended June 30, 2021, which is consistent with the change in
gross written premiums. Premiums earned increased 21.8% to $776.7 million for the three months ended June
30, 2022 compared to $637.6 million for the three months ended June 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 17.4% to $2.2 billion for the six months ended June 30, 2022 compared to
$1.9 billion for the six months ended June 30, 2021. This rise was primarily related to increases across all lines of
business, notably specialty casualty business, professional liability business and other specialty business. Net
written premiums increased by 17.2% to $1.6 billion for the six months ended June 30, 2022 compared to $1.4
billion for the six months ended June 30, 2021, which is consistent with the change in gross written premiums.
40
Premiums earned increased 20.4% to $1.5 million for the six months ended June 30, 2022 compared to $1.2
billion for the six months ended June 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 June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
489.1
63.0
%
$
-
-
%
489.1
63.0
%
Catastrophes
5.0
0.6
%
-
-
%
5.0
0.6
%
Total Segment
$
494.1
63.6
%
$
-
-
%
$
494.1
63.6
%
2021
Attritional
$
409.2
64.2
%
$
(1.2)
-0.2
%
408.0
64.0
%
Catastrophes
10.0
1.6
%
-
-
%
10.0
1.6
%
Total Segment
$
419.2
65.8
%
$
(1.2)
-0.2
%
$
418.0
65.6
%
Variance 2022/2021
Attritional
$
79.9
(1.2)
pts
$
1.2
0.2
pts
$
81.1
(1.0)
pts
Catastrophes
(5.0)
(1.0)
pts
-
-
pts
(5.0)
(1.0)
pts
Total Segment
$
74.9
(2.2)
pts
$
1.2
0.2
pts
$
76.1
(2.0)
pts
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
948.6
63.1
%
$
0.7
-
%
949.3
63.1
%
Catastrophes
10.0
0.7
%
-
-
%
10.0
0.7
%
Total Segment
$
958.6
63.8
%
$
0.7
-
%
$
959.3
63.9
%
2021
Attritional
$
801.2
64.2
%
$
(1.2)
-0.1
%
800.0
64.1
%
Catastrophes
57.5
4.6
%
-
-
%
57.5
4.6
%
Total Segment
$
858.7
68.8
%
$
(1.2)
-0.1
%
$
857.5
68.7
%
Variance 2022/2021
Attritional
$
147.4
(1.1)
pts
$
1.9
0.1
pts
$
149.3
(1.0)
pts
Catastrophes
(47.5)
(3.9)
pts
-
-
pts
(47.5)
(3.9)
pts
Total Segment
$
99.9
(5.0)
pts
$
1.9
0.1
pts
$
101.8
(4.8)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 18.2% to $494.1 million for the three months ended June 30, 2022
compared to $418.0 million for the three months ended June 30, 2021. The increase was mainly due to an
increase of $79.9 million in current year attritional losses, partially offset by a decrease in current year
catastrophe losses of $5.0 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 million related to the 2022 2
nd
quarter U.S. storms. The $10.0 million of current year catastrophe losses for the three months ended June 30,
2021 related to the Texas winter storms.
Incurred losses and LAE increased by 11.9% to $959.3 million for the six months ended June 30, 2022 compared
to $857.5 million for the six months ended June 30, 2021. The increase was mainly due to an increase of $147.4
million in current year attritional losses, partially offset by a decrease in current year catastrophe losses of $47.5
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 $10.0 million related to the 2022 March U.S. storms
41
($5.0 million) and the 2022 2
nd
losses for the six months ended June 30, 2021 related to the Texas winter storms.
Segment Expenses. Commission and brokerage increased by 17.7% to $99.4 million for the three months ended
June 30, 2022 compared to $84.5 million for the three months ended June 30, 2021. Commission and brokerage
increased by 15.6% to $190.4 million for the six months ended June 30, 2022 compared to $164.8 million for the
six months ended June 30, 2021. These increase s were mainly due to the impact of the increase in premiums
earned.
Segment other underwriting expenses increased to $117.5 million for the three months ended June 30, 2022
compared to $93.8 million for the three months ended June 30, 2021. Segment other underwriting expenses
increased to $228.3 million for the six months ended June 30, 2022 compared to $184.0 million for the six
months ended June 30, 2021. These increases were mainly due to the impact of the increases 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 were $26.6 billion at June 30, 2022, a decrease of $1.6 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, partially offset by 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. Short-term investments decreased as a result of the
reinvestment of funds into other vehicles.
The Company’s limited partnership investments are comprised of limited partnerships that invest in private
equities. Generally, the limited partnerships are reported on a 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
June 30, 2022
December 31, 2021
Fixed income portfolio duration (years)
3.1
3.2
Fixed income composite credit quality
A+
A+
Reinsurance Recoverables .
Reinsurance recoverables for both paid and unpaid losses totaled $2.1 billion and $2.1 billion at June 30, 2022
and December 31, 2021, respectively. At June 30, 2022, $618.1 million, or 29.5%, was receivable from Mt. Logan
Re collateralized segregated accounts; $224.2 million, or 10.7%, was receivable from Munich Reinsurance
America, Inc. (“Munich Re”) and $131.5 million, or 6.3% was receivable from Endurance Specialty Holdings, Ltd.
(“Endurance”). No other retrocessionaire accounted for more than 5% of our recoverables .
Loss and LAE Reserves. Gross loss and LAE reserves totaled $20.0 billion and $19.0 billion at June 30, 2022 and
December 31, 2021, respectively.
42
The following tables summarize gross outstanding loss and LAE reserves by segment, classified by case reserves
and IBNR reserves, for the periods indicated.
At June 30, 2022
Case
IBNR
Total
% of
(Dollars in millions)
Reserves
Reserves
Reserves
Total
Reinsurance
$
5,853.5
$
8,623.4
$
14,476.9
72.4
%
Insurance
1,639.8
3,731.1
5,370.9
26.9
%
Total excluding A&E
7,493.3
12,354.6
19,847.8
99.3
%
A&E
145.2
-
145.2
0.7
%
Total including A&E
$
7,638.5
$
12,354.6
$
19,993.1
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 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.
43
Asbestos and Environmental Exposures. 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
reserves on both a gross and net of retrocessions basis for the periods indicated.
At
At
June 30,
December 31,
(Dollars in millions)
2022
2021
Gross reserves
$
145.2
$
175.2
Ceded reserves
(15.8)
(19.0)
Net reserves
$
129.4
$
156.1
(Some amounts may not reconcile due to rounding.)
With respect to asbestos only, at June 30, 2022, we had net asbestos loss reserves of $129.7 million, or 100.2%,
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 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 3.6 years at June 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 June 30, 2022 and December 31, 2021 was $8.9 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
(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
scale that provides for relative comparisons. We continue to possess significant financial flexibility and access to
44
debt and equity markets as a result of our financial strength, as evidenced by the financial strength ratings as
assigned by independent rating agencies.
We maintain our own economic capital models to monitor and project our overall capital, as well as the capital
at our operating subsidiaries. A key input to the economic models is projected income and this input is
continually compared to actual results, which may require a change in the capital strategy.
As part of our capital strategy, we model our potential exposure to catastrophe losses arising from a single
event. Projected catastrophe losses are generally summarized in term of probable maximum loss (“PML”). A full
discussion on PMLs is included in our December 31, 2021 Form 10-K filing in PART 1, Item 1. Business, Risk
Management of Underwriting and Reinsurance Arrangements. We focus on the projected net economic loss
from a catastrophe in a given zone as compared to our shareholders’ equity. Economic loss is the PML exposure,
net of third party reinsurance, reduced by estimated reinstatement premiums to renew coverage and estimated
income taxes. In our December 31, 2021 Form 10-K, we reported that our projected net economic loss from our
largest projected 100-year event represented approximately 4.8% of our December 31, 2021 shareholders’
equity. During the first half of 2022, our net exposure to catastrophes has changed due to the market conditions
and business decisions. As a result, our projected net economic loss from our largest 100 -year event in a given
zone represents approximately 7.4% of our June 30, 2022 shareholders’ equity.
The table below reflects the Company’s PML exposure, net of third party reinsurance at various return periods
for its top zones/perils (as ranked by largest 1 in 100 year economic loss) based on projection data as of July 1,
2022.
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
1 in 1,000
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
0.1%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
161
$
649
$
913
$
1,299
$
1,636
$
2,469
Southeast U.S., Wind
484
652
837
1,055
1,263
1,696
Texas Wind
140
385
587
889
1,111
1,350
Europe Wind
147
335
506
781
928
1,036
Chile Earthquake
89
218
407
686
932
1,084
The projected economic losses, defined as PML exposures, net of third party reinsurance, reinstatement
premiums and estimated income taxes, for the top zones/perils scheduled are as follows:
Return Periods (in years)
1 in 20
1 in 50
1 in 100
1 in 250
1 in 500
1 in 1,000
Exceeding Probability
5.0%
2.0%
1.0%
0.4%
0.2%
0.1%
(Dollars in millions)
Zone/ Peril
California, Earthquake
$
127
$
478
$
659
$
943
$
1,226
$
1,834
Southeast U.S., Wind
304
418
527
685
838
1,165
Texas Wind
104
273
406
586
752
909
Europe Wind
120
263
383
608
704
802
Chile Earthquake
67
164
307
531
721
845
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 half of 2022, we repurchased 5,000 shares for $1.3 million in the open market and paid $126.1
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,
45
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 June 30, 2022, we had repurchased 30.5 million shares under this
authorization.
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 $1.6 billion and $1.6 billion for the six months ended June 30, 2022 and 2021, respectively. Additionally,
these cash flows reflected net catastrophe loss payments of $377.1 million and $334.7 million for the six months
ended June 30, 2022 and 2021, respectively and net tax payments of $100.5 million and $34.8 million for the six
months ended June 30, 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 June 30, 2022 and December 31, 2021, we held cash and short-term
investments of $2.4 billion and $2.6 billion, respectively. Our short-term investments are generally readily
marketable and can be converted to cash. In addition to these cash and short-term investments, at June 30,
2022, we had $1.3 billion of available for sale fixed maturity securities maturing within one year or less, $7.2
billion maturing within one to five years and $5.9 billion maturing after five years. Our $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
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. At June 30, 2022 we had $1.5 billion of net
pre-tax unrealized depreciation related to fixed maturity securities, comprised of $1.6 billion of pre-tax
unrealized depreciation and $80.3 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.
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 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 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.
46
Market Sensitive Instruments.
The SEC’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial
statement disclosure requirements for derivative financial instruments, derivative commodity instruments and
other financial instruments (collectively, “market sensitive instruments”). We do not generally enter into market
sensitive instruments for trading purposes.
Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, fixed
maturity portfolio, while maintaining an adequate level of liquidity. Our mix of 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 sensi tive risk exposure principally reflects the asset changes that took place during the period.
Interest Rate Risk. Our $28.7 billion investment portfolio, at June 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 equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The
overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by
changes in the dollar value of foreign currency denominated liabilities and their associated income statement
impact.
Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term
investments, from a change in market interest rates. In a declining interest rate environment, it includes
prepayment risk on the $3.6 billion of mortgage -backed securities in the $22.0 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 fair value fluctuations and after-tax unrealized appreciation on
our fixed maturity portfolio (including $300.8 million of short-term investments) for the period indicated based
on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal
entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To
generate appropriate price estimates on mortgage -backed securities, changes in prepayment expectations under
different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional
currency, the effective duration of the involved portfolio of securities was used as a proxy for the fair value
change under the various interest rate change scenarios.
Impact of Interest Rate Shift in Basis Points
At June 30, 2022
-200
-100
0
100
200
(Dollars in millions)
Total Fair Value
$
23,745.3
$
22,999.0
$
22,252.7
$
21,506.4
$
20,760.1
Fair Value Change from Base (%)
6.7
%
3.4
%
0.0
%
(3.4)
%
(6.7)
%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,296.2
$
648.1
$
-
$
(648.1)
$
(1,296.2)
We had $20.0 billion and $19.0 billion of gross reserves for losses and LAE as of June 30, 20 22 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
47
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 $2.5 billion resulting in a discounted reserve balance of approximately $15.5 billion,
representing approximately 69.8% of the value of the fixed maturity investment portfolio funds.
Equity Risk. Equity risk is the potential change in fair value of the common stock, preferred stock and mutual
fund portfolios arising from changing prices. Our equity investments consist of a diversified portfolio of
individual securities 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 value and after-tax change in 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 June 30, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
1,039.4
$
1,169.3
$
1,299.2
$
1,429.1
$
1,559.1
After-tax Change in Fair Value
$
(206.0)
$
(103.0)
$
-
$
103.0
$
206.0
Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from
adverse changes in foreign currency exchange rates. Each of our non-U.S./Bermuda (“foreign”) operations
maintains capital in the currency of the country of its geographic location consistent with local regulatory
guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other
countries in which it operates. The primary foreign currency exposures for these foreign operations are the
Canadian Dollar, the Singapore Dollar, the British Pound Sterling and the Euro. We mitigate foreign exchange
exposure by generally matching the currency and duration of our assets to our corresponding operating
liabilities. In accordance with FASB guidance, the impact on the fair value of available for sale fixed maturities
due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other
comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to
functional currency, on other assets and liabilities is reflected through net income as a component of other
income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional
currency legal entities to the U.S. dollar. This translation amount is reported as a component of other
comprehensive income.
Safe Harbor Disclosure.
This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We
intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements in the federal securities laws. In some cases, these statements can be identified by the use of
forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”,
“believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include
information regarding our reserves for losses and LAE, the 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
48
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.
2.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our management carried out an evaluation, with the
participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”)). 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.
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
obligations under insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its
rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by
others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately
resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In
all such matters, the Company believes that its positions are legally and commercially reasonable. The Company
considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment
expenses.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is
not a party to any other material litigation or arbitration.
ITEM 1A. RISK FACTORS
No material changes.
49
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)
April 1 - 30, 2022
-
$
-
-
1,465,181
May 1 - 31, 2022
1,601
$
276.8129
-
1,465,181
June 1 - 30, 2022
801
$
270.2875
-
1,465,181
Total
2,402
$
-
-
-
(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 million of the Company’s shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
50
ITEM 6. EXHIBITS
Exhibit Index
Exhibit No.
Description
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)
51
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
(Duly Authorized Officer and Principal Financial Officer)
Dated: August 4, 2022