Everest (EG) - 2023 Q4 - Annual Report

PART I Item 1. Business Everest Group, Ltd. is a global reinsurance and insurance organization focused on diversified underwriting and disciplined risk management - Everest Group, Ltd. is a Bermuda-based reinsurance and insurance organization, part of the S&P 500 Index, focused on diversifying its portfolio and geographic presence globally[17] - The company's principal business is underwriting reinsurance and insurance in the U.S., Bermuda, and international markets, with operations spanning over 100 countries[19] - Everest's active operating subsidiaries are rated A+ ('Superior') by A.M. Best, indicating strong financial strength[19] - As of February 1, 2024, the Company employed 2,844 persons and emphasizes talent attraction, development, and retention through various programs and a culture rooted in diversity, equity, and inclusion[24][25][31] - In 2023, the Company changed its name to Everest Group, Ltd. (NYSE: EG) to reflect its evolution and expanding presence in the global primary insurance market[35] - The Reinsurance segment wrote $11.5 billion in gross written premiums in 2023, with 89.9% from the broker reinsurance market and 10.1% directly with ceding companies[57] - The Insurance segment wrote $5.2 billion in gross written premiums in 2023, offering a broad suite of tailored property, casualty, and specialty insurance products[63][64] - The Company's investment portfolio totaled $37.1 billion at December 31, 2023, with 86.6% in fixed maturities, short-term investments, and cash, and 13.4% in other invested assets and equity securities[88] - All of the Company's operating subsidiaries hold A+ ('Superior' by A.M. Best, 'Strong' by S&P) financial strength ratings, which are crucial for customer confidence in future claim payments[92][94][95] - The Company has an established Enterprise Risk Management (ERM) framework, overseen by the Board's Risk Management Committee and an Executive Risk Management Committee, to manage key risks including underwriting, financial, operational, and strategic risks[99][100][101][103] - Everest takes a proactive approach to incorporating climate and weather-related risk into its underwriting procedures, using internal and external data to refine pricing and product development[105][106] - The Bermuda Corporate Income Tax Act of 2023, effective 2025, will impose a 15% corporate income tax on Bermuda businesses part of multinational enterprise groups with annual revenue of €750M or more. The Company recorded $578 million of net deferred income tax benefits in 2023 related to an 'Economic Transition Adjustment' provision[134] Key Financial and Operational Data (as of Dec 31, 2023) | Metric | Value | | :--------------------- | :------------------- | | Shareholders' Equity | $13.2 billion | | Total Assets | $49.4 billion | | Gross Written Premiums | $16.6 billion | | Reinsurance GWP % | 68.9% | | Insurance GWP % | 31.1% | 2023 Gross Written Premiums by Distribution Channel | Distribution Channel | Percentage of GWP | | :------------------- | :---------------- | | Broker Reinsurance | 62.4% | | Insurance Business | 30.7% | | Direct Reinsurance | 6.9% | Reinsurance Segment Gross Written Premiums by Product (2023) | Product Line | Percentage of Reinsurance GWP | | :--------------------------- | :---------------------------- | | Property Pro Rata | 29.9% | | Casualty Pro Rata | 26.9% | | Property Catastrophe XOL | 14.7% | | Casualty XOL | 13.8% | | Financial Lines | 8.3% | | Property Non-Catastrophe XOL | 6.3% | Insurance Segment Gross Written Premiums by Product (2023) | Product Line | Percentage of Insurance GWP | | :-------------------- | :-------------------------- | | Specialty Casualty | 33.4% | | Property/Short-Tail | 22.3% | | Professional Liability | 16.1% | | Accident and Health | 10.6% | | Workers' Compensation | 9.3% | | Other Specialty | 8.2% | Investment Results (Pre-tax, in millions USD) | Metric | 2023 | 2022 | | :------------------------- | :----- | :----- | | Average Investments | $33,935 | $29,788 | | Investment Income | $1,434 | $830 | | Effective Yield | 4.22% | 2.79% | | Realized Net Gains (Losses) | $(276) | $(455) | | Unrealized Net Gains (Losses) | $1,129 | $(2,225) | Fixed Maturities Credit Quality Distribution (Fair Value/Amortized Cost, in millions USD) | Rating | 2023 Fair Value | 2023 % of Total | 2022 Fair Value | 2022 % of Total | | :----- | :-------------- | :-------------- | :-------------- | :-------------- | | AAA | $7,011 | 24.5% | $8,432 | 36.6% | | AA | $8,629 | 30.2% | $2,886 | 12.5% | | A | $7,297 | 25.5% | $6,268 | 27.2% | | BBB | $4,168 | 14.6% | $3,768 | 16.3% | | BB | $1,067 | 3.7% | $1,227 | 5.3% | | B | $132 | 0.5% | $163 | 0.7% | | Below B | $51 | 0.2% | $49 | 0.2% | | Other | $240 | 0.8% | $283 | 1.2% | | Total | $28,595 | 100.0% | $23,075 | 100.0% | Item 1A. Risk Factors The Company faces diverse risks from catastrophic events, reserve adequacy, financial market volatility, operational vulnerabilities, and regulatory changes - The Company is exposed to unpredictable catastrophic events, including weather-related and other natural catastrophes, as well as acts of terrorism and wars, with potential impacts on financial statements and risk modeling assumptions[141] - Inadequate loss reserves, especially for complex A&E liabilities, could reduce net income, as actual losses may deviate substantially from estimates[143][144] - A decline in financial strength ratings could adversely affect the Company's ability to market products, compete, and write new business, potentially triggering contract termination or collateralization clauses[151][152][153] - Investment values and income are subject to decline due to financial market conditions, including interest rate risk, credit risk, and equity risk, impacting net income and shareholders' equity[157][158][159][160][161] - The Company's holding company structure means its ability to pay dividends and meet obligations depends on receiving funds from subsidiaries, which are subject to regulatory restrictions[164] - Cybersecurity risks, including breaches or system failures, could negatively impact business operations, lead to data loss, litigation, regulatory violations, and reputational damage[171] - The insurance industry is highly competitive and cyclical, with new entrants and alternative capital market products potentially reducing market share and impacting profitability[176][177] - Changes in international and U.S. tax laws, such as the Bermuda Corporate Income Tax Act of 2023 and the Inflation Reduction Act of 2022, could impact the Company's net income and effective tax rate[205][207][208][209] Pre-tax Catastrophe Losses, Net of Reinsurance (in millions USD) | Calendar Year | Pre-tax Net Catastrophe Losses | | :------------ | :----------------------------- | | 2023 | $470 | | 2022 | $1,055 | | 2021 | $1,135 | | 2020 | $425 | | 2019 | $576 | Effect of Reserve Re-estimation on Pre-tax Net Income (in millions USD) | Calendar Year | Effect on Pre-tax Net Income | | :------------ | :--------------------------- | | 2023 | $5 (increase) | | 2022 | $1 (increase) | | 2021 | $9 (increase) | | 2020 | $401 (decrease) | | 2019 | $64 (increase) | Item 1B. Unresolved Staff Comments The Company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[216] Item 1C. Cybersecurity Everest maintains a multi-layered cybersecurity program aligned with NIST standards, overseen by the Board and CISO, with no material incidents reported in 2023 - Everest's cybersecurity program aligns with the NIST Cybersecurity Incident Response Framework, incorporating preventative, detective, and responsive measures[217] - The Company utilizes a multi-layered process for assessing, identifying, and managing cybersecurity threats, including intrusion detection, firewalls, advanced threat protection, and regular testing (vulnerability scans, penetration testing, phishing tests)[218] - The Board, through its Risk Management Committee (RMC), holds ultimate responsibility for cybersecurity risk oversight, with day-to-day management handled by a certified Chief Information Security Officer (CISO) and various executive committees[222][223] - For the year ended December 31, 2023, Everest did not experience any cybersecurity incident that materially affected its business strategy, results of operations, or financial conditions[221] Item 2. Properties Everest Re's corporate offices are in Warren, New Jersey, and Bermuda Re's in Hamilton, Bermuda, with additional leased locations globally - Everest Re's corporate offices are in Warren, New Jersey (321,500 sq ft leased)[225] - Bermuda Re's corporate offices are in Hamilton, Bermuda (12,300 sq ft leased)[225] - The Company operates 29 other leased locations totaling approximately 329,100 square feet[225] Item 3. Legal Proceedings The Company is routinely involved in lawsuits and arbitrations related to its insurance and reinsurance agreements, with no other material litigation pending - The Company is involved in routine lawsuits, arbitrations, and dispute resolution procedures concerning insurance and reinsurance agreements[226] - The status of these proceedings is considered when determining reserves for unpaid loss and loss adjustment expenses[226] - There is no other material litigation or arbitration to which the Company is a party[227] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable[228] PART II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Everest Group, Ltd. common shares trade on the NYSE under 'EG', with consistent quarterly cash dividends and ongoing share repurchases - Everest Group, Ltd. common shares trade on the New York Stock Exchange under the symbol 'EG'[229] - As of February 1, 2024, there were 863 record holders of common shares[230] - As of December 31, 2023, the Company had repurchased 30.8 million shares under an authorization to purchase up to 32.0 million shares[233] Quarterly High and Low Closing Market Prices (USD) | Quarter | 2023 High | 2023 Low | 2022 High | 2022 Low | | :------------- | :-------- | :------- | :-------- | :------- | | First Quarter | $390.84 | $333.38 | $304.72 | $267.35 | | Second Quarter | $387.10 | $332.87 | $307.10 | $265.00 | | Third Quarter | $392.47 | $339.63 | $285.67 | $245.79 | | Fourth Quarter | $414.59 | $350.69 | $337.94 | $260.84 | Quarterly Cash Dividends Per Share (USD) | Period | Dividend Per Share | | :--------------------- | :----------------- | | Q1 2022 | $1.55 | | Q2 2022 - Q2 2023 | $1.65 | | Q3 2023 - Q4 2023 | $1.75 | Issuer Purchases of Equity Securities (2023) | Period | Total Shares Purchased | Average Price Paid | Remaining Authorization | | :--------------------- | :--------------------- | :----------------- | :---------------------- | | January 1 - December 31, 2023 | 62,949 | N/A | 1,228,908 | Item 6. (Reserved) This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Everest Group's 2023 financial performance shows strong premium growth, improved profitability, and enhanced capital, driven by robust underwriting and investment results - The worldwide insurance and reinsurance businesses are highly competitive and cyclical, with recent market conditions in property, especially catastrophe excess of loss, showing rate increases[242][244] - Gross written premiums increased by 19.2% to $16.6 billion in 2023, driven by a 23.9% increase in reinsurance and a 10.0% increase in insurance business[248] - Net investment income increased by 72.7% to $1.4 billion in 2023, primarily due to higher income from fixed maturity and short-term investments and an increase in limited partnership income[267] - Net income was $2.5 billion in 2023, up from $597 million in 2022, driven by strong underwriting income, net investment income, and an income tax benefit from the Bermuda Corporate Income Tax Act of 2023[263] - The combined ratio improved by 5.1 points to 90.9% in 2023, mainly due to a 6.0-point decrease in the loss ratio from lower catastrophe losses[264] - Shareholders' equity increased by $4.8 billion to $13.2 billion at December 31, 2023, primarily from net income, a public equity offering, and unrealized appreciation on available-for-sale fixed maturity portfolios[266] - Gross loss and LAE reserves totaled $24.6 billion at December 31, 2023, an 11.5% increase from $22.1 billion in 2022, with Reinsurance accounting for 70.7% and Insurance for 28.3%[316] - Management estimates the projected net economic loss from its largest 100-year event (California Earthquake) to be approximately $1.0 billion, representing 7.8% of December 31, 2023 shareholders' equity[345][350] Consolidated Financial Summary (in millions USD, except ratios) | Metric | 2023 | 2022 | 2023/2022 Change (%) | | :----------------------------- | :---------- | :---------- | :------------------- | | Gross written premiums | $16,637 | $13,952 | 19.2% | | Net written premiums | $14,730 | $12,344 | 19.3% | | Premiums earned | $13,443 | $11,787 | 14.0% | | Net investment income | $1,434 | $830 | 72.7% | | Net gains (losses) on investments | $(276) | $(455) | (39.3)% | | Total revenues | $14,587 | $12,060 | 20.9% | | Incurred losses and LAE | $8,427 | $8,100 | 4.0% | | Commission, brokerage, taxes & fees | $2,952 | $2,528 | 16.7% | | Other underwriting expenses | $846 | $682 | 24.1% | | Total claims and expenses | $12,432 | $11,472 | 8.4% | | Income (loss) before taxes | $2,154 | $588 | NM | | Income tax expense (benefit) | $(363) | $(9) | NM | | NET INCOME (LOSS) | $2,517 | $597 | NM | | Loss ratio | 62.7% | 68.7% | (6.0) pts | | Commission and brokerage ratio | 22.0% | 21.4% | 0.6 pts | | Other underwriting expense ratio | 6.3% | 5.8% | 0.5 pts | | Combined ratio | 90.9% | 96.0% | (5.1) pts | | Total investments and cash | $37,142 | $29,872 | 24.3% | | Total assets | $49,399 | $39,966 | 23.6% | | Loss and LAE reserves | $24,604 | $22,065 | 11.5% | | Total debt | $3,385 | $3,084 | 9.8% | | Total liabilities | $36,197 | $31,525 | 14.8% | | Shareholders' equity | $13,202 | $8,441 | 56.4% | | Book value per share | $304.29 | $215.54 | 41.2% | Reinsurance Segment Underwriting Results (in millions USD) | Metric | 2023 | 2022 | 2023/2022 Variance | | :------------------------- | :------ | :------ | :----------------- | | Gross written premiums | $11,460 | $9,248 | $2,213 | | Net written premiums | $10,802 | $8,919 | $1,883 | | Premiums earned | $9,799 | $8,598 | $1,201 | | Incurred losses and LAE | $5,696 | $5,966 | $(270) | | Commission and brokerage | $2,520 | $2,116 | $404 | | Other underwriting expenses | $255 | $217 | $38 | | Underwriting gain (loss) | $1,328 | $300 | $1,029 | | Loss ratio | 58.1% | 69.4% | (11.3) pts | | Combined ratio | 86.4% | 96.5% | (10.1) pts | Insurance Segment Underwriting Results (in millions USD) | Metric | 2023 | 2022 | 2023/2022 Variance | | :------------------------- | :------ | :------ | :----------------- | | Gross written premiums | $5,177 | $4,704 | $473 | | Net written premiums | $3,929 | $3,426 | $503 | | Premiums earned | $3,644 | $3,189 | $455 | | Incurred losses and LAE | $2,732 | $2,134 | $597 | | Commission and brokerage | $432 | $413 | $19 | | Other underwriting expenses | $591 | $464 | $126 | | Underwriting gain (loss) | $(109) | $178 | $(287) | | Loss ratio | 75.0% | 66.9% | 8.1 pts | | Combined ratio | 103.0% | 94.4% | 8.6 pts | Gross Outstanding Loss and LAE Reserves by Segment (in millions USD) | Segment | Case Reserves (2023) | IBNR Reserves (2023) | Total Reserves (2023) | % of Total (2023) | | :---------------------- | :------------------- | :------------------- | :-------------------- | :---------------- | | Reinsurance | $6,355 | $11,051 | $17,406 | 70.7% | | Insurance | $2,027 | $4,924 | $6,952 | 28.3% | | Total Excluding A&E | $8,383 | $15,975 | $24,357 | 99.0% | | A&E | $159 | $88 | $246 | 1.0% | | Total Including A&E | $8,541 | $16,063 | $24,604 | 100.0% | Projected Net Economic Loss for Top Four Zones/Perils (1 in 100-year event, in millions USD) | Zone | Peril | Projected Net Economic Loss | | :------------ | :--------- | :-------------------------- | | California | Earthquake | $1,031 | | Southeast U.S. | Wind | $899 | | Europe | Wind | $532 | | Texas | Wind | $525 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section details the Company's exposure to interest rate and foreign currency risks, managed through a high-quality, diversified fixed maturity portfolio and asset-liability matching - The Company's investment strategy aims to maximize after-tax income through a high-quality, diversified fixed maturity portfolio, while maintaining adequate liquidity[361] - Interest rate risk is the potential change in value of the fixed maturity securities portfolio from changes in market interest rates, including prepayment risk on mortgage-backed securities[363][364] - Foreign currency risk is managed by generally matching the currency and duration of assets to corresponding operating liabilities[368] Impact of Interest Rate Shift on Total Fair Value (Fixed Maturity Portfolio, in millions USD) | Interest Rate Shift | Total Fair Value (2023) | Fair Value Change from Base (%) (2023) | | :------------------ | :---------------------- | :------------------------------------- | | -200 bps | $32,813 | 6.8% | | -100 bps | $31,768 | 3.4% | | 0 bps (Base) | $30,722 | —% | | 100 bps | $29,677 | (3.4)% | | 200 bps | $28,631 | (6.8)% | Impact of Foreign Exchange Rate Changes on After-tax Exposure (in millions USD) | FX Rate Change | Total After-tax Foreign Exchange Exposure (2023) | | :------------- | :--------------------------------------------- | | -20% | $(1,022) | | -10% | $(511) | | 0% | $— | | 10% | $511 | | 20% | $1,022 | Item 8. Financial Statements and Supplementary Data This section confirms the filing of the Company's audited consolidated financial statements and supplementary data for 2021-2023 as part of this report - The financial statements and schedules, including consolidated balance sheets, statements of operations and comprehensive income (loss), statements of changes in shareholders' equity, and statements of cash flows for the years ended December 31, 2023, 2022, and 2021, are filed as part of this report[372][411] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The Company reported no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[373] Item 9A. Controls and Procedures Management concluded that the Company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes in Q4 - The Company's disclosure controls and procedures were effective as of December 31, 2023[374] - Management assessed and concluded that the Company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[377] - No material changes in internal control over financial reporting occurred during the fourth fiscal quarter[379] Item 9B. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q4 2023, and the Company maintains an Insider Trading Policy - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q4 2023[380] - The Company maintains an Insider Trading Policy to ensure compliance with insider trading laws and exchange listing standards[381] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The Company reported no disclosures regarding foreign jurisdictions that prevent inspections - There are no disclosures regarding foreign jurisdictions that prevent inspections[384] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the Company's 2024 Annual General Meeting of Shareholders proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement[385] Item 11. Executive Compensation Details on executive compensation are incorporated by reference from the 2024 Proxy Statement, including an updated Clawback Policy adopted in November 2023 - Information on executive compensation is incorporated by reference from the 2024 Proxy Statement[386] - An updated Clawback Policy was adopted on November 1, 2023, for mandatory recovery of erroneously awarded incentive-based compensation from executive officers following an accounting restatement[387][388] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the Company's 2024 Annual General Meeting of Shareholders proxy statement - Information on security ownership of certain beneficial owners and management is incorporated by reference from the 2024 Proxy Statement[390] Item 13. Certain Relationships and Related Transactions, and Director Independence Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the Company's 2024 Annual General Meeting of Shareholders proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement[391] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 'Audit Committee Report' section of the Company's 2024 Annual General Meeting of Shareholders proxy statement - Information on principal accountant fees and services is incorporated by reference from the 'Audit Committee Report' in the 2024 Proxy Statement[392] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the report, with Exhibit 32 certifications furnished rather than filed - The financial statements and schedules listed in the accompanying Index to Financial Statements and Schedules are filed as part of this report[394] - Exhibits listed in the Index to Exhibits are filed as part of this report, with certifications in Exhibit 32 furnished rather than filed[395]