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Interest expense incurred in connection with the Senior Notes is as follows for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
Interest Paid
Payable Dates
2024
2023
2024
2023
4.868% Senior notes
semi-annually
June 1/December 1
$
5
$
5
$
15
$
15
3.5% Senior notes
semi-annually
April 15/October 15
9
9
26
26
3.125% Senior notes
semi-annually
April 15/October 15
8
8
24
24
$
22
$
22
$
65
$
65
(Some amounts may not reconcile due to rounding.)
9.LONG-TERM SUBORDINATED NOTES
The table below displays Holdings’ outstanding fixed to floating rate long-term subordinated notes (“Subordinated Notes Issued 2007”). 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
September 30, 2024
December 31, 2023
(Dollars in millions)
Date Issued
Original Principal Amount
Scheduled
Final
Consolidated Balance Sheet Amount
Fair Value
Consolidated Balance Sheet Amount
Fair Value
Subordinated Notes Issued 2007
4/26/2007
$
400
5/15/2037
5/1/2067
$
218
$
214
$
218
$
187
During the fixed rate interest period from May 3, 2007 through 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 basis points, reset quarterly, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, subject to Holdings’ right to defer interest on one or more occasions for up to ten consecutive years. Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for August 15, 2024 to November 14, 2024 is 7.76%. Following the cessation of LIBOR, for periods from and including August 15, 2023, interest will be based on the 3-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) plus a spread.
Holdings may redeem the Subordinated Notes Issued 2007 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 is subject to a replacement capital covenant. This covenant is for the benefit of the 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 Issued 2007. The Company’s Senior Notes are the Company’s long-term indebtedness that rank senior to the Subordinated Notes Issued 2007.
Interest expense incurred in connection with these long-term subordinated notes is as follows for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
2024
2023
Interest expense incurred
$
4
$
4
$
13
$
12
10.COLLATERALIZED REINSURANCE, TRUST AGREEMENTS AND OTHER RESTRICTED ASSETS
The Company maintains certain restricted assets as security for potential future obligations, primarily to support its underwriting operations. The following table summarizes the Company’s restricted assets:
At September 30,
At December 31,
(Dollars in millions)
2024
2023
Collateral in trust for non-affiliated agreements (1)
$
3,299
$
3,208
Collateral for secured letter of credit facilities
1,380
1,438
Collateral for FHLB borrowings
1,078
1,077
Securities on deposit with or regulated by government authorities
1,482
1,447
Funds at Lloyd's
481
538
Funds held by reinsureds
1,229
1,135
Total restricted assets
8,949
8,843
(1) At September 30, 2024 and December 31, 2023, the total amount on deposit in trust accounts includes $353 million and $243 million of restricted cash, respectively.
The Company reinsures some of its catastrophe exposures with the segregated accounts of a subsidiary, Mt. Logan Re, Ltd. (“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.
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 September 30,
Nine Months Ended September 30,
Mt. Logan Re Segregated Accounts
2024
2023
2024
2023
(Dollars in millions)
Ceded written premiums
$
235
$
89
$
404
$
187
Ceded earned premiums
79
74
260
172
Ceded losses and LAE
44
26
107
79
Assumed written premiums
4
2
6
3
Assumed earned premiums
4
2
6
3
Assumed losses and LAE
—
—
—
—
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 millions)
Class
Description
Effective Date
Expiration Date
Limit
Coverage Basis
Series 2019-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
150
Occurrence
Series 2019-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
12/12/2019
12/19/2024
275
Aggregate
Series 2021-1 Class A-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
150
Occurrence
Series 2021-1 Class B-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class C-1
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/21/2025
85
Aggregate
Series 2021-1 Class A-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
150
Occurrence
Series 2021-1 Class B-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2021-1 Class C-2
US, Canada, Puerto Rico – Named Storm and Earthquake Events
4/8/2021
4/20/2026
90
Aggregate
Series 2022-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/22/2022
6/25/2025
300
Aggregate
Series 2024-1 Class A
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/27/2024
6/30/2028
75
Occurrence
Series 2024-1 Class B
US, Canada, Puerto Rico – Named Storm and Earthquake Events
6/27/2024
6/30/2028
125
Occurrence
Total available limit as of September 30, 2024
$
1,575
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.
Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. The proceeds from the issuance of the catastrophe bonds 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. The catastrophe bonds’ issue dates, maturity dates and amounts correspond to the reinsurance agreements listed above.
11.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 LAE.
Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.
The following tables present the components of comprehensive income (loss) in the consolidated statements of operations for the periods indicated:
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
URA(D) of securities (1)
$
824
$
(120)
$
704
$
531
$
(54)
$
477
Reclassification of net realized losses (gains) included
in net income (loss) (1)
33
(3)
30
49
(6)
44
Foreign currency translation and other adjustments
93
(11)
83
49
(4)
45
Reclassification of benefit plan liability amortization included
in net income (loss)
(1)
—
—
31
(6)
24
Total other comprehensive income (loss)
$
950
$
(134)
$
816
$
660
$
(70)
$
590
(Some amounts may not reconcile due to rounding)
(1) URA(D) of securities and Reclassification of net realized losses (gains) included in net income (loss) include URA(D) of fixed maturity, available for sale securities and equity method securities.
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
(Dollars in millions)
Before Tax
Tax Effect
Net of Tax
Before Tax
Tax Effect
Net of Tax
URA(D) of securities
$
(281)
$
24
$
(257)
$
(206)
$
26
$
(180)
Reclassification of net realized losses (gains) included
in net income (loss)
17
(2)
15
26
(6)
21
Foreign currency translation and other adjustments
(50)
3
(47)
(19)
2
(17)
Reclassification of benefit plan liability amortization included
in net income (loss)
1
—
—
2
—
1
Total other comprehensive income (loss)
$
(313)
$
25
$
(288)
$
(197)
$
22
$
(175)
(Some amounts may not reconcile due to rounding)
The following table presents details of the amounts reclassified from AOCI for the periods indicated:
(Dollars in millions)
Three Months Ended September 30,
Nine Months Ended September 30,
Affected line item within the statements of operations and comprehensive income (loss)
AOCI component
2024
2023
2024
2023
URA(D) of securities (1)
$
33
$
17
$
49
$
26
Net gains (losses) on investments
(3)
(2)
(6)
(6)
Income tax expense (benefit)
$
30
$
15
$
44
$
21
Net income (loss)
Benefit plan net gain (loss)
$
(1)
$
1
$
31
$
2
Other underwriting expenses
—
—
(6)
—
Income tax expense (benefit)
$
—
$
—
$
24
$
1
Net income (loss)
(Some amounts may not reconcile due to rounding)
(1) URA(D) of securities includes URA(D) of fixed maturity, available for sale securities and equity method securities.
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 September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
2024
2023
Beginning balance of URA(D) of securities (1)
$
(936)
$
(1,627)
$
(723)
$
(1,709)
Current period change in URA(D) of securities
734
(242)
521
(159)
Ending balance of URA(D) of securities
(202)
(1,868)
(202)
(1,868)
Beginning balance of foreign currency translation and other adjustments
(233)
(224)
(195)
(254)
Current period change in foreign currency translation and other adjustments
83
(47)
45
(17)
Ending balance of foreign currency translation and other adjustments
(150)
(271)
(150)
(271)
Beginning balance of benefit plan net gain (loss)
8
(32)
(16)
(33)
Current period change in benefit plan net gain (loss)
—
—
24
1
Ending balance of benefit plan net gain (loss)
8
(32)
8
(32)
Ending balance of accumulated other comprehensive income (loss)
$
(344)
$
(2,171)
$
(344)
$
(2,171)
(Some amounts may not reconcile due to rounding.)
(1) URA(D) of securities includes URA(D) of fixed maturity, available for sale securities and equity method securities.
13.SHARE-BASED COMPENSATION PLANS
During the three months ended September 30, 2024, a total of 1,744 shares of restricted stock were granted on September 12, 2024, with a fair value of $376.58 per share. During the three months ended September 30, 2023, a total of 4,580 shares of restricted stock were granted on September 8, 2023, with a fair value of $369.15 per share.
For the nine months ended September 30, 2024, a total of 220,703 shares of restricted stock were granted as follows: 207,839, 7,104, 4,016 and 1,744 of shares of restricted stock were granted on February 28, 2024, February 29, 2024, May 15, 2024 and September 12, 2024, respectively. The fair value per share of each restricted stock award was $369.52, $367.04, $377.80 and $376.58, respectively. Additionally, 18,713 performance share unit awards were granted on February 28, 2024, with a fair value of $369.52 per unit.
For the nine months ended September 30, 2023, a total of 179,676 shares of restricted stock were granted: 174,171, 925 and 4,580 shares of restricted stock were granted on February 23, 2023, May 18, 2023 and September 8, 2023, respectively. The fair value per share of each restricted stock award was $382.39, $372.91 and $369.15, respectively. Additionally, 14,975 performance share unit awards were granted on February 23, 2023, with a fair value of $382.39 per unit.
14.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.
Net income (loss) per common share has been computed as shown below, based upon weighted average common basic and dilutive shares outstanding.
(Dollars in millions, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Net income (loss) per share:
Numerator
Net income (loss)
$
509
$
678
$
1,966
$
1,713
Less: dividends declared - common shares and unvested common shares
(86)
(76)
(249)
(212)
Undistributed earnings
423
602
1,717
1,501
Percentage allocated to common shareholders (1)
98.8%
98.9%
98.8%
98.8%
418
595
1,697
1,483
Add: dividends declared - common shareholders
85
75
246
210
Numerator for basic and diluted earnings per common share
$
503
$
671
$
1,943
$
1,693
Denominator
Denominator for basic earnings per weighted-average common shares
42.6
42.9
42.8
40.8
Effect of dilutive securities:
Options
—
—
—
—
Denominator for diluted earnings per adjusted weighted-average common shares
42.6
42.9
42.8
40.8
Per common share net income (loss)
Basic
$
11.80
$
15.63
$
45.40
$
41.49
Diluted
$
11.80
$
15.63
$
45.40
$
41.49
(1) Basic weighted - average common shares outstanding
42.6
42.9
42.8
40.8
Basic weighted - average common shares outstanding and unvested common shares expected to vest
43.1
43.4
43.3
41.3
Percentage allocated to common shareholders
98.8%
98.9%
98.8%
98.8%
(Some amounts may not reconcile due to rounding.)
There were no options outstanding as of September 30, 2024 and 2023, respectively.
15.INCOME TAXES
With the assent of the governor on December 27, 2023, the Bermuda Corporate Income Tax Act of 2023 (“The 2023 Act”) became law. Beginning in 2025, a 15% corporate income tax will be applicable to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more. Group’s Bermuda entities will be subject to the new corporate income tax. The Company has evaluated The 2023 Act and has recorded $578 million of net deferred income tax benefits as of December 31, 2023. The net deferred income tax benefits relate primarily to a default provision in the law which allows for what is called an “Economic Transition Adjustment” (“ETA”). The ETA allowed companies to establish deferred tax assets or liabilities related to the revaluation of intangible assets, excluding goodwill and their other assets and liabilities, based on fair value as of September 30, 2023.
All of the income of Group's non-Bermuda subsidiaries is subject to the applicable federal, foreign, state and local taxes on corporations. Additionally, the income of the foreign branches of the Company's insurance operating companies is subject to various rates of income tax. Group's U.S. subsidiaries conduct business in and are subject to taxation in the U.S. Should the U.S. subsidiaries distribute current or accumulated earnings and profits in the form of dividends or otherwise, the Company would be subject to an accrual of 5% U.S. withholding tax. Currently, however, no withholding tax has been accrued with respect to such un-remitted earnings, as management has no intention of remitting them. The cumulative amount that would be subject to withholding tax, if distributed, is not practicable to compute. The provision for income taxes in the consolidated statement of operations and comprehensive income (loss) has been determined in accordance with the individual income of each entity and the respective applicable tax laws. The provision reflects the permanent differences between financial and taxable income relevant to each entity.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase excise tax, and do not expect the legislation to have a material impact on our results of operations.
16.SUBSEQUENT EVENTS
The Company has evaluated known recognized and non-recognized subsequent events. In October 2024, Hurricane Milton impacted Florida. The Company is estimating pre-tax net catastrophe losses to be in the range of $300 to $400 million for the fourth quarter, net of any estimated recoveries or reinstatement premiums. Additionally, in October 2024 the Company completed the sale of certain assets of EverSports & Entertainment Insurance, Inc. to Ryan Specialty. No other material subsequent events or transactions have occurred that require recognition or disclosure in the financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our results of operations, financial condition and liquidity and capital resources for the three and nine months ended September 30, 2024. This discussion should be read in conjunction with the consolidated financial statements and related notes, under Part I - Item 1 of this Form 10-Q, as well as the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s most recent Form 10-K filing.
All comparisons in this discussion are to the corresponding prior year unless otherwise indicated.
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 September 30,
Percentage Increase/ (Decrease)
Nine Months Ended September 30,
Percentage Increase/ (Decrease)
(Dollars in millions)
2024
2023
2024
2023
Gross written premiums
$
4,425
$
4,391
0.8
%
$
13,561
$
12,314
10.1
%
Net written premiums
3,805
3,866
(1.6)
%
11,789
10,870
8.5
%
REVENUES:
Premiums earned
$
3,918
$
3,513
11.5
%
$
11,262
$
9,865
14.2
%
Net investment income
496
406
22.2
%
1,481
1,023
44.8
%
Net gains (losses) on investments
(27)
(31)
(14.0)
%
(50)
(21)
NM
Other income (expense)
(102)
103
NM
(48)
61
NM
Total revenues
4,285
3,991
7.4
%
12,645
10,927
15.7
%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
2,584
2,246
15.0
%
7,132
6,173
15.5
%
Commission, brokerage, taxes and fees
826
752
9.9
%
2,398
2,099
14.2
%
Other underwriting expenses
236
215
9.6
%
694
620
12.0
%
Corporate expenses
25
19
27.7
%
69
55
24.9
%
Interest, fees and bond issue cost amortization expense
Premiums. Gross written premiums increased by 0.8% to $4.4 billion for the three months ended September 30, 2024, compared to $4.4 billion for the three months ended September 30, 2023, reflecting a $67 million, or 2.1%, increase in our reinsurance business, partially offset by a $33 million, or 2.8%, decrease in our insurance business. The increase in reinsurance premiums was primarily due to property pro rata and property catastrophe excess of loss lines of business, partially offset by actions taken on our North America casualty business. The decrease in insurance premiums compared to the prior year period was primarily due to portfolio actions taken on accident and health and specialty casualty lines of business, partially offset by an increase in property/short tail business and other specialty business. Gross written premiums increased by 10.1% to $13.6 billion for the nine months ended September 30, 2024, compared to $12.3 billion for the nine months ended September 30, 2023, reflecting a $1.1 billion, or 12.7%, increase in our reinsurance business and a $163 million, or 4.3%, increase in our insurance business. The increase in reinsurance premiums was primarily driven by property and casualty pro rata lines of business and property catastrophe excess of loss lines of business. The increase in insurance premiums was primarily due to property/short tail business, other specialty business and professional liability business, as well as continuing growth in international business across all lines. The increase in insurance premiums was partially offset by portfolio actions taken on accident and health and workers’ compensation lines.
Net written premiums decreased by 1.6% to $3.8 billion for the three months ended September 30, 2024, compared to $3.9 billion for the three months ended September 30, 2023, primarily driven by an increase in premiums ceded to Mt. Logan Re, Ltd. (“Mt. Logan Re”) cells within the Reinsurance segment for property catastrophe excess of loss line of business, and an increase in premium cession in Insurance driven by business mix and lower retention in certain lines of business. Net written premiums increased by 8.5% to $11.8 billion for the nine months ended September 30, 2024, compared to $10.9 billion for the nine months ended September 30, 2023. The current year over prior year increase remained relatively consistent with the percentage increase in gross written premiums.
Premiums earned increased by 11.5% to $3.9 billion during the three months ended September 30, 2024, compared to $3.5 billion during the three months ended September 30, 2023. Premiums earned increased by 14.2% to $11.3 billion for the nine months ended September 30, 2024, compared to $9.9 billion for the nine months ended September 30, 2023. Premiums earned generally reflect the portion of net premiums written that was recognized as revenue for the period as the exposure period expires. 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.
Other Income (Expense). We recorded other expense of $102 million and other income of $103 million for the three months ended September 30, 2024 and 2023, respectively. We recorded other expense of $48 million and other income of $61 million for the nine months ended September 30, 2024 and 2023, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates. We recognized foreign currency exchange expense of $102 million and foreign exchange currency income of $100 million for the three months ended September 30, 2024 and 2023, respectively. We recognized foreign currency exchange expense of $61 million and foreign currency exchange income of $51 million for the nine months ended September 30, 2024 and 2023, respectively. Additionally, the other expense incurred for the nine months ended September 30, 2024 includes a $9 million pension plan curtailment gain recognized in the second quarter of 2024.
Net Investment Income. Refer to the “Consolidated Investments Results” section below.
Net Gains (Losses) on Investments. Refer to the “Consolidated Investments Results” section below.
Claims and Expenses.
Incurred Losses and Loss Adjustment Expenses (“LAE”). The following tables present our incurred losses and LAE for the periods indicated.
Three Months Ended September 30,
(Dollars in millions)
Current Year
Ratio %/ Pt Change
Prior Years
Ratio %/ Pt Change
Total Incurred
Ratio %/ Pt Change
2024
Attritional
$
2,274
58.0
%
$
—
—
%
$
2,274
58.0
%
Catastrophes
310
7.9
%
—
—
%
310
7.9
%
Total
$
2,584
66.0
%
$
—
—
%
$
2,584
66.0
%
2023
Attritional
$
2,071
58.9
%
$
—
—
%
$
2,071
58.9
%
Catastrophes
175
5.0
%
—
—
%
175
5.0
%
Total
$
2,246
63.9
%
$
—
—
%
$
2,246
63.9
%
Variance 2024/2023
Attritional
$
203
(0.9)
pts
$
—
—
pts
$
203
(0.9)
pts
Catastrophes
135
2.9
pts
—
—
pts
135
2.9
pts
Total
$
338
2.0
pts
$
—
—
pts
$
338
2.0
pts
(Some amounts may not reconcile due to rounding.)
Nine Months Ended September 30,
(Dollars in millions)
Current Year
Ratio %/ Pt Change
Prior Years
Ratio %/ Pt Change
Total Incurred
Ratio %/ Pt Change
2024
Attritional
$
6,586
58.5
%
$
—
—
%
$
6,586
58.5
%
Catastrophes
546
4.9
%
—
—
%
546
4.9
%
Total
$
7,132
63.3
%
$
—
—
%
$
7,132
63.3
%
2023
Attritional
$
5,855
59.4
%
$
—
—
%
$
5,855
59.4
%
Catastrophes
317
3.2
%
—
—
%
317
3.2
%
Total
$
6,173
62.6
%
$
—
—
%
$
6,173
62.6
%
Variance 2024/2023
Attritional
$
730
(0.9)
pts
$
—
—
pts
730
(0.9)
pts
Catastrophes
229
1.6
pts
—
—
pts
229
1.6
pts
Total
$
959
0.7
pts
$
—
—
pts
$
959
0.7
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 15.0% to $2.6 billion for the three months ended September 30, 2024, compared to $2.2 billion for the three months ended September 30, 2023, primarily due to an increase of $203 million in current year attritional losses and an increase of $135 million in current year catastrophe losses. The increase in current year attritional losses was mainly due to the impact of the increase in underlying exposures, due to increased premiums earned. The current year catastrophe losses of $310 million for the three months ended September 30, 2024 related primarily to Hurricane Helene ($81 million), Hurricane Beryl ($67 million), Hurricane Debby ($60 million), the 2024 European flood Boris ($48 million) and the third quarter 2024 Calgary Alberta storms ($41 million). The $175 million of current year catastrophe losses for the three months ended September 30, 2023 related primarily to Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($35 million), the 2023 Italy convective storm ($28 million), the 2023 third quarter U.S. storms ($20 million) and the 2023 Hans windstorm ($10 million).
Incurred losses and LAE increased by 15.5% to $7.1 billion for the nine months ended September 30, 2024, compared to $6.2 billion for the nine months ended September 30, 2023, primarily due to an increase of $730 million in current year attritional losses and an increase of $229 million in current year catastrophe losses. The increase in current year attritional losses was mainly due to the impact of the increase in underlying exposures due to increased premiums earned. The current year catastrophe losses of $546 million for the nine months ended September 30, 2024 related primarily to Hurricane Helene ($81 million), Hurricane Beryl ($67 million), the 2024 Baltimore bridge collapse ($62 million), Hurricane Debby ($60 million), the 2024 European flood Boris ($48 million), the 2024 Brazil Floods ($41 million), the third quarter 2024 Calgary Alberta storms ($41 million), the 2024 Germany floods ($41 million), the 2024 Dubai floods ($40 million) and the 2024 Taiwan earthquake ($27 million). The $317 million of current year catastrophe losses for the nine months ended September 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million) the 2023 New Zealand storms ($46 million), Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($35 million), the 2023 Italy convective storm ($28 million), the 2023 third quarter U.S. storms ($20 million), Typhoon Mawar ($11 million) and the 2023 Hans windstorm ($10 million).
Catastrophe losses and loss expenses typically have a material effect on our incurred losses and LAE results and can vary significantly from period to period. Losses from natural catastrophes contributed 7.9 percentage points to the combined ratio for the three months ended September 30, 2024, compared with 5.0 percentage points in the corresponding period of 2023, and 4.9 percentage points to the combined ratio for the nine months ended September 30, 2024, compared with 3.2 percentage points in the corresponding period of 2023.
Refer to the “Ratios” section for loss ratio analysis discussion.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by 9.9% to $826 million for the three months ended September 30, 2024, compared to $752 million for the three months ended September 30, 2023. Commission, brokerage, taxes and fees increased by 14.2% to $2.4 billion for the nine months ended September 30, 2024, compared to $2.1 billion for the nine months ended September 30, 2023. The increases were primarily due to the impact of the increase in premiums earned and changes in the mix of business. Refer to the “Ratios” section for commission and brokerage ratio analysis discussion.
Other Underwriting Expenses. Other underwriting expenses were $236 million and $215 million for the three months ended September 30, 2024 and September 30, 2023, respectively. Other underwriting expenses were $694 million and $620 million for the nine months ended September 30, 2024 and 2023, respectively. The increases in other underwriting expenses remained relatively consistent with the growth in premiums earned. Refer to the “Ratios” section for other underwriting expense ratio analysis discussion.
Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, were $25 million and $19 million for the three months ended September 30, 2024 and 2023, respectively, and $69 million and $55 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in Corporate expenses for the three and nine month periods ended September 30, 2024 are primarily due to information management related costs, including the acceleration of cybersecurity, corporate applications and infrastructure investments.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $38 million and $34 million for the three months ended September 30, 2024 and 2023, respectively. Interest, fees and other bond amortization expense was $112 million and $99 million for the nine months ended September 30, 2024 and 2023, respectively. The increases were mainly due to higher interest costs on the Federal Home Loan Bank of New York borrowing. Interest expense was also impacted by the movements in the floating interest rate related to the Company’s outstanding fixed to floating rate long-term subordinated notes, which is reset quarterly, per the note agreement. The floating rate was 7.76% as of September 30, 2024 compared to 8.01% as of September 30, 2023.
Income Tax Expense (Benefit). We had income tax expense of $68 million and $47 million for the three months ended September 30, 2024 and 2023, respectively. We had income tax expense of $275 million and $169 million for the nine months ended September 30, 2024 and 2023, respectively. The period over period increase in 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.
With the assent of the governor on December 27, 2023, the Bermuda Corporate Income Tax Act of 2023 ( the “2023 Act”) became law. Beginning in 2025, a 15% corporate income tax will be applicable to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more. Group’s Bermuda entities will be subject to
the new corporate income tax. The Company has evaluated The 2023 Act and has recorded $578 million of net deferred income tax benefits as of December 31, 2023. The net deferred income tax benefits relate primarily to a default provision in the law that allows for an Economic Transition Adjustment (“ETA”). The ETA allowed companies to establish deferred tax assets or liabilities related to the revaluation of intangible assets, excluding goodwill, and their other assets and liabilities, based on fair value as of September 30, 2023.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase excise tax, and do not expect the legislation to have a material impact on our results of operations.
Net Income (Loss).
Our net income was $509 million and $678 million for the three months ended September 30, 2024 and 2023, respectively. Our net income was $2.0 billion and $1.7 billion for the nine months ended September 30, 2024 and 2023, respectively. The period over period changes in net income were primarily driven by the financial component fluctuations explained above.
Ratios.
Our combined ratio increased by 1.6 points to 93.1% for the three months ended September 30, 2024, compared to 91.4% for the three months ended September 30, 2023 and increased by 0.6 points to 90.8% for the nine months ended September 30, 2024, compared to 90.1% for the nine months ended September 30, 2023. The current year increase is primarily due to higher catastrophe losses. Refer to the analysis of combined ratio components below.
The loss ratio component increased by 2.0 points to 66.0% for the three months ended September 30, 2024, compared to 63.9% for the three months ended September 30, 2023, mainly due to a $135 million increase in catastrophe losses. The loss ratio component increased by 0.7 points to 63.3% for the nine months ended September 30, 2024, compared to 62.6% for the nine months ended September 30, 2023, primarily due to an increase of $229 million in current year catastrophe losses.
The commission and brokerage ratio components decreased to 21.1% for the three months ended September 30, 2024, compared to 21.4% for the three months ended September 30, 2023, and remained consistent with 21.3% for the nine months ended September 30, 2024, compared to 21.3% for the nine months ended September 30, 2023. The quarter over quarter variance was mainly due to changes in the mix of business.
The other underwriting expense ratios decreased to 6.0% for the three months ended September 30, 2024, compared to 6.1% for the three months ended September 30, 2023, and decreased to 6.2% for the nine months ended September 30, 2024, compared to 6.3% for the nine months ended September 30, 2023. The decrease for the three and nine months comparative period was mainly due to a higher earned premium base.
Shareholders’ Equity.
Shareholders’ equity increased by $2.1 billion to $15.3 billion at September 30, 2024 from $13.2 billion at December 31, 2023, principally as a result of $2.0 billion of net income, $521 million of unrealized appreciation on fixed income available for sale securities and equity method investments, net of tax, $45 million of net foreign currency translation adjustments, $26 million of share-based compensation transactions and $24 million of net benefit plan obligation adjustments, partially offset by $249 million of shareholder dividends and $200 million of share repurchases.
Consolidated Investment Results
Net Investment Income.
Net investment income increased by 22.2% to $496 million for the three months ended September 30, 2024, compared with net investment income of $406 million for the three months ended September 30, 2023. The increase for the three months ended September 30, 2024 was primarily the result of an increase of $79 million in income from fixed maturity investments, an increase of $21 million in income from other alternative investments and an increase of $12 million in income from short-term investments, partially offset by a decline of $24 million in limited partnership income. Net investment income increased by 44.8% to $1.5 billion for the nine months ended September 30, 2024, compared with investment income of $1.0 billion for the nine months ended September 30, 2023. The increase for the nine months ended September 30, 2024 was primarily the result of an increase of $277 million of income from fixed maturity
investments, an increase of $86 million in limited partnership income, an increase of $43 million from short-term investments and an increase of $43 million in income from other alternative investments. The limited partnership income primarily reflects changes in reported net asset values. As such, until these asset values are monetized and the resultant income is distributed, they are subject to volatile results of future increases or decreases in the asset value.
The following table shows the components of net investment income for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
2024
2023
Fixed maturities
$
378
$
299
$
1,099
$
822
Equity securities
1
1
3
3
Short-term investments and cash
54
41
135
92
Other invested assets
Limited partnerships
36
60
183
98
Other
36
15
85
42
Gross investment income before adjustments
504
416
1,506
1,056
Funds held interest income (expense)
5
5
20
7
Future policy benefit reserve income (expense)
1
—
—
(1)
Gross investment income
510
420
1,525
1,063
Investment expenses
13
14
44
41
Net investment income
$
496
$
406
$
1,481
$
1,023
(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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Annualized pre-tax yield on average cash and invested assets
4.8
%
4.5
%
4.9
%
4.0
%
Annualized after-tax yield on average cash and invested assets
The following table presents the composition of our net gains (losses) on investments for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
Variance
2024
2023
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities - available for sale
Gains
$
59
$
4
$
55
$
86
$
21
64
Losses
(84)
(23)
(61)
(133)
(42)
(90)
Total
(25)
(19)
(6)
(47)
(21)
(26)
Equity securities
Gains
—
2
(2)
2
8
(7)
Losses
—
—
—
—
—
—
Total
—
1
(1)
1
8
(7)
Other Invested Assets
Gains
—
—
—
—
—
—
Losses
1
—
1
—
—
—
Total
1
—
1
—
—
—
Short-Term Investments
Gains
1
—
1
1
1
—
Losses
—
—
—
—
—
—
Total
1
—
1
1
—
—
Total net realized gains (losses) from dispositions
Gains
60
6
54
88
30
58
Losses
(84)
(24)
(60)
(133)
(42)
(91)
Total
(24)
(18)
(6)
(45)
(12)
(33)
Allowance for credit losses
(9)
2
(11)
(3)
(6)
3
Gains (losses) from fair value adjustments
Equity securities
5
(16)
21
(3)
(3)
1
Total
5
(16)
21
(3)
(3)
1
Total net gains (losses) on investments
$
(27)
$
(31)
$
4
$
(50)
$
(21)
$
(29)
(Some amounts may not reconcile due to rounding.)
Total net gains (losses) on investments during the three months ended September 30, 2024 primarily consist of $24 million of losses due to the disposition of investments, an increase to the allowance for credit losses of $9 million, partially offset by $5 million of gains from fair value adjustments on equity securities. The realized losses from dispositions of investments mainly related to the execution of a Company strategy to sell lower yielding investments in order to reinvest the proceeds at higher interest rates.
Total net gains (losses) on investments during the nine months ended September 30, 2024 primarily relate to $45 million of net losses due to the disposition of investments, $3 million of losses from fair value adjustments on equity securities as a result of equity market deterioration and an increase to the allowance for credit losses of $3 million.
The Company operates through two operating segments: Reinsurance and Insurance. The Reinsurance segment 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 (“UK”) and Switzerland. The Insurance segment writes property and casualty insurance directly and through brokers, including for surplus lines, and general agents within the U.S., Bermuda, Canada, Europe, Singapore and South America through its offices in the U.S., Australia, Bermuda, Canada, Chile, Colombia, Mexico, Singapore, the UK, Ireland, and branches located in the UK, the Netherlands, France, Germany and Spain. The two 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.
Our two operating segments each have executive leaders who are responsible for the overall performance of their respective segments and who are directly accountable to our chief operating decision maker (“CODM”), the Chief Executive Officer of Everest Group, Ltd., who is ultimately responsible for reviewing the business to assess performance, make operating decisions and allocate resources. We report the results of our operations consistent with the manner in which our CODM reviews the business.
During the fourth quarter of 2023, the Company revised the classification and presentation of certain products related to its accident and health business within the segment groupings. These products have been realigned from within the Reinsurance segment to the Insurance segment to appropriately reflect how the business segments are managed. These changes have been reflected retrospectively.
The Company does not review and evaluate the financial results of its operating segments based upon balance sheet data. 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 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. Management has determined that these measures are appropriate and align with how the business is managed. We continue to evaluate our segments as our business evolves and may further refine our segments and financial performance measures.
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:
Premiums. Gross written premiums increased by 2.1% to $3.3 billion for the three months ended September 30, 2024 from $3.2 billion for the three months ended September 30, 2023, primarily driven by property pro rata and property catastrophe excess of loss lines of business, partially offset by actions taken on our North America casualty business. Gross written premiums increased by 12.7% to $9.6 billion for the nine months ended September 30, 2024 from $8.6 billion for the nine months ended September 30, 2023, primarily due to property and casualty pro rata and property catastrophe excess of loss lines of business.
Net written premiums of $3.0 billion for the three months ended September 30, 2024 remained consistent with the $3.0 billion for the three months ended September 30, 2023, with the minimal decrease due to increased cessions to Mt. Logan cells emanating from the property catastrophe line of business. Net written premiums increased by 11.2% to $8.9 billion for the nine months ended September 30, 2024, compared to $8.0 billion for the nine months ended September 30, 2023. The increase was consistent with the percentage increase in gross written premiums.
Premiums earned increased by 14.5% to $3.0 billion for the three months ended September 30, 2024, compared to $2.6 billion for the three months ended September 30, 2023. Premiums earned increased by 17.4% to $8.4 billion for the nine months ended September 30, 2024, compared to $7.2 billion for the nine months ended September 30, 2023. Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire.
Incurred Losses and LAE. The following tables present the incurred losses and LAE for the Reinsurance segment for the periods indicated:
Incurred losses increased by 17.5% to $1.9 billion for the three months ended September 30, 2024, compared to $1.7 billion for the three months ended September 30, 2023. The increase was primarily due to an increase of $184 million in current year attritional losses and an increase of $105 million in current year catastrophe losses. The increase in current year attritional losses was mainly related to the impact of the increase in premiums earned. The current year catastrophe losses of $270 million for the three months ended September 30, 2024 related primarily to Hurricane Helene ($65 million), Hurricane Debby ($59 million), Hurricane Beryl ($56 million), the 2024 European flood Boris ($46 million) and the 2024 third quarter Calgary Alberta storms ($35 million). The $165 million of current year catastrophe losses for the three months ended September 30, 2023 related primarily to Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the Hawaii wildfire ($30 million), the 2023 Italy convective storm ($28 million), the third quarter 2023 U.S. storms ($15 million) and the 2023 Windstorm Hans ($10 million).
Incurred losses increased by 18.5% to $5.3 billion for the nine months ended September 30, 2024, compared to $4.4 billion for the nine months ended September 30, 2023. The increase was primarily due to an increase of $642 million in current year attritional losses and an increase of $181 million in current year catastrophe losses. The increase in current year attritional losses was mainly related to the impact of the increase in premiums earned. The current year catastrophe losses of $487 million for the nine months ended September 30, 2024 related primarily to Hurricane Helene ($65 million), Hurricane Debby ($59 million), the 2024 Baltimore bridge collapse ($57 million), Hurricane Beryl ($56 million), the 2024 European flood Boris ($46 million), the 2024 Brazil Floods ($41 million), the 2024 Dubai floods ($40 million), the 2024 Germany floods ($39 million), the third quarter 2024 Calgary Alberta storms ($35 million) and the 2024 Taiwan earthquake ($25 million). The $305 million of current year catastrophe losses for the nine months ended September 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million), the 2023 New Zealand storms ($44 million), Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($30 million), the 2023 Italy convective storm ($28 million), the 2023 third quarter U.S. storms ($20 million), Typhoon Mawar ($11 million) and the 2023 Hans windstorm ($10 million).
Segment Expenses. Commission and brokerage expense increased by 10.4% to $710 million for the three months ended September 30, 2024, compared to $643 million for the three months ended September 30, 2023. Commission and brokerage expense increased by 15.5% to $2.1 billion for the nine months ended September 30, 2024, compared to $1.8 billion for the nine months ended September 30, 2023. The increases were mainly due to the impact of the increase in premiums earned and changes in the mix of business.
Segment other underwriting expenses increased to $73 million for the three months ended September 30, 2024 from $65 million for the three months ended September 30, 2023. Segment other underwriting expenses increased to $215 million for the nine months ended September 30, 2024, compared to $189 million for the nine months ended September 30, 2023. The increases were mainly due to increased expenditures supporting the increased premium volume of the segment.
The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
Variance
% Change
2024
2023
Variance
% Change
Gross written premiums
$
1,160
$
1,193
$
(33)
(2.8)
%
$
3,911
$
3,748
$
163
4.3
%
Net written premiums
830
878
(47)
(5.4)
%
2,839
2,822
17
0.6
%
Premiums earned
$
948
$
920
$
27
2.9
%
$
2,833
$
2,682
$
150
5.6
%
Incurred losses and LAE
642
593
49
8.3
%
1,865
1,730
136
7.8
%
Commission and brokerage
116
108
7
6.8
%
344
320
23
7.3
%
Other underwriting expenses
163
151
12
8.1
%
478
431
48
11.0
%
Underwriting gain (loss)
$
27
$
69
$
(42)
(60.5)
%
$
145
$
202
$
(56)
(27.9)
%
Point Chg
Point Chg
Loss ratio
67.8
%
64.4
%
3.4
65.8
%
64.5
%
1.4
Commission and brokerage ratio
12.2
%
11.8
%
0.4
12.1
%
11.9
%
0.2
Other underwriting expense ratio
17.2
%
16.4
%
0.8
16.9
%
16.1
%
0.8
Combined ratio
97.1
%
92.5
%
4.6
94.9
%
92.5
%
2.4
(NM not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums. Gross written premiums decreased by 2.8% to $1.2 billion for the three months ended September 30, 2024, compared to $1.2 billion for the three months ended September 30, 2023. The decrease in insurance premiums was primarily due to portfolio actions taken on accident and health and specialty casualty lines of business, partially offset by an increase in property/short tail business and specialty lines of business. Gross written premiums increased by 4.3% to $3.9 billion for the nine months ended September 30, 2024, compared to $3.7 billion for the nine months ended September 30, 2023. The increase in insurance premiums was primarily due to increases in property/short tail business and specialty lines of business, partially offset by portfolio actions taken on accident and health and workers’ compensation lines of business.
Net written premiums decreased by 5.4% to $830 million for the three months ended September 30, 2024, compared to $878 million for the three months ended September 30, 2023, primarily due to an increase in premium cession driven by business mix and lower retention in certain lines of business. Net written premiums of $2.8 billion for the nine months ended September 30, 2024, remained consistent with the $2.8 billion for the nine months ended September 30, 2023.
Premiums earned increased by 2.9% to $948 million for the three months ended September 30, 2024, compared to $920 million for the three months ended September 30, 2023. Premiums earned increased by 5.6% to $2.8 billion for the nine months ended September 30, 2024, compared to $2.7 billion for the nine months ended September 30, 2023. 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.
Incurred Losses and LAE. The following tables present the incurred losses and LAE for the Insurance segment for the periods indicated:
Three Months Ended September 30,
(Dollars in millions)
Current Year
Ratio %/ Pt Change
Prior Years
Ratio %/ Pt Change
Total Incurred
Ratio %/ Pt Change
2024
Attritional
$
602
63.5
%
$
—
—
%
602
63.5
%
Catastrophes
40
4.2
%
—
—
%
40
4.2
%
Total Segment
$
642
67.8
%
$
—
—
%
$
642
67.8
%
2023
Attritional
$
583
63.3
%
$
—
—
%
583
63.3
%
Catastrophes
10
1.1
%
—
—
%
10
1.1
%
Total Segment
$
593
64.4
%
$
—
—
%
$
593
64.4
%
Variance 2024/2023
Attritional
$
19
0.2
pts
$
—
—
pts
$
19
0.2
pts
Catastrophes
30
3.1
pts
—
—
pts
30
3.1
pts
Total Segment
$
49
3.4
pts
$
—
—
pts
$
49
3.4
pts
Nine Months Ended September 30,
(Dollars in millions)
Current Year
Ratio %/ Pt Change
Prior Years
Ratio %/ Pt Change
Total Incurred
Ratio %/ Pt Change
2024
Attritional
$
1,806
63.7
%
$
—
—
%
1,806
63.7
%
Catastrophes
60
2.1
%
—
—
%
60
2.1
%
Total Segment
$
1,865
65.8
%
$
—
—
%
$
1,865
65.8
%
2023
Attritional
$
1,718
64.0
%
$
—
—
%
1,718
64.0
%
Catastrophes
12
0.4
%
—
—
%
12
0.4
%
Total Segment
$
1,730
64.5
%
$
—
—
%
$
1,730
64.5
%
Variance 2024/2023
Attritional
$
88
(0.3)
pts
$
—
—
pts
88
(0.3)
pts
Catastrophes
48
1.7
pts
—
—
pts
48
1.7
pts
Total Segment
$
136
1.4
pts
$
—
—
pts
$
136
1.4
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 8.3% to $642 million for the three months ended September 30, 2024, compared to $593 million for the three months ended September 30, 2023. The increase was mainly due to an increase of $19 million in current year attritional losses and an increase of $30 million in current year catastrophe losses. The increase in current year attritional losses was primarily due to changes in mix of business. The $40 million of current year catastrophe losses for the three months ended September 30, 2024 related primarily to Hurricane Helene ($16 million), Hurricane Beryl ($11 million), the 2024 Jasper fires ($6 million) and the third quarter 2024 Calgary Alberta storms ($6 million). The $10 million of current year catastrophe losses for the three months ended September 30, 2023 related to the 2023 third quarter U.S. storms ($5 million) and the 2023 Hawaii wildfire ($5 million).
Incurred losses and LAE increased by 7.8% to $1.9 billion for the nine months ended September 30, 2024, compared to $1.7 billion for the nine months ended September 30, 2023. The increase was mainly due to an increase of $88 million in current year attritional losses and an increase in current year catastrophe losses of $48 million. The increase in current year attritional losses was primarily due to the impact of the increase in premiums earned and changes in mix of business. The current year catastrophe losses of $60 million for the nine months ended September 30, 2024 related primarily to Hurricane Helene ($16 million), Hurricane Beryl ($11 million), the 2024 second quarter U.S. convective storms ($10 million), the 2024 Jasper fires ($6 million), the third quarter 2024 Calgary Alberta storms ($6 million) and the 2024
Baltimore bridge collapse ($5 million). The $12 million of current year catastrophe losses for the nine months ended September 30, 2023 related to the 2023 third quarter U.S. storms ($5 million), the 2023 Hawaii wildfire ($5 million) and the 2023 New Zealand storms ($2 million).
Segment Expenses. Commission and brokerage expenses increased by 6.8% to $116 million for the three months ended September 30, 2024, compared to $108 million for the three months ended September 30, 2023. Commission and brokerage expenses increased by 7.3% to $344 million for the nine months ended September 30, 2024, compared to $320 million for the nine months ended September 30, 2023. The increases were mainly due to changes in the mix of business.
Segment other underwriting expenses increased to $163 million for the three months ended September 30, 2024, compared to $151 million for the three months ended September 30, 2023. Segment other underwriting expenses increased to $478 million for the nine months ended September 30, 2024, compared to $431 million for the nine months ended September 30, 2023. These increases were mainly due to the impact of the increase in premiums earned and increased expenses related to the continued investment of the international insurance platform.
FINANCIAL CONDITION
Investments. Total investments were $40.5 billion at September 30, 2024, an increase of $4.8 billion compared to $35.7 billion at December 31, 2023. The rise in investments was primarily related to an increase in fixed maturities - available for sale due to an overall net purchase of $2.1 billion of fixed maturities - available for sale during the nine months ended September 30, 2024.
The Company’s limited partnership investments are comprised of limited partnerships that invest in private equity, private credit and private real estate. Generally, the limited partnerships are reported on a month or quarter lag. We receive annual audited financial statements for all the limited partnerships, which are prepared using fair value accounting in accordance with Financial Accounting Standards Board guidance. For the quarterly reports, the Company reviews the financial reports for any unusual changes in carrying value. If the Company becomes aware of a significant decline in value during the lag reporting period, the loss will be recorded in the period in which the Company identifies the decline.
The table below summarizes the composition and characteristics of our investment portfolio for the periods indicated.
At September 30, 2024
At December 31, 2023
Fixed income portfolio duration (years)
3.1
3.3
Fixed income composite credit quality
AA-
AA-
Reinsurance Recoverables.
Reinsurance recoverables for both paid and unpaid losses totaled $2.5 billion and $2.3 billion at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, $416 million, or 16.5%, was receivable from Mt. Logan Re collateralized segregated accounts; $250 million, or 10.0%, was receivable from Munich Reinsurance America, Inc. and $187 million, or 7.4% was receivable from Endurance Specialty Holdings, Ltd. No other retrocessionaire accounted for more than 5% of our recoverables.
Loss and LAE Reserves. Gross loss and LAE reserves totaled $27.5 billion and $24.6 billion at September 30, 2024 and December 31, 2023, respectively.
The following tables summarize gross outstanding loss and LAE reserves by segment, classified by case reserves and IBNR reserves, for the periods indicated.
At September 30, 2024
(Dollars in millions)
Case Reserves
IBNR Reserves
Total Reserves
% of Total
Reinsurance
$
6,517
$
13,147
$
19,664
71.6
%
Insurance
2,339
5,264
7,603
27.7
%
Total excluding A&E
8,857
18,410
27,267
99.2
%
A&E
161
52
213
0.8
%
Total including A&E
$
9,018
$
18,462
$
27,480
100.0
%
(Some amounts may not reconcile due to rounding.)
At December 31, 2023
(Dollars in millions)
Case Reserves
IBNR Reserves
Total Reserves
% of Total
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
%
(Some amounts may not reconcile due to rounding.)
Changes in premiums earned and business mix, reserve re-estimations, catastrophe losses and changes in catastrophe loss reserves and claim settlement activity all impact loss and LAE reserves by segment and in total.
Our carried loss and LAE reserves represent management’s best estimate of our ultimate liability for unpaid claims. We continuously re-evaluate our reserves, including re-estimates of prior period reserves, taking into consideration all available information and, in particular, newly reported loss and claim experience. Changes in reserves resulting from such re-evaluations are reflected in incurred losses in the period when the re-evaluation is made. Our analytical methods and processes operate at multiple levels, including individual contracts, groupings of like contracts, classes and lines of business, internal business units, segments, accident years, legal entities, and in the aggregate. In order to set appropriate reserves, we make qualitative and quantitative analyses and judgments at these various levels. We utilize actuarial science, business expertise and management judgment in a manner intended to ensure the accuracy and consistency of our reserving practices. Management’s best estimate is developed through collaboration with actuarial, underwriting, claims, legal and finance departments and culminates with the input of reserve committees. Each segment reserve committee includes the participation of the relevant parties from actuarial, finance, claims and segment senior management and has the responsibility for recommending and approving management’s best estimate. Reserves are further reviewed by Everest’s Chief Reserving Actuary and senior management. The objective of this process is to determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability. Nevertheless, our reserves are estimates and 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.
Asbestos and Environmental Exposures. Asbestos and Environmental (“A&E”) exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The following table summarizes the outstanding loss reserves with respect to A&E reserves on both a gross and net of retrocessions basis for the periods indicated.
At September 30,
At December 31,
(Dollars in millions)
2024
2023
Gross reserves
$
213
$
247
Ceded reserves
(10)
(15)
Net reserves
$
203
$
232
(Some amounts may not reconcile due to rounding.)
With respect to asbestos only, at September 30, 2024, we had net asbestos loss reserves of $184 million, or 90.4%, 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 5.8 years at September 30, 2024. 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 September 30, 2024 and December 31, 2023 was $15.3 billion and $13.2 billion, respectively. Management’s objective in managing capital is to ensure that the Company’s 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, Everest Reinsurance (Bermuda) Ltd. (“Bermuda Re”) and Everest Reinsurance Company (“Everest Re”), are regulated by the Bermuda Monetary Authority and the State of Delaware’s 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 restrictions on 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)
2023
2022
2023
2022
Regulatory targeted capital
$
2,669
$
2,217
$
4,242
$
3,353
Actual capital
$
3,711
$
2,759
$
6,963
$
5,553
(1) Regulatory targeted capital represents the target capital level from the applicable year's Bermuda Solvency Capital Requirement calculation.
(2) Regulatory targeted capital represents 200% of the Risk Based Capital 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 debt and equity markets as a result of our financial strength, as evidenced by the financial strength ratings 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.
For the nine months ended September 30, 2024, we repurchased 536,469 of our common shares at a cost of $200 million in the open market. During this period, we paid $249 million in common share dividends to adjust our capital position and enhance long-term expected returns to our shareholders. During 2023, we repurchased no shares in the open market and paid $288 million in dividends. On May 22, 2020, our existing Board authorization to purchase up to 30 million of our shares was amended to authorize the purchase of up to 32 million shares. As of September 30, 2024, we had repurchased 31.3 million shares under this authorization. During the third quarter of 2024, the Company’s Board of Directors declared a quarterly common stock dividend of $2.00 per share. The common stock dividend was paid on September 27, 2024 for holders of record as of September 16, 2024. We paid $86 million in dividends during the third quarter of 2024.
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.
On May 19, 2023, the Company completed the public offering of 4,140,000 common shares, which included full exercise of the underwriters’ option to purchase an additional 540,000 common shares, at a public offering price of $360.00 per share. Total net proceeds from the public offering were $1,445 million, after underwriting discount and expenses. The Company’s intent was to use the net proceeds from this offering for long-term reinsurance opportunity and continued build out of the global insurance business.
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, with disbursements generally taking 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 $4.2 billion and $3.5 billion for the nine months ended September 30, 2024 and 2023, respectively. Additionally, these cash flows reflected net catastrophe loss payments of $506 million and $651 million for the nine months ended September 30, 2024 and 2023, respectively, and net tax payments of $340 million and $185 million for the nine months ended September 30, 2024 and 2023, respectively.
If disbursements for losses and LAE, 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 of both short-term investments and longer term maturities are available to supplement other operating cash flows. We do not expect to supplement negative insurance operations cash flows with investment dispositions.
As the timing of payments for losses and LAE cannot be predicted with certainty, we maintain portfolios of long-term invested assets with varying maturities, along with short-term investments that provide additional liquidity for payment of claims. At September 30, 2024 and December 31, 2023, we held cash and short-term investments of $5.5 billion and $3.6 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 September 30, 2024, we had $1.0 billion of fixed maturity securities - available for sale maturing within one year or less, $8.7 billion maturing within one to five years and $8.0 billion maturing after five years. We believe that these fixed maturity 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 and LAE in the near future. We do not anticipate selling a significant amount of securities to pay losses and LAE. At September 30, 2024, we had $223 million of net pre-tax unrealized depreciation related to fixed maturity - available for sale securities, comprised of $793 million of pre-tax unrealized depreciation and $570 million of pre-tax unrealized appreciation.
Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing. However, given catastrophic events observed in recent periods, 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 access to ample liquidity to settle its catastrophe claims and also may receive payments under the catastrophe bond program and the Mt. Logan Re collateralized reinsurance arrangement.
In addition to our cash flows from operations and liquid investments, 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 September 30, 2024, Everest Re had statutory admitted assets of approximately $29.2 billion which provides borrowing capacity of up to approximately $2.9 billion. As of September 30, 2024, Everest Re had $819 million of borrowings outstanding, which begin to expire in 2024. See Note 7 – Credit Facilities to the Notes to the consolidated financial statements in Part I, Item I of this Form 10-Q for further details.
Market Sensitive Instruments.
The Securities and Exchange Commission’s (“SEC”) 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 available for sale and held to maturity securities. Additionally, we have invested in equity securities.
The overall investment strategy considers the scope of present and anticipated Company operations. In particular, estimates of the financial impact resulting from non-investment asset and liability transactions, together with our capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated payout characteristics for which our investments provide liquidity. This analysis is considered in the development of specific investment strategies for asset allocation, duration and credit quality. The change in overall market sensitive risk exposure principally reflects the asset changes that took place during the period.
Interest Rate Risk. Our $42.1 billion investment portfolio at September 30, 2024 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 from a change in market interest rates. In a declining interest rate environment, interest rate risk includes prepayment risk on the $6.9 billion of mortgage-backed securities in the $31.3 billion fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life, and thus, the expected yield of the security.
The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $3.9 billion of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios.
Impact of Interest Rate Shift in Basis Points At September 30, 2024
-200
-100
0
100
200
(Dollars in millions)
Total Fair Value
$
37,472
$
36,331
$
35,190
$
34,049
$
32,907
Fair Value Change from Base (%)
6.5
%
3.2
%
—
%
(3.2)
%
(6.5)
%
Change in Unrealized Appreciation
After-tax from Base ($)
$
1,961
$
980
$
—
$
(980)
$
(1,961)
We had $27.5 billion and $24.6 billion of gross reserves for losses and LAE as of September 30, 2024 and December 31, 2023, respectively. These amounts are recorded at their nominal value, as opposed to present value, which would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the reserves decreases