EVEREST REINSURANCE HOLDINGS INC – 10-K –

MANAGEMENT'S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF
OPERATION
The following

is a

discussion and

analysis of

our results

of operations

and financial

condition.

It should

be read

in

conjunction with the Consolidated

Financial Statements

and accompanying notes

thereto presented

under ITEM 8,
"Financial Statements and Supplementary

Data".
Industry Conditions.
The

worldwide

reinsurance

and

insurance

businesses

are

highly

competitive,

as

well

as

cyclical

by

product

and
market.

As

such,

financial

results

tend

to

fluctuate

with

periods

of

constrained

availability,

higher

rates

and
stronger

profits followed

by periods

of abundant

capacity,

lower rates

and constrained

profitability.

Competition
in

the

types

of

reinsurance

and

insurance

business

that

we

underwrite

is

based

on

many

factors,

including

the
perceived

overall

financial

strength

of

the

reinsurer

or

insurer,

ratings

of

the

reinsurer

or

insurer

by

A.M.

Best
and/or

Standard

&

Poor's,

underwriting

expertise,

the

jurisdictions

where

the

reinsurer

or

insurer

is

licensed

or
otherwise

authorized,

capacity

and

coverages

offered,

premiums

charged,

other

terms

and

conditions

of

the
reinsurance

and

insurance

business

offered,

services

offered,

speed

of

claims

payment

and

reputation

and
experience in lines written.

Furthermore, the market impact

from these competitive factors

related to reinsurance
and

insurance

is

generally

not

consistent

across

lines

of business,

domestic

and

international

geographical

areas
and distribution channels.

We

compete

in the

U.S. and

international

reinsurance

and insurance

markets

with numerous

global competitors.
Our

competitors

include

independent

reinsurance

and

insurance

companies,

subsidiaries

or

affiliates

of
established

worldwide

insurance

companies,

reinsurance

departments

of certain

insurance

companies,

domestic
and

international

underwriting

operations,

and

certain

government

sponsored

risk

transfer

vehicles.

Some

of
these

competitors

have

greater

financial

resources

than

we

do

and

have

established

long-term

and

continuing
business relationships,

which can be a

significant competitive

advantage.

In addition, the lack

of strong barriers

to
entry

into

the

reinsurance

business

and

the

securitization

of

reinsurance

and

insurance

risks

through

capital
markets provide additional

sources of potential reinsurance

and insurance capacity and competition.

Worldwide

insurance

and

reinsurance

market

conditions

historically

have

been

competitive.

Generally,

there

is
ample

insurance

and

reinsurance

capacity

relative

to

demand,

as

well

as,

additional

capital

from

the

capital
markets through

insurance linked

financial instruments.

These financial instruments

such as side cars,

catastrophe
bonds and collateralized

reinsurance funds,

provided capital

markets with

access to insurance

and reinsurance

risk
exposure.

The capital

markets

demand for

these products

is primarily

driven by

the desire

to achieve

greater

risk
diversification

and

potentially

higher

returns

on

their

investments.

This

competition

generally

has

a

negative
impact

on

rates,

terms

and

conditions;

however,

the

impact

varies

widely

by

market

and

coverage.

Based

on
recent

competitive

behaviors

in

the

insurance

and

reinsurance

industry,

natural

catastrophe

events

and

the
macroeconomic

backdrop,

there

has

been

some

dislocation

in

the

market

which

we

expect

to

have

a

positive

impact on rates and terms and conditions

generally,

though local market specificities can

vary.
The increased frequency of

catastrophe

losses experienced throughout

2022 appears to be pressuring

the increase
of

rates.

As

business

activity

continues

to

regain

strength

after

the

pandemic

and

current

macroeconomic
15
uncertainty,

rates

also

appear

to

be

firming

in

most

lines

of

business,

particularly

in

the

casualty

lines

that

had
seen

significant

losses

such

as

excess

casualty

and

directors'

and

officers'

liability.

Other

casualty

lines

are
experiencing

modest

rate

increase,

while

some

lines

such

as

workers'

compensation

were

experiencing

softer
market

conditions.

It

is

too

early

to

tell

what

the

impact

on

pricing

conditions

will

be

but

it

is

likely

to

change
depending on the line of business and geography.
Our capital

position remains

a source

of strength,

with high

quality invested

assets, significant

liquidity and

a low
operating expense

ratio. Our diversified

global platform

with its broad mix

of products, distribution

and geography
is resilient.
The war

in the

Ukraine

is ongoing

and an

evolving

event.

Economic

and legal

sanctions

have

been levied

against

Russia, specific named individuals

and entities connected

to the Russian government,

as well as businesses

located
in the

Russian Federation

and/or owned

by Russian

nationals by

numerous countries,

including the

United States.
The

significant

political

and

economic

uncertainty

surrounding

the

war

and

associated

sanctions

have

impacted
economic

and

investment

markets

both

within

Russia

and

around

the

world.

The

Company

has

recorded

$25

million of losses related to the Ukraine

/Russia war during 2022.































































































































































































































16
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 stockholder's equity for

the periods indicated:

Years Ended December 31,
Percentage Increase/(Decrease)
(Dollars in millions)
2022
2021
2020
2022/2021
2021/2020
Gross written premiums
$
9,677
$
9,331
$
7,957
3.7%
17.3%
Net written premiums
8,032
7,719
6,639
4.0%
16.3%
REVENUES:
Premiums earned
$
7,876
$
7,179
$
6,407
9.7%
12.1%
Net investment income
638
745
376
-14.3%
98.2%
Net gains (losses) on investments
(982)
501
50
NM
NM
Other income (expense)
(6)
23
(15)
-123.7%
NM
Total revenues
7,526
8,448
6,818
-10.9%
23.9%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
5,823
5,387
4,608
8.1%
16.9%
Commission, brokerage, taxes and fees
1,632
1,513
1,373
7.9%
10.1%
Other underwriting expenses
501
454
401
10.5%
13.2%
Corporate expense
26
33
16
-22.9%
108.5%
Interest, fee and bond issue cost amortization
expense
101
70
36
44.3%
96.2%
Total claims and expenses
8,083
7,457
6,434
8.4%
15.9%
INCOME (LOSS) BEFORE TAXES
(557)
991
384
-156.1%
158.5%
Income tax expense (benefit)
(112)
192
32
-158.4%
NM
NET INCOME (LOSS)

$
(445)
$
800
$
352
-155.6%
127.3%
RATIOS:
Point Change
Loss ratio
73.9%
75.0%
71.9%
(1.1)
3.1
Commission and brokerage ratio
20.7%
21.1%
21.4%
(0.4)
(0.3)
Other underwriting expense ratio
6.4%
6.3%
6.3%
0.1
-
Combined ratio
101.0%
102.4%
99.6%
(1.4)
2.8
At December 31,
Percentage Increase/ (Decrease)
(Dollars in millions)
2022
2021
2020
2022/2021
2021/2020
Balance sheet data:
Total investments and cash
$
19,195
$
19,719
$
15,910
-2.7%
23.9%
Total assets
27,957
27,695
23,640
0.9%
17.2%
Loss and loss adjustment expense reserves
14,977
13,121
11,578
14.1%
13.3%
Total debt
3,084
3,089
1,910
-0.2%
61.7%
Total liabilities
22,303
20,657
17,226
8.0%
19.9%
Stockholder's equity
5,654
7,038
6,414
-19.7%
9.7%
(Some amounts may not reconcile due

to rounding)
(NM, not meaningful)
Revenues.
Premiums.

Gross

written

premiums

increased

by

3.7% to

$9.7 billion

in

2022, compared

to

$9.3 billion

in

2021,
reflecting a $426

million, or 12.9%,

increase in our

insurance business

and an $81 million,

or 1.3%, decrease

in our


































































































































































































































17
reinsurance

business.

The

increase

in

insurance

premiums

reflects

growth

across

most

lines

of

business,
particularly

specialty

casualty

business

and

property/short

tail

business,

driven

by

positive

rate

and

exposure
increases, new business

and strong renewal

retention.

The decrease in reinsurance

premiums was mainly due

to a
decline in property pro

rata business. Net

written premiums increased

by 4.0% to $8.0 billion in 2022,

compared to
$7.7 billion in

2021 which is

consistent

with the change

in gross

written premiums.

Premiums

earned increased by
9.7%

to

$7.9

billion

in

2022,

compared

to

$7.2

billion

in

2021.

The

change

in

premiums

earned

relative

to

net
written premiums

is the

result of

timing; premiums

are earned

ratably

over the

coverage

period whereas

written
premiums are recorded at the

initiation of the coverage period.
Other Income

(Expense).

We

recorded

other expense

of $6

million and

other income

of $23

million in

2022 and
2021, respectively.

The changes were primarily the result of fluctuations

in foreign currency exchange

rates.

Claims and Expenses.
Incurred

Losses

and

Loss

Adjustment

Expenses.

The

following

table

presents

our

incurred

losses

and

loss

adjustment expenses ("LAE") for

the periods indicated.

Total
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional (a)
$
4,828
61.3%
$
11
0.1%
$
4,839
61.4%
Catastrophes
987
12.5%
(4)
-%
983
12.5%
Total
$
5,815
73.8%
$
7
0.1%
$
5,823
73.9%
2021
Attritional (a)
$
4,439
61.8%
$
8
0.1%
$
4,447
61.9%
Catastrophes
943
13.1%
(3)
0.0%
940
13.1%
Total
$
5,382
74.9%
$
5
0.1%
$
5,387
75.0%
2020
Attritional (a)
$
3,997
62.4%
$
214
3.3%
$
4,211
65.7%
Catastrophes
411
6.4%
(13)
-0.2%
397
6.2%
Total
$
4,408
68.8%
$
200
3.1%
$
4,608
71.9%
Variance 2022/2021
Attritional (a)
$
389
(0.5)
pts
$
3
-
pts
$
392
(0.5)
pts
Catastrophes
44
(0.6)
pts
(1)
-
pts
43
(0.6)
pts
Total
$
433
(1.1)
pts
$
2
-
pts
$
436
(1.1)
pts
Variance 2021/2020
Attritional (a)
$
442
(0.6)
pts
$
(206)
(3.2)
pts
$
236
(3.8)
pts
Catastrophes
532
6.7
pts
10
0.2
pts
543
6.9
pts
Total
$
974
6.1
pts
$
(195)
(3.0)
pts
$
779
3.1
pts
(a)

Attritional losses exclude catastrophe

losses.

(Some amounts may not reconcile due

to rounding.)
Incurred losses and LAE

increased by 8.1% to $5.8

billion in 2022 compared

to $5.4 billion in 2021,

primarily due to
an

increase

of

$389

million

in

current

year

attritional

losses

and

an

increase

of

$44

million

in

current

year
catastrophe

losses.

The increase

in current

year attritional

losses was

mainly related

to the

impact of the

increase
in premiums earned

and $25 million

of attritional losses

incurred due to

the Ukraine/Russia

war.

The current year





18
catastrophe

losses

of

$987

million

in

2022

related

primarily

to

Hurricane

Ian

($768

million),

the

2022

Australia
floods ($75 million),

the 2022 South

Africa flood ($43

million), Hurricane

Fiona ($27 million),

and the 2022

Canada
derecho ($20 million), with

the remaining losses resulting

from various storm

events.

The current year

catastrophe
losses

of

$943

million

in

2021

primarily

related

to

Hurricane

Ida

($423

million),

the

Texas

winter

storms

($288
million), the

European floods

($108 million),

the Canada

drought loss

($80 million)

and the

Quad State

Tornadoes

($42 million), with the rest of the losses emanating

from the 2021 Australia floods.
Commission, Brokerage,

Taxes

and Fees.

Commission, brokerage,

taxes

and fees

increased to

$1.6 billion

in 2022
compared to $1.5 billion

in 2021. The increase was mainly

due to increases in premiums

earned and changes in the
mix of business.
Other Underwriting Expenses.

Other underwriting expenses

were $501 million and

$454 million in 2022

and 2021,
respectively.

The

increase

in

other

underwriting

expenses

was

mainly

due

to

the

continued

build

out

of

our

insurance operations, including an

expansion of the international insurance

platform.

Corporate

Expenses.

Corporate

expenses,

which

are

general

operating

expenses

that

are

not

allocated

to
segments,

were

$26 million

and

$33 million

for

the years

ended December

31,

2022 and

2021, respectively.

The

decrease from 2021 to 2022 was mainly due

to a decrease in variable incentive compensation.
Interest,

Fees

and

Bond

Issue

Cost

Amortization

Expense.

Interest,

fees

and

other

bond

amortization

expense
were $101

million and

$70 million

in 2022

and 2021,

respectively.

The increase

in interest

expense was

primarily
due

to

the

issuance

of

$1.0

billion

of

senior

notes

in

October

2021.

Interest

expense

was

also

impacted

by

the
movements

in the

floating interest

rate

related

to the

long-term subordinated

notes, which

is reset

quarterly per
the note agreement.

The floating rate

was 6.99% as

of December 31, 2022

compared to 2.54%

as of December 31,
2021.
Income Tax

Expense (Benefit).

The Company had

an income tax

benefit of $112

million and income

tax expense

of
$192

million

in

2022

and

2021,

respectively.

Variations

in

income

taxes

generally

result

from

changes

in

the
relative levels

of pre-tax

income, including

the impact

of catastrophe

losses and

net gains

(losses) on

investments
as

well

as

changes

in

tax

exempt

investment

income

and

creditable

foreign

taxes.

The

change

from

income

tax
expense to income

tax benefit

resulted primarily from

increased fair

value and capital

losses as well as

an increase
in catastrophe losses.

The Coronavirus

Aid, Relief,

and Economic

Security ("CARES")

Act, enacted

on March

27, 2020,

provided that

U.S.
companies could

carryback for

five years

net operating

losses incurred

in 2018,

2019 and/or

2020. This

beneficial
tax provision

in the CARES

Act enabled the

Company to

carryback its

significant 2018

net operating

losses to

prior
tax years

with higher effective

tax rates

of 35% versus

21% in 2018

and later

years.

As a result,

the Company

was
able to

record a

net income

tax benefit

from the

five-year

carryback of

$33 million

and obtain

federal income

tax

cash refunds of $183 million including interest

in 2020.
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. As the

IRS issues
additional guidance, we will evaluate any

impact to our consolidated financial statements.
Net Income (Loss).

Our net

loss

was

$445 million

and

net income

was

$800

million in

2022

and 20

21, respectively

.

The change

was

primarily driven by the consolidated investment

results explained below.

Ratios.
Our

combined

ratio

decreased

by

1.4

points

to

101.0%

in

2022

compared

to

102.4%

in

2021.

The

loss

ratio

component decreased by 1.1 points

in 2022 over the same period last year.

The decline in the ratio was mainly due
to lower loss experience.

Although both current

year attritional and

current year catastrophe

losses were higher in

























































































19
2022

than

2021,

the

rate

of

increase

in

the

current

year

losses

was

lower

than

the

rate

of

increase

in

earned
premiums

resulting

in

a

reduction

of

the

overall

loss

ratio.

The

commission

and

brokerage

ratio

component
decreased

to

20.7% in

2022

compared

to

21.1% in

2021,

reflecting

changes

in

affiliated

reinsurance

agreements
and changes

in the

mix of

business. The

other underwriting

expense ratio

slightly increased

to 6.4%

in 2022

from

6.3% in 2021. The increase was mainly due to higher insurance

operations costs.

Stockholder's Equity.

Stockholder's

equity decreased

by $1.4

billion to

$5.7 billion at

December 31, 2022

from $7.0

billion at

December
31,

2021,

principally

as

a

result

of

$445

million

of

net

loss,

$938

million

of

net

unrealized

depreciation

on
investments,

net

of

tax

and

$18

million

of

net

foreign

currency

translation

adjustments,

partially

offset

by

$17

million of net benefit plan obligation adjustments

.

Consolidated Investment

Results

Net Investment Income.

Net

investment

income

decreased

by

14.3%

to

$638

million

in

2022

compared

to

$745

million

in

2021.

The
decrease was

primarily the

result of

a decline

of $249

million in

limited partnership

income, partially

offset by

an
additional

$166

million

of

income

from

fixed

maturity

investments.

The

limited

partnership

income

primarily
reflects

decreases

in

their

reported

net

asset

values.

As

such,

until

these

asset

values

are

monetized

and

the
resultant income is

distributed, they

are subject to future

increases or decreases

in the asset value,

and the results
may be volatile.

The following table shows the components

of net investment income for

the periods indicated:

Years Ended December 31,
(Dollars in millions)
2022
2021
2020
Fixed maturities
$
510
$
344
$
305
Equity securities

16
15
11
Short-term investments and cash
16
1
3
Other invested assets
Limited partnerships
72
321
49
Dividends from preferred shares of affiliate
31
31
31
Other

30
63
2
Gross investment income before adjustments
675
775
401
Funds held interest income (expense)
6
8
6
Interest income from Parent
11
6
5
Gross investment income
691
788
412
Investment expenses
(52)
(43)
(36)
Net investment income
$
638
$
745
$
376
(Some amounts may not reconcile due

to rounding.)
The following table shows

a comparison of various investment

yields for the periods indicated:
2022
2021
2020
Annualized pre-tax yield on average cash and invested assets
3.3
%
4.4
%
2.8
%
Annualized after-tax yield on average cash and invested assets
2.6
%
3.5
%
2.3
%




























































































































































































































20
Net Gains (Losses) on Investments.
The following table presents the composition

of our net gains (losses) on investments

for the periods indicated:

Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities, available

for sale
Gains
$
9
$
33
$
24
$
(24)
$
9
Losses
(88)
(25)
(60)
(63)
35
Total
(79)
8
(36)
(87)
44
Equity securities
Gains
165
39
37
126
2
Losses
(48)
(15)
(45)
(33)
30
Total
117
24
(8)
93
32
Other invested assets
Gains
18
10
8
8
2
Losses
(5)
(4)
(6)
(1)
2
Total
13
6
2
7
4
Short Term Investments:
Gains
-
-
1
-
(1)
Losses
-
-
-
-
-
Total
-
-
1
-
(1)
Total net realized

gains (losses) from dispositions
Gains
192
82
70
110
11
Losses
(141)
(43)
(111)
(98)
68
Total
51
39
(41)
12
79
Allowances for credit losses:
(27)
(26)
(2)
(1)
(24)
Gains (losses) from fair value adjustments:
Fixed maturities
-
-
2
-
(2)
Equity securities
(447)
254
276
(701)
(22)
Other invested assets
(559)
234
(186)
(793)
420
Total
(1,006)
488
92
(1,494)
396
Total net gains

(losses) on investments
$
(982)
$
501
$
50
$
(1,483)
$
451
(Some amounts may not reconcile due to rounding.)
21
Net gains

(losses) on

investments

during 2022

primarily relate

to net

losses from

fair value

adjustments

on equity
securities of

$447 million

as a

result of

equity market

declines

in 2022,

net losses

of $559

million from

fair value
adjustments

on other

invested

assets, $51

million of

net

realized

gains

from

disposition

of

investments

and

$27

million

of

credit

allowances

on

fixed

maturity securities.
Segment Results.
The Company

manages its

reinsurance

and insurance

operations

as autonomous

units and

key

strategic

decisions

are based on the aggregate operating

results and projections for these segments

of business.

The

Reinsurance

operation

writes

risks

on

a

worldwide

basis

in

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

United

States

as

well as

through

branches

in

Canada

and

Singapore.

The
Insurance operation

writes property and

casualty insurance directly

and through brokers,

surplus lines brokers

and

general agents within the United States.

These segments

are

managed

independently,

but conform

with corporate

guidelines

with respect

to

pricing, risk
management,

control

of

aggregate

catastrophe

exposures,

capital,

investments

and

support

operations.

Management generally monitors

and evaluates the financial performance

of these operating segments

based upon
their underwriting results.

Underwriting

results

include

earned

premium

less

losses

and

LAE

incurred,

commission

and

brokerage

expenses

and other underwriting expenses.

We measure our underwriting results

using ratios, in particular loss, commission
and brokerage

and other underwriting

expense ratios,

which respectively,

divide incurred

losses, commissions

and
brokerage and other

underwriting expenses by premiums earned.

The

Company

does

not

maintain

separate

balance

sheet

data

for

its

operating

segments.

Accordingly,

the
Company

does not

review and

evaluate

the financial

results

of its

operating

segments based

upon balance

sheet
data.

Our

loss

and

LAE

reserves

are

management's

best

estimate

of

our

ultimate

liability

for

unpaid

claims.

We

re-
evaluate

our

estimates

on

an

ongoing

basis,

including

all

prior

period

reserves,

taking

into

consideration

all
available

information

and,

in

particular,

recently

reported

loss

claim

experience

and

trends

related

to

prior
periods.

Such

re-evaluations

are

recorded

in

incurred

losses

in

the

period

in

which

the

re-evaluation

is

made.
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

such

process

is

to

determine a single best estimate

viewed by management to be the best

estimate of its ultimate loss liability.

The following discusses the underwriting results for

each of our segments for the periods indicated:

22
Reinsurance.
The

following

table

presents

the

underwriting

results

and

ratios

for

the

Reinsurance

segment

for

the

periods
indicated.

Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
5,948
$
6,028
$
5,266
$
(80)
(1.3)%
$
763
14.5%
Net written premiums
5,269
5,265
4,632
4
0.1%
632
13.7%
Premiums earned
$
5,212
$
4,949
$
4,485
$
263
5.3%
$
464
10.3%
Incurred losses and LAE
3,957
3,761
3,209
196
5.2%
552
17.2%
Commission and brokerage
1,326
1,250
1,120
76
6.1%
130
11.6%
Other underwriting expenses
139
143
119
(4)
(3.1)%
24
19.9%
Underwriting gain (loss)
$
(210)
$
(206)
$
36
$
(5)
2.2%
$
(242)
NM
Point Chg
Point Chg
Loss ratio
75.9%
76.0%
71.6%
(0.1)
4.4
Commission and brokerage ratio
25.4%
25.3%
25.0%
0.1
0.3
Other underwriting expense
ratio
2.7%
2.9%
2.6%
(0.2)
0.3
Combined ratio
104.0%
104.2%
99.2%
(0.2)
5.0
(Some amounts may not reconcile due

to rounding)
Premiums.

Gross written

premiums decreased

by 1.3%

to $5.9

billion in

2022 from

$6.0 billion

in 2021,

primarily
due

to

a

decline

in

property

pro

rata

business.

Net

written

premiums

remained

flat

at

$5.3

billion

in

2022

and
2021. The

difference

in the

percentage

change in

gross written

premiums compared

to the

percentage

change in
net

written

premiums

was

primarily

due

to

the

reduction

in

business

ceded

to

the

segregated

accounts

of

Mt.
Logan

Re

during

2022

compared

to

2021.

Premiums

earned

increased

5.3%

to

$5.2

billion

in

2022

compared

to
$4.9

billion

in

2021.

The

change

in

premiums

earned

relative

to

net

written

premiums

is

the

result

of

timing;
premiums are earned

ratably over

the coverage period

whereas written premiums

are recorded

at the initiation of
the coverage period.



























































































































































































































23
Incurred Losses and LAE.

The following table presents

the incurred losses and LAE for the

Reinsurance segment for
the periods indicated.

Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
3,115
59.8%
$
(26)
(0.5)%
$
3,089
59.3%
Catastrophes
870
16.7%
(3)
(0.1)%
867
16.6%
Total segment
$
3,985
76.5%
$
(29)
(0.6)%
$
3,957
75.9%
2021
Attritional
$
3,004
60.7%
$
(32)
(0.6)%
$
2,972
60.1%
Catastrophes
792
16.0%
(3)
(0.1)%
789
15.9%
Total segment
$
3,796
76.7%
$
(35)
(0.7)%
$
3,761
76.0%
2020
Attritional
$
2,692
60.0%
$
187
4.2%
$
2,880
64.2%
Catastrophes
343
7.6%
(13)
(0.3)%
330
7.4%
Total segment
$
3,035
67.7%
$
174
3.9%
$
3,209
71.6%
Variance 2022/2021
Attritional
$
111
(0.9)
pts
$
6
0.1
pts
$
117
(0.8)
pts
Catastrophes
78
0.7
pts
-
-
pts
78
0.7
pts
Total segment
$
189
(0.2)
pts
$
6
0.1
pts
$
196
(0.1)
pts
Variance 2021/2020
Attritional
$
312
0.7
pts
$
(219)
(4.8)
pts
$
92
(4.1)
pts
Catastrophes
449
8.4
pts
10
0.2
pts
459
8.5
pts
Total segment
$
761
9.0
pts
$
(209)
(4.6)
pts
$
552
4.4
pts
(Some amounts may not reconcile due

to rounding.)
Incurred

losses

increased

by

5.2%

to

$4.0

billion

in

2022

compared

to

$3.8

billion

in

2021.

The

increase

was
primarily

due

to

an

increase

of

$111

million

in

current

year

attritional

losses

and

an

increase

of

$78

million

in
current year

catastrophe

losses. The

increase in

current year

attritional losses

was primarily

related to

the impact
of the

increase

in premiums

earned and

$25 million

of attritional

losses

incurred due

to the

Ukraine/Russia

war.

The current

year catastrophe

losses of

$870 million

in 2022

related

primarily to

Hurricane

Ian ($669

million), the
2022 Australia floods ($75 million), the 2022

South Africa flood ($43 million), Hurricane Fiona

($24 million), and the
2022

Canada

derecho

($20

million),

with

the

remaining

losses

resulting

from

various

storm

events.

The

current
year catastr

ophe losses

of $792

million in

2021 primarily

related to

Hurricane Ida

($345 million),

the Texas

winter
storms

($231

million),

the

European

floods

($108

million),

the

Canada

drought

loss

($80

million)

and

the

Quad
State Tornadoes

($27 million), with the rest of the losses emanating

from the 2021 Australia floods.
Segment

Expenses.

Commission

and

brokerage

increased

to

$1.33

billion

in

2022

compared

to

$1.25

billion

in
2021. The increase

was due

to the impact

of the increase

in premiums earned

and changes in

the mix of

business.

Segment other underwriting expenses decreased

slightly to $139 million in 2022 from $143 million in 2021.

24
Insurance.
The

following

table

presents

the

underwriting

results

and

ratios

for

the

Insurance

segment

for

the

periods
indicated.

Years Ended December 31,
2022/2021
2021/2020
(Dollars in millions)
2022
2021
2020
Variance
% Change
Variance
% Change
Gross written premiums
$
3,729
$
3,303
$
2,691
$
426
12.9%
$
611
22.7%
Net written premiums
2,763
2,455
2,006
308
12.5%
448
22.3%
Premiums earned
$
2,664
$
2,230
$
1,922
$
434
19.5%
$
308
16.0%
Incurred losses and LAE
1,865
1,626
1,399
239
14.7%
227
16.2%
Commission and brokerage
306
262
253
44
16.8%
9
3.6%
Other underwriting expenses
363
311
282
52
16.7%
29
10.4%
Underwriting gain (loss)
$
130
$
31
$
(12)
$
99
NM
$
43
NM
Point Chg
Point Chg
Loss ratio
70.0%
72.9%
72.8%
(2.9)
0.1
Commission and brokerage ratio
11.5%
11.8%
13.2%
(0.3)
(1.4)
Other underwriting expense
ratio
13.6%
13.9%
14.6%
(0.3)
(0.7)
Combined ratio
95.1%
98.6%
100.6%
(3.5)
(2.0)
(Some amounts may not reconcile due

to rounding)
(NM, not meaningful)
Premiums.

Gross

written

premiums

increased

by 12.9%

to

$3.7 billion

in 2022

compared

to $3.3

billion in

2021.
The

increase

in

insurance

premiums

reflects

growth

across

most

lines

of business,

particularly

specialty

casualty
business and property/short

tail business, driven

by positive rate

and exposure increases,

new business and strong
renewal

retention.

Net written

premiums

increased

by

12.5% to

$2.8 billion

in 2022

compared

to

$2.5 billion

in
2021

which

is

consistent

with

the

change

in

gross

written

premiums.

Premiums

earned

increased

19.5%

to

$2.7
billion in 2022

compared to

$2.2 billion in

2021. The change

in premiums

earned 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.


































































































































































































































25
Incurred Losses

and LAE.

The following

table presents

the incurred

losses and

LAE for

the Insurance

segment for
the periods indicated.

Years Ended December 31,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,712
64.3%
$
37
1.4%
$
1,749
65.7%
Catastrophes
117
4.4%
(1)
-%
116
4.4%
Total segment
$
1,829
68.7%
$
36
1.4%
$
1,865
70.0%
2021
Attritional
$
1,435
64.4%
$
40
1.8%
$
1,475
66.1%
Catastrophes
151
6.8%
-
-%
151
6.8%
Total segment
$
1,586
71.1%
$
40
1.8%
$
1,626
72.9%
2020
Attritional
$
1,305
67.9%
$
26
1.4%
$
1,331
69.3%
Catastrophes
68
3.5%
-
-%
68
3.5%
Total segment
$
1,373
71.4%
$
26
1.3%
$
1,399
72.8%
Variance 2022/2021
Attritional
$
277
(0.1)
pts
$
(3)
(0.4)
pts
$
274
(0.4)
pts
Catastrophes
(34)
(2.4)
pts
(1)
-
pts
(35)
(2.4)
pts
Total segment
$
243
(2.4)
pts
$
(4)
(0.4)
pts
$
239
(2.9)
pts
Variance 2021/2020
Attritional
$
130
(3.5)
pts
$
14
0.4
pts
$
144
(3.2)
pts
Catastrophes
83
3.3
pts
-
-
pts
83
3.3
pts
Total segment
$
213
(0.3)
pts
$
14
0.5
pts
$
227
0.1
pts
(Some amounts may not reconcile due

to rounding.)
Incurred losses

and LAE increased

by 14.7% to

$1.9 billion in

2022 compared

to $1.6 billion

in 2021, mainly

due to
an increase of

$277 million of

current year

attritional losses,

partially offset by

a decrease of $34

million in current
year catastrophe losses

.

The rise in current year attritional losses

was primarily due to the impact of the increase in
premiums

earned. The

current

year

catastrophe

losses of

$117 million

in 2022

related

primarily to

Hurricane Ian
($99

million),

with

the

remaining

losses

resulting

from

various

storm

events.

The

$151

million

of

current

year
catastrophe

losses in

2021, primarily

related

to Hurricane

Ida ($78

million), the

Texas

winter storms

($58 million)
and the Quad State Tornadoes

($15 million).
Segment

Expenses.

Commission

and

brokerage

increased

to

$306

million

in

2022

compared

to

$262

million

in
2021. Segment

other underwriting

expenses increased

to $363

million in

2022 compared

to $311

million in

2021.
The

increases

were

mainly

due

to

the

impact

of

the

increases

in

premiums

earned

and

expenses

related

to

the

continued build out of the insurance business.

SAFE HARBOR DISCLOSURE
This report

contains forward

-looking statements

within the meaning

of the U.S.

federal securities

laws. We

intend
these forward

-looking statements

to

be covered

by

the safe

harbor

provisions

for

forward-looking

statements

in
the federal securities

laws.

In some cases, these

statements can

be identified by the

use of forward-looking

words
such

as

"may",

"will",

"should",

"could",

"anticipate",

"estimate",

"expect",

"plan",

"believe",

"predict",

26
"potential"

and "intend".

Forward-looking

statements

contained

in

this report

include

information

regarding

our
reserves

for

losses

and

LAE,

the

impact

of

the

TCJA,

the

adequacy

of

our

provision

for

uncollectible

balances,
estimates

of

our

catastrophe

exposure,

the

effects

of

catastrophic

and

pandemic

events

on

our

financial
statements

and

the

ability

of

our

subsidiaries

to

pay

dividends.

Forward-looking

statements

only

reflect

our
expectations

and

are

not

guarantees

of

performance.

These

statements

involve

risks,

uncertainties

and
assumptions.

Actual events

or results

may

differ

materially

from our

expectations.

Important

factors

that could
cause our

actual events

or results

to be

materially different

from our

expectations

include those

discussed under
the caption