Everest Group, Ltd. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with FY 2022. Everest is a Bermuda-based global property and casualty insurer and reinsurer, operating through Reinsurance and Insurance segments. In 2023, it changed its name from Everest Re Group, Ltd. and began trading on the NYSE as EG.
Financial results and key metrics
| Metric | FY 2023 | FY 2022 | Change / context |
|---|---|---|---|
| Gross written premiums | $16.637 billion | $13.952 billion | Up 19.2% |
| Premiums earned | $13.443 billion | $11.787 billion | Up 14.0% |
| Total revenues | $14.587 billion | $12.060 billion | Up 20.9% |
| Income before taxes | $2.154 billion | $588 million | Increase largely reflected stronger underwriting and investment results |
| Net income | $2.517 billion | $597 million | Includes a substantial Bermuda tax-law-related deferred tax benefit |
| Diluted earnings per share | $60.19 | $15.19 | Up from prior year |
| Combined ratio | 90.9% | 96.0% | Improved 5.1 points; below 100% indicates underwriting profit |
| Net investment income | $1.434 billion | $830 million | Up 72.7%; pre-tax effective yield was 4.22%, versus 2.79% |
| Net investment gains (losses) | $(276) million | $(455) million | 2023 losses largely reflected sales of lower-yielding investments |
| Operating cash flow | $4.553 billion | $3.695 billion | Up from prior year |
| Total assets / shareholders’ equity | $49.399 billion / $13.202 billion | $39.966 billion / $8.441 billion | Equity rose 56.4%, including net income, share-offering proceeds and improved investment-related OCI |
| Total debt | $3.385 billion | $3.084 billion | Includes $819 million of FHLB borrowings, $2.349 billion of senior notes and $218 million of subordinated notes |
Segment performance
- Reinsurance: Gross written premiums grew 23.9% to $11.460 billion; underwriting gain was $1.328 billion, versus $300 million; combined ratio improved to 86.4% from 96.5%.
- Insurance: Gross written premiums grew 10.0% to $5.177 billion; underwriting loss was $109 million, versus a $178 million gain; combined ratio worsened to 103.0% from 94.4%.
- In the fourth quarter, certain accident and health products were reclassified from Reinsurance to Insurance; prior-period segment data were retrospectively revised.
Material changes versus FY 2022
- Catastrophe losses fell to $470 million from $1.055 billion, lowering the consolidated loss ratio by 6.0 points. 2023 losses included the Turkey earthquakes, Hurricane Otis, Italy storms, New Zealand storms, Morocco earthquake and Hawaii wildfire.
- Current-year attritional losses increased with premium growth and business mix. Prior-year reserve development was nearly neutral overall: $397 million favorable in Reinsurance was largely offset by $392 million unfavorable in Insurance, mainly casualty accident years 2016–2019 affected by social inflation.
- Investment income rose materially as fixed-income and short-term investment income increased. The company also recorded $283 million of net realized losses from investment dispositions, primarily selling lower-yielding securities to reinvest at higher rates.
- Shareholders’ equity increased by $4.8 billion. Drivers included $2.517 billion of net income, $1.445 billion of net proceeds from a May 2023 public offering, and $1.0 billion of after-tax appreciation in the available-for-sale fixed-maturity portfolio, partly offset by $288 million of dividends.
Liquidity, capital and debt
- Cash and short-term investments totaled approximately $3.6 billion at year-end; total investments and cash were $37.142 billion. Management said operating cash flow, liquid investments and maturities provide ample near-term claims liquidity.
- Fixed maturities totaled $28.595 billion; 94.8% were investment grade. The portfolio’s average duration was 3.3 years, compared with estimated underwriting-liability duration of approximately 3.9 years.
- Committed letter-of-credit facilities totaled up to $1.7 billion, with an additional $240 million of uncommitted capacity subject to lender approval. Everest Re had $819 million of FHLB borrowings outstanding, all due in 2024.
- Everest Re’s statutory capital was $6.963 billion; the stated 200%-of-RBC target was $4.242 billion. Bermuda Re’s year-end BSCR calculation was not yet complete, though management expected capital to exceed its target.
- On January 29, 2024, S&P affirmed operating-company ratings but lowered ratings of the non-operating holding companies and their debt by one notch relative to operating-company ratings, citing potential regulatory restrictions on distributions from U.S. subsidiaries.
Outlook, management commentary and risks
- No quantified earnings, premium-growth or combined-ratio guidance is provided in the supplied filing text. Management described favorable market dislocation and rate conditions in property, particularly catastrophe excess-of-loss, while noting softer conditions in some lines, including workers’ compensation and directors’ and officers’ liability. It emphasized disciplined underwriting and profitability over premium volume.
- The Bermuda Corporate Income Tax Act, enacted December 27, 2023, imposes a 15% tax on qualifying Bermuda businesses beginning in 2025. Everest recorded a $578 million net deferred tax benefit in 2023, primarily associated with the Act’s Economic Transition Adjustment. This is a significant, non-cash tax item and contributed to the year’s reported net income and tax benefit.
- Loss reserves were $24.604 billion, including $246 million of gross asbestos and environmental reserves. Reserve estimates are inherently uncertain; reported ranges for total gross reserves were approximately $22.035 billion to $27.173 billion. The auditor identified reserve valuation as a critical audit matter.
- Catastrophe models and actual loss experience may diverge. Management estimated its largest 1-in-100-year single-event exposure as California earthquake, with approximately $1.5 billion net PML and $1.0 billion estimated net economic loss; actual losses could exceed estimates.
- Other key risks include social inflation and long-tail casualty claims, pricing-cycle competition, investment-market and interest-rate risk, foreign-exchange and inflation exposure, reinsurer and counterparty credit risk, and dependence on regulated subsidiary distributions for holding-company debt service and dividends.
- The filing reports no cybersecurity incident that materially affected the company in 2023 and no other material litigation or arbitration apart from ordinary-course insurance and reinsurance disputes. Management and the auditor concluded internal control over financial reporting was effective at year-end.
Most important facts for investors to verify
- How much of 2023 net income and EPS reflects the $578 million deferred tax benefit, and what earnings impact may follow when Bermuda’s 15% tax takes effect in 2025?
- Whether adverse development in Insurance casualty reserves continues, particularly for accident years 2016–2019, and how reserve estimates compare with subsequent claims emergence.
- Whether Insurance can return to underwriting profitability after its 103.0% combined ratio and $109 million underwriting loss, while Reinsurance sustains its improved results.
- How catastrophe activity, pricing and exposure accumulation affect future loss ratios, cash flows and the adequacy of reinsurance protection.
- How the S&P holding-company debt-rating action and regulatory limits on subsidiary distributions affect funding, debt service and dividend flexibility.