Everest Reinsurance Holdings Inc.
03/18/2025 | Press release | Distributed by Public on 03/18/2025 14:27
Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Overview.
Everest is a global underwriting leader providing best-in-class property, casualty and specialty reinsurance and insurance solutions. We are a preferred Reinsurance partner in the markets we serve, and with our growing Insurance franchise we deliver consistent value to all our stakeholders. We continue to grow and develop our Insurance business, investing in our global platform and strengthening our portfolio and its potential to deliver on our customer promise.
During 2024, we formed a new "Other" segment, primarily comprised of the results of our sports and leisure business sold in October 2024, consisting of policies written prior to the sale and polices renewed and certain new business written on the Company's paper post-sale. It also includes run-off A&E exposures, certain discontinued insurance programs primarily written prior to 2012, and certain discontinued insurance and reinsurance coverage classes. The Other segment does not generally sell insurance or reinsurance products but is responsible for the management of existing policies and settlement of related losses. These segment presentation changes have been reflected retrospectively. The Company will continue to have two reportable segments that actively sell products, Reinsurance and Insurance, consistent with how the on-going business is managed. Additionally, as part of the Segment results presentation, we have separately presented the Company's affiliated reinsurance arrangements with its affiliated Bermuda entities. See Note 15 of the Notes to the Consolidated Financial Statements for a discussion of reinsurance transactions with its affiliated Bermuda entities that are included in this segment presentation. See Note 6 of the Notes to the Consolidated Financial Statements for a summary of segment results.
Our current year net income of $221 million is inclusive of unfavorable development of prior-year loss reserves of $1.5 billion. Following a comprehensive reserve review, we have significantly fortified our U.S. casualty reserves, while taking aggressive underwriting action in certain classes exposed to social inflation, bolstering talent and investing in our platform as we head into 2025. Refer to management's discussion of consolidated and segment results below.
The following is a discussion and analysis of our results of operations, financial condition and liquidity and capital resources for the years ended December 31, 2024 and 2023. This discussion should be read in conjunction with the consolidated financial statements and related notes, under ITEM 8 of this Form 10-K. Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, comparisons between 2023 and 2022 have been omitted from this Form 10-K but can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the year ended December 31, 2023.
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 stockholder's equity for the periods indicated:
| Years Ended December 31, | Percentage Increase/(Decrease) | ||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024/2023 | 2023/2022 | ||||||||||||||||||||||||
| Gross written premiums | $ | 11,616 | $ | 11,117 | $ | 9,677 | 4.5 | % | 3.7 | % | |||||||||||||||||||
| Net written premiums | 9,312 | 9,212 | 8,032 | 1.1 | % | 4.0 | % | ||||||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||||||||
| Premiums earned | $ | 9,090 | $ | 8,536 | $ | 7,876 | 6.5 | % | 9.7 | % | |||||||||||||||||||
| Net investment income | 1,250 | 993 | 638 | 26.0 | % | (14.3) | % | ||||||||||||||||||||||
| Net gains (losses) on investments | 76 | (180) | (982) | NM | NM | ||||||||||||||||||||||||
| Other income (expense) | 64 | (11) | (6) | NM | NM | ||||||||||||||||||||||||
| Total revenues | 10,481 | 9,337 | 7,526 | 12.3 | % | (10.9) | % | ||||||||||||||||||||||
| CLAIMS AND EXPENSES: | |||||||||||||||||||||||||||||
| Incurred losses and loss adjustment expenses | 7,430 | 5,578 | 5,823 | 33.2 | % | 8.1 | % | ||||||||||||||||||||||
| Commission, brokerage, taxes and fees | 1,946 | 1,851 | 1,632 | 5.1 | % | 7.9 | % | ||||||||||||||||||||||
| Other underwriting expenses | 606 | 574 | 501 | 5.6 | % | 10.5 | % | ||||||||||||||||||||||
| Corporate expense | 19 | 18 | 26 | 9.3 | % | (22.9) | % | ||||||||||||||||||||||
| Interest, fee and bond issue cost amortization expense | 150 | 134 | 101 | 11.4 | % | 44.3 | % | ||||||||||||||||||||||
| Total claims and expenses | 10,152 | 8,156 | 8,083 | 24.5 | % | 8.4 | % | ||||||||||||||||||||||
| INCOME (LOSS) BEFORE TAXES | 329 | 1,181 | (557) | (72.1) | % | NM | |||||||||||||||||||||||
| Income tax expense (benefit) | 108 | 210 | (112) | (48.3) | % | NM | |||||||||||||||||||||||
| NET INCOME (LOSS) | $ | 221 | $ | 972 | $ | (445) | (77.2) | % | NM | ||||||||||||||||||||
| RATIOS: | Point Change | ||||||||||||||||||||||||||||
| Loss ratio | 81.7 | % | 65.3 | % | 73.9 | % | 16.4 | (8.6) | |||||||||||||||||||||
| Commission and brokerage ratio | 21.4 | % | 21.7 | % | 20.7 | % | (0.3) | 1.0 | |||||||||||||||||||||
| Other underwriting expense ratio | 6.7 | % | 6.7 | % | 6.4 | % | (0.1) | 0.4 | |||||||||||||||||||||
| Combined ratio | 109.8 | % | 93.8 | % | 101.0 | % | 16.1 | (7.3) | |||||||||||||||||||||
| At December 31, | Percentage Increase/ (Decrease) | ||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024/2023 | 2023/2022 | ||||||||||||||||||||||||
| Balance sheet data: | |||||||||||||||||||||||||||||
| Total investments and cash | $ | 26,650 | $ | 23,439 | $ | 19,195 | 13.7 | % | 22.1 | % | |||||||||||||||||||
| Total assets | 36,209 | 31,638 | 27,957 | 14.4 | % | 13.2 | % | ||||||||||||||||||||||
| Loss and loss adjustment expense reserves | 19,271 | 15,796 | 14,977 | 22.0 | % | 5.5 | % | ||||||||||||||||||||||
| Total debt | 3,587 | 3,385 | 3,084 | 6.0 | % | 9.8 | % | ||||||||||||||||||||||
| Total liabilities | 28,913 | 24,451 | 22,303 | 18.3 | % | 9.6 | % | ||||||||||||||||||||||
| Stockholder's equity | 7,296 | 7,187 | 5,654 | 1.5 | % | 27.1 | % | ||||||||||||||||||||||
(Some amounts may not reconcile due to rounding)
(NM - not meaningful)
Revenues.
Premiums.Gross written premiums increased by 4.5% to $11.6 billion in 2024, compared to $11.1 billion in 2023, reflecting a $841 million, or 11.7% increase in our reinsurance business, partially offset by a $279 million, or 7.5% decrease in our insurance business and a $63 million, or 26.2% decrease in our Other segment business. The increase in reinsurance premiums reflects growth across all lines of business, particularly property and casualty pro rata business and property catastrophe excess of loss business. The decrease in insurance premiums reflects portfolio actions taken on accident and health, workers' compensation and specialty casualty lines of business.
Net written premiums increased by 1.1% to $9.3 billion in 2024, compared to $9.2 billion in 2023. The lower percentage increase in net written premiums compared to the percentage increase in gross written premiums was mainly due to lower net retention resulting from changes in the mix of business.
Premiums earned increased by 6.5% to $9.1 billion in 2024, compared to $8.5 billion in 2023, which is consistent with the percentage changes in gross written premiums. The change in premiums earned relative to net written premiums was primarily the result of timing; premiums are earned ratably over the coverage period whereas written premiums are generally recorded at the initiation of the coverage period.
Other Income (Expense).We recorded other income of $64 million in 2024 and other expense of $11 million in 2023. The change was primarily the result of fluctuations in foreign currency exchange rates, gain from sale of sports and leisure business and gain from pension plan curtailment. We recognized foreign currency exchange income of $12 million in 2024 and foreign currency exchange expense of $16 million in 2023. Additionally, we recognized a $40 million gain on sale of our sports and leisure business, including renewal rights, sold during the fourth quarter and a $9 million pension plan curtailment gain.
Claims and Expenses.
Incurred Losses and LAE.The following table presents our incurred losses and LAE for the periods indicated:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Current Year |
Ratio %/ Pt Change |
Prior Years |
Ratio %/ Pt Change |
Total Incurred |
Ratio %/ Pt Change |
|||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 5,551 | 61.1 | % | $ | 1,347 | 14.8 | % | $ | 6,898 | 75.9 | % | |||||||||||||||||||||||
| Catastrophes | 668 | 7.3 | % | (135) | (1.5) | % | 533 | 5.9 | % | ||||||||||||||||||||||||||
| Total | $ | 6,219 | 68.4 | % | $ | 1,211 | 13.3 | % | $ | 7,430 | 81.7 | % | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 5,254 | 61.5 | % | $ | 1 | - | % | $ | 5,255 | 61.6 | % | |||||||||||||||||||||||
| Catastrophes | 346 | 4.0 | % | (22) | (0.3) | % | 323 | 3.8 | % | ||||||||||||||||||||||||||
| Total | $ | 5,599 | 65.6 | % | $ | (21) | (0.3) | % | $ | 5,578 | 65.3 | % | |||||||||||||||||||||||
| 2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 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 | % | |||||||||||||||||||||||
| Variance 2024/2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 297 | (0.5) | pts | $ | 1,346 | 14.8 | pts | $ | 1,643 | 14.3 | pts | |||||||||||||||||||||||
| Catastrophes | 323 | 3.3 | pts | (113) | (1.2) | pts | 209 | 2.1 | pts | ||||||||||||||||||||||||||
| Total | $ | 619 | 2.8 | pts | $ | 1,233 | 13.6 | pts | $ | 1,852 | 16.4 | pts | |||||||||||||||||||||||
| Variance 2023/2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 426 | 0.3 | pts | $ | (11) | (0.1) | pts | $ | 416 | 0.1 | pts | |||||||||||||||||||||||
| Catastrophes | (642) | (8.5) | pts | (18) | (0.2) | pts | (659) | (8.7) | pts | ||||||||||||||||||||||||||
| Total | $ | (215) | (8.2) | pts | $ | (29) | (0.3) | pts | $ | (244) | (8.6) | pts | |||||||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 33.2% to $7.4 billion in 2024, compared to $5.6 billion in 2023, primarily due to an increase of $297 million in current year attritional losses and an increase of $323 million in current year catastrophe losses, and development on prior year attritional losses of $1.3 billion, partially offset by favorable development on prior year catastrophe losses of $113 million.
The increase in current year attritional losses was mainly due to the impact of the increase in premiums earned, changes in the mix of business and strengthening of current accident year U.S. casualty reserves by $206 million in the Insurance segment. The current year catastrophe losses of $668 million in 2024 related primarily to Hurricane Milton ($297 million), Hurricane Helene ($80 million), Hurricane Beryl ($63 million), Hurricane Debby ($56 million), Alberta floods ($45 million), Brazil floods ($35 million), Taiwan earthquake ($23 million), Dubai floods ($20 million), the Baltimore Bridge collapse ($20 million) and Jasper fires ($10 million), with the remaining losses resulting from various storm events. The current year catastrophe losses of $346 million in 2023 related primarily to the 2023 Turkey earthquakes ($92 million), Hurricane Otis ($84 million), the 2023 New Zealand storms ($41 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($26 million) and Hurricane Idalia ($20 million), with the remaining losses resulting from various storm events.
Unfavorable development on prior year attritional losses was $1.3 billion in 2024, compared to favorable development of $1 million in 2023. The net unfavorable development on prior year attritional reserves of $1.3 billion in 2024 is comprised of $1.1 billion of unfavorable development on prior years attritional losses from the Insurance segment, mainly driven by a combination of social inflation and portfolio concentrations in certain U.S. casualty lines and $333 million of unfavorable development on prior years attritional losses from the Other segment, mainly related to certain sports and leisure lines for accident years 2019 through 2023, including A&E reserve strengthening of $54 million. In addition, the Reinsurance segment recorded $87 million of unfavorable development on prior years attritional losses driven by prior year U.S. casualty reserve strengthening of $626 million, partially offset by favorable development of $545 million on well-seasoned reserves in property and mortgage lines. Unfavorable development on prior year attritional losses of $199 million across the Reinsurance, Insurance and Other segments was ceded to its affiliated Bermuda entities under its various affiliated reinsurance agreements.
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 5.9 percentage points to the combined ratio in 2024, compared with 3.8 percentage points in 2023.
Refer to the "Ratios" section for loss ratio analysis discussion.
Commission, Brokerage, Taxes and Fees.Commission, brokerage, taxes and fees remained relatively flat in 2024, compared to 2023. Commission, brokerage, taxes and fees were $1.9 billion in 2024 and 2023. Refer to the "Ratios" section for commission and brokerage ratio analysis discussion.
Other Underwriting Expenses.Other underwriting expenses were $606 million and $574 million in 2024 and 2023, respectively. The increase was primarily due to the increase in premiums earned and changes in the mix of business. 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, remained relatively flat in 2024, compared to 2023. Corporate expenses were $19 million and $18 million for the years ended December 31, 2024 and 2023, respectively.
Interest, Fees and Bond Issue Cost Amortization Expense.Interest, fees and other bond amortization expense was $150 million and $134 million in 2024 and 2023, respectively. The increase was primarily driven by higher interest costs resulting from additional borrowings from the Federal Home Loan Bank of New York ("FHLBNY"), offset by the change 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 7.17% as of December 31, 2024, compared to 8.03% as of December 31, 2023.
Income Tax Expense (Benefit).Everest had an income tax expense of $108 million and income tax expense of $210 million in 2024 and 2023, respectively. Variations in the effective tax rate generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net gains capital (losses) on investments, as well as changes in tax exempt investment income and creditable foreign taxes. The change in income tax expense resulted primarily from a decrease in pre-tax income, and a change from capital losses to capital gains.
On August 16, 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 $221 million and $972 million in 2024 and 2023, respectively. The decline was primarily driven by underwriting loss of $892 million, partially offset by higher net investment income of $258 million, and net gains on investments of $76 million compared to net (losses) on investment of $180 million in 2023.
Ratios.
Our combined ratio increased by 16.1 points to 109.8% in 2024, compared to 93.8% in 2023. The current year increase is primarily due to prior year development on attritional losses and higher current year catastrophe losses.
The loss ratio component increased by 16.4 points in 2024 over the same period last year mainly due to an increase of $323 million in catastrophe losses and prior year development on attritional losses.
The commission and brokerage ratio components decreased to 21.4% in 2024, compared to 21.7% in 2023, primarily due to change in the mix of business.
The other underwriting expense ratio remained consistent at 6.7% in 2024 and 2023.
Stockholder's Equity.
Stockholder's equity increased by $108 million to $7.3 billion at December 31, 2024 from $7.2 billion at December 31, 2023, principally as a result of $221 million of net income and $33 million of net benefit plan obligation adjustments, partially offset by $103 million of net unrealized depreciation on investments, net of tax and $42 million of net foreign currency translation adjustments.
Consolidated Investment Results
Net Investment Income.
Net investment income increased by 26.0% to $1.3 billion in 2024, compared to $993 million in 2023. The increase was primarily the result of an increase of $197 million of income from fixed maturity investments, an increase of $24 million in short-term investments and cash and an increase of $45 million in Other, primarily driven by $27M corporate-owned life insurance ("COLI"), partially offset by a decrease of $3 million in limited partnership income. The limited partnership income primarily reflects changes in their 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:
| Years Ended December 31, | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | ||||||||||||||
| Fixed maturities | $ | 1,019 | $ | 822 | $ | 510 | |||||||||||
| Equity securities | 3 | 3 | 16 | ||||||||||||||
| Short-term investments and cash | 98 | 74 | 16 | ||||||||||||||
| Other invested assets | |||||||||||||||||
| Limited partnerships | 34 | 37 | 72 | ||||||||||||||
| Dividends from preferred shares of affiliate | 31 | 31 | 31 | ||||||||||||||
| Other | 104 | 59 | 30 | ||||||||||||||
| Gross investment income before adjustments | 1,289 | 1,027 | 675 | ||||||||||||||
| Funds held interest income (expense) | 7 | 3 | 6 | ||||||||||||||
| Interest income from Parent | - | 7 | 11 | ||||||||||||||
| Gross investment income | 1,297 | 1,038 | 691 | ||||||||||||||
| Investment expenses | 46 | 46 | 52 | ||||||||||||||
| Net investment income | $ | 1,250 | $ | 993 | $ | 638 | |||||||||||
(Some amounts may not reconcile due to rounding.)
The following table shows a comparison of various investment yields for the periods indicated:
| 2024 | 2023 | 2022 | |||||||||||||||
| Annualized pre-tax yield on average cash and invested assets | 4.9 | % | 4.5 | % | 3.3 | % | |||||||||||
| Annualized after-tax yield on average cash and invested assets | 3.9 | % | 3.6 | % | 2.6 | % | |||||||||||
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, | 2024/2023 | 2023/2022 | |||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | Variance | Variance | ||||||||||||||||||||||||
| Realized gains (losses) from dispositions: | |||||||||||||||||||||||||||||
| Fixed maturity securities - available for sale | |||||||||||||||||||||||||||||
| Gains | $ | 76 | $ | 12 | $ | 9 | $ | 65 | $ | (24) | |||||||||||||||||||
| Losses | (57) | (204) | (88) | 147 | (63) | ||||||||||||||||||||||||
| Total | 19 | (192) | (79) | 212 | (87) | ||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||
| Gains | 2 | 8 | 165 | (7) | 126 | ||||||||||||||||||||||||
| Losses | (1) | - | (48) | (1) | (33) | ||||||||||||||||||||||||
| Total | 1 | 8 | 117 | (7) | 93 | ||||||||||||||||||||||||
| Other invested assets | |||||||||||||||||||||||||||||
| Gains | 1 | - | 18 | 1 | 8 | ||||||||||||||||||||||||
| Losses | - | - | (5) | - | (1) | ||||||||||||||||||||||||
| Total | 1 | - | 13 | 1 | 7 | ||||||||||||||||||||||||
| Short-term Investments: | |||||||||||||||||||||||||||||
| Gains | - | 1 | - | - | - | ||||||||||||||||||||||||
| Losses | - | - | - | - | - | ||||||||||||||||||||||||
| Total | - | - | - | - | - | ||||||||||||||||||||||||
| Total net realized gains (losses) from dispositions | |||||||||||||||||||||||||||||
| Gains | 79 | 20 | 192 | 58 | 110 | ||||||||||||||||||||||||
| Losses | (58) | (204) | (141) | 147 | (98) | ||||||||||||||||||||||||
| Total | 21 | (184) | 51 | 205 | 12 | ||||||||||||||||||||||||
| Allowances for credit losses: | 12 | (1) | (27) | 13 | (1) | ||||||||||||||||||||||||
| Gains (losses) from fair value adjustments: | |||||||||||||||||||||||||||||
| Fixed maturities | - | - | - | - | - | ||||||||||||||||||||||||
| Equity securities | 1 | (4) | (447) | 6 | (701) | ||||||||||||||||||||||||
| Other invested assets | 42 | 9 | (558) | 33 | (793) | ||||||||||||||||||||||||
| Total | 43 | 5 | (1,006) | 39 | (1,494) | ||||||||||||||||||||||||
| Total net gains (losses) on investments | $ | 76 | $ | (180) | $ | (982) | $ | 256 | $ | (1,483) | |||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
Total net gains (losses) on investments during 2024 primarily relate to $21 million of net realized gains from disposition of investments, a decrease to the allowance for credit losses of $12 million and net gains from fair value adjustments of $43 million.
Segment Results.
Our two reportable segments, Reinsurance and Insurance, each have executive leadership 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 2024, the Company revised its classification and presentation of certain run-off business, previously included within the Reinsurance and Insurance reportable segments, as part of a new segment called "Other". The new Other segment includes the results of our sports and leisure business sold in October 2024, consisting of policies written prior to the sale and polices renewed and certain new business written on the Company's paper post-sale. It also includes run-off A&E exposures, certain discontinued insurance programs primarily written prior to 2012 and certain discontinued insurance and reinsurance coverage classes. The Other segment does not generally sell insurance or reinsurance products but is responsible for the management of existing policies and settlement of related losses. Additionally, as part of the Segment results presentation, we have separately presented the Company's affiliated reinsurance arrangements with its affiliated Bermuda entities. See Note 15 of the Notes to the Consolidated Financial Statements for a discussion of reinsurance transactions with its affiliated Bermuda entities that are included in this segment presentation. 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 reportable 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 due to changes in management implemented during the fourth quarter of 2023. These segment presentation changes have been reflected retrospectively. The Company will continue to have two reportable segments that actively sell products, Reinsurance and Insurance, consistent with how the on-going business is managed.
The Company does not review and evaluate the financial results of its segments based upon balance sheet data. Management generally monitors and evaluates the financial performance of these 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.
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, excluding the impact of reinsurance with its affiliated Bermuda entities. In 2024, the impact of reinsurance with its affiliated Bermuda entities was an underwriting (loss) of $271 million that was driven by ceded written premiums of $468 million, ceded earned premiums of $468 million, ceded incurred losses and LAE of $199 million and ceded commission and brokerage expenses of $1 million. In 2023, the impact of reinsurance with its affiliated Bermuda entities was an underwriting (loss) of $442 million which was driven by ceded written premiums of $430 million, ceded earned premiums of $430 million and ceded incurred losses and LAE of $12 million. See Note 6 of the Notes to the Consolidated Financial Statements for further details.
Reinsurance.
The following table presents the underwriting results and ratios for the Reinsurance segment for the periods indicated:
| Years Ended December 31, | 2024/2023 | 2023/2022 | |||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | Variance | % Change | Variance | % Change | ||||||||||||||||||||||||||||||||||
| Gross written premiums | $ | 8,022 | $ | 7,181 | $ | 5,876 | $ | 841 | 11.7 | % | $ | 1,306 | 22.2 | % | |||||||||||||||||||||||||||
| Net written premiums | 7,219 | 6,635 | 5,572 | 584 | 8.8 | % | 1,063 | 19.1 | % | ||||||||||||||||||||||||||||||||
| Premiums earned | $ | 6,882 | $ | 6,067 | $ | 5,515 | $ | 815 | 13.4 | % | $ | 551 | 10.0 | % | |||||||||||||||||||||||||||
| Incurred losses and LAE | 4,157 | 3,271 | 3,906 | 886 | 27.1 | % | (635) | (16.3) | % | ||||||||||||||||||||||||||||||||
| Commission and brokerage | 1,664 | 1,545 | 1,308 | 119 | 7.7 | % | 237 | 18.1 | % | ||||||||||||||||||||||||||||||||
| Other underwriting expenses | 199 | 166 | 137 | 33 | 20.0 | % | 29 | 21.2 | % | ||||||||||||||||||||||||||||||||
| Underwriting gain (loss) | $ | 862 | $ | 1,085 | $ | 165 | $ | (223) | (20.6) | % | $ | 920 | NM | ||||||||||||||||||||||||||||
| Point Chg | Point Chg | ||||||||||||||||||||||||||||||||||||||||
| Loss ratio | 60.4 | % | 53.9 | % | 70.8 | % | 6.5 | (16.9) | |||||||||||||||||||||||||||||||||
| Commission and brokerage ratio | 24.2 | % | 25.5 | % | 23.7 | % | (1.3) | 1.8 | |||||||||||||||||||||||||||||||||
| Other underwriting expense ratio | 2.9 | % | 2.7 | % | 2.5 | % | 0.2 | 0.3 | |||||||||||||||||||||||||||||||||
| Combined ratio | 87.5 | % | 82.1 | % | 97.0 | % | 5.4 | (14.9) | |||||||||||||||||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
(NM - not meaningful)
Premiums.Gross written premiums increased by 11.7% to $8.0 billion in 2024 from $7.2 billion in 2023. The increase in gross written premiums reflects growth across multiple lines of business, particularly property and casualty pro rata and property catastrophe excess of loss business.
Net written premiums increased by 8.8% to $7.2 billion in 2024 from $6.6 billion in 2023. The current year over prior year increase remained relatively consistent with the percentage increase in gross written premiums.
Premiums earned increased by 13.4% to $6.9 billion in 2024, compared to $6.1 billion in 2023. 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 generally recorded at the initiation of the coverage period.
During 2023, the Company refined its premium estimation methodology for its risk attaching reinsurance contracts within its Reinsurance segment to continue to recognize gross written premium over the term of the treaty, albeit over a different pattern than what was previously used. The refined estimate resulted in an increase of gross written premium for the twelve months ended December 31, 2023, and has further aligned the estimation methodology across the reinsurance division globally. This change had no impact on the total written premium to be recognized over the term of the treaty. There was no impact on net earned premium and therefore, no impact on income from continuing operations, net income or any related per-share amounts.
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, | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Current Year |
Ratio %/ Pt Change |
Prior Years |
Ratio %/ Pt Change |
Total Incurred |
Ratio %/ Pt Change |
|||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 3,609 | 52.4 | % | $ | 87 | 1.3 | % | $ | 3,696 | 53.7 | % | |||||||||||||||||||||||
| Catastrophes | 583 | 8.5 | % | (122) | (1.8) | % | 462 | 6.7 | % | ||||||||||||||||||||||||||
| Total segment | $ | 4,192 | 60.9 | % | $ | (35) | (0.5) | % | $ | 4,157 | 60.4 | % | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 3,372 | 55.6 | % | $ | (410) | (6.8) | % | $ | 2,962 | 48.8 | % | |||||||||||||||||||||||
| Catastrophes | 330 | 5.4 | % | (21) | (0.3) | % | 309 | 5.1 | % | ||||||||||||||||||||||||||
| Total segment | $ | 3,702 | 61.0 | % | $ | (431) | (7.1) | % | $ | 3,271 | 53.9 | % | |||||||||||||||||||||||
| 2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 3,192 | 57.9 | % | $ | (153) | (2.8) | % | $ | 3,038 | 55.1 | % | |||||||||||||||||||||||
| Catastrophes | 870 | 15.8 | % | (3) | - | % | 868 | 15.7 | % | ||||||||||||||||||||||||||
| Total segment | $ | 4,062 | 73.6 | % | $ | (156) | (2.8) | % | $ | 3,906 | 70.8 | % | |||||||||||||||||||||||
| Variance 2024/2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 237 | (3.1) | pts | $ | 497 | 8.0 | pts | $ | 733 | 4.9 | pts | |||||||||||||||||||||||
| Catastrophes | 254 | 3.0 | pts | (101) | (1.4) | pts | 153 | 1.6 | pts | ||||||||||||||||||||||||||
| Total segment | $ | 490 | (0.1) | pts | $ | 396 | 6.6 | pts | $ | 886 | 6.5 | pts | |||||||||||||||||||||||
| Variance 2023/2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 181 | (2.3) | pts | $ | (256) | (4.0) | pts | $ | (76) | (6.3) | pts | |||||||||||||||||||||||
| Catastrophes | (541) | (10.3) | pts | (18) | (0.3) | pts | (559) | (10.6) | pts | ||||||||||||||||||||||||||
| Total segment | $ | (360) | (12.6) | pts | $ | (275) | (4.3) | pts | $ | (635) | (16.9) | pts | |||||||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
Incurred losses increased by 27.1% to $4.2 billion in 2024, compared to $3.3 billion in 2023. The increase was primarily due to an increase of $254 million in current year catastrophe losses, an increase of $237 million in current year attritional losses and a change in unfavorable development on prior year attritional reserves of $497 million, offset by higher favorable development on prior year catastrophe losses of $101 million. The increase in current year attritional losses was primarily related to the impact of the increase in premiums earned. During the current year, prior year U.S. casualty reserves were strengthened by $626 million. This reserve strengthening was partially offset by favorable development of $545 million on well-seasoned reserves in property and mortgage lines.
The current year catastrophe losses of $583 million in 2024 related primarily to Hurricane Milton ($254 million), Hurricane Helene ($55 million), Hurricane Debby ($55 million), Hurricane Beryl ($54 million), Alberta floods ($45 million), the Brazil floods ($35 million), the Taiwan earthquake ($23 million), the Dubai floods ($20 million), the Baltimore bridge collapse ($20 million) and Jasper fires ($10 million), with the remaining losses resulting from various storm events. The current year catastrophe losses of $330 million in 2023 related primarily to the 2023 Turkey earthquakes ($92 million), Hurricane Otis ($84 million), the 2023 New Zealand storms ($40 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($21 million) and Hurricane Idalia ($20 million), with the remaining losses resulting from various storm events.
Segment Expenses.Commission and brokerage increased to $1.7 billion in 2024, compared to $1.5 billion in 2023. The increase was mainly due to the impact of the increase in premiums earned and mostly from the change in the mix of business. Segment other underwriting expenses increased to $199 million in 2024 from $166 million in 2023. The increase was in line with growth in the business and necessary support functions.
Insurance.
The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated:
| Years Ended December 31, | 2024/2023 | 2023/2022 | |||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | Variance | % Change | Variance | % Change | ||||||||||||||||||||||||||||||||||
| Gross written premiums | $ | 3,417 | $ | 3,695 | $ | 3,568 | $ | (279) | (7.5) | % | $ | 127 | 3.6 | % | |||||||||||||||||||||||||||
| Net written premiums | 2,413 | 2,810 | 2,649 | (397) | (14.1) | % | 161 | 6.1 | % | ||||||||||||||||||||||||||||||||
| Premiums earned | $ | 2,505 | $ | 2,701 | $ | 2,561 | $ | (197) | (7.3) | % | $ | 141 | 5.5 | % | |||||||||||||||||||||||||||
| Incurred losses and LAE | 2,938 | 2,063 | 1,798 | 875 | 42.4 | % | 265 | 14.7 | % | ||||||||||||||||||||||||||||||||
| Commission and brokerage | 254 | 281 | 306 | (28) | (9.9) | % | (25) | (8.1) | % | ||||||||||||||||||||||||||||||||
| Other underwriting expenses | 383 | 381 | 342 | 1 | 0.4 | % | 39 | 11.3 | % | ||||||||||||||||||||||||||||||||
| Underwriting gain (loss) | $ | (1,070) | $ | (24) | $ | 113 | $ | (1,046) | NM | $ | (207) | NM | |||||||||||||||||||||||||||||
| Point Chg | Point Chg | ||||||||||||||||||||||||||||||||||||||||
| Loss ratio | 117.3 | % | 76.4 | % | 70.2 | % | 40.9 | 6.1 | |||||||||||||||||||||||||||||||||
| Commission and brokerage ratio | 10.1 | % | 10.4 | % | 12.0 | % | (0.3) | (1.5) | |||||||||||||||||||||||||||||||||
| Other underwriting expense ratio | 15.3 | % | 14.1 | % | 13.4 | % | 1.2 | 0.7 | |||||||||||||||||||||||||||||||||
| Combined ratio | 142.7 | % | 100.9 | % | 95.6 | % | 41.8 | 5.3 | |||||||||||||||||||||||||||||||||
(Some amounts may not reconcile due to rounding)
(NM, not meaningful)
Premiums.Gross written premiums decreased by 7.5% to $3.4 billion in 2024, compared to $3.7 billion in 2023. The decrease in insurance premiums reflects portfolio actions taken on accident and health, workers' compensation and specialty casualty lines of business.
Net written premiums decreased by 14.1% to $2.4 billion in 2024, compared to $2.8 billion in 2023. The decrease in net written premiums was mainly due to lower net retention resulting from changes in the mix of business.
Premiums earned decreased by 7.3% to $2.5 billion in 2024, compared to $2.7 billion in 2023. 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 generally recorded at the initiation of the coverage period.
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, | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) |
Current Year |
Ratio %/ Pt Change |
Prior Years |
Ratio %/ Pt Change |
Total Incurred |
Ratio %/ Pt Change |
|||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 1,743 | 69.6 | % | $ | 1,125 | 44.9 | % | $ | 2,869 | 114.5 | % | |||||||||||||||||||||||
| Catastrophes | 84 | 3.4 | % | (14) | (0.6) | % | 70 | 2.8 | % | ||||||||||||||||||||||||||
| Total segment | $ | 1,827 | 72.9 | % | $ | 1,111 | 44.4 | % | $ | 2,938 | 117.3 | % | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 1,732 | 64.1 | % | $ | 316 | 11.7 | % | $ | 2,048 | 75.8 | % | |||||||||||||||||||||||
| Catastrophes | 16 | 0.6 | % | (1) | - | % | 15 | 0.6 | % | ||||||||||||||||||||||||||
| Total segment | $ | 1,748 | 64.7 | % | $ | 315 | 11.7 | % | $ | 2,063 | 76.4 | % | |||||||||||||||||||||||
| 2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 1,682 | 65.7 | % | $ | 1 | - | % | $ | 1,682 | 65.7 | % | |||||||||||||||||||||||
| Catastrophes | 117 | 4.6 | % | (1) | - | % | 116 | 4.5 | % | ||||||||||||||||||||||||||
| Total segment | $ | 1,798 | 70.2 | % | $ | - | - | % | $ | 1,798 | 70.2 | % | |||||||||||||||||||||||
| Variance 2024/2023 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 12 | 5.5 | pts | $ | 809 | 33.2 | pts | $ | 821 | 38.7 | pts | |||||||||||||||||||||||
| Catastrophes | 68 | 2.8 | pts | (13) | (0.5) | pts | 55 | 2.2 | pts | ||||||||||||||||||||||||||
| Total segment | $ | 80 | 8.3 | pts | $ | 796 | 32.7 | pts | $ | 875 | 40.9 | pts | |||||||||||||||||||||||
| Variance 2023/2022 | |||||||||||||||||||||||||||||||||||
| Attritional | $ | 50 | (1.6) | pts | $ | 315 | 11.7 | pts | $ | 365 | 10.1 | pts | |||||||||||||||||||||||
| Catastrophes | (101) | (4.0) | pts | - | - | pts | (101) | (4.0) | pts | ||||||||||||||||||||||||||
| Total segment | $ | (51) | (5.5) | pts | $ | 315 | 11.7 | pts | $ | 265 | 6.1 | pts | |||||||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
Incurred losses and LAE increased by 42.4% to $2.9 billion in 2024, compared to $2.1 billion in 2023. The increase was mainly due to an increase in unfavorable development on prior year attritional losses of $809 million in 2024, primarily driven by a combination of social inflation and portfolio concentrations in certain U.S. casualty lines, as well as an increase of $12 million of current year attritional losses and an increase of $68 million in current year catastrophe losses, partially offset by higher favorable development on prior years catastrophe losses of $13 million. During 2024, prior year U.S. casualty reserves were strengthened by $1.1 billion. The reserve strengthening was driven by a combination of social inflation and portfolio concentrations in certain U.S casualty classes. The increase in current year attritional losses was primarily due to the strengthening of current year accident years on U.S Casualty reserves by $206 million partially offset by decreases in premium earned.
The current year catastrophe losses of $84 million in 2024 related primarily to Hurricane Milton ($42 million) and Hurricane Helene ($25 million), with the remaining losses resulting from various storm events. The $16 million of current year catastrophe losses in 2023 related primarily to the 2023 third quarter U.S. storms ($5 million), the 2023 Hawaii wildfire ($5 million) and the 2023 December U.S. East Coast flooding ($5 million), with the remaining losses resulting from various storm events.
Segment Expenses.Commission and brokerage decreased to $254 million in 2024, compared to $281 million in 2023. The decrease was mainly due to the decrease in premiums earned and mostly from the change in the mix of business. Segment other underwriting expenses increased to $383 million in 2024, compared to $381 million in 2023. The increase related to the continued build out of the insurance business.
Other.
The Other segment includes the results of our sports and leisure business sold in October 2024, consisting of policies written prior to the sale and polices renewed and certain new business written on the Company's paper post-sale. It also
includes run-off A&E exposures, certain discontinued insurance programs primarily written prior to 2012 and certain discontinued insurance and reinsurance coverage classes. The Other segment does not generally sell insurance or reinsurance products but is responsible for the management of existing policies and settlement of related losses.
The following table presents the underwriting results and ratios for the Other segment for the periods indicated:
| Years Ended December 31, | 2024/2023 | 2023/2022 | |||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | Variance | % Change | Variance | % Change | ||||||||||||||||||||||||||||||||||
| Gross written premiums | $ | 178 | $ | 241 | $ | 233 | $ | (63) | (26.2) | % | $ | 8 | 3.3 | % | |||||||||||||||||||||||||||
| Net written premiums | 149 | 197 | 182 | (48) | (24.4) | % | 15 | 8.2 | % | ||||||||||||||||||||||||||||||||
| Premiums earned | $ | 172 | $ | 199 | $ | 173 | $ | (26) | (13.1) | % | $ | 25 | 14.6 | % | |||||||||||||||||||||||||||
| Incurred losses and LAE | 533 | 232 | 77 | 301 | NM | 155 | NM | ||||||||||||||||||||||||||||||||||
| Commission and brokerage | 28 | 25 | 18 | 2 | 9.6 | % | 7 | 38.4 | % | ||||||||||||||||||||||||||||||||
| Other underwriting expenses | 24 | 27 | 22 | (2) | (9.1) | % | 5 | 20.2 | % | ||||||||||||||||||||||||||||||||
| Underwriting gain (loss) | $ | (413) | $ | (86) | $ | 55 | $ | (327) | NM | $ | (141) | NM | |||||||||||||||||||||||||||||
(Some amounts may not reconcile due to rounding.)
Premiums.Gross written premiums decreased to $178 million in 2024, compared to $241 million in 2023. Net written premiums decreased to $149 million in 2024, compared to $197 million in 2023. Gross written premium is primarily coming from the sports and leisure business. Premiums earned decreased to $172 million in 2024, compared to $199 million in 2023. The decreases in gross written premiums, net written premiums and premiums earned are due to the lines of business included in this segment primarily being in run-off, except for a limited number of renewed and new policies written on the Company's paper by the purchaser of the sports and leisure business sold in October 2024, for a finite period of time post-closing.
Incurred Losses and LAE.Incurred losses and LAE increased to $533 million in 2024, compared to $232 million in 2023. The increase was mainly due to unfavorable development on prior years' attritional losses of $251 million. During 2024, the unfavorable development on prior year losses for the Company's Other segment of 334 million was mainly related to North America casualty lines for accident years 2019 through 2023 that were impacted by social inflation, including A&E reserve strengthening of $54 million resulting in a 3-year net asbestos survival ratio of 7 years.
Segment Expenses.Commission and brokerage and other underwriting expenses remained relatively flat year over year.
LIQUIDITY AND CAPITAL RESOURCES
Capital.Stockholder's equity at December 31, 2024 and December 31, 2023 was $7.3 billion and $7.2 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 main operating company, Everest Re, is regulated by the State of Delaware's Department of Insurance. The regulatory body has its 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.
The regulatory targeted capital and the actual statutory capital for Everest Re was as follows:
|
Everest Re(1)
|
|||||||||||
| At December 31, | |||||||||||
| (Dollars in millions) | 2024 | 2023 | |||||||||
| Regulatory targeted capital | $ | 4,799 | $ | 4,242 | |||||||
| Actual capital | $ | 8,126 | $ | 6,963 | |||||||
(1)Regulatory targeted capital represents 200% of the RBC authorized control level calculation for the applicable year.
Our financial strength ratings, as determined by A.M. Best, S&P 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 markets as a result of our
financial strength, as evidenced by the financial strength ratings assigned by independent rating agencies. See also ITEM 1, Business - "Financial Strength Ratings".
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.
We repurchased $6 million of our long-term subordinated notes during the third quarter of 2022 and recognized a gain of $1 million on the repurchase. We may continue, from time to time, to seek to retire portions of our outstanding debt securities through cash repurchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be subject to and depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
Liquidity.Our liquidity requirements are generally met from positive cash flow from operations. Positive cash flow results from reinsurance and insurance premiums being collected prior to disbursements for claims, 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 $2.5 billion and $2.4 billion for the years ended December 31, 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 December 31, 2024 and December 31, 2023, we held cash and short-term investments of $3.4 billion and $1.8 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 December 31, 2024, we had $369 million of fixed maturity securities - available for sale maturing within one year or less, $3.1 billion maturing within one to five years and $3.6 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 December 31, 2024, we had $463 million of net pre-tax unrealized depreciation related to fixed maturity - available for sale securities, comprised of $569 million of pre-tax unrealized depreciation and $106 million of pre-tax unrealized appreciation.
Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing. However, given the 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/or any payments due for its catastrophe bond program.
In addition to our cash flows from operations and liquid investments, Everest Re is a member of the FHLBNY, which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of December 31, 2024, Everest Re had statutory admitted assets of approximately $30.8 billion which provides borrowing capacity of up to approximately $3.1 billion. As of December 31, 2024, Everest Re had $1.0 billion of borrowings outstanding, which begin to expire in 2025. See Note 9 - Federal Home Loan Bank Membership to the Notes to the Consolidated Financial Statements for further details.
Market Sensitive Instruments.
SEC registrants are required 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 principally 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.
Our $26.6 billion investment portfolio, at December 31, 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.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 $4.8 billion of mortgage-backed securities in the $17.9 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 tables below display the potential impact of fair value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $2.8 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. The market value change under the various interest rate change scenarios was estimated by taking duration into account, with modeling done at the individual security level.
| Impact of Interest Rate Shift in Basis Points | |||||||||||||||||||||||||||||
| At December 31, 2024 | |||||||||||||||||||||||||||||
| (Dollars in millions) | -200 | -100 | 0 | 100 | 200 | ||||||||||||||||||||||||
| Total Fair Value | $ | 22,026 | $ | 21,394 | $ | 20,761 | $ | 20,129 | $ | 19,497 | |||||||||||||||||||
| Fair Value Change from Base (%) | 6.1 | % | 3.0 | % | - | % | (3.0) | % | (6.1) | % | |||||||||||||||||||
| Change in Unrealized Appreciation | |||||||||||||||||||||||||||||
| After-tax from Base ($) | $ | 999 | $ | 500 | $ | - | $ | (500) | $ | (999) | |||||||||||||||||||
| Impact of Interest Rate Shift in Basis Points | |||||||||||||||||||||||||||||
| At December 31, 2023 | |||||||||||||||||||||||||||||
| (Dollars in millions) | -200 | -100 | 0 | 100 | 200 | ||||||||||||||||||||||||
| Total Fair Value | $ | 19,196 | $ | 18,638 | $ | 18,081 | $ | 17,523 | $ | 16,965 | |||||||||||||||||||
| Fair Value Change from Base (%) | 6.2 | % | 3.1 | % | - | % | (3.1) | % | (6.2) | % | |||||||||||||||||||
| Change in Unrealized Appreciation | |||||||||||||||||||||||||||||
| After-tax from Base ($) | $ | 881 | $ | 441 | $ | - | $ | (441) | $ | (881) | |||||||||||||||||||
We had $19.3 billion and $15.8 billion of gross reserves for losses and LAE as of December 31, 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 and, conversely, as interest rates decline, the present value increases. These movements are similar to the interest rate impacts on the fair value of investments held. While the difference between present value and nominal value is not reflected in our financial statements, our financial results will include investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration that is reasonably consistent with our fixed income portfolio.
Foreign Currency Risk.Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each non-U.S. operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these non-U.S. operations are the Singapore and Canadian Dollars. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our corresponding operating liabilities. In accordance with GAAP guidance, the impact on the fair value of available for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a component of other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income.
The tables below display the potential impact of a parallel and immediate 10% and 20% increase and decrease in foreign exchange rates on the valuation of invested assets subject to foreign currency exposure for the periods indicated. This analysis includes the after-tax impact of translation from transactional currency to functional currency as well as the after-tax impact of translation from functional currency to the U.S. dollar reporting currency.
| Change in Foreign Exchange Rates in Percent | |||||||||||||||||||||||||||||
| At December 31, 2024 | |||||||||||||||||||||||||||||
| (Dollars in millions) | -20% | -10% | 0% | 10% | 20% | ||||||||||||||||||||||||
| Total After-tax Foreign Exchange Exposure | $ | (401) | $ | (201) | $ | - | $ | 201 | $ | 401 | |||||||||||||||||||
| Change in Foreign Exchange Rates in Percent | |||||||||||||||||||||||||||||
| At December 31, 2023 | |||||||||||||||||||||||||||||
| (Dollars in millions) | -20% | -10% | 0% | 10% | 20% | ||||||||||||||||||||||||
| Total After-tax Foreign Exchange Exposure | $ | (164) | $ | (82) | $ | - | $ | 82 | $ | 164 | |||||||||||||||||||