1、2013 Annual ReportEverest Re Group,Ltd.EvErEst rEinsurancE companyProvides reinsurance to property and casualty insurers in both the United States and international markets.EvErEst rEinsurancE(BErmuda),Ltd.Including its United Kingdom branch,provides reinsurance and insurance to worldwide property a
2、nd casualty markets and reinsurance to life insurers.EvErEst rEinsurancE company(irELand),LimitEdProvides reinsurance to non-life insurers in Europe.EvErEst nationaL insurancE company,EvErEst sEcurity insurancE company and EvErEst indEmnity insurancE companyProvide property and casualty insurance to
3、 policyholders in the United States on admitted and excess and surplus lines bases.EvErEst insurancE company of canadaProvides property and casualty insurance to policyholders in Canada.mt.Logan rE,Ltd.A segregated cell company,capitalized by the Company and third party investors,to provide worldwid
4、e property catastrophe reinsurance.Everest Re Group,Ltd.is a Bermuda holding company that operates through the following subsidiariesEverest Re Group,Ltd.(RE)EIGHTEEN YEAR COMPARATIVE RETURN*RE VS.S&P 500 INDEXRE SharesS&P 500S&P 500 Index0*Includes Stock Appreciation&Dividends12/9612/9512/9712/9812
5、/9912/0012/0112/0212/0312/0412/0512/0612/0712/0812/0912/1012/1112/1212/13150%300%450%600%900%750%RE1Financial HighlightsFive-Year Financial Performance(in millions,except per share data)20132012201120102009Balance Sheet Total assets$19,808.0$19,777.9$18,893.6$18,384.2$17,970.9 Shareholders equity6,9
6、68.36,733.56,071.46,283.56,101.7 Book value per common share146.57130.96112.99115.45102.87ReSultS Gross written premiums$5,218.6$4,310.5$4,286.2$4,200.7$4,129.0 Net pre-tax investment income548.5600.2620.0653.5547.8 Net after-tax investment income456.7510.3535.2570.5493.3 After-tax operating income(
7、loss),excluding realized gains(losses)*$1,062.6$715.2$(93.6)$518.1$763.7 per basic common share21.6613.67(1.73)9.1112.55 per diluted common share21.4713.62(1.73)9.0812.51 Net income(loss)$1,259.4$829.0$(80.5)$610.8$807.0 per basic common share25.6715.85(1.49)10.7313.26 per diluted common share25.441
8、5.79(1.49)10.7013.22Financial RatioS Combined ratio84.5%93.8%118.5%102.8%89.1%After-tax operating return*on average adjusted equity16.5%12.2%(1.6)%8.9%14.0%Net income return on average adjusted equity19.5%14.1%(1.4)%10.4%14.8%(Compound Annual Growth Rate and Averages 2009 to 2013)Shareholders equity
9、7.0%Book value per share12.7%Shareholder value(Book value per share adjusted for dividends)14.1%Average operating return*on equity10.0%Average net income return on equity11.5%Combined ratio*97.3%*The Company generally uses after-tax operating income(loss),a non-GAAP financial measure,to evaluate its
10、 performance.After-tax operating income(loss)consists of net income(loss)excluding after-tax net realized capital gains(losses).Further explanation and a reconciliation of net income(loss)to after-tax operating income(loss)can be found on the inside back cover of this Annual Report.*Weighted average
11、A Message from the Chairman2Everest Re Group,Ltd.2013 Annual ReportEverest had a banner year with$1.3 bil-lion of net income and a 20%ROE.These were stellar results,when measured on both an absolute basis and on a relative basis,outperforming most in our industry.While a relatively subdued catastrop
12、he loss year contributed to these strong results,it was also the result of the suc-cessful execution of a number of strate-gic initiatives over the last several years.This began with building out the talent we already had at Everest,selectively adding key individuals to strengthen and renew our benc
13、h.In addition we devel-oped best in class analytical systems,added new products,strengthened client and broker relationships,and maintained our nimble and responsive approach to changing market dynamics.Dom will provide further details in his letter but Joseph V.TarantoChairman1995Following 22 years
14、 operating as a subsidiary of a large multi-line public company,Everest successfully completes its initial public offering and begins trading on the NYSE under the symbol“RE.”2003Everest seized opportunities,in what proved to be a very hard market,more than doubling its premium over three years to$4
15、.6 billion,substantially increasing its market stature.2000A corporate restructuring is completed to establish the Groups ultimate holding company,Everest Re Group,Ltd.,in Bermuda,along with a Bermuda operating subsidiary.Everest is a top-ranked global reinsurer,built on a solid foundation of underw
16、riting excellence,broad market expertise,valued relationships,and an enviable position of financial strength.3Return on EquityEverest had a banner year with$1.3 billion of net income and a 20%ROE.20%suffice it to say that 2013s performance is a clear indicator of the effectiveness of these strategie
17、s.Looking ahead,we recognize the chal-lenges that our industry faces from all fronts,whether it be market,economic,or regulatory.Everest,though,has a dem-onstrated track record of successfully navigating the ups and downs of the mar-ket,as evidenced by the 14%compound annual growth in its dividend-a
18、djusted book value per share.We continue to see opportunities and will remain vigilant in our quest to optimize returns while exer-cising prudent underwriting and invest-ment strategies.Capital deployment decisions are firmly supported by a strong risk management framework and when capital cannot be
19、 fully and responsibly deployed,we will return excess capital to our shareholders.This was demonstrated by the actions we took in 2013 to substantially increase the quarterly dividend,redeem debt,and repurchase 4.7 million of our common shares.The Board and management team view capital management as
20、 a top priority with a focus on achieving optimal returns for its shareholders while main taining the strength of Everests balance sheet,its hallmark.Effective January 1st,we completed the orderly transition of the Boards succes-sion plan,with Dom now at the helm as your Chief Executive Officer.I ha
21、ve every confidence in Doms leadership abilities,having had the good fortune to work side by side with him over the last several years.As a shareholder,you can expect continuity in both the vision and the culture that you have come to expect from Everest.I am proud of what Everest has accom-plished
22、over my tenure,rising to be one of the global leaders in our industry.Certainly I did not do this alone and I want to express my sincere gratitude to my fellow Board members,for their sup-port and counsel,and to all of the employees at Everest for their dedication and diligence in executing on our f
23、ound-ing vision:to build a preeminent fran-chise that is reflective of the“Everest”name.I am pleased to continue to be part of the Everest Success Story and to serve as its Chairman.Sincerely,Joseph V.TarantoChairman of the Board2008everest expands its global platform with the formation of an irelan
24、d subsidiary and a representative office in Brazil.2013everest reaches new heights with$5.2 billion in premium and$7.0 billion in shareholders equity.2010everest acquires heartland,a managing general agent specializing in crop insurance,providing everest the opportunity to grow and diversify its pri
25、mary insurance operation into shorter-tail specialty lines.4Everest Re Group,Ltd.2013 Annual ReportInsurance Operations2013 Gross Written Premium by Line of BusinessInsurance Operations2012 Gross Written Premium by Line of BusinessReinsurance Operations2013 Gross Written Premium by RegionReinsurance
26、 Operations2012 Gross Written Premium by Region49%United States17%Latin America/S.America16%Europe(including UK)8%Asia/Australia4%Middle East/Africa4%Canada2%Worldwide29%Workers Comp26%Crop16%Professional Liability15%Other Short Tail8%Other Liability6%Accident&HealthReinsurance Operations2013 Gross
27、Written Premium by Region49%United States17%Latin America/S.America16%Europe(including UK)8%Asia/Australia4%Middle East/Africa4%Canada2%Worldwide29%Workers Comp26%Crop16%Professional Liability15%Other Short Tail8%Other Liability6%Accident&HealthA Letter from the Chief Executive OfficerThis year,Ever
28、est set new records at every level$5.2 billion of gross written premium$738 million of underwriting income$1.3 billion of net income$7.0 billion of shareholders equity 20%return on equityWe are certainly pleased with our 2013 results as they continue to drive the cre-ation of shareholder value,measu
29、red by the 14%growth in book value per share,adjusted for dividends.Even more gratifying was the recognition by the investor com-munity of the Everest value proposition,evident by the 44%total return in our stock price over the year,far exceeding the 32%returned by the S&P500.Our strong earnings wer
30、e driven by excel-lent underwriting results with$738 million of underwriting income.While certainly these results benefitted from a relatively low level of catastrophe losses for the year,the margin expansion provided by the strategic and dynamic repositioning of our portfolio was also a significant
31、 factor.Stripping away the effects of catastrophe losses and favorable prior year loss develop-ment,the current year attritional combined ratio improved 4 points to 81%.This repre-sents almost 20 points of underwriting margin on our growing premium portfolio.Building on the momentum that started in
32、2012,we grew our gross written premiums by 21%,or$900 million,to$5.2 billion in 2013.Everest maintains an enviable market position,as a top-ranked global reinsurer with a dominant presence in the U.S.,the largest(re)insurance market in the world.We continue to benefit from the markets flight to qual
33、ity.Dominic J.AddessoPresident and Chief Executive Officer5ReSpondinG to MaRket dYnaMicSReinsurance represents three-quarters of our overall premium portfolio.Although we saw growth across each segment,it was dominated by growth in the property classes.This included growth in our prop-erty catastrop
34、he exposed business,which now represents approximately 30%of the reinsurance book.Our strategy here has been growth through diversification or spreading the aggregate,which enables us to better withstand a normalized level of catastrophe losses and still produce an overall underwriting profit.New pr
35、oduct initiatives,specifically the introduction of our new pillared reinsurance product,PURPLE,and the addition of several large quota share deals provided for the growth in this area.Mt.Logan Re,our capital markets platform,established mid-year,provided additional catastrophe capacity,which further
36、 drove top line growth.We were able to deploy larger lines on deals we liked and increase our catastrophe risk capacity for key clients while managing the risk accumulations on Everests balance sheet.At the critical January 1 renewals for 2014,Logan had accumulated$370 million of capital,far outreac
37、hing our initial target of$250 million,and Everest was able to deploy this capacity to write additional catastrophe risk business,while maintaining our peak zone 1-in-100 year probable maximum loss(PML)at 11%of shareholders equity;one of the lowest levels amongst our peers.As I stated earlier,catast
38、rophe risk business represents only 30%of our reinsurance premium portfolio,although with the recent influx of capital from the capital markets,it garners most of the attention.While we are seeing some pressure on catastrophe excess of loss rates with the move by the capital markets,our strategy is
39、fluid,meaning we will allocate our capac-ity to those products that provide the best risk-adjusted returns.In addition to growth in property pro-rata business,we deployed more facultative capacity and saw opportu-nities in the credit space,including mort-gage insurance.We also wrote several large mu
40、lti-line transactions,where the client needed specialized capabilities.Increasingly,we are becoming a go to market for clients seeking strategic solu-tions.We have a deep underwriting bench with broad product expertise and multi-jurisdictional capabilities that transcends the property catastrophe re
41、insurance mar-ket.The ability to adapt and react quickly to changing market dynamics,which is supported by our sophisticated and com-prehensive risk management systems,enables Everest to optimize the construc-tion of its portfolio to achieve the best risk-adjusted returns on its capital.Looking at 2
42、013,this quickly becomes evident with an attritional combined ratio for our reinsur-ance operations,excluding catastrophe losses and favorable prior year develop-ment,of 75.5%,a 5.4 point improvement over 2012.a poRtFolio in tRanSitionTurning to our primary insurance opera-tions,as we have previousl
43、y communi-cated,we have been repositioning this portfolio away from its casualty centric roots,with business largely derived through managing general agents,towards a shorter tail and specialty lines focus that is increasingly sourced through our own direct operations.While we have been successful i
44、n this regard,the calendar year results,with a combined ratio of 114.2%,do not yet reflect the underlying improve-ments we are seeing in this book.Prior year loss development,largely on discontin-ued programs,and crop insurance losses,overshadowed these results.Insurance Operations2013 Gross Written
45、 Premium by Line of BusinessInsurance Operations2012 Gross Written Premium by Line of BusinessReinsurance Operations2013 Gross Written Premium by RegionReinsurance Operations2012 Gross Written Premium by Region49%United States17%Latin America/S.America16%Europe(including UK)8%Asia/Australia4%Middle
46、East/Africa4%Canada2%Worldwide29%Workers Comp26%Crop16%Professional Liability15%Other Short Tail8%Other Liability6%Accident&HealthInsurance Operations2013 Gross Written Premium by Line of BusinessInsurance Operations2012 Gross Written Premium by Line of BusinessReinsurance Operations2013 Gross Writt
47、en Premium by RegionReinsurance Operations2012 Gross Written Premium by Region49%United States17%Latin America/S.America16%Europe(including UK)8%Asia/Australia4%Middle East/Africa4%Canada2%Worldwide29%Workers Comp26%Crop16%Professional Liability15%Other Short Tail8%Other Liability6%Accident&HealthBu
48、ilding on the momentum that started in 2012,we grew our gross written premiums by 21%,or$900 million,to$5.2 billion in 2013.$5.2b6Everest Re Group,Ltd.2013 Annual ReportOur crop business,which represents 26%of our primary insurance operation,was impacted by a significant decline in the commodity pri
49、ce of corn as well as lower than anticipated yields in several of our key states,which triggered the revenue protec-tion features of the product.Historically,this has been a very profitable book of business,notwithstanding the uncharacter-istically high losses in the last two years.We are therefore
50、optimistic that we will see more normalized results for 2014 as we build out our geographic footprint and diversify what is now a Midwest portfolio.We view this business as part of our strate-gic focus on weather and agriculture as it complements the products written by our reinsurance operation.The
51、 prior year loss development that occurred in the calendar year largely ema-nated from California workers compensa-tion,construction liability,and umbrella business primarily on program business that was terminated several years ago.While California workers compensation continues to be a large part
52、of our ongoing book of business,we have achieved rate increases since 2009 that have provided a 60%com-pounding effect.Since this has far out-paced any increase in recent loss costs,we believe our more current accident years are running profitable.We will continue to monitor reserve adequacy in thes
53、e lines but,it is important to note that overall reserves continue to run off adequately.Excluding the crop losses noted above,the current accident year combined ratio for our Insurance operations is 94.6%,a 2.6 point improvement when compared to 2012,on this same basis,and a 10.7 point improvement
54、when viewed against compa-rable results in 2011.As indicated by these results,we are making significant progress and would expect this segment to show an underwriting profit in 2014,assuming a more normalized crop year.ManaGinG econoMic RealitieSInvestment income,as anticipated,was below last year,p
55、rincipally due to the declining yields on our fixed income portfolio as well as lower limited partner-ship income.In addition,while cashflows were up significantly to$1.1 billion,these monies were utilized to support capital management activities.During 2013,we repurchased$622 million of shares,paid
56、$107 million in dividends,and redeemed$330 million of debt.In a continuing low interest rate environment,returning excess capital to shareholders and reducing debt leverage are incrementally more accretive to earnings than adding to the investment portfolio.With$16.6 billion in invested assets,we ma
57、intain a well-defined asset allocation strategy that,similar to our underwriting strategy,seeks to balance risk and return.Largely comprised of high-quality fixed income securities,with an average credit rating of Aa3,we also allocate a portion of our assets to alternative investment classes to enha
58、nce overall yield.Total return for these alternative investments was 11%in 2013.While these asset classes may be Gross Written Premium09$4.1310$4.20 11$4.29(In Billions)12$4.31 13$5.22Net Income Returnon Average Equity(ROE)0914.8%1010.4%11(1.4)%1214.1%1319.5%Shareholders Equity09$6.1010$6.2811$6.07(
59、In Billions)12$6.7313$6.97Our strong earnings were driven by excellent underwriting results with$738 million of underwriting income;margin expansion provided by the strategic and dynamic repositioning of our portfolio was a significant factor.$738m7considered riskier assets,the risk we carry in our
60、fixed income portfolio from rising interest rates is far greater.The defensive positioning of our portfolio though over the last several years in anticipation of a rise in interest rates has significantly cur-tailed this risk.Although interest rates are expected to move higher,it is likely to be at
61、a moderate pace,as the Fed has committed,for now,to holding short-term rates near zero for an extended period of time.We will continue to defensively position the portfolio as we look for opportunities to enhance returns.a poSition oF StRenGthOur business strategies are focused on delivering superio
62、r value to our sharehold-ers through growth in book value per share and returning a competitive dividend.We are careful stewards of capital and seek to optimize long-term returns through bal-anced growth and capital management strategies.With the generation of excess capital,we continued to actively
63、 repur-chase shares buying in 9%of the shares outstanding at the beginning of the year.In addition,we raised our quarterly dividend from$0.48 per share to$0.75 per share,a 56%increase.Through dividends and share repurchases,we returned almost$730 mil-lion to shareholders in 2013.In addition to repur
64、chasing shares and increasing the dividend,we redeemed$330 million of debt in 2013.Our debt to capital ratio,at 6.5%,is one of the lowest in the industry.As noted earlier,we also maintain a conservative risk posture,exposing just 11%of our capital to a low probability peak zone catastrophe event;aga
65、in one of the lowest levels in the industry.This con-servative posturing translates into superior financial strength and a high quality bal-ance sheet,which is evident by the very strong ratings we have from each of the rating agencies.Given the risk dynamics of our industry,we prefer to operate fro
66、m a position of strength as we believe this pro-vides a significant competitive advantage to access the best opportunities.outlookThe influx of new capital from third party capital providers does not mean the end of an era,as some might have you believe.It is important to recognize that capital is c
67、on-stantly flowing in and out of our industry and while the form may change,this is really nothing new for those of us that have been in the industry a long time.The ability to evolve in response to market dynamics and economic realities is crucial to maintaining a sustainable franchise.The key is t
68、o not get stuck in the averages and to turn a challenge into an opportunity.We have done just that with the creation of Mt.Logan Re,which utilizes third party capital that Everest can deploy to expand its mar-ket penetration.The market environment is certainly not without its challenges as rates,ter
69、ms and conditions come under pressure across business lines and persistently low,albeit rising,investment yields squeeze invest-ment margins.But we are optimistic that Everest will continue to generate strong returns for its shareholders as it has done over the long term.In closing,I would like to r
70、ecognize Joes accomplishments.Under his long-term lead-ership,Everest has risen to the top of the industry ranks,achieving market stature not easily replicated with its broad distribu-tion network,recognized underwriting expertise,deep client relationships,and a strong,dedicated and talented team.I
71、will continue to welcome Joes insights and advice in his ongoing role as Chairman of the Board.Sincerely,Dominic J.AddessoPresident and Chief Executive OfficerShareholder Value CreationGrowth in Book Value+Dividends Per Share95969798990001020304050607080910111213$19.39$21.66$26.21$30.10$29.32$35.39$
72、38.46$48.14$58.79$68.44$66.83$81.92$95.74$88.00$112.02$126.52$125.98$145.87$163.67Book Value per ShareDividends to ShareholdersCompound Annual Growth of 13%per YearDOMINIC J.ADDESSOPresident and Chief Executive OfficerDARYL W.BRADLEYExecutive Vice President and President of Everest National Insuranc
73、e CompanyMARK DE SARAMManaging Director and Chief Executive Officer Everest Reinsurance(Bermuda),Ltd.JOHN P.DOUCETTEExecutive Vice President and Chief Underwriting Officer CRAIG W.HOWIEExecutive Vice President and Chief Financial OfficerSANJOY MUKHERJEEExecutive Vice President,General Counsel and Se
74、cretaryBARRY H.SMITHExecutive Vice President and Chief Administrative OfficerDENNIS S.ALBASenior Vice PresidentRONALD D.DIAZSenior Vice PresidentJAMES H.FOSTERSenior Vice PresidentJEAN-LUC GOURGEONSenior Vice PresidentFRANK N.LOPAPASenior Vice President and TreasurerLUIS E.MONTEAGUDOSenior Vice Pres
75、identJACK NELSONSenior Vice President and Chief Investment OfficerGAIL M.VAN BEVERENSenior Vice PresidentCHARLES R.VOLKERSenior Vice President1.Executive Committee 2.Compensation Committee(John P.Phelan,Chairperson)3.Audit Committee(Roger M.Singer,Chairperson)4.Nominating and Governance Committee(Wi
76、lliam F.Galtney,Jr.,Chairperson)5.Investment Policy CommitteeCorporate DirectorySenior Officers of Everest Re CompaniesBoard of Directors8Everest Re Group,Ltd.2013 Annual ReportJOSEPH V.TARANTO 1,5ChairmanWILLIAM F.GALTNEY,JR.1,2,3,4President Galtney Enterprises,Inc.DOMINIC J.ADDESSO 5President and
77、Chief Executive OfficerJOHN P.PHELAN 2,3,4Retired Chairman,President and Chief Executive Officer of Munich Re America Corp.and Munich Reinsurance America;Retired Member of Munich Res VorstandJOHN J.AMORE 2,3,4Retired Chief Executive Officer of the General Division of Zurich Financial ServicesROGER M
78、.SINGER 2,3,4Retired Senior Vice President,General Counsel&Secretary OneBeacon Insurance Group LLCJOHN R.DUNNE 2,3,4Counsel Whiteman Osterman&Hanna LLPJOHN A.WEBER 1,2,3,4,5Managing Director Copley Square Capital Management,LLCEverest Reinsurance Company Everest National Insurance Company Everest In
79、demnity Insurance Company Everest Global Services,Inc.477 Martinsville Road PO Box 830 Liberty Corner,NJ 07938-0830 Telephone:(908)604-3000 Fax:(908)604-3322CHICAGO Everest Reinsurance Company 30 South Wacker Drive,Suite 3650 Chicago,IL 60606 Telephone:(312)660-0012 Fax:(312)660-0032INDIANAPOLISEver
80、est Specialty Insurance GroupThe Congressional Building111 Congressional Boulevard,Suite 220Carmel,IN 46032Telephone:(317)853-7050Fax:(317)853-7052MIAMI Everest Reinsurance Company 777 Brickell Avenue,Suite 700 Miami,FL 33131 Telephone:(305)371-8200 Fax:(305)789-3936NEW YORK Everest Reinsurance Comp
81、any 461 5th Avenue,5th Floor New York,NY 10017-6234 Telephone:(646)746-2700 Fax:(646)746-2750NEW YORK Everest Specialty Underwriters,LLC 461 5th Avenue,20th Floor New York,NY 10017-6234 Telephone:(646)746-1990 Fax:(646)746-1991OAKLANDEverest Reinsurance Company Everest National Insurance Company 111
82、1 Broadway,Suite 2050 Oakland,CA 94607-4011 Telephone:(510)273-4660 Fax:(510)267-0751ORANGE COUNTY Everest National Insurance Company 725 Town and Country Road,Suite 400 Orange,CA 92868 Telephone:(714)371-9600 Fax:(714)371-9677TAMPA Everest Indemnity Insurance Company Highland Oaks Two10210 Highland
83、 Manor Drive,Suite 200 Tampa,FL 33610 Telephone:(813)269-6970 Fax:(813)269-6980TOPEKA Heartland Crop Insurance,Inc.PO Box 330 120 SE 6th Avenue,Suite 2-210 Topeka,KS 66601 Telephone:(785)235-5566 Fax:(785)235-5577BERMUDA Everest Re Group,Ltd.Everest Reinsurance(Bermuda),Ltd.Everest International Rei
84、nsurance,Ltd.Mt.Logan Re,Ltd.Wessex House45 Reid Street,2nd Floor PO Box HM 845 Hamilton,HM DX Bermuda Telephone:(441)295-0006 Fax:(441)295-4828BRUSSELS Everest Advisors(UK),Ltd.19 Avenue Emile De Mot Bte 5 B-1000 Brussels,BelgiumTelephone:(32)2-639-6310 Fax:(32)2-644-2457DUBLIN Everest Reinsurance
85、Company(Ireland),Limited5th Floor,Hainault House 69-71 St.Stephens Green Dublin 2,IrelandTelephone:(353)1-418-0300LONDON Everest Reinsurance(Bermuda),Ltd.Everest Advisors(UK),Ltd.40 Lime Street London EC3M 5BS,England Telephone:(44)207-450-4282 Fax:(44)207-623-5967SAO PAULOEverest Reinsurance Compan
86、yEscritrio de Representao No Brasil Ltda.Av.Naes Unidas,12.3997 andarcj.75A04578-000-Brooklin PaulistaSo Paulo/SPBrasil04578-000Telephone:(55)11-5111-8292 SINGAPORE Everest Reinsurance Company 20 Cecil Street#08-06 Equity Plaza Singapore 049705 Telephone:(65)6535-1121 Fax:(65)6535-3363TORONTO Everes
87、t Reinsurance Company Everest Insurance Company of Canada The Exchange Tower 130 King Street West,Suite 2520 Toronto,Ontario,Canada M5X 1E3 Telephone:(416)862-1228 Fax:(416)366-5899TORONTOEverest Insurance Company of CanadaPremiere Insurance Underwriting Services130 Bloor Street West,Suite 602Toront
88、o,Ontario,Canada M5S 1N5Telephone:(416)487-3900Fax:(416)487-0311United States&International OfficesEverest Re Group,Ltd.2013 form 10-K3-Everest_29093_13AR-FN.indd 13/5/14 2:29 PMUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K Annual Report Pursuant to Section 13 or 15
89、(d)of the Securities Exchange Act of 1934 For the fiscal year ended December 31,2013 Commission file number 1-15731 EVEREST RE GROUP,LTD.(Exact name of registrant as specified in its charter)Bermuda 98-0365432(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identificatio
90、n No.)Wessex House 2nd Floor 45 Reid Street PO Box HM 845 Hamilton HM DX,Bermuda 441-295-0006 (Address,including zip code,and telephone number,including area code,of registrants principal executive office)Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Common Shares,$.0
91、1 par value per share Name of Each Exchange on Which Registered New York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.YES X NO Indicate by check mark
92、 if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.YES NO X Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for
93、 such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YES X NO Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data F
94、ile required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulati
95、on S-K is not contained herein,and will not be contained,to the best of the registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accelera
96、ted filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company in Rule 12b-2 of the Exchange Act.Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting
97、 company (Do not check if smaller reporting company)Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YES NO X The aggregate market value on June 30,2013,the last business day of the registrants most recently completed second quarter,of th
98、e voting shares held by non-affiliates of the registrant was$6,231,902 thousand.At February 1,2014,the number of shares outstanding of the registrants common shares was 47,374,165.DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Items 10,11,12,13 and 14 of Form 10-K is incorporate
99、d by reference into Part III hereof from the registrants proxy statement for the 2013 Annual General Meeting of Shareholders,which will be filed with the Securities and Exchange Commission within 120 days of the close of the registrants fiscal year ended December 31,2013.EVEREST RE GROUP,LTD TABLE O
100、F CONTENTS FORM 10-K Page PART I Item 1.Business 1 Item 1A.Risk Factors 27 Item 1B.Unresolved Staff Comments 40 Item 2.Properties 40 Item 3.Legal Proceedings 40 Item 4.Mine Safety Disclosures 40 PART II Item 5.Market for Registrants Common Equity,Related Shareholder Matters and Issuer Purchases of E
101、quity Securities 40 Item 6.Selected Financial Data 43 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A.Quantitative and Qualitative Disclosures About Market Risk 81 Item 8.Financial Statements and Supplementary Data 81 Item 9.Changes in and Disag
102、reements With Accountants on Accounting and Financial Disclosure 81 Item 9A.Controls and Procedures 81 Item 9B.Other Information 82 PART III Item 10.Directors,Executive Officers and Corporate Governance 82 Item 11.Executive Compensation 82 Item 12.Security Ownership of Certain Beneficial Owners and
103、Management and Related Shareholder Matters 82 Item 13.Certain Relationships and Related Transactions,and Director Independence 82 Item 14.Principal Accountant Fees and Services 83 PART IV Item 15.Exhibits and Financial Statement Schedules 83 1 PART I Unless otherwise indicated,all financial data in
104、this document have been prepared using accounting principles generally accepted in the United States of America(“GAAP”).As used in this document,“Group”means Everest Re Group,Ltd.;“Holdings Ireland”means Everest Underwriting Group(Ireland)Limited;“Ireland Re”means Everest Reinsurance Company(Ireland
105、),Limited;“Holdings”means Everest Reinsurance Holdings,Inc.;“Everest Re”means Everest Reinsurance Company and its subsidiaries(unless the context otherwise requires);and the“Company”,“we”,“us”,and“our”means Everest Re Group,Ltd.and its subsidiaries.ITEM 1.BUSINESS The Company.Group,a Bermuda company
106、,was established in 1999 as a wholly-owned subsidiary of Holdings.On February 24,2000,a corporate restructuring was completed and Group became the new parent holding company of Holdings.Holdings continues to be the holding company for the Companys U.S.based operations.Holders of shares of common sto
107、ck of Holdings automatically became holders of the same number of common shares of Group.Prior to the restructuring,Group had no significant assets or capitalization and had not engaged in any business or prior activities other than in connection with the restructuring.In connection with the Februar
108、y 24,2000 restructuring,Group established a Bermuda-based reinsurance subsidiary,Everest Reinsurance(Bermuda),Ltd.(“Bermuda Re”),which commenced business in the second half of 2000.Group also formed Everest Global Services,Inc.,a Delaware subsidiary,to perform administrative functions for Group and
109、its U.S.based and non-U.S.based subsidiaries.On December 30,2008,Group contributed Holdings to its Irish holding company,Holdings Ireland.Holdings Ireland is a direct subsidiary of Group and was established to serve as a holding company for the U.S.and Irish reinsurance and insurance subsidiaries.Ho
110、ldings,a Delaware corporation,was established in 1993 to serve as the parent holding company of Everest Re,a Delaware property and casualty reinsurer formed in 1973.Until October 6,1995,Holdings was an indirect wholly-owned subsidiary of The Prudential Insurance Company of America(“The Prudential”).
111、On October 6,1995,The Prudential sold its entire interest in Holdings in an initial public offering.Effective February 27,2013,the Company established a new subsidiary,Mt.Logan Re Ltd.(“Mt.Logan Re”)and effective July 1,2013,Mt.Logan Re established separate segregated accounts and issued non-voting
112、redeemable preferred shares to capitalize the segregated accounts.Accordingly,the financial position and operating results for Mt.Logan Re are consolidated with the Company and the non-controlling interests in Mt.Logan Res operating results and equity are presented as separate captions in the Compan
113、ys financial statements.The Companys principal business,conducted through its operating segments,is the underwriting of reinsurance and insurance in the U.S.,Bermuda and international markets.The Company had gross written premiums,in 2013,of$5.2 billion with approximately 76%representing reinsurance
114、 and 24%representing insurance.Shareholders equity at December 31,2013 was$7.0 billion.The Company underwrites reinsurance both through brokers and directly with ceding companies,giving it the flexibility to pursue business based on the ceding companys preferred reinsurance purchasing method.The Com
115、pany underwrites insurance principally through general agent relationships,brokers and surplus lines brokers.Groups active operating subsidiaries,excluding Mt.Logan Re and Mt.McKinley Insurance Company(“Mt.McKinley”),which is in run-off,are each rated A+(“Superior”)by A.M.Best Company(“A.M.Best”),a
116、leading provider of insurer ratings that assigns financial strength ratings to insurance companies based on their ability to meet their obligations to policyholders.2 Following is a summary of the Companys principal operating subsidiaries:Bermuda Re,a Bermuda insurance company and a direct subsidiar
117、y of Group,is registered in Bermuda as a Class 4 insurer and long-term insurer and is authorized to write property and casualty and life and annuity business.Bermuda Re commenced business in the second half of 2000.Bermuda Res UK branch writes property and casualty reinsurance to the United Kingdom
118、and European markets.At December 31,2013,Bermuda Re had shareholders equity of$3.0 billion.Everest International Reinsurance,Ltd.(“Everest International”),a Bermuda insurance company and a direct subsidiary of Group,is registered in Bermuda as a Class 4 insurer and is authorized to write property an
119、d casualty business.Through 2013,all of Everest Internationals business has been inter-affiliate quota share reinsurance assumed from Everest Re,the UK branch of Bermuda Re and Ireland Re.At December 31,2013,Everest International had shareholders equity of$369.2 million.Mt.Logan Re,a Bermuda insuran
120、ce company and a direct subsidiary of Group,is registered in Bermuda as a Class 3 insurer and is authorized to write property and casualty reinsurance.Through 2013,all of Mt.Logan Res business has been inter-affiliate reinsurance assumed from Everest Re,the UK branch of Bermuda Re and Ireland Re,and
121、 all business has been written through segregated cells.At December 31,2013,Mt.Logan Re had shareholders equity of$129.0 million.Ireland Re,an Ireland reinsurance company and an indirect subsidiary of Group,is licensed to write non-life reinsurance,both directly and through brokers,for the London an
122、d European markets.Everest Re,a Delaware insurance company and a direct subsidiary of Holdings,is a licensed property and casualty insurer and/or reinsurer in all states,the District of Columbia and Puerto Rico and is authorized to conduct reinsurance business in Canada,Singapore and Brazil.Everest
123、Re underwrites property and casualty reinsurance for insurance and reinsurance companies in the U.S.and international markets.At December 31,2013,Everest Re had statutory surplus of$2.8 billion.Everest Insurance Company of Canada(“Everest Canada”),a Canadian insurance company and direct subsidiary o
124、f Holdings Ireland,is licensed to write property and casualty insurance in all Canadian provinces.Everest National Insurance Company(“Everest National”),a Delaware insurance company and a direct subsidiary of Everest Re,is licensed in 50 states and the District of Columbia and is authorized to write
125、 property and casualty insurance on an admitted basis in the jurisdictions in which it is licensed.The majority of Everest Nationals business is reinsured by its parent,Everest Re.Everest Indemnity Insurance Company(“Everest Indemnity”),a Delaware insurance company and a direct subsidiary of Everest
126、 Re,writes excess and surplus lines insurance business in the U.S.on a non-admitted basis.Excess and surplus lines insurance is specialty property and liability coverage that an insurer not licensed to write insurance in a particular jurisdiction is permitted to provide to insureds when the specific
127、 specialty coverage is unavailable from admitted insurers.Everest Indemnity is licensed in Delaware and is eligible to write business on a non-admitted basis in all other states,the District of Columbia and Puerto Rico.The majority of Everest Indemnitys business is reinsured by its parent,Everest Re
128、.Everest Security Insurance Company(“Everest Security”),a Georgia insurance company and a direct subsidiary of Everest Re,writes property and casualty insurance on an admitted basis in Georgia and Alabama.The majority of Everest Securitys business is reinsured by its parent,Everest Re.Mt.McKinley,a
129、Delaware insurance company and a direct subsidiary of Holdings,was acquired by Holdings in September 2000 from The Prudential.In 1985,Mt.McKinley ceased writing new and renewal insurance and commenced a run-off operation to service claims arising from its previously written business.Effective Septem
130、ber 19,2000,Mt.McKinley and Bermuda Re entered into a loss portfolio transfer reinsurance agreement,whereby Mt.McKinley transferred,for arms-length consideration,all of its net insurance exposures and reserves to Bermuda Re.3 Heartland Crop Insurance,Inc.(“Heartland”),a Kansas based managing general
131、 agent and a direct subsidiary of Holdings,was acquired on January 2,2011.Heartland specializes in crop insurance,which is written mainly through Everest National.Reinsurance Industry Overview.Reinsurance is an arrangement in which an insurance company,the reinsurer,agrees to indemnify another insur
132、ance or reinsurance company,the ceding company,against all or a portion of the insurance risks underwritten by the ceding company under one or more insurance contracts.Reinsurance can provide a ceding company with several benefits,including a reduction in its net liability on individual risks or cla
133、sses of risks,catastrophe protection from large and/or multiple losses and/or a reduction in operating leverage as measured by the ratio of net premiums and reserves to capital.Reinsurance also provides a ceding company with additional underwriting capacity by permitting it to accept larger risks an
134、d write more business than would be acceptable relative to the ceding companys financial resources.Reinsurance does not discharge the ceding company from its liability to policyholders;rather,it reimburses the ceding company for covered losses.There are two basic types of reinsurance arrangements:tr
135、eaty and facultative.Treaty reinsurance obligates the ceding company to cede and the reinsurer to assume a specified portion of a type or category of risks insured by the ceding company.Treaty reinsurers do not separately evaluate each of the individual risks assumed under their treaties,instead,the
136、 reinsurer relies upon the pricing and underwriting decisions made by the ceding company.In facultative reinsurance,the ceding company cedes and the reinsurer assumes all or part of the risk under a single insurance contract.Facultative reinsurance is negotiated separately for each insurance contrac
137、t that is reinsured.Facultative reinsurance,when purchased by ceding companies,usually is intended to cover individual risks not covered by their reinsurance treaties because of the dollar limits involved or because the risk is unusual.Both treaty and facultative reinsurance can be written on either
138、 a pro rata basis or an excess of loss basis.Under pro rata reinsurance,the ceding company and the reinsurer share the premiums as well as the losses and expenses in an agreed proportion.Under excess of loss reinsurance,the reinsurer indemnifies the ceding company against all or a specified portion
139、of losses and expenses in excess of a specified dollar amount,known as the ceding companys retention or reinsurers attachment point,generally subject to a negotiated reinsurance contract limit.In pro rata reinsurance,the reinsurer generally pays the ceding company a ceding commission.The ceding comm
140、ission generally is based on the ceding companys cost of acquiring the business being reinsured(commissions,premium taxes,assessments and miscellaneous administrative expense and may contain profit sharing provisions,whereby the ceding commission is adjusted based on loss experience).Premiums paid b
141、y the ceding company to a reinsurer for excess of loss reinsurance are not directly proportional to the premiums that the ceding company receives because the reinsurer does not assume a proportionate risk.There is usually no ceding commission on excess of loss reinsurance.Reinsurers may purchase rei
142、nsurance to cover their own risk exposure.Reinsurance of a reinsurers business is called a retrocession.Reinsurance companies cede risks under retrocessional agreements to other reinsurers,known as retrocessionaires,for reasons similar to those that cause insurers to purchase reinsurance:to reduce n
143、et liability on individual or classes of risks,protect against catastrophic losses,stabilize financial ratios and obtain additional underwriting capacity.Reinsurance can be written through intermediaries,generally professional reinsurance brokers,or directly with ceding companies.From a ceding compa
144、nys perspective,the broker and the direct distribution channels have advantages and disadvantages.A ceding companys decision to select one distribution channel over the other will be influenced by its perception of such advantages and disadvantages relative to the reinsurance coverage being placed.4
145、 Business Strategy.The Companys business strategy is to sustain its leadership position within targeted reinsurance and insurance markets,provide effective management throughout the property and casualty underwriting cycle and thereby achieve an attractive return for its shareholders.The Companys un
146、derwriting strategies seek to capitalize on its i)financial strength and capacity,ii)global franchise,iii)stable and experienced management team,iv)diversified product and distribution offerings,v)underwriting expertise and disciplined approach,vi)efficient and low-cost operating structure and vii)e
147、ffective enterprise risk management practices.The Company offers treaty and facultative reinsurance and admitted and non-admitted insurance.The Companys products include the full range of property and casualty reinsurance and insurance coverages,including marine,aviation,surety,errors and omissions
148、liability(“E&O”),directors and officers liability(“D&O”),medical malpractice,other specialty lines,accident and health(“A&H”)and workers compensation.The Companys underwriting strategies emphasizes underwriting profitability over premium volume.Key elements of this strategy include careful risk sele
149、ction,appropriate pricing through strict underwriting discipline and adjustment of the Companys business mix in response to changing market conditions.The Company focuses on reinsuring companies that effectively manage the underwriting cycle through proper analysis and pricing of underlying risks an
150、d whose underwriting guidelines and performance are compatible with its objectives.The Companys underwriting strategies emphasizes flexibility and responsiveness to changing market conditions,such as increased demand or favorable pricing trends.The Company believes that its existing strengths,includ
151、ing its broad underwriting expertise,global presence,strong financial ratings and substantial capital,facilitate adjustments to its mix of business geographically,by line of business and by type of coverage,allowing it to participate in those market opportunities that provide the greatest potential
152、for underwriting profitability.The Companys insurance operations complement these strategies by accessing business that is not available on a reinsurance basis.The Company carefully monitors its mix of business across all operations to avoid unacceptable geographic or other risk concentrations.Marke
153、ting.The Company writes business on a worldwide basis for many different customers and lines of business,thereby obtaining a broad spread of risk.The Company is not substantially dependent on any single customer,small group of customers,line of business or geographic area.For the 2013 calendar year,
154、no single customer(ceding company or insured)generated more than 4.9%of the Companys gross written premiums.The Company believes that a reduction of business from any one customer would not have a material adverse effect on its future financial condition or results of operations.Approximately 65%,24
155、%and 11%of the Companys 2013 gross written premiums were written in the broker reinsurance,insurance markets and direct reinsurance,respectively.The broker reinsurance market consists of several substantial national and international brokers and a number of smaller specialized brokers.Brokers do not
156、 have the authority to bind the Company with respect to reinsurance agreements,nor does the Company commit in advance to accept any portion of a brokers submitted business.Reinsurance business from any ceding company,whether new or renewal,is subject to acceptance by the Company.Brokerage fees are g
157、enerally paid by reinsurers.The Companys ten largest brokers accounted for an aggregate of approximately 59%of gross written premiums in 2013.The largest broker,Marsh and McLennan,accounts for approximately 21%of gross written premiums.The second largest broker,Aon Benfield Re,accounted for approxim
158、ately 19%of gross written premiums.The Company believes that a reduction of business assumed from any one broker would not have a material adverse effect on the Company.The direct reinsurance market remains an important distribution channel for reinsurance business written by the Company.Direct plac
159、ement of reinsurance enables the Company to access clients who prefer to place their reinsurance directly with reinsurers based upon the reinsurers in-depth understanding of the ceding companys needs.5 The Companys insurance business writes direct business targeting commercial,property and casualty.
160、It also writes business through general agents,brokers and surplus lines brokers.In 2013,Arrowhead General Insurance Agency accounted for approximately 5%of the Companys gross written premium.No other single general agent generated more than 3%of the Companys gross written premiums.The Company conti
161、nually evaluates each business relationship,including the underwriting expertise and experience brought to bear through the involved distribution channel,performs analyses to evaluate financial security,monitors performance and adjusts underwriting decisions accordingly.Segment Results.The U.S.Reins
162、urance operation writes property and casualty reinsurance and specialty lines of business,including Marine,Aviation,Surety and A&H business,on both a treaty and facultative basis,through reinsurance brokers,as well as directly with ceding companies primarily within the U.S.The International operatio
163、n writes foreign property and casualty reinsurance through Everest Res branches in Canada and Singapore and through offices in Brazil,Miami and New Jersey.The Bermuda operation provides reinsurance and insurance to worldwide property and casualty markets through brokers and directly with ceding comp
164、anies from its Bermuda office and reinsurance to the United Kingdom and European markets through its UK branch and Ireland Re.The Insurance operation writes property and casualty insurance,including medical stop loss insurance,directly and through general agents,brokers and surplus lines brokers wit
165、hin the U.S.and Canada.The Mt.Logan Re segment represents business written for the segregated accounts of Mt.Logan Re,which were formed on July 1,2013.The Mt.Logan Re business represents a diversified set of catastrophe exposures,diversified by risk/peril and across different geographical regions gl
166、obally.These segments,with the exception of Mt.Logan Re,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 financ
167、ial performance of these operating segments based upon their underwriting results.The Mt.Logan Re segment is managed independently and seeks to write a diverse portfolio of catastrophe risks for each segregated account to achieve desired risk and return criteria.Underwriting results include earned p
168、remium less losses and loss adjustment expenses(“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 losse
169、s,commissions and brokerage and other underwriting expenses by premiums earned.Mt.Logan Res business is sourced through operating subsidiaries of the Company;however,the activity is only reflected in the Mt.Logan Re segment.For other inter-affiliate reinsurance,business is generally reported within
170、the segment in which the business was first produced,consistent with how the business is managed.Except for Mt.Logan Re,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 seg
171、ments based upon balance sheet data.Underwriting results include earned premium less losses and loss adjustment expenses(“LAE”)incurred,commission and brokerage expenses and other underwriting expenses.Underwriting results are measured using ratios,in particular loss,commission and brokerage and oth
172、er underwriting expense ratios,which,respectively,divide incurred losses,commissions and brokerage and other underwriting expenses by premiums earned.The Company utilizes inter-affiliate reinsurance,although such reinsurance does not materially impact segment results,as business is generally reporte
173、d within the segment in which the business was first produced.For selected financial information regarding these segments,see ITEM 8,“Financial Statements and Supplementary Data”-Note 20 of Notes to Consolidated Financial Statements and ITEM 7,“Managements Discussion and Analysis of Financial Condit
174、ion and Results of Operation-Segment Results”.6 Underwriting Operations.The following five year table presents the distribution of the Companys gross written premiums by its segments:U.S.Reinsurance,International,Bermuda and Insurance.The premiums for each segment are further split between property
175、and casualty business and,for reinsurance business,between pro rata or excess of loss business:Gross Written Premiums by SegmentYears Ended December 31,(Dollars in millions)20132012201120102009U.S.ReinsurancePropertyPro Rata(1)631.2$12.1%313.2$7.3%594.9$13.9%698.2$16.6%648.2$15.7%Excess631.7 12.1%53
176、4.8 12.4%380.6 8.9%315.9 7.5%330.5 8.0%CasualtyPro Rata(1)342.5 6.6%273.6 6.3%215.5 5.0%200.0 4.8%194.3 4.7%Excess204.4 3.9%189.1 4.4%155.8 3.6%181.3 4.3%234.0 5.7%Total(2)1,809.7 34.7%1,310.7 30.4%1,346.8 31.4%1,395.4 33.2%1,407.1 34.1%International PropertyPro Rata(1)673.4 12.9%630.9 14.6%713.0 16
177、.6%701.6 16.7%670.2 16.2%Excess426.5 8.2%365.9 8.5%315.7 7.4%291.6 6.9%241.9 5.9%CasualtyPro Rata(1)134.4 2.6%102.6 2.4%122.2 2.9%120.3 2.9%94.0 2.3%Excess111.5 2.1%92.9 2.2%87.6 2.0%93.4 2.2%78.4 1.9%Total(2)1,345.8 25.8%1,192.3 27.7%1,238.4 28.9%1,207.0 28.7%1,084.5 26.3%BermudaPropertyPro Rata(1)
178、244.6 4.7%208.3 4.8%213.2 5.0%226.1 5.4%291.1 7.1%Excess161.5 3.1%145.1 3.4%162.6 3.8%173.5 4.1%180.4 4.4%CasualtyPro Rata(1)213.9 4.1%228.9 5.3%204.9 4.8%205.0 4.9%185.6 4.5%Excess154.2 3.0%152.1 3.5%144.5 3.4%128.4 3.1%137.8 3.3%Total(2)774.3 14.9%734.4 17.1%725.3 17.0%733.0 17.5%794.8 19.3%Total
179、ReinsurancePropertyPro Rata(1)1,549.2 29.7%1,152.4 26.7%1,521.1 35.5%1,625.9 38.7%1,609.5 39.0%Excess1,219.7 23.4%1,045.8 24.3%858.9 20.0%781.0 18.6%752.8 18.2%CasualtyPro Rata(1)690.7 13.2%605.1 14.0%542.6 12.7%525.3 12.5%473.9 11.5%Excess470.1 9.0%434.1 10.1%387.9 9.0%403.1 9.6%450.2 10.9%Total(2)
180、3,929.7 75.3%3,237.4 75.1%3,310.6 77.2%3,335.3 79.4%3,286.4 79.6%InsurancePropertyPro Rata(1)545.6 10.5%459.2 10.7%341.9 8.0%130.1 3.1%112.6 2.7%Excess-0.0%-0.0%-0.0%-0.0%-0.0%CasualtyPro Rata(1)723.2 13.9%613.9 14.2%633.8 14.8%735.4 17.5%729.9 17.7%Excess-0.0%-0.0%-0.0%-0.0%-0.0%Total(2)1,268.7 24.
181、3%1,073.1 24.9%975.6 22.8%865.4 20.6%842.6 20.4%Mt.Logan RePropertyPro Rata(1)-0.0%-Excess20.2 0.4%-CasualtyPro Rata(1)-0.0%-Excess-0.0%-Total(2)20.2 0.4%-Total CompanyPropertyPro Rata(1)2,094.8 40.1%1,611.6 37.4%1,863.0 43.5%1,756.0 41.8%1,722.2 41.7%Excess1,239.9 23.8%1,045.8 24.3%858.9 20.0%781.0
182、 18.6%752.7 18.2%CasualtyPro Rata(1)1,413.9 27.1%1,219.1 28.3%1,176.3 27.4%1,260.6 30.0%1,203.9 29.2%Excess470.1 9.0%434.1 10.1%387.9 9.1%403.1 9.6%450.2 10.9%Total(2)5,218.6$100.0%4,310.5$100.0%4,286.2$100.0%4,200.7$100.0%4,129.0$100.0%_(1)For purposes of the presentation above,pro rata includes al
183、l insurance and reinsurance attaching to the first dollar of loss incurred by the ceding company.(2)Certain totals and subtotals may not reconcile due to rounding.7 U.S.Reinsurance Segment.The Companys U.S.Reinsurance segment writes property and casualty reinsurance and specialty lines of business,i
184、ncluding Marine,Aviation,Surety and A&H business,on both a treaty and facultative basis,through reinsurance brokers,as well as directly with ceding companies within the U.S.The marine and aviation business is written primarily through brokers and contains a significant international component.Surety
185、 business consists mainly of reinsurance of contract surety bonds.The Company targets certain brokers and,through the broker market,specialty companies and small to medium sized standard lines companies.The Company also targets companies that place their business predominantly in the direct market,i
186、ncluding small to medium sized regional ceding companies,and seeks to develop long-term relationships with those companies.In addition,the U.S.Reinsurance segment writes portions of reinsurance programs for large,national insurance companies.In 2013,$1,047.1 million of gross written premiums were at
187、tributable to U.S.treaty property business,of which 51.0%was written on an excess of loss basis and 49.0%was written on a pro rata basis.The Companys property underwriters utilize sophisticated underwriting methods to analyze and price property business.The Company manages its exposures to catastrop
188、he and other large losses by limiting exposures on individual contracts and limiting aggregate exposures to catastrophes in any particular zone and across contiguous zones.U.S.treaty casualty business accounted for$460.3 million of gross written premiums in 2013,of which 66.6%was written on a pro ra
189、ta basis and 33.4%was written on an excess of loss basis.The treaty casualty business consists of professional liability,D&O liability,workers compensation,excess and surplus lines and other liability coverages.As a result of the complex technical nature of most of these risks,the Companys casualty
190、underwriters tend to specialize by line of business and work closely with the Companys pricing actuaries.The Companys facultative unit conducts business both through brokers and directly with ceding companies,and consists of three underwriting units representing property,casualty,and national broker
191、age lines of business.Business is written from a facultative headquarters office in New York and satellite offices in Chicago and Oakland.In 2013,$41.2 million,$47.8 million and$15.2 million of gross written premiums were attributable to the property,casualty and national brokerage lines of business
192、,respectively.The marine and aviation units 2013 gross written premiums totaled$117.1 million,substantially all of which was written on a treaty basis and sourced through reinsurance brokers.Of the marine and aviation gross written premiums in 2013,marine treaties represented 66.9%and consisted main
193、ly of hull and cargo coverage.In 2013,the marine units premiums were written 48.1%on an excess of loss basis and 51.9%on a pro rata basis.Of the marine and aviation gross written premiums in 2013,aviation premiums accounted for 33.1%and included reinsurance of airline and general aviation risks.In 2
194、013,the aviation units premiums were written 92.7%on a pro rata basis and 7.3%on an excess of loss basis.In 2013,gross written premiums of the surety unit totaled$46.9 million,93.2%of which was written on a pro rata basis.Most of the portfolio is reinsurance of contract surety bonds written directly
195、 with ceding companies,with the remainder being trade credit reinsurance,mostly in international markets.In 2013,gross written premium of the A&H reinsurance unit totaled$34.1 million,primarily written through brokers.In 2013,94.5%and 5.5%of the U.S.Reinsurance segments gross written premiums were w
196、ritten in the broker reinsurance and direct reinsurance markets,respectively.International Segment.The Companys International segment focuses on opportunities in the international reinsurance markets.The Company targets several international markets,including:Canada,with a branch in Toronto;Asia,wit
197、h a branch in Singapore;and Latin America,Brazil,Africa and the Middle East,which business is serviced from Everest Res Miami and New Jersey offices.The Company also writes from New Jersey“home-foreign”business,which provides reinsurance on the international portfolios of U.S.insurers.Of the Company
198、s 2013 international gross written premiums,81.7%represented property business,while 18.3%represented casualty business.As with its U.S.operations,the Companys International segment focuses on financially sound companies that have strong management and underwriting discipline and 8 expertise.Of the
199、Companys international business,70.1%was written through brokers,with 29.9%written directly with ceding companies.Gross written premiums of the Companys Canadian branch totaled$169.1 million in 2013 and consisted of 33.6%of excess casualty business,40.5%of excess property business,18.2%of pro rata c
200、asualty business and 7.7%of pro rata property business.Of the Canadian gross written premiums,86.1%consisted of treaty reinsurance,while 13.9%was facultative reinsurance.The Companys Singapore branch covers the Asian markets and accounted for$278.1 million of gross written premiums in 2013 and consi
201、sted of 47.8%of pro rata property business,49.0%of excess property business,2.4%of pro rata casualty business and 0.8%of excess casualty business.International business written out of Everest Res Miami and New Jersey offices accounted for$898.5 million of gross written premiums in 2013 and consisted
202、 of 58.7%of pro rata treaty property business,21.7%of excess treaty property business,10.8%of pro rata treaty casualty business,3.6%of excess treaty casualty business and 5.2%of facultative property and casualty business.Of this international business,73.3%was sourced from Latin America,11.6%was sou
203、rced from the Middle East,7.0%was sourced from Africa and 8.1%was home-foreign business.Bermuda Segment.The Companys Bermuda segment writes property and casualty reinsurance through Bermuda Re and property and casualty reinsurance through its UK branch as well as through Ireland Re.In 2013,Bermuda R
204、e had gross written premiums of$425.1 million,virtually all of which was treaty reinsurance.In 2013,the UK branch of Bermuda Re wrote$232.1 million of gross treaty reinsurance premium consisting of 47.7%of excess casualty business,20.2%of pro rata property business,22.0%of excess property business a
205、nd 10.1%of pro rata casualty business.In 2013,Ireland Re wrote$117.1 million of gross treaty reinsurance premium consisting of 45.1%of pro rata property business,36.6%of excess property business,9.2%of excess casualty business and 9.1%of pro rata casualty business.Insurance Segment.The Insurance seg
206、ment writes property and casualty insurance,including medical stop loss insurance,directly and through general agents,brokers and surplus lines brokers within the U.S.and Canada.In 2013,the Companys Insurance segment wrote$1,268.7 million of gross written premiums,of which 57.0%was casualty and 43.0
207、%was property,principally targeting commercial property and casualty business.Business written through general agents with program administrators represented 40.9%of the premium with the remainder written directly through the Companys offices.Workers compensation business accounted for$369.6 million
208、,or 29.1%of the total business written,including$299.3 million,or 81.0%,of workers compensation business written in California.In addition,crop insurance business written was$324.7 million;professional liability business written was$204.5 million;A&H insurance business written was$83.6 million;other
209、 short-tail/package business written was$119.6 million;other liability business written was$98.7 million;and non-standard auto insurance business written through retail agents was$68.0 million.With respect to insurance written through general agents and surplus lines brokers,the Company supplements
210、the initial underwriting process with periodic claims,underwriting and operational reviews and ongoing monitoring.Mt.Logan Re Segment.The Mt.Logan Re segment represents business written for the segregated accounts of Mt.Logan Re,which were formed on July 1,2013.The Mt.Logan Re business represents a
211、diversified set of catastrophe exposures,diversified by risk/peril and across different geographical regions globally.Mt.Logan Res business is sourced through operating subsidiaries of the Company;however,the activity is only reflected in the Mt.Logan Re segment.For other inter-affiliate reinsurance
212、,business is generally reported within the segment in which the business was first produced,consistent with how the business is managed.Gross written premium for 2013 was$20.2 million.9 Geographic Areas.The Company conducts its business in Bermuda,the U.S.and a number of foreign countries.For select
213、 financial information about geographic areas,see ITEM 8,“Financial Statements and Supplementary Data”-Note 20 of Notes to the Consolidated Financial Statements.Risks attendant to the foreign operations of the Company parallel those attendant to the U.S.operations of the Company,with the primary exc
214、eption of foreign exchange risks.For more information about the risks,see ITEM 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations Safe Harbor Disclosure”.Underwriting.One of the Companys strategies is to lead as many of the reinsurance treaties it underwrites as
215、possible.The Company leads on approximately two-thirds of its treaty reinsurance business as measured by premium.The lead reinsurer on a treaty generally accepts one of the largest percentage shares of the treaty and is in the strongest position to negotiate price,terms and conditions.Management bel
216、ieves this strategy enables it to obtain more favorable terms and conditions on the treaties on which it participates.When the Company does not lead the treaty,it may still suggest changes to any aspect of the treaty.The Company may decline to participate on a treaty based upon its assessment of all
217、 relevant factors.The Companys treaty underwriting process involves a team approach among the Companys underwriters,actuaries and claim staff.Treaties are reviewed for compliance with the Companys general underwriting standards and most larger treaties are subjected to detailed actuarial analysis.Th
218、e actuarial models used in such analyses are tailored in each case to the subject exposures and loss experience.The Company does not separately evaluate each of the individual risks assumed under its treaties.The Company does,however,evaluate the underwriting guidelines of its ceding companies to de
219、termine their adequacy prior to entering into a treaty.The Company may also conduct underwriting,operational and claim audits at the offices of ceding companies to monitor adherence to underwriting guidelines.Underwriting audits focus on the quality of the underwriting staff,pricing and risk selecti
220、on and rate monitoring over time.Claim audits may be performed in order to evaluate the clients claims handling abilities and practices.The Companys facultative underwriters operate within guidelines specifying acceptable types of risks,limits and maximum risk exposures.Specified classes of large pr
221、emium U.S.risks are referred to Everest Res New York facultative headquarters for specific review before premium quotations are given to clients.In addition,the Companys guidelines require certain types of risks to be submitted for review because of their aggregate limits,complexity or volatility,re
222、gardless of premium amount on the underlying contract.Non-U.S.risks exhibiting similar characteristics are reviewed by senior managers within the involved operations.The Companys insurance operations principally write casualty coverages for homogeneous risks through select program managers.These pro
223、grams are evaluated based upon actuarial analysis and the program managers capabilities.The Companys rates,forms and underwriting guidelines are tailored to specific risk types.The Companys underwriting,actuarial,claim and financial functions work closely with its program managers to establish appro
224、priate underwriting and processing guidelines as well as appropriate performance monitoring mechanisms.Risk Management of Underwriting and Retrocession Arrangements Underwriting Risk and Accumulation Controls.Each segment and business unit manages its underwriting risk in accordance with established
225、 guidelines.These guidelines place dollar limits on the amount of business that can be written based on a variety of factors,including ceding company profile,line of business,geographic location and risk hazards.In each case,the guidelines permit limited exceptions,which must be authorized by the Co
226、mpanys senior management.Management regularly reviews and revises these guidelines in response to changes in business unit market conditions,risk versus reward analyses and the Companys enterprise and underwriting risk management processes.10 The operating results and financial condition of the Comp
227、any can be adversely affected by catastrophe and other large losses.The Company manages its exposure to catastrophes and other large losses by:selective underwriting practices;diversifying its risk portfolio by geographic area and by types and classes of business;limiting its aggregate catastrophe l
228、oss exposure in any particular geographic zone and contiguous zones;purchasing reinsurance and/or retrocessional protection to the extent that such coverage can be secured cost-effectively.See“Reinsurance and Retrocession Arrangements”.Like other insurance and reinsurance companies,the Company is ex
229、posed to multiple insured losses arising out of a single occurrence,whether a natural event,such as a hurricane or an earthquake,or other catastrophe,such as an explosion at a major factory.A large catastrophic event can be expected to generate insured losses to multiple reinsurance treaties,faculta
230、tive certificates and across lines of business.The Company focuses on potential losses that could result from any single event or series of events as part of its evaluation and monitoring of its aggregate exposures to catastrophic events.Accordingly,the Company employs various techniques to estimate
231、 the amount of loss it could sustain from any single catastrophic event or series of events in various geographic areas.These techniques range from deterministic approaches,such as tracking aggregate limits exposed in catastrophe-prone zones and applying reasonable damage factors,to modeled approach
232、es that attempt to scientifically measure catastrophe loss exposure using sophisticated Monte Carlo simulation techniques that forecast frequency and severity of expected losses on a probabilistic basis.No single computer model or group of models is currently capable of projecting the amount and pro
233、bability of loss in all global geographic regions in which the Company conducts business.In addition,the form,quality and granularity of underwriting exposure data furnished by ceding companies is not uniformly compatible with the data requirements for the Companys licensed models,which adds to the
234、inherent imprecision in the potential loss projections.Further,the results from multiple models and analytical methods must be combined and interpolated to estimate potential losses by and across business units.Also,while most models have been updated to incorporate claims information from recent ca
235、tastrophic events,catastrophe model projections are still inherently imprecise.In addition,uncertainties with respect to future climatic patterns and cycles add to the already significant uncertainty of loss projections from models using historic long term frequency and severity data.Nevertheless,wh
236、en combined with traditional risk management techniques and sound underwriting judgment,catastrophe models are a useful tool for underwriters to price catastrophe exposed risks and for providing management with quantitative analyses with which to monitor and manage catastrophic risk exposures by zon
237、e and across zones for individual and multiple events.Projected catastrophe losses are generally summarized in terms of the probable maximum loss(“PML”).The Company defines PML as its anticipated loss,taking into account contract terms and limits,caused by a single catastrophe affecting a broad cont
238、iguous geographic area,such as that caused by a hurricane or earthquake.The PML will vary depending upon the modeled simulated losses and the make-up of the in force book of business.The projected severity levels are described in terms of“return periods”,such as“100-year events”and“250-year events”.
239、For example,a 100-year PML is the estimated loss to the current in-force portfolio from a single event which has a 1%probability of being exceeded in a twelve month period.In other words,it corresponds to a 99%probability that the loss from a single event will fall below the indicated PML.It is impo
240、rtant to note that PMLs are estimates.Modeled events are hypothetical events produced by a stochastic model.As a result,there can be no assurance that any actual event will align with the modeled event or that actual losses from events similar to the modeled events will not vary materially from the
241、modeled event PML.11 From an enterprise risk management perspective,management sets limits on the levels of catastrophe loss exposure the Company may underwrite.The limits are revised periodically based on a variety of factors,including but not limited to the Companys financial resources and expecte
242、d earnings and risk/reward analyses of the business being underwritten.The Company may purchase reinsurance to cover specific business written or the potential accumulation or aggregation of exposures across some or all of its operations.Reinsurance purchasing decisions consider both the potential c
243、overage and market conditions including the pricing,terms,conditions and availability of coverage,with the aim of securing cost effective protection.The amount of reinsurance purchased has varied over time,reflecting the Companys view of its exposures and the cost of reinsurance.Management estimates
244、 that the projected net economic loss from its largest 100-year event in a given zone represents approximately 11%of its projected 2014 shareholders equity.Economic loss is the PML exposure,net of third party reinsurance and the noncontrolling interests of Mt.Logan Re,reduced by estimated reinstatem
245、ent premiums to renew coverage and estimated income taxes.The impact of income taxes on the PML depends on the distribution of the losses by corporate entity,which is also affected by inter-affiliate reinsurance.Management also monitors and controls its largest PMLs at multiple points along the loss
246、 distribution curve,such as loss amounts at the 20,50,100,250,500 and 1,000 year return periods.This process enables management to identify and control exposure accumulations and to integrate such exposures into enterprise risk,underwriting and capital management decisions.The Companys catastrophe l
247、oss projections,segmented by risk zones,are updated quarterly and reviewed as part of a formal risk management review process.The table below reflects the Companys PML exposure,net of third party reinsurance and the noncontrolling interests of Mt.Logan Re,at various return times for its top three zo
248、nes/perils(as ranked by the largest 1 in 100 year events)based on loss projection data as of January 1,2014:Return Periods(in years)1 in 201 in 501 in 1001 in 2501 in 5001 in 1,000Exceeding Probability5.0%2.0%1.0%0.4%0.2%0.1%(Dollars in millions)Zone/PerilSoutheast U.S.,Wind600$950$1,231$1,606$1,867
249、$2,052$California,Earthquake125 464 854 1,377 1,731 1,976 Europe,Wind177 452 661 883 1,030 1,115 The projected net economic losses for the top three zones/perils scheduled above are as follows:Return Periods(in years)1 in 201 in 501 in 1001 in 2501 in 5001 in 1,000Exceeding Probability5.0%2.0%1.0%0.
250、4%0.2%0.1%(Dollars in millions)Zone/PerilSoutheast U.S.,Wind397$610$796$1,029$1,200$1,324$California,Earthquake103 330 589 942 1,168 1,326 Europe,Wind146 366 533 713 822 890 The Company believes that its methods of monitoring,analyzing and managing catastrophe exposures provide a credible risk manag
251、ement framework,which are integrated with its enterprise risk management,underwriting and capital management plans.However,there is much uncertainty and imprecision inherent in the catastrophe models and the catastrophe loss estimation process generally.As a result,there can be no assurance that the
252、 Company will not experience losses from individual events that exceed the PML or other return period projections,perhaps by a material amount.Nor can there be assurance that the Company will not experience events impacting multiple zones,or multiple severe events that could,in the aggregate,exceed
253、the Companys PML expectations by a significant amount.12 Terrorism Risk.The Company has limited exposure to losses from terrorism risk.While the Company writes some reinsurance contracts covering terrorism,the Companys risk management philosophy is to limit the amount of exposure by geographic regio
254、n,and to strictly manage coverage for properties in areas that may be considered a target for terrorists.Although providing terrorism coverage on reinsurance contracts is negotiable,most insurance policies mandate inclusion of terrorism coverage.As a result,the Company is exposed to losses from terr
255、orism on its Insurance book of business,particularly its workers compensation and property policies.However,the Insurance book generally does not insure large corporations or corporate locations that represent large concentrations of risk.Because of the limited nature of terrorism exposure,the U.S.T
256、errorism Risk Insurance Act of 2002 and its amendments do not have a significant impact on company operations.Reinsurance and Retrocession Arrangements.The Company does not typically purchase significant retrocessional coverage for specific reinsurance business written,but it will do so when managem
257、ent deems it to be prudent and/or cost-effective to reinsure a portion of the risks being assumed.The Company participates in“common account”retrocessional arrangements for certain reinsurance treaties whereby a ceding company purchases reinsurance for the benefit of itself and its reinsurers under
258、one or more of its reinsurance treaties.Common account retrocessional arrangements reduce the effect of individual or aggregate losses to all participating companies,including the ceding company,with respect to the involved treaties.The Company typically considers the purchase of reinsurance to cove
259、r insurance program exposures written by the Insurance segment.The type of reinsurance coverage considered is dependent upon individual risk exposures,individual program exposures,aggregate exposures by line of business,overall segment and corporate wide exposures and the cost effectiveness of avail
260、able reinsurance.Facultative reinsurance will typically be considered for large individual exposures and quota share reinsurance will generally be considered for entire programs of business.The Company also considers purchasing corporate level retrocessional protection covering the potential accumul
261、ation of exposures.Such consideration includes balancing the underlying exposures against the availability of cost-effective retrocessional protection.All of the Companys reinsurance and retrocessional agreements transfer significant reinsurance risk and therefore,are accounted for as reinsurance in
262、 accordance with the Financial Accounting Standards Board(“FASB”)guidance.At December 31,2013,the Company had$540.9 million in reinsurance receivables with respect to both paid and unpaid losses ceded.Of this amount,$145.4 million,or 26.9%,was receivable from C.V.Starr(Bermuda)(“C.V.Starr”);$95.3 mi
263、llion,or 17.6%was receivable from Federal Crop Insurance Company(“FCIC”);$43.9 million,or 8.1%,was receivable from Transatlantic Reinsurance Company(“Transatlantic”);$37.7 million,or 7.0%was receivable from Berkley Insurance Company(“Berkley”);and$27.4 million,or 5.1%,was receivable from Munich Rein
264、surance America Inc.(“Munich Re”).The receivable from C.V.Starr is fully collateralized by a trust agreement.No other retrocessionaire accounted for more than 5%of the Companys receivables.Although management carefully selects its reinsurers,the Company is subject to credit risk with respect to its
265、reinsurance because the ceding of risk to reinsurers does not relieve the Company of its liability to insureds or ceding companies.See ITEM 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations Financial Condition”.13 Claims.Reinsurance claims are managed by the Com
266、panys professional claims staff whose responsibilities include reviewing initial loss reports and coverage issues,monitoring claims handling activities of ceding companies,establishing and adjusting proper case reserves and approving payment of claims.In addition to claims assessment,processing and
267、payment,the claims staff selectively conducts comprehensive claim audits of both specific claims and overall claim procedures at the offices of selected ceding companies.Insurance claims,except those relating to Mt.McKinleys business,are generally handled by third party claims service providers who
268、have limited authority and are subject to oversight by the Companys professional claims staff.The Company intensively manages its asbestos and environmental(“A&E”)exposures through dedicated,centrally managed claim staffs for Mt.McKinley and Everest Re.Both are staffed with experienced claim and leg
269、al professionals who specialize in the handling of such exposures.These units actively manage each individual insured and reinsured account,responding to claim developments with evaluations of the involved exposures and adjustment of reserves as appropriate.Specific or general claim developments tha
270、t may have material implications for the Company are regularly communicated to senior management,actuarial,legal and financial areas.Senior management and claim management personnel meet at least quarterly to review the Companys overall reserve positions and make changes,if appropriate.The Company c
271、ontinually reviews its internal processing,communications and analytics,seeking to enhance the management of its A&E exposures,in particular in regard to changes in asbestos claims and litigation.Reserves for Unpaid Property and Casualty Losses and LAE.Significant periods of time may elapse between
272、the occurrence of an insured loss,the reporting of the loss to the insurer and the reinsurer and the payment of that loss by the insurer and subsequent payments to the insurer by the reinsurer.To recognize liabilities for unpaid losses and LAE,insurers and reinsurers establish reserves,which are bal
273、ance sheet liabilities representing estimates of future amounts needed to pay reported and unreported claims and related expenses for losses that have already occurred.Actual losses and LAE paid may deviate,perhaps substantially,from such reserves.To the extent reserves prove to be insufficient to c
274、over actual losses and LAE after taking into account available reinsurance coverage,the Company would have to recognize such reserve shortfalls and incur a charge to earnings,which could be material in the period such recognition takes place.See ITEM 7,“Managements Discussion and Analysis of Financi
275、al Condition and Results of Operations Loss and LAE Reserves”.As part of the reserving process,insurers and reinsurers evaluate historical data and trends and make judgments as to the impact of various factors such as legislative and judicial developments that may affect future claim amounts,changes
276、 in social and political attitudes that may increase loss exposures and inflationary and general economic trends.While the reserving process is difficult and subjective for insurance companies,the inherent uncertainties of estimating such reserves are even greater for the reinsurer,due primarily to
277、the longer time between the date of an occurrence and the reporting of any attendant claims to the reinsurer,the diversity of development patterns among different types of reinsurance treaties or facultative contracts,the necessary reliance on the ceding companies for information regarding reported
278、claims and differing reserving practices among ceding companies.In addition,trends that have affected development of liabilities in the past may not necessarily occur or affect liability development in the same manner or to the same degree in the future.As a result,actual losses and LAE may deviate,
279、perhaps substantially,from estimates of reserves reflected in the Companys consolidated financial statements.Like many other property and casualty insurance and reinsurance companies,the Company has experienced adverse loss development for prior accident years,which has led to increases in losses an
280、d LAE reserves and corresponding charges to income(loss)in the periods in which the adjustments were made.There can be no assurance that adverse development from prior years will not continue in the future or that such adverse development will not have a material adverse effect on net income(loss).C
281、hanges in Historical Reserves.The following table shows changes in historical loss reserves for the Company for 2003 and subsequent years.The table is presented on a GAAP basis except that the Companys loss reserves for its Canadian branch operations are presented in Canadian dollars,the impact of w
282、hich is not material.The top line of the table shows the estimated reserves for unpaid losses and LAE recorded at each year end date.The upper(paid)portion of the table presents the related cumulative amounts paid through each subsequent year end.The lower(liability re-estimated)portion shows the re
283、-estimated amount of the original reserves as of the end 14 of each succeeding year.The reserve estimates have been revised as more information became known about the actual claims for which the reserves were carried.The cumulative(deficiency)/redundancy line represents the cumulative change in esti
284、mates since the initial reserve was established.It is equal to the initial reserve less the latest estimate of the ultimate liability.Since the Company has international operations,some of its loss reserves are established in foreign currencies and converted to U.S.dollars for financial reporting.Ch
285、anges in conversion rates from period to period impact the U.S.dollar value of carried reserves and correspondingly,the cumulative deficiency line of the table.However,unlike other reserve development that affects net income(loss),the impact of currency translation is a component of other comprehens
286、ive income(loss).To differentiate these two reserve development components,the translation impacts for each calendar year are reflected in the table of Effects on Pre-tax Income Resulting from Reserve Re-estimates.Each amount other than the original reserves in the top half of the table below includ
287、es the effects of all changes in amounts for prior periods.For example,if a loss settled in 2006 for$100,000,was first reserved in 2003 at$60,000 and remained unchanged until settlement,the$40,000 deficiency(actual loss minus original estimate)would affect the cumulative deficiency for each of the y
288、ears in 2003 through 2005.Conditions and trends that have affected development of the ultimate liability in the past are not indicative of future developments.Accordingly,it is not appropriate to extrapolate future redundancies or deficiencies based on this table.Ten Year GAAP Loss Development Table
289、 Presented Net of Reinsurance with Supplemental Gross Data(1)(2)(Dollars in millions)20032004200520062007200820092010201120122013Net Reserves for unpaidloss and LAE5,158.4$6,766.9$8,175.4$8,078.9$8,324.7$8,214.7$8,315.9$8,650.7$9,553.0$9,464.6$9,235.3$Paid(cumulative)as of:One year later1,141.7 1,55
290、3.1 2,116.9 1,915.4 1,816.4 1,997.2 1,988.7 2,008.3 2,220.2 2,353.8 Two years later1,932.6 2,412.3 3,447.8 3,192.8 3,182.2 3,405.8 3,231.2 3,238.9 3,852.4 Three years later2,404.6 3,181.4 4,485.2 4,246.3 4,191.7 4,335.1 4,043.9 4,352.7 Four years later2,928.5 3,854.8 5,306.5 5,036.3 4,791.8 4,914.8
291、4,903.9 Five years later3,451.1 4,459.5 5,950.6 5,446.9 5,206.8 5,601.3 Six years later3,948.3 4,952.9 6,281.7 5,745.7 5,777.5 Seven years later4,340.8 5,190.5 6,523.7 6,211.7 Eight years later4,510.9 5,387.3 6,920.0 Nine years later4,673.5 5,726.3 Ten years later4,969.0 Net Liability re-estimated a
292、s of:One year later5,470.4 6,633.7 8,419.8 8,356.7 8,112.9 8,461.9 8,229.4 8,648.2 9,572.4 9,424.1 Two years later5,407.1 6,740.5 8,609.2 8,186.3 8,307.6 8,382.7 8,273.9 8,657.3 9,558.7 Three years later5,654.5 7,059.9 8,489.7 8,398.7 8,267.1 8,426.5 8,274.1 8,663.2 Four years later6,073.1 6,996.7 8
293、,683.8 8,401.8 8,298.4 8,408.3 8,248.0 Five years later6,093.4 7,162.2 8,729.6 8,427.4 8,272.5 8,416.5 Six years later6,227.0 7,246.3 8,752.3 8,399.8 8,317.8 Seven years later6,329.0 7,256.8 8,750.3 8,467.3 Eight years later6,336.3 7,272.2 8,829.8 Nine years later6,339.4 7,323.8 Ten years later6,378
294、.5 Cumulative(deficiency)/redundancy(1,220.0)$(556.9)$(654.4)$(388.4)$7.0$(201.9)$67.9$(12.5)$(5.7)$40.5$Gross liability-end of year6,424.7$7,886.6$9,175.1$8,888.0$9,032.2$8,905.9$8,957.4$9,340.1$10,134.0$10,067.5$9,709.3$Reinsurance receivable1,266.3 1,119.6 999.7 809.1 707.4 691.2 641.5 689.4 581.
295、1 602.8 474.0 Net liability-end of year5,158.4$6,766.9$8,175.4$8,078.9$8,324.7$8,214.7$8,315.9$8,650.7$9,553.0$9,464.6$9,235.3$Gross re-estimated liabilityat December 31,20137,822.9$8,552.4$9,940.8$9,329.0$9,091.3$9,257.0$9,077.3$9,533.3$10,319.1$10,210.0$Re-estimated receivableat December 31,20131,
296、444.4 1,228.5 1,111.0 861.6 773.6 840.4 829.3 870.0 760.4 785.9 Net re-estimated liabilityat December 31,20136,378.5$7,323.8$8,829.8$8,467.3$8,317.8$8,416.5$8,248.0$8,663.2$9,558.7$9,424.1$Gross cumulative(deficiency)/redundancy(1,398.2)$(665.8)$(765.7)$(441.0)$(59.2)$(351.1)$(119.9)$(193.1)$(185.1)
297、$(142.5)$(1)The Canadian Branch reserves are reflected in Canadian dollars.(2)Some amounts may not reconcile due to rounding.15 There has been minimal development in reserves since 2006.Three classes of business were the principal contributors to the deficiencies through 2006:1)the run-off of asbest
298、os claims for both direct and reinsurance business has significantly contributed to the cumulative deficiencies for all years presented through 2006;2)professional liability reinsurance,general casualty reinsurance and workers compensation insurance contributed to the deficiencies for year 2003;and
299、3)property catastrophe adverse development contributed to the deficiency for 2005.In the professional liability reinsurance class,the early 2000s saw a proliferation of claims relating to bankruptcies and other corporate,financial and/or management improprieties.This resulted in an increase in the f
300、requency and severity of claims under the professional liability policies reinsured by the Company.In the general casualty area,the Company has experienced claim frequency and severity greater than expected in the Companys pricing and initial reserving assumptions.In the workers compensation insuran
301、ce class,the majority of which was written in California,the Company has experienced adverse development primarily for accident year 2002 due to higher than expected claim frequency and severity.As a result of significant growth in this book of business in a challenging business environment,the Comp
302、anys writings in this class were subject to more relative variability than in some of its established and/or stable lines of business.Although cumulative results through 2013 continue to be profitable for this book of business,there was some deterioration in claim frequency and severity related to o
303、lder accident years.The adverse development on the 2008 outstanding reserves was primarily attributable to foreign exchange rate movements resulting in an increase in the U.S.dollar reserves.In addition,the Company experienced adverse development on liability exposures for sub-prime for accident yea
304、rs 2006-2008 and contractors liability exposures for accident years 2003-2005.The contractor liability exposures are currently in run-off.The Company also experienced adverse development on property lines but was offset by favorable development on other casualty lines.The Companys loss and LAE reser
305、ves represent managements best estimate of the ultimate liability.While there can be no assurance that these reserves will not need to be increased in the future,management believes that the Companys existing reserves and reserving methodologies reduce the likelihood that any such increases would ha
306、ve a material adverse effect on the Companys financial condition,results of operations or cash flows.These statements regarding the Companys loss reserves are forward looking statements within the meaning of the U.S.federal securities laws and are intended to be covered by the safe harbor provisions
307、 contained therein.See ITEM 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations Safe Harbor Disclosure”.16 The following table is derived from the Ten Year GAAP Loss Development Table above and summarizes the effect of reserve re-estimates,net of reinsurance,on ca
308、lendar year operations by accident year for the same ten year period ended December 31,2013.Each column represents the amount of net reserve re-estimates made in the indicated calendar year and shows the accident years to which the re-estimates are applicable.The amounts in the total accident year c
309、olumn on the far right represent the cumulative reserve re-estimates for the indicated accident years.Since the Company has operations in many countries,part of the Companys loss and LAE reserves are in foreign currencies and translated to U.S.dollars for each reporting period.Fluctuations in the ex
310、change rates for the currencies,period over period,affect the U.S.dollar amount of outstanding reserves.The translation adjustment line at the bottom of the table eliminates the impact of the exchange fluctuations from the reserve re-estimates.Effects on Pre-tax Income Resulting from Reserves Re-est
311、imatesCumulative Re-estimates for Each(Dollars in millions)2004200520062007200820092010201120122013Accident YearAccident Years2003 and prior(312.0)$63.4$(247.5)$(418.6)$(20.3)$(133.5)$(102.2)$(7.4)$(3.1)$(39.1)$(1,220.0)$200469.9 140.7 99.2 83.5 (32.1)18.1 (3.2)(12.3)(12.5)351.1 2005(137.6)130.1 56.
312、3 (28.6)38.2 (12.1)17.4 (27.8)35.8 2006(88.4)50.9 (18.3)42.8 (3.0)25.7 11.9 21.5 200741.5 17.6 43.6 (5.7)(1.8)22.3 117.6 2008(52.5)38.6 (12.4)(7.7)37.0 3.0 20097.4 (0.8)(18.5)34.4 22.6 201047.1 (8.9)(32.1)6.1 2011(10.2)19.6 9.3 201226.9 26.9 Total calendar year effect(312.0)$133.3$(244.4)$(277.8)$21
313、1.8$(247.2)$86.5$2.5$(19.4)$40.5$Canada(1)(16.3)(6.6)(0.5)(49.6)63.7 (39.4)(21.2)9.7 (9.9)26.4 Translation adjustment78.9 (100.3)109.3 120.9 (310.4)157.8 (34.5)(15.9)32.9 (48.6)Re-estimate of net reserve after translation adjustment(249.4)$26.4$(135.6)$(206.5)$(34.9)$(128.8)$30.9$(3.7)$3.7$18.2$(1)T
314、his adjustment converts Canadian dollars to U.S.dollars.(Some amounts may not reconcile due to rounding.)The reserve development by accident year reflected in the above table was generally the result of the same factors described above that caused the deficiencies shown in the Ten Year GAAP Loss Dev
315、elopment Table.The unfavorable development experienced in the 2003 and prior accident years relate principally to the previously discussed asbestos development.Other business areas contributing to adverse development were casualty reinsurance,including professional liability classes,and workers comp
316、ensation insurance,where,in retrospect,the Companys initial estimates of losses were underestimated principally as the result of unanticipated variability in the underlying exposures.The favorable development for accident year 2004 relates primarily to favorable experience with respect to property r
317、einsurance business.In addition,casualty reinsurance has reflected favorable development for accident years 2004 to 2006.The Companys loss reserving methodologies continuously monitor the emergence of loss and loss development trends,seeking,on a timely basis,to both adjust reserves for the impact o
318、f trend shifts and to factor the impact of such shifts into the Companys underwriting and pricing on a prospective basis.17 The following table presents a reconciliation of beginning and ending reserve balances for the periods indicated on a GAAP basis:(Dollars in millions)201320122011Gross reserves
319、 at beginning of period10,069.1$10,123.2$9,340.2$Incurred related to:Current year2,818.5 2,748.9 3,722.5 Prior years(18.2)(3.7)3.7 Total incurred losses2,800.3 2,745.3 3,726.2 Paid related to:Current year 664.7 633.9 810.5 Prior years2,353.8 2,220.2 2,008.3 Total paid losses3,018.5 2,854.1 2,818.8 F
320、oreign exchange/translation adjustment(48.6)32.9 (15.9)Change in reinsurance receivables on unpaid losses and LAE(128.9)21.8 (108.4)Gross reserves at end of period9,673.2$10,069.1$10,123.2$(Some amounts may not reconcile due to rounding.)Years Ended December 31,Incurred prior years reserves decrease
321、d by$18.2 million,decreased by$3.7 million and increased by$3.7 million for the years ended December 31,2013,2012 and 2011,respectively.The decrease for 2013 was attributable to a$148.8 million decrease in reinsurance business,primarily related to favorable development on treaty property reserves,pa
322、rtially offset by a$130.5 million increase in insurance business primarily related to development on contractors liability,umbrella and workers compensation reserves.The decrease for 2012 was attributable to a$57.2 million decrease in reinsurance business,primarily related to favorable development o
323、n treaty casualty reserves,partially offset by a$53.5 million increase in insurance business primarily related to development on contractors liability and workers compensation reserves.The increase for 2011 was attributable to a$113.8 million increase in the insurance and US reinsurance business pri
324、marily related to development on contractors liability,excess casualty and California workers compensation reserves,partially offset by a$110.1 million decrease in non-US reinsurance business,primarily related to favorable development on non-catastrophe property reserves.Reserves for Asbestos and En
325、vironmental Losses and LAE.At December 31,2013,the Companys gross reserves for A&E claims represented 4.2%of its total reserves.The Companys A&E liabilities stem from Mt.McKinleys direct insurance business and Everest Res assumed reinsurance business.There are significant uncertainties in estimating
326、 the amount of the Companys potential losses from A&E claims and ultimate values cannot be estimated using traditional reserving techniques.See ITEM 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations Asbestos and Environmental Exposures”and Item 8,“Financial Stat
327、ements and Supplementary Data”-Note 3 of Notes to Consolidated Financial Statements.The following table summarizes the composition of the Companys total reserves for A&E losses,gross and net of reinsurance,for the periods indicated:Years Ended December 31,(Dollars in millions)201320122011Gross reser
328、ves 402.5$442.8$499.9$Reinsurance receivable(15.8)(17.1)(19.8)Net reserves 386.7$425.7$480.2$(Some amounts may not reconcile due to rounding.)18 Additional losses,including those relating to latent injuries and other exposures,which are as yet unrecognized,the type or magnitude of which cannot be fo
329、reseen by either the Company or the industry,may emerge in the future.Such future emergence could have material adverse effects on the Companys future financial condition,results of operations and cash flows.Future Policy Benefit Reserves.The Company wrote a limited amount of life and annuity reinsu
330、rance in its Bermuda segment.Future policy benefit liabilities for annuities are reported at the accumulated fund balance of these contracts.Reserves for those liabilities include mortality provisions with respect to life and annuity claims,both reported and unreported.Actual experience in a particu
331、lar period may be worse than assumed experience and,consequently,may adversely affect the Companys operating results for that period.See ITEM 8,“Financial Statements and Supplementary Data”-Note 1F of Notes to Consolidated Financial Statements.Activity in the reserve for future policy benefits is su
332、mmarized for the periods indicated:At December 31,(Dollars in millions)201320122011Balance at beginning of year66.1$67.2$63.0$Liabilities assumed0.1 0.1 0.2 Adjustments to reserves(3.1)2.4 8.4 Benefits paid in the current year(3.6)(3.6)(4.4)Balance at end of year59.5$66.1$67.2$(Some amounts may not
333、reconcile due to rounding.)Investments.The board of directors of each of the Companys operating subsidiaries is responsible for establishing investment policy and guidelines and,together with senior management,for overseeing their execution.The Companys principal investment objectives are to ensure funds are available to meet its insurance and reinsurance obligations and to maximize after-tax inve
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