UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 1-14527

EVEREST REINSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

22-3263609

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

477 Martinsville Road

Post Office Box 830

Liberty Corner, New Jersey 07938-0830

~~Liberty Corner, New Jersey 07938-0830~~

~~(908)~~(908 ) 604-3000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

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 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 ☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

YES ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated ~~filer~~Filer ☑		Smaller reporting company ☐
		Emerging growth company ☐

Indicate by check mark if the registrant is an emerging growth company and has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act.

YES ☐ NO ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

		Number of Shares Outstanding
Class		At ~~November~~August 1, ~~2019~~2020
Common Shares, $0.01 par value		1,000

The Registrant meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H of Form 10-Q.

EVEREST REINSURANCE HOLDINGS, INC.

Table of Contents

Form 10-Q

		Page
PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets at ~~September~~June 30, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (unaudited)	2

	Consolidated Statements of Changes in Stockholder’s Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (unaudited)	3

	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	3935

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5650

Item 4.	Controls and Procedures	5650

PART II

OTHER INFORMATION

Item 1.	Legal Proceedings	5651

Item 1A.	Risk Factors	5751

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5752

Item 3.	Defaults Upon Senior Securities	5752

Item 4.	Mine Safety Disclosures	5752

Item 5.	Other Information	5752

Item 6.	Exhibits	5753

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
(Dollars in thousands, except share amounts and par value per share)	2019		2018		June 30, 2020		December 31, 2019
	(unaudited)				(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value (amortized cost: 2019, $7,206,711; 2018, $7,032,749	$	7,373,719	$	6,962,075
Fixed maturities - available for sale, at market value (amortized cost: 2020, $7,657,782; 2019, $7,334,425 allowances for credit losses: 2020, $19,925; 2019, $0)					$	7,919,377	$	7,492,079
Fixed maturities - available for sale, at fair value		-		2,337		4,431		5,826
Equity securities, at fair value		744,999		564,338		789,819		764,049
Short-term investments (cost: 2019, $276,651; 2018, $174,155)		276,666		174,131
Other invested assets (cost: 2019, $967,624; 2018, $882,647)		967,624		882,647
Short-term investments (cost: 2020, $588,983; 2019, $279,824)						588,693		279,879
Other invested assets (cost: 2020, $1,033,457; 2019, $1,020,766)						1,033,457		1,020,766
Other invested assets, at fair value		2,019,642		1,717,336		1,786,003		1,982,582
Cash		420,832		404,522		445,617		411,122
Total investments and cash		11,803,482		10,707,386		12,567,397		11,956,303
Note Receivable - affiliated						300,000		300,000
Accrued investment income		54,572		47,232		62,738		54,383
Premiums receivable		1,587,425		1,471,805		1,479,774		1,337,344
Reinsurance receivables - unaffiliated		1,322,562		1,295,961		1,380,469		1,318,820
Reinsurance receivables - affiliated		3,414,547		3,544,975		2,823,553		3,125,269
Income taxes		133,691		411,994		86,402		65,793
Funds held by reinsureds		244,976		228,556		242,611		228,297
Deferred acquisition costs		369,509		353,630		383,855		388,238
Prepaid reinsurance premiums		443,460		328,796		396,556		413,612
Other assets		413,465		289,962		557,699		518,127
TOTAL ASSETS	$	19,787,689	$	18,680,297	$	20,281,054		19,706,186

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	10,412,174	$	10,167,018	$	10,383,323	$	10,209,519
Unearned premium reserve		2,148,968		1,826,868		2,286,856		2,198,932
Funds held under reinsurance treaties		39,924		41,600		42,380		41,233
Other net payable to reinsurers		341,029		316,826		354,900		267,367
Losses in course of payment						188,853		70,541
Senior notes due 6/1/2044		397,044		396,954		397,134		397,074
Long term notes due 5/1/2067		236,733		236,659		223,625		236,758
Note payable - affiliated		-		300,000
Accrued interest on debt and borrowings		7,821		3,093		2,368		2,878
Unsettled securities payable		35,534		50,912		67,485		25,230
Other liabilities		341,218		303,610		350,558		399,229
Total liabilities		13,960,445		13,643,540		14,297,482		13,848,761
Commitments and Contingencies (Note 7)		-		-

Commitments and Contingencies (Note 6)						-		-

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized; 1,000 shares issued and outstanding (2019 and 2018)		-		-
Common stock, par value: $0.01; 3,000 shares authorized; 1,000 shares issued and outstanding (2020 and 2019)						-		-
Additional paid-in capital		1,100,573		1,100,315		1,100,882		1,100,678
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $18,579 at 2019 and ($33,506) at 2018		70,307		(126,254)
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of $38,126 at 2020 and $16,977 at 2019						143,308		64,324
Retained earnings		4,656,364		4,062,696		4,739,382		4,692,423
Total stockholder's equity		5,827,244		5,036,757		5,983,572		5,857,425
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	19,787,689	$	18,680,297	$	20,281,054	$	19,706,186

The accompanying notes are an integral part of the consolidated financial statements.	The accompanying notes are an integral part of the consolidated financial statements.				The accompanying notes are an integral part of the consolidated financial statements.

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
	(unaudited)				(unaudited)				(unaudited)				(unaudited)
REVENUES:
Premiums earned	$	1,428,400	$	1,230,771	$	4,074,477	$	3,526,617	$	1,538,960	$	1,375,623	$	3,032,965	$	2,646,077
Net investment income		95,592		90,298		270,835		232,277		35,153		90,709		109,354		175,243
Net realized capital gains (losses):
Credit allowances on fixed maturity securities										(7,826)		-		(19,925)		-
Other-than-temporary impairments on fixed maturity securities		(6,968)		(2,834)		(14,187)		(3,741)		-		(4,929)		-		(7,219)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)		-		-		-		-
Other net realized capital gains (losses)		119,510		32,852		404,348		(68,713)		(471,534)		147,492		(202,568)		284,838
Total net realized capital gains (losses)		112,542		30,018		390,161		(72,454)		(479,360)		142,563		(222,493)		277,619
Other income (expense)		(2,673)		(4,802)		(8,459)		(3,905)		(5,122)		(5,055)		(9,620)		(5,785)
Total revenues		1,633,861		1,346,285		4,727,014		3,682,535		1,089,631		1,603,840		2,910,206		3,093,154

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,098,093		970,297		2,737,411		2,912,312		975,832		843,222		2,005,345		1,639,318
Commission, brokerage, taxes and fees		357,681		288,212		962,674		832,671		355,699		316,775		678,803		604,993
Other underwriting expenses		95,693		78,800		257,426		230,377		94,131		83,351		195,339		161,733
Corporate expenses		3,183		2,488		7,353		7,597		3,514		2,519		7,235		4,170
Interest, fee and bond issue cost amortization expense		7,802		7,796		27,314		22,732		6,922		9,684		14,382		19,512
Total claims and expenses		1,562,452		1,347,593		3,992,178		4,005,689		1,436,098		1,255,551		2,901,104		2,429,726

INCOME (LOSS) BEFORE TAXES		71,409		(1,308)		734,836		(323,154)		(346,467)		348,289		9,102		663,428
Income tax expense (benefit)		10,272		(23,274)		141,169		(66,032)		(75,874)		67,367		(36,950)		130,898

NET INCOME (LOSS)	$	61,137	$	21,966	$	593,667	$	(257,122)	$	(270,593)	$	280,922	$	46,052	$	532,530

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		24,454		(6,932)		180,998		(71,919)		243,550		68,095		66,026		156,544
Less: reclassification adjustment for realized losses (gains) included in net income (loss)		2,085		2,534		6,927		(2,147)		3,543		5,858		31,429		4,842
Total URA(D) on securities arising during the period		26,539		(4,398)		187,925		(74,066)		247,093		73,953		97,455		161,386

Foreign currency translation adjustments		2,881		(2,930)		4,970		(25,084)		8,436		(7,475)		(21,197)		2,089

Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		1,364		1,816		3,666		5,446		1,806		1,151		2,726		2,302
Total benefit plan net gain (loss) for the period		1,364		1,816		3,666		5,446		1,806		1,151		2,726		2,302
Total other comprehensive income (loss), net of tax		30,784		(5,512)		196,561		(93,704)		257,335		67,629		78,984		165,777

COMPREHENSIVE INCOME (LOSS)	$	91,921	$	16,454	$	790,228	$	(350,826)	$	(13,258)	$	348,551	$	125,036	$	698,307

The accompanying notes are an integral part of the consolidated financial statements.	The accompanying notes are an integral part of the consolidated financial statements.								The accompanying notes are an integral part of the consolidated financial statements.

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDER’S EQUITY

(Dollars in thousands, except share amounts)	2019		2018		2020		2019
	(unaudited)				(unaudited)
COMMON STOCK (shares outstanding):
Balance, January 1		1,000		1,000		1,000		1,000
Balance, March 31		1,000		1,000		1,000		1,000
Balance, June 30		1,000		1,000		1,000		1,000
Balance, September 30		1,000		1,000

ADDITIONAL PAID-IN CAPITAL:
Balance, January 1	$	1,100,315	$	387,841	$	1,100,678	$	1,100,315
Share-based compensation plans		87		48		103		87
Balance, March 31		1,100,402		387,889		1,100,781		1,100,402
Share-based compensation plans		87		47		101		87
Balance, June 30		1,100,489		387,936		1,100,882		1,100,489
Share-based compensation plans		84		44
Balance, September 30		1,100,573		387,980

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME TAXES:
Balance, January 1		(126,254)		(942)		64,324		(126,254)
Change to beginning balance due to adoption of ASU 2016-01		-		(2,447)
Net increase (decrease) during the period		98,148		(51,184)		(178,351)		98,148
Balance, March 31		(28,106)		(54,573)		(114,027)		(28,106)
Net increase (decrease) during the period		67,629		(37,008)		257,335		67,629
Balance, June 30		39,523		(91,581)		143,308		39,523
Net increase (decrease) during the period		30,784		(5,512)
Balance, September 30		70,307		(97,093)

RETAINED EARNINGS:
Balance, January 1		4,062,696		5,022,433		4,692,423		4,062,696
Change to beginning balance due to adoption of ASU 2016-01		-		2,447
Change to beginning balance due to adoption of ASU 2016-13						907		-
Net income (loss)		251,610		(11,793)		316,645		251,608
Balance, March 31		4,314,306		5,013,087		5,009,975		4,314,306
Net income (loss)		280,921		(267,295)		(270,593)		280,922
Balance, June 30		4,595,227		4,745,792		4,739,382		4,595,227
Net income (loss)		61,137		21,966
Balance, September 30		4,656,364		4,767,758

TOTAL STOCKHOLDER'S EQUITY, September 30	$	5,827,244	$	5,058,645
TOTAL STOCKHOLDER'S EQUITY, June 30					$	5,983,572	$	5,735,239

The accompanying notes are an integral part of the consolidated financial statements.	The accompanying notes are an integral part of the consolidated financial statements.				The accompanying notes are an integral part of the consolidated financial statements.

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended				Six Months Ended
	September 30,				June 30,
(Dollars in thousands)	2019		2018		2020		2019
	(unaudited)				(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	593,667	$	(257,122)	$	46,052	$	532,530
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(115,834)		(142,519)		(147,210)		(93,371)
Decrease (increase) in funds held by reinsureds, net		(18,129)		(17,198)		(13,336)		(13,929)
Decrease (increase) in reinsurance receivables		107,427		888,922		233,199		82,701
Decrease (increase) in income taxes		226,147		9,951		(41,843)		214,671
Decrease (increase) in prepaid reinsurance premiums		(114,587)		(7,165)		15,928		(110,643)
Increase (decrease) in reserve for losses and loss adjustment expenses		240,321		199,220		205,192		(21,387)
Increase (decrease) in unearned premiums		321,643		202,760		90,640		176,412
Increase (decrease) in other net payable to reinsurers		24,093		(106,203)		89,520		3,307
Increase (decrease) in losses in course of payment		(44,192)		36,979		118,964		(22,634)
Change in equity adjustments in limited partnerships		(42,959)		(58,996)		50,809		(23,662)
Distribution of limited partnership income		39,247		48,773		30,916		24,969
Change in other assets and liabilities, net		(33,863)		(98,702)		(75,931)		(65,421)
Non-cash compensation expense		20,425		8,779		15,462		13,913
Amortization of bond premium (accrual of bond discount)		3,416		4,842		4,436		826
Net realized capital (gains) losses		(390,161)		72,454		222,493		(277,619)
Net cash provided by (used in) operating activities		816,661		784,775		845,291		420,663

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		672,207		556,195		494,544		437,371
Proceeds from fixed maturities sold - available for sale, at market value		2,217,734		552,982		337,723		2,004,602
Proceeds from fixed maturities sold - available for sale, at fair value		2,706		1,751		-		2,706
Proceeds from equity securities sold - at fair value		184,898		616,330		213,003		148,973
Distributions from other invested assets		133,130		1,010,121		119,727		76,149
Cost of fixed maturities acquired - available for sale, at market value		(3,071,436)		(1,515,045)		(1,226,251)		(2,251,818)
Cost of fixed maturities acquired - available for sale, at fair value		-		(4,381)
Cost of equity securities acquired - at fair value		(269,672)		(603,856)		(222,818)		(228,872)
Cost of other invested assets acquired		(212,910)		(1,059,712)		(215,569)		(138,096)
Net change in short-term investments		(100,012)		(280,114)		(308,979)		(192,889)
Net change in unsettled securities transactions		(30,252)		110,139		37,744		13,100
Net cash provided by (used in) investing activities		(473,607)		(615,590)		(770,876)		(128,774)

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation, net of expense		(20,166)		(6,193)		(15,258)		(13,739)
Cost of repayment of note payable-affiliated		(300,000)		-
Cost of debt repurchase						(10,648)		-
Proceeds from issuance (cost of repayment) of note payable-affiliated						-		(300,000)
Net cash provided by (used in) financing activities		(320,166)		(6,193)		(25,906)		(313,739)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(6,578)		(16,786)		(14,015)		(5,483)

Net increase (decrease) in cash		16,310		146,206		34,495		(27,333)
Cash, beginning of period		404,522		229,552		411,122		404,522
Cash, end of period	$	420,832	$	375,758	$	445,617	$	377,189

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	(85,216)	$	(75,361)	$	4,763	$	(87,045)
Interest paid		22,421		17,426		14,782		19,433

The accompanying notes are an integral part of the consolidated financial statements.	The accompanying notes are an integral part of the consolidated financial statements.				The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019,~~2020, and ~~2018~~2019

1. GENERAL

As used in this document, “Holdings” means Everest Reinsurance Holdings, Inc., a Delaware company and direct subsidiary of Everest Underwriting Group (Ireland) Limited (“Holdings Ireland”); “Group” means Everest Re Group, Ltd. (Holdings Ireland’s parent); “Bermuda Re” means Everest Reinsurance (Bermuda), Ltd., a subsidiary of Group; “Everest Re” means Everest Reinsurance Company and its subsidiaries, a subsidiary of Holdings (unless the context otherwise requires) and the “Company” means Holdings and its subsidiaries.

During the fourth quarter of 2018, Everest Global Services (“Global Services”), a previously affiliated company, was contributed to Holdings from its parent company, Holdings Ireland.

2. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of the Company ~~as of September 30, 2019 and December 31, 2018 and~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), has been omitted since it is not required for interim reporting purposes. The December 31, ~~2018~~2019 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017 included in the Company’s most recent Form 10-K filing.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate actual results could differ, possibly materially, from those estimates. This is particularly true given the fluid and continuing nature of the COVID-19 pandemic. This is an ongoing event and so is the Company’s evaluation and analysis. While the Company’s analysis considers all aspects of its operations, it does not take into account legal, regulatory or legislative intervention that could retroactively mandate or expand coverage provisions. Given the uncertainties in the current public health and economic environment, there could be an adverse impact on results for the Property & Casualty industry and the Company for the remainder of the year. The impact is dependent on the shape and length of the economic recovery.

With recent changes in executive management and organizational structure, the Company manages its reinsurance and insurance operations as autonomous units and key strategic decisions are based on the aggregate operating results and projections for these segments of business. Accordingly, effective January 1, 2020, the Company revised it reporting segments to Reinsurance Operations and Insurance Operations. This replaces the previous reported segments of U.S. Reinsurance, International (reinsurance) and Insurance. The prior year presented segment information has been reformatted to reflect this change.

All intercompany accounts and transactions have been eliminated.

Certain reclassifications and format changes have been made to prior years’ amounts to conform to the ~~2019~~2020 presentation.

Application of Recently Issued Accounting Standard Changes.

Accounting for Income Taxes. In December 2019, The Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which provides simplification of existing guidance for income taxes, including the removal of certain exceptions related to recognition of deferred tax liabilities on foreign subsidiaries. The guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within that annual reporting period. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its financial statements.

Simplification of Disclosure Requirements. In August 2018, the Securities and Exchange Commission (“SEC”) issued Final Rule Release #33-10532 (“the Rule”) which addresses the simplification of the SEC’s disclosure requirements for quarterly and annual financial reports. The main change addressed by the Rule that is applicable to the Company is a new requirement to disclose changes in equity by line item with subtotals for each interim reporting period on the Statements of Changes in Shareholders’ Equity. The Rule became effective for all financial reports filed after November 5, 2018 (30 days after its publication in the Federal Register), except for the additional requirement for the Statements of Changes in Shareholders’ Equity which was to be implemented for first quarter 2019 reporting. The Company has adopted the portions of the Rule that became effective November 5, 2018. The portion of the Rule related to the new requirement for the Statements of Changes in Shareholders’ Equity was adopted by the Company in the first quarter of 2019.

Accounting for Cloud Computing Arrangement. In August 2018, ~~The Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”)~~ASU 2018-15, which outlines accounting for implementation costs of a cloud computing arrangement that is a service contract. This guidance requires that implementation costs of a cloud computing arrangement that is a service contract must be capitalized and expensed in accordance with the existing provisions provided in Subtopic 350-40 regarding development of internal use software. In addition, any capitalized implementation costs should be amortized over the term of the hosting arrangement. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within that annual reporting period. The Company ~~is currently evaluating~~adopted the ~~impact~~guidance as of ~~the~~January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on ~~its~~the Company’s financial statements.

~~Accounting for Long Duration Contracts.~~ In August 2018, FASB issued ASU 2018-12, which discusses changes to the recognition, measurement and presentation of long duration contracts. The main provisions of this guidance address the following: 1) In determining liability for future policy benefits, companies must review cash flow assumptions at least annually and the discount rate assumption at each reporting period date 2) Amortization of deferred acquisition costs has been simplified to be in constant level proportion to either

premiums, gross profits or gross margins 3) Disaggregated roll forwards of beginning and ending liabilities for future policy benefits are required. The guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods within that annual reporting period. The Company is currently evaluating the impact of the adoption of ASU 2018-12 on its financial statements.

~~Accounting for Deferred Taxes in Accumulated Other Comprehensive Income (AOCI).~~ In February 2018, FASB issued ASU 2018-02, which outlines guidance on the treatment of trapped deferred taxes contained within AOCI on the consolidated balance sheets. The new guidance allows the amount of trapped deferred taxes in AOCI, resulting from the change in the U.S. tax rate from 35 ~~% to 21~~% upon enactment of the Tax Cuts and Jobs Act (“TCJA”), to be reclassed as part of retained earnings in the consolidated balance sheets. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, but early adoption is allowed. The Company decided to early adopt the guidance as of December 31, 2017. The adoption resulted in a reclass of $325 thousand between AOCI and retained earnings during the fourth quarter of 2017. As an accounting policy, the Company has adopted the aggregate portfolio approach for releasing disproportionate income tax effects from AOCI.

Accounting for Impact on Income Taxes due to Tax ~~Reform.~~ Reform. In December 2017, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on the application of FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, due to the enactment of TCJA. SAB 118 became effective upon release. The Company has adopted the provisions of SAB 118 with respect to measuring the tax effects for the modifications to the determination of tax basis loss reserves. In 2018, the Company recorded adjustments to the amount of tax expense it recorded in 2017 with respect to the TCJA as estimated amounts were finalized, which did not have a material impact on the Company’s financial statements.

Amortization of Bond Premium. In March 2017, FASB issued ASU 2017-08 which outlines guidance on the amortization period for premium on callable debt securities. The new guidance requires that the premium on callable debt securities be amortized through the earliest call date rather than through the maturity date of the callable security. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The Company adopted the guidance effective January 1, 2019. The adoption of ASU 2017-08 did not have a material impact on the Company’s financial statements.

~~Presentation and Disclosure of Net Periodic Benefit Costs.~~ In March 2017, FASB issued ASU 2017-07, which outlines guidance on the presentation of net periodic costs of benefit plans. The new guidance requires that the service cost component of net periodic benefit costs be reported within the same line item of the statements of operations as other compensation costs are reported. Other components of net periodic benefit costs should be reported separately. Footnote disclosure is required to state within which line items of the statements of operations the components are reported. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2017-07 did not have a material impact on the Company’s financial statements.

~~Disclosure of Restricted Cash.~~ In November 2016, FASB issued ASU 2016-18 and in August 2016, FASB issued ASU 2016-15, which outlines guidance on the presentation in the statements of cash flows of changes in restricted cash. The new guidance requires that the statements of cash flows should reflect all changes in cash, cash equivalents and restricted cash in total and not segregated individually. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2016-18 and ASU 2016-15 did not have a material impact on the Company’s financial statements.

~~Intra-Entity Asset Transfers.~~ In October 2016, FASB issued ASU 2016-16, which outlines guidance on the tax accounting for intra-entity asset sales and transfers, other than inventory. The new guidance requires that reporting entities recognize tax expense from the intra-entity transfer of an asset in the seller’s tax jurisdiction at the time of transfer and recognize any deferred tax asset in the buyer’s tax jurisdiction at the time of transfer. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2016-16 did not have a material impact on the Company’s financial statements.

Valuation of Financial Instruments. In June 2016, FASB issued ASU 2016-13 (and has subsequently issued related guidance and amendments in ASU 2019-11 and ASU 2019-10 in November 2019) which outline guidance on the valuation of and accounting for assets measured at amortized cost and available for sale debt securities. The carrying value of assets measured at amortized cost will now be presented as the amount expected to be collected on the financial asset (amortized cost less an allowance for credit losses valuation account). Available for sale debt securities will now record credit losses through an allowance for credit losses, which will be limited to the amount by which fair value is below amortized cost. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020. The adoption resulted in a cumulative adjustment of $907 thousand in retained earnings, which is ~~currently evaluating~~disclosed separately within the ~~impact~~Consolidated Statements of ~~the adoption of ASU 2016-13 on its financial statements.~~Shareholders’ Equity.

Leases. In February 2016, FASB issued ASU 2016-02 (and subsequently issued ASU 2018-11 in July, 2018) which outline new guidance on the accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities on the balance sheets for most leases that were previously deemed operating leases and required only lease expense presentation in the statements of operations. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The Company adopted ASU 2016-02 effective January 1, 2019 and elected to utilize a cumulative-effect adjustment to the opening balance of retained earnings for the year of adoption. Accordingly, the Company’s reporting for the comparative periods prior to adoption continue to be presented in the financial statements in accordance with previous lease accounting guidance. The Company also elected to apply the package of practical expedients applicable to the Company in the updated guidance for transition for leases in effect at adoption. The Company did not elect the hindsight practical expedient to determine the lease term of existing leases (e.g. The Company did not re-assess lease renewals, termination options nor purchase options in determining lease terms). The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $60,325 thousand as part of other assets and a lease liability of $66,551 thousand as part of other liabilities in the consolidated balance sheet, as well as de-recognizing the liability for deferred rent that was required under the previous guidance. The cumulative effect adjustment to the opening balance of retained earnings was ~~zero.~~zero. The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity.

~~Recognition and Measurement of Financial Instruments.~~ In January 2016, the FASB issued ASU 2016-01, which outlines revised guidance on the accounting for equity investments. The new guidance states that all equity investments in unconsolidated entities will be measured at fair value, with the change in value being recorded through the income statement rather than being recorded within other comprehensive income. The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2016-01 resulted in a cumulative change adjustment of $2,447 ~~thousand between AOCI and retained earnings, which is disclosed separately within the consolidated statement of changes in shareholders equity.~~

~~Revenue Recognition.~~ In May 2014, the FASB issued ASU 2014-09 and in August 2015, FASB issued ASU 2015-14, which outline revised guidance on the recognition of revenue arising from contracts with customers. The new guidance states that reporting entities should apply certain steps to determine when revenue should be recognized, based upon fulfillment of performance obligations to complete contracts. The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2014-09 and ASU 2015-14 did not have a material impact on the Company’s financial statements.

Any issued guidance and pronouncements, other than those directly referenced above, are deemed by the Company to be either not applicable or immaterial to its financial statements.

3. ~~REVISIONS TO FINANCIAL STATEMENTS~~INVESTMENTS

~~In preparing its current period financial statements,~~Effective January 1, 2020, the Company ~~identified errors~~adopted ASU 2016-13 which provides guidance on the accounting for fixed maturity securities. The guidance requires the Company to record allowances for credit losses for securities that are deemed to have valuation deterioration due to credit risk issues. The initial table below presents the amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and market value of fixed maturity securities as of June 30, 2020 in accordance with ASU 2016-13 guidance. The second table presents the ~~handling~~amortized cost, gross unrealized appreciation/(depreciation), market value and other-than-temporary impairments (“OTTI”) in AOCI as of foreign exchange related to premium funds held from reinsureds. Although management determined that the impact of the foreign exchange differences were not material to prior period financial statements, the impact of recording the cumulative difference would have significantly impacted results within the current period. As a result, prior period balances have been revisedDecember 31, 2019, in ~~the~~accordance with previously applicable ~~financial statements and corresponding footnotes to correct the foreign exchange adjustments.~~guidance

	At June 30, 2020
	Amortized		Allowances for		Unrealized		Unrealized		Market
(Dollars in thousands)	Cost		Credit Losses		Appreciation		Depreciation		Value
Fixed maturity securities
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	741,244	$	-	$	31,740	$	-	$	772,984
Obligations of U.S. states and political subdivisions		507,475		-		27,597		(3,789)		531,283
Corporate securities		2,935,665		(19,398)		135,213		(51,922)		2,999,558
Asset-backed securities		991,779		-		14,504		(21,500)		984,783
Mortgage-backed securities
Commercial		348,329		-		33,506		(788)		381,047
Agency residential		604,360		-		33,190		(349)		637,201
Non-agency residential		509		-		-		(3)		506
Foreign government securities		636,346		-		38,578		(5,034)		669,890
Foreign corporate securities		892,075		(527)		57,601		(7,024)		942,125
Total fixed maturity securities	$	7,657,782	$	(19,925)	$	371,929	$	(90,409)	$	7,919,377

Management assessed the materiality of this change within prior period financial statements based upon SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections. The prior period comparative financial statements that are presented herein have been revised.

The following tables present line items for prior period financial statements that have been affected by the revision. For these line items, the tables detail the amounts as previously reported, the impact upon those line items due to the revision, and the amounts as currently revised within the financial statements.

CONSOLIDATED BALANCE SHEETS

December 31, 2018

December 31, 2017

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

ASSETS:

Funds held by reinsureds

238,566

(10,010)

228,556

210,939

(4,292)

206,647
Income taxes

409,892

2,102

411,994

87,110

901

88,011
TOTAL ASSETS

$
18,688,205

$
(7,908)

$
18,680,297

$
17,888,512

$
(3,391)

$
17,885,121

SHAREHOLDERS' EQUITY:

Retained earnings

4,070,604

(7,908)

4,062,696

5,025,824

(3,391)

5,022,433
Total shareholders' equity

5,044,665

(7,908)

5,036,757

5,412,723

(3,391)

5,409,332
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
18,688,205

$
(7,908)

$
18,680,297

$
17,888,512

$
(3,391)

$
17,885,121

CONSOLIDATED BALANCE SHEETS

June 30, 2019

March 31, 2019

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

ASSETS:

Funds held by reinsureds

250,903

(10,768)

240,135

248,993

(9,524)

239,469
Income taxes

151,109

2,261

153,370

289,210

2,000

291,210
TOTAL ASSETS

$
19,235,832

$
(8,507)

$
19,227,325

$
19,063,665

$
(7,524)

$
19,056,141

SHAREHOLDERS' EQUITY:

Retained earnings

4,603,734

(8,507)

4,595,227

4,321,830

(7,524)

4,314,306
Total stockholder's equity

5,743,746

(8,507)

5,735,239

5,394,126

(7,524)

5,386,602
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
19,235,832

$
(8,507)

$
19,227,325

$
19,063,665

$
(7,524)

$
19,056,141

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Year Ended December 31, 2018

Year Ended December 31, 2017
INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

(3,851)

(5,717)

(9,568)

23,750

2,116

25,866
Total revenues

$
4,964,232

$
(5,717)

$
4,958,515

$
2,421,157

$
2,116

$
2,423,273

INCOME (LOSS) BEFORE TAXES

$
(1,323,492)

$
(5,717)

$
(1,329,209)

$
(122,982)

$
2,116

$
(120,866)
Income tax expense (benefit)

(365,825)

(1,200)

(367,025)

(201,180)

444

(200,736)

NET INCOME (LOSS)

$
(957,667)

$
(4,517)

$
(962,184)

$
78,198

$
1,672

$
79,870

COMPREHENSIVE INCOME (LOSS)

$
(1,080,532)

$
(4,517)

$
(1,085,049)

$
113,896

$
1,672

$
115,568

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019
INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

(3,812)

(1,243)

(5,055)

(5,026)

(759)

(5,785)
Total revenues

$
1,605,083

$
(1,243)

$
1,603,840

$
3,093,913

$
(759)

$
3,093,154

INCOME (LOSS) BEFORE TAXES

$
349,532

$
(1,243)

$
348,289

$
664,187

$
(759)

$
663,428
Income tax expense (benefit)

67,628

(261)

67,367

131,057

(159)

130,898

NET INCOME (LOSS)

$
281,904

$
(982)

$
280,922

$
533,130

$
(600)

$
532,530

COMPREHENSIVE INCOME (LOSS)

$
349,533

$
(982)

$
348,551

$
698,907

$
(600)

$
698,307

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2019
AND COMPREHENSIVE INCOME (LOSS):

As Previously

Impact of

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

(1,214)

484

(730)
Total revenues

$
1,488,830

$
484

$
1,489,314

INCOME (LOSS) BEFORE TAXES

$
314,655

$
484

$
315,139
Income tax expense (benefit)

63,429

102

63,531

NET INCOME (LOSS)

$
251,226

$
382

$
251,608

COMPREHENSIVE INCOME (LOSS)

$
349,374

$
382

$
349,756

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018
INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

(1,385)

(3,417)

(4,802)

1,420

(5,325)

(3,905)
Total revenues

$
1,349,702

$
(3,417)

$
1,346,285

$
3,687,860

$
(5,325)

$
3,682,535

INCOME (LOSS) BEFORE TAXES

$
2,109

$
(3,417)

$
(1,308)

$
(317,829)

$
(5,325)

$
(323,154)
Income tax expense (benefit)

(22,556)

(718)

(23,274)

(64,914)

(1,118)

(66,032)

NET INCOME (LOSS)

$
24,665

$
(2,699)

$
21,966

$
(252,915)

$
(4,207)

$
(257,122)

COMPREHENSIVE INCOME (LOSS)

$
19,153

$
(2,699)

$
16,454

$
(346,619)

$
(4,207)

$
(350,826)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended June 30, 2018

Six Months Ended June 30, 2018
INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

77,682

(2,388)

75,294

2,805

(1,908)

897
Total revenues

$
1,287,317

$
(2,388)

$
1,284,929

$
2,338,158

$
(1,908)

$
2,336,250

INCOME (LOSS) BEFORE TAXES

$
(312,807)

$
(2,388)

$
(315,195)

$
(319,938)

$
(1,908)

$
(321,846)
Income tax expense (benefit)

(47,399)

(501)

(47,900)

(42,538)

(400)

(42,938)

NET INCOME (LOSS)

$
(265,408)

$
(1,887)

$
(267,295)

$
(277,580)

$
(1,508)

$
(279,088)

COMPREHENSIVE INCOME (LOSS)

$
(302,416)

$
(1,887)

$
(304,303)

$
(365,772)

$
(1,508)

$
(367,280)

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2018
AND COMPREHENSIVE INCOME (LOSS):

As Previously

Impact of

Reported

Revisions

As Revised
(Dollars in thousands)

Revenues:

Other income (expense)

(74,877)

480

(74,397)
Total revenues

$
1,050,841

$
480

$
1,051,321

INCOME (LOSS) BEFORE TAXES

$
(7,131)

$
480

$
(6,651)
Income tax expense (benefit)

5,041

101

5,142

NET INCOME (LOSS)

$
(12,172)

$
379

$
(11,793)

COMPREHENSIVE INCOME (LOSS)

$
(63,356)

$
379

$
(62,977)

CONSOLIDATED STATEMENTS OF

Year Ended December 31, 2018

Year Ended December 31, 2017
CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

$
5,025,824

$
(3,391)

$
5,022,433

$
4,947,301

$
(5,062)

$
4,942,239
Net income (loss)

(957,667)

(4,517)

(962,184)

78,198

1,672

79,870
Balance, end of period

4,070,604

(7,908)

4,062,696

5,025,824

(3,391)

5,022,433
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

$
5,044,665

$
(7,908)

$
5,036,757

$
5,412,723

$
(3,391)

$
5,409,332

CONSOLIDATED STATEMENTS OF

Six Months Ended June 30, 2019

Three Months Ended March 31, 2019
CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, January 1

$
4,070,604

$
(7,908)

$
4,062,696

$
4,070,604

$
(7,908)

$
4,062,696
Net income (loss)

251,226

382

251,608

251,226

382

251,608
Balance, March 31

4,321,830

(7,524)

4,314,306

4,321,830

(7,524)

4,314,306
Net income (loss)

281,904

(982)

280,922

Balance, June 30

4,603,734

(8,507)

4,595,227

TOTAL STOCKHOLDER'S EQUITY, June 30

$
5,743,746

$
(8,507)

$
5,735,239

$
5,394,126

$
(7,524)

$
5,386,602

CONSOLIDATED STATEMENTS OF

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018
CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

$
4,750,691

$
(4,897)

$
4,745,792

$
5,025,824

$
(3,391)

$
5,022,433
Net income (loss)

24,665

(2,699)

21,966

(252,915)

(4,207)

(257,122)
Balance, end of period

4,775,356

(7,597)

4,767,758

4,775,356

(7,597)

4,767,758
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

$
5,066,243

$
(7,597)

$
5,058,645

$
5,066,243

$
(7,597)

$
5,058,645

CONSOLIDATED STATEMENTS OF

Three Months Ended June 30, 2018

Six Months Ended June 30, 2018
CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

$
5,016,099

$
(3,011)

$
5,013,087

$
5,025,824

$
(3,391)

$
5,022,433
Net income (loss)

(265,408)

(1,887)

(267,295)

(277,580)

(1,508)

(279,088)
Balance, end of period

4,750,691

(4,897)

4,745,792

4,750,691

(4,897)

4,745,792
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

$
5,047,046

$
(4,897)

$
5,042,149

$
5,047,046

$
(4,897)

$
5,042,149

CONSOLIDATED STATEMENTS OF

Three Months Ended March 31, 2018
CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

$
5,025,824

$
(3,391)

$
5,022,433
Net income (loss)

(12,172)

379

(11,793)
Balance, end of period

5,016,099

(3,011)

5,013,087
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

$
5,349,415

$
(3,011)

$
5,346,404

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2018

Year Ended December 31, 2017

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
(957,667)

$
(4,517)

$
(962,184)

$
78,198

$
1,672

$
79,870
Decrease (increase) in funds held by reinsureds, net

(26,680)

5,717

(20,963)

(90,410)

(2,116)

(92,526)
Decrease (increase) in income taxes

$
(291,528)

$
(1,200)

$
(292,729)

$
(250,118)

$
444

$
(249,674)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2019

Three Months Ended March 31, 2019

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
533,130

$
(600)

$
532,530

$
251,226

$
382

$
251,608
Decrease (increase) in funds held by reinsureds, net

(14,688)

759

(13,929)

(13,877)

(484)

(14,361)
Decrease (increase) in income taxes

$
214,830

$
(159)

$
214,671

$
94,631

$
102

$
94,733

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2018

Six Months Ended June 30, 2018

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised
(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
(252,915)

$
(4,207)

$
(257,122)

$
(277,580)

$
(1,508)

$
(279,088)
Decrease (increase) in funds held by reinsureds, net

(22,523)

5,325

(17,198)

(13,233)

1,908

(11,326)
Decrease (increase) in income taxes

$
11,069

$
(1,118)

$
9,951

$
4,652

$
(400)

$
4,252

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2018

As Previously

Impact of

Reported

Revisions

As Revised
(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
(12,172)

$
379

$
(11,793)
Decrease (increase) in funds held by reinsureds, net

136,342

(480)

135,862
Decrease (increase) in income taxes

$
52,369

$
101

$
52,470

~~4. INVESTMENTS~~

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity, investments, carried at market value and other-than-temporary impairments (“OTTI”) in accumulated other comprehensive income (“AOCI”) are as follows for the periods indicated:

At September 30, 2019

Amortized

Unrealized

Unrealized

Market

OTTI in AOCI
(Dollars in thousands)
Cost

Appreciation

Depreciation

Value

(a)
Fixed maturity securities

U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
765,592

$
12,690

$
(1,489)

$
776,793

$
-
Obligations of U.S. states and political
subdivisions

505,854

30,609

(95)

536,368

-
Corporate securities

2,785,680

71,322

(28,579)

2,828,423

233
Asset-backed securities

605,172

1,946

(1,978)

605,140

-
Mortgage-backed securities

Commercial

310,630

21,458

(70)

332,018

-
Agency residential

646,559

19,426

(191)

665,794

-
Non-agency residential

2,203

2

-

2,205

-
Foreign government securities

569,493

22,393

(6,402)

585,484

-
Foreign corporate securities

1,015,528

37,649

(11,683)

1,041,494

337
Total fixed maturity securities
$
7,206,711

$
217,495

$
(50,487)

$
7,373,719

$
570

	At December 31, 2018										At December 31, 2019
	Amortized		Unrealized		Unrealized		Market		OTTI in AOCI		Amortized		Unrealized		Unrealized		Market		OTTI in AOCI
(Dollars in thousands)	Cost		Appreciation		Depreciation		Value		(a)		Cost		Appreciation		Depreciation		Value		(a)
Fixed maturity securities
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	2,250,312	$	3,573	$	(11,088)	$	2,242,797	$	-	$	768,374	$	10,128	$	(987)	$	777,515	$	-
Obligations of U.S. states and political subdivisions		489,013		12,915		(2,839)		499,089		440		506,347		29,651		(87)		535,911		-
Corporate securities		2,273,581		12,487		(69,915)		2,216,153		430		2,777,097		70,898		(26,438)		2,821,557		245
Asset-backed securities		223,192		102		(2,039)		221,255		-		761,607		5,659		(1,309)		765,957		-
Mortgage-backed securities
Commercial		135,380		1,947		(723)		136,604		-		311,961		17,242		(154)		329,049		-
Agency residential		149,306		1,177		(1,709)		148,774		-		625,612		19,395		(320)		644,687		-
Non-agency residential		3,115		3		(4)		3,114		-		1,638		-		-		1,638		-
Foreign government securities		576,540		14,399		(11,353)		579,586		-		646,149		18,908		(7,050)		658,007		27
Foreign corporate securities		932,310		13,325		(30,932)		914,703		281		935,640		31,257		(9,139)		957,758		333
Total fixed maturity securities	$	7,032,749	$	59,928	$	(130,602)	$	6,962,075	$	1,151	$	7,334,425	$	203,138	$	(45,484)	$	7,492,079	$	605

^(a) Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

Effective January 1, 2018, the Company adopted ASU 2016-01, which requires equity investments in unconsolidated entities to be measured at fair value, with any change in value being recorded within net realized capital gains/(losses) as part of the consolidated statements of operations and comprehensive income (loss). Previously, changes in the market value had been recorded within AOCI as part of the consolidated balance sheets. Therefore, effective January 1, 2018, equity security investments no longer have an impact upon the AOCI balance.

The amortized cost and market value of fixed maturity securities are shown in the following tables by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.

	At September 30, 2019				At December 31, 2018				At June 30, 2020				At December 31, 2019
	Amortized		Market		Amortized		Market		Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value		Cost		Value		Cost		Value
Fixed maturity securities – available for sale
Due in one year or less	$	522,393	$	519,742	$	511,193	$	507,572	$	716,996	$	714,607	$	569,506	$	563,730
Due after one year through five years		2,937,353		2,980,204		4,271,245		4,230,451		2,773,635		2,866,814		2,919,966		2,963,903
Due after five years through ten years		1,484,688		1,549,482		1,177,752		1,163,831		1,615,652		1,735,868		1,541,695		1,602,642
Due after ten years		697,713		719,134		561,566		550,474		606,522		598,551		602,440		620,473
Asset-backed securities		605,172		605,140		223,192		221,255		991,779		984,783		761,607		765,957
Mortgage-backed securities
Commercial		310,630		332,018		135,380		136,604		348,329		381,047		311,961		329,049
Agency residential		646,559		665,794		149,306		148,774		604,360		637,201		625,612		644,687
Non-agency residential		2,203		2,205		3,115		3,114		509		506		1,638		1,638
Total fixed maturity securities	$	7,206,711	$	7,373,719	$	7,032,749	$	6,962,075	$	7,657,782	$	7,919,377	$	7,334,425	$	7,492,079

148

The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the following sources for the periods as indicated:

Three Months Ended

Nine Months Ended

September 30,

September 30,
(Dollars in thousands)
2019

2018

2019

2018
Increase (decrease) during the period between
  the market value and cost of investments carried
  at market value, and deferred taxes thereon:

Fixed maturity securities
$
33,473

$
(5,899)

$
238,301

$
(94,451)
Fixed maturity securities, other-than-temporary
  impairment

119

326

(581)

691
Change in unrealized appreciation
  (depreciation), pre-tax

33,592

(5,573)

237,720

(93,760)
Deferred tax benefit (expense)

(7,028)

1,243

(49,917)

19,839
Deferred tax benefit (expense),
  other-than-temporary impairment

(25)

(68)

122

(145)
Change in unrealized appreciation (depreciation),
  net of deferred taxes, included in
  stockholder's equity
$
26,539

$
(4,398)

$
187,925

$
(74,066)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2020		2019		2020		2019
Increase (decrease) during the period between the market value and cost of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	311,927	$	93,919	$	123,520	$	204,828
Fixed maturity securities, other-than-temporary impairment		-		(368)		-		(700)
Change in unrealized appreciation (depreciation), pre-tax		311,927		93,551		123,520		204,128
Deferred tax benefit (expense)		(64,834)		(19,675)		(26,065)		(42,889)
Deferred tax benefit (expense), other-than-temporary impairment		-		77		-		147
Change in unrealized appreciation (depreciation), net of deferred taxes, included in stockholder's equity	$	247,093	$	73,953	$	97,455	$	161,386

The Company ~~frequently~~ reviews all of its fixed maturity, available for sale securities ~~for declines in market value and focuses its attention on securities~~ whose fair value has fallen below 80~~% of~~ their amortized cost at the time of review. The Company then assesses whether the decline in value is temporary or ~~other-than-temporary.~~credit related. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute ~~an other-than-temporary~~a credit impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is ~~other-than-temporary~~credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the ~~carrying value of~~Company establishes a credit allowance equal to the ~~investment is written down to fair value. The fair value adjustment that is~~estimated credit ~~or foreign exchange related~~loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. We will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

The Company does not create an allowance for uncollectible interest. If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time.

Prior to the adoption of ASU 2016-13 effective January 1, 2020, estimated credit losses were recorded as adjustments to the carrying value of the security and any subsequent improvement in market value were recorded through other comprehensive income.

The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

Upon the adoption of ASU 2016-01 as of January 1, 2018, all equity investments in unconsolidated entities are recorded at fair value. Prior to the adoption of ASU 2016-01, the Company presented certain equity securities at market value. The majority of the Company’s equity securities presented at market value prior to January 1, 2018 were primarily comprised of mutual fund investments whose underlying securities consisted of fixed maturity securities. When a fund’s value reflected an unrealized loss, the Company assessed whether the decline in value was temporary or other-than-temporary. In making its assessment, the Company considered the composition of its portfolios and their related markets, reports received from the portfolio managers and discussions with portfolio managers. If the Company determined that the declines were temporary and it had the ability and intent to continue to hold the investments, then the declines were recorded as unrealized losses in accumulated other comprehensive income (loss). If declines were deemed to be other-than-temporary, then the carrying value of the investment was written down to fair value and recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot

is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition

to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

	Duration of Unrealized Loss at September 30, 2019 By Security Type												Duration of Unrealized Loss at June 30, 2020 By Security Type
	Less than 12 months				Greater than 12 months				Total				Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	8,988	$	(7)	$	273,603	$	(1,482)	$	282,591	$	(1,489)
Obligations of U.S. states and political subdivisions		5,669		(50)		3,518		(45)		9,187		(95)		70,056		(3,564)		3,331		(225)		73,387		(3,789)
Corporate securities		328,241		(8,540)		240,104		(20,039)		568,345		(28,579)		423,967		(20,116)		122,165		(31,806)		546,132		(51,922)
Asset-backed securities		320,136		(1,873)		45,453		(105)		365,589		(1,978)		437,211		(16,250)		129,870		(5,250)		567,081		(21,500)
Mortgage-backed securities
Commercial		4,944		-		17,620		(70)		22,564		(70)		31,984		(756)		3,303		(32)		35,287		(788)
Agency residential		1,297		(4)		17,816		(187)		19,113		(191)		23,621		(342)		1,166		(7)		24,787		(349)
Non-agency residential		-		-		696		-		696		-		161		(2)		344		(1)		505		(3)
Foreign government securities		37,711		(351)		133,509		(6,051)		171,220		(6,402)		51,453		(506)		41,802		(4,528)		93,255		(5,034)
Foreign corporate securities		60,787		(513)		159,274		(11,170)		220,061		(11,683)		90,660		(2,151)		38,483		(4,873)		129,143		(7,024)
Total fixed maturity securities	$	767,773	$	(11,338)	$	891,593	$	(39,149)	$	1,659,366	$	(50,487)	$	1,129,113	$	(43,687)	$	340,464	$	(46,722)	$	1,469,577	$	(90,409)

	Duration of Unrealized Loss at September 30, 2019 By Maturity												Duration of Unrealized Loss at June 30, 2020 By Maturity
	Less than 12 months				Greater than 12 months				Total				Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities
Due in one year or less	$	33,264	$	(983)	$	169,830	$	(7,522)	$	203,094	$	(8,505)	$	32,323	$	(473)	$	52,176	$	(8,444)	$	84,499	$	(8,917)
Due in one year through five years		147,148		(1,980)		509,942		(13,702)		657,090		(15,682)		340,168		(12,125)		94,125		(6,849)		434,293		(18,974)
Due in five years through ten years		146,123		(4,957)		44,877		(7,579)		191,000		(12,536)		154,542		(6,913)		2,842		(659)		157,384		(7,572)
Due after ten years		114,861		(1,541)		85,359		(9,984)		200,220		(11,525)		109,103		(6,826)		56,638		(25,480)		165,741		(32,306)
Asset-backed securities		320,136		(1,873)		45,453		(105)		365,589		(1,978)		437,211		(16,250)		129,870		(5,250)		567,081		(21,500)
Mortgage-backed securities		6,241		(4)		36,132		(257)		42,373		(261)		55,766		(1,100)		4,813		(40)		60,579		(1,140)
Total fixed maturity securities	$	767,773	$	(11,338)	$	891,593	$	(39,149)	$	1,659,366	$	(50,487)	$	1,129,113	$	(43,687)	$	340,464	$	(46,722)	$	1,469,577	$	(90,409)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at ~~September~~June 30, ~~2019~~2020 were ~~$1,659,366~~$1,469,577 thousand and ~~$50,487~~$90,409 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at ~~September~~June 30, ~~2019,~~2020, did not exceed ~~0.2~~0.1 % of the overall market value of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The ~~$11,338~~$43,687 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities and asset backed securities. Of these unrealized losses, ~~$4,293~~$25,991 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The ~~$39,149~~$46,722 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for

more than one year related primarily to domestic and foreign corporate securities, foreign government securities and ~~U.S. government agencies.~~asset backed securities. Of these unrealized losses ~~$20,324~~$15,488 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the

investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.

	Duration of Unrealized Loss at December 31, 2018 By Security Type												Duration of Unrealized Loss at December 31, 2019 By Security Type
	Less than 12 months				Greater than 12 months				Total				Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	245,357	$	(6,099)	$	373,377	$	(4,989)	$	618,734	$	(11,088)	$	8,997	$	(141)	$	203,780	$	(846)	$	212,777	$	(987)
Obligations of U.S. states and political subdivisions		107,183		(2,829)		1,475		(10)		108,658		(2,839)		4,600		(38)		4,518		(49)		9,118		(87)
Corporate securities		1,390,942		(57,043)		194,770		(12,872)		1,585,712		(69,915)		334,973		(5,186)		230,679		(21,252)		565,652		(26,438)
Asset-backed securities		127,052		(1,408)		47,551		(631)		174,603		(2,039)		159,695		(887)		76,351		(422)		236,046		(1,309)
Mortgage-backed securities
Commercial		51,357		(695)		2,259		(28)		53,616		(723)		13,083		(87)		16,374		(67)		29,457		(154)
Agency residential		44,071		(1,221)		21,889		(488)		65,960		(1,709)		19,019		(82)		17,147		(238)		36,166		(320)
Non-agency residential		3,093		(4)		-		-		3,093		(4)		-		-		690		-		690		-
Foreign government securities		192,510		(10,690)		101,137		(663)		293,647		(11,353)		113,256		(858)		109,953		(6,192)		223,209		(7,050)
Foreign corporate securities		501,532		(25,821)		65,279		(5,111)		566,811		(30,932)		105,551		(1,260)		121,710		(7,879)		227,261		(9,139)
Total fixed maturity securities	$	2,663,097	$	(105,810)	$	807,737	$	(24,792)	$	3,470,834	$	(130,602)	$	759,174	$	(8,539)	$	781,202	$	(36,945)	$	1,540,376	$	(45,484)

	Duration of Unrealized Loss at December 31, 2018 By Maturity												Duration of Unrealized Loss at December 31, 2019 By Maturity
	Less than 12 months				Greater than 12 months				Total				Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities
Due in one year or less	$	165,545	$	(7,618)	$	118,322	$	(1,164)	$	283,867	$	(8,782)	$	34,542	$	(1,067)	$	188,755	$	(6,411)	$	223,297	$	(7,478)
Due in one year through five years		1,423,431		(44,924)		525,554		(9,530)		1,948,985		(54,454)		226,521		(2,554)		357,728		(11,562)		584,249		(14,116)
Due in five years through ten years		624,875		(35,360)		42,902		(2,773)		667,777		(38,133)		251,967		(3,292)		43,129		(6,785)		295,096		(10,077)
Due after ten years		223,673		(14,580)		49,260		(10,178)		272,933		(24,758)		54,347		(570)		81,028		(11,460)		135,375		(12,030)
Asset-backed securities		127,052		(1,408)		47,551		(631)		174,603		(2,039)		159,695		(887)		76,351		(422)		236,046		(1,309)
Mortgage-backed securities		98,521		(1,920)		24,148		(516)		122,669		(2,436)		32,102		(169)		34,211		(305)		66,313		(474)
Total fixed maturity securities	$	2,663,097	$	(105,810)	$	807,737	$	(24,792)	$	3,470,834	$	(130,602)	$	759,174	$	(8,539)	$	781,202	$	(36,945)	$	1,540,376	$	(45,484)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, ~~2018~~2019 were ~~$3,470,834~~$1,540,376 thousand and ~~$130,602~~$45,484 thousand, respectively. The market value of securities for the single issuer ~~(the United States government)~~ whose securities comprised the largest unrealized loss position at December 31, ~~2018,~~2019, did not exceed ~~9.0~~0.2 % of the overall market value of the

Company’s ~~fixed maturity securities. The market value of securities for the issuer with the second largest unrealized loss comprised less than 0.8% of the company’s~~ fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The ~~$105,810~~$8,539 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate ~~securities, foreign government securities and U.S. government agencies and corporations.~~securities. Of these unrealized losses, ~~$68,010~~$5,645 thousand were related to securities that were rated

investment grade by at least one nationally recognized statistical rating agency. The ~~$24,792~~$36,945 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities and ~~U.S.~~foreign government ~~agencies.~~securities. Of these unrealized losses ~~$14,802~~$16,976 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The components of net investment income are presented in the tables below for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Fixed maturities	$	68,178	$	51,834	$	200,606	$	142,776	$	74,897	$	65,374	$	148,985	$	132,428
Equity securities		1,971		2,651		5,721		10,681		2,024		2,319		3,616		3,750
Short-term investments and cash		2,210		2,110		8,115		4,340		578		3,169		2,148		5,905
Other invested assets
Limited partnerships		15,102		25,573		38,273		54,213		(40,465)		15,116		(33,469)		23,171
Dividends from preferred shares of affiliate		7,758		7,758		23,274		23,274		7,758		7,758		15,516		15,516
Other		7,285		6,061		13,564		10,716		(2,962)		3,299		(16,034)		6,279
Gross investment income before adjustments		102,504		95,987		289,553		246,000		41,830		97,035		120,762		187,049
Funds held interest income (expense)		1,108		906		5,434		4,505		901		1,445		4,158		4,326
Interest income from Parent		-		1,075		-		3,225		1,281		-		2,563		-
Gross investment income		103,612		97,968		294,987		253,730		44,012		98,480		127,483		191,375
Investment expenses		(8,020)		(7,670)		(24,152)		(21,453)		(8,859)		(7,771)		(18,129)		(16,132)
Net investment income	$	95,592	$	90,298	$	270,835	$	232,277	$	35,153	$	90,709	$	109,354	$	175,243

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)								(Some amounts may not reconcile due to rounding.)

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.

The Company had contractual commitments to invest up to an additional $~~670,158~~$1,040,369 thousand in limited partnerships and private placement loans at ~~September~~June 30, ~~2019.~~2020. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026.

~~Beginning in the first quarter of 2016, the~~The Company ~~participated~~participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. ~~Through the second quarter of 2018, the Company’s participation in the facility was classified within other invested assets on the Company’s Balance Sheets.~~

~~As of the third quarter of 2018, the~~The Company ~~has consolidated~~consolidates its participation in the facility. As ~~a result, the underlying investments are now recorded in the various investment line items within the Company’s balance~~

~~sheet, rather than as part~~ of ~~other invested assets. As of September~~June 30, ~~2019,~~2020, the market value of investments in the facility consolidated within the Company’s balance sheets was $~~158,631~~$340,950 thousand.

Other invested assets, at fair value, as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, were comprised of preferred shares held in Preferred Holdings, an affiliated company.

The components of net realized capital gains (losses) are presented in the table below for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Fixed maturity securities, market value:
Allowances for credit losses									$	(7,826)	$	-	$	(19,925)	$	-
Other-than-temporary impairments	$	(6,968)	$	(2,834)	$	(14,187)	$	(3,741)		-		(4,929)		-		(7,219)
Gains (losses) from sales		2,200		(1,288)		3,313		4,670		1,963		(2,313)		(18,974)		1,113
Fixed maturity securities, fair value:
Gains (losses) from sales		-		(717)		356		(1,799)		-		356		-		356
Gains (losses) from fair value adjustments		-		584		13		1,542		(272)		-		(1,395)		13
Equity securities, fair value:
Gains (losses) from sales		(1,192)		9,915		2,538		5,833		16,274		(1,314)		(11,328)		3,730
Gains (losses) from fair value adjustments		(10,326)		36,269		93,349		34,805		148,205		25,829		26,536		103,675
Other invested assets		2,097		913		2,341		1,497		1,292		(152)		(1,035)		244
Other invested assets, fair value:
Gains (losses) from fair value adjustments		126,655		(12,816)		302,306		(115,252)		(639,058)		125,024		(196,579)		175,651
Short-term investment gains (losses)		76		(8)		132		(9)		62		62		207		56
Total net realized capital gains (losses)	$	112,542	$	30,018	$	390,161	$	(72,454)	$	(479,360)	$	142,563	$	(222,493)	$	277,619

	Roll Forward of Allowance for Credit Losses
	Three Months Ended June 30, 2020								Six Months Ended June 30, 2020
			Foreign		Foreign						Foreign		Foreign
	Corporate		Government		Corporate				Corporate		Government		Corporate
	Securities		Securities		Securities		Total		Securities		Securities		Securities		Total
Beginning Balance	$	(11,468)	$	(70)	$	(561)	$	(12,099)	$	-	$	-	$	-	$	-
Credit losses on securities where credit
losses were not previously recorded		(10,355)		-		-		(10,355)		(21,823)		(70)		(561)		(22,454)
Increases in allowance on previously
impaired securities		(555)		-		(211)		(766)		(555)		-		(211)		(766)
Decreases in allowance on previously
impaired securities		1,238		-		116		1,354		1,238		-		116		1,354
Reduction in allowance due to disposals		1,742		70		129		1,941		1,742		70		129		1,941

Balance as of June 30, 2020	$	(19,398)	$	-	$	(527)	$	(19,925)	$	(19,398)	$	-	$	(527)	$	(19,925)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) ~~both~~ fair value re-measurements, allowances for credit losses per ASU 2016-13 and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above. The Company had no other-than-temporary impaired securities where the impairment had both a credit and non-credit component.

The proceeds and split between gross gains and losses, from sales of fixed maturity and equity securities, are presented in the table below for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Proceeds from sales of fixed maturity securities	$	213,132	$	184,810	$	2,220,440	$	554,733	$	173,479	$	403,419	$	337,723	$	2,007,308
Gross gains from sales		6,638		2,519		17,875		11,512		8,755		3,133		10,601		11,237
Gross losses from sales		(4,438)		(4,524)		(14,206)		(8,641)		(6,792)		(5,090)		(29,575)		(9,768)

Proceeds from sales of equity securities	$	35,925	$	186,403	$	184,898	$	616,330	$	8,842	$	79,735	$	213,003	$	148,973
Gross gains from sales		1,035		13,764		9,283		21,670		18,172		2,577		20,753		8,248
Gross losses from sales		(2,227)		(3,849)		(6,745)		(15,837)		(1,898)		(3,891)		(32,081)		(4,518)

5.4. RESERVES FOR LOSSES AND LAE

Activity in the reserve for losses and LAE is summarized for the periods indicated:

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,		Six Months Ended June 30,
(Dollars in thousands)	2019		2018			2020		2019
Gross reserves beginning of period	$	10,167,018	$	9,343,028	$	10,209,519	$	10,167,018
Less reinsurance recoverables		(4,697,543)		(5,727,268)		(4,215,348)		(4,697,543)
Net reserves beginning of period		5,469,475		3,615,760		5,994,171		5,469,475
Incurred related to:
Current year		2,709,367		2,431,606		2,006,988		1,615,277
Prior years		28,044		480,706		(1,643)		24,041
Total incurred losses and LAE		2,737,411		2,912,312		2,005,345		1,639,318
Paid related to:
Current year		505,856		639,528		474,372		391,381
Prior years		1,600,956		1,129,263		1,025,866		1,144,204
Total paid losses and LAE		2,106,812		1,768,791		1,500,238		1,535,585
Foreign exchange/translation adjustment		(2,720)		(23,093)

Foreign exchange/translation adjustment and cumulative adjustment due to adoption of ASU 2016-13						(26,906)		228

Net reserves end of period		6,097,354		4,736,188		6,472,371		5,573,437
Plus reinsurance recoverables		4,314,820		4,783,290		3,910,952		4,574,975
Gross reserves end of period	$	10,412,174	$	9,519,478	$	10,383,323	$	10,148,412

(Some amounts may not reconcile due to rounding.)

~~Incurred prior years~~Current year incurred losses ~~increased by $28,044~~were $2,006,988 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~by $480,706~~$1,615,277 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. The increase ~~for~~in current year incurred losses in 2020 compared to 2019 ~~is mainly attributable to unfavorable development on prior years catastrophes. The increase for 2018~~ was ~~mainly~~primarily due to ~~$494,221~~$73,691 thousand of ~~adverse development on prior years catastrophe~~incurred losses ~~primarily related~~due to ~~Hurricanes Harvey, Irma and Maria,~~COVID-19 as well as the ~~2017 California wildfires. The~~impact of the increase in loss estimates for Hurricanes Harvey, Irma and Maria was mostly driven by re-opened claims, loss inflation from higher than expected loss adjustment expenses and in particular, their impact on aggregate covers. premiums earned.

6.5. FAIR VALUE

GAAP guidance regarding fair value measurements address how companies should measure fair value when they are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability. The level in the hierarchy within which a given fair value measurement falls is determined based on

the lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.

The levels in the hierarchy are defined as follows:

Level 1:	Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in an active market;
Level 2:	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;
Level 3:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s fixed maturity and equity securities are primarily managed by third party investment asset managers. The investment asset managers managing publicly traded securities obtain prices from nationally recognized pricing services. These services seek to utilize market data and observations in their evaluation process. They use pricing applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.

In limited instances where prices are not provided by pricing services or in rare instances when a manager may not agree with the pricing service, price quotes on a non-binding basis are obtained from investment brokers. The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers. In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices. In addition, the Company continually performs analytical reviews of price changes and tests the prices on a random basis to an independent pricing source. No material variances were noted during these price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value. At ~~September~~June 30, ~~2019, $560,135~~2020, $953,190 thousand of fixed maturities, market value and $4,431 thousand of fixed maturities, fair value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, $~~480,181~~$782,259 thousand and all of the $4,431 thousand of fixed maturities, fair value, were valued by investment managers’ valuation committees and ~~a majority~~many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to review and evaluate these independent third party valuations. The remaining Level 3 fixed maturities of ~~$79,954~~$170,931 thousand were fair valued by the Company at either par or amortized cost, which the Company believes approximates fair value. At December 31, ~~2018, $383,994~~2019, $702,331 thousand of fixed maturities, market value and ~~$2,337~~$5,826 thousand of fixed maturities, fair value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, $~~354,133~~$610,873 thousand and all of the $~~2,337~~$5,826 thousand of fixed maturities, fair value, were valued by investment managers’ valuation committees and a majority of these fair values were substantiated by valuations from independent third parties. The remaining Level 3 fixed maturities of ~~$28,708~~$91,458 thousand were fair valued by the Company at either par or amortized cost, ~~and $1,153~~ ~~thousand were priced using a non-binding broker quote.~~which the Company believes approximates fair value.

The Company internally manages a public equity portfolio which had a fair value at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 of ~~$154,693~~$365,554 thousand and ~~$124,228~~$170,888 thousand, respectively, and all prices were obtained from publicly published sources.

Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as ~~level~~Level 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as ~~level~~Level 2 due to the added input of a foreign exchange conversion rate to determine fair or market value. The Company uses foreign currency exchange rates published by nationally recognized sources. During the three months ended June 30, 2020, the Company purchased preferred stock in a private entity and these are categorized as Level 3.

All categories of fixed maturity securities listed in the tables below are generally categorized as ~~level~~Level 2, since a particular security may not have traded but the pricing services are able to use valuation models with observable market inputs such as interest rate yield curves and prices for similar fixed maturity securities in

terms of issuer, maturity and seniority. For foreign government securities and foreign corporate securities, the fair values provided by the third party pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

The fixed maturities with fair values categorized as ~~level~~Level 3 result when prices are not available from the nationally recognized pricing services. The asset managers will then obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company. If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency exchange rates from nationally recognized sources. In limited circumstances when broker prices are not available for private placements, the Company will value the securities using comparable market information or receive fair values from investment managers.

The composition and valuation inputs for the presented fixed maturities categories are as follows:

· U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;

· Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

· Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

· Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;

· Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;

· Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

Other invested assets, at fair value, ~~was~~were categorized as Level 3 at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, since it represented a privately placed convertible preferred stock issued by an affiliate. The stock was received in exchange for shares of the Company’s parent. The 25 year redeemable, convertible preferred stock with a 1.75 % coupon is valued using a pricing model. The pricing model includes observable inputs such as the U.S. Treasury yield curve rate T note constant maturity 2010 year and the swap rate on the Company’s June 1, 2044 , 4.868 % senior notes, with adjustments to reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset.

2216

The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated:

			Fair Value Measurement Using:								Fair Value Measurement Using:
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs				Assets		Inputs		Inputs
(Dollars in thousands)	2019		(Level 1)		(Level 2)		(Level 3)		June 30, 2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	776,793	$	-	$	776,793	$	-	$	772,984	$	-	$	772,984	$	-
Obligations of U.S. States and political subdivisions		536,368		-		536,368		-		531,283		-		531,283		-
Corporate securities		2,828,423		-		2,311,025		517,398		2,999,558		-		2,348,372		651,186
Asset-backed securities		605,140		-		564,496		40,644		984,783		-		689,053		295,730
Mortgage-backed securities
Commercial		332,018		-		332,018		-		381,047		-		381,047		-
Agency residential		665,794		-		665,794		-		637,201		-		637,201		-
Non-agency residential		2,205		-		2,205		-		506		-		506		-
Foreign government securities		585,484		-		585,484		-		669,890		-		669,890		-
Foreign corporate securities		1,041,494		-		1,039,401		2,093		942,125		-		935,851		6,274
Total fixed maturities, market value		7,373,719		-		6,813,584		560,135		7,919,377		-		6,966,187		953,190

Fixed maturities, fair value										4,431		-		-		4,431
Equity securities, fair value		744,999		672,825		72,174		-		789,819		740,197		39,745		9,877
Other invested assets, fair value		2,019,642		-		-		2,019,642		1,786,003		-		-		1,786,003

There were no transfers between Level 1 and Level 2 for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

2317

The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated.

			Fair Value Measurement Using:								Fair Value Measurement Using:
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs				Assets		Inputs		Inputs
(Dollars in thousands)	2018		(Level 1)		(Level 2)		(Level 3)		December 31, 2019		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	2,242,797	$	-	$	2,242,797	$	-	$	777,515	$	-	$	777,515	$	-
Obligations of U.S. States and political subdivisions		499,089		-		499,089		-		535,911		-		535,911		-
Corporate securities		2,216,153		-		1,839,903		376,250		2,821,557		-		2,274,618		546,939
Asset-backed securities		221,255		-		221,255		-		765,957		-		612,316		153,641
Mortgage-backed securities
Commercial		136,604		-		136,604		-		329,049		-		329,049		-
Agency residential		148,774		-		148,774		-		644,687		-		644,687		-
Non-agency residential		3,114		-		3,114		-		1,638		-		1,638		-
Foreign government securities		579,586		-		579,586		-		658,007		-		658,007		-
Foreign corporate securities		914,703		-		906,959		7,744		957,758		-		956,007		1,751
Total fixed maturities, market value		6,962,075		-		6,578,081		383,994		7,492,079		-		6,789,748		702,331

Fixed maturities, fair value		2,337		-		-		2,337		5,826		-		-		5,826
Equity securities, fair value		564,338		540,894		23,444		-		764,049		719,548		44,501		-
Other invested assets, fair value		1,717,336		-		-		1,717,336		1,982,582		-		-		1,982,582

In addition, ~~$160,264~~$224,467 thousand and ~~$117,662~~$209,578 thousand of investments within other invested assets on the consolidated balance sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are not included within the fair value hierarchy tables as the assets are measured at NAV as a practical expedient to determine fair value.

2418

The following tables present the activity under Level 3, fair value measurements using significant unobservable inputs by asset type, for the periods indicated:

	Total Fixed Maturities, Market Value																Total Fixed Maturities, Market Value
	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019								Three Months Ended June 30, 2020								Six Months Ended June 30, 2020
	Corporate		Asset		Foreign				Corporate		Asset		Foreign				Corporate		Asset		Foreign				Corporate		Foreign		Foreign
(Dollars in thousands)	Securities		Backed Securities		Corporate		Total		Securities		Backed Securities		Corporate		Total		Securities		Backed Securities		Corporate		Total		Securities		Corporate		Corporate		Total
Beginning balance	$	472,229	$	-	$	2,093	$	474,322	$	376,250	$	-	$	7,744	$	383,994	$	642,432	$	238,631	$	-	$	881,063	$	546,939	$	153,641	$	1,751	$	702,331
Total gains or (losses) (realized/unrealized)
Included in earnings		1,018		-		-		1,018		3,348		-		(119)		3,229		(248)		121		(97)		(224)		(462)		125		(97)		(434)
Included in other comprehensive income (loss)		(1,314)		644		-		(670)		1,130		644		-		1,774		(549)		18,092		(40)		17,503		(3,906)		2,210		(40)		(1,736)
Purchases, issuances and settlements		42,289		40,000		-		82,289		131,975		40,000		(5,532)		166,443		14,346		38,886		5,434		58,666		113,410		139,754		3,683		256,847
Transfers in and/or (out) of Level 3		3,176		-		-		3,176		4,695		-		-		4,695		(4,795)		-		977		(3,818)		(4,795)		-		977		(3,818)
Ending balance	$	517,398	$	40,644	$	2,093	$	560,135	$	517,398	$	40,644	$	2,093	$	560,135	$	651,186	$	295,730	$	6,274	$	953,190	$	651,186	$	295,730	$	6,274	$	953,190
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	(539)	$	-	$	-	$	(539)

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)																(Some amounts may not reconcile due to rounding.)

	Total Fixed Maturities, Market Value												Total Fixed Maturities, Market Value
	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018						Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
	Corporate		Foreign				Corporate		Foreign				Corporate		Foreign				Corporate		Foreign
(Dollars in thousands)	Securities		Corporate		Total		Securities		Corporate		Total		Securities		Corporate		Total		Securities		Corporate		Total
Beginning balance	$	329,249	$	12,615	$	341,864	$	158,221	$	6,952	$	165,173	$	367,178	$	7,298	$	374,476	$	376,250	$	7,744	$	383,994
Total gains or (losses) (realized/unrealized)
Included in earnings		(1,935)		(472)		(2,407)		(590)		(882)		(1,472)		(2,528)		(238)		(2,766)		2,330		(119)		2,211
Included in other comprehensive income (loss)		(450)		-		(450)		(25)		-		(25)		1,870		-		1,870		2,444		-		2,444
Purchases, issuances and settlements		50,290		18		50,308		219,548		4,341		223,889		101,732		(4,967)		96,765		89,686		(5,532)		84,154
Transfers in and/or (out) of Level 3		-		-		-		-		1,750		1,750		3,977		-		3,977		1,519		-		1,519
Ending balance	$	377,154	$	12,161	$	389,315	$	377,154	$	12,161	$	389,315	$	472,229	$	2,093	$	474,322	$	472,229	$	2,093	$	474,322
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

	Total Fixed Maturities, Fair Value
	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Foreign				Foreign
(Dollars in thousands)	Corporate		Total		Corporate		Total
Beginning balance fixed maturities at fair value	$	4,703	$	4,703	$	5,826	$	5,826
Total gains or (losses) (realized/unrealized)
Included in earnings		(272)		(272)		(1,395)		(1,395)
Included in other comprehensive income (loss)		-		-		-		-
Transfers in and/or (out) of Level 3		-		-		-		-
Ending balance	$	4,431	$	4,431	$	4,431	$	4,431
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

2519

Total Fixed Maturities, Fair Value

Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Foreign

Foreign

(Dollars in thousands)
Corporate

Total

Corporate

Total
Beginning balance fixed maturities at fair value
$
-

$
-

$
2,337

$
2,337
Total gains or (losses) (realized/unrealized)

Included in earnings

-

-

369

369
Included in other comprehensive income (loss)

-

-

-

-
Purchases, issuances and settlements

-

-

(2,706)

(2,706)
Transfers in and/or (out) of Level 3

-

-

-

-
Ending balance
$
-

$
-

$
-

$
-
The amount of total gains or losses for the period
  included in earnings (or changes in net assets)
  attributable to the change in unrealized gains or
  losses relating to assets still held at the
  reporting date
$
-

$
-

$
-

$
-

(Some amounts may not reconcile due to rounding.)

	Total Fixed Maturities, Fair Value								Total Fixed Maturities, Fair Value
	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018				Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
	Foreign				Foreign				Foreign				Foreign
(Dollars in thousands)	Corporate		Total		Corporate		Total		Corporate		Total		Corporate		Total
Beginning balance fixed maturities at fair value	$	3,192	$	3,192	$	-	$	-	$	2,350	$	2,350	$	2,337	$	2,337
Total gains or (losses) (realized/unrealized)
Included in earnings		(101)		(101)		(257)		(257)		356		356		369		369
Included in other comprehensive income (loss)		(32)		(32)		-		-		-		-		-		-
Purchases, issuances and settlements		(686)		(686)		2,630		2,630		(2,706)		(2,706)		(2,706)		(2,706)
Transfers in and/or (out) of Level 3		-		-		-		-		-		-		-		-
Ending balance	$	2,373	$	2,373	$	2,373	$	2,373	$	-	$	-	$	-	$	-
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

The net transfers to/(from) level 3, fair value measurements using significant unobservable inputs for fixed maturities, market value were ~~$3,176~~($3,818 ) thousand for both the three and six months ended June 30, 2020 and were $3,977 thousand and ~~$4,695~~$1,519 thousand for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2019, respectively. The transfers during 2020 were related to securities that were priced using investment managers as of December 31, 2019 and were subsequently priced by a recognized pricing service as of June 30, 2020. The transfers during 2019 were related to securities that were priced using a recognized pricing service as of December 31, ~~2018. These securities~~2018 and were subsequently priced ~~using single non-binding broker quotes~~by investment managers as of ~~September~~June 30, 2019.

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by equity securities, for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2020		2019		2020		2019
Equity securities
Balance, beginning of period	$	-	$	-	$	-	$	-
Total (gains) or losses (realized/unrealized)
Included in earnings		-		-		-		-
Included in other comprehensive income (loss)		-		-		-		-
Purchases, issuances and settlements		9,877		-		9,877		-
Transfers in and/or (out) of Level 3		-		-		-		-
Balance, end of period	$	9,877	$	-	$	9,877	$	-

The amount of total gains or losses for the period included in earnings
(or changes in net assets) attributable to the change in unrealized
gains or losses relating to liabilities still held at the reporting date	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

2620

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by other invested assets, for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Other invested assets, fair value:
Beginning balance	$	1,892,988	$	1,705,037	$	1,717,336	$	1,807,473	$	2,425,061	$	1,767,963	$	1,982,582	$	1,717,336
Total gains or (losses) (realized/unrealized)
Included in earnings		126,655		(12,816)		302,306		(115,252)		(639,058)		125,025		(196,579)		175,652
Included in other comprehensive income (loss)		-		-		-		-		-		-		-		-
Purchases, issuances and settlements		-		-		-		-		-		-		-		-
Transfers in and/or (out) of Level 3		-		-		-		-		-		-		-		-
Ending balance	$	2,019,642	$	1,692,221	$	2,019,642	$	1,692,221	$	1,786,003	$	1,892,988	$	1,786,003	$	1,892,988
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

7.6. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the Company believes that its positions are legally and commercially reasonable. The Company considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.

Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.

The Company has entered into separate annuity agreements with The Prudential Insurance Company of America (“The Prudential”) and an additional unaffiliated life insurance company in which the Company has either purchased annuity contracts or become the assignee of annuity proceeds that are meant to settle claim payment obligations in the future. In both instances, the Company would become contingently liable if either The Prudential or the unaffiliated life insurance company were unable to make payments related to the respective annuity contract.

The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

	At September 30,		At December 31,		At June 30, 2020		At December 31, 2019
(Dollars in thousands)	2019		2018		At June 30, 2020		At December 31, 2019
The Prudential	$	141,608	$	142,754	$	141,186	$	141,703
Unaffiliated life insurance company		34,394		34,717		33,778		35,082

2721

8.7. COMPREHENSIVE INCOME (LOSS)

The following tables present the components of comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss) for the periods indicated:

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019						Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary	$	30,803		(6,443)	$	24,360	$	229,768	$	(48,311)	$	181,457	$	307,356		(63,806)	$	243,550	$	83,586		(17,560)	$	66,026
URA(D) on securities - OTTI		119		(25)		94		(581)		122		(459)		-		-		-		-		-		-
Reclassification of net realized losses (gains) included in net income (loss)		2,671		(586)		2,085		8,533		(1,606)		6,927		4,570		(1,027)		3,543		39,934		(8,505)		31,429
Foreign currency translation adjustments		3,641		(760)		2,881		6,286		(1,316)		4,970		10,675		(2,239)		8,436		(26,857)		5,660		(21,197)
Reclassification of amortization of net gain (loss) included in net income (loss)		1,726		(362)		1,364		4,640		(974)		3,666		2,286		(480)		1,806		3,451		(725)		2,726
Total other comprehensive income (loss)	$	38,960	$	(8,176)	$	30,784	$	248,646	$	(52,085)	$	196,561	$	324,887	$	(67,552)	$	257,335	$	100,114	$	(21,130)	$	78,984

(Some amounts may not reconcile due to rounding)

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018						Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary	$	(9,109)	$	1,919	$	(7,190)	$	(92,026)	$	19,561	$	(72,465)	$	86,524	$	(18,138)	$	68,386	$	198,965	$	(41,868)	$	157,097
URA(D) on securities - OTTI		326		(68)		258		691		(145)		546		(368)		77		(291)		(700)		147		(553)
Reclassification of net realized losses (gains) included in net income (loss)		3,210		(676)		2,534		(2,425)		278		(2,147)		7,394		(1,536)		5,858		5,862		(1,020)		4,842
Foreign currency translation adjustments		(3,723)		793		(2,930)		(31,781)		6,697		(25,084)		(9,465)		1,990		(7,475)		2,645		(556)		2,089
Reclassification of amortization of net gain (loss) included in net income (loss)		2,298		(482)		1,816		6,893		(1,447)		5,446		1,457		(306)		1,151		2,914		(612)		2,302
Total other comprehensive income (loss)	$	(6,998)	$	1,486	$	(5,512)	$	(118,648)	$	24,944	$	(93,704)	$	85,542	$	(17,913)	$	67,629	$	209,686	$	(43,909)	$	165,777

(Some amounts may not reconcile due to rounding)

The following table presents details of the amounts reclassified from AOCI for the periods indicated:

	Three Months Ended				Nine Months Ended				Affected line item within the	Three Months Ended				Six Months Ended				Affected line item within the
	September 30,				September 30,				statements of operations and	June 30,				June 30,				statements of operations and
AOCI component	2019		2018		2019		2018		comprehensive income (loss)	2020		2019		2020		2019		comprehensive income (loss)
(Dollars in thousands)
URA(D) on securities	$	2,671	$	3,210	$	8,533	$	(2,425)	Other net realized capital gains (losses)	$	4,570	$	7,394	$	39,934	$	5,862	Other net realized capital gains (losses)
		(586)		(676)		(1,606)		278	Income tax expense (benefit)		(1,027)		(1,536)		(8,505)		(1,020)	Income tax expense (benefit)
	$	2,085	$	2,534	$	6,927	$	(2,147)	Net income (loss)	$	3,543	$	5,858	$	31,429	$	4,842	Net income (loss)
Benefit plan net gain (loss)	$	1,726	$	2,298	$	4,640	$	6,893	Other underwriting expenses	$	2,286	$	1,457	$	3,451	$	2,914	Other underwriting expenses
		(362)		(482)		(974)		(1,447)	Income tax expense (benefit)		(480)		(306)		(725)		(612)	Income tax expense (benefit)
	$	1,364	$	1,816	$	3,666	$	5,446	Net income (loss)	$	1,806	$	1,151	$	2,726	$	2,302	Net income (loss)

(Some amounts may not reconcile due to rounding)	(Some amounts may not reconcile due to rounding)									(Some amounts may not reconcile due to rounding)

2822

The following table presents the components of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

September 30,
(Dollars in thousands)
2019

2018

2019

2018
Beginning balance of URA (D) on securities
$
105,436

$
(34,673)

$
(55,950)

$
37,442
Change to beginning balance due to adoption
  of ASU 2016-01

-

-

-

(2,447)
Current period change in URA (D) of investments -
  temporary

26,446

(4,656)

188,385

(74,612)
Current period change in URA (D) of investments -
  non-credit OTTI

94

258

(459)

546
Ending balance of URA (D) on securities

131,976

(39,071)

131,976

(39,071)
Beginning balance of foreign currency translation
  adjustments

(797)

11,391

(2,886)

33,545
Current period change in foreign currency translation
  adjustments

2,880

(2,930)

4,969

(25,084)
Ending balance of foreign currency translation
  adjustments

2,083

8,461

2,083

8,461
Beginning balance of benefit plan net gain (loss)

(65,116)

(68,299)

(67,418)

(71,929)
Current period change in benefit plan net gain (loss)

1,364

1,816

3,666

5,446
Ending balance of benefit plan net gain (loss)

(63,752)

(66,483)

(63,752)

(66,483)
Ending balance of accumulated other comprehensive
  income (loss)
$
70,307

$
(97,093)

$
70,307

$
(97,093)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2020		2019		2020		2019
Beginning balance of URA (D) on securities	$	(25,025)	$	31,483	$	124,612	$	(55,950)
Current period change in URA (D) of investments - temporary		247,093		74,244		97,455		161,939
Current period change in URA (D) of investments - non-credit OTTI		-		(291)		-		(553)
Ending balance of URA (D) on securities		222,068		105,436		222,068		105,436

Beginning balance of foreign currency translation adjustments		(15,367)		6,678		14,267		(2,886)
Current period change in foreign currency translation adjustments		8,436		(7,475)		(21,197)		2,089
Ending balance of foreign currency translation adjustments		(6,931)		(797)		(6,931)		(797)

Beginning balance of benefit plan net gain (loss)		(73,635)		(66,267)		(74,556)		(67,418)
Current period change in benefit plan net gain (loss)		1,806		1,151		2,726		2,302
Ending balance of benefit plan net gain (loss)		(71,829)		(65,116)		(71,829)		(65,116)

Ending balance of accumulated other comprehensive income (loss)	$	143,308	$	39,523	$	143,308	$	39,523

9.8. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS

A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re’s investments as collateral, as security for assumed losses payable to non-affiliated ceding companies. At ~~September~~June 30, ~~2019,~~2020, the total amount on deposit in the trust account was ~~$626,689~~$826,662 thousand.

On April 24, 2014, the Company entered into two collateralized reinsurance agreements with Kilimanjaro Re Limited (“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts, which cover specified named storm and earthquake events. The first agreement provides up to $250,000 thousand of reinsurance coverage from named storms in specified states of the Southeastern United States. The second agreement provides up to $200,000 thousand of reinsurance coverage from named storms in specified states of the Southeast, Mid-Atlantic and Northeast regions of the United States and Puerto Rico as well as reinsurance coverage from earthquakes in specified states of the Southeast, Mid-Atlantic, Northeast and West regions of the United States, Puerto Rico and British Columbia. These reinsurance agreements expired in April 2018.

On November 18, 2014, the Company entered into a collateralized reinsurance agreement with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. This agreement is a multi-year reinsurance contract which covers specified earthquake events. The agreement provides up to $500,000 thousand of reinsurance coverage from earthquakes in the United States, Puerto Rico and Canada. These reinsurance agreements expired in November, 2019.

On December 1, 2015, the Company entered into two collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first agreement provides up to $300,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The second agreement provides up to $325,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.

On April 13, 2017, the Company entered into six collateralized reinsurance agreements with Kilimanjaro to provide the Company with annual aggregate catastrophe reinsurance coverage. The initial three agreements

are four year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $225,000 thousand, $400,000 thousand and $325,000 thousand, respectively, of annual

aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The subsequent three agreements are five year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $50,000 thousand, $75,000 thousand and $175,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.

On April 30, 2018, the Company entered into four collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first two agreements are four year reinsurance contracts which provide up to $62,500 thousand and $200,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. The remaining two agreements are five year reinsurance contracts which provide up to $62,500 thousand and $200,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada.

On December 12, 2019, the Company entered into four collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first two agreements are four year reinsurance contracts which provide up to $150,000 thousand and $275,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. The remaining two agreements are five year reinsurance contracts which provide up to $150,000 thousand and $275,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United State, Puerto Rico, the U.S. Virgin Islands and Canada.

Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events, as well as, the geographic location of the events. The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses. Currently, none of the published insured loss estimates for ~~the 2017~~ catastrophe events during the applicable covered periods of the various agreements have exceeded the single event retentions or aggregate retentions under the terms of the agreements that would result in a recovery. ~~In addition, the aggregation of the to date published insured loss estimates for the 2017 covered events have not exceeded the aggregated retentions for recovery.~~

Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. On April 24, 2014, Kilimanjaro issued $450,000 thousand of notes (“Series 2014-1 Notes”). The $450,000 thousand of Series 2014-1 Notes were fully redeemed on April 30, 2018 and are no longer outstanding. On November 18, 2014, Kilimanjaro issued $500,000 thousand of notes (“Series 2014-2 Notes”). The $450,000 thousand of Series 2014-2 Notes were fully redeemed in November 2019 and are no longer outstanding. On December 1, 2015, Kilimanjaro issued $625,000 thousand of notes (“Series 2015-1 Notes). On April 13, 2017, Kilimanjaro issued $950,000 thousand of notes (“Series 2017-1 Notes) and $300,000 thousand of notes (“Series 2017-2 Notes). On April 30, 2018, Kilimanjaro issued $262,500 thousand of notes (“Series 2018-1 Notes”) and $262,500 thousand of notes (“Series 2018-2 Notes”). On December 12, 2019 Kilimanjaro issued $425,000 thousand of notes (“Series 2019-1 Notes”) and $425,000 thousand of notes (“Series 2019-2 Notes’”). The proceeds from the issuance of the Notes listed above are held in reinsurance trust throughout the duration of the applicable reinsurance agreements and invested solely in US government money market funds with a rating of at least “AAAm” by Standard & Poor’s.

~~10.~~9. SENIOR NOTES

The table below displays Holdings’ outstanding senior notes. Market value is based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.

September 30, 2019

December 31, 2018

June 30, 2020

December 31, 2019

Consolidated

Principal

Balance Sheet

Market

Balance Sheet

Market

Principal

Balance Sheet

Market

Balance Sheet

Market

(Dollars in thousands)

Date Issued

Date Due

Amounts

Amount

Value

Amount

Value

Date Issued

Date Due

Amounts

Amount

Value

Amount

Value

Senior notes

06/05/2014

06/01/2044

400,000

397,044

450,984

396,954

396,968

06/05/2014

06/01/2044

400,000

397,134

469,804

397,074

452,848

On June 5, 2014 , Holdings issued $400,000 thousand of 30 year senior notes at 4.868 %, which will mature on June 1, 2044. Interest will be paid semi-annually on June 1 and December 1 of each year.

Interest expense incurred in connection with these senior notes is as follows for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Interest expense incurred	$	4,868	$	4,868	$	14,604	$	14,604	$	4,868	$	4,868	$	9,736	$	9,736

~~11.~~10. LONG TERM SUBORDINATED NOTES

The table below displays Holdings’ outstanding fixed to floating rate long term subordinated notes. Market value is based on quoted market prices, but due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.

September 30, 2019

December 31, 2018

June 30, 2020

December 31, 2019

Original

Consolidated

Original

Consolidated

Principal

Maturity Date

Balance

Market

Balance

Market

Principal

Maturity Date

Balance

Market

Balance

Market

(Dollars in thousands)

Date Issued

Amount

Scheduled

Final

Sheet Amount

Value

Sheet Amount

Value

Date Issued

Amount

Scheduled

Final

Sheet Amount

Value

Sheet Amount

Value

Long term subordinated notes

04/26/2007

400,000

05/15/2037

05/01/2067

236,733

214,853

236,659

200,390

04/26/2007

400,000

05/15/2037

05/01/2067

223,625

197,378

236,758

233,191

During the fixed rate interest period from May 3, 2007 through May 14, 2017 , interest was at the annual rate of 6.6 %, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2007. During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the 3 month LIBOR plus 238.5 basis points, reset quarterly, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, subject to Holdings’ right to defer interest on one or more occasions for up to ten consecutive years. Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for May 15, 2020 to August ~~15, 2019 to November 14, 2019~~16, 2020 is ~~4.54~~2.78%.

Holdings may redeem the long term subordinated notes on or after May 15, 2017 , in whole or in part at 100 % of the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant. This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. Effective upon the maturity of the Company’s 5.40 % senior notes on October 15, 2014 , the Company’s 4.868 % senior notes, due on June 1, 2044, have become the Company’s long term indebtedness that ranks senior to the long term subordinated notes.

The Company repurchased and retired $11,483 thousand and $13,183 thousand of its outstanding long term subordinated notes during the three and six months ended June 30, 2020, respectively. The Company realized a gain of $2,034 thousand and $2,536 thousand from the repurchase of the long term subordinated notes during the three and six months ended June 30, 2020, respectively.

On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the 6.60% fixed to floating rate long term subordinated notes. Upon expiration of the tender offer, the Company had reduced its outstanding debt by $161,441 thousand.

Interest expense incurred in connection with these long term subordinated notes is as follows for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Interest expense incurred	$	2,881	$	2,875	$	8,892	$	7,968	$	2,000	$	3,406	$	4,539	$	6,011

~~12.~~11. FEDERAL HOME LOAN BANK MEMBERSHIP

Effective August 15, 2019, Everest Re became a member of the Federal Home Loan Bank (“FHLB”) organization, which allows Everest Re to borrow up to 10 % of its statutory admitted assets. As of June 30, ~~2019,~~2020, Everest Re had admitted assets of ~~$12,310,510~~approximately $13,435,683 thousand which provides borrowing capacity of up to ~~$1,231,051~~approximately $1,343,568 thousand. Through ~~September~~June 30, ~~2019,~~2020, Everest Re had no borrowings through the FHLB.

~~13.~~12. LEASES

Effective January 1, 2019, the Company adopted ASU 2016-02 and ASU 2018-11 which outline new guidance on the accounting for leases. The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. Most leases include an option to extend or renew the lease term. The exercise of the renewal is at the Company’s discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercise those options. The Company, in determining the present value of lease payments utilizes either the rate implicit in the lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate with terms of the underlying lease.

Supplemental information related to operating leases is as follows for the periods indicated:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,		Three Months Ended				Six Months Ended
(Dollars in thousands)	2019		2019		June 30,				June 30,
					2020		2019		2020		2019
Lease expense incurred:
Operating lease cost	$	4,791	$	14,146	$	7,424	$	4,793	$	14,672	$	9,355

	At September 30,
(Dollars in thousands)	2019		At June 30, 2020		At December 31, 2019
Operating lease right of use assets	$	50,356	$	143,986	$	152,978
Operating lease liabilities		55,702		155,440		160,387

	~~Nine Months~~ ~~Ended~~
	~~September 30,~~
~~(Dollars in thousands)~~	~~2019~~
~~Operating cash flows from operating leases~~	$	~~(12,914)~~

	Three Months Ended				Six Months Ended
(Dollars in thousands)	June 30,				June 30,
	2020		2019		2020		2019
Operating cash flows from operating leases	$	(4,501)	$	(4,314)	$	(8,858)	$	(8,617)

	~~At September 30,~~
	~~2019~~
~~Weighted average remaining operating lease term~~	~~6.0 years~~
~~Weighted average discount rate on operating leases~~	~~4.48~~	%

	At June 30, 2020			At December 31, 2019
Weighted average remaining operating lease term	12.6 years		12.8 years
Weighted average discount rate on operating leases	4.02	%	3.91		%

Maturities of the existing lease liabilities are expected to occur as follows:

(Dollars in thousands)
Remainder of 2019	$	4,294
2020		17,233
Remainder of 2020			$	9,120
2021		8,603		16,181
2022		8,328		18,615
2023		8,235		18,202
2024		8,104		18,208
2025				15,217
Thereafter		13,653		116,149
Undiscounted lease payments		68,450		211,692
Less: present value adjustment		12,748		56,252
Total operating lease liability	$	55,702	$	155,440

The amount of operating lease liabilities is not separately presented in the consolidated financial statements but is included in other liabilities. Disclosures regarding minimum lease payments under previous lease accounting guidance can be found in the Company’s 2018 Form 10-K.

On July 2, 2019, the Company entered into a lease agreement to relocate its corporate offices from Liberty Corner, New Jersey to a corporate complex in Warren, New Jersey. The new lease, which covers approximately 315,000 square feet of office space, will be effective October 1, 2019 and runs through 2036 . The initial base rent payment of the lease will be approximately $650 thousand per month or $7,800 thousand per year. The Company expects to relocate the existing operations and employees of the Liberty Corner, New Jersey facility to the new corporate complex ~~by the end of 2020.~~during 2021.

~~14.~~13. SEGMENT REPORTING

The ~~U.S.~~ Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of ~~business, including Marine, Aviation, Surety and Accident and Health (“A&H”)~~ business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding ~~companies primarily within~~companies. Business is written in the ~~U.S. The International operation writes non-U.S. property and casualty reinsurance~~United States as well as through ~~Everest Re’s~~ branches in Canada ~~Singapore~~ and ~~through offices in Brazil, Miami and New Jersey.~~Singapore. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents ~~mainly~~ within the ~~U.S.~~ United States.

These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk management, control of aggregate catastrophe exposures, capital, investments and support operations. Management generally monitors and evaluates the financial performance of these operating segments based upon their underwriting results.

Underwriting results include earned premium less losses and LAE incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.

The following tables present the underwriting results for the operating segments for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
U.S. Reinsurance	September 30,				September 30,
Reinsurance									June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Gross written premiums	$	854,641	$	940,839	$	2,260,544	$	2,237,170	$	1,124,895	$	1,014,434	$	2,433,089	$	2,167,545
Net written premiums		740,096		703,944		1,845,931		1,557,706		992,750		837,913		2,106,984		1,813,912

Premiums earned	$	630,135	$	528,867	$	1,810,175	$	1,437,761	$	1,062,833	$	958,222	$	2,069,868	$	1,855,500
Incurred losses and LAE		392,912		394,621		1,077,023		1,404,349		630,658		581,281		1,313,366		1,134,995
Commission and brokerage		215,825		156,500		555,517		432,531		292,286		258,563		553,187		495,528
Other underwriting expenses		19,148		16,250		50,467		48,608		26,599		25,360		56,446		49,416
Underwriting gain (loss)	$	2,250	$	(38,504)	$	127,168	$	(447,727)	$	113,290	$	93,018	$	146,869	$	175,561

Three Months Ended

Nine Months Ended
International
September 30,

September 30,
(Dollars in thousands)
2019

2018

2019

2018
Gross written premiums
$
442,587

$
363,359

$
1,204,229

$
1,129,097
Net written premiums

401,341

340,701

1,109,418

1,012,933
Premiums earned
$
366,410

$
331,921

$
1,041,870

$
1,003,993
Incurred losses and LAE

407,799

315,850

858,683

751,696
Commission and brokerage

81,674

78,180

237,510

240,953
Other underwriting expenses

11,258

9,991

29,355

29,946
Underwriting gain (loss)
$
(134,321)

$
(72,100)

$
(83,678)

$
(18,602)

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Insurance	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Gross written premiums	$	592,775	$	454,993	$	1,798,149	$	1,491,438	$	713,352	$	673,603	$	1,380,123	$	1,205,374
Net written premiums		428,518		333,836		1,326,714		1,105,223		508,801		481,952		1,033,275		898,196

Premiums earned	$	431,855	$	369,983	$	1,222,432	$	1,084,863	$	476,127	$	417,401	$	963,097	$	790,577
Incurred losses and LAE		297,382		259,826		801,705		756,267		345,174		261,941		691,979		504,323
Commission and brokerage		60,182		53,532		169,647		159,187		63,413		58,212		125,616		109,465
Other underwriting expenses		65,287		52,559		177,604		151,823		67,532		57,991		138,893		112,317
Underwriting gain (loss)	$	9,004	$	4,066	$	73,476	$	17,586	$	8	$	39,257	$	6,609	$	64,472

The following table reconciles the underwriting results for the operating segments to income (loss) before taxes as reported in the consolidated statements of operations and comprehensive income (loss) for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Underwriting gain (loss)	$	(123,067)	$	(106,538)	$	116,966	$	(448,743)	$	113,298	$	132,275	$	153,478	$	240,033
Net investment income		95,592		90,298		270,835		232,277		35,153		90,709		109,354		175,243
Net realized capital gains (losses)		112,542		30,018		390,161		(72,454)		(479,360)		142,563		(222,493)		277,619
Corporate expense		(3,183)		(2,488)		(7,353)		(7,597)		(3,514)		(2,519)		(7,235)		(4,170)
Interest, fee and bond issue cost amortization expense		(7,802)		(7,796)		(27,314)		(22,732)		(6,922)		(9,684)		(14,382)		(19,512)
Other income (expense)		(2,673)		(4,802)		(8,459)		(3,905)		(5,122)		(5,055)		(9,620)		(5,785)
Income (loss) before taxes	$	71,409	$	(1,308)	$	734,836	$	(323,154)	$	(346,467)	$	348,289	$	9,102	$	663,428

The Company produces business in the U.S. and internationally. The net income deriving from assets residing in the individual foreign countries in which the Company writes business are not identifiable in the Company’s financial records. Based on gross written premium, the table below presents the largest country, other than the U.S., in which the Company writes business, for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Canada gross written premiums	$	52,136	$	41,005	$	138,392	$	125,586	$	71,021	$	47,206	$	134,658	$	86,256

No other country represented more than 5 % of the Company’s revenues.

~~15.~~14. RELATED-PARTY TRANSACTIONS

Parent

Group entered into a ~~$250,000~~$300,000 thousand long term note agreement with Everest Re as of December 17, 2019. The note will pay interest annually at a rate of 1.69 % and is scheduled to mature in December, 2028. This transaction is presented as a Note Receivable – Affiliated in the Consolidated Balance Sheet of Holdings. The Company recognized interest income related to this long term note of $1,281 thousand and $0 thousand for the three months ended June 30, 2020 and 2019, respectively and $2,563 thousand and $0 thousand for the six months ended June 30, 2020 and 2019, respectively.

Group entered into a $250,000 thousand long term promissory note agreement with Holdings as of December 31, 2014. The note was repaid in December 2018. ~~Interest income in the amount of $0~~ ~~thousand and $1,075~~ ~~thousand was recorded by Holdings for the three months ended September 30, 2019 and 2018, respectively. Interest income in the amount of $0~~ ~~thousand and $2,150~~ ~~thousand was recorded by Holdings for the nine months ended September 30, 2019 and 2018, respectively.~~

Group’s Board of Directors approved an amended share repurchase program authorizing Group and/or its subsidiary Holdings to purchase Group’s common shares through open market transactions, privately negotiated transactions or both. The table below represents the amendments to the share repurchase program for the common shares approved for repurchase.

		Common
		Shares
		Authorized for
Amendment Date		Repurchase
(Dollars in thousands)
09/21/2004		5,000,000
07/21/2008		5,000,000
02/24/2010		5,000,000
02/22/2012		5,000,000
05/15/2013		5,000,000
11/19/2014		5,000,000
05/22/2020		~~30,000,000~~2,000,000
		32,000,000

Holdings had purchased and held 9,719,971 Common Shares of Group, which were purchased in the open market between February 2007 and March 2011.

In December, 2015, Holdings transferred the 9,719,971 Common Shares of Group, which it held as other invested assets, at fair value, valued at $1,773,214 thousand, to Preferred Holdings, an affiliated entity and subsidiary of Group, in exchange for 1,773.214 preferred shares of Preferred Holdings with a $1,000 thousand par value and 1.75% annual dividend rate. After the exchange, Holdings no longer holds any shares or has any ownership interest in Group.

Holdings has reported ~~its~~the preferred shares in Preferred Holdings, as other invested assets, fair value, in the consolidated balance sheets with changes in fair value re-measurement recorded in net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss). The following table presents the dividends received on the preferred shares of Preferred Holdings and on the Parent shares that are reported as net investment income in the consolidated statements of operations and comprehensive income (loss) for the period indicated.

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Dividends received on preferred stock of affiliate	$	7,758	$	7,758	$	23,274	$	23,274	$	7,758	$	7,758	$	15,516	$	15,516

Affiliated Companies

Effective December 31, 2018, Holdings entered into a $300,000 thousand long-term promissory note agreement with Bermuda Re. The note was repaid in May, 2019. ~~This transaction was presented as a Note Payable – Affiliated in the consolidated balance sheets of Holdings as of December 31, 2018.~~ Interest expense of $0$1,356 thousand and $3,658 thousand was recorded by Holdings for the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively.

Effective October 1, 2018, Holdings Ireland made a capital contribution of Global Services, an affiliated entity, to Holdings. Global Services had an equity value of $227,253 thousand at the time of contribution and that value is classified as additional paid in capital in the Company’s consolidated balance ~~sheet as of December 31, 2018.~~sheets.

Affiliates

The table below represents affiliated quota share reinsurance agreements ("whole account quota share") for all new and renewal business for the indicated coverage period:

(Dollars in thousands)
						Single
		Percent		Assuming		Occurrence		Aggregate
Coverage Period	Ceding Company	Ceded		Company	Type of Business	Limit		Limit
01/01/2010-12/31/2010	Everest Re	44.0	%	Bermuda Re	property / casualty business	150,000		325,000
01/01/2011-12/31/2011	Everest Re	50.0	%	Bermuda Re	property / casualty business	150,000		300,000
01/01/2012-12/31/2014	Everest Re	50.0	%	Bermuda Re	property / casualty business	100,000		200,000
01/01/2015-12/31/2016	Everest Re	50.0	%	Bermuda Re	property / casualty business	162,500		325,000
01/01/2017-12/31/2017	Everest Re	60.0	%	Bermuda Re	property / casualty business	219,000		438,000
01/01/2010-12/31/2010	Everest Re- Canadian Branch	60.0	%	Bermuda Re	property business	350,000	⁽¹⁾	-
01/01/2011-12/31/2011	Everest Re- Canadian Branch	60.0	%	Bermuda Re	property business	350,000	⁽¹⁾	-
01/01/2012-12/31/2012	Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	206,250	⁽¹⁾	412,500	⁽¹⁾
01/01/2013-12/31/2013	Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	150,000	⁽¹⁾	412,500	⁽¹⁾
01/01/2014-12/31/2017	Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	262,500	⁽¹⁾	412,500	⁽¹⁾
01/01/2012-12/31/2017	Everest Canada	80.0	%	Everest Re- Canadian Branch	property business	-		-

(1) Amounts shown are Canadian dollars.

Effective January 1, 2018, Everest Re entered into a twelve month whole account aggregate stop loss reinsurance contract (“stop loss agreement”) with Bermuda Re. The stop loss agreement provides coverage for ultimate net losses on applicable net earned premiums above a retention level, subject to certain other coverage limits and conditions. The stop loss agreement was most recently renewed effective January 1, ~~2019.~~2020.

In addition, Everest Re entered into a property catastrophe excess of loss reinsurance contract with Bermuda Re, effective January 1, 2019. The contract provides $100,000 thousand of reinsurance coverage for property catastrophe losses above certain attachment points. This agreement expired on December 31, 2019 and was not renewed.

The table below represents loss portfolio transfer (“LPT”) reinsurance agreements whereby net insurance exposures and reserves were transferred to an affiliate.

(Dollars in thousands)
Effective	Transferring	Assuming		% of Business or		Covered Period
Date	Company	Company		Amount of Transfer		of Transfer
10/01/2001	Everest Re (Belgium Branch)	Bermuda Re		100	%	All years
10/01/2008	Everest Re	Bermuda Re	$	747,022		01/01/2002-12/31/2007
12/31/2017	Everest Re	Bermuda Re	$	970,000		All years

On December 31, 2017, the Company entered into a LPT agreement with Bermuda Re. The LPT agreement covers subject loss reserves of $2,336,242 thousand for accident years 2017 and prior. As a result of the LPT agreement, the Company transferred $1,000,000 thousand of cash and fixed maturity securities and transferred $970,000 thousand of loss reserves to Bermuda Re. As part of the LPT agreement, Bermuda Re will provide an additional $500,000 thousand of adverse development coverage on the subject loss reserves.

The following tables summarize the premiums and losses ceded by the Company to Bermuda Re and Everest International, respectively, and premiums and losses assumed by the Company from Everest Canada and Lloyd’s syndicate 2786 for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Bermuda Re	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Ceded written premiums	$	14,660	$	146,513	$	85,667	$	421,804	$	31,669	$	19,534	$	62,169	$	71,007
Ceded earned premiums		16,510		148,228		85,632		432,459		31,813		16,598		62,313		69,122
Ceded losses and LAE		(16,836)		34,683		(8,521)		70,791		12,208		(3,417)		(9,951)		8,316

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Everest International	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Ceded written premiums	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Ceded earned premiums		-		-		-		-		-		-		-		-
Ceded losses and LAE		10		(5)		(26)		(362)		(7)		(46)		16		(36)

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Everest Canada	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Assumed written premiums	$	-	$	-	$	-	$	-	$	(235)	$	-	$	1	$	-
Assumed earned premiums		-		-		-		-		(46)		-		(7)		-
Assumed losses and LAE		(1,633)		(1,388)		(938)		1,958		(948)		2,296		650		695

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Lloyd's Syndicate 2786	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Assumed written premiums	$	24	$	1,056	$	(8,702)	$	795	$	630	$	483	$	(2,401)	$	(8,726)
Assumed earned premiums		850		2,876		(16,380)		13,826		639		1,596		(2,183)		(17,231)
Assumed losses and LAE		1,141		2,883		(2,386)		10,909		(1,438)		4,391		(624)		(3,527)

In 2013, Group established Mt. Logan Re, which is a Class 3 insurer based in Bermuda. Mt. Logan Re then established separate segregated accounts for its business activity, which invest in a diversified set of catastrophe exposures.

The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re segregated accounts and assumed by the Company from Mt. Logan Re segregated accounts.

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
Mt. Logan Re Segregated Accounts	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Ceded written premiums	$	79,152	$	53,340	$	193,664	$	154,779	$	41,864	$	51,289	$	137,214	$	114,512
Ceded earned premiums		69,942		44,699		176,576		149,674		60,412		61,812		140,267		106,634
Ceded losses and LAE		81,136		23,087		145,918		130,994		36,835		30,159		74,300		64,781
Assumed written premiums		-		3,219		-		7,866		-		-		-		-
Assumed earned premiums		-		3,219		-		7,866		-		-		-		-
Assumed losses and LAE		-		-		-		-		-		-		-		-

~~16.~~15. RETIREMENT BENEFITS

The Company maintains both qualified and non-qualified defined benefit pension plans for its U.S. employees employed prior to April 1, 2010. Generally, the Company computes the benefits based on average earnings over a period prescribed by the plans and credited length of service. The Company’s non-qualified defined benefit pension plan provided compensating pension benefits for participants whose benefits have been

curtailed under the qualified plan due to Internal Revenue Code limitations. Effective January 1, 2018, participants of the Company’s non-qualified defined benefit pension plan may no longer accrue additional service benefits.

Net periodic benefit cost for U.S. employees included the following components for the periods indicated:

Pension Benefits	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Service cost	$	2,064	$	2,977	$	6,616	$	8,931	$	2,041	$	2,276	$	6,052	$	4,553
Interest cost		2,928		2,585		8,788		7,754		2,563		2,930		5,046		5,860
Expected return on plan assets		(4,492)		(3,670)		(14,523)		(11,011)		(5,197)		(5,016)		(10,394)		(10,031)
Amortization of net (income) loss		1,909		2,237		5,111		6,710		2,462		1,601		3,675		3,203
Settlement charge		102		-		309		-		-		104		-		208
Net periodic benefit cost	$	2,511	$	4,129	$	6,301	$	12,384	$	1,869	$	1,895	$	4,379	$	3,793

Other Benefits	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Service cost	$	245	$	446	$	818	$	1,339	$	311	$	286	$	452	$	573
Interest cost		245		307		835		920		215		295		429		590
Amortization of prior service cost		(144)		(33)		(433)		(98)		(176)		(144)		(224)		(289)
Amortization of net (income) loss		(39)		94		(39)		282
Net periodic benefit cost	$	307	$	814	$	1,181	$	2,443	$	350	$	437	$	657	$	874

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)								(Some amounts may not reconcile due to rounding.)

The service cost component of net periodic benefit costs is included within other underwriting expenses on the consolidated statement of operations and comprehensive income (loss). In accordance with ASU 2017-07, other staff compensation costs are also primarily recorded within this line item.

The Company did not make any contributions to the qualified pension benefit plan for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019. For the three~~2020 and ~~nine months ended September 30, 2018, the company contributed $77,000~~ ~~thousand to the qualified pension benefit plan.~~2019, respectively.

~~17.~~16. INCOME TAXES

The Company is domiciled in the United States and has subsidiaries domiciled within the United States with significant branches in Canada and Singapore. The Company’s non-U.S. branches are subject to income taxation at varying rates in their respective domiciles.

The Company generally applies the estimated annual effective tax rate approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the estimated annual effective tax rate approach, the estimated annual effective tax rate is applied to the interim year-to-date pre-tax income/loss to determine the income tax expense or benefit for the year-to-date period. If the annual effective tax rate approach produces a year-to-date tax benefit which exceeds the amount which is estimated to be recoverable for the full year, then the tax benefit for the interim reporting period will be limited as prescribed under ASC 740-270 to the estimated recoverable based on the year-to-date result. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual pre-tax income/loss and effective tax ~~rate.~~rate..

~~18.~~17. SUBSEQUENT EVENTS

The Company has evaluated known recognized and non-recognized subsequent events. In ~~October 2019, Typhoon Hagibis made landfall~~late July and early August 2020, Hurricane Isaias impacted the United States and the Caribbean. Also, on August 4, 2020, an explosion occurred in ~~Japan. Additionally, wildfires are currently impacting California.~~Beirut, Lebanon which impacted a port and surrounding area. Due to the recentness of these events, the ~~company~~Company is unable to estimate the amount of losses at this time. However, the ~~company~~Company anticipates that the losses from these events will adversely impact ~~fourth~~third quarter 2020 financial statements.

18. REVISIONS TO FINANCIAL STATEMENTS

In preparing third quarter 2019 financial statements, the Company identified errors in the handling of foreign exchange related to premium funds held from reinsureds. Although management determined that the impact of the foreign exchange differences were not material to prior period financial statements, the impact of recording the cumulative difference would have significantly impacted results within the third quarter 2019. As a result, prior period balances have been revised in the applicable financial statements and corresponding footnotes to correct the foreign exchange adjustments.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE		Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
INCOME (LOSS):		As Previously		Impact of				As Previously		Impact of
		Reported		Revisions		As Revised		Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)		(3,812)		(1,243)		(5,055)		(5,026)		(759)		(5,785)
Total revenues	$	1,605,083	$	(1,243)	$	1,603,840	$	3,093,913	$	(759)	$	3,093,154

INCOME (LOSS) BEFORE TAXES	$	349,532	$	(1,243)	$	348,289	$	664,187	$	(759)	$	663,428
Income tax expense (benefit)		67,628		(261)		67,367		131,057		(159)		130,898

NET INCOME (LOSS)	$	281,904	$	(982)	$	280,922	$	533,130	$	(600)	$	532,530

COMPREHENSIVE INCOME (LOSS)	$	349,533	$	(982)	$	348,551	$	698,907	$	(600)	$	698,307

CONSOLIDATED STATEMENTS OF	Six Months Ended June 30, 2019
CHANGES IN STOCKHOLDER'S EQUITY	As Previously		Impact of
	Reported		Revisions		As Revised

(Dollars in thousands)
RETAINED EARNINGS:
Balance, January 1	$	4,070,604	$	(7,908)	$	4,062,696
Net income (loss)		251,226		382		251,608
Balance, March 31		4,321,830		(7,524)		4,314,306
Net income (loss)		281,904		(982)		280,922
Balance, June 30		4,603,734		(8,507)		4,595,227
TOTAL STOCKHOLDER'S EQUITY, June 30	$	5,743,746	$	(8,507)	$	5,735,239

3833

CONSOLIDATED STATEMENTS OF CASH FLOWS	Six Months Ended June 30, 2019
	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	533,130	$	(600)	$	532,530
Decrease (increase) in funds held by reinsureds, net		(14,688)		759		(13,929)
Decrease (increase) in income taxes		214,830		(159)		214,671

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Industry Conditions.

The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and stronger profits followed by periods of abundant capacity, lower rates and constrained profitability. Competition in the types of reinsurance and insurance business that we underwrite is based on many factors, including the perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by A.M. Best and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is licensed or otherwise authorized, capacity and coverages offered, premiums charged, other terms and conditions of the reinsurance and insurance business offered, services offered, speed of claims payment and reputation and experience in lines written. Furthermore, the market impact from these competitive factors related to reinsurance and insurance is generally not consistent across lines of business, domestic and international geographical areas and distribution channels.

~~We compete~~The Company competes in the ~~U.S. and international~~global reinsurance and insurance markets with numerous global competitors. ~~Our~~The Company’s competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain insurance companies, domestic and international underwriting operations, including underwriting syndicates at Lloyd’s of London and certain government sponsored risk transfer vehicles. Some of these competitors have greater financial resources than we do and have established long term and continuing business relationships, which can be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance business and recently, the securitization of reinsurance and insurance risks through capital markets provide additional sources of potential reinsurance and insurance capacity and competition.

Worldwide insurance and reinsurance market conditions ~~continued to be very competitive, particularly in the property catastrophe and casualty reinsurance lines of business.~~historically have been competitive. Generally, there was ample insurance and reinsurance capacity relative to demand, as well as, additional capital from the capital markets through insurance linked financial instruments. These financial instruments such as side cars, catastrophe bonds and collateralized reinsurance funds, ~~provide~~provided capital markets with access to insurance and reinsurance risk exposure. The capital markets demand for these products iswas being primarily driven by ~~the current~~a low interest ~~rate~~ environment and the desire to achieve greater risk diversification and potentially higher returns on their investments. This increased competition iswas generally having a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.

~~Rates tend~~The industry continues to ~~fluctuate by specific region~~deal with the impacts of a global pandemic, COVID-19. Globally, many countries mandated that their citizens remain at home and ~~products, particularly areas recently impacted by large catastrophic events. There were numerous natural catastrophes in 2018 with total industry losses estimated~~many non-essential businesses have continued to be ~~$90 billion.~~ physically closed. We closed our physical offices; however, we activated our operational resiliency plan across our global footprint and all of our critical operations are functioning effectively from remote locations. We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

The costliest event was the Camp Wildfire in California, the deadliest and most destructive California fire on record. These 2018 catastrophe losses followed another record year of catastrophes in 2017 where total industry losses for the worldwide events were estimated at $140 billion. These catastrophe losses included an unprecedented series of catastrophespandemic has caused significant volatility in the ~~third~~global financial markets. Interest rates plummeted, credit spreads widened and the equity markets lost value. We saw our fixed maturity and equity portfolios decline in value resulting in realized and unrealized investment losses in our March 31, 2020 financial statements. However, the financial markets rebounded during the second quarter and we recognized after-tax unrealized gains of ~~2017 with Hurricanes Harvey, Irma and Maria, as well as a significant earthquake in Mexico City. Additional catastrophe events occurred~~$247.1 million in the ~~fourth~~period. Nevertheless, the lack of business activity may lead to an increase in bankruptcies and corresponding credit losses. Our other invested assets are comprised primarily of limited partnership investments. The change in limited partnership values are generally recorded on a quarter ~~of 2017 with~~lag. As expected, the ~~wild fires~~change in ~~California and Hurricanes Nate and Ophelia. During 2016, catastrophe losses included the Fort McMurray Canadian wildfire, Hurricane Matthew which affected~~limited partnership values had a ~~large area of the Caribbean and southeastern United States, storms and an earthquake in Ecuador. While the future~~negative impact on ~~market conditions from these catastrophes cannot~~our second quarter results, reducing net investment income by $40.5 million.

There will also be ~~determined at this time,~~a negative impact on future industry underwriting results. With the closing of non-essential businesses, there has been ~~some firming~~a significant decline in business activity. To the ~~markets~~extent that premiums are based on business activity, there will be a decline in premium volume. Incurred losses from the pandemic will be impacted by the ~~catastrophes, as well, improvements in rate in some other reinsurance lines, including casualty lines,~~duration of the event and ~~also improvements in the insurance property and casualty lines.~~

Commencing in 2015, we initiated a strategic build out of our insurance platform through the investment in key leadership hires, which in turn has brought significant underwriting talent and stronger direction in achieving our insurance program strategic goals of increased premium volume and improved underwriting results. Recent growth is coming from highly diversified areas including newly launched lineswill vary by line of business ~~as well as, product~~ and ~~geographic expansion in existing lines~~geographical location. For the quarter ended June 30, 2020, our underwriting results include $38.0 million of ~~business.~~ estimated losses related to the pandemic and $73.7 million for the six months ended June 30, 2020. We ~~are building a world-class insurance platform capable of offering products across lines and geographies, complementing our leading global reinsurance franchise.~~

anticipate this Pandemic could have

3935

~~Overall,~~a meaningful impact on our revenue, as well as net and operating income in future quarters as a result of reinsurance and insurance claims due to the pandemic and resulting macro-economic market conditions.

Many regulators have issued moratoriums on the cancellation of policies for the non-payment of premiums and also on non-renewals. We are complying with the various regulatory requests for accommodations to policyholders during this difficult period. The moratoriums combined with the forced closure of businesses may lead to an increase in uncollectible premium expense.

Prior to the pandemic, there was a growing industry consensus that there was some firming of (re)insurance rates for the areas impacted by the recent catastrophes. Rates also appeared to be firming in some of the casualty lines of business, particularly in the casualty lines that had seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines were experiencing modest rate increase, while some lines such as workers’ compensation were experiencing softer market conditions. It is too early to tell what will be the impact on pricing conditions but it is likely to change depending on the line of business and geography.

While we ~~believe that given our size, strong ratings, distribution system, reputation, expertise and capital market vehicle activity~~are unable to predict the ~~current marketplace conditions provide profit opportunities. We~~full impact the pandemic will have on the insurance industry as it continues to have a negative impact on the global economy, we are well positioned to continue to ~~employ~~service our ~~strategy~~clients. Our capital position remains a source of ~~targeting business that offers the greatest profit potential, while maintaining balance~~strength, with high quality invested assets, significant liquidity, low financial leverage, and ~~diversification in our overall portfolio.~~ a low operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography is resilient.

Financial Summary.

We monitor and evaluate our overall performance based upon financial results. The following table displays a summary of the consolidated net income (loss), ratios and stockholder’s equity for the periods indicated:

	Three Months Ended				Percentage	Nine Months Ended				Percentage	Three Months Ended				Percentage	Six Months Ended				Percentage
	September 30,				Increase/	September 30,				Increase/	June 30,				Increase/	June 30,				Increase/
(Dollars in millions)	2019		2018		(Decrease)	2019		2018		(Decrease)	2020		2019		(Decrease)	2020		2019		(Decrease)
Gross written premiums	$	1,890.0	$	1,759.2	7.4%	$	5,262.9	$	4,857.7	8.3%	$	1,838.2	$	1,688.0	8.9%	$	3,813.2	$	3,372.9	13.1%
Net written premiums		1,570.0		1,378.5	13.9%		4,282.1		3,675.9	16.5%		1,501.6		1,319.9	13.8%		3,140.3		2,712.1	15.8%

REVENUES:
Premiums earned	$	1,428.4	$	1,230.8	16.1%	$	4,074.5	$	3,526.6	15.5%	$	1,539.0	$	1,375.6	11.9%		3,033.0	$	2,646.1	14.6%
Net investment income		95.6		90.3	5.9%		270.8		232.3	16.6%		35.2		90.7	-61.2%	$	109.4		175.2	-37.6%
Net realized capital gains (losses)		112.6		30.0	NM		390.2		(72.5)	NM		(479.4)		142.6	NM		(222.5)		277.6	-180.1%
Other income (expense)		(2.7)		(4.8)	-44.3%		(8.5)		(3.9)	116.6%		(5.1)		(5.1)	41.5%		(9.6)		(5.8)	110.1%
Total revenues		1,633.9		1,346.3	21.4%		4,727.0		3,682.5	28.4%		1,089.6		1,603.8	-32.1%		2,910.2		3,093.2	-5.9%

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,098.1		970.3	13.2%		2,737.4		2,912.3	-6.0%		975.8		843.2	15.7%		2,005.3		1,639.3	22.3%
Commission, brokerage, taxes and fees		357.7		288.2	24.1%		962.7		832.7	15.6%		355.7		316.8	12.3%		678.8		605.0	12.2%
Other underwriting expenses		95.7		78.8	21.4%		257.4		230.4	11.7%		94.1		83.3	12.9%		195.3		161.7	20.8%
Corporate expense		3.2		2.5	27.9%		7.4		7.6	-3.2%		3.5		2.5	39.5%		7.2		4.2	73.5%
Interest, fee and bond issue cost amortization expense		7.8		7.8	0.1%		27.3		22.7	20.2%		6.9		9.7	-28.5%		14.4		19.5	-26.3%
Total claims and expenses		1,562.5		1,347.6	15.9%		3,992.2		4,005.7	-0.3%		1,436.1		1,255.5	14.4%		2,901.1		2,429.7	19.4%

INCOME (LOSS) BEFORE TAXES		71.4		(1.3)	NM		734.8		(323.2)	NM		(346.5)		348.3	-199.5%		9.1		663.4	-98.6%
Income tax expense (benefit)		10.3		(23.3)	-144.1%		141.2		(66.0)	NM		(75.9)		67.4	-212.6%		(37.0)		130.9	-128.2%
NET INCOME (LOSS)	$	61.1	$	22.0	178.3%	$	593.7	$	(257.1)	NM	$	(270.6)	$	280.9	-196.3%		46.1	$	532.5	-91.4%

RATIOS:					Point Change					Point Change					Point Change					Point Change
Loss ratio		76.9%		78.8%	(1.9)		67.2%		82.6%	(15.4)		63.4%		61.3%	2.1	$	66.1%		62.0%	4.1
Commission and brokerage ratio		25.0%		23.4%	1.6		23.6%		23.6%	-		23.1%		23.0%	0.1		22.4%		22.9%	(0.5)
Other underwriting expense ratio		6.7%		6.5%	0.2		6.3%		6.5%	(0.2)		6.1%		6.1%	-		6.4%		6.1%	0.3
Combined ratio		108.6%		108.7%	(0.1)		97.1%		112.7%	(15.6)		92.6%		90.4%	2.2		94.9%		90.9%	4.0

						At		At		Percentage	At		At		Percentage
						September 30,		December 31,		Increase/	June 30,		December 31,		Increase/
(Dollars in millions)						2019		2018		(Decrease)	2020		2019		(Decrease)
Balance sheet data:
Total investments and cash						$	11,803.5	$	10,707.4	10.2%	$	12,567.4	$	11,956.3	5.1%
Total assets							19,787.7		18,680.3	5.9%		20,281.1		19,706.2	2.9%
Loss and loss adjustment expense reserves							10,412.2		10,167.0	2.4%		10,383.3		10,209.5	1.7%
Total debt							633.8		933.6	-32.1%		620.8		633.8	-2.1%
Total liabilities							13,960.4		13,643.5	2.3%		14,297.5		13,848.8	3.2%
Stockholder's equity							5,827.2		5,036.8	15.7%		5,983.6		5,857.4	2.2%

(Some amounts may not reconcile due to rounding)	(Some amounts may not reconcile due to rounding)										(Some amounts may not reconcile due to rounding)
(NM, not meaningful)	(NM, not meaningful)										(NM, not meaningful)

4037

Revenues.

Premiums. Gross written premiums increased by ~~7.4%~~8.9% to ~~$1,890.0~~$1,838.2 million for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$1,759.2~~$1,688.0 million for the three months ended ~~September~~June 30, ~~2018,~~2019, reflecting a ~~$137.8~~$110.5 million, or ~~30.3%~~10.9%, increase in our reinsurance business and a $39.7 million, or 5.9%, increase in our insurance business. The increase in reinsurance premiums was mainly due to the increase in treaty casualty writings, treaty property business and ~~a $7.0 million, or 0.5% decrease in our reinsurance~~facultative business. The rise in insurance premiums was primarily due to increases in many lines of business, including property, casualty and specialty lines. Gross written premiums increased by 13.1% to $3,813.2 million for the six months ended June 30, 2020, compared to $3,372.9 million for the six months ended June 30, 2019, reflecting a $265.5 million, or 12.3%, increase in our reinsurance business and a $174.7 million, or 14.5%, increase in our insurance business. The ~~decrease~~increase in reinsurance premiums was mainly due to ~~decreases~~increases in ~~property writings, partially offset by an increase in~~treaty casualty writings ~~facultative business~~ and proportional business. Gross written premiums increased by 8.3% to $5,262.9 million for the nine months ended September 30, 2019, compared to $4,857.7 million for the nine months ended September 30, 2018, reflecting a $306.7 million, or 20.6%, increase in our insurance business and a $98.5 million, or 2.9%, increase in our reinsuranceproperty business. The rise in insurance premiums was primarily due to increases in many lines of business, including property, casualty ~~energy~~ and accident and health. ~~The increase in reinsurance premiums was mainly due to an increase in casualty writings, facultative business and proportional business, partially offset by a decline in treaty property business.~~

Net written premiums increased by ~~13.9%~~13.8% to ~~$1,570.0~~$1,501.6 million for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$1,378.5~~$1,319.9 million for the three months ended ~~September~~June 30, ~~2018,~~2019 and increased by ~~16.5%~~15.8% to ~~$4,282.1~~$3,140.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$3,675.9~~$2,712.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~difference~~differences between the ~~change~~changes in gross written premiums compared to the ~~change~~changes in net written premiums isare primarily due to ~~the impact~~varying utilization of changes in affiliated reinsurance contracts. Premiums ceded to Bermuda Re during the three months ended September 30, 2019 were $14.7 million compared with $146.5 million during the three months ended September 30, 2018. Premiums ceded to Bermuda Re during the nine months ended September 30, 2019 were $85.7 million compared with $421.8 million during the nine months ended September 30, 2018.reinsurance. Premiums earned increased by ~~16.1%~~11.9% to ~~$1,428.4~~$1,539.0 million for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$1,230.8~~$1,375.6 million for the three months ended ~~September~~June 30, ~~2018,~~2019 and increased by ~~15.5%~~14.6% to ~~$4,074.5~~$3,033.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$3,526.6~~$2,646.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Net Investment Income. Net investment income ~~increased 5.9%~~decreased 61.2% to ~~$95.6~~$35.2 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared with net investment income of ~~$90.3~~$90.7 million for the three months ended ~~September~~June 30, ~~2018.~~2019. Net investment income ~~increased 16.6%~~decreased 37.6% to ~~$270.8~~$109.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared with net investment income of ~~$232.3~~$175.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Net pre-tax investment income as a percentage of average invested assets was ~~3.4%~~1.2% and 3.3% for the three months ended ~~September~~June 30, 2020 and 2019, respectively and was 1.9% and 3.2% for the six months ended June 30, 2020 and June 30, 2019, ~~compared to 3.9% for the three months ended September 30, 2018, and was 3.3% for the nine months ended September 30, 2019 compared to 3.4% for the nine months ended September 30, 2018,~~ respectively. The ~~increases~~decrease in income ~~were~~and yield was primarily the result of losses from our limited partnerships, partially offset by higher income from our growing fixed maturity ~~portfolio, partially offset by a decline in income from our limited partnership investments.~~ portfolio.

Net Realized Capital Gains (Losses). Net realized capital losses were $479.4 million and net realized capital gains were ~~$112.6~~$142.6 million ~~and $30.0 million~~ for the three months ended ~~September~~June 30, 2020 and 2019, respectively. As discussed earlier, the COVID-19 pandemic caused significant volatility in the global financial markets. The net realized capital losses of $479.4 million for the three months ended June 30, 2020, were comprised of $491.2 million of losses from fair value re-measurements, resulting primarily from increases in equity security valuations which rebounded from declines in the first quarter of 2020, and $7.8 million of net allowances for credit losses partially offset by $19.6 million of gains from sales of investments. The net realized capital gains of $142.6 million for the three months ended June 30, 2019, were comprised of $150.7 million of gains from fair value re-measurements, partially offset by $4.9 million of other-than-temporary impairments and ~~2018,~~$3.3million of net losses from sales of investments.

Net realized capital losses were $222.5 million and net realized capital gains were $277.6 million for the six months ended June 30, 2020 and 2019, respectively.The net realized capital losses of $222.5 million for the six months ended June 30, 2020 were comprised of $171.5 million of losses from fair value re-measurements, $31.1 million of losses from sales of investments and $19.9 million of net allowances for credit losses. The net realized capital gains of ~~$112.6~~$277.6 million for the ~~three~~six months ended ~~September~~June 30, 2019 were comprised of ~~$116.4~~$279.2 million of gains from fair value re-measurements and ~~3.1 million of gains from sales of investments, partially offset by $7.0 million of other than temporary impairments.~~ ~~The net realized capital gains of $30.0 million for the three months ended September 30, 2018 were comprised of $23.9 million of gains from fair value re-measurements, and $8.9~~ ~~million of gains from sales of investments, offset by 2.8 million of other-than-temporary investments.~~

~~Net realized capital gains were $390.2 million and net realized capital losses were $72.5 million~~ ~~for the nine months ended September 30, 2019~~ ~~and 2018, respectively.~~ ~~The net realized capital gains of $390.2 million for the nine months ended September 30, 2019 were comprised of $395.6~~ ~~million of gains from fair value re-measurements and $8.7~~$5.6 million of net gains from sales of investments, partially offset by ~~$14.2~~$7.2 million of other-than-temporary impairments.~~The net realized capital losses of $72.5 million for the nine months ended September 30, 2018 were comprised of $79.0 million of losses from fair value re-measurements and $3.7~~

~~million of other-than-temporary investments, partially offset by $10.2~~ ~~million of gains from sales of investments.~~

Other Income (Expense). We recorded other expense of ~~$2.7~~$5.1 million ~~and $4.8 million~~ for both the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018, respectively~~.2019. We recorded other expense of ~~$8.5~~$9.6 million and ~~$3.9~~$5.8 million for the ~~nine~~six months ended ~~September~~ June

30, 2020 and 2019, ~~and 2018, respectively~~respectively. . The ~~changes were~~change was primarily the result of fluctuations in foreign currency exchange ~~rates and changes in deferred gains under retroactive reinsurance agreements.~~rates.

Claims and Expenses.

Incurred Losses and Loss Adjustment Expenses. The following table presents our incurred losses and loss adjustment expenses (“LAE”) for the periods indicated.

	Three Months Ended September 30,												Three Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	965.9	62.8%		$	0.2	0.0%		$	966.1	62.8%
Catastrophes														14.7	1.0%			(4.9)	-0.3%			9.8	0.6%
Total													$	980.5	63.7%		$	(4.7)	-0.3%		$	975.8	63.4%
2019
Attritional	$	814.6	57.0%		$	(13.4)	-0.9%		$	801.2	56.1%		$	826.5	60.1%		$	(13.8)	-1.0%		$	812.7	59.1%
Catastrophes		279.5	19.6%			17.4	1.2%			296.9	20.8%			(0.1)	0.0%			30.6	2.2%			30.5	2.2%
Total	$	1,094.1	76.6%		$	4.0	0.3%		$	1,098.1	76.9%		$	826.4	60.1%		$	16.8	1.2%		$	843.2	61.3%
2018
Variance 2020/2019
Attritional	$	772.3	62.7%		$	3.2	0.3%		$	775.5	63.0%		$	139.4	2.7	pts	$	14.0	1.0	pts	$	153.4	3.7	pts
Catastrophes		208.3	16.9%			(13.5)	-1.1%			194.8	15.8%			14.8	1.0	pts		(35.5)	(2.5)	pts		(20.7)	(1.6)	pts
Total	$	980.6	79.6%		$	(10.3)	-0.8%		$	970.3	78.8%		$	154.1	3.7	pts	$	(21.5)	(1.5)	pts	$	132.6	2.1	pts
Variance 2019/2018
Attritional	$	42.3	(5.7)	pts	$	(16.6)	(1.2)	pts	$	25.7	(6.9)	pts
Catastrophes		71.2	2.7	pts		30.9	2.3	pts		102.1	5.0	pts
Total	$	113.5	(3.0)	pts	$	14.3	1.1	pts	$	127.8	(1.9)	pts

	Nine Months Ended September 30,												Six Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	1,962.3	64.7%		$	(1.0)	0.0%		$	1,961.4	64.7%
Catastrophes														44.7	1.5%			(0.7)	0.0%			44.0	1.4%
Total													$	2,007.0	66.2%		$	(1.6)	-0.1%		$	2,005.3	66.1%
2019
Attritional	$	2,405.0	59.0%		$	(27.2)	-0.7%		$	2,377.8	58.4%		$	1,590.4	60.1%		$	(13.8)	-0.5%		$	1,576.5	59.6%
Catastrophes		304.4	7.5%			55.3	1.4%			359.6	8.8%			24.9	0.9%			37.9	1.4%			62.8	2.4%
Total	$	2,709.4	66.5%		$	28.1	0.7%		$	2,737.4	67.2%		$	1,615.3	61.0%		$	24.0	0.9%		$	1,639.3	62.0%
2018
Attritional	$	2,158.7	61.3%		$	-	0.0%		$	2,158.7	61.3%
Catastrophes		272.9	7.7%			480.7	13.6%			753.6	21.3%
Total	$	2,431.6	69.0%		$	480.7	13.6%		$	2,912.3	82.6%
Variance 2019/2018
Variance 2020/2019
Attritional	$	246.3	(2.3)	pts	$	(27.2)	(0.7)	pts	$	219.1	(2.9)	pts	$	371.9	4.6	pts	$	12.8	0.5	pts	$	384.9	5.1	pts
Catastrophes		31.5	(0.2)	pts		(425.4)	(12.2)	pts		(394.0)	(12.5)	pts		19.8	0.6	pts		(38.6)	(1.4)	pts		(18.8)	(1.0)	pts
Total	$	277.8	(2.5)	pts	$	(452.6)	(12.9)	pts	$	(174.9)	(15.4)	pts	$	391.7	5.2	pts	$	(25.7)	(0.9)	pts	$	366.0	4.1	pts

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)												(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by ~~13.2%~~15.7% to ~~$1,098.1~~$975.8 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$970.3~~$843.2 million for the three months ended ~~September~~June 30, ~~2018,~~2019, primarily due to an increase of $139.4 million in current year attritional losses, related primarily to $38.0 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned. The current year catastrophe losses of ~~$71.2~~$14.7 million ~~an increase in unfavorable development on prior year catastrophe losses of $30.9 million in 2019 compared to 2018 and an increase in current year attritional losses of $42.3 million primarily due~~for the three months ended June 30, 2020 related to the ~~increase in premiums earned. This increase was~~U.S. civil unrest ($15.0 million) and the Nashville tornadoes ($2.8 million), partially offset by ~~additional favorable development on prior years attritional losses of $16.6 million~~a reduction in ~~2019 compared to 2018. The $279.5 million of~~the loss estimate for the 2020 Australia fires ($3.1 million). There were no current year catastrophe losses for the three months ended ~~September~~June 30, 2019.

Incurred losses and LAE increased by 22.3% to $2,005.3 million for the six months ended June 30, 2020 compared to $1,639.3 million for the six months ended June 30, 2019, primarily due to an increase of $371.9 million in current year attritional losses, related primarily to $73.7 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned. The current year catastrophe losses of $44.7 million for the six months ended June 30, 2020 related to the U.S. civil unrest ($15.0 million), the Nashville

4239

~~mainly related to Hurricane Dorian~~tornadoes ($~~154.5~~12.8 million), Australia East Coast storms ($10.0 million) and ~~Typhoon Faxai~~the Australia fires ($~~126.0~~6.8 million). The current year catastrophe losses of ~~$208.3~~$24.9 million for the ~~three~~six months ended September 30, 2018 related to Hurricane Florence ($77.0 million), Typhoon Jebi ($66.6 million), Typhoon Trami ($25.0 million), the 2018 California wildfires ($24.7 million), and Japan floods ($15.0 million).

Incurred losses and LAE decreased by 6.0% to $2,734.4 million for the nine months ended September 30, 2019 compared to $2,912.3 million for the nine months ended September 30, 2018, primarily due to $425.4 million less of unfavorable development on prior year catastrophe losses in 2019 compared to 2018 and favorable development on prior years attritional losses of $27.2 million in 2019, partially offset by an increase in current year attritional losses of $246.3 million due to the impact of the increase in premiums earned and an increase of $31.5 million on current year catastrophe losses. The current year catastrophe losses of $304.4 million for the nine months ended SeptemberJune 30, 2019 are primarily due to ~~Hurricane Dorian ($154.5 million) Typhoon Faxai ($126.0 million) and the~~ Townsville monsoon in Australia ($23.9 million). The $480.7 million of unfavorable development on prior years catastrophe losses, for the nine months ended September 30, 2018 mainly related to Hurricanes Harvey, Irma and Maria. The increase in loss estimates for Hurricanes Harvey, Irma and Maria was mostly driven by re-opened claims reported in the second quarter of 2018 and loss inflation from higher than expected loss adjustment expenses and in particular, their impact on aggregate covers. The current year catastrophe losses of $272.9 million for the nine months ended September 30, 2018 related to Hurricane Florence ($77.0 million), Typhoon Jebi ($66.6 million), Cyclone Mekanu ($47.7 million), Typhoon Trami ($25.0 million), the 2018 California wildfires ($24.7 million), the U.S. winter storms ($16.9 million), and Japan floods ($15.0 million). Australia.

Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees in~~creased~~increased to ~~$357.7~~$355.7 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to $~~288.2~~ $316.8 million for the three months ended ~~September~~June 30, ~~2018.~~ 2019. Commission, brokerage, taxes and fees increased to ~~$962.7~~$678.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to $~~832.7~~605.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~ 2019. The increases were mainly due to the ~~impacts~~impact of the ~~increase~~increases in premiums earned ~~the impact of the early commutation of a multi-year contract,~~ and changes in ~~the mix of business.~~ affiliated reinsurance agreements.

Other Underwriting Expenses. Other underwriting expenses increased to ~~$95.7~~$94.1 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$78.8~~$83.3 million for the three months ended ~~September~~June 30, ~~2018.~~2019. Other underwriting expenses increased to ~~$257.4~~$195.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$230.4~~$161.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. These increases were ~~primarily~~mainly due to ~~the increase in premiums earned,~~ changes in ~~the mix~~affiliated reinsurance agreements, impact of ~~business~~increases in premium earned and costs incurred to support the ~~continued~~ expansion of the insurance ~~business~~.business.

Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, have increased ~~slightly~~ to ~~$3.2~~$3.5 million from $2.5 million for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~decreased slightly~~increased to ~~$7.4~~$7.2 million from ~~$7.6~~$4.2 million for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, ~~and 2018, respectively~~. respectively. The increases were mainly due to higher incentive compensation costs.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense ~~remained flat at $7.8~~was $6.9 million and $9.7million for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Interest, fees and other bond amortization expense was ~~$27.3~~$14.4 million and ~~$22.7~~$19.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~change~~decreases in expense ~~for the nine month period was~~were primarily due to interest expense on the $300.0 million affiliated loan agreement with Bermuda Re ~~effective on December 31, 2018~~in 2019 and the movement in the floating interest rate related to the long term subordinated notes, which is reset quarterly per the note agreement. The floating rate was ~~4.5%~~2.78% as of ~~September~~June 30,~~, 2019 compared to 4.7% as of September 30, 2018.~~ 2020.

Income Tax Expense (Benefit). We had an income tax ~~expense~~benefit of ~~$10.3~~$75.9 million and ~~an income tax benefit of $23.3~~$37.0 million for the three and six months ended ~~September~~June 30, ~~2019 and 2018,~~2020, respectively. We had an income tax expense of ~~$141.2~~$67.4 million and ~~an income~~$130.9 million for the three and six months ended June 30, 2019, respectively. Income tax benefit or expense is primarily a function of ~~$66.0 million~~ ~~for~~ the ~~nine months ended September 30, 2019~~geographic location of the Company’s pre-tax income and ~~2018, respectively.~~ the statutory tax rates in those jurisdictions. The effective tax rate (“ETR”) is primarily affected by tax-exempt investment income, foreign tax credits and dividends. Variations in ~~taxes~~the ETR generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net capital gains (losses) ~~as well as changes in~~, among jurisdictions with different tax ~~exempt investment income and creditable foreign taxes.~~rates. The change in income tax expense (benefit) ~~was~~

~~primarily due to the increase in net capital gains and underwriting income~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~ 2020 compared to the three and ~~nine~~six months ended ~~September~~June 30, 2019 was primarily due to estimated incurred losses from the COVID-19 pandemic and the impact from the Coronavirus Aid, Relief and Economic Securities Act (“the CARES Act”).~~2018.~~

The CARES Act was passed by Congress and signed into law by the President on March 27, 2020 in response to the COVID-19 pandemic. Among the provisions of the CARES Act was a special tax provision which allows companies to elect to carryback five years net operating losses incurred in the 2018, 2019 and/or 2020 tax years. The Tax Cuts and Jobs Act of 2017 had eliminated net operating loss carrybacks for most companies. The Company determined that the special 5 year loss carryback tax provision provided a tax benefit of $31.0 million which it recorded in the quarter ended March 31, 2020.

Net Income (Loss).

Our net loss was $270.6 million and net income was ~~$61.1~~$280.9 million, for the three months ended ~~September~~June 30, ~~2019,~~2020 and ~~$22.0 million for the three months ended September 30, 2018~~2019 respectively. Our net income was ~~$593.7~~$46.1 million and $532.5 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020 and ~~our net loss was $257.1 million for the nine months ended September 30, 2018~~2019 respectively. The changes were primarily driven by the financial component fluctuations explained ~~above~~. above.

Ratios.

Our combined ratio ~~decreased slightly~~increased by 2.2 points to ~~108.6%~~92.6% for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~108.7%~~90.4% for the three months ended ~~September~~June 30, ~~2018,~~2019, and ~~decreased~~increased by ~~15.6~~4.0 points to ~~97.1%~~94.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~112.7%~~90.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The loss ratio component ~~decreased~~increased by ~~1.9~~2.1 points and ~~15.4~~4.1 points in for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, over the same period last year mainly due to ~~a lower~~higher attritional ~~loss ratio for the quarter and on prior year catastrophe~~ losses ~~for year~~due to ~~date in 2019 compared to 2018.~~COVID-19. The commission and brokerage ratio component increased slightly to ~~25.0%~~23.1% for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~23.4%~~23.0% for the three months ended ~~September~~June 30, ~~2018 primarily~~2019, and decreased to 22.4% for the six months ended June 30, 2020 compared to 22.9% for the six months ended June 30, 2019, reflecting changes in affiliated reinsurance agreements and changes in the mix of business. The other underwriting expense ratio remained flat at 6.1% for the three months ended June 30, 2020 and 2019 and increased slightly to 6.4% for the six months ended June 30, 2020 from 6.1% for the six months ended June 30, 2019. The increase for the six month period was mainly due to the impact of the early commutation of a multi-year contract, and remained flat at 23.6% for the nine months ended September 30, 2019 and 2018. The other underwriting expense ratio increased slightly to 6.7% for the three months ended September 30, 2019 from 6.5% for the three months ended September 30, 2018 and decreased slightly to 6.3% for the nine months ended September 30, 2019 from 6.5% for the nine months ended September 30, 2018,changes in affiliated reinsurance contracts.

Stockholder's Equity.

Stockholder’s equity increased by ~~$790.5~~$126.2 million to ~~$5,827.2~~$5,983.6 million at ~~September~~June 30, ~~2019~~ 2020 from ~~$5,036.8~~$5,857.4 million at December 31, ~~2018,~~2019, principally as a result of ~~$593.7 million of net income, $187.9~~$97.5 million of net unrealized ~~appreciation~~depreciation on investments, net of tax, ~~$5.0~~$46.1 million of net income, $2.7 million of net benefit plan obligation adjustments and $0.9 million of cumulative adjustment from the adoption of ASU-2016-13, partially offset by $21.2 million of net foreign currency translation ~~adjustments and $3.7 million of net benefit plan obligation~~ adjustments.

Consolidated Investment Results

Net Investment Income.

Net investment income ~~increased~~decreased by ~~5.9%~~61.2% to ~~$95.6~~$35.2 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared ~~with net investment income of $90.3~~to $90.7 million for the three months ended ~~September~~June 30, ~~2018.~~2019. Net investment income ~~increased~~decreased by ~~16.6%~~37.6% to ~~$270.8~~$109.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared ~~with net investment income of $232.3~~to $175.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increases~~decreases in ~~income~~2020 were primarily ~~the result of~~due to losses from our limited partnerships, partially offset by higher income from our growing fixed maturity ~~portfolio, partially offset by a decline in income from our limited partnership investments~~. portfolio.

The following table shows the components of net investment income for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in millions)	2019		2018		2019		2018		2020		2019		2020		2019
Fixed maturities	$	68.2	$	51.9	$	200.6	$	142.8	$	74.9	$	65.3	$	149.0	$	132.4
Equity securities		1.9		2.7		5.7		10.7		2.0		2.4		3.6		3.8
Short-term investments and cash		2.2		2.1		8.1		4.3		0.5		3.2		2.1		5.9
Other invested assets
Limited partnerships		15.1		25.6		38.3		54.2		(40.5)		15.1		(33.5)		23.2
Dividends from preferred shares of affiliate		7.8		7.8		23.3		23.3		7.7		7.7		15.5		15.5
Other		7.3		6.0		13.6		10.7		(2.9)		3.3		(16.0)		6.3
Gross investment income before adjustments		102.5		96.0		289.6		246.0		41.7		97.1		120.7		187.1
Funds held interest income (expense)		1.1		0.9		5.4		4.5		1.0		1.4		4.2		4.3
Interest income from Parent		-		1.1		-		3.2		1.3		-		2.6		-
Gross investment income		103.6		98.0		295.0		253.7		44.0		98.5		127.5		191.4
Investment expenses		(8.0)		(7.7)		(24.2)		(21.5)		8.8		(7.8)		18.1		(16.1)
Net investment income	$	95.6	$	90.3	$	270.8	$	232.3	$	35.2	$	90.7	$	109.4	$	175.2

(Some amounts may not reconcile due to rounding.)

The following tables show a comparison of various investment yields for the periods indicated:

	At	At	At	At
	September 30,	December 31,	June 30,	December 31,
	2019	2018	2020	2019
Imbedded pre-tax yield of cash and invested assets	3.6%	3.5%	3.5%	3.5%
Imbedded after-tax yield of cash and invested assets	2.8%	2.8%	2.8%	2.8%

	Three Months Ended		Nine Months Ended		Three Months Ended		Six Months Ended
	September 30,		September 30,		June 30,		June 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Annualized pre-tax yield on average cash and invested assets	3.4%	3.9%	3.3%	3.4%	1.2%	3.3%	1.9%	3.2%
Annualized after-tax yield on average cash and invested assets	2.7%	3.1%	2.6%	2.7%	1.0%	2.7%	1.5%	2.6%

4542

Net Realized Capital Gains (Losses).

The following table presents the composition of our net realized capital gains (losses) for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2019		2018		Variance		2019		2018		Variance		2020		2019		Variance		2020		2019		Variance
Gains (losses) from sales:
Fixed maturity securities, market value
Gains	$	6.6	$	2.5	$	4.1	$	17.5	$	11.5	$	6.0	$	8.8	$	2.8	$	6.0	$	10.6	$	10.9	$	(0.3)
Losses		(4.5)		(3.8)		(0.7)		(14.2)		(6.8)		(7.4)		(6.8)		(5.0)		(1.8)		(29.6)		(9.7)		(19.9)
Total		2.1		(1.3)		3.4		3.3		4.7		(1.4)		2.0		(2.2)		4.2		(19.0)		1.2		(20.2)
Fixed maturity securities, fair value
Gains		-		-		-		0.4		-		0.4		-		0.4		(0.4)		-		0.4		(0.4)
Losses		-		(0.7)		0.7		-		(1.8)		1.8		-		-		-		-		-		-
Total		-		(0.7)		0.7		0.4		(1.8)		2.2		-		0.4		(0.4)		-		0.4		(0.4)
Fixed maturity securities, fair value
Equity securities, fair value
Gains		1.1		13.8		(12.7)		9.3		21.7		(12.4)		18.2		2.5		15.7		20.8		8.2		12.6
Losses		(2.2)		(3.8)		1.6		(6.7)		(15.8)		9.1		(1.9)		(3.9)		2.0		(32.1)		(4.5)		(27.6)
Total		(1.1)		10.0		(11.1)		2.6		5.9		(3.3)		16.3		(1.3)		17.6		(11.3)		3.7		(15.0)
Other invested assets
Gains		2.6		0.9		1.7		2.9		1.5		1.4		1.6		-		1.6		4.6		0.3		4.3
Losses		(0.5)		-		(0.5)		(0.6)		-		(0.6)		(0.2)		(0.1)		(0.1)		(5.6)		(0.1)		(5.5)
Total		2.1		0.9		1.2		2.3		1.5		0.8		1.4		(0.1)		1.5		(1.0)		0.2		(1.2)
Short Term Investments:
Gains		-		-		-		0.1		-		0.1		0.1		0.1		-		0.2		0.1		0.1
Losses														-		-		-		-		-		-
Total														0.1		0.1		-		0.2		0.1		0.1
Total net realized gains (losses) from sales
Gains		10.3		17.2		(6.9)		30.2		34.7		(4.5)		28.7		5.7		23.0		36.2		19.9		16.3
Losses		(7.2)		(8.3)		1.1		(21.5)		(24.5)		3.0		(8.9)		(9.0)		0.1		(67.3)		(14.3)		(53.0)
Total		3.1		8.9		(5.8)		8.7		10.2		(1.5)		19.6		(3.3)		22.9		(31.1)		5.6		(36.7)

Allowances for credit losses:														(7.8)		-		(7.8)		(19.9)		-		(19.9)

Other than temporary impairments:		(7.0)		(2.8)		(4.2)		(14.2)		(3.7)		(10.5)		-		(4.9)		4.9		-		(7.2)		7.2

Gains (losses) from fair value adjustments:
Fixed maturities, fair value		-		0.5		(0.5)		-		1.5		(1.5)		(0.3)		-		(0.3)		(1.4)		-		(1.4)
Equity securities, fair value		(10.3)		36.3		(46.6)		93.3		34.8		58.5		148.2		25.8		122.4		26.5		103.6		(77.1)
Other invested assets, fair value		126.7		(12.9)		139.6		302.3		(115.3)		417.6		(639.1)		125.0		(764.1)		(196.6)		175.6		(372.2)
Total		116.4		23.9		92.5		395.6		(79.0)		474.6		(491.2)		150.8		(642.0)		(171.5)		279.2		(450.7)

Total net realized gains (losses)	$	112.6	$	30.0	$	82.6	$	390.2	$	(72.5)	$	462.7	$	(479.4)	$	142.6	$	(622.0)	$	(222.5)	$	277.6	$	(500.1)

(Some amounts may not reconcile due to rounding.)

Net Realized Capital Gains (Losses). Net realized capital losses were $479.4 million and net realized capital gains were ~~$112.6~~$142.6 million ~~and $30.0 million~~ for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. As discussed earlier, the COVID-19 pandemic caused significant volatility in the global financial markets. The net realized capital losses of $479.4 million for the three months ended June 30, 2020, were comprised of $491.2 million of losses from fair value re-measurements, resulting primarily from increases in equity security valuations which rebounded from declines in the first quarter of 2020, and $7.8 million of net allowances for credit losses partially offset by $19.6 million of gains from sales of investments. The net realized capital gains of ~~$112.6~~$142.6 million for the three months ended ~~September~~June 30, 2019, were comprised of ~~$116.4~~$150.7 million of gains from fair value re-measurements, partially offset by $4.9 million of other-than-temporary impairments and $3.3million of net losses from sales of investments.

Net realized capital losses were $222.5 million and net realized capital gains were $277.6 million for the six months ended June 30, 2020 and 2019, respectively. The net realized capital losses of $222.5 million for the six months ended June 30, 2020, were comprised of $171.5 million of losses from fair value re-measurements, $31.1 million of losses from sales of investments and $19.9 million of net allowances for credit losses. The net realized capital gains of $277.6 million for the six months ended June 30, 2019, were comprised of $279.2 million of gains from fair value re-measurements and ~~3.1 million of gains from sales of investments, partially offset by $7.0 million of other than temporary impairments.~~ ~~The net realized capital gains of $30.0 million for the three months ended September 30, 2018 were comprised of $23.9 million of gains from fair value re-measurements, and $8.9~~ ~~million of gains from sales of investments, offset by 2.8 million of other-than-temporary investments.~~

Segment Results.

The ~~U.S.~~ Reinsurance operation writes worldwide 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~~companies. Business is written in the ~~U.S. The International operation writes non-U.S. property and casualty reinsurance~~United States as well as through ~~Everest Re’s~~ branches in Canada ~~Singapore~~ and ~~through offices in Brazil, Miami and New Jersey.~~Singapore. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents ~~mainly~~ within the ~~U.S.~~ United States.

Underwriting results include earned premium less losses and LAE incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

Our loss and LAE reserves are management’s best estimate of our ultimate liability for unpaid claims. We re-evaluate our estimates on an ongoing basis, including all prior period reserves, taking into consideration all available information and, in particular, recently reported loss claim experience and trends related to prior periods. Such re-evaluations are recorded in incurred losses in the period in which the re-evaluation is made.

The following discusses the underwriting results for each of our segments for the periods indicated:

~~U.S.~~ Reinsurance.

The following table presents the underwriting results and ratios for the ~~U.S.~~ Reinsurance segment for the periods indicated.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in millions)	2019		2018		Variance		% Change	2019		2018		Variance		% Change	2020		2019		Variance		% Change	2020		2019		Variance		% Change
Gross written premiums	$	854.6	$	940.8	$	(86.2)	-9.2%	$	2,260.5	$	2,237.2	$	23.3	1.0%	$	1,124.9	$	1,014.4	$	110.5	10.9%	$	2,433.1	$	2,167.5	$	265.6	12.3%
Net written premiums		740.1		703.9		36.2	5.1%		1,845.9		1,557.7		288.2	18.5%		992.8		837.9		154.9	18.5%		2,107.0		1,813.9		293.1	16.2%

Premiums earned	$	630.1	$	528.9	$	101.2	19.1%	$	1,810.2	$	1,437.8	$	372.4	25.9%	$	1,062.8	$	958.2	$	104.6	10.9%	$	2,069.9	$	1,855.5	$	214.4	11.6%
Incurred losses and LAE		392.9		394.6		(1.7)	-0.4%		1,077.0		1,404.3		(327.3)	-23.3%		630.7		581.3		49.4	8.5%		1,313.4		1,135.0		178.4	15.7%
Commission and brokerage		215.8		156.5		59.3	37.9%		555.5		432.5		123.0	28.4%		292.3		258.6		33.7	13.0%		553.2		495.5		57.7	11.6%
Other underwriting expenses		19.1		16.3		2.8	17.2%		50.5		48.6		1.9	3.9%		26.6		25.4		1.2	4.7%		56.4		49.4		7.0	14.2%
Underwriting gain (loss)	$	2.3	$	(38.5)	$	40.8	-106.0%	$	127.2	$	(447.7)	$	574.8	-128.4%	$	113.3	$	93.0	$	20.4	21.9%	$	146.9	$	175.6	$	(28.7)	-16.3%

							Point Chg							Point Chg							Point Chg							Point Chg
Loss ratio		62.4%		74.6%			(12.2)		59.5%		97.7%			(38.2)		59.4%		60.7%			(1.3)		63.5%		61.2%			2.3
Commission and brokerage ratio		34.3%		29.6%			4.7		30.7%		30.1%			0.6		27.5%		27.0%			0.5		26.7%		26.7%			-
Other underwriting ratio		2.9%		3.1%			(0.2)		2.8%		3.3%			(0.5)		2.4%		2.7%			(0.3)		2.7%		2.7%			-
Combined ratio		99.6%		107.3%			(7.7)		93.0%		131.1%			(38.1)		89.3%		90.4%			(1.1)		92.9%		90.6%			2.3

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)														(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)	(NM, not meaningful)														(NM, not meaningful)

Premiums. Gross written premiums ~~decreased~~increased by ~~9.2%~~10.9% to ~~$854.6~~$1,124.9 million for the three months ended ~~September~~June 30, ~~2019~~ 2020 from ~~$940.8~~$1,014.4 million for the three months ended ~~September~~June 30, ~~2018~~,2019 primarily due to ~~a decrease~~increases in casualty writings and treaty property ~~writings, partially offset by an increase in casualty~~ business. Net written premiums increased by ~~5.1%~~18.5% to ~~$740.1~~$992.8 million for the three months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$703.9~~$837.9 million for the three months ended ~~September~~June 30, ~~2018.~~

2019. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of ~~reinsurance, including the impact of changes in affiliated reinsurance contracts.~~ reinsurance. Premiums earned increased ~~by 19.1%~~10.9% to ~~$630.1~~$1,062.8 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$528.9~~$958.2 million for the three months ended ~~September~~June 30, ~~2018~~. 2019. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums increased by ~~1.0%~~12.3% to ~~$2,260.5~~$2,433.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~ 2020 from ~~$2,237.2~~$2,167.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~,2019 primarily due to ~~an increase~~increases in casualty writings ~~partially offset by a decline in~~and treaty property business. Net written premiums increased by ~~18.5%~~16.2% to ~~$1,845.9~~$2,107.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$1,557.7~~$1,813.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~ 2019. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of ~~reinsurance, including the impact of changes in affiliated reinsurance contracts.~~ reinsurance. Premiums earned increased ~~by 25.9%~~11.6% to ~~$1,810.2~~$2,069.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$1,437.8~~$1,855.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~. 2019. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage ~~period~~. period.

Incurred Losses and LAE. The following tables present the incurred losses and LAE for the ~~U.S.~~ Reinsurance segment for the periods indicated.

	Three Months Ended September 30,												Three Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	635.4	59.8%		$	-	0.0%		$	635.4	59.8%
Catastrophes														(0.4)	0.0%			(4.4)	-0.4%			(4.7)	-0.4%
Total segment													$	635.1	59.8%		$	(4.4)	-0.4%		$	630.7	59.4%
2019
Attritional	$	339.2	53.8%		$	(10.3)	-1.6%		$	328.9	52.2%		$	547.4	57.1%		$	4.9	0.5%		$	552.3	57.6%
Catastrophes		50.5	8.0%			13.5	2.1%			64.0	10.2%			(0.1)	0.0%			29.1	3.0%			29.0	3.0%
Total segment	$	389.7	61.8%		$	3.2	0.5%		$	392.9	62.4%		$	547.3	57.1%		$	34.0	3.5%		$	581.3	60.7%
2018
Variance 2020/2019
Attritional	$	340.1	64.3%		$	5.2	1.0%		$	345.3	65.3%		$	88.0	2.7	pts	$	(4.9)	(0.5)	pts	$	83.1	2.2	pts
Catastrophes		97.5	18.4%			(48.2)	-9.1%			49.3	9.3%			(0.3)	-	pts		(33.5)	(3.4)	pts		(33.7)	(3.4)	pts
Total segment	$	437.6	82.7%		$	(43.0)	-8.1%		$	394.6	74.6%		$	87.8	2.7	pts	$	(38.4)	(3.9)	pts	$	49.4	(1.3)	pts
Variance 2019/2018
Attritional	$	(0.9)	(10.5)	pts	$	(15.5)	(2.6)	pts	$	(16.4)	(13.1)	pts
Catastrophes		(47.0)	(10.4)	pts		61.7	11.2	pts		14.7	0.9	pts
Total segment	$	(47.9)	(20.9)	pts	$	46.2	8.6	pts	$	(1.7)	(12.2)	pts

	Nine Months Ended September 30,												Six Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	1,290.1	62.3%		$	(0.6)	0.0%		$	1,289.4	62.3%
Catastrophes														24.2	1.2%			(0.2)	0.0%			23.9	1.2%
Total segment													$	1,314.2	63.5%		$	(0.9)	0.0%		$	1,313.4	63.5%
2019
Attritional	$	1,047.2	57.8%		$	(7.3)	-0.4%		$	1,039.9	57.3%		$	1,069.5	57.6%		$	4.9	0.3%		$	1,074.4	57.9%
Catastrophes		50.4	2.8%			(13.3)	-0.7%			37.2	2.1%			24.9	1.3%			35.8	1.9%			60.7	3.2%
Total segment	$	1,097.6	60.6%		$	(20.6)	-1.1%		$	1,077.0	59.5%		$	1,094.4	58.9%		$	40.7	2.2%		$	1,135.0	61.2%
2018
Attritional	$	901.8	62.7%		$	-	0.0%		$	901.8	62.7%
Catastrophes		101.6	7.1%			401.0	27.9%			502.6	35.0%
Total segment	$	1,003.4	69.8%		$	401.0	27.9%		$	1,404.3	97.7%
Variance 2019/2018
Variance 2020/2019
Attritional	$	145.4	(4.9)	pts	$	(7.3)	(0.4)	pts	$	138.1	(5.4)	pts	$	220.6	4.7	pts	$	(5.5)	(0.3)	pts	$	215.0	4.4	pts
Catastrophes		(51.2)	(4.3)	pts		(414.3)	(28.6)	pts		(465.4)	(32.9)	pts		(0.8)	(0.1)	pts		(36.0)	(1.9)	pts		(36.8)	(2.0)	pts
Total segment	$	94.2	(9.2)	pts	$	(421.6)	(29.0)	pts	$	(327.3)	(38.2)	pts	$	219.8	4.6	pts	$	(41.6)	(2.2)	pts	$	178.3	2.3	pts

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)												(Some amounts may not reconcile due to rounding.)

~~Incurred losses decreased by 0.4% to $392.9 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $394.6 million~~ ~~for the three months ended September 30, 2018.~~ The decrease was primarily due to a decrease of $47.0 million in current year catastrophe losses and an increase of $15.5 million of favorable development on prior years attritional losses, partially offset by $61.7 million more of unfavorable development on prior year catastrophe losses in 2019 compared to 2018. The current year catastrophe losses

4845

~~of $50.5~~Incurred losses increased by 8.5% to $630.7 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to $581.3 million for the three months ended June 30, 2019. The increase was primarily due to an increase of $88.0 million in current year attritional losses, primarily related to ~~Typhoon Faxai~~$25.4 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned. The ($~~26.5~~0.4) million of current year catastrophe losses for the three months ended June 30, 2020 related to the Nashville tornadoes ($2.8 million) which was more than offset by a reduction in the loss estimate for the 2020 Australia fires. There were no current year catastrophe losses for the three months ended June 30, 2019.

Incurred losses increased by 15.7% to $1,313.4 million for the six months ended June 30, 2020 compared to $1,135.0 million for the six months ended June 30, 2019. The increase was primarily due to an increase of $220.6 million in current year attritional losses, primarily related to $45.4 million of losses from the COVID-19 pandemic and ~~Hurricane Dorian ($24.0 million) .~~the impact of the increase in premiums earned. The current year catastrophe losses of ~~$97.5~~$24.2 million for the six months ended June 30, 2020 primarily related to Australia East Coast storms ($10.0 million), Nashville tornadoes ($7.3 million) and the 2020 Australia fires ($6.9 million). The $24.9 million of current year catastrophe losses for the six months ended June 30, 2019 related to the Townsville monsoon in Australia ($24.9 million).

Segment Expenses. Commission and brokerage increased to $292.3 million for the three months ended ~~September~~June 30, ~~2018 primarily related~~2020 compared to ~~Hurricane Florence ($58.0 million),~~$258.6 million for the ~~2018 California wildfires ($23.2 million), Typhoon Jebi ($6.5 million), Japan Floods ($5.5 million), the U.S. winter storms ($2.3 million)~~three months ended June 30, 2019. Commission and ~~Typhoon Trami ($2.0 million).~~

~~Incurred losses decreased by 23.3%~~brokerage increased to ~~$1,077.0~~$553.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$1,404.3~~$495.5 millionfor the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~decrease was primarily~~increases were mainly due to ~~$414.3~~the impact of the increase in premiums earned. Segment other underwriting expenses increased to $26.6 million ~~of less unfavorable development on prior year catastrophe losses in 2019 compared~~for the three months ended June 30, 2020 from $25.4 million for the three months ended June 30, 2019. Segment other underwriting expenses decreased to ~~2018 and a decrease of $51.2~~$56.4 million ~~on current year catastrophe losses.~~ ~~The unfavorable development of $401.0~~for the six months ended June 30, 2020 from $49.4 million ~~in 2018 mainly related to Hurricanes Harvey, Irma and Maria as well as~~for the ~~2017 California wildfires. This decline was partially offset by an increase of $145.4 million in current year attritional losses,~~ six months ended June 30, 2019. These were mainly due to the impact of the increase in premiums earned and changes in the mix of business. The current year catastrophe losses of $50.4 million mainly related to Typhoon Faxai ($26.5 million) and Hurricane Dorian ($24.0 million). The current year catastrophe losses of $101.6 million for the nine months ended ~~September~~ 30, 2018 primarily related to Hurricane Florence ($58.0 million), the 2018 California wildfires ($23.2 million), Typhoon Jebi ($6.5 million), the U.S. winter storms ($6.4 million), Japan Floods ($5.5 million) and Typhoon Trami ($2.0 million).

~~Segment Expenses.~~ ~~Commission and brokerage increased to $215.8 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $156.5 million~~ ~~for the three months ended September 30, 2018. Commission and brokerage increased to $555.5 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $432.5 million~~ ~~for the nine months ended September 30, 2018~~. ~~The increases were mainly due to the impact of the increases in premium earned, the impact of the early commutation of a multi-year contract, and changes in~~ affiliated reinsurance agreements.

~~Segment other underwriting expenses increased to $19.1 million~~ ~~for the three months ended September 30, 2019~~ ~~from $16.3 million~~ ~~for the three months ended September 30, 2018.~~ ~~Segment other underwriting expenses increased to $50.5 million~~ ~~for the nine months ended September 30, 2019~~ ~~from $48.6 million~~ ~~for the nine months ended September 30, 2018. These increases were due to the impact of the increases in premiums earned.~~

~~International.~~Insurance.

The following table presents the underwriting results and ratios for the ~~International~~Insurance segment for the periods indicated.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in millions)	2019		2018		Variance		% Change	2019		2018		Variance		% Change	2020		2019		Variance		% Change	2020		2019		Variance		% Change
Gross written premiums	$	442.6	$	363.4	$	79.2	21.8%	$	1,204.2	$	1,129.1	$	75.1	6.7%	$	713.4	$	673.6	$	39.8	5.9%	$	1,380.1	$	1,205.4	$	174.7	14.5%
Net written premiums		401.3		340.7		60.6	17.8%		1,109.4		1,012.9		96.5	9.5%		508.8		482.0		26.8	5.6%		1,033.3		898.2		135.1	15.0%

Premiums earned	$	366.4	$	331.9	$	34.5	10.4%	$	1,041.9	$	1,004.0	$	37.9	3.8%	$	476.1	$	417.4	$	58.7	14.1%	$	963.1	$	790.6	$	172.5	21.8%
Incurred losses and LAE		407.8		315.9		91.9	29.1%		858.7		751.7		107.0	14.2%		345.2		261.9		83.3	31.8%		692.0		504.3		187.7	37.2%
Commission and brokerage		81.7		78.2		3.5	4.5%		237.5		241.0		(3.5)	-1.5%		63.4		58.2		5.2	8.9%		125.6		109.5		16.1	14.7%
Other underwriting expenses		11.3		10.0		1.3	13.0%		29.4		29.9		(0.5)	-1.7%		67.5		58.0		9.5	16.4%		138.9		112.3		26.6	23.7%
Underwriting gain (loss)	$	(134.3)	$	(72.1)	$	(62.1)	86.1%	$	(83.7)	$	(18.6)	$	(65.1)	NM	$	-	$	39.3	$	(39.3)	-100.0%	$	6.6	$	64.5	$	(57.9)	-89.8%

							Point Chg							Point Chg							Point Chg							Point Chg
Loss ratio		111.3%		95.2%			16.1		82.4%		74.9%			7.5		72.5%		62.8%			9.7		71.8%		63.8%			8.0
Commission and brokerage ratio		22.3%		23.6%			(1.3)		22.8%		24.0%			(1.2)		13.3%		13.9%			(0.6)		13.0%		13.8%			(0.8)
Other underwriting ratio		3.1%		2.9%			0.2		2.8%		3.0%			(0.2)		14.2%		13.9%			0.3		14.4%		14.2%			0.2
Combined ratio		136.7%		121.7%			15.0		108.0%		101.9%			6.1		100.0%		90.6%			9.4		99.3%		91.8%			7.4

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)														(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)	(NM, not meaningful)														(NM, not meaningful)

Premiums. Gross written premiums increased by ~~21.8%~~5.9% to ~~$442.6~~$713.4 million for the three months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$363.4~~$673.6 million for the three months ended ~~September~~June 30, ~~2018, primarily due~~2019. This increase was related to ~~increases~~most lines of business including casualty, property and specialty lines. Net written premiums increased by 5.6% to $508.8 million for the three months ended June 30, 2020 compared to $482.0 million for the three months ended June 30, 2019, which is consistent with the change in ~~Latin American business, Canadian business, and facultative writings. Net~~gross written premiums. Premiums earned increased 14.1% to $476.1 million for the three months ended June 30, 2020 compared to $417.4 million for the three months ended June 30, 2019. The change in premiums earned is the result of timing;

4946

premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums increased by ~~17.8%~~14.5% to ~~$401.3~~$1,380.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$340.7~~$1,205.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2018. The difference between~~2019. This increase was related to most lines of business including casualty, property, specialty lines and accident and health. Net written premiums increased by 15.0% to $1,033.3 million for the six months ended June 30, 2020 compared to $898.2 million for the six months ended June 30, 2019, which is consistent with the change in gross written ~~premiums compared to the change in net written premiums is primarily due to the varying utilization of reinsurance, including the impact of changes in affiliated reinsurance contracts~~.premiums. Premiums earned increased ~~10.4%~~21.8% to ~~$366.4~~$963.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$331.9~~$790.6 million for the ~~three~~six months ended ~~September~~June 30, ~~2018~~. 2019. The change in premiums earned ~~relative to net written premiums~~ is ~~due to changes in affiliated reinsurance agreements and is also~~ the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

~~Gross written premiums increased by 6.7% to $1,204.2 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $1,129.1 million~~ ~~for the nine months ended September 30, 2018~~, primarily due to increases in Middle East and Africa business, facultative business, and Asian business written through our Singapore branch, partially offset by a decline in Latin American business and a negative impact of $26.0 million from the movement of foreign exchange rates. Net written premiums increased by 9.5% to $1,109.4 million ~~for the nine months ended September 30, 2019~~ ~~compared to $1,012.9 million~~ for the nine months ended September 30, 2018. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the varying utilization of reinsurance, including the impact of changes in affiliated reinsurance contracts. ~~Premiums earned increased 3.8% to $1,041.9 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $1,004.0 million~~ ~~for the nine months ended September 30, 2018~~. The change in premiums earned relative to net written premiums is due to changes in affiliated reinsurance agreements and is also the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

~~Incurred Losses and LAE.~~ ~~The following tables present the incurred losses and LAE for the International segment for the periods indicated.~~

Three Months Ended September 30,

Current

Ratio %/

Prior

Ratio %/

Total

Ratio %/
(Dollars in millions)
Year

Pt Change

Years

Pt Change

Incurred

Pt Change
2019

Attritional
$
185.7

50.7%

$
(4.4)

-1.2%

$
181.3

49.5%

Catastrophes

225.0

61.4%

1.5

0.4%

226.5

61.8%

Total segment
$
410.7

112.1%

$
(2.9)

-0.8%

407.8

111.3%

2018

Attritional
$
182.2

54.9%

$
-

0.0%

$
182.2

54.9%

Catastrophes

96.3

29.0%

37.4

11.3%

133.7

40.3%

Total segment
$
278.5

83.9%

$
37.4

11.3%

$
315.9

95.2%

Variance 2019/2018

Attritional
$
3.5

(4.2)
pts

$
(4.4)

(1.2)
pts

$
(0.9)

(5.4)
pts
Catastrophes

128.7

32.4
pts

(35.9)

(10.9)
pts

92.8

21.5
pts
Total segment
$
132.2

28.2
pts

$
(40.3)

(12.1)
pts

$
91.9

16.1
pts

Nine Months Ended September 30,

Current

Ratio %/

Prior

Ratio %/

Total

Ratio %/
(Dollars in millions)
Year

Pt Change

Years

Pt Change

Incurred

Pt Change
2019

Attritional
$
547.2

52.5%

$
(2.6)

-0.2%

$
544.7

52.2%

Catastrophes

249.9

24.0%

64.1

6.2%

314.0

30.1%

Total segment
$
797.1

76.5%

$
61.5

6.0%

$
858.7

82.4%

2018

Attritional
$
520.3

51.8%

$
-

0.0%

$
520.3

51.8%

Catastrophes

146.3

14.6%

85.1

8.5%

231.4

23.1%

Total segment
$
666.6

66.4%

$
85.1

8.5%

$
751.7

74.9%

Variance 2019/2018

Attritional
$
26.9

0.7
pts

$
(2.6)

(0.2)
pts

$
24.4

0.4
pts
Catastrophes

103.6

9.4
pts

(21.0)

(2.3)
pts

82.6

7.0
pts
Total segment
$
130.5

10.1
pts

$
(23.6)

(2.5)
pts

$
107.0

7.5
pts

(Some amounts may not reconcile due to rounding.)

~~Incurred losses and LAE increased by 29.1% to $407.8 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $315.9 million~~ ~~for the three months ended September 30, 2018~~, primarily due to an increase of $128.7 million in current year catastrophe losses, partially offset by $35.9 million less of unfavorable development on prior years catastrophe losses in 2019 compared to 2018. The current year catastrophe losses of $225.0 million for the three months ended September 30, 2019 , related to Hurricane Dorian ($126.5 million) and Typhoon Faxai ($99.5 million). ~~The current year catastrophe losses of $96.3 million for the three months ended~~ ~~September~~ ~~30, 2018 primarily related to Typhoon Jebi ($60.1 million), Typhoon Trami ($23.0 million), Japan Floods ($9.5 million) and Hurricane Florence ($6.0 million).~~

~~Incurred losses and LAE increased by 14.2% to $858.7 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $751.7 million~~ ~~for the nine months ended September 30, 2018~~, primarily due to an increase of $103.6 million in current year catastrophe losses and an increase of $26.9 million on current year attritional losses mainly due to the impact of the increase in premiums earned, partially offset by $21.0 million less of unfavorable development on prior years catastrophe losses in 2019 compared to 2018. The current year catastrophe losses of $249.9 million for the nine months ended September 30, 2019 related to Hurricane Dorian ($126.5 million), Typhoon Faxai ($99.5 million), and the Townsville monsoon in Australia ($23.9 million). The current year catastrophe losses of $146.3 million for the nine months ended ~~September~~ ~~30, 2018 primarily related to Typhoon Jebi ($60.1 million), Cyclone Mekunu ($47.7 million), Typhoon Trami ($23.0 million), Japan Floods ($9.5 million) and Hurricane Florence ($6.0 million).~~

~~Segment Expenses.Commission and brokerage increased to $81.7 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $78.2 million~~ ~~for the three months ended September 30, 2018. Commission and brokerage decreased to $237.5 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $241.0 million~~ ~~for the nine months ended September 30, 2018~~. ~~The fluctuations were mainly due to the impact of changes in affiliated reinsurance agreements~~ ~~and changes in the mix of business.~~

~~Segment other underwriting expenses increased to $11.3 million~~ ~~for the three months ended September 30, 2019~~ ~~from $10.0 million~~ ~~for the three months ended September 30, 2018.~~ ~~Segment other underwriting expenses decreased slightly to $29.4 million~~ ~~for the nine months ended September 30, 2019~~ ~~from $29.9 million~~ ~~for the nine months ended September 30, 2018. The fluctuations were mainly due to the impact of changes in affiliated reinsurance agreements and changes in the mix of business.~~

~~Insurance.~~

~~The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated.~~

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)
2019

2018

Variance

% Change

2019

2018

Variance

% Change
Gross written premiums
$
592.8

$
455.0

$
137.8

30.3%

$
1,798.1

$
1,491.4

$
306.7

20.6%
Net written premiums

428.5

333.8

94.7

28.4%

1,326.7

1,105.2

221.5

20.0%

Premiums earned
$
431.9

$
370.0

$
61.9

16.7%

$
1,222.4

$
1,084.9

$
137.5

12.7%
Incurred losses and LAE

297.4

259.8

37.6

14.5%

801.7

756.3

45.4

6.0%
Commission and brokerage

60.2

53.5

6.7

12.5%

169.6

159.2

10.4

6.5%
Other underwriting expenses

65.3

52.6

12.7

24.1%

177.6

151.8

25.8

17.0%
Underwriting gain (loss)
$
9.0

$
4.1

$
4.9

119.5%

$
73.5

$
17.6

$
55.9

NM

Point Chg

Point Chg
Loss ratio

68.9%

70.2%

(1.3)

65.6%

69.7%

(4.1)
Commission and brokerage ratio

13.9%

14.5%

(0.6)

13.9%

14.7%

(0.8)
Other underwriting ratio

15.1%

14.2%

0.9

14.5%

14.0%

0.5
Combined ratio

97.9%

98.9%

(1.0)

94.0%

98.4%

(4.4)

(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)

~~Premiums.~~ ~~Gross written premiums increased by 30.3% to $592.8 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $455.0 million~~ ~~for the three months ended September 30, 2018. This increase was related to most lines of business including property, casualty, and specialty lines. Net written premiums increased by 28.4% to $428.5 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $333.8 million~~ ~~for the three months ended September 30, 2018, which is consistent with the change in written premiums. Premiums earned increased by 16.7% to $431.9 million~~ ~~for the three months ended September 30, 2019~~ ~~compared to $370.0 million~~ ~~for the three months ended September 30, 2018~~. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

~~Gross written premiums increased by 20.6% to $1,798.1 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $1,491.4 million~~ ~~for the nine months ended September 30, 2018. This increase was related to most lines of business including property, casualty, energy, specialty lines and accident and health. Net written premiums increased by 20.0% to $1,326.7 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $1,105.2 million~~ ~~for the nine months ended September 30, 2018, which is consistent with the change in written premiums. Premiums earned increased by 12.7% to $1,222.4 million~~ ~~for the nine months ended September 30, 2019~~ ~~compared to $1,084.9 million~~ ~~for the nine months ended September 30, 2018~~. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Incurred Losses and LAE. The following tables present the incurred losses and LAE for the Insurance segment for the periods indicated.

	Three Months Ended September 30,												Three Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	330.5	69.4%		$	0.2	0.0%		$	330.7	69.5%
Catastrophes														15.0	3.2%			(0.5)	-0.1%			14.5	3.0%
Total segment													$	345.5	72.6%		$	(0.3)	-0.1%		$	345.2	72.5%
2019
Attritional	$	289.7	67.1%		$	1.3	0.3%		$	291.0	67.4%		$	279.1	66.9%		$	(18.7)	-4.5%		$	260.4	62.4%
Catastrophes		4.0	0.9%			2.3	0.5%			6.3	1.5%			-	0.0%			1.5	0.4%			1.5	0.4%
Total segment	$	293.7	68.0%		$	3.7	0.9%		$	297.4	68.9%		$	279.1	66.9%		$	(17.2)	-4.1%		$	261.9	62.8%
2018
Variance 2020/2019
Attritional	$	250.0	67.5%		$	(2.0)	-0.5%		$	248.0	67.0%		$	51.4	2.5	pts	$	18.9	4.5	pts	$	70.3	7.1	pts
Catastrophes		14.5	3.9%			(2.7)	-0.7%			11.8	3.2%			15.0	3.2	pts		(2.0)	(0.5)	pts		13.0	2.6	pts
Total segment	$	264.5	71.4%		$	(4.7)	-1.2%		$	259.8	70.2%		$	66.4	5.7	pts	$	16.9	4.0	pts	$	83.3	9.7	pts
Variance 2019/2018
Attritional	$	39.7	(0.4)	pts	$	3.3	0.8	pts	$	43.0	0.4	pts
Catastrophes		(10.5)	(3.0)	pts		5.0	1.2	pts		(5.5)	(1.7)	pts
Total segment	$	29.2	(3.4)	pts	$	8.4	2.1	pts	$	37.6	(1.3)	pts

	Nine Months Ended September 30,												Six Months Ended June 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/		Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change		Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2020
Attritional													$	672.3	69.8%		$	(0.3)	0.0%		$	671.9	69.8%
Catastrophes														20.5	2.1%			(0.5)	0.0%			20.0	2.1%
Total segment													$	692.8	71.9%		$	(0.8)	-0.1%		$	692.0	71.8%
2019
Attritional	$	810.6	66.3%		$	(17.3)	-1.4%		$	793.2	64.9%		$	520.9	65.9%		$	(18.7)	-2.4%		$	502.2	63.5%
Catastrophes		4.0	0.3%			4.5	0.4%			8.5	0.7%			-	0.0%			2.1	0.3%			2.1	0.3%
Total segment	$	814.6	66.6%		$	(12.9)	-1.1%		$	801.7	65.6%		$	520.9	65.9%		$	(16.6)	-2.1%		$	504.3	63.8%
2018
Attritional	$	736.7	67.9%		$	-	0.0%		$	736.7	67.9%
Catastrophes		25.0	2.3%			(5.4)	-0.5%			19.6	1.8%
Total segment	$	761.7	70.2%		$	(5.4)	-0.5%		$	756.3	69.7%
Variance 2019/2018
Variance 2020/2019
Attritional	$	73.9	(1.6)	pts	$	(17.3)	(1.4)	pts	$	56.5	(3.0)	pts	$	151.4	3.9	pts	$	18.4	2.4	pts	$	169.7	6.3	pts
Catastrophes		(21.0)	(2.0)	pts		9.9	0.9	pts		(11.1)	(1.1)	pts		20.5	2.1	pts		(2.6)	(0.3)	pts		17.9	1.8	pts
Total segment	$	52.9	(3.6)	pts	$	(7.5)	(0.6)	pts	$	45.4	(4.1)	pts	$	171.9	6.0	pts	$	15.8	2.1	pts	$	187.7	8.0	pts

(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)												(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by ~~14.5%~~31.8% to ~~$297.4~~$345.2 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$259.8~~$261.9 million for the three months ended ~~September~~June 30, ~~2018,~~ 2019, mainly due to an increase of ~~$39.7~~$51.4 million in current year attritional losses, ~~mainly due to~~ resulting from $12.5 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned, ~~partially offset by a decrease~~as well as an increase of ~~$10.5~~$15.0 million onin current year catastrophe losses. The $15.0 million of current year catastrophe losses ~~of $4.0 million~~ for the three months ended ~~September~~June 30, ~~2019,~~

2020, related to ~~Hurricane Dorian~~the U.S. civil unrest ($~~4.0~~15.0 million). ~~The~~There were no current year catastrophe losses ~~of $14.5 million~~ for the three months ended ~~September~~June 30, ~~2018 primarily related to the Hurricane Florence ($13.0 million) and the 2018 California wildfires ($1.5 million)~~. 2019.

Incurred losses and LAE increased by ~~6.0%~~37.2% to ~~$801.7~~$692.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$756.3~~$504.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~ 2019, mainly due to an increase of ~~$73.9~~$151.4 million in current year attritional losses, ~~mainly due to~~resulting from $28.2 million of losses from the COVID-19 pandemic and the impact of the increase in premiums earned, ~~partially offset by a decrease~~as well as an increase of ~~$21.0~~$20.5 million onin current year catastrophe losses. The $20.5 million of current year catastrophe losses for the six months ended June 30, 2020, related to the U.S. civil unrest ($15.0 million) and ~~$17.3 million of favorable development on prior years attritional losses in 2019. The~~the Nashville tornadoes ($5.5 million). There were no current year catastrophe losses ~~of $4.0 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019, related to Hurricane Dorian ($4.0 million).~~ ~~The current year catastrophe losses of $25.0 million for the nine months ended~~ ~~September~~ ~~30, 2018 primarily related to Hurricane Florence ($13.0 million), the U.S. winter storms ($10.5 million) and the 2018 California wildfires ($1.5 million).~~2019.

Segment Expenses. Commission and brokerage increased to ~~$60.2~~$63.4 million for the three months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$53.5~~$58.2 million for the three months ended ~~September~~June 30, ~~2018~~.2019. Commission and brokerage increased to ~~$169.6~~$125.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$159.2~~$109.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019. The increases were mainly due to the impact of the increase in premiums ~~earned and changes in affiliated reinsurance agreements~~.

earned. Segment other underwriting expenses increased to ~~$65.3~~$67.5 million for the three months ended ~~September~~June 30, ~~2019~~ 2020 compared to ~~$52.6~~$58.0 million for the three months ended ~~September~~June 30, ~~2018.~~ 2019. Segment other underwriting expenses increased to ~~$177.6~~$138.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$151.8~~$112.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~ 2019. The increase ~~was~~were mainly due to the impact of the increase in premiums earned and expenses related to the continued build out of the insurance business.

Market Sensitive Instruments.

The SEC’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial statement disclosure requirements for derivative financial instruments, derivative commodity instruments and other financial instruments (collectively, “market sensitive instruments”). We do not generally enter into market sensitive instruments for trading purposes.

Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, taxable and tax-preferenced fixed maturity portfolio, while maintaining an adequate level of liquidity. Our mix of taxable and tax-preferenced investments is adjusted periodically, consistent with our current and projected operating results, market conditions and our tax position. The fixed maturity securities in the investment portfolio are comprised of non-trading available for sale securities. Additionally, we have invested in equity securities.

The overall investment strategy considers the scope of present and anticipated Company operations. In particular, estimates of the financial impact resulting from non-investment asset and liability transactions, together with our capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated payout characteristics for which our investments provide liquidity. This analysis is considered in the development of specific investment strategies for asset allocation, duration and credit quality. The change in overall market sensitive risk exposure principally reflects the asset changes that took place during the period.

Interest Rate ~~Risk.~~Risk. Our ~~$11.8~~$12.6 billion investment portfolio, at~~September~~ June 30, ~~2019~~,2020, is principally comprised of fixed maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk, and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the dollar value of foreign currency denominated liabilities and their associated income statement impact.

Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term investments, from a change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the ~~$1,000.0~~$1,018.7 million of mortgage-backed securities in the ~~$7,373.7~~$7,923.8 million fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.

The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including ~~$276.7~~$588.7 million of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimate on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios.

	Impact of Interest Rate Shift in Basis Points										Impact of Interest Rate Shift in Basis Points
	At September 30, 2019										At June 30, 2020
(Dollars in millions)	-200		-100		-		100		200		-200		-100		-		100		200
Total Market/Fair Value	$	8,177.6	$	7,909.2	$	7,650.4	$	7,387.7	$	7,125.3	$	9,095.1	$	8,803.9	$	8,512.8	$	8,221.6	$	7,930.5
Market/Fair Value Change from Base (%)		6.9%		3.4%		0.0%		-3.4%		-6.9%		6.8%		3.4%		0.0%		-3.4%		-6.8%
Change in Unrealized Appreciation
After-tax from Base ($)	$	416.5	$	204.4	$	-	$	(207.6)	$	(414.8)	$	460.0	$	230.0	$	-	$	(230.0)	$	(460.0)

We had ~~$10,412.2~~$10,383.3 million and ~~$10,167.0~~$10,209.5 million of gross reserves for losses and LAE as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These amounts are recorded at their nominal value, as opposed to present value, which would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the reserves decreases and, conversely, as interest rates decline, the present value increases. These movements are the opposite of the interest rate impacts on the fair value of investments. While the difference between present value and nominal value is not reflected in our financial statements, our financial results will include investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration that is reasonably consistent with our fixed income portfolio.

Equity ~~Risk.~~Risk. Equity risk is the potential change in fair and/or market value of the common stock, preferred stock and mutual fund portfolios arising from changing prices. Our equity investments consist of a diversified portfolio of individual securities. The primary objective of the equity portfolio is to obtain greater total return relative to our core bonds over time through market appreciation and income.

The table below displays the impact on fair/market value and after-tax change in fair/market value of a 10% and 20% change in equity prices up and down for the periods indicated.

	Impact of Percentage Change in Equity Fair/Market Values										Impact of Percentage Change in Equity Fair/Market Values
	At September 30, 2019										At June 30, 2020
(Dollars in millions)	-20%		-10%		0%		10%		20%		-20%		-10%		0%		10%		20%
Fair/Market Value of the Equity Portfolio	$	596.0	$	670.5	$	745.0	$	819.5	$	894.0	$	631.9	$	710.8	$	789.8	$	868.8	$	947.8
After-tax Change in Fair/Market Value		(117.7)		(58.9)		-		58.9		117.7		(124.8)		(62.4)		-		62.4		124.8

Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. (“foreign”) operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Singapore and Canadian Dollars. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our corresponding operating liabilities. In accordance with FASB guidance, the impact on the market value of available for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a component of other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income.

SAFE HARBOR DISCLOSURE

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”, “believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include information regarding our reserves for losses and LAE, the CARES Act, the impact of the TCJA, the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic and pandemic events on our financial statements and the ability of our subsidiaries to pay dividends. Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause our actual events or results to be materially different from our expectations include those discussed under the caption ITEM 1A, “Risk Factors” in the Company’s most recent 10-K filing. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Instruments. See “Market Sensitive Instruments” in PART I – ITEM 2.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, our management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

PART II

ITEM 1. LEGAL PROCEEDINGS

Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.

ITEM 1A. RISK FACTORS

NoOther than as set forth below, there have been no material ~~changes.~~changes from the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019.

The continuing COVID-19 pandemic has adversely affected, and may materially and adversely affect, our results of operations, financial position and liquidity in the future.

The ongoing COVID-19 pandemic, including the related impact on the U.S. and global economies, has adversely affected our results of operations. We expect the pandemic and its impact on our business to continue and potentially even worsen, but we cannot predict the magnitude or duration of its continued impact, particularly given the great uncertainties associated with COVID-19, including regarding the reopening of the U.S. and global economies and the recovery from its economic and other effects. The full impact of COVID-19 on our results of operations, financial position and liquidity is not yet known, and likely will not be known for some time, but includes the following:

Claim Losses Related to COVID-19 May Exceed Reserves: We have established reserves for COVID-19-related losses. Our reserves represent management’s best estimate of what the settlement and claims administration will cost for claims that have occurred, whether reported or unreported. Given the great uncertainties associated with COVID-19 and its impact and the limited information upon which our current assumptions and assessments have been made, our preliminary reserves and the underlying estimated level of claim losses and costs arising from COVID-19 may materially change.

Adverse Legislative and Regulatory Action: Legislative and regulatory initiatives taken or which may be taken in response to COVID-19 may adversely affect us. For example, our business may be subject to, certain initiatives, including, but not limited to: legislative and regulatory action that seeks to retroactively mandate coverage for losses which our insurance policies would not otherwise cover and which were not priced to cover; actions prohibiting us from cancelling insurance policies in accordance with our policy terms or non-renewing policies at their natural expiration; and/or orders to provide premium refunds, grant extended grace periods for premium payments, and provide extended time to pay past due premiums. Any such action would likely increase both our underwriting losses and our expenses and any legal challenges to any such action could take years to resolve.

Reduction in Premiums: The demand for insurance is significantly influenced by general economic conditions. Consequently, reduced economic activity relating to the COVID-19 pandemic is likely to decrease demand for our insurance products and services and negatively impact our premium volumes (and, in certain cases, may result in return of premiums due to a decrease in exposures). This may continue for an indefinite period, with the magnitude of the impact impossible to predict.

Investments: Further disruptions in global financial markets due to the continuing impact of COVID-19 could cause us to incur additional unrealized and/or realized investment losses, including credit impairments in our fixed maturity portfolio. In addition, the economic uncertainty resulting from COVID-19 may result in a decline in interest rates, which may negatively impact our future net investment income.

Credit Risk: As credit risk is generally a function of the economy, we face greater credit risk from our policyholders, independent agents and brokers in connection with the payment and remittance of premiums as a result of the economic conditions caused by COVID-19. Similarly, our credit risk related to the reimbursement of deductibles from policyholders and in connection with reinsurance recoverables has increased.

Operational Disruptions and Costs: Our operations could be disrupted if key members of our senior management or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or other third party service providers are unable to continue to work because of illness, government directives or otherwise. In addition, our agents, brokers, suppliers and other third party service providers, which we rely on for key aspects of our operations, are subject to risks and uncertainties related to the COVID-19 pandemic, which may interfere with their ability to fulfill their respective commitments and responsibilities to us in a timely manner and in accordance with the agreed-upon terms. In response to the COVID-19 pandemic, we have implemented remote working policies which have resulted in disruptions to our business routines, heightened risk to cybersecurity attacks and data security incidents and a greater dependency on internet and telecommunication access and capabilities.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Index:

Exhibit No.	Description

31.1	Section 302 Certification of ~~Dominic J. Addesso~~Juan C. Andrade

31.2	Section 302 Certification of Craig Howie

32.1	Section 906 Certification of ~~Dominic J. Addesso~~Juan C. Andrade and Craig Howie

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Labels Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

5753

Everest Reinsurance Holdings, Inc.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Everest Reinsurance Holdings, Inc.
	(Registrant)


	/S/ CRAIG HOWIE
	Craig Howie
	Executive Vice President and
		Chief Financial Officer

	(Duly Authorized Officer and Principal Financial Officer)



Dated: ~~November~~August 14, ~~2019~~2020

5854

CONSOLIDATED BALANCE SHEETS	December 31, 2018						December 31, 2017
	As Previously		Impact of				As Previously		Impact of
	Reported		Revisions		As Revised		Reported		Revisions		As Revised
(Dollars in thousands)
ASSETS:
Funds held by reinsureds		238,566		(10,010)		228,556		210,939		(4,292)		206,647
Income taxes		409,892		2,102		411,994		87,110		901		88,011
TOTAL ASSETS	$	18,688,205	$	(7,908)	$	18,680,297	$	17,888,512	$	(3,391)	$	17,885,121

SHAREHOLDERS' EQUITY:
Retained earnings		4,070,604		(7,908)		4,062,696		5,025,824		(3,391)		5,022,433
Total shareholders' equity		5,044,665		(7,908)		5,036,757		5,412,723		(3,391)		5,409,332
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	18,688,205	$	(7,908)	$	18,680,297	$	17,888,512	$	(3,391)	$	17,885,121

CONSOLIDATED BALANCE SHEETS	June 30, 2019						March 31, 2019
	As Previously		Impact of				As Previously		Impact of
	Reported		Revisions		As Revised		Reported		Revisions		As Revised
(Dollars in thousands)
ASSETS:
Funds held by reinsureds		250,903		(10,768)		240,135		248,993		(9,524)		239,469
Income taxes		151,109		2,261		153,370		289,210		2,000		291,210
TOTAL ASSETS	$	19,235,832	$	(8,507)	$	19,227,325	$	19,063,665	$	(7,524)	$	19,056,141

SHAREHOLDERS' EQUITY:
Retained earnings		4,603,734		(8,507)		4,595,227		4,321,830		(7,524)		4,314,306
Total stockholder's equity		5,743,746		(8,507)		5,735,239		5,394,126		(7,524)		5,386,602
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	19,235,832	$	(8,507)	$	19,227,325	$	19,063,665	$	(7,524)	$	19,056,141

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE	Year Ended December 31, 2018						Year Ended December 31, 2017
INCOME (LOSS):	As Previously		Impact of				As Previously		Impact of
	Reported		Revisions		As Revised		Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)		(3,851)		(5,717)		(9,568)		23,750		2,116		25,866
Total revenues	$	4,964,232	$	(5,717)	$	4,958,515	$	2,421,157	$	2,116	$	2,423,273

INCOME (LOSS) BEFORE TAXES	$	(1,323,492)	$	(5,717)	$	(1,329,209)	$	(122,982)	$	2,116	$	(120,866)
Income tax expense (benefit)		(365,825)		(1,200)		(367,025)		(201,180)		444		(200,736)

NET INCOME (LOSS)	$	(957,667)	$	(4,517)	$	(962,184)	$	78,198	$	1,672	$	79,870

COMPREHENSIVE INCOME (LOSS)	$	(1,080,532)	$	(4,517)	$	(1,085,049)	$	113,896	$	1,672	$	115,568

CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended March 31, 2019
AND COMPREHENSIVE INCOME (LOSS):	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)		(1,214)		484		(730)
Total revenues	$	1,488,830	$	484	$	1,489,314

INCOME (LOSS) BEFORE TAXES	$	314,655	$	484	$	315,139
Income tax expense (benefit)		63,429		102		63,531

NET INCOME (LOSS)	$	251,226	$	382	$	251,608

COMPREHENSIVE INCOME (LOSS)	$	349,374	$	382	$	349,756

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
INCOME (LOSS):	As Previously		Impact of				As Previously		Impact of
	Reported		Revisions		As Revised		Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)		77,682		(2,388)		75,294		2,805		(1,908)		897
Total revenues	$	1,287,317	$	(2,388)	$	1,284,929	$	2,338,158	$	(1,908)	$	2,336,250

INCOME (LOSS) BEFORE TAXES	$	(312,807)	$	(2,388)	$	(315,195)	$	(319,938)	$	(1,908)	$	(321,846)
Income tax expense (benefit)		(47,399)		(501)		(47,900)		(42,538)		(400)		(42,938)

NET INCOME (LOSS)	$	(265,408)	$	(1,887)	$	(267,295)	$	(277,580)	$	(1,508)	$	(279,088)

COMPREHENSIVE INCOME (LOSS)	$	(302,416)	$	(1,887)	$	(304,303)	$	(365,772)	$	(1,508)	$	(367,280)

CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended March 31, 2018
AND COMPREHENSIVE INCOME (LOSS):	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)		(74,877)		480		(74,397)
Total revenues	$	1,050,841	$	480	$	1,051,321

INCOME (LOSS) BEFORE TAXES	$	(7,131)	$	480	$	(6,651)
Income tax expense (benefit)		5,041		101		5,142

NET INCOME (LOSS)	$	(12,172)	$	379	$	(11,793)

COMPREHENSIVE INCOME (LOSS)	$	(63,356)	$	379	$	(62,977)

	Three Months Ended				Nine Months Ended
International	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross written premiums	$	442,587	$	363,359	$	1,204,229	$	1,129,097
Net written premiums		401,341		340,701		1,109,418		1,012,933
Premiums earned	$	366,410	$	331,921	$	1,041,870	$	1,003,993
Incurred losses and LAE		407,799		315,850		858,683		751,696
Commission and brokerage		81,674		78,180		237,510		240,953
Other underwriting expenses		11,258		9,991		29,355		29,946
Underwriting gain (loss)	$	(134,321)	$	(72,100)	$	(83,678)	$	(18,602)