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

June 30, ~~2021~~

2022

☐

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.)~~

Delaware

22-3263609

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

100 Everest Way

Warren

New Jersey

07059

~~(908)~~

(

908

)

604-3000

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

Indicate

check

mark

whether

the

registrant

(1)

has

filed

all

reports

required

filed

Section

15(d)

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

☑

☐

Indicate by check mark whether the

registrant has submitted

electronically every Interactive

Data File required to be

submitted

pursuant

Rule

405

Regulation

S-T

during

the

preceding

months ~~(or~~

(or

for

such

shorter

period

that

the

registrant

was

required to submit such files).

YES

☑

☐

Indicate by check mark

whether the registrant

is a large

accelerated filer,

an accelerated filer,

a non-accelerated filer,

a smaller

reporting

company

emerging

growth

company.

See

the

definitions

of ~~“large~~

“large

accelerated

filer,” ~~“accelerated~~

“accelerated

filer,” ~~“smaller~~

“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange

Act.

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated 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

revised

financial

accounting

standards

provided

pursuant

Section

13(a)

the

Exchange act.

YES

☐

☑

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act).

YES

☐

☑

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 August 1, 2021~~
~~Common Shares, $0.01 par value~~		~~1,000~~

Number of Shares Outstanding

Class

At August 1, 2022

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 as of June 30, 2021 (unaudited) and December 31, 2020~~	1

	~~Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 (unaudited)~~	2

	~~Consolidated Statements of Changes in Stockholder’s Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)~~	3

	~~Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)~~	4

	~~Notes to Consolidated Interim Financial Statements (unaudited)~~	5

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operation~~	31

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	47

~~Item 4.~~	~~Controls and Procedures~~	47

~~PART II~~

~~OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~	48

~~Item 1A.~~	~~Risk Factors~~	48

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	48

~~Item 3.~~	~~Defaults Upon Senior Securities~~	48

~~Item 4.~~	~~Mine Safety Disclosures~~	48

~~Item 5.~~	~~Other Information~~	48

~~Item 6.~~	~~Exhibits~~	49

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets as of June 30, 2022 (unaudited)

and December 31,

2021

Consolidated Statements of Operations

and Comprehensive Income (Loss) for

the three and six months ended June 30, 2022 and 2021 (unaudited)

Consolidated Statements of Changes

in Stockholder’s Equity for the three

and

six months ended June 30, 2022 and 2021 (unaudited)

Consolidated Statements of Cash

Flows for the six months ended June 30, 2022

and 2021 (unaudited)

Notes to Consolidated Interim

Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of

Financial Condition and Results of

Operation

Item 3.

Quantitative and Qualitative

Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity

Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED

BALANCE SHEETS

(Dollars in thousands, except share amounts and par value per share)
June 30, 2021

December 31, 2020

(unaudited)

ASSETS:

Fixed maturities – available for sale, at market value (amortized cost: 2021, $11,255,282; 2020, $10,248,650, allowances for credit losses: 2021, $(23,783); 2020, $(1,566))
$
11,553,817

$
10,643,565
Equity securities, at fair value

1,449,667

1,288,767
Short-term investments (cost: 2021, $503,452; 2020, $708,043)

503,452

707,905
Other invested assets

1,430,635

1,094,933
Other invested assets, at fair value

1,977,109

1,796,479
Cash

545,746

378,518
Total investments and cash

17,460,426

15,910,167
Note Receivable - affiliated

300,000

300,000
Accrued investment income

107,263

80,196
Premiums receivable

1,827,456

1,591,980
Reinsurance recoverables - unaffiliated

1,558,378

1,505,650
Reinsurance recoverables - affiliated

2,434,943

2,701,655
Funds held by reinsureds

290,439

267,599
Deferred acquisition costs

428,744

379,707
Prepaid reinsurance premiums

405,847

363,489
Other assets

693,482

616,640
TOTAL ASSETS
$
25,506,978

23,717,083

LIABILITIES:

Reserve for losses and loss adjustment expenses
$
12,486,199

$
11,654,950
Unearned premium reserve

2,660,110

2,385,174
Funds held under reinsurance treaties

48,553

46,894
Other net payable to reinsurers

346,577

277,390
Losses in course of payment

200,174

161,154
Income taxes net payable

299,208

192,877
Senior notes due 6/1/2044

397,254

397,194
Senior notes due 10/15/2050

979,784

979,524
Long term notes due 5/1/2067

223,724

223,674
Borrowings from FHLB

310,000

310,000
Accrued interest on debt and borrowings

9,641

10,460
Unsettled securities payable

99,159

206,693
Other liabilities

484,991

456,786
Total liabilities

18,545,374

17,302,770
Commitments and Contingencies (Note 6)

(nil)

(nil)

STOCKHOLDER'S EQUITY:

Common shares, par value: $0.01; 3,000 shares authorized; 1,000 shares issued and outstanding (2021 and 2020)

-

-
Additional paid-in capital

1,101,316

1,101,092
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) $60,978 at 2021 and $71,080 at 2020

229,835

268,018
Retained earnings

5,630,453

5,045,203
Total stockholder's equity

6,961,604

6,414,313
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
25,506,978

$
23,717,083

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

(Dollars in thousands, except share amounts and par value per share)

June 30, 2022

December 31, 2021

(unaudited)

ASSETS:

Fixed maturities - available for

sale, at fair value

12,873,421

12,860,395

(amortized cost: 2022, $

13,754,572

; 2021, $

12,733,499

, allowances for credit losses:

2022, ($

27,274

); 2021, ($

27,491

))

Fixed maturities - held to maturity,

at amortized cost, net of credit

allowances

71,390

(fair value: 2022, $

71,245

, credit allowances: 2022, ($

366

))

Equity securities, at fair value

1,249,310

1,757,792

Short-term investments (cost:

2022, $230,929; 2021, $695,935)

230,929

695,886

Other invested assets

1,791,521

1,674,639

Other invested assets, at fair value

1,791,539

2,030,816

Cash

843,746

699,266

Total investments

and cash

18,851,856

19,718,794

Notes receivable - affiliated

715,000

500,000

Accrued investment income

119,010

89,966

Premiums receivable

1,707,740

1,719,961

Reinsurance recoverables

- unaffiliated

1,660,791

1,569,328

Reinsurance recoverables

- affiliated

2,096,416

2,298,769

Funds held by reinsureds

299,030

299,204

Deferred acquisition costs

438,412

471,931

Prepaid reinsurance premiums

474,936

431,055

Income tax asset, net

106,686

Other assets

638,134

595,970

TOTAL ASSETS

27,108,011

27,694,978

LIABILITIES:

Reserve for losses and loss adjustment

expenses

13,738,357

13,121,177

Unearned premium reserve

3,042,059

2,992,878

Funds held under reinsurance treaties

42,230

48,410

Other net payable to reinsurers

425,910

391,577

Losses in course of payment

97,508

272,592

Income tax liability, net

246,348

Senior notes

2,346,495

2,345,800

Long term notes

223,824

223,774

Borrowings from FHLB

519,000

Accrued interest on debt and borrowings

16,664

17,348

Unsettled securities payable

56,336

15,196

Other liabilities

453,217

462,831

Total liabilities

20,961,600

20,656,931

Commitments and Contingencies (Note 6)

(nil)

STOCKHOLDER'S EQUITY:

Common stock, par value: $

0.01

;

3,000

shares authorized;

1,000

shares issued and outstanding

(2022 and 2021)

Additional paid-in capital

1,101,750

1,101,527

Accumulated other comprehensive income

(loss), net of deferred income

tax expense (benefit) of ($

189,705

) at 2022 and $

24,279

at 2021

(715,759)

91,469

Retained earnings

5,760,420

5,845,051

Total stockholder's

equity

6,146,411

7,038,047

TOTAL LIABILITIES

AND STOCKHOLDER'S EQUITY

27,108,011

27,694,978

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

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020

(unaudited)

(unaudited)
REVENUES:

Premiums earned
$
1,766,555

$
1,538,960

$
3,463,455

$
3,032,965
Net investment income

248,135

35,153

395,858

109,354
Net realized capital gains (losses):

Credit allowances on fixed maturity securities

(15,075)

(7,826)

(22,217)

(19,925)
Other net realized capital gains (losses)

198,838

(471,534)

340,991

(202,568)
Total net realized capital gains (losses)

183,763

(479,360)

318,774

(222,493)
Other income (expense)

(1,867)

(5,122)

2,112

(9,620)
Total revenues

2,196,586

1,089,631

4,180,199

2,910,206

CLAIMS AND EXPENSES:

Incurred losses and loss adjustment expenses

1,095,618

975,832

2,449,702

2,005,345
Commission, brokerage, taxes and fees

386,848

355,699

736,702

678,803
Other underwriting expenses

109,930

94,131

219,725

195,339
Corporate expenses

7,618

3,514

12,199

7,235
Interest, fee and bond issue cost amortization expense

15,537

6,922

31,071

14,382
Total claims and expenses

1,615,551

1,436,098

3,449,399

2,901,104

INCOME (LOSS) BEFORE TAXES

581,035

(346,467)

730,800

9,102
Income tax expense (benefit)

115,228

(75,874)

145,550

(36,950)

NET INCOME (LOSS)
$
465,807

$
(270,593)

$
585,250

$
46,052

Other comprehensive income (loss), net of tax:

Unrealized appreciation (depreciation) ("URA(D)")
on securities arising during the period

43,410

243,550

(66,448)

66,026
Less: reclassification adjustment for realized
losses (gains) included in net income (loss)

6,442

3,543

7,932

31,429
Total URA(D) on securities arising during
the period

49,852

247,093

(58,516)

97,455

Foreign currency translation adjustments

13,985

8,436

16,247

(21,197)
Reclassification adjustment for amortization of net
(gain) loss included in net income (loss)

2,043

1,806

4,086

2,726
Total benefit plan net gain (loss) for the period

2,043

1,806

4,086

2,726
Total other comprehensive income (loss), net of tax

65,880

257,335

(38,183)

78,984

COMPREHENSIVE INCOME (LOSS)
$
531,687

$
(13,258)

$
547,067

$
125,036

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

Three Months Ended

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

(unaudited)

REVENUES:

Premiums earned

1,954,229

1,766,555

3,782,821

3,463,455

Net investment income

176,499

248,135

332,633

395,858

Net gains (losses) on investments:

Credit allowances on fixed maturity securities

1,500

(15,075)

(149)

(22,217)

Gains (losses) from fair value adjustments

(340,523)

191,376

(555,944)

322,005

Net realized gains (losses) from dispositions

(39,250)

7,462

(48,767)

18,986

Total net gains (losses) on investments

(378,273)

183,763

(604,860)

318,774

Other income (expense)

493

(1,867)

(8,904)

2,112

Total revenues

1,752,948

2,196,586

3,501,690

4,180,199

CLAIMS AND EXPENSES:

Incurred losses and loss adjustment expenses

1,303,937

1,095,618

2,529,627

2,449,702

Commission, brokerage, taxes and fees

408,663

386,848

793,293

736,702

Other underwriting expenses

120,263

109,930

238,018

219,725

Corporate expenses

5,886

7,618

11,652

12,199

Interest, fees and bond issue cost amortization expense

24,398

15,537

48,476

31,071

Total claims and expenses

1,863,147

1,615,551

3,621,066

3,449,399

INCOME (LOSS) BEFORE TAXES

(110,199)

581,035

(119,376)

730,800

Income tax expense (benefit)

(24,516)

115,228

(34,745)

145,550

NET INCOME (LOSS)

(85,683)

465,807

(84,631)

585,250

Other comprehensive income (loss), net of tax:

Unrealized appreciation (depreciation) ("URA(D)") on securities arising

during the period

(411,103)

43,410

(805,382)

(66,448)

Less: reclassification adjustment for realized losses (gains) included

in net income (loss)

6,171

6,442

8,426

7,932

Total URA(D) on securities arising during the period

(404,932)

49,852

(796,956)

(58,516)

Foreign currency translation adjustments

(9,849)

13,985

(11,788)

16,247

Reclassification adjustment for amortization of net (gain) loss included

in net income (loss)

758

2,043

1,515

4,086

Total benefit plan net gain (loss) for the period

758

2,043

1,515

4,086

Total other comprehensive income (loss), net of tax

(414,023)

65,880

(807,228)

(38,183)

COMPREHENSIVE INCOME (LOSS)

(499,706)

531,687

(891,859)

547,067

The accompanying notes are an integral

part of the consolidated financial statements.

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED

STATEMENTS

CHANGES IN STOCKHOLDER’S EQUITY

(Dollars in thousands, except share amounts)
2021

2020

(unaudited)
COMMON STOCK (shares outstanding):

Balance, January 1

1,000

1,000
Balance, March 31

1,000

1,000
Balance, June 30

1,000

1,000

ADDITIONAL PAID-IN CAPITAL:

Balance, January 1
$
1,101,092

$
1,100,678
Share-based compensation plans

108

103
Balance, March 31

1,101,200

1,100,781
Share-based compensation plans

116

101
Balance, June 30

1,101,316

1,100,882

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:

Balance, January 1

268,018

64,324
Net increase (decrease) during the period

(104,063)

(178,351)
Balance, March 31

163,955

(114,027)
Net increase (decrease) during the period

65,880

257,335
Balance, June 30

229,835

143,308

RETAINED EARNINGS:

Balance, January 1

5,045,203

4,692,423
Change to beginning balance due to adoption of ASU 2016-13

-

907
Net income (loss)

119,443

316,645
Balance, March 31

5,164,646

5,009,975
Net income (loss)

465,807

(270,593)
Balance, June 30

5,630,453

4,739,382

TOTAL STOCKHOLDER'S EQUITY, June 30
$
6,961,604

$
5,983,572

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

Three Months Ended

Six Months Ended

June 30,

(Dollars in thousands, except share amounts)

2022

2021

2022

2021

(unaudited)

COMMON STOCK (shares outstanding):

Balance, beginning of period

1,000

Balance, end of period

1,000

ADDITIONAL PAID-IN CAPITAL:

Balance, beginning of period

1,101,640

1,101,200

1,101,527

1,101,092

Share-based compensation plans

110

116

223

224

Balance, end of period

1,101,750

1,101,316

1,101,750

1,101,316

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),

NET OF DEFERRED INCOME TAXES:

Balance, beginning of period

(301,735)

163,955

91,469

268,018

Net increase (decrease) during the period

(414,023)

65,880

(807,228)

(38,183)

Balance, end of period

(715,759)

229,835

(715,759)

229,835

RETAINED EARNINGS:

Balance, beginning of period

5,846,103

5,164,646

5,845,051

5,045,203

Net income (loss)

(85,683)

465,807

(84,631)

585,250

Balance, end of period

5,760,420

5,630,453

5,760,420

5,630,453

TOTAL STOCKHOLDER'S

EQUITY, END OF PERIOD

6,146,411

6,961,604

6,146,411

6,961,604

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED

STATEMENTS

OF CASH FLOWS

Six Months Ended

June 30,
(Dollars in thousands)
2021

2020

(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)
$
585,250

$
46,052
Adjustments to reconcile net income to net cash provided by operating activities:

Decrease (increase) in premiums receivable

(233,770)

(147,210)
Decrease (increase) in funds held by reinsureds, net

(21,256)

(13,336)
Decrease (increase) in reinsurance recoverables

226,291

233,199
Decrease (increase) in income taxes

116,483

(41,843)
Decrease (increase) in prepaid reinsurance premiums

(40,542)

15,928
Increase (decrease) in reserve for losses and loss adjustment expenses

812,725

205,192
Increase (decrease) in unearned premiums

272,722

90,640
Increase (decrease) in other net payable to reinsurers

66,461

89,520
Increase (decrease) in losses in course of payment

39,117

118,964
Change in equity adjustments in limited partnerships

(201,379)

50,809
Distribution of limited partnership income

27,905

30,916
Change in other assets and liabilities, net

(93,690)

(75,931)
Non-cash compensation expense

18,406

15,462
Amortization of bond premium (accrual of bond discount)

15,535

4,436
Net realized capital (gains) losses

(318,774)

222,493
Net cash provided by (used in) operating activities

1,271,484

845,291

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from fixed maturities matured/called - available for sale, at market value

1,153,258

494,544
Proceeds from fixed maturities sold - available for sale, at market value

242,072

337,723
Proceeds from equity securities sold - at fair value

346,088

213,003
Distributions from other invested assets

70,811

119,727
Cost of fixed maturities acquired - available for sale, at market value

(2,401,534)

(1,226,251)
Cost of equity securities acquired - at fair value

(358,790)

(222,818)
Cost of other invested assets acquired

(210,373)

(215,569)
Net change in short-term investments

205,323

(308,979)
Net change in unsettled securities transactions

(129,026)

37,744
Net cash provided by (used in) investing activities

(1,082,171)

(770,876)

CASH FLOWS FROM FINANCING ACTIVITIES:

Tax benefit from share-based compensation, net of expense

(18,182)

(15,258)
Cost of debt repurchase

-

(10,648)
Net cash provided by (used in) financing activities

(18,182)

(25,906)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(3,903)

(14,015)

Net increase (decrease) in cash

167,228

34,495
Cash, beginning of period

378,518

411,122
Cash, end of period
$
545,746

$
445,617

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid (recovered)
$
28,859

$
4,763
Interest paid

31,520

14,782

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

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

(84,631)

585,250

Adjustments to reconcile net income to net cash provided by operating activities:

Decrease (increase) in premiums receivable

9,684

(233,770)

Decrease (increase) in funds held by reinsureds, net

(6,320)

(21,256)

Decrease (increase) in reinsurance recoverables

105,327

226,291

Decrease (increase) in income taxes

(139,313)

116,483

Decrease (increase) in prepaid reinsurance premiums

(44,429)

(40,542)

Increase (decrease) in reserve for losses and loss adjustment expenses

636,696

807,984

Increase (decrease) in unearned premiums

51,183

272,722

Increase (decrease) in other net payable to reinsurers

35,068

66,461

Increase (decrease) in losses in course of payment

(174,622)

39,117

Change in equity adjustments in limited partnerships

(109,613)

(201,379)

Distribution of limited partnership income

48,802

27,905

Change in other assets and liabilities, net

(19,372)

(88,949)

Non-cash compensation expense

19,766

18,406

Amortization of bond premium (accrual of bond discount)

14,784

15,535

Net (gains) losses on investments

604,860

(318,774)

Net cash provided by (used in) operating activities

947,870

1,271,484

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from fixed maturities matured/called/repaid - available for sale

875,642

1,153,258

Proceeds from fixed maturities sold - available for sale

511,218

242,072

Proceeds from fixed maturities matured/called/repaid - held to maturity

333

Proceeds from equity securities sold - at fair value

425,380

346,088

Proceeds from distributions and sales of other invested assets

98,653

70,811

Cost of fixed maturities acquired - available for sale

(2,464,587)

(2,401,534)

Cost of fixed maturities acquired - held to maturity

(72,061)

Cost of equity securities acquired - at fair value

(271,842)

(358,790)

Cost of other invested assets acquired

(153,486)

(210,373)

Net change in short-term investments

465,116

205,323

Net change in unsettled securities transactions

28,647

(129,026)

Proceeds from repayment (cost of issuance) of note receivable - affiliated

(215,000)

Net cash provided by (used in) investing activities

(771,987)

(1,082,171)

CASH FLOWS FROM FINANCING ACTIVITIES:

Tax benefit from share-based compensation, net of expense

(19,543)

(18,182)

Net cash provided by (used in) financing activities

(19,543)

(18,182)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(11,860)

(3,903)

Net increase (decrease) in cash

144,480

167,228

Cash, beginning of period

699,266

378,518

Cash, end of period

843,746

545,746

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid (recovered)

104,325

28,859

Interest paid

48,414

31,520

The accompanying notes are an integral part of the consolidated

financial statements.

NOTES TO CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

For the Three and Six Months Ended June 30, 2022, and

2021 ~~and 2020~~

1. GENERAL

Everest Reinsurance

Holdings, Inc. (“Holdings”), a Delaware

company and direct

subsidiary of Everest

Underwriting

Group

(Ireland)

Limited (“

(“Holdings

Ireland”)~~; “Group”~~ ,

which

direct

subsidiary

Everest

Group,

Ltd.

(“Group”),

through its

subsidiaries, principally

provides property

and casualty

reinsurance and

insurance in

the United

States

America

and

internationally.

used

this

document,

“Company”

means

Holdings

and

its

subsidiaries.

“Bermuda

Re”

means

Everest ~~Re Group, Ltd. (Holdings Ireland’s parent); “Bermuda Re” means Everest~~

Reinsurance

(Bermuda),

Ltd.,

subsidiary

Group; ~~“Everest~~

“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.~~

BASIS OF PRESENTATION

The unaudited ~~interim~~

consolidated financial

statements

of the Company

as of June

30, ~~2021~~2022 and

December 31, ~~2020~~ 2021

and

for the three and

six months ended June

30, ~~2021~~2022 and ~~2020~~ 2021

include all adjustments,

consisting of normal recurring

accruals,

which,

the

opinion

management,

are

necessary

for

fair

statement

the

results

interim

basis.

Certain

financial

information,

which

normally

included

annual

financial

statements

prepared

accordance

with

accounting

principles

generally

accepted

the

United

States

America

(“GAAP”),

has

been

omitted since it is

not required for

interim reporting purposes.

The December 31, ~~2020~~2021 consolidated

balance sheet

data

was

derived

from

audited

financial

statements

but

does

not

include

all

disclosures

required

GAAP.

The

results for

the three and

six months ended

June 30, 2022

and 2021 ~~and 2020~~ are

not necessarily indicative

of the results

for

full

year.

These

financial

statements

should

read

conjunction

with

the

audited

consolidated

financial

statements

and notes

thereto for

the years

ended December 31,

2021, 2020 and

2019, ~~and 2018~~ included

in the Company’s

most recent Form 10-K filing.

The ~~preparation~~ Company

consolidates

the results

of operations

and financial

position of

all voting

interest

entities ("VOE")

which

the

Company

has

controlling

financial

interest

and

all

variable

interest

entities

("VIE")

which

the

Company

is considered

to be

the primary

beneficiary.

The consolidation

assessment,

including the

determination

as to whether an entity qualifies as a VIE or VOE, depends

on the facts and circumstances surrounding

each entity.

The

preparation

financial

statements

conformity

with

GAAP

requires

management

make

estimates

and

assumptions

that

affect

the

reported

amounts

assets

and

liabilities

(and

disclosure

contingent

assets

and

liabilities) at

the date

of the

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.

All intercompany accounts

and transactions have been eliminated.

Certain

reclassifications

and

format

changes

have

been

made

prior

years’

amounts

conform

the

2022

presentation.

Application of Recently Issued Accounting

Standard Changes.

The

Company

did

not

adopt

any

new

accounting

standards

that

had

material

impact

during

the

three

and

six

months ended June 30, 2022. The Company

assessed the adoption impacts of recently issued

accounting standards

the

Financial

Accounting

Standards

Board

the

Company’s

consolidated

financial

statements

well

material

updates

assessments,

if any,

from

the Company’s

Annual

Report

Form

10-K for ~~Income Taxes. In~~

the

year

ended December ~~2019, The Financial Accounting Standards Board (“FASB”)~~31, 2021.

There were no

new material accounting

standards issued ~~ASU 2019-12, which provides simplification of existing guidance for income taxes, including~~

in 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 withinsix months

ended June

30, 2022, that ~~annual reporting period. The Company adopted~~ impacted Holdings.

Any

issued

guidance

and

pronouncements,

other

than

those

directly

referenced

above,

are

deemed

the ~~guidance effective January 1, 2021. The adoption of ASU 2019-12 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.

INVESTMENTS

The

following

tables

show

amortized

cost,

allowance

for

credit

losses,

gross

unrealized

appreciation,

gross

unrealized

depreciation

and ~~market~~

fair

value

available

for

sale,

fixed

maturity

securities

available

for

sale

the

dates indicated:

At June 30, 2022

Amortized

Allowances for

Unrealized

Fair

(Dollars in thousands)

Cost

Credit Losses

Appreciation

Depreciation

Value

Fixed maturity securities – available for sale

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

615,312

618

(26,187)

589,743

Obligations of U.S. states and political

subdivisions

528,830

(151)

3,951

(24,349)

508,281

Corporate securities

4,355,517

(25,584)

15,127

(337,377)

4,007,683

Asset-backed securities

3,928,582

679

(177,890)

3,751,371

Mortgage-backed securities

Commercial

566,417

(41,999)

524,418

Agency residential

1,522,073

185

(112,358)

1,409,900

Non-agency residential

3,536

(143)

3,393

Foreign government securities

697,135

6,339

(38,860)

664,614

Foreign corporate securities

1,537,170

(1,539)

4,439

(126,052)

1,414,018

Total fixed maturity securities as– available for sale

13,754,572

(27,274)

31,338

(885,215)

12,873,421

At December 31, 2021

Amortized

Allowances for

Unrealized

Fair

(Dollars in thousands)

Cost

Credit Losses

Appreciation

Depreciation

Value

Fixed maturity securities – available for sale

U.S. Treasury securities and obligations of ~~the dates indicated:~~

At June 30, 2021

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
$
538,733

$
-

$
14,207

$
(106)

$
552,834
Obligations of U.S. states and political
subdivisions

573,398

-

35,932

(986)

608,344
Corporate securities

3,539,895

(18,475)

131,825

(23,239)

3,630,006
Asset-backed securities

2,989,971

(4,915)

32,904

(2,426)

3,015,534
Mortgage-backed securities

Commercial

575,995

-

28,512

(2,478)

602,029
Agency residential

1,019,028

-

21,091

(6,168)

1,033,951
Non-agency residential

5,633

-

4

(2)

5,635
Foreign government securities

717,562

-

41,661

(2,571)

756,652
Foreign corporate securities

1,295,067

(393)

58,756

(4,600)

1,348,830
Total fixed maturity securities
$
11,255,282

$
(23,783)

$
364,892

$
(42,574)

$
11,553,817

At December 31, 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
$
659,957

$
-

$
22,032

$
-

$
681,989
Obligations of U.S. states and political
subdivisions

543,646

-

34,655

(1,255)

577,046
Corporate securities

3,316,525

(1,205)

166,072

(31,480)

3,449,912
Asset-backed securities

2,450,807

-

28,585

(5,222)

2,474,170
Mortgage-backed securities

Commercial

512,388

-

37,875

(183)

550,080
Agency residential

937,166

-

28,630

(696)

965,100
Non-agency residential

3,164

-

2

(2)

3,164
Foreign government securities

694,132

-

51,317

(3,211)

742,238
Foreign corporate securities

1,130,865

(361)

73,265

(3,903)

1,199,866
Total fixed maturity securities
$
10,248,650

$
(1,566)

$
442,433

$
(45,952)

$
10,643,565

U.S. government agencies and corporations

~~The amortized cost~~$

656,742

9,303

(3,296)

662,749

Obligations of U.S. states and ~~market value of~~political

subdivisions

558,842

(151)

29,080

(1,150)

586,621

Corporate securities

4,036,000

(19,267)

89,172

(31,000)

4,074,905

Asset-backed securities

3,464,248

(7,680)

20,732

(11,014)

3,466,286

Mortgage-backed securities

Commercial

586,441

20,538

(4,085)

602,894

Agency residential

1,255,186

15,568

(10,076)

1,260,678

Non-agency residential

4,398

(6)

4,408

Foreign government securities

677,327

21,658

(7,005)

691,980

Foreign corporate securities

1,494,315

(393)

34,449

(18,497)

1,509,874

Total fixed maturity securities – available for sale

12,733,499

(27,491)

240,516

(86,129)

12,860,395

The amortized cost

and fair value of

fixed maturity securities

available for sale

are shown in the following

tables by

contractual maturity.

Mortgage-backed securities

are generally

more likely to

be prepaid than other

fixed maturity

securities.

the

stated

maturity

such

securities

may

not

indicative

actual

maturities,

the

totals

for

mortgage-backed and asset-backed

securities are shown separately.

At June 30, 2022

At December 31, 2021

Amortized

Fair

Amortized

Fair

(Dollars in thousands)

Cost

Value

Cost

Value

Fixed maturity securities – available for sale

Due in one year or less

550,584

545,751

586,432

583,676

Due after one year through five years

3,688,680

3,513,385

3,488,358

3,526,854

Due after five years through ten years

2,134,269

1,933,772

2,260,481

2,309,870

Due after ten years

1,360,431

1,191,431

1,087,955

1,105,729

Asset-backed securities

3,928,582

3,751,371

3,464,248

3,466,286

Mortgage-backed securities

Commercial

566,417

524,418

586,441

602,894

Agency residential

1,522,073

1,409,900

1,255,186

1,260,678

Non-agency residential

3,536

3,393

4,398

4,408

Total fixed maturity ~~securities. As~~securities

13,754,572

12,873,421

12,733,499

12,860,395

During the ~~stated~~ second

quarter of 2022,

the Company

purchased fixed

maturity securities

classified as

held to maturity

with

amortized

cost

71.8

million

and

fair

value

71.2

million

June

30,

2022.

Fixed

maturity

securities held to maturity

consist of ~~such~~debt securities

for which the Company

has both the positive intent

and ability

hold

maturity

redemption

and

are

reported

amortized

cost,

net

the

current

expected

credit

loss

allowance.

Interest

income

for

fixed

maturity

securities

held

maturity

determined

the

same

manner

interest income for fixed

maturity securities available for

sale.

These fixed

maturity securities

held to

maturity are

comprised of

asset-backed

securities, with

an amortized

cost

of $

62.8

million,

gross

unrealized

appreciation

of $

0.1

million,

gross

unrealized

depreciation

of $

0.2

million,

and

fair value of $

62.4

million, and corporate

securities, with an amortized

cost of $

9.0

million, unrealized appreciation

0.0

million,

unrealized

depreciation

0.1

million,

and

fair

value

8.8

million,

June

30,

2022.

The

contractual maturity

of the corporate securities

held to maturity is

5 years

as of June 30, 2022. The stated

maturity

of asset-backed securities held to maturity

may not be indicative of actual maturities.

The Company evaluated

fixed maturity securities

classified as held to maturity

for current expected

credit losses as

of June

30, 2022

utilizing risk

characteristics

of each

security,

including credit

rating,

remaining time

maturity,

adjusted

for prepayment

considerations,

and subordination

level, and

applying default

and recovery

rates,

which

include the incorporation

of historical credit loss

experience and macroeconomic

forecasts, to

develop an estimate

of current

expected

credit

losses. These

fixed

maturities ~~the totals~~ classified

as held

to maturity

are of

a high

credit quality

and are

all rated

investment

grade as

of June

30, 2022.

The allowance

for ~~mortgage-backed and asset-backed~~ credit

losses expected

to be

recognized

over the

remaining life

of the

fixed maturity

securities ~~are shown separately.~~

At June 30, 2021

At December 31, 2020

Amortized

Market

Amortized

Market
(Dollars in thousands)
Cost

Value

Cost

Value
Fixed maturity securities – available for sale

Due in one year or less
$
640,570

$
646,794

$
658,561

$
659,622
Due after one year through five years

2,980,474

3,077,758

2,911,285

3,036,151
Due after five years through ten years

2,095,560

2,191,943

1,927,265

2,079,866
Due after ten years

948,051

980,172

848,014

875,412
Asset-backed securities

2,989,971

3,015,534

2,450,807

2,474,170
Mortgage-backed securities

Commercial

575,995

602,029

512,388

550,080
Agency residential

1,019,028

1,033,951

937,166

965,100
Non-agency residential

5,633

5,636

3,164

3,164
Total fixed maturity securities
$
11,255,282

$
11,553,817

$
10,248,650

$
10,643,565

classified

as held

to maturity

is $

0.4

million as

of June

30,

2022.

The

changes

net

unrealized

appreciation

(depreciation)

for

the

Company’s

available

for

sale

and

short

term

investments are derived

from the following sources for

the periods as indicated:

Three Months Ended

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Increase (decrease) during the period between the market value and cost of investments carried at market value, and deferred taxes thereon:

Fixed maturity securities
$
63,124

$
311,927

$
(74,026)

$
123,520
Change in unrealized appreciation (depreciation), pre-tax

63,124

311,927

(74,026)

123,520
Deferred tax benefit (expense)

(13,272)

(64,834)

15,510

(26,065)
Change in unrealized appreciation (depreciation), net of deferred taxes, included in stockholder's equity
$
49,852

$
247,093

$
(58,516)

$
97,455

Three Months Ended

~~The Company reviews all~~

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

Increase (decrease) during the period between the fair value and cost of ~~its fixed~~

investments carried at fair value, and deferred taxes thereon:

Fixed maturity securities, available for sale ~~securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline~~and short-term investments

(512,342)

63,124

(1,008,216)

(74,026)

Change in value is due to non-credit related or credit related factors. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a changeunrealized appreciation (depreciation), pre-tax

(512,342)

63,124

(1,008,216)

(74,026)

Deferred tax benefit (expense)

107,410

(13,272)

211,260

15,510

Change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related decline in market value. Non-credit related 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 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 Company establishes a credit allowance equal to the estimated credit 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)appreciation (depreciation), net of ~~tax, and is~~deferred taxes, included

in ~~accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company will adjust the credit allowance account for future changes in credit loss estimates for a~~

stockholder's equity

~~security~~ (404,932)

49,852

(796,956)

(58,516)

The

tables

below

display

the

aggregate

fair

value

and ~~record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements~~

gross

unrealized

depreciation

of ~~operations and comprehensive income (loss).~~

~~The Company does not create an allowance~~

fixed

maturity

securities

available

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.

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

sale, by ~~rating agencies, investment advisors and analysts.~~

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

length

of time

that individual securities had been in a continuous unrealized

loss position for the periods ~~indicated~~:

Duration of Unrealized Loss at June 30, 2021 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Gross

Gross

Market

Unrealized

Market

Unrealized

Market

Unrealized
(Dollars in thousands)
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
$
81,465

$
(106)

$
-

$
-

$
81,465

$
(106)
Obligations of U.S. states and
political subdivisions

20,473

(214)

3,189

(772)

23,662

(986)
Corporate securities

760,710

(21,706)

83,158

(1,533)

843,868

(23,239)
Asset-backed securities

640,155

(2,199)

8,539

(227)

648,694

(2,426)
Mortgage-backed securities

Commercial

108,610

(2,478)

-

-

108,610

(2,478)
Agency residential

603,966

(6,118)

10,242

(50)

614,208

(6,168)
Non-agency residential

-

-

156

(2)

156

(2)
Foreign government securities

88,608

(2,570)

1,009

(1)

89,617

(2,571)
Foreign corporate securities

231,115

(3,741)

10,755

(858)

241,870

(4,600)
Total fixed maturity securities
$
2,535,102

$
(39,132)

$
117,048

$
(3,442)

$
2,652,150

$
(42,574)

indicated:

Duration of Unrealized Loss at June 30, 2021 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Gross

Gross

Market

Unrealized

Market

Unrealized

Market

Unrealized
(Dollars in thousands)
Value

Depreciation

Value

Depreciation

Value

Depreciation
Fixed maturity securities

Due in one year or less
$
71,420

$
(1,509)

$
1,009

$
(1)

$
72,429

$
(1,510)
Due in one year through five years

494,028

(8,866)

82,946

(1,288)

576,974

(10,154)
Due in five years through ten years

406,678

(9,302)

10,967

(1,103)

417,645

(10,405)
Due after ten years

210,245

(8,660)

3,189

(772)

213,434

(9,432)
Asset-backed securities

640,155

(2,199)

8,539

(227)

648,694

(2,426)
Mortgage-backed securities

712,576

(8,596)

10,398

(51)

722,974

(8,647)
Total fixed maturity securities
$
2,535,102

$
(39,132)

$
117,048

$
(3,442)

$
2,652,150

$
(42,574)

Duration of Unrealized Loss at June 30, 2022 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

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

520,687

(23,947)

26,566

(2,240)

547,253

(26,187)

Obligations of U.S. states and

political subdivisions

207,489

(21,199)

15,223

(3,102)

222,712

(24,301)

Corporate securities

2,907,008

(282,978)

411,811

(53,735)

3,318,819

(336,713)

Asset-backed securities

3,518,224

(177,153)

9,307

(737)

3,527,531

(177,890)

Mortgage-backed securities

Commercial

515,599

(40,620)

8,818

(1,379)

524,417

(41,999)

Agency residential

1,130,396

(77,988)

266,332

(34,370)

1,396,728

(112,358)

Non-agency residential

3,393

(143)

3,393

(143)

Foreign government securities

475,696

(29,114)

66,955

(9,746)

542,651

(38,860)

Foreign corporate securities

1,102,644

(109,378)

132,205

(16,531)

1,234,849

(125,909)

Total

10,381,136

(762,520)

937,217

(121,840)

11,318,353

(884,360)

Securities where an allowance for

credit losses was recorded

7,054

(855)

7,054

(855)

Total fixed maturity securities

10,388,190

(763,375)

937,217

(121,840)

11,325,407

(885,215)

Duration of Unrealized Loss at June 30, 2022 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

Value

Depreciation

Value

Depreciation

Value

Depreciation

Fixed maturity securities - available for sale

Due in one year or less

342,251

(2,566)

39,994

(3,187)

382,245

(5,753)

Due in one year through five years

2,518,832

(149,344)

315,227

(23,856)

2,834,059

(173,200)

Due in five years through ten years

1,401,318

(158,998)

248,982

(46,474)

1,650,300

(205,472)

Due after ten years

951,123

(155,708)

48,557

(11,837)

999,680

(167,545)

Asset-backed securities

3,518,224

(177,153)

9,307

(737)

3,527,531

(177,890)

Mortgage-backed securities

1,649,388

(118,751)

275,150

(35,749)

1,924,538

(154,500)

Total

10,381,136

(762,520)

937,217

(121,840)

11,318,353

(884,360)

Securities where an allowance for credit

losses was recorded

7,054

(855)

7,054

(855)

Total fixed maturity securities

10,388,190

(763,375)

937,217

(121,840)

11,325,407

(885,215)

The

aggregate

fair

value

and

gross

unrealized

losses

fixed

maturity

securities

available

for

sale

unrealized

loss

position

June

30,

2022

were

11.3

billion

and

885.2

million,

respectively.

The

fair

value

securities for

the single

issuer

(the United

States

government)

whose securities

comprised

the largest

unrealized

loss

position

June

30,

2022,

did

not

exceed

4.3

the

overall

fair

value

the

Company’s

fixed

maturity

securities available

for

sale.

The ~~aggregate~~ fair

value

of the

securities

for

the issuer

with the

second

largest

unrealized

loss

position at June 30, 2022,

comprised less than

2.2

% of the Company’s

fixed maturity securities available

for sale. In

addition,

as indicated

on the

above

table,

there

was

no significant

concentration

of unrealized

losses

in any

one

market

sector.

The

763.4

million

unrealized

losses

fixed

maturity

securities

available

for

sale

that

have been

in an

unrealized

loss position

for less

than one

year were

generally

comprised of

domestic and

foreign

corporate

securities,

asset

backed

securities

and

agency

residential

mortgage

backed

securities.

these

unrealized

losses,

662.6

million

were

securities

that

were

rated

investment

grade

least

one

nationally

recognized

rating

agency.

The

121.8

million

unrealized

losses

fixed

maturity

securities

available

for sale

in an

unrealized

loss position

for more

than one

year related

primarily to

domestic and

foreign

corporate

securities

well

agency

residential

mortgage-backed

securities.

these

unrealized

losses

114.2

million

were

securities

that

were

rated

investment

grade

least

one

nationally

recognized

rating

agency.

all

instances,

there

were

projected

cash

flow

shortfalls

recover

the

full

book

value

the

investments

and the

related interest

obligations.

The mortgage-backed

securities still

have excess

credit coverage

and are

current on

interest and

principal payments.

Based upon

the Company’s

current evaluation

of securities

an unrealized

loss position as

of June 30,

2022, the unrealized

losses are due

to changes in

interest rates

and non-

issuer

specific credit

spreads

and are

not credit

related.

addition,

the contractual

terms of

these securities

not permit these securities to be settled at a price less than

their amortized cost.

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.

addition,

all

securities

currently

unrealized

loss

position

are

current

with

respect

principal

and interest payments.

The

tables

below

display

the

aggregate

fair

value

and

gross

unrealized

depreciation

fixed

maturity

securities

available

for

sale, by

security type

and contractual

maturity,

in each

case subdivided

according

length

of time

that individual securities

had been in a

continuous unrealized

loss position for

the periods indicated.

The amounts

presented in

the tables below include

15.7

million of fair value

and $(

0.4

) million of gross

unrealized depreciation

as of December 31, 2021 related

to fixed maturity securities

available for sale

for which the Company

has recorded

an allowance for credit losses.

Duration of Unrealized Loss at December 31, 2021 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

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

266,953

(3,296)

266,953

(3,296)

Obligations of U.S. states and

political subdivisions

51,094

(1,038)

2,558

(112)

53,652

(1,150)

Corporate securities

1,465,259

(24,853)

200,637

(6,147)

1,665,896

(31,000)

Asset-backed securities

1,890,876

(10,713)

37,910

(301)

1,928,786

(11,014)

Mortgage-backed securities

Commercial

138,934

(2,467)

34,967

(1,618)

173,901

(4,085)

Agency residential

698,896

(6,879)

167,923

(3,197)

866,819

(10,076)

Non-agency residential

1,401

(4)

156

(2)

1,557

(6)

Foreign government securities

200,294

(4,778)

14,612

(2,227)

214,906

(7,005)

Foreign corporate securities

676,609

(16,871)

33,057

(1,626)

709,666

(18,497)

Total fixed maturity securities

5,390,316

(70,899)

491,820

(15,230)

5,882,136

(86,129)

Duration of Unrealized Loss at December 31, 2021 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

Value

Depreciation

Value

Depreciation

Value

Depreciation

Fixed maturity securities - available for

sale

Due in one year or less

81,412

(1,878)

35,515

(3,829)

116,927

(5,707)

Due in one year through five years

1,209,378

(18,614)

154,449

(3,418)

1,363,827

(22,032)

Due in five years through ten years

852,857

(20,678)

34,164

(1,977)

887,021

(22,655)

Due after ten years

516,562

(9,666)

26,736

(888)

543,298

(10,554)

Asset-backed securities

1,890,876

(10,713)

37,910

(301)

1,928,786

(11,014)

Mortgage-backed securities

839,231

(9,350)

203,046

(4,817)

1,042,277

(14,167)

Total fixed maturity securities

5,390,316

(70,899)

491,820

(15,230)

5,882,136

(86,129)

The

aggregate

fair

value

and

gross

unrealized

losses

investments

unrealized

loss

position

December 31, 2021

were $

5.9

billion and $

86.1

million, respectively.

The fair value

of securities for

the issuer (the

United States

government)

whose securities

comprised the

largest unrealized

loss position

at December

31, 2021,

did not

exceed

2.1

% of the

overall

fair value

of the

Company’s

fixed maturity

securities available

for sale.

The fair

value

the

securities

for

the

issuer

with

the

second

largest

unrealized

loss

comprised

less

than

0.4

the

Company’s

fixed

maturity

securities available

for

sale. In

addition, as

indicated

on the

above

table,

there

was

significant

concentration

unrealized

losses

any

one

market

sector.

The

70.9

million

unrealized

losses

fixed

maturity

securities

that

have

been

unrealized

loss

position

for

less

than

one

year

were

generally

comprised

domestic

and

foreign

corporate

securities,

foreign

government

securities,

asset

backed

securities

and

agency

residential

mortgage

backed

securities.

these

unrealized

losses,

61.5

million

were

securities

that

were

rated

investment

grade

least

one

nationally

recognized

rating

agency.

The

15.2

million of unrealized losses related

to ~~investments~~fixed maturity securities available

for sale in an unrealized loss

position ~~at June 30, 2021 were $2,652,150 thousand and $42,574 thousand, respectively. The market value of securities~~

for the single issuer whose securities comprised the largest unrealized loss position at June 30, 2021, did not exceed 0.2% 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 $39,132 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for lessmore than

one year ~~were generally comprised of~~related

primarily to domestic

and foreign corporate ~~securities, foreign government~~

securities as well

as ~~commercial and~~ agency residential

mortgage

backed

securities.

these

unrealized

losses ~~$27,803 thousand~~

12.3

million

were

securities

that

were

rated

investment grade by

at least one nationally recognized ~~statistical~~

rating agency. The $3,442 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. Of these unrealized losses $1,421 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was 0 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~~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.

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 December 31, 2020 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Gross

Gross

Market

Unrealized

Market

Unrealized

Market

Unrealized
(Dollars in thousands)
Value

Depreciation

Value

Depreciation

Value

Depreciation
Fixed maturity securities -
available for sale

Obligations of U.S. states and
political subdivisions

19,524

(999)

4,059

(256)

23,583

(1,255)
Corporate securities

240,601

(7,799)

188,853

(23,681)

429,454

(31,480)
Asset-backed securities

223,919

(4,573)

81,952

(649)

305,871

(5,222)
Mortgage-backed securities

Commercial

37,414

(182)

3,983

(1)

41,397

(183)
Agency residential

235,809

(682)

1,573

(14)

237,382

(696)
Non-agency residential

161

(2)

-

-

161

(2)
Foreign government securities

10,505

(373)

25,793

(2,838)

36,298

(3,211)
Foreign corporate securities

57,900

(2,182)

18,349

(1,721)

76,249

(3,903)
Total fixed maturity securities
$
825,833

$
(16,792)

$
324,562

$
(29,160)

$
1,150,395

$
(45,952)

Duration of Unrealized Loss at December 31, 2020 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Gross

Gross

Market

Unrealized

Market

Unrealized

Market

Unrealized
(Dollars in thousands)
Value

Depreciation

Value

Depreciation

Value

Depreciation
Fixed maturity securities

Due in one year or less
$
28,802

$
(1,218)

$
34,555

$
(4,142)

$
63,357

$
(5,360)
Due in one year through five years

150,106

(5,828)

116,987

(4,783)

267,093

(10,611)
Due in five years through ten years

81,492

(1,634)

13,118

(435)

94,610

(2,069)
Due after ten years

68,130

(2,673)

72,394

(19,136)

140,524

(21,809)
Asset-backed securities

223,919

(4,573)

81,952

(649)

305,871

(5,222)
Mortgage-backed securities

273,384

(866)

5,556

(15)

278,940

(881)
Total fixed maturity securities
$
825,833

$
(16,792)

$
324,562

$
(29,160)

$
1,150,395

$
(45,952)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2020 were $1,150,395 thousand and $45,952 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2020, did not exceed 0.2% 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 $16,792 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 as well as asset backed securities. Of these unrealized losses, $12,522 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $29,160 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 foreign government securities. Of these unrealized losses $5,856 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was 0 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

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Fixed maturities
$
91,895

$
74,897

$
177,016

$
148,985
Equity securities

3,385

2,024

6,308

3,616
Short-term investments and cash

83

578

236

2,148
Other invested assets

Limited partnerships

126,407

(40,465)

178,558

(33,469)
Dividends from preferred shares of affiliate

7,758

7,758

15,516

15,516
Other

25,856

(2,962)

31,875

(16,034)
Gross investment income before adjustments

255,384

41,830

409,509

120,762
Funds held interest income (expense)

2,732

901

6,221

4,158
Interest income from Parent

1,281

1,281

2,549

2,563
Gross investment income

259,397

44,012

418,279

127,483
Investment expenses

(11,262)

(8,859)

(22,421)

(18,129)
Net investment income
$
248,135

$
35,153

$
395,858

$
109,354

(Some amounts may not reconcile due to rounding.)

~~The Company records results~~

Three Months Ended

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

Fixed maturities

115,510

91,895

209,941

177,016

Equity securities

4,600

3,385

8,746

6,308

Short-term investments and cash

635

850

236

Other invested assets

Limited partnerships

45,244

126,407

88,766

178,558

Dividends from ~~limited partnership investments on the equity method~~preferred shares of affiliate

7,758

15,516

Other

13,991

25,856

25,822

31,875

Gross investment income before adjustments

187,738

255,384

349,641

409,509

Funds held interest income (expense)

525

2,732

3,348

6,221

Interest income from Parent

1,800

1,281

3,568

2,549

Gross investment income

190,063

259,397

356,557

418,279

Investment expenses

(13,564)

(11,262)

(23,924)

(22,421)

Net investment income

176,499

248,135

332,633

395,858

(Some amounts may not reconcile due to rounding.)

The

Company

records

results

from

limited

partnership

investments

the

equity

method

accounting

with

changes in value reported through

net investment income.

The net investment income

from limited partnerships

dependent upon the Company’s

share of the net asset

values of interests

underlying each limited partnership.

Due

the

timing

receiving

financial

information

from

these

partnerships,

the

results

are

generally

reported

one

month

quarter

lag.

If the

Company

determines

there

has

been

significant

decline

value

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

invest

additional ~~$1,342,994 thousand~~

983.5

million

limited

partnerships

and

private

placement

loan

securities

June

30, ~~2021.~~

2022.

These

commitments

will

funded

when

called

accordance

with

the

partnership

and

loan

agreements,

which

have

investment

periods

that

expire,

unless

extended, through ~~2026.~~

2026

The Company 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

high quality,

short-duration securities

and permits daily liquidity.

The Company consolidates

its participation in

the

facility.

As of June 30, ~~2021,~~ 2022,

the ~~market~~fair value

of investments

in the facility consolidated

within the Company’s

balance

sheets was ~~$381,679 thousand.~~

262.3

million.

Other

invested

assets,

fair

value,

June

30,

2022

and

December 31,

2021,

were

comprised

preferred

held in

Everest

Preferred

International

Holdings, Ltd.

(“Preferred

Holdings”), a

wholly-owned

subsidiary

Group.

Variable Interest

Entities

The

Company

engaged

with

various

special

purpose

entities

and

other

entities

that

are

deemed

VIEs

primarily as an investor

through normal investment

activities but also as

an investment manager.

A VIE is an

entity

that either has

investors

that lack certain

essential characteristics

of a controlling

financial interest,

such as simple

majority kick-out

rights, or lacks

sufficient funds

to finance its

own activities without

financial support provided

other

entities.

The

Company

performs

ongoing

qualitative

assessments

its

VIEs

determine

whether

the

Company

has

controlling

financial

interest

in the

VIE and

therefore

the

primary

beneficiary.

The Company

deemed

have

controlling

financial

interest

when

has

both

the

ability

direct

the

activities

that

most

significantly

impact

the

economic

performance

of the

VIE

and

the

obligation

absorb

losses

right

receive

benefits

from

the

VIE

that

could

potentially

significant

the

VIE.

Based

the

Company’s

assessment,

determines

the

primary

beneficiary,

the

Company

consolidates

the

VIE

the

Company’s

Consolidated

Financial

Statements.

June

30,

2022

and

December 31,

2021,

the

Company

did

not

hold

any

securities

for

which it is the primary beneficiary.

The

Company,

through

normal

investment

activities,

makes

passive

investments

general

and

limited

partnerships

and other

alternative investments.

For these

non-consolidated

VIEs, the

Company has

determined it

not

the

primary

beneficiary

has

ability

direct

activities

that

could

significantly

affect

the

economic

performance of the investments.

The Company’s maximum

exposure to loss

as of June 30, ~~2021~~2022 and December

31, ~~2020, were comprised~~

2021 is limited to the

total carrying value of ~~preferred shares held~~$

1.8

billion and $

1.7

billion, respectively,

which are included in ~~Everest Preferred International Holdings, Ltd. (“Preferred Holdings”),~~general

and

limited

partnerships

and

other

alternative

investments

Other

Invested

Assets

the

Company's

Consolidated Balance Sheets.

As of June 30, 2022, the

Company has outstanding

commitments totaling

0.8

billion

whereby

the Company

is committed

fund these

investments

and may

be called

by the

partnership

during

the

commitment

period

fund

the

purchase

of new

investments

and

partnership

expenses.

These investments

are

generally of a ~~wholly-owned subsidiary~~passive nature

in that the Company does not take

an active role in management.

In addition, the Company

makes passive investments

in structured securities issued

by VIEs for which the Company

is not

the manager.

These investments

are

included in

asset-backed

securities,

which includes

collateralized

loan

obligations

and

are

reported

fixed

maturities

available-for-sale

and

fixed

maturities

held

maturity.

The

Company

has

not

provided

financial

other

support

with

respect

these

investments

other

than

its

original

investment.

For these

investments,

the Company

determined it

is not

the primary

beneficiary due

to the

relative

size of ~~Group.~~

the Company’s

investment in

comparison to

the principal amount

of the structured

securities issued by

the

VIEs, the level

of credit subordination

which reduces

the Company’s

obligation to

absorb losses or

right to

receive

benefits

and

the

Company’s

inability

direct

the

activities

that

most

significantly

impact

the

economic

performance of the VIEs.

The Company’s maximum

exposure to loss

on these investments

is limited to the amount

of the Company’s investment.

The components of net ~~realized capital~~ gains (losses) on investments

are presented in the table below for

the periods indicated:

Three Months Ended

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Fixed maturity securities, market value:

Allowances for credit losses
$
(15,075)

$
(7,826)

$
(22,217)

$
(19,925)
Gains (losses) from sales

4,128

1,963

8,055

(18,974)
Fixed maturity securities, fair value:

Gains (losses) from fair value adjustments

-

(272)

-

(1,395)
Equity securities, fair value:

Gains (losses) from sales

585

16,274

6,823

(11,328)
Gains (losses) from fair value adjustments

103,824

148,205

141,375

26,536
Other invested assets

2,748

1,292

4,094

(1,035)
Other invested assets, fair value:

Gains (losses) from fair value adjustments

87,552

(639,058)

180,630

(196,579)
Short-term investment gains (losses)

1

62

14

207
Total net realized capital gains (losses)
$
183,763

$
(479,360)

$
318,774

$
(222,493)

Roll Forward of Allowance for Credit Losses

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Asset

Foreign

Asset

Foreign

Corporate

Backed

Corporate

Corporate

Backed

Corporate

Securities

Securities

Securities

Total

Securities

Securities

Securities

Total
Beginning Balance
$
(3,588)

$
(4,915)

$
(205)

$
(8,708)

$
(1,205)

$
-

$
(361)

$
(1,566)
Credit losses on securities where credit

losses were not previously recorded

(13,538)

-

(188)

(13,726)

(15,921)

(4,915)

(188)

(21,024)
Increases in allowance on previously

impaired securities

(1,468)

-

-

(1,468)

(1,468)

-

-

(1,468)
Decreases in allowance on previously

��

impaired securities

-

-

-

-

-

-

-

-
Reduction in allowance due to disposals

119

-

-

119

119

-

156

275

Balance as of June 30, 2021
$
(18,475)

$
(4,915)

$
(393)

$
(23,783)

$
(18,475)

$
(4,915)

$
(393)

$
(23,783)

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~~

Three Months Ended

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

Fixed maturity securities:

Allowances for credit losses

1,500

(15,075)

(149)

(22,217)

Net realized ~~capital~~ gains (losses) ~~in the consolidated statements of operations and comprehensive income (loss)~~from dispositions

(9,875)

4,128

(14,964)

8,055

Equity securities, fair value:

Net realized gains (losses) from dispositions

(30,009)

585

(38,277)

6,823

Gains (losses) from fair value ~~re-measurements, allowances~~adjustments

(185,865)

103,824

(316,667)

141,375

Other invested assets

583

2,748

4,502

4,094

Other invested assets, fair value:

Gains (losses) from fair value adjustments

(154,658)

87,552

(239,277)

180,630

Short-term investment gains (losses)

(28)

Total net gains (losses) on investments

(378,273)

183,763

(604,860)

318,774

Roll Forward of Allowance for ~~credit~~Credit Losses – Fixed maturities,

available for sale

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Asset

Obligations of U.S.

states and

political

subdivisions

Foreign

Asset

Obligations of

U.S. states and

political

subdivisions

Foreign

Corporate

Backed

Corporate

Backed

Corporate

Securities

Total

Securities

Total

Beginning Balance

(20,049)

(7,680)

(151)

(1,260)

(29,140)

(19,267)

(7,680)

(151)

(393)

(27,491)

Credit losses ~~per ASU 2016-13 and write-downs~~on securities where credit

losses were not previously recorded

(4,888)

(172)

(5,060)

(6,817)

(1,141)

(7,958)

Increases in ~~the value~~allowance on previously

impaired securities

(653)

(107)

(760)

(653)

(107)

(760)

Decreases in allowance on previously

impaired securities

Reduction in allowance due to disposals

7,680

7,686

1,153

7,680

102

8,935

Balance as of June 30, 2022

(25,584)

(151)

(1,539)

(27,274)

(25,584)

(151)

(1,539)

(27,274)

Roll Forward of Allowance

for Credit Losses – Fixed maturities,

available for sale

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Asset

Foreign

Asset

Foreign

Corporate

Backed

Corporate

Backed

Corporate

Securities

Total

Securities

Total

Beginning Balance

(3,588)

(4,915)

(205)

(8,708)

(1,205)

(361)

(1,566)

Credit losses on securities ~~deemed~~where credit

losses were not previously recorded

(13,538)

(188)

(13,726)

(15,921)

(4,915)

(188)

(21,024)

Increases in allowance on previously

impaired securities

(1,468)

Decreases in allowance on previously

impaired securities

Reduction in allowance due to ~~be impaired on an other-than-temporary basis in prior years~~disposals

119

156

275

Balance as ~~displayed in the table above.~~

of June 30, 2021

(18,475)

(4,915)

(393)

(23,783)

(18,475)

(4,915)

(393)

(23,783)

The proceeds and split between gross

gains and losses from dispositions of fixed

maturity and equity securities, are

presented in the table below for

the periods indicated:

Three Months Ended

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

Proceeds from sales of fixed maturity ~~and~~securities, available for sale

244,553

165,443

511,218

242,072

Gross gains from dispositions

3,119

8,850

6,274

15,199

Gross losses from dispositions

(12,994)

(4,722)

(21,238)

(7,144)

Proceeds from sales of equity securities ~~are presented in the table below for the periods indicated:~~

Three Months Ended

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Proceeds from sales of fixed maturity securities
$
165,443

$
173,479

$
242,072

$
337,723
Gross gains from sales

8,850

8,755

15,199

10,601
Gross losses from sales

(4,722)

(6,792)

(7,144)

(29,575)

Proceeds from sales of equity securities
$
64,775

$
8,842

$
346,088

$
213,003
Gross gains from sales

2,633

18,172

14,937

20,753
Gross losses from sales

(2,048)

(1,898)

(8,114)

(32,081)

343,405

64,775

425,380

346,088

Gross gains from dispositions

4,126

2,633

7,634

14,937

Gross losses from dispositions

(34,135)

(2,048)

(45,911)

(8,114)

RESERVES FOR LOSSES, LAE

AND ~~LAE~~

FUTURE POLICY BENEFIT RESERVE

Activity in the reserve for losses and LAE is summarized

for the periods indicated:

Six Months Ended June 30,
(Dollars in thousands)

2021

2020
Gross reserves beginning of period
$
11,654,950

$
10,209,519
Less reinsurance recoverables

(3,951,474)

(4,215,348)
Net reserves beginning of period

7,703,476

5,994,171
Incurred related to:

Current year

2,450,567

2,006,988
Prior years

(865)

(1,643)
Total incurred losses and LAE

2,449,702

2,005,345
Paid related to:

Current year

550,907

474,372
Prior years

898,284

1,025,866
Total paid losses and LAE

1,449,191

1,500,238

Foreign exchange/translation adjustment and cumulative adjustment due to adoption of ASU 2016-13

9,986

(26,906)

Net reserves end of period

8,713,971

6,472,371
Plus reinsurance recoverables

3,772,228

3,910,952
Gross reserves end of period
$
12,486,199

$
10,383,323

(Some amounts may not reconcile due to rounding.)

Six Months Ended June 30,

(Dollars in thousands)

2022

2021

Gross reserves beginning of period

13,121,177

11,578,096

Less reinsurance recoverables on unpaid losses

(3,650,716)

(3,951,474)

Net reserves beginning of period

9,470,461

7,626,622

Incurred related to:

Current year

2,520,596

2,450,567

Prior years

9,031

(865)

Total incurred losses and LAE

2,529,627

2,449,702

Paid related to:

Current year

775,023

550,907

Prior years

1,063,144

903,025

Total paid losses and LAE

1,838,167

1,453,932

Foreign exchange/translation adjustment

(16,668)

9,986

Net reserves end of period

10,145,252

8,632,376

Plus reinsurance recoverables on unpaid losses

3,593,105

3,772,228

Gross reserves end of period

13,738,357

12,404,604

(Some amounts may not reconcile due to rounding.)

Current

year incurred

losses were ~~$2,450,567 thousand~~

2.5

billion and

2.5

billion for

the six

months

ended June

30, 2022

and 2021,

respectively.

Gross

and

net

reserves

increased

for

the

six

months

ended

June

30,

2022, reflecting

increase

underlying

exposure

due

premium

growth

and

the

impact

24.6

million

incurred

losses

the

Ukraine/Russia

war,

partially offset

by a

reduction of

150.0

million in

current

year catastrophe

losses. Prior

year

incurred development of $

9.0

million is primarily driven by unfavorable

movement on prior year catastrophes.

The war

in the

Ukraine

is ongoing

and an

evolving

event.

Economic

and legal

sanctions

have

been levied

against

Russia, specific named individuals

and entities connected

to the Russian government,

as well as businesses

located

in the

Russian Federation

and/or owned

by Russian

nationals by

numerous countries,

including the

United States.

The

significant

political

and

economic

uncertainty

surrounding

the

war

and

associated

sanctions

have

impacted

economic

and

investment

markets

both

within

Russia

and

around

the

world.

The

Company

has

recorded

24.6

million

incurred

underwriting

losses

the

Ukraine

and

Russia

conflict

for

the

three

and

six

months

ended June 30, 2021 and $2,006,988 thousand for the six months ended June 30, 2020, respectively. The increase in current year incurred losses in 2021 compared to 2020 was primarily due to a $250,850 thousand increase in current year catastrophe losses as well as the impact of the increase in premiums earned. In addition, current year incurred losses for the three and six months ended June 30, 2020 included $37,991 thousand and $73,691 thousand of losses associated with the COVID-19 Pandemic which did not recur in 2021.

2022.

FAIR VALUE

GAAP guidance regarding fair

value measurements ~~address~~ addresses

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

received to

sell

an asset or

paid to transfer

a liability in

an orderly fashion

between market

participants at

the measurement date.

addition,

establishes

three-level

valuation

hierarchy

for

the

disclosure

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

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

the valuation

methodology

include

quoted

prices

for

similar

assets

and liabilities

active

markets,

and

inputs

that

are

observable

for

the

asset

liability,

either

directly

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

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

not

trade

daily

basis

the

services

will

apply

available

information

through

processes

such as

benchmark curves,

benchmarking of

securities,

sector groupings

and matrix

pricing. In

addition, they

use

model

processes,

such

the

Option

Adjusted

Spread

model

develop

prepayment

and

interest

rate

scenarios for securities that have prepayment

features.

The investment

asset managers

do not make

any changes to

prices received from

either the pricing

services or the

investment

brokers.

addition,

the

investment

asset

managers

have

procedures

place

review

the

reasonableness

of the

prices from

the service

providers

and may

request verification

of the

prices. The

Company

also

continually

performs

quantitative

and

qualitative

analysis

prices,

including

but

not

limited

initial

and

ongoing

review

pricing

methodologies,

review

prices

obtained

from

pricing

services

and

third

party

investment

asset managers, ~~have~~

review of

pricing statistics

and trends,

and comparison

of prices

for certain

securities

with a

secondary price

source for

reasonableness. No

material variances

were noted

during these

price validation

procedures.

In limited

situations,

where

financial

markets

are

inactive

illiquid,

the

Company

may

use its

own

assumptions

about

future

cash

flows

and

risk-adjusted

discount

rates

determine

fair

value.

June

30,

2022,

2.2

billion of

fixed

maturities

were fair

valued

using unobservable

inputs. The

majority of

these

fixed

maturities

were valued

by investment

managers’

valuation

committees

and many

of these

fair values

were substantiated

valuations

from independent

third

parties.

The Company

has

procedures

in place

evaluate

these independent

third party

valuations.

At December

31, 2021,

2.0

billion of

fixed maturities

were fair

valued using

unobservable

inputs.

The

Company

internally

manages

public

equity

portfolio

which

had

fair

value

June

30,

2022

and

December 31,

2021

896.9

million

and

1.3

billion,

respectively.

During

the

fourth

quarter

2021,

the

Company

began

internally

manage

portfolio

collateralized

loan

obligations

included

asset-backed

securities available

for sale,

which had

a fair

value of

2.1

billion and

2.0

billion at

June 30,

2022 and

December

31, 2021,

respectively.

All prices

for

these securities

were obtained

from publicly

published sources

or nationally

recognized pricing vendors.

Equity

securities

denominated

U.S.

currency

with

quoted

prices

active

markets

for

identical

assets

are

categorized

Level

since

the

quoted

prices

are

directly

observable.

Equity

securities

traded

foreign

exchanges

are categorized

as Level

2 due

to ~~review~~ the ~~reasonableness~~

added input

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

foreign

exchange

conversion

rate

to determine

fair value. At June 30, 2021, $1,455,085 thousand of fixed maturities, market value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, were valued by investment managers’ valuation committees and many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to evaluate these independent third party valuations. At December 31, 2020, $1,259,576 thousand of fixed maturities, market value were fair valued using unobservable inputs.

The Company internally manages a public equity portfolio which had a fair value at June 30, 2021 and December 31, 2020 of $1,116,408 thousand and $784,746 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 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as 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.

~~All categories of fixed~~

Fixed maturity

securities listed

in the

tables below

are generally

categorized

as 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

interest

rate

yield

curves

and

prices

for

similar

fixed

maturity

securities

terms

issuer,

maturity

and

seniority.

For foreign

government

securities and

foreign corporate

securities, the

fair values

provided by

the third

party

pricing

services

local

currencies,

and

where

applicable,

are

converted

U.S.

dollars

using

currency

exchange rates from

nationally recognized sources.

In addition

to the

valuations from

investment

managers,

some of

the fixed

maturities with

fair values

categorized

as Level

3 result

when prices are

not available

from the nationally

recognized pricing

services. The asset

managers

may

obtain

non-binding

price

quotes

for

the

securities

from

brokers.

The

single

broker

quotes

are

provided

market

makers

broker-dealers

who

are

recognized

market

participants

the

markets

which

they

are

providing

the quotes.

The prices

received

from brokers

are

reviewed

for

reasonableness

by the

third

party ~~pricing services in local currencies,~~asset

managers and ~~where applicable,~~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 addition to~~

The

composition

and

valuation

inputs

for

the ~~valuations from investment managers, some of the~~

presented

fixed

maturities ~~with fair values categorized~~

categories

Level

and

Level

are

as Level 3 result when prices are not available from the nationally recognized pricing services. The asset managers may 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 Level 1 and Level 2 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

observable

market

inputs

such

quoted

market

prices,

quoted

prices

for

similar

securities, benchmark yields and credit spreads;

●

Asset-backed

and

mortgage-backed

securities

fair

values

are

based

observable

inputs

such

quoted

prices,

reported

trades,

quoted

prices

for

similar

issuances

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

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

observable

market

inputs

such

quoted

market

prices,

quoted

prices

for

similar

securities

and

models

with

observable

inputs

such

benchmark

yields

and

credit

spreads

and

then,

where

applicable,

converted to U.S. dollars

using an exchange rate

from a nationally recognized

source.

The following

table presents

the fair

value measurement

levels for

all assets,

which the

Company has

recorded at

fair value as of the period indicated:

Fair Value Measurement Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

(Dollars in thousands)

June 30, 2022

(Level 1)

(Level 2)

(Level 3)

Assets:

Fixed maturities, available for sale

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

589,743

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~~

508,281

Corporate securities

4,007,683

3,145,256

862,427

Asset-backed securities

3,751,371

2,495,974

1,255,397

Mortgage-backed securities

Commercial

524,418

518,727

5,691

Agency residential

1,409,900

Non-agency residential

3,393

Foreign government securities

664,614

Foreign corporate securities

1,414,018

1,374,057

39,961

Total fixed maturities, available 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~~sale

12,873,421

10,709,945

2,163,476

Equity 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.

value

1,249,310

1,226,921

22,389

Other invested assets, at fair value ~~were categorized as Level 3 at June 30, 2021 and~~

1,791,539

Fair Value Measurement Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

(Dollars in thousands)

December 31, ~~2020, since it represented a privately placed convertible preferred stock issued by an affiliate. The stock was received in exchange~~2021

(Level 1)

(Level 2)

(Level 3)

Assets:

Fixed maturities, available 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~~ sale

U.S. Treasury ~~yield curve rate T note constant maturity 10 year~~securities 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.

obligations of

U.S. government agencies and corporations

~~The following table presents the~~$

662,749

Obligations of U.S. states and political subdivisions

586,621

Corporate securities

4,074,905

3,344,980

729,925

Asset-backed securities

3,466,286

2,215,005

1,251,281

Mortgage-backed securities

Commercial

602,894

Agency residential

1,260,678

Non-agency residential

4,408

Foreign government securities

691,980

Foreign corporate securities

1,509,874

1,493,859

16,015

Total fixed maturities, available for sale

12,860,395

10,863,174

1,997,221

Equity securities, 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:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Inputs
(Dollars in thousands)

June 30, 2021

(Level 1)

(Level 2)

(Level 3)
Assets:

Fixed maturities, market value

U.S. Treasury securities and obligations of
U.S. government agencies and corporations

$
552,834

$
-

$
552,834

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

608,344

-

608,344

-
Corporate securities

3,630,006

-

2,995,083

634,923
Asset-backed securities

3,015,534

-

2,200,258

815,276
Mortgage-backed securities

Commercial

602,029

-

602,029

-
Agency residential

1,033,951

-

1,033,951

-
Non-agency residential

5,635

-

5,635

-
Foreign government securities

756,652

-

756,652

-
Foreign corporate securities

1,348,830

-

1,343,944

4,886
Total fixed maturities, market value

11,553,817

-

10,098,732

1,455,085

Equity securities, fair value

1,449,667

1,412,711

36,956

-
Other invested assets, fair value

1,977,109

-

-

1,977,109

1,757,792

1,721,762

36,030

~~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:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Inputs
(Dollars in thousands)
December 31, 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
$
681,989

$
-

$
681,989

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

577,046

-

577,046

-
Corporate securities

3,449,912

-

2,819,068

630,844
Asset-backed securities

2,474,170

-

1,851,137

623,033
Mortgage-backed securities

Commercial

550,080

-

550,080

-
Agency residential

965,100

-

965,100

-
Non-agency residential

3,164

-

3,164

-
Foreign government securities

742,238

-

742,238

-
Foreign corporate securities

1,199,866

-

1,194,167

5,699
Total fixed maturities, market value

10,643,565

-

9,383,989

1,259,576

Equity securities, fair value

1,288,767

1,222,158

66,609

-
Other invested assets, fair value

1,796,479

-

-

1,796,479

~~In addition, $289,278 thousand and $224,698 thousand of investments within other~~

Other invested assets, ~~on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively, are not included within the~~ fair value

2,030,816

addition,

297.2

million

and

286.6

million

investments

within

other

invested

assets

the

consolidated

balance

sheets

June

30,

2022

and

December

31,

2021,

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.

The

following

tables

present

the

activity

under

Level

fair

value

measurements

using

significant

unobservable

inputs ~~by asset type,~~for fixed maturities available

for sale, for the periods indicated:

Total Fixed Maturities, Market Value

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Asset

Asset

(Dollars in thousands)
Corporate Securities

Backed Securities

Foreign Corporate

Total

Corporate Securities

Backed Securities

Foreign Corporate

Total
Beginning balance
$
633,893

$
785,360

$
5,598

$
1,424,851

$
630,843

$
623,033

$
5,700

$
1,259,576
Total gains or (losses) (realized/unrealized)

Included in earnings

(13,762)

206

138

(13,418)

(15,550)

(3,962)

140

(19,372)
Included in other comprehensive
income (loss)

4,583

7,610

(85)

12,108

7,418

4,475

(36)

11,857
Purchases, issuances and settlements

10,209

22,100

(765)

31,544

12,212

191,730

(918)

203,024
Transfers in and/or (out) of Level 3

-

-

-

-

-

-

-

-
Ending balance
$
634,923

$
815,276

$
4,886

$
1,455,085

$
634,923

$
815,276

$
4,886

$
1,455,085
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
$
(17,279)

$
(4,915)

$
-

$
(22,194)

$
(17,279)

$
(4,915)

$
-

$
(22,194)

(Some amounts may not reconcile due to rounding.)

Total Fixed Maturities, Market Value

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Asset

Asset

(Dollars in thousands)
Corporate Securities

Backed Securities

Foreign Corporate

Total

Corporate Securities

Backed Securities

Foreign Corporate

Total
Beginning balance
$
642,432

$
238,631

$
-

$
881,063

$
546,939

$
153,641

$
1,751

$
702,331
Total gains or (losses) (realized/unrealized)

Included in earnings

(248)

121

(97)

(224)

(462)

125

(97)

(434)
Included in other comprehensive income (loss)

(549)

18,092

(40)

17,503

(3,906)

2,210

(40)

(1,736)
Purchases, issuances and settlements

14,346

38,886

5,434

58,666

113,410

139,754

3,683

256,847
Transfers in and/or (out) of Level 3

(4,795)

-

977

(3,818)

(4,795)

-

977

(3,818)
Ending balance
$
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.)

Total Fixed Maturities, Available for Sale

~~The net transfers to/(from)~~

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Corporate

Asset Backed

Foreign

Corporate

Asset Backed

Foreign

(Dollars in thousands)

Securities

CMBS

Corporate

Total

Securities

CMBS

Corporate

Total

Beginning balance fixed maturities

714,656

1,388,691

5,890

15,926

2,125,163

729,925

1,251,281

16,015

1,997,221

Total gains or (losses) (realized/unrealized)

Included in earnings

(4,534)

(4,483)

(3,105)

137

(2,939)

Included in other comprehensive

income (loss)

(3,003)

(47,202)

(199)

(3,747)

(54,151)

(7,170)

(75,990)

(222)

(3,808)

(87,190)

Purchases, issuances and settlements

27,750

61,565

7,632

96,947

15,219

227,661

5,913

7,591

256,384

Transfers in (out) of Level 3 and reclassification of

securities in/(out) investment categories

127,558

(147,692)

20,134

127,558

(147,692)

20,134

Ending balance

862,427

1,255,397

5,691

39,961

2,163,476

862,427

1,255,397

5,691

39,961

2,163,476

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

(5,261)

7,679

2,418

(4,943)

7,679

2,736

(Some amounts may not reconcile due to rounding.)

Total Fixed Maturities,

Available for Sale

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Corporate

Asset Backed

Foreign

Corporate

Asset Backed

Foreign

(Dollars in thousands)

Securities

Corporate

Total

Securities

Corporate

Total

Beginning balance fixed maturities

633,893

785,360

5,598

1,424,851

630,843

623,033

5,700

1,259,576

Total gains or (losses) (realized/unrealized)

Included in earnings

(13,762)

206

138

(13,418)

(15,550)

(3,962)

140

(19,372)

Included in other comprehensive income (loss)

4,583

7,610

(85)

12,108

7,418

4,475

(36)

11,857

Purchases, issuances and settlements

10,209

22,100

(765)

31,544

12,212

191,730

(918)

203,024

Transfers in (out) of Level

3 and reclassification of

securities in/(out) investment categories

Ending balance

634,923

815,276

4,886

1,455,085

634,923

815,276

4,886

1,455,085

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

(17,279)

(4,915)

(22,194)

(17,279)

(4,915)

(22,194)

(Some amounts may not reconcile due to rounding.)

The Company’s

fixed maturity

securities held

to maturity

are recorded

at amortized

cost net

of credit

allowances,

with a carrying

value of

71.4

million and a

fair value

of $

71.2

million as

of June 30,

2022. The fair

values of

these

securities

are

determined

similar

manner

the

Company’s

fixed

maturity

securities

available

for

sale

described

above.

The

fair

values

these

securities

incorporate

the

use

significant

unobservable

inputs

and

therefore are classified as Level

3 within the fair value ~~measurements using significant unobservable inputs for fixed maturities, market value were $(3,818~~) thousand for both the three and six months ended June 30, 2020. The transfers during 2020 were previously priced by investment managers and were subsequently priced using a recognized pricing service hierarchy

as of June 30, ~~2020.~~

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)

-

-

-

-
Purchases, issuances and settlements

-

-

-

-
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.)

2022.

~~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)
2021

2020

2021

2020
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.)

~~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

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Other invested assets, fair value:

Beginning balance
$
1,889,558

$
2,425,061

$
1,796,479

$
1,982,582
Total gains or (losses) (realized/unrealized)

Included in earnings

87,551

(639,058)

180,630

(196,579)
Included in other comprehensive income (loss)

-

-

-

-
Purchases, issuances and settlements

-

-

-

-
Transfers in and/or (out) of Level 3

-

-

-

-
Ending balance
$
1,977,109

$
1,786,003

$
1,977,109

$
1,786,003
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.)

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.

some

disputes,

the

Company

seeks

enforce

its

rights

under

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.

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 June 30, 2021

At December 31, 2020
(Dollars in thousands)

The Prudential
$
139,236

$
140,773
Unaffiliated life insurance company

33,492

35,128

7. COMPREHENSIVE INCOME (LOSS)

The following

tables

present

the

components

of comprehensive

income

(loss)

the

consolidated

statements

operations and comprehensive income

(loss) for the periods indicated:

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021
(Dollars in thousands)
Before Tax

Tax Effect

Net of Tax

Before Tax

Tax Effect

Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related temporary
$
54,925

(11,515)

$
43,410

$
(84,094)

17,646

$
(66,448)
Reclassification of net realized losses (gains) included in net income (loss)

8,198

(1,757)

6,442

10,068

(2,136)

7,932
Foreign currency translation adjustments

17,712

(3,727)

13,985

20,568

(4,321)

16,247
Reclassification of amortization of net gain (loss) included in net income (loss)

2,586

(543)

2,043

5,172

(1,086)

4,086
Total other comprehensive income (loss)
$
83,421

$
(17,542)

$
65,880

$
(48,286)

$
10,103

$
(38,183)

(Some amounts may not reconcile due to rounding)

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
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary
$
307,356

(63,806)

$
243,550

$
83,586

(17,560)

$
66,026
Reclassification of net realized losses (gains) included in net income (loss)

4,570

(1,027)

3,543

39,934

(8,505)

31,429
Foreign currency translation adjustments

10,675

(2,239)

8,436

(26,857)

5,660

(21,197)
Reclassification of amortization of net gain (loss) included in net income (loss)

2,286

(480)

1,806

3,451

(725)

2,726
Total other comprehensive income (loss)
$
324,887

$
(67,552)

$
257,335

$
100,114

$
(21,130)

$
78,984

(Some amounts may not reconcile due to rounding)

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

(Dollars in thousands)

Before Tax

Tax Effect

Net of Tax

Before Tax

Tax Effect

Net of Tax

Unrealized appreciation (depreciation) ("URA(D)")

on securities - non-credit related

(520,134)

109,031

(411,103)

(1,018,827)

213,445

(805,382)

Reclassification of net realized losses (gains)

included in net income (loss)

7,793

(1,622)

6,171

10,611

(2,185)

8,426

Foreign currency translation adjustments

(12,475)

2,626

(9,849)

(14,915)

3,127

(11,788)

Reclassification of amortization of net gain (loss)

included in net income (loss)

959

(202)

758

1,919

(404)

1,515

Total other comprehensive income (loss)

(523,857)

109,833

(414,023)

(1,021,212)

213,983

(807,228)

(Some amounts may not reconcile due to rounding)

Three Months Ended

June 30, 2021

Six Months Ended

June 30, 2021

(Dollars in thousands)

Before Tax

Tax Effect

Net of Tax

Before Tax

Tax Effect

Net of Tax

Unrealized appreciation (depreciation) ("URA(D)")

on securities - non-credit related

54,925

(11,515)

43,410

(84,094)

17,646

(66,448)

Reclassification of net realized losses (gains)

included in net income (loss)

8,198

(1,757)

6,442

10,068

(2,136)

7,932

Foreign currency translation adjustments

17,712

(3,727)

13,985

20,568

(4,321)

16,247

Reclassification of amortization of net gain (loss)

included in net income (loss)

2,586

(543)

2,043

5,172

(1,086)

4,086

Total other comprehensive income (loss)

83,421

(17,542)

65,880

(48,286)

10,103

(38,183)

(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

Six Months Ended

Affected line item within the

June 30,

June 30,

statements of operations and
AOCI component
2021

2020

2021

2020

comprehensive income (loss)
(Dollars in thousands)

URA(D) on securities
$
8,198

$
4,570

$
10,068

$
39,934

Other net realized capital gains (losses)

(1,757)

(1,027)

(2,136)

(8,505)

Income tax expense (benefit)

$
6,442

$
3,543

$
7,932

$
31,429

Net income (loss)
Benefit plan net gain (loss)
$
2,586

$
2,286

$
5,172

$
3,451

Other underwriting expenses

(543)

(480)

(1,086)

(725)

Income tax expense (benefit)

$
2,043

$
1,806

$
4,086

$
2,726

Net income (loss)

(Some amounts may not reconcile due to rounding)

Three Months Ended

Six Months Ended

Affected line item within the

June 30,

statements of operations and

AOCI component

2022

2021

2022

2021

comprehensive income (loss)

(Dollars in thousands)

URA(D) on securities

7,793

8,198

10,611

10,068

Other net gains (losses) on investments

(1,622)

(1,757)

(2,185)

(2,136)

Income tax expense (benefit)

6,171

6,442

8,426

7,932

Net income (loss)

Benefit plan net gain (loss)

959

2,586

1,919

5,172

Other underwriting expenses

(202)

(543)

(404)

(1,086)

Income tax expense (benefit)

758

2,043

1,515

4,086

Net income (loss)

(Some amounts may not reconcile due to rounding)

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

Six Months Ended

June 30,

(Dollars in thousands)

2022

2021

2022

2021

Beginning balance of URA (D) on securities

(270,155)

204,793

121,869

313,161

Current period change in URA (D) of investments - non-credit related

(404,932)

49,852

(796,956)

(58,516)

Ending balance of URA (D) on securities

(675,087)

254,645

(675,087)

254,645

Beginning balance of foreign currency translation adjustments

18,053

30,989

19,992

28,727

Current period change in foreign currency translation adjustments

(9,849)

13,985

(11,788)

16,247

Ending balance of foreign currency translation adjustments

8,204

44,974

8,204

44,974

Beginning balance of benefit plan net gain (loss)

(49,634)

(71,827)

(50,392)

(73,870)

Current period change in benefit plan net gain (loss)

758

2,043

1,515

4,086

Ending balance of benefit plan net gain (loss)

(48,876)

(69,784)

(48,876)

(69,784)

Ending balance of accumulated other comprehensive income (loss)~~, net of tax, in the consolidated balance sheets for the periods indicated:~~

Three Months Ended

Six Months Ended

June 30,

June 30,
(Dollars in thousands)
2021

2020

2021

2020
Beginning balance of URA (D) on securities
$
204,793

$
(25,025)

$
313,161

$
124,612
Current period change in URA (D) of investments - non-credit related

49,852

247,093

(58,516)

97,455
Ending balance of URA (D) on securities

254,645

222,068

254,645

222,068

Beginning balance of foreign currency translation adjustments

30,989

(15,367)

28,727

14,267
Current period change in foreign currency translation adjustments

13,985

8,436

16,247

(21,197)
Ending balance of foreign currency translation adjustments

44,974

(6,931)

44,974

(6,931)

Beginning balance of benefit plan net gain (loss)

(71,827)

(73,635)

(73,870)

(74,556)
Current period change in benefit plan net gain (loss)

2,043

1,806

4,086

2,726
Ending balance of benefit plan net gain (loss)

(69,784)

(71,829)

(69,784)

(71,829)

Ending balance of accumulated other comprehensive income (loss)
$
229,835

$
143,308

$
229,835

$
143,308

(715,759)

229,835

(715,759)

229,835

COLLATERALIZED REINSURANCE

AND TRUST AGREEMENTS

subsidiary

the

Company,

Everest ~~Re,~~

Reinsurance

company

(“Everest

Re”),

has

established

trust

agreement,

which

effectively

uses

Everest

Re’s

investments

collateral,

security

for

assumed

losses

payable

to ~~non-affiliated~~

non-

affiliated ceding companies. At

June 30, ~~2021,~~2022, the total amount on deposit in the trust

account was ~~$1,011,769 thousand.~~

554.1

million.

The

Company

entered

into

various

collateralized

reinsurance

agreements

with

Kilimanjaro

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

named

storm

and

earthquake

events. The table below summarizes

the various agreements:

(Dollars in thousands)

Class

Description

Effective Date

Expiration Date

Limit

Series 2017-1 Class A-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/13/2017

4/13/2022

50,000

Series 2017-1 Class B-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/13/2017

4/13/2022

75,000

Series 2017-1 Class C-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/13/2017

4/13/2022

175,000

Series 2018-1 Class A-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/30/2018

5/6/2022

62,500

Series 2018-1 Class B-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/30/2018

5/6/2022

200,000

Series 2018-1 Class A-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/30/2018

5/5/2023

62,500

Series 2018-1 Class B-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/30/2018

5/5/2023

200,000

Series 2019-1 Class A-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

12/12/2019

12/19/2023

150,000

Series 2019-1 Class B-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

12/12/2019

12/19/2023

275,000

Series 2019-1 Class A-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

12/12/2019

12/19/2024

150,000

Series 2019-1 Class B-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

12/12/2019

12/19/2024

275,000

Series 2020-1 Class A-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/21/2025

150,000

Series 2020-1 Class B-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/21/2025

85,000

Series 2020-1 Class C-1

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/21/2025

85,000

Series 2020-1 Class A-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/20/2026

150,000

Series 2020-1 Class B-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/20/2026

90,000

Series 2020-1 Class C-2

US, Canada, Puerto Rico – Named Storm and Earthquake Events

4/8/2021

4/20/2026

90,000

Total available limit as of June 30, 2021

$
2,325,000

(Dollars in thousands)

Class

Description

Effective Date

Expiration Date

Limit

Coverage Basis

Series 2018-1 Class A-2