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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
OR
☐        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-31721
AXIS CAPITAL HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
Bermuda
(State or other jurisdiction of incorporation or organization)
98-0395986
(I.R.S. Employer Identification No.)
92 Pitts Bay Road, Pembroke, Bermuda HM 08
(Address of principal executive offices and zip code)
(441) 496-2600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares, par value $0.0125 per shareAXSNew York Stock Exchange
Depositary Shares,shares, each representing a 1/100th interest in a 5.50% Series E preferred shareAXS PRENew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒    Accelerated filer☐
Non-accelerated filer☐ Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒
At OctoberApril 26, 2021,2022, there were 84,773,37785,285,821 common shares outstanding, $0.0125 par value per share, of the registrant.

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AXIS CAPITAL HOLDINGS LIMITED
INDEX TO FORM 10-Q


 
Page
 PART I 
3
Item 1.
5
Item 2.
5148
Item 3.
8077
Item 4.
8178
PART II
8178
Item 1.
8178
Item 1A.
8178
Item 2.
8279
Item 5.
8279
Item 6.
8380
8481


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PART I     FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this report, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States ("U.S.") federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential", "intend" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond management's control.
Forward-looking statements contained in this report may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses including losses related to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following: 
•the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition, and liquidity;
•the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;
•the occurrence and magnitude of natural and man-made disasters;
•the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;
•losses from war including losses related to the Russian invasion of Ukraine, terrorism and political unrest, or other unanticipated losses;
•actual claims exceeding loss reserves;
•general economic, capital and credit market conditions, including fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency exchange rates;
•the failure of any of the loss limitation methods we employ;
•the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions;
•the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;
•the loss of business provided to us by major brokers;
•breaches by third parties in our program business of their obligations to us;
•difficulties with technology and/or data security;
•the failure of our policyholders or intermediaries to pay premiums;
•the failure of our cedants to adequately evaluate risks;
•the inability to obtain additional capital on favorable terms, or at all;
•the loss of one or more of our key executives;
•a decline in our ratings with rating agencies;
•changes in accounting policies or practices;
•the use of industry models and changes to these models;
•changes in governmental regulations and potential government intervention in our industry;

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•inadvertent failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;

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•changes in the political environment of certain countries in which we operate or underwrite business, including the United Kingdom's withdrawal from the European Union;
•changes in tax laws; and
•other factors including but not limited to those described under Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as those factors may be updated from time to time in our periodic and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Readers are urged to carefully consider all such factors as the COVID-19 pandemic may have the effect of heightening many of the other risks and uncertainties described.

We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Website and Social Media Disclosure

We use our website (www.axiscapital.com) and our corporate LinkedIn (AXIS Capital) and Twitter (@AXIS_Capital) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received by those enrolled in our "E-mail Alerts" program, which can be found in the Investor Information section of our website. The contents of our website and social media channels are not part of this Quarterly Report on Form 10-Q.

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ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

 Page 
Consolidated Balance Sheets at September 30, 2021March 31, 2022 (Unaudited) and December 31, 20202021
6
Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 (Unaudited)
7
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 (Unaudited)
8
Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 (Unaudited)
9
Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2022 and 2021 and 2020 (Unaudited)
10
Notes to Consolidated Financial Statements (Unaudited)
12
Note 1 - Basis of Presentation and Significant Accounting Policies
12
Note 2 - Segment Information
13
Note 3 - Investments
1615
Note 4 - Fair Value Measurements
2524
Note 5 - Derivative Instruments
3634
Note 6 - Reserve for Losses and Loss Expenses
3836
Note 7 - Earnings Per Common Share
4441
Note 8 - Share-Based Compensation
4441
Note 9 - Shareholders' Equity
4744
Note 10 - Debt and Financing Arrangements
4845
Note 11 - Commitments and Contingencies
4845
Note 12 - Other Comprehensive Income (Loss)
4946
Note 13 - Related Party Transactions
5047
























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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2021MARCH 31, 2022 (UNAUDITED) AND DECEMBER 31, 20202021  
2021202020222021
(in thousands) (in thousands)
AssetsAssetsAssets
Investments:Investments:Investments:
Fixed maturities, available for sale, at fair value
(Amortized cost 2021: $12,202,767; 2020: $11,566,930
Allowance for expected credit losses 2021: $399; 2020: $323)
$12,380,959 $12,041,799 
Fixed maturities, held to maturity, at amortized cost
(Fair value 2021: $416,821
Allowance for expected credit losses 2021: $nil)
416,879 — 
Equity securities, at fair value
(Cost 2021: $510,891; 2020: $421,744)
618,822 518,445 
Mortgage loans, held for investment, at fair value
(Allowance for expected credit losses 2021: $nil; 2020: $nil)
623,487 593,290 
Fixed maturities, available for sale, at fair value
(Amortized cost 2022: $11,840,101; 2021: $12,241,782
Allowance for expected credit losses 2022: $383; 2021: $313)
Fixed maturities, available for sale, at fair value
(Amortized cost 2022: $11,840,101; 2021: $12,241,782
Allowance for expected credit losses 2022: $383; 2021: $313)
$11,456,024 $12,313,200 
Fixed maturities, held to maturity, at amortized cost
(Fair value 2022: $486,432; 2021: $445,033
Allowance for expected credit losses 2022: $nil; 2021: $nil)
Fixed maturities, held to maturity, at amortized cost
(Fair value 2022: $486,432; 2021: $445,033
Allowance for expected credit losses 2022: $nil; 2021: $nil)
493,509 446,016 
Equity securities, at fair value
(Cost 2022: $480,759; 2021: $528,864)
Equity securities, at fair value
(Cost 2022: $480,759; 2021: $528,864)
563,950 655,675 
Mortgage loans, held for investment, at fair value
(Allowance for expected credit losses 2022: $nil; 2021: $nil)
Mortgage loans, held for investment, at fair value
(Allowance for expected credit losses 2022: $nil; 2021: $nil)
627,063 594,088 
Other investments, at fair valueOther investments, at fair value892,664 829,156 Other investments, at fair value954,602 947,982 
Equity method investmentsEquity method investments145,080 114,209 Equity method investments157,843 146,293 
Short-term investments, at fair valueShort-term investments, at fair value68,267 161,897 Short-term investments, at fair value70,385 31,063 
Total investmentsTotal investments15,146,158 14,258,796 Total investments14,323,376 15,134,317 
Cash and cash equivalentsCash and cash equivalents947,542 902,831 Cash and cash equivalents987,111 844,592 
Restricted cash and cash equivalentsRestricted cash and cash equivalents551,662 600,401 Restricted cash and cash equivalents719,600 473,098 
Accrued interest receivableAccrued interest receivable62,423 65,020 Accrued interest receivable64,906 64,350 
Insurance and reinsurance premium balances receivable
(Allowance for expected credit losses 2021: $8,903; 2020: $8,836)
2,978,996 2,738,342 
Reinsurance recoverable on unpaid losses and loss expenses
(Allowance for expected credit losses 2021: $27,087; 2020: $23,711)
4,989,645 4,496,641 
Insurance and reinsurance premium balances receivable
(Allowance for expected credit losses 2022: $9,385; 2021: $7,567)
Insurance and reinsurance premium balances receivable
(Allowance for expected credit losses 2022: $9,385; 2021: $7,567)
3,163,990 2,622,676 
Reinsurance recoverable on unpaid losses and loss expenses
(Allowance for expected credit losses 2022: $28,792; 2021: $29,554)
Reinsurance recoverable on unpaid losses and loss expenses
(Allowance for expected credit losses 2022: $28,792; 2021: $29,554)
4,957,080 5,017,611 
Reinsurance recoverable on paid losses and loss expensesReinsurance recoverable on paid losses and loss expenses506,503 434,201 Reinsurance recoverable on paid losses and loss expenses612,027 642,215 
Deferred acquisition costsDeferred acquisition costs544,384 431,439 Deferred acquisition costs575,250 465,593 
Prepaid reinsurance premiumsPrepaid reinsurance premiums1,460,723 1,194,455 Prepaid reinsurance premiums1,555,303 1,377,358 
Receivable for investments soldReceivable for investments sold2,028 2,150 Receivable for investments sold55,473 4,555 
GoodwillGoodwill100,801 100,801 Goodwill100,801 100,801 
Intangible assetsIntangible assets211,557 219,633 Intangible assets205,988 208,717 
Value of business acquired770 3,854 
Operating lease right-of-use assetsOperating lease right-of-use assets107,791 123,579 Operating lease right-of-use assets98,837 103,295 
Other assetsOther assets324,154 305,544 Other assets388,816 309,792 
Total assetsTotal assets$27,935,137 $25,877,687 Total assets$27,808,558 $27,368,970 
LiabilitiesLiabilitiesLiabilities
Reserve for losses and loss expensesReserve for losses and loss expenses$14,658,996 $13,926,766 Reserve for losses and loss expenses$14,470,155 $14,653,094 
Unearned premiumsUnearned premiums4,464,282 3,685,886 Unearned premiums4,824,128 4,090,676 
Insurance and reinsurance balances payableInsurance and reinsurance balances payable1,442,729 1,092,042 Insurance and reinsurance balances payable1,522,258 1,324,620 
DebtDebt1,310,650 1,309,695 Debt1,311,304 1,310,975 
Payable for investments purchasedPayable for investments purchased239,073 104,777 Payable for investments purchased127,284 31,543 
Operating lease liabilitiesOperating lease liabilities123,874 140,263 Operating lease liabilities113,340 119,512 
Other liabilitiesOther liabilities360,478 322,564 Other liabilities319,549 427,894 
Total liabilitiesTotal liabilities22,600,082 20,581,993 Total liabilities22,688,018 21,958,314 
Shareholders’ equityShareholders’ equityShareholders’ equity
Preferred sharesPreferred shares550,000 550,000 Preferred shares550,000 550,000 
Common shares (shares issued 2021: 176,580; 2020: 176,580
shares outstanding 2021: 84,773; 2020: 84,353)
2,206 2,206 
Common shares (shares issued 2022: 176,580; 2021: 176,580
shares outstanding 2022: 85,276; 2021: 84,774)
Common shares (shares issued 2022: 176,580; 2021: 176,580
shares outstanding 2022: 85,276; 2021: 84,774)
2,206 2,206 
Additional paid-in capitalAdditional paid-in capital2,336,895 2,330,054 Additional paid-in capital2,328,986 2,346,179 
Accumulated other comprehensive income150,122 414,395 
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(338,300)56,536 
Retained earningsRetained earnings6,044,843 5,763,607 Retained earnings6,308,712 6,204,745 
Treasury shares, at cost (2021: 91,807; 2020: 92,227)
(3,749,011)(3,764,568)
Treasury shares, at cost (2022: 91,304; 2021: 91,806)
Treasury shares, at cost (2022: 91,304; 2021: 91,806)
(3,731,064)(3,749,010)
Total shareholders’ equityTotal shareholders’ equity5,335,055 5,295,694 Total shareholders’ equity5,120,540 5,410,656 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$27,935,137 $25,877,687 Total liabilities and shareholders’ equity$27,808,558 $27,368,970 

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
 Three months endedNine months ended
2021202020212020
 (in thousands, except for per share amounts)
Revenues
Net premiums earned$1,211,427 $1,091,312 $3,472,090 $3,283,941 
Net investment income107,339 101,956 326,174 240,098 
Other insurance related income (loss)7,665 1,440 16,262 (5,270)
Net investment gains:
Allowance for expected credit losses(315)3,759 (76)(2,498)
Impairment losses(22)(184)(22)(1,486)
Other realized and unrealized investment gains11,269 52,034 113,966 49,761 
Total net investment gains10,932 55,609 113,868 45,777 
Total revenues1,337,363 1,250,317 3,928,394 3,564,546 
Expenses
Net losses and loss expenses911,369 879,677 2,292,559 2,464,012 
Acquisition costs231,712 230,564 669,654 697,716 
General and administrative expenses157,960 138,823 478,820 436,538 
Foreign exchange losses (gains)(28,032)60,734 (4,316)8,760 
Interest expense and financing costs15,954 15,574 46,759 59,641 
Reorganization expenses— 1,413 — 822 
    Amortization of value of business acquired1,028 1,028 3,083 4,111 
    Amortization of intangible assets3,149 2,838 9,163 8,564 
Total expenses1,293,140 1,330,651 3,495,722 3,680,164 
Income (loss) before income taxes and interest in income (loss) of equity method investments44,223 (80,334)432,672 (115,618)
Income tax (expense) benefit(1,186)12,056 (49,827)6,030 
Interest in income (loss) of equity method investments11,911 2,896 30,871 (13,579)
Net income (loss)54,948 (65,382)413,716 (123,167)
Preferred share dividends7,563 7,563 22,688 22,688 
Net income (loss) available (attributable) to common shareholders$47,385 $(72,945)$391,028 $(145,855)
Per share data
Earnings (loss) per common share:
Earnings (loss) per common share$0.56 $(0.87)$4.62 $(1.73)
Earnings (loss) per diluted common share$0.56 $(0.87)$4.59 $(1.73)
Weighted average common shares outstanding84,771 84,308 84,684 84,235 
Weighted average diluted common shares outstanding85,336 84,308 85,191 84,235 

 Three months ended March 31,
20222021
 (in thousands, except for per share amounts)
Revenues
Net premiums earned$1,258,246 $1,103,722 
Net investment income91,355 114,165 
Other insurance related income6,693 2,781 
Net investment gains (losses):
Allowance for expected credit losses(70)89 
Impairment losses(109)— 
Other realized and unrealized investment gains (losses)(94,329)29,556 
Total net investment gains (losses)(94,508)29,645 
Total revenues1,261,786 1,250,313 
Expenses
Net losses and loss expenses732,699 714,718 
Acquisition costs248,352 218,871 
General and administrative expenses169,041 158,408 
Foreign exchange losses (gains)(44,273)4,113 
Interest expense and financing costs15,564 15,571 
    Amortization of value of business acquired— 1,028 
    Amortization of intangible assets2,729 2,690 
Total expenses1,124,112 1,115,399 
Income before income taxes and interest in income of equity method investments137,674 134,914 
Income tax expense(24)(20,776)
Interest in income of equity method investments11,550 9,162 
Net income149,200 123,300 
Preferred share dividends7,563 7,563 
Net income available to common shareholders$141,637 $115,737 
Per share data
Earnings per common share:
Earnings per common share$1.67 $1.37 
Earnings per diluted common share$1.65 $1.36 
Weighted average common shares outstanding84,961 84,514 
Weighted average diluted common shares outstanding85,808 84,965 


See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
 
 Three months endedNine months ended
 2021202020212020
 (in thousands)
Net income (loss)$54,948 $(65,382)$413,716 $(123,167)
Other comprehensive income (loss), net of tax:
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized(58,178)95,112 (179,147)210,383 
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized370 220 131 (112)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)(14,580)(29,130)(86,181)(30,289)
Unrealized gains (losses) arising during the period, net of reclassification adjustment(72,388)66,202 (265,197)179,982 
Foreign currency translation adjustment(3,807)2,310 924 (1,581)
Total other comprehensive income (loss), net of tax(76,195)68,512 (264,273)178,401 
Comprehensive income (loss)$(21,247)$3,130 $149,443 $55,234 
 Three months ended March 31,
 20222021
 (in thousands)
Net income$149,200 $123,300 
Other comprehensive income (loss), net of tax:
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized(442,722)(171,831)
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized(232)47 
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)45,343 (28,999)
Unrealized gains (losses) arising during the period, net of reclassification adjustment(397,611)(200,783)
Foreign currency translation adjustment2,775 1,249 
Total other comprehensive income (loss), net of tax(394,836)(199,534)
Comprehensive income (loss)$(245,636)$(76,234)


See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
Three months endedNine months ended
2021202020212020
 (in thousands)
Preferred shares
Balance at beginning of period$550,000 $550,000 $550,000 $775,000 
Shares repurchased— — — (225,000)
Balance at end of period550,000 550,000 550,000 550,000 
Common shares (par value)
Balance at beginning and end of period2,206 2,206 2,206 2,206 
Additional paid-in capital
Balance at beginning of period2,326,288 2,317,354 2,330,054 2,317,212 
Treasury shares reissued(397)(197)(24,437)(19,348)
Share-based compensation expense11,004 8,039 31,278 27,332 
Balance at end of period2,336,895 2,325,196 2,336,895 2,325,196 
Accumulated other comprehensive income
Balance at beginning of period226,317 281,599 414,395 171,710 
Unrealized gains (losses) on available for sale investments, net of tax:
Balance at beginning of period227,826 295,301 420,635 181,521 
Unrealized gains (losses) arising during the period, net of reclassification adjustment(72,388)66,202 (265,197)179,982 
Balance at end of period155,438 361,503 155,438 361,503 
Cumulative foreign currency translation adjustments, net of tax:
Balance at beginning of period(1,509)(13,702)(6,240)(9,811)
Foreign currency translation adjustment(3,807)2,310 924 (1,581)
Balance at end of period(5,316)(11,392)(5,316)(11,392)
Balance at end of period150,122 350,111 150,122 350,111 
Retained earnings
Balance at beginning of period6,034,151 5,913,029 5,763,607 6,056,686 
Net income (loss)54,948 (65,382)413,716 (123,167)
Preferred share dividends (1)
(7,563)(7,563)(22,688)(22,688)
Common share dividends (1)
(36,693)(35,447)(109,792)(106,194)
Balance at end of period6,044,843 5,804,637 6,044,843 5,804,637 
Treasury shares, at cost
Balance at beginning of period(3,749,202)(3,766,368)(3,764,568)(3,778,806)
Shares repurchased(206)(84)(10,025)(8,685)
Shares reissued397 197 25,582 21,236 
Balance at end of period(3,749,011)(3,766,255)(3,749,011)(3,766,255)
Total shareholders’ equity$5,335,055 $5,265,895 $5,335,055 $5,265,895 

Three months ended March 31,
20222021
 (in thousands)
Preferred shares
Balance at beginning and end of period$550,000 $550,000 
Common shares (par value)
Balance at beginning and end of period2,206 2,206 
Additional paid-in capital
Balance at beginning of period2,346,179 2,330,054 
Treasury shares reissued(29,378)(23,129)
Share-based compensation expense12,185 9,222 
Balance at end of period2,328,986 2,316,147 
Accumulated other comprehensive income (loss)
Balance at beginning of period56,536 414,395 
Unrealized gains (losses) on available for sale investments, net of tax:
Balance at beginning of period62,155 420,635 
Unrealized gains (losses) arising during the period, net of reclassification adjustment(397,611)(200,783)
Balance at end of period(335,456)219,852 
Cumulative foreign currency translation adjustments, net of tax:
Balance at beginning of period(5,619)(6,240)
Foreign currency translation adjustment2,775 1,249 
Balance at end of period(2,844)(4,991)
Balance at end of period(338,300)214,861 
Retained earnings
Balance at beginning of period6,204,745 5,763,607 
Net income149,200 123,300 
Preferred share dividends (1)
(7,563)(7,563)
Common share dividends (1)
(37,670)(36,494)
Balance at end of period6,308,712 5,842,850 
Treasury shares, at cost
Balance at beginning of period(3,749,010)(3,764,568)
Shares repurchased(12,977)(9,380)
Shares reissued30,923 24,274 
Balance at end of period(3,731,064)(3,749,674)
Total shareholders’ equity$5,120,540 $5,176,390 

(1) Refer to Note 9 'Shareholder's'Shareholders' Equity' for details on dividends declared and paid related to the Company's common and preferred shares.



See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
Nine months ended
20212020
 (in thousands)
Cash flows from operating activities:
Net income (loss)$413,716 $(123,167)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net investment gains(113,868)(45,777)
Net realized and unrealized (gains) losses on other investments(123,364)14,574 
Amortization of fixed maturities28,601 24,398 
Interest in (income) loss of equity method investments(30,871)13,579 
Amortization of value of business acquired3,083 4,111 
Other amortization and depreciation46,967 46,734 
Share-based compensation expense, net of cash payments25,848 17,650 
Changes in:
Accrued interest receivable2,441 7,792 
Reinsurance recoverable balances on unpaid and paid losses(570,087)(506,705)
Deferred acquisition costs(113,959)(29,126)
Prepaid reinsurance premiums(267,082)(177,624)
Reserve for losses and loss expenses741,277 910,106 
Unearned premiums782,094 448,035 
Insurance and reinsurance balances, net110,921 (166,708)
Other items74,447 (89,093)
Net cash provided by operating activities1,010,164 348,779 
Cash flows from investing activities:
Purchases of:
Fixed maturities, available for sale(10,183,487)(8,543,641)
Fixed maturities, held to maturity(146,150)— 
Equity securities(105,167)(40,027)
Mortgage loans(85,202)(115,290)
Other investments(194,212)(93,044)
Short-term investments(135,399)(206,400)
Proceeds from the sale of:
Fixed maturities, available for sale7,945,524 7,856,524 
Equity securities10,928 95,960 
Other investments254,580 133,536 
Short-term investments156,674 117,097 
Proceeds from the redemption of fixed maturities, available for sale1,381,867 1,155,648 
Proceeds from the redemption of fixed maturities, held to maturity134,347 — 
Proceeds from redemption of short-term investments71,665 57,948 
Proceeds from the repayment of mortgage loans

55,410 4,245 
Purchase of other assets(30,706)(36,582)
Net cash provided by (used in) investing activities(869,328)385,974 
Cash flows from financing activities:
Taxes paid on withholding shares(10,026)(8,685)
Dividends paid - common shares(109,974)(106,595)
Repurchase of preferred shares— (225,000)
Dividends paid - preferred shares(22,688)(24,269)
Redemption of senior notes— (500,000)
Net cash used in financing activities(142,688)(864,549)
Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash(2,176)(5,845)
Decrease in cash, cash equivalents and restricted cash(4,028)(135,641)
Cash, cash equivalents and restricted cash - beginning of period1,503,232 1,576,457 
Cash, cash equivalents and restricted cash - end of period$1,499,204 $1,440,816 
Supplemental disclosures of cash flow information:
Income taxes paid (refund)$43,548 $(5,309)
Interest paid$45,963 $47,108 

Three months ended
20222021
 (in thousands)
Cash flows from operating activities:
Net income$149,200 $123,300 
Adjustments to reconcile net income to net cash provided by operating activities:
Net investment (gains) losses94,508 (29,645)
Net realized and unrealized gains on other investments(25,643)(41,833)
Amortization of fixed maturities10,896 7,965 
Interest in income of equity method investments(11,550)(9,162)
Amortization of value of business acquired— 1,028 
Other amortization and depreciation15,714 15,096 
Share-based compensation expense, net of cash payments7,661 1,721 
Changes in:
Accrued interest receivable(654)3,585 
Reinsurance recoverable on unpaid losses and loss expenses60,605 (35,943)
Reinsurance recoverable on paid losses and loss expenses30,441 (25,437)
Deferred acquisition costs(111,635)(147,129)
Prepaid reinsurance premiums(176,010)(184,288)
Reserve for losses and loss expenses(182,720)97,161 
Unearned premiums736,045 867,277 
Insurance and reinsurance balances, net(345,837)(491,151)
Other items(117,710)(7,399)
Net cash provided by operating activities133,311 145,146 
Cash flows from investing activities:
Purchases of:
Fixed maturities, available for sale(2,287,937)(4,671,969)
Fixed maturities, held to maturity(50,992)(60,749)
Equity securities(2,218)(35,668)
Mortgage loans(42,802)(45,498)
Other investments(37,311)(46,324)
Short-term investments(50,896)(109,597)
Proceeds from the sale of:
Fixed maturities, available for sale2,255,915 4,188,525 
Equity securities50,097 (6,550)
Other investments57,300 127,385 
Short-term investments6,042 63,657 
Proceeds from the redemption of fixed maturities, available for sale416,838 486,401 
Proceeds from the redemption of fixed maturities, held to maturity3,500 61,170 
Proceeds from redemption of short-term investments5,530 21,886 
Proceeds from the repayment of mortgage loans9,982 9,321 
Purchase of other assets(10,431)(6,216)
Net cash provided by (used in) investing activities322,617 (24,226)
Cash flows from financing activities:
Taxes paid on withholding shares(12,977)(9,381)
Dividends paid - common shares(39,743)(38,583)
Dividends paid - preferred shares(7,563)(7,563)
Net cash used in financing activities(60,283)(55,527)
Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash(6,624)(8,346)
Increase in cash, cash equivalents and restricted cash389,021 57,047 
Cash, cash equivalents and restricted cash - beginning of period1,317,690 1,503,232 
Cash, cash equivalents and restricted cash - end of period$1,706,711 $1,560,279 
See accompanying notes to Consolidated Financial Statements.

10
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Supplemental disclosures of cash flow information:
Income taxes paid$346 $8,981 
Interest paid$16,263 $22,700 

Supplemental disclosures of cash flow information: In 2021, the transfer of securities with a fair value of $405$405 million from fixed maturities, available for sale to fixed maturities, held to maturity was treated as a non-cash activity in the consolidated statement of cash flows (refer to Note 3 'Investments').



See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation

These unaudited consolidated financial statements (the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the U.S. Securities and Exchange Commission's ("SEC") instructions to Form 10-Q and Article 10 of Regulation S-X and include AXIS Capital Holdings Limited ("AXIS Capital") and its subsidiaries (the "Company"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in AXIS Capital's Annual Report on Form 10-K for the year ended December 31, 2020,2021, as filed with the SEC.

In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations for the periods presented.

The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated.

To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year's presentation.

Tabular dollar and share amounts are in thousands, with the exception of per share amounts. All amounts are reported in U.S. dollars.

Significant Accounting Policies
Changes
There were no notable changes to the Company's significant accounting policies subsequent to its Annual Report on Form 10-K for the year ended December 31, 2020 are noted below:2021.
a)    Investments
Fixed Maturities, Held to Maturity, at Amortized Cost
Fixed maturities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity or redemption. Fixed maturities classified as held to maturity are reported at amortized cost and are presented net of an allowance for expected credit losses. The allowance for expected credit losses is estimated based on the Company’s analysis of projected lifetime losses. The allowance for expected credit losses is recognized in net investment gains (losses) in the consolidated statements of operations. Any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined.
b)    Share-based Compensation
The Company is authorized to issue restricted shares, restricted stock units, performance restricted stock units, stock options, stock appreciation rights and other equity-based awards to its employees and directors. The Company's plan includes share-settled and cash-settled service awards and performance awards.
Restricted Stock Units - Share-Settled and Cash-Settled
The fair value of share-settled and cash-settled service awards is based on market value of the Company's common shares measured at the grant date and is expensed over the requisite service period. The fair value of the cash-settled service awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.
Performance Restricted Stock Units - Share-Settled and Cash-Settled
The fair value of share-settled performance awards which include a market condition is measured on the grant date using a Monte Carlo simulation model which requires inputs including share price, expected volatility, expected term, expected dividend yield and risk-free interest rates. The fair value of share-settled and cash-settled performance awards which include a performance condition is based on market value of the Company's common shares measured at the grant date. The fair value of share-settled and cash-settled performance awards is recognized on a straight-line basis over the requisite service period. The fair value of the cash-settled performance awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION
AXIS Capital'sThe Company's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has 2 reportable segments, insurance and reinsurance. The Company does not allocate its assets by segment, with the exception of goodwill and intangible assets.

Insurance

The Company's insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The product lines in this segment are property, marine, terrorism, aviation, credit and political risk, professional lines, liability, and accident and health, and discontinued lines - Novae.health.

Reinsurance

The Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are catastrophe, property, credit and surety, professional lines, motor, liability, engineering, agriculture, marine and aviation, and accident and health, and discontinued lines - Novae.health.
The following tables present the underwriting results of the Company's reportable segments, as well as the carrying amounts of allocated goodwill and intangible assets:





















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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION (CONTINUED)
  20212020
Three months ended and at September 30,InsuranceReinsuranceTotalInsuranceReinsuranceTotal
Gross premiums written$1,176,500$469,989$1,646,489$935,817$395,361$1,331,178
Net premiums written707,492288,979996,471544,857271,125815,982
Net premiums earned681,008530,4191,211,427570,184521,1281,091,312
Other insurance related income4687,1977,6656887521,440
Net losses and loss expenses(442,681)(468,688)(911,369)(443,389)(436,288)(879,677)
Acquisition costs(123,529)(108,183)(231,712)(114,569)(115,995)(230,564)
Underwriting-related general and administrative expenses(104,905)(29,921)(134,826)(94,379)(23,456)(117,835)
Underwriting income (loss)$10,361$(69,176)(58,815)$(81,465)$(53,859)(135,324)
Net investment income107,339101,956
Net investment gains10,93255,609
Corporate expenses(23,134)(20,988)
Foreign exchange (losses) gains28,032(60,734)
Interest expense and financing costs(15,954)(15,574)
Reorganization expenses—(1,413)
Amortization of value of business acquired(1,028)(1,028)
Amortization of intangible assets(3,149)(2,838)
Income (loss) before income taxes and interest in income of equity method investments44,223(80,334)
Income tax (expense) benefit(1,186)12,056
Interest in income of equity method investments11,9112,896
Net income (loss)54,948(65,382)
Preferred share dividends7,5637,563
Net income (loss) available (attributable) to common shareholders$47,385$(72,945)
Net losses and loss expenses ratio65.0 %88.4 %75.2 %77.8 %83.7 %80.6 %
Acquisition cost ratio18.1 %20.4 %19.1 %20.1 %22.3 %21.1 %
General and administrative expense ratio15.4 %5.6 %13.1 %16.5 %4.5 %12.8 %
Combined ratio98.5 %114.4 %107.4 %114.4 %110.5 %114.5 %
Goodwill and intangible assets$312,358$—$312,358$324,365$—$324,365
  20222021
Three months ended and at March 31,InsuranceReinsuranceTotalInsuranceReinsuranceTotal
Gross premiums written$1,327,264$1,307,344$2,634,608$1,103,198$1,432,283$2,535,481
Net premiums written843,912968,9601,812,872707,8141,071,0721,778,886
Net premiums earned752,816505,4301,258,246616,286487,4361,103,722
Other insurance related income826,6116,6934152,3662,781
Net losses and loss expenses(405,745)(326,954)(732,699)(356,898)(357,820)(714,718)
Acquisition costs(138,812)(109,540)(248,352)(117,679)(101,192)(218,871)
Underwriting-related general and administrative expenses(113,950)(31,146)(145,096)(103,303)(29,365)(132,668)
Underwriting income$94,391$44,401138,792$38,821$1,42540,246
Net investment income91,355114,165
Net investment gains (losses)(94,508)29,645
Corporate expenses(23,945)(25,740)
Foreign exchange (losses) gains44,273(4,113)
Interest expense and financing costs(15,564)(15,571)
Amortization of value of business acquired—(1,028)
Amortization of intangible assets(2,729)(2,690)
Income before income taxes and interest in income of equity method investments137,674134,914
Income tax expense(24)(20,776)
Interest in income of equity method investments11,5509,162
Net income149,200123,300
Preferred share dividends7,5637,563
Net income available to common shareholders$141,637$115,737
Net losses and loss expenses ratio53.9 %64.7 %58.2 %57.9 %73.4 %64.8 %
Acquisition cost ratio18.4 %21.7 %19.7 %19.1 %20.8 %19.8 %
General and administrative expense ratio15.2 %6.1 %13.5 %16.8 %6.0 %14.3 %
Combined ratio87.5 %92.5 %91.4 %93.8 %100.2 %98.9 %
Goodwill and intangible assets$306,789$—$306,789$317,705$—$317,705



  




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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION (CONTINUED)
20212020
Nine months ended and at September 30,InsuranceReinsuranceTotalInsuranceReinsuranceTotal
Gross premiums written$3,548,169$2,574,987$6,123,156$2,914,100$2,564,419$5,478,519
Net premiums written2,128,1901,851,0253,979,2151,729,2681,821,6923,550,960
Net premiums earned1,928,9701,543,1203,472,0901,709,2681,574,6733,283,941
Other insurance related income (loss)1,43514,82716,2622,091(7,361)(5,270)
Net losses and loss expenses(1,131,753)(1,160,806)(2,292,559)(1,252,569)(1,211,443)(2,464,012)
Acquisition costs(348,172)(321,482)(669,654)(343,579)(354,137)(697,716)
Underwriting-related general and administrative expenses(307,777)(88,678)(396,455)(284,909)(76,714)(361,623)
Underwriting income (loss)$142,703$(13,019)129,684$(169,698)$(74,982)(244,680)
Net investment income326,174240,098
Net investment gains113,86845,777
Corporate expenses(82,365)(74,915)
Foreign exchange (losses) gains4,316(8,760)
Interest expense and financing costs(46,759)(59,641)
Reorganization expenses—(822)
Amortization of value of business acquired(3,083)(4,111)
Amortization of intangible assets(9,163)(8,564)
Income (loss) before income taxes and interest in income (loss) of equity method investments432,672(115,618)
Income tax (expense) benefit(49,827)6,030
Interest in income (loss) of equity method investments30,871(13,579)
Net income (loss)413,716(123,167)
Preferred share dividends22,68822,688
Net income (loss) available (attributable) to common shareholders$391,028$(145,855)
Net losses and loss expenses ratio58.7 %75.2 %66.0 %73.3 %76.9 %75.0 %
Acquisition cost ratio18.0 %20.8 %19.3 %20.1 %22.5 %21.2 %
General and administrative expense ratio16.0 %5.8 %13.8 %16.7 %4.9 %13.4 %
Combined ratio92.7 %101.8 %99.1 %110.1 %104.3 %109.6 %
Goodwill and intangible assets$312,358$—$312,358$324,365$—$324,365

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS
a)     Fixed Maturities and Equity Securities

Fixed Maturities

The following table provides the amortized cost and fair values of the Company's fixed maturities classified as available for sale:
Amortized
cost
Allowance for expected credit lossesGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2021
Available for sale
U.S. government and agency$2,688,431 $— $14,768 $(10,805)$2,692,394 
Non-U.S. government714,081 — 13,696 (7,855)719,922 
Corporate debt4,450,477 (324)121,913 (24,416)4,547,650 
Agency RMBS(1)
1,144,205 — 24,213 (5,380)1,163,038 
CMBS(2)
1,185,705 — 42,927 (2,407)1,226,225 
Non-agency RMBS192,129 (75)2,818 (1,108)193,764 
ABS(3)
1,640,602 — 6,311 (3,668)1,643,245 
Municipals(4)
187,137 — 7,826 (242)194,721 
Total fixed maturities, available for sale$12,202,767 $(399)$234,472 $(55,881)$12,380,959 
At December 31, 2020    
Available for sale
U.S. government and agency$1,881,489 $— $38,969 $(1,759)$1,918,699 
Non-U.S. government632,875 — 38,826 (428)671,273 
Corporate debt4,408,351 (303)254,261 (6,358)4,655,951 
Agency RMBS(1)
1,244,727 — 42,170 (688)1,286,209 
CMBS(2)
1,268,273 — 87,598 (2,284)1,353,587 
Non-agency RMBS136,198 (20)4,604 (678)140,104 
ABS(3)
1,712,236 — 14,527 (6,685)1,720,078 
Municipals(4)
282,781 — 13,148 (31)295,898 
Total fixed maturities, available for sale$11,566,930 $(323)$494,103 $(18,911)$12,041,799 
Amortized
cost
Allowance for expected credit lossesGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At March 31, 2022
Available for sale
U.S. government and agency$2,340,104 $— $1,077 $(67,978)$2,273,203 
Non-U.S. government761,463 — 2,051 (24,381)739,133 
Corporate debt4,658,246 (284)15,787 (200,198)4,473,551 
Agency RMBS(1)
972,244 — 2,670 (39,077)935,837 
CMBS(2)
1,188,811 — 1,333 (30,759)1,159,385 
Non-agency RMBS181,171 (79)1,250 (7,454)174,888 
ABS(3)
1,566,692 (20)1,198 (33,865)1,534,005 
Municipals(4)
171,370 — 828 (6,176)166,022 
Total fixed maturities, available for sale$11,840,101 $(383)$26,194 $(409,888)$11,456,024 
At December 31, 2021    
Available for sale
U.S. government and agency$2,693,319 $— $9,776 $(20,647)$2,682,448 
Non-U.S. government794,705 — 10,158 (9,685)795,178 
Corporate debt4,446,585 (236)87,075 (38,112)4,495,312 
Agency RMBS(1)
1,065,973 — 17,397 (8,781)1,074,589 
CMBS(2)
1,223,051 — 29,827 (4,687)1,248,191 
Non-agency RMBS185,854 (77)2,410 (2,023)186,164 
ABS(3)
1,628,739 — 3,406 (9,665)1,622,480 
Municipals(4)
203,556 — 5,928 (646)208,838 
Total fixed maturities, available for sale$12,241,782 $(313)$165,977 $(94,246)$12,313,200 
(1)Residential mortgage-backed securities ("RMBS") originated by U.S. government-sponsored agencies.
(2)Commercial mortgage-backed securities ("CMBS").
(3)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs").
(4)Municipals include bonds issued by states, municipalities and political subdivisions.




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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
The following table provides the amortized cost and fair values of the Company's fixed maturities classified as held to maturity:
Amortized
cost
Allowance for expected credit lossesNet carrying valueGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2021
Held to maturity
Corporate debt$10,000 $— $10,000 $— $(131)$9,869 
ABS(1)
406,879 — 406,879 186 (113)406,952 
Total fixed maturities, held to maturity$416,879 $— $416,879 $186 $(244)$416,821 
Amortized
cost
Allowance for expected credit lossesNet carrying valueGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At March 31, 2022
Held to maturity
Corporate debt$55,200 $— $55,200 $— $(3,917)$51,283 
ABS(1)
438,309 — 438,309 — (3,160)435,149 
Total fixed maturities, held to maturity$493,509 $— $493,509 $— $(7,077)$486,432 
At December 31, 2021    
Held to maturity
Corporate debt$37,700 $— $37,700 $18 $(146)$37,572 
ABS(1)
408,316 — 408,316 81 (936)407,461 
Total fixed maturities, held to maturity$446,016 $— $446,016 $99 $(1,082)$445,033 
(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").

On March 1, 2021, the Company transferred ABS securities with total fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity. These securities, which the Company has the intent and ability to hold to maturity, were transferred in order to better align the accounting classification with their management strategy. The net unrealized gain at the date of the transfer, March 1, 2021, continues to be reported in the carrying value of the transferred securities and is amortized over the remaining life of the securities using the effective yield method.

FixedAt March 31, 2022, fixed maturities, held to maturity of $417 $494 million at September 30, 2021(2021: $446 million) were presented net of an allowance for expected credit losseslosses of $nil.$nil (2021: $nil).

The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses of the underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to have a credit loss. At September 30, 2021,March 31, 2022, the allowance for credit losses expected to be recognized over the life of the Company's ABS, held to maturity waswas $nil.

To estimate expected credit losses for corporate debt securities, held to maturity, the Company's projected cash flows are primarily driven by assumptions regarding the severity of loss, which is a function of the probability of default and projected recovery rates. The Company's default and loss severityrecovery rates are based on credit ratings, credit analysis and macroeconomic forecasts. At September 30, 2021,March 31, 2022, the allowance for credit losses expected to be recognized over the life of the Company's corporate debt, held to maturitymaturity was $nil.



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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
Equity Securities

The following table provides the cost and fair values of the Company's equity securities:
Cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2021
Equity securities
Common stocks$943 $493 $(409)$1,027 
Preferred stocks115 148 — 263 
Exchange-traded funds203,336 107,163 (659)309,840 
Bond mutual funds306,497 1,730 (535)307,692 
Total equity securities$510,891 $109,534 $(1,603)$618,822 
At December 31, 2020   
Equity securities
Common stocks$10,810 $689 $(557)$10,942 
Preferred stocks6,301 1,767 — 8,068 
Exchange-traded funds147,794 74,314 (390)221,718 
Bond mutual funds256,839 20,878 — 277,717 
Total equity securities$421,744 $97,648 $(947)$518,445 
Cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
At March 31, 2022
Equity securities
Common stocks$1,373 $578 $(442)$1,509 
Preferred stocks115 76 — 191 
Exchange-traded funds203,455 117,952 (1,151)320,256 
Bond mutual funds275,816 — (33,822)241,994 
Total equity securities$480,759 $118,606 $(35,415)$563,950 
At December 31, 2021   
Equity securities
Common stocks$1,264 $585 $(485)$1,364 
Preferred stocks115 64 — 179 
Exchange-traded funds203,455 134,037 (677)336,815 
Bond mutual funds324,030 544 (7,257)317,317 
Total equity securities$528,864 $135,230 $(8,419)$655,675 

Variable Interest Entities
In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.

The Company also invests in limited partnerships which represent 72%69% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds as well asand CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(c) 'Other Investments').

The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs.

The maximum exposure to loss on these interests is limited to the amount of commitment made by the Company. The Company has not provided financial or other support to these structured securities other than the original investment.



1817
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
Contractual Maturities of Fixed Maturities

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The table below provides the contractual maturities of fixed maturities classified as available for sale:
Amortized
cost
Fair
value
% of Total
fair value
At September 30, 2021
Maturity
Due in one year or less$517,901 $522,219 4.2 %
Due after one year through five years4,819,479 4,895,887 39.5 %
Due after five years through ten years2,433,271 2,464,807 19.9 %
Due after ten years269,475 271,774 2.2 %
 8,040,126 8,154,687 65.8 %
Agency RMBS1,144,205 1,163,038 9.4 %
CMBS1,185,705 1,226,225 9.9 %
Non-agency RMBS192,129 193,764 1.6 %
ABS1,640,602 1,643,245 13.3 %
Total$12,202,767 $12,380,959 100.0 %
At December 31, 2020
Maturity
Due in one year or less$436,287 $444,527 3.6 %
Due after one year through five years4,165,696 4,335,219 36.0 %
Due after five years through ten years2,344,859 2,489,050 20.7 %
Due after ten years258,654 273,025 2.3 %
 7,205,496 7,541,821 62.6 %
Agency RMBS1,244,727 1,286,209 10.7 %
CMBS1,268,273 1,353,587 11.2 %
Non-agency RMBS136,198 140,104 1.2 %
ABS1,712,236 1,720,078 14.3 %
Total$11,566,930 $12,041,799 100.0 %
Amortized
cost
Fair
value
% of Total
fair value
At March 31, 2022
Maturity
Due in one year or less$500,557 $498,580 4.4 %
Due after one year through five years4,702,609 4,583,979 40.0 %
Due after five years through ten years2,440,295 2,300,432 20.1 %
Due after ten years287,722 268,918 2.3 %
 7,931,183 7,651,909 66.8 %
Agency RMBS972,244 935,837 8.2 %
CMBS1,188,811 1,159,385 10.1 %
Non-agency RMBS181,171 174,888 1.5 %
ABS1,566,692 1,534,005 13.4 %
Total$11,840,101 $11,456,024 100.0 %
At December 31, 2021
Maturity
Due in one year or less$503,716 $505,602 4.1 %
Due after one year through five years4,878,151 4,908,640 39.9 %
Due after five years through ten years2,478,542 2,488,478 20.2 %
Due after ten years277,756 279,056 2.3 %
 8,138,165 8,181,776 66.5 %
Agency RMBS1,065,973 1,074,589 8.7 %
CMBS1,223,051 1,248,191 10.1 %
Non-agency RMBS185,854 186,164 1.5 %
ABS1,628,739 1,622,480 13.2 %
Total$12,241,782 $12,313,200 100.0 %

ABS classified as held to maturity with a net carrying value of $407 $438 million (2020: $nil)(2021: $408 million) do not have a single maturity date and cannot be allocated over several maturity groupings.

CorporateCorporate debt classified as held to maturity with a net carrying value of $10$51 million (2020: $nil)(2021: $34 million) is due inbetween 3 years and 10 years and corporate debt classified as held to maturity with a net carrying value of $4 million (2021: $4 million) is due after ten years.








1918
Table of Contents

AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
 Gross Unrealized Losses

The following table summarizes fixed maturities, available for sale in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
  12 months or greaterLess than 12 monthsTotal
  
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
At September 30, 2021
Fixed maturities, available for sale
U.S. government and agency$92,049 $(3,892)$1,550,593 $(6,913)$1,642,642 $(10,805)
Non-U.S. government2,826 (880)352,085 (6,975)354,911 (7,855)
Corporate debt47,626 (1,938)1,331,148 (22,478)1,378,774 (24,416)
Agency RMBS23,194 (878)454,841 (4,502)478,035 (5,380)
CMBS12,019 (304)184,367 (2,103)196,386 (2,407)
Non-agency RMBS4,630 (527)69,865 (581)74,495 (1,108)
ABS45,628 (929)523,180 (2,739)568,808 (3,668)
Municipals— — 21,828 (242)21,828 (242)
Total fixed maturities, available for sale$227,972 $(9,348)$4,487,907 $(46,533)$4,715,879 $(55,881)
At December 31, 2020      
Fixed maturities, available for sale
U.S. government and agency$— $— $251,606 $(1,759)$251,606 $(1,759)
Non-U.S. government16,115 (262)3,652 (166)19,767 (428)
Corporate debt63,640 (2,244)233,970 (4,114)297,610 (6,358)
Agency RMBS6,580 (20)78,672 (668)85,252 (688)
CMBS19,736 (1,012)70,656 (1,272)90,392 (2,284)
Non-agency RMBS5,109 (598)9,558 (80)14,667 (678)
ABS325,436 (4,011)360,402 (2,674)685,838 (6,685)
Municipals— — 11,881 (31)11,881 (31)
Total fixed maturities, available for sale$436,616 $(8,147)$1,020,397 $(10,764)$1,457,013 $(18,911)
  12 months or greaterLess than 12 monthsTotal
  
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
At March 31, 2022
Fixed maturities, available for sale
U.S. government and agency$96,611 $(6,205)$2,117,861 $(61,773)$2,214,472 $(67,978)
Non-U.S. government18,215 (3,125)615,157 (21,256)633,372 (24,381)
Corporate debt249,273 (26,795)3,275,044 (173,403)3,524,317 (200,198)
Agency RMBS88,941 (8,801)668,456 (30,276)757,397 (39,077)
CMBS43,381 (4,206)911,339 (26,553)954,720 (30,759)
Non-agency RMBS22,667 (1,650)124,172 (5,804)146,839 (7,454)
ABS49,967 (1,976)1,354,834 (31,889)1,404,801 (33,865)
Municipals5,010 (413)115,092 (5,763)120,102 (6,176)
Total fixed maturities, available for sale$574,065 $(53,171)$9,181,955 $(356,717)$9,756,020 $(409,888)
At December 31, 2021      
Fixed maturities, available for sale
U.S. government and agency$101,776 $(4,852)$2,014,880 $(15,795)$2,116,656 $(20,647)
Non-U.S. government11,011 (1,830)463,498 (7,855)474,509 (9,685)
Corporate debt152,962 (6,542)1,681,859 (31,570)1,834,821 (38,112)
Agency RMBS41,024 (1,678)503,988 (7,103)545,012 (8,781)
CMBS30,128 (1,001)347,515 (3,686)377,643 (4,687)
Non-agency RMBS4,481 (523)109,937 (1,500)114,418 (2,023)
ABS43,466 (1,152)1,040,363 (8,513)1,083,829 (9,665)
Municipals5,293 (137)35,649 (509)40,942 (646)
Total fixed maturities, available for sale$390,141 $(17,715)$6,197,689 $(76,531)$6,587,830 $(94,246)

Fixed Maturities

At September 30, 2021, 1,721March 31, 2022, 3,956 fixed maturities (2020: 719)(2021: 2,333) were in an unrealized loss position of $56$410 million (2020: $19(2021: $94 million), of which $4$33 million (2020: $7(2021: $8 million) was related to securities below investment grade or not rated.

At September 30, 2021, 186March 31, 2022, 502 fixed maturities (2020: 249)(2021: 344) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $228$574 million (2020: $437(2021: $390 million).

The unrealized losseslosses of $56$410 million (2020: $19(2021: $94 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.

At September 30, 2021,March 31, 2022, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.





2019
Table of Contents

AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
b) Mortgage Loans

The following table provides details of the Company's mortgage loans, held for investment:
  
September 30, 2021December 31, 2020
  
Carrying value% of TotalCarrying value% of Total
Mortgage loans, held for investment:
Commercial$623,487 100 %$593,290 100 %
Total mortgage loans, held for investment$623,487 100 %$593,290 100 %
  
March 31, 2022December 31, 2021
  
Carrying value% of TotalCarrying value% of Total
Mortgage loans, held for investment:
Commercial$627,063 100 %$594,088 100 %
Total mortgage loans, held for investment$627,063 100 %$594,088 100 %

The primary credit quality indicatorindicators for commercial mortgage loans isare the debt service coverage ratio which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan, (generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio which compares the unpaid principal balance of the loan to the estimated fair value of the underlying collateral (generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis.

The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage ratioratio of 2.6x (2020: 2.4x)(2021: 2.5x) and a weighted average loan-to-value ratio of 60% (2020:(2021: 60%). At September 30, 2021,March 31, 2022, there are no credit losses or past due amounts associated with the commercial mortgage loans held by the Company.


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
c) Other Investments

The following tables providetable provides a summary of the Company's other investments, together with additional information relating to the liquidity of each category:
Fair value
Redemption frequency
(if currently eligible)
  Redemption  
  notice period  
At September 30, 2021    
Long/short equity funds$3,762 — %Annually60 days
Multi-strategy funds67,628 8 %Quarterly60-90 days
Direct lending funds297,047 33 %
Quarterly(1)
90 days
Private equity funds226,745 25 %n/an/a
Real estate funds225,673 25 %
Quarterly(2)
45 days
CLO-Equities6,297 2 %n/an/a
Other privately held investments65,512 7 %n/an/a
Overseas deposits— — %n/an/a
Total other investments$892,664 100 % 
  
At December 31, 2020    
Long/short equity funds$25,300 3 %Annually60 days
Multi-strategy funds121,420 15 %Quarterly, Semi-annually60-95 days
Direct lending funds272,131 33 %
Quarterly(1)
90 days
Private equity funds124,706 15 %n/an/a
Real estate funds164,250 20 %
Quarterly(2)
45 days
CLO-Equities6,173 1 %n/an/a
Other privately held investments70,011 8 %n/an/a
Overseas deposits45,165 5 %n/an/a
Total other investments$829,156 100 %  
     
Fair value
Redemption frequency
(if currently eligible)
  Redemption  
  notice period  
At March 31, 2022    
Long/short equity funds$3,056 — %Annually60 days
Multi-strategy funds48,561 5 %Quarterly60-90 days
Direct lending funds276,211 29 %
Quarterly(1)
90 days
Private equity funds260,596 27 %n/an/a
Real estate funds245,823 26 %
Quarterly, Annually(2)
45-90 days
CLO-Equities4,881 1 %n/an/a
Other privately held investments115,474 12 %n/an/a
Total other investments$954,602 100 % 
  
At December 31, 2021    
Long/short equity funds$3,476 — %Annually60 days
Multi-strategy funds56,012 6 %Quarterly60-90 days
Direct lending funds289,867 31 %
Quarterly(1)
90 days
Private equity funds249,974 26 %n/an/a
Real estate funds238,222 25 %
Quarterly(2)
45 days
CLO-Equities5,910 1 %n/an/a
Other privately held investments104,521 11 %n/an/a
Total other investments$947,982 100 %  
     
n/a - not applicable
(1) Applies to 1 fund with a fair valuevalue of $45$48 million (2020: $38(2021: $47 million).
(2) Applies to 1 fund2 funds with a fair value of $76 million (2021: $73 million (2020: $61 million)).

Two common redemption restrictions which may impact the Company's ability to redeem hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund's net assets which may otherwise hinder the general partner or investment manager's ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, neither of these restrictions impacted the Company's redemption requests. At September 30, 2021, March 31, 2022, there w$4 millionere no hedg (2020: $25e fund holdings (2021: $3 million), representing 5% (2020: 17%) of total hedge funds, relate to holdings where the Company is still within the lockup period. The expiration of this lockup period is March 2022. 

At September 30, 2021,March 31, 2022, the Company had $237$203 million (2020: $151 (2021: $224 million) of unfunded commitments as a limited partner in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from four to ten years and the General Partners of certain funds have the option to extend the term by up to three years.
At September 30, 2021,March 31, 2022, the Company had h$21ad $26 million (2020: $20 (2021: $23 million) of unfunded commitments as a limited partner in multi-strategy hedge funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until after the completion of the funds' investment term. These funds have investment terms rangingranging from two years to the dissolution of the underlying fund.

2221
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
At September 30, 2021,March 31, 2022, the Company had $202$198 million (2020: $201 (2021: $173 million) of unfunded commitments as a limited partner in funds which invest in real estate and real estate securities and businesses. These funds include an open-ended fund and funds with investment terms ranging fromfrom two years to the dissolution of the underlying fund.
At September 30, 2021,March 31, 2022, the Company had $170$187 million (2020: $166(2021: $178 million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over five years.

During 2015, the Company made a $50 million commitment as a limited partner of a bank revolver opportunity fund. The fund has an investment term of seven years and the General Partners have the option to extend the term by up to two years. At September 30, 2021,March 31, 2022, this commitmentcommitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.

d) Equity Method Investments

During 2016, the Company paid $108 million including direct transaction costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, AXIS Capital will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally. Harrington is not a VIE that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $5 million which represents initial transactions costs.

e) Net Investment Income

Net investment income was derived from the following sources:
  
Three months ended September 30,Nine months ended September 30,
  
2021202020212020
Fixed maturities$63,712 $73,992 $194,426 $244,394 
Other investments41,695 25,125 124,941 (14,574)
Equity securities2,724 1,871 8,322 6,258 
Mortgage loans4,426 3,609 12,967 11,322 
Cash and cash equivalents692 2,491 3,645 9,814 
Short-term investments391 440 590 2,303 
Gross investment income113,640 107,528 344,891 259,517 
Investment expenses(6,301)(5,572)(18,717)(19,419)
Net investment income$107,339 $101,956 $326,174 $240,098 
  
Three months ended March 31,
  
20222021
Fixed maturities$64,809 $69,470 
Other investments26,050 41,833 
Equity securities2,172 2,498 
Mortgage loans4,163 4,187 
Cash and cash equivalents1,118 2,336 
Short-term investments166 133 
Gross investment income98,478 120,457 
Investment expenses(7,123)(6,292)
Net investment income$91,355 $114,165 


2322
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
f) Net Investment Gains (Losses)

The following table provides an analysis of net investment gains (losses):
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Gross realized investment gains
Fixed maturities and short-term investments$21,036 $39,926 $126,901 $130,874 
Equity securities4 556 5,006 24,514 
Gross realized investment gains21,040 40,482 131,907 155,388 
Gross realized investment losses
Fixed maturities and short-term investments(4,206)(10,394)(32,443)(88,216)
Equity securities— (37)(116)(5,839)
Gross realized investment losses(4,206)(10,431)(32,559)(94,055)
Change in allowance for expected credit losses(315)3,759 (76)(2,498)
Impairment losses(1)
(22)(184)(22)(1,486)
Change in fair value of investment derivatives(2)
2,486 (1,346)3,388 1,970 
Net unrealized gains (losses) on equity securities(8,051)23,329 11,230 (13,542)
Net investment gains$10,932 $55,609 $113,868 $45,777 
  Three months ended March 31,
  20222021
Gross realized investment gains
Fixed maturities and short-term investments$10,422 $50,170 
Equity securities— 569 
Gross realized investment gains10,422 50,739 
Gross realized investment losses
Fixed maturities and short-term investments(63,146)(19,368)
Equity securities(225)(89)
Gross realized investment losses(63,371)(19,457)
Change in allowance for expected credit losses(70)89 
Impairment losses(1)
(109)— 
Change in fair value of investment derivatives(2)
2,242 1,749 
Net unrealized gains (losses) on equity securities(43,622)(3,475)
Net investment gains$(94,508)$29,645 
(1) Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.
(2) Refer to Note 5 'Derivative Instruments'.

The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Balance at beginning of period$84 $6,257 $323 $— 
Expected credit losses on securities where credit losses were not previously recognized— 194 64 22,570 
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized315 (2,545)59 (9,424)
Impairments of securities which the Company intends to sell or more likely than not will be required to sell— — — — 
Securities sold/redeemed/matured— (1,408)(47)(10,648)
Balance at end of period$399 $2,498 $399 $2,498 
  Three months ended March 31,
  20222021
Balance at beginning of period$313 $323 
Expected credit losses on securities where credit losses were not previously recognized9 63 
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized78 (105)
Impairments of securities which the Company intends to sell or more likely than not will be required to sell— — 
Securities sold/redeemed/matured(17)(47)
Balance at end of period$383 $234 

g) Reverse Repurchase Agreements

At September 30, 2021,March 31, 2022, the Company held $41$24 million (2020: $91 million) (2021: $nil) of reversereverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of cash and cash equivalents in the Company's consolidated balance sheets. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of 102% of the loan principal. Upon maturity, the Company receives principal and interest income. The Company monitors the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS
Fair Value Hierarchy

Fair value is defined as the price to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. U.S. GAAP prescribes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement. The hierarchy is broken down into three levels as follows:

•Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's judgments about assumptions that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for financial instruments categorized as Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead the Company to change the selection of valuation technique (from market to cash flow approach) or may cause the Company to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

Valuation Techniques

The valuation techniques, including significant inputs and assumptions generally used to determine the fair values of the Company's financial instruments as well as the classification of the fair values of its financial instruments in the fair value hierarchy are described in detail below.

Fixed Maturities

At each valuation date, the Company uses the market approach valuation technique to estimate the fair value of its fixed maturities portfolio, where possible. The market approach includes, but is not limited to, prices obtained from third-party pricing services for identical or comparable securities and the use of "pricing matrix models" using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third-party pricing services is sourced from multiple vendors, where available, and the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Where prices are unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers who are active in the corresponding markets. The valuation techniques including significant inputs and assumptions generally used to determine the fair values of the Company's fixed maturities by asset class as well as the classifications of the fair values of these securities in the fair value hierarchy are described in detail below.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
U.S. Government and Agency

U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of U.S. Treasury securities are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. The fair values of U.S. government agency securities are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2.

Non-U.S. Government

Non-U.S. government securities include bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair values of these securities are based on prices obtained from international indices or valuation models that include inputs such as interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs used to price these securities are observable market inputs, the fair values of non-U.S. government securities are classified as Level 2.

Corporate Debt

Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of corporate debt securities are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Agency RMBS

Agency RMBS consist of bonds issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs used to price these securities are observable market inputs, the fair values of Agency RMBS are classified as Level 2.

CMBS

CMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the fair values of CMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Non-agency RMBS

Non-agency RMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs used to price these securities are observable market inputs, the fair values of non-agency RMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

ABS

ABS mainly include investment-grade bonds backed by pools of loans with a variety of underlying collateral, including auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs"), originated by a variety of financial institutions. The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, the fair values of ABS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Municipals

Municipals comprise revenue bonds and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair values of these securities are determined using spreads obtained from the new issue market, trade prices and broker-dealers quotes. As the significant inputs used to price these securities are observable market inputs, the fair values of municipals are classified as Level 2.

Equity Securities

Equity securities include common stocks, preferred stocks, exchange-traded funds and bond mutual funds. As the fair values of common stocks, preferred stocks and exchange-traded funds are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. As bond mutual funds have daily liquidity, the fair values of these securities are classified as Level 2.

Other Investments

The fair value of an indirect investment in CLO-Equities is estimated using an income approach valuation technique, specifically an externally developed discounted cash flow model due to the lack of observable and relevant trades in secondary markets. As the significant inputs used to price this security are unobservable, the fair value of the indirect investment in CLO-Equities is classified as Level 3.

Other privately held investments include convertible preferred shares, common shares, convertible notes, investments in limited partnerships and a variable yield security. These investments are initially valued at cost, which approximates fair value. In subsequent measurement periods, the fair values of these investments are generallyis derived from one or a combination of valuation methodologies which consider factors including recent capital raises by the investee companies, comparable precedent transaction multiples, comparable publicly traded multiples, third-party valuations, discounted cash-flow models, and other techniques that account for the industry and development stage of each investee company. The fair value of the variable yield security is determined using capital statements obtained from each investee company.an externally developed discounted cash flow model. In order to assess the reasonableness of the information received from each investee company,companies, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact the results of operations, financial condition or liquidity of investeethese companies. In addition, the Company engages in regular communication with management at the investee companies. The fair value of the variable yield security was determined using an externally developed discounted cash flow model. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.

Overseas deposits include investments in private funds held by Syndicate 2007 where the underlying investments are primarily U.S. government, non-U.S. government and corporate debt securities. The funds do not trade on an exchange, therefore, they are not included in available for sale investments. As the significant inputs used to price the underlying investments are observable market inputs, the fair values of overseas deposits are classified as Level 2.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Short-term Investments

Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are typically not actively traded due to their approaching maturity, therefore their amortized cost approximates fair value. The fair values of short-term investments are classified as Level 2.

Derivative Instruments

Derivative instruments include foreign exchange forward contracts that are customized to the Company's economic hedging strategies and trade in the over-the-counter derivative market. The fair values of these derivatives are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used to price these derivatives are observable market inputs, the fair values of these derivatives are classified as Level 2.

Other underwriting-related derivatives include insurance and reinsurance contracts that are accounted for as derivatives. These derivative contracts are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3.

Cash SettledCash-Settled Awards

Cash settledCash-settled awards comprise restricted stock units that form part of the Company's compensation program. Although the fair values of these awards are determined using observable quoted market prices in active markets, the restricted stock units are not actively traded. As the significant inputs used to price these securities are observable market inputs, the fair values of these liabilities are classified as Level 2.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The tables below present the financial instruments measured at fair value on a recurring basis for the periods indicated:
Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At September 30, 2021
Assets
Fixed maturities, available for sale
U.S. government and agency$2,643,471 $48,923 $— $— $2,692,394 
Non-U.S. government— 719,922 — — 719,922 
Corporate debt— 4,500,045 47,605 — 4,547,650 
Agency RMBS— 1,163,038 — — 1,163,038 
CMBS— 1,226,225 — — 1,226,225 
Non-agency RMBS— 193,764 — — 193,764 
ABS— 1,643,245 — — 1,643,245 
Municipals— 194,721 — — 194,721 
 2,643,471 9,689,883 47,605 — 12,380,959 
Equity securities
Common stocks1,027 — — — 1,027 
Preferred stocks263 — — — 263 
Exchange-traded funds309,840 — — — 309,840 
Bond mutual funds— 307,692 — — 307,692 
 311,130 307,692 — — 618,822 
Other investments
Hedge funds (1)
— — — 71,390 71,390 
Direct lending funds— — — 297,047 297,047 
Private equity funds— — — 226,745 226,745 
Real estate funds— — — 225,673 225,673 
CLO-Equities— — 6,297 — 6,297 
Other privately held investments— — 65,512 — 65,512 
Overseas deposits— — — — — 
— — 71,809 820,855 892,664 
Short-term investments— 68,267 — — 68,267 
Other assets
Derivative instruments (refer to Note 5)— 3,290 — — 3,290 
Total Assets$2,954,601 $10,069,132 $119,414 $820,855 $13,964,002 
Liabilities
Derivative instruments (refer to Note 5)$— $12,370 $7,719 $— $20,089 
Cash settled awards (refer to Note 8)— 6,697 — — 6,697 
 Total Liabilities$— $19,067 $7,719 $— $26,786 
Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At March 31, 2022
Assets
Fixed maturities, available for sale
U.S. government and agency$2,226,233 $46,970 $— $— $2,273,203 
Non-U.S. government— 739,133 — — 739,133 
Corporate debt— 4,412,661 60,890 — 4,473,551 
Agency RMBS— 935,837 — — 935,837 
CMBS— 1,159,385 — — 1,159,385 
Non-agency RMBS— 174,888 — — 174,888 
ABS— 1,534,005 — — 1,534,005 
Municipals— 166,022 — — 166,022 
 2,226,233 9,168,901 60,890 — 11,456,024 
Equity securities
Common stocks1,509 — — — 1,509 
Preferred stocks191 — — — 191 
Exchange-traded funds320,256 — — — 320,256 
Bond mutual funds— 241,994 — — 241,994 
 321,956 241,994 — — 563,950 
Other investments
Hedge funds (1)
— — — 51,617 51,617 
Direct lending funds— — — 276,211 276,211 
Private equity funds— — — 260,596 260,596 
Real estate funds— — — 245,823 245,823 
CLO-Equities— — 4,881 — 4,881 
Other privately held investments— — 115,474 — 115,474 
— — 120,355 834,247 954,602 
Short-term investments— 70,385 — — 70,385 
Other assets
Derivative instruments (refer to Note 5)— 1,091 — — 1,091 
Total Assets$2,548,189 $9,482,371 $181,245 $834,247 $13,046,052 
Liabilities
Derivative instruments (refer to Note 5)$— $18,892 $5,074 $— $23,966 
Cash-settled awards (refer to Note 8)— 3,023 — — 3,023 
 Total Liabilities$— $21,915 $5,074 $— $26,989 
(1) Includes Long/short equity and Multi-strategy funds.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)

Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At December 31, 2020
Assets
Fixed maturities, available for sale
U.S. government and agency$1,861,240 $57,459 $— $— $1,918,699 
Non-U.S. government— 671,273 — — 671,273 
Corporate debt— 4,653,447 2,504 — 4,655,951 
Agency RMBS— 1,286,209 — — 1,286,209 
CMBS— 1,351,847 1,740 — 1,353,587 
Non-agency RMBS— 140,104 — — 140,104 
ABS— 1,709,413 10,665 — 1,720,078 
Municipals— 295,898 — — 295,898 
 1,861,240 10,165,650 14,909 — 12,041,799 
Equity securities
Common stocks10,942 — — — 10,942 
Preferred stocks8,068 — — — 8,068 
Exchange-traded funds221,718 — — — 221,718 
Bond mutual funds— 277,717 — — 277,717 
 240,728 277,717 — — 518,445 
Other investments
Hedge funds (1)
— — — 146,720 146,720 
Direct lending funds— — — 272,131 272,131 
Private equity funds— — — 124,706 124,706 
Real estate funds— — — 164,250 164,250 
CLO-Equities— — 6,173 — 6,173 
Other privately held investments— — 70,011 — 70,011 
Overseas deposits— 45,165 — — 45,165 
— 45,165 76,184 707,807 829,156 
Short-term investments— 161,897 — — 161,897 
Other assets
Derivative instruments (refer to Note 5)— 18,875 — — 18,875 
Total Assets$2,101,968 $10,669,304 $91,093 $707,807 $13,570,172 
Liabilities
Derivative instruments (refer to Note 5)$— $2,364 $9,122 $— $11,486 
Cash settled awards (refer to Note 8)— 13,273 — — 13,273 
Total Liabilities$— $15,637 $9,122 $— $24,759 
Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At December 31, 2021
Assets
Fixed maturities, available for sale
U.S. government and agency$2,632,541 $49,907 $— $— $2,682,448 
Non-U.S. government— 795,178 — — 795,178 
Corporate debt— 4,452,418 42,894 — 4,495,312 
Agency RMBS— 1,074,589 — — 1,074,589 
CMBS— 1,248,191 — — 1,248,191 
Non-agency RMBS— 186,164 — — 186,164 
ABS— 1,622,480 — — 1,622,480 
Municipals— 208,838 — — 208,838 
 2,632,541 9,637,765 42,894 — 12,313,200 
Equity securities
Common stocks1,364 — — — 1,364 
Preferred stocks179 — — — 179 
Exchange-traded funds336,815 — — — 336,815 
Bond mutual funds— 317,317 — — 317,317 
 338,358 317,317 — — 655,675 
Other investments
Hedge funds (1)
— — — 59,488 59,488 
Direct lending funds— — — 289,867 289,867 
Private equity funds— — — 249,974 249,974 
Real estate funds— — — 238,222 238,222 
CLO-Equities— — 5,910 — 5,910 
Other privately held investments— — 104,521 — 104,521 
— — 110,431 837,551 947,982 
Short-term investments— 31,063 — — 31,063 
Other assets
Derivative instruments (refer to Note 5)— 3,116 — — 3,116 
Total Assets$2,970,899 $9,989,261 $153,325 $837,551 $13,951,036 
Liabilities
Derivative instruments (refer to Note 5)$— $14,987 $5,630 $— $20,617 
Cash-settled awards (refer to Note 8)— 9,091 — — 9,091 
Total Liabilities$— $24,078 $5,630 $— $29,708 
(1) Includes Long/short equity and Multi-strategy funds.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The following table quantifies the significant unobservable inputs used in estimating fair values at September 30, 2021March 31, 2022 of investments classified as Level 3 in the fair value hierarchy:
Fair valueValuation techniqueUnobservable inputRange
Weighted
average
Other investments - CLO-Equities$6,297 Discounted cash flowDefault rates4.5%4.5%
  Loss severity rate50.0%50.0%
  Collateral spreads3.0%3.0%
Estimated maturity dates7 years7 years
Other investments - Other privately held investments$20,442 Discounted cash flowDiscount rate1.6%1.6%
Default rate0.5%0.5%
Loss absorption yield1.0%1.0%
Estimated maturity date3-4 years4 years
Derivatives - Other underwriting-related derivatives$(7,719)Discounted cash flowDiscount rate1.0%1.0%
Fair valueValuation techniqueUnobservable inputAmount / Range
Weighted
average
Other investments - CLO-Equities$4,881 Discounted cash flowDefault rate4.5%4.5%
  Loss severity rate50.0%50.0%
  Collateral spread3.0%3.0%
Estimated maturity date6 years6 years
Other investments - Other privately held investments$20,867 Discounted cash flowDiscount rate2.5%2.5%
Default rate0.5%0.5%
Loss absorption yield1.0%1.0%
Estimated maturity date2-4 years3 years
Derivatives - Other underwriting-related derivatives$(5,074)Discounted cash flowDiscount rate2.5%2.5%
Note: Fixed maturities of $48$61 million that are classified as Level 3 are excluded from the above table as these securities are priced using broker-dealer quotes. In addition, other privately held investments of $45$95 million that are classified as Level 3 are excluded from the above table as these investments are priced using capital statements received from investee companies.

Other Investments - CLO-Equities

The CLO-Equities market continues to be relatively inactive with only a small number of transactions being observed, particularly related to transactions involving CLO-Equities held by the Company. Accordingly, the fair value of the Company's indirect investment in CLO-Equities is determined using a discounted cash flow model prepared by an external investment manager.

The default and loss severity rates are the most judgmental unobservable market inputs to the discounted cash flow model to which the valuation of the Company's indirect investment in CLO-Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in a lower (higher) fair value estimate for the investment in CLO-Equities and, in general, a change in default rate assumptions would be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in a higher (lower) fair value estimate for the investment in CLO-Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.

On a quarterly basis, the Company's valuation process for its indirect investment in CLO-Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. The above significant unobservable inputs are reviewed and updated based on information obtained from secondary markets, including information received from the managers of the Company's CLO-Equities investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact future cash flows. In addition, the assumptions the Company uses in its models are updated through regular communication with industry participants and ongoing monitoring of the deals in which the Company participates.



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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Other Investments - Other Privately Held Securities

Other privately held securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of the variable yield security was determined using an externally developed discounted cash flow model. This model includes inputs that are specific to that investment. The inputs used in the fair value measurement include an appropriate discount rate, default rate, loss absorption rate and estimated maturity date. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this investment. A significant increase (decrease) in this input in isolation could result in significantly lower (higher) fair value measurement for this investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as investee specific information that may impact future cash flows.

Derivatives - Other Underwriting-related Derivatives

Other underwriting-related derivatives are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models which use appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of these derivatives. A significant increase (decrease) in this input in isolation could result in a significantly lower (higher) fair value measurement for the derivative contracts. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as contract specific information that may impact future cash flows.

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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The following tables presenttable presents changes in Level 3 for financial instruments measured at fair value on a recurring basis:
Opening
balance
Transfers
into
Level 3
Transfers
out of
Level 3
Included 
in net income(1)
Included
in OCI (2)
PurchasesSales
Settlements/
distributions
Closing
balance
Change in
unrealized
gains/(losses) (3)
  
Three months ended September 30, 2021
Fixed maturities, available for sale         
Corporate debt$22,726 $— $— $— $(121)$25,000 $— $— $47,605 $— 
CMBS— — — — — — — — — — 
ABS12,560 — (12,582)— 22 — — — — — 
 35,286 — (12,582)— (99)25,000 — — 47,605 — 
Other investments
CLO-Equities7,002 — — 356 — — — (1,061)6,297 356 
Other privately held investments64,786 — — 213 — 3,436 — (2,923)65,512 213 
 71,788 — — 569 — 3,436 — (3,984)71,809 569 
Total assets$107,074 $— $(12,582)$569 $(99)$28,436 $— $(3,984)$119,414 $569 
  
Other liabilities
Derivative instruments$8,117 $— $— $(398)$— $— $— $— $7,719 $(398)
Total liabilities$8,117 $— $— $(398)$— $— $— $— $7,719 $(398)
Nine months ended September 30, 2021
Fixed maturities          
Corporate debt$2,504 $7,000 $— $— $(199)$38,300 $— $— $47,605 $— 
CMBS1,740 — — — 13 — — (1,753)— — 
ABS10,665 18,566 (28,789)— 58 — — (500)— — 
 14,909 25,566 (28,789)— (128)38,300 — (2,253)47,605 — 
Other investments
CLO-Equities6,173 — — 2,337 — — — (2,213)6,297 2,337 
Other privately held investments70,011 — — 18,694 — 6,710 (26,980)(2,923)65,512 1,314 
 76,184 — — 21,031 — 6,710 (26,980)(5,136)71,809 3,651 
Total assets$91,093 $25,566 $(28,789)$21,031 $(128)$45,010 $(26,980)$(7,389)$119,414 $3,651 
Other liabilities
Derivative instruments$9,122 $— $— $(1,403)$— $— $— $— $7,719 $(1,403)
Total liabilities$9,122 $— $— $(1,403)$— $— $— $— $7,719 $(1,403)
           

(1) Realized gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.
(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").
(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.

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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Opening
balance
Transfers
into
Level 3
Transfers
out of
Level 3
Included 
in net income(1)
Included
in OCI (2)
PurchasesSales
Settlements/
distributions
Closing
balance
Change in
unrealized
gains/(losses)(3)
  
Three months ended September 30, 2020
Fixed maturities, available for sale         
Corporate debt$2,298 $— $— $— $101 $— $— $— $2,399 $— 
CMBS4,434 — — — 148 — — (1,959)2,623 — 
Non-agency RMBS9,562 — — — 70 — — — 9,632 — 
ABS441 10,060 — — 9 — — — 10,510 — 
 16,735 10,060 — — 328 — — (1,959)25,164 — 
Other investments
CLO-Equities9,943 — — (422)— — — (332)9,189 (422)
Other privately held investments37,420 — — 797 — 1,276 — — 39,493 566 
 47,363 — — 375 — 1,276 — (332)48,682 144 
Total assets$64,098 $10,060 $— $375 $328 $1,276 $— $(2,291)$73,846 $144 
Other liabilities
Derivative instruments$9,818 $— $— $(370)$— $— $— $— $9,448 $(370)
Total liabilities$9,818 $— $— $(370)$— $— $— $— $9,448 $(370)
Nine months ended September 30, 2020
Fixed maturities          
Corporate debt$2,297 $— $— $— $102 $— $— $— $2,399 $— 
CMBS5,235 — — — (64)— — (2,548)2,623 — 
Non-agency RMBS— 9,185 — — 447 — — — 9,632 — 
ABS489 10,060 — — (39)— — — 10,510 — 
 8,021 19,245 — — 446 — — (2,548)25,164 — 
Other investments
CLO-Equities14,328 — — (3,592)— — — (1,547)9,189 (3,592)
Other privately held investments36,934 — — 801 — 1,758 — — 39,493 570 
 51,262 — — (2,791)— 1,758 — (1,547)48,682 (3,022)
Total assets$59,283 $19,245 $— $(2,791)$446 $1,758 $— $(4,095)$73,846 $(3,022)
Other liabilities
Derivative instruments$9,672 $— $— $9,747 $— $— $— $(9,971)$9,448 $(224)
Total liabilities$9,672 $— $— $9,747 $— $— $— $(9,971)$9,448 $(224)
           

Opening
balance
Transfers
into
Level 3
Transfers
out of
Level 3
Included 
in net income(1)
Included
in OCI (2)
PurchasesSales
Settlements/
distributions
Closing
balance
Change in
unrealized
gains/(losses) (3)
Three months ended March 31, 2022
Fixed maturities, available for sale         
Corporate debt$42,894 $— $— $— $(2,794)$21,462 $— $(672)$60,890 $— 
CMBS— — — — — — — — — — 
ABS— — — — — — — — — — 
 42,894 — — — (2,794)21,462 — (672)60,890 — 
Other investments
CLO-Equities5,910 — — 872 — — — (1,901)4,881 872 
Other privately held investments104,521 — — 1,618 — 9,335 — — 115,474 1,618 
 110,431 — — 2,490 — 9,335 — (1,901)120,355 2,490 
Total assets$153,325 $— $— $2,490 $(2,794)$30,797 $— $(2,573)$181,245 $2,490 
Other liabilities
Derivative instruments$5,630 $— $— $(556)$— $— $— $— $5,074 $(556)
Total liabilities$5,630 $— $— $(556)$— $— $— $— $5,074 $(556)
Three months ended March 31, 2021
Fixed maturities          
Corporate debt$2,504 $— $— $— $(99)$— $— $— $2,405 $— 
CMBS1,740 — — — 14 — — (849)905 — 
ABS10,665 6,184 (9,203)— 29 — — (500)7,175 — 
 14,909 6,184 (9,203)— (56)— — (1,349)10,485 — 
Other investments
CLO-Equities6,173 — — 570 — — — (474)6,269 570 
Other privately held investments70,011 — — 18,479 — 273 (26,980)— 61,783 1,098 
 76,184 — — 19,049 — 273 (26,980)(474)68,052 1,668 
Total assets$91,093 $6,184 $(9,203)$19,049 $(56)$273 $(26,980)$(1,823)$78,537 $1,668 
Other liabilities
Derivative instruments$9,122 $— $— $(660)$— $— $— $— $8,462 $(660)
Total liabilities$9,122 $— $— $(660)$— $— $— $— $8,462 $(660)
(1) Realized gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.
(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").
(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.









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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Transfers into Level 3 from Level 2

There were no transfers into Level 3 from Level 2 during the three months ended September 30, 2021.March 31, 2022. The transfers into Level 3 from Level 2 during the ninethree months ended September 30,March 31, 2021 and the three and nine months ended September 30, 2020 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities.

Transfers out of Level 3 into Level 2

There were no transfers out of Level 3 into Level 2 during the three months ended March 31, 2022. The transfers out of Level 3 into Level 2 during the three and nine months ended September 30,March 31, 2021 were primarily due to the availability of observable market inputs and multiple quotes from pricing vendors for certain fixed maturities. There were no transfers out of Level 3 into Level 2 during the three and nine months ended September 30, 2020.

Measuring the Fair Value of Other Investments Using Net Asset Valuations

The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are estimated using net asset valuations ("NAVs") as advised by external fund managers or third-party administrators. For these funds, NAVs are based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP.

For hedge funds, direct lending funds, private equity funds and real estate funds, valuation statements are typically released on a reporting lag. Therefore,lag, therefore, the Company estimates the fair value of these funds by starting with the most recent fund valuations and adjusting for capital calls, redemptions, drawdowns and distributions. Return estimates are not available from the relevant fund managers for these funds, therefore the Company typically has a reporting lag in its fair value measurements of these funds. At September 30, 2021March 31, 2022 and December 31, 20202021 all funds measured at fair value using NAVs are reported on a lag.

The Company often does not have access to financial information relating to the underlying securities held within the funds, therefore, management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by fund managers or fund administrators. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by fund managers and fund administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of the Company's fair value estimates against subsequently received NAVs. Backtesting involves comparing the Company's previously reported fair values for each fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).

The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are measured using the NAV practical expedient, therefore the fair values of these funds have not been categorized within the fair value hierarchy.


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Financial Instruments Disclosed, But Not Carried, at Fair Value

The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments, including insurance contracts.
At September 30, 2021,March 31, 2022, the carrying values of cash and cash equivalents including restricted amounts, accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated fair values due to their short maturities. As these financial instruments are not actively traded, their fair values are classified as Level 2.

At September 30, 2021,March 31, 2022, the Company's fixed maturities held to maturity, were recorded at amortized cost with a carrying value of $417$494 million (2020: $nil)(2021: $446 million) and a fair value of $417$486 million (2020: $nil)(2021: $445 million). The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, their fair values are classified as Level 2.

At September 30, 2021,March 31, 2022, the carrying value of mortgage loans, held for investment, approximated fair value. The fair values of mortgage loans are primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk or are determined from pricing for similar loans. As mortgage loans are not actively traded, their fair values are classified as Level 3.

At September 30, 2021,March 31, 2022, the Company's debt was recorded at amortized cost with a carrying value of $1,311 million (2020: $1,310(2021: $1,311 million) and a fair value of $1,471$1,339 million (2020: $1,485(2021: $1,453 million). The fair value of the Company's debt is based on prices obtained from a third-party pricing service and is determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair value of the Company's debt is classified as Level 2.

5.    DERIVATIVE INSTRUMENTS

The following table provides the balance sheet classifications of derivatives recorded at fair value:
  September 30, 2021December 31, 2020
  
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Relating to investment portfolio:
Foreign exchange forward contracts$298,139 $1,745 $328 $105,781 $2 $2,364 
Relating to underwriting portfolio:
Foreign exchange forward contracts1,154,468 1,545 12,042 1,197,012 18,873 — 
Other underwriting-related contracts75,000 — 7,719 75,000 — 9,122 
Total derivatives$3,290 $20,089 $18,875 $11,486 
  March 31, 2022December 31, 2021
  
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Relating to investment portfolio:
Foreign exchange forward contracts$221,208 $1,085 $197 $184,187 $13 $1,463 
Relating to underwriting portfolio:
Foreign exchange forward contracts1,077,969 6 18,695 1,258,836 3,103 13,524 
Other underwriting-related contracts50,000 — 5,074 50,000 — 5,630 
Total derivatives$1,091 $23,966 $3,116 $20,617 
(1)Derivative assets and derivative liabilities are classified within other assets and other liabilities in the consolidated balance sheets.

The notional amounts of derivative contracts represent the basis on which amounts paid or received are calculated and are presented in the above table to quantify the volume of the Company's derivative activities. Notional amounts are not reflective of credit risk.

None of the Company's derivative instruments are designated as hedges under current accounting guidance.



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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    DERIVATIVE INSTRUMENTS (CONTINUED)
Offsetting Assets and Liabilities

The Company's derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure.

The following table provides a reconciliation of gross derivative assets and liabilities to the net amounts presented in the consolidated
balance sheets, with the difference being attributable to the impact of master netting agreements:
September 30, 2021December 31, 2020
Gross amountsGross amounts offset
Net
amounts(1)
Gross amountsGross amounts offset
Net
amounts(1)
Derivative assets$9,278 $(5,988)$3,290 $27,765 $(8,890)$18,875 
Derivative liabilities$26,077 $(5,988)$20,089 $20,376 $(8,890)$11,486 
March 31, 2022December 31, 2021
Gross amountsGross amounts offset
Net
amounts(1)
Gross amountsGross amounts offset
Net
amounts(1)
Derivative assets$2,116 $(1,025)$1,091 $9,047 $(5,931)$3,116 
Derivative liabilities$24,991 $(1,025)$23,966 $26,548 $(5,931)$20,617 
(1)Net asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.

Refer to Note 3 'Investments' for information on reverse repurchase agreements.

a) Relating to Investment Portfolio

Foreign Currency Risk

The Company's investment portfolio is exposed to foreign currency risk therefore the fair values of its investments are partially influenced by changes in foreign exchange rates. The Company may enter into foreign exchange forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.

Interest Rate Risk

The Company's investment portfolio includes a large percentage of fixed maturities which exposes it to significant interest rate risk. As part of overall management of this risk, the Company may use interest rate swaps.

b) Relating to Underwriting Portfolio

Foreign Currency Risk

The Company's insurance and reinsurance subsidiaries and branches operate in various countries. Some of its business is written in currencies other than the U.S. dollar, therefore the underwriting portfolio is exposed to significant foreign currency risk. The Company manages foreign currency risk by seeking to match its foreign-denominated net liabilities under insurance and reinsurance contracts with cash and investments that are denominated in the same currencies. The Company uses derivative instruments, specifically, forward contracts to economically hedge foreign currency exposures.

Other Underwriting-related Risks

The Company enters into insurance and reinsurance contracts that are accounted for as derivatives. These insurance or reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations.



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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    DERIVATIVE INSTRUMENTS (CONTINUED)
The following table provides the total unrealized and realized gains (losses) recognized in net income for derivatives not designated as hedges:
  Consolidated statement of operations line item that includes gain (loss) recognized in net incomeThree months ended September 30,Nine months ended September 30,
  2021202020212020
Relating to investment portfolio:
Foreign exchange forward contractsNet investment gains (losses)$2,486 $(1,346)$3,388 $1,970 
Relating to underwriting portfolio:
Foreign exchange forward contractsForeign exchange gains (losses)(10,081)16,370 (36,741)14,811 
Other underwriting-related contractsOther insurance related income (losses)399 370 1,404 (9,361)
Total$(7,196)$15,394 $(31,949)$7,420 
  Consolidated statement of operations line item that includes gain (loss) recognized in net incomeThree months ended March 31,
  20222021
Relating to investment portfolio:
Foreign exchange forward contractsNet investment gains (losses)$2,242 $1,749 
Relating to underwriting portfolio:
Foreign exchange forward contractsForeign exchange gains (losses)(27,976)(26,056)
Other underwriting-related contractsOther insurance related income (loss)555 661 
Total$(25,179)$(23,646)


6.    RESERVE FOR LOSSES AND LOSS EXPENSES

Reserve Roll-Forward

The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserves for unpaid losses and loss expenses:
Nine months ended September 30,
20212020
Gross reserve for losses and loss expenses, beginning of period$13,926,766 $12,752,081 
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period(4,496,641)(3,877,756)
Net reserve for unpaid losses and loss expenses, beginning of period9,430,125 8,874,325 
Net incurred losses and loss expenses related to:
Current year2,315,697 2,473,363 
Prior years(23,138)(9,351)
 2,292,559 2,464,012 
Net paid losses and loss expenses related to:
Current year(263,969)(227,332)
Prior years(1,778,479)(1,831,192)
 (2,042,448)(2,058,524)
Foreign exchange and other(10,885)35,992 
Net reserve for unpaid losses and loss expenses, end of period9,669,351 9,315,805 
Reinsurance recoverable on unpaid losses and loss expenses, end of period4,989,645 4,337,683 
Gross reserve for losses and loss expenses, end of period$14,658,996 $13,653,488 
Three months ended March 31,
20222021
Gross reserve for losses and loss expenses, beginning of period$14,653,094 $13,926,766 
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period(5,017,611)(4,496,641)
Net reserve for unpaid losses and loss expenses, beginning of period9,635,483 9,430,125 
Net incurred losses and loss expenses related to:
Current year741,655 720,035 
Prior years(8,956)(5,317)
 732,699 714,718 
Net paid losses and loss expenses related to:
Current year(32,477)(26,944)
Prior years(750,969)(666,139)
 (783,446)(693,083)
Foreign exchange and other(71,661)40,282 
Net reserve for unpaid losses and loss expenses, end of period9,513,075 9,492,042 
Reinsurance recoverable on unpaid losses and loss expenses, end of period4,957,080 4,533,232 
Gross reserve for losses and loss expenses, end of period$14,470,155 $14,025,274 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the ninethree months ended September 30, 2021,March 31, 2022, the Company recognized catastrophe and weather-related losses, net of reinstatement premiumsreinsurance, of $389$60 million (2020: $576(2021: $110 million)., including $30 million attributable to the Russia-Ukraine war.
At September 30,March 31, 2021, foreign exchange and other included a reduction in reinsurance recoverable on unpaid losses of $49$49 million related to the Reinsurance to Close of the 2018 year of account of Syndicate 2007.

Estimates for Significant Catastrophe Events

At September 30, 2021,March 31, 2022, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include the Russia-Ukraine war in 2022, Hurricane Ida, the July European Floods and U.S. Winter Storms Uri and Viola and July European Floods in 2021, the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020, Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian and the Australia Wildfires in 2019 and Hurricanes Michael and Florence, California Wildfires and Typhoon Jebi in 2018. As a result, actual losses for these events may ultimately differ materially from current estimates.

Prior Year Reserve Development

The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)
Insurance$5,418 $270 $13,351 $4,521 
Reinsurance5,594 314 9,787 4,830 
Total$11,012 $584 $23,138 $9,351 
  Three months ended March 31,
  20222021
Favorable (Adverse)Favorable (Adverse)
Insurance$7,062 $1,505 
Reinsurance1,894 3,812 
Total$8,956 $5,317 

The following sections provide further details on net prior year reserve development by segment, reserving class and accident year.year:










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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Insurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:
Insurance segment
Reserve class and tail
Property and otherMarineAviationCredit and political riskProfessional linesLiability
ShortShortShort/MediumMediumMediumLong
Reported lines of business
PropertyX
MarineX
TerrorismX
AviationX
Credit and political riskX
Professional linesX
LiabilityX
Accident and healthX

Prior year reserve development by reserve class was as follows:
  Three months ended March 31,
  20222021
Favorable (Adverse)Favorable (Adverse)
Property and other$11,692 $15,391 
Marine11,666 11,875 
Aviation2,980 1,035 
Credit and political risk895 (5,371)
Professional lines(6,622)(14,593)
Liability(13,549)(6,832)
Total$7,062 $1,505 

For the three months ended March 31, 2022, the Company recognized $7 million of net favorable prior year reserve development, the principal components of which were: 
•$12 million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific large claims related to the 2017 accident year, and better than expected loss emergence attributable to 2018 catastrophe events, and the accident and health book of business mainly related to the 2020 and 2021 accident years.
•$12 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to the cargo and offshore energy books of business mainly related to the 2018 and 2021 accident years.
•$14 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2016 and 2018 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2017 accident year.

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$7 million of net adverse prior year reserve development on professional lines business primarily due to increases in loss estimates attributable to specific large claims related to the 2015 and 2017 accident years, and reserve strengthening within runoff lines of business mainly related to the 2016 and 2018 accident years.
For the three months ended March 31, 2021, the Company recognized $2 million of net favorable prior year reserve development, the principal components of which were: 
•$15 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to 2017, 2019 and 2020 catastrophe events.
•$12 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo and energy offshore books of business mainly related to the 2017 and 2020 accident years.
•$15 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. commercial management solutions, European program and European management liability solutions books of business mainly related to the 2018 accident year.
•$7 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 accident year.

Reinsurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:
Reinsurance segment
Reserve class and tail
Property and otherCredit and suretyProfessional linesMotorLiability
ShortMediumMediumLongLong
Reported lines of business
CatastropheX
PropertyX
Credit and suretyX
Professional linesX
MotorX
LiabilityX
EngineeringX
AgricultureX
Marine and aviationX
Accident and healthX


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Insurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:
Insurance segment
Reserve class and tail
Property and otherMarineAviationCredit and political riskProfessional linesLiability
ShortShortShort/MediumMediumMediumLong
Reported lines of business
PropertyX
MarineX
TerrorismX
AviationX
Credit and political riskX
Professional linesX
LiabilityX
Accident and healthX
Discontinued lines - NovaeXXX

Prior year reserve development by reserve class was as follows:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)
Property and other$12,486 $6,907 $63,167 $42,688 
Marine4,189 4,095 23,411 633 
Aviation3,958 (326)9,802 5,667 
Credit and political risk7,610 871 6,294 (223)
Professional lines(20,759)(7,287)(68,405)(19,086)
Liability(2,066)(3,990)(20,918)(25,158)
Total$5,418 $270 $13,351 $4,521 
  Three months ended March 31,
  20222021
Favorable
(Adverse)		Favorable
(Adverse)
Property and other$24,786 $969 
Credit and surety7,465 (4,939)
Professional lines(24,522)(2,204)
Motor(1,730)17,140 
Liability(4,105)(7,154)
Total$1,894 $3,812 

For the three months ended September 30, 2021, weMarch 31, 2022, the Company recognized $5 million of net favorable prior year reserve development, the principal components of which were: 
•$12 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2017 to 2020 catastrophe events and better than expected loss emergence attributable to the global property and E&S property books of business related to the 2020 accident year.
•$8 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2019 and 2020 accident year.
•$4 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to the cargo and specie books of business mainly related to the 2018 and 2020 accident years.
•$4 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence mainly related to the 2020 accident year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$21 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International cyber program book of business mainly related to the 2019 accident year, the International management liability solutions book of business mainly related to the 2016 to 2019 accident years and the U.S. professional firms book of business mainly related to the 2018 and 2019 accident years.
For the three months ended September 30, 2020, we recognized $0.3 million of net favorable prior year reserve development, the principal components of which were: 
•$7 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2019 catastrophe events.
•$4 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence mainly related to the 2018 accident year.
•$7 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European professional indemnity and financial institutions books of business mainly related to the 2018 accident year and an increase in the loss estimate attributable to a specific large claim related to the 2009 accident year.
•$4 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the primary casualty, U.S. excess casualty and program books of business mainly related to 2017 and 2018 accident years.
For the nine months ended September 30, 2021, we recognized $13 million of net favorable prior year reserve development, the principal components of which were: 
•$63 million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific large claims related to the 2011 and 2012 accident years, better than expected loss emergence attributable to the 2017 to 2020 catastrophe events, the global property and E&S property books of business related to the 2020 accident year and the accident and health book of business related to the 2019 and 2020 accident years.
•$23 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo, offshore energy and specie books of business mainly related to the 2017, 2018 and 2020 accident years and decreases in loss estimates attributable to specific large claims related to 2012 accident year.
•$10 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence attributable to the International book of business related to the 2020 accident year.
•$6 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2019 accident year.
•$68 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International management liability solutions and financial institutions books of businesses related to the 2016 to 2019 accident years, the professional firms book of business mainly related to the 2018 and 2019 accident years, the International cyber book of business mainly related to the 2019 accident year, the U.S. commercial management solutions book of business mainly related to the 2018 and 2019 accident years and the European program and European management liability solutions books of business mainly related to the 2018 accident year.
•$21 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 and 2019 accident years.
For the nine months ended September 30, 2020, we recognized $5 million of net favorable prior year reserve development, the principal components of which were: 
•$43 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence related to 2018 and 2019 accident years, and to the 2017 to 2019 catastrophe events, and decreases in loss estimates attributable to specific large claims related to the 2014 and 2016 accident years.
•$6 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence related to the 2018 and 2019 accident years.
•$25 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the primary casualty, U.S. excess casualty and program books of business mainly related to the 2017 and 2018 accident years.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$19 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European professional indemnity and financial institutions books of business and the commercial management solutions book of business mainly related to the 2018 and 2019 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2009 accident year.

Reinsurance Segment:
The following table maps lines of business to reserve classes and the expected claim tails:
Reinsurance segment
Reserve class and tail
Property and otherCredit and suretyProfessional linesMotorLiability
ShortMediumMediumLongLong
Reported lines of business
CatastropheX
PropertyX
Credit and suretyX
Professional linesX
MotorX
LiabilityX
EngineeringX
AgricultureX
Marine and aviationX
Accident and healthX
Discontinued lines - NovaeXXX

Prior year reserve development by reserve class was as follows:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Favorable
(Adverse)		Favorable
(Adverse)		Favorable
(Adverse)		Favorable
(Adverse)
Property and other$(5,486)$3,126 $7,792 $(4,961)
Credit and surety8,624 11,184 (1,231)27,927 
Professional lines(3,244)(13,776)(14,048)(13,493)
Motor8,345 1,214 38,431 18,732 
Liability(2,645)(1,434)(21,157)(23,375)
Total$5,594 $314 $9,787 $4,830 

For the three months ended September 30, 2021, we recognized $6$2 million of net favorable prior year reserve development, the principal components of which were:
•$925 million of net favorable prior year reserve development on creditproperty and suretyother business primarily due to better than expected loss emergence attributable to the European surety book2018, 2019 and 2021 catastrophe events, and an aggregate excess of business related to several accident years.loss treaty.
•$8 million of net favorable prior year reserve development on motor business primarily due to proportional treaty business mainly related to the 2018 and 2019 accident years.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$5 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the engineering line of business mainly related to the 2016 to 2019 accident years, and attributable to the 2017 and 2020 catastrophe events, partially offset by better than expected loss emergence attributable to the agriculture book of business mainly related to the 2020 accident year.
For the three months ended September 30, 2020, we recognized $0.3 million of net favorable prior year reserve development, the principal components of which were:
•$117 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to recent accidents years.
•$25 million of net adverse prior year development on professional linesbusinessprimarily due to an increase in loss estimates attributable to one cedant related to the 2016 to 2018 accident years and a specific large claim related to the 2017 and 2019accident year.
•$4 million of net adverse prior year development on liability business primarily due to an increase in loss estimates attributable to a specific large claim related to the 2018 accident year.
For the three months ended March 31, 2021, the Company recognized $4 million of net favorable prior year reserve development, the principal components of which were:
•$17 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business related to several accident years.
•$147 million of net adverse prior year reserve development on professional linesliability business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 20162017 accident year and reserve strengthening within the European book of business mainly related to the 2016 to 2018 accident years.
For the nine months ended September 30, 2021, we recognized $10 million of net favorable prior year reserve development, the principal components of which were:
•$38 million of net favorable prior year reserve development on motor business primarily due to proportional and non-proportional treaty business mainly related to 2016 and older accident years.year.
•$8 million of net favorable prior year development on property and other business primarily due to decreases in the loss estimates attributable to specific large claims related to the 2009, 2019 and 2020 accident years, better than expected loss emergence attributable to the 2017 to 2019 catastrophe events, and to the accident and health book of business mainly related to the 2020 accident year, partially offset by reserve strengthening within the engineering line of business mainly related to the 2016 to 2019 accident years and attributable to the 2020 catastrophe events.
•$215 million of net adverse prior year reserve development on liability business primarily due to increases in loss estimates attributable to specific large claims related to the 2017 accident year and reserve strengthening within the commercial auto liability and U.S. multiline/regional books of business related to the 2018 accident year.
•$14 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. and European books of business related to the 2015 to 2018 accident year and increases in the loss estimates attributable to specific large claims related to the 2015 to 2017 accident years.
For the nine months ended September 30, 2020, we recognized $5 million of net favorable prior year reserve development, the principal components of which were:
•$28 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to several accident years.
•$19 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business mainly related to the 2019 and older accident years.
•$23 million of net adverse prior year development on liability business primarily due to reserve strengthening within the U.S. casualty, the U.S. multiline/regional and the European books of business mainly related to the 2016 to 2019 accident years.
•$13 million of net adverse prior year reserve development on professional lines business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 20162020 accident year and reserve strengthening within the European book of business mainly related to the 2016 to 2018 accident years.year.
•
$5 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the engineering line of business mainly related to the 2016 to 2018 accident years, and the marine and aviation line of business mainly related to the 2017 accident year, partially offset by net favorable prior year reserve development within the property line of business due to better than expected loss emergence attributable to the 2019 catastrophe events.




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7.    EARNINGS PER COMMON SHARE
The following table presents a comparison of earnings (loss) per common share and earnings (loss) per diluted common share:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Earnings (loss) per common share
Net income (loss)$54,948 $(65,382)$413,716 $(123,167)
Less: Preferred share dividends7,563 7,563 22,688 22,688 
Net income (loss) available (attributable) to common shareholders47,385 (72,945)391,028 (145,855)
Weighted average common shares outstanding84,771 84,308 84,684 84,235 
Earnings (loss) per common share$0.56 $(0.87)$4.62 $(1.73)
Earnings (loss) per diluted common share
Net income (loss) available (attributable) to common shareholders$47,385 $(72,945)$391,028 $(145,855)
Weighted average common shares outstanding84,771 84,308 84,684 84,235 
    Share-based compensation plans(1)
565 — 507 — 
Weighted average diluted common shares outstanding85,336 84,308 85,191 84,235 
Earnings (loss) per diluted common share$0.56 $(0.87)$4.59 $(1.73)
Weighted average anti-dilutive shares excluded from the dilutive computation477 859 873 1,019 
(1) Due to the net loss attributable to common shareholders recognized for the three and nine months ended September 30, 2020, the share equivalents were anti-dilutive.
Three months ended March 31,
  20222021
Earnings per common share
Net income$149,200 $123,300 
Less: Preferred share dividends7,563 7,563 
Net income available to common shareholders141,637 115,737 
Weighted average common shares outstanding84,961 84,514 
Earnings per common share$1.67 $1.37 
Earnings per diluted common share
Net income available to common shareholders$141,637 $115,737 
Weighted average common shares outstanding84,961 84,514 
    Share-based compensation plans847 451 
Weighted average diluted common shares outstanding85,808 84,965 
Earnings per diluted common share$1.65 $1.36 
Weighted average anti-dilutive shares excluded from the dilutive computation989 1,697 


8.    SHARE-BASED COMPENSATION

Performance Restricted Stock Units

Performance Restricted Stock Units granted in 20212022

Performance restricted stock units granted in 20212022 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 20212022 were share-settled awards.

Valuation assumptions

The fair value of performance restricted stock units granted in 20212022 was measured on the grant date using a Monte Carlo simulation model.

The following table provides details of the significant inputs used in the Monte Carlo simulation model:


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8.    SHARE-BASED COMPENSATION (CONTINUED)
The following table provides details of the significant inputs used in the Monte Carlo simulation model:
Nine months ended September 30,2021
Expected volatility32.99%
Expected term (in years)3.0
Expected dividend yieldn/a
Risk-free interest rate0.17%
Three months ended March 31,20222021
Expected volatility33.44%32.99%
Expected term (in years)3.03.0
Expected dividend yieldn/an/a
Risk-free interest rate1.26%0.17%

Beginning share price: The beginning share price iswas based on the average closing share price over the 10 trading days preceding and including the start of the performance period.

Ending share price: The ending share price iswas based on the average projected closing share price over the 10 trading days preceding and including the end of the performance period.

Expected volatility: The expected volatility is estimated based on the Company's historical share price volatility.

Expected term: Performance for awards granted in 2022 is measured from January 1, 2022 to December 31, 2024, and performance for awards granted in 2021 is measured from January 1, 2021 to December 31, 2023.

Expected dividend yield: The expected dividend yield is not applicable to the performance restricted stock units as dividends are paid at the end of the vesting period and do not affect the value of the performance restricted stock units.

Risk-free interest rate: The risk free rate is estimated based on the yield on a U.S. treasury zero-coupon bond issued with a remaining term equal to the vesting period of the performance restricted stock units.

Compensation expense associated with performance restricted stock units granted in 2022 and 2021 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model. The fair value of these awardsmodel, and is recognized on a straight-line basis over the requisite service period.

Performance Restricted Stock Units granted in 2020 and 2019
Performance restricted stock units granted in 2020 and 2019 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 75% to 125% of target. Performance restricted stock units granted in 2020 and 2019 were share-settled awards.

Compensation expense associated with performance restricted stock units granted in 2020 and 2019 is determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards is recognized on a straight-line basis over the requisite service period and is subject to periodic adjustment based on the achievement of established performance criteria during the performance period.

Performance Restricted Stock Units granted in 2018
Performance restricted stock units granted in 2018 included a performance condition which was growth in the Company’s book value per diluted common share adjusted for dividends over three years compared to its peer group. Growth in book value per diluted common share adjusted for dividends was calculated in accordance with the terms of the applicable award agreements. Where performance goals were achieved, these awards cliff vested at the end of a three-year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 2018 were share-settled awards.

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8.    SHARE-BASED COMPENSATION (CONTINUED)
Compensation expense associated with performance restricted stock units granted in 2018 was determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards was recognized on a straight-line basis over the requisite service period and was subject to periodic adjustment based on the achievement of established performance criteria during the performance period.

Share-Settled Awards

The following table provides an activity summary of the Company's share-settled restricted stock units for the ninethree months ended September 30, 2021:
Share-Settled Performance
Restricted Stock Units		Share-Settled Service
Restricted Stock Units
Number of
restricted
stock units
Weighted 
average
grant date
fair value
Number of
restricted
stock units
Weighted  average
grant date
fair value
Non-vested restricted stock units - beginning of period289 $55.92 1,501 $56.50 
     Granted122 49.04 1,234 48.03 
     Vested(66)48.89 (555)56.47 
     Forfeited(4)62.26 (76)54.70 
Non-vested restricted stock units - end of period341 $54.74 2,104 $51.61 
March 31, 2022:
Share-Settled Performance
Restricted Stock Units		Share-Settled Service
Restricted Stock Units
Number of
restricted
stock units
Weighted 
average
grant date
fair value
Number of
restricted
stock units
Weighted  average
grant date
fair value
Non-vested restricted stock units - beginning of period311 $54.75 2,062 $51.59 
     Granted140 68.63 927 56.00 
     Vested(100)54.70 (646)52.57 
     Forfeited— — (21)51.34 
Non-vested restricted stock units - end of period351 $60.15 2,322 $53.08 

Cash-Settled awards

The following table provides an activity summary of the Company's cash-settled restricted stock units for the ninethree months ended September 30, 2021:March 31, 2022:
Cash-Settled Service
Restricted Stock Units
Number of
restricted stock units
Non-vested restricted stock units - beginning of period471215 
     Granted— 
     Vested(231)(139)
     Forfeited(18)(2)
Non-vested restricted stock units - end of period22274 

The following table provides additional information related to share-based compensation:
Nine months ended September 30,20212020
Share-based compensation expense(1)
$37,394 $36,178 
Tax benefits associated with share-based compensation expense$6,248 $6,036 
Liability for cash-settled restricted stock units(2)
$6,697 $10,160 
Fair value of restricted stock units vested(3)
$42,582 $46,939 
Unrecognized share-based compensation expense$95,636 $83,978 
Expected weighted average period associated with the recognition of unrecognized share-based compensation expense2.6 years2.5 years
Three months ended March 31,20222021
Share-based compensation expense(1)
$15,011 $12,339 
Tax benefits associated with share-based compensation expense$2,426 $1,771 
Liability for cash-settled restricted stock units(2)
$3,023 $4,626 
Fair value of restricted stock units vested(3)
$46,970 $39,981 
Unrecognized share-based compensation expense$125,964 $122,163 
Expected weighted average period associated with the recognition of unrecognized share-based compensation expense2.9 years3.0 years
(1) Related to share-settled restricted stock units and cash-settled restricted stock units.
(2) Included in other liabilities in the consolidated balance sheets.
(3) Fair value is based on the closing price of the Company's common shares on the vest date.

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9.    SHAREHOLDERS' EQUITY
The following table presents changes in common shares issued and outstanding:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Shares issued, balance at beginning of period176,580 176,580 176,580 176,580 
Shares issued— — — — 
Total shares issued at end of period176,580 176,580 176,580 176,580 
Treasury shares, balance at beginning of period(91,813)(92,274)(92,227)(92,621)
Shares repurchased(4)(2)(201)(155)
Shares reissued10 5 621 505 
Total treasury shares at end of period(91,807)(92,271)(91,807)(92,271)
Total shares outstanding84,773 84,309 84,773 84,309 
  Three months ended March 31,
  20222021
Shares issued, balance at beginning of period176,580 176,580 
Shares issued— — 
Total shares issued at end of period176,580 176,580 
Treasury shares, balance at beginning of period(91,806)(92,227)
Shares repurchased(245)(189)
Shares reissued747 589 
Total treasury shares at end of period(91,304)(91,827)
Total shares outstanding85,276 84,753 
Treasury Shares
The following table presents common shares repurchased from shares held in Treasury:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
In the open market:
Total shares— — — — 
Total cost$— $— $— $— 
Average price per share(1)
$— $— $— $— 
From employees:(2)
Total shares4 2 201 155 
Total cost$206 $84 $10,025 $8,685 
Average price per share(1)
$49.91 $46.85 $49.87 $55.94 
Total shares repurchased:
Total shares4 2 201 155 
Total cost$206 $84 $10,025 $8,685 
Average price per share(1)
$49.91 $46.85 $49.87 $55.94 
  Three months ended March 31,
  20222021
In the open market:
Total shares— — 
Total cost$— $— 
Average price per share(1)
$— $— 
From employees:(2)
Total shares245 189 
Total cost$12,977 $9,380 
Average price per share(1)
$52.93 $49.73 
Total shares repurchased:
Total shares245 189 
Total cost$12,977 $9,380 
Average price per share(1)
$52.93 $49.73 
(1) Calculated using whole numbers.
(2)  Shares are repurchased from employees to satisfyfacilitate the satisfaction of their personal withholding tax liabilities related tothat arise on the vesting of share-settled restricted stock units.
Dividends
The following table presents dividends declared and paid related to the Company's common and preferred shares:
Per share data
Dividends declaredDividends paid in period of declarationDividends paid in period following declaration
Three months ended September 30, 2021
   Common shares$0.42 $— $0.42 
   Series E preferred shares$34.38 $— $34.38 
Three months ended September 30, 2020
   Common shares$0.41 $— $0.41 
   Series E preferred shares$34.38 $— $34.38 
Nine months ended September 30, 2021
   Common shares$1.26 $0.84 $0.42 
   Series E preferred shares$103.13 $68.75 $34.38 
Nine months ended September 30, 2020
   Common shares$1.23 $0.82 $0.41 
   Series E preferred shares$103.13 $68.75 $34.38 
Per share data
Dividends declaredDividends paid in period of declarationDividends paid in period following declaration
Three months ended March 31, 2022
   Common shares$0.43 $— $0.43 
   Series E preferred shares$34.38 $— $34.38 
Three months ended March 31, 2021
   Common shares$0.42 $— $0.42 
   Series E preferred shares$34.38 $— $34.38 

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10.    DEBT AND FINANCING ARRANGEMENTS
a)Letters of Credit

Effective March 31, 2021,2022, certain of AXIS Capital’s operating subsidiaries (the "Participating Subsidiaries") amended their existing $750$650 million secured letter of credit facility to: (i)to extend the expiration date of the $250$150 million secured letter of credit facility to March 31, 2022,2023, with each letter of credit provided pursuant to such credit facility having a tenor not to extend beyond March 31, 2023; (ii) reduce2024. The terms and conditions of the utilization capacity available under the $250$500 million secured letter of credit facility to $150 million, reducing the maximum aggregate utilization capacity of the credit facility from $750 million to $650 million; and (iii) make administrative changes to the remaining $500 million secured letter of credit facility.

Letters of credit issued under the secured letter of credit facility are principally used to support the reinsurance obligations of the Participating Subsidiaries. The Participating Subsidiaries are subject to certain covenants, including the requirement to maintain sufficient collateral to cover the obligations outstanding under the facilities. Such obligations include contingent reimbursement obligations for outstanding letters of credit and fees payable to Citibank Europe plc. In the event of default, Citibank Europe plc may exercise certain remedies, including the exercise of control over pledged collateral and the termination facility to any or all of the Participating Subsidiaries.remain unchanged.

11.    COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.

The Company is not party to any material legal proceedings arising outside the ordinary course of business.

Investments

Refer to Note 3 - 'Investments' for information on the Company's unfunded investment commitments related to the Company's other investment portfolio.


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12.    OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the tax effects allocated to each component of other comprehensive income (loss):
20212020
Before tax amountIncome tax (expense) benefitNet of tax amountBefore tax amountIncome tax (expense) benefitNet of Tax Amount
Three months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized$(65,321)$7,143 $(58,178)$105,932 $(10,820)$95,112 
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized370 — 370 218 2 220 
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)(16,438)1,858 (14,580)(33,100)3,970 (29,130)
Unrealized gains (losses) arising during the period, net of reclassification adjustment(81,389)9,001 (72,388)73,050 (6,848)66,202 
Foreign currency translation adjustment(3,807)— (3,807)2,310 — 2,310 
Total comprehensive income (loss), net of tax$(85,196)$9,001 $(76,195)$75,360 $(6,848)$68,512 
Nine months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized$(204,587)$25,440 $(179,147)$243,522 $(33,139)$210,383 
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized131 — 131 (110)(2)(112)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)(94,018)7,837 (86,181)(38,584)8,295 (30,289)
Unrealized gains (losses) arising during the period, net of reclassification adjustment(298,474)33,277 (265,197)204,828 (24,846)179,982 
Foreign currency translation adjustment924 — 924 (1,581)— (1,581)
Total other comprehensive income (loss), net of tax$(297,550)$33,277 $(264,273)$203,247 $(24,846)$178,401 
20222021
Before tax amountIncome tax (expense) benefitNet of tax amountBefore tax amountIncome tax (expense) benefitNet of Tax Amount
Three months ended March 31,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized$(507,969)$65,247 $(442,722)$(196,066)$24,235 $(171,831)
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized(232)— (232)47 — 47 
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income52,916 (7,573)45,343 (30,876)1,877 (28,999)
Unrealized gains (losses) arising during the period, net of reclassification adjustment(455,285)57,674 (397,611)(226,895)26,112 (200,783)
Foreign currency translation adjustment2,775 — 2,775 1,249 — 1,249 
Total comprehensive income (loss), net of tax$(452,510)$57,674 $(394,836)$(225,646)$26,112 $(199,534)

The following table presents details of amounts reclassified from accumulated other comprehensive income ("AOCI") to net income (loss):
Amount reclassified from AOCI(1)
AOCI ComponentsConsolidated statement of operations line item that includes reclassification adjustmentThree months ended September 30,Nine months ended September 30,
2021202020212020
Unrealized gains (losses) on available for sale investments
Other realized gains (losses)$16,460 $33,284 $94,040 $40,070 
Impairment losses(22)(184)(22)(1,486)
Total before tax16,438 33,100 94,018 38,584 
Income tax (expense) benefit(1,858)(3,970)(7,837)(8,295)
Net of tax$14,580 $29,130 $86,181 $30,289 
Amount reclassified from AOCI(1)
AOCI ComponentsConsolidated statement of operations line item that includes reclassification adjustmentThree months ended March 31,
20222021
Unrealized gains (losses) on available for sale investments
Other realized gains (losses)$(52,807)$30,876 
Impairment losses(109)— 
Total before tax(52,916)30,876 
Income tax (expense) benefit7,573 (1,877)
Net of tax$(45,343)$28,999 
(1)     Amounts in parentheses are charges to net income (loss).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13.    RELATED PARTY TRANSACTIONS

At September 30, 2021,March 31, 2022, the Company has invested $14 million with Rialto Real Estate Fund IV-Property and $14$11 million in co-investments with Rialto Real Estate Fund IV-Property, a fund managed by a portfolio companyGordon Brothers, an affiliate of Stone Point's private equity fund, Trident VII L.P.Point.

At September 30, 2021, the Company has invested $8 million in Stone Point's private equity fund, T-VIII Mercury Co-Invest LP.

At September 30, 2021, the Company has invested $8 million in Stone Point Credit Corporation.

On June 29, 2021, the Company invested $10 million in 7.25% fixed to floating rate, senior unsecured notes due 2031, issued by Harrington.



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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 and our financial condition at September 30, 2021March 31, 2022 and December 31, 2020.2021. This should be read in conjunction with Item 1 'Consolidated Financial Statements' of this report and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. Tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.
 
 Page  
ThirdFirst Quarter 20212022 Financial Highlights
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Overview
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Consolidated Results of Operations
5553
Results by Segment:
i) Insurance Segment
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ii) Reinsurance Segment
6159
Net Investment Income and Net Investment Gains (Losses)
6663
Other Expenses (Revenues), Net
6865
Financial Measures
7067
Non-GAAP Financial Measures Reconciliation
7269
Cash and Investments
7572
Liquidity and Capital Resources
7875
Critical Accounting Estimates
7976
Recent Accounting Pronouncements
7976
Off-Balance Sheet and Special Purpose Entity Arrangements
79


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THIRDFIRST QUARTER 20212022 FINANCIAL HIGHLIGHTS

ThirdFirst Quarter 20212022 Consolidated Results of Operations
 
•Net income available to common shareholders of $47$142 million, or $0.56$1.67 per common share, and $0.56$1.65 per diluted common share
•Operating income(1) of $1$180 million, or $0.01$2.09 per diluted common share(1)
•Gross premiums written of $1.6$2.6 billion
•Net premiums written of $1.0$1.8 billion
•Net premiums earned of $1.2$1.3 billion
•Pre-tax catastrophe and weather-related losses, net of reinsurance, and reinstatement premiums, of $250$60 million (Insurance: $105$33 million and Reinsurance: $145$27 million), or 20.74.7 points, onincluding $30 million attributable to the current accident year loss ratio,Russia-Ukraine war. The remaining losses of $30 million were primarily attributable to Hurricane Ida, July EuropeanEastern Australia floods, and other weather-related events.
•Net favorable prior year reserve development of $11$9 million
•Underwriting lossincome(2) of $59$139 million and combined ratio of 107.4%91.4%
•Net investment income of $107$91 million
•Net investment gainslosses of $11$95 million
•Foreign exchange gains of $28$44 million
ThirdFirst Quarter 20212022 Consolidated Financial Condition 
•Total cash and investments of $16.5$16.0 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 87%86% of total cash and investments and have an average credit rating of AA-
•Total assets of $27.9$27.8 billion
•Reserve for losses and loss expenses of $14.7$14.5 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $5.5$5.6 billion
•Total debtDebt of $1.3 billion and debt to total capital ratio(3) of 19.7%20.4%
•Common shareholders’ equity of $4.8$4.6 billion; book value per diluted common share of $54.86

$51.97



(1)Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to, net income (loss), the most comparable GAAP financial measure, net income (loss), is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations', and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.    
(3)The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt.

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OVERVIEW

Business Overview
AXIS Capital Holdings Limited ("AXIS Capital"), through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with operations in Bermuda, the U.S., Europe, Singapore and Canada. Our underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re.
We provide our clients and distribution partners with a broad range of risk transfer products and services, and meaningful capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service, intelligent risk taking and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first ninethree months of 20212022 included the following:

•increasing our relevance in a select number of attractive specialty lines insurance and treaty reinsurance markets including U.S. excess and surplus lines, North America professional lines and Lloyd's specialty insurance business;

•continuing the implementation of a focused distribution strategy;

•re-balancing our portfolio towards less volatile lines of business that carry attractive returns;returns while deploying capital with risk limits, diversification and risk management;

•continuing the implementation of a focused distribution strategy while building mutually beneficial relationships with clients and partners;

•improving the effectiveness and efficiency of our operating platforms and processes;

•investing in data and technology capabilities, and tools to empower our underwriters and enhance the service that we provide to our customers;

•utilizing reinsurance markets and third party capital relationships;

•fostering a positive workplace environment that enables us to attract, retain and develop top talent; and

•growing our corporate citizenship program to give back to our communities and help contribute to a more sustainable future.










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Outlook

We are committed to leadership in specialty insurance and global reinsurance markets, where we have depth of talent and expertise. We believe our market positioning, underwriting expertise, best-in-class claims management capabilities and strong relationships with our distributors and clients will provide opportunities for increased profitability, with differences among our lines driven by our tactical response to market conditions.

Rates, and terms and conditions across virtually all insurance lines and geographies continued to be favorable through the thirdfirst quarter of 2021.2022. We expect many specialty segments will continue to experience further pricing improvements, as carriers assess pricing adequacy, portfolio construction, economic conditionsinflationary pressure and account preferences. In this market environment, we are focusingcontinue to focus on growth in lines of business and market segments that are adequately priced.

The reinsurance market is also experiencing an improvement in rates, and terms and conditions, butconditions. This is offset by market volatility and very strong industry capitalization, and more improvement is needed to achieve price adequacy. In light of 2021 marking the fifth consecutive year of losses, marketschallenging market loss events, carriers are aiming to reduce net volatility and increase profitability. However, the case for change is dampened due to the very strong industry capitalization. Overall, we believe the reinsurance market will continue to gain momentum and there are opportunities to achieve the required risk adjusted rate increases.increases while practicing disciplined underwriting and focused growth.

We are encouraged by the pricing improvements we are seeing across both the insurance and reinsurance segments, and that we expect will carry into 20222023 and beyond. Where prices deliver adequate profitability, we will look to grow within our risk and volatility guidelines. With a strengthened book of business, and growing footprint in attractive markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.

Response to Russia-Ukraine War

Following the Russian invasion of Ukraine and the triggering of sanctions against the countries involved, organizations and named individuals, we established a task-force to coordinate our response to this situation.

The Russia-Ukraine war, and its related impacts, are an emerging and evolving risk to which we are exposed from an underwriting and reserving perspective.

Our team is tracking the situation closely, including stress and scenario testing on existing underwriting exposures. A range of economic impacts and external pressures across individual product lines are being considered.

Underwriting

We are monitoring international sanctions which impact our global operations and were effective March 27, 2022. The impact on gross premiums written for the three months ended March 31, 2022 of the cancellation of policies with exposures to the Russia-Ukraine war was immaterial. We continue to evaluate opportunities to write business in the region, not including Russia or Ukraine risks, with terms as short as seven days.

We are also closely monitoring cash due from our customers and reinsurers, giving due consideration to the Russia-Ukraine war and associated international sanctions. At March 31, 2022, we considered the potential financial impact of Russia-Ukraine war when determining allowances for expected credit losses for insurance and reinsurance premium balances receivable and reinsurance recoverable balances on unpaid losses and loss expenses. Based on facts and circumstances at that time, we did not adjust allowances for expected credit losses at March 31, 2022. We will continue to monitor the appropriateness of allowances for expected credit losses as new information comes to light. Adjustments to allowances for expected credit losses in subsequent periods could be material.

Reserving

At March 31, 2022, we incurred pre-tax catastrophe and weather-related losses of $30 million attributable the Russia-Ukraine war.

The estimate of net reserves for losses and loss expenses related to the Russia-Ukraine war is subject to significant uncertainty. This uncertainty is driven by the inherent difficulty in making assumptions around the impact of the Russia-Ukraine war due to the lack of comparable events, the ongoing nature of the event, and its far-reaching impacts.

While we believe the overall estimate of net reserves for losses and loss expenses is adequate for losses and loss adjustment expenses that have been incurred at March 31, 2022, based on current facts and circumstances, we will continue to monitor the appropriateness

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of our assumptions as new information comes to light and will adjust the estimate of net reserves for losses and loss adjustment expenses, as appropriate.

Actual losses for this event may ultimately differ materially from current estimates.

Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further information

Investments

At March 31, 2022, we had no direct exposures to Russia or Ukraine within our investments portfolio.

Refer to Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K for further information.








































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CONSOLIDATED RESULTS OF OPERATIONS

  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Underwriting revenues:
Gross premiums written$1,646,489 24%$1,331,178 $6,123,156 12%$5,478,519 
Net premiums written996,471 22%815,982 3,979,215 12%3,550,960 
Net premiums earned1,211,427 11%1,091,312 3,472,090 6%3,283,941 
Other insurance related income (loss)7,665 nm1,440 16,262 nm(5,270)
Underwriting expenses:
Net losses and loss expenses(911,369)4%(879,677)(2,292,559)(7%)(2,464,012)
Acquisition costs(231,712)—%(230,564)(669,654)(4%)(697,716)
Underwriting-related general and administrative expenses(1)
(134,826)14%(117,835)(396,455)10%(361,623)
Underwriting income (loss)(58,815)(135,324)129,684 (244,680)
Net investment income107,339 5%101,956 326,174 36%240,098 
Net investment gains10,932 (80%)55,609 113,868 nm45,777 
Corporate expenses(1)
(23,134)10%(20,988)(82,365)10%(74,915)
Foreign exchange (losses) gains28,032 nm(60,734)4,316 nm(8,760)
Interest expense and financing costs(15,954)2%(15,574)(46,759)(22%)(59,641)
Reorganization expenses— nm(1,413)— nm(822)
Amortization of value of business acquired(1,028)—%(1,028)(3,083)(25%)(4,111)
Amortization of intangible assets(3,149)11%(2,838)(9,163)7%(8,564)
Income (loss) before income taxes and interest in income (loss) of equity method investments44,223 (80,334)432,672 (115,618)
Income tax (expense) benefit(1,186)nm12,056 (49,827)nm6,030 
Interest in income (loss) of equity method investments11,911 nm2,896 30,871 nm(13,579)
Net income (loss)54,948 (65,382)413,716 (123,167)
Preferred share dividends(7,563)—%(7,563)(22,688)—%(22,688)
Net income (loss) available (attributable) to common shareholders$47,385 $(72,945)$391,028 $(145,855)
  Three months ended March 31,
  2022% Change2021
Underwriting revenues:
Gross premiums written$2,634,608 4%$2,535,481 
Net premiums written1,812,872 2%1,778,886 
Net premiums earned1,258,246 14%1,103,722 
Other insurance related income6,693 nm2,781 
Underwriting expenses:
Net losses and loss expenses(732,699)3%(714,718)
Acquisition costs(248,352)13%(218,871)
Underwriting-related general and administrative expenses(1)
(145,096)9%(132,668)
Underwriting income(2)
138,792 40,246 
Net investment income91,355 (20%)114,165 
Net investment gains (losses)(94,508)nm29,645 
Corporate expenses(1)
(23,945)(7%)(25,740)
Foreign exchange (losses) gains44,273 nm(4,113)
Interest expense and financing costs(15,564)—%(15,571)
Amortization of value of business acquired— (100%)(1,028)
Amortization of intangible assets(2,729)1%(2,690)
Income before income taxes and interest in income of equity method investments137,674 134,914 
Income tax expense(24)(100%)(20,776)
Interest in income of equity method investments11,550 26%9,162 
Net income149,200 123,300 
Preferred share dividends(7,563)—%(7,563)
Net income available to common shareholders$141,637 $115,737 
nm – not meaningful is defined as a variance greater than +/-100%

(1)Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $23,134$23,945 and $20,988$25,740 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $82,365 and $74,915 for the nine months ended September 30, 2021 and 2020, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details on corporate expenses. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented in the table above. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.





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Underwriting Revenues

Underwriting revenues by segment were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Gross premiums written:
Insurance$1,176,500 26%$935,817 $3,548,169 22%$2,914,100 
Reinsurance469,989 19%395,361 2,574,987 —%2,564,419 
Total gross premiums written$1,646,489 24%$1,331,178 $6,123,156 12%$5,478,519 
Percent of gross premiums ceded
Insurance40%(2 pts)42%40%(1 pt)41%
Reinsurance39%8 pts31%28%(1 pt)29%
Total percent of gross premiums ceded40%1 pt39%35%0 pt35%
Net premiums written:
Insurance$707,492 30%$544,857 $2,128,190 23%$1,729,268 
Reinsurance288,979 7%271,125 1,851,025 2%1,821,692 
Total net premiums written$996,471 22%$815,982 $3,979,215 12%$3,550,960 
Net premiums earned:
Insurance$681,008 19%$570,184 $1,928,970 13%$1,709,268 
Reinsurance530,419 2%521,128 1,543,120 (2%)1,574,673 
Total net premiums earned$1,211,427 11%$1,091,312 $3,472,090 6%$3,283,941 
  Three months ended March 31,
  2022% Change2021
Gross premiums written:
Insurance$1,327,26420%$1,103,198
Reinsurance1,307,344(9%)1,432,283
Total gross premiums written$2,634,6084%$2,535,481
Percent of gross premiums ceded
Insurance36 %— pt36 %
Reinsurance26 %1 pt25 %
Total percent of gross premiums ceded31 %1 pt30 %
Net premiums written:
Insurance$843,91219%$707,814
Reinsurance968,960(10%)1,071,072
Total net premiums written$1,812,8722%$1,778,886
Net premiums earned:
Insurance$752,81622%$616,286
Reinsurance505,4304%487,436
Total net premiums earned$1,258,24614%$1,103,722

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations -– Results by Segment' for further details on underwriting revenues.

Underwriting ExpensesCombined Ratio

The components of the combined ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021
% Point
Change
20202021
% Point
Change
2020
Current accident year loss ratio excluding catastrophe and weather-related losses55.4 %(3.1)58.5 %55.4 %(2.4)57.8 %
Catastrophe and weather-related losses ratio20.7 %(1.5)22.2 %11.3 %(6.2)17.5 %
Current accident year loss ratio76.1 %(4.6)80.7 %66.7 %(8.6)75.3 %
Prior year reserve development ratio(0.9 %)(0.8)(0.1 %)(0.7 %)(0.4)(0.3 %)
Net losses and loss expenses ratio75.2 %(5.4)80.6 %66.0 %(9.0)75.0 %
Acquisition cost ratio19.1 %(2.0)21.1 %19.3 %(1.9)21.2 %
General and administrative expense ratio(1)
13.1 %0.312.8 %13.8 %0.413.4 %
Combined ratio107.4 %(7.1)114.5 %99.1 %(10.5)109.6 %
  Three months ended March 31,
  2022
% Point
Change
2021
Current accident year loss ratio, excluding catastrophe and weather-related losses54.2 %(0.9)55.1 %
Catastrophe and weather-related losses ratio4.7 %(5.4)10.1 %
Current accident year loss ratio58.9 %(6.3)65.2 %
Prior year reserve development ratio(0.7 %)(0.3)(0.4 %)
Net losses and loss expenses ratio58.2 %(6.6)64.8 %
Acquisition cost ratio19.7 %(0.1)19.8 %
General and administrative expense ratio(1)
13.5 %(0.8)14.3 %
Combined ratio91.4 %(7.5)98.9 %
(1) The general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 1.9% and 1.9%2.3% for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 2.4% and 2.3% for the nine months ended September 30, 2021 and 2020, respectivelyrespectively. Refer to 'Management’s 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net'for further detailsdetails.
.

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations -– Results by Segment' for further details on underwriting expenses.

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RESULTS BY SEGMENT

Insurance Segment

Results for the insurance segment were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Revenues:
Gross premiums written$1,176,500 26%$935,817 $3,548,169 22%$2,914,100 
Net premiums written707,492 30%544,857 2,128,190 23%1,729,268 
Net premiums earned681,008 19%570,184 1,928,970 13%1,709,268 
Other insurance related income468 (32%)688 1,435 (31%)2,091 
Expenses:
Current accident year net losses and loss expenses(448,099)(443,659)(1,145,104)(1,257,090)
Prior year reserve development5,418 270 13,351 4,521 
Acquisition costs(123,529)(114,569)(348,172)(343,579)
Underwriting-related general and administrative expenses(104,905)(94,379)(307,777)(284,909)
Underwriting income (loss)$10,361 $(81,465)$142,703 $(169,698)
Ratios:
% Point
Change
% Point
Change
Current accident year loss ratio excluding catastrophe and weather-related losses50.8 %(3.9)54.7 %51.6 %(3.2)54.8 %
Catastrophe and weather-related losses ratio15.0 %(8.1)23.1 %7.8 %(10.9)18.7 %
Current accident year loss ratio65.8 %(12.0)77.8 %59.4 %(14.1)73.5 %
Prior year reserve development ratio(0.8 %)(0.8)— %(0.7 %)(0.5)(0.2 %)
Net losses and loss expenses ratio65.0 %(12.8)77.8 %58.7 %(14.6)73.3 %
Acquisition cost ratio18.1 %(2.0)20.1 %18.0 %(2.1)20.1 %
Underwriting-related general and administrative expense ratio15.4 %(1.1)16.5 %16.0 %(0.7)16.7 %
Combined ratio98.5 %(15.9)114.4 %92.7 %(17.4)110.1 %
  Three months ended March 31,
  2022% Change2021
Revenues:
Gross premiums written$1,327,26420%$1,103,198
Net premiums written843,91219%707,814
Net premiums earned752,81622%616,286
Other insurance related income82(80%)415
Expenses:
Current accident year net losses and loss expenses(412,807)(358,403)
Prior year reserve development7,0621,505
Acquisition costs(138,812)(117,679)
Underwriting-related general and administrative expenses(113,950)(103,303)
Underwriting income$94,391$38,821
Ratios:
% Point
Change
Current accident year loss ratio, excluding catastrophe and weather-related losses50.5 %(1.8)52.3 %
Catastrophe and weather-related losses ratio4.3 %(1.6)5.9 %
Current accident year loss ratio54.8 %(3.4)58.2 %
Prior year reserve development ratio(0.9 %)(0.6)(0.3 %)
Net losses and loss expenses ratio53.9 %(4.0)57.9 %
Acquisition cost ratio18.4 %(0.7)19.1 %
Underwriting-related general and administrative expense ratio15.2 %(1.6)16.8 %
Combined ratio87.5 %(6.3)93.8 %


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Gross Premiums Written

Gross premiums written by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  20212020
%
Change
20212020
%
Change
Property$273,216 24 %$238,599 26 %15%$855,395 24 %$741,043 27 %15%
Marine87,463 7 %82,810 9 %6%389,472 11 %355,503 12 %10%
Terrorism14,167 1 %14,767 2 %(4%)46,250 1 %42,296 1 %9%
Aviation32,954 3 %22,702 2 %45%83,098 2 %63,725 2 %30%
Credit and political risk27,651 2 %24,473 3 %13%108,242 3 %100,151 3 %8%
Professional lines465,469 40 %338,907 36 %37%1,267,030 36 %943,635 32 %34%
Liability228,306 19 %172,747 18 %32%663,088 19 %548,023 19 %21%
Accident and health46,644 4 %39,262 4 %19%134,971 4 %117,743 4 %15%
Discontinued lines - Novae630 — %1,550 — %nm623 — %1,981 — %nm
Total$1,176,500 100 %$935,817 100 %26%$3,548,169 100 %$2,914,100 100 %22%
nm – not meaningful
  Three months ended March 31,
  20222021% Change
Property$284,937 21 %$261,787 23 %9%
Marine198,551 15 %187,948 17 %6%
Terrorism22,982 2 %19,744 2 %16%
Aviation25,967 2 %20,402 2 %27%
Credit and political risk47,499 4 %37,451 3 %27%
Professional lines435,865 33 %337,765 31 %29%
Liability253,162 19 %193,254 18 %31%
Accident and health58,301 4 %44,847 4 %30%
Total$1,327,264 100 %$1,103,198 100 %20%

Gross premiums written for the three months ended September 30, 2021 March 31, 2022 increased by $241$224 million, or 26%20% ($228 million, or 24%21%, on a constant currency basis(1)), compared to the three months ended September 30, 2020.March 31, 2021. The increase was primarily attributable to professional lines, liability, property, aviation, and accident and health lines.

The increases in professional lines, liability and property lines were due todriven by new business and favorable rate changes. The increase in accident and health lines was due to the timing of renewals. The increase in aviation lines was due to premium adjustments and new business together with favorable rate changes and timing differences on renewed business.

Gross premiums written for the nine months ended September 30, 2021 increased by $634 million, or 22% ($596 million, or 20%, on a constant currency basis(1)), compared to the nine months ended September 30, 2020. The increase was primarily attributable to professional lines, liability, property, marine, aviation, and accident and health lines.

The increases in professional lines, liability, property and marine lines were due to new business and favorable rate changes. The increase in aviation lines was due to premium adjustments, new business and favorable rate changes. The increase in accident and health lines was due to new business and the timing of renewals.

Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2021,March 31, 2022, was $469$483 million, or 40%36%, of gross premiums written, compared to $391$395 million, or 42%36%, of gross premiums written for the three months ended September 30, 2020. March 31, 2021.

The increase in ceded premiums written of $78$88 million, or 20%22%, was primarily driven by increases in property, liability and professional lines.

The increase in property lines was attributable to the restructuring of significant quota share treaties. The increase in property lines also reflected the increase in gross premiums written for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increases in liability and professional lines and liability lines.reflected the increase in gross premiums written for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Ceded premiums written for the nine months ended September 30, 2021, was $1.4 billion, or 40%, of gross premiums written, compared to $1.2 billion, or 41%, of gross premiums written fo
r the
nine months ended

September 30, 2020. The increase in ceded premiums written of $235 million, or 20%
,
was primarily driven by increases in professional lines, liability, property, and accident and health lines, partially offset by a decrease in marine lines.










(1) Amounts presented on a constant currency basis are non-GAAP financial measures as defined in Item10 (e) of SEC Regulation S-K. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to the prior year balance.

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Net Premiums Earned

Net premiums earned by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  20212020
%
Change
20212020
%
Change
Property$169,600 25 %$145,717 27 %16%$486,467 25 %$452,876 26 %7%
Marine89,700 13 %76,544 13 %17%261,574 14 %220,248 13 %19%
Terrorism13,303 2 %11,728 2 %13%38,055 2 %34,675 2 %10%
Aviation21,104 3 %19,039 3 %11%62,235 3 %51,236 3 %21%
Credit and political risk22,156 3 %23,781 4 %(7%)65,926 3 %77,721 5 %(15%)
Professional lines236,380 35 %179,441 31 %32%651,649 34 %530,651 31 %23%
Liability90,136 13 %76,487 13 %18%253,220 13 %234,522 14 %8%
Accident and health38,072 6 %37,151 7 %2%109,089 6 %106,015 6 %3%
Discontinued lines - Novae557 — %296 — %nm755 — %1,324 — %nm
Total$681,008 100 %$570,184 100 %19%$1,928,970 100 %$1,709,268 100 %13%
nm – not meaningful
  Three months ended March 31,
  20222021
%
Change
Property$167,676 21 %$161,101 26 %4%
Marine94,912 13 %85,390 14 %11%
Terrorism12,476 2 %13,781 2 %(9%)
Aviation22,780 3 %17,722 3 %29%
Credit and political risk25,421 3 %20,998 3 %21%
Professional lines282,838 38 %203,275 33 %39%
Liability105,177 14 %77,827 13 %35%
Accident and health41,536 6 %36,192 6 %15%
Total$752,816 100 %$616,286 100 %22%

Net premiums earned for the three months ended September 30, 2021 March 31, 2022 increased by $111$137 million, or 19% ($101 million, or 18%, on a constant currency basis)22%, compared to the three months ended September 30, 2020.March 31, 2021. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property and marine lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines.

Net premiums earned for the nine months ended September 30, 2021 increased by $220 million, or 13% ($189 million, or 11%, on a constant currency basis), compared to the nine months ended September 30, 2020. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property, marine and aviation lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines and a decrease in gross premiums earned in credit and political risk lines.

Loss Ratio

The components of the loss ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
2021
% Point
Change
20202021
% Point
Change
2020
Current accident year loss ratio65.8 %(12.0)77.8 %59.4 %(14.1)73.5 %
Prior year reserve development ratio(0.8 %)(0.8)— %(0.7 %)(0.5)(0.2 %)
Loss ratio65.0 %(12.8)77.8 %58.7 %(14.6)73.3 %
  Three months ended March 31,
2022
% Point
Change
2021
Current accident year loss ratio54.8 %(3.4)58.2 %
Prior year reserve development ratio(0.9 %)(0.6)(0.3 %)
Loss ratio53.9 %(4.0)57.9 %

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 65.8% and 59.4%54.8% for the three and nine months ended September 30, 2021, respectively,March 31, 2022, from 77.8% and 73.5%58.2% for the three and nine months ended September 30, 2020, respectively.March 31, 2021.

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The decrease in the current accident year loss ratio for three and nine months ended September 30, 2021,March 31, 2022, compared to the same period in 2020,2021, was impacted by a slightly lower level of catastrophe and weather-related losses. During the three months ended September 30, 2021,March 31, 2022, catastrophe and weather-related losses, net of reinstatement premiums, were $105$33 million, or 15.04.3 points, primarilyincluding $16 million attributable to Hurricane Ida and other weather-related events. During the nine months ended September 30, 2021, catastrophe and weather-relatedRussia-Ukraine war. The remaining losses net of reinstatement premiums,$17 million were $152 million, or 7.8 points, primarily attributable to Hurricane Ida, Winter Storms Uri and Viola,Eastern Australia floods, and other weather-related events. Comparatively, during the three and nine months ended September 30, 2020,March 31, 2021, catastrophe and weather-related losses net of reinstatement premiums, were $132$36 million, or 23.1 points and $325 million, or 18.7 points, respectively.5.9 points.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 50.8%50.5% for the three months ended September 30, 2021,March 31, 2022, from 54.7%52.3% for the three months ended September 30, 2020. March 31, 2021.The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends and decreases in loss experiencemost lines of business, partially offset by changes in property lines, largelybusiness mix associated with repositioning the portfolio,increase in professional lines and credit and political risk lines.liability business written in recent periods.

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After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 51.6% for the nine months ended September 30, 2021, from 54.8% for the nine months ended September 30, 2020. The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends and a decrease in loss experience in property lines largely associated with repositioning the portfolio.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Acquisition Cost Ratio

The acquisition cost ratio decreased to 18.1% and 18.0%18.4% for the three and nine months ended September 30, 2021, respectively,March 31, 2022, from 20.1% and 20.1%19.1% for the three and nine months ended September 30, 2020, respectively, principallyMarch 31, 2021, primarily related to changes in business mix due to thea decrease in program business in Propertyvariable costs associated with property, marine, and accident and health lines, written in recent periods and an increase in ceding commissions.commissions in the property lines, partially offset by an increase in variable acquisition costs associated with professional lines.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense ratio decreased to 15.4%15.2% for the three months ended September 30, 2021,March 31, 2022, from 16.5%16.8% for the three months ended September 30, 2020,March 31, 2021, mainly driven by an increase in net premiums earned, partially offset by an increase in performance-related compensation costs, personnel costs, and information technology costs together with a decrease in fees related to arrangements with strategic capital partners.travel and entertainment costs.

The underwriting-related general and administrative expense ratio decreased to 16.0%for thenine months ended September 30, 2021, from 16.7% for the nine months ended September 30, 2020, mainly driven by an increase in net premiums earned, partially offset by an increase in personnel costs and a decrease in fees related to arrangements with strategic capital partners.

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Reinsurance SegmentNet Premiums Earned

Results from the reinsurance segmentNet premiums earned by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Revenues:
Gross premiums written$469,989 19%$395,361 $2,574,987 —%$2,564,419 
Net premiums written288,979 7%271,125 1,851,025 2%1,821,692 
Net premiums earned530,419 2%521,128 1,543,120 (2%)1,574,673 
Other insurance related income (loss)7,197 nm752 14,827 nm(7,361)
Expenses:
Current accident year net losses and loss expenses(474,282)(436,602)(1,170,593)(1,216,273)
Prior year reserve development5,594 314 9,787 4,830 
Acquisition costs(108,183)(115,995)(321,482)(354,137)
Underwriting-related general and administrative expenses(29,921)(23,456)(88,678)(76,714)
Underwriting income (loss)$(69,176)$(53,859)$(13,019)$(74,982)
Ratios:
% Point
Change
% Point
Change
Current accident year loss ratio excluding catastrophe and weather-related losses61.4 %(1.3)62.7 %60.2 %(0.9)61.1 %
Catastrophe and weather-related losses ratio28.0 %6.921.1 %15.7 %(0.4)16.1 %
Current accident year loss ratio89.4 %5.683.8 %75.9 %(1.3)77.2 %
Prior year reserve development ratio(1.0 %)(0.9)(0.1 %)(0.7 %)(0.4)(0.3 %)
Net losses and loss expenses ratio88.4 %4.783.7 %75.2 %(1.7)76.9 %
Acquisition cost ratio20.4 %(1.9)22.3 %20.8 %(1.7)22.5 %
Underwriting-related general and administrative expense ratio5.6 %1.14.5 %5.8 %0.94.9 %
Combined ratio114.4 %3.9110.5 %101.8 %(2.5)104.3 %
  Three months ended March 31,
  20222021
%
Change
Property$167,676 21 %$161,101 26 %4%
Marine94,912 13 %85,390 14 %11%
Terrorism12,476 2 %13,781 2 %(9%)
Aviation22,780 3 %17,722 3 %29%
Credit and political risk25,421 3 %20,998 3 %21%
Professional lines282,838 38 %203,275 33 %39%
Liability105,177 14 %77,827 13 %35%
Accident and health41,536 6 %36,192 6 %15%
Total$752,816 100 %$616,286 100 %22%
nm – not meaningful
Net premiums earned for the three months ended March 31, 2022 increased by $137 million, or 22%, compared to the three months ended March 31, 2021. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property and marine lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines.

Loss Ratio

The components of the loss ratio were as follows:
  Three months ended March 31,
2022
% Point
Change
2021
Current accident year loss ratio54.8 %(3.4)58.2 %
Prior year reserve development ratio(0.9 %)(0.6)(0.3 %)
Loss ratio53.9 %(4.0)57.9 %

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 54.8% for the three months ended March 31, 2022, from 58.2% for the three months ended March 31, 2021.

The current accident year loss ratio for three months ended March 31, 2022, compared to the same period in 2021, was impacted by a slightly lower level of catastrophe and weather-related losses. During the three months ended March 31, 2022, catastrophe and weather-related losses, were $33 million, or 4.3 points, including $16 million attributable to the Russia-Ukraine war. The remaining losses of $17 million were primarily to Eastern Australia floods, and other weather-related events. Comparatively, during the three months ended March 31, 2021, catastrophe and weather-related losses were $36 million, or 5.9 points.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 50.5% for the three months ended March 31, 2022, from 52.3% for the three months ended March 31, 2021.The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends in most lines of business, partially offset by changes in business mix associated with the increase in professional lines and liability business written in recent periods.

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Gross Premiums WrittenPrior Year Reserve Development

Gross premiums written by line of business were as follows:Refer to Item 1, Note 6 to the Consolidated Financial Statements
  Three months ended September 30,Nine months ended September 30,
  20212020
% 
Change
20212020
% 
Change
Catastrophe$88,396 18 %$74,656 18 %18%$472,441 17 %$526,646 21 %(10%)
Property38,584 8 %58,907 15 %(35%)209,364 8 %246,859 10 %(15%)
Credit and surety55,807 12 %38,110 10 %46%176,441 7 %189,180 7 %(7%)
Professional lines24,279 5 %31,752 8 %(24%)303,932 12 %267,047 10 %14%
Motor12,151 3 %(2,235)(1)%nm275,455 11 %319,867 12 %(14%)
Liability166,085 35 %136,791 35 %21%617,393 24 %505,322 20 %22%
Engineering(660)— %1,408 — %nm(5,590)— %20,334 1 %nm
Agriculture11,992 3 %7,455 2 %61%75,306 3 %69,599 3 %8%
Marine and aviation12,427 3 %6,341 2 %96%70,382 3 %62,202 2 %13%
Accident and health60,927 13 %41,820 11 %nm379,179 15 %356,123 14 %6%
Discontinued lines - Novae1 — %356 — %nm684 — %1,240 — %(45%)
Total$469,989 100 %$395,361 100 %19%$2,574,987 100 %$2,564,419 100 %—%
nm – not meaningful'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Gross premiums writtenAcquisition Cost Ratio

The acquisition cost ratio decreased to 18.4% for the three months ended March 31, 2022, from 19.1% for the three months ended March 31, 2021, primarily related to a decrease in variable costs associated with property, marine, and accident and health lines, and an increase in ceding commissions in the property lines, partially offset by an increase in variable acquisition costs associated with professional lines.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense ratio decreased to 15.2% for the three months ended September 30, 2021, increased by $75 million, or 19% ($71 million, or 18% on a constant currency basis), compared toMarch 31, 2022, from 16.8% for the three months ended September 30, 2020. TheMarch 31, 2021, mainly driven by an increase was primarily attributable to liability, accident and health, credit and surety, motor and catastrophe lines,in net premiums earned, partially offset by a decrease in property and professional lines.

The increases in liability, and accident and health lines were largely driven by favorable market conditions associated with renewals and new business. In addition, the timing of the renewals of large contracts contributed to thean increase in gross premiums written in accidentperformance-related compensation costs, personnel costs, and health lines. The increase in accidenttravel and health lines was also driven by premium adjustments. The increase in credit and surety lines was due to premium adjustments attributable to economic climate in the prior year. The increase in motor lines was due to the timing of the renewal of a significant contract. The increase in catastrophe lines was attributable to reinstatement premiums associated with significant catastrophe losses.

entertainment costs.
The decrease in property lines was driven by non-renewals and decreased line sizes on several contracts associated with repositioning the portfolio. The decrease in professional lines was due to prior year premium adjustments and a decreased line size on a significant contract.

Gross premiums written for the nine months ended September 30, 2021, increased by $11 million (decreased by $21 million, or 1%, on a constant currency basis), compared to the nine months ended September 30, 2020. The increase was primarily attributable to liability, professional lines, and accident and health lines, partially offset by catastrophe, motor, property, engineering and credit and surety lines.

The increases in liability, professional lines, and accident and health lines were driven by favorable market conditions associated with renewals and new business. The increase in liability lines was also due to the restructuring of several significant contracts. The increase in professional lines was also due to premium adjustments associated with favorable market conditions. The increases in accident and health lines was also due to the timing of the renewal of a significant contract.

The decrease in catastrophe lines was driven by non-renewals and decreased line sizes associated with the repositioning of the portfolio, partially offset by reinstatement premiums associated with significant catastrophe losses. The decreases in motor and property lines were driven by non-renewals and decreased line sizes associated with the repositioning of the portfolio. The decrease in engineering lines was driven by non-renewals and premium adjustments following the exit from this line of business in 2020. The decrease in credit and surety lines was driven by premium adjustments associated with the economic climate that prevailed in 2020.

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Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2021, was $181 million, or 39%, of gross premiums written, compared to $124 million, or 31%, of gross premiums written for the three months ended September 30, 2020.

The increase in ceded premiums written of $57 million, or 46%, was primarily driven by catastrophe, credit and surety, and liability lines.

The increase in catastrophe lines was attributable to an increase in premiums ceded to strategic partners due to the restructuring of several quota share retrocessional treaties together with premium adjustments. The increase in credit and surety lines was attributable to premium adjustments and the restructuring of an existing significant quota share retrocessional treaty. The increase in liability lines reflected the increase in gross premiums written for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, partially offset by a decrease in premiums ceded due to the restructuring of a significant quota share retrocessional treaty.

Ceded premiums written for the nine months ended September 30, 2021, was $724 million, or 28%, of gross premiums written, compared to $743 million, or 29%, of gross premiums written for the nine months ended September 30, 2020.

The decrease in ceded premiums written of $19 million, or 3%, was primarily driven by catastrophe and property lines, partially offset by an increase in liability lines.

The decrease in catastrophe lines was attributable to the non-renewal of significant excess of loss treaties and a significant quota share retrocessional treaty, partially offset by an increase in premiums ceded to strategic partners due to the restructuring of several quota share retrocessional treaties together with premium adjustments and additional costs associated with the purchase of catastrophe bond protection. The decrease in property lines was attributable to a non-renewal of a fronting arrangement and the non-renewal of significant excess of loss treaties. The increase in liability lines reflected the increase in gross premiums written for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, partially offset by a decrease in premiums ceded due to the restructuring of a significant quota share retrocessional treaty.

Net Premiums Earned

Net premiums earned by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021  2020  % Change2021  2020  % Change
Catastrophe$55,226 10 %$64,163 13 %(14%)$196,746 12 %$194,987 12 %1%
Property59,686 11 %62,704 12 %(5%)178,275 12 %196,229 12 %(9%)
Credit and surety43,305 8 %43,730 8 %(1%)116,276 8 %134,988 9 %(14%)
Professional lines54,977 10 %54,424 10 %1%167,329 11 %154,482 10 %8%
Motor65,822 12 %63,298 12 %4%188,823 12 %203,776 13 %(7%)
Liability116,261 22 %96,671 19 %20%314,829 20 %293,918 19 %7%
Engineering8,264 2 %14,548 3 %(43%)21,704 1 %43,742 3 %(50%)
Agriculture24,590 5 %17,750 3 %39%56,890 4 %57,949 4 %(2%)
Marine and aviation18,680 4 %14,742 3 %27%44,214 3 %37,275 2 %19%
Accident and health83,607 16 %89,087 17 %(6%)257,384 17 %256,303 16 %—%
Discontinued lines - Novae1 — %11 — %nm650 — %1,024 — %(37%)
Total$530,419 100 %$521,128 100 %2%$1,543,120 100 %$1,574,673 100 %(2%)
nm – not meaningful
  Three months ended March 31,
  20222021
%
Change
Property$167,676 21 %$161,101 26 %4%
Marine94,912 13 %85,390 14 %11%
Terrorism12,476 2 %13,781 2 %(9%)
Aviation22,780 3 %17,722 3 %29%
Credit and political risk25,421 3 %20,998 3 %21%
Professional lines282,838 38 %203,275 33 %39%
Liability105,177 14 %77,827 13 %35%
Accident and health41,536 6 %36,192 6 %15%
Total$752,816 100 %$616,286 100 %22%

Net premiums earned for the three months ended September 30, 2021, March 31, 2022 increased by $9$137 million, or 2% ($5 million, or 1%, on a constant currency basis)22%, compared to the three months ended September 30, 2020.March 31, 2021. The increase was primarily driven by an increase in gross premiums earned in liability lines, partially offset by a decrease in gross premiums earned in catastrophe lines and an increase in ceded premiums earned in liability lines.

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Net premiums earned for the nine months ended September 30, 2021, decreased by $32 million, or 2% (decreased by $41 million, or 3%, on a constant currency basis), compared to the nine months ended September 30, 2020. The decrease was primarily driven by decreases in gross premiums earned in credit and surety, property, engineering and motor lines, together with increases in ceded premiums earned in liability, professional lines, and motor lines, partially offset by increases in gross premiums earned in liability and professional lines, liability, property and decreasesmarine lines, partially offset by increases in ceded premiums earned in credit and surety,professional lines, liability and property lines.

Other Insurance Related Income (Loss)

Other insurance related income was $7 million for the three months ended September 30, 2021, compared to other insurance related income of $1 million for the three months ended September 30, 2020was primarily associated with fees related to arrangements with strategic capital partners.

Other insurance related income was $15 million for the nine months ended September 30, 2021, compared to other insurance related loss of $7 million for the nine months ended September 30, 2020. The other insurance related income for the nine months ended September 30, 2021, was primarily associated with fees related to arrangements with strategic capital partners. The other insurance related loss for the nine months ended September 30, 2020 was primarily due to the recognition of a full limit loss of $10 million associated with the WHO pandemic risk-linked swap, partially offset by fees related to arrangements with strategic capital partners.

Loss Ratio

The components of the loss ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021
% Point
Change
20202021
% Point
Change
2020
Current accident year loss ratio89.4 %5.683.8 %75.9 %(1.3)77.2 %
Prior year reserve development ratio(1.0 %)(0.9)(0.1 %)(0.7 %)(0.4)(0.3 %)
Loss ratio88.4 %4.783.7 %75.2 %(1.7)76.9 %
  Three months ended March 31,
2022
% Point
Change
2021
Current accident year loss ratio54.8 %(3.4)58.2 %
Prior year reserve development ratio(0.9 %)(0.6)(0.3 %)
Loss ratio53.9 %(4.0)57.9 %

CurrentCurrent Accident Year Loss Ratio

The current accident year loss ratio increaseddecreased to 89.4%54.8% for the three months ended September 30, 2021,March 31, 2022, from 83.8%58.2% for the three months ended September 30, 2020. The current accident year loss ratio decreased to 75.9% for the nine months ended September 30, 2021, from 77.2% for the nine months ended September 30, 2020.March 31, 2021.

The current accident year loss ratio for three months ended September 30, 2021,March 31, 2022, compared to the same period in 2020,2021, was impacted by a higherslightly lower level of catastrophe and weather-related losses. During the three months ended September 30, 2021,March 31, 2022, catastrophe and weather-related losses, net of reinstatement premiums, were $145$33 million, or 28.04.3 points, primarilyincluding $16 million attributable to Hurricane Ida, July European floods and other weather-related events.the Russia-Ukraine war. The current accident year loss ratio for nine months ended September 30, 2021, comparedremaining losses of $17 million were primarily to the same period in 2020, was impacted by a lower level of catastrophe and weather-related losses. During the nine months ended September 30, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $237 million, or 15.7 points, primarily attributable to Hurricane Ida, Winter Storms Uri and Viola, July EuropeanEastern Australia floods, and other weather-related events. Comparatively, during the three and nine months ended September 30, 2020,March 31, 2021, catastrophe and weather-related losses net of reinstatement premiums were $108$36 million, or 21.1 points and $251 million or 16.1%, respectively.5.9 points.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 61.4%50.5% for the three months ended September 30, 2021,March 31, 2022, from 62.7%52.3% for the three months ended September 30, 2020March 31, 2021.. The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends in most lines of business, partially offset by changes in business mix associated with the increase in professional lines and liability business written in recent periods.

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Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Acquisition Cost Ratio

The acquisition cost ratio decreased to 18.4% for the three months ended March 31, 2022, from 19.1% for the three months ended March 31, 2021, primarily related to a decrease in variable costs associated with property, marine, and accident and health lines, and an increase in ceding commissions in the property lines, partially offset by an increase in variable acquisition costs associated with professional lines.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense ratio decreased to 15.2% for the three months ended March 31, 2022, from 16.8% for the three months ended March 31, 2021, mainly driven by an increase in net premiums earned, partially offset by an increase in performance-related compensation costs, personnel costs, and travel and entertainment costs.



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Reinsurance Segment

Results from the reinsurance segment were as follows:
  Three months ended March 31,
  2022% Change2021
Revenues:
Gross premiums written$1,307,344(9%)$1,432,283
Net premiums written968,960(10%)1,071,072
Net premiums earned505,4304%487,436
Other insurance related income6,611nm2,366
Expenses:
Current accident year net losses and loss expenses(328,848)(361,632)
Prior year reserve development1,8943,812
Acquisition costs(109,540)(101,192)
Underwriting-related general and administrative expenses(31,146)(29,365)
Underwriting income$44,401$1,425
Ratios:
% Point
Change
Current accident year loss ratio, excluding catastrophe and weather-related losses59.7 %1.158.6 %
Catastrophe and weather-related losses ratio5.4 %(10.2)15.6 %
Current accident year loss ratio65.1 %(9.1)74.2 %
Prior year reserve development ratio(0.4 %)0.4(0.8 %)
Net losses and loss expenses ratio64.7 %(8.7)73.4 %
Acquisition cost ratio21.7 %0.920.8 %
Underwriting-related general and administrative expense ratio6.1 %0.16.0 %
Combined ratio92.5 %(7.7)100.2 %
nm – not meaningful

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Gross Premiums Written

Gross premiums written by line of business were as follows:
  Three months ended March 31,
  20222021
% 
Change
Catastrophe$138,396 10 %$250,956 17 %(45%)
Property76,323 6 %126,455 9 %(40%)
Credit and surety103,876 8 %83,221 6 %25%
Professional lines133,579 10 %131,255 9 %2%
Motor151,714 12 %223,524 16 %(32%)
Liability284,348 22 %269,201 19 %6%
Engineering10,065 1 %(2,428)— %nm
Agriculture27,826 2 %16,441 1 %69%
Marine and aviation50,485 4 %32,340 2 %56%
Accident and health330,732 25 %301,318 21 %10%
Total$1,307,344 100 %$1,432,283 100 %(9%)
nm – not meaningful

Gross premiums written for the three months ended March 31, 2022, decreased by $125 million, or 9% ($94 million, or 7% on a constant currency basis), compared to the three months ended March 31, 2021. The decrease was primarily attributable to catastrophe, motor and property lines, partially offset by an increase in accident and health, credit and surety, marine and aviation, liability engineering, agriculture lines.

The decreases in catastrophe, motor and property lines were largely driven by non-renewals and decreased line sizes on several contracts associated with repositioning the portfolio. In addition, the decrease in catastrophe lines was attributable to a decrease in reinstatement premiums due to lower catastrophe losses for the three months ended March 31, 2022, compared to reinstatement premiums associated with the U.S. Winter Storms for the three months ended March 31, 2021. The decrease in motor lines was also due to the timing of the renewals of significant contracts.

The increases in accident and health, credit and surety, liability and agriculture lines were due to new business. The increases in accident and health, and liability lines were also due to the timing of the renewals of significant contracts. In addition, premium adjustments contributed to the increase in gross premiums written in accident and health lines.

The increase in engineering lines was also associated with premium adjustments related to significant contracts. The increase in marine and aviation lines was attributable to new marine business.


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Ceded Premiums Written

Ceded premiums written for the three months ended March 31, 2022, was $338 million, or 26%, of gross premiums written, compared to $361 million, or 25%, of gross premiums written for the three months ended March 31, 2021.

The decrease in ceded premiums written of $23 million, or 6%, was primarily driven by decreases in catastrophe, and marine and aviation lines, partially offset by increases in motor and professional lines.

The decrease in catastrophe lines reflected the decrease in gross premiums written for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, partially offset by an increase in premiums ceded to strategic capital partners due to the restructuring of several quota share retrocessional treaties. The decrease in marine and aviation lines was attributable to the timing of the renewal of a significant excess of loss retrocessional treaty. The increases in motor and professional lines were attributable to the restructuring of significant quota share retrocessional treaties.

Net Premiums Earned

Net premiums earned by line of business were as follows:
  Three months ended March 31,
  2022  2021  % Change
Catastrophe$55,108 10 %$80,782 19 %(32%)
Property39,906 8 %55,337 11 %(28%)
Credit and surety44,449 9 %35,433 7 %25%
Professional lines56,369 11 %50,847 10 %11%
Motor50,017 10 %54,952 11 %(9%)
Liability109,771 22 %92,040 19 %19%
Engineering14,014 3 %7,143 1 %96%
Agriculture22,129 4 %15,316 3 %44%
Marine and aviation18,103 4 %11,228 2 %61%
Accident and health95,564 19 %84,358 17 %13%
Total$505,430 100 %$487,436 100 %4%
nm – not meaningful

Net premiums earned for the three months ended March 31, 2022, increased by $18 million, or 4%, compared to the three months ended March 31, 2021. The increase was primarily driven by increases in gross premiums earned in liability, credit and surety, and accident and health lines, and a decrease in ceded premiums earned in catastrophe lines. These increases were partially offset by decreases in gross premiums earned in catastrophe and property lines, and increases in ceded premiums earned in credit and surety, and liability lines.

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Other Insurance Related Income (Loss)

Other insurance related income of $7 million for the three months ended March 31, 2022, compared to $2 million for the three months ended March 31, 2021, respectively, was primarily associated with fees related to arrangements with strategic capital partners.

Loss Ratio

The components of the loss ratio were as follows:
  Three months ended March 31,
  2022
% Point
Change
2021
Current accident year loss ratio65.1 %(9.1)74.2 %
Prior year reserve development ratio(0.4 %)0.4(0.8 %)
Loss ratio64.7 %(8.7)73.4 %

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 65.1% for the three months ended March 31, 2022, from 74.2% for the three months ended March 31, 2021.

The current accident year loss ratio for three months ended March 31, 2022, compared to the same period in 2021, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended March 31, 2022, catastrophe and weather-related losses, were $27 million, or 5.4 points, including $14 million attributable to the Russia-Ukraine war. The remaining losses of $13 million were attributable to weather-related events. Comparatively, during the three months ended March 31, 2021, catastrophe and weather-related losses, net of reinstatement premiums were $74 million, or 15.6 points.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 59.7% for the three months ended March 31, 2022, from 58.6% for the three months ended March 31, 2021. The increase in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due to achanges in business mix driven by the decrease in loss experiencecatastrophe business written in credit and surety, and accident and health lines, andrecent periods, partially offset by the impact of favorable pricing over loss trends partially offset by the impactin most lines of changes to retrocessional arrangements and changes in business mix.

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After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 60.2% for the nine months ended September 30, 2021, from 61.1% for the nine months ended September 30, 2020.The decrease in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due to changes in business mix, the impact of favorable pricing over loss trends, partially offset by the impact of changes to retrocessional arrangements and an increase in loss experience in property lines.business.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Acquisition Cost Ratio

The acquisition cost ratio decreasedincreased to 20.4% and21.7% for the three months ended March 31, 2022, from 20.8% for the three and nine months ended September 30,March 31, 2021, from 22.3% and 22.5% forprimarily related to changes in business mix driven by the three and nine months ended September 30, 2020, principally related todecrease in catastrophe business written in recent periods, partially offset by the impact of retrocessional contracts.

Underwriting-Related General and Administrative Expense Ratio:

The underwriting-related general and administrative expense inincreasedcreased to 5.6%6.1% for the three months ended September 30, 2021,March 31, 2022, from 4.5%6.0% for the three months ended September 30, 2020,March 31, 2021, mainly driven by an increase in personnelperformance-related compensation costs, and information technology costs.largely offset by an increase of net premiums earned.

The underwriting-related general and administrative expense increased to 5.8% for the nine months ended September 30, 2021, from 4.9% for the nine months ended September 30, 2020, mainly driven by an increase in personnel costs and a decrease in fees related to arrangements with strategic capital partners.


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NET INVESTMENT INCOME AND NET INVESTMENT GAINS (LOSSES)

Net Investment Income

Net investment income from our cash and investment portfolio by major asset class was as follows:
  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Fixed maturities$63,712(14%)$73,992$194,426(20%)$244,394
Other investments41,69566%25,125124,941nm(14,574)
Equity securities2,72446%1,8718,32233%6,258
Mortgage loans4,42623%3,60912,96715%11,322
Cash and cash equivalents692(72%)2,4913,645(63%)9,814
Short-term investments391(11%)440590(74%)2,303
Gross investment income113,6406%107,528344,89133%259,517
Investment expense(6,301)13%(5,572)(18,717)(4%)(19,419)
Net investment income$107,3395%$101,956$326,17436%$240,098
Pre-tax yield:(1)
Fixed maturities2.1 %2.5 %2.2 %2.7 %
nm - not meaningful
  Three months ended March 31,
  2022% Change2021
Fixed maturities$64,809(7%)$69,470
Other investments26,050(38%)41,833
Equity securities2,172(13%)2,498
Mortgage loans4,163(1%)4,187
Cash and cash equivalents1,118(52%)2,336
Short-term investments16625%133
Gross investment income98,478(18%)120,457
Investment expense(7,123)13%(6,292)
Net investment income$91,355(20%)$114,165
Pre-tax yield:(1)
Fixed maturities2.1 %2.4 %
(1) Pre-tax yield is calculated by dividing annualized net investment income by the average month-end amortized cost balances.

Fixed Maturities

Net investment income attributable to fixed maturities for the three and nine months ended September 30, 2021March 31, 2022, was $64$65 million, and $194 million, respectively, compared to net investment income of $74 million and $244$69 million for the three and nine months ended September 30, 2020, respectively.March 31, 2021. The decrease for the three and nine months ended September 30, 2021,March 31, 2022, compared to the same period in 2020,2021, was due to the decrease inlower yields.

Other Investments

Net investment income from other investments was as follows:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Hedge, direct lending, private equity and real estate funds$38,833$24,982$101,283$(11,552)
Other privately held investments2,09656520,639570
CLO-Equities766(422)3,019(3,592)
Net investment income (loss) from other investments (1)
$41,695$25,125$124,941$(14,574)
Pre-tax return on other investments(2)
4.8 %3.5 %15.0 %(2.0 %)
  Three months ended March 31,
  20222021
Hedge, direct lending, private equity and real estate funds$22,803$22,773
Other privately held investments2,02518,478
CLO-Equities1,222582
Net investment income from other investments$26,050$41,833
Pre-tax return on other investments(1)
2.8 %5.3 %
(1)Excluding overseas deposits.
(2)The pre-tax return on other investments is calculated by dividing total net investment income from other investments (non-annualized) by the average month-end fair value balances held for the periods indicated, excluding overseas deposits.indicated.

Net investment income attributable to other investments for the three and nine months ended September 30, 2021March 31, 2022, was $42$26 million, and $125 million, respectively, compared to net investment income (loss) of $25 million and $(15)$42 million for the three and nine months ended September 30, 2020, respectively.March 31, 2021. The increasedecrease for the three and nine months ended September 30, 2021,March 31, 2022, compared to the same period in 2020,2021, was due to higher returnslower gains from direct lending, private equity and real estate funds.other privately held investments.

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Net Investment Gains (Losses)

Net investment gains (losses) were as follows:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
On sale of investments:
Fixed maturities and short-term investments$16,830 $29,532 $94,458 $42,658 
Equity securities4 519 4,890 18,675 
 16,834 30,051 99,348 61,333 
Change in allowance for expected credit losses(315)3,759 (76)(2,498)
Impairment losses(22)(184)(22)(1,486)
Change in fair value of investment derivatives2,486 (1,346)3,388 1,970 
Net unrealized gains (losses) on equity securities(8,051)23,329 11,230 (13,542)
Net investment gains$10,932 $55,609 $113,868 $45,777 
  Three months ended March 31,
  20222021
On sale of investments:
Fixed maturities and short-term investments$(52,724)$30,802 
Equity securities(225)480 
 (52,949)31,282 
Change in allowance for expected credit losses(70)89 
Impairment losses (1)
(109)— 
Change in fair value of investment derivatives2,242 1,749 
Net unrealized gains (losses) on equity securities(43,622)(3,475)
Net investment gains (losses)$(94,508)$29,645 
(1)Related to instances where we intend to sell securities, or it is more likely than not that we will be required to sell securities before their anticipated recovery.

Net investment gainslosses for the three months ended September 30, 2021March 31, 2022 were $11$95 million, compared to net investment gains of $56$30 million for the three months ended September 30, 2020.March 31, 2021. For the three months ended September 30, 2021,March 31, 2022, the net investment gainslosses were primarily due to net realized gainslosses on the sale of U.S government, Agency RMBS and corporate debt and U.S government securities partially offset byand net unrealized losses on equity securities. For the three months ended September 30, 2020,March 31, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and U.S. government securities, and net unrealized gains on equity securities.

Net investment gains for the nine months ended September 30, 2021 were $114 million, compared to net investment gains of $46 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and CMBS and net unrealized gains on equity securities. For the nine months ended September 30, 2020, the net investment gains were primarily due to net realized gains on the sale of U.S. government, agency RMBS and equity securities partially offset by net unrealized losses on equity securities.

On Sale of Investments

Generally, sales of individual securities occur when there are changes in the relative value, credit quality or duration of a particular issue. We may also sell securities to re-balance our investment portfolio in order to change exposure to particular asset classes or sectors.

Impairment Losses

The impairment losses for the three and nine months ended September 30,March 31, 2022 and 2021 were $nil, compared to impairment losses of $nil and $1 million for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2020, these losses were principally due to impairments of non-investment grade corporate debt securities that we intend to sell or more likely than not will be required to sell. $nil.

Change in Fair Value of Investment Derivatives

From time to time, we economically hedge foreign exchange exposure with derivative contracts.

For the three and nine months ended September 30,March 31, 2022 and 2021, we recorded gains of $2 million and $3 million, respectively, related to foreign exchange contracts. For the three and nine months ended September 30, 2020, we recorded losses of $1 million and gains of $2 million, respectively, related to foreign exchange contracts.

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Total Return

Total return on cash and investments was as follows:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Net investment income$107,339$101,956$326,174$240,098
Net investments gains10,93255,609113,86845,777
Change in net unrealized gains (losses) on fixed maturities (1)
(81,389)73,050(298,474)204,828
Interest in income (loss) of equity method investments11,9112,89630,871(13,579)
Total$48,793$233,511$172,439$477,124
Average cash and investments(2)
$16,340,392$15,512,967$15,997,691$15,523,879
Total return on average cash and investments, pre-tax:
Including investment related foreign exchange movements0.3 %1.5 %1.1 %3.1 %
Excluding investment related foreign exchange movements(3)
0.5 %1.2 %1.3 %3.1 %
  Three months ended March 31,
  20222021
Net investment income$91,355$114,165
Net investments gains (losses)(94,508)29,645
Change in net unrealized gains (losses) on fixed maturities (1)
(455,285)(226,895)
Interest in income of equity method investments11,5509,162
Total$(446,888)$(73,923)
Average cash and investments(2)
$16,258,477$15,727,085
Total return on average cash and investments, pre-tax:
Including investment related foreign exchange movements(2.7 %)(0.5 %)
Excluding investment related foreign exchange movements(3)
(2.6 %)(0.4 %)
(1)Change in net unrealized gains (losses) on fixed maturities is calculated by taking net unrealized gains (losses) at period end less net unrealized gains (losses) at the prior period end.
(2)The average cash and investments balance is calculated by taking the average of the period end fair value balances.
(3)Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, included foreign exchange (losses) gains gains of $(30)$(28) million and $42$(12) million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and foreign exchange (losses) gains of $(35) million and $(6) million for the nine months ended September 30, 2021 and 2020, respectively.


OTHER EXPENSES (REVENUES), NET

The following table provides a summary of other expenses (revenues), net:
  Three months ended September 30,Nine months ended September 30,
  2021% Change20202021% Change2020
Corporate expenses$23,134 10%$20,988 $82,365 10%$74,915 
Foreign exchange losses (gains)(28,032)nm60,734 (4,316)nm8,760 
Interest expense and financing costs15,954 2%15,574 46,759 (22%)59,641 
Income tax expense (benefit)1,186 nm(12,056)49,827 nm(6,030)
Total$12,242 $85,240 $174,635 $137,286 
  Three months ended March 31,
  2022% Change2021
Corporate expenses$23,945 (7%)$25,740 
Foreign exchange losses (gains)(44,273)nm4,113 
Interest expense and financing costs15,564 —%15,571 
Income tax expense24 nm20,776 
Total$(4,740)$66,200 
nm – not meaningful

Corporate Expenses

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company.

As a percentage of net premiums earned, corporate expenses weredecreased to 1.9% for the three months ended September 30, 2021,March 31, 2022, compared to 1.9%2.3% for the three months ended September 30, 2020 with an increaseMarch 31, 2021.

The decrease in personnel costs offset bycorporate expenses for the three months ended March 31, 2022 was primarily related to a decrease in professional fees.

As a percentage of net premiums earned, corporate expenses were 2.4% for the nine months ended September 30, 2021, compared to 2.3% for the nine months ended September 30, 2020 due to an increase in personnel costs, largelyand business fees, partially offset by an increase in the allocation of corporate expenses to the insurance and reinsurance segments.information technology costs.



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Foreign Exchange Losses (Gains)

Some of our business is written in currencies other than the U.S. dollar.

Foreign exchange gains of $28$44 million for the three months ended September 30, 2021March 31, 2022 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Foreign exchange gainslosses of $4 million for the nine months ended September 30, 2021 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Foreign exchange losses of $61 million for the three months ended September 30, 2020 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in euro and in pound sterling.

Foreign exchange losses of $9 million for the nine months ended September 30, 2020March 31, 2021 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling.sterling and Canadian dollar, offset by the strengthening of the U.S. dollar on the remeasurement of net insurance related liabilities denominated in euro.

Interest Expense and Financing Costs

Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes") and the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019.

Interest expense and financing costs were $16 million for the three months ended September 30, 2021March 31, 2022, and for the three months ended September 30, 2020, respectively.

Interest expense and financing costs decreased by $13 million for the nine months ended September 30, 2021, compared to the same period in 2020, due to the repayment of the 5.875% Senior Notes on June 1, 2020.2021.

Income Tax Expense (Benefit)

Income tax expense (benefit) primarily results from income (loss) generated by our operations in the U.S. and Europe. Our effective tax rate is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments. This effective rate can vary between periods depending on the distribution of net income (loss) among tax jurisdictions, as well as other factors.

The tax expense of $1 million$nil for the three months ended September 30, 2021March 31, 2022 was principally due to the generation of pre-tax income in our U.S. operations, offset by the generation of pre-tax losses in our U.K. operations together with the revaluation of net deferred tax liabilities associated with the increase in the U.K. tax rate to 25% from 19%, effective 2023.and Europe operations.

The tax expense of $50$21 million for the ninethree months ended September 30,March 31, 2021 was principally due to the generation of pre-tax income in our U.S., U.K.European, and European operations together with the revaluation of net deferred tax liabilities associated with the increase in the U.K. tax rate to 25% from 19%, effective 2023, largely offset by the generation of pre-tax losses in our U.S. operations.

The tax benefit of $12 million for the three months ended September 30, 2020 was principally due to the generation of pre-tax losses in our U.S. operations.

The tax benefit of $6 million for the nine months ended September 30, 2020 was principally due to the generation of pre-tax losses in our U.S. and U.K. operations.

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FINANCIAL MEASURES

We believe the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for common shareholders:
  Three months ended September 30,Nine months ended September 30,
  2021202020212020
Annualized return on average common equity(1)
3.9 %(6.2 %)10.9 %(4.1 %)
Annualized operating return on average common equity(2)
0.1 %(5.5 %)7.1 %(4.4 %)
Book value per diluted common share(3)
$54.86$54.75$54.86$54.75
Cash dividends declared per common share$0.42$0.41$1.26$1.23
Increase (decrease) in book value per diluted common share adjusted for dividends$(0.22)$0.07$1.03$0.19
  Three months ended March 31,
  20222021
Annualized return on average common equity(1)
12.0 %9.9 %
Annualized operating return on average common equity(2)
15.3 %7.1 %
Book value per diluted common share(3)
$51.97$53.03
Cash dividends declared per common share$0.43$0.42
Increase (decrease) in book value per diluted common share adjusted for dividends$(3.38)$(1.64)
(1)Annualized return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available (attributable) to common shareholders for the period by the average common shareholders' equity determined using the common shareholders' equity balances at the beginning and end of the period.
(2)Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, and a discussion of the rationale for theits presentation of this item is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations -– Non-GAAP Financial Measures Reconciliation'.
(3)Book value per diluted common share represents total common shareholders’ equity divided by the number of diluted common sharesshare outstanding, determined using the treasury stock method. Cash-settled restricted stock units are excluded.

Return on Average Common Equity

Our objective is to generate superior returns on capital that appropriately reward common shareholders for the risks we assume and to grow revenue only when we expect the returns will meet or exceed our requirements. We recognize that the nature of underwriting cycles and the frequency or severity of large loss events in any one year may challenge the ability to achieve a profitability target in any specific period.

ROACE reflects the impact of net income (loss) available (attributable) to common shareholders including net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in ROACE for the three months ended September 30, 2021,March 31, 2022, compared to the three months ended September 30, 2020,March 31, 2021, was primarily driven by increasesan increase in underwriting income, and interest in income (loss) of equity method investments, together with foreign exchange gains, partially offset by a decrease in net investment gains and an increase income tax expense.

The increase in ROACE for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily driven by increases in underwriting income, net investment income, net investment gains and interest in income (loss) of equity method investments, together with foreign exchange gains, and a decrease in interestincome tax expense, and financing costs, partially offset by an increasenet investment losses and a decrease to in income tax expense.net investment income.

Operating ROACE excludes the impact of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in operating ROACE for the three months ended September 30, 2021,March 31, 2022, compared to the three months ended September 30, 2020,March 31, 2021, was primarily driven by an increase in underwriting income and a decrease in income tax expense, partially offset by an increase in income tax expense.

The increase in operating ROACE for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily driven by increases in underwriting income and net investment income, together with a decrease in interest expense and financing costs, partially offset by an increase in income tax expense.net investment income.



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Book Value per Diluted Common Share

We consider book value per diluted common share to be an appropriate measure of returns to common shareholders, as we believe growth in book value on a diluted basis will ultimately translate into appreciation of our stock price.

During the three months ended September 30,March 31, 2022, book value per diluted common share decreased by 6.8% due to net unrealized investment losses reported in other comprehensive income (loss) and common dividends declared, partially offset by the net income generated.

During the three months ended March 31, 2021, book value per diluted common share decreased by 1.2%4% due to a decrease in net unrealized gains reported in accumulated other comprehensive income (loss) and common dividends declared, partially offset by the net income generated in the period.generated.

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During the nine months ended September 30, 2021, book value per diluted common share decreased by 0.4% due to a decrease in net unrealized gains reported in accumulated other comprehensive income and common dividends declared, partially offset by net income generated in the period.

Cash Dividends Declared per Common Share

We believe in returning excess capital to shareholders by way of dividends and share repurchases. Accordingly, dividend policy is an integral part of the value we create for shareholders. Our cumulative strong earnings have permitted our Board of Directors to approve seventeeneighteen successive annual increases in quarterly common share dividends.

Book Value per Diluted Common Share Adjusted for Dividends

Taken together, we believe that growth in book value per diluted common share and common share dividends declared represent the total value created for common shareholders. As companies in the insurance industry have differing dividend payout policies, we believe investors use the book value per diluted common share adjusted for dividends metric to measure comparable performance across the industry.

During the three months ended September 30, 2021,March 31, 2022, the decrease in total value of $0.22,$3.38, or 0.4%6.1%, was driven by a decrease in net unrealized gainslosses reported in accumulated other comprehensive income (income), partially offset by net income generated in the period.

During the nine months ended September 30, 2021, the increase in total value of $1.03, or 1.9% was driven by the net income generated, partially offset by a decrease in the net unrealized gains reported in other comprehensive income.generated.

During the three months ended September 30, 2020,March 31, 2021, the increasedecrease in total value of $0.07$1.64, or 0.1%3%, was driven by neta decrease in unrealized investment gains recognizedreported in accumulated other comprehensive income (loss), partially offset by the net loss generated in the period.

During the nine months ended September 30, 2020, the increase in total value of $0.19 or 0.3%, was driven by net unrealized investment gains recognized in accumulated other comprehensive income partially offset by the net loss generated in the period.generated.

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NON-GAAP FINANCIAL MEASURES RECONCILIATION

Three months ended September 30,Nine months ended September 30,
2021202020212020
Net income (loss) available (attributable) to common shareholders$47,385$(72,945)$391,028$(145,855)
Net investment (gains) losses(1)
(10,932)(55,609)(113,868)(45,777)
Foreign exchange losses (gains)(2)
(28,032)60,734(4,316)8,760
Reorganization expenses(3)
—1,413—822
Interest in (income) loss of equity method investments(4)
(11,911)(2,896)(30,871)13,579
Income tax expense4,5344,23512,31610,494
Operating income (loss)$1,044$(65,068)$254,289$(157,977)
Earnings (loss) per diluted common share$0.56$(0.87)$4.59$(1.73)
Net investment (gains) losses(0.13)(0.66)(1.34)(0.54)
Foreign exchange losses (gains)(0.33)0.72(0.05)0.10
Reorganization expenses—0.02—0.01
Interest in (income) loss of equity method investments(0.14)(0.03)(0.36)0.16
Income tax expense0.050.050.140.12
Operating income (loss) per diluted common share(5)
$0.01$(0.77)$2.98$(1.88)
Weighted average diluted common shares outstanding(6)
85,33684,30885,19184,235
Average common shareholders' equity$4,812,408$4,731,858$4,765,375$4,742,452
Annualized return on average common equity3.9 %(6.2 %)10.9 %(4.1 %)
Annualized operating return on average common equity(7)
0.1 %(5.5 %)7.1 %(4.4 %)
Three months ended March 31,
20222021
Net income available to common shareholders$141,637$115,737
Net investment (gains) losses(1)
94,508(29,645)
Foreign exchange losses (gains)(2)
(44,273)4,113
Interest in income of equity method investments(3)
(11,550)(9,162)
Income tax expense (benefit)(497)1,694
Operating income$179,825$82,737
Earnings per diluted common share$1.65$1.36
Net investment (gains) losses1.10(0.35)
Foreign exchange losses (gains)(0.52)0.05
Interest in income of equity method investments(0.13)(0.11)
Income tax expense (benefit)(0.01)0.02
Operating income per diluted common share$2.09$0.97
Weighted average diluted common shares outstanding(4)
85,80884,965
Average common shareholders' equity$4,715,599$4,686,042
Annualized return on average common equity12.0 %9.9 %
Annualized operating return on average common equity(5)
15.3 %7.1 %
(1)Tax expense (benefit) of $606($13,313) and $6,667$1,484 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $9,581 and $9,104 for the nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses.
(2)Tax expense (benefit) of $3,928$12,816 and $(2,245)$210 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $2,735 and $1,366 for the nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions.
(3)Tax expense (benefit) of $(187)$nil for the three and three months ended September 30, 2020March 31, 2022 and $24 for the nine months ended September 30, 2020,2021, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(4)Tax expense (benefit) of $nil for the three and nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(5)Loss per diluted common share and operating loss per diluted common share for the three and nine months ended September 30, 2020 were calculated using weighted average common shares outstanding due to the net loss attributable to common shareholders and the operating loss recognized in these periods.
(6)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.
(7)(5)Annualized operating ROACE is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, is presented in the table above, and a discussion of the rationale for its presentation is provided below.


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Rationale for the Use of Non-GAAP Financial Measures

We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. Some of the measurements we use are considered non-GAAP financial measures under SEC rules and regulations. In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we present underwriting-related general and administrative expenses, consolidated underwriting income (loss), operating income (loss) (in total and on a per share basis), annualized operating return on average common equity ("operating ROACE"), amounts presented on a constant currency basis and pre-tax total return on cash and investments excluding foreign exchange movements which are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. We believe that these non-GAAP financial measures, which may be defined and calculated differently by other companies, help explain and enhance the understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Underwriting-Related General and Administrative Expenses

Underwriting-related general and administrative expenses include those general and administrative expenses that are incremental and/or directly attributable to our underwriting operations. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.

The reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in 'Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Consolidated Underwriting Income (Loss)

Consolidated underwriting income (loss) is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative expenses as expenses. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

We evaluate our underwriting results separately from the performance of our investment portfolio. As a result, we believe it is appropriate to exclude net investment income and net investment gains (losses) from our underwriting profitability measure.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on our net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to our underwriting performance, therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).

Interest expense and financing costs primarily relate to interest payable on our debt. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).

Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of Novae Group plc ("Novae"), which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).


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Amortization of intangible assets including value of business acquired ('VOBA"("VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).

We believe that the presentation of underwriting-related general and administrative expenses and consolidated underwriting income (loss) provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax

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profitability of our underwriting activities. The reconciliation of consolidated underwriting income (loss) to net income (loss), the most comparable GAAP financial measure, is presented in 'Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Operating Income (Loss)

Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities in net investment gains (losses). We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss), thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business.

Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of Novae, which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expensesforeign exchange losses (gains) are excluded from consolidated operating income (loss).

Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, this income (loss) is excluded from operating income (loss).

Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments to understand the profitability of recurring sources of income.

We believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above.

We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively.

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Constant Currency Basis

We present gross premiums written, net premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written, net premiums written and net premiums earned on a constant basis. The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in 'Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'.

Pre-Tax Total Return on Cash and Investments excluding Foreign Exchange MovementMovements

Pre-tax total return on cash and investments excluding foreign exchange movements measures net investment income, (loss), net investments gains (losses), interest in income (loss) of equity method investments, and change in unrealized gains (losses) generated by average cash and investment balances. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. The reconciliation of pre-tax total return on cash and investments excluding foreign exchange movements to pre-tax total return on cash and investments, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Investment Income and Net Investment Gains (Losses)'.


CASH AND INVESTMENTS

Details of cash and investments are as follows:
  September 30, 2021December 31, 2020
  Fair ValueFair Value
Fixed maturities, available for sale$12,380,959 $12,041,799 
Fixed maturities, held to maturity(1)
416,821 — 
Equity securities618,822 518,445 
Mortgage loans623,487 593,290 
Other investments892,664 829,156 
Equity method investments145,080 114,209 
Short-term investments68,267 161,897 
Total investments$15,146,100 $14,258,796 
Cash and cash equivalents(2)
$1,499,204 $1,503,232 
  March 31, 2022December 31, 2021
  Fair ValueFair Value
Fixed maturities, available for sale$11,456,024 $12,313,200 
Fixed maturities, held to maturity(1)
486,432 445,033 
Equity securities563,950 655,675 
Mortgage loans627,063 594,088 
Other investments954,602 947,982 
Equity method investments157,843 146,293 
Short-term investments70,385 31,063 
Total investments$14,316,299 $15,133,334 
Cash and cash equivalents(2)
$1,706,711 $1,317,690 
(1)Presented at net carrying value of $417$494 million (2020: $nil)(2021: $446 million) in the consolidated balance sheets.
(2)Includes restricted cash and cash equivalents of $552$720 million and $600$473 million at September 30, 2021March 31, 2022 and at December 31, 2020,2021, respectively.




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Overview

The fair value of total investments increaseddecreased by $887$817 million in the ninethree months ended September 30, 2021,March 31, 2022, driven by cash inflows from operations, partially offset by the decrease in market value of fixed maturities due to the increase in yields.yields and a larger allocation of the portfolio to cash and cash equivalents.

An analysis of our investment portfolio by asset class is detailed below:

Fixed Maturities

Details of our fixed maturities portfolio are as follows:
  September 30, 2021December 31, 2020
  Fair Value% of TotalFair Value% of Total
Fixed maturities:
U.S. government and agency$2,692,394 21 %$1,918,699 16 %
Non-U.S. government719,922 6 %671,273 6 %
Corporate debt4,557,519 34 %4,655,951 39 %
Agency RMBS1,163,038 9 %1,286,209 11 %
CMBS1,226,225 10 %1,353,587 11 %
Non-agency RMBS193,764 2 %140,104 1 %
ABS2,050,197 16 %1,720,078 14 %
Municipals(1)
194,721 2 %295,898 2 %
Total$12,797,780 100 %$12,041,799 100 %
Credit ratings:
U.S. government and agency$2,692,394 21 %$1,918,699 16 %
AAA(2)
4,621,461 36 %4,551,312 37 %
AA908,289 7 %913,707 8 %
A1,858,808 15 %1,896,407 16 %
BBB1,585,211 12 %1,732,058 14 %
Below BBB(3)
1,131,617 9 %1,029,616 9 %
Total$12,797,780 100 %$12,041,799 100 %
  March 31, 2022December 31, 2021
  Fair Value% of TotalFair Value% of Total
Fixed maturities:
U.S. government and agency$2,273,203 19 %$2,682,448 21 %
Non-U.S. government739,133 6 %795,178 6 %
Corporate debt4,524,834 39 %4,532,884 36 %
Agency RMBS935,837 8 %1,074,589 8 %
CMBS1,159,385 10 %1,248,191 10 %
Non-agency RMBS174,888 1 %186,164 1 %
ABS1,969,154 16 %2,029,941 16 %
Municipals(1)
166,022 1 %208,838 2 %
Total$11,942,456 100 %$12,758,233 100 %
Credit ratings:
U.S. government and agency$2,273,203 19 %$2,682,448 21 %
AAA(2)
4,180,346 35 %4,491,643 34 %
AA911,018 7 %981,837 8 %
A1,897,927 16 %1,917,006 15 %
BBB1,534,264 13 %1,595,285 13 %
Below BBB(3)
1,145,698 10 %1,090,014 9 %
Total$11,942,456 100 %$12,758,233 100 %
(1)Includes bonds issued by states, municipalities, and political subdivisions.
(2)Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS").
(3)Non-investment grade and non-rated securities.

At September 30, 2021,March 31, 2022, fixed maturities had a weighted average credit rating of AA- (2020:(2021: AA-), a book yield of 1.9%2.1% (2020: 2.3%(2021: 1.9%) and an average duration of 3.1 years (2020: 3.3(2021: 3.0 years). At September 30, 2021,March 31, 2022, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $14.4$13.7 billion), had an average credit rating of AA- (2020:(2021: AA-) and an average duration of 2.8 years (2020: 3(2021: 2.8.0 years).

At September 30, 2021,March 31, 2022, net unrealized gainslosses on fixed maturities were $178$384 million, compared to net unrealized gains of $475$71 million at December 31, 2020, 2021, a decrease of $297 $455 million due to the increase in yields.

Equity Securities

At September 30, 2021,March 31, 2022, net unrealized gains on equity securities were $108$83 million, compared to net unrealized gains of $97$127 million at December 31, 2020, an increase2021, a decrease of $11$44 million driven by the rallydecline in market value of bond mutual funds and the decline in equity markets.

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Mortgage Loans

During the nine months ended September 30, 2021,At March 31, 2022, our investment in commercial mortgage loans increased by $30was $627 million, compared to $594 million at December 31, 2021, an increase of $33 million. The commercial mortgage loans are high quality and collateralized by a variety of commercial properties and are diversified both geographically throughout the U.S. and by property type to reduce the risk of concentration. At September 30, 2021,March 31, 2022, there were no credit losses or past due amounts associated with our commercial mortgage loans portfolio.

Other Investments

Details of our other investments portfolio are as follows:
September 30, 2021December 31, 2020
  Fair Value% of TotalFair Value% of Total
Hedge funds
Long/short equity funds$3,762 — %$25,300 3 %
Multi-strategy funds67,628 8 %121,420 15 %
Total hedge funds71,390 8 %146,720 18 %
Direct lending funds297,047 33 %272,131 33 %
Private equity funds226,745 25 %124,706 15 %
Real estate funds225,673 25 %164,250 20 %
Total hedge, direct lending, private equity and real estate funds820,855 91 %707,807 86 %
CLO-Equities6,297 2 %6,173 1 %
Other privately held investments65,512 7 %70,011 8 %
Overseas deposits— — %45,165 5 %
Total other investments$892,664 100 %$829,156 100 %
March 31, 2022December 31, 2021
  Fair Value% of TotalFair Value% of Total
Hedge funds
Long/short equity funds$3,056 — %$3,476 — %
Multi-strategy funds48,561 5 %56,012 6 %
Total hedge funds51,617 5 %59,488 6 %
Direct lending funds276,211 29 %289,867 31 %
Private equity funds260,596 27 %249,974 26 %
Real estate funds245,823 26 %238,222 25 %
Total hedge, direct lending, private equity and real estate funds834,247 87 %837,551 88 %
CLO-Equities4,881 1 %5,910 1 %
Other privately held investments115,474 12 %104,521 11 %
Total other investments$954,602 100 %$947,982 100 %

Refer to Note 3(c) to the Consolidated Financial Statements 'Investments'.

Equity Method Investments

During 2016, we paid $108 million including direct transactions costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Harrington is not a variable interest entity that is required to be included in our consolidated financial statements. We account for our ownership interest in Harrington under the equity method of accounting.

In our consolidated results, our ownership interest in Harrington is reported in interest in income (loss) of equity method investments.
Interest in income of equity method investments was of$12 $12 million and, $31 millionfor the three and nine months ended September 30, 2021, respectively, March 31, 2022, compared to interest in income (loss) of equity method investments of $3$9 million and $(14) million for the three and nine months ended September 30, 2020, respectively. The income for the three and nine months endedMarch 31, 2021, September 30, 2021respectively, was attributable to positive investment returns realized by Harrington.


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LIQUIDITY AND CAPITAL RESOURCES

Refer to the ‘Liquidity and Capital Resources’ section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20202021 for a general discussion of liquidity and capital resources.

The following table summarizes consolidated capital:
September 30, 2021December 31, 2020
Debt$1,310,650 $1,309,695 
Preferred shares550,000 550,000 
Common equity4,785,055 4,745,694 
Shareholders’ equity5,335,055 5,295,694 
Total capital$6,645,705 $6,605,389 
Ratio of debt to total capital19.7 %19.8 %
Ratio of debt and preferred equity to total capital28.0 %28.2 %
March 31, 2022December 31, 2021
Debt$1,311,304 $1,310,975 
Preferred shares550,000 550,000 
Common equity4,570,540 4,860,656 
Shareholders’ equity5,120,540 5,410,656 
Total capital$6,431,844 $6,721,631 
Ratio of debt to total capital20.4 %19.5 %
Ratio of debt and preferred equity to total capital28.9 %27.7 %

We finance operations with a combination of debt and equity capital. Debt to total capital, and debt and preferred equity to total capital ratios, provide an indication of our capital structure, along with some insight into our financial strength. WeWhile the impact of unrealized losses recognized in other comprehensive income (loss), following a decrease in market value of our fixed maturities, has reduced common shareholders' equity, we believe that our financial flexibility remains strong.Refer to Item 1, Note 10 to the Consolidated Financial Statements 'Debt and Financing Arrangements' for recent changes to our capital structure.

Common Equity

During the ninethree months ended September 30, 2021,March 31, 2022, common equity increaseddecreased by $39290 million. The following table reconciles opening and closing common equity positions:
NineThree months ended September 30,March 31,20212022
Common equity - opening$4,745,6944,860,656 
Treasury shares reissued1,1451,545 
Share-based compensation expense31,27812,185 
Change in unrealized gains (losses) on available for sale investments, net of tax(265,197)(397,611)
Foreign currency translation adjustment9242,775 
Net income (loss)413,716149,200 
Preferred share dividends(22,688)(7,563)
Common share dividends(109,792)(37,670)
Treasury shares repurchased(10,025)(12,977)
Common equity - closing$4,785,0554,570,540 

During the ninethree months ended September 30, 2021,March 31, 2022, we repurchased 201,000245,000 common shares from employees to satisfyfacilitate the satisfaction of their personal withholding tax liabilities related tothat arise on the vesting of share-settled restricted stock units granted under our Amended and Restated 2007 and 2017 Long-Term Equity Compensation Plans for a total cost of $1013 million.

AAt April 27, 2022, we had $100 million of remaining authorization under our Board-authorized share repurchase program for common share repurchase plan has not been authorizedrepurchases through December 31, 2022 (refer to Part II, Item 2 'Unregistered Sales of Equity Securities and Use of Proceeds' for 2021.further details).

We expect cash flows generated from operations, combined with liquidity provided by our investment portfolio, will be sufficient to cover cash outflows and other contractual commitments through the foreseeable future.

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CRITICAL ACCOUNTING ESTIMATES

The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values. We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.

We believe the material items requiring such subjective and complex estimates are:

•reserves for losses and loss expenses;

•reinsurance recoverable on unpaid losses and loss expenses, including the allowance for expected credit losses;

•gross premiums written and net premiums earned;

•fair value measurements of financial assets and liabilities; and

•the allowance for expected credit losses associated with fixed maturities, available for sale and fixed maturities, held to maturity securities.sale.

Other than our consideration of the impact of the allowance for expected credit losses associated with fixed maturities, held to maturity securities detailed in Note 1 'Basis of Presentation and Significant Accounting Policies' to the consolidated financial statements, weWe believe that the critical accounting estimates discussion in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, continue2021, continues to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.


RECENT ACCOUNTING PRONOUNCEMENTS

At September 30, 2021,March 31, 2022, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.
 

OFF-BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS

At September 30, 2021, the Company had not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K.


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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. There have been no material changes to this item since December 31, 2020,2021, with the exception of the changes in exposure to foreign currency risk presented below.

Foreign Currency Risk
The table below provides a sensitivity analysis of total net foreign currency exposures.exposures:
AUDNZDCADEURGBPJPYOtherTotal
At September 30, 2021
Net managed assets (liabilities), excluding derivatives$30,278 $9,511 $256,398 $(466,972)$(325,062)$(64,831)$42,268 $(518,410)
Foreign currency derivatives, net(20,917)(5,166)(286,908)412,010 269,888 75,511 2,802 447,220 
Net managed foreign currency exposure9,361 4,345 (30,510)(54,962)(55,174)10,680 45,070 (71,190)
Other net foreign currency exposure— — 137 (882)(1,430)— 34,757 32,582 
Total net foreign currency exposure$9,361 $4,345 $(30,373)$(55,844)$(56,604)$10,680 $79,827 $(38,608)
Net foreign currency exposure as a percentage of total shareholders’ equity0.2 %0.1 %(0.6 %)(1.0 %)(1.1 %)0.2 %1.5 %(0.7 %)
Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1)
$936 $434 $(3,037)$(5,584)$(5,660)$1,068 $7,982 $(3,861)
AUDNZDCADEURGBPJPYOtherTotal
At March 31, 2022
Net managed assets (liabilities), excluding derivatives$54,934$7,446$354,705$(418,109)$(264,087)$(72,821)$56,413$(281,519)
Foreign currency derivatives, net(41,979)(1,733)(316,856)389,671193,79872,104(20,256)274,749
Net managed foreign currency exposure12,9555,71337,849(28,438)(70,289)(717)36,157(6,770)
Other net foreign currency exposure1—114(1,537)(1,360)—31,26128,479
Total net foreign currency exposure$12,956$5,713$37,963$(29,975)$(71,649)$(717)$67,418$21,709
Net foreign currency exposure as a percentage of total shareholders’ equity0.3 %0.1 %0.7 %(0.6 %)(1.4 %)— %1.3 %0.4 %
Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1)
$1,296$571$3,796$(2,998)$(7,165)$(72)$6,742$2,171
(1)Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.

Total Net Foreign Currency Exposure

At September 30, 2021,March 31, 2022, total net foreign currency liabilitiesassets were $39$22 million primarily driven by the recognition of reserve for losses and loss expensesincreases in euro and pound sterling relatedexposures to the Europeaneuro, canadian dollar and U.K. storms and net premiums earnedother non-core currencies primarily due to new business written during the ninethree months ended September 30, 2021.March 31, 2022. Other net foreign currency exposures includes $35$31 million related to assets managed by specific investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy. An emerging market debt portfolio is the primary contributor to this group of assets.




















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ITEM 4.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) at September 30, 2021.March 31, 2022. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2021,March 31, 2022, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2021.March 31, 2022.

Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company has not experienced any material impact to its internal control over financial reporting resulting from the introduction of a remotehybrid work model due to the COVID-19 pandemic.model.


PART II     OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.

We are not party to any material legal proceedings arising outside the ordinary course of business.


ITEM 1A.     RISK FACTORS

There were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.2021.







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

Issuer Purchases of Equity Securities

Common Shares

The following table shows information regarding the number of common shares repurchased:
Period
Total number
of shares
purchased(a) (b)
Average
price paid
per share
Total number of shares purchased as part of
publicly announced
plans or programs
Maximum number (or approximate
dollar value) of shares that may yet be
purchased under the plans
or programs(b)
July 1-31, 20212 $50.19 — — 
August 1-31, 2021— $50.87 — — 
September 1-30, 20212 $49.71 — — 
Total  
4  — — 
Period
Total number
of shares
purchased(a) (b)
Average
price paid
per share
Total number of shares purchased as part of
publicly announced
plans or programs
Maximum number (or approximate
dollar value) of shares that may yet be
purchased under the plans
or programs (c)
January 1-31, 2022—$57.00 —$100 million
February 1-28, 2022— $57.34 —$100 million
March 1-31, 2022245 $52.92 —$100 million
Total  
245  —$100 million
(a) In hundred thousands.
(b) Shares are repurchased from employees to satisfyfacilitate the satisfaction of their personal withholding tax liabilities related tothat arise on the vesting of share-settled restricted stock units.
(c) On December 2, 2021, our Board of Directors authorized a share repurchase plan to repurchase up to $100 million of our common shares, effective January 1, 2022 through to December 31, 2022. Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions.



ITEM 5.     OTHER INFORMATION

Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose in their annual and quarterly reports whether they or any of their affiliates knowingly engaged in certain activities with Iran or with individuals or entities that are subject to certain sanctions under U.S. law. Issuers are required to provide this disclosure even where the activities, transactions or dealings are conducted outside of the U.S. in compliance with applicable law.

As and when allowed by the applicable law and regulations, certain of our non-U.S. subsidiaries provide treaty reinsurance coverage to non-U.S. insurers on a worldwide basis, including insurers of liability, marine, aviation and energy risks, and as a result, these underlying insurance and reinsurance portfolios may have some exposure to Iran. In addition, we provide insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull war and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended September 30, 2021,March 31, 2022, there has been no material amount of premium allocated or apportioned to activities relating to Iran. We intend for our non-U.S. subsidiaries to continue to provide such coverage only to the extent permitted by applicable law.

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ITEM 6.     EXHIBITS
2.1
Rule 2.7 Announcement, dated July 5, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 6, 2017).
2.2
Rule 2.7 Announcement, dated August 24, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 25, 2017).
3.1
Certificate of Incorporation and Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1(Amendment No. 1) (No. 333-103620) filed on April 16, 2003).
3.2
Amended and Restated Bye-Laws (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on May 15, 2009).
4.1
Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 3) (No. 333-103620) filed on June 10, 2003).
4.2
Certificate of Designations establishing the specific rights, preferences, limitations and other terms of the Series E Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 7, 2016).
10.1
Deed of Amendment dated March 31, 2022 to Committed Letter of Credit Facility Number 2 dated March 27, 2017, as amended, by and among, AXIS Specialty Limited, AXIS Re SE, AXIS Specialty Europe SE, AXIS Insurance Company, AXIS Reinsurance Company, AXIS Surplus Insurance Company and Citibank Europe plc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 31, 2022).
†31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101The following financial information from AXIS Capital Holdings Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021March 31, 2022 formatted in Inline XBRL: (i) Consolidated Balance Sheets at September 30, 2021March 31, 2022 and December 31, 2020;2021; (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020;2021; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021March 31, 2022 and 2020;2021; (iv) Consolidated Statements of Changes in Shareholders' Equity for the ninethree months ended September 30, 2021March 31, 2022 and 2020;2021; (v) Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020;2021; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
†104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
    
† Filed herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: OctoberApril 27, 20212022
 
AXIS CAPITAL HOLDINGS LIMITED
By:/S/ ALBERT BENCHIMOL
Albert Benchimol
President and Chief Executive Officer
(Principal Executive Officer)
/S/ PETER VOGT
Peter Vogt
Chief Financial Officer
(Principal Financial Officer)


































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