TABLE OF CONTENTS



Part I — FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure About Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 6. Exhibits
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(Unaudited)			(Audited)			(Unaudited)			(Audited)
Assets
Investments:
Fixed maturity securities	$	13,572,402		$	13,551,250		$	13,732,800		$	13,606,812
Real estate	1,917,250			1,469,601			2,067,544			1,957,092
Investment funds	1,251,748			1,155,677			1,401,571			1,332,818
Arbitrage trading account	678,321			617,649			533,442			452,548
Equity securities	325,254			576,647			416,588			279,006
Loans receivable	96,590			79,684			94,697			94,813
Total investments	17,841,565			17,450,508			18,246,642			17,723,089
Cash and cash equivalents	819,366			950,471			1,258,174			817,602
Premiums and fees receivable	1,872,460			1,773,844			2,034,036			1,807,762
Due from reinsurers	1,859,917			1,783,200			2,040,250			1,932,291
Deferred policy acquisition costs	513,092			507,549			520,908			497,629
Prepaid reinsurance premiums	497,285			472,009			538,358			498,880
Trading account receivables from brokers and clearing organizations	191,394			189,280			402,361			347,228
Property, furniture and equipment	424,754			422,960			398,885			416,372
Goodwill	171,095			178,945			173,037			173,037
Accrued investment income	148,646			136,597			140,864			144,481
Federal and foreign income taxes	37,196			—			—			36,193
Other assets	478,879			434,554			734,388			501,413
Total assets	$	24,855,649		$	24,299,917		$	26,487,903		$	24,895,977

Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses	$	11,872,162		$	11,670,408		$	12,320,278		$	11,966,448
Unearned premiums	3,454,955			3,290,180			3,614,152			3,359,991
Due to reinsurers	231,197			246,460			294,949			256,917
Trading account securities sold but not yet purchased	112,355			64,358			159,349			38,120
Federal and foreign income taxes	—			98,091			38,437			—
Other liabilities	1,008,145			981,987			1,258,995			1,005,184
Senior notes and other debt	1,790,498			1,769,052			1,873,799			1,882,028
Subordinated debentures	907,304			728,218			907,866			907,491
Total liabilities	19,376,616			18,848,754			20,467,825			19,416,179
Equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares; issued and outstanding - none							—			—
Common stock, par value $.20 per share:
Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 122,117,763 and 121,514,852 shares, respectively	47,024			47,024
Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 183,168,398 and 182,993,640 shares, respectively							70,535			70,535
Additional paid-in capital	1,058,074			1,048,283			1,058,416			1,039,633
Retained earnings	7,505,706			6,956,882			7,826,015			7,558,619
Accumulated other comprehensive (loss) income	(474,938		)	68,541
Treasury stock, at cost, 113,000,155 and 113,603,066 shares, respectively	(2,698,018		)	(2,709,386		)
Accumulated other comprehensive loss							(260,796		)	(510,470		)
Treasury stock, at cost, 169,508,366 and 169,683,237 shares, respectively							(2,717,410		)	(2,720,466		)
Total stockholders’ equity	5,437,848			5,411,344			5,976,760			5,437,851
Noncontrolling interests	41,185			39,819			43,318			41,947
Total equity	5,479,033			5,451,163			6,020,078			5,479,798
Total liabilities and equity	$	24,855,649		$	24,299,917		$	26,487,903		$	24,895,977

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share data)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2018			2017			2018			2017			2019			2018			2019			2018
REVENUES:
Net premiums written	$	1,624,214		$	1,571,183		$	4,913,656		$	4,782,272		$	1,743,464		$	1,624,104		$	3,453,065		$	3,289,442
Change in net unearned premiums	(20,729		)	10,317			(161,709		)	(62,028		)	(96,623		)	(43,051		)	(213,368		)	(140,981		)
Net premiums earned	1,603,485			1,581,500			4,751,947			4,720,244			1,646,841			1,581,053			3,239,697			3,148,461
Net investment income	186,124			142,479			514,419			426,601			188,333			153,777			346,587			328,295
Net realized and unrealized gains on investments	22,334			183,959			140,429			276,760			73,574			69,631			142,226			118,095
Revenues from non-insurance businesses	95,168			89,786			242,037			225,033			89,297			76,698			181,124			146,869
Insurance service fees	30,782			33,612			91,175			100,475			22,446			29,719			47,759			60,393
Other income	9			6			59			695			2,893			38			3,013			50
Total revenues	1,937,902			2,031,342			5,740,066			5,749,808			2,023,384			1,910,916			3,960,406			3,802,163
OPERATING COSTS AND EXPENSES:
Losses and loss expenses	1,017,720			1,081,174			2,954,575			3,025,475			1,028,830			973,636			2,017,479			1,936,856
Other operating costs and expenses	577,648			600,822			1,781,230			1,821,155			591,828			593,142			1,179,916			1,203,581
Expenses from non-insurance businesses	93,463			86,412			238,198			221,389			88,272			75,191			178,397			144,734
Interest expense	39,848			36,821			116,608			110,419			40,718			39,705			81,439			76,760
Total operating costs and expenses	1,728,679			1,805,229			5,090,611			5,178,438			1,749,648			1,681,674			3,457,231			3,361,931
Income before income taxes	209,223			226,113			649,455			571,370			273,736			229,242			503,175			440,232
Income tax expense	(44,780		)	(63,295		)	(136,661		)	(174,305		)	(56,309		)	(48,464		)	(104,134		)	(91,881		)
Net income before noncontrolling interests	164,443			162,818			512,794			397,065			217,427			180,778			399,041			348,351
Noncontrolling interests	(2,523		)	(764		)	(4,402		)	(2,560		)	(718		)	(703		)	(1,610		)	(1,879		)
Net income to common stockholders	$	161,920		$	162,054		$	508,392		$	394,505		$	216,709		$	180,075		$	397,431		$	346,472

NET INCOME PER SHARE:
Basic	$	1.28		$	1.29		$	4.02		$	3.17		$	1.14		$	0.95		$	2.09		$	1.83
Diluted	$	1.26		$	1.26		$	3.96		$	3.05		$	1.12		$	0.93		$	2.06		$	1.80

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net income before noncontrolling interests	$	164,443		$	162,818		$	512,794		$	397,065		$	217,427		$	180,778		$	399,041		$	348,351
Other comprehensive (loss) income:
Other comprehensive income (loss):
Change in unrealized currency translation adjustments	15,686			28,592			(75,970		)	71,574			(14,492		)	(104,455		)	5,268			(91,656		)
Change in unrealized investment (losses) gains, net of taxes	(94,842		)	(8,168		)	(253,056		)	26,598
Other comprehensive (loss) income	(79,156		)	20,424			(329,026		)	98,172
Change in unrealized investment gains (losses), net of taxes													118,649			(32,442		)	244,424			(158,214		)
Other comprehensive income (loss)													104,157			(136,897		)	249,692			(249,870		)
Comprehensive income	85,287			183,242			183,768			495,237			321,584			43,881			648,733			98,481
Noncontrolling interests	(2,463		)	(731		)	(4,316		)	(2,541		)	(748		)	(666		)	(1,592		)	(1,853		)
Comprehensive income to common stockholders	$	82,824		$	182,511		$	179,452		$	492,696		$	320,836		$	43,215		$	647,141		$	96,628

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands)


	For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018			2019			2018
COMMON STOCK:
Beginning and end of period	$	47,024		$	47,024		$	70,535		$	70,535		$	70,535		$	70,535
ADDITIONAL PAID-IN CAPITAL:
Beginning of period	$	1,048,283		$	1,037,446		$	1,053,372		$	1,033,718		$	1,039,633		$	1,024,771
Restricted stock units issued	(16,690		)	(27,047		)	(2,049		)	(5,155		)	(2,504		)	(5,642		)
Restricted stock units expensed	26,481			30,176			7,093			8,233			21,287			17,667
End of period	$	1,058,074		$	1,040,575		$	1,058,416		$	1,036,796		$	1,058,416		$	1,036,796
RETAINED EARNINGS:
Beginning of period	$	6,956,882		$	6,595,987		$	7,721,039		$	7,322,201		$	7,558,619		$	6,956,882
Cumulative effect adjustment resulting from changes in accounting principles	215,939			—			—			—			—			215,939
Net income to common stockholders	508,392			394,505			216,709			180,075			397,431			346,472
Dividends	(175,507		)	(110,430		)
Dividends ($0.61, $0.43, $0.71 and $0.53 per share, respectively)							(111,733		)	(79,114		)	(130,035		)	(96,131		)
End of period	$	7,505,706		$	6,880,062		$	7,826,015		$	7,423,162		$	7,826,015		$	7,423,162
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
Unrealized investment (losses) gains:
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Unrealized investment gains:
Beginning of period	$	375,421		$	427,154		$	34,236		$	35,099		$	(91,491	)	$	375,421
Cumulative effect adjustment resulting from changes in accounting principles	(214,539		)	—			—			—			—			(214,539		)
Change in unrealized (losses) gains on securities not other-than-temporarily impaired	(252,974		)	25,712
Change in unrealized gains on other-than-temporarily impaired securities	4			905
Change in unrealized gains (losses) on securities not other-than-temporarily impaired							118,597			(32,403		)	244,393			(158,199		)
Change in unrealized gains (losses) on other-than-temporarily impaired securities							82			(2		)	13			11
End of period	(92,088		)	453,771			152,915			2,694			152,915			2,694
Currency translation adjustments:
Beginning of period	(306,880		)	(371,586		)	(399,219		)	(294,081		)	(418,979		)	(306,880		)
Net change in period	(75,970		)	71,574			(14,492		)	(104,455		)	5,268			(91,656		)
End of period	(382,850		)	(300,012		)	(413,711		)	(398,536		)	(413,711		)	(398,536		)
Total accumulated other comprehensive (loss) income	$	(474,938	)	$	153,759
Total accumulated other comprehensive loss							$	(260,796	)	$	(395,842	)	$	(260,796	)	$	(395,842	)
TREASURY STOCK:
Beginning of period	$	(2,709,386	)	$	(2,688,817	)	$	(2,720,011	)	$	(2,715,697	)	$	(2,720,466	)	$	(2,709,386	)
Stock exercised/vested	17,478			25,584			2,049			6,475			2,504			6,963
Stock repurchased	(6,799		)	(28,378		)	—			—			—			(6,799		)
Stock issued	689			727			552			688			552			688
End of period	$	(2,698,018	)	$	(2,690,884	)	$	(2,717,410	)	$	(2,708,534	)	$	(2,717,410	)	$	(2,708,534	)
NONCONTROLLING INTERESTS:
Beginning of period	$	39,819		$	33,926		$	42,844		$	40,404		$	41,947		$	39,819
(Distributions) contributions	(2,950		)	3,646
Distributions							(274		)	(1,560		)	(221		)	(2,162		)
Net income	4,402			2,560			718			703			1,610			1,879
Other comprehensive income (loss), net of tax	(86		)	(19		)	30			(37		)	(18		)	(26		)
End of period	$	41,185		$	40,113		$	43,318		$	39,510		$	43,318		$	39,510

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,

	2018			2017			2019			2018
CASH FROM OPERATING ACTIVITIES:
Net income to common stockholders	$	508,392		$	394,505		$	397,431		$	346,472
Adjustments to reconcile net income to net cash from operating activities:
Adjustments to reconcile net income to net cash from (used in) operating activities:
Net realized and unrealized gains on investments	(140,429		)	(276,760		)	(142,226		)	(118,095		)
Depreciation and amortization	76,541			78,137			51,289			56,372
Noncontrolling interests	4,402			2,560			1,610			1,879
Investment funds	(94,075		)	(51,907		)	(58,251		)	(53,070		)
Stock incentive plans	28,528			31,883			27,340			19,722
Change in:
Arbitrage trading account	(14,795		)	(2,835		)	(14,797		)	(7,871		)
Premiums and fees receivable	(107,347		)	(112,420		)	(223,771		)	(152,832		)
Reinsurance accounts	(114,298		)	(42,319		)	(112,681		)	(77,140		)
Deferred policy acquisition costs	(7,466		)	4,483			(23,632		)	(11,152		)
Income taxes	(99,945		)	(15,451		)	2,759			(39,069		)
Reserves for losses and loss expenses	230,112			422,657			350,981			123,582
Unearned premiums	176,736			121,583			254,010			171,468
Other	(103,832		)	(32,258		)	(107,416		)	(140,904		)
Net cash from operating activities	342,524			521,858			402,646			119,362
CASH USED IN INVESTING ACTIVITIES:
CASH FROM (USED IN) INVESTING ACTIVITIES:
Proceeds from sale of fixed maturity securities	2,841,642			3,081,619			1,320,079			2,773,554
Proceeds from sale of equity securities	449,388			137,062			39,103			284,204
(Contributions to) distributions from investment funds	(3,505		)	265,371
Contributions to investment funds							(2,896		)	(4,996		)
Proceeds from maturities and prepayments of fixed maturity securities	1,957,724			2,860,678			1,490,772			1,305,805
Purchase of fixed maturity securities	(5,187,501		)	(6,530,466		)	(2,633,251		)	(4,062,901		)
Purchase of equity securities	(87,059		)	(17,049		)	(41,849		)	(87,059		)
Real estate purchased	(454,410		)	(159,006		)	(117,773		)	(419,021		)
Change in loans receivable	(14,345		)	32,574			140			(16,310		)
Net additions to property, furniture and equipment	(35,582		)	(74,268		)	(10,804		)	(29,704		)
Change in balances due to security brokers	5,601			39,978			19,096			46,641
Cash received in connection with business disposition	8,664			—
Payment for business purchased net of cash acquired	(6,637		)	(70,570		)	—			(6,637		)
Other	(443		)	—
Net cash used in investing activities	(526,463		)	(434,077		)
CASH FROM (USED IN) FINANCING ACTIVITIES:
Net cash from (used in) investing activities							62,617			(216,424		)
CASH (USED IN) FROM FINANCING ACTIVITIES:
Repayment of senior notes and other debt	(23		)	(1,788		)	—			(23		)
Net proceeds from issuance of debt	198,905			—			—			200,838
Cash dividends to common stockholders	(96,131		)	(93,371		)	(18,302		)	(77,873		)
Purchase of common treasury shares	(6,799		)	(28,378		)	—			(6,799		)
Other, net	(4,238		)	(3,835		)	(5,548		)	(1,763		)
Net cash from (used in) financing activities	91,714			(127,372		)
Net cash (used in) from financing activities							(23,850		)	114,380
Net impact on cash due to change in foreign exchange rates	(38,880		)	18,303			(841		)	(56,587		)
Net change in cash and cash equivalents	(131,105		)	(21,288		)	440,572			(39,269		)
Cash and cash equivalents at beginning of year	950,471			795,285			817,602			950,471
Cash and cash equivalents at end of period	$	819,366		$	773,997		$	1,258,174		$	911,202

See accompanying notes to interim consolidated financial statements.

W. R. Berkley Corporation and Subsidiaries

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) General

The unaudited consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”) have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for annual financial statements. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly the Company’s financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. For further information related to ~~a description of~~ areas of judgment and estimates and other information necessary to understand the Company’s financial position and results of operations, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~ 2018.

Reclassifications have been made in the ~~2017~~2018 financial statements as originally reported to conform to the presentation of the ~~2018~~2019 financial statements. Shares outstanding and per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on April 2, 2019. Additionally, commencing with the first quarter of 2019, the Company renamed the Reinsurance segment to Reinsurance & Monoline Excess, and reclassified the monoline excess business from the Insurance segment. The reclassified business includes operations that solely retain risk on an excess basis.

The income tax provision has been computed based on the Company’s estimated annual effective tax rate. The effective tax rate for the quarter differs from the federal income tax rate of 21% principally because of tax-exempt investment income, as well as tax on income from foreign jurisdictions with different tax rates.

(2) Per Share Data

The Company presents both basic and diluted net income per share (“EPS”) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period (including ~~4,847,303~~7,389,781 and ~~4,087,731~~7,270,954 common shares held in a grantor trust as of ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively). The common shares held in the grantor trust are for delivery upon settlement of vested but mandatorily deferred restricted stock units ("RSUs"). Shares held by the grantor trust do not affect diluted shares outstanding since the shares deliverable under vested RSUs were already included in diluted shares outstanding. Diluted EPS is based upon the weighted average number of basic and common equivalent shares outstanding during the period and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect.

The weighted average number of common shares used in the computation of basic and diluted earnings per share was as follows:



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(In thousands)	2019	2018	2019	2018
Basic	190,512	189,776	190,456	189,669
Diluted	193,059	192,509	192,804	192,284

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,

(In thousands) 2018 2017 2018 2017
Basic 126,827
125,818
126,575
124,363
Diluted 128,561
128,944
128,404
129,289

(3) Recent Accounting Pronouncements

Recently adopted accounting pronouncements:

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued ~~ASU 2014-09, Revenue~~Accounting Standards Update ("ASU") 2016-02, Leases, which amends the accounting and disclosure guidance for leases. This guidance retains the two classifications of a lease, as either an operating or finance lease, both of which require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months. The right-of-use asset and the lease liability are determined based upon the present value of cash flows. Finance leases reflect the financial arrangement by recognizing interest expense on the lease liability separately from ~~Customers. ASU 2014-09 clarifies~~ the ~~principles for recognizing revenue. While insurance contracts are~~amortization expense of the right-of-use asset. Operating leases recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The accounting

by lessors is not ~~within~~significantly changed by the ~~scope of this updated guidance, the Company’s insurance service fee revenue and non-insurance business revenue are subject to this~~ updated guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The updated guidance, as amended by ASU 2015-14, was effective for public business entities for annual and interim reporting periods beginning after December 15, 2017. The Company adopted this guidance on January 1, 2018 on a prospective basis. The impact of applying this guidance prospectively was a cumulative effect adjustment that increased retained earnings, a component of stockholders' equity, by $1 million after-tax.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments. ASU 2016-01 amends the accounting guidance for financial instruments to require all equity investments with readily determinable fair values to be measured at fair value with changes in the fair value recognized in net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The updated guidance was effective for public business entities for annual reporting periods beginning after December 15, 2017 and interim periods within those years. The Company adopted this updated guidance on January 1, 2018 on a prospective basis. The impact of applying this guidance prospectively was a cumulative effect adjustment that increased retained earnings and decreased accumulated other comprehensive income ("AOCI") by offsetting amounts of $291 million, resulting in no net impact to total stockholders' equity. Following the adoption, the Company reports changes in fair value related to equity securities within net realized and unrealized gains on investments.

In February 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income, which amends previous guidance to allow a reclassification to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The amount of the reclassification includes the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Act related to items in AOCI. The updated guidance will be effective for reporting periods beginning after December 15, ~~2018, and is eligible~~2018. As permitted by the rules, the Company adopted the new guidance prospectively for ~~early adoption.~~the quarter ended March 31, 2019. The Company ~~adopted this updated~~elected to use the practical expedient permitted by the transition guidance ~~on January 1, 2018.~~which allowed companies to not reassess existing lease classifications for already effective leases. The ~~impact~~adoption of ~~applying~~ this guidance ~~was~~resulted in the recognition of a ~~cumulative effect adjustment that decreased retained earnings~~right-of-use asset of $185 million and ~~increased AOCI by offsetting amounts~~a lease liability of ~~$76~~$215 million ~~resulting~~(prior to adoption the Company had a $30 million deferred rent liability recognized) reported within other assets and other liabilities, respectively, in ~~no net~~the consolidated balance sheet. The adoption of this guidance did not have an impact ~~to total stockholders' equity.~~on the Company's results of operations or liquidity.

All other accounting and reporting standards that have become effective in ~~2018~~2019 were either not applicable to the Company or their adoption did not have a material impact on the Company.

Accounting and reporting standards that are not yet effective:

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the accounting and disclosure guidance for leases. This guidance retains the two classifications of a lease, as either an operating or finance lease, both of which will require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months. The right-of-use asset and the lease liability will be determined based upon the present value of cash flows. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The accounting by lessors is not significantly changed by the updated guidance. The updated guidance is effective for reporting periods beginning after December 15, 2018, and can be adopted prospectively or will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied. The Company will adopt the new guidance prospectively as of January 1, 2019. The Company is currently evaluating the impact that the adoption of this guidance will have on its results of operations, financial position and liquidity.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which amends the accounting guidance for credit losses on financial instruments. The updated guidance amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. This guidance also applies a new current expected credit loss model for determining credit-related impairments for financial instruments measured at amortized ~~cost.~~cost, such as reinsurance recoverables. The updated guidance is effective for reporting periods beginning after December 15, 2019. The Company will not be able to determine the impact the adoption of this guidance will have on its results of operations, financial position or liquidity until the year the guidance becomes effective.

All other recently issued but not yet effective accounting and reporting standards are either not applicable to the Company or are not expected to have a material impact on the Company.

(4) Consolidated Statement of Comprehensive Income

The following table presents the components of the changes in accumulated other comprehensive (loss) income ("AOCI"):



(In thousands)	Unrealized Investment Gains (Losses)				Currency Translation Adjustments			Accumulated Other Comprehensive (Loss) Income
As of and for the six months ended June 30, 2019
Changes in AOCI
Beginning of period	$	(91,491	)		$	(418,979	)	$	(510,470	)
Other comprehensive income before reclassifications	245,615				5,268			250,883
Amounts reclassified from AOCI	(1,191		)		—			(1,191		)
Other comprehensive income	244,424				5,268			249,692
Unrealized investment loss related to noncontrolling interest	(18		)		—			(18		)
End of period	$	152,915			$	(413,711	)	$	(260,796	)
Amounts reclassified from AOCI
Pre-tax	$	(1,508	)	(1)	$	—		$	(1,508	)
Tax effect	317			(2)	—			317
After-tax amounts reclassified	$	(1,191	)		$	—		$	(1,191	)
Other comprehensive income
Pre-tax	$	316,331			$	5,268		$	321,599
Tax effect	(71,907		)		—			(71,907		)
Other comprehensive income	$	244,424			$	5,268		$	249,692
As of and for the three months ended June 30, 2019
Changes in AOCI
Beginning of period	$	34,236			$	(399,219	)	$	(364,983	)
Other comprehensive income (loss) before reclassifications	118,475				(14,492		)	103,983
Amounts reclassified from AOCI	174				—			174
Other comprehensive income (loss)	118,649				(14,492		)	104,157
Unrealized investment losses related to noncontrolling interest	30				—			30
Ending balance	$	152,915			$	(413,711	)	$	(260,796	)
Amounts reclassified from AOCI
Pre-tax	$	220		(1)	$	—		$	220
Tax effect	(46		)	(2)	—			(46		)
After-tax amounts reclassified	$	174			$	—		$	174
Other comprehensive income (loss)
Pre-tax	$	147,072			$	(14,492	)	$	132,580
Tax effect	(28,423		)		—			(28,423		)
Other comprehensive income (loss)	$	118,649			$	(14,492	)	$	104,157

_________________________

(In thousands)
Unrealized Investment
Gains (Losses)
Currency Translation Adjustments
Accumulated Other Comprehensive
(Loss) Income
As of and for the nine months ended September 30, 2018
Changes in AOCI
Beginning of period $ 375,421
$ (306,880 ) $ 68,541
Cumulative effect adjustment resulting from changes in accounting principles (214,539 ) —
(214,539 )
Restated beginning of period 160,882
(306,880 ) (145,998 )
Other comprehensive loss before reclassifications (242,944 ) (75,970 ) (318,914 )
Amounts reclassified from AOCI (10,112 ) —
(10,112 )
Other comprehensive loss (253,056 ) (75,970 ) (329,026 )
Unrealized investment loss related to noncontrolling interest 86
—
86
End of period $ (92,088 ) $ (382,850 ) $ (474,938 )
Amounts reclassified from AOCI
Pre-tax $ (12,800 ) (1) $ —
$ (12,800 )
Tax effect 2,688
(2) —
2,688
After-tax amounts reclassified $ (10,112 ) $ —
$ (10,112 )
Other comprehensive loss
Pre-tax $ (298,164 ) $ (75,970 ) $ (374,134 )
Tax effect 45,108
—
45,108
Other comprehensive loss $ (253,056 ) $ (75,970 ) $ (329,026 )
As of and for the three months ended September 30, 2018
Changes in AOCI
Beginning of period $ 2,694
$ (398,536 ) $ (395,842 )
Other comprehensive loss before reclassifications (95,312 ) 15,686
(79,626 )
Amounts reclassified from AOCI 470
—
470
Other comprehensive loss (94,842 ) 15,686
(79,156 )
Unrealized investment loss related to noncontrolling interest 60
—
60
End of period $ (92,088 ) $ (382,850 ) $ (474,938 )
Amounts reclassified from AOCI
Pre-tax $ 595
(1) $ —
$ 595
Tax effect (125 ) (2) —
(125 )
After-tax amounts reclassified $ 470
$ —
$ 470
Other comprehensive loss
Pre-tax $ (96,828 ) $ 15,686
$ (81,142 )
Tax effect 1,986
—
1,986
Other comprehensive loss $ (94,842 ) $ 15,686
$ (79,156 )

~~_________________________~~

⁽¹⁾ Net realized and unrealized gains on investments in the consolidated statements of income.

⁽²⁾Income tax expense in the consolidated statements of income.


(In thousands)	Unrealized Investment Gains (Losses)				Currency Translation Adjustments			Accumulated Other Comprehensive (Loss) Income			Unrealized Investment Gains (Losses)				Currency Translation Adjustments			Accumulated Other Comprehensive (Loss) Income
As of and for the nine months ended September 30, 2017
As of and for the six months ended June 30, 2018											As of and for the six months ended June 30, 2018
Changes in AOCI	Changes in AOCI										Changes in AOCI
Beginning of period	$	427,154			$	(371,586	)	$	55,568		$	375,421			$	(306,880	)	$	68,541
Other comprehensive income before reclassifications	109,277				71,574			180,851
Cumulative effect adjustment resulting from changes in accounting principles											(214,539		)		—			(214,539		)
Restated beginning of period											160,882				(306,880		)	(145,998		)
Other comprehensive loss before reclassifications											(147,632		)		(91,656		)	(239,288		)
Amounts reclassified from AOCI	(82,679		)		—			(82,679		)	(10,582		)		—			(10,582		)
Other comprehensive income	26,598				71,574			98,172
Unrealized investment gain related to noncontrolling interest	19				—			19
Other comprehensive loss											(158,214		)		(91,656		)	(249,870		)
Unrealized investment loss related to noncontrolling interest											26				—			26
End of period	$	453,771			$	(300,012	)	$	153,759		$	2,694			$	(398,536	)	$	(395,842	)
Amounts reclassified from AOCI
Pre-tax	$	(127,198	)	(1)	$	—		$	(127,198	)	$	(13,395	)	(1)	$	—		$	(13,395	)
Tax effect	44,519			(2)	—			44,519			2,813			(2)	—			2,813
After-tax amounts reclassified	$	(82,679	)		$	—		$	(82,679	)	$	(10,582	)		$	—		$	(10,582	)
Other comprehensive income
Other comprehensive loss
Pre-tax	$	50,148			$	71,574		$	121,722		$	(201,336	)		$	(91,656	)	$	(292,992	)
Tax effect	(23,550		)		—			(23,550		)	43,122				—			43,122
Other comprehensive income	$	26,598			$	71,574		$	98,172
As of and for the three months ended September 30, 2017
Other comprehensive loss											$	(158,214	)		$	(91,656	)	$	(249,870	)
As of and for the three months ended June 30, 2018
Changes in AOCI	Changes in AOCI										Changes in AOCI
Beginning of period	$	461,906			$	(328,604	)	$	133,302		$	35,099			$	(294,081	)	$	(258,982	)
Other comprehensive income before reclassifications	19,968				28,592			48,560
Other comprehensive loss before reclassifications											(29,443		)		(104,455		)	(133,898		)
Amounts reclassified from AOCI	(28,136		)		—			(28,136		)	(2,999		)		—			(2,999		)
Other comprehensive income	(8,168		)		28,592			20,424
Unrealized investment gain related to noncontrolling interest	33				—			33
End of period	$	453,771			$	(300,012	)	$	153,759
Other comprehensive loss											(32,442		)		(104,455		)	(136,897		)
Unrealized investment loss related to noncontrolling interest											37				—			37
Ending balance											$	2,694			$	(398,536	)	$	(395,842	)
Amounts reclassified from AOCI
Pre-tax	$	(43,286	)	(1)	$	—		$	(43,286	)	$	(3,796	)	(1)	$	—		$	(3,796	)
Tax effect	15,150			(2)	—			15,150			797			(2)	—			797
After-tax amounts reclassified	$	(28,136	)		$	—		$	(28,136	)	$	(2,999	)		$	—		$	(2,999	)
Other comprehensive income
Other comprehensive loss
Pre-tax	$	(8,563	)		$	28,592		$	20,029		$	(40,488	)		$	(104,455	)	$	(144,943	)
Tax effect	395				—			395			8,046				—			8,046
Other comprehensive income	$	(8,168	)		$	28,592		$	20,424
Other comprehensive loss											$	(32,442	)		$	(104,455	)	$	(136,897	)

_________________________

⁽¹⁾ Net realized and unrealized gains on investments in the consolidated statements of income.

⁽²⁾Income tax expense in the consolidated statements of income.

(5) Statements of Cash ~~Flow~~Flows

Interest payments were ~~$137,789,000~~$77,672,000 and ~~$134,291,000~~$72,878,000 and income taxes paid were ~~$173,000,000~~$82,800,000 and ~~$182,487,000 in~~$111,000,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

(6) Investments in Fixed Maturity Securities

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, investments in fixed maturity securities were as follows:



(In thousands)	Amortized Cost		Gross Unrealized					Fair Value		Carrying Value
			Gains		Losses
June 30, 2019
Held to maturity:
State and municipal	$	69,167	$	13,089	$	—		$	82,256	$	69,167
Residential mortgage-backed	9,380		1,083		—			10,463		9,380
Total held to maturity	78,547		14,172		—			92,719		78,547
Available for sale:
U.S. government and government agency	760,247		18,241		(1,418		)	777,070		777,070
State and municipal:
Special revenue	2,322,750		63,204		(2,674		)	2,383,280		2,383,280
State general obligation	320,338		22,108		(43		)	342,403		342,403
Pre-refunded	298,825		19,876		(122		)	318,579		318,579
Corporate backed	238,319		7,065		(639		)	244,745		244,745
Local general obligation	427,233		32,026		(443		)	458,816		458,816
Total state and municipal	3,607,465		144,279		(3,921		)	3,747,823		3,747,823
Mortgage-backed securities:
Residential (1)	1,242,880		28,521		(5,316		)	1,266,085		1,266,085
Commercial	303,332		6,829		(380		)	309,781		309,781
Total mortgage-backed securities	1,546,212		35,350		(5,696		)	1,575,866		1,575,866
Asset-backed	2,719,618		9,874		(27,707		)	2,701,785		2,701,785
Corporate:
Industrial	2,178,339		59,623		(7,755		)	2,230,207		2,230,207
Financial	1,431,612		27,484		(5,373		)	1,453,723		1,453,723
Utilities	312,200		12,548		(426		)	324,322		324,322
Other	27,027		1,096		(90		)	28,033		28,033
Total corporate	3,949,178		100,751		(13,644		)	4,036,285		4,036,285
Foreign government	818,276		20,507		(23,359		)	815,424		815,424
Total available for sale	13,400,996		329,002		(75,745		)	13,654,253		13,654,253
Total investments in fixed maturity securities	$	13,479,543	$	343,174	$	(75,745	)	$	13,746,972	$	13,732,800

(In thousands)
Amortized
Cost
Gross Unrealized
Fair
Value

Carrying
Value
Gains Losses
September 30, 2018
Held to maturity:
State and municipal $ 67,513
$ 11,081
$ —
$ 78,594
$ 67,513
Residential mortgage-backed 11,276
1,171
—
12,447
11,276
Total held to maturity 78,789
12,252
—
91,041
78,789
Available for sale:
U.S. government and government agency 490,679
4,258
(7,895 ) 487,042
487,042
State and municipal:
Special revenue 2,486,490
23,982
(32,046 ) 2,478,426
2,478,426
State general obligation 380,200
8,917
(2,742 ) 386,375
386,375
Pre-refunded 427,429
15,213
(55 ) 442,587
442,587
Corporate backed 294,243
4,833
(2,596 ) 296,480
296,480
Local general obligation 403,879
13,988
(3,841 ) 414,026
414,026
Total state and municipal 3,992,241
66,933
(41,280 ) 4,017,894
4,017,894
Mortgage-backed securities:
Residential (1) 1,237,787
4,400
(33,896 ) 1,208,291
1,208,291
Commercial 345,826
670
(6,565 ) 339,931
339,931
Total mortgage-backed securities 1,583,613
5,070
(40,461 ) 1,548,222
1,548,222
Asset-backed 2,556,499
10,753
(17,378 ) 2,549,874
2,549,874
Corporate:
Industrial 2,303,206
16,555
(41,783 ) 2,277,978
2,277,978
Financial 1,436,530
16,786
(21,688 ) 1,431,628
1,431,628
Utilities 303,260
2,222
(6,010 ) 299,472
299,472
Other 56,474
6
(389 ) 56,091
56,091
Total corporate 4,099,470
35,569
(69,870 ) 4,065,169
4,065,169
Foreign 838,834
10,427
(23,849 ) 825,412
825,412
Total available for sale 13,561,336
133,010
(200,733 ) 13,493,613
13,493,613
Total investments in fixed maturity securities $ 13,640,125
$ 145,262
$ (200,733 ) $ 13,584,654
$ 13,572,402


(In thousands)	Amortized Cost		Gross Unrealized					Fair Value		Carrying Value		Amortized Cost		Gross Unrealized					Fair Value		Carrying Value
			Gains		Losses									Gains		Losses
December 31, 2017
December 31, 2018
Held to maturity:
State and municipal	$	65,882	$	14,499	$	—		$	80,381	$	65,882	$	67,891	$	11,549	$	—		$	79,440	$	67,891
Residential mortgage-backed	13,450		1,227		—			14,677		13,450		10,744		1,259		—			12,003		10,744
Total held to maturity	79,332		15,726		—			95,058		79,332		78,635		12,808		—			91,443		78,635
Available for sale:
U.S. government and government agency	372,748		8,824		(3,832		)	377,740		377,740		697,931		9,219		(4,910		)	702,240		702,240
State and municipal:
Special revenue	2,663,245		53,512		(10,027		)	2,706,730		2,706,730		2,396,089		30,507		(19,790		)	2,406,806		2,406,806
State general obligation	439,358		16,087		(711		)	454,734		454,734		335,626		11,951		(1,103		)	346,474		346,474
Pre-refunded	436,241		22,701		(9		)	458,933		458,933		408,141		16,568		(30		)	424,679		424,679
Corporate backed	375,268		10,059		(860		)	384,467		384,467		272,440		4,319		(2,350		)	274,409		274,409
Local general obligation	417,955		23,242		(967		)	440,230		440,230		403,219		18,350		(1,339		)	420,230		420,230
Total state and municipal	4,332,067		125,601		(12,574		)	4,445,094		4,445,094		3,815,515		81,695		(24,612		)	3,872,598		3,872,598
Mortgage-backed securities:
Residential (1)	1,043,629		9,304		(13,547		)	1,039,386		1,039,386		1,264,376		7,729		(20,225		)	1,251,880		1,251,880
Commercial	261,652		1,521		(2,628		)	260,545		260,545		345,070		1,304		(3,708		)	342,666		342,666
Total mortgage-backed securities	1,305,281		10,825		(16,175		)	1,299,931		1,299,931		1,609,446		9,033		(23,933		)	1,594,546		1,594,546
Asset-backed	2,111,132		11,024		(10,612		)	2,111,544		2,111,544		2,462,303		10,131		(33,687		)	2,438,747		2,438,747
Corporate:
Industrial	2,574,400		52,210		(7,718		)	2,618,892		2,618,892		2,295,778		15,355		(53,312		)	2,257,821		2,257,821
Financial	1,402,161		37,744		(5,138		)	1,434,767		1,434,767		1,502,427		7,178		(45,683		)	1,463,922		1,463,922
Utilities	284,886		11,316		(1,248		)	294,954		294,954		330,326		2,997		(4,148		)	329,175		329,175
Other	40,560		5		(66		)	40,499		40,499		60,238		322		(167		)	60,393		60,393
Total corporate	4,302,007		101,275		(14,170		)	4,389,112		4,389,112		4,188,769		25,852		(103,310		)	4,111,311		4,111,311
Foreign	819,345		32,018		(2,866		)	848,497		848,497
Foreign government												822,093		11,753		(25,111		)	808,735		808,735
Total available for sale	13,242,580		289,567		(60,229		)	13,471,918		13,471,918		13,596,057		147,683		(215,563		)	13,528,177		13,528,177
Total investments in fixed maturity securities	$	13,321,912	$	305,293	$	(60,229	)	$	13,566,976	$	13,551,250	$	13,674,692	$	160,491	$	(215,563	)	$	13,619,620	$	13,606,812

____________

(1) Gross unrealized ~~gains~~losses for residential mortgage-backed securities include ~~$81,006~~$(42,762) and ~~$76,467~~$(55,090) as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, related to securities with the non-credit portion of other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income.

The amortized cost and fair value of fixed maturity securities at ~~September~~June 30, ~~2018,~~2019, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations.



(In thousands)	Amortized Cost		Fair Value
Due in one year or less	$	1,017,744	$	1,022,427
Due after one year through five years	4,680,578		4,764,795
Due after five years through ten years	3,226,328		3,347,580
Due after ten years	2,999,301		3,025,841
Mortgage-backed securities	1,555,592		1,586,329
Total	$	13,479,543	$	13,746,972

(In thousands)
Amortized
Cost

Fair
Value
Due in one year or less $ 948,532
$ 948,471
Due after one year through five years 4,526,907
4,523,008
Due after five years through ten years 2,958,685
2,959,406
Due after ten years 3,611,112
3,593,100
Mortgage-backed securities 1,594,889
1,560,669
Total $ 13,640,125
$ 13,584,654

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, there were no investments that exceeded 10% of common stockholders' equity, other than investments in United States government and government agency securities.

(7) Investments in Equity Securities

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, investments in equity securities were as follows:



(In thousands)	Cost		Gross Unrealized					Fair Value		Carrying Value
(In thousands)	Cost		Gains		Losses			Fair Value		Carrying Value
June 30, 2019
Common stocks	$	153,440	$	8,092	$	(21,306	)	$	140,226	$	140,226
Preferred stocks	101,423		180,316		(5,377		)	276,362		276,362
Total	$	254,863	$	188,408	$	(26,683	)	$	416,588	$	416,588
December 31, 2018
Common stocks	$	113,576	$	4,335	$	(19,719	)	$	98,192	$	98,192
Preferred stocks	115,201		72,364		(6,751		)	180,814		180,814
Total	$	228,777	$	76,699	$	(26,470	)	$	279,006	$	279,006

(In thousands) Cost Gross Unrealized (1)
Fair
Value

Carrying
Value
Gains Losses
September 30, 2018
Common stocks $ 117,880
$ 56,869
$ (7,811 ) $ 166,938
$ 166,938
Preferred stocks 117,101
44,262
(3,047 ) 158,316
158,316
Total $ 234,981
$ 101,131
$ (10,858 ) $ 325,254
$ 325,254
December 31, 2017
Common stocks $ 81,855
$ 272,309
$ (1,960 ) $ 352,204
$ 352,204
Preferred stocks 124,150
102,890
(2,597 ) 224,443
224,443
Total $ 206,005
$ 375,199
$ (4,557 ) $ 576,647
$ 576,647

~~______________________~~

(1) Effective January 1, 2018, the Company adopted new accounting guidance that requires all equity investments with readily determinable fair values (subject to certain exceptions) to be measured at fair value with changes in the fair value recognized through net income. Refer to Note 3 for additional information.

(8) Arbitrage Trading Account

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, the fair and carrying values of the arbitrage trading account were ~~$678~~$533 million and ~~$618~~$453 million, respectively. The primary focus of the trading account is merger arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less).

The Company uses put options, call options and swap contracts in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options and contracts are reported at fair value. As of ~~September~~June 30, ~~2018,~~2019, the fair value of long option contracts outstanding was ~~$89~~$313 thousand (notional amount of ~~$16.4~~$9.9 million) and the fair value of short option contracts outstanding was ~~$278~~$291 thousand (notional amount of ~~$28.8~~$15.6 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.

(9) Net Investment Income

Net investment income consists of the following:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019			2018			2019			2018
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable	$	128,903		$	129,665		$	261,022		$	252,911
Investment funds	46,840			12,716			58,251			53,070
Arbitrage trading account	7,199			8,333			17,784			13,524
Real estate	5,174			3,174			9,481			9,742
Equity securities	1,303			559			2,591			1,205
Gross investment income	189,419			154,447			349,129			330,452
Investment expense	(1,086		)	(670		)	(2,542		)	(2,157		)
Net investment income	$	188,333		$	153,777		$	346,587		$	328,295

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,

(In thousands) 2018 2017 2018 2017
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable $ 131,836
$ 118,834
$ 384,748
$ 347,976
Investment funds 41,005
15,200
94,075
50,744
Arbitrage trading account 7,632
4,418
21,156
16,235
Real estate 5,597
5,042
15,339
14,894
Equity securities 1,004
604
2,208
1,845
Gross investment income 187,074
144,098
517,526
431,694
Investment expense (950 ) (1,619 ) (3,107 ) (5,093 )
Net investment income $ 186,124
$ 142,479
$ 514,419
$ 426,601

(10) Investment Funds

The Company evaluates whether it is an investor in a variable interest entity ("VIE"). Such entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support, or the equity investors, as a group, do not have the characteristics of a controlling financial interest (primary beneficiary). The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE's capital structure, contractual terms, nature of the VIE's operations and purpose, and the Company's relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE and on an ongoing basis. The Company is not the primary beneficiary in any of its investment funds, and accordingly, carries its interests in investment funds under the equity method of accounting.

The Company’s maximum exposure to loss with respect to these investments is limited to the carrying amount reported on the Company’s consolidated balance sheet and its unfunded commitments, which were ~~$324~~$241 million as of ~~September~~June 30, ~~2018.~~2019.

Investment funds consisted of the following:



	Carrying Value as of				Income (Loss) from Investment Funds
	June 30,		December 31,		For the Six Months Ended June 30,
(In thousands)	2019		2018		2019			2018
Real estate	$	654,610	$	642,137	$	13,078		$	35,826
Energy	75,053		75,213		(7,100		)	(1,256		)
Other funds	671,908		615,468		52,273			18,500
Total	$	1,401,571	$	1,332,818	$	58,251		$	53,070

Carrying Value as of
Income (Loss) from
Investment Funds
September 30, December 31, For the Nine Months
Ended September 30,
(In thousands) 2018 2017 2018 2017
Real estate $ 632,618
$ 606,995
$ 50,044
$ 30,661
Energy 79,559
82,882
408
(12,763 )
Other funds 539,571
465,800
43,623
32,846
Total $ 1,251,748
$ 1,155,677
$ 94,075

$ 50,744

The Company's share of the earnings or losses of investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated financial statements.

(11) Real Estate

Investment in real estate represents directly owned property held for investment, as follows:



	Carrying Value
	June 30,		December 31,
(In thousands)	2019		2018
Properties in operation	$	1,310,149	$	1,279,584
Properties under development	757,395		677,508
Total	$	2,067,544	$	1,957,092

Carrying Value
September 30, December 31,
(In thousands) 2018 2017
Properties in operation $ 757,573
$ 451,691
Properties under development 1,159,677
1,017,910
Total $ 1,917,250
$ 1,469,601

In ~~2018,~~2019, properties in operation included a long-term ground lease in Washington, D.C., a hotel in Memphis, Tennessee, two office complexes in New York City, ~~and~~ office buildings in West Palm Beach and Palm Beach, ~~Florida.~~Florida, and an office building in London. Properties in operation are net of accumulated depreciation and amortization of ~~$40,623,000~~$55,515,000 and ~~$25,646,000~~$46,250,000 as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Related depreciation expense was ~~$15,175,000~~$8,931,000 and ~~$5,382,000~~$10,784,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Future minimum rental income expected on operating leases relating to properties in operation is ~~$12,632,005 in 2018, $52,014,542~~$32,963,388 in 2019, ~~$50,145,388~~$66,249,918 in 2020, ~~$49,267,711~~$68,157,589 in 2021, ~~$51,048,893~~$71,308,839 in 2022, ~~$42,435,018~~$64,897,648 in 2023, $62,673,400 in 2024 and ~~$501,089,126~~$666,203,503 thereafter.

~~Properties under development include an~~The Company borrowed $101,750,000 through a non-recourse loan secured by the West Palm Beach office building in ~~London~~2018. The loan matures in November 2028 and carries a fixed interest rate of 4.21%. The carrying value does not reflect the outstanding financing, but rather is reflected within senior notes and other debt on the Company's consolidated balance sheet.

A mixed-use project in Washington, D.C. has been under development in 2018 and 2019.

(12) Loans Receivable

Loans receivable are as follows:



(In thousands)	June 30, 2019			December 31, 2018
Amortized cost (net of valuation allowance):
Real estate loans	$	61,830		$	62,289
Commercial loans	32,867			32,524
Total	$	94,697		$	94,813

Fair value:
Real estate loans	$	62,536		$	63,047
Commercial loans	34,369			34,026
Total	$	96,905		$	97,073

Valuation allowance:
Specific	$	341		$	1,200
General	1,949			2,183
Total	$	2,290		$	3,383

	For the Three Months Ended June 30,
	For the Three Months Ended June 30,
	2019			2018
Change in valuation allowance	$	(1,093	)	$	—

	For the Six Months Ended June 30,
	For the Six Months Ended June 30,
	2019			2018
Change in valuation allowance	$	(1,093	)	$	—

(In thousands) September 30, 2018 December 31, 2017
Amortized cost (net of valuation allowance):
Real estate loans $ 62,775
$ 66,057
Commercial loans 33,815
13,627
Total $ 96,590
$ 79,684

Fair value:
Real estate loans $ 63,561
$ 66,917
Commercial loans 35,317
15,130
Total $ 98,878
$ 82,047

Valuation allowance:
Specific $ 1,200
$ 1,200
General 2,183
2,183
Total $ 3,383
$ 3,383

For the Three Months Ended
September 30,

2018 2017
Change in valuation allowance $ —
$ —

For the Nine Months
Ended September 30,

2018 2017
Decrease in valuation allowance $ —
$ (14 )

Loans receivable in non-accrual status were ~~$1.5~~$0.4 million and ~~$4.3~~$1.2 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018.

The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions. Loans receivable with a potential for default are further assessed using discounted cash flow analysis and comparable cost and sales methodologies, if appropriate.

The real estate loans are secured by commercial real estate primarily located in New York. These loans generally earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through August 2025. The commercial loans are with small business owners who have secured the related financing with the assets of the business. Commercial loans primarily earn interest on a fixed basis and have varying maturities generally not exceeding 10 years.

In evaluating the real estate loans, the Company considers their credit quality indicators, including loan to value ratios, which compare the outstanding loan amount to the estimated value of the property, the borrower’s financial condition and performance with respect to loan terms, the position in the capital structure, the overall leverage in the capital structure and other market conditions. Based on these considerations, none of the real estate loans were considered to be impaired at ~~September~~June 30, ~~2018,~~2019, and accordingly, the Company determined that a specific valuation allowance was not required.

(13) Net Realized and Unrealized Gains (Losses) on Investments

Net r~~ealized~~realized and unrealized gains (losses) on investments are as follows:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019			2018			2019			2018
Net realized and unrealized gains (losses) on investments in earnings
Fixed maturity securities:
Gains	$	3,157		$	7,921		$	8,403		$	21,260
Losses	(3,377		)	(4,125		)	(6,895		)	(7,865		)
Equity securities (1):
Net realized (losses) gains on investment sales	(6		)	119,422			23,339			241,743
Change in unrealized gains (losses)	69,418			(54,652		)	111,496			(148,857		)
Investment funds	41			(353		)	58			(234		)
Real estate	3,021			(402		)	5,767			7,596
Loans receivable	—			1			(970		)	2,059
Other	1,320			1,819			1,028			2,393
Net realized and unrealized gains on investments in earnings before OTTI	73,574			69,631			142,226			118,095
Other-than-temporary impairments	—			—			—			—
Net realized and unrealized gains on investments in earnings	73,574			69,631			142,226			118,095
Income tax expense	(15,451		)	(14,623		)	(29,867		)	(24,800		)
After-tax net realized and unrealized gains on investments in earnings	$	58,123		$	55,008		$	112,359		$	93,295

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(In thousands) 2018 2017 2018 2017
Net realized and unrealized gains (losses) on investments in earnings

Fixed maturity securities:

Gains $ 2,152
$ 8,763
$ 23,412
$ 21,795
Losses (2,747 ) (197 ) (10,612 ) (4,162 )
Equity securities (1):
Net realized gains on investment sales 149,562
34,720
391,305
109,566
Change in unrealized gains (131,513 ) —
(280,370 ) —
Investment funds (2) (30 ) 124,228
(264 ) 125,383
Real estate 4,518
1,956
12,114
4,892
Loans receivable 449
—
2,508
—
Other (57 ) 14,489
2,336
19,286
Net realized and unrealized gains on investments in earnings before OTTI 22,334
183,959
140,429
276,760
Other-than-temporary impairments —
—
—
—
Net realized and unrealized gains on investments in earnings 22,334
183,959
140,429
276,760
Income tax expense (4,690 ) (64,386 ) (29,490 ) (96,866 )
After-tax net realized and unrealized gains on investments in earnings $ 17,644
$ 119,573
$ 110,939
$ 179,894



Change in unrealized investment gains (losses) of available for sale securities:
Fixed maturity securities	$	146,629		$	(36,848	)	$	321,123		$	(196,575	)
Previously impaired fixed maturity securities	81			(2		)	12			11
Investment funds	361			(3,638		)	(4,804		)	(4,772		)
Total change in unrealized investment gains (losses)	147,071			(40,488		)	316,331			(201,336		)
Income tax (expense) benefit	(28,422		)	8,118			(71,907		)	43,194
Noncontrolling interests	30			37			(18		)	26
After-tax change in unrealized investment gains (losses) of available for sale securities	$	118,679		$	(32,333	)	$	244,406		$	(158,116	)

Change in unrealized investment (losses) gains of available for sale securities:

Fixed maturity securities $ (100,490 ) $ (10,627 ) $ (297,065 ) $ 84,214
Previously impaired fixed maturity securities (7 ) 61
4
905
Equity securities available for sale (3) —
(2,126 ) —
(44,812 )
Investment funds 3,669
4,129
(1,103 ) 9,841
Total change in unrealized investment (losses) gains (96,828 ) (8,563 ) (298,164 ) 50,148
Income tax benefit (expense) 2,086
423
45,280
(23,550 )
Noncontrolling interests 60
5
86
19
After-tax change in unrealized investment (losses) gains of available for sale securities $ (94,682 ) $ (8,135 ) $ (252,798 ) $ 26,617

______________________

(1) The net realized gains or losses on investment sales represent the total gains or losses from the purchase dates of the equity securities. The change in unrealized gains consists of two components: (i) the reversal of the gain or loss recognized in previous periods on equity securities sold and (ii) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

~~(2) Investment funds includes a gain of $124 million from the sale of an investment in an office building located in Washington, D.C. for the three and nine months ended September 30, 2017.~~

(3) Effective January 1, 2018, the Company adopted new accounting guidance that requires all equity investments with readily determinable fair values (subject to certain exceptions) to be measured at fair value with changes in the fair value recognized in net income. The Company recorded an adjustment of $291 million to opening AOCI net of tax as a result of this guidance. Refer to Note 3 for further information.

(14) Fixed Maturity Securities in an Unrealized Loss Position

The following tables summarize all fixed maturity securities in an unrealized loss position at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 by the length of time those securities have been continuously in an unrealized loss position:



	Less Than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
June 30, 2019
U.S. government and government agency	$	6,175	$	37	$	92,729	$	1,381	$	98,904	$	1,418
State and municipal	64,499		838		270,454		3,083		334,953		3,921
Mortgage-backed securities	23,049		112		334,887		5,584		357,936		5,696
Asset-backed securities	1,010,706		17,410		572,110		10,297		1,582,816		27,707
Corporate	139,627		1,095		328,409		12,549		468,036		13,644
Foreign government	140,589		18,942		73,967		4,417		214,556		23,359
Fixed maturity securities	$	1,384,645	$	38,434	$	1,672,556	$	37,311	$	3,057,201	$	75,745

December 31, 2018
U.S. government and government agency	$	195,359	$	933	$	130,815	$	3,977	$	326,174	$	4,910
State and municipal	701,700		6,874		744,905		17,738		1,446,605		24,612
Mortgage-backed securities	334,063		2,911		712,595		21,022		1,046,658		23,933
Asset-backed securities	1,687,665		28,965		342,855		4,722		2,030,520		33,687
Corporate	1,730,513		54,181		954,763		49,129		2,685,276		103,310
Foreign government	246,273		24,197		80,004		914		326,277		25,111
Fixed maturity securities	$	4,895,573	$	118,061	$	2,965,937	$	97,502	$	7,861,510	$	215,563

Less Than 12 Months 12 Months or Greater Total
(In thousands)
Fair
Value

Gross
Unrealized Losses

Fair
Value

Gross
Unrealized Losses

Fair
Value

Gross
Unrealized Losses
September 30, 2018
U.S. government and government agency $ 241,467
$ 2,712
$ 118,054
$ 5,183
$ 359,521
$ 7,895
State and municipal 1,553,827
25,957
423,785
15,323
1,977,612
41,280
Mortgage-backed securities 834,782
15,777
541,015
24,684
1,375,797
40,461
Asset-backed securities 1,740,632
14,562
300,633
2,816
2,041,265
17,378
Corporate 2,045,819
50,487
369,248
19,383
2,415,067
69,870
Foreign government 299,444
21,830
111,195
2,019
410,639
23,849
Fixed maturity securities $ 6,715,971
$ 131,325
$ 1,863,930
$ 69,408
$ 8,579,901
$ 200,733

December 31, 2017
U.S. government and government agency $ 92,167
$ 1,491
$ 72,055
$ 2,341
$ 164,222
$ 3,832
State and municipal 735,972
5,944
345,755
6,630
1,081,727
12,574
Mortgage-backed securities 480,435
5,110
373,956
11,065
854,391
16,175
Asset-backed securities 1,127,309
8,298
167,412
2,314
1,294,721
10,612
Corporate 1,103,747
8,224
170,858
5,946
1,274,605
14,170
Foreign government 244,139
2,615
25,824
251
269,963
2,866
Fixed maturity securities $ 3,783,769
$ 31,682
$ 1,155,860
$ 28,547
$ 4,939,629
$ 60,229

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at ~~September~~June 30, ~~2018~~2019 is presented in the table below:



($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	12	$	114,714	$	22,719
Corporate	11	65,905		3,278
Asset-backed securities	7	10,412		1,344
Mortgage-backed securities	4	7,170		63
Total	34	$	198,201	$	27,404

($ in thousands)
Number of
Securities

Aggregate
Fair Value

Gross
Unrealized Loss
Foreign government 20
$ 172,462
$ 20,688
Corporate 14
80,945
6,547
Asset-backed securities 7
10,930
156
Mortgage-backed securities 4
3,270
30
Total 45
$ 267,607
$ 27,421

For OTTI of fixed maturity securities that management does not intend to sell or to be required to sell, the portion of the decline in value that is considered to be due to credit factors is recognized in earnings, and the portion of the decline in value that is considered to be due to non-credit factors is recognized in other comprehensive income.

The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.

(15)Fair Value Measurements

The Company’s fixed maturity available for sale securities, equity securities and its arbitrage trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Quoted prices for similar assets or valuations based on inputs that are observable.

Level 3 - Estimates of fair value based on internal pricing methodologies using unobservable inputs. Unobservable inputs are only used to measure fair value to the extent that observable inputs are not available.

Substantially all of the Company’s fixed maturity securities were priced by independent pricing services. The prices provided by the independent pricing services are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. The pricing services may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs are available for each security evaluation on any given day. The pricing services used by the Company have indicated that they will only produce an estimate of fair value if objectively verifiable information is available. The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness and periodically performs independent price tests of a sample of securities to ensure proper valuation.

If prices from independent pricing services are not available for fixed maturity securities, the Company estimates the fair value. For Level 2 securities, the Company utilizes pricing models and processes which may include benchmark yields, sector groupings, matrix pricing, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers and reference data. Where broker quotes are used, the Company generally requests two or more quotes and sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes received from brokers. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial projections, credit quality and business developments of the issuer and other relevant information.

For Level 3 securities, the Company generally uses a discounted cash flow model to estimate the fair value of fixed maturity securities. The cash flow models are based upon assumptions as to prevailing credit spreads, interest rate and interest rate volatility, time to maturity and subordination levels. Projected cash flows are discounted at rates that are adjusted to reflect illiquidity, where appropriate.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 by level:



(In thousands)	Total		Level 1		Level 2		Level 3
June 30, 2019
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	777,070	$	—	$	777,070	$	—
State and municipal	3,747,823		—		3,747,823		—
Mortgage-backed securities	1,575,866		—		1,575,866		—
Asset-backed securities	2,701,785		—		2,701,760		25
Corporate	4,036,285		—		4,036,285		—
Foreign government	815,424		—		815,424		—
Total fixed maturity securities available for sale	13,654,253		—		13,654,228		25
Equity securities:
Common stocks	140,226		131,242		—		8,984
Preferred stocks	276,362		—		272,426		3,936
Total equity securities	416,588		131,242		272,426		12,920
Arbitrage trading account	533,442		424,030		83,206		26,206
Total	$	14,604,283	$	555,272	$	14,009,860	$	39,151
Liabilities:
Trading account securities sold but not yet purchased	$	159,349	$	144,420	$	213	$	14,716


December 31, 2018
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	702,240	$	—	$	702,240	$	—
State and municipal	3,872,598		—		3,872,598		—
Mortgage-backed securities	1,594,546		—		1,594,546		—
Asset-backed securities	2,438,747		—		2,438,648		99
Corporate	4,111,311		—		4,111,311		—
Foreign government	808,735		—		808,735		—
Total fixed maturity securities available for sale	13,528,177		—		13,528,078		99
Equity securities:
Common stocks	98,192		89,596		—		8,596
Preferred stocks	180,814		—		176,869		3,945
Total equity securities	279,006		89,596		176,869		12,541
Arbitrage trading account	452,548		353,335		81,905		17,308
Total	$	14,259,731	$	442,931	$	13,786,852	$	29,948
Liabilities:
Trading account securities sold but not yet purchased	$	38,120	$	37,327	$	—	$	793

(In thousands) Total Level 1 Level 2 Level 3
September 30, 2018
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency $ 487,042
$ —
$ 487,042
$ —
State and municipal 4,017,894
—
4,017,894
—
Mortgage-backed securities 1,548,222
—
1,548,222
—
Asset-backed securities 2,549,874
—
2,549,773
101
Corporate 4,065,169
—
4,065,169
—
Foreign government 825,412
—
825,412
—
Total fixed maturity securities available for sale 13,493,613
—
13,493,512
101
Equity securities:
Common stocks 166,938
157,855
—
9,083
Preferred stocks 158,316
—
154,521
3,795
Total equity securities 325,254
157,855
154,521
12,878
Arbitrage trading account 678,321
475,684
202,637
—
Total $ 14,497,188
$ 633,539
$ 13,850,670
$ 12,979
Liabilities:
Trading account securities sold but not yet purchased $ 112,355
$ 112,355
$ —
$ —

December 31, 2017
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency $ 377,740
$ —
$ 377,740
$ —
State and municipal 4,445,094
—
4,445,094
—
Mortgage-backed securities 1,299,931
—
1,299,931
—
Asset-backed securities 2,111,544
—
2,111,372
172
Corporate 4,389,112
—
4,389,112
—
Foreign government 848,497
—
848,497
—
Total fixed maturity securities available for sale 13,471,918
—
13,471,746
172
Equity securities:
Common stocks 352,204
342,834
—
9,370
Preferred stocks 224,443
—
213,600
10,843
Total equity securities 576,647
342,834
213,600
20,213
Arbitrage trading account 617,649
471,420
146,229
—
Total $ 14,666,214
$ 814,254
$ 13,831,575
$ 20,385
Liabilities:
Trading account securities sold but not yet purchased $ 64,358
$ 64,358
$ —
$ —

~~There were no significant transfers between Levels 1 and 2 during the nine months ended September 30, 2018 or during the year ended~~ ~~December 31, 2017~~.

The following tables summarize changes in Level 3 assets and liabilities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and for the year ended December 31, ~~2017:~~2018:



	Gains (Losses) Included in:
(In thousands)	Beginning Balance		Earnings (Losses)			Other Comprehensive Income (Loss)		Impairments		Purchases		(Sales)			Paydowns / Maturities		Transfers In / (Out)		Ending Balance
(In thousands)	Beginning Balance		Earnings (Losses)			Other Comprehensive Income (Loss)		Impairments		Purchases		(Sales)			Paydowns / Maturities		Transfers In / (Out)		Ending Balance
Six Months Ended June 30, 2019
Assets:
Fixed maturities securities available for sale:
Asset-backed securities	$	99	$	2		$	46	$	—	$	—	$	(122	)	$	—	$	—	$	25
Total	99		2			46		—		—		(122		)	—		—		25
Equity securities:
Common stocks	8,596		388			—		—		—		—			—		—		8,984
Preferred stocks	3,945		(9		)	—		—		—		—			—		—		3,936
Total	12,541		379			—		—		—		—			—		—		12,920
Arbitrage trading account	17,308		409			—		—		14,672		(21,072		)	—		14,889		26,206
Total	$	29,948	$	790		$	46	$	—	$	14,672	$	(21,194	)	$	—	$	14,889	$	39,151

Liabilities:
Trading account securities sold but not yet purchased	$	793	$	9,320		$	—	$	—	$	7,609	$	(3,006	)	$	—	$	—	$	14,716
Year Ended December 31, 2018
Assets:
Fixed maturities securities available for sale:
Asset-backed securities	$	172	$	(2	)	$	46	$	—	$	—	$	(117	)	$	—	$	—	$	99
Total	172		(2		)	46		—		—		(117		)	—		—		99
Equity securities:
Common stocks	9,370		(548		)	—		—		—		(227		)	—		1		8,596
Preferred stocks	10,843		100			—		—				(6,998		)	—		—		3,945
Total	20,213		(448		)	—		—		—		(7,225		)	—		1		12,541
Arbitrage trading account	—		(6		)	—		—		11,523		(11		)	—		5,802		17,308
Total	$	20,385	$	(456	)	$	46	$	—	$	11,523	$	(7,353	)	$	—	$	5,803	$	29,948
Liabilities:
Trading account securities sold but not yet purchased	$	—	$	(67	)	$	—	$	—	$	860	$	—		$	—	$	—	$	793

Gains (Losses) Included in:
(In thousands)
Beginning
Balance
Earnings (Losses)
Other
Comprehensive
Income (Loss)
Impairments Purchases (Sales) Paydowns / Maturities Transfers In / (Out)
Ending
Balance

Nine Months Ended September 30, 2018
Assets:
Fixed maturities securities available for sale:
Asset-backed securities $ 172
$ (2 ) $ 46
$ —
$ 10
$ (125 ) $ —
$ —
$ 101
Total 172
(2 ) 46
—
10
(125 ) —
—
101
Equity securities:
Common stocks 9,370
(288 ) —
—
—
—
—
1
9,083
Preferred stocks 10,843
(50 ) —
—
—
(6,998 ) —
—
3,795
Total 20,213
(338 ) —
—
—
(6,998 ) —
1
12,878
Arbitrage trading account —
(29 ) —
—
3,882
(11 ) —
(3,842 ) —
Total $ 20,385
$ (369 ) $ 46
$ —
$ 3,892
$ (7,134 ) $ —
$ (3,841 ) $ 12,979

Year Ended
December 31, 2017
Assets:
Fixed maturities securities available for sale:
Asset-backed securities $ 183
$ 3
$ 34
$ —
$ —
$ (48 ) $ —
$ —
$ 172
Total 183
3
34
—
—
(48 ) —
—
172
Equity securities:
Common stocks 8,754
—
616
—
—
—
—
—
9,370
Preferred stocks 3,662
8
—
—
7,173
—
—
—
10,843
Total 12,416
8
616
—
7,173
—
—
—
20,213
Arbitrage trading account —
8
—
—
—
(8 ) —
—
—
Total $ 12,599
$ 19
$ 650
$ —
$ 7,173
$ (56 ) $ —
$ —
$ 20,385

~~During the nine months ended September 30, 2018, one common stock in the arbitrage trading account was transferred out of~~Transfers into Level 3 ~~as the security became~~represent cases where a publicly traded onprice was no longer available for a ~~stock exchange. For the year ended December 31, 2017, there were no~~ t~~ransfers out of Level 3.~~particular investment.

(16) Reserves for Loss and Loss Expenses

The Company's reserves for losses and loss expenses are comprised of case reserves and incurred but not reported liabilities ("IBNR"). When a claim is reported, a case reserve is established for the estimated ultimate payment based upon known information about the claim. As more information about the claim becomes available over time, case reserves are adjusted up or down as appropriate. Reserves are also established on an aggregate basis to provide for IBNR liabilities and expected loss reserve development on reported claims.

Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is priced and written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns.

Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.

Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags.

The table below provides a reconciliation of the beginning and ending reserve balances:



	June 30,
(In thousands)	2019			2018
Net reserves at beginning of period	$	10,248,883		$	10,056,914
Net provision for losses and loss expenses:
Claims occurring during the current year (1)	1,980,138			1,916,140
Increase (decrease) in estimates for claims occurring in prior years (2) (3)	16,764			(246		)
Loss reserve discount accretion	20,577			20,962
Total	2,017,479			1,936,856
Net payments for claims:
Current year	548,589			316,567
Prior years	1,200,906			1,527,522
Total	1,749,495			1,844,089
Foreign currency translation	(2,228		)	(72,351		)
Net reserves at end of period	10,514,639			10,077,330
Ceded reserves at end of period	1,805,639			1,659,245
Gross reserves at end of period	$	12,320,278		$	11,736,575

September 30,
(In thousands) 2018 2017
Net reserves at beginning of year $ 10,056,914
$ 9,590,265
Net provision for losses and loss expenses:
Claims occurring during the current year (1) 2,917,231
2,998,687
Increase (decrease) in estimates for claims occurring in prior years (2) (3) 5,262
(7,648 )
Loss reserve discount accretion 32,082
34,436
Total 2,954,575
3,025,475
Net payments for claims:

Current year 597,859
628,078
Prior year 2,106,394
1,996,977
Total 2,704,253
2,625,055
Foreign currency translation (101,071 ) 57,789
Net reserves at end of period 10,206,165
10,048,474
Ceded reserves at end of period 1,665,997
1,605,872
Gross reserves at end of period $ 11,872,162
$ 11,654,346

(1) Claims occurring during the current year are net of loss reserve discounts of ~~$19~~$11 million and ~~$17~~$13 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~2018.

(2) The ~~increase (decrease)~~change in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the estimates for claims occurring in prior years increased by $9 million and decreased by ~~$2 million and $31~~$6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

(3) For certain retrospectively rated insurance policies and reinsurance agreements, reserve development is offset by additional or return premiums. Favorable development, net of additional and return premiums, was ~~$27~~$14 million and ~~$31~~$19 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, favorable prior year development (net of additional and return premiums) of ~~$27~~$13.6 million included ~~$35~~$17.2 million of favorable development for the Insurance segment, ~~partially~~ offset by $8$3.6 million of adverse development for the Reinsurance & Monoline Excess segment.

The overall favorable development for the Insurance segment was primarily attributable to ~~workers'~~favorable development on workers’ compensation business, partially offset by adverse development on other liability business, commercial auto liability business, and medical malpractice business. The favorable ~~workers'~~workers’ compensation development was spread across many accident years, including prior to ~~2008,~~2009, but was most significant in accident years 2015 through ~~2017.~~2018. The favorable ~~workers'~~workers’ compensation development reflects a continuation of the benign loss cost trends experienced during recent years, particularly the favorable claim frequency trends (i.e., number of reported claims per unit of exposure). The adverse other liability development was mainly related to accident years 2014 through 2016. It ~~also reflects claims management initiatives implemented during~~was driven by a higher than expected number of large losses being reported in the ~~past few years.~~ period, including both general liability and professional liability losses. The adverse commercial auto liability development was primarily related to accident year 2018, and was driven by a higher than expected number of large losses. The adverse medical malpractice development was primarily related to accident years 2013 through 2016, and stemmed from a discontinued book of business at one of our profit centers.

The adverse development for the Reinsurance & Monoline Excess segment was mainly driven by USU.S. casualty facultative business from accident years ~~2008~~2009 and prior related to construction projects.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, favorable prior year development (net of additional and return premiums) of ~~$31~~$19.3 million included ~~$62~~$18.6 million of favorable development for the Insurance segment, ~~partially offset by $31~~and $0.7 million of ~~adverse~~favorable development for the Reinsurance & Monoline Excess segment. The favorable development for the Insurance segment was primarily attributable to ~~workers'~~workers’ compensation ~~business (including excess workers' compensation).~~business. The favorable ~~workers'~~workers’ compensation development was spread across many accident years, including prior to 2008, but was most significant in accident years ~~2014 and 2015.~~2015 through 2017. The favorable ~~workers'~~workers’ compensation development reflects a continuation of the benign loss cost trends experienced ~~during 2016,~~in recent years, particularly the favorable claim frequency trends (i.e., number of reported claims per unit of exposure). The adverse development for the Reinsurance segment was due to reserve strengthening associated with claims impacted by the change in the Ogden discount rate in the U.K., as well as adverse development in the U.S. facultative casualty excess of loss business. The Ogden rate is the discount rate used to calculate lump-sum bodily injury payouts in the U.K., and was reduced by the U.K. Ministry of Justice from +2.5% to -0.75%. The adverse development mostly related to U.K. motor bodily injury claims which we reinsured on an excess of loss basis in accident years 2012 through 2016. The adverse development on U.S. facultative casualty business related to construction-related risks in accident years 2008 and prior.

(17) Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:



	June 30, 2019				December 31, 2018
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	13,732,800	$	13,746,972	$	13,606,812	$	13,619,620
Equity securities	416,588		416,588		279,006		279,006
Arbitrage trading account	533,442		533,442		452,548		452,548
Loans receivable	94,697		96,905		94,813		97,073
Cash and cash equivalents	1,258,174		1,258,174		817,602		817,602
Trading account receivables from brokers and clearing organizations	402,361		402,361		347,228		347,228
Liabilities:
Due to broker	39,230		39,230		20,144		20,144
Trading account securities sold but not yet purchased	159,349		159,349		38,120		38,120
Subordinated debentures	907,866		969,172		907,491		840,002
Senior notes and other debt	1,873,799		2,019,430		1,882,028		1,968,996

September 30, 2018 December 31, 2017
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
Assets:
Fixed maturity securities $ 13,572,402
$ 13,584,654
$ 13,551,250
$ 13,566,976
Equity securities 325,254
325,254
576,647
576,647
Arbitrage trading account 678,321
678,321
617,649
617,649
Loans receivable 96,590
98,878
79,684
82,047
Cash and cash equivalents 819,366
819,366
950,471
950,471
Trading account receivables from brokers and clearing organizations 191,394
191,394
189,280
189,280
Liabilities:
Due to broker 21,478
21,478
15,920
15,920
Trading account securities sold but not yet purchased 112,355
112,355
64,358
64,358
Subordinated debentures 907,304
913,344
728,218
769,060
Senior notes and other debt 1,790,498
1,876,579
1,769,052
1,945,313

The estimated fair values of the Company’s fixed maturity securities, equity securities and arbitrage trading account securities are based on various valuation techniques that rely on fair value measurements as described in Note 15. The fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics, which is considered a Level 2 input. The fair value of the senior notes and other debt and the subordinated debentures is based on spreads for similar securities, which is considered a Level 2 input.

(18) Reinsurance

The following is a summary of reinsurance financial information:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019			2018			2019			2018
Written premiums:
Direct	$	1,883,032		$	1,785,266		$	3,712,847		$	3,572,501
Assumed	206,828			162,808			423,243			354,995
Ceded	(346,396		)	(323,970		)	(683,025		)	(638,054		)
Total net premiums written	$	1,743,464		$	1,624,104		$	3,453,065		$	3,289,442

Earned premiums:
Direct	$	1,773,437		$	1,705,277		$	3,497,047		$	3,379,827
Assumed	198,661			180,509			386,852			369,375
Ceded	(325,257		)	(304,733		)	(644,202		)	(600,741		)
Total net premiums earned	$	1,646,841		$	1,581,053		$	3,239,697		$	3,148,461

Ceded losses and loss expenses incurred	$	239,267		$	161,073		$	412,314		$	400,068
Ceded commissions earned	$	73,092		$	65,922		$	144,109		$	132,278

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,

(In thousands) 2018 2017 2018 2017
Written premiums:
Direct $ 1,746,197
$ 1,679,389
$ 5,318,698
$ 5,127,465
Assumed 181,587
194,769
536,582
570,052
Ceded (303,570 ) (302,975 ) (941,624 ) (915,245 )
Total net premiums written $ 1,624,214
$ 1,571,183
$ 4,913,656
$ 4,782,272

Earned premiums:
Direct $ 1,735,576
$ 1,692,453
$ 5,115,403
$ 4,972,755
Assumed 177,996
202,972
547,372
605,281
Ceded (310,087 ) (313,925 ) (910,828 ) (857,792 )
Total net premiums earned $ 1,603,485
$ 1,581,500
$ 4,751,947
$ 4,720,244

Ceded losses and loss expenses incurred $ 186,538
$ 247,104
$ 586,607
$ 424,905
Ceded commissions earned $ 68,938
$ 63,222
$ 201,216
$ 177,524

The Company reinsures a portion of its insurance exposures in order to reduce its net liability on individual risks and catastrophe losses. The Company also cedes premiums to state assigned risk plans and captive insurance companies. Estimated amounts due from reinsurers are reported net of reserves for uncollectible reinsurance of $1 million as of both ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018.

(19) Restricted Stock Units

Pursuant to its stock incentive plan, the Company may issue restricted stock units ("RSUs") to employees of the Company and its subsidiaries. The RSUs generally vest three to five years from the award date and are subject to other vesting and forfeiture provisions contained in the award agreement. RSUs are expensed pro-ratably over the vesting period. RSU expenses were ~~$26~~$25 million and $3018 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018, respectively. A summary of RSUs issued in the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 follows:



($ in thousands)	Units	Fair Value
2019	5,141	$	308
2018	19,538	$	963

($ in thousands) Units Fair Value
2018 757,294
$ 57,796
2017 855,051
$ 58,712

(20) Litigation and Contingent Liabilities

In the ordinary course of business, the Company is subject to disputes, litigation and arbitration arising from its insurance and reinsurance businesses. These matters are generally related to insurance and reinsurance claims and are considered in the establishment of loss and loss expense reserves. In addition, the Company may also become involved in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in handling of insurance claims. The Company expects its ultimate liability with respect to such matters will not be material to its financial condition. However, adverse outcomes on such matters are possible, from time to time, and could be material to the Company’s results of operations in any particular financial reporting period.

(21) Leases

As described in note 3, the Company prospectively adopted ASU 2016-02, Leases, for the quarter ended March 31, 2019, which requires lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months on the balance sheet. All leases disclosed within this footnote are classified as operating leases. Recognized right-of-use asset and lease liability are reported within other assets and other liabilities, respectively, in the consolidated balance sheet. Lease expense is reported in other operating costs and expenses in the consolidated statement of income and accounted for on a straight-line basis over the lease term.

To determine the discount rate used to calculate present value of future minimum lease payments, the Company uses its incremental borrowing rate during the lease commencement period in line with the respective lease duration. In certain cases, the Company has the option to renew the lease. Lease renewal future payments are included in the present value of the future minimum lease payments when the Company determines it is reasonably certain to renew.

The main leases entered into by the Company are for office space used by the Company’s operating units across the world. Additionally, the Company, to a lesser extent, has equipment leases mainly for office equipment. Further information relating to operating lease expense and other operating lease information are as follows:



	For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019

(In thousands)
Leases:
Lease cost	$	10,680	$	22,235
Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows	$	11,132	$	22,789
Right-of-use assets obtained in exchange for new lease liabilities	$	2,918	$	7,884



($ in thousands)	June 30, 2019
Right-of-use assets	$	179,984
Lease liabilities	$	209,107
Weighted-average remaining lease term	6.6 years
Weighted-average discount rate	5.97		%

Contractual maturities of the Company’s future minimum lease payments are as follows:



(In thousands)	June 30, 2019
Contractual Maturities:
2019	$	24,117
2020	44,461
2021	40,681
2022	35,121
2023	31,556
Thereafter	77,578
Total undiscounted future minimum lease payments	253,514
Less: Discount impact	(44,407		)
Total lease liability	$	209,107

(22) Business Segments

The Company’s reportable segments include the following two business segments, plus a corporate segment:

~~Insurance~~ - predominantly commercial insurance business, including excess and surplus lines, admitted lines and specialty personal lines throughout the United States, as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and Australia.

~~Reinsurance~~ ~~- reinsurance business on a facultative and treaty basis, primarily in the United States, the United Kingdom, Continental Europe, Australia, the Asia-Pacific Region and South Africa.~~


•	Insurance - predominantly commercial insurance business, including excess and surplus lines, admitted lines and specialty personal lines throughout the United States, as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and Australia.


•	Reinsurance & Monoline Excess - reinsurance business on a facultative and treaty basis, primarily in the United States, the United Kingdom, Continental Europe, Australia, the Asia-Pacific Region and South Africa, as well as monoline excess business in the United States.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Income tax expense and benefits are calculated based upon the Company's overall effective tax rate.

Summary financial information about the Company's reporting segments is presented in the following tables. Income (loss) before income taxes by segment includes allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.


	Revenues														Revenues
(In thousands)	Earned Premiums		Investment Income		Other		Total (1)		Pre-Tax Income (Loss)			Net Income (Loss) to Common Stockholders			Earned Premiums (1)		Investment Income		Other		Total (2)		Pre-Tax Income (Loss)			Net Income (Loss) to Common Stockholders
Three months ended September 30, 2018
Three months ended June 30, 2019															Three months ended June 30, 2019
Insurance	$	1,488,658	$	146,319	$	19,447	$	1,654,424	$	226,856		$	178,571		$	1,475,184	$	132,403	$	13,687	$	1,621,274	$	225,871		$	179,241
Reinsurance	114,827		23,826		—		138,653		14,792			11,567
Corporate, other and eliminations (2)	—		15,979		106,512		122,491		(54,759		)	(45,862		)
Reinsurance & Monoline Excess															171,657		44,449		—		216,106		52,635			41,864
Corporate, other and eliminations (3)															—		11,481		100,949		112,430		(78,344		)	(62,519		)
Net realized and unrealized gains on investments	—		—		22,334		22,334		22,334			17,644			—		—		73,574		73,574		73,574			58,123
Total	$	1,603,485	$	186,124	$	148,293	$	1,937,902	$	209,223		$	161,920		$	1,646,841	$	188,333	$	188,210	$	2,023,384	$	273,736		$	216,709
Three months ended September 30, 2017
Three months ended June 30, 2018															Three months ended June 30, 2018
Insurance	$	1,433,729	$	105,924	$	—	$	1,539,653	$	171,478		$	123,240		$	1,415,579	$	94,542	$	18,707	$	1,528,828	$	163,181		$	128,693
Reinsurance	147,771		21,528		—		169,299		(57,643		)	(35,074		)
Corporate, other and eliminations (2)	—		15,027		123,404		138,431		(71,681		)	(45,685		)
Reinsurance & Monoline Excess															165,474		41,914		—		207,388		56,174			44,291
Corporate, other and eliminations (3)															—		17,321		87,748		105,069		(59,744		)	(47,917		)
Net realized and unrealized gains on investments	—		—		183,959		183,959		183,959			119,573			—		—		69,631		69,631		69,631			55,008
Total	$	1,581,500	$	142,479	$	307,363	$	2,031,342	$	226,113		$	162,054		$	1,581,053	$	153,777	$	176,086	$	1,910,916	$	229,242		$	180,075
Nine months ended September 30, 2018
Six months ended June 30, 2019															Six months ended June 30, 2019
Insurance	$	4,377,003	$	396,514	$	57,123	$	4,830,640	$	653,936		$	516,397		$	2,902,218	$	232,444	$	26,931	$	3,161,593	$	410,387		$	325,234
Reinsurance	374,944		70,599		—		445,543		50,687			40,005
Corporate, other and eliminations (2)	—		47,306		276,148		323,454		(195,597		)	(158,949		)
Reinsurance & Monoline Excess															337,479		84,023		—		421,502		97,490			77,389
Corporate, other and eliminations (3)															—		30,120		204,965		235,085		(146,928		)	(117,551		)
Net realized and unrealized gains on investments	—		—		140,429		140,429		140,429			110,939			—		—		142,226		142,226		142,226			112,359
Total	$	4,751,947	$	514,419	$	473,700	$	5,740,066	$	649,455		$	508,392		$	3,239,697	$	346,587	$	374,122	$	3,960,406	$	503,175		$	397,431
Nine months ended September 30, 2017
Six Months Ended June 30, 2018															Six Months Ended June 30, 2018
Insurance	$	4,262,485	$	320,552	$	—	$	4,583,037	$	557,605		$	381,736		$	2,806,868	$	208,040	$	37,675	$	3,052,583	$	362,109		$	286,426
Reinsurance	457,759		67,798		—		525,557		(38,279		)	(20,801		)
Corporate, other and eliminations (2)	—		38,251		326,203		364,454		(224,716		)	(146,324		)
Reinsurance & Monoline Excess															341,593		88,928		—		430,521		100,866			79,838
Corporate, other and eliminations (3)															—		31,327		169,637		200,964		(140,838		)	(113,087		)
Net realized and unrealized gains on investments	—		—		276,760		276,760		276,760			179,894			—		—		118,095		118,095		118,095			93,295
Total	$	4,720,244	$	426,601	$	602,963	$	5,749,808	$	571,370		$	394,505		$	3,148,461	$	328,295	$	325,407	$	3,802,163	$	440,232		$	346,472

_________________

(1)Certain amounts included in earned premiums of each segment are related to inter-segment transactions.

(2)Revenues for Insurance from foreign countries for the three months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ were ~~$176~~$179 million and ~~$166~~$176 million, and for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ were ~~$535~~$349 million and ~~$513~~$359 million, respectively. Revenues for Reinsurance & Monoline Excess from foreign countries for the three months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ were ~~$51~~$62 million and ~~$49~~$55 million, and for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ were ~~$163~~$121 million and ~~$150~~$112 million, respectively.


~~(2)~~(3)	Corporate, other and eliminations represent corporate revenues and expenses that are not allocated to business segments.

Identifiable Assets



(In thousands)	June 30, 2019		December 31, 2018
Insurance	$	19,444,475	$	18,214,293
Reinsurance & Monoline Excess	4,573,446		4,371,151
Corporate, other and eliminations	2,469,982		2,310,533
Consolidated	$	26,487,903	$	24,895,977

(In thousands) September 30,
2018 December 31,
2017
Insurance $ 19,511,126
$ 19,263,193
Reinsurance 2,940,606
3,169,731
Corporate, other and eliminations 2,403,917
1,866,993
Consolidated $ 24,855,649
$ 24,299,917

Net premiums earned by major line of business are as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands)	2019		2018		2019		2018
Insurance:
Other liability	$	505,621	$	474,721	$	996,282	$	938,889
Workers’ compensation	330,510		336,996		657,186		661,974
Short-tail lines (1)	305,852		288,320		594,943		583,347
Commercial automobile	188,278		175,812		369,203		351,010
Professional liability	144,923		139,730		284,604		271,648
Total Insurance	1,475,184		1,415,579		2,902,218		2,806,868

Reinsurance & Monoline Excess:
Casualty reinsurance	95,109		86,841		185,939		177,411
Monoline excess (2)	39,400		40,429		78,381		81,477
Property reinsurance	37,148		38,204		73,159		82,705
Total Reinsurance & Monoline Excess	171,657		165,474		337,479		341,593

Total	$	1,646,841	$	1,581,053	$	3,239,697	$	3,148,461

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,

(In thousands) 2018 2017 2018 2017
Insurance:
Other liability $ 482,255
$ 466,616
$ 1,421,144
$ 1,378,505
Workers’ compensation 378,922
378,529
1,122,217
1,106,616
Short-tail lines (1) 299,856
276,737
883,359
856,150
Commercial automobile 185,069
174,400
536,079
514,570
Professional liability 142,556
137,447
414,204
406,644
Total Insurance 1,488,658
1,433,729
4,377,003
4,262,485

Reinsurance:
Casualty 87,039
94,478
264,450
282,430
Property 27,788
53,293
110,494
175,329
Total Reinsurance 114,827
147,771
374,944
457,759

Total $ 1,603,485
$ 1,581,500
$ 4,751,947
$ 4,720,244

______________

(1) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(2) Monoline excess includes operations that solely retain risk on an excess basis.

SAFE HARBOR STATEMENT

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year ~~2018~~2019 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new alternative entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; the impact of climate change, which may increase the frequency and severity of catastrophe events; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response, on our results and financial condition; foreign currency and political risks (including those associated with the United Kingdom's withdrawal from the European Union, or "Brexit") relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2015; the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; potential difficulties with technology and/or ~~data security;~~cyber security issues; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

These risks and uncertainties could cause our actual results for the year ~~2018~~2019 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Our future financial performance is dependent upon factors discussed in our Annual Report on Form 10-K, elsewhere in this Form 10-Q and our other SEC filings. Forward-looking statements speak only as of the date on which they are made. Except to the extent required by applicable laws, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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

Overview

W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property and casualty business: Insurance and ~~Reinsurance.~~Reinsurance & Monoline Excess. Our decentralized structure provides us with the flexibility to respond quickly and efficiently to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. While providing our business units with certain operating autonomy, our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment, reinsurance, enterprise risk management, and actuarial, financial and corporate legal staff support. The Company’s primary sources of revenues and earnings are its insurance operations and its investments.

An important part of our strategy is to form new operating units to capitalize on various business opportunities. Over the years, the Company has formed numerous operating units that are focused on important parts of the economy in the U.S., including healthcare, cyber security, energy and agriculture, and on growing international markets, including the Asia-Pacific region, South America and Mexico.

The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time an insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic inflation on the amount of compensation for injuries or losses. General insurance prices are also influenced by available insurance capacity, i.e., the level of ~~statutory~~ capital ~~and surplus~~ employed in the industry, and the industry’s willingness to deploy that capital.

The Company’s profitability is also affected by its investment income and investment gains. The Company’s invested assets are invested principally in fixed maturity securities. The return on fixed maturity securities is affected primarily by general interest rates, as well as the credit quality and duration of the securities. Returns available on fixed maturity investments have been at ~~historically~~ low levels for an extended ~~period, although recently interest rates have increased.~~period.

The Company also invests in equity securities, merger arbitrage securities, investment funds, ~~(including energy related funds),~~ private equity, loans and real estate related assets. The Company's investments in investment funds and its other alternative investments have experienced, and the Company expects to continue to experience, greater fluctuations in investment income.

~~Through~~On April 2, 2019, a 3-for-2 common stock split was paid in the ~~second~~form of a stock dividend to holders of record as of March 14, 2019. Shares outstanding and per share amounts in this Form 10-Q reflect this 3-for-2 common stock split effected on April 2, 2019.

Commencing with the first quarter of ~~2018,~~2019, the Company ~~used~~renamed the ~~Argentine peso (“ARS”) as its functional currency for its~~Reinsurance segment to Reinsurance & Monoline Excess, and reclassified the monoline excess business ~~in Argentina and translated~~from the financial statements of its Argentine operations into U.S. dollars ("USD"). Exchange rate movements through the second quarter of 2018 between the ARS and USD had been recorded as a currency translation gain or loss, which is a component of AOCI. Based on recent ARS inflation rate movements, the Company concluded that, effective July 1, 2018, the Argentine economy is considered highly inflationary under GAAP. This conclusion required the Company to change the functional currency of its Argentine operations to USD commencing July 1, 2018, and accordingly, the Company recognized foreign exchange gains and losses in earnings for any transactions in the ArgentineInsurance segment. The reclassified business includes operations that ~~are not USD denominated.~~

Effective January 1, 2018, the Company adopted new accounting standards including ASU 2014-09, Revenue from Customers, ASU 2016-01, Financial Instruments and ASU 2018-02, Reporting Comprehensive Income. Refersolely retain risk on an excess basis. Reclassifications have been made to ~~Note 3 in the financial statements for further information on the accounting guidance and impact of their adoption on~~ the Company's ~~results and~~2018 financial ~~position.~~information to conform with this presentation.

Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and other-than-temporary impairments of investments. Management believes these policies and estimates are the most critical to its operations and require the most difficult, subjective and complex judgments.

Reserves for Losses and Loss Expenses.To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant periods of time may

elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment based upon known information about the claim at that time. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature

and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

In examining reserve adequacy, several factors are considered in estimating the ultimate economic value of losses. These factors include, among other things, historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing reserves are well tested over time, some of the major assumptions about anticipated loss emergence patterns are subject to uncertainty. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company’s control. These variables are affected by external and internal events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot provide assurance that its current reserves will prove adequate in light of subsequent events.

Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. For example, the paid loss and incurred loss development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred loss development methods would be less credible than other actuarial methods. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” and in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

The establishment of the actuarially derived loss reserve point estimate also includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions. Examples of changes in terms and conditions that can have a significant impact on reserve levels are the use of aggregate policy limits, the expansion of coverage exclusions, whether or not defense costs are within policy limits, and changes in deductibles and attachment points.

reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Management believes the estimates and assumptions it makes in the reserving process provide the best estimate of the ultimate cost of settling claims and related

expenses with respect to insured events which have occurred; however, different assumptions and variables could lead to significantly different reserve estimates.

The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect the latest reported loss data, current trends and other factors observed. If the actual level of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s estimate. The following table reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity, relative to our assumptions, on our loss estimate for claims occurring in ~~2017:~~2018:


(In thousands)	Frequency (+/-)						Frequency (+/-)
Severity (+/-)	1%		5%		10%		1%		5%		10%
1%	$	79,667	$	239,794	$	439,953	$	78,922	$	237,553	$	435,840
5%	239,794		406,263		614,349		237,553		402,465		608,606
10%	439,953		614,349		832,344		435,840		608,606		824,563

Our net reserves for losses and loss expenses of approximately ~~$10.2~~$10.5 billion as of ~~September~~June 30, ~~2018~~2019 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above. The impact of such changes would likely be manifested gradually over the course of many years, as the magnitude of the changes became evident.

Approximately ~~$1.6~~$2.5 billion, or ~~16%~~24%, of the Company’s net loss reserves as of ~~September~~June 30, ~~2018~~2019 relate to the Reinsurance & Monoline Excess segment. There is a higher degree of uncertainty and greater variability regarding estimates of excess workers' compensation and assumed reinsurance loss ~~reserves because those~~reserves. In the case of excess workers’ compensation, our policies generally attach at $1 million or higher. The claims which reach our layer therefore tend to involve the most serious injuries and many remain open for the lifetime of the claimant, which extends the claim settlement tail. These claims also occur less frequently but tend to be larger than primary claims, which increases claim variability. In the case of assumed reinsurance our loss reserve estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is also extended. Management considers the impact of delayed reporting and the extended tail in its selection of ~~assumed~~ loss development ~~factors.~~factors for these lines of business.

Information received from ceding companies is used to set initial expected loss ratios, to establish case reserves and to estimate reserves for incurred but not reported losses on assumed reinsurance business. This information, which is generally provided through reinsurance intermediaries, is gathered through the underwriting process and from periodic claim reports and other correspondence with ceding companies. The Company performs underwriting and claim audits of selected ceding companies to determine the accuracy and completeness of information provided to the Company. The information received from the ceding companies is supplemented by the Company’s own loss development experience with similar lines of business as well as industry loss trends and loss development benchmarks.

Following is a summary of the Company’s reserves for losses and loss expenses by business segment:


(In thousands)	September 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Insurance	$	8,613,278	$	8,341,622	$	8,007,810	$	7,727,447
Reinsurance	1,592,887		1,715,292
Reinsurance & Monoline Excess					2,506,829		2,521,436
Net reserves for losses and loss expenses	10,206,165		10,056,914		10,514,639		10,248,883
Ceded reserves for losses and loss expenses	1,665,997		1,613,494		1,805,639		1,717,565
Gross reserves for losses and loss expenses	$	11,872,162	$	11,670,408	$	12,320,278	$	11,966,448

Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business:


(In thousands)	Reported Case Reserves		Incurred But Not Reported		Total		Reported Case Reserves		Incurred But Not Reported		Total
September 30, 2018
June 30, 2019
Other liability	$	1,325,565	$	2,309,225	$	3,634,790	$	1,351,833	$	2,423,630	$	3,775,463
Workers’ compensation (1)	1,556,809		1,262,943		2,819,752		948,968		975,454		1,924,422
Professional liability	307,793		642,323		950,116		354,166		687,989		1,042,155
Commercial automobile	355,611		286,825		642,436		382,688		307,393		690,081
Short-tail lines (2)	275,180		291,004		566,184		289,208		286,481		575,689
Total Insurance	3,820,958		4,792,320		8,613,278		3,326,863		4,680,947		8,007,810
Reinsurance (1)	878,508		714,379		1,592,887
Reinsurance & Monoline Excess (1) (3)							1,489,128		1,017,701		2,506,829
Total	$	4,699,466	$	5,506,699	$	10,206,165	$	4,815,991	$	5,698,648	$	10,514,639

December 31, 2017
December 31, 2018
Other liability	$	1,261,957	$	2,189,596	$	3,451,553	$	1,307,068	$	2,329,659	$	3,636,727
Workers’ compensation (1)	1,543,379		1,242,501		2,785,880		962,664		955,711		1,918,375
Professional liability	295,269		618,107		913,376		306,018		659,596		965,614
Commercial automobile	364,900		269,942		634,842		365,253		290,217		655,470
Short-tail lines (2)	297,777		258,194		555,971		294,122		257,139		551,261
Total Insurance	3,763,282		4,578,340		8,341,622		3,235,125		4,492,322		7,727,447
Reinsurance (1)	919,497		795,795		1,715,292
Reinsurance & Monoline Excess (1) (3)							1,479,604		1,041,832		2,521,436
Total	$	4,682,779	$	5,374,135	$	10,056,914	$	4,714,729	$	5,534,154	$	10,248,883

___________

(1) Reserves for workers’ compensation and ~~reinsurance~~Reinsurance & Monoline Excess are net of an aggregate net discount of ~~$571~~$546 million and ~~$591~~$563 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

(2) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(3) Reinsurance & Monoline Excess includes property and casualty reinsurance, as well as operations that solely retain risk on an excess basis.

The Company evaluates reserves for losses and loss adjustment expenses on a quarterly basis. Changes in estimates of prior year losses are reported when such changes are made. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.

Certain of the Company's insurance and reinsurance contracts are retrospectively rated, whereby the Company collects more or less premiums based on the level of loss activity. For those contracts, changes in loss and loss adjustment expenses for prior years may be fully or partially offset by additional or return premiums.

Net prior year development (i.e., the sum of prior year reserve changes and prior year earned premiums changes) for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:

(In thousands) 2018 2017
Net (increase) decrease in prior year loss reserves $ (5,262 ) $ 7,648
Increase in prior year earned premiums 31,880
22,940
Net favorable prior year development $ 26,618
$ 30,588



(In thousands)	2019			2018
Net (increase) decrease in prior year loss reserves	$	(16,764	)	$	246
Increase in prior year earned premiums	30,323			19,102
Net favorable prior year development	$	13,559		$	19,348

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves that were discounted was ~~$1,814~~$1,762 million and ~~$1,855~~$1,793 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was ~~$571~~$546 million and ~~$591~~$563 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. At ~~September~~June 30, ~~2018,~~2019, discount rates by year ranged from 2.0% to 6.5%, with a weighted average discount rate of ~~3.8%~~3.7%.

Substantially all of the workers’ compensation discount (97% of total discounted reserves at ~~September~~June 30, ~~2018)~~2019) relates to excess workers’ compensation reserves. In order to properly match loss expenses with income earned on investment securities supporting the liabilities, reserves for excess workers’ compensation business are discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. These rates are determined annually based on the weighted average rate for the period. Once established, no adjustments are made to the discount rate for that period, and any increases or decreases in loss reserves in subsequent years are discounted at the same rate, without regard to when any such adjustments are recognized. The expected loss and loss expense payout patterns subject to discounting are derived from the Company’s loss payout experience.

The Company also discounts reserves for certain other long-duration workers’ compensation reserves (representing approximately 3% of total discounted reserves at ~~September~~June 30, ~~2018)~~2019), including reserves for quota share reinsurance and reserves related to losses regarding occupational lung disease. These reserves are discounted at statutory rates permitted by the Department of Insurance of the State of Delaware.

Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premiums, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately ~~$45~~$37 million at ~~September~~June 30, ~~2018~~2019 and ~~$56~~$41 million at December 31, ~~2017.~~2018. The assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies during the underwriting and negotiation of agreements, reports received from ceding

companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.

Other-Than-Temporary Impairments (OTTI) of Investments. The cost of securities is adjusted where appropriate to include a provision for decline in value which is considered to be other-than-temporary. An other-than-temporary decline is

considered to occur in investments where there has been a sustained reduction in fair value and where the Company does not expect the fair value to recover prior to the time of sale or maturity.

The Company classifies its fixed maturity securities by credit rating, primarily based on ratings assigned by credit rating agencies. For purposes of classifying securities with different ratings, the Company uses the average of the credit ratings assigned, unless in limited situations the Company’s own analysis indicates an internal rating is more appropriate. Securities that are not rated by a rating agency are evaluated and classified by the Company on a case-by-case basis.

Fixed Maturity Securities – For securities that we intend to sell or, more likely than not, would be required to sell, a decline in value below amortized cost is considered to be OTTI. The amount of OTTI is equal to the difference between amortized cost and fair value at the balance sheet date. For securities that we do not intend to sell or expect to be required to sell, a decline in value below amortized cost is considered to be an OTTI if we do not expect to recover the entire amortized cost basis of a security (i.e., the present value of cash flows expected to be collected is less than the amortized cost basis of the security).

The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the decline in value not considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other comprehensive income.

Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

The following table provides a summary of fixed maturity securities in an unrealized loss position as of ~~September~~June 30, ~~2018:~~2019:


($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss		Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Unrealized loss less than 20% of amortized cost	1,175	$	8,547,309	$	187,215	464	$	3,042,808	$	67,954
Unrealized loss of 20% or greater of amortized cost:
Less than twelve months	17	32,589		13,514		6	4,520		3,044
Twelve months and longer	2	3		4		6	9,873		4,747
Total	1,194	$	8,579,901	$	200,733	476	$	3,057,201	$	75,745

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at ~~September~~June 30, ~~2018~~2019 is presented in the table below:


($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss		Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	20	$	172,462	$	20,688	12	$	114,714	$	22,719
Corporate	14	80,945		6,547		11	65,905		3,278
Asset-backed securities	7	10,930		156		7	10,412		1,344
Mortgage-backed securities	4	3,270		30		4	7,170		63
Total	45	$	267,607	$	27,421	34	$	198,201	$	27,404

The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized loss is due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to

continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.

Loans Receivable – The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, an analysis is performed and a valuation reserve is established, if necessary, with a

charge to earnings. Loans receivable are reported net of a valuation reserve of $2 million and $3 million ~~at both September~~as of June 30, ~~2018~~2019 and December 31, ~~2017.~~2018, respectively.

The Company monitors the performance of its loans receivable and assesses the ability of each borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions. Loans receivable with a potential for default are further assessed using discounted cash flow analysis and comparable cost and sales methodologies, if appropriate.

Fair Value Measurements. The Company’s fixed maturity available for sale securities, equity securities, and its arbitrage trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available. The fair value of the vast majority of the Company’s portfolio is based on observable data (other than quoted prices) and, accordingly, is classified as Level 2.

In classifying particular financial securities in the fair value hierarchy, the Company uses its judgment to determine whether the market for a security is active and whether significant pricing inputs are observable. The Company determines the existence of an active market by assessing whether transactions occur with sufficient frequency and volume to provide reliable pricing information. The Company determines whether inputs are observable based on the use of such information by pricing services and external investment managers, the uninterrupted availability of such inputs, the need to make significant adjustments to such inputs and the volatility of such inputs over time. If the market for a security is determined to be inactive or if significant inputs used to price a security are determined to be unobservable, the security is categorized in Level 3 of the fair value hierarchy.

Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial data, projections and business developments of the issuer and other relevant information.

The following is a summary of pricing sources for the Company's fixed maturity securities available for sale as of ~~September~~June 30, ~~2018:~~2019:


($ in thousands)	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Pricing source:
Independent pricing services	$	13,324,779	98.8	%	$	13,472,380	98.7	%
Syndicate manager	34,846		0.2		35,945		0.3
Directly by the Company based on:
Observable data	133,887		1.0		145,903		1.0
Cash flow model	101		—		25		—
Total	$	13,493,613	100.0	%	$	13,654,253	100.0	%

Independent pricing services – Substantially all of the Company’s fixed maturity securities available for sale were priced by independent pricing services (generally one U.S. pricing service plus additional pricing services with respect to a limited number of foreign securities held by the Company). The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g., broker quotes and prices observed for comparable securities). The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness based upon current trading levels for similar securities. If the prices appear unusual to the Company, they are re-examined and the value is either confirmed or revised. In addition, the Company periodically performs independent price tests of a sample of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of ~~September~~June 30, ~~2018,~~2019, the Company did not make any adjustments to the prices provided by the pricing services. Based upon the Company’s review of the methodologies used by the independent pricing services, these securities were classified as Level 2.

Syndicate manager – The Company has a 15% participation in a Lloyd’s syndicate, and the Company’s share of the securities owned by the syndicate is priced by the syndicate’s manager. The majority of the securities are liquid, short duration fixed maturity securities. The Company reviews the syndicate manager’s pricing methodology and audited financial statements and holds discussions with the syndicate manager as necessary to confirm its understanding and agreement with security prices. Based upon the Company’s review of the methodologies used by the syndicate manager, these securities were classified as Level 2.

Observable data – If independent pricing is not available, the Company prices the securities directly. Prices are based on observable market data where available, including current trading levels for similar securities and non-binding quotations from brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes obtained from brokers. Since these securities were priced based on observable data, they were classified as Level 2.

Cash flow model – If the above methodologies are not available, the Company prices securities using a discounted cash flow model based upon assumptions as to prevailing credit spreads, interest rates and interest rate volatility, time to maturity and subordination levels. Discount rates are adjusted to reflect illiquidity where appropriate. These securities were classified as Level 3.

Results of Operations for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018

Business Segment Results

Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.


($ in thousands)	2018			2017			2019			2018
Insurance:
Gross premiums written	$	5,453,303		$	5,233,692		$	3,715,850		$	3,558,247
Net premiums written	4,561,370			4,364,638			3,071,964			2,964,676
Net premiums earned	4,377,003			4,262,485			2,902,218			2,806,868
Loss ratio	61.8		%	61.7		%	62.5		%	61.7		%
Expense ratio	32.5		%	32.8		%	31.4		%	32.9		%
GAAP combined ratio	94.3		%	94.5		%	93.9		%	94.6		%
Reinsurance:
Reinsurance & Monoline Excess:
Gross premiums written	$	401,977		$	463,825		$	420,240		$	369,248
Net premiums written	352,286			417,634			381,101			324,766
Net premiums earned	374,944			457,759			337,479			341,593
Loss ratio	67.1		%	86.1		%	60.0		%	60.3		%
Expense ratio	38.2		%	37.1		%	36.0		%	36.2		%
GAAP combined ratio	105.3		%	123.2		%	96.0		%	96.5		%
Consolidated:
Gross premiums written	$	5,855,280		$	5,697,517		$	4,136,090		$	3,927,495
Net premiums written	4,913,656			4,782,272			3,453,065			3,289,442
Net premiums earned	4,751,947			4,720,244			3,239,697			3,148,461
Loss ratio	62.2		%	64.1		%	62.2		%	61.5		%
Expense ratio	33.0		%	33.2		%	31.9		%	33.3		%
GAAP combined ratio	95.2		%	97.3		%	94.1		%	94.8		%

Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net income per diluted share for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


(In thousands, except per share data)	2018		2017		2019		2018
Net income to common stockholders	$	508,392	$	394,505	$	397,431	$	346,472
Weighted average diluted shares	128,404		129,289		192,804		192,284
Net income per diluted share	$	3.96	$	3.05	$	2.06	$	1.80

The Company reported net income to common stockholders of ~~$508~~$397 million in ~~2018~~2019 compared to ~~$395~~$346 million in ~~2017.~~2018. The ~~29%~~15% increase in net income was primarily due to an after-tax increase in underwriting income of ~~$82~~$20 million, an after-tax increase in net investment gains of $19 million, an after-tax increase of $14 million in net investment income, an after-tax increase of ~~$69~~$2 million ~~mainly driven by growth~~ in ~~the fixed maturity security portfolio, higher interest rates and~~other income, an after-tax increase in ~~investment funds, a $29 million increase in after-tax~~ foreign currency gains of $1 million, and a ~~$52~~decrease of $1 million ~~decrease~~ in tax expense, ~~primarily due to the reduction of the federal corporate tax rate from 35% to 21%,~~ partially offset by ~~a decrease~~an after-tax increase in ~~after-tax net investment gains~~corporate expenses of ~~$108~~$4 million and an after-tax increase in interest expense of ~~$5 million, an after-tax increase in corporate expenses of $3 million, and an after-tax reduction in insurance service fee income of $2~~$4 million. The number of weighted average diluted shares ~~decreased slightly primarily due to share repurchases.~~remained relatively unchanged for the six months ended June 30, 2019 and 2018.

Premiums. Gross premiums written were ~~$5,855~~$4,136 million in ~~2018,~~2019, an increase of 3%5% from ~~$5,698~~$3,927 million in ~~2017.~~2018. The increase was due to ana $158 million increase in the Insurance segment ~~of $220~~and a $51 million ~~partially offset by a decrease~~increase in the Reinsurance ~~segment~~& Monoline Excess segment. Approximately 75.5% of ~~$62 million. The renewal retention rate was approximately 77.7% for~~policies expiring in 2019 were renewed, and 75.9% of policies expiring in 2018 ~~and 2017.~~were renewed.

Average renewal premium rates for insurance and facultative reinsurance increased ~~2.5%~~4.1% in ~~2018~~2019 when adjusted for ~~change~~changes in exposures, and increased ~~4.1%~~5.9% excluding workers' compensation.

A summary of gross premiums written in ~~2018~~2019 compared with ~~2017~~2018 by line of business within each business segment follows:

Insurance - gross premiums increased 4% to $5,453 million in 2018 from $5,234 million in 2017. Gross premiums increased $106 million (7%) for other liability, $58 million (10%) for professional liability, $53 million (4%) for short-tail lines, and $46 million (8%) for commercial auto and decreased $44 million (3%) for workers' compensation.

~~Reinsurance - gross premiums decreased 13% to $402 million in 2018 from $464 million in 2017. Gross premiums decreased $35 million (22%) for property lines and $27 million (9%) for casualty lines.~~


•	Insurance - gross premiums increased 4% to $3,716 million in 2019 from $3,558 million in 2018. Gross premiums increased $101 million (9%) for other liability, $69 million (17%) for professional liability, $31 million (4%) for short-tail lines and $18 million (4%) for commercial auto, and decreased $61 million (8%) for workers' compensation.


•	Reinsurance & Monoline Excess - gross premiums increased 14% to $420 million in 2019 from $369 million in 2018. Gross premiums increased $41 million (23%) for casualty reinsurance, $8 million (9%) for property reinsurance and $2 million (2%) for monoline excess.

Net premiums written were ~~$4,914~~$3,453 million in ~~2018,~~2019, an increase of 3%5% from ~~$4,782~~$3,289 million in ~~2017.~~2018. Ceded reinsurance premiums as a percentage of gross written premiums were 17% in 2019 and 16% in ~~both 2018 and 2017.~~2018.

Premiums earned increased ~~less than 1%~~3% to ~~$4,752~~$3,240 million in ~~2018~~2019 from ~~$4,720~~$3,148 million in ~~2017.~~2018. Insurance premiums (including the impact of rate changes) are generally earned evenly over the policy term, and accordingly, recent rate increases will be earned over the upcoming quarters. Premiums earned in ~~2018~~2019 are related to business written during both ~~2018~~2019 and ~~2017.~~2018. Audit premiums were ~~$149~~$100 million in ~~2018~~2019 compared with ~~$137~~$98 million in ~~2017.~~2018.

Net Investment Income. Following is a summary of net investment income for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


	Amount						Average Annualized Yield				Amount						Average Annualized Yield
($ in thousands)	2018			2017			2018		2017		2019			2018			2019		2018
Fixed maturity securities, including cash and cash equivalents and loans receivable	$	384,748		$	347,976		3.6	%	3.3	%	$	261,022		$	252,911		3.5	%	3.5	%
Investment funds	94,075			50,744			10.3		5.5		58,251			53,070			8.4		8.9
Arbitrage trading account	21,156			16,235			4.4		4.0		17,784			13,524			8.5		4.1
Real estate	15,339			14,894			1.1		1.6		9,481			9,742			0.9		1.1
Equity securities	2,208			1,845			1.3		1.2		2,591			1,205			2.1		1.1
Gross investment income	517,526			431,694			3.8		3.3		349,129			330,452			3.7		3.6
Investment expenses	(3,107		)	(5,093		)	—		—		(2,542		)	(2,157		)	—		—
Total	$	514,419		$	426,601		3.8	%	3.3	%	$	346,587		$	328,295		3.6	%	3.6	%

Net investment income increased ~~21%~~6% to ~~$514~~$347 million in ~~2018~~2019 from ~~$427~~$328 million in ~~2017~~2018 due primarily to a ~~$43 million increase in income from investment funds mainly from real estate, energy and aviation funds, a $37~~$8 million increase in income from fixed maturity securities mainly driven by growth in the fixed maturity security portfolio, ~~and higher interest rates,~~ a $5 million increase in income from investment funds, a $4 million increase from the arbitrage trading account, and a $2 million ~~decrease in investment expenses.~~increase from equity securities. The Company has maintained a shortened duration of its fixed maturity security portfolio. This has reduced the potential impact of mark-to-market on the portfolio and positioned the Company to ~~take advantage of rising interest rates.~~react quickly to changes in the current environment. Average invested assets, at cost (including cash and cash equivalents), were ~~$18.3~~$19.0 billion in ~~2018~~2019 and ~~$17.4~~$18.1 billion in ~~2017.~~2018.

Insurance Service Fees. The Company earns fees from an insurance distribution business, a third-party administrator and as a servicing carrier of workers' compensation assigned risk plans for certain states. Insurance service fees decreased to ~~$91~~$48 million in ~~2018~~2019 from ~~$100~~$60 million in ~~2017.~~2018. The decrease is primarily due to the sale of a third party administration business in third quarter of 2018.

Net Realized and Unrealized Gains on Investments. The Company buys and sells securities and other investment assets on a regular basis in order to maximize its total return on investments. Decisions to sell securities and other investment assets are based on management’s view of the underlying fundamentals of specific investments as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net realized and unrealized gains on investments were ~~$140~~$142 million in ~~2018~~2019 compared with ~~$277~~$118 million in 2017. Effective January 1, 2018, the Company adopted new accounting guidance that requires all equity investments with readily determinable fair values to be measured at fair value with changes in the fair value recognized through net income (other than those equity securities accounted for under the equity method of accounting or those that result in consolidation of the investee).2018. The gains of ~~$140~~$142 million in ~~2018~~2019 reflect net realized gains on investment sales of ~~$420~~$31 million ~~reduced by a change~~and an increase in unrealized gains on equity securities of ~~$280~~$111 million.

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that provide services to aviation markets, including (i) the distribution, manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel, maintenance, storage and charter services. Revenues from non-insurance businesses were ~~$242~~$181 million in ~~2018~~2019 and ~~$225~~$147 million in ~~2017.~~2018. The increase mainly relates to growth in revenues from the ~~textile~~aviation-related businesses and the purchase of a promotional merchandise business ~~purchased~~ in ~~March 2017.~~the second half of 2018.

Losses and Loss Expenses. Losses and loss expenses ~~decreased~~increased to ~~$2,955~~$2,017 million in ~~2018~~2019 from ~~$3,025~~$1,937 million in ~~2017.~~2018. The consolidated loss ratio was 62.2% in ~~2018~~2019 and ~~64.1%~~61.5% in ~~2017.~~2018. Catastrophe losses, net of reinsurance recoveries and reinstatement premiums, were ~~$60~~$38 million in ~~2018~~2019 and ~~$167~~$21 million in ~~2017. The more significant 2017 catastrophe losses largely related to hurricanes Harvey, Irma and Maria, along with two earthquakes in Mexico.~~2018. Favorable prior year reserve development (net of premium offsets) was ~~$27~~$14 million in ~~2018~~2019 and ~~$31~~$19 million in ~~2017.~~2018. The loss ratio excluding catastrophe losses and prior year reserve development ~~increased 0.3 points to~~was 61.5% in ~~2018 from 61.2%~~2019 and 61.4% in ~~2017.~~2018.

A summary of loss ratios in ~~2018~~2019 compared with ~~2017~~2018 by business segment follows:


•	Insurance - The loss ratio was 62.5% in 2019 and 61.7% in 2018. Catastrophe losses were $38 million in 2019 compared with $20 million in 2018. Favorable prior year reserve development was $17 million in 2019 and $26 million in 2018. The loss ratio excluding catastrophe losses and prior year reserve development increased 0.4 points to 61.8% in 2019 from 61.4% in 2018.


•	Reinsurance & Monoline Excess - The loss ratio was 60.0% in 2019 and 60.3% in 2018. Catastrophe losses were $0.1 million in 2019 compared with $1 million in 2018. Adverse prior year reserve development was $3 million in 2019 and $7 million in 2018. The loss ratio excluding catastrophe losses and prior year reserve development decreased 2.5 points to 58.9% in 2019 from 61.4% in 2018.

Insurance - The loss ratio was 61.8% in 2018 and 61.7% in 2017. Catastrophe losses were $50 million in 2018 compared with $94 million in 2017. Favorable prior year reserve development was $35 million in 2018 and $62 million in 2017. The loss ratio excluding catastrophe losses and prior year reserve development increased 0.4 points to 61.4% in 2018 from 61.0% in 2017.

Reinsurance - The loss ratio of 67.1% in 2018 was 19 points lower than the loss ratio of 86.1% in 2017. Catastrophe losses were $10 million in 2018 compared with $73 million in 2017. Adverse prior year reserve development was $8 million in 2018 and $31 million in 2017. The 2017 adverse development largely related to the impact of the change in the Ogden discount rate in the U.K. and the U.S. facultative casualty excess of loss business. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.9 points to ~~62.4% in 2018 from 63.3% in 2017.~~

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses:


($ in thousands)	2018			2017		2019			2018
Policy acquisition and insurance operating expenses	$	1,566,473		$	1,567,359	$	1,031,951		$	1,047,093
Insurance service expenses	90,970			97,308		51,343			63,702
Net foreign currency (gains) losses	(22,033		)	14,255
Net foreign currency gains						(6,494		)	(4,767		)
Other costs and expenses	145,820			142,233		103,116			97,553
Total	$	1,781,230		$	1,821,155	$	1,179,916		$	1,203,581

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. ~~The percentage change of policy~~Policy acquisition and insurance operating expenses ~~remained flat~~decreased 1% and net premiums earned increased ~~less than 1%~~3% from ~~2017.~~2018. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) was ~~33.0%~~31.9% in ~~2018~~2019 and ~~33.2%~~33.3% in ~~2017.~~2018. The improvement is primarily attributable to higher net premiums earned and lower expenses.

Service expenses, which represent the costs associated with the fee-based businesses, decreased to ~~$91~~$51 million in ~~2018~~2019 from ~~$97~~$64 million in ~~2017.~~2018. The decrease is primarily due to the sale of a third party administration business in third quarter of 2018.

Net foreign currency (gains) losses result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains were ~~$22~~$6 million in 2019 compared to gains of $5 million in 2018, ~~compared to losses of $14 million in 2017,~~mainly resulting from the continued strengthening ~~U.S. dollar and the change~~ of ~~functional currency for the Company's Argentine operations to~~ the U.S. dollar ~~as of July 1, 2018. The~~in relation to the Argentine ~~economy was determined to be highly inflationary under GAAP requiring the change in functional currency beginning with the third quarter of 2018.~~Peso.

Other costs and expenses represent general and administrative expenses of the parent company and other expenses not allocated to business segments, including the cost of certain long-term incentive plans and new business ventures. Other costs and expenses increased to ~~$146~~$103 million in 2019 from $98 million in 2018, ~~from $142 million in 2017.~~primarily due to non-recurring performance-based compensation costs.

Expenses from Non-Insurance Businesses. Expenses from non-insurance businesses represent costs associated with businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that include (i) cost of goods sold related to aircraft and products sold and services provided, and (ii) general and administrative expenses. Expenses from non-insurance businesses were ~~$238~~$178 million in ~~2018~~2019 compared to ~~$221~~$145 million in ~~2017.~~2018. The increase mainly relates to expenses from ~~the textile~~a business purchased in ~~March 2017.~~the second half of 2018.

Interest Expense. Interest expense was ~~$117~~$81 million in ~~2018~~2019 compared with ~~$110~~$77 million in ~~2017.~~2018. In March 2018, the Company issued $175 million aggregate principal amount of 5.70% subordinated debentures due 2058, and in April 2018, the Company issued another $10 million principal amount of such debentures. Additionally in 2018, the Company issued subsidiary debt of ~~$20 million.~~$116 million, which was primarily attributable to a non-recourse mortgage loan on a real estate property in Florida.

Income Taxes. The effective income tax rate was ~~21.0%~~20.7% in ~~2018~~2019 and ~~30.5%~~20.9% in ~~2017.~~2018. The ~~decrease in the~~ effective income tax rate ~~in 2018~~differs from ~~2017 was primarily due to the Tax Cuts and Jobs Act of 2017, which reduced~~ the federal ~~corporate~~income tax rate of 21% primarily because of tax-exempt income and tax on income from ~~35% to 21%.~~foreign jurisdictions with different tax rates.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately ~~$60~~$89 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed the Company projects that the incremental tax, if any, will be immaterial.

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~

2018

Business Segment Results

Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.


($ in thousands)	2018			2017			2019			2018
Insurance:
Gross premiums written	$	1,794,104		$	1,718,552		$	1,905,367		$	1,798,074
Net premiums written	1,504,792			1,432,334			1,574,585			1,491,432
Net premiums earned	1,488,658			1,433,729			1,475,184			1,415,579
Loss ratio	63.0		%	63.2		%	62.9		%	62.4		%
Expense ratio	31.9		%	32.4		%	30.9		%	32.9		%
GAAP combined ratio	94.9		%	95.6		%	93.8		%	95.3		%
Reinsurance:
Reinsurance & Monoline Excess:
Gross premiums written	$	133,681		$	155,606		$	184,494		$	150,000
Net premiums written	119,422			138,849			168,879			132,672
Net premiums earned	114,827			147,771			171,657			165,474
Loss ratio	69.3		%	118.7		%	59.2		%	54.6		%
Expense ratio	38.6		%	34.9		%	36.0		%	36.8		%
GAAP combined ratio	107.9		%	153.6		%	95.2		%	91.4		%
Consolidated:
Gross premiums written	$	1,927,785		$	1,874,158		$	2,089,861		$	1,948,074
Net premiums written	1,624,214			1,571,183			1,743,464			1,624,104
Net premiums earned	1,603,485			1,581,500			1,646,841			1,581,053
Loss ratio	63.5		%	68.4		%	62.4		%	61.6		%
Expense ratio	32.4		%	32.6		%	31.5		%	33.3		%
GAAP combined ratio	95.9		%	101.0		%	93.9		%	94.9		%



Delaware			22-1867895
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer
~~incorporation or organization)~~		Identification No.)

475 Steamboat Road ~~Greenwich, Connecticut~~	Greenwich	Connecticut	06830
(Address of principal executive offices)			(Zip Code)



	~~(203) 629-3000~~
	~~(Registrant’s telephone number, including area code)~~

	None
Former name, former address and former fiscal year, if changed since last report.



Title	Trading Symbol	Name

Common Stock, par value $.20 per share	WRB	New York Stock Exchange
5.625% Subordinated Debentures due 2053	WRB B	New York Stock Exchange
5.9% Subordinated Debentures due 2056	WRB C	New York Stock Exchange
5.75% Subordinated Debentures due 2056	WRB D	New York Stock Exchange
5.70% Subordinated Debentures due 2058	WRB E	New York Stock Exchange



Large accelerated filerþ	☒		Accelerated filero	☐
Non-accelerated filero	☐		Smaller reporting companyo	☐
		Emerging growth companyo	☐



þ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



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



(In thousands)	Cost		Gross Unrealized (1)					Fair Value		Carrying Value
(In thousands)	Cost		Gains		Losses			Fair Value		Carrying Value
September 30, 2018
Common stocks	$	117,880	$	56,869	$	(7,811	)	$	166,938	$	166,938
Preferred stocks	117,101		44,262		(3,047		)	158,316		158,316
Total	$	234,981	$	101,131	$	(10,858	)	$	325,254	$	325,254
December 31, 2017
Common stocks	$	81,855	$	272,309	$	(1,960	)	$	352,204	$	352,204
Preferred stocks	124,150		102,890		(2,597		)	224,443		224,443
Total	$	206,005	$	375,199	$	(4,557	)	$	576,647	$	576,647



	Carrying Value as of				Income (Loss) from Investment Funds
	September 30,		December 31,		For the Nine Months Ended September 30,
(In thousands)	2018		2017		2018		2017
Real estate	$	632,618	$	606,995	$	50,044	$	30,661
Energy	79,559		82,882		408		(12,763		)
Other funds	539,571		465,800		43,623		32,846
Total	$	1,251,748	$	1,155,677	$	94,075	$	50,744



Change in unrealized investment (losses) gains of available for sale securities:
Fixed maturity securities	$	(100,490	)	$	(10,627	)	$	(297,065	)	$	84,214
Previously impaired fixed maturity securities	(7		)	61			4			905
Equity securities available for sale (3)	—			(2,126		)	—			(44,812		)
Investment funds	3,669			4,129			(1,103		)	9,841
Total change in unrealized investment (losses) gains	(96,828		)	(8,563		)	(298,164		)	50,148
Income tax benefit (expense)	2,086			423			45,280			(23,550		)
Noncontrolling interests	60			5			86			19
After-tax change in unrealized investment (losses) gains of available for sale securities	$	(94,682	)	$	(8,135	)	$	(252,798	)	$	26,617


•	Insurance - gross premiums increased 6% to $1,905 million in 2019 from $1,798 million in 2018. Gross premiums increased $59 million (10%) for other liability, $50 million (25%) for professional liability, $24 million (6%) for short-tail lines, and $15 million (8%) for commercial auto, and decreased $41 million (11%) for workers' compensation.


•	Insurance - The loss ratio was 62.9% in 2019 and 62.4% in 2018. Catastrophe losses were $25 million in 2019 compared with $13 million in 2018. Favorable prior year reserve development was $8 million in 2019 and $10 million in 2018. The loss ratio excluding catastrophe losses and prior year reserve development increased 0.4 points to 61.7% in 2019 from 61.3% in 2018.



Number
(~~10.1~~31.1)		~~Form of 2018 Performance-Based Restricted Stock Unit Agreement Under the W. R. Berkley Corporation 2018 Stock Incentive Plan~~ .

(~~10.2~~)		~~W. R. Berkley Corporation Deferred Compensation Plan for Officers as amended and restated November 2, 2016~~

(~~31.1~~)		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(31.2)		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(32.1)		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



		W. R. BERKLEY CORPORATION
Date:	~~November 8, 2018~~August 5, 2019	/s/ W. Robert Berkley, Jr.
		W. Robert Berkley, Jr.
		President and Chief Executive Officer

Date:	~~November 8, 2018~~August 5, 2019	/s/ Richard M. Baio
		Richard M. Baio
		~~Senior~~ Executive Vice President - Chief Financial Officer and Treasurer



Commission File Number	1-15202



(203)	629-3000