UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)


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

For the Quarterly Period Ended ~~September 30, 2021~~March 31, 2022


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

For the Transition Period from to .


Commission File Number			1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

22-1867895

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

475 Steamboat Road

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.

Securities registered pursuant to Section 12(b) of the Act:


Title	Trading Symbol	Name

Common Stock, par value $.20 per share	WRB	New York Stock Exchange


~~5.70%~~5.700% Subordinated Debentures due 2058	WRB-PE	New York Stock Exchange
~~5.10%~~5.100% Subordinated Debentures due 2059	WRB-PF	New York Stock Exchange
~~4.25%~~4.250% Subordinated Debentures due 2060	WRB-PG	New York Stock Exchange
4.125% Subordinated Debentures due 2061	WRB-PH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, $.20 par value, outstanding as of ~~October 28, 2021: 176,640,439~~April 27, 2022: 265,193,412

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-10.1
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, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(Unaudited)		(Audited)			(Unaudited)		(Audited)
Assets	Assets					Assets
Investments:	Investments:					Investments:
Fixed maturity securities (amortized cost of $15,809,028 and $13,755,858; allowance for expected credit losses of $17,283 and $2,580 at September 30, 2021 and December 31, 2020, respectively)		$	16,073,135	$	14,159,369
Fixed maturity securities (amortized cost of $16,838,703 and $16,471,304; allowance for expected credit losses of $26,531 and $22,625 at March 31, 2022 and December 31, 2021, respectively)						Fixed maturity securities (amortized cost of $16,838,703 and $16,471,304; allowance for expected credit losses of $26,531 and $22,625 at March 31, 2022 and December 31, 2021, respectively)	$	16,426,196	$	16,602,673
Real estate	Real estate	1,842,400		1,960,914		Real estate	1,276,157		1,852,508
Investment funds	Investment funds	1,400,932		1,309,430		Investment funds	1,545,648		1,480,612
Arbitrage trading account	Arbitrage trading account	860,339		341,473		Arbitrage trading account	1,188,910		1,179,606
Equity securities	Equity securities	818,738		625,667		Equity securities	1,126,491		941,243
Loans receivable (net of allowance for expected credit losses of $1,737 and $5,437 at September 30, 2021 and December 31, 2020, respectively)		115,495		84,913
Loans receivable (net of allowance for expected credit losses of $1,429 and $1,718 at March 31, 2022 and December 31, 2021, respectively)						Loans receivable (net of allowance for expected credit losses of $1,429 and $1,718 at March 31, 2022 and December 31, 2021, respectively)	115,097		115,172

Total investments	Total investments	21,111,039		18,481,766		Total investments	21,678,499		22,171,814
Cash and cash equivalents	Cash and cash equivalents	2,069,029		2,372,366		Cash and cash equivalents	2,114,841		1,568,843
Premiums and fees receivable (net of allowance for expected credit losses of $23,676 and $22,883 at September 30, 2021 and December 31, 2020, respectively)		2,524,109		2,167,799
Due from reinsurers (net of allowance for expected credit losses of $7,277 and $7,801 at September 30, 2021 and December 31, 2020, respectively)		2,792,811		2,424,502
Premiums and fees receivable (net of allowance for expected credit losses of $28,236 and $25,218 at March 31, 2022 and December 31, 2021, respectively)						Premiums and fees receivable (net of allowance for expected credit losses of $28,236 and $25,218 at March 31, 2022 and December 31, 2021, respectively)	2,599,357		2,522,972
Due from reinsurers (net of allowance for expected credit losses of $7,655 and $7,713 at March 31, 2022 and December 31, 2021, respectively)						Due from reinsurers (net of allowance for expected credit losses of $7,655 and $7,713 at March 31, 2022 and December 31, 2021, respectively)	2,929,161		2,923,026
Deferred policy acquisition costs	Deferred policy acquisition costs	662,636		556,168		Deferred policy acquisition costs	716,645		676,145
Prepaid reinsurance premiums	Prepaid reinsurance premiums	670,913		648,376		Prepaid reinsurance premiums	680,703		676,915
Trading account receivables from brokers and clearing organizations		221,165		524,727

Property, furniture and equipment	Property, furniture and equipment	419,941		405,930		Property, furniture and equipment	417,888		419,883
Goodwill	Goodwill	169,652		169,652		Goodwill	169,652		169,652
Accrued investment income	Accrued investment income	126,245		120,464		Accrued investment income	129,194		122,938
Current and deferred federal and foreign income taxes	Current and deferred federal and foreign income taxes	63,654		—		Current and deferred federal and foreign income taxes	43,527		42,457

Other assets	Other assets	713,094		700,215		Other assets	771,487		753,231
Total assets	Total assets	$	31,544,288	$	28,571,965	Total assets	$	32,250,954	$	32,047,876

Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Reserves for losses and loss expenses	Reserves for losses and loss expenses	$	14,919,576	$	13,784,430	Reserves for losses and loss expenses	$	15,722,889	$	15,390,888
Unearned premiums	Unearned premiums	4,769,313		4,073,191		Unearned premiums	5,026,905		4,847,160
Due to reinsurers	Due to reinsurers	557,478		426,124		Due to reinsurers	524,562		514,980
Trading account securities sold but not yet purchased	Trading account securities sold but not yet purchased	739		10,048		Trading account securities sold but not yet purchased	241		1,169
Trading account payable to brokers and clearing organizations						Trading account payable to brokers and clearing organizations	56,652		53,636

Current and deferred federal and foreign income taxes		—		48,495

Other liabilities	Other liabilities	1,367,353		1,178,546		Other liabilities	1,189,919		1,305,245
Senior notes and other debt	Senior notes and other debt	2,258,646		1,623,025		Senior notes and other debt	1,834,155		2,259,416
Subordinated debentures	Subordinated debentures	1,007,472		1,102,309		Subordinated debentures	1,007,832		1,007,652
Total liabilities	Total liabilities	24,880,577		22,246,168		Total liabilities	25,363,155		25,380,146
Equity:	Equity:					Equity:
Preferred stock, par value $0.10 per share:	Preferred stock, par value $0.10 per share:					Preferred stock, par value $0.10 per share:
Authorized 5,000,000 shares; issued and outstanding - none		—		—
Authorized 5,000,000 shares; issued and outstanding - NaN						Authorized 5,000,000 shares; issued and outstanding - NaN	—		—
Common stock, par value $0.20 per share:	Common stock, par value $0.20 per share:					Common stock, par value $0.20 per share:
Authorized 750,000,000 shares, issued and outstanding, net of treasury shares, 176,638,884 and 177,825,150 shares, respectively		70,535		70,535
Authorized 750,000,000 shares, issued and outstanding, net of treasury shares, 265,186,251 and 265,170,882 shares, respectively						Authorized 750,000,000 shares, issued and outstanding, net of treasury shares, 265,186,251 and 265,170,882 shares, respectively	105,803		105,803
Additional paid-in capital	Additional paid-in capital	1,018,300		1,012,483		Additional paid-in capital	992,012		981,104
Retained earnings	Retained earnings	8,920,334		8,348,381		Retained earnings	9,582,790		9,015,135
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(190,862)		(62,172)		Accumulated other comprehensive loss	(649,229)		(281,955)
Treasury stock, at cost, 176,037,616 and 174,851,350 shares, respectively		(3,169,866)		(3,058,425)
Treasury stock, at cost, 263,828,377 and 263,843,868 shares, respectively						Treasury stock, at cost, 263,828,377 and 263,843,868 shares, respectively	(3,166,873)		(3,167,076)
Total stockholders’ equity	Total stockholders’ equity	6,648,441		6,310,802		Total stockholders’ equity	6,864,503		6,653,011
Noncontrolling interests	Noncontrolling interests	15,270		14,995		Noncontrolling interests	23,296		14,719
Total equity	Total equity	6,663,711		6,325,797		Total equity	6,887,799		6,667,730
Total liabilities and equity	Total liabilities and equity	$	31,544,288	$	28,571,965	Total liabilities and equity	$	32,250,954	$	32,047,876

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 March 31,

						2021			2020			2021				2020			2022	2021
REVENUES:	REVENUES:												REVENUES:
Net premiums written	Net premiums written	$	2,325,138	$	1,879,316		$	6,587,357		$	5,464,980		Net premiums written	$	2,413,254		$	2,050,038
Change in net unearned premiums	Change in net unearned premiums	(244,120)		(130,395)			(684,759)			(347,727)			Change in net unearned premiums	(164,167)			(200,082)
Net premiums earned	Net premiums earned	2,081,018		1,748,921			5,902,598			5,117,253			Net premiums earned	2,249,087			1,849,956
Net investment income	Net investment income	179,851		142,650			506,615			402,844			Net investment income	173,512			158,577
Net investment gains (losses):
Net realized and unrealized gains (losses) on investments		17,187		(7,772)			89,407			(89,404)
Net investment gains:													Net investment gains:
Net realized and unrealized gains on investments													Net realized and unrealized gains on investments	369,882			51,759

Change in allowance for expected credit losses on investments	Change in allowance for expected credit losses on investments	2,314		46,750			(11,003)			29,093			Change in allowance for expected credit losses on investments	(3,617)			(16,920)
Net investment gains (losses)		19,501		38,978			78,404			(60,311)
Net investment gains													Net investment gains	366,265			34,839
Revenues from non-insurance businesses	Revenues from non-insurance businesses	120,374		87,495			316,927			256,966			Revenues from non-insurance businesses	97,776			87,430
Insurance service fees	Insurance service fees	21,467		21,635			69,531			67,256			Insurance service fees	27,951			25,808
Other income	Other income	2,072		140			3,163			2,446			Other income	818			259
Total revenues	Total revenues	2,424,283		2,039,819			6,877,238			5,786,454			Total revenues	2,915,409			2,156,869

OPERATING COSTS AND EXPENSES:	OPERATING COSTS AND EXPENSES:												OPERATING COSTS AND EXPENSES:
Losses and loss expenses	Losses and loss expenses	1,298,392		1,114,632			3,623,630			3,357,011			Losses and loss expenses	1,339,252			1,121,592
Other operating costs and expenses	Other operating costs and expenses	643,045		593,969			1,907,020			1,753,142			Other operating costs and expenses	713,899			616,268
Expenses from non-insurance businesses	Expenses from non-insurance businesses	115,465		85,036			308,453			256,032			Expenses from non-insurance businesses	94,855			86,290
Interest expense	Interest expense	35,100		39,768			109,846			114,874			Interest expense	34,970			36,651
Total operating costs and expenses	Total operating costs and expenses	2,092,002		1,833,405			5,948,949			5,481,059			Total operating costs and expenses	2,182,976			1,860,801
Income before income taxes	Income before income taxes	332,281		206,414			928,289			305,395			Income before income taxes	732,433			296,068
Income tax expense	Income tax expense	(64,963)		(54,048)			(191,577)			(84,900)			Income tax expense	(139,403)			(64,352)
Net income before noncontrolling interests	Net income before noncontrolling interests	267,318		152,366			736,712			220,495			Net income before noncontrolling interests	593,030			231,716
Noncontrolling interests	Noncontrolling interests	(6,021)		(688)			(8,652)			(1,975)			Noncontrolling interests	(2,392)			(2,191)
Net income to common stockholders	Net income to common stockholders	$	261,297	$	151,678		$	728,060		$	218,520		Net income to common stockholders	$	590,638		$	229,525

NET INCOME PER SHARE:	NET INCOME PER SHARE:												NET INCOME PER SHARE:
Basic	Basic	$	1.41	$	0.82		$	3.93		$	1.17		Basic	$	2.13		$	0.83
Diluted	Diluted	$	1.40	$	0.81		$	3.89		$	1.15		Diluted	$	2.12		$	0.82

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 March 31,

						2021			2020			2021				2020			2022	2021
Net income before noncontrolling interests	Net income before noncontrolling interests	$	267,318	$	152,366		$	736,712		$	220,495		Net income before noncontrolling interests	$	593,030		$	231,716
Other comprehensive (loss) income:	Other comprehensive (loss) income:												Other comprehensive (loss) income:
Change in unrealized currency translation adjustments	Change in unrealized currency translation adjustments	(32,822)		40,194			(26,235)			(36,553)			Change in unrealized currency translation adjustments	56,272			4,050
Change in unrealized investment (losses) gains, net of taxes		(35,596)		38,273			(102,454)			98,016
Change in unrealized investment losses, net of taxes													Change in unrealized investment losses, net of taxes	(423,545)			(90,130)

Other comprehensive (loss) income		(68,418)		78,467			(128,689)			61,463
Other comprehensive loss													Other comprehensive loss	(367,273)			(86,080)
Comprehensive income	Comprehensive income	198,900		230,833			608,023			281,958			Comprehensive income	225,757			145,636
Noncontrolling interests	Noncontrolling interests	(6,021)		(685)			(8,651)			(1,973)			Noncontrolling interests	(2,391)			(2,191)
Comprehensive income to common stockholders	Comprehensive income to common stockholders	$	192,879	$	230,148		$	599,372		$	279,985		Comprehensive income to common stockholders	$	223,366		$	143,445

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (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 March 31,

				2021			2020			2021			2020				2022			2021
COMMON STOCK:	COMMON STOCK:													COMMON STOCK:
Beginning and end of period	Beginning and end of period	$	70,535		$	70,535		$	70,535		$	70,535		Beginning and end of period	$	105,803		$	105,803
ADDITIONAL PAID-IN CAPITAL:	ADDITIONAL PAID-IN CAPITAL:													ADDITIONAL PAID-IN CAPITAL:
Beginning of period	Beginning of period	$	1,035,166		$	1,076,043		$	1,012,482		$	1,056,042		Beginning of period	$	981,104		$	977,215
Restricted stock units issued	Restricted stock units issued	(28,741)			(23,387)			(28,668)			(26,773)			Restricted stock units issued	(530)			(525)
Restricted stock units expensed	Restricted stock units expensed	11,875			12,063			34,486			35,450			Restricted stock units expensed	11,438			11,598

End of period	End of period	$	1,018,300		$	1,064,719		$	1,018,300		$	1,064,719		End of period	$	992,012		$	988,288
RETAINED EARNINGS:	RETAINED EARNINGS:													RETAINED EARNINGS:
Beginning of period	Beginning of period	$	8,682,088		$	7,927,280		$	8,348,381		$	7,932,372		Beginning of period	$	9,015,135		$	8,348,381
Cumulative effect adjustment resulting from changes in accounting principles		—			—			—			(30,514)

Net income to common stockholders	Net income to common stockholders	261,297			151,678			728,060			218,520			Net income to common stockholders	590,638			229,525
Dividends ( $0.13, $0.12, $0.88 and $0.35 per share, respectively)		(23,051)			(21,402)			(156,107)			(62,822)
Dividends ($0.09 and $0.08, per share, respectively)														Dividends ($0.09 and $0.08, per share, respectively)	(22,983)			(21,285)
End of period	End of period	$	8,920,334		$	8,057,556		$	8,920,334		$	8,057,556		End of period	$	9,582,790		$	8,556,621
ACCUMULATED OTHER COMPREHENSIVE LOSS:	ACCUMULATED OTHER COMPREHENSIVE LOSS:													ACCUMULATED OTHER COMPREHENSIVE LOSS:
Unrealized investment gains (losses):
Unrealized investment (loss) gains:														Unrealized investment (loss) gains:
Beginning of period	Beginning of period	$	222,855		$	209,210		$	289,714		$	124,514		Beginning of period	$	90,900		$	289,714
Cumulative effect adjustment resulting from changes in accounting principles		—			—			—			24,952
Change in unrealized (losses) gains on securities without an allowance for expected credit losses		(35,707)			35,111			(112,852)			77,537

Change in unrealized losses on securities without an allowance for expected credit losses														Change in unrealized losses on securities without an allowance for expected credit losses	(423,839)			(100,485)
Change in unrealized gains on securities with an allowance for expected credit losses	Change in unrealized gains on securities with an allowance for expected credit losses	111			3,159			10,397			20,477			Change in unrealized gains on securities with an allowance for expected credit losses	293			10,355
End of period	End of period	187,259			247,480			187,259			247,480			End of period	(332,646)			199,584
Currency translation adjustments:	Currency translation adjustments:													Currency translation adjustments:
Beginning of period	Beginning of period	(345,299)			(458,560)			(351,886)			(381,813)			Beginning of period	(372,855)			(351,886)
Net change in period	Net change in period	(32,822)			40,194			(26,235)			(36,553)			Net change in period	56,272			4,050
End of period	End of period	(378,121)			(418,366)			(378,121)			(418,366)			End of period	(316,583)			(347,836)

Total accumulated other comprehensive loss	Total accumulated other comprehensive loss	$	(190,862)		$	(170,886)		$	(190,862)		$	(170,886)		Total accumulated other comprehensive loss	$	(649,229)		$	(148,252)
TREASURY STOCK:	TREASURY STOCK:													TREASURY STOCK:
Beginning of period	Beginning of period	$	(3,087,069)		$	(3,023,392)		$	(3,058,425)		$	(2,726,711)		Beginning of period	$	(3,167,076)		$	(3,058,425)
Stock exercised/vested	Stock exercised/vested	9,946			9,537			10,985			11,758			Stock exercised/vested	203			248
Stock repurchased	Stock repurchased	(92,743)			(12,957)			(122,426)			(311,859)			Stock repurchased	—			(29,683)

End of period	End of period	$	(3,169,866)		$	(3,026,812)		$	(3,169,866)		$	(3,026,812)		End of period	$	(3,166,873)		$	(3,087,860)
NONCONTROLLING INTERESTS:	NONCONTROLLING INTERESTS:													NONCONTROLLING INTERESTS:
Beginning of period	Beginning of period	$	9,678		$	44,275		$	14,995		$	43,403		Beginning of period	$	14,719		$	14,995
Distributions		(429)			(400)			(8,376)			(816)
Contributions (distributions)														Contributions (distributions)	6,186			(1,502)
Net income	Net income	6,021			688			8,652			1,975			Net income	2,392			2,191
Other comprehensive income (loss), net of tax		—			(3)			(1)			(2)
Other comprehensive loss, net of tax														Other comprehensive loss, net of tax	(1)			—
End of period	End of period	$	15,270		$	44,560		$	15,270		$	44,560		End of period	$	23,296		$	15,684

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 Three Months Ended March 31,

				2021			2020				2022			2021
CASH FROM OPERATING ACTIVITIES:	CASH FROM OPERATING ACTIVITIES:							CASH FROM OPERATING ACTIVITIES:
Net income to common stockholders	Net income to common stockholders	$	728,060		$	218,520		Net income to common stockholders	$	590,638		$	229,525
Adjustments to reconcile net income to net cash from operating activities:	Adjustments to reconcile net income to net cash from operating activities:							Adjustments to reconcile net income to net cash from operating activities:
Net investment (gains) losses		(78,404)			60,311
Net investment gains								Net investment gains	(366,265)			(34,839)
Depreciation and amortization	Depreciation and amortization	101,330			96,195			Depreciation and amortization	24,631			33,543
Noncontrolling interests	Noncontrolling interests	8,652			1,975			Noncontrolling interests	2,392			2,191
Investment funds	Investment funds	(169,538)			(1,260)			Investment funds	(52,012)			(38,935)
Stock incentive plans	Stock incentive plans	36,486			37,842			Stock incentive plans	11,438			11,817
Change in:	Change in:							Change in:
Arbitrage trading account	Arbitrage trading account	(224,613)			(40,487)			Arbitrage trading account	(7,215)			(16,108)
Premiums and fees receivable	Premiums and fees receivable	(365,092)			(175,636)			Premiums and fees receivable	(69,704)			(96,290)
Reinsurance accounts	Reinsurance accounts	(255,126)			(204,396)			Reinsurance accounts	(2,643)			(105,589)
Deferred policy acquisition costs	Deferred policy acquisition costs	(108,131)			(43,955)			Deferred policy acquisition costs	(39,220)			(38,577)
Income taxes	Income taxes	(81,574)			(56,955)			Income taxes	123,763			47,372

Reserves for losses and loss expenses	Reserves for losses and loss expenses	1,164,594			879,277			Reserves for losses and loss expenses	316,065			303,305
Unearned premiums	Unearned premiums	707,658			407,227			Unearned premiums	167,522			219,920
Other	Other	60,092			(41,713)			Other	(221,708)			(206,345)
Net cash from operating activities	Net cash from operating activities	1,524,394			1,136,945			Net cash from operating activities	477,682			310,990
CASH (USED IN) FROM INVESTING ACTIVITIES:
CASH FROM (USED IN) INVESTING ACTIVITIES:								CASH FROM (USED IN) INVESTING ACTIVITIES:
Proceeds from sale of fixed maturity securities	Proceeds from sale of fixed maturity securities	1,631,849			3,525,926			Proceeds from sale of fixed maturity securities	408,221			1,115,114
Proceeds from sale of equity securities	Proceeds from sale of equity securities	100,366			66,850			Proceeds from sale of equity securities	9,227			57,457
Distributions from investment funds		124,892			83,935
(Contributions) distributions from investment funds								(Contributions) distributions from investment funds	(13,423)			36,236
Proceeds from maturities and prepayments of fixed maturity securities	Proceeds from maturities and prepayments of fixed maturity securities	4,672,562			2,876,642			Proceeds from maturities and prepayments of fixed maturity securities	1,440,457			1,623,357
Purchase of fixed maturity securities	Purchase of fixed maturity securities	(8,442,260)			(6,074,429)			Purchase of fixed maturity securities	(2,200,214)			(4,118,161)
Purchase of equity securities	Purchase of equity securities	(340,424)			(77,840)			Purchase of equity securities	(100,356)			(69,181)
Real estate sold (purchased)		182,998			(42,405)
Real estate sold								Real estate sold	28,141			9,787

Change in loans receivable	Change in loans receivable	(27,764)			1,202			Change in loans receivable	332			9,256
Net purchases of property, furniture and equipment	Net purchases of property, furniture and equipment	(53,558)			(31,047)			Net purchases of property, furniture and equipment	(9,114)			(10,872)
Change in balances due to security brokers	Change in balances due to security brokers	110,752			36,561			Change in balances due to security brokers	98,058			151,776

Cash received in connection with business disposition								Cash received in connection with business disposition	906,789			—
Payment for business purchased net of cash acquired								Payment for business purchased net of cash acquired	(49,572)			—
Other	Other	14			65			Other	17			—
Net cash (used in) from investing activities		(2,040,573)			365,460
CASH FROM FINANCING ACTIVITIES:
Net cash from (used in) investing activities								Net cash from (used in) investing activities	518,563			(1,195,231)
CASH (USED IN) FROM FINANCING ACTIVITIES:								CASH (USED IN) FROM FINANCING ACTIVITIES:
Repayment of senior notes and other debt	Repayment of senior notes and other debt	(503,914)			(302,453)			Repayment of senior notes and other debt	(426,503)			(110,000)

Net payments for stock options exercised								Net payments for stock options exercised	(327)			(525)
Net proceeds from issuance of debt	Net proceeds from issuance of debt	1,032,404			747,399			Net proceeds from issuance of debt	1,186			691,213
Cash dividends to common stockholders	Cash dividends to common stockholders	(156,107)			(62,822)			Cash dividends to common stockholders	(22,983)			(21,285)
Purchase of common treasury shares	Purchase of common treasury shares	(122,426)			(311,859)			Purchase of common treasury shares	—			(29,683)
Other, net	Other, net	(27,941)			(18,465)			Other, net	(2,703)			(1,503)
Net cash from financing activities		222,016			51,800
Net cash (used in) from financing activities								Net cash (used in) from financing activities	(451,330)			528,217
Net impact on cash due to change in foreign exchange rates	Net impact on cash due to change in foreign exchange rates	(9,174)			(6,468)			Net impact on cash due to change in foreign exchange rates	1,083			(1,431)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(303,337)			1,547,737			Net change in cash and cash equivalents	545,998			(357,455)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	2,372,366			1,023,710			Cash and cash equivalents at beginning of period	1,568,843			2,372,366
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	2,069,029		$	2,571,447		Cash and cash equivalents at end of period	$	2,114,841		$	2,014,911

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. ~~Reclassifications have been made in the 2020 financial statements as originally reported to conform to the presentation of the 2021 financial statements.~~ 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 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, ~~2020.~~2021.

Reclassifications have been made in the 2021 financial statements as originally reported to conform to the presentation of the 2022 financial statements. Shares outstanding and per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on March 23, 2022.

The income tax provision has been computed based on the Company’s estimated annual effective tax rate. The effective income tax rate differs from the federal income tax rate of 21% ~~principally because of tax-exempt investment income~~primarily due to a net reduction to the Company’s valuation allowance against foreign tax credits and ~~tax benefits related to equity-based compensation,~~foreign net operating losses, which was partially offset by state ~~and foreign~~ income taxes.

(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 ~~7,767,874~~11,592,699 and ~~7,575,168~~11,651,811 common shares held in a grantor trust as of ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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 September 30,			For the Nine Months Ended September 30,					For the Three Months Ended March 31,

(In thousands)	(In thousands)			2021		2020		2021			2020	(In thousands)	2022	2021
Basic	Basic	185,031	185,765		185,127		187,338		Basic	276,772		277,793
Diluted	Diluted	186,742	187,717		187,060		189,515		Diluted	279,157		280,245

(3) Recent Accounting Pronouncements and Accounting Policies

Recently adopted accounting pronouncements:

All accounting and reporting standards that ~~have become~~became effective in ~~2021~~2022 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:

All 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) Acquisitions

In March 2022, the Company acquired an 80.0% ownership interest for $51.1 million in a company engaged in residential and commercial textiles. The fair value of the assets acquired and liabilities assumed have been estimated based on a preliminary valuation. The fair values of the assets and liabilities will be adjusted, as needed, following completion of the final valuation.

The following table summarizes the initial estimated fair value of net assets acquired and liabilities assumed for the business combination completed in 2022:


(In thousands)	2022


Cash and cash equivalents	$	1,564
Real estate, furniture and equipment	2,527
Intangible assets	48,787

Other assets	11,275
Total assets acquired	64,153

Other liabilities assumed	(5,417)
Noncontrolling interest	(7,600)

Net assets acquired	$	51,136

(5) Consolidated Statements of Comprehensive Income

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


(In thousands)	(In thousands)	Unrealized Investment Gains (Losses)			Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income		(In thousands)	Unrealized Investment Gains (Losses)			Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
As of and for the nine months ended September 30, 2021
As of and for the three months ended March 31, 2022									As of and for the three months ended March 31, 2022
Changes in AOCI	Changes in AOCI								Changes in AOCI
Beginning of period	Beginning of period	$	289,714		$	(351,886)	$	(62,172)	Beginning of period	$	90,900		$	(372,855)	$	(281,955)

Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(120,695)			(26,235)		(146,930)		Other comprehensive (loss) income before reclassifications	(433,136)			56,272		(376,864)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	18,241			—		18,241		Amounts reclassified from AOCI	9,591			—		9,591
Other comprehensive (loss) income	Other comprehensive (loss) income	(102,454)			(26,235)		(128,689)		Other comprehensive (loss) income	(423,545)			56,272		(367,273)
Unrealized investment gain related to noncontrolling interest	Unrealized investment gain related to noncontrolling interest	(1)			—		(1)		Unrealized investment gain related to noncontrolling interest	(1)			—		(1)
End of period	End of period	$	187,259		$	(378,121)	$	(190,862)	End of period	$	(332,646)		$	(316,583)	$	(649,229)
Amounts reclassified from AOCI	Amounts reclassified from AOCI								Amounts reclassified from AOCI
Pre-tax	Pre-tax	$	23,091	(1)	$	—	$	23,091	Pre-tax	$	12,141	(1)	$	—	$	12,141
Tax effect	Tax effect	(4,850)		(2)	—		(4,850)		Tax effect	(2,550)		(2)	—		(2,550)
After-tax amounts reclassified	After-tax amounts reclassified	$	18,241		$	—	$	18,241	After-tax amounts reclassified	$	9,591		$	—	$	9,591
Other comprehensive (loss) income	Other comprehensive (loss) income								Other comprehensive (loss) income
Pre-tax	Pre-tax	$	(130,201)		$	(26,235)	$	(156,436)	Pre-tax	$	(539,449)		$	56,272	$	(483,177)
Tax effect	Tax effect	27,747			—		27,747		Tax effect	115,904			—		115,904
Other comprehensive (loss) income	Other comprehensive (loss) income	$	(102,454)		$	(26,235)	$	(128,689)	Other comprehensive (loss) income	$	(423,545)		$	56,272	$	(367,273)
As of and for the three months ended September 30, 2021
Changes in AOCI
Beginning of period		$	222,855		$	(345,299)	$	(122,444)

Other comprehensive (loss) income before reclassifications		(36,249)			(32,822)		(69,071)
Amounts reclassified from AOCI		653			—		653
Other comprehensive (loss) income		(35,596)			(32,822)		(68,418)
Unrealized investment gain related to noncontrolling interest		—			—		—
Ending balance		$	187,259		$	(378,121)	$	(190,862)
Amounts reclassified from AOCI
Pre-tax		$	827	(1)	$	—	$	827
Tax effect		(174)		(2)	—		(174)
After-tax amounts reclassified		$	653		$	—	$	653
Other comprehensive (loss) income
Pre-tax		$	(45,270)		$	(32,822)	$	(78,092)
Tax effect		9,674			—		9,674
Other comprehensive (loss) income		$	(35,596)		$	(32,822)	$	(68,418)


As of and for the nine months ended September 30, 2020
As of and for the three months ended March 31, 2021									As of and for the three months ended March 31, 2021
Changes in AOCI	Changes in AOCI								Changes in AOCI
Beginning of period	Beginning of period	$	124,514		$	(381,813)	$	(257,299)	Beginning of period	$	289,714		$	(351,886)	$	(62,172)
Cumulative effect adjustment resulting from changes in accounting principles		24,952			—		24,952
Restated beginning of period		149,466			(381,813)		(232,347)
Other comprehensive income (loss) before reclassifications		76,474			(36,553)		39,921

Other comprehensive (loss) income before reclassifications									Other comprehensive (loss) income before reclassifications	(98,991)			4,050		(94,941)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	21,542			—		21,542		Amounts reclassified from AOCI	8,861			—		8,861
Other comprehensive income (loss)		98,016			(36,553)		61,463
Other comprehensive (loss) income									Other comprehensive (loss) income	(90,130)			4,050		(86,080)
Unrealized investment gain related to noncontrolling interest	Unrealized investment gain related to noncontrolling interest	(2)			—		(2)		Unrealized investment gain related to noncontrolling interest	—			—		—
End of period	End of period	$	247,480		$	(418,366)	$	(170,886)	End of period	$	199,584		$	(347,836)	$	(148,252)
Amounts reclassified from AOCI	Amounts reclassified from AOCI								Amounts reclassified from AOCI
Pre-tax	Pre-tax	$	27,268	(1)	$	—	$	27,268	Pre-tax	$	11,216	(1)	$	—	$	11,216
Tax effect	Tax effect	(5,726)		(2)	—		(5,726)		Tax effect	(2,355)		(2)	—		(2,355)
After-tax amounts reclassified	After-tax amounts reclassified	$	21,542		$	—	$	21,542	After-tax amounts reclassified	$	8,861		$	—	$	8,861
Other comprehensive income (loss)
Other comprehensive (loss) income									Other comprehensive (loss) income
Pre-tax	Pre-tax	$	111,756		$	(36,553)	$	75,203	Pre-tax	$	(113,735)		$	4,050	$	(109,685)
Tax effect	Tax effect	(13,740)			—		(13,740)		Tax effect	23,605			—		23,605
Other comprehensive income (loss)		$	98,016		$	(36,553)	$	61,463
As of and for the three months ended September 30, 2020
Changes in AOCI
Beginning of period		$	209,210		$	(458,560)	$	(249,350)
Other comprehensive (loss) income									Other comprehensive (loss) income	$	(90,130)		$	4,050	$	(86,080)

Other comprehensive income (loss) before reclassifications		39,488			40,194		79,682
Amounts reclassified from AOCI		(1,215)			—		(1,215)
Other comprehensive income (loss)		38,273			40,194		78,467
Unrealized investment gain related to noncontrolling interest		(3)			—		(3)
Ending balance		$	247,480		$	(418,366)	$	(170,886)
Amounts reclassified from AOCI
Pre-tax		$	(1,538)	(1)	$	—	$	(1,538)
Tax effect		323		(2)	—		323
After-tax amounts reclassified		$	(1,215)		$	—	$	(1,215)
Other comprehensive income (loss)
Pre-tax		$	48,980		$	40,194	$	89,174
Tax effect		(10,707)			—		(10,707)
Other comprehensive income (loss)		$	38,273		$	40,194	$	78,467

____________

(1) Net investment gains (losses) in the consolidated statements of income.

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

~~(5)~~(6) Statements of Cash Flows

Interest payments were ~~$119,381,000~~$52,899,000 and ~~$126,932,000~~$45,393,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Income~~No income taxes were ~~$244,029,000 and $96,000,000 for the nine months ended September 30, 2021 and 2020, respectively.~~

paid during such periods.

~~(6)~~(7) Investments in Fixed Maturity Securities

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, investments in fixed maturity securities were as follows:


(In thousands)	(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value		(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value
						Gains		Losses											Gains		Losses
September 30, 2021
March 31, 2022														March 31, 2022
Held to maturity:	Held to maturity:													Held to maturity:
State and municipal	State and municipal	$	68,920	$	(396)	$	10,548	$	—	$	79,072	$	68,524	State and municipal	$	70,165	$	(378)	$	7,094	$	—	$	76,881	$	69,787
Residential mortgage-backed	Residential mortgage-backed	5,250		—		774		—		6,024		5,250		Residential mortgage-backed	4,455		—		324		—		4,779		4,455
Total held to maturity	Total held to maturity	74,170		(396)		11,322		—		85,096		73,774		Total held to maturity	74,620		(378)		7,418		—		81,660		74,242
Available for sale:	Available for sale:													Available for sale:
U.S. government and government agency	U.S. government and government agency	506,703		—		12,137		(507)		518,333		518,333		U.S. government and government agency	837,167		—		2,397		(20,716)		818,848		818,848
State and municipal:	State and municipal:													State and municipal:
Special revenue	Special revenue	2,019,757		—		74,682		(2,967)		2,091,472		2,091,472		Special revenue	1,948,586		—		12,944		(44,803)		1,916,727		1,916,727
State general obligation	State general obligation	376,534		—		26,967		(629)		402,872		402,872		State general obligation	378,408		—		7,043		(6,574)		378,877		378,877
Pre-refunded	Pre-refunded	209,547		—		16,933		(917)		225,563		225,563		Pre-refunded	165,882		—		6,216		—		172,098		172,098
Corporate backed	Corporate backed	170,962		—		8,271		(1,317)		177,916		177,916		Corporate backed	175,070		—		1,407		(4,472)		172,005		172,005
Local general obligation	Local general obligation	400,760		—		31,267		(505)		431,522		431,522		Local general obligation	410,058		—		11,184		(5,075)		416,167		416,167
Total state and municipal	Total state and municipal	3,177,560		—		158,120		(6,335)		3,329,345		3,329,345		Total state and municipal	3,078,004		—		38,794		(60,924)		3,055,874		3,055,874
Mortgage-backed:	Mortgage-backed:													Mortgage-backed:
Residential	Residential	835,729		—		14,156		(7,185)		842,700		842,700		Residential	1,179,468		—		2,417		(60,650)		1,121,235		1,121,235
Commercial	Commercial	125,768		—		4,979		(110)		130,637		130,637		Commercial	266,921		—		339		(3,759)		263,501		263,501
Total mortgage-backed	Total mortgage-backed	961,497		—		19,135		(7,295)		973,337		973,337		Total mortgage-backed	1,446,389		—		2,756		(64,409)		1,384,736		1,384,736
Asset-backed	Asset-backed	4,660,976		—		8,780		(14,201)		4,655,555		4,655,555		Asset-backed	4,319,535		—		1,459		(63,573)		4,257,421		4,257,421
Corporate:	Corporate:													Corporate:
Industrial	Industrial	3,057,258		(12)		85,049		(9,933)		3,132,362		3,132,362		Industrial	3,373,710		0		12,708		(115,614)		3,270,804		3,270,804
Financial	Financial	1,657,059		—		44,534		(1,753)		1,699,840		1,699,840		Financial	1,747,275		—		4,612		(45,155)		1,706,732		1,706,732
Utilities	Utilities	402,952		—		17,228		(1,327)		418,853		418,853		Utilities	422,354		—		1,806		(14,434)		409,726		409,726
Other	Other	173,504		—		154		(649)		173,009		173,009		Other	206,526		—		47		(5,328)		201,245		201,245
Total corporate	Total corporate	5,290,773		(12)		146,965		(13,662)		5,424,064		5,424,064		Total corporate	5,749,865		—		19,173		(180,531)		5,588,507		5,588,507
Foreign government	Foreign government	1,137,349		(16,875)		12,864		(34,611)		1,098,727		1,098,727		Foreign government	1,333,123		(26,153)		3,411		(63,813)		1,246,568		1,246,568
Total available for sale	Total available for sale	15,734,858		(16,887)		358,001		(76,611)		15,999,361		15,999,361		Total available for sale	16,764,083		(26,153)		67,990		(453,966)		16,351,954		16,351,954
Total investments in fixed maturity securities	Total investments in fixed maturity securities	$	15,809,028	$	(17,283)	$	369,323	$	(76,611)	$	16,084,457	$	16,073,135	Total investments in fixed maturity securities	$	16,838,703	$	(26,531)	$	75,408	$	(453,966)	$	16,433,614	$	16,426,196

____________

(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses is recognized in the consolidated statements of income. Amount excludes unrealized losses relating to non-credit factors.


(In thousands)	(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value		(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value
						Gains		Losses											Gains		Losses
December 31, 2020
December 31, 2021														December 31, 2021
Held to maturity:	Held to maturity:													Held to maturity:
State and municipal	State and municipal	$	67,117	$	(798)	$	13,217	$	—	$	79,536	$	66,319	State and municipal	$	69,539	$	(387)	$	10,813	$	—	$	79,965	$	69,152
Residential mortgage-backed	Residential mortgage-backed	6,455		—		1,043		—		7,498		6,455		Residential mortgage-backed	4,829		—		632		—		5,461		4,829

Total held to maturity	Total held to maturity	73,572		(798)		14,260		—		87,034		72,774		Total held to maturity	74,368		(387)		11,445		—		85,426		73,981
Available for sale:	Available for sale:													Available for sale:
U.S. government and government agency	U.S. government and government agency	586,020		—		18,198		(347)		603,871		603,871		U.S. government and government agency	851,128		—		8,509		(4,294)		855,343		855,343
State and municipal:	State and municipal:													State and municipal:
Special revenue	Special revenue	2,137,162		—		96,924		(714)		2,233,372		2,233,372		Special revenue	2,016,382		—		62,961		(5,706)		2,073,637		2,073,637
State general obligation	State general obligation	417,397		—		33,407		—		450,804		450,804		State general obligation	388,110		—		23,152		(1,015)		410,247		410,247
Pre-refunded	Pre-refunded	250,081		—		21,472		(162)		271,391		271,391		Pre-refunded	202,633		—		14,891		(574)		216,950		216,950
Corporate backed	Corporate backed	206,356		—		8,755		(638)		214,473		214,473		Corporate backed	166,943		—		7,191		(1,532)		172,602		172,602
Local general obligation	Local general obligation	410,583		—		40,596		(555)		450,624		450,624		Local general obligation	401,974		—		29,455		(732)		430,697		430,697
Total state and municipal	Total state and municipal	3,421,579		—		201,154		(2,069)		3,620,664		3,620,664		Total state and municipal	3,176,042		—		137,650		(9,559)		3,304,133		3,304,133
Mortgage-backed:	Mortgage-backed:													Mortgage-backed:
Residential	Residential	813,187		—		24,664		(5,238)		832,613		832,613		Residential	940,744		—		9,896		(11,321)		939,319		939,319
Commercial	Commercial	181,105		—		6,725		(113)		187,717		187,717		Commercial	125,709		—		3,388		(341)		128,756		128,756
Total mortgage-backed securities	Total mortgage-backed securities	994,292		—		31,389		(5,351)		1,020,330		1,020,330		Total mortgage-backed securities	1,066,453		—		13,284		(11,662)		1,068,075		1,068,075
Asset-backed	Asset-backed	3,218,048		—		10,035		(33,497)		3,194,586		3,194,586		Asset-backed	4,504,950		—		4,409		(18,794)		4,490,565		4,490,565
Corporate:	Corporate:													Corporate:
Industrial	Industrial	2,456,516		(518)		115,926		(7,449)		2,564,475		2,564,475		Industrial	3,231,520		(16)		62,751		(21,092)		3,273,163		3,273,163
Financial	Financial	1,513,943		—		62,947		(987)		1,575,903		1,575,903		Financial	1,739,282		—		30,709		(6,591)		1,763,400		1,763,400
Utilities	Utilities	389,267		—		31,931		(33)		421,165		421,165		Utilities	396,242		—		13,262		(3,202)		406,302		406,302
Other	Other	109,353		—		696		(11)		110,038		110,038		Other	154,210		—		125		(1,525)		152,810		152,810
Total corporate	Total corporate	4,469,079		(518)		211,500		(8,480)		4,671,581		4,671,581		Total corporate	5,521,254		(16)		106,847		(32,410)		5,595,675		5,595,675
Foreign government	Foreign government	993,268		(1,264)		28,007		(44,448)		975,563		975,563		Foreign government	1,277,109		(22,222)		7,508		(47,494)		1,214,901		1,214,901
Total available for sale	Total available for sale	13,682,286		(1,782)		500,283		(94,192)		14,086,595		14,086,595		Total available for sale	16,396,936		(22,238)		278,207		(124,213)		16,528,692		16,528,692
Total investments in fixed maturity securities	Total investments in fixed maturity securities	$	13,755,858	$	(2,580)	$	514,543	$	(94,192)	$	14,173,629	$	14,159,369	Total investments in fixed maturity securities	$	16,471,304	$	(22,625)	$	289,652	$	(124,213)	$	16,614,118	$	16,602,673

____________

(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses ~~excluding the cumulative effect adjustment resulting from changes in accounting principles,~~ is recognized in the consolidated statements of income. Amount excludes unrealized losses relating to non-credit factors.

The following table presents the rollforward of the allowance for expected credit losses for ~~state and municipal held to maturity securities for the nine months ended September 30, 2021 and 2020:~~

(In thousands) 2021 2020
Allowance for expected credit losses, beginning of period $ 798 $ —
Cumulative effect adjustment resulting from changes in accounting principles — 69
Provision for expected credit losses (402) 802
Allowance for expected credit losses, end of period $ 396 $ 871

~~The following table presents the rollforward of the allowance for expected credit losses for state and municipal~~ held to maturity securities for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


(In thousands)	2022		2021
Allowance for expected credit losses, beginning of period	$	387	$	798

Provision for expected credit losses	(9)		(68)
Allowance for expected credit losses, end of period	$	378	$	730

(In thousands) 2021 2020
Allowance for expected credit losses, beginning of period $ 453 $ 948
Provision for expected credit losses (57) (77)
Allowance for expected credit losses, end of period $ 396 $ 871

~~The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the nine months ended September 30, 2021 and 2020:~~

2021 2020
(In thousands) Foreign Government Corporate Total Foreign Government Corporate Total
Allowance for expected credit losses, beginning of period $ 1,264 $ 518 $ 1,782 $ — $ — $ —
Cumulative effect adjustment resulting from changes in accounting principles — — — 35,645 — 35,645
Expected credit losses on securities for which credit losses were not previously recorded 19,072 16 19,088 12,494 7,058 19,552
Expected credit losses on securities for which credit losses were previously recorded (2,967) (517) (3,484) 295 (3,767) (3,472)
Reduction due to disposals (494) (5) (499) (47,344) (2,685) (50,029)
Allowance for expected credit losses, end of period $ 16,875 $ 12 $ 16,887 $ 1,090 $ 606 $ 1,696

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	2022						2021
(In thousands)	Foreign Government		Corporate		Total		Foreign Government		Corporate		Total
Allowance for expected credit losses, beginning of period	$	22,222	$	16	$	22,238	$	1,264	$	518	$	1,782

Expected credit losses on securities for which credit losses were not previously recorded	484		—		484		18,990		16		19,006
Expected credit losses (gains) on securities for which credit losses were previously recorded	3,447		(16)		3,431		(261)		(513)		(774)
Reduction due to disposals	—		—		—		—		(5)		(5)
Allowance for expected credit losses, end of period	$	26,153	$	—	$	26,153	$	19,993	$	16	$	20,009

2021 2020
(In thousands) Foreign Government Corporate Total Foreign Government Corporate Total
Allowance for expected credit losses, beginning of period $ 18,899 $ 12 $ 18,911 $ 44,769 $ 724 $ 45,493
Expected credit losses on securities for which credit losses were not previously recorded 82 — 82 — 261 261
Expected credit losses on securities for which credit losses were previously recorded (2,106) — (2,106) (252) (9) (261)
Reduction due to disposals — — — (43,427) (370) (43,797)
Allowance for expected credit losses, end of period $ 16,875 $ 12 $ 16,887 $ 1,090 $ 606 $ 1,696

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company increased the allowance for expected credit losses for available for sale securities utilizing its credit loss assessment process and inputs used in its credit loss model, primarily due

to foreign government ~~securities that had no reserve in prior periods.~~securities. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company ~~decreased~~increased the allowance for expected credit losses for available for sale securities primarily due to ~~the disposition of~~foreign government securities ~~which previously~~that had ~~an allowance recorded.~~

no reserve in prior periods.

The amortized cost and fair value of fixed maturity securities at ~~September 30, 2021,~~March 31, 2022, 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)	(In thousands)	Amortized Cost (1)		Fair Value		(In thousands)	Amortized Cost (1)		Fair Value
Due in one year or less	Due in one year or less	$	1,620,333	$	1,622,938	Due in one year or less	$	1,472,865	$	1,461,188
Due after one year through five years	Due after one year through five years	6,835,525		6,974,341		Due after one year through five years	7,903,303		7,756,952
Due after five years through ten years	Due after five years through ten years	4,183,230		4,263,746		Due after five years through ten years	4,029,040		3,898,727
Due after ten years	Due after ten years	2,202,797		2,244,071		Due after ten years	1,982,273		1,927,232
Mortgage-backed securities	Mortgage-backed securities	966,747		979,361		Mortgage-backed securities	1,450,844		1,389,515
Total	Total	$	15,808,632	$	16,084,457	Total	$	16,838,325	$	16,433,614

________________

(1) Amortized cost is reduced by the allowance for expected credit losses of ~~$396~~$378 thousand related to held to maturity securities.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were no investments that exceeded 10% of common stockholders' equity, other than investments in United States government and government agency securities.

~~(7)~~

(8) Investments in Equity Securities

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, investments in equity securities were as follows:


(In thousands)	(In thousands)	Cost		Gross Unrealized				Fair Value		Carrying Value		(In thousands)	Cost		Gross Unrealized				Fair Value		Carrying Value
				Gains		Losses									Gains		Losses
September 30, 2021
March 31, 2022												March 31, 2022
Common stocks	Common stocks	$	549,015	$	73,087	$	(12,163)	$	609,939	$	609,939	Common stocks	$	699,566	$	191,842	$	(8,091)	$	883,317	$	883,317
Preferred stocks	Preferred stocks	221,887		8,702		(21,790)		208,799		208,799		Preferred stocks	262,513		2,917		(22,256)		243,174		243,174
Total	Total	$	770,902	$	81,789	$	(33,953)	$	818,738	$	818,738	Total	$	962,079	$	194,759	$	(30,347)	$	1,126,491	$	1,126,491

December 31, 2020
December 31, 2021												December 31, 2021
Common stocks	Common stocks	$	335,617	$	28,742	$	(14,178)	$	350,181	$	350,181	Common stocks	$	619,896	$	92,401	$	(16,894)	$	695,403	$	695,403
Preferred stocks	Preferred stocks	180,397		95,581		(492)		275,486		275,486		Preferred stocks	250,149		7,874		(12,183)		245,840		245,840
Total	Total	$	516,014	$	124,323	$	(14,670)	$	625,667	$	625,667	Total	$	870,045	$	100,275	$	(29,077)	$	941,243	$	941,243

~~(8)~~(9) Arbitrage Trading Account

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair and carrying values of the arbitrage trading account were ~~$860~~$1,189 million and ~~$341~~$1,180 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 and call options in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options are reported at fair value. As of ~~September 30, 2021,~~March 31, 2022, the fair value of short option contracts outstanding was ~~$(273)~~$242 thousand (notional amount of ~~$11.3~~$29.2 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.

(10) Net Investment Income

Net investment income consisted of the following:


	For the Three Months Ended March 31,

(In thousands)	2022		2021
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable	$	101,284	$	94,677
Investment funds	52,012		38,935
Arbitrage trading account	9,187		19,074
Equity securities	10,856		6,180
Real estate	2,146		1,161

Gross investment income	175,485		160,027
Investment expense	(1,973)		(1,450)
Net investment income	$	173,512	$	158,577

~~(9) Net Investment Income~~

~~Net investment income consisted of the following:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(In thousands) 2021 2020 2021 2020
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable $ 93,031 $ 97,080 $ 284,704 $ 330,941
Investment funds 69,292 18,235 169,538 1,260
Arbitrage trading account 7,187 19,543 30,176 51,985
Equity securities 8,462 1,907 21,854 6,194
Real estate 3,485 7,666 5,517 18,807
Gross investment income 181,457 144,430 511,789 409,187
Investment expense (1,606) (1,780) (5,174) (6,343)
Net investment income $ 179,851 $ 142,650 $ 506,615 $ 402,844

~~(10)~~(11) 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 ~~$458~~$615 million as of ~~September 30, 2021.~~March 31, 2022.

Investment funds consisted of the following:


		Carrying Value as of				Income (Loss) from Investment Funds					Carrying Value as of				Income (Loss) from Investment Funds
		September 30,		December 31,		For the Nine Months Ended September 30,					March 31,		December 31,		For the Three Months Ended March 31,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Financial services	Financial services	408,630		$	434,437	$	83,455	$	3,303	Financial services	$	454,701	$	431,818	$	25,932	$	17,142
Transportation	Transportation	340,721		190,125		31,805		(3,521)		Transportation	341,022		336,688		11,179		6,228
Real Estate	Real Estate	263,079		310,783		18,497		2,140		Real Estate	283,897		273,690		16,364		4,434
Energy	Energy	150,414		140,935		14,065		(13,689)		Energy	136,401		150,224		(892)		3,320
Other funds	Other funds	238,088		233,150		21,716		13,027		Other funds	329,627		288,192		(569)		7,811
Total	Total	$	1,400,932	$	1,309,430	$	169,538	$	1,260	Total	$	1,545,648	$	1,480,612	$	52,014	$	38,935

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

Financial services investment funds include the Company’s minority investment in Lifson Re, a Bermuda reinsurance company. Effective January 1, 2021, Lifson Re participates on a fully collateralized basis in a majority of the Company’s reinsurance placements for a 22.5% share of placed amounts. This pertains to all traditional reinsurance/retrocessional placements for both property and casualty business where there is more than one open market reinsurer participating. For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, the Company has ceded approximately ~~$182~~$89 million and $53 million, respectively, of written premiums to Lifson Re.

Other funds include deferred compensation trust assets of $32 million and $34 million as of March 31, 2022 and December 31, 2021, respectively. These assets support other liabilities reflected in the balance sheet of an equal amount for employees who have elected to defer a portion of their compensation. The change in the net asset value of the trust is recorded in other funds within net investment income with an offsetting equal amount within corporate expenses.

~~(11)~~(12) Real Estate

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


		Carrying Value					Carrying Value
		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Properties in operation	Properties in operation	$	1,617,524	$	1,738,144	Properties in operation	$	1,052,198	$	1,626,826
Properties under development	Properties under development	224,876		222,770		Properties under development	223,959		225,682
Total	Total	$	1,842,400	$	1,960,914	Total	$	1,276,157	$	1,852,508

As of ~~September 30, 2021,~~March 31, 2022, properties in operation included a long-term ground lease in Washington, D.C., an office complex in New York City ~~an office building in London, U.K.,~~ and the completed portion of a mixed-use project in Washington D.C. Properties in operation are net of accumulated depreciation and amortization of ~~$68,026,000~~$32,031,000 and ~~$86,970,000~~$57,391,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Related depreciation expense was ~~$14,412,000~~$4,788,000 and ~~$19,818,000~~$4,890,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Future minimum rental income expected on operating leases relating to properties in operation is ~~$14,397,620 in 2021, $59,304,963~~

$24,004,686 in 2022, ~~$53,608,253~~$30,750,724 in 2023, ~~$52,738,386~~$30,466,934 in 2024, ~~$50,218,665~~$27,802,134 in 2025, ~~$47,171,116~~$25,807,966 in 2026, $24,984,457 in 2027 and ~~$596,395,513~~$476,939,991 thereafter.

During the ~~second~~first quarter of ~~2021,~~2022, the Company sold ~~2 office buildings~~a real estate investment in ~~Palm Beach and West Palm Beach, Florida. One of these sales also resulted in a $102 million reduction of the Company's non-recourse debt that was supporting the property.~~London.

A mixed-use project in Washington, D.C. has been under development in ~~2021~~2022 and ~~2020,~~2021, with the completed portion reported in properties in operation as of ~~September 30, 2021.~~March 31, 2022.

~~(12)~~(13) Loans Receivable

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, loans receivable were as follows:


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	March 31, 2022		December 31, 2021
Amortized cost (net of allowance for expected credit losses):	Amortized cost (net of allowance for expected credit losses):					Amortized cost (net of allowance for expected credit losses):
Real estate loans	Real estate loans	$	89,635	$	51,910	Real estate loans	$	89,213	$	89,431
Commercial loans	Commercial loans	25,860		33,003		Commercial loans	25,884		25,741
Total	Total	$	115,495	$	84,913	Total	$	115,097	$	115,172

Fair value:	Fair value:					Fair value:
Real estate loans	Real estate loans	$	91,064	$	53,593	Real estate loans	$	89,672	$	90,793
Commercial loans	Commercial loans	25,859		33,003		Commercial loans	25,884		25,741
Total	Total	$	116,923	$	86,596	Total	$	115,556	$	116,534

The real estate loans are secured by commercial and residential real estate primarily located in New York. These loans generally earn interest at fixed or stepped interest rates and have maturities through 2026. 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.

Loans receivable in non-accrual status were ~~both~~NaN and $0.2 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

~~The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the nine months ended September 30,~~ 2021, ~~and 2020:~~

2021 2020
(In thousands) Real Estate Loans Commercial Loans Total Real Estate Loans Commercial Loans Total
Allowance for expected credit losses, beginning of period $ 1,683 $ 3,754 $ 5,437 $ 1,502 $ 644 $ 2,146
Cumulative effect adjustment resulting from changes in accounting principles — — — (905) 548 (357)
Provision for expected credit losses (254) (3,446) (3,700) 1,162 2,892 4,054
Allowance for expected credit losses, end of period $ 1,429 $ 308 $ 1,737 $ 1,759 $ 4,084 $ 5,843

~~During the nine months ended September 30, 2021, the Company reduced the allowance primarily due to the disposal of certain loans.~~respectively.

The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		2021						2020							2022						2021
(In thousands)	(In thousands)	Real Estate Loans		Commercial Loans		Total		Real Estate Loans		Commercial Loans		Total		(In thousands)	Real Estate Loans		Commercial Loans		Total		Real Estate Loans		Commercial Loans		Total
Allowance for expected credit losses, beginning of period	Allowance for expected credit losses, beginning of period	$	1,501	$	469	$	1,970	$	4,318	$	4,401	$	8,719	Allowance for expected credit losses, beginning of period	$	1,362	$	356	$	1,718	$	1,683	$	3,754	$	5,437

Provision for expected credit losses	Provision for expected credit losses	(72)		(161)		(233)		(2,559)		(317)		(2,876)		Provision for expected credit losses	(67)		(222)		(289)		(75)		(1,164)		(1,239)
Allowance for expected credit losses, end of period	Allowance for expected credit losses, end of period	$	1,429	$	308	$	1,737	$	1,759	$	4,084	$	5,843	Allowance for expected credit losses, end of period	$	1,295	$	134	$	1,429	$	1,608	$	2,590	$	4,198

During the three months ended March 31, 2022, the Company reduced the allowance primarily due to the decrease in the duration of the loan portfolio.

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.

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.

1514

~~(13)~~(14) Net Investment Gains (Losses)

Net investment gains (losses) were as follows:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021
Net investment gains (losses):	Net investment gains (losses):									Net investment gains (losses):
Fixed maturity securities:	Fixed maturity securities:									Fixed maturity securities:
Gains	Gains	$	2,943	$	3,811	$	16,623	$	23,586	Gains	$	1,705	$	8,240
Losses	Losses	(1,124)		(39,162)		(5,431)		(53,243)		Losses	(2,984)		(2,071)
Equity securities (1):	Equity securities (1):									Equity securities (1):
Net realized gains on investment sales	Net realized gains on investment sales	2		(176)		14,830		5,551		Net realized gains on investment sales	905		8,572
Change in unrealized (losses) gains		(19,244)		30,693		(61,818)		(61,859)
Change in unrealized gains (losses)										Change in unrealized gains (losses)	93,213		(24,335)
Investment funds	Investment funds	2,526		203		49,897		31,299		Investment funds	(2,162)		47,671
Real estate(2)	Real estate(2)	33,364		3,841		95,765		(3,983)		Real estate(2)	286,192		12,909
Loans receivable	Loans receivable	—		—		(881)		—		Loans receivable	(32)		—
Other	Other	(1,280)		(6,982)		(19,578)		(30,755)		Other	(6,955)		773
Net realized and unrealized gains (losses) on investments in earnings before allowance for expected credit losses		17,187		(7,772)		89,407		(89,404)
Net realized and unrealized gains on investments in earnings before allowance for expected credit losses										Net realized and unrealized gains on investments in earnings before allowance for expected credit losses	369,882		51,759
Change in allowance for expected credit losses on investments:	Change in allowance for expected credit losses on investments:									Change in allowance for expected credit losses on investments:
Fixed maturity securities	Fixed maturity securities	2,081		43,874		(14,703)		33,147		Fixed maturity securities	(3,906)		(18,159)
Loans receivable	Loans receivable	233		2,876		3,700		(4,054)		Loans receivable	289		1,239
Change in allowance for expected credit losses on investments	Change in allowance for expected credit losses on investments	2,314		46,750		(11,003)		29,093		Change in allowance for expected credit losses on investments	(3,617)		(16,920)
Net investment gains (losses)		19,501		38,978		78,404		(60,311)
Net investment gains										Net investment gains	366,265		34,839
Income tax expense	Income tax expense	(4,266)		(8,855)		(15,417)		13,622		Income tax expense	(78,442)		(5,887)
After-tax net investment gains (losses)		$	15,235	$	30,123	$	62,987	$	(46,689)
After-tax net investment gains										After-tax net investment gains	$	287,823	$	28,952


Change in unrealized investment (losses) gains on available for sale securities:
Change in unrealized investment losses on available for sale securities:										Change in unrealized investment losses on available for sale securities:
Fixed maturity securities without allowance for expected credit losses	Fixed maturity securities without allowance for expected credit losses	$	(41,041)	$	46,164	$	(135,099)	$	89,363	Fixed maturity securities without allowance for expected credit losses	$	(540,263)	$	(122,568)
Fixed maturity securities with allowance for expected credit losses	Fixed maturity securities with allowance for expected credit losses	111		5,036		10,397		30,027		Fixed maturity securities with allowance for expected credit losses	293		10,355

Investment funds	Investment funds	(4,098)		(198)		(4,355)		(3,632)		Investment funds	469		(1,020)
Other	Other	(242)		(2,022)		(1,144)		(4,002)		Other	52		(502)
Total change in unrealized investment (losses) gains		(45,270)		48,980		(130,201)		111,756
Income tax benefit (expense)		9,674		(10,707)		27,747		(13,740)
Total change in unrealized investment losses										Total change in unrealized investment losses	(539,449)		(113,735)
Income tax benefit										Income tax benefit	115,904		23,605
Noncontrolling interests	Noncontrolling interests	—		(3)		(1)		(2)		Noncontrolling interests	(1)		—
After-tax change in unrealized investment (losses) gains of available for sale securities		$	(35,596)	$	38,270	$	(102,455)	$	98,014
After-tax change in unrealized investment losses of available for sale securities										After-tax change in unrealized investment losses of available for sale securities	$	(423,546)	$	(90,130)

______________________

(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 (losses) 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) During March 2022, the Company realized a gain on the sale of a real estate investment in London, U.K. of $251 million, net of transaction expenses and the foreign currency impact, including the reversal of the currency translation adjustment.

1615

~~(14)~~(15) Fixed Maturity Securities in an Unrealized Loss Position

The following tables summarize all fixed maturity securities in an unrealized loss position at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 by the length of time those securities have been continuously in an unrealized loss position:


		Less Than 12 Months				12 Months or Greater				Total					Less Than 12 Months				12 Months or Greater				Total
(In thousands)	(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2021
March 31, 2022														March 31, 2022
U.S. government and government agency	U.S. government and government agency	$	61,386	$	394	$	17,342	$	113	$	78,728	$	507	U.S. government and government agency	$	547,027	$	18,521	$	36,307	$	2,195	$	583,334	$	20,716
State and municipal	State and municipal	353,630		4,345		28,562		1,990		382,192		6,335		State and municipal	1,360,055		51,579		95,853		9,345		1,455,908		60,924
Mortgage-backed	Mortgage-backed	318,897		4,502		84,883		2,793		403,780		7,295		Mortgage-backed	1,069,979		49,408		140,480		15,001		1,210,459		64,409
Asset-backed	Asset-backed	3,373,100		12,389		105,823		1,812		3,478,923		14,201		Asset-backed	3,898,607		61,254		186,663		2,319		4,085,270		63,573
Corporate	Corporate	1,465,027		11,044		54,678		2,618		1,519,705		13,662		Corporate	3,805,020		148,708		381,306		31,823		4,186,326		180,531
Foreign government	Foreign government	371,164		7,249		47,331		27,362		418,495		34,611		Foreign government	809,004		29,721		211,576		34,092		1,020,580		63,813
Fixed maturity securities	Fixed maturity securities	$	5,943,204	$	39,923	$	338,619	$	36,688	$	6,281,823	$	76,611	Fixed maturity securities	$	11,489,692	$	359,191	$	1,052,185	$	94,775	$	12,541,877	$	453,966

December 31, 2020
December 31, 2021														December 31, 2021
U.S. government and government agency	U.S. government and government agency	$	47,649	$	347	$	17	$	—	$	47,666	$	347	U.S. government and government agency	$	487,712	$	4,026	$	17,021	$	268	$	504,733	$	4,294
State and municipal	State and municipal	147,754		1,165		20,528		904		168,282		2,069��		State and municipal	502,333		7,403		29,547		2,156		531,880		9,559
Mortgage-backed	Mortgage-backed	212,388		5,121		23,943		230		236,331		5,351		Mortgage-backed	558,751		6,900		106,130		4,762		664,881		11,662
Asset-backed	Asset-backed	1,389,133		6,563		656,877		26,934		2,046,010		33,497		Asset-backed	3,832,944		18,503		75,385		291		3,908,329		18,794
Corporate	Corporate	612,177		6,721		39,985		1,759		652,162		8,480		Corporate	2,582,860		29,322		51,095		3,088		2,633,955		32,410
Foreign government	Foreign government	143,729		22,871		6,218		21,577		149,947		44,448		Foreign government	758,975		15,793		82,057		31,701		841,032		47,494
Fixed maturity securities	Fixed maturity securities	$	2,552,830	$	42,788	$	747,568	$	51,404	$	3,300,398	$	94,192	Fixed maturity securities	$	8,723,575	$	81,947	$	361,235	$	42,266	$	9,084,810	$	124,213

Substantially all of the securities in an unrealized loss position are rated investment grade, except for the securities in the foreign government classification. A significant amount of the unrealized loss on foreign government securities is the result of changes in currency exchange rates.

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at ~~September 30, 2021~~March 31, 2022 is presented in the table below:


($ in thousands)	($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss		($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	Foreign government	31	$	119,141	$	32,048	Foreign government	37	$	132,306	$	30,753
Corporate	Corporate	13	49,623		1,879		Corporate	12	30,071		3,158
State and municipal	State and municipal	2	39,693		335		State and municipal	1	13,583		1,422
Mortgage-backed	Mortgage-backed	4	249		16		Mortgage-backed	7	1,785		48
Asset-backed	Asset-backed	1	94		3		Asset-backed	1	37		5
Total	Total	51	$	208,800	$	34,281	Total	58	$	177,782	$	35,386

For 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.

1716

~~(15)~~(16) 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.

1817

The following tables present the assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 by level:


(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3
September 30, 2021
March 31, 2022										March 31, 2022
Assets:	Assets:									Assets:
Fixed maturity securities available for sale:	Fixed maturity securities available for sale:									Fixed maturity securities available for sale:
U.S. government and government agency	U.S. government and government agency	$	518,333	$	—	$	518,333	$	—	U.S. government and government agency	$	818,848	$	—	$	818,848	$	—
State and municipal	State and municipal	3,329,345		—		3,329,345		—		State and municipal	3,055,874		—		3,055,874		—
Mortgage-backed	Mortgage-backed	973,337		—		973,337		—		Mortgage-backed	1,384,736		—		1,384,736		—
Asset-backed	Asset-backed	4,655,555		—		4,655,555		—		Asset-backed	4,257,421		—		4,257,421		—
Corporate	Corporate	5,424,064		—		5,424,064		—		Corporate	5,588,507		—		5,588,507		—
Foreign government	Foreign government	1,098,727		—		1,098,727		—		Foreign government	1,246,568		—		1,246,568		—
Total fixed maturity securities available for sale	Total fixed maturity securities available for sale	15,999,361		—		15,999,361		—		Total fixed maturity securities available for sale	16,351,954		—		16,351,954		—
Equity securities:	Equity securities:									Equity securities:
Common stocks	Common stocks	609,939		600,672		—		9,267		Common stocks	883,317		877,387		1,230		4,700
Preferred stocks	Preferred stocks	208,799		—		199,466		9,333		Preferred stocks	243,174		—		231,203		11,971
Total equity securities	Total equity securities	818,738		600,672		199,466		18,600		Total equity securities	1,126,491		877,387		232,433		16,671
Arbitrage trading account	Arbitrage trading account	860,339		837,237		23,102		—		Arbitrage trading account	1,188,910		1,186,353		2,557		—
Total	Total	$	17,678,438	$	1,437,909	$	16,221,929	$	18,600	Total	$	18,667,355	$	2,063,740	$	16,586,944	$	16,671
Liabilities:	Liabilities:									Liabilities:
Trading account securities sold but not yet purchased	Trading account securities sold but not yet purchased	$	739	$	739	$	—	$	—	Trading account securities sold but not yet purchased	$	241	$	241	$	—	$	—

December 31, 2020
December 31, 2021										December 31, 2021
Assets:	Assets:									Assets:
Fixed maturity securities available for sale:	Fixed maturity securities available for sale:									Fixed maturity securities available for sale:
U.S. government and government agency	U.S. government and government agency	$	603,871	$	—	$	603,871	$	—	U.S. government and government agency	$	855,343	$	—	$	855,343	$	—
State and municipal	State and municipal	3,620,664		—		3,620,664		—		State and municipal	3,304,133		—		3,304,133		—
Mortgage-backed	Mortgage-backed	1,020,330		—		1,020,330		—		Mortgage-backed	1,068,075		—		1,068,075		—
Asset-backed	Asset-backed	3,194,586		—		3,194,586		—		Asset-backed	4,490,565		—		4,490,565		—
Corporate	Corporate	4,671,581		—		4,670,581		1,000		Corporate	5,595,675		—		5,595,675		—
Foreign government	Foreign government	975,563		—		975,563		—		Foreign government	1,214,901		—		1,214,901		—
Total fixed maturity securities available for sale	Total fixed maturity securities available for sale	14,086,595		—		14,085,595		1,000		Total fixed maturity securities available for sale	16,528,692		—		16,528,692		—
Equity securities:	Equity securities:									Equity securities:
Common stocks	Common stocks	350,181		340,966		—		9,215		Common stocks	695,403		684,470		1,639		9,294
Preferred stocks	Preferred stocks	275,486		—		266,155		9,331		Preferred stocks	245,840		—		234,544		11,296
Total equity securities	Total equity securities	625,667		340,966		266,155		18,546		Total equity securities	941,243		684,470		236,183		20,590
Arbitrage trading account	Arbitrage trading account	341,473		298,359		43,114		—		Arbitrage trading account	1,179,606		1,153,079		26,527		—
Total	Total	$	15,053,735	$	639,325	$	14,394,864	$	19,546	Total	$	18,649,541	$	1,837,549	$	16,791,402	$	20,590
Liabilities:	Liabilities:									Liabilities:
Trading account securities sold but not yet purchased	Trading account securities sold but not yet purchased	$	10,048	$	10,048	$	—	$	—	Trading account securities sold but not yet purchased	$	1,169	$	1,137	$	32	$	—

1918

The following tables summarize changes in Level 3 assets and liabilities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and for the year ended December 31, ~~2020:~~2021:


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

Three Months Ended March 31, 2022																									Three Months Ended March 31, 2022
Assets:																				Assets:

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

Nine Months Ended September 30, 2021

Equity securities:																				Equity securities:
Common stocks																				Common stocks	$	9,294	$	(4,594)		$	—	$	—	$	—	$	—	$	—	$	—	$	4,700
Preferred stocks																				Preferred stocks	11,296		—			—		—		675		—		—		—		11,971
Total																				Total	20,590		(4,594)			—		—		675		—		—		—		16,671
Arbitrage trading account																				Arbitrage trading account	—		—			—		—		—		—		—		—		—
Total																				Total	$	20,590	$	(4,594)		$	—	$	—	$	675	$	—	$	—	$	—	$	16,671

Liabilities:																				Liabilities:
Trading account securities sold but not yet purchased																				Trading account securities sold but not yet purchased	$	—	$	(1)		$	—	$	—	$	—	$	—	$	—	$	1	$	—
Year Ended December 31, 2021																				Year Ended December 31, 2021
Assets:	Assets:																			Assets:
Fixed maturities securities available for sale:	Fixed maturities securities available for sale:																			Fixed maturities securities available for sale:
Asset-backed securities		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Corporate	Corporate	$	1,000	$	—	$	—	$	—	$	—	$	(1,000)	$	—	$	—	$	—	Corporate	$	1,000	$	—		$	—	$	—	$	—	$	(1,000)	$	—	$	—	$	—
Total	Total	1,000		—		—		—		—		(1,000)		—		—		—		Total	1,000		—			—		—		—		(1,000)		—		—		—
Equity securities:	Equity securities:																			Equity securities:
Common stocks	Common stocks	$	9,215	$	613	$	—	$	—	$	—	$	(561)	$	—	$	—	$	9,267	Common stocks	9,215		640			—		—		—		(561)		—		—		9,294
Preferred stocks	Preferred stocks	9,331		2		—		—		—		—		—		—		9,333		Preferred stocks	9,331		(35)			—		—		2,000		—		—		—		11,296
Total	Total	18,546		615		—		—		—		(561)		—		—		18,600		Total	18,546		605			—		—		2,000		(561)		—		—		20,590
Arbitrage trading account	Arbitrage trading account	—		8		—		—		—		(8)		—		—		—		Arbitrage trading account	—		8			—		—		—		(8)		—		—		—
Total	Total	$	19,546	$	623	$	—	$	—	$	—	$	(1,569)	$	—	$	—	$	18,600	Total	$	19,546	$	613		$	—	$	—	$	2,000	$	(1,569)	$	—	$	—	$	20,590

Year Ended December 31, 2020
Assets:
Fixed maturities securities available for sale:
Asset-backed securities		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Corporate		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,000	$	1,000
Total		—		—		—		—		—		—		—		1,000		1,000
Equity securities:
Common stocks		9,053		1,228		—		—		—		(1,066)		—		—		9,215
Preferred stocks		6,505		(174)		—		—		3,000		—		—		—		9,331
Total		15,558		1,054		—		—		3,000		(1,066)		—		—		18,546
Arbitrage trading account		—		19		—		—		—		(19)		—		—		—
Total		$	15,558	$	1,073	$	—	$	—	$	3,000	$	(1,085)	$	—	$	1,000	$	19,546

Liabilities:																				Liabilities:
Trading account securities sold but not yet purchased																				Trading account securities sold but not yet purchased	$	—	$	1		$	—	$	—	$	(1)	$	—	$	—	$	—	$	—

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022, there was 1 security transferred into Level 3. For the year ended December 31, 2021, there were no securities transferred into or out of Level 3. ~~For the year ended December 31, 2020, a fixed maturity security was transferred from Level 2 into Level 3 as a result of observable valuation inputs no longer being available.~~

2019

~~(16)~~(17) 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 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.

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.

2120

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


		September 30,					March 31,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Net reserves at beginning of period	Net reserves at beginning of period	$	11,620,393	$	10,697,998	Net reserves at beginning of period	$	12,848,362	$	11,620,393
Cumulative effect adjustment resulting from changes in accounting principles		—		5,927
Restated net reserves at beginning of period		11,620,393		10,703,925

Net provision for losses and loss expenses:	Net provision for losses and loss expenses:					Net provision for losses and loss expenses:
Claims occurring during the current year (1)	Claims occurring during the current year (1)	3,598,969		3,328,827		Claims occurring during the current year (1)	1,327,695		1,115,173
Increase in estimates for claims occurring in prior years (2) (3)		1,552		849
Increase (decrease) in estimates for claims occurring in prior years (2) (3)						Increase (decrease) in estimates for claims occurring in prior years (2) (3)	3,761		(859)
Loss reserve discount accretion	Loss reserve discount accretion	23,109		27,335		Loss reserve discount accretion	7,796		7,278
Total	Total	3,623,630		3,357,011		Total	1,339,252		1,121,592
Net payments for claims:	Net payments for claims:					Net payments for claims:
Current year	Current year	547,082		570,924		Current year	84,598		97,586
Prior years	Prior years	2,161,877		2,077,945		Prior years	933,656		794,472
Total	Total	2,708,959		2,648,869		Total	1,018,254		892,058
Foreign currency translation	Foreign currency translation	(53,935)		(21,003)		Foreign currency translation	9,983		(14,779)
Net reserves at end of period	Net reserves at end of period	12,481,129		11,391,064		Net reserves at end of period	13,179,343		11,835,148
Ceded reserves at end of period	Ceded reserves at end of period	2,438,447		2,068,295		Ceded reserves at end of period	2,543,546		2,245,380
Gross reserves at end of period	Gross reserves at end of period	$	14,919,576	$	13,459,359	Gross reserves at end of period	$	15,722,889	$	14,080,528

(1) Claims occurring during the current year are net of loss reserve discounts of ~~$16~~$7 million and $8$5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

(2) The 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 decreased by ~~$13~~$4 million and ~~$19~~$5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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 $5$1 million and ~~$12~~$3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

The COVID-19 global pandemic has impacted, and may further impact, the Company’s results through its effect on claim frequency and severity. Loss cost trends have been impacted and may be further impacted by COVID-19-related claims in certain lines of business. Losses incurred from COVID-19-related claims have been offset, to a certain extent, by lower claim frequency in certain lines of our businesses; however, as the economy and legal systems have reopened, the benefit of lower claim frequency has ~~begun~~continued to abate. Although as populations ~~have continued~~continue to be vaccinated against the virus and the effects of the pandemic have receded in many jurisdictions, most particularly the United States, it remains too early to determine the ultimate net impact of COVID-19 on the Company. New variants of the COVID-19 virus, including the ~~“Delta”~~“Omicron” variant, ~~and the slowing of vaccination rates among certain populations~~ continue to create risks with respect to loss costs and the potential for renewed impact of the other effects of COVID-19 associated with economic conditions, inflation, and social distancing and work from home rules.

Most of the COVID-19-related claims reported to the Company to date involve certain short-tailed lines of business, including contingency and event cancellation, business interruption, and film production delay. The Company has also received COVID-19-related claims for longer-tailed casualty lines of business such as workers’ compensation and other liability; however, the estimated incurred loss impact for these reported claims are not material at this time. Given the continuing uncertainty regarding the pandemic's pervasiveness, the future impact that the pandemic may have on claim frequency and severity remains uncertain at this time.

The Company has estimated the potential COVID-19 impact to its contingency and event cancellation, workers’ compensation, and other lines of business under a number of possible scenarios; however, due to COVID-19’s continued evolving impact, there remains a high degree of uncertainty around the Company’s COVID-19 reserves. In addition, should the pandemic continue or worsen as a result of new COVID-19 variants or otherwise, governments in the jurisdictions where we operate may renew their efforts to expand policy coverage terms beyond the policy’s intended coverage. Accordingly, losses arising from these actions, and the other factors described above, could exceed the Company’s reserves established for those related policies.

the Reinsurance & Monoline Excess segment. Such ~~$256~~$290 million of COVID-19-related losses included ~~$219~~$268 million of reported losses and ~~$37~~$22 million of IBNR. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company recognized current accident year losses for COVID-19-related claims activity, net of reinsurance, of approximately ~~$46~~$1 million, of which ~~$43 million~~ relates to the Insurance segment.

During the three months ended March 31, 2022, favorable prior year development (net of additional and return premiums) of $1 million included $6 million of favorable development for the Insurance segment, ~~and $3~~largely offset by $5 million ~~relates to~~of adverse development for the Reinsurance & Monoline Excess segment.

The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2021 accident year, largely offset by adverse development on the 2015 through 2019 accident years. The favorable development on the 2021 accident year was concentrated in the commercial auto liability, other liability and accident and health (employer stop loss) lines of business. The Company continued to experience lower reported claim frequency in commercial auto and other liability in 2021 relative to historical averages, and lower reported incurred losses relative to our expectations. These trends began in 2020, and were likely caused by the impacts of the COVID-19 pandemic, including, for example, lockdowns, reduced driving/traffic, significant work from home, court closures, and similar reduced activities and travel. While reported claim frequency in these lines increased in 2021 relative to 2020, it remained below the historical levels pre- the start of the COVID-19 pandemic. Due to the ongoing uncertainty regarding the ultimate impacts of the COVID-19 pandemic on accident year 2021 incurred losses, the Company remains cautious in factoring in these trends in setting its initial loss ratio picks for this year. As accident year 2021 has begun to mature, we have recognized some of the favorable reported experience in our ultimate loss picks made as of March 31, 2022. The adverse development on the 2015 through 2019 accident years is concentrated in the other liability line of business, and to a lesser degree professional liability and commercial auto liability. The development is driven by a larger than expected number of large losses reported. The large losses particularly impacted the excess and surplus lines casualty classes of business.

The overall adverse development for the Reinsurance & Monoline Excess segment was driven mainly by adverse development in the non-proportional reinsurance assumed liability and professional liability lines of business, largely offset by favorable development in excess workers' compensation. Both the adverse and favorable development was spread across many prior accident years. The adverse development was associated primarily with our U.S. assumed reinsurance business, and related to accounts insuring construction projects and professional liability exposures. The favorable excess workers' compensation development was driven by continued lower claim frequency and reported losses relative to our expectations and to favorable claim settlements.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, favorable prior year development (net of additional and return premiums) of $5$3 million included $8$6 million of favorable development for the Insurance segment, partially offset by $3 million of adverse development for the Reinsurance & Monoline Excess segment.

The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2020 accident year, partially offset by adverse development on the 2016 through ~~2019~~2018 accident years. The favorable development on the 2020 accident year was largely concentrated in the commercial auto liability and other liability lines of ~~business including commercial multi-peril liability.~~business. During 2020, the Company achieved larger rate increases in these lines of business than were contemplated in ~~our~~its budget and ~~in our~~ initial loss ratio selections. The Company also experienced significantly lower reported claim frequency in these lines in 2020 relative to historical averages, and lower reported incurred losses relative to our expectations. We believe that the lower claim frequency and lower reported incurred losses were caused by the impacts of the COVID-19 pandemic, including for example, lockdowns, reduced driving and traffic, work from home, ~~and~~ court ~~closures. However,~~closures, etc.; however, due to the ongoing uncertainty regarding the ultimate impacts of the pandemic on accident year 2020 incurred losses, the Company ~~elected~~did not ~~to react to~~adjust its reserves based on these lower ~~reported~~ trends during 2020. As ~~more information becomes available and the 2020 accident year continues to mature, during~~of March 31, 2021, we ~~have started~~began to recognize some of the favorable accident year 2020 ~~development~~experience in ~~response to the continuing favorable reported~~certain lines in our ultimate loss ~~experience relative to our expectations.~~picks. The adverse development on the 2016 through ~~2019~~2018 accident years is concentrated ~~largely~~ in the other liability line of business, ~~including commercial multi-peril liability, but is also seen to a lesser extent in commercial auto liability. The adverse development on these years~~and is driven by a higher than expected number of large losses ~~reported, and~~reported. The large losses particularly impacted ~~the~~ directors and officers liability and excess and surplus lines casualty classes of business. ~~We also believe that increased social inflation is contributing to the increased number of large losses.~~

~~The overall adverse~~Prior year reserve development for the Reinsurance & Monoline Excess segment was ~~driven by~~less significant during the first quarter of 2021, and consisted of small adverse or favorable movements across many lines of business, which largely offset each other. The largest contributor to the slight overall adverse development infor the ~~other liability and~~segment was non-proportional reinsurance assumed ~~liability lines of~~property business, ~~related primarily to accident years 2017 through 2019, partially offset by favorable development in excess workers’ compensation~~ which was ~~spread across many prior accident years. The adverse development was driven~~impacted by higher than expected reported losses on ~~excess of loss~~property per risk treaties written in the U.S. and U.K.

During the nine months ended September 30, 2020, favorable prior year development (net of additional and return premiums) of $12 million included $19 million of favorable development for the Insurance segment, partially offset by $7 million of adverse development for the Reinsurance & Monoline Excess segment.

~~The overall favorable development for the Insurance segment was primarily attributable~~ related to favorable development on workers’ compensation business, partially offset by adverse development on professional liability business. The favorable workers’ compensation development was spread across many prior accident years, including prior to 2010, but was especially significant in accident year 2019. The favorable workers’ compensation development reflects a continuation of the benign loss cost trends experienced during recent years, particularly the favorable claim frequency trends. Our ongoing workers’ compensation claims management efforts, including active medical case management and use of networks and specialty vendors to control medical and pharmaceutical benefit costs, have also added to the favorable workers’ compensation prior year development. The adverse professional liability development was mainly concentrated in accident years 2016 through 2018 and was largely driven by higher than expected large losses being reported in the directors and officers and lawyers professional liability lines of business.

The adverse development for the Reinsurance & Monoline Excess segment was mainly driven by non-proportional reinsurance assumed liability business written in the U.K. for accident years 2016 through 2018, partially offset by favorable development on excess workers’ compensation business. The adverse development was driven by a greater than expected number of reported large losses.2020.

2322

~~(17)~~(18) Fair Value of Financial Instruments

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


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(In thousands)	(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value		(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:	Assets:									Assets:
Fixed maturity securities	Fixed maturity securities	$	16,073,135	$	16,084,457	$	14,159,369	$	14,173,629	Fixed maturity securities	$	16,426,196	$	16,433,614	$	16,602,673	$	16,614,118
Equity securities	Equity securities	818,738		818,738		625,667		625,667		Equity securities	1,126,491		1,126,491		941,243		941,243
Arbitrage trading account	Arbitrage trading account	860,339		860,339		341,473		341,473		Arbitrage trading account	1,188,910		1,188,910		1,179,606		1,179,606
Loans receivable	Loans receivable	115,495		116,923		84,913		86,596		Loans receivable	115,097		115,556		115,172		116,534
Cash and cash equivalents	Cash and cash equivalents	2,069,029		2,069,029		2,372,366		2,372,366		Cash and cash equivalents	2,114,841		2,114,841		1,568,843		1,568,843
Trading account receivables from brokers and clearing organizations		221,165		221,165		524,727		524,727

Due from broker	Due from broker	—		—		2,585		2,585		Due from broker	—		—		20,448		20,448
Liabilities:	Liabilities:									Liabilities:
Due to broker	Due to broker	107,435		107,435		—		—		Due to broker	77,601		77,601		—		—
Trading account payable to brokers and clearing organizations										Trading account payable to brokers and clearing organizations	56,652		56,652		53,636		53,636
Trading account securities sold but not yet purchased	Trading account securities sold but not yet purchased	739		739		10,048		10,048		Trading account securities sold but not yet purchased	241		241		1,169		1,169
Senior notes and other debt	Senior notes and other debt	2,258,646		2,502,912		1,623,025		1,892,444		Senior notes and other debt	1,834,155		1,788,992		2,259,416		2,526,630
Subordinated debentures	Subordinated debentures	1,007,472		1,104,166		1,102,309		1,202,842		Subordinated debentures	1,007,832		957,670		1,007,652		1,095,600

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)~~

(19) Premiums and Reinsurance Related Information

The following is a summary of insurance and reinsurance financial information:


		For the Three Months Ended September 30,					For the Nine Months Ended September 30,							For the Three Months Ended March 31,

(In thousands)	(In thousands)					2021			2020			2021				2020	(In thousands)		2022	2021
Written premiums:	Written premiums:												Written premiums:
Direct	Direct	$	2,490,875	$	2,018,530		$	7,063,151		$	5,875,379		Direct	$	2,542,336		$	2,177,162
Assumed	Assumed	296,623		244,015			870,295			750,784			Assumed	317,500			307,550
Ceded	Ceded	(462,360)		(383,229)			(1,346,089)			(1,161,183)			Ceded	(446,582)			(434,674)
Total net premiums written	Total net premiums written	$	2,325,138	$	1,879,316		$	6,587,357		$	5,464,980		Total net premiums written	$	2,413,254		$	2,050,038

Earned premiums:	Earned premiums:												Earned premiums:
Direct	Direct	$	2,276,173	$	1,877,234		$	6,430,957		$	5,511,791		Direct	$	2,404,597		$	2,003,045
Assumed	Assumed	273,808		237,815			792,515			699,025			Assumed	292,373			259,541
Ceded	Ceded	(468,963)		(366,128)			(1,320,874)			(1,093,563)			Ceded	(447,883)			(412,630)
Total net premiums earned	Total net premiums earned	$	2,081,018	$	1,748,921		$	5,902,598		$	5,117,253		Total net premiums earned	$	2,249,087		$	1,849,956

Ceded losses and loss expenses incurred	Ceded losses and loss expenses incurred	$	318,283	$	209,706		$	872,186		$	677,761		Ceded losses and loss expenses incurred	$	243,294		$	298,740
Ceded commissions earned	Ceded commissions earned	$	113,523	$	89,104		$	322,037		$	255,742		Ceded commissions earned	$	117,445		$	101,680

2423

The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the ~~nine months ended September 30, 2021 and 2020:~~
(In thousands) 2021 2020
Allowance for expected credit losses, beginning of period $ 22,883 $ 19,823
Cumulative effect adjustment resulting from changes in accounting principles — 1,270
Provision for expected credit losses 793 1,940
Allowance for expected credit losses, end of period $ 23,676 $ 23,033

~~The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Allowance for expected credit losses, beginning of period	Allowance for expected credit losses, beginning of period	$	24,808	$	22,106	Allowance for expected credit losses, beginning of period	$	25,218	$	22,883

Provision for expected credit losses	Provision for expected credit losses	(1,132)		927		Provision for expected credit losses	3,018		1,381
Allowance for expected credit losses, end of period	Allowance for expected credit losses, end of period	$	23,676	$	23,033	Allowance for expected credit losses, end of period	$	28,236	$	24,264

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 an allowance for expected credit losses.

The following table presents the rollforward of the allowance for expected credit losses associated with due from reinsurers for the ~~nine months ended September 30, 2021 and 2020:~~
(In thousands) 2021 2020
Allowance for expected credit losses, beginning of period $ 7,801 $ 690
Cumulative effect adjustment resulting from changes in accounting principles — 5,927
Provision for expected credit losses (524) 1,124
Allowance for expected credit losses, end of period $ 7,277 $ 7,741

~~The following table presents the rollforward of the allowance for expected credit losses associated with due from reinsurers for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Allowance for expected credit losses, beginning of period	Allowance for expected credit losses, beginning of period	$	7,283	$	7,175	Allowance for expected credit losses, beginning of period	$	7,713	$	7,801

Provision for expected credit losses	Provision for expected credit losses	(6)		566		Provision for expected credit losses	(58)		(428)
Allowance for expected credit losses, end of period	Allowance for expected credit losses, end of period	$	7,277	$	7,741	Allowance for expected credit losses, end of period	$	7,655	$	7,373

~~(19)~~(20) 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 ~~$34~~$11 million and ~~$35~~$12 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ respectively. A summary of RSUs issued in the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ follows:


($ in thousands)	($ in thousands)	Units	Fair Value		($ in thousands)	Units	Fair Value

2022					2022	1,660	$	150
2021	2021	847,119	$	62,981	2021	885	$	40
2020		953,519	$	59,683

~~(20)~~(21) 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)~~(22) Leases

Lessees are required 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 September 30,						For the Nine Months Ended September 30,							For the Three Months Ended March 31,

(In thousands)	(In thousands)			2021			2020			2021			2020		(In thousands)		2022			2021
Leases:	Leases:													Leases:
Lease cost	Lease cost	$	11,741		$	11,016		$	34,434		$	33,130		Lease cost	$	10,198		$	11,264
Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows	Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows	$	11,212		$	11,560		$	34,509		$	33,869		Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows	$	10,993		$	11,377
Right-of-use assets obtained in exchange for new lease liabilities	Right-of-use assets obtained in exchange for new lease liabilities	$	31,249		$	1,344		$	31,098		$	5,639		Right-of-use assets obtained in exchange for new lease liabilities	$	17,269		$	30


		As of September 30,							As of March 31,
($ in thousands)	($ in thousands)	2021			2020			($ in thousands)	2022			2021
Right-of-use assets	Right-of-use assets	$	170,729		$	172,473		Right-of-use assets	$	180,424		$	156,942
Lease liabilities	Lease liabilities	$	207,636		$	211,808		Lease liabilities	$	217,086		$	195,590
Weighted-average remaining lease term	Weighted-average remaining lease term	7.3 years			6.7 years			Weighted-average remaining lease term	7.3 years			6.7 years
Weighted-average discount rate	Weighted-average discount rate	4.96		%	5.93		%	Weighted-average discount rate	4.58		%	5.94		%

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


(In thousands)	(In thousands)	September 30, 2021		(In thousands)	March 31, 2022
Contractual Maturities:	Contractual Maturities:			Contractual Maturities:
2021		$	11,387
2022	2022	42,708		2022	$	34,336
2023	2023	41,574		2023	45,618
2024	2024	35,935		2024	39,676
2025	2025	26,941		2025	29,793
2026				2026	23,150
Thereafter	Thereafter	86,940		Thereafter	77,609
Total undiscounted future minimum lease payments	Total undiscounted future minimum lease payments	245,485		Total undiscounted future minimum lease payments	250,182
Less: Discount impact	Less: Discount impact	(37,849)		Less: Discount impact	33,096
Total lease liability	Total lease liability	$	207,636	Total lease liability	$	217,086

2625

~~(22)~~(23) Business Segments

The Company’s reportable segments include the following 2 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 & 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 operations that solely retain risk on an excess basis.

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)	(In thousands)	Earned Premiums (1)		Investment Income		Other		Total (2)		Pre-Tax Income (Loss)		Net Income (Loss) to Common Stockholders		(In thousands)	Earned Premiums (1)		Investment Income		Other		Total (2)		Pre-Tax Income (Loss)		Net Income (Loss) to Common Stockholders
Three months ended September 30, 2021
Three months ended March 31, 2022														Three months ended March 31, 2022
Insurance	Insurance	$	1,819,071	$	118,770	$	7,289	$	1,945,130	$	314,000	$	252,333	Insurance	$	1,962,835	$	137,654	$	8,676	$	2,109,165	$	382,412	$	315,552
Reinsurance & Monoline Excess	Reinsurance & Monoline Excess	261,947		48,504		—		310,451		52,742		41,964		Reinsurance & Monoline Excess	286,252		27,423		—		313,675		57,628		47,080
Corporate, other and eliminations (3)	Corporate, other and eliminations (3)	—		12,577		136,624		149,201		(53,962)		(48,235)		Corporate, other and eliminations (3)	—		8,435		117,869		126,304		(73,872)		(59,817)
Net investment gains	Net investment gains	—		—		19,501		19,501		19,501		15,235		Net investment gains	—		—		366,265		366,265		366,265		287,823
Total	Total	$	2,081,018	$	179,851	$	163,414	$	2,424,283	$	332,281	$	261,297	Total	$	2,249,087	$	173,512	$	492,810	$	2,915,409	$	732,433	$	590,638
Three months ended September 30, 2020
Three months ended March 31, 2021														Three months ended March 31, 2021
Insurance	Insurance	$	1,531,093	$	87,828	$	9,463	$	1,628,384	$	178,971	$	130,266	Insurance	$	1,604,979	$	105,237	$	8,279	$	1,718,495	$	257,109	$	198,708
Reinsurance & Monoline Excess	Reinsurance & Monoline Excess	217,828		40,306		—		258,134		61,532		49,070		Reinsurance & Monoline Excess	244,977		37,708		—		282,685		68,649		54,471
Corporate, other and eliminations (3)	Corporate, other and eliminations (3)	—		14,516		99,807		114,323		(73,067)		(57,781)		Corporate, other and eliminations (3)	—		15,632		105,218		120,850		(64,529)		(52,606)
Net investment gains	Net investment gains	—		—		38,978		38,978		38,978		30,123		Net investment gains	—		—		34,839		34,839		34,839		28,952
Total	Total	$	1,748,921	$	142,650	$	148,248	$	2,039,819	$	206,414	$	151,678	Total	$	1,849,956	$	158,577	$	148,336	$	2,156,869	$	296,068	$	229,525
Nine months ended September 30, 2021
Insurance		$	5,151,253	$	340,710	$	23,780	$	5,515,743	$	862,399	$	681,354
Reinsurance & Monoline Excess		751,345		133,092		—		884,437		196,185		155,770
Corporate, other and eliminations (3)		—		32,813		365,841		398,654		(208,699)		(172,051)
Net investment gains		—		—		78,404		78,404		78,404		62,987
Total		$	5,902,598	$	506,615	$	468,025	$	6,877,238	$	928,289	$	728,060
Nine months ended September 30, 2020
Insurance		$	4,481,092	$	255,392	$	25,953	$	4,762,437	$	431,464	$	315,733
Reinsurance & Monoline Excess		636,161		101,477		—		737,638		110,611		88,947
Corporate, other and eliminations (3)		—		45,975		300,715		346,690		(176,369)		(139,471)
Net investment losses		—		—		(60,311)		(60,311)		(60,311)		(46,689)
Total		$	5,117,253	$	402,844	$	266,357	$	5,786,454	$	305,395	$	218,520

_________________

(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 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$220~~$235 million and ~~$183 million, respectively, and for the nine months ended September 30, 2021 and 2020 were $638 million and $500~~$196 million, respectively. Revenues for Reinsurance & Monoline Excess from foreign countries for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$100~~$96 million and ~~$77 million, respectively, and for the nine months ended September 30, 2021 and 2020 were $278 million and $212~~$88 million, respectively.

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

Identifiable Assets


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	March 31, 2022		December 31, 2021
Insurance	Insurance	$	23,745,201	$	21,702,328	Insurance	$	25,057,202	$	24,403,918
Reinsurance & Monoline Excess	Reinsurance & Monoline Excess	4,857,288		4,654,158		Reinsurance & Monoline Excess	5,058,976		4,917,985
Corporate, other and eliminations	Corporate, other and eliminations	2,941,799		2,215,479		Corporate, other and eliminations	2,134,776		2,725,973
Consolidated	Consolidated	$	31,544,288	$	28,571,965	Consolidated	$	32,250,954	$	32,047,876

2826

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


		For the Three Months Ended September 30,					For the Nine Months Ended September 30,							For the Three Months Ended March 31,

(In thousands)	(In thousands)					2021			2020			2021				2020	(In thousands)		2022	2021
Insurance:	Insurance:												Insurance:
Other liability	Other liability	$	682,362	$	561,595		$	1,922,669		$	1,653,189		Other liability	$	754,456		$	611,404
Short-tail lines (1)	Short-tail lines (1)	347,835		326,019			1,012,465			917,466			Short-tail lines (1)	375,212			324,740
Workers' compensation	Workers' compensation	286,474		271,802			845,394			852,101			Workers' compensation	285,423			267,449
Commercial automobile	Commercial automobile	257,314		203,047			715,519			583,024			Commercial automobile	282,234			220,761
Professional liability	Professional liability	245,086		168,630			655,206			475,312			Professional liability	265,510			180,626
Total Insurance	Total Insurance	1,819,071		1,531,093			5,151,253			4,481,092			Total Insurance	1,962,835			1,604,979

Reinsurance & Monoline Excess:	Reinsurance & Monoline Excess:												Reinsurance & Monoline Excess:
Casualty reinsurance	Casualty reinsurance	164,095		130,186			466,264			383,375			Casualty reinsurance	184,122			149,638
Property reinsurance													Property reinsurance	50,234			49,466
Monoline excess (2)	Monoline excess (2)	52,361		43,577			146,481			126,800			Monoline excess (2)	51,896			45,873
Property reinsurance		45,491		44,065			138,600			125,986
Total Reinsurance & Monoline Excess	Total Reinsurance & Monoline Excess	261,947		217,828			751,345			636,161			Total Reinsurance & Monoline Excess	286,252			244,977

Total	Total	$	2,081,018	$	1,748,921		$	5,902,598		$	5,117,253		Total	$	2,249,087		$	1,849,956

______________

(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.

(24) Subsequent Event

On April 1, 2022, the Company entered into a senior unsecured revolving credit facility that provides for revolving, unsecured borrowings up to an aggregate of $300 million with a $50 million sublimit for letters of credit. The Company may increase the amount available under the facility to a maximum of $500 million subject to obtaining lender commitments for the increase and other customary conditions. Borrowings under the facility may be used for working capital and other general corporate purposes. All borrowings under the facility must be repaid by April 1, 2027, except that letters of credit outstanding on that date may remain outstanding until April 1, 2028 (or such later date approved by all lenders). Our ability to utilize the facility is conditioned on the satisfaction of representations, warranties and covenants that are customary for facilities of this type. As of the date of this report, there were no borrowings outstanding under the facility.

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 ~~2021~~2022 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 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, including claims for cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing COVID-19 pandemic; the impact of climate change, which may alter the frequency and increase the 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 2019; 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 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 ~~2021~~2022 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.

3028

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 & 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 capital 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 low levels for an extended period.

The Company also invests in equity securities, merger arbitrage securities, investment 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. The Company's share of the earnings or losses from investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated financial statements.

On February 25, 2022, the Company announced that its Board of Directors approved a 3-for-2 common stock split which was paid in the form of a stock dividend to holders of record as of March 9, 2022. The additional shares were issued on March 23, 2022. Shares outstanding and per share amounts in this Form 10-Q reflect such 3-for-2 common stock split.

On March 7, 2022, the Company sold a real estate investment consisting of an office building located in London for £718 million. The Company realized a pretax gain of $317 million in the first quarter of 2022, before transaction expenses and the impact of foreign currency, including the reversal of the currency translation adjustment. The gain was $251 million after such adjustments.

On April 1, 2022, the Company entered into a senior unsecured revolving credit facility that provides for revolving, unsecured borrowings up to an aggregate of $300 million. Borrowings under the facility may be used for working capital and other general corporate purposes and must be repaid by April 1, 2027. Our ability to utilize the facility is conditioned on the satisfaction of representations, warranties and covenants that are customary for facilities of this type. As of the date of this report, there were no borrowings outstanding under the facility.

The COVID-19 pandemic, including the related impact on the U.S. and global economies, ~~has~~continued to adversely ~~affected~~affect our results of operations. For the ~~nine~~three months ended ~~September 30, 2021,~~on March 31, 2022, the Company recorded approximately ~~$46~~$1 million for current accident year COVID-19-related losses, net of reinsurance. At the same time, COVID-19 has led to reduced loss frequency in certain lines of business (which has begun ato return to pre-pandemic levels as many economies and legal systems have reopened as a result of ~~populations becoming vaccinated)~~higher levels of vaccination). The ultimate impact of COVID-19 on the economy and the Company’s results of operations, financial position and liquidity is not within the Company’s control and remains unclear due to, among other factors, uncertainty in connection with its claims, reserves and reinsurance recoverables.

The scope, duration and magnitude of the direct and indirect effects of COVID-19 continue to evolve in ways that are difficult or impossible to anticipate. While many of the potential impacts on the Company have receded as populations have begun to become vaccinated, new variants of the COVID-19 virus, including the “Delta” variant, and the slowing of vaccination rates among certain populations, continue to create risks to the Company. As a result, the impact of COVID-19 on the Company’s results of operations for the nine months of 2021 is not necessarily indicative of its impact for the remainder of 2021 or beyond. Despite the effects of COVID-19 to date, the Company’s financial position and liquidity improved for the nine months ended September 30, 2021.

Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and allowance for expected credit losses on 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.

aggregate policy limits, the expansion of coverage exclusions, whether or not defense costs are within policy limits, and changes in deductibles and attachment points.

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. 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 ~~2020:~~2021:


(In thousands)	(In thousands)	Frequency (+/-)						(In thousands)	Frequency (+/-)
Severity (+/-)	Severity (+/-)	1%		5%		10%		Severity (+/-)	1%		5%		10%
1%	1%	$	89,102	$	268,193	$	492,056	1%	$	98,916	$	297,732	$	546,252
5%	5%	268,193		454,376		687,105		5%	297,732		504,422		762,785
10%	10%	492,056		687,105		930,917		10%	546,252		762,785		1,033,450

Our net reserves for losses and loss expenses of approximately ~~$12.5~~$13.2 billion as of ~~September 30, 2021~~March 31, 2022 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 ~~$2.7~~$2.8 billion, or 22%, of the Company’s net loss reserves as of ~~September 30, 2021~~March 31, 2022 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. 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 loss development 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)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	March 31, 2022		December 31, 2021
Insurance	Insurance	$	9,758,754	$	9,034,969	Insurance	$	10,336,512	$	10,060,420
Reinsurance & Monoline Excess	Reinsurance & Monoline Excess	2,722,375		2,585,424		Reinsurance & Monoline Excess	2,842,831		2,787,942
Net reserves for losses and loss expenses	Net reserves for losses and loss expenses	12,481,129		11,620,393		Net reserves for losses and loss expenses	13,179,343		12,848,362
Ceded reserves for losses and loss expenses	Ceded reserves for losses and loss expenses	2,438,447		2,164,037		Ceded reserves for losses and loss expenses	2,543,546		2,542,526
Gross reserves for losses and loss expenses	Gross reserves for losses and loss expenses	$	14,919,576	$	13,784,430	Gross reserves for losses and loss expenses	$	15,722,889	$	15,390,888

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


(In thousands)	(In thousands)	Reported Case Reserves		Incurred But Not Reported		Total		(In thousands)	Reported Case Reserves		Incurred But Not Reported		Total
September 30, 2021
March 31, 2022								March 31, 2022
Other liability	Other liability	$	1,692,098	$	3,079,753	$	4,771,851	Other liability	$	1,719,685	$	3,470,054	$	5,189,739
Workers’ compensation (1)	Workers’ compensation (1)	1,001,955		918,438		1,920,393		Workers’ compensation (1)	1,033,303		937,468		1,970,771
Professional liability	Professional liability	450,592		1,049,223		1,499,815		Professional liability	478,809		1,048,942		1,527,751
Commercial automobile	Commercial automobile	473,821		416,273		890,094		Commercial automobile	525,903		446,277		972,180
Short-tail lines (2)	Short-tail lines (2)	317,863		358,738		676,601		Short-tail lines (2)	304,813		371,258		676,071
Total Insurance	Total Insurance	3,936,329		5,822,425		9,758,754		Total Insurance	4,062,513		6,273,999		10,336,512
Reinsurance & Monoline Excess (1) (3)	Reinsurance & Monoline Excess (1) (3)	1,490,320		1,232,055		2,722,375		Reinsurance & Monoline Excess (1) (3)	1,496,676		1,346,155		2,842,831
Total	Total	$	5,426,649	$	7,054,480	$	12,481,129	Total	$	5,559,189	$	7,620,154	$	13,179,343

December 31, 2020
December 31, 2021								December 31, 2021
Other liability	Other liability	$	1,534,514	$	2,864,760	$	4,399,274	Other liability	$	1,724,907	$	3,319,665	$	5,044,572
Workers’ compensation (1)	Workers’ compensation (1)	977,035		873,072		1,850,107		Workers’ compensation (1)	1,016,014		903,448		1,919,462
Professional liability	Professional liability	414,104		875,163		1,289,267		Professional liability	468,680		1,019,344		1,488,024
Commercial automobile	Commercial automobile	442,975		398,688		841,663		Commercial automobile	504,821		424,382		929,203
Short-tail lines (2)	Short-tail lines (2)	295,313		359,345		654,658		Short-tail lines (2)	322,917		356,242		679,159
Total Insurance	Total Insurance	3,663,941		5,371,028		9,034,969		Total Insurance	4,037,339		6,023,081		10,060,420
Reinsurance & Monoline Excess (1) (3)	Reinsurance & Monoline Excess (1) (3)	1,442,099		1,143,325		2,585,424		Reinsurance & Monoline Excess (1) (3)	1,475,623		1,312,319		2,787,942
Total	Total	$	5,106,040	$	6,514,353	$	11,620,393	Total	$	5,512,962	$	7,335,400	$	12,848,362

___________

(1) Reserves for workers’ compensation and Reinsurance & Monoline Excess are net of an aggregate net discount of ~~$462~~$444 million and ~~$483~~$452 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are as follows:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Net increase in prior year loss reserves		$	(1,552)	$	(849)
Net (increase) decrease in prior year loss reserves						Net (increase) decrease in prior year loss reserves	$	(3,761)	$	859
Increase in prior year earned premiums	Increase in prior year earned premiums	6,918		12,869		Increase in prior year earned premiums	4,407		2,595
Net favorable prior year development	Net favorable prior year development	$	5,366	$	12,020	Net favorable prior year development	$	646	$	3,454

The COVID-19 global pandemic has impacted, and may further impact, the Company’s results through its effect on claim frequency and severity. Loss cost trends have been impacted and may be further impacted by COVID-19-related claims in certain lines of business. Losses incurred from COVID-19-related claims have been offset, to a certain extent, by lower claim frequency in certain lines of our businesses; however, as the economy and legal systems have reopened, the benefit of lower claim frequency has begun to abate. Although as populations have continued to be vaccinated against the virus and the effects of the pandemic have receded in many jurisdictions, most particularly the United States, it remains too early to determine the ultimate net impact of COVID-19 on the Company. New variants of the COVID-19 virus, including the ~~“Delta”~~“Omicron” variant, ~~and the slowing of vaccination rates among certain populations~~ continue to create risks with respect to loss costs and the potential for renewed impact of the other effects of COVID-19 associated with economic conditions, inflation, and social distancing and work from home rules.

The Company has estimated the potential COVID-19 impact to its contingency and event cancellation, workers’ compensation, and other lines of business under a number of possible scenarios; however, due to COVID-19’s continued evolving impact, there remains a high degree of uncertainty around the Company’s COVID-19 reserves. In addition, should the pandemic continue or worsen as a result of new COVID-19 variants or otherwise, governments in the jurisdictions where we operate may renew their efforts to expand policy coverage terms beyond the policy’s intended coverage. Accordingly, losses arising from these actions,and the other factors described above, could exceed the Company’s reserves established for those related policies.

As of ~~September 30, 2021,~~March 31, 2022, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately ~~$256~~$290 million, of which ~~$220~~$246 million relates to the Insurance segment and ~~$36~~$44 million relates to the Reinsurance & Monoline Excess segment. Such ~~$256~~$290 million of COVID-19-related losses included ~~$219~~$268 million of reported losses and ~~$37~~$22 million of IBNR. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company recognized current accident year losses for COVID-19-related claims activity, net of reinsurance, of approximately ~~$46~~$1 million, of which ~~$43 million~~ relates to the Insurance segment.

lockdowns, reduced driving/traffic, significant work from home, court closures, and similar reduced activities and travel. While reported claim frequency in these lines increased in 2021 relative to 2020, it remained below the historical levels pre- the start of the COVID-19 pandemic. Due to the ongoing uncertainty regarding the ultimate impacts of the COVID-19 pandemic on accident year 2021 incurred losses, the Company remains cautious in factoring in these trends in setting its initial loss ratio picks for this year. As accident year 2021 has begun to mature, we have recognized some of the favorable reported experience in our ultimate loss picks made as of March 31, 2022. The adverse development on the 2015 through 2019 accident years is concentrated in the other liability line of business, and to a lesser degree professional liability and commercial auto liability. The development is driven by a larger than expected number of large losses reported. The large losses particularly impacted the excess and surplus lines casualty classes of business.

~~liability, but is also seen to a lesser extent in commercial auto liability. The adverse development on these years~~and is driven by a higher than expected number of large losses ~~reported, and~~reported. The large losses particularly impacted ~~the~~ directors and officers liability and excess and surplus lines casualty classes of business. ~~We also believe that increased social inflation is contributing to the increased number of large losses.~~

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves that were discounted was ~~$1,395~~$1,336 million and ~~$1,655~~$1,387 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was ~~$462~~$444 million and ~~$483~~$452 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. At ~~September 30, 2021,~~March 31, 2022, discount rates by year ranged from 0.7% to 6.5%, with a weighted average discount rate of 3.4%.

Substantially all of the workers’ compensation discount (97% of total discounted reserves at ~~September 30, 2021)~~March 31, 2022) 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 30, 2021)~~March 31, 2022), 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 ~~$61~~$59 million at ~~September 30, 2021~~March 31, 2022 and ~~$44~~$60 million at December 31, ~~2020.~~2021. 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.

Allowance for Expected Credit Losses on Investments.

Fixed Maturity Securities – For fixed maturity securities in an unrealized loss position where the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery in value, the amortized cost basis is written down to fair value through net investment gains (losses). For fixed maturity securities in an unrealized loss position where the Company does not intend to sell, or it is more likely than not that it will not be required to sell the security before recovery in value, the Company evaluates whether the decline in fair value has resulted from credit losses or all other factors (non-credit factors). In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for expected credit losses is recorded for the credit loss through net investment gains (losses), limited by the amount that the fair value is less than the amortized cost basis. ~~Effective January 1, 2020, the~~The allowance is adjusted for any change in expected credit losses and subsequent recoveries through net investment gains (losses). The impairment related to non-credit factors is recognized in other comprehensive income (loss).

The Company’s credit assessment of allowance for expected credit losses uses a third party model for available for sale and held to maturity securities, as well as loans receivable. The allowance for expected credit losses is generally based on the performance of the underlying collateral under various economic and default scenarios that 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. A discounted cash flow analysis is used to ascertain the amount of the allowance for expected credit losses, if any. In general, the model reverts to the rating-level long-term average marginal default rates based on 10 years of historical data, beyond the forecast period. For other inputs, the model in most cases reverts to the baseline long-term assumptions linearly over 5 years beyond the forecast period. The long-term assumptions are based on the historical averages.

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.

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at ~~September 30, 2021~~March 31, 2022 is presented in the table below:

($ in thousands) Number of
Securities Aggregate
Fair Value Gross Unrealized Loss
Foreign government 31 $ 119,141 $ 32,048
Corporate 13 49,623 1,879
State and municipal 2 39,693 335
Mortgage-backed 4 249 16
Asset-backed 1 94 3
Total 51 $ 208,800 $ 34,281


($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	37	$	132,306	$	30,753
Corporate	12	30,071		3,158
State and municipal	1	13,583		1,422
Mortgage-backed	7	1,785		48
Asset-backed	1	37		5
Total	58	$	177,782	$	35,386

As of ~~September 30, 2021,~~March 31, 2022, the Company has recorded an allowance for expected credit losses on fixed maturity securities of ~~$17~~$27 million. The Company has evaluated the remaining 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.

Loans Receivable – For loans receivable, the Company estimates an allowance for expected credit losses based on relevant information about past events, including historical loss experience, current conditions and forecasts that affect the expected collectability of the amortized cost of the financial asset. The allowance for expected credit losses is presented as a reduction to amortized cost of the financial asset in the consolidated balance sheet and changes to the estimate for expected credit losses are recognized through net investment gains (losses). Loans receivable are reported net of an allowance for expected credit losses of $2$1 million and $5$2 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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 30, 2021:~~March 31, 2022:


($ in thousands)	($ in thousands)	Carrying Value		Percent of Total		($ in thousands)	Carrying Value		Percent of Total
Pricing source:	Pricing source:					Pricing source:
Independent pricing services	Independent pricing services	$	15,680,757	98.0	%	Independent pricing services	$	16,031,112	98.1	%
Syndicate manager	Syndicate manager	49,600		0.3		Syndicate manager	56,231		0.3
Directly by the Company based on:	Directly by the Company based on:					Directly by the Company based on:
Observable data	Observable data	269,004		1.7		Observable data	264,611		1.6

Total	Total	$	15,999,361	100.0	%	Total	$	16,351,954	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 30, 2021,~~March 31, 2022, 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.

3937

Results of Operations for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

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 net premiums earned), expense ratios (underwriting expenses expressed as a percentage of net premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. 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)	($ in thousands)	2021			2020			($ in thousands)	2022			2021
Insurance:	Insurance:							Insurance:
Gross premiums written	Gross premiums written	$	7,008,617		$	5,841,328		Gross premiums written	$	2,484,799		$	2,140,013
Net premiums written	Net premiums written	5,741,229			4,754,791			Net premiums written	2,073,291			1,739,824
Net premiums earned	Net premiums earned	5,151,253			4,481,092			Net premiums earned	1,962,835			1,604,979
Loss ratio	Loss ratio	61.4		%	65.5		%	Loss ratio	59.5		%	61.3		%
Expense ratio	Expense ratio	28.5		%	30.6		%	Expense ratio	28.1		%	29.3		%
GAAP combined ratio	GAAP combined ratio	89.9		%	96.1		%	GAAP combined ratio	87.6		%	90.6		%
Reinsurance & Monoline Excess:	Reinsurance & Monoline Excess:							Reinsurance & Monoline Excess:
Gross premiums written	Gross premiums written	$	924,829		$	784,835		Gross premiums written	$	375,038		$	344,699
Net premiums written	Net premiums written	846,128			710,189			Net premiums written	339,963			310,214
Net premiums earned	Net premiums earned	751,345			636,161			Net premiums earned	286,252			244,977
Loss ratio	Loss ratio	61.5		%	66.5		%	Loss ratio	59.9		%	56.5		%
Expense ratio	Expense ratio	30.1		%	32.1		%	Expense ratio	29.5		%	30.9		%
GAAP combined ratio	GAAP combined ratio	91.6		%	98.6		%	GAAP combined ratio	89.4		%	87.4		%
Consolidated:	Consolidated:							Consolidated:
Gross premiums written	Gross premiums written	$	7,933,446		$	6,626,163		Gross premiums written	$	2,859,837		$	2,484,712
Net premiums written	Net premiums written	6,587,357			5,464,980			Net premiums written	2,413,254			2,050,038
Net premiums earned	Net premiums earned	5,902,598			5,117,253			Net premiums earned	2,249,087			1,849,956
Loss ratio	Loss ratio	61.4		%	65.6		%	Loss ratio	59.5		%	60.6		%
Expense ratio	Expense ratio	28.7		%	30.8		%	Expense ratio	28.3		%	29.5		%
GAAP combined ratio	GAAP combined ratio	90.1		%	96.4		%	GAAP combined ratio	87.8		%	90.1		%

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~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


(In thousands, except per share data)	(In thousands, except per share data)	2021		2020		(In thousands, except per share data)	2022		2021
Net income to common stockholders	Net income to common stockholders	$	728,060	$	218,520	Net income to common stockholders	$	590,638	$	229,525
Weighted average diluted shares	Weighted average diluted shares	187,060		189,515		Weighted average diluted shares	279,157		280,245
Net income per diluted share	Net income per diluted share	$	3.89	$	1.15	Net income per diluted share	$	2.12	$	0.82

The Company reported net income to common stockholders of ~~$728~~$591 million in ~~2021~~2022 compared to ~~$219~~$230 million in ~~2020.~~2021. The ~~$509~~$361 million increase in net income was primarily due to an after-tax increase in net investment gains of $268 million primarily due to sale of a real estate investment in London, an after-tax increase in underwriting income of ~~$316~~$74 million mainly due to the growth in premium rates and exposure as well as reductions in loss ratio partly due to lower catastrophe losses and ina lower expense ratio driven by net earned premium growth outpacing expense growth, an after-tax increase in net investment ~~gains of $110 million primarily due to sale of real estate assets, an after-tax increase in net investment~~ income of ~~$82~~$12 million primarily due to investment funds, a reduction of ~~$22~~$8 million in tax expense due to a change in the effective tax rate, an after-tax reduction on debt extinguishment expense of $3 million for debt redeemed in March 2021, an after-tax increase in profits from non-insurance businesses of $6$1 million, an after-tax ~~savings from~~reduction in interest expenses of $4$1 million due to ~~early~~debt repayments at maturity and refinancings, ana less than $1 million after-tax increase ~~in profit from insurance service businesses~~ of ~~$2 million~~other income and a less than $1 million after-tax increase in ~~other~~insurance service income, partially offset by an after-tax increase in corporate expenses of ~~$23~~$7 million ~~which includes an after-tax debt extinguishment expense of $9 million on debt redeemed and~~mainly due to increased incentive compensation costs ~~an after-tax increase of $7 million in minority interest~~ and an after-tax decrease in foreign currency gains of $4$1 million. The number of weighted average diluted shares decreased by ~~2.5~~1.1 million for ~~2021~~2022 compared to ~~2020~~2021, mainly reflecting shares repurchased in ~~2020 and~~ 2021.

4038

Premiums. Gross premiums written were ~~$7,933~~$2,860 million in ~~2021,~~2022, an increase of ~~20%~~15% from ~~$6,626~~$2,485 million in ~~2020.~~2021. The increase was due to a ~~$1,167~~$345 million increase in the Insurance segment and a ~~$140~~$30 million increase in the Reinsurance & Monoline Excess segment. Approximately 82% of premiums expiring in ~~2021~~2022 were renewed, and ~~79%~~81% of premiums expiring in ~~2020~~2021 were renewed.

Average renewal premium rates for insurance and facultative reinsurance increased ~~9.5%~~7.2% in ~~2021~~2022 when adjusted for changes in exposures, and increased ~~10.8%~~8.3% excluding workers' compensation.

A summary of gross premiums written in ~~2021~~2022 compared with ~~2020~~2021 by line of business within each business segment follows:

•Insurance - gross premiums increased ~~20%~~16% to ~~$7,009~~$2,485 million in ~~2021~~2022 from ~~$5,841~~$2,140 million in ~~2020.~~2021. Gross premiums increased ~~$410~~$158 million (20%) for other liability, ~~$376~~$84 million ~~(45%~~(17%) for short-tail lines, $51 million (16%) for professional liability, ~~$186~~$34 million ~~(27%~~(13%) for commercial auto ~~$175~~and $18 million ~~(13%) for short-tail lines and $21 million (2%~~(6%) for workers' compensation.

•Reinsurance & Monoline Excess - gross premiums increased ~~18%~~9% to ~~$925~~$375 million in ~~2021~~2022 from ~~$785~~$345 million in ~~2020.~~2021. Gross premiums increased ~~$111~~$25 million ~~(25%~~(13%) for casualty reinsurance ~~$27~~and $6 million ~~(16%~~(6%) for monoline excess and $2decreased by less than $1 million (1%) for property reinsurance.

Net premiums written were ~~$6,587~~$2,413 million in 2022, an increase of 18% from $2,050 million in 2021 ~~an increase of 21% from $5,465 million~~due in ~~2020.~~part to our decision to retain more business. Ceded reinsurance premiums as a percentage of gross written premiums were 16% in 2022 and 17% in ~~2021 and 18% in 2020.~~2021.

Premiums earned increased ~~15%~~22% to ~~$5,903~~$2,249 million in ~~2021~~2022 from ~~$5,117~~$1,850 million in ~~2020.~~2021. 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 ~~2021~~2022 are related to business written during both ~~2021~~2022 and ~~2020.~~2021. Audit premiums were ~~$138~~$70 million in ~~2021~~2022 compared with ~~$111~~$35 million in ~~2020.~~2021.

Net Investment Income. Following is a summary of net investment income for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Amount				Average Annualized Yield					Amount				Average Annualized Yield
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Fixed maturity securities, including cash and cash equivalents and loans receivable	Fixed maturity securities, including cash and cash equivalents and loans receivable	$	284,704	$	330,941	2.2	%	2.9	%	Fixed maturity securities, including cash and cash equivalents and loans receivable	$	101,284	$	94,677	2.2	%	2.2	%
Investment funds	Investment funds	169,538		1,260		16.5		0.1		Investment funds	52,012		38,935		13.7		11.6
Arbitrage trading account	Arbitrage trading account	30,176		51,985		6.5		12.4		Arbitrage trading account	9,187		19,074		3.1		16.1
Equity securities	Equity securities	21,854		6,194		5.0		2.4		Equity securities	10,856		6,180		4.7		4.7
Real estate	Real estate	5,517		18,807		0.4		1.2		Real estate	2,146		1,161		0.5		0.2
Gross investment income	Gross investment income	511,789		409,187		3.1		2.8		Gross investment income	175,485		160,027		3.0		3.0
Investment expenses	Investment expenses	(5,174)		(6,343)		—		—		Investment expenses	(1,973)		(1,450)		—		—
Total	Total	$	506,615	$	402,844	3.1	%	2.7	%	Total	$	173,512	$	158,577	2.9	%	3.0	%

Net investment income increased ~~26%~~9% to ~~$507~~$174 million in ~~2021~~2022 from ~~$403~~$159 million in ~~2020~~2021 due primarily to a ~~$168~~$13 million increase in income from investment funds primarily from financial services and ~~transportation~~real estate funds, a ~~$16~~$7 million increase in income from fixed maturity securities mainly driven by increased investment in bonds, a $5 million increase from equity securities and a $1 million ~~decrease~~increase in ~~investment expense,~~real estate, partially offset by a ~~$46 million decrease in income from fixed maturity securities mainly driven by lower investment yields, a $22~~$10 million decrease from the arbitrage trading account and a ~~$13~~$1 million ~~decrease~~increase in ~~real estate.~~investment expenses. The Company ~~shortened~~maintained the short duration of its fixed maturity security portfolio, thereby reducing the potential impact of mark-to-market on the portfolio and positioning the Company to react quickly to changes in the current interest rate environment. Average invested assets, at cost (including cash and cash equivalents), were ~~$21.9~~$23.7 billion in ~~2021~~2022 and ~~$19.8~~$21.3 billion in ~~2020.~~2021.

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 increased to ~~$70~~$28 million in ~~2021~~2022 from ~~$67~~$26 million in ~~2020,~~2021, mainly due to the business recovery from the pandemic.

Net Realized and Unrealized Gains (Losses) 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 ~~$89~~$370 million in ~~2021~~2022 compared with net ~~losses~~gains of ~~$89~~$52 million in ~~2020.~~2021. The gains of ~~$89~~$370 million in ~~2021 reflect~~2022 reflected net realized gains on investments of ~~$151~~$277 million (primarily a $251 million net gain from the sale of a real estate investment in London after transaction expenses and the foreign currency impact, including the reversal of the currency translation adjustment), and an increase in unrealized gains on equity securities of $93 million. In 2021, the net gains of $52 million reflected net realized gains on investment sales of $76 million (primarily due to the sale of certain real estate assets and the disposition of an investment fund) ~~partially offset by unrealized losses on equity securities of $62 million. In 2020, the net losses of $89 million reflected net realized losses on investment sales of $27 million~~ and an increase in unrealized losses on equity securities of ~~$62 million, which was primarily due to market disruptions as a result of COVID-19.~~$24 million.

Change in Allowance for Expected Credit Losses on Investments. Based on credit factors, the allowance for expected credit losses is increased or decreased depending on the percentage of unrealized loss relative to amortized cost by security, changes in rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the pre-tax change in allowance for expected credit losses on investments increased by ~~$11~~$4 million ($93 million after-tax), which is reflected in net investment gains (losses), primarily due to change in estimate. For the three months ended March 31, 2021, the pre-tax change in allowance for expected credit losses on investments decreased by $17 million ($13 million after-tax), which is reflected in net investment gains (losses), primarily related to foreign government securities which did not previously have an allowance. For the nine months ended September 30, 2020, the pre-tax change in allowance for expected credit losses on investments decreased by $29 million ($23 million after-tax), which is reflected in net investment gains (losses) primarily due to the disposition of securities which previously had an allowance recorded.

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 ~~$317~~$98 million in ~~2021~~2022 and ~~$257~~$87 million in ~~2020.~~2021. The increase mainly relates to the business recovery from COVID-19 on ~~aviation-related~~promotional merchandise and textile businesses.

Losses and Loss Expenses. Losses and loss expenses increased to ~~$3,624~~$1,339 million in ~~2021~~2022 from ~~$3,357~~$1,122 million in ~~2020.~~2021. The consolidated loss ratio was ~~61.4%~~59.5% in ~~2021~~2022 and ~~65.6%~~60.6% in ~~2020.~~2021. Catastrophe losses, net of reinsurance recoveries, were ~~$154~~$29 million (including current accident year losses of approximately ~~$46~~$1 million related to COVID-19) in ~~2021~~2022 and ~~$297~~$36 million (including losses of approximately ~~$143~~$15 million related to COVID-19) in ~~2020.~~2021. Favorable prior year reserve development (net of premium offsets) was $5$1 million in ~~2021~~2022 and ~~$12~~$3 million in ~~2020.~~2021. The loss ratio excluding catastrophe losses and prior year reserve development was 58.3% in 2022 and 58.9% in ~~2021 and 60.0% in 2020.~~2021.

A summary of loss ratios in ~~2021~~2022 compared with ~~2020~~2021 by business segment follows:

•Insurance - The loss ratio was ~~61.4%~~59.5% in ~~2021~~2022 and ~~65.5%~~61.3% in ~~2020.~~2021. Catastrophe losses were ~~$109~~$11 million in ~~2021~~2022 compared with ~~$245~~$33 million in ~~2020.~~2021. The Company reflected a best estimate (net of reinsurance) based upon available information for current accident year COVID-19-related losses of approximately ~~$43 million, primarily related to contingency and event cancellation coverage.~~$1 million. Favorable prior year reserve development was $8$6 million in ~~2021~~both 2022 and ~~$19 million in 2020.~~2021. The loss ratio excluding catastrophe losses and prior year reserve development ~~decreased 0.9 points to 59.5%~~was 59.3% in ~~2021 from 60.4%~~2022 and 59.7% in ~~2020.~~2021.

•Reinsurance & Monoline Excess - The loss ratio was ~~61.5%~~59.9% in ~~2021~~2022 and ~~66.5%~~56.5% in ~~2020.~~2021. Catastrophe losses were ~~$45~~$18 million in ~~2021~~2022 compared with ~~$53~~$3 million in 2020. The Company reflected a best estimate (net of reinsurance) based upon available information for current accident year COVID-19-related losses of approximately $3 million, primarily related to excess workers’ compensation.2021. Adverse prior year reserve development was $5 million in 2022 and $3 million in ~~2021 and $7 million in 2020.~~2021. The loss ratio excluding catastrophe losses and prior year reserve development decreased ~~2.1~~2.6 points to ~~55.1%~~51.7% in ~~2021~~2022 from ~~57.2%~~54.3% in ~~2020.~~2021.

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


($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2022		2021
Policy acquisition and insurance operating expenses	Policy acquisition and insurance operating expenses	$	1,694,548	$	1,574,507	Policy acquisition and insurance operating expenses	$	635,453	$	545,750
Insurance service expenses	Insurance service expenses	63,817		64,029		Insurance service expenses	22,466		20,786
Net foreign currency gains	Net foreign currency gains	(19,216)		(23,845)		Net foreign currency gains	(4,168)		(5,594)
Debt extinguishment costs	Debt extinguishment costs	11,521		—		Debt extinguishment costs	—		3,617
Other costs and expenses	Other costs and expenses	156,350		138,451		Other costs and expenses	60,148		51,709
Total	Total	$	1,907,020	$	1,753,142	Total	$	713,899	$	616,268

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Policy acquisition and insurance operating expenses increased 8%16% and net premiums earned increased ~~15%~~22% from ~~2020.~~2021. The expense ratio (underwriting expenses expressed as a percentage of net premiums earned) was ~~28.7%~~28.3% in ~~2021~~2022 and ~~30.8%~~29.5% in ~~2020.~~2021. The improvement is primarily attributable to higher

net premiums earned outpacing compensation expense ~~growth and lower travel and entertainment expenses due to the global pandemic.~~growth. However, to the extent our net premiums earned decrease or

travel and entertainment expenses increase, due to the impact of the COVID-19 pandemic or otherwise, our expense ratio would be expected to increase.

Service expenses, which represent the costs associated with the fee-based businesses, were ~~$64~~$22 million in ~~both 2021~~2022 and ~~2020.~~$21 million in 2021.

Net foreign currency gains result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains were ~~$19~~$4 million in ~~2021~~2022 compared to ~~$24~~$6 million in ~~2020.~~2021. The reduction in gains is primarily related to less ~~weakening~~strengthening of U.S. dollar compared to the Argentine ~~Peso~~peso and U.K. sterling ~~compared to the U.S. dollar~~ in ~~2021~~2022 versus ~~2020.~~2021.

Debt extinguishment costs of ~~$12~~$4 million in 2021 related to the redemption of ~~$400 million of~~ subordinated debentures ~~in March and June 2021~~ that were due in 2056.

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 ~~$156~~$60 million in ~~2021~~2022 from ~~$138~~$52 million in ~~2020,~~2021, primarily due to the increase in performance-based compensation costs in ~~2021.~~2022.

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 ~~$308~~$95 million in ~~2021~~2022 compared to ~~$256~~$86 million in ~~2020.~~2021. The increase mainly relates to the business recovery from COVID-19 on ~~aviation-related~~promotional merchandise and textile businesses.

Interest Expense. Interest expense was ~~$110~~$35 million in ~~2021~~2022 and ~~$115~~$37 million in 2020. In May 2020, the Company issued $300 million aggregate principal amount of 4.00% senior notes due 2050. In September 2020, the Company issued an additional $170 million aggregate principal amount of 4.00% senior notes due 2050 and $250 million aggregate principal amount of 4.25% subordinated debentures due 2060 and repaid $300 million aggregate principal amount of 5.375% senior notes at maturity. In October 2020, the Company redeemed $350 million aggregate principal amount of 5.625% subordinated debentures due 2053. In February 2021, the Company issued $300 million aggregate principal amount of 4.125% subordinated debenture due 2061.2021. In March 2021, the Company issued $400 million aggregate principal amount of 3.55% senior notes due 2052 and redeemed its $110 million aggregate principal amount of 5.90% subordinated debentures due 2056. In June 2021, the Company redeemed the $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056. In September 2021, the Company issued $350 million aggregate principal amount of 3.15% senior notes due 2061.

In the first quarter of 2022, the Company repaid at maturity its $77 million aggregate principal amount of 8.7% senior notes in January and its $350 million aggregate principal amount of 4.625% senior notes in March. The above redemptions during the three months ended March 31, 2021 resulted in debt extinguishment costs of ~~$12 million during the nine months ended September 30, 2021.~~$4 million. Additionally, in the second quarter of 2021, the Company sold a real estate asset, which resulted in a $102 million reduction of the Company's non-recourse debt that was supporting the property.

The maturity and redemption of senior notes and debentures and issuance of additional senior notes and debentures in ~~2021, as described below in "Liquidity~~2022 and ~~Capital Resources -- Debt,"~~2021 are expected to decrease interest expense in ~~2021~~2022 and forward.

Income Taxes. The effective income tax rate was ~~20.6% in 2021~~19.0% and ~~27.8% in 2020. For~~21.7% for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, the effective income tax rate differs from the federal income tax rate of 21% principally because of tax-exempt investment income and tax benefits related to equity-based compensation, which was partially offset by state and foreign income taxes.respectively. The ~~increased~~lower effective income tax rate for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2022, compared to the year earlier period, was ~~principally because utilization of losses in certain~~primarily due to a net reduction to the Company’s valuation allowance against foreign ~~jurisdictions was limited.~~tax credits and foreign net operating losses.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately ~~$132.4~~$120.6 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 30, 2021 and 2020~~

~~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 net premiums earned), expense ratios (underwriting expenses expressed as a percentage of net 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 30, 2021 and 2020. 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) 2021 2020
Insurance:
Gross premiums written $ 2,446,758 $ 1,981,816
Net premiums written 2,007,194 1,628,316
Net premiums earned 1,819,071 1,531,093
Loss ratio 61.4 % 64.4 %
Expense ratio 27.9 % 29.7 %
GAAP combined ratio 89.3 % 94.1 %
Reinsurance & Monoline Excess:
Gross premiums written $ 340,740 $ 280,729
Net premiums written 317,945 251,000
Net premiums earned 261,947 217,828
Loss ratio 69.3 % 59.1 %
Expense ratio 29.1 % 31.2 %
GAAP combined ratio 98.4 % 90.3 %
Consolidated:
Gross premiums written $ 2,787,499 $ 2,262,545
Net premiums written 2,325,138 1,879,316
Net premiums earned 2,081,018 1,748,921
Loss ratio 62.4 % 63.7 %
Expense ratio 28.0 % 30.0 %
GAAP combined ratio 90.4 % 93.7 %

~~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 three months ended September 30, 2021 and 2020:~~

(In thousands, except per share data) 2021 2020
Net income to common stockholders $ 261,297 $ 151,678
Weighted average diluted shares 186,742 187,717
Net income per diluted share $ 1.40 $ 0.81

The Company reported net income to common stockholders of $261 million in 2021 compared to $152 million in 2020. The $109 million increase in net income was primarily due to an after-tax increase in underwriting income of $71 million mainly due to the growth in premium rates and exposure, an after-tax increase in net investment income of $30 million primarily due to investment funds, an after-tax increase in foreign currency gains of $14 million as the U.S. dollar strengthened against other major currencies during the quarter, a reduction of $14 million in tax expense due to a change in the effective tax rate, an after-tax saving on interest expense of $4 million due to early refinancings, an after-tax increase in profits from non-insurance businesses of $2 million and a $1 million after-tax increase in other income, partially offset by an after-tax reduction in net investment gains of $16 million, an after-tax increase in corporate expenses of $6 million and an after-tax increase of $5 million in minority interest. The number of weighted average diluted shares decreased by approximately one million for 2021 compared to 2020 mainly reflecting shares repurchased in 2020 and 2021.

~~Premiums~~. Gross premiums written were $2,787 million in 2021, an increase of 23% from $2,263 million in 2020. The increase was due to a $465 million increase in the Insurance segment and a $59 million increase in the Reinsurance & Monoline Excess segment. Approximately 81.7% of premiums expiring in 2021 were renewed, and 78.5% of premiums expiring in 2020 were renewed.

~~Average renewal premium rates for insurance and facultative reinsurance increased 8.8% in 2021 when adjusted for changes in exposures, and increased 10.1% excluding workers' compensation.~~

~~A summary of gross premiums written in 2021 compared with 2020 by line of business within each business segment follows:~~

•~~Insurance~~ - gross premiums increased 23% to $2,447 million in 2021 from $1,982 million in 2020. Gross premiums increased $162 million (23%) for other liability, $142 million (47%) for professional liability, $74 million (16%) for short-tail lines, $67 million (27%) for commercial auto and $20 million (8%) for workers' compensation.

•~~Reinsurance & Monoline Excess~~ - gross premiums increased 21% to $340 million in 2021 from $281 million in 2020. Gross premiums increased $54 million (36%) for casualty reinsurance and $6 million (10%) for monoline excess, partially offset by a $1 million (1%) reduction for property reinsurance.

~~Net premiums written were $2,325 million in 2021, an increase of 24% from $1,879 million in 2020. Ceded reinsurance premiums as a percentage of gross written premiums were 17% in both 2021 and 2020.~~

Premiums earned increased 19% to $2,081 million in 2021 from $1,749 million in 2020. 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 2021 are related to business written during both 2021 and 2020. Audit premiums were $54 million in 2021 compared with $27 million in 2020.

~~Net Investment Income. Following is a summary of net investment income for the three months ended September 30, 2021 and 2020:~~

Amount Average Annualized
Yield
($ in thousands) 2021 2020 2021 2020
Fixed maturity securities, including cash and cash equivalents and loans receivable $ 93,031 $ 97,080 2.1 % 2.5 %
Investment funds 69,292 18,235 19.9 6.2
Arbitrage trading account 7,187 19,543 3.8 13.8
Equity securities 8,462 1,907 5.0 2.2
Real estate 3,485 7,666 0.8 1.5
Gross investment income 181,457 144,430 3.2 2.9
Investment expenses (1,606) (1,780) — —
Total $ 179,851 $ 142,650 3.2 % 2.8 %

Net investment income increased 26% to $180 million in 2021 from $143 million in 2020 due primarily to a $51 million increase in income from investment funds primarily from financial services and transportation funds and a $6 million increase from equity securities, partially offset by a $12 million decrease from the arbitrage trading account, a $4 million decrease in income from fixed maturity securities mainly driven by lower investment yields and a $4 million decrease in real estate. The Company shortened the duration of its fixed maturity security portfolio, thereby reducing the potential impact of mark-to-market on the portfolio and positioning the Company to react quickly to changes in the current interest rate environment. Average invested assets, at cost (including cash and cash equivalents), were $22.5 billion in 2021 and $20.3 billion in 2020.

~~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 were $21 million in 2021 and $22 million in 2020. The decrease is primarily due to a reduction of assigned risk plan business.

~~Net Realized and Unrealized Gains (Losses) 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 $17 million in 2021 compared with net losses of $8 million in 2020. The gains of $17 million in 2021 reflect net realized gains on investments of $36 million, partially offset by an increase in unrealized losses on equity securities of $19 million. In 2020, the losses of $8 million reflected net realized losses on investment sales of $39 million and an increase in unrealized gains on equity securities of $31 million.

~~Change in Allowance for Expected Credit Losses on Investments.~~ Based on credit factors, the allowance for expected credit losses is increased or decreased depending on the percentage of unrealized loss relative to amortized cost by security, changes in rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. For the three months ended September 30, 2021, the pre-tax change in allowance for expected credit losses on investments decreased by $2 million ($1.6 million after-tax), which is reflected in net investment gains (losses). For the three months ended September 30, 2020, the pre-tax change in allowance for expected credit losses on investments decreased by $47 million ($37 million after-tax), which is reflected in net investment gains (losses), primarily due to disposition of securities which previously had an allowance recorded.

~~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 $120 million in 2021 and $87 million in 2020. The increase mainly relates to the business recovery from COVID-19 on aviation-related and textile businesses.

~~Losses and Loss Expenses~~. Losses and loss expenses increased to $1,298 million in 2021 from $1,115 million in 2020. The consolidated loss ratio was 62.4% in 2021 and 63.7% in 2020. Catastrophe losses, net of reinsurance recoveries, were $74 million (including current accident year losses of approximately $6 million related to COVID-19) in 2021 and $73 million (no additional COVID-19-related losses were recognized in the three months ended September 30, 2020) in 2020. Favorable prior year reserve development (net of premium offsets) was $2 million in 2021 and $5 million in 2020. The loss ratio excluding catastrophe losses and prior year reserve development was 58.9% in 2021 and 59.8% in 2020.

~~A summary of loss ratios in 2021 compared with 2020 by business segment follows:~~

•~~Insurance~~ - The loss ratio was 61.4% in 2021 and 64.4% in 2020. Catastrophe losses were $39 million in 2021 compared with $74 million in 2020. The Company reflected a best estimate (net of reinsurance) based upon available information for current accident year COVID-19-related losses of approximately $5 million, primarily related to contingency and event cancellation coverage. Adverse prior year reserve development was $3 million in 2021 and favorable prior year reserve development was $7 million in 2020. The loss ratio excluding catastrophe losses and prior year reserve development decreased 1.0 point to 59.0% in 2021 from 60.0% in 2020.

•~~Reinsurance & Monoline Excess~~ - The loss ratio was 69.3% in 2021 and 59.1% in 2020. Catastrophe losses were $35 million in 2021 compared with ($1) million in 2020. The Company reflected a best estimate (net of reinsurance) based upon available information for current accident year COVID-19-related losses of approximately $1 million, primarily related to excess workers’ compensation. Favorable prior year reserve development was $5 million in 2021 and adverse prior year reserve development was $2 million in 2020. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.8 points to 58.1% in 2021 from 58.9% in 2020.

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

($ in thousands) 2021 2020
Policy acquisition and insurance operating expenses $ 583,065 $ 523,349
Insurance service expenses 21,243 21,034
Net foreign currency (gains) losses (12,497) 5,078
Other costs and expenses 51,235 44,508
Total $ 643,046 $ 593,969

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Policy acquisition and insurance operating expenses increased 11% and net premiums earned increased 19% from 2020. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) was 28.0% in 2021 and 30.0% in 2020. The improvement is primarily attributable to higher net premiums earned outpacing compensation expense growth. However, to the extent our net premiums earned decrease or travel and entertainment expenses increase, due to the impact of the COVID-19 pandemic or otherwise, our expense ratio would be expected to increase.

~~Service expenses, which represent the costs associated with the fee-based businesses, were $21 million in both 2021 and 2020.~~

Net foreign currency gains result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains was $12 million in 2021 compared to losses of $5 million in 2020. The gains in 2021 were driven by the strengthening U.S. dollar against most major currencies in the third quarter of 2021.

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 $51 million in 2021 from $45 million in 2020, primarily due to the increase in performance-based compensation costs in 2021.

~~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 $115 million in 2021 compared to $85 million in 2020. The increase mainly relates to the business recovery from COVID-19 on aviation-related and textile businesses.

~~Interest Expense~~. Interest expense was $35 million in 2021 and $40 million 2020. In May 2020, the Company issued $300 million aggregate principal amount of 4.00% senior notes due 2050. In September 2020, the Company issued an additional $170 million aggregate principal amount of 4.00% senior notes due 2050 and $250 million aggregate principal amount of 4.25% subordinated debentures due 2060 and repaid $300 million aggregate principal amount of 5.375% senior notes at maturity. In October 2020, the Company redeemed $350 million aggregate principal amount of 5.625% subordinated debentures due 2053. In February 2021, the Company issued $300 million aggregate principal amount of 4.125% subordinated debenture due 2061. In March 2021, the Company issued $400 million aggregate principal amount of 3.55% senior notes due 2052 and redeemed its $110 million aggregate principal amount of 5.90% subordinated debentures due 2056. In June, 2021, the Company redeemed the $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056. In September 2021, the Company issued $350 million aggregate principal amount of 3.15% senior notes due 2061. Additionally in the second quarter of 2021, the Company sold a real estate asset which resulted in a $102 million reduction of the Company's non-recourse debt that was supporting the property.

The redemption of debentures and issuance of additional debentures in 2021, as described below in "Liquidity and Capital Resources -- Debt," are expected to decrease interest expense in 2021 and forward.

~~Income Taxes.~~ ~~The effective income tax rate was 19.6% in 2021 and 26.2% in 2020. The effective income tax rate~~

differs from the federal income tax rate of 21% principally because of tax-exempt investment income and tax benefits related to equity-based compensation, which was partially offset by state and foreign income taxes. The increased effective income tax rate for the three months ended September 30, 2020 was principally because the utilization of losses in certain foreign jurisdictions was limited.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $132.4 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.

4741

Investments

As part of its investment strategy, the Company establishes a level of cash and highly liquid short-term and intermediate-term securities that, combined with expected cash flow, it believes is adequate to meet its payment obligations. Due to the low fixed maturity investment returns, the Company invests in equity securities, merger arbitrage securities, investment 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.

The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The average duration of the fixed maturity portfolio, including cash and cash equivalents, was ~~2.3 years at September 30, 2021 and~~ 2.4 years at both March 31, 2022 and December 31, ~~2020.~~2021. The Company’s fixed maturity investment portfolio and investment-related assets as of ~~September 30, 2021~~March 31, 2022 were as follows:


($ in thousands)	($ in thousands)	Carrying Value		Percent of Total		($ in thousands)	Carrying Value		Percent of Total
Fixed maturity securities:	Fixed maturity securities:					Fixed maturity securities:
U.S. government and government agencies	U.S. government and government agencies	$	518,333	2.2	%	U.S. government and government agencies	$	818,848	3.5	%
State and municipal:	State and municipal:					State and municipal:
Special revenue	Special revenue	2,110,271		9.1		Special revenue	1,935,528		8.2
State general obligation	State general obligation	447,320		1.9		State general obligation	424,590		1.8
Local general obligation	Local general obligation	431,522		1.9		Local general obligation	416,167		1.8
Pre-refunded (1)	Pre-refunded (1)	230,840		1.0		Pre-refunded (1)	177,371		0.8
Corporate backed	Corporate backed	177,916		0.7		Corporate backed	172,005		0.7
Total state and municipal	Total state and municipal	3,397,869		14.6		Total state and municipal	3,125,661		13.3
Mortgage-backed:	Mortgage-backed:					Mortgage-backed:
Agency	Agency	681,798		2.9		Agency	874,067		3.7
Commercial						Commercial	263,501		1.1
Residential-Prime	Residential-Prime	159,826		0.7		Residential-Prime	246,852		1.0
Commercial		130,637		0.6
Residential-Alt A	Residential-Alt A	6,326		—		Residential-Alt A	4,771		—
Total mortgage-backed	Total mortgage-backed	978,587		4.2		Total mortgage-backed	1,389,191		5.8
Asset-backed	Asset-backed	4,655,555		20.0		Asset-backed	4,257,421		18.0
Corporate:	Corporate:					Corporate:
Industrial	Industrial	3,132,362		13.5		Industrial	3,270,804		13.8
Financial	Financial	1,699,840		7.3		Financial	1,706,732		7.2
Utilities	Utilities	418,853		1.8		Utilities	409,726		1.7
Other	Other	173,009		0.7		Other	201,245		0.9
Total corporate	Total corporate	5,424,064		23.3		Total corporate	5,588,507		23.6
Foreign government and foreign government agencies	Foreign government and foreign government agencies	1,098,727		4.7		Foreign government and foreign government agencies	1,246,568		5.3
Total fixed maturity securities	Total fixed maturity securities	16,073,135		69.0		Total fixed maturity securities	16,426,196		69.5
Equity securities:	Equity securities:					Equity securities:
Common stocks	Common stocks	609,939		2.6		Common stocks	883,317		3.7
Preferred stocks	Preferred stocks	208,799		0.9		Preferred stocks	243,174		1.0
Total equity securities	Total equity securities	818,738		3.5		Total equity securities	1,126,491		4.7
Cash and cash equivalents (2)	Cash and cash equivalents (2)	2,182,020		9.4		Cash and cash equivalents (2)	1,980,346		8.4
Investment funds						Investment funds	1,544,856		6.5
Real estate	Real estate	1,842,400		7.9		Real estate	1,276,157		5.4
Investment funds		1,400,140		6.0
Arbitrage trading account	Arbitrage trading account	860,339		3.7		Arbitrage trading account	1,188,910		5.0
Loans receivable	Loans receivable	115,496		0.5		Loans receivable	115,097		0.5
Total investments	Total investments	$	23,292,268	100.0	%	Total investments	$	23,658,053	100.0	%

____________________

(1) Pre-refunded securities are securities for which an escrow account has been established to fund the remaining payments of principal and interest through maturity. Such escrow accounts are funded almost exclusively with U.S. Treasury and U.S. government agency securities.

(2) Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.

Fixed Maturity Securities. The Company’s investment policy with respect to fixed maturity securities is generally to purchase instruments with the expectation of holding them to their maturity. However, management of the available for sale portfolio is considered necessary to maintain an approximate matching of assets and liabilities as well as to adjust the portfolio as a result of changes in financial market conditions and tax considerations.

The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in order to mitigate the impact of an interest rate rise on the fair value of the portfolio. Similarly, in a period in which management expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason to expect these gains to continue in future periods.

Equity Securities. Equity securities primarily represent investments in common and preferred stocks in companies with potential growth opportunities in different sectors, mainly in the financial institutions and energy sectors.

Investment Funds. At ~~September 30, 2021,~~March 31, 2022, the carrying value of investment funds was ~~$1,401~~$1,546 million, including investments in financial services funds of ~~$409~~$455 million, transportation funds of $341 million, real estate funds of ~~$263~~$284 million, other funds of ~~$238~~$330 million (which includes a deferred compensation trust asset of $32 million) and energy funds of ~~$150~~$136 million. Investment funds are generally reported on a one-quarter lag.

Real Estate. Real estate is directly owned property held for investment. At ~~September 30, 2021,~~March 31, 2022, real estate properties in operation included a long-term ground lease in Washington D.C., an office complex in New York City ~~an office building in London,~~ and the completed portion of a mixed-use project in Washington D.C. In addition, part of the previously mentioned mixed-use project in Washington D.C. is under development. The Company expects to fund further development costs for the project with a combination of its own funds and external financing. As described above, during the first quarter of 2022, the Company sold an office building in London.

Arbitrage Trading Account. The arbitrage trading account is comprised of direct investments in arbitrage securities. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers.

Loans Receivable. Loans receivable, which are carried at amortized cost (net of allowance for expected credit losses), had an amortized cost of $115 million and an aggregate fair value of ~~$117~~$116 million at ~~September 30, 2021.~~March 31, 2022. The amortized cost of loans receivable is net of an allowance for expected credit losses of $2$1 million as of ~~September 30, 2021.~~March 31, 2022. Loans receivable include real estate loans of $89 million that are secured by commercial and residential real estate located primarily in New York. Real estate loans generally earn interest at fixed or stepped interest rates and have maturities through 2026. Loans receivable include commercial loans of $26 million that are secured by business assets and have fixed interest rates with varying maturities not exceeding 10 years.

Market Risk. The fair value of the Company’s investments is subject to risks of fluctuations in credit quality and interest rates. The Company uses various models and stress test scenarios to monitor and manage interest rate risk. The Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the effective duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration for the fixed maturity portfolio (including cash and cash equivalents) was ~~2.3 years at September 30, 2021 and~~ 2.4 years at both March 31, 2022 and December 31, ~~2020.~~2021.

In addition, the fair value of the Company’s international investments is subject to currency risk. The Company attempts to manage its currency risk by matching its foreign currency assets and liabilities where considered appropriate.

4943

Liquidity and Capital Resources

Cash Flow. Cash flow provided from operating activities increased to ~~$1,524~~$478 million in the first ~~nine~~three months of ~~2021~~2022 from ~~$1,137~~$311 million in the first ~~nine~~three months of ~~2020,~~2021, primarily due to an increase in premium receipts ~~net of reinsurance and commissions settled,~~ partially offset by ~~an increase in tax~~higher loss and loss expense payments.

The Company's insurance subsidiaries' principal sources of cash are premiums, investment income, service fees and proceeds from sales and maturities of portfolio investments. The principal uses of cash are payments for claims, taxes, operating expenses and dividends. The Company expects its insurance subsidiaries to fund the payment of losses with cash received from premiums, investment income and fees. The Company generally targets an average duration for its investment portfolio that is within 1.5 years of the average duration of its liabilities so that portions of its investment portfolio mature throughout the claim cycle and are available for the payment of claims if necessary. In the event operating cash flow and proceeds from maturities and prepayments of fixed income securities are not sufficient to fund claim payments and other cash requirements, the remainder of the Company's cash and investments is available to pay claims and other obligations as they become due. The Company's investment portfolio is highly liquid, with approximately ~~78.2%~~77.9% invested in cash, cash equivalents and marketable fixed maturity securities as of ~~September 30, 2021.~~March 31, 2022. If the sale of fixed maturity securities were to become necessary, a realized gain or loss equal to the difference between the cost and sales price of securities sold would be recognized.

Debt. At ~~September 30, 2021,~~March 31, 2022, the Company had senior notes, subordinated debentures and other debt outstanding with a carrying value of ~~$3,266~~$2,842 million and a face amount of ~~$3,292 million, including $300~~$2,867 million. In the first quarter 2022, the Company repaid at maturity its $77 million aggregate principal amount of ~~its 4.125% subordinated debentures due 2061 issued in February 2021, $400 million aggregate principal amount of its 3.55%~~8.7% senior notes ~~due 2052 issued~~ in ~~March 2021~~January and its $350 million aggregate principal amount of ~~its 3.15%~~4.625% senior notes ~~due 2061 issued~~ in September 2021. The Company redeemed its $110 million aggregate principal amount of 5.90% subordinated debentures due 2056 on March 1, 2021 and its $290 million aggregate principal amount of 5.75% subordinated debentures due 2056 on June 1, 2021. Additionally in the second quarter of 2021, the Company sold a real estate asset which resulted in a $102 million reduction of the Company's non-recourse debt that was supporting the property.March. The maturities of the outstanding debt are $5$7 million in ~~2021, $427 million in 2022,~~2024, $5 million in 2025, $250 million in 2037, $350 million in 2044, $470 million in 2050, $400 million in 2052, $185 million in 2058, $300 million in 2059, $250 million in 2060, and $650 million in 2061.

Equity. At ~~September 30, 2021,~~March 31, 2022, total common stockholders’ equity was ~~$6.6~~$6.9 billion, common shares outstanding were ~~176,638,884~~265,186,251 and stockholders’ equity per outstanding share was ~~$37.64.~~$25.89. During the three months ended ~~September 30, 2021,~~March 31, 2022, the Company ~~repurchased 1,287,556~~did not repurchase any shares of its common ~~stock for $93 million. During the nine months ended September 30, 2021, the Company repurchased 1,752,619 shares of its common stock for $122 million.~~stock. In the ~~third~~first quarter of ~~2021,~~2022, the board of directors of the Company declared a regular quarterly cash dividend of ~~$0.13~~$0.09 cents per share. The number of common shares outstanding excludes shares held in a grantor trust established by the Company for delivery upon settlement of vested but mandatorily deferred RSUs.

Total Capital. Total capitalization (equity, debt and subordinated debentures) was ~~$9.9~~$9.7 billion at ~~September 30, 2021.~~March 31, 2022. The percentage of the Company’s capital attributable to senior notes, subordinated debentures and other debt was ~~33%~~29% at ~~September 30, 2021 and 30%~~March 31, 2022, down from 33% at December 31, ~~2020.~~2021.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Reference is made to the information under “Investments - Market Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14 as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting. During the quarter ended ~~September 30, 2021,~~March 31, 2022, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Please see Note 20 to the notes to the interim consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

~~Set forth below is a summary~~The Company did not repurchase any of ~~the~~its shares ~~repurchased by the Company~~ during the three months ended ~~September 30, 2021,~~March 31, 2022, and accordingly the number of shares ~~remaining~~ authorized for purchase by the ~~Company:~~

Total number
of shares purchased Average price
paid per share Total number of shares purchased
as part of publicly announced plans or programs Maximum number of
shares that may yet be purchased under the plans or programs
July 2021 50,985 $ 73.02 50,985 6,218,674
August 2021 496,171 $ 72.16 496,171 5,722,503
September 2021 740,400 $ 71.73 740,400 4,982,103
Company remains 15,000,000.

Item 6. Exhibits


Number
(10.1)						Form of ~~2021~~2022 Performance Unit Award Agreement under the W. R. Berkley Corporation 2019 Long-Term Incentive Plan.





(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.

5145

SIGNATURES

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


		W. R. BERKLEY CORPORATION
Date:	~~November 4, 2021~~May 3, 2022	/s/ W. Robert Berkley, Jr.
		W. Robert Berkley, Jr.
		President and Chief Executive Officer

Date:	~~November 4, 2021~~May 3, 2022	/s/ Richard M. Baio
		Richard M. Baio
		Executive Vice President - Chief Financial Officer

5246


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs



July 2021	50,985	$	73.02	50,985	6,218,674
August 2021	496,171	$	72.16	496,171	5,722,503
September 2021	740,400	$	71.73	740,400	4,982,103