UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:

September 30, ~~2010~~2011

Commission file number:

1-14527

EVEREST REINSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-3263609
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

477 Martinsville Road

Post Office Box 830

Liberty Corner, New Jersey 07938-0830

(908) 604-3000

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive office)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

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

Large accelerated filer		Accelerated filer
Non-accelerated filer	X	Smaller reporting company
(Do not check if smaller reporting company)

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

YES

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

	Number of Shares Outstanding
Class	At November 1, ~~2010~~2011
Common Shares, $0.01 par value		1,000

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

EVEREST REINSURANCE HOLDINGS, INC.

Table of Contents

Form 10-Q

Page

PART I

FINANCIAL INFORMATION


Item 1.	Financial Statements

	Consolidated Balance Sheets at September 30, ~~2010~~2011 (unaudited) and
		December 31, ~~2009~~2010	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for
		the three and nine months ended September 30, ~~2010~~2011 and ~~2009~~2010 (unaudited)	2

	Consolidated Statements of Changes in Stockholder’s Equity for the three and
		nine months ended September 30, ~~2010~~2011 and ~~2009~~2010 (unaudited)	3

	Consolidated Statements of Cash Flows for the three and nine months ended
		September 30, ~~2010~~2011 and ~~2009~~2010 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and
		Results of Operation	2726

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4642

Item 4.	Controls and Procedures		4642

PART II

OTHER INFORMATION


Item 1.	Legal Proceedings	4642

Item 1A.	Risk Factors	4643

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4643

Item 3.	Defaults Upon Senior Securities	4643

Item 4.	Reserved	4643

Item 5.	Other Information	4743

Item 6.	Exhibits	4743

Table of Contents

Part I

ITEM 1. FINANCIAL STATEMENTS

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
(Dollars in thousands, except par value per share)	2011		2010
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value	$	5,070,084	$	5,599,940
(amortized cost: 2011, $4,857,294; 2010, $5,438,359)
Fixed maturities - available for sale, at fair value		120,597		180,482
Equity securities - available for sale, at market value (cost: 2011, $15; 2010, $15)		11		13
Equity securities - available for sale, at fair value		1,099,456		683,454
Short-term investments		535,915		516,885
Other invested assets (cost: 2011, $394,153; 2010, $405,401)		394,153		406,916
Other invested assets, at fair value		771,571		788,142
Cash		265,012		118,092
Total investments and cash		8,256,799		8,293,924
Accrued investment income		56,977		70,874
Premiums receivable		794,523		643,257
Reinsurance receivables - unaffiliated		581,986		670,168
Reinsurance receivables - affiliated		3,042,544		2,708,193
Funds held by reinsureds		176,677		171,179
Deferred acquisition costs		172,380		184,247
Prepaid reinsurance premiums		600,642		629,323
Deferred tax asset		285,675		183,924
Federal income taxes recoverable		132,826		142,421
Other assets		226,285		171,923
TOTAL ASSETS	$	14,327,314	$	13,869,433

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	8,165,262	$	7,652,303
Unearned premium reserve		1,216,965		1,287,476
Funds held under reinsurance treaties		83,145		180,377
Losses in the course of payment		39,766		13,089
Commission reserves		32,520		37,796
Other net payable to reinsurers		622,445		467,486
Revolving credit borrowings		-		50,000
5.4% Senior notes due 10/15/2014		249,847		249,812
6.6% Long term notes due 5/1/2067		238,353		238,351
Junior subordinated debt securities payable		329,897		329,897
Accrued interest on debt and borrowings		12,092		4,793
Other liabilities		253,632		230,312
Total liabilities		11,243,924		10,741,692

Commitments and Contingencies (Note 6)

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized;
1,000 shares issued and outstanding (2011 and 2010)		-		-
Additional paid-in capital		332,647		327,767
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $109,416 at 2011 and $88,289 at 2010		203,200		163,966
Retained earnings		2,547,543		2,636,008
Total stockholder's equity		3,083,390		3,127,741
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	14,327,314	$	13,869,433

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

September 30, December 31,
(Dollars in thousands, except par value per share) 2010 2009
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value $ 6,368,800 $ 6,463,168
     (amortized cost: 2010, $6,024,830; 2009, $6,255,759)
Fixed maturities - available for sale, at fair value 116,376 50,528
Equity securities - available for sale, at market value (cost: 2010, $15; 2009, $15) 12 13
Equity securities - available for sale, at fair value 382,279 380,025
Short-term investments 304,880 261,438
Other invested assets (cost: 2010, $395,027; 2009, $387,200) 394,615 386,326
Other invested assets, at fair value 752,533 382,639
Cash 92,954 107,480
         Total investments and cash 8,412,449 8,031,617
Accrued investment income 76,368 83,705
Premiums receivable 718,307 769,744
Reinsurance receivables - unaffiliated 679,066 618,081
Reinsurance receivables - affiliated 2,721,300 2,492,152
Funds held by reinsureds 168,235 156,223
Deferred acquisition costs 194,988 183,498
Prepaid reinsurance premiums 646,757 562,146
Deferred tax asset 133,607 210,493
Federal income taxes recoverable 75,273 135,682
Other assets 188,947 136,234
TOTAL ASSETS $ 14,015,297 $ 13,379,575

LIABILITIES:
Reserve for losses and loss adjustment expenses $ 7,611,614 $ 7,300,139
Unearned premium reserve 1,350,522 1,239,320
Funds held under reinsurance treaties 173,315 175,257
Commission reserves 37,712 50,897
Other net payable to reinsurers 573,443 444,535
Revolving credit borrowings 83,000 -
8.75% Senior notes due 3/15/2010 - 199,970
5.4% Senior notes due 10/15/2014 249,801 249,769
6.6% Long term notes due 05/01/2067 238,350 238,348
Junior subordinated debt securities payable 329,897 329,897
Accrued interest on debt and borrowings 12,129 9,885
Other liabilities 248,574 282,784
         Total liabilities 10,908,357 10,520,801

Commitments and Contingencies (Note 6)

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized;
     1,000 shares issued and outstanding (2010 and 2009) - -
Additional paid-in capital 326,478 321,185
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) of
     $144,977 at 2010 and $89,912 at 2009 269,241 166,978
Retained earnings (deficit) 2,511,221 2,370,611
         Total stockholder's equity 3,106,940 2,858,774
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 14,015,297 $ 13,379,575

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

Table of Contents

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended					Nine Months Ended						Three Months Ended							Nine Months Ended
	September 30,					September 30,						September 30,							September 30,
(Dollars in thousands)	2010			2009		2010			2009			2011			2010				2011			2010
	(unaudited)					(unaudited)						(unaudited)							(unaudited)
REVENUES:
Premiums earned	$	465,302		$	438,320	$	1,322,160		$	1,337,539		$	442,862		$	465,302			$	1,354,305		$	1,322,160
Net investment income		74,212			65,492		248,665			179,667			78,325			74,212				249,916			248,665
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities		(2,023	)		-		(2,023	)		(5,510	)		(911	)		(2,023	)			(14,522	)		(2,023	)
Other-than-temporary impairments on fixed maturity securities																		��
transferred to other comprehensive income (loss)		-			-		-			-			-			-				-			-
Other net realized capital gains (losses)		161,592			101,394		60,812			61,661			(178,125	)		161,592				(192,222	)		60,812
Total net realized capital gains (losses)		159,569			101,394		58,789			56,151			(179,036	)		159,569				(206,744	)		58,789
Realized gain on debt repurchase		-			-		-			78,271
Other income (expense)		(3,617	)		15,081		10,204			7,801			(8,865	)		(3,617	)			(20,401	)		10,204
Total revenues		695,466			620,287		1,639,818			1,659,429			333,286			695,466				1,377,076			1,639,818

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		326,925			241,992		1,068,678			777,295			322,099			326,925				1,187,936			1,068,678
Commission, brokerage, taxes and fees		81,455			77,259		237,493			252,401			70,842			81,455				239,659			237,493
Other underwriting expenses		37,230			38,189		105,315			104,355			42,708			37,230				120,148			105,315
Corporate expenses		1,529			1,675		5,218			4,871			1,143			1,529				3,498			5,218
Interest, fee and bond issue cost amortization expense		12,817			17,073		41,879			53,779			12,706			12,817				38,083			41,879
Total claims and expenses		459,956			376,188		1,458,583			1,192,701			449,498			459,956				1,589,324			1,458,583

INCOME (LOSS) BEFORE TAXES		235,510			244,099		181,235			466,728			(116,212	)		235,510				(212,248	)		181,235
Income tax expense (benefit)		66,858			79,958		40,625			128,423			(116,473	)		66,858				(123,783	)		40,625

NET INCOME (LOSS)	$	168,652		$	164,141	$	140,610		$	338,305		$	261		$	168,652			$	(88,465	)	$	140,610

Other comprehensive income (loss), net of tax		65,718			162,343		102,263			285,123			3,981			65,718				39,234			102,263

COMPREHENSIVE INCOME (LOSS)	$	234,370		$	326,484	$	242,873		$	623,428		$	4,242		$	234,370			$	(49,231	)	$	242,873

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

Table of Contents

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

	Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,				September 30,						September 30,				September 30,
(Dollars in thousands, except share amounts)	2010		2009		2010		2009				2011		2010		2011			2010
	(unaudited)				(unaudited)						(unaudited)				(unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period		1,000		1,000		1,000		1,000				1,000		1,000		1,000			1,000
Balance, end of period		1,000		1,000		1,000		1,000				1,000		1,000		1,000			1,000

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	324,156	$	318,492	$	321,185	$	315,771			$	330,990	$	324,156	$	327,767		$	321,185
Share-based compensation plans		2,322		1,395		5,293		4,116				1,657		2,322		4,880			5,293
Balance, end of period		326,478		319,887		326,478		319,887				332,647		326,478		332,647			326,478

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period		203,523		35,217		166,978		(72,063	)			199,219		203,523		163,966			166,978
Cumulative adjustment of initial adoption(1), net of tax		-		-		-		(15,500	)
Net increase (decrease) during the period		65,718		162,343		102,263		285,123				3,981		65,718		39,234			102,263
Balance, end of period		269,241		197,560		269,241		197,560				203,200		269,241		203,200			269,241

RETAINED EARNINGS (DEFICIT):
RETAINED EARNINGS:
Balance, beginning of period		2,342,569		2,148,924		2,370,611		1,959,260				2,547,282		2,342,569		2,636,008			2,370,611
Cumulative adjustment of initial adoption(1), net of tax		-		-		-		15,500
Net income (loss)		168,652		164,141		140,610		338,305				261		168,652		(88,465	)		140,610
Balance, end of period		2,511,221		2,313,065		2,511,221		2,313,065				2,547,543		2,511,221		2,547,543			2,511,221

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD	$	3,106,940	$	2,830,512	$	3,106,940	$	2,830,512			$	3,083,390	$	3,106,940	$	3,083,390		$	3,106,940

(1) The cumulative adjustment to accumulated other comprehensive income (loss), net of deferred income taxes, and retained earnings (deficit), represents the effect of initially
adopting new guidance for other-than-temporary impairments of debt securities.

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

Table of Contents

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2011			2010			2011			2010
	(unaudited)						(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	261		$	168,652		$	(88,465	)	$	140,610
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(21,017	)		29,733			(149,561	)		54,616
Decrease (increase) in funds held by reinsureds, net		(94,290	)		2,829			(102,102	)		(13,433	)
Decrease (increase) in reinsurance receivables		112,376			(71,235	)		(243,523	)		(299,032	)
Decrease (increase) in deferred tax asset		(137,225	)		76,238			(122,876	)		21,823
Decrease (increase) in prepaid reinsurance premiums		(33,514	)		(68,171	)		28,649			(84,363	)
Increase (decrease) in reserve for losses and loss adjustment expenses		(96,587	)		15,455			489,779			305,807
Increase (decrease) in unearned premiums		29,928			100,938			(73,434	)		108,080
Change in equity adjustments in limited partnerships		(12,190	)		(1,071	)		(44,544	)		(19,367	)
Change in other assets and liabilities, net		111,571			(15,569	)		215,035			127,052
Non-cash compensation expense		1,584			2,273			4,638			5,153
Amortization of bond premium (accrual of bond discount)		(17	)		3,579			6,897			8,196
Amortization of underwriting discount on senior notes		12			12			36			65
Net realized capital (gains) losses		179,036			(159,569	)		206,744			(58,789	)
Net cash provided by (used in) operating activities		39,928			84,094			127,273			296,418

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		262,235			173,079			525,768			481,948
Proceeds from fixed maturities matured/called - available for sale, at fair value		-			-			12,775			-
Proceeds from fixed maturities sold - available for sale, at market value		255,913			85,667			1,042,803			457,230
Proceeds from fixed maturities sold - available for sale, at fair value		12,512			10,689			62,632			19,301
Proceeds from equity securities sold - available for sale, at market value		-			-			27,096			-
Proceeds from equity securities sold - available for sale, at fair value		61,080			14,899			150,776			87,641
Distributions from other invested assets		13,487			14,148			103,262			38,028
Cost of fixed maturities acquired - available for sale, at market value		(285,414	)		(138,332	)		(995,210	)		(693,908	)
Cost of fixed maturities acquired - available for sale, at fair value		(9,801	)		(56,937	)		(25,025	)		(80,618	)
Cost of equity securities acquired - available for sale, at market value		-			-			(27,059	)		-
Cost of equity securities acquired - available for sale, at fair value		(340,493	)		(20,938	)		(679,764	)		(71,817	)
Cost of other invested assets acquired		(2,393	)		(8,115	)		(47,471	)		(26,489	)
Cost of other invested assets acquired, at fair value		-			(80,765	)		(37,611	)		(327,876	)
Cost of businesses acquired		-			-			(63,100	)		-
Net change in short-term investments		29,080			(52,975	)		(18,105	)		(43,054	)
Net change in unsettled securities transactions		(14,007	)		1,936			30,834			(33,584	)
Net cash provided by (used in) investing activities		(17,801	)		(57,644	)		62,601			(193,198	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation		73			49			242			140
Net cost of senior notes maturing		-			-			-			(200,000	)
Revolving credit borrowings		(40,000	)		(50,000	)		(50,000	)		83,000
Net cash provided by (used in) financing activities		(39,927	)		(49,951	)		(49,758	)		(116,860	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(5,553	)		9,608			6,804			(886	)

Net increase (decrease) in cash		(23,353	)		(13,893	)		146,920			(14,526	)
Cash, beginning of period		288,365			106,847			118,092			107,480
Cash, end of period	$	265,012		$	92,954		$	265,012		$	92,954

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	4,149		$	(3,202	)	$	(16,616	)	$	(52,592	)
Interest paid		5,228			5,339			30,269			39,104

Non-cash transaction:
Net assets acquired and liabilities assumed from business acquisitions		-			-			19,130			-

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

Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 168,652 $ 164,141 $ 140,610 $ 338,305
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable 29,733 (1,371 ) 54,616 (51,192 )
Decrease (increase) in funds held by reinsureds, net 2,829 9,624 (13,433 ) 9,459
Decrease (increase) in reinsurance receivables (71,235 ) 146,809 (299,032 ) (6,656 )
Decrease (increase) in deferred tax asset 76,238 41,994 21,823 74,970
Increase (decrease) in reserve for losses and loss adjustment expenses 15,455 (35,920 ) 305,807 (218,365 )
Increase (decrease) in unearned premiums 100,938 95,297 108,080 91,611
Change in equity adjustments in limited partnerships (1,071 ) 4,423 (19,367 ) 36,548
Change in other assets and liabilities, net (83,740 ) (161,038 ) 42,689 83,477
Non-cash compensation expense 2,273 1,384 5,153 4,091
Amortization of bond premium (accrual of bond discount) 3,579 3,824 8,196 8,802
Amortization of underwriting discount on senior notes 12 48 65 142
Realized gain on debt repurchase - - - (78,271 )
Net realized capital (gains) losses (159,569 ) (101,394 ) (58,789 ) (56,151 )
Net cash provided by (used in) operating activities 84,094 167,821 296,418 236,770

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 173,079 130,349 481,948 324,432
Proceeds from fixed maturities matured/called - available for sale, at fair value - - - 5,570
Proceeds from fixed maturities sold - available for sale, at market value 85,667 34,602 457,230 87,696
Proceeds from fixed maturities sold - available for sale, at fair value 10,689 4,010 19,301 12,012
Proceeds from equity securities sold - available for sale, at market value - 23,028 - 23,028
Proceeds from equity securities sold - available for sale, at fair value 14,899 11,310 87,641 23,535
Distributions from other invested assets 14,148 4,448 38,028 24,573
Cost of fixed maturities acquired - available for sale, at market value (138,332 ) (256,130 ) (693,908 ) (865,910 )
Cost of fixed maturities acquired - available for sale, at fair value (56,937 ) (2,548 ) (80,618 ) (19,101 )
Cost of equity securities acquired - available for sale, at fair value (20,938 ) (12,948 ) (71,817 ) (32,244 )
Cost of other invested assets acquired (8,115 ) (9,780 ) (26,489 ) (26,122 )
Cost of other invested assets acquired, at fair value (80,765 ) - (327,876 ) -
Net change in short-term investments (52,975 ) (86,179 ) (43,054 ) 284,738
Net change in unsettled securities transactions 1,936 18,522 (33,584 ) 42,856
Net cash provided by (used in) investing activities (57,644 ) (141,316 ) (193,198 ) (114,937 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation 49 11 140 25
Net cost of senior notes maturing - - (200,000 ) -
Revolving credit borrowings (50,000 ) - 83,000 -
Net cost of debt repurchase - - - (83,026 )
Net cash provided by (used in) financing activities (49,951 ) 11 (116,860 ) (83,001 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH 9,608 3,411 (886 ) (5,968 )

Net increase (decrease) in cash (13,893 ) 29,927 (14,526 ) 32,864
Cash, beginning of period 106,847 95,201 107,480 92,264
Cash, end of period $ 92,954 $ 125,128 $ 92,954 $ 125,128

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash transactions:
Income taxes paid (recovered) $ (3,202 ) $ (18,847 ) $ (52,592 ) $ (2,488 )
Interest paid 5,339 13,892 39,104 51,464

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

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NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Nine Months Ended September 30, ~~2010~~2011 and ~~2009~~2010

~~1. GENERAL~~

GENERAL

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

2.	BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company for the three and nine months ended September 30, ~~2010~~2011 and ~~2009~~2010 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), has been omitted since it is not required for interim reporting purposes. The December 31, ~~2009~~2010 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three and nine months ended September 30, 2011 and 2010 ~~and 2009 a re~~are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007~~2008 included in the Company’s most recent Form 10-K filing.

All intercompany accounts and transactions have been eliminated.

Certain reclassifications and format changes have been made to prior years’ amounts to conform to the ~~2010~~2011 presentation.

~~Financial Accounting Standards Board Accounting Codification~~

~~Financial Accounting Standards Board Launched Accounting Codification.~~ ~~In June 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance establishing the FASB Accounting Standards Codification~~TM (“Codification”) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other no n-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

Following the Codification, the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

GAAP is not intended to be changed as a result of the FASB’s Codification, but it will change the way the guidance is organized and presented. As a result, these changes will have a significant impact on how companies reference GAAP in their financial statements and in the accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009. The Company’s adoption of this guidance impacts the way the Company references U.S. GAAP accounting standards in the financial statements and Notes to Consolidated ~~Financial Statements.~~

~~Table of Contents~~

Application of Recently Issued Accounting Standard Changes

Financial Accounting Standards Board Launched Accounting Codification. In June 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance establishing the FASB Accounting Standards CodificationTM (“Codification”) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

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Presentation of Comprehensive Income. In June 2011, FASB issued amendments to existing guidance to provide two alternatives for the presentation of comprehensive income. Components of net income and comprehensive income will either be presented within a single, continuous financial statement or be presented in two separate but consecutive financial statements. The guidance is effective for reporting periods beginning after December 15, 2011. The Company will adopt this guidance as of January 1, 2012 and expects to present net income and comprehensive income in a single, continuous financial statement.

Common Fair Value Measurement. In May 2011, FASB issued amendments to existing guidance to achieve common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards. The amendments change wording used to describe many GAAP fair value measurement requirements and disclosures. FASB does not intend for the amendments to cause a change in application of fair value accounting guidance. The guidance is effective for reporting periods beginning after December 15, 2011. The Company will adopt this guidance prospectively as of January 1, 2012.

Treatment of Insurance Contract Acquisition Costs. In October 2010, the FASB issued authoritative guidance for the accounting for costs associated with acquiring or renewing insurance contracts. The guidance identifies the incremental direct costs of contract acquisition and costs directly related to acquisition activities that should be capitalized. This guidance is effective for reporting periods beginning after December 15, 2011. The Company will adopt this guidance as of January 1, 2012. The Company is in the process of determining the effect on its consolidated financial statements.

Subsequent Events. In May 2009, the FASB issued authoritative guidance for subsequent events, which was later modified in February 2010, that addresses the accounting for and disclosure of subsequent events not addressed in other applicable U.S. GAAP. The Company implemented the new disclosure requirement beginning with the second quarter of 2009 and included it in the Notes to Consolidated Interim Financial Statements.

Improving Disclosures About Fair Value Measurements. In January 2010, the FASB amended the authoritative guidance for disclosures on fair value measurements. Effective for interim and annual reporting periods beginning after December 15, 2009, the guidance requires a new separate disclosure for: significant transfers in and out of Level 1 and 2 and the reasons for the transfers; and provided clarification on existing disclosures to include: fair value measurement disclosures by class of assets and liabilities and disclosure on valuation techniques and inputs used to measure fair value that fall in either Level 2 or Level 3. The Company implemented this guidance effective January 1, 2010. Effective for interim and annual reporting periods beginning after December 15, 2010, the guidance requires another new separate disclosure in regards to Level 3 fair value measurements in that, the period activity will present separately information about purchases, sales, issuances and settlements. Comparative disclosures shall be required only for periods ending after initial adoption. The Company implemented ~~the first part of~~ this guidance ~~effective January 1, 2010.~~

~~Interim Disclosures About Fair Value of Financial Instruments.~~ In April 2009, the FASB revised the authoritative guidance for disclosures about fair value of financial instruments. This new guidance requires quarterly disclosures on the qualitative and quantitative information about the fair value of all financial instruments including methods and significant assumptions used to estimate fair value during the period. These disclosures were previously only done annually. The Company adopted this disclosure beginning with the ~~second~~third quarter of ~~2009 and included it in the Notes to Consolidated Interim Financial Statements.~~2010.

Other-Than-Temporary Impairments on Investment Securities. In April 2009, the FASB revised the authoritative guidance for the recognition and presentation of other-than-temporary impairments. This new guidance amends the recognition guidance for other-than-temporary impairments of debt securities and expands the financial statement disclosures for other-than-temporary impairments on debt and equity securities. For available for sale debt securities that the Company has no intent to sell and more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment would be recognized in earnings, while the rest of the fair value loss would be recognized in accumulated ~~ot her~~other comprehensive ~~income.~~income (loss). The Company adopted this guidance effective April 1, 2009. Upon adoption the Company recognized a cumulative-effect adjustment increase in retained earnings ~~(deficit)~~ and decrease in accumulated other comprehensive income (loss) as follows:

(Dollars in thousands)
Cumulative-effect adjustment, gross	$	23,846
Tax		(8,346	)
Cumulative-effect adjustment, net	$	15,500

~~Measurement of Fair Value in Inactive Markets.~~ In April 2009, the FASB revised the authoritative guidance for fair value measurements and disclosures, which reaffirms that fair value is 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 under current market conditions. It also reaffirms the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. There was no impact to the Company’s financial statements upon adoption.

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3. INVESTMENTS

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity and equity security investments, carried at market value, are as follows for the periods indicated:

	At September 30, 2010									At September 30, 2011
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		Cost		Appreciation		Depreciation			Value
Fixed maturity securities - available for sale
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	151,672	$	6,417	$	(277	)	$	157,812	$	84,516	$	2,120	$	(857	)	$	85,779
Obligations of U.S. states and political subdivisions		3,405,935		220,320		(4,202	)		3,622,053		1,742,305		112,418		(572	)		1,854,151
Corporate securities		708,637		51,158		(7,527	)		752,268		1,016,890		39,715		(27,996	)		1,028,609
Asset-backed securities		25,362		546		(206	)		25,702		44,251		987		(82	)		45,156
Mortgage-backed securities
Commercial		32,513		8,133		-			40,646		41,829		6,926		(2,030	)		46,725
Agency residential		386,496		17,406		(107	)		403,795		388,896		17,957		(347	)		406,506
Non-agency residential		30,047		922		(1,046	)		29,923		25,779		362		(124	)		26,017
Foreign government securities		705,941		41,349		(7,461	)		739,829		804,875		58,999		(5,115	)		858,759
Foreign corporate securities		578,227		27,985		(9,440	)		596,772		707,953		29,573		(19,144	)		718,382
Total fixed maturity securities	$	6,024,830	$	374,236	$	(30,266	)	$	6,368,800	$	4,857,294	$	269,057	$	(56,267	)	$	5,070,084
Equity securities	$	15	$	-	$	(3	)	$	12	$	15	$	-	$	(4	)	$	11

	At December 31, 2009									At December 31, 2010
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		Cost		Appreciation		Depreciation			Value
Fixed maturity securities - available for sale
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	132,348	$	3,614	$	(1,671	)	$	134,291	$	153,263	$	2,450	$	(5,146	)	$	150,567
Obligations of U.S. states and political subdivisions		3,694,267		183,848		(24,256	)		3,853,859		2,809,514		116,920		(24,929	)		2,901,505
Corporate securities		618,507		30,298		(13,424	)		635,381		688,938		42,522		(9,775	)		721,685
Asset-backed securities		16,597		460		(1,909	)		15,148		19,860		705		(14	)		20,551
Mortgage-backed securities
Commercial		24,213		4,956		(111	)		29,058		31,887		7,618		-			39,505
Agency residential		556,032		10,366		(1,691	)		564,707		355,928		13,975		(212	)		369,691
Non-agency residential		61,098		916		(7,055	)		54,959		29,373		912		(317	)		29,968
Foreign government securities		638,204		27,700		(6,687	)		659,217		731,930		32,678		(15,567	)		749,041
Foreign corporate securities		514,493		17,184		(15,129	)		516,548		617,666		20,939		(21,178	)		617,427
Total fixed maturity securities	$	6,255,759	$	279,342	$	(71,933	)	$	6,463,168	$	5,438,359	$	238,719	$	(77,138	)	$	5,599,940
Equity securities	$	15	$	-	$	(2	)	$	13	$	15	$	-	$	(2	)	$	13

In accordance with FASB guidance, the Company reclassified the non-credit portion of other-than-temporary impairments from retained earnings ~~(deficit)~~ into accumulated other comprehensive income (loss), on April 1, 2009. The table below presents the pre-tax cumulative unrealized appreciation (depreciation) on those corporate securities, for the periods indicated:

(Dollars in thousands)		At September 30, 2010				At December 31, 2009				At September 30, 2011			At December 31, 2010
Pre-tax cumulative unrealized appreciation (depreciation)		$	927			$	(2,039	)		$	691		$	823

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

	At September 30, 2010				At December 31, 2009				At September 30, 2011				At December 31, 2010
	Amortized		Market		Amortized		Market		Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value		Cost		Value		Cost		Value
Fixed maturity securities – available for sale
Due in one year or less	$	242,466	$	241,645	$	334,054	$	335,948	$	190,497	$	188,938	$	212,728	$	207,739
Due after one year through five years		1,563,006		1,632,360		1,276,968		1,316,918		1,959,056		2,021,715		1,642,227		1,681,497
Due after five years through ten years		1,243,788		1,337,647		1,224,457		1,282,470		1,023,905		1,071,801		1,203,497		1,253,609
Due after ten years		2,501,152		2,657,082		2,762,340		2,863,960		1,183,081		1,263,226		1,942,859		1,997,380
Asset-backed securities		25,362		25,702		16,597		15,148		44,251		45,156		19,860		20,551
Mortgage-backed securities
Commercial		32,513		40,646		24,213		29,058		41,829		46,725		31,887		39,505
Agency residential		386,496		403,795		556,032		564,707		388,896		406,506		355,928		369,691
Non-agency residential		30,047		29,923		61,098		54,959		25,779		26,017		29,373		29,968
Total fixed maturity securities	$	6,024,830	$	6,368,800	$	6,255,759	$	6,463,168	$	4,857,294	$	5,070,084	$	5,438,359	$	5,599,940

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

		Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
		September 30,						September 30,						September 30,						September 30,
(Dollars in thousands)		2010			2009			2010			2009			2011			2010			2011			2010
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities		$	83,578		$	229,219		$	133,595		$	396,245		$	11,911		$	83,578		$	51,341		$	133,595
Fixed maturity securities, cumulative other-than-temporary impairment adjustment			384			-			2,966			(23,846	)		(137	)		384			(132	)		2,966
Equity securities			(1	)		-			(2	)		(4	)		(1	)		(1	)		(1	)		(2	)
Other invested assets			(34	)		3,387			462			5,614			215			(34	)		(1,515	)		462
Change in unrealized appreciation (depreciation), pre-tax			83,927			232,606			137,021			378,009			11,988			83,927			49,693			137,021
Deferred tax benefit (expense)			(29,240	)		(81,412	)		(46,919	)		(140,649	)		(4,243	)		(29,240	)		(17,438	)		(46,919	)
Deferred tax benefit (expense), cumulative other-than-temporary impairment adjustment	Deferred tax benefit (expense), cumulative other-than-temporary impairment adjustment		(134	)		-			(1,038	)		8,346			48			(134	)		46			(1,038	)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in stockholder's equity		$	54,553		$	151,194		$	89,064		$	245,706
net of deferred taxes, included in shareholders’ equity														$	7,793		$	54,553		$	32,301		$	89,064

The Company frequently reviews its fixed maturity securities investment portfolio for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized ~~value~~cost at the time of review. The Company then assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute an other-than-temporary impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company determines that the decline is other-than-temporary and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the carrying value of the investment is written down to fair value. The fair value adjustment that is credit related is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company’s assessments are based on the issuers current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or ~~b reakeven~~

breakeven ~~Table of Contents~~

constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

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Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected and prepayments for pass-through security types.

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

		Duration of Unrealized Loss at September 30, 2010 By Security Type															Duration of Unrealized Loss at September 30, 2011 By Security Type
		Less than 12 months					Greater than 12 months					Total					Less than 12 months					Greater than 12 months					Total
				Gross					Gross					Gross					Gross					Gross					Gross
				Unrealized					Unrealized					Unrealized					Unrealized					Unrealized					Unrealized
(Dollars in thousands)		Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations		$	4,243	$	(97	)	$	3,467	$	(180	)	$	7,710	$	(277	)	$	14,174	$	(352	)	$	3,460	$	(505	)	$	17,634	$	(857	)
Obligations of U.S. states and political subdivisions	Obligations of U.S. states and political subdivisions		13,461		(34	)		102,649		(4,168	)		116,110		(4,202	)		-		-			7,472		(572	)		7,472		(572	)
Corporate securities			83,055		(1,046	)		47,949		(6,481	)		131,004		(7,527	)		373,892		(15,394	)		100,497		(12,602	)		474,389		(27,996	)
Asset-backed securities			-		-			519		(206	)		519		(206	)		9,365		(35	)		809		(47	)		10,174		(82	)
Mortgage-backed securities
Commercial																		8,471		(2,030	)		-		-			8,471		(2,030	)
Agency residential			17,878		(107	)		-		-			17,878		(107	)		57,452		(313	)		8,384		(34	)		65,836		(347	)
Non-agency residential			-		-			22,747		(1,046	)		22,747		(1,046	)		-		-			21,344		(124	)		21,344		(124	)
Foreign government securities			74,145		(2,922	)		82,024		(4,539	)		156,169		(7,461	)		18,055		(310	)		77,907		(4,805	)		95,962		(5,115	)
Foreign corporate securities			57,169		(1,070	)		86,221		(8,370	)		143,390		(9,440	)		118,987		(5,714	)		90,007		(13,430	)		208,994		(19,144	)
Total fixed maturity securities		$	249,951	$	(5,276	)	$	345,576	$	(24,990	)	$	595,527	$	(30,266	)	$	600,396	$	(24,148	)	$	309,880	$	(32,119	)	$	910,276	$	(56,267	)
Equity securities			-		-			12		(3	)		12		(3	)		-		-			11		(4	)		11		(4	)
Total		$	249,951	$	(5,276	)	$	345,588	$	(24,993	)	$	595,539	$	(30,269	)	$	600,396	$	(24,148	)	$	309,891	$	(32,123	)	$	910,287	$	(56,271	)

	Duration of Unrealized Loss at September 30, 2010 By Maturity															Duration of Unrealized Loss at September 30, 2011 By Maturity
	Less than 12 months					Greater than 12 months					Total					Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross					Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized					Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	7,995	$	(408	)	$	48,026	$	(5,556	)	$	56,021	$	(5,964	)	$	12,234	$	(129	)	$	18,447	$	(5,075	)	$	30,681	$	(5,204	)
Due in one year through five years		132,797		(2,662	)		98,042		(5,836	)		230,839		(8,498	)		205,065		(8,562	)		204,429		(18,107	)		409,494		(26,669	)
Due in five years through ten years		73,149		(2,042	)		26,831		(1,921	)		99,980		(3,963	)		275,555		(12,380	)		26,392		(2,368	)		301,947		(14,748	)
Due after ten years		18,132		(57	)		149,411		(10,425	)		167,543		(10,482	)		32,254		(699	)		30,075		(6,364	)		62,329		(7,063	)
Asset-backed securities		-		-			519		(206	)		519		(206	)		9,365		(35	)		809		(47	)		10,174		(82	)
Mortgage-backed securities		17,878		(107	)		22,747		(1,046	)		40,625		(1,153	)		65,923		(2,343	)		29,728		(158	)		95,651		(2,501	)
Total fixed maturity securities	$	249,951	$	(5,276	)	$	345,576	$	(24,990	)	$	595,527	$	(30,266	)	$	600,396	$	(24,148	)	$	309,880	$	(32,119	)	$	910,276	$	(56,267	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position ~~as of~~at September 30, ~~2010~~2011 were ~~$595,539~~$910,287 thousand and ~~$30,269~~$56,271 thousand, respectively. There were no unrealized losses on a single ~~security~~issuer that exceeded ~~0.06%~~0.1% of the market value of the fixed maturity securities at September 30, ~~2010.~~2011. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The ~~$5,276~~$24,148 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of ~~highly rated foreign government and~~ domestic and foreign corporate securities and commercial mortgage-backed securities. Of these unrealized losses, ~~$4,488~~$10,780 thousand were related to ~~securiti es~~securities that were rated investment grade by at least one nationally recognized statistical rating organization. The ~~$24,993 thousand~~majority of the unrealized losses related to foreign corporate and foreign government securities are due to currency

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exchange rate movements as opposed to market value movements. The non-investment grade securities with unrealized losses were mainly comprised of corporate securities. The $32,119 thousand of unrealized losses related to fixed maturity ~~and equity securities~~ in an unrealized loss position for more than one year related primarily to ~~highly rated~~ domestic and foreign corporate and foreign government securities. Of these unrealized losses, $24,671 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The majority of the unrealized losses related to foreign government and foreign corporate securities are due to currency exchange rate movements as opposed to market value movements. The gross unrealized depreciation greater than 12 months for mortgage-backed securities included $88 thousand related to sub-prime and alt-A loans. In all instances, projected cash flows were sufficient to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. Unrealized losses at September 30, 2011 are comparable with unrealized losses at December 31, 2010.

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

	Duration of Unrealized Loss at December 31, 2010 By Security Type
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	47,985	$	(1,916	)	$	43,264	$	(3,230	)	$	91,249	$	(5,146	)
Obligations of U.S. states and political subdivisions		336,522		(9,519	)		171,812		(15,410	)		508,334		(24,929	)
Corporate securities		74,389		(2,715	)		33,109		(7,060	)		107,498		(9,775	)
Asset-backed securities		3,900		(14	)		-		-			3,900		(14	)
Mortgage-backed securities
Agency residential		20,867		(212	)		-		-			20,867		(212	)
Non-agency residential		-		-			22,439		(317	)		22,439		(317	)
Foreign government securities		92,123		(3,776	)		124,807		(11,791	)		216,930		(15,567	)
Foreign corporate securities		120,294		(5,512	)		121,304		(15,666	)		241,598		(21,178	)
Total fixed maturity securities	$	696,080	$	(23,664	)	$	516,735	$	(53,474	)	$	1,212,815	$	(77,138	)
Equity securities		-		-			13		(2	)		13		(2	)
Total	$	696,080	$	(23,664	)	$	516,748	$	(53,476	)	$	1,212,828	$	(77,140	)

	Duration of Unrealized Loss at December 31, 2010 By Maturity
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	5,982	$	(319	)	$	48,233	$	(8,089	)	$	54,215	$	(8,408	)
Due in one year through five years		186,524		(9,059	)		129,197		(11,559	)		315,721		(20,618	)
Due in five years through ten years		139,896		(4,356	)		92,692		(8,215	)		232,588		(12,571	)
Due after ten years		338,911		(9,704	)		224,174		(25,294	)		563,085		(34,998	)
Asset-backed securities		3,900		(14	)		-		-			3,900		(14	)
Mortgage-backed securities		20,867		(212	)		22,439		(317	)		43,306		(529	)
Total fixed maturity securities	$	696,080	$	(23,664	)	$	516,735	$	(53,474	)	$	1,212,815	$	(77,138	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2010 were $1,212,828 thousand and $77,140 thousand, respectively. There were no unrealized losses on a single issuer that exceeded 0.09% of the market value of the fixed maturity securities at December 31, 2010. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $23,664 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were

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generally comprised of highly rated municipal, U.S. government, foreign government and domestic and foreign corporate securities. Of these unrealized losses, $23,424 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The $53,474 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year also related primarily to highly rated U.S. government, domestic and foreign corporate, foreign government and municipal securities. Of these unrealized losses, ~~$19,390~~$48,165 thousand related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The non-investment grade securities with unrealized losses were mainly comprised of corporate securities. The gross unrealized depreciation greater than 12 months for mortgage-backed securities included ~~$298~~$32 thousand related to sub-prime and alt-A loans. In all instances, projected cash flows were sufficient to recover the full book value of the investments and the related interest obligations. ~~Unrealized losses have decreased sinc e December 31, 2009, as a result of improved conditions in the overall financial market resulting from increased liquidity and lower interest rates.~~

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

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

Duration of Unrealized Loss at December 31, 2009 By Security Type
Less than 12 months Greater than 12 months Total
Gross Gross Gross
Unrealized Unrealized Unrealized
(Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $ 44,943 $ (1,671 ) $ - $ - $ 44,943 $ (1,671 )
Obligations of U.S. states and political subdivisions 559 (4 ) 452,018 (24,252 ) 452,577 (24,256 )
Corporate securities 45,045 (1,056 ) 118,153 (12,368 ) 163,198 (13,424 )
Asset-backed securities 366 (26 ) 8,233 (1,883 ) 8,599 (1,909 )
Mortgage-backed securities
Commercial 959 (34 ) 3,312 (77 ) 4,271 (111 )
Agency residential 213,093 (1,691 ) - - 213,093 (1,691 )
Non-agency residential 1,272 (31 ) 47,202 (7,024 ) 48,474 (7,055 )
Foreign government securities 159,493 (2,158 ) 69,109 (4,529 ) 228,602 (6,687 )
Foreign corporate securities 124,325 (4,205 ) 98,772 (10,924 ) 223,097 (15,129 )
Total fixed maturity securities $ 590,055 $ (10,876 ) $ 796,799 $ (61,057 ) $ 1,386,854 $ (71,933 )
Equity securities 13 (2 ) - - 13 (2 )
Total $ 590,068 $ (10,878 ) $ 796,799 $ (61,057 ) $ 1,386,867 $ (71,935 )

Duration of Unrealized Loss at December 31, 2009 By Maturity
Less than 12 months Greater than 12 months Total
Gross Gross Gross
Unrealized Unrealized Unrealized
(Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation
Fixed maturity securities
Due in one year or less $ - $ - $ 58,010 $ (4,887 ) $ 58,010 $ (4,887 )
Due in one year through five years 192,929 (2,975 ) 140,349 (9,129 ) 333,278 (12,104 )
Due in five years through ten years 137,196 (2,934 ) 54,279 (3,401 ) 191,475 (6,335 )
Due after ten years 44,240 (3,185 ) 485,414 (34,656 ) 529,654 (37,841 )
Asset-backed securities 366 (26 ) 8,233 (1,883 ) 8,599 (1,909 )
Mortgage-backed securities 215,324 (1,756 ) 50,514 (7,101 ) 265,838 (8,857 )
Total fixed maturity securities $ 590,055 $ (10,876 ) $ 796,799 $ (61,057 ) $ 1,386,854 $ (71,933 )

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The aggregate market value and gross unrealized losses related to investments in an unrealized loss position as of December 31, 2009 were $1,386,867 thousand and $71,935 thousand, respectively. There were no unrealized losses on a single security that exceeded 0.11% of the market value of the fixed maturity securities at December 31, 2009. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $10,878 thousand of unrealized losses related to fixed maturity and equity securities that have been in an unrealized loss position for less than one year were generally comprised of highly rated domestic and foreign government and corporate and mortgage-backed securities. Of these unrealized losses, $10,658 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The $61,057 thousand of unrealized losses related to securities in an unrealized loss position for more than one year related primarily to highly rated municipal, domestic and foreign corporate, foreign government and mortgage-backed securities. Of these unrealized losses, $50,505 thousand related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The non-investment grade securities with unrealized losses were mainly comprised of corporate and commercial mortgage-backed securities. The gross unrealized depreciation greater than 12 months for mortgage-backed securities included $73 thousand related to sub-prime and alt-A loans. In all instances, projected cash flows were sufficient to recover the full book value of the investments and the related interest obli gations. The mortgage-backed securities still had excess credit coverage and were current on interest and principal payments.

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(Dollars in thousands)	2010			2009			2010			2009			2011			2010			2011			2010
Fixed maturity securities	$	69,918		$	70,965		$	219,335		$	212,903		$	58,248		$	69,918		$	178,006		$	219,335
Equity securities		2,448			758			7,470			2,182			8,726			2,448			20,366			7,470
Short-term investments and cash		111			277			263			3,331			296			111			890			263
Other invested assets
Limited partnerships		1,071			(4,423	)		19,367			(36,548	)		12,399			1,071			44,753			19,367
Dividends from Parent's shares														4,665			4,016			13,979			9,569
Other		4,199			664			10,454			5,693			(1,520	)		183			3,203			885
Total gross investment income		77,747			68,241			256,889			187,561			82,814			77,747			261,197			256,889
Interest debited (credited) and other expense		(3,535	)		(2,749	)		(8,224	)		(7,894	)
Interest debited (credited) and other investment expense														(4,489	)		(3,535	)		(11,281	)		(8,224	)
Total net investment income	$	74,212		$	65,492		$	248,665		$	179,667		$	78,325		$	74,212		$	249,916		$	248,665

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

The Company had contractual commitments to invest up to an additional ~~$129,690~~$123,579 thousand in limited partnerships at September 30, ~~2010.~~2011. These commitments will be funded when called in accordance with the partnership agreements, which have investment periods that expire, unless extended, through ~~2014.~~2016.

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(Dollars in thousands)	2010			2009			2010			2009			2011			2010			2011			2010
Fixed maturity securities, market value:
Other-than-temporary impairments	$	(2,023	)	$	-		$	(2,023	)	$	(5,510	)	$	(911	)	$	(2,023	)	$	(14,522	)	$	(2,023	)
Gains (losses) from sales		(4,654	)		(4,131	)		(3,814	)		(32,612	)		2,699			(4,654	)		(15,589	)		(3,814	)
Fixed maturity securities, fair value:
Gains (losses) from sales		480			172			753			401			(16	)		480			(966	)		753
Gains (losses) from fair value adjustments		3,297			5,837			3,779			7,805			(5,014	)		3,297			(8,537	)		3,779
Equity securities, market value:
Gains (losses) from sales		-			8,041			-			8,041			-			-			37			-
Equity securities, fair value:
Gains (losses) from sales		951			1,299			(48	)		6,483			637			951			2,303			(48	)
Gains (losses) from fair value adjustments		34,912			23,075			18,126			23,448			(153,395	)		34,912			(115,288	)		18,126
Other invested assets, fair value:
Gains (losses) from fair value adjustments		126,608			67,103			42,018			48,091			(23,036	)		126,608			(54,181	)		42,018
Short-term investment gains (losses)		(2	)		(2	)		(2	)		4			-			(2	)		(1	)		(2	)
Total net realized capital gains (losses)	$	159,569		$	101,394		$	58,789		$	56,151		$	(179,036	)	$	159,569		$	(206,744	)	$	58,789

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

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(Dollars in thousands)	2010			2009			2010			2009			2011			2010			2011			2010
Proceeds from sales of fixed maturity securities	$	96,356		$	38,612		$	476,531		$	99,708		$	268,425		$	96,356		$	1,105,435		$	476,531
Gross gains from sales		642			2,278			7,963			4,584			11,572			642			29,154			7,963
Gross losses from sales		(4,816	)		(6,237	)		(11,024	)		(36,795	)		(8,889	)		(4,816	)		(45,709	)		(11,024	)

Proceeds from sales of equity secuities	$	14,899		$	34,338		$	87,641		$	46,563		$	61,080		$	14,899		$	177,872		$	87,641
Gross gains from sales		1,033			9,368			4,616			15,255			6,022			1,033			9,124			4,616
Gross losses from sales		(82	)		(28	)		(4,664	)		(731	)		(5,385	)		(82	)		(6,784	)		(4,664	)

4. FAIR VALUE

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

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In limited instances where prices are not provided by pricing services or in rare instances when a manager may not agree with the pricing service, price quotes on a non-binding basis are obtained from investment brokers. The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers. In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices. In addition, the Company tests the prices on a random basis to an independent pricing source. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount ~~rate s~~rates to determine fair value. The Company made no such adjustments at September 30, 2011 and 2010.

Equity securities in U.S. denominated currency are categorized as Level 1, Quoted Prices in Active Markets for Identical Assets, since the securities are actively traded on an exchange and prices are based on quoted prices from the exchange. Equity securities traded on foreign exchanges are categorized as Level 2 due to potential foreign exchange adjustments to fair or market value.

Fixed maturity securities are generally categorized as Level 2, Significant Other Observable Inputs, since a particular security may not have traded but the pricing services are able to use valuation models with observable market inputs such as interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority. Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk) are categorized as Level 3, Significant Unobservable Inputs. These securities include broker priced ~~securities and valuation of less liquid securities such as commercial mortgage-backed~~ securities.

Other invested assets, at fair value, are categorized as Level 1, Quoted Prices in Active Markets for Identical Assets, since the securities are shares of the Company’s parent, which are actively traded on an exchange and the price is based on a quoted price.

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

			Fair Value Measurement Using:								Fair Value Measurement Using:
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
(Dollars in thousands)	September 30, 2010		(Level 1)		(Level 2)		(Level 3)		September 30, 2011		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	157,812	$	-	$	157,812	$	-	$	85,779	$	-	$	85,779	$	-
Obligations of U.S. States and political subdivisions		3,622,053		-		3,622,053		-		1,854,151		-		1,854,151		-
Corporate securities		752,268		-		745,277		6,991		1,028,609		-		1,028,609		-
Asset-backed securities		25,702		-		25,183		519		45,156		-		42,842		2,314
Mortgage-backed securities
Commercial		40,646		-		40,646		-		46,725		-		46,725		-
Agency residential		403,795		-		403,795		-		406,506		-		406,506		-
Non-agency residential		29,923		-		29,461		462		26,017		-		26,010		7
Foreign government securities		739,829		-		739,829		-		858,759		-		858,759		-
Foreign corporate securities		596,772		-		596,772		-		718,382		-		715,824		2,558
Total fixed maturities, market value		6,368,800		-		6,360,828		7,972		5,070,084		-		5,065,205		4,879

Fixed maturities, fair value		116,376		-		116,376		-		120,597		-		120,597		-
Equity securities, market value		12		12		-		-		11		11		-		-
Equity securities, fair value		382,279		382,279		-		-		1,099,456		988,707		110,749		-
Other invested assets, fair value		752,533		752,533		-		-		771,571		771,571		-		-

~~There were no significant transfers between Level 1 and Level 2 for the nine months ended September 30, 2010.~~

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There were no significant transfers between Level 1 and Level 2 for the three and nine months ended September 30, 2011.

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

			Fair Value Measurement Using:								Fair Value Measurement Using:
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
(Dollars in thousands)	December 31, 2009		(Level 1)		(Level 2)		(Level 3)		December 31, 2010		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	134,291	$	-	$	134,291	$	-	$	150,567	$	-	$	150,567	$	-
Obligations of U.S. States and political subdivisions		3,853,859		-		3,853,859		-		2,901,505		-		2,901,505		-
Corporate securities		635,381		-		628,451		6,930		721,685		-		721,685		-
Asset-backed securities		15,148		-		8,890		6,258		20,551		-		19,590		961
Mortgage-backed securities
Commercial		29,058		-		29,058		-		39,505		-		39,505		-
Agency residential		564,707		-		564,707		-		369,691		-		369,691		-
Non-agency residential		54,959		-		54,533		426		29,968		-		29,510		458
Foreign government securities		659,217		-		659,217		-		749,041		-		749,041		-
Foreign corporate securities		516,548		-		516,548		-		617,427		-		613,792		3,635
Total fixed maturities, market value		6,463,168		-		6,449,554		13,614		5,599,940		-		5,594,886		5,054

Fixed maturities, fair value		50,528		-		50,528		-		180,482		-		180,482		-
Equity securities, market value		13		13		-		-		13		13		-		-
Equity securities, fair value		380,025		379,058		967		-		683,454		683,454		-		-
Other invested assets, fair value		382,639		382,639		-		-		788,142		788,142		-		-

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

		By Asset
		Three Months Ended September 30, 2010											Nine Months Ended September 30, 2010													Three Months Ended September 30, 2011												Nine Months Ended September 30, 2011
		Corporate		Asset-backed			Non-agency						Corporate			Asset-backed			Non-agency							Asset-backed			Foreign			Non-agency						Asset-backed			Foreign			Non-agency
(Dollars in thousands)		Securities		Securities			RMBS			Total			Securities			Securities			RMBS			Total				Securities			Corporate			RMBS			Total			Securities			Corporate			RMBS			Total
Beginning balance		$	6,965	$	6,562		$	497		$	14,024		$	6,930		$	6,258		$	426		$	13,614			$	2,466		$	-		$	381		$	2,847		$	961		$	3,635		$	458		$	5,054
Total gains or (losses) (realized/unrealized)	Total gains or (losses) (realized/unrealized)
Included in earnings (or changes in net assets)	Included in earnings (or changes in net assets)		-		(258	)		32			(226	)		(1	)		(258	)		81			(178	)			16			(3	)		(39	)		(26	)		80			(3	)		10			87
Included in other comprehensive income (loss)	Included in other comprehensive income (loss)		26		1,628			(22	)		1,632			62			1,672			70			1,804				(122	)		(25	)		102			(45	)		(269	)		(25	)		54			(240	)
Purchases, issuances and settlements			-		(7,413	)		(45	)		(7,458	)		-			(7,153	)		(115	)		(7,268	)			(19	)		2,586			(88	)		2,479			37			2,586			(166	)		2,457
Transfers in and/or (out) of Level 3			-		-			-			-			-			-			-			-				(27	)		-			(349	)		(376	)		1,505			(3,635	)		(349	)		(2,479	)
Ending balance		$	6,991	$	519		$	462		$	7,972		$	6,991		$	519		$	462		$	7,972			$	2,314		$	2,558		$	7		$	4,879		$	2,314		$	2,558		$	7		$	4,879

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

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

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		By Asset
		Three Months Ended September 30, 2009											Nine Months Ended September 30, 2009													Three Months Ended September 30, 2010											Nine Months Ended September 30, 2010
		Corporate		Asset-backed			Non-agency						Corporate			Asset-backed			Non-agency							Corporate		Asset-backed			Non-agency						Corporate			Asset-backed			Non-agency
(Dollars in thousands)		Securities		Securities			RMBS			Total			Securities			Securities			RMBS			Total				Securities		Securities			RMBS			Total			Securities			Securities			RMBS			Total
Beginning balance		$	6,230	$	5,123		$	454		$	11,807		$	7,000		$	3,409		$	558		$	10,967			$	6,965	$	6,562		$	497		$	14,024		$	6,930		$	6,258		$	426		$	13,614
Total gains or (losses) (realized/unrealized)	Total gains or (losses) (realized/unrealized)
Included in earnings (or changes in net assets)	Included in earnings (or changes in net assets)		-		-			46			46			(1	)		-			43			42				-		(258	)		32			(226	)		(1	)		(258	)		81			(178	)
Included in other comprehensive income (loss)	Included in other comprehensive income (loss)		630		479			27			1,136			(139	)		1,826			5			1,692				26		1,628			(22	)		1,632			62			1,672			70			1,804
Purchases, issuances and settlements			-		-			(113	)		(113	)		-			-			(192	)		(192	)			-		(7,413	)		(45	)		(7,458	)		-			(7,153	)		(115	)		(7,268	)
Transfers in and/or (out) of Level 3			-		(149	)		-			(149	)		-			218			-			218				-		-			-			-			-			-			-			-
Ending balance		$	6,860	$	5,453		$	414		$	12,727		$	6,860		$	5,453		$	414		$	12,727			$	6,991	$	519		$	462		$	7,972		$	6,991		$	519		$	462		$	7,972

The amount of total gains or losses for the period included	The amount of total gains or losses for the period included
in earnings (or changes in net assets) attributable to the	in earnings (or changes in net assets) attributable to the
change in unrealized gains or losses relating to assets	change in unrealized gains or losses relating to assets
still held at the reporting date	still held at the reporting date	$	-	$	-		$	-		$	-		$	-		$	(73	)	$	(58	)	$	(131	)		$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-

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

5. CAPITAL TRANSACTIONS

On ~~December 17, 2008, Group and Holdings~~October 14, 2011. we renewed ~~their~~our shelf registration statement on Form S-3ASR with the SEC, as a Well Known Seasoned Issuer. This shelf registration statement can be used by Group to register common shares, preferred shares, debt securities, warrants, share purchase contracts and share purchase units; by Holdings to register debt securities and by Everest Re Capital Trust III (“Capital Trust III”) to register trust preferred securities.

6. CONTINGENCIES

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance ~~reinsurance~~ and ~~other contractual~~reinsurance agreements. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the Company believes that its positions are legally and commercially reasonable. ~~While~~The Company considers the ~~final outcom e~~statuses of these ~~matters cannot be predicted with certainty, the Company does not believe that any of these matters,~~proceedings when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, an adverse resolution of one or more of these items in any one quarter or fiscal year could have a material adverse effect on the Company’s results of operations in that period.determining its reserves for unpaid loss and loss adjustment expenses.

~~The Company does not believe that there are any material pending legal proceedings~~Aside from litigation and arbitrations related to ~~which it or any of its subsidiaries is a party or of which any of their properties are the subject.~~

~~The Company continues to receive claims under expired~~these insurance and reinsurance contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the land, air or water. Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos.

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The Company’s reserves include an estimate of the Company’s ultimate liability for asbestos and environmental (“A&E”) claims. As of September 30, 2010, approximately 8% of the Company’s gross reserves were an estimate of the Company’s ultimate liability for A&E claims. The Company’s A&E liabilities emanate from Mt. McKinley Insurance Company’s (“Mt. McKinley”), a direct subsidiary ofagreements, the Company direct insurance business and Everest Re’s assumed reinsurance business. All of the contracts of insurance and reinsurance under which the Company has received claims during the past three years, expired more than 20 years ago. There are significant uncertainties surrounding the Company’s reserves for its A&E losses.

~~A&E exposures represent~~is not a ~~separate exposure group for monitoring and evaluating reserve adequacy. The following table summarizes incurred losses with respect~~party to ~~A&E on both a gross and net of retrocessional basis for the periods indicated:~~

Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
Gross basis:
Beginning of period reserves $ 614,135 $ 704,507 $ 638,674 $ 786,842
Incurred losses - - - -
Paid losses (36,598 ) (52,170 ) (61,137 ) (134,505 )
End of period reserves $ 577,537 $ 652,337 $ 577,537 $ 652,337

Net basis:
Beginning of period reserves $ 412,651 $ 455,379 $ 430,421 $ 485,296
Incurred losses - - - -
Paid losses (14,693 ) (13,527 ) (32,463 ) (43,444 )
End of period reserves $ 397,958 $ 441,852 $ 397,958 $ 441,852

At September 30, 2010, the gross reserves for A&E losses were comprised of $131,785 thousand representing case reserves reported by ceding companies, $131,818 thousand representing additional case reserves established by the Company on assumed reinsurance claims, $41,245 thousand representing case reserves established by the Company on direct excess insurance claims, including Mt. McKinley and $272,689 thousand representing IBNR reserves.

~~With respect to asbestos only, at September 30, 2010, the Company had gross asbestos loss reserves of $551,439 thousand,~~any other material litigation or ~~95.5%, of total A&E reserves, of which $445,766 thousand was for assumed business and $105,673 thousand was for direct business.~~

Management believes that these uncertainties and factors continue to render reserves for A&E and particularly asbestos losses significantly less subject to traditional actuarial analysis than reserves for other types of losses. The Company establishes reserves to the extent that, in the judgment of management, the facts and prevailing law reflect an exposure for the Company or its ceding companies.

Due to the uncertainties, the ultimate losses attributable to A&E, and particularly asbestos, may be subject to more variability than are non-A&E reserves and such variation, depending on coverage under the Company’s various reinsurance arrangements, could have a material adverse effect on the Company’s future financial condition, results of operations and cash flows.

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arbitration.

In 1993 and prior, the Company had a business arrangement with The Prudential Insurance Company of America (“The Prudential”) wherein, for a fee, the Company accepted settled claim payment obligations of certain property and casualty insurers, and, concurrently, became the owner of the annuity or assignee of the annuity proceeds funded by the property and casualty insurers specifically to fulfill these fully settled obligations. In these circumstances, the Company would be liable if The Prudential, which has an A+ (Superior) financial strength rating from A.M. Best Company (“A.M. Best”), was unable to make the annuity payments. The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

(Dollars in thousands) At September 30, 2010 At December 31, 2009
$ 150,614 $ 152,340

(Dollars in thousands)		At September 30, 2011			At December 31, 2010
		$	142,998		$	150,560

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Prior to its 1995 initial public offering, the Company ~~had~~ purchased annuities from an unaffiliated life insurance company with an A+ (Superior) financial strength rating from A.M. Best to settle certain claim liabilities of the company. Should the life insurance company become unable to make the annuity payments, the Company would be liable for those claim liabilities. The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

(Dollars in thousands) At September 30, 2010 At December 31, 2009
$ 26,030 $ 24,568

(Dollars in thousands)		At September 30, 2011			At December 31, 2010
		$	27,094		$	26,542

7. OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of comprehensive income (loss) in the consolidated statements of operations ~~and comprehensive income (loss)~~ for the periods indicated:

Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
Unrealized appreciation (depreciation) ("URA(D)") on
securities arising during the period
URA(D) of investments - temporary $ 83,543 $ 228,551 $ 134,055 $ 392,202
URA(D) of investments - non-credit OTTI 384 4,056 2,966 9,654
Tax benefit (expense) from URA(D) arising during the period (29,374 ) (81,413 ) (47,957 ) (140,650 )
Total URA(D) on securities arising during the period, net of tax 54,553 151,194 89,064 261,206

Foreign currency translation adjustments 16,528 16,204 18,358 33,281
Tax benefit (expense) from foreign currency translation (5,785 ) (5,672 ) (6,425 ) (11,649 )
Net foreign currency translation adjustments 10,743 10,532 11,933 21,632

Pension adjustments 649 949 1,948 2,849
Tax benefit (expense) on pension (227 ) (332 ) (682 ) (564 )
Net pension adjustments 422 617 1,266 2,285

Other comprehensive income (loss), net of tax $ 65,718 $ 162,343 $ 102,263 $ 285,123

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	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2011			2010			2011			2010
Unrealized appreciation (depreciation) ("URA(D)") on
securities arising during the period
URA(D) of investments - temporary	$	12,125		$	83,543		$	49,825		$	134,055
URA(D) of investments - non-credit OTTI		(137	)		384			(132	)		2,966
Tax benefit (expense) from URA(D) arising during the period		(4,195	)		(29,374	)		(17,392	)		(47,957	)
Total URA(D) on securities arising during the period, net of tax		7,793			54,553			32,301			89,064

Foreign currency translation adjustments		(7,012	)		16,528			7,224			18,358
Tax benefit (expense) from foreign currency translation		2,454			(5,785	)		(2,529	)		(6,425	)
Net foreign currency translation adjustments		(4,558	)		10,743			4,695			11,933

Pension adjustments		1,148			649			3,443			1,948
Tax benefit (expense) on pension		(402	)		(227	)		(1,205	)		(682	)
Net pension adjustments		746			422			2,238			1,266

Other comprehensive income (loss), net of tax	$	3,981		$	65,718		$	39,234		$	102,263

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

	At September 30,			At December 31,			At September 30,			At December 31,
(Dollars in thousands)	2010			2009			2011			2010
URA(D) on securities, net of deferred taxes
Temporary	$	222,706		$	135,570		$	137,861		$	105,474
Non-credit, OTTI		603			(1,325	)		449			535
Total unrealized appreciation (depreciation) on investments, net of deferred taxes		223,309			134,245			138,310			106,009
Foreign currency translation adjustments, net of deferred taxes		68,934			57,001			88,735			84,040
Pension adjustments, net of deferred taxes		(23,002	)		(24,268	)		(23,845	)		(26,083	)
Accumulated other comprehensive income (loss)	$	269,241		$	166,978		$	203,200		$	163,966

8. CREDIT FACILITY

~~Holdings Credit Facility~~

Effective August ~~23, 2006,~~15, 2011, Holdings entered into a ~~five~~new three year, $150,000 thousand ~~senior~~unsecured revolving credit facility with a syndicate of lenders, replacing the August 23, 2006 five year senior revolving credit facility. Both the August 15, 2011 and August 23, 2006 revolving credit agreements, which have similar terms, are referred to as the “Holdings Credit Facility”. Citibank N.A. is the administrative agent for the Holdings Credit Facility. The Holdings Credit Facility may be used for liquidity and general corporate purposes. The Holdings Credit Facility provides for the borrowing of up to $150,000 thousand with interest at a rate selected by Holdings equal to either, (1) the Base Rate (as defined below) or (2) a periodic fixed rate equal to the Eurodollar Rate plus an applicable margin. The Base Rate means a fluctuating interest rate per

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annum in effect from time to time to be equal to the higher of (a) the rate of interest publicly announced by ~~Citiba nk~~Citibank as its ~~prime~~base rate, or (b) 0.5% per annum above the Federal Funds Rate or (c) 1% above the one month LIBOR, in each case plus the applicable margin. The amount of margin and the fees payable for the Holdings Credit Facility depends upon Holdings’ senior unsecured debt rating.

The Holdings Credit Facility requires Holdings to maintain a debt to capital ratio of not greater than 0.35 to 1 and Everest ~~Reinsurance Company (“Everest Re”)~~Re to maintain its statutory surplus at ~~$1,500,000~~$1,875,000 thousand plus 25% of future aggregate net income and 25% of future aggregate capital contributions after December 31, ~~2005,~~2010, which at September 30, ~~2010,~~2011, was ~~$1,970,322~~$1,898,559 thousand. As of September 30, ~~2010,~~2011, Holdings was in compliance with all Holdings Credit Facility covenants.

The following table summarizes outstanding letters of credit and/or borrowings for the periods indicated:

(Dollars in thousands) At September 30, 2010 At December 31, 2009
Bank Commitment In Use Date of Loan Maturity/Expiry Date Commitment In Use Date of Loan Maturity/Expiry Date
Citibank Holdings Credit Facility $ 150,000 $ 50,000 9/01/2010 10/01/2010 $ 150,000 $ -
20,000 9/13/2010 10/13/2010 -
13,000 9/15/2010 10/15/2010 -
Total revolving credit borrowings 83,000 -
Total letters of credit 16,951 12/31/2010 27,959 12/31/2010

Total Citibank Holdings Credit Facility $ 150,000 $ 99,951 $ 150,000 $ 27,959

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(Dollars in thousands)	At September 30, 2011						At December 31, 2010
Bank	Commitment		In Use		Date of Loan	Maturity/Expiry Date	Commitment		In Use		Date of Loan	Maturity/Expiry Date
Citibank Holdings Credit Facility	$	150,000	$	-			$	150,000	$	50,000	12/16/2010	1/18/2011
				-						-
				-						-
Total revolving credit borrowings				-						50,000
Total letters of credit				9,527		12/31/2011				9,527		12/31/2011

Total Citibank Holdings Credit Facility	$	150,000	$	9,527			$	150,000	$	59,527

The following table presents the costs incurred in connection with the Holdings Credit Facility for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(Dollars in thousands)	2010		2009		2010		2009		2011		2010		2011		2010
Credit facility fees incurred	$	225	$	108	$	376	$	166	$	163	$	225	$	341	$	376

9. TRUST AGREEMENTS

A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re’s investments as collateral, as security for assumed losses payable to a non-affiliated ceding company. At September 30, ~~2010,~~2011, the total amount on deposit in the trust account was ~~$26,046~~$14,341 thousand.

10. SENIOR NOTES

~~Holdings has completed multiple public offerings.~~ The table below displays Holdings’ outstanding senior notes. Market value is based on quoted market prices.

					September 30, 2010				December 31, 2009								September 30, 2011				December 31, 2010
					Consolidated Balance				Consolidated Balance								Consolidated Balance				Consolidated Balance
(Dollars in thousands)	Date Issued	Date Due	Principal Amounts		Sheet Amount		Market Value		Sheet Amount		Market Value		Date Issued	Date Due	Principal Amounts		Sheet Amount		Market Value		Sheet Amount		Market Value
5.40% Senior notes	10/12/2004	10/15/2014	$	250,000	$	249,801	$	270,000	$	249,769	$	256,100	10/12/2004	10/15/2014	$	250,000	$	249,847	$	261,250	$	249,812	$	267,500
8.75% Senior notes (matured and paid on March 15, 2010)	03/14/2000	03/15/2010	$	200,000	$	-	$	-	$	199,970	$	200,000	03/14/2000	03/15/2010	$	200,000	$	-	$	-	$	-	$	-

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

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(Dollars in thousands)	2010		2009		2010		2009		2011		2010		2011		2010
Interest expense incurred	$	3,386	$	7,798	$	13,833	$	23,391	$	3,386	$	3,386	$	10,159	$	13,833

11. LONG TERM SUBORDINATED NOTES

The table below displays Holdings’ outstanding fixed to floating rate long term subordinated notes. Market value is based on quoted market prices.

Maturity Date

September 30, 2010

December 31, 2009

Maturity Date

September 30, 2011

December 31, 2010

Original

Consolidated Balance

Original

Consolidated Balance

(Dollars in thousands)

Date Issued

Principal Amount

Scheduled

Final

Sheet Amount

Market Value

Sheet Amount

Market Value

Date Issued

Principal Amount

Scheduled

Final

Sheet Amount

Market Value

Sheet Amount

Market Value

6.6% Long term subordinated notes

04/26/2007

400,000

05/15/2037

05/01/2067

238,350

220,072

238,348

176,534

04/26/2007

400,000

05/15/2037

05/01/2067

238,353

202,776

238,351

227,825

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

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Holdings can redeem the long term subordinated notes prior to May 15, 2017, in whole but not in part at the applicable redemption price, which will equal the greater of (a) 100% of the principal amount being redeemed and (b) the present value of the principal payment on May 15, 2017 and scheduled payments of interest that would have accrued from the redemption date to May 15, 2017 on the long term subordinated notes being redeemed, discounted to the redemption date on a semi-annual basis at a discount rate equal to the treasury rate plus an applicable spread of either 0.25% or 0.50%, in each case plus accrued and unpaid interest. Holdings may redeem the long term subordinated notes on or after May 15, 2017, in whole or in part at 100% of the principal amount plus accrued and unpaid interest; however, redemption on or ~~af ter~~after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant. This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes.

On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the 6.60% fixed to floating rate long term subordinated notes. Upon expiration of the tender offer, the Company had reduced its outstanding debt by $161,441 thousand, which resulted in a pre-tax gain on debt repurchase of $78,271 thousand.

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

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(Dollars in thousands)	2010		2009		2010		2009		2011		2010		2011		2010
Interest expense incurred	$	3,937	$	3,937	$	11,811	$	14,385	$	3,937	$	3,937	$	11,811	$	11,811

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12. JUNIOR SUBORDINATED DEBT SECURITIES PAYABLE

The following table displays Holdings’ outstanding junior subordinated debt securities due to Everest Re Capital Trust II (“Capital Trust II”), a ~~wholly owned~~wholly-owned finance subsidiary of Holdings. Fair value is primarily based on the quoted market price of the related trust preferred securities.

					September 30, 2010				December 31, 2009								September 30, 2011				December 31, 2010
					Consolidated Balance				Consolidated Balance								Consolidated Balance				Consolidated Balance
(Dollars in thousands)	Date Issued	Date Due	Amount Issued		Sheet Amount		Fair Value		Sheet Amount		Fair Value		Date Issued	Date Due	Amount Issued		Sheet Amount		Fair Value		Sheet Amount		Fair Value
6.20% Junior subordinated debt securities	03/29/2004	03/29/2034	$	329,897	$	329,897	$	319,913	$	329,897	$	272,553	03/29/2004	03/29/2034	$	329,897	$	329,897	$	327,337	$	329,897	$	294,825

Holdings may redeem the junior subordinated debt securities before their maturity at 100% of their principal amount plus accrued interest as of the date of redemption. The securities may be redeemed, in whole or in part, on one or more occasions at any time on or after March 30, 2009; or at any time, in whole, but not in part, within 90 days of the occurrence and continuation of a determination that the Trust may become subject to tax or the Investment Company Act.

Interest expense incurred in connection with these junior subordinated debt securities is as follows for the periods indicated:

Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
Interest expense incurred $ 5,113 $ 5,113 $ 15,340 $ 15,340

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2011		2010		2011		2010
Interest expense incurred	$	5,113	$	5,113	$	15,340	$	15,340

Holdings considers that the mechanisms and obligations relating to the trust preferred securities, taken together, constitute a full and unconditional guarantee by Holdings of Capital Trust II’s payment obligations with respect to their trust preferred securities.

Capital Trust II will redeem all of the outstanding trust preferred securities when the junior subordinated debt securities are paid at maturity on March 29, 2034. The Company may elect to redeem the junior subordinated debt securities, in whole or in part, at any time on or after March 30, 2009. If such an early redemption occurs, the outstanding trust preferred securities would also be proportionately redeemed.

There are certain regulatory and contractual restrictions on the ability of Holdings’ operating subsidiaries to transfer funds to Holdings in the form of cash dividends, loans or advances. The insurance laws of the State of Delaware, where Holdings’ direct insurance subsidiaries are domiciled, require regulatory approval before those subsidiaries can pay dividends or make loans or advances to Holdings that exceed certain statutory thresholds. In addition, the terms of Holdings Credit Facility (discussed in Note ~~10)~~8) require Everest Re, Holdings’ principal insurance subsidiary, to maintain a certain statutory surplus level as measured at the end of each fiscal year. At December 31, ~~2009, $2,351,990~~2010, $2,293,643 thousand of the ~~$3,271,079~~$2,929,526 thousand in net assets of Holdings’ consolidated ~~sub sidiaries~~subsidiaries were subject to the foregoing regulatory restrictions.

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13. SEGMENT REPORTING

During the quarter ended September 30, 2011, the Company realigned its reporting segments to reflect recent changes in the type and volume of business written. The Company ~~through its subsidiaries, operates~~previously reported the results of Marine & Aviation, Surety, Accident and Health (“A&H”) Reinsurance and A&H Primary operations as a separate segment—Specialty Underwriting. The A&H primary business, which is a relatively new line of business for the Company, has increased significantly, representing approximately 2% of premiums earned and is projected to continue to grow. The A&H primary business is better aligned with the Insurance reporting segment based on the similarities of this business with that of those businesses already reflected in ~~four segments:~~the Insurance segment. The other operating units included in the Specialty Underwriting segment would have encompassed approximately 6% of the Company’s premiums earned and their volume is projected to remain approximately 6%. As a result of the size of these remaining operating units and their similarity to the business reported within U.S. Reinsurance, they have been reclassified to the U.S. Reinsurance ~~U.S. Insurance, Specialty Underwriting and International.~~ segment. There has been no change to the International reporting segment. The Company has restated all segment information for prior years to conform to the new reporting segment structure.

The U.S. Reinsurance operation writes property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and A&H business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies primarily within the U.S. The ~~U.S.~~ Insurance operation writes property and casualty insurance, ~~primarily~~including medical stop loss insurance, directly and through general agents, brokers and surplus lines brokers within the U.S. ~~The Specialty Underwriting operation writes accident~~ and ~~health (“A&H”), marine, aviation and surety business within the U.S. and worldwide through brokers and directly with ceding companies.~~Canada. The International operation writes non-U.S. property and casualty reinsurance through Everest Re’s branches in Canada and Singapore and through offices in Brazil, Miami and New Jersey.

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

Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. Underwriting results are measured using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

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

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

	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
U.S. Reinsurance	September 30,				September 30,					September 30,				September 30,
(Dollars in thousands)	2010		2009		2010		2009			2011		2010		2011		2010
Gross written premiums	$	372,358	$	345,567	$	884,581	$	876,049		$	360,833	$	435,218	$	947,155	$	1,076,614
Net written premiums		205,125		191,666		484,049		487,849	��		167,469		238,536		486,032		591,083

Premiums earned	$	159,666	$	162,037	$	449,159	$	489,067		$	167,530	$	195,663	$	512,104	$	561,958
Incurred losses and LAE		84,320		56,158		258,774		232,262			97,197		109,059		371,638		344,047
Commission and brokerage		25,070		21,397		88,142		90,525			23,298		32,434		106,123		112,790
Other underwriting expenses		8,933		9,665		26,116		25,250			10,843		11,076		30,621		32,617
Underwriting gain (loss)	$	41,343	$	74,817	$	76,127	$	141,030		$	36,192	$	43,094	$	3,722	$	72,504

	Three Months Ended						Nine Months Ended					Three Months Ended						Nine Months Ended
U.S. Insurance	September 30,						September 30,
Insurance												September 30,						September 30,
(Dollars in thousands)	2010			2009			2010			2009		2011			2010			2011			2010
Gross written premiums	$	211,632		$	230,491		$	644,810		$	648,719	$	236,294		$	214,701		$	750,283		$	650,448
Net written premiums		89,218			76,400			272,497			301,910		114,328			90,937			366,223			275,655

Premiums earned	$	103,971		$	89,237		$	291,324		$	306,860	$	124,282		$	105,690		$	362,212		$	294,481
Incurred losses and LAE		98,989			71,423			243,739			210,329		120,332			99,476			302,038			245,665
Commission and brokerage		10,432			10,512			18,171			32,379		11,858			10,732			27,781			18,694
Other underwriting expenses		19,479			19,982			52,335			56,415		24,316			19,479			68,589			52,335
Underwriting gain (loss)	$	(24,929	)	$	(12,680	)	$	(22,921	)	$	7,737	$	(32,224	)	$	(23,997	)	$	(36,196	)	$	(22,213	)

Three Months Ended Nine Months Ended
Specialty Underwriting September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
Gross written premiums $ 65,929 $ 67,615 $ 197,671 $ 183,726
Net written premiums 35,130 38,259 110,192 102,990

Premiums earned $ 37,716 $ 39,182 $ 115,956 $ 108,513
Incurred losses and LAE 25,226 25,197 87,199 73,740
Commission and brokerage 7,664 10,510 25,171 29,435
Other underwriting expenses 2,143 2,383 6,501 6,227
Underwriting gain (loss) $ 2,683 $ 1,092 $ (2,915 ) $ (889 )

	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
International	September 30,				September 30,					September 30,				September 30,
(Dollars in thousands)	2010		2009		2010			2009		2011		2010		2011			2010
Gross written premiums	$	323,741	$	272,603	$	906,089		$	797,606	$	326,053	$	323,741	$	923,649		$	906,089
Net written premiums		168,400		146,330		479,655			435,650		158,038		168,400		457,663			479,655

Premiums earned	$	163,949	$	147,864	$	465,721		$	433,099	$	151,050	$	163,949	$	479,989		$	465,721
Incurred losses and LAE		118,390		89,214		478,966			260,964		104,570		118,390		514,260			478,966
Commission and brokerage		38,289		34,840		106,009			100,062		35,686		38,289		105,755			106,009
Other underwriting expenses		6,675		6,159		20,363			16,463		7,549		6,675		20,938			20,363
Underwriting gain (loss)	$	595	$	17,651	$	(139,617	)	$	55,610	$	3,245	$	595	$	(160,964	)	$	(139,617	)

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(Dollars in thousands)	2010			2009			2010			2009			2011			2010			2011			2010
Underwriting gain (loss)	$	19,692		$	80,880		$	(89,326	)	$	203,488		$	7,213		$	19,692		$	(193,438	)	$	(89,326	)
Net investment income		74,212			65,492			248,665			179,667			78,325			74,212			249,916			248,665
Net realized capital gains (losses)		159,569			101,394			58,789			56,151			(179,036	)		159,569			(206,744	)		58,789
Realized gain on debt repurchase		-			-			-			78,271
Corporate expense		(1,529	)		(1,675	)		(5,218	)		(4,871	)		(1,143	)		(1,529	)		(3,498	)		(5,218	)
Interest, fee and bond issue cost amortization expense		(12,817	)		(17,073	)		(41,879	)		(53,779	)		(12,706	)		(12,817	)		(38,083	)		(41,879	)
Other income (expense)		(3,617	)		15,081			10,204			7,801			(8,865	)		(3,617	)		(20,401	)		10,204
Income (loss) before taxes	$	235,510		$	244,099		$	181,235		$	466,728		$	(116,212	)	$	235,510		$	(212,248	)	$	181,235

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The Company produces business in the U.S. and internationally. The net income deriving from and assets residing in the individual foreign countries in which the Company writes business are not identifiable in the Company’s financial records. Based on gross written premium, the table below presents the largest country, other than the U.S. ~~and Canada, no~~, in which the Company writes business, for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2011		2010		2011		2010
Canada	$	73,543	$	48,333	$	156,727	$	133,612

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

14. RELATED-PARTY TRANSACTIONS

Parent

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

Common Shares
Amendment Date Purchased
(Dollars in thousands)
09/21/2004 $ 5,000,000
07/21/2008 5,000,000
02/24/2010 5,000,000
$ 15,000,000

		Common Shares
		Authorized for
Amendment Date		Repurchase
09/21/2004		5,000,000
07/21/2008		5,000,000
02/24/2010		5,000,000
		15,000,000

As of September 30, ~~2010,~~2011, Holdings held ~~8,702,826~~9,719,971 common shares of Group, which it had purchased in the open market between February 1, 2007 and ~~September 27, 2010.~~March 8, 2011. The table below represents the total purchase price for these common shares purchased.

(Dollars in thousands)
Total purchase price		$	746,046			$	835,371

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

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
(Dollars in thousands)	At September 30, 2010		2011		2010		2011		2010
Dividends received	$	9,569	$	4,665	$	4,016	$	13,979	$	9,569

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Outside Directors

During the normal course of business, the Company, through its affiliates, engages in insurance and brokerage and commission business transactions, with companies controlled by or affiliated with one or more of its outside directors. Such transactions, individually and in the aggregate, are not material to the Company’s financial condition, results of operation and cash flows.

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Affiliated Companies

Everest Global Services, Inc. (“Everest Global”), an affiliate of Holdings, provides centralized management and home office services, through a management agreement, to Holdings and other affiliated companies within Holdings’ consolidated structure. Services provided by Everest Global include executive managerial services, legal services, actuarial services, accounting services, information technology services and others.

The following table presents the expenses incurred by Holdings from services provided by Everest Global for the periods indicated.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2011		2010		2011		2010
Expenses incurred	$	16,537	$	15,554	$	46,984	$	47,021

Affiliates

The Company engages in reinsurance transactions with Bermuda Re and Everest International Reinsurance, Ltd. (“Everest International”), affiliates, primarily driven by enterprise risk and capital management considerations under which business is ceded at market rates and terms.

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

(Dollars in thousands)
Percent Assuming Single Aggregate
Coverage Period Ceding Company Ceded Company Type of Business Occurrence Limit Limit

01/01/2002-12/31/2002 Everest Re 20.0 % Bermuda Re property / casualty business $ - $ -

01/01/2003-12/31/2003 Everest Re 25.0 % Bermuda Re property / casualty business - -

01/01/2004-12/31/2005 Everest Re 22.5 % Bermuda Re property / casualty business - -
Everest Re 2.5 % Everest International property / casualty business - -

01/01/2006-12/31/2006 Everest Re 18.0 % Bermuda Re property business 125,000 (1) -

Everest Re
2.0 % Everest International property business - -

01/01/2006-12/31/2007 Everest Re 31.5 % Bermuda Re casualty business - -
Everest Re 3.5 % Everest International casualty business - -

01/01/2007-12/31/2007 Everest Re 22.5 % Bermuda Re property business 130,000 (1) -
Everest Re 2.5 % Everest International property business - -

01/01/2008-12/31/2008 Everest Re 36.0 % Bermuda Re property / casualty business 130,000 (1) 275,000 (2)
Everest Re 4.0 % Everest International property / casualty business - -

01/01/2009-12/31/2009 Everest Re 36.0 % Bermuda Re property / casualty business 150,000 (1) 325,000 (2)
Everest Re 8.0 % Everest International property / casualty business - -

01/01/2010 Everest Re 44.0 % Bermuda Re property / casualty business 150,000 325,000

01/01/2003-12/31/2006 Everest Re- Canadian Branch 50.0 % Bermuda Re property business - -
01/01/2007-12/31/2009 Everest Re- Canadian Branch 60.0 % Bermuda Re property business - -
01/01/2010 Everest Re- Canadian Branch 60.0 % Bermuda Re property business 350,000 -

(1) The single occurance limit is applied before the loss cessions to either Bermuda Re or Everest International.

(2) The aggregate limit is applied before the loss cessions to either Bermuda Re or Everest International.

(Dollars in thousands)
		Percent			Assuming		Single			Aggregate
Coverage Period	Ceding Company	Ceded			Company	Type of Business	Occurrence Limit			Limit

01/01/2002-12/31/2002	Everest Re		20.0	%	Bermuda Re	property / casualty business	$	-		$	-

01/01/2003-12/31/2003	Everest Re		25.0	%	Bermuda Re	property / casualty business		-			-

01/01/2004-12/31/2005	Everest Re		22.5	%	Bermuda Re	property / casualty business		-			-
	Everest Re		2.5	%	Everest International	property / casualty business		-			-

01/01/2006-12/31/2006	Everest Re		18.0	%	Bermuda Re	property business		125,000	(1)		-
	Everest Re		2.0	%	Everest International	property business		-			-

01/01/2006-12/31/2007	Everest Re		31.5	%	Bermuda Re	casualty business		-			-
	Everest Re		3.5	%	Everest International	casualty business		-			-

01/01/2007-12/31/2007	Everest Re		22.5	%	Bermuda Re	property business		130,000	(1)		-
	Everest Re		2.5	%	Everest International	property business		-			-

01/01/2008-12/31/2008	Everest Re		36.0	%	Bermuda Re	property / casualty business		130,000	(1)		275,000		(2)
	Everest Re		4.0	%	Everest International	property / casualty business		-			-

01/01/2009-12/31/2009	Everest Re		36.0	%	Bermuda Re	property / casualty business		150,000	(1)		325,000		(2)
	Everest Re		8.0	%	Everest International	property / casualty business		-			-

01/01/2010-12/31/2010	Everest Re		44.0	%	Bermuda Re	property / casualty business		150,000			325,000	��

01/01/2011	Everest Re		50.0	%	Bermuda Re	property / casualty business		150,000			300,000

01/01/2003-12/31/2006	Everest Re- Canadian Branch		50.0	%	Bermuda Re	property business		-			-
01/01/2007-12/31/2009	Everest Re- Canadian Branch		60.0	%	Bermuda Re	property business		-			-
01/01/2010-12/31/2010	Everest Re- Canadian Branch		60.0	%	Bermuda Re	property business		350,000			-
01/01/2011	Everest Re- Canadian Branch		60.0	%	Bermuda Re	property business		350,000			-

(1) The single occurance limit is applied before the loss cessions to either Bermuda Re or Everest International.
(2) The aggregate limit is applied before the loss cessions to either Bermuda Re or Everest International.

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For premiums earned and losses incurred for the period January 1, 2002 through December 31, 2002, Everest Re, Everest National Insurance Company and Everest Security Insurance Company entered into an Excess of Loss Reinsurance Agreement with Bermuda Re, covering workers’ compensation losses occurring on and after January 1, 2002, as respect to new, renewal and in force policies effective on that date through December 31, 2002. The table below represents Bermuda Re's liability limits for any losses per one occurrence.

	Liability Limits
(Dollars in thousands)	Exceeding		Not to Exceed
Losses per one occurrence	$	100,000	$	150,000

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

(Dollars in thousands)

Effective	Transferring	Assuming	% of Business or			Covered Period
Date	Company	Company	Amount of Transfer			of Transfer

09/19/2000	Mt. McKinley	Bermuda Re		100	%	All years
10/01/2001	Everest Re (Belgium Branch)	Bermuda Re		100	%	All years
10/01/2008	Everest Re	Bermuda Re	$	747,022		01/01/2002-12/31/2007

The following tables summarize the premiums and losses ceded by the Company to Bermuda Re and Everest International, respectively, for the periods indicated:

Three Months Ended Nine Months Ended
Bermuda Re September 30, September 30,
(Dollars in thousands) 2010 2009 2010 2009
Ceded written premiums $ 400,977 $ 323,098 $ 1,046,727 $ 879,163
Ceded earned premiums 330,525 286,537 944,755 835,673
Ceded losses and LAE (a) 211,862 196,630 694,938 529,229

										Three Months Ended						Nine Months Ended
Bermuda Re										September 30,						September 30,
(Dollars in thousands)										2011			2010			2011		2010
Ceded written premiums										$	445,601		$	400,977		$	1,195,023	$	1,046,727
Ceded earned premiums											398,561			330,525			1,158,961		944,755
Ceded losses and LAE(a)											238,405			211,862			1,023,482		694,938

	Three Months Ended					Nine Months Ended				Three Months Ended						Nine Months Ended
Everest International	September 30,					September 30,				September 30,						September 30,
(Dollars in thousands)	2010			2009		2010		2009			2011			2010			2011		2010
Ceded written premiums	$	(3,587	)	$	68,937	$	45,354	$	152,819	$	31		$	(3,587	)	$	670	$	45,354
Ceded earned premiums		17,548			49,381		92,052		121,664		2,448			17,548			16,489		92,052
Ceded losses and LAE(a)		15,491			27,070		79,277		63,625
Ceded losses and LAE											(1,005	)		15,491			5,908		79,277

(a) Ceded losses and LAE include the Mt. McKinley loss portfolio transfer that constitutes losses ceded under retroactive reinsurance and therefore, in accordance with FASB guidance, a deferred gain on retroactive reinsurance is reflected in other expenses on the consolidated statements of operations and comprehensive income (loss).

Everest Re sold net assets of its ~~U.K.~~UK branch to Bermuda Re and provided Bermuda Re with a reserve indemnity agreement allowing for indemnity payments of up to 90% of ₤25.0 million of the excess of 2002 and prior reserves, provided that any recognition of profit from the reserves for 2002 and prior underwriting years is taken into account. The limit available under this agreement was fully exhausted at December 31, 2004.

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15. INCOME TAXES

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

For 2010 and the first six months ending June 30 2011, the Company utilized the estimated annual effective tax rate approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the estimated annual effective tax rate approach, the estimated annual effective tax rate is applied to the interim year-to-date pre-tax ordinary income to determine the income tax expense or benefit for the year-to-date period, adjusted by the tax impact for discrete items. Due to potential volatility in the estimated annual effective tax rate approach, management has determined that an estimated annual effective tax rate approach is not reliable for the current interim reporting period and is recording taxes using the actual tax rate for the year-to-date results. The tax expense or benefit for a quarter represents the difference between the year-to-date tax expense or benefit for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual pre-tax income and effective tax rate.

16. ACQUISITIONS

During the first nine months of 2011, the Company made several acquisitions to expand its domestic and Canadian insurance operations. Below are descriptions of the transactions.

On January 2, 2011, the Company acquired the entire business and operations of Heartland Crop Insurance, Inc. (“Heartland”) of Topeka, Kansas for $55,000 thousand in cash, plus contingent payments in future periods based upon achievement of performance targets. Heartland is a managing general agent specializing in crop insurance.

On January 28, 2011, the Company acquired the entire business and operations of Premiere Underwriting Services (“Premiere”) of Toronto, Canada. Premiere is a managing general agent specializing in entertainment and sports and leisure risks. On January 31, 2011, the Company acquired the renewal rights and operations of the financial lines business of Executive Risk Insurance Services, Ltd. (“Executive Risk”) of Toronto, Canada. The financial lines business of Executive Risk mainly underwrites Directors and Officers Liability, Fidelity, and Errors and Omissions Liability.

Overall, the Company recorded $35,068 thousand of goodwill and $26,903 thousand of intangible assets related to these acquisitions. All intangible assets recorded as part of these acquisitions will be amortized on a straight line basis over seven years.

17. SUBSEQUENT EVENTS

There is currently significant flooding in Thailand. Due to the recentness of this event, the Company is unable to estimate the amount of loss at this time. However, the Company anticipates that the flooding will adversely impact fourth quarter financial statements.

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~~15. INCOME TAXES~~

The Company uses a projected annual effective tax rate to calculate its quarterly tax expense in accordance with FASB guidance. Under this methodology, when an interim quarter’s pre-tax income (loss) varies significantly from a full year’s income (loss) projection, the tax impact resulting from the income (loss) variance is effectively spread between the impacted quarter and the remaining quarters of the year, except for discrete items impacting an individual quarter.

In 2007, the Internal Revenue Service completed its examination of the Company’s consolidated U.S. tax returns for 2003 and 2004 and issued an examination report proposing various adjustments. The Company submitted a formal protest including requests for affirmative adjustments and has been participating in the appeals process. This appeal process may result in recognition of the Company’s related unrecognized tax benefits within the next 12 months, which will positively affect the Company’s results of operations in the period of recognition.

~~16. SUBSEQUENT EVENTS~~

~~The Company has evaluated known recognized and non-recognized subsequent events. The Company does not have any subsequent events to report.~~

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Industry Conditions.

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

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

Starting in the latter part of 2007 and continuing into 2010 there has been a significant slowdown in the global economy, which has negatively impacted the financial resources of the industry. Excessive availability and use of credit, particularly by individuals, led to increased defaults on sub-prime mortgages in the U.S. and elsewhere, falling values for houses and many commodities and contracting consumer spending. The significant increase in default rates negatively impacted the value of asset-backed securities held by both foreign and domestic institutions. The defaults have led to a corresponding increase in foreclosures, which have driven down housing values, resulting in additional losses on asset-backed securities. During the third and fourth quarters of 2008, credit markets det eriorated dramatically, evidenced by widening credit spreads and dramatically reduced availability of credit. Many financial institutions, including some insurance entities, experienced liquidity crises due to immediate demands for funds for withdrawals or collateral, combined with falling asset values and their inability to sell assets to meet the increased demands. As a result, several financial institutions failed or were acquired at distressed prices, while others received loans from the U.S. government to continue operations. The liquidity crisis significantly increased the spreads on fixed maturity securities and, at the same time, had a dramatic and negative impact on the stock markets around the world. The combination of losses on securities from failed or impaired companies combined with the decline in values of fixed maturity and equity securities resulted in significant declines in the capital bases of most insurance and reinsurance companies. While ther e was significant improvement in the financial markets during 2009 and into 2010, concerns about interest rates, deflation and sovereign debt levels have hindered financial market recoveries. It is too early to predict the timing and extent of the impact these financial market fluctuations will have on insurance and reinsurance market conditions.

Worldwide insurance and reinsurance market conditions continued to be very competitive, particularly in the casualty lines of business. Generally, there was ample insurance and reinsurance capacity relative to demand. We noted, however, that in many markets and lines during 2009 and into 2010, the rates of decline have slowed, pricing in some segments was relatively flat and there was upward movement in some others, particularly property catastrophe coverage in Latin America and Australia where there have been significant losses. Competition and its effect on rates, terms and conditions vary widely by market and coverage yet ~~continues~~continued to be most prevalent in the U.S. casualty insurance and reinsurance markets. ~~The U.S. insurance markets in which we participate were extremely competitive as well.~~

~~Table~~However, during the first three quarters of ~~Contents~~

~~Rates~~2011, the industry experienced significant losses from Australian floods, the New Zealand earthquake, the earthquake and tsunami in Japan and storms in the ~~international markets~~U.S. It is too early to determine the impact on market conditions as a result of these events. While there have ~~generally~~ been ~~stable and we have seen some~~meaningful rate increases ~~particularly~~ for catastrophe ~~exposed business. We have grown our~~coverages in some global catastrophe prone regions, particularly areas impacted by these losses, whether the magnitude of these losses is sufficient to increase rates and improve market conditions for other lines of business ~~in the Middle East, Latin America and Asia. We are expanding our international reach with our new office in Brazil~~remains to ~~capitalize on the recently expanded opportunity for professional reinsurers in that market and on the economic growth expected for Brazil in the future.~~be seen.

Overall, we believe that current marketplace conditions, ~~offer pockets of~~particularly for catastrophe coverages, provide profit opportunities for us given our strong ratings, distribution system, reputation and expertise. We continue to employ our strategy of targeting business that offers the greatest profit potential, while maintaining balance and diversification in our overall portfolio.

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Financial Summary.

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

	Three Months Ended						Percentage			Nine Months Ended						Percentage			Three Months Ended						Percentage			Nine Months Ended						Percentage
	September 30,						Increase/			September 30,						Increase/			September 30,						Increase/			September 30,						Increase/
(Dollars in millions)	2010			2009			(Decrease)			2010			2009			(Decrease)			2011			2010			(Decrease)			2011			2010			(Decrease)
Gross written premiums	$	973.7		$	916.3			6.3	%	$	2,633.2		$	2,506.1			5.1	%	$	923.2		$	973.7			-5.2	%	$	2,621.1		$	2,633.2			-0.5	%
Net written premiums		497.9			452.7			10.0	%		1,346.4			1,328.4			1.4	%		439.8			497.9			-11.7	%		1,309.9			1,346.4			-2.7	%

REVENUES:
Premiums earned	$	465.3		$	438.3			6.2	%	$	1,322.2		$	1,337.5			-1.1	%	$	442.9		$	465.3			-4.8	%	$	1,354.3		$	1,322.2			2.4	%
Net investment income		74.2			65.5			13.3	%		248.7			179.7			38.4	%		78.3			74.2			5.5	%		249.9			248.7			0.5	%
Net realized capital gains (losses)		159.6			101.4			57.4	%		58.8			56.2			4.7	%		(179.0	)		159.6			-212.2	%		(206.7	)		58.8		NM
Realized gain on debt repurchase		-			-		NA				-			78.3		NA
Other income (expense)		(3.6	)		15.1			-124.0	%		10.2			7.8			30.8	%		(8.9	)		(3.6	)		145.0	%		(20.4	)		10.2		NM
Total revenues		695.5			620.3			12.1	%		1,639.8			1,659.4			-1.2	%		333.3			695.5			-52.1	%		1,377.1			1,639.8			-16.0	%

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		326.9			242.0			35.1	%		1,068.7			777.3			37.5	%		322.1			326.9			-1.5	%		1,187.9			1,068.7			11.2	%
Commission, brokerage, taxes and fees		81.5			77.3			5.4	%		237.5			252.4			-5.9	%		70.8			81.5			-13.0	%		239.7			237.5			0.9	%
Other underwriting expenses		37.2			38.2			-2.5	%		105.3			104.4			0.9	%		42.7			37.2			14.7	%		120.1			105.3			14.1	%
Corporate expense		1.5			1.7			-8.7	%		5.2			4.9			7.2	%		1.1			1.5			-25.2	%		3.5			5.2			-33.0	%
Interest, fee and bond issue cost amortization expense		12.8			17.1			-24.9	%		41.9			53.8			-22.1	%		12.7			12.8			-0.9	%		38.1			41.9			-9.1	%
Total claims and expenses		460.0			376.3			22.3	%		1,458.6			1,192.7			22.3	%		449.5			460.0			-2.3	%		1,589.3			1,458.6			9.0	%

INCOME (LOSS) BEFORE TAXES		235.5			244.1			-3.5	%		181.2			466.7			-61.2	%		(116.2	)		235.5			-149.3	%		(212.2	)		181.2			-217.1	%
Income tax expense (benefit)		66.9			80.0			-16.4	%		40.6			128.4			-68.4	%		(116.5	)		66.9		NM				(123.8	)		40.6		NM
NET INCOME (LOSS)	$	168.7		$	164.1			2.7	%	$	140.6		$	338.3			-58.4	%	$	0.3		$	168.7			-99.8	%	$	(88.5	)	$	140.6			-162.9	%

RATIOS:							Point Change									Point Change									Point Change									Point Change
Loss ratio		70.3	%		55.2	%		15.1			80.8	%		58.1	%		22.7			72.7	%		70.3	%		2.4			87.7	%		80.8	%		6.9
Commission and brokerage ratio		17.5	%		17.6	%		(0.1	)		18.0	%		18.9	%		(0.9	)		16.0	%		17.5	%		(1.5	)		17.7	%		18.0	%		(0.3	)
Other underwriting expense ratio		8.0	%		8.7	%		(0.7	)		8.0	%		7.8	%		0.2			9.7	%		8.0	%		1.7			8.9	%		8.0	%		0.9
Combined ratio		95.8	%		81.5	%		14.3			106.8	%		84.8	%		22.0			98.4	%		95.8	%		2.6			114.3	%		106.8	%		7.5


										At			At			Percentage												At			At			Percentage
										September 30,			December 31,			Increase/												September 30,			December 31,			Increase/
(Dollars in millions)											2010			2009		(Decrease)													2011			2010		(Decrease)
Balance sheet data:
Total investments and cash										$	8,412.4		$	8,031.6			4.7	%										$	8,256.8		$	8,293.9			-0.4	%
Total assets											14,015.3			13,379.6			4.8	%											14,327.3			13,869.4			3.3	%
Loss and loss adjustment expense reserves											7,611.6			7,300.1			4.3	%											8,165.3			7,652.3			6.7	%
Total debt											901.0			1,018.0			-11.5	%											818.1			868.1			-5.8	%
Total liabilities											10,908.4			10,520.8			3.7	%											11,243.9			10,741.7			4.7	%
Stockholder's equity											3,106.9			2,858.8			8.7	%											3,083.4			3,127.7			-1.4	%

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

Revenues.

Premiums. Gross written premiums ~~increased~~decreased by ~~$57.4~~$50.5 million, or ~~6.3%~~5.2%, for the three months ended September 30, ~~2010~~2011 compared to the three months ended September 30, ~~2009,~~2010, reflecting ~~an increase~~a decrease of ~~$76.2~~$72.1 million in our reinsurance business, partially offset by a ~~decline of $18.9~~$21.6 million increase in our insurance business. Gross written premiums ~~increased~~decreased by ~~$127.1~~$12.1 million, or ~~5.1%~~0.5%, for the nine months ended September 30, ~~2010~~2011 compared to the nine months ended September 30, ~~2009,~~2010, reflecting ~~an increase~~a decrease of ~~$131.0~~$111.9 million in our reinsurance business, partially offset by a ~~decline of $3.9~~$99.8 million increase in our insurance business. The increase in reinsurance premiums were primarily the result of increased writings in our treaty property and international t reaty lines of business. The decrease in insurance premiums were primarily the result of loss of business on terminated programs, lower premiums on a few of the existing programs and lower audit premium accruals on the workers’ compensation line of business.

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business. The year over year increase in insurance premiums was primarily due to the acquisition of Heartland, which provided $122.3 million of new crop insurance business, our recent initiative in primary medical stop loss insurance, which added $44.8 million of premium and improved premium rates on our California workers’ compensation business, partially offset by our reduced participation on a large casualty program. The decrease in reinsurance premiums was due to the continued reduction in U.S. casualty business, the loss of several large crop reinsurance contracts, as well as the planned reduction of catastrophe exposed business in certain territories, partially offset by higher reinstatement premiums resulting from catastrophe losses, year over year.

Net written premiums ~~increased~~decreased by ~~$45.2~~$58.0 million, or ~~10.0%~~11.7%, for the three months ended September 30, ~~2010~~2011 compared to the three months ended September 30, ~~2009,~~2010, and decreased by ~~$18.0~~$36.5 million, or ~~1.4%~~2.7%, for the nine months ended September 30, ~~2010~~2011 compared to the nine months ended September 30, ~~2009.~~2010. The fluctuations in net written premiums ~~in comparison~~relative to the ~~fluctuations~~change in gross written premiums were ~~primarily attributable~~due to ~~fluctuations in cessions~~a combination of a higher percentage of premiums ceded under the affiliated quota share ~~agreements.~~agreement and a lower level of ceded reinsurance in the Insurance segment due to the planned reduction in one casualty program. Premiums earned ~~increased $27.0~~decreased $22.4 million, or ~~6.2%~~4.8%, for the three months ended September 30, ~~2010~~2011 compared to the three months ended September 30, ~~2009~~2010 and ~~decreased by $15.4~~increased $32.1 million, or ~~1.1%~~2.4%, for the nine months ended September 30, ~~2010~~2011 compared to the nine months ended September 30, ~~2009.~~2010. The change in ~~net~~ premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Net Investment Income. Net investment income increased ~~$8.7~~$4.1 million, or ~~13.3%~~5.5%, to $78.3 million for the three months ended September 30, 2011 compared with net investment income of $74.2 million for the three months ended September 30, 2010, primarily ~~as a result of net~~driven by an $11.3 million increase in investment ~~gains~~income from our limited ~~partnerships of $1.1~~partnerships. Net investment income increased $1.3 million, ~~compared~~or 0.5%, to ~~net investment losses of $4.4~~$249.9 million for the ~~three~~nine months ended September 30, ~~2009. Net~~2011 compared with net investment income ~~increased $69.0~~of $248.7 million ~~or 38.4%,~~ for the nine months ended September 30, 2010, primarily as a result of ~~net~~a $25.4 million increase in investment ~~gains~~income from our limited partnerships. The increases from the limited partnerships were partially offset by effects of ~~$19.4 million compared with net investment losses of $36.5 million for the comparable period in 2009.~~lower reinvestment rates. Net pre-tax investment income, as a percentage of average invested assets, was 3.9% for the three months ended September 30, 2011 compared to 3.7% for the three months ended September 30, 2010 ~~compared to 3. 4%~~and was 4.1% for the ~~three~~nine months ended September 30, ~~2009 and was~~2011 compared to 4.2% for the nine months ended September 30, ~~2010 compared~~2010. The nine month investment yield is lower primarily due to ~~3.1% for~~an increase in the ~~nine months ended September 30, 2009. The variances in these yields were primarily the result of fluctuations in our limited partnership income.~~average invested asset base.

Net Realized Capital Gains (Losses). Net realized capital losses were $179.0 million and net realized capital gains were $159.6 million for the three months ended September 30, 2011 and 2010, respectively. The $179.0 million was comprised of $181.5 million of losses from fair value re-measurements and $0.9 million of other-than-temporary impairments on our available for sale fixed maturity securities, which was partially offset by $3.3 million of net realized capital gains from sales on our fixed maturity and equity securities. The net realized capital gains of $159.6 million for the three months ended September 30, 2010 were ~~comprised~~the result of $164.8 million ~~from~~of gains infrom fair value re-measurements, which ~~were~~was partially offset by $3.2 million of net realized capital losses from sales on our fixed maturity and equity securities and $2.0 million of other-than-temporary impairments. Net realized capital gains were $101.4 million for the three months ended September 30, 2009. Of the $101.4 million, $96.0 million was from gains in fair value re-measurements and $5.4 million of net realized capital gains from sales on our fixed maturity and equity securities.

Net realized capital losses were $206.7 million and net realized capital gains were $58.8 million for the nine months ended September 30, 2011 and 2010, respectively. Of the $206.7 million, there were $178.0 million of losses from fair value re-measurements, $14.5 million of other-than-temporary impairments on our available for sale fixed maturity securities and $14.2 million of net realized capital losses from sales on our fixed maturity and equity securities. The net realized capital gains of $58.8 million for the nine months ended September 30, 2010 were ~~comprised~~the result of $63.9 million ~~from~~of gains inof fair value re-measurements, ~~which were~~ partially offset by $3.1 million of net realized capital ~~loss~~losses from sales on our fixed maturity and equity securities and $2.0 million of other-than-temporary impairments. Net realized capital gains were $56.2 million for the nine months ended September 30, 2009 and were comprised of $79.3 million from gains in fair value re-measurements, which were partially offset by $17.7 million net realized capital losses from the sale on our fixed maturity and equity securities and $5.5 million of other-than-temporary impairments.

~~Realized Gain on Debt Repurchase.~~ On March 19, 2009, we commenced a cash tender offer for any and all of the 6.60% fixed to floating rate long term subordinated notes due 2067. Upon expiration of the tender offer, we had reduced our outstanding debt by $161.4 million, which resulted in a pre-tax gain on debt repurchase of $78.3 million.

Other Income (Expense). We recorded other expense of $8.9 million and $20.4 million for the three and nine months ended September 30, 2011, respectively. We recorded other expense of $3.6 million and other income of $10.2 million for the three and nine months ended September 30, 2010, respectively. ~~We recorded other income of $15.1 million and $7.8 million for the three and nine months ended September 30, 2009, respectively.~~ The ~~changes were primarily due to fluctuations in the amortization of deferred gains on retroactive reinsurance agreements with affiliates and fluctuations in currency exchange rates.~~

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changes were primarily the result of fluctuations in foreign currency exchange rates for the corresponding periods.

Claims and Expenses.

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

	Three Months Ended September 30,																			Three Months Ended September 30,
	Current		Ratio %/				Prior			Ratio %/				Total		Ratio %/				Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year		Pt Change				Years			Pt Change				Incurred		Pt Change				Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional (a)	$	297.6		64.0	%		$	(5.6	)		-1.2	%		$	292.0		62.7	%
Catastrophes (b)		35.5		7.6	%			(0.5	)		-0.1	%			35.0		7.5	%
A&E		-		0.0	%			-			0.0	%			-		0.0	%
Total	$	333.1		71.6	%		$	(6.2	)		-1.3	%		$	326.9		70.3	%

2009
2011
Attritional (a)	$	246.7		56.3	%		$	(19.1	)		-4.4	%		$	227.6		51.9	%		$	244.4			55.2	%		$	6.6			1.5	%		$	251.0			56.7	%
Catastrophes		11.2		2.6	%			3.2			0.7	%			14.4		3.3	%			70.5			15.9	%			0.6			0.1	%			71.1			16.0	%
A&E		-		0.0	%			-			0.0	%			-		0.0	%			-			0.0	%			-			0.0	%			-			0.0	%
Total	$	257.9		58.8	%		$	(15.9	)		-3.6	%		$	242.0		55.2	%		$	314.9			71.1	%		$	7.2			1.6	%		$	322.1			72.7	%

Variance 2010/2009
2010
Attritional (a)	$	50.9		7.7		pts	$	13.5			3.2		pts	$	64.4		10.8		pts	$	297.6			64.0	%		$	(5.6	)		-1.2	%		$	292.0			62.7	%
Catastrophes		24.3		5.0		pts		(3.7	)		(0.8	)	pts		20.6		4.2		pts		35.5			7.6	%			(0.5	)		-0.1	%			35.0			7.5	%
A&E		-		-		pts		-			-		pts		-		-		pts		-			0.0	%			-			0.0	%			-			0.0	%
Total	$	75.2		12.8		pts	$	9.7			2.3		pts	$	84.9		15.1		pts	$	333.1			71.6	%		$	(6.2	)		-1.3	%		$	326.9			70.3	%

Variance 2011/2010
Attritional (a)																				$	(53.2	)		(8.8	)	pts	$	12.2			2.7		pts	$	(41.0	)		(6.0	)	pts
Catastrophes																					35.0			8.3		pts		1.1			0.2		pts		36.1			8.5		pts
A&E																					-			-		pts		-			-		pts		-			-		pts
Total																				$	(18.2	)		(0.5	)	pts	$	13.4			2.9		pts	$	(4.8	)		2.4		pts

		Nine Months Ended September 30,																				Nine Months Ended September 30,
		Current		Ratio %/				Prior			Ratio %/				Total		Ratio %/					Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)		Year		Pt Change				Years			Pt Change				Incurred		Pt Change					Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional (a)		$	831.4		62.9	%		$	(5.2	)		-0.4	%		$	826.2		62.5	%
Catastrophes (b)			246.6		18.6	%			(4.1	)		-0.3	%			242.5		18.3	%
A&E			-		0.0	%			-			0.0	%			-		0.0	%
Total		$	1,077.9		81.5	%		$	(9.3	)		-0.7	%		$	1,068.7		80.8	%

2009
2011
Attritional (a)		$	789.0		59.0	%		$	(36.0	)		-2.7	%		$	753.0		56.3	%			$	752.5			55.5	%		$	(11.4	)		-0.8	%		$	741.1			54.7	%
Catastrophes			20.3		1.5	%			4.0			0.3	%			24.3		1.8	%				435.5			32.2	%			11.3			0.8	%			446.8			33.0	%
A&E			-		0.0	%			-			0.0	%			-		0.0	%				-			0.0	%			-			0.0	%			-			0.0	%
Total		$	809.3		60.5	%		$	(32.0	)		-2.4	%		$	777.3		58.1	%			$	1,188.0			87.7	%		$	(0.1	)		0.0	%		$	1,187.9			87.7	%

Variance 2010/2009
2010
Attritional (a)		$	42.4		3.9		pts	$	30.8			2.3		pts	$	73.2		6.2		pts		$	831.4			62.9	%		$	(5.2	)		-0.4	%		$	826.2			62.5	%
Catastrophes			226.3		17.1		pts		(8.1	)		(0.6	)	pts		218.2		16.5		pts			246.6			18.6	%			(4.1	)		-0.3	%			242.5			18.3	%
A&E			-		-		pts		-			-		pts		-		-		pts			-			0.0	%			-			0.0	%			-			0.0	%
Total		$	268.6		21.0		pts	$	22.7			1.7		pts	$	291.4		22.7		pts		$	1,077.9			81.5	%		$	(9.3	)		-0.7	%		$	1,068.7			80.8	%

(a) Attritional losses exclude catastrophe and A&E losses.
(b) Effective with 2010 reporting period, a catastrophe is a property event with expected reported losses of at least $10.0 million.
All prior periods reflect a catastrophe as a property event with expected reported losses of at least $5.0 million.
Variance 2011/2010
Attritional (a)																						$	(78.9	)		(7.4	)	pts	$	(6.2	)		(0.4	)	pts	$	(85.1	)		(7.8	)	pts
Catastrophes																							188.9			13.6		pts		15.4			1.1		pts		204.3			14.7		pts
A&E																							-			-		pts		-			-		pts		-			-		pts
Total																						$	110.1			6.2		pts	$	9.2			0.7		pts	$	119.3			6.9		pts

(a) Attritional losses exclude catastrophe and Asbestos and Environmental ("A&E") losses.																					(a) Attritional losses exclude catastrophe and Asbestos and Environmental ("A&E") losses.
(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)																				(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE ~~increased~~decreased by ~~$84.9~~$4.8 million, or ~~35.1%~~1.5%, for the three months ended September 30, ~~2010~~2011 compared to the three months ended September 30, ~~2009. Of the $84.9 million increase, current~~2010. Current year attritional losses ~~increased $50.9~~decreased $53.2 million, or ~~7.7~~8.8 points, primarily asdue to changes in the ~~result~~mix of ~~an increase~~business, but also due to the impact of the change in ~~premiums earned and higher expected loss ratios.~~cessions under the affiliated quota share agreement. The ~~$24.3 million, or 5.0 points,~~decrease in attritional losses was partially offset by the increase in current year catastrophe losses ~~was~~of $35.0 million, primarily due to Hurricane Irene and increased loss estimates on the first quarter earthquakes in Japan and New ~~Zealand earthquake and the Canadian hailstorm.~~Zealand.

Incurred losses and LAE increased by $291.4 million, or 37.5%, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Of the $291.4 million increase, current year catastrophe losses increased $226.3 million, or 17.1 points, period over period, primarily due to the Chilean earthquake, New Zealand earthquake, Australian hailstorms and the Canadian hailstorm.

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Incurred losses and LAE increased by $119.3 million, or 11.2%, for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. Catastrophe losses increased $204.3 million (14.7 points), period over period, primarily due to losses from the Japan and New Zealand earthquakes, Australia floods and U.S. storms. Partially offsetting the catastrophe increase was the decrease in attritional losses of $85.1 million, primarily due to changes in the mix of business, but also due to the impact of the change in cessions under the affiliated quota share agreement.

Commission, Brokerage, Taxes and Fees.Commission, brokerage, taxes and fees ~~increased~~decreased by ~~$4.2~~$10.6 million, or ~~5.4%~~13.0%, for the three months ended September 30, ~~2010~~2011 compared to the same period in ~~2009.~~2010. Commission, brokerage, taxes and fees ~~decreased~~increased by ~~$14.9~~$2.2 million, or ~~5.9%~~0.9%, for the nine months ended September 30, ~~2010~~2011 compared to the same period in ~~2009. These changes~~2010. The variances were primarily the result of ~~the changes~~fluctuations in premiums earned, changes in mix of business and a change in the affiliated quota share agreement. Commissions, as a percentage of earned premium, are down for both the quarter and the year driven by a shift in the mix of ~~business.~~reinsurance business from proportional to excess of loss, with the latter generally having lower commission rates, as well as a higher level of reinstatement premiums, which are booked without commissions. Also driving the lower commission ratio, period over period, is the change in distribution on the insurance book, with a greater proportion of the business being accessed directly rather than through managing general agents.

Other Underwriting Expenses. Other underwriting expenses were ~~comparable, period over period,~~$42.7 million and $37.2 million ~~and $38.3 million incurred~~ for the three months ended September 30, ~~2010~~2011 and ~~2009,~~2010, respectively and ~~$105.3~~$120.1 million and ~~$104.4~~$105.3 million ~~incurred~~ for the nine months ended September 30, 2011 and 2010, ~~and 2009,~~ respectively. The increases were primarily attributable to expenses of Heartland, which was acquired in January 2011.

Corporate Expenses. Corporate expenses, which are expenses that are not allocated to segments, were ~~comparable at $1.5~~$1.1 million and ~~$1.7~~$1.5 million for the three months ended September 30, ~~2010~~2011 and ~~2009,~~2010, respectively, and ~~$5.2~~$3.5 million and ~~$4.9~~$5.2 million for the nine months ended September 30, 2011 and 2010, ~~and 2009,~~ respectively. These expenses were previously included as underwriting expenses and therefore included in the other underwriting expense ratio. Effective January 1, 2010, these expenses were removed from the calculation of the other underwriting expense ratio and prior periods were recalculated to conform.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was ~~$12.8~~$12.7 million and ~~$17.1~~$12.8 million for the three months ended September 30, ~~2010~~2011 and ~~2009,~~2010, respectively, and ~~$41.9~~$38.1 million and ~~$53.8~~$41.9 million for the nine months ended September 30, 2011 and 2010, ~~and 2009,~~ respectively. ~~These decreases were~~The decrease for the nine month period was primarily due to the ~~combination of the repurchase~~maturing of debt in March, ~~2009 and maturing of debt in~~ 2010.

Income Tax Expense (Benefit). We had an income tax benefit of $116.5 million and $123.8 million for the three and nine months ended September 30, 2011, respectively. We had an income tax expense of $66.9 million and $40.6 million for the three and nine months ended September 30, 2010, ~~respectively, and income tax expense of $80.0 million and $128.4 million for the three and nine months ended September 30, 2009,~~ respectively. ~~The period over period variance was primarily due to lower pre-tax income in 2010 versus 2009.~~ Our income tax is primarily a function of the statutory tax ~~rate~~rates coupled with the impact from tax-preferenced investment income. Variations in our effective tax rate generally result from changes in the relative levels of pre-tax income.

~~Net Income (Loss).~~

~~We reported net income~~In addition, due to the timing and size of ~~$168.7 million and $140.6 million~~realized losses during the third quarter of 2011, we were unable to reliably estimate the annual effective tax rate for 2011 as small changes to the ~~three and~~assumptions underlying our full year projections produce large changes in the annual effective tax rate. As a result, the tax benefit for the nine months ended September 30, ~~2010, respectively, compared to net income of $164.1 million and $338.3 million for~~2011 was calculated on a discrete basis using the ~~three and nine months ended September 30, 2009, respectively. These changes were the result of the items discussed above.~~

~~Ratios.~~

~~Our combined ratio increased by 14.3 points to 95.8%~~actual effective tax rate. The tax benefit for the three months ended September 30, 2011 reflects the difference between the year-to-date discrete basis and the annual effective tax rate used through June 30, 2011. In 2010, ~~compared to 81.5%~~we applied the effective tax rate method for all interim periods.

Net Income (Loss).

Our net income was $0.3 million and $168.7 million for the three months ended September 30, ~~2009,~~2011 and ~~increased by 22.0 points to 106.8%~~2010, respectively. We had a net loss of $88.5 million and a net income of $140.6 million for the nine months ended September 30, 2011 and 2010, ~~compared to 84.8% for the nine months ended September 30, 2009.~~respectively. The ~~loss ratio component increased 15.1 points and 22.7 points for the three and nine months ended September 30, 2010, respectively, over the same period last year, principally due~~variances were primarily driven by higher catastrophe losses in 2011 in addition to the increase in current year catastrophe losses as a result of the Chilean earthquake, New Zealand earthquake, Australian hailstorms and the Canadian hailstorm and also due to an increase in expected current year loss ratios. Both the other ~~underwriting expense ratio component and the commission and brokerage ratio c omponent remained relatively flat over the same periods last year.~~

~~Stockholder's Equity.~~

Stockholder's equity increased by $248.2 million to $3,106.9 million at September 30, 2010 from $2,858.8 million at December 31, 2009, principally as a result of $140.6 million of net income, $89.1 million of unrealized appreciation on investments, net of tax, $11.9 million of foreign currency translation adjustments, $5.3 million of share-based compensation transactions and $1.3 million of pension adjustments.components discussed above.

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Ratios.

Our combined ratio increased by 2.6 points to 98.4% for the three months ended September 30, 2011 compared to 95.8% for the same period in 2010, and increased by 7.5 points to 114.3% for the nine months ended September 30, 2011 compared to 106.8% for the same period in 2010. The loss ratio component increased by 2.4 points and by 6.9 points for the three and nine months ended September 30, 2011, respectively, over the same periods last year, primarily driven by increased catastrophe losses. The commission and brokerage expense ratio decreased by 1.5 points to 16.0% for the three months ended September 30, 2011 compared to 17.5% for the three months ended September 30, 2010, and decreased slightly to 17.7% for the nine months ended September 30, 2011 compared to 18.0% for the nine months ended September 30, 2010. The other underwriting expense ratio component increased slightly for both the three and nine months ended September 30, 2011 compared to the same periods last year due to the mix of business, primarily due to the acquisition of Heartland.

Stockholder's Equity.

Stockholder's equity decreased by $44.4 million to $3,083.4 million at September 30, 2011 from $3,127.7 million at December 31, 2010, principally as a result of $88.5 million of net loss, partially offset by $32.3 million of unrealized appreciation on investments, net of tax, $4.9 million of share-based compensation transactions and $4.7 million of foreign currency translation adjustments.

Consolidated Investment Results

Net Investment Income.

Net investment income increased ~~13.3%~~5.5% to $78.3 million for the three months ended September 30, 2011 compared to $74.2 million for the three months ended September 30, 2010, ~~compared~~and increased 0.5% to ~~$65.5~~$249.9 million for the ~~three~~nine months ended September 30, ~~2009, and increased 38.4%~~2011 compared to $248.7 million for the nine months ended September 30, ~~2010 compared to $179.7 million for the nine months ended September 30, 2009. The increase for the three and nine months,~~2010. These increases, period over period, ~~was~~were primarily due to an increase in ~~recorded gains~~income from our equity securities and ~~losses~~higher income from our limited partnership investments. ~~The losses for the nine months~~These increases were partially offset by a decline in income from our fixed maturities, reflective of ~~2009 included the results of 2008 fourth quarter losses~~reducing our municipal bond exposure and declining reinvestment rates. Proceeds from ~~those limited partnerships that invested in non-public securities and~~reducing this portfolio were ~~on a quarter reporting lag.~~used to expand our public equity portfolio.

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

		Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
		September 30,						September 30,						September 30,						September 30,
(Dollars in millions)		2010			2009			2010			2009			2011			2010			2011			2010
Fixed maturities		$	69.9		$	71.0		$	219.3		$	212.9		$	58.2		$	69.9		$	178.0		$	219.3
Equity securities			2.5			0.8			7.5			2.2			8.7			2.5			20.4			7.5
Short-term investments and cash			0.1			0.3			0.3			3.3			0.3			0.1			0.9			0.3
Other invested assets
Limited partnerships			1.1			(4.4	)		19.4			(36.5	)		12.4			1.1			44.8			19.4
Dividends from Parent's shares															4.7			4.0			14.0			9.6
Other			4.2			0.7			10.5			5.7			(1.5	)		0.2			3.2			0.9
Total gross investment income			77.7			68.2			256.9			187.6			82.8			77.7			261.2			256.9
Interest debited (credited) and other expense			(3.5	)		(2.8	)		(8.2	)		(7.9	)		(4.5	)		(3.5	)		(11.3	)		(8.2	)
Total net investment income		$	74.2		$	65.5		$	248.7		$	179.7		$	78.3		$	74.2		$	249.9		$	248.7
(Some amounts may not reconcile due to rounding.)	(Some amounts may not reconcile due to rounding.)

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

	At	At	At	At
	September 30,	December 31,	September 30,	December 31,
	2010	2009	2011	2010
Imbedded pre-tax yield of cash and invested assets	3.8%	3.7%	3.5%	3.6%
Imbedded after-tax yield of cash and invested assets	3.1%	3.1%	2.7%	2.8%

	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2010	2009	2010	2009	2011	2010	2011	2010
Annualized pre-tax yield on average cash and invested assets	3.7%	3.4%	4.2%	3.1%	3.9%	3.7%	4.1%	4.2%
Annualized after-tax yield on average cash and invested assets	3.0%	2.9%	3.4%	2.7%	2.9%	3.0%	3.2%	3.4%

~~Table of Contents~~

Net Realized Capital Gains (Losses).

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

		Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended September 30,									Nine Months Ended September 30,
(Dollars in millions)		2010			2009			Variance			2010			2009			Variance			2011			2010			Variance			2011			2010			Variance
Gains (losses) from sales:
Fixed maturity securities, market value
Gains		$	0.2		$	2.0		$	(1.8	)	$	7.2		$	4.0		$	3.2		$	11.4		$	0.2		$	11.2		$	28.2		$	7.2		$	21.0
Losses			(4.8	)		(6.1	)		1.3			(11.0	)		(36.6	)		25.6			(8.6	)		(4.8	)		(3.8	)		(43.7	)		(11.0	)		(32.7	)
Total			(4.6	)		(4.1	)		(0.5	)		(3.8	)		(32.6	)		28.8			2.7			(4.6	)		7.3			(15.6	)		(3.8	)		(11.8	)

Fixed maturity securities, fair value
Gains			0.5			0.3			0.2			0.8			0.6			0.2			0.2			0.5			(0.3	)		1.0			0.8			0.2
Losses			-			(0.1	)		0.1			-			(0.1	)		0.1			(0.3	)		-			(0.3	)		(2.0	)		-			(2.0	)
Total			0.5			0.2			0.3			0.8			0.4			0.3			(0.1	)		0.5			(0.6	)		(1.0	)		0.8			(1.8	)

Equity securities, market value
Gains			-			8.0			(8.0	)		-			8.0			(8.0	)		-			-			-			0.2			-			0.2
Losses			-			-			-			-			-			-			-			-			-			(0.2	)		-			(0.2	)
Total			-			8.0			(8.0	)		-			8.0			(8.0	)		-			-			-			-			-			-

Equity securities, fair value
Gains			1.0			1.3			(0.3	)		4.6			7.2			(2.6	)		6.0			1.0			5.0			8.9			4.6			4.3
Losses			(0.1	)		-			(0.1	)		(4.7	)		(0.7	)		(4.0	)		(5.4	)		(0.1	)		(5.3	)		(6.6	)		(4.7	)		(1.9	)
Total			1.0			1.3			(0.3	)		-			6.5			(6.5	)		0.6			1.0			(0.4	)		2.3			-			2.3

Total net realized gains (losses) from sales
Gains			1.7			11.6			(9.9	)		12.6			19.8			(7.2	)		17.6			1.7			15.9			38.3			12.6			25.7
Losses			(4.9	)		(6.3	)		1.4			(15.7	)		(37.5	)		21.8			(14.3	)		(4.9	)		(9.4	)		(52.5	)		(15.7	)		(36.8	)
Total			(3.2	)		5.4			(8.6	)		(3.1	)		(17.7	)		14.6			3.3			(3.2	)		6.5			(14.2	)		(3.1	)		(11.1	)

Other-than-temporary impairments:			(2.0	)		-			(2.0	)		(2.0	)		(5.5	)		3.5			(0.9	)		(2.0	)		1.1			(14.5	)		(2.0	)		(12.5	)

Gains (losses) from fair value adjustments:
Fixed maturities, fair value			3.3			5.8			(2.5	)		3.8			7.8			(4.0	)		(5.0	)		3.3			(8.3	)		(8.5	)		3.8			(12.3	)
Equity securities, fair value			34.9			23.1			11.8			18.1			23.4			(5.3	)		(153.4	)		34.9			(188.3	)		(115.3	)		18.1			(133.4	)
Other invested assets, fair value			126.6			67.1			59.5			42.0			48.1			(6.1	)		(23.1	)		126.6			(149.7	)		(54.2	)		42.0			(96.2	)
Total			164.8			96.0			68.8			63.9			79.3			(15.4	)		(181.5	)		164.8			(346.3	)		(178.0	)		63.9			(241.9	)

Total net realized capital gains (losses)		$	159.6		$	101.4		$	58.2		$	58.8		$	56.2		$	2.6		$	(179.0	)	$	159.6		$	(338.6	)	$	(206.7	)	$	58.8		$	(265.5	)

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

Table of Contents

Net realized capital ~~gains~~losses were ~~$159.6 million and $101.4~~$179.0 million for the three months ended September 30, 2011 compared to net realized capital gains of $159.6 million for the three months ended September 30, 2010. For the three months ended September 30, 2011, we recorded $181.5 million of losses due to fair value re-measurements on fixed maturity and equity securities and other invested assets and $0.9 million of other-than-temporary impairments on fixed maturity securities, partially offset by $3.3 million of net realized capital gains from sales of fixed maturity and equity securities. For the three months ended September 30, 2010, ~~and 2009, respectively. We~~we recorded $164.8 million ~~and $96.0 million of~~in gains due to fair value re-measurements on fixed maturity and equity securities and other invested assets, ~~and~~partially offset by $3.2 million of net realized capital losses and $5.4 million of net realized capital gains from sales of fixed maturity and equity securities and $2.0 million and $0.0 million of other-than-temporary impairments on fixed maturity securities for the three months ended September 30, 2010 and 2009, respectively. The gains from other invested assets at fair value represent the movement in market value from our investment in our parent’s common equity.

Net realized capital gains were $58.8 million and $56.2 million for the nine months ended September 30, 2010 and 2009, respectively. We recorded $63.9 million and $79.3 million of gains due to fair value re-measurements on fixed maturity and equity securities and other invested assets, and $3.1 million and $17.7 million of net realized capital losses from sales of fixed maturity and equity securities and $2.0 million ~~and~~

~~Table~~ of ~~Contents~~

other-than-temporary impairments on fixed maturity securities.

~~$5.5~~

Net realized capital losses were $206.7 million for the nine months ended September 30, 2011 compared to net realized capital gains of $58.8 million for the nine months ended September 30, 2010. For the nine months ended September 30, 2011, we recorded $178.0 million of losses due to fair value re-measurements on fixed maturity and equity securities and other invested assets, $14.5 million of other-than-temporary impairments on fixed maturity securities ~~for~~and $14.2 million of net realized capital losses from sales of fixed maturity and equity securities. The net realized losses included the impact of selling part of our municipal bond portfolio as credit concerns arose in this market sector. For the nine months ended September 30, 2010, we recorded $63.9 million in gains due to fair value re-measurements on fixed maturity and ~~2009, respectively.~~equity securities and other invested assets, partially offset by $3.1 million of net realized capital losses from sales of fixed maturity and equity securities and $2.0 million of other-than-temporary impairments on fixed maturity securities.

Segment Results.

~~Through our subsidiaries, we operate~~During the quarter ended September 30, 2011, the Company realigned its reporting segments to reflect recent changes in ~~four segments:~~the type and volume of business written. The Company previously reported the results of Marine & Aviation, Surety, A&H Reinsurance and A&H Primary operations as a separate segment—Specialty Underwriting. The A&H primary business, which is a relatively new line of business for the Company, has increased significantly, representing approximately 2% of premiums earned and is projected to continue to grow. The A&H primary business is better aligned with the Insurance reporting segment based on the similarities of this business with that of those businesses already reflected in the Insurance segment. The other operating units included in the Specialty Underwriting segment would have encompassed approximately 6% of the Company’s premiums earned and their volume is projected to remain approximately 6%. As a result of the size of these remaining operating units and their similarity to the business reported within U.S. Reinsurance, they have been reclassified to the U.S. Reinsurance ~~U.S. Insurance, Specialty Underwriting and International.~~ segment. There has been no change to the International reporting segment. The Company has restated all segment information for prior years to conform to the new reporting segment structure.

The U.S. Reinsurance operation writes property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and A&H business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies primarily within the U.S. The ~~U.S.~~ Insurance operation writes property and casualty insurance, ~~primarily~~including medical stop loss insurance, directly and through general agents, brokers and surplus lines brokers within the U.S. ~~The Specialty Underwriting operation writes accident~~ and ~~health (“A&H”), marine, aviation and surety business within the U.S. and worldwide through brokers and directly with ceding companies.~~Canada. The International operation writes non-U.S. property and casualty reinsurance through Everest Re’s ~~br anches~~branches in Canada and Singapore and through offices in Brazil, Miami and New Jersey.

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

Table of Contents

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

~~Table of Contents~~

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

U.S. Reinsurance.

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

		Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended September 30,												Nine Months Ended September 30,
(Dollars in millions)		2010			2009			Variance			% Change			2010			2009			Variance			% Change				2011			2010			Variance			% Change			2011			2010			Variance			% Change
Gross written premiums		$	372.4		$	345.6		$	26.8			7.8	%	$	884.6		$	876.0		$	8.5			1.0	%		$	360.8		$	435.2		$	(74.4	)		-17.1	%	$	947.2		$	1,076.6		$	(129.5	)		-12.0	%
Net written premiums			205.1			191.7			13.5			7.0	%		484.0			487.8			(3.8	)		-0.8	%			167.5			238.5			(71.1	)		-29.8	%		486.0			591.1			(105.1	)		-17.8	%

Premiums earned		$	159.7		$	162.0		$	(2.4	)		-1.5	%	$	449.2		$	489.1		$	(39.9	)		-8.2	%		$	167.5		$	195.7		$	(28.1	)		-14.4	%	$	512.1		$	562.0		$	(49.9	)		-8.9	%
Incurred losses and LAE			84.3			56.2			28.2			50.1	%		258.8			232.3			26.5			11.4	%			97.2			109.1			(11.9	)		-10.9	%		371.6			344.0			27.6			8.0	%
Commission and brokerage			25.1			21.4			3.7			17.2	%		88.1			90.5			(2.4	)		-2.6	%			23.3			32.4			(9.1	)		-28.2	%		106.1			112.8			(6.7	)		-5.9	%
Other underwriting expenses			8.9			9.7			(0.7	)		-7.6	%		26.1			25.3			0.9			3.4	%			10.8			11.1			(0.2	)		-2.1	%		30.6			32.6			(2.0	)		-6.1	%
Underwriting gain (loss)		$	41.3		$	74.8		$	(33.5	)		-44.7	%	$	76.1		$	141.0		$	(64.9	)		-46.0	%		$	36.2		$	43.1		$	(6.9	)		-16.0	%	$	3.7		$	72.5		$	(68.8	)		-94.9	%

											Point Chg												Point Chg													Point Chg												Point Chg
Loss ratio			52.8	%		34.7	%					18.1			57.6	%		47.5	%					10.1				58.0	%		55.7	%					2.3			72.6	%		61.2	%					11.4
Commission and brokerage ratio			15.7	%		13.2	%					2.5			19.6	%		18.5	%					1.1				13.9	%		16.6	%					(2.7	)		20.7	%		20.1	%					0.6
Other underwriting expense ratio			5.6	%		5.9	%					(0.3	)		5.9	%		5.2	%					0.7				6.5	%		5.7	%					0.8			6.0	%		5.8	%					0.2
Combined ratio			74.1	%		53.8	%					20.3			83.1	%		71.2	%					11.9				78.4	%		78.0	%					0.4			99.3	%		87.1	%					12.2

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

Premiums. Gross written premiums ~~increased~~decreased by ~~7.8%~~17.1% to ~~$372.4~~$360.8 million for the three months ended September 30, 2011 from $435.2 million for the three months ended September 30, 2010, ~~from $345.6~~primarily due to non-renewed business in treaty property, treaty casualty, accident and health and crop lines of business. Net written premiums decreased 29.8% to $167.5 million for the three months ended September 30, ~~2009, primarily due~~2011 compared to a $37.0 million (18.2%) increase in treaty property volume, partially offset by a $5.3 million (19.6%) decrease in the crop hail quota share treaties, $4.2 million (4.5%) decrease in U.S. treaty casualty volume and a $0.7 million (3.1%) decrease in facultative volume. Net written premiums increased by 7.0% to $205.1$238.5 million for the three months ended September 30, 2010, ~~compared~~primarily due to ~~$191.7~~the decrease in gross written premiums and a higher percentage of premium ceded under the affiliated quota share agreement. Premiums earned decreased 14.4% to $167.5 million for the three months ended September 30, ~~2009, primarily due~~2011 compared to ~~the increase in gross written premiums. 0;Premiums earned decreased by 1.5% to $159.7~~$195.7 million for the three months ended September 30, ~~2010 compared to $162.0 million for the three months ended September 30, 2009.~~2010. The change in premiums earned relative to net written premiums is ~~primarily~~ the result of ~~timing on proportional contracts where~~timing; premiums are earned ratably over the coverage period whereas written premiums are recorded onat the initiation of the coverage period.

Gross written premiums ~~increased~~decreased by ~~1.0%~~12.0% to ~~$884.6~~$947.2 million for the nine months ended September 30, 2011 from $1,076.6 million for the nine months ended September 30, 2010, ~~from $876.0~~primarily due to non-renewed quota share business in treaty property, treaty casualty and crop as well reduced premium for accident and health and marine business, partially offset by a $9.6 million increase in reinstatement premiums due to catastrophe loss activity. Net written premiums decreased 17.8% to $486.0 million for the nine months ended September 30, ~~2009, primarily due~~2011 compared to a $64.0 million (13.5%) increase in treaty property volume, partially offset by a $24.4 million (35.7%) decrease in the crop hail quota share treaties, a $17.6 million (24.6%) decrease in facultative volume and a $13.3 million (5.1%) decrease in U.S. treaty casualty volume. Net written premiums decreased slightly by 0.8% to $484.0$591.1 million for the nine months ended September 30, 2010, ~~compared~~primarily due to ~~$487.8~~the decrease in gross written premiums and a higher percentage of premium ceded under the affiliated quota share agreement. Premiums earned decreased 8.9% to $512.1 million for the nine months ended September 30, ~~2009. Premiums earned decreased by 8.2%~~2011 compared to ~~$449.2~~$562.0 million for the nine months ended September 30, ~~2010 compared to $489.1 million for the nine months ended September 30, 2009. ;Variances for~~2010. The change in premiums earned ~~for~~relative to net written premiums is the ~~nine months were driven by similar factors as those discussed above for~~result of timing; premiums are earned ratably over the ~~three months.~~coverage period whereas written premiums are recorded at the initiation of the coverage period.

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

	Three Months Ended September 30,																					Three Months Ended September 30,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/				Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change				Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2011
Attritional																						$	82.7			49.3	%		$	(3.5	)		-2.1	%		$	79.2			47.2	%
Catastrophes																							16.7			10.0	%			1.3			0.8	%			18.0			10.8	%
A&E																							-			0.0	%			-			0.0	%			-			0.0	%
Total segment																						$	99.4			59.3	%		$	(2.2	)		-1.3	%		$	97.2			58.0	%

2010
Attritional	$	88.9			55.6	%		$	(1.5	)		-0.9	%		$	87.4			54.7	%		$	113.5			58.0	%		$	(1.9	)		-1.0	%		$	111.6			57.0	%
Catastrophes		(2.7	)		-1.7	%			(0.3	)		-0.2	%			(3.1	)		-1.9	%			(2.7	)		-1.4	%			0.1			0.1	%			(2.6	)		-1.3	%
A&E		-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%
Total segment	$	86.1			53.9	%		$	(1.8	)		-1.1	%		$	84.3			52.8	%		$	110.8			56.6	%		$	(1.8	)		-0.9	%		$	109.1			55.7	%

2009
Variance 2011/2010
Attritional	$	72.7			44.9	%		$	(18.4	)		-11.4	%		$	54.3			33.5	%		$	(30.8	)		(8.7	)	pts	$	(1.6	)		(1.1	)	pts	$	(32.4	)		(9.8	)	pts
Catastrophes		-			0.0	%			1.8			1.1	%			1.8			1.1	%			19.4			11.4		pts		1.2			0.7		pts		20.6			12.1		pts
A&E		-			0.0	%			-			0.0	%			-			0.0	%			-			-		pts		-			-		pts		-			-		pts
Total segment	$	72.7			44.9	%		$	(16.6	)		-10.2	%		$	56.2			34.7	%		$	(11.4	)		2.7		pts	$	(0.4	)		(0.4	)	pts	$	(11.9	)		2.3		pts

Variance 2010/2009
Attritional	$	16.2			10.7		pts	$	16.9			10.5		pts	$	33.1			21.2		pts
Catastrophes		(2.7	)		(1.7	)	pts		(2.1	)		(1.3	)	pts		(4.9	)		(3.0	)	pts
A&E		-			-		pts		-			-		pts		-			-		pts
Total segment	$	13.4			9.0		pts	$	14.8			9.1		pts	$	28.1			18.1		pts

		Nine Months Ended September 30,																					Nine Months Ended September 30,
		Current			Ratio %/				Prior			Ratio %/				Total		Ratio %/					Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)		Year			Pt Change				Years			Pt Change				Incurred		Pt Change					Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2011
Attritional																							$	262.4			51.3	%		$	(4.0	)		-0.8	%		$	258.4			50.5	%
Catastrophes																								102.4			20.0	%			10.9			2.1	%			113.3			22.1	%
A&E																								-			0.0	%			-			0.0	%			-			0.0	%
Total segment																							$	364.8			71.3	%		$	6.9			1.3	%		$	371.6			72.6	%

2010
Attritional		$	244.0			54.3	%		$	4.0			0.9	%		$	248.1		55.2	%			$	326.0			58.0	%		$	4.1			0.7	%		$	330.1			58.7	%
Catastrophes			10.1			2.3	%			0.6			0.1	%			10.7		2.4	%				10.1			1.8	%			3.8			0.7	%			13.9			2.5	%
A&E			-			0.0	%			-			0.0	%			-		0.0	%				-			0.0	%			-			0.0	%			-			0.0	%
Total segment		$	254.2			56.6	%		$	4.6			1.0	%		$	258.8		57.6	%			$	336.1			59.8	%		$	7.9			1.4	%		$	344.0			61.2	%

2009
Attritional		$	250.2			51.2	%		$	(18.1	)		-3.7	%		$	232.1		47.5	%
Catastrophes			-			0.0	%			0.1			0.0	%			0.1		0.0	%
A&E			-			0.0	%			-			0.0	%			-		0.0	%
Total segment		$	250.2			51.2	%		$	(18.0	)		-3.7	%		$	232.3		47.5	%

Variance 2010/2009
Variance 2011/2010
Attritional		$	(6.2	)		3.1		pts	$	22.1			4.6		pts	$	16.0		7.7		pts		$	(63.6	)		(6.7	)	pts	$	(8.1	)		(1.5	)	pts	$	(71.7	)		(8.2	)	pts
Catastrophes			10.1			2.3		pts		0.5			0.1		pts		10.6		2.4		pts			92.3			18.2		pts		7.1			1.4		pts		99.4			19.6		pts
A&E			-			-		pts		-			-		pts		-		-		pts			-			-		pts		-			-		pts		-			-		pts
Total segment		$	4.0			5.4		pts	$	22.6			4.7		pts	$	26.5		10.1		pts		$	28.7			11.5		pts	$	(1.0	)		(0.1	)	pts	$	27.6			11.4		pts

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

Incurred losses were ~~$28.1~~$11.9 million ~~(18.1 points) higher~~lower at ~~$84.3~~$97.2 million for the three months ended September 30, 2011 compared to $109.1 million for the three months ended September 30, 2010, ~~compared to $56.2 million for the three months ended September 30, 2009,~~ primarily as a result of the ~~$33.1~~$30.8 million ~~increase in attritional losses due to the increase~~(8.7 points) decrease in current year ~~treaty property expected loss ratios~~attritional losses, primarily due to a combination of lower earned premiums and a ~~$16.9~~change in the mix of business. Partially offsetting these decreases, the current year catastrophe losses increased $19.4 million ~~increase in prior years reserve development primarily on treaty casualty business~~(11.4 points), largely due to ~~more favorable~~Hurricane Irene and the development ~~in 2009, partially offset by a $4.9 million combined decrease in both~~on the current year Japan and ~~prior years’ catastrophe losses.~~New Zealand earthquakes.

Incurred losses were $26.5 million (10.1 points) higher at $258.8 million for the nine months ended September 30, 2010 compared to $232.3 million for the nine months ended September 30, 2009, primarily as a result of the $22.1 million (4.6 points) increase in prior years’ attritional losses, principally due to less favorable development on treaty casualty’s prior years’ losses, and a $10.6 million (2.4 points) increase in catastrophe losses, due to the New Zealand earthquake and Chilean earthquake.

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~~Segment Expenses.~~ ~~Commission and brokerage expenses increased 17.2% to $25.1~~Incurred losses were $27.6 million (11.4 points) higher at $371.6 million for the ~~three~~nine months ended September 30, ~~2010~~2011 compared to ~~$21.4 million for the three months ended September 30, 2009. Commission and brokerage expenses decreased 2.6% to $88.1~~$344.0 million for the nine months ended September 30, 2010, primarily as a result of the $92.3 million (18.2 points) increase in current year catastrophe losses, largely due to the Japan and New Zealand earthquakes, U.S. Midwest tornadoes and Hurricane Irene, and the $7.1 million (1.4 points) increase in prior year catastrophe losses, largely due to the Chile earthquake. Partially offsetting these increases, the current year attritional losses decreased $63.6 million (6.7 points), primarily due to a shift in the mix of business, with a higher level of catastrophe excess of loss business in the current year, which carries a lower attritional loss ratio, coupled with a significant reduction in pro rata property business, which further reduces the current year attritional loss ratio.

Segment Expenses. Commission and brokerage expenses decreased 28.2% to $23.3 million for the three months ended September 30, 2011 compared to ~~$90.5~~$32.4 million for the three months ended September 30, 2010. Commission and brokerage expenses decreased 5.9% to $106.1 million for the nine months ended September 30, ~~2009. The increase~~2011 compared to $112.8 million for the ~~quarter was~~nine months ended September 30, 2010. These variances were primarily due to ~~an increase~~the changes in premiums earned and the mix of business with varying commission ~~on a large treaty property transaction and an increase in contingent commissions on treaty casualty business.~~rates.

Segment other underwriting expenses ~~for the three months ended September 30, 2010~~ decreased slightly to ~~$8.9 million from $9.7~~$10.8 million for the three months ended September 30, ~~2009 and segment~~2011 compared to $11.1 million for the same period in 2010. Segment other underwriting expenses ~~for the nine months ended September 30, 2010 increased slightly~~decreased to ~~$26.1 million from $25.3~~$30.6 million for the nine months ended September 30, ~~2009.~~2011 compared to $32.6 million for the same period in 2010. These variances were due to reduced operating costs for the segment.

~~U.S.~~ Insurance.

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

		Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended September 30,												Nine Months Ended September 30,
(Dollars in millions)		2010			2009			Variance			% Change			2010			2009			Variance			% Change				2011			2010			Variance			% Change			2011			2010			Variance			% Change
Gross written premiums		$	211.6		$	230.5		$	(18.9	)		-8.2	%	$	644.8		$	648.7		$	(3.9	)		-0.6	%		$	236.3		$	214.7		$	21.6			10.1	%	$	750.3		$	650.4		$	99.8			15.3	%
Net written premiums			89.2			76.4			12.8			16.8	%		272.5			301.9			(29.4	)		-9.7	%			114.3			90.9			23.4			25.7	%		366.2			275.7			90.6			32.9	%

Premiums earned		$	104.0		$	89.2		$	14.7			16.5	%	$	291.3		$	306.9		$	(15.5	)		-5.1	%		$	124.3		$	105.7		$	18.6			17.6	%	$	362.2		$	294.5		$	67.7			23.0	%
Incurred losses and LAE			99.0			71.4			27.6			38.6	%		243.7			210.3			33.4			15.9	%			120.3			99.5			20.9			21.0	%		302.0			245.7			56.4			22.9	%
Commission and brokerage			10.4			10.5			(0.1	)		-0.8	%		18.2			32.4			(14.2	)		-43.9	%			11.9			10.7			1.1			10.5	%		27.8			18.7			9.1			48.6	%
Other underwriting expenses			19.5			20.0			(0.5	)		-2.5	%		52.3			56.4			(4.1	)		-7.2	%			24.3			19.5			4.8			24.8	%		68.6			52.3			16.3			31.1	%
Underwriting gain (loss)		$	(24.9	)	$	(12.7	)	$	(12.2	)		96.6	%	$	(22.9	)	$	7.7		$	(30.7	)	NM				$	(32.2	)	$	(24.0	)	$	(8.2	)		34.3	%	$	(36.2	)	$	(22.2	)	$	(14.0	)		62.9	%

											Point Chg												Point Chg													Point Chg												Point Chg
Loss ratio			95.2	%		80.0	%					15.2			83.7	%		68.5	%					15.2				96.8	%		94.1	%					2.7			83.4	%		83.4	%					-
Commission and brokerage ratio			10.0	%		11.8	%					(1.8	)		6.2	%		10.6	%					(4.4	)			9.5	%		10.2	%					(0.7	)		7.7	%		6.3	%					1.4
Other underwriting expense ratio			18.8	%		22.4	%					(3.6	)		18.0	%		18.4	%					(0.4	)			19.6	%		18.4	%					1.2			18.9	%		17.8	%					1.1
Combined ratio			124.0	%		114.2	%					9.8			107.9	%		97.5	%					10.4				125.9	%		122.7	%					3.2			110.0	%		107.5	%					2.5

(NM, not meaningful)

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

Premiums. Gross written premiums ~~decreased~~increased by ~~8.2%~~10.1% to ~~$211.6~~$236.3 million for the three months ended September 30, ~~2010~~2011 compared to ~~$230.5~~$214.7 million for the three months ended September 30, ~~2009, as we continue~~2010. This increase was due to ~~adjust our book~~strategic portfolio changes with growth in short-tail business, primarily driven by the acquisition of Heartland, which provided $44.8 million of new crop insurance premium in the current quarter and $14.0 million growth in A&H primary business, ~~in response to changing market conditions.~~partially offset by the planned reduction of a large casualty program. Net written premiums ~~were higher in 2010 primarily due~~increased 25.7% to ~~higher cessions under the affiliated quota share during the third quarter of 2009. Premiums earned increased 16.5% to $104.0~~$114.3 million for the three months ended September 30, ~~2010~~2011 compared to ~~$89.2~~$90.9 million for the same period in 2010 due to higher gross premiums and reduced levels of ceded reinsurance primarily related to the reduced casualty program. Premiums earned increased 17.6% to $124.3 million for the three months ended September 30, ~~2009, generally~~2011 compared to $105.7 million for the three months ended September 30, 2010. The change in ~~line~~premiums earned is relatively consistent with the increase in net written ~~premiums.~~premium.

Gross written premiums decreased by 0.6% to $644.8 million for the nine months ended September 30, 2010 compared to $648.7 million for the nine months ended September 30, 2009. Net written premiums decreased by a larger percentage than the decline in gross written premiums due to increased cessions on certain programs. Premiums earned decreased 5.1% to $291.3 million for the nine months ended September 30, 2010 compared to $306.9 million for the nine months ended September 30, 2009 due to the lower net written premiums.

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Gross written premiums increased by 15.3% to $750.3 million for the nine months ended September 30, 2011 compared to $650.4 million for the nine months ended September 30, 2010. This increase was due to strategic portfolio changes with growth in short-tail business, primarily driven by the acquisition of Heartland, which provided $122.3 million of new crop insurance premium in 2011 and $44.8 million growth in A&H primary business, partially offset by the reduction of a large casualty program. Net written premiums increased 32.9% to $366.2 million for the nine months ended September 30, 2011 compared to $275.7 million for the same period in 2010 due to higher gross premiums and reduced levels of ceded reinsurance. Premiums earned increased 23.0% to $362.2 million for the nine months ended September 30, 2011 compared to $294.5 million for the nine months ended September 30, 2010. The change in premiums earned is relatively consistent with the increase in net written premium.

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

	Three Months Ended September 30,																		Three Months Ended September 30,
	Current		Ratio %/				Prior		Ratio %/				Total		Ratio %/				Current		Ratio %/				Prior		Ratio %/				Total		Ratio %/
(Dollars in millions)	Year		Pt Change				Years		Pt Change				Incurred		Pt Change				Year		Pt Change				Years		Pt Change				Incurred		Pt Change
2011
Attritional																			$	100.9		81.1	%		$	18.0		14.5	%		$	118.9		95.6	%
Catastrophes																				1.4		1.2	%			-		0.0	%			1.4		1.2	%
Total segment																			$	102.3		82.3	%		$	18.0		14.5	%		$	120.3		96.8	%

2010
Attritional	$	89.2		85.8	%		$	9.8		9.4	%		$	99.0		95.2	%		$	89.7		84.9	%		$	9.8		9.2	%		$	99.5		94.1	%
Catastrophes		-		0.0	%			-		0.0	%			-		0.0	%			-		0.0	%			-		0.0	%			-		0.0	%
Total segment	$	89.2		85.8	%		$	9.8		9.4	%		$	99.0		95.2	%		$	89.7		84.9	%		$	9.8		9.2	%		$	99.5		94.1	%

2009
Variance 2011/2010
Attritional	$	71.4		80.0	%		$	0.1		0.1	%		$	71.4		80.0	%		$	11.2		(3.8	)	pts	$	8.2		5.3		pts	$	19.4		1.5		pts
Catastrophes		-		0.0	%			-		0.0	%			-		0.0	%			1.4		1.2		pts		-		-		pts		1.4		1.2		pts
Total segment	$	71.4		80.0	%		$	0.1		0.1	%		$	71.4		80.0	%		$	12.6		(2.6	)	pts	$	8.2		5.3		pts	$	20.9		2.7		pts

Variance 2010/2009
Attritional	$	17.8		5.8		pts	$	9.7		9.3		pts	$	27.6		15.2		pts
Catastrophes		-		-		pts		-		-		pts		-		-		pts
Total segment	$	17.8		5.8		pts	$	9.7		9.3		pts	$	27.6		15.2		pts

		Nine Months Ended September 30,																				Nine Months Ended September 30,
		Current		Ratio %/				Prior			Ratio %/				Total		Ratio %/					Current		Ratio %/				Prior		Ratio %/				Total		Ratio %/
(Dollars in millions)		Year		Pt Change				Years			Pt Change				Incurred		Pt Change					Year		Pt Change				Years		Pt Change				Incurred		Pt Change
2011
Attritional																						$	287.9		79.4	%		$	12.5		3.5	%		$	300.4		82.9	%
Catastrophes																							1.4		0.4	%			0.2		0.1	%			1.6		0.5	%
Total segment																						$	289.3		79.8	%		$	12.7		3.6	%		$	302.0		83.4	%

2010
Attritional		$	234.0		80.4	%		$	9.7			3.3	%		$	243.7		83.7	%			$	235.9		80.1	%		$	9.7		3.3	%		$	245.7		83.4	%
Catastrophes			-		0.0	%			-			0.0	%			-		0.0	%				-		0.0	%			-		0.0	%			-		0.0	%
Total segment		$	234.0		80.4	%		$	9.7			3.3	%		$	243.7		83.7	%			$	235.9		80.1	%		$	9.7		3.3	%		$	245.7		83.4	%

2009
Attritional		$	226.8		73.9	%		$	(16.4	)		-5.4	%		$	210.3		68.5	%
Catastrophes			-		0.0	%			-			0.0	%			-		0.0	%
Total segment		$	226.8		73.9	%		$	(16.4	)		-5.4	%		$	210.3		68.5	%

Variance 2010/2009
Variance 2011/2010
Attritional		$	7.2		6.5		pts	$	26.1			8.7		pts	$	33.4		15.2		pts		$	52.0		(0.7	)	pts	$	2.8		0.2		pts	$	54.7		(0.5	)	pts
Catastrophes			-		-		pts		-			-		pts		-		-		pts			1.4		0.4		pts		0.2		0.1		pts		1.6		0.5		pts
Total segment		$	7.2		6.5		pts	$	26.1			8.7		pts	$	33.4		15.2		pts		$	53.4		(0.3	)	pts	$	3.0		0.3		pts	$	56.4		-		pts

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

Incurred losses and LAE increased by ~~38.6%~~$20.9 million, or 21.0%, to ~~$99.0~~$120.3 million for the three months ended September 30, ~~2010~~2011 compared to ~~$71.4~~$99.5 million for the three months ended September 30, ~~2009. The~~2010. This increase was primarily due to an increase of $11.2 million (3.8 points) in current year attritional losses primarily due to higher ~~current year attritional reserves, resulting primarily from the increase in~~net premiums earned and ~~the $9.7 million~~an increase in prior years’ losses of $8.2 million (5.3 points) attributable to development on excess casualty and California workers’ compensation reserves.

Table of Contents

Incurred losses and LAE increased by ~~15.9%~~$56.4 million, or 22.9%, to ~~$243.7~~$302.0 million for the nine months ended September 30, ~~2010~~2011 compared to ~~$210.3~~$245.7 million for the nine months ended September 30, ~~2009. The~~2010. This increase was primarily due to ~~the $26.1~~an increase of $52.0 million ~~increase~~(0.7 points) in ~~prior years’~~current year attritional losses primarily due to ~~favorable development~~higher net premiums earned and an increase in ~~2009 of~~ prior years’ ~~attritional reserves, specifically net~~losses of $3.0 million (0.3 points) primarily attributable to development on excess casualty ~~losses.~~and California workers’ compensation.

Segment Expenses. Commission and brokerage expenses ~~decreased by 0.8%~~increased to ~~$10.4~~$11.9 million for the three months ended September 30, ~~2010~~2011 compared to ~~$10.5~~$10.7 million for the three months ended September 30, ~~2009.~~2010. Commission and brokerage expenses ~~decreased by 43.9%~~increased to ~~$18.2~~$27.8 million for the nine months ended September 30, ~~2010~~2011 compared to ~~$32.4~~$18.7 million for the nine months ended September 30, ~~2009.~~2010. These ~~decreases are~~increases were primarily ~~due to~~ the ~~changes~~result of an increase in net premiums earned and changes in ~~conjunction with~~distribution and the ~~impact~~mix of ~~variations in reinsurance ceded, particularly under the affiliated quota share.~~business.

~~Table of Contents~~

Segment other underwriting expenses for the three months ended September 30, ~~2010 decreased~~2011 increased to ~~$19.5~~$24.3 million from ~~$20.0~~$19.5 million for the three months ended September 30, ~~2009.~~2010. Segment other underwriting expenses for the nine months ended September 30, ~~2010 decreased~~2011 increased to ~~$52.3~~$68.6 million from ~~$56.4~~$52.3 million for the nine months ended September 30, ~~2009.~~2010. These ~~decreases~~increases were primarily due to the ~~result~~expenses of ~~management’s direct actions to reduce expenses.~~the newly acquired Heartland.

~~Specialty Underwriting.~~International.

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

		Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended September 30,												Nine Months Ended September 30,
(Dollars in millions)		2010			2009			Variance			% Change			2010			2009			Variance			% Change				2011			2010			Variance			% Change			2011			2010			Variance			% Change
Gross written premiums		$	65.9		$	67.6		$	(1.7	)		-2.5	%	$	197.7		$	183.7		$	13.9			7.6	%		$	326.1		$	323.7		$	2.3			0.7	%	$	923.6		$	906.1		$	17.6			1.9	%
Net written premiums			35.1			38.3			(3.1	)		-8.2	%		110.2			103.0			7.2			7.0	%			158.0			168.4			(10.4	)		-6.2	%		457.7			479.7			(22.0	)		-4.6	%

Premiums earned		$	37.7		$	39.2		$	(1.5	)		-3.7	%	$	116.0		$	108.5		$	7.4			6.9	%		$	151.1		$	163.9		$	(12.9	)		-7.9	%	$	480.0		$	465.7		$	14.3			3.1	%
Incurred losses and LAE			25.2			25.2			-			0.1	%		87.2			73.7			13.5			18.3	%			104.6			118.4			(13.8	)		-11.7	%		514.3			479.0			35.3			7.4	%
Commission and brokerage			7.7			10.5			(2.8	)		-27.1	%		25.2			29.4			(4.3	)		-14.5	%			35.7			38.3			(2.6	)		-6.8	%		105.8			106.0			(0.3	)		-0.2	%
Other underwriting expenses			2.1			2.4			(0.2	)		-10.1	%		6.5			6.2			0.3			4.4	%			7.5			6.7			0.9			13.1	%		20.9			20.4			0.6			2.8	%
Underwriting gain (loss)		$	2.7		$	1.1		$	1.6			145.7	%	$	(2.9	)	$	(0.9	)	$	(2.0	)		227.9	%		$	3.2		$	0.6		$	2.7		NM			$	(161.0	)	$	(139.6	)	$	(21.3	)		15.3	%

											Point Chg												Point Chg													Point Chg												Point Chg
Loss ratio			66.9	%		64.3	%					2.6			75.2	%		68.0	%					7.2				69.2	%		72.2	%					(3.0	)		107.1	%		102.8	%					4.3
Commission and brokerage ratio			20.3	%		26.8	%					(6.5	)		21.7	%		27.1	%					(5.4	)			23.6	%		23.4	%					0.2			22.0	%		22.8	%					(0.8	)
Other underwriting expense ratio			5.7	%		6.1	%					(0.4	)		5.6	%		5.7	%					(0.1	)			5.1	%		4.0	%					1.1			4.4	%		4.4	%					-
Combined ratio			92.9	%		97.2	%					(4.3	)		102.5	%		100.8	%					1.7				97.9	%		99.6	%					(1.7	)		133.5	%		130.0	%					3.5

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

Premiums. Gross written premiums ~~decreased~~increased by ~~2.5%~~0.7% to ~~$65.9~~$326.1 million for the three months ended September 30, 2011 compared to $323.7 million for the three months ended September 30, 2010, ~~compared~~due to ~~$67.6~~an increase in premiums written through Canada, $11.2 million; and Asia, $8.4 million; partially offset by a $17.5 million net decrease in business written in the Latin America, South America, Middle East, and Africa regions. The increases were primarily due to generally higher rate levels on retained business and favorable foreign exchange impact of $11.3 million, partially offset by non-renewed business in certain catastrophe exposed territories that have not responded to the recent elevation in catastrophe loss activity. Net written premiums decreased by 6.2% to $158.0 million for the three months ended September 30, ~~2009, primarily due~~2011 compared to a $6.5 million and $5.8 million decrease in marine and aviation business, respectively, partially offset by a $10.2 million increase in A&H business, attributable to travel reinsurance and medical stop loss business. Net written premiums decreased by 8.2% to $35.1$168.4 million for the three months ended September 30, 2010, ~~compared~~principally as a result of the change in the affiliated quota share agreement. Premiums earned decreased by 7.9% to ~~$38.3~~$151.1 million for the three months ended September 30, ~~2009, primarily as a result of the decrease in gross written premiums combined with changes in amounts ceded un der the affiliated quota share. Premiums earned decreased 3.7%~~2011 compared to ~~$37.7~~$163.9 million for the three months ended September 30, ~~2010 compared to $39.2 million for the three months ended September 30, 2009.~~2010. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums increased by 7.6% to $197.7 million for the nine months ended September 30, 2010 compared to $183.7 million for the nine months ended September 30, 2009, primarily due to an increase in A&H business, attributable to travel reinsurance and medical stop loss business of $29.0 million, partially offset by a net decrease in marine and aviation business of $14.2 million. Correspondingly, net written premiums increased 7.0% to $110.2 million for the nine months ended September 30, 2010 compared to $103.0 million for the nine months ended September 30, 2009. Premiums earned increased 6.9% to $116.0 million for the nine months ended September 30, 2010 compared to $108.5 million for the nine months ended September 30, 2009, relatively consistent with the increase in net written premiums.

4038

Table of Contents

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

Three Months Ended September 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2010
Attritional $ 25.1 66.7 % $ (0.4 ) -1.0 % $ 24.8 65.6 %
Catastrophes - 0.0 % 0.5 1.2 % 0.5 1.2 %
Total segment $ 25.1 66.7 % $ 0.1 0.2 % $ 25.2 66.9 %

2009
Attritional $ 26.2 66.8 % $ (0.2 ) -0.4 % $ 26.0 66.4 %
Catastrophes - 0.0 % (0.8 ) -2.1 % (0.8 ) -2.1 %
Total segment $ 26.2 66.8 % $ (1.0 ) -2.5 % $ 25.2 64.3 %

Variance 2010/2009
Attritional $ (1.1 ) (0.1 ) pts $ (0.2 ) (0.6 ) pts $ (1.2 ) (0.8 ) pts
Catastrophes - - pts 1.3 3.3 pts 1.3 3.3 pts
Total segment $ (1.1 ) (0.1 ) pts $ 1.1 2.7 pts $ - 2.6 pts

Nine Months Ended September 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2010
Attritional $ 83.9 72.3 % $ 0.1 0.1 % $ 84.0 72.4 %
Catastrophes - 0.0 % 3.2 2.8 % 3.2 2.8 %
Total segment $ 83.9 72.3 % $ 3.3 2.8 % $ 87.2 75.2 %

2009
Attritional $ 77.0 70.9 % $ (6.0 ) -5.5 % $ 71.0 65.4 %
Catastrophes - 0.0 % 2.8 2.6 % 2.8 2.6 %
Total segment $ 77.0 70.9 % $ (3.2 ) -3.0 % $ 73.7 68.0 %

Variance 2010/2009
Attritional $ 6.9 1.4 pts $ 6.1 5.6 pts $ 13.0 7.0 pts
Catastrophes - - pts 0.4 0.2 pts 0.4 0.2 pts
Total segment $ 6.9 1.4 pts $ 6.5 5.8 pts $ 13.5 7.2 pts

(Some amounts may not reconcile due to rounding.)

~~Incurred losses and LAE remained flat at $25.2~~Gross written premiums increased by 1.9% to $923.6 million for the ~~three~~nine months ended September 30, ~~2010 and 2009. Incurred losses and LAE increased by 18.3%~~2011 compared to ~~$87.2~~$906.1 million for the nine months ended September 30, 2010, ~~compared~~due to ~~$73.7~~a net increase of $9.2 million in premiums written in Canada, $5.3 million in the Latin America, South America, Middle East, and Africa regions and $2.9 million in Asia. The increase in gross written premiums included a net favorable foreign exchange impact of $33.4 million. Growth from increased rate levels, particularly in regions recently affected by catastrophe losses, and from the impact of foreign exchange were partially offset by non-renewed business which did not meet our current pricing targets. Net written premiums decreased by 4.6% to $457.7 million for the nine months ended September 30, ~~2009. This increase was driven by a $13.0 million (7.0 points) increase in attritional losses, primarily from the A&H business and from losses on the offshore oil rig in the Gulf.~~

~~Segment Expenses.~~ ~~Commission and brokerage expenses decreased 27.1% to $7.7 million for the three months ended September 30, 2010~~2011 compared to ~~$10.5 million for the three months ended September 30, 2009. Commission and brokerage expenses decreased 14.5% to $25.2~~$479.7 million for the nine months ended September 30, 2010, ~~compared~~primarily due to ~~$29.4~~the change in our affiliated quota share agreement. Premiums earned increased by 3.1% to $480.0 million for the nine months ended September 30, ~~2009. These decreases were due to the changes in the mix in business and lower contingent commissions on the surety book of business.~~

~~Table of Contents~~

~~Segment other underwriting expenses decreased slightly to $2.1 million for the three months ended September 30, 2010~~2011 compared to ~~$2.4 million for the three months ended September 30, 2009. Segment other underwriting expenses increased slightly to $6.5~~$465.7 million for the nine months ended September 30, ~~2010 compared to $6.2 million for the nine months ended September 30, 2009.~~

~~International.~~

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

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions) 2010 2009 Variance % Change 2010 2009 Variance % Change
Gross written premiums $ 323.7 $ 272.6 $ 51.1 18.8 % $ 906.1 $ 797.6 $ 108.5 13.6 %
Net written premiums 168.4 146.3 22.1 15.1 % 479.7 435.7 44.0 10.1 %

Premiums earned $ 163.9 $ 147.9 $ 16.1 10.9 % $ 465.7 $ 433.1 $ 32.6 7.5 %
Incurred losses and LAE 118.4 89.2 29.2 32.7 % 479.0 261.0 218.0 83.5 %
Commission and brokerage 38.3 34.8 3.4 9.9 % 106.0 100.1 5.9 5.9 %
Other underwriting expenses 6.7 6.2 0.5 8.4 % 20.4 16.5 3.9 23.7 %
Underwriting gain (loss) $ 0.6 $ 17.7 $ (17.1 ) -96.6 % $ (139.6 ) $ 55.6 $ (195.2 ) NM

Point Chg Point Chg
Loss ratio 72.2 % 60.3 % 11.9 102.8 % 60.3 % 42.5
Commission and brokerage ratio 23.4 % 23.6 % (0.2 ) 22.8 % 23.1 % (0.3 )
Other underwriting expense ratio 4.0 % 4.2 % (0.2 ) 4.4 % 3.8 % 0.6
Combined ratio 99.6 % 88.1 % 11.5 130.0 % 87.2 % 42.8

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

~~Premiums.~~ Gross written premiums increased by 18.8% to $323.7 million for the three months ended September 30, 2010 compared to $272.6 million for the three months ended September 30, 2009, due to continued strong growth in our Brazil, Miami and New Jersey offices, a $42.9 million increase; Canada, a $5.5 million increase; and Asia, a $2.8 million increase. Net written premiums increased by 15.1% to $168.4 million for the three months ended September 30, 2010 compared to $146.3 million for the three months ended September 30, 2009, principally as a result of the increase in gross written premiums. Premiums earned increased by 10.9% to $163.9 million for the three months ended September 30, 2010 compared to $147.9 million for the three months ended September 30, 2009.2010. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Gross written premiums increased by 13.6% to $906.1 million for the nine months ended September 30, 2010 compared to $797.6 million for the nine months ended September 30, 2009, due to continued strong growth in Brazil, Miami and New Jersey offices, a $49.4 million increase; Asia, a $36.6 million increase; and Canada, a $22.6 million increase; the result of a combination of new business, rate increases in select areas and economic and insurance growth in some markets. Also contributing to the increase was $13.4 million in reinstatement premiums from the Chilean earthquake. Net written premiums increased by 10.1% to $479.7 million for the nine months ended September 30, 2010 compared to $435.7 million for the nine months ended September 30, 2009. Premiums earned increased by 7.5% to $465.7 million f or the nine months ended September 30, 2010 compared to $433.1 million for the nine months ended September 30, 2009, as a result of the increase in net written premiums. Variance explanations for net written premiums and premiums earned for the nine months were similar to those discussed above for the three months.

~~Table of Contents~~

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

	Three Months Ended September 30,																			Three Months Ended September 30,
	Current		Ratio %/				Prior			Ratio %/				Total		Ratio %/				Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year		Pt Change				Years			Pt Change				Incurred		Pt Change				Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2011
Attritional																				$	60.8			40.2	%		$	(7.9	)		-5.2	%		$	52.9			35.0	%
Catastrophes																					52.3			34.6	%			(0.7	)		-0.4	%			51.7			34.2	%
Total segment																				$	113.1			74.8	%		$	(8.6	)		-5.6	%		$	104.6			69.2	%

2010
Attritional	$	94.4		57.6	%		$	(13.5	)		-8.3	%		$	80.8		49.3	%		$	94.4			57.6	%		$	(13.5	)		-8.3	%		$	80.8			49.3	%
Catastrophes		38.2		23.3	%			(0.7	)		-0.4	%			37.5		22.9	%			38.2			23.3	%			(0.7	)		-0.4	%			37.5			22.9	%
Total segment	$	132.6		80.9	%		$	(14.2	)		-8.7	%		$	118.4		72.2	%		$	132.6			80.9	%		$	(14.2	)		-8.7	%		$	118.4			72.2	%

2009
Variance 2011/2010
Attritional	$	76.4		51.7	%		$	(0.6	)		-0.4	%		$	75.8		51.3	%		$	(33.6	)		(17.4	)	pts	$	5.6			3.1		pts	$	(27.9	)		(14.3	)	pts
Catastrophes		11.2		7.6	%			2.1			1.5	%			13.4		9.0	%			14.1			11.3		pts		-			-		pts		14.2			11.3		pts
Total segment	$	87.7		59.3	%		$	1.5			1.0	%		$	89.2		60.3	%		$	(19.5	)		(6.1	)	pts	$	5.6			3.1		pts	$	(13.8	)		(3.0	)	pts

Variance 2010/2009
Attritional	$	18.0		5.9		pts	$	(12.9	)		(7.9	)	pts	$	5.0		(2.0	)	pts
Catastrophes		27.0		15.7		pts		(2.8	)		(1.9	)	pts		24.1		13.9		pts
Total segment	$	44.9		21.6		pts	$	(15.7	)		(9.7	)	pts	$	29.2		11.9		pts

		Nine Months Ended September 30,																				Nine Months Ended September 30,
		Current		Ratio %/				Prior			Ratio %/				Total		Ratio %/					Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)		Year		Pt Change				Years			Pt Change				Incurred		Pt Change					Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2011
Attritional																						$	202.3			42.1	%		$	(19.9	)		-4.1	%		$	182.4			38.0	%
Catastrophes																							331.7			69.1	%			0.2			0.0	%			331.9			69.1	%
Total segment																						$	534.0			111.2	%		$	(19.7	)		-4.1	%		$	514.3			107.1	%

2010
Attritional		$	269.4		57.8	%		$	(19.0	)		-4.1	%		$	250.4		53.8	%			$	269.4			57.8	%		$	(19.0	)		-4.1	%		$	250.4			53.8	%
Catastrophes			236.4		50.8	%			(7.9	)		-1.7	%			228.6		49.1	%				236.4			50.8	%			(7.9	)		-1.7	%			228.6			49.1	%
Total segment		$	505.9		108.6	%		$	(26.9	)		-5.8	%		$	479.0		102.8	%			$	505.9			108.6	%		$	(26.9	)		-5.8	%		$	479.0			102.8	%

2009
Attritional		$	235.0		54.3	%		$	4.5			1.1	%		$	239.5		55.3	%
Catastrophes			20.3		4.7	%			1.1			0.3	%			21.4		5.0	%
Total segment		$	255.3		58.9	%		$	5.7			1.3	%		$	261.0		60.3	%

Variance 2010/2009
Variance 2011/2010
Attritional		$	34.4		3.5		pts	$	(23.5	)		(5.2	)	pts	$	10.9		(1.5	)	pts		$	(67.1	)		(15.7	)	pts	$	(0.9	)		-		pts	$	(68.0	)		(15.8	)	pts
Catastrophes			216.1		46.1		pts		(9.0	)		(2.0	)	pts		207.2		44.1		pts			95.3			18.3		pts		8.1			1.7		pts		103.3			20.0		pts
Total segment		$	250.6		49.7		pts	$	(32.6	)		(7.1	)	pts	$	218.0		42.5		pts		$	28.1			2.6		pts	$	7.2			1.7		pts	$	35.3			4.3		pts

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

Incurred losses and LAE ~~increased 32.7%~~decreased 11.7% to $104.6 million for the three months ended September 30, 2011 compared to $118.4 million for the three months ended September 30, ~~2010 compared to $89.2 million for the three months ended September 30, 2009.~~2010. The ~~increase~~decrease was principally due to a ~~$27.0~~$33.6 million ~~increase~~(17.4 points) decrease in current year attritional losses. Partially offsetting the attritional losses were current year catastrophes losses ~~due to the New Zealand earthquake, Chile earthquake and the Canadian hailstorm. Attritional losses also~~which increased $14.1 million (11.3 points) primarily due to the ~~increased premiums earned and higher expected loss ratios, which were partially offset by more favorable development~~Japan earthquake.

Table of ~~prior years’ attritional reserves.~~Contents

Incurred losses and LAE increased ~~83.5%~~7.4% to $514.3 million for the nine months ended September 30, 2011 compared to $479.0 million for the nine months ended September 30, ~~2010~~2010. The increase was principally due to a $95.3 million (18.3 points) increase in current year catastrophes (Japan and New Zealand earthquakes, the Australia floods, and the wildfire loss in Alberta, Canada), compared to ~~$261.0 million~~the 2010 reported catastrophe losses (Chile earthquake and Australia hailstorms). The current year attritional loss ratio decreased to 42.1% for the nine months ended September 30, ~~2009. The increase was principally due to the 2010 large catastrophes of $187.1 million~~2011 from 57.8% for the Chilean earthquake, $28.0 million for the New Zealand earthquake, $18.0 million for the Australian hailstorms and $3.4 million for the Canadian hailstorm compared to the absence in 2009 of any similar large events. Attritional losses also increasednine months ended September 30, 2010, primarily due to a shift in the ~~increased premiums earned and~~mix of business with a lower level of quota share business, which generally carries a higher ~~expected~~ loss ~~ratios, which were partially offset by favorable development~~ratio, in addition to the impact of ~~prior years’ attritional reserves.~~changes in the affiliated quota share agreement.

Segment Expenses. Commission and brokerage expenses ~~increased 9.9%~~decreased 6.8% to $35.7 million for the three months ended September 30, 2011 compared to $38.3 million for the three months ended September 30, ~~2010 compared~~2010. Commission and brokerage expenses decreased 0.2% to ~~$34.8~~$105.8 million for the ~~three~~nine months ended September 30, ~~2009. Commission and brokerage expenses increased 5.9%~~2011 compared to $106.0 million for the nine months ended September 30, ~~2010~~2010. These variances were due to the changes in premiums and the mix of business.

Segment other underwriting expenses increased to $7.5 million for the three months ended September 30, 2011 compared to ~~$100.1~~$6.7 million for the three months ended September 30, 2010. Segment other underwriting expenses increased to $20.9 million for the nine months ended September 30, ~~2009. The increases were primarily in line with the increases in premiums earned.~~

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~~Segment other underwriting expenses for the three months ended September 30, 2010 were $6.7 million~~2011 compared to ~~$6.2 million for the three months ended September 30, 2009. Segment other underwriting expenses for the nine months ended September 30, 2010 were~~ $20.4 ~~million compared to $16.5~~ million for the nine months ended September 30, ~~2009. These increases were due to growth in the overall infrastructure and consistent with the growth in premiums earned resulting in stable other underwriting expense ratios.~~2010.

Market Sensitive Instruments.

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

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

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

Interest Rate Risk. Our ~~$8.4~~$8.3 billion investment portfolio, at September 30, ~~2010,~~2011, is principally comprised of fixed maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk, and some equity securities, which are subject to price ~~fluctuations.~~fluctuations and some foreign exchange rate risk. The impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the dollar value of foreign currency denominated liabilities and their associated income statement impact.

Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term investments, from a change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the ~~$474.4~~$479.2 million of mortgage-backed securities in the ~~$6,485.2~~$5,190.7 million fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.

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The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity ~~securities~~ portfolio (including ~~$304.9~~$535.9 million of short-term investments) for the ~~period~~periods indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates for mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under ~~th e~~the various interest rate change scenarios.

Impact of Interest Rate Shift in Basis Points
At September 30, 2010
(Dollars in millions) -200 -100 0 100 200
Total Market/Fair Value $ 7,310.9 $ 7,066.6 $ 6,790.1 $ 6,464.2 $ 6,142.7
Market/Fair Value Change from Base (%) 7.7 % 4.1 % 0.0 % -4.8 % -9.5 %
Change in Unrealized Appreciation
After-tax from Base ($) $ 338.5 $ 179.7 $ - $ (211.8 ) $ (420.8 )

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	Impact of Interest Rate Shift in Basis Points
	At September 30, 2011
(Dollars in millions)		-200			-100			0			100			200
Total Market/Fair Value	$	6,030.8		$	5,883.2		$	5,726.6		$	5,553.3		$	5,375.1
Market/Fair Value Change from Base (%)		5.3	%		2.7	%		0.0	%		-3.0	%		-6.1	%
Change in Unrealized Appreciation
After-tax from Base ($)	$	197.7		$	101.8		$	-		$	(112.6	)	$	(228.5	)

We had ~~$7,611.6~~$8,165.3 million and ~~$7,300.1~~$7,652.3 million of gross reserves for losses and LAE as of September 30, ~~2010~~2011 and December 31, ~~2009,~~2010, respectively. These amounts are recorded at their nominal value, as opposed to present value, which would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the reserves decreases and, conversely, as interest rates decline, the present value increases. These movements are the opposite of the interest rate impacts on the fair value of investments. While the difference between present value and nominal value is not reflected in our financial statements, our financial results will include investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration that is reasonably consistent with our fixed income portfolio.

Equity Risk. Equity risk is the potential change in fair and/or market value of the common stock and preferred stock portfolios arising from changing ~~equity~~ prices. Our equity investments consist of a diversified portfolio of individual securities and mutual funds, which invest principally in high quality common and preferred stocks that are traded on major exchanges. The primary objective of the equity portfolio is to obtain greater total return relative to bonds over time through market appreciation and income.

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

	Impact of Percentage Change in Equity Fair/Market Values												Impact of Percentage Change in Equity Fair/Market Values
	At September 30, 2010												At September 30, 2011
(Dollars in millions)		-20%			-10%			0%		10%		20%		-20%			-10%			0%		10%		20%
Fair/Market Value of the Equity Portfolio	$	305.8		$	344.1		$	382.3	$	420.5	$	458.7	$	879.6		$	989.5		$	1,099.5	$	1,209.4	$	1,319.4
After-tax Change in Fair/Market Value		(49.7	)		(24.8	)		-		24.8		49.7		(142.9	)		(71.5	)		-		71.5		142.9

Foreign Exchange Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. (“foreign”) operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Singapore and Canadian ~~Dollar,~~Dollars, the British Pound Sterling and the Euro. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our ~~corresp onding~~corresponding operating liabilities. In accordance with FASB guidance, we translate the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income. As of September 30, ~~2010,~~2011, there has been no material change in exposure to foreign exchange rates as compared to December 31, ~~2009.~~2010.

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SAFE HARBOR DISCLOSURE

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”, “believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include information regarding our reserves for losses and LAE, the adequacy of our provision for uncollectible balances, estimates of our ~~c atastrophe~~catastrophe exposure, the effects of catastrophic events on our financial statements and the ability of our subsidiaries to pay dividends. Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause our actual events or results to be materially different from our expectations include the uncertainties that surround the impact on our financial statements and liquidity resulting from changes in the global economy and credit markets, the estimating of reserves for losses and LAE, those discussed in Note 6 of Notes to Consolidated Financial Statements (unaudited) included in this report and risks described under the caption “Risk Factors” in our most recently filed Annual Report on Form 10-K, Part 1, ITEM 1A. We undertake no obligation to update ~~o r~~or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

~~ITEM 4.~~

ITEM 4. CONTROLS AND PROCEDURES

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

PART II

~~ITEM 1.~~

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, ~~we are~~the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine ~~our~~the Company’s rights and obligations under insurance and reinsurance ~~and~~agreements. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other ~~contractual agreements.~~matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, ~~we believe~~the Company believes that ~~our~~its positions are legally and commercially ~~reasonable, and we vigorously seek to preserve, enforce and defend our legal rights under various agreements. While~~reasonable. The Company considers the ~~final outcome~~statuses of these ~~matters cannot be predicted with certainty, we do not believe that any of these matters,~~proceedings when finally resolved, will have a material adverse effect on o ur financial position or liquidity. However, an adverse resolution of one or more of these items in any one quarter or fiscal year could have a material adverse effect on our results of operations in that period.determining its reserves for unpaid loss and loss adjustment expenses.

~~ITEM 1A.~~

~~RISK FACTORS~~

NoAside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material ~~changes.~~

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~ITEM 4.~~

~~RESERVED~~

litigation or arbitration.

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ITEM 1A. RISK FACTORS

~~ITEM 5.~~

~~OTHER INFORMATION~~

No material changes.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~ITEM 6.~~Exhibit Index:

~~EXHIBITS~~

~~Exhibit Index:~~

~~Exhibit No.~~	~~Description~~

Exhibit No.	Description

31.1	Section 302 Certification of Joseph V. Taranto

31.2	Section 302 Certification of Dominic J. Addesso

32.1	Section 906 Certification of Joseph V. Taranto and Dominic J. Addesso

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Labels Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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Everest Reinsurance Holdings, Inc.

~~Everest Reinsurance Holdings, Inc.~~

~~Signatures~~

Signatures

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


	Everest Reinsurance Holdings, Inc.
	(Registrant)


	/S/ DOMINIC J. ADDESSO
	Dominic J. Addesso
	~~Executive Vice~~ President and
		Chief Financial Officer

	(Duly Authorized Officer and Principal Financial Officer)



Dated: November ~~15, 2010~~14, 2011

	Three Months Ended				Nine Months Ended
Specialty Underwriting	September 30,				September 30,
(Dollars in thousands)	2010		2009		2010			2009
Gross written premiums	$	65,929	$	67,615	$	197,671		$	183,726
Net written premiums		35,130		38,259		110,192			102,990

Premiums earned	$	37,716	$	39,182	$	115,956		$	108,513
Incurred losses and LAE		25,226		25,197		87,199			73,740
Commission and brokerage		7,664		10,510		25,171			29,435
Other underwriting expenses		2,143		2,383		6,501			6,227
Underwriting gain (loss)	$	2,683	$	1,092	$	(2,915	)	$	(889	)

	Common Shares
Amendment Date	Purchased
(Dollars in thousands)
09/21/2004	$	5,000,000
07/21/2008		5,000,000
02/24/2010		5,000,000
	$	15,000,000