SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:

June 30, ~~2013~~2014

Commission file number:

1-14527

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

477 Martinsville Road

Liberty Corner, New Jersey 07938-0830

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

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)

	Number of Shares Outstanding
Class	At August 1, ~~2013~~	2014
Common Shares, $0.01 par value	1,000

EVEREST REINSURANCE HOLDINGS, INC.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
(Dollars in thousands, except par value per share)	2014		2013
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value	$	5,900,397	$	5,201,921
(amortized cost: 2014, $5,750,381; 2013, $5,116,600)
Fixed maturities - available for sale, at fair value		-		19,388
Equity securities - available for sale, at market value (cost: 2014, $15; 2013, $15)		15		13
Equity securities - available for sale, at fair value		1,247,792		1,298,940
Short-term investments		673,408		757,162
Other invested assets (cost: 2014, $392,951; 2013, $385,776)		392,951		385,776
Other invested assets, at fair value		1,559,958		1,515,052
Cash		227,033		316,807
Total investments and cash		10,001,554		9,495,059
Accrued investment income		51,380		50,306
Premiums receivable		1,256,740		1,173,780
Reinsurance receivables - unaffiliated		673,999		530,158
Reinsurance receivables - affiliated		3,284,249		3,062,884
Funds held by reinsureds		179,551		175,526
Deferred acquisition costs		104,516		112,024
Prepaid reinsurance premiums		773,401		673,753
Other assets		300,793		247,505
TOTAL ASSETS	$	16,626,183	$	15,520,995

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	7,657,561	$	7,653,229
Unearned premium reserve		1,418,445		1,317,147
Funds held under reinsurance treaties		96,754		92,514
Losses in the course of payment		502,639		350,820
Commission reserves		37,219		47,226
Other net payable to reinsurers		1,109,597		1,026,292
4.868% Senior notes due 6/1/2044		400,000		-
5.4% Senior notes due 10/15/2014		249,984		249,958
6.6% Long term notes due 5/1/2067		238,362		238,361
Accrued interest on debt and borrowings		6,133		4,781
Income taxes		83,675		23,949
Unsettled securities payable		72,534		53,772
Other liabilities		269,196		272,468
Total liabilities		12,142,099		11,330,517

Commitments and Contingencies (Note 6)

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized;
1,000 shares issued and outstanding (2014 and 2013)		-		-
Additional paid-in capital		357,537		351,051
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $70,069 at 2014 and $47,195 at 2013		130,128		87,648
Retained earnings		3,996,419		3,751,779
Total stockholder's equity		4,484,084		4,190,478
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	16,626,183	$	15,520,995

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

June 30, December 31,
(Dollars in thousands, except par value per share) 2013 2012
(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value $ 5,395,606 $ 5,531,410
     (amortized cost: 2013, $5,285,667; 2012, $5,289,619)
Fixed maturities - available for sale, at fair value 18,129 41,470
Equity securities - available for sale, at market value (cost: 2013, $15; 2012, $15) 15 13
Equity securities - available for sale, at fair value 1,225,181 1,199,848
Short-term investments 368,667 465,550
Other invested assets (cost: 2013, $394,285; 2012, $420,744) 394,285 420,744
Other invested assets, at fair value 1,246,683 1,068,711
Cash 291,632 347,720
         Total investments and cash 8,940,198 9,075,466
Accrued investment income 52,724 54,914
Premiums receivable 1,197,274 1,001,267
Reinsurance receivables - unaffiliated 702,792 650,261
Reinsurance receivables - affiliated 3,009,003 2,976,992
Funds held by reinsureds 173,174 161,694
Deferred acquisition costs 104,567 97,522
Prepaid reinsurance premiums 611,106 557,460
Deferred tax asset 152,142 214,175
Income taxes recoverable 48,341 61,244
Other assets 265,905 236,955
TOTAL ASSETS $ 15,257,226 $ 15,087,950

LIABILITIES:
Reserve for losses and loss adjustment expenses $ 7,868,222 $ 8,143,055
Unearned premium reserve 1,214,652 1,093,822
Funds held under reinsurance treaties 89,543 90,079
Losses in the course of payment 414,899 179,774
Commission reserves 35,507 39,324
Other net payable to reinsurers 1,017,243 900,794
Revolving credit agreement 40,000 -
5.4% Senior notes due 10/15/2014 249,932 249,907
6.6% Long term notes due 5/1/2067 238,359 238,357
Junior subordinated debt securities payable - 329,897
Accrued interest on debt and borrowings 4,791 4,781
Unsettled securities payable 24,156 48,830
Other liabilities 294,584 290,724
         Total liabilities 11,491,888 11,609,344

Commitments and Contingencies (Note 6)

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized;
     1,000 shares issued and outstanding (2013 and 2012) - -
Additional paid-in capital 346,279 340,223
Accumulated other comprehensive income (loss), net of deferred income tax expense
     (benefit) of $50,955 at 2013 and $99,544 at 2012 94,630 184,867
Retained earnings 3,324,429 2,953,516
         Total stockholder's equity 3,765,338 3,478,606
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 15,257,226 $ 15,087,950

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2014			2013			2014			2013
	(unaudited)						(unaudited)
REVENUES:
Premiums earned	$	520,736		$	490,022		$	991,181		$	938,028
Net investment income		68,636			81,736			132,423			158,605
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities		(199	)		-			(199	)		-
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss)		-			-			-			-
Other net realized capital gains (losses)		125,313			15,526			121,263			325,332
Total net realized capital gains (losses)		125,114			15,526			121,064			325,332
Other income (expense)		(8,782	)		9,744			(11,837	)		83
Total revenues		705,704			597,028			1,232,831			1,422,048

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		321,517			333,899			599,563			602,540
Commission, brokerage, taxes and fees		85,322			75,365			161,416			143,487
Other underwriting expenses		47,158			44,284			86,409			87,806
Corporate expenses		(524	)		2,065			778			3,837
Interest, fee and bond issue cost amortization expense		8,811			17,928			16,247			30,544
Total claims and expenses		462,284			473,541			864,413			868,214

INCOME (LOSS) BEFORE TAXES		243,420			123,487			368,418			553,834
Income tax expense (benefit)		85,246			38,225			123,778			182,921

NET INCOME (LOSS)	$	158,174		$	85,262		$	244,640		$	370,913

Other comprehensive income (loss), net of tax :
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		19,102			(78,581	)		39,899			(84,187	)
Less: reclassification adjustment for realized losses (gains) included in net income (loss)		857			(158	)		2,155			(1,516	)
Total URA(D) on securities arising during the period		19,959			(78,739	)		42,054			(85,703	)

Foreign currency translation adjustments		6,721			371			(1,115	)		(7,225	)

Benefit plan actuarial net gain (loss) for the period		-			-			-			-
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		770			1,345			1,541			2,691
Total benefit plan net gain (loss) for the period		770			1,345			1,541			2,691
Total other comprehensive income (loss), net of tax		27,450			(77,023	)		42,480			(90,237	)

COMPREHENSIVE INCOME (LOSS)	$	185,624		$	8,239		$	287,120		$	280,676

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

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
(unaudited) (unaudited)
REVENUES:
Premiums earned $ 490,022 $ 438,470 $ 938,028 $ 872,181
Net investment income 81,736 74,206 158,605 155,448
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities - (467 ) - (6,141 )
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss) - - - -
Other net realized capital gains (losses) 15,526 83,056 325,332 264,871
Total net realized capital gains (losses) 15,526 82,589 325,332 258,730
Other income (expense) 9,744 25,428 83 19,174
Total revenues 597,028 620,693 1,422,048 1,305,533

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses 333,899 293,577 602,540 543,974
Commission, brokerage, taxes and fees 75,365 93,365 143,487 180,856
Other underwriting expenses 44,284 41,099 87,806 80,613
Corporate expenses 2,065 1,732 3,837 3,298
Interest, fee and bond issue cost amortization expense 17,928 12,683 30,544 25,379
Total claims and expenses 473,541 442,456 868,214 834,120

INCOME (LOSS) BEFORE TAXES 123,487 178,237 553,834 471,413
Income tax expense (benefit) 38,225 52,584 182,921 131,036

NET INCOME (LOSS) $ 85,262 $ 125,653 $ 370,913 $ 340,377

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period (78,581 ) (936 ) (84,187 ) 5,475
Less: reclassification adjustment for realized losses (gains) included in net income (loss) (158 ) (1,278 ) (1,516 ) 1,435
Total URA(D) on securities arising during the period (78,739 ) (2,214 ) (85,703 ) 6,910
Foreign currency translation adjustments 371 (7,861 ) (7,225 ) (2,564 )
Pension adjustments 1,345 983 2,691 1,967
Total other comprehensive income (loss), net of tax (77,023 ) (9,092 ) (90,237 ) 6,313

COMPREHENSIVE INCOME (LOSS) $ 8,239 $ 116,561 $ 280,676 $ 346,690

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDER’S EQUITY

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(Dollars in thousands, except share amounts)	2014		2013			2014		2013
	(unaudited)					(unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period		1,000		1,000			1,000		1,000
Balance, end of period		1,000		1,000			1,000		1,000

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	354,445	$	343,381		$	351,051	$	340,223
Share-based compensation plans		3,092		2,898			6,486		6,056
Balance, end of period		357,537		346,279			357,537		346,279

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period		102,678		171,653			87,648		184,867
Net increase (decrease) during the period		27,450		(77,023	)		42,480		(90,237	)
Balance, end of period		130,128		94,630			130,128		94,630

RETAINED EARNINGS:
Balance, beginning of period		3,838,245		3,239,167			3,751,779		2,953,516
Net income (loss)		158,174		85,262			244,640		370,913
Balance, end of period		3,996,419		3,324,429			3,996,419		3,324,429

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD	$	4,484,084	$	3,765,338		$	4,484,084	$	3,765,338

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

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except share amounts) 2013 2012 2013 2012
(unaudited) (unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period 1,000 1,000 1,000 1,000
Balance, end of period 1,000 1,000 1,000 1,000

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period $ 343,381 $ 335,042 $ 340,223 $ 333,416
Share-based compensation plans 2,898 1,771 6,056 3,397
Balance, end of period 346,279 336,813 346,279 336,813

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period 171,653 190,195 184,867 174,790
Net increase (decrease) during the period (77,023 ) (9,092 ) (90,237 ) 6,313
Balance, end of period 94,630 181,103 94,630 181,103

RETAINED EARNINGS:
Balance, beginning of period 3,239,167 2,647,911 2,953,516 2,433,187
Net income (loss) 85,262 125,653 370,913 340,377
Balance, end of period 3,324,429 2,773,564 3,324,429 2,773,564

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $ 3,765,338 $ 3,291,480 $ 3,765,338 $ 3,291,480

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2014			2013			2014			2013
	(unaudited)						(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	158,174		$	85,262		$	244,640		$	370,913
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(95,148	)		(145,988	)		(82,537	)		(197,543	)
Decrease (increase) in funds held by reinsureds, net		(2,476	)		(6,364	)		401			(12,486	)
Decrease (increase) in reinsurance receivables		(89,030	)		(64,010	)		(368,394	)		(86,152	)
Decrease (increase) in income taxes		12,432			(8,697	)		36,879			123,402
Decrease (increase) in prepaid reinsurance premiums		(53,035	)		(37,771	)		(100,075	)		(54,149	)
Increase (decrease) in reserve for losses and loss adjustment expenses		66,292			(77,864	)		7,882			(254,292	)
Increase (decrease) in unearned premiums		25,138			78,867			101,264			122,814
Increase (decrease) in other net payable to reinsurers		(47,321	)		121,516			83,206			116,897
Increase (decrease) in losses in course of payment		49,634			73,102			151,503			235,534
Change in equity adjustments in limited partnerships		(1,982	)		(13,602	)		1,161			(24,822	)
Distribution of limited partnership income		3,333			5,933			9,157			16,185
Change in other assets and liabilities, net		(35,283	)		(24,739	)		(51,901	)		(11,751	)
Non-cash compensation expense		1,969			1,800			3,698			3,973
Amortization of bond premium (accrual of bond discount)		5,577			7,134			11,581			13,697
Amortization of underwriting discount on senior notes		14			14			28			27
Net realized capital (gains) losses		(125,114	)		(15,526	)		(121,064	)		(325,332	)
Net cash provided by (used in) operating activities		(126,826	)		(20,933	)		(72,571	)		36,915

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		312,199			329,143			519,733			627,384
Proceeds from fixed maturities matured/called - available for sale, at fair value		-			4,213			875			7,213
Proceeds from fixed maturities sold - available for sale, at market value		178,281			173,690			327,859			340,624
Proceeds from fixed maturities sold - available for sale, at fair value		-			13,678			20,763			17,342
Proceeds from equity securities sold - available for sale, at fair value		116,827			251,018			292,943			354,846
Distributions from other invested assets		5,443			21,378			15,271			43,603
Cost of fixed maturities acquired - available for sale, at market value		(810,168	)		(414,379	)		(1,499,373	)		(1,000,902	)
Cost of fixed maturities acquired - available for sale, at fair value		-			(1,411	)		(1,309	)		(2,706	)
Cost of equity securities acquired - available for sale, at fair value		(86,025	)		(113,147	)		(163,452	)		(233,674	)
Cost of other invested assets acquired		(27,803	)		(3,847	)		(32,764	)		(8,508	)
Net change in short-term investments		(29,636	)		13,055			83,935			96,677
Net change in unsettled securities transactions		15,765			(14,825	)		6,953			(32,383	)
Net cash provided by (used in) investing activities		(325,117	)		258,566			(428,566	)		209,516

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation		1,123			1,098			2,788			2,083
Revolving credit borrowings		-			40,000			-			40,000
Net cost of junior subordinated debt securities redemption		-			(329,897	)		-			(329,897	)
Net proceeds from issuance of senior notes		400,000			-			400,000			-
Net cash provided by (used in) financing activities		401,123			(288,799	)		402,788			(287,814	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		4,588			(1,157	)		8,575			(14,705	)

Net increase (decrease) in cash		(46,232	)		(52,323	)		(89,774	)		(56,088	)
Cash, beginning of period		273,265			343,955			316,807			347,720
Cash, end of period	$	227,033		$	291,632		$	227,033		$	291,632

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	71,932		$	42,557		$	84,406		$	53,395
Interest paid		14,677			17,846			14,719			22,982

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

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 85,262 $ 125,653 $ 370,913 $ 340,377
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable (145,988 ) 66,341 (197,543 ) 103,547
Decrease (increase) in funds held by reinsureds, net (6,364 ) 22,830 (12,486 ) (17,524 )
Decrease (increase) in reinsurance receivables (64,010 ) 22,823 (86,152 ) 30,491
Decrease (increase) in current income taxes (17,133 ) 5,526 12,779 4,628
Decrease (increase) in deferred tax asset 8,436 38,950 110,623 113,624
Decrease (increase) in prepaid reinsurance premiums (37,771 ) 90,785 (54,149 ) 95,321
Increase (decrease) in reserve for losses and loss adjustment expenses (77,864 ) (131,146 ) (254,292 ) (297,135 )
Increase (decrease) in unearned premiums 78,867 (190,678 ) 122,814 (201,002 )
Increase (decrease) in other net payable to reinsurers 121,516 38,445 116,897 42,550
Increase (decrease) in losses in course of payment 73,102 (27,312 ) 235,534 10,589
Change in equity adjustments in limited partnerships (13,602 ) (8,765 ) (24,822 ) (20,050 )
Change in other assets and liabilities, net (24,739 ) 82,274 (11,751 ) 88,755
Non-cash compensation expense 1,800 1,628 3,973 3,244
Amortization of bond premium (accrual of bond discount) 7,134 5,335 13,697 9,609
Amortization of underwriting discount on senior notes 14 12 27 25
Net realized capital (gains) losses (15,526 ) (82,589 ) (325,332 ) (258,730 )
Net cash provided by (used in) operating activities (26,866 ) 60,112 20,730 48,319

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value 329,143 172,534 627,384 374,721
Proceeds from fixed maturities matured/called - available for sale, at fair value 4,213 - 7,213 -
Proceeds from fixed maturities sold - available for sale, at market value 173,690 92,165 340,624 176,301
Proceeds from fixed maturities sold - available for sale, at fair value 13,678 1,862 17,342 61,143
Proceeds from equity securities sold - available for sale, at fair value 251,018 52,340 354,846 291,880
Distributions from other invested assets 27,311 9,522 59,788 15,383
Cost of fixed maturities acquired - available for sale, at market value (414,379 ) (369,223 ) (1,000,902 ) (662,071 )
Cost of fixed maturities acquired - available for sale, at fair value (1,411 ) (2,382 ) (2,706 ) (5,506 )
Cost of equity securities acquired - available for sale, at fair value (113,147 ) (75,674 ) (233,674 ) (180,888 )
Cost of other invested assets acquired (3,847 ) (12,130 ) (8,508 ) (23,766 )
Net change in short-term investments 13,055 64,548 96,677 (157,589 )
Net change in unsettled securities transactions (14,825 ) (24,657 ) (32,383 ) 5,112
Net cash provided by (used in) investing activities 264,499 (91,095 ) 225,701 (105,280 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation 1,098 143 2,083 153
Revolving credit borrowings 40,000 - 40,000 -
Net cost of junior subordinated debt securities maturing (329,897 ) - (329,897 ) -
Net cash provided by (used in) financing activities (288,799 ) 143 (287,814 ) 153

EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,157 ) (8,174 ) (14,705 ) 14,274

Net increase (decrease) in cash (52,323 ) (39,014 ) (56,088 ) (42,534 )
Cash, beginning of period 343,955 344,747 347,720 348,267
Cash, end of period $ 291,632 $ 305,733 $ 291,632 $ 305,733

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered) $ 42,557 $ 4,754 $ 53,395 $ 9,379
Interest paid 17,846 19,825 22,982 25,042

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

For the Three and Six Months Ended June 30, ~~2013~~2014 and ~~2012~~2013

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); “Mt. Logan Re” means Mt. Logan Re Ltd., a subsidiary of Group; and the “Company” means Holdings and its subsidiaries.

2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company for the three and six months ended June 30, ~~2013~~2014 and ~~2012~~2013 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, ~~2012~~2013 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 six months ended June 30, ~~2013~~2014 and ~~2012~~2013 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, 2013, 2012 ~~2011~~ and ~~2010~~2011 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 ~~period~~years’ amounts to conform to the ~~current period~~2014 presentation. One reclassification relates to a correction in the manner in which the Company reports distributions received from limited partnership investments in the consolidated Statements of Cash Flows. Prior to the fourth quarter of 2013, the Company incorrectly reflected all distributions as cash flows from investing activities in its Consolidated Statements of Cash Flows. Starting with the fourth quarter of 2013, cash distributions from the limited partnerships that represent net investment income are reflected as cash flows from operating activities and distributions that represent the return of capital contributions are reflected as cash flows from investing activities. For the three and six months ended June 30, 2013, $5,933 thousand and $16,185 thousand, respectively, have been reclassified from “Distributions from other invested assets” included in cash flows from investing activities to “Distribution of limited partnership income” included in cash flows from operations. The Company has determined that this error is not material to the financial statements of any prior period.

Application of Recently Issued Accounting Standard Changes

~~Intangibles-Goodwill or Other.~~ In September 2011, the Financial Accounting Standards Board (“FASB”) amended the authoritative guidance for disclosures on Goodwill Impairment. The amendment allows an entity first to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis in determining whether it is necessary to perform the two-step goodwill impairment test. This guidance is effective for periods beginning after December 15, 2011. The Company implemented this guidance as of January 1, 2012.

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 can either be presented within a single, continuous financial statement or be presented in two separate but consecutive financial statements. The Company has chosen to present the components of net income and comprehensive income in a single, continuous financial statement. The guidance is effective for reporting periods beginning after December 15, 2011. The Company implemented this guidance as of January 1, 2012. In February, 2013, the FASB issued an additional amendment for the presentation of amounts reclassified out of accumulated other comprehensive income by component. The Company implemented the proposed guidance as of January 1, 2013.

~~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 implemented this guidance prospectively as of January 1, 2012.

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 June 30, 2014
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	393,018	$	728	$	(635	)	$	393,111
Obligations of U.S. states and political subdivisions		881,697		44,770		(2,050	)		924,417
Corporate securities		2,042,111		53,019		(7,381	)		2,087,749
Asset-backed securities		65,443		1,410		(7	)		66,846
Mortgage-backed securities
Commercial		31,942		3,282		-			35,224
Agency residential		658,989		8,375		(6,393	)		660,971
Non-agency residential		636		186		-			822
Foreign government securities		585,776		30,390		(3,938	)		612,228
Foreign corporate securities		1,090,769		33,971		(5,711	)		1,119,029
Total fixed maturity securities	$	5,750,381	$	176,131	$	(26,115	)	$	5,900,397
Equity securities	$	15	$	-	$	-		$	15

At June 30, 2013
Amortized Unrealized Unrealized Market
(Dollars in thousands) Cost Appreciation Depreciation Value
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $ 75,135 $ 643 $ (1,141 ) $ 74,637
Obligations of U.S. states and political subdivisions 1,053,722 50,344 (8,017 ) 1,096,049
Corporate securities 1,589,897 43,073 (15,623 ) 1,617,347
Asset-backed securities 43,349 1,340 - 44,689
Mortgage-backed securities
Commercial 44,975 5,812 - 50,787
Agency residential 754,785 7,829 (11,981 ) 750,633
Non-agency residential 1,131 147 (47 ) 1,231
Foreign government securities 715,270 35,408 (4,901 ) 745,777
Foreign corporate securities 1,007,403 24,235 (17,182 ) 1,014,456
Total fixed maturity securities $ 5,285,667 $ 168,831 $ (58,892 ) $ 5,395,606
Equity securities $ 15 $ - $ - $ 15

Total fixed maturity securities

The ~~$745,777~~$612,228 thousand of foreign government securities at June 30, ~~2013~~2014 included ~~$83,921~~$77,363 thousand of European sovereign securities. Approximately ~~53.1%~~51.5%, ~~14.8%~~16.6%, ~~12.3%~~12.4%, ~~7.7%~~8.4% and ~~5.1%~~5.4% of European Sovereign Securities represented securities held in the governments of France, the United Kingdom, Sweden, the

In accordance with FASB guidance, the Company reclassified the non-credit portion of other-than-temporary impairments from retained earnings into accumulated other comprehensive income (loss), on April 1, 2009. As of June 30, ~~2013,~~2014, all of the previously reclassified securities have either matured or have been sold. ~~The table below presents the pre-tax cumulative unrealized appreciation (depreciation) on those corporate securities, for the period indicated:~~

(Dollars in thousands) At December 31, 2012
Pre-tax cumulative unrealized appreciation (depreciation) $ 399

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.

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

The Company frequently reviews all of its fixed maturity, available for sale securities for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized 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, interest rate or foreign exchange environment does not constitute an ~~other-than-~~

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

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

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity 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:

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at June 30, ~~2013~~2014 were ~~$1,895,966~~$1,419,356 thousand and ~~$58,892~~$26,115 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at June 30, ~~2013,~~2014, did not exceed ~~0.3%~~0.4% of the overall market value of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The ~~$44,642~~$5,022 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were primarily comprised of domestic and foreign corporate ~~securities, agency residential mortgage-backed securities as well as state and municipal~~ securities. Of these unrealized losses, ~~$37,043~~$2,508 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The ~~$14,250~~

$21,093 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to agency residential mortgage-backed securities, foreign and domestic ~~and~~corporate securities, foreign ~~corporate~~government securities as well as ~~foreign government~~state and municipal securities. Of these unrealized losses, ~~$13,179~~$19,842 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The gross unrealized depreciation for mortgage-backed securities included ~~$47~~less than $1 thousand related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The 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.

Duration of Unrealized Loss at December 31, 2012 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 $ 8,058 $ (292 ) $ 3,386 $ (577 ) $ 11,444 $ (869 )
Obligations of U.S. states and political subdivisions 38,754 (1,072 ) 5,781 (51 ) 44,535 (1,123 )
Corporate securities 122,138 (1,566 ) 62,492 (4,905 ) 184,630 (6,471 )
Asset-backed securities - - - - - -
Mortgage-backed securities
Commercial - - 10,729 (67 ) 10,729 (67 )
Agency residential 177,336 (1,042 ) 54,595 (682 ) 231,931 (1,724 )
Non-agency residential - - 446 (33 ) 446 (33 )
Foreign government securities 13,958 (105 ) 34,355 (3,630 ) 48,313 (3,735 )
Foreign corporate securities 44,945 (565 ) 53,672 (5,716 ) 98,617 (6,281 )
Total fixed maturity securities $ 405,189 $ (4,642 ) $ 225,456 $ (15,661 ) $ 630,645 $ (20,303 )
Equity securities - - 13 (2 ) 13 (2 )
Total $ 405,189 $ (4,642 ) $ 225,469 $ (15,663 ) $ 630,658 $ (20,305 )

Duration of Unrealized Loss at December 31, 2012 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 $ 5,875 $ (24 ) $ 19,291 $ (2,833 ) $ 25,166 $ (2,857 )
Due in one year through five years 103,313 (1,671 ) 110,161 (10,564 ) 213,474 (12,235 )
Due in five years through ten years 57,225 (678 ) 16,385 (1,008 ) 73,610 (1,686 )
Due after ten years 61,440 (1,227 ) 13,849 (474 ) 75,289 (1,701 )
Asset-backed securities - - - - - -
Mortgage-backed securities 177,336 (1,042 ) 65,770 (782 ) 243,106 (1,824 )
Total fixed maturity securities $ 405,189 $ (4,642 ) $ 225,456 $ (15,661 ) $ 630,645 $ (20,303 )

	Duration of Unrealized Loss at December 31, 2013 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	$	39,274	$	(302	)	$	8,751	$	(644	)	$	48,025	$	(946	)
Obligations of U.S. states and political subdivisions		92,760		(4,852	)		39,689		(4,170	)		132,449		(9,022	)
Corporate securities		388,721		(8,981	)		56,156		(3,512	)		444,877		(12,493	)
Asset-backed securities		-		-			-		-			-		-
Mortgage-backed securities
Commercial		-		-			-		-			-		-
Agency residential		381,149		(14,084	)		131,504		(4,437	)		512,653		(18,521	)
Non-agency residential		-		-			202		(33	)		202		(33	)
Foreign government securities		100,984		(5,255	)		29,174		(2,686	)		130,158		(7,941	)
Foreign corporate securities		321,933		(11,394	)		66,715		(4,205	)		388,648		(15,599	)
Total fixed maturity securities	$	1,324,821	$	(44,868	)	$	332,191	$	(19,687	)	$	1,657,012	$	(64,555	)
Equity securities		13		(2	)		-		-			13		(2	)
Total	$	1,324,834	$	(44,870	)	$	332,191	$	(19,687	)	$	1,657,025	$	(64,557	)

	Duration of Unrealized Loss at December 31, 2013 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	$	17,315	$	(1,273	)	$	31,679	$	(4,132	)	$	48,994	$	(5,405	)
Due in one year through five years		425,627		(8,982	)		111,150		(5,647	)		536,777		(14,629	)
Due in five years through ten years		312,341		(10,408	)		14,865		(663	)		327,206		(11,071	)
Due after ten years		188,389		(10,121	)		42,791		(4,775	)		231,180		(14,896	)
Asset-backed securities		-		-			-		-			-		-
Mortgage-backed securities		381,149		(14,084	)		131,706		(4,470	)		512,855		(18,554	)
Total fixed maturity securities	$	1,324,821	$	(44,868	)	$	332,191	$	(19,687	)	$	1,657,012	$	(64,555	)

obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

Other invested assets, at fair value, is comprised of common shares of the Company’s ultimate parent, Group. At June 30, ~~2013,~~2014, the Company held 9,719,971 shares of Group representing ~~16.7%~~17.5% of the total outstanding shares.

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

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 identifies the decline.

The Company had contractual commitments to invest up to an additional ~~$67,067~~$168,244 thousand in limited partnerships at June 30, ~~2013.~~2014. These commitments will be funded when called in accordance with the partnership agreements, which have investment periods that expire, unless extended, through ~~2016.~~2017.

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:

Gross losses from sales

The Company’s fixed maturity and equity securities are primarily 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.

The Company internally manages a small public equity portfolio which had a fair value at June 30, 2014 and December 31, 2013, of ~~$77,512~~$91,802 thousand and $88,338 thousand, respectively, and all prices were obtained from publically published sources.

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.

As of June 30, ~~2013~~2014 and December 31, ~~2012,~~2013, all Level 3 fixed maturity securities, were priced using single non-binding broker quotes since prices for these securities were not provided by normal pricing service companies. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company.

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.

			Fair Value Measurement Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	June 30, 2014		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	393,111	$	-	$	393,111	$	-
Obligations of U.S. States and political subdivisions		924,417		-		924,417		-
Corporate securities		2,087,749		-		2,087,749		-
Asset-backed securities		66,846		-		64,318		2,528
Mortgage-backed securities
Commercial		35,224		-		35,224		-
Agency residential		660,971		-		660,971		-
Non-agency residential		822		-		818		4
Foreign government securities		612,228		-		612,228		-
Foreign corporate securities		1,119,029		-		1,119,029		-
Total fixed maturities, market value		5,900,397		-		5,897,865		2,532

Fixed maturities, fair value		-		-		-		-
Equity securities, market value		15		15		-		-
Equity securities, fair value		1,247,792		1,125,956		121,836		-
Other invested assets, fair value		1,559,958		1,559,958		-		-

There were no transfers between Level 1 and Level 2 for the six months ended June 30, 2014.

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

			Fair Value Measurement Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	71,685	$	-	$	71,685	$	-
Obligations of U.S. States and political subdivisions		1,002,528		-		1,002,528		-
Corporate securities		1,702,415		-		1,702,415		-
Asset-backed securities		39,609		-		36,076		3,533
Mortgage-backed securities
Commercial		38,666		-		38,666		-
Agency residential		697,399		-		697,399		-
Non-agency residential		939		-		935		4
Foreign government securities		674,827		-		674,827		-
Foreign corporate securities		973,853		-		973,372		481
Total fixed maturities, market value		5,201,921		-		5,197,903		4,018

Fixed maturities, fair value		19,388		-		19,388		-
Equity securities, market value		13		13		-		-
Equity securities, fair value		1,298,940		1,179,139		119,801		-
Other invested assets, fair value		1,515,052		1,515,052		-		-

Total fixed maturities, market value

Fair Value Measurement Using:
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Dollars in thousands) December 31, 2012 (Level 1) (Level 2) (Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations $ 78,190 $ - $ 78,190 $ -
Obligations of U.S. States and political subdivisions 1,291,963 - 1,291,963 -
Corporate securities 1,564,852 - 1,564,852 -
Asset-backed securities 46,487 - 41,638 4,849
Mortgage-backed securities
Commercial 52,624 - 52,624 -
Agency residential 683,722 - 654,324 29,398
Non-agency residential 2,329 - 2,324 5
Foreign government securities 780,003 - 780,003 -
Foreign corporate securities 1,031,240 - 1,019,819 11,421
Total fixed maturities, market value
5,531,410 - 5,485,737 45,673

Fixed maturities, fair value 41,470 - 41,470 -
Equity securities, market value 13 13 - -
Equity securities, fair value 1,199,848 1,059,288 140,560 -
Other invested assets, fair value 1,068,711 1,068,711 - -

	Three Months Ended June 30, 2014											Six Months Ended June 30, 2014
	Asset-backed			Foreign			Non-agency					Asset-backed			Foreign			Non-agency
(Dollars in thousands)	Securities			Corporate			RMBS		Total			Securities			Corporate			RMBS			Total
Beginning balance	$	3,044		$	473		$	4	$	3,521		$	3,533		$	481		$	4		$	4,018
Total gains or (losses) (realized/unrealized)										-
Included in earnings		38			17			-		55			56			18			1			75
Included in other comprehensive income (loss)		28			(20	)		-		8			93			(20	)		-			73
Purchases, issuances and settlements		(582	)		(470	)		-		(1,052	)		(1,154	)		(479	)		(1	)		(1,634	)
Transfers in and/or (out) of Level 3		-			-			-		-			-			-			-			-
Ending balance	$	2,528		$	-		$	4	$	2,532		$	2,528		$	-		$	4		$	2,532

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

(Some amounts may not reconcile due to rounding.)

	Three Months Ended June 30, 2013														Six Months Ended June 30, 2013
	Asset-backed			Foreign			Non-agency			Agency					Asset-backed			Foreign			Non-agency			Agency
(Dollars in thousands)	Securities			Corporate			RMBS			RMBS		Total			Securities			Corporate			RMBS			RMBS			Total
Beginning balance	$	4,686		$	1,792		$	5		$	-	$	6,483		$	4,849		$	11,421		$	5		$	29,398		$	45,673
Total gains or (losses) (realized/unrealized)
Included in earnings		115			(649	)		2			-		(532	)		16			(651	)		2			-			(633	)
Included in other comprehensive income (loss)		(139	)		(298	)		(25	)		-		(462	)		(329	)		(422	)		(25	)		-			(776	)
Purchases, issuances and settlements		(146	)		2,087			(71	)		-		1,870			(20	)		2,837			(71	)		-			2,746
Transfers in and/or (out) of Level 3		316			4,293			412			-		5,021			316			(5,960	)		412			(29,398	)		(34,630	)
Ending balance	$	4,832		$	7,225		$	323		$	-	$	12,380		$	4,832		$	7,225		$	323		$	-		$	12,380

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

(Some amounts may not reconcile due to rounding.)

There were no transfers from level 3, fair value measurements using significant unobservable inputs, for the six months ended June 30, 2014. The transfer from level 3, fair value measurements using significant unobservable inputs, of $34,630 thousand of investments for the six months ended June 30, 2013, primarily relates to securities that were priced using single non-binding broker quotes as of December 31, 2012. The securities were subsequently priced using a recognized pricing service as of June 30, 2013 and were classified as level 2 as of that date.

Three Months Ended June 30, 2012 Six Months Ended June 30, 2012
Asset-backed Foreign Non-agency Asset-backed Foreign Non-agency
(Dollars in thousands) Securities Corporate RMBS Total Securities Corporate RMBS Total
Beginning balance $ 12,756 $ 5,119 $ 6 $ 17,881 $ 16,046 $ 2,536 $ 7 $ 18,589
Total gains or (losses) (realized/unrealized)
Included in earnings - (16 ) 1 (15 ) 55 (19 ) 2 38
Included in other comprehensive income (loss) 6 (13 ) (1 ) (8 ) 338 112 (2 ) 448
Purchases, issuances and settlements 1,793 4,755 (1 ) 6,547 4,468 7,216 (2 ) 11,682
Transfers in and/or (out) of Level 3 (5,559 ) (2,462 ) - (8,021 ) (11,911 ) (2,462 ) - (14,373 )
Ending balance $ 8,996 $ 7,383 $ 5 $ 16,384 $ 8,996 $ 7,383 $ 5 $ 16,384

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

(Some amounts may not reconcile due to rounding.)

5. CAPITAL TRANSACTIONS

On ~~October 14, 2011,~~July 9, 2014, the Company renewed its shelf registration statement on Form S-3ASR with the ~~SEC,~~Securities and Exchange Commission (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.

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements. 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. The Company considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.

Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.

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 June 30, 2013 At December 31, 2012
$ 144,841 $ 144,628

(Dollars in thousands)		At June 30, 2014				At December 31, 2013
		$	144,022			$	144,734

Prior to its 1995 initial public offering, the Company 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 June 30, 2013 At December 31, 2012
$ 29,474 $ 29,132

(Dollars in thousands)		At June 30, 2014				At December 31, 2013
		$	30,724			$	30,664

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

	Three Months Ended June 30, 2013									Six Months Ended June 30, 2013
(Dollars in thousands)	Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary	$	(120,591	)	$	42,207		$	(78,385	)	$	(129,119	)	$	45,192		$	(83,928	)
URA(D) on securities - OTTI		(302	)		106			(196	)		(399	)		140			(259	)
Reclassification of net realized losses (gains) included in net income (loss)		(244	)		85			(158	)		(2,333	)		816			(1,516	)
Foreign currency translation adjustments		570			(199	)		371			(11,116	)		3,891			(7,225	)
Benefit plan actuarial net gain (loss)		-			-			-			-			-			-
Reclassification of amortization of net gain (loss) included in net income (loss)		2,070			(725	)		1,345			4,140			(1,449	)		2,691
Total other comprehensive income (loss)	$	(118,497	)	$	41,474		$	(77,023	)	$	(138,827	)	$	48,590		$	(90,237	)

(Some amounts may not reconcile due to rounding)

The following table presents details of the amounts reclassified from accumulated other comprehensive income (“AOCI”) for the periods indicated:

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

Effective August 15, 2011, the Company entered into a ~~new~~ three year, $150,000 thousand 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 annum in effect from time to time to be equal to the higher of (a) the rate of interest publicly announced by Citibank as its base rate, (b) 0.5% per annum above the Federal Funds Rate or (c) 1% above the one month London Interbank Offered Rate (“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 Re to maintain its statutory surplus at $1,875,000 thousand plus 25% of future aggregate net income and 25% of future aggregate capital contributions after December 31, 2010, which at June 30, ~~2013,~~2014, was ~~$2,071,087~~$2,178,952 thousand. As of June 30, ~~2013,~~2014, the Company was in compliance with all Holdings Credit Facility covenants.

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. At December 31, ~~2012, $2,272,346~~2013, $2,294,461 thousand of the ~~$3,068,916~~$3,136,782 thousand in net assets of Holdings’ consolidated subsidiaries were subject to the foregoing regulatory restrictions.

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

(Dollars in thousands)	At June 30, 2014						At December 31, 2013
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	$	-
Total revolving credit borrowings				-						-
Total letters of credit				851		12/31/2014				851		12/31/2014

Total Citibank Holdings Credit Facility	$	150,000	$	851			$	150,000	$	851

(Dollars in thousands) At June 30, 2013 At December 31, 2012
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 $ 40,000 5/22/2013 7/24/2013 $ 150,000 $ -
Total revolving credit borrowings 40,000 -
Total letters of credit 1,551 12/31/2013 1,551 12/31/2013

Total Citibank Holdings Credit Facility $ 150,000 $ 41,551 $ 150,000 $ 1,551

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

The Company has notified the syndicate of lenders that it will not be renewing this facility at expiration.

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 June 30, ~~2013,~~2014, the total amount on deposit in the trust account was ~~$187,504~~$213,335 thousand.

On April 24, 2014, the Company entered into two collateralized reinsurance agreements with Kilimanjaro Re Limited (“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover specified named storm and earthquake events. The first agreement provides up to $250,000 thousand of reinsurance coverage from named storms in specified states of the Southeastern United States. The second agreement provides up to $200,000 thousand of reinsurance coverage from named storms in specified states of the Southeast, Mid-Atlantic and Northeast regions of the United States and Puerto Rico as well as reinsurance coverage from earthquakes in specified states of the Southeast, Mid-Atlantic, Northeast and West regions of the United States, Puerto Rico and British Columbia.

Kilimanjaro has financed the property catastrophe reinsurance coverage by issuing $450,000 thousand of catastrophe bonds to unrelated, external investors. The proceeds from the catastrophe bond issuance will be held in a reinsurance trust throughout the duration of the reinsurance agreements and invested solely in US government money market funds with a rating of at least “AAAm” by Standard & Poor’s at the time of the bond issuance.

The table below displays Holdings’ outstanding senior notes. Market value is based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.

					June 30, 2014				December 31, 2013
					Consolidated Balance				Consolidated Balance
(Dollars in thousands)	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	$	249,984	$	253,920	$	249,958	$	259,130
4.868% Senior notes	06/05/2014	06/01/2044		400,000		400,000		400,112		-		-

June 30, 2013 December 31, 2012
Consolidated Balance Consolidated Balance
(Dollars in thousands) 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 $ 249,932 $ 260,000 $ 249,907 $ 266,390

On June 5, 2014, Holdings issued $400,000 thousand of 30 year senior notes at 4.868%, which will mature on June 1, 2044. Capitalized costs of approximately $4,300 thousand related to the issuance of the senior notes will be expensed over the 30 year life of the notes. Interest will be paid semi-annually on June 1 and December 1 of each year.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Interest expense incurred	$	4,741	$	3,388	$	8,129	$	6,775

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Interest expense incurred $ 3,388 $ 3,387 $ 6,775 $ 6,774

1918

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, but due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.

Maturity Date

June 30, 2014

December 31, 2013

Original

Consolidated Balance

(Dollars in thousands)

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

238,362

251,083

238,361

233,292

Maturity Date June 30, 2013 December 31, 2012
Original Consolidated Balance Consolidated Balance
(Dollars in thousands) 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 $ 238,359 $ 244,553 $ 238,357 $ 242,138

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.

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 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.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Interest expense incurred	$	3,937	$	3,937	$	7,874	$	7,874

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Interest expense incurred $ 3,937 $ 3,937 $ 7,874 $ 7,874

2019

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 finance subsidiary of Holdings. Fair value is primarily based on the quoted market price of the related trust preferred securities, and as such, these securities are considered Level 2 under the fair value hierarchy.

June 30, 2013 December 31, 2012
Consolidated Balance Consolidated Balance
(Dollars in thousands) 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 $ 333,225

In accordance with the provisions of the junior subordinated debt securities which were issued on March 29, 2004, Holdings elected to redeem the $329,897 thousand of 6.2% junior subordinated debt securities outstanding on May 24, 2013. As a result of the early redemption, the Company incurred pre-tax expense of $7,282 thousand related to the immediate amortization of the remaining capitalized issuance costs on the trust preferred securities.

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(Dollars in thousands)	2013		2012		2013		2012		2014		2013		2014		2013
Interest expense incurred	$	3,068	$	5,114	$	8,181	$	10,227	$	-	$	3,068	$	-	$	8,181

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

13. SEGMENT REPORTING

The U.S. Reinsurance operation writes property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and Accident and Health (“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 International operation writes non-U.S. property and casualty reinsurance through Everest Re’s branches in Canada, Singapore and through offices in Brazil, Miami and New Jersey. The Insurance operation writes property and casualty insurance, including medical stop loss insurance, directly and through general agents, brokers and surplus lines brokers within the U.S. and Canada.

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.

Three Months Ended Six Months Ended
U.S. Reinsurance June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Gross written premiums $ 418,367 $ 135,469 $ 853,158 $ 504,950
Net written premiums 215,839 68,162 433,462 255,387

Premiums earned $ 199,254 $ 164,146 $ 396,199 $ 348,013
Incurred losses and LAE 137,099 103,495 238,293 213,244
Commission and brokerage 38,540 54,651 76,670 99,828
Other underwriting expenses 9,994 10,021 20,528 20,775
Underwriting gain (loss) $ 13,621 $ (4,021 ) $ 60,708 $ 14,166

Three Months Ended Six Months Ended
International June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Gross written premiums $ 354,388 $ 349,717 $ 654,787 $ 630,178
Net written premiums 162,557 160,199 296,346 296,528

Premiums earned $ 151,125 $ 157,015 $ 293,018 $ 304,808
Incurred losses and LAE 89,883 97,888 171,966 162,528
Commission and brokerage 31,156 36,978 59,263 68,740
Other underwriting expenses 7,667 6,546 15,597 13,286
Underwriting gain (loss) $ 22,419 $ 15,603 $ 46,192 $ 60,254

Three Months Ended Six Months Ended
Insurance June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Gross written premiums $ 307,550 $ 247,693 $ 556,106 $ 454,942
Net written premiums 153,214 111,071 277,969 214,896

Premiums earned $ 139,643 $ 117,309 $ 248,811 $ 219,360
Incurred losses and LAE 106,917 92,194 192,281 168,202
Commission and brokerage 5,669 1,736 7,554 12,288
Other underwriting expenses 26,623 24,532 51,681 46,552
Underwriting gain (loss) $ 434 $ (1,153 ) $ (2,705 ) $ (7,682 )

2220

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

	Three Months Ended				Six Months Ended
U.S. Reinsurance	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Gross written premiums	$	453,115	$	418,367	$	983,416	$	853,158
Net written premiums		215,091		215,839		466,612		433,462

Premiums earned	$	246,265	$	199,254	$	464,456	$	396,199
Incurred losses and LAE		129,676		137,099		245,660		238,293
Commission and brokerage		53,380		38,540		93,516		76,670
Other underwriting expenses		11,453		9,994		20,935		20,528
Underwriting gain (loss)	$	51,756	$	13,621	$	104,345	$	60,708

	Three Months Ended				Six Months Ended
International	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Gross written premiums	$	466,008	$	354,388	$	794,886	$	654,787
Net written premiums		147,210		162,557		288,667		296,346

Premiums earned	$	147,728	$	151,125	$	292,732	$	293,018
Incurred losses and LAE		88,888		89,883		172,463		171,966
Commission and brokerage		27,412		31,156		56,581		59,263
Other underwriting expenses		8,093		7,667		15,930		15,597
Underwriting gain (loss)	$	23,335	$	22,419	$	47,758	$	46,192

	Three Months Ended					Six Months Ended
Insurance	June 30,					June 30,
(Dollars in thousands)	2014			2013		2014			2013
Gross written premiums	$	305,697		$	307,550	$	530,973		$	556,106
Net written premiums		130,426			153,214		237,152			277,969

Premiums earned	$	126,743		$	139,643	$	233,993		$	248,811
Incurred losses and LAE		102,953			106,917		181,440			192,281
Commission and brokerage		4,530			5,669		11,319			7,554
Other underwriting expenses		27,612			26,623		49,544			51,681
Underwriting gain (loss)	$	(8,352	)	$	434	$	(8,310	)	$	(2,705	)

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						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
(Dollars in thousands)	2013			2012			2013			2012			2014			2013			2014			2013
Underwriting gain (loss)	$	36,474		$	10,429		$	104,195		$	66,738		$	66,739		$	36,474		$	143,793		$	104,195
Net investment income		81,736			74,206			158,605			155,448			68,636			81,736			132,423			158,605
Net realized capital gains (losses)		15,526			82,589			325,332			258,730			125,114			15,526			121,064			325,332
Corporate expense		(2,065	)		(1,732	)		(3,837	)		(3,298	)		524			(2,065	)		(778	)		(3,837	)
Interest, fee and bond issue cost amortization expense		(17,928	)		(12,683	)		(30,544	)		(25,379	)		(8,811	)		(17,928	)		(16,247	)		(30,544	)
Other income (expense)		9,744			25,428			83			19,174			(8,782	)		9,744			(11,837	)		83
Income (loss) before taxes	$	123,487		$	178,237		$	553,834		$	471,413		$	243,420		$	123,487		$	368,418		$	553,834

The Company produces business in the U.S. and internationally. The net income deriving from 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., in which the Company writes business, for the periods indicated:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(Dollars in thousands)	2013		2012		2013		2012		2014		2013		2014		2013
Canada	$	35,436	$	27,835	$	75,582	$	75,275	$	36,830	$	35,436	$	74,489	$	75,582

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

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
		Authorized for
Amendment Date		Repurchase
(Dollars in thousands)

09/21/2004		5,000,000
07/21/2008		5,000,000
02/24/2010		5,000,000
02/22/2012		5,000,000
05/15/2013		5,000,000
		25,000,000

As of June 30, ~~2013,~~2014, Holdings held 9,719,971 common shares of Group, which it had purchased in the open market between February 1, 2007 and March 8, 2011. The table below represents the total purchase price for these common shares purchased.

(Dollars in thousands)
Total purchase price		$	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				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(Dollars in thousands)	2013		2012		2013		2012		2014		2013		2014		2013
Dividends received	$	4,665	$	4,665	$	9,331	$	9,331	$	7,290	$	4,665	$	14,580	$	9,331

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 Group’s outside directors. Such transactions, individually and in the aggregate, are not material to the Company’s financial condition, results of operation and cash flows.

Affiliated Companies

Everest Global Services, Inc. (“Global Services”), 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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Expenses incurred	$	17,676	$	18,214	$	33,519	$	36,769

Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Expenses incurred $ 18,214 $ 18,239 $ 36,769 $ 36,373

Affiliates

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 - -

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

01/01/2011-12/31/2011 Everest Re 50.0 % Bermuda Re property / casualty business 150,000 300,000

01/01/2012 Everest Re 50.0 % Bermuda Re property / casualty business 100,000 200,000

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 (3) -
01/01/2011-12/31/2011 Everest Re- Canadian Branch 60.0 % Bermuda Re property business 350,000 (3) -
01/01/2012-12/31/2012 Everest Re- Canadian Branch 75.0 % Bermuda Re property / casualty business 206,250 (3) 412,500 (3)
01/01/2013 Everest Re- Canadian Branch 75.0 % Bermuda Re property / casualty business 150,000 (3) 412,500 (3)

01/01/2012 Everest Canada 80.0 % Everest Re- Canadian Branch property business - -

(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.

(3) Amounts shown are Canadian dollars.

(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

01/01/2011-12/31/2011	Everest Re		50.0	%	Bermuda Re	property / casualty business		150,000			300,000

01/01/2012	Everest Re		50.0	%	Bermuda Re	property / casualty business		100,000			200,000

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	(3)		-
01/01/2011-12/31/2011	Everest Re- Canadian Branch		60.0	%	Bermuda Re	property business		350,000	(3)		-
01/01/2012-12/31/2012	Everest Re- Canadian Branch		75.0	%	Bermuda Re	property / casualty business		206,250	(3)		412,500	(3)
01/01/2013-12/31/2013	Everest Re- Canadian Branch		75.0	%	Bermuda Re	property / casualty business		150,000	(3)		412,500	(3)
01/01/2014	Everest Re- Canadian Branch		75.0	%	Bermuda Re	property / casualty business		262,500	(3)		412,500	(3)

01/01/2012

Everest Canada

80.0

Everest Re- Canadian Branch

property business


(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.
(3)	Amounts shown are Canadian dollars.

2523

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. This agreement was commuted as of September 30, 2013. 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, and premiums and losses assumed by the Company from Everest Canada for the periods indicated:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
Bermuda Re	June 30,				June 30,				June 30,				June 30,
(Dollars in thousands)	2013		2012		2013		2012		2014		2013		2014		2013
Ceded written premiums	$	509,451	$	341,220	$	986,582	$	740,288	$	524,057	$	509,451	$	1,042,074	$	986,582
Ceded earned premiums		475,419		427,461		929,801		825,493		535,287		475,419		1,015,100		929,801
Ceded losses and LAE (a)		266,455		211,805		497,986		468,180		296,322		266,455		534,823		497,986

	Three Months Ended					Six Months Ended
Everest International	June 30,					June 30,
(Dollars in thousands)	2014		2013			2014		2013
Ceded written premiums	$	203	$	269		$	88	$	134
Ceded earned premiums		348		353			274		414
Ceded losses and LAE		260		(643	)		2,144		(603	)

Three Months Ended Six Months Ended
Everest International June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Ceded written premiums $ 269 $ 439 $ 134 $ 694
Ceded earned premiums 353 875 414 1,967
Ceded losses and LAE (643 ) 523 (603 ) (1,576 )

	Three Months Ended				Six Months Ended
Everest Canada	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Assumed written premiums	$	11,215	$	6,287	$	15,225	$	9,125
Assumed earned premiums		5,268		3,619		9,956		7,389
Assumed losses and LAE		3,091		2,048		6,383		4,274

Three Months Ended Six Months Ended
Everest Canada June 30, June 30,
(Dollars in thousands) 2013 2012 2013 2012
Assumed written premiums $ 6,287 $ 5,476 $ 9,125 $ 8,643
Assumed earned premiums 3,619 3,514 7,389 7,366
Assumed losses and LAE 2,048 2,109 4,274 4,420

(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 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.

Effective February 27, 2013, Group established a new subsidiary, Mt. Logan Re, which is a Class 3 insurer based in Bermuda. Effective July 1, 2013, Mt. Logan Re established separate segregated accounts for its business activity, which will invest in a diversified set of catastrophe exposures.

The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re and assumed by the Company from Mt. Logan Re.

	Three Months Ended				Six Months Ended
Mt. Logan Re	June 30,				June 30,
(Dollars in thousands)	2014		2013		2014		2013
Ceded written premiums	$	20,228	$	-	$	48,594	$	-
Ceded earned premiums		22,680		-		40,517		-
Ceded losses and LAE		9,648		-		14,791		-

Assumed written premiums		-		-		9,919		-
Assumed earned premiums		2,605		-		4,711		-
Assumed losses and LAE		-		-		-		-

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.

~~The Company~~For interim reporting periods, the company is generally ~~will~~required to use the ~~estimated annual~~annualized effective tax rate ~~approach for calculating its tax provision for interim periods~~(“AETR”) method, as prescribed by ASC 740-270, Interim ~~Reporting.~~Reporting, to calculate its income tax provision. Under this method, the ~~estimated annual effective tax rate approach, the estimated annual effective tax rate~~AETR is applied to the interim year-to-date pre-tax income to determine the income tax expense or benefit for the year-to-date period. The income tax expense or benefit for a quarter represents the difference between the year-to-date income 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.~~AETR.

During the second quarter of 2012, the Company identified an understatement in its Deferred tax asset account of $9,257 thousand. The understatement resulted from differences between filed and recorded amounts that had accumulated over several prior periods. The Company corrected this understatement in its June 30, 2012 financial statements, resulting in an additional $9,257 thousand income tax benefit included in the income tax expense (benefit) caption in the Consolidated Statements of Operations and Comprehensive Income (Loss) and increased net income for the same amount for the quarter ended June 30, 2012. The Company also increased its Deferred tax asset in its Consolidated Balance Sheets by the same amount. The Company recorded a similar adjustment of $12,417 thousand during the first quarter of 2012, for a total six-month adjustment of $21,674 thousand. The Company believes that the out of period adjustments are immaterial to its June 30, 2012 financial statements and to all prior periods. As such, the Company has not restated any prior period amounts.

16. SUBSEQUENT EVENTS

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

2725

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 sources of potential reinsurance and insurance capacity and competition.

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. Competition and its effect on rates, terms and conditions vary widely by market and coverage yet continued to be most prevalent in the U.S. casualty insurance and reinsurance markets and additional capacity from the capital markets is impacting worldwide catastrophe rates.

Catastrophe rates tend to fluctuate by global region, particularly areas recently impacted by large catastrophic events. During the ~~fourth quarter~~second and third quarters of ~~2012,~~2013, Canada experienced historic flooding in Alberta and Toronto, which has resulted in higher catastrophe rates in these areas. Although there were flooding and wind storm events in Europe and Asia in the latter part of 2013, the overall 2013 catastrophe losses for the industry ~~sustained significant~~were lower than average. This lower level of losses, ~~from Superstorm Sandy and also sustained significant losses during 2011 from Australian floods, the New Zealand earthquake, the earthquake and tsunami~~combined with increased competition is putting downward pressure on rates in ~~Japan, storms~~certain geographical areas resulting in the U.S., and the Thailand floods. It is too early to determine the longer term impact on market conditions as a result of these events. While the 2011 events have resulted in meaningful rate increaseslower rates for most catastrophe coverages in ~~some global catastrophe prone regions, particularly areas impacted by these losses, whether~~ the ~~magnitude~~beginning of ~~these 2012 and 2011 losses is sufficient to increase rates and improve market conditions for other lines of business remains to be seen.~~2014.

Overall, we believe that current marketplace conditions, 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.

2826

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			Six Months Ended						Percentage			Three Months Ended						Percentage			Six Months Ended						Percentage
	June 30,						Increase/			June 30,						Increase/			June 30,						Increase/			June 30,						Increase/
(Dollars in millions)	2013			2012			(Decrease)			2013			2012			(Decrease)			2014			2013			(Decrease)			2014			2013			(Decrease)
Gross written premiums	$	1,080.3		$	732.9			47.4	%	$	2,064.1		$	1,590.1			29.8	%	$	1,224.8		$	1,080.3			13.4	%	$	2,309.3		$	2,064.1			11.9	%
Net written premiums		531.6			339.4			56.6	%		1,007.8			766.8			31.4	%		492.7			531.6			-7.3	%		992.4			1,007.8			-1.5	%

REVENUES:
Premiums earned	$	490.0		$	438.5			11.8	%	$	938.0		$	872.2			7.5	%	$	520.7		$	490.0			6.3	%	$	991.2		$	938.0			5.7	%
Net investment income		81.7			74.2			10.1	%		158.6			155.4			2.0	%		68.6			81.7			-16.0	%		132.4			158.6			-16.5	%
Net realized capital gains (losses)		15.5			82.6			-81.2	%		325.3			258.7			25.7	%		125.1			15.5		NM				121.1			325.3			-62.8	%
Other income (expense)		9.7			25.4			-61.7	%		0.1			19.2			-99.6	%		(8.8	)		9.7			-190.1	%		(11.8	)		0.1		NM
Total revenues		597.0			620.7			-3.8	%		1,422.0			1,305.5			8.9	%		705.7			597.0			18.2	%		1,232.8			1,422.0			-13.3	%

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		333.9			293.6			13.7	%		602.5			544.0			10.8	%		321.5			333.9			-3.7	%		599.6			602.5			-0.5	%
Commission, brokerage, taxes and fees		75.4			93.4			-19.3	%		143.5			180.9			-20.7	%		85.3			75.4			13.2	%		161.4			143.5			12.5	%
Other underwriting expenses		44.3			41.1			7.7	%		87.8			80.6			8.9	%		47.2			44.3			6.5	%		86.4			87.8			-1.6	%
Corporate expense		2.1			1.7			19.2	%		3.8			3.3			16.4	%		(0.5	)		2.1			-125.4	%		0.8			3.8			-79.7	%
Interest, fee and bond issue cost amortization expense		17.9			12.7			41.4	%		30.5			25.4			20.4	%		8.8			17.9			-50.9	%		16.2			30.5			-46.8	%
Total claims and expenses		473.5			442.5			7.0	%		868.2			834.1			4.1	%		462.3			473.5			-2.4	%		864.4			868.2			-0.4	%

INCOME (LOSS) BEFORE TAXES		123.5			178.2			-30.7	%		553.8			471.4			17.5	%		243.4			123.5			97.1	%		368.4			553.8			-33.5	%
Income tax expense (benefit)		38.2			52.6			-27.3	%		182.9			131.0			39.6	%		85.2			38.2			123.0	%		123.8			182.9			-32.3	%
NET INCOME (LOSS)	$	85.3		$	125.7			-32.1	%	$	370.9		$	340.4			9.0	%	$	158.2		$	85.3			85.5	%	$	244.6		$	370.9			-34.0	%

RATIOS:							Point Change									Point Change									Point Change									Point Change
Loss ratio		68.1	%		67.0	%		1.1			64.2	%		62.4	%		1.8			61.7	%		68.1	%		(6.4	)		60.5	%		64.2	%		(3.7	)
Commission and brokerage ratio		15.4	%		21.3	%		(5.9	)		15.3	%		20.7	%		(5.4	)		16.4	%		15.4	%		1.0			16.3	%		15.3	%		1.0
Other underwriting expense ratio		9.1	%		9.3	%		(0.2	)		9.4	%		9.2	%		0.2			9.1	%		9.1	%		-			8.7	%		9.4	%		(0.7	)
Combined ratio		92.6	%		97.6	%		(5.0	)		88.9	%		92.3	%		(3.4	)		87.2	%		92.6	%		(5.4	)		85.5	%		88.9	%		(3.4	)


										At			At			Percentage												At			At			Percentage
										June 30,			December 31,			Increase/												June 30,			December 31,			Increase/
(Dollars in millions)											2013			2012		(Decrease)													2014			2013		(Decrease)
Balance sheet data:
Total investments and cash										$	8,940.2		$	9,075.5			-1.5	%										$	10,001.6		$	9,495.1			5.3	%
Total assets											15,257.2			15,088.0			1.1	%											16,626.2			15,521.0			7.1	%
Loss and loss adjustment expense reserves											7,868.2			8,143.1			-3.4	%											7,657.6			7,653.2			0.1	%
Total debt											528.3			818.2			-35.4	%											888.3			488.3			81.9	%
Total liabilities											11,491.9			11,609.3			-1.0	%											12,142.1			11,330.5			7.2	%
Stockholder's equity											3,765.3			3,478.6			8.2	%											4,484.1			4,190.5			7.0	%

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

Revenues.

Premiums. Gross written premiums increased by ~~47.4%~~13.4% to $1,224.8 million for the three months ended June 30, 2014, compared to $1,080.3 million for the three months ended June 30, 2013, ~~compared to $732.9 million for the three months ended June 30, 2012,~~ reflecting a ~~$287.6~~$146.4 million, or ~~59.3%~~18.9%, increase in our reinsurance business while our insurance business remained relatively flat. The increase in reinsurance premiums was mainly due to new business: quota share contracts, contracts with catastrophe exposed risks and mortgage guaranty business. Gross written premiums increased by 11.9% to $2,309.3 million for the six months ended June 30, 2014, compared to $2,064.1 million for the six months ended June 30, 2013, reflecting a ~~$59.9~~$270.4 million, or 17.9%, increase in our reinsurance business, partially offset by a $25.1 million, or 4.5%, decrease in our insurance business. The increase in reinsurance premiums was mainly due to ~~the impact of a Florida~~new business: quota share ~~reinsurance contract as well as new business, increased participations on existing business~~contracts, contracts with catastrophe exposed risks and ~~higher original rates on subject~~mortgage guaranty business. ~~Excluding the large Florida quota share reinsurance contract, gross written premiums increased 12.5% and reinsurance premiums increased 8.1%, quarter over quarter.~~ The ~~increase~~decrease in insurance premiums was primarily due to ~~the growth~~lower crop premiums, partially offset by an increase in ~~California workers compensation, crop and~~ non-standard auto business. ~~Gross written premiums increased by 29.8% to $2,064.1 million for the six~~

2927

Net written premiums decreased by 7.3% to $492.7 million for the three months ended June 30, ~~2013~~2014 compared to $1,590.1 million for the six months ended June 30, 2012, reflecting a $372.8 million, or 32.8%, increase in our reinsurance business and a $101.2 million increase in our insurance business. The increase in reinsurance premiums was mainly due to the impact of a Florida quota share reinsurance contract as well as new business, increased participations on existing business and higher original rates on subject business. Excluding the large Florida quota share reinsurance contract, gross written premiums increased 13.6% and reinsurance premiums increased 10.6%, compared to the prior year six-month period. The increase in insurance premiums was primarily due to the growth in California workers compensation, crop and non-standard auto business.

~~Net written premiums increased 56.6%~~ to $531.6 million for the three months ended June 30, 2013, ~~compared~~and decreased by 1.5% to ~~$339.4~~$992.4 million for the ~~three~~six months ended June 30, ~~2012 and increased 31.4%~~2014 compared to $1,007.8 million for the six months ended June 30, ~~2013 compared to $766.8 million for the six months ended June 30, 2012, which is consistent with~~2013. The variance between the increase in gross written ~~premiums.~~premiums compared to the decrease in net written premiums is primarily due to a higher utilization of reinsurance related to the new quota share contracts. Premiums earned increased by ~~11.8%~~6.3% to $520.7 million for the three months ended June 30, 2014, compared to $490.0 million for the three months ended June 30, 2013 ~~compared~~and increased by 5.7% to ~~$438.5~~$991.2 million for the ~~three~~six months ended June 30, ~~2012, and increased by 7.5%~~2014, compared to $938.0 million for the six months ended June 30, ~~2013 compared to $872.2 million for the six months ended June 30, 2012. Unlike written premiums, premiums earned were not impacted by the Florida quota share reinsurance contract.~~2013. The change in premiums earned ~~was comparable~~relative to ~~the change in~~ net written premiums ~~excluding~~is the ~~impact~~result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the ~~Florida quota share reinsurance contract.~~coverage period.

Net Investment Income. Net investment income ~~increased~~decreased by ~~10.1%~~16.0% to $68.6 million for the three months ended June 30, 2014, compared with net investment income of $81.7 million for the three months ended June 30, 2013 and decreased by 16.5% to $132.4 million for the six months ended June 30, 2014, compared with net investment income of ~~$74.2 million for the three months ended June 30, 2012 and increased by 2.0% to~~ $158.6 million for the six months ended June 30, ~~2013 compared with net investment income of $155.4 million for the six months ended June 30, 2012.~~2013. Net pre-tax investment income, as a percentage of average invested assets, was 3.2% for the three months ended June 30, 2014 compared to 4.0% for the three months ended June 30, 2013 ~~compared to 3.6%~~and was 3.1% for the ~~three~~six months ended June 30, ~~2012 and was~~2014 compared to 3.8% for the six months ended June 30, ~~2013~~2013. The decline in income and ~~2012.~~yield was primarily the result of a decrease in our limited partnership income.

Net Realized Capital Gains (Losses). Net realized capital gains were $125.1 million and $15.5 million for the three months ended June 30, 2014 and ~~$82.6~~2013, respectively. The $125.1 million was comprised of $124.5 million of gains from fair value re-measurements and $0.8 million of gains from sales on our fixed maturity and equity securities, partially offset by $0.2 million of other-than-temporary impairments. The net realized capital gains of $15.5 million for the three months ended June 30, 2013, ~~and 2012, respectively. The $15.5 million was comprised~~were the result of ~~$16.3~~$16.3 million of net realized capital gains from sales on our fixed maturity and equity securities, ~~and~~partially offset by $0.8 million of losses from fair value re-measurements. ~~The net~~

Net realized capital gains ~~of $82.6~~were $121.1 million and $325.3 million for the ~~three~~six months ended June 30, ~~2012 were the result~~2014 and 2013, respectively. The $121.1 million was comprised of ~~$83.2~~$122.9 million of gains from fair value re-measurements, partially offset by ~~$0.5~~$1.6 million of ~~other-than-temporary impairments on our available for sale fixed maturity securities and $0.1 million of net realized capital~~ losses from sales on our fixed maturity and equity ~~securities.~~

~~Net~~securities and $0.2 million of other-than-temporary impairments. The net realized capital gains ~~were~~of $325.3 ~~million and $258.7~~ million for the six months ended June 30, 2013, ~~and 2012, respectively. Of~~were the ~~$325.3 million, there were $298.9~~result of $298.9 million of gains from fair value re-measurements and $26.4 million of net realized capital gains from sales on our fixed maturity and equity securities. The net realized capital gains of $258.7 million for the six months ended June 30, 2012 were the result of $236.0 million of gains from fair value re-measurements and $28.9 million of net realized capital gains from sales on our fixed maturity and equity securities, partially offset by $6.1 million of other-than-temporary impairments on our available for sale fixed maturity securities.

Other Income (Expense). We recorded other expense of $8.8 million and $11.8 million for the three and six months ended June 30, 2014, respectively. We recorded other income of $9.7 million and $0.1 million for the three and six months ended June 30, 2013, respectively. ~~We recorded other income of $25.4 million and $19.2 million for the three and six months ended June 30, 2012, respectively.~~ The ~~changes were~~change was primarily due to fluctuations in currency exchange rates for the corresponding ~~periods.~~periods and fluctuations in the amortization of deferred gains on retroactive reinsurance agreements with affiliates.

3028

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 June 30,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2014
Attritional	$	302.6			58.1	%		$	(1.9	)		-0.4	%		$	300.7			57.7	%
Catastrophes		20.5			3.9	%			0.3			0.1	%			20.8			4.0	%
Total segment	$	323.1			62.0	%		$	(1.6	)		-0.3	%		$	321.5			61.7	%

2013
Attritional	$	290.4			59.2	%		$	11.7			2.4	%		$	302.1			61.6	%
Catastrophes		30.0			6.1	%			1.8			0.4	%			31.8			6.5	%
Total segment	$	320.4			65.3	%		$	13.5			2.8	%		$	333.9			68.1	%

Variance 2014/2013
Attritional	$	12.2			(1.1	)	pts	$	(13.6	)		(2.8	)	pts	$	(1.4	)		(3.9	)	pts
Catastrophes		(9.5	)		(2.2	)	pts		(1.5	)		(0.3	)	pts		(11.0	)		(2.5	)	pts
Total segment	$	2.7			(3.3	)	pts	$	(15.1	)		(3.1	)	pts	$	(12.4	)		(6.4	)	pts

	Six Months Ended June 30,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2014
Attritional	$	583.9			58.8	%		$	(2.4	)		-0.2	%		$	581.5			58.6	%
Catastrophes		20.5			2.1	%			(2.4	)		-0.2	%			18.1			1.9	%
Total segment	$	604.4			60.9	%		$	(4.8	)		-0.4	%		$	599.6			60.5	%

2013
Attritional	$	546.4			58.2	%		$	10.1			1.1	%		$	556.5			59.3	%
Catastrophes		30.0			3.2	%			16.1			1.7	%			46.1			4.9	%
Total segment	$	576.4			61.4	%		$	26.2			2.8	%		$	602.5			64.2	%

Variance 2014/2013
Attritional	$	37.5			0.6		pts	$	(12.5	)		(1.3	)	pts	$	25.0			(0.7	)	pts
Catastrophes		(9.5	)		(1.1	)	pts		(18.5	)		(1.9	)	pts		(28.0	)		(3.0	)	pts
Total segment	$	28.0			(0.5	)	pts	$	(31.0	)		(3.2	)	pts	$	(2.9	)		(3.7	)	pts

(Some amounts may not reconcile due to rounding.)

Three Months Ended June 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2013
Attritional $ 290.4 59.2 % $ 11.7 2.4 % $ 302.1 61.6 %
Catastrophes 30.0 6.1 % 1.8 0.4 % 31.8 6.5 %
A&E - 0.0 % - 0.0 % - 0.0 %
Total segment $ 320.4 65.3 % $ 13.5 2.8 % $ 333.9 68.1 %

2012
Attritional $ 266.1 60.8 % $ 14.1 3.2 % $ 280.2 64.0 %
Catastrophes 15.0 3.4 % (1.7 ) -0.4 % 13.3 3.0 %
A&E - 0.0 % - 0.0 % - 0.0 %
Total segment $ 281.1 64.2 % $ 12.5 2.8 % $ 293.6 67.0 %

Variance 2013/2012
Attritional $ 24.3 (1.6 ) pts $ (2.4 ) (0.8 ) pts $ 21.9 (2.4 ) pts
Catastrophes 15.0 2.7 pts 3.5 0.8 pts 18.5 3.5 pts
A&E - - pts - - pts - - pts
Total segment $ 39.3 1.1 pts $ 1.0 - pts $ 40.3 1.1 pts

Six Months Ended June 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2013
Attritional $ 546.4 58.2 % $ 10.1 1.1 % $ 556.5 59.3 %
Catastrophes 30.0 3.2 % 16.1 1.7 % 46.1 4.9 %
A&E - 0.0 % - 0.0 % - 0.0 %
Total segment $ 576.4 61.4 % $ 26.2 2.8 % $ 602.5 64.2 %

2012
Attritional $ 501.5 57.6 % $ 15.9 1.8 % $ 517.4 59.4 %
Catastrophes 30.0 3.4 % (3.5 ) -0.4 % 26.5 3.0 %
A&E - 0.0 % 0.1 0.0 % 0.1 0.0 %
Total segment $ 531.5 61.0 % $ 12.5 1.4 % $ 544.0 62.4 %

Variance 2013/2012
Attritional $ 44.9 0.6 pts $ (5.8 ) (0.7 ) pts $ 39.1 (0.1 ) pts
Catastrophes - (0.2 ) pts 19.6 2.1 pts 19.6 1.9 pts
A&E - - pts (0.1 ) - pts (0.1 ) - pts
Total segment $ 44.9 0.4 pts $ 13.7 1.4 pts $ 58.5 1.8 pts

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

Incurred losses and LAE ~~increased~~decreased by ~~13.7%~~3.7% to $321.5 million for the three months ended June 30, 2014 compared to $333.9 million for the three months ended June 30, 2013, ~~compared to $293.6 million for the three months ended June 30, 2012, representing 1.1 loss ratio points,~~ primarily due to ~~increases~~decreases in prior years attritional losses and by a reduction in current year catastrophe losses, ~~and~~partially offset by an increase in current year attritional losses. Current year catastrophe losses for the three months ended June 30, 2013 were $30.0 million, or 6.1 points, due to U.S. Storms ($25.0 million), Canadian floods ($2.5 million) and European floods (2.5 million). The ~~$15.0~~$20.5 million of current year catastrophe losses for the three months ended June 30, ~~2012~~2014 represented ~~3.4~~3.9 points and related to ~~U.S. tornadoes. Current year attritional losses increased due to higher premiums earned. Despite~~ the ~~increase in~~Japan snowstorm ($13.2 million) and the Chilean earthquake ($7.3 million). The current year ~~attritional~~catastrophe losses ~~the current year attritional loss ratio decreased by 1.6 points due to a shift in the mix~~ of ~~business towards excess of loss business, which generally results lower loss ratios.~~

~~Incurred losses and LAE increased by 10.8% to $602.5~~$30.0 million for the six months ended June 30, 2013 compared to $544.0 million for the six months ended June 30, 2012, representing an increase of 1.8 loss ratio points, primarily due to higher current year attritional losses and unfavorable development on prior year catastrophe losses in 2013 compared to 2012. The current year attritional losses increased by $44.9 million due to the increases in premiums earned. Prior year catastrophe losses for the sixthree months ended June 30, 2013 were ~~$16.1 million, or 1.7 points, and related primarily to Superstorm Sandy. Current year~~

~~catastrophe losses for the six month ended June 30, 2013 were $30.0 million, or 3.2 points,~~ due to U.S. ~~Storms~~storms ($25.0 million), Canadian floods ($2.5 million) and European floods ($2.5 million).

Incurred losses and LAE decreased by 0.5% to $599.6 million for the six months ended June 30, 2014 compared to $602.5 million for the six months ended June 30, 2013, primarily due to a reduction in catastrophe losses and prior years attritional losses, partially offset by an increase in current year attritional losses. The ~~$30.0~~increase in current year attritional losses is primarily attributable to the increase in premiums earned. The $20.5 million of current year catastrophe losses for the six months ended June 30, ~~2012~~2014 represented ~~3.4~~2.1 points and related ~~primarily~~to the Japan snowstorm ($13.2 million) and the Chilean earthquake ($7.3 million). The current year catastrophe losses of $30.0 million for the six months ended June 30, 2013 were due to U.S. ~~storm losses.~~storms ($25.0 million), Canadian floods ($2.5 million) and European floods ($2.5 million).

Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees ~~decreased~~increased by ~~19.3%~~13.2% to $85.3 million for the three months ended June 30, 2014 compared to $75.4 million for the three months ended June 30, ~~2013 compared to $93.4 million for the three months ended June 30, 2012.~~ 2013. Commission, brokerage, taxes and fees ~~decreased~~increased by ~~20.7%~~12.5% to $161.4 million for the six months ended June 30, 2014 compared to $143.5 million for the six months ended June 30, 2013. The quarter over quarter and year over year changes were primarily due to the impact of the increase in premiums earned, higher contingent commissions and changes in the mix of business.

Other Underwriting Expenses. Other underwriting expenses were comparable at $47.2 million and $44.3 million for the three months ended June 30, 2014 and 2013, ~~compared to $180.9~~respectively, and $86.4 million and $87.8 million for the six months ended June 30, 2012. The decreases were due primarily to the one-time impact of the termination of the Florida quota share reinsurance contract in the second quarter of 2012, as well as an increase in excess of loss business in2014 and 2013, ~~which carries a lower commission than pro rata business.~~respectively.

~~Other Underwriting Expenses.~~ Other underwriting expenses were $44.3 million and $41.1 million for the three months ended June 30, 2013 and 2012, respectively, and $87.8 million and $80.6 million for the six months ended June 30, 2013 and 2012, respectively. The increases in other underwriting expense were mainly due to higher compensation expenses.

Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, were ~~$2.1~~($0.5) million and ~~$1.7~~$2.1 million for the three months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively, and ~~$3.8~~$0.8 million and ~~$3.3~~$3.8 million for the six months ended June 30, 2014 and 2013, respectively. The decreases in corporate expenses were mainly due to the timing of allocations and ~~2012, respectively.~~lower compensation expenses.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was ~~$17.9~~$8.8 million and ~~$12.7~~$17.9 million for the three months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively, and ~~$30.5~~$16.2 million and ~~$25.4~~$30.5 million for the six months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively. The ~~increases~~decreases were primarily due to ~~$7.3 million of amortization expense on remaining capitalized issuance costs, related to~~ the redemption of ~~the~~ $329.9 million of trust preferred securities in May ~~2013.~~2013, but partially offset by the impact of the issuance of $400.0 million of senior notes on June 5, 2014.

Income Tax Expense (Benefit). ~~Income~~We had income tax ~~expense was $38.2~~expenses of $85.2 million and ~~$52.6~~$38.2 million for the three months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively, and ~~$182.9~~$123.8 million and ~~$131.0~~$182.9 million for the six months ended June 30, 2014 and 2013, ~~and 2012,~~ respectively. ~~Our income~~Income tax expense is primarily a function of the geographic location of the Company’s pre-tax income and the statutory tax rates ~~coupled with~~in those jurisdictions, as affected by tax-exempt investment income and as calculated under the ~~impact from tax-preferenced investment income.~~AETR method. Variations in ~~our effective tax rate~~the AETR generally result from changes in the relative levels of pre-tax ~~income. The increase in tax expense for~~income, including the three month period was mainly due to the increase in taxable income resulting from higher underwriting income, partially offset by lower net capital gains in 2013. The increase in tax expense for the six month period was mainly due to the increase in taxable income resulting from higher underwriting incomeimpact of catastrophe losses and net capital gains (losses), among jurisdictions with different tax rates. The increase in ~~2013. The~~ income tax expense for the three ~~and~~months ended June 30, 2014 compared to 2013 is primarily due to higher net realized capitals gains in the U.S. The decrease in income tax expense for the six months ended June 30, ~~2012 also reflect tax benefits of $9.3 million and $21.7 million, respectively, realized~~2014 compared to 2013 is primarily due to ~~corrections of understatement~~lower net realized capital gains in the ~~deferred tax asset account.~~US.

Net Income (Loss).

Our net income was ~~$85.3~~$158.2 million and ~~$125.7~~$85.3 million for the three months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively, and ~~$370.9~~$244.6 million and ~~$340.4~~$370.9 million for the six months ended June 30, ~~2013~~2014 and ~~2012,~~2013, respectively. The ~~variance was~~changes were primarily driven by the financial component fluctuations explained above.

Ratios.

Our combined ratio decreased by ~~5.0~~5.4 points to 87.2% for the three months ended June 30, 2014 compared to 92.6% for the three months ended June 30, 2013 ~~compared~~and decreased by 3.4 points to ~~97.6%~~85.5% for the ~~three~~six months ended June 30, ~~2012 and decreased by 3.4 points~~2014 compared to 88.9% for the six months ended June 30, ~~2013 compared to 92.3% for the six months ended June 30, 2012.~~2013. The loss ratio component increased 1.1 points for the three months ended June 30, 2013, over the same period last year primarily due to the $15.0 million increase in current year catastrophe losses, which added 2.7 points to the loss ratio. The loss ratio increased 1.8 points for the six months ended June 30, 2013 over the same period last year primarily due to the variance of prior year development on catastrophe losses in 2013 compared to 2012 of 2.1 points. The commission and brokerage ratio components decreased ~~5.9~~6.4 points and ~~5.4~~3.7 points for the three and six months ended June 30, ~~2013,~~2014, respectively, over the same periods last year, primarily due to lower catastrophe losses and lower prior years attritional losses. The commission and brokerage ratio components increased 1.0 points for the three and six months ended June 30, 2014 over the same period last year primarily due to an increase in ~~excess~~contingent commissions and changes in the mix of ~~loss~~business. The other underwriting expense ratio components remained relatively flat for the three months ended June 30, 2014, and decreased 0.7 points for the six months ended June 30, 2014.

3230

business which carries a lower commission than pro rata business and the one-time impact of the termination of the Florida quota share reinsurance contract in the second quarter of 2012. The other underwriting expense ratio component remained relatively flat compared to the same periods last year.

Stockholder's Equity.

~~Stockholder's~~Stockholders’ equity increased by ~~$286.7~~$293.6 million to ~~$3,765.3~~$4,484.1 million at June 30, ~~2013~~2014 from ~~$3,478.6~~$4,190.5 million at December 31, ~~2012,~~2013, principally as a result of ~~$370.9~~$244.6 million of net income, ~~$6.1~~$42.1 million of net unrealized appreciation on investments, net of tax, $6.5 million of share-based compensation transactions and ~~$2.7~~$1.5 million of net benefit plan obligation adjustments, partially offset by ~~$85.7 million of net unrealized depreciation on investments and $7.2~~$1.1 million of net foreign currency translation adjustments.

Consolidated Investment Results

Net Investment Income.

Net investment income ~~increased 10.1%~~decreased 16.0% to $68.6 million for the three months ended June 30, 2014 compared to $81.7 million for the three months ended June 30, 2013 ~~compared~~and decreased by 16.5% to ~~$74.2~~$132.4 million for the ~~three~~six months ended June 30, ~~2012 and increased 2.0%~~2014 compared to $158.6 million for the six months ended June 30, ~~2013 compared to $155.4 million for the six months ended June 30, 2012.~~2013. The ~~increases~~decreases were primarily due to ~~increases~~a decline in income from our limited ~~partnerships.~~partnership investments, partially offset by an increase in dividends from parent’s shares.

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
(Dollars in millions)	2013			2012			2013			2012			2014			2013			2014			2013
Fixed maturities	$	53.4		$	54.0		$	107.3		$	108.8		$	53.9		$	53.4		$	105.0		$	107.3
Equity securities		11.1			10.1			18.8			20.4			9.2			11.1			18.1			18.8
Short-term investments and cash		0.1			0.3			0.4			0.4			0.5			0.1			0.6			0.4
Other invested assets
Limited partnerships		14.2			9.2			25.5			20.8			2.7			14.2			(0.4	)		25.5
Dividends from Parent's shares		4.7			4.6			9.3			9.3			7.3			4.7			14.6			9.3
Other		1.9			(0.5	)		4.3			1.0			0.3			1.9			2.4			4.3
Gross investment income before adjustments		85.4			77.7			165.6			160.8			73.9			85.4			140.3			165.6
Funds held interest income (expense)		1.0			0.9			3.4			2.9			1.2			1.0			3.3			3.4
Gross investment income		86.4			78.7			169.1			163.7			75.1			86.4			143.6			169.1
Investment expenses		(4.7	)		(4.5	)		(10.5	)		(8.3	)		(6.4	)		(4.7	)		(11.2	)		(10.5	)
Net investment income	$	81.7		$	74.2		$	158.6		$	155.4		$	68.6		$	81.7		$	132.4		$	158.6

(Some amounts may not reconcile due to rounding)

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

	At	At
	June 30,	December 31,
	2014	2013
Imbedded pre-tax yield of cash and invested assets	3.3%	3.3%
Imbedded after-tax yield of cash and invested assets	2.3%	2.4%

At At
June 30, December 31,
2013 2012
Imbedded pre-tax yield of cash and invested assets 3.3% 3.4%
Imbedded after-tax yield of cash and invested assets 2.4% 2.4%

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014	2013	2014	2013
Annualized pre-tax yield on average cash and invested assets	3.2%	4.0%	3.1%	3.8%
Annualized after-tax yield on average cash and invested assets	2.2%	2.8%	2.2%	2.8%

Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Annualized pre-tax yield on average cash and invested assets 4.0% 3.6% 3.8% 3.8%
Annualized after-tax yield on average cash and invested assets 2.8% 2.7% 2.8% 2.8%

3331

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 June 30,									Six Months Ended June 30,									Three Months Ended June 30,									Six Months Ended June 30,
(Dollars in millions)	2013			2012			Variance			2013			2012			Variance			2014			2013			Variance			2014			2013			Variance
Gains (losses) from sales:
Fixed maturity securities, market value
Gains	$	4.6		$	3.6		$	1.0		$	8.3		$	7.2		$	1.1		$	3.8		$	4.6		$	(0.8	)	$	5.1		$	8.3		$	(3.2	)
Losses		(4.4	)		(1.2	)		(3.2	)		(6.0	)		(3.3	)		(2.7	)		(4.7	)		(4.4	)		(0.3	)		(8.0	)		(6.0	)		(2.0	)
Total		0.2			2.4			(2.2	)		2.3			3.9			(1.6	)		(0.9	)		0.2			(1.1	)		(2.9	)		2.3			(5.2	)

Fixed maturity securities, fair value
Gains		0.3			0.1			0.2			0.4			5.5			(5.1	)		-			0.3			(0.3	)		1.2			0.4			0.8
Losses		(0.1	)		(0.2	)		0.1			(0.3	)		(0.4	)		0.1			-			(0.1	)		0.1			(0.3	)		(0.3	)		-
Total		0.2			(0.2	)		0.4			0.1			5.0			(4.9	)		-			0.2			(0.2	)		0.9			0.1			0.8

Equity securities, fair value
Gains		20.5			1.0			19.5			29.4			27.8			1.6			3.7			20.5			(16.8	)		10.3			29.4			(19.1	)
Losses		(4.6	)		(3.4	)		(1.2	)		(5.4	)		(7.9	)		2.5			(2.0	)		(4.6	)		2.6			(9.9	)		(5.4	)		(4.5	)
Total		15.9			(2.4	)		18.3			24.0			19.9			4.1			1.7			15.9			(14.2	)		0.4			24.0			(23.6	)

Total net realized gains (losses) from sales
Gains		25.4			4.7			20.7			38.1			40.5			(2.4	)		7.5			25.4			(17.9	)		16.6			38.1			(21.5	)
Losses		(9.1	)		(4.8	)		(4.3	)		(11.7	)		(11.6	)		(0.1	)		(6.7	)		(9.1	)		2.4			(18.2	)		(11.7	)		(6.5	)
Total		16.3			(0.1	)		16.4			26.4			28.9			(2.5	)		0.8			16.3			(15.5	)		(1.6	)		26.4			(28.0	)

Other than temporary impairments:		-			(0.5	)		0.5			-			(6.1	)		6.1			(0.2	)		-			(0.2	)		(0.2	)		-			(0.2	)

Gains (losses) from fair value adjustments:
Fixed maturities, fair value		(1.7	)		(1.7	)		-			(1.6	)		1.3			(2.9	)		-			(1.7	)		1.7			-			(1.6	)		1.6
Equity securities, fair value		16.4			(21.7	)		38.1			122.5			46.1			76.4			52.2			16.4			35.8			78.0			122.5			(44.5	)
Other invested assets, fair value		(15.5	)		106.7			(122.2	)		178.0			188.6			(10.6	)		72.3			(15.5	)		87.8			44.9			178.0			(133.1	)
Total		(0.8	)		83.2			(84.0	)		298.9			236.0			62.9			124.5			(0.8	)		125.3			122.9			298.9			(176.0	)

Total net realized gains (losses)	$	15.5		$	82.6		$	(67.1	)	$	325.3		$	258.7		$	66.6		$	125.1		$	15.5		$	109.6		$	121.1		$	325.3		$	(204.2	)

(Some amounts may not reconcile due to rounding)

Net realized capital gains were ~~$15.5~~$125.1 million and ~~$82.6~~$15.5 million for the three months ended June 30, 2014 and 2013, respectively. For the three months ended June 30, 2014, we recorded $124.5 million of net realized capital gains due to fair value re-measurements on equity securities and ~~2012, respectively.~~other invested assets and $0.8 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $0.2 million of other-than-temporary impairments. For the three months ended June 30, 2013, we recorded $16.3 million of net realized capital gains from sales of fixed maturity and equity securities, ~~and~~partially offset by $0.8 million of net realized capital losses due to fair value re-measurements on fixed maturity, equity securities and other invested assets. The fixed maturity and equity sales for the three months ended June 30, 2014 and 2013 related primarily to adjusting the portfolios for overall market changes and individual credit ~~shifts. For~~shifts along with maintaining a balanced foreign currency exposure.

Net realized capital gains were $121.1 million and $325.3 million for the ~~three~~six months ended June 30, ~~2012,~~2014 and 2013, respectively. For the six months ended June 30, 2014, we recorded ~~$83.2~~$122.9 million of net realized capital gains due to fair value re-measurements on ~~fixed maturity,~~ equity securities and other invested assets, partially offset by ~~$0.5 million of other-than-temporary impairments on fixed maturity securities and $0.1~~$1.6 million of net realized capital losses from sales of fixed maturity and equity ~~securities.~~

~~Net realized capital gains were $325.3~~securities and $0.2 million ~~and $258.7 million for the six months ended June 30, 2013 and 2012, respectively.~~of other-than-temporary impairments. For the six months ended June 30, 2013, we recorded $298.9 million of net realized capital gains due to fair value re-measurements on fixed maturity, equity securities and other invested assets and $26.4 million of net realized capital gains from sales of fixed maturity and equity securities. The fixed maturity and equity sales for the six months ended June 30, 2014 and 2013 related primarily to adjusting the portfolios for overall market changes and individual credit shifts. For the six months ended June 30, 2012, we recorded $236.0 million of gains due to fair value re-measurements on fixed maturity, equity securities and other invested assets and $28.9 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $6.1 million of other-than-temporary impairments on fixed maturity securities.

shifts along with maintaining a balanced foreign currency exposure.

3432

Segment Results.

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 International operation writes non-U.S. property and casualty reinsurance through Everest Re’s branches in Canada, Singapore and through offices in Brazil, Miami and New Jersey. The Insurance operation writes property and casualty insurance, including medical stop loss insurance, directly and through general agents, brokers and surplus lines brokers within the U.S and Canada.

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.

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.

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 June 30,												Six Months Ended June 30,												Three Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)	2013			2012			Variance			% Change			2013			2012			Variance			% Change			2014			2013			Variance			% Change			2014			2013			Variance		% Change
Gross written premiums	$	418.4		$	135.5		$	282.9			208.8	%	$	853.2		$	505.0		$	348.2			69.0	%	$	453.1		$	418.4		$	34.7			8.3	%	$	983.4		$	853.2		$	130.3		15.3	%
Net written premiums		215.8			68.2			147.7			216.7	%		433.5			255.4			178.1			69.7	%		215.1			215.8			(0.7	)		-0.3	%		466.6			433.5			33.2		7.6	%

Premiums earned	$	199.3		$	164.1		$	35.1			21.4	%	$	396.2		$	348.0		$	48.2			13.8	%	$	246.3		$	199.3		$	47.0			23.6	%	$	464.5		$	396.2		$	68.3		17.2	%
Incurred losses and LAE		137.1			103.5			33.6			32.5	%		238.3			213.2			25.1			11.7	%		129.7			137.1			(7.4	)		-5.4	%		245.7			238.3			7.4		3.1	%
Commission and brokerage		38.5			54.7			(16.1	)		-29.5	%		76.7			99.8			(23.2	)		-23.2	%		53.4			38.5			14.8			38.5	%		93.5			76.7			16.8		22.0	%
Other underwriting expenses		10.0			10.0			-			-0.3	%		20.5			20.8			(0.2	)		-1.2	%		11.5			10.0			1.5			14.6	%		20.9			20.5			0.4		2.0	%
Underwriting gain (loss)	$	13.6		$	(4.0	)	$	17.6		NM			$	60.7		$	14.2		$	46.5		NM			$	51.8		$	13.6		$	38.1		NM			$	104.3		$	60.7		$	43.6		71.9	%

										Point Chg												Point Chg												Point Chg											Point Chg
Loss ratio		68.8	%		63.0	%					5.8			60.1	%		61.3	%					(1.2	)		52.7	%		68.8	%					(16.1	)		52.9	%		60.1	%				(7.2	)
Commission and brokerage ratio		19.3	%		33.3	%					(14.0	)		19.4	%		28.7	%					(9.3	)		21.7	%		19.3	%					2.4			20.1	%		19.4	%				0.7
Other underwriting expense ratio		5.1	%		6.1	%					(1.0	)		5.2	%		5.9	%					(0.7	)		4.6	%		5.1	%					(0.5	)		4.5	%		5.2	%				(0.7	)
Combined ratio		93.2	%		102.4	%					(9.2	)		84.7	%		95.9	%					(11.2	)		79.0	%		93.2	%					(14.2	)		77.5	%		84.7	%				(7.2	)

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

Premiums. Gross written premiums increased by ~~208.8%~~8.3% to $453.1 million for the three months ended June 30, 2014 from $418.4 million for the three months ended June 30, 2013, ~~from $135.5 million for the three months ended June 30, 2012,~~ primarily due to ~~the impact of a large Florida quota share reinsurance contract,~~ new business opportunities, particularly for contracts with catastrophe exposed risks and higher subject premium on casualty quota share business as rates began to rise in these markets. Excluding the impact of the Florida quota share reinsurance contract, gross written premiums increased 15.6%.mortgage guaranty business. Net written premiums ~~increased 216.7%~~decreased by 0.3% to $215.1 million for the three months ended June 30, 2014 compared to $215.8 million for the three months ended June 30, ~~2013~~2013. The variance between the increase in gross written premiums compared to ~~$68.2~~the decrease in net written premiums is primarily due to the impact of changes in affiliated reinsurance agreements, particularly Mt. Logan. Premiums earned increased 23.6% to $246.3 million for the three months ended June 30, ~~2012, which is in line with the increase in gross written premiums. Premiums earned increased 21.4%~~2014 compared to $199.3 million for the three months ended June 30, ~~2013 compared to $164.1 million for the three months ended June 30, 2012. Premiums earned were not impacted by the Florida quota share reinsurance contract that affected written premiums.~~2013. The change in premiums earned ~~was relatively comparable~~relative to ~~the increase in~~ net written premiums ~~excluding~~ is primarily

the ~~Florida quota share reinsurance contract.~~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 ~~69.0%~~15.3% to $983.4 million for the six months ended June 30, 2014 from $853.2 million for the six months ended June 30, 2013, ~~from $505.0 million for the six months ended June 30, 2012,~~ primarily due to ~~the impact of a large Florida quota share reinsurance contract,~~ new business opportunities, particularly for contracts with catastrophe exposed risks and higher subject premium on casualty quota share business as rates began to rise in these markets. Excluding the impact of the Florida quota share reinsurance contract, gross written premiums increased 16.7%.mortgage guaranty business. Net written premiums increased ~~69.7%~~by 7.6% to $466.6 million for the six months ended June 30, 2014 compared to $433.5 million for the six months ended June 30, ~~2013~~2013. The variance between the increase in gross written premiums compared to ~~$255.4~~the decrease in net written premiums is primarily due to the impact of changes in affiliated reinsurance agreements, particularly Mt. Logan. Premiums earned increased 17.2% to $464.5 million for the six months ended June 30, ~~2012, which is in line with the increase in gross written premiums. Premiums earned increased 13.8%~~2014 compared to $396.2 million for the six months ended June 30, ~~2013 compared to $348.0 million for the six months ended June 30, 2012. Premiums earned were not impacted by the Florida quota share reinsurance contract that affected the written premiums.~~2013. The change in premiums earned ~~was relatively comparable~~relative to ~~the increase in~~ net written premiums ~~excluding~~is primarily the ~~Florida quota share reinsurance contract.~~result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

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 June 30,																			Three Months Ended June 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
2014
Attritional																				$	127.4			51.7	%		$	(1.6	)		-0.6	%		$	125.8			51.1	%
Catastrophes																					3.2			1.3	%			0.7			0.3	%			3.9			1.6	%
Total segment																				$	130.6			53.0	%		$	(0.9	)		-0.3	%		$	129.7			52.7	%

2013
Attritional	$	103.9		52.1	%		$	5.7			2.9	%		$	109.6		55.0	%		$	103.9			52.1	%		$	5.7			2.9	%		$	109.6			55.0	%
Catastrophes		27.5		13.8	%			-			0.0	%			27.5		13.8	%			27.5			13.8	%			-			0.0	%			27.5			13.8	%
A&E		-		0.0	%			-			0.0	%			-		0.0	%
Total segment	$	131.4		65.9	%		$	5.7			2.9	%		$	137.1		68.8	%		$	131.4			65.9	%		$	5.7			2.9	%		$	137.1			68.8	%

2012
Variance 2014/2013
Attritional	$	82.9		50.6	%		$	8.3			5.0	%		$	91.2		55.6	%		$	23.5			(0.4	)	pts	$	(7.3	)		(3.5	)	pts	$	16.2			(3.9	)	pts
Catastrophes		15.0		9.1	%			(2.7	)		-1.7	%			12.3		7.4	%			(24.3	)		(12.5	)	pts		0.7			0.3		pts		(23.6	)		(12.2	)	pts
A&E		-		0.0	%			-			0.0	%			-		0.0	%
Total segment	$	97.9		59.7	%		$	5.6			3.3	%		$	103.5		63.0	%		$	(0.8	)		(12.9	)	pts	$	(6.6	)		(3.2	)	pts	$	(7.4	)		(16.1	)	pts

Variance 2013/2012
Attritional	$	21.0		1.5		pts	$	(2.6	)		(2.1	)	pts	$	18.4		(0.6	)	pts
Catastrophes		12.5		4.7		pts		2.7			1.7		pts		15.2		6.4		pts
A&E		-		-		pts		-			-		pts		-		-		pts
Total segment	$	33.5		6.2		pts	$	0.1			(0.4	)	pts	$	33.6		5.8		pts

		Six Months Ended June 30,																						Six Months Ended June 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
2014
Attritional																								$	248.0			53.3	%		$	(4.8	)		-1.0	%		$	243.2			52.3	%
Catastrophes																									3.2			0.7	%			(0.7	)		-0.1	%			2.5			0.6	%
Total segment																								$	251.2			54.0	%		$	(5.5	)		-1.1	%		$	245.7			52.9	%

2013
Attritional		$	192.2			48.5	%		$	3.4			0.9	%		$	195.6			49.4	%			$	192.2			48.5	%		$	3.4			0.9	%		$	195.6			49.4	%
Catastrophes			27.5			6.9	%			15.2			3.8	%			42.7			10.7	%				27.5			6.9	%			15.2			3.8	%			42.7			10.7	%
A&E			-			0.0	%			-			0.0	%			-			0.0	%
Total segment		$	219.7			55.4	%		$	18.6			4.7	%		$	238.3			60.1	%			$	219.7			55.4	%		$	18.6			4.7	%		$	238.3			60.1	%

2012
Variance 2014/2013
Attritional		$	177.6			51.1	%		$	12.6			3.6	%		$	190.2			54.7	%			$	55.8			4.8		pts	$	(8.2	)		(1.9	)	pts	$	47.6			2.9		pts
Catastrophes			30.0			8.6	%			(7.1	)		-2.0	%			22.9			6.6	%				(24.3	)		(6.2	)	pts		(15.9	)		(3.9	)	pts		(40.2	)		(10.1	)	pts
A&E			-			0.0	%			0.1			0.0	%			0.1			0.0	%
Total segment		$	207.6			59.7	%		$	5.6			1.6	%		$	213.2			61.3	%

Variance 2013/2012
Attritional		$	14.6			(2.6	)	pts	$	(9.2	)		(2.7	)	pts	$	5.4			(5.3	)	pts
Catastrophes			(2.5	)		(1.7	)	pts		22.3			5.8		pts		19.8			4.1		pts
A&E			-			-		pts		(0.1	)		-		pts		(0.1	)		-		pts
Total segment		$	12.1			(4.3	)	pts	$	13.0			3.1		pts	$	25.1			(1.2	)	pts		$	31.5			(1.4	)	pts	$	(24.1	)		(5.8	)	pts	$	7.4			(7.2	)	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 ~~increased 32.5%~~decreased by 5.4% to $129.7 million for the three months ended June 30, 2014 compared to $137.1 million for the three months ended June 30, 2013, ~~compared~~primarily due to ~~$103.5 million for~~ the ~~three months ended June 30, 2012. Current~~decrease in current year catastrophe losses ~~for the three months ended June 30, 2013 were $27.5~~of $24.3 million and a decrease in prior years attritional losses, partially offset by an increase of $23.5 million in current year attritional losses due to ~~U.S. Storms ($25.0 million) and~~ the ~~European floods ($2.5 million), compared to $15.0~~impact of the increase in premiums earned. The $3.2 million of current year catastrophe losses for the three months ended June 30, ~~2012, which~~2014 related to ~~U.S. tornadoes. Current~~the Japan snowstorm ($3.2 million). The $27.5 million of current year ~~attritional~~catastrophe losses ~~increased by $21.0 million primarily~~for the three months ended June 30, 2013 were due to the ~~increase in premiums earned.~~U.S. storms ($25.0 million) and the European floods ($2.5 million).

Incurred losses increased ~~11.7%~~by 3.1% to $245.7 million for the six months ended June 30, 2014 compared to $238.3 million for the six months ended June 30, 2013, ~~compared~~primarily due to ~~$213.2~~the increase in current year attritional losses of $55.8 million ~~for~~resulting primarily from the ~~six months ended June 30, 2012. Current~~impact of the increase in premiums earned, partially offset by a decrease of $24.3 million in current year catastrophe losses ~~for the six months ended June 30, 2013, were $27.5~~and a decrease of $15.9 million ~~due to U.S. Storms ($25.0 million) and the European floods ($2.5 million), compared to $30.0~~in prior years catastrophe losses. The $3.2 million of current year catastrophe losses for the six months ended June 30, ~~2012, which~~2014 related to ~~U.S. tornadoes. Current~~the Japan snowstorm ($3.2 million). The $27.5 million of current year ~~attritional~~catastrophe losses ~~increased by $14.6 million primarily~~for the six months ended June 30, 2013 were due to the ~~increase in premiums earned. Despite~~U.S. storms ($25.0 million) and the increase in current year attritional losses, the current year attritional loss ratio decreased 2.6 points due to the continued shift in business to excess of loss contracts which generally have lower attritional losses than pro rata contracts.European floods ($2.5 million).

Segment Expenses. Commission and brokerage ~~decreased 29.5%~~expenses increased by 38.5% to $53.4 million for the three months ended June 30, 2014 compared to $38.5 million for the three months ended June 30, ~~2013 compared~~2013. Commission and brokerage expenses increased by 22.0% to ~~$54.7~~$93.5 million for the ~~three~~six months ended June 30, ~~2012. Commission and brokerage decreased 23.2%~~2014 compared to $76.7 million for the six months ended June 30, ~~2013 compared to $99.8 million for the six months ended June 30, 2012.~~2013. These variances were ~~primarily~~ due to the impact of the ~~termination of the large Florida quota share reinsurance contract~~increases in ~~second quarter 2012 as well as the shift~~premiums earned, an increase in contingent commissions and changes in the mix of ~~business to contracts with lower commission rates.~~business.

Segment other underwriting expenses ~~remained flat at~~increased to $11.5 million for the three months ended June 30, 2014 from $10.0 million for the three months ended June 30, ~~2013 and 2012.~~2013. Segment other underwriting expenses ~~decreased~~increased slightly to $20.9 million for the six months ended June 30, 2014 from $20.5 million for the six months ended June 30, ~~2013 from $20.8 million for~~2013. These increases were primarily due to the ~~six months ended June 30, 2012.~~impact of the increase in premiums earned.

International.

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

	Three Months Ended June 30,												Six Months Ended June 30,												Three Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)	2013			2012			Variance			% Change			2013			2012			Variance			% Change			2014			2013			Variance			% Change			2014			2013			Variance			% Change
Gross written premiums	$	354.4		$	349.7		$	4.7			1.3	%	$	654.8		$	630.2		$	24.6			3.9	%	$	466.0		$	354.4		$	111.6			31.5	%	$	794.9		$	654.8		$	140.1			21.4	%
Net written premiums		162.6			160.2			2.4			1.5	%		296.3			296.5			(0.2	)		-0.1	%		147.2			162.6			(15.3	)		-9.4	%		288.7			296.3			(7.7	)		-2.6	%

Premiums earned	$	151.1		$	157.0		$	(5.9	)		-3.8	%	$	293.0		$	304.8		$	(11.8	)		-3.9	%	$	147.7		$	151.1		$	(3.4	)		-2.2	%	$	292.7		$	293.0		$	(0.3	)		-0.1	%
Incurred losses and LAE		89.9			97.9			(8.0	)		-8.2	%		172.0			162.5			9.5			5.8	%		88.9			89.9			(1.0	)		-1.1	%		172.5			172.0			0.5			0.3	%
Commission and brokerage		31.2			37.0			(5.8	)		-15.7	%		59.3			68.7			(9.5	)		-13.8	%		27.4			31.2			(3.7	)		-12.0	%		56.6			59.3			(2.7	)		-4.5	%
Other underwriting expenses		7.7			6.5			1.1			17.1	%		15.6			13.3			2.3			17.4	%		8.1			7.7			0.4			5.6	%		15.9			15.6			0.3			2.1	%
Underwriting gain (loss)	$	22.4		$	15.6		$	6.8			43.7	%	$	46.2		$	60.3		$	(14.1	)		-23.3	%	$	23.3		$	22.4		$	0.9			4.1	%	$	47.8		$	46.2		$	1.6			3.4	%

										Point Chg												Point Chg												Point Chg												Point Chg
Loss ratio		59.5	%		62.3	%					(2.8	)		58.7	%		53.3	%					5.4			60.2	%		59.5	%					0.7			58.9	%		58.7	%					0.2
Commission and brokerage ratio		20.6	%		23.6	%					(3.0	)		20.2	%		22.6	%					(2.4	)		18.6	%		20.6	%					(2.0	)		19.3	%		20.2	%					(0.9	)
Other underwriting expense ratio		5.1	%		4.2	%					0.9			5.3	%		4.3	%					1.0			5.4	%		5.1	%					0.3			5.5	%		5.3	%					0.2
Combined ratio		85.2	%		90.1	%					(4.9	)		84.2	%		80.2	%					4.0			84.2	%		85.2	%					(1.0	)		83.7	%		84.2	%					(0.5	)

(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by ~~1.3%~~31.5% to $466.0 million for the three months ended June 30, 2014 compared to $354.4 million for the three months ended June 30, 2013, ~~compared~~primarily due new quota share contracts, partially offset by approximately $23 million of negative impacts from foreign exchange movements quarter over quarter. Net written premiums decreased by 9.4% to ~~$349.7~~$147.2 million for the three months ended June 30, ~~2012, primarily due to growth in Latin America business. Net written premiums increased by 1.5%~~2014 compared to $162.6 million for the three months ended June 30, ~~2013~~2013. The variance of the change in gross written premiums compared to ~~$160.2~~the change in net written premiums is due to a higher utilization of reinsurance related to the new quota share contracts. Premiums earned decreased 2.2% to $147.7 million for the three months ended June 30, ~~2012, which is consistent with the change in gross written premiums. Premiums earned decreased by 3.8%~~2014 compared to $151.1 million for the three months ended June 30, ~~2013~~2013. The change in premiums earned relative to net written premiums is primarily 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 21.4% to $794.9 million for the six months ended June 30, 2014 compared to ~~$157.0~~$654.8 million for the six months ended June 30, 2013, primarily due to new quota share contracts, partially offset by approximately $26 million of negative impacts from foreign exchange movements year over year. Net written premiums decreased by 2.6% to $288.7 million for the six months ended June 30, 2014 compared to $296.3 million for the six months ended June 30, 2013. The variance of the change in gross written premiums compared to the change in net written premiums is due to a higher utilization of reinsurance related to the new quota share contracts. Premiums earned decreased 0.1% to $292.7 million for the six months ended June 30, 2014 compared to $293.0 million for the six months ended June 30, 2013. The change in premiums earned relative to net written premiums is primarily the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

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

	Three Months Ended June 30,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2014
Attritional	$	72.4			49.0	%		$	(0.5	)		-0.3	%		$	71.9			48.7	%
Catastrophes		17.3			11.7	%			(0.4	)		-0.2	%			16.9			11.5	%
Total segment	$	89.7			60.7	%		$	(0.9	)		-0.5	%		$	88.9			60.2	%

2013
Attritional	$	83.2			55.1	%		$	2.4			1.6	%		$	85.7			56.7	%
Catastrophes		2.5			1.7	%			1.7			1.1	%			4.2			2.8	%
Total segment	$	85.7			56.8	%		$	4.1			2.7	%		$	89.9			59.5	%

Variance 2014/2013
Attritional	$	(10.8	)		(6.1	)	pts	$	(2.9	)		(1.9	)	pts	$	(13.8	)		(8.0	)	pts
Catastrophes		14.8			10.0		pts		(2.1	)		(1.3	)	pts		12.7			8.7		pts
Total segment	$	4.0			3.9		pts	$	(5.0	)		(3.2	)	pts	$	(1.0	)		0.7		pts

	Six Months Ended June 30,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2014
Attritional	$	157.1			53.7	%		$	(0.2	)		-0.1	%		$	156.9			53.6	%
Catastrophes		17.3			5.9	%			(1.7	)		-0.6	%			15.6			5.3	%
Total segment	$	174.4			59.6	%		$	(1.9	)		-0.7	%		$	172.5			58.9	%

2013
Attritional	$	170.4			58.1	%		$	(1.8	)		-0.6	%		$	168.6			57.5	%
Catastrophes		2.5			0.9	%			0.9			0.3	%			3.4			1.2	%
Total segment	$	172.9			59.0	%		$	(0.9	)		-0.3	%		$	172.0			58.7	%

Variance 2014/2013
Attritional	$	(13.3	)		(4.4	)	pts	$	1.6			0.5		pts	$	(11.7	)		(3.9	)	pts
Catastrophes		14.8			5.0		pts		(2.6	)		(0.9	)	pts		12.2			4.1		pts
Total segment	$	1.5			0.6		pts	$	(1.0	)		(0.4	)	pts	$	0.5			0.2		pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE decreased by 1.1% to $88.9 million for the three months ended June 30, ~~2012.~~2014 compared to $89.9 million for the three months ended June 30, 2013, primarily due to a decrease in attritional losses, partially offset by the increase in catastrophe losses. The $17.3 million of current year catastrophe losses for the three months ended June 30, 2014 were due to Japan snowstorm ($10.0 million) and the Chilean earthquake ($7.3 million). The $2.5 million of current year catastrophe losses were due to the Canadian floods.

Incurred losses and LAE increased by 0.3% to $172.5 million for the six months ended June 30, 2014 compared to $172.0 million for the six months ended June 30, 2013, primarily due to the increase in catastrophe losses, partially offset by a decrease in attritional losses. The $17.3 million of current year catastrophe losses for the six months ended June 30, 2014 were due to Japan snowstorm ($10.0 million) and the Chilean earthquake ($7.3 million). The $2.5 million of current year catastrophe losses were due to the Canadian floods.

Segment Expenses. Commission and brokerage decreased 12.0% to $27.4 million for the three months ended June 30, 2014 compared to $31.2 million for the three months ended June 30, 2013. Commission and brokerage decreased 4.5% to $56.6 million for the six months ended June 30, 2014 compared to $59.3 million for the six months ended June 30, 2013. This decrease was primarily due to the new quota share contracts, which have lower net commission rates.

Segment other underwriting expenses slightly increased to $8.1 million for the three months ended June 30, 2014 compared to $7.7 million for the three months ended June 30, 2013. Segment other underwriting expenses slightly increased to $15.9 million for the six months ended June 30, 2014 compared to $15.6 million for the six months ended June 30, 2013.

Insurance.

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

	Three Months Ended June 30,												Six Months Ended June 30,
(Dollars in millions)	2014			2013			Variance			% Change			2014			2013			Variance			% Change
Gross written premiums	$	305.7		$	307.6		$	(1.9	)		-0.6	%	$	531.0		$	556.1		$	(25.1	)		-4.5	%
Net written premiums		130.4			153.2			(22.8	)		-14.9	%		237.2			278.0			(40.8	)		-14.7	%

Premiums earned	$	126.7		$	139.6		$	(12.9	)		-9.2	%	$	234.0		$	248.8		$	(14.8	)		-6.0	%
Incurred losses and LAE		103.0			106.9			(4.0	)		-3.7	%		181.4			192.3			(10.8	)		-5.6	%
Commission and brokerage		4.5			5.7			(1.1	)		-20.1	%		11.3			7.6			3.8			49.8	%
Other underwriting expenses		27.6			26.6			1.0			3.7	%		49.5			51.7			(2.1	)		-4.1	%
Underwriting gain (loss)	$	(8.4	)	$	0.4		$	(8.8	)	NM			$	(8.3	)	$	(2.7	)	$	(5.6	)		207.2	%

										Point Chg												Point Chg
Loss ratio		81.2	%		76.6	%					4.6			77.5	%		77.3	%					0.2
Commission and brokerage ratio		3.6	%		4.1	%					(0.5	)		4.8	%		3.0	%					1.8
Other underwriting expense ratio		21.8	%		19.0	%					2.8			21.3	%		20.8	%					0.5
Combined ratio		106.6	%		99.7	%					6.9			103.6	%		101.1	%					2.5

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

Premiums. Gross written premiums decreased by 0.6% to $305.7 million for the three months ended June 30, 2014 compared to $307.6 million for the three months ended June 30, 2013. This decrease was primarily driven by a decline in crop business. Net written premiums decreased by 14.9% to $130.4 million for the three months ended June 30, 2014 compared to $153.2 million for the three months ended June 30, 2013. The variance in the change of gross written premiums compared to the change in net written premiums is due to the impact of changes to affiliated reinsurance agreements. Premiums earned decreased 9.2% to $126.7 million for the three months ended June 30, 2014 compared to $139.6 million for the three months ended June 30, 2013. 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~~decreased by ~~3.9%~~4.5% to ~~$654.8~~$531.0 million for the six months ended June 30, ~~2013~~2014 compared to ~~$630.2~~$556.1 million for the six months ended June 30, ~~2012,~~2013. This decrease was primarily ~~due to growth~~driven by a decline in ~~Latin America~~crop business. Net written premiums decreased by ~~0.1%~~14.7% to ~~$296.3~~$237.2 million for the six months ended June 30, ~~2013~~2014 compared to ~~$296.5~~$278.0 million for the six months ended June 30, ~~2012, primarily~~2013. The variance in the change of gross written premiums compared to the change in net written premiums is due to the impact of changes ~~in our~~to affiliated ~~quota share~~reinsurance agreements. Premiums earned decreased ~~by 3.9%~~6.0% to ~~$293.0~~$234.0 million for the six months ended June 30, ~~2013~~2014 compared to ~~$304.8~~$248.8 million for the six months ended June 30, ~~2012.~~2013. 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.

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

Three Months Ended June 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2013
Attritional $ 83.2 55.1 % $ 2.4 1.6 % $ 85.7 56.7 %
Catastrophes 2.5 1.7 % 1.7 1.1 % 4.2 2.8 %
Total segment $ 85.7 56.8 % $ 4.1 2.7 % $ 89.9 59.5 %

2012
Attritional $ 93.8 59.7 % $ 3.1 1.9 % $ 96.8 61.6 %
Catastrophes - 0.0 % 1.1 0.7 % 1.1 0.7 %
Total segment $ 93.8 59.7 % $ 4.2 2.6 % $ 97.9 62.3 %

Variance 2013/2012
Attritional $ (10.6 ) (4.6 ) pts $ (0.7 ) (0.3 ) pts $ (11.1 ) (4.9 ) pts
Catastrophes 2.5 1.7 pts 0.6 0.4 pts 3.1 2.1 pts
Total segment $ (8.1 ) (2.9 ) pts $ (0.1 ) 0.1 pts $ (8.0 ) (2.8 ) pts

Six Months Ended June 30,
Current Ratio %/ Prior Ratio %/ Total Ratio %/
(Dollars in millions) Year Pt Change Years Pt Change Incurred Pt Change
2013
Attritional $ 170.4 58.1 % $ (1.8 ) -0.6 % $ 168.6 57.5 %
Catastrophes 2.5 0.9 % 0.9 0.3 % 3.4 1.2 %
Total segment $ 172.9 59.0 % $ (0.9 ) -0.3 % $ 172.0 58.7 %

2012
Attritional $ 158.9 52.1 % $ - 0.0 % $ 158.9 52.1 %
Catastrophes - 0.0 % 3.6 1.2 % 3.6 1.2 %
Total segment $ 158.9 52.1 % $ 3.6 1.2 % $ 162.5 53.3 %

Variance 2013/2012
Attritional $ 11.5 6.0 pts $ (1.8 ) (0.6 ) pts $ 9.7 5.4 pts
Catastrophes 2.5 0.9 pts (2.7 ) (0.9 ) pts (0.2 ) - pts
Total segment $ 14.0 6.9 pts $ (4.5 ) (1.5 ) pts $ 9.5 5.4 pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE decreased 8.2% to $89.9 million for the three months ended June 30, 2013 compared to $97.9 million for the three months ended June 30, 2012, representing 2.8 loss ratio points. Current year attritional losses decreased $10.6 million due primarily to the decrease in premiums earned. Current year catastrophe losses were $2.5 million for the three months ended June 30, 2013, due to the Canadian floods. There were no current catastrophe losses for the three months ended June 30, 2012.

Incurred losses and LAE increased 5.8% to $172.0 million for the six months ended June 30, 2013 compared to $162.5 million for the six months ended June 30, 2012, representing 5.4 loss ratio points. Current year attritional losses increased $11.5 million, or 6.0 points, due primarily to the impact of changes in our affiliated quota share agreements and the effect of fluctuations in foreign currency. Current year catastrophe losses were $2.5 million for the six months ended June 30, 2013, due to the Canadian floods. There were no current catastrophe losses for the six months ended June 30, 2012.

~~Segment Expenses.~~ Commission and brokerage decreased 15.7% to $31.2 million for the three months ended June 30, 2013 compared to $37.0 million for the three months ended June 30, 2012. Commission and brokerage decreased 13.8% to $59.3 million for the six months ended June 30, 2013 compared to $68.7 million for the six months ended June 30, 2012. These decreases were mainly due to the shift in the mix of business towards property catastrophe and excess of loss business which have lower commission rates and the decrease in premiums earned.

Segment other underwriting expenses increased to $7.7 million for the three months ended June 30, 2013 compared to $6.5 million for the three months ended June 30, 2012. Segment other underwriting expenses increased to $15.6 million for the six months ended June 30, 2013 compared to $13.3 million for the six months ended June 30, 2012. These increases related primarily to higher compensation costs.

~~Insurance.~~

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

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions) 2013 2012 Variance % Change 2013 2012 Variance % Change
Gross written premiums $ 307.6 $ 247.7 $ 59.9 24.2 % $ 556.1 $ 454.9 $ 101.2 22.2 %
Net written premiums 153.2 111.1 42.1 37.9 % 278.0 214.9 63.1 29.4 %

Premiums earned $ 139.6 $ 117.3 $ 22.3 19.0 % $ 248.8 $ 219.4 $ 29.5 13.4 %
Incurred losses and LAE 106.9 92.2 14.7 16.0 % 192.3 168.2 24.1 14.3 %
Commission and brokerage 5.7 1.7 3.9 226.6 % 7.6 12.3 (4.7 ) -38.5 %
Other underwriting expenses 26.6 24.5 2.1 8.5 % 51.7 46.6 5.1 11.0 %
Underwriting gain (loss) $ 0.4 $ (1.2 ) $ 1.6 -137.6 % $ (2.7 ) $ (7.7 ) $ 5.0 -64.8 %

Point Chg Point Chg
Loss ratio 76.6 % 78.6 % (2.0 ) 77.3 % 76.7 % 0.6
Commission and brokerage ratio 4.1 % 1.5 % 2.6 3.0 % 5.6 % (2.6 )
Other underwriting expense ratio 19.0 % 20.9 % (1.9 ) 20.8 % 21.2 % (0.4 )
Combined ratio 99.7 % 101.0 % (1.3 ) 101.1 % 103.5 % (2.4 )

(Some amounts may not reconcile due to rounding.)

~~Premiums.~~ Gross written premiums increased by 24.2% to $307.6 million for the three months ended June 30, 2013 compared to $247.7 million for the three months ended June 30, 2012. This increase was primarily driven by California workers compensation, crop and non-standard auto business. Net written premiums increased 37.9% to $153.2 million for the three months ended June 30, 2013 compared to $111.1 million for the three months ended June 30, 2012. The larger increase in net written premiums compared to gross written premiums is mainly due to less use of reinsurance in 2013, particularly on the crop business. Premiums earned increased 19.0% to $139.6 million for the three months ended June 30, 2013 compared to $117.3 million for the three months ended June 30, 2012. 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 22.2% to $556.1 million for the six months ended June 30, 2013 compared to $454.9 million for the six months ended June 30, 2012. This increase was primarily driven by California workers compensation, crop and non-standard auto business. Net written premiums increased 29.4% to $278.0 million for the six months ended June 30, 2013 compared to $214.9 million for the six months ended June 30, 2012. The larger increase in net written premiums compared to gross written premiums is mainly due to less use of reinsurance in 2013, particularly on the crop business. Premiums earned increased 13.4% to $248.8 million for the six months ended June 30, 2013 compared to $219.4 million for the six months ended June 30, 2012. As with the quarter, the change in premiums earned in relation to net premiums written is due to timing.

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

	Three Months Ended June 30,																		Three Months Ended June 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
2014
Attritional																			$	102.8			81.1	%		$	0.2			0.1	%		$	103.0			81.2	%
Catastrophes																				-			0.0	%			(0.1	)		0.0	%			(0.1	)		0.0	%
Total segment																			$	102.8			81.1	%		$	0.1			0.1	%		$	103.0			81.2	%

2013
Attritional	$	103.3		74.1	%		$	3.5		2.5	%		$	106.8		76.6	%		$	103.3			74.1	%		$	3.5			2.5	%		$	106.8			76.6	%
Catastrophes		-		0.0	%			0.1		0.0	%			0.1		0.0	%			-			0.0	%			0.1			0.0	%			0.1			0.0	%
Total segment	$	103.3		74.1	%		$	3.6		2.5	%		$	106.9		76.6	%		$	103.3			74.1	%		$	3.6			2.5	%		$	106.9			76.6	%

2012
Variance 2014/2013
Attritional	$	89.4		76.2	%		$	2.8		2.4	%		$	92.2		78.6	%		$	(0.5	)		7.0		pts	$	(3.3	)		(2.4	)	pts	$	(3.8	)		4.6		pts
Catastrophes		-		0.0	%			-		0.0	%			-		0.0	%			-			-		pts		(0.2	)		-		pts		(0.2	)		-		pts
Total segment	$	89.4		76.2	%		$	2.8		2.4	%		$	92.2		78.6	%		$	(0.5	)		7.0		pts	$	(3.5	)		(2.4	)	pts	$	(4.0	)		4.6		pts

Variance 2013/2012
Attritional	$	13.9		(2.1	)	pts	$	0.7		0.1		pts	$	14.6		(2.0	)	pts
Catastrophes		-		-		pts		0.1		-		pts		0.1		-		pts
Total segment	$	13.9		(2.1	)	pts	$	0.8		0.1		pts	$	14.7		(2.0	)	pts

Incurred losses and LAE ~~increased~~decreased by ~~16.0%~~3.7% to $103.0 million for the three months ended June 30, 2014 compared to $106.9 million for the three months ended June 30, 2013, ~~compared~~mainly due to ~~$92.2~~an improvement of $3.3 million ~~for the three months ended June 30, 2012.~~in prior year development of attritional losses. There were no current year catastrophe losses for the three months ended June 30, ~~2013~~2014 and ~~2012. The variance resulted from a $13.9 million increase in current year attritional losses due to higher premiums earned, while the current year attritional loss ratio declined 2.1 points.~~2013.

Incurred losses and LAE ~~increased~~decreased by ~~14.3%~~5.6% to $181.4 million for the six months ended June 30, 2014 compared to $192.3 million for the six months ended June 30, 2013, ~~compared~~mainly due to ~~$168.2~~an improvement of $5.8 million ~~for~~on prior year development of attritional losses and lower current year attritional losses due to the ~~six months ended June 30, 2012.~~impact of the decline in premiums earned. There were no current year catastrophe losses for the six months ended June 30, ~~2013~~2014 and 2012. The variance resulted from an $18.9 million increase in current year attritional losses due to higher premiums earned, while the current year attritional loss ratio was down 1.3 points. The prior year loss development variance of $5.1 million, or 1.9 points, was primarily due to losses on the crop business from 2012’s severe weather conditions.2013.

Segment other underwriting expenses increased slightly to $27.6 million for the three months ended June 30, 2014 compared to $26.6 million for the three months ended June 30, ~~2013 compared to $24.5 million for the same period in 2012.~~2013. Segment other underwriting expenses ~~increased~~decreased to $49.5 million for the six months ended June 30, 2014 compared to $51.7 million for the six months ended June 30, 2013 ~~compared~~due to ~~$46.6 million for~~ the ~~same period~~impact of the decline in ~~2012. These increases were primarily due primarily to increased~~ premiums ~~earned and higher compensation costs.~~earned.

Market Sensitive Instruments.

The 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 ~~$8.9~~$10.0 billion investment portfolio, at June 30, ~~2013,~~2014, 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 and some foreign exchange rate risk. The overall economic 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 ~~$802.7~~$697.0 million of mortgage-backed securities in the ~~$5,413.7~~$5,900.4 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.

Market/Fair Value Change from Base (%)

We had ~~$7,868.2~~$7,657.6 million and ~~$8,143.1~~$7,653.2 million of gross reserves for losses and LAE as of June 30, ~~2013~~2014 and December 31, ~~2012,~~2013, 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 prices. Our equity investments consist of a diversified portfolio of individual securities. 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 periods indicated.

Fair/Market Value of the Equity Portfolio

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 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 those discussed 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 or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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 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.

~~ITEM 1.~~

ITEM 1. LEGAL PROCEEDINGS

Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.

ITEM 1A.

RISK FACTORS

No material changes.

~~ITEM 3.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~ITEM 4.~~

ITEM 4. MINE SAFETY DISCLOSURES

~~ITEM 5.~~

ITEM 5. OTHER INFORMATION

~~ITEM 6.~~

ITEM 6. EXHIBITS

Exhibit Index:

Exhibit No.	Description

31.1	Section 302 Certification of ~~Joseph V. Taranto~~Dominic J. Addesso

31.2	Section 302 Certification of Craig Howie

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

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

~~Everest Reinsurance Holdings, Inc.~~

~~Signatures~~

Everest Reinsurance Holdings, Inc.

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/ CRAIG HOWIE
	Craig Howie
	Executive Vice President and
		Chief Financial Officer

	(Duly Authorized Officer and Principal Financial Officer)



Dated: August 14, ~~2013~~2014


Item 1.	Financial Statements

	Consolidated Balance Sheets at June 30, ~~2013~~2014 (unaudited) and
		December 31, ~~2012~~ 2013	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the
		three and six months ended June 30, 2014 and 2013 ~~and 2012~~ (unaudited)	2

	Consolidated Statements of Changes in Stockholder’s Equity for the three and
		six months ended June 30, 2014 and 2013 ~~and 2012~~ (unaudited)	3

	Consolidated Statements of Cash Flows for the three and six months ended
		June 30, 2014 and 2013 ~~and 2012~~ (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and
		Results of Operation	2826

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4441

Item 4.	Controls and Procedures		4441


Item 1.	Legal Proceedings	4441

Item 1A.	Risk Factors	4542

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542

Item 3.	Defaults Upon Senior Securities	4542

Item 4.	Mine Safety Disclosures	4542

Item 5.	Other Information	4542

Item 6.	Exhibits	4542

	Duration of Unrealized Loss at June 30, 2013 By Security Type															Duration of Unrealized Loss at June 30, 2014 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	$	39,168	$	(444	)	$	5,979	$	(697	)	$	45,147	$	(1,141	)	$	105,986	$	(45	)	$	24,597	$	(590	)	$	130,583	$	(635	)
Obligations of U.S. states and political subdivisions		96,852		(7,802	)		5,480		(215	)		102,332		(8,017	)		-		-			92,739		(2,050	)		92,739		(2,050	)
Corporate securities		673,746		(11,617	)		68,986		(4,006	)		742,732		(15,623	)		345,912		(2,814	)		190,310		(4,567	)		536,222		(7,381	)
Asset-backed securities		-		-			-		-			-		-			12,591		(7	)		-		-			12,591		(7	)
Mortgage-backed securities
Commercial		-		-			-		-			-		-			-		-			-		-			-		-
Agency residential		326,597		(11,286	)		115,509		(695	)		442,106		(11,981	)		56,079		(235	)		286,429		(6,158	)		342,508		(6,393	)
Non-agency residential		-		-			318		(47	)		318		(47	)		-		-			-		-			-		-
Foreign government securities		97,116		(1,986	)		30,397		(2,915	)		127,513		(4,901	)		32,337		(711	)		65,825		(3,227	)		98,162		(3,938	)
Foreign corporate securities		361,421		(11,507	)		74,382		(5,675	)		435,803		(17,182	)		68,342		(1,210	)		138,194		(4,501	)		206,536		(5,711	)
Total fixed maturity securities	$	1,594,900	$	(44,642	)	$	301,051	$	(14,250	)	$	1,895,951	$	(58,892	)	$	621,247	$	(5,022	)	$	798,094	$	(21,093	)	$	1,419,341	$	(26,115	)
Equity securities		-		-			15		-			15		-			15		-			-		-			15		-
Total	$	1,594,900	$	(44,642	)	$	301,066	$	(14,250	)	$	1,895,966	$	(58,892	)	$	621,262	$	(5,022	)	$	798,094	$	(21,093	)	$	1,419,356	$	(26,115	)

	Duration of Unrealized Loss at June 30, 2013 By Maturity															Duration of Unrealized Loss at June 30, 2014 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	$	33,981	$	(713	)	$	28,277	$	(3,649	)	$	62,258	$	(4,362	)	$	31,259	$	(1,340	)	$	37,625	$	(4,040	)	$	68,884	$	(5,380	)
Due in one year through five years		608,398		(11,175	)		96,655		(6,608	)		705,053		(17,783	)		331,857		(1,950	)		265,430		(6,480	)		597,287		(8,430	)
Due in five years through ten years		445,301		(12,025	)		47,827		(1,979	)		493,128		(14,004	)		185,929		(1,383	)		107,068		(1,615	)		292,997		(2,998	)
Due after ten years		180,623		(9,443	)		12,465		(1,272	)		193,088		(10,715	)		3,532		(107	)		101,542		(2,800	)		105,074		(2,907	)
Asset-backed securities		-		-			-		-			-		-			12,591		(7	)		-		-			12,591		(7	)
Mortgage-backed securities		326,597		(11,286	)		115,827		(742	)		442,424		(12,028	)		56,079		(235	)		286,429		(6,158	)		342,508		(6,393	)
Total fixed maturity securities	$	1,594,900	$	(44,642	)	$	301,051	$	(14,250	)	$	1,895,951	$	(58,892	)	$	621,247	$	(5,022	)	$	798,094	$	(21,093	)	$	1,419,341	$	(26,115	)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
(Dollars in thousands)	2013			2012			2013			2012			2014			2013			2014			2013
Fixed maturities	$	53,366		$	53,932		$	107,265		$	108,753		$	53,921		$	53,366		$	105,000		$	107,265
Equity securities		11,114			10,127			18,845			20,432			9,180			11,114			18,117			18,845
Short-term investments and cash		137			300			403			428			459			137			645			403
Other invested assets
Limited partnerships		14,192			9,232			25,540			20,844			2,695			14,192			(392	)		25,540
Dividends from Parent's shares		4,665			4,665			9,331			9,331			7,290			4,665			14,580			9,331
Other		1,935			(492	)		4,255			1,026			330			1,935			2,351			4,255
Gross investment income before adjustments		85,409			77,764			165,639			160,814			73,875			85,409			140,301			165,639
Funds held interest income (expense)		1,018			946			3,436			2,894			1,183			1,018			3,292			3,436
Gross investment income		86,427			78,710			169,075			163,708			75,058			86,427			143,593			169,075
Investment expenses		(4,691	)		(4,504	)		(10,470	)		(8,260	)		(6,422	)		(4,691	)		(11,170	)		(10,470	)
Net investment income	$	81,736		$	74,206		$	158,605		$	155,448		$	68,636		$	81,736		$	132,423		$	158,605

	At June 30, 2013
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	75,135	$	643	$	(1,141	)	$	74,637
Obligations of U.S. states and political subdivisions		1,053,722		50,344		(8,017	)		1,096,049
Corporate securities		1,589,897		43,073		(15,623	)		1,617,347
Asset-backed securities		43,349		1,340		-			44,689
Mortgage-backed securities
Commercial		44,975		5,812		-			50,787
Agency residential		754,785		7,829		(11,981	)		750,633
Non-agency residential		1,131		147		(47	)		1,231
Foreign government securities		715,270		35,408		(4,901	)		745,777
Foreign corporate securities		1,007,403		24,235		(17,182	)		1,014,456
Total fixed maturity securities	$	5,285,667	$	168,831	$	(58,892	)	$	5,395,606
Equity securities	$	15	$	-	$	-		$	15

	At December 31, 2012									At December 31, 2013
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		Cost		Appreciation		Depreciation			Value
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	77,611	$	1,448	$	(869	)	$	78,190	$	72,211	$	420	$	(946	)	$	71,685
Obligations of U.S. states and political subdivisions		1,214,990		78,096		(1,123	)		1,291,963		970,735		40,815		(9,022	)		1,002,528
Corporate securities		1,510,186		61,137		(6,471	)		1,564,852		1,669,553		45,355		(12,493	)		1,702,415
Asset-backed securities		44,070		2,417		-			46,487		38,544		1,065		-			39,609
Mortgage-backed securities
Commercial		45,157		7,534		(67	)		52,624		34,855		3,811		-			38,666
Agency residential		672,724		12,722		(1,724	)		683,722		709,589		6,331		(18,521	)		697,399
Non-agency residential		1,933		429		(33	)		2,329		859		113		(33	)		939
Foreign government securities		732,277		51,461		(3,735	)		780,003		654,029		28,739		(7,941	)		674,827
Foreign corporate securities		990,671		46,850		(6,281	)		1,031,240		966,225		23,227		(15,599	)		973,853
Total fixed maturity securities	$	5,289,619	$	262,094	$	(20,303	)	$	5,531,410	$	5,116,600	$	149,876	$	(64,555	)	$	5,201,921
Equity securities	$	15	$	-	$	(2	)	$	13	$	15	$	-	$	(2	)	$	13

(Dollars in thousands)		At December 31, 2012
Pre-tax cumulative unrealized appreciation (depreciation)		$	399

	Three Months Ended June 30, 2012												Six Months Ended June 30, 2012
	Asset-backed			Foreign			Non-agency						Asset-backed			Foreign			Non-agency
(Dollars in thousands)	Securities			Corporate			RMBS			Total			Securities			Corporate			RMBS			Total
Beginning balance	$	12,756		$	5,119		$	6		$	17,881		$	16,046		$	2,536		$	7		$	18,589
Total gains or (losses) (realized/unrealized)
Included in earnings		-			(16	)		1			(15	)		55			(19	)		2			38
Included in other comprehensive income (loss)		6			(13	)		(1	)		(8	)		338			112			(2	)		448
Purchases, issuances and settlements		1,793			4,755			(1	)		6,547			4,468			7,216			(2	)		11,682
Transfers in and/or (out) of Level 3		(5,559	)		(2,462	)		-			(8,021	)		(11,911	)		(2,462	)		-			(14,373	)
Ending balance	$	8,996		$	7,383		$	5		$	16,384		$	8,996		$	7,383		$	5		$	16,384

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

(Some amounts may not reconcile due to rounding.)

	At June 30,			At December 31,			At June 30,			At December 31,
(Dollars in thousands)	2013			2012			2014			2013

Beginning balance of URA (D) on securities	$	157,163		$	147,140		$	55,457		$	157,163
Current period change in URA (D) of investments - temporary		(85,444	)		10,177			42,054			(101,447	)
Current period change in URA (D) of investments - non-credit OTTI		(259	)		(154	)		-			(259	)
Ending balance of URA (D) on securities		71,460			157,163			97,511			55,457

Beginning balance of foreign currency translation adjustments		90,215			83,185			71,087			90,215
Current period change in foreign currency translation adjustments		(7,225	)		7,030			(1,115	)		(19,128	)
Ending balance of foreign currency translation adjustments		82,990			90,215			69,972			71,087

Beginning balance of benefit plans		(62,511	)		(55,535	)
Current period change in benefit plans		2,691			(6,976	)
Ending balance of benefit plans		(59,820	)		(62,511	)
Beginning balance of benefit plan net gain (loss)								(38,896	)		(62,511	)
Current period change in benefit plan net gain (loss)								1,541			23,615
Ending balance of benefit plan net gain (loss)								(37,355	)		(38,896	)

Ending balance of accumulated other comprehensive income (loss)	$	94,630		$	184,867		$	130,128		$	87,648

					June 30, 2013				December 31, 2012
					Consolidated Balance				Consolidated Balance
(Dollars in thousands)	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	$	249,932	$	260,000	$	249,907	$	266,390

	Impact of Interest Rate Shift in Basis Points															Impact of Interest Rate Shift in Basis Points
	At June 30, 2013															At June 30, 2014
(Dollars in millions)		-200			-100			0			100			200		-200			-100			0			100			200
Total Market/Fair Value	$	6,078.1		$	5,935.8		$	5,782.4		$	5,616.4		$	5,446.9		$	6,883.5		$	6,731.9		$	6,573.8		$	6,407.7		$	6,236.7
Market/Fair Value Change from Base (%)		5.1	%		2.7	%		0.0	%		-2.9	%		-5.8	%		4.7	%		2.4	%		0.0	%		-2.5	%		-5.1	%
Change in Unrealized Appreciation
After-tax from Base ($)	$	192.2		$	99.7		$	-		$	(107.9	)	$	(218.0	)	$	201.3		$	102.8		$	-		$	(107.9	)	$	(219.1	)

	Impact of Percentage Change in Equity Fair/Market Values												Impact of Percentage Change in Equity Fair/Market Values
	At June 30, 2013												At June 30, 2014
(Dollars in millions)		-20%			-10%			0%		10%		20%	-20%			-10%			0%		10%		20%
Fair/Market Value of the Equity Portfolio	$	980.2		$	1,102.7		$	1,225.2	$	1,347.7	$	1,470.2	$	998.2		$	1,123.0		$	1,247.8	$	1,372.6	$	1,497.4
After-tax Change in Fair/Market Value		(159.3	)		(79.6	)		-		79.6		159.3		(162.2	)		(81.1	)		-		81.1		162.2