UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

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

Commission file number 1-14527

EVEREST REINSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

22-3263609

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

100 Everest Way

Warren, New Jersey 07059

(908) 604-3000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

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

YES ☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☑ NO ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated Filer ☑		Smaller reporting company ☐
		Emerging growth company ☐

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

YES ☐NO ☑

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

YES ☐NO ☑

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

		Number of Shares Outstanding
Class		At November 1, 2021
Common Shares, $0.01 par value		1,000

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

EVEREST REINSURANCE HOLDINGS, INC.

Table of Contents

Form 10-Q

		Page
PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 (unaudited)	2

	Consolidated Statements of Changes in Stockholder’s Equity for the nine months ended September 30, 2021 and 2020 (unaudited)	3

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	47

PART II

OTHER INFORMATION

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except share amounts and par value per share)	September 30, 2021		December 31, 2020
	(unaudited)
ASSETS:
Fixed maturities – available for sale, at market value (amortized cost: 2021, $11,658,597; 2020, $10,248,650, allowances for credit losses: 2021, $(31,113); 2020, $(1,566))	$	11,897,480	$	10,643,565
Equity securities, at fair value		1,488,355		1,288,767
Short-term investments (cost: 2021, $538,094; 2020, $708,043)		538,094		707,905
Other invested assets		1,626,435		1,094,933
Other invested assets, at fair value		1,933,277		1,796,479
Cash		453,090		378,518
Total investments and cash		17,936,731		15,910,167
Note Receivable - affiliated		500,000		300,000
Accrued investment income		110,188		80,196
Premiums receivable		1,852,973		1,591,980
Reinsurance recoverables - unaffiliated		1,662,942		1,505,650
Reinsurance recoverables - affiliated		2,371,998		2,701,655
Funds held by reinsureds		295,473		267,599
Deferred acquisition costs		443,973		379,707
Prepaid reinsurance premiums		444,768		363,489
Other assets		717,167		616,640
TOTAL ASSETS	$	26,336,213		23,717,083

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	13,321,811	$	11,654,950
Unearned premium reserve		2,914,338		2,385,174
Funds held under reinsurance treaties		48,922		46,894
Other net payable to reinsurers		428,985		277,390
Losses in course of payment		150,028		161,154
Income taxes net payable		251,609		192,877
Senior notes due 6/1/2044		397,284		397,194
Senior notes due 10/15/2050		979,915		979,524
Long term notes due 5/1/2067		223,749		223,674
Borrowings from FHLB		310,000		310,000
Accrued interest on debt and borrowings		23,267		10,460
Unsettled securities payable		64,984		206,693
Other liabilities		463,543		456,786
Total liabilities		19,578,435		17,302,770
Commitments and Contingencies (Note 6)		(nil)		(nil)

STOCKHOLDER'S EQUITY:
Common shares, par value: $0.01; 3,000 shares authorized; 1,000 shares issued and outstanding (2021 and 2020)		-		-
Additional paid-in capital		1,101,425		1,101,092
Accumulated other comprehensive income (loss), net of deferred income tax expense (benefit) $44,898 at 2021 and $71,080 at 2020		169,214		268,018
Retained earnings		5,487,139		5,045,203
Total stockholder's equity		6,757,778		6,414,313
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	26,336,213	$	23,717,083

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				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
	(unaudited)				(unaudited)
REVENUES:
Premiums earned	$	1,851,364	$	1,615,457	$	5,314,819	$	4,648,422
Net investment income		197,161		135,428		593,019		244,782
Net realized capital gains (losses):
Credit allowances on fixed maturity securities		(7,329)		2,289		(29,546)		(17,636)
Other net realized capital gains (losses)		(44,122)		112,904		296,869		(89,664)
Total net realized capital gains (losses)		(51,451)		115,193		267,323		(107,300)
Other income (expense)		9,937		(1,790)		12,049		(11,410)
Total revenues		2,007,011		1,864,288		6,187,210		4,774,494

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,653,019		1,277,851		4,102,721		3,283,196
Commission, brokerage, taxes and fees		388,847		322,404		1,125,549		1,001,207
Other underwriting expenses		109,512		109,366		329,238		304,705
Corporate expenses		10,907		4,206		23,106		11,441
Interest, fee and bond issue cost amortization expense		15,539		6,535		46,610		20,917
Total claims and expenses		2,177,824		1,720,362		5,627,224		4,621,466

INCOME (LOSS) BEFORE TAXES		(170,813)		143,926		559,986		153,028
Income tax expense (benefit)		(27,500)		24,120		118,050		(12,830)

NET INCOME (LOSS)	$	(143,313)	$	119,806	$	441,936	$	165,858

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		(43,482)		38,572		(109,930)		104,598
Less: reclassification adjustment for realized losses (gains) included in net income (loss)		2,160		(2,605)		10,092		28,824
Total URA(D) on securities arising during the period		(41,322)		35,967		(99,838)		133,422

Foreign currency translation adjustments		(20,862)		14,414		(4,615)		(6,783)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		1,563		1,806		5,649		4,532
Total benefit plan net gain (loss) for the period		1,563		1,806		5,649		4,532
Total other comprehensive income (loss), net of tax		(60,621)		52,187		(98,804)		131,171

COMPREHENSIVE INCOME (LOSS)	$	(203,934)	$	171,992	$	343,132	$	297,028

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDER’S EQUITY

(Dollars in thousands, except share amounts)	2021		2020
	(unaudited)
COMMON STOCK (shares outstanding):
Balance, January 1		1,000		1,000
Balance, March 31		1,000		1,000
Balance, June 30		1,000		1,000
Balance, September 30		1,000		1,000

ADDITIONAL PAID-IN CAPITAL:
Balance, January 1	$	1,101,092	$	1,100,678
Share-based compensation plans		108		103
Balance, March 31		1,101,200		1,100,781
Share-based compensation plans		116		101
Balance, June 30		1,101,316		1,100,882
Share-based compensation plans		109		101
Balance, September 30		1,101,425		1,100,983

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME TAXES:
Balance, January 1		268,018		64,324
Net increase (decrease) during the period		(104,063)		(178,351)
Balance, March 31		163,955		(114,027)
Net increase (decrease) during the period		65,880		257,335
Balance, June 30		229,835		143,308
Net increase (decrease) during the period		(60,621)		52,187
Balance, September 30		169,214		195,495

RETAINED EARNINGS:
Balance, January 1		5,045,203		4,692,423
Change to beginning balance due to adoption of ASU 2016-13		-		907
Net income (loss)		119,443		316,645
Balance, March 31		5,164,646		5,009,975
Net income (loss)		465,807		(270,593)
Balance, June 30		5,630,453		4,739,382
Net income (loss)		(143,313)		119,806
Balance, September 30		5,487,139		4,859,188

TOTAL STOCKHOLDER'S EQUITY, September 30	$	6,757,778	$	6,155,666

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

EVEREST REINSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
(Dollars in thousands)	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	441,936	$	165,858
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(261,405)		(182,948)
Decrease (increase) in funds held by reinsureds, net		(26,033)		(30,632)
Decrease (increase) in reinsurance recoverables		171,961		288,732
Decrease (increase) in income taxes		84,791		162,490
Decrease (increase) in prepaid reinsurance premiums		(81,012)		17,584
Increase (decrease) in reserve for losses and loss adjustment expenses		1,674,386		843,790
Increase (decrease) in unearned premiums		529,640		201,163
Increase (decrease) in other net payable to reinsurers		150,925		76,161
Increase (decrease) in losses in course of payment		(11,090)		116,447
Change in equity adjustments in limited partnerships		(310,870)		7,020
Distribution of limited partnership income		64,513		41,167
Change in other assets and liabilities, net		(104,489)		(94,329)
Non-cash compensation expense		27,532		23,901
Amortization of bond premium (accrual of bond discount)		22,686		7,109
Net realized capital (gains) losses		(267,323)		107,300
Net cash provided by (used in) operating activities		2,106,148		1,750,813

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		1,639,849		681,605
Proceeds from fixed maturities sold - available for sale, at market value		394,004		420,491
Proceeds from fixed maturities sold - available for sale, at fair value		-		2,054
Proceeds from equity securities sold - at fair value		450,319		328,519
Distributions from other invested assets		134,821		157,703
Cost of fixed maturities acquired - available for sale, at market value		(3,484,809)		(2,084,790)
Cost of equity securities acquired - at fair value		(506,643)		(459,572)
Cost of other invested assets acquired		(396,089)		(253,357)
Net change in short-term investments		170,671		(627,143)
Net change in unsettled securities transactions		(194,217)		73,467
Proceeds from repayment (cost of issuance) of note receivable - affiliated		(200,000)		-
Net cash provided by (used in) investing activities		(1,992,094)		(1,761,023)

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from share-based compensation, net of expense		(27,200)		(23,596)
FHLB borrowings (repayments)		-		90,000
Cost of debt repurchase		-		(10,647)
Net cash provided by (used in) financing activities		(27,200)		55,757

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(12,282)		(5,156)

Net increase (decrease) in cash		74,572		40,390
Cash, beginning of period		378,518		411,122
Cash, end of period	$	453,090	$	451,512

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	33,080	$	(175,535)
Interest paid		33,248		16,416

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

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Nine Months Ended September 30, 2021, and 2020

1. GENERAL

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

2. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of the Company as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020 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, 2020 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three and nine months ended September 30, 2021 and 2020 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, 2020, 2019 and 2018 included in the Company’s most recent Form 10-K filing.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate actual results could differ, possibly materially, from those estimates. This is particularly true given the fluid and continuing nature of the COVID-19 pandemic. This is an ongoing event and so is the Company’s evaluation and analysis. While the Company’s analysis considers all aspects of its operations, it does not take into account legal, regulatory or legislative intervention that could retroactively mandate or expand coverage provisions. Given the uncertainties in the current public health and economic environment, there could be an adverse impact on results for the Property & Casualty industry and the Company for the remainder of the year. The impact is dependent on the shape and length of the economic recovery.

All intercompany accounts and transactions have been eliminated.

Application of Recently Issued Accounting Standard Changes.

Reference Rate Reform - LIBOR. In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04 (and subsequently issued ASU 2021-01 in January 2021), which outlines the issues surrounding the cessation of LIBOR as a reference rate for contractual debt agreements. The guidance also details the potential alternative expedients and sources available for use in determination of rates and terms for such debt agreements in order to apply appropriate accounting policy. The guidance is effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact of the adoption of ASU 2020-04 and 2021-01 on its financial statements.

Accounting for Income Taxes. In December 2019, FASB issued ASU 2019-12, which provides simplification of existing guidance for income taxes, including the removal of certain exceptions related to recognition of deferred tax liabilities on foreign subsidiaries. The guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within that annual reporting period. The Company adopted the guidance

effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial statements.

Any issued guidance and pronouncements, other than those directly referenced above, are deemed by the Company to be either not applicable or immaterial to its financial statements.

3. INVESTMENTS

The following tables show amortized cost, allowance for credit losses, gross unrealized appreciation, gross unrealized depreciation and market value of available for sale, fixed maturity securities as of the dates indicated:

	At September 30, 2021
	Amortized		Allowances for		Unrealized		Unrealized		Market
(Dollars in thousands)	Cost		Credit Losses		Appreciation		Depreciation		Value
Fixed maturity securities
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	612,456	$	-	$	12,505	$	(911)	$	624,050
Obligations of U.S. states and political subdivisions		577,289		(151)		31,294		(1,057)		607,375
Corporate securities		3,675,504		(22,889)		119,670		(21,015)		3,751,270
Asset-backed securities		3,162,626		(7,680)		30,688		(2,987)		3,182,647
Mortgage-backed securities
Commercial		575,056		-		26,423		(3,096)		598,383
Agency residential		997,672		-		20,963		(3,523)		1,015,112
Non-agency residential		4,972		-		8		(4)		4,976
Foreign government securities		689,353		-		28,743		(4,747)		713,349
Foreign corporate securities		1,363,669		(393)		46,475		(9,433)		1,400,318
Total fixed maturity securities	$	11,658,597	$	(31,113)	$	316,769	$	(46,773)	$	11,897,480

	At December 31, 2020
	Amortized		Allowances for		Unrealized		Unrealized		Market
(Dollars in thousands)	Cost		Credit Losses		Appreciation		Depreciation		Value
Fixed maturity securities
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	659,957	$	-	$	22,032	$	-	$	681,989
Obligations of U.S. states and political subdivisions		543,646		-		34,655		(1,255)		577,046
Corporate securities		3,316,525		(1,205)		166,072		(31,480)		3,449,912
Asset-backed securities		2,450,807		-		28,585		(5,222)		2,474,170
Mortgage-backed securities
Commercial		512,388		-		37,875		(183)		550,080
Agency residential		937,166		-		28,630		(696)		965,100
Non-agency residential		3,164		-		2		(2)		3,164
Foreign government securities		694,132		-		51,317		(3,211)		742,238
Foreign corporate securities		1,130,865		(361)		73,265		(3,903)		1,199,866
Total fixed maturity securities	$	10,248,650	$	(1,566)	$	442,433	$	(45,952)	$	10,643,565

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

	At September 30, 2021				At December 31, 2020
	Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value
Fixed maturity securities – available for sale
Due in one year or less	$	638,736	$	638,370	$	658,561	$	659,622
Due after one year through five years		3,146,824		3,223,451		2,911,285		3,036,151
Due after five years through ten years		2,119,485		2,193,899		1,927,265		2,079,866
Due after ten years		1,013,226		1,040,642		848,014		875,412
Asset-backed securities		3,162,626		3,182,647		2,450,807		2,474,170
Mortgage-backed securities
Commercial		575,056		598,383		512,388		550,080
Agency residential		997,672		1,015,112		937,166		965,100
Non-agency residential		4,972		4,976		3,164		3,164
Total fixed maturity securities	$	11,658,597	$	11,897,480	$	10,248,650	$	10,643,565

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Increase (decrease) during the period between the market value and cost of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities and short-term investments	$	(52,322)	$	45,476	$	(126,348)	$	168,996
Change in unrealized appreciation (depreciation), pre-tax		(52,322)		45,476		(126,348)		168,996
Deferred tax benefit (expense)		11,000		(9,509)		26,510		(35,574)
Change in unrealized appreciation (depreciation), net of deferred taxes, included in stockholder's equity	$	(41,322)	$	35,967	$	(99,838)	$	133,422

The Company reviews all of its fixed maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline in value is due to non-credit related or credit related factors. 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 a credit impairment, but rather a non-credit related decline in market value. Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company will adjust the credit allowance account for future changes in credit loss estimates for a

security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

The Company does not create an allowance for uncollectible interest. If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time.

The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or 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 securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

	Duration of Unrealized Loss at September 30, 2021 By Security Type
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	164,510	$	(911)	$	-	$	-	$	164,510	$	(911)
Obligations of U.S. states and political subdivisions		61,687		(937)		3,569		(120)		65,256		(1,057)
Corporate securities		926,023		(15,559)		171,444		(5,456)		1,097,467		(21,015)
Asset-backed securities		579,799		(2,619)		23,396		(368)		603,195		(2,987)
Mortgage-backed securities
Commercial		82,124		(1,908)		25,450		(1,188)		107,574		(3,096)
Agency residential		459,632		(2,872)		55,358		(651)		514,990		(3,523)
Non-agency residential		1,724		(2)		156		(2)		1,880		(4)
Foreign government securities		178,925		(2,881)		10,819		(1,866)		189,744		(4,747)
Foreign corporate securities		430,909		(8,034)		24,008		(1,399)		454,917		(9,433)
Total fixed maturity securities	$	2,885,334	$	(35,723)	$	314,199	$	(11,050)	$	3,199,533	$	(46,773)

	Duration of Unrealized Loss at September 30, 2021 By Maturity
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities
Due in one year or less	$	99,157	$	(1,838)	$	23,908	$	(2,582)	$	123,065	$	(4,420)
Due in one year through five years		756,922		(8,846)		124,406		(3,228)		881,328		(12,074)
Due in five years through ten years		614,332		(12,640)		34,678		(1,876)		649,010		(14,516)
Due after ten years		291,643		(4,998)		26,847		(1,155)		318,490		(6,153)
Asset-backed securities		579,799		(2,619)		23,396		(368)		603,195		(2,987)
Mortgage-backed securities		543,480		(4,782)		80,964		(1,841)		624,444		(6,623)
Total fixed maturity securities	$	2,885,334	$	(35,723)	$	314,199	$	(11,050)	$	3,199,533	$	(46,773)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at September 30, 2021 were $3,199.5 million and $46.8 million, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at September 30, 2021, did not exceed 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 $35.7 million of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, foreign government securities, asset backed securities and agency residential mortgage backed securities. Of these unrealized losses, $30.2 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. The $11.1 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities as well as foreign government securities. Of these unrealized losses $8.7 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. There was no gross unrealized depreciation for mortgage-backed securities 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, 2020 By Security Type
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities - available for sale
Obligations of U.S. states and political subdivisions		19,524		(999)		4,059		(256)		23,583		(1,255)
Corporate securities		240,601		(7,799)		188,853		(23,681)		429,454		(31,480)
Asset-backed securities		223,919		(4,573)		81,952		(649)		305,871		(5,222)
Mortgage-backed securities
Commercial		37,414		(182)		3,983		(1)		41,397		(183)
Agency residential		235,809		(682)		1,573		(14)		237,382		(696)
Non-agency residential		161		(2)		-		-		161		(2)
Foreign government securities		10,505		(373)		25,793		(2,838)		36,298		(3,211)
Foreign corporate securities		57,900		(2,182)		18,349		(1,721)		76,249		(3,903)
Total fixed maturity securities	$	825,833	$	(16,792)	$	324,562	$	(29,160)	$	1,150,395	$	(45,952)

	Duration of Unrealized Loss at December 31, 2020 By Maturity
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in thousands)	Value		Depreciation		Value		Depreciation		Value		Depreciation
Fixed maturity securities
Due in one year or less	$	28,802	$	(1,218)	$	34,555	$	(4,142)	$	63,357	$	(5,360)
Due in one year through five years		150,106		(5,828)		116,987		(4,783)		267,093		(10,611)
Due in five years through ten years		81,492		(1,634)		13,118		(435)		94,610		(2,069)
Due after ten years		68,130		(2,673)		72,394		(19,136)		140,524		(21,809)
Asset-backed securities		223,919		(4,573)		81,952		(649)		305,871		(5,222)
Mortgage-backed securities		273,384		(866)		5,556		(15)		278,940		(881)
Total fixed maturity securities	$	825,833	$	(16,792)	$	324,562	$	(29,160)	$	1,150,395	$	(45,952)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2020 were $1,150.4 million and $46.0 million, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2020, did not exceed 0.2% 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 $16.8 million of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities as well as asset backed securities. Of these unrealized losses, $12.5 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. The $29.2 million of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities and foreign government securities. Of these unrealized losses $5.9 million were related to securities that were rated investment grade by at least one nationally recognized rating agency. There was no gross unrealized depreciation for mortgage-backed securities 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 components of net investment income are presented in the tables below for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Fixed maturities	$	83,412	$	78,272	$	260,428	$	227,257
Equity securities		3,774		2,504		10,082		6,120
Short-term investments and cash		73		410		309		2,558
Other invested assets
Limited partnerships		81,928		35,908		260,486		2,439
Dividends from preferred shares of affiliate		7,758		7,758		23,274		23,274
Other		30,954		14,743		62,829		(1,291)
Gross investment income before adjustments		207,899		139,595		617,408		260,358
Funds held interest income (expense)		814		957		7,035		5,115
Interest income from Parent		1,607		1,295		4,156		3,858
Gross investment income		210,320		141,848		628,599		269,331
Investment expenses		(13,159)		(6,420)		(35,580)		(24,549)
Net investment income	$	197,161	$	135,428	$	593,019	$	244,782

(Some amounts may not reconcile due to rounding.)

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. The net investment income from limited partnerships is dependent upon the Company’s share of the net asset values of interests underlying each limited partnership. 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 $,12152. million in limited partnerships and private placement loan securities at September 30, 2021. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026.

The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its participation in the facility. As of September 30, 2021, the market value of investments in the facility consolidated within the Company’s balance sheets was $241.6 million.

Other invested assets, at fair value, as of September 30, 2021 and December 31, 2020, were comprised of preferred shares held in Everest Preferred International Holdings, Ltd. (“Preferred Holdings”), a wholly-owned subsidiary of Group.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Fixed maturity securities, market value:
Allowances for credit losses	$	(7,329)	$	2,289	$	(29,546)	$	(17,636)
Gains (losses) from sales		2,725		(31)		10,780		(19,005)
Fixed maturity securities, fair value:
Gains (losses) from sales		-		(1,968)		-		(1,968)
Gains (losses) from fair value adjustments		-		3,339		-		1,944
Equity securities, fair value:
Gains (losses) from sales		(488)		(281)		6,335		(11,609)
Gains (losses) from fair value adjustments		(4,446)		94,260		136,929		120,796
Other invested assets		1,920		1,085		6,014		50
Other invested assets, fair value:
Gains (losses) from fair value adjustments		(43,832)		15,741		136,798		(180,838)
Short-term investment gains (losses)		(1)		759		13		966
Total net realized capital gains (losses)	$	(51,451)	$	115,193	$	267,323	$	(107,300)

	Roll Forward of Allowance for Credit Losses
	Three Months Ended September 30, 2021										Nine Months Ended September 30, 2021
			Asset		Obligations of U.S. states and political subdivisions		Foreign						Asset		Obligations of U.S. states and political subdivisions		Foreign
	Corporate		Backed				Corporate				Corporate		Backed				Corporate
	Securities		Securities				Securities		Total		Securities		Securities				Securities		Total
Beginning Balance	$	(18,475)	$	(4,915)	$	-	$	(393)	$	(23,783)	$	(1,205)	$	-	$	-	$	(361)	$	(1,566)
Credit losses on securities where credit
losses were not previously recorded		(5,257)		-		(151)		-		(5,408)		(21,178)		(4,915)		(151)		(188)		(26,432)
Increases in allowance on previously
impaired securities		(620)		(2,765)		-		-		(3,385)		(2,088)		(2,765)		-		-		(4,853)
Decreases in allowance on previously
impaired securities		-		-		-		-		-		-		-		-		-		-
Reduction in allowance due to disposals		1,463		-		-		-		1,463		1,582		-		-		156		1,738

Balance as of September 30, 2021	$	(22,889)	$	(7,680)	$	(151)	$	(393)	$	(31,113)	$	(22,889)	$	(7,680)	$	(151)	$	(393)	$	(31,113)

	Roll Forward of Allowance for Credit Losses
	Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
			Foreign		Foreign						Foreign		Foreign
	Corporate		Government		Corporate				Corporate		Government		Corporate
	Securities		Securities		Securities		Total		Securities		Securities		Securities		Total

Beginning Balance	$	(19,398)	$	-	$	(527)	$	(19,925)	$	-	$	-	$	-	$	-
Credit losses on securities where credit
losses were not previously recorded		(6)		-		-		(6)		(21,829)		(70)		(561)		(22,460)
Increases in allowance on previously
impaired securities		(5,354)		-		-		(5,354)		(5,909)		-		(211)		(6,120)
Decreases in allowance on previously
impaired securities		65		-		128		193		1,303		-		244		1,547
Reduction in allowance due to disposals		7,456		-		-		7,456		9,198		70		129		9,397

Balance as of September 30, 2020	$	(17,237)	$	-	$	(399)	$	(17,636)	$	(17,237)	$	-	$	(399)	$	(17,636)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) fair value re-measurements, allowances for credit losses per ASU 2016-13 and

write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Proceeds from sales of fixed maturity securities	$	151,932	$	84,822	$	394,004	$	422,545
Gross gains from sales		8,868		4,977		24,067		15,578
Gross losses from sales		(6,143)		(6,976)		(13,287)		(36,551)

Proceeds from sales of equity securities	$	104,231	$	115,516	$	450,319	$	328,519
Gross gains from sales		2,769		9,503		17,706		30,256
Gross losses from sales		(3,257)		(9,784)		(11,371)		(41,865)

4. RESERVES FOR LOSSES AND LAE

Activity in the reserve for losses and LAE is summarized for the periods indicated:

	Nine Months Ended September 30,
(Dollars in thousands)		2021		2020
Gross reserves beginning of period	$	11,654,950	$	10,209,519
Less reinsurance recoverables on unpaid losses		(3,951,474)		(4,215,348)
Net reserves beginning of period		7,703,476		5,994,171
Incurred related to:
Current year		4,106,331		3,288,049
Prior years		(3,610)		(4,853)
Total incurred losses and LAE		4,102,721		3,283,196
Paid related to:
Current year		1,117,795		856,707
Prior years		1,186,019		1,275,408
Total paid losses and LAE		2,303,814		2,132,115

Foreign exchange/translation adjustment and cumulative adjustment due to adoption of ASU 2016-13		(19,783)		(5,954)

Net reserves end of period		9,482,600		7,139,298
Plus reinsurance recoverables on unpaid losses		3,839,211		3,902,713
Gross reserves end of period	$	13,321,811	$	11,042,011

(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $4,106.3 and $3,288.0 million for the nine months ended September 30, 2021 and 2020, respectively. Gross and net reserves increased for the nine months ended September 30, 2021, reflecting an increase in underlying exposure due to premium growth and catastrophe losses of $837.4 million and $341.0 million for the nine months ended September 30, 2021 and 2020, respectively. In addition, current year incurred losses for the nine months ended September 30, 2020 included $104.8 million of losses associated with the COVID-19 Pandemic which did not recur in 2021.

5. FAIR VALUE

GAAP guidance regarding fair value measurements address how companies should measure fair value when they are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.

The levels in the hierarchy are defined as follows:

Level 1Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2:Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;

Level 3:Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s fixed maturity and equity securities are primarily managed by third party investment asset managers. The investment asset managers managing publicly traded securities 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 investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers. In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices. In addition, the Company continually performs analytical reviews of price changes and tests the prices on a random basis to an independent pricing source. No material variances were noted during these price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value. At September 30, 2021, $1,732.3 million of fixed maturities, market value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, were valued by investment managers’ valuation committees and many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to evaluate these independent third party valuations. At December 31, 2020, $1,259.6 million of fixed maturities, market value were fair valued using unobservable inputs.

The Company internally manages a public equity portfolio which had a fair value at September 30, 2021 and December 31, 2020 of $1,253.9 million and $784.7 million, respectively, and all prices were obtained from publicly published sources.

Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as Level 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as Level 2 due to the added input of a foreign exchange conversion rate to determine fair or market value. The Company uses foreign currency exchange rates published by nationally recognized sources.

All categories of fixed maturity securities listed in the tables below are generally categorized as Level 2, 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. For foreign government securities and foreign corporate securities, the fair values provided by the third party pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

In addition to the valuations from investment managers, some of the fixed maturities with fair values categorized as Level 3 result when prices are not available from the nationally recognized pricing services. The asset managers may obtain non-binding price quotes for the securities from brokers. 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. If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency exchange rates from nationally recognized sources. In limited circumstances when broker prices are not available for private placements, the Company will value the securities using comparable market information or receive fair values from investment managers.

The composition and valuation inputs for the presented fixed maturities categories Level 1 and Level 2 are as follows:

 U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;

 Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

 Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

 Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;

 Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;

 Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

Other invested assets, at fair value, were categorized as Level 3 at September 30, 2021 and December 31, 2020, since it represented a privately placed convertible preferred stock issued by an affiliate. The stock was received in exchange for shares of the Company’s parent. The 25-year redeemable, convertible preferred stock with a 1.75% coupon is valued using a pricing model. The pricing model includes observable inputs such as the U.S. Treasury yield curve rate T note constant maturity 10 year and the swap rate on the Company’s June 1, 2044, 4.868% senior

notes, with adjustments to reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset.

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)	September 30, 2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	624,050	$	-	$	624,050	$	-
Obligations of U.S. states and political subdivisions		607,375		-		607,375		-
Corporate securities		3,751,270		-		3,027,877		723,393
Asset-backed securities		3,182,647		-		2,178,578		1,004,069
Mortgage-backed securities
Commercial		598,383		-		598,383		-
Agency residential		1,015,112		-		1,015,112		-
Non-agency residential		4,976		-		4,976		-
Foreign government securities		713,349		-		713,349		-
Foreign corporate securities		1,400,318		-		1,395,444		4,874
Total fixed maturities, market value		11,897,480		-		10,165,144		1,732,336

Equity securities, fair value		1,488,355		1,451,271		37,084		-
Other invested assets, fair value		1,933,277		-		-		1,933,277

			Fair Value Measurement Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	December 31, 2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$	681,989	$	-	$	681,989	$	-
Obligations of U.S. states and political subdivisions		577,046		-		577,046		-
Corporate securities		3,449,912		-		2,819,068		630,844
Asset-backed securities		2,474,170		-		1,851,137		623,033
Mortgage-backed securities
Commercial		550,080		-		550,080		-
Agency residential		965,100		-		965,100		-
Non-agency residential		3,164		-		3,164		-
Foreign government securities		742,238		-		742,238		-
Foreign corporate securities		1,199,866		-		1,194,167		5,699
Total fixed maturities, market value		10,643,565		-		9,383,989		1,259,576

Equity securities, fair value		1,288,767		1,222,158		66,609		-
Other invested assets, fair value		1,796,479		-		-		1,796,479

In addition, $266.3 million and $224.7 million of investments within other invested assets on the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively, are not included within the fair value hierarchy tables as the assets are measured at NAV as a practical expedient to determine fair value.

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

	Total Fixed Maturities, Market Value
	Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021
			Asset								Asset
(Dollars in thousands)	Corporate Securities		Backed Securities		Foreign Corporate		Total		Corporate Securities		Backed Securities		Foreign Corporate		Total
Beginning balance	$	634,923	$	815,276	$	4,886	$	1,455,085	$	630,843	$	623,033	$	5,700	$	1,259,576
Total gains or (losses) (realized/unrealized)
Included in earnings		3,184		(3,292)		33		(75)		(12,366)		(7,254)		173		(19,447)
Included in other comprehensive income (loss)		(1,311)		(381)		(34)		(1,726)		6,107		4,094		(70)		10,131
Purchases, issuances and settlements		86,597		192,466		(11)		279,052		98,809		384,196		(929)		482,076
Transfers in and/or (out) of Level 3		-		-		-		-		-		-		-		-
Ending balance	$	723,393	$	1,004,069	$	4,874	$	1,732,336	$	723,393	$	1,004,069	$	4,874	$	1,732,336
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	$	761	$	(2,764)	$	-	$	(2,003)	$	(16,518)	$	(7,679)	$	-	$	(24,197)

(Some amounts may not reconcile due to rounding.)

	Total Fixed Maturities, Market Value
	Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
			Asset								Asset
(Dollars in thousands)	Corporate Securities		Backed Securities		Foreign Corporate		Total		Corporate Securities		Backed Securities		Foreign Corporate		Total
Beginning balance	$	651,186	$	295,730	$	6,274	$	953,190	$	546,939	$	153,641	$	1,751	$	702,331
Total gains or (losses) (realized/unrealized)
Included in earnings		361		457		26		844		(101)		582		(71)		410
Included in other comprehensive income (loss)		(992)		5,028		126		4,162		(4,898)		7,238		86		2,426
Purchases, issuances and settlements		(1,349)		103,574		139		102,364		112,061		243,328		3,822		359,211
Transfers in and/or (out) of Level 3		4,189		-		(863)		3,326		(606)		-		114		(492)
Ending balance	$	653,395	$	404,789	$	5,702	$	1,063,886	$	653,395	$	404,789	$	5,702	$	1,063,886
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	$	-	$	-	$	-	$	-	$	(539)	$	-	$	-	$	(539)

(Some amounts may not reconcile due to rounding.)

The net transfers to/(from) Level 3, fair value measurements using significant unobservable inputs for fixed maturities, market value were $3.3 million and ($0.5) million for the three and nine months ended September 30, 2020, respectively. The net transfers for the three months ended September 30, 2020 were previously priced using a recognized pricing service and were subsequently priced by investment managers as of September 30, 2020. The net transfers for the nine months ended September 30, 2020 were previously priced by investment managers and were subsequently priced using a recognized pricing service as of September 30,2020.

	Total Fixed Maturities, Fair Value
	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
	Foreign				Foreign
(Dollars in thousands)	Corporate		Total		Corporate		Total
Beginning balance fixed maturities at fair value	$	4,431	$	4,431	$	5,826	$	5,826
Total gains or (losses) (realized/unrealized)
Included in earnings		1,371		1,371		(24)		(24)
Included in other comprehensive income (loss)		-		-		-		-
Purchases, issuances and settlements		(2,054)		(2,054)		(2,054)		(2,054)
Transfers in and/or (out) of Level 3		-		-		-		-
Ending balance	$	3,748	$	3,748	$	3,748	$	3,748
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.)

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by equity securities for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Equity securities
Balance, beginning of period	$	-	$	9,877	$	-	$	-
Total (gains) or losses (realized/unrealized)
Included in earnings		-		-		-		-
Included in other comprehensive income (loss)		-		-		-		-
Purchases, issuances and settlements		-		-		-		9,877
Transfers in and/or (out) of Level 3		-		(9,877)		-		(9,877)
Balance, end of period	$	-	$	-	$	-	$	-

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 liabilities still held at the reporting date	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

The net transfers to/(from) level 3, fair value measurements using significant unobservable inputs for equity securities, fair value were ($9.9) million for both the three and nine months ended September 30, 2020. The transfers of ($9.9) million during both the three and nine months ended September 30, 2020, were related to preferred stock in a private entity purchased during the second quarter of 2020 which was priced at cost as of June 30, 2020 and was subsequently priced based upon the book value of the underlying private entity as of September 30, 2020.

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs by other invested assets, for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Other invested assets, fair value:
Beginning balance	$	1,977,109	$	1,786,003	$	1,796,479	$	1,982,582
Total gains or (losses) (realized/unrealized)
Included in earnings		(43,832)		15,740		136,798		(180,839)
Included in other comprehensive income (loss)		-		-		-		-
Purchases, issuances and settlements		-		-		-		-
Transfers in and/or (out) of Level 3		-		-		-		-
Ending balance	$	1,933,277	$	1,801,743	$	1,933,277	$	1,801,743
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.)

6. COMMITMENTS AND CONTINGENCIES

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.

The Company has entered into separate annuity agreements with The Prudential Insurance Company of America (“The Prudential”) and an additional unaffiliated life insurance company in which the Company has either purchased annuity contracts or become the assignee of annuity proceeds that are meant to settle claim payment obligations in the future. In both instances, the Company would become contingently liable if either The Prudential or the unaffiliated life insurance company were unable to make payments related to the respective annuity contract.

The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

	At September 30, 2021		At December 31, 2020
(Dollars in thousands)	At September 30, 2021		At December 31, 2020
The Prudential	$	138,869	$	140,773
Unaffiliated life insurance company		34,163		35,128

7. COMPREHENSIVE INCOME (LOSS)

The following 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 September 30, 2021						Nine Months Ended September 30, 2021
(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related temporary	$	(55,005)		11,524	$	(43,482)	$	(139,099)		29,170	$	(109,930)
Reclassification of net realized losses (gains) included in net income (loss)		2,683		(524)		2,160		12,751		(2,660)		10,092
Foreign currency translation adjustments		(26,357)		5,495		(20,862)		(5,789)		1,174		(4,615)
Reclassification of amortization of net gain (loss) included in net income (loss)		1,978		(416)		1,563		7,150		(1,502)		5,649
Total other comprehensive income (loss)	$	(76,701)	$	16,079	$	(60,621)	$	(124,987)	$	26,182	$	(98,804)

(Some amounts may not reconcile due to rounding)

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
(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	$	48,819		(10,247)	$	38,572	$	132,405		(27,807)	$	104,598
Reclassification of net realized losses (gains) included in net income (loss)		(3,343)		738		(2,605)		36,591		(7,767)		28,824
Foreign currency translation adjustments		18,239		(3,825)		14,414		(8,618)		1,835		(6,783)
Reclassification of amortization of net gain (loss) included in net income (loss)		2,285		(480)		1,806		5,736		(1,205)		4,532
Total other comprehensive income (loss)	$	66,000	$	(13,814)	$	52,187	$	166,114	$	(34,944)	$	131,171

(Some amounts may not reconcile due to rounding)

The following table presents details of the amounts reclassified from AOCI for the periods indicated:

	Three Months Ended				Nine Months Ended				Affected line item within the
	September 30,				September 30,				statements of operations and
AOCI component	2021		2020		2021		2020		comprehensive income (loss)
(Dollars in thousands)
URA(D) on securities	$	2,683	$	(3,343)	$	12,751	$	36,591	Other net realized capital gains (losses)
		(524)		738		(2,660)		(7,767)	Income tax expense (benefit)
	$	2,160	$	(2,605)	$	10,092	$	28,824	Net income (loss)
Benefit plan net gain (loss)	$	1,978	$	2,285	$	7,150	$	5,736	Other underwriting expenses
		(416)		(480)		(1,502)		(1,205)	Income tax expense (benefit)
	$	1,563	$	1,806	$	5,649	$	4,532	Net income (loss)

(Some amounts may not reconcile due to rounding)

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Beginning balance of URA (D) on securities	$	254,645	$	222,068	$	313,161	$	124,612
Current period change in URA (D) of investments - non-credit related		(41,322)		35,967		(99,838)		133,422
Ending balance of URA (D) on securities		213,323		258,034		213,323		258,034

Beginning balance of foreign currency translation adjustments		44,974		(6,931)		28,727		14,267
Current period change in foreign currency translation adjustments		(20,862)		14,414		(4,615)		(6,783)
Ending balance of foreign currency translation adjustments		24,112		7,483		24,112		7,483

Beginning balance of benefit plan net gain (loss)		(69,784)		(71,829)		(73,870)		(74,556)
Current period change in benefit plan net gain (loss)		1,562		1,806		5,649		4,532
Ending balance of benefit plan net gain (loss)		(68,221)		(70,023)		(68,221)		(70,023)

Ending balance of accumulated other comprehensive income (loss)	$	169,214	$	195,495	$	169,214	$	195,495

8. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS

A subsidiary of the Company, Everest Re, has established a trust agreement, which effectively uses Everest Re’s investments as collateral, as security for assumed losses payable to non-affiliated ceding companies. At September 30, 2021, the total amount on deposit in the trust account was $1,065.6 million.

The Company entered into various 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 named storm and earthquake events. The table below summarizes the various agreements:

(Dollars in thousands)
Class	Description	Effective Date	Expiration Date	Limit		Coverage Basis

Series 2017-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/13/2017	4/13/2022		50,000	Aggregate
Series 2017-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/13/2017	4/13/2022		75,000	Aggregate
Series 2017-1 Class C-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/13/2017	4/13/2022		175,000	Aggregate
Series 2018-1 Class A-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/30/2018	5/6/2022		62,500	Aggregate
Series 2018-1 Class B-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/30/2018	5/6/2022		200,000	Aggregate
Series 2018-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/30/2018	5/5/2023		62,500	Aggregate
Series 2018-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/30/2018	5/5/2023		200,000	Aggregate
Series 2019-1 Class A-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2023		150,000	Occurrence
Series 2019-1 Class B-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2023		275,000	Aggregate
Series 2019-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2024		150,000	Occurrence
Series 2019-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	12/12/2019	12/19/2024		275,000	Aggregate
Series 2021-1 Class A-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025		150,000	Occurrence
Series 2021-1 Class B-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025		85,000	Aggregate
Series 2021-1 Class C-1	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/21/2025		85,000	Aggregate
Series 2021-1 Class A-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026		150,000	Occurrence
Series 2021-1 Class B-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026		90,000	Aggregate
Series 2021-1 Class C-2	US, Canada, Puerto Rico – Named Storm and Earthquake Events	4/8/2021	4/20/2026		90,000	Aggregate

	Total available limit as of September 30, 2021			$	2,325,000

Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events, as well as, the geographic location of the events. The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses. Currently, none of the published insured loss estimates for catastrophe events during the applicable covered periods of the various agreements have exceeded the single event retentions or aggregate retentions under the terms of the agreements that would result in a recovery.

Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. The proceeds from the issuance of the Notes listed below are held in reinsurance trusts throughout the duration of the applicable reinsurance agreements and invested solely in US government money market funds with a rating of at least “AAAm” by Standard & Poor’s.

(Dollars in thousands)
Note Series	Issue Date	Maturity Date	Amount
Series 2017-1 Class A-2	4/13/2017	4/13/2022		50,000
Series 2017-1 Class B-2	4/13/2017	4/13/2022		75,000
Series 2017-1 Class C-2	4/13/2017	4/13/2022		175,000
Series 2018-1 Class A-1	4/30/2018	5/6/2022		62,500
Series 2018-1 Class B-1	4/30/2018	5/6/2022		200,000
Series 2018-1 Class A-2	4/30/2018	5/5/2023		62,500
Series 2018-1 Class B-2	4/30/2018	5/5/2023		200,000
Series 2019-1 Class A-1	12/12/2019	12/19/2023		150,000
Series 2019-1 Class B-1	12/12/2019	12/19/2023		275,000
Series 2019-1 Class A-2	12/12/2019	12/19/2024		150,000
Series 2019-1 Class B-2	12/12/2019	12/19/2024		275,000
Series 2021-1 Class A-1	4/8/2021	4/21/2025		150,000
Series 2021-1 Class B-1	4/8/2021	4/21/2025		85,000
Series 2021-1 Class C-1	4/8/2021	4/21/2025		85,000
Series 2021-1 Class A-2	4/8/2021	4/20/2026		150,000
Series 2021-1 Class B-2	4/8/2021	4/20/2026		90,000
Series 2021-1 Class C-2	4/8/2021	4/20/2026		90,000

9. SENIOR NOTES

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.

				September 30, 2021				December 31, 2020
				Consolidated				Consolidated
			Principal	Balance Sheet		Market		Balance Sheet		Market
(Dollars in thousands)	Date Issued	Date Due	Amounts	Amount		Value		Amount		Value
4.868% Senior notes	06/05/2014	06/01/2044	400,000	$	397,284	$	506,828	$	397,194	$	528,000
3.5% Senior notes	10/07/2020	10/15/2050	1,000,000	$	979,915	$	1,065,400	$	979,524	$	1,138,100

On June 5, 2014, Holdings issued $400.0 million of 30 year senior notes at 4.868%, which will mature on June 1, 2044. Interest is paid semi-annually on June 1 and December 1 of each year.

On October 7, 2020, Holdings issued $1,000.0 million of 30 year senior notes an interest coupon rate of 3.5% which will mature on October 15, 2050. Interest is paid semi-annually on April 15th and October 15th of each year.

On October 4, 2021, Holdings issued $1,000.0 million of 31 year senior notes an interest coupon rate of 3.125% which will mature on October 15, 2052. Interest is paid semi-annually on April 15th and October 15th of each year.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Interest expense incurred 4.868% Senior notes	$	4,868	$	4,868	$	14,604	$	14,604
Interest expense incurred 3.5% Senior notes	$	8,805	$	-	$	26,415	$	-

10. 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.

September 30, 2021

December 31, 2020

Original

Consolidated

Principal

Maturity Date

Balance

Market

Balance

Market

(Dollars in thousands)

Date Issued

Amount

Scheduled

Final

Sheet Amount

Value

Sheet Amount

Value

Long term subordinated notes

04/26/2007

400,000

05/15/2037

05/01/2067

223,749

216,043

223,674

206,447

During the fixed rate interest period from May 3, 2007 through May 14, 2017, interest was 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. 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 quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for August 16, 2021 to November 14, 2021 is 2.51%.

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. Effective upon the maturity of the Company’s 5.40% senior notes on October 15, 2014, the Company’s 4.868% senior notes, due on June 1, 2044, have become the Company’s long term indebtedness that ranks senior to the long term subordinated notes.

The Company repurchased and retired $0 million and $13.2 million of its outstanding long term subordinated notes during the three and nine months ended September 30, 2020, respectively. The Company realized a gain of $0 million and $2.5 million from the repurchase of the long term subordinated notes during the three and nine months ended September 30, 2020, respectively. No repurchases of debt were made during the three and nine months ended September 30, 2021.

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 $161.4 million. In addition, during 2020, the Company repurchased and retired $13.2 million of these notes.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Interest expense incurred	$	1,456	$	1,587	$	4,378	$	6,126

11. FEDERAL HOME LOAN BANK MEMBERSHIP

Everest Re is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of September 30, 2021, Everest Re had admitted assets of approximately $18,874.0 million which provides borrowing capacity of up to approximately $1,887.4 million.

During 2020, Everest Re borrowed $400.0 million under its FHLBNY capacity. The borrowings have interest payable at an interest rate of 0.35%. As of September 30, 2021, $310.0 million of these borrowings remain outstanding, with maturities in November and December 2021. The FHLBNY membership agreement requires that 4.5% of borrowed funds be used to acquire additional membership stock.

12. SEGMENT REPORTING

The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies. Business is written in the United States as well as through branches in Canada and Singapore. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the United States.

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 LAE incurred, commission and brokerage expenses and other underwriting expenses. The Company measures its 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.

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.

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

	Three Months Ended				Nine Months Ended
Reinsurance	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Gross written premiums	$	1,693,027	$	1,473,266	$	4,552,364	$	3,906,355
Net written premiums		1,461,238		1,296,107		3,961,280		3,403,090

Premiums earned	$	1,280,181	$	1,153,740	$	3,689,508	$	3,223,608
Incurred losses and LAE		1,207,528		936,904		2,917,285		2,250,270
Commission and brokerage		319,707		265,095		935,252		818,282
Other underwriting expenses		32,049		35,697		101,337		92,143
Underwriting gain (loss)	$	(279,103)	$	(83,956)	$	(264,366)	$	62,913

	Three Months Ended				Nine Months Ended
Insurance	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Gross written premiums	$	830,688	$	591,695	$	2,421,716	$	1,971,818
Net written premiums		608,248		429,594		1,801,884		1,462,869

Premiums earned	$	571,183	$	461,717	$	1,625,311	$	1,424,814
Incurred losses and LAE		445,491		340,947		1,185,435		1,032,926
Commission and brokerage		69,139		57,309		190,296		182,925
Other underwriting expenses		77,464		73,669		227,901		212,562
Underwriting gain (loss)	$	(20,911)	$	(10,208)	$	21,678	$	(3,599)

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Underwriting gain (loss)	$	(300,014)	$	(94,164)	$	(242,688)	$	59,314
Net investment income		197,161		135,428		593,019		244,782
Net realized capital gains (losses)		(51,451)		115,193		267,323		(107,300)
Corporate expense		(10,907)		(4,206)		(23,106)		(11,441)
Interest, fee and bond issue cost amortization expense		(15,539)		(6,535)		(46,610)		(20,917)
Other income (expense)		9,937		(1,790)		12,049		(11,410)
Income (loss) before taxes	$	(170,813)	$	143,926	$	559,986	$	153,028

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				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Canada gross written premiums	$	60,455	$	65,785	$	163,740	$	200,443

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

13. RELATED-PARTY TRANSACTIONS

Parent

Group entered into a $300.0 million long term note agreement with Everest Re as of December 17, 2019. The note will pay interest annually at a rate of 1.69% and is scheduled to mature in December, 2028. The Company recognized interest income related to this long term note of $1.3 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively and $3.8 million and $3.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Group entered into a $200.0 million long term note agreement with Everest Re as of August 5, 2021. The note will pay interest annually at a rate of 1.00% and is scheduled to mature in August, 2030. The Company recognized interest income related to this long term note of $0.3 million for both the three and nine months ended September 30, 2021.

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 most recent amendment from the Board, approved on May 22, 2020, increased the cumulative number of shares that may be repurchased under the program to 32.0 million shares.

Holdings had purchased and held 9,719,971 Common Shares of Group, which were purchased in the open market between February 2007 and March 2011.

In December, 2015, Holdings transferred the 9,719,971 Common Shares of Group, which it held as other invested assets, at fair value, valued at $1,773.2 million, to Preferred Holdings in exchange for 1,773.214 preferred shares of Preferred Holdings with a $1.0 million par value and 1.75% annual dividend rate. After the exchange, Holdings no longer holds any shares or has any ownership interest in Group.

Holdings has reported the preferred shares in Preferred Holdings, 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 the preferred shares of Preferred Holdings and on the Parent shares that are reported as net investment income in the consolidated statements of operations and comprehensive income (loss) for the period indicated.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Dividends received on preferred stock of affiliate	$	7,758	$	7,758	$	23,274	$	23,274

Affiliates

The Company has engaged in reinsurance transactions with Bermuda Re, Everest Reinsurance Company (Ireland) dac (“Ireland Re”), Everest Insurance (Ireland) dac (“Ireland Insurance”), Everest International Reinsurance Ltd. (“Everest International”), Everest Insurance Company of Canada (“Everest Canada”), Lloyd’s Syndicate 2786 and Mt. Logan Re, which are affiliated companies primarily driven by enterprise risk and capital management considerations under which business is ceded at market rates and terms.

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

(Dollars in thousands)
							Single
			Percent		Assuming		Occurrence		Aggregate
Coverage Period		Ceding Company	Ceded		Company	Type of Business	Limit		Limit
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
01/01/2012-12/31/2014		Everest Re	50.0	%	Bermuda Re	property / casualty business	100,000		200,000
01/01/2015-12/31/2016		Everest Re	50.0	%	Bermuda Re	property / casualty business	162,500		325,000
01/01/2017-12/31/2017		Everest Re	60.0	%	Bermuda Re	property / casualty business	219,000		438,000
01/01/2010-12/31/2010		Everest Re- Canadian Branch	60.0	%	Bermuda Re	property business	350,000	⁽¹⁾	-
01/01/2011-12/31/2011		Everest Re- Canadian Branch	60.0	%	Bermuda Re	property business	350,000	⁽¹⁾	-
01/01/2012-12/31/2012		Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	206,250	⁽¹⁾	412,500	⁽¹⁾
01/01/2013-12/31/2013		Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	150,000	⁽¹⁾	412,500	⁽¹⁾
01/01/2014-12/31/2017		Everest Re- Canadian Branch	75.0	%	Bermuda Re	property / casualty business	262,500	⁽¹⁾	412,500	⁽¹⁾
01/01/2012-12/31/2017		Everest Canada	80.0	%	Everest Re- Canadian Branch	property business	-		-
01/01/2020		Everest International Assurance	100.0	%	Bermuda Re	life business	-		-

(1)	Amounts shown are Canadian dollars.

Effective January 1, 2018, Everest Re entered into a twelve month whole account aggregate stop loss reinsurance contract (“stop loss agreement”) with Bermuda Re. The stop loss agreement provides coverage for ultimate net

losses on applicable net earned premiums above a retention level, subject to certain other coverage limits and conditions. The stop loss agreement was most recently renewed effective January 1, 2021.

Everest Re entered into a property catastrophe excess of loss reinsurance contract with Bermuda Re, effective January 1, 2019. The contract provides $100.0 million of reinsurance coverage for property catastrophe losses above certain attachment points. This agreement expired on December 31, 2019 and was not renewed.

Everest Re entered into a catastrophe excess of loss reinsurance contract with Bermuda Re (UK Branch), effective January 1, 2021 through December 31, 2021, subject to renewal thereafter. The contract provides Bermuda Re (UK Branch), with up to £100.0 million of reinsurance coverage for each catastrophe occurrence above £40.0 million. Bermuda Re (UK Branch) paid Everest Re £3.5 million for this coverage.

Everest Re entered into a catastrophe excess of loss reinsurance contract with Ireland Re, effective February 1, 2021 through January 31, 2022, subject to renewal thereafter. The contract provides Ireland Re with up to €145.0 million of reinsurance coverage for each catastrophe occurrence above €16.0 million. Ireland Re paid Everest Re €9.8 million for this coverage.

The table below represents loss portfolio transfer (“LPT”) 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
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
12/31/2017	Everest Re	Bermuda Re	$	970,000		All years

On December 31, 2017, the Company entered into a LPT agreement with Bermuda Re. The LPT agreement covers subject loss reserves of $2,336.2 million for accident years 2017 and prior. As a result of the LPT agreement, the Company transferred $1,000.0 million of cash and fixed maturity securities and transferred $970.0 million of loss reserves to Bermuda Re. As part of the LPT agreement, Bermuda Re will provide an additional $500.0 million of adverse development coverage on the subject loss reserves. As of September 30, 2021, and December 31, 2020, the Company has a reinsurance recoverable of $882.7 million and $886.4 million, respectively, recorded on its balance sheet due from Bermuda Re.

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, Everest Ireland and Lloyd’s syndicate 2786 for the periods indicated:

	Three Months Ended				Nine Months Ended
Bermuda Re	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Ceded written premiums	$	78,330	$	32,255	$	224,131	$	96,353
Ceded earned premiums		77,078		32,278		221,754		95,215
Ceded losses and LAE		12,355		12,605		3,241		4,263

Assumed written premiums		4,820		-		4,820		-
Assumed earned premiums		3,676		62		3,799		186
Assumed losses and LAE		(199)		62		(134)		115

	Three Months Ended				Nine Months Ended
Ireland Re	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Assumed written premiums	$	7,092	$	-	$	12,993	$	-
Assumed earned premiums		7,092		-		12,018		-
Assumed losses and LAE		62,472		-		62,472		-

	Three Months Ended				Nine Months Ended
Ireland Insurance	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Assumed written premiums	$	3,619	$	1,217	$	6,409	$	3,723
Assumed earned premiums		1,724		788		4,237		2,569
Assumed losses and LAE		1,134		704		2,139		1,625

	Three Months Ended				Nine Months Ended
Lloyd's Syndicate 2786	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Assumed written premiums	$	56	$	(1,743)	$	728	$	(4,144)
Assumed earned premiums		81		(1,743)		722		(3,926)
Assumed losses and LAE		(473)		293		(259)		(331)

	Three Months Ended				Nine Months Ended
Everest International & Canada	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Ceded written premiums	$	-	$	-	$	-	$	-
Ceded earned premiums		-		-		-		-
Ceded losses and LAE		-		-		-		16

Assumed written premiums		-		-		-		1
Assumed earned premiums		-		-		-		(7)
Assumed losses and LAE		46		(1,709)		112		(1,059)

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

	Three Months Ended				Nine Months Ended
Mt. Logan Re Segregated Accounts	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Ceded written premiums	$	97,649	$	74,215	$	225,592	$	211,429
Ceded earned premiums		86,049		62,543		212,153		202,810
Ceded losses and LAE		97,070		68,879		191,677		143,179

14. INCOME TAXES

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

The Company generally applies the estimated annual effective tax rate approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the estimated annual effective tax rate approach, the estimated annual effective tax rate is applied to the interim year-to-date pre-tax income/(loss)to determine the income tax expense or benefit for the year-to-date period. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the current

year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual pre-tax income/(loss) and effective tax rate.

15. SUBSEQUENT EVENTS

The Company has evaluated known recognized and non-recognized subsequent events. Other than the debt issuance on October 4, 2021, described in Note 9, the Company does not have any subsequent events to report.

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, higher rates and stronger profits followed by periods of abundant capacity, lower 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, domestic and international underwriting operations, and certain government sponsored risk transfer vehicles. 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 recently, the 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 historically have been competitive. Generally, there was ample insurance and reinsurance capacity relative to demand, as well as, additional capital from the capital markets through insurance linked financial instruments. These financial instruments such as side cars, catastrophe bonds and collateralized reinsurance funds, provided capital markets with access to insurance and reinsurance risk exposure. The capital markets demand for these products was being primarily driven by a low interest environment and the desire to achieve greater risk diversification and potentially higher returns on their investments. This increased competition was generally having a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.

The industry continues to deal with the impacts of a global pandemic, COVID-19 and its subsequent variants. Globally, many countries mandated that their citizens remain at home and many non-essential businesses have continued to be physically closed. We activated our operational resiliency plan across our global footprint and all of our critical operations are functioning effectively from remote locations. We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

There continues to be a negative impact on industry underwriting results from the pandemic. These impacts vary significantly from country to country depending on the rate of infections and the corresponding mandated business restrictions.

Prior to the pandemic, there was a growing industry consensus that there was some firming of (re)insurance rates for the areas impacted by the recent catastrophes. The increased frequency of catastrophe losses in 2020 and 2021 appears to be further pressuring the increase of rates. As business activity continues to regain strength, rates also appear to be firming in most lines of business, particularly in the casualty lines that had seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines are experiencing modest rate increase, while some lines such as workers’ compensation were experiencing softer market conditions. It is too early to tell what will be the impact on pricing conditions but it is likely to change depending on the line of business and geography.

While we are unable to predict the full impact the pandemic will have on the insurance industry as it continues to have a negative impact on the global economy, we are well positioned to continue to service our clients. Our capital position remains a source of strength, with high quality invested assets, significant liquidity and a low operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography is resilient.

Financial Summary.

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

	Three Months Ended				Percentage	Nine Months Ended				Percentage
	September 30,				Increase/	September 30,				Increase/
(Dollars in millions)	2021		2020		(Decrease)	2021		2020		(Decrease)
Gross written premiums	$	2,523.7	$	2,065.0	22.2%	$	6,974.1	$	5,878.2	18.6%
Net written premiums		2,069.5		1,725.7	19.9%		5,763.2		4,866.0	18.4%

REVENUES:
Premiums earned	$	1,851.3	$	1,615.5	14.6%	$	5,314.8	$	4,648.4	14.3%
Net investment income		197.1		135.4	45.6%		593.0		244.8	142.3%
Net realized capital gains (losses)		(51.5)		115.2	-144.7%		267.3		(107.3)	NM
Other income (expense)		9.9		(1.8)	NM		12.0		(11.4)	NM
Total revenues		2,007.0		1,864.3	7.7%		6,187.2		4,774.5	29.6%

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,653.0		1,277.9	29.4%		4,102.7		3,283.2	25.0%
Commission, brokerage, taxes and fees		388.8		322.4	20.6%		1,125.5		1,001.2	12.4%
Other underwriting expenses		109.5		109.4	0.1%		329.2		304.7	8.1%
Corporate expense		10.9		4.2	159.3%		23.1		11.4	102.0%
Interest, fee and bond issue cost amortization expense		15.5		6.5	137.8%		46.6		20.9	122.8%
Total claims and expenses		2,177.8		1,720.4	26.6%		5,627.2		4,621.5	21.8%

INCOME (LOSS) BEFORE TAXES		(170.8)		143.9	NM		560.0		153.0	NM
Income tax expense (benefit)		(27.5)		24.1	NM		118.1		(12.8)	NM
NET INCOME (LOSS)	$	(143.3)	$	119.8	NM	$	441.9	$	165.9	166.5%

RATIOS:					Point Change					Point Change
Loss ratio		89.3%		79.1%	10.2		77.2%		70.6%	6.6
Commission and brokerage ratio		21.0%		20.0%	1.0		21.2%		21.5%	(0.3)
Other underwriting expense ratio		5.9%		6.7%	(0.8)		6.2%		6.6%	(0.4)
Combined ratio		116.2%		105.8%	10.4		104.6%		98.7%	5.9

	At		At		Percentage
	September 30,		December 31,		Increase/
(Dollars in millions)	2021		2020		(Decrease)
Balance sheet data:
Total investments and cash	$	17,936.7	$	15,910.2	12.7%
Total assets		26,336.2		23,717.1	11.0%
Loss and loss adjustment expense reserves		13,321.8		11,655.0	14.3%
Total debt		1,910.9		1,910.4	0.0%
Total liabilities		19,578.4		17,302.8	13.2%
Stockholder's equity		6,757.8		6,414.3	5.4%

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

Revenues.

Premiums. Gross written premiums increased by 22.2% to $2,523.7 million for the three months ended September 30, 2021, compared to $2,065.0 million for the three months ended September 30, 2020, reflecting a $219.8 million, or 14,9%, increase in our reinsurance business and a $239.0 million, or 40.4%, increase in our insurance business. The increase in reinsurance premiums was mainly due to increases in casualty pro rata business, casualty excess of loss business and property catastrophe excess of loss writings. The rise in insurance premiums was primarily due to increases in specialty casualty business, professional liability business and short tail business, including property. Gross written premiums increased by 18.6% to $6,974.1 million for the nine months ended September 30, 2021, compared to $5,878.2 million for the nine months ended September 30, 2020, reflecting a $646.0 million, or 16.5%, increase in our reinsurance business and a $449.9 million, or 22.8%, increase in our insurance business. The increase in reinsurance premiums was mainly due to increases in casualty pro rata business, casualty excess of loss business and property catastrophe excess of loss writings. The rise in insurance premiums was primarily due to increases in specialty casualty business, professional liability business and short tail business, including property, partially offset by a decline in workers’ compensation business.

Net written premiums increased by 19.9% to $2,069.5 million for the three months ended September 30, 2021, compared to $1,725.7 million for the three months ended September 30, 2020 and increased by 18.4% to $5,763.2 million for the nine months ended September 30, 2021, compared to $4,866.0 million for the nine months ended September 30, 2020, which is consistent with the change in gross written premiums. Premiums earned increased by 14.6% to $1,851.3 million for the three months ended September 30, 2021, compared to $1,615.5 million for the three months ended September 30, 2020 and increased by 14.3% to $5,314.8 million for the nine months ended September 30, 2021, compared to $4,648.4 million for the nine months ended September 30, 2020. 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.

Net Investment Income. Net investment income increased to $197.1 million for the three months ended September 30, 2021 compared with net investment income of $135.4 million for the three months ended September 30, 2020. Net investment income increased to $593.0 million for the nine months ended September 30, 2021 compared with net investment income of $244.8 million for the nine months ended September 30, 2020. Net pre-tax investment income as a percentage of average invested assets was 4.7% and 4.3% for the three months ended September 30, 2021 and 2020, respectively and was 4.9% and 2.6% for the nine months ended September 30, 2021 and 2020, respectively. The increases in both income and yield were primarily the result of an increase in limited partnership income and higher income from other alternative investments. The limited partnership income primarily reflects increases in their reported net asset values. As such, until these asset values are monetized and the resultant income is distributed, they are subject to future increases or decreases in the asset value, and the results may be volatile.

Net Realized Capital Gains (Losses). Net realized capital losses were $51.5 million and net realized capital gains were $115.2 million for the three months ended September 30, 2021 and 2020, respectively. The net realized capital losses of $51.5 million for the three months ended September 30, 2021, were comprised of $48.3 million of losses from fair value re-measurements and $7.3 million in net allowances for credit losses, partially offset by $4.1 million of gains from sales of investments. The net realized capital gains of $115.2 million for the three months ended September 30, 2020, were comprised of $113.4 million of gains from fair value re-measurements, resulting primarily from increases in equity security valuations which further rebounded from declines in the first quarter of 2020, and $2.3 million from a decline in net allowances for credit losses partially offset by $0.5 million of losses from sales of investments.

Net realized capital gains were $267.3 million and net realized capital losses were $107.3 million for the nine months ended September 30, 2021 and 2020, respectively. The net realized capital gains of $267.3 million for the nine months ended September 30, 2021 were comprised of $273.7 million of gains from fair value re-measurements and $23.1 million of gains from sales of investments, partially offset by $29.5 million in net allowances for credit losses. The net realized capital losses of $107.3 million for the nine months ended September

30, 2020 were comprised of $58.1 million of losses from fair value re-measurements, $31.6 million of losses from sales of investments and $17.6 million of net allowances for credit losses.

Other Income (Expense). We recorded other income of $9.9 million and other expense of $1.8 million for the three months ended September 30, 2021 and 2020, respectively. We recorded other income of $12.0 million and other expense of $11.4 million for the nine months ended September 30, 2021 and 2020, respectively. The change was primarily the result of fluctuations in foreign currency exchange rates.

Claims and Expenses.

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

	Three Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	1,111.7	60.0%		$	-	0.0%		$	1,111.7	60.0%
Catastrophes		544.1	29.4%			(2.7)	-0.1%			541.3	29.3%
Total	$	1,655.8	89.4%		$	(2.7)	-0.1%		$	1,653.0	89.3%
2020
Attritional	$	980.8	60.7%		$	-	0.0%		$	980.8	60.7%
Catastrophes		300.2	18.6%			(3.2)	-0.2%			297.0	18.4%
Total	$	1,281.1	79.3%		$	(3.2)	-0.2%		$	1,277.9	79.1%
Variance 2021/2020
Attritional	$	130.9	(0.7)	pts	$	-	-	pts	$	130.9	(0.7)	pts
Catastrophes		243.9	10.8	pts		0.5	0.1	pts		244.3	10.9	pts
Total	$	374.7	10.1	pts	$	0.5	0.1	pts	$	375.2	10.2	pts

	Nine Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	3,266.8	61.5%		$	(1.5)	0.0%		$	3,265.3	61.5%
Catastrophes		839.6	15.8%			(2.1)	0.0%			837.4	15.8%
Total	$	4,106.3	77.3%		$	(3.6)	0.0%		$	4,102.7	77.2%
2020
Attritional	$	2,943.2	63.3%		$	(1.0)	0.0%		$	2,942.2	63.3%
Catastrophes		344.9	7.4%			(3.9)	-0.1%			341.0	7.3%
Total	$	3,288.0	70.7%		$	(4.9)	-0.1%		$	3,283.2	70.6%
Variance 2021/2020
Attritional	$	323.6	(1.8)	pts	$	(0.5)	-	pts	$	323.1	(1.8)	pts
Catastrophes		494.7	8.4	pts		1.8	0.1	pts		496.5	8.5	pts
Total	$	818.3	6.6	pts	$	1.2	0.1	pts	$	819.5	6.6	pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by 29.4% to $1,653.0 million for the three months ended September 30, 2021 compared to $1,277.9 million for the three months ended September 30, 2020, primarily due to an increase of $130.9 million in current year attritional losses, mainly related to the impact of the increase in premiums earned partially offset by $31.1 million of COVID-19 losses incurred in 2020 which did not recur in 2021, and an increase of $243.9 million in current year catastrophe losses. The current year catastrophe losses of $544.1 million for the three months ended September 30, 2021 related to Hurricane Ida ($430.8 million) and the European floods ($112.5

million). The current year catastrophe losses of $300.2 million for the three months ended September 30, 2020 related to Hurricane Laura ($122.4 million), the Northern California wildfires ($52.0 million), the California Glass wildfire ($30.0 million), Hurricane Sally ($24.6 million), Oregon wildfires ($21.0 million), Hurricane Isaias ($19.9 million), the Derecho storms ($15.1 million), Calgary storms in Canada ($15.0 million), the U.S. Civil Unrest ($2.4 million) and the Nashville tornadoes ($2.3 million), partially offset by a reduction in the loss estimate for the Australia East Coast Storm ($3.2 million) and the 2020 Australia fires ($1.3 million).

Incurred losses and LAE increased by 25.0% to $4,102.7 million for the nine months ended September 30, 2021 compared to $3,283.2 million for the nine months ended September 30, 2020, primarily due to an increase of $494.7 million in current year catastrophe losses and an increase of $323.6 million in current year attritional losses, mainly related to the impact of the increase in premiums earned partially offset by $104.8 million of COVID-19 losses incurred in 2020 which did not recur in 2021. The current year catastrophe losses of $839.6 million for the nine months ended September 30, 2021 primarily related to Hurricane Ida ($430.8 million), the Texas winter storms ($278.8 million) and the European floods ($112.5 million) with the rest of the losses emanating from the 2021 Australia floods and Victoria Australia flooding. The current year catastrophe losses of $344.9 million for the nine months ended September 30, 2020 related to Hurricane Laura ($122.4 million), the Northern California wildfires ($52.0 million), the California Glass wildfire ($30.0 million), Hurricane Sally ($24.6 million), Oregon wildfires ($21.0 million), Hurricane Isaias ($19.9 million), the U.S. Civil Unrest ($17.4 million), the Derecho storms ($15.1 million), the Nashville tornadoes ($15.1 million), the Calgary storms in Canada ($15.0 million), the Australia East Coast storm ($6.8 million) and the 2020 Australia fires ($5.6 million).

Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased to $388.8 million for the three months ended September 30, 2021 compared to $322.4 million for the three months ended September 30, 2020. Commission, brokerage, taxes and fees increased to $1,125.5 million for the nine months ended September 30, 2021 compared to $1,001.2 million for the nine months ended September 30, 2020. The increases were mainly due to the impact of the increase in premiums earned and changes in the mix of business.

Other Underwriting Expenses. Other underwriting expenses remained relatively flat at $109.5 million for the three months ended September 30, 2021 compared to $109.4 million for the three months ended September 30, 2020. Other underwriting expenses increased to $329.2 million for the nine months ended September 30, 2021 compared to $304.7 million for the nine months ended September 30, 2020. The year over year increase was mainly due to the impact of increase in premiums earned and costs incurred to support the expansion of the insurance business.

Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, have increased to $10.9 million from $4.2 million for the three months ended September 30, 2021 and 2020, respectively, and increased to $23.1 million from $11.4 million for the nine months ended September 30, 2021 and 2020, respectively. The increases were mainly due to higher compensation costs from increased staff count.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $15.5 million and $6.5 million for the three months ended September 30, 2021 and 2020, respectively. Interest, fees and other bond amortization expense was $46.6 million and $20.9 million for the nine months ended September 30, 2021 and 2020, respectively. The variances in expenses were primarily due to interest expense on the $1,000.0 million of senior notes issued in October 2020 and the movement in the floating interest rate related to the long term subordinated notes, which is reset quarterly per the note agreement. The floating rate was 2.51% as of September 30, 2021.

Income Tax Expense (Benefit). We had an income tax benefit of $27.5 million and an income tax expense of $118.1 million for the three and nine months ended September 30, 2021, respectively. We had an income tax expense of $24.1 million and income tax benefit of $12.8 million for the three and nine months ended September 30, 2020, respectively. Income tax benefit or expense is primarily a function of the geographic location of the Company’s pre-tax income and the statutory tax rates in those jurisdictions. The effective tax rate (“ETR”) is

primarily affected by tax-exempt investment income, qualifying dividends, and foreign tax credits. Variations in the ETR generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net capital gains (losses), among jurisdictions with different tax rates. The change in income tax expense (benefit) for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 resulted primarily from higher investment income and earned premiums offset by an increase in catastrophe losses.

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was passed by Congress and signed into law by the President on March 27, 2020 in response to the COVID-19 pandemic. Among the provisions of the CARES Act was a special tax provision which allows companies to elect to carryback five years net operating losses incurred in the 2018, 2019 and/or 2020 tax years. The Tax Cuts and Jobs Act of 2017 had eliminated net operating loss carrybacks for most companies. The Company determined that the special five year loss carryback tax provision provided a tax benefit of $31.0 million which it recorded in the quarter ended March 31, 2020.

Net Income (Loss).

Our net loss was $143.3 million and net income was $119.8 million, for the three months ended September 30, 2021 and 2020 respectively. Our net income was $441.9 million and $165.9 million, for the nine months ended September 30, 2021 and 2020 respectively. The changes were primarily driven by the financial component fluctuations explained above.

Ratios.

Our combined ratio increased by 10.4 points to 116.2% for the three months ended September 30, 2021 compared to 105.8% for the three months ended September 30, 2020 and increased by 5.9 points to 104.6% for the nine months ended September 30, 2021 compared to 98.7% for the nine months ended September 30, 2020. The loss ratio component increased by 10.2 points and 6.6 points for the three and nine months ended September 30, 2021, respectively, over the same period last year. The increases were mainly due to higher current year catastrophe losses. The commission and brokerage ratio component increased to 21.0% for the three months ended September 30, 2021 compared to 20.0% for the three months ended September 30, 2020 and decreased to 21.2% for the nine months ended September 30, 2021 compared to 21.5% for the nine months ended September 30, 2020, reflecting changes in affiliated reinsurance agreements and changes in the mix of business. The other underwriting expense ratio decreased to 5.9% from 6.7% for the three months ended September 30, 2021 and 2020, respectively and decreased to 6.2% from 6.6% for the nine months ended September 30, 2021 and 2020, respectively. The decreases were mainly due to changes in the mix of business.

Stockholder's Equity.

Stockholder’s equity increased by $343.5 million to $6,757.8 million at September 30, 2021 from $6,414.3 million at December 31, 2020, principally as a result of $441.9 million of net income and $5.6 million of net benefit plan obligation adjustments, partially offset by $99.8 million of net unrealized depreciation on investments, net of tax and $4.6 million of net foreign currency translation adjustments.

Consolidated Investment Results

Net Investment Income.

Net investment income increased to $197.1 million for the three months ended September 30, 2021 compared to $135.4 million for the three months ended September 30, 2020. Net investment income increased to $593.0 million for the nine months ended September 30, 2021 compared to $244.8 million for the nine months ended September 30, 2020. The increases were primarily the result of an increase in limited partnership income and higher income from other alternative investments. The limited partnership income primarily reflects increases in their reported net asset values. As such, until these asset values are monetized and the resultant income is distributed, they are subject to future increases or decreases in the asset value, and the results may be volatile.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in millions)	2021		2020		2021		2020
Fixed maturities	$	83.4	$	78.3	$	260.4	$	227.3
Equity securities		3.8		2.5		10.1		6.1
Short-term investments and cash		0.1		0.5		0.3		2.6
Other invested assets
Limited partnerships		81.9		35.9		260.5		2.4
Dividends from preferred shares of affiliate		7.8		7.8		23.3		23.3
Other		30.9		14.7		62.8		(1.3)
Gross investment income before adjustments		207.9		139.7		617.4		260.4
Funds held interest income (expense)		0.8		0.9		7.0		5.1
Interest income from Parent		1.6		1.3		4.2		3.9
Gross investment income		210.3		141.8		628.6		269.3
Investment expenses		13.1		(6.4)		35.6		(24.5)
Net investment income	$	197.2	$	135.4	$	593.0	$	244.8

(Some amounts may not reconcile due to rounding.)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2021	2020	2021	2020
Annualized pre-tax yield on average cash and invested assets	4.7%	4.3%	4.9%	2.6%
Annualized after-tax yield on average cash and invested assets	3.7%	3.4%	3.9%	2.1%

Net Realized Capital Gains (Losses).

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

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2021		2020		Variance		2021		2020		Variance
Gains (losses) from sales:
Fixed maturity securities, market value
Gains	$	8.9	$	5.0	$	3.9	$	24.1	$	15.6	$	8.5
Losses		(6.2)		(5.0)		(1.2)		(13.3)		(34.6)		21.3
Total		2.7		-		2.7		10.8		(19.0)		29.8
Fixed maturity securities, fair value
Gains		-		-		-		-		-		-
Losses		-		(2.0)		2.0		-		(2.0)		2.0
Total		-		(2.0)		2.0		-		(2.0)		2.0
Equity securities, fair value
Gains		2.8		9.5		(6.7)		17.7		30.3		(12.6)
Losses		(3.3)		(9.8)		6.5		(11.4)		(41.9)		30.5
Total		(0.5)		(0.3)		(0.2)		6.3		(11.6)		17.9
Other invested assets
Gains		2.4		1.4		1.0		8.0		6.0		2.0
Losses		(0.4)		(0.3)		(0.1)		(2.0)		(5.9)		3.9
Total		1.9		1.1		0.8		6.0		0.1		5.9
Short Term Investments:
Gains		-		0.8		(0.8)		-		1.0		(1.0)
Losses		-		-		-		-		-		-
Total		-		0.8		(0.8)		-		1.0		(1.0)
Total net realized gains (losses) from sales
Gains		14.1		16.7		(2.6)		49.8		52.9		(3.1)
Losses		(9.9)		(17.1)		7.2		(26.7)		(84.4)		57.7
Total		4.1		(0.5)		4.6		23.1		(31.6)		54.7

Allowances for credit losses:		(7.3)		2.3		(9.6)		(29.5)		(17.6)		(11.9)

Gains (losses) from fair value adjustments:
Fixed maturities, fair value		-		3.3		(3.3)		-		1.9		(1.9)
Equity securities, fair value		(4.5)		94.3		(98.8)		136.9		120.8		16.1
Other invested assets, fair value		(43.8)		15.8		(59.6)		136.8		(180.8)		317.6
Total		(48.3)		113.4		(161.7)		273.7		(58.1)		331.8

Total net realized gains (losses)	$	(51.5)	$	115.2	$	(166.7)	$	267.3	$	(107.3)	$	374.6

(Some amounts may not reconcile due to rounding.)

Segment Results.

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 management’s 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:

Reinsurance.

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

	Three Months Ended September 30,							Nine Months Ended September 30,
(Dollars in millions)	2021		2020		Variance		% Change	2021		2020		Variance		% Change
Gross written premiums	$	1,693.0	$	1,473.3	$	219.8	14.9%	$	4,552.4	$	3,906.4	$	646.0	16.5%
Net written premiums		1,461.2		1,296.1		165.1	12.7%		3,961.3		3,403.1		558.2	16.4%

Premiums earned	$	1,280.2	$	1,153.7	$	126.4	11.0%	$	3,689.5	$	3,223.6	$	465.9	14.5%
Incurred losses and LAE		1,207.5		936.9		270.6	28.9%		2,917.3		2,250.3		667.0	29.6%
Commission and brokerage		319.7		265.1		54.6	20.6%		935.3		818.3		117.0	14.3%
Other underwriting expenses		32.0		35.7		(3.6)	-10.1%		101.3		92.1		9.2	10.0%
Underwriting gain (loss)	$	(279.1)	$	(84.0)	$	(195.1)	232.4%	$	(264.4)	$	62.9	$	(327.3)	-520.2%

							Point Chg							Point Chg
Loss ratio		94.3%		81.2%			13.1		79.1%		69.8%			9.3
Commission and brokerage ratio		25.0%		23.0%			2.0		25.3%		25.4%			(0.1)
Other underwriting ratio		2.5%		3.1%			(0.6)		2.7%		2.8%			(0.1)
Combined ratio		121.8%		107.3%			14.5		107.2%		98.0%			9.1

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

Premiums. Gross written premiums increased by 14.9% to $1,693.0 million for the three months ended September 30, 2021 from $1,473.3 million for the three months ended September 30, 2020 primarily due to

increases in casualty pro rata business, casualty excess of loss business and property catastrophe excess of loss writings. Net written premiums increased by 12.7% to $1,461.2 million for the three months ended September 30, 2021 compared to $1,296.1 million for the three months ended September 30, 2020, which is consistent with the change in gross written premiums. Premiums earned increased 11.0% to $1,280.2 million for the three months ended September 30, 2021 compared to $1,153.7 million for the three months ended September 30, 2020. 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 16.5% to $4,552.4 million for the nine months ended September 30, 2021 from $3,906.4 million for the nine months ended September 30, 2020 primarily due to increases in casualty pro rata business, casualty excess of loss business and property catastrophe excess of loss writings. Net written premiums increased by 16.4% to $3,961.3 million for the nine months ended September 30, 2021 compared to $3,403.1 million for the nine months ended September 30, 2020, which is consistent with the change in gross written premiums. Premiums earned increased 14.5% to $3,689.5 million for the nine months ended September 30, 2021 compared to $3,223.6 million for the nine months ended September 30, 2020. 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 Reinsurance segment for the periods indicated.

	Three Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	743.8	58.1%		$	-	0.0%		$	743.8	58.1%
Catastrophes		465.6	36.4%			(1.9)	-0.1%			463.7	36.2%
Total segment	$	1,209.4	94.5%		$	(1.9)	-0.1%		$	1,207.5	94.3%
2020
Attritional	$	677.2	58.7%		$	-	0.0%		$	677.2	58.7%
Catastrophes		262.7	22.8%			(3.0)	-0.3%			259.7	22.5%
Total segment	$	939.9	81.5%		$	(3.0)	-0.3%		$	936.9	81.2%
Variance 2021/2020
Attritional	$	66.7	(0.6)	pts	$	-	-	pts	$	66.7	(0.6)	pts
Catastrophes		202.9	13.6	pts		1.1	0.2	pts		204.0	13.7	pts
Total segment	$	269.6	13.0	pts	$	1.1	0.2	pts	$	270.6	13.1	pts

	Nine Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	2,216.3	60.1%		$	0.5	0.0%		$	2,216.8	60.1%
Catastrophes		703.6	19.1%			(3.1)	-0.1%			700.5	19.0%
Total segment	$	2,919.9	79.1%		$	(2.6)	-0.1%		$	2,917.3	79.1%
2020
Attritional	$	1,967.2	61.0%		$	(0.6)	0.0%		$	1,966.6	61.0%
Catastrophes		286.9	8.9%			(3.2)	-0.1%			283.7	8.8%
Total segment	$	2,254.1	69.9%		$	(3.8)	-0.1%		$	2,250.3	69.8%
Variance 2021/2020
Attritional	$	249.0	(0.9)	pts	$	1.1	-	pts	$	250.2	(0.9)	pts
Catastrophes		416.8	10.2	pts		0.1	-	pts		416.8	10.2	pts
Total segment	$	665.8	9.3	pts	$	1.2	-	pts	$	667.0	9.3	pts

(Some amounts may not reconcile due to rounding.)

Incurred losses increased by 28.9% to $1,207.5 million for the three months ended September 30, 2021 compared to $936.9 million for the three months ended September 30, 2020. The rise in incurred losses was primarily due to an increase of $202.9 million on current year catastrophe losses and an increase of $66.7 million in current year attritional losses, mainly related to the impact of the increase in premiums earned partially offset by $27.1 million of COVID-19 losses incurred in 2020 which did not recur in 2021. The $465.6 million of current year catastrophe losses for the three months ended September 30, 2021 primarily related to Hurricane Ida ($352.4 million) and the European floods ($112.5 million). The $262.7 million of current year catastrophe losses for the three months ended September 30, 2020 related to Hurricane Laura ($107.4 million), the Northern California wildfires ($52.0 million), the California Glass wildfire ($30.0 million), Oregon wildfires ($21.0 million), Hurricane Isaias ($17.9 million), the Derecho storms ($13.1 million), Calgary storms in Canada ($12.5 million), Hurricane Sally ($8.6 million), the U.S. Civil Unrest ($2.4 million) and the Nashville tornadoes ($2.3 million), partially offset by a reduction in the loss estimate for the Australia East Coast storm ($3.2 million) and the 2020 Australia fires ($1.3 million).

Incurred losses increased by 29.6% to $2,917.3 million for the nine months ended September 30, 2021 compared to $2,250.3 million for the nine months ended September 30, 2020. The rise in incurred losses was primarily due to an increase of $416.8 million on current years catastrophe losses and an increase of $249.0 million in current year attritional losses, primarily related to the impact of the increase in premiums earned and partially offset by $72.6 million of COVID-19 losses incurred in 2020 which did not recur in 2021. The $703.6 million of current year catastrophe losses for the nine months ended September 30, 2021 primarily related to Hurricane Ida ($352.4 million), the Texas winter storms ($221.3 million) and the European floods ($112.5 million) with the rest of the losses emanating from the 2021 Australia floods and Victoria Australia flooding. The current year catastrophe losses of $286.9 million for the nine months ended September 30, 2020 primarily related to Hurricane Laura ($107.4 million), the Northern California wildfires ($52.0 million), the California Glass wildfire ($30.0 million), Oregon wildfires ($21.0 million), Hurricane Isaias ($17.9 million), the Derecho storms ($13.1 million), the Nashville tornadoes ($9.6 million), the Calgary storms in Canada ($12.5 million), Hurricane Sally ($8.6 million), the Australia East Coast storm ($6.8 million), the 2020 Australia fires ($5.6 million) and the U.S. Civil Unrest ($2.4 million).

Segment Expenses. Commission and brokerage increased to $319.7 million for the three months ended September 30, 2021 compared to $265.1 million for the three months ended September 30, 2020. Commission and brokerage increased to $935.3 million for the nine months ended September 30, 2021 compared to $818.3 million for the nine months ended September 30, 2020. The increases were mainly due to the impact of the increase in premiums earned and changes in the mix of business.

Segment other underwriting expenses decreased to $32.0 million for the three months ended September 30, 2021 from $35.7 million for the three months ended September 30, 2020. The quarter over quarter decrease was primarily due to changes in the mix of business. Segment other underwriting expenses increased to $101.3 million for the nine months ended September 30, 2021 from $92.1 million for the nine months ended September 30, 2020. The year over year increase was mainly due to the impact of the increase in premiums earned.

Insurance.

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

	Three Months Ended September 30,							Nine Months Ended September 30,
(Dollars in millions)	2021		2020		Variance		% Change	2021		2020		Variance		% Change
Gross written premiums	$	830.7	$	591.7	$	239.0	40.4%	$	2,421.7	$	1,971.8	$	449.9	22.8%
Net written premiums		608.2		429.6		178.7	41.6%		1,801.9		1,462.9		339.0	23.2%

Premiums earned	$	571.2	$	461.7	$	109.5	23.7%	$	1,625.3	$	1,424.8	$	200.5	14.1%
Incurred losses and LAE		445.5		340.9		104.5	30.6%		1,185.4		1,032.9		152.5	14.8%
Commission and brokerage		69.1		57.3		11.8	20.6%		190.3		182.9		7.4	4.0%
Other underwriting expenses		77.5		73.7		3.8	5.2%		227.9		212.6		15.3	7.2%
Underwriting gain (loss)	$	(20.9)	$	(10.2)	$	(10.7)	NM	$	21.7	$	(3.6)	$	25.3	-702.4%

							Point Chg							Point Chg
Loss ratio		78.0%		73.8%			4.2		72.9%		72.5%			0.4
Commission and brokerage ratio		12.1%		12.4%			(0.3)		11.7%		12.8%			(1.1)
Other underwriting ratio		13.6%		16.0%			(2.4)		14.0%		15.0%			(1.0)
Combined ratio		103.7%		102.2%			1.5		98.7%		100.3%			(1.7)

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

Premiums. Gross written premiums increased by 40.4% to $830.7 million for the three months ended September 30, 2021 compared to $591.7 million for the three months ended September 30, 2020. The rise in gross written premiums was primarily due to increases in specialty casualty business, professional liability business and short tail business, including property. Net written premiums increased by 41.6% to $608.2 million for the three months ended September 30, 2021 compared to $429.6 million for the three months ended September 30, 2020, which is consistent with the change in gross written premiums. Premiums earned increased 23.7% to $571.2 million for the three months ended September 30, 2021 compared to $461.7 million for the three months ended September 30, 2020. The change in premiums earned 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 22.8% to $2,421.7 million for the nine months ended September 30, 2021 compared to $1,971.8 million for the nine months ended September 30, 2020. The rise in gross written premiums was primarily due to increases in specialty casualty business, professional liability business and short tail business, including property, partially offset by a decline in workers’ compensation business. Net written premiums increased by 23.2% to $1,801.9 million for the nine months ended September 30, 2021 compared to $1,462.9 million for the nine months ended September 30, 2020, which is consistent with the change in gross written premiums. Premiums earned increased 14.1% to $1,625.3 million for the nine months ended September 30, 2021 compared to $1,424.8 million for the nine months ended September 30, 2020. The change in premiums earned 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 Insurance segment for the periods indicated.

	Three Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	367.9	64.4%		$	-	0.0%		$	367.9	64.4%
Catastrophes		78.4	13.7%			(0.8)	-0.1%			77.6	13.6%
Total segment	$	446.3	78.1%		$	(0.8)	-0.1%		$	445.5	78.0%
2020
Attritional	$	303.7	65.8%		$	-	0.0%		$	303.7	65.8%
Catastrophes		37.5	8.1%			(0.2)	-0.1%			37.3	8.1%
Total segment	$	341.2	73.9%		$	(0.2)	-0.1%		$	340.9	73.8%
Variance 2021/2020
Attritional	$	64.2	(1.4)	pts	$	-	-	pts	$	64.2	(1.4)	pts
Catastrophes		40.9	5.6	pts		(0.6)	-	pts		40.3	5.5	pts
Total segment	$	105.1	4.2	pts	$	(0.6)	-	pts	$	104.5	4.2	pts

	Nine Months Ended September 30,
	Current		Ratio %/		Prior		Ratio %/		Total		Ratio %/
(Dollars in millions)	Year		Pt Change		Years		Pt Change		Incurred		Pt Change
2021
Attritional	$	1,050.5	64.6%		$	(2.0)	-0.1%		$	1,048.5	64.5%
Catastrophes		135.9	8.4%			1.0	0.1%			136.9	8.4%
Total segment	$	1,186.4	73.0%		$	(1.0)	-0.1%		$	1,185.4	72.9%
2020
Attritional	$	976.0	68.5%		$	(0.3)	0.0%		$	975.6	68.5%
Catastrophes		58.0	4.1%			(0.7)	0.0%			57.3	4.0%
Total segment	$	1,034.0	72.6%		$	(1.0)	-0.1%		$	1,032.9	72.5%
Variance 2021/2020
Attritional	$	74.5	(3.9)	pts	$	(1.6)	(0.1)	pts	$	72.9	(4.0)	pts
Catastrophes		77.9	4.3	pts		1.7	0.1	pts		79.6	4.4	pts
Total segment	$	152.5	0.4	pts	$	-	-	pts	$	152.5	0.4	pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by 30.6% to $445.5 million for the three months ended September 30, 2021 compared to $340.9 million for the three months ended September 30, 2020, mainly due to an increase of $64.2 million in current year attritional losses primarily related to the impact of the increase in premiums earned and a $40.9 million increase in current year catastrophe losses. The increase in attritional losses was partially offset by $4.0 million of COVID-19 losses incurred in 2020 which did not recur in 2021. The $78.4 million of current year catastrophe losses for the three months ended September 30, 2021, related to Hurricane Ida. The $37.5 million of current year catastrophe losses for the three months ended September 30, 2020, related to Hurricane Sally ($16.0 million), Hurricane Laura ($15.0 million), the Calgary storms in Canada ($2.5 million), Hurricane Isaias ($2.0 million) and the Derecho storms ($2.0 million).

Incurred losses and LAE increased by 14.8% to $1,185.4 million for the nine months ended September 30, 2021 compared to $1,032.9 million for the nine months ended September 30, 2020, mainly due to an increase of $77.9 million in current year catastrophe losses and an increase of $74.5 million in current year attritional losses. The rise in current year attritional losses was primarily due to the impact of the increase in premiums earned and partially offset by $32.2 million of COVID-19 losses incurred in 2020 which did not recur in 2021. The $135.9 million of current year catastrophe losses for the nine months ended September 30, 2021, related to Hurricane Ida ($78.4

million) and the Texas winter storms ($57.5 million). The $58.0 million of current year catastrophe losses for the nine months ended September 30, 2020, primarily related to Hurricane Sally ($16.0 million), Hurricane Laura ($15.0 million), the U.S. Civil Unrest ($15.0 million), the Nashville tornadoes ($5.5 million), the Calgary storms in Canada ($2.5 million), the Derecho storms ($2.0 million) and Hurricane Isaias ($2.0 million).

Segment Expenses. Commission and brokerage increased to $69.1 million for the three months ended September 30, 2021 compared to $57.3 million for the three months ended September 30, 2020. Commission and brokerage increased to $190.3 million for the nine months ended September 30, 2021 compared to $182.9 million for the nine months ended September 30, 2020. The increases were mainly due to the impact of the increase in premiums earned and expenses related to the continued build out of the insurance business.

Segment other underwriting expenses increased to $77.5 million for the three months ended September 30, 2021 compared to $73.7 million for the three months ended September 30, 2020. Segment other underwriting expenses increased to $227.9 million for the nine months ended September 30, 2021 compared to $212.6 million for the nine months ended September 30, 2020. The increases were mainly due to the impact of the increase in premiums earned and expenses related to the continued build out of the insurance business.

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 $17.9 billion investment portfolio, at September 30, 2021, 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 $1,618.5 million of mortgage-backed securities in the $11,897.5 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.

The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $538.1 million of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimate on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios.

	Impact of Interest Rate Shift in Basis Points
	At September 30, 2021
(Dollars in millions)	-200		-100		-		100		200
Total Market/Fair Value	$	13,282.2	$	12,858.9	$	12,435.6	$	12,012.3	$	11,589.0
Market/Fair Value Change from Base (%)		6.8%		3.4%		0.0%		-3.4%		-6.8%
Change in Unrealized Appreciation
After-tax from Base ($)	$	668.8	$	334.4	$	-	$	(334.4)	$	(668.8)

We had $13,321.8 million and $11,654.9 million of gross reserves for losses and LAE as of September 30, 2021 and December 31, 2020, 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, preferred stock and mutual fund 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 our core 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.

	Impact of Percentage Change in Equity Fair/Market Values
	At September 30, 2021
(Dollars in millions)	-20%		-10%		0%		10%		20%
Fair/Market Value of the Equity Portfolio	$	1,190.7	$	1,339.5	$	1,488.4	$	1,637.2	$	1,786.0
After-tax Change in Fair/Market Value		(235.2)		(117.6)		-		117.6		235.2

Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. (“foreign”) operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Singapore and Canadian Dollars. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our corresponding operating liabilities. In accordance with FASB guidance, the impact on the market value of available for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a component of other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income.

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 CARES Act, the impact of the TCJA, the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic and pandemic 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 ITEM 1A, “Risk Factors” in the Company’s most recent 10-K filing. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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.

PART II

ITEM 1. LEGAL PROCEEDINGS

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.

ITEM 1A. RISK FACTORS

No material changes.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Index:

Exhibit No.	Description

31.1	Section 302 Certification of Juan C. Andrade

31.2	Section 302 Certification of Mark Kociancic

32.1	Section 906 Certification of Juan C. Andrade and Mark Kociancic

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

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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/ MARK KOCIANCIC
	Mark Kociancic
	Executive Vice President and
		Chief Financial Officer

	(Duly Authorized Officer and Principal Financial Officer)



Dated: November 10, 2021