EVEREST REINSURANCE HOLDINGS INC – 10-Q – 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.





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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.





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Financial Summary.

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



                                     Three Months Ended          Percentage     Nine Months Ended     Percentage
                                       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%

                                                                   Point                                Point
RATIOS:                                                            Change                               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)






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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



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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



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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



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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.





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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%






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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.)




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.





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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.

Segment Results.

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. 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



                                       40

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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






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                                         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.





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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.





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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



                                       44

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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.





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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.







                                       46

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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.