MANAGEMENT&apos;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.

We
continue to

service and

meet the

needs of

our clients

while ensuring

the safety

and health

of our

employees and
customers.
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 that

continued
to be experienced in

2022 and throughout

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 the

impact on

pricing conditions

will be,

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.
31
The war

in the

Ukraine

is ongoing

and an

evolving

event.

Economic

and legal

sanctions

have

been levied

against

Russia, specific named individuals

and entities connected

to the Russian government,

as well as businesses

located
in the

Russian Federation

and/or owned

by Russian

nationals by

numerous countries,

including the

United States.
The

significant

political

and

economic

uncertainty

surrounding

the

war

and

associated

sanctions

have

impacted
economic

and

investment

markets

both

within

Russia

and

around

the

world.

The

Company

has

recorded

$24.6
million

of incurred

underwriting

losses

related

to

the

Ukraine

and

Russia

conflict

as of

the

three

and six

months
ended June 30, 2022.













































































































































































































































32
Financial Summary.
We

monitor

and

evaluate

our

overall

performance

based

upon

financial

results.

The

following

table

displays

a

summary of the consolidated net income (loss), ratios

and stockholder's equity for

the periods indicated:

Three Months Ended

Percentage

Six Months Ended

Percentage

June 30,
Increase/
June 30,
Increase/
(Dollars in millions)
2022
2021
(Decrease)
2022
2021
(Decrease)
Gross written premiums
$
2,436.9
$
2,317.1
5.2%
$
4,641.9
$
4,450.4
4.3%
Net written premiums
1,994.6
1,928.4
3.4%
3,790.8
3,693.7
2.6%
REVENUES:
Premiums earned
$
1,954.2
$
1,766.6
10.6%
$
3,782.8
$
3,463.5
9.2%
Net investment income
176.5
248.1
-28.9%
332.6
395.9
-16.0%
Net gains (losses) on investments
(378.3)
183.8
NM
(604.9)
318.8
NM
Other income (expense)
0.5
(1.9)
NM
(8.9)
2.1
NM
Total revenues
1,753.0
2,196.5
-20.2%
3,501.7
4,180.2
-16.2%
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses
1,303.9
1,095.6
19.0%
2,529.6
2,449.7
3.3%
Commission, brokerage, taxes and fees
408.7
386.8
5.6%
793.3
736.7
7.7%
Other underwriting expenses
120.3
109.9
9.4%
238.0
219.7
8.3%
Corporate expense
5.9
7.6
-22.7%
11.7
12.2
-4.5%
Interest, fee and bond issue cost amortization expense
24.4
15.6
56.5%
48.5
31.1
56.0%
Total claims and expenses
1,863.1
1,615.5
15.3%
3,621.1
3,449.4
5.0%
INCOME (LOSS) BEFORE TAXES
(110.2)
581.0
-119.0%
(119.4)
730.8
-116.3%
Income tax expense (benefit)
(24.5)
115.3
-121.3%
(34.7)
145.6
-123.9%
NET INCOME (LOSS)

$
(85.7)
$
465.8
-118.4%
$
(84.6)
$
585.3
-114.5%
RATIOS:
Point
Change
Point
Change
Loss ratio
66.7%
62.0%
4.7
66.9%
70.7%
(3.8)
Commission and brokerage ratio
20.9%
21.9%
(1.0)
21.0%
21.3%
(0.3)
Other underwriting expense ratio
6.2%
6.2%
-
6.3%
6.3%
-
Combined ratio
93.8%
90.1%
3.7
94.1%
98.3%
(4.2)
At
At

Percentage

June 30,
December 31,
Increase/
(Dollars in millions)
2022
2021
(Decrease)
Balance sheet data:
Total investments and cash
$
18,851.9
$
19,718.8
-4.4%
Total assets
27,108.0
27,695.0
-2.1%
Loss and loss adjustment expense reserves
13,738.4
13,121.2
4.7%
Total debt
3,089.3
3,088.6
0.0%
Total liabilities
20,961.6
20,656.9
1.5%
Stockholder's equity
6,146.4
7,038.0
-12.7%
(Some amounts may not reconcile due to rounding)
(NM, not meaningful)




33
Revenues.
Premiums.

Gross written

premiums increased

by 5.2%

to $2.4

billion for

the three

months

ended June

30, 2022,
compared to $2.3

billion for the

three months

ended June 30,

2021, reflecting a

$165.1 million, or

18.8%, increase
in our Insurance

business and a

$45.3 million, or

3.1%, decrease

in our reinsurance

business. The

rise in insurance
premiums

was

primarily

due

to

increases

across

most

lines

of

business,

notably

specialty

casualty

business,
professional

liability business and

other specialty

business. The decrease

in reinsurance

premiums was

mainly due
to

a

decline

property

pro

rata

business.

Gross

written

premiums

increased

by

4.3%

to

$4.6

billion

for

the

six
months ended June

30, 2022, compared to

$4.5 billion for the

six months ended June

30, 2021, reflecting a

$277.2
million,

or

17.4%,

increase

in

our

Insurance

business

and

a

$85.7

million,

or

3.0%,

decrease

in

our

reinsurance

business. The rise in insurance

premiums was primarily due

to increases in most


lines of business, notably specialty
casualty

business,

professional

liability

business

and

other

specialty

business.

The

decrease

in

reinsurance

premiums was mainly due to a decline property pro

rata business.
Net written

premiums

increased

by 3.4%

to $2.0

billion for

the three

months

ended June

30, 2022,

compared

to
$1.9

billion

for

the

three

months

ended

June

30,

2021

and

increased

by

2.6%

to

$3.8

billion

for

the

six

months
ended June

30, 2022,

compared to

$3.7 billion

for the

six months

ended June

30, 2021.

The percentage

increases
in net written

premiums are

consistent

with the percentage

changes

in gross written

premiums. Premiums

earned
increased

by

10.6%

to

$2.0

billion

for

the

three

months

ended

June

30,

2022,

compared

to

$1.8

billion

for

the
three months

ended June

30, 2021

and increased

by 9.2%

to $3.8

billion for

the six

months ended

June 30,

2022,
compared to

$3.5 billion

for the

six months

ended June

30, 2021.

The change

in premiums

earned relative

to net
written premiums

is primarily the result

of timing; premiums are

earned ratably

over the coverage

period whereas
written

premiums

are

recorded

at

the

initiation

of

the

coverage

period.

Accordingly,

the

significant

increases

in
gross

written

premiums

from

pro

rata

business

during

the latter

half

of 2021

contributed

to

the current

quarter

percentage increase in net earned

premiums.
Other

Income

(Expense).

We

recorded

other

income

of

$0.5

million

and

other

expense

of

$1.9

million

for

the
three months

ended June

30, 2022

and 2021,

respectively.

We

recorded

other expense

of $8.9

million and

other
income of

$2.1 million

for the

six months

ended June

30, 2022

and 2021,

respectively.

The change

was primarily
the result of fluctuations in foreign currency

exchange rates.

Net Investment Income.

Refer to Consolidated

Investments Results Section below.
Net Gains (Losses) on Investments.

Refer to Consolidated Investments

Results Section below.


































































































































































































































































































34
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 June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,236.6
63.3%
$
-
0.0%
$
1,236.6
63.3%
Catastrophes
65.0
3.3%
2.3
0.1%
67.3
3.4%
Total
$
1,301.7
66.6%
$
2.3
0.1%
$
1,303.9
66.7%
2021
Attritional
$
1,076.7
60.9%
$
(0.5)
0.0%
$
1,076.2
60.9%
Catastrophes
35.0
2.0%
(15.6)
-0.9%
19.4
1.1%
Total
$
1,111.7
62.9%
$
(16.1)
-0.9%
$
1,095.6
62.0%
Variance 2022/2021
Attritional
$
160.0
2.4
pts
$
0.5
-
pts
$
160.5
2.4
pts
Catastrophes
30.0
1.3
pts
17.8
1.0
pts
47.9
2.3
pts
Total
$
190.0
3.7
pts
$
18.3
1.0
pts
$
208.3
4.7
pts
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
2,375.1
62.8%
$
-
0.0%
$
2,375.1
62.7%
Catastrophes
145.5
3.8%
9.0
0.2%
154.5
4.0%
Total
$
2,520.6
66.6%
$
9.0
0.2%
$
2,529.6
66.9%
2021
Attritional
$
2,155.1
62.2%
$
(1.5)
0.0%
$
2,153.6
62.2%
Catastrophes
295.5
8.5%
0.6
0.0%
296.1
8.5%
Total
$
2,450.6
70.7%
$
(0.9)
0.0%
$
2,449.7
70.7%
Variance 2022/2021
Attritional
$
220.0
0.6
pts
$
1.5
-
pts
$
221.5
0.6
pts
Catastrophes
(150.0)
(4.7)
pts
8.4
0.2
pts
(141.6)
(4.5)
pts
Total
$
70.0
(4.1)
pts
$
9.9
0.2
pts
$
79.9
(3.8)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and

LAE increased by

19.0% to $1.3 billion

for the three

months ended June

30, 2022 compared

to
$1.1 billion

for

the

three

months

ended

June 30,

2021, primarily

due

to

an

increase

of $160.0

million

in

current
year attritional

losses and

an increase

of $30.0

million in

current year

catastrophe

losses. The

increase in

current
year

attritional

losses

was

mainly

due

to

the

impact

of

the

increase

in

premiums

earned

and

$24.6

million

of
attritional

losses incurred

due to

the Ukraine/Russia

war.

The current

year catastrophe

losses of

$65.0 million

for
the three months

ended June 30,

2022 mainly related

to 2022

South Africa

flood ($37.5 million),

the 2022 Canada
derecho ($16.0 million) and the 2022 2
nd

quarter U.S. storms

($12.0 million). The current year

catastrophe losses

of
$35.0 million for

the three

months ended

June 30, 2021

related to

Tropical

Storm Claudette,

Texas

winter storms,
and the Victoria Australia floods.
Incurred losses and LAE

increased by 3.3% to $2.5

billion for the six months

ended June 30, 2022 compared

to $2.4
billion

for

the

six

months

ended

June

30,

2021,

primarily

due

to

an

increase

of

$220.0

million

in

current

year
attritional

losses, partially

offset by

a decline

of $150.0

million in

current year

catastrophe

losses.

The increase

in
current year

attritional losses

was mainly

due to the

impact of

the increase

in premiums

earned and $24.6

million





35
of attritional

losses incurred

due to

the Ukraine/Russia

war.

The current

year catastrophe

losses of

$145.5 million
for

the six

months

ended June

30,

2022 related

to

2022 Australia

floods ($71.4

million),

2022 South

Africa

flood
($37.5

million),

the

2022

Canada

derecho

($16.0

million),

2022

2
nd

quarter

U.S.

storms

($12.0

million),

and

the
2022

March

U.S.

storms

($8.6

million).

The

current

year

catastrophe

losses

of

$295.5

million

for

the

six

months
ended

June

30,

2021

primarily

related

to

the

Texas

winter

storms

($263.0

million),

with

the

remaining

losses
emanating from Tropical

Storm Claudette, Victoria Australia


floods and the 2021 Australia floods.
Commission,

Brokerage,

Taxes

and Fees.

Commission,

brokerage,

taxes

and

fees

increased

to

$408.7 million

for
the

three

months

ended

June

30,

2022

compared

to

$386.8

million

for

the

three

months

ended

June

30,

2021.
Commission,

brokerage,

taxes

and

fees

increased

to

$793.3

million

for

the

six

months

ended

June

30,

2022
compared to

$736.7 million for

the six months

ended June 30,

2021. The increase

s

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

increased

to

$120.3

million

for

the

three

months
ended June

30, 2022

compared

to $109.9

million for

the three

months

ended June

30, 2021.

Other underwriting
expenses increased

to $238.0

million for

the six

months ended

June 30,

2022 compared

to $219.7

million for

the
six months ended June

30, 2021. The increases were

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

decreased to

$5.9 million

from $7.6

million for

the three

months ended

June 30,

2022 and

2021,
respectively and

decreased slightly

to $11.7 million from

$12.2 million for

the six months

ended June 30,

2022 and
2021, respectively.

The variances are mainly due to changes in variable


incentive compensation expenses.
Interest, Fees

and Bond Issue Cost

Amortization Expense.

Interest, fees

and other bond amortization

expense was
$24.4

million and

$15.6

million

for

the

three

months

ended

June

30,

2022

and

2021,

respectively.

Interest,

fees
and other bond

amortization expense

was $48.5

million and

$31.1 million for

the six months

ended June 30,

2022
and 2021, respectively.

The variances

in expenses

were primarily due to

the issuance of $1.0 billion

of senior notes
in October 2021.

Interest expense

was also impacted

by the movements

in the floating

interest rate

related to

the
long term

subordinated

notes, which

is reset

quarterly per

the note

agreement. The

floating rate

was 3.80%

as of
June 30, 2022.

Income Tax

Expense (Benefit).

We had

income tax

benefit of

$24.5 million

and $34.7

million for

the three

and six
months ended June

30, 2022, respectively.

We had an

income tax expense

of $115.3 million and

$145.6 million for
the

three

and

six

months

ended

June

30,

2021,

respectively.

Income

tax

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,

foreign tax

credits and dividends.
Variations

in the ETR generally

result from changes

in the relative

levels of pre

-tax income, including

the impact of
catastrophe

losses, foreign

exchange gains

(losses) and net

gains (losses) on

investments, among

jurisdictions with
different tax rates.

Net Income (Loss).

Our net loss

was $85.7

million and

net income

was $465.8

million, for

the three

months ended

June 30,

2022 and
2021

respectively.

Our

net

loss

was

$84.6

million

and

net

income

was

$585.3

million,

for

the

six

months

ended
June 30,

2022 and

2021 respectively.

The changes

were primarily

driven

by the

financial component

fluctuations
explained above.

36
Ratios.
Our

combined

ratio

increased

by

3.7

points

to

93.8%

for

the

three

months

ended

June

30,

2022,

compared

to
90.1% for

the three

months ended

June 30,

2021 and

decreased by

4.2 points

to 94.1%

for the

six months

ended
June 30, 2022

compared to

98.3% for the

six months

ended June 30,

2021. The loss

ratio component

increased by
4.7 points

for the

three months

ended June

30, 2022

over the

same period

last year

mainly due

to an

increase of
$30.0 million

in current

year

catastrophe

losses and

an increase

of $24.6

million in

current

year attritional

losses
due to

the Ukraine/Russia

war.

The loss

ratio

component decreased

by 3.8

points for

the six

months ended

June
30,

2022

over

the

same

period

last

year

mainly

due

to

a

decline

of

$150.0

million

in

current

year

catastrophe
losses,

partially

offset

by

an increase

of $24.6

million

in current

year

attritional

losses

due to

the Ukraine

Russia
conflict.

The commission

and brokerage

ratio

components

decreased

to

20.9%

for

the

three

months

ended June
30, 2022 compared

to 21.9% for

the three months

ended June 30, 2021

and decreased slightly

to 21.0% for

the six
months

ended

June

30,

2022

compared

to

21.3%

for

the

six

months

ended

June

30,

2021.

These

changes

were
mainly due

to changes

in the

mix of

business. The

other underwriting

expense ratios

remained the

same at

6.2%
for

the

three

months

ended

June

30,

2022

and

2021,

respectively

and

remained

the

same

at

6.3%

for

the

six

months ended June 30, 2022 and 2021, respectively.

Stockholder's Equity.

Stockholder's equity decreased

by $891.6 million to

$6.1 billion at June

30, 2022 from $7.0

billion at December 31,
2021,

principally

as

a

result

of

$797.0

million

of

net

unrealized

depreciation

on

investments,

net

of

tax,

$84.6
million of net loss

and $11.8 million of

net foreign currency

translation adjustments

,

partially offset by

$1.5 million
of

net

benefit

plan

obligation

adjustments,

net

of

tax.

The

movement

in

the

unrealized

depreciation

on
investments was driven

by the change in interest rates

on the Company's fixed

maturity portfolio.

Consolidated Investment

Results

Net Investment Income.

Net

investment

income

decreased

to

$176.5

million

for

the

three

months

ended

June

30,

2022

compared

to
$248.1 million

for the

three months

ended June

30, 2021. Net

investment

income decreased

to $332.6

million for
the

six

months

ended

June

30,

2022

compared

to

$395.9

million

for

the

six

months

ended

June

30,

2021.

The
decreases

were

primarily

the

result

of

reductions

in

income

from

limited

partnerships

and

other

alternative
investments,

partially

offset

by

an

increase

in

income

from

fixed

maturity

securities.

The

limited

partnership
income

primarily

reflects

changes

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
Six Months Ended
June 30,
June 30,
(Dollars in millions)
2022
2021
2022
2021
Fixed maturities
$
115.5
$
91.9
$
209.9
$
177.0
Equity securities

4.6
3.4
8.7
6.3
Short-term investments and cash
0.7
0.1
0.9
0.2
Other invested assets
Limited partnerships
45.3
126.4
88.8
178.6
Dividends from preferred shares of affiliate
7.7
7.7
15.5
15.5
Other

14.0
25.9
25.8
31.9
Gross investment income before adjustments
187.8
255.4
349.6
409.5
Funds held interest income (expense)
0.5
2.7
3.3
6.2
Interest income from Parent
1.8
1.2
3.6
2.6
Gross investment income
191.1
259.3
356.5
418.3
Investment expenses
13.6
11.2
23.9
22.4
Net investment income
$
176.5
$
248.1
$
332.6
$
395.9
(Some amounts may not reconcile due to rounding.)
The following table shows a comparison

of various investment yields

for the periods indicated.
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Annualized pre-tax yield on average cash and invested assets
3.6%
6.1%
3.5%
5.0%
Annualized after-tax yield on average cash and invested assets
2.9%
4.9%
2.8%
4.0%
























































































































































































































38
Net Gains (Losses) on Investments.
The following table presents the composition

of our net gains (losses) on investments

for the periods indicated:

Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
2022
2021
Variance
Realized gains (losses) from dispositions:
Fixed maturity securities available for sale
Gains
$
3.1
$
8.9
$
(5.8)
$
6.3
$
15.2
$
(8.9)
Losses
(13.0)
(4.7)
(8.4)
(21.2)
(7.1)
(14.1)
Total
(10.0)
4.2
(14.1)
(15.0)
8.1
(23.1)
Equity securities, fair value
Gains
4.1
2.6
1.5
7.6
14.9
(7.3)
Losses
(34.1)
(2.0)
(32.1)
(45.9)
(8.1)
(37.8)
Total
(30.0)
0.6
(30.5)
(38.3)
6.8
(45.1)
Other invested assets
Gains
3.3
4.2
(0.9)
7.6
5.6
2.0
Losses
(2.8)
(1.5)
(1.4)
(3.1)
(1.6)
(1.6)
Total
0.5
2.8
(2.3)
4.5
4.1
0.4
Total net realized gains (losses) from dispositions
Gains
10.5
15.7
(5.2)
21.5
35.7
(14.2)
Losses
(50.0)
(8.2)
(41.8)
(70.4)
(16.8)
(53.6)
Total
(39.4)
7.5
(47.0)
(48.8)
19.0
(67.8)
Allowances for credit losses:
1.5
(15.1)
16.6
(0.1)
(22.2)
22.1
Gains (losses) from fair value adjustments:
Equity securities, fair value
(185.9)
103.8
(289.7)
(316.7)
141.4
(458.1)
Other invested assets, fair value
(154.7)
87.5
(242.2)
(239.3)
180.6
(419.9)
Total
(340.5)
191.4
(531.9)
(555.9)
322.0
(877.9)
Total net gains (losses) on investments
$
(378.5)
$
183.8
$
(562.3)
$
(604.9)
$
318.8
$
(923.7)
(Some amounts may not reconcile due to rounding.)
Net gains

(losses) on investments

during the three

months ended June

30, 2022 primarily

relate to

net losses from
fair value adjustments

on equity securities of $185.9

million as a result

of equity market declines

during the second
quarter of 2022, net losses

of $154.7 million from fair

value adjustments

on other invested assets

and $39.4 million
of net realized losses from disposition

of investments.
Net gains (losses) on investments

during the six months ended June 30, 2022 primarily

relate to net losses from

fair
value

adjustments

on

equity

securities

of $316.7

million

as

a

result

of equity

market

declines

during

the

first

six

months of 2022, net losses of $239.3 million

from fair value adjustments

on other invested assets


and $48.8 million
of net realized losses from disposition

of investments.
Segment Results.
The Company

manages its

reinsurance

and insurance

operations

as autonomous

units and

key

strategic

decisions

are based on the aggregate operating

results and projections for these segments

of business.

The

Reinsurance

operation

writes

risks

on

a

worldwide

basis

in

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.





































































39
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.

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.

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 June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
1,394.0
$
1,439.3
$
(45.3)
-3.1%
$
2,773.7
$
2,859.3
$
(85.7)
-3.0%
Net written premiums
1,245.1
1,291.2
(46.2)
-3.6%
2,430.4
2,500.0
(69.6)
-2.8%
Premiums earned
$
1,294.9
$
1,232.2
$
62.7
5.1%
$
2,504.2
$
2,409.3
$
94.9
3.9%
Incurred losses and LAE
875.4
739.4
136.0
18.4%
1,695.9
1,709.8
(13.9)
-0.8%
Commission and brokerage
331.9
325.0
6.9
2.1%
647.2
615.5
31.7
5.1%
Other underwriting expenses
32.5
33.0
(0.5)
-1.5%
63.4
69.3
(5.9)
-8.5%
Underwriting gain (loss)
$
55.1
$
134.7
$
(79.6)
-59.1%
$
97.7
$
14.7
$
82.9
NM
Point Chg
Point Chg
Loss ratio
67.6%
60.0%
7.6
67.7%
71.0%
(3.3)
Commission and brokerage ratio
25.6%
26.4%
(0.8)
25.8%
25.5%
0.3
Other underwriting ratio
2.5%
2.7%
(0.2)
2.5%
2.9%
(0.4)
Combined ratio
95.7%
89.1%
6.6
96.1%
99.4%
(3.3)
(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)
Premiums.

Gross written

premiums decreased

by 3.1% to

$1.39 billion for

the three

months ended

June 30, 2022
from

$1.44

billion

for

the

three

months

ended

June

30,

2021

primarily

due

to

a

decline

in

property

pro

rata
business.

Net

written

premiums

decreased

by

3.6%

to

$1.25

billion

for

the

three

months

ended

June

30,

2022
compared to

$1.29 billion for

the three

months ended

June 30, 2021,

which is consistent

with the change

in gross
written

premiums.

Premiums

earned

increased

5.1%

to

$1.3

billion

for

the

three

months

ended

June

30,

2022
compared

to

$1.2 billion

for

the three

months

ended June

30, 2021.

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. Accordingly,

the increases in

gross written
premiums

from

pro

rata

business

during

the

latter

half

of

2021

contributed

to

the

current

quarter

percentage
increase in net earned premiums.
Gross written premiums

decreased by 3.0% to

$2.8 billion for the six

months ended June 30, 2022 from

$2.9 billion
for

the

six

months

ended

June

30,

2021

primarily

due

to

a

decline

in

property

pro

rata

business.

Net

written

































































































































































































































































































40
premiums decreased

by 2.8%

to $2.4

billion for

the six

months

ended June

30, 2022

compared

to $2.5

billion for
the

six

months

ended

June

30,

2021,

which

is

consistent

with

the

change

in

gross

written

premiums.

Premiums
earned increased

3.9% to

$2.5 billion

for the

six months

ended June

30, 2022

compared to

$2.4 billion

for the

six
months

ended

June

30,

2021.

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.

Accordingly,

the

increases

in

gross

written

premiums

from

pro

rata

business

during the latter half of 2021 contributed

to the current quarter percentage


increase in net earned premiums.
Incurred Losses and LAE.

The following tables present

the incurred losses and LAE for

the Reinsurance segment

for
the periods indicated.
Three Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
812.8
62.8%
$
-
0.0%
$
812.8
62.8%
Catastrophes
60.0
4.6%
2.6
0.2%
62.6
4.8%
Total segment
$
872.8
67.4%
$
2.6
0.2%
$
875.4
67.6%
2021
Attritional
$
730.7
59.3%
$
0.5
0.0%
$
731.2
59.3%
Catastrophes
25.0
2.0%
(16.7)
-1.4%
8.3
0.7%
Total segment
$
755.7
61.3%
$
(16.2)
-1.3%
$
739.4
60.0%
Variance 2022/2021
Attritional
$
82.1
3.5
pts
$
(0.5)
-
pts
$
81.6
3.5
pts
Catastrophes
35.0
2.6
pts
19.3
1.6
pts
54.3
4.1
pts
Total segment
$
117.1
6.1
pts
$
18.8
1.6
pts
$
136.0
7.6
pts
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
1,550.4
61.9%
$
0.4
0.0%
$
1,550.8
61.9%
Catastrophes
135.5
5.4%
9.6
0.4%
145.1
5.8%
Total segment
$
1,685.9
67.3%
$
10.0
0.4%
$
1,695.9
67.7%
2021
Attritional
$
1,472.5
61.1%
$
0.5
0.0%
$
1,472.9
61.1%
Catastrophes
238.0
9.9%
(1.2)
0.0%
236.8
9.8%
Total segment
$
1,710.5
71.0%
$
(0.7)
0.0%
$
1,709.8
71.0%
Variance 2022/2021
Attritional
$
77.9
0.8
pts
$
(0.1)
-
pts
$
77.8
0.8
pts
Catastrophes
(102.5)
(4.5)
pts
10.8
0.4
pts
(91.7)
(4.0)
pts
Total segment
$
(24.6)
(3.7)
pts
$
10.7
0.4
pts
$
(13.9)
(3.3)
pts
(Some amounts may not reconcile due to rounding.)
Incurred

losses

increased

by

18.4%

to

$875.4

million

for

the

three

months

ended

June

30,

2022,

compared

to
$739.4 million

for the

three months

ended June

30, 2021.

The increase

was primarily

due to

an increase

of $82.1
million in

current

year

attritional

losses

and an

increase

of $35.0

million in

current

year

catastrophe

losses.

The
increase in current year

attritional losses

was mainly related

to the impact of the increase

in premiums earned and
$24.6 million

of attritional

losses incurred

due to

the Ukraine

/Russia

war.

The current

year

catastrophe

losses of
$60.0

million

for

the

three

months

ended

June

30,

2022

related

primarily

to

2022

South

Africa

flood

($37.5
million), the

2022

Canada

derecho

($16.0 million)

and the

2022 2
nd

quarter

U.S.

storms

($7.0 million).

The $25.0
































































































41
million

of

current

year

catastrophe

losses

for

the

three

months

ended

June

30,

2021

related

to

Tropical

Storm

Claudette and the Victoria Australia

floods.
Incurred

losses

decreased

by

0.8%

to

$1.70

billion

for

the

six

months

ended

June

30,

2022,

compared

to

$1.71
billion for

the six

months

ended June

30, 2021.

The decrease

was

primarily

due to

a

decline of

$102.5

million in
current

year

catastrophe

losses,

partially

offset

by

an

increase

of

$77.9

million

in

current

year

attritional

losses.
The increase in current

year attritional

losses was mainly related

to the impact of the

increase in premiums

earned
and $24.6 million

of attritional

losses incurred

due to the

Ukraine/Russia war.

The current

year catastrophe

losses
of $135.5 million

for the six

months ended June

30, 2022 related

primarily to 2022

Australia floods

($71.4 million),
2022

South

Africa

flood

($37.5

million),

the

2022

Canada

derecho

($16.0

million),

2022

2
nd

quarter

U.S.

storms
($7.0 million), and the 2022

March U.S. storms

($3.6 million). The $238.0

million of current year

catastrophe losses
for

the

six

months

ended

June

30,

2021

primarily

related

to

the

Texas

winter

storms

($205.5

million),

with

the

remaining losses emanating from Tropical

Storm Claudette, Victoria Australia


floods and the 2021 Australia floods.
Segment Expenses.

Commission and

brokerage

expense increased

by 2.1%

to $331.9

million for

the three

months
ended

June

30,

2022

compared

to

$325.0

million

for

the

three

months

ended

June

30,

2021.

Commission

and
brokerage

expense

increased

by

5.1%

to

$647.2

million

for

the

six

months

ended

June

30,

2022

compared

to
$615.5 million

for

the

six

months

ended June

30, 2021.

The

increases

were

mainly

due

to

changes

in the

mix of
business.

Segment other

underwriting expenses

decreased to

$32.5 million for

the three

months

ended June

30, 2022 from
$33.0 million for the three

months ended June 30, 2021. Segment

other underwriting expenses decreased

to $63.4
million for

the

six

months

ended June

30,

2022 from

$69.3

million

for

the

six

months

ended

June

30,

2021. The
decreases

were mainly due to the impact of decreases in premiums

earned and changes in the mix of business.

Insurance.
The

following

table

presents

the

underwriting

results

and

ratios

for

the

Insurance

segment

for

the

periods
indicated.

Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in millions)
2022
2021
Variance
% Change
2022
2021
Variance
% Change
Gross written premiums
$
1,042.9
$
877.8
$
165.1
18.8%
$
1,868.2
$
1,591.0
$
277.2
17.4%
Net written premiums
749.6
637.1
112.4
17.6%
1,360.4
1,193.6
166.8
14.0%
Premiums earned
$
659.3
$
534.4
$
124.9
23.4%
$
1,278.6
$
1,054.1
$
224.5
21.4%
Incurred losses and LAE
428.5
356.2
72.4
20.3%
833.8
739.9
93.8
12.7%
Commission and brokerage
76.7
61.9
14.9
24.1%
146.0
121.2
24.9
20.6%
Other underwriting expenses
87.8
76.9
10.9
14.2%
174.6
150.4
24.2
16.1%
Underwriting gain (loss)
$
66.2
$
39.4
$
26.8
68.0%
$
124.2
$
42.6
$
81.6
191.6%
Point Chg
Point Chg
Loss ratio
65.0%
66.7%
(1.7)
65.2%
70.2%
(5.0)
Commission and brokerage ratio
11.6%
11.6%
-
11.4%
11.5%
(0.1)
Other underwriting ratio
13.3%
14.4%
(0.9)
13.7%
14.3%
(0.6)
Combined ratio
90.0%
92.6%
(2.6)
90.3%
96.0%
(5.7)
(Some amounts may not reconcile due to rounding.)
(NM, not meaningful)


















































































































































42
Premiums.
Gross written

premiums increased

by 18.8%

to $1.0

billion for

the three

months

ended June

30, 2022
compared

to

$877.8

million

for

the

three

months

ended

June

30,

2021.

The rise

in

gross

written

premiums

was
primarily

related

to

increases

across

most

lines

of

business,

notably

specialty

casualty

business,

professional
liability business

and other

specialty business.

Net written

premiums increased

by 17.6%

to $749.6

million for

the

three months ended June 30, 2022 compared

to $637.1 million for the three


months ended June 30, 2021, which is
consistent with

the change in gross

written premiums.

Premiums earned increased

23.4% to $659.3

million for the
three

months

ended

June

30,

2022 compared

to

$534.4

million

for

the

three

months

ended

June

30,

2021.

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.

Accordingly,

the

significant

increases

in
gross

written

premiums

during

the

latter

half

of 2021

contributed

to

the

current

quarter

percentage

increase

in
net earned premiums.
Gross

written

premiums

increased

by

17.4% to

$1.9 billion

for

the six

months

ended June

30, 2022

compared

to
$1.6 billion

for

the six

months

ended June

30, 2021.

The rise

in gross

written

premiums

was

primarily related

to
increases

across

most

lines

of

business,

notably

specialty

casualty

business,

professional

liability

business

and
other specialty

business.

Net written

premiums

increased by

14.0% to

$1.4 billion

for the

six months

ended June
30, 2022

compared to

$1.2 billion

for the

six months

ended June

30, 2021,

which is

consistent

with the

change in
gross written

premiums.

Premiums earned increased

21.4% to $1.3

billion for

the six months

ended June 30,

2022
compared to

$1.1 billion

for the

six months

ended June

30, 2021.

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. Accordingly,

the significant

increases in

gross written

premiums during

the latter
half of 2021 contributed to the current quarter

percentage increase in net earned premiums.
Incurred Losses

and LAE.

The following

tables present

the incurred

losses and

LAE for

the Insurance

segment for
the periods indicated.

Three Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
423.9
64.3%
$
-
0.0%
$
423.9
64.3%
Catastrophes
5.0
0.8%
(0.3)
0.0%
4.7
0.7%
Total segment
$
428.9
65.0%
$
(0.3)
0.0%
$
428.5
65.0%
2021
Attritional
$
346.0
64.7%
$
(1.0)
-0.2%
$
345.0
64.6%
Catastrophes
10.0
1.9%
1.1
0.2%
11.1
2.1%
Total segment
$
356.0
66.6%
$
0.2
0.0%
$
356.2
66.7%
Variance 2022/2021
Attritional
$
77.9
(0.4)
pts
$
1.0
0.2
pts
$
78.8
(0.3)
pts
Catastrophes
(5.0)
(1.1)
pts
(1.5)
(0.2)
pts
(6.5)
(1.4)
pts
Total segment
$
72.9
(1.5)
pts
$
(0.5)
-
pts
$
72.4
(1.7)
pts

















































































































































43
Six Months Ended June 30,
Current
Ratio %/
Prior
Ratio %/
Total
Ratio %/
(Dollars in millions)
Year
Pt Change
Years
Pt Change
Incurred
Pt Change
2022
Attritional
$
824.7
64.5%
$
(0.4)
0.0%
$
824.3
64.5%
Catastrophes
10.0
0.8%
(0.6)
0.0%
9.4
0.7%
Total segment
$
834.7
65.3%
$
(1.0)
0.0%
$
833.8
65.2%
2021
Attritional
$
682.6
64.8%
$
(2.0)
-0.2%
$
680.6
64.6%
Catastrophes
57.5
5.5%
1.8
0.2%
59.3
5.6%
Total segment
$
740.1
70.2%
$
(0.2)
0.0%
$
739.9
70.2%
Variance 2022/2021
Attritional
$
142.1
(0.3)
pts
$
1.6
0.2
pts
$
143.7
(0.1)
pts
Catastrophes
(47.5)
(4.7)
pts
(2.4)
(0.2)
pts
(49.9)
(4.9)
pts
Total segment
$
94.6
(5.0)
pts
$
(0.8)
-
pts
$
93.8
(5.0)
pts
(Some amounts may not reconcile due to rounding.)
Incurred losses and

LAE increased by

20.3% to $428.5 million

for the three

months ended June

30, 2022 compared
to $356.2

million for

the three

months ended

June 30,

2021, mainly due

to an

increase of

$77.9 million

in current
year attritional

losses which

is primarily

related to

the impact

of the

increase in

premiums earned,

partially offset
by a decrease of $5.0

million in current year

catastrophe losses.

The $5.0 million of current

year catastrophe

losses
for

the three

months

ended June

30, 2022,

related

to

the

2022 2
nd

quarter

U.S.

storms

($5.0 million)

.

The $10.0
million

of

current

year

catastrophe

losses

for

the

three

months

ended

June

30,

2021,

related

to

Texas

winter
storms.
Incurred losses and

LAE increased by

12.7% to $833.8 million

for the six

months ended June 30,

2022 compared to
$739.9 million for

the six months

ended June 30,

2021, mainly due

to an increase

of $142.1 million

in current

year
attritional losses

which is

primarily related

to the

impact of

the increase

in premiums

earned, partially

offset by

a
decrease of

$47.5 million

in current

year catastrophe

losses. The

$10.0 million

of current

year catastrophe

losses
for

the six

months

ended June

30, 2022,

related

to

the 2022

2
nd

quarter

U.S.

storms

($5.0 million)

and

the 2022
March

U.S.

storms

($5.0

million).

The

$57.5

million

of

current

year

catastrophe

losses

for

the

six

months

ended

June 30, 2021, related to Texas

winter storms.
Segment

Expenses.

Commission and

brokerage

increased by

24.1% to

$76.7 million

for

the three

months

ended
June 30,

2022 compared

to $61.9

million for

the three

months

ended June

30, 2021.

Commission and

brokerage
increased by

20.6% to

$146.0 million

for the

six months

ended June

30, 2022

compared

to $121.2

million for

the
six

months

ended

June

30,

2021.

These

increases

were

mainly

due

to

the

impact

of

the

increase

in

premiums
earned.

Segment

other

underwriting

expenses

increased

to

$87.8

million

for

the

three

months

ended

June

30,

2022
compared

to

$76.9

million

for

the

three

months

ended

June

30,

2021.

Segment

other

underwriting

expenses
increased to $174.6

million for the

six months ended

June 30, 2022

compared to $150.4

million for the

six months
ended

June

30,

2021.

These

increases

were

mainly

due

to

the

impact

of

the

increases

in

premiums

earned

and

increased 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.





























44
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

$18.9

billion

investment

portfolio,

at

June

30,

2022,

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

$1.9

billion

of

mortgage-backed

securities

in

the

$12.9

billion

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

fair

value

fluctuations

and

after-tax

unrealized

appreciation

on
our fixed

maturity portfolio

(including $230.9 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 fair

value

change

under the
various interest rate

change scenarios.

Impact of Interest Rate Shift in Basis Points
At June 30, 2022
(Dollars in millions)
-200
-100
0
100
200
Total Fair Value
$
13,937.1
$
13,556.4
$
13,175.7
$
12,795.0
$
12,414.4
Fair Value Change from Base (%)
5.8%
2.9%
0.0%
-2.9%
-5.8%
Change in Unrealized Appreciation
After-tax from Base ($)
$
601.5
$
300.7
$
-
$
(300.7)
$
(601.5)
We had

$13.7 billion

and $13.1

billion of

gross reserves

for losses

and LAE

as of

June 30,

2022 and

December 31,
2021, 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.



























45
Equity Risk.

Equity risk

is the potential

change in fair

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

value

and after-tax

change

in fair

value

of a

10% and

20% change

in

equity prices up and down for the periods indicated.


Impact of Percentage Change in Equity Fair Value
At June 30, 2022
(Dollars in millions)
-20%
-10%
0%
10%
20%
Fair Value of the Equity Portfolio
$
999.4
$
1,124.4
$
1,249.3
$
1,374.2
$
1,499.2
After-tax Change in Fair Value
(197.4)
(98.7)
-
98.7
197.4
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 fair

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 statement

s

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.

46
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.