Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nyse  >  Everest Re Group, Ltd.    RE   BMG3223R1088

EVEREST RE GROUP, LTD.

(RE)
  Report
Delayed Quote. Delayed Nyse - 12/04 04:10:00 pm
234.64 USD   +0.89%
12/01EVEREST RE GROUP, LTD. : Ex-dividend day for
FA
11/19EVEREST RE : Announces Dividend
BU
11/09EVEREST RE : MANAGEMENT'S DISCUSSION (form 10-Q)
AQ
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsAnalyst Recommendations

EVEREST RE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (form 10-Q)

08/10/2020 | 04:35pm EST

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., Bermuda 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, including
underwriting syndicates at Lloyd's of London 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.
Globally, many countries mandated that their citizens remain at home and many
non-essential businesses have continued to be physically closed. We closed our
physical offices; however, 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.



The pandemic has caused significant volatility in the global financial markets.
Interest rates plummeted, credit spreads widened and the equity markets lost
value. We saw our fixed maturity and equity portfolios decline in value
resulting in realized and unrealized investment losses in our March 31, 2020
financial statements. However, the financial markets rebounded during the second
quarter and we recognized after-tax realized gains of $150.5 million and
unrealized gains of $544.5 million in our June 30, 2020 financial statements.
Nevertheless, the lack of business activity may lead to an increase in
bankruptcies and corresponding credit losses. Our other invested assets are
comprised primarily of limited partnership investments. The change in limited
partnership values are generally recorded on a quarter lag. As expected, the
change in limited partnership values had a negative impact on our second quarter
results, reducing net investment income by $88.3 million.



                                       36

--------------------------------------------------------------------------------


There will also be a negative impact on future industry underwriting results.
With the closing of non-essential businesses, there has been a significant
decline in business activity. To the extent that premiums are based on business
activity, there will be a decline in premium volume. Incurred losses from the
pandemic will be impacted by the duration of the event and will vary by line of
business and geographical location. For the quarter ended June 30, 2020, our
underwriting results include $160 million of estimated losses related to the
pandemic and $310 million for the six months ended June 30, 2020. We anticipate
this Pandemic could have a meaningful impact on our revenue, as well as net and
operating income in future quarters as a result of reinsurance and insurance
claims due to the pandemic and resulting macro-economic market conditions.



Many regulators have issued moratoriums on the cancellation of policies for the
non-payment of premiums and also on non-renewals. We are complying with the
various regulatory requests for accommodations to policyholders during this
difficult period. The moratoriums combined with the forced closure of businesses
may lead to an increase in uncollectible premium expense.



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. Rates also appeared to be firming in some of the casualty 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 were experiencing modest rate increase, while some lines such as workers'
compensation were experiencing softer market conditions. It is too early to tell
what will be the impact on pricing conditions but it is likely to change
depending on the line of business and geography.



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



                                       37

--------------------------------------------------------------------------------

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 shareholders' equity for the periods indicated.



                                  Three Months Ended        Percentage            Six Months Ended           Percentage
                                       June 30,              Increase/                June 30,                Increase/
(Dollars in millions)             2020          2019        (Decrease)         2020            2019          (Decrease)
Gross written premiums         $ 2,369.3$ 2,166.7             9.4 %   $  4,940.2$     4,293.8            15.1 %
Net written premiums             2,017.5       1,784.0            13.1 %      4,219.0           3,635.7            16.0 %

REVENUES:
Premiums earned                $ 2,042.4$ 1,817.3            12.4 %   $  4,079.2$     3,550.0            14.9 %
Net investment income               38.1         179.0          (78.7) %        185.9             320.0          (41.9) %
Net realized capital gains         184.6          30.3              NM %       (25.9)             122.5         (121.2) %

(losses)

Net derivative gain (loss)          11.9           0.4              NM %        (3.5)               3.6         (197.8) %
Other income (expense)            (32.5)        (18.2)            89.4 %        (9.1)            (21.5)          (45.8) %
Total revenues                   2,244.5       2,008.7            11.7 %      4,226.5           3,974.6             6.3 %

CLAIMS AND EXPENSES:
Incurred losses and loss         1,407.0       1,094.6            28.5 %      2,837.9           2,143.2            32.4 %
adjustment expenses
Commission, brokerage, taxes       466.3         421.0            10.8 %        914.8             810.4            12.9 %
and fees
Other underwriting expenses        118.1         104.8            12.7 %        247.0             203.8            21.2 %
Corporate expenses                   8.7           7.5            15.9 %         18.6              14.2            30.9 %
Interest, fees and bond issue        7.3           8.4          (14.0) %         14.8              16.1           (7.6) %
cost amortization expense
Total claims and expenses        2,007.4       1,636.4            22.7 %      4,033.1           3,187.7            26.5 %

INCOME (LOSS) BEFORE TAXES 237.1 372.3 (36.3) %

     193.4             786.9          (75.4) %
Income tax expense (benefit)        46.2          39.5            17.0 %       (14.0)              99.5         (114.1) %
NET INCOME (LOSS)              $   190.9$   332.9          (42.7) %   $    207.5$       687.4          (69.8) %

RATIOS:                                                    Point Change                                     Point Change
Loss ratio                          68.9 %        60.2 %           8.7           69.6 %            60.4 %           9.2

Commission and brokerage ratio 22.8 % 23.2 % (0.4)

      22.4 %            22.8 %         (0.4)
Other underwriting expense                         5.8                                              5.7             0.4
ratio                                5.8 %             %             -            6.1 %                 %
Combined ratio                      97.5 %        89.2 %           8.3           98.1 %            88.9 %           9.2

                                                                                At              At           Percentage
                                                                             June 30,      December 31,       Increase/
(Dollars in millions, except                                                   2020            2019          (Decrease)
per share amounts)
Balance sheet data:
Total investments and cash                                                 $ 21,601.7$    20,748.5             4.1 %
Total assets                                                                 28,584.8          27,324.1             4.6 %
Loss and loss adjustment                                                     14,276.6          13,611.3             4.9 %
expense reserves
Total debt                                                                      620.8             633.8           (2.1) %
Total liabilities                                                            19,298.5          18,191.1             6.1 %
Shareholders' equity                                                          9,286.3           9,132.9             1.7 %
Book value per share                                                           232.32            223.85             3.8 %

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




Revenues.

Premiums. Gross written premiums increased by 9.4% to $2,369.3 million for the
three months ended June 30, 2020, compared to $2,166.7 million for the three
months ended June 30, 2019, reflecting a $128.8 million, or 9.1%, increase in
our reinsurance business and a $73.9 million, or 9.8%, increase in our insurance
business. The increase in reinsurance premiums was mainly due to increases in
property business, casualty writings and facultative business. The rise in
insurance premiums was primarily due to increases in many lines of business,
including property, casualty, specialty lines and business written through the
Lloyd's Syndicate. Gross written premiums increased by 15.1% to $4,940.2 million
for the six months ended June 30, 2020, compared to $4,293.8 million for the six
months ended June 30, 2019, reflecting a $374.5 million, or 12.7%, increase in
our reinsurance business and a $272.0 million, or 20.1%, increase in our
insurance business. The increase in reinsurance premiums was mainly due to
increases in treaty property business and facultative business. The rise in

                                       38

--------------------------------------------------------------------------------


insurance premiums was primarily due to increases in many lines of business,
including property, casualty, specialty lines, accident and health and business
written through the Lloyd's Syndicate.



Net written premiums increased by 13.1% to $2,017.5 million for the three months
ended June 30, 2020, compared to $1,784.0 million for the three months ended
June 30, 2019. Net written premiums increased by 16.0% to $4,219.0 million for
the six months ended June 30, 2020, compared to $3,635.7 million for the six
months ended June 30, 2019. The differences between the changes in gross written
premiums compared to the changes in net written premiums are primarily due to
varying utilization of reinsurance. Premiums earned increased by 12.4% to
$2,042.4 million for the three months ended June 30, 2020, compared to $1,817.3
million for the three months ended June 30, 2019. Premiums earned increased by
14.9% to $4,079.2 million for the six months ended June 30, 2020, compared to
$3,550.0 million for the six months ended June 30, 2019. The changes in premiums
earned relative to net written premiums are 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 decreased by 78.7% to $38.1 million
for the three months ended June 30, 2020, compared with investment income of
$179.0 million for the three months ended June 30, 2019. Net investment income
decreased by 41.9% to $185.9 million for the six months ended June 30, 2020,
compared with investment income of $320.0 million for the six months ended June
30, 2019. Net pre-tax investment income, as a percentage of average invested
assets, was 0.7% for the three months ended June 30, 2020, compared to 3.7% for
the three months ended June 30, 2019. Net pre-tax investment income, as a
percentage of average invested assets, was 1.8% for the six months ended June
30, 2020, compared to 3.4% for the six months ended June 30, 2019. The decreases
in income and yield were primarily the result of losses from our limited
partnerships, partially offset by higher income from our growing fixed maturity
portfolio.



Net Realized Capital Gains (Losses). Net realized capital gains were $184.6
million and $30.3 million for the three months ended June 30, 2020 and 2019,
respectively. As discussed earlier, the COVID-19 pandemic caused significant
volatility in the global financial markets. The net realized capital gains of
$184.6 million for the three months ended June 30, 2020 were comprised of $161.4
million of net gains from fair value re-measurements, resulting primarily from
increases in equity security valuations which rebounded from declines in the
first quarter of 2020, and $27.3 million of net realized capital gains from
sales of investments, partially offset by $4.1 million of net allowances for
credit losses. The net realized capital gains of $30.3 million for the three
months ended June 30, 2019 were comprised of $30.4 million of net gains from
fair value re-measurements and $5.1 million of net realized capital gains from
sales of investments, partially offset by $5.2 million of other-than-temporary
impairments.



Net realized capital losses were $25.9 million and net realized capital gains
were $122.5 million for the six months ended June 30, 2020 and 2019,
respectively. The net realized capital losses of $25.9 million for the six
months ended June 30, 2020 were comprised of $25.8 million of net allowances for
credit losses and $16.4 million of net realized capital losses from sales of
investments, partially offset by $16.3 million of net gains from fair value
re-measurements. The net realized capital gains of $122.5 million for the six
months ended June 30, 2019 were comprised of $114.8 million of net gains from
fair value re-measurements and $15.8 million of net realized capital gains from
sales of investments, partially offset by $8.1 million of other-than-temporary
impairments.



Net Derivative Gain (Loss). In 2005 and prior, we sold seven equity index put
option contracts, two of which remained outstanding at June 30, 2020. These
contracts meet the definition of a derivative in accordance with FASB guidance
and as such, are fair valued each quarter with the change recorded as net
derivative gain or loss in the consolidated statements of operations and
comprehensive income (loss). As a result of these adjustments in value, we
recognized net derivative gains of $11.9 million and $0.4 million for the three
months ended June 30, 2020 and 2019, respectively, and net derivative losses of
$3.5 million and net derivative gains of $3.6 million for the six months ended
June 30, 2020 and 2019, respectively. The changes in the fair value of

                                       39

--------------------------------------------------------------------------------

these equity index put option contracts is generally indicative of the changes in the equity markets and interest rates over the same periods.




Other Income (Expense). We recorded other expense of $32.5 million and $18.2
million for the three months ended June 30, 2020 and 2019, respectively. We
recorded other expense of $9.1 million and $21.5 million for the six months
ended June 30, 2020 and 2019, respectively. The changes were primarily the
result of fluctuations in foreign currency exchange rates, income related to Mt.
Logan Re and changes in deferred gains related to any retroactive reinsurance
transactions. We recognized foreign currency exchange expense of $44.2 million
and $18.1 million for the three months ended June 30, 2020 and 2019,
respectively. We recognized foreign currency exchange expense of $23.6 million
and $18.5 million for the six months ended June 30, 2020 and 2019, respectively.



Claims and Expenses.

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



                                           Three Months Ended June 30,
                      Current     Ratio %/     Prior      Ratio %/      Total      Ratio %/
(Dollar in millions)   Year      Pt Change     Years     Pt Change    Incurred    Pt Change
2020
Attritional          $ 1,386.7     67.9 %     $    5.3      0.3 %     $ 1,392.0     68.2 %
Catastrophes              15.0      0.7 %            -        - %          15.0      0.7 %
Total                $ 1,401.7     68.6 %     $    5.3      0.3 %     $ 1,407.0     68.9 %

2019

Attritional $ 1,085.2 59.6 % $ (20.6) -1.1 % $ 1,064.6 58.5 % Catastrophes

                 -        - %         30.0      1.7 %          30.0      1.7 %
Total                $ 1,085.2     59.6 %     $    9.4      0.6 %     $ 1,094.6     60.2 %

Variance 2020/2019
Attritional          $   301.5      8.3 pts   $   25.9      1.4 pts   $   327.4      9.7 pts
Catastrophes              15.0      0.7 pts     (30.0)    (1.7) pts      (15.0)    (1.0) pts
Total                $   316.5      9.0 pts   $  (4.1)    (0.3) pts   $   312.4      8.7 pts




                                            Six Months Ended June 30,
                      Current     Ratio %/     Prior      Ratio %/      Total      Ratio %/
(Dollar in millions)   Year      Pt Change     Years     Pt Change    Incurred    Pt Change
2020
Attritional          $ 2,790.1     68.4 %     $    2.7      0.1 %     $ 2,792.9     68.5 %
Catastrophes              45.0      1.1 %            -        - %          45.0      1.1 %
Total                $ 2,835.1     69.5 %     $    2.7      0.1 %     $ 2,837.9     69.6 %

2019

Attritional $ 2,110.3 59.5 % $ (22.2) -0.6 % $ 2,088.2 58.9 % Catastrophes

              25.0      0.7 %         30.0      0.8 %          55.0      1.5 %
Total                $ 2,135.3     60.2 %     $    7.8      0.2 %     $ 

2,143.2 60.4 %


Variance 2020/2019
Attritional          $   679.8      8.9 pts   $   24.9      0.7 pts   $   704.7      9.6 pts
Catastrophes              20.0      0.4 pts     (30.0)    (0.8) pts      (10.0)    (0.4) pts
Total                $   699.8      9.3 pts   $  (5.1)    (0.1) pts   $   694.7      9.2 pts




Incurred losses and LAE increased by 28.5% to $1,407.0 million for the three
months ended June 30, 2020, compared to $1,094.6 million for the three months
ended June 30, 2019. The increase was primarily due to a rise of $301.5 million
in current year attritional losses, mainly due to $160.0 million of losses
related to the COVID-19 pandemic and the impact of the increase in premiums
earned, as well as an increase of $15.0 million in current year catastrophe
losses. The current year catastrophe losses of $15.0 million for the three
months ended June 30, 2020 related to the 2020 U.S. civil unrest ($15.0
million). There were no current year catastrophe losses for the three months
ended June 30, 2019.


Incurred losses and LAE increased by 32.4% to $2,837.9 million for the six months ended June 30, 2020, compared to $2,143.2 million for the six months ended June 30, 2019. The increase was primarily due to a rise

                                       40

--------------------------------------------------------------------------------


of $679.8 million in current year attritional losses, mainly due to $310.0
million of losses related to the COVID-19 pandemic and the impact of the
increase in premiums earned, as well as an increase of $20.0 million in current
year catastrophe losses. The current year catastrophe losses of $45.0 million
for the six months ended June 30, 2020 related to the 2020 U.S. civil unrest
($15.0 million), Nashville tornadoes ($13.1 million), Australia East Coast Storm
($10.0 million) and the 2020 Australia fires ($6.9 million). The $25.0 million
of current year catastrophe losses for the six months ended June 30, 2019
related to the Townsville monsoon in Australia ($25.0 million).



Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees
increased by 10.8% to $466.3 million for the three months ended June 30, 2020,
compared to $421.0 million for the three months ended June 30, 2019. Commission,
brokerage, taxes and fees increased by 12.9% to $914.8 million for the six
months ended June 30, 2020, compared to $810.4 million for the six months ended
June 30, 2019. The increases were primarily due to the impact of the increases
in premiums earned and changes in the mix of business.



Other Underwriting Expenses. Other underwriting expenses were $118.1 million and
$104.8 million for the three months ended June 30, 2020 and 2019, respectively.
Other underwriting expenses were $247.0 million and $203.8 million for the six
months ended June 30, 2020 and 2019, respectively. The increases in other
underwriting expenses were mainly due to the impact of the increases in premiums
earned.



Corporate Expenses. Corporate expenses, which are general operating expenses
that are not allocated to segments, were $8.7 million and $7.5 million for the
three months ended June 30, 2020 and 2019, respectively, and $18.6 million and
$14.2 million for the six months ended June 30, 2020 and 2019, respectively.
These increases were mainly due to higher incentive compensation expenses.



Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and
other bond amortization expense was $7.3 million and $8.4 million for the three
months ended June 30, 2020 and 2019, respectively. Interest, fees and other bond
amortization expense was $14.8 million and $16.1 million for the six months
ended June 30, 2020 and 2019, respectively. Any variance in expense was
primarily due to 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 2.78% as of June 30, 2020.



Income Tax Expense (Benefit). We had an income tax expense of $46.2 million and
an income tax benefit of $14.0 million for the three and six months ended June
30, 2020, respectively. We had an income tax expense of $39.5 million and $99.5
million for the three and six months ended June 30, 2019, respectively. Income
tax benefit or expense is primarily a function of the geographic location of the
Company's pre-tax income and the statutory tax rates in those jurisdictions. The
effective tax rate ("ETR") is primarily affected by tax-exempt investment
income, 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 and net capital gains (losses), among jurisdictions
with different tax rates. The change in income tax expense (benefit) for the
three and six months ended June 30, 2020 compared to the three and six months
ended June 30, 2019 was primarily due to the estimated incurred losses from the
COVID-19 pandemic and the beneficial tax impact from the Coronavirus Aid, Relief
and Economic Securities Act ("the CARES Act").



The 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 5 year
loss carryback tax provision provided a tax benefit of $31.0 million which it
recorded in the quarter ended March 31, 2020.



                                       41

--------------------------------------------------------------------------------

Net Income (Loss).


Our net income was $190.9 million and $332.9 million for the three months ended
June 30, 2020 and 2019, respectively. Our net income was $207.5 million and
$687.4 million for the six months ended June 30, 2020 and 2019, respectively.
The changes were primarily driven by the financial component fluctuations
explained above.



Ratios.

Our combined ratio increased by 8.3 points to 97.5% for the three months ended
June 30, 2020, compared to 89.2% for the three months ended June 30, 2019, and
increased by 9.2 points to 98.1% for the six months ended June 30, 2020,
compared to 88.9% for the six months ended June 30, 2019. The loss ratio
component increased 8.7 points and 9.2 points for the three and six months ended
June 30, 2020 over the same periods last year mainly due to $160.0 million and
$310.0 million of attritional losses related to the COVID-19 pandemic for the
three and six months ended June 30, 2020, respectively. The commission and
brokerage ratio component decreased slightly to 22.8% for the three months ended
June 30, 2020 compared to 23.2% for the three months ended June 30, 2019, and
decreased slightly to 22.4% for the six months ended June 30, 2020 compared to
22.8% for the six months ended June 30, 2019. The changes were mainly due to
changes in the mix of business. The other underwriting expense ratio remained
flat at 5.8% for the three months ended June 30, 2020 and 2019, and increased
slightly to 6.1% for the six months ended June 30, 2020 from 5.7% for the six
months ended June 30, 2019. The increase for the six month period was mainly due
to higher incentive compensation expenses.



Shareholders' Equity.


Shareholders' equity increased by $153.4 million to $9,286.3 million at June 30,
2020 from $9,132.9 million at December 31, 2019, principally as a result of
$296.5 million of unrealized appreciation on investments net of tax, $207.5
million of net income, $6.3 million of share-based compensation transactions and
$2.7 million of net benefit plan obligation adjustments, partially offset by the
repurchase of 970,892 common shares for $200.0 million, $125.2 million of
shareholder dividends, $30.2 million of net foreign currency translation
adjustments and $4.2 million of cumulative adjustment from the adoption of ASU
2016-13.


Consolidated Investment Results

Net Investment Income.


Net investment income decreased by 78.7% to $38.1 million for the three months
ended June 30, 2020, compared with investment income of $179.0 million for the
three months ended June 30, 2019. Net investment income decreased by 41.9% to
$185.9 million for the six months ended June 30, 2020, compared with investment
income of $320.0 million for the six months ended June 30, 2019. The decreases
were primarily the result of losses from our limited partnerships, partially
offset by higher income from our growing fixed maturity portfolio.



                                       42

--------------------------------------------------------------------------------


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)                             2020          2019         2020          2019
Fixed maturities                               $     133.9$    126.6$     271.8$    253.3
Equity securities                                      3.7          4.6           7.2          8.1
Short-term investments and cash                        1.7          5.4           3.9          9.6
Other invested assets
Limited partnerships                                (88.3)         48.2        (66.7)         56.5
Other                                                (2.9)          3.3        (16.0)          6.3
Gross investment income before adjustments            48.1        188.1         200.2        333.8
Funds held interest income (expense)                   2.0          1.4          10.2          7.4
Future policy benefit reserve income (expense)       (0.3)        (0.4)         (0.5)        (0.6)
Gross investment income                               49.8        189.1         209.9        340.6
Investment expenses                                 (11.7)       (10.2)        (24.0)       (20.6)
Net investment income                          $      38.1$    179.0$     185.9$    320.0

(Some amounts may not reconcile due to rounding.)





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



                                                        At            At
                                                     June 30,    December 31,
                                                       2020          2019
Imbedded pre-tax yield of cash and invested assets      3.4 %          3.4 %
Imbedded after-tax yield of cash and invested assets    2.9 %          3.0 %




                                               Three Months Ended       Six Months Ended
                                                    June 30,               June 30,
                                               2020         2019        2020         2019
Annualized pre-tax yield on average cash and    0.7 %        3.7 %       1.8 %        3.4 %
invested assets
Annualized after-tax yield on average cash      0.6 %        3.4 %       1.6 %        3.0 %
and invested assets




                                       43
--------------------------------------------------------------------------------

Net Realized Capital Gains (Losses).

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



                                   Three Months Ended June 30,            Six Months Ended June 30,
(Dollars in millions)            2020           2019       Variance        2020       2019    Variance
Gains (losses) from sales:
Fixed maturity securities,
market value:
Gains                         $      21.4$     11.6$      9.8$    35.4$   27.7$     7.7
Losses                             (11.7)         (5.4)        (6.3)      (39.8)     (16.3)      (23.5)
Total                                 9.6           6.1          3.5       (4.5)       11.4      (15.8)

Fixed maturity securities,
fair value:
Gains                         $         -    $      0.4$    (0.4)           -        0.4       (0.4)
Losses                                  -             -            -           -          -           -
Total                                   -           0.4        (0.4)           -        0.4       (0.4)
Equity securities, fair
value:
Gains                                18.2           2.6         15.6        20.8        8.3        12.5
Losses                              (1.9)         (3.9)          2.0      (32.1)      (4.5)      (27.6)
Total                                16.3         (1.4)         17.6      (11.3)        3.7      (15.0)

Other Invested Assets:
Gains                                 1.6         (0.1)          1.7         4.6        0.3         4.3
Losses                              (0.3)         (0.1)        (0.2)       (5.6)      (0.1)       (5.5)
Total                                 1.3         (0.2)          1.5       (1.0)        0.2       (1.2)

Short Term Investments:
Gains                                 0.1           0.1            -         0.4        0.1         0.3
Losses                                  -             -            -           -          -           -
Total                                 0.1           0.1            -         0.4        0.1         0.3

Total net realized gains
(losses) from sales:
Gains                                41.2          14.6         26.6        61.1       36.7        24.4
Losses                             (13.9)         (9.4)        (4.4)      (77.5)     (20.9)      (56.6)
Total                                27.3           5.1         22.2      (16.4)       15.8      (32.2)

Allowance for credit losses         (4.1)             -        (4.1)      (25.8)          -      (25.8)

Other-than-temporary
impairments:                            -         (5.2)          5.2           -      (8.1)         8.1

Gains (losses) from fair
value adjustments:
Fixed maturities, fair value        (0.3)             -        (0.3)       (1.4)          -       (1.4)
Equity securities, fair value       161.7          30.4        131.3        17.7      114.8      (97.1)
Total                               161.4          30.4        131.0        16.3      114.8      (98.5)

Total net realized capital
gains (losses)                $     184.6$     30.3$    154.3

(25.9) 122.5 (148.5)

(Some amounts may not
reconcile due to rounding.)




Net realized capital gains were $184.6 million and $30.3 million for the three
months ended June 30, 2020 and 2019, respectively. As discussed earlier, the
COVID-19 pandemic caused significant volatility in the global financial markets.
For the three months ended June 30, 2020, we recorded $161.4 million of net
gains from fair value re-measurements, resulting primarily from increases in
equity security valuations which rebounded from declines in the first quarter of
2020, and $27.3 million of net realized capital gains from sales of investments,
partially offset by $4.1 million of net allowances for credit losses. For the
three months ended June 30, 2019, we recorded $30.4 million of net gains from
fair value re-measurements and $5.1 million of net realized capital gains from
sales of investments, partially offset by $5.2 million of other-than-temporary
impairments. The fixed maturity and equity sales for the three months ended June
30, 2020 and 2019 related primarily to adjusting the portfolios for overall
market changes and individual credit shifts.



                                       44

--------------------------------------------------------------------------------


Net realized capital losses were $25.9 million and net realized capital gains
were $122.5 million for the six months ended June 30, 2020 and 2019,
respectively. For the six months ended June 30, 2020, we recorded $25.8 million
of net allowances for credit losses and $16.4 million of net realized capital
losses from sales of investments, partially offset by $16.3 million of net gains
from fair value re-measurements. For the six months ended June 30, 2019, we
recorded $114.8 million of net gains from fair value re-measurements and $15.8
million of net realized capital gains from sales of investments, partially
offset by $8.1 million of other-than-temporary impairments. The fixed maturity
and equity sales for the six months ended June 30, 2020 and 2019 related
primarily to adjusting the portfolios for overall market changes and individual
credit shifts.



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 U.S., Bermuda, and Ireland offices, as well as, through branches
in Canada, Singapore and the United Kingdom. The Insurance operation writes
property and casualty insurance directly and through brokers, surplus lines
brokers and general agents within the U.S., Canada and Europe through its
offices in the U.S., Canada, Ireland and a branch located in Zurich.



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



Underwriting results include earned premium less losses and loss adjustment
expenses ("LAE") incurred, commission and brokerage expenses and other
underwriting expenses. 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.

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)     2020             2019       Variance     % Change 

2020 2019 Variance % Change Gross written premiums

              $  1,538.3$  1,409.6$   128.8        9.1 

% $ 3,316.1$ 2,941.6$ 374.5 12.7 % Net written premiums 1,424.1 1,234.7 189.4 15.3 % 3,037.2 2,629.2 407.9 15.5 %


Premiums earned       $  1,502.3$  1,343.8$   158.5       11.8 %   $ 2,987.5$ 2,651.3$   336.2       12.7 %
Incurred losses and
LAE                      1,005.7            783.1         222.6       28.4 %     2,026.3       1,555.3         471.0       30.3 %
Commission and
brokerage                  387.3            345.4          42.0       12.2

% 757.7 668.0 89.7 13.4 % Other underwriting expenses

                    39.7             37.4           2.3        6.1 %        83.8          73.2          10.6       14.5 %
Underwriting gain
(loss)                $     69.5$    177.9$ (108.3)      -60.9 %   $   119.6$   354.8$ (235.2)      -66.3 %

                                                                  Point Chg                                            Point Chg
Loss ratio                  67.0 %           58.3 %                    8.7          67.8 %        58.6 %                    9.2
Commission and
brokerage ratio             25.8 %           25.7 %                    0.1          25.4 %        25.2 %                    0.2
Other underwriting
expense ratio                2.6 %            2.8 %                  (0.2)           2.8 %         2.8 %                      -
Combined ratio              95.4 %           86.8 %                    8.6          96.0 %        86.6 %                    9.4

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




                                       45
--------------------------------------------------------------------------------


Premiums. Gross written premiums increased by 9.1% to $1,538.3 million for the
three months ended June 30, 2020 from $1,409.6 million for the three months
ended June 30, 2019, primarily due to an increase in treaty property writings,
casualty business and facultative business. Net written premiums increased by
15.3% to $1,424.1 million for the three months ended June 30, 2020 compared to
$1,234.7 million for the three months ended June 30, 2019. The difference
between the change in gross written premiums compared to the change in net
written premiums is primarily due to varying utilization of reinsurance.
Premiums earned increased by 11.8% to $1,502.3 million for the three months
ended June 30, 2020, compared to $1,343.8 million for the three months ended
June 30, 2019. The change in premiums earned relative to net written premiums is
primarily the result of timing; premiums are earned ratably over the coverage
period whereas written premiums are recorded at the initiation of the coverage
period.



Gross written premiums increased by 12.7% to $3,316.1 million for the six months
ended June 30, 2020 from $2,941.6 million for the six months ended June 30,
2019, primarily due to an increase in treaty property writings, casualty
business and facultative business. Net written premiums increased by 15.5% to
$3,037.2 million for the six months ended June 30, 2020 compared to $2,629.2
million for the six months ended June 30, 2019. The difference between the
change in gross written premiums compared to the change in net written premiums
is primarily due to varying utilization of reinsurance. Premiums earned
increased by 12.7% to $2,987.5 million for the six months ended June 30, 2020,
compared to $2,651.3 million for the six months ended June 30, 2019. The change
in premiums earned relative to net written premiums is primarily the result of
timing; premiums are earned ratably over the coverage period whereas written
premiums are recorded at the initiation of the coverage period.



Incurred Losses and LAE. The following table presents 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
2020
Attritional           $ 1,004.9     66.9 %     $    0.8      0.1 %     $ 1,005.7     67.0 %
Catastrophes                  -        - %            -        - %             -        - %
Total Segment         $ 1,004.9     66.9 %     $    0.8      0.1 %     $ 1,005.7     67.0 %

2019
Attritional           $   773.7     57.6 %     $ (20.6)     -1.5 %         753.1     56.1 %
Catastrophes                  -        - %         30.0      2.2 %          30.0      2.2 %
Total Segment         $   773.7     57.6 %     $    9.4      0.7 %     $   783.1     58.3 %

Variance 2020/2019
Attritional           $   231.2      9.3 pts   $   21.4      1.6 pts       252.6     10.9 pts
Catastrophes                  -        - pts     (30.0)    (2.2) pts      (30.0)    (2.2) pts
Total Segment         $   231.2      9.3 pts   $  (8.6)    (0.6) pts   $   222.6      8.7 pts




                                       46
--------------------------------------------------------------------------------

                                                    Six Months Ended June 30,
                              Current        Ratio %/     Prior      Ratio %/      Total      Ratio %/
(Dollars in millions)          Year         Pt Change     Years     Pt Change    Incurred    Pt Change
2020
Attritional               $       2,003.6     67.1 %     $  (1.8)     -0.1 %       2,001.8     67.0 %
Catastrophes                         24.5      0.8 %            -        - %          24.5      0.8 %
Total Segment             $       2,028.1     67.9 %     $  (1.8)     -0.1 %     $ 2,026.3     67.8 %

2019
Attritional               $       1,522.5     57.4 %     $ (22.2)     -0.8 %       1,500.3     56.6 %
Catastrophes                         25.0      0.9 %         30.0      1.1 %          55.0      2.0 %
Total Segment             $       1,547.5     58.3 %     $    7.8      0.3 %     $ 1,555.3     58.6 %

Variance 2020/2019
Attritional               $         481.2      9.7 pts   $   20.4      0.7 pts   $   501.5     10.4 pts
Catastrophes                        (0.5)    (0.1) pts     (30.0)    (1.1) pts      (30.5)    (1.2) pts
Total Segment             $         480.7      9.6 pts   $  (9.6)    (0.4) pts   $   471.0      9.2 pts

(Some amounts may not reconcile due to
rounding.)




Incurred losses increased by 28.4% to $1,005.7 million for the three months
ended June 30, 2020, compared to $783.1 million for the three months ended June
30, 2019. The increase was primarily due to an increase of $231.2 million in
current year attritional losses, mainly related to $131.0 million of losses from
the COVID-19 pandemic and the impact of the increase in premiums earned. There
were no current year catastrophe losses for the three months ended June 30, 2020
and 2019.



Incurred losses increased by 30.3% to $2,026.3 million for the six months ended
June 30, 2020, compared to $1,555.3 million for the six months ended June 30,
2019. The increase was primarily due to an increase of $481.2 million in current
year attritional losses, mainly related to $241.0 million of losses from the
COVID-19 pandemic and the impact of the increase in premiums earned. The current
year catastrophe losses of $24.5 million for the six months ended June 30, 2020
related primarily to the Australia East Coast storm ($10.0 million), the
Nashville tornadoes ($7.6 million) and the Australia fires ($6.9 million). The
$25.0 million of current year catastrophe losses for the six months ended June
30, 2019 were related to the Townsville monsoon in Australia ($25.0 million).



Segment Expenses. Commission and brokerage expenses increased by 12.2% to $387.3
million for the three months ended June 30, 2020 compared to $345.4 million for
the three months ended June 30, 2019. Commission and brokerage expenses
increased by 13.4% to $757.7 million for the six months ended June 30, 2020
compared to $668.0 million for the six months ended June 30, 2019. The increases
were mainly due to the impact of the increases in premiums earned and changes in
the mix of business.



Segment other underwriting expenses increased to $39.7 million for the three
months ended June 30, 2020 from $37.4 million for the three months ended June
30, 2019. Segment other underwriting expenses increased to $83.8 million for the
six months ended June 30, 2020 from $73.2 million for the six months ended June
30, 2019. These increases were mainly due to the impact of the increase in
premiums earned.



                                       47
--------------------------------------------------------------------------------

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)              2020        2019      Variance     % Change       2020          2019       Variance     % Change
Gross written
premiums            $  831.0$ 757.1$    73.9        9.8 %   $ 1,624.1$ 1,352.1$   272.0       20.1 %
Net written
premiums               593.4       549.3          44.1        8.0 %     1,181.8       1,006.4         175.3       17.4 %

Premiums earned     $  540.1$ 473.5$    66.6       14.1 %   $ 1,091.7$   898.7$   193.0       21.5 %
Incurred losses and
LAE                    401.3       311.5          89.8       28.8 %       811.5         587.9         223.6       38.0 %
Commission and
brokerage               79.0        75.6           3.4        4.5 %       157.1         142.4          14.7       10.3 %
Other underwriting
expenses                78.4        67.4          11.0       16.3 %       163.2         130.6          32.5       24.9 %
Underwriting gain
(loss)              $ (18.6)$  19.0$  (37.6)     -197.7 %   $  (40.1)$    37.8$  (77.9)     -206.1 %

                                                         Point Chg                                            Point Chg
Loss ratio              74.3 %      65.8 %                    8.5          74.3 %        65.4 %                    8.9
Commission and
brokerage ratio         14.6 %      16.0 %                  (1.4)          14.4 %        15.8 %                  (1.4)
Other underwriting
expense ratio           14.5 %      14.2 %                    0.3          15.0 %        14.6 %                    0.4
Combined ratio         103.4 %      96.0 %                    7.4         103.7 %        95.8 %                    7.9

(NM not meaningful)
(Some amounts may not reconcile due to rounding.)
Premiums. Gross written premiums increased by 9.8% to $831.0 million for the
three months ended June 30, 2020 compared to $757.1 million for the three months
ended June 30, 2019. This increase was related to most lines of business
including property, casualty, specialty lines and business written through
Lloyd's syndicate. Net written premiums increased by 8.0% to $593.4 million for
the three months ended June 30, 2020 compared to $549.3 million for the three
months ended June 30, 2019. The change is consistent with the change in gross
written premiums. Premiums earned increased 14.1% to $540.1 million for the
three months ended June 30, 2020 compared to $473.5 million for the three months
ended June 30, 2019. 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 20.1% to $1,624.1 million for the six months
ended June 30, 2020 compared to $1,352.1 million for the six months ended June
30, 2019. This increase was related to most lines of business including
property, casualty, specialty lines, accident and health and business written
through Lloyd's syndicate. Net written premiums increased by 17.4% to $1,181.8
million for the six months ended June 30, 2020 compared to $1,006.4 million for
the six months ended June 30, 2019. The change is consistent with the change in
gross written premiums. Premiums earned increased 21.5% to $1,091.7 million for
the six months ended June 30, 2020 compared to $898.7 million for the six months
ended June 30, 2019. 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.



                                       48
--------------------------------------------------------------------------------

Incurred Losses and LAE. The following table presents 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
2020
Attritional           $  381.8     70.7 %     $  4.5     0.8 %      $    386.3     71.5 %
Catastrophes              15.0      2.8 %          -       - %            15.0      2.8 %
Total Segment         $  396.8     73.5 %     $  4.5     0.8 %      $    401.3     74.3 %

2019
Attritional           $  311.5     65.8 %     $    -       - %      $    311.5     65.8 %
Catastrophes                 -        - %          -       - %               -        - %
Total Segment         $  311.5     65.8 %     $    -       - %      $    311.5     65.8 %

Variance 2020/2019
Attritional           $   70.3      4.9 pts   $  4.5     0.8 pts    $     74.8      5.7 pts
Catastrophes              15.0      2.8 pts        -       - pts          15.0      2.8 pts
Total Segment         $   85.3      7.7 pts   $  4.5     0.8 pts    $     89.8      8.5 pts




                                                     Six Months Ended June 30,
                             Current        Ratio %/      Prior      Ratio %/       Total       Ratio %/
(Dollars in millions)          Year        Pt Change      Years      Pt Change     Incurred    Pt Change
2020
Attritional               $        786.5     72.0 %     $     4.6      0.4 %      $    791.0     72.4 %
Catastrophes                        20.5      1.9 %             -        - %            20.5      1.9 %
Total Segment             $        807.0     73.9 %     $     4.6      0.4 %      $    811.5     74.3 %

2019
Attritional               $        587.9     65.4 %     $       -        - %      $    587.9     65.4 %
Catastrophes                           -        - %             -        - %               -        - %
Total Segment             $        587.9     65.4 %     $       -        - %      $    587.9     65.4 %

Variance 2020/2019
Attritional               $        198.6      6.6 pts   $     4.5      0.4 pts    $    203.1      7.0 pts
Catastrophes                        20.5      1.9 pts           -        - pts          20.5      1.9 pts
Total Segment             $        219.1      8.5 pts   $     4.5      0.4 pts    $    223.6      8.9 pts

(Some amounts may not reconcile due to
rounding.)




Incurred losses and LAE increased by 28.8% to $401.3 million for the three
months ended June 30, 2020 compared to $311.5 million for the three months ended
June 30, 2019. The increase was mainly due to a rise of $70.3 million in current
year attritional losses, primarily related to $29.0 million of losses from the
COVID-19 pandemic and the impact of the increase in premiums earned, as well as
an increase of $15.0 million in current year catastrophe losses. The current
year catastrophe losses of $15.0 million for the three months ended June 30,
2020 related to the 2020 U.S. civil unrest ($15.0 million). There were no
current year catastrophe losses for the three months ended June 30, 2019.



Incurred losses and LAE increased by 38.0% to $811.5 million for the six months
ended June 30, 2020 compared to $587.9 million for the six months ended June 30,
2019. The increase was mainly due to a rise of $198.6 million in current year
attritional losses, primarily related to $69.0 million of losses from the
COVID-19 pandemic and the impact of the increase in premiums earned, as well as
an increase of $20.5 million in current year catastrophe losses. The current
year catastrophe losses of $20.5 million for the six months ended June 30, 2020
related to the 2020 U.S. civil unrest ($15.0 million) and the Nashville
tornadoes ($5.5 million). There were no current year catastrophe losses for the
six months ended June 30, 2019.



Segment Expenses. Commission and brokerage increased by 4.5% to $79.0 million
for the three months ended June 30, 2020 compared to $75.6 million for the three
months ended June 30, 2019. Commission and brokerage increased by 10.3% to
$157.1 million for the six months ended June 30, 2020 compared to $142.4 million
for the

                                       49
--------------------------------------------------------------------------------

six months ended June 30, 2019. The increases were mainly due to the impact of the increases in premiums earned.




Segment other underwriting expenses increased to $78.4 million for the three
months ended June 30, 2020 compared to $67.4 million for the three months ended
June 30, 2019. Segment other underwriting expenses increased to $163.2 million
for the six months ended June 30, 2020 compared to $130.6 million for the six
months ended June 30, 2019. The increases were mainly due to the impact of the
increase in premiums earned and increased expenses related to the continued
build out of the insurance business.



FINANCIAL CONDITION



Cash and Invested Assets. Aggregate invested assets, including cash and
short-term investments, were $21,601.7 million at June 30, 2020, an increase of
$853.2 million compared to $20,748.5 million at December 31, 2019. This increase
was primarily the result of $1,104.6 million of cash flows from operations,
$337.1 million of pre-tax unrealized appreciation, $49.5 million of unsettled
securities and $9.4 million in fair value re-measurements, partially offset by
repurchases of 970,892 million common shares for $200.0 million, $125.2 million
paid out in dividends to shareholders, $104.2 million due to fluctuations in
foreign currencies, $84.1 million in equity adjustments of our limited
partnership investments, $25.9 million of allowance for credit losses and $20.5
million of amortization bond premium.



Our principal investment objectives are to ensure funds are available to meet
our insurance and reinsurance obligations and to maximize after-tax investment
income while maintaining a high quality diversified investment portfolio.
Considering these objectives, we view our investment portfolio as having two
components: 1) the investments needed to satisfy outstanding liabilities (our
core fixed maturities portfolio) and 2) investments funded by our shareholders'
equity.



For the portion needed to satisfy global outstanding liabilities, we generally
invest in taxable and tax-preferenced fixed income securities with an average
credit quality of A1. For the U.S. portion of this portfolio, our mix of taxable
and tax-preferenced investments is adjusted periodically, consistent with our
current and projected U.S. operating results, market conditions and our tax
position. This global fixed maturity securities portfolio is externally managed
by independent, professional investment managers using portfolio guidelines
approved by internal management.



Over the past several years, we have expanded the allocation of our investments
funded by shareholders' equity to include: 1) a greater percentage of publicly
traded equity securities, 2) emerging market fixed maturities through mutual
fund structures, as well as individual holdings, 3) high yield fixed maturities,
4) bank and private loan securities and 5) private equity limited partnership
investments. The objective of this portfolio diversification is to enhance the
risk-adjusted total return of the investment portfolio by allocating a prudent
portion of the portfolio to higher return asset classes, which are also less
subject to changes in value with movements in interest rates. We limit our
allocation to these asset classes because of 1) the potential for volatility in
their values and 2) the impact of these investments on regulatory and rating
agency capital adequacy models. We use investment managers experienced in these
markets and adjust our allocation to these investments based upon market
conditions. At June 30, 2020, the market value of investments in these
investment market sectors, carried at both market and fair value, approximated
56.5% of shareholders' equity.



The Company's limited partnership investments are comprised of limited
partnerships that invest in private equities. Generally, the limited
partnerships are reported on a quarter lag. We receive annual audited financial
statements for all of the limited partnerships which are prepared using fair
value accounting in accordance with FASB guidance. For the quarterly reports,
the Company's staff performs reviews of the financial reports for any unusual
changes in carrying value. If the Company becomes aware of a significant decline
in value during the lag reporting period, the loss will be recorded in the
period in which the Company identifies the decline.



                                       50

--------------------------------------------------------------------------------

The tables below summarize the composition and characteristics of our investment portfolio as of the dates indicated.




(Dollars in millions)            At June 30, 2020       At December 31, 

2019

Fixed maturities, market value $ 17,055.3 79.0 % $ 16,824.9 81.1 % Fixed maturities, fair value 4.4 0.0 %

             5.8      0.0 %
Equity securities, fair value       949.2     4.4 %           931.5      4.5 %
Short-term investments              854.0     3.9 %           414.7      2.0 %
Other invested assets             1,816.3     8.4 %         1,763.5      8.5 %
Cash                                922.5     4.3 %           808.0      3.9 %
Total investments and cash     $ 21,601.7   100.0 %   $    20,748.5    100.0 %

(Some amounts may not reconcile due to rounding.)




                                              At                  At
                                         June 30, 2020     December 31, 2019
Fixed income portfolio duration (years)        3.7                  3.5
Fixed income composite credit quality           A1                   A1
Imbedded end of period yield, pre-tax          3.4 %                3.4 %
Imbedded end of period yield, after-tax        2.9 %                3.0 %




The following table provides a comparison of our total return by asset class relative to broadly accepted industry benchmarks for the periods indicated:



                                                Six Months Ended      Twelve Months Ended
                                                 June 30, 2020         December 31, 2019
Fixed income portfolio total return                       4.0 %                   6.2 %
Barclay's Capital - U.S. aggregate index                  6.1 %             

8.7 %


Common equity portfolio total return                      2.6 %                  23.8 %
S&P 500 index                                           (3.1) %             

31.5 %


Other invested asset portfolio total return             (6.2) %                   9.9 %




The pre-tax equivalent total return for the bond portfolio was approximately
3.3% and 6.3%, respectively, for the six months ended June 30, 2020 and the
twelve months ended December 31, 2019. The pre-tax equivalent return adjusts the
yield on tax-exempt bonds to the fully taxable equivalent.



Our fixed income and equity portfolios have different compositions than the
benchmark indexes. Our fixed income portfolios have a shorter duration because
we align our investment portfolio with our liabilities. We also hold foreign
securities to match our foreign liabilities while the index is comprised of only
U.S. securities. Our equity portfolios reflect an emphasis on dividend yield and
growth equities, while the index is comprised of the largest 500 equities by
market capitalization.



Reinsurance Receivables.

Reinsurance receivables for both paid and recoverable on unpaid losses totaled
$1,852.9 million and $1,763.5 million at June 30, 2020 and December 31, 2019,
respectively. At June 30, 2020, $667.8 million, or 36.0%, was receivable from
Mt. Logan Re collateralized segregated accounts and $146.5 million, or 7.9%, was
receivable from Munich Reinsurance America, Inc. ("Munich Re"). No other
retrocessionaire accounted for more than 5% of our receivables.



Loss and LAE Reserves. Gross loss and LAE reserves totaled $14,276.6 million and $13,611.3 million at June 30, 2020 and December 31, 2019, respectively.

                                       51

--------------------------------------------------------------------------------


The following tables summarize gross outstanding loss and LAE reserves by
segment, classified by case reserves and IBNR reserves, for the periods
indicated.



                                                   At June 30, 2020
                                    Case          IBNR          Total         % of
(Dollars in millions)             Reserves       Reserves     Reserves        Total
Reinsurance                      $   4,859.1$   5,234.3$  10,093.4        70.7 %
Insurance                            1,162.6       2,789.1       3,951.7        27.7 %
Total excluding A&E                  6,021.7       8,023.4      14,045.0        98.4 %
A&E                                    185.1          46.6         231.6         1.6 %
Total including A&E              $   6,206.7$   8,069.9$  14,276.6       100.0 %

(Some amounts may not reconcile
due to rounding.)




                                                 At December 31, 2019
                                    Case          IBNR          Total         % of
(Dollars in millions)             Reserves      Reserves      Reserves        Total
Reinsurance                      $   5,050.5$   4,839.4$   9,889.9        72.7 %
Insurance                            1,090.4       2,373.2       3,463.5        25.4 %
Total excluding A&E                  6,140.9       7,212.5      13,353.4        98.1 %
A&E                                    203.4          54.5         257.9         1.9 %
Total including A&E              $   6,344.3$   7,267.0$  13,611.3       100.0 %

(Some amounts may not reconcile
due to rounding.)




Changes in premiums earned and business mix, reserve re-estimations, catastrophe
losses and changes in catastrophe loss reserves and claim settlement activity
all impact loss and LAE reserves by segment and in total.



Our loss and LAE reserves represent management's best estimate of our ultimate
liability for unpaid claims. We continuously re-evaluate our reserves, including
re-estimates of prior period reserves, taking into consideration all available
information and, in particular, newly reported loss and claim experience.
Changes in reserves resulting from such re-evaluations are reflected in incurred
losses in the period when the re-evaluation is made. Our analytical methods and
processes operate at multiple levels including individual contracts, groupings
of like contracts, classes and lines of business, internal business units,
segments, legal entities, and in the aggregate. In order to set appropriate
reserves, we make qualitative and quantitative analyses and judgments at these
various levels. Additionally, the attribution of reserves, changes in reserves
and incurred losses among accident years requires qualitative and quantitative
adjustments and allocations at these various levels. We utilize actuarial
science, business expertise and management judgment in a manner intended to
ensure the accuracy and consistency of our reserving practices. Nevertheless,
our reserves are estimates, which are subject to variation, which may be
significant.



There can be no assurance that reserves for, and losses from, claim obligations
will not increase in the future, possibly by a material amount. However, we
believe that our existing reserves and reserving methodologies lessen the
probability that any such increase would have a material adverse effect on our
financial condition, results of operations or cash flows.



                                       52

--------------------------------------------------------------------------------


Asbestos and Environmental Exposures. A&E exposures represent a separate
exposure group for monitoring and evaluating reserve adequacy. The following
table summarizes the outstanding loss reserves with respect to A&E reserves on
both a gross and net of retrocessions basis for the periods indicated.



                                                     At             At
                                                  June 30,     December 31,
(Dollars in millions)                               2020           2019
Gross reserves                                    $   233.6$        257.9
Reinsurance receivable                               (20.1)           (29.2)
Net reserves                                      $   213.5$        228.7

(Some amounts may not reconcile due to rounding.)

With respect to asbestos only, at June 30, 2020, we had net asbestos loss reserves of $208.6 million, or 97.7%, of total net A&E reserves, all of which was for assumed business.




In 2015, we sold Mt. McKinley to Clearwater Insurance Company. Concurrently with
the closing, we entered into a retrocession treaty with an affiliate of
Clearwater. Per the retrocession treaty, we retroceded 100% of the liabilities
associated with certain Mt. McKinley policies, which had been reinsured by
Bermuda Re. As consideration for entering into the retrocession treaty, Bermuda
Re transferred cash of $140.3 million, an amount equal to the net loss reserves
as of the closing date. Of the $140.3 million of net loss reserves retroceded,
$100.5 million were related to A&E business. The maximum liability retroceded
under the retrocession treaty will be $440.3 million, equal to the retrocession
payment plus $300.0 million. We will retain liability for any amounts exceeding
the maximum liability retroceded under the retrocession treaty.



On December 20, 2019, the retrocession treaty was amended and included a partial
commutation. As a result of this amendment and partial commutation, gross A&E
reserves and correspondingly reinsurance receivable were reduced by $43.4
million. In addition, the maximum liability permitted to be retroceded increased
to $450.3 million.



Ultimate loss projections for A&E liabilities cannot be accomplished using
standard actuarial techniques. We believe that our A&E reserves represent
management's best estimate of the ultimate liability; however, there can be no
assurance that ultimate loss payments will not exceed such reserves, perhaps by
a significant amount.



Industry analysts use the "survival ratio" to compare the A&E reserves among
companies with such liabilities. The survival ratio is typically calculated by
dividing a company's current net reserves by the three year average of annual
paid losses. Hence, the survival ratio equals the number of years that it would
take to exhaust the current reserves if future loss payments were to continue at
historical levels. Using this measurement, our net three year asbestos survival
ratio was 5.3 years at June 30, 2020. These metrics can be skewed by individual
large settlements occurring in the prior three years and therefore, may not be
indicative of the timing of future payments.



Shareholders' Equity. Our shareholders' equity increased to $9,286.3 million as
of June 30, 2020 from $9,132.9 million as of December 31, 2019. This increase
was the result of $296.5 million of unrealized appreciation on investments net
of tax, $207.5 million of net income, $6.3 million of share-based compensation
transactions and $2.7 million of net benefit plan obligation adjustments,
partially offset by the repurchase of 970,892 common shares for $200.0 million,
$125.2 million of shareholder dividends, $30.2 million of net foreign currency
translation adjustments and $4.2 million of cumulative adjustment from the
adoption of ASU 2016-13.



LIQUIDITY AND CAPITAL RESOURCES




Capital. Shareholders' equity at June 30, 2020 and December 31, 2019 was
$9,286.3 million and $9,132.9 million, respectively. Management's objective in
managing capital is to ensure its overall capital level, as well as the capital
levels of its operating subsidiaries, exceed the amounts required by regulators,
the amount needed

                                       53
--------------------------------------------------------------------------------


to support our current financial strength ratings from rating agencies and our
own economic capital models. The Company's capital has historically exceeded
these benchmark levels.



Our two main operating companies Bermuda Re and Everest Re are regulated by the
Bermuda Monetary Authority ("BMA") and the State of Delaware, Department of
Insurance, respectively. Both regulatory bodies have their own capital adequacy
models based on statutory capital as opposed to GAAP basis equity. Failure to
meet the required statutory capital levels could result in various regulatory
restrictions, including business activity and the payment of dividends to their
parent companies.


The regulatory targeted capital and the actual statutory capital for Bermuda Re and Everest Re were as follows:



                               Bermuda Re (1)          Everest Re (2)
                               At December 31,         At December 31,

(Dollars in millions) 2019 2018 2019 2018 Regulatory targeted capital $ 2,061.1$ 1,753.2$ 2,001.2$ 2,173.0 Actual capital

              $ 3,197.4$ 3,068.5$ 3,739.1$ 3,650.6

(1) Regulatory targeted capital represents the target capital level from the applicable year's BSCR calculation.

(2) Regulatory targeted capital represents 200% of the RBC authorized control level calculation for the applicable year.




Our financial strength ratings as determined by A.M. Best, Standard & Poor's and
Moody's are important as they provide our customers and investors with an
independent assessment of our financial strength using a rating scale that
provides for relative comparisons. We continue to possess significant financial
flexibility and access to debt and equity markets as a result of our financial
strength, as evidenced by the financial strength ratings as assigned by
independent rating agencies.



We maintain our own economic capital models to monitor and project our overall
capital, as well as, the capital at our operating subsidiaries. A key input to
the economic models is projected income and this input is continually compared
to actual results, which may require a change in the capital strategy.



As part of our capital strategy, we model our potential exposure to catastrophe
losses arising from a single event. Projected catastrophe losses are generally
summarized in term of probable maximum loss ("PML"). A full discussion on PMLs
is included in our December 31, 2019 Form 10-K filing in PART 1, Item 1.
Business, Risk Management of Underwriting and Reinsurance Arrangements. We focus
on the projected net economic loss from a catastrophe in a given zone as
compared to our shareholders' equity. Economic loss is the PML exposure, net of
third party reinsurance, reduced by estimated reinstatement premiums to renew
coverage and estimated income taxes. In our December 31, 2019 Form 10-K, we
reported that our projected net economic loss from our largest projected
100-year event represented approximately 6% of our December 31, 2019
shareholders' equity. During the first half of 2020, in response to current
favorable market conditions, we increased our net exposure to catastrophes. As a
result, our projected net economic loss from our largest 100-year event in a
given zone represents approximately 7% of our June 30, 2020 shareholders'
equity.



The table below reflects the Company's PML exposure, net of third party
reinsurance at various return periods for its top three zones/perils (as ranked
by largest 1 in 100 year economic loss) based on projection data as of July 1,
2020.


Return Periods (in years) 1 in 20 1 in 50 1 in 100 1 in 250

    1 in 500     1 in 1,000
Exceeding Probability        5.0%         2.0%         1.0%         0.4%         0.2%          0.1%
(Dollars in millions)
Zone/ Peril
California, Earthquake    $      164$      582$      914$    1,135$    1,342$      1,887
Southeast U.S., Wind             530          726          891        1,140        1,418          2,170
Europe Wind                      147          378          632          993        1,106          1,245




                                       54
--------------------------------------------------------------------------------

The projected economic losses, defined as PML exposures, net of third party reinsurance, reinstatement premiums and estimated income taxes, for the top three zones/perils scheduled are as follows:

Return Periods (in years) 1 in 20 1 in 50 1 in 100 1 in 250

    1 in 500     1 in 1,000
Exceeding Probability        5.0%         2.0%         1.0%         0.4%         0.2%          0.1%
(Dollars in millions)
Zone/ Peril
California, Earthquake    $      130$      443$      689$      853$    1,034$      1,648
Southeast U.S., Wind             358          495          635          840        1,068          1,705
Europe Wind                      122          310          509          815          909          1,022




During the first half of 2020, we repurchased 920,892 shares for $200.0 million
in the open market and paid $125.2 million in dividends to adjust our capital
position and enhance long term expected returns to our shareholders. We also
repurchased $13.2 million of our long-term subordinated notes in the first half
of 2020. We recognized a realized gain of $2.5 million on the repurchase.



We may continue, from time to time, to seek to retire portions of our
outstanding debt securities through cash repurchases, in open-market purchases,
privately negotiated transactions or otherwise. Such repurchases, if any, will
be subject to and depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors. The amounts involved
in any such transactions, individually or in the aggregate, may be material.



In 2019, we repurchased 114,633 shares for $24.6 million in the open market and
paid $234.3 million in dividends. We may at times enter into a Rule 10b5-1
repurchase plan agreement to facilitate the repurchase of shares. On May 22,
2020, our existing Board authorization to purchase up to 30 million of our
shares was amended to authorize the purchase of up to 32 million shares. As of
June 30, 2020, we had repurchased 29.6 million shares under this authorization.



Liquidity. Our liquidity requirements are generally met from positive cash flow
from operations. Positive cash flow results from reinsurance and insurance
premiums being collected prior to disbursements for claims, which disbursements
generally take place over an extended period after the collection of premiums,
sometimes a period of many years. Collected premiums are generally invested,
prior to their use in such disbursements, and investment income provides
additional funding for loss payments. Our net cash flows from operating
activities were $1,104.6 million and $853.5 million for the six months ended
June 30, 2020 and 2019, respectively. Additionally, these cash flows reflected
net catastrophe loss payments of $355.6 million and $485.3 million for the six
months ended June 30, 2020 and 2019, respectively and net tax payments of $10.9
million and net tax recoveries of $84.0 million for the six months ended June
30, 2020 and 2019, respectively.



If disbursements for claims and benefits, policy acquisition costs and other
operating expenses were to exceed premium inflows, cash flow from reinsurance
and insurance operations would be negative. The effect on cash flow from
insurance operations would be partially offset by cash flow from investment
income. Additionally, cash inflows from investment maturities and dispositions,
both short-term investments and longer term maturities are available to
supplement other operating cash flows.



As the timing of payments for claims and benefits cannot be predicted with
certainty, we maintain portfolios of long term invested assets with varying
maturities, along with short-term investments that provide additional liquidity
for payment of claims. At June 30, 2020 and December 31, 2019, we held cash and
short-term investments of $1,776.4 million and $1,222.7 million, respectively.
Our short-term investments are generally readily marketable and can be converted
to cash. In addition to these cash and short-term investments, at June 30, 2020,
we had $1,413.3 million of available for sale fixed maturity securities maturing
within one year or less, $6,636.2 million maturing within one to five years and
$4,924.0 million maturing after five years. Our $949.2 million of equity
securities are comprised primarily of publicly traded securities that can be
easily liquidated. We believe that these fixed maturity and equity securities,
in conjunction with the short-term investments and

                                       55

--------------------------------------------------------------------------------


positive cash flow from operations, provide ample sources of liquidity for the
expected payment of losses in the near future. We do not anticipate selling a
significant amount of securities or using available credit facilities to pay
losses and LAE but have the ability to do so. Sales of securities might result
in realized capital gains or losses. At June 30, 2020 we had $688.9 million of
net pre-tax unrealized appreciation related to fixed maturity securities,
comprised of $858.2 million of pre-tax unrealized appreciation and $169.3
million of pre-tax unrealized depreciation.



Management generally expects annual positive cash flow from operations, which
reflects the strength of overall pricing. Cash flow from operations may decline
and could become negative; however, as indicated above, the Company has ample
liquidity to settle its claims.



In addition to our cash flows from operations and liquid investments, we also
have multiple credit facilities that provide up to $200.0 million of unsecured
revolving credit for liquidity and letters of credit but more importantly
provide for up to $600.0 million and £52.2 million of collateralized standby
letters of credit to support business written by our Bermuda operating
subsidiaries.



Effective May 26, 2016, Group, Bermuda Re and Everest International entered into
a five year, $800.0 million senior credit facility with a syndicate of lenders,
which amended and restated in its entirety the June 22, 2012, four year, $800.0
million senior credit facility. Both the May 26, 2016 and June 22, 2012 senior
credit facilities, which have similar terms, are referred to as the "Group
Credit Facility". Wells Fargo Corporation ("Wells Fargo Bank") is the
administrative agent for the Group Credit Facility, which consists of two
tranches. Tranche one provides up to $200.0 million of unsecured revolving
credit for liquidity and general corporate purposes, and for the issuance of
unsecured standby letters of credit. The interest on the revolving loans shall,
at the Company's option, be either (1) the Base Rate (as defined below) or (2)
an adjusted London Interbank Offered Rate ("LIBOR") plus a margin. The Base Rate
is the higher of (a) the prime commercial lending rate established by Wells
Fargo Bank, (b) the Federal Funds Rate plus 0.5% per annum or (c) the one month
LIBOR Rate plus 1.0% per annum. The amount of margin and the fees payable for
the Group Credit Facility depends on Group's senior unsecured debt rating.
Tranche two exclusively provides up to $600.0 million for the issuance of
standby letters of credit on a collateralized basis.



The Group Credit Facility requires Group to maintain a debt to capital ratio of
not greater than 0.35 to 1 and to maintain a minimum net worth. Minimum net
worth is an amount equal to the sum of $5,371.0 million plus 25% of consolidated
net income for each of Group's fiscal quarters, for which statements are
available ending on or after March 31, 2016 and for which consolidated net
income is positive, plus 25% of any increase in consolidated net worth during
such period attributable to the issuance of ordinary and preferred shares, which
at June 30, 2020, was $6,309.6 million. As of June 30, 2020, the Company was in
compliance with all Group Credit Facility covenants.



At June 30, 2020 and December 31, 2019, the Company had no outstanding
short-term borrowings from the Group Credit Facility revolving credit line. At
June 30, 2020, the Group Credit Facility had $99.1 million outstanding letters
of credit under tranche one and $584.9 million outstanding letters of credit
under tranche two. At December 31, 2019, the Group Credit Facility had $33.7
million outstanding letters of credit under tranche one and $589.7 million
outstanding letters of credit under tranche two.



Effective May 12 2020, Everest International amended its credit facility with
Lloyds Bank plc ("Everest International Credit Facility"). The current amendment
of the Everest International Credit Facility provides up to £52.2 million for
the issuance of standby letters of credit on a collateralized basis. The Company
pays a commitment fee of 0.1% per annum on the average daily amount of the
remainder of (1) the aggregate amount available under the facility and (2) the
aggregate amount of drawings outstanding under the facility. The Company pays a
credit commission fee of 0.35% per annum on drawings outstanding under the
facility.



The Everest International Credit Facility requires Group to maintain a debt to
capital ratio of not greater than 0.35 to 1 and to maintain a minimum net worth.
Minimum net worth is an amount equal to the sum of $5,532.7

                                       56

--------------------------------------------------------------------------------


million (70% of consolidated net worth as of December 31, 2018), plus 25% of
consolidated net income for each of Group's fiscal quarters, for which
statements are available ending on or after January 1, 2019 and for which net
income is positive, plus 25% of any increase in consolidated net worth of Group
during such period attributable to the issuance of ordinary and preferred
shares, which at June 30, 2020, was $5,847.3 million. As of June 30, 2020, the
Company was in compliance with all Everest International Credit Facility
requirements.



At June 30, 2020 and December 31, 2019, Everest International Credit Facility
had £52.2 million and £47.0 million, respectively, of outstanding letters of
credit.



Costs incurred in connection with the Group Credit Facility and Everest
International Credit Facility were $0.3 million and $0.1 million for the three
months ended June 30, 2020 and 2019, respectively. Costs incurred in connection
with the Group Credit Facility and Everest International Credit Facility were
$0.5 million and $0.2 million for the six months ended June 30, 2020 and 2019,
respectively.


Market Sensitive Instruments.


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



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



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



Interest Rate Risk. Our $21.6 billion investment portfolio, at June 30, 2020, 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 $3,012.2 million of mortgage-backed securities in the $17,059.7
million fixed maturity portfolio. Prepayment risk results from potential
accelerated principal payments that shorten the average life and thus the
expected yield of the security.



The table below displays the potential impact of market value fluctuations and
after-tax unrealized appreciation on our fixed maturity portfolio (including
$854.0 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 estimates on mortgage-backed securities, changes in prepayment
expectations

                                       57

--------------------------------------------------------------------------------


under different interest rate environments were taken into account. For legal
entities with a 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 June 30, 2020
                                     -200            -100           0              100            200
(Dollars in millions)
Total Market/Fair Value          $ 19,223.0$ 18,568.3$ 17,913.7$ 17,259.0        16,604.3
Market/Fair Value Change from           7.3 %          3.7 %          0.0 %        (3.7) %         (7.3) %
Base (%)
Change in Unrealized
Appreciation
After-tax from Base ($)          $  1,157.4$    578.7     $        -     $  (578.7)$ (1,157.4)




We had $14,276.6 million and $13,611.3 million of gross reserves for losses and
LAE as of June 30, 2020 and December 31, 2019, 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 of approximately 3.0 years, which is reasonably consistent
with our fixed income portfolio. If we were to discount our loss and LAE
reserves, net of ceded reserves, the discount would be approximately $1.4
billion resulting in a discounted reserve balance of approximately $11.2
billion, representing approximately 62.5% of the value of the fixed maturity
investment portfolio funds.



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 and mutual funds, which invest principally in high quality
common and preferred stocks that are traded on the major exchanges, and mutual
fund investments in emerging market debt. The primary objective of the equity
portfolio is to obtain greater total return relative to our core bonds over time
through market appreciation and income.



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



                                       Impact of Percentage Change in Equity Fair/Market Values
                                                           At June 30, 2020
(Dollars in millions)                -20%             -10%            0%           10%          20%
Fair/Market Value of the Equity  $       759.3$      854.3$    949.2$  1,044.1$ 1,139.0
Portfolio
After-tax Change in Fair/Market  $     (156.0)$     (78.0)    $        -    $     78.0$   156.0
Value




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./Bermuda ("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 Canadian
Dollar, the Singapore Dollar, the British Pound Sterling and the Euro. 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

                                       58

--------------------------------------------------------------------------------


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.



In January 2020, the United Kingdom exited the European Union (commonly referred
to as "Brexit"). The Company has a Lloyd's of London Syndicate and Bermuda Re
has a branch operation in the United Kingdom. The nature and extent of the long
term impact of Brexit on regulation, interest rates, currency exchange rates and
financial markets is still uncertain and may adversely affect our operations.



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 Tax Cut and Jobs Act, the adequacy of capital in relation to regulatory
required capital, the adequacy of our provision for uncollectible balances,
estimates of our catastrophe exposure, the effects of catastrophic and pandemic
events on our financial statements, the ability of Everest Re, Holdings,
Holdings Ireland, Dublin Holdings, Bermuda Re and Everest International to pay
dividends and the settlement costs of our specialized equity index put option
contracts. 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.

© Edgar Online, source Glimpses

All news about EVEREST RE GROUP, LTD.
12/01EVEREST RE GROUP, LTD. : Ex-dividend day for
FA
11/19EVEREST RE : Announces Dividend
BU
11/09EVEREST RE : MANAGEMENT'S DISCUSSION (form 10-Q)
AQ
11/02EVEREST RE : Q3 2020 Earnings Conference Call Transcript
PU
10/29THIRD QUARTER 2020 : Financial Supplement
PU
10/29EVEREST RE : 3Q Earnings Snapshot
AQ
10/29EVEREST RE : Q3 2020 Investor Presentation
PU
10/29EVEREST RE : Reports Third Quarter 2020 Results; Net Income of $243.1 Million an..
BU
10/22EVEREST RE : Announces Estimated Third Quarter 2020 Catastrophe Losses
BU
10/08AM BEST : Assigns Issue Credit Rating to Everest Reinsurance Holdings, Inc.'s Se..
BU
More news