AXIS CAPITAL HOLDINGS LTD - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-31721

AXIS CAPITAL HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

Bermuda

(State or other jurisdiction of incorporation or organization)

98-0395986

(I.R.S. Employer Identification No.)

92 Pitts Bay Road, Pembroke, Bermuda HM 08

(Address of principal executive offices and zip code)

(441) 496-2600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, par value $0.0125 per share	AXS	New York Stock Exchange
Depositary Shares, each representing a 1/100th interest in a 5.50% Series E preferred share	AXS PRE	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At October 26, 2021, there were 84,773,377 common shares outstanding, $0.0125 par value per share, of the registrant.

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AXIS CAPITAL HOLDINGS LIMITED

INDEX TO FORM 10-Q


		Page
	PART I
	Financial Information	3
Item 1.	Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	51
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	80
Item 4.	Controls and Procedures	81
	PART II
	Other Information	81
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	81
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 5.	Other Information	82
Item 6.	Exhibits	83
	Signatures	84

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PART I FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this report, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States ("U.S.") federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential", "intend" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond management's control.

Forward-looking statements contained in this report may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses including losses related to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency rates.

Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:

•the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition, and liquidity;

•the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;

•the occurrence and magnitude of natural and man-made disasters;

•the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;

•losses from war, terrorism and political unrest, or other unanticipated losses;

•actual claims exceeding loss reserves;

•general economic, capital and credit market conditions, including fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency rates;

•the failure of any of the loss limitation methods we employ;

•the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions;

•the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;

•the loss of business provided to us by major brokers;

•breaches by third parties in our program business of their obligations to us;

•difficulties with technology and/or data security;

•the failure of our policyholders or intermediaries to pay premiums;

•the failure of our cedants to adequately evaluate risks;

•the inability to obtain additional capital on favorable terms, or at all;

•the loss of one or more of our key executives;

•a decline in our ratings with rating agencies;

•changes in accounting policies or practices;

•the use of industry models and changes to these models;

•changes in governmental regulations and potential government intervention in our industry;

•inadvertent failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;

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•changes in the political environment of certain countries in which we operate or underwrite business, including the United Kingdom's withdrawal from the European Union;

•changes in tax laws; and

•other factors including but not limited to those described under Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as those factors may be updated from time to time in our periodic and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Readers are urged to carefully consider all such factors as the COVID-19 pandemic may have the effect of heightening many of the other risks and uncertainties described.

We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Website and Social Media Disclosure

We use our website (www.axiscapital.com) and our corporate LinkedIn (AXIS Capital) and Twitter (@AXIS_Capital) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received by those enrolled in our "E-mail Alerts" program, which can be found in the Investor Information section of our website. The contents of our website and social media channels are not part of this Quarterly Report on Form 10-Q.

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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


			Page

Consolidated Balance Sheets at September 30, 2021 (Unaudited) and December 31, 2020			6
Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited)			7
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (Unaudited)			8
Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)			9
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)			10
Notes to Consolidated Financial Statements (Unaudited)			12
Note 1 - Basis of Presentation and Significant Accounting Policies			12
Note 2 - Segment Information			13
Note 3 - Investments			16
Note 4 - Fair Value Measurements			25
Note 5 - Derivative Instruments			36
Note 6 - Reserve for Losses and Loss Expenses			38
Note 7 - Earnings Per Common Share			44
Note 8 - Share-Based Compensation			44
Note 9 - Shareholders' Equity			47
Note 10 - Debt and Financing Arrangements			48
Note 11 - Commitments and Contingencies			48
Note 12 - Other Comprehensive Income (Loss)			49
Note 13 - Related Party Transactions			50

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AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020


	2021		2020
	(in thousands)
Assets
Investments:
Fixed maturities, available for sale, at fair value (Amortized cost 2021: $12,202,767; 2020: $11,566,930 Allowance for expected credit losses 2021: $399; 2020: $323)	$	12,380,959	$	12,041,799
Fixed maturities, held to maturity, at amortized cost (Fair value 2021: $416,821 Allowance for expected credit losses 2021: $nil)	416,879		—
Equity securities, at fair value (Cost 2021: $510,891; 2020: $421,744)	618,822		518,445
Mortgage loans, held for investment, at fair value (Allowance for expected credit losses 2021: $nil; 2020: $nil)	623,487		593,290
Other investments, at fair value	892,664		829,156
Equity method investments	145,080		114,209
Short-term investments, at fair value	68,267		161,897
Total investments	15,146,158		14,258,796
Cash and cash equivalents	947,542		902,831
Restricted cash and cash equivalents	551,662		600,401
Accrued interest receivable	62,423		65,020
Insurance and reinsurance premium balances receivable (Allowance for expected credit losses 2021: $8,903; 2020: $8,836)	2,978,996		2,738,342
Reinsurance recoverable on unpaid losses and loss expenses (Allowance for expected credit losses 2021: $27,087; 2020: $23,711)	4,989,645		4,496,641
Reinsurance recoverable on paid losses and loss expenses	506,503		434,201
Deferred acquisition costs	544,384		431,439
Prepaid reinsurance premiums	1,460,723		1,194,455
Receivable for investments sold	2,028		2,150
Goodwill	100,801		100,801
Intangible assets	211,557		219,633
Value of business acquired	770		3,854
Operating lease right-of-use assets	107,791		123,579
Other assets	324,154		305,544
Total assets	$	27,935,137	$	25,877,687
Liabilities
Reserve for losses and loss expenses	$	14,658,996	$	13,926,766
Unearned premiums	4,464,282		3,685,886
Insurance and reinsurance balances payable	1,442,729		1,092,042
Debt	1,310,650		1,309,695
Payable for investments purchased	239,073		104,777
Operating lease liabilities	123,874		140,263
Other liabilities	360,478		322,564
Total liabilities	22,600,082		20,581,993

Shareholders’ equity
Preferred shares	550,000		550,000
Common shares (shares issued 2021: 176,580; 2020: 176,580 shares outstanding 2021: 84,773; 2020: 84,353)	2,206		2,206
Additional paid-in capital	2,336,895		2,330,054
Accumulated other comprehensive income	150,122		414,395
Retained earnings	6,044,843		5,763,607
Treasury shares, at cost (2021: 91,807; 2020: 92,227)	(3,749,011)		(3,764,568)
Total shareholders’ equity	5,335,055		5,295,694


Total liabilities and shareholders’ equity	$	27,935,137	$	25,877,687

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Three months ended				Nine months ended
	2021		2020		2021		2020
	(in thousands, except for per share amounts)
Revenues
Net premiums earned	$	1,211,427	$	1,091,312	$	3,472,090	$	3,283,941
Net investment income	107,339		101,956		326,174		240,098
Other insurance related income (loss)	7,665		1,440		16,262		(5,270)

Net investment gains:
Allowance for expected credit losses	(315)		3,759		(76)		(2,498)
Impairment losses	(22)		(184)		(22)		(1,486)


Other realized and unrealized investment gains	11,269		52,034		113,966		49,761
Total net investment gains	10,932		55,609		113,868		45,777
Total revenues	1,337,363		1,250,317		3,928,394		3,564,546

Expenses
Net losses and loss expenses	911,369		879,677		2,292,559		2,464,012
Acquisition costs	231,712		230,564		669,654		697,716
General and administrative expenses	157,960		138,823		478,820		436,538
Foreign exchange losses (gains)	(28,032)		60,734		(4,316)		8,760
Interest expense and financing costs	15,954		15,574		46,759		59,641
Reorganization expenses	—		1,413		—		822
Amortization of value of business acquired	1,028		1,028		3,083		4,111
Amortization of intangible assets	3,149		2,838		9,163		8,564
Total expenses	1,293,140		1,330,651		3,495,722		3,680,164

Income (loss) before income taxes and interest in income (loss) of equity method investments	44,223		(80,334)		432,672		(115,618)
Income tax (expense) benefit	(1,186)		12,056		(49,827)		6,030
Interest in income (loss) of equity method investments	11,911		2,896		30,871		(13,579)
Net income (loss)	54,948		(65,382)		413,716		(123,167)


Preferred share dividends	7,563		7,563		22,688		22,688

Net income (loss) available (attributable) to common shareholders	$	47,385	$	(72,945)	$	391,028	$	(145,855)

Per share data
Earnings (loss) per common share:
Earnings (loss) per common share	$	0.56	$	(0.87)	$	4.62	$	(1.73)
Earnings (loss) per diluted common share	$	0.56	$	(0.87)	$	4.59	$	(1.73)
Weighted average common shares outstanding	84,771		84,308		84,684		84,235
Weighted average diluted common shares outstanding	85,336		84,308		85,191		84,235

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Three months ended				Nine months ended
	2021		2020		2021		2020
	(in thousands)
Net income (loss)	$	54,948	$	(65,382)	$	413,716	$	(123,167)
Other comprehensive income (loss), net of tax:
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized	(58,178)		95,112		(179,147)		210,383
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized	370		220		131		(112)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)	(14,580)		(29,130)		(86,181)		(30,289)
Unrealized gains (losses) arising during the period, net of reclassification adjustment	(72,388)		66,202		(265,197)		179,982

Foreign currency translation adjustment	(3,807)		2,310		924		(1,581)


Total other comprehensive income (loss), net of tax	(76,195)		68,512		(264,273)		178,401


Comprehensive income (loss)	$	(21,247)	$	3,130	$	149,443	$	55,234

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Three months ended				Nine months ended
	2021		2020		2021		2020
	(in thousands)
Preferred shares
Balance at beginning of period	$	550,000	$	550,000	$	550,000	$	775,000

Shares repurchased	—		—		—		(225,000)
Balance at end of period	550,000		550,000		550,000		550,000

Common shares (par value)


Balance at beginning and end of period	2,206		2,206		2,206		2,206

Additional paid-in capital
Balance at beginning of period	2,326,288		2,317,354		2,330,054		2,317,212

Treasury shares reissued	(397)		(197)		(24,437)		(19,348)




Share-based compensation expense	11,004		8,039		31,278		27,332
Balance at end of period	2,336,895		2,325,196		2,336,895		2,325,196

Accumulated other comprehensive income
Balance at beginning of period	226,317		281,599		414,395		171,710
Unrealized gains (losses) on available for sale investments, net of tax:
Balance at beginning of period	227,826		295,301		420,635		181,521


Unrealized gains (losses) arising during the period, net of reclassification adjustment	(72,388)		66,202		(265,197)		179,982

Balance at end of period	155,438		361,503		155,438		361,503
Cumulative foreign currency translation adjustments, net of tax:
Balance at beginning of period	(1,509)		(13,702)		(6,240)		(9,811)
Foreign currency translation adjustment	(3,807)		2,310		924		(1,581)

Balance at end of period	(5,316)		(11,392)		(5,316)		(11,392)




Balance at end of period	150,122		350,111		150,122		350,111

Retained earnings
Balance at beginning of period	6,034,151		5,913,029		5,763,607		6,056,686


Net income (loss)	54,948		(65,382)		413,716		(123,167)

Preferred share dividends (1)	(7,563)		(7,563)		(22,688)		(22,688)

Common share dividends (1)	(36,693)		(35,447)		(109,792)		(106,194)
Balance at end of period	6,044,843		5,804,637		6,044,843		5,804,637

Treasury shares, at cost
Balance at beginning of period	(3,749,202)		(3,766,368)		(3,764,568)		(3,778,806)
Shares repurchased	(206)		(84)		(10,025)		(8,685)
Shares reissued	397		197		25,582		21,236
Balance at end of period	(3,749,011)		(3,766,255)		(3,749,011)		(3,766,255)

Total shareholders’ equity	$	5,335,055	$	5,265,895	$	5,335,055	$	5,265,895

(1) Refer to Note 9 'Shareholder's Equity' for details on dividends declared and paid related to the Company's common and preferred shares.

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Nine months ended
	2021		2020
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	413,716	$	(123,167)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net investment gains	(113,868)		(45,777)
Net realized and unrealized (gains) losses on other investments	(123,364)		14,574
Amortization of fixed maturities	28,601		24,398
Interest in (income) loss of equity method investments	(30,871)		13,579
Amortization of value of business acquired	3,083		4,111
Other amortization and depreciation	46,967		46,734
Share-based compensation expense, net of cash payments	25,848		17,650


Changes in:
Accrued interest receivable	2,441		7,792
Reinsurance recoverable balances on unpaid and paid losses	(570,087)		(506,705)
Deferred acquisition costs	(113,959)		(29,126)
Prepaid reinsurance premiums	(267,082)		(177,624)
Reserve for losses and loss expenses	741,277		910,106
Unearned premiums	782,094		448,035
Insurance and reinsurance balances, net	110,921		(166,708)
Other items	74,447		(89,093)
Net cash provided by operating activities	1,010,164		348,779

Cash flows from investing activities:
Purchases of:
Fixed maturities, available for sale	(10,183,487)		(8,543,641)
Fixed maturities, held to maturity	(146,150)		—
Equity securities	(105,167)		(40,027)
Mortgage loans	(85,202)		(115,290)
Other investments	(194,212)		(93,044)

Short-term investments	(135,399)		(206,400)
Proceeds from the sale of:
Fixed maturities, available for sale	7,945,524		7,856,524
Equity securities	10,928		95,960
Other investments	254,580		133,536
Short-term investments	156,674		117,097
Proceeds from the redemption of fixed maturities, available for sale	1,381,867		1,155,648
Proceeds from the redemption of fixed maturities, held to maturity	134,347		—
Proceeds from redemption of short-term investments	71,665		57,948
Proceeds from the repayment of mortgage loans	55,410		4,245
Purchase of other assets	(30,706)		(36,582)



Net cash provided by (used in) investing activities	(869,328)		385,974

Cash flows from financing activities:


Taxes paid on withholding shares	(10,026)		(8,685)
Dividends paid - common shares	(109,974)		(106,595)
Repurchase of preferred shares	—		(225,000)
Dividends paid - preferred shares	(22,688)		(24,269)







Redemption of senior notes	—		(500,000)
Net cash used in financing activities	(142,688)		(864,549)

Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash	(2,176)		(5,845)
Decrease in cash, cash equivalents and restricted cash	(4,028)		(135,641)
Cash, cash equivalents and restricted cash - beginning of period	1,503,232		1,576,457
Cash, cash equivalents and restricted cash - end of period	$	1,499,204	$	1,440,816

Supplemental disclosures of cash flow information:
Income taxes paid (refund)	$	43,548	$	(5,309)
Interest paid	$	45,963	$	47,108

See accompanying notes to Consolidated Financial Statements.

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Supplemental disclosures of cash flow information: In 2021, the transfer of securities with a fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity was treated as a non-cash activity in the consolidated statement of cash flows (refer to Note 3 'Investments').

See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited consolidated financial statements (the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the U.S. Securities and Exchange Commission's ("SEC") instructions to Form 10-Q and Article 10 of Regulation S-X and include AXIS Capital Holdings Limited ("AXIS Capital") and its subsidiaries (the "Company"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in AXIS Capital's Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.

In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations for the periods presented.

The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated.

Tabular dollar and share amounts are in thousands, with the exception of per share amounts. All amounts are reported in U.S. dollars.

Significant Accounting Policies

Changes to the Company's significant accounting policies subsequent to its Annual Report on Form 10-K for the year ended December 31, 2020 are noted below:

a) Investments

Fixed Maturities, Held to Maturity, at Amortized Cost

Fixed maturities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity or redemption. Fixed maturities classified as held to maturity are reported at amortized cost and are presented net of an allowance for expected credit losses. The allowance for expected credit losses is estimated based on the Company’s analysis of projected lifetime losses. The allowance for expected credit losses is recognized in net investment gains (losses) in the consolidated statements of operations. Any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined.

b) Share-based Compensation

The Company is authorized to issue restricted shares, restricted stock units, performance restricted stock units, stock options, stock appreciation rights and other equity-based awards to its employees and directors. The Company's plan includes share-settled and cash-settled service awards and performance awards.

Restricted Stock Units - Share-Settled and Cash-Settled

The fair value of share-settled and cash-settled service awards is based on market value of the Company's common shares measured at the grant date and is expensed over the requisite service period. The fair value of the cash-settled service awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.

Performance Restricted Stock Units - Share-Settled and Cash-Settled

The fair value of share-settled performance awards which include a market condition is measured on the grant date using a Monte Carlo simulation model which requires inputs including share price, expected volatility, expected term, expected dividend yield and risk-free interest rates. The fair value of share-settled and cash-settled performance awards which include a performance condition is based on market value of the Company's common shares measured at the grant date. The fair value of share-settled and cash-settled performance awards is recognized on a straight-line basis over the requisite service period. The fair value of the cash-settled performance awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2. SEGMENT INFORMATION

AXIS Capital's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has two reportable segments, insurance and reinsurance. The Company does not allocate its assets by segment, with the exception of goodwill and intangible assets.

Insurance

The Company's insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The product lines in this segment are property, marine, terrorism, aviation, credit and political risk, professional lines, liability, accident and health, and discontinued lines - Novae.

Reinsurance

The Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are catastrophe, property, credit and surety, professional lines, motor, liability, engineering, agriculture, marine and aviation, accident and health, and discontinued lines - Novae.

The following tables present the underwriting results of the Company's reportable segments, as well as the carrying amounts of allocated goodwill and intangible assets:

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2. SEGMENT INFORMATION (CONTINUED)


	2021									2020
Three months ended and at September 30,	Insurance			Reinsurance			Total			Insurance			Reinsurance			Total

Gross premiums written	$	1,176,500		$	469,989		$	1,646,489		$	935,817		$	395,361		$	1,331,178
Net premiums written	707,492			288,979			996,471			544,857			271,125			815,982
Net premiums earned	681,008			530,419			1,211,427			570,184			521,128			1,091,312
Other insurance related income	468			7,197			7,665			688			752			1,440
Net losses and loss expenses	(442,681)			(468,688)			(911,369)			(443,389)			(436,288)			(879,677)
Acquisition costs	(123,529)			(108,183)			(231,712)			(114,569)			(115,995)			(230,564)
Underwriting-related general and administrative expenses	(104,905)			(29,921)			(134,826)			(94,379)			(23,456)			(117,835)
Underwriting income (loss)	$	10,361		$	(69,176)		(58,815)			$	(81,465)		$	(53,859)		(135,324)

Net investment income							107,339									101,956
Net investment gains							10,932									55,609
Corporate expenses							(23,134)									(20,988)
Foreign exchange (losses) gains							28,032									(60,734)
Interest expense and financing costs							(15,954)									(15,574)
Reorganization expenses							—									(1,413)
Amortization of value of business acquired							(1,028)									(1,028)
Amortization of intangible assets							(3,149)									(2,838)
Income (loss) before income taxes and interest in income of equity method investments							44,223									(80,334)
Income tax (expense) benefit							(1,186)									12,056
Interest in income of equity method investments							11,911									2,896
Net income (loss)							54,948									(65,382)
Preferred share dividends							7,563									7,563
Net income (loss) available (attributable) to common shareholders							$	47,385								$	(72,945)

Net losses and loss expenses ratio	65.0		%	88.4		%	75.2		%	77.8		%	83.7		%	80.6		%
Acquisition cost ratio	18.1		%	20.4		%	19.1		%	20.1		%	22.3		%	21.1		%
General and administrative expense ratio	15.4		%	5.6		%	13.1		%	16.5		%	4.5		%	12.8		%
Combined ratio	98.5		%	114.4		%	107.4		%	114.4		%	110.5		%	114.5		%

Goodwill and intangible assets	$	312,358		$	—		$	312,358		$	324,365		$	—		$	324,365

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AXIS CAPITAL HOLDINGS LIMITED

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2. SEGMENT INFORMATION (CONTINUED)


	2021									2020
Nine months ended and at September 30,	Insurance			Reinsurance			Total			Insurance			Reinsurance			Total

Gross premiums written	$	3,548,169		$	2,574,987		$	6,123,156		$	2,914,100		$	2,564,419		$	5,478,519
Net premiums written	2,128,190			1,851,025			3,979,215			1,729,268			1,821,692			3,550,960
Net premiums earned	1,928,970			1,543,120			3,472,090			1,709,268			1,574,673			3,283,941
Other insurance related income (loss)	1,435			14,827			16,262			2,091			(7,361)			(5,270)
Net losses and loss expenses	(1,131,753)			(1,160,806)			(2,292,559)			(1,252,569)			(1,211,443)			(2,464,012)
Acquisition costs	(348,172)			(321,482)			(669,654)			(343,579)			(354,137)			(697,716)
Underwriting-related general and administrative expenses	(307,777)			(88,678)			(396,455)			(284,909)			(76,714)			(361,623)
Underwriting income (loss)	$	142,703		$	(13,019)		129,684			$	(169,698)		$	(74,982)		(244,680)

Net investment income							326,174									240,098
Net investment gains							113,868									45,777
Corporate expenses							(82,365)									(74,915)
Foreign exchange (losses) gains							4,316									(8,760)
Interest expense and financing costs							(46,759)									(59,641)
Reorganization expenses							—									(822)
Amortization of value of business acquired							(3,083)									(4,111)
Amortization of intangible assets							(9,163)									(8,564)
Income (loss) before income taxes and interest in income (loss) of equity method investments							432,672									(115,618)
Income tax (expense) benefit							(49,827)									6,030
Interest in income (loss) of equity method investments							30,871									(13,579)
Net income (loss)							413,716									(123,167)
Preferred share dividends							22,688									22,688
Net income (loss) available (attributable) to common shareholders							$	391,028								$	(145,855)

Net losses and loss expenses ratio	58.7		%	75.2		%	66.0		%	73.3		%	76.9		%	75.0		%
Acquisition cost ratio	18.0		%	20.8		%	19.3		%	20.1		%	22.5		%	21.2		%
General and administrative expense ratio	16.0		%	5.8		%	13.8		%	16.7		%	4.9		%	13.4		%
Combined ratio	92.7		%	101.8		%	99.1		%	110.1		%	104.3		%	109.6		%

Goodwill and intangible assets	$	312,358		$	—		$	312,358		$	324,365		$	—		$	324,365

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS

a) Fixed Maturities and Equity Securities

Fixed Maturities

The following table provides the amortized cost and fair values of the Company's fixed maturities classified as available for sale:


	Amortized cost		Allowance for expected credit losses		Gross unrealized gains		Gross unrealized losses		Fair value

At September 30, 2021
Available for sale
U.S. government and agency	$	2,688,431	$	—	$	14,768	$	(10,805)	$	2,692,394
Non-U.S. government	714,081		—		13,696		(7,855)		719,922
Corporate debt	4,450,477		(324)		121,913		(24,416)		4,547,650
Agency RMBS(1)	1,144,205		—		24,213		(5,380)		1,163,038
CMBS(2)	1,185,705		—		42,927		(2,407)		1,226,225
Non-agency RMBS	192,129		(75)		2,818		(1,108)		193,764
ABS(3)	1,640,602		—		6,311		(3,668)		1,643,245
Municipals(4)	187,137		—		7,826		(242)		194,721
Total fixed maturities, available for sale	$	12,202,767	$	(399)	$	234,472	$	(55,881)	$	12,380,959







At December 31, 2020
Available for sale
U.S. government and agency	$	1,881,489	$	—	$	38,969	$	(1,759)	$	1,918,699
Non-U.S. government	632,875		—		38,826		(428)		671,273
Corporate debt	4,408,351		(303)		254,261		(6,358)		4,655,951
Agency RMBS(1)	1,244,727		—		42,170		(688)		1,286,209
CMBS(2)	1,268,273		—		87,598		(2,284)		1,353,587
Non-agency RMBS	136,198		(20)		4,604		(678)		140,104
ABS(3)	1,712,236		—		14,527		(6,685)		1,720,078
Municipals(4)	282,781		—		13,148		(31)		295,898
Total fixed maturities, available for sale	$	11,566,930	$	(323)	$	494,103	$	(18,911)	$	12,041,799

(1)Residential mortgage-backed securities ("RMBS") originated by U.S. government-sponsored agencies.

(2)Commercial mortgage-backed securities ("CMBS").

(3)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs").

(4)Municipals include bonds issued by states, municipalities and political subdivisions.

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AXIS CAPITAL HOLDINGS LIMITED

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3. INVESTMENTS (CONTINUED)

The following table provides the amortized cost and fair values of the Company's fixed maturities classified as held to maturity:


	Amortized cost		Allowance for expected credit losses		Net carrying value		Gross unrealized gains		Gross unrealized losses		Fair value

At September 30, 2021
Held to maturity
Corporate debt	$	10,000	$	—	$	10,000	$	—	$	(131)	$	9,869
ABS(1)	406,879		—		406,879		186		(113)		406,952
Total fixed maturities, held to maturity	$	416,879	$	—	$	416,879	$	186	$	(244)	$	416,821

(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").

On March 1, 2021, the Company transferred ABS securities with total fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity. These securities, which the Company has the intent and ability to hold to maturity, were transferred in order to better align the accounting classification with their management strategy. The net unrealized gain at the date of the transfer, March 1, 2021, continues to be reported in the carrying value of the transferred securities and is amortized over the remaining life of the securities using the effective yield method.

Fixed maturities, held to maturity of $417 million at September 30, 2021 were presented net of an allowance for expected credit losses of $nil.

The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses of the underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to have a credit loss. At September 30, 2021, the allowance for credit losses expected to be recognized over the life of the Company's ABS, held to maturity was $nil.

To estimate expected credit losses for corporate debt securities, the Company's projected cash flows are primarily driven by assumptions regarding the severity of loss, probability of default and projected recovery rates. The Company's default and loss severity rates are based on credit ratings, credit analysis and macroeconomic forecasts. At September 30, 2021, the allowance for credit losses expected to be recognized over the life of the Company's corporate debt, held to maturity was $nil.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS (CONTINUED)

Equity Securities

The following table provides the cost and fair values of the Company's equity securities:


	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
At September 30, 2021
Equity securities
Common stocks	$	943	$	493	$	(409)	$	1,027
Preferred stocks	115		148		—		263
Exchange-traded funds	203,336		107,163		(659)		309,840
Bond mutual funds	306,497		1,730		(535)		307,692
Total equity securities	$	510,891	$	109,534	$	(1,603)	$	618,822

At December 31, 2020
Equity securities
Common stocks	$	10,810	$	689	$	(557)	$	10,942
Preferred stocks	6,301		1,767		—		8,068
Exchange-traded funds	147,794		74,314		(390)		221,718
Bond mutual funds	256,839		20,878		—		277,717
Total equity securities	$	421,744	$	97,648	$	(947)	$	518,445

In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.

The Company also invests in limited partnerships which represent 72% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds as well as CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(c) 'Other Investments'). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs.

The maximum exposure to loss on these interests is limited to the amount of commitment made by the Company. The Company has not provided financial or other support to these structured securities other than the original investment.

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AXIS CAPITAL HOLDINGS LIMITED

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3. INVESTMENTS (CONTINUED)

Contractual Maturities of Fixed Maturities

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The table below provides the contractual maturities of fixed maturities classified as available for sale:


	Amortized cost		Fair value		% of Total fair value

At September 30, 2021
Maturity
Due in one year or less	$	517,901	$	522,219	4.2	%
Due after one year through five years	4,819,479		4,895,887		39.5	%
Due after five years through ten years	2,433,271		2,464,807		19.9	%
Due after ten years	269,475		271,774		2.2	%
	8,040,126		8,154,687		65.8	%
Agency RMBS	1,144,205		1,163,038		9.4	%
CMBS	1,185,705		1,226,225		9.9	%
Non-agency RMBS	192,129		193,764		1.6	%
ABS	1,640,602		1,643,245		13.3	%
Total	$	12,202,767	$	12,380,959	100.0	%

At December 31, 2020
Maturity
Due in one year or less	$	436,287	$	444,527	3.6	%
Due after one year through five years	4,165,696		4,335,219		36.0	%
Due after five years through ten years	2,344,859		2,489,050		20.7	%
Due after ten years	258,654		273,025		2.3	%
	7,205,496		7,541,821		62.6	%
Agency RMBS	1,244,727		1,286,209		10.7	%
CMBS	1,268,273		1,353,587		11.2	%
Non-agency RMBS	136,198		140,104		1.2	%
ABS	1,712,236		1,720,078		14.3	%
Total	$	11,566,930	$	12,041,799	100.0	%

ABS classified as held to maturity with a net carrying value of $407 million (2020: $nil) do not have a single maturity date and cannot be allocated over several maturity groupings.

Corporate debt classified as held to maturity with a net carrying value of $10 million (2020: $nil) is due in ten years.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS (CONTINUED)

Gross Unrealized Losses

The following table summarizes fixed maturities available for sale in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:


	12 months or greater				Less than 12 months				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses

At September 30, 2021
Fixed maturities, available for sale
U.S. government and agency	$	92,049	$	(3,892)	$	1,550,593	$	(6,913)	$	1,642,642	$	(10,805)
Non-U.S. government	2,826		(880)		352,085		(6,975)		354,911		(7,855)
Corporate debt	47,626		(1,938)		1,331,148		(22,478)		1,378,774		(24,416)
Agency RMBS	23,194		(878)		454,841		(4,502)		478,035		(5,380)
CMBS	12,019		(304)		184,367		(2,103)		196,386		(2,407)
Non-agency RMBS	4,630		(527)		69,865		(581)		74,495		(1,108)
ABS	45,628		(929)		523,180		(2,739)		568,808		(3,668)
Municipals	—		—		21,828		(242)		21,828		(242)
Total fixed maturities, available for sale	$	227,972	$	(9,348)	$	4,487,907	$	(46,533)	$	4,715,879	$	(55,881)







At December 31, 2020
Fixed maturities, available for sale
U.S. government and agency	$	—	$	—	$	251,606	$	(1,759)	$	251,606	$	(1,759)
Non-U.S. government	16,115		(262)		3,652		(166)		19,767		(428)
Corporate debt	63,640		(2,244)		233,970		(4,114)		297,610		(6,358)
Agency RMBS	6,580		(20)		78,672		(668)		85,252		(688)
CMBS	19,736		(1,012)		70,656		(1,272)		90,392		(2,284)
Non-agency RMBS	5,109		(598)		9,558		(80)		14,667		(678)
ABS	325,436		(4,011)		360,402		(2,674)		685,838		(6,685)
Municipals	—		—		11,881		(31)		11,881		(31)
Total fixed maturities, available for sale	$	436,616	$	(8,147)	$	1,020,397	$	(10,764)	$	1,457,013	$	(18,911)

Fixed Maturities

At September 30, 2021, 1,721 fixed maturities (2020: 719) were in an unrealized loss position of $56 million (2020: $19 million), of which $4 million (2020: $7 million) was related to securities below investment grade or not rated.

At September 30, 2021, 186 fixed maturities (2020: 249) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $228 million (2020: $437 million).

The unrealized losses of $56 million (2020: $19 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.

At September 30, 2021, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.

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AXIS CAPITAL HOLDINGS LIMITED

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3. INVESTMENTS (CONTINUED)

b) Mortgage Loans

The following table provides details of the Company's mortgage loans, held for investment:


	September 30, 2021				December 31, 2020
	Carrying value		% of Total		Carrying value		% of Total

Mortgage loans, held for investment:
Commercial	$	623,487	100	%	$	593,290	100	%


Total mortgage loans, held for investment	$	623,487	100	%	$	593,290	100	%

The primary credit quality indicator for commercial mortgage loans is the debt service coverage ratio which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan (generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio which compares the unpaid principal balance of the loan to the estimated fair value of the underlying collateral (generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis.

The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage ratio of 2.6x (2020: 2.4x) and a weighted average loan-to-value ratio of 60% (2020: 60%). At September 30, 2021, there are no credit losses or past due amounts associated with the commercial mortgage loans held by the Company.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS (CONTINUED)

c) Other Investments

The following tables provide a summary of the Company's other investments, together with additional information relating to the liquidity of each category:


	Fair value				Redemption frequency (if currently eligible)	Redemption notice period

At September 30, 2021
Long/short equity funds	$	3,762	—	%	Annually	60 days
Multi-strategy funds	67,628		8	%	Quarterly	60-90 days


Direct lending funds	297,047		33	%	Quarterly(1)	90 days
Private equity funds	226,745		25	%	n/a	n/a
Real estate funds	225,673		25	%	Quarterly(2)	45 days
CLO-Equities	6,297		2	%	n/a	n/a
Other privately held investments	65,512		7	%	n/a	n/a
Overseas deposits	—		—	%	n/a	n/a
Total other investments	$	892,664	100	%

At December 31, 2020
Long/short equity funds	$	25,300	3	%	Annually	60 days
Multi-strategy funds	121,420		15	%	Quarterly, Semi-annually	60-95 days


Direct lending funds	272,131		33	%	Quarterly(1)	90 days
Private equity funds	124,706		15	%	n/a	n/a
Real estate funds	164,250		20	%	Quarterly(2)	45 days
CLO-Equities	6,173		1	%	n/a	n/a
Other privately held investments	70,011		8	%	n/a	n/a
Overseas deposits	45,165		5	%	n/a	n/a
Total other investments	$	829,156	100	%

n/a - not applicable

(1) Applies to one fund with a fair value of $45 million (2020: $38 million).

(2) Applies to one fund with a fair value of $73 million (2020: $61 million).

Two common redemption restrictions which may impact the Company's ability to redeem hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund's net assets which may otherwise hinder the general partner or investment manager's ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During the nine months ended September 30, 2021 and 2020, neither of these restrictions impacted the Company's redemption requests. At September 30, 2021, $4 million (2020: $25 million), representing 5% (2020: 17%) of total hedge funds, relate to holdings where the Company is still within the lockup period. The expiration of this lockup period is March 2022.

At September 30, 2021, the Company had $237 million (2020: $151 million) of unfunded commitments as a limited partner in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from four to ten years and the General Partners of certain funds have the option to extend the term by up to three years.

At September 30, 2021, the Company had $21 million (2020: $20 million) of unfunded commitments as a limited partner in multi-strategy hedge funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until after the completion of the funds' investment term. These funds have investment terms ranging from two years to the dissolution of the underlying fund.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS (CONTINUED)

At September 30, 2021, the Company had $202 million (2020: $201 million) of unfunded commitments as a limited partner in funds which invest in real estate and real estate securities and businesses. These funds include an open-ended fund and funds with investment terms ranging from two years to the dissolution of the underlying fund.

At September 30, 2021, the Company had $170 million (2020: $166 million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over five years.

During 2015, the Company made a $50 million commitment as a limited partner of a bank revolver opportunity fund. The fund has an investment term of seven years and the General Partners have the option to extend the term by up to two years. At September 30, 2021, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.

d) Equity Method Investments

During 2016, the Company paid $108 million including direct transaction costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, AXIS Capital will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally. Harrington is not a VIE that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $5 million which represents initial transactions costs.

e) Net Investment Income

Net investment income was derived from the following sources:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Fixed maturities	$	63,712	$	73,992	$	194,426	$	244,394
Other investments	41,695		25,125		124,941		(14,574)
Equity securities	2,724		1,871		8,322		6,258
Mortgage loans	4,426		3,609		12,967		11,322
Cash and cash equivalents	692		2,491		3,645		9,814
Short-term investments	391		440		590		2,303
Gross investment income	113,640		107,528		344,891		259,517
Investment expenses	(6,301)		(5,572)		(18,717)		(19,419)
Net investment income	$	107,339	$	101,956	$	326,174	$	240,098

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. INVESTMENTS (CONTINUED)

f) Net Investment Gains (Losses)

The following table provides an analysis of net investment gains (losses):


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Gross realized investment gains
Fixed maturities and short-term investments	$	21,036	$	39,926	$	126,901	$	130,874
Equity securities	4		556		5,006		24,514
Gross realized investment gains	21,040		40,482		131,907		155,388
Gross realized investment losses
Fixed maturities and short-term investments	(4,206)		(10,394)		(32,443)		(88,216)
Equity securities	—		(37)		(116)		(5,839)
Gross realized investment losses	(4,206)		(10,431)		(32,559)		(94,055)
Change in allowance for expected credit losses	(315)		3,759		(76)		(2,498)
Impairment losses(1)	(22)		(184)		(22)		(1,486)

Change in fair value of investment derivatives(2)	2,486		(1,346)		3,388		1,970
Net unrealized gains (losses) on equity securities	(8,051)		23,329		11,230		(13,542)

Net investment gains	$	10,932	$	55,609	$	113,868	$	45,777

(1) Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.

(2) Refer to Note 5 'Derivative Instruments'.

The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Balance at beginning of period	$	84	$	6,257	$	323	$	—
Expected credit losses on securities where credit losses were not previously recognized	—		194		64		22,570
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized	315		(2,545)		59		(9,424)
Impairments of securities which the Company intends to sell or more likely than not will be required to sell	—		—		—		—
Securities sold/redeemed/matured	—		(1,408)		(47)		(10,648)
Balance at end of period	$	399	$	2,498	$	399	$	2,498

g) Reverse Repurchase Agreements

At September 30, 2021, the Company held $41 million (2020: $91 million) of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of cash and cash equivalents in the Company's consolidated balance sheets. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of 102% of the loan principal. Upon maturity, the Company receives principal and interest income. The Company monitors the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

Fair value is defined as the price to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. U.S. GAAP prescribes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement. The hierarchy is broken down into three levels as follows:

•Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's judgments about assumptions that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for financial instruments categorized as Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead the Company to change the selection of valuation technique (from market to cash flow approach) or may cause the Company to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

Valuation Techniques

The valuation techniques, including significant inputs and assumptions generally used to determine the fair values of the Company's financial instruments as well as the classification of the fair values of its financial instruments in the fair value hierarchy are described in detail below.

Fixed Maturities

At each valuation date, the Company uses the market approach valuation technique to estimate the fair value of its fixed maturities portfolio, where possible. The market approach includes, but is not limited to, prices obtained from third-party pricing services for identical or comparable securities and the use of "pricing matrix models" using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third-party pricing services is sourced from multiple vendors, where available, and the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Where prices are unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers who are active in the corresponding markets. The valuation techniques including significant inputs and assumptions generally used to determine the fair values of the Company's fixed maturities by asset class as well as the classifications of the fair values of these securities in the fair value hierarchy are described in detail below.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

U.S. Government and Agency

U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of U.S. Treasury securities are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. The fair values of U.S. government agency securities are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2.

Non-U.S. Government

Non-U.S. government securities include bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair values of these securities are based on prices obtained from international indices or valuation models that include inputs such as interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs used to price these securities are observable market inputs, the fair values of non-U.S. government securities are classified as Level 2.

Corporate Debt

Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of corporate debt securities are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Agency RMBS

Agency RMBS consist of bonds issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs used to price these securities are observable market inputs, the fair values of Agency RMBS are classified as Level 2.

CMBS

CMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the fair values of CMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

Non-agency RMBS

Non-agency RMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs used to price these securities are observable market inputs, the fair values of non-agency RMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

ABS

ABS mainly include investment-grade bonds backed by pools of loans with a variety of underlying collateral, including auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs"), originated by a variety of financial institutions. The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, the fair values of ABS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Municipals

Municipals comprise revenue bonds and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair values of these securities are determined using spreads obtained from the new issue market, trade prices and broker-dealers quotes. As the significant inputs used to price these securities are observable market inputs, the fair values of municipals are classified as Level 2.

Equity Securities

Equity securities include common stocks, preferred stocks, exchange-traded funds and bond mutual funds. As the fair values of common stocks, preferred stocks and exchange-traded funds are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. As bond mutual funds have daily liquidity, the fair values of these securities are classified as Level 2.

Other Investments

The fair value of an indirect investment in CLO-Equities is estimated using an income approach valuation technique, specifically an externally developed discounted cash flow model due to the lack of observable and relevant trades in secondary markets. As the significant inputs used to price this security are unobservable, the fair value of the indirect investment in CLO-Equities is classified as Level 3.

Other privately held investments include convertible preferred shares, common shares, convertible notes and a variable yield security. These investments are initially valued at cost, which approximates fair value. In subsequent measurement periods, the fair values of these investments are generally determined using capital statements obtained from each investee company. In order to assess the reasonableness of the information received from each investee company, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact the results of operations, financial condition or liquidity of investee companies. In addition, the Company engages in regular communication with management at the investee companies. The fair value of the variable yield security was determined using an externally developed discounted cash flow model. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.

Overseas deposits include investments in private funds held by Syndicate 2007 where the underlying investments are primarily U.S. government, non-U.S. government and corporate debt securities. The funds do not trade on an exchange, therefore, they are not included in available for sale investments. As the significant inputs used to price the underlying investments are observable market inputs, the fair values of overseas deposits are classified as Level 2.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

Short-term Investments

Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are typically not actively traded due to their approaching maturity, therefore their amortized cost approximates fair value. The fair values of short-term investments are classified as Level 2.

Derivative Instruments

Derivative instruments include foreign exchange forward contracts that are customized to the Company's economic hedging strategies and trade in the over-the-counter derivative market. The fair values of these derivatives are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used to price these derivatives are observable market inputs, the fair values of these derivatives are classified as Level 2.

Other underwriting-related derivatives include insurance and reinsurance contracts that are accounted for as derivatives. These derivative contracts are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3.

Cash Settled Awards

Cash settled awards comprise restricted stock units that form part of the Company's compensation program. Although the fair values of these awards are determined using observable quoted market prices in active markets, the restricted stock units are not actively traded. As the significant inputs used to price these securities are observable market inputs, the fair values of these liabilities are classified as Level 2.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

The tables below present the financial instruments measured at fair value on a recurring basis for the periods indicated:


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair value based on NAV practical expedient		Total fair value

At September 30, 2021
Assets
Fixed maturities, available for sale
U.S. government and agency	$	2,643,471	$	48,923	$	—	$	—	$	2,692,394
Non-U.S. government	—		719,922		—		—		719,922
Corporate debt	—		4,500,045		47,605		—		4,547,650
Agency RMBS	—		1,163,038		—		—		1,163,038
CMBS	—		1,226,225		—		—		1,226,225
Non-agency RMBS	—		193,764		—		—		193,764
ABS	—		1,643,245		—		—		1,643,245
Municipals	—		194,721		—		—		194,721
	2,643,471		9,689,883		47,605		—		12,380,959
Equity securities
Common stocks	1,027		—		—		—		1,027
Preferred stocks	263		—		—		—		263
Exchange-traded funds	309,840		—		—		—		309,840
Bond mutual funds	—		307,692		—		—		307,692
	311,130		307,692		—		—		618,822
Other investments
Hedge funds (1)	—		—		—		71,390		71,390
Direct lending funds	—		—		—		297,047		297,047
Private equity funds	—		—		—		226,745		226,745
Real estate funds	—		—		—		225,673		225,673
CLO-Equities	—		—		6,297		—		6,297
Other privately held investments	—		—		65,512		—		65,512
Overseas deposits	—		—		—		—		—
	—		—		71,809		820,855		892,664
Short-term investments	—		68,267		—		—		68,267
Other assets
Derivative instruments (refer to Note 5)	—		3,290		—		—		3,290

Total Assets	$	2,954,601	$	10,069,132	$	119,414	$	820,855	$	13,964,002
Liabilities
Derivative instruments (refer to Note 5)	$	—	$	12,370	$	7,719	$	—	$	20,089
Cash settled awards (refer to Note 8)	—		6,697		—		—		6,697
Total Liabilities	$	—	$	19,067	$	7,719	$	—	$	26,786

(1) Includes Long/short equity and Multi-strategy funds.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair value based on NAV practical expedient		Total fair value


































At December 31, 2020
Assets
Fixed maturities, available for sale
U.S. government and agency	$	1,861,240	$	57,459	$	—	$	—	$	1,918,699
Non-U.S. government	—		671,273		—		—		671,273
Corporate debt	—		4,653,447		2,504		—		4,655,951
Agency RMBS	—		1,286,209		—		—		1,286,209
CMBS	—		1,351,847		1,740		—		1,353,587
Non-agency RMBS	—		140,104		—		—		140,104
ABS	—		1,709,413		10,665		—		1,720,078
Municipals	—		295,898		—		—		295,898
	1,861,240		10,165,650		14,909		—		12,041,799
Equity securities
Common stocks	10,942		—		—		—		10,942
Preferred stocks	8,068		—		—		—		8,068
Exchange-traded funds	221,718		—		—		—		221,718
Bond mutual funds	—		277,717		—		—		277,717
	240,728		277,717		—		—		518,445
Other investments
Hedge funds (1)	—		—		—		146,720		146,720
Direct lending funds	—		—		—		272,131		272,131
Private equity funds	—		—		—		124,706		124,706
Real estate funds	—		—		—		164,250		164,250
CLO-Equities	—		—		6,173		—		6,173
Other privately held investments	—		—		70,011		—		70,011
Overseas deposits	—		45,165		—		—		45,165
	—		45,165		76,184		707,807		829,156
Short-term investments	—		161,897		—		—		161,897
Other assets
Derivative instruments (refer to Note 5)	—		18,875		—		—		18,875

Total Assets	$	2,101,968	$	10,669,304	$	91,093	$	707,807	$	13,570,172
Liabilities
Derivative instruments (refer to Note 5)	$	—	$	2,364	$	9,122	$	—	$	11,486
Cash settled awards (refer to Note 8)	—		13,273		—		—		13,273
Total Liabilities	$	—	$	15,637	$	9,122	$	—	$	24,759

(1) Includes Long/short equity and Multi-strategy funds.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

The following table quantifies the significant unobservable inputs used in estimating fair values at September 30, 2021 of investments classified as Level 3 in the fair value hierarchy:


	Fair value		Valuation technique	Unobservable input	Range	Weighted average

Other investments - CLO-Equities	$	6,297	Discounted cash flow	Default rates	4.5%	4.5%
				Loss severity rate	50.0%	50.0%
				Collateral spreads	3.0%	3.0%
				Estimated maturity dates	7 years	7 years

Other investments - Other privately held investments	$	20,442	Discounted cash flow	Discount rate	1.6%	1.6%
				Default rate	0.5%	0.5%
				Loss absorption yield	1.0%	1.0%
				Estimated maturity date	3-4 years	4 years

Derivatives - Other underwriting-related derivatives	$	(7,719)	Discounted cash flow	Discount rate	1.0%	1.0%

Note: Fixed maturities of $48 million that are classified as Level 3 are excluded from the above table as these securities are priced using broker-dealer quotes. In addition, other privately held investments of $45 million that are classified as Level 3 are excluded from the above table as these investments are priced using capital statements received from investee companies.

Other Investments - CLO-Equities

The CLO-Equities market continues to be relatively inactive with only a small number of transactions being observed, particularly related to transactions involving CLO-Equities held by the Company. Accordingly, the fair value of the Company's indirect investment in CLO-Equities is determined using a discounted cash flow model prepared by an external investment manager.

The default and loss severity rates are the most judgmental unobservable market inputs to the discounted cash flow model to which the valuation of the Company's indirect investment in CLO-Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in a lower (higher) fair value estimate for the investment in CLO-Equities and, in general, a change in default rate assumptions would be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in a higher (lower) fair value estimate for the investment in CLO-Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.

On a quarterly basis, the Company's valuation process for its indirect investment in CLO-Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. The above significant unobservable inputs are reviewed and updated based on information obtained from secondary markets, including information received from the managers of the Company's CLO-Equities investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact future cash flows. In addition, the assumptions the Company uses in its models are updated through regular communication with industry participants and ongoing monitoring of the deals in which the Company participates.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

Other Investments - Other Privately Held Securities

Other privately held securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of the variable yield security was determined using an externally developed discounted cash flow model. This model includes inputs that are specific to that investment. The inputs used in the fair value measurement include an appropriate discount rate, default rate, loss absorption rate and estimated maturity date. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this investment. A significant increase (decrease) in this input in isolation could result in significantly lower (higher) fair value measurement for this investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as investee specific information that may impact future cash flows.

Derivatives - Other Underwriting-related Derivatives

Other underwriting-related derivatives are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models which use appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of these derivatives. A significant increase (decrease) in this input in isolation could result in a significantly lower (higher) fair value measurement for the derivative contracts. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as contract specific information that may impact future cash flows.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

The following tables present changes in Level 3 for financial instruments measured at fair value on a recurring basis:


	Opening balance		Transfers into Level 3		Transfers out of Level 3		Included in net income(1)		Included in OCI (2)		Purchases		Sales		Settlements/ distributions		Closing balance		Change in unrealized gains/(losses) (3)

Three months ended September 30, 2021
Fixed maturities, available for sale
Corporate debt	$	22,726	$	—	$	—	$	—	$	(121)	$	25,000	$	—	$	—	$	47,605	$	—
CMBS	—		—		—		—		—		—		—		—		—		—

ABS	12,560		—		(12,582)		—		22		—		—		—		—		—
	35,286		—		(12,582)		—		(99)		25,000		—		—		47,605		—
Other investments



CLO-Equities	7,002		—		—		356		—		—		—		(1,061)		6,297		356
Other privately held investments	64,786		—		—		213		—		3,436		—		(2,923)		65,512		213
	71,788		—		—		569		—		3,436		—		(3,984)		71,809		569




Total assets	$	107,074	$	—	$	(12,582)	$	569	$	(99)	$	28,436	$	—	$	(3,984)	$	119,414	$	569

Other liabilities
Derivative instruments	$	8,117	$	—	$	—	$	(398)	$	—	$	—	$	—	$	—	$	7,719	$	(398)
Total liabilities	$	8,117	$	—	$	—	$	(398)	$	—	$	—	$	—	$	—	$	7,719	$	(398)

Nine months ended September 30, 2021
Fixed maturities
Corporate debt	$	2,504	$	7,000	$	—	$	—	$	(199)	$	38,300	$	—	$	—	$	47,605	$	—
CMBS	1,740		—		—		—		13		—		—		(1,753)		—		—

ABS	10,665		18,566		(28,789)		—		58		—		—		(500)		—		—
	14,909		25,566		(28,789)		—		(128)		38,300		—		(2,253)		47,605		—
Other investments



CLO-Equities	6,173		—		—		2,337		—		—		—		(2,213)		6,297		2,337
Other privately held investments	70,011		—		—		18,694		—		6,710		(26,980)		(2,923)		65,512		1,314
	76,184		—		—		21,031		—		6,710		(26,980)		(5,136)		71,809		3,651




Total assets	$	91,093	$	25,566	$	(28,789)	$	21,031	$	(128)	$	45,010	$	(26,980)	$	(7,389)	$	119,414	$	3,651

Other liabilities
Derivative instruments	$	9,122	$	—	$	—	$	(1,403)	$	—	$	—	$	—	$	—	$	7,719	$	(1,403)
Total liabilities	$	9,122	$	—	$	—	$	(1,403)	$	—	$	—	$	—	$	—	$	7,719	$	(1,403)

(1) Realized gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.

(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").

(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.

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4. FAIR VALUE MEASUREMENTS (CONTINUED)


	Opening balance		Transfers into Level 3		Transfers out of Level 3		Included in net income(1)		Included in OCI (2)		Purchases		Sales		Settlements/ distributions		Closing balance		Change in unrealized gains/(losses)(3)

Three months ended September 30, 2020
Fixed maturities, available for sale
Corporate debt	$	2,298	$	—	$	—	$	—	$	101	$	—	$	—	$	—	$	2,399	$	—
CMBS	4,434		—		—		—		148		—		—		(1,959)		2,623		—
Non-agency RMBS	9,562		—		—		—		70		—		—		—		9,632		—
ABS	441		10,060		—		—		9		—		—		—		10,510		—
	16,735		10,060		—		—		328		—		—		(1,959)		25,164		—
Other investments



CLO-Equities	9,943		—		—		(422)		—		—		—		(332)		9,189		(422)
Other privately held investments	37,420		—		—		797		—		1,276		—		—		39,493		566
	47,363		—		—		375		—		1,276		—		(332)		48,682		144





Total assets	$	64,098	$	10,060	$	—	$	375	$	328	$	1,276	$	—	$	(2,291)	$	73,846	$	144

Other liabilities
Derivative instruments	$	9,818	$	—	$	—	$	(370)	$	—	$	—	$	—	$	—	$	9,448	$	(370)
Total liabilities	$	9,818	$	—	$	—	$	(370)	$	—	$	—	$	—	$	—	$	9,448	$	(370)

Nine months ended September 30, 2020
Fixed maturities
Corporate debt	$	2,297	$	—	$	—	$	—	$	102	$	—	$	—	$	—	$	2,399	$	—
CMBS	5,235		—		—		—		(64)		—		—		(2,548)		2,623		—
Non-agency RMBS	—		9,185		—		—		447		—		—		—		9,632		—
ABS	489		10,060		—		—		(39)		—		—		—		10,510		—
	8,021		19,245		—		—		446		—		—		(2,548)		25,164		—
Other investments



CLO-Equities	14,328		—		—		(3,592)		—		—		—		(1,547)		9,189		(3,592)
Other privately held investments	36,934		—		—		801		—		1,758		—		—		39,493		570
	51,262		—		—		(2,791)		—		1,758		—		(1,547)		48,682		(3,022)




Total assets	$	59,283	$	19,245	$	—	$	(2,791)	$	446	$	1,758	$	—	$	(4,095)	$	73,846	$	(3,022)

Other liabilities
Derivative instruments	$	9,672	$	—	$	—	$	9,747	$	—	$	—	$	—	$	(9,971)	$	9,448	$	(224)
Total liabilities	$	9,672	$	—	$	—	$	9,747	$	—	$	—	$	—	$	(9,971)	$	9,448	$	(224)

(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").

(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.

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4. FAIR VALUE MEASUREMENTS (CONTINUED)

Transfers into Level 3 from Level 2

There were no transfers into Level 3 from Level 2 during the three months ended September 30, 2021. The transfers into Level 3 from Level 2 during the nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities.

Transfers out of Level 3 into Level 2

The transfers out of Level 3 into Level 2 during the three and nine months ended September 30, 2021 were primarily due to the availability of observable market inputs and multiple quotes from pricing vendors for certain fixed maturities. There were no transfers out of Level 3 into Level 2 during the three and nine months ended September 30, 2020.

Measuring the Fair Value of Other Investments Using Net Asset Valuations

The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are estimated using net asset valuations ("NAVs") as advised by external fund managers or third-party administrators. For these funds, NAVs are based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP.

For hedge funds, direct lending funds, private equity funds and real estate funds, valuation statements are typically released on a reporting lag. Therefore, the Company estimates the fair value of these funds by starting with the most recent fund valuations and adjusting for capital calls, redemptions, drawdowns and distributions. Return estimates are not available from the relevant fund managers for these funds, therefore the Company typically has a reporting lag in its fair value measurements of these funds. At September 30, 2021 and December 31, 2020 all funds measured at fair value using NAVs are reported on a lag.

The Company often does not have access to financial information relating to the underlying securities held within the funds, therefore, management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by fund managers or fund administrators. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by fund managers and fund administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of the Company's fair value estimates against subsequently received NAVs. Backtesting involves comparing the Company's previously reported fair values for each fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).

The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are measured using the NAV practical expedient, therefore the fair values of these funds have not been categorized within the fair value hierarchy.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. FAIR VALUE MEASUREMENTS (CONTINUED)

Financial Instruments Disclosed, But Not Carried, at Fair Value

The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments, including insurance contracts.

At September 30, 2021, the carrying values of cash and cash equivalents including restricted amounts, accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated fair values due to their short maturities. As these financial instruments are not actively traded, their fair values are classified as Level 2.

At September 30, 2021, the Company's fixed maturities held to maturity, were recorded at amortized cost with a carrying value of $417 million (2020: $nil) and a fair value of $417 million (2020: $nil). The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, their fair values are classified as Level 2.

At September 30, 2021, the carrying value of mortgage loans, held for investment, approximated fair value. The fair values of mortgage loans are primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk or are determined from pricing for similar loans. As mortgage loans are not actively traded, their fair values are classified as Level 3.

At September 30, 2021, the Company's debt was recorded at amortized cost with a carrying value of $1,311 million (2020: $1,310 million) and a fair value of $1,471 million (2020: $1,485 million). The fair value of the Company's debt is based on prices obtained from a third-party pricing service and is determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair value of the Company's debt is classified as Level 2.

5. DERIVATIVE INSTRUMENTS

The following table provides the balance sheet classifications of derivatives recorded at fair value:


	September 30, 2021						December 31, 2020
	Derivative notional amount		Derivative asset fair value(1)		Derivative liability fair value(1)		Derivative notional amount		Derivative asset fair value(1)		Derivative liability fair value(1)

Relating to investment portfolio:
Foreign exchange forward contracts	$	298,139	$	1,745	$	328	$	105,781	$	2	$	2,364

Relating to underwriting portfolio:
Foreign exchange forward contracts	1,154,468		1,545		12,042		1,197,012		18,873		—


Other underwriting-related contracts	75,000		—		7,719		75,000		—		9,122
Total derivatives			$	3,290	$	20,089			$	18,875	$	11,486

(1)Derivative assets and derivative liabilities are classified within other assets and other liabilities in the consolidated balance sheets.

The notional amounts of derivative contracts represent the basis on which amounts paid or received are calculated and are presented in the above table to quantify the volume of the Company's derivative activities. Notional amounts are not reflective of credit risk.

None of the Company's derivative instruments are designated as hedges under current accounting guidance.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. DERIVATIVE INSTRUMENTS (CONTINUED)

Offsetting Assets and Liabilities

The Company's derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure.

The following table provides a reconciliation of gross derivative assets and liabilities to the net amounts presented in the consolidated

balance sheets, with the difference being attributable to the impact of master netting agreements:


	September 30, 2021						December 31, 2020
	Gross amounts		Gross amounts offset		Net amounts(1)		Gross amounts		Gross amounts offset		Net amounts(1)

Derivative assets	$	9,278	$	(5,988)	$	3,290	$	27,765	$	(8,890)	$	18,875
Derivative liabilities	$	26,077	$	(5,988)	$	20,089	$	20,376	$	(8,890)	$	11,486

(1)Net asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.

Refer to Note 3 'Investments' for information on reverse repurchase agreements.

a) Relating to Investment Portfolio

Foreign Currency Risk

The Company's investment portfolio is exposed to foreign currency risk therefore the fair values of its investments are partially influenced by changes in foreign exchange rates. The Company may enter into foreign exchange forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.

b) Relating to Underwriting Portfolio

Foreign Currency Risk

The Company's insurance and reinsurance subsidiaries and branches operate in various countries. Some of its business is written in currencies other than the U.S. dollar, therefore the underwriting portfolio is exposed to significant foreign currency risk. The Company manages foreign currency risk by seeking to match its foreign-denominated net liabilities under insurance and reinsurance contracts with cash and investments that are denominated in the same currencies. The Company uses derivative instruments, specifically, forward contracts to economically hedge foreign currency exposures.

Other Underwriting-related Risks

The Company enters into insurance and reinsurance contracts that are accounted for as derivatives. These insurance or reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. DERIVATIVE INSTRUMENTS (CONTINUED)

The following table provides the total unrealized and realized gains (losses) recognized in net income for derivatives not designated as hedges:


	Consolidated statement of operations line item that includes gain (loss) recognized in net income	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020


Relating to investment portfolio:
Foreign exchange forward contracts	Net investment gains (losses)	$	2,486	$	(1,346)	$	3,388	$	1,970

Relating to underwriting portfolio:
Foreign exchange forward contracts	Foreign exchange gains (losses)	(10,081)		16,370		(36,741)		14,811


Other underwriting-related contracts	Other insurance related income (losses)	399		370		1,404		(9,361)
Total		$	(7,196)	$	15,394	$	(31,949)	$	7,420

6. RESERVE FOR LOSSES AND LOSS EXPENSES

Reserve Roll-Forward

The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserves for unpaid losses and loss expenses:


	Nine months ended September 30,
	2021		2020

Gross reserve for losses and loss expenses, beginning of period	$	13,926,766	$	12,752,081
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period	(4,496,641)		(3,877,756)
Net reserve for unpaid losses and loss expenses, beginning of period	9,430,125		8,874,325

Net incurred losses and loss expenses related to:
Current year	2,315,697		2,473,363
Prior years	(23,138)		(9,351)
	2,292,559		2,464,012

Net paid losses and loss expenses related to:
Current year	(263,969)		(227,332)
Prior years	(1,778,479)		(1,831,192)
	(2,042,448)		(2,058,524)

Foreign exchange and other	(10,885)		35,992

Net reserve for unpaid losses and loss expenses, end of period	9,669,351		9,315,805
Reinsurance recoverable on unpaid losses and loss expenses, end of period	4,989,645		4,337,683
Gross reserve for losses and loss expenses, end of period	$	14,658,996	$	13,653,488

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the nine months ended September 30, 2021, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums of $389 million (2020: $576 million).

At September 30, 2021, foreign exchange and other included a reduction in reinsurance recoverable on unpaid losses of $49 million related to the Reinsurance to Close of the 2018 year of account of Syndicate 2007.

Estimates for Significant Catastrophe Events

At September 30, 2021, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include Hurricane Ida, the July European Floods and U.S. Winter Storms Uri and Viola in 2021, the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020, Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian and the Australia Wildfires in 2019 and Hurricanes Michael and Florence, California Wildfires and Typhoon Jebi in 2018. As a result, actual losses for these events may ultimately differ materially from current estimates.

Prior Year Reserve Development

The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)

Insurance	$	5,418	$	270	$	13,351	$	4,521
Reinsurance	5,594		314		9,787		4,830
Total	$	11,012	$	584	$	23,138	$	9,351

The following sections provide further details on net prior year reserve development by segment, reserving class and accident year.

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6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

Insurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:

Insurance segment

Reserve class and tail

Property and other

Marine

Aviation

Credit and political risk

Professional lines

Liability

Short

Short/Medium

Medium

Long

Reported lines of business

Property

Marine

Terrorism

Aviation

Credit and political risk

Professional lines

Liability

Accident and health

Discontinued lines - Novae

Prior year reserve development by reserve class was as follows:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)

Property and other	$	12,486	$	6,907	$	63,167	$	42,688
Marine	4,189		4,095		23,411		633
Aviation	3,958		(326)		9,802		5,667
Credit and political risk	7,610		871		6,294		(223)
Professional lines	(20,759)		(7,287)		(68,405)		(19,086)
Liability	(2,066)		(3,990)		(20,918)		(25,158)
Total	$	5,418	$	270	$	13,351	$	4,521

For the three months ended September 30, 2021, we recognized $5 million of net favorable prior year reserve development, the principal components of which were:

•$12 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2017 to 2020 catastrophe events and better than expected loss emergence attributable to the global property and E&S property books of business related to the 2020 accident year.

•$8 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2019 and 2020 accident year.

•$4 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to the cargo and specie books of business mainly related to the 2018 and 2020 accident years.

•$4 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence mainly related to the 2020 accident year.

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6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

•$21 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International cyber program book of business mainly related to the 2019 accident year, the International management liability solutions book of business mainly related to the 2016 to 2019 accident years and the U.S. professional firms book of business mainly related to the 2018 and 2019 accident years.

For the three months ended September 30, 2020, we recognized $0.3 million of net favorable prior year reserve development, the principal components of which were:

•$7 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2019 catastrophe events.

•$4 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence mainly related to the 2018 accident year.

•$7 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European professional indemnity and financial institutions books of business mainly related to the 2018 accident year and an increase in the loss estimate attributable to a specific large claim related to the 2009 accident year.

•$4 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the primary casualty, U.S. excess casualty and program books of business mainly related to 2017 and 2018 accident years.

For the nine months ended September 30, 2021, we recognized $13 million of net favorable prior year reserve development, the principal components of which were:

•$63 million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific large claims related to the 2011 and 2012 accident years, better than expected loss emergence attributable to the 2017 to 2020 catastrophe events, the global property and E&S property books of business related to the 2020 accident year and the accident and health book of business related to the 2019 and 2020 accident years.

•$23 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo, offshore energy and specie books of business mainly related to the 2017, 2018 and 2020 accident years and decreases in loss estimates attributable to specific large claims related to 2012 accident year.

•$10 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence attributable to the International book of business related to the 2020 accident year.

•$6 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2019 accident year.

•$68 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the International management liability solutions and financial institutions books of businesses related to the 2016 to 2019 accident years, the professional firms book of business mainly related to the 2018 and 2019 accident years, the International cyber book of business mainly related to the 2019 accident year, the U.S. commercial management solutions book of business mainly related to the 2018 and 2019 accident years and the European program and European management liability solutions books of business mainly related to the 2018 accident year.

•$21 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 and 2019 accident years.

For the nine months ended September 30, 2020, we recognized $5 million of net favorable prior year reserve development, the principal components of which were:

•$43 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence related to 2018 and 2019 accident years, and to the 2017 to 2019 catastrophe events, and decreases in loss estimates attributable to specific large claims related to the 2014 and 2016 accident years.

•$6 million of net favorable prior year reserve development on aviation business primarily due to better than expected loss emergence related to the 2018 and 2019 accident years.

•$25 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the primary casualty, U.S. excess casualty and program books of business mainly related to the 2017 and 2018 accident years.

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6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

•$19 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European professional indemnity and financial institutions books of business and the commercial management solutions book of business mainly related to the 2018 and 2019 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2009 accident year.

Reinsurance Segment:

The following table maps lines of business to reserve classes and the expected claim tails:

Reinsurance segment

Reserve class and tail

Property and other

Credit and surety

Professional lines

Motor

Liability

Short

Medium

Long

Reported lines of business

Catastrophe

Property

Credit and surety

Professional lines

Motor

Liability

Engineering

Agriculture

Marine and aviation

Accident and health

Discontinued lines - Novae

Prior year reserve development by reserve class was as follows:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)		Favorable (Adverse)

Property and other	$	(5,486)	$	3,126	$	7,792	$	(4,961)
Credit and surety	8,624		11,184		(1,231)		27,927
Professional lines	(3,244)		(13,776)		(14,048)		(13,493)
Motor	8,345		1,214		38,431		18,732
Liability	(2,645)		(1,434)		(21,157)		(23,375)
Total	$	5,594	$	314	$	9,787	$	4,830

For the three months ended September 30, 2021, we recognized $6 million of net favorable prior year reserve development, the principal components of which were:

•$9 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence attributable to the European surety book of business related to several accident years.

•$8 million of net favorable prior year reserve development on motor business primarily due to proportional treaty business mainly related to the 2018 and 2019 accident years.

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6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

•$5 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the engineering line of business mainly related to the 2016 to 2019 accident years, and attributable to the 2017 and 2020 catastrophe events, partially offset by better than expected loss emergence attributable to the agriculture book of business mainly related to the 2020 accident year.

For the three months ended September 30, 2020, we recognized $0.3 million of net favorable prior year reserve development, the principal components of which were:

•$11 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to 2017 and 2019 accident years.

•$14 million of net adverse prior year reserve development on professional lines business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 2016 accident year and reserve strengthening within the European book of business mainly related to the 2016 to 2018 accident years.

For the nine months ended September 30, 2021, we recognized $10 million of net favorable prior year reserve development, the principal components of which were:

•$38 million of net favorable prior year reserve development on motor business primarily due to proportional and non-proportional treaty business mainly related to 2016 and older accident years.

•$8 million of net favorable prior year development on property and other business primarily due to decreases in the loss estimates attributable to specific large claims related to the 2009, 2019 and 2020 accident years, better than expected loss emergence attributable to the 2017 to 2019 catastrophe events, and to the accident and health book of business mainly related to the 2020 accident year, partially offset by reserve strengthening within the engineering line of business mainly related to the 2016 to 2019 accident years and attributable to the 2020 catastrophe events.

•$21 million of net adverse prior year reserve development on liability business primarily due to increases in loss estimates attributable to specific large claims related to the 2017 accident year and reserve strengthening within the commercial auto liability and U.S. multiline/regional books of business related to the 2018 accident year.

•$14 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. and European books of business related to the 2015 to 2018 accident year and increases in the loss estimates attributable to specific large claims related to the 2015 to 2017 accident years.

For the nine months ended September 30, 2020, we recognized $5 million of net favorable prior year reserve development, the principal components of which were:

•$28 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to several accident years.

•$19 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business mainly related to the 2019 and older accident years.

•$23 million of net adverse prior year development on liability business primarily due to reserve strengthening within the U.S. casualty, the U.S. multiline/regional and the European books of business mainly related to the 2016 to 2019 accident years.

•$13 million of net adverse prior year reserve development on professional lines business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 2016 accident year and reserve strengthening within the European book of business mainly related to the 2016 to 2018 accident years.

•$5 million of net adverse prior year development on property and other business primarily due to reserve strengthening within the engineering line of business mainly related to the 2016 to 2018 accident years, and the marine and aviation line of business mainly related to the 2017 accident year, partially offset by net favorable prior year reserve development within the property line of business due to better than expected loss emergence attributable to the 2019 catastrophe events.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7. EARNINGS PER COMMON SHARE

The following table presents a comparison of earnings (loss) per common share and earnings (loss) per diluted common share:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Earnings (loss) per common share
Net income (loss)	$	54,948	$	(65,382)	$	413,716	$	(123,167)

Less: Preferred share dividends	7,563		7,563		22,688		22,688

Net income (loss) available (attributable) to common shareholders	47,385		(72,945)		391,028		(145,855)
Weighted average common shares outstanding	84,771		84,308		84,684		84,235
Earnings (loss) per common share	$	0.56	$	(0.87)	$	4.62	$	(1.73)

Earnings (loss) per diluted common share
Net income (loss) available (attributable) to common shareholders	$	47,385	$	(72,945)	$	391,028	$	(145,855)

Weighted average common shares outstanding	84,771		84,308		84,684		84,235

Share-based compensation plans(1)	565		—		507		—
Weighted average diluted common shares outstanding	85,336		84,308		85,191		84,235

Earnings (loss) per diluted common share	$	0.56	$	(0.87)	$	4.59	$	(1.73)

Weighted average anti-dilutive shares excluded from the dilutive computation	477		859		873		1,019

(1) Due to the net loss attributable to common shareholders recognized for the three and nine months ended September 30, 2020, the share equivalents were anti-dilutive.

8. SHARE-BASED COMPENSATION

Performance Restricted Stock Units

Performance Restricted Stock Units granted in 2021

Performance restricted stock units granted in 2021 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 2021 were share-settled awards.

Valuation assumptions

The fair value of performance restricted stock units granted in 2021 was measured on the grant date using a Monte Carlo simulation model.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. SHARE-BASED COMPENSATION (CONTINUED)

The following table provides details of the significant inputs used in the Monte Carlo simulation model:


			Nine months ended September 30,			2021

			Expected volatility			32.99%
			Expected term (in years)			3.0
			Expected dividend yield			n/a
			Risk-free interest rate			0.17%

Beginning share price: The beginning share price is based on the average closing share price over the 10 trading days preceding and including the start of the performance period.

Ending share price: The ending share price is based on the average closing share price over the 10 trading days preceding and including the end of the performance period.

Expected volatility: The expected volatility is estimated based on the Company's historical share price volatility.

Expected term: Performance is measured from January 1, 2021 to December 31, 2023.

Expected dividend yield: The expected dividend yield is not applicable to the performance restricted stock units as dividends are paid at the end of the vesting period and do not affect the value of the performance restricted stock units.

Risk-free interest rate: The risk free rate is estimated based on the yield on a U.S. treasury zero-coupon bond issued with a remaining term equal to the vesting period of the performance restricted stock units.

Compensation expense associated with performance restricted stock units granted in 2021 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model. The fair value of these awards is recognized on a straight-line basis over the requisite service period.

Performance Restricted Stock Units granted in 2020 and 2019

Performance restricted stock units granted in 2020 and 2019 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 75% to 125% of target. Performance restricted stock units granted in 2020 and 2019 were share-settled awards.

Compensation expense associated with performance restricted stock units granted in 2020 and 2019 is determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards is recognized on a straight-line basis over the requisite service period and is subject to periodic adjustment based on the achievement of established performance criteria during the performance period.

Performance Restricted Stock Units granted in 2018

Performance restricted stock units granted in 2018 included a performance condition which was growth in the Company’s book value per diluted common share adjusted for dividends over three years compared to its peer group. Growth in book value per diluted common share adjusted for dividends was calculated in accordance with the terms of the applicable award agreements. Where performance goals were achieved, these awards cliff vested at the end of a three-year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 2018 were share-settled awards.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. SHARE-BASED COMPENSATION (CONTINUED)

Compensation expense associated with performance restricted stock units granted in 2018 was determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards was recognized on a straight-line basis over the requisite service period and was subject to periodic adjustment based on the achievement of established performance criteria during the performance period.

Share-Settled Awards

The following table provides an activity summary of the Company's share-settled restricted stock units for the nine months ended September 30, 2021:


	Share-Settled Performance Restricted Stock Units			Share-Settled Service Restricted Stock Units
	Number of restricted stock units	Weighted average grant date fair value		Number of restricted stock units	Weighted average grant date fair value

Non-vested restricted stock units - beginning of period	289	$	55.92	1,501	$	56.50
Granted	122	49.04		1,234	48.03
Vested	(66)	48.89		(555)	56.47
Forfeited	(4)	62.26		(76)	54.70
Non-vested restricted stock units - end of period	341	$	54.74	2,104	$	51.61

Cash-Settled awards

The following table provides an activity summary of the Company's cash-settled restricted stock units for the nine months ended September 30, 2021:


												Cash-Settled Service Restricted Stock Units
												Number of restricted stock units

			Non-vested restricted stock units - beginning of period									471
			Granted									—
			Vested									(231)
			Forfeited									(18)
			Non-vested restricted stock units - end of period									222

The following table provides additional information related to share-based compensation:


Nine months ended September 30,	2021		2020

Share-based compensation expense(1)	$	37,394	$	36,178
Tax benefits associated with share-based compensation expense	$	6,248	$	6,036
Liability for cash-settled restricted stock units(2)	$	6,697	$	10,160
Fair value of restricted stock units vested(3)	$	42,582	$	46,939
Unrecognized share-based compensation expense	$	95,636	$	83,978
Expected weighted average period associated with the recognition of unrecognized share-based compensation expense	2.6 years		2.5 years

(1) Related to share-settled restricted stock units and cash-settled restricted stock units.

(2) Included in other liabilities in the consolidated balance sheets.

(3) Fair value is based on the closing price of the Company's common shares on the vest date.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9. SHAREHOLDERS' EQUITY

The following table presents changes in common shares issued and outstanding:


	Three months ended September 30,		Nine months ended September 30,
	2021	2020	2021	2020

Shares issued, balance at beginning of period	176,580	176,580	176,580	176,580
Shares issued	—	—	—	—
Total shares issued at end of period	176,580	176,580	176,580	176,580

Treasury shares, balance at beginning of period	(91,813)	(92,274)	(92,227)	(92,621)
Shares repurchased	(4)	(2)	(201)	(155)
Shares reissued	10	5	621	505
Total treasury shares at end of period	(91,807)	(92,271)	(91,807)	(92,271)

Total shares outstanding	84,773	84,309	84,773	84,309

Treasury Shares

The following table presents common shares repurchased from shares held in Treasury:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

In the open market:
Total shares	—		—		—		—
Total cost	$	—	$	—	$	—	$	—
Average price per share(1)	$	—	$	—	$	—	$	—

From employees:(2)
Total shares	4		2		201		155
Total cost	$	206	$	84	$	10,025	$	8,685
Average price per share(1)	$	49.91	$	46.85	$	49.87	$	55.94






Total shares repurchased:
Total shares	4		2		201		155
Total cost	$	206	$	84	$	10,025	$	8,685
Average price per share(1)	$	49.91	$	46.85	$	49.87	$	55.94

(1) Calculated using whole numbers.

(2) Shares are repurchased from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units.

Dividends

The following table presents dividends declared and paid related to the Company's common and preferred shares:


	Per share data
	Dividends declared		Dividends paid in period of declaration		Dividends paid in period following declaration

Three months ended September 30, 2021
Common shares	$	0.42	$	—	$	0.42

Series E preferred shares	$	34.38	$	—	$	34.38

Three months ended September 30, 2020
Common shares	$	0.41	$	—	$	0.41

Series E preferred shares	$	34.38	$	—	$	34.38

Nine months ended September 30, 2021
Common shares	$	1.26	$	0.84	$	0.42

Series E preferred shares	$	103.13	$	68.75	$	34.38

Nine months ended September 30, 2020
Common shares	$	1.23	$	0.82	$	0.41

Series E preferred shares	$	103.13	$	68.75	$	34.38

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10. DEBT AND FINANCING ARRANGEMENTS

a)Letters of Credit

Effective March 31, 2021, certain of AXIS Capital’s operating subsidiaries (the "Participating Subsidiaries") amended their existing $750 million secured letter of credit facility to: (i) extend the expiration date of the $250 million secured letter of credit facility to March 31, 2022, with each letter of credit provided pursuant to such credit facility having a tenor not to extend beyond March 31, 2023; (ii) reduce the utilization capacity available under the $250 million secured letter of credit facility to $150 million, reducing the maximum aggregate utilization capacity of the credit facility from $750 million to $650 million; and (iii) make administrative changes to the remaining $500 million secured letter of credit facility.

Letters of credit issued under the secured letter of credit facility are principally used to support the reinsurance obligations of the Participating Subsidiaries. The Participating Subsidiaries are subject to certain covenants, including the requirement to maintain sufficient collateral to cover the obligations outstanding under the facilities. Such obligations include contingent reimbursement obligations for outstanding letters of credit and fees payable to Citibank Europe plc. In the event of default, Citibank Europe plc may exercise certain remedies, including the exercise of control over pledged collateral and the termination facility to any or all of the Participating Subsidiaries.

11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.

The Company is not party to any material legal proceedings arising outside the ordinary course of business.

Investments

Refer to Note 3 - 'Investments' for information on the Company's unfunded investment commitments related to the Company's other investment portfolio.

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12. OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the tax effects allocated to each component of other comprehensive income (loss):


	2021						2020
	Before tax amount		Income tax (expense) benefit		Net of tax amount		Before tax amount		Income tax (expense) benefit		Net of Tax Amount

Three months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized	$	(65,321)	$	7,143	$	(58,178)	$	105,932	$	(10,820)	$	95,112
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized	370		—		370		218		2		220
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)	(16,438)		1,858		(14,580)		(33,100)		3,970		(29,130)
Unrealized gains (losses) arising during the period, net of reclassification adjustment	(81,389)		9,001		(72,388)		73,050		(6,848)		66,202

Foreign currency translation adjustment	(3,807)		—		(3,807)		2,310		—		2,310


Total comprehensive income (loss), net of tax	$	(85,196)	$	9,001	$	(76,195)	$	75,360	$	(6,848)	$	68,512

Nine months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized	$	(204,587)	$	25,440	$	(179,147)	$	243,522	$	(33,139)	$	210,383
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized	131		—		131		(110)		(2)		(112)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)	(94,018)		7,837		(86,181)		(38,584)		8,295		(30,289)
Unrealized gains (losses) arising during the period, net of reclassification adjustment	(298,474)		33,277		(265,197)		204,828		(24,846)		179,982

Foreign currency translation adjustment	924		—		924		(1,581)		—		(1,581)


Total other comprehensive income (loss), net of tax	$	(297,550)	$	33,277	$	(264,273)	$	203,247	$	(24,846)	$	178,401

The following table presents details of amounts reclassified from accumulated other comprehensive income ("AOCI") to net income (loss):


		Amount reclassified from AOCI(1)
AOCI Components	Consolidated statement of operations line item that includes reclassification adjustment	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020

Unrealized gains (losses) on available for sale investments
	Other realized gains (losses)	$	16,460	$	33,284	$	94,040	$	40,070
	Impairment losses	(22)		(184)		(22)		(1,486)

	Total before tax	16,438		33,100		94,018		38,584
	Income tax (expense) benefit	(1,858)		(3,970)		(7,837)		(8,295)
	Net of tax	$	14,580	$	29,130	$	86,181	$	30,289

(1) Amounts in parentheses are charges to net income (loss).

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AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13. RELATED PARTY TRANSACTIONS

At September 30, 2021, the Company has invested $14 million with Rialto Real Estate Fund IV-Property and $14 million in co-investments with Rialto Real Estate Fund IV-Property, a fund managed by a portfolio company of Stone Point's private equity fund, Trident VII L.P.

At September 30, 2021, the Company has invested $8 million in Stone Point's private equity fund, T-VIII Mercury Co-Invest LP.

At September 30, 2021, the Company has invested $8 million in Stone Point Credit Corporation.

On June 29, 2021, the Company invested $10 million in 7.25% fixed to floating rate, senior unsecured notes due 2031, issued by Harrington.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2021 and 2020 and our financial condition at September 30, 2021 and December 31, 2020. This should be read in conjunction with Item 1 'Consolidated Financial Statements' of this report and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020. Tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.


			Page

Third Quarter 2021 Financial Highlights			52
Overview			53
Consolidated Results of Operations			55
Results by Segment:
i) Insurance Segment			57
ii) Reinsurance Segment			61
Net Investment Income and Net Investment Gains (Losses)			66
Other Expenses (Revenues), Net			68
Financial Measures			70
Non-GAAP Financial Measures Reconciliation			72
Cash and Investments			75
Liquidity and Capital Resources			78
Critical Accounting Estimates			79
Recent Accounting Pronouncements			79
Off-Balance Sheet and Special Purpose Entity Arrangements			79

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THIRD QUARTER 2021 FINANCIAL HIGHLIGHTS

Third Quarter 2021 Consolidated Results of Operations

•Net income available to common shareholders of $47 million, or $0.56 per common share, and $0.56 per diluted common share

•Operating income(1) of $1 million, or $0.01 per diluted common share(1)

•Gross premiums written of $1.6 billion

•Net premiums written of $1.0 billion

•Net premiums earned of $1.2 billion

•Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $250 million (Insurance: $105 million and Reinsurance: $145 million), or 20.7 points on the current accident year loss ratio, primarily attributable to Hurricane Ida, July European floods and other weather-related events.

•Net favorable prior year reserve development of $11 million

•Underwriting loss(2) of $59 million and combined ratio of 107.4%

•Net investment income of $107 million

•Net investment gains of $11 million

•Foreign exchange gains of $28 million

Third Quarter 2021 Consolidated Financial Condition

•Total cash and investments of $16.5 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 87% of total cash and investments and have an average credit rating of AA-

•Total assets of $27.9 billion

•Reserve for losses and loss expenses of $14.7 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $5.5 billion

•Total debt of $1.3 billion and debt to total capital ratio(3) of 19.7%

•Common shareholders’ equity of $4.8 billion; book value per diluted common share of $54.86

(1)Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.

(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

(3)The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt.

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OVERVIEW

Business Overview

AXIS Capital Holdings Limited ("AXIS Capital"), through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with operations in Bermuda, the U.S., Europe, Singapore and Canada. Our underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re.

We provide our clients and distribution partners with a broad range of risk transfer products and services, and meaningful capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service, intelligent risk taking and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first nine months of 2021 included the following:

•increasing our relevance in a select number of attractive specialty lines insurance and treaty reinsurance markets including U.S. excess and surplus lines, North America professional lines and Lloyd's specialty insurance business;

•continuing the implementation of a focused distribution strategy;

•re-balancing our portfolio towards less volatile lines of business that carry attractive returns;

•improving the effectiveness and efficiency of our operating platforms and processes;

•investing in data and technology capabilities, and tools to empower our underwriters and enhance the service that we provide to our customers;

•utilizing reinsurance markets and third party capital relationships; and

•growing our corporate citizenship program to give back to our communities and help contribute to a more sustainable future.

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Outlook

We are committed to leadership in specialty insurance and global reinsurance, where we have depth of talent and expertise. We believe our market positioning, underwriting expertise, best-in-class claims management capabilities and strong relationships with our distributors and clients will provide opportunities for increased profitability, with differences among our lines driven by our tactical response to market conditions.

Rates, and terms and conditions across virtually all insurance lines and geographies continued to be favorable through the third quarter of 2021. We expect many specialty segments will continue to experience further pricing improvements, as carriers assess pricing adequacy, portfolio construction, economic conditions and account preferences. In this market environment, we are focusing on growth in lines of business and market segments that are adequately priced.

The reinsurance market is also experiencing an improvement in rates, and terms and conditions, but more is needed to achieve price adequacy. In light of 2021 marking the fifth consecutive year of losses, markets are aiming to reduce net volatility and increase profitability. However, the case for change is dampened due to the very strong industry capitalization. Overall, we believe the reinsurance market will continue to gain momentum and achieve the required risk adjusted rate increases.

We are encouraged by the pricing improvements we are seeing across both the insurance and reinsurance segments, and that we expect will carry into 2022 and beyond. Where prices deliver adequate profitability, we will look to grow within our risk and volatility guidelines. With a strengthened book of business, and growing footprint in attractive markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.

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CONSOLIDATED RESULTS OF OPERATIONS


	Three months ended September 30,					Nine months ended September 30,
	2021		% Change	2020		2021		% Change	2020

Underwriting revenues:
Gross premiums written	$	1,646,489	24%	$	1,331,178	$	6,123,156	12%	$	5,478,519
Net premiums written	996,471		22%	815,982		3,979,215		12%	3,550,960
Net premiums earned	1,211,427		11%	1,091,312		3,472,090		6%	3,283,941
Other insurance related income (loss)	7,665		nm	1,440		16,262		nm	(5,270)
Underwriting expenses:
Net losses and loss expenses	(911,369)		4%	(879,677)		(2,292,559)		(7%)	(2,464,012)
Acquisition costs	(231,712)		—%	(230,564)		(669,654)		(4%)	(697,716)
Underwriting-related general and administrative expenses(1)	(134,826)		14%	(117,835)		(396,455)		10%	(361,623)
Underwriting income (loss)	(58,815)			(135,324)		129,684			(244,680)

Net investment income	107,339		5%	101,956		326,174		36%	240,098
Net investment gains	10,932		(80%)	55,609		113,868		nm	45,777
Corporate expenses(1)	(23,134)		10%	(20,988)		(82,365)		10%	(74,915)
Foreign exchange (losses) gains	28,032		nm	(60,734)		4,316		nm	(8,760)
Interest expense and financing costs	(15,954)		2%	(15,574)		(46,759)		(22%)	(59,641)
Reorganization expenses	—		nm	(1,413)		—		nm	(822)
Amortization of value of business acquired	(1,028)		—%	(1,028)		(3,083)		(25%)	(4,111)
Amortization of intangible assets	(3,149)		11%	(2,838)		(9,163)		7%	(8,564)

Income (loss) before income taxes and interest in income (loss) of equity method investments	44,223			(80,334)		432,672			(115,618)
Income tax (expense) benefit	(1,186)		nm	12,056		(49,827)		nm	6,030
Interest in income (loss) of equity method investments	11,911		nm	2,896		30,871		nm	(13,579)
Net income (loss)	54,948			(65,382)		413,716			(123,167)

Preferred share dividends	(7,563)		—%	(7,563)		(22,688)		—%	(22,688)

Net income (loss) available (attributable) to common shareholders	$	47,385		$	(72,945)	$	391,028		$	(145,855)

nm – not meaningful is defined as a variance greater than +/-100%

(1)Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $23,134 and $20,988 for the three months ended September 30, 2021 and 2020, respectively, and $82,365 and $74,915 for the nine months ended September 30, 2021 and 2020, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details on corporate expenses. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.

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Underwriting Revenues

Underwriting revenues by segment were as follows:


	Three months ended September 30,					Nine months ended September 30,
	2021		% Change	2020		2021		% Change	2020

Gross premiums written:
Insurance	$	1,176,500	26%	$	935,817	$	3,548,169	22%	$	2,914,100
Reinsurance	469,989		19%	395,361		2,574,987		—%	2,564,419
Total gross premiums written	$	1,646,489	24%	$	1,331,178	$	6,123,156	12%	$	5,478,519

Percent of gross premiums ceded
Insurance	40%		(2 pts)	42%		40%		(1 pt)	41%
Reinsurance	39%		8 pts	31%		28%		(1 pt)	29%
Total percent of gross premiums ceded	40%		1 pt	39%		35%		0 pt	35%

Net premiums written:
Insurance	$	707,492	30%	$	544,857	$	2,128,190	23%	$	1,729,268
Reinsurance	288,979		7%	271,125		1,851,025		2%	1,821,692
Total net premiums written	$	996,471	22%	$	815,982	$	3,979,215	12%	$	3,550,960

Net premiums earned:
Insurance	$	681,008	19%	$	570,184	$	1,928,970	13%	$	1,709,268
Reinsurance	530,419		2%	521,128		1,543,120		(2%)	1,574,673
Total net premiums earned	$	1,211,427	11%	$	1,091,312	$	3,472,090	6%	$	3,283,941

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Results by Segment' for further details on underwriting revenues.

Underwriting Expenses

The components of the combined ratio were as follows:


	Three months ended September 30,					Nine months ended September 30,
	2021		% Point Change	2020		2021		% Point Change	2020

Current accident year loss ratio excluding catastrophe and weather-related losses	55.4	%	(3.1)	58.5	%	55.4	%	(2.4)	57.8	%
Catastrophe and weather-related losses ratio	20.7	%	(1.5)	22.2	%	11.3	%	(6.2)	17.5	%
Current accident year loss ratio	76.1	%	(4.6)	80.7	%	66.7	%	(8.6)	75.3	%
Prior year reserve development ratio	(0.9	%)	(0.8)	(0.1	%)	(0.7	%)	(0.4)	(0.3	%)
Net losses and loss expenses ratio	75.2	%	(5.4)	80.6	%	66.0	%	(9.0)	75.0	%
Acquisition cost ratio	19.1	%	(2.0)	21.1	%	19.3	%	(1.9)	21.2	%
General and administrative expense ratio(1)	13.1	%	0.3	12.8	%	13.8	%	0.4	13.4	%
Combined ratio	107.4	%	(7.1)	114.5	%	99.1	%	(10.5)	109.6	%

(1) The general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 1.9% and 1.9% for the three months ended September 30, 2021 and 2020, respectively, and 2.4% and 2.3% for the nine months ended September 30, 2021 and 2020, respectively Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details.

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Results by Segment' for further details on underwriting expenses.

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RESULTS BY SEGMENT

Insurance Segment

Results for the insurance segment were as follows:


	Three months ended September 30,							Nine months ended September 30,
	2021			% Change	2020			2021			% Change	2020

Revenues:
Gross premiums written	$	1,176,500		26%	$	935,817		$	3,548,169		22%	$	2,914,100
Net premiums written	707,492			30%	544,857			2,128,190			23%	1,729,268
Net premiums earned	681,008			19%	570,184			1,928,970			13%	1,709,268
Other insurance related income	468			(32%)	688			1,435			(31%)	2,091

Expenses:
Current accident year net losses and loss expenses	(448,099)				(443,659)			(1,145,104)				(1,257,090)
Prior year reserve development	5,418				270			13,351				4,521
Acquisition costs	(123,529)				(114,569)			(348,172)				(343,579)
Underwriting-related general and administrative expenses	(104,905)				(94,379)			(307,777)				(284,909)

Underwriting income (loss)	$	10,361			$	(81,465)		$	142,703			$	(169,698)

Ratios:				% Point Change							% Point Change
Current accident year loss ratio excluding catastrophe and weather-related losses	50.8		%	(3.9)	54.7		%	51.6		%	(3.2)	54.8		%
Catastrophe and weather-related losses ratio	15.0		%	(8.1)	23.1		%	7.8		%	(10.9)	18.7		%
Current accident year loss ratio	65.8		%	(12.0)	77.8		%	59.4		%	(14.1)	73.5		%
Prior year reserve development ratio	(0.8		%)	(0.8)	—		%	(0.7		%)	(0.5)	(0.2		%)
Net losses and loss expenses ratio	65.0		%	(12.8)	77.8		%	58.7		%	(14.6)	73.3		%
Acquisition cost ratio	18.1		%	(2.0)	20.1		%	18.0		%	(2.1)	20.1		%
Underwriting-related general and administrative expense ratio	15.4		%	(1.1)	16.5		%	16.0		%	(0.7)	16.7		%
Combined ratio	98.5		%	(15.9)	114.4		%	92.7		%	(17.4)	110.1		%

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Gross Premiums Written

Gross premiums written by line of business were as follows:


	Three months ended September 30,									Nine months ended September 30,
	2021				2020				% Change	2021				2020				% Change

Property	$	273,216	24	%	$	238,599	26	%	15%	$	855,395	24	%	$	741,043	27	%	15%
Marine	87,463		7	%	82,810		9	%	6%	389,472		11	%	355,503		12	%	10%
Terrorism	14,167		1	%	14,767		2	%	(4%)	46,250		1	%	42,296		1	%	9%
Aviation	32,954		3	%	22,702		2	%	45%	83,098		2	%	63,725		2	%	30%
Credit and political risk	27,651		2	%	24,473		3	%	13%	108,242		3	%	100,151		3	%	8%
Professional lines	465,469		40	%	338,907		36	%	37%	1,267,030		36	%	943,635		32	%	34%
Liability	228,306		19	%	172,747		18	%	32%	663,088		19	%	548,023		19	%	21%
Accident and health	46,644		4	%	39,262		4	%	19%	134,971		4	%	117,743		4	%	15%
Discontinued lines - Novae	630		—	%	1,550		—	%	nm	623		—	%	1,981		—	%	nm
Total	$	1,176,500	100	%	$	935,817	100	%	26%	$	3,548,169	100	%	$	2,914,100	100	%	22%

nm – not meaningful

Gross premiums written for the three months ended September 30, 2021 increased by $241 million, or 26% ($228 million, or 24%, on a constant currency basis(1)), compared to the three months ended September 30, 2020. The increase was primarily attributable to professional lines, liability, property, aviation, and accident and health lines.

The increases in professional lines, liability and property lines were due to new business and favorable rate changes. The increase in accident and health lines was due to the timing of renewals. The increase in aviation lines was due to premium adjustments and new business together with favorable rate changes and timing differences on renewed business.

Gross premiums written for the nine months ended September 30, 2021 increased by $634 million, or 22% ($596 million, or 20%, on a constant currency basis(1)), compared to the nine months ended September 30, 2020. The increase was primarily attributable to professional lines, liability, property, marine, aviation, and accident and health lines.

The increases in professional lines, liability, property and marine lines were due to new business and favorable rate changes. The increase in aviation lines was due to premium adjustments, new business and favorable rate changes. The increase in accident and health lines was due to new business and the timing of renewals.

Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2021, was $469 million, or 40%, of gross premiums written, compared to $391 million, or 42%, of gross premiums written for the three months ended September 30, 2020. The increase in ceded premiums written of $78 million, or 20%, was primarily driven by increases in professional lines and liability lines.

Ceded premiums written for the nine months ended September 30, 2021, was $1.4 billion, or 40%, of gross premiums written, compared to $1.2 billion, or 41%, of gross premiums written for the nine months ended September 30, 2020. The increase in ceded premiums written of $235 million, or 20%, was primarily driven by increases in professional lines, liability, property, and accident and health lines, partially offset by a decrease in marine lines.

(1) Amounts presented on a constant currency basis are non-GAAP financial measures as defined in Item10 (e) of SEC Regulation S-K. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to the prior year balance.

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Net Premiums Earned

Net premiums earned by line of business were as follows:


	Three months ended September 30,									Nine months ended September 30,
	2021				2020				% Change	2021				2020				% Change

Property	$	169,600	25	%	$	145,717	27	%	16%	$	486,467	25	%	$	452,876	26	%	7%
Marine	89,700		13	%	76,544		13	%	17%	261,574		14	%	220,248		13	%	19%
Terrorism	13,303		2	%	11,728		2	%	13%	38,055		2	%	34,675		2	%	10%
Aviation	21,104		3	%	19,039		3	%	11%	62,235		3	%	51,236		3	%	21%
Credit and political risk	22,156		3	%	23,781		4	%	(7%)	65,926		3	%	77,721		5	%	(15%)
Professional lines	236,380		35	%	179,441		31	%	32%	651,649		34	%	530,651		31	%	23%
Liability	90,136		13	%	76,487		13	%	18%	253,220		13	%	234,522		14	%	8%
Accident and health	38,072		6	%	37,151		7	%	2%	109,089		6	%	106,015		6	%	3%
Discontinued lines - Novae	557		—	%	296		—	%	nm	755		—	%	1,324		—	%	nm
Total	$	681,008	100	%	$	570,184	100	%	19%	$	1,928,970	100	%	$	1,709,268	100	%	13%

nm – not meaningful

Net premiums earned for the three months ended September 30, 2021 increased by $111 million, or 19% ($101 million, or 18%, on a constant currency basis), compared to the three months ended September 30, 2020. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property and marine lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines.

Net premiums earned for the nine months ended September 30, 2021 increased by $220 million, or 13% ($189 million, or 11%, on a constant currency basis), compared to the nine months ended September 30, 2020. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property, marine and aviation lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines and a decrease in gross premiums earned in credit and political risk lines.

Loss Ratio

The components of the loss ratio were as follows:


	Three months ended September 30,					Nine months ended September 30,
	2021		% Point Change	2020		2021		% Point Change	2020

Current accident year loss ratio	65.8	%	(12.0)	77.8	%	59.4	%	(14.1)	73.5	%
Prior year reserve development ratio	(0.8	%)	(0.8)	—	%	(0.7	%)	(0.5)	(0.2	%)
Loss ratio	65.0	%	(12.8)	77.8	%	58.7	%	(14.6)	73.3	%

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 65.8% and 59.4% for the three and nine months ended September 30, 2021, respectively, from 77.8% and 73.5% for the three and nine months ended September 30, 2020, respectively.

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The decrease in the current accident year loss ratio for three and nine months ended September 30, 2021, compared to the same period in 2020, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended September 30, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $105 million, or 15.0 points, primarily attributable to Hurricane Ida and other weather-related events. During the nine months ended September 30, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $152 million, or 7.8 points, primarily attributable to Hurricane Ida, Winter Storms Uri and Viola, and other weather-related events. Comparatively, during the three and nine months ended September 30, 2020, catastrophe and weather-related losses, net of reinstatement premiums, were $132 million, or 23.1 points and $325 million, or 18.7 points, respectively.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 50.8% for the three months ended September 30, 2021, from 54.7% for the three months ended September 30, 2020. The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends, and decreases in loss experience in property lines, largely associated with repositioning the portfolio, and credit and political risk lines.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 51.6% for the nine months ended September 30, 2021, from 54.8% for the nine months ended September 30, 2020. The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends and a decrease in loss experience in property lines largely associated with repositioning the portfolio.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Acquisition Cost Ratio

The acquisition cost ratio decreased to 18.1% and 18.0% for the three and nine months ended September 30, 2021, respectively, from 20.1% and 20.1% for the three and nine months ended September 30, 2020, respectively, principally related to changes in business mix due to the decrease in program business in Property lines written in recent periods and an increase in ceding commissions.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense ratio decreased to 15.4% for the three months ended September 30, 2021, from 16.5% for the three months ended September 30, 2020, mainly driven by an increase in net premiums earned, partially offset by an increase in personnel costs and information technology costs together with a decrease in fees related to arrangements with strategic capital partners.

The underwriting-related general and administrative expense ratio decreased to 16.0% for the nine months ended September 30, 2021, from 16.7% for the nine months ended September 30, 2020, mainly driven by an increase in net premiums earned, partially offset by an increase in personnel costs and a decrease in fees related to arrangements with strategic capital partners.

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Reinsurance Segment

Results from the reinsurance segment were as follows:


	Three months ended September 30,							Nine months ended September 30,
	2021			% Change	2020			2021			% Change	2020

Revenues:
Gross premiums written	$	469,989		19%	$	395,361		$	2,574,987		—%	$	2,564,419
Net premiums written	288,979			7%	271,125			1,851,025			2%	1,821,692
Net premiums earned	530,419			2%	521,128			1,543,120			(2%)	1,574,673
Other insurance related income (loss)	7,197			nm	752			14,827			nm	(7,361)

Expenses:
Current accident year net losses and loss expenses	(474,282)				(436,602)			(1,170,593)				(1,216,273)
Prior year reserve development	5,594				314			9,787				4,830
Acquisition costs	(108,183)				(115,995)			(321,482)				(354,137)
Underwriting-related general and administrative expenses	(29,921)				(23,456)			(88,678)				(76,714)

Underwriting income (loss)	$	(69,176)			$	(53,859)		$	(13,019)			$	(74,982)
Ratios:				% Point Change							% Point Change
Current accident year loss ratio excluding catastrophe and weather-related losses	61.4		%	(1.3)	62.7		%	60.2		%	(0.9)	61.1		%
Catastrophe and weather-related losses ratio	28.0		%	6.9	21.1		%	15.7		%	(0.4)	16.1		%
Current accident year loss ratio	89.4		%	5.6	83.8		%	75.9		%	(1.3)	77.2		%
Prior year reserve development ratio	(1.0		%)	(0.9)	(0.1		%)	(0.7		%)	(0.4)	(0.3		%)
Net losses and loss expenses ratio	88.4		%	4.7	83.7		%	75.2		%	(1.7)	76.9		%
Acquisition cost ratio	20.4		%	(1.9)	22.3		%	20.8		%	(1.7)	22.5		%
Underwriting-related general and administrative expense ratio	5.6		%	1.1	4.5		%	5.8		%	0.9	4.9		%
Combined ratio	114.4		%	3.9	110.5		%	101.8		%	(2.5)	104.3		%

nm – not meaningful

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Gross Premiums Written

Gross premiums written by line of business were as follows:


	Three months ended September 30,									Nine months ended September 30,
	2021				2020				% Change	2021				2020				% Change

Catastrophe	$	88,396	18	%	$	74,656	18	%	18%	$	472,441	17	%	$	526,646	21	%	(10%)
Property	38,584		8	%	58,907		15	%	(35%)	209,364		8	%	246,859		10	%	(15%)
Credit and surety	55,807		12	%	38,110		10	%	46%	176,441		7	%	189,180		7	%	(7%)
Professional lines	24,279		5	%	31,752		8	%	(24%)	303,932		12	%	267,047		10	%	14%
Motor	12,151		3	%	(2,235)		(1)	%	nm	275,455		11	%	319,867		12	%	(14%)
Liability	166,085		35	%	136,791		35	%	21%	617,393		24	%	505,322		20	%	22%
Engineering	(660)		—	%	1,408		—	%	nm	(5,590)		—	%	20,334		1	%	nm
Agriculture	11,992		3	%	7,455		2	%	61%	75,306		3	%	69,599		3	%	8%
Marine and aviation	12,427		3	%	6,341		2	%	96%	70,382		3	%	62,202		2	%	13%
Accident and health	60,927		13	%	41,820		11	%	nm	379,179		15	%	356,123		14	%	6%
Discontinued lines - Novae	1		—	%	356		—	%	nm	684		—	%	1,240		—	%	(45%)
Total	$	469,989	100	%	$	395,361	100	%	19%	$	2,574,987	100	%	$	2,564,419	100	%	—%

nm – not meaningful

Gross premiums written for the three months ended September 30, 2021, increased by $75 million, or 19% ($71 million, or 18% on a constant currency basis), compared to the three months ended September 30, 2020. The increase was primarily attributable to liability, accident and health, credit and surety, motor and catastrophe lines, partially offset by a decrease in property and professional lines.

The increases in liability, and accident and health lines were largely driven by favorable market conditions associated with renewals and new business. In addition, the timing of the renewals of large contracts contributed to the increase in gross premiums written in accident and health lines. The increase in accident and health lines was also driven by premium adjustments. The increase in credit and surety lines was due to premium adjustments attributable to economic climate in the prior year. The increase in motor lines was due to the timing of the renewal of a significant contract. The increase in catastrophe lines was attributable to reinstatement premiums associated with significant catastrophe losses.

The decrease in property lines was driven by non-renewals and decreased line sizes on several contracts associated with repositioning the portfolio. The decrease in professional lines was due to prior year premium adjustments and a decreased line size on a significant contract.

Gross premiums written for the nine months ended September 30, 2021, increased by $11 million (decreased by $21 million, or 1%, on a constant currency basis), compared to the nine months ended September 30, 2020. The increase was primarily attributable to liability, professional lines, and accident and health lines, partially offset by catastrophe, motor, property, engineering and credit and surety lines.

The increases in liability, professional lines, and accident and health lines were driven by favorable market conditions associated with renewals and new business. The increase in liability lines was also due to the restructuring of several significant contracts. The increase in professional lines was also due to premium adjustments associated with favorable market conditions. The increases in accident and health lines was also due to the timing of the renewal of a significant contract.

The decrease in catastrophe lines was driven by non-renewals and decreased line sizes associated with the repositioning of the portfolio, partially offset by reinstatement premiums associated with significant catastrophe losses. The decreases in motor and property lines were driven by non-renewals and decreased line sizes associated with the repositioning of the portfolio. The decrease in engineering lines was driven by non-renewals and premium adjustments following the exit from this line of business in 2020. The decrease in credit and surety lines was driven by premium adjustments associated with the economic climate that prevailed in 2020.

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Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2021, was $181 million, or 39%, of gross premiums written, compared to $124 million, or 31%, of gross premiums written for the three months ended September 30, 2020.

The increase in ceded premiums written of $57 million, or 46%, was primarily driven by catastrophe, credit and surety, and liability lines.

The increase in catastrophe lines was attributable to an increase in premiums ceded to strategic partners due to the restructuring of several quota share retrocessional treaties together with premium adjustments. The increase in credit and surety lines was attributable to premium adjustments and the restructuring of an existing significant quota share retrocessional treaty. The increase in liability lines reflected the increase in gross premiums written for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, partially offset by a decrease in premiums ceded due to the restructuring of a significant quota share retrocessional treaty.

Ceded premiums written for the nine months ended September 30, 2021, was $724 million, or 28%, of gross premiums written, compared to $743 million, or 29%, of gross premiums written for the nine months ended September 30, 2020.

The decrease in ceded premiums written of $19 million, or 3%, was primarily driven by catastrophe and property lines, partially offset by an increase in liability lines.

The decrease in catastrophe lines was attributable to the non-renewal of significant excess of loss treaties and a significant quota share retrocessional treaty, partially offset by an increase in premiums ceded to strategic partners due to the restructuring of several quota share retrocessional treaties together with premium adjustments and additional costs associated with the purchase of catastrophe bond protection. The decrease in property lines was attributable to a non-renewal of a fronting arrangement and the non-renewal of significant excess of loss treaties. The increase in liability lines reflected the increase in gross premiums written for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, partially offset by a decrease in premiums ceded due to the restructuring of a significant quota share retrocessional treaty.

Net Premiums Earned

Net premiums earned by line of business were as follows:


	Three months ended September 30,									Nine months ended September 30,
	2021				2020				% Change	2021				2020				% Change

Catastrophe	$	55,226	10	%	$	64,163	13	%	(14%)	$	196,746	12	%	$	194,987	12	%	1%
Property	59,686		11	%	62,704		12	%	(5%)	178,275		12	%	196,229		12	%	(9%)
Credit and surety	43,305		8	%	43,730		8	%	(1%)	116,276		8	%	134,988		9	%	(14%)
Professional lines	54,977		10	%	54,424		10	%	1%	167,329		11	%	154,482		10	%	8%
Motor	65,822		12	%	63,298		12	%	4%	188,823		12	%	203,776		13	%	(7%)
Liability	116,261		22	%	96,671		19	%	20%	314,829		20	%	293,918		19	%	7%
Engineering	8,264		2	%	14,548		3	%	(43%)	21,704		1	%	43,742		3	%	(50%)
Agriculture	24,590		5	%	17,750		3	%	39%	56,890		4	%	57,949		4	%	(2%)
Marine and aviation	18,680		4	%	14,742		3	%	27%	44,214		3	%	37,275		2	%	19%
Accident and health	83,607		16	%	89,087		17	%	(6%)	257,384		17	%	256,303		16	%	—%
Discontinued lines - Novae	1		—	%	11		—	%	nm	650		—	%	1,024		—	%	(37%)
Total	$	530,419	100	%	$	521,128	100	%	2%	$	1,543,120	100	%	$	1,574,673	100	%	(2%)

nm – not meaningful

Net premiums earned for the three months ended September 30, 2021, increased by $9 million, or 2% ($5 million, or 1%, on a constant currency basis), compared to the three months ended September 30, 2020. The increase was primarily driven by an increase in gross premiums earned in liability lines, partially offset by a decrease in gross premiums earned in catastrophe lines and an increase in ceded premiums earned in liability lines.

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Net premiums earned for the nine months ended September 30, 2021, decreased by $32 million, or 2% (decreased by $41 million, or 3%, on a constant currency basis), compared to the nine months ended September 30, 2020. The decrease was primarily driven by decreases in gross premiums earned in credit and surety, property, engineering and motor lines, together with increases in ceded premiums earned in liability, professional lines, and motor lines, partially offset by increases in gross premiums earned in liability and professional lines and decreases in ceded premiums earned in credit and surety, and property lines.

Other Insurance Related Income (Loss)

Other insurance related income was $7 million for the three months ended September 30, 2021, compared to other insurance related income of $1 million for the three months ended September 30, 2020 was primarily associated with fees related to arrangements with strategic capital partners.

Other insurance related income was $15 million for the nine months ended September 30, 2021, compared to other insurance related loss of $7 million for the nine months ended September 30, 2020. The other insurance related income for the nine months ended September 30, 2021, was primarily associated with fees related to arrangements with strategic capital partners. The other insurance related loss for the nine months ended September 30, 2020 was primarily due to the recognition of a full limit loss of $10 million associated with the WHO pandemic risk-linked swap, partially offset by fees related to arrangements with strategic capital partners.

Loss Ratio

The components of the loss ratio were as follows:


	Three months ended September 30,					Nine months ended September 30,
	2021		% Point Change	2020		2021		% Point Change	2020

Current accident year loss ratio	89.4	%	5.6	83.8	%	75.9	%	(1.3)	77.2	%
Prior year reserve development ratio	(1.0	%)	(0.9)	(0.1	%)	(0.7	%)	(0.4)	(0.3	%)
Loss ratio	88.4	%	4.7	83.7	%	75.2	%	(1.7)	76.9	%

Current Accident Year Loss Ratio

The current accident year loss ratio increased to 89.4% for the three months ended September 30, 2021, from 83.8% for the three months ended September 30, 2020. The current accident year loss ratio decreased to 75.9% for the nine months ended September 30, 2021, from 77.2% for the nine months ended September 30, 2020.

The current accident year loss ratio for three months ended September 30, 2021, compared to the same period in 2020, was impacted by a higher level of catastrophe and weather-related losses. During the three months ended September 30, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $145 million, or 28.0 points, primarily attributable to Hurricane Ida, July European floods and other weather-related events. The current accident year loss ratio for nine months ended September 30, 2021, compared to the same period in 2020, was impacted by a lower level of catastrophe and weather-related losses. During the nine months ended September 30, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $237 million, or 15.7 points, primarily attributable to Hurricane Ida, Winter Storms Uri and Viola, July European floods and other weather-related events. Comparatively, during the three and nine months ended September 30, 2020, catastrophe and weather-related losses, net of reinstatement premiums were $108 million, or 21.1 points and $251 million or 16.1%, respectively.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 61.4% for the three months ended September 30, 2021, from 62.7% for the three months ended September 30, 2020. The decrease in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due to a decrease in loss experience in credit and surety, and accident and health lines, and the impact of favorable pricing over loss trends, partially offset by the impact of changes to retrocessional arrangements and changes in business mix.

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After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 60.2% for the nine months ended September 30, 2021, from 61.1% for the nine months ended September 30, 2020. The decrease in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due to changes in business mix, the impact of favorable pricing over loss trends, partially offset by the impact of changes to retrocessional arrangements and an increase in loss experience in property lines.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.

Acquisition Cost Ratio

The acquisition cost ratio decreased to 20.4% and 20.8% for the three and nine months ended September 30, 2021, from 22.3% and 22.5% for the three and nine months ended September 30, 2020, principally related to the impact of retrocessional contracts.

Underwriting-Related General and Administrative Expense Ratio:

The underwriting-related general and administrative expense increased to 5.6% for the three months ended September 30, 2021, from 4.5% for the three months ended September 30, 2020, mainly driven by an increase in personnel costs and information technology costs.

The underwriting-related general and administrative expense increased to 5.8% for the nine months ended September 30, 2021, from 4.9% for the nine months ended September 30, 2020, mainly driven by an increase in personnel costs and a decrease in fees related to arrangements with strategic capital partners.

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NET INVESTMENT INCOME AND NET INVESTMENT GAINS (LOSSES)

Net Investment Income

Net investment income from our cash and investment portfolio by major asset class was as follows:


	Three months ended September 30,							Nine months ended September 30,
	2021			% Change	2020			2021			% Change	2020

Fixed maturities	$	63,712		(14%)	$	73,992		$	194,426		(20%)	$	244,394
Other investments	41,695			66%	25,125			124,941			nm	(14,574)
Equity securities	2,724			46%	1,871			8,322			33%	6,258
Mortgage loans	4,426			23%	3,609			12,967			15%	11,322
Cash and cash equivalents	692			(72%)	2,491			3,645			(63%)	9,814
Short-term investments	391			(11%)	440			590			(74%)	2,303
Gross investment income	113,640			6%	107,528			344,891			33%	259,517
Investment expense	(6,301)			13%	(5,572)			(18,717)			(4%)	(19,419)
Net investment income	$	107,339		5%	$	101,956		$	326,174		36%	$	240,098

Pre-tax yield:(1)
Fixed maturities	2.1		%		2.5		%	2.2		%		2.7		%

nm - not meaningful

(1) Pre-tax yield is calculated by dividing annualized net investment income by the average month-end amortized cost balances.

Fixed Maturities

Net investment income attributable to fixed maturities for the three and nine months ended September 30, 2021 was $64 million and $194 million, respectively, compared to net investment income of $74 million and $244 million for the three and nine months ended September 30, 2020, respectively. The decrease for the three and nine months ended September 30, 2021, compared to the same period in 2020, was due to the decrease in yields.

Other Investments

Net investment income from other investments was as follows:


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020

Hedge, direct lending, private equity and real estate funds	$	38,833		$	24,982		$	101,283		$	(11,552)
Other privately held investments	2,096			565			20,639			570
CLO-Equities	766			(422)			3,019			(3,592)
Net investment income (loss) from other investments (1)	$	41,695		$	25,125		$	124,941		$	(14,574)

Pre-tax return on other investments(2)	4.8		%	3.5		%	15.0		%	(2.0		%)

(1)Excluding overseas deposits.

(2)The pre-tax return on other investments is calculated by dividing total net investment income from other investments (non-annualized) by the average month-end fair value balances held for the periods indicated, excluding overseas deposits.

Net investment income attributable to other investments for the three and nine months ended September 30, 2021 was $42 million and $125 million, respectively, compared to net investment income (loss) of $25 million and $(15) million for the three and nine months ended September 30, 2020, respectively. The increase for the three and nine months ended September 30, 2021, compared to the same period in 2020, was due to higher returns from direct lending, private equity and real estate funds.

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Net Investment Gains (Losses)

Net investment gains (losses) were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

On sale of investments:
Fixed maturities and short-term investments	$	16,830	$	29,532	$	94,458	$	42,658
Equity securities	4		519		4,890		18,675
	16,834		30,051		99,348		61,333
Change in allowance for expected credit losses	(315)		3,759		(76)		(2,498)
Impairment losses	(22)		(184)		(22)		(1,486)

Change in fair value of investment derivatives	2,486		(1,346)		3,388		1,970
Net unrealized gains (losses) on equity securities	(8,051)		23,329		11,230		(13,542)
Net investment gains	$	10,932	$	55,609	$	113,868	$	45,777

Net investment gains for the three months ended September 30, 2021 were $11 million, compared to net investment gains of $56 million for the three months ended September 30, 2020. For the three months ended September 30, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and U.S government securities, partially offset by net unrealized losses on equity securities. For the three months ended September 30, 2020, the net investment gains were primarily due to net realized gains on the sale of corporate debt and U.S. government securities and net unrealized gains on equity securities.

Net investment gains for the nine months ended September 30, 2021 were $114 million, compared to net investment gains of $46 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and CMBS and net unrealized gains on equity securities. For the nine months ended September 30, 2020, the net investment gains were primarily due to net realized gains on the sale of U.S. government, agency RMBS and equity securities partially offset by net unrealized losses on equity securities.

On Sale of Investments

Generally, sales of individual securities occur when there are changes in the relative value, credit quality or duration of a particular issue. We may also sell securities to re-balance our investment portfolio in order to change exposure to particular asset classes or sectors.

Impairment Losses

The impairment losses for the three and nine months ended September 30, 2021 were $nil, compared to impairment losses of $nil and $1 million for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2020, these losses were principally due to impairments of non-investment grade corporate debt securities that we intend to sell or more likely than not will be required to sell.

Change in Fair Value of Investment Derivatives

From time to time, we economically hedge foreign exchange exposure with derivative contracts.

For the three and nine months ended September 30, 2021, we recorded gains of $2 million and $3 million, respectively, related to foreign exchange contracts. For the three and nine months ended September 30, 2020, we recorded losses of $1 million and gains of $2 million, respectively, related to foreign exchange contracts.

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Total Return

Total return on cash and investments was as follows:


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020

Net investment income	$	107,339		$	101,956		$	326,174		$	240,098
Net investments gains	10,932			55,609			113,868			45,777
Change in net unrealized gains (losses) on fixed maturities (1)	(81,389)			73,050			(298,474)			204,828
Interest in income (loss) of equity method investments	11,911			2,896			30,871			(13,579)
Total	$	48,793		$	233,511		$	172,439		$	477,124

Average cash and investments(2)	$	16,340,392		$	15,512,967		$	15,997,691		$	15,523,879

Total return on average cash and investments, pre-tax:
Including investment related foreign exchange movements	0.3		%	1.5		%	1.1		%	3.1		%
Excluding investment related foreign exchange movements(3)	0.5		%	1.2		%	1.3		%	3.1		%

(1)Change in net unrealized gains (losses) on fixed maturities is calculated by taking net unrealized gains (losses) at period end less net unrealized gains (losses) at the prior period end.

(2)The average cash and investments balance is calculated by taking the average of the period end fair value balances.

(3)Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, included foreign exchange (losses) gains of $(30) million and $42 million for the three months ended September 30, 2021 and 2020, respectively, and foreign exchange (losses) gains of $(35) million and $(6) million for the nine months ended September 30, 2021 and 2020, respectively.

OTHER EXPENSES (REVENUES), NET

The following table provides a summary of other expenses (revenues), net:


	Three months ended September 30,					Nine months ended September 30,
	2021		% Change	2020		2021		% Change	2020

Corporate expenses	$	23,134	10%	$	20,988	$	82,365	10%	$	74,915
Foreign exchange losses (gains)	(28,032)		nm	60,734		(4,316)		nm	8,760
Interest expense and financing costs	15,954		2%	15,574		46,759		(22%)	59,641
Income tax expense (benefit)	1,186		nm	(12,056)		49,827		nm	(6,030)
Total	$	12,242		$	85,240	$	174,635		$	137,286

nm – not meaningful

Corporate Expenses

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company.

As a percentage of net premiums earned, corporate expenses were 1.9% for the three months ended September 30, 2021, compared to 1.9% for the three months ended September 30, 2020 with an increase in personnel costs offset by a decrease in professional fees.

As a percentage of net premiums earned, corporate expenses were 2.4% for the nine months ended September 30, 2021, compared to 2.3% for the nine months ended September 30, 2020 due to an increase in personnel costs, largely offset by an increase in the allocation of corporate expenses to the insurance and reinsurance segments.

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Foreign Exchange Losses (Gains)

Some of our business is written in currencies other than the U.S. dollar.

Foreign exchange gains of $28 million for the three months ended September 30, 2021 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Foreign exchange gains of $4 million for the nine months ended September 30, 2021 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Foreign exchange losses of $61 million for the three months ended September 30, 2020 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in euro and in pound sterling.

Foreign exchange losses of $9 million for the nine months ended September 30, 2020 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling.

Interest Expense and Financing Costs

Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes") and the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019.

Interest expense and financing costs were $16 million for the three months ended September 30, 2021 and for the three months ended September 30, 2020, respectively.

Interest expense and financing costs decreased by $13 million for the nine months ended September 30, 2021, compared to the same period in 2020, due to the repayment of the 5.875% Senior Notes on June 1, 2020.

Income Tax Expense (Benefit)

Income tax expense (benefit) primarily results from income (loss) generated by our operations in the U.S. and Europe. Our effective tax rate is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments. This effective rate can vary between periods depending on the distribution of net income (loss) among tax jurisdictions, as well as other factors.

The tax expense of $1 million for the three months ended September 30, 2021 was principally due to the generation of pre-tax income in our U.K. operations together with the revaluation of net deferred tax liabilities associated with the increase in the U.K. tax rate to 25% from 19%, effective 2023.

The tax expense of $50 million for the nine months ended September 30, 2021 was principally due to the generation of pre-tax income in our U.S., U.K. and European operations together with the revaluation of net deferred tax liabilities associated with the increase in the U.K. tax rate to 25% from 19%, effective 2023, largely offset by the generation of pre-tax losses in our U.S. operations.

The tax benefit of $12 million for the three months ended September 30, 2020 was principally due to the generation of pre-tax losses in our U.S. operations.

The tax benefit of $6 million for the nine months ended September 30, 2020 was principally due to the generation of pre-tax losses in our U.S. and U.K. operations.

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FINANCIAL MEASURES

We believe the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for common shareholders:


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020

Annualized return on average common equity(1)	3.9		%	(6.2		%)	10.9		%	(4.1		%)
Annualized operating return on average common equity(2)	0.1		%	(5.5		%)	7.1		%	(4.4		%)

Book value per diluted common share(3)	$	54.86		$	54.75		$	54.86		$	54.75
Cash dividends declared per common share	$	0.42		$	0.41		$	1.26		$	1.23
Increase (decrease) in book value per diluted common share adjusted for dividends	$	(0.22)		$	0.07		$	1.03		$	0.19

(1)Annualized return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available (attributable) to common shareholders for the period by the average common shareholders' equity determined using the common shareholders' equity balances at the beginning and end of the period.

(2)Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, and a discussion of the rationale for the presentation of this item is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures Reconciliation'.

(3)Book value per diluted common share represents total common shareholders’ equity divided by diluted common shares outstanding, determined using the treasury stock method. Cash-settled restricted stock units are excluded.

Return on Average Common Equity

Our objective is to generate superior returns on capital that appropriately reward common shareholders for the risks we assume and to grow revenue only when we expect the returns will meet or exceed our requirements. We recognize that the nature of underwriting cycles and the frequency or severity of large loss events in any one year may challenge the ability to achieve a profitability target in any specific period.

ROACE reflects the impact of net income (loss) available (attributable) to common shareholders including net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in ROACE for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, was primarily driven by increases in underwriting income and interest in income (loss) of equity method investments, together with foreign exchange gains, partially offset by a decrease in net investment gains and an increase income tax expense.

The increase in ROACE for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily driven by increases in underwriting income, net investment income, net investment gains and interest in income (loss) of equity method investments, together with foreign exchange gains and a decrease in interest expense and financing costs, partially offset by an increase in income tax expense.

Operating ROACE excludes the impact of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in operating ROACE for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, was primarily driven by an increase in underwriting income, partially offset by an increase in income tax expense.

The increase in operating ROACE for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily driven by increases in underwriting income and net investment income, together with a decrease in interest expense and financing costs, partially offset by an increase in income tax expense.

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Book Value per Diluted Common Share

We consider book value per diluted common share to be an appropriate measure of returns to common shareholders, as we believe growth in book value on a diluted basis will ultimately translate into appreciation of stock price.

During the three months ended September 30, 2021, book value per diluted common share decreased by 1.2% due to a decrease in net unrealized gains reported in accumulated other comprehensive income and common dividends declared, partially offset by net income generated in the period.

During the nine months ended September 30, 2021, book value per diluted common share decreased by 0.4% due to a decrease in net unrealized gains reported in accumulated other comprehensive income and common dividends declared, partially offset by net income generated in the period.

Cash Dividends Declared per Common Share

We believe in returning excess capital to shareholders by way of dividends and share repurchases. Accordingly, dividend policy is an integral part of the value we create for shareholders. Our cumulative strong earnings have permitted our Board of Directors to approve seventeen successive annual increases in quarterly common share dividends.

Book Value per Diluted Common Share Adjusted for Dividends

Taken together, we believe that growth in book value per diluted common share and common share dividends declared represent the total value created for common shareholders. As companies in the insurance industry have differing dividend payout policies, we believe investors use the book value per diluted common share adjusted for dividends metric to measure comparable performance across the industry.

During the three months ended September 30, 2021, the decrease in total value of $0.22, or 0.4%, was driven by a decrease in net unrealized gains reported in accumulated other comprehensive income, partially offset by net income generated in the period.

During the nine months ended September 30, 2021, the increase in total value of $1.03, or 1.9% was driven by the net income generated, partially offset by a decrease in the net unrealized gains reported in other comprehensive income.

During the three months ended September 30, 2020, the increase in total value of $0.07 or 0.1%, was driven by net unrealized investment gains recognized in accumulated other comprehensive income, partially offset by the net loss generated in the period.

During the nine months ended September 30, 2020, the increase in total value of $0.19 or 0.3%, was driven by net unrealized investment gains recognized in accumulated other comprehensive income, partially offset by the net loss generated in the period.

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NON-GAAP FINANCIAL MEASURES RECONCILIATION


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020


Net income (loss) available (attributable) to common shareholders	$	47,385		$	(72,945)		$	391,028		$	(145,855)
Net investment (gains) losses(1)	(10,932)			(55,609)			(113,868)			(45,777)
Foreign exchange losses (gains)(2)	(28,032)			60,734			(4,316)			8,760

Reorganization expenses(3)	—			1,413			—			822

Interest in (income) loss of equity method investments(4)	(11,911)			(2,896)			(30,871)			13,579
Income tax expense	4,534			4,235			12,316			10,494

Operating income (loss)	$	1,044		$	(65,068)		$	254,289		$	(157,977)





Earnings (loss) per diluted common share	$	0.56		$	(0.87)		$	4.59		$	(1.73)
Net investment (gains) losses	(0.13)			(0.66)			(1.34)			(0.54)
Foreign exchange losses (gains)	(0.33)			0.72			(0.05)			0.10

Reorganization expenses	—			0.02			—			0.01

Interest in (income) loss of equity method investments	(0.14)			(0.03)			(0.36)			0.16
Income tax expense	0.05			0.05			0.14			0.12

Operating income (loss) per diluted common share(5)	$	0.01		$	(0.77)		$	2.98		$	(1.88)





Weighted average diluted common shares outstanding(6)	85,336			84,308			85,191			84,235

Average common shareholders' equity	$	4,812,408		$	4,731,858		$	4,765,375		$	4,742,452

Annualized return on average common equity	3.9		%	(6.2		%)	10.9		%	(4.1		%)


Annualized operating return on average common equity(7)	0.1		%	(5.5		%)	7.1		%	(4.4		%)

(1)Tax expense (benefit) of $606 and $6,667 for the three months ended September 30, 2021 and 2020, respectively, and $9,581 and $9,104 for the nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses.

(2)Tax expense (benefit) of $3,928 and $(2,245) for the three months ended September 30, 2021 and 2020, respectively, and $2,735 and $1,366 for the nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions.

(3)Tax expense (benefit) of $(187) for the three months ended September 30, 2020 and $24 for the nine months ended September 30, 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

(4)Tax expense (benefit) of $nil for the three and nine months ended September 30, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

(5)Loss per diluted common share and operating loss per diluted common share for the three and nine months ended September 30, 2020 were calculated using weighted average common shares outstanding due to the net loss attributable to common shareholders and the operating loss recognized in these periods.

(6)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.

(7)Annualized operating ROACE is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, is presented in the table above, and a discussion of the rationale for its presentation is provided below.

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Rationale for the Use of Non-GAAP Financial Measures

We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. Some of the measurements we use are considered non-GAAP financial measures under SEC rules and regulations. In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we present underwriting-related general and administrative expenses, consolidated underwriting income (loss), operating income (loss) (in total and on a per share basis), annualized operating return on average common equity ("operating ROACE"), amounts presented on a constant currency basis and pre-tax total return on cash and investments excluding foreign exchange movements which are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. We believe that these non-GAAP financial measures, which may be defined and calculated differently by other companies, help explain and enhance the understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Underwriting-Related General and Administrative Expenses

Underwriting-related general and administrative expenses include those general and administrative expenses that are incremental and/or directly attributable to our underwriting operations. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.

The reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Consolidated Underwriting Income (Loss)

Consolidated underwriting income (loss) is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative expenses as expenses. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

We evaluate our underwriting results separately from the performance of our investment portfolio. As a result, we believe it is appropriate to exclude net investment income and net investment gains (losses) from our underwriting profitability measure.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on our net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio. As a result, we believe that foreign exchange losses (gains) are not a meaningful contributor to our underwriting performance, therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).

Interest expense and financing costs primarily relate to interest payable on our debt. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).

Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of Novae Group plc ("Novae"), which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).

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Amortization of intangible assets including value of business acquired ('VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).

We believe that the presentation of underwriting-related general and administrative expenses and consolidated underwriting income (loss) provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax profitability of our underwriting activities. The reconciliation of consolidated underwriting income (loss) to net income (loss), the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Operating Income (Loss)

Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities in net investment gains (losses). We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss), thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business.

Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of Novae, which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from operating income (loss).

Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, this income (loss) is excluded from operating income (loss).

Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments to understand the profitability of recurring sources of income.

We believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above.

We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively.

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Constant Currency Basis

We present gross premiums written, net premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written, net premiums written and net premiums earned on a constant basis. The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'.

Pre-Tax Total Return on Cash and Investments excluding Foreign Exchange Movement

Pre-tax total return on cash and investments excluding foreign exchange movements measures net investment income (loss), net investments gains (losses), interest in income (loss) of equity method investments, and change in unrealized gains (losses) generated by average cash and investment balances. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. The reconciliation of pre-tax total return on cash and investments excluding foreign exchange movements to pre-tax total return on cash and investments, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Investment Income and Net Investment Gains (Losses)'.

CASH AND INVESTMENTS

Details of cash and investments are as follows:


	September 30, 2021			December 31, 2020
		Fair Value		Fair Value

Fixed maturities, available for sale		$	12,380,959	$	12,041,799
Fixed maturities, held to maturity(1)		416,821		—
Equity securities		618,822		518,445
Mortgage loans		623,487		593,290
Other investments		892,664		829,156
Equity method investments		145,080		114,209
Short-term investments		68,267		161,897
Total investments		$	15,146,100	$	14,258,796

Cash and cash equivalents(2)		$	1,499,204	$	1,503,232

(1)Presented at net carrying value of $417 million (2020: $nil) in the consolidated balance sheets.

(2)Includes restricted cash and cash equivalents of $552 million and $600 million at September 30, 2021 and at December 31, 2020, respectively.

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Overview

The fair value of total investments increased by $887 million in the nine months ended September 30, 2021, driven by cash inflows from operations, partially offset by the decrease in market value of fixed maturities due to the increase in yields.

An analysis of our investment portfolio by asset class is detailed below:

Fixed Maturities

Details of our fixed maturities portfolio are as follows:


	September 30, 2021				December 31, 2020
	Fair Value		% of Total		Fair Value		% of Total

Fixed maturities:
U.S. government and agency	$	2,692,394	21	%	$	1,918,699	16	%
Non-U.S. government	719,922		6	%	671,273		6	%
Corporate debt	4,557,519		34	%	4,655,951		39	%
Agency RMBS	1,163,038		9	%	1,286,209		11	%
CMBS	1,226,225		10	%	1,353,587		11	%
Non-agency RMBS	193,764		2	%	140,104		1	%
ABS	2,050,197		16	%	1,720,078		14	%
Municipals(1)	194,721		2	%	295,898		2	%
Total	$	12,797,780	100	%	$	12,041,799	100	%

Credit ratings:
U.S. government and agency	$	2,692,394	21	%	$	1,918,699	16	%
AAA(2)	4,621,461		36	%	4,551,312		37	%
AA	908,289		7	%	913,707		8	%
A	1,858,808		15	%	1,896,407		16	%
BBB	1,585,211		12	%	1,732,058		14	%
Below BBB(3)	1,131,617		9	%	1,029,616		9	%
Total	$	12,797,780	100	%	$	12,041,799	100	%

(1)Includes bonds issued by states, municipalities, and political subdivisions.

(2)Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS").

(3)Non-investment grade and non-rated securities.

At September 30, 2021, fixed maturities had a weighted average credit rating of AA- (2020: AA-), a book yield of 1.9% (2020: 2.3%) and an average duration of 3.1 years (2020: 3.3 years). At September 30, 2021, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $14.4 billion), had an average credit rating of AA- (2020: AA-) and an average duration of 2.8 years (2020: 3.0 years).

At September 30, 2021, net unrealized gains on fixed maturities were $178 million, compared to net unrealized gains of $475 million at December 31, 2020, a decrease of $297 million due to the increase in yields.

Equity Securities

At September 30, 2021, net unrealized gains on equity securities were $108 million, compared to net unrealized gains of $97 million at December 31, 2020, an increase of $11 million driven by the rally in equity markets.

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Mortgage Loans

During the nine months ended September 30, 2021, our investment in commercial mortgage loans increased by $30 million. The commercial mortgage loans are high quality and collateralized by a variety of commercial properties and are diversified both geographically throughout the U.S. and by property type to reduce the risk of concentration. At September 30, 2021, there were no credit losses or past due amounts associated with our commercial mortgage loans portfolio.

Other Investments

Details of our other investments portfolio are as follows:


	September 30, 2021				December 31, 2020
	Fair Value		% of Total		Fair Value		% of Total

Hedge funds
Long/short equity funds	$	3,762	—	%	$	25,300	3	%
Multi-strategy funds	67,628		8	%	121,420		15	%


Total hedge funds	71,390		8	%	146,720		18	%

Direct lending funds	297,047		33	%	272,131		33	%
Private equity funds	226,745		25	%	124,706		15	%
Real estate funds	225,673		25	%	164,250		20	%
Total hedge, direct lending, private equity and real estate funds	820,855		91	%	707,807		86	%

CLO-Equities	6,297		2	%	6,173		1	%
Other privately held investments	65,512		7	%	70,011		8	%
Overseas deposits	—		—	%	45,165		5	%
Total other investments	$	892,664	100	%	$	829,156	100	%

Refer to Note 3(c) to the Consolidated Financial Statements 'Investments'.

Equity Method Investments

During 2016, we paid $108 million including direct transactions costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Harrington is not a variable interest entity that is required to be included in our consolidated financial statements. We account for our ownership interest in Harrington under the equity method of accounting.

In our consolidated results, our ownership interest in Harrington is reported in interest in income (loss) of equity method investments.

Interest in income of equity method investments was $12 million and $31 million for the three and nine months ended September 30, 2021, respectively, compared to interest in income (loss) of equity method investments of $3 million and $(14) million for the three and nine months ended September 30, 2020, respectively. The income for the three and nine months ended September 30, 2021 was attributable to positive investment returns realized by Harrington.

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LIQUIDITY AND CAPITAL RESOURCES

Refer to the ‘Liquidity and Capital Resources’ section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 for a general discussion of liquidity and capital resources.

The following table summarizes consolidated capital:


	September 30, 2021			December 31, 2020

Debt	$	1,310,650		$	1,309,695

Preferred shares	550,000			550,000
Common equity	4,785,055			4,745,694
Shareholders’ equity	5,335,055			5,295,694
Total capital	$	6,645,705		$	6,605,389

Ratio of debt to total capital	19.7		%	19.8		%

Ratio of debt and preferred equity to total capital	28.0		%	28.2		%

We finance operations with a combination of debt and equity capital. Debt to total capital and debt, and preferred equity to total capital ratios provide an indication of our capital structure, along with some insight into our financial strength. We believe that our financial flexibility remains strong. Refer to Item 1, Note 10 to the Consolidated Financial Statements 'Debt and Financing Arrangements' for recent changes to our capital structure.

Common Equity

During the nine months ended September 30, 2021, common equity increased by $39 million. The following table reconciles opening and closing common equity positions:


Nine months ended September 30,	2021

Common equity - opening	$	4,745,694
Treasury shares reissued	1,145

Share-based compensation expense	31,278
Change in unrealized gains (losses) on available for sale investments, net of tax	(265,197)
Foreign currency translation adjustment	924
Net income (loss)	413,716
Preferred share dividends	(22,688)
Common share dividends	(109,792)
Treasury shares repurchased	(10,025)


Common equity - closing	$	4,785,055

During the nine months ended September 30, 2021, we repurchased 201,000 common shares from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units granted under our Amended and Restated 2007 and 2017 Long-Term Equity Compensation Plans for a total of $10 million.

A common share repurchase plan has not been authorized for 2021.

We expect cash flows generated from operations, combined with liquidity provided by our investment portfolio, will be sufficient to cover cash outflows and other contractual commitments through the foreseeable future.

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CRITICAL ACCOUNTING ESTIMATES

The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values. We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.

We believe the material items requiring such subjective and complex estimates are:

•reserves for losses and loss expenses;

•reinsurance recoverable on unpaid losses and loss expenses, including the allowance for expected credit losses;

•gross premiums written and net premiums earned;

•fair value measurements of financial assets and liabilities; and

•the allowance for expected credit losses associated with fixed maturities, available for sale and fixed maturities, held to maturity securities.

Other than our consideration of the impact of the allowance for expected credit losses associated with fixed maturities, held to maturity securities detailed in Note 1 'Basis of Presentation and Significant Accounting Policies' to the consolidated financial statements, we believe that the critical accounting estimates discussion in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, continue to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

At September 30, 2021, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.

OFF-BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS

At September 30, 2021, the Company had not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to this item since December 31, 2020, with the exception of the changes in exposure to foreign currency risk presented below.

Foreign Currency Risk

The table below provides a sensitivity analysis of total net foreign currency exposures.



	AUD			NZD			CAD			EUR			GBP			JPY			Other			Total

At September 30, 2021
Net managed assets (liabilities), excluding derivatives	$	30,278		$	9,511		$	256,398		$	(466,972)		$	(325,062)		$	(64,831)		$	42,268		$	(518,410)
Foreign currency derivatives, net	(20,917)			(5,166)			(286,908)			412,010			269,888			75,511			2,802			447,220
Net managed foreign currency exposure	9,361			4,345			(30,510)			(54,962)			(55,174)			10,680			45,070			(71,190)
Other net foreign currency exposure	—			—			137			(882)			(1,430)			—			34,757			32,582
Total net foreign currency exposure	$	9,361		$	4,345		$	(30,373)		$	(55,844)		$	(56,604)		$	10,680		$	79,827		$	(38,608)
Net foreign currency exposure as a percentage of total shareholders’ equity	0.2		%	0.1		%	(0.6		%)	(1.0		%)	(1.1		%)	0.2		%	1.5		%	(0.7		%)
Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1)	$	936		$	434		$	(3,037)		$	(5,584)		$	(5,660)		$	1,068		$	7,982		$	(3,861)

(1)Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.

Total Net Foreign Currency Exposure

At September 30, 2021, total net foreign currency liabilities were $39 million primarily driven by the recognition of reserve for losses and loss expenses in euro and pound sterling related to the European and U.K. storms and net premiums earned during the nine months ended September 30, 2021. Other net foreign currency exposures includes $35 million related to assets managed by specific investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy. An emerging market debt portfolio is the primary contributor to this group of assets.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) at September 30, 2021. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2021, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2021.

Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company has not experienced any material impact to its internal control over financial reporting resulting from the introduction of a remote work model due to the COVID-19 pandemic.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.

We are not party to any material legal proceedings arising outside the ordinary course of business.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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

Issuer Purchases of Equity Securities

Common Shares

The following table shows information regarding the number of common shares repurchased:


Period	Total number of shares purchased(a) (b)	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(b)

July 1-31, 2021	2	$50.19	—	—
August 1-31, 2021	—	$50.87	—	—
September 1-30, 2021	2	$49.71	—	—
Total	4		—	—

(a) In hundred thousands.

(b) Shares are repurchased from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units.

ITEM 5. OTHER INFORMATION

Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose in their annual and quarterly reports whether they or any of their affiliates knowingly engaged in certain activities with Iran or with individuals or entities that are subject to certain sanctions under U.S. law. Issuers are required to provide this disclosure even where the activities, transactions or dealings are conducted outside of the U.S. in compliance with applicable law.

As and when allowed by the applicable law and regulations, certain of our non-U.S. subsidiaries provide treaty reinsurance coverage to non-U.S. insurers on a worldwide basis, including insurers of liability, marine, aviation and energy risks, and as a result, these underlying insurance portfolios may have some exposure to Iran. In addition, we provide insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull war and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended September 30, 2021, there has been no material amount of premium allocated or apportioned to activities relating to Iran. We intend for our non-U.S. subsidiaries to continue to provide such coverage only to the extent permitted by applicable law.

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ITEM 6. EXHIBITS


2.1			Rule 2.7 Announcement, dated July 5, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 6, 2017).
2.2			Rule 2.7 Announcement, dated August 24, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 25, 2017).
3.1			Certificate of Incorporation and Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1(Amendment No. 1) (No. 333-103620) filed on April 16, 2003).
3.2			Amended and Restated Bye-Laws (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on May 15, 2009).
4.1			Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 3) (No. 333-103620) filed on June 10, 2003).
4.2			Certificate of Designations establishing the specific rights, preferences, limitations and other terms of the Series E Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 7, 2016).
†31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101			The following financial information from AXIS Capital Holdings Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 formatted in Inline XBRL: (i) Consolidated Balance Sheets at September 30, 2021 and December 31, 2020; (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020; (iv) Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2021 and 2020; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
†104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

† Filed herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 27, 2021


AXIS CAPITAL HOLDINGS LIMITED
By:			/S/ ALBERT BENCHIMOL
			Albert Benchimol
			President and Chief Executive Officer
			(Principal Executive Officer)

			/S/ PETER VOGT
			Peter Vogt
			Chief Financial Officer
			(Principal Financial Officer)