BERKLEY W R CORP - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021


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

For the Transition Period from to .


Commission File Number			1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

22-1867895

(State or other jurisdiction of
incorporation or organization)

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

475 Steamboat Road

Greenwich

Connecticut

06830

(Address of principal executive offices)

(Zip Code)


(203)			629-3000

(Registrant’s telephone number, including area code)


			None
Former name, former address and former fiscal year, if changed since last report.

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


Title	Trading Symbol	Name

Common Stock, par value $.20 per share	WRB	New York Stock Exchange

5.75% Subordinated Debentures due 2056	WRB-PD	New York Stock Exchange
5.70% Subordinated Debentures due 2058	WRB-PE	New York Stock Exchange
5.10% Subordinated Debentures due 2059	WRB-PF	New York Stock Exchange
4.25% Subordinated Debentures due 2060	WRB-PG	New York Stock Exchange
4.125% Subordinated Debentures due 2061	WRB-PH	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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 ☒

Number of shares of common stock, $.20 par value, outstanding as of April 29, 2021: 177,380,548

TABLE OF CONTENTS


Part I — FINANCIAL INFORMATION
			Item 1. Financial Statements
			Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
			Item 3. Quantitative and Qualitative Disclosure About Market Risk
			Item 4. Controls and Procedures
PART II — OTHER INFORMATION
			Item 1. Legal Proceedings
			Item 1A. Risk Factors
			Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
			Item 6. Exhibits
SIGNATURES


EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

W. R. BERKLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	March 31, 2021		December 31, 2020
	(Unaudited)		(Audited)
Assets
Investments:
Fixed maturity securities (amortized cost of $15,126,980 and $13,755,858; allowance for expected credit losses of $20,739 and $2,580 at March 31, 2021 and December 31, 2020, respectively)	$	15,400,118	$	14,159,369
Real estate	1,961,212		1,960,914
Investment funds	1,358,997		1,309,430
Arbitrage trading account	614,721		341,473
Equity securities	621,629		625,667
Loans receivable (net of allowance for expected credit losses of $4,198 and $5,437 at March 31, 2021 and December 31, 2020, respectively)	76,896		84,913

Total investments	20,033,573		18,481,766
Cash and cash equivalents	2,014,911		2,372,366
Premiums and fees receivable (net of allowance for expected credit losses of $24,264 and $22,883 at March 31, 2021 and December 31, 2020, respectively)	2,260,026		2,167,799
Due from reinsurers (net of allowance for expected credit losses of $7,373 and $7,801 at March 31, 2021 and December 31, 2020, respectively)	2,549,739		2,424,502
Deferred policy acquisition costs	594,309		556,168
Prepaid reinsurance premiums	668,111		648,376
Trading account receivables from brokers and clearing organizations	257,756		524,727
Property, furniture and equipment	404,281		405,930
Goodwill	169,652		169,652
Accrued investment income	123,755		120,464


Other assets	715,161		700,215
Total assets	$	29,791,274	$	28,571,965

Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses	$	14,080,528	$	13,784,430
Unearned premiums	4,288,252		4,073,191
Due to reinsurers	463,467		426,124
Trading account securities sold but not yet purchased	218		10,048

Current and deferred federal and foreign income taxes	76,667		48,495
Other liabilities	1,141,444		1,178,546
Senior notes and other debt	2,021,142		1,623,025
Subordinated debentures	1,289,272		1,102,309
Total liabilities	23,360,990		22,246,168
Equity:
Preferred stock, par value $0.10 per share:
Authorized 5,000,000 shares; issued and outstanding - none	—		—
Common stock, par value $0.20 per share:
Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 177,372,943 and 177,825,150 shares, respectively	70,535		70,535
Additional paid-in capital	1,023,556		1,012,483
Retained earnings	8,556,621		8,348,381
Accumulated other comprehensive loss	(148,252)		(62,172)
Treasury stock, at cost, 175,303,557 and 174,851,350 shares, respectively	(3,087,860)		(3,058,425)
Total stockholders’ equity	6,414,600		6,310,802
Noncontrolling interests	15,684		14,995
Total equity	6,430,284		6,325,797
Total liabilities and equity	$	29,791,274	$	28,571,965

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

(In thousands, except per share data)


	For the Three Months Ended March 31,

	2021		2020
REVENUES:
Net premiums written	$	2,050,038	$	1,845,846
Change in net unearned premiums	(200,082)		(154,428)
Net premiums earned	1,849,956		1,691,418
Net investment income	158,577		174,763
Net investment gains (losses):
Net realized and unrealized gains (losses) on investments	51,759		(143,285)

Change in allowance for expected credit losses on investments	(16,920)		(33,889)
Net investment gains (losses)	34,839		(177,174)
Revenues from non-insurance businesses	87,430		93,729
Insurance service fees	25,808		25,751
Other income	259		2,123
Total revenues	2,156,869		1,810,610


OPERATING COSTS AND EXPENSES:
Losses and loss expenses	1,121,592		1,107,253
Other operating costs and expenses	616,268		578,334
Expenses from non-insurance businesses	86,290		94,757
Interest expense	36,651		36,734
Total operating costs and expenses	1,860,801		1,817,078
Income (loss) before income taxes	296,068		(6,468)
Income tax (expense) benefit	(64,352)		2,942
Net income (loss) before noncontrolling interests	231,716		(3,526)
Noncontrolling interests	(2,191)		(892)
Net income (loss) to common stockholders	$	229,525	$	(4,418)

NET INCOME (LOSS) PER SHARE:
Basic	$	1.24	$	(0.02)
Diluted	$	1.23	$	(0.02)

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)


	For the Three Months Ended March 31,

	2021		2020
Net income (loss) before noncontrolling interests	$	231,716	$	(3,526)
Other comprehensive loss:
Change in unrealized currency translation adjustments	4,050		(98,194)
Change in unrealized investment gains, net of taxes	(90,130)		(258,981)

Other comprehensive loss	(86,080)		(357,175)
Comprehensive income (loss)	145,636		(360,701)
Noncontrolling interests	(2,191)		(893)
Comprehensive income (loss) to common stockholders	$	143,445	$	(361,594)

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except per share data)


	For the Three Months Ended March 31,

	2021		2020
COMMON STOCK:
Beginning and end of period	$	70,535	$	70,535
ADDITIONAL PAID-IN CAPITAL:
Beginning of period	$	1,012,483	$	1,056,042
Restricted stock units issued	(525)		(4,590)
Restricted stock units expensed	11,598		11,632

End of period	$	1,023,556	$	1,063,084
RETAINED EARNINGS:
Beginning of period	$	8,348,381	$	7,932,372
Cumulative effect adjustment resulting from changes in accounting principles	—		(30,514)
Net income (loss) to common stockholders	229,525		(4,418)
Dividends ($0.12 and $0.11 per share, respectively)	(21,285)		(20,069)
End of period	$	8,556,621	$	7,877,371
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Unrealized investment gains (losses):
Beginning of period	$	289,714	$	124,514
Cumulative effect adjustment resulting from changes in accounting principles	—		24,952
Change in unrealized gains on securities without an allowance for expected credit losses	(100,485)		(260,521)
Change in unrealized gains on securities with an allowance for expected credit losses	10,355		1,541
End of period	199,584		(109,514)
Currency translation adjustments:
Beginning of period	(351,886)		(381,813)
Net change in period	4,050		(98,194)
End of period	(347,836)		(480,007)




Total accumulated other comprehensive loss	$	(148,252)	$	(589,521)
TREASURY STOCK:
Beginning of period	$	(3,058,425)	$	(2,726,711)
Stock exercised/vested	248		1,338
Stock repurchased	(29,683)		(202,621)

End of period	$	(3,087,860)	$	(2,927,994)
NONCONTROLLING INTERESTS:
Beginning of period	$	14,995	$	43,403
Distributions	(1,502)		(227)
Net income	2,191		892
Other comprehensive income, net of tax	—		1
End of period	$	15,684	$	44,069

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	For the Three Months Ended March 31,

	2021		2020
CASH FROM OPERATING ACTIVITIES:
Net income (loss) to common stockholders	$	229,525	$	(4,418)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Net investment (gains) losses	(34,839)		177,174
Depreciation and amortization	33,543		25,063
Noncontrolling interests	2,191		892
Investment funds	(38,935)		(40,576)
Stock incentive plans	11,817		11,683
Change in:
Arbitrage trading account	(16,108)		2,455
Premiums and fees receivable	(96,290)		(97,169)
Reinsurance accounts	(105,589)		(43,104)
Deferred policy acquisition costs	(38,577)		(26,139)
Income taxes	47,372		(12,500)

Reserves for losses and loss expenses	303,305		200,294
Unearned premiums	219,920		163,793
Other	(206,345)		(204,878)
Net cash from operating activities	310,990		152,570
CASH (USED IN) FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed maturity securities	1,115,114		1,574,232
Proceeds from sale of equity securities	57,457		5,311
Distributions from investment funds	36,236		99,194
Proceeds from maturities and prepayments of fixed maturity securities	1,623,357		1,055,722
Purchase of fixed maturity securities	(4,118,161)		(2,598,076)
Purchase of equity securities	(69,181)		(35,260)
Real estate sold (purchased)	9,787		(24,249)

Change in loans receivable	9,256		2,877
Net purchases of property, furniture and equipment	(10,872)		(14,637)
Change in balances due to security brokers	151,776		(34,378)


Other	—		86
Net cash (used in) from investing activities	(1,195,231)		30,822
CASH FROM (USED IN) FINANCING ACTIVITIES:
Repayment of senior notes and other debt	(110,000)		—
Net payments for stock options exercised	(525)		(3,321)
Net proceeds from issuance of debt	691,213		4,259
Cash dividends to common stockholders	(21,285)		(20,069)
Purchase of common treasury shares	(29,683)		(202,621)
Other, net	(1,503)		(204)
Net cash from (used in) financing activities	528,217		(221,956)
Net impact on cash due to change in foreign exchange rates	(1,431)		(20,134)
Net change in cash and cash equivalents	(357,455)		(58,698)
Cash and cash equivalents at beginning of year	2,372,366		1,023,710
Cash and cash equivalents at end of period	$	2,014,911	$	965,012

See accompanying notes to interim consolidated financial statements.

W. R. Berkley Corporation and Subsidiaries

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) General

The unaudited consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”), have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for annual financial statements. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly the Company’s financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year. All significant intercompany accounts and transactions have been eliminated. Reclassifications have been made in the 2020 financial statements as originally reported to conform to the presentation of the 2021 financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. For further information related to areas of judgment and estimates and other information necessary to understand the Company’s financial position and results of operations, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The income tax provision has been computed based on the Company’s estimated annual effective tax rate. The effective income tax rate differs from the federal income tax rate of 21% principally because of state and foreign income taxes, which was partially offset by tax-exempt investment income and tax benefits related to equity-based compensation.

(2) Per Share Data

The Company presents both basic and diluted net income (loss) per share (“EPS”) amounts. Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period (including 7,767,874 and 7,575,168 common shares held in a grantor trust as of March 31, 2021 and 2020, respectively). The common shares held in the grantor trust are for delivery upon settlement of vested but mandatorily deferred restricted stock units ("RSUs"). Shares held by the grantor trust do not affect diluted shares outstanding since the shares deliverable under vested RSUs were already included in diluted shares outstanding. Diluted EPS is based upon the weighted average number of basic and common equivalent shares outstanding during the period and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. For the period ended March 31, 2020, diluted shares have been reduced by 2.0 million to reflect the anti-dilutive effect of common equivalent shares.

The weighted average number of common shares used in the computation of basic and diluted earnings per share was as follows:


	For the Three Months Ended March 31,

(In thousands)	2021	2020
Basic	185,195	190,287
Diluted	186,830	190,287

(3) Recent Accounting Pronouncements and Accounting Policies

Recently adopted accounting pronouncements:

All accounting and reporting standards that have become effective in 2021 were either not applicable to the Company or their adoption did not have a material impact on the Company.

Accounting and reporting standards that are not yet effective:

All recently issued but not yet effective accounting and reporting standards are either not applicable to the Company or are not expected to have a material impact on the Company.

(4) Consolidated Statements of Comprehensive Income (Loss)

The following table presents the components of the changes in accumulated other comprehensive income (loss) ("AOCI"):


(In thousands)	Unrealized Investment Gains (Losses)			Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
As of and for the three months ended March 31, 2021
Changes in AOCI
Beginning of period	$	289,714		$	(351,886)	$	(62,172)


Other comprehensive (loss) income before reclassifications	(98,991)			4,050		(94,941)
Amounts reclassified from AOCI	8,861			—		8,861
Other comprehensive (loss) income	(90,130)			4,050		(86,080)
Unrealized investment gain related to noncontrolling interest	—			—		—
End of period	$	199,584		$	(347,836)	$	(148,252)
Amounts reclassified from AOCI
Pre-tax	$	11,216	(1)	$	—	$	11,216
Tax effect	(2,355)		(2)	—		(2,355)
After-tax amounts reclassified	$	8,861		$	—	$	8,861
Other comprehensive (loss) income
Pre-tax	$	(113,735)		$	4,050	$	(109,685)
Tax effect	23,605			—		23,605
Other comprehensive (loss) income	$	(90,130)		$	4,050	$	(86,080)



As of and for the three months ended March 31, 2020
Changes in AOCI
Beginning of period	$	124,514		$	(381,813)	$	(257,299)
Cumulative effect adjustment resulting from changes in accounting principles	24,952			—		24,952
Restated beginning of period	149,466			(381,813)		(232,347)
Other comprehensive loss before reclassifications	(298,531)			(98,194)		(396,725)
Amounts reclassified from AOCI	39,550			—		39,550
Other comprehensive loss	(258,981)			(98,194)		(357,175)
Unrealized investment loss related to noncontrolling interest	1			—		1
End of period	$	(109,514)		$	(480,007)	$	(589,521)
Amounts reclassified from AOCI
Pre-tax	$	50,063	(1)	$	—	$	50,063
Tax effect	(10,513)		(2)	—		(10,513)
After-tax amounts reclassified	$	39,550		$	—	$	39,550
Other comprehensive loss
Pre-tax	$	(332,850)		$	(98,194)	$	(431,044)
Tax effect	73,869			—		73,869
Other comprehensive loss	$	(258,981)		$	(98,194)	$	(357,175)

____________

(1) Net investment gains (losses) in the consolidated statements of income (loss).

(2) Income tax (expense) benefit in the consolidated statements of income (loss).

(5) Statements of Cash Flows

Interest payments were $45,393,000 and $54,582,000 for the three months ended March 31, 2021 and 2020, respectively. No income taxes were paid during such periods.

(6) Investments in Fixed Maturity Securities

At March 31, 2021 and December 31, 2020, investments in fixed maturity securities were as follows:


(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value
					Gains		Losses
March 31, 2021
Held to maturity:
State and municipal	$	67,710	$	(730)	$	11,150	$	—	$	78,130	$	66,980
Residential mortgage-backed	6,101		—		924		—		7,025		6,101
Total held to maturity	73,811		(730)		12,074		—		85,155		73,081
Available for sale:
U.S. government and government agency	541,180		—		15,449		(915)		555,714		555,714
State and municipal:
Special revenue	2,112,542		—		78,450		(3,284)		2,187,708		2,187,708
State general obligation	399,636		—		28,156		(1,059)		426,733		426,733
Pre-refunded	231,235		—		17,990		(465)		248,760		248,760
Corporate backed	164,542		—		8,585		(788)		172,339		172,339
Local general obligation	432,788		—		34,850		(585)		467,053		467,053
Total state and municipal	3,340,743		—		168,031		(6,181)		3,502,593		3,502,593
Mortgage-backed securities:
Residential	889,638		—		19,315		(12,215)		896,738		896,738
Commercial	172,817		—		6,555		(86)		179,286		179,286
Total mortgage-backed securities	1,062,455		—		25,870		(12,301)		1,076,024		1,076,024
Asset-backed	3,952,009		—		10,789		(18,160)		3,944,638		3,944,638
Corporate:
Industrial	2,986,688		(16)		88,810		(14,819)		3,060,663		3,060,663
Financial	1,517,251		—		48,756		(1,638)		1,564,369		1,564,369
Utilities	426,213		—		15,476		(2,360)		439,329		439,329
Other	153,700		—		429		(301)		153,828		153,828
Total corporate	5,083,852		(16)		153,471		(19,118)		5,218,189		5,218,189
Foreign government	1,072,930		(19,993)		19,361		(42,419)		1,029,879		1,029,879
Total available for sale	15,053,169		(20,009)		392,971		(99,094)		15,327,037		15,327,037
Total investments in fixed maturity securities	$	15,126,980	$	(20,739)	$	405,045	$	(99,094)	$	15,412,192	$	15,400,118

____________

(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses is recognized in the consolidated statements of income (loss). Amount excludes unrealized losses relating to non-credit factors.


(In thousands)	Amortized Cost		Allowance for Expected Credit Losses (1)		Gross Unrealized				Fair Value		Carrying Value
					Gains		Losses
December 31, 2020
Held to maturity:
State and municipal	$	67,117	$	(798)	$	13,217	$	—	$	79,536	$	66,319
Residential mortgage-backed	6,455		—		1,043		—		7,498		6,455

Total held to maturity	73,572		(798)		14,260		—		87,034		72,774
Available for sale:
U.S. government and government agency	586,020		—		18,198		(347)		603,871		603,871
State and municipal:
Special revenue	2,137,162		—		96,924		(714)		2,233,372		2,233,372
State general obligation	417,397		—		33,407		—		450,804		450,804
Pre-refunded	250,081		—		21,472		(162)		271,391		271,391
Corporate backed	206,356		—		8,755		(638)		214,473		214,473
Local general obligation	410,583		—		40,596		(555)		450,624		450,624
Total state and municipal	3,421,579		—		201,154		(2,069)		3,620,664		3,620,664
Mortgage-backed securities:
Residential	813,187		—		24,664		(5,238)		832,613		832,613
Commercial	181,105		—		6,725		(113)		187,717		187,717
Total mortgage-backed securities	994,292		—		31,389		(5,351)		1,020,330		1,020,330
Asset-backed	3,218,048		—		10,035		(33,497)		3,194,586		3,194,586
Corporate:
Industrial	2,456,516		(518)		115,926		(7,449)		2,564,475		2,564,475
Financial	1,513,943		—		62,947		(987)		1,575,903		1,575,903
Utilities	389,267		—		31,931		(33)		421,165		421,165
Other	109,353		—		696		(11)		110,038		110,038
Total corporate	4,469,079		(518)		211,500		(8,480)		4,671,581		4,671,581
Foreign government	993,268		(1,264)		28,007		(44,448)		975,563		975,563
Total available for sale	13,682,286		(1,782)		500,283		(94,192)		14,086,595		14,086,595
Total investments in fixed maturity securities	$	13,755,858	$	(2,580)	$	514,543	$	(94,192)	$	14,173,629	$	14,159,369

____________

(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses, excluding the cumulative effect adjustment resulting from changes in accounting principles, is recognized in the consolidated statements of income (loss). Amount excludes unrealized losses relating to non-credit factors.

The following table presents the rollforward of the allowance for expected credit losses for held to maturity securities for the three months ended March 31, 2021:


	State and Municipal
(In thousands)
Allowance for expected credit losses at December 31, 2020	$	798

Provision for expected credit losses	(68)
Allowance for expected credit losses at March 31, 2021	$	730

The following table presents the rollforward of the allowance for expected credit losses for held to maturity securities for the three months ended March 31, 2020:


	State and Municipal
(In thousands)
Allowance for expected credit losses at January 1, 2020	$	—
Cumulative effect adjustment resulting from changes in accounting principles	69
Provision for expected credit losses	38
Allowance for expected credit losses at March 31, 2020	$	107

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended March 31, 2021:


	Foreign Government		Corporate		Total
(In thousands)
Allowance for expected credit losses at December 31, 2020	$	1,264	$	518	$	1,782
Expected credit losses on securities for which credit losses were not previously recorded	18,990		16		19,006
Expected credit losses on securities for which credit losses were previously recorded	(261)		(513)		(774)
Reduction due to disposals	—		(5)		(5)
Allowance for expected credit losses at March 31, 2021	$	19,993	$	16	$	20,009

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended March 31, 2020:


	Foreign Government		Corporate		Total
(In thousands)
Allowance for expected credit losses at January 1, 2020	$	—	$	—	$	—
Cumulative effect adjustment resulting from changes in accounting principles	35,645		—		35,645
Expected credit losses on securities for which credit losses were not previously recorded	12,494		6,436		18,930
Expected credit losses on securities for which credit losses were previously recorded	16,369		—		16,369
Reduction due to disposals	(3,588)		—		(3,588)
Allowance for expected credit losses at March 31, 2020	$	60,920	$	6,436	$	67,356

During the three months ended March 31, 2021, the Company increased the allowance for expected credit losses for available for sale securities utilizing its credit loss assessment process and inputs used in its credit loss model, primarily due to foreign government securities that had no reserve in prior periods. During the three months ended March 31, 2020, the Company increased the allowance for expected credit losses for available for sale securities primarily due to the negative impact to the financial markets caused by COVID-19.

The amortized cost and fair value of fixed maturity securities at March 31, 2021, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations.



(In thousands)	Amortized Cost (1)		Fair Value
Due in one year or less	$	1,778,569	$	1,765,769
Due after one year through five years	6,419,223		6,576,943
Due after five years through ten years	3,500,751		3,592,140
Due after ten years	2,359,151		2,394,291
Mortgage-backed securities	1,068,556		1,083,049
Total	$	15,126,250	$	15,412,192

________________

(1) Amortized cost is reduced by the allowance for expected credit losses of $730 thousand related to held to maturity securities.

At March 31, 2021 and December 31, 2020, there were no investments that exceeded 10% of common stockholders' equity, other than investments in United States government and government agency securities.

(7) Investments in Equity Securities

At March 31, 2021 and December 31, 2020, investments in equity securities were as follows:


(In thousands)	Cost		Gross Unrealized				Fair Value		Carrying Value
			Gains		Losses
March 31, 2021
Common stocks	$	339,742	$	60,766	$	(8,345)	$	392,163	$	392,163
Preferred stocks	196,569		33,523		(626)		229,466		229,466
Total	$	536,311	$	94,289	$	(8,971)	$	621,629	$	621,629

December 31, 2020
Common stocks	$	335,617	$	28,742	$	(14,178)	$	350,181	$	350,181
Preferred stocks	180,397		95,581		(492)		275,486		275,486
Total	$	516,014	$	124,323	$	(14,670)	$	625,667	$	625,667

(8) Arbitrage Trading Account

At March 31, 2021 and December 31, 2020, the fair and carrying values of the arbitrage trading account were $615 million and $341 million, respectively. The primary focus of the trading account is merger arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less).

The Company uses put options and call options in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options are reported at fair value. As of March 31, 2021, the fair value of short option contracts outstanding was $161 thousand (notional amount of $18.5 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.

(9) Net Investment Income

Net investment income consisted of the following:


	For the Three Months Ended March 31,

(In thousands)	2021		2020
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable	$	94,677	$	128,018
Investment funds	38,935		40,577
Arbitrage trading account	19,074		1,138
Equity securities	6,180		1,563
Real estate	1,161		6,096

Gross investment income	160,027		177,392
Investment expense	(1,450)		(2,629)
Net investment income	$	158,577	$	174,763

(10) Investment Funds

The Company evaluates whether it is an investor in a variable interest entity ("VIE"). Such entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support, or the equity investors, as a group, do not have the characteristics of a controlling financial interest (primary beneficiary). The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE's capital structure, contractual terms, nature of the VIE's operations and purpose, and the Company's relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE and on an ongoing basis. The Company is not the primary beneficiary in any of its investment funds, and accordingly, carries its interests in investment funds under the equity method of accounting.

The Company’s maximum exposure to loss with respect to these investments is limited to the carrying amount reported on the Company’s consolidated balance sheet and its unfunded commitments, which were $129 million as of March 31, 2021.

Investment funds consisted of the following:


	Carrying Value as of				Income from Investment Funds
	March 31,		December 31,		For the Three Months Ended March 31,
(In thousands)	2021		2020		2021		2020
Financial services	$	477,927	$	434,437	$	17,142	$	15,209
Real Estate	304,461		310,783		4,434		6,790
Energy	143,852		140,935		3,320		4,413
Transportation	193,401		190,125		6,228		2,646
Other funds	239,356		233,150		7,811		11,519
Total	$	1,358,997	$	1,309,430	$	38,935	$	40,577

The Company's share of the earnings or losses from investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated financial statements.

Financial services investment funds include the Company’s minority investment in Lifson Re, a Bermuda reinsurance company. Effective January 1, 2021, Lifson Re participates on a fully collateralized basis in a majority of the Company’s reinsurance placements for a 22.5% share of placed amounts. This pertains to all traditional reinsurance/retrocessional placements for both property and casualty business where there is more than one open market reinsurer participating. As of March 31, 2021, the Company has ceded approximately $53 million of written premiums to Lifson Re.

(11) Real Estate

Investment in real estate represents directly owned property held for investment, as follows:


	Carrying Value
	March 31,		December 31,
(In thousands)	2021		2020
Properties in operation	$	1,737,394	$	1,738,144
Properties under development	223,818		222,770
Total	$	1,961,212	$	1,960,914

As of March 31, 2021, properties in operation included a long-term ground lease in Washington, D.C., an office complex in New York City, office buildings in West Palm Beach and Palm Beach, Florida, an office building in London, U.K., and the completed portion of a mixed-use project in Washington D.C. Properties in operation are net of accumulated depreciation and amortization of $90,424,000 and $86,970,000 as of March 31, 2021 and December 31, 2020, respectively. Related depreciation expense was $4,890,000 and $6,620,000 for the three months ended March 31, 2021 and 2020, respectively. Future minimum rental income expected on operating leases relating to properties in operation is $51,375,848 in 2021, $69,979,774 in 2022, $62,948,942 in 2023, $59,715,831 in 2024, $55,715,947 in 2025, $51,654,944 in 2026 and $594,894,205 thereafter.

The Company borrowed $101,750,000 through a non-recourse loan secured by the West Palm Beach office building in 2018. The loan matures in November 2028 and carries a fixed interest rate of 4.21%. The carrying value does not reflect the outstanding financing, which is reflected within senior notes and other debt on the Company's consolidated balance sheets.

A mixed-use project in Washington, D.C. has been under development in 2021 and 2020, with the completed portion reported in properties in operation as of March 31, 2021.

(12) Loans Receivable

At March 31, 2021 and December 31, 2020, loans receivable were as follows:


(In thousands)	March 31, 2021		December 31, 2020
Amortized cost (net of allowance for expected credit losses):
Real estate loans	$	51,717	$	51,910
Commercial loans	25,179		33,003
Total	$	76,896	$	84,913

Fair value:
Real estate loans	$	53,325	$	53,593
Commercial loans	25,179		33,003
Total	$	78,504	$	86,596

The real estate loans are secured by commercial real estate primarily located in New York. These loans generally earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through August 2025. The commercial loans are with small business owners who have secured the related financing with the assets of the business. Commercial loans primarily earn interest on a fixed basis and have varying maturities generally not exceeding 10 years.

Loans receivable in non-accrual status were both $0.2 million as of March 31, 2021 and December 31, 2020.

The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended March 31, 2021:


	Real Estate Loans		Commercial Loans		Total
(In thousands)
Allowance for expected credit losses at December 31, 2020	$	1,683	$	3,754	$	5,437

Provision for expected credit losses	(75)		(1,164)		(1,239)
Allowance for expected credit losses at March 31, 2021	$	1,608	$	2,590	$	4,198

The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended March 31, 2020:


	Real Estate Loans		Commercial Loans		Total
(In thousands)
Allowance for expected credit losses at January 1, 2020	$	1,502	$	644	$	2,146
Cumulative effect adjustment resulting from changes in accounting principles	(905)		548		(357)
Provision for expected credit losses	838		1,301		2,139
Allowance for expected credit losses at March 31, 2020	$	1,435	$	2,493	$	3,928

The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions.

In evaluating the real estate loans, the Company considers their credit quality indicators, including loan to value ratios, which compare the outstanding loan amount to the estimated value of the property, the borrower’s financial condition and performance with respect to loan terms, the position in the capital structure, the overall leverage in the capital structure and other market conditions.

(13) Net Investment Gains (Losses)

Net investment gains (losses) were as follows:


	For the Three Months Ended March 31,
(In thousands)	2021		2020
Net investment gains (losses):
Fixed maturity securities:
Gains	$	8,240	$	4,931
Losses	(2,071)		(4,847)
Equity securities (1):
Net realized gains on investment sales	8,572		—
Change in unrealized losses	(24,335)		(154,467)
Investment funds	47,671		30,183
Real estate	12,909		(687)

Other	773		(18,398)
Net realized and unrealized gains (losses) on investments in earnings before allowance for expected credit losses	51,759		(143,285)
Change in allowance for expected credit losses on investments:
Fixed maturity securities	(18,159)		(31,750)
Loans receivable	1,239		(2,139)
Change in allowance for expected credit losses on investments	(16,920)		(33,889)
Net investment gains (losses)	34,839		(177,174)
Income tax (expense) benefit	(5,887)		37,207
After-tax net investment gains (losses)	$	28,952	$	(139,967)


Change in unrealized investment losses on available for sale securities:
Fixed maturity securities without allowance for expected credit losses	$	(122,568)	$	(326,416)
Fixed maturity securities with allowance for expected credit losses	10,355		1,541

Investment funds	(1,020)		(7,646)
Other	(502)		(329)
Total change in unrealized investment losses	(113,735)		(332,850)
Income tax benefit	23,605		73,869
Noncontrolling interests	—		1
After-tax change in unrealized investment losses of available for sale securities	$	(90,130)	$	(258,980)

______________________

(1) The net realized gains or losses on investment sales represent the total gains or losses from the purchase dates of the equity securities. The change in unrealized losses consists of two components: (i) the reversal of the gain or loss recognized in previous periods on equity securities sold and (ii) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

(14) Fixed Maturity Securities in an Unrealized Loss Position

The following tables summarize all fixed maturity securities in an unrealized loss position at March 31, 2021 and December 31, 2020 by the length of time those securities have been continuously in an unrealized loss position:


	Less Than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2021
U.S. government and government agency	$	57,625	$	913	$	462	$	2	$	58,087	$	915
State and municipal	288,083		4,949		20,219		1,232		308,302		6,181
Mortgage-backed securities	322,410		11,927		30,537		374		352,947		12,301
Asset-backed securities	1,803,588		4,917		652,450		13,243		2,456,038		18,160
Corporate	1,414,453		15,904		113,498		3,214		1,527,951		19,118
Foreign government	309,304		9,253		20,374		33,166		329,678		42,419
Fixed maturity securities	$	4,195,463	$	47,863	$	837,540	$	51,231	$	5,033,003	$	99,094





December 31, 2020
U.S. government and government agency	$	47,649	$	347	$	17	$	—	$	47,666	$	347
State and municipal	147,754		1,165		20,528		904		168,282		2,069
Mortgage-backed securities	212,388		5,121		23,943		230		236,331		5,351
Asset-backed securities	1,389,133		6,563		656,877		26,934		2,046,010		33,497
Corporate	612,177		6,721		39,985		1,759		652,162		8,480
Foreign government	143,729		22,871		6,218		21,577		149,947		44,448
Fixed maturity securities	$	2,552,830	$	42,788	$	747,568	$	51,404	$	3,300,398	$	94,192

Substantially all of the securities in an unrealized loss position are rated investment grade, except for the securities in the foreign government classification. A significant amount of the unrealized loss on foreign government securities is the result of changes in currency exchange rates.

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at March 31, 2021 is presented in the table below:


($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	19	$	79,761	$	39,694
Corporate	8	25,066		2,071
Mortgage-backed securities	5	540		24


Total	32	$	105,367	$	41,789

For fixed maturity securities that management does not intend to sell or to be required to sell, the portion of the decline in value that is considered to be due to credit factors is recognized in earnings, and the portion of the decline in value that is considered to be due to non-credit factors is recognized in other comprehensive income.

The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

(15) Fair Value Measurements

The Company’s fixed maturity available for sale securities, equity securities and its arbitrage trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Quoted prices for similar assets or valuations based on inputs that are observable.

Level 3 - Estimates of fair value based on internal pricing methodologies using unobservable inputs. Unobservable inputs are only used to measure fair value to the extent that observable inputs are not available.

Substantially all of the Company’s fixed maturity securities were priced by independent pricing services. The prices provided by the independent pricing services are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. The pricing services may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs are available for each security evaluation on any given day. The pricing services used by the Company have indicated that they will only produce an estimate of fair value if objectively verifiable information is available. The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness and periodically performs independent price tests of a sample of securities to ensure proper valuation.

If prices from independent pricing services are not available for fixed maturity securities, the Company estimates the fair value. For Level 2 securities, the Company utilizes pricing models and processes which may include benchmark yields, sector groupings, matrix pricing, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers and reference data. Where broker quotes are used, the Company generally requests two or more quotes and sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes received from brokers. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial projections, credit quality and business developments of the issuer and other relevant information.

For Level 3 securities, the Company generally uses a discounted cash flow model to estimate the fair value of fixed maturity securities. The cash flow models are based upon assumptions as to prevailing credit spreads, interest rate and interest rate volatility, time to maturity and subordination levels. Projected cash flows are discounted at rates that are adjusted to reflect illiquidity, where appropriate.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by level:


(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2021
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	555,714	$	—	$	555,714	$	—
State and municipal	3,502,593		—		3,502,593		—
Mortgage-backed securities	1,076,024		—		1,076,024		—
Asset-backed securities	3,944,638		—		3,944,638		—
Corporate	5,218,189		—		5,218,189		—
Foreign government	1,029,879		—		1,029,879		—
Total fixed maturity securities available for sale	15,327,037		—		15,327,037		—
Equity securities:
Common stocks	392,163		382,822		—		9,341
Preferred stocks	229,466		—		220,135		9,331
Total equity securities	621,629		382,822		220,135		18,672
Arbitrage trading account	614,721		498,401		116,320		—
Total	$	16,563,387	$	881,223	$	15,663,492	$	18,672
Liabilities:
Trading account securities sold but not yet purchased	$	218	$	218	$	—	$	—


December 31, 2020
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	603,871	$	—	$	603,871	$	—
State and municipal	3,620,664		—		3,620,664		—
Mortgage-backed securities	1,020,330		—		1,020,330		—
Asset-backed securities	3,194,586		—		3,194,586		—
Corporate	4,671,581		—		4,670,581		1,000
Foreign government	975,563		—		975,563		—
Total fixed maturity securities available for sale	14,086,595		—		14,085,595		1,000
Equity securities:
Common stocks	350,181		340,966		—		9,215
Preferred stocks	275,486		—		266,155		9,331
Total equity securities	625,667		340,966		266,155		18,546
Arbitrage trading account	341,473		298,359		43,114		—
Total	$	15,053,735	$	639,325	$	14,394,864	$	19,546
Liabilities:
Trading account securities sold but not yet purchased	$	10,048	$	10,048	$	—	$	—

The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2021 and for the year ended December 31, 2020:


	Gains (Losses) Included in:
(In thousands)	Beginning Balance		Earnings (Losses)		Other Comprehensive Income		Impairments		Purchases		(Sales)		Paydowns / Maturities		Transfers In / (Out)		Ending Balance

Three Months Ended March 31, 2021
Assets:
Fixed maturities securities available for sale:

Corporate	$	1,000	$	—	$	—	$	—	$	—	$	(1,000)	$	—	$	—	$	—
Total	1,000		—		—		—		—		(1,000)		—		—		—
Equity securities:
Common stocks	$	9,215	$	126	$	—	$	—	$	—	$	—	$	—	$	—	$	9,341
Preferred stocks	9,331		—		—		—		—		—		—		—		9,331
Total	18,546		126		—		—		—		—		—		—		18,672
Arbitrage trading account	—		1		—		—		—		(1)		—		—		—
Total	$	19,546	$	127	$	—	$	—	$	—	$	(1,001)	$	—	$	—	$	18,672



Year Ended December 31, 2020
Assets:
Fixed maturities securities available for sale:

Corporate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,000	$	1,000
Total	—		—		—		—		—		—		—		1,000		1,000
Equity securities:
Common stocks	9,053		1,228		—		—		—		(1,066)		—		—		9,215
Preferred stocks	6,505		(174)		—		—		3,000		—		—		—		9,331
Total	15,558		1,054		—		—		3,000		(1,066)		—		—		18,546
Arbitrage trading account	—		19		—		—		—		(19)		—		—		—
Total	$	15,558	$	1,073	$	—	$	—	$	3,000	$	(1,085)	$	—	$	1,000	$	19,546

For the three months ended March 31, 2021, there were no securities transferred into or out of Level 3. For the year ended December 31, 2020, a fixed maturity security was transferred from Level 2 into Level 3 as a result of observable valuation inputs no longer being available.

(16) Reserves for Loss and Loss Expenses

The Company's reserves for losses and loss expenses are comprised of case reserves and incurred but not reported liabilities ("IBNR"). When a claim is reported, a case reserve is established for the estimated ultimate payment based upon known information about the claim. As more information about the claim becomes available over time, case reserves are adjusted up or down as appropriate. Reserves are also established on an aggregate basis to provide for IBNR liabilities and expected loss reserve development on reported claims.

Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is priced and written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns.

Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.

Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags.

The table below provides a reconciliation of the beginning and ending reserve balances:


	March 31,
(In thousands)	2021		2020
Net reserves at beginning of period	$	11,620,393	$	10,697,998
Cumulative effect adjustment resulting from changes in accounting principles	—		5,927
Restated net reserves at beginning of period	11,620,393		10,703,925
Net provision for losses and loss expenses:
Claims occurring during the current year (1)	1,115,173		1,097,523
(Decrease) increase in estimates for claims occurring in prior years (2) (3)	(859)		433
Loss reserve discount accretion	7,278		9,297
Total	1,121,592		1,107,253
Net payments for claims:
Current year	97,586		84,310
Prior years	794,472		864,064
Total	892,058		948,374
Foreign currency translation	(14,779)		(77,167)
Net reserves at end of period	11,835,148		10,785,637
Ceded reserves at end of period	2,245,380		1,946,878
Gross reserves at end of period	$	14,080,528	$	12,732,515

_______________________________________

(1) Claims occurring during the current year are net of loss reserve discounts of $5 million and $3 million for the three months ended March 31, 2021 and 2020, respectively.

(2) The change in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $5 million and $4 million for the three months ended March 31, 2021 and 2020, respectively.

(3) For certain retrospectively rated insurance policies and reinsurance agreements, reserve development is offset by additional or return premiums. Favorable development, net of additional and return premiums, was $3 million and $4 million for the three months ended March 31, 2021 and 2020, respectively.

The ongoing COVID-19 global pandemic has impacted, and will likely continue to impact, the Company’s results through its effect on claim frequency and severity. Loss cost trends have been impacted and will likely be further impacted by COVID-19-related claims in certain lines of business, as well as by other effects of COVID-19 associated with economic conditions, inflation, and social distancing and work from home rules, for example. It remains too early to determine the ultimate net impact of COVID-19. Losses incurred from COVID-19-related claims as well as increased severity are being offset, to a certain extent, by lower claim frequency in certain lines of our businesses, including commercial auto, workers’ compensation, and other liability. However, as the economy and legal systems continue to reopen, we expect the benefit of lower claim frequency in certain lines of business will abate. Given the continuing nature of the pandemic, the direct and indirect impacts of COVID-19 remain uncertain and ultimately could increase or decrease overall loss cost trends and will likely continue to have differing impacts on the Company's different lines of business.

Most of the COVID-19-related claims reported to the Company to date involve certain short-tailed lines of business, including contingency and event cancellation, business interruption, and film production delay. Until the economy fully reopens, the Company expects additional claims to be reported for these lines of business. The Company has also received COVID-19-related claims for longer-tailed casualty lines of business such as workers’ compensation and other liability; however, the estimated incurred loss impact for these reported claims appears to be modest at this time. Given the continuing uncertainty regarding the pandemic's pervasiveness, the future impact that the pandemic may have on claim frequency and severity remains uncertain at this time. In workers’ compensation, for example, currently nearly one-half of the states still have rules, legislation or administrative orders creating a presumption that certain “essential” workers who contract COVID-19 did so through the course of their employment. Several other states are considering similar actions, including varying the definition of “essential” workers. While the ultimate impact of these presumptions remains unknown at this time, the Company believes that such state actions will likely increase workers’ compensation claims with respect to workers deemed “essential,” although this impact may be partially offset by lower workers’ compensation claim frequency with respect to non-essential workers.

action, continue to seek to expand policy coverage terms beyond the policy’s intended coverage, including, for example, but not limited to, property coverages, where there are attempts to extend business interruption coverage where there is no physical damage or loss to property, and attempts to disregard policy exclusions for communicable disease. Accordingly, losses arising from these actions, and the other factors described above, could exceed the Company’s reserves established for those related policies.

As of March 31, 2021, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $204 million, of which $183 million relates to the Insurance segment and $21 million relates to the Reinsurance & Monoline Excess segment. Such $204 million of COVID-19-related losses included $120 million of reported losses and $84 million of IBNR. For the three months ended March 31, 2021, the Company recognized current accident year losses for COVID-19-related claims activity, net of reinsurance, of approximately $15 million, all of which relates to the Insurance segment.

During the three months ended March 31, 2021, favorable prior year development (net of additional and return premiums) of $3 million included $6 million of favorable development for the Insurance segment, partially offset by $3 million of adverse development for the Reinsurance & Monoline Excess segment.

The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2020 accident year, partially offset by adverse development on the 2016 through 2018 accident years. The favorable development on the 2020 accident year was largely concentrated in the commercial auto liability and other liability lines of business. During 2020, the Company achieved larger rate increases in these lines of business than were contemplated in its budget and initial loss ratio selections. The Company also experienced significantly lower reported claim frequency in these lines in 2020 relative to historical averages, and lower reported incurred losses relative to our expectations. We believe that the lower claim frequency and lower reported incurred losses were caused by the impacts of the COVID-19 pandemic, including for example, lockdowns, reduced driving and traffic, work from home, court closures, etc.; however, due to the ongoing uncertainty regarding the ultimate impacts of the pandemic on accident year 2020 incurred losses, the Company did not adjust its reserves based on these lower trends during 2020. As of March 31, 2021 we began to recognize some of the favorable accident year 2020 experience in certain lines in our ultimate loss picks. The adverse development on the 2016 through 2018 accident years is concentrated in the other liability line of business, and is driven by a higher than expected number of large losses reported. The large losses particularly impacted directors and officers liability and excess and surplus lines casualty classes of business.

Prior year reserve development for the Reinsurance & Monoline Excess segment was less significant during the first quarter of 2021, and consisted of small adverse or favorable movements across many lines of business, which largely offset each other. The largest contributor to the slight overall adverse development for the segment was non-proportional reinsurance assumed property business, which was impacted by higher than expected reported losses on property per risk treaties written in the U.S. and U.K. related to accident year 2020.

During the three months ended March 31, 2020, favorable prior year development (net of additional and return premiums) of $4 million included $7 million of favorable development for the Insurance segment, partially offset by $3 million of adverse development for the Reinsurance & Monoline Excess segment.

The overall favorable development for the Insurance segment was primarily attributable to favorable development on workers’ compensation business, partially offset by adverse development on professional liability business. The favorable workers’ compensation development was spread across many accident years, including prior to 2010, and was especially significant in accident years 2018 and 2019. The favorable workers’ compensation development reflects a continuation of the benign loss cost trends experienced during recent years, particularly the favorable claim frequency trends (i.e., number of reported claims per unit of exposure). In addition, ongoing workers’ compensation claims management efforts, including active medical case management and use of networks and specialty vendors to control medical and pharmaceutical benefit costs, have added to the Company’s favorable workers’ compensation prior year development. The adverse professional liability development was mainly concentrated in accident years 2016 and 2017, but was also spread to a lesser degree across other accident years. The development mainly relates to directors and officers and lawyers professional liability lines of business, and was driven by a higher than expected number of large losses being reported in the period. The Company also experienced a small amount of adverse prior year development during the first quarter 2020 on general liability business stemming from large losses in its excess and surplus lines book of business, mainly in accident years 2016 and 2017.

The adverse development for the Reinsurance & Monoline Excess segment was mainly driven by non-proportional reinsurance assumed liability business written in the U.K., primarily from accident years 2015 through 2019. The development was driven by a higher than expected number of reported large losses.

(17) Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:


	March 31, 2021				December 31, 2020
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	15,400,118	$	15,412,192	$	14,159,369	$	14,173,629
Equity securities	621,629		621,629		625,667		625,667
Arbitrage trading account	614,721		614,721		341,473		341,473
Loans receivable	76,896		78,504		84,913		86,596
Cash and cash equivalents	2,014,911		2,014,911		2,372,366		2,372,366
Trading account receivables from brokers and clearing organizations	257,756		257,756		524,727		524,727
Due from broker	—		—		2,585		2,585
Liabilities:
Due to broker	149,295		149,295		—		—
Trading account securities sold but not yet purchased	218		218		10,048		10,048
Senior notes and other debt	2,021,142		2,191,022		1,623,025		1,892,444
Subordinated debentures	1,289,272		1,364,002		1,102,309		1,202,842

The estimated fair values of the Company’s fixed maturity securities, equity securities and arbitrage trading account securities are based on various valuation techniques that rely on fair value measurements as described in Note 15. The fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics, which is considered a Level 2 input. The fair value of the senior notes and other debt and the subordinated debentures is based on spreads for similar securities, which is considered a Level 2 input.

In April 2021, the Company announced it will redeem the $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056 on June 1, 2021.

(18) Premiums and Reinsurance Related Information

The following is a summary of insurance and reinsurance financial information:


	For the Three Months Ended March 31,

(In thousands)	2021		2020
Written premiums:
Direct	$	2,177,162	$	1,964,490
Assumed	307,550		266,882
Ceded	(434,674)		(385,526)
Total net premiums written	$	2,050,038	$	1,845,846

Earned premiums:
Direct	$	2,003,045	$	1,829,713
Assumed	259,541		228,214
Ceded	(412,630)		(366,509)
Total net premiums earned	$	1,849,956	$	1,691,418

Ceded losses and loss expenses incurred	$	298,740	$	235,183
Ceded commissions earned	$	101,680	$	81,045

The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the three months ended March 31, 2021:


(In thousands)
Allowance for expected credit losses at December 31, 2020	$	22,883

Provision for expected credit losses	1,381
Allowance for expected credit losses at March 31, 2021	$	24,264

The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the three months ended March 31, 2020:


(In thousands)
Allowance for expected credit losses at January 1, 2020	$	19,823
Cumulative effect adjustment resulting from changes in accounting principles	1,270
Provision for expected credit losses	431
Allowance for expected credit losses at March 31, 2020	$	21,524

The Company reinsures a portion of its insurance exposures in order to reduce its net liability on individual risks and catastrophe losses. The Company also cedes premiums to state assigned risk plans and captive insurance companies. Estimated amounts due from reinsurers are reported net of an allowance for expected credit losses.

The following table presents the rollforward of the allowance for expected credit losses associated with due from reinsurers for the three months ended March 31, 2021:


(In thousands)
Allowance for expected credit losses at December 31, 2020	$	7,801

Provision for expected credit losses	(428)
Allowance for expected credit losses at March 31, 2021	$	7,373

The following table presents the rollforward of the allowance for expected credit losses associated with due from reinsurers for the three months ended March 31, 2020:


(In thousands)
Allowance for expected credit losses at January 1, 2020	$	690
Cumulative effect adjustment resulting from changes in accounting principles	5,927
Provision for expected credit losses	183
Allowance for expected credit losses at March 31, 2020	$	6,800

(19) Restricted Stock Units

Pursuant to its stock incentive plan, the Company may issue restricted stock units ("RSUs") to employees of the Company and its subsidiaries. The RSUs generally vest three to five years from the award date and are subject to other vesting and forfeiture provisions contained in the award agreement. RSUs are expensed pro-ratably over the vesting period. RSU expenses were $12 million for both the three months ended March 31, 2021 and 2020, respectively. A summary of RSUs issued in the three months ended March 31, 2021 and 2020 follows:


($ in thousands)	Units	Fair Value

2021	590	$	40
2020	724	$	57

(20) Litigation and Contingent Liabilities

In the ordinary course of business, the Company is subject to disputes, litigation and arbitration arising from its insurance and reinsurance businesses. These matters are generally related to insurance and reinsurance claims and are considered in the establishment of loss and loss expense reserves. In addition, the Company may also become involved in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in handling of insurance claims. The Company expects its ultimate liability with respect to such matters will not be material to its financial

condition. However, adverse outcomes on such matters are possible, from time to time, and could be material to the Company’s results of operations in any particular financial reporting period.

(21) Leases

Lessees are required to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months on the balance sheet. All leases disclosed within this footnote are classified as operating leases. Recognized right-of-use asset and lease liability are reported within other assets and other liabilities, respectively, in the consolidated balance sheet. Lease expense is reported in other operating costs and expenses in the consolidated statement of income and accounted for on a straight-line basis over the lease term.

To determine the discount rate used to calculate present value of future minimum lease payments, the Company uses its incremental borrowing rate during the lease commencement period in line with the respective lease duration. In certain cases, the Company has the option to renew the lease. Lease renewal future payments are included in the present value of the future minimum lease payments when the Company determines it is reasonably certain to renew.

The main leases entered into by the Company are for office space used by the Company’s operating units across the world. Additionally, the Company, to a lesser extent, has equipment leases mainly for office equipment. Further information relating to operating lease expense and other operating lease information are as follows:


	For the Three Months Ended March 31,

(In thousands)	2021		2020
Leases:
Lease cost	$	11,264	$	11,236
Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows	$	11,377	$	10,830
Right-of-use assets obtained in exchange for new lease liabilities	$	30	$	1,612


	As of March 31
($ in thousands)	2021			2020
Right-of-use assets	$	156,942		$	184,544
Lease liabilities	$	195,590		$	224,189
Weighted-average remaining lease term	6.73 years			6.95 years
Weighted-average discount rate	5.94		%	5.95		%

Contractual maturities of the Company’s future minimum lease payments are as follows:


(In thousands)	March 31, 2021
Contractual Maturities:
2021	$	35,596
2022	41,887
2023	38,218
2024	31,694
2025	22,881
Thereafter	56,217
Total undiscounted future minimum lease payments	226,493
Less: Discount impact	(30,903)
Total lease liability	$	195,590

(22) Business Segments

The Company’s reportable segments include the following two business segments, plus a corporate segment:

•Insurance - predominantly commercial insurance business, including excess and surplus lines, admitted lines and specialty personal lines throughout the United States, as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and Australia.

•Reinsurance & Monoline Excess - reinsurance business on a facultative and treaty basis, primarily in the United States, the United Kingdom, Continental Europe, Australia, the Asia-Pacific Region and South Africa, as well as operations that solely retain risk on an excess basis.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Income tax expense and benefits are calculated based upon the Company's overall effective tax rate.

Summary financial information about the Company's reporting segments is presented in the following tables. Income (loss) before income taxes by segment includes allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.


	Revenues
(In thousands)	Earned Premiums (1)		Investment Income		Other		Total (2)		Pre-Tax Income (Loss)		Net Income (Loss) to Common Stockholders
Three months ended March 31, 2021
Insurance	$	1,604,979	$	105,237	$	8,279	$	1,718,495	$	257,109	$	198,708
Reinsurance & Monoline Excess	244,977		37,708		—		282,685		68,649		54,471
Corporate, other and eliminations (3)	—		15,632		105,218		120,850		(64,529)		(52,606)
Net investment gains	—		—		34,839		34,839		34,839		28,952
Total	$	1,849,956	$	158,577	$	148,336	$	2,156,869	$	296,068	$	229,525
Three months ended March 31, 2020
Insurance	$	1,484,955	$	123,458	$	8,473	$	1,616,886	$	175,947	$	140,117
Reinsurance & Monoline Excess	206,463		37,710		—		244,173		36,514		29,187
Corporate, other and eliminations (3)	—		13,595		113,130		126,725		(41,755)		(33,755)
Net investment losses	—		—		(177,174)		(177,174)		(177,174)		(139,967)
Total	$	1,691,418	$	174,763	$	(55,571)	$	1,810,610	$	(6,468)	$	(4,418)

_________________

(1) Certain amounts included in earned premiums of each segment are related to inter-segment transactions.

(2) Revenues for Insurance from foreign countries for the three months ended March 31, 2021 and 2020 were $196 million and $168 million, respectively. Revenues for Reinsurance & Monoline Excess from foreign countries for the three months ended March 31, 2021 and 2020 were $88 million and $69 million, respectively.

(3) Corporate, other and eliminations represent corporate revenues and expenses that are not allocated to business segments.

Identifiable Assets


(In thousands)	March 31, 2021		December 31, 2020
Insurance	$	21,985,027	$	21,702,328
Reinsurance & Monoline Excess	4,678,740		4,654,158
Corporate, other and eliminations	3,127,507		2,215,479
Consolidated	$	29,791,274	$	28,571,965

Net premiums earned by major line of business are as follows:


	For the Three Months Ended March 31,

(In thousands)	2021		2020
Insurance:
Other liability	$	601,902	$	547,129
Short-tail lines (1)	324,740		295,478
Workers' compensation	267,449		301,600
Commercial automobile	220,761		189,643
Professional liability	190,128		151,105
Total Insurance	1,604,979		1,484,955

Reinsurance & Monoline Excess:
Casualty reinsurance	149,638		122,731
Property reinsurance	49,466		41,571
Monoline excess (2)	45,873		42,161
Total Reinsurance & Monoline Excess	244,977		206,463

Total	$	1,849,956	$	1,691,418

______________

(1) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(2) Monoline excess includes operations that solely retain risk on an excess basis.

SAFE HARBOR STATEMENT

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2021 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new alternative entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts, including claims for cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing COVID-19 pandemic; the impact of climate change, which may alter the frequency and increase the severity of catastrophe events; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response, on our results and financial condition; foreign currency and political risks (including those associated with the United Kingdom's withdrawal from the European Union, or "Brexit") relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2019; the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; potential difficulties with technology and/or cyber security issues; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

These risks and uncertainties could cause our actual results for the year 2021 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Our future financial performance is dependent upon factors discussed in our Annual Report on Form 10-K, elsewhere in this Form 10-Q and our other SEC filings. Forward-looking statements speak only as of the date on which they are made. Except to the extent required by applicable laws, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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

Overview

W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property and casualty business: Insurance and Reinsurance & Monoline Excess. Our decentralized structure provides us with the flexibility to respond quickly and efficiently to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. While providing our business units with certain operating autonomy, our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment, reinsurance, enterprise risk management, and actuarial, financial and corporate legal staff support. The Company’s primary sources of revenues and earnings are its insurance operations and its investments.

An important part of our strategy is to form new operating units to capitalize on various business opportunities. Over the years, the Company has formed numerous operating units that are focused on important parts of the economy in the U.S., including healthcare, cyber security, energy and agriculture, and on growing international markets, including the Asia-Pacific region, South America and Mexico.

The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time an insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic inflation on the amount of compensation for injuries or losses. General insurance prices are also influenced by available insurance capacity, i.e., the level of capital employed in the industry, and the industry’s willingness to deploy that capital.

The Company’s profitability is also affected by its investment income and investment gains. The Company’s invested assets are invested principally in fixed maturity securities. The return on fixed maturity securities is affected primarily by general interest rates, as well as the credit quality and duration of the securities. Returns available on fixed maturity investments have been at low levels for an extended period.

The Company also invests in equity securities, merger arbitrage securities, investment funds, private equity, loans and real estate related assets. The Company's investments in investment funds and its other alternative investments have experienced, and the Company expects to continue to experience, greater fluctuations in investment income. The Company's share of the earnings or losses from investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated financial statements.

The ongoing COVID-19 pandemic, including the related impact on the U.S. and global economies, has materially and adversely affected our results of operations. For the three months ended March 31, 2021, the Company recorded approximately $15 million for current accident year COVID-19-related losses, net of reinsurance. At the same time, COVID-19 has led to reduced loss frequency in certain lines of business (which may increase as the economy returns to normal). The ultimate impact of COVID-19 on the economy and on the Company’s results of operations, financial position and liquidity is uncertain and not within the Company’s control. The scope, duration and magnitude of the direct and indirect effects of COVID-19 continue to evolve in ways that are difficult or impossible to anticipate. Its impact on the Company’s first three months of 2021 is not necessarily indicative of its impact for the remainder of 2021 or beyond. Despite the effects of COVID-19 to date, the Company’s financial position and liquidity continued to improve.

The ultimate impact of the COVID-19 pandemic on our results of operations, financial position and liquidity remains uncertain due to, among other factors, the following:

Adverse Legislative and Regulatory Action. Legislative and regulatory initiatives taken or that may be taken in response to COVID-19, such as those that seek to retroactively mandate or provide a presumption of coverage for losses which our insurance policies would not otherwise cover and were not priced to cover, may adversely affect us, particularly in our workers’ compensation and property coverages businesses.

Claim Losses Related to COVID-19 May Exceed Reserves. Given the great uncertainty associated with COVID-19 and its continuing impact and the limited information upon which our current assumptions and assessments have been made, our reserves and underlying estimated level of claim losses and costs arising from COVID-19 may materially change.

Claim Losses and Adjustment Expenses May Increase. As the effects of COVID-19 on industry practices and economic, legal, judicial, social and other environmental conditions continue to evolve, unexpected and unintended issues

related to claims and coverages may emerge (including in the area of property coverages where physical damage requirements and communicable disease exclusions are currently being challenged).

Reinsurance. Reinsurers may dispute the applicability of reinsurance to COVID-19 related losses (including the application of reinsurance reinstatements) and, as a result, our reinsurers may refuse to pay reinsurance recoverables related thereto or they may not pay them on a timely basis. In addition, we may be unable to renew our current reinsurance coverages or purchase new coverages with respect to certain exposures under our policies, including COVID-19-related exposures.

Premium Volumes May Be Negatively Impacted. Continued reduced economic activity relating to the COVID-19 pandemic will likely decrease demand for our insurance products and services. In addition, we may alter our view on the insurance coverages that are appropriate to offer in various jurisdictions, which could further negatively impact our premium volumes.

Investments. Further disruptions in global financial markets due to the continuing impact of COVID-19 could cause us to incur additional unrealized and/or realized investment losses, including impairments in our fixed income portfolio and other investments.

Credit Risk. As credit risk is generally a function of the economy, we face greater credit risk from our policyholders, independent agents and brokers in connection with the payment and remittance of premiums as a result of the economic impact caused by COVID-19. Similarly, our credit risk related to the reimbursement of deductibles from policyholders and in connection with reinsurance recoverables has increased.

Operational Disruptions and Costs. Our operations could be disrupted if key members of our senior management or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or other third party service providers are unable to continue to work because of illness, government directives or otherwise. In response to the COVID-19 pandemic, we have implemented remote working policies which have resulted in disruptions to our business routines, heightened risk to cybersecurity attacks and data security incidents and a greater dependency on internet and telecommunication access and capabilities.

Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and allowance for expected credit losses on investments. Management believes these policies and estimates are the most critical to its operations and require the most difficult, subjective and complex judgments.

Reserves for Losses and Loss Expenses. To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment based upon known information about the claim at that time. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

In examining reserve adequacy, several factors are considered in estimating the ultimate economic value of losses. These factors include, among other things, historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing reserves are well tested

over time, some of the major assumptions about anticipated loss emergence patterns are subject to uncertainty. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company’s control. These variables are affected by external and internal events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot provide assurance that its current reserves will prove adequate in light of subsequent events.

Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. For example, the paid loss and incurred loss development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred loss development methods would be less credible than other actuarial methods. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” and in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

The establishment of the actuarially derived loss reserve point estimate also includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions. Examples of changes in terms and conditions that can have a significant impact on reserve levels are the use of aggregate policy limits, the expansion of coverage exclusions, whether or not defense costs are within policy limits, and changes in deductibles and attachment points.

The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Management believes the estimates and assumptions it makes in the reserving process provide the best estimate of the ultimate cost of settling claims and related expenses with respect to insured events which have occurred; however, different assumptions and variables could lead to significantly different reserve estimates.

losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags.

The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect the latest reported loss data, current trends and other factors observed. If the actual level of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s estimate. The following table reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity, relative to our assumptions, on our loss estimate for claims occurring in 2020:


(In thousands)	Frequency (+/-)
Severity (+/-)	1%		5%		10%
1%	$	89,102	$	268,193	$	492,056
5%	268,193		454,376		687,105
10%	492,056		687,105		930,917

Our net reserves for losses and loss expenses of approximately $11.8 billion as of March 31, 2021 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above. The impact of such changes would likely be manifested gradually over the course of many years, as the magnitude of the changes became evident.

Approximately $2.6 billion, or 22%, of the Company’s net loss reserves as of March 31, 2021 relate to the Reinsurance & Monoline Excess segment. There is a higher degree of uncertainty and greater variability regarding estimates of excess workers' compensation and assumed reinsurance loss reserves. In the case of excess workers’ compensation, our policies generally attach at $1 million or higher. The claims which reach our layer therefore tend to involve the most serious injuries and many remain open for the lifetime of the claimant, which extends the claim settlement tail. These claims also occur less frequently but tend to be larger than primary claims, which increases claim variability. In the case of assumed reinsurance our loss reserve estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is also extended. Management considers the impact of delayed reporting and the extended tail in its selection of loss development factors for these lines of business.

Information received from ceding companies is used to set initial expected loss ratios, to establish case reserves and to estimate reserves for incurred but not reported losses on assumed reinsurance business. This information, which is generally provided through reinsurance intermediaries, is gathered through the underwriting process and from periodic claim reports and other correspondence with ceding companies. The Company performs underwriting and claim audits of selected ceding companies to determine the accuracy and completeness of information provided to the Company. The information received from the ceding companies is supplemented by the Company’s own loss development experience with similar lines of business as well as industry loss trends and loss development benchmarks.

Following is a summary of the Company’s reserves for losses and loss expenses by business segment:


(In thousands)	March 31, 2021		December 31, 2020
Insurance	$	9,220,681	$	9,034,969
Reinsurance & Monoline Excess	2,614,467		2,585,424
Net reserves for losses and loss expenses	11,835,148		11,620,393
Ceded reserves for losses and loss expenses	2,245,380		2,164,037
Gross reserves for losses and loss expenses	$	14,080,528	$	13,784,430

Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business:


(In thousands)	Reported Case Reserves		Incurred But Not Reported		Total
March 31, 2021
Other liability	$	1,608,645	$	2,920,315	$	4,528,960
Workers’ compensation (1)	984,401		883,669		1,868,070
Professional liability	412,037		927,549		1,339,586
Commercial automobile	449,342		392,003		841,345
Short-tail lines (2)	263,958		378,762		642,720
Total Insurance	3,718,383		5,502,298		9,220,681
Reinsurance & Monoline Excess (1) (3)	1,451,441		1,163,026		2,614,467
Total	$	5,169,824	$	6,665,324	$	11,835,148

December 31, 2020
Other liability	$	1,534,514	$	2,864,760	$	4,399,274
Workers’ compensation (1)	977,035		873,072		1,850,107
Professional liability	414,104		875,163		1,289,267
Commercial automobile	442,975		398,688		841,663
Short-tail lines (2)	295,313		359,345		654,658
Total Insurance	3,663,941		5,371,028		9,034,969
Reinsurance & Monoline Excess (1) (3)	1,442,099		1,143,325		2,585,424
Total	$	5,106,040	$	6,514,353	$	11,620,393

___________

(1) Reserves for workers’ compensation and Reinsurance & Monoline Excess are net of an aggregate net discount of $478 million and $483 million as of March 31, 2021 and December 31, 2020, respectively.

(2) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(3) Reinsurance & Monoline Excess includes property and casualty reinsurance, as well as operations that solely retain risk on an excess basis.

The Company evaluates reserves for losses and loss adjustment expenses on a quarterly basis. Changes in estimates of prior year losses are reported when such changes are made. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.

Certain of the Company's insurance and reinsurance contracts are retrospectively rated, whereby the Company collects more or less premiums based on the level of loss activity. For those contracts, changes in loss and loss adjustment expenses for prior years may be fully or partially offset by additional or return premiums.

Net prior year development (i.e., the sum of prior year reserve changes and prior year earned premiums changes) for the three months ended March 31, 2021 and 2020 are as follows:


(In thousands)	2021		2020
Net decrease (increase) in prior year loss reserves	$	859	$	(433)
Increase in prior year earned premiums	2,595		4,448
Net favorable prior year development	$	3,454	$	4,015

The Company has estimated the potential COVID-19 impact to its contingency and event cancellation, workers’ compensation, and other lines of business under a number of possible scenarios; however, due to COVID-19’s evolving impact and the still limited amount of available data, there remains a high degree of uncertainty around the Company’s COVID-19 reserves. In addition, several states (and international jurisdictions), through regulation, legislation and/or judicial action, continue to seek to expand policy coverage terms beyond the policy’s intended coverage, including, for example, but not limited to, property coverages, where there are attempts to extend business interruption coverage where there is no physical damage or loss to property, and attempts to disregard policy exclusions for communicable disease. Accordingly, losses arising from these actions, and the other factors described above, could exceed the Company’s reserves established for those related policies.

The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2020 accident year, partially offset by adverse development on the 2016 through 2018 accident years. The favorable development on the 2020 accident year was largely concentrated in the commercial auto liability and other liability lines of business. During 2020, the Company achieved larger rate increases in these lines of business than were contemplated in its budget and initial loss ratio selections. The Company also experienced significantly lower reported claim frequency in these lines in 2020 relative to historical averages, and lower reported incurred losses relative to our expectations. We believe that the lower claim frequency and lower reported incurred losses were caused by the impacts of the COVID-19 pandemic, including for example, lockdowns, reduced driving and traffic, work from home, court closures, etc.; however, due to the ongoing uncertainty regarding the ultimate impacts of the pandemic on accident year 2020 incurred losses, the Company did not adjust its reserves based on these lower trends during 2020. As the accident year starts to mature, we began to recognize some of the favorable accident year 2020 experience in certain lines in our ultimate loss picks made as of March 31, 2021. The adverse development on the 2016 through 2018 accident years is concentrated in the other liability line of business, and is driven by a higher than expected number of large losses reported. The large losses particularly impacted directors and officers liability and excess and surplus lines casualty classes of business.

each other. The largest contributor to the slight overall adverse development for the segment was non-proportional reinsurance assumed property business, which was impacted by higher than expected reported losses on property per risk treaties written in the U.S. and U.K. related to accident year 2020.

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves that were discounted was $1,651 million and $1,655 million at March 31, 2021 and December 31, 2020, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was $478 million and $483 million at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, discount rates by year ranged from 0.7% to 6.5%, with a weighted average discount rate of 3.5%.

Substantially all of the workers’ compensation discount (97% of total discounted reserves at March 31, 2021) relates to excess workers’ compensation reserves. In order to properly match loss expenses with income earned on investment securities supporting the liabilities, reserves for excess workers’ compensation business are discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. These rates are determined annually based on the weighted average rate for the period. Once established, no adjustments are made to the discount rate for that period, and any increases or decreases in loss reserves in subsequent years are discounted at the same rate, without regard to when any such adjustments are recognized. The expected loss and loss expense payout patterns subject to discounting are derived from the Company’s loss payout experience.

The Company also discounts reserves for certain other long-duration workers’ compensation reserves (representing approximately 3% of total discounted reserves at March 31, 2021), including reserves for quota share reinsurance and reserves related to losses regarding occupational lung disease. These reserves are discounted at statutory rates permitted by the Department of Insurance of the State of Delaware.

Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premiums, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately $47 million at March 31, 2021 and $44 million at December 31, 2020. The assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies during the underwriting and negotiation of agreements, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.

Allowance for Expected Credit Losses on Investments.

Fixed Maturity Securities – For fixed maturity securities in an unrealized loss position where the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery in value, the amortized cost basis is written down to fair value through net investment gains (losses). For fixed maturity securities in an unrealized loss position

where the Company does not intend to sell, or it is more likely than not that it will not be required to sell the security before recovery in value, the Company evaluates whether the decline in fair value has resulted from credit losses or all other factors (non-credit factors). In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for expected credit losses is recorded for the credit loss through net investment gains (losses), limited by the amount that the fair value is less than the amortized cost basis. Effective January 1, 2020, the allowance is adjusted for any change in expected credit losses and subsequent recoveries through net investment gains (losses). The impairment related to non-credit factors is recognized in other comprehensive income (loss) .

The Company’s credit assessment of allowance for expected credit losses uses a third party model for available for sale and held to maturity securities, as well as loans receivable. The allowance for expected credit losses is generally based on the performance of the underlying collateral under various economic and default scenarios that involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. A discounted cash flow analysis is used to ascertain the amount of the allowance for expected credit losses, if any. In general, the model reverts to the rating-level long-term average marginal default rates based on 10 years of historical data, beyond the forecast period. For other inputs, the model in most cases reverts to the baseline long-term assumptions linearly over 5 years beyond the forecast period. The long-term assumptions are based on the historical averages.

The Company classifies its fixed maturity securities by credit rating, primarily based on ratings assigned by credit rating agencies. For purposes of classifying securities with different ratings, the Company uses the average of the credit ratings assigned, unless in limited situations the Company’s own analysis indicates an internal rating is more appropriate. Securities that are not rated by a rating agency are evaluated and classified by the Company on a case-by-case basis.

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at March 31, 2021 is presented in the table below:


($ in thousands)	Number of Securities	Aggregate Fair Value		Gross Unrealized Loss
Foreign government	19	$	79,761	$	39,694
Corporate	8	25,066		2,071
Mortgage-backed securities	5	540		24


Total	32	$	105,367	$	41,789

As of March 31, 2021, the Company has recorded an allowance for expected credit losses on fixed maturity securities of $21 million. The Company has evaluated the remaining fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

Loans Receivable – For loans receivable, the Company estimates an allowance for expected credit losses based on relevant information about past events, including historical loss experience, current conditions and forecasts that affect the expected collectability of the amortized cost of the financial asset. The allowance for expected credit losses is presented as a reduction to amortized cost of the financial asset in the consolidated balance sheet and changes to the estimate for expected credit losses are recognized through net investment gains (losses). Loans receivable are reported net of an allowance for expected credit losses of $4 million and $5 million as of March 31, 2021 and December 31, 2020, respectively.

Fair Value Measurements. The Company’s fixed maturity available for sale securities, equity securities, and its arbitrage trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available. The fair

value of the vast majority of the Company’s portfolio is based on observable data (other than quoted prices) and, accordingly, is classified as Level 2.

In classifying particular financial securities in the fair value hierarchy, the Company uses its judgment to determine whether the market for a security is active and whether significant pricing inputs are observable. The Company determines the existence of an active market by assessing whether transactions occur with sufficient frequency and volume to provide reliable pricing information. The Company determines whether inputs are observable based on the use of such information by pricing services and external investment managers, the uninterrupted availability of such inputs, the need to make significant adjustments to such inputs and the volatility of such inputs over time. If the market for a security is determined to be inactive or if significant inputs used to price a security are determined to be unobservable, the security is categorized in Level 3 of the fair value hierarchy.

Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial data, projections and business developments of the issuer and other relevant information.

The following is a summary of pricing sources for the Company's fixed maturity securities available for sale as of March 31, 2021:


($ in thousands)	Carrying Value		Percent of Total
Pricing source:
Independent pricing services	$	14,967,529	97.7	%
Syndicate manager	46,393		0.3
Directly by the Company based on:
Observable data	313,115		2.0

Total	$	15,327,037	100.0	%

Independent pricing services – Substantially all of the Company’s fixed maturity securities available for sale were priced by independent pricing services (generally one U.S. pricing service plus additional pricing services with respect to a limited number of foreign securities held by the Company). The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g., broker quotes and prices observed for comparable securities). The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness based upon current trading levels for similar securities. If the prices appear unusual to the Company, they are re-examined and the value is either confirmed or revised. In addition, the Company periodically performs independent price tests of a sample of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of March 31, 2021, the Company did not make any adjustments to the prices provided by the pricing services. Based upon the Company’s review of the methodologies used by the independent pricing services, these securities were classified as Level 2.

Syndicate manager – The Company has a 15% participation in a Lloyd’s syndicate, and the Company’s share of the securities owned by the syndicate is priced by the syndicate’s manager. The majority of the securities are liquid, short duration fixed maturity securities. The Company reviews the syndicate manager’s pricing methodology and audited financial statements and holds discussions with the syndicate manager as necessary to confirm its understanding and agreement with security prices. Based upon the Company’s review of the methodologies used by the syndicate manager, these securities were classified as Level 2.

Observable data – If independent pricing is not available, the Company prices the securities directly. Prices are based on observable market data where available, including current trading levels for similar securities and non-binding quotations from brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes obtained from brokers. Since these securities were priced based on observable data, they were classified as Level 2.

Cash flow model – If the above methodologies are not available, the Company prices securities using a discounted cash flow model based upon assumptions as to prevailing credit spreads, interest rates and interest rate volatility, time to maturity and subordination levels. Discount rates are adjusted to reflect illiquidity where appropriate. These securities were classified as Level 3.

Results of Operations for the Three Months Ended March 31, 2021 and 2020

Business Segment Results

Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the three months ended March 31, 2021 and 2020. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.


($ in thousands)	2021			2020
Insurance:
Gross premiums written	$	2,140,013		$	1,941,809
Net premiums written	1,739,824			1,583,318
Net premiums earned	1,604,979			1,484,955
Loss ratio	61.3		%	65.1		%
Expense ratio	29.3		%	31.3		%
GAAP combined ratio	90.6		%	96.4		%
Reinsurance & Monoline Excess:
Gross premiums written	$	344,699		$	289,563
Net premiums written	310,214			262,528
Net premiums earned	244,977			206,463
Loss ratio	56.5		%	68.3		%
Expense ratio	30.9		%	32.3		%
GAAP combined ratio	87.4		%	100.6		%
Consolidated:
Gross premiums written	$	2,484,712		$	2,231,372
Net premiums written	2,050,038			1,845,846
Net premiums earned	1,849,956			1,691,418
Loss ratio	60.6		%	65.5		%
Expense ratio	29.5		%	31.4		%
GAAP combined ratio	90.1		%	96.9		%

Net Income (Loss) to Common Stockholders. The following table presents the Company’s net income (loss) to common stockholders and net income (loss) per diluted share for the three months ended March 31, 2021 and 2020:


(In thousands, except per share data)	2021		2020
Net income (loss) to common stockholders	$	229,525	$	(4,418)
Weighted average diluted shares	186,830		190,287
Net income (loss) per diluted share	$	1.23	$	(0.02)

The Company reported net income to common stockholders of $230 million in 2021 compared to net loss of $4 million in 2020. The $234 million increase in net income was primarily due to an after-tax increase in net investment gains of $166 million (primarily resulting from change in market value on equity securities and the gain from disposition of an investment fund), an after-tax increase in underwriting income of $102 million mainly due to the growth in premium rates, an after-tax increase in profits from non-insurance businesses of $2 million and an after-tax increase in profit from insurance service businesses of $1 million, partially offset by an after-tax decrease in net investment income of $13 million primarily due to reduced investment yields from fixed maturity securities, an after-tax decrease in foreign currency gains of $12 million, an after-tax increase in corporate expenses of $5 million, an after-tax debt extinguishment expense of $3 million on debt redeemed in February 2021, an increase in tax expense of $2 million due to a change in the effective tax rate, an after-tax decrease in other income of $1 million and an after-tax increase in minority interest expense of $1 million. The number of weighted average diluted shares decreased by approximately 3 million for 2021 compared to 2020 mainly reflecting shares repurchased in 2020 and 2021.

Premiums. Gross premiums written were $2,485 million in 2021, an increase of 11% from $2,231 million in 2020. The increase was due to a $198 million increase in the Insurance segment and a $55 million increase in the Reinsurance & Monoline Excess segment. Approximately 81% of premiums expiring in 2021 were renewed, and 78% of premiums expiring in 2020 were renewed.

Average renewal premium rates for insurance and facultative reinsurance increased 11.0% in 2021 when adjusted for changes in exposures, and increased 12.8% excluding workers' compensation.

A summary of gross premiums written in 2021 compared with 2020 by line of business within each business segment follows:

•Insurance - gross premiums increased 10% to $2,140 million in 2021 from $1,942 million in 2020. Gross premiums increased $92 million (36%) for professional liability, $81 million (12%) for other liability, $43 million (20%) for commercial auto and $25 million (5%) for short-tail lines, and decreased $43 million (13%) for workers' compensation.

•Reinsurance & Monoline Excess - gross premiums increased 19% to $345 million in 2021 from $290 million in 2020. Gross premiums increased $33 million (22%) for casualty reinsurance, $15 million (18%) for monoline excess and $7 million (13%) for property reinsurance.

Net premiums written were $2,050 million in 2021, an increase of 11% from $1,846 million in 2020. Ceded reinsurance premiums as a percentage of gross written premiums were 17% in both 2021 and 2020.

Premiums earned increased 9% to $1,850 million in 2021 from $1,691 million in 2020. Insurance premiums (including the impact of rate changes) are generally earned evenly over the policy term, and accordingly, recent rate increases will be earned over the upcoming quarters. Premiums earned in 2021 are related to business written during both 2021 and 2020. Audit premiums were $35 million in 2021 compared with $44 million in 2020.

Net Investment Income. Following is a summary of net investment income for the three months ended March 31, 2021 and 2020:


	Amount				Average Annualized Yield
($ in thousands)	2021		2020		2021		2020
Fixed maturity securities, including cash and cash equivalents and loans receivable	$	94,677	$	128,018	2.2	%	3.4	%
Investment funds	38,935		40,577		11.6		13.4
Arbitrage trading account	19,074		1,138		16.1		0.9
Equity securities	6,180		1,563		4.7		1.7
Real estate	1,161		6,096		0.2		1.2
Gross investment income	160,027		177,392		3.0		3.7
Investment expenses	(1,450)		(2,629)		—		—
Total	$	158,577	$	174,763	3.0	%	3.6	%

Net investment income decreased 9% to $159 million in 2021 from $175 million in 2020 due primarily to a $33 million decrease in income from fixed maturity securities mainly driven by lower investment yields, a $5 million decrease in real estate and a $2 million decrease in income from investment funds, partially offset by a $18 million increase from the arbitrage trading account, a $5 million increase from equity securities and a $1 million decrease in investment expense. The Company shortened the duration of its fixed maturity security portfolio, thereby reducing the potential impact of mark-to-market on the portfolio and positioning the Company to react quickly to changes in the current interest rate environment. Average invested assets, at cost (including cash and cash equivalents), were $21.3 billion in 2021 and $19.4 billion in 2020.

Insurance Service Fees. The Company earns fees from an insurance distribution business, a third-party administrator and as a servicing carrier of workers' compensation assigned risk plans for certain states. Insurance service fees were $26 million in both 2021 and 2020.

Net Realized and Unrealized Gains (Losses) on Investments. The Company buys and sells securities and other investment assets on a regular basis in order to maximize its total return on investments. Decisions to sell securities and other investment assets are based on management’s view of the underlying fundamentals of specific investments as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net

realized and unrealized gains on investments were $52 million in 2021 compared with net losses of $143 million in 2020. The gains of $52 million in 2021 reflect net realized gains on investments of $76 million (primarily due to the sale of a private equity investment and real estate assets) and an increase in unrealized losses on equity securities of $24 million. In 2020, the losses of $143 million reflected net realized gains on investment sales of $11 million and an increase in unrealized losses on equity securities of $154 million.

Change in Allowance for Expected Credit Losses on Investments. Based on credit factors, the allowance for expected credit losses is increased or decreased depending on the percentage of unrealized loss relative to amortized cost by security, changes in rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. For the three months ended March 31, 2021, the pre-tax change in allowance for expected credit losses on investments increased by $17 million ($13 million after-tax), which is reflected in net investment gains (losses), primarily related to foreign government securities which did not previously have an allowance. For the three months ended March 31, 2020, the pre-tax change in allowance for expected credit losses on investments increased by $34 million ($27 million after-tax), which is reflected in net investment gains (losses) primarily related to market disruptions as a result of COVID-19.

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that provide services to aviation markets, including (i) the distribution, manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel, maintenance, storage and charter services. Revenues from non-insurance businesses were $87 million in 2021 and $94 million in 2020. The decrease mainly relates to a reduction in revenues from the aviation-related businesses impacted by COVID-19.

Losses and Loss Expenses. Losses and loss expenses increased to $1,122 million in 2021 from $1,107 million in 2020. The consolidated loss ratio was 60.6% in 2021 and 65.5% in 2020. Catastrophe losses, net of reinsurance recoveries, were $36 million (including current accident year losses of approximately $15 million related to COVID-19) in 2021 and $79 million (including losses of approximately $58 million related to COVID-19) in 2020. Favorable prior year reserve development (net of premium offsets) was $3 million in 2021 and $4 million in 2020. The loss ratio excluding catastrophe losses and prior year reserve development was 58.9% in 2021 and 61.0% in 2020.

A summary of loss ratios in 2021 compared with 2020 by business segment follows:

•Insurance - The loss ratio was 61.3% in 2021 and 65.1% in 2020. Catastrophe losses were $33 million in 2021 compared with $57 million in 2020. The Company reflected a best estimate (net of reinsurance) based upon available information for current accident year COVID-19-related losses of approximately $15 million, primarily related to contingency and event cancellation coverage. Favorable prior year reserve development was $6 million in 2021 and $7 million in 2020. The loss ratio excluding catastrophe losses and prior year reserve development decreased 2.1 points to 59.7% in 2021 from 61.8% in 2020.

•Reinsurance & Monoline Excess - The loss ratio was 56.5% in 2021 and 68.3% in 2020. Catastrophe losses were $3 million in 2021 compared with $22 million in 2020. Adverse prior year reserve development was $3 million in both 2021 and 2020. The loss ratio excluding catastrophe losses and prior year reserve development decreased 1.8 points to 54.3% in 2021 from 56.1% in 2020.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses:


($ in thousands)	2021		2020
Policy acquisition and insurance operating expenses	$	545,750	$	531,924
Insurance service expenses	20,786		22,573
Net foreign currency gains	(5,594)		(21,541)
Debt extinguishment costs	3,617		—
Other costs and expenses	51,709		45,378
Total	$	616,268	$	578,334

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Policy acquisition and insurance operating expenses increased 3% and net premiums earned increased 9% from 2020. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) was 29.5% in 2021 and 31.4% in 2020. The improvement is primarily attributable to higher net premiums earned and lower travel and entertainment expenses due to the global pandemic. However, to the extent our net premiums earned decrease, due to the impact of the COVID-19 pandemic or otherwise, our expense ratio would be expected to increase.

Service expenses, which represent the costs associated with the fee-based businesses, decreased to $21 million in 2021 from $23 million in 2020. The decrease is primarily due to a reduction of assigned risk plan business.

Net foreign currency gains result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains were $6 million in 2021 compared to $22 million in 2020.

Debt extinguishment costs of $4 million in 2021 related to the redemption of subordinated debentures that were due in 2056.

Other costs and expenses represent general and administrative expenses of the parent company and other expenses not allocated to business segments, including the cost of certain long-term incentive plans and new business ventures. Other costs and expenses increased to $52 million in 2021 from $45 million in 2020, primarily due to the increase in non-recurring performance-based compensation costs in 2021.

Expenses from Non-Insurance Businesses. Expenses from non-insurance businesses represent costs associated with businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that include (i) cost of goods sold related to aircraft and products sold and services provided, and (ii) general and administrative expenses. Expenses from non-insurance businesses were $86 million in 2021 compared to $95 million in 2020. The decrease mainly relates to a reduction of aviation-related business impacted by COVID-19.

Interest Expense. Interest expense was $37 million in both 2021 and 2020. In May 2020, the Company issued $300 million aggregate principal amount of 4.00% senior notes due 2050. In September 2020, the Company issued an additional $170 million aggregate principal amount of 4.00% senior notes due 2050 and $250 million aggregate principal amount of 4.25% subordinated debentures due 2060 and repaid $300 million aggregate principal amount of 5.375% senior notes at maturity. In October 2020, the Company redeemed $350 million aggregate principal amount of 5.625% subordinated debentures due 2053. In February 2021, the Company issued $300 million aggregate principal amount of 4.125% subordinated debenture due 2061. In March 2021, the Company issued $400 million aggregate principal amount of 3.55% senior notes due 2052 and redeemed its $110 million aggregate principal amount of 5.90% subordinated debentures due 2056. Accordingly, the timing of the debt repayments and issuance in 2020 and 2021 offset the impact on interest expense from lower interest rates of new issuances for the three months ended March 31, 2021 compared to 2020.

In April 2021, the Company announced it will redeem the $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056 on June 1, 2021. This redemption will result in debt extinguishment costs of $8 million in second quarter of 2021. The redemption of debentures and issuance of additional debentures in 2021, as described below in "Liquidity and Capital Resources -- Debt," are expected to impact interest expense in 2021 and forward.

Income Taxes. The effective income tax rate was 21.7% in 2021 and 45.5% in 2020. The effective income tax rate

differs from the federal income tax rate of 21% principally because of state and foreign income taxes, which was partially offset by tax-exempt investment income and tax benefits related to equity-based compensation. The relative impact of these items diminished significantly in the first quarter of 2021.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $104 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed the Company projects that the incremental tax, if any, will be immaterial.

Investments

As part of its investment strategy, the Company establishes a level of cash and highly liquid short-term and intermediate-term securities that, combined with expected cash flow, it believes is adequate to meet its payment obligations. Due to the low fixed maturity investment returns, the Company invests in equity securities, merger arbitrage securities, investment funds, private equity, loans and real estate related assets. The Company's investments in investment funds and its other alternative investments have experienced, and the Company expects to continue to experience, greater fluctuations in investment income.

The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The average duration of the fixed maturity portfolio, including cash and cash equivalents, was 2.4 years at both March 31, 2021 and December 31, 2020. The Company’s fixed maturity investment portfolio and investment-related assets as of March 31, 2021 were as follows:


($ in thousands)	Carrying Value		Percent of Total
Fixed maturity securities:
U.S. government and government agencies	$	555,714	2.5	%
State and municipal:
Special revenue	2,206,460		10.0
State general obligation	469,681		2.1
Local general obligation	467,053		2.1
Pre-refunded (1)	254,040		1.2
Corporate backed	172,339		0.8
Total state and municipal	3,569,573		16.2
Mortgage-backed securities:
Agency	747,559		3.4
Commercial	179,286		0.8
Residential-Prime	147,220		0.7
Residential-Alt A	8,060		—
Total mortgage-backed securities	1,082,125		4.9
Asset-backed securities	3,944,638		17.9
Corporate:
Industrial	3,060,663		13.9
Financial	1,564,369		7.1
Utilities	439,329		2.0
Other	153,828		0.7
Total corporate	5,218,189		23.7
Foreign government and foreign government agencies	1,029,879		4.7
Total fixed maturity securities	15,400,118		69.9
Equity securities:
Common stocks	392,163		1.8
Preferred stocks	229,466		1.0
Total equity securities	621,629		2.8
Cash and cash equivalents	2,014,911		9.1
Real estate	1,961,212		8.9
Investment funds	1,358,997		6.2
Arbitrage trading account	614,721		2.8
Loans receivable	76,896		0.3
Total investments	$	22,048,484	100.0	%

_______________________

(1) Pre-refunded securities are securities for which an escrow account has been established to fund the remaining payments of principal and interest through maturity. Such escrow accounts are funded almost exclusively with U.S. Treasury and U.S. government agency securities.

Fixed Maturity Securities. The Company’s investment policy with respect to fixed maturity securities is generally to purchase instruments with the expectation of holding them to their maturity. However, management of the available for sale portfolio is considered necessary to maintain an approximate matching of assets and liabilities as well as to adjust the portfolio as a result of changes in financial market conditions and tax considerations.

The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in order to mitigate the impact of an interest rate rise on the fair value of the portfolio. Similarly, in a period in which management expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason to expect these gains to continue in future periods.

Equity Securities. Equity securities primarily represent investments in common and preferred stocks in companies with potential growth opportunities in different sectors, mainly in the financial institutions and energy sectors.

Investment Funds. At March 31, 2021, the carrying value of investment funds was $1,359 million, including investments in financial services funds of $478 million, real estate funds of $305 million, other funds of $239 million, transportation funds of $193 million and energy funds of $144 million. Investment funds are generally reported on a one-quarter lag.

Real Estate. Real estate is directly owned property held for investment. At March 31, 2021, real estate properties in operation included a long-term ground lease in Washington D.C., an office complex in New York City, office buildings in West Palm Beach and Palm Beach, Florida, an office building in London, and the completed portion of a mixed-use project in Washington D.C. In addition, part of the previously mentioned mixed-use project in Washington D.C. is under development. The Company expects to fund further development costs for the project with a combination of its own funds and external financing.

Arbitrage Trading Account. The arbitrage trading account is comprised of direct investments in arbitrage securities. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers.

Loans Receivable. Loans receivable, which are carried at amortized cost (net of allowance for expected credit losses), had an amortized cost of $77 million and an aggregate fair value of $79 million at March 31, 2021. The amortized cost of loans receivable is net of an allowance for expected credit losses of $4 million as of March 31, 2021. Loans receivable include real estate loans of $52 million that are secured by commercial real estate located primarily in New York. Real estate loans receivable generally earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through August 2025. Loans receivable include commercial loans of $25 million that are secured by business assets and have fixed interest rates and floating LIBOR-based interest rates with varying maturities not exceeding 10 years.

Market Risk. The fair value of the Company’s investments is subject to risks of fluctuations in credit quality and interest rates. The Company uses various models and stress test scenarios to monitor and manage interest rate risk. The Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the effective duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration for the fixed maturity portfolio (including cash and cash equivalents) was 2.4 years at both March 31, 2021 and December 31, 2020.

In addition, the fair value of the Company’s international investments is subject to currency risk. The Company attempts to manage its currency risk by matching its foreign currency assets and liabilities where considered appropriate.

Liquidity and Capital Resources

Cash Flow. Cash flow provided from operating activities increased to $311 million in the first three months of 2021 from $153 million in the first three months of 2020, primarily due to an increase in premium receipts, net of reinsurance and commissions settled.

The Company's insurance subsidiaries' principal sources of cash are premiums, investment income, service fees and proceeds from sales and maturities of portfolio investments. The principal uses of cash are payments for claims, taxes, operating expenses and dividends. The Company expects its insurance subsidiaries to fund the payment of losses with cash received from premiums, investment income and fees. The Company generally targets an average duration for its investment portfolio that is within 1.5 years of the average duration of its liabilities so that portions of its investment portfolio mature throughout the claim cycle and are available for the payment of claims if necessary. In the event operating cash flow and proceeds from maturities and prepayments of fixed income securities are not sufficient to fund claim payments and other cash requirements, the remainder of the Company's cash and investments is available to pay claims and other obligations as they become due. The Company's investment portfolio is highly liquid, with approximately 79% invested in cash, cash equivalents and marketable fixed maturity securities as of March 31, 2021. If the sale of fixed maturity securities were to become necessary, a realized gain or loss equal to the difference between the cost and sales price of securities sold would be recognized.

Debt. At March 31, 2021, the Company had senior notes, subordinated debentures and other debt outstanding with a carrying value of $3,310 million and a face amount of $3,337 million, including $300 million aggregate principal amount of its 4.125% subordinated debentures due 2061 issued in February 2021 as well as $400 million aggregate principal amount of its 3.55% senior notes due 2052 issued in March 2021. The Company redeemed its $110 million aggregate principal amount of 5.90% subordinated debentures on March 1, 2021. The maturities of the outstanding debt are $5 million in 2021, $426 million in 2022, $9 million in 2025, $102 million in 2028, $250 million in 2037, $350 million in 2044, $470 million in 2050, $400 million in 2052, $290 million in 2056, $185 million in 2058, $300 million in 2059, $250 million in 2060 and $300 million in 2061.

In April 2021, the Company announced it will redeem the $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056 on June 1, 2021.

Equity. At March 31, 2021, total common stockholders’ equity was $6.4 billion, common shares outstanding were 177,372,943 and stockholders’ equity per outstanding share was $36.16. During the three months ended March 31, 2021, the Company repurchased 465,063 shares of its common stock for $30 million. In the first quarter of 2021, the Board declared a regular quarterly cash dividend of $0.12 per share. The number of common shares outstanding excludes shares held in a grantor trust established by the Company for delivery upon settlement of vested but mandatorily deferred RSUs.

Total Capital. Total capitalization (equity, debt and subordinated debentures) was $9.7 billion at March 31, 2021. The percentage of the Company’s capital attributable to senior notes, subordinated debentures and other debt was 34% at March 31, 2021 and 30% at December 31, 2020.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Reference is made to the information under “Investments - Market Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14 as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting. During the quarter ended March 31, 2021, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Please see Note 20 to the notes to the interim consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020.

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

Set forth below is a summary of the shares repurchased by the Company during the three months ended March 31, 2021, and the number of shares remaining authorized for purchase by the Company:


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs



January 2021	465,063	$	63.82	465,063	6,269,659
February 2021	—	$	—	—	6,269,659
March 2021	—	$	—	—	6,269,659

Item 6. Exhibits


Number






(31.1)						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(31.2)						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(32.1)						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.


		W. R. BERKLEY CORPORATION
Date:	May 5, 2021	/s/ W. Robert Berkley, Jr.
		W. Robert Berkley, Jr.
		President and Chief Executive Officer

Date:	May 5, 2021	/s/ Richard M. Baio
		Richard M. Baio
		Executive Vice President - Chief Financial Officer