EVEREST GROUP, LTD. - Quarter Report: 2016 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:

June 30, 2016

Commission file number:

1-15731

EVEREST RE GROUP, LTD.

(Exact name of registrant as specified in its charter)

Bermuda		98-0365432
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Seon Place – 4^th Floor

141 Front Street

PO Box HM 845

Hamilton HM 19, Bermuda

441-295-0006

(Address, including zip code, and telephone number, including area code,

of registrant's principal executive office)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

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

Large accelerated filer	X	Accelerated filer
Non-accelerated filer		Smaller reporting company
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

		Number of Shares Outstanding
Class		At August 1, 2016
Common Shares, $0.01 par value		41,888,224

EVEREST RE GROUP, LTD

Table of Contents

Form 10-Q

Page

PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets June 30, 2016 (unaudited)
	and December 31, 2015 (unaudited)	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the
	three and six months ended June 30, 2016 and 2015 (unaudited)	2

	Consolidated Statements of Changes in Shareholders' Equity for the three and
	six months ended June 30, 2016 and 2015 (unaudited)	3

	Consolidated Statements of Cash Flows for the six months ended
	June 30, 2016 and 2015 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)	5

Item 2.	Management's Discussion and Analysis of Financial Condition and
	Results of Operation	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56

Item 4.	Controls and Procedures	56

PART II

OTHER INFORMATION

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3.	Defaults Upon Senior Securities	57

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	58

EVEREST RE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
(Dollars and share amounts in thousands, except par value per share)	2016			2015
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value	$	14,058,965		$	13,357,294
(amortized cost: 2016, $13,631,263; 2015, $13,276,206)
Fixed maturities - available for sale, at fair value		-			2,102
Equity securities - available for sale, at market value (cost: 2016, $124,699; 2015, $122,271)		118,740			108,940
Equity securities - available for sale, at fair value		1,104,430			1,337,733
Short-term investments		531,511			799,684
Other invested assets (cost: 2016, $1,216,171; 2015, $786,994)		1,216,171			786,994
Cash		429,287			283,658
Total investments and cash		17,459,104			16,676,405
Accrued investment income		96,772			100,942
Premiums receivable		1,461,563			1,483,090
Reinsurance receivables		950,323			894,037
Funds held by reinsureds		242,033			278,673
Deferred acquisition costs		319,781			372,351
Prepaid reinsurance premiums		219,050			164,971
Income taxes		195,094			258,541
Other assets		338,455			316,408
TOTAL ASSETS	$	21,282,175		$	20,545,418

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	10,263,267		$	9,951,798
Future policy benefit reserve		57,827			58,910
Unearned premium reserve		1,495,838			1,613,390
Funds held under reinsurance treaties		23,373			13,544
Commission reserves		85,670			60,098
Other net payable to reinsurers		224,380			173,087
Losses in course of payment		124,703			112,170
4.868% Senior notes due 6/1/2044		396,654			396,594
6.6% Long term notes due 5/1/2067		236,413			236,364
Accrued interest on debt and borrowings		3,537			3,537
Equity index put option liability		41,729			40,705
Unsettled securities payable		86,003			15,314
Other liabilities		257,313			261,322
Total liabilities		13,296,707			12,936,833

Commitments and contingencies (Note 7)

SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50,000 shares authorized;
no shares issued and outstanding		-			-
Common shares, par value: $0.01; 200,000 shares authorized; (2016) 68,805
and (2015) 68,606 outstanding before treasury shares		688			686
Additional paid-in capital		2,120,581			2,103,638
Accumulated other comprehensive income (loss), net of deferred income tax expense
(benefit) of $57,700 at 2016 and ($15,863) at 2015		84,000			(231,755	)
Treasury shares, at cost; 26,921 shares (2016) and 25,912 shares (2015)		(3,072,313	)		(2,885,956	)
Retained earnings		8,852,512			8,621,972
Total shareholders' equity		7,985,468			7,608,585
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	21,282,175		$	20,545,418

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands, except per share amounts)	2016			2015			2016			2015
	(unaudited)						(unaudited)
REVENUES:
Premiums earned	$	1,288,860		$	1,285,255		$	2,507,727		$	2,557,743
Net investment income		132,737			124,990			235,261			247,556
Net realized capital gains (losses):
Other-than-temporary impairments on fixed maturity securities		(1,470	)		(16,238	)		(30,263	)		(42,256	)
Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive income (loss)		-			-			-			-
Other net realized capital gains (losses)		34,128			(7,940	)		(11,338	)		7,573
Total net realized capital gains (losses)		32,658			(24,178	)		(41,601	)		(34,683	)
Net derivative gain (loss)		1,996			6,445			(1,024	)		6,203
Other income (expense)		(28,367	)		(2,064	)		(30,433	)		49,217
Total revenues		1,427,884			1,390,448			2,669,930			2,826,036

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		857,816			778,184			1,558,565			1,493,339
Commission, brokerage, taxes and fees		295,502			290,520			570,508			573,614
Other underwriting expenses		72,077			61,902			144,187			120,643
Corporate expenses		7,117			5,925			15,003			11,388
Interest, fees and bond issue cost amortization expense		9,073			9,026			18,301			18,016
Total claims and expenses		1,241,585			1,145,557			2,306,564			2,217,000

INCOME (LOSS) BEFORE TAXES		186,299			244,891			363,366			609,036
Income tax expense (benefit)		30,607			35,834			35,988			77,001

NET INCOME (LOSS)	$	155,692		$	209,057		$	327,378		$	532,035

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		124,356			(136,481	)		267,318			(53,276	)
Reclassification adjustment for realized losses (gains) included in net income (loss)		(1,448	)		12,747			30,933			34,930
Total URA(D) on securities arising during the period		122,908			(123,734	)		298,251			(18,346	)

Foreign currency translation adjustments		5,050			54,337			14,823			(48,003	)

Benefit plan actuarial net gain (loss) for the period		-			-			-			-
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		1,341			1,609			2,681			3,213
Total benefit plan net gain (loss) for the period		1,341			1,609			2,681			3,213
Total other comprehensive income (loss), net of tax		129,299			(67,788	)		315,755			(63,136	)

COMPREHENSIVE INCOME (LOSS)	$	284,991		$	141,269		$	643,133		$	468,899

EARNINGS PER COMMON SHARE
Basic	$	3.70		$	4.72		$	7.73		$	11.99
Diluted		3.67			4.68			7.68			11.88
Dividends declared		1.15			0.95			2.30			1.90

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS' EQUITY

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands, except share and dividends per share amounts)	2016			2015			2016			2015
	(unaudited)						(unaudited)
COMMON SHARES (shares outstanding):
Balance, beginning of period		42,399,666			44,410,420			42,694,252			44,685,637
Issued during the period, net		28,492			59,606			198,266			219,267
Treasury shares acquired		(544,728	)		(277,500	)		(1,009,088	)		(712,378	)
Balance, end of period		41,883,430			44,192,526			41,883,430			44,192,526

COMMON SHARES (par value):
Balance, beginning of period	$	688		$	685		$	686		$	683
Issued during the period, net		-			-			2			2
Balance, end of period		688			685			688			685

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period		2,111,828			2,073,977			2,103,638			2,068,807
Share-based compensation plans		8,753			10,659			16,943			15,829
Balance, end of period		2,120,581			2,084,636			2,120,581			2,084,636

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period		(45,299	)		52,969			(231,755	)		48,317
Net increase (decrease) during the period		129,299			(67,788	)		315,755			(63,136	)
Balance, end of period		84,000			(14,819	)		84,000			(14,819	)

RETAINED EARNINGS:
Balance, beginning of period		8,744,952			8,099,936			8,621,972			7,819,210
Net income (loss)		155,692			209,057			327,378			532,035
Dividends declared ($1.15 per share in second quarter 2016 and $2.30 year-to-date
per share in 2016 and $0.95 per share in second quarter 2015 and $1.90
year-to-date per share in 2015)		(48,132	)		(41,955	)		(96,838	)		(84,207	)
Balance, end of period		8,852,512			8,267,038			8,852,512			8,267,038

TREASURY SHARES AT COST:
Balance, beginning of period		(2,971,870	)		(2,560,937	)		(2,885,956	)		(2,485,897	)
Purchase of treasury shares		(100,443	)		(49,941	)		(186,357	)		(124,981	)
Balance, end of period		(3,072,313	)		(2,610,878	)		(3,072,313	)		(2,610,878	)

TOTAL SHAREHOLDERS' EQUITY, END OF PERIOD	$	7,985,468		$	7,726,662		$	7,985,468		$	7,726,662

The accompanying notes are an integral part of the consolidated financial statements.

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,
(Dollars in thousands)	2016			2015
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	327,378		$	532,035
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		20,168			(56,849	)
Decrease (increase) in funds held by reinsureds, net		45,656			(6,755	)
Decrease (increase) in reinsurance receivables		(68,284	)		(49,185	)
Decrease (increase) in income taxes		(10,424	)		(20,898	)
Decrease (increase) in prepaid reinsurance premiums		(51,243	)		(39,563	)
Increase (decrease) in reserve for losses and loss adjustment expenses		352,147			113,567
Increase (decrease) in future policy benefit reserve		(1,083	)		(364	)
Increase (decrease) in unearned premiums		(119,315	)		(160,849	)
Increase (decrease) in other net payable to reinsurers		46,508			16,712
Increase (decrease) in losses in course of payment		11,188			95,003
Change in equity adjustments in limited partnerships		(16,518	)		(12,840	)
Distribution of limited partnership income		41,296			18,332
Change in other assets and liabilities, net		17,012			32,728
Non-cash compensation expense		14,262			10,364
Amortization of bond premium (accrual of bond discount)		24,125			25,514
Amortization of underwriting discount on senior notes		2			2
Net realized capital (gains) losses		41,601			34,683
Net cash provided by (used in) operating activities		674,476			531,637

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		923,832			1,172,211
Proceeds from fixed maturities matured/called - available for sale, at fair value		-			-
Proceeds from fixed maturities sold - available for sale, at market value		594,764			731,673
Proceeds from fixed maturities sold - available for sale, at fair value		1,587			1,613
Proceeds from equity securities sold - available for sale, at market value		226			4,599
Proceeds from equity securities sold - available for sale, at fair value		430,038			300,620
Distributions from other invested assets		2,261,682			27,705
Cost of fixed maturities acquired - available for sale, at market value		(1,932,527	)		(2,448,121	)
Cost of fixed maturities acquired - available for sale, at fair value		-			(234	)
Cost of equity securities acquired - available for sale, at market value		(2,393	)		(5,541	)
Cost of equity securities acquired - available for sale, at fair value		(194,043	)		(317,650	)
Cost of other invested assets acquired		(2,711,306	)		(98,890	)
Net change in short-term investments		271,913			207,879
Net change in unsettled securities transactions		59,619			4,475
Net cash provided by (used in) investing activities		(296,608	)		(419,661	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period, net		2,683			5,468
Purchase of treasury shares		(186,357	)		(124,981	)
Dividends paid to shareholders		(96,838	)		(84,207	)
Net cash provided by (used in) financing activities		(280,512	)		(203,720	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		48,273			(6,829	)

Net increase (decrease) in cash		145,629			(98,573	)
Cash, beginning of period		283,658			437,474
Cash, end of period	$	429,287		$	338,901

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	41,905		$	93,352
Interest paid		18,192			17,907

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended June 30, 2016 and 2015

1. GENERAL

Everest Re Group, Ltd. ("Group"), a Bermuda company, through its subsidiaries, principally provides reinsurance and insurance in the U.S., Bermuda and international markets. As used in this document, "Company" means Group and its subsidiaries.

During the fourth quarter of 2015, the Company established new subsidiaries, Everest Preferred International Holdings, Ltd. ("Preferred International"), a Bermuda based company and Everest International Holdings (Bermuda), Ltd. ("International Holdings"), a Bermuda based company. These new subsidiaries were part of a capital restructuring within the Company to support a planned increase in international business production, which includes directly supporting Group's new Lloyd's of London Syndicate corporate member.

Effective July 13, 2015, the Company sold all of the outstanding shares of capital stock of a wholly-owned subsidiary entity, Mt. McKinley Insurance Company ("Mt. McKinley"), to Clearwater Insurance Company. The operating results of Mt. McKinley for the three and six months ended June 30, 2015, are included within the Company's financial statements.

Effective February 27, 2013, the Company established a new subsidiary, Mt. Logan Re Ltd. ("Mt. Logan Re"). Mt. Logan Re manages separate segregated accounts whose assets and capital relate mainly to third party external investors.

2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company for the three and six months ended June 30, 2016 and 2015 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), has been omitted since it is not required for interim reporting purposes. The December 31, 2015 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three and six months ended June 30, 2016 and 2015 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2015, 2014 and 2013 included in the Company's most recent Form 10-K filing.

The Company consolidates the results of operations and financial position of all voting interest entities ("VOE") in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.

Effective January 1, 2016, the Company adopted Accounting Standards Update 2015-02, "Consolidation (Topic 810) Amendments to the Consolidation Analysis" issued by the United States Financial Accounting Standards Board ("FASB"), which changed the method in which the Company determines whether entities are consolidated by the Company. The adoption of this amended accounting guidance has been implemented utilizing a full retrospective application for all periods presented in the Company's unaudited interim consolidated financial statements.

The amended guidance includes changes in the identification of the primary beneficiary of companies considered to be VIEs. These changes resulted in the Company concluding that Mt. Logan Re is a VIE given it has insufficient equity at risk and that each underlying separate segregated account is likewise a VIE. The Company has concluded that it is the primary beneficiary of Mt. Logan Re, but not of the underlying separate segregated accounts and therefore has deconsolidated these segregated accounts. This change had no impact to the net income or retained earnings of the Company.

All significant intercompany accounts and transactions have been eliminated.

Certain reclassifications and format changes have been made to prior years' amounts to conform to the 2016 presentation.

Application of Recently Issued Accounting Standard Changes.

Disclosures about Short-Duration Contracts. In May 2015, the FASB issued ASU 2015-09, authoritative guidance regarding required disclosures associated with short duration insurance contracts. The new disclosure requirements focus on information about initial claim estimates and subsequent claim estimate adjustment, methodologies in estimating claims and the timing, frequency and severity of claims related to short duration insurance contracts. This guidance is effective for annual reporting periods beginning after December 15, 2015 and interim reporting periods beginning after December 15, 2016. Therefore, the initial presentation of this guidance in the Company's financial statements and footnotes will be for its 10-K filing as of December 31, 2016. The Company does not anticipate that it will have a significant impact on its financial statements.

Debt Issuance Costs. In April 2015, The FASB issued ASU 2015–03, authoritative guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs be presented within the balance sheet as a reduction of the carrying value of the debt liability, rather than as a separate asset. This guidance is effective for annual reporting periods beginning after December 15, 2015 and related interim reporting periods. Based upon this guidance, the Company has adjusted prior financial statements and footnotes to conform with this new presentation.

Consolidation. In February 2015, the FASB issued ASU 2015-02, authoritative guidance regarding consolidation of reporting entities. The new guidance focuses on the required evaluation of whether certain legal entities should be consolidated. This guidance is effective for annual and interim reporting periods beginning after December 15, 2015. Based upon this guidance, the Company has determined that the separate segregated accounts associated with Mt. Logan Re, should not be consolidated. As a result, the Company has adjusted prior financial statements and footnotes to conform with this new consolidation presentation.

The following tables present certain financial statement line items as previously reported in 2015, the effect on those line items due to not consolidating the segregated accounts of Mt. Logan Re, in accordance with the newly adopted accounting policy and the line items as currently reported within the financial statements.

CONSOLIDATED BALANCE SHEET:	December 31, 2015
			Effect of adoption
	As previously		of new accounting
	reported		policy			As adopted
(Dollars in thousands)
ASSETS:
Short-term investments	$	1,795,455	$	(995,771	)	$	799,684
Total investments and cash		17,672,176		(995,771	)		16,676,405
Premiums receivable		1,479,293		3,797			1,483,090
Reinsurance receivables		840,420		53,617			894,037
Deferred acquisition costs		373,072		(721	)		372,351
Prepaid reinsurance premiums		157,424		7,547			164,971
Other assets		265,634		56,184			321,818
TOTAL ASSETS		21,426,175		(875,347	)		20,550,828

LIABILITIES:
Funds held under reinsurance treaties		88,544		(75,000	)		13,544
Commission reserves		79,849		(19,751	)		60,098
Other net payable to reinsurers		166,822		6,265			173,087
Other liabilities		291,322		(30,000	)		261,322
Total liabilities		13,060,729		(118,486	)		12,942,243

NONCONTROLLING INTERESTS:
Redeemable noncontrolling interests - Mt. Logan Re		756,861		(756,861	)		-

TOTAL LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY		21,426,175		(875,347	)		20,550,828

CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended June 30, 2015									Six Months Ended June 30, 2015
AND COMPREHENSIVE INCOME (LOSS):				Effect of									Effect of
				adoption of									adoption of
	As previously			new accounting						As previously			new accounting
	reported			policy			As adopted			reported			policy			As adopted
(Dollars in thousands)
REVENUES:
Premiums earned	$	1,332,398		$	(47,143	)	$	1,285,255		$	2,639,475		$	(81,732	)	$	2,557,743
Net investment income		125,046			(56	)		124,990			247,629			(73	)		247,556
Other income (expense)		(3,925	)		1,861			(2,064	)		42,148			7,069			49,217
Total revenues		1,435,786			(45,338	)		1,390,448			2,900,772			(74,736	)		2,826,036

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		790,661			(12,477	)		778,184			1,513,126			(19,787	)		1,493,339
Commission, brokerage, taxes and fees		294,917			(4,397	)		290,520			582,084			(8,470	)		573,614
Other underwriting expenses		63,951			(2,049	)		61,902			124,615			(3,972	)		120,643
Total claims and expenses		1,164,480			(18,923	)		1,145,557			2,249,229			(32,229	)		2,217,000

INCOME (LOSS) BEFORE TAXES		271,306			(26,415	)		244,891			651,543			(42,507	)		609,036
NET INCOME (LOSS)		235,472			(26,415	)		209,057			574,542			(42,507	)		532,035

Net income (loss) attributable to noncontrolling interests		(26,415	)		26,415			-			(42,507	)		42,507			-

NET INCOME (LOSS) ATTRIBUTABLE TO EVEREST RE GROUP		209,057			-			209,057			532,035			-			532,035

CONSOLIDATED STATEMENT OF CASH FLOWS:	Six Months Ended June 30, 2015
				Effect of adoption
	As previously			of new accounting
(Dollars in thousands)	reported			policy			As adopted
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	574,542		$	(42,507	)	$	532,035
Decrease (increase) in premiums receivable		(51,422	)		(5,427	)		(56,849	)
Decrease (increase) in funds held by reinsureds, net		68,245			(75,000	)		(6,755	)
Decrease (increase) in reinsurance receivables		(32,526	)		(16,659	)		(49,185	)
Decrease (increase) in prepaid reinsurance premiums		(28,916	)		(10,647	)		(39,563	)
Increase (decrease) in other net payable to reinsurers		23,867			(7,155	)		16,712
Change in other assets and liabilities, net		26,768			5,960			32,728
Net cash provided by (used in) operating activities		683,072			(151,435	)		531,637

CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in short-term investments		(199,226	)		407,105			207,879
Net cash provided by (used in) investing activities		(826,766	)		407,105			(419,661	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Third party investment in redeemable noncontrolling interest		296,848			(296,848	)		-
Dividends paid on third party investment in redeemable noncontrolling interest		(41,178	)		41,178			-
Net cash provided by (used in) financing activities		51,950			(255,670	)		(203,720	)

3. INVESTMENTS

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity, equity security investments, carried at market value and other-than-temporary impairments ("OTTI") in accumulated other comprehensive income ("AOCI") are as follows for the periods indicated:

	At June 30, 2016
	Amortized		Unrealized		Unrealized			Market		OTTI in AOCI
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		(a)
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	838,823	$	35,865	$	(161	)	$	874,527	$	-
Obligations of U.S. states and political subdivisions		701,171		49,219		(478	)		749,912		-
Corporate securities		4,833,072		173,613		(31,470	)		4,975,215		6,724
Asset-backed securities		501,999		5,045		(860	)		506,184		-
Mortgage-backed securities
Commercial		277,921		8,108		(2,069	)		283,960		-
Agency residential		2,480,550		50,009		(1,653	)		2,528,906		-
Non-agency residential		776		45		(46	)		775		-
Foreign government securities		1,331,323		75,287		(39,457	)		1,367,153		108
Foreign corporate securities		2,665,628		149,438		(42,733	)		2,772,333		3,592
Total fixed maturity securities	$	13,631,263	$	546,629	$	(118,927	)	$	14,058,965	$	10,424
Equity securities	$	124,699	$	4,477	$	(10,436	)	$	118,740	$	-

	At December 31, 2015
	Amortized		Unrealized		Unrealized			Market		OTTI in AOCI
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		(a)
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	805,273	$	13,465	$	(1,861	)	$	816,877	$	-
Obligations of U.S. states and political subdivisions		669,945		34,020		(890	)		703,075		-
Corporate securities		4,817,014		97,159		(109,310	)		4,804,863		1,412
Asset-backed securities		470,320		719		(3,813	)		467,226		-
Mortgage-backed securities
Commercial		264,924		4,750		(3,375	)		266,299		-
Agency residential		2,313,265		25,318		(18,059	)		2,320,524		-
Non-agency residential		893		51		(46	)		898		-
Foreign government securities		1,256,983		54,403		(52,205	)		1,259,181		53
Foreign corporate securities		2,677,589		107,163		(66,401	)		2,718,351		36
Total fixed maturity securities	$	13,276,206	$	337,048	$	(255,960	)	$	13,357,294	$	1,501
Equity securities	$	122,271	$	3,401	$	(16,732	)	$	108,940	$	-

^(a) Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The amortized cost and market value of fixed maturity securities are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.

	At June 30, 2016				At December 31, 2015
	Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value
Fixed maturity securities – available for sale:
Due in one year or less	$	1,038,566	$	1,055,335	$	1,021,200	$	1,036,016
Due after one year through five years		6,537,730		6,716,423		6,193,426		6,220,563
Due after five years through ten years		1,880,481		1,956,278		2,217,075		2,203,932
Due after ten years		913,240		1,011,104		795,103		841,836
Asset-backed securities		501,999		506,184		470,320		467,226
Mortgage-backed securities:
Commercial		277,921		283,960		264,924		266,299
Agency residential		2,480,550		2,528,906		2,313,265		2,320,524
Non-agency residential		776		775		893		898
Total fixed maturity securities	$	13,631,263	$	14,058,965	$	13,276,206	$	13,357,294

The changes in net unrealized appreciation (depreciation) for the Company's investments are derived from the following sources for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2016			2015			2016			2015
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	137,383		$	(144,172	)	$	337,691		$	(17,910	)
Fixed maturity securities, other-than-temporary impairment		8,714			(477	)		8,924			9,207
Equity securities		3,005			(430	)		7,371			(1,880	)
Change in unrealized appreciation (depreciation), pre-tax		149,102			(145,079	)		353,986			(10,583	)
Deferred tax benefit (expense)		(23,938	)		21,344			(53,410	)		(4,356	)
Deferred tax benefit (expense), other-than-temporary impairment		(2,256	)		1			(2,325	)		(3,407	)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders' equity	$	122,908		$	(123,734	)	$	298,251		$	(18,346	)

The Company frequently reviews all of its fixed maturity, available for sale securities for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized cost at the time of review. The Company then assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security's value caused by a change in the market, interest rate or foreign exchange environment does not constitute an other-than-temporary impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company determines that the decline is other-than-temporary and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the carrying value of the investment is written down to fair value. The fair value adjustment that is credit or foreign exchange related is recorded in net realized capital gains (losses) in the Company's consolidated statements of operations and comprehensive income (loss). The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company's consolidated balance sheets.

The Company's assessments are based on the issuers current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

The majority of the Company's equity securities available for sale at market value are primarily comprised of mutual fund investments whose underlying securities consist of fixed maturity securities. When a fund's value reflects an unrealized loss, the Company assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company considers the composition of its portfolios and their related markets, reports received from the portfolio managers and discussions with portfolio managers. If the Company determines that the declines are temporary and it has the ability and intent to continue to hold the investments, then the declines are recorded as unrealized losses in accumulated other comprehensive income (loss). If declines are deemed to be other-than-temporary, then the carrying value of the investment is written down to fair value and recorded in net realized capital gains (losses) in the Company's consolidated statements of operations and comprehensive income (loss).

Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company's asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity and equity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

	Duration of Unrealized Loss at June 30, 2016 By Security Type
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	7,851	$	(161	)	$	-	$	-		$	7,851	$	(161	)
Obligations of U.S. states and political subdivisions		-		-			562		(478	)		562		(478	)
Corporate securities		361,829		(7,778	)		403,815		(23,692	)		765,644		(31,470	)
Asset-backed securities		23,269		(76	)		64,821		(784	)		88,090		(860	)
Mortgage-backed securities
Commercial		19,532		(1,727	)		5,823		(342	)		25,355		(2,069	)
Agency residential		101,296		(467	)		203,950		(1,186	)		305,246		(1,653	)
Non-agency residential		-		-			146		(46	)		146		(46	)
Foreign government securities		128,397		(11,750	)		210,746		(27,707	)		339,143		(39,457	)
Foreign corporate securities		194,137		(10,879	)		296,452		(31,854	)		490,589		(42,733	)
Total fixed maturity securities	$	836,311	$	(32,838	)	$	1,186,315	$	(86,089	)	$	2,022,626	$	(118,927	)
Equity securities		-		-			100,535		(10,436	)		100,535		(10,436	)
Total	$	836,311	$	(32,838	)	$	1,286,850	$	(96,525	)	$	2,123,161	$	(129,363	)

	Duration of Unrealized Loss at June 30, 2016 By Maturity
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	25,648	$	(1,137	)	$	95,994	$	(14,183	)	$	121,642	$	(15,320	)
Due in one year through five years		420,466		(21,372	)		604,273		(55,248	)		1,024,739		(76,620	)
Due in five years through ten years		233,230		(7,378	)		190,057		(12,431	)		423,287		(19,809	)
Due after ten years		12,870		(681	)		21,251		(1,869	)		34,121		(2,550	)
Asset-backed securities		23,269		(76	)		64,821		(784	)		88,090		(860	)
Mortgage-backed securities		120,828		(2,194	)		209,919		(1,574	)		330,747		(3,768	)
Total fixed maturity securities	$	836,311	$	(32,838	)	$	1,186,315	$	(86,089	)	$	2,022,626	$	(118,927	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at June 30, 2016 were $2,123,161 thousand and $129,363 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at June 30, 2016, did not exceed 0.4% of the overall market value of the Company's fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $32,838 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of foreign government securities, foreign corporate securities and domestic corporate securities. The majority of these unrealized losses are attributable to net unrealized foreign exchange losses, $31,679 thousand, as the U.S. dollar has strengthened against other currencies. The $86,089 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to foreign corporate securities, foreign government securities and domestic corporate securities. The majority of these unrealized losses are attributable to net unrealized foreign exchange losses, $74,394 thousand, as the U.S. dollar has strengthened against other currencies. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.

	Duration of Unrealized Loss at December 31, 2015 By Security Type
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	539,177	$	(1,855	)	$	692	$	(6	)	$	539,869	$	(1,861	)
Obligations of U.S. states and political subdivisions		6,434		(84	)		4,917		(806	)		11,351		(890	)
Corporate securities		1,818,331		(74,161	)		440,682		(35,149	)		2,259,013		(109,310	)
Asset-backed securities		348,545		(2,510	)		67,230		(1,303	)		415,775		(3,813	)
Mortgage-backed securities
Commercial		145,490		(3,375	)		-		-			145,490		(3,375	)
Agency residential		1,021,390		(10,014	)		326,449		(8,045	)		1,347,839		(18,059	)
Non-agency residential		152		(2	)		38		(44	)		190		(46	)
Foreign government securities		227,384		(21,996	)		216,428		(30,209	)		443,812		(52,205	)
Foreign corporate securities		821,548		(25,627	)		295,389		(40,774	)		1,116,937		(66,401	)
Total fixed maturity securities	$	4,928,451	$	(139,624	)	$	1,351,825	$	(116,336	)	$	6,280,276	$	(255,960	)
Equity securities		-		-			91,907		(16,732	)		91,907		(16,732	)
Total	$	4,928,451	$	(139,624	)	$	1,443,732	$	(133,068	)	$	6,372,183	$	(272,692	)

	Duration of Unrealized Loss at December 31, 2015 By Maturity
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	29,737	$	(1,840	)	$	74,615	$	(13,440	)	$	104,352	$	(15,280	)
Due in one year through five years		2,328,805		(62,329	)		651,228		(59,993	)		2,980,033		(122,322	)
Due in five years through ten years		969,139		(52,725	)		206,538		(28,018	)		1,175,677		(80,743	)
Due after ten years		85,193		(6,829	)		25,727		(5,493	)		110,920		(12,322	)
Asset-backed securities		348,545		(2,510	)		67,230		(1,303	)		415,775		(3,813	)
Mortgage-backed securities		1,167,032		(13,391	)		326,487		(8,089	)		1,493,519		(21,480	)
Total fixed maturity securities	$	4,928,451	$	(139,624	)	$	1,351,825	$	(116,336	)	$	6,280,276	$	(255,960	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2015 were $6,372,183 thousand and $272,692 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2015, did not exceed 0.7% of the overall market value of the Company's fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $139,624 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, foreign government securities and agency residential mortgage-backed securities. The majority of these unrealized losses are attributable to unrealized losses in the energy sector, $46,793 thousand, as falling oil prices have disrupted the market values for this sector, particularly for oil exploration, production and servicing companies and net unrealized foreign exchange losses, $39,037 thousand, as the U.S. dollar has strengthened against other currencies. The $116,336 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to foreign and domestic corporate securities, foreign

government securities and agency residential mortgage-backed securities. The majority of these unrealized losses are attributable to net unrealized foreign exchange losses, $72,738 thousand, as the U.S. dollar has strengthened against other currencies and to unrealized losses in the energy sector, $18,447 thousand, as falling oil prices have disrupted the market values for this sector, particularly for oil exploration as well as production and servicing companies. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The components of net investment income are presented in the table below for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2016			2015			2016			2015
Fixed maturities	$	102,851		$	109,481		$	205,376		$	218,836
Equity securities		10,923			13,015			22,062			24,693
Short-term investments and cash		345			400			745			630
Other invested assets
Limited partnerships		23,003			6,655			16,845			13,623
Other		1,151			983			301			1,608
Gross investment income before adjustments		138,273			130,534			245,329			259,390
Funds held interest income (expense)		1,740			2,717			4,280			5,593
Future policy benefit reserve income (expense)		(425	)		(709	)		(726	)		(1,102	)
Gross investment income		139,588			132,542			248,883			263,881
Investment expenses		(6,851	)		(7,552	)		(13,622	)		(16,325	)
Net investment income	$	132,737		$	124,990		$	235,261		$	247,556

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.

The Company had contractual commitments to invest up to an additional $471,801 thousand in limited partnerships at June 30, 2016. These commitments will be funded when called in accordance with the partnership agreements, which have investment periods that expire, unless extended, through 2020.

The components of net realized capital gains (losses) are presented in the table below for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2016			2015			2016			2015
Fixed maturity securities, market value:
Other-than-temporary impairments	$	(1,470	)	$	(16,238	)	$	(30,263	)	$	(42,256	)
Gains (losses) from sales		3,329			(2,570	)		(13,582	)		(10,594	)
Fixed maturity securities, fair value:
Gains (losses) from sales		(1,854	)		14			(1,854	)		42
Gains (losses) from fair value adjustments		1,571			(6	)		1,339			56
Equity securities, market value:
Gains (losses) from sales		8			(901	)		65			(882	)
Equity securities, fair value:
Gains (losses) from sales		(7,690	)		755			(16,116	)		605
Gains (losses) from fair value adjustments		38,764			(5,232	)		18,809			18,346
Short-term investments gain (loss)		-			-			1			-
Total net realized capital gains (losses)	$	32,658		$	(24,178	)	$	(41,601	)	$	(34,683	)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) both fair value re-measurements and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis as displayed in the table above. The Company had no other-than-temporary impaired securities where the impairment had both a credit and non-credit component.

The proceeds and split between gross gains and losses, from sales of fixed maturity and equity securities, are presented in the table below for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2016		2015		2016		2015
Proceeds from sales of fixed maturity securities	$	272,233	$	376,238	$	596,351<