EVEREST GROUP, LTD. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

_X_ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

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

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 – 4th Floor

141 Front Street

PO Box HM 845

HamiltonHM 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

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

Indicate by check mark if the registrant is an emerging growth company and 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.

YES

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

YES

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

Class

Trading Symbol

Name of Exchange where

Registered

Number of Shares Outstanding

At August 1, 2021

Common Shares, $0.01 par value

New York Stock Exchange

39,872,807

EVEREST RE GROUP, LTD

Table of Contents

Form 10-Q

Page

PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 30, 2021 (unaudited)
	and December 31, 2020	1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the
	three and six months ended June 30, 2021 and 2020 (unaudited)	2

	Consolidated Statements of Changes in Shareholders’ Equity for the six
	months ended June 30, 2021 and 2020 (unaudited)	3

	Consolidated Statements of Cash Flows for the six months ended
	June 30, 2021 and 2020 (unaudited)	4

	Notes to Consolidated Interim Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operation	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	53

PART II

OTHER INFORMATION

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	55

Item 6.	Exhibits	55

EVEREST RE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
(Dollars and share amounts in thousands, except par value per share)	2021		2020
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value	$	21,275,199	$	20,040,173
(amortized cost: 2021, $20,718,717; 2020, $19,225,067, credit allowances: 2021, $(24,650); 2020, $(1,745))
Equity securities, at fair value		1,485,833		1,472,236
Short-term investments (cost: 2021, $629,943; 2020, $1,135,088)		629,943		1,134,950
Other invested assets (cost: 2021, $2,558,631; 2020, $2,012,581)		2,558,631		2,012,581
Cash		1,106,345		801,651
Total investments and cash		27,055,951		25,461,591
Accrued investment income		170,907		141,304
Premiums receivable		3,199,024		2,680,562
Reinsurance receivables		2,032,363		1,994,555
Funds held by reinsureds		798,780		716,655
Deferred acquisition costs		748,897		622,053
Prepaid reinsurance premiums		495,657		412,015
Income taxes net recoverable		-		17,253
Other assets		868,477		742,369
TOTAL ASSETS	$	35,370,056	$	32,788,357

LIABILITIES:
Reserve for losses and loss adjustment expenses	$	17,645,762	$	16,398,997
Future policy benefit reserve		36,497		37,723
Unearned premium reserve		4,024,050		3,501,359
Funds held under reinsurance treaties		17,520		15,807
Other net payable to reinsurers		379,524		294,347
Losses in course of payment		198,352		127,971
Senior notes due 6/1/2044		397,254		397,194
Senior notes due 10/15/2050		979,784		979,524
Long term notes due 5/1/2067		223,724		223,674
Borrowings from FHLB		310,000		310,000
Accrued interest on debt and borrowings		9,641		10,460
Unsettled securities payable		124,559		206,693
Income taxes net payable		35,089		-
Other liabilities		571,511		558,432
Total liabilities		24,953,267		23,062,181

Commitments and contingencies (Note 7)		(nil)		(nil)

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; (2021) 69,817
and (2020) 69,620 outstanding before treasury shares		698		696
Additional paid-in capital		2,256,390		2,245,301
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of $56,797 at 2021 and $80,451 at 2020		357,178		534,899
Treasury shares, at cost; 29,802 shares (2021) and 29,636 shares (2020)		(3,662,499)		(3,622,172)
Retained earnings		11,465,022		10,567,452
Total shareholders' equity		10,416,789		9,726,176
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	35,370,056	$	32,788,357

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)	2021		2020		2021		2020
	(unaudited)				(unaudited)
REVENUES:
Premiums earned	$	2,558,372	$	2,042,405	$	4,946,237	$	4,079,219
Net investment income		407,095		38,083		667,508		185,883
Net realized capital gains (losses):
Credit allowances on fixed maturity securities		(15,927)		(4,063)		(22,904)		(25,837)
Other net realized capital gains (losses)		120,036		188,711		165,915		(103)
Total net realized capital gains (losses)		104,109		184,648		143,011		(25,940)
Other income (expense)		7,114		(20,621)		63,707		(12,631)
Total revenues		3,076,690		2,244,515		5,820,463		4,226,531

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		1,586,141		1,407,016		3,297,560		2,837,856
Commission, brokerage, taxes and fees		557,749		466,316		1,046,760		914,838
Other underwriting expenses		140,844		118,130		283,075		246,990
Corporate expenses		16,168		8,733		28,546		18,566
Interest, fees and bond issue cost amortization expense		15,607		7,253		31,246		14,836
Total claims and expenses		2,316,509		2,007,448		4,687,187		4,033,086

INCOME (LOSS) BEFORE TAXES		760,181		237,067		1,133,276		193,445
Income tax expense (benefit)		80,199		46,187		111,432		(14,047)

NET INCOME (LOSS)	$	679,982	$	190,880	$	1,021,844	$	207,492

Other comprehensive income (loss), net of tax:
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		84,171		551,753		(204,444)		272,354
Reclassification adjustment for realized losses (gains) included in net income (loss)		1,590		(7,257)		(2,076)		24,142
Total URA(D) on securities arising during the period		85,761		544,496		(206,520)		296,496

Foreign currency translation adjustments		34,295		20,586		24,713		(30,238)

Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		2,043		1,806		4,086		2,726
Total benefit plan net gain (loss) for the period		2,043		1,806		4,086		2,726
Total other comprehensive income (loss), net of tax		122,099		566,888		(177,721)		268,984

COMPREHENSIVE INCOME (LOSS)	$	802,081	$	757,768	$	844,123	$	476,476

EARNINGS PER COMMON SHARE:
Basic	$	16.97	$	4.78	$	25.50	$	5.14
Diluted		16.95		4.77		25.47		5.13

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

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except share and dividends per share amounts)	2021		2020
	(unaudited)
COMMON SHARES (shares outstanding):
Balance, January 1		39,983,481		40,798,963
Issued during the period, net		196,481		159,423
Treasury shares acquired		(97,462)		(970,892)
Balance, March 31		40,082,500		39,987,494
Issued during the period, net		940		(15,849)
Treasury shares acquired		(68,100)		-
Balance, June 30		40,015,340		39,971,645

COMMON SHARES (par value):
Balance, January 1	$	696	$	694
Issued during the period, net		2		2
Balance, March 31		698		696
Issued during the period, net		-		-
Balance, June 30		698		696

ADDITIONAL PAID-IN CAPITAL:
Balance, January 1		2,245,301		2,219,660
Share-based compensation plans		436		(3,181)
Balance, March 31		2,245,737		2,216,479
Share-based compensation plans		10,653		9,514
Balance, June 30		2,256,390		2,225,993

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF DEFERRED INCOME TAXES:
Balance, January 1		534,899		28,152
Net increase (decrease) during the period		(299,820)		(297,903)
Balance, March 31		235,079		(269,751)
Net increase (decrease) during the period		122,099		566,888
Balance, June 30		357,178		297,137

RETAINED EARNINGS:
Balance, January 1		10,567,452		10,306,571
Change to beginning balance due to adoption of Accounting Standards Update 2016-13		-		(4,214)
Net income (loss)		341,862		16,612
Dividends declared ($1.55 per share 2021 and $1.55 per share 2020)		(62,228)		(63,277)
Balance, March 31		10,847,086		10,255,692
Net income (loss)		679,982		190,880
Dividends declared ($1.55 per share 2021 and $1.55 per share 2020)		(62,046)		(61,927)
Balance, June 30		11,465,022		10,384,645

TREASURY SHARES AT COST:
Balance, January 1		(3,622,172)		(3,422,152)
Purchase of treasury shares		(23,545)		(200,020)
Balance, March 31		(3,645,717)		(3,622,172)
Purchase of treasury shares		(16,782)		-
Balance, June 30		(3,662,499)		(3,622,172)

TOTAL SHAREHOLDERS' EQUITY, June 30	$	10,416,789	$	9,286,299

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)	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,021,844	$	207,492
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in premiums receivable		(499,647)		(252,609)
Decrease (increase) in funds held by reinsureds, net		(79,485)		(23,498)
Decrease (increase) in reinsurance receivables		15,836		(147,515)
Decrease (increase) in income taxes		76,452		(25,000)
Decrease (increase) in prepaid reinsurance premiums		(71,566)		(29,699)
Increase (decrease) in reserve for losses and loss adjustment expenses		1,144,620		800,816
Increase (decrease) in future policy benefit reserve		(1,226)		(1,933)
Increase (decrease) in unearned premiums		500,077		159,744
Increase (decrease) in other net payable to reinsurers		72,850		89,499
Increase (decrease) in losses in course of payment		70,653		147,427
Change in equity adjustments in limited partnerships		(377,120)		84,066
Distribution of limited partnership income		49,053		40,447
Change in other assets and liabilities, net		(211,735)		(10,313)
Non-cash compensation expense		22,439		19,175
Amortization of bond premium (accrual of bond discount)		37,928		20,547
Net realized capital (gains) losses		(143,011)		25,940
Net cash provided by (used in) operating activities		1,627,962		1,104,586

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale, at market value		1,897,536		1,261,650
Proceeds from fixed maturities sold - available for sale, at market value		599,737		990,273
Proceeds from equity securities sold, at fair value		474,663		213,185
Distributions from other invested assets		112,398		164,975
Cost of fixed maturities acquired - available for sale, at market value		(3,949,973)		(2,301,701)
Cost of equity securities acquired, at fair value		(360,016)		(224,086)
Cost of other invested assets acquired		(309,691)		(343,332)
Net change in short-term investments		506,285		(439,457)
Net change in unsettled securities transactions		(103,527)		49,504
Net cash provided by (used in) investing activities		(1,132,588)		(628,989)

CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period for share-based compensation, net of expense		(11,349)		(12,841)
Purchase of treasury shares		(40,328)		(200,019)
Dividends paid to shareholders		(124,274)		(125,205)
Cost of debt repurchase		-		(10,647)
Cost of shares withheld on settlements of share-based compensation awards		(13,713)		(14,141)
Net cash provided by (used in) financing activities		(189,664)		(362,853)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(1,016)		1,699

Net increase (decrease) in cash		304,694		114,443
Cash, beginning of period		801,651		808,036
Cash, end of period	$	1,106,345	$	922,479

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (recovered)	$	34,780	$	10,895
Interest paid		31,695		14,992

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, 2021 and 2020

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.

2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company as of June 30, 2021 and December 31, 2020 and for the three and six months ended June 30, 2021 and 2020 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, 2020 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, 2021 and 2020 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, 2020, 2019 and 2018, 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.

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 disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate actual results could differ, possibly materially, from those estimates. This is particularly true given the fluid and continuing nature of the COVID-19 Pandemic. This is an ongoing event and so is the Company’s evaluation and analysis. While the Company’s analysis considers all aspects of its operations, it does not take into account legal, regulatory or legislative intervention that could retroactively mandate or expand coverage provisions. Given the uncertainties in the current public health and economic environment, there could be an adverse impact on results for the Property & Casualty industry and the Company for the remainder of the year. The impact is dependent on the shape and length of the economic recovery.

All intercompany accounts and transactions have been eliminated.

Certain reclassifications and format changes have been made to prior years’ amounts to conform to the 2021 presentation.

Application of Recently Issued Accounting Standard Changes.

Accounting for Income Taxes. In December 2019, The Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which provides simplification of existing guidance for income taxes, including the removal of certain exceptions related to recognition of deferred tax liabilities on foreign subsidiaries. The guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within that annual reporting period. The Company adopted the guidance as of January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial statements.

Accounting for Long Duration Contracts. In August 2018, FASB issued ASU 2018-12, which discusses changes to the recognition, measurement and presentation of long duration contracts. The main provisions of this guidance address the following: 1) In determining liability for future policy benefits, companies must review cash flow assumptions at least annually and the discount rate assumption at each reporting period date 2) Amortization of deferred acquisition costs has been simplified to be in constant level proportion to either premiums, gross profits or gross margins 3) Disaggregated roll forwards of beginning and ending liabilities for future policy benefits are required. The guidance was originally effective for annual reporting periods beginning after December 15, 2020 and interim periods within that annual reporting period. However, FASB issued ASU 2019-09 in November 2019 and then ASU 2020-11 in November 2021, which ultimately defers the effective date of ASU 2018-12 until annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact of the adoption of ASU 2018-12 on its financial statements.

Any issued guidance and pronouncements, other than those directly referenced above, are deemed by the Company to be either not applicable or immaterial to its financial statements.

3. INVESTMENTS

The following tables show amortized cost, allowance for credit losses, gross unrealized appreciation, gross unrealized depreciation and market value of available for sale, fixed maturity securities as of the dates indicated:

		At June 30, 2021
		Amortized		Allowance for		Unrealized		Unrealized		Market
(Dollars in thousands)		Cost		Credit Losses		Appreciation		Depreciation		Value
Fixed maturity securities
	U.S. Treasury securities and obligations of
	U.S. government agencies and corporations	$	1,259,149	$	-	$	29,365	$	(12,756)	$	1,275,758
	Obligations of U.S. states and political subdivisions		574,398		-		35,933		(986)		609,345
	Corporate securities		7,155,688		(18,475)		285,509		(63,018)		7,359,704
	Asset-backed securities		3,141,971		(4,915)		35,316		(2,955)		3,169,417
	Mortgage-backed securities
	Commercial		1,026,809		-		55,125		(3,535)		1,078,399
	Agency residential		2,255,348		-		47,124		(12,205)		2,290,267
	Non-agency residential		8,220		-		6		(15)		8,211
	Foreign government securities		1,494,989		-		80,268		(21,296)		1,553,961
	Foreign corporate securities		3,802,145		(1,260)		167,015		(37,763)		3,930,137
Total fixed maturity securities		$	20,718,717	$	(24,650)	$	735,661	$	(154,529)	$	21,275,199

		At December 31, 2020
		Amortized		Allowance for		Unrealized		Unrealized		Market
(Dollars in thousands)		Cost		Credit Losses		Appreciation		Depreciation		Value
Fixed maturity securities
	U.S. Treasury securities and obligations of
	U.S. government agencies and corporations	$	1,325,156	$	-	$	49,084	$	(7,134)	$	1,367,106
	Obligations of U.S. states and political subdivisions		543,895		-		34,654		(1,254)		577,295
	Corporate securities		6,824,800		(1,220)		380,677		(55,231)		7,149,026
	Asset-backed securities		2,540,809		-		30,691		(5,698)		2,565,802
	Mortgage-backed securities
	Commercial		915,923		-		75,275		(895)		990,303
	Agency residential		2,206,139		-		64,663		(3,063)		2,267,739
	Non-agency residential		5,187		-		9		(2)		5,194
	Foreign government securities		1,565,260		(22)		102,587		(22,450)		1,645,375
	Foreign corporate securities		3,297,898		(503)		204,023		(29,085)		3,472,333
Total fixed maturity securities		$	19,225,067	$	(1,745)	$	941,663	$	(124,812)	$	20,040,173

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, 2021				At December 31, 2020
	Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value
Fixed maturity securities – available for sale:
Due in one year or less	$	1,628,113	$	1,638,768	$	1,365,793	$	1,374,674
Due after one year through five years		6,432,847		6,618,429		6,529,189		6,774,785
Due after five years through ten years		4,890,259		5,091,435		4,414,211		4,751,903
Due after ten years		1,335,150		1,380,273		1,247,816		1,309,773
Asset-backed securities		3,141,971		3,169,417		2,540,809		2,565,802
Mortgage-backed securities:
Commercial		1,026,809		1,078,399		915,923		990,303
Agency residential		2,255,348		2,290,267		2,206,139		2,267,739
Non-agency residential		8,220		8,211		5,187		5,194
Total fixed maturity securities	$	20,718,717	$	21,275,199	$	19,225,067	$	20,040,173

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)	2021		2020		2021		2020
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	97,127	$	614,077	$	(235,581)	$	337,053
Change in unrealized appreciation (depreciation), pre-tax		97,127		614,077		(235,581)		337,053
Deferred tax benefit (expense)		(11,366)		(69,581)		29,061		(40,557)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity	$	85,761	$	544,496	$	(206,520)	$	296,496

The Company reviews all of its fixed maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline in value is due to non-credit related or credit related factors. 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 a credit impairment, but rather a non-credit related decline in market value. Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to

sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is credit related 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 Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. 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 will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

The Company does not create an allowance for uncollectible interest. If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time.

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.

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 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, 2021 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	$	341,846	$	(12,494)	$	2,620	$	(262)	$	344,466	$	(12,756)
Obligations of U.S. states and political subdivisions		23,662		(986)		-		-		23,662		(986)
Corporate securities		1,598,159		(61,141)		37,936		(1,877)		1,636,095		(63,018)
Asset-backed securities		710,904		(2,955)		-		-		710,904		(2,955)
Mortgage-backed securities
Commercial		134,941		(3,535)		-		-		134,941		(3,535)
Agency residential		1,020,232		(11,327)		43,983		(878)		1,064,215		(12,205)
Non-agency residential		1,309		(15)		-		-		1,309		(15)
Foreign government securities		304,722		(20,686)		3,107		(610)		307,829		(21,296)
Foreign corporate securities		861,693		(34,534)		30,035		(3,229)		891,728		(37,763)
Total fixed maturity securities	$	4,997,468	$	(147,673)	$	117,681	$	(6,856)	$	5,115,149	$	(154,529)

		Duration of Unrealized Loss at June 30, 2021 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	$	260,687	$	(15,951)	$	5,846	$	(471)	$	266,533	$	(16,422)
Due in one year through five years		1,385,520		(51,928)		48,824		(3,048)		1,434,344		(54,976)
Due in five years through ten years		1,153,553		(48,557)		19,028		(2,459)		1,172,581		(51,016)
Due after ten years		330,322		(13,405)		-		-		330,322		(13,405)
Asset-backed securities		710,904		(2,955)		-		-		710,904		(2,955)
Mortgage-backed securities		1,156,482		(14,877)		43,983		(878)		1,200,465		(15,755)
Total fixed maturity securities	$	4,997,468	$	(147,673)	$	117,681	$	(6,856)	$	5,115,149	$	(154,529)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at June 30, 2021 were $5,115,149 thousand and $154,529 thousand, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at June 30, 2021, did not exceed 1.6% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss position at June 30, 2021, comprised less than 0.3% 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 $147,673 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, U.S. Treasury and government securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $133,996 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $6,856 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. Of these unrealized losses, $6,678 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. 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, 2020 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	$	135,190	$	(7,134)	$	-	$	-	$	135,190	$	(7,134)
Obligations of U.S. states and political subdivisions		19,524		(999)		4,059		(255)		23,583		(1,254)
Corporate securities		669,755		(26,159)		247,962		(29,072)		917,717		(55,231)
Asset-backed securities		235,566		(4,768)		85,595		(930)		321,161		(5,698)
Mortgage-backed securities
Commercial		53,511		(578)		6,592		(317)		60,103		(895)
Agency residential		434,447		(2,016)		50,353		(1,047)		484,800		(3,063)
Non-agency residential		185		(2)		-		-		185		(2)
Foreign government securities		114,755		(8,813)		150,812		(13,637)		265,567		(22,450)
Foreign corporate securities		354,548		(17,489)		115,595		(11,596)		470,143		(29,085)
Total fixed maturity securities	$	2,017,481	$	(67,958)	$	660,968	$	(56,854)	$	2,678,449	$	(124,812)

		Duration of Unrealized Loss at December 31, 2020 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	$	96,144	$	(4,942)	$	112,419	$	(12,071)	$	208,563	$	(17,013)
Due in one year through five years		653,816		(32,469)		283,866		(21,319)		937,682		(53,788)
Due in five years through ten years		422,517		(19,392)		49,749		(2,034)		472,266		(21,426)
Due after ten years		121,295		(3,791)		72,394		(19,136)		193,689		(22,927)
Asset-backed securities		235,566		(4,768)		85,595		(930)		321,161		(5,698)
Mortgage-backed securities		488,143		(2,596)		56,945		(1,364)		545,088		(3,960)
Total fixed maturity securities	$	2,017,481	$	(67,958)	$	660,968	$	(56,854)	$	2,678,449	$	(124,812)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2020 were $2,678,449 thousand and $124,812 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2020, did not exceed 0.7.% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss comprised less than 0.1% 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 $67,958 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 and foreign government securities. Of these unrealized losses, $63,424 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $56,854 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $33,533 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. 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)	2021		2020		2021		2020
Fixed maturities	$	148,262	$	133,918	$	289,178	$	271,842
Equity securities		3,493		3,662		8,331		7,183
Short-term investments and cash		773		1,687		953		3,862
Other invested assets:
Limited partnerships		239,966		(88,254)		354,299		(66,686)
Other		25,855		(2,962)		31,874		(16,033)
Gross investment income before adjustments		418,349		48,051		684,635		200,168
Funds held interest income (expense)		3,287		2,021		11,253		10,237
Future policy benefit reserve income (expense)		(170)		(303)		(461)		(514)
Gross investment income		421,466		49,769		695,427		209,891
Investment expenses		(14,371)		(11,686)		(27,919)		(24,008)
Net investment income	$	407,095	$	38,083	$	667,508	$	185,883

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. The net investment income from limited partnerships is dependent upon the Company’s share of the net asset values of interests underlying each limited partnership. 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 $2,866,741 thousand in limited partnerships and private placement loan securities at June 30, 2021. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026.

The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its participation in the facility. As of June 30, 2021, the market value of investments in the facility consolidated within the Company’s balance sheets was $575,807 thousand.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2021			2020	2021			2020
Fixed maturity securities, market value:
Allowance for credit losses	$	(15,927)	$	(4,063)	$	(22,904)	$	(25,837)
Gains (losses) from sales		10,060		9,619		19,234		(4,457)
Fixed maturity securities, fair value:
Gains (losses) from sales		-		-		-		-
Gains (losses) from fair value adjustments		-		(272)		-		(1,395)
Equity securities, fair value:
Gains (losses) from sales		3,755		16,274		9,993		(11,325)
Gains (losses) from fair value adjustments		103,525		161,694		132,581		17,691
Other invested assets		2,748		1,293		4,094		(1,034)
Short-term investments gain (loss)		(52)		103		13		417
Total net realized capital gains (losses)	$	104,109	$	184,648	$	143,011	$	(25,940)

	Roll Forward of Allowance for Credit Losses
	Three Months Ended June 30, 2021										Six Months Ended June 30, 2021
					Foreign		Foreign								Foreign		Foreign
	Corporate		Asset-Backed		Government		Corporate				Corporate		Asset-Backed		Government		Corporate
	Securities		Securities		Securities		Securities		Total		Securities		Securities		Securities		Securities		Total
(Dollars in thousands)
Beginning Balance	$	(3,603)	$	(4,915)	$	-	$	(205)	$	(8,723)	$	(1,220)	$	-	$	(22)	$	(503)	$	(1,745)
Credit losses on securities where credit
losses were not previously recorded		(13,537)		-		-		(1,055)		(14,592)		(15,920)		(4,915)		-		(1,055)		(21,890)
Increases in allowance on previously										-
impaired securities		(1,468)		-		-		-		(1,468)		(1,468)		-		-		-		(1,468)
Decreases in allowance on previously										-
impaired securities		-		-		-		-		-		-		-		-		-		-
Reduction in allowance due to disposals		133		-		-		-		133		133		-		22		298		453