Item 1. Financial Statements

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Item 1. Financial Statements

W. R. BERKLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

June 30, 2024December 31, 2023
(Unaudited)(Audited)
Assets
Investments:
Fixed maturity securities (amortized cost of $21,911,417 and $20,915,245; allowance for expected credit losses of $21,871 and $36,751 at June 30, 2024 and December 31, 2023, respectively)$21,082,676$20,178,308
Investment funds1,589,1191,621,655
Real estate1,279,3061,249,874
Equity securities1,078,0921,090,347
Arbitrage trading account1,221,861938,049
Loans receivable (net of allowance for expected credit losses of $1,813 and $3,004 at June 30, 2024 and December 31, 2023, respectively)349,325201,271
Total investments26,600,37925,279,504
Cash and cash equivalents1,580,2701,363,195
Premiums and fees receivable (net of allowance for expected credit losses of $37,279 and $35,110 at June 30, 2024 and December 31, 2023, respectively)3,430,9913,109,334
Due from reinsurers (net of allowance for expected credit losses of $10,255 and $8,404 at June 30, 2024 and December 31, 2023, respectively)3,501,8923,534,527
Deferred policy acquisition costs939,453861,609
Prepaid reinsurance premiums814,858758,927
Trading account receivables from brokers and clearing organizations40,705303,614
Property, furniture and equipment477,034426,803
Goodwill184,089174,597
Accrued investment income225,214213,408
Current and deferred federal and foreign income taxes220,080220,756
Other assets894,954865,556
Total assets$38,909,919$37,111,830
Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses$19,567,190$18,739,652
Unearned premiums6,332,6995,922,326
Due to reinsurers730,407631,164
Trading account securities sold but not yet purchased81,2739,357
Other liabilities1,573,4281,503,053
Senior notes and other debt1,828,4221,827,951
Subordinated debentures1,009,4491,009,090
Total liabilities31,122,86829,642,593
Equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares; issued and outstanding - none——
Common stock, par value $.20 per share:
Authorized 1,250,000,000 shares; issued and outstanding, net of treasury shares, 380,646,644 and 384,817,136 shares, respectively158,705158,705
Additional paid-in capital986,892964,789
Retained earnings11,669,56711,040,908
Accumulated other comprehensive loss(1,033,640)(925,838)
Treasury stock, at cost, 412,875,299 and 408,704,807 shares, respectively(4,007,742)(3,783,133)
Total stockholders’ equity7,773,7827,455,431
Noncontrolling interests13,26913,806
Total equity7,787,0517,469,237
Total liabilities and equity$38,909,919$37,111,830

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share data)

For the Three Months Ended June 30,For the Six Months Ended June 30,
2024202320242023
REVENUES:
Net premiums written$3,126,779$2,811,515$5,978,070$5,386,339
Change in net unearned premiums(280,364)(258,788)(367,308)(342,180)
Net premiums earned2,846,4152,552,7275,610,7625,044,159
Net investment income372,129245,152691,967468,551
Net investment (losses) gains:
Net realized and unrealized (losses) gains on investments(60,306)68,647(48,803)91,258
Change in allowance for expected credit losses on investments1,794(9,993)16,070(9,594)
Net investment (losses) gains(58,512)58,654(32,733)81,664
Revenues from non-insurance businesses125,705113,910246,696238,110
Insurance service fees27,59725,47152,91758,328
Other income698—1,196106
Total revenues3,314,0322,995,9146,570,8055,890,918
OPERATING COSTS AND EXPENSES:
Losses and loss expenses1,780,5961,569,6543,444,3743,108,409
Other operating costs and expenses892,935823,6821,761,5241,649,255
Expenses from non-insurance businesses121,120113,538239,727236,306
Interest expense31,70831,85663,43663,692
Total operating costs and expenses2,826,3592,538,7305,509,0615,057,662
Income before income taxes487,673457,1841,061,744833,256
Income tax expense(115,788)(101,460)(247,824)(181,803)
Net income before noncontrolling interests371,885355,724813,920651,453
Noncontrolling interests24584460(1,019)
Net income to common stockholders$371,909$356,308$814,380$650,434
NET INCOME PER SHARE:
Basic$0.93$0.88$2.03$1.59
Diluted$0.92$0.87$2.01$1.58

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

For the Three Months Ended June 30,For the Six Months Ended June 30,
2024202320242023
Net income before noncontrolling interests$371,885$355,724$813,920$651,453
Other comprehensive (loss) income:
Change in unrealized currency translation adjustments3,22710,528(24,343)15,394
Change in unrealized investment (losses) gains, net of taxes(13,338)(113,284)(83,460)67,515
Other comprehensive (loss) income(10,111)(102,756)(107,803)82,909
Comprehensive income361,774252,968706,117734,362
Noncontrolling interests23584459(1,018)
Comprehensive income to common stockholders$361,797$253,552$706,576$733,344

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 June 30,For the Six Months Ended June 30,
2024202320242023
COMMON STOCK:
Beginning and end of period$158,705$158,705$158,705$158,705
ADDITIONAL PAID-IN CAPITAL:
Beginning of period$977,573$955,226$964,789$944,632
Restricted stock units issued(2,950)1,198(3,145)(2)
Restricted stock units expensed12,26911,49225,24823,286
End of period$986,892$967,916$986,892$967,916
RETAINED EARNINGS:
Beginning of period$11,455,158$10,296,539$11,040,908$10,161,005
Net income to common stockholders371,909356,308814,380650,434
Dividends ($0.41, $0.07, $0.49 and $0.47 per share, respectively)(157,500)(28,329)(185,721)(186,921)
End of period$11,669,567$10,624,518$11,669,567$10,624,518
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Unrealized investment losses:
Beginning of period$(656,476)$(712,107)$(586,354)$(892,905)
Change in unrealized (losses) gains on securities without an allowance for expected credit losses(5,654)(116,978)(76,763)60,364
Change in unrealized (losses) gains on securities with an allowance for expected credit losses(7,683)3,694(6,696)7,150
End of period(669,813)(825,391)(669,813)(825,391)
Currency translation adjustments:
Beginning of period(367,054)(366,810)(339,484)(371,676)
Net change in period3,22710,528(24,343)15,394
End of period(363,827)(356,282)(363,827)(356,282)
Total accumulated other comprehensive loss$(1,033,640)$(1,181,673)$(1,033,640)$(1,181,673)
TREASURY STOCK:
Beginning of period$(3,783,074)$(3,387,538)$(3,783,133)$(3,251,429)
Stock exercised/vested1,2655971,324992
Stock repurchased(223,763)(292,467)(223,763)(427,619)
Other(2,170)(2,873)(2,170)(4,225)
End of period$(4,007,742)$(3,682,281)$(4,007,742)$(3,682,281)
NONCONTROLLING INTERESTS:
Beginning of period$13,680$21,608$13,806$19,829
(Distribution) contributions(388)143(78)320
Net (loss) income(24)(584)(460)1,019
Other comprehensive income (loss), net of tax1—1(1)
End of period$13,269$21,167$13,269$21,167

See accompanying notes to interim consolidated financial statements.

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

For the Six Months Ended June 30,
20242023
CASH FROM OPERATING ACTIVITIES:
Net income to common stockholders$814,380$650,434
Adjustments to reconcile net income to net cash from operating activities:
Net investment losses (gains)32,733(81,664)
Depreciation and (accretion) amortization(145,062)6,900
Noncontrolling interests(460)1,019
Investment funds3,873(993)
Stock incentive plans26,85625,085
Change in:
Arbitrage trading account51,013(30,331)
Premiums and fees receivable(332,640)(272,849)
Reinsurance accounts81,755(242,376)
Deferred policy acquisition costs(77,772)(68,414)
Income taxes27,699(5,703)
Reserves for losses and loss expenses852,523914,169
Unearned premiums422,409398,563
Other(129,742)(139,771)
Net cash from operating activities1,627,5651,154,069
CASH USED IN INVESTING ACTIVITIES:
Proceeds from sale of fixed maturity securities1,089,183623,886
Proceeds from sale of equity securities253,49897,916
Distributions from investment funds21,01112,963
Proceeds from maturities and prepayments of fixed maturity securities2,133,7751,824,819
Purchase of fixed maturity securities(4,203,540)(2,833,467)
Purchase of equity securities(180,350)(62,485)
Real estate purchased(44,603)(7,049)
Change in loans receivable(148,241)13,767
Net purchases of property, furniture and equipment(78,468)(25,720)
Change in balances due to security brokers165,43099,976
Cash received in connection with business disposition—94,076
Other—127
Net cash used in investing activities(992,305)(161,191)
CASH USED IN FINANCING ACTIVITIES:
Repayment of senior notes and other debt—(1,954)
Net proceeds from issuance of debt420160
Cash dividends to common stockholders(185,721)(186,921)
Purchase of common treasury shares(223,763)(427,619)
Other, net943324
Net cash used in financing activities(408,121)(616,010)
Net impact on cash due to change in foreign exchange rates(10,064)(2,656)
Net change in cash and cash equivalents217,075374,212
Cash and cash equivalents at beginning of period1,363,1951,449,346
Cash and cash equivalents at end of period$1,580,270$1,823,558

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.

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, 2023.

Reclassifications have been made in the 2023 financial statements as originally reported to conform to the presentation of the 2024 financial statements. The Company reclassified a program management business from the Insurance segment to the Reinsurance & Monoline Excess segment. The reclassified business is a program management business offering support on a nationwide basis for commercial casualty and property program administrators. In addition, share and per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on July 10, 2024.

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% primarily due to the geographical mix of earnings and larger amounts being subject to tax at a rate greater than the U.S. statutory rate, which was partially offset by tax benefits related to tax-exempt investment income.

(2) Per Share Data

The Company presents both basic and diluted net income per share (“EPS”) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period (including 17,495,175 and 17,125,284 common shares held in a grantor trust as of June 30, 2024 and 2023, 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.

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 June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Basic400,273406,296401,295409,364
Diluted403,737409,643404,679412,819

(3) Recent Accounting Pronouncements and Accounting Policies

Recently adopted accounting pronouncements:

All accounting and reporting standards that became effective in 2024 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 (Loss) Income

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

(In thousands)Unrealized Investment (Losses) GainsCurrency Translation AdjustmentsAccumulated Other Comprehensive (Loss) Income
As of and for the six months ended June 30, 2024
Changes in AOCI
Beginning of period$(586,354)$(339,484)$(925,838)
Other comprehensive loss before reclassifications(156,023)(24,343)(180,366)
Amounts reclassified from AOCI72,563—72,563
Other comprehensive loss(83,460)(24,343)(107,803)
Unrealized investment gain related to noncontrolling interest1—1
End of period$(669,813)$(363,827)$(1,033,640)
Amounts reclassified from AOCI
Pre-tax$91,852(1)$—$91,852
Tax effect(19,289)(2)—(19,289)
After-tax amounts reclassified$72,563$—$72,563
Other comprehensive loss
Pre-tax$(109,937)$(24,343)$(134,280)
Tax effect26,477—26,477
Other comprehensive loss$(83,460)$(24,343)$(107,803)
As of and for the three months ended June 30, 2024
Changes in AOCI
Beginning of period$(656,476)$(367,054)$(1,023,530)
Other comprehensive (loss) income before reclassifications(54,711)3,227(51,484)
Amounts reclassified from AOCI41,373—41,373
Other comprehensive (loss) income(13,338)3,227(10,111)
Unrealized investment gain to noncontrolling interest1—1
Ending balance$(669,813)$(363,827)$(1,033,640)
Amounts reclassified from AOCI
Pre-tax$52,371(1)$—$52,371
Tax effect(10,998)(2)—(10,998)
After-tax amounts reclassified$41,373$—$41,373
Other comprehensive (loss) income
Pre-tax$(20,640)$3,227$(17,413)
Tax effect7,302—7,302
Other comprehensive (loss) income$(13,338)$3,227$(10,111)
(In thousands)Unrealized Investment (Losses) GainsCurrency Translation AdjustmentsAccumulated Other Comprehensive (Loss) Income
As of and for the six months ended June 30, 2023
Changes in AOCI
Beginning of period$(892,905)$(371,676)$(1,264,581)
Other comprehensive income before reclassifications99,09315,394114,487
Amounts reclassified from AOCI(31,578)—(31,578)
Other comprehensive income67,51515,39482,909
Unrealized investment loss related to noncontrolling interest(1)—(1)
End of period$(825,391)$(356,282)$(1,181,673)
Amounts reclassified from AOCI
Pre-tax$(39,972)(1)$—$(39,972)
Tax effect8,394(2)—8,394
After-tax amounts reclassified$(31,578)$—$(31,578)
Other comprehensive income
Pre-tax$87,978$15,394$103,372
Tax effect(20,463)—(20,463)
Other comprehensive income$67,515$15,394$82,909
As of and for the three months ended June 30, 2023
Changes in AOCI
Beginning of period$(712,107)$(366,810)$(1,078,917)
Other comprehensive (loss) income before reclassifications(56,122)10,528(45,594)
Amounts reclassified from AOCI(57,162)—(57,162)
Other comprehensive (loss) income(113,284)10,528(102,756)
Unrealized investment loss related to noncontrolling interest———
Ending balance$(825,391)$(356,282)$(1,181,673)
Amounts reclassified from AOCI
Pre-tax$(72,357)(1)$—$(72,357)
Tax effect15,195(2)—15,195
After-tax amounts reclassified$(57,162)$—$(57,162)
Other comprehensive (loss) income
Pre-tax$(144,043)$10,528$(133,515)
Tax effect30,759—30,759
Other comprehensive (loss) income$(113,284)$10,528$(102,756)

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

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

(5) Statements of Cash Flows

Interest payments were $63,051,000 and $62,983,000 for the six months ended June 30, 2024 and 2023, respectively. Income taxes paid were $165,739,000 and $158,000,000 for the six months ended June 30, 2024 and 2023, respectively.

(6) Investments in Fixed Maturity Securities

At June 30, 2024 and December 31, 2023, investments in fixed maturity securities were as follows:

(In thousands)Amortized CostAllowance for Expected Credit Losses (1)Gross UnrealizedFair ValueCarrying Value
GainsLosses
June 30, 2024
Held to maturity:
State and municipal$40,983$(34)$1,766$—$42,715$40,949
Residential mortgage-backed2,615—60—2,6752,615
Total held to maturity43,598(34)1,826—45,39043,564
Available for sale:
U.S. government and government agency1,869,971—6,877(54,472)1,822,3761,822,376
State and municipal:
Special revenue1,586,511—2,558(80,860)1,508,2091,508,209
State general obligation416,788—1,862(15,926)402,724402,724
Pre-refunded88,086—269(377)87,97887,978
Corporate backed171,007(339)582(9,918)161,332161,332
Local general obligation390,455—1,254(12,685)379,024379,024
Total state and municipal2,652,847(339)6,525(119,766)2,539,2672,539,267
Mortgage-backed:
Residential2,206,563—7,330(178,950)2,034,9432,034,943
Commercial567,094(1,140)313(8,216)558,051558,051
Total mortgage-backed2,773,657(1,140)7,643(187,166)2,592,9942,592,994
Asset-backed4,071,678(889)5,279(61,622)4,014,4464,014,446
Corporate:
Industrial4,026,477—9,683(142,415)3,893,7453,893,745
Financial3,253,805—7,899(65,121)3,196,5833,196,583
Utilities735,920—1,614(25,567)711,967711,967
Other616,007—1,247(7,129)610,125610,125
Total corporate8,632,209—20,443(240,232)8,412,4208,412,420
Foreign government1,867,457(19,469)3,306(193,685)1,657,6091,657,609
Total available for sale21,867,819(21,837)50,073(856,943)21,039,11221,039,112
Total investments in fixed maturity securities$21,911,417$(21,871)$51,899$(856,943)$21,084,502$21,082,676

(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. Amount excludes unrealized losses relating to non-credit factors.

(In thousands)Amortized CostAllowance for Expected Credit Losses (1)Gross UnrealizedFair ValueCarrying Value
GainsLosses
December 31, 2023
Held to maturity:
State and municipal$50,547$(43)$3,132$—$53,636$50,504
Residential mortgage-backed2,868—107—2,9752,868
Total held to maturity53,415(43)3,239—56,61153,372
Available for sale:
U.S. government and government agency1,762,997—11,403(57,669)1,716,7311,716,731
State and municipal:
Special revenue1,682,550—5,651(82,006)1,606,1951,606,195
State general obligation394,429—3,550(16,405)381,574381,574
Pre-refunded103,029—1,634(185)104,478104,478
Corporate backed166,873(757)696(11,973)154,839154,839
Local general obligation396,041—3,188(11,893)387,336387,336
Total state and municipal2,742,922(757)14,719(122,462)2,634,4222,634,422
Mortgage-backed:
Residential1,773,206—12,780(163,844)1,622,1421,622,142
Commercial657,157(158)626(13,312)644,313644,313
Total mortgage-backed2,430,363(158)13,406(177,156)2,266,4552,266,455
Asset-backed4,252,883(1,164)8,527(73,206)4,187,0404,187,040
Corporate:
Industrial3,679,219(40)24,312(143,936)3,559,5553,559,555
Financial2,838,220(4,986)14,681(68,681)2,779,2342,779,234
Utilities701,865—6,471(23,412)684,924684,924
Other635,975—1,605(7,234)630,346630,346
Total corporate7,855,279(5,026)47,069(243,263)7,654,0597,654,059
Foreign government1,817,386(29,603)15,865(137,419)1,666,2291,666,229
Total available for sale20,861,830(36,708)110,989(811,175)20,124,93620,124,936
Total investments in fixed maturity securities$20,915,245$(36,751)$114,228$(811,175)$20,181,547$20,178,308

(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. 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 six months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$43$114
Provision for expected credit losses(9)(61)
Allowance for expected credit losses, end of period$34$53

The following table presents the rollforward of the allowance for expected credit losses for held to maturity securities for the three months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$38$107
Provision for expected credit losses(4)(54)
Allowance for expected credit losses, end of period$34$53

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the six months ended June 30, 2024 and 2023:

20242023
(In thousands)Foreign GovernmentCorporateMortgage-backedAsset-backedState and MunicipalTotalForeign GovernmentCorporateMortgage-backedAsset-backedTotal
Allowance for expected credit losses, beginning of period$29,603$5,026$158$1,164$757$36,708$32,633$4,701$18$—$37,352
Expected credit losses on securities for which credit losses were not previously recorded300—1,701——2,001—1868611,4442,491
Expected credit (gains) losses on securities for which credit losses were previously recorded(10,434)(5,026)(158)(275)(418)(16,311)4193,9876—4,412
Reduction due to disposals——(561)——(561)—(7)——(7)
Allowance for expected credit losses, end of period$19,469$—$1,140$889$339$21,837$33,052$8,867$885$1,444$44,248

During the six months ended June 30, 2024, the Company decreased 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 improved pricing associated with foreign government securities and corporate securities. During the six months ended June 30, 2023, the Company increased the allowance for expected credit losses for available for sale securities due to changes in economic assumptions utilized in its credit loss model, primarily affecting the financial services and real estate sectors.

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended June 30, 2024 and 2023:

20242023
(In thousands)Foreign GovernmentCorporateMortgage-backedAsset-backedState and MunicipalTotalForeign GovernmentCorporateMortgage-backedAsset-backedTotal
Allowance for expected credit losses, beginning of period$20,479$—$562$1,097$693$22,831$33,324$3,795$23$—$37,142
Expected credit losses on securities for which credit losses were not previously recorded300—1,139——1,439——8611,4442,305
Expected credit (gains) losses on securities for which credit losses were previously recorded(1,310)——(208)(354)(1,872)(272)5,0741—4,803
Reduction due to disposals——(561)——(561)—(2)——(2)
Allowance for expected credit losses, end of period$19,469$—$1,140$889$339$21,837$33,052$8,867$885$1,444$44,248

The amortized cost and fair value of fixed maturity securities at June 30, 2024, 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$1,943,246$1,884,790
Due after one year through five years9,983,5429,601,275
Due after five years through ten years4,262,6924,152,066
Due after ten years2,945,6312,850,702
Mortgage-backed securities2,776,2722,595,669
Total$21,911,383$21,084,502

(1) Amortized cost is reduced by the allowance for expected credit losses of $34 thousand related to held to maturity securities.

At June 30, 2024 and December 31, 2023, 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 June 30, 2024 and December 31, 2023, investments in equity securities were as follows:

(In thousands)CostGross UnrealizedFair ValueCarrying Value
GainsLosses
June 30, 2024
Common stocks$603,574$139,146$(46,165)$696,555$696,555
Preferred stocks374,40919,762(12,634)381,537381,537
Total$977,983$158,908$(58,799)$1,078,092$1,078,092
December 31, 2023
Common stocks$664,997$191,806$(18,749)$838,054$838,054
Preferred stocks284,3353,075(35,117)252,293252,293
Total$949,332$194,881$(53,866)$1,090,347$1,090,347

(8) Arbitrage Trading Account

At June 30, 2024 and December 31, 2023, the fair and carrying values of the arbitrage trading account were $1,222 million and $938 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 June 30, 2024, the fair value of long option contracts outstanding was $3 million (notional amount of $401 million) and the fair value of short option contracts was $81 million (notional amount of $401 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 June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Investment income (loss) earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable$324,136$217,830$659,384$413,473
Arbitrage trading account (1)16,68217,03734,69335,293
Equity securities12,38615,25423,72129,000
Investment funds25,476(1,186)(3,873)993
Real estate(3,705)(2,123)(16,868)(5,834)
Gross investment income374,975246,812697,057472,925
Investment expense(2,846)(1,660)(5,090)(4,374)
Net investment income$372,129$245,152$691,967$468,551

(1) Net investment income includes earnings from trading account receivables from brokers and clearing organizations.

(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 $275 million as of June 30, 2024.

Investment funds consisted of the following:

Carrying Value as ofIncome (Loss) from Investment Funds
June 30,December 31,For the Six Months Ended June 30,
(In thousands)2024202320242023
Financial services$436,057$433,407$(18,231)$(20,321)
Transportation306,485344,278(3,732)23,843
Real Estate198,111201,62512,8802,963
Infrastructure140,699130,5897,8285,936
Energy131,719114,7948,5053,439
Other funds376,048396,962(11,123)(14,867)
Total$1,589,119$1,621,655$(3,873)$993

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 minority investment in Lifson Re, a Bermuda reinsurance company. Effective January 1, 2021, Lifson Re participated on a fully collateralized basis in a majority of the Company’s reinsurance placements for a 22.5% share of placed amounts. The percentage increased from 22.5% to 30.0% effective July 1, 2022. This pertains to all traditional reinsurance/retrocessional placements for both property and casualty business where there is more than

one open market reinsurer participating. For the six months ended June 30, 2024 and 2023, the Company ceded approximately $206 million and $281 million, respectively, of written premiums to Lifson Re.

Other funds include deferred compensation trust assets of $41 million and $36 million as of June 30, 2024 and December 31, 2023, respectively. These assets support other liabilities reflected in the balance sheet of an equal amount for employees who have elected to defer a portion of their compensation. The change in the net asset value of the trust is recorded in other funds within net investment income with an offsetting equal amount within corporate expenses.

(11) Real Estate

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

Carrying Value
June 30,December 31,
(In thousands)20242023
Properties in operation$1,051,755$1,022,654
Properties under development227,551227,220
Total$1,279,306$1,249,874

As of June 30, 2024, properties in operation included a long-term ground lease in Washington, D.C., an office complex in New York City and the completed portion of a mixed-use project in Washington D.C. Properties in operation are net of accumulated depreciation and amortization of $35,389,000 and $32,745,000 as of June 30, 2024 and December 31, 2023, respectively. Related depreciation expense was $4,164,000 and $4,394,000 for the six months ended June 30, 2024 and 2023, respectively. Future minimum rental income expected on operating leases relating to properties in operation is $15,013,195 in 2024, $32,278,604 in 2025, $33,991,743 in 2026, $32,850,623 in 2027, $33,376,327 in 2028, $31,999,237 in 2029 and $416,884,751 thereafter.

A mixed-use project in Washington, D.C. had been under development in 2024 and 2023, with the completed portion reported in properties in operation as of June 30, 2024.

(12) Loans Receivable

At June 30, 2024 and December 31, 2023, loans receivable were as follows:

(In thousands)June 30, 2024December 31, 2023
Amortized cost (net of allowance for expected credit losses):
Real estate loans$347,742$200,381
Commercial loans1,583890
Total$349,325$201,271
Fair value:
Real estate loans$347,727$197,354
Commercial loans1,583890
Total$349,310$198,244

The real estate loans are secured by commercial and residential real estate primarily located in the UK and New York. These loans generally earn interest at fixed or stepped interest rates and have maturities through 2026. 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.

The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the six months ended June 30, 2024 and 2023:

20242023
(In thousands)Real Estate LoansCommercial LoansTotalReal Estate LoansCommercial LoansTotal
Allowance for expected credit losses, beginning of period$2,983$21$3,004$1,100$691$1,791
Change in expected credit losses(1,190)(1)(1,191)2,5582012,759
Allowance for expected credit losses, end of period$1,793$20$1,813$3,658$892$4,550

During the six months ended June 30, 2024, the Company decreased the allowance for expected credit losses due to a decrease in the weighted average life of the loan portfolio. During the six months ended June 30, 2023, the Company increased the allowance for expected credit losses due to changes in economic assumptions utilized in its credit loss model.

The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended June 30, 2024 and 2023:

20242023
(In thousands)Real Estate LoansCommercial LoansTotalReal Estate LoansCommercial LoansTotal
Allowance for expected credit losses, beginning of period$2,587$22$2,609$1,039$570$1,609
Change in expected credit losses(794)(2)(796)2,6193222,941
Allowance for expected credit losses, end of period$1,793$20$1,813$3,658$892$4,550

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 (Losses) Gains

Net investment (losses) gains were as follows:

For the Three Months Ended June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Net investment (losses) gains:
Fixed maturity securities:
Gains$3,092$115$6,649$1,058
Losses(5,362)(3,640)(7,685)(21,770)
Equity securities (1):
Net realized gains on investment sales (2)61,521111,072101,798112,132
Change in unrealized (losses) gains(66,717)21,260(40,905)64,664
Investment funds217(98)1,210(88)
Real estate (3)(1,958)(55,449)(4,174)(44,710)
Loans receivable————
Other (4)(51,099)(4,613)(105,696)(20,028)
Net realized and unrealized (losses) gains on investments in earnings before allowance for expected credit losses(60,306)68,647(48,803)91,258
Change in allowance for expected credit losses on investments:
Fixed maturity securities998(7,052)14,879(6,835)
Loans receivable796(2,941)1,191(2,759)
Change in allowance for expected credit losses on investments1,794(9,993)16,070(9,594)
Net investment (losses) gains(58,512)58,654(32,733)81,664
Income tax benefit12,401(12,587)5,769(17,437)
After-tax net investment (losses) gains$(46,111)$46,067$(26,964)$64,227
Change in unrealized investment (losses) gains on available for sale securities:
Fixed maturity securities without allowance for expected credit losses$(11,394)$(148,021)$(99,988)$79,094
Fixed maturity securities with allowance for expected credit losses(7,683)3,694(6,696)7,150
Investment funds(1,338)462(3,041)2,398
Other(225)(178)(212)(664)
Total change in unrealized investment (losses) gains(20,640)(144,043)(109,937)87,978
Income tax benefit (expense)7,30230,75926,477(20,463)
Noncontrolling interests1—1(1)
After-tax change in unrealized investment (losses) gains of available for sale securities$(13,337)$(113,284)$(83,459)$67,514

(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) gains 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.

(2) In June 2023, the Company completed a sale of the property and casualty insurance services division of Breckenridge IS, Inc. and recognized a pre-tax net realized gain on investment of $88 million on the sale (proceeds from the sale is presented on the business disposition line within the Consolidated Statements of Cash Flows).

(3) During the second quarter of 2023, the Company recognized an impairment loss of $51 million on a real estate investment.

(4) Primarily relates to realized foreign currency losses upon the disposition of fixed maturity securities.

(14) Fixed Maturity Securities in an Unrealized Loss Position

The following tables summarize all fixed maturity securities in an unrealized loss position at June 30, 2024 and December 31, 2023 by the length of time those securities have been continuously in an unrealized loss position:

Less Than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
June 30, 2024
U.S. government and government agency$422,945$3,391$795,297$51,081$1,218,242$54,472
State and municipal357,5294,9351,758,572114,8312,116,101119,766
Mortgage-backed530,8024,2581,356,573182,9081,887,375187,166
Asset-backed947,7804,4341,079,69557,1882,027,47561,622
Corporate2,068,01517,7884,333,968222,4446,401,983240,232
Foreign government563,15015,565759,174178,1201,322,324193,685
Fixed maturity securities$4,890,221$50,371$10,083,279$806,572$14,973,500$856,943
December 31, 2023
U.S. government and government agency$384,392$6,655$614,623$51,014$999,015$57,669
State and municipal264,2733,0131,680,034119,4491,944,307122,462
Mortgage-backed278,8192,0251,360,748175,1311,639,567177,156
Asset-backed413,5112,0702,176,03571,1362,589,54673,206
Corporate874,75411,9754,418,309231,2885,293,063243,263
Foreign government204,9081,758794,174135,661999,082137,419
Fixed maturity securities$2,420,657$27,496$11,043,923$783,679$13,464,580$811,175

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 June 30, 2024 is presented in the table below:

($ in thousands)Number of SecuritiesAggregate Fair ValueGross Unrealized Loss
Foreign government51$99,230$159,930
State and municipal524,8654,838
Corporate3042,1312,651
Mortgage-backed164,107201
Total102$170,333$167,620

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 (loss).

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 June 30, 2024 and December 31, 2023 by level:

(In thousands)TotalLevel 1Level 2Level 3
June 30, 2024
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency$1,822,376$—$1,822,376$—
State and municipal2,539,267—2,539,267—
Mortgage-backed2,592,994—2,592,994—
Asset-backed4,014,446—4,014,446—
Corporate8,412,420—8,412,420—
Foreign government1,657,609—1,657,609—
Total fixed maturity securities available for sale21,039,112—21,039,112—
Equity securities:
Common stocks696,555693,2941,1162,145
Preferred stocks381,537—377,9013,636
Total equity securities1,078,092693,294379,0175,781
Arbitrage trading account1,221,8611,061,891156,3773,593
Total$23,339,065$1,755,185$21,574,506$9,374
Liabilities:
Trading account securities sold but not yet purchased$81,273$81,273$—$—
December 31, 2023
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency$1,716,731$—$1,716,731$—
State and municipal2,634,422—2,634,422—
Mortgage-backed2,266,455—2,266,455—
Asset-backed4,187,040—4,187,040—
Corporate7,654,059—7,654,059—
Foreign government1,666,229—1,666,229—
Total fixed maturity securities available for sale20,124,936—20,124,936—
Equity securities:
Common stocks838,054835,3381,1581,558
Preferred stocks252,293—248,5983,695
Total equity securities1,090,347835,338249,7565,253
Arbitrage trading account938,049546,110388,1673,772
Total$22,153,332$1,381,448$20,762,859$9,025
Liabilities:
Trading account securities sold but not yet purchased$9,357$9,357$—$—

The following tables summarize changes in Level 3 assets and liabilities for the six months ended June 30, 2024 and for the year ended December 31, 2023:

Gains (Losses) Included In:
(In thousands)Beginning BalanceEarnings (Losses)Other Comprehensive Income (Losses)ImpairmentsPurchasesSalesPaydowns / MaturitiesTransfers In / (Out)Ending Balance
Six Months Ended June 30, 2024
Assets:
Equity securities:
Common stocks$1,558$715$—$—$—$(128)$—$—$2,145
Preferred stocks3,695(2)———(57)——3,636
Total5,253713———(185)——5,781
Arbitrage trading account3,772(178)———(38)—373,593
Total$9,025$535$—$—$—$(223)$—$37$9,374
Year Ended December 31, 2023
Assets:
Equity securities:
Common stocks$2,599$(1,041)$—$—$—$—$—$—$1,558
Preferred stocks11,299(3)—(7,601)————3,695
Total13,898(1,044)—(7,601)————5,253
Arbitrage trading account3,590117—————653,772
Total$17,488$(927)$—$(7,601)$—$—$—$65$9,025

For both the six months ended June 30, 2024 and the year ended December 31, 2023, one security within the arbitrage trading account portfolio that no longer had a publicly traded price was transferred into Level 3.

(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 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.

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 auto, 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 business 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.

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

June 30,
(In thousands)20242023
Net reserves at beginning of period$15,661,820$14,248,879
Net provision for losses and loss expenses:
Claims occurring during the current year (1)3,411,8883,064,046
Increase in estimates for claims occurring in prior years (2) (3)14,70028,853
Loss reserve discount accretion17,78615,510
Total3,444,3743,108,409
Net payments for claims:
Current year383,639375,365
Prior years2,205,5662,019,371
Total2,589,2052,394,736
Foreign currency translation(56,143)5,929
Net reserves at end of period16,460,84614,968,481
Ceded reserves at end of period3,106,3442,951,515
Gross reserves at end of period$19,567,190$17,919,996

(1) Claims occurring during the current year are net of loss reserve discounts of $26 million and $22 million for the six months ended June 30, 2024 and 2023, 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 increased by $7 million and decreased by $6 million for the six months ended June 30, 2024 and 2023, 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 $2 million and adverse development was $21 million for the six months ended June 30, 2024 and 2023, respectively.

The ultimate net impact of COVID-19 on the Company’s reserves remains uncertain. As of June 30, 2024, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $388 million, of which $329 million relates to the Insurance segment and $59 million relates to the Reinsurance & Monoline Excess segment. Such $388 million of COVID-19-related losses included $385 million of reported losses and $3 million of IBNR.

During the six months ended June 30, 2024, favorable prior year development (net of additional and return premiums) of $2 million included $7 million for the Reinsurance & Monoline Excess segment partially offset by $5 million of adverse prior year development for the Insurance segment.

For the Insurance segment, the adverse development during the first half of 2024 was driven by commercial auto liability and other liability (mainly umbrella and excess liability), and was partially offset by favorable development for workers’ compensation and professional liability. The adverse commercial auto liability development was concentrated in accident years 2020 through 2023. The other liability development was mainly driven by umbrella and excess liability claims, and was focused in accident years 2017 through 2021. A significant portion of the umbrella and excess liability development related to underlying commercial auto exposures. The Company believes that commercial auto-related claims are being particularly impacted by social inflation, which is contributing to an increase in the frequency of large losses beyond expectations. Social inflation can include higher settlement demands from plaintiffs, use of aggressive actions by the plaintiffs’ bar such as litigation funding, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among other factors.

The favorable workers’ compensation development for the Insurance segment was mainly related to accident years 2016 through 2023, while the favorable professional liability development was mainly in accident years 2018 through 2022. For workers’ compensation, favorable reported claim frequency, below expectations, continued to be the main driver of the favorable reserve development. For professional liability, reported loss experience for accident years 2018 through 2022 was better than expected, which drove the favorable reserve development. Accident years 2020 through 2022 also feature business written at peak pricing levels, which the Company now believes will result in higher profitability than initially anticipated.

For the Reinsurance & Monoline Excess segment, the favorable development during the first half of 2024 was driven mainly by favorable development in excess workers’ compensation, partially offset by adverse development in the non-proportional reinsurance assumed liability line of business. The favorable excess workers’ compensation development was driven by continued lower claim frequency and reported losses relative to expectations, and to favorable claim settlements

spread across many prior accident years. The unfavorable development for non-proportional reinsurance was concentrated mainly in accident years 2017 through 2019 and was associated primarily with our U.S. and U.K. excess general liability reinsurance businesses, including coverage for cedants insuring construction projects.

During the six months ended June 30, 2023, adverse prior year development (net of additional and return premiums) of $21 million included $19 million for the Insurance segment and $2 million for the Reinsurance & Monoline Excess segment.

Overall adverse development was recognized during the first quarter of 2023 in both business segments due to property catastrophe losses related to 2022 events that were still being adjusted and settled. In particular, losses related to U.S. winter storms that occurred in December were a significant driver of the development, as information gathering and evaluation of these losses were still ongoing into the first quarter. As a result, prior year reserve development (net of additional and return premiums) overall was adverse by $24 million in the first quarter, but was favorable by $3 million during the second quarter of 2023.

For the Insurance segment, in addition to the property prior year adverse development discussed above, the adverse development during the six months ended June 30, 2023 included adverse prior year development on casualty lines for the 2016 through 2019 accident years, which was largely offset by favorable prior year development on casualty lines for the 2021 and 2022 accident years. The adverse development on the 2016 through 2019 accident years was concentrated in the other liability line of business, and to a lesser degree, professional liability, including medical professional. The development, which particularly impacted business attaching excess of primary policy limits, was driven by a larger than expected number of large losses reported. The Company believes social inflation is contributing to an increase in the frequency of large losses for these accident years. Social inflation can include higher settlement demands from plaintiffs, use of tactics such as litigation funding by the plaintiffs’ bar, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among others.

The favorable prior year development on casualty lines for the 2021 and 2022 accident years in the Insurance segment was concentrated in the professional liability, workers’ compensation, and other liability lines of business, partially offset by adverse development in commercial auto liability. Due to uncertainty regarding incurred loss frequency and severity in light of ongoing social inflation and the impacts of the COVID-19 pandemic, the Company set its initial loss ratios for the 2021 and 2022 accident years prudently, and largely maintained these estimates through the end of each respective accident year. The reported loss experience for these lines of business for the 2021 and 2022 accident years has been better than was expected, and the Company has begun to react to this favorable emergence as the accident years mature beyond 12 months. Commercial auto liability experienced adverse prior year development during the six months ended June 30, 2023 for the 2021 accident year, which was driven by a larger than expected number of large losses reported.

For the Reinsurance & Monoline Excess segment, the adverse development during the six months ended June 30, 2023 was driven mainly by adverse development in property (discussed above) and non-proportional reinsurance assumed liability lines of business, largely offset by favorable development in excess workers' compensation. The favorable excess workers’ compensation development was driven by continued lower claim frequency and reported losses relative to our expectations, and to favorable claim settlements. The favorable development was spread across many prior accident years. The adverse development on reinsurance assumed liability was associated primarily with our U.S. assumed reinsurance business, and related to accounts reinsuring excess and umbrella business and construction projects. The adverse development was concentrated mainly in accident years 2017 through 2020.

(17) Fair Value of Financial Instruments

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

June 30, 2024December 31, 2023
(In thousands)Carrying ValueFair ValueCarrying ValueFair Value
Assets:
Fixed maturity securities$21,082,676$21,084,502$20,178,308$20,181,547
Equity securities1,078,0921,078,0921,090,3471,090,347
Arbitrage trading account1,221,8611,221,861938,049938,049
Loans receivable349,325349,310201,271198,244
Cash and cash equivalents1,580,2701,580,2701,363,1951,363,195
Trading account receivables from brokers and clearing organizations40,70540,705303,614303,614
Due from broker——36,74736,747
Liabilities:
Due to broker128,563128,563——
Trading account securities sold but not yet purchased81,27381,2739,3579,357
Senior notes and other debt1,828,4221,422,5061,827,9511,480,076
Subordinated debentures1,009,449825,3441,009,090929,598

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.

(18) Premiums and Reinsurance Related Information

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

For the Three Months Ended June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Written premiums:
Direct$3,380,470$2,985,563$6,419,537$5,724,317
Assumed337,302351,210660,991661,773
Ceded(590,993)(525,258)(1,102,458)(999,751)
Total net premiums written$3,126,779$2,811,515$5,978,070$5,386,339
Earned premiums:
Direct$3,048,872$2,725,650$5,985,516$5,392,712
Assumed328,114302,431666,024597,661
Ceded(530,571)(475,354)(1,040,778)(946,214)
Total net premiums earned$2,846,415$2,552,727$5,610,762$5,044,159
Ceded losses and loss expenses incurred$327,243$333,795$633,194$649,271
Ceded commissions earned$123,647$117,523$244,701$235,941

The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the six months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$35,110$30,660
Change in expected credit losses2,1692,110
Allowance for expected credit losses, end of period$37,279$32,770

The following table presents the rollforward of the allowance for expected credit losses for premiums and fees receivable for the three months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$35,039$32,353
Change in expected credit losses2,240417
Allowance for expected credit losses, end of period$37,279$32,770

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 six months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$8,404$8,064
Change in expected credit losses1,8511,301
Allowance for expected credit losses, end of period$10,255$9,365

The following table presents the rollforward of the allowance for expected credit losses associated with due from reinsurers for the three months ended June 30, 2024 and 2023:

(In thousands)20242023
Allowance for expected credit losses, beginning of period$9,185$8,703
Change in expected credit losses1,070662
Allowance for expected credit losses, end of period$10,255$9,365

(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 $25 million and $23 million for the six months ended June 30, 2024 and 2023, respectively. A summary of RSUs issued in the six months ended June 30, 2024 and 2023 follows:

($ in thousands)UnitsFair Value
20242,277$125
20238,381$332

(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.

On December 22, 2023, one of the Company’s subsidiaries filed a lawsuit against certain reinsurers to recover in excess of $90 million in respect of certain losses paid to its policyholders under certain event cancellation and related insurance policies. The Company believes its claims against the reinsurers are meritorious and expects a positive resolution to its lawsuit. While an adverse outcome is possible, the Company believes that the outcome, in any case, will not be material to the Company’s financial condition.

(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 June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Leases:
Lease cost$11,326$10,138$22,403$20,326
Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows$12,364$11,281$24,596$21,844
Right-of-use assets obtained in exchange for new lease liabilities$8,853$2,633$33,548$7,946
As of June 30,
($ in thousands)20242023
Right-of-use assets$190,207$157,991
Lease liabilities$231,128$191,576
Weighted-average remaining lease term7.5 years7.0 years
Weighted-average discount rate5.51%4.49%

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

(In thousands)June 30, 2024
Contractual Maturities:
2024$26,008
202545,629
202639,117
202730,117
202828,576
Thereafter107,255
Total undiscounted future minimum lease payments276,702
Less: Discount impact45,574
Total lease liability$231,128

(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 Asia, Australia, Canada, Continental Europe, Mexico, Scandinavia, South America and the United Kingdom.

  • 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 and certain program management business.

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 IncomeOtherTotal (2)Pre-Tax Income (Loss)Net Income (Loss) to Common Stockholders
Three months ended June 30, 2024
Insurance$2,484,569$303,561$9,591$2,797,721$490,053$374,247
Reinsurance & Monoline Excess361,84658,472—420,318124,44997,638
Corporate, other and eliminations (3)—10,096144,409154,505(68,317)(53,865)
Net investment losses——(58,512)(58,512)(58,512)(46,111)
Total$2,846,415$372,129$95,488$3,314,032$487,673$371,909
Three months ended June 30, 2023
Insurance$2,215,186$185,327$8,853$2,409,366$386,350$300,239
Reinsurance & Monoline Excess337,54142,187—379,728105,42082,317
Corporate, other and eliminations (3)—17,638130,528148,166(93,240)(72,315)
Net investment gains——58,65458,65458,65446,067
Total$2,552,727$245,152$198,035$2,995,914$457,184$356,308
Six months ended June 30, 2024
Insurance$4,883,338$548,338$19,014$5,450,690$968,202$739,337
Reinsurance & Monoline Excess727,424111,683—839,107252,074199,764
Corporate, other and eliminations (3)—31,946281,795313,741(125,799)(97,757)
Net investment losses——(32,733)(32,733)(32,733)(26,964)
Total$5,610,762$691,967$268,076$6,570,805$1,061,744$814,380
Six Months Ended June 30, 2023
Insurance$4,358,110$348,886$18,427$4,725,423$738,977$574,347
Reinsurance & Monoline Excess686,04996,770—782,819206,704164,674
Corporate, other and eliminations (3)—22,895278,117301,012(194,089)(152,814)
Net investment gains——81,66481,66481,66464,227
Total$5,044,159$468,551$378,208$5,890,918$833,256$650,434

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

(2) Revenues for Insurance from foreign operations for the three months ended June 30, 2024 and 2023 were $368 million and $280 million, respectively, and for the six months ended June 30, 2024 and 2023 were $762 million and $554 million, respectively. Revenues for Reinsurance & Monoline Excess from foreign operations for the three months ended June 30, 2024 and 2023 were $117 million and $102 million, respectively, and for the six months ended June 30, 2024 and 2023 were $228 million and $209 million, respectively.

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

Identifiable Assets

(In thousands)June 30, 2024December 31, 2023
Insurance$31,264,338$29,923,282
Reinsurance & Monoline Excess5,557,2325,545,249
Corporate, other and eliminations2,088,3491,643,299
Consolidated$38,909,919$37,111,830

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

For the Three Months Ended June 30,For the Six Months Ended June 30,
(In thousands)2024202320242023
Insurance:
Other liability$1,001,987$890,984$1,969,247$1,744,456
Short-tail lines (1)538,797444,8341,049,606857,368
Auto361,580307,578715,593601,694
Workers' compensation310,564299,149612,060604,710
Professional liability271,641272,641536,832549,882
Total Insurance2,484,5692,215,1864,883,3384,358,110
Reinsurance & Monoline Excess:
Casualty (2)199,080202,348396,924417,060
Property (2)97,25576,348199,638151,500
Monoline excess (3)65,51158,845130,862117,489
Total Reinsurance & Monoline Excess361,846337,541727,424686,049
Total$2,846,415$2,552,727$5,610,762$5,044,159

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

(2) Includes reinsurance casualty and property and certain program management business.

(3) 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 2024 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 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, foreign governmental bonds, 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 effects of the COVID-19 pandemic, or other epidemics and pandemics; the impact of climate change, which may alter the frequency and increase the severity of catastrophe events; general economic and market activities, including inflation, changing 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 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; cyber security breaches of our information technology systems and the information technology systems of our vendors and other third parties, or related processes and systems; 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 2024 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.

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