SEC Info - Everest Re Group Ltd - ‘10-Q’ for 9/30/19

December 31, 2017

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

ASSETS:

Premiums Receivable

i 2,218,283

( i 35,100)

i 2,183,183

i 1,844,881

( i 25,106)

i 1,819,775

Funds held by reinsureds

i 445,040

( i 10,009)

i 435,031

i 292,927

( i 4,292)

i 288,635

Income taxes

i 592,385

i 2,102

i 594,487

i 299,438

i 902

i 300,340

TOTAL ASSETS

i 24,793,999

( i 43,007)

i 24,750,992

i 23,591,792

( i 28,496)

i 23,563,296

SHAREHOLDERS' EQUITY:

Retained earnings

i 9,574,440

( i 43,007)

i 9,531,433

i 9,685,908

( i 28,496)

i 9,657,412

Total shareholders' equity

i 7,903,804

( i 43,007)

i 7,860,797

i 8,369,232

( i 28,496)

i 8,340,736

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

i 24,793,999

( i 43,007)

i 24,750,992

i 23,591,792

( i 28,496)

i 23,563,296

CONSOLIDATED BALANCE SHEETS

June 30, 2019

March 31, 2019

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

ASSETS:

Premiums Receivable

i 2,389,943

( i 38,836)

i 2,351,107

i 2,392,094

( i 29,831)

i 2,362,263

Funds held by reinsureds

i 498,043

( i 10,768)

i 487,275

i 432,736

( i 9,525)

i 423,211

Income taxes

i 358,457

i 2,261

i 360,718

i 475,851

i 2,000

i 477,851

TOTAL ASSETS

i 26,387,791

( i 47,343)

i 26,340,448

i 25,630,507

( i 37,356)

i 25,593,151

SHAREHOLDERS' EQUITY:

Retained earnings

i 10,152,059

( i 47,343)

i 10,104,716

i 9,866,203

( i 37,356)

i 9,828,847

Total stockholder's equity

i 8,884,160

( i 47,343)

i 8,836,817

i 8,426,629

( i 37,356)

i 8,389,273

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

i 26,387,791

( i 47,343)

i 26,340,448

i 25,630,507

( i 37,356)

i 25,593,151

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Year Ended December 31, 2018

Year Ended December 31, 2017

INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

Revenues:

Other income (expense)

( i 9,060)

( i 15,711)

( i 24,771)

( i 35,442)

i 14,227

( i 21,215)

Total revenues

i 7,377,206

( i 15,711)

i 7,361,495

i 6,608,071

i 14,227

i 6,622,298

INCOME (LOSS) BEFORE TAXES

( i 226,471)

( i 15,711)

( i 242,182)

i 405,184

i 14,227

i 419,411

Income tax expense (benefit)

( i 330,023)

( i 1,200)

( i 331,223)

( i 63,784)

i 444

( i 63,340)

NET INCOME (LOSS)

i 103,552

( i 14,511)

i 89,041

i 468,968

i 13,783

i 482,751

COMPREHENSIVE INCOME (LOSS)

( i 196,913)

( i 14,511)

( i 211,424)

i 526,091

i 13,783

i 539,874

EARNINGS PER COMMON SHARE:

Basic

i 2.54

( i 0.36)

i 2.18

i 11.43

i 0.34

i 11.77

Diluted

i 2.53

( i 0.36)

i 2.17

i 11.36

i 0.34

i 11.70

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

Revenues:

Other income (expense)

( i 7,977)

( i 10,248)

( i 18,225)

( i 17,030)

( i 4,495)

( i 21,525)

Total revenues

i 2,018,975

( i 10,248)

i 2,008,727

i 3,979,058

( i 4,495)

i 3,974,563

INCOME (LOSS) BEFORE TAXES

i 382,593

( i 10,248)

i 372,345

i 791,384

( i 4,495)

i 786,889

Income tax expense (benefit)

i 39,738

( i 261)

i 39,477

i 99,629

( i 159)

i 99,470

NET INCOME (LOSS)

i 342,855

( i 9,987)

i 332,868

i 691,755

( i 4,336)

i 687,419

COMPREHENSIVE INCOME (LOSS)

i 514,064

( i 9,987)

i 504,077

i 1,109,410

( i 4,336)

i 1,105,074

EARNINGS PER COMMON SHARE:

Basic

i 8.42

( i 0.25)

i 8.17

i 16.98

( i 0.10)

i 16.88

Diluted

i 8.39

( i 0.24)

i 8.15

i 16.93

( i 0.11)

i 16.82

CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended March 31, 2019
AND COMPREHENSIVE INCOME (LOSS):	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)	$	( i 9,053)	$	i 5,753	$	( i 3,300)
Total revenues	$	i 1,960,083	$	i 5,753	$	i 1,965,836

INCOME (LOSS) BEFORE TAXES	$	i 408,791	$	i 5,753	$	i 414,544
Income tax expense (benefit)		i 59,891		i 102		i 59,993

NET INCOME (LOSS)	$	i 348,900	$	i 5,651	$	i 354,551

COMPREHENSIVE INCOME (LOSS)	$	i 595,346	$	i 5,651	$	i 600,997

EARNINGS PER COMMON SHARE:
Basic	$	i 8.57	$	i 0.13	$	i 8.70
Diluted	$	i 8.54	$	i 0.13	$	i 8.67

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

Revenues:

Other income (expense)

( i 5,458)

( i 7,950)

( i 13,408)

i 9,642

( i 12,590)

( i 2,948)

Total revenues

i 1,944,413

( i 7,950)

i 1,936,463

i 5,582,509

( i 12,590)

i 5,569,919

INCOME (LOSS) BEFORE TAXES

i 197,421

( i 7,950)

i 189,471

i 475,827

( i 12,590)

i 463,237

Income tax expense (benefit)

( i 8,192)

( i 718)

( i 8,910)

( i 9,999)

( i 1,118)

( i 11,117)

NET INCOME (LOSS)

i 205,613

( i 7,232)

i 198,381

i 485,826

( i 11,472)

i 474,354

COMPREHENSIVE INCOME (LOSS)

i 180,634

( i 7,232)

i 173,402

i 177,601

( i 11,472)

i 166,129

EARNINGS PER COMMON SHARE:

Basic

i 5.04

( i 0.17)

i 4.87

i 11.89

( i 0.28)

i 11.61

Diluted

i 5.02

( i 0.18)

i 4.84

i 11.83

( i 0.28)

i 11.55

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

Three Months Ended June 30, 2018

Six Months Ended June 30, 2018

INCOME (LOSS):

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

Revenues:

Other income (expense)

i 3,036

( i 9,609)

( i 6,573)

i 15,100

( i 4,640)

i 10,460

Total revenues

i 1,892,939

( i 9,609)

i 1,883,330

i 3,638,096

( i 4,640)

i 3,633,456

INCOME (LOSS) BEFORE TAXES

i 60,763

( i 9,609)

i 51,154

i 278,406

( i 4,640)

i 273,766

Income tax expense (benefit)

( i 9,132)

( i 501)

( i 9,633)

( i 1,807)

( i 400)

( i 2,207)

NET INCOME (LOSS)

i 69,895

( i 9,108)

i 60,787

i 280,213

( i 4,240)

i 275,973

COMPREHENSIVE INCOME (LOSS)

( i 33,469)

( i 9,108)

( i 42,577)

( i 3,033)

( i 4,240)

( i 7,273)

EARNINGS PER COMMON SHARE:

Basic

i 1.71

( i 0.22)

i 1.49

i 6.85

( i 0.10)

i 6.75

Diluted

i 1.70

( i 0.22)

i 1.48

i 6.81

( i 0.10)

i 6.71

CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended March 31, 2018
AND COMPREHENSIVE INCOME (LOSS):	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
Revenues:
Other income (expense)	$	i 12,064	$	i 4,969	$	i 17,033
Total revenues	$	i 1,745,157	$	i 4,969	$	i 1,750,126

INCOME (LOSS) BEFORE TAXES	$	i 217,643	$	i 4,969	$	i 222,612
Income tax expense (benefit)		i 7,325		i 101		i 7,426

NET INCOME (LOSS)	$	i 210,318	$	i 4,868	$	i 215,186

COMPREHENSIVE INCOME (LOSS)	$	i 30,436	$	i 4,868	$	i 35,304

EARNINGS PER COMMON SHARE:
Basic	$	i 5.14	$	i 0.12	$	i 5.26
Diluted	$	i 5.11	$	i 0.12	$	i 5.23

CONSOLIDATED STATEMENTS OF

Year Ended December 31, 2018

Year Ended December 31, 2017

CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

i 9,685,908

( i 28,496)

i 9,657,412

i 9,422,932

( i 42,279)

i 9,380,653

Net income (loss)

i 103,552

( i 14,511)

i 89,041

i 468,968

i 13,783

i 482,751

Balance, end of period

i 9,574,440

( i 43,007)

i 9,531,433

i 9,685,908

( i 28,496)

i 9,657,412

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

i 7,903,804

( i 43,007)

i 7,860,797

i 8,369,232

( i 28,496)

i 8,340,736

CONSOLIDATED STATEMENTS OF

Six Months Ended June 30, 2019

Three Months Ended March 31, 2019

CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, January 1

i 9,574,440

( i 43,007)

i 9,531,433

i 9,574,440

( i 43,007)

i 9,531,433

Net income (loss)

i 348,900

i 5,651

i 354,551

i 348,900

i 5,651

i 354,551

Balance, March 31

i 9,866,203

( i 37,356)

i 9,828,847

i 9,866,203

( i 37,356)

i 9,828,847

Net income (loss)

i 342,855

( i i 9,987 / )

i 332,868

Balance, June 30,

i 10,152,059

( i 47,343)

i 10,104,716

TOTAL STOCKHOLDER'S EQUITY, June 30

i 8,884,160

( i 47,343)

i 8,836,817

i 8,426,629

( i 37,356)

i 8,389,273

CONSOLIDATED STATEMENTS OF

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

i 9,860,842

( i 32,736)

i 9,828,106

i 9,685,908

( i 28,496)

i 9,657,412

Net income (loss)

i 205,613

( i 7,232)

i 198,381

i 485,826

( i 11,472)

i 474,354

Balance, end of period

i 10,013,592

( i 39,968)

i 9,973,624

i 10,013,592

( i 39,968)

i 9,973,624

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

i 8,329,013

( i 39,968)

i 8,289,045

i 8,329,013

( i 39,968)

i 8,289,045

CONSOLIDATED STATEMENTS OF

Three Months Ended June 30, 2018

Six Months Ended June 30, 2018

CHANGES IN STOCKHOLDER'S EQUITY

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

RETAINED EARNINGS:

Balance, beginning of period

i 9,844,187

( i 23,628)

i 9,820,559

i 9,685,908

( i 28,496)

i 9,657,412

Net income (loss)

i 69,895

( i 9,108)

i 60,787

i 280,213

( i 4,240)

i 275,973

Balance, end of period

i 9,860,842

( i 32,736)

i 9,828,106

i 9,860,842

( i 32,736)

i 9,828,106

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD

i 8,241,349

( i 32,736)

i 8,208,613

i 8,241,349

( i 32,736)

i 8,208,613

CONSOLIDATED STATEMENTS OF	Three Months Ended March 31, 2018
CHANGES IN STOCKHOLDER'S EQUITY	As Previously		Impact of
	Reported		Revisions		As Revised

(Dollars in thousands)
RETAINED EARNINGS:
Balance, beginning of period	$	i 9,685,908	$	( i 28,496)	$	i 9,657,412
Net income (loss)		i 210,318		i 4,868		i 215,186
Balance, end of period		i 9,844,187		( i 23,628)		i 9,820,559
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD	$	i 8,344,180	$	( i 23,628)	$	i 8,320,552

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2018

Year Ended December 31, 2017

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

i 103,552

( i 14,511)

i 89,041

i 468,968

i 13,783

i 482,751

Decrease (increase) in premiums receivable

( i 392,981)

i 9,994

( i 382,987)

( i 338,335)

( i 12,111)

( i 350,446)

Decrease (increase) in funds held by reinsureds, net

( i 159,344)

i 5,717

( i 153,627)

( i 31,104)

( i 2,116)

( i 33,220)

Decrease (increase) in income taxes

( i 263,865)

( i 1,200)

( i 265,065)

( i 114,521)

i 444

( i 114,077)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2019

Three Months Ended March 31, 2019

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

i 691,755

( i 4,336)

i 687,419

i 348,900

i 5,651

i 354,551

Decrease (increase) in premiums receivable

( i 178,319)

i 3,736

( i 174,583)

( i 163,108)

( i 5,269)

( i 168,377)

Decrease (increase) in funds held by reinsureds, net

( i 56,180)

i 759

( i 55,421)

i 9,837

( i 484)

i 9,353

Decrease (increase) in income taxes

i 180,285

( i 159)

i 180,126

i 91,754

i 102

i 91,856

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2018

Six Months Ended June 30, 2018

As Previously

Impact of

As Previously

Impact of

Reported

Revisions

As Revised

Reported

Revisions

As Revised

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

i 485,826

( i 11,472)

i 474,354

i 280,213

( i 4,240)

i 275,973

Decrease (increase) in premiums receivable

( i 264,556)

i 7,265

( i 257,291)

( i 126,355)

i 2,733

( i 123,622)

Decrease (increase) in funds held by reinsureds, net

( i 78,514)

i 5,325

( i 73,189)

( i 77,794)

i 1,907

( i 75,887)

Decrease (increase) in income taxes

i 59,034

( i 1,118)

i 57,916

i 43,516

( i 400)

i 43,116

CONSOLIDATED STATEMENTS OF CASH FLOWS	Three Months Ended March 31, 2018
	As Previously		Impact of
	Reported		Revisions		As Revised
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	i 210,318	$	i 4,868	$	i 215,186
Decrease (increase) in premiums receivable		( i 56,826)		( i 4,489)		( i 61,315)
Decrease (increase) in funds held by reinsureds, net		i 95,416		( i 480)		i 94,936
Decrease (increase) in income taxes		i 55,905		i 101		i 56,006

4. INVESTMENTS

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

Amortized

Unrealized

Market

OTTI in AOCI

(Dollars in thousands)

Cost

Appreciation

Depreciation

Value

(a)

Fixed maturity securities

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

i 1,202,171

i 39,053

( i 1,824)

i 1,239,400

Obligations of U.S. states and political subdivisions

i 506,860

i 30,609

( i 98)

i 537,371

Corporate securities

i 6,315,184

i 199,078

( i 38,925)

i 6,475,337

i 409

Asset-backed securities

i 864,311

i 3,293

( i 2,718)

i 864,886

Mortgage-backed securities

Commercial

i 728,348

i 39,643

( i 699)

i 767,292

Agency residential

i 2,367,704

i 40,888

( i 6,976)

i 2,401,616

Non-agency residential

i 8,047

i 38

( i 18)

i 8,067

Foreign government securities

i 1,325,153

i 54,419

( i 36,009)

i 1,343,563

Foreign corporate securities

i 2,847,063

i 129,449

( i 47,911)

i 2,928,601

i 465

Total fixed maturity securities

i i 16,164,841 /

i i 536,470 /

( i i 135,178 / )

i 16,566,133

i i 874 /

Amortized

Unrealized

Market

OTTI in AOCI

(Dollars in thousands)

Cost

Appreciation

Depreciation

Value

(a)

Fixed maturity securities

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

i 2,629,454

i 16,781

( i 15,101)

i 2,631,134

Obligations of U.S. states and political subdivisions

i 490,018

i 12,915

( i 2,839)

i 500,094

i 439

Corporate securities

i 5,538,582

i 48,465

( i 141,515)

i 5,445,532

i 1,688

Asset-backed securities

i 545,427

i 162

( i 5,492)

i 540,097

Mortgage-backed securities

Commercial

i 329,883

i 2,167

( i 5,340)

i 326,710

Agency residential

i 1,832,760

i 7,325

( i 43,821)

i 1,796,264

Non-agency residential

i 10,198

i 37

( i 26)

i 10,209

Foreign government securities

i 1,335,328

i 34,743

( i 55,906)

i 1,314,165

i 98

Foreign corporate securities

i 2,694,922

i 63,994

( i 97,858)

i 2,661,058

i 320

Total fixed maturity securities

i 15,406,572

i 186,589

( i 367,898)

i 15,225,263

i 2,545

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

Effective January 1, 2018, the Company adopted ASU 2016-01, which requires equity investments in unconsolidated entities to be measured at fair value, with any change in value being recorded within net realized capital gains/(losses) as part of the consolidated statements of operations and comprehensive income (loss). Previously, changes in the market value had been recorded within AOCI as part of the consolidated

balance sheets. Therefore, effective January 1, 2018, equity security investments no longer have an impact upon the AOCI balance.

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 September 30, 2019				At December 31, 2018
	Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value
Fixed maturity securities – available for sale:
Due in one year or less	$	i 1,430,361	$	i 1,444,393	$	i 1,328,571	$	i 1,330,534
Due after one year through five years		i 6,639,678		i 6,750,145		i 8,114,247		i 8,016,490
Due after five years through ten years		i 3,117,529		i 3,274,937		i 2,455,911		i 2,413,846
Due after ten years		i 1,008,863		i 1,054,797		i 789,575		i 791,113
Asset-backed securities		i 864,311		i 864,886		i 545,427		i 540,097
Mortgage-backed securities:
Commercial		i 728,348		i 767,292		i 329,883		i 326,710
Agency residential		i 2,367,704		i 2,401,616		i 1,832,760		i 1,796,264
Non-agency residential		i 8,047		i 8,067		i 10,198		i 10,209
Total fixed maturity securities	$.	i 16,164,841	$.	i 16,566,133	$.	i 15,406,572	$.	i 15,225,263

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				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	i 103,173	$	( i 22,073)	$	i 584,333	$	( i 282,479)
Fixed maturity securities, other-than-temporary impairment		i 72		i 72		( i 1,671)		i 339
Change in unrealized appreciation (depreciation), pre-tax		i 103,245		( i 22,001)		i 582,662		( i 282,140)
Deferred tax benefit (expense)		( i 9,984)		i 1,205		( i 62,415)		i 20,497
Deferred tax benefit (expense), other-than-temporary impairment		( i 25)		( i 69)		i 122		( i 145)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity	$	i 93,236	$	( i 20,865)	$	i 520,369	$	( i 261,788)

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

The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit

enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

Upon the adoption of ASU 2016-01 as of January 1, 2018, all equity investments in unconsolidated entities are recorded at fair value. Prior to the adoption of ASU 2016-01, the Company presented certain equity securities at market value. The majority of the Company’s equity securities presented at market value prior to January 1, 2018 were primarily comprised of mutual fund investments whose underlying securities consisted of fixed maturity securities. When a fund’s value reflected an unrealized loss, the Company assessed whether the decline in value was temporary or other-than-temporary. In making its assessment, the Company considered the composition of its portfolios and their related markets, reports received from the portfolio managers and discussions with portfolio managers. If the Company determined that the declines were temporary and it had the ability and intent to continue to hold the investments, then the declines were recorded as unrealized losses in accumulated other comprehensive income (loss). If declines were deemed to be other-than-temporary, then the carrying value of the investment was written down to fair value and recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

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

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

Duration of Unrealized Loss at September 30, 2019 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

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

i 23,964

( i 20)

i 316,601

( i 1,804)

i 340,565

( i 1,824)

Obligations of U.S. states and political subdivisions

i 6,672

( i 52)

i 3,518

( i 46)

i 10,190

( i 98)

Corporate securities

i 524,855

( i 11,045)

i 526,975

( i 27,880)

i 1,051,830

( i 38,925)

Asset-backed securities

i 337,232

( i 2,029)

i 175,138

( i 689)

i 512,370

( i 2,718)

Mortgage-backed securities

Commercial

i 4,944

i 47,201

( i 699)

i 52,145

( i 699)

Agency residential

i 32,779

( i 95)

i 617,460

( i 6,881)

i 650,239

( i 6,976)

Non-agency residential

i 3,200

( i 16)

i 2,381

( i 2)

i 5,581

( i 18)

Foreign government securities

i 163,595

( i 4,794)

i 304,079

( i 31,215)

i 467,674

( i 36,009)

Foreign corporate securities

i 235,652

( i 5,728)

i 491,150

( i 42,183)

i 726,802

( i 47,911)

Total fixed maturity securities

i 1,332,893

( i 23,779)

i 2,484,503

( i 111,399)

i 3,817,396

( i 135,178)

Duration of Unrealized Loss at September 30, 2019 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities

Due in one year or less

i 76,571

( i 1,341)

i 446,039

( i 22,077)

i 522,610

( i 23,418)

Due in one year through five years

i 354,417

( i 6,986)

i 982,505

( i 55,581)

i 1,336,922

( i 62,567)

Due in five years through ten years

i 330,090

( i 10,236)

i 118,854

( i 14,860)

i 448,944

( i 25,096)

Due after ten years

i 193,660

( i 3,076)

i 94,925

( i 10,610)

i 288,585

( i 13,686)

Asset-backed securities

i 337,232

( i 2,029)

i 175,138

( i 689)

i 512,370

( i 2,718)

Mortgage-backed securities

i 40,923

( i 111)

i 667,042

( i 7,582)

i 707,965

( i 7,693)

Total fixed maturity securities

i 1,332,893

( i 23,779)

i 2,484,503

( i 111,399)

i 3,817,396

( i 135,178)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at September 30, 2019 were $ i 3,817,396 thousand and $ i 135,178 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at September 30, 2019, did not exceed i 0.9% of the overall market value of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $ i 23,779 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, foreign government securities and asset-backed securities. Of these unrealized losses, $ i 15,284 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ i 111,399 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to foreign and domestic corporate securities, foreign government securities, agency residential mortgage-backed securities and U.S. government agencies and corporations. Of these unrealized losses, $ i 89,726 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, 2018 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

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

i 76,226

( i 158)

i 777,409

( i 14,943)

i 853,635

( i 15,101)

Obligations of U.S. states and political subdivisions

i 71,559

( i 1,444)

i 38,105

( i 1,395)

i 109,664

( i 2,839)

Corporate securities

i 2,513,463

( i 69,619)

i 1,683,729

( i 71,896)

i 4,197,192

( i 141,515)

Asset-backed securities

i 230,285

( i 2,746)

i 245,300

( i 2,746)

i 475,585

( i 5,492)

Mortgage-backed securities

Commercial

i 71,167

( i 1,128)

i 154,201

( i 4,212)

i 225,368

( i 5,340)

Agency residential

i 156,930

( i 975)

i 1,373,629

( i 42,846)

i 1,530,559

( i 43,821)

Non-agency residential

i 10,174

( i 26)

i 10,174

( i 26)

Foreign government securities

i 196,303

( i 9,719)

i 494,156

( i 46,187)

i 690,459

( i 55,906)

Foreign corporate securities

i 939,808

( i 35,023)

i 782,405

( i 62,835)

i 1,722,213

( i 97,858)

Total fixed maturity securities

i 4,265,915

( i 120,838)

i 5,548,934

( i 247,060)

i 9,814,849

( i 367,898)

Duration of Unrealized Loss at December 31, 2018 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities

Due in one year or less

i 454,239

( i 2,558)

i 427,513

( i 20,675)

i 881,752

( i 23,233)

Due in one year through five years

i 2,014,704

( i 45,148)

i 2,764,981

( i 129,940)

i 4,779,685

( i 175,088)

Due in five years through ten years

i 1,082,568

( i 51,300)

i 492,216

( i 34,210)

i 1,574,784

( i 85,510)

Due after ten years

i 245,848

( i 16,957)

i 91,094

( i 12,431)

i 336,942

( i 29,388)

Asset-backed securities

i 230,285

( i 2,746)

i 245,300

( i 2,746)

i 475,585

( i 5,492)

Mortgage-backed securities

i 238,271

( i 2,129)

i 1,527,830

( i 47,058)

i 1,766,101

( i 49,187)

Total fixed maturity securities

i 4,265,915

( i 120,838)

i 5,548,934

( i 247,060)

i 9,814,849

( i 367,898)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2018 were $ i 9,814,849 thousand and $ i 367,898 thousand, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2018, did not exceed i 5.7% 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 i 1.0% 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 $ i 120,838 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, foreign government securities and asset-backed securities. Of these unrealized losses, $ i 74,729 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ i 247,060 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, agency residential mortgage-backed securities and U.S. government agencies and corporations. Of these unrealized losses, $ i 230,560 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				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018			2019		2018
Fixed maturities	$	i 130,139	$	i 119,513	$	i 383,440	$	i 343,019
Equity securities		i 4,147		i 5,380		i 12,250		i 18,879
Short-term investments and cash		i 3,899		i 5,005		i 13,497		i 8,829
Other invested assets
Limited partnerships		i 43,758		i 38,342		i 100,298		i 83,719
Other		i 7,286		i 2,980		i 13,565		i 9,964
Gross investment income before adjustments		i 189,229		i 171,220		i 523,050		i 464,410
Funds held interest income (expense)		i 2,325		i 1,003		i 9,715		i 6,572
Future policy benefit reserve income (expense)		( i 372)		( i 431)		( i 965)		( i 999)
Gross investment income		i 191,182		i 171,792		i 531,800		i 469,983
Investment expenses		( i 10,124)		( i 10,429)		( i 30,738)		( i 29,004)
Net investment income	$	i 181,058	$	i 161,363	$	i 501,062	$	i 440,979

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

The Company had contractual commitments to invest up to an additional $ i 934,290 thousand in limited partnerships and private placement loans at September 30, 2019. 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.

Beginning in the first quarter of 2016, the Company participated 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. Through the second quarter of 2018, the Company’s participation in the facility was classified within other invested assets on the Company’s Balance Sheets.

Starting in the third quarter of 2018, the Company has consolidated its participation in the facility. As a result of the consolidation of the underlying investments of the facility, effective July 1, 2018, the Company has reclassified $ i 143,656 thousand from other invested assets to fixed maturity securities, available for sale, at market value and has reclassified $ i 243,864 thousand from other invested assets to short-term investments. As of September 30, 2019, the market value of investments in the facility consolidated within the Company’s balance sheets was $ i 441,567 thousand.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019			2018	2019		2018
Fixed maturity securities, market value:
Other-than-temporary impairments	$	( i 7,314)	$	( i 3,825)	$	( i 15,404)	$	( i 4,783)
Gains (losses) from sales		i 5,290		i 738		i 16,660		i 11,087
Fixed maturity securities, fair value:
Gains (losses) from sales		-		( i 717)		i 356		( i 1,799)
Gains (losses) from fair value adjustments		-		i 584		i 13		i 1,542
Equity securities, fair value:
Gains (losses) from sales		( i 1,192)		i 9,507		i 2,541		i 7,984
Gains (losses) from fair value adjustments		( i 12,008)		i 47,653		i 102,795		i 30,200
Other invested assets		i 2,098		i 913		i 2,341		i 1,497
Short-term investments gain (loss)		i 183		( i 49)		i 259		( i 49)
Total net realized capital gains (losses)	$	( i 12,943)	$	i 54,804	$	i 109,561	$	i 45,679

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Proceeds from sales of fixed maturity securities	$	i 271,025	$	i 531,452	$	i 2,591,938	$	i 1,757,890
Gross gains from sales		i 14,270		i 5,653		i 42,316		i 25,479
Gross losses from sales		( i 8,980)		( i 5,632)		( i 25,300)		( i 16,191)

Proceeds from sales of equity securities	$	i 35,924	$	i 209,437	$	i 185,157	$	i 785,819
Gross gains from sales		i 1,035		i 14,182		i 9,286		i 28,228
Gross losses from sales		( i 2,227)		( i 4,675)		( i 6,745)		( i 20,244)

5. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE

Activity in the reserve for losses and LAE is summarized for the periods indicated:

	Nine Months Ended
	September 30,
(Dollars in thousands)	2019		2018
Gross reserves beginning of period	$	i 13,119,090	$	i 11,884,321
Less reinsurance recoverables		( i 1,619,641)		( i 1,212,649)
Net reserves beginning of period		i 11,499,449		i 10,671,672

Incurred related to:
Current year		i 3,559,505		i 3,218,162
Prior years		( i 44,401)		i 432,187
Total incurred losses and LAE		i 3,515,104		i 3,650,349

Paid related to:
Current year		i 550,724		i 724,791
Prior years		i 2,406,753		i 2,730,015
Total paid losses and LAE		i 2,957,477		i 3,454,806

Foreign exchange/translation adjustment		( i 52,125)		( i 78,103)

Net reserves end of period		i 12,004,952		i 10,789,112
Plus reinsurance recoverables		i 1,632,687		i 1,601,041
Gross reserves end of period	$	i 13,637,639	$	i 12,390,153

(Some amounts may not reconcile due to rounding.)

Incurred prior years losses decreased by $ i 44,401 thousand for the nine months ended September 30, 2019 and increased by $ i 432,187 thousand for the nine months ended September 30, 2018. The $ i 44,401 thousand decrease for the nine months ended September 30, 2019, primarily related to reserve reductions associated with the early commutation of a multi-year contract. The increase for the nine months ended September 30, 2018 was mainly due to $ i 532,156 thousand of adverse development on prior years catastrophe losses, primarily related to Hurricanes Harvey, Irma and Maria, as well as the 2017 California wildfires. The increase in loss estimates for Hurricanes Harvey, Irma and Maria was mostly driven by re-opened claims, loss inflation from higher than expected loss adjustment expenses and in particular, their impact on aggregate covers. This reserve increase was partially offset by $ i 99,968 thousand of favorable development on prior years attritional losses which mainly related to U.S. and international property and casualty reinsurance business.

6. DERIVATIVES

The Company sold i i seven / equity index put option contracts, based on i two indices, in 2001 and 2005. The Company sold these equity index put options as insurance products with the intent of achieving a profit. These equity index put option contracts meet the definition of a derivative under FASB guidance and the Company’s position in these equity index put option contracts is unhedged. Accordingly, these equity index put option contracts are carried at fair value in the consolidated balance sheets with changes in fair value recorded in the consolidated statements of operations and comprehensive income (loss). i Four of these contracts had expired prior to September 30, 2019 with i no liabilities due under the terms of the expired contracts.

The Company had two remaining equity index put option contracts at September 30, 2019, based on the Standard & Poor’s 500 (“S&P 500”) index. Based on historical index volatilities and trends and the September 30, 2019 S&P 500 index value, the Company estimates the probability that each equity index put option contract of the S&P 500 index falling below the strike price on the exercise date to be less than i 1%. The theoretical maximum payouts under these equity index put option contracts would occur if on each of the

exercise dates the S&P 500 index value were i zero. At September 30, 2019, the present value of these theoretical maximum payouts using a i 3% discount factor was $ i 206,755 thousand. Conversely, if the contracts had all expired on September 30, 2019, with the S&P index at $ i 2,976.74, there would have been i no settlement amount.

The Company has i one equity index put option contract based on the FTSE 100 index. Based on historical index volatilities and trends and the September 30, 2019 FTSE 100 index value, the Company estimates the probability that the equity index put option contract of the FTSE 100 index will fall below the strike price on the exercise date to be less than i 7%. The theoretical maximum payout under the equity index put option contract would occur if on the exercise date the FTSE 100 index value was i zero. At September 30, 2019, the present value of the theoretical maximum payout using a i 3% discount factor and current exchange rate was $ i 40,130 thousand. Conversely, if the contract had expired on September 30, 2019, with the FTSE index at ₤, i 7408.21, there would have been i no settlement amount.

At September 30, 2019 and December 31, 2018, the fair value for these equity put options was $, i 8563 thousand and $ i 11,958 thousand, respectively.

The fair value of the equity index put options can be found in the Company’s consolidated balance sheets as follows:

(Dollars in thousands)
Derivatives not designated as	Location of fair value	At		At
hedging instruments	in balance sheets	September 30, 2019		December 31, 2018
Equity index put option contracts	Equity index put option liability	$	i 8,563	$	i 11,958
Total		$	i 8,563	$	i 11,958

The change in fair value of the equity index put option contracts can be found in the Company’s statement of operations and comprehensive income (loss) as follows:

(Dollars in thousands)

For the Three Months Ended

For Nine Months Ended

Derivatives not designated as

Location of gain (loss) in statements of

September 30,

hedging instruments

operations and comprehensive income (loss)

2019

2018

2019

2018

Equity index put option contracts

Net derivative gain (loss)

( i 189)

i 2,225

i 3,395

i 5,485

Total

( i 189)

i 2,225

i 3,395

i 5,485

7. FAIR VALUE

GAAP guidance regarding fair value measurements address how companies should measure fair value when they are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.

The levels in the hierarchy are defined as follows:

Level 1:Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2:Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;

Level 3:Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s fixed maturity and equity securities are primarily managed by third party investment asset managers. The investment asset managers obtain prices from nationally recognized pricing services. These services seek to utilize market data and observations in their evaluation process. They use pricing applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.

In limited instances where prices are not provided by pricing services or in rare instances when a manager may not agree with the pricing service, price quotes on a non-binding basis are obtained from investment brokers. The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers. In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices. In addition, the Company continually performs analytical reviews of price changes and tests the prices on a random basis to an independent pricing source. No material variances were noted during these price validation procedures. In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value. At September 30, 2019, $ i 630,784 thousand of fixed maturities, market value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, $ i 480,181 thousand, were valued by investment managers’ valuation committees and a majority of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to review and evaluate these independent third party valuations. The remaining Level 3 fixed maturities of $ i 150,603 thousand were valued at either par or amortized cost, which the Company believes approximates fair value. At December 31, 2018, $ i 435,959 thousand of fixed maturities, market value and $ i 2,337 thousand of fixed maturities, fair value were fair valued using unobservable inputs. The majority of the fixed maturities, market value, $ i 354,143 thousand and all of the $ i 2,337 thousand of fixed maturities, fair value were valued by investment managers’ valuation committees and a majority of these fair values were substantiated by valuations from independent third parties. The remaining Level 3 fixed maturities of $ i 80,663 thousand were fair valued by the Company at either par or amortized cost and $ i 1,153 thousand were priced using a non-binding broker quote.

The Company internally manages a public equity portfolio which had a fair value at September 30, 2019 and December 31, 2018 of $ i 154,693 thousand and $ i 124,228 thousand, respectively, and all prices were obtained from publicly published sources.

Equity securities denominated in U.S. currency with quoted prices in active markets for identical assets are categorized as level 1 since the quoted prices are directly observable. Equity securities traded on foreign exchanges are categorized as level 2 due to the added input of a foreign exchange conversion rate to determine fair or market value. The Company uses foreign currency exchange rates published by nationally recognized sources.

All categories of fixed maturity securities listed in the tables below are generally categorized as level 2, since a particular security may not have traded but the pricing services are able to use valuation models with observable market inputs such as interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority. For foreign government securities and foreign corporate securities, the fair values provided by the third party pricing services in local currencies, and where applicable, are converted to U.S. dollars using currency exchange rates from nationally recognized sources.

The fixed maturities with fair values categorized as level 3 result when prices are not available from the nationally recognized pricing services. The asset managers will then obtain non-binding price quotes for the securities from brokers. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company. If the broker quotes are for foreign denominated securities, the quotes are converted to U.S. dollars using currency exchange rates from nationally recognized sources. In limited circumstances when broker prices are not available for private placements, the Company will value the securities using comparable market information or receive fair values from investment managers.

The composition and valuation inputs for the presented fixed maturities categories are as follows:

•U.S. Treasury securities and obligations of U.S. government agencies and corporations are primarily comprised of U.S. Treasury bonds and the fair value is based on observable market inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields;

•Obligations of U.S. states and political subdivisions are comprised of state and municipal bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

•Corporate securities are primarily comprised of U.S. corporate and public utility bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities, benchmark yields and credit spreads;

•Asset-backed and mortgage-backed securities fair values are based on observable inputs such as quoted prices, reported trades, quoted prices for similar issuances or benchmark yields and cash flow models using observable inputs such as prepayment speeds, collateral performance and default spreads;

•Foreign government securities are comprised of global non-U.S. sovereign bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source;

•Foreign corporate securities are comprised of global non-U.S. corporate bond issuances and the fair values are based on observable market inputs such as quoted market prices, quoted prices for similar securities and models with observable inputs such as benchmark yields and credit spreads and then, where applicable, converted to U.S. dollars using an exchange rate from a nationally recognized source.

The Company’s liability for equity index put options is categorized as level 3 since there is no active market for these equity put options. The fair values for these options are calculated by the Company using an industry accepted pricing model, Black-Scholes. The model inputs and assumptions are: risk free interest rates, equity market indexes values, volatilities and dividend yields and duration. The model results are then adjusted for the Company’s credit default swap rate. All of these inputs and assumptions are updated quarterly. One of the option contacts is in British Pound Sterling so the fair value for this contract is converted to U.S. dollars using an exchange rate from a nationally recognized source.

The following table presents the fair value measurement levels for all assets and liabilities, which the Company has recorded at fair value (fair and market value) as of the periods indicated:

Fair Value Measurement Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

(Dollars in thousands)

September 30, 2019

(Level 1)

(Level 2)

(Level 3)

Assets:

Fixed maturities, market value

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

i 1,239,400

Obligations of U.S. States and political subdivisions

i 537,371

Corporate securities

i 6,475,337

i 5,887,290

i 588,047

Asset-backed securities

i 864,886

i 824,242

i 40,644

Mortgage-backed securities

Commercial

i 767,292

Agency residential

i 2,401,616

Non-agency residential

i 8,067

Foreign government securities

i 1,343,563

Foreign corporate securities

i 2,928,601

i 2,926,508

i 2,093

Total fixed maturities, market value

i 16,566,133

i 15,935,349

i 630,784

Fixed maturities, fair value

Equity securities, fair value

i 906,230

i 814,833

i 91,397

Liabilities:

Equity index put option contracts

i 8,563

There were i no transfers between Level 1 and Level 2 for the nine months ended September 30, 2019.

The following table presents the fair value measurement levels for all assets and liabilities, which the Company has recorded at fair value (fair and market value) as of the periods indicated:

Fair Value Measurement Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

(Dollars in thousands)

(Level 1)

(Level 2)

(Level 3)

Assets:

Fixed maturities, market value

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

i 2,631,134

Obligations of U.S. States and political subdivisions

i 500,094

Corporate securities

i 5,445,532

i 5,017,317

i 428,215

Asset-backed securities

i 540,097

Mortgage-backed securities

Commercial

i 326,710

Agency residential

i 1,796,264

Non-agency residential

i 10,209

Foreign government securities

i 1,314,165

Foreign corporate securities

i 2,661,058

i 2,653,314

i 7,744

Total fixed maturities, market value

i 15,225,263

i 14,789,304

i 435,959

Fixed maturities, fair value

i 2,337

Equity securities, fair value

i 716,639

i 674,433

i 42,206

Liabilities:

Equity index put option contracts

i 11,958

In addition, $ i 160,264 thousand and $ i 117,662 thousand of investments within other invested assets on the consolidated balance sheets as September 30, 2019 and December 31, 2018, respectively, are not included within the fair value hierarchy tables as the assets are measured at NAV as a practical expedient to determine fair value.

The following tables present the activity under Level 3, fair value measurements using significant unobservable inputs by asset type, for the periods indicated:

Total Fixed Maturities, Market Value

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Corporate

Asset-Backed

Foreign

Corporate

Asset-Backed

Foreign

(Dollars in thousands)

Securities

Corporate

Total

Securities

Corporate

Total

Beginning balance fixed maturities at market value

i 542,878

i 2,093

i 544,971

i 428,215

i 7,744

i 435,959

Total gains or (losses) (realized/unrealized)

Included in earnings

i 1,018

i 3,348

( i 119)

i 3,229

Included in other comprehensive income (loss)

( i 1,314)

i 644

( i 670)

i 1,130

i 644

i 1,774

Purchases, issuances and settlements

i 42,289

i 40,000

i 82,289

i 150,659

i 40,000

( i 5,532)

i 185,127

Transfers in and/or (out) of Level 3

i 3,176

i 4,695

Ending balance

i 588,047

i 40,644

i 2,093

i 630,784

i 588,047

i 40,644

i 2,093

i 630,784

The amount of total gains or losses for the period

included in earnings (or changes in net assets)

attributable to the change in unrealized gains

or losses relating to assets still held

at the reporting date

(Some amounts may not reconcile due to rounding.)

Total Fixed Maturities, Market Value

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

Corporate

Foreign

Corporate

Foreign

(Dollars in thousands)

Securities

Corporate

Total

Securities

Corporate

Total

Beginning balance fixed maturities at market value

i 381,215

i 12,615

i 393,830

i 210,186

i 6,952

i 217,138

Total gains or (losses) (realized/unrealized)

Included in earnings

( i 1,937)

( i 472)

( i 2,409)

( i 591)

( i 882)

( i 1,473)

Included in other comprehensive income (loss)

( i 449)

( i 24)

Purchases, issuances and settlements

i 50,290

i 18

i 50,308

i 219,548

i 4,341

i 223,889

Transfers in and/or (out) of Level 3

i 1,750

Ending balance

i 429,119

i 12,161

i 441,280

i 429,119

i 12,161

i 441,280

The amount of total gains or losses for the period

included in earnings (or changes in net assets)

attributable to the change in unrealized gains

or losses relating to assets still held

at the reporting date

(Some amounts may not reconcile due to rounding.)

Total Fixed Maturities, Fair Value

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Foreign

(Dollars in thousands)

Corporate

Total

Corporate

Total

Beginning balance fixed maturities at market value

i 2,337

Total gains or (losses) (realized/unrealized)

Included in earnings

i 369

Included in other comprehensive income (loss)

Purchases, issuances and settlements

( i 2,706)

Transfers in and/or (out) of Level 3

Ending balance

The amount of total gains or losses for the period

included in earnings (or changes in net assets)

attributable to the change in unrealized gains

or losses relating to assets still held

at the reporting date

(Some amounts may not reconcile due to rounding.)

Total Fixed Maturities, Fair Value

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

Foreign

(Dollars in thousands)

Corporate

Total

Corporate

Total

Beginning balance fixed maturities at market value

i 3,192

Total gains or (losses) (realized/unrealized)

Included in earnings

( i 101)

( i 257)

Included in other comprehensive income (loss)

( i 32)

Purchases, issuances and settlements

( i 686)

i 2,630

Transfers in and/or (out) of Level 3

Ending balance

i 2,373

The amount of total gains or losses for the period

included in earnings (or changes in net assets)

attributable to the change in unrealized gains

or losses relating to assets still held

at the reporting date

(Some amounts may not reconcile due to rounding.)

The net transfers to/(from) level 3, fair value measurements using significant unobservable inputs for fixed maturities, market value were $ i 3,176 thousand and $ i 4,695 thousand for the three and nine months ended September 30, 2019, respectively. The transfers during 2019 were related to securities that were priced using a recognized pricing service as of December 31, 2018. These securities were subsequently priced by investment managers as of September 30, 2019.

The following table presents the activity under Level 3, fair value measurements using significant unobservable inputs for equity index put option contracts, for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Liabilities:
Balance, beginning of period	$	i 8,374	$	i 9,218	$	i 11,958	$	i 12,477
Total (gains) or losses (realized/unrealized)
Included in earnings		i 189		( i 2,225)		( i 3,395)		( i 5,485)
Included in other comprehensive income (loss)		-		-		-		-
Purchases, issuances and settlements		-		-		-		-
Transfers in and/or (out) of Level 3		-		-		-		-
Balance, end of period	$	i 8,563	$	i 6,993	$	i 8,563	$	i 6,993

The amount of total gains or losses for the period included in earnings
(or changes in net assets) attributable to the change in unrealized
gains or losses relating to liabilities still held at the reporting date	$	-	$	-	$	-	$	-

(Some amounts may not reconcile due to rounding.)

8. EARNINGS PER COMMON SHARE

Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if options granted under various share-based compensation plans were exercised resulting in the issuance of common shares that would participate in the earnings of the entity.

Net income (loss) per common share has been computed as per below, based upon weighted average common basic and dilutive shares outstanding.

Three Months Ended

Nine Months Ended

September 30,

(Dollars in thousands, except per share amounts)

2019

2018

2019

2018

Net income (loss) per share:

Numerator

Net income (loss)

i 104,398

i 198,381

i 791,817

i 474,354

Less: dividends declared-common shares and nonvested common shares

( i 56,995)

( i 52,863)

( i 171,131)

( i 159,343)

Undistributed earnings

i 47,403

i 145,519

i 620,687

i 315,012

Percentage allocated to common shareholders (1)

i 98.9

i 99.0

i 98.9

i 46,869

i 144,024

i 613,847

i 311,695

Add: dividends declared-common shareholders

i 56,403

i 52,356

i 169,329

i 157,759

Numerator for basic and diluted earnings per common share

i 103,273

i 196,379

i 783,176

i 469,454

Denominator

Denominator for basic earnings per weighted-average common shares

i 40,287

i 40,350

i 40,289

i 40,441

Effect of dilutive securities:

Options

i 125

i 192

i 131

i 206

Denominator for diluted earnings per adjusted weighted-average common shares

i 40,411

i 40,542

i 40,421

i 40,646

Per common share net income (loss)

Basic

i 2.56

i 4.87

i 19.44

i 11.61

Diluted

i 2.56

i 4.84

i 19.38

i 11.55

⁽¹⁾

Basic weighted-average common shares outstanding

i 40,287

i 40,350

i 40,289

i 40,441

Basic weighted-average common shares outstanding and nonvested common shares expected to vest

i 40,746

i 40,769

i 40,738

i 40,871

Percentage allocated to common shareholders

i 98.9

i 99.0

i 98.9

(Some amounts may not reconcile due to rounding.)

There were i i i i no / / / anti-diluted options outstanding for the three and nine months ended September 30, 2019 and 2018.

All outstanding options expire on or between February 24, 2020 and September 19, 2022.

9. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the Company believes that its positions are legally and commercially reasonable. The Company considers the statuses of these proceedings when determining its reserves for unpaid loss and loss adjustment expenses.

Aside from litigation and arbitrations related to these insurance and reinsurance agreements, the Company is not a party to any other material litigation or arbitration.

The Company has entered into separate annuity agreements with The Prudential Insurance of America (“The Prudential”) and an additional unaffiliated life insurance company in which the Company has either purchased annuity contracts or become the assignee of annuity proceeds that are meant to settle claim payment

obligations in the future. In both instances, the Company would become contingently liable if either The Prudential or the unaffiliated life insurance company were unable to make payments related to the respective annuity contract.

The table below presents the estimated cost to replace all such annuities for which the Company was contingently liable for the periods indicated:

	At September 30,		At December 31,
(Dollars in thousands)	2019		2018
The Prudential	$	i 141,608	$	i 142,754
Unaffiliated life insurance company		i 34,394		i 34,717

10. OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of comprehensive income (loss) in the consolidated statements of operations for the periods indicated:

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

(Dollars in thousands)

Before Tax

Tax Effect

Net of Tax

Before Tax

Tax Effect

Net of Tax

Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary

i 103,247

( i 9,529)

i 93,718

i 587,930

( i 61,792)

i 526,138

URA(D) on securities - OTTI

i 72

( i 25)

i 47

( i 1,671)

i 122

( i 1,549)

Reclassification of net realized losses (gains) included in net income (loss)

( i 74)

( i 455)

( i 529)

( i 3,597)

( i 623)

( i 4,220)

Foreign currency translation adjustments

( i 2,665)

( i 761)

( i 3,426)

( i 13,890)

( i 1,316)

( i 15,206)

Benefit plan actuarial net gain (loss)

Reclassification of benefit plan liability amortization included in net income (loss)

i 1,726

( i 363)

i 1,363

i 4,640

( i 975)

i 3,665

Total other comprehensive income (loss)

i 102,306

( i 11,133)

i 91,173

i 573,412

( i 64,584)

i 508,828

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

(Dollars in thousands)

Before Tax

Tax Effect

Net of Tax

Before Tax

Tax Effect

Net of Tax

Unrealized appreciation (depreciation) ("URA(D)") on securities - temporary

( i 24,248)

i 1,963

( i 22,285)

( i 274,679)

i 19,803

( i 254,876)

URA(D) on securities - OTTI

i 72

( i 69)

i 3

i 339

( i 145)

i 194

Reclassification of net realized losses (gains) included in net income (loss)

i 2,175

( i 758)

i 1,417

( i 7,800)

i 694

( i 7,106)

Foreign currency translation adjustments

( i 6,723)

i 793

( i 5,930)

( i 58,580)

i 6,697

( i 51,883)

Reclassification of benefit plan liability amortization included in net income (loss)

i 2,298

( i 482)

i 1,816

i 6,893

( i 1,447)

i 5,446

Total other comprehensive income (loss)

( i 26,426)

i 1,447

( i 24,979)

( i 333,827)

i 25,602

( i 308,225)

The following table presents details of the amounts reclassified from AOCI for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

Affected line item within the statements of

AOCI component

2019

2018

2019

2018

operations and comprehensive income (loss)

(Dollars in thousands)

URA(D) on securities

( i 74)

i 2,175

( i 3,597)

( i 7,800)

Other net realized capital gains (losses)

( i 455)

( i 758)

( i 623)

i 694

Income tax expense (benefit)

( i 529)

i 1,417

( i 4,220)

( i 7,106)

Net income (loss)

Benefit plan net gain (loss)

i 1,726

i 2,298

i 4,640

i 6,893

Other underwriting expenses

( i 363)

( i 482)

( i 975)

( i 1,447)

Income tax expense (benefit)

i 1,363

i 1,816

i 3,665

i 5,446

Net income (loss)

The following table presents the components of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Beginning balance of URA (D) on securities	$	i 247,741	$	( i 192,155)	$	( i 179,392)	$	i 49,969
Change to beginning balance due to adoption of ASU 2016-01		-		-		-		( i 1,201)
Current period change in URA (D) of investments - temporary		i 93,190		( i 20,868)		i 521,919		( i 261,982)
Current period change in URA (D) of investments - non-credit OTTI		i 47		i 3		( i 1,549)		i 194
Ending balance of URA (D) on securities		i 340,978		( i 213,020)		i 340,978		( i 213,020)

Beginning balance of foreign currency translation adjustments		( i 227,527)		( i 184,884)		( i 215,747)		( i 138,931)
Current period change in foreign currency translation adjustments		( i 3,426)		( i 5,930)		( i 15,206)		( i 51,883)
Ending balance of foreign currency translation adjustments		( i 230,953)		( i 190,814)		( i 230,953)		( i 190,814)

Beginning balance of benefit plan net gain (loss)		( i 65,116)		( i 68,299)		( i 67,418)		( i 71,929)
Current period change in benefit plan net gain (loss)		i 1,363		i 1,816		i 3,665		i 5,446
Ending balance of benefit plan net gain (loss)		( i 63,753)		( i 66,483)		( i 63,753)		( i 66,483)

Ending balance of accumulated other comprehensive income (loss)	$	i 46,272	$	( i 470,317)	$	i 46,272	$	( i 470,317)

(Some amounts may not reconcile due to rounding.)

11. CREDIT FACILITIES

The Company has i two active credit facilities for a total commitment of up to $ i 1,000,000 thousand and an additional credit facility for a total commitment of up to £ i 30,000 thousand, providing for the issuance of letters of credit and/or unsecured revolving credit lines. The following table presents the interest and fees incurred in connection with the two credit facilities for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Credit facility interest and fees incurred	$	i 105	$	i 105	$	i 315	$	i 315

The terms and outstanding amounts for each facility are discussed below:

Group Credit Facility

Effective May 26, 2016, Group, Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”) and Everest International Reinsurance, Ltd. (“Everest International”), both direct subsidiaries of Group, entered into a i five year, $ i 800,000 thousand senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22, 2012, i four year, $ i 800,000 thousand senior credit facility. Both the May 26, 2016 and June 22, 2012 senior credit facilities, which have similar terms, are referred to as the “Group Credit Facility”. Wells Fargo Corporation (“Wells Fargo Bank”) is the administrative agent for the Group Credit Facility, which consists of two tranches. Tranche one provides up to $ i 200,000 thousand of unsecured revolving credit for liquidity and general corporate purposes, and for the issuance of unsecured standby letters of credit. The interest on the revolving loans shall, at the Company’s option, be either (1) the Base Rate (as defined below) or (2) an adjusted London Interbank Offered Rate (“LIBOR”) plus a margin. The Base Rate is the higher of (a) the prime commercial lending rate established by Wells Fargo Bank, (b) the Federal Funds Rate plus i 0.5% per annum or (c) the one month LIBOR Rate plus i 1.0% per annum. The amount of margin and the fees payable for the Group Credit Facility depends on Group’s senior unsecured debt rating. Tranche two exclusively provides up to $ i 600,000 thousand for the issuance of standby letters of credit on a collateralized basis.

The Group Credit Facility requires Group to maintain a debt to capital ratio of not greater than i 0.35 to 1 and to maintain a minimum net worth. Minimum net worth is an amount equal to the sum of $ i 5,370,979 thousand plus

i 25% of consolidated net income for each of Group’s fiscal quarters, for which statements are available ending on or after March 31, 2016 and for which consolidated net income is positive, plus i 25% of any increase in consolidated net worth during such period attributable to the issuance of ordinary and preferred shares, which at September 30, 2019, was $ i 6,198,350 thousand. As of September 30, 2019, the Company was in compliance with all Group Credit Facility covenants.

The following table summarizes the outstanding letters of credit and/or borrowings for the periods indicated:

(Dollars in thousands)

Bank

Commitment

In Use

Date of Expiry

Commitment

In Use

Date of Expiry

Wells Fargo Bank Group Credit Facility

Tranche One

i 200,000

Tranche Two

i 600,000

i 595,575

i 12/31/2019

i 600,000

i 558,818

i 12/31/2019

Total Wells Fargo Bank Group Credit Facility

i 800,000

i 595,575

i 800,000

i 558,818

Bermuda Re Letter of Credit Facility

Effective December 10, 2018, Bermuda Re renewed its letter of credit issuance facility with Citibank N.A. referred to as the “Bermuda Re Letter of Credit Facility”, which commitment is reconfirmed annually with updated fees. The current renewal of the Bermuda Re Letter of Credit Facility provides for the issuance of up to $ i 200,000 thousand of secured letters of credit to collateralize reinsurance obligations as a non-admitted reinsurer. The interest on drawn letters of credit shall be (A) i 0.35% per annum of the principal amount of issued standard letters of credit (expiry of 15 months or less) and (B) i 0.45% per annum of the principal amount of issued extended tenor letters of credit (expiry maximum of up to i 60 months). The commitment fee on undrawn credit shall be i 0.15% per annum.

The following table summarizes the outstanding letters of credit for the periods indicated:

(Dollars in thousands)

Bank

Commitment

In Use

Date of Expiry

Commitment

In Use

Date of Expiry

Citibank Bilateral Letter of Credit Agreement

i 200,000

i 3,672

i 11/24/2019

i 200,000

i 3,482

02/28/2019

i 74,243

i 12/31/2019

i 3,672

i 11/24/2019

i 3,482

02/29/2020

i 72,443

i 12/31/2019

i 173

i 12/16/2020

i 296

08/15/2020

i 122

i 12/20/2020

i 177

i 12/16/2020

i 2,993

i 12/31/2020

i 125

i 12/20/2020

i 547

08/15/2021

i 1,851

11/04/2022

i 39,027

09/30/2023

i 407

i 11/13/2022

i 59,293

i 12/30/2022

Total Citibank Bilateral Agreement

i 200,000

i 124,259

i 200,000

i 141,746

Everest International Credit Facility

Effective November 9, 2018, Everest International renewed its credit facility with Lloyds Bank plc (“Everest International Credit Facility”). The current renewal of the Everest International Credit Facility has a i four year term and provides up to £ i 30,000 thousand for the issuance of standby letters of credit on a collateralized basis. The Company pays a commitment fee of i 0.1% per annum on the average daily amount of the remainder of (1) the aggregate amount available under the facility and (2) the aggregate amount of drawings outstanding under the facility. The Company pays a credit commission fee of i 0.35% per annum on drawings outstanding under the facility.

The Everest International Credit Facility requires Group to maintain a debt to capital ratio of not greater than 0.35 to 1 and to maintain a minimum net worth. Minimum net worth is an amount equal to the sum of $ i 5,326,009 thousand ( i 70% of consolidated net worth as of December 31, 2015), plus i 25% of consolidated net income for each of Group’s fiscal quarters, for which statements are available ending on or after January 1, 2015 and for which net income is positive, plus i 25% of any increase in consolidated net worth of Group during such period attributable to the issuance of ordinary and preferred shares, which at September 30, 2019, was

$, i 6189,098 thousand. As of September 30, 2019, the Company was in compliance with all Everest International Credit Facility requirements.

The following table summarizes the outstanding letters of credit for the periods indicated:

(Dollars in thousands)

Bank

Commitment

In Use

Date of Expiry

Commitment

In Use

Date of Expiry

Lloyd's Bank plc

i 30,000

i 24,845

i 12/31/2022

i 30,000

i 26,000

i 12/31/2022

Total Lloyd's Bank Credit Facility

i 30,000

i 24,845

i 30,000

i 26,000

Federal Home Loan Bank Membership

Effective August 15, 2019, Everest Reinsurance Company (“Everest Re”) became a member of the Federal Home Loan Banks (“FHLB”) organization, which allows Everest Re to borrow up to i 10% of its statutory admitted assets. As of June 30, 2019, Everest Re had admitted assets of $ i 12,310,510 thousand which provides borrowing capacity of up to $ i 1,231,051 thousand. Through September 30, 2019, Everest had i no borrowings through the FLHB.

12. COLLATERALIZED REINSURANCE AND TRUST AGREEMENTS

Certain subsidiaries of Group have established trust agreements, which effectively use the Company’s investments as collateral, as security for assumed losses payable to certain non-affiliated ceding companies. At September 30, 2019, the total amount on deposit in trust accounts was $ i 867,357 thousand.

The Company reinsures some of its catastrophe exposures with the segregated accounts of Mt. Logan Re. Mt. Logan Re is a Class 3 insurer registered in Bermuda effective February 27, 2013 under The Segregated Accounts Companies Act 2000 and i 100% of the voting common shares are owned by Group. Separate segregated accounts for Mt. Logan Re began being established effective July 1, 2013 and non-voting, redeemable preferred shares have been issued to capitalize the segregated accounts. Each segregated account invests predominantly in a diversified set of catastrophe exposures, diversified by risk/peril and across different geographic regions globally.

The following table summarizes the premiums and losses that are ceded by the Company to Mt. Logan Re segregated accounts and assumed by the Company from Mt. Logan Re segregated accounts.

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
Mt. Logan Re Segregated Accounts	2019	2018	2019	2018
(Dollars in thousands)
Ceded written premiums	i 97,391	i 73,015	i 237,841	i 203,445
Ceded earned premiums	i 79,560	i 65,982	i 220,200	i 192,820
Ceded losses and LAE	i 79,499	i 28,982	i 164,914	i 189,505

Assumed written premiums	i 9,867	i 4,793	i 14,900	i 9,440
Assumed earned premiums	i 9,867	i 4,793	i 14,900	i 9,440
Assumed losses and LAE	-	-	-	-

Each segregated account is permitted to assume net risk exposures equal to the amount of its available posted collateral, which in the aggregate was $ i 993,036 thousand and $ i 1,156,853 thousand at September 30, 2019 and December 31, 2018, respectively. Of this amount, Group had investments recorded at $ i 45,748 thousand and $ i 45,625 thousand at September 30, 2019 and December 31, 2018, respectively, in the segregated accounts.

Effective April 1, 2018, the Company entered into a retroactive reinsurance transaction with one of the Mt. Logan Re segregated accounts to retrocede $ i 269,198 thousand of casualty reserves held by Bermuda Re

related to accident years i 2002 through i 2015. As consideration for entering the agreement, the Company transferred cash of $ i 252,000 thousand to the Mt. Logan Re segregated account. The maximum liability to be retroceded under the agreement will be $ i 319,000 thousand. The Company will retain liability for any amounts exceeding the maximum liability.

On April 24, 2014, the Company entered into i two collateralized reinsurance agreements with Kilimanjaro Re Limited (“Kilimanjaro”), a Bermuda based special purpose reinsurer, to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover specified named storm and earthquake events. The first agreement provides up to $ i 250,000 thousand of reinsurance coverage from named storms in specified states of the Southeastern United States. The second agreement provides up to $ i 200,000 thousand of reinsurance coverage from named storms in specified states of the Southeast, Mid-Atlantic and Northeast regions of the United States and Puerto Rico as well as reinsurance coverage from earthquakes in specified states of the Southeast, Mid-Atlantic, Northeast and West regions of the United States, Puerto Rico and British Columbia. These reinsurance agreements expired in April, 2018.

On November 18, 2014, the Company entered into a collateralized reinsurance agreement with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. This agreement is a multi-year reinsurance contract which covers specified earthquake events. The agreement provides up to $ i 500,000 thousand of reinsurance coverage from earthquakes in the United States, Puerto Rico and Canada.

On December 1, 2015 the Company entered into i two collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first agreement provides up to $ i 300,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The second agreement provides up to $ i 325,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.

On April 13, 2017 the Company entered into i six collateralized reinsurance agreements with Kilimanjaro to provide the Company with annual aggregate catastrophe reinsurance coverage. The initial i three agreements are i four year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $ i 225,000 thousand, $ i 400,000 thousand and $ i 325,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The subsequent i three agreements are i five year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $ i 50,000 thousand, $ i 75,000 thousand and $ i 175,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.

On April 30, 2018 the Company entered into i four collateralized reinsurance agreements with Kilimanjaro to provide the Company with catastrophe reinsurance coverage. These agreements are multi-year reinsurance contracts which cover named storm and earthquake events. The first i two agreements are i four year reinsurance contracts which provide up to $ i 62,500 thousand and $ i 200,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. The remaining i two agreements are i five year reinsurance contracts which provide up to $ i 62,500 thousand and $ i 200,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico, the U.S. Virgin Islands and Canada.

Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events, as well as, the geographic location of the events. The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses. Currently, none of the published insured loss estimates for the 2017 catastrophe events have exceeded the single event retentions under the terms of the agreements that would result in a recovery. In addition, the aggregation of the to-date published insured loss estimates for the 2017 covered events have not exceeded the aggregated retentions for recovery.

Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. On April 24, 2014, Kilimanjaro issued $ i 450,000 thousand of notes (“Series 2014-1 Notes”). The $ i 450,000 thousand of Series 2014-1 Notes were fully redeemed on April 30, 2018 and are no longer outstanding. On November 18, 2014, Kilimanjaro issued $ i 500,000 thousand of notes (“Series 2014-2 Notes”). On December 1, 2015, Kilimanjaro issued $ i 625,000 thousand of notes (“Series 2015-1 Notes). On April 13, 2017, Kilimanjaro issued $ i 950,000 thousand of notes (“Series 2017-1 Notes) and $ i 300,000 thousand of notes (“Series 2017-2 Notes). On April 30, 2018, Kilimanjaro issued $ i 262,500 thousand of notes (“Series 2018-1 Notes”) and $ i 262,500 thousand of notes (“Series 2018-2 Notes”). The proceeds from the issuance of the Notes listed above are held in reinsurance trust throughout the duration of the applicable reinsurance agreements and invested solely in US government money market funds with a rating of at least “AAAm” by Standard & Poor’s.

13. SENIOR NOTES

The table below displays Holdings’ outstanding senior notes. Market value is based on quoted market prices, but due to limited trading activity, these senior notes are considered Level 2 in the fair value hierarchy.

September 30, 2019

Consolidated Balance

(Dollars in thousands)

Date Issued

Date Due

Principal Amounts

Sheet Amount

Market Value

Sheet Amount

Market Value

Senior notes

i 06-05-2014

i 06-01-2044

i 400,000

i 397,044

i 450,984

i 396,954

i 396,968

On June 5, 2014, Holdings issued $ i 400,000 thousand of i 30 year senior notes at i 4.868%, which will mature on June 1, 2044. Interest will be paid semi-annually on June 1 and December 1 of each year.

Interest expense incurred in connection with these senior notes is as follows for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars In thousands	2019		2018		2019		2018
Interest expense incurred	$	i 4,868	$	i 4,868	$	i 14,604	$	i 14,604

14. LONG TERM SUBORDINATED NOTES

The table below displays Holdings’ outstanding fixed to floating rate long term subordinated notes. Market value is based on quoted market prices, but due to limited trading activity, these subordinated notes are considered Level 2 in the fair value hierarchy.

Maturity Date

September 30, 2019