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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

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

Commission file number 1-15731

EVEREST RE GROUP, LTD.

(Exact name of registrant as specified in its charter)

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

Seon Place – 4th Floor

141 Front Street

PO Box HM 845

Hamilton HM 19, Bermuda

441-295-0006

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

of registrant’s principal executive office)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes | X |  | No |

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

Yes | X |  | No |

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

Large Accelerated Filer | X |  | Accelerated filer |
Non-accelerated filer |  |  | Smaller reporting company |
| Emerging growth company |

Indicate by check mark if the registrant is an emerging growth company and has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act.

YES |  |  | NO | X

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

YES |  |  | NO | X

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

Class | Trading Symbol | Name of Exchange where Registered | Number of Shares Outstanding At May 1, 2021
Common Shares, $0.01 par value | RE | New York Stock Exchange | 40,083,525

EVEREST RE GROUP, LTD

Table of Contents

Form 10-Q

Page

PART I

FINANCIAL INFORMATION

Item 1. | Financial Statements |
| Consolidated Balance Sheets March 31, 2021 (unaudited) |
| and December 31, 2020 | 1
| Consolidated Statements of Operations and Comprehensive Income (Loss) for the |
| three months ended March 31, 2021 and 2020 (unaudited) | 2
| Consolidated Statements of Changes in Shareholders’ Equity for the three |
| months ended March 31, 2021 and 2020 (unaudited) | 3
| Consolidated Statements of Cash Flows for the three months ended |
| March 31, 2021 and 2020 (unaudited) | 4
| Notes to Consolidated Interim Financial Statements (unaudited) | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and |
| Results of Operation | 29
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 48
Item 4. | Controls and Procedures | 48

PART II

OTHER INFORMATION

Item 1. | Legal Proceedings | 48
Item 1A. | Risk Factors | 48
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 49
Item 3. | Defaults Upon Senior Securities | 49
Item 4. | Mine Safety Disclosures | 49
Item 5. | Other Information | 49
Item 6. | Exhibits | 50

EVEREST RE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

| March 31, |  | December 31,
(Dollars and share amounts in thousands, except par value per share) | 2021 |  | 2020
| (unaudited) |  |  |
ASSETS: |  |  |  |  |
Fixed maturities - available for sale, at market value | $ | 20,407,480 |  | $ | 20,040,173
(amortized cost: 2021, $19,932,190; 2020, $19,225,067, credit allowances: 2021, $(8,723); 2020, $(1,745)) |  |  |  |  |
Equity securities, at fair value |  | 1,400,674 |  |  | 1,472,236
Short-term investments (cost: 2021, $826,777; 2020, $1,135,088) |  | 826,769 |  |  | 1,134,950
Other invested assets (cost: 2021, $2,173,221; 2020, $2,012,581) |  | 2,173,221 |  |  | 2,012,581
Cash |  | 1,132,660 |  |  | 801,651
Total investments and cash |  | 25,940,804 |  |  | 25,461,591
Accrued investment income |  | 156,330 |  |  | 141,304
Premiums receivable |  | 2,789,602 |  |  | 2,680,562
Reinsurance receivables |  | 2,029,734 |  |  | 1,994,555
Funds held by reinsureds |  | 740,554 |  |  | 716,655
Deferred acquisition costs |  | 663,560 |  |  | 622,053
Prepaid reinsurance premiums |  | 441,606 |  |  | 412,015
Income taxes |  | 31,738 |  |  | 17,253
Other assets |  | 801,424 |  |  | 742,369
TOTAL ASSETS | $ | 33,595,352 |  | $ | 32,788,357
LIABILITIES: |  |  |  |  |
Reserve for losses and loss adjustment expenses | $ | 17,090,644 |  | $ | 16,398,997
Future policy benefit reserve |  | 37,561 |  |  | 37,723
Unearned premium reserve |  | 3,704,189 |  |  | 3,501,359
Funds held under reinsurance treaties |  | 13,875 |  |  | 15,807
Other net payable to reinsurers |  | 402,379 |  |  | 294,347
Losses in course of payment |  | 139,382 |  |  | 127,971
Senior notes due 6/1/2044 |  | 397,224 |  |  | 397,194
Senior notes due 10/15/2050 |  | 979,654 |  |  | 979,524
Long term notes due 5/1/2067 |  | 223,699 |  |  | 223,674
Advances from FHLB |  | 310,000 |  |  | 310,000
Accrued interest on debt and borrowings |  | 24,035 |  |  | 10,460
Unsettled securities payable |  | 151,174 |  |  | 206,693
Other liabilities |  | 438,654 |  |  | 558,432
Total liabilities |  | 23,912,470 |  |  | 23,062,181
Commitments and contingencies (Note 7) |  | (nil) |  |  | (nil)
SHAREHOLDERS' EQUITY: |  |  |  |  |
Preferred shares, par value: $0.01; 50,000 shares authorized; |  |  |  |  |
no shares issued and outstanding |  | - |  |  | -
Common shares, par value: $0.01; 200,000 shares authorized; (2021) 69,816 |  |  |  |  |
and (2020) 69,620 outstanding before treasury shares |  | 698 |  |  | 696
Additional paid-in capital |  | 2,245,737 |  |  | 2,245,301
Accumulated other comprehensive income (loss), net of deferred income |  |  |  |  |
tax expense (benefit) of $41,161 at 2021 and $80,451 at 2020 |  | 235,079 |  |  | 534,899
Treasury shares, at cost; 29,734 shares (2021) and 29,636 shares (2020) |  | (3,645,717) |  |  | (3,622,172)
Retained earnings |  | 10,847,085 |  |  | 10,567,452
Total shareholders' equity |  | 9,682,882 |  |  | 9,726,176
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 33,595,352 |  | $ | 32,788,357
The accompanying notes are an integral part of the consolidated financial statements.

1

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

| Three Months Ended
| March 31,
(Dollars in thousands, except per share amounts) | 2021 |  | 2020
| (unaudited)
REVENUES: |  |  |  |  |
Premiums earned | $ | 2,387,865 |  | $ | 2,036,814
Net investment income |  | 260,413 |  |  | 147,800
Net realized capital gains (losses): |  |  |  |  |
Credit allowances on fixed maturity securities |  | (6,977) |  |  | (21,774)
Other net realized capital gains (losses) |  | 45,879 |  |  | (188,814)
Total net realized capital gains (losses) |  | 38,902 |  |  | (210,588)
Other income (expense) |  | 56,593 |  |  | 7,990
Total revenues |  | 2,743,773 |  |  | 1,982,016
CLAIMS AND EXPENSES: |  |  |  |  |
Incurred losses and loss adjustment expenses |  | 1,711,419 |  |  | 1,430,840
Commission, brokerage, taxes and fees |  | 489,011 |  |  | 448,522
Other underwriting expenses |  | 142,231 |  |  | 128,860
Corporate expenses |  | 12,378 |  |  | 9,833
Interest, fees and bond issue cost amortization expense |  | 15,639 |  |  | 7,583
Total claims and expenses |  | 2,370,678 |  |  | 2,025,638
INCOME (LOSS) BEFORE TAXES |  | 373,095 |  |  | (43,622)
Income tax expense (benefit) |  | 31,233 |  |  | (60,234)
NET INCOME (LOSS) | $ | 341,862 |  | $ | 16,612
Other comprehensive income (loss), net of tax: |  |  |  |  |
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period |  | (288,615) |  |  | (279,398)
Reclassification adjustment for realized losses (gains) included in net income (loss) |  | (3,666) |  |  | 31,399
Total URA(D) on securities arising during the period |  | (292,281) |  |  | (247,999)
Foreign currency translation adjustments |  | (9,582) |  |  | (50,824)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss) |  | 2,043 |  |  | 920
Total benefit plan net gain (loss) for the period |  | 2,043 |  |  | 920
Total other comprehensive income (loss), net of tax |  | (299,820) |  |  | (297,903)
COMPREHENSIVE INCOME (LOSS) | $ | 42,042 |  | $ | (281,291)
EARNINGS PER COMMON SHARE: |  |  |  |  |
Basic | $ | 8.53 |  | $ | 0.41
Diluted |  | 8.52 |  |  | 0.41
The accompanying notes are an integral part of the consolidated financial statements.

2

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except share and dividends per share amounts) | 2021 |  | 2020
| (unaudited)
COMMON SHARES (shares outstanding): |  |  |  |  |
Balance, January 1 |  | 39,983,481 |  |  | 40,798,963
Issued during the period, net |  | 196,481 |  |  | 159,423
Treasury shares acquired |  | (97,462) |  |  | (970,892)
Balance, March 31 |  | 40,082,500 |  |  | 39,987,494
COMMON SHARES (par value): |  |  |  |  |
Balance, January 1 | $ | 696 |  | $ | 694
Issued during the period, net |  | 2 |  |  | 2
Balance, March 31 |  | 698 |  |  | 696
ADDITIONAL PAID-IN CAPITAL: |  |  |  |  |
Balance, January 1 |  | 2,245,301 |  |  | 2,219,660
Share-based compensation plans |  | 436 |  |  | (3,181)
Balance, March 31 |  | 2,245,737 |  |  | 2,216,479
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), |  |  |  |  |
NET OF DEFERRED INCOME TAXES: |  |  |  |  |
Balance, January 1 |  | 534,899 |  |  | 28,152
Net increase (decrease) during the period |  | (299,820) |  |  | (297,903)
Balance, March 31 |  | 235,079 |  |  | (269,751)
RETAINED EARNINGS: |  |  |  |  |
Balance, January 1 |  | 10,567,452 |  |  | 10,306,571
Change to beginning balance due to adoption of Accounting Standards Update 2016-13 |  | - |  |  | (4,214)
Net income (loss) |  | 341,862 |  |  | 16,612
Dividends declared ($1.55 per share 2021 and $1.55 per share 2020) |  | (62,228) |  |  | (63,277)
Balance, March 31 |  | 10,847,085 |  |  | 10,255,692
TREASURY SHARES AT COST: |  |  |  |  |
Balance, January 1 |  | (3,622,172) |  |  | (3,422,152)
Purchase of treasury shares |  | (23,545) |  |  | (200,020)
Balance, March 31 |  | (3,645,717) |  |  | (3,622,172)
TOTAL SHAREHOLDERS' EQUITY, March 31, | $ | 9,682,882 |  | $ | 8,580,944
The accompanying notes are an integral part of the consolidated financial statements.

3

EVEREST RE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
| (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |
Net income (loss) | $ | 341,862 |  | $ | 16,612
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Decrease (increase) in premiums receivable |  | (105,460) |  |  | (119,548)
Decrease (increase) in funds held by reinsureds, net |  | (25,584) |  |  | (28,973)
Decrease (increase) in reinsurance receivables |  | (14,518) |  |  | (130,593)
Decrease (increase) in income taxes |  | 24,908 |  |  | (65,114)
Decrease (increase) in prepaid reinsurance premiums |  | (27,071) |  |  | (10,572)
Increase (decrease) in reserve for losses and loss adjustment expenses |  | 655,054 |  |  | 406,257
Increase (decrease) in future policy benefit reserve |  | (162) |  |  | (915)
Increase (decrease) in unearned premiums |  | 196,631 |  |  | 158,744
Increase (decrease) in other net payable to reinsurers |  | 105,390 |  |  | 95,555
Increase (decrease) in losses in course of payment |  | 11,980 |  |  | (1,422)
Change in equity adjustments in limited partnerships |  | (116,767) |  |  | (8,512)
Distribution of limited partnership income |  | 18,125 |  |  | 11,108
Change in other assets and liabilities, net |  | (149,464) |  |  | (45,259)
Non-cash compensation expense |  | 11,021 |  |  | 9,393
Amortization of bond premium (accrual of bond discount) |  | 17,323 |  |  | 8,640
Net realized capital (gains) losses |  | (38,902) |  |  | 210,588
Net cash provided by (used in) operating activities |  | 904,366 |  |  | 505,989
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |
Proceeds from fixed maturities matured/called - available for sale, at market value |  | 818,352 |  |  | 656,070
Proceeds from fixed maturities sold - available for sale, at market value |  | 228,278 |  |  | 501,953
Proceeds from equity securities sold, at fair value |  | 281,313 |  |  | 112,841
Distributions from other invested assets |  | 52,211 |  |  | 104,085
Cost of fixed maturities acquired - available for sale, at market value |  | (1,776,730) |  |  | (1,359,281)
Cost of equity securities acquired, at fair value |  | (174,981) |  |  | (76,513)
Cost of other invested assets acquired |  | (98,939) |  |  | (152,269)
Net change in short-term investments |  | 308,585 |  |  | (27,882)
Net change in unsettled securities transactions |  | (93,610) |  |  | (17,185)
Net cash provided by (used in) investing activities |  | (455,521) |  |  | (258,181)
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |
Common shares issued during the period for share-based compensation, net of expense |  | (10,583) |  |  | (12,573)
Purchase of treasury shares |  | (23,545) |  |  | (200,020)
Dividends paid to shareholders |  | (62,229) |  |  | (63,277)
Proceeds from revolving credit borrowings |  | - |  |  | 50,000
Cost of debt repurchase |  | - |  |  | (1,198)
Cost of shares withheld on settlements of share-based compensation awards |  | (12,507) |  |  | (13,982)
Net cash provided by (used in) financing activities |  | (108,864) |  |  | (241,050)
EFFECT OF EXCHANGE RATE CHANGES ON CASH |  | (8,972) |  |  | 2,832
Net increase (decrease) in cash |  | 331,009 |  |  | 9,590
Cash, beginning of period |  | 801,651 |  |  | 808,036
Cash, end of period | $ | 1,132,660 |  | $ | 817,626
SUPPLEMENTAL CASH FLOW INFORMATION: |  |  |  |  |
Income taxes paid (recovered) | $ | 6,417 |  | $ | 4,920
Interest paid |  | 1,880 |  |  | 2,817
The accompanying notes are an integral part of the consolidated financial statements. |  |  |  |  |

4

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three Months Ended March 31, 2021 and 2020

1. GENERAL

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

2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), has been omitted since it is not required for interim reporting purposes. The December 31, 2020 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2020, 2019 and 2018, included in the Company’s most recent Form 10-K filing.

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

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

All intercompany accounts and transactions have been eliminated.

5

Application of Recently Issued Accounting Standard Changes.

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

Accounting for Cloud Computing Arrangement. In August 2018, FASB issued ASU 2018-15, which outlines accounting for implementation costs of a cloud computing arrangement that is a service contract. This guidance requires that implementation costs of a cloud computing arrangement that is a service contract must be capitalized and expensed in accordance with the existing provisions provided in Subtopic 350-40 regarding development of internal use software. In addition, any capitalized implementation costs should be amortized over the term of the hosting arrangement. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within that annual reporting period. The Company adopted the guidance as of January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s financial statements.

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

Valuation of Financial Instruments. In June 2016, FASB issued ASU 2016-13 (and has subsequently issued related guidance and amendments in ASU 2019-11 and ASU 2019-10 in November 2019) which outline guidance on the valuation of and accounting for assets measured at amortized cost and available for sale debt securities. The new guidance requires the carrying value of assets measured at amortized cost, including reinsurance and premiums receivables to be presented as the net amount expected to be collected on the financial asset (amortized cost less an allowance for credit losses valuation account). The allowance reflects expected credit losses of the financial asset which considers available information using a combination both historical information, current market conditions and reasonable and supportable forecasts. For available-for-sale debt securities, the guidance modified the previous other than temporary impairment model, now requiring an allowance for estimated credit related losses rather than a permanent impairment, which will be limited to the amount by which fair value is below amortized cost. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, on a modified retrospective basis. The adoption resulted in a cumulative reduction of $4,214 thousand in retained earnings, net of tax, which is disclosed separately within the Consolidated Statements of Shareholders’ Equity.

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

6

3. INVESTMENTS

Effective January 1, 2020, the Company adopted ASU 2016-13 which modified the previous other than temporary impairment model for available for sale fixed maturity securities. The guidance requires the Company to record allowances for credit losses for securities that are deemed to have valuation deterioration due to credit related factors. The following tables show amortized cost, allowance for credit losses, gross unrealized appreciation, gross unrealized depreciation and market value of available for sale, fixed maturity securities as of the dates indicated:

|  | At March 31, 2021
|  | Amortized |  | Allowance for |  | Unrealized |  | Unrealized |  | Market
(Dollars in thousands) | Cost |  | Credit Losses |  | Appreciation |  | Depreciation |  | Value
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury securities and obligations of |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government agencies and corporations | $ | 1,271,760 |  | $ | - |  | $ | 33,703 |  | $ | (11,537) |  | $ | 1,293,926
| Obligations of U.S. states and political subdivisions |  | 566,698 |  |  | - |  |  | 32,092 |  |  | (2,741) |  |  | 596,049
| Corporate securities |  | 7,228,229 |  |  | (3,603) |  |  | 255,940 |  |  | (85,555) |  |  | 7,395,011
| Asset-backed securities |  | 2,615,962 |  |  | (4,915) |  |  | 27,486 |  |  | (2,762) |  |  | 2,635,771
| Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Commercial |  | 992,442 |  |  | - |  |  | 43,127 |  |  | (6,252) |  |  | 1,029,317
| Agency residential |  | 2,257,474 |  |  | - |  |  | 56,223 |  |  | (14,724) |  |  | 2,298,973
| Non-agency residential |  | 9,253 |  |  | - |  |  | 4 |  |  | (12) |  |  | 9,245
| Foreign government securities |  | 1,556,644 |  |  | - |  |  | 74,746 |  |  | (27,160) |  |  | 1,604,230
| Foreign corporate securities |  | 3,433,728 |  |  | (205) |  |  | 154,145 |  |  | (42,710) |  |  | 3,544,958
Total fixed maturity securities | $ | 19,932,190 |  | $ | (8,723) |  | $ | 677,466 |  | $ | (193,453) |  | $ | 20,407,480

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

7

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 March 31, 2021 |  | At December 31, 2020
| Amortized |  | Market |  | Amortized |  | Market
(Dollars in thousands) | Cost |  | Value |  | Cost |  | Value
Fixed maturity securities – available for sale: |  |  |  |  |  |  |  |  |  |  |
Due in one year or less | $ | 1,548,669 |  | $ | 1,559,198 |  | $ | 1,365,793 |  | $ | 1,374,674
Due after one year through five years |  | 6,510,731 |  |  | 6,715,932 |  |  | 6,529,189 |  |  | 6,774,785
Due after five years through ten years |  | 4,895,574 |  |  | 5,036,321 |  |  | 4,414,211 |  |  | 4,751,903
Due after ten years |  | 1,102,085 |  |  | 1,122,723 |  |  | 1,247,816 |  |  | 1,309,773
Asset-backed securities |  | 2,615,962 |  |  | 2,635,771 |  |  | 2,540,809 |  |  | 2,565,802
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 992,442 |  |  | 1,029,317 |  |  | 915,923 |  |  | 990,303
Agency residential |  | 2,257,474 |  |  | 2,298,973 |  |  | 2,206,139 |  |  | 2,267,739
Non-agency residential |  | 9,253 |  |  | 9,245 |  |  | 5,187 |  |  | 5,194
Total fixed maturity securities | $ | 19,932,190 |  | $ | 20,407,480 |  | $ | 19,225,067 |  | $ | 20,040,173

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

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Increase (decrease) during the period between the market value and cost |  |  |  |  |
of investments carried at market value, and deferred taxes thereon: |  |  |  |  |
Fixed maturity securities | $ | (332,708) |  | $ | (277,023)
Change in unrealized appreciation (depreciation), pre-tax |  | (332,708) |  |  | (277,023)
Deferred tax benefit (expense) |  | 40,427 |  |  | 29,024
Change in unrealized appreciation (depreciation), |  |  |  |  |
net of deferred taxes, included in shareholders’ equity | $ | (292,281) |  | $ | (247,999)

The Company reviews all of its fixed maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline in value is due to non-credit related or credit related factors. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related decline in market value. Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

8

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

Prior to the adoption of ASU 2016-13 effective January 1, 2020, estimated credit losses were recorded as adjustments to the carrying value of the security and any subsequent improvement in market value were recorded through other comprehensive income.

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

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

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

|  | Duration of Unrealized Loss at March 31, 2021 By Security Type
| Less than 12 months |  | Greater than 12 months |  | Total
|  |  |  | Gross |  |  |  |  | Gross |  |  |  |  | Gross
|  |  |  | Unrealized |  |  |  |  | Unrealized |  |  |  |  | Unrealized
(Dollars in thousands) | Market Value |  | Depreciation |  | Market Value |  | Depreciation |  | Market Value |  | Depreciation
Fixed maturity securities - available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies and corporations | $ | 230,960 |  | $ | (9,326) |  | $ | 14,778 |  | $ | (2,211) |  | $ | 245,738 |  | $ | (11,537)
Obligations of U.S. states and political subdivisions |  | 57,823 |  |  | (1,709) |  |  | 12,079 |  |  | (1,032) |  |  | 69,902 |  |  | (2,741)
Corporate securities |  | 1,571,716 |  |  | (61,150) |  |  | 253,539 |  |  | (24,405) |  |  | 1,825,255 |  |  | (85,555)
Asset-backed securities |  | 304,407 |  |  | (1,981) |  |  | 24,619 |  |  | (781) |  |  | 329,026 |  |  | (2,762)
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 152,882 |  |  | (5,290) |  |  | 5,600 |  |  | (962) |  |  | 158,482 |  |  | (6,252)
Agency residential |  | 899,288 |  |  | (13,640) |  |  | 54,717 |  |  | (1,084) |  |  | 954,005 |  |  | (14,724)
Non-agency residential |  | 6,266 |  |  | (10) |  |  | 156 |  |  | (2) |  |  | 6,422 |  |  | (12)
Foreign government securities |  | 215,989 |  |  | (11,701) |  |  | 123,143 |  |  | (15,459) |  |  | 339,132 |  |  | (27,160)
Foreign corporate securities |  | 782,295 |  |  | (32,134) |  |  | 100,457 |  |  | (10,576) |  |  | 882,752 |  |  | (42,710)
Total fixed maturity securities | $ | 4,221,626 |  | $ | (136,941) |  | $ | 589,088 |  | $ | (56,512) |  | $ | 4,810,714 |  | $ | (193,453)

|  | Duration of Unrealized Loss at March 31, 2021 By Maturity
| Less than 12 months |  | Greater than 12 months |  | Total
|  |  |  | Gross |  |  |  |  | Gross |  |  |  |  | Gross
|  |  |  | Unrealized |  |  |  |  | Unrealized |  |  |  |  | Unrealized
(Dollars in thousands) | Market Value |  | Depreciation |  | Market Value |  | Depreciation |  | Market Value |  | Depreciation
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less | $ | 159,736 |  | $ | (6,665) |  | $ | 108,331 |  | $ | (10,340) |  | $ | 268,067 |  | $ | (17,005)
Due in one year through five years |  | 1,117,370 |  |  | (33,855) |  |  | 246,205 |  |  | (20,081) |  |  | 1,363,575 |  |  | (53,936)
Due in five years through ten years |  | 1,231,926 |  |  | (60,905) |  |  | 60,821 |  |  | (7,511) |  |  | 1,292,747 |  |  | (68,416)
Due after ten years |  | 349,751 |  |  | (14,595) |  |  | 88,639 |  |  | (15,751) |  |  | 438,390 |  |  | (30,346)
Asset-backed securities |  | 304,407 |  |  | (1,981) |  |  | 24,619 |  |  | (781) |  |  | 329,026 |  |  | (2,762)
Mortgage-backed securities |  | 1,058,436 |  |  | (18,940) |  |  | 60,473 |  |  | (2,048) |  |  | 1,118,909 |  |  | (20,988)
Total fixed maturity securities | $ | 4,221,626 |  | $ | (136,941) |  | $ | 589,088 |  | $ | (56,512) |  | $ | 4,810,714 |  | $ | (193,453)

9

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at March 31, 2021 were $,4,810714 thousand and $193,453 thousand, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at March 31, 2021, did not exceed 1.3% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second the largest unrealized loss position at March 31, 2021, comprised less than 0.1% of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $136,941 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, agency residential mortgage-backed securities and foreign government securities. Of these unrealized losses, $130,331 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $56,512 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 and foreign government securities. Of these unrealized losses, $38,150 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.

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 December 31, 2020 By Security Type
| Less than 12 months |  | Greater than 12 months |  | Total
|  |  |  | Gross |  |  |  |  | Gross |  |  |  |  | Gross
|  |  |  | Unrealized |  |  |  |  | Unrealized |  |  |  |  | Unrealized
(Dollars in thousands) | Market Value |  | Depreciation |  | Market Value |  | Depreciation |  | Market Value |  | Depreciation
Fixed maturity securities - available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies and corporations | $ | 135,190 |  | $ | (7,134) |  | $ | - |  | $ | - |  | $ | 135,190 |  | $ | (7,134)
Obligations of U.S. states and political subdivisions |  | 19,524 |  |  | (999) |  |  | 4,059 |  |  | (255) |  |  | 23,583 |  |  | (1,254)
Corporate securities |  | 669,755 |  |  | (26,159) |  |  | 247,962 |  |  | (29,072) |  |  | 917,717 |  |  | (55,231)
Asset-backed securities |  | 235,566 |  |  | (4,768) |  |  | 85,595 |  |  | (930) |  |  | 321,161 |  |  | (5,698)
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 53,511 |  |  | (578) |  |  | 6,592 |  |  | (317) |  |  | 60,103 |  |  | (895)
Agency residential |  | 434,447 |  |  | (2,016) |  |  | 50,353 |  |  | (1,047) |  |  | 484,800 |  |  | (3,063)
Non-agency residential |  | 185 |  |  | (2) |  |  | - |  |  | - |  |  | 185 |  |  | (2)
Foreign government securities |  | 114,755 |  |  | (8,813) |  |  | 150,812 |  |  | (13,637) |  |  | 265,567 |  |  | (22,450)
Foreign corporate securities |  | 354,548 |  |  | (17,489) |  |  | 115,595 |  |  | (11,596) |  |  | 470,143 |  |  | (29,085)
Total fixed maturity securities | $ | 2,017,481 |  | $ | (67,958) |  | $ | 660,968 |  | $ | (56,854) |  | $ | 2,678,449 |  | $ | (124,812)

10

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

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2020 were $2,678,449 thousand and $124,812 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2020, did not exceed 0.7.% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss comprised less than 0.1% of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $67,958 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities and foreign government securities. Of these unrealized losses, $63,424 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $56,854 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $33,533 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

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

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Fixed maturities | $ | 140,916 |  | $ | 137,924
Equity securities |  | 4,838 |  |  | 3,521
Short-term investments and cash |  | 180 |  |  | 2,175
Other invested assets: |  |  |  |  |
Limited partnerships |  | 114,333 |  |  | 21,568
Other |  | 6,019 |  |  | (13,071)
Gross investment income before adjustments |  | 266,286 |  |  | 152,117
Funds held interest income (expense) |  | 7,966 |  |  | 8,216
Future policy benefit reserve income (expense) |  | (291) |  |  | (211)
Gross investment income |  | 273,961 |  |  | 160,122
Investment expenses |  | (13,548) |  |  | (12,322)
Net investment income | $ | 260,413 |  | $ | 147,800

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.

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The Company had contractual commitments to invest up to an additional $1,413,543 thousand in limited partnerships and private placement loans at March 31, 2021. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026.

The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its participation in the facility. As of March 31, 2021, the market value of investments in the facility consolidated within the Company’s balance sheets was $734,888 thousand.

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

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  |  | 2020
Fixed maturity securities, market value: |  |  |  |  |
Allowance for credit losses | $ | (6,977) |  | $ | (21,774)
Gains (losses) from sales |  | 9,174 |  |  | (14,076)
Fixed maturity securities, fair value: |  |  |  |  |
Gains (losses) from sales |  | - |  |  | -
Gains (losses) from fair value adjustments |  | - |  |  | (1,123)
Equity securities, fair value: |  |  |  |  |
Gains (losses) from sales |  | 6,238 |  |  | (27,599)
Gains (losses) from fair value adjustments |  | 29,056 |  |  | (144,003)
Other invested assets |  | 1,346 |  |  | (2,327)
Short-term investments gain (loss) |  | 66 |  |  | 314
Total net realized capital gains (losses) | $ | 38,902 |  | $ | (210,588)

| Roll Forward of Allowance for Credit Losses
| Three Months Ended March 31, 2021 |  | Three Months Ended March 31, 2020
|  |  |  |  |  |  | Foreign |  | Foreign |  |  |  |  |  |  |  | Foreign |  | Foreign |  |  |
| Corporate |  | Asset-Backed |  | Government |  | Corporate |  |  |  |  | Corporate |  | Government |  | Corporate |  |  |
| Securities |  | Securities |  | Securities |  | Securities |  | Total |  | Securities |  | Securities |  | Securities |  | Total
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | (1,220) |  | $ | - |  | $ | (22) |  | $ | (503) |  | $ | (1,745) |  | $ | - |  | $ | - |  | $ | - |  | $ | -
Credit losses on securities where credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
losses were not previously recorded |  | (2,383) |  |  | (4,915) |  |  | - |  |  | - |  |  | (7,298) |  |  | (17,305) |  |  | (519) |  |  | (3,950) |  |  | (21,774)
Increases in allowance on previously |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |
impaired securities |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Decreases in allowance on previously |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |
impaired securities |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Reduction in allowance due to disposals |  | - |  |  | - |  |  | 22 |  |  | 298 |  |  | 320 |  |  | - |  |  | - |  |  | - |  |  | -
Balance as of March 31, 2021 | $ | (3,603) |  | $ | (4,915) |  | $ | - |  | $ | (205) |  | $ | (8,723) |  | $ | (17,305) |  | $ | (519) |  | $ | (3,950) |  | $ | (21,774)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) fair value re-measurements, allowances for credit losses per ASU 2016-13 and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above.

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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
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Proceeds from sales of fixed maturity securities | $ | 228,278 |  | $ | 501,953
Gross gains from sales |  | 14,864 |  |  | 14,001
Gross losses from sales |  | (5,690) |  |  | (28,077)
Proceeds from sales of equity securities | $ | 281,313 |  | $ | 112,841
Gross gains from sales |  | 12,304 |  |  | 2,584
Gross losses from sales |  | (6,066) |  |  | (30,183)

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

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

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Gross reserves beginning of period | $ | 16,398,997 |  | $ | 13,611,313
Less reinsurance recoverables |  | (1,843,691) |  |  | (1,640,712)
Net reserves beginning of period |  | 14,555,306 |  |  | 11,970,601
Incurred related to: |  |  |  |  |
Current year |  | 1,713,253 |  |  | 1,433,440
Prior years |  | (1,834) |  |  | (2,600)
Total incurred losses and LAE |  | 1,711,419 |  |  | 1,430,840
Paid related to: |  |  |  |  |
Current year |  | 215,302 |  |  | 168,528
Prior years |  | 837,051 |  |  | 907,790
Total paid losses and LAE |  | 1,052,353 |  |  | 1,076,318
Foreign exchange/translation adjustment |  | (5,841) |  |  | (156,565)
Net reserves end of period |  | 15,208,531 |  |  | 12,168,558
Plus reinsurance recoverables |  | 1,882,113 |  |  | 1,651,946
Gross reserves end of period | $ | 17,090,644 |  | $ | 13,820,504
(Some amounts may not reconcile due to rounding.)

Current year incurred losses were $1,713,253 thousand and $1,433,440 thousand for the three months ended March 31, 2021 and 2020, respectively. The increase in current year incurred losses in 2021 compared to 2020 was primarily due to a $240,000 thousand increase in catastrophe losses and the impact of the increase in premiums earned.

5. 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

13

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 managing publicly traded securities 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.

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 March 31, 2021, $1,495,500 thousand of fixed maturities, market value were fair valued using unobservable inputs. The majority of these fixed maturities were valued by investment managers’ valuation committees and many of these fair values were substantiated by valuations from independent third parties. The Company has procedures in place to evaluate these independent third party valuations. At December 31, 2020, $1,330,224 thousand of fixed maturities, market value were fair valued using unobservable inputs.

The Company internally manages a public equity portfolio which had a fair value at March 31, 2021 and December 31, 2020 of $912,126 thousand and $784,746 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.

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In addition to the valuations from investment managers, some of 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 may 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 Level 1 and Level 2 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.

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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 |  | Inputs
(Dollars in thousands) |  | March 31, 2021 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities, market value |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies and corporations |  | $ | 1,293,926 |  | $ | - |  | $ | 1,293,926 |  | $ | -
Obligations of U.S. States and political subdivisions |  |  | 596,049 |  |  | - |  |  | 596,049 |  |  | -
Corporate securities |  |  | 7,395,011 |  |  | - |  |  | 6,690,469 |  |  | 704,542
Asset-backed securities |  |  | 2,635,771 |  |  | - |  |  | 1,850,411 |  |  | 785,360
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 1,029,317 |  |  | - |  |  | 1,029,317 |  |  | -
Agency residential |  |  | 2,298,973 |  |  | - |  |  | 2,298,973 |  |  | -
Non-agency residential |  |  | 9,245 |  |  | - |  |  | 9,245 |  |  | -
Foreign government securities |  |  | 1,604,230 |  |  | - |  |  | 1,604,230 |  |  | -
Foreign corporate securities |  |  | 3,544,958 |  |  | - |  |  | 3,539,360 |  |  | 5,598
Total fixed maturities, market value |  |  | 20,407,480 |  |  | - |  |  | 18,911,980 |  |  | 1,495,500
Equity securities, fair value |  |  | 1,400,674 |  |  | 1,343,843 |  |  | 56,831 |  |  | -

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

|  |  |  |  |  | Fair Value Measurement Using:
|  |  |  |  | Quoted Prices |  |  |  |  |  |
|  |  |  |  | in Active |  | Significant |  |  |
|  |  |  |  | Markets for |  | Other |  | Significant
|  |  |  |  | Identical |  | Observable |  | Unobservable
|  |  |  |  | Assets |  | Inputs |  | Inputs
(Dollars in thousands) |  | December 31, 2020 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities, market value |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies and corporations |  | $ | 1,367,106 |  | $ | - |  | $ | 1,367,106 |  | $ | -
Obligations of U.S. States and political subdivisions |  |  | 577,295 |  |  | - |  |  | 577,295 |  |  | -
Corporate securities |  |  | 7,149,026 |  |  | - |  |  | 6,447,534 |  |  | 701,492
Asset-backed securities |  |  | 2,565,802 |  |  | - |  |  | 1,942,769 |  |  | 623,033
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 990,303 |  |  | - |  |  | 990,303 |  |  | -
Agency residential |  |  | 2,267,739 |  |  | - |  |  | 2,267,739 |  |  | -
Non-agency residential |  |  | 5,194 |  |  | - |  |  | 5,194 |  |  | -
Foreign government securities |  |  | 1,645,375 |  |  | - |  |  | 1,645,375 |  |  | -
Foreign corporate securities |  |  | 3,472,333 |  |  | - |  |  | 3,466,634 |  |  | 5,699
Total fixed maturities, market value |  |  | 20,040,173 |  |  | - |  |  | 18,709,949 |  |  | 1,330,224
Equity securities, fair value |  |  | 1,472,236 |  |  | 1,368,704 |  |  | 103,532 |  |  | -

In addition, $240,892 thousand and $224,698 thousand of investments within other invested assets on the consolidated balance sheets as of March 31, 2021 and December 31, 2020, 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.

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

|  |  | Total Fixed Maturities, Market Value
|  | Three Months Ended March 31, 2021 |  | Three Months Ended March 31, 2020
|  | Corporate |  | Asset-Backed |  | Foreign |  |  |  |  | Corporate |  | Asset-Backed |  | Foreign |  |  |
(Dollars in thousands) |  | Securities |  | Securities |  | Corporate |  | Total |  | Securities |  | Securities |  | Corporate |  | Total
Beginning balance fixed maturities at market value |  | $ | 701,492 |  | $ | 623,033 |  | $ | 5,699 |  | $ | 1,330,224 |  | $ | 617,588 |  | $ | 153,641 |  | $ | 1,750 |  | $ | 772,979
Total gains or (losses) (realized/unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings |  |  | (1,789) |  |  | (4,168) |  |  | 3 |  |  | (5,954) |  |  | (214) |  |  | 4 |  |  | - |  |  | (210)
Included in other comprehensive income (loss) |  |  | 2,836 |  |  | (3,135) |  |  | 49 |  |  | (250) |  |  | (3,357) |  |  | (15,882) |  |  | - |  |  | (19,239)
Purchases, issuances and settlements |  |  | 2,003 |  |  | 169,630 |  |  | (153) |  |  | 171,480 |  |  | 99,064 |  |  | 100,868 |  |  | (1,750) |  |  | 198,182
Transfers in and/or (out) of Level 3 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Ending balance |  | $ | 704,542 |  | $ | 785,360 |  | $ | 5,598 |  | $ | 1,495,500 |  | $ | 713,081 |  | $ | 238,631 |  | $ | - |  | $ | 951,712
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 |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | (539) |  | $ | - | $ | $ | - |  | $ | (539)
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |  |  |

|  | Total Fixed Maturities, Fair Value
|  | Three Months Ended March 31, 2021 |  | Three Months Ended March 31, 2020
|  | Foreign |  |  |  |  | Foreign |  |  |
(Dollars in thousands) |  |  | Corporate |  | Total |  | Corporate |  | Total
Beginning balance fixed maturities at fair value |  | $ | - |  | $ | - |  | $ | 5,826 |  | $ | 5,826
Total gains or (losses) (realized/unrealized) |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings |  |  | - |  |  | - |  |  | (1,123) |  |  | (1,123)
Included in other comprehensive income (loss) |  |  | - |  |  | - |  |  | - |  |  | -
Purchases, issuances and settlements |  |  | - |  |  | - |  |  | - |  |  | -
Transfers in and/or (out) of Level 3 |  |  | - |  |  | - |  |  | - |  |  | -
Ending balance |  | $ | - |  | $ | - |  | $ | 4,703 |  | $ | 4,703
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.)

6. 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.

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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
|  | March 31,
(Dollars in thousands, except per share amounts) | 2021 |  | 2020
Net income (loss) per share: |  |  |  |  |  |  |
| Numerator |  |  |  |  |  |  |
| Net income (loss) | $ | 341,862 |  |  | $ | 16,612 |
| Less: dividends declared-common shares and unvested common shares |  | (62,229) |  |  |  | (63,277) |
| Undistributed earnings |  | 279,633 |  |  |  | (46,666) |
| Percentage allocated to common shareholders (1) |  | 98.7 | % |  |  | 98.7 | %
|  |  | 276,031 |  |  |  | (46,082) |
| Add: dividends declared-common shareholders |  | 61,415 |  |  |  | 62,488 |
| Numerator for basic and diluted earnings per common share | $ | 337,446 |  |  | $ | 16,406 |
| Denominator |  |  |  |  |  |  |
| Denominator for basic earnings per weighted-average common shares |  | 39,543 |  |  |  | 40,204 |
| Effect of dilutive securities: |  |  |  |  |  |  |
| Options |  | 54 |  |  |  | 92 |
| Denominator for diluted earnings per adjusted weighted-average common shares |  | 39,597 |  |  |  | 40,296 |
| Per common share net income (loss) |  |  |  |  |  |  |
| Basic | $ | 8.53 |  |  | $ | 0.41 |
| Diluted | $ | 8.52 |  |  | $ | 0.41 |
(1) | Basic weighted-average common shares outstanding |  | 39,543 |  |  |  | 40,204 |
| Basic weighted-average common shares outstanding and unvested common shares expected to vest |  | 40,059 |  |  |  | 40,713 |
| Percentage allocated to common shareholders |  | 98.7 | % |  |  | 98.7 | %
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |

There were no anti-diluted options outstanding for the three months ended March 31, 2021 and 2020.

All outstanding options expire on or between May 18, 2021 and September 19, 2022.

7. 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 had one equity index put option contract at March 31, 2021, based on the Standard & Poor’s 500 (“S&P 500”) index. Based on historical index volatilities and trends and the March 31, 2021 S&P 500 index value, the Company estimates the probability that the equity index put option contract of the S&P 500 index falling below the strike price on the exercise date to be less than 0.2%. The theoretical maximum payout under this equity index put option contract would occur if on the exercise date the S&P 500 index value was zero. At March 31, 2021, the present value of the theoretical maximum payout using a 3% discount factor was $148,976

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thousand. Conversely, if the contract had expired on March 31, 2021, with the S&P index at 3,972.89, there would have been no settlement amount.

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 March 31, |  | At December 31,
(Dollars in thousands) | 2021 |  | 2020
The Prudential | $ | 139,981 |  | $ | 140,773
Unaffiliated life insurance company |  | 32,835 |  |  | 35,128

8. 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 March 31, 2021 |  | Three Months Ended March 31, 2020
(Dollars in thousands) | Before Tax |  | Tax Effect |  | Net of Tax |  | Before Tax |  | Tax Effect |  | Net of Tax
Unrealized appreciation (depreciation) ("URA(D)") on securities - non-credit related | $ | (329,166) |  | $ | 40,551 |  | $ | (288,615) |  | $ | (315,200) |  | $ | 35,802 |  | $ | (279,398)
Reclassification of net realized losses (gains) included in net income (loss) |  | (3,542) |  |  | (124) |  |  | (3,666) |  |  | 38,177 |  |  | (6,778) |  |  | 31,399
Foreign currency translation adjustments |  | (8,988) |  |  | (594) |  |  | (9,582) |  |  | (58,723) |  |  | 7,899 |  |  | (50,824)
Reclassification of benefit plan liability amortization included in net income (loss) |  | 2,586 |  |  | (543) |  |  | 2,043 |  |  | 1,165 |  |  | (245) |  |  | 920
Total other comprehensive income (loss) | $ | (339,110) |  | $ | 39,290 |  | $ | (299,820) |  | $ | (334,581) |  | $ | 36,678 |  | $ | (297,903)

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

|  | Three Months Ended |  |
|  | March 31, |  | Affected line item within the statements of
AOCI component |  | 2021 |  | 2020 |  | operations and comprehensive income (loss)
(Dollars in thousands) |  |  |  |  |  |  |  |
URA(D) on securities |  | $ | (3,542) |  | $ | 38,177 |  | Other net realized capital gains (losses)
|  |  | (124) |  |  | (6,778) |  | Income tax expense (benefit)
|  | $ | (3,666) |  | $ | 31,399 |  | Net income (loss)
Benefit plan net gain (loss) |  | $ | 2,586 |  | $ | 1,165 |  | Other underwriting expenses
|  |  | (543) |  |  | (245) |  | Income tax expense (benefit)
|  | $ | 2,043 |  | $ | 920 |  | Net income (loss)

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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
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Beginning balance of URA (D) on securities | $ | 724,159 |  | $ | 304,425
Current period change in URA (D) of investments - non-credit OTTI |  | (292,281) |  |  | (247,999)
Ending balance of URA (D) on securities |  | 431,878 |  |  | 56,426
Beginning balance of foreign currency translation adjustments |  | (115,390) |  |  | (201,717)
Current period change in foreign currency translation adjustments |  | (9,582) |  |  | (50,824)
Ending balance of foreign currency translation adjustments |  | (124,972) |  |  | (252,541)
Beginning balance of benefit plan net gain (loss) |  | (73,870) |  |  | (74,556)
Current period change in benefit plan net gain (loss) |  | 2,043 |  |  | 920
Ending balance of benefit plan net gain (loss) |  | (71,827) |  |  | (73,636)
Ending balance of accumulated other comprehensive income (loss) | $ | 235,079 |  | $ | (269,751)
(Some amounts may not reconcile due to rounding.) |  |  |  |  |

9. CREDIT FACILITIES

The Company has three active credit facilities for a total commitment of up to $1,050,000 thousand and an additional credit facility for a total commitment of up to £52,175 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
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Credit facility interest and fees incurred - Wells Fargo Bank | $ | 105 |  | $ | 123
Loan interest and fees incurred - Federal Home Loan Bank |  | 271 |  |  | -
Total interest and fees incurred | $ | 376 |  | $ | 123

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 five year, $800,000 thousand senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22, 2012, four year, $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 $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 0.5% per annum or (c) the one month LIBOR Rate plus 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 $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 0.35 to 1 and to maintain a minimum net worth. Minimum net worth is an amount equal to the sum of $5,370,979 thousand

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plus 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 25% of any increase in consolidated net worth during such period attributable to the issuance of ordinary and preferred shares, which at March 31, 2021, was $6,476,618 thousand. As of March 31, 2021, the Company was in compliance with all Group Credit Facility covenants.

On March 25, 2020, Group borrowed $50,000 thousand under Tranche one of the credit facility as an unsecured revolving credit loan. The loan was fully paid off on June 26, 2020.

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

(Dollars in thousands) |  |  |  |  | At March 31, 2021 |  |  | At December 31, 2020
Bank |  |  |  | Commitment |  | In Use |  | Date of Expiry |  | Commitment |  | In Use |  | Date of Expiry
Wells Fargo Bank Group Credit Facility |  | Tranche One |  | $ | 200,000 |  | $ | 151,380 |  | 12/31/2021 |  | $ | 200,000 |  | $ | 164,242 |  | 12/31/2021
|  | Tranche Two |  |  | 600,000 |  |  | 598,386 |  | 12/31/2021 |  |  | 600,000 |  |  | 589,690 |  | 12/31/2021
Total Wells Fargo Bank Group Credit Facility |  |  |  | $ | 800,000 |  | $ | 749,766 |  |  |  | $ | 800,000 |  | $ | 753,932 |  |

Bermuda Re Wells Fargo Letter of Credit Facility

Effective February 23, 2021, Bermuda Re entered into a letter of credit issuance facility with Wells Fargo referred to as the “Bermuda Re Wells Fargo Letter of Credit Facility.” The Bermuda Re Wells Fargo Letter of Credit Facility provides for the issuance of up to $50,000 thousand of secured letters of credit to collateralize reinsurance obligations as a non-admitted reinsurer.

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

(Dollars in thousands) |  | At March 31, 2021 |  | At December 31, 2020
Bank |  | Commitment |  | In Use |  | Date of Expiry |  | Commitment |  | In Use |  | Date of Expiry
Wells Fargo Bank Bilateral LOC Agreement |  | $ | 50,000 |  | $ | 42,893 |  | 12/31/2021 |  | $ | - |  | $ | - |  |
|  |  |  |  |  | - |  |  |  |  |  |  |  | - |  |
|  | $ | 50,000 |  | $ | 42,893 |  |  |  | $ | - |  | $ | - |  |

Bermuda Re Citibank Letter of Credit Facility

Effective December 31, 2020, 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 $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) 0.35% per annum of the principal amount of issued standard letters of credit (expiry of 15 months or less) and (B) 0.45% per annum of the principal amount of issued extended tenor letters of credit (expiry maximum of up to 60 months). The commitment fee on undrawn credit shall be 0.15% per annum.

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

(Dollars in thousands) |  | At March 31, 2021 |  | At December 31, 2020
Bank |  | Commitment |  | In Use |  | Date of Expiry |  | Commitment |  | In Use |  | Date of Expiry
Citibank Bilateral Letter of Credit Agreement |  | $ | 200,000 |  | $ | 1,264 |  | 11/24/2021 |  | $ | 200,000 |  | $ | 4,425 |  | 02/28/2021
|  |  |  |  |  | 452 |  | 12/16/2021 |  |  |  |  |  | 3,672 |  | 11/24/2021
|  |  |  |  |  | 156 |  | 12/20/2021 |  |  |  |  |  | 448 |  | 12/16/2021
|  |  |  |  |  | 139,005 |  | 12/31/2021 |  |  |  |  |  | 115 |  | 12/20/2021
|  |  |  |  |  | 4,425 |  | 02/28/2022 |  |  |  |  |  | 136,383 |  | 12/31/2021
|  |  |  |  |  | 828 |  | 08/15/2022 |  |  |  |  |  | 39,619 |  | 12/30/2024
|  |  |  |  |  | 40,147 |  | 03/30/2025 |  |  |  |  |  | 821 |  | 08/15/2022
Total Citibank Bilateral Agreement |  | $ | 200,000 |  | $ | 186,277 |  |  |  | $ | 200,000 |  | $ | 185,483 |  |

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Everest International Credit Facility

Effective May 12, 2020, Everest International amended its credit facility with Lloyds Bank plc (“Everest International Credit Facility”). The current amendment of the Everest International Credit Facility provides up to £52,175 thousand for the issuance of standby letters of credit on a collateralized basis. The Company pays a commitment fee of 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 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 $6,393,047 thousand (70% of consolidated net worth as of December 31, 2019), plus 25% of consolidated net income for each of Group’s fiscal quarters, for which statements are available ending on or after January 1, 2020 and for which net income is positive, plus 25% of any increase in consolidated net worth of Group during such period attributable to the issuance of ordinary and preferred shares, which at March 31, 2021, was $6,613,571 thousand. As of March 31, 2021, 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) |  | At March 31, 2021 |  | At December 31, 2020
Bank |  | Commitment |  | In Use |  | Date of Expiry |  | Commitment |  | In Use |  | Date of Expiry
Lloyd's Bank plc |  | £ | 52,175 |  | £ | 52,175 |  | 12/31/2024 |  | £ | 52,175 |  | £ | 52,175 |  | 12/31/2023
|  |  | - |  |  | - |  |  |  |  | - |  |  | - |  |
Total Lloyd's Bank Credit Facility |  | £ | 52,175 |  | £ | 52,175 |  |  |  | £ | 52,175 |  | £ | 52,175 |  |

Federal Home Loan Bank Membership

Effective August 15, 2019, Everest Reinsurance Company (“Everest Re”) became a member of the Federal Home Loan Bank of New York (“FHLBNY”), which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of March 31, 2021, Everest Re had admitted assets of approximately $17,280,068 thousand which provides borrowing capacity of up to approximately $1,728,007 thousand. During 2020, Everest Re borrowed $400,000 thousand under its FHLBNY capacity. The borrowings have interest payable at an interest rate of 0.35%. As of March 31, 2021, $310,000 of these borrowings remain outstanding, with maturities in November and December 2021. The FHLBNY membership agreement requires that 4.5% of borrowed funds be used to acquire additional membership stock.

10. 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 March 31, 2021, the total amount on deposit in trust accounts was $1,293,107 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 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.

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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
|  | March 31,
Mt. Logan Re Segregated Accounts |  | 2021 |  | 2020
(Dollars in thousands) |  |  |  |
Ceded written premiums |  | 99,110 |  | 110,188
Ceded earned premiums |  | 78,107 |  | 90,550
Ceded losses and LAE |  | 80,843 |  | 45,115
Assumed written premiums |  | 2,476 |  | 2,759
Assumed earned premiums |  | 2,476 |  | 2,759
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 $920,339 thousand and $806,564 thousand at March 31, 2021 and December 31, 2020, respectively. Of this amount, Group had investments recorded at $70,419 thousand and $67,645 thousand at March 31, 2021 and December 31, 2020, 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 $269,198 thousand of casualty reserves held by Bermuda Re related to accident years 2002 through 2015. As consideration for entering the agreement, the Company transferred cash of $252,000 thousand to the Mt. Logan Re segregated account. The maximum liability to be retroceded under the agreement will be $319,000 thousand. The Company will retain liability for any amounts exceeding the maximum liability.

On December 1, 2015 the Company entered into 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 $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 $325,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. These reinsurance agreements expired in December 2020.

On April 13, 2017 the Company entered into six collateralized reinsurance agreements with Kilimanjaro to provide the Company with annual aggregate catastrophe reinsurance coverage. The initial three agreements are four year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $225,000 thousand, $400,000 thousand and $325,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada. The subsequent three agreements are five year reinsurance contracts which cover named storm and earthquake events. These agreements provide up to $50,000 thousand, $75,000 thousand and $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 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 two agreements are four year reinsurance contracts which provide up to $62,500 thousand and $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 two agreements are five year reinsurance contracts which provide up to $62,500 thousand and $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.

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On December 12, 2019, the Company entered into 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 two agreements are four year reinsurance contracts which provide up to $150,000 thousand and $275,000 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 two agreements are five year reinsurance contracts which provide up to $150,000 thousand and $275,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United State, Puerto Rico, the U.S. Virgin Islands and Canada.

On April 8, 2021, the Company entered into six 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 three agreements are four year reinsurance contracts which provide up to $150,000 thousand, $85,000 thousand and $85,000 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 three agreements are five year reinsurance contracts which provide up to $150,000 thousand, $90,000 thousand and $90,000 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 catastrophe events during the applicable covered periods of the various agreements have exceeded the single event retentions or aggregate retentions under the terms of the agreements that would result in a recovery.

Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors. On December 1, 2015, Kilimanjaro issued $625,000 thousand of notes (“Series 2015-1 Notes). The $625,000 thousand of Series 2015-1 Notes were fully redeemed and are no longer outstanding. On April 13, 2017, Kilimanjaro issued $950,000 thousand of notes (“Series 2017-1 Notes) and $300,000 thousand of notes (“Series 2017-2 Notes). On April 30, 2018, Kilimanjaro issued $262,500 thousand of notes (“Series 2018-1 Notes”) and $262,500 thousand of notes (“Series 2018-2 Notes”). On December 12, 2019 Kilimanjaro issued $425,000 thousand of notes (“Series 2019-1 Notes”) and $425,000 of notes (“Series 2019-2 Notes”). On April 8, 2021 Kilimanjaro issued $320,000 thousand of notes (“Series 2021-1 Notes”) and $330,000 thousand of notes (“Series 2021-2 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.

11. SENIOR NOTES

The table below displays Everest Reinsurance Holdings’ (“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.

|  |  |  |  |  |  | March 31, 2021 |  | December 31, 2020
|  |  |  |  |  |  | Consolidated Balance |  |  |  |  | Consolidated Balance |  |  |
(Dollars in thousands) | Date Issued |  | Date Due |  | Principal Amounts |  | Sheet Amount |  | Market Value |  | Sheet Amount |  | Market Value
4.868% Senior notes | 6/5/2014 |  | 6/1/2044 |  | 400,000 |  | $ | 397,224 |  | $ | 479,616 |  | $ | 397,194 |  | $ | 528,000
3.5% Senior notes | 10/07/2020 |  | 10/15/2050 |  | 1,000,000 |  |  | 979,654 |  |  | 976,480 |  |  | 979,524 |  |  | 1,138,100

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

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On October 7, 2020, Holdings issued $1,000,000 thousand of 30 year senior notes with an interest coupon rate of 3.50%, which will mature on October 15, 2050. Interest will be paid semi-annually on April 15 and October 15 of each year.

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

| Three Months Ended
| March 31,
(Dollars In thousands | 2021 |  | 2020
Interest expense incurred 4.868% Senior notes | $ | 4,868 |  | $ | 4,868
Interest expense incurred 3.5% Senior notes |  | 8,805 |  |  | -

12. 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 |  | March 31, 2021 |  | December 31, 2020
|  |  | Original |  |  |  |  |  | Consolidated Balance |  | Market |  | Consolidated Balance |  | Market
(Dollars in thousands) | Date Issued |  | Principal Amount |  | Scheduled |  | Final |  | Sheet Amount |  | Value |  | Sheet Amount |  | Value
Long term subordinated notes | 4/26/2007 |  | $ | 400,000 |  | 5/15/2037 |  | 5/1/2067 |  | $ | 223,699 |  | $ | 207,648 |  | $ | 223,674 |  | $ | 206,447

During the fixed rate interest period from May 3, 2007 through May 14, 2017, interest was at the annual rate of 6.6%, payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2007. During the floating rate interest period from May 15, 2017 through maturity, interest will be based on the 3 month LIBOR plus 238.5 basis points, reset quarterly, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, subject to Holdings’ right to defer interest on one or more occasions for up to ten consecutive years. Deferred interest will accumulate interest at the applicable rate compounded quarterly for periods from and including May 15, 2017. The reset quarterly interest rate for February 16, 2021 to May 16, 2021 is 2.58%.

Holdings may redeem the long term subordinated notes on or after May 15, 2017, in whole or in part at 100% of the principal amount plus accrued and unpaid interest; however, redemption on or after the scheduled maturity date and prior to May 1, 2047 is subject to a replacement capital covenant. This covenant is for the benefit of certain senior note holders and it mandates that Holdings receive proceeds from the sale of another subordinated debt issue, of at least similar size, before it may redeem the subordinated notes. Effective upon the maturity of the Company’s 5.40% senior notes on October 15, 2014, the Company’s 4.868% senior notes, due on June 1, 2044, have become the Company’s long term indebtedness that ranks senior to the long term subordinated notes.

The Company repurchased and retired $0 thousand and $1,700 thousand of its outstanding long term subordinated notes during the three months ended March 31, 2021 and 2020, respectively. The Company realized a gain of $0 thousand and $502 thousand from the repurchase of the long term subordinated notes for the three months ended March 31, 2021 and 2020, respectively.

On March 19, 2009, Group announced the commencement of a cash tender offer for any and all of the 6.60% fixed to floating rate long term subordinated notes. Upon expiration of the tender offer, the Company had reduced its outstanding debt by $161,441 thousand. In addition, during 2020, the Company repurchased and retired $13,183 thousand of the notes.

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

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Interest expense incurred | $ | 1,462 |  | $ | 2,538

13. SEGMENT REPORTING

The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies. Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore and the United Kingdom. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Canada and Europe through its offices in the U.S., Canada, Ireland and a branch located in Zurich.

These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk management, control of aggregate catastrophe exposures, capital, investments and support operations. Management generally monitors and evaluates the financial performance of these operating segments based upon their underwriting results.

Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.

The following tables present the underwriting results for the operating segments for the periods indicated:

| Three Months Ended
Reinsurance | March 31,
(Dollars in thousands) | 2021 |  | 2020
Gross written premiums | $ | 2,059,015 |  | $ | 1,777,771
Net written premiums |  | 1,912,950 |  |  | 1,613,094
Premiums earned | $ | 1,777,452 |  | $ | 1,485,221
Incurred losses and LAE |  | 1,271,906 |  |  | 1,020,642
Commission and brokerage |  | 408,724 |  |  | 370,356
Other underwriting expenses |  | 51,996 |  |  | 44,139
Underwriting gain (loss) | $ | 44,826 |  | $ | 50,084

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| Three Months Ended
Insurance | March 31,
(Dollars in thousands) | 2021 |  | 2020
Gross written premiums | $ | 872,418 |  | $ | 793,100
Net written premiums |  | 640,987 |  |  | 588,385
Premiums earned | $ | 610,413 |  | $ | 551,593
Incurred losses and LAE |  | 439,513 |  |  | 410,198
Commission and brokerage |  | 80,287 |  |  | 78,166
Other underwriting expenses |  | 90,235 |  |  | 84,721
Underwriting gain (loss) | $ | 378 |  | $ | (21,492)

The following table reconciles the underwriting results for the operating segments to income before taxes as reported in the consolidated statements of operations and comprehensive income (loss) for the periods indicated:

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Underwriting gain (loss) | $ | 45,204 |  | $ | 28,592
Net investment income |  | 260,413 |  |  | 147,800
Net realized capital gains (losses) |  | 38,902 |  |  | (210,588)
Corporate expenses |  | (12,378) |  |  | (9,833)
Interest, fee and bond issue cost amortization expense |  | (15,639) |  |  | (7,583)
Other income (expense) |  | 56,593 |  |  | 7,990
Income (loss) before taxes | $ | 373,095 |  | $ | (43,622)

The Company produces business in the U.S., Bermuda and internationally. The net income deriving from and assets residing in the individual foreign countries in which the Company writes business are not identifiable in the Company’s financial records. Based on gross written premium, the table below presents the largest country, other than the U.S., in which the Company writes business, for the periods indicated:

| Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
United Kingdom gross written premium | $ | 366,148 |  | $ | 306,708

No other country represented more than 5% of the Company’s revenues.

14. SHARE-BASED COMPENSATION PLANS

For the three months ended March 31, 2021, a total of 205,266 restricted stock awards were granted: 194,610 and 10,656 restricted share awards were granted on February 23, 2021 and February 24, 2021, with a fair value of $242.24 per share and $244.445 per share, respectively. Additionally, 22,205 performance share unit awards were granted on February 23, 2021, with a fair value of $242.24 per unit.

15. RETIREMENT BENEFITS

The Company maintains both qualified and non-qualified defined benefit pension plans for its U.S. employees employed prior to April 1, 2010. Generally, the Company computes the benefits based on average earnings over a period prescribed by the plans and credited length of service. The Company’s non-qualified defined benefit pension plan provided compensating pension benefits for participants whose benefits have been curtailed under the qualified plan due to Internal Revenue Code limitations. Effective January 1, 2018, participants of the Company’s non-qualified defined benefit pension plan may no longer accrue additional service benefits.

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Net periodic benefit cost for U.S. employees included the following components for the periods indicated:

Pension Benefits | Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Service cost | $ | 2,738 |  | $ | 4,011
Interest cost |  | 1,999 |  |  | 2,483
Expected return on plan assets |  | (5,580) |  |  | (5,197)
Amortization of net (income) loss |  | 2,730 |  |  | 1,213
Net periodic benefit cost | $ | 1,887 |  | $ | 2,510

Other Benefits | Three Months Ended
| March 31,
(Dollars in thousands) | 2021 |  | 2020
Service cost | $ | 281 |  | $ | 141
Interest cost |  | 181 |  |  | 215
Amortization of prior service cost |  | (144) |  |  | (48)
Net periodic benefit cost | $ | 318 |  | $ | 308

The service cost component of net periodic benefit costs is included within other underwriting expenses on the consolidated statement of operations and comprehensive income (loss). In accordance with ASU 2017-07, other staff compensation costs are also primarily recorded within this line item.

The Company did no t make any contributions to the qualified pension benefit plan for the three months ended March 31, 2021 and 2020, respectively.

16. INCOME TAXES

The Company is domiciled in Bermuda and has significant subsidiaries and/or branches in Canada, Ireland, the Netherlands, Singapore, Switzerland, the United Kingdom, and the United States. The Company’s Bermuda domiciled subsidiaries are exempt from income taxation under Bermuda law until 2035. The Company’s non-Bermudian subsidiaries and branches are subject to income taxation at varying rates in their respective domiciles.

The Company generally applies the estimated Annualized Effective Tax Rate (“AETR”) approach for calculating its tax provision for interim periods as prescribed by ASC 740-270, Interim Reporting. Under the AETR approach, the estimated annualized effective tax rate is applied to the interim year-to-date pre-tax income/loss to determine the income tax expense or benefit for the year-to-date period. The tax expense or benefit for the quarter represents the difference between the year-to-date tax expense or benefit for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual pre-tax income/loss and annualized effective tax rate.

17. SUBSEQUENT EVENTS

The Company has evaluated known recognized and non-recognized subsequent events. The Company does not have any subsequent events to report.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Industry Conditions.

The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and market. As such, financial results tend to fluctuate with periods of constrained availability, higher rates and stronger profits followed by periods of abundant capacity, lower rates and constrained profitability. Competition in the types of reinsurance and insurance business that we underwrite is based on many factors, including the perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by A.M. Best and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is licensed or otherwise authorized, capacity and coverages offered, premiums charged, other terms and conditions of the reinsurance and insurance business offered, services offered, speed of claims payment and reputation and experience in lines written. Furthermore, the market impact from these competitive factors related to reinsurance and insurance is generally not consistent across lines of business, domestic and international geographical areas and distribution channels.

We compete in the U.S., Bermuda and international reinsurance and insurance markets with numerous global competitors. Our competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain insurance companies, domestic and international underwriting operations, including underwriting syndicates at Lloyd’s of London and certain government sponsored risk transfer vehicles. Some of these competitors have greater financial resources than we do and have established long term and continuing business relationships, which can be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance business and recently, the securitization of reinsurance and insurance risks through capital markets provide additional sources of potential reinsurance and insurance capacity and competition.

Worldwide insurance and reinsurance market conditions historically have been competitive. Generally, there was ample insurance and reinsurance capacity relative to demand, as well as, additional capital from the capital markets through insurance linked financial instruments. These financial instruments such as side cars, catastrophe bonds and collateralized reinsurance funds, provided capital markets with access to insurance and reinsurance risk exposure. The capital markets demand for these products was being primarily driven by a low interest environment and the desire to achieve greater risk diversification and potentially higher returns on their investments. This increased competition was generally having a negative impact on rates, terms and conditions; however, the impact varies widely by market and coverage.

The industry continues to deal with the impacts of a global pandemic, COVID-19. Globally, many countries mandated that their citizens remain at home and many non-essential businesses have continued to be physically closed. We activated our operational resiliency plan across our global footprint and all of our critical operations are functioning effectively from remote locations. We continue to service and meet the needs of our clients while ensuring the safety and health of our employees and customers.

There continues to be a negative impact on industry underwriting results from the pandemic. These impacts vary significantly from country to country depending on the rate of infections and the corresponding mandated business restrictions.

Prior to the pandemic, there was a growing industry consensus that there was some firming of (re)insurance rates for the areas impacted by the recent catastrophes. The increased frequency of catastrophe losses in 2020 appears to be further pressuring the increase of rates. Rates also appear to be firming in most lines of business, particularly in the casualty lines that had seen significant losses such as excess casualty and directors’ and officers’ liability. Other casualty lines are experiencing modest rate increase, while some lines such as workers’ compensation were experiencing softer market conditions. It is too early to tell what will be the impact on pricing conditions but it is likely to change depending on the line of business and geography.

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While we are unable to predict the full impact the pandemic will have on the insurance industry as it continues to have a negative impact on the global economy, we are well positioned to continue to service our clients. Our capital position remains a source of strength, with high quality invested assets, significant liquidity and a low operating expense ratio. Our diversified global platform with its broad mix of products, distribution and geography is resilient.

Financial Summary.

We monitor and evaluate our overall performance based upon financial results. The following table displays a summary of the consolidated net income (loss), ratios and shareholders’ equity for the periods indicated.

| Three Months Ended |  | Percentage
| March 31, |  | Increase/
(Dollars in millions) | 2021 |  | 2020 |  | (Decrease)
Gross written premiums | $ | 2,931.4 |  |  | $ | 2,570.9 |  |  | 14.0 | %
Net written premiums |  | 2,553.9 |  |  |  | 2,201.5 |  |  | 16.0 | %
REVENUES: |  |  |  |  |  |  |  |  |  |
Premiums earned | $ | 2,387.9 |  |  | $ | 2,036.8 |  |  | 17.2 | %
Net investment income |  | 260.4 |  |  |  | 147.8 |  |  | 76.2 | %
Net realized capital gains (losses) |  | 38.9 |  |  |  | (210.6) |  |  | -118.5 | %
Other income (expense) |  | 56.6 |  |  |  | 8.0 |  |  | NM |
Total revenues |  | 2,743.8 |  |  |  | 1,982.0 |  |  | 38.4 | %
CLAIMS AND EXPENSES: |  |  |  |  |  |  |  |  |  |
Incurred losses and loss adjustment expenses |  | 1,711.4 |  |  |  | 1,430.8 |  |  | 19.6 | %
Commission, brokerage, taxes and fees |  | 489.0 |  |  |  | 448.5 |  |  | 9.0 | %
Other underwriting expenses |  | 142.2 |  |  |  | 128.9 |  |  | 10.4 | %
Corporate expenses |  | 12.4 |  |  |  | 9.8 |  |  | 25.9 | %
Interest, fees and bond issue cost amortization expense |  | 15.6 |  |  |  | 7.6 |  |  | 106.2 | %
Total claims and expenses |  | 2,370.7 |  |  |  | 2,025.6 |  |  | 17.0 | %
INCOME (LOSS) BEFORE TAXES |  | 373.1 |  |  |  | (43.6) |  |  | NM |
Income tax expense (benefit) |  | 31.2 |  |  |  | (60.2) |  |  | NM |
NET INCOME (LOSS) | $ | 341.9 |  |  | $ | 16.6 |  |  | NM |
RATIOS: |  |  |  |  |  |  |  |  | Point Change
Loss ratio |  | 71.7 | % |  |  | 70.3 | % |  | 1.4 |
Commission and brokerage ratio |  | 20.5 | % |  |  | 22.0 | % |  | (1.5) |
Other underwriting expense ratio |  | 5.9 | % |  |  | 6.3 | % |  | (0.4) |
Combined ratio |  | 98.1 | % |  |  | 98.6 | % |  | (0.5) |
| At |  | At |  | Percentage
| March 31, |  | December 31, |  | Increase/
(Dollars in millions, except per share amounts) | 2021 |  | 2020 |  | (Decrease)
Balance sheet data: |  |  |  |  |  |  |  |  |  |
Total investments and cash | $ | 25,940.8 |  |  | $ | 25,461.6 |  |  | 1.9 | %
Total assets |  | 33,595.4 |  |  |  | 32,788.4 |  |  | 2.5 | %
Loss and loss adjustment expense reserves |  | 17,090.6 |  |  |  | 16,399.0 |  |  | 4.2 | %
Total debt |  | 1,910.6 |  |  |  | 1,910.4 |  |  | - | %
Total liabilities |  | 23,912.5 |  |  |  | 23,062.2 |  |  | 3.7 | %
Shareholders' equity |  | 9,682.9 |  |  |  | 9,726.2 |  |  | -0.4 | %
Book value per share |  | 241.57 |  |  |  | 243.25 |  |  | -0.7 | %
(NM, not meaningful) |  |  |  |  |  |  |  |  |  |
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |  |  |  |

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Revenues.

Premiums. Gross written premiums increased by 14.0% to $2,931.4 million for the three months ended March 31, 2021, compared to $2,570.9 million for the three months ended March 31, 2020, reflecting a $281.2 million, or 15.8%, increase in our reinsurance business and a $79.3 million, or 10.0%, increase in our insurance business. The increase in reinsurance premiums was mainly due to increases in property pro rata business, property excess of loss business and casualty excess of loss writings, as well as $26.9 million positive impact from the movement of foreign exchange rates. The rise in insurance premiums was primarily due to increases in specialty casualty business, property business and professional liability business, partially offset by a decline in workers’ compensation business.

Net written premiums increased by 16.0% to $2,553.9 million for the three months ended March 31, 2021, compared to $2,201.5 million for the three months ended March 31, 2020. This change is consistent with the change in gross written premiums. Premiums earned increased by 17.2% to $2,387.9 million for the three months ended March 31, 2021, compared to $2,036.8 million for the three months ended March 31, 2020. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Net Investment Income. Net investment income increased by 76.2% to $260.4 million for the three months ended March 31, 2021, compared with investment income of $147.8 million for the three months ended March 31, 2020. Net pre-tax investment income, as a percentage of average invested assets, was 4.2% for the three months ended March 31, 2021 compared to 2.9% for the three months ended March 31, 2020. The increases in both income and yield were primarily the result of an increase in limited partnership income.

Net Realized Capital Gains (Losses). Net realized capital gains were $38.9 million and net realized capital losses were $210.6 million for the three months ended March 31, 2021 and 2020, respectively. The net realized capital gains of $38.9 million for the three months ended March 31, 2021 were comprised of $29.1 million of net gains from fair value re-measurements and $16.8 million of net realized capital gains from sales of investments, partially offset by $7.0 million of allowances for credit losses. The net realized capital losses of $210.6 million for the three months ended March 31, 2020 were comprised of $145.1 million of net losses from fair value re-measurements, $43.7 million of net realized capital losses from sales of investments and $21.8 million of allowances for credit losses.

Other Income (Expense). We recorded other income of $56.6 million and $8.0 million for the three months ended March 31, 2021 and 2020, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates. We recognized foreign currency exchange income of $51.8 million and $20.6 million for the three months ended March 31, 2021 and 2020, respectively.

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Claims and Expenses.

Incurred Losses and Loss Adjustment Expenses. The following tables present our incurred losses and loss adjustment expenses (“LAE”) for the periods indicated.

| Three Months Ended March 31,
| Current |  | Ratio %/ |  | Prior |  | Ratio %/ |  | Total |  | Ratio %/
(Dollar in millions) | Year |  | Pt Change |  | Years |  | Pt Change |  | Incurred |  | Pt Change
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 1,443.3 |  | 60.4 | % |  | $ | (1.8) |  | -0.1 | % |  | $ | 1,441.4 |  | 60.3 | %
Catastrophes |  | 270.0 |  | 11.3 | % |  |  | - |  | - | % |  |  | 270.0 |  | 11.3 | %
Total | $ | 1,713.3 |  | 71.7 | % |  | $ | (1.8) |  | -0.1 | % |  | $ | 1,711.4 |  | 71.7 | %
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 1,403.4 |  | 68.9 | % |  | $ | (2.6) |  | -0.1 | % |  | $ | 1,400.8 |  | 68.8 | %
Catastrophes |  | 30.0 |  | 1.5 | % |  |  | - |  | - | % |  |  | 30.0 |  | 1.5 | %
Total | $ | 1,433.4 |  | 70.4 | % |  | $ | (2.6) |  | -0.1 | % |  | $ | 1,430.8 |  | 70.3 | %
Variance 2021/2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 39.8 |  | (8.5) | pts |  | $ | 0.8 |  | - | pts |  | $ | 40.6 |  | (8.5) | pts
Catastrophes |  | 240.0 |  | 9.8 | pts |  |  | - |  | - | pts |  |  | 240.0 |  | 9.8 | pts
Total | $ | 279.8 |  | 1.3 | pts |  | $ | 0.8 |  | - | pts |  | $ | 280.6 |  | 1.4 | pts

Incurred losses and LAE increased by 19.6% to $1,711.4 million for the three months ended March 31, 2021, compared to $1,430.8 million for the three months ended March 31, 2020, primarily due to an increase of $240.0 million in current year catastrophe losses and a rise of $39.8 million in current year attritional losses, mainly due to the impact of the increase in premiums earned. The current year catastrophe losses of $270.0 million for the three months ended March 31, 2021 related to the Texas winter storms ($260.0 million) and the 2021 Australia floods ($10.0 million). Th e $30.0 million of current year catastrophe losses for the three months ended March 31, 2020 related to the Nashville tornadoes ($10.0 million), Australia East Coast Storm ($10.0 million) and the Australia fires ($10.0 million).

Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by 9.0% to $489.0 million for the three months ended March 31, 2021, compared to $448.5 million for the three months ended March 31, 2020. The increase was primarily due to the impact of the increases in premiums earned and changes in the mix of business.

Other Underwriting Expenses. Other underwriting expenses were $142.2 million and $128.9 million for the three months ended March 31, 2021 and 2020, respectively. The increases in other underwriting expenses were mainly due to the continued build out of our insurance operations and the impact of the increases in premiums earned.

Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, were $12.4 million and $9.8 million for the three months ended March 31, 2021 and 2020, respectively. The increase was mainly due to higher compensation expenses.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $15.6 million and $7.6 million for the three months ended March 31, 2021 and 2020, respectively. The increase was primarily due to interest expense on the $1,000.0 million senior note issuance in October 2020 and the movement in the floating interest rate related to the long term subordinated notes, which is reset quarterly per the note agreement. The floating rate was 2.58% as of March 31, 2021.

Income Tax Expense (Benefit). We had an income tax expense of $31.2 million and an income tax benefit of $60.2 million for the three months ended March 31, 2021 and 2020, respectively. I ncome tax benefit or expense is primarily a function of the geographic location of the Company’s pre-tax income and the statutory tax rates in those jurisdictions. The annualized effective tax rate (“AETR”) is primarily affected by tax-exempt investment income, qualifying dividends and foreign tax credits. Variations in the AETR generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net capital gains (losses), among jurisdictions with different tax rates. The change in income tax expense (benefit) for the three months ended

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March 31, 2021 as compared to the three months ended March 31, 2020 results primarily from higher investment income, realized investment gains and earned premiums, partially offset by incurred losses.

The CARES Act was passed by Congress and signed into law by the President on March 27, 2020 in response to the COVID-19 pandemic. Among the provisions of the CARES Act was a special tax provision which allowed companies to elect to carryback five years net operating losses incurred in the 2018, 2019 and/or 2020 tax years. The Tax Cuts and Jobs Act of 2017 had eliminated net operating loss carrybacks for most companies. The Company determined that the special five year loss carryback tax provision provided a tax benefit of $31.0 million which it recorded in the quarter ended March 31, 2020.

Net Income (Loss).

Our net income was $341.9 million and $16.6 million for the three months ended March 31, 2021 and 2020, respectively. The changes were primarily driven by the financial component fluctuations explained above.

Ratios.

Our combined ratio decreased by 0.5 points to 98.1% for the three months ended March 31, 2021, compared to 98.6% for the three months ended March 31, 2020. The loss ratio component increased 1.4 points for the three months ended March 31, 2021 over the same period last year mainly due an increase of $240.0 million in current year catastrophe losses. The commission and brokerage ratio components decreased to 20.5% for the three months ended March 31, 2021 compared to 22.0% for the three months ended March 31, 2020 mainly due to changes in the mix of business. The other underwriting expense ratios decreased slightly to 5.9% for the three months ended March 31, 2021 compared to 6.3% for the three months ended March 31, 2020.

Shareholders’ Equity.

Shareholders’ equity decreased by $43.3 million to $9,682.9 million at March 31, 2021 from $9,726.2 million at December 31, 2020, principally as a result of $292.3 million of unrealized depreciation on investments net of tax, $62.2 million of shareholder dividends, the repurchase of 97,462 common shares for $23.5 million and $9.6 million of net foreign currency translation adjustments, partially offset by $341.9 million of net income, $2.0 million of net benefit plan obligation adjustments, net of tax and $0.4 million of share-based compensation transactions.

Consolidated Investment Results

Net Investment Income.

Net investment income increased by 76.2% to $260.4 million for the three months ended March 31, 2021, compared with investment income of $147.8 million for the three months ended March 31, 2020. The increase was primarily due an increase in limited partnership income.

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The following table shows the components of net investment income for the periods indicated.

| Three Months Ended
| March 31,
(Dollars in millions) | 2021 |  | 2020
Fixed maturities | $ | 140.9 |  | $ | 137.9
Equity securities |  | 4.8 |  |  | 3.5
Short-term investments and cash |  | 0.2 |  |  | 2.2
Other invested assets |  |  |  |  |
Limited partnerships |  | 114.3 |  |  | 21.6
Other |  | 6.0 |  |  | (13.1)
Gross investment income before adjustments |  | 266.3 |  |  | 152.1
Funds held interest income (expense) |  | 8.0 |  |  | 8.2
Future policy benefit reserve income (expense) |  | (0.3) |  |  | (0.2)
Gross investment income |  | 274.0 |  |  | 160.1
Investment expenses |  | (13.5) |  |  | (12.3)
Net investment income | $ | 260.4 |  | $ | 147.8
(Some amounts may not reconcile due to rounding.)

The following tables show a comparison of various investment yields for the periods indicated.

| At |  | At
| March 31, |  | December 31,
| 2021 |  | 2020
Imbedded pre-tax yield of cash and invested assets | 3.0 | % |  | 3.0 | %
Imbedded after-tax yield of cash and invested assets | 2.6 | % |  | 2.6 | %

| Three Months Ended
| March 31, |
| 2021 |  | 2020
Annualized pre-tax yield on average cash and invested assets | 4.2 | % |  | 2.9 | %
Annualized after-tax yield on average cash and invested assets | 3.7 | % |  | 2.6 | %

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Net Realized Capital Gains (Losses).

The following table presents the composition of our net realized capital gains (losses) for the periods indicated.

| Three Months Ended March 31,
(Dollars in millions) |  | 2021 |  |  | 2020 |  | Variance
Gains (losses) from sales: |  |  |  |  |  |  |  |
Fixed maturity securities, market value: |  |  |  |  |  |  |  |
Gains | $ | 14.9 |  | $ | 14.0 |  | $ | 0.9
Losses |  | (5.7) |  |  | (28.1) |  |  | 22.4
Total |  | 9.2 |  |  | (14.1) |  |  | 23.3
Equity securities, fair value: |  |  |  |  |  |  |  |
Gains |  | 12.3 |  |  | 2.6 |  |  | 9.7
Losses |  | (6.1) |  |  | (30.2) |  |  | 24.1
Total |  | 6.2 |  |  | (27.6) |  |  | 33.8
Other Invested Assets: |  |  |  |  |  |  |  |
Gains |  | 1.4 |  |  | 3.0 |  |  | (1.6)
Losses |  | (0.1) |  |  | (5.4) |  |  | 5.3
Total |  | 1.3 |  |  | (2.3) |  |  | 3.6
Short Term Investments: |  |  |  |  |  |  |  |
Gains |  | 0.1 |  |  | 0.3 |  |  | (0.2)
Losses |  | - |  |  | - |  |  | -
Total |  | 0.1 |  |  | 0.3 |  |  | (0.2)
Total net realized gains (losses) from sales: |  |  |  |  |  |  |  |
Gains |  | 28.7 |  |  | 19.9 |  |  | 8.8
Losses |  | (11.9) |  |  | (63.6) |  |  | 51.7
Total |  | 16.8 |  |  | (43.7) |  |  | 60.5
Allowance for credit losses: |  | (7.0) |  |  | (21.8) |  |  | 14.8
Gains (losses) from fair value adjustments: |  |  |  |  |  |  |  |
Fixed maturities, fair value |  | - |  |  | (1.1) |  |  | 1.1
Equity securities, fair value |  | 29.1 |  |  | (144.0) |  |  | 173.1
Total |  | 29.1 |  |  | (145.1) |  |  | 174.2
Total net realized capital gains (losses) | $ | 38.9 |  | $ | (210.6) |  | $ | 249.5
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |  |

Net realized capital gains were $38.9 million and net realized capital losses were $210.6 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021, we recorded 29.1 million of net gains from fair value re-measurements and $16.8 million of net realized capital gains from sales of investments, partially offset by $7.0 million of allowances for credit losses. For the three months ended March 31, 2020, we recorded $145.1 million of net losses from fair value re-measurements, $43.7 million of net realized capital losses from sales of investments and $21.8 million of allowances for credit losses. The fixed maturity and equity sales for the three months ended March 31, 2021 and 2021 related primarily to adjusting the portfolios for overall market changes and individual credit shifts.

Segment Results.

The Reinsurance operation writes worldwide property and casualty reinsurance and specialty lines of business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies. Business is written in the U.S., Bermuda, and Ireland offices, as well as, through branches in Canada, Singapore and the United Kingdom. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Canada and Europe through its offices in the U.S., Canada, Ireland and a branch located in Zurich.

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These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk management, control of aggregate catastrophe exposures, capital, investments and support operations. Management generally monitors and evaluates the financial performance of these operating segments based upon their underwriting results.

Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.

The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.

Our loss and LAE reserves are management’s best estimate of our ultimate liability for unpaid claims. We re-evaluate our estimates on an ongoing basis, including all prior period reserves, taking into consideration all available information, and in particular, recently reported loss claim experience and trends related to prior periods. Such re-evaluations are recorded in incurred losses in the period in which re-evaluation is made.

The following discusses the underwriting results for each of our segments for the periods indicated.

Reinsurance.

The following table presents the underwriting results and ratios for the Reinsurance segment for the periods indicated.

| Three Months Ended March 31,
(Dollars in millions) | 2021 |  | 2020 |  | Variance |  | % Change
Gross written premiums | $ | 2,059.0 |  |  | $ | 1,777.8 |  |  | $ | 281.2 |  | 15.8 | %
Net written premiums |  | 1,913.0 |  |  |  | 1,613.1 |  |  |  | 299.9 |  | 18.6 | %
Premiums earned | $ | 1,777.5 |  |  | $ | 1,485.2 |  |  | $ | 292.2 |  | 19.7 | %
Incurred losses and LAE |  | 1,271.9 |  |  |  | 1,020.6 |  |  |  | 251.3 |  | 24.6 | %
Commission and brokerage |  | 408.7 |  |  |  | 370.4 |  |  |  | 38.4 |  | 10.4 | %
Other underwriting expenses |  | 52.0 |  |  |  | 44.1 |  |  |  | 7.9 |  | 17.9 | %
Underwriting gain (loss) | $ | 44.8 |  |  | $ | 50.1 |  |  | $ | (5.3) |  | -10.6 | %
|  |  |  |  |  |  |  |  |  |  |  | Point Chg
Loss ratio |  | 71.6 | % |  |  | 68.7 | % |  |  |  |  | 2.9 |
Commission and brokerage ratio |  | 23.0 | % |  |  | 24.9 | % |  |  |  |  | (1.9) |
Other underwriting expense ratio |  | 2.9 | % |  |  | 3.0 | % |  |  |  |  | (0.1) |
Combined ratio |  | 97.5 | % |  |  | 96.6 | % |  |  |  |  | 0.9 |
(NM, Not Meaningful) |  |  |  |  |  |  |  |  |  |  |  |  |
(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 15.8% to $2,059.0 million for the three months ended March 31, 2021 from $1,777.8 million for the three months ended March 31, 2020, primarily due to increases in property pro rata business, property excess of loss business and casualty excess of loss writings as well as a $26.9 million positive impact from the movement of foreign exchange rates. Net written premiums increased by 18.6% to $1,913.0 million for the three months ended March 31, 2021 compared to $1,613.1 million for the three months ended March 31, 2020. The difference between the change in gross written premiums compared to the change in net written premiums was primarily due to varying utilization of reinsurance. Premiums earned increased by 19.7% to $1,775.5 million for the three months ended March 31, 2021, compared to $1,485.2 million for the three months ended March 31, 2020. The change in premiums earned relative to net written

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premiums is primarily the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Reinsurance segment for the periods indicated.

| Three Months Ended March 31,
| Current |  | Ratio %/ |  | Prior |  | Ratio %/ |  | Total |  | Ratio %/
(Dollars in millions) | Year |  | Pt Change |  | Years |  | Pt Change |  | Incurred |  | Pt Change
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 1,051.2 |  | 59.1 | % |  | $ | (1.8) |  | -0.1 | % |  |  | 1,049.4 |  | 59.0 | %
Catastrophes |  | 222.5 |  | 12.5 | % |  |  | - |  | - | % |  |  | 222.5 |  | 12.5 | %
Total Segment | $ | 1,273.7 |  | 71.6 | % |  | $ | (1.8) |  | -0.1 | % |  | $ | 1,271.9 |  | 71.6 | %
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 998.8 |  | 67.2 | % |  | $ | (2.6) |  | -0.2 | % |  | $ | 996.1 |  | 67.0 | %
Catastrophes |  | 24.5 |  | 1.7 | % |  |  | - |  | - | % |  |  | 24.5 |  | 1.7 | %
Total Segment | $ | 1,023.3 |  | 68.9 | % |  | $ | (2.6) |  | -0.2 | % |  | $ | 1,020.6 |  | 68.7 | %
Variance 2021/2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 52.5 |  | (8.1) | pts |  | $ | 0.8 |  | 0.1 | pts |  | $ | 53.3 |  | (8.0) | pts
Catastrophes |  | 198.0 |  | 10.8 | pts |  |  | - |  | - | pts |  |  | 198.0 |  | 10.8 | pts
Total Segment | $ | 250.5 |  | 2.7 | pts |  | $ | 0.8 |  | 0.1 | pts |  | $ | 251.3 |  | 2.9 | pts

Incurred losses increased by 24.6% to $1,271.9 million for the three months ended March 31, 2021, compared to $1,020.6 million for the three months ended March 31, 2020. The increase was primarily due to an increase of $198.0 million in current year catastrophe losses and an increase of $52.5 million in current year attritional losses, mainly related to the impact of the increase in premiums earned. The current year catastrophe losses of $222.5 million for the three months ended March 31, 2021 related primarily to the Texas winter storms ($212.5 million) and the 2021 Australia floods ($10.0 million). The $24.5 million of current year catastrophe losses for the three months ended March 31, 2020 related to the Australian East Coast storm ($10.0 million), Australia fires ($10.0 million) and the Nashville tornadoes ($4.5 million).

Segment Expenses. Commission and brokerage expenses increased by 10.4% to $408.7 million for the three months ended March 31, 2021 compared to $370.4 million for the three months ended March 31, 2020. This increase was mainly due to the impact of the increases in premiums earned and changes in the mix of business.

Segment other underwriting expenses increased to $52.0 million for the three months ended March 31, 2021 from $44.1 million for the three months ended March 31, 2020. This increase was mainly due to the impact of the increase in premiums earned.

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Insurance.

The following table presents the underwriting results and ratios for the Insurance segment for the periods indicated.

| Three Months Ended March 31,
(Dollars in millions) | 2021 |  | 2020 |  | Variance |  | % Change
Gross written premiums | $ | 872.4 |  |  | $ | 793.1 |  |  | $ | 79.3 |  | 10.0 | %
Net written premiums |  | 641.0 |  |  |  | 588.4 |  |  |  | 52.6 |  | 8.9 | %
Premiums earned | $ | 610.4 |  |  | $ | 551.6 |  |  | $ | 58.8 |  | 10.7 | %
Incurred losses and LAE |  | 439.5 |  |  |  | 410.2 |  |  |  | 29.3 |  | 7.1 | %
Commission and brokerage |  | 80.3 |  |  |  | 78.2 |  |  |  | 2.1 |  | 2.7 | %
Other underwriting expenses |  | 90.2 |  |  |  | 84.7 |  |  |  | 5.5 |  | 6.5 | %
Underwriting gain (loss) | $ | 0.4 |  |  | $ | (21.5) |  |  | $ | 21.9 |  | NM |
|  |  |  |  |  |  |  |  |  |  |  | Point Chg
Loss ratio |  | 72.0 | % |  |  | 74.4 | % |  |  |  |  | -2.4 |
Commission and brokerage ratio |  | 13.2 | % |  |  | 14.2 | % |  |  |  |  | -1.0 |
Other underwriting expense ratio |  | 14.8 | % |  |  | 15.3 | % |  |  |  |  | -0.5 |
Combined ratio |  | 99.9 | % |  |  | 103.9 | % |  |  |  |  | -4.0 |
(NM not meaningful) |  |  |  |  |  |  |  |  |  |  |  |  |
(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 10.0% to $872.4 million for the three months ended March 31, 2021 compared to $793.1 million for the three months ended March 31, 2020. This rise was related to increases in specialty casualty business, property business and professional liability business, partially offset by a decline in workers’ compensation business. Net written premiums increased by 8.9% to $641.0 million for the three months ended March 31, 2021 compared to $588.4 million for the three months ended March 31, 2020, which is consistent with the change in gross written premiums. Premiums earned increased 10.7% to $610.4 million for the three months ended March 31, 2021 compared to $551.6 million for the three months ended March 31, 2020. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Insurance segment for the periods indicated.

| Three Months Ended March 31,
| Current |  | Ratio %/ |  | Prior |  | Ratio %/ |  | Total |  | Ratio %/
(Dollars in millions) | Year |  | Pt Change |  | Years |  | Pt Change |  | Incurred |  | Pt Change
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 392.0 |  | 64.2 | % |  | $ | - |  | - | % |  | $ | 392.0 |  | 64.2 | %
Catastrophes |  | 47.5 |  | 7.8 | % |  |  | - |  | - | % |  |  | 47.5 |  | 7.8 | %
Total Segment | $ | 439.5 |  | 72.0 | % |  | $ | - |  | - | % |  | $ | 439.5 |  | 72.0 | %
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | 404.7 |  | 73.4 | % |  | $ | - |  | - | % |  | $ | 404.7 |  | 73.4 | %
Catastrophes |  | 5.5 |  | 1.0 | % |  |  | - |  | - | % |  |  | 5.5 |  | 1.0 | %
Total Segment | $ | 410.2 |  | 74.4 | % |  | $ | - |  | - | % |  | $ | 410.2 |  | 74.4 | %
Variance 2021/2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Attritional | $ | (12.7) |  | (9.2) | pts |  | $ | - |  | - | pts |  | $ | (12.7) |  | (9.2) | pts
Catastrophes |  | 42.0 |  | 6.8 | pts |  |  | - |  | - | pts |  |  | 42.0 |  | 6.8 | pts
Total Segment | $ | 29.3 |  | (2.4) | pts |  | $ | - |  | - | pts |  | $ | 29.3 |  | (2.4) | pts

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Incurred losses and LAE increased by 7.1% to $439.5 million for the three months ended March 31, 2021 compared to $410.2 million for the three months ended March 31, 2021. The increase was mainly due to an increase in current year catastrophe losses of $42.0 million, partially offset by a decrease of $12.7 million in current year attritional losses. The current year catastrophe losses of $47.5 million for the three months ended March 31, 2021 related to the Texas winter storms ($47.5 million). The $5.5 million of current year catastrophe losses for the three months ended March 31, 2020 related primarily to the Nashville tornadoes ($5.5 million).

Segment Expenses. Commission and brokerage increased by 2.7% to $80.3 million for the three months ended March 31, 2021 compared to $78.2 million for the three months ended March 31, 2020. The increase was mainly due to the impact of the increases in premiums earned.

Segment other underwriting expenses increased to $90.2 million for the three months ended March 31, 2021 compared to $84.7 million for the three months ended March 31, 2021. The increase was mainly due to the impact of the increase in premiums earned and increased expenses related to the continued build out of the insurance business.

FINANCIAL CONDITION

Cash and Invested Assets. Aggregate invested assets, including cash and short-term investments, were $25,940.8 million at March 31, 2021, an increase of $479.2 million compared to $25,461.6 million at December 31, 2020. This increase was primarily the result of $904.4 million of cash flows from operations and $116.8 million in equity adjustments of our limited partnership investments, partially offset by $332.7 million of pre-tax unrealized depreciation, $93.6 million decrease in unsettled securities, $62.2 million paid out in dividends to shareholders, $56.9 million in fair value re-measurements, the repurchases of 97,462 common shares for $23.5 million, $17.3 million of amortization bond premium and $10.2 million due to fluctuations in foreign currencies.

Our principal investment objectives are to ensure funds are available to meet our insurance and reinsurance obligations and to maximize after-tax investment income while maintaining a high quality diversified investment portfolio. Considering these objectives, we view our investment portfolio as having two components: 1) the investments needed to satisfy outstanding liabilities (our core fixed maturities portfolio) and 2) investments funded by our shareholders’ equity.

For the portion needed to satisfy global outstanding liabilities, we generally invest in fixed maturities with an average credit quality of Aa3. This global fixed maturity securities portfolio is externally managed by independent, professional investment managers using portfolio guidelines approved by internal management.

Over the past several years, we have expanded the allocation of our investments funded by shareholders’ equity to include: 1) a greater percentage of publicly traded equity securities, 2) emerging market fixed maturities through mutual fund structures, as well as individual holdings, 3) high yield fixed maturities, 4) bank and private loan securities and 5) private equity limited partnership investments. The objective of this portfolio diversification is to enhance the risk-adjusted total return of the investment portfolio by allocating a prudent portion of the portfolio to higher return asset classes. We limit our allocation to these asset classes because of 1) the potential for volatility in their values and 2) the impact of these investments on regulatory and rating agency capital adequacy models. We use investment managers experienced in these markets and adjust our allocation to these investments based upon market conditions. At March 31, 2021, the market value of investments in these investment market sectors, carried at both market and fair value, approximated 81% of shareholders’ equity.

The Company’s limited partnership investments are comprised of limited partnerships that invest in private equities. Generally, the limited partnerships are reported on a quarter lag. We receive annual audited financial statements for all of the limited partnerships which are prepared using fair value accounting in accordance with FASB guidance. For the quarterly reports, the Company’s staff performs reviews of the financial reports for any

39

unusual changes in carrying value. If the Company becomes aware of a significant decline in value during the lag reporting period, the loss will be recorded in the period in which the Company identifies the decline.

The tables below summarize the composition and characteristics of our investment portfolio as of the dates indicated.

(Dollars in millions) | At March 31, 2021 |  | At December 31, 2020
Fixed maturities, market value | $ | 20,407.5 |  | 78.7 | % |  | $ | 20,040.2 |  | 78.7 | %
Equity securities, fair value |  | 1,400.7 |  | 5.4 | % |  |  | 1,472.2 |  | 5.8 | %
Short-term investments |  | 826.8 |  | 3.1 | % |  |  | 1,135.0 |  | 4.5 | %
Other invested assets |  | 2,173.2 |  | 8.4 | % |  |  | 2,012.6 |  | 7.9 | %
Cash |  | 1,132.7 |  | 4.4 | % |  |  | 801.7 |  | 3.1 | %
Total investments and cash | $ | 25,940.8 |  | 100.0 | % |  | $ | 25,461.6 |  | 100.0 | %
(Some amounts may not reconcile due to rounding.)

| At |  | At
| March 31, 2021 |  | December 31, 2020
Fixed income portfolio duration (years) | 3.5 |  |  | 3.6 |
Fixed income composite credit quality | Aa3 |  |  | Aa3 |
Imbedded end of period yield, pre-tax | 3.0 | % |  | 3.0 | %
Imbedded end of period yield, after-tax | 2.6 | % |  | 2.6 | %

The following table provides a comparison of our total return by asset class relative to broadly accepted industry benchmarks for the periods indicated:

| Three Months Ended |  | Twelve Months Ended
| March 31, 2021 |  | December 31, 2020
Fixed income portfolio total return | (1.1) | % |  | 6.3 | %
Barclay's Capital - U.S. aggregate index | (3.4) | % |  | 7.5 | %
Common equity portfolio total return | 2.5 | % |  | 26.7 | %
S&P 500 index | 6.2 | % |  | 18.4 | %
Other invested asset portfolio total return | 8.2 | % |  | 8.3 | %

The pre-tax equivalent total return for the bond portfolio was approximately (1.1)% and 5.3%, respectively, for the three months ended March 31, 2021 and the twelve months ended December 31, 2020. The pre-tax equivalent return adjusts the yield on tax-exempt bonds to the fully taxable equivalent.

Our fixed income and equity portfolios have different compositions than the benchmark indexes. Our fixed income portfolios have a shorter duration because we align our investment portfolio with our liabilities. We also hold foreign securities to match our foreign liabilities while the index is comprised of only U.S. securities. Our equity portfolios reflect an emphasis on dividend yield and growth equities, while the index is comprised of the largest 500 equities by market capitalization.

Reinsurance Receivables.

Reinsurance receivables for both paid and recoverable on unpaid losses totaled $2,029.7 million and $1,994.6 million at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, $698.3 million, or 34.4%, was receivable from Mt. Logan Re collateralized segregated accounts; $189.0 million, or 9.3%, was receivable from Munich Reinsurance America, Inc. (“Munich Re”) and $109.0 million or 5.4% was receivable from Endurance Specialty Holdings, Ltd. (“Endurance”). No other retrocessionaire accounted for more than 5% of our receivables.

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Loss and LAE Reserves. Gross loss and LAE reserves totaled $17,090.6 million and $16,399.0 million at March 31, 2021 and December 31, 2020, respectively.

The following tables summarize gross outstanding loss and LAE reserves by segment, classified by case reserves and IBNR reserves, for the periods indicated.

| At March 31, 2021
| Case |  | IBNR |  | Total |  | % of
(Dollars in millions) | Reserves |  | Reserves |  | Reserves |  | Total
Reinsurance | $ | 5,197.0 |  | $ | 7,111.7 |  | $ | 12,308.6 |  | 72.0 | %
Insurance |  | 1,274.2 |  |  | 3,305.2 |  |  | 4,579.4 |  | 26.8 | %
Total excluding A&E |  | 6,471.2 |  |  | 10,416.8 |  |  | 16,888.0 |  | 98.8 | %
A&E |  | 172.9 |  |  | 29.7 |  |  | 202.6 |  | 1.2 | %
Total including A&E | $ | 6,644.1 |  | $ | 10,446.5 |  | $ | 17,090.6 |  | 100.0 | %
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |  |  |  |  |

| At December 31, 2020
| Case |  | IBNR |  | Total |  | % of
(Dollars in millions) | Reserves |  | Reserves |  | Reserves |  | Total
Reinsurance | $ | 5,092.7 |  | $ | 6,723.8 |  | $ | 11,816.5 |  | 72.1 | %
Insurance |  | 1,282.1 |  |  | 3,082.6 |  |  | 4,364.8 |  | 26.6 | %
Total excluding A&E |  | 6,374.8 |  |  | 9,806.4 |  |  | 16,181.3 |  | 98.7 | %
A&E |  | 184.0 |  |  | 33.8 |  |  | 217.7 |  | 1.3 | %
Total including A&E | $ | 6,558.8 |  | $ | 9,840.2 |  | $ | 16,399.0 |  | 100.0 | %
(Some amounts may not reconcile due to rounding.) |  |  |  |  |  |  |  |  |  |  |

Changes in premiums earned and business mix, reserve re-estimations, catastrophe losses and changes in catastrophe loss reserves and claim settlement activity all impact loss and LAE reserves by segment and in total.

Our loss and LAE reserves represent management’s best estimate of our ultimate liability for unpaid claims. We continuously re-evaluate our reserves, including re-estimates of prior period reserves, taking into consideration all available information and, in particular, newly reported loss and claim experience. Changes in reserves resulting from such re-evaluations are reflected in incurred losses in the period when the re-evaluation is made. Our analytical methods and processes operate at multiple levels including individual contracts, groupings of like contracts, classes and lines of business, internal business units, segments, legal entities, and in the aggregate. In order to set appropriate reserves, we make qualitative and quantitative analyses and judgments at these various levels. Additionally, the attribution of reserves, changes in reserves and incurred losses among accident years requires qualitative and quantitative adjustments and allocations at these various levels. We utilize actuarial science, business expertise and management judgment in a manner intended to ensure the accuracy and consistency of our reserving practices. Nevertheless, our reserves are estimates, which are subject to variation, which may be significant.

There can be no assurance that reserves for, and losses from, claim obligations will not increase in the future, possibly by a material amount. However, we believe that our existing reserves and reserving methodologies lessen the probability that any such increase would have a material adverse effect on our financial condition, results of operations or cash flows.

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Asbestos and Environmental Exposures. A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The following table summarizes the outstanding loss reserves with respect to A&E reserves on both a gross and net of retrocessions basis for the periods indicated.

| At |  | At
| March 31, |  | December 31,
(Dollars in millions) | 2021 |  | 2020
Gross reserves | $ | 204.2 |  | $ | 219.3
Reinsurance receivable |  | (20.1) |  |  | (21.1)
Net reserves | $ | 184.1 |  | $ | 198.3
(Some amounts may not reconcile due to rounding.) |  |  |  |  |

With respect to asbestos only, at March 31, 2021, we had net asbestos loss reserves of $181.6 million, or 98.7%, of total net A&E reserves, all of which was for assumed business.

In 2015, we sold Mt. McKinley to Clearwater Insurance Company. Concurrently with the closing, we entered into a retrocession treaty with an affiliate of Clearwater. Per the retrocession treaty, we retroceded 100% of the liabilities associated with certain Mt. McKinley policies, which had been reinsured by Bermuda Re. As consideration for entering into the retrocession treaty, Bermuda Re transferred cash of $140.3 million, an amount equal to the net loss reserves as of the closing date. Of the $140.3 million of net loss reserves retroceded, $100.5 million were related to A&E business. The maximum liability retroceded under the retrocession treaty will be $440.3 million, equal to the retrocession payment plus $300.0 million. We will retain liability for any amounts exceeding the maximum liability retroceded under the retrocession treaty.

On December 20, 2019, the retrocession treaty was amended and included a partial commutation. As a result of this amendment and partial commutation, gross A&E reserves and correspondingly reinsurance receivable were reduced by $43.4 million. In addition, the maximum liability permitted to be retroceded increased to $450.3 million.

Ultimate loss projections for A&E liabilities cannot be accomplished using standard actuarial techniques. We believe that our A&E reserves represent management’s best estimate of the ultimate liability; however, there can be no assurance that ultimate loss payments will not exceed such reserves, perhaps by a significant amount.

Industry analysts use the “survival ratio” to compare the A&E reserves among companies with such liabilities. The survival ratio is typically calculated by dividing a company’s current net reserves by the three year average of annual paid losses. Hence, the survival ratio equals the number of years that it would take to exhaust the current reserves if future loss payments were to continue at historical levels. Using this measurement, our net three year asbestos survival ratio was 5.1 years at March 31, 2021. These metrics can be skewed by individual large settlements occurring in the prior three years and therefore, may not be indicative of the timing of future payments.

Shareholders’ Equity. Our shareholders’ equity decreased to $9,682.9 million as of March 31, 2021 from $9,726.2 million as of December 31, 2020. This decrease was the result of $292.3 million of unrealized depreciation on investments net of tax, $62.2 million of shareholder dividends, the repurchase of 97,462 common shares for $23.5 million and $9.6 million of net foreign currency translation adjustments, partially offset by $341.9 million of net income, $2.0 million of net benefit plan obligation adjustments, net of tax and $0.4 million of share-based compensation transactions.

LIQUIDITY AND CAPITAL RESOURCES

Capital. Shareholders’ equity at March 31, 2021 and December 31, 2020 was $9,682.9 million and $9,726.2 million, respectively. Management’s objective in managing capital is to ensure its overall capital level, as well as the capital levels of its operating subsidiaries, exceed the amounts required by regulators, the amount needed to

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support our current financial strength ratings from rating agencies and our own economic capital models. The Company’s capital has historically exceeded these benchmark levels.

Our two main operating companies Bermuda Re and Everest Re are regulated by the Bermuda Monetary Authority (“BMA”) and the State of Delaware, Department of Insurance, respectively. Both regulatory bodies have their own capital adequacy models based on statutory capital as opposed to GAAP basis equity. Failure to meet the required statutory capital levels could result in various regulatory restrictions, including business activity and the payment of dividends to their parent companies.

The regulatory targeted capital and the actual statutory capital for Bermuda Re and Everest Re were as follows:

| Bermuda Re (1) |  | Everest Re (2)
| At December 31, |  | At December 31,
(Dollars in millions) | 2020 |  | 2019 |  | 2020 |  | 2019
Regulatory targeted capital | $ | 1,923.2 |  | $ | 2,061.1 |  | $ | 2,489.8 |  | $ | 2,001.2
Actual capital | $ | 2,930.3 |  | $ | 3,197.4 |  | $ | 5,276.0 |  | $ | 3,739.1

(1) Regulatory targeted capital represents the target capital level from the applicable year's BSCR calculation.

(2) Regulatory targeted capital represents 200% of the RBC authorized control level calculation for the applicable year.

Our financial strength ratings as determined by A.M. Best, Standard & Poor’s and Moody’s are important as they provide our customers and investors with an independent assessment of our financial strength using a rating scale that provides for relative comparisons. We continue to possess significant financial flexibility and access to debt and equity markets as a result of our financial strength, as evidenced by the financial strength ratings as assigned by independent rating agencies.

We maintain our own economic capital models to monitor and project our overall capital, as well as, the capital at our operating subsidiaries. A key input to the economic models is projected income and this input is continually compared to actual results, which may require a change in the capital strategy.

On October 7, 2020, we issued an additional $1,000.0 million of 30 year senior notes at a rate of 3.5%. These senior notes will mature on October 15, 2050 and will pay interest semi-annually.

During the first quarter of 2021, we repurchased 97,462 shares for $23.5 million in the open market and paid $62.2 million in dividends to adjust our capital position and enhance long term expected returns to our shareholders. In 2020, we repurchased 970,892 shares for $200.0 million in the open market and paid $249.1 million in dividends to adjust our capital position and enhance long term expected returns to our shareholders. We may at times enter into a Rule 10b5-1 repurchase plan agreement to facilitate the repurchase of shares. On May 22, 2020, our existing Board authorization to purchase up to 30 million of our shares was amended to authorize the purchase of up to 32 million shares. As of March 31, 2021, we had repurchased 29.7 million shares under this authorization.

We also repurchased $13.2 million of our long-term subordinated notes in 2020. We recognized a realized gain of $2.5 million on the repurchase. We may continue, from time to time, to seek to retire portions of our outstanding debt securities through cash repurchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be subject to and depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.

Liquidity. Our liquidity requirements are generally met from positive cash flow from operations. Positive cash flow results from reinsurance and insurance premiums being collected prior to disbursements for claims, which disbursements generally take place over an extended period after the collection of premiums, sometimes a period of many years. Collected premiums are generally invested, prior to their use in such disbursements, and investment income provides additional funding for loss payments. Our net cash flows from operating activities

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were $904.4 million and $506.0 million for the three months ended March 31, 2021 and 2020, respectively. Additionally, these cash flows reflected net catastrophe loss payments of $173.6 million and $219.3 million for the three months ended March 31, 2021 and 2020, respectively and net tax payments of $6.4 million and $4.9 million for the three months ended March 31, 2021 and 2020, respectively.

If disbursements for claims and benefits, policy acquisition costs and other operating expenses were to exceed premium inflows, cash flow from reinsurance and insurance operations would be negative. The effect on cash flow from insurance operations would be partially offset by cash flow from investment income. Additionally, cash inflows from investment maturities and dispositions, both short-term investments and longer term maturities are available to supplement other operating cash flows.

As the timing of payments for claims and benefits cannot be predicted with certainty, we maintain portfolios of long term invested assets with varying maturities, along with short-term investments that provide additional liquidity for payment of claims. At March 31, 2021 and December 31, 2020, we held cash and short-term investments of $1,959.4 million and $1,936.6 million, respectively. Our short-term investments are generally readily marketable and can be converted to cash. In addition to these cash and short-term investments, at March 31, 2021, we had $1,559.2 million of available for sale fixed maturity securities maturing within one year or less, $6,715.9 million maturing within one to five years and $6,159.0 million maturing after five years. Our $1,400.7 million of equity securities are comprised primarily of publicly traded securities that can be easily liquidated. We believe that these fixed maturity and equity securities, in conjunction with the short-term investments and positive cash flow from operations, provide ample sources of liquidity for the expected payment of losses in the near future. We do not anticipate selling a significant amount of securities or using available credit facilities to pay losses and LAE but have the ability to do so. Sales of securities might result in realized capital gains or losses. At March 31, 2021 we had $484.0 million of net pre-tax unrealized appreciation related to fixed maturity securities, comprised of $677.5 million of pre-tax unrealized appreciation and $193.5 million of pre-tax unrealized depreciation.

Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing. However, given the recent set of catastrophic events, cash flow from operations may decline and could become negative in the near term as significant claim payments are made related to the catastrophes. However, as indicated above, the Company has ample liquidity to settle its catastrophe claims.

In addition to our cash flows from operations and liquid investments, we also have multiple credit facilities that provide up to $200.0 million of unsecured revolving credit for liquidity and letters of credit but more importantly provide for up to $600.0 million and £52.2 million of collateralized standby letters of credit to support business written by our Bermuda operating subsidiaries.

Effective May 26, 2016, Group, Bermuda Re and Everest International entered into a five year, $800.0 million senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22, 2012, four year, $800.0 million 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 $200.0 million 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 0.5% per annum or (c) the one month LIBOR Rate plus 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 $600.0 million 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 0.35 to 1 and to maintain a minimum net worth. Minimum net worth is an amount equal to the sum of $5,371.0 million plus 25%

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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 25% of any increase in consolidated net worth during such period attributable to the issuance of ordinary and preferred shares, which at March 31, 2021, was $6,476.6 million. As of March 31, 2021, the Company was in compliance with all Group Credit Facility covenants.

At March 31, 2021 and December 31, 2020, the Company had no outstanding short-term borrowings from the Group Credit Facility revolving credit line. At March 31, 2021, the Group Credit Facility had $151.4 million outstanding letters of credit under tranche one and $598.4 million outstanding letters of credit under tranche two. At December 31, 2020, the Group Credit Facility had $164.2 million outstanding letters of credit under tranche one and $589.7 million outstanding letters of credit under tranche two.

Effective May 12 2020, Everest International amended its credit facility with Lloyds Bank plc (“Everest International Credit Facility”). The current amendment of the Everest International Credit Facility provides up to £52.2 million for the issuance of standby letters of credit on a collateralized basis. The Company pays a commitment fee of 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 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 $6,393.0, million (70% of consolidated net worth as of December 31, 2019), plus 25% of consolidated net income for each of Group’s fiscal quarters, for which statements are available ending on or after January 1, 2019 and for which net income is positive, plus 25% of any increase in consolidated net worth of Group during such period attributable to the issuance of ordinary and preferred shares, which at March 31, 2021, was $6,613.6 million. As of March 31, 2021, the Company was in compliance with all Everest International Credit Facility requirements.

At March 31, 2021 and December 31, 2020, Everest International Credit Facility had £52.2 million of outstanding letters of credit.

Costs incurred in connection with the Group Credit Facility and Everest International Credit Facility were $0.1 million for the three months ended March 31, 2021 and 2020.

Effective August 15, 2019, Everest Re became a member of the Federal Home Loan Banks (“FHLB”) organization, which allows Everest Re to borrow up to 10% of its statutory admitted assets. As of March 31, 2021, Everest Re had admitted assets of approximately $17,280.1 million which provides borrowing capacity of up to approximately $1,728.0 million. As of March 31, 2021, Everest Re had $310.0 million of outstanding borrowings through its FHLB borrowing capacity. The $310.0 million of collateralized borrowings have interest payable at a rate of 0.35%.

Market Sensitive Instruments.

The SEC’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial statement disclosure requirements for derivative financial instruments, derivative commodity instruments and other financial instruments (collectively, “market sensitive instruments”). We do not generally enter into market sensitive instruments for trading purposes.

Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, fixed maturity portfolio, while maintaining an adequate level of liquidity. Our mix of investments is adjusted periodically, consistent with our current and projected operating results and market conditions. The fixed maturity securities in the investment portfolio are comprised of non-trading available for sale securities. Additionally, we have invested in equity securities.

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The overall investment strategy considers the scope of present and anticipated Company operations. In particular, estimates of the financial impact resulting from non-investment asset and liability transactions, together with our capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated payout characteristics for which our investments provide liquidity. This analysis is considered in the development of specific investment strategies for asset allocation, duration and credit quality. The change in overall market sensitive risk exposure principally reflects the asset changes that took place during the period.

Interest Rate Risk. Our $25.9 billion investment portfolio, at March 31, 2021, is principally comprised of fixed maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk, and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the dollar value of foreign currency denominated liabilities and their associated income statement impact.

Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term investments, from a change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the $3,337.6 million of mortgage-backed securities in the $20,407.5 million fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.

The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $826.8 million of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios.

| Impact of Interest Rate Shift in Basis Points
| At March 31, 2021
| -200 |  |  | -100 |  | 0 |  |  | 100 |  | 200
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Market/Fair Value | $ | 22,698.1 |  |  | $ | 21,966.2 |  |  | $ | 21,234.2 |  |  | $ | 20,502.3 |  |  |  | 19,770.4 |
Market/Fair Value Change from Base (%) |  | 6.9 | % |  |  | 3.4 | % |  |  | 0.0 | % |  |  | (3.4) | % |  |  | (6.9) | %
Change in Unrealized Appreciation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After-tax from Base ($) | $ | 1,280.3 |  |  | $ | 640.2 |  |  | $ | - |  |  | $ | (640.2) |  |  | $ | (1,280.3) |

We had $17,090.6 million and $16,399.0 million of gross reserves for losses and LAE as of March 31, 2021 and December 31, 2020, respectively. These amounts are recorded at their nominal value, as opposed to present value, which would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the reserves decreases and, conversely, as interest rates decline, the present value increases. These movements are the opposite of the interest rate impacts on the fair value of investments. While the difference between present value and nominal value is not reflected in our financial statements, our financial results will include investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration of approximately 2.9 years, which is reasonably consistent with our fixed income portfolio. If we were to discount our loss and LAE reserves, net of ceded reserves, the discount would be approximately $1.4 billion resulting in a discounted reserve balance of approximately $13.8 billion, representing approximately 65.1% of the value of the fixed maturity investment portfolio funds.

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Equity Risk. Equity risk is the potential change in fair and/or market value of the common stock, preferred stock and mutual fund portfolios arising from changing prices. Our equity investments consist of a diversified portfolio of individual securities and mutual funds, which invest principally in high quality common and preferred stocks that are traded on the major exchanges, and mutual fund investments in emerging market debt. The primary objective of the equity portfolio is to obtain greater total return relative to our core bonds over time through market appreciation and income.

The table below displays the impact on fair/market value and after-tax change in fair/market value of a 10% and 20% change in equity prices up and down for the period indicated.

| Impact of Percentage Change in Equity Fair/Market Values
| At March 31, 2021
(Dollars in millions) | -20% |  | -10% |  | 0% |  | 10% |  | 20%
Fair/Market Value of the Equity Portfolio | $ | 1,120.5 |  | $ | 1,260.6 |  | $ | 1,400.7 |  | $ | 1,540.7 |  | $ | 1,680.8
After-tax Change in Fair/Market Value | $ | (227.7) |  | $ | (113.8) |  | $ | - |  | $ | 113.8 |  | $ | 227.7

Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S./Bermuda (“foreign”) operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Canadian Dollar, the Singapore Dollar, the British Pound Sterling and the Euro. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our corresponding operating liabilities. In accordance with FASB guidance, the impact on the market value of available for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a component of other income (expense). In addition, we translate the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income.

Safe Harbor Disclosure.

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”, “believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include information regarding our reserves for losses and LAE, the CARES Act, the impact of the Tax Cut and Jobs Act, the adequacy of capital in relation to regulatory required capital, the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic and pandemic events on our financial statements, the ability of Everest Re, Holdings, Holdings Ireland, Dublin Holdings, Bermuda Re and Everest International to pay dividends and the settlement costs of our specialized equity index put option contracts. Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause our actual events or results to be materially different from our expectations include those discussed under the caption ITEM 1A, “Risk Factors” in the Company’s most recent 10-K filing. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Instruments. See “Liquidity and Capital Resources - Market Sensitive Instruments” in PART I – ITEM 2.

ITEM 4.CONTROLS AND PROCEDURES

As of the end of the period covered by this report, our management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

PART II

ITEM 1.LEGAL PROCEEDINGS

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.

ITEM 1A.RISK FACTORS

No material changes.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities.

Issuer Purchases of Equity Securities
| (a) | (b) | (c) | (d)
|  |  |  |  | Maximum Number (or
|  |  |  | Total Number of | Approximate Dollar
|  |  |  | Shares (or Units) | Value) of Shares (or
|  |  |  | Purchased as Part | Units) that May Yet
| Total Number of |  |  | of Publicly | Be Purchased Under
| Shares (or Units) | Average Price Paid | Announced Plans or | the Plans or
Period | Purchased | per Share (or Unit) | Programs | Programs (1)
January 1 - 31, 2021 | - | $ | - | - | 2,357,803
February 1 - 28, 2021 | 49,610 | $ | 241.4919 | 4,100 | 2,353,703
March 1 - 31, 2021 | 93,362 | $ | 241.7088 | 93,362 | 2,260,341
Total | 142,972 | $ | - | 97,462 | 2,260,341

(1)On May 22, 2020, the Company’s executive committee of the Board of Directors approved an amendment to the share repurchase program authorizing the Company and/or its subsidiary Holdings, to purchase up to a current aggregate of 32.0 million of the Company’s shares (recognizing that the number of shares authorized for repurchase has been reduced by those shares that have already been purchased) in open market transactions, privately negotiated transactions or both. Currently, the Company and/or its subsidiary Holdings have repurchased 29.6 million of the Company’s shares.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

Exhibit Index

Exhibit No. | Description
10.1 | Credit Agreement, dated February 23, 2021, between Everest Reinsurance (Bermuda), Ltd. and Wells Fargo Bank, N.A. as administrative agent, providing for an $50.0 million credit facility, filed herewith
31.1 | Section 302 Certification of Juan C. Andrade
31.2 | Section 302 Certification of Mark Kociancic
32.1 | Section 906 Certification of Juan C. Andrade and Mark Kociancic

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Everest Re Group, Ltd.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Everest Re Group, Ltd. |
(Registrant) |
/S/ MARK KOCIANCIC |  |
Mark Kociancic |  |
Executive Vice President and |
Chief Financial Officer |
(Duly Authorized Officer and Principal Financial Officer)

Dated: May 10, 2021

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