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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the Transition Period from                      to                     .
Commission File Number
1-15202

W. R. BERKLEY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1867895
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
   
475 Steamboat Road Greenwich Connecticut 06830
(Address of principal executive offices) (Zip Code)
(203) 629-3000
(Registrant’s telephone number, including area code)
None
Former name, former address and former fiscal year, if changed since last report.
Securities registered pursuant to Section 12(b) of the Act:
Title Trading Symbol Name
 
Common Stock, par value $.20 per share WRB New York Stock Exchange
5.700% Subordinated Debentures due 2058 WRB-PE New York Stock Exchange
5.100% Subordinated Debentures due 2059 WRB-PF New York Stock Exchange
4.250% Subordinated Debentures due 2060 WRB-PG New York Stock Exchange
4.125% Subordinated Debentures due 2061 WRB-PH New York Stock Exchange
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      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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No
1


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant 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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No
Number of shares of common stock, $.20 par value, outstanding as of July 27, 2022: 265,272,980
2


TABLE OF CONTENTS
3


Part I — FINANCIAL INFORMATION
Item 1.     Financial Statements
W. R. BERKLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30,
2022
December 31,
2021
(Unaudited) (Audited)
Assets    
Investments:    
Fixed maturity securities (amortized cost of $17,697,420 and $16,471,304; allowance for expected credit losses of $33,405 and $22,625 at June 30, 2022 and December 31, 2021, respectively)
$ 16,851,514  $ 16,602,673 
Investment funds 1,702,270  1,480,612 
Real estate 1,304,094  1,852,508 
Equity securities 1,155,326  941,243 
Arbitrage trading account 1,142,003  1,179,606 
Loans receivable (net of allowance for expected credit losses of $2,175 and $1,718 at June 30, 2022 and December 31, 2021, respectively)
113,483  115,172 
Total investments 22,268,690  22,171,814 
Cash and cash equivalents 1,316,603  1,568,843 
Premiums and fees receivable (net of allowance for expected credit losses of $30,557 and $25,218 at June 30, 2022 and December 31, 2021, respectively)
2,799,805  2,522,972 
Due from reinsurers (net of allowance for expected credit losses of $7,744 and $7,713 at June 30, 2022 and December 31, 2021, respectively)
3,046,754  2,923,026 
Deferred policy acquisition costs 753,185  676,145 
Prepaid reinsurance premiums 694,888  676,915 
Trading account receivables from brokers and clearing organizations 9,937  — 
Property, furniture and equipment 415,446  419,883 
Goodwill 169,652  169,652 
Accrued investment income 133,014  122,938 
Current and deferred federal and foreign income taxes 296,943  42,457 
Other assets 787,530  753,231 
Total assets $ 32,692,447  $ 32,047,876 
Liabilities and Equity    
Liabilities:    
Reserves for losses and loss expenses $ 16,145,821  $ 15,390,888 
Unearned premiums 5,249,543  4,847,160 
Due to reinsurers 541,689  514,980 
Trading account securities sold but not yet purchased 68  1,169 
Trading account payable to brokers and clearing organizations —  53,636 
Other liabilities 1,378,169  1,305,245 
Senior notes and other debt 1,832,273  2,259,416 
Subordinated debentures 1,008,011  1,007,652 
Total liabilities 26,155,574  25,380,146 
Equity:    
Preferred stock, par value $0.10 per share:
   
Authorized 5,000,000 shares; issued and outstanding - none
—  — 
Common stock, par value $0.20 per share:
   
Authorized 1,250,000,000 shares and 750,000,000 shares, respectively; issued and outstanding, net of treasury shares, 265,272,980 and 265,170,882 shares, respectively
105,803  105,803 
Additional paid-in capital 1,001,093  981,104 
Retained earnings 9,602,948  9,015,135 
Accumulated other comprehensive loss (1,029,630) (281,955)
Treasury stock, at cost, 263,741,648 and 263,843,868 shares, respectively
(3,165,729) (3,167,076)
Total stockholders’ equity 6,514,485  6,653,011 
Noncontrolling interests 22,388  14,719 
Total equity 6,536,873  6,667,730 
Total liabilities and equity $ 32,692,447  $ 32,047,876 
See accompanying notes to interim consolidated financial statements.
1


W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2022 2021 2022 2021
REVENUES:    
Net premiums written $ 2,585,635  $ 2,212,181  $ 4,998,889  $ 4,262,219 
Change in net unearned premiums (228,477) (240,557) (392,645) (440,639)
Net premiums earned 2,357,158  1,971,624  4,606,244  3,821,580 
Net investment income 171,574  168,187  345,086  326,764 
Net investment (losses) gains:
Net realized and unrealized (losses) gains on investments (163,935) 20,461  205,947  72,219 
Change in allowance for expected credit losses on investments (7,620) 3,603  (11,237) (13,316)
Net investment (losses) gains (171,555) 24,064  194,710  58,903 
Revenues from non-insurance businesses 128,421  109,122  226,197  196,552 
Insurance service fees 26,393  22,256  54,344  48,064 
Other income 896  833  1,716  1,092 
Total revenues 2,512,887  2,296,086  5,428,297  4,452,955 
OPERATING COSTS AND EXPENSES:    
Losses and loss expenses 1,435,817  1,203,647  2,775,069  2,325,238 
Other operating costs and expenses 699,819  647,705  1,413,718  1,263,973 
Expenses from non-insurance businesses 122,966  106,698  217,822  192,989 
Interest expense 31,723  38,096  66,693  74,747 
Total operating costs and expenses 2,290,325  1,996,146  4,473,302  3,856,947 
Income before income taxes 222,562  299,940  954,995  596,008 
Income tax expense (43,095) (62,262) (182,499) (126,614)
Net income before noncontrolling interests 179,467  237,678  772,496  469,394 
Noncontrolling interests (145) (440) (2,536) (2,631)
Net income to common stockholders $ 179,322  $ 237,238  $ 769,960  $ 466,763 
NET INCOME PER SHARE:    
Basic $ 0.65  $ 0.85  $ 2.78  $ 1.68 
Diluted $ 0.64  $ 0.85  $ 2.76  $ 1.66 

See accompanying notes to interim consolidated financial statements.






2


W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(In thousands)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2022 2021 2022 2021
Net income before noncontrolling interests $ 179,467  $ 237,678  $ 772,496  $ 469,394 
Other comprehensive (loss) income:    
Change in unrealized currency translation adjustments (43,393) 2,537  12,879  6,587 
Change in unrealized investment (losses) gains, net of taxes (337,008) 23,272  (760,553) (66,858)
Other comprehensive (loss) income (380,401) 25,809  (747,674) (60,271)
Comprehensive (loss) income (200,934) 263,487  24,822  409,123 
Noncontrolling interests (145) (439) (2,535) (2,630)
Comprehensive (loss) income to common stockholders $ (201,079) $ 263,048  $ 22,287  $ 406,493 

See accompanying notes to interim consolidated financial statements.
3


W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except per share data)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2022 2021 2022 2021
COMMON STOCK:    
Beginning and end of period $ 105,803  $ 105,803  $ 105,803  $ 105,803 
ADDITIONAL PAID-IN CAPITAL:    
Beginning of period $ 992,012  $ 988,288  $ 981,104  $ 977,215 
Restricted stock units issued (1,840) 597  (2,370) 72 
Restricted stock units expensed 10,921  11,013  22,359  22,611 
End of period $ 1,001,093  $ 999,898  $ 1,001,093  $ 999,898 
RETAINED EARNINGS:    
Beginning of period $ 9,582,790  $ 8,556,621  $ 9,015,135  $ 8,348,381 
Net income to common stockholders 179,322  237,238  769,960  466,763 
Dividends ($0.60, $0.42, $0.69 and $0.50 per share, respectively)
(159,164) (111,771) (182,147) (133,056)
End of period $ 9,602,948  $ 8,682,088  $ 9,602,948  $ 8,682,088 
ACCUMULATED OTHER COMPREHENSIVE LOSS:    
Unrealized investment (loss) gains:    
Beginning of period $ (332,646) $ 199,584  $ 90,900  $ 289,714 
Change in unrealized (losses) gains on securities without an allowance for expected credit losses (320,130) 23,340  (743,969) (77,145)
Change in unrealized (losses) gains on securities with an allowance for expected credit losses (16,878) (69) (16,585) 10,286 
End of period (669,654) 222,855  (669,654) 222,855 
Currency translation adjustments:    
Beginning of period (316,583) (347,836) (372,855) (351,886)
Net change in period (43,393) 2,537  12,879  6,587 
End of period (359,976) (345,299) (359,976) (345,299)
Total accumulated other comprehensive loss $ (1,029,630) $ (122,444) $ (1,029,630) $ (122,444)
TREASURY STOCK:    
Beginning of period $ (3,166,873) $ (3,087,860) $ (3,167,076) $ (3,058,425)
Stock exercised/vested 1,144  791  1,347  1,039 
Stock repurchased —  —  —  (29,683)
End of period $ (3,165,729) $ (3,087,069) $ (3,165,729) $ (3,087,069)
NONCONTROLLING INTERESTS:    
Beginning of period $ 23,296  $ 15,684  $ 14,719  $ 14,995 
(Contributions) distributions (1,053) (6,445) 5,134  (7,947)
Net income 145  440  2,536  2,631 
Other comprehensive loss, net of tax —  (1) (1) (1)
End of period $ 22,388  $ 9,678  $ 22,388  $ 9,678 
See accompanying notes to interim consolidated financial statements.
4


W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
For the Six Months
Ended June 30,
  2022 2021
CASH FROM OPERATING ACTIVITIES:    
Net income to common stockholders $ 769,960  $ 466,763 
Adjustments to reconcile net income to net cash from operating activities:    
Net investment gains (194,710) (58,903)
Depreciation and amortization 37,238  70,597 
Noncontrolling interests 2,536  2,631 
Investment funds (85,874) (100,246)
Stock incentive plans 24,158  23,122 
Change in:
Arbitrage trading account (27,071) (139,520)
Premiums and fees receivable (284,092) (321,718)
Reinsurance accounts (111,350) (178,442)
Deferred policy acquisition costs (77,561) (72,125)
Income taxes (56,725) (71,205)
Reserves for losses and loss expenses 788,211  705,454 
Unearned premiums 409,450  473,395 
Other (188,517) (103,994)
Net cash from operating activities 1,005,653  695,809 
CASH USED IN INVESTING ACTIVITIES:    
Proceeds from sale of fixed maturity securities 909,295  1,474,054 
Proceeds from sale of equity securities 19,842  98,765 
(Contributions to) distributions from investment funds (142,801) 88,363 
Proceeds from maturities and prepayments of fixed maturity securities 2,655,789  3,156,861 
Purchase of fixed maturity securities (4,860,991) (6,266,934)
Purchase of equity securities (271,296) (143,836)
Real estate (purchased) sold (5,974) 202,115 
Change in loans receivable 1,200  (28,510)
Net purchases of property, furniture and equipment (22,028) (48,273)
Change in balances due to security brokers 69,801  65,751 
Cash received in connection with business disposition 906,789  — 
Payment for business purchased net of cash acquired (49,572) — 
Other 37 
Net cash used in investing activities (789,909) (1,401,642)
CASH (USED IN) FROM FINANCING ACTIVITIES:    
Repayment of senior notes and other debt (426,503) (505,230)
Net proceeds from issuance of debt 192  686,893 
Cash dividends to common stockholders (22,983) (21,285)
Purchase of common treasury shares —  (29,683)
Other, net (1,400) (6,725)
Net cash (used in) from financing activities (450,694) 123,970 
Net impact on cash due to change in foreign exchange rates (17,290) (304)
Net change in cash and cash equivalents (252,240) (582,167)
Cash and cash equivalents at beginning of period 1,568,843  2,372,366 
Cash and cash equivalents at end of period $ 1,316,603  $ 1,790,199 
See accompanying notes to interim consolidated financial statements.
5



W. R. Berkley Corporation and Subsidiaries
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) General
    The unaudited consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”), have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for annual financial statements. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly the Company’s financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. For further information related to areas of judgment and estimates and other information necessary to understand the Company’s financial position and results of operations, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Reclassifications have been made in the 2021 financial statements as originally reported to conform to the presentation of the 2022 financial statements. Shares outstanding and per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on March 23, 2022.
The income tax provision has been computed based on the Company’s estimated annual effective tax rate. The effective income tax rate differs from the federal income tax rate of 21% primarily due to a net reduction to the Company’s valuation allowance against foreign tax credits and foreign net operating losses, which was partially offset by state income taxes.


(2) Per Share Data
    The Company presents both basic and diluted net income per share (“EPS”) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period (including 11,592,699 and 11,651,811 common shares held in a grantor trust as of June 30, 2022 and 2021, respectively). The common shares held in the grantor trust are for delivery upon settlement of vested but mandatorily deferred restricted stock units ("RSUs"). Shares held by the grantor trust do not affect diluted shares outstanding since the shares deliverable under vested RSUs were already included in diluted shares outstanding. Diluted EPS is based upon the weighted average number of basic and common equivalent shares outstanding during the period and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect.
    The weighted average number of common shares used in the computation of basic and diluted earnings per share was as follows:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(In thousands) 2022 2021 2022 2021
Basic 276,815  277,733  276,794  277,763 
Diluted 279,525  280,659  279,327  280,478 


(3) Recent Accounting Pronouncements and Accounting Policies
Recently adopted accounting pronouncements:
    All accounting and reporting standards that became effective in 2022 were either not applicable to the Company or their adoption did not have a material impact on the Company.
Accounting and reporting standards that are not yet effective:
    All recently issued but not yet effective accounting and reporting standards are either not applicable to the Company or are not expected to have a material impact on the Company.
6


(4) Acquisition

In March 2022, the Company acquired an 80.0% ownership interest for $51.1 million in a company engaged in residential and commercial textiles. The fair value of the assets acquired and liabilities assumed have been estimated based on a preliminary valuation. The fair values of the assets and liabilities will be adjusted, as needed, following completion of the final valuation.

    The following table summarizes the initial estimated fair value of net assets acquired and liabilities assumed for the business combination completed in 2022:
(In thousands) 2022
Cash and cash equivalents $ 1,564 
Real estate, furniture and equipment 2,527 
Intangible assets 48,787 
Other assets 11,275 
Total assets acquired 64,153 
Other liabilities assumed (5,417)
Noncontrolling interest (7,600)
  Net assets acquired $ 51,136 



7


(5) Consolidated Statements of Comprehensive (Loss) Income

    The following table presents the components of the changes in accumulated other comprehensive (loss) income ("AOCI"):
(In thousands) Unrealized Investment (Losses) Gains Currency Translation Adjustments Accumulated Other Comprehensive
(Loss) Income
As of and for the six months ended June 30, 2022
Changes in AOCI
Beginning of period $ 90,900  $ (372,855) $ (281,955)
Other comprehensive (loss) income before reclassifications (799,623) 12,879  (786,744)
Amounts reclassified from AOCI 39,070  —  39,070 
Other comprehensive (loss) income (760,553) 12,879  (747,674)
Unrealized investment loss related to noncontrolling interest (1) —  (1)
End of period $ (669,654) $ (359,976) $ (1,029,630)
Amounts reclassified from AOCI
Pre-tax $ 49,456  (1) $ —  $ 49,456 
Tax effect (10,386) (2) —  (10,386)
After-tax amounts reclassified $ 39,070  $ —  $ 39,070 
Other comprehensive (loss) income
Pre-tax $ (970,232) $ 12,879  $ (957,353)
Tax effect 209,679  —  209,679 
Other comprehensive (loss) income $ (760,553) $ 12,879  $ (747,674)
As of and for the three months ended June 30, 2022
Changes in AOCI
Beginning of period $ (332,646) $ (316,583) $ (649,229)
Other comprehensive loss before reclassifications (366,488) (43,393) (409,881)
Amounts reclassified from AOCI 29,480  —  29,480 
Other comprehensive loss (337,008) (43,393) (380,401)
Unrealized investment loss related to noncontrolling interest —  —  — 
Ending balance $ (669,654) $ (359,976) $ (1,029,630)
Amounts reclassified from AOCI
Pre-tax $ 37,316  (1) $ —  $ 37,316 
Tax effect (7,836) (2) —  (7,836)
After-tax amounts reclassified $ 29,480  $ —  $ 29,480 
Other comprehensive loss
Pre-tax $ (430,784) $ (43,393) $ (474,177)
Tax effect 93,776  —  93,776 
Other comprehensive loss $ (337,008) $ (43,393) $ (380,401)
8


As of and for the six months ended June 30, 2021
Changes in AOCI
Beginning of period $ 289,714  $ (351,886) $ (62,172)
Other comprehensive (loss) income before reclassifications (87,168) 6,587  (80,581)
Amounts reclassified from AOCI 20,310  —  20,310 
Other comprehensive (loss) income (66,858) 6,587  (60,271)
Unrealized investment loss related to noncontrolling interest (1) —  (1)
End of period $ 222,855  $ (345,299) $ (122,444)
Amounts reclassified from AOCI
Pre-tax $ 25,709  (1) $ —  $ 25,709 
Tax effect (5,399) (2) —  (5,399)
After-tax amounts reclassified $ 20,310  $ —  $ 20,310 
Other comprehensive (loss) income
Pre-tax $ (84,931) $ 6,587  $ (78,344)
Tax effect 18,073  —  18,073 
Other comprehensive (loss) income $ (66,858) $ 6,587  $ (60,271)
As of and for the three months ended June 30, 2021
Changes in AOCI
Beginning of period $ 199,584  $ (347,836) $ (148,252)
Other comprehensive income before reclassifications 11,823  2,537  14,360 
Amounts reclassified from AOCI 11,449  —  11,449 
Other comprehensive income 23,272  2,537  25,809 
Unrealized investment loss related to noncontrolling interest (1) —  (1)
Ending balance $ 222,855  $ (345,299) $ (122,444)
Amounts reclassified from AOCI
Pre-tax $ 14,493  (1) $ —  $ 14,493 
Tax effect (3,044) (2) —  (3,044)
After-tax amounts reclassified $ 11,449  $ —  $ 11,449 
Other comprehensive income
Pre-tax $ 28,804  $ 2,537  $ 31,341 
Tax effect (5,532) —  (5,532)
Other comprehensive income $ 23,272  $ 2,537  $ 25,809 
____________
(1) Net investment (losses) gains in the consolidated statements of income.
(2) Income tax expense in the consolidated statements of income.


(6) Statements of Cash Flows
    Interest payments were $74,577,437 and $71,781,000 for the six months ended June 30, 2022 and 2021, respectively. Income taxes paid were $183,000,000 and $177,000,000 for the six months ended June 30, 2022 and 2021, respectively.
9


(7) Investments in Fixed Maturity Securities
    At June 30, 2022 and December 31, 2021, investments in fixed maturity securities were as follows:
 
(In thousands) Amortized
Cost
Allowance for Expected Credit Losses (1) Gross Unrealized Fair
Value
Carrying
Value
Gains Losses
June 30, 2022
Held to maturity:
State and municipal $ 46,486  $ (127) $ 5,347  $ —  $ 51,706  $ 46,359 
Residential mortgage-backed 4,155  —  170  —  4,325  4,155 
Total held to maturity 50,641  (127) 5,517  —  56,031  50,514 
Available for sale:
U.S. government and government agency 762,615  —  1,213  (42,914) 720,914  720,914 
State and municipal:
Special revenue 1,937,329  —  6,636  (76,329) 1,867,636  1,867,636 
State general obligation 378,081  —  3,957  (13,458) 368,580  368,580 
Pre-refunded 200,716  —  3,232  (49) 203,899  203,899 
Corporate backed 166,591  —  453  (6,836) 160,208  160,208 
Local general obligation 418,962  —  6,593  (8,615) 416,940  416,940 
Total state and municipal 3,101,679  —  20,871  (105,287) 3,017,263  3,017,263 
Mortgage-backed:
Residential 1,181,482  —  794  (110,774) 1,071,502  1,071,502 
Commercial 413,090  —  552  (8,045) 405,597  405,597 
Total mortgage-backed 1,594,572  —  1,346  (118,819) 1,477,099  1,477,099 
Asset-backed 4,421,553  —  484  (129,549) 4,292,488  4,292,488 
Corporate:
Industrial 3,412,383  (164) 2,643  (199,225) 3,215,637  3,215,637 
Financial 1,909,682  (18) 341  (98,344) 1,811,661  1,811,661 
Utilities 448,342  —  249  (26,490) 422,101  422,101 
Other 247,531  —  29  (7,834) 239,726  239,726 
Total corporate 6,017,938  (182) 3,262  (331,893) 5,689,125  5,689,125 
Foreign government 1,748,422  (33,096) 528  (111,743) 1,604,111  1,604,111 
Total available for sale 17,646,779  (33,278) 27,704  (840,205) 16,801,000  16,801,000 
Total investments in fixed maturity securities $ 17,697,420  $ (33,405) $ 33,221  $ (840,205) $ 16,857,031  $ 16,851,514 
____________
(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses is recognized in the consolidated statements of income. Amount excludes unrealized losses relating to non-credit factors.
10


(In thousands) Amortized
Cost
Allowance for Expected Credit Losses (1) Gross Unrealized Fair
Value
Carrying
Value
Gains Losses
December 31, 2021
Held to maturity:
State and municipal $ 69,539  $ (387) $ 10,813  $ —  $ 79,965  $ 69,152 
Residential mortgage-backed 4,829  —  632  —  5,461  4,829 
Total held to maturity 74,368  (387) 11,445  —  85,426  73,981 
Available for sale:
U.S. government and government agency 851,128  —  8,509  (4,294) 855,343  855,343 
State and municipal:
Special revenue 2,016,382  —  62,961  (5,706) 2,073,637  2,073,637 
State general obligation 388,110  —  23,152  (1,015) 410,247  410,247 
Pre-refunded 202,633  —  14,891  (574) 216,950  216,950 
Corporate backed 166,943  —  7,191  (1,532) 172,602  172,602 
Local general obligation 401,974  —  29,455  (732) 430,697  430,697 
Total state and municipal 3,176,042  —  137,650  (9,559) 3,304,133  3,304,133 
Mortgage-backed:
Residential 940,744  —  9,896  (11,321) 939,319  939,319 
Commercial 125,709  —  3,388  (341) 128,756  128,756 
Total mortgage-backed securities 1,066,453  —  13,284  (11,662) 1,068,075  1,068,075 
Asset-backed 4,504,950  —  4,409  (18,794) 4,490,565  4,490,565 
Corporate:
Industrial 3,231,520  (16) 62,751  (21,092) 3,273,163  3,273,163 
Financial 1,739,282  —  30,709  (6,591) 1,763,400  1,763,400 
Utilities 396,242  —  13,262  (3,202) 406,302  406,302 
Other 154,210  —  125  (1,525) 152,810  152,810 
Total corporate 5,521,254  (16) 106,847  (32,410) 5,595,675  5,595,675 
Foreign government 1,277,109  (22,222) 7,508  (47,494) 1,214,901  1,214,901 
Total available for sale 16,396,936  (22,238) 278,207  (124,213) 16,528,692  16,528,692 
Total investments in fixed maturity securities $ 16,471,304  $ (22,625) $ 289,652  $ (124,213) $ 16,614,118  $ 16,602,673 
____________
(1) Represents the amount of impairment that has resulted from credit-related factors. The change in the allowance for expected credit losses is recognized in the consolidated statements of income. Amount excludes unrealized losses relating to non-credit factors.
The following table presents the rollforward of the allowance for expected credit losses for held to maturity securities for the six months ended June 30, 2022 and 2021:
(In thousands) 2022 2021
Allowance for expected credit losses, beginning of period $ 387  $ 798 
Provision for expected credit losses (260) (345)
Allowance for expected credit losses, end of period $ 127  $ 453 
The following table presents the rollforward of the allowance for expected credit losses for held to maturity securities for the three months ended June 30, 2022 and 2021:
(In thousands) 2022 2021
Allowance for expected credit losses, beginning of period $ 378  $ 730 
Provision for expected credit losses (251) (277)
Allowance for expected credit losses, end of period $ 127  $ 453 
11


The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the six months ended June 30, 2022 and 2021:
2022 2021
(In thousands) Foreign Government Corporate Total Foreign Government Corporate Total
Allowance for expected credit losses, beginning of period $ 22,222  $ 16  22,238  $ 1,264  $ 518  $ 1,782 
Expected credit losses on securities for which credit losses were not previously recorded 1,897  182  2,079  18,990  16  19,006 
Expected credit losses (gains) on securities for which credit losses were previously recorded 9,010  (16) 8,994  (861) (517) (1,378)
Reduction due to disposals (33) —  (33) (494) (5) (499)
Allowance for expected credit losses, end of period $ 33,096  $ 182  $ 33,278  $ 18,899  $ 12  $ 18,911 

During the six months ended June 30, 2022, the Company increased the allowance for expected credit losses for available for sale securities utilizing its credit loss assessment process and inputs used in its credit loss model due to an increase in unrealized losses primarily associated with foreign government securities. During the six months ended June 30, 2021, the Company increased the allowance for expected credit losses for available for sale securities, mainly due to foreign government securities that had no reserve in prior periods.
The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended June 30, 2022 and 2021:

2022 2021
(In thousands) Foreign Government Corporate Total Foreign Government Corporate Total
Allowance for expected credit losses, beginning of period $ 26,153  $ —  $ 26,153  $ 19,993  $ 16  $ 20,009 
Expected credit losses on securities for which credit losses were not previously recorded 1,413  182  1,595  —  —  — 
Expected credit losses (gains) on securities for which credit losses were previously recorded 5,563  —  5,563  (600) (4) (604)
Reduction due to disposals (33) —  (33) (494) —  (494)
Allowance for expected credit losses, end of period $ 33,096  $ 182  $ 33,278  $ 18,899  $ 12  $ 18,911 
The amortized cost and fair value of fixed maturity securities at June 30, 2022, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations.  
(In thousands) Amortized
Cost (1)
Fair
Value
Due in one year or less $ 1,859,431  $ 1,829,253 
Due after one year through five years 8,188,520  7,879,921 
Due after five years through ten years 3,970,551  3,716,098 
Due after ten years 2,080,064  1,950,335 
Mortgage-backed securities 1,598,727  1,481,424 
Total $ 17,697,293  $ 16,857,031 
________________
(1) Amortized cost is reduced by the allowance for expected credit losses of $127 thousand related to held to maturity securities.    
At June 30, 2022 and December 31, 2021, there were no investments that exceeded 10% of common stockholders' equity, other than investments in United States government and government agency securities.


12


(8) Investments in Equity Securities
    At June 30, 2022 and December 31, 2021, investments in equity securities were as follows:
 
(In thousands) Cost Gross Unrealized Fair
Value
Carrying
Value
Gains Losses
June 30, 2022
Common stocks $ 863,106  $ 111,393  $ (41,827) $ 932,672  $ 932,672 
Preferred stocks 259,338  2,652  (39,336) 222,654  222,654 
Total $ 1,122,444  $ 114,045  $ (81,163) $ 1,155,326  $ 1,155,326 
December 31, 2021
Common stocks $ 619,896  $ 92,401  $ (16,894) $ 695,403  $ 695,403 
Preferred stocks 250,149  7,874  (12,183) 245,840  245,840 
Total $ 870,045  $ 100,275  $ (29,077) $ 941,243  $ 941,243 




(9) Arbitrage Trading Account
    At June 30, 2022 and December 31, 2021, the fair and carrying values of the arbitrage trading account were $1,142 million and $1,180 million, respectively. The primary focus of the trading account is merger arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less).
    The Company uses put options and call options in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options are reported at fair value. As of June 30, 2022, the fair value of short option contracts outstanding was $68 thousand (notional amount of $13.5 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.


(10) Net Investment Income
    Net investment income consisted of the following: 
  For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(In thousands) 2022 2021 2022 2021
Investment income (loss) earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable $ 124,389  $ 96,996  $ 225,673  $ 191,673 
Investment funds 33,861  61,311  85,874  100,246 
Equity securities 12,797  7,212  23,653  13,392 
Arbitrage trading account 4,127  3,914  13,313  22,989 
Real estate (1,551) 872  595  2,032 
Gross investment income 173,623  170,305  349,108  330,332 
Investment expense (2,049) (2,118) (4,022) (3,568)
Net investment income $ 171,574  $ 168,187  $ 345,086  $ 326,764 


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(11) Investment Funds
    The Company evaluates whether it is an investor in a variable interest entity ("VIE"). Such entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support, or the equity investors, as a group, do not have the characteristics of a controlling financial interest (primary beneficiary). The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE's capital structure, contractual terms, nature of the VIE's operations and purpose, and the Company's relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE and on an ongoing basis. The Company is not the primary beneficiary in any of its investment funds, and accordingly, carries its interests in investment funds under the equity method of accounting.    
    The Company’s maximum exposure to loss with respect to these investments is limited to the carrying amount reported on the Company’s consolidated balance sheet and its unfunded commitments, which were $440 million as of June 30, 2022.
    Investment funds consisted of the following:
Carrying Value as of Income (Loss) from
Investment Funds
June 30, December 31, For the Six Months
Ended June 30,
(In thousands) 2022 2021 2022 2021
Financial services $ 469,474  $ 431,818  $ 24,135  $ 48,990 
Transportation 338,555  336,688  25,355  17,177 
Real Estate 275,075  273,690  28,243  10,506 
Energy 132,728  150,224  3,708  9,492 
Infrastructure 110,491  12,314  (133) 699 
Other funds 375,947  275,878  4,566  13,382 
Total $ 1,702,270  $ 1,480,612  $ 85,874  $ 100,246 
    The Company's share of the earnings or losses from investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated financial statements.
Financial services investment funds include the Company’s minority investment in Lifson Re, a Bermuda reinsurance company. Effective January 1, 2021, Lifson Re participates on a fully collateralized basis in a majority of the Company’s reinsurance placements for a 22.5% share of placed amounts. The percentage will be increased from 22.5% to 30.0% effective July 1, 2022. This pertains to all traditional reinsurance/retrocessional placements for both property and casualty business where there is more than one open market reinsurer participating. For the six months ended June 30, 2022 and 2021, the Company has ceded approximately $226 million and $139 million, respectively, of written premiums to Lifson Re.
Other funds include deferred compensation trust assets of $31 million and $34 million as of June 30, 2022 and December 31, 2021, respectively. These assets support other liabilities reflected in the balance sheet of an equal amount for employees who have elected to defer a portion of their compensation. The change in the net asset value of the trust is recorded in other funds within net investment income with an offsetting equal amount within corporate expenses.

(12) Real Estate
    Investment in real estate represents directly owned property held for investment, as follows:
Carrying Value
June 30, December 31,
(In thousands) 2022 2021
Properties in operation $ 1,079,174  $ 1,626,826 
Properties under development 224,920  225,682 
Total $ 1,304,094  $ 1,852,508 

    As of June 30, 2022, properties in operation included a long-term ground lease in Washington, D.C., an office complex in New York City and the completed portion of a mixed-use project in Washington D.C. Properties in operation are net of accumulated depreciation and amortization of $32,743,000 and $57,391,000 as of June 30, 2022 and December 31, 2021, respectively. Related depreciation expense was $7,445,000 and $9,622,000 for the six months ended June 30, 2022 and
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2021, respectively. Future minimum rental income expected on operating leases relating to properties in operation is $15,974,530 in 2022, $31,172,279 in 2023, $31,529,168 in 2024, $28,867,842 in 2025, $26,877,236 in 2026, $26,067,784 in 2027 and $482,756,589 thereafter.
During the first quarter of 2022, the Company sold a real estate investment in London.
    A mixed-use project in Washington, D.C. has been under development in 2022 and 2021, with the completed portion reported in properties in operation as of June 30, 2022.

(13) Loans Receivable

At June 30, 2022 and December 31, 2021, loans receivable were as follows:
(In thousands) June 30,
2022
December 31,
2021
Amortized cost (net of allowance for expected credit losses):
Real estate loans $ 89,009  $ 89,431 
Commercial loans 24,474  25,741 
Total $ 113,483  $ 115,172 
Fair value:
Real estate loans $ 87,598  $ 90,793 
Commercial loans 24,474  25,741 
Total $ 112,072  $ 116,534 
The real estate loans are secured by commercial and residential real estate primarily located in New York. These loans generally earn interest at fixed or stepped interest rates and have maturities through 2026. The commercial loans are with small business owners who have secured the related financing with the assets of the business. Commercial loans primarily earn interest on a fixed basis and have varying maturities generally not exceeding 10 years.
Loans receivable in non-accrual status were none and $0.2 million as of June 30, 2022 and December 31, 2021, respectively.
The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the six months ended June 30, 2022 and 2021:
2022 2021
(In thousands) Real Estate Loans Commercial Loans Total Real Estate Loans Commercial Loans Total
Allowance for expected credit losses, beginning of period $ 1,362  $ 356  $ 1,718  $ 1,683  $ 3,754  $ 5,437 
Change in expected credit losses (134) 591  457  (182) (3,285) (3,467)
Allowance for expected credit losses, end of period $ 1,228  $ 947  $ 2,175  $ 1,501  $ 469  $ 1,970 
During the six months ended June 30, 2022, the Company increased the allowance primarily due to an increase in the weighted average life of the loans receivable portfolio. During the six months ended June 30, 2021, the Company decreased the allowance primarily due to loan repayments.
The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended June 30, 2022 and 2021:
2022 2021
(In thousands) Real Estate Loans Commercial Loans Total Real Estate Loans Commercial Loans Total
Allowance for expected credit losses, beginning of period $ 1,295  $ 134  $ 1,429  $ 1,608  $ 2,590  $ 4,198 
Change in expected credit losses (67) 813  746  (107) (2,121) (2,228)
Allowance for expected credit losses, end of period $ 1,228  $ 947  $ 2,175  $ 1,501  $ 469  $ 1,970 
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The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions.
    In evaluating the real estate loans, the Company considers their credit quality indicators, including loan to value ratios, which compare the outstanding loan amount to the estimated value of the property, the borrower’s financial condition and performance with respect to loan terms, the position in the capital structure, the overall leverage in the capital structure and other market conditions.

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(14) Net Investment (Losses) Gains
     Net investment (losses) gains were as follows:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(In thousands) 2022 2021 2022 2021
Net investment (losses) gains:    
Fixed maturity securities:    
Gains $ 647  $ 5,440  $ 2,352  $ 13,680 
Losses (3,459) (2,236) (6,443) (4,307)
Equity securities (1):
Net realized gains on investment sales 41  6,256  946  14,828 
Change in unrealized losses (131,530) (18,239) (38,317) (42,574)
Investment funds (2,362) (300) (4,524) 47,371 
Real estate (2) 358  49,492  286,550  62,401 
Loans receivable —  (881) (32) (881)
Other (27,630) (19,071) (34,585) (18,299)
Net realized and unrealized (losses) gains on investments in earnings before allowance for expected credit losses (163,935) 20,461  205,947  72,219 
Change in allowance for expected credit losses on investments:
Fixed maturity securities (6,874) 1,375  (10,780) (16,783)
Loans receivable (746) 2,228  (457) 3,467 
Change in allowance for expected credit losses on investments (7,620) 3,603  (11,237) (13,316)
Net investment (losses) gains (171,555) 24,064  194,710  58,903 
Income tax benefit (expense) 37,519  (5,264) (40,923) (11,151)
After-tax net investment (losses) gains $ (134,036) $ 18,800  $ 153,787  $ 47,752 
Change in unrealized investment (losses) gains on available for sale securities:    
Fixed maturity securities without allowance for expected credit losses $ (409,647) $ 28,511  $ (949,910) $ (94,058)
Fixed maturity securities with allowance for expected credit losses (16,878) (69) (16,585) 10,286 
Investment funds (3,302) 762  (2,833) (257)
Other (957) (400) (904) (902)
Total change in unrealized investment (losses) gains (430,784) 28,804  (970,232) (84,931)
Income tax benefit (expense) 93,776  (5,532) 209,679  18,073 
Noncontrolling interests —  (1) (1) (1)
After-tax change in unrealized investment (losses) gains of available for sale securities $ (337,008) $ 23,271  $ (760,554) $ (66,859)
______________________
(1) The net realized gains or losses on investment sales represent the total gains or losses from the purchase dates of the equity securities. The change in unrealized (losses) gains consists of two components: (i) the reversal of the gain or loss recognized in previous periods on equity securities sold and (ii) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

(2) During March 2022, the Company realized a gain on the sale of a real estate investment in London, U.K. of $251 million, net of transaction expenses and the foreign currency impact, including the reversal of the currency translation adjustment.

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(15) Fixed Maturity Securities in an Unrealized Loss Position
    The following tables summarize all fixed maturity securities in an unrealized loss position at June 30, 2022 and December 31, 2021 by the length of time those securities have been continuously in an unrealized loss position:
   Less Than 12 Months 12 Months or Greater Total
(In thousands) Fair
Value
Gross
Unrealized Losses
Fair
Value
Gross
Unrealized Losses
Fair
Value
Gross
Unrealized Losses
June 30, 2022
U.S. government and government agency $ 570,441  $ 40,355  $ 35,683  $ 2,559  $ 606,124  $ 42,914 
State and municipal 1,789,266  92,972  95,746  12,315  1,885,012  105,287 
Mortgage-backed 1,223,393  97,556  116,005  21,263  1,339,398  118,819 
Asset-backed 3,788,329  124,135  193,620  5,414  3,981,949  129,549 
Corporate 4,775,827  277,520  499,270  54,373  5,275,097  331,893 
Foreign government 1,292,469  59,376  246,041  52,367  1,538,510  111,743 
Fixed maturity securities $ 13,439,725  $ 691,914  $ 1,186,365  $ 148,291  $ 14,626,090  $ 840,205 
December 31, 2021
U.S. government and government agency $ 487,712  $ 4,026  $ 17,021  $ 268  $ 504,733  $ 4,294 
State and municipal 502,333  7,403  29,547  2,156  531,880  9,559 
Mortgage-backed 558,751  6,900  106,130  4,762  664,881  11,662 
Asset-backed 3,832,944  18,503  75,385  291  3,908,329  18,794 
Corporate 2,582,860  29,322  51,095  3,088  2,633,955  32,410 
Foreign government 758,975  15,793  82,057  31,701  841,032  47,494 
Fixed maturity securities $ 8,723,575  $ 81,947  $ 361,235  $ 42,266  $ 9,084,810  $ 124,213 
    Substantially all of the securities in an unrealized loss position are rated investment grade, except for the securities in the foreign government classification. A significant amount of the unrealized loss on foreign government securities is the result of changes in currency exchange rates. 
    A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at June 30, 2022 is presented in the table below:
($ in thousands) Number of
Securities
Aggregate
Fair Value
Gross
Unrealized Loss
Foreign government 42  $ 124,609  $ 52,655 
Corporate 12  46,437  5,739 
State and municipal 13,248  1,756 
Mortgage-backed 11  3,513  144 
Asset-backed 87  24 
Total 69  $ 187,894  $ 60,318 
    For fixed maturity securities that management does not intend to sell or to be required to sell, the portion of the decline in value that is considered to be due to credit factors is recognized in earnings, and the portion of the decline in value that is considered to be due to non-credit factors is recognized in other comprehensive income.
     The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

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(16) Fair Value Measurements
    The Company’s fixed maturity available for sale securities, equity securities and its arbitrage trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Quoted prices for similar assets or valuations based on inputs that are observable.
Level 3 - Estimates of fair value based on internal pricing methodologies using unobservable inputs. Unobservable inputs are only used to measure fair value to the extent that observable inputs are not available.
    Substantially all of the Company’s fixed maturity securities were priced by independent pricing services. The prices provided by the independent pricing services are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. The pricing services may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs are available for each security evaluation on any given day. The pricing services used by the Company have indicated that they will only produce an estimate of fair value if objectively verifiable information is available. The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness and periodically performs independent price tests of a sample of securities to ensure proper valuation.
    If prices from independent pricing services are not available for fixed maturity securities, the Company estimates the fair value. For Level 2 securities, the Company utilizes pricing models and processes which may include benchmark yields, sector groupings, matrix pricing, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers and reference data. Where broker quotes are used, the Company generally requests two or more quotes and sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes received from brokers. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial projections, credit quality and business developments of the issuer and other relevant information.
    For Level 3 securities, the Company generally uses a discounted cash flow model to estimate the fair value of fixed maturity securities. The cash flow models are based upon assumptions as to prevailing credit spreads, interest rate and interest rate volatility, time to maturity and subordination levels. Projected cash flows are discounted at rates that are adjusted to reflect illiquidity, where appropriate.
    
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    The following tables present the assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 by level:
(In thousands) Total Level 1 Level 2 Level 3
June 30, 2022
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency $ 720,914  $ —  $ 720,914  $ — 
State and municipal 3,017,263  —  3,017,263  — 
Mortgage-backed 1,477,099  —  1,477,099  — 
Asset-backed 4,292,488  —  4,292,488  — 
Corporate 5,689,125  —  5,689,125  — 
Foreign government 1,604,111  —  1,604,111  — 
Total fixed maturity securities available for sale 16,801,000  —  16,801,000  — 
Equity securities:
Common stocks 932,672  926,865  1,256  4,551 
Preferred stocks 222,654  —  211,358