What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-03 · 162 added, 184 removed, 509 unchanged (40% of the section changed)

23 unchanged sentences

Our diversified global platform with its broad mix of products, distribution and geography is resilient.

The war in the Ukraine is ongoing and an evolving event.

The recent emergence of the Middle East war and t he ongoing war in the Ukraine are evolving events.

Economic and legal sanctions have been levied against Russia, specific named individuals and entities connected to the Russian government, as well as businesses located in the Russian Federation and/or owned by Russian nationals in numerous countries, including the United States.

The significant political and economic uncertainty surrounding the war and associated sanctions have impacted economic and investment markets both within Russia and around the world.

The significant political and economic uncertainty surrounding these wars and associated sanctions have impacted economic and investment markets both within Russia, Ukraine, the Middle East region, and around the world.

Financial Summary.

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Three Months Ended

June 30, Percentage

(Decrease) Six Months Ended

June 30, Percentage

September 30, Percentage

(Decrease) Nine Months Ended

September 30, Percentage

(Dollars in millions) 2023 2022 2023 2022

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Premiums earned $ 3,513 $ 3,067 14.6 % $ 9,865 $ 8,775 12.4 %

Net investment income 357 226 57.8 % 617 469 31.5 %

Net gains (losses) on investments 5 (236) NM 10 (390) NM

Other income (expense) 38 (71) NM (42) (56) -25.6 %

Net investment income 406 151 NM 1,023 620 64.9 %

Net gains (losses) on investments (31) (129) -75.9 % (21) (519) -95.9 %

Other income (expense) 103 (16) NM 61 (71) NM

Total revenues 3,991 3,073 29.9 % 10,927 8,805 24.1 %

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Combined ratio 91.4 % 112.0 % (20.5) 90.1 % 98.8 % (8.6)

September 30, At

December 31, Percentage

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(Some amounts may not reconcile due to rounding.)

Gross written premiums increased by 21.3% to $4.2 billion for the three months ended June 30, 2023, compared to $3.4 billion for the three months ended June 30, 2022, reflecting a $565 million, or 25.7%, increase in our reinsurance business and a $168 million, or 13.5%, increase in our insurance business.

The increase in reinsurance premiums was primarily due to increases across all lines of business.

The increase in insurance premiums was primarily

due to growth in property/short tail business, specialty casualty business and other specialty lines of business.

Gross written premiums increased by 19.4% to $7.9 billion for the six months ended June 30, 2023, compared to $6.6 billion for the six months ended June 30, 2022, reflecting a $1.0 billion, or 23.2%, increase in our reinsurance business and a $274 million, or 12.2%, increase in our insurance business.

The increase in reinsurance premiums was primarily due to increases in property pro rata business, casualty pro rata business, property catastrophe excess of loss business and financial lines of business.

The increase in insurance premiums reflects growth across most lines of business driven by positive rate and exposure increases, new business and strong renewal retention.

Net written premiums increased by 21.6% to $3.7 billion for the three months ended June 30, 2023, compared to $3.0 billion for the three months ended June 30, 2022.

Net written premiums increased by 20.1% to $7.0 billion for the six months ended June 30, 2023, compared to $5.8 billion for the six months ended June 30, 2022.

Gross written premiums increased by 19.3% to $4.4 billion for the three months ended September 30, 2023, compared to $3.7 billion for the three months ended September 30, 2022, reflecting a $668 million, or 26.2%, increase in our reinsurance business and a $43 million, or 3.8%, increase in our insurance business.

The increase in reinsurance premiums was primarily due to increases across all lines of business, particularly property pro rata business, casualty pro rata business and casualty excess of loss business.

The increase in insurance premiums was due to a mix of growth in property and specialty lines, partially offset by lower written premiums in monoline workers' compensation and financial lines.

Gross written premiums increased by 19.4% to $12.3 billion for the nine months ended September 30, 2023,

compared to $10.3 billion for the nine months ended September 30, 2022, reflecting a $1.7 billion, or 24.3%, increase in our reinsurance business and a $316 million, or 9.4%, increase in our insurance business.

The increase in reinsurance premiums was primarily due to increases across all line of business, particularly property pro rata business and casualty pro rata business.

The increase in insurance premiums was due to property/short tail business, other specialty business and specialty casualty business.

Net written premiums increased by 16.4% to $3.9 billion for the three months ended September 30, 2023, compared to $3.3 billion for the three months ended September 30, 2022.

Net written premiums increased by 18.7% to $10.9 billion for the nine months ended September 30, 2023, compared to $9.2 billion for the nine months ended September 30, 2022.

These increases were consistent with the percentage changes in gross written premiums.

Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire.

Premiums earned increased by 11.5% to $3.3 billion for the three months ended June 30, 2023, compared to $2.9 billion for the three months ended June 30, 2022.

Premiums earned increased by 11.3% to $6.4 billion for the six months ended June 30, 2023, compared to $5.7 billion for the six months ended June 30, 2022.

Premiums earned increased by 14.6% to $3.5 billion for the three months ended September 30, 2023, compared to $3.1 billion for the three months ended September 30, 2022.

Premiums earned increased by 12.4% to $9.9 billion for the nine months ended September 30, 2023, compared to $8.8 billion for the nine months ended September 30, 2022.

Other Income (Expense).

We recorded other income of $38 million and other expense of $71 million for the three months ended June 30, 2023 and 2022, respectively.

We recorded other expense of $42 million and other expense of $56 million for the six months ended June 30, 2023 and 2022, respectively.

We recorded other income of $103 million and other expense of $16 million for the three months ended September 30, 2023 and 2022, respectively.

We recorded other income of $61 million and other expense of $71 million for the nine months ended September 30, 2023 and 2022, respectively.

The changes were primarily the result of fluctuations in foreign currency exchange rates.

We recognized foreign currency exchange income of $36 million and foreign currency expense of $74 million for the three months ended June 30, 2023 and 2022, respectively.

We recognized foreign currency exchange expense of $49 million and $61 million for the six months ended June 30, 2023 and 2022, respectively.

We recognized foreign currency exchange income of $100 million and foreign currency expense of $9 million for the three months ended September 30, 2023 and 2022, respectively.

We recognized foreign currency exchange income of $51 million and foreign currency expense of $70 million for the nine months ended September 30, 2023 and 2022, respectively.

Net Investment Income.

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The following tables present our incurred losses and LAE for the periods indicated.

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in millions) Current

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(Some amounts may not reconcile due to rounding.)

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) Current

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(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by 4.5% to $2.0 billion for the three months ended June 30, 2023, compared to $1.9 billion for the three months ended June 30, 2022, primarily due to an increase of $141 million in current year attritional losses, partially offset by a decrease of $58 million in current year catastrophe losses.

The increase in current year attritional losses was mainly due to the impact of the increase in premiums earned.

The current year catastrophe losses of $27 million for the three months ended June 30, 2023 related primarily to the 2023 Turkey earthquakes ($20 million), Typhoon Mawar ($12 million), the 2023 Italian floods ($10 million), and the 2023 2nd quarter U.S.

storms ($10 million), partially offset by $30 million of reinsurance recoveries related to Hurricane Ian.

The $85 million of current year catastrophe losses for the three months ended June 30, 2022 related primarily to the 2022 South Africa flood ($45 million), the 2022 Canada derecho ($18 million), the 2022 2 nd quarter U.S.

storms ($12 million) and the 2022 Western Europe Convective storm ($10 million).

Incurred losses and LAE increased by 7.1% to $3.9 billion for the six months ended June 30, 2023, compared to $3.7 billion for the six months ended June 30, 2022, primarily due to an increase of $317 million in current year attritional losses, partially offset by a decrease of $58 million in current year catastrophe losses.

The increase in current year attritional losses was mainly due to the impact of the increase in premiums earned.

The current year catastrophe losses of $142 million for the six months ended June 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million) the 2023 New Zealand storms ($45 million), Typhoon Mawar ($12 million), the 2023 Italian floods ($10 million) and the 2023 2 nd quarter U.S.

storms ($10 million), partially offset by $30 million of reinsurance recoveries related to Hurricane Ian.

The $200 million of current year catastrophe losses for the six months ended June 30, 2022 related primarily to the 2022 Australia floods ($76 million), the 2022 South Africa flood ($45 million), the 2022 European storms ($30 million), the 2022 Canada derecho ($18 million), the 2022 2 nd quarter U.S.

storms ($12 million), the 2022 Western Europe Convective Storm ($10 million) and the 2022 March U.S.

Incurred losses and LAE decreased by 14.4% to $2.2 billion for the three months ended September 30, 2023, compared to $2.6 billion for the three months ended September 30, 2022, primarily due to a decrease of $665 million in current year catastrophe losses, partially offset by an increase of $288 million in current year attritional losses.

The increase in current year attritional losses was mainly due to the impact of the increase in underlying exposures due to increased premiums earned.

The current year catastrophe losses of $175 million for the three months ended September 30, 2023 related primarily to Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($35 million), the 2023 Italy convective storm ($28 million), the 2023 3rd quarter U.S.

storms ($20 million) and the 2023 Hans windstorm ($10 million).

The $840 million of current year catastrophe losses for the three months ended September 30, 2022 related primarily to Hurricane Ian ($700 million), the 2022 Western Europe hailstorms ($75 million), Hurricane Fiona ($25 million), Typhoon Nanmadol ($20 million) and the 2022 Western Europe convective storm ($20 million).

Incurred losses and LAE decreased by 1.9% to $6.2 billion for the nine months ended September 30, 2023, compared to $6.3 billion for the nine months ended September 30, 2022, primarily due to a decrease of $723 million in current year catastrophe losses, partially offset by an increase of $604 million in current year attritional losses.

The increase in current year attritional losses was mainly due to the impact of the increase in underlying exposures due to increased premiums earned.

The current year catastrophe losses of $317 million for the nine months ended September 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million) the 2023 New Zealand storms ($46 million), Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($35 million), the 2023 Italy convective storm ($28 million), the 2023 3rd quarter U.S.

storms ($20 million), Typhoon Mawar ($11 million) and the 2023 Hans windstorm ($10 million).

The $1.0 billion of current year catastrophe losses for the nine months ended September 30, 2022 related primarily to Hurricane Ian ($700 million), the 2022 Australia floods ($85 million), the 2022 Western Europe hailstorms ($75 million), the 2022 South Africa flood ($45 million), the 2022 Western Europe convective storm ($30 million), Hurricane Fiona ($25 million), the 2022 European storms ($21 million), Typhoon Nanmadol ($20 million), the 2022 Canada derecho ($18 million), the 2022 2nd quarter U.S.

storms ($12 million), and the 2022 March U.S.

storms ($8 million).

Catastrophe losses and loss expenses typically have a material effect on our incurred losses and LAE results and can vary significantly from period to period.

Losses from natural catastrophes contributed 0.8 percentage points to the combined ratio for the three months ended June 30, 2023, compared with 2.9 percentage points in the same period of 2022, and 2.2 percentage points to the combined ratio for the six months ended June 30, 2023, compared with 3.5 percentage points in the corresponding period of 2022.

Losses from natural catastrophes contributed 5.0 percentage points to the combined ratio for the three months ended September 30, 2023, compared with 27.4 percentage points in the same period of 2022, and 3.2 percentage points to the combined ratio for the nine months ended September 30, 2023, compared with 11.9 percentage points in the corresponding period of 2022.

The Company has up to $350 million of a CAT Bond that attaches at a $48.1 billion PCS Industry loss threshold.

This recovery would be recognized on a pro-rata basis up to a $63.8 billion PCS Industry loss level.

PCS’s current industry estimate of $49.4 billion exceeds the attachment point.

The recovery under the CAT Bond, included in the Company’s financial results, is estimated to be $25 million, subject to further revision of the industry loss estimate.

In addition to the recoveries under the CAT Bond, the Company has an additional reinsurance agreement in place resulting in $5 million of recoveries related to Hurricane Ian.

PCS’s current industry estimate of $48.4 billion e xceeds the attachment point.

The current recoverables under the CAT Bond, included in the Company’s financial results, are estimated to be $20 million, subject to further revision of the industry loss estimate.

In addition to the recoverables under the CAT Bond, the Company has additional reinsurance agreements in place resulting in a total of $50 million current reinsurance recoverables related to Hurricane Ian.

Commission, Brokerage, Taxes and Fees.

Commission, brokerage, taxes and fees increased by 8.8% to $686 million for the three months ended June 30, 2023, compared to $630 million for the three months ended June 30, 2022.

Commission, brokerage, taxes and fees increased by 9.0% to $1.3 billion for the six months ended June 30, 2023, compared to $1.2 billion for the six months ended June 30, 2022.

Commission, brokerage, taxes and fees increased by 17.2% to $752 million for the three months ended September 30, 2023, compared to $641 million for the three months ended September 30, 2022.

Commission, brokerage, taxes and fees increased by 11.8% to $2.1 billion for the nine months ended September 30, 2023, compared to $1.9 billion for the nine months ended September 30, 2022.

The increases were primarily due to the impact of the increase in premiums earned and changes in the mix of business.

Other Underwriting Expenses.

Other underwriting expenses were $205 million and $170 million for the three months ended June 30, 2023 and 2022, respectively.

Other underwriting expenses were $405 million and $331 million for the six months ended June 30, 2023 and 2022, respectively.

Other underwriting expenses were $215 million and $169 million for the three months ended September 30, 2023 and 2022, respectively.

Other underwriting expenses were $620 million and $500 million for the nine months ended September 30, 2023 and 2022, respectively.

The increases in other underwriting expenses were mainly due to the impact of the increases in premiums earned as well as the continued build out of our insurance operations, including an expansion of the international insurance platform.

Corporate Expenses.

Corporate expenses, which are general operating expenses that are not allocated to segments, were $17 million and $15 million for the three months ended June 30, 2023 and 2022, respectively, and $36 million and $29 million for the six months ended June 30, 2023 and 2022, respectively.

Corporate expenses, which are general operating expenses that are not allocated to segments, were $19 million and $16 million for the three months ended September 30, 2023 and 2022, respectively, and $55 million and $45 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase in Corporate expenses for both the three and nine month periods are primarily due to employee compensation-related expenses.

Interest, Fees and Bond Issue Cost Amortization Expense.

Interest, fees and other bond amortization expense was $33 million and $24 million for the three months ended June 30, 2023 and 2022, respectively.

Interest, fees and other bond amortization expense was $65 million and $48 million for the six months ended June 30, 2023 and 2022, respectively.

Interest, fees and other bond amortization expense was $34 million and $25 million for the three months ended September 30, 2023 and 2022, respectively.

Interest, fees and other bond amortization expense was $99 million and $74 million for the nine months ended September 30, 2023 and 2022, respectively.

The increases were mainly due to higher interest costs on the FHLBNY borrowing as a result of the rising interest rate environment.

Interest expense was also impacted by the movements in the floating interest rate related to the Company’s long-term Subordinated Notes Issued 2007, which is reset quarterly per the note agreement.

The floating rate was 7.71% as of June 30, 2023.

The floating rate was 8.01% as of September 30, 2023.

Income Tax Expense (Benefit).

We had income tax expense of $80 million and income tax benefit of $4 million for the three months ended June 30, 2023 and 2022, respectively.

We had income tax expense of $122 million and income tax expense of $1 million for the six months ended June 30, 2023 and 2022, respectively.

We had income tax expense of $47 million and income tax benefit of $82 million for the three months ended September 30, 2023 and 2022, respectively.

We had income tax expense of $169 million and income tax benefit of $81 million for the nine months ended September 30, 2023 and 2022, respectively.

Income tax expense is primarily a function of the geographic location of the Company’s pre-tax income and the statutory tax rates in those jurisdictions.

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Variations in the ETR 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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted.

We have evaluated the tax provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase excise tax and do not expect the legislation to have a material impact on our results of operations.

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Net Income (Loss).

Our net income was $670 million and $123 million for the three months ended June 30, 2023 and 2022, respectively.

Our net income was $1.0 billion and $420 million for the six months ended June 30, 2023 and 2022, respectively.

Our net income was $678 million and our net loss was $319 million for the three months ended September 30, 2023 and 2022, respectively.

Our net income was $1.7 billion and $101 million for the nine months ended September 30, 2023 and 2022, respectively.

These changes were primarily driven by the financial component fluctuations explained above.

Our combined ratio decreased by 4.1 points to 87.7% for the three months ended June 30, 2023, compared to 91.8% for the three months ended June 30, 2022 and decreased by 2.3 points to 89.4% for the six months ended June 30, 2023, compared to 91.7% for the six months ended June 30, 2022.

The loss ratio component decreased by 4.0 points for the three months ended June 30, 2023 over the corresponding period last year primarily due to lower current year catastrophe losses and lack of losses from the war in the Ukraine in 2023.

In the second quarter 2022, the Company established reserves of $45 million for losses from the war in the Ukraine in 2023.

The loss ratio component decreased by 2.4 points for the six months ended June 30, 2022 over the corresponding period last year primarily due to lower current year catastrophe losses and no losses from the war in the Ukraine.

The commission and brokerage ratio components decreased slightly to 21.1% for the three months ended June 30, 2023 compared to 21.6% for the three months ended June 30, 2022 and decreased to 21.2% for the six months ended June 30, 2023 compared to 21.6% for the six months ended June 30, 2022.

Our combined ratio decreased by 20.5 points to 91.4% for the three months ended September 30, 2023, compared to 112.0% for the three months ended September 30, 2022 and decreased by 8.6 points to 90.1% for the nine months ended September 30, 2023, compared to 98.8% for the nine months ended September 30, 2022.

The loss ratio component decreased by 21.6 points for the three months ended September 30, 2023 over the corresponding period last year primarily due to a decline of $665 million in current year catastrophe losses.

The loss ratio component decreased by 9.1 points for the nine months ended September 30, 2022 over the corresponding period last year primarily due to a decline of $723 million in current year catastrophe losses and no losses from the war in the Ukraine.

The commission and brokerage ratio components increased to 21.4% for the three months ended September 30, 2023 compared to 20.9% for the three months ended September 30, 2022 and decreased slightly to 21.3% for the nine months ended September 30, 2023 compared to 21.4% for the nine months ended September 30, 2022.

These changes were mainly due to changes in the mix of business.

The other underwriting expense ratios increased to 6.3% for the three months ended June 30, 2023 compared to 5.8% for the three months ended June 30, 2022 and increased to 6.4% for the six months ended June 30, 2023 compared to 5.8% for the six months ended June 30, 2022.

The other underwriting expense ratios increased to 6.1% for the three months ended September 30, 2023 compared to 5.5% for the three months ended September 30, 2022 and increased to 6.3% for the nine months ended September 30, 2023 compared to 5.7% for the nine months ended September 30, 2022.

These increases were mainly due to insurance operations costs associated with the continued build out of the insurance platform.

Shareholders’ Equity.

Shareholders’ equity increased by $2.5 billion to $10.9 billion at June 30, 2023 from $8.4 billion at December 31, 2022, principally as a result of $1.4 billion from a public offering of shares, $1.0 billion of net income, $82 million of unrealized appreciation on available for sale fixed maturity portfolio net of tax and $30 million of net foreign currency translation adjustments, partially offset by $136 million of shareholder dividends.

Shareholders’ equity increased by $2.8 billion to $11.2 billion at September 30, 2023 from $8.4 billion at December 31, 2022, principally as a result of $1.4 billion from a public offering of shares and $1.7 billion of net income, partially offset by $212 million of shareholder dividends, $(159) million of unrealized depreciation on available for sale fixed maturity portfolio net of tax and $(17) million of net foreign currency translation adjustments.

Consolidated Investment Results

Net Investment Income.

Net investment income increased by 57.8% to $357 million for the three months ended June 30, 2023, compared with net investment income of $226 million for the three months ended June 30, 2022.

The increase for the three months ended June 30, 2023 was primarily the result of an increase of $107 million of income from fixed maturity investments and $27 million from short-term investments and cash.

Net investment income increased by 31.5% to $617 million for the six months ended June 30, 2023, compared with investment income of $469 million for the six months ended June 30, 2022.

The increase for the six months ended June 30, 2023 was primarily the result of an increase of $206 million from fixed maturity investments and $44 million from short-term investments and cash, partially offset by a decline of $98 million in limited partnership income.

The limited partnership income primarily reflects decreases in their reported NAVs.

Net investment income increased to $406 million for the three months ended September 30, 2023, compared with net investment income of $151 million for the three months ended September 30, 2022.

The increase for the three months ended September 30, 2023 was primarily the result of an increase of $113 million of income from fixed maturity investments and an increase of $36 million from short-term investments due to the rising interest rate environment as well as an increase of $102 million in limited partnership income.

Net investment income increased by 64.9% to $1.0 billion for the nine months ended September 30, 2023, compared with investment income of $620 million for the nine months ended September 30, 2022.

The increase for the nine months ended September 30, 2023 was primarily the result of an increase of $319 million in income from fixed maturity investments and an increase of $80 million in income from short-term investments due to the rising interest rate environment, as well as an increase of $4 million in limited partnership income.

Accordingly, until these asset values are monetized and the resultant income is distributed, they are subject to future increases or decreases in the asset value, and the results may be volatile.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2023 2022 2023 2022

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in millions) 2023 2022 Variance 2023 2022 Variance

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(Some amounts may not reconcile due to rounding.)

Net gains (losses) on investments during the three months ended June 30, 2023 primarily relate to net gains from fair value adjustments on equity securities in the amount of $8 million as a result of equity market improvement during the second quarter of 2023.

In addition, we realized $3 million of net losses due to the disposition of investments.

There were no allowances for credit losses during the second quarter of 2023.

Net gains (losses) on investments during the six months ended June 30, 2023 primarily relate to net gains from fair value adjustments on equity securities in the amount of $12 million as a result of equity market improvement during the first six months of 2023.

In addition, we realized $5 million of net losses due to the disposition of investments and recorded an increase to the allowance for credit losses of $8 million primarily related to our direct holdings of Russian corporate fixed maturity securities.

Net gains (losses) on investments during the three months ended September 30, 2023 primarily related to net losses from fair value adjustments on equity securities in the amount of $16 million as a result of equity market deterioration and $18 million of net losses due to the disposition of investments, partially offset by $2 million of reduction in allowances for credit losses during the quarter.

Net gains (losses) on investments during the nine months ended September 30, 2023 primarily related to net losses from fair value adjustments on equity securities in the amount of $3 million as a result of equity market deterioration, $12 million of net losses due to the disposition of investments and an increase to the allowance for credit losses of $6 million.

Segment Results.

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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.

We write reinsurance business from entities chartered in the U.S., Bermuda, and Ireland, as well as through branches of those entities established in Canada, Singapore, the United Kingdom and Switzerland.

reinsurance business from entities chartered in the U.S., Bermuda, and Ireland, as well as through branches of those entities established in Canada, Singapore, the United Kingdom and Switzerland.

The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Bermuda, Canada, Europe, Singapore and South America through its offices in the U.S., Bermuda, Canada, Chile, Singapore, the United Kingdom, Ireland and branches located in the Netherlands, France, Germany and Spain.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in millions) 2023 2022 Variance % Change 2023 2022 Variance % Change

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Other underwriting expenses 65 54 11 21.0 % 190 156 34 21.6 %

Underwriting gain (loss) $ 337 $ 175 $ 162 93.0 % $ 544 $ 351 $ 193 54.8 %

Underwriting gain (loss) $ 234 $ (338) $ 572 (169.3) % $ 778 $ 14 $ 765 NM

Point Chg Point Chg

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(Some amounts may not reconcile due to rounding.)

Gross written premiums increased by 25.7% to $2.8 billion for the three months ended June 30, 2023 from $2.2 billion for the three months ended June 30, 2022, primarily due to increases across all lines of business.

Net written premiums increased by 24.4% to $2.6 billion for the three months ended June 30, 2023, compared to $2.1 billion for the three months ended June 30, 2022, which is consistent with the percentage change in gross written premiums.

Gross written premiums increased by 26.2% to $3.2 billion for the three months ended September 30, 2023 from $2.6 billion for the three months ended September 30, 2022, due to increases across all lines of business, particularly property pro rata business, casualty pro rata business and casualty excess of loss business.

Net written premiums increased by 22.3% to $3.0 billion for the three months ended September 30, 2023, compared to $2.5 billion for the three months ended September 30, 2022, which is consistent with the percentage change in gross written premiums.

Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire.

Premiums earned increased by 11.3% to $2.4 billion for the three months ended June 30, 2023, compared to $2.1 billion for the three months ended June 30, 2022.

Gross written premiums increased by 23.2% to $5.4 billion for the six months ended June 30, 2023 from $4.4 billion for the six months ended June 30, 2022, primarily due to increases across all lines of business.

Net written premiums increased by 21.2% to $5.1 billion for the six months ended June 30, 2023 compared to $4.2 billion for the six months ended June 30, 2022.

Premiums earned increased by 16.4% to $2.6 billion for the three months ended September 30, 2023, compared to $2.2 billion for the three months ended September 30, 2022.

Gross written premiums increased by 24.3% to $8.6 billion for the nine months ended September 30, 2023 from $6.9 billion for the nine months ended September 30, 2022, due to increases across all lines of business, particularly property pro rata business and casualty pro rata business.

Net written premiums increased by 21.6% to $8.1 billion for the nine months ended September 30, 2023 compared to $6.7 billion for the nine months ended September 30, 2022.

The increase was consistent with the percentage increase in gross written premiums.

Premiums earned generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire.

Premiums earned increased by 9.9% to $4.6 billion for the six months ended June 30, 2023, compared to $4.2 billion for the six months ended June 30, 2022.

Premiums earned increased by 12.2% to $7.2 billion for the nine months ended September 30, 2023, compared to $6.5 billion for the nine months ended September 30, 2022.

Incurred Losses and LAE.

The following tables present the incurred losses and LAE for the Reinsurance segment for the periods indicated.

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in millions) Current

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Total Segment $ (327) (25.0) pts $ — — pts $ (327) (25.0) pts

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) Current

14 unchanged sentences

Total Segment $ (225) (11.0) pts $ 2 — pts $ (222) (10.9) pts

Incurred losses increased by 1.3% to $1.4 billion for the three months ended June 30, 2023, compared to $1.4 billion for the three months ended June 30, 2022.

The increase was primarily due to an increase of $70 million in current year attritional losses, partially offset by a decrease of $53 million in current year catastrophe losses.

(Some amounts may not reconcile due to rounding.)

Incurred losses decreased by 16.4% to $1.7 billion for the three months ended September 30, 2023, compared to $2.0 billion for the three months ended September 30, 2022.

The decrease was primarily due to a decrease of $565 million in current year catastrophe losses, partially offset by an increase of $238 million in current year attritional losses.

The increase in current year attritional losses was mainly related to the impact of the increase in premiums earned.

storms ($10 million) and the 2023 New Zealand storms ($5 million), partially offset by $30 million of reinsurance recoveries related to Hurricane Ian.

The $80 million of current year catastrophe losses for the three months ended June 30, 2022 related primarily to the 2022 South Africa flood ($45 million), the 2022 Canada derecho ($18 million), the 2022 Western Europe Convective storm ($10 million) and the 2022 2 nd quarter U.S.

storms ($7 million).

Incurred losses increased by 3.9% to $2.8 billion for the six months ended June 30, 2023, compared to $2.7 billion for the six months ended June 30, 2022.

The increase was primarily due to an increase of $152 million in current year attritional losses, partially offset by a decrease of $50 million in current year catastrophe losses.

The current year catastrophe losses of $165 million for the three months ended September 30, 2023 related primarily to Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the Hawaii wildfire ($30 million), the 2023 Italy convective storm ($28 million), the 3rd quarter 2023 U.S.

storms ($15 million) and the 2023 Windstorm Hans ($10 million).

The $730 million of current year catastrophe losses for the three months ended September 30, 2022 related

primarily to Hurricane Ian ($600 million), the Western Europe hailstorms ($70 million), Typhoon Nanmadol ($20 million), Hurricane Fiona ($20 million) and the 2022 Western Europe convective storm ($20 million).

Incurred losses decreased by 4.7% to $4.5 billion for the nine months ended September 30, 2023, compared to $4.7 billion for the nine months ended September 30, 2022.

The decrease was primarily due to a decrease of $615 million in current year catastrophe losses, partially offset by an increase of $390 million in current year attritional losses.

The increase in current year attritional losses was mainly related to the impact of the increase in premiums earned.

The current year catastrophe losses of $140 million for the six months ended June 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million) the 2023 New Zealand storms ($43 million), Typhoon Mawar ($12 million), the 2023 Italian floods ($10 million) and the 2023 2 nd quarter U.S.

storms ($10 million), partially offset by $30 million of reinsurance recoveries related to Hurricane Ian.

The $190 million of current year catastrophe losses for the six months ended June 30, 2022 related primarily to the 2022 Australia floods ($76 million), the 2022 South Africa flood ($45 million), the 2022 European storms ($30 million), the 2022 Canada derecho ($18 million), the 2022 Western Europe Convective storm ($10 million), the 2022 2 nd quarter U.S.

The current year catastrophe losses of $305 million for the nine months ended September 30, 2023 related primarily to the 2023 Turkey earthquakes ($95 million), the 2023 New Zealand storms ($44 million), Hurricane Idalia ($42 million), the 2023 Morocco earthquake ($40 million), the 2023 Hawaii wildfire ($30 million), the 2023 Italy convective storm ($28 million), the 2023 3rd quarter U.S.

storms ($20 million), Typhoon Mawar ($11 million) and the 2023 Hans windstorm ($10 million).

The $920 million of current year catastrophe losses for the nine months ended September 30, 2022 related primarily to Hurricane Ian ($600 million), the 2022 Australia floods ($85 million), the Western Europe hailstorms ($70 million), the 2022 South Africa flood ($45 million), the 2022 Western Europe convective storm ($30 million), the 2022 European storms ($21 million), Typhoon Nanmadol ($20 million), Hurricane Fiona ($20 million), the 2022 Canada derecho ($18 million), the 2022 2nd quarter U.S.

storms ($7 million) and the 2022 March U.S.

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Segment Expenses.

Commission and brokerage expense increased by 9.8% to $583 million for the three months ended June 30, 2023, compared to $531 million for the three months ended June 30, 2022.

Commission and brokerage expense increased by 9.4% to $1.1 billion for the six months ended June 30, 2023, compared to $1.0 billion for the six months ended June 30, 2022.

Commission and brokerage expense increased by 20.6% to $648 million for the three months ended September 30, 2023, compared to $537 million for the three months ended September 30, 2022.

Commission and brokerage expense increased by 13.2% to $1.8 billion for the nine months ended September 30, 2023, compared to $1.6 billion for the nine months ended September 30, 2022.

The increases were mainly due to the impact of the increase in premiums earned and changes in the mix of business.

Segment other underwriting expenses increased to $62 million for the three months ended June 30, 2023 from $52 million for the three months ended June 30, 2022.

Segment other underwriting expenses increased to $125 million for the six months ended June 30, 2023 from $103 million for the six months ended June 30, 2022.

Segment other underwriting expenses increased to $65 million for the three months ended September 30, 2023 from $54 million for the three months ended September 30, 2022.

Segment other underwriting expenses increased to $190 million for the nine months ended September 30, 2023 from $156 million for the nine months ended September 30, 2022.

The increases were mainly due to the increase in written premium attributable to the planned expansion of the business.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in millions) 2023 2022 Variance % Change 2023 2022 Variance % Change

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Other underwriting expenses 150 115 35 30.1 % 430 344 86 25.0 %

Underwriting gain (loss) $ 64 $ 66 $ (2) (3.0) % $ 129 $ 124 $ 5 4.1 %

Underwriting gain (loss) $ 66 $ (29) $ 95 NM $ 196 $ 95 $ 100 NM

Point Chg Point Chg

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(Some amounts may not reconcile due to rounding.)

Gross written premiums increased by 13.5% to $1.4 billion for the three months ended June 30, 2023 compared to $1.2 billion for the three months ended June 30, 2022.

The increase in insurance premiums was primarily due to increases in property/short tail business, specialty casualty business and other specialty lines of business.

Net written premiums increased by 15.0% to $1.0 billion for the three months ended June 30, 2023, compared to $899 million for the three months ended June 30, 2022.

The higher percentage change in net written premiums compared to gross written premiums is due to higher net retention resulting from changes in the mix of business.

Premiums earned increased by 11.9% to $869 million for the three months ended June 30, 2023, compared to $777 million for the three months ended June 30, 2022.

Gross written premiums increased by 12.2% to $2.5 billion for the six months ended June 30, 2023, compared to $2.2 billion for the six months ended June 30, 2022.

The increase in insurance premiums was primarily due to increases in

property/short tail business, specialty casualty business and other specialty lines of business.

Net written premiums increased by 17.2% to $1.9 billion for the six months ended June 30, 2023, compared to $1.6 billion for the six months ended June 30, 2022.

Gross written premiums increased by 3.8% to $1.2 billion for the three months ended September 30, 2023 compared to $1.1 billion for the three months ended September 30, 2022.

The increase in insurance premiums was primarily due to increases in property/short tail business and other specialty lines of business, partially offset by lower written premiums in monoline workers' compensation and financial lines.

Net written premiums decreased by 0.4% to $0.9 billion for the three months ended September 30, 2023, compared to $862 million for the three months ended September 30, 2022.

The lower percentage change in net written premiums compared to gross written premiums is due to lower net retention resulting from changes in the mix of business.

Premiums earned increased by 9.6% to $901 million

for the three months ended September 30, 2023, compared to $822 million for the three months ended September 30, 2022.

Gross written premiums increased by 9.4% to $3.7 billion for the nine months ended September 30, 2023, compared to $3.4 billion for the nine months ended September 30, 2022.

The increase in insurance premiums was primarily due to increases in property/short tail business, other specialty lines of business and specialty casualty business.

Net written premiums increased by 11.1% to $2.8 billion for the nine months ended September 30, 2023, compared to $2.5 billion for the nine months ended September 30, 2022.

The higher percentage increase in net written premiums compared to gross written premiums was mainly due to higher net retention resulting from changes in the mix of business.

Premiums earned increased by 15.0% to $1.7 billion for the six months ended June 30, 2023, compared to $1.5 billion for the six months ended June 30, 2022.

Premiums earned increased by 13.1% to $2.6 billion for the nine months ended September 30, 2023, compared to $2.3 billion for the nine months ended September 30, 2022.

The change in premiums earned relative to net written premiums is the result of timing;

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The following tables present the incurred losses and LAE for the Insurance segment for the periods indicated.

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in millions) Current

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Total Segment $ (50) (12.3) pts $ — — pts $ (50) (12.4) pts

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) Current

15 unchanged sentences

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by 13.3% to $560 million for the three months ended June 30, 2023, compared to $494 million for the three months ended June 30, 2022.

The increase was mainly due to an increase of $71 million in current year attritional losses.

The increase in current year attritional losses was primarily due to a change in mix of business and to a one-time premium adjustment, which reduced net premiums written and net premiums earned by approximately $6 million.

There were no current year catastrophe losses for the three months ended June 30, 2023.

The $5 million of current year catastrophe losses for the three months ended June 30, 2022 related to the 2022 2 nd quarter U.S.

Incurred losses and LAE increased by 16.3% to $1.1 billion for the six months ended June 30, 2023, compared to $959 million for the six months ended June 30, 2022.

The increase was mainly due to an increase of $165 million in current

year attritional losses, partially offset by a decrease in current year catastrophe losses of $8 million.

The current year catastrophe losses of $2 million for the six months ended June 30, 2023 related to the 2023 New Zealand storms.

The $10 million of current year catastrophe losses for the six months ended June 30, 2022 related to the 2022 March U.S.

Incurred losses and LAE decreased by 8.0% to $581 million for the three months ended September 30, 2023, compared to $631 million for the three months ended September 30, 2022.

The decrease was mainly due to a decrease of $100 million in current year catastrophe losses, partially offset by an increase of $50 million in current year attritional losses.

The increase in current year attritional losses was primarily due to the impact of the increase in premiums earned and changes in mix of business.

The $10 million of current year catastrophe losses for the three months ended September 30, 2023 related to the 2023 3rd quarter U.S.

storms ($5 million) and the 2023 Hawaii wildfire ($5 million).

The $110 million of current year catastrophe losses for the three months ended September 30, 2022 related to Hurricane Ian ($100 million), Hurricane Fiona ($5 million) and the Western Europe hailstorms ($5 million).

Incurred losses and LAE increased by 6.6% to $1.7 billion for the nine months ended September 30, 2023, compared to $1.6 billion for the nine months ended September 30, 2022.

The increase was mainly due to an increase of $214 million in current year attritional losses, partially offset by a decrease in current year catastrophe losses of $108 million.

The increase in current year attritional losses was primarily due to the impact of the increase in premiums earned and changes in mix of business and to a one-time premium adjustment, which reduced net premiums written and net premiums earned by approximately $6 million.

The current year catastrophe losses of $12 million for the nine months ended September 30, 2023 related to the 2023 3rd quarter U.S.

storms ($5 million), the 2023 Hawaii wildfire ($5 million) and the 2023 New Zealand storms ($2 million).

The $120 million of current year catastrophe losses for the nine months ended September 30, 2022 related to Hurricane Ian ($100 million), Hurricane Fiona ($5 million), the Western Europe hailstorms ($5 million), the 2022 March U.S.

storms ($5 million) and the 2022 2nd quarter U.S.

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Segment Expenses.

Commission and brokerage expenses increased by 3.1% to $103 million for the three months ended June 30, 2023 compared to $99 million for the three months ended June 30, 2022.

Commission and brokerage expenses increased by 6.9% to $204 million for the six months ended June 30, 2023, compared to $190 million for the six months ended June 30, 2022.

These increases were mainly due to the impact of the increase in premiums earned and increased expenses related to the continued build out of the insurance business, including an expansion of the international insurance platform.

Segment other underwriting expenses increased to $143 million for the three months ended June 30, 2023, compared to $117 million for the three months ended June 30, 2022.

Segment other underwriting expenses increased to $280 million for the six months ended June 30, 2023, compared to $228 million for the six months ended June 30, 2022.

Commission and brokerage expenses remained flat at $104 million for both the three months ended September 30, 2023 and the three months ended September 30, 2022.

Commission and brokerage expenses increased by 4.3% to $307 million for the nine months ended September 30, 2023, compared to $295 million for the nine months ended September 30, 2022.

The nine month 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, including an expansion of the international insurance platform.

Segment other underwriting expenses increased to $150 million for the three months ended September 30, 2023, compared to $115 million for the three months ended September 30, 2022.

Segment other underwriting expenses increased to $430 million for the nine months ended September 30, 2023, compared to $344 million for the nine months ended September 30, 2022.

FINANCIAL CONDITION

Total investments were $31.5 billion at June 30, 2023, an increase of $3.0 billion compared to $28.5 billion at December 31, 2022.

The rise in investments was primarily related to an increase in fixed maturities - available for sale due to an overall net purchase of $2.1 billion of fixed maturities - available for sale during the first half of 2023.

Total investments were $32.9 billion at September 30, 2023, an increase of $4.4 billion compared to $28.5 billion at December 31, 2022.

The rise in investments was primarily related to an increase in fixed maturities - available for sale due to an overall net purchase of $3.2 billion of fixed maturities - available for sale during the three quarters of 2023.

The Company’s limited partnership investments are comprised of limited partnerships that invest in private equity, private credit and private real estate.

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The table below summarizes the composition and characteristics of our investment portfolio for the periods indicated.

June 30, 2023 At

September 30, 2023 At

December 31, 2022

Fixed income portfolio duration (years) 2.7 3.1

Fixed income composite credit quality A+ A+

Fixed income composite credit quality AA- A+

Reinsurance Recoverables.

Reinsurance recoverables for both paid and unpaid losses totaled $2.4 billion and $2.2 billion at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, $470 million, or 19.8%, was receivable from Mt.

Reinsurance recoverables for both paid and unpaid losses totaled $2.4 billion and $2.2 billion at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, $461 million, or 19.1%, was receivable from Mt.

Logan Re collateralized segregated accounts;

3 unchanged sentences

Loss and LAE Reserves.

Gross loss and LAE reserves totaled $23.4 billion and $22.1 billion at June 30, 2023 and December 31, 2022, respectively.

Gross loss and LAE reserves totaled $23.8 billion and $22.1 billion at September 30, 2023 and December 31, 2022, 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 June 30, 2023

At September 30, 2023

(Dollars in millions) Case

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The objective of this process is to determine a single best estimate viewed by management to be the best estimate of its ultimate loss liability.

Nevertheless, our reserves are estimates, which are subject to variation, which may be significant.

Nevertheless, our reserves are estimates and 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.

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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.

September 30, At

(Dollars in millions) 2023 2022

3 unchanged sentences

(Some amounts may not reconcile due to rounding.)

With respect to asbestos only, at June 30, 2023, we had net asbestos loss reserves of $223 million, or 90.5%, of total net A&E reserves, all of which was for assumed business.

With respect to asbestos only, at September 30, 2023, we had net asbestos loss reserves of $218 million, or 90.7%, of total net A&E reserves, all of which was for assumed business.

Ultimate loss projections for A&E liabilities cannot be accomplished using standard actuarial techniques.

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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 7.0 years at June 30, 2023.

Using this measurement, our net three-year asbestos survival ratio was 6.8 years at September 30, 2023.

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.

LIQUIDITY AND CAPITAL RESOURCES

Shareholders’ equity at June 30, 2023 and December 31, 2022 was $10.9 billion and $8.4 billion, respectively.

Shareholders’ equity at September 30, 2023 and December 31, 2022 was $11.2 billion and $8.4 billion, 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 support our current financial strength ratings from rating agencies and our own economic capital models.

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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.

As part of our capital strategy, we model our potential exposure to catastrophe losses arising from a single event.

Projected catastrophe losses are generally summarized in terms of probable maximum loss (“PML”).

A full discussion on PMLs is included in our December 31, 2022 Form 10-K filing in PART 1, Item 1.

Business, Risk Management of Underwriting and Reinsurance Arrangements.

We focus on the projected net economic loss from a catastrophe in a given zone as compared to our shareholders’ equity.

Economic loss is the PML exposure, net of third party reinsurance, reduced by estimated reinstatement premiums to renew coverage and estimated income taxes.

In our December 31, 2022 Form 10-K, we reported that our projected net economic loss from our largest projected 100-year event represented approximately 6.9% of our December 31, 2022 shareholders’ equity.

During the first half of 2023, our net exposure to catastrophes has changed due to the market conditions and business decisions.

As a result, our projected net economic loss from our largest 100-year event in a given zone represents approximately 6.5% of our June 30, 2023 shareholders’ equity.

The table below reflects the Company’s PML exposure, net of third party reinsurance at various return periods for its top zones/perils (as ranked by largest 1 in 100 year economic loss) based on projection data as of July 1, 2023.

Return Periods (in years) 1 in 20 1 in 50 1 in 100 1 in 250 1 in 500

Exceeding Probability 5.0% 2.0% 1.0% 0.4% 0.2%

(Dollars in millions)

California, Earthquake $ 169 $ 726 $ 1,029 $ 1,313 $ 1,576

Southeast U.S., Wind 487 693 886 1,132 1,297

Europe Wind 167 384 611 913 1,058

Texas Wind 141 378 592 825 1,102

The projected economic losses, defined as PML exposures, net of third party reinsurance, reinstatement premiums and estimated income taxes, for the top zones/perils scheduled are as follows:

Return Periods (in years) 1 in 20 1 in 50 1 in 100 1 in 250 1 in 500

Exceeding Probability 5.0% 2.0% 1.0% 0.4% 0.2%

(Dollars in millions)

California, Earthquake $ 134 $ 514 $ 707 $ 874 $ 1,039

Southeast U.S., Wind 333 452 546 701 803

Europe Wind 137 296 458 686 781

Texas Wind 104 273 403 525 685

During the first half of 2023, we conducted no repurchases of our shares in the open market.

During the first three quarters of 2023, we conducted no repurchases of our shares in the open market.

We paid $212 million in dividends to adjust our capital position and enhance long-term expected returns to our shareholders.

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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 June 30, 2023, we had repurchased 30.8 million shares under this authorization.

As of September 30, 2023, we had repurchased 30.8 million shares under this authorization.

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.

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Total net proceeds from the public offering were $1,445 million, after underwriting discount and expenses.

Company intends to use the net proceeds from this offering for long-term reinsurance opportunity and continuing build out of the global insurance business.

The Company intends to use the net proceeds from this offering for long-term reinsurance opportunity and continuing build out of the global insurance business.

Our liquidity requirements are generally met from positive cash flow from operations.

1 unchanged sentence

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 were $2.2 billion and $1.6 billion for the six months ended June 30, 2023 and 2022, respectively.

Additionally, these cash flows reflected net catastrophe loss payments of $458 million and $377 million for the six months ended June 30, 2023 and 2022, respectively, and net tax payments of $73 million and $101 million for the six months ended June 30, 2023 and 2022, respectively.

Our net cash flows from operating activities were $3.5 billion and $2.7 billion for the nine months ended September 30, 2023 and 2022, respectively.

Additionally, these cash flows reflected net catastrophe loss payments of $651 million and $534 million for the nine months ended September 30, 2023 and 2022, respectively, and net tax payments of $185 million and $167 million for the nine months ended September 30, 2023 and 2022, respectively.

If disbursements for losses and LAE, policy acquisition costs and other operating expenses were to exceed premium inflows, cash flow from reinsurance and insurance operations would be negative.

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As the timing of payments for losses and LAE 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 June 30, 2023 and December 31, 2022, we held cash and short-term investments of $3.7 billion and $2.4 billion, respectively.

At September 30, 2023 and December 31, 2022, we held cash and short-term investments of $4.2 billion and $2.4 billion, 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 June 30, 2023, we had $1.6 billion of available for sale fixed maturity securities maturing within one year or less, $7.8 billion maturing within one to five years and $5.7 billion maturing after five years.

In addition to these cash and short-term investments, at September 30, 2023, we had $1.6 billion of available for sale fixed maturity securities maturing within one year or less, $8.0 billion maturing within one to five years and $5.7 billion maturing after five years.

We believe that these fixed maturity 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 and LAE in the near future.

We do not anticipate selling a significant amount of securities to pay losses and LAE.

At June 30, 2023, we had $1.8 billion of net pre-tax unrealized depreciation related to fixed maturity - available for sale securities, comprised of $1.9 billion of pre-tax unrealized depreciation and $63 million of pre-tax unrealized appreciation.

At September 30, 2023, we had $2.1 billion of net pre-tax unrealized depreciation related to fixed maturity - available for sale securities, comprised of $2.1 billion of pre-tax unrealized depreciation and $57 million of pre-tax unrealized appreciation.

Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing.

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Interest Rate Risk.

Our $33.5 billion investment portfolio at June 30, 2023 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.

Our $34.6 billion investment portfolio at September 30, 2023 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.

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Impact of Interest Rate Shift in Basis Points

At June 30, 2023

At September 30, 2023

-200 -100 0 100 200

4 unchanged sentences

After-tax from Base ($) $ 1,431 $ 715 $ — $ (715) $ (1,431)

We had $23.4 billion and $22.1 billion of gross reserves for losses and LAE as of June 30, 2023 and December 31, 2022, respectively.

We had $23.8 billion and $22.1 billion of gross reserves for losses and LAE as of September 30, 2023 and December 31, 2022, 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.

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Our loss and loss reserve obligations have an expected duration of approximately 3.7 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 $3.8 billion resulting in a discounted reserve balance of approximately $17.4 billion, representing approximately 64.5% of the value of the fixed maturity investment portfolio funds.

If we were to discount our loss and LAE reserves, net of ceded reserves, the discount would be approximately $4.2 billion resulting in a discounted reserve balance of

approximately $17.4 billion, representing approximately 61.4% of the value of the fixed maturity investment portfolio funds.

Equity risk is the potential change in fair value of the common stock, preferred stock and mutual fund portfolios arising from changing prices.

3 unchanged sentences

Impact of Percentage Change in Equity Fair Values

At June 30, 2023

At September 30, 2023

(Dollars in millions) -20% -10% 0% 10% 20%

3 unchanged sentences

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.

Each of our non-U.S./Bermuda operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines.

Each non-U.S.

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 non-U.S.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis