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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 March 31, 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 April 27, 2022: 265,193,412
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)
March 31,
2022		 December 31,
2021
(Unaudited) (Audited)
Assets    
Investments:    
Fixed maturity securities (amortized cost of $16,838,703 and $16,471,304; allowance for expected credit losses of $26,531 and $22,625 at March 31, 2022 and December 31, 2021, respectively)
 $ 16,426,196  $ 16,602,673 
Real estate 1,276,157  1,852,508 
Investment funds 1,545,648  1,480,612 
Arbitrage trading account 1,188,910  1,179,606 
Equity securities 1,126,491  941,243 
Loans receivable (net of allowance for expected credit losses of $1,429 and $1,718 at March 31, 2022 and December 31, 2021, respectively)
 115,097  115,172 
Total investments 21,678,499  22,171,814 
Cash and cash equivalents 2,114,841  1,568,843 
Premiums and fees receivable (net of allowance for expected credit losses of $28,236 and $25,218 at March 31, 2022 and December 31, 2021, respectively)
 2,599,357  2,522,972 
Due from reinsurers (net of allowance for expected credit losses of $7,655 and $7,713 at March 31, 2022 and December 31, 2021, respectively)
 2,929,161  2,923,026 
Deferred policy acquisition costs 716,645  676,145 
Prepaid reinsurance premiums 680,703  676,915 
Property, furniture and equipment 417,888  419,883 
Goodwill 169,652  169,652 
Accrued investment income 129,194  122,938 
Current and deferred federal and foreign income taxes 43,527  42,457 
Other assets 771,487  753,231 
Total assets $ 32,250,954  $ 32,047,876 
Liabilities and Equity    
Liabilities:    
Reserves for losses and loss expenses $ 15,722,889  $ 15,390,888 
Unearned premiums 5,026,905  4,847,160 
Due to reinsurers 524,562  514,980 
Trading account securities sold but not yet purchased 241  1,169 
Trading account payable to brokers and clearing organizations 56,652  53,636 
Other liabilities 1,189,919  1,305,245 
Senior notes and other debt 1,834,155  2,259,416 
Subordinated debentures 1,007,832  1,007,652 
Total liabilities 25,363,155  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 750,000,000 shares, issued and outstanding, net of treasury shares, 265,186,251 and 265,170,882 shares, respectively
 105,803  105,803 
Additional paid-in capital 992,012  981,104 
Retained earnings 9,582,790  9,015,135 
Accumulated other comprehensive loss (649,229) (281,955)
Treasury stock, at cost, 263,828,377 and 263,843,868 shares, respectively
 (3,166,873) (3,167,076)
Total stockholders’ equity 6,864,503  6,653,011 
Noncontrolling interests 23,296  14,719 
Total equity 6,887,799  6,667,730 
Total liabilities and equity $ 32,250,954  $ 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 March 31,
2022 2021
REVENUES:
Net premiums written $ 2,413,254  $ 2,050,038 
Change in net unearned premiums (164,167) (200,082)
Net premiums earned 2,249,087  1,849,956 
Net investment income 173,512  158,577 
Net investment gains:
Net realized and unrealized gains on investments 369,882  51,759 
Change in allowance for expected credit losses on investments (3,617) (16,920)
Net investment gains 366,265  34,839 
Revenues from non-insurance businesses 97,776  87,430 
Insurance service fees 27,951  25,808 
Other income 818  259 
Total revenues 2,915,409  2,156,869 
OPERATING COSTS AND EXPENSES:
Losses and loss expenses 1,339,252  1,121,592 
Other operating costs and expenses 713,899  616,268 
Expenses from non-insurance businesses 94,855  86,290 
Interest expense 34,970  36,651 
Total operating costs and expenses 2,182,976  1,860,801 
Income before income taxes 732,433  296,068 
Income tax expense (139,403) (64,352)
Net income before noncontrolling interests 593,030  231,716 
Noncontrolling interests (2,392) (2,191)
Net income to common stockholders $ 590,638  $ 229,525 
NET INCOME PER SHARE:
Basic $ 2.13  $ 0.83 
Diluted $ 2.12  $ 0.82 

See accompanying notes to interim consolidated financial statements.






2

W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
For the Three Months
Ended March 31,
2022 2021
Net income before noncontrolling interests $ 593,030  $ 231,716 
Other comprehensive (loss) income:
Change in unrealized currency translation adjustments 56,272  4,050 
Change in unrealized investment losses, net of taxes (423,545) (90,130)
Other comprehensive loss (367,273) (86,080)
Comprehensive income 225,757  145,636 
Noncontrolling interests (2,391) (2,191)
Comprehensive income to common stockholders $ 223,366  $ 143,445 

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 March 31,
2022 2021
COMMON STOCK:
Beginning and end of period $ 105,803  $ 105,803 
ADDITIONAL PAID-IN CAPITAL:
Beginning of period $ 981,104  $ 977,215 
Restricted stock units issued (530) (525)
Restricted stock units expensed 11,438  11,598 
End of period $ 992,012  $ 988,288 
RETAINED EARNINGS:
Beginning of period $ 9,015,135  $ 8,348,381 
Net income to common stockholders 590,638  229,525 
Dividends ($0.09 and $0.08, per share, respectively)
 (22,983) (21,285)
End of period $ 9,582,790  $ 8,556,621 
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Unrealized investment (loss) gains:
Beginning of period $ 90,900  $ 289,714 
Change in unrealized losses on securities without an allowance for expected credit losses (423,839) (100,485)
Change in unrealized gains on securities with an allowance for expected credit losses 293  10,355 
End of period (332,646) 199,584 
Currency translation adjustments:
Beginning of period (372,855) (351,886)
Net change in period 56,272  4,050 
End of period (316,583) (347,836)
Total accumulated other comprehensive loss $ (649,229) $ (148,252)
TREASURY STOCK:
Beginning of period $ (3,167,076) $ (3,058,425)
Stock exercised/vested 203  248 
Stock repurchased —  (29,683)
End of period $ (3,166,873) $ (3,087,860)
NONCONTROLLING INTERESTS:
Beginning of period $ 14,719  $ 14,995 
Contributions (distributions) 6,186  (1,502)
Net income 2,392  2,191 
Other comprehensive loss, net of tax (1) — 
End of period $ 23,296  $ 15,684 
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 Three Months
Ended March 31,
  2022 2021
CASH FROM OPERATING ACTIVITIES:    
Net income to common stockholders $ 590,638  $ 229,525 
Adjustments to reconcile net income to net cash from operating activities:    
Net investment gains (366,265) (34,839)
Depreciation and amortization 24,631  33,543 
Noncontrolling interests 2,392  2,191 
Investment funds (52,012) (38,935)
Stock incentive plans 11,438  11,817 
Change in:
Arbitrage trading account (7,215) (16,108)
Premiums and fees receivable (69,704) (96,290)
Reinsurance accounts (2,643) (105,589)
Deferred policy acquisition costs (39,220) (38,577)
Income taxes 123,763  47,372 
Reserves for losses and loss expenses 316,065  303,305 
Unearned premiums 167,522  219,920 
Other (221,708) (206,345)
Net cash from operating activities 477,682  310,990 
CASH FROM (USED IN) INVESTING ACTIVITIES:    
Proceeds from sale of fixed maturity securities 408,221  1,115,114 
Proceeds from sale of equity securities 9,227  57,457 
(Contributions) distributions from investment funds (13,423) 36,236 
Proceeds from maturities and prepayments of fixed maturity securities 1,440,457  1,623,357 
Purchase of fixed maturity securities (2,200,214) (4,118,161)
Purchase of equity securities (100,356) (69,181)
Real estate sold 28,141  9,787 
Change in loans receivable 332  9,256 
Net purchases of property, furniture and equipment (9,114) (10,872)
Change in balances due to security brokers 98,058  151,776 
Cash received in connection with business disposition 906,789  — 
Payment for business purchased net of cash acquired (49,572) — 
Other 17  — 
Net cash from (used in) investing activities 518,563  (1,195,231)
CASH (USED IN) FROM FINANCING ACTIVITIES:    
Repayment of senior notes and other debt (426,503) (110,000)
Net payments for stock options exercised (327) (525)
Net proceeds from issuance of debt 1,186  691,213 
Cash dividends to common stockholders (22,983) (21,285)
Purchase of common treasury shares —  (29,683)
Other, net (2,703) (1,503)
Net cash (used in) from financing activities (451,330) 528,217 
Net impact on cash due to change in foreign exchange rates 1,083  (1,431)
Net change in cash and cash equivalents 545,998  (357,455)
Cash and cash equivalents at beginning of period 1,568,843  2,372,366 
Cash and cash equivalents at end of period $ 2,114,841  $ 2,014,911 
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 March 31, 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 March 31,
(In thousands) 2022 2021
Basic 276,772  277,793 
Diluted 279,157  280,245 


(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) Acquisitions

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 Income

    The following table presents the components of the changes in accumulated other comprehensive (loss) income ("AOCI"):
(In thousands) Unrealized Investment Gains (Losses) Currency Translation Adjustments Accumulated Other Comprehensive
(Loss) Income
As of and for the three months ended March 31, 2022
Changes in AOCI
Beginning of period $ 90,900  $ (372,855) $ (281,955)
Other comprehensive (loss) income before reclassifications (433,136) 56,272  (376,864)
Amounts reclassified from AOCI 9,591  —  9,591 
Other comprehensive (loss) income (423,545) 56,272  (367,273)
Unrealized investment gain related to noncontrolling interest (1) —  (1)
End of period $ (332,646) $ (316,583) $ (649,229)
Amounts reclassified from AOCI
Pre-tax $ 12,141  (1) $ —  $ 12,141 
Tax effect (2,550) (2) —  (2,550)
After-tax amounts reclassified $ 9,591  $ —  $ 9,591 
Other comprehensive (loss) income
Pre-tax $ (539,449) $ 56,272  $ (483,177)
Tax effect 115,904  —  115,904 
Other comprehensive (loss) income $ (423,545) $ 56,272  $ (367,273)
As of and for the three months ended March 31, 2021
Changes in AOCI
Beginning of period $ 289,714  $ (351,886) $ (62,172)
Other comprehensive (loss) income before reclassifications (98,991) 4,050  (94,941)
Amounts reclassified from AOCI 8,861  —  8,861 
Other comprehensive (loss) income (90,130) 4,050  (86,080)
Unrealized investment gain related to noncontrolling interest —  —  — 
End of period $ 199,584  $ (347,836) $ (148,252)
Amounts reclassified from AOCI
Pre-tax $ 11,216  (1) $ —  $ 11,216 
Tax effect (2,355) (2) —  (2,355)
After-tax amounts reclassified $ 8,861  $ —  $ 8,861 
Other comprehensive (loss) income
Pre-tax $ (113,735) $ 4,050  $ (109,685)
Tax effect 23,605  —  23,605 
Other comprehensive (loss) income $ (90,130) $ 4,050  $ (86,080)
____________
(1) Net investment gains (losses) in the consolidated statements of income.
(2) Income tax expense in the consolidated statements of income.


(6) Statements of Cash Flows
    Interest payments were $52,899,000 and $45,393,000 for the three months ended March 31, 2022 and 2021, respectively. No income taxes were paid during such periods.
8

(7) Investments in Fixed Maturity Securities
    At March 31, 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
March 31, 2022
Held to maturity:
State and municipal $ 70,165  $ (378) $ 7,094  $ —  $ 76,881  $ 69,787 
Residential mortgage-backed 4,455  —  324  —  4,779  4,455 
Total held to maturity 74,620  (378) 7,418  —  81,660  74,242 
Available for sale:
U.S. government and government agency 837,167  —  2,397  (20,716) 818,848  818,848 
State and municipal:
Special revenue 1,948,586  —  12,944  (44,803) 1,916,727  1,916,727 
State general obligation 378,408  —  7,043  (6,574) 378,877  378,877 
Pre-refunded 165,882  —  6,216  —  172,098  172,098 
Corporate backed 175,070  —  1,407  (4,472) 172,005  172,005 
Local general obligation 410,058  —  11,184  (5,075) 416,167  416,167 
Total state and municipal 3,078,004  —  38,794  (60,924) 3,055,874  3,055,874 
Mortgage-backed:
Residential 1,179,468  —  2,417  (60,650) 1,121,235  1,121,235 
Commercial 266,921  —  339  (3,759) 263,501  263,501 
Total mortgage-backed 1,446,389  —  2,756  (64,409) 1,384,736  1,384,736 
Asset-backed 4,319,535  —  1,459  (63,573) 4,257,421  4,257,421 
Corporate:
Industrial 3,373,710  12,708  (115,614) 3,270,804  3,270,804 
Financial 1,747,275  —  4,612  (45,155) 1,706,732  1,706,732 
Utilities 422,354  —  1,806  (14,434) 409,726  409,726 
Other 206,526  —  47  (5,328) 201,245  201,245 
Total corporate 5,749,865  —  19,173  (180,531) 5,588,507  5,588,507 
Foreign government 1,333,123  (26,153) 3,411  (63,813) 1,246,568  1,246,568 
Total available for sale 16,764,083  (26,153) 67,990  (453,966) 16,351,954  16,351,954 
Total investments in fixed maturity securities $ 16,838,703  $ (26,531) $ 75,408  $ (453,966) $ 16,433,614  $ 16,426,196 
____________
(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.
9

(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 three months ended March 31, 2022 and 2021:
(In thousands) 2022 2021
Allowance for expected credit losses, beginning of period $ 387  $ 798 
Provision for expected credit losses (9) (68)
Allowance for expected credit losses, end of period $ 378  $ 730 





10

The following table presents the rollforward of the allowance for expected credit losses for available for sale securities for the three months ended March 31, 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 484  —  484  18,990  16  19,006 
Expected credit losses (gains) on securities for which credit losses were previously recorded 3,447  (16) 3,431  (261) (513) (774)
Reduction due to disposals —  —  —  —  (5) (5)
Allowance for expected credit losses, end of period $ 26,153  $ —  $ 26,153  $ 19,993  $ 16  $ 20,009 

During the three months ended March 31, 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, primarily due
to foreign government securities. During the three months ended March 31, 2021, the Company increased the allowance for expected credit losses for available for sale securities primarily due to foreign government securities that had no reserve in prior periods.
The amortized cost and fair value of fixed maturity securities at March 31, 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 $ 1,472,865  $ 1,461,188 
Due after one year through five years 7,903,303  7,756,952 
Due after five years through ten years 4,029,040  3,898,727 
Due after ten years 1,982,273  1,927,232 
Mortgage-backed securities 1,450,844  1,389,515 
Total $ 16,838,325  $ 16,433,614 
________________
(1) Amortized cost is reduced by the allowance for expected credit losses of $378 thousand related to held to maturity securities.    
At March 31, 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.


11

(8) Investments in Equity Securities
    At March 31, 2022 and December 31, 2021, investments in equity securities were as follows:
 
(In thousands) Cost Gross Unrealized Fair
Value		 Carrying
Value
Gains Losses
March 31, 2022
Common stocks $ 699,566  $ 191,842  $ (8,091) $ 883,317  $ 883,317 
Preferred stocks 262,513  2,917  (22,256) 243,174  243,174 
Total $ 962,079  $ 194,759  $ (30,347) $ 1,126,491  $ 1,126,491 
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 March 31, 2022 and December 31, 2021, the fair and carrying values of the arbitrage trading account were $1,189 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 March 31, 2022, the fair value of short option contracts outstanding was $242 thousand (notional amount of $29.2 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 March 31,
(In thousands) 2022 2021
Investment income earned on:
Fixed maturity securities, including cash and cash equivalents and loans receivable $ 101,284  $ 94,677 
Investment funds 52,012  38,935 
Arbitrage trading account 9,187  19,074 
Equity securities 10,856  6,180 
Real estate 2,146  1,161 
Gross investment income 175,485  160,027 
Investment expense (1,973) (1,450)
Net investment income $ 173,512  $ 158,577 


12

(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 $615 million as of March 31, 2022.
    Investment funds consisted of the following:
Carrying Value as of Income (Loss) from
Investment Funds
March 31, December 31, For the Three Months
Ended March 31,
(In thousands) 2022 2021 2022 2021
Financial services $ 454,701  $ 431,818  $ 25,932  $ 17,142 
Transportation 341,022  336,688  11,179  6,228 
Real Estate 283,897  273,690  16,364  4,434 
Energy 136,401  150,224  (892) 3,320 
Other funds 329,627  288,192  (569) 7,811 
Total $ 1,545,648  $ 1,480,612  $ 52,014  $ 38,935 
    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. 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 three months ended March 31, 2022 and 2021, the Company has ceded approximately $89 million and $53 million, respectively, of written premiums to Lifson Re.
Other funds include deferred compensation trust assets of $32 million and $34 million as of March 31, 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
March 31, December 31,
(In thousands) 2022 2021
Properties in operation $ 1,052,198  $ 1,626,826 
Properties under development 223,959  225,682 
Total $ 1,276,157  $ 1,852,508 

    As of March 31, 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 $32,031,000 and $57,391,000 as of March 31, 2022 and December 31, 2021, respectively. Related depreciation expense was $4,788,000 and $4,890,000 for the three months ended March 31, 2022 and 2021, respectively. Future minimum rental income expected on operating leases relating to properties in operation is
13

$24,004,686 in 2022, $30,750,724 in 2023, $30,466,934 in 2024, $27,802,134 in 2025, $25,807,966 in 2026, $24,984,457 in 2027 and $476,939,991 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 March 31, 2022.

(13) Loans Receivable

At March 31, 2022 and December 31, 2021, loans receivable were as follows:
(In thousands) March 31,
2022		 December 31,
2021
Amortized cost (net of allowance for expected credit losses):
Real estate loans $ 89,213  $ 89,431 
Commercial loans 25,884  25,741 
Total $ 115,097  $ 115,172 
Fair value:
Real estate loans $ 89,672  $ 90,793 
Commercial loans 25,884  25,741 
Total $ 115,556  $ 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 March 31, 2022 and December 31, 2021, respectively.
The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the three months ended March 31, 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 
Provision for expected credit losses (67) (222) (289) (75) (1,164) (1,239)
Allowance for expected credit losses, end of period $ 1,295  $ 134  $ 1,429  $ 1,608  $ 2,590  $ 4,198 
During the three months ended March 31, 2022, the Company reduced the allowance primarily due to the decrease in the duration of the loan portfolio.
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.

14

(14) Net Investment Gains (Losses)
     Net investment gains (losses) were as follows:
For the Three Months
Ended March 31,
(In thousands) 2022 2021
Net investment gains (losses):
Fixed maturity securities:
Gains $ 1,705  $ 8,240 
Losses (2,984) (2,071)
Equity securities (1):
Net realized gains on investment sales 905  8,572 
Change in unrealized gains (losses) 93,213  (24,335)
Investment funds (2,162) 47,671 
Real estate (2) 286,192  12,909 
Loans receivable (32) — 
Other (6,955) 773 
Net realized and unrealized gains on investments in earnings before allowance for expected credit losses 369,882  51,759 
Change in allowance for expected credit losses on investments:
Fixed maturity securities (3,906) (18,159)
Loans receivable 289  1,239 
Change in allowance for expected credit losses on investments (3,617) (16,920)
Net investment gains 366,265  34,839 
Income tax expense (78,442) (5,887)
After-tax net investment gains $ 287,823  $ 28,952 
Change in unrealized investment losses on available for sale securities:
Fixed maturity securities without allowance for expected credit losses $ (540,263) $ (122,568)
Fixed maturity securities with allowance for expected credit losses 293  10,355 
Investment funds 469  (1,020)
Other 52  (502)
Total change in unrealized investment losses (539,449) (113,735)
Income tax benefit 115,904  23,605 
Noncontrolling interests (1) — 
After-tax change in unrealized investment losses of available for sale securities $ (423,546) $ (90,130)
______________________
(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.

15

(15) Fixed Maturity Securities in an Unrealized Loss Position
    The following tables summarize all fixed maturity securities in an unrealized loss position at March 31, 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
March 31, 2022
U.S. government and government agency $ 547,027  $ 18,521  $ 36,307  $ 2,195  $ 583,334  $ 20,716 
State and municipal 1,360,055  51,579  95,853  9,345  1,455,908  60,924 
Mortgage-backed 1,069,979  49,408  140,480  15,001  1,210,459  64,409 
Asset-backed 3,898,607  61,254  186,663  2,319  4,085,270  63,573 
Corporate 3,805,020  148,708  381,306  31,823  4,186,326  180,531 
Foreign government 809,004  29,721  211,576  34,092  1,020,580  63,813 
Fixed maturity securities $ 11,489,692  $ 359,191  $ 1,052,185  $ 94,775  $ 12,541,877  $ 453,966 
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 March 31, 2022 is presented in the table below:
($ in thousands) Number of
Securities		 Aggregate
Fair Value		 Gross
Unrealized Loss
Foreign government 37  $ 132,306  $ 30,753 
Corporate 12  30,071  3,158 
State and municipal 1  13,583  1,422 
Mortgage-backed 7  1,785  48 
Asset-backed 1  37  5 
Total 58  $ 177,782  $ 35,386 
    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.

16

(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.
    
17

    The following tables present the assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 by level:
(In thousands) Total Level 1 Level 2 Level 3
March 31, 2022
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency $ 818,848  $ —  $ 818,848  $ — 
State and municipal 3,055,874  —  3,055,874  — 
Mortgage-backed 1,384,736  —  1,384,736  — 
Asset-backed 4,257,421  —  4,257,421  — 
Corporate 5,588,507  —  5,588,507  — 
Foreign government 1,246,568  —  1,246,568  — 
Total fixed maturity securities available for sale 16,351,954  —  16,351,954  — 
Equity securities:
Common stocks 883,317  877,387  1,230  4,700 
Preferred stocks 243,174  —  231,203  11,971 
Total equity securities 1,126,491  877,387  232,433  16,671 
Arbitrage trading account 1,188,910  1,186,353  2,557  — 
Total $ 18,667,355  $ 2,063,740  $ 16,586,944  $ 16,671 
Liabilities:
Trading account securities sold but not yet purchased $ 241  $ 241  $ —  $ — 
December 31, 2021
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency $ 855,343  $ —  $ 855,343  $ — 
State and municipal 3,304,133  —  3,304,133  — 
Mortgage-backed 1,068,075  —  1,068,075  — 
Asset-backed 4,490,565  —  4,490,565  — 
Corporate 5,595,675  —  5,595,675  — 
Foreign government 1,214,901  —  1,214,901  — 
Total fixed maturity securities available for sale 16,528,692  —  16,528,692  — 
Equity securities:
Common stocks 695,403  684,470  1,639  9,294 
Preferred stocks 245,840  —  234,544  11,296 
Total equity securities 941,243  684,470  236,183  20,590 
Arbitrage trading account 1,179,606  1,153,079  26,527  — 
Total $ 18,649,541  $ 1,837,549  $ 16,791,402  $ 20,590 
Liabilities:
Trading account securities sold but not yet purchased $ 1,169  $ 1,137  $ 32  $ — 

18

    The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2022 and for the year ended December 31, 2021:
Gains (Losses) Included In:
(In thousands) Beginning
Balance		 Earnings (Losses) Other
Comprehensive
Income (Losses)		 Impairments Purchases Sales Paydowns / Maturities Transfers In / (Out) Ending
Balance
Three Months Ended March 31, 2022
Assets:
Equity securities:
Common stocks $ 9,294  $ (4,594) $ —  $ —  $ —  $ —  $ —  $ —  $ 4,700 
Preferred stocks 11,296  —  —  —  675  —  —  —  11,971 
Total 20,590  (4,594) —  —  675  —  —  —  16,671 
Arbitrage trading account —  —  —  —  —  —  —  —  — 
Total $ 20,590  $ (4,594) $ —  $ —  $ 675  $ —  $ —  $ —  $ 16,671 
Liabilities:
Trading account securities sold but not yet purchased $ —  $ (1) $ —  $ —  $ —  $ —  $ —  $ 1  $ — 
Year Ended
December 31, 2021
Assets:
Fixed maturities securities available for sale:
Corporate $ 1,000  $ —  $ —  $ —  $ —  $ (1,000) $ —  $ —  $ — 
Total 1,000  —  —  —  —  (1,000) —  —  — 
Equity securities:
Common stocks 9,215  640  —  —  —  (561) —  —  9,294 
Preferred stocks 9,331  (35) —  —  2,000  —  —  —  11,296 
Total 18,546  605  —  —  2,000  (561) —  —  20,590 
Arbitrage trading account —  8  —  —  —  (8) —  —  — 
Total $ 19,546  $ 613  $ —  $ —  $ 2,000  $ (1,569) $ —  $ —  $ 20,590 
Liabilities:
Trading account securities sold but not yet purchased $ —  $ 1  $ —  $ —  $ (1) $ —  $ —  $ —  $ — 
    For the three months ended March 31, 2022, there was one security transferred into Level 3. For the year ended December 31, 2021, there were no securities transferred into or out of Level 3.

19

(17) Reserves for Loss and Loss Expenses
    The Company's reserves for losses and loss expenses are comprised of case reserves and incurred but not reported liabilities ("IBNR"). When a claim is reported, a case reserve is established for the estimated ultimate payment based upon known information about the claim. As more information about the claim becomes available over time, case reserves are adjusted up or down as appropriate. Reserves are also established on an aggregate basis to provide for IBNR liabilities and expected loss reserve development on reported claims.
    Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.
    The establishment of the actuarially derived loss reserve point estimate also includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions.
    The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is priced and written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns.
    Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.
    Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags.
    The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect the latest reported loss data, current trends and other factors observed.
20

    The table below provides a reconciliation of the beginning and ending reserve balances:
March 31,
(In thousands) 2022 2021
Net reserves at beginning of period $ 12,848,362  $ 11,620,393 
Net provision for losses and loss expenses:
Claims occurring during the current year (1) 1,327,695  1,115,173 
Increase (decrease) in estimates for claims occurring in prior years (2) (3) 3,761  (859)
Loss reserve discount accretion 7,796  7,278 
Total 1,339,252  1,121,592 
Net payments for claims:    
Current year 84,598  97,586 
Prior years 933,656  794,472 
Total 1,018,254  892,058 
Foreign currency translation 9,983  (14,779)
Net reserves at end of period 13,179,343  11,835,148 
Ceded reserves at end of period 2,543,546  2,245,380 
Gross reserves at end of period $ 15,722,889  $ 14,080,528 
_______________________________________
(1) Claims occurring during the current year are net of loss reserve discounts of $7 million and $5 million for the three months ended March 31, 2022 and 2021, respectively.
(2) The change in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $4 million and $5 million for the three months ended March 31, 2022 and 2021, respectively.
(3) For certain retrospectively rated insurance policies and reinsurance agreements, reserve development is offset by additional or return premiums. Favorable development, net of additional and return premiums, was $1 million and $3 million for the three months ended March 31, 2022 and 2021, respectively.
The COVID-19 global pandemic has impacted, and may further impact, the Company’s results through its effect on claim frequency and severity. Loss cost trends have been impacted and may be further impacted by COVID-19-related claims in certain lines of business. Losses incurred from COVID-19-related claims have been offset, to a certain extent, by lower claim frequency in certain lines of our businesses; however, as the economy and legal systems have reopened, the benefit of lower claim frequency has continued to abate. Although as populations continue to be vaccinated against the virus and the effects of the pandemic have receded in many jurisdictions, most particularly the United States, it remains too early to determine the ultimate net impact of COVID-19 on the Company. New variants of the COVID-19 virus, including the “Omicron” variant, continue to create risks with respect to loss costs and the potential for renewed impact of the other effects of COVID-19 associated with economic conditions, inflation, and social distancing and work from home rules.
Most of the COVID-19-related claims reported to the Company to date involve certain short-tailed lines of business, including contingency and event cancellation, business interruption, and film production delay. The Company has also received COVID-19-related claims for longer-tailed casualty lines of business such as workers’ compensation and other liability; however, the estimated incurred loss impact for these reported claims are not material at this time. Given the continuing uncertainty regarding the pandemic's pervasiveness, the future impact that the pandemic may have on claim frequency and severity remains uncertain at this time.
The Company has estimated the potential COVID-19 impact to its contingency and event cancellation, workers’ compensation, and other lines of business under a number of possible scenarios; however, due to COVID-19’s continued evolving impact, there remains a high degree of uncertainty around the Company’s COVID-19 reserves. In addition, should the pandemic continue or worsen as a result of new COVID-19 variants or otherwise, governments in the jurisdictions where we operate may renew their efforts to expand policy coverage terms beyond the policy’s intended coverage. Accordingly, losses arising from these actions, and the other factors described above, could exceed the Company’s reserves established for those related policies.
As of March 31, 2022, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $290 million, of which $246 million relates to the Insurance segment and $44 million relates to the Reinsurance & Monoline Excess segment. Such $290 million of COVID-19-related losses included $268 million of reported losses and $22 million of IBNR. For the three months ended March 31, 2022, the Company recognized current accident year losses for COVID-19-related claims activity, net of reinsurance, of approximately $1 million, which relates to the Insurance segment.
21

During the three months ended March 31, 2022, favorable prior year development (net of additional and return premiums) of $1 million included $6 million of favorable development for the Insurance segment, largely offset by $5 million of adverse development for the Reinsurance & Monoline Excess segment.
The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2021 accident year, largely offset by adverse development on the 2015 through 2019 accident years. The favorable development on the 2021 accident year was concentrated in the commercial auto liability, other liability and accident and health (employer stop loss) lines of business. The Company continued to experience lower reported claim frequency in commercial auto and other liability in 2021 relative to historical averages, and lower reported incurred losses relative to our expectations. These trends began in 2020, and were likely caused by the impacts of the COVID-19 pandemic, including, for example, lockdowns, reduced driving/traffic, significant work from home, court closures, and similar reduced activities and travel. While reported claim frequency in these lines increased in 2021 relative to 2020, it remained below the historical levels pre- the start of the COVID-19 pandemic. Due to the ongoing uncertainty regarding the ultimate impacts of the COVID-19 pandemic on accident year 2021 incurred losses, the Company remains cautious in factoring in these trends in setting its initial loss ratio picks for this year. As accident year 2021 has begun to mature, we have recognized some of the favorable reported experience in our ultimate loss picks made as of March 31, 2022. The adverse development on the 2015 through 2019 accident years is concentrated in the other liability line of business, and to a lesser degree professional liability and commercial auto liability. The development is driven by a larger than expected number of large losses reported. The large losses particularly impacted the excess and surplus lines casualty classes of business.
The overall adverse development for the Reinsurance & Monoline Excess segment was driven mainly by adverse development in the non-proportional reinsurance assumed liability and professional liability lines of business, largely offset by favorable development in excess workers' compensation. Both the adverse and favorable development was spread across many prior accident years. The adverse development was associated primarily with our U.S. assumed reinsurance business, and related to accounts insuring construction projects and professional liability exposures. The favorable excess workers' compensation development was driven by continued lower claim frequency and reported losses relative to our expectations and to favorable claim settlements.
During the three months ended March 31, 2021, favorable prior year development (net of additional and return premiums) of $3 million included $6 million of favorable development for the Insurance segment, partially offset by $3 million of adverse development for the Reinsurance & Monoline Excess segment.
The overall favorable development for the Insurance segment was primarily attributable to favorable development on the 2020 accident year, partially offset by adverse development on the 2016 through 2018 accident years. The favorable development on the 2020 accident year was largely concentrated in the commercial auto liability and other liability lines of business. During 2020, the Company achieved larger rate increases in these lines of business than were contemplated in its budget and initial loss ratio selections. The Company also experienced significantly lower reported claim frequency in these lines in 2020 relative to historical averages, and lower reported incurred losses relative to our expectations. We believe that the lower claim frequency and lower reported incurred losses were caused by the impacts of the COVID-19 pandemic, including for example, lockdowns, reduced driving and traffic, work from home, court closures, etc.; however, due to the ongoing uncertainty regarding the ultimate impacts of the pandemic on accident year 2020 incurred losses, the Company did not adjust its reserves based on these lower trends during 2020. As of March 31, 2021, we began to recognize some of the favorable accident year 2020 experience in certain lines in our ultimate loss picks. The adverse development on the 2016 through 2018 accident years is concentrated in the other liability line of business, and is driven by a higher than expected number of large losses reported. The large losses particularly impacted directors and officers liability and excess and surplus lines casualty classes of business.
Prior year reserve development for the Reinsurance & Monoline Excess segment was less significant during the first quarter of 2021, and consisted of small adverse or favorable movements across many lines of business, which largely offset each other. The largest contributor to the slight overall adverse development for the segment was non-proportional reinsurance assumed property business, which was impacted by higher than expected reported losses on property per risk treaties written in the U.S. and U.K. related to accident year 2020.

22

(18) Fair Value of Financial Instruments
    The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:
   March 31, 2022 December 31, 2021
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
Assets:
Fixed maturity securities $ 16,426,196  $ 16,433,614  $ 16,602,673  $ 16,614,118 
Equity securities