W. R. Berkley Annual Report 2016

FY2016 Annual Report · W. R. Berkley

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W. R. Berkley Corporation

Celebrating Fifty Years

2 0 1 6 A N N U A L R E P O R T

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At A Glance
Our Business
Chairman’s Letter
Investments
Segment Overview
50th Anniversary Feature
Form 10-K
Operating Units
Board of Directors & Officers
Corporate Information

3
4
7
13
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175
183
IBC

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2016
Financial Highlights

By taking advantage of challenging opportunities
and bringing together talented people and capital,
we feel confident we will be able to continue
to deliver outstanding returns.

COMBINED RATIO
averaged 94.8% over the past 5 years.

TOTAL REVENUES
increased 48% over the past 5 years.

94.3%

$7.7B

BOOK VALUE PER SHARE
grew 45% over the past 5 years.

$41.65

TOTAL RETURN
5-year cumulative growth in
stock price plus dividends was 108%.

24.3%

W. R . B E R K L E Y C O R P O R A T I O N | 2 0 1 6 A N N U A L R E P O R T

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Relative Stock Price Performance

■ W. R. BERKLEY CORPORATION
■ S&P 500

Cumulative Growth:

7,634%

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

1,239%

In thousands, except per share data

Years ended December 31,

Total revenues

Net premiums written

Net investment income

Net realized investment gains

Insurance service fees

Net income to common stockholders

Net income per common share:

Basic

Diluted

Return on common stockholders’ equity

AT YEAR END

Total assets

Total investments

2012

2013

2014

2015

2016

$5,823,554

$6,408,534

$7,128,928

$7,206,457

4,898,539

5,500,173

5,996,947

6,189,515

586,763

201,451

103,133

510,592

544,291

127,586

107,513

499,925

600,885

254,852

117,443

648,884

3.72

3.56

12.9%

3.69

3.55

11.6%

5.07

4.86

15.0%

512,645

125,663

139,440

503,694

4.06

3.87

11.0%

$7,654,184

6,423,913

564,163

285,119

138,944

601,916

4.91

4.68

13.1%

$20,155,896

$20,551,796

$21,716,691

$21,730,967

$23,364,844

14,467,440

14,458,630

15,591,824

15,351,467

Reserves for losses and loss expenses

9,751,086

10,080,941

10,369,701

10,669,150

Common stockholders’ equity

Common shares outstanding

Common stockholders’ equity per share

4,306,217

4,336,035

4,589,945

4,600,246

136,018

31.66

132,233

32.79

126,749

36.21

123,308

37.31

C E L E B R A T I N G F I F T Y Y E A R S

16,649,792

11,197,195

5,047,208

121,194

41.65

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At A Glance

TOTAL REVENUES
(dollars in billions)

7.7

7.1

7.2

6.4

5.8

INVESTMENTS
Market Value
(dollars in billions)

16.6

14.5 14.5

15.6 15.4

RESERVES FOR LOSSES
AND LOSS EXPENSES
(dollars in billions)

11.2

10.1 10.4 10.7

9.8

COMMON
STOCKHOLDERS’ EQUITY*

(dollars in billions)

5.0

4.6 4.6

4.3

*Net of $1.3 billion in
special dividends and shares
repurchased from 2012-2016

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Our Business

TODAY, AS YESTERDAY AND TOMORROW,
the combined expertise of underwriting, risk
management, claims handling and investing will
deliver outstanding risk-adjusted returns.

Insurance
The Insurance units underwrite commercial insurance business, including excess and surplus
lines and admitted lines throughout the United States, as well as insurance business in the United
Kingdom, Continental Europe, South America, Canada, Scandinavia, Australia and Asia.

2016 RESULTS: Total revenues were $6.2 billion. Pre-tax income was $823 million.

Reinsurance
The Reinsurance units write reinsurance business on a facultative and treaty basis, primarily in the
United States, United Kingdom, Continental Europe, Australia, the Asia-Pacific Region and South Africa.
2016 RESULTS: Total revenues were $719 million. Pre-tax income was $75 million.

C E L E B R A T I N G F I F T Y Y E A R S

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W. R. Berkley Corporation,
founded in 1967, is one of the nation’s premier commercial
lines property casualty insurance providers. Each of the operating
units within Berkley participates in a niche market requiring
specialized knowledge about a territory or product.

Our competitive advantage lies in our long-term strategy of decentralized operations, allowing

each of our units to identify and respond quickly and effectively to changing market conditions and

local customer needs. This decentralized structure provides financial accountability and incentives

to local management and enables us to attract and retain the highest caliber professionals. We have

the expertise and resources to utilize our strengths in the present environment, and the flexibility to

anticipate, innovate and respond to whatever opportunities and challenges the future may hold.

HOW WE ARE DIFFERENT:

Risk-Adjusted Returns
Management company-wide is focused on obtaining the best
potential returns with a real understanding of the amount of risk
being assumed. Superior risk-adjusted returns are generated over
the insurance cycle.

Responsible Financial Practices
Risk exposures are managed proactively. A strong balance sheet,
including a high-quality investment portfolio, ensures ample
resources to grow the business profitably whenever there are
opportunities to do so.

Accountability
The business is operated with an ownership perspective and a clear
sense of fiduciary responsibility to shareholders.

Transparency
Consistent and objective standards are used to measure performance
—and, the same standards are used regardless of the environment.

People-Oriented Strategy
New businesses are started when opportunities are identified and,
most importantly, when the right talent is found to lead a business.
Of the Company’s 54 operating units, 47 were developed internally
and seven were acquired.

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W. R. Berkley Corporation’s Performance vs. the S&P 500®

W. R. Berkley Corporation

S&P 500®

60,000%

40,000%

20,000%

58,591%

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Notes: W. R. Berkley Corporation’s book value per share has been adjusted for stock dividends paid from 1975 to 1983. Stock dividends were 6% in each year
from 1975 to 1978, 14% in 1979, and 7% in each year from 1980 to 1983. The Company has paid cash dividends each year since 1976.

ANNUAL PERCENTAGE CHANGE

In Per-Share Book Value of
W. R. Berkley Corporation with Dividends Included

In S&P 500® with
Dividends Included

Relative
Results

Year

1974
1975
1976
1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015
2016

Average Annual Gain — 1974–2016

Overall Gain — 1973–2016

Overall gain 1973–2016 with dividends compounded = 58,591%

(1)

50.0%
12.5%
29.6%
28.6%

24.4%

18.2%

9.4%

14.5%

-9.0%

-11.6%

-16.9%

59.6%

106.8%

23.5%

22.5%

13.2%

7.8%

20.8%

13.5%

16.7%

-10.8%

34.5%

7.9%

15.9%

1.9%

-18.1%

17.1%

7.6%

31.2%

26.7%

25.6%

21.9%

30.1%

16.3%

-4.1%

23.3%

15.4%

12.2%

14.8%

4.8%

14.8%

4.3%
15.7%

17.3%

52,324%

(2)

-26.4%
37.2%
23.6%
-7.4%

6.4%

18.2%

32.3%

-5.0%

21.4%

22.4%

6.1%

31.6%

18.6%

5.1%

16.6%

31.7%

-3.1%

30.5%

7.6%

10.1%

1.3%

37.6%

23.0%

33.4%

28.6%

21.0%

-9.1%

-11.9%

-22.1%

28.7%

10.9%

4.9%

15.8%

5.5%

-37.0%

26.5%

15.1%

2.1%

16.0%

32.4%

13.7%

1.4%
12.0%

12.3%

8,096%

(1)-(2)

76.4%
-24.7%
6.0%
36.0%

18.0%

0.0%

-22.9%

19.5%

-30.4%

-34.0%

-23.0%

28.0%

88.2%

18.4%

5.9%

-18.5%

10.9%

-9.7%

5.9%

6.6%

-12.1%

-3.1%

-15.1%

-17.5%

-26.7%

-39.1%

26.2%

19.5%

53.3%

-2.0%

14.7%

17.0%

14.3%

10.8%

32.9%

-3.2%

0.3%

10.1%

-1.2%

-27.6%

1.1%

3.0%
3.7%

5.0%

C E L E B R A T I N G F I F T Y Y E A R S

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Chairman’s Letter

Left to Right: W. Robert Berkley, Jr., President and Chief Executive Ofﬁ cer & William R. Berkley, Executive Chairman

To Our Shareholders:

We were pleased with our results in 2016. A 13.1% after tax
return was a great way to complete almost 50 years in business.
On April 17, 2017 we will celebrate our 50th anniversary. Over
that period of time, the initial capital of our company, $2,500,
has become almost $9 billion in market value and in addition, we
have distributed over $4.2 billion of cash to our shareholders.

These outstanding results are truly more than anyone could ever
imagine back in the midst of our first year at Harvard Business
School—and we were optimists. From our first year of public
ownership in 1973 to the end of the first quarter of 2017,
investors have seen the value of their shares grow over 130,000%,
which translates to a compound growth rate of over 18%.

We are proud of our results for many reasons. First and foremost,
our enterprise exists to provide outstanding returns to our
owners—and we have certainly done that. We have achieved this
result by delivering outstanding service to our customers through
specialized knowledge and expertise that give us a distinct com-
petitive advantage. We succeed because we have great people
who are committed to our shared corporate goal of meeting our
customers’ needs. Finally, we do it all in a way that allows us to
make a positive contribution to our society.

All of this is far beyond any expectations that existed when we
started the company in 1967. At the beginning, we wanted to
manage other people’s money, delivering better returns with

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The initial capital of our company, $2,500, has become
almost $9 billion in market value and in addition, we have
distributed over $4.2 billion of cash to our shareholders.

less risk than other investment managers. The one common
characteristic that existed then and remains in place today is the
goal to deliver the best possible risk-adjusted return, whether
it is as an investor or in the insurance business. It is always our
obligation to the people who entrust their capital to us to deliver on
this commitment. It isn’t by coincidence that the word “risk” comes
before “return” in our mantra. We are a Company that from the
beginning focused first on examining and understanding risk and
second on optimizing the concomitant returns. We are pleased to
say that for the past fifty years we have achieved that goal. We
expect to continue to do that with the same cultural beliefs that
represent the bedrock values of our enterprise. Long-term values,
long-term returns—always understanding the risk being assumed.

As we mark our fiftieth anniversary, our Company must look
ahead to the future and build upon what we have accomplished.
The past was an evolution from managing other people’s money
to becoming a property casualty insurance enterprise where we
managed our own money. We entered the insurance industry to
compete as both a manager of our own funds and an underwriter,
whose job is to assess risk and price risk. Both tasks require
mathematical analysis and logic.

We accessed the property casualty insurance business through
the initial process of acquiring two insurance companies, each

in a separate transaction: Houston General Insurance Company
in Fort Worth, Texas, followed by Traders & General Insurance
Company in Dallas, Texas. We then went on to convert a mutual
company—Union Insurance Company (mutual)
in Lincoln
Nebraska—to a stock company in a unique way. Today, Union
Insurance Company is the oldest continuing part of our insurance
enterprise. The two Texas companies were sold to The Equitable
Life Assurance Society of the United States. This transaction was
the game changer. After this sale, we had the capital to build our
enterprise and overcome the mistakes we made at the beginning.

We continued to expand the regional insurance business and in
1975, entered the reinsurance business. In 1979, we moved into
the specialty business through the acquisition of Admiral Insurance
Company. Our growth continued for the next two decades primarily
through new ventures and occasionally through acquisitions, such
as Continental Western in Des Moines, Iowa in 1986.

At the turn of the century, we encountered a few bumps in all
segments of our business. Through determination and focus, we
managed through these issues, keeping in mind that we had a
fiduciary obligation to our customers, our people and our owners.

The Company’s returns started to skyrocket in the middle of the
first decade of the 21st century to a level we had not achieved in
20 years. We were getting returns well in excess of 20% after tax,

C E L E B R A T I N G F I F T Y Y E A R S

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2016 RETURN ON
SHAREHOLDERS’ EQUITY

13%

FIVE YEAR GROWTH IN
BOOK VALUE PER SHARE

45%

and the leverage of our investment returns was extraordinary.
We continued to build on this success and, in spite of the difficulties
of the economic debacle of 2008, our financial strength and
prudent risk management allowed our business to continue to
do exceptionally well. We were able to take advantage of our
strengths, increasing the pace of starting new units. This was a
moment when many very capable people were looking for a new
permanent home.

We were able to find exceptionally talented teams of people and
build extraordinary new business units that expanded our specialty
core substantially. The number of operating units grew from
twenty-two in 2001 to forty in 2008 and we firmly established
ourselves as a leading player in the specialty business. While
declining interest rates put pressure on investment returns, strong
underwriting results helped to maintain our overall profitability.
Our relative competitive strength was being enhanced as this
extraordinary talent joined us.

Simultaneously, our Latin American business that was started
in Argentina in 1996 grew through internal expansion and
acquisition. It has prospered and now represents a strong
international foothold. We now do business in Brazil, Uruguay,
Colombia, and Mexico. Our Argentine business, to this day, has
been an outstanding performer, whatever the local situation. Over

the years, our international business has expanded to the U.K.,
Continental Europe, Australia, Scandinavia, and Southeast Asia,
as well as globally through Lloyd’s of London.

W. R. Berkley Corporation continues to grow primarily through
start-up enterprises. In 2016, we started five new businesses,
expanding into additional specialty niches where knowledge
and expertise can add value for our customers. We combine our
capital and infrastructure with outstanding teams of people to
enter new areas of the market with a competitive advantage that
few can match. In addition, we have expanded and enhanced our
central platform to facilitate the creation of these new businesses
and add efficiencies, while refocusing our business to achieve
better returns in the current lower interest rate environment.

Generally our results in these new ventures have been very
positive. Some have been better than others, but we have been able
to compound our growth and continue to achieve a rate of return
that sets us apart from most of our competitors.

Our target return on capital continues to be 15% after tax—a
challenging goal in an interest rate environment such as the current
one. While it is a goal that was somewhat easier to earn when
the risk-free rate of return was substantially higher, we remain
focused on delivering superior value creation to our shareholders.

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We believe this is still an attainable goal with our current revised
portfolio structure. We recognize that trade-offs must occur to
achieve this return in the current economic environment. We do not
want to change our risk profile, but we do have significantly more
liquidity than we need. Thus, we can give up a little liquidity and
some short-term predictability in our quarterly returns to improve
our current return on equity. We expect that in spite of the current
uncertainty in the market, we can achieve our ROE goal.

Insurance companies make money through assuming underwriting
risk with what is hopefully a margin of profitability. Achieving
underwriting profitability is the mark of a fine insurance company.
Insurers also make money by investing their capital, reserves for
future loss payments, and premiums that are not yet earned. How
well a company invests this money is a significant determinant of its
level of profitability. It is critical to understand that most of these
funds are fiduciary funds and the investing risk must always be made
with the clear knowledge that the money might be called upon for
claim payments with little notice.

Satisfactory returns in the current investment environment are
extraordinarily difficult to attain. The risks related to potential
inflation and rising interest rates require great care in building a
fixed income portfolio with an appropriate balance of risk and
return. One has to be careful that the duration and quality of
securities does not exceed the exposure inherent with one’s

liabilities. The issue is to always try to attain the highest available
interest rate while maintaining the appropriate quality. At the
same time, owning longer-term securities creates greater exposure
to the risk of a market value decline as inflation pushes up rates.
Thus, the investment returns available might not result in
satisfactory overall risk-adjusted returns for our shareholders. We
therefore have rebalanced our portfolio to include real estate and
private equity components. We believe that the change in our
investment strategy will give us substantially higher, although
somewhat more variable, returns. We do this without increasing
our exposure to rising interest rates.

Our results in recent years have demonstrated our ability to
perform well in a low interest rate environment. We have increased
our focus on underwriting profits and worked diligently to keep
expenses at an appropriate level. Without giving up the autonomy
of our operating units that makes our Company so unique, our
structure has been adjusted to provide enhanced opportunities
to process business more efficiently. We have examined the true
costs of insurance protection that we deliver to our customers,
including the frictional costs that might not create value for the
people who wish to ameliorate risk. The current world requires
us to use technology and focus on transparency to deliver value to
our customers. We need to be conscious of the value proposition
put forward in our increasingly competitive world.

YEARS OF CONSECUTIVE
DIVIDEND PAYMENTS

INDEPENDENT
OPERATING UNITS

C E L E B R A T I N G F I F T Y Y E A R S

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The one common characteristic that existed then
and remains in place today is the goal to deliver the
best possible risk-adjusted return.

Each day new products and methods of distribution are developed.
New technology makes pricing and risk management more subject
to automated analytical tools, attaining greater accuracy. It is just
such a world where our Company, which is large enough to have
resources but small enough to be nimble, can prosper.

The world is no longer based only on the laws of large numbers
and mass markets, but it is more focused on predictive models
and better data analytics. Products are designed to meet the
specialized coverage needs of specialized risks and types of
businesses that have unique exposures. The exposures that come
about in this ever more complex world require more expertise,
as well as distribution that provides real customer knowledge.
The pace of change is accelerating. The value of knowledge
is increasing. Customized service and products—not the old
one-size-fits-all—is the current world.

The past several years have borne out these changes. We have
been able to achieve better returns without increasing our risk by
using new tools and building better old ones. Based on the past
year and looking toward our expectations for the current year,
we are optimistic that our investment returns and our overall
returns will prove to meet or exceed our targets.

None of this could be accomplished without the support
and dedication of our employees, the relationships with our
outstanding agents and brokers and the advice of our Board of

Directors. The past fifty years have built a good foundation for
an even brighter future.

We have this bright future only because of people who have
been present over these past fifty years. There were many who
went out of their way to assist a young man who worked hard but
did not realize how much help he would require. I was a good
investor but needed capital.

In the summer between my first and second year at Harvard
Business School, I worked at Fidelity Management and Research,
spending much time doing projects for Ned Johnson, the president
of this giant of the mutual fund industry. We got along well, and he
allowed me to consult during the school year. He planned to have
Fidelity buy 33% of my new company for $25,000. His lawyers
explained why Fidelity could not do that. When Ned called me
into his office to deliver the bad news that his lawyers had advised
him it was not appropriate for Fidelity to make the investment, he
handed me a Fidelity check for $25,000. He said he knew I was
counting on the money, so I should consider it a consulting fee.
I learned a lot from that experience—if you want to do what you
promised, there almost always is a way.

I was fortunate to have had similar experiences with important and
influential people who always chose the helping hand approach
to life. John Gutfreund, the managing partner at Salomon Bros.,
stepped up to provide essential financing when his firm did not

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The past fifty years have built a
good foundation for an even brighter future.

fully place a private stock offering. Salomon wrote their own
check in order to complete the placement. There were many
people like that, who actually did what they said.

There are many other individuals who deserve special mention.
The list is very long, and unfortunately I have limited space. I am
fortunate to have had two directors for an exceedingly long time.
The first is Jack Nusbaum, my long-time friend and one of the
original directors of our Company. He has put up with me for over
fifty years and much of our success is a result of his advice. The
second is Mark Shapiro, a director for 43 years who started out
providing investment banking advice and has been a wonderful
sounding board over these many years. He has always been willing
to step back and improve our perspective on the issues.

When I examine these years, and reflect on the bumps in the road,
I recall how I used to tell my family that they had to understand
the demands of the business, because the business had no
ability to understand. The result was incredible tolerance and
patience from all my children—Lisa, Rob and Lauren. My wife,
Marge, who was my first secretary, was a real trooper and never
complained about late nights or dinners alone. She was always
there, supportive and cheering.

Rob, who is now CEO, is clearly the person who I believe can
carry on the enterprise with the same character and culture that
allows us to be the outstanding performer our shareholders have
grown to expect. He has taken on the job with over twenty years
of experience and a demonstrated desire and ability to lead the
Company in this complex world. I am confident in his abilities.

This annual report contains pictures of all our employees. Each
of them makes an important contribution to the ongoing success
of our enterprise. Our Company can only be as good as the sum
of the people who work within the enterprise. We strive to be the
very best, and if we get there, it is a function of the efforts of this
team of people. Thank you all for the first fifty years.

William R. Berkley

Executive Chairman

C E L E B R A T I N G F I F T Y Y E A R S

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Investments

Over the past few years, we have shortened the duration
of our fixed-income portfolio to 3.1 years to manage
the yield curve as well as the impact of potential inflation.
These changes have reduced the potential impact
of mark-to-market on our portfolio and positioned us
to take advantage of rising interest rates. In addition,
due to the prolonged low interest rate environment, we
have allocated a portion of our portfolio to investments
designed to generate capital gains.

BREAKDOWN OF FIXED MATURITY SECURITIES
(including cash)

33%

14%

29%

■ State and Municipal Bonds
■ Corporate Bonds
■ Asset-backed Securities
■ Mortgage-backed Securities
■ Foreign Bonds
■ Cash and Cash Equivalents
■ U.S. Government and Government Agency Bonds

INVESTMENT DATA

(Dollars in millions)

Cash and invested assets:

Invested assets

Cash and cash equivalents

Total

Net investment income

Net realized gains on investment sales

2015

2016

$15,351

$16,650

$764

$795

$16,115

$17,445

$513

$126

$564

$285

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Segment Overview

Each of our business segments — Insurance and
Reinsurance — comprises individual operating units that
serve a market defined by geography, products, services,
or types of customers. Our growth is based on meeting the
needs of customers, maintaining a high-quality balance
sheet, and allocating capital to our best opportunities.

We combine capital with outstanding people and
wrap it all in a culture that is focused on optimizing
risk-adjusted returns. It creates a permanent
competitive advantage that can only be acquired
over many years with consistent discipline.

C E L E B R A T I N G F I F T Y Y E A R S

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2016 Segment Data

Insurance
Assets

Reserves

Reinsurance
Assets

Reserves

2016 ASSETS AND RESERVES
(dollars in billions)

$8.2

$19.1

$2.5

$1.4

2016 REVENUES

2016 PRE-TAX INCOME

90%

10%

92%

■ Insurance ■ Reinsurance ■ Insurance ■ Reinsurance

W. R . B E R K L E Y C O R P O R A T I O N | 2 0 1 6 A N N U A L R E P O R T

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1 6

Comparison of
Cumulative Total Returns

W. R. Berkley Corporation S&P 500® Index S&P 500® Property & Casualty Insurance Index

Assumes initial investment of $100 on January 01, 2012, 2007, and 2002, respectively, with dividends reinvested.

$800

$700

$600

$500

$400

$300

15 YEAR

$200

$100

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 2012 2013 2014 2015 2016

DEC. 01 DEC. 02 DEC. 03 DEC. 04 DEC. 05 DEC. 06 DEC. 07 DEC. 08 DEC. 09 DEC. 10 DEC. 11 DEC. 12 DEC. 13 DEC. 14 DEC.15 DEC.16

S&P 500® Index

W. R. Berkley Corporation

$100.00 $111.71 $149.11 $202.57 $308.39 $336.78 $292.79 $307.18 $246.64 $276.86 $351.20 $398.92 $462.88 $562.91 $606.60 $756.71
$100.00
S&P 500® Property and Casualty Insurance Index $100.00

$89.75 $113.50 $130.59 $133.35 $154.69 $204.79 $232.83 $236.05 $264.28

$98.81 $110.87 $121.09 $120.78 $145.07 $200.62 $232.20 $254.33 $294.28

$88.98 $112.46 $124.20 $142.97 $161.31 $140.02

$77.90 $100.24 $111.15 $116.61 $135.03 $142.45

$300

$250

$200

$150

$100

$50

10 YEAR

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

W. R. Berkley Corporation

S&P 500® Index

DEC. 06 DEC. 07 DEC. 08 DEC. 09 DEC. 10 DEC. 11 DEC. 12 DEC. 13 DEC. 14 DEC. 15 DEC. 16

$100.00

$86.94

$91.21

$73.24

$82.21 $104.28 $118.45 $137.44 $167.15 $180.12 $224.69

$100.00 $105.49

$66.46

84.05

$96.71

$98.76 $114.56 $151.66 $172.43 $174.81 $195.72

S&P 500® Property and Casualty Insurance Index

$100.00

$86.80

$61.25

$68.73

75.07

$74.87

$89.93 $124.37 $143.94 $157.66 $182.42

$300

$250

$200

$150

$100

$50

5 YEAR

2011 2012 2013 2014 2015 2016

W. R. Berkley Corporation

S&P 500® Index

S&P 500® Property and Casualty Insurance Index

DEC. 11 DEC. 12 DEC. 13 DEC. 14 DEC. 15 DEC. 16

$100.00 $113.59 $131.80 $160.28 $172.72 $215.46

$100.00 $116.00 $153.57 $174.60 $177.01 $198.18

$100.00 $120.11 $166.10 $192.25 $210.57 $243.65

The S&P 500® Property and Casualty Insurance Index consists of Allstate Corporation, Chubb, Ltd., Cincinnati Financial Corporation, Progressive Corporation, The Travelers Companies, Inc., and XL Group, plc.

C E L E B R A T I N G F I F T Y Y E A R S

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1 7

C E L E B R A T I N G

Our People
for

YEARS

W. R. Berkley Corporation is made up of
dedicated, detail-oriented people committed to
delivering the highest quality insurance products
and services to specialized markets worldwide.
We believe that every person in the organization
is important and every task they accomplish
makes a difference in our results.

Everything Counts, Everyone Matters ®

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WE ARE
Dedicated
Responsible
Strategic
Knowledgeable
& Caring

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2 5

DEDICATED

We are committed to delivering superior risk-adjusted
returns to our shareholders by providing outstanding
products and services to our customers.

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3 1

RESPONSIBLE

We have a clear sense of responsibility to our shareholders,
our customers and the society in which we live and work.

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3 7

STRATEGIC

We make thoughtful decisions every day in every aspect of our
business that build value over the long term and prepare us for
whatever challenges and opportunities the future may hold.

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4 3

KNOWLEDGEABLE

We believe that knowledge and expertise in underwriting,
risk management, claims handling and investing
is the best way to deliver value to our shareholders,
customers and all other stakeholders.

W. R . B E R K L E Y C O R P O R A T I O N | 2 0 1 6 A N N U A L R E P O R T

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4 9

CARING

We achieve success by working together with shared
values for a common goal in a way that allows us to make
a positive contribution to our society.

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W. R. Berkley Corporation
FORM 10-K

2 0 1 6 A N N U A L R E P O R T

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

(Mark One)

[x]

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended
December 31, 2016
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
(State or other jurisdiction
of incorporation or organization)
475 Steamboat Road, Greenwich, CT
(Address of principal executive offices)

22-1867895
(I.R.S. Employer
Identification Number)
06830
(Zip Code)

Registrant’s telephone number, including area code: (203) 629-3000

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

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, par value $.20 per share
5.625% Subordinated Debentures due 2053
5.9% Subordinated Debentures due 2056
5.75% Subordinated Debentures due 2056

New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes  No 
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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K. 

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

(Do not check if a smaller reporting company)

Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

The aggregate market value of the voting and non-voting common stock held by non-affiliates (computed by reference to the
price at which the common stock was last sold) as of the last business day of the registrant’s most recently completed second
fiscal quarter was $5,857,187,550.

Number of shares of common stock, $.20 par value, outstanding as of February 22, 2017: 121,213,179

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within
120 days after December 31, 2016, are incorporated herein by reference in Part III.

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Page

101

107

SAFE HARBOR STATEMENT

ITEM

PART I

BUSINESS

1A. RISK FACTORS

1B. UNRESOLVED STAFF COMMENTS

PROPERTIES

LEGAL PROCEEDINGS

4. MINE SAFETY DISCLOSURES

PART II

ITEM

5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER

ITEM

EX-21

EX-23

EX-31.1

EX-31.2

EX-32.1

EX-101

PURCHASES OF EQUITY SECURITIES

SELECTED FINANCIAL DATA

7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

9A. CONTROLS AND PROCEDURES

9B. OTHER INFORMATION

PART III

10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

11. EXECUTIVE COMPENSATION

12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED

STOCKHOLDER MATTERS

13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

16. FORM 10-K SUMMARY

LIST OF COMPANIES AND SUBSIDIARIES

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) /15d-14(a)

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) /15d-14(a)

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
INSTANCE DOCUMENT

SCHEMA DOCUMENT

CALCULATION LINKBASE DOCUMENT

LABELS LINKBASE DOCUMENT

PRESENTATION LINKBASE DOCUMENT

DEFINITION LINKBASE DOCUMENT

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SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. This document may contain
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-
looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “potential,” “continued,”
“may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative
version of those words or other comparable words. Any forward-looking statements contained in this report including statements
related to our outlook for the industry and for our performance for the year 2017 and beyond, are based upon our historical
performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be
regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. They are
subject to various risks and uncertainties, including but not limited to:

•

the cyclical nature of the property casualty industry;

the impact of significant competition, including new alternative entrants to the industry;

the long-tail and potentially volatile nature of the insurance and reinsurance business;

product demand and pricing;

• claims development and the process of estimating reserves;

•

investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities,
including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable,
investment funds, including real estate, merger arbitrage, energy related and private equity investments;

the effects of emerging claim and coverage issues;

the uncertain nature of damage theories and loss amounts;

natural and man-made catastrophic losses, including as a result of terrorist activities;

general economic and market activities, including inflation, interest rates and volatility in the credit and capital
markets;

the impact of conditions in the financial markets and the global economy, and the potential effect of legislative,
regulatory, accounting or other initiatives taken in response to it, on our results and financial condition;

foreign currency and political risks (including those associated with the United Kingdom's expected withdrawal
from the European Union, or "Brexit") relating to our international operations;

our ability to attract and retain key personnel and qualified employees;

continued availability of capital and financing;

the success of our new ventures or acquisitions and the availability of other opportunities;

the availability of reinsurance;

our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2015 ("TRIPRA");

the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us;

other legislative and regulatory developments, including those related to business practices in the insurance industry;

credit risk relating to our policyholders, independent agents and brokers;

changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies;

the availability of dividends from our insurance company subsidiaries;

potential difficulties with technology and/or data security;

the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards;
and

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•

other risks detailed in this Form 10-K and from time to time in our other filings with the Securities and Exchange
Commission (“SEC”).

We describe these risks and uncertainties in greater detail in Item 1A, Risk Factors. These risks and uncertainties could cause
our actual results for the year 2017 and beyond to differ materially from those expressed in any forward-looking statement we
make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Our future
financial performance is dependent upon factors discussed elsewhere in this Form 10-K and our other SEC filings. Forward-
looking statements speak only as of the date on which they are made.

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PART I

ITEM 1. BUSINESS

W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United

States and operates worldwide in two segments of the property casualty insurance business:

• Insurance - commercial insurance business, including excess and surplus lines and admitted lines, throughout the United States,

as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia
and Australia; and

• Reinsurance - reinsurance business on a facultative and treaty basis, primarily in the United States, United Kingdom,

Continental Europe, Australia, the Asia-Pacific region and South Africa.

Commencing with the first quarter of 2016, the Company changed the aggregation of its reported segments. Operating units in
the Insurance-Domestic segment and Insurance-International segment, previously reported separately, were combined into the Insurance
segment. The segment disclosures for prior periods have been revised to be consistent with the new reportable business segment
presentation.

Our two reporting segments are composed of individual operating units that serve a market defined by geography, products,
services or types of customers. Each of our operating units is positioned close to its customer base and participates in a niche market
requiring specialized knowledge about a territory or product. This strategy of decentralized operations allows each of our units to
identify and respond quickly and effectively to changing market conditions and local customer needs, while capitalizing on the benefits
of centralized capital, investment and reinsurance management, and corporate actuarial, financial, enterprise risk management and legal
staff support.

Our business approach is focused on meeting the needs of our customers, maintaining a high quality balance sheet, and

allocating capital to our best opportunities. New businesses are started when opportunities are identified and when the right talent and
expertise are found to lead a business. Of our 54 operating units, 47 have been organized and developed internally and seven have been
added through acquisition.

Net premiums written, as reported based on United States generally accepted accounting principles (“GAAP”), for each of our
operating segments for each of the past five years were as follows:

(In thousands)

Net premiums written:

Insurance

Reinsurance

Total

2016

2015

2014

2013

2012

Year Ended December 31,

$ 5,775,913 $ 5,591,397 $ 5,345,663 $ 4,750,572 $ 4,234,342
664,197
$ 6,423,913 $ 6,189,515 $ 5,996,947 $ 5,500,173 $ 4,898,539

648,000

651,284

598,118

749,601

Percentage of net premiums written:

Insurance

Reinsurance

Total

2016

2015

2014

2013

2012

Year Ended December 31,

89.9 %
10.1

90.3 %
9.7

89.1 %
10.9

86.4 %
13.6

100.0 %

Twenty-eight of our twenty-nine insurance company subsidiaries rated by A.M. Best Company, Inc. ("A.M. Best")

have ratings of A+ (Superior) (the second highest rating out of 15 possible ratings), and one is rated A (Excellent) (the third highest
rating). A.M. Best's ratings are based upon factors of concern to policyholders, insurance agents and brokers and are not directed toward
the protection of investors. A.M. Best states: “The Financial Strength Rating opinion addresses the relative ability of an insurer to meet
its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts and do not address any other
risk.” A.M. Best reviews its ratings on a periodic basis, and its ratings of the Company's subsidiaries are therefore subject to change.

Our twenty-four insurance company subsidiaries rated by Standard & Poor's (“S&P”) have financial strength ratings of A+ (the

seventh highest rating out of twenty-seven possible ratings).

Our Moody's ratings are A2 for Berkley Insurance Company, Berkley Regional Insurance Company and Admiral Insurance

Company (the sixth highest rating out of twenty-one possible ratings).

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The following sections describe our reporting segments and their operating units in greater detail. These operating units
underwrite on behalf of one or more affiliated insurance companies within the group. Certain operating units are identified by us herein
for descriptive purposes only and are not legal entities. Unless otherwise indicated, all references in this Form 10-K to “W. R. Berkley,”
“we,” “us,” “our,” the “Company” or similar terms refer to W. R. Berkley Corporation together with its subsidiaries and operating units.
W. R. Berkley Corporation is a Delaware corporation formed in 1970.

Insurance

Our U.S.-based operating units underwrite commercial insurance business primarily throughout the United States, although

many units offer coverage globally, focusing on the following general areas:

Excess & Surplus Lines: A number of our operating units are dedicated to the U.S. excess and surplus lines market. They serve

a highly diverse group of customers that often have complex risk or unique exposures that typically fall outside the underwriting
guidelines of the standard insurance market. Lines of business underwritten by our excess and surplus lines operating units include
premises operations, commercial automobile, property, products liability and professional liability lines. Products are generally
distributed through wholesale agents and brokers.

Industry Specialty: Certain other operating units focus on providing specialty coverages to customers within a particular

industry that are best served by underwriters and claims professionals with specialized knowledge of that industry. They offer multiple
lines of business with policies tailored to address these unique exposures, often with the flexibility of providing coverages on either an
admitted or a non-admitted basis in the U.S. Each operating unit delivers its products through one or more distribution channels,
including retail and wholesale agents, brokers, and managing general agents (MGAs), depending on the customer and the particular
risks insured.

Product Specialty: Other operating units specialize in providing specific lines of insurance coverage, such as workers’

compensation or professional liability, to a wide range of customers. They offer insurance products, analytical tools and risk
management services such as loss control and claims management that enable clients to manage their risk appropriately. Business is
typically written on an admitted basis, although some units may offer non-admitted products in the U.S. and offer products
internationally. Independent agents and brokers are the primary means of distribution.

Regional: Certain operating units offer standard insurance products and services focused on meeting the specific needs of a

geographically differentiated customer base. Key clients of these units are small-to-midsized businesses. These regionally focused
operating units provide a broad array of commercial insurance products to customers primarily in 45 states and the District of Columbia
and have developed expertise in niches that reflect local economies. They are organized geographically in order to provide them with
the flexibility to adapt quickly to local market conditions and customer needs.

In addition, through our non-U.S. insurance operating units, we write business in more than 60 countries worldwide, with
branches or offices in 20 locations outside the United States, including the United Kingdom, Continental Europe, South America,
Canada, Mexico, Scandinavia, Asia and Australia. In each of our operating territories, we have built decentralized structures that allow
products and services to be tailored to each regional customer base. Our businesses are managed by teams of professionals with
expertise in local markets and knowledge of regional environments.

In addition to providing insurance products, certain operating units also provide a wide variety of fee-based services, including

claims, administrative and consulting services.

Operating units comprising the Insurance segment are as follows:

Acadia Insurance is a Northeast regional property casualty underwriter offering a broad portfolio of products exclusively
through local independent agents in Connecticut, Maine, Massachusetts, New Hampshire, New York and Vermont. In addition to its
general offerings, Acadia has specialized expertise in insuring regional industries such as construction, lumber and fishing.

Admiral Insurance provides excess and surplus lines coverage for commercial risks that generally consist of hard-to- place,
specialized risks that involve moderate to high degrees of hazard. Its lines of business include general liability, professional liability,
property, and excess and umbrella coverage. Admiral's professional liability and program operations include special coverages for
technology, ambulatory surgery centers, chiropractors and concierge physicians. Its products are distributed exclusively by wholesale
brokers.

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American Mining Insurance Group specializes in mono-line workers’ compensation coverage for mining and mining related
industries throughout the United States and for high hazard risks in select states.

Berkley Accident and Health underwrites accident and health insurance and reinsurance products in four primary areas:
medical stop loss, managed care, special risk and group captive. It has a diversified product and service portfolio serving a range of
clients from small employers, health care organizations, and membership groups to Fortune 500 companies.

Berkley Agribusiness Risk Specialists offers insurance for larger commercial risks across the United States involved in the

supply, storage, handling, processing and distribution of commodities related to the agriculture and food industries.

Berkley Alliance Managers specializes in professional liability for the design professional, construction professional and

certified public accounting industries. The Berkley Design Professional division specializes in architects, engineers and consultants. In
addition to professional liability, the Berkley Construction Professional division provides pollution liability and protective coverages to
contractors and owners across all forms of non-environmental construction.

Berkley Aviation offers a wide range of aviation insurance products on a global basis, including coverage for airlines, airplanes,

helicopters, miscellaneous general aviation operations, non-owned aircraft, fixed-base operations, control towers, airports and other
specialized niche programs. In the U.S., it places its business on an admitted and non-admitted basis nationwide.

Berkley Canada underwrites specialty, casualty and surety lines of business on behalf of the Canadian branch of Berkley
Insurance Company. It specializes in commercial casualty and professional liability, and offers a broad portfolio of risk products that
include commercial general liability, umbrella, professional liability, directors and officers, commercial property and surety, in addition
to niche products for specific industries such as technology, life sciences and travel.

Berkley Custom Insurance focuses on the excess casualty insurance market and offers umbrella liability, pollution liability,

excess liability, construction wrap-ups and completed operations coverages to wholesalers, retailers, manufacturers, insurance
companies, financial institutions and construction companies.

Berkley Cyber Risk Solutions focuses on insurance and risk management products that respond to the changing cyber security
vulnerabilities of organizations around the world. It offers specialty commercial insurance coverages on a worldwide basis to clients of
all sizes.

Berkley FinSecure serves the insurance needs of financial institutions, credit unions, mortgage lenders, mortgage servicers and
trust managers. It offers a comprehensive range of property, casualty, professional liability, and specialty lines insurance products and
loss control services, including financial institution-specific commercial package policies, workers' compensation, umbrella, commercial
auto, management liability and crime coverages, and financial institution bonds.

Berkley Fire & Marine offers a broad range of preferred inland marine and related property risks and services to customers
throughout the United States, both regionally and nationwide. Products are distributed through independent agents and brokers.

Berkley Global Product Recall Management provides worldwide insurance protection and technical assistance to help clients
with the prevention, management and indemnification of product recall and contamination events.

Berkley Healthcare Professional provides customized, comprehensive professional liability solutions for the full spectrum of

healthcare providers.

Berkley Latinoamérica is a leading provider of property, casualty, automobile, surety, group life and workers' compensation

products and services in its operating territories of Argentina, Brazil, the Caribbean, Colombia, Mexico and Uruguay.

Berkley Life Sciences offers a comprehensive spectrum of property, casualty, and specialty products such as professional and
management liability to the life sciences industry on a global basis, including both primary and excess liability coverages. It serves
pharmaceutical and biotech companies, medical device companies, dietary supplement companies, medical and research related
software developers, contract research and manufacturing organizations, research institutions and organizations, and other related
businesses.

Berkley Medical Excess insures healthcare organizations such as hospitals and clinics that retain a portion of their risk exposure
through a self-funded mechanism and seek to maximize the effectiveness and efficiency of their excess risk financing program.

Berkley Mid-Atlantic Group provides commercial property casualty coverages to a wide variety of businesses in Delaware, the
District of Columbia, Maryland, Ohio, Pennsylvania, and Virginia. Focusing on middle market accounts, it complements its standard
writings with specialized products in areas such as construction.

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Berkley Net Underwriters focuses on small and medium-sized commercial risks, using a web-based system to allow producers
to quote, bind and service workers' compensation insurance products on behalf of W. R. Berkley Corporation member companies.
Berkley Net Underwriters also manages W. R. Berkley's assigned risk servicing carrier operations.

Berkley North Pacific provides local underwriting, claims and risk management services from its home office in Seattle,
Washington and branch offices in Boise, Idaho, Spokane, Washington and Salt Lake City, Utah. It operates with a select group of agents
in Idaho, Montana, Oregon, Utah and Washington to sell and service property and casualty policies for larger middle-market standard
businesses and specialty lines, such as construction.

Berkley Offshore Underwriting Managers is a specialist global underwriter of energy and marine risks. Its three divisions
provide specialty insurance products in the energy upstream, energy liability and marine sectors.

Berkley Oil & Gas provides property casualty products and risk services to the United States energy sector. Its customer base
includes risks of any size that work in the oil patch, including operators, drillers, geophysical contractors, well-servicing contractors,
and manufacturers/distributors of oil field products, as well as those in the renewable energy sector.

Berkley One is expected to launch its products in the latter half of 2017 and will offer specialty personal insurance to
sophisticated individuals and families, supported by world class risk and claim management.

Berkley Professional Liability specializes in professional liability insurance for publicly-traded and private entities based on a

worldwide basis. Its liability coverages include directors and officers, fiduciary, employment practices, and sponsored insurance agents.
Berkley Transactional, a division of Berkley Professional Liability, underwrites a full suite of transactional insurance products,
including representations and warranties insurance, tax opinion insurance and contingency liability insurance.

Berkley Program Specialists is a program management company offering both admitted and non-admitted insurance support on
a nationwide basis for commercial casualty and inland marine program administrators with specialized insurance expertise. Its book is
built around blocks of homogeneous business, or programs, allowing for efficient processes, effective oversight of existing programs
and sound implementation of new programs.

Berkley Public Entity specializes in providing excess coverage and services to individual governmental and scholastic entities
and intergovernmental risk sharing groups. Products include general liability, automobile liability, law enforcement liability, public
officials and educator's legal liability, employment practices liability, incidental medical, property and crime.

Berkley Regional Specialty provides excess and surplus lines coverage on a national basis to small to medium-sized insureds
with low to moderate insurance risk. Its product lines include general liability, liquor liability and some property and inland marine
coverage. It serves a limited distribution channel consisting of select W. R. Berkley Corporation member company agents.

Berkley Risk Administrators provides at-risk and alternative risk insurance program management services for a broad range of

groups and individuals including public entity pools, professional associations, captives and self-insured clients. As a third party
administrator, it manages workers’ compensation, liability and property claims nationwide.

Berkley Select specializes in underwriting professional liability insurance with a particular emphasis on large law firms,
accounting firms and medical institution facilities. Its products are distributed nationwide through a limited number of brokers.

Berkley Southeast offers a wide array of commercial lines products in six southeastern states: Alabama, Georgia, Mississippi,
North Carolina, South Carolina and Tennessee.

Berkley Specialty Underwriting Managers has two underwriting divisions. Its entertainment and sports division underwrites

property casualty insurance products, both on an admitted and non-admitted basis, for the entertainment industry and sports-related
organizations. The environmental division underwrites specialty insurance products for environmental customers such as contractors,
consultants and owners of sites and facilities.

Berkley Surety provides a broad array of surety products for contract and commercial surety risks in the U.S. and Canada,
including specialty niches such as environmental and secured credit for small contractors, through an independent agency and broker
platform across a network of 16 field offices.

Berkley Technology Underwriters provides a broad range of first and third-party insurance programs for technology exposures
and technology industries on both a local and global basis.

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Carolina Casualty Insurance provides commercial insurance products and services to the transportation industry with an
emphasis on intermediate and long-haul trucking and various classes of business and public automobile coverage. It underwrites on an
admitted basis in all 50 states and the District of Columbia.

Clermont Specialty Managers provides package insurance programs for high-end cooperative, condominium, and quality rental
apartment buildings and upscale restaurants in the New York, New Jersey, Chicago and Washington, D.C. metropolitan markets, as well
as other select markets.

Continental Western Group is a midwest regional property and casualty insurance operation based in Des Moines, Iowa,
providing underwriting and risk management services to a broad array of regional businesses in thirteen midwest states. In addition to
its generalist portfolio, Continental Western offers specialty underwriting solutions for diversified agriculture, construction, light
manufacturing, transportation, volunteer fire departments, rural utilities and public entities.

Gemini Transportation is a national provider of excess liability insurance for various domestic surface transportation
businesses. It underwrites liability insurance policies for the railroad industry as well as excess liability policies for the trucking, busing
and other industries that use rubber-wheeled vehicles for over-the-road use.

Intrepid Direct offers business coverages to franchise restaurants on a direct basis.

Key Risk is a premier provider of workers' compensation insurance and third party administrative services. It focuses on middle
market and national accounts in several niches that appreciate expertise and exceptional service. The unit operates three business units;
one focused on middle market accounts located primarily in the mid-Atlantic and southeastern United States, one focused on national
temporary staffing and United States Longshoreman & Harbor Act (USL&H) specialty programs and one focused on self-insured
customers. Its products are distributed by a select group of independent retail agents and wholesale brokers located through the United
States.

Lloyd's Syndicate 2791 Participation represents the Company's minority participation in a Lloyd's syndicate that writes a broad

range of mainly short-tail classes of business.

Midwest Employers Casualty provides excess workers' compensation insurance products to individual employers, groups and
workers' compensation insurance companies across the United States. Its workers' compensation excess of loss products include self-
insured excess of loss coverages, large deductible policies and reinsurance. Through its relationship with Berkley Net Underwriters,
Midwest Employers Casualty also offers multi-state coverage for group self-insureds. It has developed sophisticated, proprietary
analytical tools and risk management services that help its insureds lower their total cost of risk.
Monitor Liability Managers provides executive and professional liability insurance to small to middle-market risks on a
nationwide basis. Its primary professional liability products are management liability, employment practices and fiduciary coverages for
private companies and nonprofit organizations, and errors and omissions policies for accounting and law firms.

Nautilus Insurance Group insures excess and surplus lines risks for small to medium-sized commercial risks with low to
moderate susceptibility to loss. It writes commercial excess and surplus lines business nationwide and admitted lines commercial
business in a limited number of states. A substantial portion of Nautilus' business is written through its close, long-standing network of
general agents, who are chosen on a highly selective basis.

Preferred Employers Insurance focuses exclusively on workers' compensation products and services for businesses in
California. It serves over 12,000 customers covering a broad spectrum of industries throughout the state.

Riverport Insurance Services provides property casualty insurance coverages to human services organizations, including
nonprofit and for-profit organizations, public schools and sports and recreational organizations. Riverport also insures special events.
Its product offerings include traditional primary coverages and risk purchasing groups, as well as alternative market solutions for clients
who wish to retain a larger share of their own risk.

Union Standard offers preferred commercial property and casualty insurance products and services to a wide range of small to
medium size commercial entities through independent agents in Arizona, Arkansas, New Mexico, Oklahoma and Texas. Union
Standard's strategy is built around relationships and service.

Vela Insurance Services specializes in commercial casualty insurance on an excess and surplus lines basis. Its primary focus is
on general liability insurance for construction, manufacturing and general casualty clients as well as products liability and miscellaneous
professional liability coverages distributed through wholesale insurance brokers.

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Verus Underwriting Managers offers general liability, professional liability and property coverages for small to mid-sized
commercial risks in the excess and surplus lines insurance market through a select group of appointed wholesale brokers and agents.

W. R. Berkley Europe is comprised of specialist operating units offering a focused range of insurance products to markets in
Continental Europe and Nordic countries.

W. R. Berkley Insurance Asia underwrites specialty commercial insurance coverages to clients in North Asia and Southeast
Asia through offices in Hong Kong and Singapore.

W. R. Berkley Insurance Australia underwrites general insurance business in Australia, including professional indemnity

insurance for companies of all sizes.

W / R / B Underwriting provides a broad range of leading insurance products to the European marketplace, with a
concentration in specialist classes of business including property, professional indemnity, crisis management, aviation, personal accident
and asset protection.

The following table sets forth the percentage of gross premiums written by each Insurance operating unit:

Year Ended December 31,

2016

2015

2014

2013

2012

Acadia Insurance
Admiral Insurance

American Mining Insurance Group

Berkley Accident and Health

Berkley Agribusiness Risk Specialists

Berkley Alliance Managers

Berkley Aviation

Berkley Canada

Berkley Custom Insurance

Berkley Cyber Risk Solutions

Berkley FinSecure

Berkley Fire & Marine

Berkley Global Product Recall Management

Berkley Healthcare Professional

Berkley Latinoamérica

Berkley Life Sciences

Berkley Medical Excess

Berkley Mid-Atlantic Group

Berkley Net Underwriters

Berkley North Pacific

Berkley Offshore Underwriting Managers

Berkley Oil & Gas

Berkley One

Berkley Professional Liability

Berkley Program Specialists

Berkley Public Entity

Berkley Regional Specialty

Berkley Risk Administrators

Berkley Select

Berkley Southeast

Berkley Specialty Underwriting Managers

Berkley Surety

Berkley Technology Underwriters

Carolina Casualty Insurance

Clermont Specialty Managers

6.7 %
5.5
0.7
4.4
1.1
1.5
1.0
0.8
2.7
—
0.9
0.4
0.2
0.2
4.1
0.8
0.8
1.2
7.9
1.5
1.1
2.7
—
1.5
1.2
0.5
0.3
0.2
1.6
2.0
6.1
1.2
0.6
0.6
1.3

6.7 %
4.9
0.8
3.7
0.9
0.7
1.2
0.6
2.8
—
1.0
0.3
—
—
4.7
0.8
0.9
1.8
4.0
1.7
1.4
3.2
—
1.7
1.2
0.4
0.3
3.9
1.6
2.3
5.7
1.2
0.5
1.2
1.3

7.1 %
5.3
0.7
2.9
0.9
0.1
0.8
0.5
2.4
—
0.7
0.2
—
—
4.6
0.9
0.8
2.4
3.7
1.6
1.7
3.5
—
1.8
1.2
0.4
0.3
3.9
1.8
2.5
5.3
1.1
0.4
1.8
1.3

6.9 %
4.9
0.7
2.5
0.9
—
0.8
0.7
2.3
—
0.7
—
—
—
5.1
0.9
0.7
3.6
3.4
1.5
1.9
3.2
—
1.1
1.2
0.3
0.3
4.1
2.3
—
5.5
1.1
0.3
2.0
1.3

7.1 %
5.1
0.7
3.0
0.9
—
1.2
0.7
0.6
—
0.7
—
—
—
5.4
0.7
0.7
4.0
2.9
1.5
1.8
2.7
—
1.0
1.5
0.2
0.3
4.0
2.4
—
6.5
1.1
0.1
1.9
1.3

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Continental Western Group

Gemini Transportation

Intrepid Direct

Key Risk

Lloyd's Syndicate 2791 Participation

Midwest Employers Casualty

Monitor Liability Managers

Nautilus Insurance Group

Preferred Employers Insurance

Riverport Insurances Services

Union Standard

Vela Insurance Services

Verus Underwriting Managers

W. R. Berkley Europe

W. R. Berkley Insurance Asia

W. R. Berkley Insurance Australia

W/R/B Underwriting

Other

Total

4.0
1.8
—
2.6
0.5
2.4
2.3
4.9
2.6
0.7
2.6
3.9
0.9
1.7
—
1.0
3.9
0.9

4.0
1.1
—
2.8
0.5
2.4
2.4
4.7
2.4
0.6
2.6
3.3
0.8
1.9
—
0.8
5.4
0.9

3.8
0.9
—
2.9
0.6
2.5
2.2
4.6
2.1
0.6
2.6
3.2
0.8
2.4
—
1.3
6.1
0.8

4.0
0.8
—
2.8
1.0
2.4
2.6
4.8
1.8
0.6
4.3
2.9
0.8
2.5
—
1.3
6.0
1.2

4.4
0.9
—
2.7
1.5
2.8
2.6
5.2
1.6
1.2
4.4
1.8
0.6
2.4
—
0.8
6.2
0.9

100.0 %

The following table sets forth percentages of gross premiums written, by line, by our Insurance operations:

Other liability
Workers' compensation

Short-tail lines (1)

Professional liability

Commercial auto

Total

Year Ended December 31,

2016

2015

2014

2013

2012

31.3 %
25.1
23.9
10.0
9.7

31.8 %
27.9
21.2
9.4
9.7

31.9 %
27.2
21.8
8.7
10.4

32.4 %
27.0
22.0
7.9
10.7

30.7 %
26.8
23.5
7.8
11.2

100.0 %

___________________
(1) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and
machinery and other lines.

Reinsurance

We provide other insurance companies and self-insureds with assistance in managing their net risk through reinsurance on

either a portfolio basis, through treaty reinsurance, or on an individual basis, through facultative reinsurance.

Operating units comprising the Reinsurance segment are as follows:

Berkley Re America provides treaty and facultative reinsurance solutions on a variety of product lines through reinsurance

brokers to companies whose primary operations are within the United States and Canada.

Berkley Re Asia Pacific provides property and casualty reinsurance to the Asia Pacific marketplace. With offices in Brisbane,
Sydney, Hong Kong and Singapore, each branch focuses on excess of loss reinsurance, targeting both property and casualty treaty and
facultative contracts, through multiple distribution channels.

Berkley Re Direct is a direct casualty facultative reinsurance underwriter serving clients through a nationwide network of
regional offices. Its facultative reinsurance products include automatic, semi-automatic and individual risk assumed reinsurance.
Berkley Re Direct also provides its customers value-added services across its lines, including underwriting, claims and actuarial
consultation.

Berkley Re UK writes international property casualty treaty accounts. Its territorial scope includes reinsured clients domiciled

in the United Kingdom, Europe, Africa, the Middle East and the Caribbean.

1001618in_10k.indd 7

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The following table sets forth the percentages of gross premiums written by each Reinsurance operating unit:

Year Ended December 31,

2016

2015

2014

2013

2012

Berkley Re America
Berkley Re America
Berkley Re UK
Berkley Re UK
Berkley Re Asia Pacific
Berkley Re Asia Pacific
Berkley Re Direct
Berkley Re Direct
Other
Other
Total
Total

67.6 %
11.4
10.6
9.7
0.7
100.0 %

64.2 %
10.8
16.4
8.6
—
100.0 %

60.4 %
11.2
21.2
7.2
—
100.0 %

52.2 %
9.1
24.9
6.5
7.3
100.0 %

54.3 %
6.9
22.1
6.2
10.5
100.0 %

The following table sets forth the percentages of gross premiums written by our Reinsurance operations:

Year Ended December 31,

2016

2015

2014

2013

2012

Casualty
Property

Total

Results by Segment

59.7 %
40.3

66.7 %
33.3

66.9 %
33.1

65.6 %
34.4

66.9 %
33.1

100.0 %

Summary financial information about our segments is presented on a GAAP basis in the following table:

(In thousands)

Insurance
Revenue

Income before income taxes

Reinsurance

Revenue

Income before income taxes

Other(1)

Revenue

Income (loss) before income taxes

Total
Revenue

Year Ended December 31,

2016

2015

2014

2013

2012

$ 6,205,921 $ 5,938,444 $ 5,665,200 $ 5,064,403 $ 4,622,579
630,139

$ 6,205,921 $ 5,938,444 $ 5,665,200 $ 5,064,403 $ 4,622,579
630,139
822,617

705,662

776,593

822,617

826,088

719,412
74,799

683,335
94,852

758,931
115,677

810,060
110,425

731,585
103,690

728,851
(978 )

584,678
(139,415 )

704,797
10,431

534,071
(117,199 )

469,390
(31,901 )

Income before income taxes
Income before income taxes
_______________________________________
_______________________________________
(1) Represents corporate revenues, corporate expenses, net investment gains and losses, and revenues and expenses from non-insurance
(1) Represents corporate revenues, corporate expenses, net investment gains and losses, and revenues and expenses from non-insurance
businesses that are consolidated for financial reporting purposes.

businesses that are consolidated for financial reporting purposes.

$ 7,654,184 $ 7,206,457 $ 7,128,928 $ 6,408,534 $ 5,823,554
701,928
$

$ 7,654,184 $ 7,206,457 $ 7,128,928 $ 6,408,534 $ 5,823,554
701,928
896,438 $
$

732,030 $

952,196 $

698,888 $

896,438 $

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The table below represents summary underwriting ratios on a GAAP basis for our segments. Loss ratio is losses and loss expenses

incurred expressed as a percentage of net premiums earned. Expense ratio is underwriting expenses expressed as a percentage of net
premiums earned. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses.
Combined ratio is the sum of the loss ratio and the expense ratio. The combined ratio represents a measure of underwriting profitability,
excluding investment income. A number in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting
profit:

Insurance
Loss ratio

Expense ratio

Combined ratio

Reinsurance
Loss ratio

Expense ratio

Combined ratio

Total
Loss ratio

Expense ratio

Combined ratio

Investments

Year Ended December 31,

2016

2015

2014

2013

2012

61.0 %
32.6

93.6 %

61.8 %
38.8

100.6 %

61.1 %
33.2

94.3 %

60.8 %
32.6

93.4 %

58.4 %
38.2

96.6 %

60.5 %
33.2

93.7 %

60.6 %
32.9

93.5 %

62.0 %
34.0

96.0 %

60.8 %
33.0

93.8 %

61.0 %
33.7

94.7 %

62.2 %
34.8

97.0 %

61.2 %
33.9

95.1 %

62.9 %
33.7

96.6 %

64.3 %
36.3

100.6 %

63.1 %
34.1

97.2 %

Investment results, before income taxes, were as follows:

Year Ended December 31,

(In thousands)

Average investments, at cost(1)

Net investment income(1)

Percent earned on average investments(1)

Net investment gains (2)

Change in unrealized investment gains (losses) (3)

2016
$ 16,730,964
564,163

2015
$ 15,970,931
512,645
$

2014
$ 15,560,335
600,885
$

2013
$ 14,848,386
544,291
$

2012
$ 14,545,371
586,763
$

3.4 %

267,005
371,716

$
$

3.2 %

92,324
$
(192,186 ) $

3.9 %

3.7 %

4.0 %

254,852
72,889

$
$

121,544
$
(399,122 ) $

10,465
135,282

_______________________________________
(1) Includes investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading

account securities sold but not yet purchased and unsettled purchases.

(2) Represents realized gains on investments not classified as trading account securities.
(3) Represents the change in unrealized investment gains (losses) for available for sale securities.

For comparison, the following are the coupon returns for the Barclays U.S. Aggregate Bond Index and the dividend returns for the

S&P 500® Index:

Barclays U.S. Aggregate Bond Index
S&P 500® Index

Year Ended December 31,

2016

2015

2014

2013

2012

3.0 %
2.4

3.0 %
2.1

3.2 %
2.1

3.1 %
2.4

3.5 %
2.5

1001618in_10k.indd 9

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The percentages of the fixed maturity portfolio categorized by contractual maturity, based on fair value, on the dates indicated, are

set forth below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay
certain obligations.

1 year or less
Over 1 year through 5 years

Over 5 years through 10 years

Over 10 years

Mortgage-backed securities

Total

Year Ended December 31,

2016

2015

2014

2013

2012

7.9 %
39.6
24.6
18.8
9.1
100.0 %

5.8 %
33.6
30.5
20.3
9.8
100.0 %

7.0 %
32.4
29.8
20.4
10.4
100.0 %

8.0 %
30.5
27.5
22.3
11.7
100.0 %

5.8 %
30.7
23.4
25.5
14.6
100.0 %

At December 31, 2016, the fixed maturity portfolio had an effective duration of 3.1 years including cash and cash equivalents.

Loss and Loss Expense Reserves

To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account

representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred.
Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often
including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible
to change as significant periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the
ultimate determination of the cost of the loss and the insurer’s payment of that loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment

based upon known information about the claim at that time. The estimate represents an informed judgment based on general reserving
practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim.
Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer, potential
inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of
administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage
provided.

In examining reserve adequacy, several factors are considered in estimating the ultimate economic value of losses. These factors

include, among others, historical data, legal developments, changes in social attitudes and economic conditions, including the effects of
inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current
developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are necessarily based on
management’s informed estimates and judgments using currently available data. As additional experience and other data become
available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would
be reflected in our results in periods in which such estimates and assumptions are changed.

The risk and complexity of estimating loss reserves are greater when economic conditions are uncertain. It is especially difficult to

estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Whereas a
slowing economy would generally lead to lower inflation or even deflation, increased government spending would generally lead to
higher inflation. A change in our assumptions regarding inflation would result in reserve increases or decreases that would be reflected
in our earnings in periods in which such assumptions are changed.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the

ultimate settlement and claim administration will cost. While the methods for establishing the reserves are well tested over time, some
of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which
generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as
estimates of trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties,
which are beyond the Company’s control. These variables are affected by external and internal events, such as inflation and economic
volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which
make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of
liabilities where long periods of time elapse before a definitive determination of liability is made. Although the loss reserves included in

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the Company’s financial statements represent management’s best estimates, setting reserves is inherently uncertain and the Company
cannot provide assurance that its current reserves will prove adequate in light of subsequent events.

The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves
that were discounted was $1,907 million and $2,308 million at December 31, 2016 and 2015, respectively. The aggregate net discount
for those reserves, after reflecting the effects of ceded reinsurance, was $640 million and $699 million at December 31, 2016 and 2015,
respectively. At December 31, 2016, discount rates by year ranged from 2.0% to 6.5%, with a weighted average discount rate of 3.9%.

Substantially all of discounted workers’ compensation reserves (97% of total discounted reserves at December 31, 2016) are excess
workers’ compensation reserves. In order to properly match loss expenses with income earned on investment securities supporting the
liabilities, reserves for excess workers’ compensation business are discounted using risk-free discount rates determined by reference to
the U.S. Treasury yield curve. These rates are determined annually based on the weighted average rate for the period. Once established,
no adjustments are made to the discount rate for that period, and any increases or decreases in loss reserves in subsequent years are
discounted at the same rate, without regard to when any such adjustments are recognized. The expected loss and loss expense payout
patterns subject to discounting are derived from the Company’s loss payout experience.

The Company also discounts reserves for certain other long-duration workers’ compensation reserves (representing approximately

3% of total discounted reserves at December 31, 2016), including reserves for quota share reinsurance and reserves related to losses
regarding occupational lung disease. These reserves are discounted at statutory rates permitted by the Department of Insurance of the
State of Delaware.

To date, known environmental and asbestos claims have not had a material impact on the Company’s operations, because its
subsidiaries generally did not insure large industrial companies that are subject to significant environmental or asbestos exposures prior
to 1986 when an absolute exclusion was incorporated into standard policy language.

The Company’s net reserves for losses and loss expenses relating to asbestos and environmental claims on policies written before

adoption of the absolute exclusion was $31 million at December 31, 2016 and $33 million at December 31, 2015. The estimation of
these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make an actuarial
estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential effect
of significant unresolved legal matters, including coverage issues, as well as the cost of litigating the legal issues. Additionally, the
determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

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The table below provides a reconciliation of the beginning of year and end of year property casualty reserves for the indicated

years:

(In thousands)

Net reserves at beginning of year

Net provision for losses and loss expenses:

Claims occurring during the current year (1)

Decrease in estimates for claims occurring in prior years (2)

Loss reserve discount amortization (3)

Total

Net payments for claims:

Current year

Prior years

Total

Foreign currency translation

Net reserves at end of year
Ceded reserves at end of year

Gross reserves at end of year

2016
9,244,872 $ 8,970,641 $

2015

2014
8,683,797

3,826,620
(29,904 )
49,084
3,845,800

3,653,561
(46,713 )
49,422
3,656,270

3,495,825
(75,764 )
70,506
3,490,567

1,052,452
2,401,722
3,454,174
(46,233 )
9,590,265
1,606,930

898,944
2,216,283
3,115,227
(88,496 )
8,970,641
1,399,060
$ 11,197,195 $ 10,669,150 $ 10,369,701

914,637
2,342,378
3,257,015
(125,024 )
9,244,872
1,424,278

Net change in premiums and losses occurring in prior years:

Decrease in estimates for claims occurring in prior years (2)

Retrospective premium adjustments for claims occurring in prior years (4)

Net favorable premium and reserve development on prior years

29,904 $
29,000
58,904 $

46,713 $
16,730
63,443 $

75,764
9,088
84,852

____________________________________
(1) Claims occurring during the current year are net of discounts of $18,929,000, $20,357,000 and $21,306,000 in 2016, 2015 and

2014, respectively.

(2) The decrease in estimates for claims occurring in prior years is net of discounts. On an undiscounted basis, the estimates for claims

occurring in prior years decreased by $59,175,000 in 2016, $64,971,000 in 2015 and $116,866,000 in 2014.

(3) In 2014, the Company entered into a commutation agreement that resulted in a reduction in prior year workers' compensation

reserves of $30 million on an undiscounted basis and $12 million on a discounted basis.

(4) For certain retrospectively rated insurance policies and reinsurance agreements, changes in loss and loss expenses for prior years

are offset by additional or return premiums.

Also, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 14,
Reserves for Losses and Loss Expenses included in our audited consolidated financial statements for further information regarding the
decrease in estimates for claims occurring in prior years.

A reconciliation between the reserves as of December 31, 2016 as reported in the accompanying consolidated GAAP financial
statements and those reported on the basis of statutory accounting principles (“SAP”) in the Company’s U.S. regulatory filings is as
follows:

(In thousands)

Net reserves reported in U.S. regulatory filings on a SAP basis

Reserves for non-U.S. companies

Loss reserve discounting(1)

Ceded reserves

Gross reserves reported in the consolidated GAAP financial statements

$ 9,235,211
570,556
(215,502 )
1,606,930
$ 11,197,195

_________________________
(1) For statutory purposes, the Company discounts its workers’ compensation reinsurance reserves at 2.2% as permitted by the Department of Insurance
of the State of Delaware. In its GAAP financial statements, the Company discounts excess workers’ compensation reserves at the risk-free rate and
assumed workers’ compensation reserves at the statutory rate.

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Reinsurance

We follow a common industry practice of reinsuring a portion of our exposures and paying to reinsurers a portion of the premiums

received on the policies that we write. Reinsurance is purchased principally to reduce net liability on individual risks and to protect
against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of
the policies, it does make the assuming reinsurer contractually liable to the insurer to the extent of the reinsurance coverage. We monitor
the financial condition of our reinsurers and attempt to place our coverages only with substantial, financially sound carriers. As a result,
generally the reinsurers who reinsure our casualty insurance must have an A.M. Best rating of “A (Excellent)” or better with at least $1
billion in policyholder surplus and the reinsurers who cover our property insurance must have an A.M. Best rating of “A- (Excellent)” or
better with at least $1 billion in policyholder surplus.

Regulation

U.S. Regulation

Our U.S. insurance subsidiaries are subject to varying degrees of regulation and supervision in the jurisdictions in which they do

business.

Overview. Our domestic insurance subsidiaries are subject to statutes which delegate regulatory, supervisory and administrative
powers to state insurance commissioners. This regulation relates to such matters as the standards of solvency which must be met and
maintained; the licensing of insurers and their agents; the nature of and limitations on investments; deposits of securities for the benefit
of policyholders; approval of certain policy forms and premium rates; periodic examination of the affairs of insurance companies;
annual and other reports required to be filed on the financial condition of insurers or for other purposes; establishment and maintenance
of reserves for unearned premiums, loss expenses and losses; and requirements regarding numerous other matters. Our property casualty
subsidiaries, other than excess and surplus and reinsurance subsidiaries, must generally file all rates with the insurance department of
each state in which they operate. Our excess and surplus and reinsurance subsidiaries generally operate free of rate and form regulation.

Holding Company Statutes. In addition to regulatory supervision of our insurance subsidiaries, we are subject to state statutes
governing insurance holding company systems. Under the terms of applicable state statutes, any person or entity desiring to purchase
more than a specified percentage (commonly 10%) of our outstanding voting securities would be required to obtain prior regulatory
approval of the purchase. Typically, such statutes require that we periodically file information with the appropriate state insurance
commissioner, including information concerning our capital structure, ownership, financial condition and general business operations.

In addition, we must annually submit to our lead state regulator an “enterprise risk management report” which identifies the
activities and circumstances of any affiliated company that might have a material adverse effect on the financial condition of our group
or our U.S. licensed insurers.

Several states have also adopted changes to the holding company act that authorize U.S. insurance regulators to lead or participate

in the group-wide supervision of certain international insurance groups. International standard setters, such as the International
Association of Insurance Supervisors, are developing capital standards for international groups, and U.S. insurance regulators are
currently working on U.S. group capital standards for insurance groups. The U.S. group capital calculation is expected to incorporate
existing risk-based capital standards. It is unclear how the development of group capital measures will interact with existing capital
requirements for insurance companies in the United States and with international capital standards. It is possible that we may be
required to hold additional capital as a result of these developments.

Most states have adopted the National Association of Insurance Commissioners's (“NAIC”) Risk Management and Own Risk
Solvency Assessment Model Act (the “ORSA Model Act”), which requires an insurance holding company system’s chief risk officer to
submit annually to its lead state insurance regulator an Own Risk and Solvency Assessment Summary Report (“ORSA”). The ORSA is
a confidential internal assessment of the material and relevant risks associated with an insurer’s current business plan and the sufficiency
of capital resources to support those risks. Under ORSA, we are required to:

• regularly, no less than annually, conduct an ORSA to assess the adequacy of our risk management framework, and current and

estimated projected future solvency position;

•

internally document the process and results of the assessment; and

• provide a confidential high-level ORSA Summary Report annually to the Commissioner of Insurance of the State of Delaware

(our lead state commissioner).

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The NAIC is working on an Insurance Data Security Model Law, which would require insurers, insurance producers and other
entities required to be licensed under state insurance laws to develop and maintain a written information security program, conduct risk
assessments, and oversee the data security practices of third-party vendors. In addition, the New York Department of Financial Services
has adopted a cybersecurity regulation that would impose significant new regulatory burdens on companies they supervise, including
entities doing business in New York and operating or required to operate under a license, registration, certificate, accreditation or similar
authorization. The regulation, which will become effective on March 1, 2017, would require any such company to maintain a
cybersecurity program meeting certain core functions, adopt a cybersecurity policy and oversee the cybersecurity practices of third-
party service providers, among other requirements.

We cannot predict the impact, if any, that these holding company statutes and compliance with the ORSA Model Act or any

proposed or future cybersecurity regulations will have on our business, financial condition or results of operations.

Risk Based Capital Requirements. The NAIC utilizes a Risk Based Capital (“RBC”) formula that is designed to measure the
adequacy of an insurer's statutory surplus in relation to the risks inherent in its business. The RBC formula develops a risk adjusted
target level of adjusted statutory capital by applying certain factors to various asset, premium and reserve items. The NAIC RBC Model
Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These
levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under
regulatory control. The RBC of each of our domestic insurance subsidiaries was above any RBC action level as of December 31, 2016.

Insurance Regulatory Information System. The NAIC also has developed a set of 13 financial ratios referred to as the Insurance
Regulatory Information System (“IRIS”). On the basis of statutory financial statements filed with state insurance regulators, the NAIC
annually calculates these IRIS ratios to assist state insurance regulators in monitoring the financial condition of insurance companies.
The NAIC has established an acceptable range for each of the IRIS financial ratios.

Guaranty Funds. Our U.S. insurance subsidiaries are also subject to assessment by state guaranty funds when an insurer in a

particular jurisdiction has been judicially declared insolvent and the insolvent company's available funds are insufficient to pay
policyholders and claimants the amounts to which they are entitled. The protection afforded under a state's guaranty fund to
policyholders of the insolvent insurer varies from state to state. Generally, all licensed property casualty insurers are considered to be
members of the fund, and assessments are based upon their pro rata share of direct written premiums in that state. The NAIC Model
Post-Assessment Guaranty Fund Act, which many states have adopted, limits assessments to an insurer to 2% of its subject premium
and permits recoupment of assessments through rate setting. Likewise, several states (or underwriting organizations of which our
insurance subsidiaries are required to be members) have limited assessment authority with regard to deficits in certain lines of business.

Additionally, state insurance laws and regulations require us to participate in mandatory property-liability “shared market,”

“pooling” or similar arrangements that provide certain types of insurance coverage to individuals or others who otherwise are unable to
purchase coverage voluntarily provided by private insurers. Shared market mechanisms include assigned risk plans and fair access to
insurance requirement or “FAIR” plans. In addition, some states require insurers to participate in reinsurance pools for claims that
exceed specified amounts. Our participation in these mandatory shared market or pooling mechanisms generally is related to the amount
of our direct writings for the type of coverage written by the specific arrangement in the applicable state.

Dividends. We receive funds from our insurance company subsidiaries in the form of dividends and management fees for certain

management services. Annual dividends in excess of maximum amounts prescribed by state statutes may not be paid without the
approval of the insurance commissioner of the state in which an insurance subsidiary is domiciled. See “Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

Trade Practices. State insurance laws and regulations include numerous provisions governing trade practices and the marketplace

activities of insurers, including provisions governing marketing and sales practices, policyholder services, claims management and
complaint handling. State regulatory authorities generally enforce these provisions through periodic market conduct examinations.

Investment Regulation. Investments by our domestic insurance companies must comply with applicable laws and regulations which

prescribe the kind, quality and concentration of investments. In general, these laws and regulations permit investments in federal, state
and municipal obligations, corporate bonds, preferred and common equity securities, mortgage loans, real estate and certain other
investments, subject to specified limits and certain other qualifications. Investments that do not comply with these limits and
qualifications are deducted in our insurance subsidiaries' calculation of their statutory capital and surplus.

Terrorism Risk Insurance. The Terrorism Risk Insurance Act of 2002 established a Federal program that provides for a system of

shared public and private compensation for insured losses resulting from acts of terrorism. Pursuant to the Terrorism Risk Insurance
Program Reauthorization Act of 2015 (“TRIPRA”), the program has been extended for a six year period ending on December 31, 2020.
TRIPRA provides a federal backstop to all U.S. based property and casualty insurers for insurance related losses resulting from any act

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of terrorism on U.S. soil or against certain U.S. air carriers, vessels or foreign missions. TRIPRA is applicable to almost all commercial
lines of property and casualty insurance but excludes commercial auto, burglary and theft, surety, professional liability and farm owners'
multi-peril insurance. Insurers with direct commercial property and casualty insurance exposure in the United States are required to
participate in the program and make available coverage for certified acts of terrorism. TRIPRA's definition of certified acts includes
domestic terrorism. Federal participation will be triggered under TRIPRA when the Secretary of Treasury certifies an act of terrorism.
Under the program, the federal government will currently pay 84% of an insurer's covered losses in excess of the insurer's applicable
deductible. This amount will decrease to 80% on a pro-rata basis over five years, beginning in 2017. The insurer's deductible is based on
20% of earned premium for the prior year for covered lines of commercial property and casualty insurance. Based on our 2016 earned
premiums, our aggregate deductible under TRIPRA during 2017 will be approximately $915 million. The federal program will not pay
losses for certified acts unless such losses exceed $140 million industry-wide for calendar year 2017. This threshold will increase to
$200 million on a pro-rata basis over five years beginning in 2016. TRIPRA limits the federal government's share of losses at
$100 billion for a program year. In addition, an insurer that has satisfied its deductible is not liable for the payment of losses in excess
of the $100 billion cap.

Excess and Surplus Lines. The regulation of our U.S. subsidiaries' excess and surplus lines insurance business differs significantly

from the regulation of our admitted business. Our surplus lines subsidiaries are subject to the surplus lines regulation and reporting
requirements of the jurisdictions in which they are eligible to write surplus lines insurance. Although the surplus lines business is
generally less regulated than admitted business, principally with respect to rates and policy forms, strict regulations apply to surplus
lines placements in the laws of every state and the regulation of surplus lines insurance may undergo changes in the future. Federal or
state measures may be introduced to increase the oversight of surplus lines insurance in the future.

Federal Regulation. Although the federal government and its regulatory agencies generally do not directly regulate the business of

insurance, federal initiatives could have an impact on our business in a variety of ways. The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Dodd-Frank Act”) effected sweeping changes to financial services regulation in the United
States. The Dodd-Frank Act created two new federal government bodies, the Federal Insurance Office (the “FIO”) and the Financial
Stability Oversight Council (the “FSOC”), which may impact the regulation of insurance. Although the FIO has preemption authority
over state insurance laws that conflict with certain international agreements, it does not have general supervisory or regulatory authority
over the business of insurance. The FIO has authority to represent the United States in international insurance matters and is authorized
to monitor the U.S. insurance industry and identify potential regulatory gaps that could contribute to systemic risk.

The FIO has a particular role in connection with international insurance matters. The FIO represents the U.S. at the International

Association of Insurance Supervisors (“IAIS”); in 2016, the FIO participated in IAIS’s Financial Stability Committee and joined IAIS’s
Executive Committee. The Dodd-Frank Act authorizes the Secretary of the Treasury and U.S. Trade Representative to enter into
international agreements of mutual recognition regarding the prudential regulation of insurance or reinsurance (a “Covered
Agreement”). On January 13, 2017, the U.S. Department of Treasury and the U.S. Trade Representative notified the U.S. Congress, as
required under the Dodd-Frank Act, that they had successfully negotiated a Covered Agreement with the European Union (“EU”). The
Covered Agreement addresses three areas of insurance regulation: reinsurance, group supervision, and the exchange of information
between insurance supervisors. The Covered Agreement, if it comes into force, would eliminate reinsurance collateral requirements in
the U.S. for a reinsurer domiciled in the EU (and likewise in the EU for a reinsurer domiciled in the U.S.) if such reinsurer meets certain
specified minimum criteria. The Covered Agreement would also prevent U.S. states and EU countries from maintaining or adopting any
new requirements with substantially the same impact on a reinsurer as the collateral requirements eliminated under the Covered
Agreement. "Local presence" requirements for reinsurers from the U.S. or EU operating in the other party's territory would also be
eliminated. With respect to group supervision, a U.S. or EU insurance or reinsurance group would be subject to worldwide group
supervision (including governance, solvency and capital, and reporting) in the jurisdiction where the ultimate/worldwide parent has its
head office or is domiciled. However, if the insurance group also operates in the territory of the other party to the Covered Agreement,
then a regulator in a jurisdiction in the other party could exercise authority over an insurance or reinsurance group, but only at the level
of the parent holding company located in its jurisdiction and not on a worldwide level, subject to certain exceptions. With respect to the
exchange of information between insurance supervisors, the Covered Agreement includes a provision that encourages insurance
supervisory authorities in the U.S. and the EU to cooperate in exchanging supervisory information.

Under the Dodd-Frank Act, ninety days following the date it is submitted to the U.S. Congress, the Covered Agreement may enter

into force. On the EU side, the European Council and the European Parliament must each adopt decisions approving the Covered
Agreement before it can come into force. The Covered Agreement sets out, on a provision-by-provision basis, time frames for
implementation. However, there is no guarantee that the Covered Agreement will come into force or that cedants will be willing to
accept reduced collateral requirements.

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The FIO is required to report to Congress annually on the insurance industry and any preemption actions regarding any Covered

Agreement.

On December 12, 2013, the FIO delivered a report to Congress on how to modernize and improve the system of insurance

regulation in the U.S. The report recommended that, in the short term, the U.S. system of insurance regulation can be modernized
through state-based improvements combined with certain federal actions. The report identified areas for direct federal involvement in
international standard setting, the FIO participation in supervisory colleges which monitor the regulation of large national and
internationally active insurance groups and federal pursuit of international covered agreements to afford nationally uniform treatment of
reinsurance collateral requirements. The report also made several recommendations for state reform of insurance regulation including
changes to the state regulation of insurance company solvency, group supervision and corporate governance. The FIO report stated that
the system of U.S. insurance regulation can be modernized and improved in the short-term, while warning that if the states do not act in
the near term to effectively regulate matters on a consistent and cooperative basis, in the FIO’s view there will be a greater role for
federal regulation of insurance.

The FIO also can recommend to the FSOC that it designate an insurer as an entity posing risks to the United States' financial
stability in the event of the insurer's material financial distress or failure, i.e., a "systemically important financial institution." An insurer
so designated by FSOC will be subject to Federal Reserve supervision and heightened prudential standards. As of December 31, 2016,
two insurance groups are subject to this supervision and heightened standards. Based upon our current business model and balance
sheet, we do not believe that we will be designated by the FSOC as such an institution. Although the potential impacts of the Dodd-
Frank Act on the U. S. insurance industry are not clear, our business could be affected by changes to the U.S. system of insurance
regulation or our designation or the designation of insurers or reinsurers with which we do business as systemically important non-bank
financial companies.

International Regulation

Our insurance subsidiaries based in the United Kingdom are regulated by the Prudential Regulation Authority ("PRA") and the
Financial Conduct Authority ("FCA"). The PRA's primary objectives with regard to insurers are to promote the safety and soundness of
insurers and to contribute to the securing of an appropriate degree of protection for current and future policyholders, while the FCA has
three operational objectives: (i) to secure an appropriate degree of protection for consumers, (ii) to protect and enhance the integrity of
the United Kingdom financial system, and (iii) to promote effective competition in the interests of consumers in the financial services
markets. The PRA and FCA employ a variety of regulatory tools to achieve their objectives, including periodic auditing and reporting
requirements, risk assessment reviews, minimum solvency margins and individual capital assessment requirements, dividend
restrictions, in certain cases, approval requirements governing the appointment of key officers, approval requirements governing
controlling ownership interests and various other requirements. Our Lloyd's managing agency is also regulated by the PRA, FCA and
Lloyd's, and the Lloyd's syndicate business is subject to Lloyd's supervision. Through Lloyd's, we are licensed to write business in
various countries throughout the world by virtue of Lloyd's international licenses. In each such country, we are subject to the laws and
insurance regulation of that country. Additionally, PRA and FCA regulations also impact us as “controller” (a PRA/FCA defined term)
of our U.K.-regulated subsidiaries, whereby we are required to notify the PRA/FCA about significant events relating to the U.K.-
regulated subsidiaries' controllers (i.e. persons or entities which have certain levels of direct or indirect voting power or economic
interests in the regulated entities) as well as changes of control, and to submit an annual report regarding their controllers. As well, the
PRA/FCA's Senior Insurance Managers Regime provides a regulatory framework for standards of fitness and propriety, conduct and
accountability to be applied to individuals in positions of responsibility at insurers. In addition, certain employees are individually
registered at Lloyd's.

In the European Union, a new insurance regulatory regime governing, among other things, capital adequacy and risk management

called “Solvency II” became effective on January 1, 2016. Lloyd’s applies a capital adequacy test to all Lloyd’s syndicates, including
our syndicate, that is based on Solvency II principles. Solvency II provides for the supervision of group solvency. Under Solvency II, it
is possible that the U.S. parent of a European Union subsidiary could be subject to certain Solvency II requirements if the U.S. company
is not already subject to regulations deemed “equivalent” to Solvency II. Currently, the U.S. system of insurance regulation relating to
group supervision is not deemed "equivalent" to Solvency II by European Union authorities. However, we have received a waiver from
the PRA, subject to conditions, with respect to the PRA's supervision of our group, which waives the requirement on us to maintain a
group solvency capital requirement as calculated under Solvency II rules. The Covered Agreement also prohibits any EU supervisor
from exercising group-wide supervision at any level above the highest company organized in the country of that supervisor.

Our international underwriting subsidiaries are also subject to varying degrees of regulation in certain countries in Mexico,
Scandinavia, Continental Europe, South America, Australia, Southeast Asia and Canada. Generally, our subsidiaries must satisfy local
regulatory requirements. While each country imposes licensing, solvency, auditing and financial reporting requirements, the type and

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extent of the requirements differ substantially. Key areas where country regulations may differ include: (i) the type of financial reports
to be filed; (ii) a requirement to use local intermediaries; (iii) the amount of reinsurance permissible; (iv) the scope of any regulation of
policy forms and rates; and (v) the type and frequency of regulatory examinations.

Competition

The property casualty insurance and reinsurance businesses are highly competitive, with many insurance companies of various
sizes, as well as other entities offering risk alternatives such as self-insured retentions or captive programs, transacting business in the
United States and internationally. We compete directly with a large number of these companies. Competition in our industry is largely
measured by the ability to provide insurance and services at a price and on terms that are reasonable and acceptable to the customer. Our
strategy in this highly fragmented industry is to seek specialized areas or geographic regions where our insurance subsidiaries can gain a
competitive advantage by responding quickly to changing market conditions. Our subsidiaries establish their own pricing practices
based upon a Company-wide philosophy to price products with the intent of making an underwriting profit. Although insurance prices
have generally increased for most lines of business since 2011, the rate of increase has declined in more recent years. That decline
accelerated in 2016. Loss costs have also increased over that period of time. With the low level of interest rates available, current price
levels for certain lines of business remain below the prices required for the Company to achieve its long-term return objectives.

Competition for the Insurance business within the United States comes from other specialty insurers, regional carriers, large
national multi-line companies and reinsurers. Our specialty operating units compete with excess and surplus insurers as well as standard
carriers. Other regional units compete with mutual and other regional stock companies as well as national carriers. Additionally, direct
writers of property casualty insurance compete with our regional units by writing insurance through their salaried employees, generally
at a lower acquisition cost than through independent agents such as those used by the Company. Our Insurance operations compete
internationally with native insurance operations both large and small, which in some cases are related to government entities, as well as
with branches or local subsidiaries of multinational companies.

Competition for the Reinsurance business, which is especially strong, comes from domestic and foreign reinsurers, which produce

their business either on a direct basis or through the broker market. These competitors include Swiss Re, Munich Re, Berkshire
Hathaway, Transatlantic Reinsurance, Partner Re and others.

In recent years, various institutional investors have increasingly sought to participate in the property and casualty insurance and

reinsurance industries. Well-capitalized new entrants to the property and casualty insurance and reinsurance industries, or existing
competitors that receive substantial infusions of capital, provide increasing competition, which may adversely impact our business and
profitability. Further, an expanded supply of reinsurance capital may lower costs for insurers that rely on reinsurance and, as a
consequence, those insurers may be able to price their products more competitively.

Additionally, competition from insurers and reinsurers based in tax-advantaged jurisdictions continues to increase, including from

domestic-based subsidiaries of foreign-based entities in the excess and surplus lines businesses.

Employees

As of January 31, 2017, we employed 7,683 individuals. Of this number, our subsidiaries employed 7,536 persons and the

remaining persons were employed at the parent company.

Other Information about the Company's Business

We maintain an interest in the acquisition and startup of complementary businesses and continue to evaluate possible acquisitions

and new ventures on an ongoing basis. In addition, our insurance subsidiaries develop new coverages or lines of business to meet the
needs of insureds.

Seasonal weather variations and other events affect the severity and frequency of losses sustained by the insurance and reinsurance
subsidiaries. Although the effect on our business of catastrophes such as tornadoes, hurricanes, hailstorms, earthquakes and terrorist acts
may be mitigated by reinsurance, they nevertheless can have a significant impact on the results of any one or more reporting periods.

We have no customer that accounts for 10 percent or more of our consolidated revenues.

Compliance by W. R. Berkley and its subsidiaries with federal, state and local provisions that have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise relating to protection of the environment, has not had a material
effect upon our capital expenditures, earnings or competitive position.

The Company's internet address is www.wrberkley.com. The information on our website is not incorporated by reference in this
annual report on Form 10-K. The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-
K, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act and other reports

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filed by us or with respect to our securities by others are accessible free of charge through this website as soon as reasonably practicable
after they have been electronically filed with or furnished to the SEC.

ITEM 1A. RISK FACTORS

Our businesses face significant risks. If any of the events or circumstances described as risks below occur, our businesses, results
of operations and/or financial condition could be materially and adversely affected. In addition to those described below, our businesses
may also be adversely affected by risks and uncertainties not currently known to us or that we currently consider immaterial.

Risks Relating to Our Industry

Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry.

The results of companies in the property casualty insurance industry historically have been subject to significant fluctuations and

uncertainties in demand and pricing, causing cyclical changes in the insurance and reinsurance industry. The demand for insurance is
influenced primarily by general economic conditions, while the supply of insurance is often directly related to available capacity or the
perceived profitability of the business. In recent years, we have faced increased competition in our business, as a result of new entrants
and existing insurers seeking to gain market share, resulting in decreased premium rates and less favorable contract terms and conditions
for certain lines of business. The adequacy of premium rates is affected mainly by the severity and frequency of claims, which are
influenced by many factors, including natural disasters, regulatory measures and court decisions that define and expand the extent of
coverage and the effects of economic inflation on the amount of compensation due for injuries or losses. In addition, investment rates of
return have impacted rate adequacy, with interest rates remaining at historic lows. These factors can have a significant impact on
ultimate profitability because a property casualty insurance policy is priced before its costs are known as premiums usually are
determined long before claims are reported. These factors could produce results that would have a negative impact on our results of
operations and financial condition.

We face significant competitive pressures in our businesses, which have reduced premium rates in certain areas and could

harm our ability to maintain or increase our profitability and premium volume.

We compete with a large number of other companies in our selected lines of business. We compete, and will continue to compete,

with major U.S. and non-U.S. insurers and reinsurers, other regional companies, as well as mutual companies, specialty insurance
companies, underwriting agencies and diversified financial services companies. Competitiveness in our businesses is based on many
factors, including premium charges, ratings assigned by independent rating agencies, commissions paid to producers, the perceived
financial strength of the company, other terms and conditions offered, services provided (including ease of doing business over the
internet), speed of claims payment and reputation and experience in the lines to be written. In recent years, the insurance industry has
undergone increasing consolidation, which may further increase competition.

Some of our competitors, particularly in the Reinsurance business, have greater financial and/or marketing resources than we do.
These competitors within the reinsurance segment include Swiss Re, Munich Re, Berkshire Hathaway, Transatlantic Reinsurance, and
Partner Re. We expect that perceived financial strength, in particular, will become more important as customers seek high quality
reinsurers. Certain of our competitors operate from Bermuda or other tax advantaged or less regulated jurisdictions that may provide
them with additional competitive and pricing advantages.

Over the past several years, we have faced increased competition in our business, as increased supply has led to reduced prices and,
at times, less favorable terms and conditions. Our specialty operating units have also encountered competition from admitted companies
seeking to increase market share. Although insurance prices have generally increased for most lines of business since 2011, the rate of
increase has declined in more recent years. That decline accelerated in 2016. Loss costs have also increased over that period of time.
With the low level of interest rates available, current price levels for certain lines of business remain below the prices required for us to
achieve our long-term return objectives. We expect to continue to face strong competition in these and our other lines of business and as
a result pressure on pricing and policy terms and conditions.

In recent years, various institutional investors have increasingly sought to participate in the property and casualty insurance and

This intense competition could cause the supply and/or demand for insurance or reinsurance to change, which affect our ability to

price our products at attractive rates and retain existing business or write new products at adequate rates or on terms and conditions
acceptable to us. If we are unable to retain existing business or write new business at adequate rates or on terms and conditions
acceptable to us, our results of operations could be materially and adversely affected.

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Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves.

Our gross reserves for losses and loss expenses were approximately $11.2 billion as of December 31, 2016. Our loss reserves

reflect our best estimates of the cost of settling claims and related expenses with respect to insured events that have occurred.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the

ultimate settlement and claims administration will cost for claims that have occurred, whether known or unknown. The major
assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve
actuarial projections, are based on management's assessment of facts and circumstances then known, as well as estimates of future trends
in claims severity and frequency, inflation, judicial theories of liability, reinsurance coverage, legislative changes and other factors,
including the actions of third parties, which are beyond our control.

The inherent uncertainties of estimating reserves are greater for certain types of liabilities, where long periods of time elapse before

a definitive determination of liability is made and settlement is reached. In periods with increased economic volatility, it becomes more
difficult to accurately predict claim costs. It is especially difficult to estimate the impact of inflation on loss reserves given the current
economic environment and related government actions. Both inflation overall and medical cost inflation, which has historically been
greater than inflation overall, can have an adverse impact.

Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled.

Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is
inherently uncertain, we cannot assure that our current reserves will prove adequate in light of subsequent events. Should we need to
increase our reserves, our pre-tax income for the reporting period would decrease by a corresponding amount.

We discount our reserves for excess and assumed workers' compensation business because of the long period of time over which

losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities
supporting liabilities. The expected loss and loss expense payout pattern subject to discounting is derived from our loss payout
experience. Changes in the loss and loss expense payout pattern are recorded in the period they are determined. If the actual loss payout
pattern is shorter than anticipated, the discount will be reduced and pre-tax income will decrease by a corresponding amount.

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and economic, legal, judicial, social and other environmental conditions change, unexpected and unintended
issues related to claim and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond
our underwriting intent or by increasing the number or size of claims. Examples of emerging claims and coverage issues include, but are
not limited to:

• judicial expansion of policy coverage and the impact of new theories of liability;

• plaintiffs targeting property and casualty insurers, including us, in purported class action litigation relating to claims-

handling and other practices;

• medical developments that link health issues to particular causes, resulting in liability claims;

• claims relating to unanticipated consequences of current or new technologies, including cyber security related risks; and

• claims relating to potentially changing climate conditions.

In some instances, these emerging issues may not become apparent for some time after we have issued the affected insurance

policies. As a result, the full extent of liability under our insurance policies may not be known until many years after the policies are
issued.

In addition, the potential passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to

extend the statutes of limitations or otherwise to repeal or weaken tort reforms could have an adverse impact on our business.

The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm our business

and materially and adversely affect our results of operations.

As a property casualty insurer, we face losses from natural and man-made catastrophes.

Property casualty insurers are subject to claims arising out of catastrophes that may have a significant effect on their results of

operations, liquidity and financial condition. Catastrophe losses have had a significant impact on our results. For example, catastrophe
losses net of reinsurance recoveries were $105 million in 2016, $58 million in 2015, $87 million in 2014, $65 million in 2013 and
$80 million in 2012. Similarly, man-made catastrophes can also have a material impact on our financial results.

Catastrophes can be caused by various events, including hurricanes, windstorms, earthquakes, tsunamis, hailstorms, explosions,

severe winter weather and fires, as well as terrorist and other man-made activities, including drilling, mining and other industrial

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accidents or terrorist activities. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a
catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event.
Some catastrophes are restricted to small geographic areas; however, hurricanes, earthquakes, tsunamis and other disasters may produce
significant damage in large, heavily populated areas. Catastrophes can cause losses in a variety of our property and casualty lines, and
most of our past catastrophe-related claims have resulted from severe storms. Seasonal weather variations or the impact of climate
change may affect the severity and frequency of our losses. Insurance companies are not permitted to reserve for a catastrophe until it
has occurred. It is therefore possible that a catastrophic event or multiple catastrophic events could produce significant losses and have a
material adverse effect on our results of operations and financial condition.

Changing climate conditions may adversely affect our financial condition or profitability.

There is an emerging scientific view that the earth is getting warmer. Climate change, to the extent it produces rising temperatures

and changes in weather patterns, may affect the frequency and severity of storms and other weather events as well as the affordability,
availability and underwriting results of various types of commercial insurance, and, if frequency and severity patterns increase, could
negatively affect our financial results.

Conditions in the financial markets and the global economy have had and may continue to have a negative impact on our

results of operations and financial condition.

The significant volatility and uncertainty experienced in financial markets around the world during the past several years and the

effect of the economic downturn have continued. Although the U.S. and various foreign governments have taken various actions to try to
stabilize the financial markets, the ultimate effectiveness of such actions remains unclear. Therefore, volatility and uncertainty in the
financial markets and the resulting negative economic impact may continue for some time. For example, financial markets have been
affected by concerns over U.S. fiscal policy as well as the related concern regarding the need to reduce the federal deficit. These issues,
together with the slowing of the global economy generally, could send the U.S. into a new recession, further exacerbate concerns over
sovereign debt of other countries and disrupt economic activity in the U.S. and elsewhere. Similarly, concerns about the solvency of
certain European Union member states, and of financial institutions that have significant direct or indirect exposure to debt issued by
them, has created market volatility that continues to affect the performance of various asset classes, and likely will continue until there is
an ultimate resolution of these sovereign debt related concerns.

While we monitor conditions in the financial markets, we cannot predict future conditions or their impact on our results of
operations and financial condition. Depending on conditions in the financial markets, we could incur additional realized and unrealized
losses in our investment portfolio in future periods, and financial market volatility and uncertainty and an economic downturn could
have a significant negative impact on third parties that we do business with, including insureds and reinsurers.

We, as a primary insurer, may have significant exposure for terrorist acts.

To the extent an act of terrorism, whether a domestic or foreign act, is certified by the Secretary of Treasury, we may be covered

under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”), for up to 84% of our losses for certain
property/casualty lines of insurance. However, any such coverage would be subject to a mandatory deductible based on 20% of earned
premium for the prior year for the covered lines of commercial property and casualty insurance. Based on our 2016 earned premiums,
our aggregate deductible under TRIPRA during 2017 is approximately $915 million. TRIPRA is currently in effect through
December 31, 2020. In addition, the coverage provided under TRIPRA does not apply to reinsurance that we write.

We are subject to extensive governmental regulation, which increases our costs and could restrict the conduct of our business.

We are subject to extensive governmental regulation and supervision in both the United States and foreign jurisdictions. Most
insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. This system of
regulation, generally administered in the United States by a department of insurance in each state in which we do business, relates to,
among other things:

• standards of solvency, including risk-based capital measurements;

• restrictions on the nature, quality and concentration of investments;

• requirements pertaining to certain methods of accounting;

• evaluating enterprise risk to an insurer;

• rate and form regulation pertaining to certain of our insurance businesses;

• potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided

by impaired, insolvent or failed insurance companies; and

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• involvement in the payment or adjudication of catastrophe or other claims beyond the terms of the policies.

State insurance departments conduct periodic examinations of the affairs of insurance companies and require the filing of annual
and other reports relating to the financial condition of insurance companies, holding company issues and other matters. Our Insurance
business internationally is also generally subject to a similar regulatory scheme in each of the jurisdictions where we conduct operations
outside the United States.

Federal financial services modernization legislation and legislative and regulatory initiatives taken or which may be taken in
response to the current conditions in the financial markets and the recent economic downturn may lead to additional federal regulation of
the insurance industry in the coming years.

The Dodd-Frank Act effected sweeping changes to financial services regulation in the United States. The Dodd-Frank Act
established the Financial Stability Oversight Council (“FSOC”), which is authorized to recommend that certain systemically significant
non-bank financial companies, including insurance companies, be regulated by the Board of Governors of the Federal Reserve. The
Dodd-Frank Act also established a Federal Insurance Office (“FIO”) which is authorized to study, monitor and report to Congress on the
U.S. insurance industry and the significance of global reinsurance to the U.S. insurance market. The FIO also can recommend to the
FSOC that it designate an insurer as an entity posing risks to the United States financial stability in the event of the insurer's material
financial distress or failure. The potential impact of the Dodd-Frank Act on the U.S. insurance business is not clear. Our business could
be affected by changes, whether as a result of the Dodd-Frank Act or otherwise, to the U.S. system of insurance regulation or our
designation or the designation of insurers or reinsurers with which we do business as systemically significant non-bank financial
companies.

Three non-bank financial companies, including two insurance groups, are subject to Federal Reserve supervision and heightened

prudential standards, as systematically significant financial institutions.

The new U.S. administration and the majority party have expressed the desire to dismantle or roll back the Dodd-Frank Act, which
may present risks to our business. For example, in 2016, the U.S. House of Representatives passed the Financial CHOICE Act of 2016,
which proposed to roll back provisions of the Dodd-Frank Act affecting insurance. While the Financial CHOICE Act was not passed by
the Senate, it is likely that the Act or another Dodd-Frank “roll back” bill affecting the insurance business will be introduced. We are not
able to predict whether any such proposal to roll back the Dodd-Frank Act would have a material effect on our business operations and
cannot identify the risks, if any, that may be posed to our businesses as a result of changes to, or legislative replacements for, the Dodd-
Frank Act.

Although state regulation is the primary form of regulation of insurance and reinsurance in the United States, in addition to the
changes brought about by the Dodd-Frank Act, Congress has considered various proposals relating to the creation of an optional federal
charter, repeal of the insurance company antitrust exemption from the McCarran-Ferguson Act, and tax law changes. We may be subject
to potentially increased federal oversight as a financial institution. In addition, the results of the recent U.S. presidential and
congressional elections may increase the chance of other federal legislative and regulatory changes that could affect us in ways we
cannot predict.

With respect to international measures, Solvency II, the EU directive concerning the capital adequacy, risk management and
regulatory reporting for insurers and reinsurers may affect our insurance businesses. Implementation of Solvency II in EU member states
occurred on January 1, 2016, and may require us to utilize a significant amount of resources to ensure compliance. In addition, despite
the waiver of the Solvency II group capital requirements we received, Solvency II may have the effect of increasing the capital
requirements of our EU domiciled insurers. Additionally, our capital requirements and compliance requirements may be adversely
affected if the EU commission finds that the insurance regulatory regimes of the jurisdictions outside the EU in which we have insurance
or reinsurance companies domiciled are not "equivalent" to the requirements of Solvency II.

We may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of

applicable laws and regulations or the relevant authority's interpretation of the laws and regulations. Also, some regulatory authorities
have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals
or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us
from carrying on some or all of our activities or monetarily penalize us. Also, changes in the level of regulation of the insurance industry,
whether federal, state or foreign, or changes in laws or regulations themselves or interpretations by regulatory authorities, may further
restrict the conduct of our business.

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Risks Relating to Our Business

Our international operations expose us to investment, political and economic risks, including foreign currency and credit risk.

Our expanding international operations in the United Kingdom, Continental Europe, South America, Canada, Mexico,

Scandinavia, the Asia-Pacific region, Africa and Australia expose us to increased investment, political and economic risks, including
foreign currency and credit risk. Changes in the value of the U.S. dollar relative to other currencies could have an adverse effect on our
results of operations and financial condition.

Our investments in non-U.S.-denominated assets are subject to fluctuations in non-U.S. securities and currency markets, and those
markets can be volatile. Non-U.S. currency fluctuations also affect the value of any dividends paid by our non-U.S. subsidiaries to their
parent companies in the U.S.

The vote by the United Kingdom to leave the European Union ("EU") could adversely affect our business.

The 2016 U.K. referendum on its membership in the EU resulted in a majority of U.K. voters voting in favor of the U.K. exiting
the EU (“Brexit”). As a result of this vote, negotiations are commencing to determine the terms of the U.K.’s withdrawal from the EU
and its future relationship with the EU. As a result, we face risks associated with the potential uncertainty and consequences related to
the vote and Brexit, including with respect to volatility in financial markets, exchange rates and interest rates. These uncertainties could
increase the volatility of, or reduce, our investment results in particular periods or over time. Brexit could adversely affect European or
worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions and regulatory
agencies. Brexit could also lead to legal uncertainty and differing laws and regulations between the U.K. and the EU. Any of these
potential effects, and others we cannot anticipate, could adversely affect our results of operations or financial condition.

We may be unable to attract and retain key personnel and qualified employees.

We depend on our ability to attract and retain key personnel, including our Executive Chairman, our President and CEO, senior
executive officers, presidents of our operating units, experienced underwriters and other skilled employees who are knowledgeable about
our business. If the quality of our underwriting team and other personnel decreases, we may be unable to maintain our current
competitive position in the specialized markets in which we operate, and be unable to expand our operations into new markets.

We cannot guarantee that our reinsurers will pay in a timely fashion, if at all, and, as a result, we could experience losses.

We purchase reinsurance by transferring part of the risk that we have assumed, known as ceding, to a reinsurance company in
exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer contractually liable
to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us, the reinsured, of our liability to our
policyholders. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay such recoverables on a
timely basis. Accordingly, we bear credit risk with respect to our reinsurers, and if our reinsurers fail to pay us, our financial results
would be adversely affected. Underwriting results and investment returns of some of our reinsurers may affect their future ability to pay
claims. As of December 31, 2016, the amount due from our reinsurers was approximately $1,744 million, including amounts due from
state funds and industry pools where it was intended that we would bear no risk. Certain of these amounts due from reinsurers are
secured by letters of credit or by funds held in trust on our behalf.

We are subject to credit risk relating to our policyholders, independent agents and brokers.

In addition to exposure to credit risk related to our reinsurance recoverables and investment portfolio, we are exposed to credit risk

in several other areas of our business, including credit risk relating to policyholders, independent agents and brokers. For example our
policyholders, independent agents or brokers may not pay a part of or the full amount of premiums owed to us or our brokers or other
third party claim administrators may not deliver amounts owed on claims under our insurance and reinsurance contracts for which we
have provided funds.

As credit risk is generally a function of the economy, we face a greater credit risk in an economic downturn. While we attempt to

manage credit risks through underwriting guidelines, collateral requirements and other oversight mechanisms, our efforts may not be
successful. For example, to reduce such credit risk, we require certain third parties to post collateral for some or all of their obligations to
us. In cases where we receive pledged securities and the applicable counterparty is unable to honor its obligations, we may be exposed to
credit risk on the securities pledged and/or the risk that our access to that collateral may be stayed as a result of bankruptcy. In cases
where we receive letters of credit from banks as collateral and one of our counterparties is unable to honor its obligations, we are
exposed to the credit risk of the banks that issued the letters of credit.

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We are rated by A.M. Best, Standard & Poor's, and Moody's, and a decline in these ratings could affect our standing in the

insurance industry and cause our sales and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Certain of
our insurance company subsidiaries are rated by A.M. Best, Standard & Poor's and Moody's. Our ratings are subject to periodic review,
and we cannot assure you that we will be able to retain our current or any future ratings.

If our ratings are reduced from their current levels by A.M. Best, Standard & Poor's or Moody's, our competitive position in the
insurance industry could suffer and it would be more difficult for us to market our products. A ratings downgrade could also adversely
limit our access to capital markets, which may increase the cost of debt. A significant downgrade could result in a substantial loss of
business as policyholders move to other companies with higher claims-paying and financial strength ratings.

If market conditions cause reinsurance to be more costly or unavailable, we may be required to bear increased risks or reduce

the level of our underwriting commitments.

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain amounts of risk underwritten by

our insurance company subsidiaries, especially catastrophe risks and those risks with relatively high policy limits. We also purchase
reinsurance on risks underwritten by others which we reinsure. Market conditions beyond our control determine the availability and cost
of the reinsurance protection we seek to purchase, which may affect the level of our business and profitability. Our reinsurance contracts
are generally subject to annual renewal, and we may be unable to maintain our current reinsurance contracts or to obtain other
reinsurance contracts in adequate amounts and at favorable rates. In addition, we may be unable to obtain reinsurance on terms
acceptable to us relating to certain lines of business that we intend to begin writing. If we are unable to renew our expiring contracts or
to obtain new reinsurance contracts, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures,
we would have to reduce the level of our underwriting commitments, especially catastrophe exposed risks.

Depending on conditions in the financial markets and the general economy, we may be unable to raise debt or equity capital if

needed.

If conditions in the financial markets and the general economy are unfavorable, which may result from disruptions, uncertainty or
volatility in the capital and credit markets, we may be unable to access debt or equity capital on acceptable terms if needed, which could
have a negative impact on our ability to invest in our insurance company subsidiaries and/or to take advantage of opportunities to
expand our business, such as possible acquisitions and the creation of new ventures, and inhibit our ability to refinance our existing
indebtedness if we desire to do so, on terms acceptable to us.

We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate

any such acquired companies or successfully invest in such ventures.

As part of our present strategy, we continue to evaluate possible acquisition transactions and the start-up of complementary
businesses on an ongoing basis, and at any given time we may be engaged in discussions with respect to possible acquisitions and new
ventures. We cannot assure you that we will be able to identify suitable acquisition targets or insurance ventures, that such transactions
will be financed and completed on acceptable terms or that our future acquisitions or start-up ventures will be successful. The process of
integrating any companies we do acquire or investing in new ventures may have a material adverse effect on our results of operations
and financial condition.

If we experience difficulties with our information technology, telecommunications or other computer systems, our ability to

conduct our business could be negatively or severely impacted.

Our business is highly dependent upon our employees' ability to perform necessary business functions in an efficient and

uninterrupted fashion. A shut-down of, or inability to access, one or more of our facilities, a power outage or a failure of one or more of
our information technology, telecommunications or other computer systems could significantly impair our employees' ability to perform
such functions on a timely basis. In the event of a disaster such as a natural catastrophe, terrorist attack or industrial accident, or the
infection of our systems by a malicious computer virus, our systems could be inaccessible for an extended period of time. In addition,
because our information technology and telecommunications systems interface with and depend on third-party systems, we could
experience service denials or failures of controls if demand for our service exceeds capacity or a third-party system fails or experiences
an interruption. If our business continuity plans or system security does not sufficiently address such a business interruption, system
failure or service denial, our ability to write and process new and renewal business, provide customer service, pay claims in a timely
manner or perform other necessary business functions could be significantly impaired and our business could be harmed.

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Failure to maintain the security of our networks and confidential data may expose us to liability.

Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer

systems and networks. Computer viruses, hackers, employee misconduct and other external hazards could expose our data systems to
security breaches. In addition, we routinely transmit and receive personal, confidential and proprietary information by email and other
electronic means. Our outsourcing of certain technology and business process functions to third parties may expose us to enhanced risk
related to data security. While we attempt to develop secure data transmission capabilities with these third-party vendors and others with
whom we do business, we may be unable to put in place such secure capabilities with all of such vendors and third parties and, in
addition, these third parties may not have appropriate controls in place to protect the confidentiality of the sensitive information being
transferred. Our failure to protect sensitive personal and our proprietary information, whether owing to breaches of our own systems or
those of our vendors, could result in significant monetary and reputational damages. These increased risks, and expanding regulatory
requirements regarding data security, could expose us to data loss, monetary and reputational damages and significant increases in
compliance costs. As a result, our ability to conduct our business could be materially and adversely affected.

We could be adversely affected if our controls to ensure compliance with guidelines, policies and legal and regulatory standards

are not effective.

Our business is highly dependent on our ability to engage on a daily basis in a large number of insurance underwriting, claim

processing and investment activities, many of which are highly complex. These activities often are subject to internal guidelines and
policies, as well as legal and regulatory standards, including those related to privacy, anti-corruption, anti-bribery and global finance and
insurance matters. Our continued expansion into new international markets has brought about additional requirements. A control system,
no matter how well designed and operated, can provide only reasonable assurance that the control system's objectives will be met. If our
controls are not effective, it could lead to financial loss, unanticipated risk exposure (including underwriting, credit and investment risk)
or damage to our reputation.

Risks Relating to Our Investments

A significant amount of our assets is invested in fixed maturity securities and is subject to market fluctuations.

Our investment portfolio consists substantially of fixed maturity securities. As of December 31, 2016, our investment in fixed
maturity securities was approximately $13.2 billion, or 75.6% of our total investment portfolio, including cash and cash equivalents. As
of that date, our portfolio of fixed maturity securities consisted of the following types of securities: U.S. Government securities (3.9%);
state and municipal securities (34.8%); corporate securities (30.8%); asset-backed securities (14.5%); mortgage-backed securities (9.1%)
and foreign government (6.9%).

The fair value of these assets and the investment income from these assets fluctuate depending on general economic and market
conditions. The fair value of fixed maturity securities generally decreases as interest rates rise. If significant inflation or an increase in
interest rates were to occur, the fair value of our fixed maturity securities would be negatively impacted. Conversely, if interest rates
decline, investment income earned from future investments in fixed maturity securities will be lower. Some fixed maturity securities,
such as mortgage-backed and other asset-backed securities, also carry prepayment risk as a result of interest rate fluctuations.
Additionally, given the historically low interest rate environment, we may not be able to successfully reinvest the proceeds from
maturing securities at yields commensurate with our target performance goals.

The value of investments in fixed maturity securities is subject to impairment as a result of deterioration in the credit worthiness of

the issuer, default by the issuer (including states and municipalities) in the performance of its obligations in respect of the securities
and/or increases in market interest rates. To a large degree, the credit risk we face is a function of the economy; accordingly, we face a
greater risk in an economic downturn or recession. During periods of market disruption, it may be difficult to value certain of our
securities, particularly if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes
that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases,
more securities may require additional subjectivity and management judgment.

Although the historical rates of default on state and municipal securities have been relatively low, our state and municipal fixed

maturity securities could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue. The
economic downturn has resulted in many states and municipalities operating under deficits or projected deficits, the severity and
duration of which could have an adverse impact on both the valuation of our state and municipal fixed maturity securities and the issuer's
ability to perform its obligations thereunder. Additionally, our investments are subject to losses as a result of a general decrease in
commercial and economic activity for an industry sector in which we invest, as well as risks inherent in particular securities.

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Although we attempt to manage these risks through the use of investment guidelines and other oversight mechanisms and by
diversifying our portfolio and emphasizing preservation of principal, our efforts may not be successful. Impairments, defaults and/or rate
increases could reduce our net investment income and net realized investment gains or result in investment losses. Investment returns are
currently, and will likely continue to remain, under pressure due to the significant volatility experienced in the financial markets,
economic uncertainty, more generally, and the shape of the yield curve. As a result, our exposure to the risks described above could
materially and adversely affect our results of operations.

We have invested a portion of our assets in equity securities, merger arbitrage securities, investment funds, private equity, loans

and real estate related assets, which are subject to significant volatility and may decline in value.

We invest a portion of our investment portfolio in equity securities, merger arbitrage securities, investment funds, private equity,
loans and real estate related assets. At December 31, 2016, our investment in these assets was approximately $3.5 billion, or 19.8%, of
our investment portfolio, including cash and cash equivalents.

Merger and arbitrage trading securities were $300 million, or 1.7% of our investment portfolio, including cash and cash

equivalents at December 31, 2016. Merger arbitrage involves investing in the securities of publicly held companies that are the targets in
announced tender offers and mergers. Merger arbitrage differs from other types of investments 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. Our merger arbitrage
positions are exposed to the risk associated with the completion of announced deals, which are subject to regulatory as well as political
and other risks.

Real estate related investments, including directly owned, investment funds and loans receivable, were $1.9 billion, or 11.1% of

our investment portfolio, including cash and cash equivalents, at December 31, 2016. We also invest in aviation and rail equipment
funds, hedged equity and energy and other investment funds. The values of these investments are subject to fluctuations based on
changes in the economy and interest rates in general and the related asset valuations in particular. In addition, our investments in real
estate related assets and other alternative investments are less liquid than our other investments.

These investments are subject to significant volatility as a result of the conditions in the financial and commodity markets and the

global economy.

Risks Relating to Purchasing Our Securities

We are an insurance holding company and, therefore, may not be able to receive dividends in needed amounts.

As an insurance holding company, our principal assets are the shares of capital stock of our insurance company subsidiaries. We

have to rely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on
outstanding debt obligations, paying dividends to stockholders and repurchasing our shares and paying corporate expenses. The payment
of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future
earnings of these subsidiaries. During 2017, the maximum amount of dividends that can be paid without regulatory approval is
approximately $580 million. As a result, in the future we may not be able to receive dividends from these subsidiaries at times and in
amounts necessary to meet our obligations, pay dividends or repurchase shares.

Laws and regulations of the jurisdictions in which we conduct business could delay, deter or prevent an attempt to acquire
control of us that stockholders might consider to be desirable, and may restrict a stockholder's ability to purchase our common stock.

Generally, United States insurance holding company laws require that, before a person can acquire control of an insurance

company, prior written approval must be obtained from the insurance regulatory authorities in the state in which that insurance company
is domiciled. Pursuant to applicable laws and regulations, “control” over an insurer is generally presumed to exist if any person, directly
or indirectly, owns, controls, holds the power to vote, or holds proxies representing 10% or more of the voting securities of that insurer.
Indirect ownership includes ownership of the shares of our common stock. Thus, the insurance regulatory authorities of the states in
which our insurance subsidiaries are domiciled are likely to apply these restrictions on acquisition of control to any proposed acquisition
of our common stock. Some states require a person seeking to acquire control of an insurer licensed but not domiciled in that state to
make a filing prior to completing an acquisition if the acquirer and its affiliates, on the one hand, and the target insurer and its affiliates,
on the other hand, have specified market shares in the same lines of insurance in that state. Additionally, many foreign jurisdictions
where we conduct business impose similar restrictions and requirements.

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While these provisions may not require acquisition approval, they can lead to the imposition of conditions on an acquisition that
could delay or prevent its consummation. These laws may discourage potential acquisition proposals and may delay, deter or prevent a
change in control of us through transactions, and in particular unsolicited transactions, that some or all of our stockholders might
consider to be desirable.

Certain provisions in our organizational documents may have the effect of hindering, delaying or preventing third party
takeovers and thus may prevent our stockholders from receiving premium prices for their shares in an unsolicited takeover or make
it more difficult for third parties to replace our current management.

Provisions of our Restated Certificate of Incorporation and By-Laws, as well as state insurance statutes, may hinder, delay or
prevent unsolicited acquisitions or changes of our control. These provisions may also have the effect of making it more difficult for third
parties to cause the replacement of our current management without the concurrence of our board of directors.

These provisions include:

• our classified board of directors and the ability of our board to increase its size and to appoint directors to fill newly created

directorships;

•

the requirement that 80% of our stockholders must approve mergers and other transactions between us and the holder of 5% or
more of our shares, unless the transaction was approved by our board of directors prior to such holder's acquisition of 5% of our
shares; and

•

the need for advance notice in order to raise business or make nominations at stockholders' meetings.

These provisions may discourage potential acquisition proposals and may delay, deter or prevent a change in control of us through

transactions, and in particular unsolicited transactions, that some or all of our stockholders might consider to be desirable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our

fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934.

ITEM 2. PROPERTIES

W. R. Berkley and its subsidiaries own or lease office buildings or office space suitable to conduct their operations. At
December 31, 2016, the Company had aggregate office space of 3,840,380 square feet, of which 1,096,329 were owned and 2,744,051
were leased.

Rental expense for the Company's operations was approximately $47,453,000 $46,271,000 and $45,189,000 for 2016, 2015

and 2014, respectively. Future minimum lease payments, without provision for sublease income, are $45,305,000 in 2017,
$40,634,000 in 2018 and $199,459,000 thereafter.

ITEM 3. LEGAL PROCEEDINGS

The Company's subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their

insurance and reinsurance businesses. The Company's estimates of the costs of settling such matters are reflected in its aggregate
reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material
adverse effect on its financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER

PURCHASES OF EQUITY SECURITIES

The common stock of the Company is traded on the New York Stock Exchange under the symbol “WRB”.

2016:
Fourth Quarter

Third Quarter

Second Quarter

First Quarter

2015:
Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Price Range

High

Low

Dividends
Declared Per
Share

66.91 $
60.08
59.93
56.53

57.27 $
58.46
53.40
51.78

55.55 $
56.12
54.56
47.57

52.36 $
51.91
48.72
47.45

0.63 (1)
0.63 (2)
0.13
0.12

0.12
0.12
0.12
0.11

_______________________
(1) Includes a special dividend of $0.50 per share paid in November 2016.
(2) Includes a special dividend of $0.50 per share paid in October 2016.

The closing price of the common stock on February 22, 2017 as reported on the New York Stock Exchange was $71.15 per

share. The approximate number of record holders of the common stock on February 22, 2017 was 355.

Set forth below is a summary of the shares repurchased by the Company during the fourth quarter of 2016 and the remaining

number of shares authorized for purchase by the Company during such period.

October 2016
November 2016

December 2016

Total Number of
Shares Purchased
204,326
370,226
—

Average Price
Paid per Share
57.30
56.22
—

Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
204,326
370,226
—

Maximum
Number of Shares
that may yet be
Purchased Under
the Plans or
Programs
7,221,312
6,851,086
6,851,086

For equity compensation plan information, see Item 12 of this annual report on Form 10-K.

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ITEM 6. SELECTED FINANCIAL DATA

(In thousands, except per share data)

Net premiums written
Net premiums earned

Net investment income

Insurance service fees

Net investment gains

Revenues from non-insurance businesses

Total revenues

Interest expense

Income before income taxes

Income tax expense

Noncontrolling interests

Net income to common stockholders

Data per common share:

Net income per basic share

Net income per diluted share

Common stockholders’ equity

Cash dividends declared

Weighted average shares outstanding:

Basic

Diluted

Investments

Total assets

Year Ended December 31,

2016
6,423,913 $
6,293,348
564,163
138,944
267,005
390,348
7,654,184
140,896
896,438
(292,953 )

(1,569 )
601,916

2014

2015
6,189,515 $ 5,996,947 $
6,040,609
512,645
139,440
92,324
421,102
7,206,457
130,946
732,030
(227,923 )

5,744,418
600,885
117,443
254,852
410,022
7,128,928
128,174
952,196
(302,593 )

(413 )
503,694

(719 )
648,884

4.91
4.68
41.65
1.51

4.06
3.87
37.31
0.47

5.07
4.86
36.21
1.43

122,651
128,553

124,040
130,189
16,649,792 $ 15,351,467 $ 15,591,824 $
21,730,967
23,364,844

127,874
133,652

21,716,691

2013
5,500,173 $
5,226,537
544,291
107,513
121,544
407,623
6,408,534
123,177
698,888
(193,587 )

(5,376 )
499,925

3.69
3.55
32.79
0.39

2012
4,898,539
4,673,516
586,763
103,133
210,465
247,113
5,823,554
126,302
701,928
(191,285 )

(51 )
510,592

3.72
3.56
31.66
1.35

135,305
140,743

137,097
143,315
14,548,630 $ 14,467,440
20,155,896
20,155,896

Reserves for losses and loss expenses

Senior notes and other debt

Subordinated debentures

Common stockholders’ equity

11,197,195
1,760,595
727,630
5,047,208

10,669,150
1,844,621
340,320
4,600,246

10,369,701
2,115,527
340,060
4,589,945

10,080,941
1,692,442
339,800
4,336,035

9,751,086
1,871,535
243,206
4,306,217

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United

States and operates worldwide in two business segments of the property and casualty business: Insurance and Reinsurance. Our
decentralized structure provides us with the flexibility to respond quickly and efficiently to local or specific market conditions and to
pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and
risk characteristics. While providing our business units with certain operating autonomy, our structure allows us to capitalize on the
benefits of economies of scale through centralized capital, investment, reinsurance and enterprise risk management, and actuarial,
financial and corporate legal staff support. Our primary sources of revenues and earnings are its insurance operations and its
investments.

An important part of our strategy is to form new operating units to capitalize on various business opportunities. Over the years,

the Company has formed numerous new operating units that are focused on important parts of the economy in the U.S., including
healthcare, cyber security, energy and agriculture, and on growing international markets, including Scandinavia, Australia, the Asia-
Pacific region, South America and Mexico.

The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate
adequacy of premium rates is not known with certainty at the time an insurance policy is issued because premiums are determined
before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which
are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change
the extent of coverage and the effects of economic inflation on the amount of compensation for injuries or losses. General insurance
prices are also influenced by available insurance capacity, i.e., the level of statutory capital and surplus employed in the industry, and
the industry’s willingness to deploy that capital.

Although insurance prices have generally increased for most lines of business since 2011, the rate of increase has declined in
more recent years. That decline accelerated in 2016. Loss costs have also increased over that period of time. With the low level of
interest rates available, current price levels for certain lines of business remain below the prices required for the Company to achieve
its long-term return objectives. Part of the Company's strategy is to selectively reduce its business in areas where it believes returns are
not adequate. Price changes are reflected in the Company’s results over time as premiums are earned.

The Company’s profitability is also affected by its investment income and investment gains. The Company’s invested assets are
invested principally in fixed maturity securities. The return on fixed maturity securities is affected primarily by general interest rates,
as well as the credit quality and duration of the securities. Returns available on fixed maturity investments are at historically low
levels. The Company's investment income has been negatively impacted by the low fixed maturity investment returns, and will be
further impacted if investment returns remain at this level.

The Company also invests in equity securities, merger arbitrage securities, investment funds (including energy related funds),

private equity, loans and real estate related assets. The Company's investments in investment funds and its other alternative
investments have experienced, and the Company expects to continue to experience, greater fluctuations in investment income.

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Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses,
assumed premiums and other-than-temporary impairments of investments. Management believes these policies and estimates are the
most critical to its operations and require the most difficult, subjective and complex judgments.

Reserves for Losses and Loss Expenses. To recognize liabilities for unpaid losses, either known or unknown, insurers establish

reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with
respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based
on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial
measurements. Such estimates are also susceptible to change as significant periods of time may elapse between the occurrence of an
insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that
loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment
based upon known information about the claim at that time. The estimate represents an informed judgment based on general reserving
practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of
claim. Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer,
potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general
expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of
coverage provided.

In examining reserve adequacy, several factors are considered in estimating the ultimate economic value of losses. These factors

include, among other things, historical data, legal developments, changes in social attitudes and economic conditions, including the
effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of
current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are based on
management’s informed estimates and judgments using currently available data. As additional experience and other data become
available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that
would be reflected in our results in periods in which such estimates and assumptions are changed.

Reserves do not represent a certain calculation of liability. Rather, reserves represent an estimate of what management expects the
ultimate settlement and claim administration will cost. While the methods for establishing reserves are well tested over time, the major
assumptions about anticipated loss emergence patterns are subject to uncertainty. These estimates, which generally involve actuarial
projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of trends in claims
severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the
Company’s control. These variables are affected by external and internal events, such as inflation and economic volatility, judicial and
litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which make it more difficult to
accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long
periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the
Company cannot provide assurance that its current reserves will prove adequate in light of subsequent events.

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. For example, the paid loss and incurred loss
development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of
paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred
loss development methods would be less credible than other actuarial methods. 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” and 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. Examples of changes in terms and

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conditions that can have a significant impact on reserve levels are the use of aggregate policy limits, the expansion of coverage
exclusions, whether or not defense costs are within policy limits, and changes in deductibles and attachment points.

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. Management believes the estimates and assumptions it makes in the reserving process provide the best estimate of the
ultimate cost of settling claims and related expenses with respect to insured events which have occurred; however, different
assumptions and variables could lead to significantly different reserve estimates.

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. If the actual level of loss
frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s estimate. The
following table reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity, relative to our
assumptions, on our loss estimate for claims occurring in 2016:

(In thousands)

Severity (+/-)
1%
5%

10%

Frequency (+/-)

10%

76,915 $
231,511
424,755

231,511 $
392,229
593,126

424,755
593,126
803,590

Our net reserves for losses and loss expenses of approximately $9.6 billion as of December 31, 2016 relate to multiple accident

years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the
amounts reflected above. The impact of such changes would likely be manifested gradually over the course of many years, as the
magnitude of the changes became evident.

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Approximately $1.4 billion, or 14%, of the Company’s net loss reserves as of December 31, 2016 relate to the Reinsurance
segment. There is a higher degree of uncertainty and greater variability regarding estimates of assumed loss reserves because those
estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not
timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim
information by ceding companies, the claim settlement tail for assumed reinsurance is extended. Management considers the impact of
delayed reporting in its selection of assumed loss development factors.

Information received from ceding companies is used to set initial expected loss ratios, to establish case reserves and to estimate

reserves for incurred but not reported losses on assumed reinsurance business. This information, which is generally provided through
reinsurance intermediaries, is gathered through the underwriting process and from periodic claim reports and other correspondence
with ceding companies. The Company performs underwriting and claim audits of selected ceding companies to determine the
accuracy and completeness of information provided to the Company. The information received from the ceding companies is
supplemented by the Company’s own loss development experience with similar lines of business as well as industry loss trends and
loss development benchmarks.

Following is a summary of the Company’s reserves for losses and loss expenses by business segment as of December 31, 2016

and 2015:

(In thousands)

Insurance
Reinsurance

Net reserves for losses and loss expenses
Ceded reserves for losses and loss expenses

Gross reserves for losses and loss expenses

2016
8,215,798 $
1,374,467
9,590,265
1,606,930
11,197,195 $

2015
7,876,193
1,368,679
9,244,872
1,424,278
10,669,150

Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of December 31,

2016 and 2015:

(In thousands)

December 31, 2016
Other liability
Workers’ compensation (1)
Professional liability
Commercial automobile
Short-tail lines (2)

Total primary
Reinsurance (1)

Total

December 31, 2015
Other liability
Workers’ compensation (1)
Professional liability
Commercial automobile
Short-tail lines (2)

Total primary
Reinsurance (1)

Total
____________________

Reported Case
Reserves

Incurred But
Not Reported

Total

1,186,425 $
1,596,079
255,971
344,143
330,887
3,713,505
653,615
4,367,120 $

1,079,641 $
1,655,726
256,783
352,208
317,375
3,661,733
631,666
4,293,399 $

2,136,189 $
1,326,469
492,985
252,978
293,672
4,502,293
720,852
5,223,145 $

1,947,637 $
1,263,508
478,796
242,071
282,448
4,214,460
737,013
4,951,473 $

3,322,614
2,922,548
748,956
597,121
624,559
8,215,798
1,374,467
9,590,265

3,027,278
2,919,234
735,579
594,279
599,823
7,876,193
1,368,679
9,244,872

(1) Reserves for excess and assumed workers’ compensation business are net of an aggregate net discount of $640 million and $699

million as of December 31, 2016 and 2015, respectively.

(2) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler

and machinery and other lines.

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The Company evaluates reserves for losses and loss expenses on a quarterly basis. Changes in estimates of prior year losses are

reported when such changes are made. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of
recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding
individual claims and aggregate claim trends.

Certain of the Company's insurance and reinsurance contracts are retrospectively rated, whereby the Company collects more or
less premiums based on the level of loss activity. For those contracts, changes in loss and loss expenses for prior years may be fully or
partially offset by additional or return premiums.

Net prior year development (i.e, the sum of prior year reserve changes and prior year earned premiums changes) for each of the

last three years ended December 31, are as follows:

(In thousands)
Decrease in prior year loss reserves
Increase in prior year earned premiums

Net favorable prior year development

2016
29,904 $
29,000
58,904 $

2015
46,713 $
16,730
63,443 $

2014
75,764
9,088
84,852

Favorable prior year development (net of additional and return premiums) was $59 million in 2016.

Insurance - Reserves for the Insurance segment developed favorably by $53 million in 2016. The favorable development was
primarily related to workers' compensation business, and was partially offset by unfavorable development for medical professional
liability business.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident

For medical professional liability business, unfavorable development was primarily related to a class of business that has been

discontinued. The adverse development for that business stemmed mainly from accident years 2010 through 2015.

Reinsurance - Reserves for the Reinsurance segment developed favorably by $6 million in 2016. The favorable development was

primarily related to direct facultative reinsurance business and to accident years 2008 through 2014.

Favorable prior year development (net of additional and return premiums) was $63 million in 2015.

Insurance - Reserves for the Insurance segment developed favorably by $52 million in 2015. The favorable development was
primarily related to workers' compensation, other liability business and commercial property, and was partially offset by unfavorable
development for commercial automobile liability business and professional indemnity business.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident
years, including those prior to 2006. In 2015, reported workers' compensation losses were below our expectations for many of our
operating units. In addition, overall loss frequency and severity trends emerged better than the assumptions underlying our previous
reserve estimates. The long term trend of declining workers' compensation claim frequency continued in 2015. The improvement is
attributable to better workplace safety and to benign medical severity trends as we continue to invest in medical case management
services and higher usage of preferred provider networks.

For other liability business, favorable development was concentrated in accident years 2007 through 2013. The favorable

development was primarily related to our excess and surplus lines casualty business that has benefited from a persistent improvement
in claim frequency trends over the past several years.

For commercial property business, favorable development was attributable to accident years 2012 through 2014 and was driven

by favorable frequency and severity trends on property business written in Lloyd's.

For commercial automobile business, adverse development was primarily related to large losses for long-haul trucking business
and to accident years 2011 through 2014. The higher loss cost trends for the commercial automobile industry are attributable, in part,
to the increase in miles driven as the economy improved and fuel prices declined over the past several years.

For professional indemnity business in the U.K., adverse development was primarily for accident years 2006 through 2013.

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Reinsurance - Reserves for the Reinsurance segment developed favorably by $11 million in 2015. The favorable development

was primarily related to direct facultative reinsurance business and to accident years 2005 through 2013. Loss reserves developed
favorably for umbrella business and for other liability coverage for contractors.

Favorable prior year development (net of additional and return premiums) was $85 million in 2014.

Insurance - For the Insurance segment, favorable development in 2014 of $69 million was driven principally by other liability
business for accident years 2006 through 2010, primarily related to our excess and surplus lines casualty business. Reported losses
during these years continued to be below our initial expectations at the time the business was written, largely as a result of persistent
improvement in claim frequency trends (i.e., number of reported claims per unit of exposure). As these accident years have matured,
the weighting of actuarial methods has shifted from methods based on initial expected losses to methods based on actual reported
losses. We believe the favorable claim frequency trends we have seen during this time period are due to changes in the mix of business
written and to the general slowdown in the economy. Commercial automobile reported unfavorable development primarily as a result
of large losses for long-haul trucking business in 2012 and 2013. The favorable development was also offset by adverse reserve
development driven primarily by unexpected large losses from accident years 2009-2012 in the professional indemnity line of business
in the United Kingdom.

Reinsurance - For the Reinsurance segment, favorable reserve development in 2014 of $16 million was driven primarily by
assumed professional liability excess of loss and umbrella treaty business, as well as direct facultative business. This was partially
offset by adverse development on brokerage facultative business caused by completed operations losses associated with construction
projects in accident years prior to 2009.

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’
compensation reserves that were discounted was $1,907 million and $2,308 million at December 31, 2016 and 2015, respectively. The
aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was $640 million and $699 million at
December 31, 2016 and 2015, respectively. At December 31, 2016, discount rates by year ranged from 2.0% to 6.5%, with a weighted
average discount rate of 3.9%.

Substantially all of discounted workers’ compensation reserves (97% of total discounted reserves at December 31, 2016) are
excess workers’ compensation reserves. In order to properly match loss expenses with income earned on investment securities
supporting the liabilities, reserves for excess workers’ compensation business are discounted using risk-free discount rates determined
by reference to the U.S. Treasury yield curve. These rates are determined annually based on the weighted average rate for the period.
Once established, no adjustments are made to the discount rate for that period, and any increases or decreases in loss reserves in
subsequent years are discounted at the same rate, without regard to when any such adjustments are recognized. The expected loss and
loss expense payout patterns subject to discounting are derived from the Company’s loss payout experience.

The Company also discounts reserves for certain other long-duration workers’ compensation reserves (representing approximately

Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive
under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of
assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the
related amount of earned premiums, commissions and incurred losses associated with those premiums are recorded. Estimated
assumed premiums receivable were approximately $68 million and $62 million at December 31, 2016 and 2015, respectively. The
assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies
during the underwriting and negotiation of agreements, reports received from ceding companies and discussions and correspondence
with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with
similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be
received under its assumed reinsurance agreements.

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Other-Than-Temporary Impairments (OTTI) of Investments. The cost of securities is adjusted where appropriate to include a
provision for decline in value which is considered to be other-than-temporary. An other-than-temporary decline is considered to occur
in investments where there has been a sustained reduction in fair value and where the Company does not expect the fair value to
recover prior to the time of sale or maturity. Since equity securities do not have a contractual cash flow or maturity, the Company
considers whether the price of an equity security is expected to recover within a reasonable period of time.

The Company classifies its fixed maturity securities and preferred stocks by credit rating, primarily based on ratings assigned by

credit rating agencies. For purposes of classifying securities with different ratings, the Company uses the lower rating if two ratings
were assigned and the middle rating if three ratings were assigned, unless the Company’s own analysis indicates that the lower rating
is more appropriate. Securities that are not rated by a rating agency are evaluated and classified by the Company on a case-by-case
basis.

Fixed Maturity Securities – For securities that we intend to sell or, more likely than not, would be required to sell, a decline in
value below amortized cost is considered to be OTTI. The amount of OTTI is equal to the difference between amortized cost and fair
value at the balance sheet date. For securities that we do not intend to sell or expect to be required to sell, a decline in value below
amortized cost is considered to be an OTTI if we do not expect to recover the entire amortized cost basis of a security (i.e., the present
value of cash flows expected to be collected is less than the amortized cost basis of the security).

The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows
expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the decline in value not
considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the
security) is recognized in other comprehensive income.

Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized

debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various
economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities
involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer
to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination
is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

The following table provides a summary of fixed maturity securities in an unrealized loss position as of December 31, 2016:

($ in thousands)

Unrealized loss less than 20% of amortized cost
Unrealized loss of 20% or greater of amortized cost:

Less than twelve months
Twelve months and longer

Total

Number of
Securities

Aggregate
Fair Value

Unrealized
Loss

739 $

5,123,665 $

90,505

2
3
744 $

5,324
774

5,129,763 $

3,776
302
94,583

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at
December 31, 2016 is presented in the table below.

($ in thousands)

State and municipal
Corporate
Mortgage-backed securities
Asset-backed securities
Foreign government

Total

Number of
Securities

Aggregate
Fair Value

Unrealized
Loss

1 $
10
11
4
15
41 $

5,136 $
78,462
22,987
1,256
112,985
220,826 $

3,725
1,370
1,106
362
341
6,904

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The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized loss is 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 and does not consider any of these securities to be OTTI. For the year ended
December 31, 2016, there were no OTTI for fixed maturity securities recognized in earnings. OTTI for fixed maturity securities for
the year ended December 31, 2015 were $9.0 million.

Preferred Stocks – At December 31, 2016, there was one preferred stock in an unrealized loss position, with an aggregate fair

value of $22.0 million and a gross unrealized loss of $3.6 million. The preferred stock is rated investment grade. Management
believes the unrealized loss is due primarily to market and sector related factors and does not consider it to be OTTI. For the year
ended December 31, 2016, there were no OTTI for preferred stocks. OTTI for preferred stocks for the year ended December 31, 2015
were $13.4 million.

Common Stocks – At December 31, 2016, there were two common stocks in an unrealized loss position with an aggregate fair
value of $9.1 million and a gross unrealized loss of $1.1 million. Based on management's view of these securities, the Company does
not consider the common stocks to be OTTI. For the year ended December 31, 2016, OTTI for common stocks were $18.1 million.
OTTI for common stocks for the year ended December 31, 2015 were $10.9 million.

Loans Receivable – The Company monitors the performance of its loans receivable, including current market conditions for each
loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms
will not be met, an analysis is performed and a valuation reserve is established, if necessary, with a charge to earnings. Loans
receivable are reported net of a valuation reserve of $3 million and $2 million at December 31, 2016 and 2015, respectively.

The Company monitors the performance of its loans receivable and assesses the ability of each 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. Loans receivable with a potential for default are further assessed using discounted cash flow analysis
and comparable cost and sales methodologies, if appropriate.

Fair Value Measurements. The Company’s fixed maturity and equity securities available for sale and its 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. Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement
date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets.
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the
extent that observable inputs are not available. The fair value of the vast majority of the Company’s portfolio is based on observable
data (other than quoted prices) and, accordingly, is classified as Level 2.

In classifying particular financial securities in the fair value hierarchy, the Company uses its judgment to determine whether the

market for a security is active and whether significant pricing inputs are observable. The Company determines the existence of an
active market by assessing whether transactions occur with sufficient frequency and volume to provide reliable pricing information.
The Company determines whether inputs are observable based on the use of such information by pricing services and external
investment managers, the uninterrupted availability of such inputs, the need to make significant adjustments to such inputs and the
volatility of such inputs over time. If the market for a security is determined to be inactive or if significant inputs used to price a
security are determined to be unobservable, the security is categorized in Level 3 of the fair value hierarchy.

Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which
may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate
securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities,
bids, offers and reference data. Quoted prices are often unavailable for recently issued securities that are infrequently traded or
securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the
Company determines fair value based on independent broker quotations and other observable market data. 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 data, projections and business developments of the issuer and
other relevant information.

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The following is a summary of pricing sources for the Company's fixed maturity securities available for sale as of December 31,

2016:

(In thousands)

Pricing source:
Independent pricing services
Syndicate manager
Directly by the Company based on:

Observable data
Cash flow model

Total

Carrying
Value

Percent
of Total

12,944,960
48,443

108,556
183
13,102,142

98.1 %
0.4

1.5
—
100.0 %

Independent pricing services - Substantially all of the Company’s fixed maturity securities available for sale were priced by
independent pricing services (generally one U.S. pricing service plus additional pricing services with respect to a limited number of
foreign securities held by the Company). The prices provided by the independent pricing services are generally based on observable
market data in active markets (e.g., broker quotes and prices observed for comparable securities). 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 based upon current trading levels for similar securities. If the prices appear
unusual to the Company, they are re-examined and the value is either confirmed or revised. In addition, the Company periodically
performs independent price tests of a sample of securities to ensure proper valuation and to verify our understanding of how securities
are priced. As of December 31, 2016, the Company did not make any adjustments to the prices provided by the pricing services. Based
upon the Company’s review of the methodologies used by the independent pricing services, these securities were classified as Level 2.

Syndicate manager – The Company has a 15% participation in a Lloyd’s syndicate, and the Company’s share of the securities

owned by the syndicate is priced by the syndicate’s manager. The majority of the securities are liquid, short duration fixed maturity
securities. The Company reviews the syndicate manager’s pricing methodology and audited financial statements and holds discussions
with the syndicate manager as necessary to confirm its understanding and agreement with security prices. Based upon the Company’s
review of the methodologies used by the syndicate manager, these securities were classified as Level 2.

Observable data – If independent pricing is not available, the Company prices the securities directly. Prices are based on
observable market data where available, including current trading levels for similar securities and non-binding quotations from
brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company 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 obtained from brokers. Since these securities were priced based on observable data, they were
classified as Level 2.

Cash flow model – If the above methodologies are not available, the Company prices securities using a discounted cash flow

model based upon assumptions as to prevailing credit spreads, interest rates and interest rate volatility, time to maturity and
subordination levels. Discount rates are adjusted to reflect illiquidity where appropriate. These securities were classified as Level 3.

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Results of Operations for the Years Ended December 31, 2016 and 2015

Business Segment Results

Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred

expressed as a percentage of net premiums earned), expense ratios (underwriting expenses expressed as a percentage of net premiums
earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended
December 31, 2016 and 2015. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment
income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting
profit.

(In thousands)

Insurance

Gross premiums written
Net premiums written
Net premiums earned
Loss ratio
Expense ratio
GAAP combined ratio
Reinsurance
Gross premiums written
Net premiums written
Net premiums earned
Loss ratio
Expense ratio
GAAP combined ratio
Consolidated
Gross premiums written
Net premiums written
Net premiums earned
Loss ratio
Expense ratio
GAAP combined ratio

2016

2015

6,835,062
5,775,913
5,652,903

6,607,492
5,591,397
5,431,500

61.0 %
32.6
93.6

60.8 %
32.6
93.4

708,639
648,000
640,445

642,501
598,118
609,109

61.8 %
38.8
100.6

58.4 %
38.2
96.6

7,543,701
6,423,913
6,293,348

7,249,993
6,189,515
6,040,609

61.1 %
33.2
94.3

60.5 %
33.2
93.7

Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net

income per diluted share for the years ended December 31, 2016 and 2015.

(In thousands, except per share data)
Net income to common stockholders
Weighted average diluted shares
Net income per diluted share

2016

2015

601,916 $
128,553

4.68 $

503,694
130,189
3.87

The Company reported net income of $602 million in 2016 compared to $504 million in 2015. The 20% increase in net income
was primarily due to increases in after-tax net investment gains of $114 million, after-tax net investment income of $34 million and
after-tax foreign currency gains of $8 million, partially offset by a decrease in after-tax underwriting income of $13 million, an
increase in after-tax interest expense of $7 million, a decrease in after-tax income from non-insurance businesses of $6 million, a
decrease in after-tax service fee income of $8 million and an an increase in after-tax other expenses of $24 million. The number of
weighted average diluted shares decreased as a result of the Company’s repurchases of its common stock in 2016 and 2015.

Premiums. Gross premiums written were $7,544 million in 2016, an increase of 4% from $7,250 million in 2015. The growth was

due to a combination of increased exposures and higher rates. Approximately 77% of policies expiring in 2016 were renewed, the
same renewal retention rate as for policies expiring in 2015.

Average renewal premium rates (adjusted for change in exposures) increased 3.4% in 2014, 1.2% in 2015 and 0.3% in 2016.
However, overall loss costs are also increasing, and current market price levels for certain lines of business remain below the prices
required for the Company to achieve its long-term return objectives.

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A summary of gross premiums written in 2016 compared with 2015 by line of business within each business segment follows:

• Insurance gross premiums increased 3% to $6,835 million in 2016 from $6,607 million in 2015. Gross premiums increased
$194 million (10%) for other liability, $61 million (10%) for professional liability and $32 million (2%) for workers'
compensation, partially offset by decreases of $30 million (4%) for commercial auto and $29 million (2%) for short-tail lines.

• Reinsurance gross premiums increased 10% to $709 million in 2016 from $643 million in 2015. Gross premiums written

decreased $6 million (1%) for casualty lines and increased $72 million (34%) for property lines.

Net premiums written were $6,424 million in 2016, an increase of 4% from $6,190 million in 2015. Ceded reinsurance premiums

as a percentage of gross written premiums were 15% in both 2016 and 2015.

Premiums earned increased 4% to $6,293 million in 2016 from $6,041 million in 2015. Insurance premiums (including the impact

of rate changes) are generally earned evenly over the policy term, and accordingly recent rate increases will be earned over the
upcoming quarters. Premiums earned in 2016 are related to business written during both 2016 and 2015. Audit premiums were $156
million in 2016 compared with $153 million in 2015.

Net Investment Income. Following is a summary of net investment income for the years ended December 31, 2016 and 2015:

(In thousands)
Fixed maturity securities, including cash and cash
equivalents and loans receivable
Investment funds

Arbitrage trading account

Real estate
Equity securities available for sale

Gross investment income
Investment expenses

Total

Amount

Average Annualized
Yield

2016

2015

2016

2015

444,247
99,301
18,693
7,054
4,028
573,323
(9,160 )
564,163 $

428,325
62,228
16,891
11,294
4,624
523,362
(10,717 )
512,645

3.2 %
8.1
4.8
0.7
2.1
3.4
—
3.4 %

3.2 %
5.2
3.3
1.4
2.7
3.3
—
3.2 %

Net investment income increased 10% to $564 million in 2016 from $513 million in 2015 primarily due to an increase in income
from investment funds of $37 million and fixed maturity securities of $16 million. Investment funds are reported on a one quarter lag.
The average annualized yield for fixed maturity securities was 3.2% in both 2016 and 2015; accordingly the increase in fixed maturity
securities income was mainly a result of a larger investment base. The effective duration of the fixed maturity portfolio was 3.1 years
at December 31, 2016, down from 3.3 years at December 31, 2015. Average invested assets, at cost (including cash and cash
equivalents), were $16.7 billion in 2016 and $16.0 billion in 2015.

Insurance Service Fees. The Company earns fees from an insurance distribution business and as a servicing carrier of workers'

compensation assigned risk plans for certain states. Service fees were $139 million in 2016 and 2015.

Net Realized Gains on Investment Sales. The Company buys and sells securities on a regular basis in order to maximize its total

return on investments. Decisions to sell securities are based on management’s view of the underlying fundamentals of specific
securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic
conditions. Net realized gains on investment sales were $285 million in 2016 compared with $126 million in 2015. In 2016, realized
gains were primarily related to the sale of Aero Precision Industries and the sale of some shares of a publicly traded common stock. In
2015, realized gains were primarily related to sale of some shares of a publicly traded common stock held by one of the Company's
investment funds.

Other-Than-Temporary Impairments. The cost of securities is adjusted where appropriate to include a provision for a decline in

value that is considered to be other-than-temporary. Other-than-temporary impairments of $18 million in 2016 were primarily related
to common stock. In 2015, other-than-temporary impairments of $33 million were primarily related to equity securities.

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from a business engaged in the

distribution of promotional merchandise and aviation-related businesses that provide services to aviation markets, including (i) the
distribution, manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii)
avionics, fuel, maintenance, storage and charter services. Revenues from non-insurance businesses decreased to $390 million in 2016
from $421 million in 2015, primarily due to the sale of Aero Precision Industries in August 2016.

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Losses and Loss Expenses. Losses and loss expenses increased to $3,846 million in 2016 from $3,656 million in 2015. The
consolidated loss ratio was 61.1% in 2016 and 60.5% in 2015. Catastrophe losses, net of reinsurance recoveries and reinstatement
premiums, were $105 million in 2016 compared with $58 million in 2015, an increase of 0.7 loss ratio points. Favorable prior year
reserve development (net of premium offsets) was $59 million in 2016 compared with $63 million in 2015, a difference of 0.2 loss
ratio points (see "- Critical Accounting Estimates - Reserves for Losses and Loss Expenses"). The loss ratio excluding catastrophe
losses and prior year reserve development decreased 0.3 points to 60.3% in 2016 from 60.6% in 2015.

A summary of loss ratios in 2016 compared with 2015 by business segment follows:

• Insurance - The loss ratio of 61.0% in 2016 was 0.2 points higher than the loss ratio of 60.8% in 2015. Catastrophe losses
were $89 million in 2016 compared with $55 million in 2015, an increase of 0.6 loss ratio points. Favorable prior year
reserve development was $53 million in 2016 compared with $52 million in 2015, reflecting no difference of loss ratio
points. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.4 points to 60.4% in 2016
from 60.8% in 2015.

• Reinsurance - The loss ratio of 61.8% in 2016 was 3.4 points higher than the loss ratio of 58.4% in 2015. Catastrophe losses
were $16 million in 2016 compared with $3 million in 2015, an increase of 2.0 loss ratio points. Favorable prior year reserve
development was $6 million in 2016 compared with $11 million in 2015, a difference of 0.9 loss ratio points. The loss ratio
excluding catastrophe losses and prior year reserve development increased 0.5 points to 60.2% in 2016 from 59.7% in 2015.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses:

(In thousands)

Policy acquisition and operating insurance expenses
Service expenses
Net foreign currency (gains) losses
Other costs and expenses

Total

2016
2,089,203 $
138,908
(11,904 )
179,412
2,395,619 $

2015
2,005,498
127,365
400
156,487
2,289,750

Policy acquisition and operating insurance expenses are comprised of commissions paid to agents and brokers, premium taxes
and other assessments and internal underwriting costs. Policy acquisition and operating insurance expenses increased 4%, the same as
the increase in net premiums earned of 4%. The expense ratio (policy acquisition and operating insurance expenses expressed as a
percentage of premiums earned) was 33.2% in both 2016 and 2015.

Service expenses, which represent the costs associated with the fee-based businesses, increased 9% to $139 million.

Net foreign currency (gains) losses result from transactions denominated in a currency other than an operating unit’s functional
currency. Net foreign currency gains were $12 million in 2016 compared to losses of $400 thousand in 2015.

Other costs and expenses represent general and administrative expenses of the parent company and other expenses not allocated
to business segments, including the cost of certain long-term incentive plans. Other costs and expenses increased to $179 million in
2016 from $156 million in 2015 due partially to the formation of additional operating units that had not yet commenced operations.

Expenses from Non-Insurance Businesses. Expenses from non-insurance businesses represent costs associated with a business
engaged in the distribution of promotional merchandise and aviation-related businesses that include (i) cost of goods sold related to
aircraft and products sold and services provided, and (ii) general and administrative expenses. Expenses from non-insurance
businesses were $375 million in 2016 compared to $397 million in 2015, with the decrease primarily related to the sale of Aero
Precision Industries in August 2016.

Interest Expense. Interest expense was $141 million in 2016 compared with $131 million in 2015. During 2016, the Company
repaid $87 million of debt on various issuances, mainly in connection with the sale of Aero Precision Industries. The Company repaid
$200 million of 5.6% senior notes at maturity on May 15, 2015. In February 2016, the Company issued $110 million of 5.9%
subordinated debentures maturing in 2056, and in May 2016, the Company issued $290 million of 5.75% subordinated debentures
maturing in 2056.

Income Taxes. The effective income tax rate was 33% in 2016 compared to 31% in 2015. The higher tax rate in 2016 was due, in

part, to higher capital gains and state taxes. The effective income tax rate differs from the federal income tax rate of 35% primarily
because of tax-exempt investment income.

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Results of Operations for the Years Ended December 31, 2015 and 2014

Business Segment Results

Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred

expressed as a percentage of net premiums earned), expense ratios (underwriting expenses expressed as a percentage of net premiums
earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended
December 31, 2015 and 2014. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment
income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting
profit.

(In thousands)

Insurance

2015

2014

6,607,492
5,591,397
5,431,500

6,367,950
5,345,663
5,074,308

60.8 %
32.6
93.4

60.6 %
32.9
93.5

642,501
598,118
609,109

694,888
651,284
670,110

58.4 %
38.2
96.6

62.0 %
34.0
96.0

7,249,993
6,189,515
6,040,609

7,062,838
5,996,947
5,744,418

60.5 %
33.2
93.7

60.8 %
33.0
93.8

Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net

income per diluted share for the years ended December 31, 2015 and 2014.

(In thousands, except per share data)
Net income to common stockholders
Weighted average diluted shares
Net income per diluted share

2015
503,694 $
130,189

3.87 $

2014
648,884
133,652
4.86

The Company reported net income of $504 million in 2015 compared to $649 million in 2014. The 22% decrease in net income
was primarily due to decreases in after-tax net investment gains of $106 million and after-tax net investment income of $60 million
partially offset by an increase in after-tax net underwriting income of $14 million. The number of weighted average diluted shares
decreased as a result of the Company’s repurchases of its common stock in 2015 and 2014.

Premiums. Gross premiums written were $7,250 million in 2015, an increase of 3% from $7,063 million in 2014. The growth was

due to a combination of rate increases and increased exposures. Approximately 77% of policies expiring in 2015 were renewed,
compared with a 79% renewal retention rate for policies expiring in 2014.

Average renewal premium rates (adjusted for change in exposures) increased 6.5% in 2013, 3.4% in 2014 and 1.2% in 2015.
However, overall loss costs are also increasing, and current market price levels for certain lines of business remain below the prices
required for the Company to achieve its long-term return objectives.

A summary of gross premiums written in 2015 compared with 2014 by line of business within each business segment follows:

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• Insurance - gross premiums increased 4% to $6,607 million in 2015 from $6,368 million in 2014. Gross premiums increased

$142 million (9%) for workers' compensation, $112 million (6%) for other liability, $32 million (5%) for professional
liability and $5 million (1%) for commercial auto, partially offset by a decrease of $52 million (3%) for short-tail lines.

• Reinsurance - gross premiums decreased 8% to $643 million in 2015 from $695 million in 2014. Gross premiums written

decreased $36 million (8%) for casualty lines and $16 million (7%) for property lines.

Net premiums written were $6,190 million in 2015, an increase of 3% from $5,997 million in 2014. Ceded reinsurance premiums

as a percentage of gross written premiums were 15% in 2015 and 2014.

Premiums earned increased 5% to $6,041 million in 2015 from $5,744 million in 2014. Insurance premiums (including the impact

of rate changes) are generally earned evenly over the policy term, and rate increases were earned over the following quarters.
Premiums earned in 2015 are related to business written during both 2015 and 2014. Audit premiums were $153 million in 2015
compared with $118 million in 2014.

Net Investment Income. Following is a summary of net investment income for the years ended December 31, 2015 and 2014:

(In thousands)
Fixed maturity securities, including cash and cash
equivalents and loans receivable
Investment funds

Arbitrage trading account

Real estate
Equity securities available for sale

Gross investment income
Investment expenses

Total

Amount

Average Annualized
Yield

2015

2014

2015

2014

$ 428,325
62,228
16,891
11,294
4,624
523,362
(10,717 )

$ 439,489
131,649
22,438
10,228
6,726
610,530

(9,645 )

3.2 %
5.2
3.3
1.4
2.7
3.3

3.4 %
12.7
3.9
1.5
3.7
3.9

$ 512,645 $ 600,885

3.2 %

3.9 %

Net investment income decreased 15% to $513 million in 2015 from $601 million in 2014 primarily due to an decrease in income

from energy investment funds. Investment funds are reported on a one quarter lag. The average annualized yield for fixed maturity
securities declined to 3.2% from 3.4% due to lower long-term reinvestment yields available in the market. The effective duration of
the fixed maturity portfolio was 3.3 years in December 31, 2015 compared with 3.2 years at December 31, 2014. Average invested
assets, at cost (including cash and cash equivalents), were $16.0 billion in 2015 and $15.6 billion in 2014.

Insurance Service Fees. The Company earns fees from an insurance distribution business and as a servicing carrier of workers'
compensation assigned risk plans for certain states. Service fees increased 19% to $139 million in 2015 from $117 million in 2014
primarily as a result of an increase in fees from assigned risk plans.

Net Realized Gains on Investment Sales. The Company buys and sells securities on a regular basis in order to maximize its total

return on investments. Decisions to sell securities are based on management’s view of the underlying fundamentals of specific
securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic
conditions. Net realized gains on investment sales were $126 million in 2015 compared with $255 million in 2014. In 2015, realized
gains were related primarily to the sale of some shares of a publicly traded common stock held by one the Company's investment
funds. In 2014, realized gains included an $86 million gain from the sale of a commercial office building in London, England and a
$39 million gain resulting from the initial public offering of the above public company.

Other-Than-Temporary Impairments. The cost of securities is adjusted where appropriate to include a provision for a decline in
value that is considered to be other-than-temporary. Other-than-temporary impairments of $33 million in 2015 were primarily related
to equity securities. There were no other-than-temporary impairments in 2014.

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from aviation-related

businesses that provide services to aviation markets, including (i) the distribution, manufacturing, repair and overhaul of aircraft parts
and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel, maintenance, storage and charter services. Revenues
from non-insurance businesses increased to $421 million in 2015 from $410 million in 2014.

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Losses and Loss Expenses. Losses and loss expenses increased to $3,656 million in 2015 from $3,491 million in 2014. The
consolidated loss ratio was 60.5% in 2015 and 60.8% in 2014. Catastrophe losses, net of reinsurance recoveries and reinstatement
premiums, were $58 million in 2015 compared with $87 million in 2014, a decrease of 0.4 loss ratio points. Favorable prior year
reserve development (net of premium offsets) was $63 million in 2015 compared with $85 million in 2014, a difference of 0.3 loss
ratio points (see "- Critical Accounting Estimates - Reserves for Losses and Loss Expenses"). The loss ratio excluding catastrophe
losses and prior year reserve development decreased 0.2 points to 60.6% in 2015 from 60.8% in 2014.

A summary of loss ratios in 2015 compared with 2014 by business segment follows:

• Insurance - The loss ratio of 60.8% in 2015 was 0.2 points higher than the loss ratio of 60.6% in 2014. Catastrophe losses

were $55 million in 2015 compared with $85 million in 2014, a decrease of 0.7 loss ratio points. Favorable prior year reserve
development was $52 million in 2015 compared with $69 million in 2014, a difference of 0.4 loss ratio points. The loss ratio
excluding catastrophe losses and prior year reserve development increased 0.5 points to 60.8% in 2015 from 60.3% in 2014.

• Reinsurance - The loss ratio of 58.4% in 2015 was 3.6 points lower than the loss ratio of 62.0% in 2014. Catastrophe losses
were $3 million in 2015 compared with $2 million in 2014, an increase of 0.2 loss ratio points. Favorable prior year reserve
development was $11 million in 2015 compared with $16 million in 2014, a difference of 0.6 loss ratio points. The loss ratio
excluding catastrophe losses and prior year reserve development decreased 4.4 points to 59.7% in 2015 from 64.1% in 2014.

• Operating Costs and Expenses. Following is a summary of other operating costs and expenses:

(In thousands)

Policy acquisition and operating insurance expenses
Service expenses
Net foreign currency losses (gains)
Other costs and expenses

Total

2015
2,005,498 $
127,365
400
156,487
2,289,750 $

2014
1,896,530
102,726
(27 )
158,227
2,157,456

Policy acquisition and operating insurance expenses are comprised of commissions paid to agents and brokers, premium taxes and
other assessments and internal underwriting costs. Policy acquisition and operating insurance expenses increased 6%, compared with
an increase in net premiums earned of 5%. The expense ratio (policy acquisition and operating insurance expenses expressed as a
percentage of premiums earned) increased to 33.2% in 2015 from 33.0% in 2014.

Service expenses, which represent the costs associated with the fee-based businesses, increased 24% to $127 million as a result of

the acquisition of a specialty property and casualty insurance distribution company in 2014.

Net foreign currency losses (gains) result from transactions denominated in a currency other than an operating unit's functional

currency.

Other costs and expenses represent general and administrative expenses of the parent company and other expenses not allocated
to business segments, including the cost of certain long-term incentive plans. Other costs and expenses decreased to $156 million in
2015 from $158 million in 2014.

Expenses from Non-Insurance Businesses. Expenses from non-insurance businesses represent costs associated with aviation-

related businesses that include (i) cost of goods sold related to aircraft and products sold and services provided, and (ii) general and
administrative expenses. Expenses from non-insurance businesses were $397 million in 2015 compared to $401 million in 2014.

Interest Expense. Interest expense was $131 million in 2015 compared with $128 million in 2014. In August 2014, the Company
issued $350 million of 4.75% senior notes due 2044. A portion of the proceeds was used to repay $200 million of 5.60% senior notes
at maturity on May 15, 2015.

Income Taxes. The effective income tax rate was 31% in 2015 compared to 32% in 2014. The lower tax rate in 2015 was due, in
part, to the utilization of foreign tax credits. The effective income tax rate differs from the federal income tax rate of 35% primarily
because of tax-exempt investment income.

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Investments

As part of its investment strategy, the Company establishes a level of cash and highly liquid short-term and intermediate-term
securities that, combined with expected cash flow, it believes is adequate to meet its payment obligations. Due to the historically low
fixed maturity investment returns, the Company invests in equity securities, merger arbitrage securities, investment funds, private
equity, loans and real estate related assets. The Company's investments in investment funds and its other alternative investments have
experienced, and the Company expects to continue to experience, greater fluctuations in investment income.

The Company also attempts to maintain an appropriate relationship between the effective duration of the investment portfolio and

the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration of the investment portfolio
was 3.1 years and 3.3 years at December 31, 2016 and 2015, respectively. The Company’s investment portfolio and investment-related
assets as of December 31, 2016 were as follows:

($ in thousands)

Fixed maturity securities:

U.S. government and government agencies
State and municipal:
Special revenue
State general obligation
Corporate backed
Local general obligation
Pre-refunded (1)

Total state and municipal

Mortgage-backed securities:

Agency
Residential-Prime
Commercial
Residential-Alt A

Total mortgage-backed securities

Asset-backed securities

Corporate:

Industrial
Financial
Utilities
Other

Total corporate

Foreign government

Total fixed maturity securities

Equity securities available for sale:

Common stocks
Preferred stocks

Total equity securities available for sale

Investment funds
Real estate

Cash and cash equivalents
Arbitrage trading account
Loans receivable

Total investments

______________

Carrying
Value

Percent
of Total

513,802

2.9 %

2,847,343
570,699
410,653
387,129
376,261
4,592,085

826,796
191,492
152,863
34,438
1,205,589
1,907,860

2,379,400
1,397,274
237,544
54,309
4,068,527
902,805
13,190,668

445,858
223,342
669,200
1,198,146
1,184,981
795,285
299,999
106,798
17,445,077

16.2
3.3
2.4
2.2
2.2
26.3

4.7
1.1
0.9
0.2
6.9
10.9

13.6
8.0
1.4
0.3
23.2
5.2
75.6

2.6
1.3
3.8
6.9
6.8
4.6
1.7
0.6
100.0 %

(1) Pre-refunded securities are securities for which an escrow account has been established to fund the remaining payments of principal and interest

through maturity. Such escrow accounts are funded almost exclusively with U.S. Treasury and U.S. government agency securities.

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Fixed Maturity Securities. The Company’s investment policy with respect to fixed maturity securities is generally to purchase

instruments with the expectation of holding them to their maturity. However, management of the available for sale portfolio is
considered necessary to maintain an approximate matching of assets and liabilities as well as to adjust the portfolio as a result of
changes in financial market conditions and tax considerations.

The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total
return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are
its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and
currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in
order to mitigate the impact of an interest rate rise on the fair value of the portfolio. Similarly, in a period in which management
expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain
foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed
maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason
to expect these gains to continue in future periods.

At December 31, 2016, investments in foreign government fixed maturity securities were as follows:

(In thousands)

Argentina
Australia
Canada
United Kingdom
Brazil
Germany
Supranational (1)
Norway
Uruguay
Singapore
Colombia
Total
_______________

Carrying
Value
239,064
227,075
162,584
105,906
48,830
41,419
35,172
25,187
6,057
6,003
5,508
902,805

(1) Supranational represents investments in the North American Development Bank, European Investment Bank and International Bank for

Reconstruction & Development.

Equity Securities Available for Sale. Equity securities available for sale primarily represent investments in mid-sized
capitalization common stock and high-dividend yielding common and preferred stocks issued by large market capitalization
companies. At December 31, 2016, common stocks included HealthEquity, Inc. shares, which had previously been reported in
investment funds.

Investment Funds. At December 31, 2016, the carrying value of investment funds was $1,198 million, including investments in
real estate funds of $642 million, energy funds of $91 million, hedged equity funds of $74 million and other funds of $391 million.
Investment funds are primarily reported on a one-quarter lag.

Real Estate. Real estate is directly owned property held for investment. At December 31, 2016, real estate properties in operation
included a long-term ground lease in Washington D.C., a hotel in Memphis, Tennessee, an office complex in New York City and office
buildings in West Palm Beach and Palm Beach, Florida. In addition, there are two properties under development: an office building in
London and a mixed-use project in Washington D.C. The Company expects to fund further development costs for these projects with a
combination of its own funds and external financing.

Arbitrage Trading Account. The arbitrage trading account is comprised of direct investments in arbitrage securities. Merger
arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and
mergers.

Loans Receivable. Loans receivable, which are carried at amortized cost, had an amortized cost of $107 million and an aggregate
fair value of $108 million at December 31, 2016. The amortized cost of loans receivable is net of a valuation allowance of $3 million
as of December 31, 2016. Loans receivable include real estate loans of $92 million that are secured by commercial real estate located
primarily in North Carolina and New York. Real estate loans receivable generally earn interest at floating LIBOR-based interest rates
and have maturities (inclusive of extension options) through August 2025. Loans receivable include commercial loans of $14 million
that are secured by business assets and have fixed interest rates and varying maturities not exceeding 10 years.

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Liquidity and Capital Resources

Cash Flow. Cash flow provided from operating activities decreased to $848 million in 2016 from $881 million in 2015. The

decrease in cash flow was due primarily to higher taxes paid and losses paid. Paid losses as a percentage of earned premiums were
55% in 2016 and 54% in 2015.

As a holding company, the Company derives cash from its subsidiaries in the form of dividends, tax payments and management

fees. Maximum amounts of dividends that our insurance companies can pay without regulatory approval are prescribed by statute.
During 2017, the maximum amount of dividends which can be paid without regulatory approval is approximately $580 million. The
ability of the holding company to service its debt obligations is limited by the ability of its insurance subsidiaries to pay dividends. In
the event dividends, tax payments and management fees available to the holding company were inadequate to service its debt
obligations, the Company would need to raise capital, sell assets or restructure its debt obligations.

The Company's insurance subsidiaries' principal sources of cash are premiums, investment income, service fees and proceeds
from sales and maturities of portfolio investments. The principal uses of cash are payments for claims, taxes, operating expenses and
dividends. The Company expects its insurance subsidiaries to fund the payment of losses with cash received from premiums,
investment income and fees. The Company generally has targeted an effective duration for its investment portfolio that is within one
year of the average duration of its liabilities so that portions of its investment portfolio mature throughout the claim cycle and are
available for the payment of claims if necessary. In the event operating cash flow and proceeds from maturities and prepayments of
fixed income securities are not sufficient to fund claim payments and other cash requirements, the remainder of the Company's cash
and investments is available to pay claims and other obligations as they become due. The Company's investment portfolio is highly
liquid, with approximately 80% invested in cash, cash equivalents and marketable fixed maturity securities as of December 31, 2016.
If the sale of fixed maturity securities were to become necessary, a realized gain or loss equal to the difference between the cost and
sales price of securities sold would be recognized.

Debt. At December 31, 2016, the Company had senior notes, subordinated debentures and other debt outstanding with a carrying

value of $2,488 million and a face amount of $2,523 million. The maturities of the outstanding debt are $4 million in 2017, $443
million in 2019, $300 million in 2020, $427 million in 2022, $250 million in 2037, $350 million in 2044, $350 million in 2053 and
$400 million in 2056.

In February 2016, the Company issued $110 million aggregate principal amount of its 5.9% subordinated debentures due 2056,

and in May 2016, the Company issued $290 million aggregate principal amount of its 5.75% subordinated debentures due 2056.
During 2016, the Company repaid $87 million of debt on various issuances, mainly in connection with the sale of Aero Precision
Industries. In May 2015, the Company repaid $200 million of 5.60% senior notes at maturity and $71 million of mortgage loans.

Equity. The Company repurchased 2,395,892, 4,502,025 and 5,816,468 shares of its common stock in 2016, 2015 and 2014,
respectively. The aggregate cost of the repurchases was $132 million in 2016, $224 million in 2015 and $239 million in 2014. At
December 31, 2016, total common stockholders’ equity was $5.05 billion, common shares outstanding were 121,193,599 and
stockholders’ equity per outstanding share was $41.65.

Total Capital. Total capitalization (equity, senior notes and other debt and subordinated debentures) was $7.5 billion at

December 31, 2016. The percentage of the Company’s capital attributable to senior notes, subordinated debentures and other debt was
33% at December 31, 2016 and 32% at December 31, 2015.

Federal and Foreign Income Taxes

The Company files a consolidated income tax return in the U.S. and foreign tax returns in each of the countries in which it has
overseas operations. At December 31, 2016, the Company had a gross deferred tax asset (net of valuation allowance) of $472 million
(which primarily relates to loss and loss expense reserves and unearned premium reserves) and a gross deferred tax liability of $606
million (which primarily relates to deferred policy acquisition costs and unrealized investment gains). The realization of the deferred
tax asset is dependent upon the Company's ability to generate sufficient taxable income in future periods. Based on historical results
and the prospects for future operations, management anticipates that it is more likely than not that future taxable income will be
sufficient for the realization of this asset.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $55 million of its non-
U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. However, in the future, if
such earnings were distributed to the Company, taxes of approximately $6.1 million, assuming all tax credits are realized, would be
payable on such undistributed earnings and would be reflected in the tax provision for the year in which these earnings are no longer
intended to be permanently reinvested in the foreign subsidiary.

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Reinsurance

The Company follows customary industry practice of reinsuring a portion of its exposures in exchange for paying reinsurers a part

of the premiums received on the policies it writes. Reinsurance is purchased by the Company principally to reduce its net liability on
individual risks and to protect it against catastrophic losses. Although reinsurance does not legally discharge an insurer from its
primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the
reinsurance coverage. The Company monitors the financial condition of its reinsurers and attempts to place its coverages only with
substantial and financially sound carriers. Reinsurance coverage and retentions vary depending on the line of business, location of the
risk and nature of loss. The Company’s reinsurance purchases include the following:

• Property reinsurance treaties - The Company purchases property reinsurance to reduce its exposure to large individual property

losses and catastrophe events. Following is a summary of significant property reinsurance treaties in effect as of January 1, 2017:
The Company’s property per risk reinsurance generally covers losses between $2.5 million and $50 million. The Company’s
catastrophe excess of loss reinsurance program provides protection for net losses between $30 million and $355 million for the
majority of business written by its U.S. Insurance segment operating units, excluding offshore energy. The Company has separate
catastrophe excess of loss reinsurance for business written through its Lloyd’s Syndicate that provides protection for losses
between $8.5 million and $55 million for events in North America. For North American losses greater than $55 million, the
business written through the Company's Lloyd's Syndicate is protected within the U.S. program up to $355 million. The
Company’s catastrophe reinsurance agreements are subject to certain limits, exclusions and reinstatement premiums.

• Casualty reinsurance treaties - The Company purchases casualty reinsurance to reduce its exposure to large individual casualty

losses, workers’ compensation catastrophe losses and casualty losses involving multiple claimants or insureds for the majority of
business written by its U.S. companies. A significant casualty treaty in effect as of January 1, 2017 provides protection for losses
between $5 million and $75 million from single events with claims involving two or more claimants or insureds. The treaty also
covers casualty contingency losses in excess of $5 million and up to $75 million. For losses involving two or more claimants for
primary workers’ compensation business, coverage is generally in place for losses between $5 million and $200 million. For
excess workers’ compensation business, such coverage is generally in place for losses between $25 million and $265 million.

• Facultative reinsurance - The Company also purchases facultative reinsurance on certain individual policies or risks that are in

excess of treaty reinsurance capacity.

• Other reinsurance - Depending on the operating unit, the Company purchases specific additional reinsurance to supplement the

above programs.

The Company places most of its significant casualty treaties on a “risk attaching” basis. Under risk attaching treaties, all claims
from policies incepting during the period of the reinsurance contract are covered even if they occur after the expiration date of the
reinsurance contract. If the Company is unable to renew or replace its existing reinsurance coverage, protection for unexpired policies
would remain in place until their expiration. In such case, the Company could revise its underwriting strategy for new business to
reflect the absence of reinsurance protection. Property catastrophe and workers’ compensation catastrophe reinsurance is generally
placed on a “losses occurring basis,” whereby only claims occurring during the period are covered. If the Company is unable to renew
or replace this reinsurance coverage, unexpired policies would not be protected, though we frequently have the option to purchase run-
off coverage in our treaties.

Following is a summary of earned premiums and loss and loss expenses ceded to reinsurers for each of the three years ended

December 31, 2016:

Year Ended December 31,

(In thousands)

Earned premiums
Losses and loss expenses

2016

2015
$ 1,099,462 $ 1,050,840 $ 1,030,666
475,802

707,336

501,999

2014

Ceded earned premiums increased 4.6% in 2016 to $1,099 million, in-line with the increase in direct and assumed earned

premiums of 4.2%. The ceded losses and loss expenses ratio increased 16 points to 64% in 2016 from 48% in 2015.

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The following table presents the credit quality of amounts due from reinsurers as of December 31, 2016. Amounts due

from reinsurers are net of reserves for uncollectible reinsurance of $1 million in the aggregate.

(In thousands)

Reinsurer
Amounts due in excess of $20 million:
Alleghany Group
Munich Re
Swiss Re
Lloyd’s of London
Partner Re
Axis Capital
Everest Re
Hannover Re Group
Berkshire Hathaway
Chubb Limited
Korean Re
Validus
Arch Capital Group
Other reinsurers:
Rated A- or better
Secured (2)
All Others

Subtotal
Residual markets pools (3)

Total

_________________

Rating

(1)

Amount

A+
AA-
AA-
A+
A+
A+
A+
AA-
AA+
AA
A
A
A+

150,604
130,623
120,906
118,607
74,948
72,600
53,482
52,472
49,340
35,304
28,654
22,871
21,359

157,553
69,882
18,725
1,177,930
566,050
1,743,980

(1) S&P rating, or if not rated by S&P, A.M. Best rating.

(2) Secured by letters of credit or other forms of collateral.

(3) Many states require licensed insurers that provide workers' compensation insurance to participate in programs that provide

workers' compensation to employers that cannot procure coverage from an insurer on a voluntary basis. Insurers can fulfill this
residual market obligation by participating in pools where results are shared by the participating companies. The Company acts as
a servicing carrier for workers' compensation pools in certain states. As a servicing carrier, the Company writes residual market
business directly and then cedes 100% of this business to the respective pool. As a servicing carrier, the Company receives fee
income for its services. The Company does not retain underwriting risk, and credit risk is limited as ceded balances are jointly
shared by all the pool members.

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Contractual Obligations

Following is a summary of the Company's contractual obligations as of December 31, 2016:

(In thousands)

Estimated Payments By Periods

Gross reserves for losses
Operating lease obligations

Purchase obligations
Subordinated debentures
Debt maturities
Interest payments
Other long-term liabilities

2017
2,907,411 $ 2,000,891 $ 1,482,866 $ 1,083,642 $

2019

2020

2018

45,305
88,941
—
3,615
144,965
4,557

40,634
39,877
—
—
144,892
4,198

35,805
37,769
—
442,590
135,005
3,828

33,575
37,783
—
300,000
109,313
3,524

Total

3,194,794 $ 2,230,492 $ 2,137,863 $ 1,567,837 $

Thereafter
2021
814,559 $ 3,579,611
100,704
29,374
899
35,786
750,000
—
1,026,503
—
2,027,294
97,946
27,149
3,165
980,830 $ 7,512,160

The estimated payments for reserves for losses and loss expenses in the above table represent the projected (undiscounted)
payments for gross loss and loss expense reserves related to losses incurred as of December 31, 2016. The estimated payments in the
above table do not consider payments for losses to be incurred in future periods. These amounts include reserves for reported losses
and reserves for incurred but not reported losses. Estimated amounts recoverable from reinsurers are not reflected. The estimated
payments by year are based on historical loss payment patterns.The actual payments may differ from the estimated amounts due to
changes in ultimate loss reserves and in the timing of the settlement of those reserves. In addition, at December 31, 2016, the
Company had commitments to invest up to $373.2 million and $495.7 million in certain investment funds and real estate construction
projects, respectively. These amounts are not included in the above table.

The Company utilizes letters of credit to back certain reinsurance payments and obligations. Outstanding letters of credit were
$18 million as of December 31, 2016. The Company has made certain guarantees to state regulators that the statutory capital of certain
subsidiaries will be maintained above certain minimum levels.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated
entity under which a company has (1) made guarantees, (2) a retained or contingent interest in transferred assets, (3) an obligation
under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated
entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing, hedging or
research and development arrangements with the Company. The Company has no arrangements of these types that management
believes may have a material current or future effect on our financial condition, liquidity or results of operations.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk. The fair value of the Company’s investments is subject to risks of fluctuations in credit quality and interest rates.

The Company uses various models and stress test scenarios to monitor and manage interest rate risk. The Company attempts to
manage its interest rate risk by maintaining an appropriate relationship between the effective duration of the investment portfolio and
the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration for the fixed maturity
portfolio (including cash and cash equivalents) was 3.1 years and 3.3 years at December 31, 2016 and 2015, respectively.

In addition, the fair value of the Company’s international investments is subject to currency risk. The Company attempts to

manage its currency risk by matching its foreign currency assets and liabilities where considered appropriate.

The following table outlines the groups of fixed maturity securities and their effective duration at December 31, 2016:

($ in thousands)
Cash and cash equivalents
U. S. government and governmental agencies
State and municipal
Asset-backed securities
Corporate
Foreign government
Mortgage-backed securities
Loans receivable
Total

Effective
Duration
(Years)
—

3.0
4.3
0.6
3.5
2.4
4.0
3.7
3.1 $

Fair Value

795,285
513,802
4,604,538
1,907,860
4,068,527
902,805
1,207,282
108,299
14,108,398

Duration is a common measure of the price sensitivity of fixed maturity securities to changes in interest rates. The Company

determines the estimated change in fair value of the fixed maturity securities, assuming parallel shifts in
the yield curve for treasury securities while keeping spreads between individual securities and treasury securities static. The estimated
fair value at specified levels at December 31, 2016 would be as follows:

(In thousands)

Change in interest rates:

300 basis point rise
200 basis point rise
100 basis point rise
Base scenario
100 basis point decline
200 basis point decline
300 basis point decline

Estimated
Fair Value

Change in
Fair Value

$ 12,779,442 $ (1,328,956 )
(893,159 )
(451,181 )
—
455,233
880,580
1,291,946

13,215,239
13,657,217
14,108,398
14,563,631
14,988,978
15,400,344

Arbitrage investing differs from other types of investments in that its focus is 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 believes that this makes
arbitrage investments less vulnerable to changes in general stock market conditions. Potential changes in market conditions are also
mitigated by the implementation of hedging strategies, including short sales.

Additionally, the arbitrage positions are generally hedged against market declines by purchasing put options, selling call options

or entering into swap contracts. The Company's merger arbitrage securities are primarily exposed to the risk of completion of
announced deals, which are subject to regulatory as well as transactional and other risks.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
W. R. Berkley Corporation:

We have audited the accompanying consolidated balance sheets of W. R. Berkley Corporation and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders'
equity, and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of W. R. Berkley Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity
with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), W. R. Berkley Corporation's internal control over financial reporting as of December 31, 2016, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated February 27, 2017 expressed an unqualified opinion on the
effectiveness of the Company's internal control over financial reporting.

New York, New York
February 27, 2017

/S/ KPMG LLP

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

REVENUES:

Net premiums written

Change in net unearned premiums

Net premiums earned

Net investment income
Insurance service fees

Net investment gains:

Net realized gains on investment sales

Other-than-temporary impairments

Net investment gains

Revenues from non-insurance businesses
Other income

Total revenues

OPERATING COSTS AND EXPENSES:

Losses and loss expenses

Other operating costs and expenses

Expenses from non-insurance businesses

Interest expense

Total operating costs and expenses

Income before income taxes

Income tax expense

Net income before noncontrolling interests

Noncontrolling interests

Net income to common stockholders

NET INCOME PER SHARE:

Basic

Diluted

Year Ended December 31,

2016

2015

2014

$ 6,423,913 $ 6,189,515 $ 5,996,947
(252,529 )
5,744,418
600,885
117,443

(130,565 )
(148,906 )
6,293,348 6,040,609
512,645
139,440

564,163
138,944

285,119
(18,114 )
267,005
390,348
376

254,852
—
254,852
410,022
1,308
7,654,184 7,206,457 7,128,928

125,633
(33,309 )
92,324
421,102
337

375,431
140,896

3,845,800 3,656,270
2,395,619 2,289,750
397,461
130,946
6,757,746 6,474,427
732,030
(227,923 )
504,107
(413 )

3,490,567
2,157,456
400,535
128,174
6,176,732
952,196
(302,593 )
649,603
(719 )
$ 601,916 $ 503,694 $ 648,884

896,438
(292,953 )
603,485
(1,569 )

4.91 $
4.68 $

4.06 $
3.87 $

5.07
4.86

See accompanying notes to consolidated financial statements.

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

(In thousands)

Net income before noncontrolling interests
Other comprehensive gain (loss):

Change in unrealized translation adjustments

Change in unrealized investment gains (losses), net of taxes

Change in unrecognized pension obligation, net of taxes

Other comprehensive gain (loss)

Comprehensive income

Comprehensive loss (income) to the noncontrolling interest

Comprehensive income to common shareholders

2016

2015
$ 603,485 $ 504,107 $ 649,603

2014

(124,744 )

(124,193 )
246,518
—
122,325
725,810
1,510

(62,125 )
49,666
6,651
(5,808 )
643,795
(752 )
$ 727,320 $ 253,446 $ 643,043

(125,542 )
—
(250,286 )
253,821
(375 )

See accompanying notes to consolidated financial statements.

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
Assets

Investments:

Fixed maturity securities
Investment funds
Real estate
Arbitrage trading account
Loans receivable
Equity securities available for sale

Total investments
Cash and cash equivalents
Premiums and fees receivable
Due from reinsurers
Deferred policy acquisition costs
Prepaid reinsurance premiums
Trading account receivable from brokers and clearing organizations
Property, furniture and equipment
Goodwill
Accrued investment income
Current federal and foreign income taxes
Other assets

Total assets
Liabilities and Equity
Liabilities:

Reserves for losses and loss expenses
Unearned premiums
Due to reinsurers
Trading account securities sold but not yet purchased
Deferred federal and foreign income taxes
Other liabilities
Senior notes and other debt
Subordinated debentures

Total liabilities
Equity:

Preferred stock, par value $.10 per share:

Authorized 5,000,000 shares; issued and outstanding — none

Common stock, par value $.20 per share:

Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 121,193,599
and 123,307,837 shares, respectively

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, at cost, 113,924,319 and 111,810,081 shares, respectively

Total common stockholders’ equity

Noncontrolling interests

Total equity

Total liabilities and equity

See accompanying notes to consolidated financial statements.

December 31,

2016

2015

$ 13,190,668 $ 12,444,394
1,170,040
936,367
376,697
273,103
150,866
15,351,467
763,631
1,669,186
1,532,829
513,128
394,387
383,115
348,224
153,291
123,164
55,763
442,782
$ 23,364,844 $ 21,730,967

1,198,146
1,184,981
299,999
106,798
669,200
16,649,792
795,285
1,701,854
1,743,980
537,890
413,140
484,593
349,432
144,513
127,047
14,768
402,550

$ 11,197,195 $ 10,669,150
3,137,133
224,752
37,035
6,811
837,937
1,844,621
340,320
17,097,759

3,283,300
213,128
51,179
134,365
916,318
1,760,595
727,630
18,283,710

—

47,024
1,037,446
6,595,987
55,568
(2,688,817 )
5,047,208
33,926
5,081,134

47,024
1,005,455
6,178,070
(66,698 )
(2,563,605 )
4,600,246
32,962
4,633,208
$ 23,364,844 $ 21,730,967

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

COMMON STOCK:

Beginning and end of period

ADDITIONAL PAID IN CAPITAL:

Beginning of period

Restricted stock units issued including tax benefit

Restricted stock units expensed

End of period

RETAINED EARNINGS:

Beginning of period

Net income to common stockholders

Dividends

End of period

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Unrealized investment gains (losses):

Beginning of period

Unrealized gains (losses) on securities not other-than-temporarily impaired

Unrealized gains (losses) on other-than-temporarily impaired securities

End of period

Currency translation adjustments:

Beginning of period

Net change in period

End of period

Net pension asset:

Beginning of period

Net change in period

End of period

Year Ended December 31,

2016

2015

2014

47,024 $

47,024

$ 1,005,455 $

(3,594 )
35,585

991,512 $
(16,748 )
30,691

$ 1,037,446 $ 1,005,455 $

967,440
(3,894 )
27,966
991,512

$ 6,178,070 $ 5,732,410 $ 5,265,015
648,884
(181,489 )
$ 6,595,987 $ 6,178,070 $ 5,732,410

601,916
(183,999 )

503,694
(58,034 )

180,695 $
246,872
(413 )
427,154

306,199 $
(125,391 )

(113 )
180,695

256,566
49,071
562
306,199

(247,393 )
(124,193 )
(371,586 )

(122,649 )
(124,744 )
(247,393 )

(60,524 )

(62,125 )

(122,649 )

—
—
—
55,568 $

—
—
—
(66,698 ) $

(6,651 )
6,651
—
183,550

Total accumulated other comprehensive income (loss)

TREASURY STOCK:
Beginning of period

Stock exercised/vested

Stock issued

Stock repurchased

End of period

NONCONTROLLING INTERESTS:

Beginning of period

Contributions (distributions)

Net income

Other comprehensive income (loss), net of tax

End of period

$ (2,563,605 ) $ (2,364,551 ) $ (2,132,835 )
6,623
594
(238,933 )

6,495
685
(132,392 )

23,975
623
(223,652 )

$ (2,688,817 ) $ (2,563,605 ) $ (2,364,551 )

32,962 $
(546 )
1,569
(59 )
33,926 $

34,189 $
(1,602 )
413
(38 )
32,962 $

33,359
78
719
33
34,189

See accompanying notes to consolidated financial statements.

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
CASH FROM OPERATING ACTIVITIES:

Net income to common stockholders
Adjustments to reconcile net income to net cash from operating activities:
Net investment gains
Depreciation and amortization
Noncontrolling interests
Investment funds
Stock incentive plans
Change in:

Arbitrage trading account
Premiums and fees receivable
Reinsurance accounts
Deferred policy acquisition costs
Current income taxes
Deferred income taxes
Reserves for losses and loss expenses
Unearned premiums
Other

Net cash from operating activities
CASH FLOWS USED IN INVESTING ACTIVITIES:

Proceeds from sale of fixed maturity securities
Proceeds from sale of equity securities
Distributions from investment funds
Proceeds from maturities and prepayments of fixed maturity securities
Purchase of fixed maturity securities
Purchase of equity securities
Real estate purchased
Proceeds from sale of real estate
Change in loans receivable
Net additions to property, furniture and equipment
Change in balances due from security brokers
Cash received in connection with business disposition
Payment for business purchased, net of cash acquired

Net cash used in investing activities
CASH FLOWS USED IN FINANCING ACTIVITIES:

Net proceeds from issuance of debt
Repayment of senior notes and other debt
Cash dividends to common stockholders
Purchase of common treasury shares
Other, net

Net cash used in financing activities
Net impact on cash due to change in foreign exchange rates
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Year Ended December 31,

2016

2015

2014

601,916 $

503,694 $

648,884

(267,005 )
86,051
1,569
(99,301 )
37,174

(10,633 )
(60,403 )
(235,455 )
(25,912 )
42,632
9,012
572,196
149,683
46,852
848,376

2,440,310
143,042
142,601
2,189,365
(5,541,202 )
(202,736 )
(299,123 )
—
166,327
(50,829 )
20,992
250,216
(53,451 )
(794,488 )

(92,324 )
85,139
413
(62,228 )
32,123

(7,173 )
(60,942 )
(31,930 )
(29,860 )
20,428
47,260
397,685
142,699
(63,680 )
881,304

1,388,680
15,833
177,424
2,999,339
(4,455,223 )
(29,526 )
(222,659 )
—
48,909
(63,562 )
(22,666 )
—
(7,312 )
(170,763 )

388,769
(75,487 )
(183,999 )
(132,392 )
(3,823 )
(6,932 )
(15,302 )
31,654
763,631
795,285 $

9,056
(281,086 )
(58,034 )
(223,652 )
(1,602 )
(555,318 )
(66,033 )
89,190
674,441
763,631 $

(254,852 )
88,836
719
(131,649 )
28,068

(50,817 )
(104,174 )
(33,445 )
(42,789 )
(40,935 )
30,812
376,617
277,826
(58,254 )
734,847

633,459
113,251
69,319
2,605,839
(4,292,165 )
(31,207 )
(213,159 )
343,723
21,608
(41,958 )
32,617
15,783
(65,421 )

(808,311 )

354,012
(3,700 )
(181,489 )
(238,933 )
337
(69,773 )
(22,060 )
(165,297 )
839,738
674,441

Cash and cash equivalents at end of year

See accompanying notes to consolidated financial statements.

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W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016, 2015 and 2014

(1) Summary of Significant Accounting Policies

(A) Principles of consolidation and basis of presentation

The 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"). All significant
intercompany transactions and balances have been eliminated. Reclassifications have been made in the 2015 and 2014 financial
statements to conform to the presentation of the 2016 financial statements. 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. The most significant items on our balance sheet that involve a greater degree of accounting estimates that are subject
to change in the future are the valuation of investments, other-than-temporary impairments, loss and loss expense reserves and
premium estimates. Actual results could differ from those estimates.

(B) Revenue recognition

Insurance premiums are recognized as written at the inception of the policy. Reinsurance premiums are estimated based upon
information received from ceding companies, and subsequent differences from such estimates are recorded in the period they are
determined. Insurance and reinsurance premiums are primarily earned on a pro rata basis over the policy term. Fees for services are
earned over the period that the services are provided.

Audit premiums are recognized when they are reliably determinable. The change in accruals for earned but unbilled audit
premiums increased net premiums written and premiums earned by $8 million, $3 million and $9 million in 2016, 2015 and 2014,
respectively.

Revenues from non-insurance businesses are derived from a business engaged in the distribution of promotional merchandise and
aircraft services provided to the general, commercial and military aviation markets. These aircraft services include (i) the distribution,
manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel,
maintenance, storage and charter services. Revenue is recognized upon the shipment of products and parts, the delivery of aircraft, the
delivery of fuel, and upon completion of services.

Insurance service fee revenue represents servicing fees for program administration and claims management services provided
by the Company, including workers' compensation assigned risk plans, as well as insurance brokerage and risk management services.
Fees for program administration, claims management and risk management services are primarily recognized ratably over the related
contract period for which the underlying services are rendered. Commissions for insurance brokerage are generally recognized when
the underlying insurance policy is effective.

Cash equivalents consist of funds invested in money market accounts and investments with an effective maturity of three

months or less when purchased.

(D) Investments

Fixed maturity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses,

net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate
component of stockholders' equity. Fixed maturity securities that the Company has the positive intent and ability to hold to maturity
are classified as held to maturity and reported at amortized cost. Investment income from fixed maturity securities is recognized based
on the constant effective yield method. Premiums and discounts on mortgage-backed securities are adjusted for the effects of actual
and anticipated prepayments on a retrospective basis.

Equity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of

applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of
stockholders' equity.

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Equity and fixed maturity securities that the Company purchased with the intent to sell in the near-term are classified as

trading account securities and are reported at estimated fair value. Realized and unrealized gains and losses from trading activity are
reported as net investment income and are recorded at the trade date. Short sales and short call options are presented as trading
securities sold but not yet purchased. Unsettled trades and the net margin balances held by the clearing broker are presented as a
trading account receivable from brokers and clearing organizations.

Investment funds are carried under the equity method of accounting. For certain investment funds, the Company's share of

the earnings or losses is reported on a one-quarter lag in order to facilitate the timely completion of the Company's consolidated
financial statements.

Loans receivable primarily represent commercial real estate mortgage loans and bank loans and are carried at amortized cost.

The Company monitors the performance of its loans receivable and establishes an allowance for loan losses for loans where the
Company determines it is probable that the contractual terms will not be met, with a corresponding charge to earnings. For loans that
are evaluated individually and deemed to be impaired, the Company establishes a specific allowance based on a discounted cash flow
analysis and comparable cost and sales methodologies, if appropriate. Individual loans that are not considered impaired and smaller-
balance homogeneous loans are evaluated collectively and a general allowance is established if it is considered probable that a loss has
been incurred.

The accrual of interest on loans receivable is discontinued if the loan is 90 days past due based on the contractual terms of the

loan unless the loan is adequately secured and in process of collection. In general, loans are placed on non-accrual status or charged
off at an earlier date if collection of principal or interest is considered doubtful. Interest on these loans is accounted for on a cash basis
until qualifying for return to accrual status. Loans are returned to accrual status when all principal and interest amounts contractually
due are brought current and future payments are reasonably assured.

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.” Fair value of investments is determined based on a fair value hierarchy that
prioritizes the use of observable inputs over the use of unobservable inputs and requires the use of observable inputs when available.
(See Note 13 of the Notes to Consolidated Financial Statements.)

Realized gains or losses represent the difference between the cost of securities sold and the proceeds realized upon sale and

are recorded at the trade date. The Company uses primarily the first-in, first-out method to determine the cost of securities sold.

The cost of securities is adjusted where appropriate to include a provision for a decline in value which is considered to be

other than temporary. An other-than-temporary decline is considered to occur in investments where there has been a sustained
reduction in fair value and where the Company does not expect to recover the cost basis of the investment prior to the time of sale or
maturity. Since equity securities do not have a contractual cash flow or a maturity, the Company considers whether the price of an
equity security is expected to recover within a reasonable period of time.

For fixed maturity securities that the Company intends to sell or, more likely than not, would be required to sell, a decline in

value below amortized cost is considered to be an other-than-temporary impairment (“OTTI”). The amount of OTTI is equal to the
difference between amortized cost and fair value at the balance sheet date. For fixed maturity securities that the Company does not
intend to sell or believes that it is more likely than not it would not be required to sell, a decline in value below amortized cost is
considered to be an OTTI if the Company does not expect to recover the entire amortized cost basis of a security (i.e., the present
value of cash flows expected to be collected is less than the amortized cost basis of the security). The portion of the decline in value
considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized
cost basis of the security) is recognized in earnings. The portion of the decline in value not considered to be a credit loss (i.e., the
difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other
comprehensive income.

Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities,
collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under
various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these
securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of

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the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI
determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

Real estate held for investment purposes is initially recorded at the purchase price, which is generally fair value, and is

subsequently reported at cost less accumulated depreciation. Real estate taxes, interest and other costs incurred during development
and construction are capitalized. Buildings are depreciated on a straight-line basis over the estimated useful lives of the building.
Minimum rental income is recognized on a straight-line basis over the lease term. Income and expenses from real estate are reported
as net investment income. The carrying value of real estate is reviewed for impairment and an impairment loss is recognized if the
estimated undiscounted cash flows from the use and disposition of the property are less than the carrying value of the property.

(E) 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 weighted average number of common shares outstanding during the year. Diluted EPS is based upon the weighted average
number of common and common equivalent shares outstanding during the year 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.

(F) Deferred policy acquisition costs

Acquisition costs associated with the successful acquisition of new and renewed insurance and reinsurance contracts are
deferred and amortized ratably over the terms of the related contracts. Ceding commissions received on reinsurance contracts are
netted against acquisition costs and are recognized ratably over the life of the contract. Deferred policy acquisition costs are presented
net of unearned ceding commissions. Deferred policy acquisition costs are comprised primarily of commissions, as well as
employment-related underwriting costs and premium taxes. Deferred policy acquisition costs are reviewed to determine if they are
recoverable from future income and, if not, are charged to expense. The recoverability of deferred policy acquisition costs is evaluated
separately by each of our operating companies for each of their major lines of business. Future investment income is taken into
account in measuring the recoverability of deferred policy acquisition costs.

(G) Reserves for losses and loss expenses

Reserves for losses and loss expenses are an accumulation of amounts determined on the basis of (1) evaluation of claims for
business written directly by the Company; (2) estimates received from other companies for reinsurance assumed by the Company; and
(3) estimates for losses incurred but not reported (based on Company and industry experience). These estimates are periodically
reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments
are reflected in the statements of income in the period in which they are determined. The Company discounts its reserves for excess
and assumed workers' compensation claims using a risk-free or statutory rate. (See Note 14 of Notes to Consolidated Financial
Statements.)

(H) Reinsurance ceded

The unearned portion of premiums ceded to reinsurers is reported as prepaid reinsurance premiums and earned ratably over

the policy term. The estimated amounts of reinsurance recoverable on unpaid losses are reported as due from reinsurers. To the extent
any reinsurer does not meet its obligations under reinsurance agreements, the Company must discharge its liability. Amounts due from
reinsurers are reflected net of funds held where the right of offset is present. The Company has provided reserves for estimated
uncollectible reinsurance.

(I) Deposit accounting

Contracts that do not meet the risk transfer requirements of GAAP are accounted for using the deposit accounting method.

Under this method, an asset or liability is recognized at the inception of the contract based on consideration paid or received. The
amount of the deposit asset or liability is adjusted at subsequent reporting dates using the interest method with a corresponding credit
or charge to interest income or expense. Deposit liabilities for assumed reinsurance contracts were $51 million and $54 million at
December 31, 2016 and 2015, respectively.

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(J) Federal and foreign income taxes

The Company files a consolidated income tax return in the U.S. and foreign tax returns in countries where it has overseas

operations. The Company's method of accounting for income taxes is the asset and liability method. Under this method, deferred tax
assets and liabilities are measured using tax rates currently in effect or expected to apply in the years in which those temporary
differences are expected to reverse. Interest and penalties, if any, are reported as income tax expense. The Company believes there
are no tax positions that would require disclosure under GAAP. Deferred tax assets are reduced by a valuation allowance if it is more
likely than not that all or a portion of the deferred tax assets will not be realized.

(K) Foreign currency

Gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity's

functional currency) are reported on the statements of income as other operating costs and expenses. Unrealized gains or losses
resulting from translating the results of non-U.S. dollar denominated operations are reported in accumulated other comprehensive
income. Revenues and expenses denominated in currencies other than U.S. dollars are translated at the weighted average exchange
rate during the year. Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date.

(L) Property, furniture and equipment

Property, furniture and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the

estimated useful lives of the respective assets. Depreciation expense was $47 million, $45 million and $44 million for 2016, 2015 and
2014, respectively.

(M) Comprehensive income

Comprehensive income encompasses all changes in stockholders' equity (except those arising from transactions with

stockholders) and includes net income, net unrealized holding gains or losses on available for sale securities, unrealized foreign
currency translation adjustments and changes in unrecognized pension obligations.

(N) Goodwill and other intangible assets

Goodwill and other intangible assets are tested for impairment on an annual basis and at interim periods where circumstances
require. The Company's impairment test as of December 31, 2016 indicated that there were no material impairment losses related to
goodwill and other intangible assets. Intangible assets of $82 million and $94 million are included in other assets as of December 31,
2016 and 2015, respectively.

(O) Stock options

The costs resulting from all share-based payment transactions with employees are recognized in the consolidated financial
statements using a fair-value-based measurement method. Compensation cost is recognized for financial reporting purposes over the
period in which the employee is required to provide service in exchange for the award (generally the vesting period).

(P) Statements of cash flows

Interest payments were $137 million, $130 million and $120 million in 2016, 2015 and 2014, respectively. Income taxes paid

were $232 million, $165 million and $314 million in 2016, 2015 and 2014, respectively. Other non-cash items include unrealized
investment gains and losses and pension expense. (See Note 11 and Note 25 of Notes to Consolidated Financial Statements.)

(Q) Recent accounting pronouncements

Recently adopted accounting pronouncements:

In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2015-02,

Consolidation. ASU 2015-02 makes targeted amendments to the current consolidation accounting guidance, in response to
accounting complexity concerns. The guidance simplifies consolidation accounting by reducing the number of approaches to
consolidation. The Company adopted this updated guidance on January 1, 2016. The adoption of this guidance did not have a
material effect on the Company’s financial condition or results of operations, but did result in additional disclosures.

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In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts. ASU 2015-09 requires

companies that issue short duration insurance contracts to disclose additional information, including: (i) incurred and paid claims
development tables; (ii) frequency and severity of claims; and (iii) information about material changes in judgments made in
calculating the liability for unpaid claim adjustment expenses, including reasons for the change and the effects on the financial
statements. The Company adopted this updated guidance on January 1, 2016 with regard to the annual requirements and on January
1, 2017 with regard to the interim requirements. The amendments in ASU 2015-09 are applied retrospectively by providing
comparative disclosures for each period presented, except for those requirements that apply only to the current period. As the
requirements are disclosure only, the adoption of this guidance did not impact our financial condition or results of operations, but did
result in additional disclosures.

All other accounting and reporting standards that became effective in 2016 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:

In May 2014, the FASB issued ASU 2014-09, Revenue from Customers. ASU 2014-09 clarifies the principles for recognizing
revenue. While insurance contracts are not within the scope of this updated guidance, the Company’s insurance service fee revenue
will be subject to this updated guidance. The updated guidance requires an entity to recognize revenue as performance obligations are
met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is
entitled to receive for those goods or services. The updated guidance, as amended by ASU 2015-14, is effective for public business
entities for annual and interim reporting periods beginning after December 15, 2017. The adoption of this guidance is not expected to
have a material effect on the Company’s financial condition or results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments. ASU 2016-01 amends the accounting guidance for
financial instruments to require all equity investments to be measured at fair value with changes in the fair value recognized through
net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee).
The updated guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017 and
interim periods within those years. The adoption of this guidance is not expected to have a material effect on the Company’s financial
condition upon adoption, but will impact results of operations after adoption of this guidance as unrealized gains and losses on equity
securities will no longer be reported directly in accumulated other comprehensive income (AOCI), but will instead be reported in net
income.

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the accounting and disclosure guidance for leases.

This guidance retains the two classifications of a lease, as either an operating or finance lease, both of which will require lessees to
recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months. The right-of-use asset and the lease
liability will be determined based upon the present value of cash flows. Finance leases will reflect the financial arrangement by
recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating leases
will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The
accounting by lessors is not significantly changed by the updated guidance. The updated guidance is effective for reporting periods
beginning after December 15, 2018, and will require that the earliest comparative period presented include the measurement and
recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied. The Company is
currently evaluating the impact that the adoption of this guidance will have on its results of operations, financial position and
liquidity.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which amends the accounting guidance

for credit losses on financial instruments. The updated guidance amends the current other-than-temporary impairment model for
available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account
and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. This guidance also
applies a new current expected credit loss model for determining credit-related impairments for financial instruments measured at
amortized cost. The updated guidance is effective for reporting periods beginning after December 15, 2019. The Company will not be
able to determine the impact the adoption of this guidance will have on its results of operations, financial position or liquidity until the
year the guidance becomes effective.

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All other 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.

(2) Acquisitions / Dispositions

In February 2016, the Company acquired an 85% ownership interest for $42.3 million in a company engaged in the distribution of

promotional merchandise. The fair value of the assets acquired and liabilities assumed have been estimated based on a third party
valuation.

In July 2016, the Company acquired a specialty property and casualty insurance company for $15.5 million.

The following table summarizes the estimated fair value of net assets acquired and liabilities assumed for the business

combinations completed in 2016:

(In thousands)

Investments

Cash and cash equivalents

Real estate, furniture and equipment

Goodwill

Premium and service fee receivable

Other assets (1)

Total assets acquired

Other liabilities assumed

Non controlling interest

Net assets acquired

_____________________

2016

6,764
4,202
701
12,281
4,399
37,981
66,328

(5,395 )

(3,280 )
57,653

(1) Other assets includes $31.8 million of intangible assets.

In July 2016, the Company sold Aero Precision Industries, an aviation-related business, for $253.1 million. The business had a net

carrying value of $118.2 million.

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(3) Consolidated Statement of Comprehensive Income (Loss)

The following tables present the components of the changes in accumulated other comprehensive income (loss) (AOCI) as of and

for the years ended December 31, 2016 and 2015:

(In thousands)
December 31, 2016

Changes in AOCI
Beginning of period
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from AOCI

Other comprehensive income (loss)
Unrealized investment gain related to non-
controlling interest
Ending balance

Amounts reclassified from AOCI
Pre-tax
Tax effect

After-tax amounts reclassified

Other comprehensive income (loss)
Pre-tax
Tax effect

Other comprehensive income (loss)

(In thousands)
December 31, 2015

Changes in AOCI
Beginning of period
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from AOCI

Other comprehensive income (loss)
Unrealized investment loss related to non-
controlling interest
Ending balance

Amounts reclassified from AOCI
Pre-tax
Tax effect

After-tax amounts reclassified

Other comprehensive income (loss)
Pre-tax
Tax effect

Unrealized
investment
gains (losses)

Currency
translation
adjustments

Accumulated
other
comprehensive
income (loss)

180,695

(247,393 ) $

(66,698 )

286,734

(40,216 )
246,518

(59 )
427,154

(124,193 )
—
(124,193 )

—

(371,586 ) $

(61,871 ) (1) $
21,655 (2)
(40,216 )

— $
—
— $

379,258
(132,740 )
246,518

(124,193 ) $

—

(124,193 ) $

162,541

(40,216 )
122,325

(59 )
55,568

(61,871 )
21,655
(40,216 )

255,065
(132,740 )
122,325

Unrealized
investment
gains (losses)

Currency
translation
adjustments

Accumulated
other
comprehensive
income (loss)

306,199

(122,649 ) $

183,550

(119,994 )

(5,548 )
(125,542 )

(124,744 )
—
(124,744 )

—

180,695

(247,393 ) $

(8,535 ) (1) $
2,987 (2)
(5,548 )

— $
—
— $

(192,186 )
66,644
(125,542 )

(124,744 ) $
—
(124,744 ) $

(244,738 )

(5,548 )

(250,286 )

(66,698 )

(8,535 )
2,987
(5,548 )

(316,930 )
66,644
(250,286 )

Other comprehensive income (loss)
_______________
(1) Net investment gains in the consolidated statements of income.
(2) Income tax expense in the consolidated statements of income.

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(4) Investments in Fixed Maturity Securities

At December 31, 2016 and 2015, investments in fixed maturity securities were as follows:

(In thousands)

December 31, 2016
Held to maturity:

State and municipal
Residential mortgage-backed
Total held to maturity

Available for sale:

U.S. government and government agency
State and municipal:
Special revenue
State general obligation
Pre-refunded
Corporate backed
Local general obligation
Total state and municipal
Mortgage-backed securities:

Residential (1)
Commercial

Total mortgage-backed securities

Asset-backed securities
Corporate:
Industrial
Financial
Utilities
Other

Total corporate

Foreign

Total available for sale

2,791,211
524,682
356,535
410,933
360,022
4,443,383

1,034,301
155,540
1,189,841
1,913,830

2,315,567
1,369,001
229,154
54,073
3,967,795
858,773
12,869,809

Total investments in fixed maturity securities $ 12,958,335 $

Amortized
Cost

Gross Unrealized

Gains

Losses

Fair
Value

Carrying
Value

72,582 $
15,944
88,526

12,453 $
1,693
14,146

— $
—
—

85,035 $
17,637
102,672

72,582
15,944
88,526

496,187

20,208

(2,593 )

513,802

58,559
16,964
19,181
6,172
15,682
116,558

15,431
304
15,735
5,971

(26,315 )
(5,139 )
(165 )
(6,452 )
(2,367 )
(40,438 )

(12,950 )
(2,981 )
(15,931 )
(11,941 )

2,823,455
536,507
375,551
410,653
373,337
4,519,503

1,036,782
152,863
1,189,645
1,907,860

2,823,455
536,507
375,551
410,653
373,337
4,519,503

1,036,782
152,863
1,189,645
1,907,860

71,007
39,543
10,801
299
121,650
46,794
326,916
341,062 $

2,379,400
2,379,400
(7,174 )
1,397,274
1,397,274
(11,270 )
237,544
237,544
(2,411 )
54,309
54,309
(63 )
4,068,527
4,068,527
(20,918 )
902,805
902,805
(2,762 )
13,102,142
13,102,142
(94,583 )
(94,583 ) $ 13,204,814 $ 13,190,668

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(In thousands)

December 31, 2015
Held to maturity:

State and municipal
Residential mortgage-backed
Total held to maturity

Available for sale:

Residential (1)
Commercial

Total mortgage-backed securities

Asset-backed securities
Corporate:
Industrial
Financial
Utilities
Other

Total corporate

Foreign

Total available for sale

Amortized
Cost

Gross Unrealized

Gains

Losses

Fair
Value

Carrying
Value

77,129 $
19,138
96,267

16,246 $
2,207
18,453

— $
—
—

93,375 $
21,345
114,720

77,129
19,138
96,267

645,092

27,660

(2,333 )

670,419

2,510,816
583,456
439,772
388,904
342,158
4,265,106

1,126,382
64,975
1,191,357
1,706,694

1,976,393
1,153,096
192,857
81,607
3,403,953
799,839
12,012,041

102,909
28,068
32,056
14,039
24,270
201,342

18,935
875
19,810
12,892

(3,737 )
(2,070 )
(31 )
(402 )
(29 )
(6,269 )

(11,180 )
(128 )
(11,308 )
(14,414 )

2,609,988
609,454
471,797
402,541
366,399
4,460,179

1,134,137
65,722
1,199,859
1,705,172

2,609,988
609,454
471,797
402,541
366,399
4,460,179

1,134,137
65,722
1,199,859
1,705,172

75,168
31,744
8,321
245
115,478
50,310
427,492
445,945 $

2,021,534
2,021,534
(30,027 )
1,173,021
1,173,021
(11,819 )
198,651
198,651
(2,527 )
81,832
81,832
(20 )
3,475,038
3,475,038
(44,393 )
837,460
837,460
(12,689 )
12,348,127
12,348,127
(91,406 )
(91,406 ) $ 12,462,847 $ 12,444,394

Total investments in fixed maturity securities $ 12,108,308 $
____________________
(1) Gross unrealized losses for mortgage-backed securities include $818,691 and $1,269,491, as of December 31, 2016 and 2015,
respectively, related to the non-credit portion of OTTI recognized in other comprehensive income.

The amortized cost and fair value of fixed maturity securities at December 31, 2016, 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)

Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage-backed securities

Total

Fair Value

Amortized
Cost
1,023,413 $
5,100,876
3,157,579
2,470,682
1,205,785

1,042,713
5,223,935
3,249,731
2,481,153
1,207,282
$ 12,958,335 $ 13,204,814

At December 31, 2016 and 2015, there were no investments, other than investments in United States government and
government agency securities, which exceeded 10% of common stockholders’ equity. At December 31, 2016, investments with a
carrying value of $1,261 million were on deposit in custodial or trust accounts, of which $1,022 million was on deposit with state
insurance departments, $178 million was on deposit in support of the Company’s underwriting activities at Lloyd’s, $43 million was
on deposit as security for reinsurance clients and $18 million was on deposit as security for letters of credit issued in support of the
Company’s reinsurance operations.

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(5) Investments in Equity Securities Available for Sale

At December 31, 2016 and 2015, investments in equity securities available for sale were as follows:

(In thousands)

December 31, 2016
Common stocks

Preferred stocks

Total

December 31, 2015
Common stocks

Preferred stocks

Total

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Cost

Fair
Value

Carrying
Value

94,998 $ 351,906 $
125,589

101,392

$ 220,587 $ 453,298 $

(1,046 ) $ 445,858 $ 445,858
223,342
223,342
(3,639 )
(4,685 ) $ 669,200 $ 669,200

56,462 $
108,730
$ 165,192 $

— $

8,216
8,216 $

(19,189 ) $

37,273
37,273 $
113,593
113,593
(3,353 )
(22,542 ) $ 150,866 $ 150,866

At December 31, 2016, common stocks included HealthEquity, Inc. shares, which had previously been reported in investment

funds.

(6) Arbitrage Trading Account

At December 31, 2016 and 2015, the fair value and carrying value of the arbitrage trading account were $300 million and $377
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, call options and swap contracts in order to mitigate the impact of potential changes in market
conditions on the merger arbitrage trading account. These options and contracts are reported at fair value. As of December 31, 2016,
the fair value of long option contracts outstanding was $1 million (notional amount of $27 million) and the fair value of short option
contracts outstanding was $2 million (notional amount of $36 million). Other than with respect to the use of these trading account
securities, the Company does not make use of derivatives.

(7) Net Investment Income

Net investment income consists of the following:

(In thousands)

Investment income earned on:

Fixed maturity securities, including cash and cash equivalents and loans
receivable
Investment funds

Arbitrage trading account

Real estate

Equity securities available for sale

Gross investment income

Investment expense

Net investment income

2016

2015

2014

444,247
99,301
18,693
7,054
4,028
573,323
(9,160 )
564,163 $

428,325
62,228
16,891
11,294
4,624
523,362
(10,717 )
512,645 $

439,489
131,649
22,438
10,228
6,726
610,530
(9,645 )
600,885

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(8) 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 investments 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 of $372.1 million as of December 31, 2016.

Investment funds consist of the following:

(In thousands)
Real estate
Energy

Hedged equity

Other funds

Total

Carrying Value
as of December 31,
2015
2016
580,830 $
641,783 $
93,719
91,448
70,580
73,913
424,911
391,002

Income (Losses)

2016
50,415 $
19,747
3,334
25,805

2015
58,032 $
(37,373 )

(2,762 )
44,331

2014
26,233
12,797
10,760
81,859

$ 1,198,146 $ 1,170,040 $

99,301 $

62,228 $

131,649

The Company's share of the earnings or losses of investment funds is primarily reported on a one-quarter lag in order to

facilitate the timely completion of the Company's consolidated financial statements.

Other funds include private equity investments carried on the equity method of accounting, which included the Company's

publicly traded common stock investment in HealthEquity, Inc. (HQY) in 2015. The Company's ownership interest in HQY was
approximately 21%, as of December 31, 2015, with a fair value of $300.1 million and a carrying value of $45.4 million. In October
2016, the Company sold approximately 2.2 million shares in HQY, reducing the Company's ownership to 16.5% and causing the
Company to report its investment in HQY at fair value as an available for sale security rather than under investment funds.

(9) Real Estate

Investment in real estate represents directly owned property held for investment, as follows:

(In thousands)
Properties in operation
Properties under development

Total

As of December 31,

2016

457,237
727,744
1,184,981

2015

226,055
710,312
936,367

In 2016, properties in operation included a long-term ground lease in Washington, D.C., a hotel in Memphis, Tennessee, an

office complex in New York City and office buildings in West Palm Beach and Palm Beach, Florida. Properties in operation are net of
accumulated depreciation and amortization of $14,996,000 and $9,073,000 as of December 31, 2016 and 2015, respectively. Related
depreciation expense was $14,802,000 and $7,425,000 for the years ended December 31, 2016 and 2015, respectively. Future
minimum rental income expected on operating leases relating to properties in operation is $16,466,519 in 2017, $27,165,624 in 2018,
$27,451,819 in 2019, $26,281,505 in 2020, $26,560,894 in 2021 and $464,803,187 thereafter.

Properties under development include an office building in London and a mixed-use project in Washington, D.C.

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(10) Loans Receivable

Loans receivable are as follows:

(In thousands)

Amortized cost (net of valuation allowance):
Real estate loans
Commercial loans

Total

Fair value:
Real estate loans
Commercial loans

Total

Valuation allowance:
Specific
General

Total

Increase (decrease) in valuation allowance

As of December 31,

2016

2015

92,415 $
14,383
106,798 $

200,499
72,604
273,103

92,415 $
15,884
108,299 $

201,641
74,106
275,747

1,200 $
2,197
3,397 $

—
2,094
2,094

For the Year Ended December 31,

2016

2015

1,303 $

(392 )

Loans receivable in non-accrual status were $5.4 million and $3.1 million as of December 31, 2016 and 2015, respectively.

The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and

The real estate loans are secured by commercial real estate primarily located in North Carolina and New York. These loans
generally earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through August
2025. The commercial loans are with small business owners who have secured the related financing with the assets of the business.
Commercial loans generally earn interest on a fixed basis and have varying maturities not exceeding 10 years.

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.
Based on these considerations, none of the real estate loans were considered to be impaired at December 31, 2016, and accordingly,
the Company determined that a specific valuation allowance was not required.

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(11) Realized and Unrealized Investment Gains (Losses)

Realized and unrealized investment gains (losses) are as follows:

(In thousands)

Realized investment gains (losses):

Fixed maturity securities:

Gains

Losses

Equity securities available for sale

Investment funds

Real estate

Other (1)

Net realized gains on investments sales

Other-than-temporary impairments (2)

Net investment gains

Income tax expense

After-tax realized investment gains

Change in unrealized gains (losses) of available for sales securities:

Fixed maturity securities

Previously impaired fixed maturity securities

Equity securities available for sale

Investment funds

Total change in unrealized investment gains (losses)

Income tax benefit (expense)

Noncontrolling interests

2016

2015

2014

72,215 $
(6,434 )
14,201
58,861
7,757
138,519
285,119
(18,114 )
267,005
(93,452 )
173,553 $

23,755 $
(4,065 )
9,639
93,529
—
2,775
125,633
(33,309 )
92,324
(32,313 )
60,011 $

(107,094 ) $
451
465,727
12,631
371,715
(125,315 )
59

(144,445 ) $

(174 )

(27,809 )

(19,758 )

(192,186 )
66,644
38

39,113
(4,420 )
38,296
96,204
85,659
—
254,852
—
254,852
(89,198 )
165,654

155,765
865
(69,016 )

(14,725 )
72,889
(23,223 )

(33 )

After-tax change in unrealized investment gains (losses) of available for sale
securities

246,459

(125,504 ) $

49,633

____________________
(1) Other includes a gain of $134.9 million from the sale of Aero Precision Industries, and certain related aviation services business,
for the year ended December 31, 2016.

(2) For the year ended December 31, 2016, OTTI related to equity securities were $18.1 million. For the year ended December 31,
2015, OTTI related to equity securities were $24.3 million and related to fixed maturity securities were
$9.0 million. There was no OTTI for the year ended December 31, 2014.

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(12) Securities in an Unrealized Loss Position

The following tables summarize all securities in an unrealized loss position at December 31, 2016 and 2015 by the length of

time those securities have been continuously in an unrealized loss position.

(In thousands)

Less Than 12 Months
Gross
Unrealized
Losses

Fair
Value

12 Months or Greater
Gross
Unrealized
Losses

Fair
Value

Total

Fair
Value

Gross
Unrealized
Losses

Total

$ 4,560,889 $

68,703 $ 599,999 $

December 31, 2016
U.S. government and government agency $ 112,709 $
State and municipal

Mortgage-backed securities

Asset-backed securities

Corporate

Foreign government

Fixed maturity securities

Common stocks

Preferred stocks

Equity securities available for sale

December 31, 2015
U.S. government and government agency $ 101,660 $
State and municipal

Mortgage-backed securities

Asset-backed securities

Corporate

Foreign government

Fixed maturity securities

Common stocks

Preferred stocks

Equity securities available for sale

Total

$ 3,497,447 $

1,562,614
625,903
1,010,836
1,035,245
213,246
4,560,553
336
—
336

501,952
381,986
1,091,078
1,232,940
169,190
3,478,806
18,641
—
18,641

1,252 $
35,553
11,103
5,340
13,448
1,985
68,681
22
—
22

35,450 $
133,034
109,066
201,693
65,147
24,820
569,210
8,755
22,034
30,789

487 $

64,500 $
106,681
184,807
190,467
76,797
19,528
642,780
7,829
22,320
30,149

4,404
3,639
7,703
35,406
8,822
60,461
18,005
—
18,005
78,466 $ 672,929 $

1,341 $ 148,159 $
4,885
4,828
6,601
7,470
777
25,902
1,024
3,639
4,663
30,565 $ 5,160,888 $

1,695,648
734,969
1,212,529
1,100,392
238,066
5,129,763
9,091
22,034
31,125

2,593
40,438
15,931
11,941
20,918
2,762
94,583
1,046
3,639
4,685
99,268

2,333
1,846 $ 166,160 $
6,269
608,633
1,865
11,308
566,793
7,669
14,414
1,281,545
6,711
44,393
1,309,737
8,987
12,689
188,718
3,867
91,406
4,121,586
30,945
19,189
26,470
1,184
3,353
22,320
3,353
4,537
22,542
48,790
35,482 $ 4,170,376 $ 113,948

Fixed Maturity Securities — A summary of the Company’s non-investment grade fixed maturity securities that were in an

unrealized loss position at December 31, 2016 is presented in the table below:

($ in thousands)

State and municipal
Corporate

Mortgage-backed securities

Asset-backed securities

Foreign government

Total

Number of
Securities

Aggregate
Fair Value

Gross
Unrealized
Loss

1 $
10
11
4
15
41 $

5,136 $
78,462
22,987
1,256
112,985
220,826 $

3,725
1,370
1,106
362
341
6,904

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For OTTI of fixed maturity securities that management does not intend to sell or, more likely than not, would not be required to
sell, the portion of the decline in value considered to be due to credit factors is recognized in earnings and the portion of the decline in
value considered to be due to non-credit factors is recognized in other comprehensive income.

For the year ended December 31, 2016, there were no OTTI recognized in earnings for fixed maturity securities. For the year
ended December 31, 2015, OTTI for fixed maturity securities were $9.0 million, all of which was considered due to credit factors.

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 on 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 and does not consider any of these securities to be OTTI.

Preferred Stocks – At December 31, 2016, there was one preferred stock in an unrealized loss position, with an aggregate fair

value of $22.0 million and a gross unrealized loss of $3.6 million. The preferred stock is rated investment grade. Management believes
the unrealized loss is due primarily to market and sector related factors and does not consider it to be OTTI. For the year ended
December 31, 2016, there were no OTTI for preferred stocks. OTTI for preferred stocks for the year ended December 31, 2015 were
$13.4 million.

Common Stocks – At December 31, 2016, there were two common stocks in an unrealized loss position, with an aggregate fair
value of $9.1 million and a gross unrealized loss of $1.1 million. Based on management's view on these securities, the Company does
not consider the common stocks to be OTTI. For the year ended December 31, 2016, OTTI for common stocks were $18.1 million.
OTTI for common stocks for the year ended December 31, 2015 were $10.9 million.

(13) Fair Value Measurements

The Company’s fixed maturity and equity securities classified as available for sale and its 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.

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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.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and

2015 by level:

(In thousands)
December 31, 2016
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency
State and municipal
Mortgage-backed securities
Asset-backed securities
Corporate
Foreign government

Total fixed maturity securities available for sale

Equity securities available for sale:

Common stocks
Preferred stocks

Total equity securities available for sale

Arbitrage trading account

Total
Liabilities:
Trading account securities sold but not yet purchased

December 31, 2015
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency
State and municipal
Mortgage-backed securities
Asset-backed securities
Corporate
Foreign government

Total fixed maturity securities available for sale

Equity securities available for sale:

Common stocks
Preferred stocks

Total equity securities available for sale

Arbitrage trading account

Total
Liabilities:
Trading account securities sold but not yet purchased

Total

Level 1

Level 2

Level 3

513,802 $

4,519,503
1,189,645
1,907,860
4,068,527
902,805
13,102,142

445,858
223,342
669,200
299,999

$ 14,071,341 $

— $
—
—
—
—
—
—

513,802 $

4,519,503
1,189,645
1,907,677
4,068,527
902,805
13,101,959

—
—
—
183
—
—
183

429,647
—
429,647
224,623
654,270 $ 13,404,472 $

7,457
219,680
227,137
75,376

8,754
3,662
12,416
—
12,599

51,179 $

51,089 $

90 $

—

670,419 $

4,460,179
1,199,859
1,705,172
3,475,038
837,460
12,348,127

37,273
113,593
150,866
376,697

$ 12,875,690 $

— $
—
—
—
—
—
—

670,419 $

4,460,179
1,199,859
1,704,973
3,474,884
837,460
12,347,774

—
—
—
199
154
—
353

29,444
—
29,444
256,914
286,358 $ 12,577,350 $

—
109,969
109,969
119,607

7,829
3,624
11,453
176
11,982

37,035 $

35,559 $

1,476 $

—

There were no significant transfers between Levels 1 and 2 for the years ended December 31, 2016 and 2015.

1001618in_10k.indd 72

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The following tables summarize changes in Level 3 assets and liabilities for the years ended December 31, 2016 and 2015:

Beginning
Balance

Earnings
(Losses)

Other
Comprehensive
Income
(Losses)

Impairments Purchases

Sales

Paydowns/
Maturities

Transfers
In / Out

Ending
Balance

Gains (Losses) Included in:

(In thousands)

Year ended December 31, 2016

Assets:

Fixed maturity securities available for
sale:

Asset-backed securities

Corporate

Total

Equity securities available for sale:

Common stocks

Preferred stocks

Total

Arbitrage trading account

Total

Year ended December 31, 2015

Assets:

Fixed maturity securities available for
sale:

Asset-backed securities

Corporate

Total

Equity securities available for sale:

Common stocks

Preferred stocks

Total

Arbitrage trading account

Total

199 $
154
353

7,829
3,624
11,453
176
11,982 $

20,611 $
154
20,765

10,741
3,713
14,454
720
35,939 $

3 $

177
180

—
38
38
(176 )
42 $

19 $
—
19

—
(89 )
(89 )
(799 )
(869 ) $

16 $
—
16

160
—
160
—
176 $

191 $
—
191

(273 )
—
(273 )
—
(82 ) $

— $
—
—

—
—
—
—
— $

— $
—
—

765
—
765
—
765 $

— $
(331 )
(331 )

—
—
—
—
(331 ) $

(35 ) $
—
(35 )

—
—
—
—
(35 ) $

— $
—
—

—
—
—
—
— $

183
—
183

8,754
3,662
12,416
—
12,599

— $
—
—

(1,820 ) $
—
(1,820 )

(18,802 ) $
—
(18,802 )

(2,331 )
—
(2,331 )
—
(2,331 ) $

—
—
—
72,640
72,640 $

(308 )
—
(308 )
(71,921 )
(72,229 ) $

—
—
—
—
(1,820 ) $

—
—
—
(464 )
(19,266 ) $

199
154
353

7,829
3,624
11,453
176
11,982

During the year ended December 31, 2016, there were no securities transferred out of Level 3. During the year ended

December 31, 2015, five securities were transferred out of Level 3 as an observable price was available.

(14) Reserves for Losses and Loss Expenses

Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially

1001618in_10k.indd 73

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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

Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the

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.

A claim may be defined as an event, as a claimant (number of parties claiming damages from an event) or by exposure type (e.g.,

an event may give rise to two parties, each claiming loss for bodily injury and property damage).

The most commonly used claim count method is by event. Most of the Company's operating units use the number of events to

define and quantify the number of claims. However, in certain lines of business, where it is common for multiple parties to claim
damages arising from a single event, an operating unit may quantify claims on the basis of the number of separate parties involved in
an event. This may be the case with businesses writing substantial automobile or transportation exposure.

Claim counts for assumed reinsurance will vary based on whether the business is written on a facultative or treaty basis. Further

variability as respects treaty claim counts may be reflective of the nature of the treaty, line of business coverage, and type of
participation such as quota share or excess of loss contracts. Accordingly, the claim counts have been excluded from the below
Reinsurance segment tables due to this variability.

The claim count information set forth in the tables presented below may not provide an accurate reflection of ultimate loss

payouts by product line.

1001618in_10k.indd 74

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The following tables present undiscounted incurred and paid claims development as of December 31, 2016, net of reinsurance, as

well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR). The information about incurred and
paid claims development for the years ended December 31, 2007 to 2015 is presented as supplementary information. To enhance the
comparability of the loss development data, the Company has removed the impact of foreign exchange rate movements by using the
December 31, 2016 exchange rate for all periods. In addition, the Company’s UK and European insurance business has been included
in the Insurance segment tables below (excluding primary and excess workers' compensation) for accident years 2012 through 2016,
since underwriting year information was only available prior to 2012.

Insurance

Other Liability

(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

$ 888,917 $ 846,759 $ 799,566 $ 759,028 $ 726,338 $ 712,995 $ 693,669 $ 668,914 $

—
—
—
—
—
—
—
—
—

843,528
—
—
—
—
—
—
—
—

812,048
699,630
—
—
—
—
—
—
—

755,595
664,619
620,030
—
—
—
—
—
—

717,985
632,324
623,798
676,275
—
—
—
—
—

698,709
605,497
598,926
681,815
704,519
—
—
—
—

689,571
595,643
597,272
666,887
712,889
754,543
—
—
—

662,644
567,578
583,916
665,885
711,727
797,759
850,243
—
—

Total

As of December 31,
2016

Cumulative
Number of
Reported
Claims

26
26
23
23
24
25
26
26
24
18

2015
663,122 $
653,088
563,317
580,882
660,412
716,617
788,498
850,666
953,822
—

IBNR
2016
662,889 $ 30,457
40,213
654,908
41,517
558,566
51,702
579,538
65,108
655,443
723,961
93,444
790,734 143,155
851,724 282,056
992,128 546,566
1,020,972 770,954

$ 7,490,863

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

$ 46,993 $ 126,938 $ 233,194 $ 332,348 $ 414,621 $ 477,050 $ 528,583 $ 564,049 $

—
—
—
—
—
—
—
—
—

48,699
—
—
—
—
—
—
—
—

139,809
45,461
—
—
—
—
—
—
—

2011

2010

2013

2012

2014

252,214
124,901
46,868
—
—
—
—
—
—

356,362
217,471
132,654
50,702
—
—
—
—
—

2016
609,568
588,965
489,453
494,381
527,270
517,386
476,662
342,933
208,837
65,599
$ 4,321,054
120,276
Reserves for loss and loss adjustment expenses, net of reinsurance $ 3,290,085

2015
589,270 $
569,020
474,893
466,048
475,650
422,269
335,206
192,893
83,378
—

445,060
314,994
252,518
146,070
59,669
—
—
—
—

505,829
388,508
340,262
271,011
162,543
64,535
—
—
—

539,166
432,622
421,217
384,107
304,171
191,902
79,801
—
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

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Primary Workers' Compensation
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2007

$ 383,641 $ 362,843 $ 311,511 $ 303,788 $ 297,208 $ 347,731 $ 347,596 $ 348,335 $

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

—
—
—
—
—
—
—
—

—

377,794
—
—
—
—
—
—
—

347,423
327,537
—
—
—
—
—
—

345,605
332,303
358,734
—
—
—
—
—

345,413
326,766
361,808
419,364
—
—
—
—

388,558
387,503
411,527
444,887
501,681
—
—
—

388,472
392,791
420,604
457,134
501,810
552,570
—
—

389,343
394,303
426,622
470,026
503,956
547,295
639,436
—

—

As of December 31,
2016

Cumulative
Number of
Reported
Claims

48
46
41
42
43
44
48
51
52

2015
348,327 $
391,788
392,287
429,952
472,087
503,863
546,995
637,307
712,800

2016

IBNR
350,731 $ 10,478
11,623
393,932
13,128
395,288
23,233
429,762
29,589
474,076
44,568
509,167
63,271
543,293
110,364
627,862
214,854
690,656

—

702,761
$ 5,117,528

339,257

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

$ 85,962 $ 176,184 $ 223,380 $ 251,437 $ 265,770 $ 292,764 $ 303,058 $ 309,988 $

—
—
—
—
—
—
—
—
—

94,385
—
—
—
—
—
—
—
—

203,079
93,647
—
—
—
—
—
—
—

2011

2010

2014

2012

2013

261,867
197,736
107,742
—
—
—
—
—
—

296,667
257,972
214,034
106,157
—
—
—
—
—

2016
319,350
360,799
352,516
374,013
408,304
419,588
414,216
412,716
323,879
143,066
$ 3,528,447
138,281
Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,727,362

2015
315,309 $
352,539
344,771
362,078
385,759
387,368
363,028
319,743
139,320
—

344,892
333,793
344,631
355,909
339,560
277,538
148,405
—
—

320,169
297,619
281,280
236,207
115,536
—
—
—
—

335,030
318,349
320,154
309,509
255,063
117,900
—
—
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

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Excess Workers' Compensation
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2007

$ 241,493 $ 242,094 $ 246,499 $ 262,171 $ 259,181 $ 254,748 $ 254,806 $ 250,170 $

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

—
—
—
—
—
—
—
—
—

243,067
—
—
—
—
—
—
—
—

240,528
228,830
—
—
—
—
—
—
—

211,624
214,506
182,028
—
—
—
—
—
—

202,419
220,124
178,317
128,301
—
—
—
—
—

197,321
210,273
171,925
146,493
98,799
—
—
—
—

195,385
202,239
163,365
150,551
101,663
75,214
—
—
—

193,395
190,439
147,043
139,251
112,477
54,171
68,521
—
—

As of December 31,
2016

Cumulative
Number of
Reported
Claims

2
1
1
1
1
1
1
1
—
—

2016

2015
251,356 $
194,302
193,697
153,430
138,775
117,066
50,448
66,854
74,777
—

IBNR
243,758 $ 40,607
52,994
183,802
54,310
189,646
47,030
149,806
45,151
137,265
34,805
115,583
28,016
46,028
37,366
59,903
45,861
61,574
62,033
76,184
$ 1,263,549

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

$ 2,420 $ 10,422 $ 18,713 $ 27,445 $ 39,212 $ 49,129 $ 61,962 $ 72,674 $

—
—
—
—
—
—
—
—
—

2,464
—
—
—
—
—
—
—
—

2,942
5,298
—
—
—
—
—
—
—

6,302
8,893
3,227
—
—
—
—
—
—

14,489
18,338
4,916
5,051
715
—
—
—
—

9,907
12,444
4,700
3,015
—
—
—
—
—

87,356
48,042
45,963
20,799
32,008
28,055
3,013
4,266
2,484
2,501
274,487
734,713
Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,723,774

80,770 $
39,257
39,200
15,871
27,399
24,120
2,159
2,277
2,069
—

25,063
25,925
7,938
9,991
7,421
279
—
—
—

34,418
32,419
11,745
18,995
19,184
679
377
—
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

1001618in_10k.indd 77

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Professional Liability
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

2015

$ 98,534 $ 98,272 $ 105,191 $ 104,445 $ 102,807 $ 103,607 $ 99,723 $ 99,193 $

— 113,171
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

119,953
134,978
—
—
—
—
—
—
—

116,539
139,340
147,564
—
—
—
—
—
—

111,452
145,638
165,875
180,080
—
—
—
—
—

110,268 107,760 107,320
148,992 148,108 150,545
179,478 178,079 176,843
165,439 187,213 190,411
236,681 240,210 263,640
— 266,538 245,925
— 252,167
—
—
—
—
—
—
—

97,571 $
109,242
150,875
172,683
177,401
250,074
242,639
246,068
259,368
—

2016
IBNR
595
98,461 $
1,857
108,507
2,523
153,574
3,689
174,969
8,319
173,777
23,185
238,086
36,873
247,687
255,700
75,613
256,432 121,119
311,042 232,577

Total

$ 2,018,235

As of December 31,
2016

Cumulative
Number of
Reported
Claims

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

$ 5,162 $ 43,314 $ 68,764 $ 88,053 $ 95,829 $ 99,370 $ 98,384 $ 98,539 $

—
—
—
—
—
—
—
—
—

9,998
—
—
—
—
—
—
—
—

37,818
12,608
—
—
—
—
—
—
—

66,167
52,597
14,844
—
—
—
—
—
—

96,585

85,588
97,796 100,352
85,929 117,738 127,798 138,947
58,946 108,627 129,823 144,541
62,513 103,200 134,785
18,804
86,356 127,980
21,524
—
63,927
23,550
—
—
19,391
—
—
—
—
—
—
—
—
—
—
—

96,916 $
105,299
144,024
160,666
151,026
159,061
119,553
83,672
20,496
—

97,846
106,381
144,792
165,084
159,193
189,796
176,103
134,726
85,348
28,789
$ 1,288,059
7,173
737,349

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

Reserves for loss and loss adjustment expenses, net of reinsurance $

1001618in_10k.indd 78

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Commercial Automobile
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

$ 438,263 $ 425,645 $ 431,903 $ 424,158 $ 427,800 $ 427,918 $ 426,200 $ 425,576 $

—
—
—
—
—
—
—
—
—

432,629
—
—
—
—
—
—
—
—

444,941
362,302
—
—
—
—
—
—
—

430,453
345,139
310,591
—
—
—
—
—
—

427,088
340,962
320,302
314,038
—
—
—
—
—

425,600
335,851
330,432
322,724
314,309
—
—
—
—

422,999
337,922
329,109
330,125
326,831
327,514
—
—
—

422,309
336,861
333,028
335,024
342,588
349,136
363,968
—
—

Total

As of December 31,
2016

Cumulative
Number of
Reported
Claims

2015
426,314 $
423,258
334,654
331,865
343,701
355,609
368,894
385,345
389,914
—

IBNR
2016
307
426,769 $
361
421,829
895
335,091
1,193
330,586
2,567
341,200
5,014
355,461
18,768
366,843
28,672
394,998
390,590
58,001
387,499 124,075

$ 3,750,866

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

2007

2008

2009

2010

2011

2012

2013

2014

$ 167,894 $ 259,300 $ 328,600 $ 375,101 $ 405,204 $ 415,228 $ 421,192 $ 423,046 $

—
—
—
—
—
—
—
—
—

175,402
—
—
—
—
—
—
—
—

270,421
136,433
—
—
—
—
—
—
—

334,078
209,553
136,029
—
—
—
—
—
—

377,643
257,326
208,790
135,350
—
—
—
—
—

402,882
291,925
263,639
211,756
136,844
—
—
—
—

413,411
312,903
295,355
262,685
215,214
142,929
—
—
—

417,598
328,845
313,262
296,370
273,446
218,596
155,615
—
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

Reserves for loss and loss adjustment expenses, net of reinsurance $

2015
424,954 $
420,553
331,484
324,997
321,814
312,342
267,253
237,766
160,239
—

2016
425,081
420,596
333,144
326,804
333,987
335,806
312,952
306,594
242,031
156,545
$ 3,193,540
2,157
559,482

1001618in_10k.indd 79

4/6/17 11:30 AM

As of December 31,
2016

Cumulative
Number of
Reported
Claims

2015
327,996 $
392,457
327,465
360,616
470,593
550,656
588,285
718,422
752,486
—

2016
IBNR
991
327,951 $
1,202
392,782
1,129
327,199
1,555
360,786
2,359
465,856
8,173
546,259
10,793
588,399
22,492
705,706
774,801
56,787
817,059 179,583

$ 5,306,798

Short-tail lines
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

$ 358,317 $ 337,419 $ 325,658 $ 324,765 $ 324,052 $ 327,882 $ 329,293 $ 328,659 $

—
—
—
—
—
—
—
—
—

428,243
—
—
—
—
—
—
—
—

415,554
368,106
—
—
—
—
—
—
—

402,911
354,134
404,551
—
—
—
—
—
—

396,055
344,157
387,712
505,432
—
—
—
—
—

393,943
332,782
374,214
488,681
555,079
—
—
—
—

393,913
332,621
370,705
477,675
560,110
588,182
—
—
—

393,137
328,711
360,614
473,186
556,418
598,549
710,961
—
—

Total

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

2007

2008

2009

2010

2011

2012

2013

2014

$ 185,994 $ 282,504 $ 301,059 $ 309,544 $ 314,535 $ 318,691 $ 323,904 $ 324,788 $

—
—
—
—
—
—
—
—
—

248,653
—
—
—
—
—
—
—
—

353,632
214,062
—
—
—
—
—
—
—

369,446
296,125
248,944
—
—
—
—
—
—

380,158
311,568
333,807
307,397
—
—
—
—
—

379,494
313,052
346,598
425,522
284,916
—
—
—
—

385,350
318,138
356,044
446,687
462,315
316,170
—
—
—

386,792
318,775
349,611
451,135
514,064
492,780
374,214
—
—

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

Reserves for loss and loss adjustment expenses, net of reinsurance $

2015
325,521 $
388,068
320,701
353,594
456,707
524,678
542,173
601,225
397,084
—

2016
326,959
390,626
323,248
356,838
461,039
532,900
564,813
652,405
645,601
447,240
$ 4,701,669
3,099
608,228

1001618in_10k.indd 80

4/6/17 11:30 AM

Reinsurance

Casualty
(In thousands)

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

$ 370,597 $ 350,646 $ 343,561 $ 333,549 $ 313,240 $ 326,388 $ 318,062 $ 330,451 $

—
—
—
—
—
—
—
—
—

289,826
—
—
—
—
—
—
—
—

273,071
266,204
—
—
—
—
—
—
—

257,676
260,300
236,460
—
—
—
—
—
—

246,116
254,200
236,246
239,562
—
—
—
—
—

237,149
240,722
228,052
247,663
291,395
—
—
—
—

235,122
241,181
223,537
243,468
295,673
300,906
—
—
—

240,631
236,095
213,384
241,309
282,343
259,110
311,776
—
—

As of
December
31, 2016

2015
330,322 $
241,337
226,141
200,288
247,739
273,152
264,625
307,849
250,976
—

2016
329,635 $
240,434
227,923
196,105
244,833
281,961
275,901
306,791
224,777
234,392
$ 2,562,752

IBNR

9,329
7,806
11,383
18,259
27,815
53,802
72,629
119,679
115,419
173,456

Total

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

2007

2008

2011
6,580 $ 34,100 $ 82,716 $ 151,243 $ 192,654 $ 234,173 $ 249,420 $ 265,680 $

2010

2013

2009

—
—
—
—
—
—
—
—
—

9,675
—
—
—
—
—
—
—
—

30,151
20,535
—
—
—
—
—
—
—

2012

2016

2014

64,589
51,270
16,049
—
—
—
—
—
—

102,511
81,594
41,463
15,670
—
—
—
—
—

2015
279,051 $ 295,987
207,257
190,494
196,395
182,913
155,603
140,946
175,933
152,163
171,102
134,122
143,071
106,396
114,334
66,656
51,082
17,259
23,741
—
$ 1,534,505
257,239
Reserves for loss and loss adjustment expenses, net of reinsurance $ 1,285,485

157,689
146,140
101,312
88,490
55,884
28,154
—
—
—

175,813
171,526
122,709
123,450
97,666
61,692
20,394
—
—

135,642
116,544
72,274
47,500
20,749
—
—
—
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

1001618in_10k.indd 81

4/6/17 11:30 AM

Property
(In thousands)

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

Accident
Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total

Loss and Loss Expenses Incurred, Net of Reinsurance

For the Year Ended December 31,

Unaudited

As of
December
31, 2016

2007

2008

2009

2010

2011

2012

2013

2014

$ 21,645 $ 19,073 $ 17,366 $ 15,093 $ 15,459 $ 15,258 $ 15,191 $ 15,211 $

—
—
—
—
—
—
—
—
—

23,896
—
—
—
—
—
—
—
—

21,055
26,917
—
—
—
—
—
—
—

19,597
25,118
39,792
—
—
—
—
—
—

19,449
25,424
37,397
66,860
—
—
—
—
—

18,879
24,160
36,802
69,441
73,551
—
—
—
—

19,498
24,071
36,489
69,084
69,515
125,131
—
—
—

18,952
23,824
36,915
70,320
64,989
97,153
102,644
—
—

2015
15,210 $
18,968
23,704
36,860
69,494
65,526
100,897
86,848
115,942
—

2016
15,265
19,061
23,246
36,956
69,418
64,170
99,513
88,592
106,965
158,664
681,850

IBNR

(28 )
66
60
33
152
545
1,312
1,552
5,887
43,516

Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance

For the Year Ended December 31,

Unaudited

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

15,125
18,940
23,009
36,285
67,940
60,917
91,192
74,695
81,565
72,976
542,644
557
139,763

2,387 $
—
—
—
—
—
—
—
—
—

9,609 $ 12,014 $ 13,755 $ 13,924 $ 14,383 $ 14,948 $ 14,970 $
7,275
—
—
—
—
—
—
—
—

16,620
17,216
19,859
—
—
—
—
—
—

18,111
22,510
33,656
51,216
11,908
—
—
—
—

13,993
8,256
—
—
—
—
—
—
—

18,816
23,026
35,442
66,012
52,640
69,056
36,723
—
—

18,591
23,159
34,632
63,560
42,504
34,625
—
—
—

17,670
21,384
29,231
27,164
—
—
—
—
—

15,054 $
18,839
23,053
35,764
67,301
58,760
85,182
61,966
51,982
—

Reserves for loss and loss adjustment expenses before 2007, net of reinsurance

Reserves for loss and loss adjustment expenses, net of reinsurance $

1001618in_10k.indd 82

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The reconciliation of the net incurred and paid claims development tables to the reserves for loss and loss adjustment expenses in

the consolidated balance sheet is as follows:

(In thousands)

Undiscounted reserves for loss and loss expenses, net of reinsurance:

Other liability

Primary workers' compensation

Excess workers' compensation

Professional liability

Commercial automobile

Short-tail lines

Other

Insurance

Casualty
Property

Reinsurance

Total undiscounted reserves for loss and loss expenses, net of reinsurance

(In thousands)

Due from reinsurers on unpaid claims:
Other liability

Primary workers' compensation

Excess workers' compensation

Professional liability

Commercial automobile

Short-tail lines

Other

Insurance

Casualty
Property

Reinsurance

Total due from reinsurers on unpaid claims

December 31,
2016

3,290,085
1,727,362
1,723,774
737,349
559,482
608,228
158,269
8,804,549
1,285,485
139,763
1,425,248
10,229,797

December 31,
2016

362,047
585,861
55,154
278,460
7,286
210,859
32,468
1,532,135
65,314
9,481
74,795
1,606,930

1001618in_10k.indd 83

4/6/17 11:30 AM

(In thousands)

Loss reserve discount:

Other liability

Primary workers' compensation

Excess workers' compensation

Professional liability

Commercial automobile

Short-tail lines

Other

Insurance

Casualty
Property

Reinsurance

Total loss reserve discount

Total gross reserves for loss and loss expenses

December 31,
2016

—
(6,367 )

(582,384 )
—
—
—
—

(588,751 )

(50,781 )
—

(50,781 )

(639,532 )
11,197,195

The following is supplementary information regarding average historical claims duration as of December 31, 2016:

Insurance

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance

Years

Other liability

Primary workers'
compensation
Excess workers'
compensation
Professional
liability
Commercial
automobile

7.9 %

14.0 %

18.1 %

16.4 %

13.4 %

8.4 %

6.3 %

4.2 %

3.4 %

3.1 %

22.8 %

27.0 %

15.2 %

9.2 %

5.6 %

4.8 %

2.7 %

2.0 %

1.8 %

1.2 %

1.8 %

2.0 %

3.4 %

3.3 %

3.9 %

4.3 %

3.5 %

4.1 %

2.7 %

8.5 %

26.1 %

23.2 %

17.8 %

9.2 %

5.2 %

1.8 %

1.7 %

1.0 %

0.9 %

40.1 %

21.6 %

15.5 %

10.6 %

6.5 %

3.3 %

0.9 %

0.5 %

0.2 %

— %

Short-tail lines

58.5 %

28.5 %

6.0 %

2.2 %

0.6 %

1.0 %

0.9 %

0.5 %

0.4 %

Reinsurance

Years

Casualty

Property

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance

7.2 %

12.3 %

15.2 %

15.3 %

12.5 %

10.4 %

37.2 %

35.5 %

15.4 %

6.2 %

2.3 %

1.3 %

6.2 %

1.6 %

5.7 %

— %

5.5 %

0.5 %

5.1 %

0.5 %

1001618in_10k.indd 84

4/6/17 11:30 AM

The table below provides a reconciliation of the beginning and ending reserve balances:

(In thousands)

Net reserves at beginning of year

Net provision for losses and loss expenses:
Claims occurring during the current year (1)

Decrease in estimates for claims occurring in prior years (2)

Loss reserve discount accretion (3)

Total

Net payments for claims:
Current year

Prior year

Total

Foreign currency translation

Net reserves at end of year
Ceded reserve at end of year

Gross reserves at end of year

2016
9,244,872 $

2015
8,970,641 $

2014
8,683,797

3,826,620
(29,904 )
49,084
3,845,800

3,653,561
(46,713 )
49,422
3,656,270

1,052,452
2,401,722
3,454,174
(46,233 )
9,590,265
1,606,930
11,197,195 $

914,637
2,342,378
3,257,015
(125,024 )
9,244,872
1,424,278
10,669,150 $

3,495,825
(75,764 )
70,506
3,490,567

898,944
2,216,283
3,115,227
(88,496 )
8,970,641
1,399,060
10,369,701

_______________________________________
(1) Claims occurring during the current year are net of loss reserve discounts of $18,929,000, $20,357,000 and $21,306,000 in 2016,

2015, and 2014 , respectively.

(2) The decrease 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 $59,175,000, $64,971,000 and $116,866,000 in 2016, 2015 and 2014,
respectively.

(3) In 2014, the Company entered into a commutation agreement that resulted in a reduction in prior year workers' compensation

reserves of $30 million on an undiscounted basis and $12 million on a discounted basis.

Favorable prior year development (net of additional and return premiums) was $59 million in 2016.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident

85
For medical professional liability business, unfavorable development was primarily related to a class of business that has been

discontinued. The adverse development for that business stemmed mainly from accident years 2010 through 2015.

Reinsurance - Reserves for the Reinsurance segment developed favorably by $6 million in 2016. The favorable development was

primarily related to direct facultative reinsurance business and to accident years 2008 through 2014.

Favorable prior year development (net of additional and return premiums) was $63 million in 2015.

Insurance - Reserves for the Insurance segment developed favorably by $52 million in 2015. The favorable development was

1001618in_10k.indd 85

primarily related to workers' compensation, other liability business and commercial property, and was partially offset by unfavorable

4/6/17 11:30 AM

development for commercial automobile liability business and professional indemnity business.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident

years, including those prior to 2006. In 2015, reported workers' compensation losses were below our expectations for many of our

operating units. In addition, overall loss frequency and severity trends emerged better than the assumptions underlying our previous

reserve estimates. The long term trend of declining workers' compensation claim frequency continued in 2015. The improvement is

attributable to better workplace safety and to benign medical severity trends as we continue to invest in medical case management

services and higher usage of preferred provider networks.

For other liability business, favorable development was concentrated in accident years 2007 through 2013. The favorable

development was primarily related to our excess and surplus lines casualty business that has benefited from a persistent improvement

in claim frequency trends over the past several years.

For commercial property business, favorable development was attributable to accident years 2012 through 2014 and was driven

by favorable frequency and severity trends on property business written in Lloyd's.

For commercial automobile business, adverse development was primarily related to large losses for long-haul trucking business

and to accident years 2011 through 2014. The higher loss cost trends for the commercial automobile industry are attributable, in part,

to the increase in miles driven as the economy improved and fuel prices declined over the past several years.

For Professional indemnity business in the U.K., adverse development was primarily for accident years 2006 through 2013.

_______________________________________
(1) Claims occurring during the current year are net of loss reserve discounts of $18,929,000, $20,357,000 and $21,306,000 in 2016,

2015, and 2014 , respectively.

(2) The decrease 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 $59,175,000, $64,971,000 and $116,866,000 in 2016, 2015 and 2014,
respectively.

(3) In 2014, the Company entered into a commutation agreement that resulted in a reduction in prior year workers' compensation

reserves of $30 million on an undiscounted basis and $12 million on a discounted basis.

_______________________________________
(1) Claims occurring during the current year are net of loss reserve discounts of $18,929,000, $20,357,000 and $21,306,000 in 2016,

Favorable prior year development (net of additional and return premiums) was $59 million in 2016.

2015, and 2014 , respectively.
(2) The decrease in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the
Insurance - Reserves for the Insurance segment developed favorably by $53 million in 2016. The favorable development was
estimates for claims occurring in prior years decreased by $59,175,000, $64,971,000 and $116,866,000 in 2016, 2015 and 2014,
primarily related to workers' compensation business, and was partially offset by unfavorable development for medical professional
respectively.
liability business.
(3) In 2014, the Company entered into a commutation agreement that resulted in a reduction in prior year workers' compensation
reserves of $30 million on an undiscounted basis and $12 million on a discounted basis.
For workers' compensation, the favorable development was related to both primary and excess business and to many accident

Favorable prior year development (net of additional and return premiums) was $59 million in 2016.

years, including those prior to 2007. During 2016, reported workers' compensation losses continued to be below our expectations at
most of our operating units. Loss frequency and severity trends continued to be better than the assumptions underlying our previous
reserve estimates. Loss severity trends also benefited from our continued investment in medical case management services and from
our preferred provider networks. The long term trend of declining workers' compensation frequency can be attributed to improved
Insurance - Reserves for the Insurance segment developed favorably by $53 million in 2016. The favorable development was
workplace safety.
primarily related to workers' compensation business, and was partially offset by unfavorable development for medical professional
liability business.

For medical professional liability business, unfavorable development was primarily related to a class of business that has been

discontinued. The adverse development for that business stemmed mainly from accident years 2010 through 2015.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident

Reinsurance - Reserves for the Reinsurance segment developed favorably by $6 million in 2016. The favorable development was

years, including those prior to 2007. During 2016, reported workers' compensation losses continued to be below our expectations at
most of our operating units. Loss frequency and severity trends continued to be better than the assumptions underlying our previous
primarily related to direct facultative reinsurance business and to accident years 2008 through 2014.
reserve estimates. Loss severity trends also benefited from our continued investment in medical case management services and from
our preferred provider networks. The long term trend of declining workers' compensation frequency can be attributed to improved
workplace safety.

Favorable prior year development (net of additional and return premiums) was $63 million in 2015.

For medical professional liability business, unfavorable development was primarily related to a class of business that has been

Favorable prior year development (net of additional and return premiums) was $63 million in 2015.

For workers' compensation, the favorable development was related to both primary and excess business and to many accident
Reinsurance - Reserves for the Reinsurance segment developed favorably by $6 million in 2016. The favorable development was
years, including those prior to 2006. In 2015, reported workers' compensation losses were below our expectations for many of our
primarily related to direct facultative reinsurance business and to accident years 2008 through 2014.
operating units. In addition, overall loss frequency and severity trends emerged better than the assumptions underlying our previous
reserve estimates. The long term trend of declining workers' compensation claim frequency continued in 2015. The improvement is
attributable to better workplace safety and to benign medical severity trends as we continue to invest in medical case management
Insurance - Reserves for the Insurance segment developed favorably by $52 million in 2015. The favorable development was
services and higher usage of preferred provider networks.
primarily related to workers' compensation, other liability business and commercial property, and was partially offset by unfavorable
For other liability business, favorable development was concentrated in accident years 2007 through 2013. The favorable
development for commercial automobile liability business and professional indemnity business.
development was primarily related to our excess and surplus lines casualty business that has benefited from a persistent improvement
For workers' compensation, the favorable development was related to both primary and excess business and to many accident
in claim frequency trends over the past several years.
years, including those prior to 2006. In 2015, reported workers' compensation losses were below our expectations for many of our
operating units. In addition, overall loss frequency and severity trends emerged better than the assumptions underlying our previous
For commercial property business, favorable development was attributable to accident years 2012 through 2014 and was driven
reserve estimates. The long term trend of declining workers' compensation claim frequency continued in 2015. The improvement is
by favorable frequency and severity trends on property business written in Lloyd's.
attributable to better workplace safety and to benign medical severity trends as we continue to invest in medical case management
For commercial automobile business, adverse development was primarily related to large losses for long-haul trucking business
services and higher usage of preferred provider networks.
and to accident years 2011 through 2014. The higher loss cost trends for the commercial automobile industry are attributable, in part,
to the increase in miles driven as the economy improved and fuel prices declined over the past several years.
development was primarily related to our excess and surplus lines casualty business that has benefited from a persistent improvement
For Professional indemnity business in the U.K., adverse development was primarily for accident years 2006 through 2013.
in claim frequency trends over the past several years.

For other liability business, favorable development was concentrated in accident years 2007 through 2013. The favorable

For commercial property business, favorable development was attributable to accident years 2012 through 2014 and was driven
86

by favorable frequency and severity trends on property business written in Lloyd's.

For Professional indemnity business in the U.K., adverse development was primarily for accident years 2006 through 2013.

1001618in_10k.indd 86

4/6/17 11:30 AM

Reinsurance - Reserves for the Reinsurance segment developed favorably by $11 million in 2015. The favorable development

Favorable prior year development (net of additional and return premiums) was $85 million in 2014.

Environmental and Asbestos — To date, known environmental and asbestos claims have not had a material impact on the
Company’s operations, because its subsidiaries generally did not insure large industrial companies that are subject to significant
environmental or asbestos exposures prior to 1986 when an absolute exclusion was incorporated into standard policy language.

The Company’s net reserves for losses and loss expenses relating to asbestos and environmental claims on policies written before

adoption of the absolute exclusion was $31 million at December 31, 2016 and $33 million at December 31, 2015. The estimation of
these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make an actuarial
estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential
effect of significant unresolved legal matters, including coverage issues, as well as the cost of litigating the legal issues. Additionally,
the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

Discounting — The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’
compensation reserves that were discounted was $1.907 million million and $2.308 million at December 31, 2016 and December 31,
2015, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was $640 million
and $699 million at December 31, 2016 and 2015, respectively. At December 31, 2016, discount rates by year ranged from 2.0% to
6.5%, with a weighted average discount rate of 3.9%.

Substantially all of discounted workers’ compensation reserves (97% of total discounted reserves at December 31, 2016) are

excess workers’ compensation reserves. In order to properly match loss expenses with income earned on investment securities
supporting the liabilities, reserves for excess workers’ compensation business are discounted using risk-free discount rates determined
by reference to the U.S. Treasury yield curve. These rates are determined annually based on the weighted average rate for the period.
Once established, no adjustments are made to the discount rate for that period, and any increases or decreases in loss reserves in
subsequent years are discounted at the same rate, without regard to when any such adjustments are recognized. The expected loss and
loss expense payout patterns subject to discounting are derived from the Company’s loss payout experience.

The Company also discounts reserves for certain other long-duration workers’ compensation reserves (representing

approximately 3% of total discounted reserves at December 31, 2016), including reserves for quota share reinsurance and reserves
related to losses regarding occupational lung disease. These reserves are discounted at statutory rates permitted by the Department of
Insurance of the State of Delaware.

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(15) Reinsurance

The Company reinsures a portion of its insurance exposures in order to reduce its net liability on individual risks and catastrophe
losses. Reinsurance coverage and retentions vary depending on the line of business, location of the risk and nature of loss. The
Company’s reinsurance purchases include the following: property reinsurance treaties that reduce exposure to large individual
property losses and catastrophe events; casualty reinsurance treaties that reduce its exposure to large individual casualty losses,
workers’ compensation catastrophe losses and casualty losses involving multiple claimants or insureds; and facultative reinsurance
that reduces exposure on individual policies or risks for losses that exceed treaty reinsurance capacity. Depending on the operating
unit, the Company purchases specific additional reinsurance to supplement the above programs.

The following is a summary of reinsurance financial information:

(In thousands)

Written premiums:
Direct

Assumed

Ceded

Total net written premiums

Earned premiums:

Direct

Assumed

Ceded

Total net earned premiums

Ceded losses and loss expenses incurred

Ceded commission earned

2016

2015

2014

$ 6,647,600 $ 6,412,533 $ 6,185,242
877,596
837,460
(1,065,891 )
(1,060,478 )
$ 6,423,913 $ 6,189,515 $ 5,996,947

896,101
(1,119,788 )

$ 6,492,240 $ 6,245,714 $ 5,889,021
886,063
845,735
(1,030,666 )
(1,050,840 )
$ 6,293,348 $ 6,040,609 $ 5,744,418

900,570
(1,099,462 )

707,336 $
201,957 $

501,999 $
173,288 $

475,802
160,215

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The Company reinsures a portion of its exposures principally to reduce its net liability on individual risks and to protect against

catastrophic losses. Estimated amounts due from reinsurers are reported net of reserves for uncollectible reinsurance of $1,049,000,
$1,020,000 and $1,144,000 as of December 31, 2016, 2015 and 2014, respectively.

The following table presents the amounts due from reinsurers as of December 31, 2016:

(In thousands)

Alleghany Group

Munich Re

Swiss Re

Lloyd’s of London

Partner Re

Axis Capital

Everest Re

Hannover Re Group

Berkshire Hathaway

Chubb Limited

Korean Re

Validus

Arch Capital Group

Other reinsurers less than $20,000

Subtotal
Residual market pools

Total

150,604
130,623
120,906
118,607
74,948
72,600
53,482
52,472
49,340
35,304
28,654
22,871
21,359
246,160
1,177,930
566,050
1,743,980

(16) Indebtedness
Indebtedness consisted of the following as of December 31, 2016 (the difference between the face value and the carrying value is
unamortized discount and debt issuance costs):

(In thousands)

Senior notes due on:
August 15, 2019

September 15, 2019

September 15, 2020

January 1, 2022

March 15, 2022

February 15, 2037

August 1, 2044

Subsidiary debt (1)

Total senior notes and other debt

Subordinated debentures due on:
April 30, 2053

March 1, 2056

June 1, 2056

Total subordinated debentures

Interest
Rate

6.15%

7.375%

5.375%

8.7%

4.625%

6.25%

4.75%

Various

Face Value

2016
Carrying
Value

2015
Carrying
Value

140,651 $
300,000
300,000
76,503
350,000
250,000
350,000
5,554

149,484
299,054
298,411
76,097
347,417
247,676
344,730
81,752
$ 1,772,708 $ 1,760,595 $ 1,844,621

140,301 $
299,308
298,747
76,151
347,834
247,786
344,914
5,554

5.625%

5.9%

5.75%

350,000 $
110,000
290,000
750,000 $

340,579 $
105,952
281,099
727,630 $

340,320
—
—
340,320

________________
(1) Subsidiary debt is due as follows: $4 million in 2017 and $2 million in 2019.

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(17) Income Taxes

Income tax expense (benefits) consists of:

(In thousands)

December 31, 2016

Domestic

Foreign

Total expense

December 31, 2015

Domestic

Foreign

Total expense

December 31, 2014

Domestic

Foreign

Total expense

Current
Expense

Deferred
Expense

Total

259,539 $
23,634
283,173 $

3,355 $
6,425
9,780 $

262,894
30,059
292,953

179,150 $
(2,318 )
176,832 $

31,145 $
19,946
51,091 $

210,295
17,628
227,923

258,337 $
12,969
271,306 $

28,029 $
3,258
31,287 $

286,366
16,227
302,593

Income before income taxes from domestic operations was $837 million, $689 million and $910 million for the years ended
December 31, 2016, 2015 and 2014, respectively. Income before income taxes from foreign operations was $59 million, $43 million
and $42 million for the years ended December 31, 2016, 2015 and 2014, respectively.

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of

35% to pre-tax income are as follows:

(In thousands)

Computed “expected” tax expense
Tax-exempt investment income

Change in valuation allowance

Impact of foreign tax rates

State and local taxes

Other, net

Total expense

2016
313,753 $
(37,379 )
1,420
1,984
7,748
5,427
292,953 $

2015
256,210 $
(39,283 )
2,702
4,447
940
2,907
227,923 $

2014
333,269
(38,757 )
1,335
6,239
2,375
(1,868 )
302,593

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At December 31, 2016 and 2015, the tax effects of differences that give rise to significant portions of the deferred tax asset and

deferred tax liability are as follows:

(In thousands)

Deferred tax asset:
Loss reserve discounting

Unearned premiums

Other-than-temporary impairments

Restricted stock units

Other

Gross deferred tax asset
Less valuation allowance

Deferred tax asset

Deferred tax liability:
Amortization of intangibles

Deferred policy acquisition costs

Unrealized investment gains

Property, furniture and equipment

Investment funds

Other

Deferred tax liability

Net deferred tax liability

2016

2015

86,659 $
187,522
26,139
72,889
104,130
477,339
(5,457 )
471,882

21,192
173,481
238,232
34,857
85,075
53,410
606,247
134,365 $

100,806
176,465
26,509
62,442
89,761
455,983
(4,037 )
451,946

20,316
162,344
115,499
33,398
79,124
48,076
458,757
6,811

The Company had current tax receivables of $14,768,000 and $55,763,000 at December 31, 2016 and 2015, respectively. At
December 31, 2016, the Company had foreign net operating loss carryforwards of $5.3 million that expire beginning in 2031, and an
additional $29.9 million that have no expiration date. At December 31, 2016, the Company had a valuation allowance of $5.5 million,
as compared to $4.0 million at December 31, 2015. The Company has provided a valuation allowance against future tax benefits of
certain foreign operations. The statute of limitations has closed for the Company’s U.S. Federal tax returns through December 31,
2012.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future
periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than
not that future taxable income will be sufficient for the realization of this asset.

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(18) Dividends from Subsidiaries and Statutory Financial Information

The Company’s insurance subsidiaries are restricted by law as to the amount of dividends they may pay without the approval of
regulatory authorities. The Company’s lead insurer, Berkley Insurance Company (BIC), directly or indirectly owns all of the
Company’s other insurance companies. During 2017, the maximum amount of dividends that can be paid by BIC without such
approval is approximately $580 million.

BIC’s combined net income and statutory capital and surplus, as determined in accordance with statutory accounting practices
(SAP), are as follows:

(In thousands)

Net income
Statutory capital and surplus

2016
702,830 $

2014
757,010
$
$ 5,493,044 $ 5,296,435 $ 5,438,063

2015
813,303 $

The significant variances between SAP and GAAP are that for statutory purposes bonds are carried at amortized cost, acquisition

costs are charged to income as incurred, deferred Federal income taxes are subject to limitations, excess and assumed workers’
compensation reserves are discounted at different discount rates and certain assets designated as “non-admitted assets” are charged
against surplus. The Commissioner of Insurance of the State of Delaware has allowed BIC to discount non-tabular workers'
compensation loss reserves, which is a permitted practice that differs from SAP. The effect of using this permitted practice was an
increase to BIC’s statutory capital and surplus by $231 million at December 31, 2016.

The National Association of Insurance Commissioners (“NAIC”) has risk-based capital (“RBC”) requirements that require

insurance companies to calculate and report information under a risk-based formula which measures statutory capital and surplus
needs based on a regulatory definition of risk in a company’s mix of products and its balance sheet. This guidance is used to calculate
two capital measurements: Total Adjusted Capital and RBC Authorized Control Level. Total Adjusted Capital is equal to the
Company’s statutory capital and surplus excluding capital and surplus derived from the use of permitted practices that differ from
statutory accounting practices. RBC Authorized Control Level is the capital level used by regulatory authorities to determine whether
remedial action is required. Generally, no remedial action is required if Total Adjusted Capital is 200% or more of the RBC Authorized
Control Level. At December 31, 2016, BIC’s Total Adjusted Capital of $5.262 billion was 422% of its RBC Authorized Control Level.

See Note 4, Investments in Fixed Maturity Securities, for a description of assets held on deposit as security.

(19) Common Stockholders’ Equity

The weighted average number of shares used in the computation of net income per share was as follows:

Basic
Diluted

2016

2015

122,650,997 124,040,313
128,552,838 130,188,866

2014
127,873,708
133,651,855

Treasury shares have been excluded from average outstanding shares from the date of acquisition. The difference in calculating

basic and diluted net income per share is attributable entirely to the dilutive effect of stock-based compensation plans. Changes in
shares of common stock outstanding, net of treasury shares, are presented below. Shares of common stock issued and outstanding do
not include shares related to unissued restricted stock units and unexercised stock options.

Balance, beginning of year
Shares issued

Shares repurchased

Balance, end of year

2016

2015

123,307,837 126,748,836
1,061,026
(4,502,025 )
121,193,599 123,307,837

281,654
(2,395,892 )

2014
132,233,167
332,137

(5,816,468)

126,748,836

The amount of dividends paid is dependent upon factors such as the receipt of dividends from our subsidiaries, our results of
operations, cash flow, financial condition and business needs, the capital and surplus requirements of our subsidiaries, and applicable
insurance regulations that limit the amount of dividends that may be paid by our regulated insurance subsidiaries.

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(20) Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of
December 31, 2016 and 2015:

(In thousands)

Assets:

Fixed maturity securities
Equity securities available for sale
Arbitrage trading account
Loans receivable
Cash and cash equivalents
Trading accounts receivable from brokers and clearing
organizations
Due from broker

Liabilities:

Due to broker
Trading account securities sold but not yet purchased
Subordinated debentures
Senior notes and other debt

2016

2015

Carrying
Value

Fair Value

Carrying
Value

Fair Value

$ 13,190,668 $ 13,204,814 $ 12,444,394 $ 12,462,847
150,866
376,697
275,747
763,631

150,866
376,697
273,103
763,631

669,200
299,999
106,798
795,285

669,200
299,999
108,299
795,285

484,593
—

383,115
1,713

19,416
51,179
727,630
1,760,595

19,416
51,179
687,504
1,914,727

—
37,035
340,320
1,844,621

—
37,035
355,880
2,029,572

The estimated fair values of the Company’s fixed maturity securities, equity securities available for sale and arbitrage trading
account securities are based on various valuation techniques that rely on fair value measurements as described in Note 13 above. The
fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit
characteristics, which is considered a Level 2 input. The fair value of the senior notes and other debt and the subordinated debentures
is based on spreads for similar securities, which is considered a Level 2 input.

(21) Lease Obligations

The Company and its subsidiaries use office space and equipment under leases expiring at various dates. These leases are
considered operating leases for financial reporting purposes. Some of these leases have options to extend the length of the leases and
contain clauses for cost of living, operating expense and real estate tax adjustments. Future minimum lease payments, without
provision for sublease income, are: $45,305,000 in 2017; $40,634,000 in 2018; $35,805,000 in 2019; $33,575,000 in 2020;
$29,374,000 in 2021 and $100,704,000 thereafter. Rental expense was $47,453,000, $46,271,000 and $45,198,000 for 2016, 2015 and
2014, respectively.

(22) Commitments, Litigation and Contingent Liabilities

In the ordinary course of business, the Company is subject to disputes, litigation and arbitration arising from its insurance and

reinsurance businesses. These matters are generally related to insurance and reinsurance claims and are considered in the
establishment of loss and loss expense reserves. In addition, the Company may also become involved in legal actions which seek
extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in handling of insurance claims. The
Company expects its ultimate liability with respect to such matters will not be material to its financial condition. However, adverse
outcomes on such matters are possible, from time to time, and could be material to the Company’s results of operations in any
particular financial reporting period.

At December 31, 2016, the Company had commitments to invest up to $373.2 million and $495.7 million in certain investment

funds and real estate construction projects, respectively.

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(23) Stock Incentive Plan

Pursuant to the Company's stock incentive plan, the Company may issue restricted stock units (RSUs) to employees of the
Company and its subsidiaries. The RSUs generally vest three to five years from the award date and are subject to other vesting and
forfeiture provisions contained in the award agreement. The following table summarizes RSU information for the three years ended
December 31, 2016:

RSUs granted and unvested at beginning of period:

Granted

Vested

Canceled

RSUs granted and unvested at end of period:

2016
4,158,325
1,000,559
(77,250 )

(219,536 )
4,862,098

2015
5,330,445
997,522
(1,938,000 )

(231,642 )
4,158,325

2014
4,491,520
1,154,950
(81,500 )

(234,525 )
5,330,445

Upon vesting, shares of the Company’s common stock equal to the number of vested RSUs are issued or deferred to a later date,

depending on the terms of the specific award agreement. As of December 31, 2016, 4,097,497 RSUs had been deferred. RSUs that
have not yet vested and vested RSUs that have been deferred are not considered to be issued and outstanding shares.
The fair value of RSUs at the date of grant are recorded as unearned compensation, a component of stockholders’ equity, and expensed
over the vesting period. Following is a summary of changes in unearned compensation for the three years ended December 31, 2016:

(In thousands)

Unearned compensation at beginning of year
RSUs granted, net of cancellations

RSUs expensed

RSUs forfeitures

Unearned compensation at end of year

(24) Compensation Plans

2016
103,538 $
52,697
(35,585 )

(4,685 )
115,965 $

2015
88,015 $
50,442
(30,691 )

(4,228 )
103,538 $

2014
73,205
51,575
(27,966 )

(8,799 )
88,015

The Company and its subsidiaries have profit sharing plans in which substantially all employees participate. The plans provide for
minimum annual contributions of 5% of eligible compensation; contributions above the minimum are discretionary and vary with each
participating subsidiary’s profitability. Employees become eligible to participate in the plan on the first day of the calendar quarter
following the first full calendar quarter after the employee's date of hire provided the employee has completed 250 hours of service
during the calendar quarter. The plans provide that 40% of the contributions vest immediately and that the remaining 60% vest at
varying percentages based upon years of service. Profit sharing expense was $39 million, $42 million and $38 million in 2016, 2015
and 2014, respectively.

The Company has a long-term incentive compensation plan ("LTIP") that provides for incentive compensation to key executives

based on the growth in the Company's book value per share over a five year period.
The following table summarizes the outstanding LTIP awards as of December 31, 2016:

Units Outstanding

Maximum Value

Inception to date earned
through December 31, 2016
on outstanding units

197,500 $
209,750
211,250
230,500

49,375,000 $
20,975,000
21,125,000
23,050,000

31,852,800
9,883,420
7,239,538
4,001,480

2013 grant
2014 grant

2015 grant

2016 grant

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The following table summarizes the LTIP expense for each of the three years ended December 31, 2016:

(In thousands)

2011 grant
2013 grant

2014 grant

2015 grant

2016 grant

Total

(25) Retirement Benefits

2016

2015

2014

(82 ) $

8,918
3,503
4,072
4,002
20,413 $

7,397 $
7,336
2,935
3,205
—
20,873 $

9,855
9,493
3,663
—
—
23,011

The Company and its executive chairman of the board entered into an unfunded supplemental benefit agreement (SBA) in 2004.

On March 28, 2013, the Company agreed to terminate and distribute the retirement benefit of the SBA. As a result, the Company
distributed retirement benefits of $4.6 million in 2014. The final retirement benefit of $59.4 million, which was fully accrued at
December 31, 2014, was distributed in 2015. Net retirement benefit expense was $9,994,000 in 2014, and none in 2015 and 2016.

(26) Supplemental Financial Statement Data

Other operating costs and expenses consist of the following:

(In thousands)
Amortization of deferred policy acquisition costs
Operating insurance expenses

Service company expenses

Net foreign currency (gains) losses

Other costs and expenses

Total

2016

2014

2015
$ 1,155,954 $ 1,102,492 $ 1,053,397
843,133
102,726
(27 )
158,227

903,006
127,365
400
156,487

933,249
138,908
(11,904 )
179,412

$ 2,395,619

$ 2,289,750

$ 2,157,456

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(27) Industry Segments
The Company’s reportable segments include the following two business segments, plus a corporate segment:

Insurance - commercial insurance business, including excess and surplus lines and admitted lines, throughout the United States,

•
as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and
Australia; and

Reinsurance - reinsurance business on a facultative and treaty basis, primarily in the United States, United Kingdom, Continental

•
Europe, Australia, the Asia-Pacific region and South Africa.

Commencing with the first quarter of 2016, the Company changed the aggregation of its reported segments. Operating units in the

Insurance-Domestic segment and Insurance-International segment, previously reported separately, were combined into the Insurance
segment. The segment disclosures for prior periods have been revised to be consistent with the new reportable business segment
presentation.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Income tax expense and benefits are calculated based upon the Company’s overall effective tax rate.

Summary financial information about the Company’s reporting segments is presented in the following table. Income before
income taxes by segment includes allocated investment income. Identifiable assets by segment are those assets used in or allocated to
the operation of each segment.

(In thousands)

December 31, 2016:

Insurance
Reinsurance

Corporate, other and eliminations(2)

Net investment gains

Consolidated

December 31, 2015:

Insurance

Reinsurance

Corporate, other and eliminations(2)

Net investment gains

Consolidated

December 31, 2014:

Insurance

Reinsurance

Corporate, other and eliminations(2)

Net investment gains

Consolidated

Revenues

Earned
Premiums

Investment
Income

Other

Total (1)

Pre-Tax
Income
(Loss)

Net
Income
(Loss)

$ 5,652,903 $ 455,139 $
78,967
30,057
—

97,879 $ 6,205,921 $ 822,617 $ 551,482
51,531
(174,650 )
173,553
$ 6,293,348 $ 564,163 $ 796,673 $ 7,654,184 $ 896,438 $ 601,916

74,799
(267,983 )
267,005

640,445
—
—

—
431,789
267,005

719,412
461,846
267,005

$ 5,431,500 $ 410,457 $

96,487 $ 5,938,444 $ 776,593 $ 532,286
66,627
(155,230 )
60,011
$ 6,040,609 $ 512,645 $ 653,203 $ 7,206,457 $ 732,030 $ 503,694

94,852
(231,739 )
92,324

—
464,392
92,324

609,109
—
—

683,335
492,354
92,324

74,226
27,962
—

$ 5,074,308 $ 484,039 $ 106,853 $ 5,665,200 $ 826,088 $ 561,643
79,720
(158,133 )
165,654
$ 5,744,418 $ 600,885 $ 783,625 $ 7,128,928 $ 952,196 $ 648,884

115,677
(244,421 )
254,852

—
421,920
254,852

758,931
449,945
254,852

670,110
—
—

88,821
28,025
—

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Identifiable Assets

(In thousands)

Insurance
Reinsurance

Corporate, other and eliminations(2)

Consolidated

December 31,

2016

2015

$ 19,137,758 $ 18,063,730
2,441,340
1,225,897
$ 23,364,844 $ 21,730,967

2,524,338
1,702,748

_______________________________________
(1) Revenues for Insurance includes $830.8 million, $828.3 million and $890.1 million in 2016, 2015 and 2014, respectively, from
foreign countries. Revenues for Reinsurance includes $166.6 million, $186.6 million and $249.3 million in 2016, 2015 and 2014,
respectively, from foreign countries.
(2) Corporate, other and eliminations represent corporate revenues and expenses and other items that are not allocated to business
segments

Net premiums earned by major line of business are as follows:

(In thousands)

Insurance
Other liability

Workers' compensation

Short-tail lines

Commercial automobile

Professional liability

Total Insurance

Reinsurance
Casualty

Property

Total Reinsurance

Total

2016

2015

2014

$ 1,798,771 $ 1,650,131 $ 1,541,836
1,198,701
1,291,021
642,713
400,037
5,074,308

1,408,911
1,299,545
642,452
503,224
5,652,903

1,363,513
1,298,883
674,078
444,895
5,431,500

390,863
249,582
640,445

487,264
182,846
670,110
$ 6,293,348 $ 6,040,609 $ 5,744,418

421,811
187,298
609,109

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(28) Quarterly Financial Information (Unaudited)

The following is a summary of quarterly financial data:

(In thousands, except per share data)

2016

Three months ended
Revenues
Net income

Net income per share(1)

Basic

Diluted

Three months ended
Revenues
Net income

Net income per share(1)

Basic

Diluted

March 31

June 30

September 30

December 31

1,807,211 $
119,511

1,855,914 $
108,967

2,019,727 $
220,650

1,971,333
152,790

0.97
0.93

0.89
0.85

2015

1.80
1.72

1.26
1.20

March 31

June 30

September 30

December 31

1,744,679 $
118,307

1,789,765 $
123,035

1,860,957 $
152,607

1,811,056
109,745

0.94
0.89

0.99
0.95

1.24
1.18

0.89
0.85

_______________________________________
(1) Net income per share (“EPS”) in each quarter is computed using the weighted-average number of shares outstanding during that
quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the
sum of the four quarters EPS does not necessarily equal the full-year EPS.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company's management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation
of the effectiveness of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the
period covered by this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the
Company in the reports it files or submits under the Exchange Act and the rules thereunder, is recorded, processed, summarized and
reported within the time periods specified in the Commission's rules and forms.
During the quarter ended December 31, 2016, there have been no changes in our internal controls over financial reporting that
have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Management's Report On Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of Treadway Commission. Based on
our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control
over financial reporting was effective as of December 31, 2016.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
W. R. Berkley Corporation:

We have audited W. R. Berkley Corporation's internal control over financial reporting as of December 31, 2016 based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). W. R. Berkley Corporation's management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on
our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, W. R. Berkley Corporation maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of W. R. Berkley Corporation and Subsidiaries as of December 31, 2016 and
2015, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 2016, and our report dated February 27, 2017 expressed an
unqualified opinion on those consolidated financial statements.

New York, New York
February 27, 2017

/S/ KPMG LLP

100

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ITEM 9B. OTHER INFORMATION

None.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED

STOCKHOLDER MATTERS

(a) Security ownership of certain beneficial owners

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

(b) Security ownership of management

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

(d) Equity compensation plan information

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Reference is made to the registrant's definitive proxy statement, which will be filed with the Securities and Exchange

Commission within 120 days after December 31, 2016, and which is incorporated herein by reference.

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to Financial Statements

The schedules to the consolidated financial statements listed below should be read in conjunction with the consolidated financial

statements included in this Annual Report on Form 10-K. Financial statement schedules not included in this Annual Report on Form
10-K have been omitted because they are not applicable or required information is shown in the financial statements or notes thereto.
101

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Index to Financial Statement Schedules

Independent Registered Public Accountants’ Report on Schedules

Schedule II — Condensed Financial Information of Registrant

Schedule III — Supplementary Insurance Information

Schedule IV — Reinsurance

Schedule V — Valuation and Qualifying Accounts

Schedule VI — Supplementary Information Concerning Property — Casualty Insurance Operations

(b)

Exhibits

The exhibits filed as part of this report are listed on pages 105 - 107 hereof.

Page

107

108

112

113

114

115

102

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

W. R. BERKLEY CORPORATION

/s/ W. Robert Berkley, Jr.

W. Robert Berkley, Jr., President and Chief

Executive Officer

February 27, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons

on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ William R. Berkley

William R. Berkley

Executive Chairman

February 27, 2017

of the Board of Directors

/s/ W. Robert Berkley, Jr.

President, Chief Executive Officer

W. Robert Berkley, Jr.

and Director
(Principal executive officer)

February 27, 2017

/s/ Christopher L. Augostini

Christopher L. Augostini

/s/ Ronald E. Blaylock

Ronald E. Blaylock

/s/ Mark E. Brockbank

Mark E. Brockbank

/s/ George G. Daly

George G. Daly

/s/ Mary C. Farrell

Mary C. Farrell

/s/ Jack H. Nusbaum

Jack H. Nusbaum

/s/ Mark L. Shapiro

Mark L. Shapiro

/s/ Richard M. Baio

Richard M. Baio

Director

Senior Vice President,

Chief Financial Officer and Treasurer
(Principal financial officer
and principal accounting officer)

103

February 27, 2017

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ITEM 15. (b) EXHIBITS

Number

(3.1)

(3.2)

(3.3)

(3.4)

(4.1)

(4.2)

(4.3)

(4.4)

(4.5)

(4.6)

(4.7)

(4.8)

(4.9)

The Company’s Restated Certificate of Incorporation, as amended through May 10, 2004 (incorporated by reference
to Exhibits 3.1 and 3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the
Commission on August 6, 2003).

Amendment, dated May 11, 2004, to the Company’s Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.2 of the Company’s Quarterly report on Form 10-Q (File No. 1-15202) filed with the
Commission on August 5, 2004).

Amendment, dated May 16, 2006, to the Company’s Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the
Commission on May 17, 2006).

Amended and Restated By-Laws (incorporated by reference to Exhibit 3 (ii) of the Company’s Current Report on
Form 8-K (File No. 1-15202) filed with the Commission on August 5, 2015).

Indenture, dated as of February 14, 2003, between the Company and The Bank of New York, as trustee (incorporated
by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the
Commission of March 31, 2003).

Third Supplemental Indenture, dated as of August 24, 2004, between the Company and The Bank of New York, as
Trustee, relating to $150,000,000 principal amount of the Company’s 6.150% Senior Notes due 2019, including
form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form
10-K (File No. 1-15202) filed with the Commission on March 14, 2005).

Fifth Supplemental Indenture, dated as of February 9, 2007, between the Company and The Bank of New York, as
Trustee, relating to $250,000,000 principal amount of the Company’s 6.25% Senior Notes due 2037, including form
of the Notes as Exhibit A (incorporated by reference to Exhibit 4.7 of the Company’s Annual Report on Form 10-K
(File No. 1-15202) filed with the Commission on March 1, 2007).

Sixth Supplemental Indenture, dated as of September 14, 2009, between the Company and The Bank of New York
Mellon, as Trustee, relating to $300,000,000 principal amount of the Company’s 7.375% Senior Notes due 2019,
including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.7 of the Company’s Annual Report
on Form 10-K (File No. 1-15202) filed with the Commission on February 26, 2010).

Seventh Supplemental Indenture, dated as of September 16, 2010, between the Company and The Bank of New York
Mellon, as Trustee, relating to $300,000,000 principal amount of the Company’s 5.375% Senior Notes due 2020,
including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s Current Report
on Form 8-K (File No. 1-15202) filed with the Commission on September 16, 2010).

Eighth Supplemental Indenture, dated as of March 16, 2012, between the Company and The Bank of New York
Mellon, as Trustee, relating to $350,000,000 principal amount of the Company’s 4.625% Senior Notes due 2022,
including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company's Current Report
on Form 8-K (File No. 1-15202) filed with the Commission on March 16, 2012).

Ninth Supplemental Indenture, dated as of August 6, 2014, between the Company and The Bank of New York
Mellon, as Trustee, relating to $350,000,000 principal amount of the Company’s 4.75% Senior Notes due 2044,
including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company's Current Report
on Form 8-K (File No. 1-15202) filed with the Commission on August 6, 2014).

Subordinated Indenture, dated as of May 2, 2013, between the Company and The Bank of New York Mellon, as
Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 1-15202)
filed with the Commission on May 2, 2013).

First Supplemental Indenture, dated as of May 2, 2013, between the Company and The Bank of New York Mellon,
as Trustee, relating to $350,000,000 principal amount of the Company's 5.625% Subordinated Debentures due 2053,
including the form of the Securities as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company's Current
Report on Form 8-K (File No. 1-15202) filed with the Commission on May 2, 2013).

104

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(4.10)

Subordinated Indenture, dated as of March 1, 2016, between the Company and The Bank of New York Mellon, as
Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 1-15202)
filed with the Commission on March 1, 2016).

(4.11)

First Supplemental Indenture, dated as of March 1, 2016, between the Company and The Bank of New York Mellon,
as Trustee, relating to $110,000,000 principal amount of the Company's 5.9% Subordinated Debentures due 2056,
including the form of the Securities as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company's Current
Report on Form 8-K (File No. 1-15202) filed with the Commission on March 1, 2016).

(4.12)

Second Supplemental Indenture, dated as of May 25, 2016, between the Company and The Bank of New York
Mellon, as Trustee, relating to $290,000,000 principal amount of the Company's 5.75% Subordinated Debentures
due 2056, including the form of the Securities as Exhibit A (incorporated by reference to Exhibit 4.2 of the
Company's Current Report on Form 8-K (File No. 1-15202) filed with the Commission on May 25, 2016).

(4.13) The instruments defining the rights of holders of the other long term debt securities of the Company are omitted
pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company agrees to furnish supplementally
copies of these instruments to the Commission upon request.

(10.1) W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s 2003

Proxy Statement (File No. 1-15202) filed with the Commission on April 14, 2003).

(10.2) W. R. Berkley Corporation 2012 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s 2015

Proxy Statement (File No. 1-15202) filed with the Commission on April 20, 2015).

(10.3)

Form of 2014 Performance-Based Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2012
Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(File No. 1-15202) filed with the Commission on November 7, 2014).

(10.4)

Form of 2015 Performance-Based Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2012
Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(File No. 1-15202) filed with the Commission on November 9, 2015).

(10.5)

Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2012 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (File No. 1-15202)
filed with the Commission on November 8, 2012).

(10.6)

(10.7)

Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2003 Stock Incentive Plan
(incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202)
filed with the Commission on May 3, 2005).

Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2003 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202)
filed with the Commission on August 6, 2010).

(10.8)

Form of Restricted Stock Unit Agreement for grant of April 4, 2003 (incorporated by reference to Exhibit 10.2 of the
Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).

(10.9) W. R. Berkley Corporation Deferred Compensation Plan for Officers as amended and restated effective December 3,

2007 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K (File No. 1-15202)
filed with the Commission on December 19, 2007).

(10.10) W. R. Berkley Corporation Deferred Compensation Plan for Directors as amended and restated effective December

3, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 1-
15202) filed with the Commission on December 19, 2007).

(10.11) W. R. Berkley Corporation 2007 Annual Incentive Compensation Plan (incorporated by reference to Annex A of the

Company’s 2006 Proxy Statement (File No. 1-15202) filed with the Commission on April 18, 2006).

105

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(10.12) W. R. Berkley Corporation Amended and Restated Annual Incentive Compensation Plan (incorporated by reference

to Annex A of the Company's 2016 Proxy Statement (File No. 1-15202) filed with the Commission on April 15,
2016).

(10.13) W. R. Berkley Corporation 2009 Long-Term Incentive Plan (incorporated by reference to Annex A of the Company’s

2009 Proxy Statement (File No. 1-15202) filed with the Commission on April 17, 2009).

(10.14) Form of 2011 Performance Unit Award Agreement under the W. R. Berkley Corporation 2009 Long-Term Incentive
Plan (incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K (File No. 1-15202)
filed with the Commission on February 28, 2012).

(10.15) W. R. Berkley Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Annex A of the Company’s

2014 Proxy Statement (File No. 1-15202) filed with the Commission on April 7, 2014).

(10.16) Form of 2014 Performance Unit Award Agreement under the W. R. Berkley Corporation 2014 Long-Term Incentive

Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-
15202) filed with the Commission on May 12, 2014).

(10.17) Form of 2015 Performance Unit Award Agreement under the W. R. Berkley Corporation 2014 Long-Term Incentive

Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-
15202) filed with the Commission on May 4, 2015).

(10.18) Form of 2016 Performance Unit Award Agreement under the W. R. Berkley Corporation 2014 Long-Term Incentive

Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-
15202) filed with the Commission on May 10, 2016).

(10.19) W. R. Berkley Corporation 2009 Directors Stock Plan (incorporated by reference to Annex B of the Company’s 2015

Proxy Statement (File No. 1-15202) filed with the Commission on April 20, 2015).

(10.20) Supplemental Benefits Agreement between William R. Berkley and the Company as amended and restated as of

December 21, 2011 (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K (File
No. 1-15202) filed with the Commission on February 28, 2012).

(10.21) Form of Dividend Equivalent Rights Award Agreement Under the W. R. Berkley Corporation 2012 Stock Incentive

Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-
15202) filed with the Commission on August 7, 2015).

(14)

Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 of the Company’s Annual
Report on Form 10-K (File No. 1-15202) filed with the Commission on March 14, 2005).

(21)

List of the Company’s subsidiaries.

(23)

Consent of Independent Registered Public Accounting Firm.

(31.1) Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(31.2) Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(32.1) Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as

adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

106

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ITEM 16. FORM 10-K Summary
None.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
W. R. Berkley Corporation:

Under date of February 27, 2017, we reported on the consolidated balance sheets of W. R. Berkley Corporation and
subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive
income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2016,
which are included in the Annual Report on Form 10-K for the year ended December 31, 2016. In connection with our
audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial
statement schedules II through VI. These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/S/ KPMG LLP

New York, New York
February 27, 2017

107

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W. R. Berkley Corporation
Condensed Financial Information of Registrant
Balance Sheets (Parent Company)

Schedule II

(In thousands)
Assets:
Cash and cash equivalents

Fixed maturity securities available for sale at fair value (cost $899,206 and $201,256 at

December 31, 2016 and 2015, respectively)

Loans receivable

Equity securities available for sale, at fair value (cost $3,430 in 2016 and 2015)

Investment in subsidiaries

Deferred federal income taxes

Current federal income taxes

Property, furniture and equipment at cost, less accumulated depreciation

Other assets

Total assets

Liabilities and stockholders’ equity
Liabilities:

Due to subsidiaries

Other liabilities

Deferred federal income taxes

Subordinated debentures

Senior notes

Total liabilities

Stockholders’ equity:

Preferred stock

Common stock

Additional paid-in capital

Retained earnings (including accumulated undistributed net income of subsidiaries of

$4,850,878 and $4,746,934 at December 31, 2016 and 2015, respectively)

Accumulated other comprehensive income (loss)

Treasury stock, at cost

Total stockholders’ equity

Total liabilities and stockholders’ equity

________________

December 31,

2016

2015

124,803 $

195,658

894,748
23,419
3,430
6,891,246
—
15,455
14,798
7,122

201,738
—
3,430
6,454,065
37,135
51,512
13,150
6,153
$ 7,975,021 $ 6,962,841

234,014 $
120,160
90,966
727,630
1,755,043
2,927,813

—
47,024
1,037,446

143,669
115,737
—
340,320
1,762,869
2,362,595

—
47,024
1,005,455

6,178,070

(66,698 )

6,595,987
55,568
(2,688,817 )
5,047,208

(2,563,605 )
4,600,246
$ 7,975,021 $ 6,962,841

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

108

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4/6/17 11:30 AM

W. R. Berkley Corporation
Condensed Financial Information of Registrant, Continued
Statements of Income (Parent Company)

Schedule II, Continued

(In thousands)
Management fees and investment income including dividends from

subsidiaries of $700,664, $642,421 and $503,483 for the years ended
December 31, 2016, 2015 and 2014, respectively

Net investment gains

Other income

Total revenues
Operating costs and expense

Interest expense

Income before federal income taxes

Federal income taxes:

Year Ended December 31,

2016

2015

2014

726,742
909
376
728,027
171,967
139,216
416,844

655,318
696
348
656,362
143,391
128,248
384,723

515,775
5,487
450
521,712
148,288
125,352
248,072

Federal income taxes provided by subsidiaries on a separate return basis

Federal income tax expense on a consolidated return basis

Net expense
Income before undistributed equity in net income of subsidiaries

Equity in undistributed net income of subsidiaries

Net income

________________

327,520
(246,389 )
81,131
497,975
103,941
601,916 $

272,180
(199,322 )
72,858
457,581
46,113
503,694 $

366,721
(273,310 )
93,411
341,483
307,401
648,884

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

109

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4/6/17 11:30 AM

W. R. Berkley Corporation
Condensed Financial Information of Registrant, Continued
Statements of Cash Flows (Parent Company)

Schedule II, Continued

(In thousands)
Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash from operating activities:
Net investment gains
Depreciation and amortization
Equity in undistributed earnings of subsidiaries
Tax payments received from subsidiaries
Federal income taxes provided by subsidiaries on a separate return basis
Stock incentive plans
Change in:

Federal income taxes
Other assets
Other liabilities
Accrued investment income

Net cash from operating activities
Cash from (used in) investing activities:

Proceeds from sales of fixed maturity securities
Proceeds from maturities and prepayments of fixed maturity securities
Proceeds from sales of equity securities
Cost of purchases of fixed maturity securities
Change in loans receivable

Cost of acquired companies

Investments in and advances to subsidiaries, net
Change in balance due to security broker
Net additions to real estate, furniture & equipment

Net cash from (used in) investing activities
Cash from (used in) financing activities:

Net proceeds from issuance of senior notes
Repayment of senior notes
Purchase of common treasury shares
Cash dividends to common stockholders

Net cash from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

________________

Year Ended December 31,

2016

2015

2014

601,919 $

503,694 $

648,884

3,649
2,744
(103,944 )
414,386
(327,520 )
37,174

44,839
1,772
(88,282 )
(2,743 )
583,994

373,252
210,904
—
(1,285,101 )
(23,419 )
—
11,471
—
(3,042 )

(715,935 )

386,830
(9,353 )
(132,392 )
(183,999 )
61,086
(70,855 )
195,658
124,803 $

(696 )
2,693
(46,113 )
311,482
(272,180 )
29,725

51,772
301
(92,752 )
524
488,450

380,986
123,639
308
(432,645 )
—
—
30,338
—
(4,425 )
98,201

—
(200,000 )
(223,652 )
(58,034 )

(481,686 )
104,965
90,693
195,658 $

(5,487 )
2,916
(307,401 )
462,809
(366,721 )
28,068

(15,239 )
(364 )
(39,780 )
(820 )
406,865

289,683
103,646
7,356
(605,768 )
—
(82,879 )
34,191
(2,151 )
(1,615 )

(257,537 )

344,472
—
(238,933 )
(181,489 )

(75,950 )
73,378
17,315
90,693

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

110

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W. R. Berkley Corporation

Condensed Financial Information of Registrant, Continued

December 31, 2016

Note to Condensed Financial Statements (Parent Company)

The accompanying condensed financial statements should be read in conjunction with the notes to consolidated financial
statements included elsewhere herein. Reclassifications have been made in the 2015 and 2014 financial statements as originally
reported to conform them to the presentation of the 2016 financial statements.

The Company files a consolidated federal tax return with the results of its domestic insurance subsidiaries included on a
statutory basis. Under present Company policy, federal income taxes payable by subsidiary companies on a separate-return basis are
paid to W. R. Berkley Corporation, and the Company pays the tax due on a consolidated return basis.

111

1001618in_10k.indd 111

4/6/17 11:30 AM

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1001618in_10k.indd 112

4/6/17 11:30 AM

W. R. Berkley Corporation and Subsidiaries
Reinsurance
Years ended December 31, 2016, 2015 and 2014

Schedule IV

Premiums Written

Direct
Amount

Ceded
to Other
Companies

Assumed
from Other
Companies

Net
Amount

Percentage
of Amount
Assumed
to Net

$ 6,634,540 $ 1,059,149 $
60,639
$ 6,647,600 $ 1,119,788 $

13,060

200,522 $ 5,775,913
648,000
695,579
896,101 $ 6,423,913

$ 6,395,806 $ 1,016,095 $
44,383
$ 6,412,533 $ 1,060,478 $

16,727

211,686 $ 5,591,397
625,774
598,118
837,460 $ 6,189,515

$ 6,142,648 $ 1,022,287 $
43,604
$ 6,185,242 $ 1,065,891 $

42,594

225,302 $ 5,345,663
652,294
651,284
877,596 $ 5,996,947

3.5 %

107.3 %

13.9 %

3.8 %

104.6 %

13.5 %

4.2 %

100.2 %

14.6 %

(In thousands, other than percentages)

Year ended December 31, 2016:

Insurance

Reinsurance

Total

Year ended December 31, 2015:

Insurance

Reinsurance

Total

Year ended December 31, 2014:

Insurance

Reinsurance

Total

___________________________

See accompanying Report of Independent Registered Public Accounting Firm.

113

1001618in_10k.indd 113

4/6/17 11:30 AM

W. R. Berkley Corporation and Subsidiaries
Valuation and Qualifying Accounts
Years ended December 31, 2016, 2015 and 2014

Schedule V

(In thousands)

Year ended December 31, 2016:
Premiums and fees receivable

Due from reinsurers

Deferred federal and foreign income taxes

Loan loss reserves

Total

Year ended December 31, 2015:
Premiums and fees receivable

Due from reinsurers

Deferred federal and foreign income taxes

Loan loss reserves

Total

Year ended December 31, 2014:
Premiums and fees receivable

Due from reinsurers

Deferred federal and foreign income taxes

Loan loss reserves

Total

Opening
Balance

Additions-
Charged to
Expense

Deduction-
Amounts
Written Off

Ending
Balance

22,524 $
1,020
4,037
2,094
29,675 $

21,446 $
1,144
1,335
2,486
26,411 $

20,951 $
1,385
—
2,087
24,423 $

10,006 $
20
1,420
1,303
12,749 $

6,281 $
(24 )
2,702
(392 )
8,567 $

5,944 $
301
1,335
399
7,979 $

(5,961 ) $

9
—
—
(5,952 ) $

(5,203 ) $

(100 )
—
—

(5,303 ) $

(5,449 ) $

(542 )
—
—

(5,991 ) $

26,569
1,049
5,457
3,397
36,472

22,524
1,020
4,037
2,094
29,675

21,446
1,144
1,335
2,486
26,411

_______________________
See accompanying Report of Independent Registered Public Accounting Firm.

114

1001618in_10k.indd 114

4/6/17 11:30 AM

W. R. Berkley Corporation and Subsidiaries
Supplementary Information Concerning Property-Casualty Insurance Operations
Years Ended December 31, 2016, 2015 and 2014

Schedule VI

(In thousands)

Deferred policy acquisition costs
Reserves for losses and loss expenses

Unearned premiums

Net premiums earned

Net investment income

Losses and loss expenses incurred:

Current year

Prior years

Loss reserve discount accretion

Amortization of deferred policy acquisition costs

Paid losses and loss expenses

Net premiums written

2016
537,890 $

2015
513,128 $

11,197,195
3,283,300
6,293,348
564,163

10,669,150
3,137,133
6,040,609
512,645

2014
488,525
10,369,701
3,026,732
5,744,418
600,885

3,826,620
(29,904 )
49,084
1,155,954
3,454,174
6,423,913

3,653,561
(46,713 )
49,422
1,102,492
3,257,015
6,189,515

3,495,825
(75,764 )
70,506
1,053,397
3,115,227
5,996,947

___________________
See accompanying Report of Independent Registered Public Accounting Firm.

115

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Operating Units

Berkley Insurance Company
475 Steamboat Road
Greenwich, Connecticut 06830
Tel: (203) 542 3800

William R. Berkley, Chairman
W. Robert Berkley, Jr., President and Chief Executive Officer

INSURANCE

Acadia Insurance Group
One Acadia Commons
Westbrook, Maine 04092
Tel: (207) 772 4300
www.acadiainsurance.com

Douglas M. Nelson, President

Albany, New York
Bedford, New Hampshire
Marlborough, Massachusetts
Rocky Hill, Connecticut
South Burlington, Vermont
Syracuse, New York

Admiral Insurance Group
1000 Howard Boulevard, Suite 300
P. O. Box 5430
Mount Laurel, New Jersey 08054
Tel: (856) 429 9200
www.admiralins.com

Scott R. Barraclough, President

Atlanta, Georgia
Austin, Texas
Chicago, Illinois
Seattle, Washington

Tel: (800) 773 4300
Tel: (800) 224 8850
Tel: (888) 665 1170
Tel: (866) 382 0036
Tel: (800) 224 8847
Tel: (866) 811 7722

Tel: (770) 476 1561
Tel: (512) 795 0766
Tel: (312) 705 1121
Tel: (206) 467 6511

American Mining Insurance Group
3490 Independence Drive
Birmingham, Alabama 35209
Tel: (205) 870 3535
www.americanmining.com

Atlanta, Georgia
Charlotte, North Carolina
Chicago, Illinois
Cleveland, Ohio
Dallas, Texas
Denver, Colorado
Hamilton Square, New Jersey
Hartford, Connecticut
Kansas City, Kansas
Marlborough, Massachusetts
Minneapolis, Minnesota
Philadelphia, Pennsylvania
San Francisco, California
Seattle, Washington

Tel: (678) 387 1823
Tel: (980) 214 1353
Tel: (312) 485 9249
Tel: (440) 728 1805
Tel: (972) 849 7406
Tel: (303) 667 5198
Tel: (973) 616 0685
Tel: (860) 380 1190
Tel: (913) 515 7374
Tel: (508) 573 6102
Tel: (303) 667 5198
Tel: (908) 415 2711
Tel: (480) 529 6787
Tel: (425) 401 4246

Berkley Accident & Health Special Risk Division
757 Third Avenue, 10th Floor
New York, New York 10017
Tel: (212) 822 3333

Susan M. Clarke, President

Berkley Agribusiness Risk Specialists
11201 Douglas Avenue
Urbandale, Iowa 50322
Tel: (800) 382 7314
www.berkleyag.com

Michael Ekiss, President

Berkley Alliance Managers
30 South Pearl Street, 6th Floor
Albany, New York 12138
Tel: (518) 407 0088

Stephen L. Porcelli, President

Berkley Construction Professional Underwriters
Tel: (678) 387 1816
www.berkleycp.com

Berkley Design Professional Underwriters
Tel: (405) 805 6635
www.berkleydp.com

Chandler F. Cox, Jr., President and Chief Executive Officer

Bettendorf, Iowa
Las Vegas, Nevada
Lexington, Kentucky

Tel: (563) 345 6311
Tel: (702) 754 5800
Tel: (859) 971 1955

Berkley Service Professionals
Tel: (405) 805 6635
www.berkleysp.com

Berkley Accident and Health
2445 Kuser Road, Suite 201
Hamilton Square, New Jersey 08690
Tel: (609) 584 6990
www.berkleyah.com

Christopher C. Brown, President and Chief Executive Officer

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Tel: (678) 987 1754
Tel: (617) 310 8227
Tel: (44) 207 088 1967

Berkley Aviation
1101 Anacapa Street, Suite 200
Santa Barbara, California 93101
Tel: (805) 898 7640
www.berkleyaviation.com

Peter Jarrett, President

Atlanta, Georgia
Boston, Massachusetts
London, England

Berkley Canada
145 King Street West, Suite 1000
Toronto, Ontario M5H 1J8
Tel: (416) 304 1178
www.berkleycanada.com

1002, Rue Sherbrooke Ouest
Bureau 2220
Montreal, Quebec H3A 3L6
Tel: (514) 842 5587

Andrew Steen, President

Berkley Custom Insurance
Three Stamford Plaza
301 Tresser Boulevard, 8th Floor
Stamford, Connecticut 06901
Tel: (203) 905 7561
www.berkleycustom.com

Michael P. Fujii, President and Chief Executive Officer

Berkley Custom Insurance Services, LLC
Los Angeles, California

Tel: (213) 417 5431

BXM Insurance Services, Inc.
Chicago, Illinois
Los Angeles, California

Tel: (312) 605 4660
Tel: (213) 891 9259

Berkley Cyber Risk Solutions
412 Mount Kemble Avenue, Suite G50
Morristown, New Jersey 07960
Tel: (973) 775 7491
www.berkleycyberrisk.com

Tracey Vispoli, President

Berkley FinSecure
849 Fairmount Avenue, Suite 301
Towson, Maryland 21286
Tel: (866) 539 3995
www.berkleyfinsecure.com

Michael P. Dandini, President

Niles, Michigan

Berkley Crime
Tel: (844) 44 CRIME
www.berkleycrime.com

Tel: (866) 539 3995
ext 6325

Berkley Fire & Marine Underwriters
425 North Martingale Road, Suite 1520
Schaumburg, Illinois 60173
Tel: (847) 466 9371
www.berkleymarine.com

John T. Geary, President

Berkley Global Product Recall Management
80 Broad Street, 32nd Floor
New York, New York 10004
Tel: (212) 413 2499

Louis Lubrano, President

Dallas, Texas
London, England

Tel: (972) 552 6100
Tel: (44) 207 088 1900

Berkley Managers Insurance Services, LLC
Los Angeles, California
San Francisco, California

Tel: (213) 372 1727
Tel: (415) 417 5950

Berkley Healthcare Professional Underwriters
Berkley Healthcare Professional Insurance Services, LLC
220 Petaluma Avenue, Suite A
Sebastopol, California 95472
Tel: (707) 829 4740
www.berkleyhpl.com

Peter Bergmann, Executive Vice President

Berkley Insurance Asia
China Square Central, Unit 07-01, 7th Floor
18 Cross Street
Singapore 048423
Tel: (65) 6902 0601

Shasi N. Gangadharan, Chief Executive Officer

Central Plaza, Suite 6707A, 67th Floor
18 Harbour Road
Wan Chai, Hong Kong
Tel: (852) 3708 5000

Berkley Insurance Australia
Level 23, 31 Market Street
Sydney, NSW 2000, Australia
Tel: (61) 2 9275 8500
www.berkleyinaus.com.au

Tony Wheatley, Chief Executive Officer

Level 7, 300 Ann Street
Brisbane, QLD, 4000, Australia

Level 6, 114 William Street
Melbourne, VIC, 3000, Australia

Unit 3, 193 Carr Place
Leederville, WA, 6007, Australia

24 Divett Place
Adelaide, SA 5000, Australia

Tel: (61) 7 3220 9900

Tel: (61) 3 8622 2000

Tel: (61) 8 6488 0900

Tel: (61) 8 8232 2767

C E L E B R A T I N G F I F T Y Y E A R S

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Berkley International Latinoamérica S.A.
Berkley Argentina de Reaseguros S.A.
Berkley International Seguros S.A.
Berkley International Aseguradora de Riesgos del Trabajo S.A.
Carlos Pellegrini 1023
C1009ABU Buenos Aires, Argentina
Tel: 54 (11) 4378 8100
www.berkley.com.ar

Bartolome Mitre 699
S2000COM Rosario, Argentina
Tel: (54) 341 410 4200
www.berkley.com.ar

Eduardo I. Llobet, President and Chief Executive Officer

Berkley International do Brasil Seguros S.A.
Rua Olimpíadas 242, 10th Floor
704551-000 São Paulo, Brazil
Tel: 55 (11) 3848 8622
www.berkley.com.br

José Marcelino Risden, President and Chief Executive Officer

Berkley International Puerto Rico, LLC
Atrium Office Center
530 Avenida de la Constitución
San Juan, Puerto Rico 00901
Tel: (787) 289 7846

Eduardo I. Llobet, President

Berkley International Seguros Colombia S.A.
Carrera 7 # 71 – 21 Torre B Oficina 1002
110231 Bogotá, Colombia
Tel: (571) 357 2727
www.berkley.com.co

Sylvia Luz Rincón, President and Chief Executive Officer

Berkley International Seguros S.A. (Uruguay)
Rincón 391, 5th Floor
11100 Montevideo, Uruguay
Tel: (598) 2916 6998
www.berkley.com.uy

Eduardo I. Llobet, President

Berkley Latin America and Caribbean Managers
600 Brickell Avenue, Suite 3900
Miami, Florida 33131
Tel: (305) 921 6200

Eduardo I. Llobet, President and Chief Executive Officer

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Berkley Insurance Company
Representative Office in Colombia
Carrera 11 No 77ª-49/65, Oficina 202
Edificio Semana
110231 Bogotá, Colombia
Tel: (57) 1 744 4015

Jaime Aramburo, Director

Representative Office in Mexico
Mario Pani No. 400
Lomas de Sante Fe
Cuajimalpa de Morelos
05348 Ciudad de Mexico, Mexico
Tel: 52 (55) 4738 4448

Carlos Mireles Poulat, Director

Berkley Life Sciences
200 PrincetonSouth Corporate Center, Suite 250
Ewing, New Jersey 08628
Tel: (609) 844 7800
www.berkleyls.com

Jill E. Wadlund, President

Naperville, Illinois

Tel: (630) 210 0369

Berkley LS Insurance Solutions, LLC
Walnut Creek, California

Tel: (925) 472 8190

Berkley Medical Excess Underwriters
16305 Swingley Ridge Road, Suite 450
Chesterfield, Missouri 63017
Tel: (800) 523 3815
www.berkleymed.com

Collin J. Suttie, President

Berkley Managers Insurance Services, LLC
San Diego, California

Tel: (858) 812 2935

Berkley Medical Management Solutions
10851 Mastin Boulevard, Suite 200
Overland Park, Kansas 66210
Tel: (913) 401 2002
www.berkleymms.com

Patricia L. Onion, Chief Executive Officer

Berkley Mid-Atlantic Group
4820 Lake Brook Drive, Suite 300
Glen Allen, Virginia 23060
Tel: (804) 285 2700
www.wrbmag.com

Susan N. Grady, President

Columbus, Ohio
Glen Allen, Virginia
Harrisburg, Pennsylvania
Pittsburgh, Pennsylvania

Tel: (800) 283 1153
Tel: (800) 283 1153
Tel: (800) 283 1153
Tel: (800) 283 1153

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Berkley Professional Liability
757 Third Avenue, 10th Floor
New York, New York 10017
Tel: (212) 618 2900
www.berkleypro.com

John R. Benedetto, President

London, England
Schaumburg, Illinois
Toronto, Ontario

Tel: (44) 207 088 1960
Tel: (630) 237 3650
Tel: (416) 304 1178

Berkley Transactional
412 Mount Kemble Avenue
Morristown, New Jersey 07960
Tel: (973) 775 7499
www.berkleytransactional.com

Randolph Hein, President

Berkley Program Specialists
1250 East Diehl Road, Suite 200
Naperville, Illinois 60563
Tel: (630) 210 0360
www.berkley-ps.com

Gregory A. Douglas, President

Berkley Equine & Cattle Division
3655 North Point Parkway, Suite 625
Alpharetta, Georgia 30005
Tel: (866) 298 5525
www.berkleyequine.com

Berkley Classics Division
P.O. Box 500
Luverne, Minnesota 56156
Tel: (800) 603 3330
www.berkleyclassics.com

Berkley Recreational Marine Division
3655 North Point Parkway, Suite 625
Alpharetta, Georgia 30005
Tel: (855) 558 3843
www.berkleyrecmarine.com

Berkley Public Entity Managers
30 South 17th Street, Suite 820
Philadelphia, Pennsylvania 19103
Tel: (215) 553 7384
www.bpem.com

Richard B. Vincelette, President

Minneapolis, Minnesota
New York, New York

Tel: (612) 766 3827
Tel: (212) 922 9458

BerkleyNet
9301 Innovation Drive, Suite 200
Manassas, Virginia 20110
Tel: (877) 497 2637
www.berkleynet.com

James B. Gilbert, President

Berkley North Pacific Group
13920 SE Eastgate Way, Suite 120
Bellevue, Washington 98005
Tel: (877) 316 9038
www.berkleynpac.com

Christopher R. Rourke, President

Meridian, Idaho
Portland, Oregon
Salt Lake City, Utah

Tel: (800) 480 2942
Tel: (800) 480 2942
Tel: (800) 480 2942

Berkley Offshore Underwriting Managers
757 Third Avenue, 10th Floor
New York, New York 10017
Tel: (212) 618 2950
www.berkleyoffshore.com

Frank A. Costa, President

Houston, Texas

Tel: (832) 547 2900

Berkley Offshore Underwriting Managers UK, Limited
40 Lime Street, 7th Floor
London EC3M 7AW
Tel: (44) 207 337 1400

R. Christian Walker, Executive Vice President

Berkley Oil & Gas
10375 Richmond Avenue, Suite 1900
Houston, Texas 77042
Tel: (877) 972 2264
www.berkleyoil-gas.com

Carol A. Randall, President

Berkley Renewable Energy
230 W Monroe, Suite 220
Chicago, Illinois 60606
Tel: (312) 725 7222
www.berkleyrenewable.com

Marie Gwin, Vice President

Berkley One
412 Mount Kemble Avenue, Suite G50
Morristown, New Jersey 07960
Tel: (203) 542 3301
www.berkleyone.com

Kathleen M. Tierney, President

C E L E B R A T I N G F I F T Y Y E A R S

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Berkley Regional Specialty
14902 North 73rd Street
Scottsdale, Arizona 85260
Tel: (480) 444 5950
www.brsic.com

Miklos F. Kallo, President

Charlotte, North Carolina
Glen Allen, Virginia
Meridian, Idaho
Naperville, Illinois
Scottsdale, Arizona

Berkley Risk
222 South Ninth Street, Suite 2700
Minneapolis, Minnesota 55402
Tel: (612) 766 3000
www.berkleyrisk.com

John M. Goodwin, President

Council Bluffs, Iowa
Denver, Colorado
Nashville, Tennessee
Scottsdale, Arizona
St. Paul, Minnesota

Berkley Select
250 South Wacker Drive, Suite 700
Chicago, Illinois 60606
Tel: (312) 881 1330
www.berkleyselect.com

Joseph G. Shores, President

Tel: (704) 759 7016
Tel: (804) 237 5273
Tel: (208) 898 5168
Tel: (630) 210 0363
Tel: (866) 412 7742

Tel: (800) 832 0137
Tel: (303) 357 2600
Tel: (615) 493 7746
Tel: (602) 996 8810
Tel: (651) 281 1200

Berkley Southeast Insurance Group
1745 North Brown Road, Suite 400
Lawrenceville, Georgia 30043
Tel: (678) 533 3400
www.berkleysig.com

Dennis L. Barger, President

Birmingham, Alabama
Charlotte, North Carolina
Lawrenceville, Georgia
Meridian, Mississippi
Brentwood, Tennessee

Tel: (855) 610 4545
Tel: (855) 610 4545
Tel: (855) 610 4545
Tel: (855) 610 4545
Tel: (855) 610 4545

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Entertainment and Sports Division
600 East Colinas Boulevard, Suite 1400
Irving, Texas 75039
Tel: (972) 819 8980

Cindy Broschart, President

Environmental Division
101 Hudson Street, Suite 2550
Jersey City, New Jersey 07302
Tel: (201) 748 3100

Kenneth J. Berger, President

Atlanta, Georgia
Boston, Massachusetts
Chicago, Illinois
Philadelphia, Pennsylvania
Irving, Texas

Tel: (404) 443 2117
Tel: (857) 265 7479
Tel: (404) 443 2082
Tel: (215) 533 7360
Tel: (972) 819 8863

Berkley Managers Insurance Services, LLC
Walnut Creek, California

Tel: (925) 472 8210

Berkley Surety
412 Mount Kemble Avenue, Suite 310N
Morristown, New Jersey 07960
Tel: (973) 775 5024
www.berkleysurety.com

Andrew M. Tuma, President

Arlington, Virginia
Atlanta, Georgia
Dallas, Texas
Danvers, Massachusetts
Denver, Colorado
Morristown, New Jersey
Naperville, Illinois
Nashville, Tennessee
New York, New York
Orlando, Florida
Radnor, Pennsylvania
Santa Ana, California
Seattle, Washington
Tampa, Florida
Toronto, Ontario
Urbandale, Iowa
Westbrook, Maine

Tel: (973) 775 5086
Tel: (678) 624 1818
Tel: (972) 385 1140
Tel: (973) 775 5082
Tel: (303) 357 2620
Tel: (973) 775 5021
Tel: (630) 210 0360
Tel: (629) 999 4010
Tel: (212) 867 2650
Tel: (407) 867 4595
Tel: (973) 775 5096
Tel: (714) 338 0860
Tel: (206) 223 5842
Tel: (813) 223 2617
Tel: (416) 304 1178
Tel: (800) 456 5486
Tel: (207) 228 1922

Berkley Specialty Underwriting Managers
Two Ravinia Drive, Suite 1100
Atlanta, Georgia 30346
Tel: (404) 443 2040
www.berkleysum.com

Kenneth J. Berger, President

Berkley Technology Underwriters
222 South Ninth Street, Suite 2550
Minneapolis, Minnesota 55402
Tel: (612) 344 4550
www.berkley-tech.com

Matthew A. Mueller, President

San Francisco, California
Irvine, California

Tel: (415) 216 2202
Tel: (714) 215 9322

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Carolina Casualty
5011 Gate Parkway
Building 200, Suite 200
Jacksonville, Florida 32256
Tel: (904) 363 0900
www.carolinacas.com

David A. Dunn, President

Clermont Specialty Managers
301 Route 17 North, Suite 900
Rutherford, New Jersey 07070
Tel: (201) 518 2500
www.clermont.wrberkley.com

William J. Johnston, President

Chicago, Illinois

Tel: (312) 881 1456

Continental Western Group
11201 Douglas Avenue
Urbandale, Iowa 50322
Tel: (515) 473 3000
www.cwgins.com

Michael G. Connor, President

Columbus, Ohio
Denver, Colorado
Lincoln, Nebraska
Luverne, Minnesota

Tel: (855) 327 5906
Tel: (800) 533 9013
Tel: (800) 456 7688
Tel: (800) 533 0303

Gemini Transportation Underwriters
99 Summer Street, Suite 1800
Boston, Massachusetts 02110
Tel: (617) 310 8200
www.geminiunderwriters.com

Rocco P. Modafferi, President

Intrepid Direct Insurance
10851 Mastin Boulevard, Suite 200
Overland Park, Kansas 66210
Tel: (877) 249 7181
www.intrepidinsurance.com

Bill Strout, Executive Vice President
David Kramer, Executive Vice President

Key Risk
P.O. Box 49129
Greensboro, North Carolina 27419
Tel: (800) 942 0225
www.keyrisk.com

Robert W. Standen, President

1 8 0

Midwest Employers Casualty
14755 North Outer Forty Drive, Suite 300
Chesterfield, Missouri 63017
Tel: (636) 449 7000
www.mwecc.com

Timothy F. Galvin, President

Monitor Liability Managers
233 South Wacker Drive, Suite 3900
Chicago, Illinois 60606
Tel: (312) 800 6200
www.monitorliability.com

Joseph G. Shores, President

Nautilus Insurance Group
7233 East Butherus Drive
Scottsdale, Arizona 85260
Tel: (480) 951 0905
www.nautilusinsgroup.com

Thomas M. Kuzma, President and Chief Executive Officer

Duluth, Georgia

Tel: (480) 951 0905

Nautilus Excess Insurance Agency, LLC
Corona, California

Tel: (480) 951 0905

Preferred Employers Insurance
9797 Aero Drive, Suite 200
San Diego, California 92123
Tel: (888) 472 9001
www.peiwc.com

Steven A. Gallacher, President

Riverport Insurance Services
222 South Ninth Street, Suite 2500
Minneapolis, Minnesota 55402
Tel: (612) 766 3100
www.riverportinsurance.com

Roger M. Nulton, President

Union Standard Insurance Group
222 Las Colinas Boulevard W, Suite 1300
Irving, Texas 75039
Tel: (972) 719 2400
www.usic.com

B. Keith Mitchell, President

Albuquerque, New Mexico
Dallas, Texas
Little Rock, Arkansas
Oklahoma City, Oklahoma
Phoenix, Arizona
San Antonio, Texas

Tel: (480) 281 3949
Tel: (972) 719 2431
Tel: (501) 707 6543
Tel: (501) 707 6543
Tel: (480) 281 3949
Tel: (972) 719 2431

C E L E B R A T I N G F I F T Y Y E A R S

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Paseo de la Castellana, 149-8a
28046 Madrid, Spain
Tel: 34 914 492 646

Enzo Gianluca Piscopo, Managing Director — Spain

W/R/B Underwriting
W. R. Berkley Syndicate Management Limited
Syndicate 1967 At Lloyd’s
W. R. Berkley UK Limited
W. R. Berkley Insurance (Europe), Limited
2nd Floor, 40 Lime Street
London, EC3M 7AW, England
Tel: (44) 207 088 1900

3rd Floor, 55 King Street
Manchester, M2 4LQ, England
Tel: (44) 161 817 3440

www.wrbunderwriting.com

Alastair Blades, President and Chief Executive Officer

Berkley Asset Protection
757 Third Avenue, 10th Floor
New York, New York 10017
Tel: (212) 497 3700
www.berkleyassetpro.com

Joseph P. Dowd, President

REINSURANCE

Berkley Re America
Three Stamford Plaza
301 Tresser Boulevard, 7th Floor
Stamford, Connecticut 06901
Tel: (203) 905 4444
www.berkleyreamerica.com

Joseph L. Sullivan, President

Berkley Re Asia Pacific
Berkley Re Asia (Hong Kong)
Suite 6708, Central Plaza
18 Harbour Road
Wan Chai, Hong Kong
Tel: (852) 3120 7000

Berkley Re Asia (Singapore)
China Square Central, Unit 09-04 9th Floor
18 Cross Street
Singapore 048423
Tel: (65) 6671 2070

Glen Ridell, Chief Executive Officer, Asia

Vela Insurance Services
311 South Wacker Drive, Suite 3600
Chicago, Illinois 60606
Tel: (312) 553 4413
www.vela-ins.com

David A. Jordan, President and Chief Executive Officer

Atlanta, Georgia
Boston, Massachusetts
Chicago, Illinois
Denver, Colorado
Glastonbury, Connecticut
Hamilton Square, New Jersey
Las Vegas, Nevada
Los Angeles, California
Morristown, New Jersey
Omaha, Nebraska
Radnor, Pennsylvania
Richmond, Virginia
St. Paul, Minnesota

Vela Insurance Services, LLC
Los Angeles, California
Solvang, California
Walnut Creek, California

Tel: (678) 987 1701
Tel: (609) 689 6656
Tel: (312) 553 4413
Tel: (720) 360 3517
Tel: (860) 652 9291
Tel: (609) 584 4605
Tel: (925) 472 8227
Tel: (213) 417 5452
Tel: (973) 355 8220
Tel: (402) 492 8352
Tel: (610) 688 4275
Tel: (804) 525 1865
Tel: (651) 406 5630

Tel: (213) 417 5452
Tel: (805) 693 0839
Tel: (925) 472 8220

Verus Underwriting Managers
4820 Lake Brook Drive, Suite 200
Glen Allen, Virginia 23060
Tel: (804) 525 1360
www.verusins.com

Dale H. Pilkington, President

W. R. Berkley European Holdings AG
Zurich, Switzerland

Mark Talbot, Managing Director

W. R. Berkley Europe AG
Städtle 35A, P.O. Box 835
9490 Vaduz, Liechtenstein
Tel: 423 237 27 41

Hans-Peter Naef, General Manager

Henrik Ibsens Gate 100
0255 Oslo, Norway
Tel: 47 (23) 27 24 00

Jan Tinus Larsen, Managing Director — Nordic

Birger Jarlsgatan 22
114 34 Stockholm, Sweden
Tel: 46 8 410 337 00

Martin Spangenberg, Branch Manager — Sweden

Kaiser-Wilhelm-Ring 27-29
50672 Köln, Germany
Tel: 49 (0) 221 99386 102

Michael Grassée, Managing Director — Germany

W. R . B E R K L E Y C O R P O R A T I O N | 2 0 1 6 A N N U A L R E P O R T

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Berkley Re Australia
Level 27, Australia Square
264 George Street
Sydney, NSW, 2000, Australia
Tel: 61 (2) 8117 2100

Level 21, 12 Creek Street
Brisbane, Qld., 4000, Australia

SERVICE OPERATIONS

Berkley Capital, LLC
600 Brickell Avenue, 39th Floor
Miami, Florida 33131
Tel: (786) 450 5510

Tel: 61 (7) 3175 0200

Frank T. Medici, President

Level 40, 140 Williams Street
Melbourne VIC, 3000, Australia

Tel: 61 (3) 9607 8404

Tony Piper, Chief Executive Officer, Australia and New Zealand

Berkley Re Direct
Three Stamford Plaza
301 Tresser Boulevard, 9th Floor
Stamford, Connecticut 06901
Tel: (203) 975 7739
www.berkleyredirect.com

Gregory A. Douglas, President

Chicago, Illinois
Cleveland, Ohio
Dublin, Ohio
Hartford, Connecticut
Irving, Texas
Johns Creek, Georgia
Philadelphia, Pennsylvania
Walnut Creek, California

Berkley Re UK Limited
37-39 Lime Street, 2nd Floor
London EC3M 7AY, England
Tel: (44) 20 7398 1000
www.berkleyreuk.com

Richard Fothergill, Chief Executive Officer

Tel: (312) 553 4707
Tel: (614) 766 4316
Tel: (614) 766 4316
Tel: (215) 568 3570
Tel: (972) 850-5819
Tel: (770) 814 7531
Tel: (215) 568 3570
Tel: (925) 472 8030

Berkley Dean & Company, Inc.
475 Steamboat Road
Greenwich, Connecticut 06830
Tel: (203) 629 3000

James G. Shiel, President

Berkley Technology Services LLC
101 Bellevue Parkway
Wilmington, Delaware 19809
Tel: (302) 439 2000

Richard M. Lowery, President

Des Moines, Iowa

Tel: (515) 564 2300

W. R. Berkley Corporation’s operating units conduct business
through the following insurance entities:

Acadia Insurance Company; Admiral Indemnity Company; Admiral
Insurance Company; American Mining Insurance Company; Berkley
Argentina de Reaseguros S.A.; Berkley Assurance Company; Berkley
Insurance Company; Berkley International Aseguradora de Riesgos
del Trabajo S.A.; Berkley International do Brasil Seguros S.A.;
Berkley International Seguros S.A.; Berkley International Seguros
Colombia S.A., Berkley International Seguros S.A. (Uruguay);
Berkley Life and Health Insurance Company; Berkley National
Insurance Company; Berkley Regional Insurance Company; Berkley
Regional Specialty Insurance Company; Carolina Casualty Insurance
Company; Clermont Insurance Company; Continental Western
Insurance Company; East Isles Reinsurance, Ltd.; Firemen’s
Insurance Company of Washington, D.C.; Gemini Insurance
Company; Great Divide Insurance Company; Greenwich Knight
Insurance Company, Ltd.; Intrepid Insurance Company, Key Risk
Insurance Company; Midwest Employers Casualty Company;
Nautilus Insurance Company; Preferred Employers Insurance
Company; Queen’s Island Insurance Company, Ltd.; Riverport
Insurance Company; StarNet Insurance Company; Syndicate 1967
at Lloyd’s; Tri-State Insurance Company of Minnesota; Union
Insurance Company; Union Standard Lloyds; W. R. Berkley Europe
AG; W. R. Berkley Insurance (Europe), Limited.

C E L E B R A T I N G F I F T Y Y E A R S

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DIRECTORS

William R. Berkley
Executive Chairman

W. Robert Berkley, Jr.
President and Chief Executive Officer

Christopher L. Augostini
Senior Vice President and Chief Operating Officer
Georgetown University

Ronald E. Blaylock
Managing Partner
GenNx360 Capital Partners

Mark E. Brockbank
Retired Chief Executive
XL Brockbank Ltd.

George G. Daly
Professor and Former Dean
McDonough School of Business
Georgetown University

Mary C. Farrell
President, The Howard Gilman Foundation
Retired Managing Director, Chief Investment Strategist
UBS Wealth Management USA

Jack H. Nusbaum
Senior Partner
Willkie Farr & Gallagher LLP

Mark L. Shapiro
Private Investor

OFFICERS

William R. Berkley
Executive Chairman

W. Robert Berkley, Jr.
President and Chief Executive Officer

Eugene G. Ballard
Executive Vice President – Finance

Ira S. Lederman
Executive Vice President – Secretary

Lucille T. Sgaglione
Executive Vice President

James G. Shiel
Executive Vice President – Investments

James P. Bronner
Executive Vice President

1 8 3

John K. Goldwater
Executive Vice President

Jeffrey M. Hafter
Executive Vice President

Robert C. Hewitt
Executive Vice President

William M. Rohde, Jr.
Executive Vice President

Kenneth P. Sroka
Executive Vice President

Robert D. Stone
Executive Vice President

Kathleen M. Tierney
Executive Vice President

Philip S. Welt
Executive Vice President

Jared E. Abbey
Senior Vice President – Corporate Strategy and Development

Richard M. Baio
Senior Vice President – Chief Financial Officer and Treasurer

Kevin H. Ebers
Senior Vice President – Business Shared Services

Melissa M. Emmendorfer
Senior Vice President – Insurance Risk Management

Robert W. Gosselink
Senior Vice President

Paul J. Hancock
Senior Vice President – Chief Corporate Actuary

Gillian James
Senior Vice President – Enterprise Risk Management

Peter L. Kamford
Senior Vice President

Carol J. LaPunzina
Senior Vice President – Human Resources

Richard M. Lowery
Senior Vice President – Chief Information Officer

Mir Mazhar
Senior Vice President – Chief Project Officer

Matthew M. Ricciardi
Senior Vice President – General Counsel

Jonathan A. Schriber
Senior Vice President - Underwriting

W. R . B E R K L E Y C O R P O R A T I O N | 2 0 1 6 A N N U A L R E P O R T

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Nelson Tavares
Senior Vice President – Claims

Steven W. Taylor
Senior Vice President

Richard K. Altorelli
Vice President – Investment Controller

Harry J. Berkley
Vice President – Information Technology

Thomas P. Boyle
Vice President – Corporate Actuarial

Trish Conway
Vice President – Enterprise Risk Management

Michele Fleckenstein
Vice President – Internal Audit

Dana R. Frantz
Vice President – Corporate Actuary

1 8 4

Josephine A. Raimondi
Vice President – Senior Counsel and Assistant Secretary

Robert E. Sabio
Vice President – Corporate Catastrophe Analysis

Scott A. Siegel
Vice President – Taxes

Jessica L. Somerfeld
Vice President – Corporate Actuary

Jo-Marie St. Martin
Vice President – Federal Government Relations

David S. Atkinson
Assistant Vice President – Corporate Actuary

Tatiana Connolly
Assistant Vice President – Counsel

Arthur Gurevitch
Assistant Vice President – Analytics

Laura Goodall
Vice President – Insurance Risk Management

David D. Hudson
Assistant Vice President – Corporate Data Manager

Karen A. Horvath
Vice President – External Financial Communications

Naomi B. Kinderman
Assistant Vice President – Counsel

Joan E. Kapfer
Vice President

Andrea C. Kanefsky
Vice President – Corporate Controller

Jonathan M. Levine
Vice President – Chief Marketing Officer

Edward F. Linekin
Vice President – Investments

John M. Littzi
Vice President – Senior Counsel

Robert L. McPherson
Vice President – Analytics

Steven J. Malawer
Vice President – Senior Counsel

A. Scott Mansolillo
Vice President – Chief Compliance Officer

Jane B. Parker
Vice President – Senior Counsel

Clement P. Patafio
Vice President

Suzette A. Lemson
Assistant Vice President – Office of the Chairman

Jamie L. Martin
Assistant Vice President – Finance

Nancy Micale
Assistant Vice President – Human Resources

Raymond J. O’Brien
Assistant Vice President – Director of Internal Audit

Srinivas R. Somayajula
Assistant Vice President – Corporate Actuary

Bryan V. Spero
Assistant Vice President – Corporate Actuary

Laura A. Stevens
Assistant Vice President – Corporate Actuary

Tracey M. Vizzo
Assistant Vice President – Risk Management

Bruce I. Weiser
Assistant Vice President – Counsel

Justin R. Woytowich
Assistant Vice President – Finance

C E L E B R A T I N G F I F T Y Y E A R S

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Annual Meeting
The Annual Meeting of Stockholders of W. R. Berkley Corporation
will be held at 1:00 p.m. on May 16, 2017 at the offices of
W. R. Berkley Corporation, 475 Steamboat Road, Greenwich,
Connecticut 06830.

Shares Traded
Common Stock of W. R. Berkley Corporation is traded on the
New York Stock Exchange.
Symbol: WRB

Transfer Agent and Registrar
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
Tel: (800) 468 9716
www.shareowneronline.com

Website
For additional information, including press releases, visit our
internet site at: http://www.wrberkley.com
Follow us on Twitter @WRBerkleyCorp

Auditors
KPMG LLP, New York, New York

Outside Counsel
Willkie Farr & Gallagher LLP, New York, New York

The W. R. Berkley Corporation 2016 Annual Report editorial sections
are printed on recycled paper made from fiber sourced from well-managed
forests and other controlled wood sources and is independently certified to
the Forest Stewardship Council™ (FSC®) standards.

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W. R. Berkley Corporation

“Always do right.
This will gratify some people
and astonish the rest.”

—Mark Twain—

ON THE COVER:

Queen Anne’s Lace, 1890
George Hitchcock (1850-1913)

W. R. Berkley Corporation
475 Steamboat Road Greenwich, CT 06830
203.629.3000 www.wrberkley.com

@WRBerkleyCorp

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