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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Fiscal Year Ended December 31, 2011 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Bermuda | Not Applicable | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
141 Front Street Hamilton, Bermuda (Address of principal executive offices) | HM 19 (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Ordinary Shares, 0.15144558¢ par value 5.625% Perpetual Preferred Income Equity Replacement Securities 7.401% Perpetual Non-Cumulative Preference Shares | New York Stock Exchange, Inc. New York Stock Exchange, Inc. New York Stock Exchange, Inc. |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
INDEX TOFORM 10-K
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• | the possibility of greater frequency or severity of claims and loss activity, including as a result of natural or man-made (including economic and political risks) catastrophic or material loss events, than our underwriting, reserving, reinsurance purchasing or investment practices have anticipated; | |
• | the reliability of, and changes in assumptions to, natural and man-made catastrophe pricing, accumulation and estimated loss models; | |
• | evolving issues with respect to interpretation of coverage after major loss events; |
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• | any intervening legislative or governmental action and changing judicial interpretation and judgments on insurers’ liability to various risks; | |
• | the effectiveness of our loss limitation methods; | |
• | changes in the total industry losses, or our share of total industry losses, resulting from past events such as the floods in Thailand, various losses from the U.S. storms and the earthquake and ensuing tsunami in Japan in 2011, the floods in Australia in late 2010 and early 2011, the Deepwater Horizon incident in the Gulf of Mexico, the Chilean and the New Zealand Earthquakes, Hurricanes Ike and Gustav and, with respect to such events, our reliance on loss reports received from cedants and loss adjustors, our reliance on industry loss estimates and those generated by modeling techniques, changes in rulings on flood damage or other exclusions as a result of prevailing lawsuits and case law; | |
• | the impact of acts of terrorism and acts of war and related legislation; | |
• | decreased demand for our insurance or reinsurance products and cyclical changes in the insurance and reinsurance sectors; | |
• | any changes in our reinsurers’ credit quality and the amount and timing of reinsurance recoverables; | |
• | changes in the availability, cost or quality of reinsurance or retrocessional coverage; | |
• | the continuing and uncertain impact of the current depressed lower growth economic environment in many of the countries in which we operate; | |
• | the level of inflation in repair costs due to limited availability of labor and materials after catastrophes; | |
• | changes in insurance and reinsurance market conditions; | |
• | increased competition on the basis of pricing, capacity, coverage terms or other factors and the related demand and supply dynamics as contracts come up for renewal; | |
• | a decline in our Operating Subsidiaries’ ratings with Standard & Poor’s (“S&P”), A.M. Best or Moody’s Investor Service (“Moody’s”); | |
• | our ability to execute our business plan to enter new markets, introduce new products and develop new distribution channels, including their integration into our existing operations; | |
• | the persistence of the global financial crisis and the Eurozone debt crisis; | |
• | changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect our investment portfolio; | |
• | the risk of a material decline in the value or liquidity of all or parts of our investment portfolio; | |
• | changes in our ability to exercise capital management initiatives or to arrange banking facilities as a result of prevailing market conditions or changes in our financial position; | |
• | changes in government regulations or tax laws in jurisdictions where we conduct business; | |
• | Aspen Holdings or Aspen Bermuda becoming subject to income taxes in the United States or the United Kingdom; | |
• | loss of key personnel; and | |
• | increased counterparty risk due to the credit impairment of financial institutions. |
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Item 1. | Business |
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• | 1.75 times our internal estimate of Economic Capital (calibrated to TailValue-at-Risk (“TVAR”) at the 99th percentile) as produced by our group Economic Capital Model (“ECM”) plus a variable margin above that level (the level of the margin is re-set from year to year depending on our assessment of our access to capital markets); | |
• | the level required to meet our rating ambitions with credit rating agencies; and | |
• | the level required to meet all our regulatory capital requirements. |
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Business Segment | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Reinsurance | $ | 1,187.5 | 53.8 | % | $ | 1,162.2 | 56.0 | % | $ | 1,176.0 | 56.9 | % | ||||||||||||
Insurance | 1,020.3 | 46.2 | % | 914.6 | 44.0 | % | 891.1 | 43.1 | % | |||||||||||||||
Total | $ | 2,207.8 | 100.0 | % | $ | 2,076.8 | 100.0 | % | $ | 2,067.1 | 100.0 | % | ||||||||||||
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Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Reinsurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Australia/Asia | $ | 122.3 | 10.3 | % | $ | 95.6 | 8.2 | % | $ | 71.2 | 6.1 | % | ||||||||||||
Caribbean | 9.5 | 0.8 | % | 4.3 | 0.4 | % | 1.9 | 0.1 | % | |||||||||||||||
Europe (excluding U.K.) | 93.8 | 7.9 | % | 96.9 | 8.3 | % | 64.3 | 5.5 | % | |||||||||||||||
United Kingdom | 27.3 | 2.3 | % | 23.8 | 2.0 | % | 26.8 | 2.3 | % | |||||||||||||||
United States & Canada(1) | 547.4 | 46.1 | % | 564.5 | 48.6 | % | 659.3 | 56.1 | % | |||||||||||||||
Worldwide excluding United States(2) | 61.8 | 5.2 | % | 55.4 | 4.8 | % | 67.3 | 5.7 | % | |||||||||||||||
Worldwide including United States(3) | 274.3 | 23.1 | % | 291.9 | 25.1 | % | 273.3 | 23.2 | % | |||||||||||||||
Others | 51.1 | 4.3 | % | 29.8 | 2.6 | % | 11.9 | 1.0 | % | |||||||||||||||
Total | $ | 1,187.5 | 100.0 | % | $ | 1,162.2 | 100.0 | % | $ | 1,176.0 | 100.0 | % | ||||||||||||
(1) | “United States and Canada” comprises individual policies that insure risks specifically in the United States and/or Canada, but not elsewhere. | |
(2) | “Worldwide excluding the United States” comprises individual policies that insure risks wherever they may be across the world but specifically excludes the United States. | |
(3) | “Worldwide including the United States” comprises individual policies that insure risks wherever they may be across the world but specifically includes the United States. |
Gross Written Premiums | ||||||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Reinsurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Property catastrophe reinsurance | $ | 306.9 | 25.9 | % | $ | 292.9 | 25.2 | % | $ | 254.3 | 21.6 | % | ||||||||||||
Other property reinsurance | 279.1 | 23.5 | % | 268.9 | 23.1 | % | 314.0 | 26.7 | % | |||||||||||||||
Casualty reinsurance | 309.1 | 26.0 | % | 340.5 | 29.3 | % | 351.9 | 29.9 | % | |||||||||||||||
Specialty reinsurance | 292.4 | 24.6 | % | 259.9 | 22.4 | % | 255.8 | 21.8 | % | |||||||||||||||
Total | $ | 1,187.5 | 100.0 | % | $ | 1,162.2 | 100.0 | % | $ | 1,176.0 | 100.0 | % | ||||||||||||
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Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Insurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Australia/Asia | $ | 7.3 | 0.7 | % | $ | 6.2 | 0.7 | % | $ | 13.2 | 1.5 | % | ||||||||||||
Caribbean | 2.9 | 0.3 | % | 3.6 | 0.4 | % | 0.6 | 0.1 | % | |||||||||||||||
Europe | 9.4 | 0.9 | % | 7.7 | 0.8 | % | 14.5 | 1.6 | % | |||||||||||||||
United Kingdom | 118.4 | 11.6 | % | 117.8 | 12.9 | % | 104.8 | 11.8 | % | |||||||||||||||
United States & Canada(1) | 328.2 | 32.2 | % | 275.0 | 30.1 | % | 265.2 | 29.7 | % | |||||||||||||||
Worldwide excluding United States(2) | 95.7 | 9.4 | % | 90.6 | 9.9 | % | 83.3 | 9.3 | % | |||||||||||||||
Worldwide including United States(3) | 424.4 | 41.6 | % | 381.4 | 41.7 | % | 386.5 | 43.4 | % | |||||||||||||||
Others | 34.0 | 3.3 | % | 32.3 | 3.5 | % | 23.0 | 2.6 | % | |||||||||||||||
Total | $ | 1,020.3 | 100.0 | % | $ | 914.6 | 100.0 | % | $ | 891.1 | 100.0 | % | ||||||||||||
(1) | “United States and Canada” comprises individual policies that insure risks specifically in the United States and/or Canada, but not elsewhere. | |
(2) | “Worldwide excluding the United States” comprises individual policies that insure risks wherever they may be across the world but specifically excludes the United States. | |
(3) | “Worldwide including the United States” comprises individual policies that insure risks wherever they may be across the world but specifically includes the United States. |
Gross Written Premiums | ||||||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Insurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Property insurance | $ | 220.4 | 21.6 | % | $ | 171.7 | 18.8 | % | $ | 139.1 | 15.6 | % | ||||||||||||
Casualty insurance | 137.2 | 13.4 | % | 148.2 | 16.2 | % | 196.1 | 22.0 | % | |||||||||||||||
Marine, energy and transportation insurance | 432.2 | 42.4 | % | 435.1 | 47.6 | % | 443.4 | 49.8 | % | |||||||||||||||
Financial and professional lines insurance | 230.5 | 22.6 | % | 159.6 | 17.4 | % | 112.5 | 12.6 | % | |||||||||||||||
Total | $ | 1,020.3 | 100.0 | % | $ | 914.6 | 100.0 | % | $ | 891.1 | 100.0 | % | ||||||||||||
• | U.S. Property: The U.S. commercial property team covers mercantile, manufacturing, municipal and commercial real estate business. |
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• | U.S. Programs: U.S. property also includes our program business which writes property insurance risks for a select group of U.S. program managers. | |
• | U.K. Property: The U.K. commercial team’s client base is predominantly U.K. institutional property owners, middle market corporates and public sector clients. |
• | Commercial Liability: Commercial liability is primarily written in the U.K. and provides employers’ liability coverage and public liability coverage for insureds domiciled in the U.K. and Ireland. A new team based in Zurich writes public liability coverage for insureds domiciled in Switzerland. | |
• | Global Excess Casualty: The global excess casualty line comprises large, sophisticated and risk-managed insureds worldwide and covers broad-based risks at high attachment points, including general liability, commercial and residential construction liability, life science, railroads, trucking, product and public liability and associated types of cover found in general liability policies in the global insurance market. | |
• | U.S. Casualty: The U.S. casualty account primarily consists of lines written within the general liability and umbrella liability insurance sectors. Coverage on our general liability line is offered on those risks that are primarily miscellaneous, products liability, contractors (general contractors and artisans), real estate and retail risks and other general liability business. | |
• | Environmental Liability: The U.S. environmental account primarily provides contractors’ pollution liability and pollution legal liability across industry segments that have environmental regulatory drivers and contractual requirements for coverage including: real estate and public entities, contractors and engineers, energy contractors and environmental contractors and consultants. The business is written in both the primary and excess insurance markets. |
• | M.E.C. Liability: The M.E.C. liability business includes marine liability cover mainly related to the liabilities of ship-owners and port operators, including reinsurance of Protection and Indemnity Clubs (“P&I Clubs”). It also provides liability cover for companies in the oil and gas sector, both onshore and offshore and in the power generation and U.S. commercial construction sectors. | |
• | Energy Physical Damage: Energy physical damage provides insurance cover against physical damage losses in addition to Operators Extra Expenses (“OEE”) for companies operating in the oil and gas exploration and production sector. | |
• | Marine Hull: The marine hull team insures physical damage for ships (including war and associated perils) and related marine assets. | |
• | Specie: The specie business line focuses on the insurance of high value property items on an all risks basis, including fine art, general and bank related specie, jewelers’ block and armored car. | |
• | Inland Marine and Ocean Risks: The inland marine and ocean cargo team writes business principally covering builders’ construction risk, contractors’ equipment, transportation and ocean cargo risks in addition to exhibition, fine arts and museums insurance. | |
• | Aviation: The aviation team writes physical damage insurance on hulls and spares (including war and associated perils) and comprehensive legal liability for airlines, smaller operators of airline |
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equipment, airports and associated business and non-critical component part manufacturers. We also provide aviation hull deductible cover. |
• | Financial Institutions: Our financial institutions business is written on both a primary and excess of loss basis and consists of professional liability, crime insurance and directors’ and officers’ (“D&O”) cover, with the largest exposure comprising risks headquartered in the U.K., followed by Australia and the U.S. and then Canada. We cover financial institutions including commercial and investment banks, asset managers, insurance companies, stockbrokers and insureds with hybrid business models. | |
• | Professional Liability: Our professional liability business is written out of the U.S. (including Errors and Omissions (“E&O”)), the U.K. and Switzerland and is written on both a primary and excess of loss basis. The U.K. team focuses on risks in the U.K. with some Australian and Canadian business while the U.S. team focuses on the U.S. We insure a wide range of professions including lawyers, accountants, architects and engineers. | |
• | Management and Technology Liability: Our management and technology liability teams write on both a primary and excess basis D&O insurance, technology-related policies in the areas of network privacy, misuse of data and cyber liability and warranty and indemnity insurance in connection with, or to facilitate, corporate transactions. | |
• | Financial and Political Risks: The financial and political risks team writes business covering the credit/default risk on a variety of project and trade transactions, as well as political risks, terrorism (including multi-year war on land cover), piracy and kidnap and ransom (“K&R”). We write financial and political risks worldwide but with concentrations in a number of countries, such as China, Egypt, Kazakhstan, Russia, South Korea, Switzerland, U.K. and Turkey. | |
• | U.S. Surety Risks: Our surety team writes commercial surety risks, admiralty bonds and similar maritime undertakings including, but not limited to, federal and public official bonds, license and permits and fiduciary and miscellaneous bonds, focused on Fortune 1000 companies and large, privately owned companies in the U.S. |
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• | operate within agreed boundaries as defined by the Aspen Underwriting Principles (“AUP”) for the relevant line of business; | |
• | operate within prescribed maximum underwriting authority limits, which we delegate in accordance with an understanding of each individual’s capabilities, tailored to the lines of business written by the particular underwriter; | |
• | price each submission based on our experience in the line of business, and where appropriate, by deploying one or more actuarial models either developed internally or licensed from third-party providers; | |
• | where appropriate, make use of peer review to sustain high standards of underwriting discipline and consistency; other than for simpler insurance risks, risks underwritten are subject to peer review by at least one qualified peer reviewer (for reinsurance risks, peer review occurs mostly prior to risk acceptance; for complex insurance risks, peer review may occur before or after risk acceptance and for simpler insurance risks, peer review is replaced by standardized underwriting systems and controls over adherence); | |
• | more complex risks may involve peer review by several underwriters and input from catastrophe risk management specialists, our team of actuaries and senior management; | |
• | evaluate the underlying data provided by clients and adjust such data where we believe it does not adequately reflect the underlying exposure; | |
• | in respect of catastrophe perils and certain other key risks, prepare monthly aggregation reports for review by our senior management, which are reviewed quarterly by the Risk Committee; and | |
• | risks outside of agreed underwriting authority limits are referred to the Chief Executive Officer or the Group Underwriting Committee as exceptions for approval before we accept the risks. |
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• | making recommendations to the Board regarding management’s proposals for the risk management framework, risk appetite, key risk limits and the use of our Internal Model; | |
• | monitoring compliance with the agreed Group risk appetite and risk limits; and | |
• | oversight of the process of stress and scenario testing established by management. |
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• | the establishment and maintenance of a risk management and internal control system based on a three lines of defense approach to the allocation of responsibilities between risk accepting units (first line), risk management activity (second line) and independent assurance (third line); | |
• | identifying material risks to the achievement of the Group’s objectives including emerging risks; | |
• | the articulation at Group level of our risk appetite and a consistent set of risk limits for each material component of risk; | |
• | the cascading of risk limits for material risks to each Operating Subsidiary and, where appropriate, risk accepting business units; | |
• | measurement, monitoring, managing and reporting of risk positions and trends; | |
• | the use, subject to an understanding of its limitations, of the Internal Model to test strategic and tactical business decisions and to assess compliance with the Risk Appetite Statement; and | |
• | stress and scenario testing, including reverse stress testing, designed to help us better understand and develop contingency plans for the likely effects of extreme events or combinations of events on capital adequacy and liquidity. |
• | Risk preferences: a high level description of the types of risks we prefer to assume and to avoid; | |
• | Return objective: the levels of return on capital we seek to achieve, subject to our risk constraints; | |
• | Volatility constraint: a target limit on earnings volatility; and | |
• | Capital constraint: a minimum level of risk adjusted capital. |
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Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Reinsurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Aon Corporation | $ | 309.9 | 26.1 | % | $ | 305.1 | 26.3 | % | $ | 369.9 | 31.4 | % | ||||||||||||
Marsh & McLennan Companies, Inc. | 290.9 | 24.5 | % | 298.9 | 25.7 | % | 200.6 | 17.1 | % | |||||||||||||||
Willis Group Holdings, Ltd. | 255.3 | 21.5 | % | 217.3 | 18.7 | % | 217.4 | 18.4 | % | |||||||||||||||
Others | 331.4 | 27.9 | % | 340.9 | 29.3 | % | 388.1 | 33.1 | % | |||||||||||||||
Total | $ | 1,187.5 | 100.0 | % | $ | 1,162.2 | 100.0 | % | $ | 1,176.0 | 100.0 | % | ||||||||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Written | Written | Written | ||||||||||||||||||||||
Insurance | Premiums | % of Total | Premiums | % of Total | Premiums | % of Total | ||||||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||||||||||
Marsh & McLennan Companies, Inc. | $ | 126.6 | 12.4 | % | $ | 94.5 | 10.3 | % | $ | 88.3 | 9.9 | % | ||||||||||||
Aon Corporation | 119.7 | 11.7 | % | 98.7 | 10.8 | % | 93.6 | 10.5 | % | |||||||||||||||
Willis Group Holdings, Ltd. | 100.1 | 9.8 | % | 92.3 | 10.1 | % | 95.8 | 10.8 | % | |||||||||||||||
Jardine Lloyd Thompson Ltd. | 54.3 | 5.3 | % | 77.0 | 8.4 | % | 21.3 | 2.4 | % | |||||||||||||||
Miller Insurance Services, Ltd. | 48.0 | 4.7 | % | 48.2 | 5.3 | % | 54.8 | 6.1 | % | |||||||||||||||
Lloyd & Partners Ltd. | 41.2 | 4.0 | % | 38.7 | 4.2 | % | — | — | ||||||||||||||||
Price Forbes & Partners Limited | 36.8 | 3.6 | % | 35.3 | �� | 3.9 | % | 39.6 | 4.4 | % | ||||||||||||||
Others | 493.6 | 48.5 | % | 429.9 | 47.0 | % | 497.7 | 55.9 | % | |||||||||||||||
Total | $ | 1,020.3 | 100.0 | % | $ | 914.6 | 100.0 | % | $ | 891.1 | 100.0 | % | ||||||||||||
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• | process, manage and resolve reported insurance or reinsurance claims efficiently and accurately, using workflow management systems, ensure the proper application of intended coverage, reserving in a timely fashion for the probable ultimate cost of both indemnity and expense and make timely payments in the appropriate amount on those claims for which we are legally obligated to pay; | |
• | select appropriate counsel and experts for claims, manage claims-related litigation and regulatory compliance; | |
• | contribute to the underwriting process by collaborating with both underwriting teams and senior management in terms of the evolution of policy language and endorsements and providing claim-specific feedback and education regarding legal activity; | |
• | contribute to the analysis and reporting of financial data and forecasts by collaborating with the finance and actuarial functions relating to the drivers of actual claim reserve developments and potential for financial exposures on known claims; and | |
• | support our marketing efforts through the quality of our claims service. |
• | case reserves to cover the cost of claims that were reported to us but not yet paid; | |
• | incurred but not reported (“IBNR”) reserves to cover the anticipated cost of claims incurred but not reported; and | |
• | a reserve for the expense associated with settling claims, including legal and other fees and the general expenses of administering the claims adjustment process, known as Loss Adjustment Expenses (“LAE”). |
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• | Initial expected loss ratio (“IELR”) method: This method calculates an estimate of ultimate losses by applying an estimated loss ratio to an estimate of ultimate earned premium for each accident year. The estimated loss ratio may be based on pricing informationand/or industry dataand/or historical claims experience revalued to the year under review. | |
• | Bornhuetter-Ferguson (“BF”) method: The BF method uses as a starting point an assumed IELR and blends in the loss ratio implied by the claims experience to date by using benchmark loss development patterns on paid claims data (“Paid BF”) or reported claims data (“Reported BF”). Although the method tends to provide less volatile indications at early stages of development and reflects changes in the external environment, this method can be slow to react to emerging loss development and if IELR proves to be inaccurate can produce loss estimates which take longer to converge with the final settlement value of loss. | |
• | Loss development (“Chain Ladder”): This method uses actual loss data and the historical development profiles on older accident years to project more recent, less developed years to their ultimate position. | |
• | Exposure-based method: This method is used for specific large typically catastrophic events such as a major hurricane. All exposure is identified and we work with known market information and information from our cedants to determine a percentage of the exposure to be taken as the ultimate loss. |
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As at December 31, | ||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||||||
Estimated liability for unpaid losses and loss expenses, net of reinsurance recoverables | 81.4 | 482.2 | 1,080.2 | 1,848.9 | 2,351.7 | 2,641.3 | 2,787.0 | 3,009.6 | 3,540.6 | 4,098.6 | ||||||||||||||||||||||||||||||
Liability re-estimate as of: | ||||||||||||||||||||||||||||||||||||||||
One year later | 71.8 | 420.2 | 1,029.6 | 1,797.6 | 2,244.3 | 2,557.8 | 2,702.6 | 2,988.2 | 3,448.3 | |||||||||||||||||||||||||||||||
Two years later | 53.1 | 398.3 | 983.5 | 1,778.8 | 2,153.1 | 2,536.0 | 2,662.5 | 2,937.6 | ||||||||||||||||||||||||||||||||
Three years later | 52.4 | 381.2 | 952.1 | 1,726.4 | 2,114.8 | 2,480.0 | 2,621.4 | |||||||||||||||||||||||||||||||||
Four years later | 49.5 | 369.5 | 928.4 | 1,687.2 | 2,066.4 | 2,405.3 | ||||||||||||||||||||||||||||||||||
Five years later | 47.3 | 365.0 | 910.5 | 1,641.2 | 2,008.1 | |||||||||||||||||||||||||||||||||||
Six years later | 45.1 | 357.1 | 890.2 | 1,608.2 | ||||||||||||||||||||||||||||||||||||
Seven years later | 44.2 | 342.2 | 870.2 | |||||||||||||||||||||||||||||||||||||
Eight years later | 40.6 | 328.5 | ||||||||||||||||||||||||||||||||||||||
Nine years later | 37.5 | |||||||||||||||||||||||||||||||||||||||
Cumulative redundancy | 43.9 | 153.7 | 210.0 | 240.7 | 343.6 | 236.0 | 165.6 | 72.0 | 92.3 | |||||||||||||||||||||||||||||||
Cumulative paid losses, net of reinsurance recoveries, as of:(1) | ||||||||||||||||||||||||||||||||||||||||
One year later | 9.0 | 88.0 | 399.7 | 332.4 | 585.1 | 534.2 | 677.0 | 550.3 | 712.9 | |||||||||||||||||||||||||||||||
Two years later | 18.7 | 152.6 | 452.5 | 815.4 | 931.9 | 1,002.1 | 1,080.9 | 1,101.5 | ||||||||||||||||||||||||||||||||
Three years later | 19.6 | 156.3 | 555.1 | 1,083.3 | 1,240.0 | 1,227.0 | 1,501.9 | |||||||||||||||||||||||||||||||||
Four years later | 25.4 | 203.3 | 597.7 | 1,310.0 | 1,379.4 | 1,520.0 | ||||||||||||||||||||||||||||||||||
Five years later | 27.7 | 210.4 | 652.4 | 1,397.9 | 1,579.1 | |||||||||||||||||||||||||||||||||||
Six years later | 30.5 | 225.2 | 682.2 | 1,528.8 | ||||||||||||||||||||||||||||||||||||
Seven years later | 31.3 | 233.8 | 717.9 | |||||||||||||||||||||||||||||||||||||
Eight years later | 31.6 | 244.9 | ||||||||||||||||||||||||||||||||||||||
Nine years later | 34.7 |
(1) | The prior period cumulative paid claims, net of reinsurance recoveries for the 2002 year, as of seven years later, was previously reported as $77.8 million and has been reduced by $46.5 million to $31.3 million. The adjustment is due to the reallocation of claims across 2003 and subsequent years. Cumulative paid claims for each of the periods two years to six years later have also been amended due to a similar reallocation. |
As at December 31, | ||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||||||
Estimated liability for unpaid losses and loss expenses, gross of reinsurance recoverables | 93.9 | 525.8 | 1,277.9 | 3,041.6 | 2,820.0 | 2,946.0 | 3,070.3 | 3,331.1 | 3,820.5 | 4,525.2 | ||||||||||||||||||||||||||||||
Liability re-estimate as of: | ||||||||||||||||||||||||||||||||||||||||
One year later | 88.4 | 455.4 | 1,260.0 | 3,048.3 | 2,739.9 | 2,883.3 | 3,041.9 | 3,338.3 | 3,773.6 | |||||||||||||||||||||||||||||||
Two years later | 69.7 | 433.5 | 1,174.9 | 3,027.6 | 2,634.6 | 2,896.1 | 3,011.3 | 3,330.4 | ||||||||||||||||||||||||||||||||
Three years later | 69.0 | 403.7 | 1,157.4 | 2,957.4 | 2,625.9 | 2,853.5 | 2,994.3 | |||||||||||||||||||||||||||||||||
Four years later | 61.8 | 398.5 | 1,134.1 | 2,943.6 | 2,589.0 | 2,792.3 | ||||||||||||||||||||||||||||||||||
Five years later | 65.2 | 393.5 | 1,118.4 | 2,909.5 | 2,541.3 | |||||||||||||||||||||||||||||||||||
Six years later | 62.7 | 386.1 | 1,098.4 | 2,886.0 | ||||||||||||||||||||||||||||||||||||
Seven years later | 62.2 | 371.6 | 1,082.2 | |||||||||||||||||||||||||||||||||||||
Eight years later | 58.6 | 360.0 | ||||||||||||||||||||||||||||||||||||||
Nine years later | 55.4 | |||||||||||||||||||||||||||||||||||||||
Cumulative redundancy (deficiency) | 38.5 | 165.8 | 195.7 | 155.6 | 278.7 | 153.7 | 76.0 | 0.7 | 46.9 |
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Net Reserves as at December 31, | ||||||||||||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
Aspen U.K (formerly City Fire) | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.4 | $ | 0.2 | $ | 0.8 | $ | 2.4 | ||||||||||||||||
Aspen Specialty Run-off (formerly Dakota Specialty) | 0.1 | 0.2 | 0.2 | 1.9 | 0.6 | 0.5 | 1.6 | 2.8 | ||||||||||||||||||||||||
Total | $ | 0.3 | $ | 0.4 | $ | 0.4 | $ | 2.1 | $ | 1.0 | $ | 0.7 | $ | 2.4 | $ | 5.2 | ||||||||||||||||
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As at December 31, 2011 | ||||||||||||||||
Cost or | Gross | Gross | Fair | |||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 873.9 | $ | 58.5 | $ | — | $ | 932.4 | ||||||||
U.S. Agency | 271.7 | 23.8 | — | 295.5 | ||||||||||||
Municipal | 33.6 | 2.0 | — | 35.6 | ||||||||||||
Corporate | 1,722.6 | 127.7 | (3.8 | ) | 1,846.5 | |||||||||||
FDIC Guaranteed Corporate | 72.5 | 0.4 | — | 72.9 | ||||||||||||
Non-U.S. Government-backed Corporate | 163.9 | 3.9 | — | 167.8 | ||||||||||||
Foreign Government | 632.1 | 28.4 | (0.1 | ) | 660.4 | |||||||||||
Asset-backed | 56.4 | 4.6 | — | 61.0 | ||||||||||||
Non-agency Commercial Mortgage-backed | 77.1 | 8.3 | — | 85.4 | ||||||||||||
Agency Mortgage-backed | 1,195.9 | 72.5 | (0.1 | ) | 1,268.3 | |||||||||||
Total Fixed Maturities — Available for Sale | $ | 5,099.7 | $ | 330.1 | $ | (4.0 | ) | $ | 5,425.8 | |||||||
As at December 31, 2010 | ||||||||||||||||
Cost or | Gross | Gross | Fair | |||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 701.5 | $ | 25.5 | $ | (1.6 | ) | $ | 725.4 | |||||||
U.S. Agency | 278.7 | 23.6 | — | 302.3 | ||||||||||||
Municipal | 31.1 | 0.4 | (0.8 | ) | 30.7 | |||||||||||
Corporate | 1,861.2 | 113.6 | (3.7 | ) | 1,971.1 | |||||||||||
FDIC Guaranteed Corporate | 123.6 | 2.2 | — | 125.8 | ||||||||||||
Non-U.S. Government-backed Corporate | 223.6 | 5.2 | — | 228.8 | ||||||||||||
Foreign Government | 601.0 | 16.9 | (1.0 | ) | 616.9 | |||||||||||
Asset-backed | 54.0 | 4.8 | — | 58.8 | ||||||||||||
Non-agency Commercial Mortgage-backed | 119.7 | 8.4 | — | 128.1 | ||||||||||||
Agency Mortgage-backed | 1,126.4 | 48.7 | (2.6 | ) | 1,172.5 | |||||||||||
Total Fixed Maturities — Available for Sale | $ | 5,120.8 | $ | 249.3 | $ | (9.7 | ) | $ | 5,360.4 | |||||||
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As at December 31, 2011 | ||||||||||
Cost or | Fair | Average | ||||||||
Amortized | Market | Ratings by | ||||||||
Cost | Value | Maturity | ||||||||
($ in millions) | ||||||||||
Due one year or less | $ | 726.0 | $ | 732.9 | AA+ | |||||
Due after one year through five years | 1,955.0 | 2,057.9 | AA | |||||||
Due after five years through ten years | 997.9 | 1,112.3 | AA− | |||||||
Due after ten years | 91.4 | 108.0 | AA− | |||||||
Subtotal | 3,770.3 | 4,011.1 | ||||||||
Non-agency Commercial Mortgage-backed | 77.1 | 85.4 | AA+ | |||||||
Agency Mortgage-backed | 1,195.9 | 1,268.3 | AA+ | |||||||
Other Asset-backed | 56.4 | 61.0 | AAA | |||||||
Total Fixed Income Maturities — Available for Sale | $ | 5,099.7 | $ | 5,425.8 | ||||||
As at December 31, 2010 | ||||||||||
Cost or | Fair | Average | ||||||||
Amortized | Market | Ratings by | ||||||||
Cost | Value | Maturity | ||||||||
($ in millions) | ||||||||||
Due one year or less | $ | 337.7 | $ | 343.8 | AA+ | |||||
Due after one year through five years | 2,236.3 | 2,330.9 | AA+ | |||||||
Due after five years through ten years | 1,146.6 | 1,222.2 | AA− | |||||||
Due after ten years | 100.1 | 104.1 | AA | |||||||
Subtotal | 3,820.7 | 4,001.0 | ||||||||
Non-agency Commercial Mortgage-backed | 119.7 | 128.1 | AA+ | |||||||
Agency Mortgage-backed | 1,126.4 | 1,172.5 | AAA | |||||||
Other Asset-backed | 54.0 | 58.8 | AAA | |||||||
Total Fixed Income Maturities — Available for Sale | $ | 5,120.8 | $ | 5,360.4 | ||||||
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Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Available for sale short-term investments and fixed maturities and equity securities: | ||||||||||||
Gross realized gains | $ | 35.8 | $ | 45.3 | $ | 24.6 | ||||||
Gross realized (losses) | (8.3 | ) | (7.3 | ) | (10.9 | ) | ||||||
Trading portfolio short-term investments and fixed maturities: | ||||||||||||
Gross realized gains | 6.2 | 11.3 | 3.1 | |||||||||
Gross realized (losses) | (1.7 | ) | (2.9 | ) | (0.1 | ) | ||||||
Net change in gross unrealized gains | (3.3 | ) | 1.8 | 15.6 | ||||||||
Equity investments: | ||||||||||||
Gross realized (losses) from equity investments | (1.5 | ) | — | — | ||||||||
Impairments: | ||||||||||||
Totalother-than-temporary impairments | — | (0.3 | ) | (23.2 | ) | |||||||
Equity accounted investments: | ||||||||||||
Gross realized and unrealized gains in Cartesian Iris | 3.1 | 2.7 | 2.3 | |||||||||
Net realized and unrealized investment gains | $ | 30.3 | $ | 50.6 | $ | 11.4 | ||||||
Change in available for sale unrealized gains and (losses) | ||||||||||||
Fixed maturities | 86.5 | 53.9 | 118.2 | |||||||||
Equity securities | 9.7 | — | — | |||||||||
Total change in pre-tax available for sale unrealized gains/(losses) | $ | 96.2 | $ | 53.9 | $ | 118.2 | ||||||
Change in taxes | (2.7 | ) | 2.9 | (16.4 | ) | |||||||
Total change in unrealized gains/(losses), net of taxes | $ | 93.5 | $ | 56.8 | $ | 101.8 | ||||||
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As at December 31, 2011 | ||||||||||||||||
Cost or | Gross | Gross | Estimated | |||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 30.3 | $ | 2.0 | $ | — | $ | 32.3 | ||||||||
U.S. Agency | 1.6 | 0.2 | — | 1.8 | ||||||||||||
Municipal | 2.8 | 0.1 | — | 2.9 | ||||||||||||
Corporate | 337.9 | 15.6 | (4.2 | ) | 349.3 | |||||||||||
Foreign Government | 7.1 | 0.3 | — | 7.4 | ||||||||||||
Asset-backed | 0.7 | — | — | 0.7 | ||||||||||||
Total Fixed Maturities — Trading | $ | 380.4 | $ | 18.2 | $ | (4.2 | ) | $ | 394.4 | |||||||
As at December 31, 2010 | ||||||||||||||||
Cost or | Gross | Gross | Estimated | |||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 48.9 | $ | 0.1 | $ | (0.7 | ) | $ | 48.3 | |||||||
U.S. Agency | 0.5 | — | — | 0.5 | ||||||||||||
Municipal | 3.2 | 0.1 | — | 3.3 | ||||||||||||
Corporate | 322.4 | 18.4 | (1.0 | ) | 339.8 | |||||||||||
Foreign Government | 8.9 | 0.5 | — | 9.4 | ||||||||||||
Asset-backed | 4.9 | — | — | 4.9 | ||||||||||||
Total Fixed Maturities — Trading | $ | 388.8 | $ | 19.1 | $ | (1.7 | ) | $ | 406.2 | |||||||
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As at December 31, 2011 | ||||||||||||||||||||||||||||
0-12 months | Over 12 months | Total | ||||||||||||||||||||||||||
Fair | Gross | Fair | Gross | Fair | Gross | |||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | Market | Unrealized | Number of | ||||||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | Securities | ||||||||||||||||||||||
($ in millions except per number of securities) | ||||||||||||||||||||||||||||
U.S. Government | $ | 6.3 | $ | — | $ | — | $ | — | $ | 6.3 | $ | — | 2 | |||||||||||||||
U.S. Agency | 2.7 | — | — | — | 2.7 | — | 1 | |||||||||||||||||||||
Municipal | 2.4 | — | — | — | 2.4 | — | 1 | |||||||||||||||||||||
Foreign Government | 14.6 | (0.1 | ) | — | — | 14.6 | (0.1 | ) | 7 | |||||||||||||||||||
Corporate | 133.7 | (3.4 | ) | 11.1 | (0.4 | ) | 144.8 | (3.8 | ) | 96 | ||||||||||||||||||
Non-U.S. Government-backed Corporate | 17.4 | — | 3.4 | — | 20.8 | — | 14 | |||||||||||||||||||||
FDIC Guaranteed | 2.0 | — | — | — | 2.0 | — | 1 | |||||||||||||||||||||
Asset-backed | 8.2 | — | — | — | 8.2 | — | 20 | |||||||||||||||||||||
Agency Mortgage-backed | 24.4 | (0.1 | ) | 0.1 | — | 24.5 | (0.1 | ) | 11 | |||||||||||||||||||
Non-agency Commercial Mortgage-backed | 0.4 | — | 0.7 | — | 1.1 | — | 2 | |||||||||||||||||||||
Total Fixed Income Maturities — Available for Sale | 212.1 | (3.6 | ) | 15.3 | (0.4 | ) | 227.4 | (4.0 | ) | 155 | ||||||||||||||||||
Total Short-term investments — Available for Sale | 18.1 | — | — | — | 18.1 | — | 9 | |||||||||||||||||||||
Total Equity investments — Available for Sale | 37.5 | (5.4 | ) | — | — | 37.5 | (5.4 | ) | 15 | |||||||||||||||||||
Total | $ | 267.7 | $ | (9.0 | ) | $ | 15.3 | $ | (0.4 | ) | $ | 283.0 | $ | (9.4 | ) | 179 | ||||||||||||
As at December 31, 2010 | ||||||||||||||||||||||||||||
0-12 months | Over 12 months | Total | ||||||||||||||||||||||||||
Fair | Gross | Fair | Gross | Fair | Gross | |||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | Market | Unrealized | Number of | ||||||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | Securities | ||||||||||||||||||||||
($ in millions except per number of securities) | ||||||||||||||||||||||||||||
U.S. Government | $ | 112.9 | $ | (1.6 | ) | $ | — | $ | — | $ | 112.9 | $ | (1.6 | ) | 28 | |||||||||||||
U.S. Agency | 5.5 | — | — | — | 5.5 | — | 3 | |||||||||||||||||||||
Municipal | 16.0 | (0.8 | ) | — | — | 16.0 | (0.8 | ) | 6 | |||||||||||||||||||
Foreign Government | 110.0 | (1.0 | ) | 5.0 | — | 115.0 | (1.0 | ) | 12 | |||||||||||||||||||
Corporate | 188.2 | (3.7 | ) | 2.2 | — | 190.4 | (3.7 | ) | 101 | |||||||||||||||||||
Non-U.S. Government-backed Corporate | 24.3 | — | — | — | 24.3 | — | 9 | |||||||||||||||||||||
Asset-backed | 0.2 | — | — | — | 0.2 | — | 1 | |||||||||||||||||||||
Agency Mortgage-backed | 182.6 | (2.6 | ) | 0.3 | — | 182.9 | (2.6 | ) | 57 | |||||||||||||||||||
Non-agency Commercial Mortgage-backed | 2.9 | — | — | — | 2.9 | — | 4 | |||||||||||||||||||||
Total Fixed Income Maturities — Available for Sale | 642.6 | (9.7 | ) | 7.5 | — | 650.1 | (9.7 | ) | 221 | |||||||||||||||||||
Total Short-term investments — Available for Sale | 45.8 | (0.1 | ) | — | — | 45.8 | (0.1 | ) | 22 | |||||||||||||||||||
Total | $ | 688.4 | $ | (9.8 | ) | $ | 7.5 | $ | — | $ | 695.9 | $ | (9.8 | ) | 243 | |||||||||||||
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• | Level 1 — Valuations based on unadjusted quoted prices in active markets, to which the Company has access, for identical assets or liabilities. | |
• | Level 2 — Valuations based on observable inputs other than unadjusted quoted prices in active markets for identical assets or liabilities. Inputs include quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs other than quoted prices which are directly or indirectly observable for the asset or liability (for example interest rates, yield curves, prepayment speeds, default rates, loss severities). | |
• | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s own views about the assumptions that market participants would use in pricing the asset or liability. |
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As at December 31, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Available for sale financial assets, at fair value | ||||||||||||||||
U.S. Government | $ | 932.4 | $ | — | $ | — | $ | 932.4 | ||||||||
U.S. Government Agency | — | 295.5 | — | 295.5 | ||||||||||||
Municipal | — | 35.6 | — | 35.6 | ||||||||||||
Foreign Government | 548.8 | 111.6 | — | 660.4 | ||||||||||||
Non-agency Commercial Mortgage-backed | — | 85.5 | — | 85.5 | ||||||||||||
Agency Mortgage-backed | — | 1,268.3 | — | 1,268.3 | ||||||||||||
Asset-backed | — | 61.0 | — | 61.0 | ||||||||||||
Corporate | — | 1,846.4 | — | 1,846.4 | ||||||||||||
FDIC Guaranteed Corporate | — | 72.9 | — | 72.9 | ||||||||||||
Bonds backed by Foreign Government | — | 167.8 | — | 167.8 | ||||||||||||
Total fixed income maturities available for sale, at fair value | $ | 1,481.2 | $ | 3,944.6 | $ | — | $ | 5,425.8 | ||||||||
Short-term investments available for sale, at fair value | 270.6 | 27.6 | — | 298.2 | ||||||||||||
Equity investments available for sale, at fair value | 179.5 | — | — | 179.5 | ||||||||||||
Financial assets held for trading, at fair value | ||||||||||||||||
U.S. Government | $ | 32.3 | $ | — | $ | — | $ | 32.3 | ||||||||
U.S. Government Agency | — | 1.8 | — | 1.8 | ||||||||||||
Municipal | — | 2.9 | — | 2.9 | ||||||||||||
Foreign Government | 4.1 | 3.3 | — | 7.4 | ||||||||||||
Asset-backed | — | 0.7 | — | 0.7 | ||||||||||||
Corporate | — | 349.3 | — | 349.3 | ||||||||||||
Total fixed income maturities trading, at fair value | $ | 36.4 | $ | 358.0 | $ | — | $ | 394.4 | ||||||||
Short-term investments trading, at fair value | 3.4 | 0.7 | — | 4.1 | ||||||||||||
Derivatives at Fair Value | — | 1.3 | — | 1.3 | ||||||||||||
Liabilities under Derivative Contracts | — | (2.1 | ) | — | (2.1 | ) | ||||||||||
Total | $ | 1,971.1 | $ | 4,330.1 | $ | — | $ | 6,301.2 | ||||||||
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As at December 31, 2010 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Available for sale financial assets, at fair value | ||||||||||||||||
U.S. Government | $ | 725.4 | $ | — | $ | — | $ | 725.4 | ||||||||
U.S. Government Agency | — | 302.3 | — | 302.3 | ||||||||||||
Municipal | — | 30.7 | — | 30.7 | ||||||||||||
Foreign Government | 507.5 | 109.4 | — | 616.9 | ||||||||||||
Non-agency Commercial Mortgage-backed | — | 128.1 | — | 128.1 | ||||||||||||
Agency Mortgage-backed | — | 1,172.5 | — | 1,172.5 | ||||||||||||
Asset-backed | — | 58.8 | — | 58.8 | ||||||||||||
Corporate | — | 1,964.3 | 6.8 | 1,971.1 | ||||||||||||
FDIC Guaranteed Corporate | — | 125.8 | — | 125.8 | ||||||||||||
Bonds backed by Foreign Government | — | 228.8 | — | 228.8 | ||||||||||||
Total fixed income maturities available for sale, at fair value | $ | 1,232.9 | $ | 4,120.7 | $ | 6.8 | $ | 5,360.4 | ||||||||
Short-term investments available for sale, at fair value | 246.8 | 39.2 | — | 286.0 | ||||||||||||
Financial assets held for trading, at fair value | ||||||||||||||||
U.S. Government | $ | 48.3 | $ | — | $ | — | $ | 48.3 | ||||||||
U.S. Government Agency | — | 0.5 | — | 0.5 | ||||||||||||
Municipal | — | 3.3 | — | 3.3 | ||||||||||||
Foreign Government | 4.1 | 5.3 | — | 9.4 | ||||||||||||
Asset-backed | — | 4.9 | — | 4.9 | ||||||||||||
Corporate | — | 339.8 | — | 339.8 | ||||||||||||
Total fixed income maturities trading, at fair value | $ | 52.4 | $ | 353.8 | $ | — | $ | 406.2 | ||||||||
Short-term investments trading, at fair value | — | 3.7 | — | 3.7 | ||||||||||||
Derivatives at fair value (interest rate swaps) | — | 6.8 | — | 6.8 | ||||||||||||
Total | $ | 1,532.1 | $ | 4,524.2 | $ | 6.8 | $ | 6,063.1 | ||||||||
Twelve Months Ended December 31, 2011 | ||||||||||||
Fixed Maturity | Derivatives at | |||||||||||
Investments | Fair Value | Total | ||||||||||
($ in millions) | ||||||||||||
Level 3 assets as of January 1, 2011 | $ | 6.8 | $ | — | $ | 6.8 | ||||||
Total unrealized gains or (losses): | ||||||||||||
Included in earnings | 4.8 | — | 4.8 | |||||||||
Included in comprehensive income | (4.0 | ) | — | (4.0 | ) | |||||||
Sales | (7.6 | ) | — | (7.6 | ) | |||||||
Level 3 assets as of December 31, 2011 | $ | — | $ | — | $ | — | ||||||
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Twelve Months Ended December 31, 2010 | ||||||||||||
Fixed Maturity | Derivatives at | |||||||||||
Investments | Fair Value | Total | ||||||||||
($ in millions) | ||||||||||||
Level 3 assets as of January 1, 2010 | $ | 14.9 | $ | 6.7 | $ | 21.6 | ||||||
Total unrealized gains or (losses): | ||||||||||||
Included in earnings | — | (6.7 | ) | (6.7 | ) | |||||||
Included in comprehensive income | (1.1 | ) | — | (1.1 | ) | |||||||
Settlements | 3.7 | — | 3.7 | |||||||||
Sales | (10.7 | ) | — | (10.7 | ) | |||||||
Level 3 assets as of December 31, 2010 | $ | 6.8 | $ | — | $ | 6.8 | ||||||
Twelve Months Ended December 31, | ||||||||
2011 | 2010 | |||||||
($ in millions) | ||||||||
Beginning Balance | $ | — | $ | 9.2 | ||||
Fair value changes included in earnings | — | 0.3 | ||||||
Settlements | — | (9.5 | ) | |||||
Ending Balance | $ | — | $ | — | ||||
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As at December 31, 2011 by Ratings | ||||||||||||||||||||||||||||
Country | AAA | AA | A | BBB | NR | Market Value | Market Value % | |||||||||||||||||||||
($ in millions except percentages) | ||||||||||||||||||||||||||||
Austria | $ | 12.8 | $ | — | $ | — | $ | — | $ | — | $ | 12.8 | 1 | % | ||||||||||||||
Belgium | — | — | 0.8 | 1.3 | 2.5 | 4.6 | 1 | % | ||||||||||||||||||||
Denmark | 23.4 | — | 0.4 | — | — | 23.8 | 3 | % | ||||||||||||||||||||
Finland | 6.8 | — | — | — | — | 6.8 | 1 | % | ||||||||||||||||||||
France | 63.0 | 19.3 | 10.2 | 1.4 | 13.0 | 106.9 | 12 | % | ||||||||||||||||||||
Germany | 65.6 | 4.1 | 13.9 | 4.1 | — | 87.7 | 10 | % | ||||||||||||||||||||
Italy | — | — | — | 0.6 | 2.3 | 2.9 | 0 | % | ||||||||||||||||||||
Luxembourg | — | — | — | 1.3 | — | 1.3 | 0 | % | ||||||||||||||||||||
Netherlands | 31.3 | 36.0 | 6.9 | — | 2.2 | 76.4 | 8 | % | ||||||||||||||||||||
Norway | 10.0 | 13.6 | — | — | — | 23.6 | 3 | % | ||||||||||||||||||||
Spain | — | — | 0.7 | 2.6 | 1.7 | 5.0 | 1 | % | ||||||||||||||||||||
Sweden | — | 17.2 | 0.8 | — | 6.7 | 24.7 | 3 | % | ||||||||||||||||||||
Switzerland | 7.7 | 23.5 | 65.2 | 2.1 | 9.8 | 108.3 | 12 | % | ||||||||||||||||||||
United Kingdom | 278.8 | 10.8 | 76.2 | 6.4 | 43.1 | 415.3 | 46 | % | ||||||||||||||||||||
Total European Exposures | $ | 499.4 | $ | 124.5 | $ | 175.1 | $ | 19.8 | $ | 81.3 | $ | 900.1 | 100 | % |
As at December 31, 2011 by Sectors | ||||||||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||||||||
Government | Corporate | Non- | Unrealized | |||||||||||||||||||||||||||||||||||||||||
Guaranteed | Local | Financial | Financial | Covered | Market | Market | Pre-tax | |||||||||||||||||||||||||||||||||||||
Country | Sovereign | Bonds | Agency | Government | Issuers | Issuers | Bonds | Equity | Value | Value % | Gain/(Loss) | |||||||||||||||||||||||||||||||||
($ in millions except percentages) | ||||||||||||||||||||||||||||||||||||||||||||
Austria | $ | — | $ | 12.8 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 12.8 | 1 | % | $ | 0.4 | ||||||||||||||||||||||
Belgium | — | — | — | — | 0.8 | 1.3 | — | 2.5 | 4.6 | 1 | % | 0.4 | ||||||||||||||||||||||||||||||||
Denmark | — | 23.4 | — | — | 0.4 | — | — | — | 23.8 | 3 | % | 0.2 | ||||||||||||||||||||||||||||||||
Finland | 6.8 | — | — | — | — | — | — | — | 6.8 | 1 | % | 0.2 | ||||||||||||||||||||||||||||||||
France | 20.8 | 9.8 | 31.7 | — | 2.3 | 19.1 | 10.2 | 13.0 | 106.9 | 12 | % | 3.4 | ||||||||||||||||||||||||||||||||
Germany | 17.3 | 42.3 | — | 2.9 | 3.9 | 14.6 | 6.7 | — | 87.7 | 10 | % | 3.8 | ||||||||||||||||||||||||||||||||
Italy | — | — | — | — | — | 0.6 | — | 2.3 | 2.9 | 0 | % | (0.2 | ) | |||||||||||||||||||||||||||||||
Luxembourg | — | — | — | — | — | 1.3 | — | — | 1.3 | 0 | % | (0.1 | ) | |||||||||||||||||||||||||||||||
Netherlands | — | 22.8 | 8.5 | — | 25.9 | 17.0 | — | 2.2 | 76.4 | 8 | % | 2.0 | ||||||||||||||||||||||||||||||||
Norway | — | — | 21.6 | — | — | — | 2.0 | — | 23.6 | 3 | % | 1.4 | ||||||||||||||||||||||||||||||||
Spain | — | — | — | — | — | 3.3 | — | 1.7 | 5.0 | 1 | % | (0.7 | ) | |||||||||||||||||||||||||||||||
Sweden | — | — | 3.5 | — | 14.5 | — | — | 6.7 | 24.7 | 3 | % | 0.2 | ||||||||||||||||||||||||||||||||
Switzerland | 3.2 | — | — | — | 39.3 | 51.4 | 4.6 | 9.8 | 108.3 | 12 | % | 5.3 | ||||||||||||||||||||||||||||||||
United Kingdom | 206.2 | 48.0 | — | — | 37.4 | 60.5 | 20.1 | 43.1 | 415.3 | 46 | % | 21.6 | ||||||||||||||||||||||||||||||||
Total European Exposures | $ | 254.3 | $ | 159.1 | $ | 65.3 | $ | 2.9 | $ | 124.5 | $ | 169.1 | $ | 43.6 | $ | 81.3 | $ | 900.1 | 100 | % | $ | 37.9 |
Opening | Closing | |||||||||||||||||||
Undistributed | Undistributed | |||||||||||||||||||
Fair Value of | Unrealized | Carrying | Funds | Fair Value of | ||||||||||||||||
As at December 31, 2011 | Investment | Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris Offshore Fund L.P. | $ | 30.0 | $ | 3.1 | $ | 33.1 | $ | — | $ | 33.1 | ||||||||||
Opening | Closing | |||||||||||||||||||
Undistributed | Realized and | Undistributed | ||||||||||||||||||
Fair Value of | Unrealized | Carrying | Funds | Fair Value of | ||||||||||||||||
As at December 31, 2010 | Investment | Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris 2009 A L.P. | $ | 27.3 | $ | 0.5 | $ | 27.8 | $ | (27.8 | ) | $ | — | |||||||||
Cartesian Iris Offshore Fund L.P. | $ | 27.8 | $ | 2.2 | $ | 30.0 | $ | — | $ | 30.0 |
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• | the experience of the management in the line of insurance or reinsurance to be written; | |
• | financial ratings assigned by independent rating agencies and actual and perceived financial strength; | |
• | responsiveness to clients, including speed of claims payment; | |
• | services provided, products offered and scope of business (both by size and geographic location); | |
• | relationships with brokers; | |
• | premiums charged and other terms and conditions offered; and | |
• | reputation. |
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Aspen U.K. | ||
S&P | A (Strong) (seventh highest of twenty-two levels) | |
A.M. Best | A (Excellent) (third highest of fifteen levels) | |
Moody’s | A2 (Good) (eighth highest of twenty-three levels) | |
Aspen Bermuda | ||
S&P | A (Strong) (seventh highest of twenty-two levels) | |
A.M. Best | A (Excellent) (third highest of fifteen levels) | |
Moody’s | A2 (Good) (eighth highest of twenty-three levels) | |
Aspen Specialty | ||
A.M. Best | A (Excellent) (third highest of fifteen levels) | |
AAIC | ||
A.M. Best | A (Excellent) (third highest of fifteen levels) |
As at | As at | |||||||
December 31, | December 31, | |||||||
Country | 2011 | 2010 | ||||||
United Kingdom | 446 | 377 | ||||||
United States | 251 | 199 | ||||||
Bermuda | 51 | 53 | ||||||
France | 4 | 5 | ||||||
Switzerland | 28 | 24 | ||||||
Singapore | 10 | 9 | ||||||
Ireland | 9 | 8 | ||||||
Germany | 3 | 3 | ||||||
Total | 802 | 678 | ||||||
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• | the Insurance (Group Supervision) Rules 2011 (“Group Supervision Rules”) which set out the rules in respect of: the assessment of the financial situation and solvency of an insurance group, the system of governance and risk management of the insurance group; and supervisory reporting and disclosures of the insurance group. The majority of the Group Supervision Rules will come |
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into operation on January 1, 2013. However, certain sections came into operation on January 16, 2012 which include that every insurance group must prepare (a) consolidated financial statements of the parent company of the group, (b) financial statements of the parent company of the group, and (c) annual statutory financial return, each of which is to be prepared in accordance with the Group Supervision Rules. The BMA has recently announced that the transition period for insurers to bring their capital instruments into compliance with the BMA’s eligible capital standards has been extended to ten years to January 1, 2024 (from the original five years); and |
• | the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011 (the “Group Solvency Rules”) which came into operation on January 16, 2012 (with the exception of the provision pertaining to the duty to comply with the enhanced capital requirement, which will come into effect on January 1, 2013). The Group Solvency Rules set out the rules in respect of the capital and solvency return and enhanced capital requirements for an insurance group. |
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• | the Prudential Regulation Authority (the “PRA”); | |
• | the Financial Policy Committee (the “FPC”); and | |
• | the Consumer Protection and Markets Authority (the “CPMA”), now the Financial Conduct Authority (“FCA”), a specialist regulatory authority focusing on consumer protection and markets. |
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• | 10% of its policyholders surplus as of the 31st day of December of the preceding year; or | |
• | the statutory net income, not including realized capital gains for the12-month period ending, for the preceding calendar year (the 31st day of December next preceding); |
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Item 1A. | Risk Factors |
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Tier 1 risks - our largest exposures | Tier 2 risks - other significant exposures | |
•Tropical storms and hurricanes making landfall in the United States •Earthquakes in the United States •Windstorms making landfall in Europe and European flood risk •Tropical cyclones making landfall in Japan •Earthquakes in Japan | •North American tornadoes, hailstorms and winter storms •Earthquakes in South and Central America and Canada •Earthquakes in Europe, Turkey and Israel •Earthquakes in Australia and New Zealand •Windstorms making landfall in Australia, Hong Kong and islands in the Caribbean |
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• | integrating financial and operational reporting systems; | |
• | establishing satisfactory budgetary and other financial controls; | |
• | funding increased capital needs and overhead expenses; | |
• | the value of assets acquired may be lower than expected or may diminish due to credit defaults or changes in interest rates and liabilities assumed may be greater than expected; and | |
• | financial exposures in the event that the sellers of the entities we acquire are unable or unwilling to meet their indemnification, reinsurance and other obligations to us. |
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• | the introduction, for solvency purposes, of an economic balance sheet to ensure that all assets and liabilities are valued on a consistent economic basis; and | |
• | enhancements to the disclosure and transparency regime by introducing a number of additional qualitative and quantitative public and regulatory disclosure requirements. |
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• | election of directors is staggered, meaning that members of only one of three classes of directors are elected each year; | |
• | directors serve for a term of three years (unless aged 70 years or older); | |
• | our directors may decline to approve or register any transfer of shares to the extent they determine, in their sole discretion, that any non-de minimis adverse tax, regulatory or legal consequences to Aspen Holdings, any of its subsidiaries, shareholders or affiliates would result from such transfer; | |
• | if our directors determine that share ownership by any person may result in material adverse tax consequences to Aspen Holdings, any of its subsidiaries, shareholders or affiliates, we have the option, but not the obligation, to purchase or assign to a third party the right to purchase the |
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minimum number of shares held by such person solely to the extent that it is necessary to eliminate such material risk; |
• | shareholders have limited ability to remove directors; and | |
• | if the ordinary shares of any U.S. Person constitute 9.5% or more of the votes conferred by the issued shares of Aspen Holdings, the voting rights with respect to the controlled shares of such U.S. Person shall be limited, in the aggregate, to a voting power of less than 9.5%. |
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• | the material facts as to the interested director’s relationship or interests were disclosed or were known to the Board and the Board in good faith authorized the transaction by the affirmative vote of a majority of the disinterested directors; | |
• | the material facts were disclosed or were known to the shareholders entitled to vote on such transaction and the transaction was specifically approved in good faith by vote of the majority of shares entitled to vote thereon; or | |
• | the transaction was fair as to the corporation at the time it was authorized, approved or ratified. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
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Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Price Range of | ||||||||||||
Ordinary Shares | Dividends Paid Per | |||||||||||
High | Low | Ordinary Share | ||||||||||
Period | ||||||||||||
2011 | ||||||||||||
First Quarter | $ | 31.57 | $ | 25.86 | $ | 0.15 | ||||||
Second Quarter | $ | 29.09 | $ | 24.71 | $ | 0.15 | ||||||
Third Quarter | $ | 27.19 | $ | 22.01 | $ | 0.15 | ||||||
Fourth Quarter | $ | 27.32 | $ | 21.99 | $ | 0.15 | ||||||
2010 | ||||||||||||
First Quarter | $ | 29.03 | $ | 25.42 | $ | 0.15 | ||||||
Second Quarter | $ | 29.46 | $ | 23.80 | $ | 0.15 | ||||||
Third Quarter | $ | 30.46 | $ | 24.39 | $ | 0.15 | ||||||
Fourth Quarter | $ | 31.60 | $ | 28.00 | $ | 0.15 |
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Number of | ||||
Date Issued | Shares Issued | |||
October 15, 2011 | 389 |
• | exercise respective voting rights as shareholders to approve the change of control; and | |
• | tender its respective shares for sale in relation to the change of control on terms no less favorable than those on which the investors sell their shares. |
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Item 6. | Selected Consolidated Financial Data |
Twelve Months Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
($ in millions, except per share amounts and percentages) | ||||||||||||||||||||
Summary Income Statement Data | ||||||||||||||||||||
Gross written premiums | $ | 2,207.8 | $ | 2,076.8 | $ | 2,067.1 | $ | 2,001.7 | $ | 1,818.5 | ||||||||||
Net premiums written | 1,929.1 | 1,891.1 | 1,836.8 | 1,835.5 | 1,601.4 | |||||||||||||||
Net premiums earned | 1,888.5 | 1,898.9 | 1,823.0 | 1,701.7 | 1,733.6 | |||||||||||||||
Loss and loss adjustment expenses | (1,556.0 | ) | (1,248.7 | ) | (948.1 | ) | (1,119.5 | ) | (919.8 | ) | ||||||||||
Policy acquisition, general, administrative and corporate expenses | (627.2 | ) | (587.1 | ) | (586.6 | ) | (507.4 | ) | (518.7 | ) | ||||||||||
Net investment income | 225.6 | 232.0 | 248.5 | 139.2 | 299.0 | |||||||||||||||
Net income/(loss) | (105.8 | ) | 312.7 | 473.9 | 103.8 | 489.0 | ||||||||||||||
Basic earnings/(loss) per share | (1.82 | ) | 3.80 | 5.82 | 0.92 | 5.25 | ||||||||||||||
Fully diluted earnings/(loss) per share | (1.82 | ) | 3.62 | 5.64 | 0.89 | 5.11 | ||||||||||||||
Basic weighted average shares outstanding (millions) | 70.7 | 76.3 | 82.7 | 83.0 | 87.8 | |||||||||||||||
Diluted weighted average shares outstanding (millions) | 70.7 | 80.0 | 85.3 | 85.5 | 90.4 | |||||||||||||||
Selected Ratios (based on U.S. GAAP income statement data): | ||||||||||||||||||||
Loss ratio (on net premiums earned)(1) | 83 | % | 66 | % | 52 | % | 66 | % | 53 | % | ||||||||||
Expense ratio (on net premiums earned)(2) | 33 | % | 31 | % | 32 | % | 30 | % | 30 | % | ||||||||||
Combined ratio(3) | 116 | % | 97 | % | 84 | % | 96 | % | 83 | % | ||||||||||
Summary Balance Sheet Data | ||||||||||||||||||||
Total cash and investments(4) | $ | 7,625.1 | $ | 7,320.0 | $ | 6,811.9 | $ | 5,974.9 | $ | 5,930.5 | ||||||||||
Premiums receivable(5) | 985.1 | 905.0 | 793.4 | 762.5 | 680.1 | |||||||||||||||
Total assets | 9,484.9 | 8,832.1 | 8,257.2 | 7,288.8 | 7,201.3 | |||||||||||||||
Loss and loss adjustment expense reserves | 4,525.2 | 3,820.5 | 3,331.1 | 3,070.3 | 2,946.0 | |||||||||||||||
Reserves for unearned premiums | 916.1 | 859.0 | 907.6 | 810.7 | 757.6 | |||||||||||||||
Long-term debt | 499.0 | 498.8 | 249.6 | 249.5 | 249.5 | |||||||||||||||
Total shareholders’ equity | 3,172.0 | 3,241.9 | 3,305.4 | 2,779.1 | 2,817.6 | |||||||||||||||
Per Share Data (Based on U.S. GAAP Balance Sheet Data): | ||||||||||||||||||||
Book value per ordinary share(6) | $ | 39.89 | $ | 40.96 | $ | 35.42 | $ | 28.95 | $ | 28.05 | ||||||||||
Diluted book value per share (treasury stock method)(7) | $ | 38.43 | $ | 38.90 | $ | 34.14 | $ | 28.19 | $ | 27.17 | ||||||||||
Cash dividend declared per ordinary share | $ | 0.60 | $ | 0.60 | $ | 0.60 | $ | 0.60 | $ | 0.60 |
(1) | The loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned. |
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(2) | The expense ratio is calculated by dividing policy acquisition expenses and general and administrative expenses by net premiums earned. | |
(3) | The combined ratio is the sum of the loss ratio and the expense ratio. | |
(4) | Total cash and investments include cash, cash equivalents, fixed maturities, other investments, short-term investments, accrued interest and receivables for investments sold. | |
(5) | Premiums receivable including funds withheld. | |
(6) | Book value per ordinary share is based on total shareholders’ equity excluding the aggregate value of the liquidation preferences of our preference shares, divided by the number of shares outstanding of 85,510,673, 81,506,503, 83,327,594, 70,508,013 and 70,655,698 at December 31, 2007, 2008, 2009, 2010 and 2011, respectively. In calculating the number of shares outstanding as at December 31, 2007 for this purpose, we have deducted shares delivered to us and canceled on January 22, 2008 pursuant to our accelerated share repurchase agreement. | |
(7) | Diluted book value per share is calculated based on total shareholders’ equity excluding the aggregate value of the liquidation preferences of our preference shares, at December 31, 2007, 2008, 2009, 2010 and 2011, divided by the number of dilutive equivalent shares outstanding of 88,268,968, 83,705,984, 86,465,357, 74,172,657 and 73,355,674 at December 31, 2007, 2008, 2009, 2010 and 2011, respectively. At December 31, 2007, 2008, 2009, 2010 and 2011, there were 2,758,295, 2,199,481, 3,137,763, 3,664,644 and 2,699,976 of dilutive equivalent shares, respectively. Potentially dilutive shares outstanding are calculated using the treasury method and all relate to employee, director and investor options. In calculating the number of shares outstanding as at December 31, 2007 for this purpose, we have deducted shares delivered to us and canceled on January 22, 2008 pursuant to our accelerated share repurchase agreement. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Gross Written Premiums for the Twelve Months Ended December 31, | ||||||||||||||||||||
Business Segment | 2011 | 2010 | 2009 | |||||||||||||||||
($ in millions) | % increase/ | ($ in millions) | % increase/ | ($ in millions) | ||||||||||||||||
(decrease) | (decrease) | |||||||||||||||||||
Reinsurance | $ | 1,187.5 | 2.2 | % | $ | 1,162.2 | (1.2 | )% | $ | 1,176.0 | ||||||||||
Insurance | 1,020.3 | 11.6 | 914.6 | 2.6 | 891.1 | |||||||||||||||
Total | $ | 2,207.8 | 6.3 | % | $ | 2,076.8 | 0.5 | % | $ | 2,067.1 | ||||||||||
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Loss Ratios for the | ||||||||||||
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
Business Segment | 2011 | 2010 | 2009 | |||||||||
Reinsurance | 97.7 | % | 60.7 | % | 42.2 | % | ||||||
Insurance | 60.6 | 73.3 | 67.3 | |||||||||
Total | 82.4 | % | 65.8 | % | 52.0 | % | ||||||
For the Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions, except for percentages) | ||||||||||||
Reserve Releases | $ | 92.3 | $ | 21.4 | $ | 84.4 | ||||||
% of net premiums earned | 4.9 | % | 1.1 | % | 4.6 | % |
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Expense Ratios for the | ||||||||||||
Twelve Months Ended, | ||||||||||||
December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Policy Acquisition Expenses | 18.4 | % | 17.3 | % | 18.3 | % | ||||||
General, Administrative and Corporate Expenses | 14.8 | 13.6 | 13.8 | |||||||||
Expense Ratio | 33.2 | % | 30.9 | % | 32.1 | % | ||||||
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• | net loss after tax for the year of $105.8 million; | |
• | an increase in net of tax unrealized gains on investments of $93.5 million, accounted for in other comprehensive income; | |
• | share repurchases of $8.1 million during the year; and | |
• | dividend payments to ordinary and preference shareholders totaling $65.3 million in 2011. |
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As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except for share amounts) | ||||||||
Total shareholders’ equity | $ | 3,172.0 | $ | 3,241.9 | ||||
Preference shares less issue expenses | (353.6 | ) | (353.6 | ) | ||||
$ | 2,818.4 | $ | 2,888.3 | |||||
Ordinary shares | 70,655,698 | 70,508,013 | ||||||
Diluted ordinary shares | 73,355,674 | 74,172,657 |
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• | changes in the renewal rate or rate of new business acceptances by the cedant insurance companies leading to lower or greater volumes of ceded premiums than our estimate, which could result from changes in the relevant primary market that could affect more than one of our cedants or could be a consequence of changes in marketing strategy or risk appetite by a particular cedant; | |
• | changes in the rates being charged by cedants; and | |
• | differences between the pattern of inception dates assumed in our estimate and the actual pattern of inception dates. |
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• | case reserves to cover the cost of claims that were reported to us but not yet paid; | |
• | reserves for IBNR claims to cover the anticipated cost of claims incurred but not reported; and | |
• | a reserve for the LAE associated with settling claims, including legal and other fees and the general expenses of administering the claims adjustment process. |
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• | Initial expected loss ratio (“IELR”) method: This method calculates an estimate of ultimate losses by applying an estimated loss ratio to an estimate of ultimate earned premium for each accident year. The estimated loss ratio may be based on pricing informationand/or industry dataand/or historical claims experience revalued to the year under review. | |
• | Bornhuetter-Ferguson (“BF”) method: The BF method uses as a starting point an assumed IELR and blends in the loss ratio, which is implied by the claims experience to date using benchmark loss development patterns on paid claims data (“Paid BF”) or reported claims data (“Reported BF”). Although the method tends to provide less volatile indications at early stages of development and reflects changes in the external environment, it can be slow to react to emerging loss development and can, if the IELR proves to be inaccurate, produce loss estimates which take longer to converge with the final settlement value of loss. | |
• | Loss development (“Chain Ladder”) method: This method uses actual loss data and the historical development profiles on older accident years to project more recent, less developed years to their ultimate position. | |
• | Exposure-based method: This method is typically used for specific large catastrophic events such as a major hurricane. All exposure is identified and we work with known market information and information from our cedants to determine a percentage of the exposure to be taken as the ultimate loss. |
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• | changes in our processes which might accelerate or slow down the developmentand/or recording of paid or incurred claims; | |
• | changes in the legal environment (including challenges to tort reform); | |
• | the effects of inflation; | |
• | changes in the mix of business; | |
• | the impact of large losses; and | |
• | changes in our cedants’ reserving methodologies. |
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As at December 31, 2011 | ||||||||||||||||||||||||||||
Management’s | ||||||||||||||||||||||||||||
Selected | ||||||||||||||||||||||||||||
Gross Reserves | Reserve | Percentile | 10th | 25th | Mean | 75th | 90th | |||||||||||||||||||||
($ in million, except for percentages) | ||||||||||||||||||||||||||||
Reinsurance | $ | 2,953.5 | 75 | % | $ | 2,244.8 | $ | 2,423.6 | $ | 2,700.6 | $ | 2,941.5 | $ | 3,240.2 | ||||||||||||||
Insurance | 1,571.7 | 75 | 1,138.3 | 1,245.2 | 1,426.8 | 1,570.2 | 1,770.9 | |||||||||||||||||||||
Diversification | — | — | 402.5 | 250.8 | — | (205.0 | ) | (482.0 | ) | |||||||||||||||||||
Total Gross Losses and Loss Expense Reserves | $ | 4,525.2 | 90 | % | $ | 3,785.6 | $ | 3,919.6 | $ | 4,127.6 | $ | 4,306.7 | $ | 4,529.1 | ||||||||||||||
As at December 31, 2010 | ||||||||||||||||||||||||||||
Management’s | ||||||||||||||||||||||||||||
Selected | ||||||||||||||||||||||||||||
Gross Reserves | Reserve | Percentile | 10th | 25th | Mean | 75th | 90th | |||||||||||||||||||||
($ in million, except for percentages) | ||||||||||||||||||||||||||||
Reinsurance | $ | 2,304.6 | 74 | % | $ | 1,691.9 | $ | 1,879.5 | $ | 2,132.4 | $ | 2,355.2 | $ | 2,614.2 | ||||||||||||||
Insurance | 1,515.9 | 72 | 1,108.0 | 1,210.9 | 1,371.9 | 1,499.9 | 1,669.7 | |||||||||||||||||||||
Diversification | — | — | 379.7 | 225.2 | — | (184.7 | ) | (413.8 | ) | |||||||||||||||||||
Total Gross Losses and Loss Expense Reserves | $ | 3,820.5 | 88 | % | $ | 3,179.6 | $ | 3,315.6 | $ | 3,504.3 | $ | 3,670.4 | $ | 3,870.1 | ||||||||||||||
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Twelve Months Ended | ||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||
($ in millions, except for percentages) | ||||||||||||
Gross written premiums | $ | 2,207.8 | $ | 2,076.8 | $ | 2,067.1 | ||||||
Net premiums written | 1,929.1 | 1,891.1 | 1,836.8 | |||||||||
Gross premiums earned | 2,141.1 | 2,094.3 | 2,035.4 | |||||||||
Net premiums earned | 1,888.5 | 1,898.9 | 1,823.0 | |||||||||
Net investment income | 225.6 | 232.0 | 248.5 | |||||||||
Net realized and unrealized investment gains/(losses) | 30.3 | 50.6 | 11.4 | |||||||||
Change in fair value of derivatives | (59.9 | ) | (0.2 | ) | (8.0 | ) | ||||||
Other (expense) income | (6.8 | ) | 9.1 | 8.0 | ||||||||
Total Revenues | 2,077.7 | 2,190.4 | 2,082.9 | |||||||||
Expenses | �� | |||||||||||
Insurance losses and loss adjustment expenses | (1,556.0 | ) | (1,248.7 | ) | (948.1 | ) | ||||||
Policy acquisition expenses | (347.0 | ) | (328.5 | ) | (334.1 | ) | ||||||
General, administrative and corporate expenses | (280.2 | ) | (258.6 | ) | (252.4 | ) | ||||||
Interest on long-term debt | (30.8 | ) | (16.5 | ) | (15.6 | ) | ||||||
Net realized and unrealized exchange gains/(losses) | (6.7 | ) | 2.2 | 2.0 | ||||||||
Total Expenses | (2,220.7 | ) | (1,850.1 | ) | (1,548.2 | ) | ||||||
Income/(loss) from operations before income tax | (143.0 | ) | 340.3 | 534.7 | ||||||||
Income tax (expense)/benefit | 37.2 | (27.6 | ) | (60.8 | ) | |||||||
Net Income/Loss | $ | (105.8 | ) | $ | 312.7 | $ | 473.9 | |||||
Ratios | ||||||||||||
Loss ratio | 82.4 | % | 65.8 | % | 52.0 | % | ||||||
Expense ratio | 33.2 | % | 30.9 | % | 32.1 | % | ||||||
Combined ratio | 115.6 | % | 96.7 | % | 84.1 | % |
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For the Twelve Months Ended | ||||||||||||
December 31, 2011 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions, except for percentages) | ||||||||||||
Gross written premiums | $ | 1,187.5 | $ | 1,020.3 | $ | 2,207.8 | ||||||
Less: Catastrophic event-related premiums | (32.5 | ) | — | (32.5 | ) | |||||||
Underlying premiums | $ | 1,155.0 | $ | 1,020.3 | $ | 2,175.3 | ||||||
% change in underlying premiums between 2011 and 2010 | 0.4 | % | 11.6 | % | 5.3 | % |
For the Twelve Months Ended December 31, 2010 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions, except for percentages) | ||||||||||||
Gross written premiums | $ | 1,162.2 | $ | 914.6 | $ | 2,076.8 | ||||||
Less: Catastrophic event-related premiums | (12.0 | ) | — | (12.0 | ) | |||||||
Underlying premiums | 1,150.2 | $ | 914.6 | $ | 2,064.8 | |||||||
% change in underlying premiums between 2010 and 2009 | (2.2 | )% | 2.6 | % | (0.1 | )% |
For the Twelve Months Ended December 31, 2009 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions, except for percentages) | ||||||||||||
Gross written premiums | $ | 1,176.0 | $ | 891.1 | $ | 2,067.1 | ||||||
Less: Catastrophic event-related premiums | — | — | — | |||||||||
Underlying premiums | $ | 1,176.0 | 891.1 | 2,067.1 | ||||||||
% change in underlying premiums between 2009 and 2008 | 6.7 | % | 0.1 | % | 4.1 | % |
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Net Premiums Earned for the Twelve Months Ended December 31, | ||||||||||||||||||||
Business Segment | 2011 | 2010 | 2009 | |||||||||||||||||
($ in millions) | % change | ($ in millions) | % change | ($ in millions) | ||||||||||||||||
Reinsurance | 1,108.3 | (2.9 | )% | 1,141.8 | 3.0 | % | $ | 1,108.1 | ||||||||||||
Insurance | 780.2 | 3.1 | 757.1 | 5.9 | 714.9 | |||||||||||||||
Total | $ | 1,888.5 | (0.5 | )% | $ | 1,898.9 | 4.2 | % | $ | 1,823.0 | ||||||||||
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Accident | ||||||||||||||||||||
Year Loss | ||||||||||||||||||||
Ratio Excluding | ||||||||||||||||||||
Prior Year | Total | Prior and | ||||||||||||||||||
Total Loss | Claims | Accident Year | Current Year | Current Year | ||||||||||||||||
For the Twelve Months Ended December 31, 2011 | Ratio | Adjustment | Loss Ratio | Adjustment | Adjustments | |||||||||||||||
Reinsurance | 97.7 | % | 6.7 | % | 104.4 | % | (48.4 | )% | 56.0 | % | ||||||||||
Insurance | 60.6 | 2.6 | 63.2 | (1.8 | ) | 61.4 | ||||||||||||||
Total | 82.4 | % | 5.0 | % | 87.4 | % | (29.1 | )% | 58.3 | % |
Accident | ||||||||||||||||||||
Year Loss | ||||||||||||||||||||
Ratio Excluding | ||||||||||||||||||||
Prior Year | Total | Prior and | ||||||||||||||||||
Total Loss | Claims | Accident Year | Current Year | Current Year | ||||||||||||||||
For the Twelve Months Ended December 31, 2010 | Ratio | Adjustment | Loss Ratio | Adjustment | Adjustments | |||||||||||||||
Reinsurance | 60.7 | % | 5.7 | % | 66.4 | % | (15.8 | )% | 50.6 | % | ||||||||||
Insurance | 73.3 | (5.8 | ) | 67.5 | — | 67.5 | ||||||||||||||
Total | 65.8 | % | 1.1 | % | 66.9 | % | (9.5 | )% | 57.4 | % |
Accident | ||||||||||||||||
Year Loss | ||||||||||||||||
Ratio Excluding | ||||||||||||||||
Prior Year | Current Year | Prior and | ||||||||||||||
Total Loss | Claims | Claims | Current Year | |||||||||||||
For the Twelve Months Ended December 31, 2009 | Ratio | Adjustment | Adjustment | Claims Adjustments | ||||||||||||
Reinsurance | 42.2 | % | 9.4 | % | — | % | 51.6 | % | ||||||||
Insurance | 67.3 | (2.7 | ) | — | 64.6 | |||||||||||
Total | 52.0 | % | 4.6 | % | — | % | 56.6 | % |
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Expense Ratios for the | ||||||||||||
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Policy acquisition expense ratio | 16.2 | % | 15.7 | % | 16.4 | % | ||||||
General, administrative and corporate expense ratio | 13.1 | 12.3 | 12.4 | |||||||||
Gross expense ratio | 29.3 | 28.0 | 28.8 | |||||||||
Effect of reinsurance | 3.9 | 2.9 | 3.3 | |||||||||
Total net expense ratio | 33.2 | % | 30.9 | % | 32.1 | % | ||||||
For the Twelve Months Ended | ||||||||||||
December 31, 2011 | ||||||||||||
Ratios Based on Gross Earned Premium | Reinsurance | Insurance | Total | |||||||||
Policy acquisition expense ratio | 16.6 | % | 15.7 | % | 16.2 | % | ||||||
General and administrative expense ratio(1) | 9.2 | 13.2 | 13.1 | |||||||||
Gross expense ratio | 25.8 | 28.9 | 29.3 | |||||||||
Effect of reinsurance | 1.9 | 6.3 | 3.9 | |||||||||
Total net expense ratio | 27.7 | % | 35.2 | % | 33.2 | % | ||||||
For the Twelve Months Ended | ||||||||||||
December 31, 2010 | ||||||||||||
Ratios Based on Gross Earned Premium | Reinsurance | Insurance | Total | |||||||||
Policy acquisition expense ratio | 17.1 | % | 13.9 | % | 15.7 | % | ||||||
General and administrative expense ratio(1) | 9.5 | 10.9 | 12.3 | |||||||||
Gross expense ratio | 26.6 | 24.8 | 28.0 | |||||||||
Effect of reinsurance | 0.9 | 5.0 | 2.9 | |||||||||
Total net expense ratio | 27.5 | % | 29.8 | % | 30.9 | % | ||||||
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For the Twelve Months Ended | ||||||||||||
December 31, 2009 | ||||||||||||
Ratios Based on Gross Earned Premium | Reinsurance | Insurance | Total | |||||||||
Policy acquisition expense ratio | 18.4 | % | 13.7 | % | 16.4 | % | ||||||
General and administrative expense ratio(1) | 8.4 | 11.6 | 12.4 | |||||||||
Gross expense ratio | 26.8 | 25.3 | 28.8 | |||||||||
Effect of reinsurance | 1.4 | 5.5 | 3.3 | |||||||||
Total net expense ratio | 28.2 | % | 30.8 | % | 32.1 | % | ||||||
(1) | The total group general and administrative expense ratio includes corporate expenses. |
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Twelve Months Ended December 31, 2011 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,187.5 | $ | 1,020.3 | $ | 2,207.8 | ||||||
Net written premiums | 1,098.1 | 831.0 | 1,929.1 | |||||||||
Gross earned premiums | 1,190.6 | 950.5 | 2,141.1 | |||||||||
Net earned premiums | 1,108.3 | 780.2 | 1,888.5 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 1,083.3 | 472.7 | 1,556.0 | |||||||||
Policy acquisition expenses | 197.7 | 149.3 | 347.0 | |||||||||
General and administrative expenses | 109.8 | 125.7 | 235.5 | |||||||||
Underwriting income/(loss) | $ | (282.5 | ) | $ | 32.5 | (250.0 | ) | |||||
Corporate expenses | (44.7 | ) | ||||||||||
Net investment income | 225.6 | |||||||||||
Net realized and unrealized investment gains/(losses) | 30.3 | |||||||||||
Change in fair value of derivatives | (59.9 | ) | ||||||||||
Interest on long-term debt | (30.8 | ) | ||||||||||
Net realized and unrealized foreign exchange gains/(losses) | (6.7 | ) | ||||||||||
Other income/(expenses) | (6.8 | ) | ||||||||||
Income/(loss) before income taxes | (143.0 | ) | ||||||||||
Income tax benefit | 37.2 | |||||||||||
Net income/(loss) | $ | (105.8 | ) | |||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,770.0 | $ | 1,328.6 | $ | 4,098.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 97.7 | % | 60.6 | % | 82.4 | % | ||||||
Policy acquisition expense ratio | 17.8 | % | 19.1 | % | 18.4 | % | ||||||
General and administrative expense ratio(1) | 9.9 | % | 16.1 | % | 14.8 | % | ||||||
Expense ratio | 27.7 | % | 35.2 | % | 33.2 | % | ||||||
Combined ratio | 125.4 | % | 95.8 | % | 115.6 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
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Twelve Months Ended December 31, 2010 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,162.2 | $ | 914.6 | $ | 2,076.8 | ||||||
Net written premiums | 1,118.5 | 772.6 | 1,891.1 | |||||||||
Gross earned premiums | 1,186.4 | 907.9 | 2,094.3 | |||||||||
Net earned premiums | 1,141.8 | 757.1 | 1,898.9 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 693.5 | 555.2 | 1,248.7 | |||||||||
Policy acquisition expenses | 202.4 | 126.1 | 328.5 | |||||||||
General and administrative expenses | 112.3 | 99.4 | 211.7 | |||||||||
Underwriting income/(loss) | $ | 133.6 | $ | (23.6 | ) | 110.0 | ||||||
Corporate expenses | (46.9 | ) | ||||||||||
Net investment income | 232.0 | |||||||||||
Net realized and unrealized investment gains | 50.6 | |||||||||||
Change in fair value of derivatives | (0.2 | ) | ||||||||||
Interest on long-term debt | (16.5 | ) | ||||||||||
Net realized and unrealized foreign exchange gains/(losses) | 2.2 | |||||||||||
Other income/(expenses) | 9.1 | |||||||||||
Income/(loss) before income taxes | 340.3 | |||||||||||
Income tax (expense) | (27.6 | ) | ||||||||||
Net income/(loss) | $ | 312.7 | ||||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,243.9 | $ | 1,296.7 | $ | 3,540.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 60.7 | % | 73.3 | % | 65.8 | % | ||||||
Policy acquisition expense ratio | 17.7 | % | 16.7 | % | 17.3 | % | ||||||
General and administrative expense ratio(1) | 9.8 | % | 13.1 | % | 13.6 | % | ||||||
Expense ratio | 27.5 | % | 29.8 | % | 30.9 | % | ||||||
Combined ratio | 88.2 | % | 103.1 | % | 96.7 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
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Twelve Months Ended December 31, 2009 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,176.0 | $ | 891.1 | $ | 2,067.1 | ||||||
Net written premiums | 1,116.7 | 720.1 | 1,836.8 | |||||||||
Gross earned premiums | 1,164.4 | 871.0 | 2,035.4 | |||||||||
Net earned premiums | 1,108.1 | 714.9 | 1,823.0 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 467.3 | 480.8 | 948.1 | |||||||||
Policy acquisition expenses | 214.6 | 119.5 | 334.1 | |||||||||
Operating and administrative expenses | 97.5 | 100.7 | 198.2 | |||||||||
Underwriting profit/(loss) | 328.7 | 13.9 | 342.6 | |||||||||
Corporate expenses | (54.2 | ) | ||||||||||
Net investment income | 248.5 | |||||||||||
Net realized and unrealized investment gains | 11.4 | |||||||||||
Change in fair value of derivatives | (8.0 | ) | ||||||||||
Interest on long-term debt | (15.6 | ) | ||||||||||
Net realized and unrealized foreign exchange gains/(losses) | 2.0 | |||||||||||
Other income | 8.0 | |||||||||||
Net income before tax | $ | 534.7 | ||||||||||
Net reserves for loss and loss adjustment expenses | $ | 1,988.4 | $ | 1,021.2 | $ | 3,009.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 42.2 | % | 67.3 | % | 52.0 | % | ||||||
Policy acquisition expense ratio | 19.4 | % | 16.7 | % | 18.3 | % | ||||||
General and administrative expense ratio(1) | 8.8 | % | 14.1 | % | 13.8 | % | ||||||
Expense ratio | 28.2 | % | 30.8 | % | 32.1 | % | ||||||
Combined ratio | 70.4 | % | 98.1 | % | 84.1 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
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Gross Written Premiums for the Twelve Months Ended December 31, | ||||||||||||||||||||
Lines of Business | 2011 | 2010 | 2009 | |||||||||||||||||
($ in millions) | % increase/ | ($ in millions) | % increase/ | ($ in millions) | ||||||||||||||||
(decrease) | (decrease) | |||||||||||||||||||
Property catastrophe reinsurance | $ | 306.9 | 4.8 | % | $ | 292.9 | 15.2 | % | $ | 254.3 | ||||||||||
Other property reinsurance | 279.1 | 3.8 | 268.9 | (14.4 | ) | 314.0 | ||||||||||||||
Casualty reinsurance | 309.1 | (9.2 | ) | 340.5 | (3.2 | ) | 351.9 | |||||||||||||
Specialty reinsurance | 292.4 | 12.5 | 259.9 | 1.6 | 255.8 | |||||||||||||||
Total | $ | 1,187.5 | 2.2 | % | $ | 1,162.2 | (1.2 | )% | $ | 1,176.0 | ||||||||||
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Gross Written Premiums | ||||||||||||||||||||
For the Twelve Months | For the Twelve Months | For the Twelve Months | ||||||||||||||||||
Lines of Business | Ended December 31, 2011 | Ended December 31, 2010 | Ended December 31, 2009 | |||||||||||||||||
($ in millions) | % increase/ | ($ in millions) | % increase/ | ($ in millions) | ||||||||||||||||
(decrease) | (decrease) | |||||||||||||||||||
Property insurance | $ | 220.4 | 28.4 | % | $ | 171.7 | 23.4 | % | $ | 139.1 | ||||||||||
Casualty insurance | 137.2 | (7.4 | ) | 148.2 | (24.4 | ) | 196.1 | |||||||||||||
Marine, energy and transportation insurance | 432.2 | (0.7 | ) | 435.1 | (1.9 | ) | 443.4 | |||||||||||||
Financial and professional lines insurance | 230.5 | 44.4 | 159.6 | 41.9 | 112.5 | |||||||||||||||
Total | $ | 1,020.3 | 11.6 | % | $ | 914.6 | 2.6 | % | $ | 891.1 | ||||||||||
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As at December 31, 2011 | As at December 31, 2010 | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Estimated | Total Cash and | Estimated | Total Cash and | |||||||||||||
Fair Value | Investments | Fair Value | Investments | |||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
Fixed Income Securities — Available for Sale | ||||||||||||||||
U.S. Government | $ | 932.4 | 12.2 | % | $ | 725.4 | 10.0 | % | ||||||||
U.S. Government Agency | 295.5 | 3.9 | 302.3 | 4.2 | ||||||||||||
Municipal | 35.6 | 0.5 | 30.7 | 0.4 | ||||||||||||
Corporate | 1,846.5 | 24.2 | 2,325.7 | 31.9 | ||||||||||||
FDIC Corporate | 72.9 | 0.9 | — | — | ||||||||||||
Non-U.S. Government-backed Corporate | 167.8 | 2.2 | — | — | ||||||||||||
Foreign Government | 660.4 | 8.7 | 616.9 | 8.5 | ||||||||||||
Asset-backed | 61.0 | 0.8 | 58.8 | 0.8 | ||||||||||||
Mortgage-backed | 1,353.7 | 17.8 | 1,300.6 | 17.9 | ||||||||||||
Total Fixed Income — Available for Sale | 5,425.8 | 71.2 | % | 5,360.4 | 73.7 | % | ||||||||||
Fixed Income Securities — Trading | ||||||||||||||||
U.S. Government | 32.3 | 0.4 | % | 48.3 | 0.7 | % | ||||||||||
U.S. Government Agency | 1.8 | — | 0.5 | — | ||||||||||||
Municipal | 2.9 | — | 3.3 | — | ||||||||||||
Corporate | 349.3 | 4.6 | 339.8 | 4.7 | ||||||||||||
FDIC Guaranteed Corporate | — | — | — | — | ||||||||||||
Non-U.S. Government-backed Corporate | — | — | — | — | ||||||||||||
Foreign Government | 7.4 | 0.1 | 9.4 | 0.1 | ||||||||||||
Asset-backed | 0.7 | — | 4.9 | 0.1 | ||||||||||||
Total Fixed Income — Trading | 394.4 | 5.1 | % | 406.2 | 5.6 | % | ||||||||||
Total Other Investments | 33.1 | 0.4 | 30.0 | 0.4 | ||||||||||||
Total Equity Securities | 179.5 | 2.4 | — | — | ||||||||||||
Total Short-term Investments — Available for Sale | 298.2 | 3.9 | 286.0 | 3.9 | ||||||||||||
Total Short-term Investments — Trading | 4.1 | 0.1 | 3.7 | 0.1 | ||||||||||||
Total Cash and Cash Equivalents | 1,239.1 | 16.3 | 1,179.1 | 16.2 | ||||||||||||
Total Net Receivable/(Payable) for Securities Sold/(Purchased) | 1.1 | — | (40.4 | ) | (0.6 | ) | ||||||||||
Total Accrued Interest Receivable | 49.6 | 0.6 | 54.4 | 0.7 | ||||||||||||
Total Cash and Investments | $ | 7,624.9 | 100.0 | % | $ | 7,279.4 | 100.0 | % | ||||||||
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AAA | AA and Below | Total | ||||||||||
($ in millions) | ||||||||||||
Agency mortgage-backed | $ | 10.9 | $ | 1,257.4 | $ | 1,268.3 | ||||||
Non-agency commercial mortgage-backed | 57.8 | 27.7 | 85.4 | |||||||||
Total Mortgage-backed Securities | $ | 68.7 | $ | 1,285.1 | $ | 1,353.7 | ||||||
Opening | Closing | |||||||||||||||||||
Undistributed | Undistributed | |||||||||||||||||||
Fair Value of | Unrealized | Carrying | Funds | Fair Value of | ||||||||||||||||
As at December 31, 2011 | Investment | Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris Offshore Fund L.P. | $ | 30.0 | $ | 3.1 | $ | 33.1 | $ | — | $ | 33.1 | ||||||||||
Opening | Closing | |||||||||||||||||||
Undistributed | Realized and | Undistributed | ||||||||||||||||||
Fair Value of | Unrealized | Carrying | Funds | Fair Value of | ||||||||||||||||
As at December 31, 2010 | Investment | Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris 2009 A L.P. | $ | 27.3 | $ | 0.5 | $ | 27.8 | $ | (27.8 | ) | $ | — | |||||||||
Cartesian Iris Offshore Fund L.P. | $ | 27.8 | $ | 2.2 | $ | 30.0 | $ | — | $ | 30.0 |
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Twelve Months Ended | Twelve Months Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
Index providers | 83 | % | 85 | % | ||||
Pricing services | 15 | 13 | ||||||
Broker-dealers | 2 | 2 | ||||||
Total | 100 | % | 100 | % | ||||
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Twelve Months Ended | Twelve Months Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
Index providers | 95 | % | N/A | |||||
Pricing services | 5 | N/A | ||||||
Broker-dealers | — | N/A | ||||||
Total | 100 | % | N/A | |||||
December 31, 2011 | December 31, 2010 | |||||||||||||||
Fair Market | Fair Market | |||||||||||||||
Value Determined | % of Total | Value Determined | % of Total | |||||||||||||
using Prices from | Fair Value by | using Prices from | Fair Value by | |||||||||||||
Index Providers | Security Type | Index Providers | Security Type | |||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
U.S. Government | $932.4 | 100 | % | $725.4 | 100 | % | ||||||||||
U.S. Agency | 238.1 | 81 | 261.7 | 87 | ||||||||||||
Municipal | 26.4 | 74 | 29.6 | 96 | ||||||||||||
Corporate | 1,635.0 | 89 | 1,809.1 | 92 | ||||||||||||
FDIC Guaranteed Corporate | 1.0 | 1 | 86.4 | 69 | ||||||||||||
Non-U.S. Government-backed Corporate | 111.3 | 66 | 185.8 | 81 | ||||||||||||
Foreign Government | 498.6 | 75 | 486.3 | 79 | ||||||||||||
Asset-backed | 37.4 | 61 | 39.3 | 67 | ||||||||||||
Non-agency commercial mortgage-backed | 2.9 | 3 | — | — | ||||||||||||
Agency Mortgage-backed | 1,011.6 | 80 | 919.8 | 78 | ||||||||||||
Total Fixed Maturities — Available for Sale | $4,494.7 | 83 | % | $4,543.4 | 85 | % |
December 31, 2011 | December 31, 2010 | |||||||||||||||
Fair Market | Fair Market | |||||||||||||||
Value Determined | % of Total | Value Determined | % of Total | |||||||||||||
using Prices from | Fair Value by | using Prices from | Fair Value by | |||||||||||||
Index Providers | Security Type | Index Providers | Security Type | |||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
U.S. Government | $32.3 | 100 | % | $48.3 | 100 | % | ||||||||||
U.S. Agency | 1.8 | 100 | 0.5 | 100 | ||||||||||||
Municipal | 2.9 | 100 | 2.9 | 88 | ||||||||||||
Corporate | 322.1 | 92 | 315.4 | 92 | ||||||||||||
Asset-backed | 0.5 | 70 | — | — | ||||||||||||
Foreign Government | 3.7 | 49 | 2.7 | 29 | ||||||||||||
Total Fixed Maturities — Trading | $363.3 | 92 | % | $369.8 | 91 | % |
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• | quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); | |
• | comparison of market values obtained from pricing services, index providers and broker-dealers against fund manager pricing where further investigation is completed when significant differences exist for pricing of individual securities between pricing sources; | |
• | initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; and | |
• | comparison of the fair value estimates to our knowledge of the current market and on a sample basis against alternative internationally recognized independent pricing sources. |
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As at December 31, 2011 | As at December 31, 2010 | |||||||||||||
Rating With | Rating without | Market | Rating With | Rating without | Market | |||||||||
Guarantee | Guarantee | Value | Guarantee | Guarantee | Value | |||||||||
($ in millions) | ($ in millions) | |||||||||||||
AAA | AAA | $ | 72.9 | AAA | AAA | $ | 93.8 | |||||||
AA+ | 21.1 | AA+ | — | |||||||||||
AA | 24.5 | AA | 16.1 | |||||||||||
AA− | 4.0 | AA− | 9.5 | |||||||||||
A+ | 13.5 | A+ | 58.2 | |||||||||||
A | 16.9 | A | 38.4 | |||||||||||
A− | 3.2 | A− | 81.2 | |||||||||||
BBB+ | 2.8 | BBB+ | 17.8 | |||||||||||
BBB | 2.6 | BBB | — | |||||||||||
BBB− | — | BBB− | 23.7 | |||||||||||
BB+ | 3.7 | BB+ | — | |||||||||||
BB− | — | BB− | 3.1 | |||||||||||
B+ | 19.9 | B+ | — | |||||||||||
B | 3.7 | B | — | |||||||||||
AA+ | AA+ | 5.9 | AA+ | AA+ | — | |||||||||
AA | 7.5 | AA | 24.9 | |||||||||||
AA− | 2.5 | AA− | 1.9 | |||||||||||
A+ | — | A+ | 3.1 | |||||||||||
A | 13.1 | A | 6.4 | |||||||||||
A− | 28.4 | A− | — | |||||||||||
BBB+ | 19.4 | BBB+ | — | |||||||||||
AA | AA | — | AA | AA | 1.4 | |||||||||
AA− | AA− | 3.7 | AA− | AA− | 3.2 | |||||||||
A− | A− | — | A− | A− | 1.9 | |||||||||
BBB | BBB | 0.1 | BBB | BBB | — | |||||||||
BBB− | BBB− | — | BBB− | BBB− | 0.1 | |||||||||
$ | 269.4 | $ | 384.7 | |||||||||||
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As at December 31, 2011 | As at December 31, 2010 | |||||||||||||||||||||||
Reinsurance | Reinsurance | |||||||||||||||||||||||
Gross | Recoverable | Net | Gross | Recoverable | Net | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Reinsurance | $ | 2,953.5 | $ | (183.5 | ) | $ | 2,770.0 | $ | 2,343.8 | $ | (60.7 | ) | $ | 2,283.1 | ||||||||||
Insurance | 1,571.7 | (243.1 | ) | 1,328.6 | 1,476.7 | (219.2 | ) | 1,257.5 | ||||||||||||||||
Total Losses and loss expense reserves | $ | 4,525.2 | $ | (426.6 | ) | $ | 4,098.6 | $ | 3,820.5 | $ | (279.9 | ) | $ | 3,540.6 | ||||||||||
As at December 31, 2011 | ||||||||||||||||
Gross | Gross | Gross | ||||||||||||||
Outstandings | IBNR | Reserve | % IBNR | |||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
Reinsurance | $ | 1,451.2 | $ | 1,502.1 | $ | 2,953.3 | 50.9 | % | ||||||||
Insurance | 759.6 | 812.3 | 1,571.9 | 51.7 | ||||||||||||
Total Losses and loss expense reserves | $ | 2,210.8 | $ | 2,314.4 | $ | 4,525.2 | 51.1 | % | ||||||||
As at December 31, 2010 | ||||||||||||||||
Gross | Gross | Gross | ||||||||||||||
Outstandings | IBNR | Reserve | % IBNR | |||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
Reinsurance | $ | 967.0 | $ | 1,376.8 | $ | 2,343.8 | 58.7 | % | ||||||||
Insurance | 778.7 | 698.0 | 1,476.7 | 47.3 | ||||||||||||
Total Losses and loss expense reserves | $ | 1,745.7 | $ | 2,074.8 | $ | 3,820.5 | 54.3 | % | ||||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||
Business Segment | December 31, 2011 | December 31, 2010 | December 31, 2009 | |||||||||
($ in millions) | ||||||||||||
Reinsurance | $ | 72.3 | $ | 65.6 | $ | 103.8 | ||||||
Insurance | 20.0 | (44.2 | ) | (19.4 | ) | |||||||
Total reduction in prior year loss reserves | $ | 92.3 | $ | 21.4 | $ | 84.4 | ||||||
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As at | As at | |||||||||||||||
December 31, 2011 | December 31, 2010 | |||||||||||||||
($ in millions, except for percentages) | ||||||||||||||||
Share capital, additional paid-in capital and retained income and accumulated other comprehensive income attributable to ordinary shareholders | $ | 2,818.4 | 76.8 | % | $ | 2,888.3 | 77.2 | % | ||||||||
Preference shares (liquidation preference), net of issue costs | 353.6 | 9.6 | 353.6 | 9.5 | ||||||||||||
Long-term debt | 499.0 | 13.6 | 498.8 | 13.3 | ||||||||||||
Total capital | $ | 3,671.0 | 100.0 | % | $ | 3,740.7 | 100.0 | % | ||||||||
�� |
• | On February 9, 2010, our Board authorized a new repurchase program for up to $400 million of ordinary shares of which $192.4 million remained available as at December 31, 2011. The authorization for the remaining amount of the repurchase program was extended by the Board at its meeting on February 2, 2012. | |
• | On November 10, 2010, we entered into an accelerated share repurchase program with Barclays Capital to repurchase $184 million of our ordinary shares. As of December 31, 2010, a total of 5,737,449 ordinary shares were received and cancelled. Upon the termination of the contract on March 14, 2011, an additional 542,736 ordinary shares were received and cancelled. A total of 6,280,185 ordinary shares were cancelled under this contract. | |
• | On February 16, 2011, an agreement was signed to repurchase 58,310 shares from the Names’ Trustee. The shares were repurchased on March 10, 2011 for a total consideration of $1.7 million and subsequently cancelled. | |
• | On June 29, 2011, an agreement was signed to repurchase 254,107 shares from the Names’ Trustee for a total consideration of $6.4 million. The transaction was completed on August 10, 2011. |
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As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except percentages) | ||||||||
Assets held in multi-beneficiary trusts | $ | 1,343.7 | $ | 1,895.7 | ||||
Assets held in single beneficiary trusts | 811.5 | 58.2 | ||||||
Secured letters of credit(1) | 1,208.0 | 533.8 | ||||||
Total | $ | 3,363.2 | $ | 2,487.7 | ||||
Total as % of cash and invested assets | 44.4 | % | 34.2 | % | ||||
(1) | As of December 31, 2011, the Company had pledged assets under these arrangements of $1,344.1 million and £19.3 million (December 31, 2010 — $699.9 million and £30.0 million) as collateral for the secured letters of credit. |
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Payments Due By Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Contractual Basis | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Operating lease obligations | $ | 64.7 | $ | 10.6 | $ | 19.2 | $ | 15.8 | $ | 19.1 | ||||||||||
Long-term debt obligations(1) | 500.0 | — | 250.0 | — | 250.0 | |||||||||||||||
Reserves for losses and loss adjustment expenses(2) | $ | 4,525.2 | $ | 1,375.3 | $ | 1,664.2 | $ | 660.8 | $ | 824.9 |
(1) | The long term debt obligations disclosed above do not include the $30.0 million annual interest payable on our outstanding Senior Notes. | |
(2) | In estimating the time intervals into which payments of our reserves for losses and loss adjustment expenses fall, as set out above, we have utilized actuarially assessed payment patterns. By the nature of the insurance and reinsurance contracts under which these liabilities are assumed, there can be no certainty that actual payments will fall in the periods shown and there could be a material acceleration or deceleration of claims payments depending on factors outside our control. This uncertainty is heightened by the relatively short time in which we have operated, thereby providing limited Company-specific claims loss payment patterns. The total amount of payments in respect of our reserves, as well as the timing of such payments, may differ materially from our current estimates for the reasons set out above under “— Critical Accounting Policies — Reserves for Losses and Loss Expenses.” |
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As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except for share amounts) | ||||||||
Total shareholders’ equity | $ | 3,172.0 | $ | 3,241.9 | ||||
Preference shares less issue expenses | (353.6 | ) | (353.6 | ) | ||||
Ordinary dividends | 22.8 | 22.8 | ||||||
Total shareholders’ equity | $ | 2,841.2 | $ | 2,911.13 | ||||
Ordinary shares | 70,655,698 | 70,508,013 | ||||||
Diluted ordinary shares | 73,355,674 | 74,172,657 |
As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except percentages) | ||||||||
Total shareholders’ equity | $ | 3,172.0 | $ | 3,241.9 | ||||
Average preference shares | (353.6 | ) | (353.6 | ) | ||||
Average adjustment | (411.5 | ) | (291.1 | ) | ||||
Average Equity | $ | 2,406.9 | $ | 2,597.2 | ||||
As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except percentages) | ||||||||
Net income/(loss) after tax | $ | (105.8 | ) | $ | 312.7 | |||
Add (deduct) after tax income: | ||||||||
Net realized and unrealized investment (gains)/losses | 39.6 | (44.1 | ) | |||||
Net realized and unrealized exchange (gains)/losses | 0.1 | (2.9 | ) | |||||
Operating income/(loss) after tax | $ | (66.1 | ) | $ | 265.7 | |||
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Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Effect of Changes in Interest Rates on Portfolio Given a Parallel Shift in the Yield Curve | ||||||||||||||||||||
Movement in Rates in Basis Points | −100 | −50 | 0 | 50 | 100 | |||||||||||||||
($ in millions, except percentages) | ||||||||||||||||||||
Market Value | $ | 6,298.8 | $ | 6,210.7 | $ | 6,122.5 | $ | 6,034.3 | $ | 5,946.2 | ||||||||||
Gain/Loss | 176.3 | 88.2 | — | (88.2 | ) | (176.3 | ) | |||||||||||||
Percentage of Portfolio | 2.9 | % | 1.4 | % | — | (1.4 | )% | (2.9 | )% | |||||||||||
Corresponding percentage at December 31, 2010 | 3.3 | % | 1.6 | % | — | (1.6 | )% | (3.3 | )% |
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• | We have ISDA master agreements with multiple potential counterparties to diversify our counterparty credit risk exposure as we deem appropriate. | |
• | We view senior unsecured debt ratings as the key factor in assessing the financial strength and probability of default of a counterparty. Accordingly, as of December 31, 2011, we have only entered into interest rate swap transactions with swap counterparties who have (or whose obligations are guaranteed by an affiliate that has) a senior unsecured debt rating of at least “A–”. As at December 31, 2011, the Goldman Sachs Group (the guarantor of the obligations of Goldman under the Goldman ISDA Agreement) was rated “A1” from Moody’s and “A–” from S&P and Crédit Agricole was rated “Aa3” from Moody’s and “A+” from S&P. | |
• | We protected the ability to maintain a minimum counterparty rating by negotiating provisions that permit us to terminate the ISDA agreements with our counterparties (and all interest rate swaps thereunder) if the rating of the counterparty (or its guarantor) fell below certain levels. | |
• | Our credit exposure to any one swap counterparty is the amount of uncollateralized NPV (i.e., the amount, if any, that the counterparty would owe us upon termination of the swap following a default by the counterparty that is unsecured by collateral that has been delivered by the counterparty to us). Under each ISDA agreement, we negotiated a maximum amount of unsecured credit risk (uncollateralized NPV) that we can be exposed to before the counterparty is required to post collateral to us. Such amount is called the Minimum Transfer Amount (“MTA”). If an Event of Default or certain other events (such as the downgrade event discussed above, a merger or other |
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combination of the counterparty as a result of which the counterparty is materially weaker, or a change in law) has occurred and is continuing with respect to a counterparty, the MTA with respect to such party becomes zero, and the counterparty is required to post collateral for all amounts due to us. |
• | The movement in the NPV of each interest rate swap is measured on a daily basis and settled on a daily basis if the amount required to be transferred to us is greater than the respective MTA of the ISDA agreement. Collateral required to be posted to us is required to be delivered to a collateral account held by our custodian. Therefore, our exposure to a counterparty’s credit risk is recalibrated on a daily basis. The permitted collateral that can be posted between the parties is cash and U.S. Treasuries of various maturities, but not exceeding 10 years. Valuation of the posted collateral is based on the closing market price of the posted Treasury from Bloomberg and applies a valuation percentage by type of security. |
A.M. Best | ($ in millions) | |||
A++ | $ | 6.6 | ||
A+ | 99.7 | |||
A | 209.0 | |||
A− | 10.5 | |||
F(1) | 0.6 | |||
Fully collateralized | 95.1 | |||
Not rated | 5.1 | |||
Total | $ | 426.6 | ||
(1) | The A.M. Best rating of “F” denotes liquidation. We have not reduced the carrying value of the recoverable from this particular reinsurer as a trust account exists to replace the potentially insufficient reserves. |
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Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
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Item 10. | Directors, Executive Officers of the Registrant and Corporate Governance |
Corporate | ||||||||||||||||||||
Director | Governance | |||||||||||||||||||
Name | Age | Since | Audit | Compensation | & Nominating | Investment | Risk | |||||||||||||
Class I Directors: | ||||||||||||||||||||
Christopher O’Kane | 57 | 2002 | ||||||||||||||||||
Heidi Hutter | 54 | 2002 | ü | ü | Chair | |||||||||||||||
John Cavoores | 54 | 2006 | ü | |||||||||||||||||
Liaquat Ahamed | 59 | 2007 | Chair | ü | ||||||||||||||||
Albert Beer | 61 | 2011 | ü | ü | ü | |||||||||||||||
Class II Directors: | ||||||||||||||||||||
Julian Cusack | 61 | 2002 | ü | ü | ||||||||||||||||
Glyn Jones | 59 | 2006 | ü | |||||||||||||||||
Richard Houghton(1) | 46 | 2007 | ü | |||||||||||||||||
Class III Directors: | ||||||||||||||||||||
Ian Cormack | 64 | 2003 | Chair | ü | ü | |||||||||||||||
Richard Bucknall | 63 | 2007 | ü | Chair | ü | |||||||||||||||
Peter O’Flinn | 59 | 2009 | ü | Chair | ||||||||||||||||
Ronald Pressman(2) | 53 | 2011 | ü | ü |
(1) | Mr. Houghton will be stepping down from his position as director and Chief Financial Officer with effect February 29, 2012. | |
(2) | Effective November 17, 2011. |
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Name | Age | Position | ||||
Christopher O’Kane(1) | 57 | Chief Executive Officer of Aspen Holdings | ||||
Richard Houghton(1)(2) | 46 | Chief Financial Officer of Aspen Holdings | ||||
Julian Cusack(1) | 61 | Chief Risk Officer of Aspen Holdings, Chief Executive Officer and Chairman of Aspen Bermuda | ||||
Brian Boornazian | 51 | CEO of Aspen Reinsurance | ||||
Michael Cain | 39 | Group General Counsel, Head of Group Human Resources | ||||
James Few | 40 | President of Aspen Reinsurance, Chief Executive Officer of Aspen Bermuda | ||||
Karen Green | 44 | Chief Executive Officer, Aspen U.K. and AMAL, Group Head of Corporate Development and Office of the Group CEO | ||||
Emil Issavi | 39 | Head of Casualty Reinsurance, Executive Vice President of Aspen Reinsurance | ||||
Rupert Villers | 59 | Co-CEO of Aspen Insurance | ||||
Stephen Postlewhite | 40 | Head of Risk | ||||
Kate Vacher | 40 | Director of Underwriting | ||||
Mario Vitale | 56 | President of Aspen U.S. and Co-CEO of Aspen Insurance |
(1) | Biography available above under “— Directors” above. | |
(2) | Effective February 29, 2012, Mr. Houghton will be stepping down from his position as director and Chief Financial Officer. |
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• | the name of each person recommended by the shareholder(s) to be considered as a nominee; | |
• | the name(s) and address(es) of the shareholder(s) making the nomination, the number of ordinary shares which are owned beneficially and of record by such shareholder(s) and the period for which such ordinary shares have been held; | |
• | a description of the relationship between the nominating shareholder(s) and each nominee; | |
• | biographical information regarding such nominee, including the person’s employment and other relevant experience and a statement as to the qualifications of the nominee; | |
• | a business address and telephone number for each nominee (ane-mail address may also be included); and | |
• | the written consent to nomination and to serving as a director, if elected, of the recommended nominee. |
• | he or she must have the highest standards of personal and professional integrity; | |
• | he or she must have exhibited mature judgment through significant accomplishments in his or her chosen field of expertise; | |
• | he or she must have a well-developed career history with specializations and skills that are relevant to understanding and benefiting the Company; | |
• | he or she must be able to allocate sufficient time and energy to director duties, including preparation for meetings and attendance at meetings; | |
• | he or she must be able to read and understand financial statements to an appropriate level for the exercise of his or her duties; and | |
• | he or she must be familiar with, and willing to assume, the duties of a director on the Board of Directors of a public company. |
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• | the nominee’s qualifications and accomplishments and whether they complement the Board’s existing strengths; | |
• | the nominee’s leadership, strategic, or policy setting experience; | |
• | the nominee’s experience and expertise relevant to the Company’s insurance and reinsurance business, including any actuarial or underwriting expertise, or other specialized skills; | |
• | the nominee’s independence qualifications, as defined by NYSE listing standards; | |
• | the nominee’s actual or potential conflict of interest, or the appearance of any conflict of interest, with the best interests of the Company and its shareholders; | |
• | the nominee’s ability to represent the interests of all shareholders of the Company; and | |
• | the nominee’s financial literacy, accounting or related financial management expertise as defined by NYSE listing standards, or qualifications as an audit committee financial expert, as defined by SEC rules and regulations. |
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Item 11. | Executive Compensation |
• | Salary: Decisions on salary increases which became effective during 2011 were approved by the Compensation Committee early in 2011, taking into account the 2010 results and other benchmarking information. There were no significant salary increases for any of our NEOs in 2011 other than for our Chief Executive Officer, whose salary was increased by 9.90% to reflect appropriate benchmarking and Mr. Villers whose full-time equivalent base salary was increased to reflect his expanded role as Co-CEO of Aspen Insurance; | |
• | Bonus: As we had an Operating ROE (as defined below) of (3.7)% for the year, bonus pool funding was at the Compensation Committee’s discretion rather than in accordance with a set formula. The Compensation Committee exercised its discretion and approved a bonus pool to reward the positive performance of certain underwriting and other teams notwithstanding the overall group results. The following points should be noted: |
• | In establishing the funding level of the discretionary bonus pool, the Compensation Committee considered the actual performance of individual underwriting teams and support functions. The consequence of thisbottom-up approach was then reviewed in the context of overall group performance in reaching an appropriate level of bonus funding; | |
• | As part of this process, none of the NEOs (including the Chief Executive Officer and the Chief Financial Officer) received a bonus in light of the Company’s overall performance, other than Mr. Villers, who received a bonus to reflect the strong performance of the insurance segment, and in particular, certain product lines within international insurance, and Mr. Vitale, who in relation to his recruitment by us in 2011 received a guaranteed bonus for the year in the amount of $900,000 reflecting lost bonus opportunity at his previous employer; and |
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• | It is also important to note that several senior executives volunteered to forego a bonus for 2011 in light of our overall performance. |
• | Long-term incentive awards: Based on our ROE of (5.3)% for the year, the relevant portions of the 2009, 2010 and 2011 performance shares which were subject to the 2011 ROE test did not vest and were forfeited. As a result of our 2011 performance, 404,227 shares did not vest and were forfeited by our executive officers, which impacted one-third of the performance share grants in each of 2009, 2010 and 2011. This underlines the performance conditions embedded in theselong-term plans. |
2011 Bonus | ||||||||||||||||
2011 % | Awarded; | 2011 Performance | 2011 Performance | |||||||||||||
Name and Principal Position | Salary Increase | % of Target | Shares Granted | Shares Forfeited | ||||||||||||
Christopher O’Kane, Chief Executive Officer | 9.90 | % | 0 | % | 83,278 | 27,759 | ||||||||||
Richard Houghton, Chief Financial Officer | 2.78 | % | 0 | % | 24,983 | 8,328 | ||||||||||
Mario Vitale, President Aspen U.S.,Co-CEO of Aspen Insurance | N/A | 120 | %(1) | 31,669 | 10,556 | |||||||||||
Rupert Villers, Co-CEO of Aspen Insurance | 11.11 | % | 100 | % | 49,967 | 16,656 | ||||||||||
John Cavoores, Co-CEO of Aspen Insurance | 0 | % | 0 | % | 49,967 | 16,656 |
(1) | This represents a guaranteed bonus amount of $900,000 for Mr. Vitale reflecting lost bonus opportunity at his previous employer. |
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• | base salary; | |
• | annual cash bonuses; | |
• | long-term incentive awards; | |
• | other stock plans; and | |
• | benefits and perquisites. |
• | attract and retain highly skilled executives; | |
• | link compensation to achievement of the Company’s financial and strategic goals by having a significant portion of compensation be performance-based; | |
• | create commonality of interest between management and shareholders by tying substantial elements of compensation directly to changes in shareholder value over time in a sustainable manner that does not reward or appear to reward short-term behavior that may involve excessive risk taking; | |
• | maximize the financial efficiency of the overall program to the Company from a tax, accounting, and cash flow perspective; |
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• | ensure compliance with the highest standards of corporate governance; and | |
• | encourage executives to work hard for the success of the business and work effectively with clients and colleagues for the benefit of the business as a whole. |
• | research of peer company annual reports onForm 10-K and similar filings for companies in our sector in the markets in which we operate; | |
• | publicly available compensation surveys from reputable survey providers; | |
• | advice and tailored research from compensation consultants; and | |
• | experience from recruiting senior positions in the market place. |
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U.S. & Bermuda | U.K. | |
Allied World Assurance Co Holdings, AG | Amlin Plc | |
Alterra Capital Holdings Limited | Brit Insurance Holdings Plc | |
Arch Capital Group Ltd. | Catlin Group Limited | |
Axis Capital Holdings Ltd. | Hiscox Ltd. | |
Endurance Specialty Holdings Ltd. | ||
Everest Re Group, Ltd. | ||
Validus Holdings Limited | ||
White Mountains Insurance Group |
U.S. & Bermuda | U.K. | |
Montpelier Re Holdings Ltd. | Beazley Group Plc | |
PartnerRe Ltd. | ||
Platinum Underwriters Holdings, Ltd. | ||
RenaissanceRe Holdings Ltd. | ||
Transatlantic Holdings, Inc. |
• | the performance of the business; | |
• | the performance of the executives in their roles over the previous year; | |
• | the historical context of the executive’s compensation awards; | |
• | the importance and responsibilities of the role; | |
• | the experience, skills and knowledge brought to the role by the executive; | |
• | the function undertaken by the role; and |
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• | analysis of the market data from competitors and more general market data from labor markets in which we operate. |
2009 Annual | 2010 Annual | 2011 Annual | ||||||||||||||||||
Name and Principal Position | Salary | Salary | % Increase | Salary | % Increase | |||||||||||||||
Christopher O’Kane, Chief Executive Officer | £480,000 | £480,000 | 0 | % | £ | 527,500 | 9.90 | % | ||||||||||||
Richard Houghton, Chief Financial Officer | £360,000 | £360,000 | 0 | % | £ | 370,000 | 2.78 | % | ||||||||||||
Mario Vitale, President Aspen U.S.,Co-CEO of Aspen Insurance | N/A | N/A | N/A | $ | 750,000 | N/A | ||||||||||||||
Rupert Villers, Co-CEO of Aspen Insurance | £315,000 | £315,000 | 0 | % | £ | 350,000 | 11.11 | % (1) | ||||||||||||
John Cavoores, Co-CEO of Aspen Insurance | N/A | $ | 480,000 | N/A | $ | 480,000 | 0 | % (2) |
(1) | Mr. Villers’ salary of £315,000 was increased to the full-time equivalent of £350,000 for 2011 based on a full-time basis. Mr. Villers’ actual earned salary was £280,000 for 2011 reflecting his contractual working commitments. | |
(2) | Mr. Cavoores’ original 2010 salary of $360,000 was based on employment for three days per week. It was subsequently increased pro rata to $480,000 to reflect his employment for four days per week. |
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Bonus | ||||||||||||||||||||||||
Name and Principal Position(2) | Year | Potential % | Target ($) | Actual ($) | % of Base | % of Target | ||||||||||||||||||
Christopher O’Kane, | 2011 | 175 | % | $ | 1,480,785 | $ | 0 | 0 | % | 0 | % | |||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||
Richard Houghton, | 2011 | 100 | % | $ | 593.517 | $ | 0 | 0 | % | 0 | % | |||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||
Mario Vitale, | 2011 | 120 | % | $ | 900,000 | $ | 900,000 | (2) | 120 | % | 100 | % | ||||||||||||
President Aspen U.S., Co-CEO Aspen Insurance | ||||||||||||||||||||||||
Rupert Villers, | 2011 | 125 | % | $ | 561,435 | $ | 561,435 | 125 | % | 100 | % | |||||||||||||
Co-CEO of Aspen Insurance | ||||||||||||||||||||||||
John Cavoores, | 2011 | 125 | % | $ | 600,000 | $ | 0 | 0 | % | 0 | % | |||||||||||||
Co-CEO of Aspen Insurance |
(1) | All compensation information is taken from the Summary Compensation Table for 2011. For those paid in British Pounds we have used the applicable exchange rate for 2011 as disclosed in such year’s Summary Compensation Table. | |
(2) | Mr. Vitale’s 2011 bonus reflects a contractual obligation agreed upon joining us during 2011 in order to reflect lost bonus potential opportunity at his former employer. |
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• | If the ROE achieved in 2011 is less than 6%, then the portion of the performance shares subject to the vesting conditions in such year will be forfeited (i.e. 33.33% of the initial grant); | |
• | If the ROE achieved in 2011 is between 6% and 11%, then the percentage of the performance shares eligible for vesting will be between 10% and 100% on a straight-line basis; | |
• | If the ROE achieved in 2011 is between 11% and 21%, then the percentage of the performance shares eligible for vesting will be between 100% and 200% on a straight-line basis; provided however that if the ROE for 2011 is greater than 11% and the average ROE for 2011 and the previous year is less than 6%, then only 100% of the shares eligible for vesting in such year shall vest. |
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Year | 2007 | 2008 | 2009 | 2010 | 2011(2) | 2012 | ||||||||||||||||||
Threshold ROE | 10 | % | 10 | % | 7 | % | 7 | % | 6 | % | — | |||||||||||||
Target ROE | 15 | % | 15 | % | 12 | % | 12 | % | 11 | % | — | |||||||||||||
Actual ROE | 21.6 | % | 3.3 | % | 18.4 | % | 11.2 | % | (5.3 | )% | — | |||||||||||||
2009 Performance share awards(1) | N/A | N/A | 164 | % | 85.6 | % | 0 | % | N/A | |||||||||||||||
2010 Performance share awards(1) | N/A | N/A | N/A | 85.6 | % | 0 | % | — | ||||||||||||||||
2011 Performance share awards(1) | N/A | N/A | N/A | N/A | 0 | % | — |
(1) | Represents annual performance test; percentage to be applied to 33.3% of the original grant | |
(2) | Represents the performance test for one-third of the grant (2011 portion only). |
2011 LTIP Grants | ||||||||
Amount of | Fair Value | |||||||
Name and Principal Position | Performance Shares | of Award | ||||||
Christopher O’Kane, Chief Executive Officer | 83,278 | $ | 2,350,105 | |||||
Richard Houghton, Chief Financial Officer | 24,983 | $ | 705,020 | |||||
Mario Vitale, President Aspen U.S., Co-CEO Aspen Insurance | 31,669 | $ | 792,992 | |||||
Rupert Villers, Co-CEO of Aspen Insurance | 49,967 | $ | 1,410,069 | |||||
John Cavoores, Co-CEO of Aspen Insurance | 49,967 | $ | 1,410,069 |
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• | All Company shares owned by Group Executive Committee members will be held in own name or joint with spouse; | |
• | All Company shares owned by Group Executive Committee members should be held in a Merrill Lynch brokerage account or other Company approved broker; | |
• | Executive Directors should inform the Chief Executive Officer and the Chairman if they plan to trade Aspen shares, and should provide detailed reasons for sale upon request; | |
• | Other Group Executive Committee members should obtain permission to trade from the Chief Executive Officer and provide detailed reasons for sale upon request; | |
• | The Compensation Committee will be informed on a quarterly basis of all trading of stock by all Aspen employees; |
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• | Recommendation that sales by Group Executive Committee members be undertaken using SECRule 10b5-1 trading programs, where possible with the additional cost of administration connected with such trades to be paid by the Company; | |
• | It is prohibited for Company shares to be used as collateral for loans, purchasing of Company stock on margin or pledging Company stock in a margin account; and | |
• | The Chief Executive Officer should inform the Chairman of any decision to sell stock. |
• | the amount of stock that an executive holds, the duration of the period over which that stock has been held and the amount of stock being requested to be sold; | |
• | the nature of the role held by the executive; | |
• | any reasons related to hardship, retirement planning, divorce etc. that would make a sale of stock required; | |
• | the history of trading by the executive; | |
• | the remaining stock holdings left after the sale; and | |
• | the market conditions and other factors which relate to the Company’s trading situation at the proposed time of sale. |
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Change in | ||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||||
Stock | Option | Deferred | All Other | |||||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Compensation | |||||||||||||||||||||||||||
Name and Principal Position | Year | ($)(2) | ($)(3) | ($)(4) | ($) | Earnings ($) | ($) | Total ($) | ||||||||||||||||||||||||
Christopher O’Kane, | 2011 | $ | 827,114 | $ | 0 | $ | 2,350,105 | $ | 165,424 | $ | 3,342,643 | |||||||||||||||||||||
Chief Executive | 2010 | $ | 741,984 | $ | 881,106 | $ | 2,807,090 | $ | 148,397 | $ | 4,578,577 | |||||||||||||||||||||
Officer(5) | 2009 | $ | 740,408 | $ | 2,256,480 | $ | 2,792,710 | — | — | $ | 133,273 | $ | 5,922,871 | |||||||||||||||||||
Richard Houghton, | 2011 | $ | 589,507 | $ | 0 | $ | 705,020 | $ | 93,830 | $ | 1,388,357 | |||||||||||||||||||||
Chief Financial | 2010 | $ | 556,488 | $ | 367,128 | $ | 654,985 | $ | 89,038 | $ | 1,667,639 | |||||||||||||||||||||
Officer(6) | 2009 | $ | 560,203 | $ | 902,592 | $ | 930,903 | — | $ | 79,248 | $ | 2,472,946 | ||||||||||||||||||||
Mario Vitale, | 2011 | $ | 588,462 | $ | 900,000 | $ | 2,918,713 | $ | 1,176,457 | $ | 5,583,632 | |||||||||||||||||||||
President Aspen U.S., | ||||||||||||||||||||||||||||||||
Co-CEO Aspen Insurance(7) | ||||||||||||||||||||||||||||||||
Rupert Villers, | 2011 | $ | 449,148 | $ | 561,435 | $ | 1,410,069 | $ | 69,623 | $ | 2,490,275 | |||||||||||||||||||||
Co-CEO of Aspen | 2010 | $ | 486,927 | $ | 386,450 | $ | 701,766 | $ | 75,474 | $ | 1,650,617 | |||||||||||||||||||||
Insurance(8) | 2009 | $ | 329,070 | $ | 756,861 | $ | 558,551 | $ | 51,006 | $ | 1,695,488 | |||||||||||||||||||||
John Cavoores, | 2011 | $ | 480,000 | $ | 0 | $ | 1,410,069 | $ | 24,500 | $ | 1,914,569 | |||||||||||||||||||||
Co-CEO of Aspen | 2010 | $ | 80,000 | $ | 75,000 | $ | 462,141 | $ | 132,000 | $ | 749,141 | |||||||||||||||||||||
Insurance(9) | 2009 | — | — | — | — | — | — | — |
(1) | Unless otherwise indicated, compensation payments paid in British Pounds have been translated into U.S. Dollars at the average exchange rate of $1.6041 to £1, $1.5458 to £1 and $1.567 to £1 for 2011, 2010 and 2009, respectively. | |
(2) | The salaries provided represent earned salaries. | |
(3) | For a description of our bonus plan, see “Compensation Discussion and Analysis — Cash Compensation — Annual Cash Bonuses” above. | |
(4) | Consists of performance share awards and/or RSUs, as applicable. Valuation is based on the grant date fair values of the awards calculated in accordance with FASB ASC Topic 718, without regard to forfeiture assumptions. The performance share awards’ potential maximum value, assuming the highest level of performance conditions are met are $4,700,210, $1,410,041, $3,861,965, $2,820,137 and $2,820,137 for Messrs. O’Kane, Houghton, Vitale, Villers and Cavoores, respectively. Please refer to Note 16 of our consolidated financial statements for the assumptions made with respect to these awards. | |
(5) | Mr. O’Kane’s compensation was paid in British Pounds. With respect to 2011 “All Other Compensation,” this consists of the Company’s contribution to the pension plan (including any pension opt out lump sum payments) of $165,424. | |
(6) | Mr. Houghton’s compensation was paid in British Pounds. With respect to 2011 “All Other Compensation” this consists of the Company’s contribution to the pension plan (including any pension opt out lump sum payments) of $93,830. | |
(7) | Mr. Vitale’s compensation was paid in U.S. Dollars. His bonus amount of $900,000 represented a guaranteed bonus amount in connection with his recruitment per contractual obligations. Of the $2,918,713 in stock awards, $2,125,721 represents the grant date fair value of RSUs awarded for forfeiture of certain stock awards and other benefits from his prior employer and the remaining $792,992 represents the grant fair value of performance shares. With respect to “All Other Compensation” this includes (i) a |
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6-month housing allowance in respect of his repatriation from Zurich to the U.S. of $61,340, (ii) shipment costs of $11,105, (iii) the Company’s contribution to a Supplemental Executive Retirement Plan of $30,300 for 2011, (iv) a profit sharing contribution of $14,700 for 2011, (v) additional premium paid for additional life insurance of $5,190, (vi) additional premium for supplemental disability income insurance of $13,982, (vii) atax-gross-up payment in respect of Mr. Vitale’s (a) temporary housing allowance of $26,471, (b) shipment costs of $4,978, (c) executive life assurance of $1,022 and (d) disability income insurance of $7,225, and (viii) a cash replacement payment for forfeited bonus for prior years and the loss of certain stock awards from his prior employer of $1,000,000 for 2011. Mr. Vitale joined the Company effective March 21, 2011 and therefore received no compensation during 2010 and 2009. | ||
(8) | Mr. Villers’s compensation was paid in British Pounds. With respect to 2011 “All Other Compensation,” this consists of (i) the Company’s contribution to the pension plan (including any pension opt out lump sum payments as applicable) of $69,623. | |
(9) | Mr. Cavoores’s compensation was paid in U.S. Dollars. With respect to 2011 “All Other Compensation,” this consists of the Company’s contribution to the pension plan (consisting of profit sharing and matching contributions) of $24,500. This table does not include contributions made by the Company to Mr. Cavoores in respect of his role as a non-executive director of the Company in 2010 and 2009. Mr. Cavoores was not an executive officer at any time during 2009 and as such received no compensation in respect of an executive role during 2009. |
All Other | ||||||||||||||||||||||||||||
Stock Awards: | Grant Date | |||||||||||||||||||||||||||
Estimated Future Payout Under | Number of | Fair Value | ||||||||||||||||||||||||||
Equity Incentive Plan Awards | Shares of Stocks | of Stock | ||||||||||||||||||||||||||
Grant | Approval | Threshold | or Units | Maximum | or Units | Awards | ||||||||||||||||||||||
Name | Date(1) | Date(1) | (#)(2) | (#)(2) | (#)(3) | (#)(4) | (#)(5) | |||||||||||||||||||||
Christopher O’Kane | 02/09/2011 | 02/03/2011 | 0 | 83,278 | 110,037 | $ | 2,350,105 | |||||||||||||||||||||
Richard Houghton | 02/09/2011 | 02/03/2011 | 0 | 24,983 | 33,311 | $ | 705,020 | |||||||||||||||||||||
Mario Vitale | 03/21/2011 | 02/03/2011 | 0 | 31,669 | 42,225 | $ | 792,992 | |||||||||||||||||||||
03/21/2011 | 02/03/2011 | 84,893 | $ | 2,125,721 | ||||||||||||||||||||||||
Rupert Villers | 02/09/2011 | 02/03/2011 | 0 | 49,967 | 66,623 | $ | 1,410,069 | |||||||||||||||||||||
John Cavoores | 02/09/2011 | 02/03/2011 | 0 | 49,967 | 66,623 | $ | 1,410,069 |
(1) | In 2007, we adopted a policy whereby the Compensation Committee approves annual grants at a regularly scheduled meeting. However, if such a meeting takes place while the Company is in a close period (i.e., prior to the release of our quarterly or yearly earnings), the grant date will be the day on which our close period ends. The approval date of February 3, 2011 was during our close period, and therefore the grant date was February 9, 2011, the day our close period ended. In the case of Mr. Vitale, the grant date was the date of the commencement of his his employment with us. | |
In respect of ad hoc grants of RSUs (if not in a close period), in particular with respect to new hires, the grant date is the later of (i) the date on which the Compensation Committee approves the grant or (ii) the date on which the employee commences employment with the Company. | ||
(2) | Under the terms of the 2011 performance share awards, one-third of the grant is eligible for vesting each year. If the 2011 ROE is less than 6%, then the portion of the grant for such year will not vest and is forfeited. If the 2011 ROE is between 6% and 11%, the percentage of the performance shares eligible for vesting in that year will be between 10% and 100% on a straight-line basis. If the 2011ROE is between 11% and 21%, then the percentage of the performance shares eligible for vesting will be between 100% and 200% on a straight-line basis; provided however that if the ROE for 2011 is greater than 11% and the |
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average ROE for 2011 and the previous year is less than 6%, then only 100% of the shares eligible for vesting in such year shall vest. The Compensation Committee also agreed that it will determine the vesting conditions for the 2012 and 2013 portions of the 2011 performance shares in such years taking into consideration the market conditions and the Company’s business plans at the commencement of the years concerned. For the purpose of this table, the amounts provided represent 100% of the performance shares vested for each portion of the grant subject to the separate annual ROE test. For a more detailed description of our performance share awards granted in 2011, refer to “Narrative Description of Summary Compensation and Grants of Plan-Based Awards — Share Incentive Plan — 2011 Performance Share Awards” below. | ||
(3) | Amounts provided represent no vesting (forfeiture) in respect of one-third of the initial grant as our ROE for 2011 was (5.3)%, and assumes a vesting of 200% for the remaining two-thirds of the performance shares. | |
(4) | For a description of our RSUs, refer to “Narrative Description of Summary Compensation and Grants of Plan-Based Awards — Share Incentive Plan — Resticted Share Units” below. | |
(5) | Valuation is based on the grant date fair value of the awards calculated in accordance with FASB ASC Topic 718, without regard to forfeiture assumptions, which is $28.22 for the performance shares granted on February 9, 2011 and $25.04 for the performance shares granted to Mr. Vitale on March 21, 2011. Refer to Note 16 of our consolidated financial statements for the assumptions made with respect to our performance share awards. |
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• | the employee becomes bankrupt, is convicted of a criminal offence (other than a traffic violation or a crime with a penalty other than imprisonment), commits serious misconduct or other conduct bringing the employee or Aspen Holdings or any of its subsidiaries into disrepute; | |
• | the employee materially breaches any provisions of the service agreement or conducts himself in a manner prejudicial to the business; | |
• | the employee is disqualified from being a director in the case of Messrs. O’Kane and Houghton; or | |
• | the employee breaches any code of conduct or ceases to be registered by any regulatory body; |
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• | the employee’s willful misconduct is materially injurious to Aspen U.S. Services or its affiliates; | |
• | the employee intentionally fails to act in accordance with the direction of the Co-Chief Executive Officer of Aspen Insurance in the case of Mr. Vitale or the Chief Executive Officer of Aspen Holdings in the case of Mr. Cavoores, or the Board of Directors of Aspen U.S. Services or Aspen Holdings; | |
• | the employee is convicted of a felony; | |
• | the employee violates a law, rule or regulation that (i) governs the business of Aspen U.S. Services, (ii) has a material adverse effect on the business Aspen U.S. Services, or (iii) disqualifies him from employment; or | |
• | the employee intentionally breaches a non-compete or non-disclosure agreement; |
• | the employee’s annual salary or bonus opportunity is reduced; | |
• | there is a material diminution in the employee’s duties, authority, responsibilities or title, or the employee is assigned duties materially inconsistent with his position; | |
• | the employee is removed from any of his positions (or in the case of Mr. O’Kane is not elected or re-elected to such positions); | |
• | an adverse change in the employee’s reporting relationship occurs in the case of Mr. O’Kane; | |
• | the employee is required to relocate more than 50 miles from the employee’s current office; or | |
• | provided that, in each case, the default has not been cured within 30 days of receipt of a written notice from the employee; |
• | there is a material diminution in the employee’s responsibilities, duties, title or authority; | |
• | the employee’s annual salary is materially reduced; | |
• | there is a material breach by the Company of the employment agreement; or | |
• | in the case of Mr. Cavoores, the employee is required to relocate more than 200 miles from the employee’s current office; |
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Employee | Company | |||||||||||
Contribution — | Contribution — | |||||||||||
Percentage of | Age of | Percentage of | ||||||||||
Scale | Salary | Employee | Employee’s Salary | |||||||||
Standard Scale | 3 | % | 18 - 19 | 5 | % | |||||||
3 | % | 20 - 24 | 7 | % | ||||||||
3 | % | 25 - 29 | 8 | % | ||||||||
3 | % | 30 - 34 | 9.5 | % | ||||||||
3 | % | 35 - 39 | 10.5 | % | ||||||||
3 | % | 40 - 44 | 12 | % | ||||||||
3 | % | 45 - 49 | 13.5 | % | ||||||||
3 | % | 50 - 54 | 14.5 | % | ||||||||
3 | % | 55 plus | 15.5 | % | ||||||||
Director Scale | 3 | % | 20 - 24 | 7 | % | |||||||
3 | % | 25 - 29 | 8 | % | ||||||||
3 | % | 30 - 34 | 9.5 | % | ||||||||
3 | % | 35 - 39 | 12 | % | ||||||||
3 | % | 40 - 44 | 14 | % | ||||||||
3 | % | 45 - 49 | 16 | % | ||||||||
3 | % | 50 - 54 | 18 | % | ||||||||
3 | % | 55 plus | 20 | % |
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Contribution | ||||
by the | ||||
Company as a | ||||
Percentage of | ||||
Employee’s | ||||
Age of Employee | Salary | |||
20 - 29 | 3 | % | ||
30 - 39 | 4 | % | ||
40 - 49 | 5 | % | ||
50 and older | 6 | % |
Vesting | ||||
Years of Vesting Service | Percentage | |||
Less than 3 years | 0 | % | ||
3 years | 100 | % |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||
Equity | Incentive Plan | |||||||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||||||
Equity | Plan Awards: | Market | ||||||||||||||||||||||||||||||||||||||
Incentive | Market | Number of | Value or | |||||||||||||||||||||||||||||||||||||
Number of | Number of | Plan Awards: | Number of | Value of | Unearned | Payout Value | ||||||||||||||||||||||||||||||||||
Securities | Securities | Number of | Shares or | Shares or | Shares, | of Unearned | ||||||||||||||||||||||||||||||||||
Underlying | Underlying | Securities | Units of | Units of | Units or | Shares, Units or | ||||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Underlying | Stock That | Stock That | Other Rights | Other Rights | ||||||||||||||||||||||||||||||||||
Options (#) | Options (#) | Unexercised | Option | Option | Have Not | Have Not | That Have | That Have | ||||||||||||||||||||||||||||||||
Year of | Exercisable | Unexer- | Unearned | Exercise | Expiration | Vested (#) | Vested | Not Vested | Not Vested | |||||||||||||||||||||||||||||||
Name | Grant | (1) | cisable | Options (#)(1) | Price ($) | Date | (1) | ($)(2) | (#)(1) | ($)(2) | ||||||||||||||||||||||||||||||
Christopher O’Kane | 2003 | 991,830 | — | $ | 16.20 | 08/20/2013 | — | — | ||||||||||||||||||||||||||||||||
2004 | 23,603 | (3) | — | $ | 24.44 | 12/22/2014 | — | — | ||||||||||||||||||||||||||||||||
2005 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
2006 | 87,719 | (4) | — | $ | 23.65 | 02/16/2016 | — | — | ||||||||||||||||||||||||||||||||
2007 | 75,988 | — | $ | 27.28 | 05/04/2014 | — | — | |||||||||||||||||||||||||||||||||
2008 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
2009 | — | — | 104,522 | (5) | $ | 2,769,833 | — | — | ||||||||||||||||||||||||||||||||
2010 | — | — | 30,664 | (6) | $ | 812,596 | 35,823 | (7) | $ | 949,310 | ||||||||||||||||||||||||||||||
2011 | — | — | 55,519 | (8) | $ | 1,471,254 | ||||||||||||||||||||||||||||||||||
Richard Houghton | 2007 | 12,158 | — | $ | 27.28 | 05/04/2014 | — | — | ||||||||||||||||||||||||||||||||
2008 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
2009 | — | — | 34,840 | (5) | $ | 923,260 | — | — | ||||||||||||||||||||||||||||||||
2010 | — | — | 7,155 | (6) | $ | 189,608 | 8,358 | (7) | $ | 221,487 | ||||||||||||||||||||||||||||||
2011 | — | — | 16,656 | (8) | $ | 441,384 | ||||||||||||||||||||||||||||||||||
Mario Vitale | 2011 | — | — | 84,893 | (9) | $ | 2,249,665 | 21,113 | (8) | $ | 559,495 | |||||||||||||||||||||||||||||
Rupert Villers | 2009 | — | — | 20,904 | (5) | $ | 553,956 | |||||||||||||||||||||||||||||||||
2010 | — | — | 7,665 | (6) | $ | 203,123 | 8,956 | (7) | $ | 237,334 | ||||||||||||||||||||||||||||||
2011 | — | — | 33,312 | (8) | $ | 882,768 | ||||||||||||||||||||||||||||||||||
John Cavoores(11) | 2007 | 2,012 | (10) | $ | 24.76 | 07/30/2016 | ||||||||||||||||||||||||||||||||||
2010 | — | — | 5,047 | (6) | $ | 133,746 | 5,898 | (7) | $ | 156,297 | ||||||||||||||||||||||||||||||
2011 | — | — | 33,312 | (8) | $ | 882,768 |
(1) | For a description of the terms of the grants and the related vesting schedule, see “Narrative Description of Summary Compensation and Grants of Plan-Based Awards — Share Incentive Plan” above. | |
(2) | Calculated based upon the closing price of $26.50 per share of the Company’s ordinary shares at December 30, 2011 (December 31, 2011 was not a trading day). | |
(3) | As the performance targets for the 2004 options were not fully met based on the 2004 ROE achieved, 51.48% of the grant vested and the remaining portion of the grant was forfeited. | |
(4) | As the performance targets for the 2006 options were not fully met, 92.2% of the grant vested and the remaining portion of the grant was forfeited. | |
(5) | With respect to the 2009 performance shares, amount represents (i) 164.0% vesting in respect of one-third of the grant as our ROE for 2009 was 18.4%, (ii) 85.6% vesting in respect of one-third of the grant as our ROE for 2010 was 11.2% and (iii) and forfeiture in respect of one-third of the grant as our ROE for 2011 was (5.3%). These performance shares vest and become issuable upon the filing of this report. | |
(6) | With respect to the 2010 performance shares, amount represents (i) 85.6% vesting in respect of one-third of the grant as our ROE for 2010 was 11.2% and (ii) forfeiture in respect of one-third of the grant as our ROE for 2011 was (5.3)%. | |
(7) | With respect to the 2010 performance shares, amount assumes a vesting of 100% for the remaining one-third of the grant. | |
(8) | With respect to the 2011 performance shares, amount represents (i) forfeiture in respect of one-third of the grant as our ROE for 2011 was (5.3)% and (iii) assumes a vesting of 100% for the remaining two-thirds of the grant. | |
(9) | Reflects RSUs granted in 2011, which vest in one-third increments on March 21, 2012, 2013 and 2014. | |
(10) | Reflects options granted to Mr. Cavoores when he was solely a member of the Board. |
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(11) | In the case of Mr. Cavoores, effective January 1, 2012, he has forfeited the entire amount granted in 2010 and 2011 due to his departure as an executive prior to the vesting date. |
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||||||||
Contributions in | Contributions in | Earnings | Withdrawals/ | Balance | ||||||||||||||||
Name | Last FY ($) | Last FY ($) | in Last FY ($) | Distributions ($) | at Last FYE ($) | |||||||||||||||
Mario Vitale | 0 | 30,300(1 | ) | 0 | 0 | 30,300 |
(1) | The amount is also reflected in the “All Other Compensation” column of the Summary Compensation Table. |
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares | Value | Shares | Value | |||||||||||||
Acquired on | Realized on | Acquired on | Realized on | |||||||||||||
Name | Exercise (#) | Exercise ($) | Vesting (#) | Vesting ($)(1) | ||||||||||||
Christopher O’Kane | — | — | 78,974 | $ | 2,313,938 | |||||||||||
Richard Houghton | — | — | 22,355 | $ | 655,002 | |||||||||||
Mario Vitale | — | — | — | — | ||||||||||||
Rupert Villers | — | — | — | — | ||||||||||||
John Cavoores | — | — | — | — |
(1) | In respect of Messrs. O’Kane and Mr. Houghton, their 2007 and 2008 performance shares vested on the date on which we filed our annual report onForm 10-K for the fiscal year ended December 31, 2010 (February 25, 2011). The market value was calculated based on the closing price of $29.30 on February 25, 2011. The amounts reflect the amount vested (gross of tax). |
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Christopher O’Kane(1) | Richard Houghton(1) | Mario Vitale | ||||||||||||||||||||||
Value of | Value of | Value of | ||||||||||||||||||||||
Total Cash | Accelerated | Total Cash | Accelerated | Total Cash | Accelerated | |||||||||||||||||||
Payout | Equity Awards | Payout | Equity Awards | Payout | Equity Awards | |||||||||||||||||||
Termination without Cause (or other than for Cause) or for Good Reason(2) | $ | 4,916,567 | (6) | $ | — | $ | 1,463,473 | (8) | $ | — | $ | 1,650,000 | (10) | $ | 2,249,665 | (11) | ||||||||
Death(3) | $ | 1,480,785 | $ | 3,582,429 | $ | 593,517 | $ | 1,112,868 | $ | 2,400,000 | $ | 2,249,665 | ||||||||||||
Disability(4) | $ | — | $ | 3,582,429 | $ | — | $ | 1,112,868 | $ | 3,877,682 | $ | 2,249,665 | ||||||||||||
Change in Control(5) | $ | 4,916,567 | (6) | $ | 6,003,225 | (7) | $ | 1,463,473 | (8) | $ | 1,775,739 | (9) | $ | 1,650,000 | (10) | $ | 2,809,159 | (12) |
(1) | The calculation for the payouts for Messrs. O’Kane and Houghton were converted from British Pounds into U.S. Dollars at the average exchange rate of $1.6041 to £1 for 2011. | |
(2) | For a description of termination provisions, see “Narrative Description of Summary Compensation and Grants of Plan-Based Awards — Employment-Related Agreements” above. | |
(3) | In respect of death, the executives are entitled to the pro rated annual bonus based on the actual bonus earned for the year in which the date of termination occurs. This amount represents 100% of the bonus potential for 2011. In addition, the amount of performance share awards that have already met their vesting criteria but have not vested yet would vest and be issued. Any options granted would continue to vest under the terms of their agreement. Similarly, RSUs will accelerate and vest. Mr. Vitale would also be entitled to $1.5 million in proceeds payable pursuant to his supplemental life insurance benefit. | |
(4) | The amount of performance share awards that have already met their vesting criteria but have not vested yet would vest and be issued. Any options granted would continue to vest under the terms of their agreement. Similarly, RSUs will accelerate and vest. In the case of Mr. Vitale, he receives a pro rated annual bonus, which for purposes of this calculation represents 100% of the bonus potential and he would be entitled to $2,977,682 in benefits payable pursuant to his supplemental disability benefits. This amount is comprised of two separate policies and includes cover for temporary and permanent total disability benefits as well as catastrophic disability benefits. The amount payable under this policy has been discounted by a factor of 1.63% being the pro-rated rate between the 5-year and 10-year U.S. Treasury yield curve rates at December 31, 2011. | |
(5) | The total cash payout and the acceleration of vesting are provided only if the employment of the above named executive is terminated by the Company without Cause or by the executive with Good Reason (as described above under “Employment-Related Agreements” and as defined in each of the individual’s respective employment agreement) within the six-month period prior to a change in control or within a two-year period after a change in control. The occurrence of any of the following events constitutes a “Change in Control”: | |
(A) the sale or disposition, in one or a series of related transactions, of all or substantially all, of the assets of the Company to any person or group (other than (x) any subsidiary of the Company or (y) any entity that is a holding company of the Company (other than any holding company which became a holding company in a transaction that resulted in a Change in Control) or any subsidiary of such holding company); | ||
(B) any person or group is or becomes the beneficial owner, directly or indirectly, of more than 30% of the combined voting power of the voting shares of the Company (or any entity which is the |
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beneficial owner of more than 50% of the combined voting power of the voting shares of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; excluding, however, the following: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by a person or group if immediately after such acquisition a person or group who is a shareholder of the Company on the effective date of our 2003 Share Incentive Plan continues to own voting power of the voting shares of the Company that is greater than the voting power owned by such acquiring person or group; | ||
(C) the consummation of any transaction or series of transactions resulting in a merger, consolidation or amalgamation, in which the Company is involved, other than a merger, consolidation or amalgamation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity), in the same proportion as immediately prior to the transaction(s), more than 50% of the combined voting power of the voting shares of the Company or such surviving entity outstanding immediately after such merger, consolidation or amalgamation; or | ||
(D) a change in the composition of the Board such that the individuals who, as of the effective date of the 2003 Share Incentive Plan, constitute the Board of Directors (such Board of Directors shall be referred to for purposes of this section only as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board of Directors subsequent to the Effective Date, whose election, or nomination for election, by a majority of those individuals who are members of the Board of Directors and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and, provided further, however, that any such individual whose initial assumption of office occurs as the result of or in connection with either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of an entity other than the Board of Directors shall not be so considered as a member of the Incumbent Board. | ||
(6) | Represents the lesser of the target annual incentive for the year in which termination occurs and the average of the bonus received by Mr. O’Kane for the previous three years ($1,074,747) plus twice the sum of the highest salary paid during the term of the agreement ($846,163) and the average bonus actually earned during three years immediately prior to termination ($1,074,747). Mr. O’Kane’s agreement includes provisions with respect to the treatment of “parachute payments” under the U.S. Internal Revenue Code. As Mr. O’Kane is currently not a U.S. taxpayer, the above amounts do not reflect the impact of such provisions. | |
(7) | Represents the acceleration of vesting of the entire grant of the 2009 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test), the 2010 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test) and the 2011 performance shares (other than the 1/3 of the grant which will be foreited on vesting for non-achievement of the 2011 performance test). For the portion 2009 performance shares which have exceeded the performance threshold, we have assumed the greater percentage amount for calculation purposes. With respect to performance shares, the value is based on the closing price of our shares on December 30, 2011. The amounts do not include the (i) 2003 options as they have fully vested on December 31, 2009, (ii) 2005 options, as the performance targets were not met and the options were forfeited, (iii) 2005 performance share awards as the performance targets were not met and the performance shares were forfeited, (iv) 2004 options as the earned portion has vested and any remaining unearned portions of the grant were forfeited due to non-achievement of performance targets, (v) 2006 options as the earned portions have vested and any remaining unearned portions of the grant were forfeited due to non-achievement of performance tests and (vi) the 2007 options as those have vested. | |
(8) | Represents the lesser of the target annual incentive for the year in which termination occurs and average of Mr. Houghton’s bonuses for the previous three years ($434,978), plus the sum of the highest salary |
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paid during the term of the agreement ($593,517) and the average bonus actually earned during the three years immediately prior to termination ($434,978). | ||
(9) | Represents the acceleration of vesting of the entire grant of the 2009 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test), the 2010 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test) and the 2011 performance shares (other than the 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test). For the portion of the 2009 performance shares which have exceeded the performance threshold, we have assumed the greater percentage amount for calculation purposes. The amounts do not include the 2007 options as those have vested. With respect to performance shares, the value is based on the closing price of our shares on December 30, 2011. | |
(10) | Represents a lump sum equal to Mr. Vitale’s current base salary ($750,000) and the lesser of the target annual incentive for the year in which termination occurs and the average of the bonus received by Mr. Vitale for the previous three years ($900,000). In respect of Mr. Vitale who joined us in 2011, we have used his guaranteed bonus for purposes of this calculation. | |
(11) | Represents value of the entire grant of RSUs, based on the closing price of our shares on December 30, 2011, which will continue to vest on their original vesting dates. | |
(12) | Represents the acceleration of vesting of the entire grant of the 2011 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test) as well as the RSUs granted to Mr. Vitale on joining us. With respect to performance shares and RSUs, the value is based on the closing price of our shares on December 30, 2011. |
Rupert Villers(1) | John Cavoores | |||||||||||||||
Value of | Value of | |||||||||||||||
Accelerated | Accelerated | |||||||||||||||
Total Cash | Equity | Total Cash | Equity | |||||||||||||
Payout | Awards | Payout | Awards | |||||||||||||
Termination without Cause (or other than for Cause) or for Good Reason(2) | $ | 1,654,597 | (6) | $ | — | $ | 1,155,000 | (8) | $ | — | ||||||
Death(3) | $ | 561,435 | $ | 757,079 | $ | 600,000 | $ | 133,746 | ||||||||
Disability(4) | $ | — | $ | 757,079 | $ | 600,000 | $ | 133,746 | ||||||||
Change in Control(5) | $ | 1,654,597 | (6) | $ | 1,877,154 | (7) | $ | 1,155,000 | (8) | $ | 1,172,811 | (9) |
(1) | The calculation for the payouts for Mr. Villers was converted from British Pounds into U.S. Dollars at the average exchange rate of $1.6041 to £1 for 2011. | |
(2) | For a description of termination provisions, see “Narrative Description of Summary Compensation and Grants of Plan-Based Awards — Employment-Related Agreements” above. | |
(3) | In respect of death, the executives are entitled to the pro rated annual bonus based on the actual bonus earned for the year in which the date of termination occurs. This amount represents 100% of the bonus potential for 2011. In addition, the amount of performance share awards that have already met their vesting criteria but have not vested yet would vest and be issued. Any options granted would continue to vest under the terms of their agreement. Similarly, RSUs will accelerate and vest. | |
(4) | The amount of performance share awards that have already met their vesting criteria but have not vested yet would vest and be issued. Any options granted would continue to vest under the terms of their agreement. Similarly, RSUs will accelerate and vest. In the case of Mr. Cavoores, he also receives a pro rated annual bonus, which for purposes of this calculation represents 100% of the bonus potential. | |
(5) | Same as Footnote 5 in table above. | |
(6) | Represents lesser of the target annual incentive for the year in which termination occurs and the average of the annual incentive awards received by Mr. Villers for the previous two years, as Mr. Villers joined us in 2009 ($561,435) plus the sum of the highest salary paid during the term of the agreement ($505,292) and the average bonus actually earned during the two years immediately prior to termination ($587,871). |
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(7) | Represents the acceleration of vesting of the entire grant of the 2009 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test), the 2010 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test) and the 2011 performance shares (other than the 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test). For the portion of the 2009 performance shares which have exceeded the performance threshold, we have assumed the greater percentage amount for calculation purposes. With respect to performance shares, the value is based on the closing price of our shares on December 30, 2011. | |
(8) | Represents a lump sum payment equal to Mr. Cavoores’ current base salary ($480,000), the lesser of the target annual incentive for the year in which termination occurs and the average of the bonus received by Mr. Cavoores for the previous year, as Mr. Cavoores began serving in his capacity as Co-CEO of Aspen Insurance ($75,000) plus the sum equal to his bonus potential ($600,000). | |
(9) | Represents the acceleration of vesting of the entire grant of the 2010 performance shares (other than 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test) and the 2011 performance shares (other than the 1/3 of the grant which will be forfeited on vesting for non-achievement of the 2011 performance test). The amounts do not include the 2007 options as those have vested. |
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Fees Earned | 2011 | 2011 | ||||||||||||||||||
or Paid in | Stock | Option | All Other | |||||||||||||||||
Cash | Awards | Awards | Compensation | Total | ||||||||||||||||
Name | ($)(1) | ($)(2) | ($) | ($) | ($) | |||||||||||||||
Liaquat Ahamed(3) | $ | 90,000 | $ | 97,979 | — | — | $ | 187,979 | ||||||||||||
Matthew Botein(4) | $ | 38,668 | $ | 97,979 | — | — | $ | 136,647 | ||||||||||||
Richard Bucknall(5) | $ | 168,808 | $ | 97,979 | — | — | $ | 266,787 | ||||||||||||
Ian Cormack(6) | $ | 158,706 | $ | 97,979 | — | — | $ | 256,685 | ||||||||||||
Heidi Hutter(7) | $ | 184,251 | $ | 97,979 | — | — | $ | 282,230 | ||||||||||||
Glyn Jones(8) | $ | 320,820 | $ | 489,955 | — | — | $ | 810,775 | ||||||||||||
David Kelso(9) | $ | 41,666 | — | — | — | $ | 41,666 | |||||||||||||
Peter O’Flinn(10) | $ | 130,000 | $ | 97,979 | — | — | $ | 227,979 | ||||||||||||
Albert Beer(11) | $ | 90,000 | $ | 97,979 | — | — | $ | 187,979 | ||||||||||||
Ron Pressman(12) | $ | 6,164 | — | $ | 6,164 |
(1) | Effective July 2007, for directors who are paid for their services to Aspen Holdings in British Pounds rather than U.S. Dollars such as Messrs. Bucknall and Cormack, their compensation is converted at an exchange rate of $1.779:£1 for payment in British Pounds. Similarly, for Heidi Hutter, who is paid in British Pounds for her services to AMAL, her compensation for such services is converted at the same exchange rate of $1.779:£1 for payment in U.S. Dollars. For fees denominated and paid to directors in British Pounds such as Mr. Jones for his fee of £200,000, Mr. Bucknall, for his services to AMAL and Aspen U.K., and Mr. Cormack for his services to Aspen U.K. for reporting purposes, an exchange rate of $1.6041:£1 has been used for 2011, the average rate of exchange. | |
(2) | Consists of RSUs. Valuation is based on the grant date fair values of the awards calculated in accordance with FASB ASC Topic 718, without regard to forfeiture assumptions. Please refer to Note 16 of our consolidated financial statements for the assumptions made with respect to these awards. | |
(3) | Represents the annual board fee of $50,000, $30,000 attendance fee and $10,000 for serving as the Chair of the Investment Committee. Mr. Ahamed holds 12,849 ordinary shares, which includes the RSUs granted on February 9, 2011 that have vested and are issued. | |
(4) | Represents a pro rata amount of the annual board fee of $50,000 through July 27, 2011, Mr. Botein’s resignation date and $10,000 attendance fee. Mr. Botein holds 11,551 ordinary shares, which includes 1,393 ordinary shares of the 3,344 restricted share units granted on February 9, 2011 which have vested and are issued. Mr. Botein resigned from the Board effective July 27, 2011. | |
(5) | Represents the annual board fee of $50,000, $30,000 attendance fee, $10,000 for serving on the Audit Committee, $15,000 for serving as the Chair of the Compensation Committee, the pro rata amount of the annual fee of $10,000 (through May 18, 2011) and the pro rata amount of the annual fee of £20,000 (commencing May 18, 2011) for serving as director of Aspen U.K. and £25,000 for serving as director of AMAL. Mr. Bucknall holds 19,002 ordinary shares, which includes the RSUs granted on February 9, 2011 that have vested and are issued. | |
(6) | Represents the annual board fee of $50,000, $30,000 attendance fee, $30,000 fee for serving as the Audit Committee Chairman, the pro rata amount of the annual fee of $10,000 (through May 18, 2011) and the pro rata amount of the annual fee of £20,000 (commencing May 18, 2011) for serving on the Board of Aspen U.K. and $25,000 for serving as the Chair of the Audit Committee of Aspen U.K. Mr. Cormack holds 16,017 ordinary shares, which includes the RSUs granted on February 9, 2011 which have vested and are issued. Mr. Cormack holds a total of 45,175 vested options as at December 31, 2011. | |
(7) | Represents the annual board fee of $50,000, $30,000 attendance fee, $10,000 for serving as a member of the Audit Committee, $15,000 for serving as the Chair of the Risk Committee, the pro rata amount of the annual fee of $10,000 (through May 18, 2011) and the pro rata amount of the annual fee of £20,000 (commencing May 18, 2011) for serving on the Board of Aspen U.K. and £30,000 for serving as the Chair of AMAL. Eighty percent of the total compensation is paid to The Black Diamond Group LLC, of which Ms. Hutter is |
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the Chief Executive Officer. Ms. Hutter holds a total of 85,925 vested options as at December 31, 2011. Ms. Hutter (including the awards held by The Black Diamond Group) holds 18,189 ordinary shares, which includes the RSUs granted on February 9, 2011 that have vested and are issued. | ||
(8) | Represents Mr. Jones’ annual fee of £200,000. Mr. Jones holds 55,281 ordinary shares. Mr. Jones also holds a total of 2,012 vested options as at December 31, 2011. | |
(9) | Represents the pro rata amount of the annual board fee of $50,000, $5,000 attendance fee, the pro rata amount of the annual fee of $10,000 for serving as a member of the Audit Committee and a payment of $16,666 made in lieu of RSUs on resignation. Mr. Kelso holds 12,503 ordinary shares. Mr. Kelso resigned from the Board effective April 28, 2011. | |
(10) | Represents the annual board fee of $50,000, $30,000 attendance fee, $10,000 for serving as a member of the Audit Committee, $10,000 for acting as Chair of the Corporate Governance and Nominating Committee and $30,000 for serving on the Board of Aspen Bermuda. Mr. O’Flinn holds 10,089 ordinary shares, which includes the RSUs granted on February 9, 2011 that have vested and are issued. | |
(11) | Represents the annual board fee of $50,000, $30,000 attendance fee and $10,000 for serving as a member of the Audit Committee. Mr. Beer holds 3,344 ordinary shares which represent the RSUs granted on February 9, 2011 that have vested and are issued. | |
(12) | Mr. Pressman was appointed to the Board effective November 17, 2011. As a result, Mr. Pressman was paid the pro rata amount of the annual board fee of $50,000. |
• | Audit Committee Chair — increase from $25,000 to $30,000 | |
• | Compensation Committee Chair — increase from $5,000 to $15,000 | |
• | Risk Committee Chair — increase from $5,000 to $15,000 | |
• | Corporate Governance and Nominating Committee Chair — increase from $5,000 to $10,000 | |
• | Investment Committee Chair — increase from $5,000 to $10,000 |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
• | each person known by us to beneficially own approximately 5% or more of our outstanding ordinary shares; | |
• | each of our directors; | |
• | each of our named executive officers; and | |
• | all of our executive officers and directors as a group. |
Number of | Percentage of | |||||||
Ordinary | Ordinary Shares | |||||||
Name and Address of Beneficial Owner(1) | Shares(2) | Outstanding(2) | ||||||
BlackRock, Inc.(3) | 5,401,646 | 7.63 | % | |||||
40 East 52nd Street New York, NY 10022 U.S.A. | ||||||||
Greenlight Capital(4) | 4,493,349 | 6.35 | % | |||||
140 East 45th Street, 24th Floor New York, NY 10017 U.S.A. | ||||||||
Royce & Associates LLC(5) | 3,571,332 | 5.05 | % | |||||
745 Fifth Avenue New York, NY 10151 U.S.A. | ||||||||
Norges Bank (Central Bank of Norway)(6) | 3,520,716 | 4.98 | % | |||||
Bankplassen 2, P.O. Box 1179 Sentrum NO 0107, Oslo, Norway | ||||||||
Glyn Jones(7) | 57,293 | * | ||||||
Christopher O’Kane(8) | 1,356,572 | 1.88 | % | |||||
Richard Houghton(9) | 70,284 | * | ||||||
Julian Cusack(10) | 292,889 | * | ||||||
Mario Vitale(11) | 28,298 | * | ||||||
John Cavoores(12) | 11,521 | * | ||||||
Rupert Villers(13) | 31,251 | * | ||||||
Liaquat Ahamed(14) | 12,849 | * | ||||||
Richard Bucknall(15) | 19,002 | * | ||||||
Ian Cormack(16) | 61,192 | * | ||||||
Heidi Hutter(17) | 104,114 | * | ||||||
Peter O’Flinn(18) | 10,089 | * | ||||||
Albert Beer(19) | 3,344 | * | ||||||
Ronald Pressman | — | * | ||||||
All directors and executive officers as a group (21 persons) | 2,692,907 | 3.68 | % |
* | Less than 1% |
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(1) | Unless otherwise stated, the address for each director and officer isc/o Aspen Insurance Holdings Limited, 141 Front Street, Hamilton HM 19, Bermuda. | |
(2) | Represents the outstanding ordinary shares as at February 15, 2012, except for unaffiliated shareholders, whose information is disclosed as of the dates of their Schedule 13G noted in their respective footnotes. With respect to the directors and officers, includes ordinary shares that may be acquired within 60 days of February 15, 2012 upon (i) the exercise of vested options and (ii) awards issuable for ordinary shares, in each case, held only by such person. The percentage of ordinary shares outstanding reflects the amount outstanding as at February 15, 2012. However, the beneficial ownership for non-affiliates is as of the earlier dates referenced in their respective notes below. Accordingly, the percentage ownership may have changed following such Schedule 13G filings. | |
Our bye-laws generally provide for voting adjustments in certain circumstances. | ||
(3) | As filed with the SEC on Schedule 13G on February 13, 2012 by BlackRock, Inc. | |
(4) | Based upon information contained in the Scheduled 13G filed on February 14, 2012 by (i) Greenlight Capital, L.L.C.; (ii) Greenlight Capital, Inc.; (iii) DME Management GP, LLC; (iv) DME Advisors, LP; (v) DME Capital Management, LP (“DME CM”); (vi) DME Advisors GP, LLC; and (vii) David Einhorn (collectively, the “Greenlight Entities”). This number consists of: (a) an aggregate of 1,496,864 shares of common stock held for the accounts of Greenlight Fund and Greenlight Qualified; (b) 1,830,508 shares of common stock held for the account of Greenlight Offshore; (c) 326,869 shares of common stock held for the account of Greenlight Gold; (d) 171,930 shares of common stock held for the account Greenlight Gold Offshore; and (e) 667,178 shares of common stock held by the Managed Account. Greenlight LLC is the general partner for Greenlight Fund and Greenlight Qualified. DME CM acts as investment manager for Greenlight Gold Offshore. DME GP is the general partner of DME Advisors and DME CM. The prinicipal business office of each of the Greenlight Entities is 140 East 45th Street, 24th Floor, New York, New York 10017. Pursuant toRule 13d-4, each of the Greenlight Entities disclaims all such beneficial ownership except to the extent of their pecuniary interest in any shares of common stock, if applicable. | |
(5) | As filed with the SEC on Schedule 13G by Royce & Associates LLC on January 24, 2012. | |
(6) | As filed with the SEC on Schedule 13G by Norges Bank on July 5, 2011. | |
(7) | Represents 55,281 ordinary shares and 2,012 vested options. | |
(8) | Includes 72,910 ordinary shares, 1,179,140 ordinary shares issuable upon exercise of vested options, and 104,522 performance shares that vest upon filing of this report and are issuable, held by Mr. O’Kane. | |
(9) | Represents 16,131 ordinary shares, 12,158 ordinary shares issuable upon exercise of vested options, and 34,840 2009 performance shares and 7,155 2010 performance shares that vest upon filing of this report and are issuable, held by Mr. Houghton and his wife. | |
(10) | Represents 14,962 ordinary shares, 225,666 ordinary shares issuable upon exercise of vested options, and 52,261 performance shares that vest upon this filing and are issuable, held by Mr. Cusack. | |
(11) | Represents 28,298 RSUs, held by Mr. Vitale. | |
(12) | Represents 9,509 ordinary shares and 2,012 ordinary shares issuable upon exercise of vested options, held by Mr. Cavoores. | |
(13) | Represents 10,347 ordinary shares and 20,904 performance shares that vest upon filing of this report and are issuable, held by Mr. Villers. | |
(14) | Represents 12,849 ordinary shares held by Mr. Ahamed. | |
(15) | Represents 19,002 ordinary shares held by Mr. Bucknall. | |
(16) | Represents 16,017 ordinary shares and 45,175 ordinary shares issuable upon exercise of vested options held by Mr. Cormack. | |
(17) | Ms. Hutter, one of our directors, is the beneficial owner of 3,640 ordinary shares. As Chief Executive Officer of The Black Diamond Group, LLC, Ms. Hutter has shared voting and investment power over the 14,549 ordinary shares beneficially owned by The Black Diamond Group, LLC The business address of Ms. Hutter isc/o Black Diamond Group, 515 Congress Avenue, Suite 2220, Austin, Texas 78701. Ms. Hutter also holds vested options exercisable for 85,925 ordinary shares. |
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(18) | Represents 10,089 ordinary shares held by Mr. O’Flinn. | |
(19) | Represents 3,344 ordinary shares held by Mr. Beer. |
A | B | C | ||||||||||
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Weighted-Average | Future Issuance Under | |||||||||||
Number of Securities to | Exercise of Price of | Equity Compensation | ||||||||||
Be Issued Upon Exercise | Outstanding | Plans (Excluding | ||||||||||
of Outstanding Options, | Options, Warrants and | Securities Reflected in | ||||||||||
Plan Category | Warrants and Rights | Rights(1) | Column A) | |||||||||
Equity compensation plans approved by security holders | 4,876,125 | $ | 10.14 | 1,797,677 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 4,876,125 | $ | 10.14 | 1,797,677 |
(1) | The weighted average exercise price calculation includes option exercise prices between $16.20 and $27.52 plus outstanding RSUs and performance shares which have a $Nil exercise price. |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence |
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Item 14. | Principal Accounting Fees and Services |
Twelve Months Ended | Twelve Months Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions) | ||||||||
Audit Fees(a) | $ | 2.4 | $ | 2.5 | ||||
Audit-Related Fees(b) | 0.4 | 0.2 | ||||||
Tax Fees(c) | — | 0.2 | ||||||
All Other Fees(d) | — | — | ||||||
Total Fees | $ | 2.8 | $ | 2.9 | ||||
�� |
(a) | Audit fees related to the audit of the Company’s financial statements for the twelve months ended December 31, 2011 and 2010, the review of the financial statements included in our quarterly reports onForm 10-Q during 2011 and 2010 and for services that are normally provided by KPMG in connection with statutory and regulatory filings for the relevant fiscal years. | |
(b) | Audit-related fees are fees related to assurance and related services for the performance of the audit or review of the Company’s financial statements (other than the audit fees disclosed above). | |
(c) | Tax fees are fees related to tax compliance, tax advice and tax planning services. | |
(d) | All other fees relate to fees billed to the Company by KPMG for all other non-audit services rendered to the Company. |
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Item 15. | Exhibits, Financial Statement Schedules |
Exhibit | ||||
Number | Description | |||
3 | .1 | Certificate of Incorporation and Memorandum of Association (incorporated herein by reference to exhibit 3.1 to the Company’s 2003 Registration Statement onForm F-1 (RegistrationNo. 333-110435)) | ||
3 | .2 | Amendments to the Memorandum of Association (incorporated by reference to exhibit 3.2 of the Company’s Current Report onForm 8-K filed on May 4, 2009) | ||
3 | .3 | Amended and Restated Bye-laws (incorporated herein by reference to exhibit 3.1 to the Company’s Current Report onForm 8-K filed on May 4, 2009) | ||
4 | .1 | Specimen Ordinary Share Certificate (incorporated herein by reference to exhibit 4.1 to the Company’s 2003 Registration Statement onForm F-1 (RegistrationNo. 333-110435)) | ||
4 | .2 | Amended and Restated Instrument Constituting Options to Subscribe for Shares in Aspen Insurance Holdings Limited, dated September 30, 2005 (incorporated herein by reference to exhibit 4.1 to the Company’s Current Report onForm 8-K filed on September 30, 2005) | ||
4 | .3 | Indenture between Aspen Insurance Holdings Limited and Deutsche Bank Trust Company Americas, as trustee dated as of August 16, 2004 (incorporated herein by reference to exhibit 4.3 to the Company’s 2004 Registration Statement onForm F-1 (RegistrationNo. 333-119-314)) | ||
4 | .4 | First Supplemental Indenture by and between Aspen Insurance Holdings Limited, as issuer and Deutsche Bank Trust Company Americas, as trustee dated as of August 16, 2004 (incorporated herein by reference to exhibit 4.4 to the Company’s 2004 Registration Statement onForm F-1 (RegistrationNo. 333-119-314)) | ||
4 | .5 | Second Supplemental Indenture, dated December 10, 2010, to the Base Indenture, dated as of August 16, 2004, between the Company and Deutsche Bank Trust Company Americas (incorporated herein by reference to exhibit 4.1 to the Company’s Current Report onForm 8-K filed on December 10, 2010). | ||
4 | .6 | Certificate of Designations of the Company’s Perpetual PIERS, dated December 12, 2005 (incorporated herein by reference to exhibit 4.1 to the Company’s Current Report onForm 8-K filed on December 13, 2005) | ||
4 | .7 | Specimen Certificate for the Company’s Perpetual PIERS (incorporated herein by reference to the form of which is in exhibit 4.1 to the Company’s Current Report onForm 8-K filed on December 13, 2005) | ||
4 | .8 | Certificate of Designations of the Company’s Preference Shares, dated December 12, 2005 (incorporated herein by reference to exhibit 4.3 to the Company’s Current Report onForm 8-K filed on December 13, 2005) | ||
4 | .9 | Specimen Certificate for the Company’s Preference Shares (incorporated herein by reference to the form of which is in exhibit 4.3 to the Company’s Current Report onForm 8-K filed on December 13, 2005) | ||
4 | .10 | Form of Certificate of Designations of the Company’s Perpetual Preference Shares, dated November 15, 2006 (incorporated herein by reference to exhibit 4.1 to the Company’s Current Report onForm 8-K filed on November 15, 2006) |
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Exhibit | ||||
Number | Description | |||
4 | .11 | Specimen Certificate for the Company’s Perpetual Preference Shares, (incorporated herein by reference to the form of which is in exhibit 4.1 to the Company’s Current Report onForm 8-K filed on November 15, 2006) | ||
4 | .12 | Form of Replacement Capital Covenant, dated November 15, 2006 (incorporated herein by reference to exhibit 4.3 to the Company’s Current Report onForm 8-K filed on November 15, 2006) | ||
10 | .1 | Amended and Restated Shareholders’ Agreement, dated as of September 30, 2003 among the Company and each of the persons listed on Schedule A thereto (incorporated herein by reference to exhibit 10.1 to the Company’s 2003 Registration Statement onForm F-1 (RegistrationNo. 333-110435)) | ||
10 | .2 | Third Amended and Restated Registration Rights Agreement dated as of November 14, 2003 among the Company and each of the persons listed on Schedule 1 thereto (incorporated herein by reference to exhibit 10.2 to the Company’s 2003 Registration Statement onForm F-1 (RegistrationNo. 333-110435)) | ||
10 | .3 | Service Agreement dated September 24, 2004 among Christopher O’Kane, Aspen Insurance UK Services Limited and the Company (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K filed on September 24, 2004)* | ||
10 | .4 | Amended and Restated Service Agreement between Rupert Villers and Aspen Insurance UK Services Limited dated January 1, 2011, filed with this report* | ||
10 | .5 | Employment Agreement dated October 27, 2010 between John Cavoores and Aspen Insurance U.S. Services Inc., filed with this report* | ||
10 | .6 | Employment Agreement dated February 25, 2011 between Mario Vitale and Aspen Insurance U.S. Services Inc., filed with this report* | ||
10 | .7 | Appointment Letter between Glyn Jones and Aspen Insurance Holdings Limited, dated April 19, 2007 (incorporated herein by reference to exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q for three months ended March 31, 2007, filed May 9, 2007)* | ||
10 | .8 | Appointment Letter between Glyn Jones and Aspen Insurance Holdings Limited, dated May 6, 2010 (incorporated herein by reference to exhibit 1021 to the Company’s Quarterly Report onForm 10-Q for three months ended March 31, 2010, filed May 7, 2010)* | ||
10 | .9 | Service Agreement dated April 3, 2007 among Richard David Houghton and Aspen Insurance UK Services Limited (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K filed on April 9, 2007)* | ||
10 | .10 | Amendment to Richard David Houghton’s Service Agreement, dated May 13, 2008 (incorporated herein by reference to exhibit 10.3 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2008, filed August 6, 2008)* | ||
10 | .11 | Letter to Richard David Houghton dated April 3, 2007 (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K filed April 9, 2007)* | ||
10 | .12 | Richard David Houghton’s Restricted Share Unit Award Agreement, as amended, effective October 27, 2009 , (incorporated herein by reference to exhibit 10.16 to the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed on February 26, 2010)* | ||
10 | .13 | Aspen Insurance Holdings Limited 2003 Share Incentive Plan, as amended dated February 6, 2008 (incorporated herein by reference to exhibit 10.12 to the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2007, filed on February 29, 2008)* | ||
10 | .14 | Amendment to the Aspen Insurance Holdings Limited Amended 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .15 | 2006 Option Plan for Non-Employee Directors (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed May 26, 2006)* | ||
10 | .16 | Aspen Insurance Holdings Limited 2006 Stock Incentive Plan for Non-Employee Directors, as amended dated March 21, 2007 (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K filed on May 7, 2007)* |
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Exhibit | ||||
Number | Description | |||
10 | .17 | Amendment to the Aspen Insurance Holdings Limited 2006 Stock Incentive Plan for Non-Employee Directors (incorporated herein by reference to exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .18 | Employee Share Purchase Plan, including the International Employee Share Purchase Plan of Aspen Insurance Holdings Limited (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K filed on May 5, 2008)* | ||
10 | .19 | Aspen Insurance Holdings Limited Revised 2008 Sharesave Scheme (incorporated herein by reference to exhibit 10.3 to the Company’s Quarterly Report onForm 10-Q for three months ended March 31, 2010, filed May 7, 2010)* | ||
10 | .20 | Form of Shareholders’ Agreement between the Company and certain employee and/or director shareholders and/or optionholders (incorporated herein by reference to exhibit 4.11 to the Company’s 2005 Registration Statement onForm F-3 (RegistrationNo. 333-122571))* | ||
10 | .21 | Form of First Amendment to Shareholders’ Agreement between the Company and certain employee and/or director shareholders and/or optionholders, dated as of May 4, 2007 (incorporated herein by reference to exhibit 10.3 to the Company’s Current Report onForm 8-K filed on May 7, 2007)* | ||
10 | .22 | Form of Option Agreement relating to initial option grants under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.21 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2004, filed on March 14, 2005)* | ||
10 | .23 | Form of Option Agreement relating to options granted in 2004 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.22 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2004, filed on March 14, 2005)* | ||
10 | .24 | Form of Performance Share Award Agreement relating to grants in 2004 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.23 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2004, filed on March 14, 2005)* | ||
10 | .25 | Form of Option Agreement relating to options granted in 2005 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.24 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2004, filed on March 14, 2005)* | ||
10 | .26 | Form of Performance Share Award Agreement relating to grants in 2005 under the Share Incentive Plan (incorporated herein by reference to exhibit 10.25 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2004, filed on March 14, 2005)* | ||
10 | .27 | Form of letter amendment to the Option Agreements relating to options granted in 2004 and 2005 and Performance Share Award Agreements relating to grants in 2004 and 2005 to certain Bermudian employees (incorporated herein by reference to exhibit 10.26 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2005, filed on November 9, 2005)* | ||
10 | .28 | Form of Option Agreement relating to options granted in 2006 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.24 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2005, filed on March 6, 2006)* | ||
10 | .29 | Form of Performance Share Award Agreement relating to grants in 2006 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.25 to the Company’s Annual Report onForm 10-K for fiscal year ended December 31, 2005, filed on March 6, 2006)* | ||
10 | .30 | Amendment to Form of 2006 Performance Share Award Agreement (incorporated herein by reference to exhibit 10.3 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .31 | Form of Option Agreement relating to options granted in 2007 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2007, filed August 7, 2007)* |
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Exhibit | ||||
Number | Description | |||
10 | .32 | Amendment to the Form of Option Agreement relating to options granted in 2007 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.50 to the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed on February 26, 2010)* | ||
10 | .33 | Form of Performance Share Award relating to performance shares granted in 2007 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2007, filed August 7, 2007)* | ||
10 | .34 | Amendment to Form of 2007 Performance Share Agreement (incorporated herein by reference to exhibit 10.4 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .35 | Form of 2008 Performance Share Agreement (incorporated herein by reference to exhibit 10.4 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2008, filed August 6, 2008)* | ||
10 | .36 | Amendment to the Forms of Performance Share Award Agreements relating to grants in 2007, 2008 and 2009 under the 2003 Share Incentive Plan (incorporated herein by reference to exhibit 10.51 to the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed on February 26, 2010)* | ||
10 | .37 | Form of 2009 Performance Share Agreement (incorporated herein by reference to exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2009, filed August 4, 2009)* | ||
10 | .38 | Form of 2010 Performance Share Award Agreement (incorporated herein by reference to exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for three months ended March 31, 2010, filed May 7, 2010)* | ||
10 | .39 | Form of 2011 Performance Share Award Agreement, dated February 9, 2011, filed with this report* | ||
10 | .40 | Performance Share Award Agreement, dated February 9, 2011, between John Cavoores and Aspen Insurance Holdings Limited, filed with this report* | ||
10 | .41 | Performance Share Award Agreement, dated February 9, 2011, between Rupert Villers and Aspen Insurance Holdings Limited, filed with this report* | ||
10 | .42 | Form of Non-Employee Director Nonqualified Share Option Agreement (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K, filed May 26, 2006)* | ||
10 | .43 | Form of Non-Employee Director Restricted Share Unit Award Agreement (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K, filed on May 7, 2007)* | ||
10 | .44 | Form of 2008 Non-Employee Director Restricted Share Unit Award Agreement (incorporated herein by reference to exhibit 10.5 to the Company’s Quarterly Report onForm 10-Q for six months ended June 30, 2008, filed August 6, 2008)* | ||
10 | .45 | Form of Restricted Share Unit Award Agreement (incorporated herein by reference to exhibit 10.40 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2008, filed on February 26, 2009)* | ||
10 | .46 | Amendment to Form of Restricted Share Unit Award Agreement (U.S. version) (incorporated herein by reference to exhibit 10.5 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .47 | Amendment to Form of Restricted Share Unit Award Agreement (U.S. employees employed outside the U.S.) (incorporated herein by reference to exhibit 10.6 to the Company’s Quarterly Report onForm 10-Q for nine months ended September 30, 2008, filed November 10, 2008)* | ||
10 | .48 | Master Confirmation, dated as of November 10, 2010, between the Company and Barclays Bank plc relating to the accelerated share purchase program, (incorporated herein by reference to Exhibit 10.55 to the Company’s annual report onForm 10-K for the year ended December 31, 2010, filed February 25, 2011) |
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Exhibit | ||||
Number | Description | |||
10 | .49 | Supplemental Confirmation, dated as of November 10, 2010, between the Company and Barclays Bank plc relating to the accelerated share purchase program, (incorporated herein by reference to Exhibit 10.56 to the Company’s annual report onForm 10-K for the year ended December 31, 2010, filed February 25, 2011)** | ||
10 | .50 | Credit Agreement dated as of July 30, 2010, among Aspen Insurance Holdings Limited, various lenders and Barclays Bank plc, as administrative agent (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K filed on August 4, 2010) | ||
10 | .51 | Committed Letter of Credit Facility dated October 11, 2006 between Aspen Insurance Limited and Citibank Ireland Financial Services plc. (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .52 | Insurance Letters of Credit — Master Agreement dated December 15, 2003 between Aspen Insurance Limited and Citibank Ireland Financial Services plc. (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .53 | Pledge Agreement dated January 17, 2006 between Aspen Insurance Limited and Citibank, N.A. (incorporated herein by reference to exhibit 10.3 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .54 | Side Letter relating to the Pledge Agreement, dated January 27, 2006 between Aspen Insurance Limited and Citibank, N.A. (incorporated herein by reference to exhibit 10.4 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .55 | Assignment Agreement dated October 11, 2006 among Aspen Insurance Limited, Citibank, N.A., Citibank Ireland Financial Services plc and The Bank of New York (incorporated herein by reference to exhibit 10.5 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .56 | Letter Agreement dated October 11, 2006 between Aspen Insurance Limited and Citibank Ireland Financial Services plc. (incorporated herein by reference to exhibit 10.6 to the Company’s Current Report onForm 8-K, filed October 13, 2006) | ||
10 | .57 | Amendment to Committed Letter of Credit Facility dated October 29, 2008 between Aspen Insurance Limited and Citibank Europe plc (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed November 4, 2008) | ||
10 | .58 | Amendment to Pledge Agreement dated October 29, 2008 between Aspen Insurance Limited and Citibank Europe plc (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K, filed November 4, 2008) | ||
10 | .59 | Letter of Credit between Aspen Insurance Limited and Citibank Europe plc dated April 29, 2009 (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed on May 4, 2009) | ||
10 | .60 | Letter of Credit between Aspen Insurance Limited and Citibank Europe plc, dated August 12, 2011 (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed on August 15, 2011) | ||
10 | .61 | Amendment to Pledge Agreement between Aspen Insurance Limited and Citibank Europe plc dated August 12, 2011 (incorporated herein by reference to exhibit 10.2 to the Company’s Current Report onForm 8-K, filed on August 15, 2011) | ||
10 | .62 | $200,000,000 Facility Agreement between Aspen Insurance Limited, Aspen Insurance UK Limited and Barclays Bank plc dated October 6, 2009 (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed on October 7, 2009) | ||
10 | .63 | First Amendment Agreement to Multicurrency Letter of Credit Facility dated February 28, 2011 among Aspen Insurance Limited, Aspen Insurance UK Limited and Barclays Bank PLC (incorporated herein by reference to exhibit 10.1 to the Company’s Current Report onForm 8-K, filed on March 1, 2011). | ||
10 | .64 | Supplemental Confirmation, dated as of January 5, 2010, between the Company and Goldman, Sachs & Co. relating to a collared accelerated stock buyback (incorporated herein by reference to exhibit 10.67 to the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed on February 26, 2010)** |
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Exhibit | ||||
Number | Description | |||
10 | .65 | Compromise Agreement, dated February 22, 2012 between Richard David Houghton and Aspen Insurance UK Services Limited, filed with this report* | ||
21 | .1 | Subsidiaries of the Company, filed with this report | ||
23 | .1 | Consent of KPMG Audit Plc, filed with this report | ||
24 | .1 | Power of Attorney for officers and directors of Aspen Insurance Holdings Limited (included on the signature page of this report) | ||
31 | .1 | Officer Certification of Christopher O’Kane, Chief Executive Officer of Aspen Insurance Holdings Limited, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed with this report | ||
31 | .2 | Officer Certification of Richard Houghton, Chief Financial Officer of Aspen Insurance Holdings Limited, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed with this report | ||
32 | .1 | Officer Certification of Christopher O’Kane, Chief Executive Officer of Aspen Insurance Holdings Limited, and Richard Houghton, Chief Financial Officer of Aspen Insurance Holdings Limited, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, submitted with this report | ||
101 | .INS | XBRL Instance Document submitted with this report | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document submitted with this report | ||
101 | .CAL | XBRL Taxonomy Calculation Linkbase Document submitted with this report | ||
101 | .PRE | XBRL Taxonomy Presentation Linkbase Document submitted with this report |
* | This exhibit is a management contract or compensatory plan or arrangement. | |
** | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been separately filed with the SEC. |
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Last(2) | High | Low | Average(3) | |||||||||||||
Month Ended January 31, 2012 | 1.5760 | 1.5760 | 1.5318 | 1.5524 | ||||||||||||
Month Ended December 31, 2011 | 1.5543 | 1.5710 | 1.5516 | 1.5589 | ||||||||||||
Month Ended November 30, 2011 | 1.5704 | 1.6089 | 1.5439 | 1.5800 | ||||||||||||
Month Ended October 31, 2011 | 1.6087 | 1.6130 | 1.5432 | 1.5773 | ||||||||||||
Month Ended September 30, 2011 | 1.5584 | 1.6217 | 1.5343 | 1.5773 | ||||||||||||
Month Ended August 31, 2011 | 1.6250 | 1.6543 | 1.6134 | 1.6359 | ||||||||||||
Year Ended December 31, 2011 | 1.5543 | 1.6707 | 1.5343 | 1.6041 | ||||||||||||
Year Ended December 31, 2010 | 1.5612 | 1.6362 | 1.4334 | 1.5458 | ||||||||||||
Year Ended December 31, 2009 | 1.6170 | 1.6989 | 1.3753 | 1.5670 | ||||||||||||
Year Ended December 31, 2008 | 1.4593 | 2.0335 | 1.4392 | 1.8524 | ||||||||||||
Year Ended December 31, 2007 | 1.9849 | 2.1074 | 1.9205 | 2.0019 | ||||||||||||
Year Ended December 31, 2006 | 1.9589 | 1.9815 | 1.7199 | 1.8436 | ||||||||||||
Year Ended December 31, 2005 | 1.7230 | 1.9291 | 1.7142 | 1.8196 | ||||||||||||
Year Ended December 31, 2004 | 1.9183 | 1.9467 | 1.7663 | 1.8323 | ||||||||||||
Year Ended December 31, 2003 | 1.7902 | 1.7902 | 1.5500 | 1.6450 | ||||||||||||
Year Ended December 31, 2002 | 1.6099 | 1.6099 | 1.4088 | 1.5033 |
(1) | Data obtained from Bloomberg LP. | |
(2) | “Last” is the closing exchange rate on the last business day of each of the periods indicated. | |
(3) | “Average” for the monthly exchange rates is the average of the daily closing exchange rates during the periods indicated. “Average” for the year ended periods is also calculated using daily closing exchange rate during those periods. |
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By: | /s/ Christopher O’Kane |
Signature | Title | |||
/s/ Glyn Jones Glyn Jones | Chairman and Director | |||
/s/ Christopher O’Kane Christopher O’Kane | Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ Richard Houghton Richard Houghton | Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) | |||
/s/ Albert Beer Albert Beer | Director | |||
/s/ Liaquat Ahamed Liaquat Ahamed | Director |
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Signature | Title | |||
/s/ Richard Bucknall Richard Bucknall | Director | |||
/s/ John Cavoores John Cavoores | Director | |||
/s/ Ian Cormack Ian Cormack | Director | |||
/s/ Julian Cusack Julian Cusack | Director | |||
/s/ Heidi Hutter Heidi Hutter | Director | |||
/s/ Peter O’Flinn Peter O’Flinn | Director | |||
/s/ Ronald Pressman Ronald Pressman | Director |
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F-1
Table of Contents
F-2
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KPMG Audit Plc
F-3
Table of Contents
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Revenues | ||||||||||||
Net earned premium | $ | 1,888.5 | $ | 1,898.9 | $ | 1,823.0 | ||||||
Net investment income | 225.6 | 232.0 | 248.5 | |||||||||
Net realized and unrealized investment gains | 30.3 | 50.6 | 11.4 | |||||||||
Change in fair value of derivatives | (59.9 | ) | (0.2 | ) | (8.0 | ) | ||||||
Other (expense)/income | (6.8 | ) | 9.1 | 8.0 | ||||||||
Total Revenues | 2,077.7 | 2,190.4 | 2,082.9 | |||||||||
Expenses | ||||||||||||
Losses and loss adjustment expenses | 1,556.0 | �� | 1,248.7 | 948.1 | ||||||||
Policy acquisition expenses | 347.0 | 328.5 | 334.1 | |||||||||
General, administrative and corporate expenses | 280.2 | 258.6 | 252.4 | |||||||||
Interest on long-term debt | 30.8 | 16.5 | 15.6 | |||||||||
Net realized and unrealized foreign exchange gains/(losses) | 6.7 | (2.2 | ) | (2.0 | ) | |||||||
Total Expenses | 2,220.7 | 1,850.1 | 1,548.2 | |||||||||
(Loss)/Income from operations before income tax | (143.0 | ) | 340.3 | 534.7 | ||||||||
Income tax credit/(expense) | 37.2 | (27.6 | ) | (60.8 | ) | |||||||
Net (Loss)/Income | $ | (105.8 | ) | $ | 312.7 | $ | 473.9 | |||||
Per share data | ||||||||||||
Weighted average number of ordinary share & share equivalents | ||||||||||||
Basic | 70,665,166 | 76,342,632 | 82,698,325 | |||||||||
Diluted | 70,665,166 | 80,014,738 | 85,327,212 | |||||||||
Basic (loss)/earnings per ordinary share adjusted for preference share dividends | $ | (1.82 | ) | $ | 3.80 | $ | 5.82 | |||||
Diluted (loss)/earnings per ordinary share adjusted for preference share dividends | $ | (1.82 | ) | $ | 3.62 | $ | 5.64 | |||||
(1) | The basic and diluted number of ordinary shares for the twelve months ended December 31, 2011 is the same, as the inclusion of dilutive securities in a loss-making period would be anti-dilutive. |
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Table of Contents
CONSOLIDATED BALANCE SHEETS
As at December 31, 2011 and 2010
($ in millions, except share and per share amounts)
December 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Investments | ||||||||
Fixed income maturities, available for sale at fair value (amortized cost — $5,099.7 and $5,120.8) | $ | 5,425.8 | $ | 5,360.4 | ||||
Fixed income maturities, trading at fair value (amortized cost — $380.4 and $388.8) | 394.4 | 406.2 | ||||||
Other investments, equity method | 33.1 | 30.0 | ||||||
Equity securities, available for sale at fair value (cost— $169.8 and $Nil) | 179.5 | — | ||||||
Short-term investments, available for sale at fair value (amortized cost — $298.2 and $286.1) | 298.2 | 286.0 | ||||||
Short-term investments, trading at fair value (amortized cost — $4.1 and $3.7) | 4.1 | 3.7 | ||||||
Total investments | 6,335.1 | 6,086.3 | ||||||
Cash and cash equivalents | 1,239.1 | 1,179.1 | ||||||
Reinsurance recoverable | ||||||||
Unpaid losses | 426.6 | 279.9 | ||||||
Ceded unearned premiums | 87.8 | 62.4 | ||||||
Receivables | ||||||||
Underwriting premiums | 894.4 | 821.7 | ||||||
Other | 69.7 | 67.9 | ||||||
Funds withheld | 90.7 | 83.3 | �� | |||||
Deferred policy acquisition costs | 200.5 | 166.8 | ||||||
Derivatives at fair value | 1.3 | 6.8 | ||||||
Receivable for securities sold | 1.1 | 0.2 | ||||||
Office properties and equipment | 53.9 | 34.8 | ||||||
Tax recoverable | 19.5 | — | ||||||
Other assets | 36.8 | 21.9 | ||||||
Intangible assets | 20.0 | 21.0 | ||||||
Total assets | $ | 9,476.5 | $ | 8,832.1 | ||||
F-5
Table of Contents
CONSOLIDATED BALANCE SHEETS
As at December 31, 2011 and 2010
($ in millions, except share and per share amounts)
December 31, | December 31, | |||||||
2011 | 2010 | |||||||
LIABILITIES | ||||||||
Insurance reserves | ||||||||
Losses and loss adjustment expenses | $ | 4,525.2 | $ | 3,820.5 | ||||
Unearned premiums | 916.1 | 859.0 | ||||||
Total insurance reserves | 5,441.3 | 4,679.5 | ||||||
Payables | ||||||||
Reinsurance premiums | 155.8 | 113.7 | ||||||
Deferred taxation | 18.5 | 49.1 | ||||||
Current taxation | — | 11.1 | ||||||
Accrued expenses and other payables | 187.8 | 238.0 | ||||||
Liabilities under derivative contracts | 2.1 | — | ||||||
Total payables | 364.2 | 411.9 | ||||||
Long-term debt | 499.0 | 498.8 | ||||||
Total liabilities | $ | 6,304.5 | $ | 5,590.2 | ||||
Commitments and contingent liabilities (see Note 18) | — | — | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Ordinary shares: 70,655,698 shares of 0.15144558¢ each (2010 — 70,508,013 ) | 0.1 | 0.1 | ||||||
Preference shares: | ||||||||
4,600,000 5.625% shares of par value 0.15144558¢ each (2010 — 4,600,000) | — | — | ||||||
5,327,500 7.401% shares of par value 0.15144558¢ each (2010 — 5,327,500) | — | — | ||||||
Non-controlling interest | 0.4 | 0.5 | ||||||
Additional paid-in capital | 1,385.0 | 1,388.3 | ||||||
Retained earnings | 1,357.6 | 1,528.7 | ||||||
Accumulated other comprehensive income | 428.9 | 324.3 | ||||||
Total shareholders’ equity | 3,172.0 | 3,241.9 | ||||||
Total liabilities and shareholders’ equity | $ | 9,476.5 | $ | 8,832.1 | ||||
F-6
Table of Contents
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For The Twelve Months Ended December 31, 2011, 2010 and 2009
($ in millions)
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Ordinary shares | ||||||||||||
Beginning and end of the year | $ | 0.1 | $ | 0.1 | $ | 0.1 | ||||||
Preference shares | ||||||||||||
Beginning and end of the year | — | — | — | |||||||||
Non-controlling interest | ||||||||||||
Beginning of the year | 0.5 | — | — | |||||||||
Introductory capital | — | 0.8 | — | |||||||||
Share of net (loss) for the year | (0.1 | ) | (0.3 | ) | — | |||||||
Dividend paid to non-controlling interest | (0.1 | ) | — | — | ||||||||
End of the year | 0.3 | 0.5 | — | |||||||||
Additional paid-in capital | ||||||||||||
Beginning of the year | 1,388.3 | 1,763.0 | 1,754.8 | |||||||||
New ordinary shares issued | 0.8 | 20.3 | 25.1 | |||||||||
Ordinary shares repurchased and cancelled | (8.1 | ) | (407.8 | ) | — | |||||||
Preference shares repurchased and cancelled | — | — | (34.1 | ) | ||||||||
Share-based compensation | 4.0 | 12.8 | 17.2 | |||||||||
End of the year | 1,385.0 | 1,388.3 | 1,763.0 | |||||||||
Retained earnings | ||||||||||||
Beginning of the year | 1,528.7 | 1,285.0 | 884.7 | |||||||||
Net (loss)/income for the year | (105.8 | ) | 312.7 | 473.9 | ||||||||
Dividends on ordinary shares | (42.5 | ) | (46.5 | ) | (49.8 | ) | ||||||
Dividends on preference shares | (22.8 | ) | (22.8 | ) | (23.8 | ) | ||||||
Share of net loss due to non-controlling interest | 0.1 | 0.3 | — | |||||||||
End of the year | 1,357.7 | 1,528.7 | 1,285.0 | |||||||||
Accumulated other comprehensive income: | ||||||||||||
Cumulative foreign currency translation adjustments, net of taxes: | ||||||||||||
Beginning of the year | 113.4 | 103.4 | 87.6 | |||||||||
Change for the year, net of income tax | 10.8 | 10.0 | 15.8 | |||||||||
End of the year | 124.2 | 113.4 | 103.4 | |||||||||
Loss on derivatives, net of taxes: | ||||||||||||
Beginning of the year | (1.0 | ) | (1.2 | ) | (1.4 | ) | ||||||
Reclassification to interest payable | 0.3 | 0.2 | 0.2 | |||||||||
End of the year | (0.7 | ) | (1.0 | ) | (1.2 | ) | ||||||
Unrealized appreciation on investments, net of taxes: | ||||||||||||
Beginning of the year | 211.9 | 155.1 | 53.3 | |||||||||
Change for the year, net of taxes | 93.5 | 56.8 | 101.8 | |||||||||
End of the year | 305.4 | 211.9 | 155.1 | |||||||||
Total accumulated other comprehensive income, net of taxes | 428.9 | 324.3 | 257.3 | |||||||||
Total shareholders’ equity | $ | 3,172.0 | $ | 3,241.9 | $ | 3,305.4 | ||||||
F-7
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For The Twelve Months Ended December 31, 2011, 2010 and 2009
($ in millions)
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net (loss)/income | $ | (105.8 | ) | $ | 312.7 | $ | 473.9 | |||||
Other comprehensive income, net of taxes: | ||||||||||||
Available for sale investments: | ||||||||||||
Reclassification adjustment for net realized (gains)/losses on investments included in net income | (16.6 | ) | (21.0 | ) | 3.8 | |||||||
Change in net unrealized gains on available for sale securities held | 110.1 | 77.8 | 98.0 | |||||||||
Amortization of loss on derivative contract | 0.3 | 0.2 | 0.2 | |||||||||
Change in foreign currency translation adjustment | 10.8 | 10.0 | 15.8 | |||||||||
Other comprehensive income | 104.6 | 67.0 | 117.8 | |||||||||
Comprehensive (loss)/income | $ | (1.2 | ) | $ | 379.7 | $ | 591.7 | |||||
F-8
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended December 31, 2011, 2010 and 2009
($ in millions)
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net (loss)/income | $ | (105.8 | ) | $ | 312.7 | $ | 473.9 | |||||
Income/(loss) due to non-controlling interest | 0.1 | (0.3 | ) | — | ||||||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||||||
Depreciation and amortization | 28.1 | 21.4 | 10.5 | |||||||||
Share-based compensation | 4.0 | 12.8 | 17.2 | |||||||||
Net realized and unrealized investment (gains) | (30.3 | ) | (50.6 | ) | (11.4 | ) | ||||||
Net realized investment (gains) included in net investment income | — | — | (19.6 | ) | ||||||||
Loss on derivative contracts | 0.3 | 0.2 | 0.2 | |||||||||
Changes in: | ||||||||||||
Insurance reserves: | ||||||||||||
Losses and loss adjustment expenses | 700.2 | 509.2 | 171.5 | |||||||||
Unearned premiums | 60.3 | (42.8 | ) | 96.9 | ||||||||
Reinsurance recoverables: | ||||||||||||
Unpaid losses | (146.6 | ) | 40.0 | (38.6 | ) | |||||||
Ceded unearned premiums | (25.2 | ) | 39.5 | (57.5 | ) | |||||||
Other receivables | (1.8 | ) | — | — | ||||||||
Accrued investment income and other receivables | — | (3.1 | ) | (17.6 | ) | |||||||
Deferred policy acquisition costs | (33.8 | ) | (2.3 | ) | (15.8 | ) | ||||||
Reinsurance premiums payable | 42.6 | 3.2 | 5.0 | |||||||||
Funds withheld | (7.4 | ) | 1.8 | (0.1 | ) | |||||||
Premiums receivable | (63.5 | ) | (119.7 | ) | (55.9 | ) | ||||||
Deferred taxes | (36.0 | ) | (29.9 | ) | 20.3 | |||||||
Income tax payable | (32.1 | ) | 2.2 | 1.3 | ||||||||
Accrued expenses and other payable | (10.4 | ) | (50.2 | ) | 56.8 | |||||||
Fair value of derivatives and settlement of liabilities under derivatives | 9.7 | (9.3 | ) | 3.2 | ||||||||
Long-term debt | 0.2 | — | — | |||||||||
Intangible assets | — | 0.8 | — | |||||||||
Other assets | (9.1 | ) | (11.3 | ) | 6.3 | |||||||
Net cash generated by operating activities | $ | 343.5 | $ | 624.3 | $ | 646.6 | ||||||
F-9
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended December 31, 2011, 2010 and 2009
($ in millions)
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows generated (used in)/from investing activities: | ||||||||||||
Purchases of fixed income maturities | $ | (2,163.0 | ) | $ | (2,807.2 | ) | $ | (2,927.2 | ) | |||
Net (purchases)/sales of equity securities | (176.2 | ) | — | — | ||||||||
Net sales from other investments | — | — | 282.1 | |||||||||
Proceeds from sales and maturities of fixed income maturities | 2,213.4 | 2,712.0 | 1,898.9 | |||||||||
Net (purchases)/sales of short-term investments | (13.3 | ) | 91.8 | (97.0 | ) | |||||||
Net change in (payable)/receivable for securities (purchased)/sold | (41.5 | ) | 52.3 | 165.4 | ||||||||
Payments for acquisitions net of cash acquired | — | (13.4 | ) | — | ||||||||
Non-controlling interest introductory capital | — | 0.8 | — | |||||||||
Purchase of equipment | (29.9 | ) | (17.9 | ) | (4.6 | ) | ||||||
Net cash generated from/(used in) investing activities | (210.5 | ) | 18.4 | (682.4 | ) | |||||||
Cash flows used in financing activities: | ||||||||||||
Proceeds from the issuance of ordinary shares, net of issuance costs | 0.8 | 20.3 | 25.1 | |||||||||
Ordinary shares repurchased | (8.1 | ) | (407.8 | ) | — | |||||||
Costs from the redemption of preference shares | — | — | (34.1 | ) | ||||||||
Proceeds from issuance of long-term debt | — | 249.2 | — | |||||||||
Dividends paid on ordinary shares | (42.5 | ) | (46.5 | ) | (49.8 | ) | ||||||
Dividends paid on preference shares | (22.8 | ) | (22.8 | ) | (23.8 | ) | ||||||
Dividends paid to non-controlling interest | (0.1 | ) | — | — | ||||||||
Net cash (used in) financing activities | (72.7 | ) | (207.6 | ) | (82.6 | ) | ||||||
Effect of exchange rate movements on cash and cash equivalents | (0.3 | ) | (4.4 | ) | 57.7 | |||||||
Increase/(decrease) in cash and cash equivalents | 60.0 | 430.7 | (60.7 | ) | ||||||||
Cash and cash equivalents at beginning of year | 1,179.1 | 748.4 | 809.1 | |||||||||
Cash and cash equivalents at end of year | $ | 1,239.1 | $ | 1,179.1 | $ | 748.4 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the year for income tax | $ | 24.8 | $ | 56.0 | $ | 55.5 | ||||||
Cash paid during the year for interest | $ | 30.2 | $ | 15.0 | $ | 15.0 |
F-10
Table of Contents
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Twelve Months Ended December 31, 2011, 2010 and 2009
($ in millions, except share and per share amounts)
1. | History and Organization |
2. | Basis of Preparation and Significant Accounting Policies |
(a) | Use of Estimates |
(b) | Accounting for Insurance and Reinsurance Operations |
F-11
Table of Contents
F-12
Table of Contents
(c) | Accounting for Investments, Cash and Cash Equivalents |
F-13
Table of Contents
F-14
Table of Contents
(d) | Accounting for Derivative Financial Instruments |
(e) | Intangible Assets |
(f) | Office Properties and Equipment |
(g) | Foreign Currencies Translation |
(h) | Earnings Per Share |
(i) | Accounting for Income Tax |
F-15
Table of Contents
(j) | Preference Shares |
(k) | Share Based Employee Compensation |
(l) | New Accounting Policies |
F-16
Table of Contents
3. | Related Party Transactions |
F-17
Table of Contents
4. | Earnings Per Ordinary Share |
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Earnings | ||||||||||||
Net (loss)/income as reported | $ | (105.8 | ) | $ | 312.7 | $ | 473.9 | |||||
Preference share dividends | (22.8 | ) | (22.8 | ) | (23.8 | ) | ||||||
Preference stock repurchase gain | — | — | 31.5 | |||||||||
Basic and diluted net (loss)/income available to ordinary shareholders | $ | (128.6 | ) | $ | 289.9 | $ | 481.6 | |||||
Ordinary shares | ||||||||||||
Basic weighted average ordinary shares | 70,665,166 | 76,342,632 | 82,698,325 | |||||||||
Weighted average effect of dilutive securities(1) | — | 3,672,106 | 2,628,887 | |||||||||
Total diluted weighted average ordinary shares | 70,665,166 | 80,014,738 | 85,327,212 | |||||||||
(Loss)/earnings per ordinary share | ||||||||||||
Basic | $ | (1.82 | ) | $ | 3.80 | $ | 5.82 | |||||
Diluted | $ | (1.82 | ) | $ | 3.62 | $ | 5.64 | |||||
(1) | The basic and diluted number of ordinary shares for the twelve months ended December 31, 2011 is the same, as the inclusion of dilutive securities in a loss-making period would be anti-dilutive. |
Dividend | Payable on: | Record Date: | ||||||||||
Ordinary shares | $ | 0.15 | March 5, 2012 | February 17,2012 | ||||||||
5.625% preference shares | $ | 0.703125 | April 1, 2012 | March 15, 2012 | ||||||||
7.401% preference shares | $ | 0.462563 | April 1, 2012 | March 15, 2012 |
5. | Segment Reporting |
F-18
Table of Contents
F-19
Table of Contents
Twelve Months Ended December 31, 2011 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,187.5 | $ | 1,020.3 | $ | 2,207.8 | ||||||
Net written premiums | 1,098.1 | 831.0 | 1,929.1 | |||||||||
Gross earned premiums | 1,190.6 | 950.5 | 2,141.1 | |||||||||
Net earned premiums | 1,108.3 | 780.2 | 1,888.5 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 1,083.3 | 472.7 | 1,556.0 | |||||||||
Policy acquisition expenses | 197.7 | 149.3 | 347.0 | |||||||||
General and administrative expenses | 109.8 | 125.7 | 235.5 | |||||||||
Underwriting (loss)/income | $ | (282.5 | ) | $ | 32.5 | (250.0 | ) | |||||
Corporate expenses | (44.7 | ) | ||||||||||
Net investment income | 225.6 | |||||||||||
Net realized and unrealized investment gains | 30.3 | |||||||||||
Change in fair value of derivatives | �� | (59.9 | ) | |||||||||
Interest expense on long-term debt | (30.8 | ) | ||||||||||
Net realized and unrealized foreign exchange (losses) | (6.7 | ) | ||||||||||
Other (expense) | (6.8 | ) | ||||||||||
(Loss) before income taxes | (143.0 | ) | ||||||||||
Income tax credit | 37.2 | |||||||||||
Net (loss) | $ | (105.8 | ) | |||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,770.0 | $ | 1,328.6 | $ | 4,098.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 97.7 | % | 60.6 | % | 82.4 | % | ||||||
Policy acquisition expense ratio | 17.8 | % | 19.1 | % | 18.4 | % | ||||||
General and administrative expense ratio(1) | 9.9 | % | 16.1 | % | 14.8 | % | ||||||
Expense ratio | 27.7 | % | 35.2 | % | 33.2 | % | ||||||
Combined ratio | 125.4 | % | 95.8 | % | 115.6 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
F-20
Table of Contents
Twelve Months Ended December 31, 2010 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,162.2 | $ | 914.6 | $ | 2,076.8 | ||||||
Net written premiums | 1,118.5 | 772.6 | 1,891.1 | |||||||||
Gross earned premiums | 1,186.4 | 907.9 | 2,094.3 | |||||||||
Net earned premiums | 1,141.8 | 757.1 | 1,898.9 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 693.5 | 555.2 | 1,248.7 | |||||||||
Policy acquisition expenses | 202.4 | 126.1 | 328.5 | |||||||||
General and administrative expenses | 112.3 | 99.4 | 211.7 | |||||||||
Underwriting income/(loss) | $ | 133.6 | $ | (23.6 | ) | 110.0 | ||||||
Corporate expenses | (46.9 | ) | ||||||||||
Net investment income | 232.0 | |||||||||||
Net realized and unrealized investment gains | 50.6 | |||||||||||
Change in fair value of derivatives | (0.2 | ) | ||||||||||
Interest on long term debt | (16.5 | ) | ||||||||||
Net realized and unrealized foreign exchange gains | 2.2 | |||||||||||
Other income | 9.1 | |||||||||||
Income before income taxes | 340.3 | |||||||||||
Income tax (expense) | (27.6 | ) | ||||||||||
Net income | $ | 312.7 | ||||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,243.9 | $ | 1,296.7 | $ | 3,540.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 60.7 | % | 73.3 | % | 65.8 | % | ||||||
Policy acquisition expense ratio | 17.7 | % | 16.7 | % | 17.3 | % | ||||||
General and administrative expense ratio(1) | 9.8 | % | 13.1 | % | 13.6 | % | ||||||
Expense ratio | 27.5 | % | 29.8 | % | 30.9 | % | ||||||
Combined ratio | 88.2 | % | 103.1 | % | 96.7 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
F-21
Table of Contents
Twelve Months Ended December 31, 2009 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting revenues | ||||||||||||
Gross written premiums | $ | 1,176.0 | $ | 891.1 | $ | 2,067.1 | ||||||
Net written premiums | 1,116.7 | 720.1 | 1,836.8 | |||||||||
Gross earned premiums | 1,164.4 | 871.0 | 2,035.4 | |||||||||
Net earned premiums | 1,108.1 | 714.9 | 1,823.0 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss expenses | 467.3 | 480.8 | 948.1 | |||||||||
Policy acquisition expenses | 214.6 | 119.5 | 334.1 | |||||||||
General and administrative expenses | 97.5 | 100.7 | 198.2 | |||||||||
Underwriting income | $ | 328.7 | $ | 13.9 | 342.6 | |||||||
Corporate expenses | (54.2 | ) | ||||||||||
Net investment income | 248.5 | |||||||||||
Net realized and unrealized investment gains | 11.4 | |||||||||||
Change in fair value of derivatives | (8.0 | ) | ||||||||||
Interest expense on long-term debt | (15.6 | ) | ||||||||||
Net realized and unrealized foreign exchange gains | 2.0 | |||||||||||
Other income | 8.0 | |||||||||||
Income before income taxes | 534.7 | |||||||||||
Income tax (expense) | (60.8 | ) | ||||||||||
Net income | $ | 473.9 | ||||||||||
Net reserves for loss and loss adjustment expenses | $ | 1,988.4 | $ | 1,021.2 | $ | 3,009.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 42.2 | % | 67.3 | % | 52.0 | % | ||||||
Policy acquisition expense ratio | 19.4 | % | 16.7 | % | 18.3 | % | ||||||
General and administrative expense ratio(1) | 8.8 | % | 14.1 | % | 13.8 | % | ||||||
Expense ratio | 28.2 | % | 30.8 | % | 32.1 | % | ||||||
Combined ratio | 70.4 | % | 98.1 | % | 84.1 | % | ||||||
(1) | The total group general and administrative expense ratio includes the impact from corporate expenses. |
F-22
Table of Contents
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||
($ in millions) | ||||||||||||
Australia/Asia | $ | 129.6 | $ | 102.2 | $ | 84.4 | ||||||
Caribbean | 12.4 | 7.9 | 2.5 | |||||||||
Europe | 103.2 | 104.9 | 78.8 | |||||||||
United Kingdom | 145.7 | 141.1 | 131.6 | |||||||||
United States & Canada(1) | 875.6 | 840.4 | 924.5 | |||||||||
Worldwide excluding United States(2) | 157.5 | 145.8 | 150.6 | |||||||||
Worldwide including United States(3) | 698.7 | 672.4 | 659.8 | |||||||||
Others | 85.1 | 62.1 | 34.9 | |||||||||
Total | $ | 2,207.8 | $ | 2,076.8 | $ | 2,067.1 | ||||||
(1) | “United States and Canada” comprises individual policies that insure risks specifically in the United States and/or Canada, but not elsewhere. | |
(2) | “Worldwide excluding the United States” comprises individual policies that insure risks wherever they may be across the world but specifically excludes the United States. | |
(3) | “Worldwide including the United States” comprises individual policies that insure risks wherever they may be across the world but specifically includes the United States. |
6. | Investments |
As at December 31, 2011 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Cost or | Unrealized | Unrealized | Fair Market | |||||||||||||
Amortized Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 873.9 | $ | 58.5 | $ | — | $ | 932.4 | ||||||||
U.S. Agency | 271.7 | 23.8 | — | 295.5 | ||||||||||||
Municipal | 33.6 | 2.0 | — | 35.6 | ||||||||||||
Corporate | 1,722.6 | 127.7 | (3.8 | ) | 1,846.5 | |||||||||||
FDIC Guaranteed Corporate | 72.5 | 0.4 | — | 72.9 | ||||||||||||
Non-U.S. Government-backed Corporate | 163.9 | 3.9 | — | 167.8 | ||||||||||||
Foreign Government | 632.1 | 28.4 | (0.1 | ) | 660.4 | |||||||||||
Asset-backed | 56.4 | 4.6 | — | 61.0 | ||||||||||||
Non-agency Commercial Mortgage-backed | 77.1 | 8.3 | — | 85.4 | ||||||||||||
Agency Mortgage-backed | 1,195.9 | 72.5 | (0.1 | ) | 1,268.3 | |||||||||||
Total Fixed Income Maturities — Available for Sale | 5,099.7 | 330.1 | (4.0 | ) | 5,425.8 | |||||||||||
Total Short-term Investments — Available for Sale | 298.2 | — | — | 298.2 | ||||||||||||
Total Equity Securities — Available for Sale(1) | 169.8 | 15.1 | (5.4 | ) | 179.5 | |||||||||||
Total | $ | 5,567.7 | $ | 345.2 | $ | (9.4 | ) | $ | 5,903.5 | |||||||
(1) | The equity securities available for sale have no fixed maturity date. |
F-23
Table of Contents
As at December 31, 2010 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Cost or | Unrealized | Unrealized | Fair Market | |||||||||||||
Amortized Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 701.5 | $ | 25.5 | $ | (1.6 | ) | $ | 725.4 | |||||||
U.S. Agency | 278.7 | 23.6 | — | 302.3 | ||||||||||||
Municipal | 31.1 | 0.4 | (0.8 | ) | 30.7 | |||||||||||
Corporate | 1,861.2 | 113.6 | (3.7 | ) | 1,971.1 | |||||||||||
FDIC Guaranteed Corporate | 123.6 | 2.2 | — | 125.8 | ||||||||||||
Non-U.S. Government-backed Corporate | 223.6 | 5.2 | — | 228.8 | ||||||||||||
Foreign Government | 601.0 | 16.9 | (1.0 | ) | 616.9 | |||||||||||
Asset-backed | 54.0 | 4.8 | — | 58.8 | ||||||||||||
Non-agency Commercial Mortgage-backed | 119.7 | 8.4 | — | 128.1 | ||||||||||||
Agency Mortgage-backed | 1,126.4 | 48.7 | (2.6 | ) | 1,172.5 | |||||||||||
Total Fixed Income Maturities — Available for Sale | 5,120.8 | 249.3 | (9.7 | ) | 5,360.4 | |||||||||||
Short-Term Investments — Available for Sale | 286.1 | — | (0.1 | ) | 286.0 | |||||||||||
Total | $ | 5,406.9 | $ | 249.3 | $ | (9.8 | ) | $ | 5,646.4 | |||||||
As at December 31, 2011 | ||||||||||
Average | ||||||||||
Cost or | Fair Market | Ratings by | ||||||||
Amortized Cost | Value | Maturity | ||||||||
($ in millions) | ||||||||||
Due one year or less | $ | 726.0 | $ | 732.9 | AA+ | |||||
Due after one year through five years | 1,955.0 | 2,057.9 | AA | |||||||
Due after five years through ten years | 997.9 | 1,112.3 | AA– | |||||||
Due after ten years | 91.4 | 108.0 | AA– | |||||||
Subtotal | 3,770.3 | 4,011.1 | ||||||||
Non-agency Commercial Mortgage-backed | 77.1 | 85.4 | AA+ | |||||||
Agency Mortgage-backed | 1,195.9 | 1,268.3 | AA+ | |||||||
Other Asset-backed | 56.4 | 61.0 | AAA | |||||||
Total Fixed Income Maturities — Available for Sale | $ | 5,099.7 | $ | 5,425.8 | ||||||
F-24
Table of Contents
As at December 31, 2010 | ||||||||||
Cost or | Average | |||||||||
Amortized | Fair Market | Ratings by | ||||||||
Cost | Value | Maturity | ||||||||
($ in millions) | ||||||||||
Due one year or less | $ | 337.7 | $ | 343.8 | AA+ | |||||
Due after one year through five years | 2,236.3 | 2,330.9 | AA+ | |||||||
Due after five years through ten years | 1,146.6 | 1,222.2 | AA– | |||||||
Due after ten years | 100.1 | 104.1 | AA | |||||||
Subtotal | 3,820.7 | 4,001.0 | ||||||||
Non-agency Commercial Mortgage-backed | 119.7 | 128.1 | AA+ | |||||||
Agency Mortgage-backed | 1,126.4 | 1,172.5 | AAA | |||||||
Other Asset-backed | 54.0 | 58.8 | AAA | |||||||
Total Fixed Income Maturities — Available for Sale | $ | 5,120.8 | $ | 5,360.4 | ||||||
As at December 31, 2011 | ||||||||||||||||
Cost or | Gross | Gross | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 30.3 | $ | 2.0 | $ | — | $ | 32.3 | ||||||||
U.S. Agency | 1.6 | 0.2 | — | 1.8 | ||||||||||||
Municipal | 2.8 | 0.1 | — | 2.9 | ||||||||||||
Corporate | 337.9 | 15.6 | (4.2 | ) | 349.3 | |||||||||||
Foreign Government | 7.1 | 0.3 | — | 7.4 | ||||||||||||
Asset-backed | 0.7 | — | — | 0.7 | ||||||||||||
Total Fixed Income Maturities — Trading | $ | 380.4 | $ | 18.2 | $ | (4.2 | ) | $ | 394.4 | |||||||
As at December 31, 2010 | ||||||||||||||||
Cost or | Gross | Gross | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. Government | $ | 48.9 | $ | 0.1 | $ | (0.7 | ) | $ | 48.3 | |||||||
U.S. Agency | 0.5 | — | — | 0.5 | ||||||||||||
Municipal | 3.2 | 0.1 | — | 3.3 | ||||||||||||
Corporate | 322.4 | 18.4 | (1.0 | ) | 339.8 | |||||||||||
Foreign Government | 8.9 | 0.5 | — | 9.4 | ||||||||||||
Asset-backed | 4.9 | — | — | 4.9 | ||||||||||||
Total Fixed Income Maturities — Trading | $ | 388.8 | $ | 19.1 | $ | (1.7 | ) | $ | 406.2 | |||||||
F-25
Table of Contents
Opening | Closing | |||||||||||||||||||
Undistributed | Undistributed | |||||||||||||||||||
Fair Value of | Carrying | Funds | Fair Value of | |||||||||||||||||
As at December 31, 2011 | Investment | Unrealized Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris Offshore Fund L.P. | $ | 30.0 | $ | 3.1 | $ | 33.1 | $ | — | $ | 33.1 | ||||||||||
Opening | Closing | |||||||||||||||||||
Undistributed | Undistributed | |||||||||||||||||||
Fair Value of | Realized and | Carrying | Funds | Fair Value of | ||||||||||||||||
As at December 31, 2010 | Investment | Unrealized Gain | Value | Distributed | Investment | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Cartesian Iris 2009 A L.P. | $ | 27.3 | $ | 0.5 | $ | 27.8 | $ | (27.8 | ) | $ | — | |||||||||
Cartesian Iris Offshore Fund L.P. | $ | 27.8 | $ | 2.2 | $ | 30.0 | $ | — | $ | 30.0 |
F-26
Table of Contents
As at December 31, 2011 | ||||||||||||||||||||||||||||
0-12 months | Over 12 months | Total | ||||||||||||||||||||||||||
Fair | Gross | Fair | Gross | Fair | Gross | |||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | Market | Unrealized | Number of | ||||||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | Securities | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
U.S. Government | $ | 6.3 | $ | — | $ | — | $ | — | $ | 6.3 | $ | — | 2 | |||||||||||||||
U.S. Agency | 2.7 | — | — | — | 2.7 | — | 1 | |||||||||||||||||||||
Foreign Government | 14.6 | (0.1 | ) | — | — | 14.6 | (0.1 | ) | 7 | |||||||||||||||||||
Municipal | 2.4 | — | — | — | 2.4 | — | 1 | |||||||||||||||||||||
Corporate | 133.7 | (3.4 | ) | 11.1 | (0.4 | ) | 144.8 | (3.8 | ) | 96 | ||||||||||||||||||
Non-U.S. Government-backed Corporate | 17.4 | — | 3.4 | — | 20.8 | — | 14 | |||||||||||||||||||||
Asset-backed | 8.2 | — | — | — | 8.2 | — | 20 | |||||||||||||||||||||
Non-agency Commercial Mortgage-backed | 0.4 | — | 0.7 | — | 1.1 | — | 2 | |||||||||||||||||||||
FDIC Guaranteed Corporate | 2.0 | — | — | — | 2.0 | — | 1 | |||||||||||||||||||||
Agency Mortgage-backed | 24.4 | (0.1 | ) | 0.1 | — | 24.5 | (0.1 | ) | 11 | |||||||||||||||||||
Total Fixed Income Maturities — Available for Sale | 212.1 | (3.6 | ) | 15.3 | (0.4 | ) | 227.4 | (4.0 | ) | 155 | ||||||||||||||||||
Total Short-term Investments — Available for Sale | 18.1 | — | — | — | 18.1 | — | 9 | |||||||||||||||||||||
Total Equity Securities — Available for Sale | 37.5 | (5.4 | ) | — | — | 37.5 | (5.4 | ) | 15 | |||||||||||||||||||
Total | $ | 267.7 | $ | (9.0 | ) | $ | 15.3 | $ | (0.4 | ) | $ | 283.0 | $ | (9.4 | ) | 179 | ||||||||||||
F-27
Table of Contents
As at December 31, 2010 | ||||||||||||||||||||||||||||
0-12 months | Over 12 months | Total | ||||||||||||||||||||||||||
Fair | Gross | Fair | Gross | Fair | Gross | |||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | Market | Unrealized | Number of | ||||||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | Securities | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
U.S. Government | $ | 112.9 | $ | (1.6 | ) | $ | — | $ | — | $ | 112.9 | $ | (1.6 | ) | 28 | |||||||||||||
U.S. Agency | 5.5 | — | — | — | 5.5 | — | 3 | |||||||||||||||||||||
Municipal | 16.0 | (0.8 | ) | — | — | 16.0 | (0.8 | ) | 6 | |||||||||||||||||||
Foreign Government | 110.0 | (1.0 | ) | 5.0 | — | 115.0 | (1.0 | ) | 12 | |||||||||||||||||||
Corporate | 188.2 | (3.7 | ) | 2.2 | — | 190.4 | (3.7 | ) | 101 | |||||||||||||||||||
Non-U.S. Government-backed Corporate | 24.3 | — | — | — | 24.3 | — | 9 | |||||||||||||||||||||
Asset-backed | 0.2 | — | — | — | 0.2 | — | 1 | |||||||||||||||||||||
Agency Mortgage-backed | 182.6 | (2.6 | ) | 0.3 | — | 182.9 | (2.6 | ) | 57 | |||||||||||||||||||
Non-agency Commercial Mortgage-backed | 2.9 | — | — | — | 2.9 | — | 4 | |||||||||||||||||||||
Total Fixed Income Maturities — Available for Sale | 642.6 | (9.7 | ) | 7.5 | — | 650.1 | (9.7 | ) | 221 | |||||||||||||||||||
Total Short-term investments — Available for Sale | 45.8 | (0.1 | ) | — | — | 45.8 | (0.1 | ) | 22 | |||||||||||||||||||
Total | $ | 688.4 | $ | (9.8 | ) | $ | 7.5 | $ | — | $ | 695.9 | $ | (9.8 | ) | 243 | |||||||||||||
• | Level 1 — Valuations based on unadjusted quoted prices in active markets, to which the Company has access, for identical assets or liabilities. | |
• | Level 2 — Valuations based on observable inputs other than unadjusted quoted prices in active markets for identical assets or liabilities. Inputs include quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs other than quoted prices which are directly or indirectly observable for the asset or liability (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities). |
F-28
Table of Contents
• | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s own views about the assumptions that market participants would use in pricing the asset or liability. |
F-29
Table of Contents
F-30
Table of Contents
As at December 31, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Available for sale financial assets, at fair value | ||||||||||||||||
U.S. Government | $ | 932.4 | $ | — | $ | — | $ | 932.4 | ||||||||
U.S. Government Agency | — | 295.5 | — | 295.5 | ||||||||||||
Municipal | — | 35.6 | — | 35.6 | ||||||||||||
Foreign Government | 548.8 | 111.6 | — | 660.4 | ||||||||||||
Non-agency Commercial Mortgage-backed | — | 85.4 | — | 85.4 | ||||||||||||
Agency Mortgage-backed | — | 1,268.3 | — | 1,268.3 | ||||||||||||
Asset-backed | — | 61.0 | — | 61.0 | ||||||||||||
Corporate | — | 1,846.5 | — | 1,846.5 | ||||||||||||
FDIC Guaranteed Corporate | — | 72.9 | — | 72.9 | ||||||||||||
Bonds backed by Foreign Government | — | 167.8 | — | 167.8 | ||||||||||||
Total fixed income maturities available for sale, at fair value | $ | 1,481.2 | $ | 3,944.6 | $ | — | $ | 5,425.8 | ||||||||
Short-term investments available for sale, at fair value | 270.6 | 27.6 | — | 298.2 | ||||||||||||
Equity investments available for sale, at fair value | 179.5 | — | — | 179.5 | ||||||||||||
Financial assets held for trading, at fair value | ||||||||||||||||
U.S. Government | $ | 32.3 | — | — | $ | 32.3 | ||||||||||
U.S. Government Agency | — | 1.8 | — | 1.8 | ||||||||||||
Municipal | — | 2.9 | — | 2.9 | ||||||||||||
Foreign Government | 4.1 | 3.3 | — | 7.4 | ||||||||||||
Asset-backed | — | 0.7 | — | 0.7 | ||||||||||||
Corporate | — | 349.3 | — | 349.3 | ||||||||||||
Total fixed income maturities trading, at fair value | $ | 36.4 | $ | 358.0 | $ | — | $ | 394.4 | ||||||||
Short-term investments trading, at fair value | 3.4 | 0.7 | — | 4.1 | ||||||||||||
Derivatives at Fair Value | — | 1.3 | — | 1.3 | ||||||||||||
Liabilities under Derivative Contracts | — | (2.1 | ) | — | (2.1 | ) | ||||||||||
Total | $ | 1,971.1 | $ | 4,330.1 | $ | — | $ | 6,301.2 | ||||||||
F-31
Table of Contents
As at December 31, 2010 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Available for sale financial assets, at fair value | ||||||||||||||||
U.S. Government | $ | 725.4 | $ | — | $ | — | $ | 725.4 | ||||||||
U.S. Government Agency | — | 302.3 | — | 302.3 | ||||||||||||
Municipal | — | 30.7 | — | 30.7 | ||||||||||||
Foreign Government | 507.5 | 109.4 | — | 616.9 | ||||||||||||
Non-agency Commercial Mortgage-backed | — | 128.1 | — | 128.1 | ||||||||||||
Agency Mortgage-backed | — | 1,172.5 | — | 1,172.5 | ||||||||||||
Asset-backed | — | 58.8 | — | 58.8 | ||||||||||||
Corporate | — | 1,964.3 | 6.8 | 1,971.1 | ||||||||||||
FDIC Guaranteed Corporate | — | 125.8 | — | 125.8 | ||||||||||||
Bonds backed by Foreign Government | — | 228.8 | — | 228.8 | ||||||||||||
Total fixed income maturities available for sale, at fair value | $ | 1,232.9 | $ | 4,120.7 | $ | 6.8 | $ | 5,360.4 | ||||||||
Short-term investments available for sale, at fair value | 246.8 | 39.2 | — | 286.0 | ||||||||||||
Financial assets held for trading, at fair value | ||||||||||||||||
U.S. Government | $ | 48.3 | — | — | $ | 48.3 | ||||||||||
U.S. Government Agency | — | 0.5 | — | 0.5 | ||||||||||||
Municipal | — | 3.3 | — | 3.3 | ||||||||||||
Foreign Government | 4.1 | 5.3 | — | 9.4 | ||||||||||||
Asset-backed | — | 4.9 | — | 4.9 | ||||||||||||
Corporate | — | 339.8 | — | 339.8 | ||||||||||||
Total fixed income maturities trading, at fair value | $ | 52.4 | $ | 353.8 | $ | — | $ | 406.2 | ||||||||
Short-term investments trading, at fair value | — | 3.7 | — | 3.7 | ||||||||||||
Derivatives at fair value (interest rate swaps) | — | 6.8 | — | 6.8 | ||||||||||||
Total | $ | 1,532.1 | $ | 4,524.2 | $ | 6.8 | $ | 6,063.1 | ||||||||
F-32
Table of Contents
Twelve Months Ended December 31, 2011 | ||||||||||||
Fixed Maturity | Derivatives at | |||||||||||
Investments | Fair Value | Total | ||||||||||
($ in millions) | ||||||||||||
Level 3 assets as of January 1, 2011 | $ | 6.8 | $ | — | $ | 6.8 | ||||||
Total unrealized gains or (losses): | ||||||||||||
Included in earnings | 4.8 | — | 4.8 | |||||||||
Included in comprehensive income | (4.0 | ) | — | (4.0 | ) | |||||||
Sales | (7.6 | ) | — | (7.6 | ) | |||||||
Level 3 assets as of December 31, 2011 | $ | — | $ | — | $ | — | ||||||
Twelve Months Ended December 31, 2010 | ||||||||||||
Fixed Maturity | Derivatives at | |||||||||||
Investments | Fair Value | Total | ||||||||||
($ in millions) | ||||||||||||
Level 3 assets as of January 1, 2010 | $ | 14.9 | $ | 6.7 | $ | 21.6 | ||||||
Total unrealized gains or (losses): | ||||||||||||
Included in earnings | — | (6.7 | ) | (6.7 | ) | |||||||
Included in comprehensive income | (1.1 | ) | — | (1.1 | ) | |||||||
Settlements | 3.7 | — | 3.7 | |||||||||
Sales | (10.7 | ) | — | (10.7 | ) | |||||||
Level 3 assets as of December 31, 2010 | $ | 6.8 | $ | — | $ | 6.8 | ||||||
Twelve Months Ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
($ in millions) | ||||||||
Beginning Balance | $ | — | $ | 9.2 | ||||
Fair value changes included in earnings | — | 0.3 | ||||||
Settlements | — | (9.5 | ) | |||||
Ending Balance | $ | — | $ | — | ||||
F-33
Table of Contents
7. | Investment Transactions |
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Purchases of fixed income maturities | $ | 2,163.0 | $ | 2,807.2 | $ | 2,927.2 | ||||||
Net purchases of equity securities | 176.2 | — | — | |||||||||
(Proceeds) from sales and maturities of fixed income maturities | (2,213.4 | ) | (2,712.0 | ) | (1,898.9 | ) | ||||||
Net change in payable/(receivable) for securities purchased/(sold) | 41.5 | (52.3 | ) | (165.4 | ) | |||||||
Net purchases/(sales) of short-term investments | 13.3 | (91.8 | ) | 97.0 | ||||||||
Net (sales) of other investments | — | — | (282.1 | ) | ||||||||
Net purchases/(sales) for the year | $ | 180.6 | $ | (48.9 | ) | $ | 677.8 | |||||
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Fixed income maturities — Available for sale | $ | 203.2 | $ | 217.0 | $ | 230.5 | ||||||
Fixed income maturities — Trading portfolio | 17.1 | 17.5 | — | |||||||||
Short-term investments — Available for sale | 4.8 | 2.0 | 5.6 | |||||||||
Short-term investments — Trading portfolio | 0.1 | 0.1 | — | |||||||||
Fixed term deposits (included in cash and equivalents) | 2.2 | 2.6 | — | |||||||||
Other investments | — | 0.2 | 19.8 | |||||||||
Equity securities | 6.1 | — | — | |||||||||
Total | 233.5 | 239.4 | 255.9 | |||||||||
Investment expenses | (7.9 | ) | (7.4 | ) | (7.4 | ) | ||||||
Net investment income | $ | 225.6 | $ | 232.0 | $ | 248.5 | ||||||
F-34
Table of Contents
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Available for sale short-term investments and fixed income maturities and equity securities: | ||||||||||||
Gross realized gains | $ | 35.8 | $ | 45.3 | $ | 24.6 | ||||||
Gross realized (losses) | (8.3 | ) | (7.3 | ) | (10.9 | ) | ||||||
Trading portfolio short-term investments and fixed income maturities: | ||||||||||||
Gross realized gains | 6.2 | 11.3 | 3.1 | |||||||||
Gross realized (losses) | (1.7 | ) | (2.9 | ) | (0.1 | ) | ||||||
Net change in gross unrealized (losses)/gains | (3.3 | ) | 1.8 | 15.6 | ||||||||
Equity Investments: | ||||||||||||
Gross realized (losses) from equity investments | (1.5 | ) | — | — | ||||||||
Impairments: | ||||||||||||
Totalother-than-temporary impairments | — | (0.3 | ) | (23.2 | ) | |||||||
Equity accounted investments: | ||||||||||||
Gross realized and unrealized gains in Cartesian Iris | 3.1 | 2.7 | 2.3 | |||||||||
Net realized and unrealized investment gains | $ | 30.3 | $ | 50.6 | $ | 11.4 | ||||||
Change in available for sale unrealized gains | ||||||||||||
Fixed income maturities | 86.5 | 53.9 | 118.2 | |||||||||
Equity securities | 9.7 | — | — | |||||||||
Total change in pre-tax available for sale unrealized gains | $ | 96.2 | $ | 53.9 | $ | 118.2 | ||||||
Change in taxes | (2.7 | ) | 2.9 | (16.4 | ) | |||||||
Total change in unrealized gains, net of taxes | $ | 93.5 | $ | 56.8 | $ | 101.8 | ||||||
8. | Reinsurance |
F-35
Table of Contents
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Premiums written: | ||||||||||||
Direct | $ | 1,020.3 | $ | 914.6 | $ | 641.6 | ||||||
Assumed | 1,187.5 | 1,162.2 | 1,425.5 | |||||||||
Ceded | (278.7 | ) | (185.7 | ) | (230.3 | ) | ||||||
Net premiums written | $ | 1,929.1 | $ | 1,891.1 | $ | 1,836.8 | ||||||
Premiums earned: | ||||||||||||
Direct | $ | 950.5 | $ | 907.9 | $ | 616.2 | ||||||
Assumed | 1,190.6 | 1,186.4 | 1,419.2 | |||||||||
Ceded | (252.6 | ) | (195.4 | ) | (212.4 | ) | ||||||
Net premiums earned | $ | 1,888.5 | $ | 1,898.9 | $ | 1,823.0 | ||||||
Insurance losses and loss adjustment expenses: | ||||||||||||
Direct | $ | 553.4 | $ | 639.1 | $ | 432.0 | ||||||
Assumed | 1,230.3 | 695.2 | 617.5 | |||||||||
Ceded | (227.7 | ) | (85.6 | ) | (101.4 | ) | ||||||
Net insurance losses and loss adjustment expenses | $ | 1,556.0 | $ | 1,248.7 | $ | 948.1 | ||||||
9. | Derivative Financial Instruments |
As at December 31, | ||||||||||||||||||
Derivatives Not Designated as | 2011 | 2010 | ||||||||||||||||
Hedging Instruments | Notional | Fair | Notional | |||||||||||||||
Under ASC 815 | Balance Sheet Location | Amount | Value | Amount | Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||||
Interest Rate Swaps | Liabilities under Derivative Contracts | $ | 1,000.0 | $ | (2.1 | )(1) | $ | — | $ | — | ||||||||
Forward Exchange contracts | Derivatives at Fair Value | $ | 192.4 | $ | 1.3 | $ | — | $ | — | |||||||||
Interest Rate Swaps | Derivatives at Fair Value | $ | — | $ | — | $ | 500.0 | $ | 6.8 |
(1) | Gross liability of $45.8 million net of $43.7 million of cash collateral provided to counterparties as security for our net liability position. |
Amount of Gain/(Loss) | ||||||||||
Recognized in Income | ||||||||||
Derivatives Not Designated a | Twelve Months Ended | |||||||||
Hedging Instruments | December 31, | December 31, | ||||||||
Under ASC 815 | Location of Gain/(Loss) Recognized in Income | 2011 | 2010 | |||||||
($ in millions) | ||||||||||
Credit Insurance Contract | Change in Fair Value of Derivatives | $ | — | $ | (7.0 | ) | ||||
Foreign Exchange Contracts | Change in Fair Value of Derivatives | $ | 4.5 | $ | — | |||||
Interest Rate Swaps | Change in Fair Value of Derivatives | $ | (64.4 | ) | $ | 6.8 |
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10. | Reserves for Loss and Loss Adjustment Expenses |
As at December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Provision for losses and LAE at start of year | $ | 3,820.5 | $ | 3,331.1 | $ | 3,070.3 | ||||||
Less reinsurance recoverable | (279.9 | ) | (321.5 | ) | (283.3 | ) | ||||||
Net loss and LAE at start of year | 3,540.6 | 3,009.6 | 2,787.0 | |||||||||
Net loss and loss expenses (disposed) | (20.6 | ) | (35.5 | ) | (10.0 | ) | ||||||
Provision for losses and LAE for claims incurred: | ||||||||||||
Current year | 1,648.3 | 1,270.1 | 1,032.5 | |||||||||
Prior years | (92.3 | ) | (21.4 | ) | (84.4 | ) | ||||||
Total incurred | 1,556.0 | 1,248.7 | 948.1 | |||||||||
Losses and LAE payments for claims incurred: | ||||||||||||
Current year | (269.3 | ) | (116.5 | ) | (131.6 | ) | ||||||
Prior years | (712.9 | ) | (550.3 | ) | (677.0 | ) | ||||||
Total paid | (982.2 | ) | (666.8 | ) | (808.6 | ) | ||||||
Foreign exchange losses/(gains) | 4.8 | (15.4 | ) | 93.1 | ||||||||
Net losses and LAE reserves at year end | 4,098.6 | 3,540.6 | 3,009.6 | |||||||||
Plus reinsurance recoverable on unpaid losses at end of year | 426.6 | 279.9 | 321.5 | |||||||||
Provision for losses and LAE at end of year | $ | 4,525.2 | $ | 3,820.5 | $ | 3,331.1 | ||||||
11. | Income Taxes |
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Twelve Months Ended | ||||||||||||
December 31, 2011 | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Income tax (benefit)/expense on income | $ | (37.2 | ) | $ | 27.6 | $ | 60.8 | |||||
Income tax expense/(benefit) on other comprehensive income | 2.7 | (2.9 | ) | 16.1 | ||||||||
Total income tax | $ | (34.5 | ) | $ | 24.7 | $ | 76.9 | |||||
Twelve Months Ended December 31, 2011 | ||||||||||||||||
Income/Loss | Current | Deferred | Total | |||||||||||||
Before Tax | Income Taxes | Income Taxes | Income Taxes | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. | $ | (87.2 | ) | $ | (5.2 | ) | $ | — | $ | (5.2 | ) | |||||
Non-U.S. | (55.8 | ) | (19.2 | ) | (12.8 | ) | (32.0 | ) | ||||||||
Total | $ | (143.0 | ) | $ | (24.4 | ) | $ | (12.8 | ) | $ | (37.2 | ) | ||||
Twelve Months Ended December 31, 2010 | ||||||||||||||||
Income/Loss | Current | Deferred | Total | |||||||||||||
Before Tax | Income Taxes | Income Taxes | Income Taxes | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. | $ | (67.1 | ) | $ | (2.2 | ) | $ | — | $ | (2.2 | ) | |||||
Non-U.S. | 407.4 | 33.4 | (3.6 | ) | 29.8 | |||||||||||
Total | $ | 340.3 | $ | 31.2 | $ | (3.6 | ) | $ | 27.6 | |||||||
Twelve Months Ended December 31, 2009 | ||||||||||||||||
Income/Loss | Current | Deferred | Total | |||||||||||||
Before Tax | Income Taxes | Income Taxes | Income Taxes | |||||||||||||
($ in millions) | ||||||||||||||||
U.S. | $ | (13.6 | ) | $ | — | $ | — | $ | — | |||||||
Non-U.S. | 548.3 | 45.3 | 15.5 | 60.8 | ||||||||||||
Total | $ | 534.7 | $ | 45.3 | $ | 15.5 | $ | 60.8 | ||||||||
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Income Tax Reconciliation | ||||||||||||
Expected tax provision at weighted average rate | $ | (42.9 | ) | $ | 6.8 | $ | 53.4 | |||||
Prior year adjustment | (7.2 | ) | 3.4 | (3.7 | ) | |||||||
Valuation provision on U.S. deferred tax assets | 15.9 | 16.9 | 4.6 | |||||||||
Other | (3.0 | ) | 0.5 | 6.5 | ||||||||
Total income tax (credit)/expense | $ | (37.2 | ) | $ | 27.6 | $ | 60.8 | |||||
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12. | Deferred Taxation |
As at December 31, | ||||||||
2011 | 2010 | |||||||
($ in millions) | ||||||||
Deferred tax assets: | ||||||||
Share options | $ | 7.2 | $ | 6.5 | ||||
Operating loss carry forwards | 47.1 | 28.3 | ||||||
Insurance reserves | 1.7 | 2.3 | ||||||
Intangible assets (other) | (1.2 | ) | (0.8 | ) | ||||
Deferred policy acquisition costs | (1.6 | ) | (0.1 | ) | ||||
Other temporary differences | 16.1 | (1.4 | ) | |||||
Total gross deferred tax assets | 69.3 | 34.8 | ||||||
Less valuation allowance | (56.6 | ) | (33.5 | ) | ||||
Net deferred tax assets | $ | 12.7 | $ | 1.3 | ||||
Deferred tax liabilities: | ||||||||
Insurance equalization provision reserves | $ | (31.7 | ) | $ | (58.7 | ) | ||
Unrealized gains on investments | 3.7 | (0.4 | ) | |||||
Other | (3.2 | ) | 8.7 | |||||
Total gross deferred tax liabilities | (31.2 | ) | (50.4 | ) | ||||
Net deferred tax liability | $ | (18.5 | ) | $ | (49.1 | ) | ||
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13. | Capital Structure |
As at December 31, 2011 | As at December 31, 2010 | |||||||||||||||
Number | $’000 | Number | $’000 | |||||||||||||
Authorized Share Capital | ||||||||||||||||
Ordinary Shares 0.15144558¢ per share | 969,629,030 | 1,469 | 969,629,030 | 1,469 | ||||||||||||
Non-Voting Shares 0.15144558¢ per share | 6,787,880 | 10 | 6,787,880 | 10 | ||||||||||||
Preference Shares 0.15144558¢ per share | 100,000,000 | 152 | 100,000,000 | 152 | ||||||||||||
Issued Share Capital | ||||||||||||||||
Issued ordinary shares of 0.15144558¢ per share | 70,655,698 | 107 | 70,508,013 | 107 | ||||||||||||
Issued preference shares of 0.15144558¢ each with a liquidation preference of $50 per share | 4,600,000 | 7 | 4,600,000 | 7 | ||||||||||||
Issued preference shares of 0.15144558¢ each with a liquidation preference of $25 per share | 5,327,500 | 8 | 5,327,500 | 8 | ||||||||||||
Total issued share capital | 122 | 122 | ||||||||||||||
As at December 31, 2011 | As at December 31, 2010 | |||||||
($ in millions) | ($ in millions) | |||||||
Additional paid-in capital | $ | 1,385.0 | $ | 1,388.3 | ||||
(a) | Ordinary Shares. |
Number of | ||||
Shares | ||||
Shares in issue at December 31, 2008 | 81,506,503 | |||
Share transactions in 2009: | ||||
Shares issued to the Names’ trust upon exercise of investor options (refer to Note 16) | 3,056 | |||
Shares issued to employees under the share incentive plan | 598,035 | |||
Shares issued through registered public offerings | 1,220,000 | |||
Shares in issue at December 31, 2009 | 83,327,594 | |||
Share transactions in 2010: | ||||
Shares issued to the Names’ trust upon exercise of investor options (refer to Note 16) | 46,749 | |||
Shares issued to employees under the share incentive plan | 863,178 | |||
Shares issued to non-employee directors | 59,415 | |||
Repurchase of ordinary shares from shareholders | (13,788,923 | ) | ||
Shares in issue at December 31, 2010 | 70,508,013 | |||
Share transactions in 2011: | ||||
Shares issued to the Names’ trust upon exercise of investor options (refer to Note 16) | 255,504 | |||
Shares issued to employees under the share incentive plan | 714,920 | |||
Shares issued to non-employee directors | 32,414 | |||
Repurchase of ordinary shares from shareholders | (855,153 | ) | ||
Shares in issue at December 31, 2011 | 70,655,698 | |||
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(b) | Preference Shares |
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14. | Statutory Requirements and Dividends Restrictions |
U.S. | Bermuda | U.K. | ||||||||||
($ in millions) | ||||||||||||
Required statutory capital and surplus | $ | 27.2 | $ | 1,024.0 | $ | 212.5 | ||||||
Statutory capital and surplus | $ | 180.1 | $ | 1,711.0 | $ | 1,330.0 |
15. | Retirement Plans |
16. | Share Based Payments |
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(a) | Investor Options |
Options Granted | Options Exercised | Ordinary Shares Issued | ||||||||||
2002 | 3,006,760 | — | — | |||||||||
2003 | — | 440,144 | 152,583 | |||||||||
2004 | — | 856,218 | 135,321 | |||||||||
2005 | — | 303,321 | 56,982 | |||||||||
2006 | — | 34,155 | 3,757 | |||||||||
2007 | — | 66,759 | 7,381 | |||||||||
2008 | — | 20,641 | 3,369 | |||||||||
2009 | — | 9,342 | 3,056 | |||||||||
2010 | — | 149,895 | 49,538 | |||||||||
2011 | — | 761,037 | 255,504 | |||||||||
Total as at December 31, 2011 | 3,006,760 | 2,641,512 | 667,491 | |||||||||
At December 31, 2011 | At December 31, 2010 | |||||||||||||||||||||||
Options | Options | Exercise | ||||||||||||||||||||||
Option Holder | Outstanding | Exercisable | Outstanding | Exercisable | Price | Expiration | ||||||||||||||||||
Names’ Trustee | 365,248 | 365,248 | 1,126,285 | 1,126,285 | $ | 19.53 | (1) | June 21, 2012 |
(1) | Exercise price at February 15, 2012 being the most recent exercise date. Exercise price at any date is the amount in U.S. Dollars converted at an average exchange rate over afive-day period from an underlying price of £10 per share increased by 5% per annum from June 21, 2002 to date of exercise, less the amount of any prior dividend or distribution per share. |
(b) | Employee equity incentives |
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Weighted Average | Remaining | |||||||||||||||||||
Options | Exercise | Fair Value at | Contractual | |||||||||||||||||
Option Holder | Outstanding | Exercisable | Price | Grant Date | Time | |||||||||||||||
2003 Option grants | 1,420,995 | 1,420,995 | $ | 16.20 | $ | 5.31 | 1 yr 8 mths | |||||||||||||
2004 Option grants | 112,511 | 112,511 | $ | 24.44 | $ | 5.74 | 3 yrs | |||||||||||||
2006 Option grants February 16 | 467,671 | 467,671 | $ | 23.65 | $ | 6.99 | 4 yrs 2 mths | |||||||||||||
2007 Option grants May 4 | 447,754 | 447,754 | $ | 27.28 | $ | 6.14 | 2 yrs 4 mths |
Options | ||||||||
Option Holder | Exercised | Forfeited | ||||||
2003 Option grants | 1,750,129 | 712,906 | ||||||
2004 Option grants | 111,599 | 276,003 | ||||||
2005 Option grants | — | 525,881 | ||||||
2006 Option grants | 196,963 | 550,014 | ||||||
2007 Option grants | 28,496 | 146,583 |
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
Option Holder | 2011 | 2010 | 2009 | |||||||||
($ in millions) | ||||||||||||
2003 Option grants | $ | — | $ | — | $ | (1.8 | ) | |||||
2006 Option grants | — | — | (1.4 | ) | ||||||||
2007 Option grants | — | (0.5 | ) | 1.2 | ||||||||
Total | $ | — | $ | (0.5 | ) | $ | (2.0 | ) | ||||
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Grant date | ||||||||||||||||||||||||
October 22, | May 4, | August 4, | February 16, | December 23, | August 20, | |||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2004 | 2003(1) | |||||||||||||||||||
Per share weighted average fair value | $ | 5.76 | $ | 6.14 | $ | 4.41 | $ | 6.99 | $ | 5.74 | $ | 5.31 | ||||||||||||
Risk free interest rate | 4.09 | % | 4.55 | % | 5.06 | % | 4.66 | % | 3.57 | % | 4.70 | % | ||||||||||||
Dividend yield | 2.1 | % | 2.2 | % | 2.6 | % | 2.7 | % | 0.5 | % | 0.6 | % | ||||||||||||
Expected life | 5 years | 5 years | 5 years | 5 years | 5 years | 7 years | ||||||||||||||||||
Share price volatility | 20.28 | % | 23.76 | % | 19.33 | % | 35.12 | % | 19.68 | % | 0 | % | ||||||||||||
Foreign currency volatility | — | — | — | — | 9.40 | % | 9.40 | % |
(1) | The 2003 options had a price volatility of zero. The minimum value method was utilized because the Company was unlisted on the date that the options were issued. Foreign currency volatility of 9.40% was applied as the exercise price was initially in British Pounds and the share price of the Company is in U.S. Dollars. |
As at December 31, 2011 | ||||||||||||||||
Restricted Share Units | ||||||||||||||||
Amount | Amount | Amount | Amount | |||||||||||||
RSU Holder | Granted | Vested | Forfeited | Outstanding | ||||||||||||
2004 - 2008 Grants | 516,796 | 490,284 | 26,512 | — | ||||||||||||
2009 Grants | 97,389 | 55,604 | 18,644 | 23,141 | ||||||||||||
2010 Grants | 168,707 | 61,480 | 3,191 | 104,036 | ||||||||||||
2011 Grants | 183,019 | — | — | 183,019 | ||||||||||||
Total | 965,911 | 607,368 | 48,347 | 310,196 | ||||||||||||
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As at December 31, 2011 | ||||||||||||||||
Performance Share Awards | ||||||||||||||||
Amount | Amount | Amount | Amount | |||||||||||||
Granted | Vested | Forfeited | Outstanding | |||||||||||||
2004 - 2008 Grants | 1,625,555 | 788,592 | 836,963 | — | ||||||||||||
2009 Grants | 928,152 | 663,117 | 265,035 | — | ||||||||||||
2010 Grants | 750,137 | 186,214 | 97,518 | 466,405 | (1) | |||||||||||
2011 Grants | 890,794 | — | 115,803 | 774,991 | (1) | |||||||||||
Total | 4,194,638 | 1,637,923 | 1,315,319 | 1,241,396 | ||||||||||||
(1) | These balances could increase depending on future performance. |
2009 Performance Shares | ||||||||||||
Year | Split | ROE | Vested | |||||||||
2009 | 33.3 | % | 18.4 | % | 54.7 | % | ||||||
2010 | 33.3 | % | 11.2 | % | 28.5 | % | ||||||
2011 | 33.3 | % | (5.3 | )% | — | |||||||
Total | 100.0 | % | 83.2 | % | ||||||||
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2010 Performance Shares | ||||||||||||
Year | Split | ROE | Banked | |||||||||
2010 | 33.3 | % | 11.2 | % | 28.5 | % | ||||||
2011 | 33.3 | % | (5.3 | )% | — | |||||||
2012 | 33.3 | % | NA | NA | ||||||||
Total | 100.0 | % | 28.5 | % | ||||||||
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2011 Performance Shares | ||||||||||||
Year | Split | ROE | Banked | |||||||||
2011 | 33.3 | % | (5.3 | )% | — | |||||||
2012 | 33.3 | % | NA | NA | ||||||||
2013 | 33.3 | % | NA | NA | ||||||||
Total | 100.0 | % | — | % | ||||||||
Twelve Months Ended | ||||||||
December 31, 2011 | ||||||||
Weighted Average | ||||||||
Number of | Grant Date | |||||||
Shares | Fair Value | |||||||
Outstanding performance share awards, beginning of period | 606,742 | $ | 23.83 | |||||
Granted | 890,794 | 28.10 | ||||||
Forfeited | (256,140 | ) | 24.88 | |||||
Outstanding performance share awards, end of period | 1,241,396 | $ | 26.68 | |||||
Grant Date | ||||||||||||||||||||||||||||||||
November 4, | December 4, | November 23, | December 21, | December 22, | December 22, | December 13, | December 13, | |||||||||||||||||||||||||
2008 | 2008 | 2009 | 2009 | 2010 | 2010 | 2011 | 2011 | |||||||||||||||||||||||||
Per share weighted average fair value | $ | 3.18 | $ | 2.87 | $ | 3.76 | $ | 3.82 | $ | 4.24 | $ | 4.46 | $ | 4.20 | $ | 3.85 | ||||||||||||||||
Risk free interest rate | 0.48 | % | (0.41 | )% | 0.01 | % | 0.04 | % | 0.13 | % | 0.13 | % | 0.05 | % | 0.05 | % | ||||||||||||||||
Dividend yield | 2.70 | % | 3.16 | % | 2.28 | % | 2.34 | % | 2.07 | % | 2.07 | % | 2.80 | % | 2.75 | % | ||||||||||||||||
Expected life | 3 years | 2 years | 3 years | 2 years | 3 years | 2 years | 3 years | 2 years | ||||||||||||||||||||||||
Share price volatility | 68.00 | % | 102.00 | % | 22.00 | % | 18.00 | % | 14.00 | % | 14.00 | % | 26.21 | % | 26.21 | % |
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(c) | Non-employee equity incentives |
Options | Exercise | Fair Value at | Remaining | |||||||||||||||||
Option Holder | Outstanding | Exercisable | Price | Grant Date | Contractual Time | |||||||||||||||
Non-Employee Directors — 2006 Option grants (May 25) | 13,305 | 13,305 | $ | 21.96 | $ | 4.24 | 4 yrs 5 months | |||||||||||||
Non-Employee Directors — 2007 Option grants (July 30) | 4,024 | 4,024 | $ | 24.76 | $ | 4.97 | 5 yrs 7 months |
Grant Date | ||||||||
July 30, 2007 | May 25, 2006 | |||||||
Per share weighted average fair value | $ | 4.97 | $ | 4.24 | ||||
Risk-free interest rate | 4.64 | % | 4.85 | % | ||||
Dividend yield | 2.4 | % | 2.7 | % | ||||
Expected life | 5 years | 5 years | ||||||
Share price volatility | 19.55 | % | 20.05 | % |
As at December 31, 2011 | ||||||||||||||||
Restricted Share Units | ||||||||||||||||
Amount | Amount | Amount | Amount | |||||||||||||
Granted | Vested | Forfeited | Outstanding | |||||||||||||
Non-Employee Directors — 2008 and prior | 32,065 | (28,375 | ) | (3,690 | ) | — | ||||||||||
Non-Employee Directors — 2009 | 25,320 | (25,320 | ) | — | — | |||||||||||
Non-Employee Directors — 2010 | 28,640 | (27,643 | ) | (997 | ) | — | ||||||||||
Non-Employee Directors — 2011 | 23,408 | (18,115 | ) | (1,951 | ) | 3,342 | ||||||||||
Chairman — 2008 and prior | 15,031 | (15,031 | ) | — | — | |||||||||||
Chairman — 2009 | 8,439 | (5,626 | ) | — | 2,813 | |||||||||||
Chairman — 2010 | 17,902 | (17,902 | ) | — | — | |||||||||||
Chairman — 2011 | 16,722 | (13,935 | ) | — | 2,787 | |||||||||||
Total | 167,527 | (151,947 | ) | (6,638 | ) | 8,942 | ||||||||||
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(d) | Summary of investor options and employee and non-employee share options and restricted share units. |
Twelve Months Ended December 31, 2011 | ||||||||
Number of | Weighted Average | |||||||
Option activity | Options | Exercise Price | ||||||
Outstanding options, beginning of period | 3,660,436 | $ | 19.47 | |||||
Exercised | (814,528 | ) | 19.52 | |||||
Forfeited or expired | (14,400 | ) | 21.65 | |||||
Outstanding options, end of period | 2,831,508 | $ | 19.84 | |||||
Exercisable options, end of period | 2,831,508 | $ | 19.84 | |||||
Twelve Months Ended December 31, 2011 | ||||||||
Weighted Average | ||||||||
Number of | Grant Date | |||||||
Restricted share unit activity | Shares | Fair Value | ||||||
Outstanding restricted stock, beginning of period | 280,491 | $ | 26.57 | |||||
Granted | 223,149 | 27.19 | ||||||
Vested | (160,409 | ) | 26.79 | |||||
Forfeited | (24,093 | ) | 26.66 | |||||
Outstanding restricted stock, end of period | 319,138 | $ | 26.58 | |||||
17. | Intangible Assets |
As at December 31, 2011 | As at December 31, 2010 | |||||||||||||||||||||||||||||||
Trade | Insurance | Trade | Insurance | |||||||||||||||||||||||||||||
Mark | Licenses | Other | Total | Mark | Licenses | Other | Total | |||||||||||||||||||||||||
($ in millions) | ($ in millions) | |||||||||||||||||||||||||||||||
Intangible Assets | ||||||||||||||||||||||||||||||||
Beginning of the period | $ | 1.6 | $ | 16.6 | $ | 2.8 | $ | 21.0 | $ | 1.6 | $ | 6.6 | $ | — | $ | 8.2 | ||||||||||||||||
Additions | — | — | — | — | — | 10.0 | 3.6 | 13.6 | ||||||||||||||||||||||||
Amortization | — | — | (1.0 | ) | (1.0 | ) | — | — | (0.8 | ) | (0.8 | ) | ||||||||||||||||||||
End of the period | $ | 1.6 | $ | 16.6 | $ | 1.8 | $ | 20.0 | $ | 1.6 | $ | 16.6 | $ | 2.8 | $ | 21.0 | ||||||||||||||||
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Table of Contents
18. | Commitments and Contingencies |
(a) | Restricted assets |
As at December 31, 2011 | As at December 31, 2010 | |||||||
($ in millions, except percentages) | ||||||||
Assets held in multi-beneficiary trusts | $ | 1,343.7 | $ | 1,895.7 | ||||
Assets held in single-beneficiary trusts | 811.5 | 58.2 | ||||||
Secured letters of credit(1) | 1,208.0 | 533.8 | ||||||
Total | $ | 3,363.2 | $ | 2,487.7 | ||||
Total as percent of cash and invested assets | 44.4 | % | 34.2 | % | ||||
(1) | As of December 31, 2011, the Company had funds on deposit of $1,344.1 million and £19.3 million (December 31, 2010 — $699.9 million and £30.0 million) as collateral for the secured letters of credit. |
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(b) | Operating leases |
Later | ||||||||||||||||||||||||||||
As at December 31, 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Years | Total | |||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
Operating Lease Obligations | $ | 10.6 | 9.8 | 9.4 | 9.0 | 6.8 | 19.1 | $ | 64.7 |
Later | ||||||||||||||||||||||||||||
As at December 31, 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Years | Total | |||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
Operating Lease Obligations | $ | 7.9 | 6.8 | 6.0 | 6.2 | 5.2 | 15.1 | $ | 47.2 |
(c) | Variable interest entities |
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Table of Contents
(d) | Contingencies |
19. | Concentrations of credit risk |
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Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Broker | % | % | % | |||||||||
Aon Corporation | 19.5 | 19.4 | 23.1 | |||||||||
Marsh & McLennan Companies, Inc. | 18.9 | 19.0 | 14.6 | |||||||||
Willis Group Holdings, Ltd. | 16.1 | 14.9 | 14.2 | |||||||||
Others(1) | 45.5 | 46.7 | 48.1 | |||||||||
Total | 100.0 | 100.0 | 100.0 | |||||||||
Gross written premiums ($ millions) | $ | 2,207.8 | $ | 2,076.8 | $ | 2,067.1 | ||||||
(1) | No other individual broker accounted for more than 10% of gross written premiums. |
20. | Other Comprehensive Income |
Twelve Months Ended | ||||||||||||
December 31, 2011 | ||||||||||||
Pre-Tax | Income Tax Effect | After Tax | ||||||||||
($ in millions) | ||||||||||||
Other Comprehensive Income | ||||||||||||
Unrealized gains on investments | $ | 86.5 | $ | 7.0 | $ | 93.5 | ||||||
Loss on derivatives | 0.3 | — | 0.3 | |||||||||
Change in currency translation | 10.8 | — | 10.8 | |||||||||
Total other comprehensive income | $ | 97.6 | $ | 7.0 | $ | 104.6 | ||||||
Twelve Months Ended | ||||||||||||
December 31, 2010 | ||||||||||||
Pre-Tax | Income Tax Effect | After Tax | ||||||||||
($ in millions) | ||||||||||||
Other Comprehensive Income | ||||||||||||
Unrealized gains on investments | $ | 54.0 | $ | 2.8 | $ | 56.8 | ||||||
Loss on derivatives | 0.2 | — | 0.2 | |||||||||
Change in currency translation | 10.0 | — | 10.0 | |||||||||
Total other comprehensive income | $ | 64.2 | $ | 2.8 | $ | 67.0 | ||||||
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Twelve Months Ended | ||||||||||||
December 31, 2009 | ||||||||||||
Pre-Tax | Income Tax Effect | After Tax | ||||||||||
($ in millions) | ||||||||||||
Other Comprehensive Income | ||||||||||||
Unrealized gains on investments | $ | 118.2 | $ | (16.4 | ) | $ | 101.8 | |||||
Loss on derivatives | 0.2 | — | 0.2 | |||||||||
Change in currency translation | 15.8 | — | 15.8 | |||||||||
Total other comprehensive income | $ | 134.2 | $ | (16.4 | ) | $ | 117.8 | |||||
21. | Credit Facility and Long-term Debt |
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Payments Due By Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Contractual Basis | Total | 1 year | 1-3 Years | 3-5 Years | 5 years | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Long-term Debt Obligations | $ | 500.0 | — | $ | 250.0 | — | $ | 250.0 |
22. | Subsequent Events |
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23. | Unaudited Quarterly Financial Data |
Twelve Months Ended December 31, 2011 | ||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||
2011 | 2011 | 2011 | 2011 | Full Year | ||||||||||||||||
($ in millions except for per share amounts) | ||||||||||||||||||||
Gross written premium | $ | 671.3 | $ | 582.2 | $ | 495.6 | $ | 458.7 | $ | 2,207.8 | ||||||||||
Gross earned premium | 508.8 | 524.8 | 549.9 | 557.6 | 2,141.1 | |||||||||||||||
Net earned premium | 452.4 | 459.8 | 486.9 | 489.4 | 1,888.5 | |||||||||||||||
Losses and loss adjustment expenses | (528.9 | ) | (326.4 | ) | (306.2 | ) | (394.5 | ) | (1,556.0 | ) | ||||||||||
Policy acquisition, general, administrative and corporate expenses | (142.8 | ) | (156.3 | ) | (164.4 | ) | (163.7 | ) | (627.2 | ) | ||||||||||
Underwriting profit/(loss), including corporate expenses | $ | (219.3 | ) | $ | (22.9 | ) | $ | 16.3 | $ | (68.8 | ) | $ | (294.7 | ) | ||||||
Net investment income | 55.5 | 58.6 | 57.3 | 54.2 | 225.6 | |||||||||||||||
Interest expense | (7.7 | ) | (7.7 | ) | (7.7 | ) | (7.7 | ) | (30.8 | ) | ||||||||||
Other (expense) income | (8.1 | ) | 6.8 | (9.1 | ) | 3.6 | (6.8 | ) | ||||||||||||
Total other operating revenue | $ | 39.7 | $ | 57.7 | $ | 40.5 | $ | 50.1 | $ | 188.0 | ||||||||||
Operating income/(loss) before tax | $ | (179.6 | ) | $ | 34.8 | $ | 56.8 | $ | (18.7 | ) | $ | (106.7 | ) | |||||||
Net exchange gains/(losses) | 2.9 | (7.7 | ) | 0.3 | 2.3 | (2.2 | ) | |||||||||||||
Net realized investment gains (losses) | 8.5 | (15.7 | ) | (32.9 | ) | 6.0 | (34.1 | ) | ||||||||||||
Income before tax | $ | (168.2 | ) | $ | 11.4 | $ | 24.2 | $ | (10.4 | ) | $ | (143.0 | ) | |||||||
Income tax benefit/(expense) | 16.5 | (1.2 | ) | (2.0 | ) | 23.9 | 37.2 | |||||||||||||
Net income after tax | $ | (151.7 | ) | $ | 10.2 | $ | 22.2 | $ | 13.5 | $ | (105.8 | ) | ||||||||
Ordinary Shares | ||||||||||||||||||||
Basic weighted average ordinary shares | 70,551,859 | 70,792,483 | 70,699,343 | 70,615,233 | 70,665,166 | |||||||||||||||
Weighted average effect of dilutive securities(1) | — | 2,776,427 | 2,600,642 | 2,645,341 | — | |||||||||||||||
Total diluted weighted average ordinary shares | 70,551,859 | 73,568,910 | 73,299,985 | 73,260,574 | 70,665,166 | |||||||||||||||
Earnings per ordinary shares | ||||||||||||||||||||
Basic | $ | (2.23 | ) | $ | 0.06 | $ | 0.23 | $ | 0.11 | $ | (1.82 | ) | ||||||||
Diluted | $ | (2.23 | ) | $ | 0.06 | $ | 0.23 | $ | 0.11 | $ | (1.82 | ) |
(1) | The basic and diluted number of ordinary shares for the quarter ended March 31, 2011, and the year ended December 31, 2011, are the same, as the inclusion of dilutive securities in a loss-making period would be anti-dilutive. |
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Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||
2010 | 2010 | 2010 | 2010 | Full Year | ||||||||||||||||
($ in millions except for per share amounts) | ||||||||||||||||||||
Gross written premium | $ | 702.8 | $ | 545.4 | $ | 415.8 | $ | 412.8 | $ | 2,076.8 | ||||||||||
Gross earned premium | 517.1 | 523.5 | 503.3 | 550.4 | 2,094.3 | |||||||||||||||
Net earned premium | 467.6 | 479.9 | 451.7 | 499.7 | 1,898.9 | |||||||||||||||
Losses and loss adjustment expenses | (378.8 | ) | (276.7 | ) | (285.8 | ) | (307.4 | ) | (1,248.7 | ) | ||||||||||
Policy acquisition, general, administrative and corporate expenses | (137.0 | ) | (140.4 | ) | (140.6 | ) | (169.1 | ) | (587.1 | ) | ||||||||||
Underwriting profit/(loss), including corporate expenses | $ | (48.2 | ) | $ | 62.8 | $ | 25.3 | $ | 23.2 | $ | 63.1 | |||||||||
Net investment income | 59.4 | 57.5 | 58.1 | 57.0 | 232.0 | |||||||||||||||
Interest expense | (3.8 | ) | (4.0 | ) | (3.9 | ) | (4.8 | ) | (16.5 | ) | ||||||||||
Other (expense) income | (0.9 | ) | 1.6 | (1.9 | ) | 10.1 | 8.9 | |||||||||||||
Total other operating revenue | $ | 54.7 | $ | 55.1 | $ | 52.3 | $ | 62.3 | $ | 224.4 | ||||||||||
Operating income/(loss) before tax | $ | 6.5 | $ | 117.9 | $ | 77.6 | $ | 85.5 | $ | 287.5 | ||||||||||
Net exchange gains/(losses) | 1.5 | (2.6 | ) | 3.4 | (0.1 | ) | 2.2 | |||||||||||||
Net realized investment gains (losses) | 12.3 | 5.7 | 22.1 | 10.5 | 50.6 | |||||||||||||||
Income before tax | $ | 20.3 | $ | 121.0 | $ | 103.1 | $ | 95.9 | $ | 340.3 | ||||||||||
Income taxes | (2.0 | ) | (12.1 | ) | (10.3 | ) | (3.2 | ) | (27.6 | ) | ||||||||||
Net income after tax | $ | 18.3 | $ | 108.9 | $ | 92.8 | $ | 92.7 | $ | 312.7 | ||||||||||
Ordinary Shares | ||||||||||||||||||||
Basic weighted average ordinary shares | 77,394,967 | 77,289,082 | 76,722,965 | 73,996,399 | 76,342,632 | |||||||||||||||
Weighted average effect of dilutive securities | 3,243,684 | 3,438,173 | 3,640,775 | 3,737,316 | 3,672,106 | |||||||||||||||
Total diluted weighted average ordinary shares | 80,638,651 | 80,727,255 | 80,363,740 | 77,733,716 | 80,014,738 | |||||||||||||||
Earnings per ordinary shares | ||||||||||||||||||||
Basic | $ | 0.16 | $ | 1.34 | $ | 1.14 | $ | 1.18 | $ | 3.80 | ||||||||||
Diluted | $ | 0.16 | $ | 1.28 | $ | 1.08 | $ | 1.12 | $ | 3.62 |
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Twelve Months Ended December 31, 2009 | ||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||
2009 | 2009 | 2009 | 2009 | Full Year | ||||||||||||||||
($ in millions except per share amounts) | ||||||||||||||||||||
Gross written premium | $ | 636.8 | $ | 534.3 | $ | 490.3 | $ | 405.7 | $ | 2,067.1 | ||||||||||
Gross earned premium | 493.2 | 491.3 | 522.2 | 528.7 | 2,035.4 | |||||||||||||||
Net earned premium | 447.3 | 428.6 | 470.9 | 476.2 | 1,823.0 | |||||||||||||||
Losses and loss adjustment expenses | (250.8 | ) | (234.7 | ) | (235.1 | ) | (227.5 | ) | (948.1 | ) | ||||||||||
Policy acquisition, general, administrative and corporate expenses | (127.1 | ) | (140.7 | ) | (143.3 | ) | (175.4 | ) | (586.5 | ) | ||||||||||
Underwriting income/(loss), including corporate expenses | $ | 69.4 | $ | 53.2 | $ | 92.5 | $ | 73.3 | $ | 288.4 | ||||||||||
Net investment income | 59.2 | 72.2 | 58.9 | 58.2 | 248.5 | |||||||||||||||
Interest expense | (3.9 | ) | (4.0 | ) | (3.9 | ) | (3.8 | ) | (15.6 | ) | ||||||||||
Other (expense) income | (2.7 | ) | 0.7 | 1.1 | 0.9 | — | ||||||||||||||
Total other operating revenue | $ | 52.6 | $ | 68.9 | $ | 56.1 | $ | 55.3 | $ | 232.9 | ||||||||||
Operating income/(loss) before tax | $ | 122.0 | $ | 122.1 | $ | 148.6 | $ | 128.6 | $ | 521.3 | ||||||||||
Net exchange gains/(losses) | (2.3 | ) | 3.1 | 7.9 | (6.7 | ) | 2.0 | |||||||||||||
Net realized investment losses | (12.2 | ) | 4.8 | 14.6 | 4.2 | 11.4 | ||||||||||||||
Income before tax | $ | 107.5 | $ | 130.0 | $ | 171.1 | $ | 126.1 | $ | 534.7 | ||||||||||
Income taxes | (16.1 | ) | (19.6 | ) | (25.3 | ) | 0.2 | (60.8 | ) | |||||||||||
Net income after tax | $ | 91.4 | $ | 110.4 | $ | 145.8 | $ | 126.3 | $ | 473.9 | ||||||||||
Ordinary Shares | ||||||||||||||||||||
Basic weighted average ordinary shares | 81,534,704 | 82,940,270 | 83,056,587 | 83,239,074 | 82,698,325 | |||||||||||||||
Weighted average effect of dilutive securities | 2,037,148 | 2,705,862 | 2,936,702 | 3,172,155 | 2,628,887 | |||||||||||||||
Total diluted weighted average ordinary shares | 83,571,852 | 85,646,132 | 85,993,289 | 86,411,229 | 85,327,212 | |||||||||||||||
Earnings per ordinary shares | ||||||||||||||||||||
Basic | $ | 1.42 | $ | 1.26 | $ | 1.69 | $ | 1.45 | $ | 5.82 | ||||||||||
Diluted | $ | 1.39 | $ | 1.22 | $ | 1.63 | $ | 1.40 | $ | 5.64 |
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As at | As at | |||||||
December 31, 2011 | December 31, 2010 | |||||||
($ in millions, except per share amounts) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 125.3 | $ | 354.0 | ||||
Investments in subsidiaries | 2,570.1 | 2,767.2 | ||||||
Other investments | 33.1 | 30.0 | ||||||
Eurobond issued by subsidiary | 917.0 | 550.0 | ||||||
Intercompany funds due from affiliates | 32.9 | 44.7 | ||||||
Other assets | 7.3 | 8.0 | ||||||
Total Assets | $ | 3,685.7 | $ | 3,753.9 | ||||
LIABILITIES | ||||||||
Accrued expenses and other payables | 14.7 | 13.2 | ||||||
Long-term debt | 499.0 | 498.8 | ||||||
Total Liabilities | $ | 513.7 | $ | 512.0 | ||||
SHAREHOLDERS’ EQUITY | ||||||||
Ordinary shares: 70,655,698 ordinary shares of 0.15144558¢ each (2010 — 76,342,632) | $ | 0.1 | $ | 0.1 | ||||
Preference shares: 4,600,000 5.625% shares of par value 0.15144558¢ each (2010 — 4,600,000) | — | — | ||||||
5,327,500 7.401% shares of par value 0.15144558¢ each (2010 — 5,327,500) | — | — | ||||||
Additional paid in capital | 1,385.0 | 1,388.3 | ||||||
Retained earnings | 1,357.7 | 1,528.7 | ||||||
Non-controlling interest | 0.3 | 0.5 | ||||||
Accumulated other comprehensive income, net of taxes | ||||||||
Unrealized gains on investments | 305.4 | 211.9 | ||||||
Loss on derivatives | (0.7 | ) | (1.0 | ) | ||||
Gains on foreign currency translation | 124.2 | 113.4 | ||||||
Total accumulated other comprehensive income | 428.9 | 324.3 | ||||||
Total Shareholders’ Equity | 3,172.0 | 3,241.9 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 3,685.7 | $ | 3,753.9 | ||||
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For the Twelve Months Ended December 31, 2011, 2010 and 2009
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2009 | ||||||||||
($ in millions) | ||||||||||||
Operating Activities: | ||||||||||||
Equity in net (loss)/earnings of subsidiaries | $ | (307.2 | ) | $ | (19.3 | ) | $ | 65.6 | ||||
Net investment income | — | — | — | |||||||||
Net realized and unrealized gains | — | — | 0.9 | |||||||||
Dividend income | 185.0 | 323.1 | 401.0 | |||||||||
Interest income on Eurobond | 52.0 | 36.5 | 36.5 | |||||||||
Change in fair value of derivatives | — | (7.0 | ) | (8.0 | ) | |||||||
Realized investment gains | 3.1 | 2.7 | — | |||||||||
Other income | 4.0 | 8.1 | 7.2 | |||||||||
Total Revenues | (63.1 | ) | 344.1 | 503.2 | ||||||||
Expenses: | ||||||||||||
Operating and administrative expenses | (11.9 | ) | (14.6 | ) | (13.7 | ) | ||||||
Interest expense | (30.8 | ) | (16.8 | ) | (15.6 | ) | ||||||
Income from operations before income tax | (105.8 | ) | 312.7 | 473.9 | ||||||||
Income tax | — | — | — | |||||||||
Net income | (105.8 | ) | $ | 312.7 | $ | 473.9 | ||||||
Other comprehensive income/(loss), net of taxes: | ||||||||||||
Change in unrealized losses on investments | 93.5 | $ | 56.8 | $ | 101.8 | |||||||
Loss on derivatives reclassified to interest expense | 0.2 | 0.2 | 0.2 | |||||||||
Change in unrealized gains on foreign currency translation | 10.8 | 10.0 | 15.8 | |||||||||
Other comprehensive income | 104.5 | 67.0 | 117.8 | |||||||||
Comprehensive income | $ | (1.3 | ) | $ | 379.7 | $ | 591.7 | |||||
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For the Twelve Months Ended December 31, 2011, 2010 and 2009
Twelve Months | Twelve Months | Twelve Months | ||||||||||
Ended | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Cash Flows Provided By Operating Activities: | ||||||||||||
Net income (excluding equity in net earnings of subsidiaries) | $ | 201.4 | $ | 332.0 | $ | 408.3 | ||||||
Adjustments: | ||||||||||||
Share based compensation expenses | 4.0 | 12.8 | 17.2 | |||||||||
Net realized and unrealized (gains) | (3.1 | ) | (2.7 | ) | (0.9 | ) | ||||||
Loss on derivative reclassified to interest expense | 0.3 | 0.2 | 0.2 | |||||||||
Change in other assets | 0.9 | (4.8 | ) | 1.1 | ||||||||
Change in accrued expenses and other payables | (4.4 | ) | 2.2 | — | ||||||||
Change in intercompany activities | 11.8 | 188.4 | (317.2 | ) | ||||||||
Net cash generated by operating activities | 210.9 | 528.1 | 108.7 | |||||||||
Cash Flows Used in Investing Activities: | ||||||||||||
(Purchase) of other investments | — | — | (25.0 | ) | ||||||||
Net cash (used in) investing activities | — | — | (25.0 | ) | ||||||||
Cash Flows Used in Financing Activities: | ||||||||||||
Proceeds from the issuance of ordinary shares, net of issuance costs | 0.8 | 20.3 | 25.1 | |||||||||
Ordinary share repurchase | (8.1 | ) | (407.8 | ) | — | |||||||
Costs from the redemption of preference shares | — | — | (34.1 | ) | ||||||||
Proceeds from long term debt | — | 249.2 | — | |||||||||
Ordinary and preference share dividends paid | (65.3 | ) | (69.3 | ) | (73.6 | ) | ||||||
Eurobond purchased from subsidiary | (367.0 | ) | — | — | ||||||||
Net cash (used in)/generated by financing activities | (439.6 | ) | (207.6 | ) | (82.6 | ) | ||||||
Increase in cash and cash equivalents | (228.7 | ) | 320.5 | 1.1 | ||||||||
Cash and cash equivalents — beginning of period | 354.0 | 33.5 | 32.4 | |||||||||
Cash and cash equivalents — end of period | $ | 125.3 | $ | 354.0 | $ | 33.5 | ||||||
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Net | ||||||||||||||||||||||||||||||||||||
Deferred | Net | Reserves | General | |||||||||||||||||||||||||||||||||
Policy | Reserves | for | Net | Losses and | Policy | Net | and | |||||||||||||||||||||||||||||
Acquisition | for Losses | Unearned | Net Premiums | Investment | LAE | Acquisition | Premium | Administrative | ||||||||||||||||||||||||||||
Year-ended December 31, 2011 | Costs | and LAE | Premiums | Earned | Income | expenses | Expenses | Written | Expenses | |||||||||||||||||||||||||||
Reinsurance | $ | 88.2 | $ | 2,770.0 | $ | 393.3 | $ | 1,108.3 | $ | 1,083.3 | $ | 197.7 | $ | 1,098.1 | $ | 109.8 | ||||||||||||||||||||
Insurance | 112.3 | 1,328.6 | 435.0 | 780.2 | 472.7 | 149.3 | 831.0 | 125.7 | ||||||||||||||||||||||||||||
Total | $ | 200.5 | $ | 4,098.6 | $ | 828.3 | $ | 1,888.5 | $ | 225.6 | $ | 1,556.0 | $ | 347.0 | $ | 1,929.1 | $ | 235.5 | ||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||
Deferred | Net | Reserves | General | |||||||||||||||||||||||||||||||||
Policy | Reserves | for | Net | Losses and | Policy | Net | and | |||||||||||||||||||||||||||||
Acquisition | for Losses | Unearned | Net Premiums | Investment | LAE | Acquisition | Premium | Administrative | ||||||||||||||||||||||||||||
Year-ended December 31, 2010 | Costs | and LAE | Premiums | Earned | Income | Expenses | Expenses | Written | Expenses | |||||||||||||||||||||||||||
Reinsurance | $ | 93.8 | $ | 2,243.9 | $ | 460.3 | $ | 1,141.8 | $ | 693.5 | $ | 202.4 | $ | 1,118.5 | $ | 112.3 | ||||||||||||||||||||
Insurance | 73.0 | 1,296.7 | 336.3 | 757.1 | 555.2 | 126.1 | 772.6 | 99.4 | ||||||||||||||||||||||||||||
Total | $ | 166.8 | $ | 3,540.6 | $ | 796.6 | $ | 1,898.9 | $ | 232.0 | $ | 1,248.7 | $ | 328.5 | $ | 1,891.1 | $ | 211.7 | ||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||
Deferred | Net | Reserves | General | |||||||||||||||||||||||||||||||||
Policy | Reserves | for | Net | Losses and | Policy | Net | and | |||||||||||||||||||||||||||||
Acquisition | Losses | Unearned | Net Premiums | Investment | LAE | Acquisition | Premium | Administrative | ||||||||||||||||||||||||||||
Year-ended December 31, 2009 | Costs | and LAE | Premiums | Earned | Income | Expenses | Expenses | Written | Expenses | |||||||||||||||||||||||||||
Reinsurance | $ | 76.8 | $ | 1,988.4 | $ | 424.1 | $ | 1,108.1 | $ | 467.3 | $ | 214.6 | $ | 1,116.7 | $ | 97.5 | ||||||||||||||||||||
Insurance | 88.7 | 1,021.2 | 379.7 | 714.9 | 480.8 | 119.5 | 720.1 | 100.7 | ||||||||||||||||||||||||||||
Total | $ | 165.5 | $ | 3,009.6 | $ | 803.8 | $ | 1,823.0 | $ | 248.5 | $ | 948.1 | $ | 334.1 | $ | 1,836.8 | $ | 198.2 | ||||||||||||||||||
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For the Twelve Months Ended December 31, 2011, 2010 and 2009
Direct | Assumed | Ceded | Net Amount | |||||||||||||
($ in millions) | ||||||||||||||||
2011 | $ | 1,020.3 | $ | 1,187.5 | $ | (278.7 | ) | $ | 1,929.1 | |||||||
2010 | $ | 914.6 | $ | 1,162.2 | $ | (185.7 | ) | $ | 1,891.1 | |||||||
2009 | $ | 641.6 | $ | 1,425.5 | $ | (230.3 | ) | $ | 1,836.8 |
Percentage of | ||||||||||||||||||||
Assumed From | Amount | |||||||||||||||||||
Ceded to Other | Other | Assumed | ||||||||||||||||||
Gross Amount | Companies | Companies | Net Amount | to Net | ||||||||||||||||
($ in millions. except for percentages) | ||||||||||||||||||||
2011 | $ | 950.5 | $ | (252.6 | ) | $ | 1,190.6 | $ | 1,888.5 | 63.0 | % | |||||||||
2010 | $ | 907.9 | $ | (195.4 | ) | $ | 1,186.4 | $ | 1,898.9 | 62.5 | % | |||||||||
2009 | $ | 616.2 | $ | (212.4 | ) | $ | 1,419.2 | $ | 1,823.0 | 77.8 | % |
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For the Twelve Months Ended December 31, 2011, 2010 and 2009
Balance at | Charged to | Charged to | ||||||||||||||||||
Beginning of | Costs and | Other | Balance at | |||||||||||||||||
Year | Expenses | Accounts | Deductions | End of Year | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
2011 | ||||||||||||||||||||
Premiums receivable from underwriting activities | $ | 1.5 | $ | (1.5 | ) | — | — | $ | — | |||||||||||
Reinsurance | $ | 0.2 | — | — | — | $ | 0.2 | |||||||||||||
2010 | ||||||||||||||||||||
Premiums receivable from underwriting activities | $ | 1.4 | $ | 0.1 | — | — | $ | 1.5 | ||||||||||||
Reinsurance | $ | 0.2 | — | — | — | $ | 0.2 | |||||||||||||
2009 | ||||||||||||||||||||
Premiums receivable from underwriting activities | — | $ | 1.4 | — | — | $ | 1.4 | |||||||||||||
Reinsurance | $ | 0.2 | — | — | — | $ | 0.2 |
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