| Investments | Investments The Company holds: (i) available-for-sale ("AFS") portfolios of fixed maturity and equity securities, carried at fair value; (ii) other investments, of which certain investments are carried at fair value and investments in direct lending entities are carried at cost less impairment; (iii) equity method investments; and (iv) funds held - directly managed. a) Fixed Maturities The amortized cost, gross unrealized gains and losses, and fair value of fixed maturities at March 31, 2024 and December 31, 2023 are as follows: March 31, 2024 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 66,447 $ — $ (3) $ 66,444 U.S. agency bonds – mortgage-backed 29,221 — (3,603) 25,618 Non-U.S. government bonds 42,029 6 (462) 41,573 Collateralized loan obligations 63,960 — (765) 63,195 Corporate bonds 64,711 — (2,090) 62,621 Total fixed maturity investments $ 266,368 $ 6 $ (6,923) $ 259,451 December 31, 2023 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 55,046 $ 8 $ (2) $ 55,052 U.S. agency bonds – mortgage-backed 29,918 — (3,267) 26,651 Non-U.S. government bonds 21,219 — (468) 20,751 Collateralized loan obligations 80,591 — (1,788) 78,803 Corporate bonds 71,762 — (2,418) 69,344 Total fixed maturity investments $ 258,536 $ 8 $ (7,943) $ 250,601 The Company separately presents the accrued interest receivable balance on its AFS fixed maturity investments on the Condensed Consolidated Balance Sheets under accrued investment income. The amount of accrued interest receivable on AFS securities was $1,370 at March 31, 2024 (December 31, 2023 - $1,418). The Company has elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the AFS fixed maturity securities for the purposes of identifying and measuring any impairments under the allowance for expected credit losses standard adopted on January 1, 2023. Write-offs of accrued interest receivable balances are recognized in net investment gains and losses in the period in which they are deemed uncollectible. There was no write-off recognized on the accrued interest receivable during the three months ended March 31, 2024 and 2023. The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. March 31, 2024 Amortized cost Fair value Due in one year or less $ 139,186 $ 138,553 Due after one year through five years 30,458 28,973 Due after five years through ten years 3,543 3,112 173,187 170,638 U.S. agency bonds – mortgage-backed 29,221 25,618 Collateralized loan obligations 63,960 63,195 Total fixed maturity investments $ 266,368 $ 259,451 4. Investments (continued) The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position: Less than 12 Months 12 Months or More Total March 31, 2024 Fair Unrealized Fair Unrealized Fair Unrealized U.S. treasury bonds $ 46,011 $ (3) $ — $ — $ 46,011 $ (3) U.S. agency bonds – mortgage-backed — — 25,618 (3,603) 25,618 (3,603) Non-U.S. government bonds 10,700 (9) 10,109 (453) 20,809 (462) Collateralized loan obligations — — 63,195 (765) 63,195 (765) Corporate bonds — — 62,621 (2,090) 62,621 (2,090) Total temporarily impaired fixed maturities $ 56,711 $ (12) $ 161,543 $ (6,911) $ 218,254 $ (6,923) At March 31, 2024, there were 57 securities in an unrealized loss position with a fair value of $218,254 and unrealized losses of $6,923. Of these securities in an unrealized loss position, there were 52 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $161,543 and unrealized losses of $6,911. Less than 12 Months 12 Months or More Total December 31, 2023 Fair Unrealized Fair Unrealized Fair Unrealized U.S. treasury bonds $ 518 $ (2) $ — $ — $ 518 $ (2) U.S. agency bonds – mortgage-backed — — 26,651 (3,267) 26,651 (3,267) Non-U.S. government bonds 8,217 (1) 10,343 (467) 18,560 (468) Collateralized loan obligations — — 78,803 (1,788) 78,803 (1,788) Corporate bonds — — 69,344 (2,418) 69,344 (2,418) Total temporarily impaired fixed maturities $ 8,735 $ (3) $ 185,141 $ (7,940) $ 193,876 $ (7,943) At December 31, 2023, there were 59 securities in an unrealized loss position with a fair value of $193,876 and unrealized losses of $7,943. Of these securities in an unrealized loss position, there were 56 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $185,141 and unrealized losses of $7,940. Allowance for Expected Credit Losses & Non-Credit Related Impairment Costs The Company evaluates AFS securities for impairment when fair value is below amortized cost on a quarterly basis. If the Company intends to sell or will be required to sell the security before its anticipated recovery, the full amount of the impairment loss is charged to net income (loss) and included in net investment gains (losses). If the Company does not intend to sell or will not be required to sell the security before its anticipated recovery, an allowance for expected credit losses is established and the portion of the loss relating to credit factors is recorded in net income (loss). The non-credit impairment amount of the loss (which could be related to interest rates and/or market conditions) is recognized in other comprehensive income. To estimate the allowance for expected credit losses for most of the AFS securities, the Company analyzes projected cash flows which are primarily driven by assumptions regarding loss severity, probability of default and projected recovery rates. The Company's determination of default and loss severity rates are based on credit rating, credit analysis and macroeconomic forecasts. Unrealized losses on securities issued or backed, either explicitly or implicitly by the U.S. government are not analyzed for credit losses. The Company has concluded that any possibility of a credit loss on these securities is highly unlikely due to the explicit U.S. government guarantee related to certain securities (e.g., Government National Mortgage Association issuances) and the implicit guarantee related to other securities that has been validated by past actions (e.g., U.S. government bailout of Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the 2008 credit crisis). Although these securities are not analyzed for credit losses, they are evaluated for impairment based on the Company's intention to sell and likely requirement to sell. Based on the Company's analysis at March 31, 2024 and 2023, respectively, the unrealized losses on the Company’s AFS fixed maturity securities were due to non-credit factors and were expected to be recovered as the related securities approach maturity. At March 31, 2024, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs. Therefore, there was no allowance recorded for expected credit losses on AFS securities for the three months ended March 31, 2024 and 2023. 4. Investments (continued) The following tables summarize the credit ratings of our fixed maturities as at March 31, 2024 and December 31, 2023: March 31, 2024 Amortized cost Fair value % of Total U.S. treasury bonds $ 66,447 $ 66,444 25.6 % U.S. agency bonds – mortgage-backed 29,221 25,618 9.9 % AAA 74,228 73,452 28.3 % AA+, AA, AA- 29,096 28,582 11.0 % A+, A, A- 33,836 32,588 12.6 % BBB+, BBB, BBB- 28,145 27,453 10.6 % BB+ or lower 5,395 5,314 2.0 % Total fixed maturities (1) $ 266,368 $ 259,451 100.0 % December 31, 2023 Amortized cost Fair value % of Total U.S. treasury bonds $ 55,046 $ 55,052 22.0 % U.S. agency bonds – mortgage-backed 29,918 26,651 10.6 % AAA 84,455 82,703 33.0 % AA+, AA, AA- 18,952 18,372 7.3 % A+, A, A- 33,060 31,810 12.7 % BBB+, BBB, BBB- 31,585 30,631 12.2 % BB+ or lower 5,520 5,382 2.2 % Total fixed maturities (1) $ 258,536 $ 250,601 100.0 % (1) Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings. b) Other Investments, Equity Securities and Equity Method Investments Certain of the Company's other investments and equity method investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which could limit our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request. Certain other investments and equity method investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments and equity method investments are not eligible for redemption or sales are restricted, the Company may still receive income distributions from those investments. Other investments The table shows the composition of the Company's other investments as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Carrying value % of Total Carrying value % of Total Private equity funds $ 53,757 26.8 % $ 47,383 25.9 % Private credit investments 29,220 14.6 % 27,806 15.2 % Privately held equity investments 44,768 22.3 % 38,617 21.1 % Total other investments at fair value 127,745 63.7 % 113,806 62.2 % Investments in direct lending entities (at cost) 72,643 36.3 % 69,005 37.8 % Total other investments $ 200,388 100.0 % $ 182,811 100.0 % The Company's collateralized investments in direct lending entities of $72,643 at March 31, 2024 (December 31, 2023 - $69,005) are carried at cost less an allowance for expected credit losses, with any indication of credit loss recognized in net income when determined. An allowance for expected credit losses of $1,023 was reported on the investments in direct lending entities as at March 31, 2024 and December 31, 2023. Please see "Note 5(d). Fair Value Measurements" for additional information regarding this investment. 4. Investments (continued) Equity Securities Equity securities include publicly traded equity investments in common stocks and privately held equity investments in common and preferred stocks. The Company's publicly traded equity investments in common stocks trade on major exchanges. The Company's privately held equity investments in common and preferred stocks are direct investments in companies that the Company believes offer attractive risk adjusted returns or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. The following table provides the cost and fair values of the equity securities held at March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Cost Fair Value Cost Fair Value Privately held common stocks $ 34,549 $ 34,400 $ 34,549 $ 35,272 Privately held preferred stocks 8,800 9,946 8,800 9,946 Publicly traded equity investments in common stocks 90 82 90 81 Total equity securities $ 43,439 $ 44,428 $ 43,439 $ 45,299 With the exception of the publicly traded equity investments in common stocks presented in the table above, all of the privately held securities held at March 31, 2024 are subject to contractual sale restrictions. Each of these investments are subject to agreements that restrict the transfer, sale, and indemnification of these privately held investments indefinitely. The Company must hold these shares indefinitely unless the investee's shares are registered with the SEC and qualified by state authorities, or until an exemption from such registration and qualification requirements may become available. Fair Value Remaining duration of restrictions Nature of contractual sale restrictions Circumstances that could cause a lapse in restrictions Privately held common stocks $ 34,400 Indefinite The Purchaser must hold the restricted shares indefinitely Registration of securities with the SEC or if exemption is available Privately held preferred stocks 9,946 Indefinite The Purchaser must hold the restricted shares indefinitely Registration of securities with the SEC or if exemption is available Total equity securities subject to contractual sale restrictions $ 44,346 Equity Method Investments The equity method investments currently include real estate investments and other investments. The table below shows the carrying value of the Company's equity method investments as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Carrying Value % of Total Carrying Value % of Total Real estate investments $ 52,614 64.0 % $ 49,897 61.7 % Other investments 29,545 36.0 % 31,032 38.3 % Total equity method investments $ 82,159 100.0 % $ 80,929 100.0 % The equity method investments above include limited partnerships which are variable interests issued by variable interest entities ("VIEs"). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs, therefore, the Company is not the primary beneficiary of these VIEs. T he Company is deemed to have limited influence over the operating and financial policies of the investee and accordingly, these investments are reported under the equity method of accounting. In applying the equity method of accounting, the investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the investee's net income or loss. Generally, the maximum exposure to loss on these interests is limited to the amount of commitment made by the Company as more fully described in "Note 11 - Commitments, Contingencies and Guarantees" in these condensed consolidated financial statements. 4. Investments (continued) c) Net Investment Income Net investment income was derived from the following sources for the three months ended March 31, 2024 and 2023: For the Three Months Ended March 31, 2024 2023 Fixed maturities $ 2,440 $ 2,418 Income on funds withheld 901 3,335 Interest income from loan to related party 3,070 2,698 Cash and cash equivalents 1,381 1,193 7,792 9,644 Investment expenses (92) (99) Net investment income $ 7,700 $ 9,545 d) Net Realized and Unrealized Investment Gains (Losses) Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following tables show the net realized and unrealized investment gains (losses) included in the Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023: For the Three Months Ended March 31, 2024 Gross gains Gross losses Net Fixed maturities $ — $ (218) $ (218) Equity securities 146 (1,017) (871) Other investments 11,324 (1,485) 9,839 Net realized and unrealized investment gains (losses) $ 11,470 $ (2,720) $ 8,750 For the Three Months Ended March 31, 2023 Gross gains Gross losses Net Equity securities $ 1,024 $ (378) $ 646 Other investments 1,641 (1,282) 359 Net realized and unrealized investment gains (losses) $ 2,665 $ (1,660) $ 1,005 Realized and unrealized gains and losses from equity securities detailed above include both sales and distributions of equity securities and unrealized gains and losses coming from fair value changes. Unrealized (losses) gains recognized for equity securities still held at reporting date for the three months ended March 31, 2024 and 2023, respectively, included: For the Three Months Ended March 31, 2024 2023 Net (losses) gains recognized for equity securities $ (871) $ 646 Net gains recognized for equity securities divested — (176) Unrealized (losses) gains recognized for equity securities still held at reporting date $ (871) $ 470 Proceeds from sales of fixed maturity investments were $23,835 for the three months ended March 31, 2024 (2023 - $954). Net unrealized losses included in accumulated other comprehensive income ("AOCI") were as follows at March 31, 2024 and December 31, 2023, respectively: March 31, 2024 December 31, 2023 Net unrealized losses on fixed maturity investments $ (6,917) $ (7,935) Deferred income tax 147 151 Net unrealized losses, net of deferred income tax $ (6,770) $ (7,784) Change, net of deferred income tax $ 1,014 $ 7,884 4. Investments (continued) e) Restricted Cash and Cash Equivalents and Investments The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of restricted assets at March 31, 2024 and December 31, 2023 are: March 31, 2024 December 31, 2023 Restricted cash – third party agreements $ 5,643 $ 6,019 Restricted cash – related party agreements 3,806 1,247 Total restricted cash 9,449 7,266 Restricted investments – in trust for third party agreements at fair value (amortized cost: 2024 – $67,490; 2023 – $63,299) 64,913 61,192 Restricted investments – in trust for related party agreements at fair value (amortized cost: 2024 – $155,319; 2023 – $155,546) 152,396 151,416 Total restricted investments 217,309 212,608 Total restricted cash and investments $ 226,758 $ 219,874 |
