Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 28, 2020 | Jun. 28, 2019 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Watford Holdings Ltd. | ||
Entity Central Index Key | 0001601669 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Shell Company | false | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 19,902,895 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 548.9 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Term loans, fair value option (Amortized cost: $1,113,212 and $1,055,664) | $ 1,061,934,000 | $ 1,000,652,000 |
Fixed maturities, fair value option (Amortized cost: $432,576 and $972,653) | 416,594,000 | 922,819,000 |
Short-term investments, fair value option (Cost: $325,542 and $281,959) | 329,303,000 | 282,132,000 |
Equity securities, fair value option | 59,799,000 | 56,638,000 |
Other investments, fair value option | 30,461,000 | 49,762,000 |
Investments, fair value option | 1,898,091,000 | 2,312,003,000 |
Fixed maturities, available for sale (Amortized cost: $739,456 and $397,509) | 745,708,000 | 393,351,000 |
Equity securities, fair value through net income | 65,338,000 | 33,013,000 |
Total investments | 2,709,137,000 | 2,738,367,000 |
Cash and cash equivalents | 102,437,000 | 63,529,000 |
Accrued investment income | 14,025,000 | 19,461,000 |
Premiums receivable | 273,657,000 | 227,301,000 |
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 170,974,000 | 86,445,000 |
Prepaid reinsurance premiums | 132,577,000 | 61,587,000 |
Deferred acquisition costs, net | 64,044,000 | 80,858,000 |
Receivable for securities sold | 16,288,000 | 24,507,000 |
Intangible assets | 7,650,000 | 7,650,000 |
Funds held by reinsurers | 42,505,000 | 44,830,000 |
Other assets | 17,562,000 | 18,321,000 |
Total assets | 3,550,856,000 | 3,372,856,000 |
Liabilities | ||
Reserve for losses and loss adjustment expenses | 1,263,628,000 | 1,032,760,000 |
Unearned premiums | 438,907,000 | 390,114,000 |
Losses payable | 61,314,000 | 24,750,000 |
Reinsurance balances payable | 77,066,000 | 21,034,000 |
Payable for securities purchased | 18,180,000 | 60,142,000 |
Payable for securities sold short | 66,257,000 | 8,928,000 |
Revolving credit agreement borrowings | 484,287,000 | 693,917,000 |
Senior notes | 172,418,000 | 0 |
Amounts due to affiliates | 4,467,000 | 5,888,000 |
Investment management and performance fees payable | 17,762,000 | 3,807,000 |
Other liabilities | 21,912,000 | 20,916,000 |
Total liabilities | 2,626,198,000 | 2,262,256,000 |
Commitments and contingencies | ||
Contingently redeemable preference shares | 52,305,000 | 220,992,000 |
Shareholders’ equity | ||
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,692,300 and 22,682,875) | 227,000 | 227,000 |
Additional paid-in capital | 898,083,000 | 895,386,000 |
Retained earnings (deficit) | 43,470,000 | (1,275,000) |
Accumulated other comprehensive income (loss) | 5,629,000 | (4,730,000) |
Common shares held in treasury, at cost (shares: 2,789,405 and Nil) | 75,056,000 | 0 |
Total shareholders’ equity | 872,353,000 | 889,608,000 |
Total liabilities, contingently redeemable preference shares and shareholders’ equity | $ 3,550,856,000 | $ 3,372,856,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Term loans, fair value option, amortized cost | $ 1,113,212 | $ 1,055,664 |
Fixed maturities, fair value option, amortized cost | 432,576 | 972,653 |
Short term investments, fair value option, amortized cost | 325,542 | 281,959 |
Fixed maturities, available for sale, amortized cost | $ 739,456 | $ 397,509 |
Common shares, par value | $ 0.01 | $ 0.01 |
Common shares, authorized | 120,000,000 | 120,000,000 |
Common shares, issued | 22,692,300 | 22,682,875 |
Common shares held in treasury | 2,789,405 | 0 |
Consolidated Statements of Inco
Consolidated Statements of Income (Loss) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | |||
Gross premiums written | $ 754,881 | $ 735,015 | $ 600,304 |
Gross premiums ceded | (222,019) | (130,840) | (47,187) |
Net premiums written | 532,862 | 604,175 | 553,117 |
Change in unearned premiums | 23,828 | (25,313) | (21,391) |
Net premiums earned | 556,690 | 578,862 | 531,726 |
Other underwriting income (loss) | 2,412 | 2,722 | 3,180 |
Interest income | 163,888 | 152,916 | 125,463 |
Investment management fees - related parties | (18,392) | (17,006) | (21,451) |
Borrowing and miscellaneous other investment expenses | (29,285) | (28,377) | (17,489) |
Net interest income | 116,211 | 107,533 | 86,523 |
Realized and unrealized gains (losses) on investments | 24,243 | (113,834) | 1,120 |
Investment performance fees - related parties | (12,191) | (48) | (14,905) |
Net investment income (loss) | 128,263 | (6,349) | 72,738 |
Total revenues | 687,365 | 575,235 | 607,644 |
Expenses | |||
Loss and loss adjustment expenses | (453,135) | (441,255) | (436,402) |
Acquisition expenses | (126,788) | (141,136) | (140,726) |
General and administrative expenses | (30,843) | (22,311) | (21,174) |
Interest expense | (5,791) | 0 | 0 |
Net foreign exchange gains (losses) | (8,247) | 3,611 | 1,420 |
Non-recurring direct listing expenses | 0 | (9,000) | 0 |
Total expenses | (624,804) | (610,091) | (596,882) |
Income (loss) before income taxes | 62,561 | (34,856) | 10,762 |
Income tax expense | (20) | (27) | (21) |
Net income (loss) before preference dividends and redemption costs | 62,541 | (34,883) | 10,741 |
Preference dividends | (13,632) | (19,633) | (19,633) |
Accelerated amortization of costs related to the redemption of preference shares | (4,164) | 0 | 0 |
Net income (loss) available to common shareholders | $ 44,745 | $ (54,516) | $ (8,892) |
Earnings (loss) per common share: | |||
Earnings (loss) per share, basic | $ 2 | $ (2.40) | $ (0.39) |
Earnings (loss) per share, diluted | $ 2 | $ (2.40) | $ (0.39) |
Weighted average number of common shares used in the determination of earnings (loss) per share, basic | 22,366,682 | 22,682,875 | 22,682,875 |
Weighted average number of common shares used in the determination of earnings (loss) per share, diluted | 22,373,968 | 22,682,875 | 22,682,875 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) Statement - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Net income (loss) available to common shareholders | $ 44,745,000 | $ (54,516,000) | $ (8,892,000) | |
Other comprehensive income (loss) net of income tax: | ||||
Available for sale investments: unrealized holding gains (losses) arising during the year | [1] | 16,021,000 | (5,204,000) | 0 |
Available for sale investments: reclassification of net realized (gains) losses, net of income taxes, included in net income | (5,611,000) | 1,046,000 | 0 | |
Foreign currency translation adjustments | (51,000) | 400,000 | (597,000) | |
Other comprehensive income (loss) net of income tax | 10,359,000 | (3,758,000) | (597,000) | |
Comprehensive income (loss) | 55,104,000 | (58,274,000) | (9,489,000) | |
Unrealized net foreign exchange gains (losses) | $ 3,400,000 | $ (2,700,000) | $ 0 | |
[1] | Includes $3.4 million, $(2.7) million and $Nil unrealized net foreign exchange gains (losses) for the years ended December 31, 2019, 2018 and 2017, respectively. |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity Statement - USD ($) $ in Thousands | Total | Common shares | Additional paid-in capital | Accumulated other comprehensive income (loss) | Unrealized holding gains (losses) of available for sale investments | Currency translation adjustment | Common shares held in treasury, at cost | Retained earnings (deficit) |
Balance, beginning of period at Dec. 31, 2016 | $ 227 | $ 895,386 | $ (375) | $ 0 | $ (375) | $ 0 | $ 62,133 | |
Common shares issued | 0 | 0 | ||||||
Share compensation expense | 0 | |||||||
Unrealized holding gains (losses) of available for sale investments, net of reclassification adjustment | 0 | |||||||
Currency translation adjustment | $ (597) | (597) | ||||||
Shares repurchased for treasury | 0 | |||||||
Net income (loss) before preference dividends and redemption costs | 10,741 | 10,741 | ||||||
Preference dividends | (19,633) | (19,633) | ||||||
Accelerated amortization of costs related to the redemption of preference shares | 0 | 0 | ||||||
Balance, end of period at Dec. 31, 2017 | 947,882 | 227 | 895,386 | (972) | 0 | (972) | 0 | 53,241 |
Common shares issued | 0 | 0 | ||||||
Share compensation expense | 0 | |||||||
Unrealized holding gains (losses) of available for sale investments, net of reclassification adjustment | (4,158) | |||||||
Currency translation adjustment | 400 | 400 | ||||||
Shares repurchased for treasury | 0 | |||||||
Net income (loss) before preference dividends and redemption costs | (34,883) | (34,883) | ||||||
Preference dividends | (19,633) | (19,633) | ||||||
Accelerated amortization of costs related to the redemption of preference shares | 0 | 0 | ||||||
Balance, end of period at Dec. 31, 2018 | 889,608 | 227 | 895,386 | (4,730) | (4,158) | (572) | 0 | (1,275) |
Common shares issued | 0 | 250 | ||||||
Share compensation expense | 2,447 | |||||||
Unrealized holding gains (losses) of available for sale investments, net of reclassification adjustment | 10,410 | |||||||
Currency translation adjustment | (51) | (51) | ||||||
Shares repurchased for treasury | (75,056) | |||||||
Net income (loss) before preference dividends and redemption costs | 62,541 | 62,541 | ||||||
Preference dividends | (13,632) | (13,632) | ||||||
Accelerated amortization of costs related to the redemption of preference shares | (4,164) | (4,164) | ||||||
Balance, end of period at Dec. 31, 2019 | $ 872,353 | $ 227 | $ 898,083 | $ 5,629 | $ 6,252 | $ (623) | $ (75,056) | $ 43,470 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating Activities | |||
Net income (loss) before preference dividends | $ 62,541 | $ (34,883) | $ 10,741 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Net realized and unrealized (gains) losses on investments | (24,243) | 113,834 | (1,120) |
Amortization of fixed assets | 86 | 157 | 187 |
Share-based compensation | 2,697 | 0 | 0 |
Changes in: | |||
Accrued investment income | 5,441 | (1,212) | (1,237) |
Premiums receivable | (39,849) | (58,700) | 18,923 |
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | (84,737) | (42,822) | (18,023) |
Prepaid reinsurance premiums | (70,990) | (36,825) | (11,716) |
Deferred acquisition costs, net | 19,577 | 5,709 | 950 |
Reserve for losses and loss adjustment expenses | 216,596 | 257,479 | 272,295 |
Unearned premiums | 47,162 | 62,138 | 33,106 |
Reinsurance balances payable | 57,554 | 3,847 | 5,367 |
Funds held with reinsurers | 2,915 | (5,219) | (17,855) |
Other liabilities | 44,605 | (24,021) | 18,051 |
Other items | (71) | (10,168) | (17,444) |
Net Cash Provided By Operating Activities | 239,284 | 229,314 | 292,225 |
Investing Activities | |||
Purchase of term loans | (443,550) | (774,570) | (827,757) |
Purchase of fixed maturity investments | (1,247,573) | (1,286,151) | (1,579,591) |
Purchase of other investments | 0 | 0 | (50,000) |
Purchase of short-term investments with maturities over three months | (45,106) | (25,876) | 0 |
Proceeds from sale, redemptions and maturity of term loans | 324,142 | 633,923 | 731,679 |
Proceeds from sales, redemptions and maturities of fixed maturity investments | 1,508,008 | 1,062,966 | 1,162,210 |
Proceeds from sales, redemptions and maturities of other investments | 47,281 | 0 | 0 |
Proceeds from sales, redemptions and maturities of short-term investments with maturities over three months | 6,953 | 0 | 0 |
Net (purchases) sales of short-term investments with maturities less than three months | (6,015) | 70,165 | 50,829 |
Purchases of equity securities | (75,164) | (122,766) | (71,562) |
Proceeds from sales of equity securities | 26,112 | 95,371 | 8,486 |
Net settlements of derivative instruments | 2,471 | 1,642 | (1,734) |
Purchases of furniture, equipment and other assets | 0 | (11) | (21) |
Net Cash Provided by (Used For) Investing Activities | 97,559 | (345,307) | (577,461) |
Financing Activities | |||
Dividends paid on redeemable preference shares | (13,402) | (19,264) | (19,264) |
Repayments on borrowings | (273,155) | (201,401) | (72,000) |
Proceeds from borrowings | 62,800 | 348,433 | 359,238 |
Repurchase of preference shares | (173,081) | 0 | 0 |
Net proceeds from issuance of senior notes | 172,283 | 0 | 0 |
Purchases of common shares under share repurchase program | (75,056) | 0 | 0 |
Borrowings issuance costs | 0 | 0 | (5,667) |
Net Cash Provided By (Used For) Financing Activities | (299,611) | 127,768 | 262,307 |
Effects of exchange rate changes on foreign currency cash | 1,676 | (2,749) | 2,539 |
Increase (decrease) in cash | 38,908 | 9,026 | (20,390) |
Cash and cash equivalents, beginning of year | 63,529 | 54,503 | 74,893 |
Cash and cash equivalents, end of year | 102,437 | 63,529 | 54,503 |
Supplementary information | |||
Income taxes paid | 20 | 27 | 21 |
Interest paid | 33,384 | 26,717 | 15,719 |
Non-cash exchange of investments | $ 45,541 | $ 0 | $ 0 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Watford Holdings Ltd. (the “Parent”) and its wholly-owned subsidiary, Watford Re Ltd. (“Watford Re”), were incorporated under the laws of Bermuda on July 19, 2013. As used herein, the terms “Company” or “Companies,” or “we,” “us” and “our,” collectively refer to the Parent and/or, as applicable, its subsidiaries. Watford Re is licensed as a Class 4 multi-line insurer under the Insurance Act 1978 of Bermuda, as amended, and related regulations (the “Insurance Act”) and is licensed to underwrite general business on an insurance and reinsurance basis. Through Watford Re, the Company primarily underwrites reinsurance on exposures worldwide. In the first quarter of 2014, the Company raised approximately $1.1 billion of capital consisting of $907.3 million in common equity ( $895.6 million net of issuance costs) and $226.6 million in preference equity ( $219.2 million net of issuance costs and discount). Through its wholly-owned subsidiary, Arch Reinsurance Ltd. (“ARL”), Arch Capital Group Ltd. (“ACGL”) invested $100.0 million and acquired approximately 11% of the Company’s common equity and a warrant to purchase up to 975,503 of common shares. See Note 18 - “Shareholders’ equity” for further details. On March 28, 2019, the Company completed a direct listing of its common shares on the Nasdaq Global Select Market. On June 28, 2019, the Company completed a direct listing of its 8½% Cumulative Redeemable Preference Shares (the “preference shares”) on the Nasdaq Global Select Market. The Company did not issue any new common shares or preference shares, nor did the Company receive any proceeds from the sale of common shares or preference shares by the selling shareholders. Watford Re and Watford Insurance Company Europe Limited (“WICE”) have engaged Arch Underwriters Ltd. (“AUL”), a company incorporated in Bermuda and a wholly-owned subsidiary of Arch Capital Group Ltd. (“ACGL”), to act as their insurance and reinsurance manager pursuant to services agreements between AUL and Watford Re and WICE, respectively. AUL manages the day-to-day underwriting activities of Watford Re and WICE, subject to the provisions of the services agreement and the oversight of our board of directors. See Note 13 - “Transactions with related parties” for further details. In May 2018, Watford Insurance Company Europe (“WICE”) formed a branch in Romania and commenced underwriting operations in June 2018. WICE is a wholly-owned subsidiary of Watford Re. Watford Specialty Insurance Company (“WSIC”) and Watford Insurance Company (“WIC”), which are wholly-owned, indirect subsidiaries of Watford Re, have engaged Arch Underwriters Inc. (“AUI”), a company incorporated in Delaware and a wholly-owned subsidiary of ACGL, to act as their insurance and reinsurance manager pursuant to services agreements between AUI and WSIC and WIC, respectively. AUI manages the day-to-day underwriting activities of WSIC and WIC, subject to the provisions of the services agreement and the oversight of our board of directors. See Note 13 - “Transactions with related parties” for further details. The Company has engaged HPS Investment Partners, LLC (“HPS”), as investment manager of the assets in its non-investment grade portfolio pursuant to various investment management agreements. HPS invests the Company’s non-investment grade assets and a portion of its investment grade assets, subject to the terms of the applicable investment management agreements. See Note 13 - “Transactions with related parties” for further details. The Company has engaged Arch Investment Management Ltd. (“AIM”), a Bermuda exempted company and a subsidiary of ACGL, as investment manager of assets in its investment grade portfolio pursuant to various investment management agreements. AIM manages the majority of the Company’s investment grade assets pursuant to the terms of the investment management agreements with AIM. See Note 13 - “Transactions with related parties” for further details. |
Basis of presentation and signi
Basis of presentation and significant accounting policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Significant accounting policies | (a) Basis of presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. (b) Premium revenues and related expenses Reinsurance premiums written are recorded based on the type of contracts the Company writes. Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of loss contracts, premiums are recorded as written, on the inception date, based on the terms of the contract. Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annual installments, premium recognition depends on whether the contract is non-cancellable. If either party retains the ability to cancel or commute coverage prior to expiration, only the initial annual installment is included as premiums written at policy inception. The remaining annual installments would then be included as premiums written at each successive anniversary date within the multi-year term. If, on the other hand, the contract is non-cancellable, the full multi-year premiums would be recognized as written at policy inception. Reinsurance premiums written and assumed include amounts reported by brokers and ceding companies, supplemented by the Company’s own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each line of business, and management’s judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company reviews the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business. In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information. Based on a review of all available information, management establishes premium estimates where reports have not been received. Premium estimates are updated when new information is received and differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined. Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned. Reinstatement premiums are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment. Reinsurance premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the term of the underlying policies or reinsurance contracts. Contracts and policies written on a “losses occurring” basis cover claims that may occur during the term of the contract or policy, which is typically 1 year . Accordingly, the premium is earned evenly over the term. Contracts which are written on a “risks attaching” basis cover claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 2 years period. Certain of the Company’s reinsurance contracts include provisions that adjust premiums or acquisition expenses based upon the experience under the contracts. Premiums written and earned, as well as related acquisition expenses are recorded based upon the projected experience under such contracts. Acquisition expenses consist primarily of brokerage fees, ceding commissions, premium taxes, underwriting fees payable to Arch under our services agreements and other direct expenses that relate to our contracts and policies and are presented net of commissions received from reinsurance we purchase. We amortize deferred acquisition expenses over the related contract term in the same proportion that the premiums are earned. Our acquisition expenses may also include profit commissions paid to our sources of business in the event of favorable underwriting experience. Deferred acquisition costs, which are based on the related unearned premiums, are carried at their estimated realizable value and take into account anticipated losses and loss adjustment expenses, based on historical and current experience, and anticipated investment income. A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition costs and anticipated investment income exceed unearned premiums. A premium deficiency is recorded by charging any unamortized acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds unamortized acquisition costs then a liability is accrued for the excess deficiency. No premium deficiency charges were recorded by the Company during December 31, 2019 , 2018 and 2017 . (c) Retroactive Reinsurance Accounting Retroactive reinsurance reimburses a ceding company for liabilities incurred as a result of past insurable events covered by the underlying policies reinsured. For retroactive contracts that meet the established criteria for reinsurance accounting, written premiums are fully earned and corresponding losses and loss expense are recognized at inception. The initial gain, if applicable, is deferred and amortized into income over an actuarially determined expected payout period. Any future loss is recognized immediately and charged against earnings. The contracts can cause significant variances in gross premiums written, net premiums written, net premiums earned, and net incurred losses in the years in which they are written. Reinsurance contracts sold not meeting the established criteria for reinsurance accounting are recorded using the deposit method. In certain instances, reinsurance contracts cover losses both on a prospective basis and on a retroactive basis and, accordingly, the Company bifurcates the prospective and retrospective elements of these reinsurance contracts and accounts for each element separately where practical. Underwriting income generated in connection with retroactive reinsurance contracts is deferred and amortized into income over the settlement period while losses are charged to income immediately. Subsequent changes in estimated or actual cash flows under such retroactive reinsurance contracts are accounted for by adjusting the previously deferred amount to the balance that would have existed had the revised estimate been available at the inception of the reinsurance transaction, with a corresponding charge or credit to income. (d) Reinsurance ceded The accompanying consolidated statements of income (loss) reflect premiums and losses and loss adjustment expenses and acquisition expenses, net of reinsurance ceded (see Note 4, “Reinsurance” ). Ceded unearned premiums are reported as prepaid reinsurance premiums and estimated amounts of reinsurance recoverable on unpaid losses are reported as unpaid losses and loss adjustment expenses recoverable. Reinsurance premiums ceded and unpaid losses and loss adjustment expenses recoverable are estimated in a manner consistent with that of the original policies issued and the terms of the reinsurance contracts. If the reinsurers are unable to satisfy their obligations under the agreements, the Company would be liable for such defaulted amounts. Reinsurance ceding commissions are recognized as income on a pro rata basis over the period of risk. Reinsurance ceding commissions that represent a recovery of acquisition costs are recognized as a reduction to acquisition expenses while the remaining portion is deferred. (e) Cash and cash equivalents Cash includes cash equivalents, which are investments with original maturities of three months or less that are not managed by the external investment managers. Short-term investments include certain cash equivalents which are part of investment portfolios under the management of our investment managers. (f) Investments The Company has elected the fair value option for the majority of its long and short-term investments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 825, Financial Instruments. As a result, the Company’s non-investment grade investments are reported at fair value with changes in fair value included in “realized and unrealized gain (loss) on investments” in the consolidated statements of income (loss). See Note 7 - “Investment information” for further information about the investment portfolios. The fair values of investments are based on quotations received from nationally recognized pricing services, or when such prices are not available, by reference to broker or underwriter bid indications. Short-term investments are comprised of securities due to mature within one year of the date of issue. Investment transactions are recorded on a trade date basis with balances pending settlement recorded separately in the consolidated balance sheets as receivable for securities sold or payable for securities purchased. See Note 8 - “Fair value” for further details. Beginning January 1, 2018, the Company elected to classify newly acquired debt investments in its investment grade portfolio as “available for sale.” Accordingly, they are carried at estimated fair value (also known as fair value) with the changes in fair value recorded as an unrealized gain or loss component of accumulated other comprehensive income in shareholders’ equity. The Company performs quarterly reviews of its investment grade investments to determine whether declines in fair value below the cost basis are considered other-than-temporary in accordance with applicable accounting guidance regarding the recognition and presentation of other-than-temporary impairment (“OTTI”). The process of determining whether a security is other-than-temporarily impaired requires judgment and involves analyzing many factors. These factors include (i) an analysis of the liquidity, business prospects and overall financial condition of the issuer, (ii) the time period in which there was a significant decline in value, (iii) the significance of the decline and (iv) the analysis of specific credit events. When there are credit-related losses associated with investment grade debt securities for which the Company does not have an intent to sell and it is more likely than not that it will not be required to sell the security before recovery of its cost basis, the amount of the OTTI related to a credit loss is recognized in earnings and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of other comprehensive income (loss). The amount of the credit loss of an impaired debt security is the difference between the amortized cost and the greater of (i) the present value of expected future cash flows and (ii) the fair value of the security. In instances where no credit loss exists but it is more likely than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in fair value below amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI were recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted or amortized into net investment income. As of December 31, 2019 , the Company had no investment losses on the available for sale portfolio that are considered as other-than-temporary. Investment gains or losses realized on the sale of investments are determined on a first-in, first-out basis and are reflected in net income. Unrealized appreciation or decline in the value of available for sale securities, which are carried at fair value, is excluded from net income and recorded as a separate component of accumulated other comprehensive income, net of applicable deferred income tax. Net interest income includes interest income together with amortization of market premiums and discounts, net of investment management fees, interest expense and custody fees. Anticipated prepayments and expected maturities are used in applying the interest method for certain investments, such as asset-backed securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The investment in such securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security. Such adjustments, if any, are included in interest income when determined. Investment gains or losses realized on the sale of investments are determined on a first-in, first-out basis and are reflected in “realized and unrealized gain (loss) on investments” in the consolidated statements of income (loss). Performance fees related to the non-investment grade portfolio (i) equal to 15% of income for periods prior to January 1, 2018 and (ii) for periods beginning January 1, 2018 equal to 10% of income plus an additional performance fee equal to 25% of any Excess Income (as defined in such investment management agreements) in excess of a net 10% return to Watford after deduction for paid and accrued management fees and base performance fees, with the total performance fees not to exceed 17.5% of the Income or Aggregate Income, as applicable, are reflected in “investment performance fees - related parties” in the consolidated statements of income (loss). See Note 7 - “Investment information” for further details. The Company invests in limited partnerships and limited liability companies. Such amounts are included in other investments, fair value option. These investments can often have characteristics of a variable interest entity (“VIE”). A VIE refers to entities that have characteristics such as (i) insufficient equity at risk to allow the entity to finance its activities without additional financial support or (ii) instances where the equity investors, as a group, do not have the characteristic of a controlling financial interest. If the Company is determined to be the primary beneficiary, it is required to consolidate the VIE. The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (i) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. At inception of the VIE as well as on an ongoing basis, the Company determines whether it is the primary beneficiary based on an analysis of the Company’s level of involvement in the VIE, the contractual terms, and the overall structure of the VIE. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. (g) Derivative instruments The Company recognizes all derivative financial instruments, including embedded derivative instruments, at fair value in the consolidated balance sheets. The Company’s investment and underwriting strategy allows for the use of derivative instruments to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under the Company’s investment guidelines if implemented in other ways. For such investment derivative instruments, changes in assets and liabilities measured at fair value are recorded as a component of “realized and unrealized gain (loss) on investments.” In addition, the Company’s derivative instruments include amounts related to underwriting activities where an insurance or reinsurance contract meets the accounting definition of a derivative instrument. For such contracts, changes in fair value are reflected in “other underwriting income” in the consolidated statements of income (loss), as the underlying contract originates from the Company’s underwriting operations. See Note 10 - “Derivative instruments” for further details. (h) Reserves for losses and loss adjustment expenses The reserve for losses and loss adjustment expenses consists of estimates of unpaid reported losses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received. The Company’s reserves are based on a combination of reserving methods, incorporating ceding company and industry loss development patterns. The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by AUL and AUI managers during the initial pricing of the business, supplemented by industry data where appropriate. Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. The Company, in conjunction with data and analysis supplied by AUL and AUI, reviews the reserves regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are reflected in income in the period in which they are determined. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss adjustment expenses may differ materially from the amounts recorded in the accompanying consolidated financial statements. Losses and loss adjustment expenses are recorded on an un-discounted basis. See Note 5 - “Reserve for losses and loss adjustment expenses” for further details. (i) Foreign exchange Monetary assets and liabilities, such as premiums receivable and the reserve for losses and loss adjustment expenses, denominated in foreign currencies are revalued at the exchange rate in effect at the balance sheet date with the resulting foreign exchange gains and losses included in net income. Accounts that are classified as non-monetary, such as deferred acquisition costs and the unearned premium reserves, are not subsequently re-measured. In the case of foreign currency-denominated cash and investments, the change in exchange rates between the local currency and the Company’s functional currency at each balance sheet date is included as a component of net foreign exchange gains and losses included in the consolidated statements of income (loss). In the case of foreign currency denominated fixed maturity securities which are classified as “available for sale,” the change in exchange rates between the local currency in which the investments are denominated and the Company’s functional currency at each balance sheet date is included in unrealized appreciation or decline in value of securities, a component of accumulated other comprehensive income, net of applicable deferred income tax. Assets and liabilities of foreign operations whose functional currency is not the U.S. dollar are translated at the prevailing exchange rates at each balance sheet date. Revenues and expenses of such foreign operations are translated at average exchange rates during the year. The net effect of the translation adjustments for foreign operations is included in accumulated other comprehensive income. (j) Intangible assets The Company’s intangible assets with indefinite lives include licenses held by its U.S. insurance subsidiary which allow such subsidiary to write insurance business in various jurisdictions. These indefinite-lived intangible assets are carried at or below fair value and are tested annually for impairment, either qualitatively or quantitatively, and between annual tests if events or change in circumstances indicate that it is more likely than not that the asset is impaired. If intangible assets are impaired, such assets are written down to their fair values with the related expense recorded in the Company’s results of operations. (k) Income taxes Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. A valuation allowance is recorded if it is more likely than not that some or all of a deferred tax asset may not be realized. The Company considers future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance. In the event the Company determines that it will not be able to realize all or part of its deferred income tax assets in the future, an adjustment to the deferred income tax assets would be charged to income in the period in which such determination is made. In addition, if the Company subsequently assesses that the valuation allowance is no longer needed, a benefit would be recorded to income in the period in which such determination is made. See Note 12 - “Income taxes” for more information. The Company recognizes a tax benefit where it concludes that it is more likely than not that the tax benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized. The Company records related interest and penalties in income tax expense. (l) Warrants The Company issued certain warrant contracts to Arch and HPS in conjunction with the initial capitalization of the Company which may be settled by the Company using either the physical settlement or net-share settlement methods. In the event these warrants are exercised and settled, the fair value of these warrants would be recorded in equity as additional paid-in capital based on an option-pricing model (Black-Scholes) used to calculate the fair value of the warrants issued. (m) Earnings per share Basic earnings per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares and participating securities outstanding during the period. The weighted average number of common shares excludes any dilutive effect of outstanding warrants, options and convertible securities, such as nonparticipating unvested restricted shares, if applicable. Diluted earnings per share are based on the weighted average number of common shares and share equivalents including any dilutive effects of warrants, options and other awards under stock plans, if applicable. U.S. GAAP requires that unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid (referred to as “participating securities”), be included in the number of shares outstanding for both basic and diluted earnings per share calculations. In the event of a net loss, the participating securities are excluded from the calculation of both basic and diluted loss per share. See Note 11 - “Earnings per common share” for more information. (n) Share-based compensation The Company applies a fair value-based measurement method in accounting for its share-based compensation plans with eligible employees and directors. Compensation expense is estimated based on the fair value of the award at the grant date and is recognized in net income over the requisite service period with a corresponding increase in shareholders’ equity. No value is attributed to awards that employees forfeit because they fail to satisfy vesting conditions. The Company’s time-based awards generally vest over a three -year period with one-third vesting on each of the first, second and third anniversaries of the grant date. The share-based compensation expense associated with awards that have graded vesting features and vest based only on service conditions is calculated on a straight-line basis over the requisite service period for the entire award. Compensation expense recognized in connection with performance awards is based on the achievement of the specified performance and service conditions. The final measure of compensation expense recognized over the requisite service period reflects the final performance outcome. During the recognition period, compensation expense is accrued based on the specified performance conditions that are probable of achievement. For awards granted to retirement-eligible employees where no service is required for the employee to retain the award, the grant date fair value is immediately recognized as compensation expense at the grant date because the employee is able to retain the award without continuing to provide service. For employees near retirement eligibility, the attribution of compensation expense is over the period from the grant date to the retirement eligibility date. The Company accounts for forfeitures of share-based awards as such forfeitures occur. See Note 19 - “Share transactions” for information relating to the Company’s share-based compensation. (o) Treasury shares Treasury shares are common shares purchased by the Company and not subsequently canceled. These shares are recorded at cost and result in a reduction of the Company’s shareholders’ equity in its consolidated balance sheets. (p) Recent accounting pronouncements Recently adopted accounting standards and accounting standard updates ( “ ASU ” ) In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases and subsequently issued several improvements to that update (collectively “ASU 2016-02”). The new accounting guidance requires that the lessee recognize an asset and a liability for leases with a lease term greater than 12 months regardless of whether the lease is classified as operating or financing. Under the previous accounting standard, operating leases were not reflected in the balance sheet. The Company adopted ASU 2016-02 on January 1, 2019. The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $1.1 million and a lease liability of $1.1 million in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets. The cumulative effect adjustment to the opening balance of retained earnings was $ Nil . The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 intends to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective January 1, 2019. This ASU was adopted on January 1, 2019, and did not have a material impact on the Company ’ s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 permits companies to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years. This ASU was adopted on January 1, 2019, and did not have a material impact on the Company ’ s consolidated financial statements and disclosures. Recently issued accounting standards not yet adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The new accounting guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses rather than incurred credit losses. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has assessed the impact of the implementation of this ASU and considers the impact to be immaterial to the Company’s consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”). ASU 2018-13 intends to modify the disclosure requirements on fair value measurements. The accounting guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted; removal or modification disclosures can be early adopted upon issuance of ASU 2018-13, and a delay of the adoption of additional disclosures is permitted until the effective date noted above. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements and disclosures. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”), which identified and clarified issues relevant to the implementation of ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), ASU 2016-13 and ASU 2017-12. The Company is assessing the impact the implementation will have on its consolidated financial statements and disclosures. • For amendments related to ASU 2016-01 and ASU 2016-13, the effective date is for fiscal years and interim periods beginning after December 15, 2019; with early adoption in any interim period permitted for ASU 2016-01. • For amendments related to ASU 2017-12, the effective date is as of the beginning of the first annual reporting period beginning after April 25, 2019. As the Company has implemented ASU 2017-12, early adoption in any interim period is permitted. |
Segment information
Segment information | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment information | The Company reports results under one segment, referred to as the “ underwriting segment. ” The underwriting segment captures the results of the Company’s underwriting lines of business, which are comprised of specialty products on a worldwide basis. Lines of business include: (i) casualty reinsurance; (ii) property catastrophe reinsurance; (iii) other specialty reinsurance; and (iv) insurance programs and coinsurance. The accounting policies of the underwriting segment are the same as those used for the preparation of the Company’s consolidated financial statements. The Company has a corporate function that includes certain general and administrative expenses related to corporate activities, interest expense (on the 6.5% senior notes due 2029), net foreign exchange gains (losses), income tax expense and items related to the Company’s preference shares. The following table provides summary information regarding premiums written and earned by line of business and net premiums written by underwriting location: Year Ended December 31, 2019 2018 2017 ($ in thousands) Gross premiums written: Casualty reinsurance $ 279,967 $ 274,661 $ 284,481 Other specialty reinsurance 119,518 196,170 169,100 Property catastrophe reinsurance 16,226 10,424 12,740 Insurance programs and coinsurance 339,170 253,760 133,983 Total $ 754,881 $ 735,015 $ 600,304 Net premiums written: Casualty reinsurance $ 225,758 $ 273,048 $ 281,783 Other specialty reinsurance 114,876 181,096 155,666 Property catastrophe reinsurance 15,517 10,193 12,455 Insurance programs and coinsurance 176,711 139,838 103,213 Total $ 532,862 $ 604,175 $ 553,117 Net premiums earned: Casualty reinsurance $ 238,437 $ 278,656 $ 308,526 Other specialty reinsurance 149,688 162,691 134,855 Property catastrophe reinsurance 13,399 10,998 12,690 Insurance programs and coinsurance 155,166 126,517 75,655 Total $ 556,690 $ 578,862 $ 531,726 Net premiums written by underwriting location: United States $ 127,176 $ 49,800 $ 11,750 Europe 52,065 91,635 91,463 Bermuda 353,621 462,740 449,904 Total $ 532,862 $ 604,175 $ 553,117 |
Reinsurance
Reinsurance | 12 Months Ended |
Dec. 31, 2019 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Through reinsurance agreements with Arch Reinsurance Ltd. (“ARL”) and Arch Reinsurance Company (“ARC”) , which are subsidiaries of ACGL, as well as through other third-party reinsurance agreements, the Company cedes a portion of its premiums. The effects of reinsurance on the Company’s written and earned premiums, losses and loss adjustment expenses were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Premiums written Direct $ 339,170 $ 253,760 $ 133,983 Assumed 415,711 481,255 466,321 Ceded (222,019 ) (130,840 ) (47,187 ) Net $ 532,862 $ 604,175 $ 553,117 Premiums earned Direct $ 290,328 $ 201,868 $ 96,125 Assumed 419,778 468,156 471,073 Ceded (153,416 ) (91,162 ) (35,472 ) Net $ 556,690 $ 578,862 $ 531,726 Losses and loss adjustment expenses Direct $ 244,354 $ 157,991 $ 71,679 Assumed 347,378 348,332 393,565 Ceded (138,597 ) (65,068 ) (28,842 ) Net $ 453,135 $ 441,255 $ 436,402 The Company monitors the financial condition of its reinsurers and attempts to place coverages only with financially sound carriers. At December 31, 2019 and 2018 , approximately 95% and 98% , respectively, were due from carriers which had an A.M. Best rating of “A-” or better, while 5% and 2% , respectively, were due from companies not rated. At December 31, 2019 and 2018 , approximately 47% and 53% , respectively, of the Company’s reinsurance recoverables on paid and unpaid losses (not including prepaid reinsurance premiums) were due from ARL and ARC, each of which have ratings of “A+” from A.M. Best. Although the Company has not experienced any material credit losses to date, an inability of its reinsurers to meet their obligations to it over the relevant exposure periods for any reason could have a material adverse effect on its financial condition and results of operations. |
Reserve for losses and loss adj
Reserve for losses and loss adjustment expenses | 12 Months Ended |
Dec. 31, 2019 | |
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | |
Reserve for losses and loss adjustment expenses | The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses for the years ended December 31, 2019 , 2018 and 2017 . Year Ended December 31, 2019 2018 2017 ($ in thousands) Gross reserve for losses and loss adjustment expenses at beginning of year $ 1,032,760 $ 798,262 $ 510,809 Unpaid losses and loss adjustment expenses recoverable 81,267 39,856 21,518 Net reserve for losses and loss adjustment expenses at beginning of year 951,493 758,406 489,291 Net incurred losses and loss adjustment expenses relating to losses occurring in: Current year 429,322 443,482 399,530 Prior years 23,813 (2,227 ) 36,872 Total net losses and loss adjustment expenses 453,135 441,255 436,402 Foreign exchange gains (losses) 15,286 (23,962 ) 14,832 Net paid losses and loss adjustment expenses relating to losses occurring in: Current year (73,723 ) (64,026 ) (70,423 ) Prior years (248,112 ) (160,180 ) (111,696 ) Total paid losses and loss adjustment expenses (321,835 ) (224,206 ) (182,119 ) Net reserve for losses and loss adjustment expenses at end of year 1,098,079 951,493 758,406 Unpaid losses and loss adjustment expenses recoverable 165,549 81,267 39,856 Gross reserve for losses and loss adjustment expenses at end of year $ 1,263,628 $ 1,032,760 $ 798,262 During 2019 , the Company recorded net unfavorable development on prior year loss reserves of $23.8 million . Net unfavorable development was experienced on casualty reinsurance losses of $24.4 million and insurance programs of $3.2 million . This unfavorable development was partially offset by favorable development on property catastrophe reinsurance of $3.2 million and other specialty reinsurance of $0.6 million . The loss reserve strengthening in 2019 is in response to higher than projected reported losses, mainly in U.S. casualty reinsurance and certain casualty exposures where losses are expected to have been incurred but have yet to be reported. During 2018 , the Company recorded net favorable development on prior year loss reserves of $2.2 million . Net favorable development was experienced on property catastrophe reinsurance losses of $5.9 million and other specialty reinsurance losses of $3.6 million . This favorable development was offset by adverse development on casualty reinsurance losses of $6.3 million and $0.9 million on insurance programs. During 2017 , the Company recorded net unfavorable development on prior year loss reserves of $36.9 million . The net unfavorable prior year development was driven by casualty reinsurance and other specialty reinsurance contracts. Casualty reinsurance experienced net unfavorable development of $33.8 million primarily due to the U.K. Ministry of Justice’s reduction of the discount rate known as the “Ogden” rate and adverse development on certain large multi-line and professional liability contracts. The Ogden rate was reduced from 2.5% to negative 0.75% ; the resulting claims development in 2017 was higher than expected. Other specialty reinsurance experienced net unfavorable development of $5.2 million primarily due to worse than expected emergence on nonstandard and U.K. motor quota share contracts. The remaining lines had net favorable prior year development of $2.2 million due to better than expected emergence of reported losses. |
Short duration contracts
Short duration contracts | 12 Months Ended |
Dec. 31, 2019 | |
Short Duration Contracts [Abstract] | |
Short duration contracts | The Company is required by applicable insurance laws and regulations and U.S. GAAP to establish reserves for losses and loss adjustment expenses (“loss reserves”) that arise from the business it underwrites. Loss reserves are balance sheet liabilities representing estimates of future amounts required to pay losses and loss adjustment expenses for insured or reinsured events which have occurred at or before the balance sheet date. Loss reserves do not reflect contingency reserve allowances to account for future loss occurrences. Losses arising from future events will be estimated and recognized at the time the losses are incurred and could be substantial. Loss reserves are comprised of (1) case reserves for claims reported, (2) additional case reserves, or ACRs, and (3) IBNR reserves. Loss reserves are established to provide for loss adjustment expenses and represent the estimated expense of settling claims, including legal and other fees and the general expenses of administering the claims adjustment process. Periodically, adjustments to the reported or case reserves may be made as additional information regarding the claims is reported or payments are made. IBNR reserves are established to provide for incurred claims which have not yet been reported at the balance sheet date as well as to adjust for any projected variance in case reserving. Actuaries estimate ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made. The process of estimating reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. Ultimate losses and loss adjustment expenses are generally determined by extrapolation of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. In forecasting ultimate losses and loss adjustment expenses with respect to any line of business, past experience with respect to that line of business is the primary resource, developed through both industry and company experience, but cannot be relied upon in isolation. Uncertainties in estimating ultimate losses and loss adjustment expenses are magnified by the time lag between when a claim actually occurs and when it is reported and settled. This time lag is sometimes referred to as the “claim-tail.” The claim-tail for most property coverages is typically short (usually several months up to a few years). The claim-tail for certain professional liability, executive assurance and health care coverages, which are generally written on a claims-made basis, is typically longer than property coverages but shorter than casualty lines. The claim-tail for liability/casualty coverages, such as general liability, products liability, multiple peril coverage and workers’ compensation, may be especially long as claims are often reported and ultimately paid or settled years, or even decades, after the related loss events occur. During the claims reporting and settlement period, additional facts regarding coverages written in prior accident years, as well as about actual claims and trends, may become known and, as a result, management may adjust its reserves. If management determines that an adjustment is appropriate, the adjustment is recorded in the accounting period in which such determination is made in accordance with U.S. GAAP. Accordingly, if loss reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted, respectively. In addition, the inherent uncertainties of estimating such reserves are even greater for our reinsurance lines of business, due primarily to the following factors: (1) the claim-tail for reinsurers is generally longer because claims are first reported to the ceding company and then to the reinsurer through one or more intermediaries, (2) the reliance on premium estimates, where reports have not been received from the ceding company, in the reserving process, (3) the potential for writing a number of reinsurance contracts with different ceding companies with the same exposure to a single loss event, (4) the diversity of loss development patterns among different types of reinsurance contracts, (5) the necessary reliance on the ceding companies for information regarding reported claims and (6) the differing reserving practices among ceding companies. In determining ultimate losses and loss adjustment expenses, the cost to indemnify claimants, provide needed legal defense and other services for insureds and administer the investigation and adjustment of claims are considered. These claim costs are influenced by many factors that change over time, such as expanded coverage definitions as a result of new court decisions, inflation in costs to repair or replace damaged property, inflation in the cost of medical services and legislated changes in statutory benefits, as well as by the particular, unique facts that pertain to each claim. As a result, the rate at which claims arose in the past and the costs to settle them may not always be representative of what will occur in the future. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses are frequently subject to multiple and conflicting interpretations. Changes in coverage terms or claims handling practices may also cause future experience and/or development patterns to vary from the past. A key objective of actuaries in developing estimates of ultimate losses and loss adjustment expenses, and resulting IBNR reserves, is to identify aberrations and systemic changes occurring within historical experience and accurately adjust for them so that the future can be projected reliably. Pricing actuaries devote considerable effort to understanding and analyzing a ceding company and program administrator’s operations and loss history during the underwriting of the business, using a combination of ceding company, program administrator, and industry statistics. Such statistics normally include historical premium and loss data by class of business, individual claim information for larger claims, distributions of insurance limits provided, loss reporting and payment patterns, and rate change history. Because of the factors previously discussed, this process requires the substantial use of informed judgment and is inherently uncertain. As mentioned above, there can be a considerable time lag from the time a claim is reported to a ceding company to the time it is reported to the reinsurer. The lag can be several years in some cases and may be attributed to a number of reasons; including the time it takes to investigate a claim, delays associated with the litigation process, the deterioration in a claimant’s physical condition many years after an accident occurs, the case reserving approach of the ceding company, etc. In the reserving process, the Company assumes that such lags are predictable, on average, over time and therefore the lags are contemplated in the loss reporting patterns used in their actuarial methods. This means that reserves for our reinsurance lines of business must rely on estimates for a longer period of time than for our insurance lines of business. Backlogs in the recording of assumed reinsurance can also complicate the accuracy of loss reserve estimation. As of December 31, 2019 there were no significant backlogs related to the processing of assumed reinsurance information for our reinsurance lines of business. Although loss reserves are initially determined based on underwriting and pricing analysis, we apply several generally accepted actuarial methods, as discussed below, on a quarterly basis. Each quarter, as part of the reserving process, actuaries at our operations reaffirm that the assumptions used in the reserving process continue to form a sound basis for projection of liabilities. If actual loss activity differs substantially from expectations based on historical information, an adjustment to loss reserves may be supported. Estimated loss reserves for more mature underwriting years are based more on actual loss activity and historical patterns than on the initial assumptions based on pricing indications. More recent underwriting years rely more heavily on internal pricing assumptions. We place more or less reliance on a particular actuarial method based on the facts and circumstances at the time the estimates of loss reserves are made. These methods generally fall into one of the following categories or are hybrids of one or more of the following categories: • Expected loss methods: these methods are based on the assumption that ultimate losses vary proportionately with premiums. Expected loss and loss adjustment expense ratios are typically developed based upon the information derived by underwriters and actuaries during the initial pricing of the business, supplemented by industry data available from organizations, such as statistical bureaus and consulting firms, where appropriate. These ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. Expected loss methods are useful for estimating ultimate losses and loss adjustment expenses in the early years of long-tailed lines of business, when little or no paid or incurred loss information is available, and is commonly applied when limited loss experience exists for a company. • Historical incurred loss development methods: these methods assume that the ratio of losses in one period to losses in an earlier period will remain constant in the future. These methods use incurred losses (i.e., the sum of cumulative historical loss payments plus outstanding case reserves) over discrete periods of time to estimate future losses. Historical incurred loss development methods may be preferable to historical paid loss development methods because they explicitly take into account open cases and the claims adjusters’ evaluations of the cost to settle all known claims. However, historical incurred loss development methods necessarily assume that case reserving practices are consistently applied over time. Therefore, when there have been significant changes in how case reserves are established, using incurred loss data to project ultimate losses may be less reliable than other methods. • Historical paid loss development methods: these methods, like historical incurred loss development methods, assume that the ratio of losses in one period to losses in an earlier period will remain constant. These methods use historical loss payments over discrete periods of time to estimate future losses and necessarily assume that factors that have affected paid losses in the past, such as inflation or the effects of litigation, will remain constant in the future. Because historical paid loss development methods do not use incurred losses to estimate ultimate losses, they may be more reliable than the other methods that use incurred losses in situations where there are significant changes in how incurred losses are established by a company’s claims adjusters. However, historical paid loss development methods are more leveraged (meaning that small changes in payments have a larger impact on estimates of ultimate losses) than actuarial methods that use incurred losses because cumulative loss payments take much longer to equal the expected ultimate losses than cumulative incurred amounts. In addition, and for similar reasons, historical paid loss development methods are often slow to react to situations when new or different factors arise than those that have affected paid losses in the past. • Adjusted historical paid and incurred loss development methods: these methods take traditional historical paid and incurred loss development methods and adjust them for the estimated impact of changes from the past in factors such as inflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred loss development methods are often more reliable methods of predicting ultimate losses in periods of significant change, provided the actuaries can develop methods to reasonably quantify the impact of changes. As such, these methods utilize more judgment than historical paid and incurred loss development methods. • Bornhuetter-Ferguson, or B-F, paid and incurred loss methods: these methods utilize actual paid and incurred losses and expected patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of expected ultimate losses. The B-F paid and incurred loss methods are useful when there are few reported claims and a relatively less stable pattern of reported losses. • Additional analysis: other methodologies are often used in the reserving process for specific types of claims or events, such as catastrophic or other specific major events. These include vendor catastrophe models, which are typically used in the estimation of loss reserves at the early stage of known catastrophic events before information has been reported to an insurer or reinsurer, and analysis of specific industry events, such as large lawsuits or claims. In the initial reserving process for short-tail lines, consisting of property catastrophe and other exposures, we rely on a combination of the reserving methods discussed above. For known catastrophic events, our reserving process also includes the usage of catastrophe models and a heavy reliance on analysis which includes ceding company inquiries and management judgment. The development of property losses may be unstable, especially where there is high catastrophic exposure, may be characterized by high severity, low frequency losses for excess and catastrophe-exposed business and may be highly correlated across contracts. As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process. We make a number of key assumptions in reserving for short-tail lines, including that historical paid and reported development patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and our underwriters’ judgment and guidance received from ceding companies as to potential loss exposures may be relied on. The expected loss ratios used in the initial reserving process for our property exposures will vary over time due to changes in pricing, reinsurance structure, estimates of catastrophe losses, terms and conditions and geographical distribution. As losses in property lines are reported relatively quickly, expected loss ratios are selected for the current underwriting year incorporating the experience for earlier underwriting years, adjusted for rate changes, inflation, changes in reinsurance programs, expectations about present and future market conditions and expected attritional losses based on modeling. Due to the short-tail nature of property business, reported loss experience emerges quickly and ultimate losses are known in a comparatively short period of time. In the initial reserving process for medium-tail and long-tail lines, consisting of casualty, other specialty, and other exposures, we primarily rely on the expected loss method. The development of medium-tail and long-tail business may be unstable, especially if there are high severity major events, with business written on an excess of loss basis typically having a longer tail than business written on a pro rata basis. As time passes, for a given exposure, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process. We make a number of key assumptions in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the contract is entered into, historical paid and reported development patterns are stable and our claims personnel and underwriters analysis of our exposure to major events are assumed to be our best estimate of our exposure to the known claims on those events. The expected loss ratios used in initial reserving process for medium-tail and long-tail contracts will vary over time due to changes in pricing, terms and conditions and reinsurance structure. As the credibility of historical experience for earlier underwriting year’s increases, the experience from these underwriting years will be used in the actuarial analysis to determine future underwriting year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure. Our reinsurance business receives reports of claims notices from ceding companies and record case reserves based upon the amount of reserves recommended by the ceding company. Case reserves on known events may be supplemented by ACRs, which are often estimated by our reinsurance operations’ claims personnel ahead of official notification from the ceding company, or when our reinsurance operations’ judgment regarding the size or severity of the known event differs from the ceding company. In certain instances, our reinsurance operations establish ACRs even when the ceding company does not report any liability on a known event. In addition, specific claim information reported by ceding companies or obtained through claim audits can alert our reinsurance operations to emerging trends such as changing legal interpretations of coverage and liability, claims from unexpected sources or classes of business, and significant changes in the frequency or severity of individual claims. Our reinsurance business relies heavily on information reported by ceding companies, as discussed above. In order to determine the accuracy and completeness of such information, underwriters, actuaries, and claims personnel at our reinsurance operations often perform audits of ceding companies and regularly review information received from ceding companies for unusual or unexpected results. Material findings are usually discussed with the ceding companies. Our reinsurance operations sometimes encounter situations where they determine that a claim presentation from a ceding company is not in accordance with contract terms. In these situations, our reinsurance operations attempt to resolve the dispute with the ceding company. Most situations are resolved amicably and without the need for litigation or arbitration. However, in the infrequent situations where a resolution is not possible, our reinsurance operations will vigorously defend their position in such disputes. For our insurance programs and coinsurance line of business, Arch’s claim personnel, under our service arrangements, determine whether to establish a case reserve for the estimated amount of the ultimate settlement of individual claims. The estimate reflects the judgment of claims personnel based on general corporate reserving practices, the experience and knowledge of such personnel regarding the nature and value of the specific type of claim and, where appropriate, advice of counsel. We contract with a number of outside third-party administrators in the claims process who, in certain cases, have limited authority to establish case reserves. The work of these administrators is reviewed and monitored by such claims personnel. Our reserves for loss and loss adjustment expenses primarily relate to short-duration contracts with various characteristics (e.g., type of coverage, geography, claims duration). We have considered such information in determining the level of disaggregation for disclosures related to our short-duration contracts, as detailed in the table below: Level of disaggregation Included product lines Casualty reinsurance - pro rata Executive assurance, medical malpractice liability, other professional liability, workers’ compensation, excess and umbrella liability and excess auto liability all written primarily on a treaty pro rata basis Casualty reinsurance - excess of loss Executive assurance, medical malpractice liability, other professional liability, workers’ compensation, excess and umbrella liability and excess auto liability all written primarily on a treaty excess of loss basis Other specialty reinsurance Personal and commercial auto (other than excess auto liability), surety, accident and health, and workers compensation catastrophe written primarily on a treaty basis Property catastrophe reinsurance Property catastrophe reinsurance Insurance programs and coinsurance Primary and excess general liability, umbrella liability, professional liability, workers’ compensation, personal and commercial automobile, inland marine and property business with minimal catastrophe exposure written on a direct basis We have determined the following product lines to be insignificant for disclosure purposes: (i) mortgage reinsurance, (ii) marine and aviation reinsurance; (iii) other property reinsurance; and (iv) agriculture reinsurance. Such amounts are included as reconciling items. We do not include claim count information in our short duration triangles for reinsurance. A significant percentage of our reinsurance business is written on a proportional basis, for which individual loss information is typically unavailable. For our insurance programs and coinsurance line of business, we generally consider a reported claim to be per claimant, and we include claims with nil or nominal payments and/or case reserves. We write the majority of our reinsurance contracts on an underwriting year basis and therefore may involve multiple accident years. Pursuant to customary cedant/reinsurer reporting requirements, the cedant reports premium for a given contract to us in total for the contract period, not separated by accident year. Similarly, for certain contract structures, the paid and outstanding losses will also be reported in total for the contract period, not by accident year. The short duration disclosure requires us to separately disclose paid losses, case reserves and IBNR losses by accident year, which necessitates an allocation of the underwriting year data between each of the applicable accident years. To separate reported losses by accident year we employ certain assumptions, which can lead to anomalies in the presentation of individual accident year results. The following tables present information on the short-duration contracts by line of business: Casualty reinsurance - Pro Rata ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 43,675 $ 43,026 $ 44,255 $ 45,847 $ 48,675 $ 50,353 $ 7,057 2015 159,460 160,004 173,994 177,786 185,728 35,987 2016 167,764 186,899 188,019 197,028 51,520 2017 178,479 179,978 192,420 67,144 2018 147,936 143,108 74,847 2019 115,895 75,819 Total $ 884,532 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ 883 $ 6,869 $ 13,980 $ 20,741 $ 25,628 $ 32,184 2015 12,985 37,392 70,101 86,921 114,698 2016 11,409 45,346 68,884 111,334 2017 15,369 40,632 82,190 2018 11,134 35,905 2019 16,598 Total 392,909 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 491,623 Casualty reinsurance - Excess of Loss ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 4,759 $ 5,756 $ 5,315 $ 11,636 $ 10,647 $ 10,392 $ 821 2015 27,910 29,008 36,466 38,030 38,343 2,247 2016 38,321 42,553 49,517 50,252 7,956 2017 45,349 36,170 39,442 12,043 2018 70,079 67,550 27,263 2019 79,050 53,402 Total $ 285,029 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ 2 $ 72 $ 671 $ 1,348 $ 3,369 2015 97 622 2,015 6,957 8,756 2016 218 797 2,617 5,554 2017 107 970 2,476 2018 155 2,455 2019 301 Total 22,911 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 262,118 Other specialty reinsurance ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 16,868 $ 17,247 $ 17,134 $ 17,605 $ 18,032 $ 18,031 $ 732 2015 72,131 73,461 71,845 74,414 76,917 2,841 2016 66,514 57,377 58,375 55,979 2,786 2017 77,923 73,308 77,661 7,003 2018 81,807 84,262 12,260 2019 85,895 33,440 Total $ 398,745 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ 4,835 $ 12,471 $ 14,329 $ 15,460 $ 16,892 $ 17,182 2015 30,103 49,238 58,214 67,476 70,401 2016 25,293 38,342 45,545 49,885 2017 29,764 55,164 61,226 2018 18,376 52,457 2019 20,982 Total 272,133 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 126,612 Property catastrophe reinsurance ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 1,516 $ 1,127 $ 815 $ 783 $ 659 $ 613 $ 25 2015 4,662 3,563 2,766 2,065 1,981 — 2016 5,111 4,113 3,413 2,968 78 2017 22,516 18,178 17,404 244 2018 16,734 14,833 875 2019 10,332 2,272 Total $ 48,131 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ 221 $ 545 $ 576 $ 598 $ 606 2015 377 804 1,374 1,456 1,494 2016 1,021 1,932 2,297 2,574 2017 6,615 12,090 13,245 2018 2,765 7,499 2019 583 Total 26,001 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 22,130 Insurance programs and coinsurance ($000’s except claim amount) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Cumulative number of reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ — $ — $ — $ — $ — $ — $ — — 2015 1,033 1,033 1,161 1,169 1,169 22 775 2016 26,299 25,992 27,627 28,090 2,284 31546 2017 59,717 58,665 62,289 8,530 55106 2018 100,538 100,011 15,379 49283 2019 127,368 51,992 58262 Total $ 318,927 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ — $ — $ — $ — $ — 2015 9 403 735 857 922 2016 6,036 15,723 21,115 23,198 2017 18,491 37,778 45,005 2018 31,561 67,067 2019 31,199 Total 167,391 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 151,536 The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2019 : Average annual percentage payout of incurred losses and loss adjustment expenses by age, net of reinsurance Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Casualty reinsurance - pro rata 7.4% 14.5% 16.3% 14.7% 12.3% 13.0% Casualty reinsurance - excess of loss 0.3% 1.6% 2.9% 8.2% 5.6% 19.5% Other specialty reinsurance 32.6% 32.7% 10.7% 8.7% 5.9% 1.6% Property catastrophe reinsurance 19.3% 30.4% 25.1% 6.2% 2.8% 1.2% Insurance programs and coinsurance 21.6% 33.7% 19.7% 8.9% 5.6% N/A For the year ended December 31, 2019 , the Company did not make any significant changes in its methodologies or assumptions. The following table represents a reconciliation of the disclosures of net incurred and paid loss development tables to the reserve for losses and loss adjustment expenses at December 31, 2019 : December 31, 2019 ($ in thousands) Net outstanding liabilities: Casualty reinsurance - pro rata $ 491,623 Casualty reinsurance - excess of loss 262,118 Insurance programs and coinsurance 151,536 Other specialty reinsurance 126,612 Property catastrophe reinsurance 22,130 Other short duration lines not included in disclosures (1) 39,055 Total for short duration lines 1,093,074 Unpaid losses and loss adjustment expenses recoverable: Insurance programs and coinsurance 128,674 Other specialty reinsurance 19,700 Casualty reinsurance - excess of loss 9,949 Casualty reinsurance - pro rata 4,889 Property catastrophe reinsurance 3 Other short duration lines not included in disclosures (1) 2,334 Total for short duration lines 165,549 Unallocated claims adjustment expenses 5,005 Reserve for losses and loss adjustment expenses $ 1,263,628 (1) Other short duration lines includes liabilities acquired in the purchase of WIC of $2.3 million , which are 100% reinsured pursuant to a 100% quota share agreement, and other miscellaneous items. |
Investment information
Investment information | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment information | Available for Sale Investments The following table summarizes the fair value of the Company’s securities classified as available for sale as of December 31, 2019 and 2018 : Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2019 Fixed maturities: U.S. government and government agency bonds $ 282,076 $ 1,708 $ (137 ) $ 283,647 Corporate bonds 155,834 2,326 (41 ) 158,119 Asset-backed securities 145,555 614 (735 ) 145,434 Non-U.S. government and government agency bonds 129,456 3,530 (1,033 ) 131,953 Mortgage-backed securities 24,776 18 (44 ) 24,750 Municipal government and government agency bonds 1,759 46 — 1,805 Total investments, available for sale $ 739,456 $ 8,242 $ (1,990 ) $ 745,708 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2018 Fixed maturities: U.S. government and government agency bonds $ 156,884 $ 672 $ (127 ) $ 157,429 Non-U.S. government and government agency bonds 89,661 670 (2,859 ) 87,472 Corporate bonds 77,178 19 (1,204 ) 75,993 Asset-backed securities 58,369 72 (1,351 ) 57,090 Mortgage-backed securities 14,344 17 (81 ) 14,280 Municipal government and government agency bonds 1,073 14 — 1,087 Total investments, available for sale $ 397,509 $ 1,464 $ (5,622 ) $ 393,351 The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized losses by length of time the security has been in a continual unrealized loss position: Less than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in thousands) December 31, 2019 Fixed maturities: U.S. government and government agency bonds $ 36,540 $ (137 ) $ — $ — $ 36,540 $ (137 ) Non-U.S. government and government agency bonds 51,779 (1,027 ) 5,410 (6 ) 57,189 (1,033 ) Corporate bonds 9,854 (41 ) — — 9,854 (41 ) Asset-backed securities 55,194 (504 ) 19,430 (231 ) 74,624 (735 ) Mortgage-backed securities 14,481 (44 ) — — 14,481 (44 ) Total $ 167,848 $ (1,753 ) $ 24,840 $ (237 ) $ 192,688 $ (1,990 ) December 31, 2018 Fixed maturities: U.S. government and government agency bonds $ 66,422 $ (127 ) $ — $ — $ 66,422 $ (127 ) Non-U.S. government and government agency bonds 78,084 (2,859 ) — — 78,084 (2,859 ) Corporate bonds 70,443 (1,204 ) — — 70,443 (1,204 ) Asset-backed securities 49,400 (1,351 ) — — 49,400 (1,351 ) Mortgage-backed securities 8,478 (81 ) — — 8,478 (81 ) Total $ 272,827 $ (5,622 ) $ — $ — $ 272,827 $ (5,622 ) At December 31, 2019 , 48 positions out of a total of 146 positions were in an unrealized loss position; however, the unrealized loss was less than 10% of the fair value for all 48 positions. The decrease in value can be attributed to movement in foreign exchange rates for the non-U.S. government agency bonds since purchase and the decrease in value for the asset-backed securities, primarily driven by market movements during the period. The Company believes that such securities were temporarily impaired at December 31, 2019 . At December 31, 2018 , 60 positions out of a total of 73 positions were in an unrealized loss position; however, the unrealized loss was less than 10% of the fair value for all 60 positions. The decrease in value can be attributed to an increase in interest rates and unfavorable foreign exchange rates for the non-U.S. government agency bonds during the year ended December 31, 2018 . The Company believes that such securities were temporarily impaired at December 31, 2018 . The amortized cost and fair value of our fixed maturities classified as available for sale, summarized by contractual maturity as of December 31, 2019 and December 31, 2018 are shown in the following tables. December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 9,235 $ 9,248 1.3 % Due after one year through five years 414,235 417,921 56.0 % Due after five years through ten years 133,822 136,329 18.3 % Due after ten years 11,833 12,026 1.6 % Asset-backed securities 145,555 145,434 19.5 % Mortgage-backed securities 24,776 24,750 3.3 % Total investments, available for sale $ 739,456 $ 745,708 100.0 % December 31, 2018 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due after one year through five years $ 278,443 $ 276,706 70.4 % Due after five years through ten years 46,353 45,275 11.5 % Asset-backed securities 58,369 57,090 14.5 % Mortgage-backed securities 14,344 14,280 3.6 % Total investments, available for sale $ 397,509 $ 393,351 100.0 % Fair Value Option and Fair Value Through Net Income The following table summarizes the fair value of the Company’s securities held as of December 31, 2019 and December 31, 2018 , classified as fair value through net income or for which the fair value option was elected: Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2019 Term loan investments $ 1,113,212 $ 7,340 $ (58,618 ) $ 1,061,934 Fixed maturities: Corporate bonds 221,024 8,430 (15,100 ) 214,354 U.S. government and government agency bonds 1,963 1 (2 ) 1,962 Asset-backed securities 200,361 3,329 (12,953 ) 190,737 Mortgage-backed securities 7,399 712 (405 ) 7,706 Non-U.S. government and government agency bonds 1,449 18 (11 ) 1,456 Municipal government and government agency bonds 380 — (1 ) 379 Short-term investments 325,542 3,817 (56 ) 329,303 Other investments 28,672 2,264 (475 ) 30,461 Equities 54,893 10,690 (5,784 ) 59,799 Investments, fair value option $ 1,954,895 $ 36,601 $ (93,405 ) $ 1,898,091 Fair Value Through Net Income: Equities, fair value through net income (1) $ 78,031 $ 2,360 $ (15,053 ) $ 65,338 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2018 Term loan investments $ 1,055,664 $ 767 $ (55,779 ) $ 1,000,652 Fixed maturities: Corporate bonds 617,013 6,468 (44,867 ) 578,614 U.S. government and government agency bonds 113,452 — (2,206 ) 111,246 Asset-backed securities 174,846 673 (6,626 ) 168,893 Mortgage-backed securities 9,122 — (1,241 ) 7,881 Non-U.S. government and government agency bonds 50,914 1 (1,874 ) 49,041 Municipal government and government agency bonds 7,306 — (162 ) 7,144 Short-term investments 281,959 570 (397 ) 282,132 Other investments 50,000 — (238 ) 49,762 Equities 56,609 5,136 (5,107 ) 56,638 Investments, fair value option $ 2,416,885 $ 13,615 $ (118,497 ) $ 2,312,003 Fair Value Through Net Income: Equities, fair value through net income (1) $ 41,358 $ 2,030 $ (10,375 ) $ 33,013 (1) Effective January 1, 2018, the Company adopted new accounting guidance for financial instruments. As a result, equity securities acquired after January 1, 2018 are classified as fair value through net income and are shown separately above. The amortized cost and fair value of our term loans, fixed maturities and short-term investments, excluding securities classified as available for sale, summarized by contractual maturity as of December 31, 2019 and December 31, 2018 are shown in the following tables. December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 307,041 $ 306,372 16.9 % Due after one year through five years 779,643 742,960 41.1 % Due after five years through ten years 514,961 495,416 27.4 % Due after ten years 61,925 64,640 3.6 % Asset-backed securities 200,361 190,737 10.6 % Mortgage-backed securities 7,399 7,706 0.4 % Total $ 1,871,330 $ 1,807,831 100.0 % December 31, 2018 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 300,554 $ 300,519 13.6 % Due after one year through five years 1,044,539 992,834 45.0 % Due after five years through ten years 777,290 731,662 33.2 % Due after ten years 3,925 3,814 0.2 % Asset-backed securities 174,846 168,893 7.6 % Mortgage-backed securities 9,122 7,881 0.4 % Total $ 2,310,276 $ 2,205,603 100.0 % Variable Interest Entities In the normal course of its investing activities, the Company invests in limited partnerships, limited liability companies and other investment securities. Due to the legal forms of the entities and the fact that the investors lack the ability, through voting rights or similar rights, to make decisions that have a significant effect on the entities, such investments are considered variable interest entities. Since the Company lacks the ability to control the activities that most significantly impact the economic performance of these variable interest entities, the Company is not considered the primary beneficiary and does not consolidate these investments. The activities of these entities is generally limited to holding and managing the underlying investments. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported as “other investments ” in the Company’s consolidated balance sheet and any unfunded commitments. Realized and unrealized gains and losses from such investments are included in “r ealized and unrealized gains (losses) on investments ” in the Company’s consolidated statements of net income (loss). The table below summarizes the credit quality of our total investments as of December 31, 2019 and December 31, 2018 , as rated by Standard & Poor’s Financial Services, LLC, or Standard & Poor’s, Moody’s Investors Service, or Moody’s, Fitch Ratings Inc., or Fitch, Kroll Bond Rating Agency, or KBRA, or DBRS Morningstar, or DBRS, as applicable: Credit Rating (1) December 31, 2019 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 1,061,934 $ — $ — $ — $ — $ 9,617 $ 761,168 $ 215,909 $ 6,823 $ 2,119 $ — $ 66,298 Fixed maturities: Corporate bonds 372,473 — 36,128 81,401 41,103 9,003 58,345 135,613 — — — 10,880 U.S. government and government agency bonds 285,609 — 285,609 — — — — — — — — — Asset-backed securities 336,171 2,006 — 29,179 223,956 29,695 18,381 — — — — 32,954 Mortgage-backed securities 32,456 — — 1,100 23,650 976 — — — — 2,497 4,233 Non-U.S. government and government agency bonds 133,409 — 132,460 — 949 — — — — — — — Municipal government and government agency bonds 2,184 1,135 573 476 — — — — — — — — Total fixed income instruments 2,224,236 3,141 454,770 112,156 289,658 49,291 837,894 351,522 6,823 2,119 2,497 114,365 Short-term investments 329,303 25,783 136,842 34,903 115,155 — — 8,359 — — — 8,261 Total fixed income instruments and short-term investments 2,553,539 28,924 591,612 147,059 404,813 49,291 837,894 359,881 6,823 2,119 2,497 122,626 Other Investments 30,461 Equities 125,137 Total $ 2,709,137 $ 28,924 $ 591,612 $ 147,059 $ 404,813 $ 49,291 $ 837,894 $ 359,881 $ 6,823 $ 2,119 $ 2,497 $ 122,626 (1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS. Credit Rating (1) December 31, 2018 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 1,000,652 $ — $ — $ — $ — $ 57,844 $ 677,211 $ 201,116 $ 2,438 $ — $ — $ 62,043 Fixed maturities: Corporate bonds 654,607 3,961 58,185 100,590 63,791 15,246 174,867 203,505 — 2,200 — 32,262 U.S. government and government agency bonds 268,675 — 268,675 — — — — — — — — — Asset-backed securities 225,983 4,532 4,973 10,278 113,075 36,643 20,818 — — — — 35,664 Mortgage-backed securities 22,161 — — 944 13,336 742 — — — — 2,962 4,177 Non-U.S. government and government agency bonds 136,513 5,173 122,715 8,625 — — — — — — — — Municipal government and government agency bonds 8,231 6,490 715 1,026 — — — — — — — — Total fixed income instruments 2,316,822 20,156 455,263 121,463 190,202 110,475 872,896 404,621 2,438 2,200 2,962 134,146 Short-term investments 282,132 4,450 128,015 54,970 68,853 — 25,844 — — — — — Total fixed income instruments and short-term investments 2,598,954 24,606 583,278 176,433 259,055 110,475 898,740 404,621 2,438 2,200 2,962 134,146 Other Investments 49,762 Equities 89,651 Total $ 2,738,367 $ 24,606 $ 583,278 $ 176,433 $ 259,055 $ 110,475 $ 898,740 $ 404,621 $ 2,438 $ 2,200 $ 2,962 $ 134,146 (1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA. Fair value option The Company elected to carry the majority of fixed maturity securities and other investments at fair value under the fair value option afforded by accounting guidance regarding the fair value option for financial assets and liabilities. Changes in fair value of investments accounted for using the fair value option are included in “realized and unrealized gain (loss) on investments” in the consolidated statements of income (loss). The Company elected to use this option as investments are not necessarily held to maturity, and in order to address simplification and cost-benefit considerations. Net investment income (loss) The components of net investment income (loss) for the years ended December 31, 2019 , 2018 and 2017 were derived from the following sources: Year Ended December 31, 2019 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 90,048 $ 3,526 $ (19,599 ) $ 73,975 Fixed maturities - Fair value option 48,698 23,884 7,048 79,630 Fixed maturities - Available for sale (1) 17,893 — 5,673 23,566 Short-term investments 4,131 (277 ) 27 3,881 Equities (2) 203 4,337 — 4,540 Equities, fair value through net income (2) 2,201 (3,963 ) (1,162 ) (2,924 ) Other investments 714 2,027 (2,719 ) 22 Other (3) — 2,657 2,784 5,441 Investment management fees - related parties (18,392 ) — — (18,392 ) Borrowing and miscellaneous other investment expenses (29,285 ) — — (29,285 ) Investment performance fees - related parties — — — (12,191 ) $ 116,211 $ 32,191 $ (7,948 ) $ 128,263 (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $6.1 million and $0.5 million , respectively. (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Year Ended December 31, 2018 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 79,971 $ (53,702 ) $ (3,988 ) $ 22,281 Fixed maturities - Fair value option 63,556 (42,601 ) (11,490 ) 9,465 Fixed maturities - Available for sale (1) 5,802 — (878 ) 4,924 Short-term investments 2,722 390 35 3,147 Equities (2) (425 ) (3,266 ) 8,223 4,532 Equities, fair value through net income (2) 1,290 (8,786 ) 3,310 (4,186 ) Other investments — 149 — 149 Other (3) — (1,230 ) — (1,230 ) Investment management fees - related parties (17,006 ) — — (17,006 ) Borrowing and miscellaneous other investment expenses (28,377 ) — — (28,377 ) Investment performance fees - related parties — — — (48 ) $ 107,533 $ (109,046 ) $ (4,788 ) $ (6,349 ) (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $86 thousand and $964 thousand , respectively. (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Year Ended December 31, 2017 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 73,472 $ (10,354 ) $ 346 $ 63,464 Fixed maturities - Fair value option 49,179 8,017 (660 ) 56,536 Short-term investments 2,473 220 (1,745 ) 948 Equities (1) 339 2,902 2,781 6,022 Other investments — (387 ) — (387 ) Investment management fees - related parties (21,451 ) — — (21,451 ) Borrowing and miscellaneous other investment expenses (17,489 ) — — (17,489 ) Investment performance fees - related parties — — — (14,905 ) $ 86,523 $ 398 $ 722 $ 72,738 (1) Net interest income includes dividends for securities held in long and short positions. Fixed maturities that have been non-income producing for the twelve months preceding December 31, 2019 , 2018 and 2017 have a market value of $ Nil , $1.0 million and $ Nil . Other-than-temporary impairments The Company reviews its available for sale investments on a quarterly basis to determine whether declines in fair value below the amortized cost basis are considered other-than-temporary in accordance with applicable guidance. As of December 31, 2019 , the Company did not identify any other-than-temporary impairments. As such, the Company did not intend to sell these investments, and it was not more likely than not that the Company would be required to sell these investments before the anticipated recovery of the remaining amortized cost basis as of December 31, 2019 . Pledged and restricted assets For the benefit of certain Arch entities and other third parties that cede business to the Company, the Company is required to post and maintain collateral to support its potential obligations under reinsurance contracts written. This collateral can be in the form of either investment assets held in collateral trust accounts or letters of credit. Under its secured credit facilities, in order for the Company to have the bank issue a letter of credit to the Company’s reinsurance contract counterparty, the Company must post investment assets or cash as collateral to the bank. In either case, the amounts remain restricted for the duration of the term of the trust or letter of credit, as applicable. At December 31, 2019 and 2018 , the Company held $2.1 billion and $2.4 billion , respectively, in pledged assets in support of insurance and reinsurance liabilities as well as to collateralize the Company’s secured credit facilities and investment derivatives. Included within total pledged assets, the Company held $6.4 million and $5.5 million , respectively, in deposits with U.S. regulatory authorities. Non-cash investing activities During the year ended December 31, 2019 , the Company exchanged a preference share position of $28.7 million , which was held within “equity securities, fair value through net income,” for a limited partnership interest of $28.7 million , held under “other investments, fair value option.” HPS acts as the general partner and manager of the limited partnership. At December 31, 2019 , the Company’s investment had a fair value of $30.5 million and represented approximately 12% of the outstanding partnership interest. As a result of the restructuring of an investment position held by the Company, $16.9 million of term loans were converted to $23.0 million of common and preferred stock held within “equity securities, fair value through net income,” along with cash funding from short-term investments of $6.5 million . |
Fair value
Fair value | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value | Fair value hierarchy Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement (Level 1 being the highest priority and Level 3 being the lowest priority). The levels in the hierarchy are defined as follows: • Level 1: Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets; • Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and • Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The availability of observable inputs can vary by financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by the Company in determining fair value is greatest for financial instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead to a change in the valuation techniques used to estimate the fair value measurement and cause an instrument to be reclassified between levels within the fair value hierarchy. Fair value measurements on a recurring basis The following is a description of the valuation methodologies used for securities measured at fair value, as well as the general classification of such securities pursuant to the valuation hierarchy. The Company determines the existence of an active market based on its judgment as to whether transactions for the financial instrument occur in such market with sufficient frequency and volume to provide reliable pricing information. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. The Company uses quoted values and other data provided by nationally recognized independent pricing sources as inputs into its process for determining fair values of its fixed maturity investments. Each price source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value. Where multiple quotes or prices are obtained, a price source hierarchy is maintained in order to determine which price source would be used ( i.e., a price obtained from a pricing service with more seniority in the hierarchy will be used over a less senior one in all cases). The hierarchy prioritizes pricing services based on availability and reliability and assigns the highest priority to index providers. Based on the above review, the Company will challenge any prices for a security or portfolio which are considered not to be representative of fair value. In certain circumstances, when fair values are unavailable from these independent pricing sources, quotes are obtained directly from broker-dealers who are active in the corresponding markets. Such quotes are subject to the validation procedures noted above. Where quotes are unavailable, fair value is determined by the investment manager using quantitative and qualitative assessments such as internally modeled values, which are reviewed by the Company’s management. Of the $2.6 billion of net financial assets and liabilities measured at fair value at December 31, 2019 , approximately $131.8 million , or 5.0% , were priced using non-binding broker-dealer quotes or modeled valuations. Of the $2.7 billion of net financial assets and liabilities measured at fair value at December 31, 2018 , approximately $178.3 million , or 6.5% , were priced using non-binding broker-dealer quotes or modeled valuations. The Company reviews its securities measured at fair value and discusses the proper classification of such investments with its investment managers and others. A discussion of the general classification of the Company’s financial instruments follows: Fixed Maturities. The Company uses the market approach valuation technique to estimate the fair value of its fixed maturity securities, when possible. The market approach includes obtaining prices from independent pricing services, such as index providers and pricing vendors, as well as to a lesser extent quotes from broker-dealers. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value. The following describes the significant inputs generally used to determine the fair value of the Company’s investment securities by asset class: Term Loans. Fair values are estimated by using quoted prices obtained from independent pricing services for term loan investments with similar characteristics, pricing models or matrix pricing. Such investments are generally classified within Level 2. The fair values for certain of the Company’s term loans are determined by the investment manager using quantitative and qualitative assessments such as internally modeled values, which are reviewed by the Company’s management. The modeled values are based on peer loans and comparison to industry-specific market data. Significant unobservable inputs used to price these securities may include changes in peer and/or comparable credit spreads, accretion of any original issue discount and changes in the issuer’s debt leverage since issue. Changes in peer credit spreads, comparable credits spreads, and issuer debt leverage are negatively correlated with the modeled fair value measurement. Such investments are generally classified within Level 3. Corporate Bonds . Valuations are provided by independent pricing services, substantially all through index providers and pricing vendors, with a small amount through broker-dealers. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. As the significant inputs used in the pricing process for corporate bonds are observable market inputs, the fair value of the majority of these securities are classified within Level 2. The fair values for certain of the Company’s corporate bonds are determined by the investment manager using quantitative and qualitative assessments such as internally modeled values, which are reviewed by the Company’s management. The modeled values are based on peer bonds and comparison to industry-specific market data. In addition, the investment manager assesses the fair value based on the valuation of the underlying holdings in accordance with the bonds’ governing documents. Significant unobservable inputs used to price these securities may include changes in peer and/or comparable credit spreads, accretion of any original issue discount and changes in the issuer’s debt leverage since issue. Changes in peer credit spreads, comparable credits spreads, and issuer debt leverage are negatively correlated with the modeled fair value measurement. Such investments are generally classified within Level 3. Asset-Backed Securities . Valuations are provided by independent pricing services, substantially all through index providers and pricing vendors, with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including option adjusted spread) which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for asset-backed securities are observable market inputs, the fair value of these securities are classified within Level 2. Mortgage-Backed Securities . Valuations are provided by independent pricing services, substantially all through pricing vendors and index providers with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including option adjusted spread) which use spreads to determine the expected average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2. U.S. Government and Government Agencies . Valuations are provided by independent pricing services, with all prices provided through index providers and pricing vendors. The Company determined that all U.S. Treasuries would be classified as Level 1 securities due to observed levels of trading activity, the high number of strongly correlated pricing quotes received on U.S. Treasuries and other factors. The fair values of U.S. government agency securities are generally determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2. Non-U.S. Government Securities . Valuations are provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally based on international indices or valuation models which include daily observed yield curves, cross-currency basis index spreads and country credit spreads. As the significant inputs used in the pricing process for non-U.S. government securities are observable market inputs, the fair value of these securities are classified within Level 2. Municipal Government Bonds . Valuations are provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally determined using spreads obtained from broker-dealers who trade in the relevant security market, trade prices and the new issue market. As the significant inputs used in the pricing process for municipal bonds are observable market inputs, the fair value of these securities are classified within Level 2. Short-Term Investments . The Company determined that certain of its short-term investments, held in highly liquid money market-type funds, and equities would be included in Level 1 as their fair values are based on quoted market prices in active markets. The fair values of other short-term investments are generally determined using the spread above the risk-free yield curve and are classified within Level 2. Equity Securities . The Company determined that exchange-traded equity securities would be included in Level 1 as their values are based on quoted market prices in active markets. Other equity securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these securities are determined using non-binding broker-dealer quotes. These equity securities are included in Level 2 of the valuation hierarchy. Where such quotes are unavailable, fair value is determined by the investment manager using quantitative and qualitative assessments such as internally modeled values, which are reviewed by the Company’s management. As the significant inputs used to price these securities are unobservable, the fair value of these securities are classified as Level 3. Significant unobservable inputs used to price preferred stock may include changes in peer and/or comparable credit spreads, accretion of any original issue discount and changes in the issuer’s debt leverage since issue. Changes in peer credit spreads, comparable credit spreads, and issuer debt leverage are negatively correlated with the modeled fair value measurement. Underwriting Derivative Instruments . The Company values the government-sponsored enterprise credit-risk sharing transactions using a valuation methodology based on observable inputs from non-binding broker-dealer quotes and/or recent trading activity. As the inputs used in the valuation process are observable market inputs, the fair value of these securities are classified within Level 2. Refer to Note 10 - “Derivative instruments” for more information. Investment Derivative Instruments . The Company values the investment derivatives, including total return swaps and options, at fair value. As the underlying investments have observable inputs, the fair value of these securities are classified within Level 2. Refer to Note 10 - “Derivative instruments” for more information. Other Investments. The fair value of the Company ’ s investments in private funds are measured using the most recently available NAVs, as advised by the third-party administrators. Measuring the Fair Value of Other Investments Using Net Asset Valuations The fair value of the Company’s investments in private funds are measured using the most recently available NAVs as advised by the third-party administrators. The fund NAVs are based on the administrator’s valuation of the underlying holdings in accordance with the fund’s governing documents and in accordance with GAAP. The Company often does not have access to financial information relating to the underlying securities held within the fund therefore management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by the fund manager or fund administrator. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by the fund manager and fund administrator. These procedures include, but are not limited to, regular review and discussion of the fund’s performance with its manager. The fair value of the private funds are measured using the NAV as a practical expedient, therefore the fair value of the funds have not been categorized within the fair value hierarchy. The following table presents the Company’s financial assets and liabilities measured at fair value by level as of December 31, 2019 and 2018 : Fair Value Measurement Using: December 31, 2019 Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ($ in thousands) Assets measured at fair value: Term loans $ 1,061,934 $ — $ 1,025,886 $ 36,048 Fixed maturities: Corporate bonds 372,473 — 371,540 933 U.S. government and government agency bonds 285,609 285,500 109 — Asset-backed securities 336,171 — 336,171 — Mortgage-backed securities 32,456 — 32,456 — Non-U.S. government and government agency bonds 133,409 — 133,409 — Municipal government and government agency bonds 2,184 — 2,184 — Short-term investments 329,303 318,012 11,291 — Equities 125,137 13,548 2,998 108,591 Other underwriting derivative assets 148 — 148 — Investment derivative assets (1) 1,667 — 1,667 — Other investments measured at net asset value (2) 30,461 — — — Total assets measured at fair value $ 2,710,952 $ 617,060 $ 1,917,859 $ 145,572 Investment derivative liabilities (1) 257 — 257 — Payable for securities sold short: Corporate bonds 66,257 — 66,257 — Total liabilities measured at fair value $ 66,514 $ — $ 66,514 $ — (1) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of December 31, 2019 . (2) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. Fair Value Measurement Using: December 31, 2018 Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ($ in thousands) Assets measured at fair value: Term loans $ 1,000,652 $ — $ 953,173 $ 47,479 Fixed maturities: Corporate bonds 654,607 — 630,330 24,277 U.S. government and government agency bonds 268,675 268,567 108 — Asset-backed securities 225,983 — 203,423 22,560 Mortgage-backed securities 22,161 — 22,161 — Non-U.S. government and government agency bonds 136,513 — 136,513 — Municipal government and government agency bonds 8,231 — 8,231 — Short-term investments 282,132 256,288 25,844 — Equities 89,651 7,977 11,223 70,451 Other underwriting derivative assets 249 — 249 — Investment derivative assets (1) 51 — 51 — Other investments measured at net asset value (2) 49,762 — — — Total assets measured at fair value $ 2,738,667 $ 532,832 $ 1,991,306 $ 164,767 Investment derivative liabilities (1) 1,279 — 1,279 — Payable for securities sold short: Corporate bonds 7,790 — 7,790 — Equities (1) 1,138 — 1,138 — Total liabilities measured at fair value $ 10,207 $ — $ 10,207 $ — (1) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of December 31, 2018 . The Compa ny’s call opt ions are recorded as equities in payable for securities sold short in the consolidated balance sheets as of December 31, 2018 . Such call options matured in the first quarter of 2019. The Company’s put options are recorded as equities in the consolidated balance sheets as of December 31, 2018 . (2) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. When the fair value of financial assets and financial liabilities cannot be derived from active markets, the fair value is determined using a variety of valuation techniques that include the use of models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required to establish fair values. Changes in assumptions about these factors could affect the reported fair value of financial instruments and the level where the instruments are disclosed in the fair value hierarchy. The following table presents a reconciliation of the beginning and ending balances for all the financial assets measured at fair value on a recurring basis using Level 3 inputs for the year ending December 31, 2019 and 2018 : Year Ended December 31, 2019 Beginning Balance Transfers in (out) of Level 3 (1) Net Purchases (Sales)(2) Net Unrealized Gains (Losses)(3) Net Unrealized Foreign Exchange Gains (Losses) Ending Balance Term loans $ 47,479 $ — $ (15,402 ) $ 3,971 $ — $ 36,048 Corporate bonds 24,277 — (23,341 ) (3 ) — 933 Asset-backed securities 22,560 (22,560 ) — — — — Equities 70,451 — 39,705 (1,565 ) — 108,591 Total $ 164,767 $ (22,560 ) $ 962 $ 2,403 $ — $ 145,572 Year Ended December 31, 2018 Beginning Balance Net Purchases (Sales)(2) Net Unrealized Gains (Losses)(3) Net Unrealized Foreign Exchange Gains (Losses) Ending Balance Term loans $ 62,478 $ (11,705 ) $ (3,294 ) $ — $ 47,479 Corporate bonds 24,710 985 (285 ) (1,133 ) 24,277 Asset-backed securities — 22,560 — — 22,560 Equities 52,921 21,932 (4,402 ) — 70,451 Total $ 140,109 $ 33,772 $ (7,981 ) $ (1,133 ) $ 164,767 (1) During the year ended December 31, 2019 , the Company obtained pricing for an asset-backed security, in which pricing was not available as of December 31, 2018. As such, the security was transferred from Level 3 to Level 2 at its fair value as of December 31, 2018. (2) For the twelve months ended December 31, 2019 , the net purchases (sales) consisted of purchases of $75.0 million of equities and $0.6 million of term loans, offset in part by the sale of $35.3 million of equities, $15.8 million of term loans and $90 thousand of corporate bonds, as well as the $0.3 million of redemptions of term loans and $23.3 million of redemptions of corporate bonds. For the year ended December 31, 2018 , the net purchases (sales) consisted of purchases of: $57.1 million of equities, $22.6 million of asset-backed securities, $18.0 million of term loans, $4.4 million of short-term investments and $1.0 million of corporate bonds, partially offset by sales, calls and redemptions of $35.1 million of equities, $29.7 million of term loans and the sale of short term investments of $4.4 million . (3) Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss). Financial instruments disclosed, but not carried, at fair value The Company uses various financial instruments in the normal course of its business. The carrying values of cash and cash equivalents, accrued investment income, receivable for securities sold, certain other assets, payable for securities purchased and certain other liabilities approximated their fair values at December 31, 2019 and 2018 due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2. On July 2, 2019, the Company completed a private offering of $175.0 million in aggregate principal amount of its 6.5% senior notes due July 2, 2029 (the “senior notes”). At December 31, 2019 , the Company’s senior notes were carried at cost, net of debt issuance costs, of $172.4 million and had a fair value of $179.0 million . The fair value of the senior notes was obtained from a third party pricing service and was based on observable market inputs. As such, the fair values of the senior notes are classified within Level 2. Fair value measurements on a non-recurring basis The Company measures the fair value of certain assets on a non-recurring basis, generally quarterly, annually, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company uses a variety of techniques to determine the fair value of these assets when appropriate, as described below. Intangible Assets The Company tests intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. When the Company determines intangible assets may be impaired, the Company uses techniques including discounted expected future cash flows, to measure fair value. There were no such triggering events or changes in circumstances as of December 31, 2019 . |
Borrowings to purchase investme
Borrowings to purchase investments | 12 Months Ended |
Dec. 31, 2019 | |
Line of Credit Facility [Abstract] | |
Borrowings to purchase investments | Bank of America secured credit facility On November 30, 2017, Watford Re amended and restated its $800 million secured credit facility with Bank of America, N.A. ( “ Bank of America ”) through Watford Asset Trust I, ( “ Watford Trust. ”) Watford Re owns all of the beneficial interests of Watford Trust. The facility expires on November 30, 2021 and is backed by a portion of Watford Re’s non-investment grade portfolio which has been transferred to Watford Trust and which continues to be managed by HPS pursuant to an investment management agreement between HPS and Watford Trust. The purpose of the facility is to provide borrowing capacity, including for the purchase of loans, securities and other assets and distributing cash or any such loans, securities or other assets to Watford Re. Borrowings on the facility may be made at LIBOR or an alternative base rate at our option, in either case plus an applicable margin. The applicable margin varies based on the applicable base rate and, in the case of LIBOR rate borrowings, the currency in which the borrowing is denominated. In addition, the facility allows for us to issue up to $400.0 million in evergreen standby letters of credit in favor of primary insurance or reinsurance counterparties with which we have entered into reinsurance arrangements. We pay a fee on each letter of credit equal to the amount available to be drawn under such letter of credit multiplied by an applicable percentage. The applicable percentage varies based on the currency in which the letter of credit is denominated. As at December 31, 2019 and 2018 , Watford Re, through Watford Trust, had borrowed approximately $484.3 million and $455.7 million , respectively. Bank of America requires the Company to hold cash and investments in deposit with, or in trust accounts with respect to the borrowed funds and outstanding letters of credit. As at December 31, 2019 and 2018 , the Company was required to hold $791.0 million and $764.0 million , respectively, in such deposits and trust accounts. Watford Re has deferred the issuance and extension costs relating to the borrowings of $14.5 million and is subsequently amortizing the deferred costs over the term of the borrowing arrangements. Custodian bank facility During the years ended December 31, 2019 and 2018 , the Company borrowed $Nil and $238.2 million from the Company’s custodian bank to purchase U.S.-denominated securities. As of December 31, 2018 , the total borrowed amount of $238.2 million included 2.0 million Swiss Francs, or CHF, (USD equivalent of $2.0 million ) to purchase CHF-denominated securities. The Company pays interest based on 3-month LIBOR plus a margin and the borrowed amount is payable upon demand. The custodian bank requires the Company to hold cash and investments in deposit with, or in an investment account with respect to the borrowed funds. As at December 31, 2019 and 2018 , the Company was required to hold $Nil and $339.1 million , respectively, in such deposits and investment accounts. The foreign exchange gain or loss on revaluation on the borrowed CHF-denominated funds is included as a component of foreign exchange gains (losses) included in the consolidated statements of net income (loss). Revolving credit agreement borrowings As at December 31, 2019 and 2018 , the Company had total revolving credit agreement borrowings of $484.3 million and $693.9 million , respectively, which consist of the borrowings from the secured credit facility and the custodian bank facility as discussed above. During the years ending December 31, 2019 , 2018 and 2017 , interest expense incurred on the secured credit facility and the custodian bank facility was $27.7 million , $26.5 million and $15.9 million , respectively. The interest expense incurred is included as a component of borrowings and miscellaneous other investment expenses in the Company’s consolidated statements of income (loss). As of December 31, 2019 and 2018 , the fair value of the Company’s outstanding borrowings approximated their carrying value. |
Derivatives
Derivatives | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives instruments | Underwriting Derivatives The Company’s underwriting strategy allows it to enter into government-sponsored enterprise credit-risk sharing transactions. These transactions are accounted for as derivatives. The derivative assets and derivative liabilities relating to these transactions are included in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets. Realized and unrealized gains and losses from other derivatives are included in other underwriting income (loss) in the Company’s consolidated statements of net income (loss). The risk in force of these transactions is considered the notional amount. As of December 31, 2019 and 2018 , the Company posted $13.1 million and $15.5 million , respectively, in assets as collateral. These assets are included in fixed maturities, which are recorded at fair value in the Company’s consolidated balance sheets. Investment Derivatives The Company’s investment strategy allows for the use of derivative securities. Beginning in the third quarter of 2018, the Company invested in call options to manage specific market risks; such derivative instruments are recorded at fair value, and shown as part of payable for securities sold short on its consolidated balance sheets. Such call options matured in the first quarter of 2019. Additionally, beginning in the fourth quarter of 2018, the Company invested in put options to manage specific market risks; such derivative instruments are recorded at fair value, and shown as part of equity investments on its consolidated balance sheets. Such put options were sold in the first quarter of 2019. The Company began investing in total return swaps (“swaps”) during 2018, through a Master Confirmation of Total Return Swap Transactions agreement, and recognizes the swap derivatives at fair value. The derivative assets and derivative liabilities relating to these transactions are included in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets. At December 31, 2019 and 2018 , the Company had collateral funds held by the counterparty of $64.1 million and $36.3 million included in short-term investments in the Company’s consolidated balance sheets. The fair value of such swaps are based on observable inputs and classified in Level 2 of the valuation hierarchy. Realized and unrealized gains and losses from investment derivatives are included in r ealized and unrealized gains (losses) on investments in the Company’s consolidated statements of net income (loss). The Company did not hold any derivatives designated as hedging instruments at December 31, 2019 and 2018 . The following table summarizes information on the fair values and notional amount of the Company’s derivative instruments at December 31, 2019 and 2018 : Estimated Fair Value Asset Derivatives Liability Derivatives Net Derivatives Notional Amount (1) ($ in thousands) December 31, 2019 Other underwriting derivatives $ 148 $ — $ 148 $ 59,879 Total return swaps 1,667 257 1,410 162,678 Total $ 1,815 $ 257 $ 1,558 $ 222,557 December 31, 2018 Other underwriting derivatives $ 249 $ — $ 249 $ 72,148 Options 808 1,138 (330 ) 24,551 Total return swaps 51 1,279 (1,228 ) 91,663 Total $ 1,108 $ 2,417 $ (1,309 ) $ 188,362 (1) The notional amount represents the absolute value of all outstanding contracts. The realized and unrealized gains and losses on the Company’s derivative instruments are reflected in the consolidated statements of income, as summarized in the following table: Year Ended December 31, 2019 2018 2017 ($ in thousands) Underwriting derivatives: Other underwriting income (loss) $ 2,412 $ 2,722 $ 3,180 Investment derivatives: Net realized and unrealized gains (losses): Options 799 1,314 — Total return swaps 5,441 (1,230 ) — |
Earnings per common share
Earnings per common share | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings per common share | The following table sets forth the computation of basic and diluted earnings per common share: Year Ended December 31, 2019 2018 2017 ($ in thousands except share and per share data) Numerator: Net income (loss) before preference dividends and redemption costs $ 62,541 $ (34,883 ) $ 10,741 Preference dividends (13,632 ) (19,633 ) (19,633 ) Accelerated amortization of costs related to the redemption of preference shares (4,164 ) — — Net income (loss) available to common shareholders 44,745 (54,516 ) (8,892 ) Denominator: Weighted average common shares outstanding - basic 22,366,682 22,682,875 22,682,875 Effect of dilutive common share equivalents: Weighted average non-vested restricted share units (1) 7,286 — — Weighted average common shares outstanding - diluted (2) 22,373,968 22,682,875 22,682,875 Earnings (loss) per common share: Basic $ 2.00 $ (2.40 ) $ (0.39 ) Diluted $ 2.00 $ (2.40 ) $ (0.39 ) (1) During the year ended December 31, 2019 , the Company granted 165,287 restricted share units and common shares to certain employees and directors, 82,360 of which are non-vested. Refer to Note 19 - “Share transactions” for further details. (2) Warrants held by Arch and HPS were not included in the computation of diluted earnings because the exercise price of the warrants exceeded the market price of the common shares during the period and the exercise of the warrants would have been anti-dilutive. The warrants expire on March 25, 2020. The number of common shares issuable upon exercise of the warrants that was excluded was 1,704,691 common shares. |
Income taxes
Income taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Watford Holdings and Watford Re are incorporated under the laws of Bermuda and, under current law, are not obligated to pay any taxes in Bermuda based upon income or capital gains. In the event that any legislation is enacted in Bermuda imposing such taxes, a written undertaking has been received from the Bermuda Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 that such taxes will not be applicable to Watford Holdings and Watford Re until March 31, 2035. WICE is incorporated under the laws of Gibraltar and regulated by the Gibraltar Financial Services Commission (the “ FSC ” ) under the Financial Services (Insurance Company) Act (the “ Gibraltar Act ” ). In addition to its operations in Gibraltar, WICE operates a branch in Romania. The current rates of tax on applicable profits in Gibraltar and Romania are 10% and 16% , respectively. The open tax years that are potentially subject to examination are 2018 and 2019 in Gibraltar and 2018 and 2019 in Romania. Watford Holdings (U.K.) Limited is incorporated in the United Kingdom and is subject to U.K. corporate income tax. The current U.K. corporate income tax rate is 19% and will be reduced to 17% from April 1, 2020. The open tax years that are potentially subject to examination by U.K. tax authorities are 2018 and 2019. Watford Holdings (U.S.) Inc. is incorporated in the United States and files a consolidated U.S. federal tax return with its subsidiaries, Watford Specialty Insurance Company, Watford Insurance Company, and Watford Services Inc. The U.S. federal tax rate is 21% for tax years beginning after December 31, 2017. The open tax years that are potentially subject to examination by U.S. tax authorities are 2016 through 2019. The components of income taxes attributable to operations were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Current income tax expense (benefit): United States $ 20 $ 27 $ — Gibraltar — — 21 United Kingdom — — — 20 27 21 Deferred income tax expense (benefit): United States — — — Gibraltar — — — United Kingdom — — — — — — Total income tax expense (benefit) $ 20 $ 27 $ 21 The Company’s income or loss after preferred dividends and before income taxes was earned in the following jurisdictions: Year Ended December 31, 2019 2018 2017 ($ in thousands) Income (loss) before income taxes: Bermuda $ 42,775 $ (52,953 ) $ (6,041 ) United States 346 (2,146 ) (1,485 ) Other 1,644 610 (1,345 ) Total income (loss) before income taxes $ 44,765 $ (54,489 ) $ (8,871 ) The reconciliation between the Company’s income tax expense and the expected income tax expense at the Bermuda statutory tax rate is as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Expected income tax expense (benefit) at Bermuda statutory rate $ — $ — $ — Addition (reduction) in income tax expense (benefit) resulting from: Foreign taxes at local expected rates 280 (395 ) (659 ) Change in tax rate related to U.S. tax reform — — 664 Change in valuation allowance (120 ) 400 17 Other (140 ) 22 (1 ) Total income tax expense (benefit) $ 20 $ 27 $ 21 Deferred income tax assets and liabilities reflect temporary differences based on enacted tax rates between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant components of the Company’s deferred income tax assets and liabilities were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Deferred income tax assets: Net operating loss $ 84 $ 858 $ 1,068 Unearned premium reserve 291 142 49 Loss reserves 138 59 10 Ceding commissions 1,006 339 170 Capitalized expenses 92 101 109 Investment basis differences — 133 — Other accruals 18 — — Deferred tax assets before valuation allowance 1,629 1,632 1,406 Valuation allowance (1,269 ) (1,488 ) (1,127 ) Deferred tax assets net of valuation allowance 360 144 279 Deferred income tax liabilities: Goodwill and intangible assets (260 ) (144 ) (27 ) Investment basis differences (100 ) — (252 ) Total deferred tax liabilities (360 ) (144 ) (279 ) Net deferred income tax assets (liabilities) $ — $ — $ — The Company provides a valuation allowance to reduce certain deferred tax assets to an amount which management expects to more likely than not be realized. As of December 31, 2019 and 2018 , the Company’s valuation allowance was $1.3 million and $1.5 million , respectively. The valuation allowance includes U.S. operating loss carry-forwards that begin to expire in 2037. After consideration of the valuation allowance, the Company had net deferred tax assets of $ Nil as of December 31, 2019 and 2018 . After taking into account the impact of the change in the valuation allowance, the Company recognized income tax expense of $20.0 thousand , $27.0 thousand and $21.0 thousand during the year ended December 31, 2019 , 2018 and 2017 , respectively. The Company recognizes a tax benefit where it concludes that it is more likely than not that the tax benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. The Company records interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of both December 31, 2019 and 2018 , the Company’s total unrecognized tax benefits, including interest and penalties, were $ Nil . Federal excise taxes The United States also imposes an excise tax on insurance and reinsurance premiums paid to non-U.S. insurers or reinsurers with respect to risks located in the United States. The rate of tax, unless reduced by an applicable U.S. tax treaty, is 1% for all reinsurance premiums. The Company incurs federal excise taxes on certain of its reinsurance transactions. For the years ended December 31, 2019 , 2018 and 2017 , the Company incurred approximately $5.7 million , $4.3 million and $3.6 million , respectively, of federal excise taxes. Such amounts are reflected as acquisition expenses in the Company’s consolidated statements of income (loss). |
Transactions with related parti
Transactions with related parties | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Transactions with related parties | In March 2014, ARL invested $100.0 million in the Company and acquired approximately 11% of its common equity. AUL acts as the insurance and reinsurance manager for Watford Re and WICE while AUI acts as the insurance and reinsurance manager for WSIC and WIC, all under separate long-term services agreements. HPS manages the Company’s non-investment grade portfolio and a portion of the Company’s investment grade portfolio as investment manager and AIM manages a portion of the Company’s investment grade portfolio as investment manager, each under separate long-term services agreements. ARL and HPS were granted warrants to purchase additional common equity based on performance criteria. In recognition of the sizable ownership interest, two senior executives of ACGL were appointed to the Company’s board of directors. The services agreements with AUL and AUI and the investment management agreements with HPS and AIM provide for services for an extended period of time with limited termination rights by the Company. In addition, these agreements allow for AUL, AUI, HPS and AIM to participate in the favorable results of the Company in the form of performance fees. ACGL and affiliates At December 31, 2019 , ARL held approximately 12.5% of the Company’s common equity. Affiliates of ACGL held approximately 6.6% of the Company’s preference shares. On July 2, 2019, affiliates of ACGL purchased $35 million in aggregate principal amount of the Company’s 6.5% senior notes due July 2, 2029. On August 1, 2019, affiliates of ACGL received $11.5 million in connection with the Company’s redemption of its preference shares. Certain directors, executive officers and management of ACGL own common and preference shares of the Company. The related balances presented in the consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Interest expense 1,131 — — Preference dividends 902 1,299 1,299 Accelerated amortization of costs related to the redemption of preference shares 276 — — AUL and AUI Watford Re and WICE entered into services agreements with AUL. WSIC and WIC entered into services agreements with AUI. AUL and AUI provide services related to the management of the underwriting portfolio for a term ending on December 2025. The services agreements perpetually renew automatically in five -year increments unless either the Company or Arch gives notice to not renew at least 24 months before the end of the then-current term. As part of the services agreements, AUL and AUI make available to the Companies, on a non-exclusive basis, certain designated employees who serve as officers of the Companies and underwrite business on behalf of the Companies (the “Designated Employees”). AUL and AUI also provide portfolio management, Designated Employee supervision, exposure modeling, loss reserve recommendations, claims-handling, accounting and other related services as part of the services agreements. In return for their services, AUL and AUI receive fees from the Companies, including an underwriting fee and profit commission, as well as reimbursement for the services of the Designated Employees and reimbursements for an allocated portion of the expenses related to seconded employees, plus other expenses incurred on behalf of the Company. The related AUL and AUI fees and reimbursements incurred in the consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Acquisition expenses $ 20,808 $ 15,578 $ 10,755 General and administrative expenses 6,899 6,796 6,599 Total $ 27,707 $ 22,374 $ 17,354 Reinsurance transactions with ACGL affiliates The Company reinsures ARL and other ACGL subsidiaries and affiliates for property and casualty risks on a quota share basis. ACGL cedes business to the Company pursuant to inward retrocession agreements the Company’s operating subsidiaries have entered into with ACGL. Pursuant to these inward retrocession agreements, the Company pays a ceding fee based on the business ceded and the applicable retrocession agreement. Such fees, in addition to origination fees, are reflected in “acquisition expenses” on the consolidated statement of income (loss). The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 for the inward retrocession transactions were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums written $ 201,110 $ 252,841 $ 289,484 Net premiums earned 235,923 277,576 302,774 Losses and loss adjustment expenses 198,386 211,434 243,079 Acquisition expenses (1) 71,302 89,832 102,098 (1) Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the years ended December 31, 2019 , 2018 and 2017 , the Company incurred ceding fees to Arch, in aggregate, of $16.6 million , $17.6 million and $17.0 million , respectively, under these inward retrocession agreements. Separately, the Company’s operating subsidiaries have entered into outward quota share retrocession or reinsurance agreements with ACGL subsidiaries. Specifically, each of Watford Re and WICE has entered into a separate outward quota share retrocession or reinsurance agreement with ARL, and each of WSIC and WIC has entered into a separate outward quota share reinsurance agreement with ARC. The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 for the outward retrocession transactions were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums ceded $ (112,701 ) $ (55,934 ) $ (32,028 ) Net premiums earned (65,234 ) (44,730 ) (24,351 ) Losses and loss adjustment expenses (56,164 ) (31,031 ) (19,125 ) Acquisition expenses (1) (13,672 ) (10,200 ) (4,906 ) (1) Acquisition expenses relating to the ACGL outward quota share agreements referred to above. The related consolidated balance sheet account balances as of December 31, 2019 and 2018 were as follows: December 31, December 31, 2019 2018 ($ in thousands) Consolidated balance sheet items: Total investments $ 815,528 $ 719,189 Premiums receivable 106,462 118,208 Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses 79,597 45,954 Prepaid reinsurance premiums 75,249 27,598 Deferred acquisition costs, net 31,609 48,380 Funds held by reinsurers 29,867 33,352 Other assets - contingent commissions — 2,967 Reserve for losses and loss adjustment expenses 693,861 631,670 Unearned premiums 143,852 166,491 Losses payable 39,619 19,098 Reinsurance balances payable 62,301 20,299 Senior notes 35,000 — Amounts due to affiliates 4,467 5,888 Other liabilities - contingent commissions 5,516 — Contingently redeemable preference shares 3,462 14,627 AIM Watford Re, WSIC, WICE and WIC entered into investment management agreements with AIM pursuant to which AIM manages a portion of our investment grade portfolio. Each of the Watford Re, WICE, WSIC and WIC investment management agreements with AIM has a one-year term, with the terms ending annually on March 31, July 31, January 31 and July 31, respectively. The terms will continue to renew for successive one -year periods; provided, however, that either party may terminate any of the investment management agreements with AIM at any time upon 45 days prior written notice. To date, there has been no such notice filed under such agreements. In return for its investment management services, AIM receives a monthly management fee. The management fee is based on a percentage of the aggregate asset value of the AIM managed portfolio. For the purposes of calculating the management fees, asset value is determined by AIM in accordance with the investment management agreements and is measured before deduction of any management fees or expense reimbursement. The Company has also agreed to reimburse AIM for additional services related to investment consulting and oversight services, administrative operations and risk analytic support services related to the management of the Company’s portfolio, as set forth in the investment management agreements. The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 1,062 $ 1,176 $ 624 HPS Certain HPS principals and management own common and preference shares of the Company. In return for its investment services, HPS receives a management fee, a performance fee and allocated operating expenses. The management fee is calculated at an annual rate of 1.0% of the aggregate net asset value of the assets that are managed by HPS, payable quarterly in arrears. For purposes of calculating the management fees, net asset value is determined by HPS in accordance with the investment management agreements and is measured before reduction for any management fees, performance fees or any expense reimbursement and as adjusted for any non-routine intra-month withdrawals. The Company has also agreed to reimburse HPS for certain expenses related to the management of the Company’s investment portfolios as set forth in the investment management agreements. The base performance fee is equal to 10% of the Income (as defined in the investment management agreements relating to Watford Re, WICE and Watford Trust) or Aggregate Income (as defined in the investment management agreements relating to WSIC and WIC), as applicable, if any, on the assets managed by HPS, calculated and payable as of each fiscal year-end and the date on which the investment management agreements are terminated and not renewed, and HPS is eligible to earn an additional performance fee equal to 25% of any Excess Income (as defined in the investment management agreements) in excess of a net 10% return to Watford after deduction for paid and accrued management fees and base performance fees, with the total performance fees not to exceed 17.5% of the Income or Aggregate Income, as applicable. No performance fees will be paid to HPS if the high water mark (as described in the investment management agreements with HPS) is not met. During the year ended December 31, 2017, the Company invested $50.0 million in a private fund ( “Master Fund”) as part of HPS’s investment strategy. HPS acts as the Trading Manager and provides certain administrative management services to the Master Fund. During the year ended December 31, 2019, the Company fully redeemed its investment in the Master Fund. During the year ended December 31, 2019 , the Company invested $28.7 million in a limited partnership as part of HPS’s investment strategy. HPS acts as the general partner and manager of the limited partnership. At December 31, 2019 , the Company ’s investment had a fair value of $30.5 million and represented approximately 12% of the outstanding partnership interests. The management fees and performance fees on the limited partnership will be subject to the existing fee structure of the existing investment management agreement between the Company and HPS, as discussed above. The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 , and consolidated balance sheet account balances for HPS management fees and performance fees as of December 31, 2019 and 2018 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 17,330 $ 15,830 $ 20,827 Investment performance fees - related parties 12,191 48 14,905 $ 29,521 $ 15,878 $ 35,732 December 31, December 31, 2019 2018 ($ in thousands) Consolidated balance sheet items: Other investments, at fair value $ 30,461 $ 49,762 Investment management and performance fees payable 17,762 3,807 Artex In 2015, WICE and AUL entered into an insurance management services agreement with Artex Risk Solutions (Gibraltar) Limited, or Artex, pursuant to which Artex provides services to WICE relating to management, secretarial, governance, underwriting, claims, reinsurance, financial management, investment, regulatory, compliance, risk management and Solvency II. In addition, two principals of Artex have been appointed directors of WICE. In exchange for these services, the Company pays Artex fees based on WICE’s gross premiums written, subject to a minimum amount of £150,000 per annum and a maximum amount of £400,000 per annum, in each case subject to an inflation increase on an annual basis. The insurance management services agreement may be terminated by either Artex or WICE upon twelve months prior written notice; provided that the agreement is subject to earlier termination by WICE or Artex upon the occurrence of certain events. The table below provides the aggregate fees the Company paid to Artex under the insurance management services agreement for the years ended December 31, 2019 , 2018 and 2017 : Year Ended December 31, 2019 2018 2017 ($ in thousands) Fees paid to Artex under insurance management services agreement $ 431 $ 534 $ 325 For the years ended December 31, 2019 , 2018 and 2017 , the Company paid no fees to Arch under this insurance management services agreement. |
Commitments and contingencies
Commitments and contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Concentrations of credit risk For our reinsurance agreements, the creditworthiness of a counterparty is evaluated by the Company, taking into account credit ratings assigned by independent agencies. The credit approval process involves an assessment of factors, including, among others, the counterparty country and industry exposures. Collateral may be required, at the discretion of the Company, on certain transactions based on the creditworthiness of the counterparty. The areas where significant concentrations of credit risk may exist include unpaid losses and loss adjustment expenses recoverable, prepaid reinsurance premiums and paid losses and loss adjustment expenses recoverable net of reinsurance balances payable (collectively, “net reinsurance recoverables”), investments and cash and cash equivalent balances. The Company’s reinsurance recoverables, and prepaid reinsurance premiums, net of reinsurance balances payable, resulting from reinsurance agreements entered into with ARL and ARC as of December 31, 2019 and 2018 amounted to $92.5 million and $53.3 million , respectively. ARL and ARC have “A+” credit ratings from A.M. Best. A credit exposure exists with respect to reinsurance recoverables as they may become uncollectible. The Company manages its credit risk in its reinsurance relationships by transacting with reinsurers that it considers financially sound and, if necessary, the Company may hold collateral in the form of funds, trust accounts and/or irrevocable letters of credit. This collateral can be drawn on for amounts that remain unpaid beyond specified time periods on an individual reinsurer basis. In addition, the Company underwrites a significant amount of its business through brokers and a credit risk exists should any of these brokers be unable to fulfill their contractual obligations with respect to the payments of insurance and reinsurance balances owed to the Company. The Company’s investment portfolios are managed in accordance with investment guidelines that include standards of diversification, which limit the allowable holdings of any single issuer. There were no investments in any entity in excess of 10% of the Company’s shareholders’ equity at December 31, 2019 and 2018 , other than cash and cash equivalents held in operating and investment accounts with financial institutions with credit ratings between “A” and “AA-.” Lloyds letter of credit facility On May 14, 2019, Watford Re renewed its letter of credit facility with Lloyds Bank Corporate Markets Plc, New York Branch (the “Lloyds Facility”). The Lloyds Facility amount is $100.0 million and was renewed through to May 16, 2020. Under the renewed Lloyds Facility, the Company may request an increase in the facility amount, up to an aggregate of $50.0 million . The principal purpose of the Lloyds Facility is to issue, as required, evergreen standby letters of credit in favor of primary insurance or reinsurance counterparties with which the Company has entered into reinsurance arrangements to ensure that such counterparties are permitted to take credit for reinsurance obtained from the Company as required under insurance regulations in the United States. The amount of letters of credit issued is driven by, among other things, the timing and payment of catastrophe losses, loss development of existing reserves, the payment pattern of such reserves, the further expansion of the Company’s business and the loss experience of such business. When issued, the letters of credit are secured by certificates of deposit or cash. In addition, the Lloyds Facility also requires the maintenance of certain covenants, with which the Company was in compliance at December 31, 2019 and 2018 . At such dates, the Company had $51.0 million and $68.9 million , respectively, in restricted assets as collateral for outstanding letters of credit issued from the Lloyds Facility, which were secured by certificates of deposit. These collateral amounts are reflected as short-term investments in the Company’s consolidated balance sheets. Unsecured letter of credit facility On September 20, 2019, Watford Re signed a 364 -day letter of credit agreement with Lloyds Bank Corporate Markets Plc and BMO Capital Markets Corp. (the “Unsecured Facility”). The Unsecured Facility amount is $100.0 million , and will be automatically extended for a period of one year unless canceled or not renewed by either counterparty prior to expiration. The principal purpose of the Unsecured Facility is to issue, as required, evergreen standby letters of credit in favor of primary insurance or reinsurance counterparties with which the Company has entered into reinsurance arrangements to ensure that such counterparties are permitted to take credit for reinsurance obtained from the Company as required under insurance regulations in the United States. The amount of letters of credit issued is driven by, among other things, the timing and payment of catastrophe losses, loss development of existing reserves, the payment pattern of such reserves, the further expansion of the Company’s business and the loss experience of such business. When issued, the letters of credit are secured by certificates of deposit or cash. The Unsecured Facility also requires the maintenance of certain covenants, which the Company was in compliance with at December 31, 2019 . In the Unsecured Facility, the Company makes representations, warranties and covenants that are customary for facilities of this type, which the Company was in compliance with at December 31, 2019 . At December 31, 2019 , the Company had $19.3 million in outstanding letters of credit issued from the Unsecured Facility. Bank of America secured credit facility On November 30, 2017, Watford Re amended and restated its $800.0 million secured credit facility (the “Secured Facility”) with Bank of America, N.A., which expires on November 30, 2021. The purpose of the Secured Facility is to provide borrowings, backed by Watford Re’s investment portfolios. In addition, the Secured Facility allows for Watford Re to issue up to $400.0 million in evergreen standby letters of credit in favor of primary insurance or reinsurance counterparties with which the Company has entered into reinsurance arrangements. At December 31, 2019 , Watford Re had $484.3 million and $52.5 million in borrowings and outstanding letters of credit, respectively. At December 31, 2018 , Watford Re had $455.7 million and $52.5 million in borrowings and outstanding letters of credit, respectively. At December 31, 2019 and 2018 , Watford Re was in compliance with all covenants contained in the Secured Facility. Custodian bank facility As of December 31, 2019 and 2018 , Watford Re had $Nil and $238.2 million , respectively, in borrowings from our custodian bank to purchase USD-denominated securities. As of December 31, 2018 , the total borrowed amount of $238.2 million included 2.0 million Swiss Francs, or CHF (USD equivalent of $2.0 million ), to purchase CHF-denominated securities. The Company pays interest based on 3-month LIBOR plus a margin and the borrowed amount is payable upon demand. The foreign exchange gain or loss on revaluation on the non-U.S. dollar-denominated borrowed funds is included as a component of foreign exchange gains (losses) included in the consolidated statements of net income (loss). The custodian bank requires the Company to hold cash and investments on deposit, or in an investment account with respect to the borrowed funds. At December 31, 2019 and 2018 , the Company was required to hold $Nil and $339.1 million , respectively, in such deposits and investment accounts. Employment and other arrangements The Company has employment agreements with certain of its executive officers. Such employment arrangements provide for compensation in the form of base salary, annual bonus, participation in the Company’s employee benefit programs, the Company’s share-based compensation plans, and the reimbursements of expenses. Investment commitments As of December 31, 2019 , the Company had unfunded commitments of $8.4 million relating to term loans and $26.4 million relating to equities within its investment portfolios. As of December 31, 2018 , the Company had unfunded commitments of $2.9 million relating to equities within its investment portfolios. Acquisition commitments The Company has entered into an agreement to purchase Axeria IARD, a property and casualty insurance company based in France. The Company has committed to acquire 100% of the capital stock of Axeria IARD from the APRIL group. The transaction is subject to regulatory approval and is expected to close in the second quarter of 2020. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Leases | The Company has entered into a lease agreement for real estate that is used for office space in the ordinary course of business. The lease is accounted for as an operating lease, whereby the lease expense is recognized on a straight-line basis over the term of the lease. Refer to Note 2, “Basis of presentation and significant accounting policies” for additional information regarding the accounting for leases. The lease includes an option to extend or renew the lease term. The exercise of the renewal option is at the Company’s discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercising those options. Such options relating to the extension or renewal of the lease term are not included in the operating lease liability at this time. Lease expense is included in general and administrative expenses in the Company’s consolidated statements of net income (loss). Additional information regarding the Company’s real estate operating lease is as follows. Year Ended December 31, 2019 ($ in thousands) Lease cost: Operating lease $ 241 Other information on operating lease: Cash payments included in the measurement of lease liability reported in operating cash flows 283 Right-of-use assets (1) 970 Operating lease liability (2) 970 Weighted average discount rate 3.9 % Weighted average remaining lease term in years 3.75 years (1) Included i n “other assets” on the Company’s consolidated balance sheet. (2) Included in “other liabilities” on the Company’s consolidated balance sheet. The following tables present the contractual maturity of the Company’s lease liability: December 31, 2019 ($ in thousands) 2020 283 2021 283 2022 283 2023 189 Total undiscounted lease payments 1,038 Less: present value adjustment (68 ) Operating lease liability 970 December 31, 2018 ($ in thousands) Future rental commitments 2019 283 2020 283 2021 283 2022 283 2023 189 Total 1,321 |
Senior notes
Senior notes | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Senior notes | On July 2, 2019, the Company completed a private offering of $175.0 million in aggregate principal amount of its 6.5% senior notes due July 2, 2029. Interest on the senior notes is paid semi-annually in arrears on each January 2 and July 2, commencing January 2, 2020. The $172.3 million net proceeds from the offering were used to redeem a portion of the Company’s outstanding preference shares, as described above in Note 17, “Contingently redeemable preference shares” . Affiliates of ACGL purchased $35 million in aggregate principal amount of the senior notes. The senior notes are the Parent’s senior unsecured and unsubordinated obligations and rank equally with all of the other existing and future obligations of the Parent that are unsecured and unsubordinated. The Company may redeem the senior notes at any time, in whole or in part, prior to July 2, 2024, at “make-whole” redemption price, subject to BMA requirements. After July 2, 2024, the senior notes are redeemable, in whole or in part, at a redemption price equal to 100% of the principal amount, subject to BMA requirements. The indenture governing the senior notes contains certain customary covenants, including those related to the punctual payment of interest and principal amounts due. The Company was in compliance with such covenants at December 31, 2019 . As of December 31, 2019 , the carrying amount of the senior notes was $172.4 million , presented net of unamortized debt issuance costs of $2.6 million . As of December 31, 2018 , the carrying amount of the senior notes was $ Nil . |
Contingently redeemable preferr
Contingently redeemable preferred shares | 12 Months Ended |
Dec. 31, 2019 | |
Preferred Shares [Abstract] | |
Contingently redeemable preference shares | In March 2014, the Company issued 9,065,200 8½% Cumulative Redeemable Preference Shares (the “preference shares”). The preference shares have a par value of $0.01 per share and a liquidation preference of $25.00 per share. The preference shares were issued at a discounted purchase price of $24.50 per share. Holders of the preference shares are entitled to receive, if declared by the board of directors, quarterly cash dividends on the last day of March, June, September, and December of each year. Prior to June 30, 2019, dividends on the preference shares accrued at a fixed rate of 8.5% per annum (the “Fixed Rate Period”). Dividends accrue from (and including) June 30, 2019 (the “Floating Rate Period”), at a floating rate per annum (the “Floating Rate”) equal to three-month U.S. dollar LIBOR plus a margin of 667.85 basis points; provided, that, if, at any time, the three-month U.S. dollar LIBOR shall be less than 1% , then the three-month U.S. dollar LIBOR for purposes of calculating the Floating Rate at the time of such calculation shall be 1% . The preference shares may be redeemed by the Company on or after June 30, 2019 or at the option of the preference shareholders at any time on or after June 30, 2034 at the liquidation price of $25.00 per share. Because the redemption features are not solely within the control of the Company, the preference shares have been recorded as mezzanine equity on the Company’s consolidated balance sheets in accordance with applicable accounting guidance. Preference share dividends, including the accretion of the discount and issuance costs, are included in “Preference dividends” in the Company’s consolidated statements of income (loss). On August 1, 2019, the Company redeemed 6,919,998 of its 9,065,200 total issued and outstanding preference shares, which were redeemed at a total redemption price of $25.19748 per share, inclusive of all declared and unpaid dividends, with accumulation of any undeclared dividends on or after June 30, 2019. After the redemption date, dividends on the preference shares that were redeemed ceased to accrue, and such redeemed preference shares ceased to be outstanding. Affiliates of Arch Capital Group Ltd. received $11.5 million in connection with the redemption of the preference shares. For the years ended December 31, 2019 , 2018 and 2017 , dividends paid on the preference shares totaled $13.4 million , $19.3 million and $19.3 million , respectively. For the year ended December 31, 2019 , a ccelerated amortization of costs related to the redemption of preference shares totaled $4.2 million . For the years ended December 31, 2019 , 2018 and 2017 , accretion of the discount and issuance costs was $0.2 million , $0.4 million and $0.4 million , respectively. The following table presents a reconciliation of the preference shares for the years ended December 31, 2019 , 2018 and 2017 : Year Ended December 31, 2019 2018 2017 ($ in thousands) Preference shares: Balance at the beginning of the period $ 220,992 $ 220,622 $ 220,253 Preference shares repurchased during the period (173,081 ) — — Accelerated amortization of costs related to the redemption of preference shares 4,164 — — Accretion discount and issuance costs on remaining preference shares 230 370 369 Balance at the end of the period $ 52,305 $ 220,992 $ 220,622 |
Shareholders' Equity
Shareholders' Equity | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' equity | Common shares The authorized share capital of the Company at December 31, 2019 and 2018 was 120 million of common shares and 30 million of preference shares. Share repurchase program During 2019, the Company’s board of directors authorized a share repurchase program up to $75 million of our outstanding common shares. During the fourth quarter of 2019, the Company fully utilized the board authorized share repurchase program limit and purchased 2.8 million shares at an average price per share of $26.89 . At December 31, 2019, the shares are held in treasury, at an aggregate cost of $75.0 million (excluding transaction costs). The following table presents a roll-forward of changes in the Company’s issued and outstanding common shares: Year Ended December 31, 2019 2018 2017 Common shares: Shares issued and outstanding, beginning of year 22,682,875 22,682,875 22,682,875 Shares issued (1) 9,425 — — Shares issued, end of year 22,692,300 22,682,875 22,682,875 Common shares in treasury, end of year (2,789,405 ) — — Shares outstanding, end of year (2) 19,902,895 22,682,875 22,682,875 (1) Includes shares issued from the share-based compensation plans. Refer to Note 19 - “Share transactions” . (2) Excludes unissued vested shares of 73,502 . Refer to Note 11 - “Earnings per common share” . Warrants In connection with our initial private placement, we issued to Arch warrants to purchase up to 975,503 of common shares and to HPS warrants to purchase up to 729,188 of common shares. The warrants expire on March 25, 2020, and are exercisable at any time following a listing or public share offering by the Company. The exercise price of the warrants is determined on the date of exercise so that, if all such warrants then outstanding were exercised in full on such exercise date in respect of the common shares then subject to such warrants, initial holders who purchased common shares in our initial private placement would achieve a 15% target return (including dilution from such warrants and excluding dilution from start-up expenses related to our formation and initial private placement or any warrants we may issue in the future) from March 25, 2014, the initial closing of our private placement, through the date of such exercise, based on the $40.00 initial purchase price per common share paid by such initial holders and the market value of the common shares that would be necessary for the initial holders to achieve such target return if the initial holders disposed of their common shares on the date of such exercise. The warrants issued to Arch and HPS contain a provision where, at the holder’s request and at our option and in our sole discretion, the holder may, subject to certain conditions, receive cash in lieu of common shares upon exercise of the warrants. The amount of the cash payment is calculated by multiplying (i) the number of common shares for which the warrant is being exercised by (ii) the volume weighted average price per common share for the 20 trading days immediately prior to (but not including) the date of exercise less the strike price. We are not, however, required to net cash settle the warrants. |
Share Transactions
Share Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Share transactions | Share-based compensation The Company uses share-based compensation plans for officers, other employees and directors of the Parent and its subsidiaries to provide competitive compensation opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of performance goals and to promote the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders. The 2018 Stock Incentive Plan (the “2018 Plan”) became effective as of March 28, 2019 following approval by the Board of Directors of the Company and the listing of the Company’s common shares. The 2018 Plan provides for the issuance of restricted share units, performance units, restricted shares, performance shares, share options and share appreciation rights and other equity-based awards to the Company’s employees and directors. The 2018 Plan authorizes the issuance of 907,315 common shares and will terminate on March 28, 2029. As of December 31, 2019 , 742,028 shares were available for future issuance. During 2019, the Company granted 165,287 restricted share units and common shares to certain officers, other employees and directors. On the grant date of April 26, 2019, the fair value of the restricted share units and common shares was approximately $26.53 per share. Of the total restricted share units and common shares granted, 82,927 were vested and fully expensed, including 9,425 common shares issued. The remaining 82,360 restricted share units are being amortized over a 3 -year vesting period, being the requisite service period. No additional restricted share units or common shares were granted during remainder of 2019. There were no forfeitures or expired awards during 2019. The effect of compensation cost arising from share-based payment awards on the consolidated statement of income (loss), within general and administrative expenses, for the year ended December 31, 2019 was $2.7 million , which includes an accelerated expense recognition for retirement eligible employees. |
Retirement plans
Retirement plans | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
Retirement plans | For purposes of providing employees with retirement benefits, the Company maintains defined contribution retirement plans. Contributions are based on the participants’ eligible compensation. For the years ended December 31, 2019 , 2018 and 2017 , the Company expensed approximately $0.3 million , $0.2 million and $0.2 million , respectively, related to these retirement plans. |
Legal proceedings
Legal proceedings | 12 Months Ended |
Dec. 31, 2019 | |
Legal Proceedings Disclosure [Abstract] | |
Legal proceedings | The Company, in common with the insurance industry in general, is subject to litigation and arbitration in the normal course of its business. As of December 31, 2019 , the Company was not a party to any litigation or arbitration, which is expected by management to have a material adverse effect on the Company’s results of operations or financial condition and liquidity. |
Statutory information
Statutory information | 12 Months Ended |
Dec. 31, 2019 | |
Statutory information [Abstract] | |
Statutory information | The Company’s subsidiaries are subject to insurance and/or reinsurance laws and regulations in the jurisdictions in which they operate. These regulations include certain restrictions on the amount of dividends or other distributions available to shareholders without prior approval of the regulatory authorities. The actual and required statutory capital and surplus for the Company’s significant regulatory jurisdictions at December 31, 2019 and 2018 was as follows: December 31, 2019 2018 Actual Required Actual Required ($ in thousands) Statutory capital and surplus: Bermuda (1) $ 1,106,576 $ 700,000 $ 1,114,933 $ 650,902 Watford Specialty Insurance Company 59,763 4,603 60,964 3,464 Watford Insurance Company 29,749 2,280 17,088 1,789 United States 89,512 6,883 78,052 5,253 Gibraltar 29,113 15,710 22,927 13,136 (1) The BSCR for Watford Re for the year ended December 31, 2019 will not be filed with the BMA until April 2020 . As such, the required statutory capital and surplus as at December 31, 2019 is an estimate of ECR. There were no state-prescribed or permitted regulatory accounting practices for any of the Company’s subsidiaries that resulted in reported statutory surplus that differed from that which would have been reported under the prescribed practices of the respective regulatory authorities, including the National Association of Insurance Commissioners. The differences between statutory financial statements and statements prepared in accordance with GAAP vary by jurisdiction, however, with the primary differences being that statutory financial statements may not reflect deferred acquisition costs, certain net deferred tax assets, goodwill and intangible assets, unrealized appreciation or depreciation on debt securities and certain unauthorized reinsurance recoverables and include contingency reserves. The statutory net income (loss) for the Company’s significant regulatory jurisdictions at December 31, 2019 , 2018 and 2017 was as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Statutory net income (loss): Bermuda $ 72,771 $ (25,110 ) $ 10,982 Watford Specialty Insurance Company 426 525 315 Watford Insurance Company (730 ) (2,488 ) (204 ) United States (304 ) (1,963 ) 111 Gibraltar 1,681 653 1,320 Bermuda Under the Insurance Act, Watford Re, the Company’s reinsurance subsidiary, is registered as a Class 4 insurer and is required to maintain minimum statutory capital and surplus equal to the greater of a minimum solvency margin and the enhanced capital requirement as determined by the Bermuda Monetary Authority (“BMA”). The enhanced capital requirement is calculated based on the Bermuda Solvency Capital Requirement model (“BSCR Model”), a risk-based model that takes into account the risk characteristics of different aspects of the Company’s business. At December 31, 2019 and 2018 , all such requirements were met. The ability to pay dividends is limited under Bermuda laws and regulations. Under the Insurance Act, Watford Re is restricted with respect to the payment of dividends. Watford Re is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files, at least 7 days before payment of such dividends, with the BMA, an affidavit stating that it will continue to meet the required margins following the declaration of those dividends. Accordingly, Watford Re can pay dividends or return capital of approximately $276.6 million during 2020 without providing an affidavit to the BMA. Gibraltar WICE is licensed by the Gibraltar Financial Services Commission (“GFSC”) under the Gibraltar Financial Services (Insurance Companies) Act (“the Gibraltar Act”) to underwrite various insurance businesses across Europe. Under the Gibraltar Act, WICE is subject to capital requirements and is required to prepare and submit annual financial statements to the GFSC as outlined in the Gibraltar Act and in accordance with Gibraltar Generally Accepted Accounting Practice. WICE shall notify the GFSC of any proposals to declare or pay a dividend on any of its share capital. WICE shall not declare or pay any dividend within 14 days of the date of notification. As of December 31, 2019 and 2018 , WICE was in compliance with the GFSC dividend requirement. United States The Company’s U.S. subsidiaries are subject to insurance laws and regulations in the jurisdictions in which they operate. The ability of the Company’s regulated U.S. subsidiaries to pay dividends or make distributions is dependent on their ability to meet applicable regulatory standards. These regulations include restrictions that limit the amount of dividends or other distributions, such as loans or cash advances, available to common shareholders without prior approval of the insurance regulatory authorities. Any dividends or distributions made by WSIC or WIC would result in an increase in available capital at Holdings U.S. WSIC and WIC can declare a maximum of $6.0 million and $3.0 million , respectively, of dividends during 2020 , without prior approval from the New Jersey Commissioner of Insurance. |
Unaudited condensed quarterly f
Unaudited condensed quarterly financial information | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Unaudited Condensed Quarterly Financial Information | The following table summarizes the 2019 and 2018 unaudited condensed quarterly financial information: Fourth Quarter Third Quarter Second Quarter First Quarter ($ in thousands, except per share data) Year Ended December 31, 2019 Net premiums written $ 112,353 $ 155,752 $ 119,370 $ 145,387 Net premiums earned 133,446 125,832 151,318 146,094 Underwriting income (loss) (37,819 ) (5,021 ) (5,266 ) (5,970 ) Net interest income 29,826 29,536 26,415 30,434 Realized and unrealized gains (losses) on investments 6,105 (14,646 ) (936 ) 33,720 Net investment income (loss) 32,082 14,040 23,787 58,354 Preference dividends (1,209 ) (2,608 ) (4,908 ) (4,907 ) Accelerated amortization of costs related to the redemption of preference shares — (4,164 ) — — Net income (loss) available to common shareholders (16,864 ) 152 13,825 47,632 Earnings (loss) per common share - basic $ (0.79 ) $ 0.01 $ 0.61 $ 2.10 Earnings (loss) per common share - diluted $ (0.79 ) $ 0.01 $ 0.61 $ 2.10 Year Ended December 31, 2018 Net premiums written $ 132,360 $ 151,677 $ 140,586 $ 179,552 Net premiums earned 146,973 135,624 159,518 136,747 Underwriting income (loss) (22,660 ) (912 ) (1,006 ) (1,262 ) Net interest income 29,955 27,397 26,042 24,139 Realized and unrealized gains (losses) on investments (97,597 ) (3,617 ) (10,614 ) (2,006 ) Net investment income (loss) (61,084 ) 21,373 13,826 19,536 Preference dividends (4,909 ) (4,909 ) (4,908 ) (4,907 ) Net income (loss) available to common shareholders (95,259 ) 18,837 9,124 12,782 Earnings (loss) per common share - basic $ (4.20 ) $ 0.83 $ 0.41 $ 0.56 Earnings (loss) per common share - diluted $ (4.20 ) $ 0.83 $ 0.41 $ 0.56 |
Subsequent events
Subsequent events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent events | The Company has completed its subsequent events evaluation for the period subsequent to the balance sheet date of December 31, 2019 , and concluded that there are no subsequent events requiring recognition or disclosure. |
Schedule I - Summary of Investm
Schedule I - Summary of Investments - Other than Investments in Related Parties [Schedule] | 12 Months Ended |
Dec. 31, 2019 | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Abstract] | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties | WATFORD HOLDINGS LTD. Schedule I - Summary of investments - other than investments in related parties. (Expressed in thousands of U.S. dollars) Cost or Amortized Cost Fair Value Amount Shown on the Balance Sheet December 31, 2019 Fair Value Option: Term loan investments $ 1,113,212 $ 1,061,934 $ 1,061,934 Fixed maturities: Corporate bonds 221,024 214,354 214,354 U.S. government and government agency bonds 1,963 1,962 1,962 Asset-backed securities 200,361 190,737 190,737 Mortgage-backed securities 7,399 7,706 7,706 Non-U.S. government and government agency bonds 1,449 1,456 1,456 Municipal government and government agency bonds 380 379 379 Short-term investments 325,542 329,303 329,303 Other investments (1) 28,672 30,461 30,461 Equities 54,893 59,799 59,799 Investments, fair value option 1,954,895 1,898,091 1,898,091 Fair Value Through Net Income: Equities, fair value through net income 78,031 65,338 65,338 Available for Sale: U.S. government and government agency bonds 282,076 283,647 283,647 Non-U.S. government and government agency bonds 129,456 131,953 131,953 Corporate bonds 155,834 158,119 158,119 Asset-backed securities 145,555 145,434 145,434 Mortgage-backed securities 24,776 24,750 24,750 Municipal government and government agency bonds 1,759 1,805 1,805 Total investments, available for sale 739,456 745,708 745,708 Total Investments $ 2,772,382 $ 2,709,137 $ 2,709,137 (1) See Note 13 - “Transactions with related parties” for disclosure of related party amounts. |
Schedule II - Condensed Financi
Schedule II - Condensed Financial Information of Registrant [Schedule] | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Financial Information of Parent Company Only Disclosure | WATFORD HOLDINGS LTD. Schedule II - Condensed Financial Statements of Registrant Condensed Balance Sheets - Parent company only (Expressed in thousands of U.S. dollars) December 31, 2019 December 31, 2018 Assets Cash and cash equivalents $ 179 $ 4 Investments in subsidiaries 1,111,003 1,120,596 Prepaid expenses 80 31 Total assets $ 1,111,262 $ 1,120,631 Liabilities Other liabilities $ 840 $ 4,995 Amounts due to affiliates 13,346 5,036 Senior notes 172,418 — Total liabilities 186,604 10,031 Contingently redeemable preference shares 52,305 220,992 Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,692,300 and 22,682,875) 227 227 Additional paid-in capital 898,083 895,386 Retained earnings (deficit) 43,470 (1,275 ) Accumulated other comprehensive income (loss) 5,629 (4,730 ) Common shares held in treasury, at cost (shares: 2,789,405 and Nil) (75,056 ) — Total shareholders’ equity 872,353 889,608 Total liabilities, contingently redeemable preference shares and shareholders’ equity $ 1,111,262 $ 1,120,631 WATFORD HOLDINGS LTD. Schedule II - Condensed Financial Statements of Registrant Condensed Statements of Income (Loss) and Comprehensive Income (Loss) - Parent company only (Expressed in thousands of U.S. dollars) Year Ended December 31, 2019 2018 2017 Revenues Equity in earnings of consolidated subsidiaries $ 72,771 $ (25,110 ) $ 10,981 Net investment income (loss) 247 (1 ) (1 ) Total revenues 73,018 (25,111 ) 10,980 Expenses General and administrative expenses (4,686 ) (772 ) (239 ) Interest expense (5,791 ) — — Non-recurring direct listing expenses — (9,000 ) — Total expenses (10,477 ) (9,772 ) (239 ) Net income (loss) before preference dividends and redemption costs 62,541 (34,883 ) 10,741 Preference dividends (13,632 ) (19,633 ) (19,633 ) Accelerated amortization of costs related to the redemption of preference shares (4,164 ) — — Net income (loss) available to common shareholders $ 44,745 $ (54,516 ) $ (8,892 ) Comprehensive income (loss) $ 55,104 $ (58,274 ) $ (9,489 ) WATFORD HOLDINGS LTD. Schedule II - Condensed Financial Statements of Registrant Condensed Statements of Cash Flows - Parent company only (Expressed in thousands of U.S. dollars) Year Ended December 31, 2019 2018 2017 Operating Activities Net income (loss) before preference dividends and redemption costs $ 62,541 $ (34,883 ) $ 10,741 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Share-based compensation 2,697 — — Equity in earnings of consolidated subsidiaries (72,771 ) 25,110 (10,981 ) Prepaid expenses (49 ) 3,825 (3,850 ) Other liabilities (4,155 ) 4,618 374 Amounts due to affiliates 8,310 1,332 3,704 Other items 136 — — Net Cash Provided By (Used For) Operating Activities (3,291 ) 2 (12 ) Investing Activities Return of capital from subsidiary 80,687 — — Dividend received from subsidiary 12,035 19,265 19,265 Net Cash Provided By (Used For) Investing Activities 92,722 19,265 19,265 Financing Activities Repurchase of preference shares (173,081 ) — — Net proceeds of issuances of senior notes 172,283 — — Purchases of common shares under share repurchase program (75,056 ) — — Dividends paid on redeemable preference shares (13,402 ) (19,264 ) (19,264 ) Net Cash Provided By (Used For) Financing Activities (89,256 ) (19,264 ) (19,264 ) Increase (decrease) in cash 175 3 (11 ) Cash and cash equivalents, beginning of year 4 1 12 Cash and cash equivalents, end of year $ 179 $ 4 $ 1 |
Schedule IV - Reinsurance _Sche
Schedule IV - Reinsurance [Schedule] | 12 Months Ended |
Dec. 31, 2019 | |
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Abstract] | |
SEC Schedule, 12-17, Insurance Companies, Reinsurance | WATFORD HOLDINGS LTD. Schedule IV - Reinsurance (Expressed in thousands of U.S. dollars) Gross Amount Ceded to Other Companies Assumed from Other Companies Net Amount Percentage of Amount Assumed to Net December 31, 2019 Premiums written: Insurance $ 339,170 $ (162,459 ) $ — $ 176,711 — % Reinsurance — (59,560 ) 415,711 356,151 116.7 % Total $ 339,170 $ (222,019 ) $ 415,711 $ 532,862 78.0 % December 31, 2018 Premiums written: Insurance $ 253,760 $ (113,922 ) $ — $ 139,838 — % Reinsurance — (16,918 ) 481,255 464,337 103.6 % Total $ 253,760 $ (130,840 ) $ 481,255 $ 604,175 79.7 % December 31, 2017 Premiums written: Insurance $ 133,983 $ (30,770 ) $ — $ 103,213 — % Reinsurance — (16,417 ) 466,321 449,904 103.6 % Total $ 133,983 $ (47,187 ) $ 466,321 $ 553,117 84.3 % |
Schedule VI - Supplementary Inf
Schedule VI - Supplementary Information For Property and Casualty Insurance Underwriters [Schedule] | 12 Months Ended |
Dec. 31, 2019 | |
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Abstract] | |
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters | WATFORD HOLDINGS LTD. Schedule VI - Supplementary Information for Property and Casualty Insurance Underwriters (Expressed in thousands of U.S. dollars) Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K Net Losses and Loss Adjustment Expenses Incurred Relating to Affiliation with Registrant Deferred Acquisition Costs, Net Reserves for Losses and Loss Adjustment Expenses Discount, if any, deducted in Column C Unearned Premiums Net Premiums Earned Net Investment Income (Loss) (a) Current Year (b) Prior Years Amortization of Deferred Acquisition Costs Net Paid Losses and Loss Adjustment Expenses Net Premiums Written Consolidated Subsidiaries 2019 $ 64,044 $ 1,263,628 $ — $ 438,907 $ 556,690 $ 128,263 $ 429,322 $ 23,813 $ (126,788 ) $ 321,835 $ 532,862 2018 80,858 1,032,760 — 390,114 578,862 (6,349 ) 443,482 (2,227 ) (141,136 ) 224,206 604,175 2017 85,961 798,262 — 330,644 531,726 72,738 399,530 36,872 (140,726 ) 182,119 553,117 |
Basis of presentation and sig_2
Basis of presentation and significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of presentation | The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. |
Use of estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. |
Premiums | Reinsurance premiums written are recorded based on the type of contracts the Company writes. Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of loss contracts, premiums are recorded as written, on the inception date, based on the terms of the contract. Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annual installments, premium recognition depends on whether the contract is non-cancellable. If either party retains the ability to cancel or commute coverage prior to expiration, only the initial annual installment is included as premiums written at policy inception. The remaining annual installments would then be included as premiums written at each successive anniversary date within the multi-year term. If, on the other hand, the contract is non-cancellable, the full multi-year premiums would be recognized as written at policy inception. Reinsurance premiums written and assumed include amounts reported by brokers and ceding companies, supplemented by the Company’s own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each line of business, and management’s judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company reviews the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business. In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information. Based on a review of all available information, management establishes premium estimates where reports have not been received. Premium estimates are updated when new information is received and differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined. Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned. Reinstatement premiums are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment. Reinsurance premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the term of the underlying policies or reinsurance contracts. Contracts and policies written on a “losses occurring” basis cover claims that may occur during the term of the contract or policy, which is typically 1 year . Accordingly, the premium is earned evenly over the term. Contracts which are written on a “risks attaching” basis cover claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 2 years period. Certain of the Company’s reinsurance contracts include provisions that adjust premiums or acquisition expenses based upon the experience under the contracts. Premiums written and earned, as well as related acquisition expenses are recorded based upon the projected experience under such contracts. |
Acquisition expenses | Acquisition expenses consist primarily of brokerage fees, ceding commissions, premium taxes, underwriting fees payable to Arch under our services agreements and other direct expenses that relate to our contracts and policies and are presented net of commissions received from reinsurance we purchase. We amortize deferred acquisition expenses over the related contract term in the same proportion that the premiums are earned. Our acquisition expenses may also include profit commissions paid to our sources of business in the event of favorable underwriting experience. Deferred acquisition costs, which are based on the related unearned premiums, are carried at their estimated realizable value and take into account anticipated losses and loss adjustment expenses, based on historical and current experience, and anticipated investment income. A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition costs and anticipated investment income exceed unearned premiums. A premium deficiency is recorded by charging any unamortized acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds unamortized acquisition costs then a liability is accrued for the excess deficiency. No premium deficiency charges were recorded by the Company during December 31, 2019 , 2018 and 2017 . |
Retroactive reinsurance accounting | Retroactive reinsurance reimburses a ceding company for liabilities incurred as a result of past insurable events covered by the underlying policies reinsured. For retroactive contracts that meet the established criteria for reinsurance accounting, written premiums are fully earned and corresponding losses and loss expense are recognized at inception. The initial gain, if applicable, is deferred and amortized into income over an actuarially determined expected payout period. Any future loss is recognized immediately and charged against earnings. The contracts can cause significant variances in gross premiums written, net premiums written, net premiums earned, and net incurred losses in the years in which they are written. Reinsurance contracts sold not meeting the established criteria for reinsurance accounting are recorded using the deposit method. In certain instances, reinsurance contracts cover losses both on a prospective basis and on a retroactive basis and, accordingly, the Company bifurcates the prospective and retrospective elements of these reinsurance contracts and accounts for each element separately where practical. Underwriting income generated in connection with retroactive reinsurance contracts is deferred and amortized into income over the settlement period while losses are charged to income immediately. Subsequent changes in estimated or actual cash flows under such retroactive reinsurance contracts are accounted for by adjusting the previously deferred amount to the balance that would have existed had the revised estimate been available at the inception of the reinsurance transaction, with a corresponding charge or credit to income. |
Reinsurance ceded | The accompanying consolidated statements of income (loss) reflect premiums and losses and loss adjustment expenses and acquisition expenses, net of reinsurance ceded (see Note 4, “Reinsurance” ). Ceded unearned premiums are reported as prepaid reinsurance premiums and estimated amounts of reinsurance recoverable on unpaid losses are reported as unpaid losses and loss adjustment expenses recoverable. Reinsurance premiums ceded and unpaid losses and loss adjustment expenses recoverable are estimated in a manner consistent with that of the original policies issued and the terms of the reinsurance contracts. If the reinsurers are unable to satisfy their obligations under the agreements, the Company would be liable for such defaulted amounts. Reinsurance ceding commissions are recognized as income on a pro rata basis over the period of risk. Reinsurance ceding commissions that represent a recovery of acquisition costs are recognized as a reduction to acquisition expenses while the remaining portion is deferred. |
Cash and cash equivalents | Cash includes cash equivalents, which are investments with original maturities of three months or less that are not managed by the external investment managers. Short-term investments include certain cash equivalents which are part of investment portfolios under the management of our investment managers. |
Investments | The Company has elected the fair value option for the majority of its long and short-term investments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 825, Financial Instruments. As a result, the Company’s non-investment grade investments are reported at fair value with changes in fair value included in “realized and unrealized gain (loss) on investments” in the consolidated statements of income (loss). See Note 7 - “Investment information” for further information about the investment portfolios. The fair values of investments are based on quotations received from nationally recognized pricing services, or when such prices are not available, by reference to broker or underwriter bid indications. Short-term investments are comprised of securities due to mature within one year of the date of issue. Investment transactions are recorded on a trade date basis with balances pending settlement recorded separately in the consolidated balance sheets as receivable for securities sold or payable for securities purchased. See Note 8 - “Fair value” for further details. Beginning January 1, 2018, the Company elected to classify newly acquired debt investments in its investment grade portfolio as “available for sale.” Accordingly, they are carried at estimated fair value (also known as fair value) with the changes in fair value recorded as an unrealized gain or loss component of accumulated other comprehensive income in shareholders’ equity. The Company performs quarterly reviews of its investment grade investments to determine whether declines in fair value below the cost basis are considered other-than-temporary in accordance with applicable accounting guidance regarding the recognition and presentation of other-than-temporary impairment (“OTTI”). The process of determining whether a security is other-than-temporarily impaired requires judgment and involves analyzing many factors. These factors include (i) an analysis of the liquidity, business prospects and overall financial condition of the issuer, (ii) the time period in which there was a significant decline in value, (iii) the significance of the decline and (iv) the analysis of specific credit events. When there are credit-related losses associated with investment grade debt securities for which the Company does not have an intent to sell and it is more likely than not that it will not be required to sell the security before recovery of its cost basis, the amount of the OTTI related to a credit loss is recognized in earnings and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of other comprehensive income (loss). The amount of the credit loss of an impaired debt security is the difference between the amortized cost and the greater of (i) the present value of expected future cash flows and (ii) the fair value of the security. In instances where no credit loss exists but it is more likely than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in fair value below amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI were recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted or amortized into net investment income. As of December 31, 2019 , the Company had no investment losses on the available for sale portfolio that are considered as other-than-temporary. Investment gains or losses realized on the sale of investments are determined on a first-in, first-out basis and are reflected in net income. Unrealized appreciation or decline in the value of available for sale securities, which are carried at fair value, is excluded from net income and recorded as a separate component of accumulated other comprehensive income, net of applicable deferred income tax. Net interest income includes interest income together with amortization of market premiums and discounts, net of investment management fees, interest expense and custody fees. Anticipated prepayments and expected maturities are used in applying the interest method for certain investments, such as asset-backed securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The investment in such securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security. Such adjustments, if any, are included in interest income when determined. Investment gains or losses realized on the sale of investments are determined on a first-in, first-out basis and are reflected in “realized and unrealized gain (loss) on investments” in the consolidated statements of income (loss). Performance fees related to the non-investment grade portfolio (i) equal to 15% of income for periods prior to January 1, 2018 and (ii) for periods beginning January 1, 2018 equal to 10% of income plus an additional performance fee equal to 25% of any Excess Income (as defined in such investment management agreements) in excess of a net 10% return to Watford after deduction for paid and accrued management fees and base performance fees, with the total performance fees not to exceed 17.5% of the Income or Aggregate Income, as applicable, are reflected in “investment performance fees - related parties” in the consolidated statements of income (loss). See Note 7 - “Investment information” for further details. The Company invests in limited partnerships and limited liability companies. Such amounts are included in other investments, fair value option. These investments can often have characteristics of a variable interest entity (“VIE”). A VIE refers to entities that have characteristics such as (i) insufficient equity at risk to allow the entity to finance its activities without additional financial support or (ii) instances where the equity investors, as a group, do not have the characteristic of a controlling financial interest. If the Company is determined to be the primary beneficiary, it is required to consolidate the VIE. The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (i) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. At inception of the VIE as well as on an ongoing basis, the Company determines whether it is the primary beneficiary based on an analysis of the Company’s level of involvement in the VIE, the contractual terms, and the overall structure of the VIE. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. |
Derivative instruments | The Company recognizes all derivative financial instruments, including embedded derivative instruments, at fair value in the consolidated balance sheets. The Company’s investment and underwriting strategy allows for the use of derivative instruments to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under the Company’s investment guidelines if implemented in other ways. For such investment derivative instruments, changes in assets and liabilities measured at fair value are recorded as a component of “realized and unrealized gain (loss) on investments.” In addition, the Company’s derivative instruments include amounts related to underwriting activities where an insurance or reinsurance contract meets the accounting definition of a derivative instrument. For such contracts, changes in fair value are reflected in “other underwriting income” in the consolidated statements of income (loss), as the underlying contract originates from the Company’s underwriting operations. See Note 10 - “Derivative instruments” for further details. |
Reserves for losses and loss adjustment expenses | The reserve for losses and loss adjustment expenses consists of estimates of unpaid reported losses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received. The Company’s reserves are based on a combination of reserving methods, incorporating ceding company and industry loss development patterns. The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by AUL and AUI managers during the initial pricing of the business, supplemented by industry data where appropriate. Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. The Company, in conjunction with data and analysis supplied by AUL and AUI, reviews the reserves regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are reflected in income in the period in which they are determined. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss adjustment expenses may differ materially from the amounts recorded in the accompanying consolidated financial statements. Losses and loss adjustment expenses are recorded on an un-discounted basis. See Note 5 - “Reserve for losses and loss adjustment expenses” for further details. |
Foreign exchange | Monetary assets and liabilities, such as premiums receivable and the reserve for losses and loss adjustment expenses, denominated in foreign currencies are revalued at the exchange rate in effect at the balance sheet date with the resulting foreign exchange gains and losses included in net income. Accounts that are classified as non-monetary, such as deferred acquisition costs and the unearned premium reserves, are not subsequently re-measured. In the case of foreign currency-denominated cash and investments, the change in exchange rates between the local currency and the Company’s functional currency at each balance sheet date is included as a component of net foreign exchange gains and losses included in the consolidated statements of income (loss). In the case of foreign currency denominated fixed maturity securities which are classified as “available for sale,” the change in exchange rates between the local currency in which the investments are denominated and the Company’s functional currency at each balance sheet date is included in unrealized appreciation or decline in value of securities, a component of accumulated other comprehensive income, net of applicable deferred income tax. Assets and liabilities of foreign operations whose functional currency is not the U.S. dollar are translated at the prevailing exchange rates at each balance sheet date. Revenues and expenses of such foreign operations are translated at average exchange rates during the year. The net effect of the translation adjustments for foreign operations is included in accumulated other comprehensive income. |
Intangible assets | The Company’s intangible assets with indefinite lives include licenses held by its U.S. insurance subsidiary which allow such subsidiary to write insurance business in various jurisdictions. These indefinite-lived intangible assets are carried at or below fair value and are tested annually for impairment, either qualitatively or quantitatively, and between annual tests if events or change in circumstances indicate that it is more likely than not that the asset is impaired. If intangible assets are impaired, such assets are written down to their fair values with the related expense recorded in the Company’s results of operations. |
Income taxes | Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. A valuation allowance is recorded if it is more likely than not that some or all of a deferred tax asset may not be realized. The Company considers future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance. In the event the Company determines that it will not be able to realize all or part of its deferred income tax assets in the future, an adjustment to the deferred income tax assets would be charged to income in the period in which such determination is made. In addition, if the Company subsequently assesses that the valuation allowance is no longer needed, a benefit would be recorded to income in the period in which such determination is made. See Note 12 - “Income taxes” for more information. The Company recognizes a tax benefit where it concludes that it is more likely than not that the tax benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized. The Company records related interest and penalties in income tax expense. |
Warrants | The Company issued certain warrant contracts to Arch and HPS in conjunction with the initial capitalization of the Company which may be settled by the Company using either the physical settlement or net-share settlement methods. In the event these warrants are exercised and settled, the fair value of these warrants would be recorded in equity as additional paid-in capital based on an option-pricing model (Black-Scholes) used to calculate the fair value of the warrants issued. |
Earnings per share | Basic earnings per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares and participating securities outstanding during the period. The weighted average number of common shares excludes any dilutive effect of outstanding warrants, options and convertible securities, such as nonparticipating unvested restricted shares, if applicable. Diluted earnings per share are based on the weighted average number of common shares and share equivalents including any dilutive effects of warrants, options and other awards under stock plans, if applicable. U.S. GAAP requires that unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid (referred to as “participating securities”), be included in the number of shares outstanding for both basic and diluted earnings per share calculations. In the event of a net loss, the participating securities are excluded from the calculation of both basic and diluted loss per share. See Note 11 - “Earnings per common share” for more information. |
Share-based compensation | The Company applies a fair value-based measurement method in accounting for its share-based compensation plans with eligible employees and directors. Compensation expense is estimated based on the fair value of the award at the grant date and is recognized in net income over the requisite service period with a corresponding increase in shareholders’ equity. No value is attributed to awards that employees forfeit because they fail to satisfy vesting conditions. The Company’s time-based awards generally vest over a three -year period with one-third vesting on each of the first, second and third anniversaries of the grant date. The share-based compensation expense associated with awards that have graded vesting features and vest based only on service conditions is calculated on a straight-line basis over the requisite service period for the entire award. Compensation expense recognized in connection with performance awards is based on the achievement of the specified performance and service conditions. The final measure of compensation expense recognized over the requisite service period reflects the final performance outcome. During the recognition period, compensation expense is accrued based on the specified performance conditions that are probable of achievement. For awards granted to retirement-eligible employees where no service is required for the employee to retain the award, the grant date fair value is immediately recognized as compensation expense at the grant date because the employee is able to retain the award without continuing to provide service. For employees near retirement eligibility, the attribution of compensation expense is over the period from the grant date to the retirement eligibility date. The Company accounts for forfeitures of share-based awards as such forfeitures occur. See Note 19 - “Share transactions” for information relating to the Company’s share-based compensation. |
Treasury shares | Treasury shares are common shares purchased by the Company and not subsequently canceled. These shares are recorded at cost and result in a reduction of the Company’s shareholders’ equity in its consolidated balance sheets. |
Recent accounting pronouncements | Recently adopted accounting standards and accounting standard updates ( “ ASU ” ) In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases and subsequently issued several improvements to that update (collectively “ASU 2016-02”). The new accounting guidance requires that the lessee recognize an asset and a liability for leases with a lease term greater than 12 months regardless of whether the lease is classified as operating or financing. Under the previous accounting standard, operating leases were not reflected in the balance sheet. The Company adopted ASU 2016-02 on January 1, 2019. The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $1.1 million and a lease liability of $1.1 million in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets. The cumulative effect adjustment to the opening balance of retained earnings was $ Nil . The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 intends to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective January 1, 2019. This ASU was adopted on January 1, 2019, and did not have a material impact on the Company ’ s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 permits companies to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years. This ASU was adopted on January 1, 2019, and did not have a material impact on the Company ’ s consolidated financial statements and disclosures. Recently issued accounting standards not yet adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The new accounting guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses rather than incurred credit losses. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has assessed the impact of the implementation of this ASU and considers the impact to be immaterial to the Company’s consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”). ASU 2018-13 intends to modify the disclosure requirements on fair value measurements. The accounting guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted; removal or modification disclosures can be early adopted upon issuance of ASU 2018-13, and a delay of the adoption of additional disclosures is permitted until the effective date noted above. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements and disclosures. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”), which identified and clarified issues relevant to the implementation of ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), ASU 2016-13 and ASU 2017-12. The Company is assessing the impact the implementation will have on its consolidated financial statements and disclosures. • For amendments related to ASU 2016-01 and ASU 2016-13, the effective date is for fiscal years and interim periods beginning after December 15, 2019; with early adoption in any interim period permitted for ASU 2016-01. • For amendments related to ASU 2017-12, the effective date is as of the beginning of the first annual reporting period beginning after April 25, 2019. As the Company has implemented ASU 2017-12, early adoption in any interim period is permitted. |
Segment information (Tables)
Segment information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Summary segment information | The following table provides summary information regarding premiums written and earned by line of business and net premiums written by underwriting location: Year Ended December 31, 2019 2018 2017 ($ in thousands) Gross premiums written: Casualty reinsurance $ 279,967 $ 274,661 $ 284,481 Other specialty reinsurance 119,518 196,170 169,100 Property catastrophe reinsurance 16,226 10,424 12,740 Insurance programs and coinsurance 339,170 253,760 133,983 Total $ 754,881 $ 735,015 $ 600,304 Net premiums written: Casualty reinsurance $ 225,758 $ 273,048 $ 281,783 Other specialty reinsurance 114,876 181,096 155,666 Property catastrophe reinsurance 15,517 10,193 12,455 Insurance programs and coinsurance 176,711 139,838 103,213 Total $ 532,862 $ 604,175 $ 553,117 Net premiums earned: Casualty reinsurance $ 238,437 $ 278,656 $ 308,526 Other specialty reinsurance 149,688 162,691 134,855 Property catastrophe reinsurance 13,399 10,998 12,690 Insurance programs and coinsurance 155,166 126,517 75,655 Total $ 556,690 $ 578,862 $ 531,726 Net premiums written by underwriting location: United States $ 127,176 $ 49,800 $ 11,750 Europe 52,065 91,635 91,463 Bermuda 353,621 462,740 449,904 Total $ 532,862 $ 604,175 $ 553,117 |
Reinsurance (Tables)
Reinsurance (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Reinsurance Disclosures [Abstract] | |
Effects of reinsurance | The effects of reinsurance on the Company’s written and earned premiums, losses and loss adjustment expenses were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Premiums written Direct $ 339,170 $ 253,760 $ 133,983 Assumed 415,711 481,255 466,321 Ceded (222,019 ) (130,840 ) (47,187 ) Net $ 532,862 $ 604,175 $ 553,117 Premiums earned Direct $ 290,328 $ 201,868 $ 96,125 Assumed 419,778 468,156 471,073 Ceded (153,416 ) (91,162 ) (35,472 ) Net $ 556,690 $ 578,862 $ 531,726 Losses and loss adjustment expenses Direct $ 244,354 $ 157,991 $ 71,679 Assumed 347,378 348,332 393,565 Ceded (138,597 ) (65,068 ) (28,842 ) Net $ 453,135 $ 441,255 $ 436,402 |
Reserve for losses and loss a_2
Reserve for losses and loss adjustment expenses (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | |
Analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses | The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses for the years ended December 31, 2019 , 2018 and 2017 . Year Ended December 31, 2019 2018 2017 ($ in thousands) Gross reserve for losses and loss adjustment expenses at beginning of year $ 1,032,760 $ 798,262 $ 510,809 Unpaid losses and loss adjustment expenses recoverable 81,267 39,856 21,518 Net reserve for losses and loss adjustment expenses at beginning of year 951,493 758,406 489,291 Net incurred losses and loss adjustment expenses relating to losses occurring in: Current year 429,322 443,482 399,530 Prior years 23,813 (2,227 ) 36,872 Total net losses and loss adjustment expenses 453,135 441,255 436,402 Foreign exchange gains (losses) 15,286 (23,962 ) 14,832 Net paid losses and loss adjustment expenses relating to losses occurring in: Current year (73,723 ) (64,026 ) (70,423 ) Prior years (248,112 ) (160,180 ) (111,696 ) Total paid losses and loss adjustment expenses (321,835 ) (224,206 ) (182,119 ) Net reserve for losses and loss adjustment expenses at end of year 1,098,079 951,493 758,406 Unpaid losses and loss adjustment expenses recoverable 165,549 81,267 39,856 Gross reserve for losses and loss adjustment expenses at end of year $ 1,263,628 $ 1,032,760 $ 798,262 |
Short duration contracts (Table
Short duration contracts (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Short Duration Contracts [Abstract] | |
Levels of disaggregation | Level of disaggregation Included product lines Casualty reinsurance - pro rata Executive assurance, medical malpractice liability, other professional liability, workers’ compensation, excess and umbrella liability and excess auto liability all written primarily on a treaty pro rata basis Casualty reinsurance - excess of loss Executive assurance, medical malpractice liability, other professional liability, workers’ compensation, excess and umbrella liability and excess auto liability all written primarily on a treaty excess of loss basis Other specialty reinsurance Personal and commercial auto (other than excess auto liability), surety, accident and health, and workers compensation catastrophe written primarily on a treaty basis Property catastrophe reinsurance Property catastrophe reinsurance Insurance programs and coinsurance Primary and excess general liability, umbrella liability, professional liability, workers’ compensation, personal and commercial automobile, inland marine and property business with minimal catastrophe exposure written on a direct basis |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Percentage annual payout by age | The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2019 : Average annual percentage payout of incurred losses and loss adjustment expenses by age, net of reinsurance Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Casualty reinsurance - pro rata 7.4% 14.5% 16.3% 14.7% 12.3% 13.0% Casualty reinsurance - excess of loss 0.3% 1.6% 2.9% 8.2% 5.6% 19.5% Other specialty reinsurance 32.6% 32.7% 10.7% 8.7% 5.9% 1.6% Property catastrophe reinsurance 19.3% 30.4% 25.1% 6.2% 2.8% 1.2% Insurance programs and coinsurance 21.6% 33.7% 19.7% 8.9% 5.6% N/A |
Reconciliation of claims development to liability | The following table represents a reconciliation of the disclosures of net incurred and paid loss development tables to the reserve for losses and loss adjustment expenses at December 31, 2019 : December 31, 2019 ($ in thousands) Net outstanding liabilities: Casualty reinsurance - pro rata $ 491,623 Casualty reinsurance - excess of loss 262,118 Insurance programs and coinsurance 151,536 Other specialty reinsurance 126,612 Property catastrophe reinsurance 22,130 Other short duration lines not included in disclosures (1) 39,055 Total for short duration lines 1,093,074 Unpaid losses and loss adjustment expenses recoverable: Insurance programs and coinsurance 128,674 Other specialty reinsurance 19,700 Casualty reinsurance - excess of loss 9,949 Casualty reinsurance - pro rata 4,889 Property catastrophe reinsurance 3 Other short duration lines not included in disclosures (1) 2,334 Total for short duration lines 165,549 Unallocated claims adjustment expenses 5,005 Reserve for losses and loss adjustment expenses $ 1,263,628 (1) Other short duration lines includes liabilities acquired in the purchase of WIC of $2.3 million , which are 100% reinsured pursuant to a 100% quota share agreement, and other miscellaneous items. |
Casualty reinsurance pro rata | |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Claims development tables | Casualty reinsurance - Pro Rata ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 43,675 $ 43,026 $ 44,255 $ 45,847 $ 48,675 $ 50,353 $ 7,057 2015 159,460 160,004 173,994 177,786 185,728 35,987 2016 167,764 186,899 188,019 197,028 51,520 2017 178,479 179,978 192,420 67,144 2018 147,936 143,108 74,847 2019 115,895 75,819 Total $ 884,532 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ 883 $ 6,869 $ 13,980 $ 20,741 $ 25,628 $ 32,184 2015 12,985 37,392 70,101 86,921 114,698 2016 11,409 45,346 68,884 111,334 2017 15,369 40,632 82,190 2018 11,134 35,905 2019 16,598 Total 392,909 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 491,623 |
Casualty reinsurance excess of loss | |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Claims development tables | Casualty reinsurance - Excess of Loss ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 4,759 $ 5,756 $ 5,315 $ 11,636 $ 10,647 $ 10,392 $ 821 2015 27,910 29,008 36,466 38,030 38,343 2,247 2016 38,321 42,553 49,517 50,252 7,956 2017 45,349 36,170 39,442 12,043 2018 70,079 67,550 27,263 2019 79,050 53,402 Total $ 285,029 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ 2 $ 72 $ 671 $ 1,348 $ 3,369 2015 97 622 2,015 6,957 8,756 2016 218 797 2,617 5,554 2017 107 970 2,476 2018 155 2,455 2019 301 Total 22,911 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 262,118 |
Other specialty reinsurance | |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Claims development tables | Other specialty reinsurance ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 16,868 $ 17,247 $ 17,134 $ 17,605 $ 18,032 $ 18,031 $ 732 2015 72,131 73,461 71,845 74,414 76,917 2,841 2016 66,514 57,377 58,375 55,979 2,786 2017 77,923 73,308 77,661 7,003 2018 81,807 84,262 12,260 2019 85,895 33,440 Total $ 398,745 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ 4,835 $ 12,471 $ 14,329 $ 15,460 $ 16,892 $ 17,182 2015 30,103 49,238 58,214 67,476 70,401 2016 25,293 38,342 45,545 49,885 2017 29,764 55,164 61,226 2018 18,376 52,457 2019 20,982 Total 272,133 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 126,612 |
Property catastrophe reinsurance | |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Claims development tables | Property catastrophe reinsurance ($000’s) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ 1,516 $ 1,127 $ 815 $ 783 $ 659 $ 613 $ 25 2015 4,662 3,563 2,766 2,065 1,981 — 2016 5,111 4,113 3,413 2,968 78 2017 22,516 18,178 17,404 244 2018 16,734 14,833 875 2019 10,332 2,272 Total $ 48,131 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ 221 $ 545 $ 576 $ 598 $ 606 2015 377 804 1,374 1,456 1,494 2016 1,021 1,932 2,297 2,574 2017 6,615 12,090 13,245 2018 2,765 7,499 2019 583 Total 26,001 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 22,130 |
Insurance programs and coinsurance | |
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |
Claims development tables | Insurance programs and coinsurance ($000’s except claim amount) Incurred losses and allocated loss adjustment expenses, net of reinsurance December 31, 2019 Year ended December 31, Total of IBNR liabilities plus expected development on reported claims Cumulative number of reported claims Accident year 2014 unaudited 2015 unaudited 2016 unaudited 2017 unaudited 2018 unaudited 2019 2014 $ — $ — $ — $ — $ — $ — $ — — 2015 1,033 1,033 1,161 1,169 1,169 22 775 2016 26,299 25,992 27,627 28,090 2,284 31546 2017 59,717 58,665 62,289 8,530 55106 2018 100,538 100,011 15,379 49283 2019 127,368 51,992 58262 Total $ 318,927 Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance 2014 $ — $ — $ — $ — $ — $ — 2015 9 403 735 857 922 2016 6,036 15,723 21,115 23,198 2017 18,491 37,778 45,005 2018 31,561 67,067 2019 31,199 Total 167,391 Liabilities for losses and loss adjustment expenses, net of reinsurance $ 151,536 |
Investment information (Tables)
Investment information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of fair value and cost or amortized cost of available for sale securities | The following table summarizes the fair value of the Company’s securities classified as available for sale as of December 31, 2019 and 2018 : Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2019 Fixed maturities: U.S. government and government agency bonds $ 282,076 $ 1,708 $ (137 ) $ 283,647 Corporate bonds 155,834 2,326 (41 ) 158,119 Asset-backed securities 145,555 614 (735 ) 145,434 Non-U.S. government and government agency bonds 129,456 3,530 (1,033 ) 131,953 Mortgage-backed securities 24,776 18 (44 ) 24,750 Municipal government and government agency bonds 1,759 46 — 1,805 Total investments, available for sale $ 739,456 $ 8,242 $ (1,990 ) $ 745,708 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2018 Fixed maturities: U.S. government and government agency bonds $ 156,884 $ 672 $ (127 ) $ 157,429 Non-U.S. government and government agency bonds 89,661 670 (2,859 ) 87,472 Corporate bonds 77,178 19 (1,204 ) 75,993 Asset-backed securities 58,369 72 (1,351 ) 57,090 Mortgage-backed securities 14,344 17 (81 ) 14,280 Municipal government and government agency bonds 1,073 14 — 1,087 Total investments, available for sale $ 397,509 $ 1,464 $ (5,622 ) $ 393,351 |
Summary of available for sale securities in a continual unrealized loss position | The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized losses by length of time the security has been in a continual unrealized loss position: Less than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in thousands) December 31, 2019 Fixed maturities: U.S. government and government agency bonds $ 36,540 $ (137 ) $ — $ — $ 36,540 $ (137 ) Non-U.S. government and government agency bonds 51,779 (1,027 ) 5,410 (6 ) 57,189 (1,033 ) Corporate bonds 9,854 (41 ) — — 9,854 (41 ) Asset-backed securities 55,194 (504 ) 19,430 (231 ) 74,624 (735 ) Mortgage-backed securities 14,481 (44 ) — — 14,481 (44 ) Total $ 167,848 $ (1,753 ) $ 24,840 $ (237 ) $ 192,688 $ (1,990 ) December 31, 2018 Fixed maturities: U.S. government and government agency bonds $ 66,422 $ (127 ) $ — $ — $ 66,422 $ (127 ) Non-U.S. government and government agency bonds 78,084 (2,859 ) — — 78,084 (2,859 ) Corporate bonds 70,443 (1,204 ) — — 70,443 (1,204 ) Asset-backed securities 49,400 (1,351 ) — — 49,400 (1,351 ) Mortgage-backed securities 8,478 (81 ) — — 8,478 (81 ) Total $ 272,827 $ (5,622 ) $ — $ — $ 272,827 $ (5,622 ) |
Contractual maturities of investments | The amortized cost and fair value of our term loans, fixed maturities and short-term investments, excluding securities classified as available for sale, summarized by contractual maturity as of December 31, 2019 and December 31, 2018 are shown in the following tables. December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 307,041 $ 306,372 16.9 % Due after one year through five years 779,643 742,960 41.1 % Due after five years through ten years 514,961 495,416 27.4 % Due after ten years 61,925 64,640 3.6 % Asset-backed securities 200,361 190,737 10.6 % Mortgage-backed securities 7,399 7,706 0.4 % Total $ 1,871,330 $ 1,807,831 100.0 % December 31, 2018 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 300,554 $ 300,519 13.6 % Due after one year through five years 1,044,539 992,834 45.0 % Due after five years through ten years 777,290 731,662 33.2 % Due after ten years 3,925 3,814 0.2 % Asset-backed securities 174,846 168,893 7.6 % Mortgage-backed securities 9,122 7,881 0.4 % Total $ 2,310,276 $ 2,205,603 100.0 % The amortized cost and fair value of our fixed maturities classified as available for sale, summarized by contractual maturity as of December 31, 2019 and December 31, 2018 are shown in the following tables. December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 9,235 $ 9,248 1.3 % Due after one year through five years 414,235 417,921 56.0 % Due after five years through ten years 133,822 136,329 18.3 % Due after ten years 11,833 12,026 1.6 % Asset-backed securities 145,555 145,434 19.5 % Mortgage-backed securities 24,776 24,750 3.3 % Total investments, available for sale $ 739,456 $ 745,708 100.0 % December 31, 2018 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due after one year through five years $ 278,443 $ 276,706 70.4 % Due after five years through ten years 46,353 45,275 11.5 % Asset-backed securities 58,369 57,090 14.5 % Mortgage-backed securities 14,344 14,280 3.6 % Total investments, available for sale $ 397,509 $ 393,351 100.0 % |
Summary of fair value option and fair value through net income | The following table summarizes the fair value of the Company’s securities held as of December 31, 2019 and December 31, 2018 , classified as fair value through net income or for which the fair value option was elected: Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2019 Term loan investments $ 1,113,212 $ 7,340 $ (58,618 ) $ 1,061,934 Fixed maturities: Corporate bonds 221,024 8,430 (15,100 ) 214,354 U.S. government and government agency bonds 1,963 1 (2 ) 1,962 Asset-backed securities 200,361 3,329 (12,953 ) 190,737 Mortgage-backed securities 7,399 712 (405 ) 7,706 Non-U.S. government and government agency bonds 1,449 18 (11 ) 1,456 Municipal government and government agency bonds 380 — (1 ) 379 Short-term investments 325,542 3,817 (56 ) 329,303 Other investments 28,672 2,264 (475 ) 30,461 Equities 54,893 10,690 (5,784 ) 59,799 Investments, fair value option $ 1,954,895 $ 36,601 $ (93,405 ) $ 1,898,091 Fair Value Through Net Income: Equities, fair value through net income (1) $ 78,031 $ 2,360 $ (15,053 ) $ 65,338 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in thousands) December 31, 2018 Term loan investments $ 1,055,664 $ 767 $ (55,779 ) $ 1,000,652 Fixed maturities: Corporate bonds 617,013 6,468 (44,867 ) 578,614 U.S. government and government agency bonds 113,452 — (2,206 ) 111,246 Asset-backed securities 174,846 673 (6,626 ) 168,893 Mortgage-backed securities 9,122 — (1,241 ) 7,881 Non-U.S. government and government agency bonds 50,914 1 (1,874 ) 49,041 Municipal government and government agency bonds 7,306 — (162 ) 7,144 Short-term investments 281,959 570 (397 ) 282,132 Other investments 50,000 — (238 ) 49,762 Equities 56,609 5,136 (5,107 ) 56,638 Investments, fair value option $ 2,416,885 $ 13,615 $ (118,497 ) $ 2,312,003 Fair Value Through Net Income: Equities, fair value through net income (1) $ 41,358 $ 2,030 $ (10,375 ) $ 33,013 (1) Effective January 1, 2018, the Company adopted new accounting guidance for financial instruments. As a result, equity securities acquired after January 1, 2018 are classified as fair value through net income and are shown separately above. |
Summary of investments classified by investment rating | The table below summarizes the credit quality of our total investments as of December 31, 2019 and December 31, 2018 , as rated by Standard & Poor’s Financial Services, LLC, or Standard & Poor’s, Moody’s Investors Service, or Moody’s, Fitch Ratings Inc., or Fitch, Kroll Bond Rating Agency, or KBRA, or DBRS Morningstar, or DBRS, as applicable: Credit Rating (1) December 31, 2019 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 1,061,934 $ — $ — $ — $ — $ 9,617 $ 761,168 $ 215,909 $ 6,823 $ 2,119 $ — $ 66,298 Fixed maturities: Corporate bonds 372,473 — 36,128 81,401 41,103 9,003 58,345 135,613 — — — 10,880 U.S. government and government agency bonds 285,609 — 285,609 — — — — — — — — — Asset-backed securities 336,171 2,006 — 29,179 223,956 29,695 18,381 — — — — 32,954 Mortgage-backed securities 32,456 — — 1,100 23,650 976 — — — — 2,497 4,233 Non-U.S. government and government agency bonds 133,409 — 132,460 — 949 — — — — — — — Municipal government and government agency bonds 2,184 1,135 573 476 — — — — — — — — Total fixed income instruments 2,224,236 3,141 454,770 112,156 289,658 49,291 837,894 351,522 6,823 2,119 2,497 114,365 Short-term investments 329,303 25,783 136,842 34,903 115,155 — — 8,359 — — — 8,261 Total fixed income instruments and short-term investments 2,553,539 28,924 591,612 147,059 404,813 49,291 837,894 359,881 6,823 2,119 2,497 122,626 Other Investments 30,461 Equities 125,137 Total $ 2,709,137 $ 28,924 $ 591,612 $ 147,059 $ 404,813 $ 49,291 $ 837,894 $ 359,881 $ 6,823 $ 2,119 $ 2,497 $ 122,626 (1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS. Credit Rating (1) December 31, 2018 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 1,000,652 $ — $ — $ — $ — $ 57,844 $ 677,211 $ 201,116 $ 2,438 $ — $ — $ 62,043 Fixed maturities: Corporate bonds 654,607 3,961 58,185 100,590 63,791 15,246 174,867 203,505 — 2,200 — 32,262 U.S. government and government agency bonds 268,675 — 268,675 — — — — — — — — — Asset-backed securities 225,983 4,532 4,973 10,278 113,075 36,643 20,818 — — — — 35,664 Mortgage-backed securities 22,161 — — 944 13,336 742 — — — — 2,962 4,177 Non-U.S. government and government agency bonds 136,513 5,173 122,715 8,625 — — — — — — — — Municipal government and government agency bonds 8,231 6,490 715 1,026 — — — — — — — — Total fixed income instruments 2,316,822 20,156 455,263 121,463 190,202 110,475 872,896 404,621 2,438 2,200 2,962 134,146 Short-term investments 282,132 4,450 128,015 54,970 68,853 — 25,844 — — — — — Total fixed income instruments and short-term investments 2,598,954 24,606 583,278 176,433 259,055 110,475 898,740 404,621 2,438 2,200 2,962 134,146 Other Investments 49,762 Equities 89,651 Total $ 2,738,367 $ 24,606 $ 583,278 $ 176,433 $ 259,055 $ 110,475 $ 898,740 $ 404,621 $ 2,438 $ 2,200 $ 2,962 $ 134,146 (1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA. |
Summary of components of net investment income | The components of net investment income (loss) for the years ended December 31, 2019 , 2018 and 2017 were derived from the following sources: Year Ended December 31, 2019 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 90,048 $ 3,526 $ (19,599 ) $ 73,975 Fixed maturities - Fair value option 48,698 23,884 7,048 79,630 Fixed maturities - Available for sale (1) 17,893 — 5,673 23,566 Short-term investments 4,131 (277 ) 27 3,881 Equities (2) 203 4,337 — 4,540 Equities, fair value through net income (2) 2,201 (3,963 ) (1,162 ) (2,924 ) Other investments 714 2,027 (2,719 ) 22 Other (3) — 2,657 2,784 5,441 Investment management fees - related parties (18,392 ) — — (18,392 ) Borrowing and miscellaneous other investment expenses (29,285 ) — — (29,285 ) Investment performance fees - related parties — — — (12,191 ) $ 116,211 $ 32,191 $ (7,948 ) $ 128,263 (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $6.1 million and $0.5 million , respectively. (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Year Ended December 31, 2018 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 79,971 $ (53,702 ) $ (3,988 ) $ 22,281 Fixed maturities - Fair value option 63,556 (42,601 ) (11,490 ) 9,465 Fixed maturities - Available for sale (1) 5,802 — (878 ) 4,924 Short-term investments 2,722 390 35 3,147 Equities (2) (425 ) (3,266 ) 8,223 4,532 Equities, fair value through net income (2) 1,290 (8,786 ) 3,310 (4,186 ) Other investments — 149 — 149 Other (3) — (1,230 ) — (1,230 ) Investment management fees - related parties (17,006 ) — — (17,006 ) Borrowing and miscellaneous other investment expenses (28,377 ) — — (28,377 ) Investment performance fees - related parties — — — (48 ) $ 107,533 $ (109,046 ) $ (4,788 ) $ (6,349 ) (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $86 thousand and $964 thousand , respectively. (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Year Ended December 31, 2017 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 73,472 $ (10,354 ) $ 346 $ 63,464 Fixed maturities - Fair value option 49,179 8,017 (660 ) 56,536 Short-term investments 2,473 220 (1,745 ) 948 Equities (1) 339 2,902 2,781 6,022 Other investments — (387 ) — (387 ) Investment management fees - related parties (21,451 ) — — (21,451 ) Borrowing and miscellaneous other investment expenses (17,489 ) — — (17,489 ) Investment performance fees - related parties — — — (14,905 ) $ 86,523 $ 398 $ 722 $ 72,738 (1) Net interest income includes dividends for securities held in long and short positions. |
Fair value (Tables)
Fair value (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value hierarchy | The following table presents the Company’s financial assets and liabilities measured at fair value by level as of December 31, 2019 and 2018 : Fair Value Measurement Using: December 31, 2019 Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ($ in thousands) Assets measured at fair value: Term loans $ 1,061,934 $ — $ 1,025,886 $ 36,048 Fixed maturities: Corporate bonds 372,473 — 371,540 933 U.S. government and government agency bonds 285,609 285,500 109 — Asset-backed securities 336,171 — 336,171 — Mortgage-backed securities 32,456 — 32,456 — Non-U.S. government and government agency bonds 133,409 — 133,409 — Municipal government and government agency bonds 2,184 — 2,184 — Short-term investments 329,303 318,012 11,291 — Equities 125,137 13,548 2,998 108,591 Other underwriting derivative assets 148 — 148 — Investment derivative assets (1) 1,667 — 1,667 — Other investments measured at net asset value (2) 30,461 — — — Total assets measured at fair value $ 2,710,952 $ 617,060 $ 1,917,859 $ 145,572 Investment derivative liabilities (1) 257 — 257 — Payable for securities sold short: Corporate bonds 66,257 — 66,257 — Total liabilities measured at fair value $ 66,514 $ — $ 66,514 $ — (1) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of December 31, 2019 . (2) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. Fair Value Measurement Using: December 31, 2018 Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ($ in thousands) Assets measured at fair value: Term loans $ 1,000,652 $ — $ 953,173 $ 47,479 Fixed maturities: Corporate bonds 654,607 — 630,330 24,277 U.S. government and government agency bonds 268,675 268,567 108 — Asset-backed securities 225,983 — 203,423 22,560 Mortgage-backed securities 22,161 — 22,161 — Non-U.S. government and government agency bonds 136,513 — 136,513 — Municipal government and government agency bonds 8,231 — 8,231 — Short-term investments 282,132 256,288 25,844 — Equities 89,651 7,977 11,223 70,451 Other underwriting derivative assets 249 — 249 — Investment derivative assets (1) 51 — 51 — Other investments measured at net asset value (2) 49,762 — — — Total assets measured at fair value $ 2,738,667 $ 532,832 $ 1,991,306 $ 164,767 Investment derivative liabilities (1) 1,279 — 1,279 — Payable for securities sold short: Corporate bonds 7,790 — 7,790 — Equities (1) 1,138 — 1,138 — Total liabilities measured at fair value $ 10,207 $ — $ 10,207 $ — (1) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of December 31, 2018 . The Compa ny’s call opt ions are recorded as equities in payable for securities sold short in the consolidated balance sheets as of December 31, 2018 . Such call options matured in the first quarter of 2019. The Company’s put options are recorded as equities in the consolidated balance sheets as of December 31, 2018 . (2) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. |
Rollforward of level 3 investments | The following table presents a reconciliation of the beginning and ending balances for all the financial assets measured at fair value on a recurring basis using Level 3 inputs for the year ending December 31, 2019 and 2018 : Year Ended December 31, 2019 Beginning Balance Transfers in (out) of Level 3 (1) Net Purchases (Sales)(2) Net Unrealized Gains (Losses)(3) Net Unrealized Foreign Exchange Gains (Losses) Ending Balance Term loans $ 47,479 $ — $ (15,402 ) $ 3,971 $ — $ 36,048 Corporate bonds 24,277 — (23,341 ) (3 ) — 933 Asset-backed securities 22,560 (22,560 ) — — — — Equities 70,451 — 39,705 (1,565 ) — 108,591 Total $ 164,767 $ (22,560 ) $ 962 $ 2,403 $ — $ 145,572 Year Ended December 31, 2018 Beginning Balance Net Purchases (Sales)(2) Net Unrealized Gains (Losses)(3) Net Unrealized Foreign Exchange Gains (Losses) Ending Balance Term loans $ 62,478 $ (11,705 ) $ (3,294 ) $ — $ 47,479 Corporate bonds 24,710 985 (285 ) (1,133 ) 24,277 Asset-backed securities — 22,560 — — 22,560 Equities 52,921 21,932 (4,402 ) — 70,451 Total $ 140,109 $ 33,772 $ (7,981 ) $ (1,133 ) $ 164,767 (1) During the year ended December 31, 2019 , the Company obtained pricing for an asset-backed security, in which pricing was not available as of December 31, 2018. As such, the security was transferred from Level 3 to Level 2 at its fair value as of December 31, 2018. (2) For the twelve months ended December 31, 2019 , the net purchases (sales) consisted of purchases of $75.0 million of equities and $0.6 million of term loans, offset in part by the sale of $35.3 million of equities, $15.8 million of term loans and $90 thousand of corporate bonds, as well as the $0.3 million of redemptions of term loans and $23.3 million of redemptions of corporate bonds. For the year ended December 31, 2018 , the net purchases (sales) consisted of purchases of: $57.1 million of equities, $22.6 million of asset-backed securities, $18.0 million of term loans, $4.4 million of short-term investments and $1.0 million of corporate bonds, partially offset by sales, calls and redemptions of $35.1 million of equities, $29.7 million of term loans and the sale of short term investments of $4.4 million . (3) Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss). |
Derivatives (Tables)
Derivatives (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary information on the fair values and notional amount of derivative instruments | The following table summarizes information on the fair values and notional amount of the Company’s derivative instruments at December 31, 2019 and 2018 : Estimated Fair Value Asset Derivatives Liability Derivatives Net Derivatives Notional Amount (1) ($ in thousands) December 31, 2019 Other underwriting derivatives $ 148 $ — $ 148 $ 59,879 Total return swaps 1,667 257 1,410 162,678 Total $ 1,815 $ 257 $ 1,558 $ 222,557 December 31, 2018 Other underwriting derivatives $ 249 $ — $ 249 $ 72,148 Options 808 1,138 (330 ) 24,551 Total return swaps 51 1,279 (1,228 ) 91,663 Total $ 1,108 $ 2,417 $ (1,309 ) $ 188,362 (1) The notional amount represents the absolute value of all outstanding contracts. |
Summary of realized and unrealized gains and losses on derivative instruments | The realized and unrealized gains and losses on the Company’s derivative instruments are reflected in the consolidated statements of income, as summarized in the following table: Year Ended December 31, 2019 2018 2017 ($ in thousands) Underwriting derivatives: Other underwriting income (loss) $ 2,412 $ 2,722 $ 3,180 Investment derivatives: Net realized and unrealized gains (losses): Options 799 1,314 — Total return swaps 5,441 (1,230 ) — |
Earnings per common share (Tabl
Earnings per common share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted earnings per common share | The following table sets forth the computation of basic and diluted earnings per common share: Year Ended December 31, 2019 2018 2017 ($ in thousands except share and per share data) Numerator: Net income (loss) before preference dividends and redemption costs $ 62,541 $ (34,883 ) $ 10,741 Preference dividends (13,632 ) (19,633 ) (19,633 ) Accelerated amortization of costs related to the redemption of preference shares (4,164 ) — — Net income (loss) available to common shareholders 44,745 (54,516 ) (8,892 ) Denominator: Weighted average common shares outstanding - basic 22,366,682 22,682,875 22,682,875 Effect of dilutive common share equivalents: Weighted average non-vested restricted share units (1) 7,286 — — Weighted average common shares outstanding - diluted (2) 22,373,968 22,682,875 22,682,875 Earnings (loss) per common share: Basic $ 2.00 $ (2.40 ) $ (0.39 ) Diluted $ 2.00 $ (2.40 ) $ (0.39 ) (1) During the year ended December 31, 2019 , the Company granted 165,287 restricted share units and common shares to certain employees and directors, 82,360 of which are non-vested. Refer to Note 19 - “Share transactions” for further details. (2) Warrants held by Arch and HPS were not included in the computation of diluted earnings because the exercise price of the warrants exceeded the market price of the common shares during the period and the exercise of the warrants would have been anti-dilutive. The warrants expire on March 25, 2020. The number of common shares issuable upon exercise of the warrants that was excluded was 1,704,691 common shares. |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of income taxes attributable to operations | The components of income taxes attributable to operations were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Current income tax expense (benefit): United States $ 20 $ 27 $ — Gibraltar — — 21 United Kingdom — — — 20 27 21 Deferred income tax expense (benefit): United States — — — Gibraltar — — — United Kingdom — — — — — — Total income tax expense (benefit) $ 20 $ 27 $ 21 |
Income (loss) before income tax by jurisdiction | The Company’s income or loss after preferred dividends and before income taxes was earned in the following jurisdictions: Year Ended December 31, 2019 2018 2017 ($ in thousands) Income (loss) before income taxes: Bermuda $ 42,775 $ (52,953 ) $ (6,041 ) United States 346 (2,146 ) (1,485 ) Other 1,644 610 (1,345 ) Total income (loss) before income taxes $ 44,765 $ (54,489 ) $ (8,871 ) |
Effective income tax rate reconciliation | The reconciliation between the Company’s income tax expense and the expected income tax expense at the Bermuda statutory tax rate is as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Expected income tax expense (benefit) at Bermuda statutory rate $ — $ — $ — Addition (reduction) in income tax expense (benefit) resulting from: Foreign taxes at local expected rates 280 (395 ) (659 ) Change in tax rate related to U.S. tax reform — — 664 Change in valuation allowance (120 ) 400 17 Other (140 ) 22 (1 ) Total income tax expense (benefit) $ 20 $ 27 $ 21 |
Significant components of deferred income tax assets and liabilities | Significant components of the Company’s deferred income tax assets and liabilities were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Deferred income tax assets: Net operating loss $ 84 $ 858 $ 1,068 Unearned premium reserve 291 142 49 Loss reserves 138 59 10 Ceding commissions 1,006 339 170 Capitalized expenses 92 101 109 Investment basis differences — 133 — Other accruals 18 — — Deferred tax assets before valuation allowance 1,629 1,632 1,406 Valuation allowance (1,269 ) (1,488 ) (1,127 ) Deferred tax assets net of valuation allowance 360 144 279 Deferred income tax liabilities: Goodwill and intangible assets (260 ) (144 ) (27 ) Investment basis differences (100 ) — (252 ) Total deferred tax liabilities (360 ) (144 ) (279 ) Net deferred income tax assets (liabilities) $ — $ — $ — |
Transactions with related par_2
Transactions with related parties (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ACGL and Subsidiaries | Outward Retrocession Quota Share Business | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 for the outward retrocession transactions were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums ceded $ (112,701 ) $ (55,934 ) $ (32,028 ) Net premiums earned (65,234 ) (44,730 ) (24,351 ) Losses and loss adjustment expenses (56,164 ) (31,031 ) (19,125 ) Acquisition expenses (1) (13,672 ) (10,200 ) (4,906 ) (1) Acquisition expenses relating to the ACGL outward quota share agreements referred to above. |
HPS | Investment management and performance fees | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 , and consolidated balance sheet account balances for HPS management fees and performance fees as of December 31, 2019 and 2018 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 17,330 $ 15,830 $ 20,827 Investment performance fees - related parties 12,191 48 14,905 $ 29,521 $ 15,878 $ 35,732 December 31, December 31, 2019 2018 ($ in thousands) Consolidated balance sheet items: Other investments, at fair value $ 30,461 $ 49,762 Investment management and performance fees payable 17,762 3,807 |
Artex | Investment management and performance fees | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The table below provides the aggregate fees the Company paid to Artex under the insurance management services agreement for the years ended December 31, 2019 , 2018 and 2017 : Year Ended December 31, 2019 2018 2017 ($ in thousands) Fees paid to Artex under insurance management services agreement $ 431 $ 534 $ 325 |
Arch Capital Group Limited | ACGL and Subsidiaries | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated balance sheet account balances as of December 31, 2019 and 2018 were as follows: December 31, December 31, 2019 2018 ($ in thousands) Consolidated balance sheet items: Total investments $ 815,528 $ 719,189 Premiums receivable 106,462 118,208 Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses 79,597 45,954 Prepaid reinsurance premiums 75,249 27,598 Deferred acquisition costs, net 31,609 48,380 Funds held by reinsurers 29,867 33,352 Other assets - contingent commissions — 2,967 Reserve for losses and loss adjustment expenses 693,861 631,670 Unearned premiums 143,852 166,491 Losses payable 39,619 19,098 Reinsurance balances payable 62,301 20,299 Senior notes 35,000 — Amounts due to affiliates 4,467 5,888 Other liabilities - contingent commissions 5,516 — Contingently redeemable preference shares 3,462 14,627 The related balances presented in the consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Interest expense 1,131 — — Preference dividends 902 1,299 1,299 Accelerated amortization of costs related to the redemption of preference shares 276 — — |
Arch Capital Group Limited | ACGL and Subsidiaries | Direct Business and Inward Retrocession | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 for the inward retrocession transactions were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums written $ 201,110 $ 252,841 $ 289,484 Net premiums earned 235,923 277,576 302,774 Losses and loss adjustment expenses 198,386 211,434 243,079 Acquisition expenses (1) 71,302 89,832 102,098 (1) Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the years ended December 31, 2019 , 2018 and 2017 , the Company incurred ceding fees to Arch, in aggregate, of $16.6 million , $17.6 million and $17.0 million , respectively, under these inward retrocession agreements. |
AUL and AUI | ACGL and Subsidiaries | Underwriting fees and expenses | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related AUL and AUI fees and reimbursements incurred in the consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Acquisition expenses $ 20,808 $ 15,578 $ 10,755 General and administrative expenses 6,899 6,796 6,599 Total $ 27,707 $ 22,374 $ 17,354 |
AIM | ACGL and Subsidiaries | Fees paid to Artex under insurance management services agreement | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the years ended December 31, 2019 , 2018 and 2017 were as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 1,062 $ 1,176 $ 624 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Additional information regarding real estate operating lease | Additional information regarding the Company’s real estate operating lease is as follows. Year Ended December 31, 2019 ($ in thousands) Lease cost: Operating lease $ 241 Other information on operating lease: Cash payments included in the measurement of lease liability reported in operating cash flows 283 Right-of-use assets (1) 970 Operating lease liability (2) 970 Weighted average discount rate 3.9 % Weighted average remaining lease term in years 3.75 years (1) Included i n “other assets” on the Company’s consolidated balance sheet. (2) Included in “other liabilities” on the Company’s consolidated balance sheet. |
Contractual maturity of lease obligations | The following tables present the contractual maturity of the Company’s lease liability: December 31, 2019 ($ in thousands) 2020 283 2021 283 2022 283 2023 189 Total undiscounted lease payments 1,038 Less: present value adjustment (68 ) Operating lease liability 970 |
Future rental commitments | December 31, 2018 ($ in thousands) Future rental commitments 2019 283 2020 283 2021 283 2022 283 2023 189 Total 1,321 |
Contingently redeemable prefe_2
Contingently redeemable preferred shares (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Preferred Shares [Abstract] | |
Reconciliation of beginning and ending balances of preference shares | The following table presents a reconciliation of the preference shares for the years ended December 31, 2019 , 2018 and 2017 : Year Ended December 31, 2019 2018 2017 ($ in thousands) Preference shares: Balance at the beginning of the period $ 220,992 $ 220,622 $ 220,253 Preference shares repurchased during the period (173,081 ) — — Accelerated amortization of costs related to the redemption of preference shares 4,164 — — Accretion discount and issuance costs on remaining preference shares 230 370 369 Balance at the end of the period $ 52,305 $ 220,992 $ 220,622 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Rollforward of changes in issued and outstanding common shares | The following table presents a roll-forward of changes in the Company’s issued and outstanding common shares: Year Ended December 31, 2019 2018 2017 Common shares: Shares issued and outstanding, beginning of year 22,682,875 22,682,875 22,682,875 Shares issued (1) 9,425 — — Shares issued, end of year 22,692,300 22,682,875 22,682,875 Common shares in treasury, end of year (2,789,405 ) — — Shares outstanding, end of year (2) 19,902,895 22,682,875 22,682,875 (1) Includes shares issued from the share-based compensation plans. Refer to Note 19 - “Share transactions” . (2) Excludes unissued vested shares of 73,502 . Refer to Note 11 - “Earnings per common share” . |
Statutory information (Tables)
Statutory information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Statutory information [Abstract] | |
Statutory Accounting Practices Disclosure | The statutory net income (loss) for the Company’s significant regulatory jurisdictions at December 31, 2019 , 2018 and 2017 was as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) Statutory net income (loss): Bermuda $ 72,771 $ (25,110 ) $ 10,982 Watford Specialty Insurance Company 426 525 315 Watford Insurance Company (730 ) (2,488 ) (204 ) United States (304 ) (1,963 ) 111 Gibraltar 1,681 653 1,320 The actual and required statutory capital and surplus for the Company’s significant regulatory jurisdictions at December 31, 2019 and 2018 was as follows: December 31, 2019 2018 Actual Required Actual Required ($ in thousands) Statutory capital and surplus: Bermuda (1) $ 1,106,576 $ 700,000 $ 1,114,933 $ 650,902 Watford Specialty Insurance Company 59,763 4,603 60,964 3,464 Watford Insurance Company 29,749 2,280 17,088 1,789 United States 89,512 6,883 78,052 5,253 Gibraltar 29,113 15,710 22,927 13,136 (1) The BSCR for Watford Re for the year ended December 31, 2019 will not be filed with the BMA until April 2020 . As such, the required statutory capital and surplus as at December 31, 2019 is an estimate of ECR. |
Unaudited condensed quarterly_2
Unaudited condensed quarterly financial information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of condensed quarterly financial information | The following table summarizes the 2019 and 2018 unaudited condensed quarterly financial information: Fourth Quarter Third Quarter Second Quarter First Quarter ($ in thousands, except per share data) Year Ended December 31, 2019 Net premiums written $ 112,353 $ 155,752 $ 119,370 $ 145,387 Net premiums earned 133,446 125,832 151,318 146,094 Underwriting income (loss) (37,819 ) (5,021 ) (5,266 ) (5,970 ) Net interest income 29,826 29,536 26,415 30,434 Realized and unrealized gains (losses) on investments 6,105 (14,646 ) (936 ) 33,720 Net investment income (loss) 32,082 14,040 23,787 58,354 Preference dividends (1,209 ) (2,608 ) (4,908 ) (4,907 ) Accelerated amortization of costs related to the redemption of preference shares — (4,164 ) — — Net income (loss) available to common shareholders (16,864 ) 152 13,825 47,632 Earnings (loss) per common share - basic $ (0.79 ) $ 0.01 $ 0.61 $ 2.10 Earnings (loss) per common share - diluted $ (0.79 ) $ 0.01 $ 0.61 $ 2.10 Year Ended December 31, 2018 Net premiums written $ 132,360 $ 151,677 $ 140,586 $ 179,552 Net premiums earned 146,973 135,624 159,518 136,747 Underwriting income (loss) (22,660 ) (912 ) (1,006 ) (1,262 ) Net interest income 29,955 27,397 26,042 24,139 Realized and unrealized gains (losses) on investments (97,597 ) (3,617 ) (10,614 ) (2,006 ) Net investment income (loss) (61,084 ) 21,373 13,826 19,536 Preference dividends (4,909 ) (4,909 ) (4,908 ) (4,907 ) Net income (loss) available to common shareholders (95,259 ) 18,837 9,124 12,782 Earnings (loss) per common share - basic $ (4.20 ) $ 0.83 $ 0.41 $ 0.56 Earnings (loss) per common share - diluted $ (4.20 ) $ 0.83 $ 0.41 $ 0.56 |
Organization (Details)
Organization (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2019 | |
Arch Capital Group Limited | ||
Class of Stock [Line Items] | ||
Warrants outstanding | 975,503 | |
Arch Capital Group Limited | ACGL and Subsidiaries | ||
Class of Stock [Line Items] | ||
Amount of investment by related party | $ 100 | |
Percentage of common equity owned by related party | 11.00% | 12.50% |
Warrants outstanding | 975,503 | |
Contingently redeemable preference share | ||
Class of Stock [Line Items] | ||
Stated dividend rate (percent) | 8.50% | |
Initial capital raising | ||
Class of Stock [Line Items] | ||
Proceeds from issuance of capital | $ 1,100 | |
Net proceeds from issuance of common equity | 895.6 | |
Net proceeds from issuance of preference equity | 219.2 | |
Initial capital raising | Common equity | ||
Class of Stock [Line Items] | ||
Proceeds from issuance of capital | 907.3 | |
Initial capital raising | Preference equity | ||
Class of Stock [Line Items] | ||
Proceeds from issuance of capital | $ 226.6 |
Basis of presentation and sig_3
Basis of presentation and significant accounting policies Reinsurance contracts (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Losses Occurring [Member] | |
Reinsurance Contracts [Line Items] | |
Losses Occuring | 12 months |
Risks Attaching [Member] | |
Reinsurance Contracts [Line Items] | |
Risks Attaching | 24 months |
Basis of presentation and sig_4
Basis of presentation and significant accounting policies Related party fees (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Share-based compensation - requisite service period | 3 years | |
HPS | ||
Related Party Transaction [Line Items] | ||
Related Party Incentive Fee Percentage | 10.00% | 15.00% |
Additional performance fee percentage | 25.00% | |
Related Party Incentive Fee Percentage | 10.00% | |
Maximum incentive fee percentage | 17.50% |
Basis of presentation and sig_5
Basis of presentation and significant accounting policies Recent accounting pronouncements (Details) - USD ($) | Dec. 31, 2019 | Jan. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease liability | $ 970,000 | |
Other assets | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease, right-of-use asset | 970,000 | |
Other liabilities | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease liability | $ 970,000 | |
ASU 2016-02 | Other assets | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease, right-of-use asset | $ 1,100,000 | |
ASU 2016-02 | Other liabilities | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease liability | 1,100,000 | |
ASU 2016-02 | Retained earnings | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cumulative effect adjustment | $ 0 |
Segment information (Details)
Segment information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)segment | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jul. 02, 2019 | |
Segment Reporting Information [Line Items] | ||||||||||||
Number of operating segments | segment | 1 | |||||||||||
Gross premiums written | $ 754,881 | $ 735,015 | $ 600,304 | |||||||||
Net premiums written | $ 112,353 | $ 155,752 | $ 119,370 | $ 145,387 | $ 132,360 | $ 151,677 | $ 140,586 | $ 179,552 | 532,862 | 604,175 | 553,117 | |
Net premiums earned | $ 133,446 | $ 125,832 | $ 151,318 | $ 146,094 | $ 146,973 | $ 135,624 | $ 159,518 | $ 136,747 | 556,690 | 578,862 | 531,726 | |
United States | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net premiums written | 127,176 | 49,800 | 11,750 | |||||||||
Europe | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net premiums written | 52,065 | 91,635 | 91,463 | |||||||||
Bermuda | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net premiums written | 353,621 | 462,740 | 449,904 | |||||||||
Casualty reinsurance | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Gross premiums written | 279,967 | 274,661 | 284,481 | |||||||||
Net premiums written | 225,758 | 273,048 | 281,783 | |||||||||
Net premiums earned | 238,437 | 278,656 | 308,526 | |||||||||
Other specialty reinsurance | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Gross premiums written | 119,518 | 196,170 | 169,100 | |||||||||
Net premiums written | 114,876 | 181,096 | 155,666 | |||||||||
Net premiums earned | 149,688 | 162,691 | 134,855 | |||||||||
Property catastrophe reinsurance | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Gross premiums written | 16,226 | 10,424 | 12,740 | |||||||||
Net premiums written | 15,517 | 10,193 | 12,455 | |||||||||
Net premiums earned | 13,399 | 10,998 | 12,690 | |||||||||
Insurance programs and coinsurance | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Gross premiums written | 339,170 | 253,760 | 133,983 | |||||||||
Net premiums written | 176,711 | 139,838 | 103,213 | |||||||||
Net premiums earned | $ 155,166 | $ 126,517 | $ 75,655 | |||||||||
Senior notes | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Stated interest rate (percent) | 6.50% |
Reinsurance - Effects of reinsu
Reinsurance - Effects of reinsurance (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Premiums written | |||||||||||
Direct | $ 339,170 | $ 253,760 | $ 133,983 | ||||||||
Assumed | 415,711 | 481,255 | 466,321 | ||||||||
Ceded | (222,019) | (130,840) | (47,187) | ||||||||
Net premiums written | $ 112,353 | $ 155,752 | $ 119,370 | $ 145,387 | $ 132,360 | $ 151,677 | $ 140,586 | $ 179,552 | 532,862 | 604,175 | 553,117 |
Premiums earned | |||||||||||
Direct | 290,328 | 201,868 | 96,125 | ||||||||
Assumed | 419,778 | 468,156 | 471,073 | ||||||||
Ceded | (153,416) | (91,162) | (35,472) | ||||||||
Net premiums earned | $ 133,446 | $ 125,832 | $ 151,318 | $ 146,094 | $ 146,973 | $ 135,624 | $ 159,518 | $ 136,747 | 556,690 | 578,862 | 531,726 |
Losses and loss adjustment expenses | |||||||||||
Direct | 244,354 | 157,991 | 71,679 | ||||||||
Assumed | 347,378 | 348,332 | 393,565 | ||||||||
Ceded | (138,597) | (65,068) | (28,842) | ||||||||
Net loss and loss adjustment expenses | $ 453,135 | $ 441,255 | $ 436,402 |
Reinsurance - Ceded credit risk
Reinsurance - Ceded credit risk (Details) - Reinsurance recoverable for paid and unpaid losses - Reinsurer concentration risk | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
AM Best A minus or better | ||
Ceded Credit Risk [Line Items] | ||
Concentration risk, percentage | 95.00% | 98.00% |
AM Best not rated | ||
Ceded Credit Risk [Line Items] | ||
Concentration risk, percentage | 5.00% | 2.00% |
ARL and ARC | AM Best, A plus Rating | ||
Ceded Credit Risk [Line Items] | ||
Concentration risk, percentage | 47.00% | 53.00% |
Reserve for losses and loss a_3
Reserve for losses and loss adjustment expenses - Reconciliation of beginning and ending balances of loss reserves (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | |||
Gross reserve for losses and loss adjustment expenses at beginning of period | $ 1,032,760 | $ 798,262 | $ 510,809 |
Unpaid losses and loss adjustment expenses recoverable | 81,267 | 39,856 | 21,518 |
Net reserve for losses and loss adjustment expenses at beginning of period | 951,493 | 758,406 | 489,291 |
Net incurred losses and loss adjustment expenses relating to losses occurring in: | |||
Current period | 429,322 | 443,482 | 399,530 |
Prior years | 23,813 | (2,227) | 36,872 |
Total net losses and loss adjustment expenses | 453,135 | 441,255 | 436,402 |
Foreign exchange gains (losses) | 15,286 | (23,962) | 14,832 |
Net paid losses and loss adjustment expenses relating to losses occurring in: | |||
Current period | (73,723) | (64,026) | (70,423) |
Prior years | (248,112) | (160,180) | (111,696) |
Total paid losses and loss adjustment expenses | (321,835) | (224,206) | (182,119) |
Net reserve for losses and loss adjustment expenses at end of period | 1,098,079 | 951,493 | 758,406 |
Unpaid losses and loss adjustment expenses recoverable | 165,549 | 81,267 | 39,856 |
Gross reserve for losses and loss adjustment expenses at end of period | $ 1,263,628 | $ 1,032,760 | $ 798,262 |
Reserve for losses and loss a_4
Reserve for losses and loss adjustment expenses - Prior year development (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | $ (23,813) | $ 2,227 | $ (36,872) | |
Property catastrophe reinsurance and insurance programs/coinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | 2,200 | |||
Property catastrophe reinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | 3,200 | 5,900 | ||
Insurance programs and coinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | (3,200) | (900) | ||
Casualty reinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | (24,400) | (6,300) | (33,800) | |
Other specialty reinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Prior year favorable (unfavorable) development | $ 600 | $ 3,600 | $ (5,200) | |
United Kingdom | Casualty reinsurance | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||
Ogden rate | (0.75%) | 2.50% |
Short duration contracts Claims
Short duration contracts Claims development (Details) $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) |
Claims Development [Line Items] | ||||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | $ 1,093,074 | |||||
Casualty reinsurance pro rata | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 884,532 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 392,909 | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 491,623 | |||||
Casualty reinsurance pro rata | Accident year 2014 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 50,353 | $ 48,675 | $ 45,847 | $ 44,255 | $ 43,026 | $ 43,675 |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 32,184 | 25,628 | 20,741 | 13,980 | 6,869 | 883 |
Total of IBNR liabilities plus expected development on reported claims | 7,057 | |||||
Casualty reinsurance pro rata | Accident year 2015 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 185,728 | 177,786 | 173,994 | 160,004 | 159,460 | |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 114,698 | 86,921 | 70,101 | 37,392 | 12,985 | |
Total of IBNR liabilities plus expected development on reported claims | 35,987 | |||||
Casualty reinsurance pro rata | Accident year 2016 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 197,028 | 188,019 | 186,899 | 167,764 | ||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 111,334 | 68,884 | 45,346 | 11,409 | ||
Total of IBNR liabilities plus expected development on reported claims | 51,520 | |||||
Casualty reinsurance pro rata | Accident year 2017 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 192,420 | 179,978 | 178,479 | |||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 82,190 | 40,632 | 15,369 | |||
Total of IBNR liabilities plus expected development on reported claims | 67,144 | |||||
Casualty reinsurance pro rata | Accident year 2018 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 143,108 | 147,936 | ||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 35,905 | 11,134 | ||||
Total of IBNR liabilities plus expected development on reported claims | 74,847 | |||||
Casualty reinsurance pro rata | Accident year 2019 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 115,895 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 16,598 | |||||
Total of IBNR liabilities plus expected development on reported claims | 75,819 | |||||
Casualty reinsurance excess of loss | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 285,029 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 22,911 | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 262,118 | |||||
Casualty reinsurance excess of loss | Accident year 2014 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 10,392 | 10,647 | 11,636 | 5,315 | 5,756 | 4,759 |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 3,369 | 1,348 | 671 | 72 | 2 | 0 |
Total of IBNR liabilities plus expected development on reported claims | 821 | |||||
Casualty reinsurance excess of loss | Accident year 2015 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 38,343 | 38,030 | 36,466 | 29,008 | 27,910 | |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 8,756 | 6,957 | 2,015 | 622 | 97 | |
Total of IBNR liabilities plus expected development on reported claims | 2,247 | |||||
Casualty reinsurance excess of loss | Accident year 2016 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 50,252 | 49,517 | 42,553 | 38,321 | ||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 5,554 | 2,617 | 797 | 218 | ||
Total of IBNR liabilities plus expected development on reported claims | 7,956 | |||||
Casualty reinsurance excess of loss | Accident year 2017 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 39,442 | 36,170 | 45,349 | |||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 2,476 | 970 | 107 | |||
Total of IBNR liabilities plus expected development on reported claims | 12,043 | |||||
Casualty reinsurance excess of loss | Accident year 2018 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 67,550 | 70,079 | ||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 2,455 | 155 | ||||
Total of IBNR liabilities plus expected development on reported claims | 27,263 | |||||
Casualty reinsurance excess of loss | Accident year 2019 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 79,050 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 301 | |||||
Total of IBNR liabilities plus expected development on reported claims | 53,402 | |||||
Other specialty reinsurance | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 398,745 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 272,133 | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 126,612 | |||||
Other specialty reinsurance | Accident year 2014 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 18,031 | 18,032 | 17,605 | 17,134 | 17,247 | 16,868 |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 17,182 | 16,892 | 15,460 | 14,329 | 12,471 | 4,835 |
Total of IBNR liabilities plus expected development on reported claims | 732 | |||||
Other specialty reinsurance | Accident year 2015 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 76,917 | 74,414 | 71,845 | 73,461 | 72,131 | |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 70,401 | 67,476 | 58,214 | 49,238 | 30,103 | |
Total of IBNR liabilities plus expected development on reported claims | 2,841 | |||||
Other specialty reinsurance | Accident year 2016 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 55,979 | 58,375 | 57,377 | 66,514 | ||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 49,885 | 45,545 | 38,342 | 25,293 | ||
Total of IBNR liabilities plus expected development on reported claims | 2,786 | |||||
Other specialty reinsurance | Accident year 2017 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 77,661 | 73,308 | 77,923 | |||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 61,226 | 55,164 | 29,764 | |||
Total of IBNR liabilities plus expected development on reported claims | 7,003 | |||||
Other specialty reinsurance | Accident year 2018 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 84,262 | 81,807 | ||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 52,457 | 18,376 | ||||
Total of IBNR liabilities plus expected development on reported claims | 12,260 | |||||
Other specialty reinsurance | Accident year 2019 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 85,895 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 20,982 | |||||
Total of IBNR liabilities plus expected development on reported claims | 33,440 | |||||
Property catastrophe reinsurance | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 48,131 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 26,001 | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 22,130 | |||||
Property catastrophe reinsurance | Accident year 2014 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 613 | 659 | 783 | 815 | 1,127 | 1,516 |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 606 | 598 | 576 | 545 | 221 | 0 |
Total of IBNR liabilities plus expected development on reported claims | 25 | |||||
Property catastrophe reinsurance | Accident year 2015 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 1,981 | 2,065 | 2,766 | 3,563 | 4,662 | |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 1,494 | 1,456 | 1,374 | 804 | 377 | |
Total of IBNR liabilities plus expected development on reported claims | 0 | |||||
Property catastrophe reinsurance | Accident year 2016 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 2,968 | 3,413 | 4,113 | 5,111 | ||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 2,574 | 2,297 | 1,932 | 1,021 | ||
Total of IBNR liabilities plus expected development on reported claims | 78 | |||||
Property catastrophe reinsurance | Accident year 2017 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 17,404 | 18,178 | 22,516 | |||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 13,245 | 12,090 | 6,615 | |||
Total of IBNR liabilities plus expected development on reported claims | 244 | |||||
Property catastrophe reinsurance | Accident year 2018 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 14,833 | 16,734 | ||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 7,499 | 2,765 | ||||
Total of IBNR liabilities plus expected development on reported claims | 875 | |||||
Property catastrophe reinsurance | Accident year 2019 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 10,332 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 583 | |||||
Total of IBNR liabilities plus expected development on reported claims | 2,272 | |||||
Insurance programs and coinsurance | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 318,927 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 167,391 | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 151,536 | |||||
Insurance programs and coinsurance | Accident year 2014 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | 0 | 0 | 0 | 0 | 0 | 0 |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 0 | 0 | 0 | 0 | 0 | $ 0 |
Total of IBNR liabilities plus expected development on reported claims | $ 0 | |||||
Cumulative number of reported claims | 0 | |||||
Insurance programs and coinsurance | Accident year 2015 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | $ 1,169 | 1,169 | 1,161 | 1,033 | 1,033 | |
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 922 | 857 | 735 | 403 | $ 9 | |
Total of IBNR liabilities plus expected development on reported claims | $ 22 | |||||
Cumulative number of reported claims | 775 | |||||
Insurance programs and coinsurance | Accident year 2016 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | $ 28,090 | 27,627 | 25,992 | 26,299 | ||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 23,198 | 21,115 | 15,723 | $ 6,036 | ||
Total of IBNR liabilities plus expected development on reported claims | $ 2,284 | |||||
Cumulative number of reported claims | 31,546 | |||||
Insurance programs and coinsurance | Accident year 2017 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | $ 62,289 | 58,665 | 59,717 | |||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 45,005 | 37,778 | $ 18,491 | |||
Total of IBNR liabilities plus expected development on reported claims | $ 8,530 | |||||
Cumulative number of reported claims | 55,106 | |||||
Insurance programs and coinsurance | Accident year 2018 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | $ 100,011 | 100,538 | ||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 67,067 | $ 31,561 | ||||
Total of IBNR liabilities plus expected development on reported claims | $ 15,379 | |||||
Cumulative number of reported claims | 49,283 | |||||
Insurance programs and coinsurance | Accident year 2019 | ||||||
Claims Development [Line Items] | ||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance | $ 127,368 | |||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance | 31,199 | |||||
Total of IBNR liabilities plus expected development on reported claims | $ 51,992 | |||||
Cumulative number of reported claims | 58,262 |
Short duration contracts Short
Short duration contracts Short duration contracts - percentage annual payout - all segments (Details) | Dec. 31, 2019 |
Casualty reinsurance pro rata | |
Short-duration Insurance Contracts, Historical Claims Duration [Line Items] | |
Year One | 7.40% |
Year Two | 14.50% |
Year Three | 16.30% |
Year Four | 14.70% |
Year Five | 12.30% |
Year Six | 13.00% |
Casualty reinsurance excess of loss | |
Short-duration Insurance Contracts, Historical Claims Duration [Line Items] | |
Year One | 0.30% |
Year Two | 1.60% |
Year Three | 2.90% |
Year Four | 8.20% |
Year Five | 5.60% |
Year Six | 19.50% |
Other specialty reinsurance | |
Short-duration Insurance Contracts, Historical Claims Duration [Line Items] | |
Year One | 32.60% |
Year Two | 32.70% |
Year Three | 10.70% |
Year Four | 8.70% |
Year Five | 5.90% |
Year Six | 1.60% |
Property catastrophe reinsurance | |
Short-duration Insurance Contracts, Historical Claims Duration [Line Items] | |
Year One | 19.30% |
Year Two | 30.40% |
Year Three | 25.10% |
Year Four | 6.20% |
Year Five | 2.80% |
Year Six | 1.20% |
Insurance programs and coinsurance | |
Short-duration Insurance Contracts, Historical Claims Duration [Line Items] | |
Year One | 21.60% |
Year Two | 33.70% |
Year Three | 19.70% |
Year Four | 8.90% |
Year Five | 5.60% |
Short duration contracts Reconc
Short duration contracts Reconciliation of claims development to liability (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | $ 1,093,074 | ||||
Unpaid losses and loss adjustment expenses recoverable | 165,549 | ||||
Short-duration Insurance Contracts, Liability for Unpaid Claims and Claims Adjustment Expense, Accumulated Unallocated Claim Adjustment Expense | 5,005 | ||||
Reserve for losses and loss adjustment expenses | $ 1,263,628 | $ 1,032,760 | $ 798,262 | $ 510,809 | |
Reinsured risk percentage | 100.00% | ||||
Casualty reinsurance pro rata | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | $ 491,623 | ||||
Unpaid losses and loss adjustment expenses recoverable | 4,889 | ||||
Casualty reinsurance excess of loss | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 262,118 | ||||
Unpaid losses and loss adjustment expenses recoverable | 9,949 | ||||
Other specialty reinsurance | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 126,612 | ||||
Unpaid losses and loss adjustment expenses recoverable | 19,700 | ||||
Insurance programs and coinsurance | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 151,536 | ||||
Unpaid losses and loss adjustment expenses recoverable | 128,674 | ||||
Property catastrophe reinsurance | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | 22,130 | ||||
Unpaid losses and loss adjustment expenses recoverable | 3 | ||||
Other short duration lines not included | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Liabilities for losses and loss adjustment expenses, net of reinsurance | [1] | 39,055 | |||
Unpaid losses and loss adjustment expenses recoverable | [1] | 2,334 | |||
WIC | Other short duration lines not included | |||||
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] | |||||
Unpaid losses and loss adjustment expenses recoverable | [1] | $ 2,300 | |||
[1] | Other short duration lines includes liabilities acquired in the purchase of WIC of $2.3 million, which are 100% reinsured pursuant to a 100% quota share agreement, and other miscellaneous items. |
Investment information - Summar
Investment information - Summary of available for sale securities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | $ 739,456 | $ 397,509 |
Fair Value | 745,708 | 393,351 |
Fixed maturities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 739,456 | 397,509 |
Gross Unrealized Gains | 8,242 | 1,464 |
Gross Unrealized Losses | (1,990) | (5,622) |
Fair Value | 745,708 | 393,351 |
Fixed maturities | U.S. government and government agency bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 282,076 | 156,884 |
Gross Unrealized Gains | 1,708 | 672 |
Gross Unrealized Losses | (137) | (127) |
Fair Value | 283,647 | 157,429 |
Fixed maturities | Corporate bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 155,834 | 77,178 |
Gross Unrealized Gains | 2,326 | 19 |
Gross Unrealized Losses | (41) | (1,204) |
Fair Value | 158,119 | 75,993 |
Fixed maturities | Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 145,555 | 58,369 |
Gross Unrealized Gains | 614 | 72 |
Gross Unrealized Losses | (735) | (1,351) |
Fair Value | 145,434 | 57,090 |
Fixed maturities | Non-U.S. government and government agencies | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 129,456 | 89,661 |
Gross Unrealized Gains | 3,530 | 670 |
Gross Unrealized Losses | (1,033) | (2,859) |
Fair Value | 131,953 | 87,472 |
Fixed maturities | Mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 24,776 | 14,344 |
Gross Unrealized Gains | 18 | 17 |
Gross Unrealized Losses | (44) | (81) |
Fair Value | 24,750 | 14,280 |
Fixed maturities | Municipal government and government agency bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost or Amortized Cost | 1,759 | 1,073 |
Gross Unrealized Gains | 46 | 14 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | $ 1,805 | $ 1,087 |
Investment information - Aging
Investment information - Aging of available for sale securities in an unrealized loss position (Details) - Fixed maturities - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | $ 167,848 | $ 272,827 |
Less than 12 months - gross unrealized losses | (1,753) | (5,622) |
12 months or more - fair value | 24,840 | 0 |
12 months or more - gross unrealized losses | (237) | 0 |
Total - fair value | 192,688 | 272,827 |
Total - gross unrealized losses | (1,990) | (5,622) |
U.S. government and government agency bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 36,540 | 66,422 |
Less than 12 months - gross unrealized losses | (137) | (127) |
12 months or more - fair value | 0 | 0 |
12 months or more - gross unrealized losses | 0 | 0 |
Total - fair value | 36,540 | 66,422 |
Total - gross unrealized losses | (137) | (127) |
Non-U.S. government and government agencies | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 51,779 | 78,084 |
Less than 12 months - gross unrealized losses | (1,027) | (2,859) |
12 months or more - fair value | 5,410 | 0 |
12 months or more - gross unrealized losses | (6) | 0 |
Total - fair value | 57,189 | 78,084 |
Total - gross unrealized losses | (1,033) | (2,859) |
Corporate bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 9,854 | 70,443 |
Less than 12 months - gross unrealized losses | (41) | (1,204) |
12 months or more - fair value | 0 | 0 |
12 months or more - gross unrealized losses | 0 | 0 |
Total - fair value | 9,854 | 70,443 |
Total - gross unrealized losses | (41) | (1,204) |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 55,194 | 49,400 |
Less than 12 months - gross unrealized losses | (504) | (1,351) |
12 months or more - fair value | 19,430 | 0 |
12 months or more - gross unrealized losses | (231) | 0 |
Total - fair value | 74,624 | 49,400 |
Total - gross unrealized losses | (735) | (1,351) |
Mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 14,481 | 8,478 |
Less than 12 months - gross unrealized losses | (44) | (81) |
12 months or more - fair value | 0 | 0 |
12 months or more - gross unrealized losses | 0 | 0 |
Total - fair value | 14,481 | 8,478 |
Total - gross unrealized losses | $ (44) | $ (81) |
Investment information - Maturi
Investment information - Maturity profile of available for sale securities (Details) - Fixed maturities - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||
Due in one year or less - amortized cost | $ 9,235 | |
Due in one year or less - estimated fair value | $ 9,248 | |
Due in one year or less - % of fair value | 1.30% | |
Due after one year through five years - amortized cost | $ 414,235 | $ 278,443 |
Due after one year through five years - estimated fair value | $ 417,921 | $ 276,706 |
Due after one year through five years - % of fair value | 56.00% | 70.40% |
Due after five years through ten years - amortized cost | $ 133,822 | $ 46,353 |
Due after five years through ten years - estimated fair value | $ 136,329 | $ 45,275 |
Due after five years through ten years - % of fair value | 18.30% | 11.50% |
Due after ten years - amortized cost | $ 11,833 | |
Due after ten years - estimated fair value | $ 12,026 | |
Due after ten years - % of fair value | 1.60% | |
Total investments, available for sale - amortized cost | $ 739,456 | $ 397,509 |
Total investments, available for sale - estimated fair value | $ 745,708 | $ 393,351 |
Total investments, available for sale - % of fair value | 100.00% | 100.00% |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
No single maturity date - amortized cost | $ 145,555 | $ 58,369 |
No single maturity date - estimated fair value | $ 145,434 | $ 57,090 |
No single maturity date - % of fair value | 19.50% | 14.50% |
Mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
No single maturity date - amortized cost | $ 24,776 | $ 14,344 |
No single maturity date - estimated fair value | $ 24,750 | $ 14,280 |
No single maturity date - % of fair value | 3.30% | 3.60% |
Investment information - Fair v
Investment information - Fair value option (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | $ 1,954,895 | $ 2,416,885 | |
Investments, fair value option - gross unrealized gains | 36,601 | 13,615 | |
Investments, fair value option - gross unrealized losses | (93,405) | (118,497) | |
Investments, fair value option | 1,898,091 | 2,312,003 | |
Equities, fair value through net income - cost | 78,031 | 41,358 | [1] |
Equities, fair value through net income - gross unrealized gains | 2,360 | 2,030 | [1] |
Equities, fair value through net income - gross unrealized losses | (15,053) | (10,375) | [1] |
Equities, fair value through net income | 65,338 | 33,013 | |
Term loans | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 1,113,212 | 1,055,664 | |
Investments, fair value option - gross unrealized gains | 7,340 | 767 | |
Investments, fair value option - gross unrealized losses | (58,618) | (55,779) | |
Investments, fair value option | 1,061,934 | 1,000,652 | |
Fixed maturities | Corporate bonds | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 221,024 | 617,013 | |
Investments, fair value option - gross unrealized gains | 8,430 | 6,468 | |
Investments, fair value option - gross unrealized losses | (15,100) | (44,867) | |
Investments, fair value option | 214,354 | 578,614 | |
Fixed maturities | U.S. government and government agency bonds | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 1,963 | 113,452 | |
Investments, fair value option - gross unrealized gains | 1 | 0 | |
Investments, fair value option - gross unrealized losses | (2) | (2,206) | |
Investments, fair value option | 1,962 | 111,246 | |
Fixed maturities | Asset-backed securities | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 200,361 | 174,846 | |
Investments, fair value option - gross unrealized gains | 3,329 | 673 | |
Investments, fair value option - gross unrealized losses | (12,953) | (6,626) | |
Investments, fair value option | 190,737 | 168,893 | |
Fixed maturities | Mortgage-backed securities | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 7,399 | 9,122 | |
Investments, fair value option - gross unrealized gains | 712 | 0 | |
Investments, fair value option - gross unrealized losses | (405) | (1,241) | |
Investments, fair value option | 7,706 | 7,881 | |
Fixed maturities | Non-U.S. government and government agencies | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 1,449 | 50,914 | |
Investments, fair value option - gross unrealized gains | 18 | 1 | |
Investments, fair value option - gross unrealized losses | (11) | (1,874) | |
Investments, fair value option | 1,456 | 49,041 | |
Fixed maturities | Municipal government and government agency bonds | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 380 | 7,306 | |
Investments, fair value option - gross unrealized gains | 0 | 0 | |
Investments, fair value option - gross unrealized losses | (1) | (162) | |
Investments, fair value option | 379 | 7,144 | |
Short-term investments | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 325,542 | 281,959 | |
Investments, fair value option - gross unrealized gains | 3,817 | 570 | |
Investments, fair value option - gross unrealized losses | (56) | (397) | |
Investments, fair value option | 329,303 | 282,132 | |
Other investments measured at net asset value (2) | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 28,672 | 50,000 | |
Investments, fair value option - gross unrealized gains | 2,264 | 0 | |
Investments, fair value option - gross unrealized losses | (475) | (238) | |
Investments, fair value option | 30,461 | 49,762 | |
Equities | |||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||
Investments, fair value option - cost or amortized cost | 54,893 | 56,609 | |
Investments, fair value option - gross unrealized gains | 10,690 | 5,136 | |
Investments, fair value option - gross unrealized losses | (5,784) | (5,107) | |
Investments, fair value option | $ 59,799 | $ 56,638 | |
[1] | Effective January 1, 2018, the Company adopted new accounting guidance for financial instruments. As a result, equity securities acquired after January 1, 2018 are classified as fair value through net income and are shown separately above. |
Investment information - Matu_2
Investment information - Maturity profile of investments other than available for sale (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 1,954,895 | $ 2,416,885 |
Investments, fair value option | 1,898,091 | 2,312,003 |
Fixed income and short term investments | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | 1,871,330 | 2,310,276 |
Investments, fair value option | $ 1,807,831 | $ 2,205,603 |
Investments, fair value option percentage of fair value | 100.00% | 100.00% |
Fixed income and short term investments | Due in one year or less | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 307,041 | $ 300,554 |
Investments, fair value option | $ 306,372 | $ 300,519 |
Investments, fair value option percentage of fair value | 16.90% | 13.60% |
Fixed income and short term investments | Due after one year through five years | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 779,643 | $ 1,044,539 |
Investments, fair value option | $ 742,960 | $ 992,834 |
Investments, fair value option percentage of fair value | 41.10% | 45.00% |
Fixed income and short term investments | Due after five years through ten years | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 514,961 | $ 777,290 |
Investments, fair value option | $ 495,416 | $ 731,662 |
Investments, fair value option percentage of fair value | 27.40% | 33.20% |
Fixed income and short term investments | Due after ten years | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 61,925 | $ 3,925 |
Investments, fair value option | $ 64,640 | $ 3,814 |
Investments, fair value option percentage of fair value | 3.60% | 0.20% |
Fixed income and short term investments | No single maturity date | Asset-backed securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 200,361 | $ 174,846 |
Investments, fair value option | $ 190,737 | $ 168,893 |
Investments, fair value option percentage of fair value | 10.60% | 7.60% |
Fixed income and short term investments | No single maturity date | Mortgage-backed securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 7,399 | $ 9,122 |
Investments, fair value option | $ 7,706 | $ 7,881 |
Investments, fair value option percentage of fair value | 0.40% | 0.40% |
Investment information - Credit
Investment information - Credit quality of investments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Investments by Credit Rating Table [Line Items] | |||
Total investments | $ 2,709,137 | $ 2,738,367 | |
AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 28,924 | 24,606 | |
AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 591,612 | 583,278 | |
A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 147,059 | 176,433 | |
BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 404,813 | 259,055 | |
BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 49,291 | 110,475 | |
B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 837,894 | 898,740 | |
CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 359,881 | 404,621 | |
CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 6,823 | 2,438 | |
C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,119 | 2,200 | |
D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,497 | 2,962 | |
Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 122,626 | 134,146 | |
Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,553,539 | 2,598,954 | |
Fixed income and short term investments | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 28,924 | 24,606 | [1] |
Fixed income and short term investments | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 591,612 | 583,278 | [1] |
Fixed income and short term investments | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 147,059 | 176,433 | [1] |
Fixed income and short term investments | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 404,813 | 259,055 | [1] |
Fixed income and short term investments | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 49,291 | 110,475 | [1] |
Fixed income and short term investments | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 837,894 | 898,740 | [1] |
Fixed income and short term investments | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 359,881 | 404,621 | [1] |
Fixed income and short term investments | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 6,823 | 2,438 | [1] |
Fixed income and short term investments | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,119 | 2,200 | [1] |
Fixed income and short term investments | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,497 | 2,962 | [1] |
Fixed income and short term investments | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 122,626 | 134,146 | [1] |
Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,224,236 | 2,316,822 | |
Fixed income instruments | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 3,141 | 20,156 | [1] |
Fixed income instruments | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 454,770 | 455,263 | [1] |
Fixed income instruments | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 112,156 | 121,463 | [1] |
Fixed income instruments | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 289,658 | 190,202 | [1] |
Fixed income instruments | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 49,291 | 110,475 | [1] |
Fixed income instruments | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 837,894 | 872,896 | [1] |
Fixed income instruments | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 351,522 | 404,621 | [1] |
Fixed income instruments | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 6,823 | 2,438 | [1] |
Fixed income instruments | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,119 | 2,200 | [1] |
Fixed income instruments | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,497 | 2,962 | [1] |
Fixed income instruments | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 114,365 | 134,146 | [1] |
Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 1,061,934 | 1,000,652 | |
Term loans | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Term loans | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Term loans | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Term loans | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Term loans | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 9,617 | 57,844 | [1] |
Term loans | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 761,168 | 677,211 | [1] |
Term loans | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 215,909 | 201,116 | [1] |
Term loans | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 6,823 | 2,438 | [1] |
Term loans | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,119 | 0 | [1] |
Term loans | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Term loans | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 66,298 | 62,043 | [1] |
Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 372,473 | 654,607 | |
Fixed maturities | Corporate bonds | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 3,961 | [1] |
Fixed maturities | Corporate bonds | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 36,128 | 58,185 | [1] |
Fixed maturities | Corporate bonds | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 81,401 | 100,590 | [1] |
Fixed maturities | Corporate bonds | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 41,103 | 63,791 | [1] |
Fixed maturities | Corporate bonds | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 9,003 | 15,246 | [1] |
Fixed maturities | Corporate bonds | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 58,345 | 174,867 | [1] |
Fixed maturities | Corporate bonds | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 135,613 | 203,505 | [1] |
Fixed maturities | Corporate bonds | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Corporate bonds | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 2,200 | [1] |
Fixed maturities | Corporate bonds | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Corporate bonds | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 10,880 | 32,262 | [1] |
Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 285,609 | 268,675 | |
Fixed maturities | U.S. government and government agency bonds | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 285,609 | 268,675 | [1] |
Fixed maturities | U.S. government and government agency bonds | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | U.S. government and government agency bonds | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 336,171 | 225,983 | |
Fixed maturities | Asset-backed securities | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,006 | 4,532 | [1] |
Fixed maturities | Asset-backed securities | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 4,973 | [1] |
Fixed maturities | Asset-backed securities | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 29,179 | 10,278 | [1] |
Fixed maturities | Asset-backed securities | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 223,956 | 113,075 | [1] |
Fixed maturities | Asset-backed securities | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 29,695 | 36,643 | [1] |
Fixed maturities | Asset-backed securities | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 18,381 | 20,818 | [1] |
Fixed maturities | Asset-backed securities | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Asset-backed securities | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Asset-backed securities | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Asset-backed securities | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Asset-backed securities | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 32,954 | 35,664 | [1] |
Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 32,456 | 22,161 | |
Fixed maturities | Mortgage-backed securities | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 1,100 | 944 | [1] |
Fixed maturities | Mortgage-backed securities | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 23,650 | 13,336 | [1] |
Fixed maturities | Mortgage-backed securities | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 976 | 742 | [1] |
Fixed maturities | Mortgage-backed securities | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Mortgage-backed securities | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,497 | 2,962 | [1] |
Fixed maturities | Mortgage-backed securities | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 4,233 | 4,177 | [1] |
Fixed maturities | Non-U.S. government and government agencies | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 133,409 | 136,513 | |
Fixed maturities | Non-U.S. government and government agencies | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 5,173 | [1] |
Fixed maturities | Non-U.S. government and government agencies | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 132,460 | 122,715 | [1] |
Fixed maturities | Non-U.S. government and government agencies | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 8,625 | [1] |
Fixed maturities | Non-U.S. government and government agencies | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 949 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Non-U.S. government and government agencies | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,184 | 8,231 | |
Fixed maturities | Municipal government and government agency bonds | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 1,135 | 6,490 | [1] |
Fixed maturities | Municipal government and government agency bonds | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 573 | 715 | [1] |
Fixed maturities | Municipal government and government agency bonds | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 476 | 1,026 | [1] |
Fixed maturities | Municipal government and government agency bonds | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Fixed maturities | Municipal government and government agency bonds | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 329,303 | 282,132 | |
Short-term investments | AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 25,783 | 4,450 | [1] |
Short-term investments | AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 136,842 | 128,015 | [1] |
Short-term investments | A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 34,903 | 54,970 | [1] |
Short-term investments | BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 115,155 | 68,853 | [1] |
Short-term investments | BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Short-term investments | B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 25,844 | [1] |
Short-term investments | CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 8,359 | 0 | [1] |
Short-term investments | CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Short-term investments | C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Short-term investments | D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 0 | 0 | [1] |
Short-term investments | Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 8,261 | 0 | [1] |
Other investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 30,461 | 49,762 | |
Equities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | $ 125,137 | $ 89,651 | |
[1] | For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA. |
Investment information - Net in
Investment information - Net investment income (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net Investment Income [Line Items] | |||||||||||
Net interest income | $ 29,826,000 | $ 29,536,000 | $ 26,415,000 | $ 30,434,000 | $ 29,955,000 | $ 27,397,000 | $ 26,042,000 | $ 24,139,000 | $ 116,211,000 | $ 107,533,000 | $ 86,523,000 |
Net unrealized gains (losses) | 32,191,000 | (109,046,000) | 398,000 | ||||||||
Net realized gains (losses) | (7,948,000) | (4,788,000) | 722,000 | ||||||||
Net investment income (loss) | $ 32,082,000 | $ 14,040,000 | $ 23,787,000 | $ 58,354,000 | $ (61,084,000) | $ 21,373,000 | $ 13,826,000 | $ 19,536,000 | 128,263,000 | (6,349,000) | 72,738,000 |
Non-income producing fixed maturities | 0 | 1,000,000 | 0 | ||||||||
Investment management fees - related parties | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | (18,392,000) | (17,006,000) | (21,451,000) | ||||||||
Net investment income (loss) | (18,392,000) | (17,006,000) | (21,451,000) | ||||||||
Borrowing and miscellaneous other investment expenses | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | (29,285,000) | (28,377,000) | (17,489,000) | ||||||||
Net investment income (loss) | (29,285,000) | (28,377,000) | (17,489,000) | ||||||||
Investment performance fees - related parties | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net investment income (loss) | (12,191,000) | (48,000) | (14,905,000) | ||||||||
Term loans | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 90,048,000 | 79,971,000 | 73,472,000 | ||||||||
Net unrealized gains (losses) | 3,526,000 | (53,702,000) | (10,354,000) | ||||||||
Net realized gains (losses) | (19,599,000) | (3,988,000) | 346,000 | ||||||||
Net investment income (loss) | 73,975,000 | 22,281,000 | 63,464,000 | ||||||||
Fixed maturities - Fair value option | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 48,698,000 | 63,556,000 | 49,179,000 | ||||||||
Net unrealized gains (losses) | 23,884,000 | (42,601,000) | 8,017,000 | ||||||||
Net realized gains (losses) | 7,048,000 | (11,490,000) | (660,000) | ||||||||
Net investment income (loss) | 79,630,000 | 9,465,000 | 56,536,000 | ||||||||
Fixed maturities - Available for sale | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 17,893,000 | 5,802,000 | |||||||||
Net unrealized gains (losses) | 0 | 0 | |||||||||
Net realized gains (losses) | 5,673,000 | (878,000) | |||||||||
Net investment income (loss) | 23,566,000 | 4,924,000 | |||||||||
Short-term investments | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 4,131,000 | 2,722,000 | 2,473,000 | ||||||||
Net unrealized gains (losses) | (277,000) | 390,000 | 220,000 | ||||||||
Net realized gains (losses) | 27,000 | 35,000 | (1,745,000) | ||||||||
Net investment income (loss) | 3,881,000 | 3,147,000 | 948,000 | ||||||||
Equities | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 203,000 | (425,000) | 339,000 | ||||||||
Net unrealized gains (losses) | 4,337,000 | (3,266,000) | 2,902,000 | ||||||||
Net realized gains (losses) | 0 | 8,223,000 | 2,781,000 | ||||||||
Net investment income (loss) | 4,540,000 | 4,532,000 | 6,022,000 | ||||||||
Equities, fair value through net income | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 2,201,000 | 1,290,000 | |||||||||
Net unrealized gains (losses) | (3,963,000) | (8,786,000) | |||||||||
Net realized gains (losses) | (1,162,000) | 3,310,000 | |||||||||
Net investment income (loss) | (2,924,000) | (4,186,000) | |||||||||
Other investments | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 714,000 | 0 | 0 | ||||||||
Net unrealized gains (losses) | 2,027,000 | 149,000 | (387,000) | ||||||||
Net realized gains (losses) | (2,719,000) | 0 | 0 | ||||||||
Net investment income (loss) | 22,000 | 149,000 | $ (387,000) | ||||||||
Other | |||||||||||
Net Investment Income [Line Items] | |||||||||||
Net interest income | 0 | 0 | |||||||||
Net unrealized gains (losses) | 2,657,000 | (1,230,000) | |||||||||
Net realized gains (losses) | 2,784,000 | 0 | |||||||||
Net investment income (loss) | $ 5,441,000 | $ (1,230,000) |
Investment information - Narrat
Investment information - Narrative (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($)positions | Dec. 31, 2018USD ($)positions | Dec. 31, 2017USD ($) | |
Investments, Debt and Equity Securities [Abstract] | |||
Number of positions in an unrealized loss position | positions | 48 | 60 | |
Total number of positions | positions | 146 | 73 | |
Percentage of positions in unrealized loss | 10.00% | 10.00% | |
Fixed maturities, AFS, realized gain | $ 6,100 | $ 86 | |
Fixed maturities, AFS, realized loss | 500 | 964 | |
Restricted Assets [Line Items] | |||
Restricted assets | 2,100,000 | 2,400,000 | |
Transfer from investments | 45,541 | 0 | $ 0 |
Other investments, fair value option | 30,461 | 49,762 | |
Deposits with US regulatory authorities | |||
Restricted Assets [Line Items] | |||
Restricted assets | 6,400 | $ 5,500 | |
Equities, fair value through net income | |||
Restricted Assets [Line Items] | |||
Transfer from investments | 28,700 | ||
Transfer to investments | 23,000 | ||
Other investments, fair value option | |||
Restricted Assets [Line Items] | |||
Transfer to investments | $ 28,700 | ||
Company's ownership percentage of master fund | 12.00% | ||
Term loans | |||
Restricted Assets [Line Items] | |||
Transfer from investments | $ 16,900 | ||
Short-term investments | |||
Restricted Assets [Line Items] | |||
Transfer from investments | $ 6,500 |
Fair value - Fair value hierarc
Fair value - Fair value hierarchy (Details) - Recurring - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | $ 617,060 | $ 532,832 | ||
Total liabilities measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Investment derivative liabilities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 0 | 0 | [1] | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Term loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Corporate bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Corporate bonds | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | U.S. government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 285,500 | 268,567 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Asset-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Mortgage-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Non-U.S. government and government agencies | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Municipal government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 318,012 | 256,288 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 13,548 | 7,977 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equities | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | [1] | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other underwriting derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Investment derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | [1] | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other investments measured at net asset value (2) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Other Observable Inputs (Level 2) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 1,917,859 | 1,991,306 | ||
Total liabilities measured at fair value | 66,514 | 10,207 | ||
Significant Other Observable Inputs (Level 2) | Investment derivative liabilities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 257 | 1,279 | [1] | |
Significant Other Observable Inputs (Level 2) | Term loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 1,025,886 | 953,173 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Corporate bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 371,540 | 630,330 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Corporate bonds | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 66,257 | 7,790 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | U.S. government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 109 | 108 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Asset-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 336,171 | 203,423 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Mortgage-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 32,456 | 22,161 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Non-U.S. government and government agencies | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 133,409 | 136,513 | ||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Municipal government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 2,184 | 8,231 | ||
Significant Other Observable Inputs (Level 2) | Short-term investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 11,291 | 25,844 | ||
Significant Other Observable Inputs (Level 2) | Equities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 2,998 | 11,223 | ||
Significant Other Observable Inputs (Level 2) | Equities | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | [1] | 1,138 | ||
Significant Other Observable Inputs (Level 2) | Other underwriting derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 148 | 249 | ||
Significant Other Observable Inputs (Level 2) | Investment derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 1,667 | 51 | [1] | |
Significant Other Observable Inputs (Level 2) | Other investments measured at net asset value (2) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 145,572 | 164,767 | ||
Total liabilities measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Investment derivative liabilities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 0 | 0 | [1] | |
Significant Unobservable Inputs (Level 3) | Term loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 36,048 | 47,479 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Corporate bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 933 | 24,277 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Corporate bonds | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | U.S. government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Asset-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 22,560 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Mortgage-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Non-U.S. government and government agencies | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Fixed maturities | Municipal government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Short-term investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Equities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 108,591 | 70,451 | ||
Significant Unobservable Inputs (Level 3) | Equities | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | [1] | 0 | ||
Significant Unobservable Inputs (Level 3) | Other underwriting derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) | Investment derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | [1] | |
Significant Unobservable Inputs (Level 3) | Other investments measured at net asset value (2) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 0 | 0 | ||
Estimated Fair Value | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 2,710,952 | 2,738,667 | ||
Total liabilities measured at fair value | 66,514 | 10,207 | ||
Estimated Fair Value | Investment derivative liabilities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 257 | 1,279 | [1] | |
Estimated Fair Value | Term loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 1,061,934 | 1,000,652 | ||
Estimated Fair Value | Fixed maturities | Corporate bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 372,473 | 654,607 | ||
Estimated Fair Value | Fixed maturities | Corporate bonds | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | 66,257 | 7,790 | ||
Estimated Fair Value | Fixed maturities | U.S. government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 285,609 | 268,675 | ||
Estimated Fair Value | Fixed maturities | Asset-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 336,171 | 225,983 | ||
Estimated Fair Value | Fixed maturities | Mortgage-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 32,456 | 22,161 | ||
Estimated Fair Value | Fixed maturities | Non-U.S. government and government agencies | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 133,409 | 136,513 | ||
Estimated Fair Value | Fixed maturities | Municipal government and government agency bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 2,184 | 8,231 | ||
Estimated Fair Value | Short-term investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 329,303 | 282,132 | ||
Estimated Fair Value | Equities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 125,137 | 89,651 | ||
Estimated Fair Value | Equities | Payable for securities sold short | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total liabilities measured at fair value | [1] | 1,138 | ||
Estimated Fair Value | Other underwriting derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 148 | 249 | ||
Estimated Fair Value | Investment derivative assets | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | 1,667 | 51 | [1] | |
Estimated Fair Value | Other investments measured at net asset value (2) | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets measured at fair value | $ 30,461 | $ 49,762 | [2] | |
[1] | Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of December 31, 2018. The Company’s call options are recorded as equities in payable for securities sold short in the consolidated balance sheets as of December 31, 2018. Such call options matured in the first quarter of 2019. The Company’s put options are recorded as equities in the consolidated balance sheets as of December 31, 2018. | |||
[2] | In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. |
Fair value - Level 3 rollforwar
Fair value - Level 3 rollforward (Details) - Recurring - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | $ 164,767 | $ 140,109 |
Transfers in (out) of Level 3 | (22,560) | |
Net Purchases (Sales) | 962 | 33,772 |
Net Unrealized Gains (Losses) | 2,403 | (7,981) |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | (1,133) |
Ending balance | 145,572 | 164,767 |
Term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | 47,479 | 62,478 |
Transfers in (out) of Level 3 | 0 | |
Net Purchases (Sales) | (15,402) | (11,705) |
Net Unrealized Gains (Losses) | 3,971 | (3,294) |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | 0 |
Ending balance | 36,048 | 47,479 |
Fixed maturities | Corporate bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | 24,277 | 24,710 |
Transfers in (out) of Level 3 | 0 | |
Net Purchases (Sales) | (23,341) | 985 |
Net Unrealized Gains (Losses) | (3) | (285) |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | (1,133) |
Ending balance | 933 | 24,277 |
Fixed maturities | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | 22,560 | 0 |
Transfers in (out) of Level 3 | (22,560) | |
Net Purchases (Sales) | 0 | 22,560 |
Net Unrealized Gains (Losses) | 0 | 0 |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | 0 |
Ending balance | 0 | 22,560 |
Equities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | 70,451 | 52,921 |
Transfers in (out) of Level 3 | 0 | |
Net Purchases (Sales) | 39,705 | 21,932 |
Net Unrealized Gains (Losses) | (1,565) | (4,402) |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | 0 |
Ending balance | $ 108,591 | $ 70,451 |
Fair value - Narrative (Details
Fair value - Narrative (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Jul. 02, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total assets and liabilities measured at fair value | $ 2,600,000,000 | $ 2,700,000,000 | |
Total assets and liabilities measured at fair value priced using non-binding broker quotes | $ 131,800,000 | $ 178,300,000 | |
Total assets and liabilities measured at fair value priced using non-binding broker quotes (percentage) | 5.00% | 6.50% | |
Purchases and sales of level 3 assets | |||
Senior notes | $ 172,418,000 | $ 0 | |
Estimated fair value of senior notes | 179,000,000 | ||
Recurring | Significant Unobservable Inputs (Level 3) | Corporate bonds | |||
Purchases and sales of level 3 assets | |||
Purchases | 1,000,000 | ||
Sales | 90,000 | ||
Redemptions | 23,300,000 | ||
Recurring | Significant Unobservable Inputs (Level 3) | Asset-backed securities | |||
Purchases and sales of level 3 assets | |||
Purchases | 22,600,000 | ||
Recurring | Significant Unobservable Inputs (Level 3) | Equities | |||
Purchases and sales of level 3 assets | |||
Purchases | 75,000,000 | 57,100,000 | |
Sales | 35,300,000 | 35,100,000 | |
Recurring | Significant Unobservable Inputs (Level 3) | Short-term investments | |||
Purchases and sales of level 3 assets | |||
Purchases | 4,400,000 | ||
Sales | 4,400,000 | ||
Recurring | Significant Unobservable Inputs (Level 3) | Term loans | |||
Purchases and sales of level 3 assets | |||
Purchases | 600,000 | 18,000,000 | |
Sales | 15,800,000 | $ 29,700,000 | |
Redemptions | $ 300,000 | ||
Senior notes | |||
Purchases and sales of level 3 assets | |||
Face amount of senior notes | $ 175,000,000 | ||
Stated interest rate (percent) | 6.50% |
Borrowings to purchase invest_2
Borrowings to purchase investments Credit facilities (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Nov. 30, 2017 | |
Line of Credit Facility [Line Items] | ||||
Revolving credit agreement borrowings | $ 484,287 | $ 693,917 | ||
Restricted assets | 2,100,000 | 2,400,000 | ||
Issuance and extension costs | 14,500 | |||
Borrowings and miscellaneous investment expense | ||||
Line of Credit Facility [Line Items] | ||||
Interest expense incurred on secured credit facility and custodian bank facility | 27,700 | 26,500 | $ 15,900 | |
Bank Of America, N.A. | Secured facility | ||||
Line of Credit Facility [Line Items] | ||||
Credit facility, maximum borrowing capacity | $ 800,000 | |||
Restricted assets | 791,000 | 764,000 | ||
Bank Of America, N.A. | Standby letters of credit | ||||
Line of Credit Facility [Line Items] | ||||
Credit facility, maximum borrowing capacity | $ 400,000 | |||
Revolving credit agreement borrowings | 52,500 | 52,500 | ||
Bank Of America, N.A. | Borrowings | ||||
Line of Credit Facility [Line Items] | ||||
Revolving credit agreement borrowings | $ 484,300 | $ 455,700 |
Borrowings to purchase invest_3
Borrowings to purchase investments Custodian facility (Details) $ in Thousands, SFr in Millions | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2018CHF (SFr) |
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 484,287 | $ 693,917 | |
Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | 0 | 238,200 | |
Cash and investments held on deposit with custodian | $ 0 | 339,100 | |
Custodian bank facility | CHF denominated borrowings | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 2,000 | SFr 2 |
Derivatives - Fair values and n
Derivatives - Fair values and notional amounts of derivatives (Details) - Not designated as hedging instrument - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | $ 1,815 | $ 1,108 | |
Liability Derivatives | 257 | 2,417 | |
Net Derivatives | 1,558 | (1,309) | |
Notional Amount | [1] | 222,557 | 188,362 |
Other underwriting derivatives | |||
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | 148 | 249 | |
Liability Derivatives | 0 | 0 | |
Net Derivatives | 148 | 249 | |
Notional Amount | [1] | 59,879 | 72,148 |
Options | |||
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | 808 | ||
Liability Derivatives | 1,138 | ||
Net Derivatives | (330) | ||
Notional Amount | [1] | 24,551 | |
Total return swaps | |||
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | 1,667 | 51 | |
Liability Derivatives | 257 | 1,279 | |
Net Derivatives | 1,410 | (1,228) | |
Notional Amount | [1] | $ 162,678 | $ 91,663 |
[1] | The notional amount represents the absolute value of all outstanding contracts. |
Derivatives - Summary of realiz
Derivatives - Summary of realized and unrealized gains and losses on derivatives (Details) - Not designated as hedging instrument - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Other underwriting income (loss) | Other underwriting derivatives | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Realized and unrealized gains and losses on derivative instruments | $ 2,412 | $ 2,722 | $ 3,180 |
Realized and unrealized gains (losses) on investments | Options | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Realized and unrealized gains and losses on derivative instruments | 799 | 1,314 | 0 |
Realized and unrealized gains (losses) on investments | Total return swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Realized and unrealized gains and losses on derivative instruments | $ 5,441 | $ (1,230) | $ 0 |
Derivatives - Narrative (Detail
Derivatives - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Short-term investments | ||
Derivative [Line Items] | ||
Collateral held by counterparty | $ 64.1 | $ 36.3 |
Other underwriting derivatives | Fixed maturities | ||
Derivative [Line Items] | ||
Collateral held by counterparty | $ 13.1 | $ 15.5 |
Earnings per common share (Deta
Earnings per common share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | |||||||||||
Net income (loss) before preference dividends and redemption costs | $ 62,541 | $ (34,883) | $ 10,741 | ||||||||
Preference dividends | $ (1,209) | $ (2,608) | $ (4,908) | $ (4,907) | $ (4,909) | $ (4,909) | $ (4,908) | $ (4,907) | (13,632) | (19,633) | (19,633) |
Accelerated amortization of discount and issuance costs related to the redemption of preference shares | 0 | (4,164) | 0 | 0 | (4,164) | 0 | 0 | ||||
Net income (loss) available to common shareholders | $ (16,864) | $ 152 | $ 13,825 | $ 47,632 | $ (95,259) | $ 18,837 | $ 9,124 | $ 12,782 | $ 44,745 | $ (54,516) | $ (8,892) |
Denominator: | |||||||||||
Weighted average common shares outstanding - basic | 22,366,682 | 22,682,875 | 22,682,875 | ||||||||
Weighted average non-vested restricted share units (1) | 7,286 | 0 | 0 | ||||||||
Weighted average common shares outstanding - diluted (2) | 22,373,968 | 22,682,875 | 22,682,875 | ||||||||
Earnings (loss) per common share: | |||||||||||
Earnings (loss) per share, basic | $ (0.79) | $ 0.01 | $ 0.61 | $ 2.10 | $ (4.20) | $ 0.83 | $ 0.41 | $ 0.56 | $ 2 | $ (2.40) | $ (0.39) |
Earnings (loss) per share, diluted | $ (0.79) | $ 0.01 | $ 0.61 | $ 2.10 | $ (4.20) | $ 0.83 | $ 0.41 | $ 0.56 | $ 2 | $ (2.40) | $ (0.39) |
Granted during the period, shares | 165,287 | ||||||||||
Unvested number, shares | 82,360 | 82,360 | |||||||||
Antidilutive securities excluded from computation of earnings per share | 1,704,691 |
Income taxes Narrative (Details
Income taxes Narrative (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Line Items] | |||
Valuation allowance | $ 1,269,000 | $ 1,488,000 | $ 1,127,000 |
Net deferred income tax assets (liabilities) | 0 | 0 | 0 |
Income tax expense (benefit) | 20,000 | 27,000 | 21,000 |
Unrecognized tax benefits | 0 | 0 | |
Excise and Sales Taxes | $ 5,700,000 | $ 4,300,000 | $ 3,600,000 |
Gibraltar | |||
Income Tax Disclosure [Line Items] | |||
Statutory tax rate (percentage) | 10.00% | ||
Romania | |||
Income Tax Disclosure [Line Items] | |||
Statutory tax rate (percentage) | 16.00% | ||
United Kingdom | |||
Income Tax Disclosure [Line Items] | |||
Statutory tax rate (percentage) | 19.00% | ||
United Kingdom | Tax Year 2021 | |||
Income Tax Disclosure [Line Items] | |||
Statutory tax rate (percentage) | 17.00% | ||
United States | |||
Income Tax Disclosure [Line Items] | |||
U.S. statutory tax rate (percentage) | 21.00% | ||
U.S. excise tax on Non-US insurance entities | |||
Income Tax Disclosure [Line Items] | |||
U.S. statutory tax rate (percentage) | 1.00% |
Income taxes Components of inco
Income taxes Components of income tax (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Line Items] | |||
United States | $ 20 | $ 27 | $ 0 |
Current income tax expense (benefit) | 20 | 27 | 21 |
United States | 0 | 0 | 0 |
Deferred income tax expense (benefit) | 0 | 0 | 0 |
Income tax expense (benefit) | 20 | 27 | 21 |
Gibraltar | |||
Income Tax Disclosure [Line Items] | |||
Non-U.S. | 0 | 0 | 21 |
Non-U.S. | 0 | 0 | 0 |
United Kingdom | |||
Income Tax Disclosure [Line Items] | |||
Non-U.S. | 0 | 0 | 0 |
Non-U.S. | $ 0 | $ 0 | $ 0 |
Income taxes Income before taxe
Income taxes Income before taxes by jurisdiction (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Line Items] | |||
Total income (loss) before income taxes | $ 44,765 | $ (54,489) | $ (8,871) |
Bermuda | |||
Income Tax Disclosure [Line Items] | |||
Income (loss) before income taxes, domestic | 42,775 | (52,953) | (6,041) |
United States | |||
Income Tax Disclosure [Line Items] | |||
Income (loss) before income taxes, foreign | 346 | (2,146) | (1,485) |
Other | |||
Income Tax Disclosure [Line Items] | |||
Income (loss) before income taxes, foreign | $ 1,644 | $ 610 | $ (1,345) |
Income taxes Reconciliation of
Income taxes Reconciliation of effective tax rate (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
Expected income tax expense (benefit) at Bermuda statutory rate | $ 0 | $ 0 | $ 0 |
Foreign taxes at local expected rates | 280 | (395) | (659) |
Change in tax rate related to U.S. tax reform | 0 | 0 | 664 |
Change in valuation allowance | (120) | 400 | 17 |
Other | (140) | 22 | (1) |
Income tax expense (benefit) | $ 20 | $ 27 | $ 21 |
Income taxes Components of defe
Income taxes Components of deferred tax assets and liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred income tax assets: | |||
Net operating loss | $ 84,000 | $ 858,000 | $ 1,068,000 |
Unearned premium reserve | 291,000 | 142,000 | 49,000 |
Loss reserves | 138,000 | 59,000 | 10,000 |
Ceding commissions | 1,006,000 | 339,000 | 170,000 |
Capitalized expenses | 92,000 | 101,000 | 109,000 |
Investment basis differences | 0 | 133,000 | 0 |
Other accruals | 18,000 | 0 | 0 |
Deferred tax assets before valuation allowance | 1,629,000 | 1,632,000 | 1,406,000 |
Valuation allowance | (1,269,000) | (1,488,000) | (1,127,000) |
Deferred tax assets net of valuation allowance | 360,000 | 144,000 | 279,000 |
Deferred income tax liabilities: | |||
Goodwill and intangible assets | (260,000) | (144,000) | (27,000) |
Investment basis differences | (100,000) | 0 | (252,000) |
Total deferred tax liabilities | (360,000) | (144,000) | (279,000) |
Net deferred income tax assets (liabilities) | $ 0 | $ 0 | $ 0 |
Transactions with related par_3
Transactions with related parties - Transactions with ACGL (Details) | Aug. 01, 2019USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jul. 02, 2019USD ($) | Dec. 31, 2016USD ($) | Mar. 31, 2014USD ($)executive | |
Related Party Transaction [Line Items] | ||||||||||||||||
Other investments, fair value option | $ 30,461,000 | $ 49,762,000 | $ 30,461,000 | $ 49,762,000 | ||||||||||||
Repurchase of preference shares | 173,081,000 | 0 | $ 0 | |||||||||||||
Consolidated statement of income (loss) items: | ||||||||||||||||
Gross premiums written | 754,881,000 | 735,015,000 | 600,304,000 | |||||||||||||
Gross premiums ceded | (222,019,000) | (130,840,000) | (47,187,000) | |||||||||||||
Net premiums earned | (133,446,000) | $ (125,832,000) | $ (151,318,000) | $ (146,094,000) | (146,973,000) | $ (135,624,000) | $ (159,518,000) | $ (136,747,000) | (556,690,000) | (578,862,000) | (531,726,000) | |||||
Loss and loss adjustment expenses | (453,135,000) | (441,255,000) | (436,402,000) | |||||||||||||
Acquisition expenses | (126,788,000) | (141,136,000) | (140,726,000) | |||||||||||||
Interest expense | 5,791,000 | 0 | 0 | |||||||||||||
Preference dividends | 1,209,000 | 2,608,000 | 4,908,000 | 4,907,000 | 4,909,000 | $ 4,909,000 | $ 4,908,000 | $ 4,907,000 | 13,632,000 | 19,633,000 | 19,633,000 | |||||
Accelerated amortization of discount and issuance costs related to the redemption of preference shares | 0 | $ 4,164,000 | $ 0 | $ 0 | 4,164,000 | 0 | 0 | |||||||||
Consolidated balance sheet items: | ||||||||||||||||
Total investments | 2,709,137,000 | 2,738,367,000 | 2,709,137,000 | 2,738,367,000 | ||||||||||||
Premiums receivable | 273,657,000 | 227,301,000 | 273,657,000 | 227,301,000 | ||||||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 170,974,000 | 86,445,000 | 170,974,000 | 86,445,000 | ||||||||||||
Prepaid reinsurance premiums | 132,577,000 | 61,587,000 | 132,577,000 | 61,587,000 | ||||||||||||
Deferred acquisition costs, net | 64,044,000 | 80,858,000 | 64,044,000 | 80,858,000 | ||||||||||||
Funds held by reinsurers | 42,505,000 | 44,830,000 | 42,505,000 | 44,830,000 | ||||||||||||
Reserve for losses and loss adjustment expenses | 1,263,628,000 | 1,032,760,000 | 1,263,628,000 | 1,032,760,000 | 798,262,000 | $ 510,809,000 | ||||||||||
Unearned premiums | 438,907,000 | 390,114,000 | 438,907,000 | 390,114,000 | ||||||||||||
Losses payable | 61,314,000 | 24,750,000 | 61,314,000 | 24,750,000 | ||||||||||||
Reinsurance balances payable | 77,066,000 | 21,034,000 | 77,066,000 | 21,034,000 | ||||||||||||
Senior notes | 172,418,000 | 0 | 172,418,000 | 0 | ||||||||||||
Amounts due to affiliates | 4,467,000 | 5,888,000 | 4,467,000 | 5,888,000 | ||||||||||||
Contingently redeemable preference shares | $ 52,305,000 | 220,992,000 | 52,305,000 | 220,992,000 | 220,622,000 | $ 220,253,000 | ||||||||||
General and administrative expenses | $ 30,843,000 | 22,311,000 | 21,174,000 | |||||||||||||
Senior notes | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Stated interest rate (percent) | 6.50% | |||||||||||||||
Arch Capital Group Limited | Contingently redeemable preference share | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Repurchase of preference shares | $ 11,500,000 | |||||||||||||||
ACGL and Subsidiaries | Arch Capital Group Limited | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Amount of investment by related party | $ 100,000,000 | |||||||||||||||
Percentage of common equity owned by related party | 12.50% | 12.50% | 11.00% | |||||||||||||
Related party - number of executives serving as directors | executive | 2 | |||||||||||||||
Percentage of preference shares owned by related party | 6.60% | 6.60% | ||||||||||||||
Consolidated statement of income (loss) items: | ||||||||||||||||
Interest expense | $ 1,131,000 | 0 | 0 | |||||||||||||
Preference dividends | 902,000 | 1,299,000 | 1,299,000 | |||||||||||||
Accelerated amortization of discount and issuance costs related to the redemption of preference shares | 276,000 | 0 | 0 | |||||||||||||
Consolidated balance sheet items: | ||||||||||||||||
Total investments | $ 815,528,000 | 719,189,000 | 815,528,000 | 719,189,000 | ||||||||||||
Premiums receivable | 106,462,000 | 118,208,000 | 106,462,000 | 118,208,000 | ||||||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 79,597,000 | 45,954,000 | 79,597,000 | 45,954,000 | ||||||||||||
Prepaid reinsurance premiums | 75,249,000 | 27,598,000 | 75,249,000 | 27,598,000 | ||||||||||||
Deferred acquisition costs, net | 31,609,000 | 48,380,000 | 31,609,000 | 48,380,000 | ||||||||||||
Funds held by reinsurers | 29,867,000 | 33,352,000 | 29,867,000 | 33,352,000 | ||||||||||||
Other assets - contingent commissions | 0 | 2,967,000 | 0 | 2,967,000 | ||||||||||||
Reserve for losses and loss adjustment expenses | 693,861,000 | 631,670,000 | 693,861,000 | 631,670,000 | ||||||||||||
Unearned premiums | 143,852,000 | 166,491,000 | 143,852,000 | 166,491,000 | ||||||||||||
Losses payable | 39,619,000 | 19,098,000 | 39,619,000 | 19,098,000 | ||||||||||||
Reinsurance balances payable | 62,301,000 | 20,299,000 | 62,301,000 | 20,299,000 | ||||||||||||
Senior notes | 35,000,000 | 0 | 35,000,000 | 0 | $ 35,000,000 | |||||||||||
Amounts due to affiliates | 4,467,000 | 5,888,000 | 4,467,000 | 5,888,000 | ||||||||||||
Other liabilities - contingent commissions | 5,516,000 | 0 | 5,516,000 | 0 | ||||||||||||
Contingently redeemable preference shares | $ 3,462,000 | $ 14,627,000 | 3,462,000 | 14,627,000 | ||||||||||||
ACGL and Subsidiaries | Arch Capital Group Limited | Direct Business and Inward Retrocession | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Ceding fee expense | 16,600,000 | 17,600,000 | 17,000,000 | |||||||||||||
Consolidated statement of income (loss) items: | ||||||||||||||||
Gross premiums written | 201,110,000 | 252,841,000 | 289,484,000 | |||||||||||||
Net premiums earned | (235,923,000) | (277,576,000) | (302,774,000) | |||||||||||||
Loss and loss adjustment expenses | (198,386,000) | (211,434,000) | (243,079,000) | |||||||||||||
Acquisition expenses | [1] | (71,302,000) | (89,832,000) | (102,098,000) | ||||||||||||
ACGL and Subsidiaries | Arch Capital Group Limited | Outward Retrocession Quota Share Business | ||||||||||||||||
Consolidated statement of income (loss) items: | ||||||||||||||||
Gross premiums ceded | (112,701,000) | (55,934,000) | (32,028,000) | |||||||||||||
Net premiums earned | (65,234,000) | (44,730,000) | (24,351,000) | |||||||||||||
Loss and loss adjustment expenses | (56,164,000) | (31,031,000) | (19,125,000) | |||||||||||||
Acquisition expenses | [2] | $ (13,672,000) | $ (10,200,000) | $ (4,906,000) | ||||||||||||
[1] | Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the years ended December 31, 2019, 2018 and 2017, the Company incurred ceding fees to Arch, in aggregate, of $16.6 million, $17.6 million and $17.0 million, respectively, under these inward retrocession agreements. | |||||||||||||||
[2] | Acquisition expenses relating to the ACGL outward quota share agreements referred to above. |
Transactions with related par_4
Transactions with related parties - Transactions with other ACGL entities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated statement of income (loss) items: | |||
Investment management fees - related parties | $ 18,392 | $ 17,006 | $ 21,451 |
Acquisition expenses | 126,788 | 141,136 | 140,726 |
General and administrative expenses | $ 30,843 | 22,311 | 21,174 |
ACGL and Subsidiaries | AIM | |||
Related Party Transaction [Line Items] | |||
Investment management agreement, term | 1 year | ||
Investment management agreement termination, notice period required | 45 days | ||
Consolidated statement of income (loss) items: | |||
Investment management fees - related parties | $ 1,062 | 1,176 | 624 |
ACGL and Subsidiaries | AUL and AUI | |||
Related Party Transaction [Line Items] | |||
Services agreement term | 5 years | ||
Services agreement termination, notice period required | 24 months | ||
Consolidated statement of income (loss) items: | |||
Acquisition expenses | $ 20,808 | 15,578 | 10,755 |
General and administrative expenses | 6,899 | 6,796 | 6,599 |
Total related party expenses | $ 27,707 | $ 22,374 | $ 17,354 |
Transactions with related par_5
Transactions with related parties - Transactions with HPS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Purchase of other investments | $ 0 | $ 0 | $ 50,000 |
Consolidated statement of income (loss) items: | |||
Investment management fees - related parties | 18,392 | 17,006 | 21,451 |
Investment performance fees - related parties | 12,191 | 48 | 14,905 |
Consolidated balance sheet items: | |||
Other investments, at fair value | 30,461 | 49,762 | |
Investment management and performance fees payable | $ 17,762 | 3,807 | |
HPS | |||
Related Party Transaction [Line Items] | |||
Management fee percentage | 1.00% | ||
Performance fee percentage | 10.00% | ||
Additional performance fee percentage | 25.00% | ||
Minimum investment return for additional incentive fee | 10.00% | ||
Maximum incentive fee percentage | 17.50% | ||
Purchase of other investments | $ 28,700 | 50,000 | |
Company's ownership percentage of master fund | 12.00% | ||
Consolidated statement of income (loss) items: | |||
Investment management fees - related parties | $ 17,330 | 15,830 | 20,827 |
Investment performance fees - related parties | 12,191 | 48 | 14,905 |
Total related party expense | 29,521 | 15,878 | $ 35,732 |
Consolidated balance sheet items: | |||
Other investments, at fair value | 30,461 | 49,762 | |
Investment management and performance fees payable | $ 17,762 | $ 3,807 |
Transactions with related par_6
Transactions with related parties - Transactions with Artex (Details) - Artex $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2019USD ($) | Dec. 31, 2019GBP (£) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2015executive | |
Related Party Transaction [Line Items] | |||||
Related party - number of executives serving as directors | executive | 2 | ||||
Insurance management agreement termination, notice period required | 12 months | 12 months | |||
Insurance management fees paid | $ | $ 431 | $ 534 | $ 325 | ||
Minimum | |||||
Related Party Transaction [Line Items] | |||||
Insurance management agreed service fees | £ 150,000 | ||||
Maximum | |||||
Related Party Transaction [Line Items] | |||||
Insurance management agreed service fees | £ 400,000 |
Commitments and contingencies -
Commitments and contingencies - Concentrations of credit risk (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Concentrations of credit risk | ACGL and Subsidiaries | AM Best, A plus Rating | ||
Concentration Risk [Line Items] | ||
Reinsurance recoverables and prepaid reinsurance premiums | $ 92.5 | $ 53.3 |
Commitments and contingencies_2
Commitments and contingencies - Credit facilities (Details) - USD ($) $ in Thousands | Sep. 20, 2019 | Dec. 31, 2019 | May 14, 2019 | Dec. 31, 2018 | Nov. 30, 2017 |
Line of Credit Facility [Line Items] | |||||
Revolving credit agreement borrowings | $ 484,287 | $ 693,917 | |||
Lloyds Bank PLC | Letter of credit facility | |||||
Line of Credit Facility [Line Items] | |||||
Credit facility, maximum borrowing capacity | $ 100,000 | ||||
Allowable capacity increase | $ 50,000 | ||||
Restricted assets | 51,000 | 68,900 | |||
Lloyds Bank and BMO Capital Markets | Letter of credit facility | |||||
Line of Credit Facility [Line Items] | |||||
Credit facility term | 364 | ||||
Credit facility, maximum borrowing capacity | $ 100,000 | ||||
Revolving credit agreement borrowings | 19,300 | ||||
Bank Of America, N.A. | Secured facility | |||||
Line of Credit Facility [Line Items] | |||||
Credit facility, maximum borrowing capacity | $ 800,000 | ||||
Bank Of America, N.A. | Borrowings | |||||
Line of Credit Facility [Line Items] | |||||
Revolving credit agreement borrowings | 484,300 | 455,700 | |||
Bank Of America, N.A. | Standby letters of credit | |||||
Line of Credit Facility [Line Items] | |||||
Credit facility, maximum borrowing capacity | $ 400,000 | ||||
Revolving credit agreement borrowings | $ 52,500 | $ 52,500 |
Commitments and contingencies_3
Commitments and contingencies - Custodian facility (Details) $ in Thousands, SFr in Millions | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2018CHF (SFr) |
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 484,287 | $ 693,917 | |
Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | 0 | 238,200 | |
Cash and investments held on deposit with custodian | $ 0 | 339,100 | |
CHF denominated borrowings | Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 2,000 | SFr 2 |
Commitments and contingencies_4
Commitments and contingencies - Investment commitments (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Investment commitment | Term loans | ||
Other Commitments [Line Items] | ||
Commitment, amount | $ 8.4 | |
Investment commitment | Equity | ||
Other Commitments [Line Items] | ||
Commitment, amount | $ 26.4 | $ 2.9 |
Acquisition commitment | ||
Other Commitments [Line Items] | ||
Acquisition commitment percentage of ownership | 100.00% |
Leases - Additional information
Leases - Additional information regarding real estate operating leases (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Lease cost: | |
Operating lease | $ 241 |
Other information on operating lease: | |
Cash payments included in the measurement of lease liability reported in operating cash flows | 283 |
Operating lease liability | $ 970 |
Weighted average discount rate | 3.90% |
Weighted average remaining lease term in years | 3 years 9 months |
Other assets | |
Other information on operating lease: | |
Operating lease, right-of-use asset | $ 970 |
Other liabilities | |
Other information on operating lease: | |
Operating lease liability | $ 970 |
Leases - Contractual maturity o
Leases - Contractual maturity of lease liability (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 283 |
2021 | 283 |
2022 | 283 |
2023 | 189 |
Total undiscounted lease payments | 1,038 |
Less: present value adjustment | (68) |
Operating lease liability | $ 970 |
Leases - Future rental commitme
Leases - Future rental commitments (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Leases [Abstract] | |
2019 | $ 283 |
2020 | 283 |
2021 | 283 |
2022 | 283 |
2023 | 189 |
Total future rental commitments | $ 1,321 |
Senior notes (Details)
Senior notes (Details) - USD ($) | Jul. 02, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||
Senior notes | $ 172,418,000 | $ 0 | |
Unamortized debt issuance expense | $ 2,600,000 | ||
Senior notes | |||
Debt Instrument [Line Items] | |||
Face amount of senior notes | $ 175,000,000 | ||
Stated interest rate (percent) | 6.50% | ||
Proceeds from issuance of senior long term debt | $ 172,300,000 | ||
Senior notes, redemption price percentage | 100.00% | ||
Arch Capital Group Limited | ACGL and Subsidiaries | |||
Debt Instrument [Line Items] | |||
Senior notes | $ 35,000,000 | $ 35,000,000 | $ 0 |
Contingently redeemable prefe_3
Contingently redeemable preferred shares - Reconciliation of beginning and ending balances of preference shares (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Class of Stock [Line Items] | |||||||
Preference shares: beginning of period | $ 220,992 | $ 220,992 | $ 220,622 | $ 220,253 | |||
Preference shares repurchased during the period | (173,081) | 0 | 0 | ||||
Accelerated amortization of costs related to the redemption of preference shares | $ 0 | $ 4,164 | $ 0 | $ 0 | 4,164 | 0 | 0 |
Accretion discount and issuance costs on remaining preference shares | 230 | 370 | 369 | ||||
Preference shares: end of period | $ 52,305 | $ 52,305 | $ 220,992 | $ 220,622 |
Contingently redeemable prefe_4
Contingently redeemable preferred shares - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 01, 2019 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Jul. 31, 2019 | Mar. 31, 2014 |
Class of Stock [Line Items] | ||||||||||
Repurchase of preference shares | $ 173,081 | $ 0 | $ 0 | |||||||
Preference dividends | 13,400 | 19,300 | 19,300 | |||||||
Accelerated amortization of costs related to the redemption of preference shares | $ 0 | $ (4,164) | $ 0 | $ 0 | (4,164) | 0 | 0 | |||
Accretion discount and issuance costs on remaining preference shares | $ 230 | $ 370 | $ 369 | |||||||
Contingently redeemable preference share | ||||||||||
Class of Stock [Line Items] | ||||||||||
Number of shares issued | 9,065,200 | 9,065,200 | ||||||||
Preference shares, par value per share | $ 0.01 | |||||||||
Preference shares, liquidation preference per share | 25 | |||||||||
Preference shares, issue price per share | $ 24.50 | |||||||||
Stated dividend rate (percent) | 8.50% | |||||||||
Number of shares redeemed during the period | 6,919,998 | |||||||||
Redemption price per share | $ 25.19748 | |||||||||
Contingently redeemable preference share | From June 30, 2014 to June 29, 2019 | ||||||||||
Class of Stock [Line Items] | ||||||||||
Stated dividend rate (percent) | 8.50% | |||||||||
Contingently redeemable preference share | On or after June 30, 2019 | 3 month LIBOR | ||||||||||
Class of Stock [Line Items] | ||||||||||
Preferred Stock Basis Spread On Variable Rate | 6.6785% | |||||||||
Contingently redeemable preference share | On or after June 30, 2019 | 3 month LIBOR | Minimum | ||||||||||
Class of Stock [Line Items] | ||||||||||
Stated dividend rate (percent) | 1.00% | |||||||||
Arch Capital Group Limited | Contingently redeemable preference share | ||||||||||
Class of Stock [Line Items] | ||||||||||
Repurchase of preference shares | $ 11,500 |
Shareholders' Equity Common sha
Shareholders' Equity Common shares (Details) - shares | 12 Months Ended | |||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||||
Stockholders' Equity Note [Abstract] | ||||||
Common shares, authorized | 120,000,000 | 120,000,000 | ||||
Preferred shares, authorized | 30,000,000 | 30,000,000 | ||||
Roll-forward of changes in issued and outstanding common shares | ||||||
Common shares, issued, beginning of year | 22,682,875 | 22,682,875 | 22,682,875 | |||
Shares outstanding, beginning of year, basic | 22,682,875 | [1] | 22,682,875 | [1] | 22,682,875 | |
Shares issued | [2] | 9,425 | 0 | 0 | ||
Common shares, issued, end of year | 22,692,300 | 22,682,875 | 22,682,875 | |||
Common shares in treasury, end of year | (2,789,405) | 0 | 0 | |||
Shares outstanding, end of year, basic | [1] | 19,902,895 | 22,682,875 | 22,682,875 | ||
Number of vested but unissued shares | 73,502 | |||||
[1] | Excludes unissued vested shares of 73,502. Refer to Note 11 - “Earnings per common share”. | |||||
[2] | Includes shares issued from the share-based compensation plans. Refer to Note 19 - “Share transactions” |
Shareholders' Equity Share repu
Shareholders' Equity Share repurchase program (Details) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Stockholders' Equity Note [Abstract] | |
Share repurchase authorization, amount | $ 75 |
Number of shares repurchased | shares | 2.8 |
Average purchase price per share | $ / shares | $ 26.89 |
Aggregate cost of share repurchases | $ 75 |
Shareholders' Equity Warrants (
Shareholders' Equity Warrants (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Mar. 25, 2014 | |
Class of Warrant or Right [Line Items] | ||
Target return on warrants | 15.00% | |
Initial purchase price per share | $ 40 | |
Number of trading days in warrant price calculation | 20 days | |
Arch Capital Group Limited | ||
Class of Warrant or Right [Line Items] | ||
Warrants issued and outstanding | 975,503 | |
HPS | ||
Class of Warrant or Right [Line Items] | ||
Warrants issued and outstanding | 729,188 |
Share Transactions - Share-base
Share Transactions - Share-based compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | ||||
Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 28, 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted during the period, shares | 165,287 | |||||
Share-based compensation, shares issued in period | [1] | 9,425 | 0 | 0 | ||
Requisite service period | 3 years | |||||
General and administrative expenses | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Compensation expense | $ 2.7 | |||||
Performance-vesting restricted share units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted during the period, shares | 165,287 | |||||
Weighted average grant date fair value, per share | $ 26.53 | |||||
Performance-vesting restricted share units | Immediate vesting | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted during the period, shares | 82,927 | |||||
Share-based compensation, shares issued in period | 9,425 | |||||
Performance-vesting restricted share units | Vesting over requisite service period | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted during the period, shares | 82,360 | |||||
Requisite service period | 3 years | |||||
2018 Stock Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized | 907,315 | |||||
Number of shares available for future grant | 742,028 | |||||
[1] | Includes shares issued from the share-based compensation plans. Refer to Note 19 - “Share transactions” |
Retirement plans (Details)
Retirement plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |||
Defined Contribution Plan, Cost | $ 0.3 | $ 0.2 | $ 0.2 |
Statutory information Summary o
Statutory information Summary of statutory capital, surplus and net income (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Bermuda | ||||
Statutory Accounting Practices [Line Items] | ||||
Actual statutory capital and surplus | [1] | $ 1,106,576 | $ 1,114,933 | |
Required statutory capital and surplus | [1] | 700,000 | 650,902 | |
Statutory net income (loss) | 72,771 | (25,110) | $ 10,982 | |
United States | ||||
Statutory Accounting Practices [Line Items] | ||||
Actual statutory capital and surplus | 89,512 | 78,052 | ||
Required statutory capital and surplus | 6,883 | 5,253 | ||
Statutory net income (loss) | (304) | (1,963) | 111 | |
United States | Watford Specialty Insurance Company | ||||
Statutory Accounting Practices [Line Items] | ||||
Actual statutory capital and surplus | 59,763 | 60,964 | ||
Required statutory capital and surplus | 4,603 | 3,464 | ||
Statutory net income (loss) | 426 | 525 | 315 | |
United States | Watford Insurance Company | ||||
Statutory Accounting Practices [Line Items] | ||||
Actual statutory capital and surplus | 29,749 | 17,088 | ||
Required statutory capital and surplus | 2,280 | 1,789 | ||
Statutory net income (loss) | (730) | (2,488) | (204) | |
Gibraltar | ||||
Statutory Accounting Practices [Line Items] | ||||
Actual statutory capital and surplus | 29,113 | 22,927 | ||
Required statutory capital and surplus | 15,710 | 13,136 | ||
Statutory net income (loss) | $ 1,681 | $ 653 | $ 1,320 | |
[1] | The BSCR for Watford Re for the year ended December 31, 2019 will not be filed with the BMA until April 2020. As such, the required statutory capital and surplus as at December 31, 2019 is an estimate of ECR. |
Statutory information Narrative
Statutory information Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | ||
Bermuda | |||
Statutory Accounting Practices [Line Items] | |||
Actual statutory capital and surplus | [1] | $ 1,106,576 | $ 1,114,933 |
Required statutory capital and surplus | [1] | 700,000 | 650,902 |
Gibraltar | |||
Statutory Accounting Practices [Line Items] | |||
Actual statutory capital and surplus | 29,113 | 22,927 | |
Required statutory capital and surplus | 15,710 | 13,136 | |
United States | |||
Statutory Accounting Practices [Line Items] | |||
Actual statutory capital and surplus | 89,512 | 78,052 | |
Required statutory capital and surplus | 6,883 | 5,253 | |
Watford Re | |||
Statutory Accounting Practices [Line Items] | |||
Dividends available for payment in 2020 | $ 276,600 | ||
Watford Re | Bermuda | |||
Statutory Accounting Practices [Line Items] | |||
Dividends, percentage permitted | 25.00% | ||
Dividend required notice period | 7 days | ||
WICE | Gibraltar | |||
Statutory Accounting Practices [Line Items] | |||
Dividend required notice period | 14 days | ||
WSIC | |||
Statutory Accounting Practices [Line Items] | |||
Dividends available for payment in 2020 | $ 6,000 | ||
WSIC | United States | |||
Statutory Accounting Practices [Line Items] | |||
Actual statutory capital and surplus | 59,763 | 60,964 | |
Required statutory capital and surplus | 4,603 | 3,464 | |
WIC | |||
Statutory Accounting Practices [Line Items] | |||
Dividends available for payment in 2020 | 3,000 | ||
WIC | United States | |||
Statutory Accounting Practices [Line Items] | |||
Actual statutory capital and surplus | 29,749 | 17,088 | |
Required statutory capital and surplus | $ 2,280 | $ 1,789 | |
[1] | The BSCR for Watford Re for the year ended December 31, 2019 will not be filed with the BMA until April 2020. As such, the required statutory capital and surplus as at December 31, 2019 is an estimate of ECR. |
Unaudited condensed quarterly_3
Unaudited condensed quarterly financial information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Net premiums written | $ 112,353 | $ 155,752 | $ 119,370 | $ 145,387 | $ 132,360 | $ 151,677 | $ 140,586 | $ 179,552 | $ 532,862 | $ 604,175 | $ 553,117 |
Net premiums earned | 133,446 | 125,832 | 151,318 | 146,094 | 146,973 | 135,624 | 159,518 | 136,747 | 556,690 | 578,862 | 531,726 |
Underwriting income (loss) | (37,819) | (5,021) | (5,266) | (5,970) | (22,660) | (912) | (1,006) | (1,262) | |||
Net interest income | 29,826 | 29,536 | 26,415 | 30,434 | 29,955 | 27,397 | 26,042 | 24,139 | 116,211 | 107,533 | 86,523 |
Realized and unrealized gains (losses) on investments | 6,105 | (14,646) | (936) | 33,720 | (97,597) | (3,617) | (10,614) | (2,006) | 24,243 | (113,834) | 1,120 |
Net investment income (loss) | 32,082 | 14,040 | 23,787 | 58,354 | (61,084) | 21,373 | 13,826 | 19,536 | 128,263 | (6,349) | 72,738 |
Preference dividends | (1,209) | (2,608) | (4,908) | (4,907) | (4,909) | (4,909) | (4,908) | (4,907) | (13,632) | (19,633) | (19,633) |
Accelerated amortization of costs related to the redemption of preference shares | 0 | (4,164) | 0 | 0 | (4,164) | 0 | 0 | ||||
Net income (loss) available to common shareholders | $ (16,864) | $ 152 | $ 13,825 | $ 47,632 | $ (95,259) | $ 18,837 | $ 9,124 | $ 12,782 | $ 44,745 | $ (54,516) | $ (8,892) |
Earnings (loss) per share, basic | $ (0.79) | $ 0.01 | $ 0.61 | $ 2.10 | $ (4.20) | $ 0.83 | $ 0.41 | $ 0.56 | $ 2 | $ (2.40) | $ (0.39) |
Earnings (loss) per share, diluted | $ (0.79) | $ 0.01 | $ 0.61 | $ 2.10 | $ (4.20) | $ 0.83 | $ 0.41 | $ 0.56 | $ 2 | $ (2.40) | $ (0.39) |
Schedule I - Summary of Inves_2
Schedule I - Summary of Investments - Other than Investments in Related Parties [Schedule] (Details) $ in Thousands | Dec. 31, 2019USD ($) |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | $ 2,772,382 |
Fair Value | 2,709,137 |
Amount Shown on the Balance Sheet | 2,709,137 |
Fair Value Option | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 1,954,895 |
Fair Value | 1,898,091 |
Amount Shown on the Balance Sheet | 1,898,091 |
Fair Value Option | Term loans | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 1,113,212 |
Fair Value | 1,061,934 |
Amount Shown on the Balance Sheet | 1,061,934 |
Fair Value Option | Fixed maturities | Corporate bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 221,024 |
Fair Value | 214,354 |
Amount Shown on the Balance Sheet | 214,354 |
Fair Value Option | Fixed maturities | U.S. government and government agency bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 1,963 |
Fair Value | 1,962 |
Amount Shown on the Balance Sheet | 1,962 |
Fair Value Option | Fixed maturities | Asset-backed securities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 200,361 |
Fair Value | 190,737 |
Amount Shown on the Balance Sheet | 190,737 |
Fair Value Option | Fixed maturities | Mortgage-backed securities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 7,399 |
Fair Value | 7,706 |
Amount Shown on the Balance Sheet | 7,706 |
Fair Value Option | Fixed maturities | Non-U.S. government and government agencies | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 1,449 |
Fair Value | 1,456 |
Amount Shown on the Balance Sheet | 1,456 |
Fair Value Option | Fixed maturities | Municipal government and government agency bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 380 |
Fair Value | 379 |
Amount Shown on the Balance Sheet | 379 |
Fair Value Option | Short-term investments | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 325,542 |
Fair Value | 329,303 |
Amount Shown on the Balance Sheet | 329,303 |
Fair Value Option | Other investments | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 28,672 |
Fair Value | 30,461 |
Amount Shown on the Balance Sheet | 30,461 |
Fair Value Option | Equities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 54,893 |
Fair Value | 59,799 |
Amount Shown on the Balance Sheet | 59,799 |
Fair Value Through Net Income | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 78,031 |
Fair Value | 65,338 |
Amount Shown on the Balance Sheet | 65,338 |
Available for Sale | Fixed maturities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 739,456 |
Fair Value | 745,708 |
Amount Shown on the Balance Sheet | 745,708 |
Available for Sale | Fixed maturities | Corporate bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 155,834 |
Fair Value | 158,119 |
Amount Shown on the Balance Sheet | 158,119 |
Available for Sale | Fixed maturities | U.S. government and government agency bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 282,076 |
Fair Value | 283,647 |
Amount Shown on the Balance Sheet | 283,647 |
Available for Sale | Fixed maturities | Asset-backed securities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 145,555 |
Fair Value | 145,434 |
Amount Shown on the Balance Sheet | 145,434 |
Available for Sale | Fixed maturities | Mortgage-backed securities | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 24,776 |
Fair Value | 24,750 |
Amount Shown on the Balance Sheet | 24,750 |
Available for Sale | Fixed maturities | Non-U.S. government and government agencies | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 129,456 |
Fair Value | 131,953 |
Amount Shown on the Balance Sheet | 131,953 |
Available for Sale | Fixed maturities | Municipal government and government agency bonds | |
SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |
Cost or Amortized Cost | 1,759 |
Fair Value | 1,805 |
Amount Shown on the Balance Sheet | $ 1,805 |
Schedule II - Condensed Finan_2
Schedule II - Condensed Financial Information of Registrant [Schedule] - Condensed Balance Sheet (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Condensed Balance Sheet [Line Items] | ||||
Cash and cash equivalents | $ 102,437,000 | $ 63,529,000 | $ 54,503,000 | $ 74,893,000 |
Total assets | 3,550,856,000 | 3,372,856,000 | ||
Other liabilities | 21,912,000 | 20,916,000 | ||
Amounts due to affiliates | 4,467,000 | 5,888,000 | ||
Senior notes | 172,418,000 | 0 | ||
Total liabilities | 2,626,198,000 | 2,262,256,000 | ||
Contingently redeemable preference shares | 52,305,000 | 220,992,000 | 220,622,000 | $ 220,253,000 |
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,692,300 and 22,682,875) | 227,000 | 227,000 | ||
Additional paid-in capital | 898,083,000 | 895,386,000 | ||
Retained earnings (deficit) | 43,470,000 | (1,275,000) | ||
Accumulated other comprehensive income (loss) | 5,629,000 | (4,730,000) | ||
Common shares held in treasury, at cost (shares: 2,789,405 and Nil) | (75,056,000) | 0 | ||
Total shareholders’ equity | 872,353,000 | 889,608,000 | $ 947,882,000 | |
Total liabilities, contingently redeemable preference shares and shareholders’ equity | $ 3,550,856,000 | $ 3,372,856,000 | ||
Common shares, par value | $ 0.01 | $ 0.01 | ||
Common shares, authorized | 120,000,000 | 120,000,000 | ||
Common shares, issued | 22,692,300 | 22,682,875 | 22,682,875 | 22,682,875 |
Common shares held in treasury | 2,789,405 | 0 | 0 | |
Parent Company | ||||
Condensed Balance Sheet [Line Items] | ||||
Cash and cash equivalents | $ 179,000 | $ 4,000 | $ 1,000 | $ 12,000 |
Investments in subsidiaries | 1,111,003,000 | 1,120,596,000 | ||
Prepaid expenses | 80,000 | 31,000 | ||
Total assets | 1,111,262,000 | 1,120,631,000 | ||
Other liabilities | 840,000 | 4,995,000 | ||
Amounts due to affiliates | 13,346,000 | 5,036,000 | ||
Senior notes | 172,418,000 | 0 | ||
Total liabilities | 186,604,000 | 10,031,000 | ||
Contingently redeemable preference shares | 52,305,000 | 220,992,000 | ||
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,692,300 and 22,682,875) | 227,000 | 227,000 | ||
Additional paid-in capital | 898,083,000 | 895,386,000 | ||
Retained earnings (deficit) | 43,470,000 | (1,275,000) | ||
Accumulated other comprehensive income (loss) | 5,629,000 | (4,730,000) | ||
Common shares held in treasury, at cost (shares: 2,789,405 and Nil) | (75,056,000) | 0 | ||
Total shareholders’ equity | 872,353,000 | 889,608,000 | ||
Total liabilities, contingently redeemable preference shares and shareholders’ equity | $ 1,111,262,000 | $ 1,120,631,000 | ||
Common shares, par value | $ 0.01 | $ 0.01 | ||
Common shares, authorized | 120,000,000 | 120,000,000 | ||
Common shares, issued | 22,692,300 | 22,682,875 | ||
Common shares held in treasury | 2,789,405 | 0 |
Schedule II - Condensed Finan_3
Schedule II - Condensed Financial Information of Registrant [Schedule] - Condensed Income Statement (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Condensed Income Statements, Captions [Line Items] | |||||||||||
Net investment income (loss) | $ 32,082 | $ 14,040 | $ 23,787 | $ 58,354 | $ (61,084) | $ 21,373 | $ 13,826 | $ 19,536 | $ 128,263 | $ (6,349) | $ 72,738 |
Total revenues | 687,365 | 575,235 | 607,644 | ||||||||
General and administrative expenses | 30,843 | 22,311 | 21,174 | ||||||||
Interest expense | (5,791) | 0 | 0 | ||||||||
Non-recurring direct listing expenses | 0 | (9,000) | 0 | ||||||||
Total expenses | (624,804) | (610,091) | (596,882) | ||||||||
Net income (loss) before preference dividends and redemption costs | 62,541 | (34,883) | 10,741 | ||||||||
Preference dividends | (1,209) | (2,608) | (4,908) | (4,907) | (4,909) | (4,909) | (4,908) | (4,907) | (13,632) | (19,633) | (19,633) |
Accelerated amortization of costs related to the redemption of preference shares | 0 | (4,164) | 0 | 0 | (4,164) | 0 | 0 | ||||
Net income (loss) available to common shareholders | $ (16,864) | $ 152 | $ 13,825 | $ 47,632 | $ (95,259) | $ 18,837 | $ 9,124 | $ 12,782 | 44,745 | (54,516) | (8,892) |
Comprehensive income (loss) | 55,104 | (58,274) | (9,489) | ||||||||
Parent Company | |||||||||||
Condensed Income Statements, Captions [Line Items] | |||||||||||
Equity in earnings of consolidated subsidiaries | 72,771 | (25,110) | 10,981 | ||||||||
Net investment income (loss) | 247 | (1) | (1) | ||||||||
Total revenues | 73,018 | (25,111) | 10,980 | ||||||||
General and administrative expenses | 4,686 | 772 | 239 | ||||||||
Interest expense | (5,791) | 0 | 0 | ||||||||
Non-recurring direct listing expenses | 0 | (9,000) | 0 | ||||||||
Total expenses | (10,477) | (9,772) | (239) | ||||||||
Net income (loss) before preference dividends and redemption costs | 62,541 | (34,883) | 10,741 | ||||||||
Preference dividends | (13,632) | (19,633) | (19,633) | ||||||||
Accelerated amortization of costs related to the redemption of preference shares | (4,164) | 0 | 0 | ||||||||
Net income (loss) available to common shareholders | 44,745 | (54,516) | (8,892) | ||||||||
Comprehensive income (loss) | $ 55,104 | $ (58,274) | $ (9,489) |
Schedule II - Condensed Finan_4
Schedule II - Condensed Financial Information of Registrant [Schedule] - Condensed Cash Flow (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating Activities | |||
Net income (loss) before preference dividends | $ 62,541 | $ (34,883) | $ 10,741 |
Share-based compensation | 2,697 | 0 | 0 |
Other liabilities | 44,605 | (24,021) | 18,051 |
Net Cash Provided By Operating Activities | 239,284 | 229,314 | 292,225 |
Investing Activities | |||
Net Cash Provided by (Used For) Investing Activities | 97,559 | (345,307) | (577,461) |
Financing Activities | |||
Repurchase of preference shares | (173,081) | 0 | 0 |
Net proceeds from issuance of senior notes | 172,283 | 0 | 0 |
Purchases of common shares under share repurchase program | (75,056) | 0 | 0 |
Dividends paid on redeemable preferred shares | (13,402) | (19,264) | (19,264) |
Net Cash Provided By (Used For) Financing Activities | (299,611) | 127,768 | 262,307 |
Increase (decrease) in cash | 38,908 | 9,026 | (20,390) |
Cash and cash equivalents, beginning of year | 63,529 | 54,503 | 74,893 |
Cash and cash equivalents, end of year | 102,437 | 63,529 | 54,503 |
Parent Company | |||
Operating Activities | |||
Net income (loss) before preference dividends | 62,541 | (34,883) | 10,741 |
Share-based compensation | 2,697 | 0 | 0 |
Equity in earnings of consolidated subsidiaries | 72,771 | (25,110) | 10,981 |
Prepaid expenses | (49) | 3,825 | (3,850) |
Other liabilities | (4,155) | 4,618 | 374 |
Amounts due to affiliates | 8,310 | 1,332 | 3,704 |
Other items | 136 | 0 | 0 |
Net Cash Provided By Operating Activities | (3,291) | 2 | (12) |
Investing Activities | |||
Return of capital from subsidiary | 80,687 | 0 | 0 |
Dividend received from subsidiary | 12,035 | 19,265 | 19,265 |
Net Cash Provided by (Used For) Investing Activities | 92,722 | 19,265 | 19,265 |
Financing Activities | |||
Repurchase of preference shares | (173,081) | 0 | 0 |
Net proceeds from issuance of senior notes | 172,283 | 0 | 0 |
Purchases of common shares under share repurchase program | (75,056) | 0 | 0 |
Dividends paid on redeemable preferred shares | (13,402) | (19,264) | (19,264) |
Net Cash Provided By (Used For) Financing Activities | (89,256) | (19,264) | (19,264) |
Increase (decrease) in cash | 175 | 3 | (11) |
Cash and cash equivalents, beginning of year | 4 | 1 | 12 |
Cash and cash equivalents, end of year | $ 179 | $ 4 | $ 1 |
Schedule IV - Reinsurance _Sc_2
Schedule IV - Reinsurance [Schedule] (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items] | |||||||||||
Gross Amount | $ 339,170 | $ 253,760 | $ 133,983 | ||||||||
Ceded to Other Companies | (222,019) | (130,840) | (47,187) | ||||||||
Assumed from Other Companies | 415,711 | 481,255 | 466,321 | ||||||||
Net Amount | $ 112,353 | $ 155,752 | $ 119,370 | $ 145,387 | $ 132,360 | $ 151,677 | $ 140,586 | $ 179,552 | $ 532,862 | $ 604,175 | $ 553,117 |
Percentage Amount Assumed to Net | 78.00% | 79.70% | 84.30% | ||||||||
Insurance programs and coinsurance | |||||||||||
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items] | |||||||||||
Gross Amount | $ 339,170 | $ 253,760 | $ 133,983 | ||||||||
Ceded to Other Companies | (162,459) | (113,922) | (30,770) | ||||||||
Assumed from Other Companies | 0 | 0 | 0 | ||||||||
Net Amount | $ 176,711 | $ 139,838 | $ 103,213 | ||||||||
Percentage Amount Assumed to Net | 0.00% | 0.00% | 0.00% | ||||||||
Reinsurance | |||||||||||
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items] | |||||||||||
Gross Amount | $ 0 | $ 0 | $ 0 | ||||||||
Ceded to Other Companies | (59,560) | (16,918) | (16,417) | ||||||||
Assumed from Other Companies | 415,711 | 481,255 | 466,321 | ||||||||
Net Amount | $ 356,151 | $ 464,337 | $ 449,904 | ||||||||
Percentage Amount Assumed to Net | 116.70% | 103.60% | 103.60% |
Schedule VI - Supplementary I_2
Schedule VI - Supplementary Information For Property and Casualty Insurance Underwriters [Schedule] (Details) - Consolidated Subsidiaries - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items] | |||
Deferred acquisition costs, net | $ 64,044 | $ 80,858 | $ 85,961 |
Reserve for losses and loss adjustment expenses | 1,263,628 | 1,032,760 | 798,262 |
Discount, if any, deducted in Column C | 0 | 0 | 0 |
Unearned premiums | 438,907 | 390,114 | 330,644 |
Net premiums earned | 556,690 | 578,862 | 531,726 |
Net investment income (loss) | 128,263 | (6,349) | 72,738 |
Net losses and loss adjustment expenses incurred relating to current year | 429,322 | 443,482 | 399,530 |
Net losses and loss adjustment expenses incurred relating to prior years | 23,813 | (2,227) | 36,872 |
Amortization of deferred acquisition costs | (126,788) | (141,136) | (140,726) |
Net paid losses and loss adjustment expenses | 321,835 | 224,206 | 182,119 |
Net premiums written | $ 532,862 | $ 604,175 | $ 553,117 |