Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 11, 2020 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Watford Holdings Ltd. | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Central Index Key | 0001601669 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
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 Common Stock, Shares Outstanding | 19,886,979 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Term loans, fair value option (Amortized cost: $1,113,510 and $1,113,212) | $ 906,999 | $ 1,061,934 |
Fixed maturities, fair value option (Amortized cost: $504,750 and $432,576) | 392,452 | 416,594 |
Short-term investments, fair value option (Cost: $348,059 and $325,542) | 343,861 | 329,303 |
Equity securities, fair value option | 58,091 | 59,799 |
Other investments, fair value option | 30,682 | 30,461 |
Investments, fair value option | 1,732,085 | 1,898,091 |
Fixed maturities, available for sale (Amortized cost: $749,835 and $739,456) | 717,552 | 745,708 |
Equity securities, fair value through net income | 63,169 | 65,338 |
Total investments | 2,512,806 | 2,709,137 |
Cash and cash equivalents | 96,580 | 102,437 |
Accrued investment income | 16,344 | 14,025 |
Premiums receivable | 281,541 | 273,657 |
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 197,458 | 170,974 |
Prepaid reinsurance premiums | 128,570 | 132,577 |
Deferred acquisition costs, net | 71,402 | 64,044 |
Receivable for securities sold | 26,789 | 16,288 |
Intangible assets | 7,650 | 7,650 |
Funds held by reinsurers | 40,520 | 42,505 |
Other assets | 27,287 | 17,562 |
Total assets | 3,406,947 | 3,550,856 |
Liabilities | ||
Reserve for losses and loss adjustment expenses | 1,300,249 | 1,263,628 |
Unearned premiums | 478,663 | 438,907 |
Losses payable | 46,424 | 61,314 |
Reinsurance balances payable | 71,204 | 77,066 |
Payable for securities purchased | 63,829 | 18,180 |
Payable for securities sold short | 30,076 | 66,257 |
Revolving credit agreement borrowings | 576,486 | 484,287 |
Senior notes | 172,486 | 172,418 |
Amounts due to affiliates | 4,168 | 4,467 |
Investment management and performance fees payable | 5,428 | 17,762 |
Other liabilities (1) | 41,552 | 21,912 |
Total liabilities | 2,790,565 | 2,626,198 |
Commitments and contingencies | ||
Contingently redeemable preference shares | 52,328 | 52,305 |
Shareholders’ equity | ||
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,703,170 and 22,692,300) | 227 | 227 |
Additional paid-in capital | 898,693 | 898,083 |
Retained earnings (deficit) | (224,737) | 43,470 |
Accumulated other comprehensive income (loss) | (32,206) | 5,629 |
Common shares held in treasury, at cost (shares: 2,917,149 and 2,789,405) | (77,923) | (75,056) |
Total shareholders’ equity | 564,054 | 872,353 |
Total liabilities, contingently redeemable preference shares and shareholders’ equity | $ 3,406,947 | $ 3,550,856 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Term loans, fair value option, amortized cost | $ 1,113,510 | $ 1,113,212 |
Fixed maturities, fair value option, amortized cost | 504,750 | 432,576 |
Short term investments, fair value option, amortized cost | 348,059 | 325,542 |
Fixed maturities, available for sale, amortized cost | $ 749,835 | $ 739,456 |
Common shares, par value | $ 0.01 | $ 0.01 |
Common shares, authorized | 120,000,000 | 120,000,000 |
Common shares, issued | 22,703,170 | 22,692,300 |
Common shares, held in treasury | 2,917,149 | 2,789,405 |
Unaudited Consolidated Statemen
Unaudited Consolidated Statements of Income (Loss) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Revenues | |||
Gross premiums written | $ 234,902,000 | $ 186,689,000 | |
Gross premiums ceded | (48,202,000) | (41,302,000) | |
Net | 186,700,000 | 145,387,000 | |
Change in unearned premiums | (46,661,000) | 707,000 | |
Net premiums earned | 140,039,000 | 146,094,000 | |
Other underwriting income (loss) | 133,000 | 592,000 | |
Interest income | 37,824,000 | 43,141,000 | |
Investment management fees - related parties | (4,352,000) | (4,409,000) | |
Borrowing and miscellaneous other investment expenses | (5,669,000) | (8,298,000) | |
Net interest income | 27,803,000 | 30,434,000 | |
Realized and unrealized gains (losses) on investments | (290,502,000) | 33,720,000 | |
Investment performance fees - related parties | 0 | (5,800,000) | |
Net investment income (loss) | (262,699,000) | 58,354,000 | |
Total revenues | (122,527,000) | 205,040,000 | |
Expenses | |||
Loss and loss adjustment expenses | (110,676,000) | (110,850,000) | |
Acquisition expenses | (28,367,000) | (33,974,000) | |
General and administrative expenses | (7,139,000) | (7,240,000) | |
Interest expense | (2,912,000) | 0 | |
Net foreign exchange gains (losses) | 5,013,000 | (437,000) | |
Total expenses | (144,081,000) | (152,501,000) | |
Income (loss) before income taxes | (266,608,000) | 52,539,000 | |
Income tax expense | 0 | 0 | |
Net income (loss) before preference dividends | (266,608,000) | 52,539,000 | |
Preference dividends | (1,171,000) | (4,907,000) | |
Net income (loss) available to common shareholders | $ (267,779,000) | $ 47,632,000 | |
Earnings (loss) per common share: | |||
Earnings (loss) per share, basic and diluted | $ (13.42) | $ 2.10 | |
Weighted average common shares outstanding - basic and diluted | [1] | 19,951,932 | 22,682,875 |
[1] | 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 expired on March 25, 2020. The number of common shares issuable upon exercise of the warrants that was excluded was 1,704,691 common shares. |
Unaudited Consolidated Statem_2
Unaudited Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net income (loss) available to common shareholders | $ (267,779) | $ 47,632 |
Other comprehensive income (loss) net of income tax: | ||
Unrealized holding gains (losses) arising during the year | (28,431) | 3,915 |
Unrealized foreign currency gains (losses) arising during the year | (7,699) | 1,130 |
Credit loss recognized in net income (loss) | 563 | 0 |
Reclassification of net realized (gains) losses, net of income taxes, included in net income (loss) | (2,405) | (229) |
Unrealized holding gains (losses) of available for sale investments | (37,972) | 4,816 |
Foreign currency translation adjustments | 137 | (165) |
Other comprehensive income (loss) net of income tax | (37,835) | 4,651 |
Comprehensive income (loss) | $ (305,614) | $ 52,283 |
Unaudited Consolidated Statem_3
Unaudited Consolidated Statements of Changes in Shareholders' Equity - 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) |
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 | $ 0 | |||||||
Balance, beginning of period at Dec. 31, 2018 | $ 227 | $ 895,386 | $ (4,730) | $ (4,158) | $ (572) | $ 0 | (1,275) | |
Common shares issued | 0 | 0 | ||||||
Share compensation expense | 0 | |||||||
Unrealized holding gains (losses) of available for sale investments, net of reclassification adjustments | $ 4,816 | 4,816 | ||||||
Currency translation adjustment | (165) | (165) | ||||||
Shares repurchased for treasury | 0 | |||||||
Net income (loss) before preference dividends | 52,539 | 52,539 | ||||||
Preferred share dividends paid and accrued | (4,907) | (4,907) | ||||||
Balance, end of period at Mar. 31, 2019 | 941,891 | 227 | 895,386 | (79) | 658 | (737) | 0 | 46,357 |
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 | (428) | |||||||
Balance, beginning of period at Dec. 31, 2019 | 872,353 | 227 | 898,083 | 5,629 | 6,252 | (623) | (75,056) | 43,470 |
Common shares issued | 0 | 250 | ||||||
Share compensation expense | 360 | |||||||
Unrealized holding gains (losses) of available for sale investments, net of reclassification adjustments | (37,972) | (37,972) | ||||||
Currency translation adjustment | 137 | 137 | ||||||
Shares repurchased for treasury | (77,900) | (2,867) | ||||||
Net income (loss) before preference dividends | (266,608) | (266,608) | ||||||
Preferred share dividends paid and accrued | (1,171) | (1,171) | ||||||
Balance, end of period at Mar. 31, 2020 | $ 564,054 | $ 227 | $ 898,693 | $ (32,206) | $ (31,720) | $ (486) | $ (77,923) | $ (224,737) |
Unaudited Consolidated Statem_4
Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating Activities | ||
Net income (loss) before preference dividends | $ (266,608) | $ 52,539 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Net realized and unrealized (gains) losses on investments | 290,502 | (33,720) |
Amortization of fixed assets | 1 | 38 |
Share-based compensation | 610 | 0 |
Changes in: | ||
Accrued investment income | (2,329) | 2,121 |
Premiums receivable | (16,272) | (22,686) |
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | (23,069) | (16,703) |
Prepaid reinsurance premiums | 4,007 | (11,374) |
Deferred acquisition costs, net | (7,995) | 471 |
Reserve for losses and loss adjustment expenses | 60,178 | 67,964 |
Unearned premiums | 42,654 | 10,667 |
Reinsurance balances payable | (6,901) | 6,069 |
Funds held with reinsurers | (2,868) | 598 |
Other liabilities | (27,662) | 18,353 |
Other items | (19,673) | (4,031) |
Net Cash Provided By Operating Activities | 24,575 | 70,306 |
Investing Activities | ||
Purchase of term loans | (86,702) | (72,168) |
Purchase of fixed maturity investments | (328,927) | (306,656) |
Purchase of short-term investments with maturities over three months | (36,119) | 0 |
Proceeds from sale, redemptions and maturity of term loans | 98,992 | 48,630 |
Proceeds from sales, redemptions and maturities of fixed maturity investments | 215,719 | 303,076 |
Proceeds from sales, redemptions and maturities of short-term investments with maturities over three months | 5,596 | 25,000 |
Net (purchases) sales of short-term investments with maturities less than three months | 22,337 | 504 |
Purchases of equity securities | (6,388) | (38,399) |
Proceeds from sales of equity securities | 1,531 | 7,312 |
Net settlements of derivative instruments | 2,336 | 824 |
Purchases of furniture, equipment and other assets | (2) | 0 |
Net Cash Provided by (Used For) Investing Activities | (111,627) | (31,877) |
Financing Activities | ||
Dividends paid on redeemable preference shares | (1,148) | (4,816) |
Repayments on borrowings | 0 | (100,102) |
Proceeds from borrowings | 92,199 | 59,000 |
Purchases of common shares under share repurchase program | (2,867) | 0 |
Net Cash Provided By (Used For) Financing Activities | 88,184 | (45,918) |
Effects of exchange rate changes on foreign currency cash | (6,989) | 261 |
Increase (decrease) in cash | (5,857) | (7,228) |
Cash and cash equivalents, beginning of period | 102,437 | 63,529 |
Cash and cash equivalents, end of period | 96,580 | 56,301 |
Supplementary information | ||
Income taxes paid | 0 | 0 |
Interest paid | 5,422 | 7,864 |
Non-cash exchange of investments | $ 13,467 | $ 0 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2020 | |
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. 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 12, “Transactions with related parties” for further details. In May 2018, 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 12, “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 12, “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 12, “Transactions with related parties” for further details. The results for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the full calendar year. |
Basis of presentation and signi
Basis of presentation and significant accounting policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant accounting policies | (a) Basis of presentation The unaudited interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended. All significant intercompany transactions and balances have been eliminated on 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. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of recurring accruals) necessary for a fair statement of results on an interim basis. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company ’ s audited consolidated financial statements and the accompanying notes for the years ended December 31, 2019 , 2018 and 2017 . 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) Recent accounting pronouncements Issued and effective as of March 31, 2020 - Credit Losses Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”) which was issued in June 2016. This ASU applies a new credit loss model (current expected credit losses, or “ CECL ” ) for determining credit-related impairments for financial instruments measured at amortized cost (including reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the Company ’ s consolidated balance sheet. This ASU also amends the previous other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted this ASU for the quarter ending March 31, 2020. For available for sale debt securities, the updated guidance was applied prospectively. For financial instruments measured at amortized cost, the updated guidance was applied by recognizing a cumulative effect adjustment of $0.4 million , net of tax, to the opening balance of retained earnings as of January 1, 2020, the beginning of the period of adoption. This adjustment is associated with “ premiums receivable ” and “ reinsurance recoverables on unpaid and paid losses and loss adjustment expenses ” in the Company’s consolidated balance sheets . The cumulative effect adjustment decreased retained earnings as of January 1, 2020 and increased the allowance for estimated uncollectible reinsurance. The following accounting policies have been updated to reflect the Company ’ s adoption of ASU 2016-13, as described above. Results for the reporting periods beginning January 1, 2020 and thereafter are presented under ASC 326, while prior period amounts continue to be reported in accordance with previous applicable GAAP. Investment Impairments The Company conducts a periodic review to identify and evaluate invested assets that may have credit impairments. Credit Impairments of Available For Sale Fixed Maturities The Company derives estimated credit losses for fixed maturities by comparing expected future cash flows to be collected to the amortized cost of the security. Estimates of expected future cash flows consider among other things, macroeconomic conditions as well as the financial condition, near-term and long-term prospects for the issuer, and the likelihood of the recoverability of principal and interest. Beginning on January 1, 2020, credit losses are recognized through an allowance account subject to reversal, rather than a reduction in amortized cost. Declines in value attributable to factors other than credit are reported in other comprehensive income while the allowance for credit loss is charged to “ realized and unrealized gains (losses) on investments ” in the Company’s consolidated statements of income . For fixe d maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in “ r ealized and unrealized gains (losses) on investments ” on the Company’s consolidated statements of income (loss) . The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in “ realized and unrealized gains (losses) on investments. ” The new cost basis is not adjusted for any subsequent recoveries in fair value. The Company reports accrued investment income separately from available for sale fixed maturities, and has elected not to measure an allowance for credit losses for accrued investment income. Uncollectible accrued interest is written off when the Company determines that no additional interest payments will be received. Reinsurance Recoverables In the normal course of business, the Company’s subsidiaries cede a portion of their premium and losses through pro rata and excess of loss reinsurance agreements on a treaty or facultative basis. Reinsurance recoverables are recorded as assets, predicated on the reinsurers’ ability to meet their obligations under the reinsurance agreements. In certain instances, the Company obtains collateral, including letters of credit and trust accounts, to further reduce the credit exposure on its reinsurance recoverables. The Company reports its reinsurance recoverables net of an allowance for expected credit loss in the Company’s consolidated balance sheets . The allowance is based upon the Company’s ongoing review of amounts outstanding, the financial condition of its reinsurers, amounts and form of collateral obtained and other relevant factors. A ratings based probability-of-default and loss-given-default methodology is used to estimate the allowance for expected credit loss. Any allowance for credit losses is charged to the Company’s consolidated statement of income (loss) in the period the recoverable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate of expected credit losses. Premiums receivable and unearned premium reserves Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in premiums receivable balances. Premiums receivable balances are reported net of an allowance for expected credit losses. The Company monitors credit risk associated with premiums receivable through its ongoing review of amounts outstanding, aging of the receivable, historical loss data and counterparty financial strength measures. The allowance also includes estimated uncollectible amounts related to dispute risk. Amounts deemed to be uncollectible, are written off against the allowance. In certain instances, credit risk may be reduced by the Company’s right to offset loss obligations or unearned premiums against premiums receivable. Any allowance for credit losses is charged to the Company’s consolidated statements of income (loss) in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate of expected credit losses . Issued and effective as of March 31, 2020 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. This ASU was adopted on January 1, 2020, and the Company considers the impact to be immaterial to the Company’s consolidated financial statements and disclosures. In March 2020, the FASB issued ASU 2020-03, Codification Improvements ( “ASU 2020-03”), which provide updates to a wide variety of Topics in the Codification. For public business entities, this ASU was effective upon issuance. This ASU was adopted upon issuance, and did not have a material impact on the Company’s consolidated financial statements. In April 2019, the FASB issued ASU 2019-04, which identified and clarified issues relevant to ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). 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. This ASU was adopted on January 1, 2020 and did not have a material impact on the Company’s consolidated financial statements. Recently issued accounting standards not yet adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), (“ASU 2020-04”). This ASU provides practical expedients and exceptions for applying GAAP to contracts and transactions affected by reference rate reform if such contracts or transactions reference LIBOR or another reference rate expected to be discontinued. Amendments in this ASU for contract modifications may be applied as of March 12, 2020 through December 31, 2022. Once adopted, this ASU must be applied prospectively for all eligible contract modifications. The Company is currently assessing the impact the implementation of this ASU will have on its consolidated financial statements and disclosures, but does not believe that such impact will be material. For additional information regarding accounting standards that the Company has not yet adopted, see Note 2, “Basis of presentation and significant accounting policies” in the Company’s audited consolidated financial statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ending December 31, 2019. |
Segment information
Segment information | 3 Months Ended |
Mar. 31, 2020 | |
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 its 6.5% senior notes due July 2, 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: Three Months Ended March 31, 2020 2019 ($ in thousands) Gross premiums written: Casualty reinsurance $ 83,818 $ 75,601 Other specialty reinsurance 36,880 24,298 Property catastrophe reinsurance 9,832 5,992 Insurance programs and coinsurance 104,372 80,798 Total $ 234,902 $ 186,689 Net premiums written: Casualty reinsurance $ 83,667 $ 75,065 Other specialty reinsurance 35,484 23,182 Property catastrophe reinsurance 9,832 5,982 Insurance programs and coinsurance 57,717 41,158 Total $ 186,700 $ 145,387 Net premiums earned: Casualty reinsurance $ 52,765 $ 63,313 Other specialty reinsurance 35,364 44,561 Property catastrophe reinsurance 4,884 2,971 Insurance programs and coinsurance 47,026 35,249 Total $ 140,039 $ 146,094 Net premiums written by underwriting location: United States $ 36,303 $ 18,402 Europe 21,203 23,258 Bermuda 129,194 103,727 Total $ 186,700 $ 145,387 |
Reinsurance
Reinsurance | 3 Months Ended |
Mar. 31, 2020 | |
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: Three Months Ended March 31, 2020 2019 ($ in thousands) Premiums written Direct $ 104,372 $ 80,798 Assumed 130,530 105,891 Ceded (48,202 ) (41,302 ) Net $ 186,700 $ 145,387 Premiums earned Direct $ 88,536 $ 63,517 Assumed 99,529 113,481 Ceded (48,026 ) (30,904 ) Net $ 140,039 $ 146,094 Losses and loss adjustment expenses Direct $ 88,694 $ 48,404 Assumed 74,720 84,524 Ceded (52,738 ) (22,078 ) Net $ 110,676 $ 110,850 The Company monitors the financial condition of its reinsurers and attempts to place coverages only with financially sound carriers. At March 31, 2020 and December 31, 2019 , approximately 95% and 95% , respectively, were due from carriers which had an A.M. Best rating of “A-” or better, while 5% and 5% , respectively, were due from companies not rated. At March 31, 2020 and December 31, 2019 , approximately 45% and 47% , 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 | 3 Months Ended |
Mar. 31, 2020 | |
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 three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 2019 ($ in thousands) Gross reserve for losses and loss adjustment expenses at beginning of period $ 1,263,628 $ 1,032,760 Unpaid losses and loss adjustment expenses recoverable 165,549 81,267 Net reserve for losses and loss adjustment expenses at beginning of period 1,098,079 951,493 Net incurred losses and loss adjustment expenses relating to losses occurring in: Current period 110,856 110,901 Prior years (180 ) (51 ) Total net losses and loss adjustment expenses 110,676 110,850 Foreign exchange (gains) losses (26,015 ) 4,163 Net paid losses and loss adjustment expenses relating to losses occurring in: Current period (10,585 ) (6,330 ) Prior years (62,585 ) (54,598 ) Total paid losses and loss adjustment expenses (73,170 ) (60,928 ) Net reserve for losses and loss adjustment expenses at end of period 1,109,570 1,005,578 Unpaid losses and loss adjustment expenses recoverable 190,679 98,954 Gross reserve for losses and loss adjustment expenses at end of period $ 1,300,249 $ 1,104,532 During the three months ended March 31, 2020 , the Company recorded net favorable development on prior year loss reserves of $0.2 million . Net favorable development was experienced on casualty reinsurance losses of $4.0 million , property catastrophe reinsurance losses of $0.5 million , and other specialty reinsurance losses $0.1 million , offset by unfavorable development on insurance losses of $4.4 million . During the three months ended March 31, 2019 , the Company recorded net favorable development on prior year loss reserves of $0.1 million . Net favorable development was experienced on casualty reinsurance losses of $1.8 million , offset by unfavorable development on property catastrophe reinsurance losses of $0.8 million , insurance programs and coinsurance losses of $0.6 million , and other specialty reinsurance losses of $0.4 million . |
Allowance for expected credit l
Allowance for expected credit losses (Notes) | 3 Months Ended |
Mar. 31, 2020 | |
Credit Loss [Abstract] | |
Allowance for expected credit losses | Premiums Receivable The following table presents the balances of premiums receivable, net of the allowance for expected credit losses, at January 1, 2020 and March 31, 2020 and changes in the allowance for expected credit losses for the three months ended March 31, 2020 . Premiums Receivable, Net of Allowance Allowance for Expected Credit Losses ($ in thousands) Balance at beginning of period $ 273,657 $ — Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 156 Current period change for expected credit losses — Write-offs charged against the allowance — Balance at end of period $ 281,541 $ 156 Reinsurance Recoverables The following table presents the balances of reinsurance recoverables, net of the allowance for expected credit losses, at January 1, 2020 and March 31, 2020 , and changes in the allowance for expected credit losses for the three months ended March 31, 2020 . Reinsurance Recoverables, Net of Allowance Allowance for Expected Credit Losses ($ in thousands) Balance at beginning of period $ 170,974 $ — Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 (1) 297 Current period change for expected credit losses — Write-offs charged against the allowance — Balance at end of period $ 197,458 $ 297 |
Investment information
Investment information | 3 Months Ended |
Mar. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment information | Available for Sale Investments The following tables summarize the fair value of the Company’s securities classified as available for sale as of March 31, 2020 and December 31, 2019 : Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value ($ in thousands) March 31, 2020 Fixed maturities: U.S. government and government agency bonds $ 256,191 $ 8,635 $ — $ 264,826 Non-U.S. government and government agency bonds 151,000 4,040 (6,564 ) 148,476 Corporate bonds 169,735 2,296 (4,969 ) 167,062 Asset-backed securities 144,808 — (31,225 ) 113,583 Mortgage-backed securities 26,341 — (4,556 ) 21,785 Municipal government and government agency bonds 1,760 60 — 1,820 Total investments, available for sale $ 749,835 $ 15,031 $ (47,314 ) $ 717,552 (1) Effective January 1, 2020, the Company adopted ASU 2016-13, and as a result any credit impairment losses on the Company’s available for sale securities are recorded as an allowance, subject to reversal. See Note 2. "Basis of presentation and significant accounting policies-(b) Recent accounting pronouncements-Issued and effective as of March 31, 2020 - Credit Losses" above for more information about ASU 2016-13. Included within the gross unrealized losses for corporate bonds is a credit allowance of $0.6 million for securities with an unrealized loss of $5.7 million as of March 31, 2020 . Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ 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 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 March 31, 2020 ($ in thousands) Fixed maturities: Non-U.S. government and government agency bonds $ 120,115 $ (6,564 ) $ — $ — $ 120,115 $ (6,564 ) Corporate bonds 86,724 (4,969 ) — — 86,724 (4,969 ) Asset-backed securities 100,514 (27,336 ) 13,069 (3,889 ) 113,583 (31,225 ) Mortgage-backed securities 21,784 (4,556 ) — — 21,784 (4,556 ) Total $ 329,137 $ (43,425 ) $ 13,069 $ (3,889 ) $ 342,206 $ (47,314 ) 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 ) At March 31, 2020 , 103 positions out of a total of 140 positions were in an unrealized loss position. The unrealized loss position increased during the three -month period from $2.0 million to $47.3 million . The decrease in value can be attributed to the market movements resulting from the COVID-19 global pandemic, which primarily impacted the asset-backed securities, and unfavorable foreign exchange rates impacting the non-U.S. government agency bonds during the period. 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 . Allowance for expected credit losses The Company recognized an allowance for expected credit losses on available for sale securities of $0.6 million for the three months ended March 31, 2020 . No credit losses were previously recognized and there were no write-offs charged against the allowance. The allowance is recognized in “ r ealized and unrealized gains (losses) on investments ” in the Company’s consolidated statements of income (loss). There were no impairments of securities which the Company intends to sell or more likely than not will be required to sell. The amortized cost and fair value of our fixed maturities classified as available for sale, summarized by contractual maturity as of March 31, 2020 and December 31, 2019 are shown in the following tables. March 31, 2020 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 15,055 $ 14,846 2.1 % Due after one year through five years 423,133 428,376 59.7 % Due after five years through ten years 127,826 127,555 17.8 % Due after ten years 12,672 11,407 1.6 % Asset-backed securities 144,808 113,583 15.8 % Mortgage-backed securities 26,341 21,785 3.0 % Total investments, available for sale $ 749,835 $ 717,552 100.0 % 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 % Fair Value Option and Fair Value Through Net Income The following table summarizes the fair value of the Company’s securities held as of March 31, 2020 and December 31, 2019 , 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) March 31, 2020 Term loan investments $ 1,113,510 $ 986 $ (207,497 ) $ 906,999 Fixed maturities: Corporate bonds 296,918 4,038 (59,878 ) 241,078 U.S. government and government agency bonds 586 11 — 597 Asset-backed securities 198,262 2,231 (59,880 ) 140,613 Mortgage-backed securities 7,289 1,649 (409 ) 8,529 Non-U.S. government and government agency bonds 1,443 42 (103 ) 1,382 Municipal government and government agency bonds 252 1 — 253 Short-term investments 348,059 542 (4,740 ) 343,861 Other investments 28,673 2,009 — 30,682 Equities 53,111 12,130 (7,150 ) 58,091 Investments, fair value option $ 2,048,103 $ 23,639 $ (339,657 ) $ 1,732,085 Fair Value Through Net Income: Equities, fair value through net income $ 88,134 $ 1,855 $ (26,820 ) $ 63,169 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 $ 78,031 $ 2,360 $ (15,053 ) $ 65,338 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 March 31, 2020 and December 31, 2019 are shown in the following tables. March 31, 2020 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 368,381 $ 361,088 22.0 % Due after one year through five years 809,886 660,746 40.2 % Due after five years through ten years 582,501 472,336 28.7 % Asset-backed securities 198,262 140,613 8.6 % Mortgage-backed securities 7,289 8,529 0.5 % Total $ 1,966,319 $ 1,643,312 100.0 % December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 368,452 $ 370,479 20.5 % 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 514 533 — % 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 % 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 are 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 income (loss). The table below summarizes the credit quality of our total investments as of March 31, 2020 and December 31, 2019 , 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) March 31, 2020 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 906,999 $ — $ — $ — $ — $ 10,277 $ 650,028 $ 161,307 $ 2,823 $ 1,314 $ 1,590 $ 79,660 Fixed maturities: Corporate bonds 408,140 — 34,647 76,063 58,018 19,222 84,955 118,847 1,872 — 3,699 10,817 U.S. government and government agency bonds 265,423 — 265,423 — — — — — — — — — Asset-backed securities 254,196 1,628 — 19,319 181,547 19,727 7,395 1,418 — — — 23,162 Mortgage-backed securities 30,314 — — 4,600 17,185 1,190 — — — — 2,552 4,787 Non-U.S. government and government agency bonds 149,858 — 149,858 — — — — — — — — — Municipal government and government agency bonds 2,073 1,023 570 480 — — — — — — — — Total fixed income instruments 2,017,003 2,651 450,498 100,462 256,750 50,416 742,378 281,572 4,695 1,314 7,841 118,426 Short-term investments 343,861 30,174 154,787 402 110,795 — 40,000 — — — — 7,703 Total fixed income instruments and short-term investments 2,360,864 32,825 605,285 100,864 367,545 50,416 782,378 281,572 4,695 1,314 7,841 126,129 Other Investments 30,682 Equities 121,260 Total $ 2,512,806 $ 32,825 $ 605,285 $ 100,864 $ 367,545 $ 50,416 $ 782,378 $ 281,572 $ 4,695 $ 1,314 $ 7,841 $ 126,129 (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, 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. 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 Company’s 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 three months ended March 31, 2020 and 2019 were derived from the following sources: Three Months Ended March 31, 2020 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 $ 21,018 $ (155,233 ) $ (8,145 ) $ (142,360 ) Fixed maturities - Fair value option 9,068 (89,675 ) (1,244 ) (81,851 ) Fixed maturities - Available for sale (1) 4,660 — 2,180 6,840 Short-term investments 1,850 (3,440 ) 87 (1,503 ) Equities (2) — 76 1,041 1,117 Equities, fair value through net income (2) 377 (12,275 ) (212 ) (12,110 ) Other investments 851 220 — 1,071 Other (3) — (25,129 ) 1,247 (23,882 ) Investment management fees - related parties (4,352 ) — — (4,352 ) Borrowing and miscellaneous other investment expenses (5,669 ) — — (5,669 ) $ 27,803 $ (285,456 ) $ (5,046 ) $ (262,699 ) (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $3.3 million and $1.1 million , respectively. Realized losses include an allowance for expected credit losses on available for sale securities of $0.6 million for the three months ended March 31, 2020 . (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Three Months Ended March 31, 2019 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 22,410 $ 9,366 $ 64 $ 31,840 Fixed maturities - Fair value option 16,043 19,975 (749 ) 35,269 Fixed maturities - Available for sale (1) 3,422 — 395 3,817 Short-term investments 524 (448 ) — 76 Equities (2) 120 2,158 — 2,278 Equities, fair value through net income (2) 622 (1,989 ) 1,572 205 Other investments — 1,794 — 1,794 Other (3) — 1,582 — 1,582 Investment management fees - related parties (4,409 ) — — (4,409 ) Borrowing and miscellaneous other investment expenses (8,298 ) — — (8,298 ) Investment performance fees - related parties — — — (5,800 ) $ 30,434 $ 32,438 $ 1,282 $ 58,354 (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $498.0 thousand and $103.0 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. 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 March 31, 2020 and December 31, 2019 , the Company held $2.1 billion and $2.1 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 $5.1 million and $6.4 million , respectively, in deposits with U.S. regulatory authorities. Non-cash investing activities During the first quarter of 2020, as a result of the restructuring of an investment position held by the Company, $13.5 million of term loans, held within “term loans, fair value option,” were exchanged for $13.5 million of short-term investments held within “short-term investments, fair value option.” During 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. During 2019, 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 | 3 Months Ended |
Mar. 31, 2020 | |
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 $2.5 billion of net financial assets and liabilities measured at fair value at March 31, 2020 , approximately $130.0 million , or 5.3% , were priced using non-binding broker-dealer quotes or modeled valuations. 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. 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 9, “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 9, “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 net asset valuations, or 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 NAVs 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 March 31, 2020 and December 31, 2019 : Fair Value Measurement Using: March 31, 2020 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 $ 906,999 $ — $ 871,054 $ 35,945 Fixed maturities: Corporate bonds 408,140 — 407,175 965 U.S. government and government agency bonds 265,423 265,310 113 — Asset-backed securities 254,196 — 254,196 — Mortgage-backed securities 30,314 — 30,314 — Non-U.S. government and government agency bonds 149,858 — 149,858 — Municipal government and government agency bonds 2,073 — 2,073 — Short-term investments 343,861 296,158 47,703 — Equities 121,260 9,750 1,420 110,090 Other investments measured at net asset value (1) 30,682 — — — Total assets measured at fair value $ 2,512,806 $ 571,218 $ 1,763,906 $ 147,000 Other underwriting derivative liabilities $ 314 $ — $ 314 $ — Investment derivative liabilities (2) 23,726 — 23,726 — Payable for securities sold short: Corporate bonds 30,076 — 30,076 — Total liabilities measured at fair value $ 54,116 $ — $ 54,116 $ — (1) 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. (2) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in “other liabilities” in the consolidated balance sheets as of March 31, 2020 . 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. 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 three months ended March 31, 2020 and 2019 : Three Months Ended March 31, 2020 Beginning Net Purchases (Sales)(1) Net Unrealized Gains (Losses)(2) Net Unrealized Foreign Exchange Gains (Losses) Ending Term loans $ 36,048 $ (74 ) $ (29 ) $ — $ 35,945 Corporate bonds 933 32 — — 965 Equities 108,591 3,277 (1,778 ) — 110,090 Total $ 145,572 $ 3,235 $ (1,807 ) $ — $ 147,000 Three Months Ended March 31, 2019 Beginning Transfers in (out) of Level 3 (3) Net Purchases (Sales)(1) Net Unrealized Gains (Losses)(2) Net Unrealized Foreign Exchange Gains (Losses) Ending Term loans $ 47,479 $ — $ 163 $ (274 ) $ — $ 47,368 Corporate bonds 24,277 — (90 ) (69 ) (399 ) 23,719 Asset-backed securities 22,560 (22,560 ) — — — — Equities 70,451 — 30,534 (334 ) — 100,651 Total $ 164,767 $ (22,560 ) $ 30,607 $ (677 ) $ (399 ) $ 171,738 (1) For the three months ended March 31, 2020 , the net purchases (sales) consisted of purchases of $3.3 million of equities and $32.0 thousand of corporate bonds, partially offset by calls and redemptions of $74.0 thousand of term loans. For the three months ended March 31, 2019 , the net purchases (sales) consisted of purchases of $37.8 million of equities and $237.0 thousand of term loans, offset in part by sales, calls and redemptions of $7.3 million of equities, $89.9 thousand of corporate bonds and $74.0 thousand of term loans. (2) 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). (3) During the three months ended March 31, 2019, the Company obtained pricing for an asset-backed security, for 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. 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 March 31, 2020 and December 31, 2019 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 March 31, 2020 , the Company’s senior notes were carried at cost, net of debt issuance costs, of $172.5 million and had a fair value of $167.2 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 March 31, 2020 . There were no additional assets measured at fair value on a non-recurring basis as of March 31, 2020 and December 31, 2019 . |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative 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 March 31, 2020 and December 31, 2019 , the Company posted $12.5 million and $13.1 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. The Company invests 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 were purchased and sold in the first quarter of 2020. 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 securities ” 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 March 31, 2020 and December 31, 2019 , the Company had collateral funds held by the counterparty of $62.1 million and $64.1 million included in “short-term investments” in the Company’s consolidated balance sheets. The fair value of such swaps are based on observable inputs and classified in Level 2 of the valuation hierarchy. Realized and unrealized gains and losses from investment derivatives are included in “r ealized and unrealized gains (losses) ” on investments in the Company’s consolidated statements of net income (loss). The Company did not hold any derivatives designated as hedging instruments at March 31, 2020 and December 31, 2019 . The following table summarizes information on the fair values and notional amount of the Company’s derivative instruments at March 31, 2020 and December 31, 2019 : Estimated Fair Value Asset Derivatives Liability Derivatives Net Derivatives Notional Amount (1) ($ in thousands) March 31, 2020 Other underwriting derivatives $ — $ 314 $ (314 ) $ 56,923 Total return swaps — 23,726 (23,726 ) 112,745 Total $ — $ 24,040 $ (24,040 ) $ 169,668 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 (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: Three Months Ended March 31, 2020 2019 ($ in thousands) Underwriting derivatives: Other underwriting income (loss) $ 133 $ 592 Investment derivatives: Net realized and unrealized gains (losses): Options 1,081 801 Total return swaps (23,882 ) 1,582 |
Earnings per common share
Earnings per common share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings per common share | The following table sets forth the computation of basic and diluted earnings per common share: Three Months Ended March 31, 2020 2019 ($ in thousands except share and per share data) Numerator: Net income (loss) before preference dividends $ (266,608 ) $ 52,539 Preference dividends (1,171 ) (4,907 ) Net income (loss) available to common shareholders (267,779 ) 47,632 Denominator: Weighted average common shares outstanding - basic and diluted (1)(2) 19,951,932 22,682,875 Earnings (loss) per common share: Basic and diluted $ (13.42 ) $ 2.10 (1) During the three months ended March 31, 2020 , the Company granted an aggregate of 63,591 restricted share units and common shares to certain employees and directors, 48,916 of which are non-vested. During the three months ended March 31, 2019, the Company did not grant any restricted share units or common shares. The weighted average non-vested restricted share units of 13,727 are excluded from the calculation of diluted weighted average common shares outstanding for the three months ended March 31, 2020 , due to a net loss reported. Refer to Note 17, “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 expired 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 | 3 Months Ended |
Mar. 31, 2020 | |
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 through 2020 in Gibraltar and 2018 through 2020 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 through 2020. Watford Holdings (U.S.) Inc. is incorporated in the United States and files a consolidated U.S. federal tax return with its subsidiaries, WSIC, WIC 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 2020. 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 March 31, 2020 and December 31, 2019 , the Company’s valuation allowance was $1.5 million and $1.3 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 March 31, 2020 and December 31, 2019 . After taking into account the impact of the change in the valuation allowance, the Company recognized income tax expense of $ Nil during the three months ended March 31, 2020 and 2019 . 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 March 31, 2020 and December 31, 2019 , the Company’s total unrecognized tax benefits, including interest and penalties, were $ Nil . |
Transactions with related parti
Transactions with related parties | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 , ARL held approximately 12.6% 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 $11.5 million in connection with the Company’s redemption of its preference shares. Certain directors, executive officers and management of ACGL own common and preference shares of the Company. The related balances presented in the consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Interest expense $ 582 $ — Preference dividends 78 325 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 three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Acquisition expenses $ 6,563 $ 4,948 General and administrative expenses 988 2,011 Total $ 7,551 $ 6,959 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 terms of the applicable retrocession agreement. Such fees, in addition to origination fees, are reflected in “acquisition expenses” on the Company’s consolidated statement of income (loss). The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums written $ 81,348 $ 72,005 Net premiums earned 58,785 61,838 Loss and loss adjustment expenses 46,541 45,370 Acquisition expenses (1) 13,853 19,915 (1) Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the three months ended March 31, 2020 and 2019 , the Company incurred ceding fees to Arch, in aggregate, of $4.0 million and $4.2 million , respectively, under these inward retrocession agreements. Separately, the Company’s operating subsidiaries have entered into outward quota share retrocession or reinsurance agreements with ACGL subsidiaries. Specifically, each of Watford Re and WICE has entered into a separate outward quota share retrocession or reinsurance agreement with ARL, and each of WSIC and WIC has entered into a separate outward quota share reinsurance agreement with ARC. The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 for the outward retrocession transactions were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums ceded $ (19,828 ) $ (16,990 ) Net premiums earned (19,788 ) (12,940 ) Loss and loss adjustment expenses (15,815 ) (9,138 ) Acquisition expenses (1) (4,537 ) (3,104 ) (1) Acquisition expenses relating to the ACGL outward quota share agreements referred to above. The related consolidated balance sheet account balances as of March 31, 2020 and December 31, 2019 were as follows: March 31, December 31, 2020 2019 ($ in thousands) Consolidated balance sheet items: Total investments $ 680,448 $ 815,528 Premiums receivable 122,147 106,462 Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses 88,179 79,597 Prepaid reinsurance premiums 74,696 75,249 Deferred acquisition costs, net 34,760 31,609 Funds held by reinsurers 26,964 29,867 Reserve for losses and loss adjustment expenses 684,802 693,861 Unearned premiums 160,328 143,852 Losses payable 32,146 39,619 Reinsurance balances payable 58,604 62,301 Senior notes 34,497 34,484 Amounts due to affiliates 32,146 4,467 Other liabilities - contingent commissions 3,911 5,516 Contingently redeemable preference shares 3,463 3,462 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 three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 253 $ 262 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 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 2 019, the Company fully redeemed its investment in the Master Fund. During 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 March 31, 2020 , the Company ’s investment had a fair value of $30.7 million and represented approximately 12% of the outstanding partnership interests. The management fees and performance fees on the limited partnership will be subject to the existing fee structure of the existing investment management agreement between the Company and HPS, as discussed above. The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 , and consolidated balance sheet account balances for HPS management fees and performance fees as of March 31, 2020 and December 31, 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 4,099 $ 4,147 Investment performance fees - related parties — 5,800 $ 4,099 $ 9,947 March 31, December 31, 2020 2019 ($ in thousands) Consolidated balance sheet items: Other investments, at fair value $ 30,682 $ 30,461 Investment management and performance fees payable 5,428 17,762 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 three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 2019 ($ in thousands) Fees paid to Artex under insurance management services agreement $ 86 $ 131 For the three months ended March 31, 2020 and 2019 , the Company paid no fees to Arch under this insurance management services agreement. |
Commitments and contingencies
Commitments and contingencies | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 and December 31, 2019 amounted to $104.3 million and $92.5 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 March 31, 2020 and December 31, 2019 , 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 March 31, 2020 and December 31, 2019 . At such dates, the Company had $48.7 million and $51.0 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. The Unsecured Facility requires the maintenance of certain covenants, as well as certain representations and warranties that are customary for facilities of this type. At March 31, 2020 and December 31, 2019 , the Company had $25.2 million and $19.3 million , respectively, in outstanding letters of credit issued from the Unsecured Facility, and was in compliance with the Unsecured Facility requirements. 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 March 31, 2020 , Watford Re had $500.6 million and $52.5 million in borrowings and outstanding letters of credit, respectively. At December 31, 2019 , Watford Re had $484.3 million and $52.5 million in borrowings and outstanding letters of credit, respectively. At March 31, 2020 and December 31, 2019 , Watford Re was in compliance with all covenants contained in the Secured Facility. Custodian bank facility As of March 31, 2020 and December 31, 2019 , Watford Re had $75.9 million and $Nil , respectively, in borrowings from our custodian bank to purchase U.S. dollar denominated securities. As of March 31, 2020 , the total borrowed amount of $75.9 million included 0.6 million Euros, or EUR, (U.S. dollar equivalent of $0.7 million ) to purchase EUR-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 “net foreign exchange gains (losses)” included in the Company’s 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 March 31, 2020 and December 31, 2019 , the Company was required to hold $108.2 million and $Nil , 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 March 31, 2020 , the Company had unfunded commitments of $23.1 million relating to equities within its investment portfolios. As of December 31, 2019 , the Company had unfunded commitments of $8.4 million relating to term loans and $26.4 million relating to equities within its investment portfolios. Acquisition commitments The Company has entered into an agreement to acquire Axeria IARD, a property and casualty insurance company based in France. The Company has committed to acquire 100% of the capital stock of Axeria IARD from the APRIL group. The completion of this transaction is subject to regulatory approval and other customary closing conditions, and is expected to close in the third quarter of 2020. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | The Company has entered into a lease agreement for real estate that is used for office space in the ordinary course of business. The lease is accounted for as an operating lease, whereby the lease expense is recognized on a straight-line basis over the term of the lease. The lease includes an option to extend or renew the lease term. The exercise of the renewal option is at the Company’s discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercising those options. Such options relating to the extension or renewal of the lease term are not included in the operating lease liability at this time. Lease expense is included in “general and administrative expenses” in the Company’s consolidated statements of net income (loss). Additional information regarding the Company’s real estate operating lease is as follows. Three Months Ended March 31, 2020 ($ in thousands) Lease cost: Operating lease $ 62 Other information on operating lease: Cash payments included in the measurement of lease liability reported in operating cash flows 71 Right-of-use assets (1) 908 Operating lease liability (2) 908 Weighted average discount rate 3.9 % Weighted average remaining lease term in years 3.5 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: March 31, 2020 ($ in thousands) Remainder of 2020 212 2021 283 2022 283 2023 189 Total undiscounted lease payments 967 Less: present value adjustment (59 ) Operating lease liability 908 |
Senior notes
Senior notes | 3 Months Ended |
Mar. 31, 2020 | |
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, which commenced on 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 in Note 16, “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 March 31, 2020 . As of March 31, 2020 , the carrying amount of the senior notes was $172.5 million , presented net of unamortized debt issuance costs of $2.5 million . 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 . |
Contingently redeemable preferr
Contingently redeemable preferred shares | 3 Months Ended |
Mar. 31, 2020 | |
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 three months ended March 31, 2020 and 2019 , dividends paid on the preference shares totaled $1.1 million and $4.9 million , respectively. The following table presents a reconciliation of the preference shares for the three months ended March 31, 2020 and 2019 : Three Months Ended March 31, 2020 2019 ($ in thousands) Preference shares: Balance at the beginning of the period $ 52,305 $ 220,992 Accretion discount and issuance costs on remaining preference shares 23 91 Balance at the end of the period $ 52,328 $ 221,083 |
Share Transactions
Share Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Share Transactions [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 on the Nasdaq Global Select Market. 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 March 31, 2020 , 678,437 shares were available for future issuance. During the first quarter of 2020, the Company granted an aggregate of 63,591 restricted share units and common shares to certain officers, other employees and directors. On the grant date of March 1, 2020, the fair value of the restricted share units and common shares was approximately $23.00 per share. Of the total restricted share units and common shares granted, 14,675 were vested and fully expensed, including 10,870 common shares issued. The remaining 48,916 restricted share units are being amortized over a three -year vesting period, being the requisite service period. There were no forfeitures or expired awards during the first quarter of 2020. The effect of compensation cost arising from share-based payment awards on the Company ’ s consolidated statement of income (loss), within “general and administrative expenses,” for the three months ended March 31, 2020 and 2019 , was $0.6 million and $Nil , respectively, including an accelerated expense recognition for retirement eligible employees. Share repurchase program In the first quarter of 2020, the board of directors of the Parent authorized the Company’s investment in its common shares through a share repurchase program under which the Company may repurchase up to $50 million of its outstanding common shares (the "current share repurchase program"). During the first quarter of 2020, the Company purchased 127,744 shares at an average price per share of $22.42 under the current share repurchase program. As of March 31, 2020 , approximately $47.1 million of unused share repurchase capacity remained available under the current share repurchase program. Since the inception of the share repurchase programs in 2019, the Company has repurchased a total of 2.9 million shares. At March 31, 2020 , the shares are held in treasury, at an aggregate cost of $77.9 million (excluding transaction costs). Repurchases under the current share repurchase program may be effected from time to time in open market or privately negotiated transactions. The timing and amount of repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. Repurchases of the Company’s common shares in connection with the current share repurchase program and other share-based transactions are recorded at cost and result in a reduction of the Company’s shareholders’ equity in its consolidated balance sheets. |
Legal proceedings
Legal proceedings | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 , 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. |
Basis of presentation and sig_2
Basis of presentation and significant accounting policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of presentation | The unaudited interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended. All significant intercompany transactions and balances have been eliminated on consolidation. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of recurring accruals) necessary for a fair statement of results on an interim basis. |
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. |
Recent accounting pronouncements | Issued and effective as of March 31, 2020 - Credit Losses Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”) which was issued in June 2016. This ASU applies a new credit loss model (current expected credit losses, or “ CECL ” ) for determining credit-related impairments for financial instruments measured at amortized cost (including reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the Company ’ s consolidated balance sheet. This ASU also amends the previous other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted this ASU for the quarter ending March 31, 2020. For available for sale debt securities, the updated guidance was applied prospectively. For financial instruments measured at amortized cost, the updated guidance was applied by recognizing a cumulative effect adjustment of $0.4 million , net of tax, to the opening balance of retained earnings as of January 1, 2020, the beginning of the period of adoption. This adjustment is associated with “ premiums receivable ” and “ reinsurance recoverables on unpaid and paid losses and loss adjustment expenses ” in the Company’s consolidated balance sheets . The cumulative effect adjustment decreased retained earnings as of January 1, 2020 and increased the allowance for estimated uncollectible reinsurance. The following accounting policies have been updated to reflect the Company ’ s adoption of ASU 2016-13, as described above. Results for the reporting periods beginning January 1, 2020 and thereafter are presented under ASC 326, while prior period amounts continue to be reported in accordance with previous applicable GAAP. Investment Impairments The Company conducts a periodic review to identify and evaluate invested assets that may have credit impairments. Credit Impairments of Available For Sale Fixed Maturities The Company derives estimated credit losses for fixed maturities by comparing expected future cash flows to be collected to the amortized cost of the security. Estimates of expected future cash flows consider among other things, macroeconomic conditions as well as the financial condition, near-term and long-term prospects for the issuer, and the likelihood of the recoverability of principal and interest. Beginning on January 1, 2020, credit losses are recognized through an allowance account subject to reversal, rather than a reduction in amortized cost. Declines in value attributable to factors other than credit are reported in other comprehensive income while the allowance for credit loss is charged to “ realized and unrealized gains (losses) on investments ” in the Company’s consolidated statements of income . For fixe d maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in “ r ealized and unrealized gains (losses) on investments ” on the Company’s consolidated statements of income (loss) . The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in “ realized and unrealized gains (losses) on investments. ” The new cost basis is not adjusted for any subsequent recoveries in fair value. The Company reports accrued investment income separately from available for sale fixed maturities, and has elected not to measure an allowance for credit losses for accrued investment income. Uncollectible accrued interest is written off when the Company determines that no additional interest payments will be received. Reinsurance Recoverables In the normal course of business, the Company’s subsidiaries cede a portion of their premium and losses through pro rata and excess of loss reinsurance agreements on a treaty or facultative basis. Reinsurance recoverables are recorded as assets, predicated on the reinsurers’ ability to meet their obligations under the reinsurance agreements. In certain instances, the Company obtains collateral, including letters of credit and trust accounts, to further reduce the credit exposure on its reinsurance recoverables. The Company reports its reinsurance recoverables net of an allowance for expected credit loss in the Company’s consolidated balance sheets . The allowance is based upon the Company’s ongoing review of amounts outstanding, the financial condition of its reinsurers, amounts and form of collateral obtained and other relevant factors. A ratings based probability-of-default and loss-given-default methodology is used to estimate the allowance for expected credit loss. Any allowance for credit losses is charged to the Company’s consolidated statement of income (loss) in the period the recoverable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate of expected credit losses. Premiums receivable and unearned premium reserves Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in premiums receivable balances. Premiums receivable balances are reported net of an allowance for expected credit losses. The Company monitors credit risk associated with premiums receivable through its ongoing review of amounts outstanding, aging of the receivable, historical loss data and counterparty financial strength measures. The allowance also includes estimated uncollectible amounts related to dispute risk. Amounts deemed to be uncollectible, are written off against the allowance. In certain instances, credit risk may be reduced by the Company’s right to offset loss obligations or unearned premiums against premiums receivable. Any allowance for credit losses is charged to the Company’s consolidated statements of income (loss) in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate of expected credit losses . Issued and effective as of March 31, 2020 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. This ASU was adopted on January 1, 2020, and the Company considers the impact to be immaterial to the Company’s consolidated financial statements and disclosures. In March 2020, the FASB issued ASU 2020-03, Codification Improvements ( “ASU 2020-03”), which provide updates to a wide variety of Topics in the Codification. For public business entities, this ASU was effective upon issuance. This ASU was adopted upon issuance, and did not have a material impact on the Company’s consolidated financial statements. In April 2019, the FASB issued ASU 2019-04, which identified and clarified issues relevant to ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). 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. This ASU was adopted on January 1, 2020 and did not have a material impact on the Company’s consolidated financial statements. Recently issued accounting standards not yet adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), (“ASU 2020-04”). This ASU provides practical expedients and exceptions for applying GAAP to contracts and transactions affected by reference rate reform if such contracts or transactions reference LIBOR or another reference rate expected to be discontinued. Amendments in this ASU for contract modifications may be applied as of March 12, 2020 through December 31, 2022. Once adopted, this ASU must be applied prospectively for all eligible contract modifications. The Company is currently assessing the impact the implementation of this ASU will have on its consolidated financial statements and disclosures, but does not believe that such impact will be material. For additional information regarding accounting standards that the Company has not yet adopted, see Note 2, “Basis of presentation and significant accounting policies” in the Company’s audited consolidated financial statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ending December 31, 2019. |
Segment information (Tables)
Segment information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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: Three Months Ended March 31, 2020 2019 ($ in thousands) Gross premiums written: Casualty reinsurance $ 83,818 $ 75,601 Other specialty reinsurance 36,880 24,298 Property catastrophe reinsurance 9,832 5,992 Insurance programs and coinsurance 104,372 80,798 Total $ 234,902 $ 186,689 Net premiums written: Casualty reinsurance $ 83,667 $ 75,065 Other specialty reinsurance 35,484 23,182 Property catastrophe reinsurance 9,832 5,982 Insurance programs and coinsurance 57,717 41,158 Total $ 186,700 $ 145,387 Net premiums earned: Casualty reinsurance $ 52,765 $ 63,313 Other specialty reinsurance 35,364 44,561 Property catastrophe reinsurance 4,884 2,971 Insurance programs and coinsurance 47,026 35,249 Total $ 140,039 $ 146,094 Net premiums written by underwriting location: United States $ 36,303 $ 18,402 Europe 21,203 23,258 Bermuda 129,194 103,727 Total $ 186,700 $ 145,387 |
Reinsurance (Tables)
Reinsurance (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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: Three Months Ended March 31, 2020 2019 ($ in thousands) Premiums written Direct $ 104,372 $ 80,798 Assumed 130,530 105,891 Ceded (48,202 ) (41,302 ) Net $ 186,700 $ 145,387 Premiums earned Direct $ 88,536 $ 63,517 Assumed 99,529 113,481 Ceded (48,026 ) (30,904 ) Net $ 140,039 $ 146,094 Losses and loss adjustment expenses Direct $ 88,694 $ 48,404 Assumed 74,720 84,524 Ceded (52,738 ) (22,078 ) Net $ 110,676 $ 110,850 |
Reserve for losses and loss a_2
Reserve for losses and loss adjustment expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 2019 ($ in thousands) Gross reserve for losses and loss adjustment expenses at beginning of period $ 1,263,628 $ 1,032,760 Unpaid losses and loss adjustment expenses recoverable 165,549 81,267 Net reserve for losses and loss adjustment expenses at beginning of period 1,098,079 951,493 Net incurred losses and loss adjustment expenses relating to losses occurring in: Current period 110,856 110,901 Prior years (180 ) (51 ) Total net losses and loss adjustment expenses 110,676 110,850 Foreign exchange (gains) losses (26,015 ) 4,163 Net paid losses and loss adjustment expenses relating to losses occurring in: Current period (10,585 ) (6,330 ) Prior years (62,585 ) (54,598 ) Total paid losses and loss adjustment expenses (73,170 ) (60,928 ) Net reserve for losses and loss adjustment expenses at end of period 1,109,570 1,005,578 Unpaid losses and loss adjustment expenses recoverable 190,679 98,954 Gross reserve for losses and loss adjustment expenses at end of period $ 1,300,249 $ 1,104,532 |
Allowance for expected credit_2
Allowance for expected credit losses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Credit Loss [Abstract] | |
Changes in the allowance for expected credit losses on premiums receivable | The following table presents the balances of premiums receivable, net of the allowance for expected credit losses, at January 1, 2020 and March 31, 2020 and changes in the allowance for expected credit losses for the three months ended March 31, 2020 . Premiums Receivable, Net of Allowance Allowance for Expected Credit Losses ($ in thousands) Balance at beginning of period $ 273,657 $ — Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 156 Current period change for expected credit losses — Write-offs charged against the allowance — Balance at end of period $ 281,541 $ 156 |
Changes in the allowance for estimated uncollectible reinsurance | The following table presents the balances of reinsurance recoverables, net of the allowance for expected credit losses, at January 1, 2020 and March 31, 2020 , and changes in the allowance for expected credit losses for the three months ended March 31, 2020 . Reinsurance Recoverables, Net of Allowance Allowance for Expected Credit Losses ($ in thousands) Balance at beginning of period $ 170,974 $ — Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 (1) 297 Current period change for expected credit losses — Write-offs charged against the allowance — Balance at end of period $ 197,458 $ 297 |
Investment information (Tables)
Investment information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of fair value and cost or amortized cost of available for sale securities | The following tables summarize the fair value of the Company’s securities classified as available for sale as of March 31, 2020 and December 31, 2019 : Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value ($ in thousands) March 31, 2020 Fixed maturities: U.S. government and government agency bonds $ 256,191 $ 8,635 $ — $ 264,826 Non-U.S. government and government agency bonds 151,000 4,040 (6,564 ) 148,476 Corporate bonds 169,735 2,296 (4,969 ) 167,062 Asset-backed securities 144,808 — (31,225 ) 113,583 Mortgage-backed securities 26,341 — (4,556 ) 21,785 Municipal government and government agency bonds 1,760 60 — 1,820 Total investments, available for sale $ 749,835 $ 15,031 $ (47,314 ) $ 717,552 (1) Effective January 1, 2020, the Company adopted ASU 2016-13, and as a result any credit impairment losses on the Company’s available for sale securities are recorded as an allowance, subject to reversal. See Note 2. "Basis of presentation and significant accounting policies-(b) Recent accounting pronouncements-Issued and effective as of March 31, 2020 - Credit Losses" above for more information about ASU 2016-13. Included within the gross unrealized losses for corporate bonds is a credit allowance of $0.6 million for securities with an unrealized loss of $5.7 million as of March 31, 2020 . Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ 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 |
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 March 31, 2020 ($ in thousands) Fixed maturities: Non-U.S. government and government agency bonds $ 120,115 $ (6,564 ) $ — $ — $ 120,115 $ (6,564 ) Corporate bonds 86,724 (4,969 ) — — 86,724 (4,969 ) Asset-backed securities 100,514 (27,336 ) 13,069 (3,889 ) 113,583 (31,225 ) Mortgage-backed securities 21,784 (4,556 ) — — 21,784 (4,556 ) Total $ 329,137 $ (43,425 ) $ 13,069 $ (3,889 ) $ 342,206 $ (47,314 ) 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 ) |
Contractual maturities of investments | The amortized cost and fair value of our fixed maturities classified as available for sale, summarized by contractual maturity as of March 31, 2020 and December 31, 2019 are shown in the following tables. March 31, 2020 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 15,055 $ 14,846 2.1 % Due after one year through five years 423,133 428,376 59.7 % Due after five years through ten years 127,826 127,555 17.8 % Due after ten years 12,672 11,407 1.6 % Asset-backed securities 144,808 113,583 15.8 % Mortgage-backed securities 26,341 21,785 3.0 % Total investments, available for sale $ 749,835 $ 717,552 100.0 % 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 % 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 March 31, 2020 and December 31, 2019 are shown in the following tables. March 31, 2020 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 368,381 $ 361,088 22.0 % Due after one year through five years 809,886 660,746 40.2 % Due after five years through ten years 582,501 472,336 28.7 % Asset-backed securities 198,262 140,613 8.6 % Mortgage-backed securities 7,289 8,529 0.5 % Total $ 1,966,319 $ 1,643,312 100.0 % December 31, 2019 Amortized Cost Estimated Fair Value % of Fair Value ($ in thousands) Due in one year or less $ 368,452 $ 370,479 20.5 % 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 514 533 — % 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 % |
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 March 31, 2020 and December 31, 2019 , 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) March 31, 2020 Term loan investments $ 1,113,510 $ 986 $ (207,497 ) $ 906,999 Fixed maturities: Corporate bonds 296,918 4,038 (59,878 ) 241,078 U.S. government and government agency bonds 586 11 — 597 Asset-backed securities 198,262 2,231 (59,880 ) 140,613 Mortgage-backed securities 7,289 1,649 (409 ) 8,529 Non-U.S. government and government agency bonds 1,443 42 (103 ) 1,382 Municipal government and government agency bonds 252 1 — 253 Short-term investments 348,059 542 (4,740 ) 343,861 Other investments 28,673 2,009 — 30,682 Equities 53,111 12,130 (7,150 ) 58,091 Investments, fair value option $ 2,048,103 $ 23,639 $ (339,657 ) $ 1,732,085 Fair Value Through Net Income: Equities, fair value through net income $ 88,134 $ 1,855 $ (26,820 ) $ 63,169 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 $ 78,031 $ 2,360 $ (15,053 ) $ 65,338 |
Summary of investments classified by investment rating | The table below summarizes the credit quality of our total investments as of March 31, 2020 and December 31, 2019 , 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) March 31, 2020 Fair Value AAA AA A BBB BB B CCC CC C D Not Rated ($ in thousands) Term loan investments $ 906,999 $ — $ — $ — $ — $ 10,277 $ 650,028 $ 161,307 $ 2,823 $ 1,314 $ 1,590 $ 79,660 Fixed maturities: Corporate bonds 408,140 — 34,647 76,063 58,018 19,222 84,955 118,847 1,872 — 3,699 10,817 U.S. government and government agency bonds 265,423 — 265,423 — — — — — — — — — Asset-backed securities 254,196 1,628 — 19,319 181,547 19,727 7,395 1,418 — — — 23,162 Mortgage-backed securities 30,314 — — 4,600 17,185 1,190 — — — — 2,552 4,787 Non-U.S. government and government agency bonds 149,858 — 149,858 — — — — — — — — — Municipal government and government agency bonds 2,073 1,023 570 480 — — — — — — — — Total fixed income instruments 2,017,003 2,651 450,498 100,462 256,750 50,416 742,378 281,572 4,695 1,314 7,841 118,426 Short-term investments 343,861 30,174 154,787 402 110,795 — 40,000 — — — — 7,703 Total fixed income instruments and short-term investments 2,360,864 32,825 605,285 100,864 367,545 50,416 782,378 281,572 4,695 1,314 7,841 126,129 Other Investments 30,682 Equities 121,260 Total $ 2,512,806 $ 32,825 $ 605,285 $ 100,864 $ 367,545 $ 50,416 $ 782,378 $ 281,572 $ 4,695 $ 1,314 $ 7,841 $ 126,129 (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, 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. |
Summary of components of net investment income | The components of net investment income (loss) for the three months ended March 31, 2020 and 2019 were derived from the following sources: Three Months Ended March 31, 2020 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 $ 21,018 $ (155,233 ) $ (8,145 ) $ (142,360 ) Fixed maturities - Fair value option 9,068 (89,675 ) (1,244 ) (81,851 ) Fixed maturities - Available for sale (1) 4,660 — 2,180 6,840 Short-term investments 1,850 (3,440 ) 87 (1,503 ) Equities (2) — 76 1,041 1,117 Equities, fair value through net income (2) 377 (12,275 ) (212 ) (12,110 ) Other investments 851 220 — 1,071 Other (3) — (25,129 ) 1,247 (23,882 ) Investment management fees - related parties (4,352 ) — — (4,352 ) Borrowing and miscellaneous other investment expenses (5,669 ) — — (5,669 ) $ 27,803 $ (285,456 ) $ (5,046 ) $ (262,699 ) (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $3.3 million and $1.1 million , respectively. Realized losses include an allowance for expected credit losses on available for sale securities of $0.6 million for the three months ended March 31, 2020 . (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. Three Months Ended March 31, 2019 Net Interest Income Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Investment Income (Loss) ($ in thousands) Net investment income (loss) by asset class: Term loan investments $ 22,410 $ 9,366 $ 64 $ 31,840 Fixed maturities - Fair value option 16,043 19,975 (749 ) 35,269 Fixed maturities - Available for sale (1) 3,422 — 395 3,817 Short-term investments 524 (448 ) — 76 Equities (2) 120 2,158 — 2,278 Equities, fair value through net income (2) 622 (1,989 ) 1,572 205 Other investments — 1,794 — 1,794 Other (3) — 1,582 — 1,582 Investment management fees - related parties (4,409 ) — — (4,409 ) Borrowing and miscellaneous other investment expenses (8,298 ) — — (8,298 ) Investment performance fees - related parties — — — (5,800 ) $ 30,434 $ 32,438 $ 1,282 $ 58,354 (1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $498.0 thousand and $103.0 thousand , respectively. (2) Net interest income includes dividends for securities held in long and short positions. (3) Other includes unrealized gains and unrealized losses for total return swaps. |
Fair value (Tables)
Fair value (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value hierarchy | The following table presents the Company’s financial assets and liabilities measured at fair value by level as of March 31, 2020 and December 31, 2019 : Fair Value Measurement Using: March 31, 2020 Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ($ in thousands) Assets measured at fair value: Term loans $ 906,999 $ — $ 871,054 $ 35,945 Fixed maturities: Corporate bonds 408,140 — 407,175 965 U.S. government and government agency bonds 265,423 265,310 113 — Asset-backed securities 254,196 — 254,196 — Mortgage-backed securities 30,314 — 30,314 — Non-U.S. government and government agency bonds 149,858 — 149,858 — Municipal government and government agency bonds 2,073 — 2,073 — Short-term investments 343,861 296,158 47,703 — Equities 121,260 9,750 1,420 110,090 Other investments measured at net asset value (1) 30,682 — — — Total assets measured at fair value $ 2,512,806 $ 571,218 $ 1,763,906 $ 147,000 Other underwriting derivative liabilities $ 314 $ — $ 314 $ — Investment derivative liabilities (2) 23,726 — 23,726 — Payable for securities sold short: Corporate bonds 30,076 — 30,076 — Total liabilities measured at fair value $ 54,116 $ — $ 54,116 $ — (1) 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. (2) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in “other liabilities” in the consolidated balance sheets as of March 31, 2020 . 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. |
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 three months ended March 31, 2020 and 2019 : Three Months Ended March 31, 2020 Beginning Net Purchases (Sales)(1) Net Unrealized Gains (Losses)(2) Net Unrealized Foreign Exchange Gains (Losses) Ending Term loans $ 36,048 $ (74 ) $ (29 ) $ — $ 35,945 Corporate bonds 933 32 — — 965 Equities 108,591 3,277 (1,778 ) — 110,090 Total $ 145,572 $ 3,235 $ (1,807 ) $ — $ 147,000 Three Months Ended March 31, 2019 Beginning Transfers in (out) of Level 3 (3) Net Purchases (Sales)(1) Net Unrealized Gains (Losses)(2) Net Unrealized Foreign Exchange Gains (Losses) Ending Term loans $ 47,479 $ — $ 163 $ (274 ) $ — $ 47,368 Corporate bonds 24,277 — (90 ) (69 ) (399 ) 23,719 Asset-backed securities 22,560 (22,560 ) — — — — Equities 70,451 — 30,534 (334 ) — 100,651 Total $ 164,767 $ (22,560 ) $ 30,607 $ (677 ) $ (399 ) $ 171,738 (1) For the three months ended March 31, 2020 , the net purchases (sales) consisted of purchases of $3.3 million of equities and $32.0 thousand of corporate bonds, partially offset by calls and redemptions of $74.0 thousand of term loans. For the three months ended March 31, 2019 , the net purchases (sales) consisted of purchases of $37.8 million of equities and $237.0 thousand of term loans, offset in part by sales, calls and redemptions of $7.3 million of equities, $89.9 thousand of corporate bonds and $74.0 thousand of term loans. (2) Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss). (3) During the three months ended March 31, 2019, the Company obtained pricing for an asset-backed security, for which pricing was not available as of December 31, 2018. As such, the security was transferred from Level 3 to Level 2 at its fair value as of December 31, 2018. |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary information on the fair values and notional amount of derivative instruments | The following table summarizes information on the fair values and notional amount of the Company’s derivative instruments at March 31, 2020 and December 31, 2019 : Estimated Fair Value Asset Derivatives Liability Derivatives Net Derivatives Notional Amount (1) ($ in thousands) March 31, 2020 Other underwriting derivatives $ — $ 314 $ (314 ) $ 56,923 Total return swaps — 23,726 (23,726 ) 112,745 Total $ — $ 24,040 $ (24,040 ) $ 169,668 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 (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: Three Months Ended March 31, 2020 2019 ($ in thousands) Underwriting derivatives: Other underwriting income (loss) $ 133 $ 592 Investment derivatives: Net realized and unrealized gains (losses): Options 1,081 801 Total return swaps (23,882 ) 1,582 |
Earnings per common share (Tabl
Earnings per common share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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: Three Months Ended March 31, 2020 2019 ($ in thousands except share and per share data) Numerator: Net income (loss) before preference dividends $ (266,608 ) $ 52,539 Preference dividends (1,171 ) (4,907 ) Net income (loss) available to common shareholders (267,779 ) 47,632 Denominator: Weighted average common shares outstanding - basic and diluted (1)(2) 19,951,932 22,682,875 Earnings (loss) per common share: Basic and diluted $ (13.42 ) $ 2.10 (1) During the three months ended March 31, 2020 , the Company granted an aggregate of 63,591 restricted share units and common shares to certain employees and directors, 48,916 of which are non-vested. During the three months ended March 31, 2019, the Company did not grant any restricted share units or common shares. The weighted average non-vested restricted share units of 13,727 are excluded from the calculation of diluted weighted average common shares outstanding for the three months ended March 31, 2020 , due to a net loss reported. Refer to Note 17, “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 expired on March 25, 2020. The number of common shares issuable upon exercise of the warrants that was excluded was 1,704,691 common shares. |
Transactions with related par_2
Transactions with related parties (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Acquisition expenses $ 6,563 $ 4,948 General and administrative expenses 988 2,011 Total $ 7,551 $ 6,959 |
ACGL and Subsidiaries | Investment management and performance fees | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 253 $ 262 |
ACGL and Subsidiaries | Quota share business | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 for the outward retrocession transactions were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums ceded $ (19,828 ) $ (16,990 ) Net premiums earned (19,788 ) (12,940 ) Loss and loss adjustment expenses (15,815 ) (9,138 ) Acquisition expenses (1) (4,537 ) (3,104 ) (1) Acquisition expenses relating to the ACGL outward quota share agreements referred to above. |
ACGL and Subsidiaries | Arch Capital Group Limited | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated balance sheet account balances as of March 31, 2020 and December 31, 2019 were as follows: March 31, December 31, 2020 2019 ($ in thousands) Consolidated balance sheet items: Total investments $ 680,448 $ 815,528 Premiums receivable 122,147 106,462 Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses 88,179 79,597 Prepaid reinsurance premiums 74,696 75,249 Deferred acquisition costs, net 34,760 31,609 Funds held by reinsurers 26,964 29,867 Reserve for losses and loss adjustment expenses 684,802 693,861 Unearned premiums 160,328 143,852 Losses payable 32,146 39,619 Reinsurance balances payable 58,604 62,301 Senior notes 34,497 34,484 Amounts due to affiliates 32,146 4,467 Other liabilities - contingent commissions 3,911 5,516 Contingently redeemable preference shares 3,463 3,462 The related balances presented in the consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Interest expense $ 582 $ — Preference dividends 78 325 |
ACGL and Subsidiaries | Arch Capital Group Limited | Direct business | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Gross premiums written $ 81,348 $ 72,005 Net premiums earned 58,785 61,838 Loss and loss adjustment expenses 46,541 45,370 Acquisition expenses (1) 13,853 19,915 (1) Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the three months ended March 31, 2020 and 2019 , the Company incurred ceding fees to Arch, in aggregate, of $4.0 million and $4.2 million , respectively, under these inward retrocession agreements. |
HPS | Investment management and performance fees | |
Related Party Transaction [Line Items] | |
Summary of related party transactions | The related consolidated statement of income (loss) for the three months ended March 31, 2020 and 2019 , and consolidated balance sheet account balances for HPS management fees and performance fees as of March 31, 2020 and December 31, 2019 were as follows: Three Months Ended March 31, 2020 2019 ($ in thousands) Consolidated statement of income (loss) items: Investment management fees - related parties $ 4,099 $ 4,147 Investment performance fees - related parties — 5,800 $ 4,099 $ 9,947 March 31, December 31, 2020 2019 ($ in thousands) Consolidated balance sheet items: Other investments, at fair value $ 30,682 $ 30,461 Investment management and performance fees payable 5,428 17,762 |
Artex | Insurance management 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 three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 2019 ($ in thousands) Fees paid to Artex under insurance management services agreement $ 86 $ 131 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Additional information regarding real estate operating lease | Additional information regarding the Company’s real estate operating lease is as follows. Three Months Ended March 31, 2020 ($ in thousands) Lease cost: Operating lease $ 62 Other information on operating lease: Cash payments included in the measurement of lease liability reported in operating cash flows 71 Right-of-use assets (1) 908 Operating lease liability (2) 908 Weighted average discount rate 3.9 % Weighted average remaining lease term in years 3.5 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: March 31, 2020 ($ in thousands) Remainder of 2020 212 2021 283 2022 283 2023 189 Total undiscounted lease payments 967 Less: present value adjustment (59 ) Operating lease liability 908 |
Contingently redeemable prefe_2
Contingently redeemable preferred shares (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Preferred Shares [Abstract] | |
Reconciliation of beginning and ending balances of preference shares | The following table presents a reconciliation of the preference shares for the three months ended March 31, 2020 and 2019 : Three Months Ended March 31, 2020 2019 ($ in thousands) Preference shares: Balance at the beginning of the period $ 52,305 $ 220,992 Accretion discount and issuance costs on remaining preference shares 23 91 Balance at the end of the period $ 52,328 $ 221,083 |
Organization (Details)
Organization (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Contingently redeemable preference share | |
Class of Stock [Line Items] | |
Stated dividend rate (percent) | 8.50% |
Basis of presentation and sig_3
Basis of presentation and significant accounting policies (Details) $ in Millions | Dec. 31, 2019USD ($) |
ASU 2016-13 | Retained earnings | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 | $ (0.4) |
Segment information (Details)
Segment information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)segment | Mar. 31, 2019USD ($) | Jul. 02, 2019 | |
Segment Reporting Information [Line Items] | |||
Number of operating segments | segment | 1 | ||
Gross premiums written | $ 234,902 | $ 186,689 | |
Net premiums written | 186,700 | 145,387 | |
Net premiums earned | 140,039 | 146,094 | |
United States | |||
Segment Reporting Information [Line Items] | |||
Net premiums written | 36,303 | 18,402 | |
Europe | |||
Segment Reporting Information [Line Items] | |||
Net premiums written | 21,203 | 23,258 | |
Bermuda | |||
Segment Reporting Information [Line Items] | |||
Net premiums written | 129,194 | 103,727 | |
Casualty reinsurance | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 83,818 | 75,601 | |
Net premiums written | 83,667 | 75,065 | |
Net premiums earned | 52,765 | 63,313 | |
Other specialty reinsurance | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 36,880 | 24,298 | |
Net premiums written | 35,484 | 23,182 | |
Net premiums earned | 35,364 | 44,561 | |
Property catastrophe reinsurance | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 9,832 | 5,992 | |
Net premiums written | 9,832 | 5,982 | |
Net premiums earned | 4,884 | 2,971 | |
Insurance programs and coinsurance | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 104,372 | 80,798 | |
Net premiums written | 57,717 | 41,158 | |
Net premiums earned | $ 47,026 | $ 35,249 | |
Senior notes | |||
Segment Reporting Information [Line Items] | |||
Stated interest rate (percent) | 6.50% | 6.50% |
Reinsurance - Effects of reinsu
Reinsurance - Effects of reinsurance (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Premiums written | ||
Direct | $ 104,372 | $ 80,798 |
Assumed | 130,530 | 105,891 |
Ceded | (48,202) | (41,302) |
Net | 186,700 | 145,387 |
Premiums earned | ||
Direct | 88,536 | 63,517 |
Assumed | 99,529 | 113,481 |
Ceded | (48,026) | (30,904) |
Net premiums earned | 140,039 | 146,094 |
Losses and loss adjustment expenses | ||
Direct | 88,694 | 48,404 |
Assumed | 74,720 | 84,524 |
Ceded | (52,738) | (22,078) |
Net | $ 110,676 | $ 110,850 |
Reinsurance - Ceded credit risk
Reinsurance - Ceded credit risk (Details) - Reinsurer concentration risk - Reinsurance recoverable for paid and unpaid losses | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
AM Best, A minus or better rating | |||
Ceded Credit Risk [Line Items] | |||
Concentration risk, percentage | 95.00% | 95.00% | |
AM Best, not rated | |||
Ceded Credit Risk [Line Items] | |||
Concentration risk, percentage | 5.00% | 5.00% | |
AM Best, A plus Rating | ARL and ARC | |||
Ceded Credit Risk [Line Items] | |||
Concentration risk, percentage | 45.00% | 47.00% |
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 ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
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 | $ 1,263,628,000 | $ 1,032,760,000 |
Unpaid losses and loss adjustment expenses recoverable | 165,549,000 | 81,267,000 |
Net reserve for losses and loss adjustment expenses at beginning of period | 1,098,079,000 | 951,493,000 |
Net incurred losses and loss adjustment expenses relating to losses occurring in: | ||
Current period | 110,856,000 | 110,901,000 |
Prior years | (180,000) | (51,000) |
Total net losses and loss adjustment expenses | 110,676,000 | 110,850,000 |
Foreign exchange (gains) losses | (26,015,000) | 4,163,000 |
Net paid losses and loss adjustment expenses relating to losses occurring in: | ||
Current period | (10,585,000) | (6,330,000) |
Prior years | (62,585,000) | (54,598,000) |
Total paid losses and loss adjustment expenses | (73,170,000) | (60,928,000) |
Net reserve for losses and loss adjustment expenses at end of period | 1,109,570,000 | 1,005,578,000 |
Unpaid losses and loss adjustment expenses recoverable | 190,679,000 | 98,954,000 |
Gross reserve for losses and loss adjustment expenses at end of period | $ 1,300,249,000 | $ 1,104,532,000 |
Reserve for losses and loss a_4
Reserve for losses and loss adjustment expenses - Prior year development (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||
Prior year favorable (unfavorable) development | $ 180,000 | $ 51,000 |
Casualty reinsurance | ||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||
Prior year favorable (unfavorable) development | 4,000,000 | 1,800,000 |
Other specialty reinsurance | ||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||
Prior year favorable (unfavorable) development | 100,000 | (400,000) |
Insurance programs | ||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||
Prior year favorable (unfavorable) development | (4,400,000) | (600,000) |
Property catastrophe reinsurance | ||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||
Prior year favorable (unfavorable) development | $ 500,000 | $ (800,000) |
Allowance for expected credit_3
Allowance for expected credit losses - Premiums receivable (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Credit Loss [Abstract] | |
Balance at beginning of period | $ 273,657 |
Balance at end of period | 281,541 |
Allowance for Expected Credit Losses - Premiums Receivable | |
Balance at beginning of period | 0 |
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 | 156 |
Current period change for expected credit losses | 0 |
Write-offs charged against the allowance | 0 |
Balance at end of period | $ 156 |
Allowance for expected credit_4
Allowance for expected credit losses - Reinsurance recoverable (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($) | ||
Credit Loss [Abstract] | ||
Balance at beginning of period | $ 170,974 | |
Balance at end of period | 197,458 | |
Deferred tax asset | 25 | |
Allowance for Expected Credit Losses - Reinsurance Recoverables | ||
Balance at beginning of period | 0 | |
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020 | 297 | [1] |
Current period change for expected credit losses | 0 | |
Write-offs charged against the allowance | 0 | |
Balance at end of period | $ 297 | |
[1] | The allowance for credit losses is gross of deferred tax of $25 thousand. |
Investment information - Summar
Investment information - Summary of available for sale securities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | $ 749,835 | $ 739,456 | |
Gross Unrealized Gains | 15,031 | 8,242 | |
Gross Unrealized Losses | (47,314) | (1,990) | |
Fair Value | 717,552 | 745,708 | |
U.S. government and government agency bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 256,191 | 282,076 | |
Gross Unrealized Gains | 8,635 | 1,708 | |
Gross Unrealized Losses | 0 | [1] | (137) |
Fair Value | 264,826 | 283,647 | |
Non-U.S. government and government agency bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 151,000 | 155,834 | |
Gross Unrealized Gains | 4,040 | 2,326 | |
Gross Unrealized Losses | (6,564) | [1] | (41) |
Fair Value | 148,476 | 158,119 | |
Corporate bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 169,735 | 145,555 | |
Gross Unrealized Gains | 2,296 | 614 | |
Gross Unrealized Losses | (4,969) | [1] | (735) |
Fair Value | 167,062 | 145,434 | |
Asset-backed securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 144,808 | 129,456 | |
Gross Unrealized Gains | 0 | 3,530 | |
Gross Unrealized Losses | (31,225) | [1] | (1,033) |
Fair Value | 113,583 | 131,953 | |
Mortgage-backed securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 26,341 | 24,776 | |
Gross Unrealized Gains | 0 | 18 | |
Gross Unrealized Losses | (4,556) | [1] | (44) |
Fair Value | 21,785 | 24,750 | |
Municipal government and government agency bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cost or Amortized Cost | 1,760 | 1,759 | |
Gross Unrealized Gains | 60 | 46 | |
Gross Unrealized Losses | 0 | [1] | 0 |
Fair Value | $ 1,820 | $ 1,805 | |
[1] | Effective January 1, 2020, the Company adopted ASU 2016-13, and as a result any credit impairment losses on the Company’s available for sale securities are recorded as an allowance, subject to reversal. See Note 2. "Basis of presentation and significant accounting policies-(b) Recent accounting pronouncements-Issued and effective as of March 31, 2020 - Credit Losses" above for more information about ASU 2016-13. Included within the gross unrealized losses for corporate bonds is a credit allowance of $0.6 million for securities with an unrealized loss of $5.7 million as of March 31, 2020. |
Investment information - Aging
Investment information - Aging of available for sale securities in an unrealized loss position (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | $ 329,137 | $ 167,848 |
Less than 12 months - gross unrealized losses | (43,425) | (1,753) |
12 months or more - fair value | 13,069 | 24,840 |
12 months or more - gross unrealized losses | (3,889) | (237) |
Total - fair value | 342,206 | 192,688 |
Total - gross unrealized losses | (47,314) | (1,990) |
U.S. government and government agency bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 36,540 | |
Less than 12 months - gross unrealized losses | (137) | |
12 months or more - fair value | 0 | |
12 months or more - gross unrealized losses | 0 | |
Total - fair value | 36,540 | |
Total - gross unrealized losses | (137) | |
Non-U.S. government and government agency bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 120,115 | 51,779 |
Less than 12 months - gross unrealized losses | (6,564) | (1,027) |
12 months or more - fair value | 0 | 5,410 |
12 months or more - gross unrealized losses | 0 | (6) |
Total - fair value | 120,115 | 57,189 |
Total - gross unrealized losses | (6,564) | (1,033) |
Corporate bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 86,724 | 9,854 |
Less than 12 months - gross unrealized losses | (4,969) | (41) |
12 months or more - fair value | 0 | 0 |
12 months or more - gross unrealized losses | 0 | 0 |
Total - fair value | 86,724 | 9,854 |
Total - gross unrealized losses | (4,969) | (41) |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 100,514 | 55,194 |
Less than 12 months - gross unrealized losses | (27,336) | (504) |
12 months or more - fair value | 13,069 | 19,430 |
12 months or more - gross unrealized losses | (3,889) | (231) |
Total - fair value | 113,583 | 74,624 |
Total - gross unrealized losses | (31,225) | (735) |
Mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than 12 months - fair value | 21,784 | 14,481 |
Less than 12 months - gross unrealized losses | (4,556) | (44) |
12 months or more - fair value | 0 | 0 |
12 months or more - gross unrealized losses | 0 | 0 |
Total - fair value | 21,784 | 14,481 |
Total - gross unrealized losses | $ (4,556) | $ (44) |
Investment information - Maturi
Investment information - Maturity profile of available for sale securities (Details) - Fixed maturities - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Securities, Available-for-sale [Line Items] | ||
Due in one year or less - amortized cost | $ 15,055 | $ 9,235 |
Due in one year or less - estimated fair value | $ 14,846 | $ 9,248 |
Due in one year or less - % of fair value | 2.10% | 1.30% |
Due after one to five years - amortized cost | $ 423,133 | $ 414,235 |
Due after one to five years - estimated fair value | $ 428,376 | $ 417,921 |
Due after one to five years - % of fair value | 59.70% | 56.00% |
Due after five to ten years - amortized cost | $ 127,826 | $ 133,822 |
Due after five to ten years - estimated fair value | $ 127,555 | $ 136,329 |
Due after five to ten years - % of fair value | 17.80% | 18.30% |
Due after ten years - amortized cost | $ 12,672 | $ 11,833 |
Due after ten years - estimated fair value | $ 11,407 | $ 12,026 |
Due after ten years - % of fair value | 1.60% | 1.60% |
Total investments - available for sale - amortized cost | $ 749,835 | $ 739,456 |
Total investments - available for sale - estimated fair value | $ 717,552 | $ 745,708 |
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 | $ 144,808 | $ 145,555 |
No single maturity date - estimated fair value | $ 113,583 | $ 145,434 |
No single maturity date - % of fair value | 15.80% | 19.50% |
Mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
No single maturity date - amortized cost | $ 26,341 | $ 24,776 |
No single maturity date - estimated fair value | $ 21,785 | $ 24,750 |
No single maturity date - % of fair value | 3.00% | 3.30% |
Investment information - Fair v
Investment information - Fair value option (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 2,048,103 | $ 1,954,895 |
Investments, fair value option - gross unrealized gains | 23,639 | 36,601 |
Investments, fair value option - gross unrealized losses | (339,657) | (93,405) |
Investments, fair value option | 1,732,085 | 1,898,091 |
Equities, fair value through net income - cost | 88,134 | 78,031 |
Equities, fair value through net income - gross unrealized gains | 1,855 | 2,360 |
Equities, fair value through net income - gross unrealized losses | (26,820) | (15,053) |
Equities, fair value through net income | 63,169 | 65,338 |
Term loans | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 1,113,510 | 1,113,212 |
Investments, fair value option - gross unrealized gains | 986 | 7,340 |
Investments, fair value option - gross unrealized losses | (207,497) | (58,618) |
Investments, fair value option | 906,999 | 1,061,934 |
Fixed maturities | Corporate bonds | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 296,918 | 221,024 |
Investments, fair value option - gross unrealized gains | 4,038 | 8,430 |
Investments, fair value option - gross unrealized losses | (59,878) | (15,100) |
Investments, fair value option | 241,078 | 214,354 |
Fixed maturities | U.S. government and government agency bonds | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 586 | 1,963 |
Investments, fair value option - gross unrealized gains | 11 | 1 |
Investments, fair value option - gross unrealized losses | 0 | (2) |
Investments, fair value option | 597 | 1,962 |
Fixed maturities | Asset-backed securities | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 198,262 | 200,361 |
Investments, fair value option - gross unrealized gains | 2,231 | 3,329 |
Investments, fair value option - gross unrealized losses | (59,880) | (12,953) |
Investments, fair value option | 140,613 | 190,737 |
Fixed maturities | Mortgage-backed securities | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 7,289 | 7,399 |
Investments, fair value option - gross unrealized gains | 1,649 | 712 |
Investments, fair value option - gross unrealized losses | (409) | (405) |
Investments, fair value option | 8,529 | 7,706 |
Fixed maturities | Non-U.S. government and government agency bonds | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 1,443 | 1,449 |
Investments, fair value option - gross unrealized gains | 42 | 18 |
Investments, fair value option - gross unrealized losses | (103) | (11) |
Investments, fair value option | 1,382 | 1,456 |
Fixed maturities | Municipal government and government agency bonds | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 252 | 380 |
Investments, fair value option - gross unrealized gains | 1 | 0 |
Investments, fair value option - gross unrealized losses | 0 | (1) |
Investments, fair value option | 253 | 379 |
Short-term investments | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 348,059 | 325,542 |
Investments, fair value option - gross unrealized gains | 542 | 3,817 |
Investments, fair value option - gross unrealized losses | (4,740) | (56) |
Investments, fair value option | 343,861 | 329,303 |
Other investments measured at net asset value | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 28,673 | 28,672 |
Investments, fair value option - gross unrealized gains | 2,009 | 2,264 |
Investments, fair value option - gross unrealized losses | 0 | (475) |
Investments, fair value option | 30,682 | 30,461 |
Equities | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Investments, fair value option - cost or amortized cost | 53,111 | 54,893 |
Investments, fair value option - gross unrealized gains | 12,130 | 10,690 |
Investments, fair value option - gross unrealized losses | (7,150) | (5,784) |
Investments, fair value option | $ 58,091 | $ 59,799 |
Investment information - Matu_2
Investment information - Maturity profile of investments other than available for sale (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | $ 2,048,103 | $ 1,954,895 |
Investments, fair value option | 1,732,085 | 1,898,091 |
Fixed income and short term investments | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, fair value option - cost or amortized cost | 1,966,319 | 1,871,330 |
Investments, fair value option | $ 1,643,312 | $ 1,807,831 |
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 | $ 368,381 | $ 368,452 |
Investments, fair value option | $ 361,088 | $ 370,479 |
Investments, fair value option percentage of fair value | 22.00% | 20.50% |
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 | $ 809,886 | $ 779,643 |
Investments, fair value option | $ 660,746 | $ 742,960 |
Investments, fair value option percentage of fair value | 40.20% | 41.10% |
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 | $ 582,501 | $ 514,961 |
Investments, fair value option | $ 472,336 | $ 495,416 |
Investments, fair value option percentage of fair value | 28.70% | 27.40% |
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 | $ 514 | |
Investments, fair value option | $ 533 | |
Investments, fair value option percentage of fair value | 0.00% | |
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 | $ 198,262 | $ 200,361 |
Investments, fair value option | $ 140,613 | $ 190,737 |
Investments, fair value option percentage of fair value | 8.60% | 10.60% |
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 | $ 7,289 | $ 7,399 |
Investments, fair value option | $ 8,529 | $ 7,706 |
Investments, fair value option percentage of fair value | 0.50% | 0.40% |
Investment information - Credit
Investment information - Credit quality of investments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | |
Investments by Credit Rating Table [Line Items] | |||
Total investments | $ 2,512,806 | $ 2,709,137 | |
Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,360,864 | 2,553,539 | |
Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,017,003 | 2,224,236 | |
Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 906,999 | 1,061,934 | |
Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 408,140 | 372,473 | |
Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 265,423 | 285,609 | |
Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 254,196 | 336,171 | |
Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 30,314 | 32,456 | |
Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 149,858 | 133,409 | |
Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 2,073 | 2,184 | |
Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 343,861 | 329,303 | |
Other investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 30,682 | 30,461 | |
Equities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 121,260 | 125,137 | |
AAA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 32,825 | 28,924 | |
AAA | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 32,825 | 28,924 |
AAA | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 2,651 | 3,141 |
AAA | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AAA | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AAA | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AAA | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,628 | 2,006 |
AAA | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AAA | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AAA | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,023 | 1,135 |
AAA | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 30,174 | 25,783 |
AA | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 605,285 | 591,612 | |
AA | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 605,285 | 591,612 |
AA | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 450,498 | 454,770 |
AA | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AA | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 34,647 | 36,128 |
AA | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 265,423 | 285,609 |
AA | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AA | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
AA | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 149,858 | 132,460 |
AA | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 570 | 573 |
AA | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 154,787 | 136,842 |
A | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 100,864 | 147,059 | |
A | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 100,864 | 147,059 |
A | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 100,462 | 112,156 |
A | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
A | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 76,063 | 81,401 |
A | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
A | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 19,319 | 29,179 |
A | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 4,600 | 1,100 |
A | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
A | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 480 | 476 |
A | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 402 | 34,903 |
BBB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 367,545 | 404,813 | |
BBB | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 367,545 | 404,813 |
BBB | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 256,750 | 289,658 |
BBB | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BBB | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 58,018 | 41,103 |
BBB | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BBB | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 181,547 | 223,956 |
BBB | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 17,185 | 23,650 |
BBB | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 949 |
BBB | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BBB | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 110,795 | 115,155 |
BB | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 50,416 | 49,291 | |
BB | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 50,416 | 49,291 |
BB | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 50,416 | 49,291 |
BB | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 10,277 | 9,617 |
BB | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 19,222 | 9,003 |
BB | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BB | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 19,727 | 29,695 |
BB | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,190 | 976 |
BB | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BB | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
BB | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
B | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 782,378 | 837,894 | |
B | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 782,378 | 837,894 |
B | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 742,378 | 837,894 |
B | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 650,028 | 761,168 |
B | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 84,955 | 58,345 |
B | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
B | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 7,395 | 18,381 |
B | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
B | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
B | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
B | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 40,000 | 0 |
CCC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 281,572 | 359,881 | |
CCC | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 281,572 | 359,881 |
CCC | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 281,572 | 351,522 |
CCC | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 161,307 | 215,909 |
CCC | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 118,847 | 135,613 |
CCC | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CCC | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,418 | 0 |
CCC | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CCC | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CCC | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CCC | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 8,359 |
CC | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 4,695 | 6,823 | |
CC | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 4,695 | 6,823 |
CC | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 4,695 | 6,823 |
CC | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 2,823 | 6,823 |
CC | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,872 | 0 |
CC | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CC | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CC | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CC | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CC | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
CC | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 1,314 | 2,119 | |
C | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,314 | 2,119 |
C | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,314 | 2,119 |
C | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,314 | 2,119 |
C | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
C | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
D | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 7,841 | 2,497 | |
D | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 7,841 | 2,497 |
D | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 7,841 | 2,497 |
D | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 1,590 | 0 |
D | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 3,699 | 0 |
D | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
D | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
D | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 2,552 | 2,497 |
D | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
D | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
D | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
Not Rated | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | 126,129 | 122,626 | |
Not Rated | Fixed income and short term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 126,129 | 122,626 |
Not Rated | Fixed income instruments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 118,426 | 114,365 |
Not Rated | Term loans | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 79,660 | 66,298 |
Not Rated | Fixed maturities | Corporate bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 10,817 | 10,880 |
Not Rated | Fixed maturities | U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
Not Rated | Fixed maturities | Asset-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 23,162 | 32,954 |
Not Rated | Fixed maturities | Mortgage-backed securities | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 4,787 | 4,233 |
Not Rated | Fixed maturities | Non-U.S. government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
Not Rated | Fixed maturities | Municipal government and government agency bonds | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | 0 | 0 |
Not Rated | Short-term investments | |||
Investments by Credit Rating Table [Line Items] | |||
Total investments | [1] | $ 7,703 | $ 8,261 |
[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. |
Investment information - Net in
Investment information - Net investment income (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2020 | Mar. 31, 2019 | ||||
Net Investment Income [Line Items] | |||||
Allowance for expected credit losses on available for sale securities recognized in period | $ 600 | ||||
Net interest income | 27,803 | $ 30,434 | |||
Net unrealized gains (losses) | (285,456) | 32,438 | |||
Net realized gains (losses) | (5,046) | 1,282 | |||
Net investment income (loss) | (262,699) | 58,354 | |||
Investment management fees - related parties | |||||
Net Investment Income [Line Items] | |||||
Net interest income | (4,352) | (4,409) | |||
Net investment income (loss) | (4,352) | (4,409) | |||
Borrowing and miscellaneous other investment expenses | |||||
Net Investment Income [Line Items] | |||||
Net interest income | (5,669) | (8,298) | |||
Net investment income (loss) | (5,669) | (8,298) | |||
Investment performance fees - related parties | |||||
Net Investment Income [Line Items] | |||||
Net investment income (loss) | (5,800) | ||||
Term loans | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 21,018 | 22,410 | |||
Net unrealized gains (losses) | (155,233) | 9,366 | |||
Net realized gains (losses) | (8,145) | 64 | |||
Net investment income (loss) | (142,360) | 31,840 | |||
Fixed maturities - Fair value option | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 9,068 | 16,043 | |||
Net unrealized gains (losses) | (89,675) | 19,975 | |||
Net realized gains (losses) | (1,244) | (749) | |||
Net investment income (loss) | (81,851) | 35,269 | |||
Fixed maturities - Available for sale | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 4,660 | 3,422 | |||
Net unrealized gains (losses) | 0 | 0 | |||
Net realized gains (losses) | 2,180 | 395 | |||
Net investment income (loss) | 6,840 | [1] | 3,817 | [2] | |
Short-term investments | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 1,850 | 524 | |||
Net unrealized gains (losses) | (3,440) | (448) | |||
Net realized gains (losses) | 87 | 0 | |||
Net investment income (loss) | (1,503) | 76 | |||
Equities | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 0 | 120 | |||
Net unrealized gains (losses) | 76 | 2,158 | |||
Net realized gains (losses) | 1,041 | 0 | |||
Net investment income (loss) | [3] | 1,117 | 2,278 | ||
Equities, fair value through net income | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 377 | 622 | |||
Net unrealized gains (losses) | (12,275) | (1,989) | |||
Net realized gains (losses) | (212) | 1,572 | |||
Net investment income (loss) | [3] | (12,110) | 205 | ||
Other investments | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 851 | 0 | |||
Net unrealized gains (losses) | 220 | 1,794 | |||
Net realized gains (losses) | 0 | 0 | |||
Net investment income (loss) | 1,071 | 1,794 | |||
Other | |||||
Net Investment Income [Line Items] | |||||
Net interest income | 0 | 0 | |||
Net unrealized gains (losses) | (25,129) | 1,582 | |||
Net realized gains (losses) | 1,247 | 0 | |||
Net investment income (loss) | [4] | $ (23,882) | $ 1,582 | ||
[1] | Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $3.3 million and $1.1 million, respectively. Realized losses include an allowance for expected credit losses on available for sale securities of $0.6 million for the three months ended March 31, 2020. | ||||
[2] | Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $498.0 thousand and $103.0 thousand, respectively. | ||||
[3] | Net interest income includes dividends for securities held in long and short positions. | ||||
[4] | Other includes unrealized gains and unrealized losses for total return swaps. |
Investment information - Narrat
Investment information - Narrative (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020USD ($)positions | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($)positions | |
Investments, Debt and Equity Securities [Abstract] | |||
Number of positions in an unrealized loss position | positions | 103 | 48 | |
Total - gross unrealized losses on fixed maturities | $ 47,314,000 | $ 1,990,000 | |
Total number of positions | positions | 140 | 146 | |
Percentage of positions in unrealized loss | 10.00% | ||
Allowance for expected credit losses on available for sale securities recognized in period | $ 600,000 | ||
Fixed maturities, AFS, realized gain | 3,300,000 | $ 498,000 | |
Fixed maturities, AFS, realized loss | 1,100,000 | 103,000 | |
Restricted Assets [Line Items] | |||
Allowance for expected credit losses on available for sale securities | 600,000 | ||
Transfer from investments | 13,467,000 | $ 0 | |
Restricted assets | 2,100,000,000 | $ 2,100,000,000 | |
Deposits with US regulatory authorities | |||
Restricted Assets [Line Items] | |||
Restricted assets | 5,100,000 | 6,400,000 | |
Corporate bonds | |||
Investments, Debt and Equity Securities [Abstract] | |||
Total - gross unrealized losses on fixed maturities | 4,969,000 | 41,000 | |
Restricted Assets [Line Items] | |||
Unrealized losses on investments with credit losses | 5,700,000 | ||
Equities, fair value through net income | |||
Restricted Assets [Line Items] | |||
Transfer from investments | 28,700,000 | ||
Transfer to investments | 23,000,000 | ||
Other investments, fair value option | |||
Restricted Assets [Line Items] | |||
Transfer to investments | 28,700,000 | ||
Term loans | |||
Restricted Assets [Line Items] | |||
Transfer from investments | 13,500,000 | 16,900,000 | |
Short-term investments | |||
Restricted Assets [Line Items] | |||
Transfer from investments | $ 6,500,000 | ||
Transfer to investments | $ 13,500,000 |
Fair value - Fair value hierarc
Fair value - Fair value hierarchy (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | |||
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 | $ 571,218 | $ 617,060 | |||
Total liabilities measured at fair value | 0 | 0 | |||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other underwriting derivative liabilities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total liabilities measured at fair value | 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 | [1] | 0 | [2] | |
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 | 265,310 | 285,500 | |||
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 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) | 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 | 296,158 | 318,012 | |||
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 | 9,750 | 13,548 | |||
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 | ||||
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 | [3] | 0 | |||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other investments measured at net asset value | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | [2] | 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 | 1,763,906 | 1,917,859 | |||
Total liabilities measured at fair value | 54,116 | 66,514 | |||
Significant Other Observable Inputs (Level 2) | Other underwriting derivative liabilities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total liabilities measured at fair value | 314 | ||||
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 | 23,726 | [1] | 257 | [2] | |
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 | 871,054 | 1,025,886 | |||
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 | 407,175 | 371,540 | |||
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 | 30,076 | 66,257 | |||
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 | 113 | 109 | |||
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 | 254,196 | 336,171 | |||
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 | 30,314 | 32,456 | |||
Significant Other Observable Inputs (Level 2) | Fixed maturities | Non-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 | 149,858 | 133,409 | |||
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 | 2,073 | 2,184 | |||
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 | 47,703 | 11,291 | |||
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 | 1,420 | 2,998 | |||
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 | ||||
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 | [3] | 1,667 | |||
Significant Other Observable Inputs (Level 2) | Other investments measured at net asset value | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | [2] | 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 | 147,000 | 145,572 | |||
Total liabilities measured at fair value | 0 | 0 | |||
Significant Unobservable Inputs (Level 3) | Other underwriting derivative liabilities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total liabilities measured at fair value | 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 | [1] | 0 | [2] | |
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 | 35,945 | 36,048 | |||
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 | 965 | 933 | |||
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 | 0 | |||
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 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 | 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 | 110,090 | 108,591 | |||
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 | ||||
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 | [3] | 0 | |||
Significant Unobservable Inputs (Level 3) | Other investments measured at net asset value | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | [2] | 0 | 0 | ||
Estimated Fair Value | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | 2,512,806 | 2,710,952 | |||
Total liabilities measured at fair value | 54,116 | 66,514 | |||
Estimated Fair Value | Other underwriting derivative liabilities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total liabilities measured at fair value | 314 | ||||
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 | 23,726 | [1] | 257 | [2] | |
Estimated Fair Value | Term loans | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | 906,999 | 1,061,934 | |||
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 | 408,140 | 372,473 | |||
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 | 30,076 | 66,257 | |||
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 | 265,423 | 285,609 | |||
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 | 254,196 | 336,171 | |||
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 | 30,314 | 32,456 | |||
Estimated Fair Value | Fixed maturities | Non-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 | 149,858 | 133,409 | |||
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 | 2,073 | 2,184 | |||
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 | 343,861 | 329,303 | |||
Estimated Fair Value | Equities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | 121,260 | 125,137 | |||
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 | ||||
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 | [3] | 1,667 | |||
Estimated Fair Value | Other investments measured at net asset value | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Total assets measured at fair value | [2] | $ 30,682 | $ 30,461 | ||
[1] | Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in “other liabilities” in the consolidated balance sheets as of March 31, 2020 | ||||
[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. | ||||
[3] | 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. |
Fair value - Level 3 rollforwar
Fair value - Level 3 rollforward (Details) - Recurring - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Beginning balance | $ 145,572 | $ 164,767 | ||
Transfers in (out) of Level 3 | [1] | (22,560) | ||
Net Purchases (Sales) | 3,235 | [2] | 30,607 | |
Net Unrealized Gains (Losses) | [3] | (1,807) | (677) | |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | (399) | ||
Ending balance | 147,000 | 171,738 | ||
Term loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Beginning balance | 36,048 | 47,479 | ||
Transfers in (out) of Level 3 | [1] | 0 | ||
Net Purchases (Sales) | (74) | [2] | 163 | |
Net Unrealized Gains (Losses) | [3] | (29) | (274) | |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | 0 | ||
Ending balance | 35,945 | 47,368 | ||
Fixed maturities | Corporate bonds | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Beginning balance | 933 | 24,277 | ||
Transfers in (out) of Level 3 | [1] | 0 | ||
Net Purchases (Sales) | 32 | [2] | (90) | |
Net Unrealized Gains (Losses) | [3] | 0 | (69) | |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | (399) | ||
Ending balance | 965 | 23,719 | ||
Fixed maturities | Asset-backed securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Beginning balance | 22,560 | |||
Transfers in (out) of Level 3 | [1] | (22,560) | ||
Net Purchases (Sales) | 0 | |||
Net Unrealized Gains (Losses) | [3] | 0 | ||
Net Unrealized Foreign Exchange Gains (Losses) | 0 | |||
Ending balance | 0 | |||
Equities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Beginning balance | 108,591 | 70,451 | ||
Transfers in (out) of Level 3 | [1] | 0 | ||
Net Purchases (Sales) | 3,277 | [2] | 30,534 | |
Net Unrealized Gains (Losses) | [3] | (1,778) | (334) | |
Net Unrealized Foreign Exchange Gains (Losses) | 0 | 0 | ||
Ending balance | $ 110,090 | $ 100,651 | ||
[1] | During the three months ended March 31, 2019, the Company obtained pricing for an asset-backed security, for 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 three months ended March 31, 2020, the net purchases (sales) consisted of purchases of $3.3 million of equities and $32.0 thousand of corporate bonds, partially offset by calls and redemptions of $74.0 thousand of term loans. For the three months ended March 31, 2019, the net purchases (sales) consisted of purchases of $37.8 million of equities and $237.0 thousand of term loans, offset in part by sales, calls and redemptions of $7.3 million of equities, $89.9 thousand of corporate bonds and $74.0 thousand of term loans. | |||
[3] | Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss). |
Fair value - Narrative (Details
Fair value - Narrative (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Jul. 02, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total assets and liabilities measured at fair value | $ 2,500,000,000 | $ 2,600,000,000 | ||
Total assets and liabilities measured at fair value priced using non-binding broker quotes | $ 130,000,000 | $ 131,800,000 | ||
Total assets and liabilities measured at fair value priced using non-binding broker quotes (percentage) | 5.30% | 5.00% | ||
Senior notes | $ 172,486,000 | $ 172,418,000 | ||
Estimated fair value of senior notes | 167,200,000 | |||
Recurring | Significant Unobservable Inputs (Level 3) | Equities | ||||
Purchases and sales of level 3 assets | ||||
Purchases | 3,300,000 | $ 37,800,000 | ||
Sales | 7,300,000 | |||
Recurring | Significant Unobservable Inputs (Level 3) | Fixed maturities | Corporate bonds | ||||
Purchases and sales of level 3 assets | ||||
Purchases | 32,000 | |||
Sales | 89,900 | |||
Recurring | Significant Unobservable Inputs (Level 3) | Term loans | ||||
Purchases and sales of level 3 assets | ||||
Purchases | 237,000 | |||
Sales | $ 74,000 | $ 74,000 | ||
Senior notes | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Face amount of senior notes | $ 175,000,000 | |||
Stated interest rate (percent) | 6.50% | 6.50% |
Derivatives - Fair values and n
Derivatives - Fair values and notional amounts of derivatives (Details) - Not designated as hedging instrument - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | |
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | $ 0 | $ 1,815 | |
Liability Derivatives | 24,040 | 257 | |
Net Derivatives | (24,040) | 1,558 | |
Notional Amount | [1] | 169,668 | 222,557 |
Other underwriting derivatives | |||
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | 0 | 148 | |
Liability Derivatives | 314 | 0 | |
Net Derivatives | (314) | 148 | |
Notional Amount | [1] | 56,923 | 59,879 |
Total return swaps | |||
Derivatives, Fair Value [Line Items] | |||
Asset Derivatives | 0 | 1,667 | |
Liability Derivatives | 23,726 | 257 | |
Net Derivatives | (23,726) | 1,410 | |
Notional Amount | [1] | $ 112,745 | $ 162,678 |
[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 | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other underwriting income (loss) | Underwriting derivatives | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Realized and unrealized gains and losses on derivative instruments | $ 133 | $ 592 |
Realized and unrealized gains (losses) on investments | Options | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Realized and unrealized gains and losses on derivative instruments | 1,081 | 801 |
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 | $ (23,882) | $ 1,582 |
Derivatives - Narrative (Detail
Derivatives - Narrative (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Short-term investments | ||
Derivative [Line Items] | ||
Collateral held by counterparty | $ 62.1 | $ 64.1 |
Underwriting derivatives | Fixed maturities | ||
Derivative [Line Items] | ||
Collateral held by counterparty | $ 12.5 | $ 13.1 |
Earnings per common share (Deta
Earnings per common share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Numerator: | |||
Net income (loss) before preference dividends | $ (266,608) | $ 52,539 | |
Preference dividends | (1,171) | (4,907) | |
Net income (loss) available to common shareholders | $ (267,779) | $ 47,632 | |
Denominator: | |||
Weighted average common shares outstanding - basic and diluted | [1] | 19,951,932 | 22,682,875 |
Earnings (loss) per common share: | |||
Earnings (loss) per share, basic and diluted | $ (13.42) | $ 2.10 | |
Granted during the period, shares | 63,591 | ||
Number of restricted share units and common shares that are not vested, shares | 48,916 | ||
Incremental Common Shares Attributable to Participating Nonvested Shares with Non-forfeitable Dividend Rights | 13,727 | ||
Antidilutive securities excluded from computation of earnings per share, shares | 1,704,691 | ||
[1] | 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 expired 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 (Details)
Income taxes (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Deferred tax assets, valuation allowance | $ 1,500,000 | $ 1,300,000 | |
Net deferred tax assets after valuation allowance | 0 | 0 | |
Income tax expense (benefit) | 0 | $ 0 | |
Unrecognized tax benefits | $ 0 | $ 0 | |
Income Tax Disclosure [Line Items] | |||
U.S. statutory tax rate (percentage) | 21.00% | ||
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% |
Transactions with related par_3
Transactions with related parties - Transactions with ACGL (Details) $ in Thousands | Aug. 01, 2019USD ($) | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | Jul. 02, 2019USD ($) | Dec. 31, 2018USD ($) | Mar. 31, 2014USD ($)executive | |
Related Party Transaction [Line Items] | ||||||||
Repurchase of preference shares | $ 2,867 | $ 0 | ||||||
Ceding fee expense | 4,000 | 4,200 | ||||||
Consolidated statement of income (loss) items: | ||||||||
Gross premiums written | 234,902 | 186,689 | ||||||
Gross premiums ceded | (48,202) | (41,302) | ||||||
Net premiums earned | (140,039) | (146,094) | ||||||
Loss and loss adjustment expenses | (110,676) | (110,850) | ||||||
Acquisition expenses | (28,367) | (33,974) | ||||||
Interest expense | 2,912 | 0 | ||||||
Preference dividends | 1,171 | 4,907 | ||||||
Consolidated balance sheet items: | ||||||||
Total investments | 2,512,806 | $ 2,709,137 | ||||||
Premiums receivable | 281,541 | 273,657 | ||||||
Prepaid reinsurance premiums | 128,570 | 132,577 | ||||||
Deferred acquisition costs, net | 71,402 | 64,044 | ||||||
Funds held by reinsurers | 40,520 | 42,505 | ||||||
Reserve for losses and loss adjustment expenses | 1,300,249 | 1,104,532 | 1,263,628 | $ 1,032,760 | ||||
Unearned premiums | 478,663 | 438,907 | ||||||
Losses payable | 46,424 | 61,314 | ||||||
Reinsurance balances payable | 71,204 | 77,066 | ||||||
Senior notes | 172,486 | 172,418 | ||||||
Amounts due to affiliates | 4,168 | 4,467 | ||||||
Contingently redeemable preference shares | $ 52,328 | 221,083 | 52,305 | $ 220,992 | ||||
ACGL and Subsidiaries | Arch Capital Group Limited | ||||||||
Related Party Transaction [Line Items] | ||||||||
Amount of investment by related party | $ 100,000 | |||||||
Percentage of common equity owned by related party | 12.60% | 11.00% | ||||||
Related party - number of executives serving as directors | executive | 2 | |||||||
Percentage of preference equity owned by related party | 6.60% | |||||||
Face amount of senior notes | $ 35,000 | |||||||
Consolidated statement of income (loss) items: | ||||||||
Interest expense | $ 582 | 0 | ||||||
Preference dividends | 78 | 325 | ||||||
Consolidated balance sheet items: | ||||||||
Total investments | 680,448 | 815,528 | ||||||
Premiums receivable | 122,147 | 106,462 | ||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 88,179 | 79,597 | ||||||
Prepaid reinsurance premiums | 74,696 | 75,249 | ||||||
Deferred acquisition costs, net | 34,760 | 31,609 | ||||||
Funds held by reinsurers | 26,964 | 29,867 | ||||||
Reserve for losses and loss adjustment expenses | 684,802 | 693,861 | ||||||
Unearned premiums | 160,328 | 143,852 | ||||||
Losses payable | 32,146 | 39,619 | ||||||
Reinsurance balances payable | 58,604 | 62,301 | ||||||
Senior notes | 34,497 | 34,484 | 35,000 | |||||
Amounts due to affiliates | 32,146 | 4,467 | ||||||
Other liabilities - contingent commissions | 3,911 | 5,516 | ||||||
Contingently redeemable preference shares | 3,463 | $ 3,462 | ||||||
ACGL and Subsidiaries | AUL and AUI | ||||||||
Consolidated statement of income (loss) items: | ||||||||
Acquisition expenses | (6,563) | (4,948) | ||||||
Quota share business | ACGL and Subsidiaries | Arch Capital Group Limited | ||||||||
Consolidated statement of income (loss) items: | ||||||||
Gross premiums ceded | (19,828) | (16,990) | ||||||
Net premiums earned | (19,788) | (12,940) | ||||||
Loss and loss adjustment expenses | (15,815) | (9,138) | ||||||
Acquisition expenses | [1] | (4,537) | (3,104) | |||||
Direct business | ACGL and Subsidiaries | Arch Capital Group Limited | ||||||||
Consolidated statement of income (loss) items: | ||||||||
Gross premiums written | 81,348 | 72,005 | ||||||
Net premiums earned | (58,785) | (61,838) | ||||||
Loss and loss adjustment expenses | (46,541) | (45,370) | ||||||
Acquisition expenses | [2] | $ (13,853) | $ (19,915) | |||||
Senior notes | ||||||||
Related Party Transaction [Line Items] | ||||||||
Face amount of senior notes | $ 175,000 | |||||||
Stated interest rate (percent) | 6.50% | 6.50% | ||||||
Contingently redeemable preference share | Arch Capital Group Limited | ||||||||
Related Party Transaction [Line Items] | ||||||||
Repurchase of preference shares | $ 11,500 | |||||||
[1] | Acquisition expenses relating to the ACGL outward quota share agreements referred to above. | |||||||
[2] | Acquisition expenses relating to the ACGL inward quota share agreements referred to above. For the three months ended March 31, 2020 and 2019, the Company incurred ceding fees to Arch, in aggregate, of $4.0 million and $4.2 million, respectively, under these inward retrocession agreements. |
Transactions with related par_4
Transactions with related parties - Transactions with other ACGL entities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Consolidated statement of income (loss) items: | ||
Investment management fees - related parties | $ 4,352 | $ 4,409 |
Acquisition expenses | 28,367 | 33,974 |
General and administrative expenses | $ 7,139 | 7,240 |
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 | $ 253 | 262 |
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 | $ 6,563 | 4,948 |
General and administrative expenses | 988 | 2,011 |
Total related party expenses | $ 7,551 | $ 6,959 |
Transactions with related par_5
Transactions with related parties - Transactions with HPS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2017 | |
Consolidated statement of income (loss) items: | ||||
Investment management fees - related parties | $ 4,352 | $ 4,409 | ||
Investment performance fees - related parties | 0 | 5,800 | ||
Consolidated balance sheet items: | ||||
Other investments, at fair value | 30,682 | $ 30,461 | ||
Investment management and performance fees payable | $ 5,428 | 17,762 | ||
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 | ||
Fair value of fund | $ 30,700 | |||
Company's ownership percentage of master fund | 12.00% | |||
Consolidated statement of income (loss) items: | ||||
Investment management fees - related parties | $ 4,099 | 4,147 | ||
Investment performance fees - related parties | 0 | 5,800 | ||
Total related party expense | 4,099 | $ 9,947 | ||
Consolidated balance sheet items: | ||||
Other investments, at fair value | 30,682 | 30,461 | ||
Investment management and performance fees payable | $ 5,428 | $ 17,762 |
Transactions with related par_6
Transactions with related parties - Transactions with Artex (Details) | 3 Months Ended | ||
Mar. 31, 2020USD ($)executive | Mar. 31, 2020GBP (£)executive | Mar. 31, 2019USD ($) | |
ACGL and Subsidiaries | |||
Related Party Transaction [Line Items] | |||
Insurance management fees paid | $ | $ 0 | $ 0 | |
Artex | |||
Related Party Transaction [Line Items] | |||
Related party - number of executives serving as directors | executive | 2 | 2 | |
Insurance management agreement termination, notice period required | 12 months | 12 months | |
Insurance management fees paid | $ | $ 86,000 | $ 131,000 | |
Artex | Minimum | |||
Related Party Transaction [Line Items] | |||
Insurance management agreed service fees | £ | £ 150,000 | ||
Artex | 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 | Mar. 31, 2020 | Dec. 31, 2019 |
Concentrations of credit risk | ACGL and Subsidiaries | AM Best, A plus Rating | ||
Concentration Risk [Line Items] | ||
Reinsurance recoverables and prepaid reinsurance premiums | $ 104.3 | $ 92.5 |
Commitments and contingencies_2
Commitments and contingencies - Credit facilities (Details) - USD ($) $ in Thousands | Sep. 20, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | May 14, 2019 | Nov. 30, 2017 |
Line of Credit Facility [Line Items] | |||||
Revolving credit agreement borrowings | $ 576,486 | $ 484,287 | |||
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 | 48,700 | 51,000 | |||
Lloyds Bank and BMO Capital Markets | Letter of credit facility | |||||
Line of Credit Facility [Line Items] | |||||
Credit facility, maximum borrowing capacity | $ 100,000 | ||||
Credit facility term | 364 days | ||||
Revolving credit agreement borrowings | 25,200 | 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 | 500,600 | 484,300 | |||
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 | Mar. 31, 2020USD ($) | Mar. 31, 2020CHF (SFr) | Dec. 31, 2019USD ($) |
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 576,486 | $ 484,287 | |
Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | 75,900 | 0 | |
Cash and investments held on deposit with custodian | 108,200 | $ 0 | |
EUR denominated borrowings | Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | SFr | SFr 0.6 | ||
USD denominated borrowings equivalent | Custodian bank facility | |||
Short-term Debt [Line Items] | |||
Revolving credit agreement borrowings | $ 700 |
Commitments and contingencies_4
Commitments and contingencies - Investment commitments (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Acquisition commitment | ||
Other Commitments [Line Items] | ||
Acquisition commitment percentage of ownership | 100.00% | |
Equities | Investment commitment | ||
Other Commitments [Line Items] | ||
Commitment, amount | $ 23.1 | $ 26.4 |
Term loans | Investment commitment | ||
Other Commitments [Line Items] | ||
Commitment, amount | $ 8.4 |
Leases - Additional information
Leases - Additional information regarding real estate operating leases (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Lease cost: | |
Operating lease | $ 62 |
Other information on operating lease: | |
Cash payments included in the measurement of lease liability reported in operating cash flows | 71 |
Operating lease liability | $ 908 |
Weighted average discount rate | 3.90% |
Weighted average remaining lease term in years | 3 years 6 months |
Other assets | |
Other information on operating lease: | |
Operating lease, right-of-use asset | $ 908 |
Other liabilities | |
Other information on operating lease: | |
Operating lease liability | $ 908 |
Leases - Contractual maturity o
Leases - Contractual maturity of lease liability (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
Remainder of 2020 | $ 212 |
2021 | 283 |
2022 | 283 |
2023 | 189 |
Total undiscounted lease payments | 967 |
Less: present value adjustment | (59) |
Operating lease liability | $ 908 |
Senior notes (Details)
Senior notes (Details) - USD ($) $ in Thousands | Jul. 02, 2019 | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Senior notes | $ 172,486 | $ 172,418 | |
Unamortized debt issuance expense | 2,500 | 2,600 | |
ACGL and Subsidiaries | Arch Capital Group Limited | |||
Debt Instrument [Line Items] | |||
Face amount of senior notes | $ 35,000 | ||
Senior notes | 35,000 | $ 34,497 | $ 34,484 |
Senior notes | |||
Debt Instrument [Line Items] | |||
Face amount of senior notes | $ 175,000 | ||
Stated interest rate (percent) | 6.50% | 6.50% | |
Proceeds from issuance of senior long term debt | $ 172,300 | ||
Senior notes, redemption price percentage | 100.00% |
Contingently redeemable prefe_3
Contingently redeemable preferred shares - Reconciliation of beginning and ending balances of preference shares (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Preferred Shares [Abstract] | ||
Preference shares: beginning of period | $ 52,305 | $ 220,992 |
Accretion discount and issuance costs on remaining preference shares | 23 | 91 |
Preference shares: end of period | $ 52,328 | $ 221,083 |
Contingently redeemable prefe_4
Contingently redeemable preferred shares - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 01, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jul. 31, 2019 | Mar. 31, 2014 |
Class of Stock [Line Items] | |||||
Repurchase of preference shares | $ 2,867 | $ 0 | |||
Dividends paid on redeemable preference shares | $ 1,148 | $ 4,816 | |||
Contingently redeemable preference share | |||||
Class of Stock [Line Items] | |||||
Number of shares issued | 9,065,200 | 9,065,200 | |||
Stated dividend rate (percent) | 8.50% | ||||
Preference shares, par value per share | $ 0.01 | ||||
Preference shares, liquidation preference per share | 25 | ||||
Preference shares, issue price per share | $ 24.50 | ||||
Number of shares redeemed during the period | 6,919,998 | ||||
Redemption price per share | $ 25.19748 | ||||
Contingently redeemable preference share | Prior to June 30, 2019 | |||||
Class of Stock [Line Items] | |||||
Stated dividend rate (percent) | 8.50% | ||||
Contingently redeemable preference share | On or after June 30, 2019 | |||||
Class of Stock [Line Items] | |||||
Preference share dividends, 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 |
Share Transactions - Share-base
Share Transactions - Share-based compensation (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 28, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted during the period, shares | 63,591 | ||
General and administrative expenses | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 600,000 | $ 0 | |
Performance-vesting restricted share units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted during the period, shares | 63,591 | ||
Weighted average grant date fair value, per share | $ 23 | ||
Performance-vesting restricted share units | Immediate vesting | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted during the period, shares | 14,675 | ||
Share-based compensation, shares issued in period | 10,870 | ||
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 | 48,916 | ||
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 | 678,437 |
Share Transactions - Share repu
Share Transactions - Share repurchase program (Details) $ / shares in Units, $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($)$ / sharesshares | |
Share Transactions [Abstract] | |
Authorized amount of share repurchase program | $ 50 |
Number of shares repurchased | shares | 127,744 |
Shares repurchased, average cost per share | $ / shares | $ 22.42 |
Remaining authorized repurchase amount | $ 47.1 |
Number of shares acquired since inception | shares | 2,900,000 |
Shares repurchased, value | $ 77.9 |