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Section 1: 10-Q (10-Q)

agii-10q_20150630.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 1-15259

 

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

 

 

Bermuda

 

98-0214719

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

110 Pitts Bay Road
Pembroke HM08
Bermuda

 

P.O. Box HM 1282
Hamilton HM FX
Bermuda

(Address of principal executive offices)

 

(Mailing address)

(441) 296-5858

(Registrant’s telephone number, including area code)

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

 

Title of Security

 

Name of Each Exchange on Which Registered

Common Stock, par value of $1.00 per share

 

NASDAQ Global Select Market

Guarantee of Argo Group US, Inc.  6.500% Senior Notes due 2042

 

NASDAQ Stock Market LLC

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

None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer  x

Accelerated filer   ¨

Non-accelerated filer  ¨

Smaller reporting company  ¨

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

Indicate the number of shares outstanding (net of treasury shares) of each of the issuer’s classes of common shares as of August 3, 2015.

 

Title

Outstanding

Common Shares, par value $1.00 per share

27,925,756

 

 

 

 

 

 


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

INDEX

 

 

 

 

Page

PART I. Financial Information

3

 

Item 1.

 

Consolidated Financial Statements (unaudited)

3

 

 

Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

3

 

 

Consolidated Statements of Income for three and six months ended June 30, 2015 and 2014

4

 

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014

5

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014

6

 

 

Notes to Consolidated Financial Statements

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

 

Controls and Procedures

47

PART II. Other Information

47

 

Item 1.

 

Legal Proceedings

47

Item 1A.

 

Risk Factors

47

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

 

Defaults Upon Senior Securities

48

Item 4.

 

Mine Safety Disclosures

48

Item 5.

 

Other Information

48

Item 6.

 

Exhibits

49

 

 

Signatures

50

 

 

 

 


PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014 *

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed maturities, at fair value:

 

 

 

 

 

 

 

 

Available-for-sale (cost: 2015 - $2,759.5; 2014 - $2,817.2)

 

$

2,764.0

 

 

$

2,840.7

 

Equity securities, at fair value (cost: 2015 - $332.4; 2014 - $307.3)

 

 

486.6

 

 

 

486.3

 

Other investments (cost: 2015 - $501.1; 2014 - $488.9)

 

 

508.9

 

 

 

495.1

 

Short-term investments, at fair value (cost: 2015 - $322.7; 2014 - $275.8)

 

 

322.7

 

 

 

275.8

 

Total investments

 

 

4,082.2

 

 

 

4,097.9

 

Cash

 

 

106.5

 

 

 

81.0

 

Accrued investment income

 

 

20.6

 

 

 

22.1

 

Premiums receivable

 

 

448.9

 

 

 

353.6

 

Reinsurance recoverables

 

 

1,019.2

 

 

 

997.2

 

Goodwill

 

 

152.2

 

 

 

152.2

 

Intangible assets, net of accumulated amortization

 

 

76.5

 

 

 

78.6

 

Current income taxes receivable, net

 

 

6.0

 

 

 

14.9

 

Deferred acquisition costs, net

 

 

139.3

 

 

 

124.6

 

Ceded unearned premiums

 

 

261.9

 

 

 

207.6

 

Other assets

 

 

230.7

 

 

 

226.6

 

Total assets

 

$

6,544.0

 

 

$

6,356.3

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Reserves for losses and loss adjustment expenses

 

$

3,078.2

 

 

$

3,042.4

 

Unearned premiums

 

 

896.4

 

 

 

817.2

 

Accrued underwriting expenses

 

 

118.9

 

 

 

143.1

 

Ceded reinsurance payable, net

 

 

261.5

 

 

 

178.8

 

Funds held

 

 

58.8

 

 

 

55.0

 

Senior unsecured fixed rate notes

 

 

143.8

 

 

 

143.8

 

Other indebtedness

 

 

56.7

 

 

 

62.0

 

Junior subordinated debentures

 

 

172.7

 

 

 

172.7

 

Deferred tax liabilities, net

 

 

41.2

 

 

 

53.0

 

Other liabilities

 

 

46.9

 

 

 

41.6

 

Total liabilities

 

 

4,875.1

 

 

 

4,709.6

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common shares - $1.00 par, 500,000,000 shares authorized; 37,021,341

   and 34,318,224 shares issued and outstanding at June 30, 2015 and

   December 31, 2014, respectively

 

 

37.0

 

 

 

34.3

 

Additional paid-in capital

 

 

960.6

 

 

 

836.3

 

Treasury shares (9,095,585 and 8,606,489 shares at June 30, 2015

   and December 31, 2014, respectively)

 

 

(326.3

)

 

 

(301.4

)

Retained earnings

 

 

920.5

 

 

 

969.4

 

Accumulated other comprehensive income, net of taxes

 

 

77.1

 

 

 

108.1

 

Total shareholders' equity

 

 

1,668.9

 

 

 

1,646.7

 

Total liabilities and shareholders' equity

 

$

6,544.0

 

 

$

6,356.3

 

 

* Derived from audited consolidated financial statements.

See accompany notes.

 

 

 

3


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except number of shares and per share amount)

(Unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Premiums and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned premiums

 

$

346.0

 

 

$

336.1

 

 

$

680.6

 

 

$

661.8

 

Net investment income

 

 

21.8

 

 

 

20.6

 

 

 

42.6

 

 

 

43.9

 

Net realized investment and other gains

 

 

5.3

 

 

 

18.5

 

 

 

21.3

 

 

 

29.6

 

Total revenue

 

 

373.1

 

 

 

375.2

 

 

 

744.5

 

 

 

735.3

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

190.6

 

 

 

185.1

 

 

 

374.3

 

 

 

367.6

 

Underwriting, acquisition and insurance expenses

 

 

139.5

 

 

 

136.8

 

 

 

269.1

 

 

 

265.5

 

Interest expense

 

 

4.6

 

 

 

5.1

 

 

 

9.5

 

 

 

10.1

 

Fee expense, net

 

 

0.7

 

 

 

0.1

 

 

 

1.1

 

 

 

1.5

 

Foreign currency exchange loss (gain)

 

 

3.0

 

 

 

3.4

 

 

 

(6.6

)

 

 

3.2

 

Total expenses

 

 

338.4

 

 

 

330.5

 

 

 

647.4

 

 

 

647.9

 

Income before income taxes

 

 

34.7

 

 

 

44.7

 

 

 

97.1

 

 

 

87.4

 

Provision for income taxes

 

 

6.8

 

 

 

6.1

 

 

 

10.4

 

 

 

8.6

 

Net income

 

$

27.9

 

 

$

38.6

 

 

$

86.7

 

 

$

78.8

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.00

 

 

$

1.34

 

 

$

3.09

 

 

$

2.72

 

Diluted

 

$

0.98

 

 

$

1.32

 

 

$

3.03

 

 

$

2.67

 

Dividend declared per common share

 

$

0.20

 

 

$

0.16

 

 

$

0.40

 

 

$

0.30

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

27,948,978

 

 

 

28,761,138

 

 

 

28,038,836

 

 

 

28,962,406

 

Diluted

 

 

28,470,741

 

 

 

29,274,571

 

 

 

28,573,562

 

 

 

29,467,713

 

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net realized investment and other gains before other-than-

   temporary impairment losses

 

$

6.7

 

 

$

19.9

 

 

$

23.2

 

 

$

31.0

 

Other-than-temporary impairment losses recognized in earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other-than-temporary impairment losses on fixed maturities

 

 

(0.5

)

 

 

(1.2

)

 

 

(0.9

)

 

 

(1.2

)

Other-than-temporary impairment losses on equity securities

 

 

(0.9

)

 

 

(0.2

)

 

 

(1.0

)

 

 

(0.2

)

Impairment losses recognized in earnings

 

 

(1.4

)

 

 

(1.4

)

 

 

(1.9

)

 

 

(1.4

)

Net realized investment and other gains

 

$

5.3

 

 

$

18.5

 

 

$

21.3

 

 

$

29.6

 

 

See accompanying notes.

 

 

 

4


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net income

 

$

27.9

 

 

$

38.6

 

 

$

86.7

 

 

$

78.8

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

0.5

 

 

 

0.6

 

 

 

(2.6

)

 

 

0.4

 

Unrealized gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Losses) gains arising during the year

 

 

(10.3

)

 

 

49.8

 

 

 

(34.6

)

 

 

54.9

 

Reclassification adjustment for gains included in net income

 

 

(9.5

)

 

 

(16.1

)

 

 

(7.0

)

 

 

(16.2

)

Other comprehensive (loss) income before tax

 

 

(19.3

)

 

 

34.3

 

 

 

(44.2

)

 

 

39.1

 

Income tax (benefit) provision related to other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Losses) gains arising during the year

 

 

(7.5

)

 

 

11.8

 

 

 

(10.3

)

 

 

15.6

 

Reclassification adjustment for gains included in net income

 

 

(2.8

)

 

 

(3.0

)

 

 

(2.9

)

 

 

(3.1

)

Income tax (benefit) provision related to other comprehensive (loss) income

 

 

(10.3

)

 

 

8.8

 

 

 

(13.2

)

 

 

12.5

 

Other comprehensive (loss) income, net of tax

 

 

(9.0

)

 

 

25.5

 

 

 

(31.0

)

 

 

26.6

 

Comprehensive income

 

$

18.9

 

 

$

64.1

 

 

$

55.7

 

 

$

105.4

 

 

See accompanying notes.

 

 

 

5


 

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

86.7

 

 

$

78.8

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

19.6

 

 

 

18.0

 

Share-based payments expense

 

 

12.9

 

 

 

11.2

 

Excess tax benefit from share-based payment arrangements

 

 

(0.1

)

 

 

 

Deferred income tax provision, net

 

 

1.6

 

 

 

4.3

 

Net realized investment and other gains

 

 

(21.3

)

 

 

(29.6

)

Loss on disposals of fixed assets, net

 

 

0.2

 

 

 

 

Change in:

 

 

 

 

 

 

 

 

Accrued investment income

 

 

1.5

 

 

 

1.5

 

Receivables

 

 

(120.4

)

 

 

169.0

 

Deferred acquisition costs

 

 

(15.0

)

 

 

(8.6

)

Ceded unearned premiums

 

 

(56.0

)

 

 

(47.3

)

Reserves for losses and loss adjustment expenses

 

 

41.1

 

 

 

(145.4

)

Unearned premiums

 

 

82.7

 

 

 

58.6

 

Ceded reinsurance payable and funds held

 

 

87.4

 

 

 

(141.9

)

Income taxes

 

 

8.7

 

 

 

(13.2

)

Accrued underwriting expenses

 

 

(31.7

)

 

 

(3.1

)

Other, net

 

 

(3.3

)

 

 

24.2

 

Cash provided (used) by operating activities

 

 

94.6

 

 

 

(23.5

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Sales of fixed maturity investments

 

 

564.1

 

 

 

558.0

 

Maturities and mandatory calls of fixed maturity investments

 

 

382.6

 

 

 

156.8

 

Sales of equity securities

 

 

33.6

 

 

 

56.7

 

Sales of other investments

 

 

46.2

 

 

 

17.6

 

Purchases of fixed maturity investments

 

 

(907.6

)

 

 

(718.9

)

Purchases of equity securities

 

 

(48.0

)

 

 

(12.9

)

Purchases of other investments

 

 

(61.7

)

 

 

(34.4

)

Change in foreign regulatory deposits and voluntary pools

 

 

6.8

 

 

 

21.6

 

Change in short-term investments

 

 

(47.5

)

 

 

28.9

 

Settlements of foreign currency exchange forward contracts

 

 

(4.6

)

 

 

0.1

 

Purchases of fixed assets

 

 

(14.4

)

 

 

(18.9

)

Other, net

 

 

18.6

 

 

 

(15.1

)

Cash (used) provided by investing activities

 

 

(31.9

)

 

 

39.5

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Activity under stock incentive plans

 

 

(1.4

)

 

 

2.3

 

Repurchase of Company's common shares

 

 

(24.9

)

 

 

(31.2

)

Excess tax expense from share-based payment arrangements

 

 

0.1

 

 

 

 

Payment of cash dividends to common shareholders

 

 

(11.2

)

 

 

(8.7

)

Cash used by financing activities

 

 

(37.4

)

 

 

(37.6

)

Effect of exchange rate changes on cash

 

 

0.2

 

 

 

0.4

 

Change in cash

 

 

25.5

 

 

 

(21.2

)

Cash, beginning of period

 

 

81.0

 

 

 

157.4

 

Cash, end of period

 

$

106.5

 

 

$

136.2

 

 

See accompanying notes.

 

 

 

6


 

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.

Basis of Presentation

The accompanying consolidated financial statements of Argo Group International Holdings, Ltd. (“Argo Group,” “we” or the “Company”) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The preparation of interim 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 reported amounts of revenues and expenses during the reporting period. The major estimates reflected in our consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses; reinsurance recoverables, including the reinsurance recoverables allowance for doubtful accounts; estimates of written and earned premiums; reinsurance premium receivable; fair value of investments and assessment of potential impairment; valuation of goodwill and intangibles and our deferred tax asset valuation allowance. Actual results could differ from those estimates. Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015.

The interim financial information as of, and for the three and six months ended, June 30, 2015 and 2014 is unaudited. However, in the opinion of management, the interim information includes all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results presented for the interim periods. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year. All significant intercompany amounts have been eliminated in consolidation. Certain amounts in prior years’ financial statements have been reclassified to conform to the current presentation.

10% Stock Dividend

On February 17, 2015, our Board of Directors declared a 10% stock dividend, payable on March 16, 2015, to shareholders of record at the close of business on March 2, 2015. As a result of the stock dividend, 2,554,506 additional shares were issued. Cash was paid in lieu of fractional shares of our common shares. All references to share and per share amounts in this document and related disclosures have been adjusted to reflect the stock dividend for all periods presented.

 

 

2.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic 606). The ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The ASU provides a five-step analysis of transactions to determine when and how revenue is recognized and requires additional disclosures sufficient to describe the nature, amount, timing and uncertainty of revenue and cash flows for these transactions. This ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. Accordingly, we will adopt this ASU on January 1, 2017. On April 1, 2015 the FASB voted to propose to defer ASU 2014-09 for one year, which if accepted, would delay our adoption date until January 1, 2018.  Companies may use either a “full retrospective” adoption, meaning the update is applied to all periods presented, or a “modified retrospective” adoption, meaning the update is applied only to the most current period presented in the financial statements. While insurance contracts are excluded from this ASU, fee income related to our brokerage operations and management of the third-party capital for our underwriting Syndicate at Lloyd’s will be subject to this updated guidance. We are currently evaluating what impact this ASU will have on our financial results and disclosures and which adoption method to apply.

In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether entities should be consolidated if they are deemed variable interest entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

In May 2015, the FASB issued ASU 2015-09, “Insurance (Topic 944), Disclosures about Short-Duration Contracts.” ASU 2015-09 requires additional disclosures about short-duration contracts for products in effect for typically a year or less. The disclosures will focus on the liability for unpaid claims and claim adjustment expenses. ASU 2015-09 is effective for annual periods beginning after

7


 

December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2015-09 on our consolidated financial statements.

 

 

3.

Investments

Composition of Invested Assets

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investments were as follows:

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

Fixed maturities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Governments

 

$

183.9

 

 

$

1.2

 

 

$

0.1

 

 

$

185.0

 

Non-U.S. Governments

 

 

84.7

 

 

 

0.4

 

 

 

0.7

 

 

 

84.4

 

Obligations of states and political subdivisions

 

 

477.1

 

 

 

17.3

 

 

 

1.6

 

 

 

492.8

 

Credit-Financial

 

 

461.7

 

 

 

9.7

 

 

 

1.8

 

 

 

469.6

 

Credit-Industrial

 

 

430.4

 

 

 

7.5

 

 

 

2.4

 

 

 

435.5

 

Credit-Utility

 

 

143.8

 

 

 

2.9

 

 

 

2.4

 

 

 

144.3

 

Structured securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO/MBS-agency (1)

 

 

143.0

 

 

 

6.4

 

 

 

0.4

 

 

 

149.0

 

CMO/MBS-non agency

 

 

12.1

 

 

 

0.8

 

 

 

 

 

 

12.9

 

CMBS (2)

 

 

161.9

 

 

 

1.1

 

 

 

0.7

 

 

 

162.3

 

ABS (3)

 

 

245.4

 

 

 

1.2

 

 

 

0.7

 

 

 

245.9

 

Foreign denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Governments

 

 

175.9

 

 

 

1.9

 

 

 

13.7

 

 

 

164.1

 

Credit

 

 

239.6

 

 

 

3.5

 

 

 

24.9

 

 

 

218.2

 

Total fixed maturities

 

 

2,759.5

 

 

 

53.9

 

 

 

49.4

 

 

 

2,764.0

 

Equity securities

 

 

332.4

 

 

 

164.5

 

 

 

10.3

 

 

 

486.6

 

Other investments

 

 

501.1

 

 

 

10.3

 

 

 

2.5

 

 

 

508.9

 

Short-term investments

 

 

322.7

 

 

 

 

 

 

 

 

 

322.7

 

Total investments

 

$

3,915.7

 

 

$

228.7

 

 

$

62.2

 

 

$

4,082.2

 

 

(1) 

Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”).

(2) 

Commercial mortgage-backed securities (“CMBS”).

(3) 

Asset-backed securities (“ABS”).

 

8


 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

Fixed maturities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Governments

 

$

184.0

 

 

$

1.3

 

 

$

0.3

 

 

$

185.0

 

Non-U.S. Governments

 

 

79.9

 

 

 

0.6

 

 

 

0.6

 

 

 

79.9

 

Obligations of states and political subdivisions

 

 

468.1

 

 

 

22.9

 

 

 

0.3

 

 

 

490.7

 

Credit-Financial

 

 

508.1

 

 

 

12.3

 

 

 

2.3

 

 

 

518.1

 

Credit-Industrial

 

 

493.7

 

 

 

9.4

 

 

 

3.5

 

 

 

499.6

 

Credit-Utility

 

 

142.7

 

 

 

3.2

 

 

 

3.9

 

 

 

142.0

 

Structured securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO/MBS-agency (1)

 

 

168.0

 

 

 

8.0

 

 

 

0.7

 

 

 

175.3

 

CMO/MBS-non agency

 

 

13.2

 

 

 

0.8

 

 

 

 

 

 

14.0

 

CMBS (2)

 

 

178.6

 

 

 

1.6

 

 

 

0.2

 

 

 

180.0

 

ABS (3)

 

 

221.4

 

 

 

0.6

 

 

 

1.0

 

 

 

221.0

 

Foreign denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Governments

 

 

148.4

 

 

 

1.2

 

 

 

9.4

 

 

 

140.2

 

Credit

 

 

211.1

 

 

 

2.7

 

 

 

18.9

 

 

 

194.9

 

Total fixed maturities

 

 

2,817.2

 

 

 

64.6

 

 

 

41.1

 

 

 

2,840.7

 

Equity securities

 

 

307.3

 

 

 

184.1

 

 

 

5.1

 

 

 

486.3

 

Other investments

 

 

488.9

 

 

 

7.5

 

 

 

1.3

 

 

 

495.1

 

Short-term investments

 

 

275.8

 

 

 

 

 

 

 

 

 

275.8

 

Total investments

 

$

3,889.2

 

 

$

256.2

 

 

$

47.5

 

 

$

4,097.9

 

 

(1) 

Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”).

(2) 

Commercial mortgage-backed securities (“CMBS”).

(3) 

Asset-backed securities (“ABS”).

 

Included in “Total investments” in our Consolidated Balance Sheets at June 30, 2015 and December 31, 2014 is $78.3 million and $75.2 million, respectively, of assets managed on behalf of the trade capital providers, who are third-party participants that provide underwriting capital to our Syndicate 1200 segment.

Contractual Maturity

The amortized cost and fair values of fixed maturity investments as of June 30, 2015, by contractual maturity, were as follows:

 

(in millions)

 

Amortized

Cost

 

 

Fair

Value

 

Due in one year or less

 

$

252.7

 

 

$

245.9

 

Due after one year through five years

 

 

1,207.9

 

 

 

1,208.7

 

Due after five years through ten years

 

 

555.0

 

 

 

557.2

 

Thereafter

 

 

181.5

 

 

 

182.1

 

Structured securities

 

 

562.4

 

 

 

570.1

 

Total

 

$

2,759.5

 

 

$

2,764.0

 

 

The expected maturities may differ from the contractual maturities because debtors may have the right to call or prepay obligations.

9


 

Other Invested Assets

Details regarding the carrying value and unfunded investment commitments of the other invested assets portfolio as of June 30, 2015 and December 31, 2014 were as follows:

 

June 30, 2015

 

 

 

 

 

 

 

 

(in millions)

 

Carrying Value

 

 

Unfunded Commitments

 

Investment Type

 

 

 

 

 

 

 

 

Hedge funds

 

$

145.6

 

 

$

 

Private equity

 

 

141.8

 

 

 

74.5

 

Long only funds

 

 

202.7

 

 

 

 

Other investments