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Section 1: 10-Q (10-Q)

agii-10q_20160331.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 March 31, 2016

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 May 2, 2016.

 

Title

Outstanding

Common Shares, par value $1.00 per share

27,492,452

 

 

 

 

 

 


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

INDEX

 

 

 

 

Page

PART I. Financial Information

3

 

Item 1.

 

Consolidated Financial Statements (unaudited)

3

 

 

Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

3

 

 

Consolidated Statements of Income for three months ended March 31, 2016 and 2015

4

 

 

Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2016 and 2015

5

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015

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

44

Item 4.

 

Controls and Procedures

46

PART II. Other Information

46

 

Item 1.

 

Legal Proceedings

46

Item 1A.

 

Risk Factors

46

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

 

Defaults Upon Senior Securities

47

Item 4.

 

Mine Safety Disclosures

47

Item 5.

 

Other Information

47

Item 6.

 

Exhibits

48

 

 

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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015 *

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed maturities, at fair value:

 

 

 

 

 

 

 

 

Available-for-sale (cost: 2016 - $2,911.8; 2015 - $2,971.0)

 

$

2,907.6

 

 

$

2,927.3

 

Equity securities, at fair value (cost: 2016 - $324.5; 2015 - $349.7)

 

 

430.3

 

 

 

463.9

 

Other investments (cost: 2016 - $532.1; 2015 - $499.6)

 

 

523.0

 

 

 

513.7

 

Short-term investments, at fair value (cost: 2016 - $266.1; 2015 - $211.2)

 

 

266.2

 

 

 

210.8

 

Total investments

 

 

4,127.1

 

 

 

4,115.7

 

Cash

 

 

122.9

 

 

 

121.7

 

Accrued investment income

 

 

21.3

 

 

 

21.6

 

Premiums receivable

 

 

448.4

 

 

 

404.5

 

Reinsurance recoverables

 

 

1,151.1

 

 

 

1,121.1

 

Goodwill

 

 

152.2

 

 

 

152.2

 

Intangible assets, net of accumulated amortization

 

 

71.9

 

 

 

73.3

 

Current income taxes receivable, net

 

 

9.3

 

 

 

11.6

 

Deferred acquisition costs, net

 

 

136.4

 

 

 

132.4

 

Ceded unearned premiums

 

 

308.0

 

 

 

250.8

 

Other assets

 

 

271.1

 

 

 

220.7

 

Total assets

 

$

6,819.7

 

 

$

6,625.6

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Reserves for losses and loss adjustment expenses

 

$

3,141.5

 

 

$

3,123.6

 

Unearned premiums

 

 

907.8

 

 

 

886.7

 

Accrued underwriting expenses

 

 

121.4

 

 

 

133.9

 

Ceded reinsurance payable, net

 

 

410.1

 

 

 

312.4

 

Funds held

 

 

87.7

 

 

 

77.6

 

Senior unsecured fixed rate notes

 

 

139.4

 

 

 

139.3

 

Other indebtedness

 

 

56.4

 

 

 

55.2

 

Junior subordinated debentures

 

 

172.7

 

 

 

172.7

 

Deferred tax liabilities, net

 

 

31.5

 

 

 

23.6

 

Other liabilities

 

 

45.8

 

 

 

32.5

 

Total liabilities

 

 

5,114.3

 

 

 

4,957.5

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common shares - $1.00 par, 500,000,000 shares authorized; 37,162,077 and

   37,105,922 shares issued at March 31, 2016 and December 31, 2015,

   respectively

 

 

37.2

 

 

 

37.1

 

Additional paid-in capital

 

 

970.8

 

 

 

964.9

 

Treasury shares (9,525,296 and 9,181,644 shares at March 31, 2016

   and December 31, 2015, respectively)

 

 

(350.1

)

 

 

(331.1

)

Retained earnings

 

 

1,007.2

 

 

 

985.7

 

Accumulated other comprehensive income, net of taxes

 

 

40.3

 

 

 

11.5

 

Total shareholders' equity

 

 

1,705.4

 

 

 

1,668.1

 

Total liabilities and shareholders' equity

 

$

6,819.7

 

 

$

6,625.6

 

 

*

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 March 31,

 

 

 

2016

 

 

2015

 

Premiums and other revenue:

 

 

 

 

 

 

 

 

Earned premiums

 

$

344.9

 

 

$

334.6

 

Net investment income

 

 

21.2

 

 

 

25.7

 

Fee and other income

 

 

6.8

 

 

 

4.6

 

Net realized investment and other (losses) gains

 

 

(2.8

)

 

 

11.1

 

Total revenue

 

 

370.1

 

 

 

376.0

 

Expenses:

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

191.6

 

 

 

183.7

 

Underwriting, acquisition and insurance expenses

 

 

132.6

 

 

 

129.6

 

Interest expense

 

 

4.8

 

 

 

4.9

 

Fee and other expense

 

 

6.5

 

 

 

5.0

 

Foreign currency exchange loss (gain)

 

 

1.5

 

 

 

(9.6

)

Total expenses

 

 

337.0

 

 

 

313.6

 

Income before income taxes

 

 

33.1

 

 

 

62.4

 

Provision for income taxes

 

 

5.4

 

 

 

3.6

 

Net income

 

$

27.7

 

 

$

58.8

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

1.00

 

 

$

2.09

 

Diluted

 

$

0.98

 

 

$

2.05

 

Dividend declared per common share

 

$

0.22

 

 

$

0.20

 

Weighted average common shares:

 

 

 

 

 

 

 

 

Basic

 

 

27,710,955

 

 

 

28,129,692

 

Diluted

 

 

28,304,571

 

 

 

28,677,379

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Net realized investment and other (losses) gains before other-than-

   temporary impairment losses

 

$

(1.1

)

 

$

11.6

 

Other-than-temporary impairment losses recognized in earnings:

 

 

 

 

 

 

 

 

Other-than-temporary impairment losses on fixed maturities

 

 

(0.6

)

 

 

(0.4

)

Other-than-temporary impairment losses on equity securities

 

 

(1.1

)

 

 

(0.1

)

Impairment losses recognized in earnings

 

 

(1.7

)

 

 

(0.5

)

Net realized investment and other (losses) gains

 

$

(2.8

)

 

$

11.1

 

 

See accompanying notes.

 

 

 

4


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in millions)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Net income

 

$

27.7

 

 

$

58.8

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

1.5

 

 

 

(3.1

)

Unrealized gains (losses) on securities:

 

 

 

 

 

 

 

 

Gains (losses) arising during the year

 

 

38.8

 

 

 

(24.3

)

Reclassification adjustment for (gains) losses included in net income

 

 

(7.8

)

 

 

2.5

 

Other comprehensive income (loss) before tax

 

 

32.5

 

 

 

(24.9

)

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

 

 

 

 

 

 

 

 

Unrealized gains (loss) on securities:

 

 

 

 

 

 

 

 

Gains (losses) arising during the year

 

 

7.8

 

 

 

(2.8

)

Reclassification adjustment for gains included in net income

 

 

(4.1

)

 

 

(0.1

)

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

 

 

3.7

 

 

 

(2.9

)

Other comprehensive income (loss), net of tax

 

 

28.8

 

 

 

(22.0

)

Comprehensive income

 

$

56.5

 

 

$

36.8

 

 

See accompanying notes.

 

 

 

5


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

  

 

 

For the Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

27.7

 

 

$

58.8

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

10.0

 

 

 

8.9

 

Share-based payments expense

 

 

3.0

 

 

 

5.2

 

Excess tax benefit from share-based payment arrangements

 

 

(0.1

)

 

 

 

Deferred income tax provision, net

 

 

3.9

 

 

 

3.8

 

Net realized investment and other (gains) losses

 

 

2.8

 

 

 

(11.1

)

Undistributed earnings from alternative investment portfolio

 

 

1.6

 

 

 

(4.9

)

Amortization of debt extinguishment costs

 

 

(0.1

)

 

 

(0.1

)

Loss on disposals of fixed assets, net

 

 

0.1

 

 

 

0.2

 

Change in:

 

 

 

 

 

 

 

 

Accrued investment income

 

 

0.3

 

 

 

1.2

 

Receivables

 

 

(71.5

)

 

 

(12.5

)

Deferred acquisition costs

 

 

(3.9

)

 

 

(5.4

)

Ceded unearned premiums

 

 

(56.7

)

 

 

(51.0

)

Reserves for losses and loss adjustment expenses

 

 

14.6

 

 

 

(2.2

)

Unearned premiums

 

 

19.7

 

 

 

13.1

 

Ceded reinsurance payable and funds held

 

 

107.5

 

 

 

27.9

 

Income taxes

 

 

2.4

 

 

 

7.7

 

Accrued underwriting expenses

 

 

(8.8

)

 

 

(18.9

)

Other, net

 

 

(1.3

)

 

 

6.8

 

Cash provided by operating activities

 

 

51.2

 

 

 

27.5

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Sales of fixed maturity investments

 

 

304.1

 

 

 

399.3

 

Maturities and mandatory calls of fixed maturity investments

 

 

133.2

 

 

 

142.0

 

Sales of equity securities

 

 

74.6

 

 

 

14.7

 

Sales of other investments

 

 

2.0

 

 

 

9.0

 

Purchases of fixed maturity investments

 

 

(389.5

)

 

 

(514.5

)

Purchases of equity securities

 

 

(35.8

)

 

 

(19.9

)

Purchases of other investments

 

 

(33.3

)

 

 

(22.8

)

Change in foreign regulatory deposits and voluntary pools

 

 

(1.1

)

 

 

1.1

 

Change in short-term investments

 

 

(54.8

)

 

 

3.7

 

Settlements of foreign currency exchange forward contracts

 

 

(3.9

)

 

 

(2.2

)

Purchases of fixed assets

 

 

(6.8

)

 

 

(17.8

)

Other, net

 

 

(14.2

)

 

 

9.5

 

Cash (used) provided by investing activities

 

 

(25.5

)

 

 

2.1

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

0.1

 

 

 

0.1

 

Activity under stock incentive plans

 

 

0.3

 

 

 

0.9

 

Repurchase of Company's common shares

 

 

(19.0

)

 

 

(17.0

)

Excess tax expense from share-based payment arrangements

 

 

0.1

 

 

 

 

Payment of cash dividends to common shareholders

 

 

(6.2

)

 

 

(5.7

)

Cash used by financing activities

 

 

(24.7

)

 

 

(21.7

)

Effect of exchange rate changes on cash

 

 

0.2

 

 

 

0.2

 

Change in cash

 

 

1.2

 

 

 

8.1

 

Cash, beginning of period

 

 

121.7

 

 

 

81.0

 

Cash, end of period

 

$

122.9

 

 

$

89.1

 

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, 2015, filed with the Securities and Exchange Commission on February 26, 2016.

The interim financial information as of, and for the three months ended, March 31, 2016 and 2015 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.

During the first quarter of 2016, we evaluated our accounting for our alternative investment portfolio and determined that as we manage these investments to appreciate in value on a quarter to quarter basis, it is more appropriate to classify the change in value as net investment income as opposed to realized investment gains (losses). As a result, net investment income for the three months ended March 31, 2015 was increased $4.9 million and net realized investment and other gains were reduced $4.9 million for this reclassification.  For the three months ended March 31, 2016, we recorded a $1.6 million reduction to net investment income for the change in value of these securities.

 

 

2.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842). ASU 2016-02 requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additionally, ASU 2016-02 modifies current guidance for lessors' accounting. ASU 2016-02 is effective for interim and annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. We are currently assessing the impact that the adoption of ASU 2016-02 will have on our financial results and disclosures.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (Subtopic 825-10). The ASU will require equity investments that are not consolidated or accounted for under the equity method of accounting to be measured at fair value with changes in fair value recognized in net income. This ASU will also require us to assess the ability to realize of any deferred tax assets (“DTAs”) related to an available-for-sale debt security in combination with our other DTAs. The ASU will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently in the process of evaluating the impact of the adoption of ASU 2016-01 on our financial results and disclosures.

In May 2015, the FASB issued ASU 2015-09, “Disclosures about Short-Duration Contracts” (Topic 944). ASU 2015-09 requires additional disclosures for unpaid claim liabilities and claim adjustment expenses for short-duration insurance contracts (i.e., coverage provided for a fixed period of short duration, typically a year or less). The standard will require tables showing incurred and paid claims development information by accident year for the number of years claims typically remaining outstanding, but not more than 10 years, including a reconciliation of this information to the statement of financial position. This ASU is effective for annual periods beginning after December 15, 2015 and interim periods within annual periods after December 15, 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2015-09 on our financial disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). ASU 2014-09 contains principles that an entity will need to apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an

7


amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations” (Topic 606) which reframes the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent.

Entities can apply the final standard using one of the following two methods:

 

1.

retrospectively to each prior period presented; or

 

2.

retrospectively, with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application, with additional disclosures in reporting periods that include the date of initial application.

ASU 2014-09 is effective for interim and annual reporting periods beginning on or after January 1, 2017. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date” (Topic 606) which allows for a deferral of the implementation until January 1, 2018, and permits early application, but not before the original effective date of January 1, 2017. 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 continue to evaluate what impact this ASU will have on our financial results and disclosures and which adoption method to apply, but do not anticipate such impact being material based on the limited revenue streams subject to the ASU.

Accounting Standards Retrospectively Adopted in 2016

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amends the guidance in Accounting Standards Codification Topic 835-30 “Interest-Imputation of Interest.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. For public business entities, the guidance was effective for annual and interim periods beginning after December 15, 2015. We adopted this guidance effective January 1, 2016 and adjusted our prior period balances to reflect the adoption of this guidance.

As of December 31, 2015, we reported $4.5 million of unamortized debt issuance costs related to our Senior unsecured fixed rate notes. The effects of the retrospective application of this guidance on individual financial statement line items in our Consolidated Balance Sheets were as follows:

 

 

 

December 31, 2015

 

(in millions)

 

As Previously Reported

 

 

As Adjusted

 

 

Effect of Change

 

Other assets

 

$

225.2

 

 

$

220.7

 

 

$

(4.5

)

Senior unsecured fixed rate notes

 

 

143.8

 

 

 

139.3

 

 

 

(4.5

)

 

The effects of the retrospective application of this guidance on individual financial statement line items in our Consolidated Statements of Cash Flows were as follows:

 

 

 

For the three months ended March 31, 2015

 

(in millions)

 

As Previously Reported

 

 

As Adjusted

 

 

Effect of Change

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

$

 

 

$

(0.1

)

 

$

(0.1

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

 

0.1

 

 

 

0.1

 

 

There were no changes to the Consolidated Statements of Income for the periods presented as a result of adoption of the authoritative guidance.

 

 

8


3.

Investments

Composition of Invested Assets

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

 

March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

Fixed maturities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Governments

 

$

197.4

 

 

$

2.1

 

 

$

0.1

 

 

$

199.4

 

Non-U.S. Governments

 

 

82.1

 

 

 

0.6

 

 

 

0.2

 

 

 

82.5

 

Obligations of states and political subdivisions

 

 

408.6

 

 

 

20.8

 

 

 

0.3

 

 

 

429.1

 

Credit-Financial

 

 

504.0

 

 

 

8.0

 

 

 

2.2

 

 

 

509.8

 

Credit-Industrial

 

 

533.2

 

 

 

9.8

 

 

 

7.8

 

 

 

535.2

 

Credit-Utility

 

 

162.1

 

 

 

2.4

 

 

 

11.3

 

 

 

153.2

 

Structured securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO/MBS-agency (1)

 

 

145.8

 

 

 

5.7

 

 

 

0.1

 

 

 

151.4

 

CMO/MBS-non agency

 

 

6.3

 

 

 

0.6

 

 

 

 

 

 

6.9

 

CMBS (2)

 

 

217.2

 

 

 

1.1

 

 

 

0.9

 

 

 

217.4

 

ABS (3)

 

 

116.4

 

 

 

0.4

 

 

 

0.3

 

 

 

116.5

 

CLO (4)

 

 

145.5

 

 

 

 

 

 

2.9

 

 

 

142.6

 

Foreign denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Governments

 

 

166.9

 

 

 

2.4

 

 

 

10.6

 

 

 

158.7

 

Credit

 

 

119.7

 

 

 

1.6

 

 

 

15.0

 

 

 

106.3

 

ABS/CMBS

 

 

18.7

 

 

 

0.1

 

 

 

2.2

 

 

 

16.6

 

CLO

 

 

87.9

 

 

 

1.5

 

 

 

7.4

 

 

 

82.0

 

Total fixed maturities

 

 

2,911.8

 

 

 

57.1

 

 

 

61.3

 

 

 

2,907.6

 

Equity securities

 

 

324.5

 

 

 

121.0

 

 

 

15.2

 

 

 

430.3

 

Other investments

 

 

532.1

 

 

 

7.5

 

 

 

16.6

 

 

 

523.0

 

Short-term investments

 

 

266.1

 

 

 

0.1

 

 

 

 

 

 

266.2

 

Total investments

 

$

4,034.5

 

 

$

185.7

 

 

$

93.1

 

 

$

4,127.1

 

 

(1) 

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

(2) 

Commercial mortgage-backed securities (“CMBS”).

(3) 

Asset-backed securities (“ABS”).

(4) 

Collateralized loan obligations (“CLO”).

9


 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

Fixed maturities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Governments

 

$

207.9

 

 

$

0.7

 

 

$

0.7

 

 

$

207.9

 

Non-U.S. Governments

 

 

92.9

 

 

 

 

 

 

1.2

 

 

 

91.7

 

Obligations of states and political subdivisions

 

 

467.6

 

 

 

20.7

 

 

 

0.3

 

 

 

488.0

 

Credit-Financial

 

 

533.3

 

 

 

6.1

 

 

 

3.5

 

 

 

535.9

 

Credit-Industrial

 

 

524.2

 

 

 

5.4

 

 

 

11.7

 

 

 

517.9

 

Credit-Utility

 

 

168.7

 

 

 

0.9

 

 

 

13.4

 

 

 

156.2

 

Structured securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO/MBS-agency (1)

 

 

126.5

 

 

 

5.0

 

 

 

0.5

 

 

 

131.0

 

CMO/MBS-non agency

 

 

11.0

 

 

 

0.6

 

 

 

0.1

 

 

 

11.5

 

CMBS (2)

 

 

182.2

 

 

 

0.5

 

 

 

1.5

 

 

 

181.2

 

ABS (3)

 

 

111.4

 

 

 

0.2

 

 

 

0.7

 

 

 

110.9

 

CLO (4)

 

 

137.1

 

 

 

0.2

 

 

 

1.7

 

 

 

135.6

 

Foreign denominated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Governments

 

 

170.0

 

 

 

0.8

 

 

 

19.6

 

 

 

151.2

 

Credit

 

 

129.1

 

 

 

1.2

 

 

 

20.2

 

 

 

110.1

 

ABS/CMBS

 

 

24.1

 

 

 

0.1

 

 

 

2.3

 

 

 

21.9

 

CLO

 

 

85.0

 

 

 

0.7

 

 

 

9.4

 

 

 

76.3

 

Total fixed maturities

 

 

2,971.0

 

 

 

43.1

 

 

 

86.8

 

 

 

2,927.3

 

Equity securities

 

 

349.7

 

 

 

131.5

 

 

 

17.3

 

 

 

463.9

 

Other investments

 

 

499.6

 

 

 

15.0

 

 

 

0.9

 

 

 

513.7

 

Short-term investments

 

 

211.2

 

 

 

 

 

 

0.4

 

 

 

210.8

 

Total investments

 

$

4,031.5

 

 

$

189.6

 

 

$

105.4

 

 

$

4,115.7

 

 

(1) 

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

(2) 

Commercial mortgage-backed securities (“CMBS”).

(3) 

Asset-backed securities (“ABS”).

(4) 

Collateralized loan obligations (“CLO”).

 

Included in “Total investments” in our Consolidated Balance Sheets at March 31, 2016 and December 31, 2015 is $119.5 million and $95.3 million, respectively, of assets managed on behalf of the trade capital providers, who are third-party participants that provide underwriting capital to the operations of our Syndicate 1200 segment.

Contractual Maturity

The amortized cost and fair values of fixed maturity investments as of March 31, 2016, by contractual maturity, were as follows:

 

(in millions)

 

Amortized

Cost

 

 

Fair

Value

 

Due in one year or less

 

$

241.9

 

 

$

233.8

 

Due after one year through five years

 

 

1,343.9

 

 

 

1,341.1

 

Due after five years through ten years

 

 

430.5

 

 

 

434.7

 

Thereafter

 

 

157.7

 

 

 

164.6

 

Structured securities

 

 

737.8

 

 

 

733.4

 

Total

 

$

2,911.8

 

 

$

2,907.6

 

 

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

10


Other Invested Assets

Details regarding the carrying value and unfunded investment commitments of the other invested assets portfolio as of March 31, 2016 and December 31, 2015 were as follows:

 

March 31, 2016

 

 

 

 

 

 

 

 

(in millions)

 

Carrying

Value

 

 

Unfunded

Commitments

 

Investment Type

 

 

 

 

 

 

 

 

Hedge funds

 

$

152.0

 

 

$

 

Private equity

 

 

146.8

 

 

 

88.6

 

Long only funds

 

 

221.8

 

 

 

 

Other investments

 

 

2.4

 

 

 

 

Total other invested assets

 

$

523.0

 

 

$

88.6

 

 

December 31, 2015

 

 

 

 

 

 

 

 

(in millions)

 

Carrying

Value

 

 

Unfunded

Commitments

 

Investment Type

 

 

 

 

 

 

 

 

Hedge funds

 

$

146.9

 

 

$

 

Private equity

 

 

144.1