x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the quarterly period ended September 30, 2016
|
|
|
|
|
|
OR
|
|
|
|
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
XL GROUP LTD
|
(Exact name of registrant as specified in its charter)
|
Bermuda
|
|
98-1304974
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
Large accelerated filer
x
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
|
|
Page No.
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|
|
|
|
|
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|
||
|
Unaudited Consolidated Balance Sheets at September 30, 2016 and December 31, 2015
|
|
|
Unaudited Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015
|
|
|
Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015
|
|
|
Unaudited Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2016 and 2015
|
|
|
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015
|
|
|
||
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|
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|
Item 5.
|
Other Information
|
|
|
ITEM 1.
|
|
FINANCIAL STATEMENTS
|
(U.S. dollars in thousands, except share data)
|
September 30, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
|||||||
Investments:
|
|
|
|
|
|
||
Fixed maturities, at fair value (amortized cost: 2016 - $30,402,019; 2015 - $31,517,654)
|
$
|
31,934,135
|
|
|
$
|
32,257,589
|
|
Equity securities, at fair value (cost: 2016 - $968,040; 2015 - $834,079)
|
1,038,165
|
|
|
878,919
|
|
||
Short-term investments, at fair value (amortized cost: 2016 - $655,792; 2015 - $618,851)
|
652,772
|
|
|
617,390
|
|
||
Total investments available for sale
|
$
|
33,625,072
|
|
|
$
|
33,753,898
|
|
Fixed maturities, at fair value (amortized cost: 2016 - $1,480,434; 2015 - $1,263,609)
|
1,608,882
|
|
|
1,235,699
|
|
||
Short-term investments, at fair value (amortized cost: 2016 - $24,179; 2015 - $60,176)
|
24,169
|
|
|
60,330
|
|
||
Total investments, trading
|
$
|
1,633,051
|
|
|
$
|
1,296,029
|
|
Investments in affiliates
|
2,118,489
|
|
|
1,708,899
|
|
||
Other investments
|
1,260,938
|
|
|
1,433,057
|
|
||
Total investments
|
$
|
38,637,550
|
|
|
$
|
38,191,883
|
|
Cash and cash equivalents
|
3,393,277
|
|
|
3,256,236
|
|
||
Restricted cash
|
150,118
|
|
|
154,992
|
|
||
Accrued investment income
|
285,504
|
|
|
312,667
|
|
||
Deferred acquisition costs and value of business acquired
|
989,733
|
|
|
890,568
|
|
||
Ceded unearned premiums
|
1,917,127
|
|
|
1,821,793
|
|
||
Premiums receivable
|
5,925,969
|
|
|
4,712,493
|
|
||
Reinsurance balances receivable
|
524,343
|
|
|
418,666
|
|
||
Unpaid losses and loss expenses recoverable
|
5,481,882
|
|
|
5,262,706
|
|
||
Receivable from investments sold
|
105,781
|
|
|
231,158
|
|
||
Goodwill and other intangible assets
|
2,234,071
|
|
|
2,210,266
|
|
||
Deferred tax asset
|
219,905
|
|
|
282,311
|
|
||
Other assets
|
906,790
|
|
|
937,199
|
|
||
Total assets
|
$
|
60,772,050
|
|
|
$
|
58,682,938
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||||||
Liabilities:
|
|
|
|
|
|
||
Unpaid losses and loss expenses
|
$
|
26,170,383
|
|
|
$
|
25,439,744
|
|
Deposit liabilities
|
1,138,789
|
|
|
1,168,376
|
|
||
Future policy benefit reserves
|
3,721,451
|
|
|
4,163,500
|
|
||
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable: 2016 - $3,288,908; 2015 - $3,719,131)
|
1,283,055
|
|
|
914,629
|
|
||
Unearned premiums
|
7,724,957
|
|
|
7,043,358
|
|
||
Notes payable and debt
|
2,647,000
|
|
|
2,644,970
|
|
||
Reinsurance balances payable
|
2,698,185
|
|
|
2,117,727
|
|
||
Payable for investments purchased
|
370,456
|
|
|
130,060
|
|
||
Deferred tax liability
|
108,996
|
|
|
120,651
|
|
||
Other liabilities
|
1,315,898
|
|
|
1,285,460
|
|
||
Total liabilities
|
$
|
47,179,170
|
|
|
$
|
45,028,475
|
|
Commitments and Contingencies
|
|
|
|
|
|
||
Shareholders’ Equity:
|
|
|
|
|
|
||
Common shares, 999,990,000 authorized, par value $0.01; issued and outstanding (2016 - 270,371,192; 2015 - 294,745,045)
|
$
|
2,704
|
|
|
$
|
2,947
|
|
Additional paid in capital
|
8,165,141
|
|
|
8,910,167
|
|
||
Accumulated other comprehensive income
|
1,519,805
|
|
|
686,616
|
|
||
Retained earnings
|
1,924,516
|
|
|
2,077,349
|
|
||
Shareholders’ equity attributable to XL Group Ltd
|
$
|
11,612,166
|
|
|
$
|
11,677,079
|
|
Non-controlling interest in equity of consolidated subsidiaries
|
1,980,714
|
|
|
1,977,384
|
|
||
Total shareholders’ equity
|
$
|
13,592,880
|
|
|
$
|
13,654,463
|
|
Total liabilities and shareholders’ equity
|
$
|
60,772,050
|
|
|
$
|
58,682,938
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(U.S. dollars in thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net premiums earned
|
$
|
2,434,037
|
|
|
$
|
2,423,552
|
|
|
$
|
7,320,859
|
|
|
$
|
5,839,605
|
|
Net investment income:
|
|
|
|
|
|
|
|
||||||||
Net investment income - excluding Life Funds Withheld Assets
|
170,834
|
|
|
178,560
|
|
|
511,402
|
|
|
512,994
|
|
||||
Net investment income - Life Funds Withheld Assets
|
38,937
|
|
|
46,586
|
|
|
119,643
|
|
|
143,869
|
|
||||
Total net investment income
|
$
|
209,771
|
|
|
$
|
225,146
|
|
|
$
|
631,045
|
|
|
$
|
656,863
|
|
Net realized gains (losses) on investments, and net unrealized gains (losses) on investments, trading ("Trading") - Life Funds Withheld Assets:
|
|
|
|
|
|
|
|
||||||||
Net realized gains (losses) on investments sold - excluding Life Funds Withheld Assets
|
68,414
|
|
|
42,513
|
|
|
131,568
|
|
|
78,630
|
|
||||
Other-than-temporary impairments ("OTTI") on investments - excluding Life Funds Withheld Assets
|
(10,019
|
)
|
|
(42,013
|
)
|
|
(62,379
|
)
|
|
(69,048
|
)
|
||||
OTTI on investments transferred to (from) other comprehensive income - excluding Life Funds Withheld Assets
|
—
|
|
|
(701
|
)
|
|
258
|
|
|
(830
|
)
|
||||
Net realized gains (losses) on investments sold - Life Funds Withheld Assets
|
44,011
|
|
|
53,780
|
|
|
108,541
|
|
|
174,555
|
|
||||
OTTI on investments - Life Funds Withheld Assets
|
—
|
|
|
(2,023
|
)
|
|
(2,598
|
)
|
|
(10,110
|
)
|
||||
Net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
41,270
|
|
|
(149
|
)
|
|
165,653
|
|
|
(18,932
|
)
|
||||
Total net realized gains (losses) on investments, and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
$
|
143,676
|
|
|
$
|
51,407
|
|
|
$
|
341,043
|
|
|
$
|
154,265
|
|
Net realized and unrealized gains (losses) on derivative instruments
|
5,490
|
|
|
(7,903
|
)
|
|
2,774
|
|
|
57,127
|
|
||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
(225,610
|
)
|
|
(126,140
|
)
|
|
(691,432
|
)
|
|
(116,333
|
)
|
||||
Income (loss) from investment fund affiliates
|
12,156
|
|
|
(3,715
|
)
|
|
20,756
|
|
|
62,991
|
|
||||
Fee income and other
|
8,600
|
|
|
7,355
|
|
|
27,724
|
|
|
23,095
|
|
||||
Total revenues
|
$
|
2,588,120
|
|
|
$
|
2,569,702
|
|
|
$
|
7,652,769
|
|
|
$
|
6,677,613
|
|
Expenses:
|
|
|
|
|
|
|
|
||||||||
Net losses and loss expenses incurred
|
$
|
1,491,803
|
|
|
$
|
1,464,285
|
|
|
$
|
4,506,674
|
|
|
$
|
3,385,307
|
|
Claims and policy benefits
|
5,875
|
|
|
22,579
|
|
|
16,294
|
|
|
64,047
|
|
||||
Acquisition costs
|
403,888
|
|
|
409,173
|
|
|
1,227,675
|
|
|
904,486
|
|
||||
Operating expenses
|
508,458
|
|
|
570,142
|
|
|
1,546,360
|
|
|
1,403,152
|
|
||||
Foreign exchange (gains) losses
|
(1,695
|
)
|
|
11,661
|
|
|
(54,614
|
)
|
|
49,425
|
|
||||
Loss (gain) on sale of subsidiary
|
(3,670
|
)
|
|
—
|
|
|
(3,670
|
)
|
|
—
|
|
||||
Interest expense
|
49,445
|
|
|
51,929
|
|
|
157,486
|
|
|
153,034
|
|
||||
Total expenses
|
$
|
2,454,104
|
|
|
$
|
2,529,769
|
|
|
$
|
7,396,205
|
|
|
$
|
5,959,451
|
|
Income (loss) before income tax and income (loss) from operating affiliates
|
$
|
134,016
|
|
|
$
|
39,933
|
|
|
$
|
256,564
|
|
|
$
|
718,162
|
|
Income (loss) from operating affiliates
|
12,410
|
|
|
8,196
|
|
|
46,478
|
|
|
40,326
|
|
||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
340,407
|
|
||||
Provision (benefit) for income tax
|
17,749
|
|
|
(37,042
|
)
|
|
42,511
|
|
|
20,135
|
|
||||
Net income (loss)
|
$
|
128,677
|
|
|
$
|
85,171
|
|
|
$
|
260,531
|
|
|
$
|
1,078,760
|
|
Non-controlling interests
|
58,076
|
|
|
57,889
|
|
|
124,263
|
|
|
100,158
|
|
||||
Net income (loss) attributable to common shareholders
|
$
|
70,601
|
|
|
$
|
27,282
|
|
|
$
|
136,268
|
|
|
$
|
978,602
|
|
Weighted average common shares and common share equivalents outstanding, in thousands – basic
|
273,660
|
|
|
301,867
|
|
|
282,442
|
|
|
282,506
|
|
||||
Weighted average common shares and common share equivalents outstanding, in thousands – diluted
|
277,094
|
|
|
306,954
|
|
|
286,125
|
|
|
287,473
|
|
||||
Earnings (loss) per common share and common share equivalent – basic
|
$
|
0.26
|
|
|
$
|
0.09
|
|
|
$
|
0.48
|
|
|
$
|
3.46
|
|
Earnings (loss) per common share and common share equivalent – diluted
|
$
|
0.25
|
|
|
$
|
0.09
|
|
|
$
|
0.48
|
|
|
$
|
3.40
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income (loss) attributable to common shareholders
|
$
|
70,601
|
|
|
$
|
27,282
|
|
|
$
|
136,268
|
|
|
$
|
978,602
|
|
Change in net unrealized gains (losses) on investments - excluding Life Funds Withheld Assets, net of tax
|
(25,188
|
)
|
|
(97,658
|
)
|
|
530,344
|
|
|
(356,248
|
)
|
||||
Change in adjustments related to future policy benefit reserves, net of tax
|
2,058
|
|
|
40,681
|
|
|
27,820
|
|
|
127,365
|
|
||||
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets, net of tax
|
77,242
|
|
|
(33,569
|
)
|
|
206,480
|
|
|
(317,500
|
)
|
||||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax
|
7,457
|
|
|
(10,394
|
)
|
|
(31,091
|
)
|
|
24,293
|
|
||||
Change in OTTI losses recognized in other comprehensive income, net of tax
|
1,461
|
|
|
2,137
|
|
|
5,580
|
|
|
13,570
|
|
||||
Change in underfunded pension liability, net of tax
|
4,037
|
|
|
93
|
|
|
3,088
|
|
|
(261
|
)
|
||||
Change in value of cash flow hedge
|
(47
|
)
|
|
12
|
|
|
(134
|
)
|
|
119
|
|
||||
Foreign currency translation adjustments, net of tax
|
44,198
|
|
|
(22,394
|
)
|
|
91,102
|
|
|
(20,714
|
)
|
||||
Comprehensive income (loss)
|
$
|
181,819
|
|
|
$
|
(93,810
|
)
|
|
$
|
969,457
|
|
|
$
|
449,226
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Common Shares:
|
|
|
|
|
|
||
Balance - beginning of year
|
$
|
2,947
|
|
|
$
|
2,552
|
|
Issuance of common shares
|
16
|
|
|
515
|
|
||
Buybacks of common shares
|
(262
|
)
|
|
(78
|
)
|
||
Exercise of stock options
|
3
|
|
|
4
|
|
||
Balance - end of period
|
$
|
2,704
|
|
|
$
|
2,993
|
|
Additional Paid in Capital:
|
|
|
|
|
|
||
Balance - beginning of year
|
$
|
8,910,167
|
|
|
$
|
7,359,102
|
|
Issuance of common shares
|
23
|
|
|
1,856,253
|
|
||
Buybacks of common shares
|
(790,541
|
)
|
|
(228,857
|
)
|
||
Exercise of stock options
|
5,731
|
|
|
7,900
|
|
||
Share-based compensation
|
39,761
|
|
|
42,009
|
|
||
Balance - end of period
|
$
|
8,165,141
|
|
|
$
|
9,036,407
|
|
Accumulated Other Comprehensive Income (Loss):
|
|
|
|
|
|
||
Balance - beginning of year
|
$
|
686,616
|
|
|
$
|
1,484,458
|
|
Change in net unrealized gains (losses) on investments - excluding Life Funds Withheld Assets, net of tax
|
530,344
|
|
|
(356,248
|
)
|
||
Change in adjustments related to future policy benefit reserves, net of tax
|
27,820
|
|
|
127,365
|
|
||
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets, net of tax
|
206,480
|
|
|
(317,500
|
)
|
||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax
|
(31,091
|
)
|
|
24,293
|
|
||
Change in OTTI losses recognized in other comprehensive income, net of tax
|
5,580
|
|
|
13,570
|
|
||
Change in underfunded pension liability, net of tax
|
3,088
|
|
|
(261
|
)
|
||
Change in value of cash flow hedge
|
(134
|
)
|
|
119
|
|
||
Foreign currency translation adjustments, net of tax
|
91,102
|
|
|
(20,714
|
)
|
||
Balance - end of period
|
$
|
1,519,805
|
|
|
$
|
955,082
|
|
Retained Earnings (Deficit):
|
|
|
|
|
|
||
Balance - beginning of year
|
$
|
2,077,349
|
|
|
$
|
1,187,639
|
|
Net income (loss) attributable to common shareholders
|
136,268
|
|
|
978,602
|
|
||
Dividends on common shares
|
(170,172
|
)
|
|
(151,997
|
)
|
||
Buybacks of common shares
|
(115,334
|
)
|
|
(63,334
|
)
|
||
Share-based compensation
|
(3,595
|
)
|
|
(7,163
|
)
|
||
Balance - end of period
|
$
|
1,924,516
|
|
|
$
|
1,943,747
|
|
Non-controlling Interest in Equity of Consolidated Subsidiaries:
|
|
|
|
|
|
||
Balance - beginning of year
|
$
|
1,977,384
|
|
|
$
|
1,402,015
|
|
Non-controlling interests - contributions
|
6,393
|
|
|
10,292
|
|
||
Non-controlling interests - distributions
|
(7,958
|
)
|
|
(17,519
|
)
|
||
Non-controlling interests - acquired
|
—
|
|
|
562,285
|
|
||
Non-controlling interests
|
5,916
|
|
|
5,206
|
|
||
Non-controlling interest share in change in accumulated other comprehensive income (loss)
|
(1,021
|
)
|
|
—
|
|
||
Balance - end of period
|
$
|
1,980,714
|
|
|
$
|
1,962,279
|
|
Total Shareholders’ Equity
|
$
|
13,592,880
|
|
|
$
|
13,900,508
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Cash flows provided by (used in) operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
260,531
|
|
|
$
|
1,078,760
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Total net realized (gains) losses on investments and net unrealized (gains) losses on investments, Trading - Life Funds Withheld Assets
|
(341,043
|
)
|
|
(154,265
|
)
|
||
Net realized and unrealized (gains) losses on derivative instruments
|
(2,774
|
)
|
|
(57,127
|
)
|
||
Net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
691,432
|
|
|
116,333
|
|
||
Amortization of premiums (discounts) on fixed maturities
|
143,855
|
|
|
143,118
|
|
||
(Income) loss from investment and operating affiliates
|
(25,915
|
)
|
|
(72,802
|
)
|
||
Loss (gain) on sale of life subsidiary
|
(3,670
|
)
|
|
—
|
|
||
Gain on sale of ARX Holding Corp.
|
—
|
|
|
(340,407
|
)
|
||
Share-based compensation
|
60,514
|
|
|
57,695
|
|
||
Depreciation and amortization
|
86,014
|
|
|
50,662
|
|
||
Accretion of deposit liabilities
|
33,133
|
|
|
32,098
|
|
||
Changes in:
|
|
|
|
||||
Unpaid losses and loss expenses
|
820,938
|
|
|
16,169
|
|
||
Future policy benefit reserves
|
(156,804
|
)
|
|
(208,286
|
)
|
||
Funds withheld on GreyCastle life retrocession arrangements, net
|
(203,983
|
)
|
|
(213,749
|
)
|
||
Unearned premiums
|
731,463
|
|
|
225,785
|
|
||
Premiums receivable
|
(1,294,936
|
)
|
|
(334,537
|
)
|
||
Unpaid losses and loss expenses recoverable
|
(255,627
|
)
|
|
(346,847
|
)
|
||
Ceded unearned premiums
|
(122,856
|
)
|
|
(16,172
|
)
|
||
Reinsurance balances receivable
|
(111,238
|
)
|
|
(918
|
)
|
||
Deferred acquisition costs and value of business acquired
|
(88,261
|
)
|
|
(40,087
|
)
|
||
Reinsurance balances payable
|
587,682
|
|
|
389,494
|
|
||
Deferred tax asset - net
|
(11,015
|
)
|
|
(38,619
|
)
|
||
Derivatives
|
45,469
|
|
|
163,663
|
|
||
Other assets
|
(96,971
|
)
|
|
(30,670
|
)
|
||
Other liabilities
|
(41,972
|
)
|
|
39,841
|
|
||
Other
|
(54,355
|
)
|
|
50,368
|
|
||
Total adjustments
|
$
|
389,080
|
|
|
$
|
(569,260
|
)
|
Net cash provided by (used in) operating activities
|
$
|
649,611
|
|
|
$
|
509,500
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
||||
Proceeds from sale of fixed maturities and short-term investments
|
$
|
9,581,243
|
|
|
$
|
10,568,708
|
|
Proceeds from redemption of fixed maturities and short-term investments
|
3,010,158
|
|
|
2,787,870
|
|
||
Proceeds from sale of equity securities
|
411,330
|
|
|
443,941
|
|
||
Purchases of fixed maturities and short-term investments
|
(11,557,045
|
)
|
|
(12,720,937
|
)
|
||
Purchases of equity securities
|
(611,086
|
)
|
|
(436,622
|
)
|
||
Proceeds from sale of affiliates
|
325,050
|
|
|
724,382
|
|
||
Purchases of affiliates
|
(556,548
|
)
|
|
(94,745
|
)
|
||
Purchase of subsidiaries, net of cash acquired
|
(92,893
|
)
|
|
(1,020,015
|
)
|
||
Proceeds from sales of subsidiaries, net of cash sold
|
19,144
|
|
|
—
|
|
||
Change in restricted cash
|
4,874
|
|
|
(147,810
|
)
|
||
Other
|
193,392
|
|
|
(138,168
|
)
|
||
Net cash provided by (used in) investing activities
|
$
|
727,619
|
|
|
$
|
(33,396
|
)
|
Cash flows provided by (used in) financing activities:
|
|
|
|
||||
Proceeds from issuance of common shares and exercise of stock options
|
$
|
5,735
|
|
|
$
|
7,904
|
|
Buybacks of common shares
|
(906,137
|
)
|
|
(292,269
|
)
|
||
Dividends paid on common shares
|
(169,346
|
)
|
|
(149,030
|
)
|
||
Distributions to non-controlling interests
|
(93,470
|
)
|
|
(80,641
|
)
|
||
Contributions from non-controlling interests
|
6,394
|
|
|
10,292
|
|
||
Proceeds from the issuance of debt
|
—
|
|
|
980,600
|
|
||
Repayment of debt
|
(8,248
|
)
|
|
—
|
|
||
Deposit liabilities
|
(63,488
|
)
|
|
(79,944
|
)
|
||
Net cash provided by (used in) financing activities
|
$
|
(1,228,560
|
)
|
|
$
|
396,912
|
|
Effects of exchange rate changes on foreign currency cash
|
(11,629
|
)
|
|
(54,760
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
$
|
137,041
|
|
|
$
|
818,256
|
|
Cash and cash equivalents - beginning of period
|
3,256,236
|
|
|
2,521,814
|
|
||
Cash and cash equivalents - end of period
|
$
|
3,393,277
|
|
|
$
|
3,340,070
|
|
•
|
Deferred acquisition costs and value of business acquired - The adjustment consists of two components. The first adjustment is the elimination of Catlin's deferred acquisition costs asset. The second adjustment is the establishment of the value of business acquired asset, which represents the present value of the expected underwriting profit within the unearned premiums liability, net of reinsurance, less costs to service the related policies and a risk premium. This adjustment will be amortized to underwriting, acquisition and insurance expenses over approximately
two years
, as the contracts for business in-force as of the Acquisition Date expire. The Company has included
$21.6 million
and
$140.4 million
, for the
three months ended September 30, 2016 and 2015
, respectively, and
$121.1 million
and
$323.7 million
, for the
nine months ended September 30, 2016 and 2015
, respectively, in acquisition expenses related to the amortization of the value of business acquired asset.
|
•
|
Unpaid losses and loss adjustment expenses - Unpaid losses and loss adjustment expenses acquired include an increase to adjust the carrying value of Catlin's historical unpaid losses and loss adjustment expenses, net of related reinsurance recoverable, to fair value as of the Acquisition Date. The estimated fair value consists of the present value of the expected net loss and loss adjustment expense payments plus a risk premium. This adjustment, plus the unamortized fair value adjustment included in Catlin's historical unpaid losses and loss adjustment expenses, will be amortized to losses and loss adjustment expenses over a weighted average period of approximately
20 years
, based on the estimated payout pattern of net reserves as of the Acquisition Date.
|
(U.S. dollars in thousands)
|
Severance related costs
|
|
Retention and other compensation costs
|
|
Facilities-related costs
|
|
Consulting and other
|
|
Total
|
||||||||||
Liabilities at December 31, 2015
|
$
|
16,127
|
|
|
$
|
16,969
|
|
|
$
|
818
|
|
|
$
|
23,375
|
|
|
$
|
57,289
|
|
Costs incurred in 2016
|
42,295
|
|
|
26,470
|
|
|
9,160
|
|
|
83,641
|
|
|
161,566
|
|
|||||
2016 payments
|
41,593
|
|
|
37,263
|
|
|
9,802
|
|
|
95,852
|
|
|
184,510
|
|
|||||
Liabilities at September 30, 2016
|
$
|
16,829
|
|
|
$
|
6,176
|
|
|
$
|
176
|
|
|
$
|
11,164
|
|
|
$
|
34,345
|
|
September 30, 2016
(U.S. dollars in thousands)
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Collateral
and
Counterparty
Netting
|
|
Balance at
September 30, 2016 |
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and Government-Related/Supported ("U.S. Government")
|
$
|
—
|
|
|
$
|
3,889,709
|
|
|
$
|
43,650
|
|
|
$
|
—
|
|
|
$
|
3,933,359
|
|
Corporate - Financials
|
—
|
|
|
3,768,137
|
|
|
10,207
|
|
|
—
|
|
|
3,778,344
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
6,898,790
|
|
|
79
|
|
|
—
|
|
|
6,898,869
|
|
|||||
Residential mortgage-backed securities – Agency ("RMBS - Agency")
|
—
|
|
|
4,591,774
|
|
|
—
|
|
|
—
|
|
|
4,591,774
|
|
|||||
Residential mortgage-backed securities – Non-Agency ("RMBS - Non-Agency")
|
—
|
|
|
285,927
|
|
|
—
|
|
|
—
|
|
|
285,927
|
|
|||||
Commercial mortgage-backed securities ("CMBS")
|
—
|
|
|
296,003
|
|
|
101
|
|
|
—
|
|
|
296,104
|
|
|||||
Collateralized debt obligations ("CDOs")
|
—
|
|
|
—
|
|
|
141,281
|
|
|
—
|
|
|
141,281
|
|
|||||
Other asset-backed securities
|
—
|
|
|
972,040
|
|
|
1,130
|
|
|
—
|
|
|
973,170
|
|
|||||
U.S. States and political subdivisions of the States
|
—
|
|
|
2,598,854
|
|
|
—
|
|
|
—
|
|
|
2,598,854
|
|
|||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported ("Non-U.S. Governments")
|
—
|
|
|
5,642,141
|
|
|
—
|
|
|
—
|
|
|
5,642,141
|
|
|||||
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
28,943,375
|
|
|
$
|
196,448
|
|
|
$
|
—
|
|
|
$
|
29,139,823
|
|
Equity securities, at fair value
|
693,510
|
|
|
344,655
|
|
|
—
|
|
|
—
|
|
|
1,038,165
|
|
|||||
Short-term investments, at fair value (1)
|
—
|
|
|
652,772
|
|
|
—
|
|
|
—
|
|
|
652,772
|
|
|||||
Total investments AFS - Excluding Funds Withheld Assets
|
$
|
693,510
|
|
|
$
|
29,940,802
|
|
|
$
|
196,448
|
|
|
$
|
—
|
|
|
$
|
30,830,760
|
|
Fixed maturities - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
—
|
|
|
$
|
12,391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,391
|
|
Corporate - Financials
|
—
|
|
|
498,074
|
|
|
—
|
|
|
—
|
|
|
498,074
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
1,185,022
|
|
|
—
|
|
|
—
|
|
|
1,185,022
|
|
|||||
RMBS – Agency
|
—
|
|
|
671
|
|
|
—
|
|
|
—
|
|
|
671
|
|
|||||
RMBS – Non-Agency
|
—
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|||||
CMBS
|
—
|
|
|
105,969
|
|
|
—
|
|
|
—
|
|
|
105,969
|
|
|||||
Other asset-backed securities
|
—
|
|
|
137,929
|
|
|
—
|
|
|
—
|
|
|
137,929
|
|
|||||
Non-U.S. Governments
|
—
|
|
|
854,191
|
|
|
—
|
|
|
—
|
|
|
854,191
|
|
|||||
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
2,794,312
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,794,312
|
|
Total investments - AFS, at fair value
|
$
|
693,510
|
|
|
$
|
32,735,114
|
|
|
$
|
196,448
|
|
|
$
|
—
|
|
|
$
|
33,625,072
|
|
September 30, 2016
(U.S. dollars in thousands)
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Collateral
and
Counterparty
Netting
|
|
Balance at
September 30, 2016 |
||||||||||
Fixed maturities - Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Government
|
$
|
—
|
|
|
$
|
16,866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,866
|
|
Corporate - Financials
|
—
|
|
|
487,472
|
|
|
—
|
|
|
—
|
|
|
487,472
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
675,644
|
|
|
—
|
|
|
—
|
|
|
675,644
|
|
|||||
RMBS – Agency
|
—
|
|
|
1,680
|
|
|
—
|
|
|
—
|
|
|
1,680
|
|
|||||
RMBS – Non-Agency
|
—
|
|
|
151
|
|
|
—
|
|
|
—
|
|
|
151
|
|
|||||
CMBS
|
—
|
|
|
5,614
|
|
|
—
|
|
|
—
|
|
|
5,614
|
|
|||||
Other asset-backed securities
|
—
|
|
|
27,699
|
|
|
—
|
|
|
—
|
|
|
27,699
|
|
|||||
Non-U.S. Governments
|
—
|
|
|
393,756
|
|
|
—
|
|
|
—
|
|
|
393,756
|
|
|||||
Total fixed maturities - Trading - Life Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
1,608,882
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,608,882
|
|
Short-term investments, at fair value (1)
|
—
|
|
|
24,169
|
|
|
—
|
|
|
—
|
|
|
$
|
24,169
|
|
||||
Total investments, Trading
|
$
|
—
|
|
|
$
|
1,633,051
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,633,051
|
|
Cash equivalents (2)
|
270,607
|
|
|
1,460,054
|
|
|
—
|
|
|
—
|
|
|
1,730,661
|
|
|||||
Cash equivalents - Life Funds Withheld Assets (2)
|
—
|
|
|
74,936
|
|
|
—
|
|
|
—
|
|
|
74,936
|
|
|||||
Other investments (3)
|
—
|
|
|
527,802
|
|
|
212,754
|
|
|
—
|
|
|
740,556
|
|
|||||
Other assets (4)
|
—
|
|
|
60,684
|
|
|
18,683
|
|
|
(23,873
|
)
|
|
55,494
|
|
|||||
Total assets accounted for at fair value
|
$
|
964,117
|
|
|
$
|
36,491,641
|
|
|
$
|
427,885
|
|
|
$
|
(23,873
|
)
|
|
$
|
37,859,770
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) (5)
|
$
|
—
|
|
|
$
|
1,122,127
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,122,127
|
|
Other liabilities (4)
|
—
|
|
|
48,347
|
|
|
18,640
|
|
|
(23,873
|
)
|
|
43,114
|
|
|||||
Total liabilities accounted for at fair value
|
$
|
—
|
|
|
$
|
1,170,474
|
|
|
$
|
18,640
|
|
|
$
|
(23,873
|
)
|
|
$
|
1,165,241
|
|
December 31, 2015
(U.S. dollars in thousands) |
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Collateral
and
Counterparty
Netting
|
|
Balance at
December 31,
2015
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
—
|
|
|
$
|
5,020,574
|
|
|
$
|
45,063
|
|
|
$
|
—
|
|
|
$
|
5,065,637
|
|
Corporate - Financials
|
—
|
|
|
3,508,224
|
|
|
53,685
|
|
|
—
|
|
|
3,561,909
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
6,900,259
|
|
|
188
|
|
|
—
|
|
|
6,900,447
|
|
|||||
RMBS - Agency
|
—
|
|
|
3,754,894
|
|
|
3,077
|
|
|
—
|
|
|
3,757,971
|
|
|||||
RMBS - Non-Agency
|
—
|
|
|
328,540
|
|
|
—
|
|
|
—
|
|
|
328,540
|
|
|||||
CMBS
|
—
|
|
|
405,316
|
|
|
—
|
|
|
—
|
|
|
405,316
|
|
|||||
CDOs
|
—
|
|
|
2
|
|
|
32,408
|
|
|
—
|
|
|
32,410
|
|
|||||
Other asset-backed securities
|
—
|
|
|
1,150,715
|
|
|
17,857
|
|
|
—
|
|
|
1,168,572
|
|
|||||
U.S. States and political subdivisions of the States
|
—
|
|
|
2,632,070
|
|
|
—
|
|
|
—
|
|
|
2,632,070
|
|
|||||
Non-U.S. Government
|
—
|
|
|
5,251,614
|
|
|
—
|
|
|
—
|
|
|
5,251,614
|
|
|||||
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
28,952,208
|
|
|
$
|
152,278
|
|
|
$
|
—
|
|
|
$
|
29,104,486
|
|
Equity securities, at fair value
|
528,581
|
|
|
350,338
|
|
|
—
|
|
|
—
|
|
|
878,919
|
|
|||||
Short-term investments, at fair value (1)
|
—
|
|
|
617,390
|
|
|
—
|
|
|
—
|
|
|
617,390
|
|
|||||
Total investments AFS - Excluding Funds Withheld Assets
|
$
|
528,581
|
|
|
$
|
29,919,936
|
|
|
$
|
152,278
|
|
|
$
|
—
|
|
|
$
|
30,600,795
|
|
December 31, 2015
(U.S. dollars in thousands) |
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Collateral
and
Counterparty
Netting
|
|
Balance at
December 31,
2015
|
||||||||||
Fixed maturities - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
—
|
|
|
$
|
12,742
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,742
|
|
Corporate - Financials
|
—
|
|
|
598,236
|
|
|
—
|
|
|
—
|
|
|
598,236
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
1,308,628
|
|
|
—
|
|
|
—
|
|
|
1,308,628
|
|
|||||
RMBS – Agency
|
—
|
|
|
752
|
|
|
—
|
|
|
—
|
|
|
752
|
|
|||||
RMBS – Non-Agency
|
—
|
|
|
26,953
|
|
|
—
|
|
|
—
|
|
|
26,953
|
|
|||||
CMBS
|
—
|
|
|
122,481
|
|
|
—
|
|
|
—
|
|
|
122,481
|
|
|||||
Other asset-backed securities
|
—
|
|
|
149,795
|
|
|
—
|
|
|
—
|
|
|
149,795
|
|
|||||
Non-U.S. Government
|
—
|
|
|
933,516
|
|
|
—
|
|
|
—
|
|
|
933,516
|
|
|||||
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
3,153,103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,153,103
|
|
Total investments - AFS, at fair value
|
$
|
528,581
|
|
|
$
|
33,073,039
|
|
|
$
|
152,278
|
|
|
$
|
—
|
|
|
$
|
33,753,898
|
|
Fixed maturities - Trading
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
—
|
|
|
$
|
4,990
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,990
|
|
Corporate - Financials
|
—
|
|
|
335,956
|
|
|
—
|
|
|
—
|
|
|
335,956
|
|
|||||
Corporate - Non Financials
|
—
|
|
|
493,621
|
|
|
—
|
|
|
—
|
|
|
493,621
|
|
|||||
RMBS – Agency
|
—
|
|
|
368
|
|
|
—
|
|
|
—
|
|
|
368
|
|
|||||
CMBS
|
—
|
|
|
4,803
|
|
|
—
|
|
|
—
|
|
|
4,803
|
|
|||||
Other asset-backed securities
|
—
|
|
|
25,700
|
|
|
—
|
|
|
—
|
|
|
25,700
|
|
|||||
Non-U.S. Government
|
—
|
|
|
370,261
|
|
|
—
|
|
|
—
|
|
|
370,261
|
|
|||||
Total fixed maturities - Trading - Life Funds Withheld Assets, at fair value
|
$
|
—
|
|
|
$
|
1,235,699
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,235,699
|
|
Short-term investments, at fair value (1)
|
—
|
|
|
60,330
|
|
|
—
|
|
|
—
|
|
|
$
|
60,330
|
|
||||
Total investments, Trading
|
$
|
—
|
|
|
$
|
1,296,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,296,029
|
|
Cash equivalents (2)
|
437,742
|
|
|
830,924
|
|
|
—
|
|
|
—
|
|
|
1,268,666
|
|
|||||
Cash equivalents - Life Funds Withheld Assets (2)
|
517
|
|
|
100,757
|
|
|
—
|
|
|
—
|
|
|
101,274
|
|
|||||
Other investments (3)
|
—
|
|
|
490,058
|
|
|
264,415
|
|
|
—
|
|
|
754,473
|
|
|||||
Other assets (4)
|
—
|
|
|
69,914
|
|
|
19,400
|
|
|
(3,087
|
)
|
|
86,227
|
|
|||||
Total assets accounted for at fair value
|
$
|
966,840
|
|
|
$
|
35,860,721
|
|
|
$
|
436,093
|
|
|
$
|
(3,087
|
)
|
|
$
|
37,260,567
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) (5)
|
$
|
—
|
|
|
$
|
463,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
463,915
|
|
Financial instruments sold, but not yet purchased (6)
|
347
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
347
|
|
|||||
Other liabilities (4)
|
—
|
|
|
16,304
|
|
|
29,191
|
|
|
(3,087
|
)
|
|
42,408
|
|
|||||
Total liabilities accounted for at fair value
|
$
|
347
|
|
|
$
|
480,219
|
|
|
$
|
29,191
|
|
|
$
|
(3,087
|
)
|
|
$
|
506,670
|
|
(1)
|
Short-term investments consist primarily of Other asset-backed securities, U.S. and Non-U.S. Government securities and Corporate securities.
|
(2)
|
Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to recurring fair value measurement guidance.
|
(3)
|
Excluded from Other Investments are
$378.4 million
and
$537.2 million
as of
September 30, 2016
and
December 31, 2015
, respectively, measured using Net Asset Value. Based on new accounting guidance, these investments are excluded from the fair value hierarchy table. In addition, the Other investments balance excludes a certain payment obligation. This investment, which totaled
$142.0 million
as of
September 30, 2016
and
$141.3 million
as of
December 31, 2015
, is carried at amortized cost. For further information, see Item 8,
Note 8, "Other Investments
," to the Consolidated Financial Statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2015
.
|
(4)
|
Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported on a gross basis by level with a netting adjustment presented separately in the Collateral and Counterparty Netting column. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy. For further details regarding derivative fair values and associated collateral received or paid, see
Note 7, "Derivative Instruments
."
|
(5)
|
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) include balances related to the life retrocession embedded derivative, under which all investment results associated with the Life Funds Withheld Assets related to the GreyCastle Life Retro Arrangements described in
Note 1, "Basis of Preparation and Consolidation
," accrue to the benefit of GCLR.
|
(6)
|
Financial instruments sold, but not yet purchased, represent "short sales" and are included within "Payable for investments purchased" on the balance sheets.
|
|
Level 3 Assets and Liabilities - Three Months Ended September 30, 2016
|
||||||||||||||
(U.S. dollars in thousands)
|
U.S. Government
|
|
Corporate - Financials
|
|
Corporate - Non-Financials
|
|
RMBS - Agency
|
||||||||
Balance, beginning of period
|
$
|
44,256
|
|
|
$
|
43,637
|
|
|
$
|
1,929
|
|
|
$
|
15
|
|
Realized gains (losses)
|
(37
|
)
|
|
(3,088
|
)
|
|
—
|
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
116
|
|
|
78
|
|
|
16
|
|
|
—
|
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
(30,420
|
)
|
|
—
|
|
|
—
|
|
||||
Settlements
|
(685
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
(1,866
|
)
|
|
(15
|
)
|
||||
Balance, end of period
|
$
|
43,650
|
|
|
$
|
10,207
|
|
|
$
|
79
|
|
|
$
|
—
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
RMBS - Non
Agency |
|
CMBS
|
|
CDO
|
|
Other asset-
backed securities |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,794
|
|
|
$
|
6,855
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
99
|
|
|
(7
|
)
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
(1
|
)
|
|
1,141
|
|
|
48
|
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
124,843
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(2,596
|
)
|
|
(1,671
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
102
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,095
|
)
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
141,281
|
|
|
$
|
1,130
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
333
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
Non-U.S. Government
|
|
Short-term
investments |
|
Other investments
|
|
Derivative Contracts
- Net |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
225,094
|
|
|
$
|
(9,836
|
)
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
7,757
|
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
9,879
|
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
9,297
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(12,000
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(14,869
|
)
|
|
—
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
(2,463
|
)
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
212,754
|
|
|
$
|
43
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,902
|
|
|
$
|
55
|
|
|
Level 3 Assets and Liabilities - Three Months Ended September 30, 2015
|
||||||||||||||
(U.S. dollars in thousands)
|
U.S. Government
|
|
Corporate - Financials
|
|
Corporate - Non-Financials
|
|
RMBS - Agency
|
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
5,554
|
|
|
$
|
3,038
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(236
|
)
|
|
(154
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
5,272
|
|
|
$
|
2,882
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
RMBS - Non
Agency |
|
CMBS
|
|
CDO
|
|
Other asset-
backed securities |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
484,171
|
|
|
$
|
42,745
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
(8,469
|
)
|
|
553
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
8,994
|
|
|
(976
|
)
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
2,101
|
|
|
3,334
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(56,576
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(22,558
|
)
|
|
(3,087
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,449
|
)
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
407,663
|
|
|
$
|
36,120
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
164
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
Non-U.S. Government
|
|
Short-term
investments |
|
Other investments
|
|
Derivative Contracts
- Net |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
255,672
|
|
|
$
|
(9,753
|
)
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
9,185
|
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
(5,567
|
)
|
|
69
|
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
30,519
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(1,417
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(10,170
|
)
|
|
—
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
278,222
|
|
|
$
|
(9,684
|
)
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,618
|
|
|
$
|
69
|
|
|
Level 3 Assets and Liabilities - Nine Months Ended September 30, 2016
|
||||||||||||||
(U.S. dollars in thousands)
|
U.S. Government
|
|
Corporate - Financials
|
|
Corporate - Non-Financials
|
|
RMBS - Agency
|
||||||||
Balance, beginning of period
|
$
|
45,063
|
|
|
$
|
53,685
|
|
|
$
|
188
|
|
|
$
|
3,077
|
|
Realized gains (losses)
|
(112
|
)
|
|
(2,991
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Movement in unrealized gains (losses)
|
743
|
|
|
10
|
|
|
16
|
|
|
7
|
|
||||
Purchases and issuances
|
—
|
|
|
208
|
|
|
1,747
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
(30,420
|
)
|
|
—
|
|
|
—
|
|
||||
Settlements
|
(2,044
|
)
|
|
—
|
|
|
(6
|
)
|
|
(229
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
(10,285
|
)
|
|
(1,866
|
)
|
|
(2,852
|
)
|
||||
Balance, end of period
|
$
|
43,650
|
|
|
$
|
10,207
|
|
|
$
|
79
|
|
|
$
|
—
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
630
|
|
|
$
|
31
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
RMBS - Non
Agency |
|
CMBS
|
|
CDO
|
|
Other asset-
backed securities |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,408
|
|
|
$
|
17,857
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
189
|
|
|
515
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
(1
|
)
|
|
6,871
|
|
|
(2,149
|
)
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
124,843
|
|
|
1,072
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(23,030
|
)
|
|
(14,190
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
102
|
|
|
—
|
|
|
3,015
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,990
|
)
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
141,281
|
|
|
$
|
1,130
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
6,152
|
|
|
$
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
Non-U.S. Government
|
|
Short-term
investments |
|
Other investments
|
|
Derivative Contracts
- Net |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
264,415
|
|
|
$
|
(9,791
|
)
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
14,588
|
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
(8,519
|
)
|
|
9,834
|
|
||||
Purchases and issuances
|
—
|
|
|
—
|
|
|
34,450
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(12,000
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(34,334
|
)
|
|
—
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
15,494
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
(61,340
|
)
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
212,754
|
|
|
$
|
43
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,276
|
|
|
$
|
10
|
|
|
Level 3 Assets and Liabilities - Nine Months Ended September 30, 2015
|
||||||||||||||
(U.S. dollars in thousands)
|
U.S. Government
|
|
Corporate - Financials
|
|
Corporate - Non-Financials
|
|
RMBS - Agency
|
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,894
|
|
|
$
|
1,910
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
(186
|
)
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
3
|
|
|
(4
|
)
|
||||
Purchases and issuances (1)
|
—
|
|
|
10,000
|
|
|
(123
|
)
|
|
1,297
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(316
|
)
|
|
(321
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
5,272
|
|
|
$
|
2,882
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(137
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
RMBS - Non
Agency |
|
CMBS
|
|
CDO
|
|
Other asset-
backed securities |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
687,958
|
|
|
$
|
5,288
|
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
(8,209
|
)
|
|
644
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
16,994
|
|
|
(966
|
)
|
||||
Purchases and issuances (1)
|
—
|
|
|
—
|
|
|
14,042
|
|
|
43,962
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(211,661
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(91,461
|
)
|
|
(6,359
|
)
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,449
|
)
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
407,663
|
|
|
$
|
36,120
|
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,889
|
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars in thousands)
|
Non-U.S.
Government |
|
Short-term
investments |
|
Other investments
|
|
Derivative Contracts
- Net |
||||||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
185,083
|
|
|
$
|
(9,764
|
)
|
Realized gains (losses)
|
—
|
|
|
—
|
|
|
11,778
|
|
|
—
|
|
||||
Movement in unrealized gains (losses)
|
—
|
|
|
—
|
|
|
(7,533
|
)
|
|
80
|
|
||||
Purchases and issuances (1)
|
—
|
|
|
—
|
|
|
103,822
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
(1,417
|
)
|
|
—
|
|
||||
Settlements
|
—
|
|
|
—
|
|
|
(13,511
|
)
|
|
—
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
278,222
|
|
|
$
|
(9,684
|
)
|
Movement in total gains (losses) above relating to instruments still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,246
|
|
|
$
|
80
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
(U.S. dollars in thousands)
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Financial Assets
- Other investments
|
$
|
141,995
|
|
|
$
|
153,398
|
|
|
$
|
141,329
|
|
|
$
|
154,065
|
|
Deposit liabilities
|
$
|
1,138,789
|
|
|
$
|
1,450,164
|
|
|
$
|
1,168,376
|
|
|
$
|
1,436,210
|
|
Notes payable and debt
|
2,675,000
|
|
|
2,921,113
|
|
|
2,644,970
|
|
|
2,805,152
|
|
||||
Financial Liabilities
|
$
|
3,813,789
|
|
|
$
|
4,371,277
|
|
|
$
|
3,813,346
|
|
|
$
|
4,241,362
|
|
Three Months Ended September 30, 2016
(U.S. dollars in thousands, except ratios)
|
Insurance
|
|
Reinsurance
|
|
Total P&C
|
|
Corporate
and Other (1)
|
|
Total
|
||||||||||
Gross premiums written
|
$
|
2,153,379
|
|
|
$
|
565,541
|
|
|
$
|
2,718,920
|
|
|
$
|
64,683
|
|
|
$
|
2,783,603
|
|
Net premiums written
|
1,615,132
|
|
|
518,166
|
|
|
2,133,298
|
|
|
2,360
|
|
|
2,135,658
|
|
|||||
Net premiums earned
|
1,653,461
|
|
|
778,216
|
|
|
2,431,677
|
|
|
2,360
|
|
|
2,434,037
|
|
|||||
Less: Net losses and loss expenses (2)
|
1,068,268
|
|
|
423,535
|
|
|
1,491,803
|
|
|
5,875
|
|
|
1,497,678
|
|
|||||
Less: Acquisition costs (2)
|
221,137
|
|
|
181,749
|
|
|
402,886
|
|
|
1,002
|
|
|
403,888
|
|
|||||
Less: Operating expenses (3)
|
302,373
|
|
|
67,764
|
|
|
370,137
|
|
|
142
|
|
|
370,279
|
|
|||||
Underwriting profit (loss)
|
$
|
61,683
|
|
|
$
|
105,168
|
|
|
$
|
166,851
|
|
|
$
|
(4,659
|
)
|
|
$
|
162,192
|
|
Net investment income - excluding Life Funds Withheld Assets (4)
|
|
|
|
|
148,579
|
|
|
8,127
|
|
|
156,706
|
|
|||||||
Net investment income - Life Funds Withheld Assets
|
|
|
|
|
|
|
38,937
|
|
|
38,937
|
|
||||||||
Net results from structured products (5)
|
2,353
|
|
|
5,355
|
|
|
7,708
|
|
|
—
|
|
|
7,708
|
|
|||||
Net fee income and other (6)
|
(4,486
|
)
|
|
620
|
|
|
(3,866
|
)
|
|
595
|
|
|
(3,271
|
)
|
|||||
Loss (gain) on sale of subsidiary
|
|
|
|
|
—
|
|
|
(3,670
|
)
|
|
(3,670
|
)
|
|||||||
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
60,401
|
|
|
(2,006
|
)
|
|
58,395
|
|
|||||
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
|
|
|
|
68
|
|
|
85,213
|
|
|
85,281
|
|
|||||||
Net realized and unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
—
|
|
|
5,490
|
|
|
5,490
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
|
|
|
|
—
|
|
|
(225,610
|
)
|
|
(225,610
|
)
|
|||||||
Net income (loss) from investment fund affiliates and operating affiliates
|
|
|
|
|
|
|
—
|
|
|
24,566
|
|
|
24,566
|
|
|||||
Less: Exchange (gains) losses
|
|
|
|
|
|
|
—
|
|
|
(1,695
|
)
|
|
(1,695
|
)
|
|||||
Less: Corporate operating expenses
|
|
|
|
|
|
|
—
|
|
|
126,308
|
|
|
126,308
|
|
|||||
Contribution from P&C and Corporate and Other
|
|
|
|
|
|
|
379,741
|
|
|
(190,290
|
)
|
|
189,451
|
|
|||||
Less: Interest expense (7)
|
|
|
|
|
|
|
|
|
|
43,025
|
|
|
43,025
|
|
|||||
Less: Non-controlling interests
|
|
|
|
|
|
|
|
|
|
58,076
|
|
|
58,076
|
|
|||||
Less: Income tax expense
|
|
|
|
|
|
|
|
|
|
17,749
|
|
|
17,749
|
|
|||||
Net income (loss) attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
70,601
|
|
||||
Ratios – P&C operations: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
64.6
|
%
|
|
54.4
|
%
|
|
61.3
|
%
|
|
|
|
|
|
|
|||||
Underwriting expense ratio
|
31.7
|
%
|
|
32.1
|
%
|
|
31.8
|
%
|
|
|
|
|
|
|
|||||
Combined ratio
|
96.3
|
%
|
|
86.5
|
%
|
|
93.1
|
%
|
|
|
|
|
|
|
(1)
|
Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.
|
(2)
|
The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.
|
(3)
|
Operating expenses of the segments exclude Corporate operating expenses, shown separately.
|
(4)
|
Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.
|
(5)
|
The net results from P&C structured products include net investment income and interest expense of
$14.1 million
and
$6.4 million
, respectively.
|
(6)
|
Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.
|
(7)
|
Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.
|
(8)
|
Ratios are based on net premiums earned from P&C operations.
|
Three Months Ended September 30, 2015
(U.S. dollars in thousands, except ratios) |
Insurance
|
|
Reinsurance
|
|
Total P&C
|
|
Corporate
and Other (1) |
|
Total
|
||||||||||
Gross premiums written
|
$
|
2,200,196
|
|
|
$
|
458,946
|
|
|
$
|
2,659,142
|
|
|
$
|
80,208
|
|
|
$
|
2,739,350
|
|
Net premiums written
|
1,664,562
|
|
|
408,654
|
|
|
2,073,216
|
|
|
17,812
|
|
|
2,091,028
|
|
|||||
Net premiums earned
|
1,632,988
|
|
|
772,752
|
|
|
2,405,740
|
|
|
17,812
|
|
|
2,423,552
|
|
|||||
Less: Net losses and loss expenses (2)
|
1,037,727
|
|
|
426,558
|
|
|
1,464,285
|
|
|
22,579
|
|
|
1,486,864
|
|
|||||
Less: Acquisition costs (2)
|
214,773
|
|
|
189,671
|
|
|
404,444
|
|
|
4,729
|
|
|
409,173
|
|
|||||
Less: Operating expenses (3)
|
334,211
|
|
|
88,682
|
|
|
422,893
|
|
|
(26
|
)
|
|
422,867
|
|
|||||
Underwriting profit (loss)
|
$
|
46,277
|
|
|
$
|
67,841
|
|
|
$
|
114,118
|
|
|
$
|
(9,470
|
)
|
|
$
|
104,648
|
|
Net investment income - excluding Life Funds Withheld Assets (4)
|
|
|
|
|
152,738
|
|
|
10,254
|
|
|
162,992
|
|
|||||||
Net investment income - Life Funds Withheld Assets
|
|
|
|
|
|
|
46,586
|
|
|
46,586
|
|
||||||||
Net results from structured products (5)
|
3,328
|
|
|
1,109
|
|
|
4,437
|
|
|
—
|
|
|
4,437
|
|
|||||
Net fee income and other (6)
|
(5,207
|
)
|
|
533
|
|
|
(4,674
|
)
|
|
254
|
|
|
(4,420
|
)
|
|||||
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
(197
|
)
|
|
(4
|
)
|
|
(201
|
)
|
|||||
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
|
|
|
|
|
|
—
|
|
|
51,608
|
|
|
51,608
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
—
|
|
|
(7,903
|
)
|
|
(7,903
|
)
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
|
|
|
|
—
|
|
|
(126,140
|
)
|
|
(126,140
|
)
|
|||||||
Net income (loss) from investment fund affiliates and operating affiliates
|
|
|
|
|
|
|
—
|
|
|
4,481
|
|
|
4,481
|
|
|||||
Less: Exchange (gains) losses
|
|
|
|
|
|
|
—
|
|
|
11,661
|
|
|
11,661
|
|
|||||
Less: Corporate operating expenses
|
|
|
|
|
|
|
—
|
|
|
135,500
|
|
|
135,500
|
|
|||||
Contribution from P&C and Corporate and Other
|
|
|
|
|
|
|
266,422
|
|
|
(177,495
|
)
|
|
88,927
|
|
|||||
Less: Interest expense (7)
|
|
|
|
|
|
|
|
|
|
40,798
|
|
|
40,798
|
|
|||||
Less: Non-controlling interests
|
|
|
|
|
|
|
|
|
57,889
|
|
|
57,889
|
|
||||||
Less: Income tax expense
|
|
|
|
|
|
|
|
|
|
(37,042
|
)
|
|
(37,042
|
)
|
|||||
Net income (loss) attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,282
|
|
||||
Ratios – P&C operations: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
63.5
|
%
|
|
55.2
|
%
|
|
60.9
|
%
|
|
|
|
|
|
|
|||||
Underwriting expense ratio
|
33.7
|
%
|
|
36.0
|
%
|
|
34.4
|
%
|
|
|
|
|
|
|
|||||
Combined ratio
|
97.2
|
%
|
|
91.2
|
%
|
|
95.3
|
%
|
|
|
|
|
|
|
(1)
|
Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.
|
(2)
|
The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.
|
(3)
|
Operating expenses of the segments exclude Corporate operating expenses, shown separately.
|
(4)
|
Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.
|
(5)
|
The net results from P&C structured products include net investment income and interest expense of
$15.6 million
and
$11.1 million
, respectively.
|
(6)
|
Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.
|
(7)
|
Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.
|
(8)
|
Ratios are based on net premiums earned from P&C operations.
|
Nine Months Ended September 30, 2016
(U.S. dollars in thousands, except ratios) |
Insurance
|
|
Reinsurance
|
|
Total P&C
|
|
Corporate
and Other (1)
|
|
Total
|
||||||||||
Gross premiums written
|
$
|
7,169,363
|
|
|
$
|
3,439,650
|
|
|
$
|
10,609,013
|
|
|
$
|
202,139
|
|
|
$
|
10,811,152
|
|
Net premiums written
|
4,899,258
|
|
|
3,018,246
|
|
|
7,917,504
|
|
|
9,032
|
|
|
7,926,536
|
|
|||||
Net premiums earned
|
4,944,055
|
|
|
2,367,772
|
|
|
7,311,827
|
|
|
9,032
|
|
|
7,320,859
|
|
|||||
Less: Net losses and loss expenses (2)
|
3,163,599
|
|
|
1,343,075
|
|
|
4,506,674
|
|
|
16,294
|
|
|
4,522,968
|
|
|||||
Less: Acquisition costs (2)
|
679,009
|
|
|
544,380
|
|
|
1,223,389
|
|
|
4,286
|
|
|
1,227,675
|
|
|||||
Less: Operating expenses (3)
|
922,273
|
|
|
215,258
|
|
|
1,137,531
|
|
|
765
|
|
|
1,138,296
|
|
|||||
Underwriting profit (loss)
|
$
|
179,174
|
|
|
$
|
265,059
|
|
|
$
|
444,233
|
|
|
$
|
(12,313
|
)
|
|
$
|
431,920
|
|
Net investment income - excluding Life Funds Withheld Assets (4)
|
|
|
|
|
446,352
|
|
|
24,185
|
|
|
470,537
|
|
|||||||
Net investment income - Life Funds Withheld Assets
|
|
|
|
|
|
|
119,643
|
|
|
119,643
|
|
||||||||
Net results from structured products (5)
|
6,340
|
|
|
5,397
|
|
|
11,737
|
|
|
—
|
|
|
11,737
|
|
|||||
Net fee income and other (6)
|
(12,097
|
)
|
|
2,705
|
|
|
(9,392
|
)
|
|
1,068
|
|
|
(8,324
|
)
|
|||||
Loss (gain) on sale of subsidiary
|
|
|
|
|
—
|
|
|
(3,670
|
)
|
|
(3,670
|
)
|
|||||||
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
77,189
|
|
|
(7,742
|
)
|
|
69,447
|
|
|||||
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
|
|
|
|
|
|
(3
|
)
|
|
271,599
|
|
|
271,596
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
—
|
|
|
2,774
|
|
|
2,774
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
|
|
|
|
—
|
|
|
(691,432
|
)
|
|
(691,432
|
)
|
|||||||
Net income (loss) from investment fund affiliates and operating affiliates
|
|
|
|
|
|
|
—
|
|
|
67,234
|
|
|
67,234
|
|
|||||
Less: Exchange (gains) losses
|
|
|
|
|
|
|
—
|
|
|
(54,614
|
)
|
|
(54,614
|
)
|
|||||
Less: Corporate operating expenses
|
|
|
|
|
|
|
—
|
|
|
372,003
|
|
|
372,003
|
|
|||||
Contribution from P&C and Corporate and Other
|
|
|
|
|
|
|
970,116
|
|
|
(538,703
|
)
|
|
431,413
|
|
|||||
Less: Interest expense (7)
|
|
|
|
|
|
|
|
|
|
128,371
|
|
|
128,371
|
|
|||||
Less: Non-controlling interests
|
|
|
|
|
|
|
|
|
|
124,263
|
|
|
124,263
|
|
|||||
Less: Income tax expense
|
|
|
|
|
|
|
|
|
|
42,511
|
|
|
42,511
|
|
|||||
Net income (loss) attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
$
|
136,268
|
|
|||||
Ratios – P&C operations: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
64.0
|
%
|
|
56.7
|
%
|
|
61.6
|
%
|
|
|
|
|
|
|
|||||
Underwriting expense ratio
|
32.4
|
%
|
|
32.1
|
%
|
|
32.3
|
%
|
|
|
|
|
|
|
|||||
Combined ratio
|
96.4
|
%
|
|
88.8
|
%
|
|
93.9
|
%
|
|
|
|
|
|
|
(1)
|
Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.
|
(2)
|
The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.
|
(3)
|
Operating expenses of the segments exclude Corporate operating expenses, shown separately.
|
(4)
|
Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.
|
(5)
|
The net results from P&C structured products include net investment income and interest expense of
$40.9 million
and
$29.1 million
, respectively.
|
(6)
|
Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.
|
(7)
|
Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.
|
(8)
|
Ratios are based on net premiums earned from P&C operations.
|
Nine Months Ended September 30, 2015
(U.S. dollars in thousands, except ratios) |
Insurance
|
|
Reinsurance
|
|
Total P&C
|
|
Corporate
and Other (1) |
|
Total
|
||||||||||
Gross premiums written
|
$
|
6,074,387
|
|
|
$
|
2,066,856
|
|
|
$
|
8,141,243
|
|
|
$
|
234,602
|
|
|
$
|
8,375,845
|
|
Net premiums written
|
4,155,442
|
|
|
1,854,590
|
|
|
6,010,032
|
|
|
50,576
|
|
|
6,060,608
|
|
|||||
Net premiums earned
|
4,008,200
|
|
|
1,780,829
|
|
|
5,789,029
|
|
|
50,576
|
|
|
5,839,605
|
|
|||||
Less: Net losses and loss expenses (2)
|
2,551,044
|
|
|
834,263
|
|
|
3,385,307
|
|
|
64,047
|
|
|
3,449,354
|
|
|||||
Less: Acquisition costs (2)
|
476,876
|
|
|
419,380
|
|
|
896,256
|
|
|
8,230
|
|
|
904,486
|
|
|||||
Less: Operating expenses (3)
|
834,829
|
|
|
202,904
|
|
|
1,037,733
|
|
|
846
|
|
|
1,038,579
|
|
|||||
Underwriting profit (loss)
|
$
|
145,451
|
|
|
$
|
324,282
|
|
|
$
|
469,733
|
|
|
$
|
(22,547
|
)
|
|
$
|
447,186
|
|
Net investment income - excluding Life Funds Withheld Assets (4)
|
|
|
|
|
435,007
|
|
|
31,295
|
|
|
466,302
|
|
|||||||
Net investment income - Life Funds Withheld Assets
|
|
|
|
|
|
|
143,869
|
|
|
143,869
|
|
||||||||
Net results from structured products (5)
|
9,634
|
|
|
5,085
|
|
|
14,719
|
|
|
—
|
|
|
14,719
|
|
|||||
Net fee income and other (6)
|
(14,705
|
)
|
|
1,981
|
|
|
(12,724
|
)
|
|
432
|
|
|
(12,292
|
)
|
|||||
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
9,833
|
|
|
(1,081
|
)
|
|
8,752
|
|
|||||
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
|
|
|
|
|
|
—
|
|
|
145,513
|
|
|
145,513
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
—
|
|
|
57,127
|
|
|
57,127
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
|
|
|
|
—
|
|
|
(116,333
|
)
|
|
(116,333
|
)
|
|||||||
Net income (loss) from investment fund affiliates and operating affiliates
|
|
|
|
|
|
|
—
|
|
|
103,317
|
|
|
103,317
|
|
|||||
Gain on sale of operating affiliate
|
|
|
|
|
|
|
|
340,407
|
|
|
340,407
|
|
|||||||
Less: Exchange (gains) losses
|
|
|
|
|
|
|
—
|
|
|
49,425
|
|
|
49,425
|
|
|||||
Less: Corporate operating expenses
|
|
|
|
|
|
|
—
|
|
|
328,930
|
|
|
328,930
|
|
|||||
Contribution from P&C and Corporate and Other
|
|
|
|
|
|
|
916,568
|
|
|
303,644
|
|
|
1,220,212
|
|
|||||
Less: Interest expense (7)
|
|
|
|
|
|
|
|
|
|
121,317
|
|
|
121,317
|
|
|||||
Less: Non-controlling interests
|
|
|
|
|
|
|
|
|
|
100,158
|
|
|
100,158
|
|
|||||
Less: Income tax expense
|
|
|
|
|
|
|
|
|
|
20,135
|
|
|
20,135
|
|
|||||
Net income (loss) attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
$
|
978,602
|
|
|||||
Ratios – P&C operations: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
63.6
|
%
|
|
46.8
|
%
|
|
58.5
|
%
|
|
|
|
|
|
|
|||||
Underwriting expense ratio
|
32.8
|
%
|
|
35.0
|
%
|
|
33.4
|
%
|
|
|
|
|
|
|
|||||
Combined ratio
|
96.4
|
%
|
|
81.8
|
%
|
|
91.9
|
%
|
|
|
|
|
|
|
(1)
|
Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.
|
(2)
|
The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.
|
(3)
|
Operating expenses of the segments exclude Corporate operating expenses, shown separately.
|
(4)
|
Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.
|
(5)
|
The net results from P&C structured products include net investment income and interest expense of
$46.7 million
and
$31.7 million
, respectively.
|
(6)
|
Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.
|
(7)
|
Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.
|
(8)
|
Ratios are based on net premiums earned from P&C operations.
|
Three Months Ended September 30, 2016
(U.S. dollars in thousands) |
Insurance
|
|
Reinsurance
|
|
Corporate
and Other |
|
Total
|
||||||||
P&C Operations:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional
|
$
|
317,973
|
|
|
$
|
39,029
|
|
|
$
|
—
|
|
|
$
|
357,002
|
|
Casualty
|
485,846
|
|
|
163,845
|
|
|
—
|
|
|
649,691
|
|
||||
Property catastrophe
|
—
|
|
|
183,381
|
|
|
—
|
|
|
183,381
|
|
||||
Property
|
451,007
|
|
|
263,324
|
|
|
—
|
|
|
714,331
|
|
||||
Specialty
|
408,177
|
|
|
43,712
|
|
|
—
|
|
|
451,889
|
|
||||
Other (1)
|
(9,542
|
)
|
|
84,925
|
|
|
—
|
|
|
75,383
|
|
||||
Total P&C Operations
|
$
|
1,653,461
|
|
|
$
|
778,216
|
|
|
$
|
—
|
|
|
$
|
2,431,677
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
|
||||||
Run-off Life operations - Annuity
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Run-off Life operations - Other Life
|
—
|
|
|
—
|
|
|
2,360
|
|
|
2,360
|
|
||||
Total Corporate and Other
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,360
|
|
|
$
|
2,360
|
|
Total
|
$
|
1,653,461
|
|
|
$
|
778,216
|
|
|
$
|
2,360
|
|
|
$
|
2,434,037
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2015
(U.S. dollars in thousands) |
Insurance (2)
|
|
Reinsurance
|
|
Corporate
and Other |
|
Total
|
||||||||
P&C Operations:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional
|
$
|
300,775
|
|
|
$
|
46,877
|
|
|
$
|
—
|
|
|
$
|
347,652
|
|
Casualty
|
503,190
|
|
|
141,135
|
|
|
—
|
|
|
644,325
|
|
||||
Property catastrophe
|
—
|
|
|
205,337
|
|
|
—
|
|
|
205,337
|
|
||||
Property
|
369,007
|
|
|
271,297
|
|
|
—
|
|
|
640,304
|
|
||||
Specialty
|
447,642
|
|
|
36,345
|
|
|
—
|
|
|
483,987
|
|
||||
Other (1)
|
12,374
|
|
|
71,761
|
|
|
—
|
|
|
84,135
|
|
||||
Total P&C Operations
|
$
|
1,632,988
|
|
|
$
|
772,752
|
|
|
$
|
—
|
|
|
$
|
2,405,740
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
|
||||||
Run-off Life operations - Annuity
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Run-off Life operations - Other Life
|
—
|
|
|
—
|
|
|
17,812
|
|
|
17,812
|
|
||||
Total Corporate and Other
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,812
|
|
|
$
|
17,812
|
|
Total
|
$
|
1,632,988
|
|
|
$
|
772,752
|
|
|
$
|
17,812
|
|
|
$
|
2,423,552
|
|
(1)
|
Other within the Insurance segment includes: surety, structured indemnity and certain discontinued lines. Other within the Reinsurance segment includes: whole account contracts, structured indemnity and other lines.
|
(2)
|
Amounts from the prior year have been represented to reflect current mapping of underlying lines of business to be consistent with the manner in which they are reflected in the current period. The most significant movements include the following: Energy business previously shown under Specialty is now reflected in Property; Programs business formerly in Other is now reflected in Property or Casualty, depending upon the predominant line for each program; and Excess and Surplus is now reflected primarily in Casualty.
|
Nine Months Ended September 30, 2016
(U.S. dollars in thousands) |
Insurance
|
|
Reinsurance
|
|
Corporate
and Other |
|
Total
|
||||||||
P&C Operations:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional
|
$
|
970,271
|
|
|
$
|
121,982
|
|
|
$
|
—
|
|
|
$
|
1,092,253
|
|
Casualty
|
1,465,869
|
|
|
510,031
|
|
|
—
|
|
|
1,975,900
|
|
||||
Property catastrophe
|
—
|
|
|
602,995
|
|
|
—
|
|
|
602,995
|
|
||||
Property
|
1,216,264
|
|
|
777,993
|
|
|
—
|
|
|
1,994,257
|
|
||||
Specialty
|
1,286,738
|
|
|
125,717
|
|
|
—
|
|
|
1,412,455
|
|
||||
Other (1)
|
4,913
|
|
|
229,054
|
|
|
—
|
|
|
233,967
|
|
||||
Total P&C Operations
|
$
|
4,944,055
|
|
|
$
|
2,367,772
|
|
|
$
|
—
|
|
|
$
|
7,311,827
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Run-off Life operations - Annuity
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Run-off Life operations - Other Life
|
—
|
|
|
—
|
|
|
9,032
|
|
|
9,032
|
|
||||
Total Corporate and Other
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,032
|
|
|
$
|
9,032
|
|
Total
|
$
|
4,944,055
|
|
|
$
|
2,367,772
|
|
|
$
|
9,032
|
|
|
$
|
7,320,859
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2015
(U.S. dollars in thousands) |
Insurance (2)
|
|
Reinsurance
|
|
Corporate
and Other |
|
Total
|
||||||||
P&C Operations:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional
|
$
|
853,547
|
|
|
$
|
125,110
|
|
|
$
|
—
|
|
|
$
|
978,657
|
|
Casualty
|
1,298,033
|
|
|
325,130
|
|
|
—
|
|
|
1,623,163
|
|
||||
Property catastrophe
|
—
|
|
|
462,862
|
|
|
—
|
|
|
462,862
|
|
||||
Property
|
847,454
|
|
|
634,419
|
|
|
—
|
|
|
1,481,873
|
|
||||
Specialty
|
974,195
|
|
|
86,969
|
|
|
—
|
|
|
1,061,164
|
|
||||
Other (1)
|
34,971
|
|
|
146,339
|
|
|
—
|
|
|
181,310
|
|
||||
Total P&C Operations
|
$
|
4,008,200
|
|
|
$
|
1,780,829
|
|
|
$
|
—
|
|
|
$
|
5,789,029
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Run-off Life operations - Annuity
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Run-off Life operations - Other Life
|
—
|
|
|
—
|
|
|
50,576
|
|
|
50,576
|
|
||||
Total Corporate and Other
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,576
|
|
|
$
|
50,576
|
|
Total
|
$
|
4,008,200
|
|
|
$
|
1,780,829
|
|
|
$
|
50,576
|
|
|
$
|
5,839,605
|
|
(1)
|
Other within the Insurance segment includes: surety, structured indemnity and certain discontinued lines. Other within the Reinsurance segment includes: whole account contracts, structured indemnity and other lines.
|
(2)
|
Amounts from the prior year have been represented to reflect current mapping of underlying lines of business to be consistent with the manner in which they are reflected in the current period. The most significant movements include the following: Energy business previously shown under Specialty is now reflected in Property; Programs business formerly in Other is now reflected in Property or Casualty, depending upon the predominant line for each program; and Excess and Surplus is now reflected primarily in Casualty.
|
|
|
|
Included in AOCI
|
|
|
|
|
||||||||||||
September 30, 2016
(U.S. dollars in thousands)
|
Cost or
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Non-credit Related OTTI (1)
|
||||||||||
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
3,828,005
|
|
|
$
|
108,504
|
|
|
$
|
(3,150
|
)
|
|
$
|
3,933,359
|
|
|
$
|
—
|
|
Corporate - Financials
|
3,687,552
|
|
|
104,004
|
|
|
(13,212
|
)
|
|
3,778,344
|
|
|
—
|
|
|||||
Corporate - Non Financials
|
6,693,500
|
|
|
256,933
|
|
|
(51,564
|
)
|
|
6,898,869
|
|
|
(39
|
)
|
|||||
RMBS – Agency
|
4,469,725
|
|
|
124,185
|
|
|
(2,136
|
)
|
|
4,591,774
|
|
|
—
|
|
|||||
RMBS – Non-Agency
|
279,130
|
|
|
21,381
|
|
|
(14,584
|
)
|
|
285,927
|
|
|
(48,731
|
)
|
|||||
CMBS
|
288,544
|
|
|
10,226
|
|
|
(2,666
|
)
|
|
296,104
|
|
|
(1,223
|
)
|
|||||
CDO
|
143,783
|
|
|
175
|
|
|
(2,677
|
)
|
|
141,281
|
|
|
(1,208
|
)
|
|||||
Other asset-backed securities
|
959,675
|
|
|
20,715
|
|
|
(7,220
|
)
|
|
973,170
|
|
|
(914
|
)
|
|||||
U.S. States and political subdivisions of the States
|
2,437,321
|
|
|
162,609
|
|
|
(1,076
|
)
|
|
2,598,854
|
|
|
—
|
|
|||||
Non-U.S. Governments
|
5,513,697
|
|
|
207,178
|
|
|
(78,734
|
)
|
|
5,642,141
|
|
|
—
|
|
|||||
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
$
|
28,300,932
|
|
|
$
|
1,015,910
|
|
|
$
|
(177,019
|
)
|
|
$
|
29,139,823
|
|
|
$
|
(52,115
|
)
|
Total short-term investments - Excluding Life Funds Withheld Assets
|
655,792
|
|
|
815
|
|
|
(3,835
|
)
|
|
652,772
|
|
|
—
|
|
|||||
Total equity securities - Excluding Life Funds Withheld Assets
|
968,040
|
|
|
80,050
|
|
|
(9,925
|
)
|
|
1,038,165
|
|
|
—
|
|
|||||
Total investments - AFS - Excluding Life Funds Withheld Assets
|
$
|
29,924,764
|
|
|
$
|
1,096,775
|
|
|
$
|
(190,779
|
)
|
|
$
|
30,830,760
|
|
|
$
|
(52,115
|
)
|
Fixed maturities - AFS - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Government
|
$
|
9,405
|
|
|
$
|
2,986
|
|
|
$
|
—
|
|
|
$
|
12,391
|
|
|
$
|
—
|
|
Corporate - Financials
|
417,040
|
|
|
81,034
|
|
|
—
|
|
|
498,074
|
|
|
—
|
|
|||||
Corporate - Non Financials
|
888,588
|
|
|
296,434
|
|
|
—
|
|
|
1,185,022
|
|
|
—
|
|
|||||
RMBS – Agency
|
537
|
|
|
134
|
|
|
—
|
|
|
671
|
|
|
—
|
|
|||||
RMBS – Non-Agency
|
49
|
|
|
16
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|||||
CMBS
|
83,828
|
|
|
22,141
|
|
|
—
|
|
|
105,969
|
|
|
—
|
|
|||||
Other asset-backed securities
|
112,446
|
|
|
25,483
|
|
|
—
|
|
|
137,929
|
|
|
—
|
|
|||||
Non-U.S. Governments
|
589,194
|
|
|
264,997
|
|
|
—
|
|
|
854,191
|
|
|
—
|
|
|||||
Total fixed maturities - AFS - Life Funds Withheld Assets
|
$
|
2,101,087
|
|
|
$
|
693,225
|
|
|
$
|
—
|
|
|
$
|
2,794,312
|
|
|
$
|
—
|
|
Total investments - AFS
|
$
|
32,025,851
|
|
|
$
|
1,790,000
|
|
|
$
|
(190,779
|
)
|
|
$
|
33,625,072
|
|
|
$
|
(52,115
|
)
|
(1)
|
Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.
|
December 31, 2015
(U.S. dollars in thousands) |
Cost or
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Non-credit Related OTTI (1)
|
||||||||||
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Government
|
$
|
5,047,621
|
|
|
$
|
52,355
|
|
|
$
|
(34,339
|
)
|
|
$
|
5,065,637
|
|
|
$
|
—
|
|
Corporate - Financials
|
3,535,830
|
|
|
49,535
|
|
|
(23,456
|
)
|
|
3,561,909
|
|
|
—
|
|
|||||
Corporate - Non Financials
|
6,867,525
|
|
|
130,568
|
|
|
(97,646
|
)
|
|
6,900,447
|
|
|
—
|
|
|||||
RMBS – Agency
|
3,697,756
|
|
|
77,776
|
|
|
(17,561
|
)
|
|
3,757,971
|
|
|
—
|
|
|||||
RMBS – Non-Agency
|
319,876
|
|
|
25,644
|
|
|
(16,980
|
)
|
|
328,540
|
|
|
(54,200
|
)
|
|||||
CMBS
|
401,713
|
|
|
7,933
|
|
|
(4,330
|
)
|
|
405,316
|
|
|
(1,182
|
)
|
|||||
CDOs
|
41,679
|
|
|
4
|
|
|
(9,273
|
)
|
|
32,410
|
|
|
(1,208
|
)
|
|||||
Other asset-backed securities
|
1,164,426
|
|
|
17,665
|
|
|
(13,519
|
)
|
|
1,168,572
|
|
|
(1,144
|
)
|
|||||
U.S. States and political subdivisions of the States
|
2,514,048
|
|
|
125,395
|
|
|
(7,373
|
)
|
|
2,632,070
|
|
|
—
|
|
|||||
Non-U.S. Government
|
5,249,148
|
|
|
100,383
|
|
|
(97,917
|
)
|
|
5,251,614
|
|
|
—
|
|
|||||
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
$
|
28,839,622
|
|
|
$
|
587,258
|
|
|
$
|
(322,394
|
)
|
|
$
|
29,104,486
|
|
|
$
|
(57,734
|
)
|
Total short-term investments - Excluding Life Funds Withheld Assets
|
618,851
|
|
|
967
|
|
|
(2,428
|
)
|
|
617,390
|
|
|
—
|
|
|||||
Total equity securities - Excluding Life Funds Withheld Assets
|
834,079
|
|
|
89,993
|
|
|
(45,153
|
)
|
|
878,919
|
|
|
—
|
|
|||||
Total investments - AFS - Excluding Life Funds Withheld Assets
|
$
|
30,292,552
|
|
|
$
|
678,218
|
|
|
$
|
(369,975
|
)
|
|
$
|
30,600,795
|
|
|
$
|
(57,734
|
)
|
Fixed maturities - AFS - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
|
$
|
10,721
|
|
|
$
|
2,021
|
|
|
$
|
—
|
|
|
$
|
12,742
|
|
|
$
|
—
|
|
Corporate - Financials
|
531,016
|
|
|
67,220
|
|
|
—
|
|
|
598,236
|
|
|
—
|
|
|||||
Corporate - Non Financials
|
1,132,926
|
|
|
175,702
|
|
|
—
|
|
|
1,308,628
|
|
|
—
|
|
|||||
RMBS – Agency
|
591
|
|
|
161
|
|
|
—
|
|
|
752
|
|
|
—
|
|
|||||
RMBS – Non-Agency
|
24,401
|
|
|
2,552
|
|
|
—
|
|
|
26,953
|
|
|
—
|
|
|||||
CMBS
|
107,968
|
|
|
14,513
|
|
|
—
|
|
|
122,481
|
|
|
—
|
|
|||||
Other asset-backed securities
|
132,674
|
|
|
17,121
|
|
|
—
|
|
|
149,795
|
|
|
—
|
|
|||||
Non-U.S. Governments
|
737,735
|
|
|
195,781
|
|
|
—
|
|
|
933,516
|
|
|
—
|
|
|||||
Total fixed maturities - AFS - Life Funds Withheld Assets
|
$
|
2,678,032
|
|
|
$
|
475,071
|
|
|
$
|
—
|
|
|
$
|
3,153,103
|
|
|
$
|
—
|
|
Total investments - AFS
|
$
|
32,970,584
|
|
|
$
|
1,153,289
|
|
|
$
|
(369,975
|
)
|
|
$
|
33,753,898
|
|
|
$
|
(57,734
|
)
|
(1)
|
Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.
|
September 30, 2016
(U.S. dollars in thousands) |
Amortized
Cost |
|
Fair Value
|
||||
Fixed maturities - Trading - Life Funds Withheld Assets
|
|
|
|
|
|
||
U.S. Government
|
$
|
16,438
|
|
|
$
|
16,866
|
|
Corporate - Financials
|
458,097
|
|
|
487,472
|
|
||
Corporate - Non Financials
|
616,770
|
|
|
675,644
|
|
||
RMBS – Agency
|
1,674
|
|
|
1,680
|
|
||
RMBS – Non-Agency
|
148
|
|
|
151
|
|
||
CMBS
|
5,198
|
|
|
5,614
|
|
||
Other asset-backed securities
|
25,744
|
|
|
27,699
|
|
||
Non-U.S. Governments
|
356,365
|
|
|
393,756
|
|
||
Total fixed maturities - Trading - Life Funds Withheld Assets
|
$
|
1,480,434
|
|
|
$
|
1,608,882
|
|
Total short-term investments - Trading - Life Funds Withheld Assets
|
$
|
24,179
|
|
|
$
|
24,169
|
|
Total investments - Trading - Life Funds Withheld Assets
|
$
|
1,504,613
|
|
|
$
|
1,633,051
|
|
December 31, 2015
(U.S. dollars in thousands) |
Amortized
Cost |
|
Fair Value
|
||||
Fixed maturities - Trading - Life Funds Withheld Assets
|
|
|
|
|
|
||
U.S. Government
|
$
|
4,957
|
|
|
$
|
4,990
|
|
Corporate - Financials
|
344,070
|
|
|
335,956
|
|
||
Corporate - Non Financials
|
509,441
|
|
|
493,621
|
|
||
RMBS – Agency
|
370
|
|
|
368
|
|
||
CMBS
|
4,874
|
|
|
4,803
|
|
||
Other asset-backed securities
|
26,405
|
|
|
25,700
|
|
||
Non-U.S. Governments
|
373,492
|
|
|
370,261
|
|
||
Total fixed maturities - Trading - Life Funds Withheld Assets
|
$
|
1,263,609
|
|
|
$
|
1,235,699
|
|
Total short-term investments - Trading - Life Funds Withheld Assets
|
$
|
60,176
|
|
|
$
|
60,330
|
|
Total investments - Trading - Life Funds Withheld Assets
|
$
|
1,323,785
|
|
|
$
|
1,296,029
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
(U.S. dollars in thousands)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due less than one year
|
$
|
2,132,413
|
|
|
$
|
2,137,838
|
|
|
$
|
2,106,851
|
|
|
$
|
2,104,106
|
|
Due after 1 through 5 years
|
12,900,781
|
|
|
13,142,832
|
|
|
14,051,494
|
|
|
14,143,461
|
|
||||
Due after 5 through 10 years
|
5,663,250
|
|
|
5,927,235
|
|
|
5,680,830
|
|
|
5,740,954
|
|
||||
Due after 10 years
|
1,463,631
|
|
|
1,643,662
|
|
|
1,374,997
|
|
|
1,423,156
|
|
||||
|
$
|
22,160,075
|
|
|
$
|
22,851,567
|
|
|
$
|
23,214,172
|
|
|
$
|
23,411,677
|
|
RMBS – Agency
|
4,469,725
|
|
|
4,591,774
|
|
|
3,697,756
|
|
|
3,757,971
|
|
||||
RMBS – Non-Agency
|
279,130
|
|
|
285,927
|
|
|
319,876
|
|
|
328,540
|
|
||||
CMBS
|
288,544
|
|
|
296,104
|
|
|
401,713
|
|
|
405,316
|
|
||||
CDOs
|
143,783
|
|
|
141,281
|
|
|
41,679
|
|
|
32,410
|
|
||||
Other asset-backed securities
|
959,675
|
|
|
973,170
|
|
|
1,164,426
|
|
|
1,168,572
|
|
||||
Total mortgage and asset-backed securities
|
$
|
6,140,857
|
|
|
$
|
6,288,256
|
|
|
$
|
5,625,450
|
|
|
$
|
5,692,809
|
|
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets
|
$
|
28,300,932
|
|
|
$
|
29,139,823
|
|
|
$
|
28,839,622
|
|
|
$
|
29,104,486
|
|
Fixed maturities - AFS - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due less than one year
|
$
|
70,372
|
|
|
$
|
82,442
|
|
|
$
|
81,700
|
|
|
$
|
92,921
|
|
Due after 1 through 5 years
|
316,288
|
|
|
348,173
|
|
|
386,810
|
|
|
416,743
|
|
||||
Due after 5 through 10 years
|
369,152
|
|
|
453,723
|
|
|
491,621
|
|
|
558,805
|
|
||||
Due after 10 years
|
1,148,415
|
|
|
1,665,340
|
|
|
1,452,267
|
|
|
1,784,653
|
|
||||
|
$
|
1,904,227
|
|
|
$
|
2,549,678
|
|
|
$
|
2,412,398
|
|
|
$
|
2,853,122
|
|
RMBS – Agency
|
537
|
|
|
671
|
|
|
591
|
|
|
752
|
|
||||
RMBS – Non-Agency
|
49
|
|
|
65
|
|
|
24,401
|
|
|
26,953
|
|
||||
CMBS
|
83,828
|
|
|
105,969
|
|
|
107,968
|
|
|
122,481
|
|
||||
Other asset-backed securities
|
112,446
|
|
|
137,929
|
|
|
132,674
|
|
|
149,795
|
|
||||
Total mortgage and asset-backed securities
|
$
|
196,860
|
|
|
$
|
244,634
|
|
|
$
|
265,634
|
|
|
$
|
299,981
|
|
Total fixed maturities - AFS - Life Funds Withheld Assets
|
$
|
2,101,087
|
|
|
$
|
2,794,312
|
|
|
$
|
2,678,032
|
|
|
$
|
3,153,103
|
|
Total fixed maturities - AFS
|
$
|
30,402,019
|
|
|
$
|
31,934,135
|
|
|
$
|
31,517,654
|
|
|
$
|
32,257,589
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
(U.S. dollars in thousands)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Fixed maturities - Trading - Life Funds Withheld Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due less than one year
|
$
|
47,425
|
|
|
$
|
48,617
|
|
|
$
|
4,573
|
|
|
$
|
5,096
|
|
Due after 1 through 5 years
|
316,116
|
|
|
321,982
|
|
|
278,163
|
|
|
272,220
|
|
||||
Due after 5 through 10 years
|
408,421
|
|
|
429,326
|
|
|
280,487
|
|
|
277,920
|
|
||||
Due after 10 years
|
675,709
|
|
|
773,813
|
|
|
668,737
|
|
|
649,592
|
|
||||
|
$
|
1,447,671
|
|
|
$
|
1,573,738
|
|
|
$
|
1,231,960
|
|
|
$
|
1,204,828
|
|
RMBS – Agency
|
1,674
|
|
|
1,680
|
|
|
370
|
|
|
368
|
|
||||
RMBS – Non-Agency
|
148
|
|
|
151
|
|
|
—
|
|
|
—
|
|
||||
CMBS
|
5,198
|
|
|
5,614
|
|
|
4,874
|
|
|
4,803
|
|
||||
Other asset-backed securities
|
25,744
|
|
|
27,699
|
|
|
26,405
|
|
|
25,700
|
|
||||
Total mortgage and asset-backed securities
|
$
|
32,764
|
|
|
$
|
35,144
|
|
|
$
|
31,649
|
|
|
$
|
30,871
|
|
Total fixed maturities - Trading - Life Funds Withheld Assets
|
$
|
1,480,435
|
|
|
$
|
1,608,882
|
|
|
$
|
1,263,609
|
|
|
$
|
1,235,699
|
|
|
Less than 12 months
|
|
Equal to or greater
than 12 months
|
||||||||||||
September 30, 2016
(U.S. dollars in thousands) |
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed maturities and short-term investments - AFS
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government
|
$
|
545,749
|
|
|
$
|
(1,815
|
)
|
|
$
|
42,332
|
|
|
$
|
(1,341
|
)
|
Corporate – Financials
|
227,180
|
|
|
(8,009
|
)
|
|
70,183
|
|
|
(5,205
|
)
|
||||
Corporate – Non Financials
|
822,596
|
|
|
(27,034
|
)
|
|
248,323
|
|
|
(24,598
|
)
|
||||
RMBS – Agency
|
289,418
|
|
|
(574
|
)
|
|
157,061
|
|
|
(1,562
|
)
|
||||
RMBS – Non-Agency
|
7,916
|
|
|
(238
|
)
|
|
172,875
|
|
|
(14,346
|
)
|
||||
CMBS
|
85,587
|
|
|
(1,070
|
)
|
|
17,959
|
|
|
(1,596
|
)
|
||||
CDOs
|
3,646
|
|
|
(315
|
)
|
|
3,574
|
|
|
(2,362
|
)
|
||||
Other asset-backed securities
|
499,412
|
|
|
(1,172
|
)
|
|
60,103
|
|
|
(6,213
|
)
|
||||
U.S. States and political subdivisions of the States
|
52,272
|
|
|
(977
|
)
|
|
9,909
|
|
|
(99
|
)
|
||||
Non-U.S. Governments
|
983,007
|
|
|
(46,450
|
)
|
|
313,460
|
|
|
(35,878
|
)
|
||||
Total fixed maturities and short-term investments - AFS
|
$
|
3,516,783
|
|
|
$
|
(87,654
|
)
|
|
$
|
1,095,779
|
|
|
$
|
(93,200
|
)
|
Total equity securities
|
$
|
309,423
|
|
|
$
|
(9,925
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Less than 12 months
|
|
Equal to or greater
than 12 months
|
||||||||||||
December 31, 2015
(U.S. dollars in thousands) |
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed maturities and short-term investments - AFS
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government
|
$
|
3,762,869
|
|
|
$
|
(29,339
|
)
|
|
$
|
89,113
|
|
|
$
|
(5,044
|
)
|
Corporate – Financials
|
1,641,021
|
|
|
(13,280
|
)
|
|
102,022
|
|
|
(10,192
|
)
|
||||
Corporate – Non Financials
|
3,275,270
|
|
|
(73,069
|
)
|
|
227,527
|
|
|
(24,706
|
)
|
||||
RMBS – Agency
|
1,065,055
|
|
|
(10,046
|
)
|
|
221,211
|
|
|
(7,515
|
)
|
||||
RMBS – Non-Agency
|
19,614
|
|
|
(1,104
|
)
|
|
180,146
|
|
|
(15,876
|
)
|
||||
CMBS
|
118,605
|
|
|
(1,561
|
)
|
|
78,651
|
|
|
(2,769
|
)
|
||||
CDOs
|
12,311
|
|
|
(516
|
)
|
|
20,096
|
|
|
(8,757
|
)
|
||||
Other asset-backed securities
|
572,671
|
|
|
(5,252
|
)
|
|
57,563
|
|
|
(8,268
|
)
|
||||
U.S. States and political subdivisions of the States
|
565,055
|
|
|
(6,609
|
)
|
|
12,259
|
|
|
(765
|
)
|
||||
Non-U.S. Governments
|
1,921,286
|
|
|
(53,440
|
)
|
|
474,929
|
|
|
(46,714
|
)
|
||||
Total fixed maturities and short-term investments - AFS
|
$
|
12,953,757
|
|
|
$
|
(194,216
|
)
|
|
$
|
1,463,517
|
|
|
$
|
(130,606
|
)
|
Total equity securities
|
$
|
356,742
|
|
|
$
|
(45,153
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Net Realized Gains (Losses) on Investments
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets:
|
|
|
|
|
|
|
|
||||||||
Gross realized gains
|
$
|
98,452
|
|
|
$
|
88,224
|
|
|
$
|
241,855
|
|
|
$
|
199,070
|
|
Gross realized losses on investments sold
|
(30,038
|
)
|
|
(45,711
|
)
|
|
(110,287
|
)
|
|
(120,440
|
)
|
||||
OTTI on investments, net of amounts transferred to other comprehensive income
|
(10,019
|
)
|
|
(42,714
|
)
|
|
(62,121
|
)
|
|
(69,878
|
)
|
||||
|
$
|
58,395
|
|
|
$
|
(201
|
)
|
|
$
|
69,447
|
|
|
$
|
8,752
|
|
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets:
|
|
|
|
|
|
|
|
||||||||
Gross realized gains
|
$
|
44,183
|
|
|
$
|
60,643
|
|
|
$
|
140,703
|
|
|
$
|
198,412
|
|
Gross realized losses on investments sold
|
(172
|
)
|
|
(6,863
|
)
|
|
(32,162
|
)
|
|
(23,857
|
)
|
||||
OTTI on investments, net of amounts transferred to other comprehensive income
|
—
|
|
|
(2,023
|
)
|
|
(2,598
|
)
|
|
(10,110
|
)
|
||||
Net unrealized gains (losses) on trading securities
|
$
|
41,270
|
|
|
$
|
(149
|
)
|
|
$
|
165,653
|
|
|
$
|
(18,932
|
)
|
|
$
|
85,281
|
|
|
$
|
51,608
|
|
|
$
|
271,596
|
|
|
$
|
145,513
|
|
Total net realized gains (losses) on investments
|
$
|
143,676
|
|
|
$
|
51,407
|
|
|
$
|
341,043
|
|
|
$
|
154,265
|
|
▪
|
$2.1 million
related to certain fixed maturities that we no longer intend to hold for a period sufficient to recover their fair value to cost.
|
▪
|
$1.1 million
related to certain high yield securities where we determined that the likely recovery on these securities was below the carrying value.
|
▪
|
$0.6 million
for structured securities, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities.
|
•
|
$6.1 million
related to foreign exchange losses.
|
Credit Loss Impairments
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Opening balance as of beginning of indicated period
|
$
|
73,391
|
|
|
$
|
94,219
|
|
|
$
|
73,469
|
|
|
$
|
131,942
|
|
Credit loss impairment recognized in the current period on securities not previously impaired
|
811
|
|
|
2,004
|
|
|
12,049
|
|
|
9,565
|
|
||||
Credit loss impairments previously recognized on securities that matured or were paid down, prepaid or sold during the period
|
(7,760
|
)
|
|
(1,531
|
)
|
|
(15,579
|
)
|
|
(38,564
|
)
|
||||
Credit loss impairments previously recognized on securities impaired to fair value during the period
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,629
|
)
|
||||
Additional credit loss impairments recognized in the current period on securities previously impaired
|
911
|
|
|
945
|
|
|
2,014
|
|
|
1,331
|
|
||||
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
|
(2,003
|
)
|
|
(2,165
|
)
|
|
(6,603
|
)
|
|
(8,173
|
)
|
||||
Balance as of September 30,
|
$
|
65,350
|
|
|
$
|
93,472
|
|
|
$
|
65,350
|
|
|
$
|
93,472
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
(U.S. dollars in thousands)
|
Asset
Derivative
Notional
Amount
|
|
Asset
Derivative
Fair Value
(1)
|
|
Liability
Derivative
Notional
Amount
|
|
Liability
Derivative
Fair Value
(1)
|
|
Asset
Derivative
Notional
Amount
|
|
Asset
Derivative
Fair Value
(1)
|
|
Liability
Derivative
Notional
Amount
|
|
Liability
Derivative
Fair Value
(1)
|
||||||||||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
$
|
1,443,726
|
|
|
$
|
58,686
|
|
|
$
|
1,155,580
|
|
|
$
|
36,240
|
|
|
$
|
1,667,585
|
|
|
$
|
64,289
|
|
|
$
|
674,976
|
|
|
$
|
11,941
|
|
Total derivatives designated as hedging instruments
|
$
|
1,443,726
|
|
|
$
|
58,686
|
|
|
$
|
1,155,580
|
|
|
$
|
36,240
|
|
|
$
|
1,667,585
|
|
|
$
|
64,289
|
|
|
$
|
674,976
|
|
|
$
|
11,941
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment Related Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange exposure
|
214,406
|
|
|
1,583
|
|
|
76,821
|
|
|
1,512
|
|
|
102,234
|
|
|
2,888
|
|
|
144,707
|
|
|
1,702
|
|
||||||||
Credit exposure
|
5,000
|
|
|
411
|
|
|
87,500
|
|
|
6,605
|
|
|
8,433
|
|
|
652
|
|
|
71,614
|
|
|
12,067
|
|
||||||||
Financial market exposure
|
5
|
|
|
5
|
|
|
30,117
|
|
|
3,990
|
|
|
37
|
|
|
77
|
|
|
26,500
|
|
|
417
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
(U.S. dollars in thousands)
|
Asset
Derivative
Notional
Amount
|
|
Asset
Derivative
Fair Value
(1)
|
|
Liability
Derivative
Notional
Amount
|
|
Liability
Derivative
Fair Value
(1)
|
|
Asset
Derivative
Notional
Amount
|
|
Asset
Derivative
Fair Value
(1)
|
|
Liability
Derivative
Notional
Amount
|
|
Liability
Derivative
Fair Value
(1)
|
||||||||||||||||
Other Non-Investment Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
194,566
|
|
|
2,009
|
|
|
—
|
|
|
—
|
|
||||||||
Credit exposure
|
31,531
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
29,874
|
|
|
31
|
|
|
—
|
|
|
—
|
|
||||||||
Guaranteed minimum income benefit contract
|
44,112
|
|
|
18,640
|
|
|
44,112
|
|
|
18,640
|
|
|
46,032
|
|
|
19,368
|
|
|
46,032
|
|
|
19,368
|
|
||||||||
Modified coinsurance funds withheld contracts (2)
|
60,812
|
|
|
—
|
|
|
4,567,500
|
|
|
—
|
|
|
60,667
|
|
|
—
|
|
|
4,620,879
|
|
|
—
|
|
||||||||
Total derivatives not designated as hedging instruments
|
$
|
355,866
|
|
|
$
|
20,681
|
|
|
$
|
4,806,050
|
|
|
$
|
30,747
|
|
|
$
|
441,843
|
|
|
$
|
25,025
|
|
|
$
|
4,909,732
|
|
|
$
|
33,554
|
|
Total derivatives
|
|
|
$
|
79,367
|
|
|
|
|
$
|
66,987
|
|
|
|
|
$
|
89,314
|
|
|
|
|
$
|
45,495
|
|
||||||||
Counterparty netting
|
|
|
(23,873
|
)
|
|
|
|
(23,873
|
)
|
|
|
|
(3,087
|
)
|
|
|
|
(3,087
|
)
|
||||||||||||
Total derivatives net of counterparty netting (1)
|
|
|
55,494
|
|
|
|
|
43,114
|
|
|
|
|
86,227
|
|
|
|
|
42,408
|
|
||||||||||||
Cash collateral held/paid (3)
|
|
|
(24,040
|
)
|
|
|
|
(8,260
|
)
|
|
|
|
(30,958
|
)
|
|
|
|
—
|
|
||||||||||||
Total derivatives as recorded in the balance sheets
|
|
|
$
|
31,454
|
|
|
|
|
$
|
34,854
|
|
|
|
|
$
|
55,269
|
|
|
|
|
$
|
42,408
|
|
(1)
|
Derivative instruments in an asset or liability position are included within Other assets or Other liabilities, respectively, in the balance sheets on a net basis where the Company has both a legal right of offset and the intention to settle the contracts on a net basis. The Company often enters into different types of derivative contracts with a single counterparty and these contracts are covered under netting agreements.
|
(2)
|
The fair value movements in derivative assets and liabilities relating to modified coinsurance funds withheld contracts are included within the associated asset or liability at each period end on the face of the balance sheets. Notional amounts associated with reinsurance agreements under which the Company assumes reinsurance risk are recorded as asset derivative notional amounts. Notional amounts associated with the GreyCastle Life Retro Arrangements under which the Company cedes reinsurance risk are recorded as liability derivative notional amounts. Included in the liability derivative notional amount as of
September 30, 2016
is the cumulative net realized and unrealized loss on the life retrocession embedded derivative of
$1.1 billion
.
|
(3)
|
As of
September 30, 2016
, the Company held cash collateral related to foreign currency derivative positions and certain other derivative positions of
$24.0 million
for derivatives in an asset position and paid cash collateral of
$8.3 million
for derivatives in a liability position. As of
December 31, 2015
, the Company held cash collateral related to a foreign currency derivative position and certain other derivative positions of
$31.0 million
for derivatives in an asset position and paid cash collateral of
nil
for derivatives in a liability position. The assets and liabilities related to the net collateral paid or held were recorded as Other assets and Other liabilities within the unaudited consolidated balance sheets as the collateral and derivative positions are not intended to be settled on a net basis.
|
Settlement of Fair Value Hedges - Summary
|
Fair Value Hedges -
Deposit Liabilities
September 30, |
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Cumulative reduction to interest expense
|
$
|
110,914
|
|
|
$
|
101,461
|
|
Remaining balance
|
122,282
|
|
|
131,734
|
|
||
Weighted average years remaining to maturity
|
20.4 years
|
|
|
22.0 years
|
|
Derivative Instruments Designated as Hedges of a
Net Investment in a Foreign Operation - Summary
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Weighted average of U.S. dollar equivalent of foreign denominated net assets
|
$
|
2,575,987
|
|
|
$
|
2,299,875
|
|
|
$
|
2,401,640
|
|
|
$
|
1,581,470
|
|
Derivative gains (losses) (1)
|
1,999
|
|
|
29,943
|
|
|
35,882
|
|
|
66,215
|
|
(1)
|
Derivative gains (losses) from derivative instruments designated as hedges of an investment in a foreign operation are recorded in the cumulative translation adjustment account within AOCI for each period.
|
Net Realized and Unrealized Gains (Losses) on Derivative Instruments
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Investment Related Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate exposure
|
$
|
—
|
|
|
$
|
(5,120
|
)
|
|
$
|
781
|
|
|
$
|
(2,046
|
)
|
Foreign exchange exposure
|
74
|
|
|
(146
|
)
|
|
(592
|
)
|
|
(1,026
|
)
|
||||
Credit exposure
|
(812
|
)
|
|
1,684
|
|
|
(959
|
)
|
|
1,380
|
|
||||
Financial market exposure
|
(45
|
)
|
|
(4,309
|
)
|
|
(2,866
|
)
|
|
(2,913
|
)
|
||||
Other Non-Investment Derivatives:
|
|
|
|
|
|
|
|
|
|||||||
Foreign exchange contracts
|
(347
|
)
|
|
4,063
|
|
|
(1,345
|
)
|
|
61,494
|
|
||||
Credit exposure
|
4,477
|
|
|
(327
|
)
|
|
4,424
|
|
|
1,151
|
|
||||
Modified coinsurance funds withheld contract
|
2,143
|
|
|
(3,748
|
)
|
|
3,331
|
|
|
(913
|
)
|
||||
Net realized and unrealized gains (losses) on derivative instruments
|
$
|
5,490
|
|
|
$
|
(7,903
|
)
|
|
$
|
2,774
|
|
|
$
|
57,127
|
|
|
|
|
|
|
|
|
|
||||||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
$
|
(225,610
|
)
|
|
$
|
(126,140
|
)
|
|
$
|
(691,432
|
)
|
|
$
|
(116,333
|
)
|
Impact of GreyCastle Life Retro Arrangements
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Underwriting profit (loss) (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
603
|
|
Net investment income - Life Funds Withheld Assets
|
38,937
|
|
|
46,586
|
|
|
119,643
|
|
|
143,869
|
|
||||
Net realized gains (losses) on investments sold - Life Funds Withheld Assets
|
44,011
|
|
|
53,780
|
|
|
108,541
|
|
|
174,555
|
|
||||
Net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
41,270
|
|
|
(149
|
)
|
|
165,653
|
|
|
(18,932
|
)
|
||||
OTTI on investments - Life Funds Withheld Assets
|
—
|
|
|
(2,023
|
)
|
|
(2,598
|
)
|
|
(10,110
|
)
|
||||
Exchange gains (losses)
|
1,535
|
|
|
8,754
|
|
|
5,899
|
|
|
(5,932
|
)
|
||||
Other income and expenses
|
—
|
|
|
(121
|
)
|
|
(170
|
)
|
|
2,354
|
|
||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
(225,610
|
)
|
|
(126,140
|
)
|
|
(691,432
|
)
|
|
(116,333
|
)
|
||||
Net income (loss)
|
$
|
(99,857
|
)
|
|
$
|
(19,313
|
)
|
|
$
|
(294,464
|
)
|
|
$
|
170,074
|
|
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets, net of tax
|
77,242
|
|
|
(33,569
|
)
|
|
206,480
|
|
|
(317,500
|
)
|
||||
Change in adjustments related to future policy benefit reserves, net of tax
|
2,058
|
|
|
40,681
|
|
|
27,820
|
|
|
127,365
|
|
||||
Change in cumulative translation adjustment - Life Funds Withheld Assets, net of tax
|
20,557
|
|
|
12,201
|
|
|
60,164
|
|
|
20,664
|
|
||||
Total changes to other comprehensive income as a result of GreyCastle Life Retro Arrangements
|
$
|
99,857
|
|
|
$
|
19,313
|
|
|
$
|
294,464
|
|
|
$
|
(169,471
|
)
|
Comprehensive income (loss)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
603
|
|
(1)
|
The underwriting profit of
$0.6 million
relates to a premium adjustment during the nine months ended September 30, 2015 relating to the GreyCastle Life Retro Arrangements transaction. Excluding this transaction, the impact to comprehensive income relating to the GreyCastle Life Retro Arrangements was
nil
for the nine months ended September 30, 2015.
|
Components of Life Retrocession Embedded Derivative and Derivative Instruments - Life Funds Withheld Assets:
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Interest income - Life Funds Withheld Assets
|
$
|
(40,065
|
)
|
|
(48,809
|
)
|
|
$
|
(124,630
|
)
|
|
$
|
(147,679
|
)
|
|
Realized and unrealized gains (losses) - Life Funds Withheld Assets
|
(181,952
|
)
|
|
(38,161
|
)
|
|
(533,752
|
)
|
|
130,047
|
|
||||
Other
|
—
|
|
|
121
|
|
|
171
|
|
|
276
|
|
||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative
|
$
|
(222,017
|
)
|
|
$
|
(86,849
|
)
|
|
$
|
(658,211
|
)
|
|
$
|
(17,356
|
)
|
Net adjustments related to future policy benefit reserves, net of tax
|
(5,309
|
)
|
|
(40,668
|
)
|
|
(33,312
|
)
|
|
(88,551
|
)
|
||||
Net realized and unrealized gains (losses) on derivative instruments - Life Funds Withheld Assets
|
1,716
|
|
|
1,377
|
|
|
91
|
|
|
(10,426
|
)
|
||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
$
|
(225,610
|
)
|
|
$
|
(126,140
|
)
|
|
$
|
(691,432
|
)
|
|
$
|
(116,333
|
)
|
(U.S. dollars in thousands)
|
Goodwill
|
|
Intangible
assets with an indefinite life |
|
Intangible
assets with a definite life |
|
Total
|
||||||||
Balance at December 31, 2015
|
$
|
1,213,630
|
|
|
$
|
682,859
|
|
|
$
|
313,777
|
|
|
$
|
2,210,266
|
|
Additions
|
14,084
|
|
|
8,000
|
|
|
28,948
|
|
|
51,032
|
|
||||
Amortization
|
—
|
|
|
—
|
|
|
(16,695
|
)
|
|
(16,695
|
)
|
||||
Foreign Currency Translation
|
(3,200
|
)
|
|
262
|
|
|
(7,594
|
)
|
|
(10,532
|
)
|
||||
Balance at September 30, 2016
|
$
|
1,224,514
|
|
|
$
|
691,121
|
|
|
$
|
318,436
|
|
|
$
|
2,234,071
|
|
Dividend yield
|
2.00
|
%
|
Risk free interest rate
|
1.37
|
%
|
Volatility
|
21.7
|
%
|
Expected lives
|
6.0 years
|
|
(U.S. dollars in thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
Commitment/
Debt (1)
|
|
In Use/
Outstanding (2)
|
|
Commitment/
Debt (1)
|
|
In Use/
Outstanding (2)
|
|||||||||
Debt:
|
|
|
|
|
|
|
|
||||||||
2.30% Senior Notes due 2018
|
$
|
300,000
|
|
|
$
|
298,518
|
|
|
$
|
300,000
|
|
|
$
|
298,015
|
|
5.75% Senior Notes due 2021
|
400,000
|
|
|
397,846
|
|
|
400,000
|
|
|
397,523
|
|
||||
6.375% Senior Notes due 2024
|
350,000
|
|
|
349,111
|
|
|
350,000
|
|
|
349,029
|
|
||||
4.45% Subordinated Notes due 2025
|
500,000
|
|
|
493,127
|
|
|
500,000
|
|
|
492,521
|
|
||||
6.25% Senior Notes due 2027
|
325,000
|
|
|
323,336
|
|
|
325,000
|
|
|
323,218
|
|
||||
5.25% Senior Notes due 2043
|
300,000
|
|
|
296,394
|
|
|
300,000
|
|
|
296,294
|
|
||||
5.5% Subordinated Notes due 2045
|
500,000
|
|
|
488,668
|
|
|
500,000
|
|
|
488,370
|
|
||||
Total debt carrying value
|
$
|
2,675,000
|
|
|
$
|
2,647,000
|
|
|
$
|
2,675,000
|
|
|
$
|
2,644,970
|
|
(1)
|
Excluded from the table are certain credit facilities under which the Company is permitted to utilize up to
$1.1 billion
and
$1.4 billion
as of
September 30, 2016
and
December 31, 2015
, respectively, for revolving loans to support general operating and financing needs. However, as of
September 30, 2016
and
December 31, 2015
,
$501.5 million
and
$527.1 million
, respectively, were utilized under these facilities to issue letters of credit, leaving
$598.5 million
and $
822.9 million
, respectively, available to support other operating and financing needs.
|
Letter of Credit Summary:
(U.S. dollars in thousands except percentages) |
September 30, 2016 (1)
|
|
December 31, 2015 (1)
|
||||
Available letter of credit facilities - commitments
|
$
|
3,991,806
|
|
|
$
|
4,463,041
|
|
Available letter of credit facilities - in use (2)
|
2,482,386
|
|
|
2,515,653
|
|
||
Collateralized by certain assets of the Company’s investment portfolio
|
51.1
|
%
|
|
50.9
|
%
|
(1)
|
As of
September 30, 2016
and
December 31, 2015
, there were
fifteen
available credit facilities
|
(2)
|
As of
September 30, 2016
and
December 31, 2015
, the stated portion of allowable credit facilities permitted to be utilized for revolving loans was
$1.1 billion
and
$1.4 billion
, respectively. However, as of
September 30, 2016
and
December 31, 2015
,
$501.5 million
and
$527.1 million
, respectively, of such facilities' limits were utilized to issue letters of credit, leaving
$598.5 million
and $
822.9 million
, respectively, available either to issue additional letters of credit or to support other operating or financing needs under these particular facilities.
|
(U.S. dollars in thousands)
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Reported net premiums
|
$
|
14,491
|
|
|
$
|
5,075
|
|
|
$
|
60,397
|
|
|
$
|
36,596
|
|
Reported net losses
|
8,927
|
|
|
1,402
|
|
|
24,823
|
|
|
10,567
|
|
||||
Reported net acquisition costs
|
6,115
|
|
|
1,874
|
|
|
25,550
|
|
|
12,269
|
|
Three months ended September 30, 2016
(U.S. dollars in thousands)
|
Unrealized Gains (Losses) on Investments (1)
|
|
OTTI Losses Recognized in AOCI
|
|
Foreign Currency Translation Adjustments
|
|
Underfunded Pension Liability
|
|
Cash Flow Hedge
|
|
Total
|
||||||||||||
Balance, beginning of period, net of tax
|
$
|
1,475,078
|
|
|
$
|
(53,383
|
)
|
|
$
|
10,401
|
|
|
$
|
(25,590
|
)
|
|
$
|
2,081
|
|
|
$
|
1,408,587
|
|
OCI before reclassifications
|
203,451
|
|
|
—
|
|
|
45,185
|
|
|
4,037
|
|
|
—
|
|
|
252,673
|
|
||||||
Amounts reclassified from AOCI
|
(150,482
|
)
|
|
1,497
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
(149,032
|
)
|
||||||
Tax benefit (expense)
|
8,600
|
|
|
(36
|
)
|
|
(987
|
)
|
|
—
|
|
|
—
|
|
|
7,577
|
|
||||||
Net current period OCI - net of tax
|
61,569
|
|
|
1,461
|
|
|
44,198
|
|
|
4,037
|
|
|
(47
|
)
|
|
111,218
|
|
||||||
Balance, end of period, net of tax
|
$
|
1,536,647
|
|
|
$
|
(51,922
|
)
|
|
$
|
54,599
|
|
|
$
|
(21,553
|
)
|
|
$
|
2,034
|
|
|
$
|
1,519,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three months ended September 30, 2015
(U.S. dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance, beginning of period, net of tax
|
$
|
1,168,964
|
|
|
$
|
(64,614
|
)
|
|
$
|
(9,508
|
)
|
|
$
|
(21,143
|
)
|
|
$
|
2,475
|
|
|
$
|
1,076,174
|
|
OCI before reclassifications
|
(4,334
|
)
|
|
—
|
|
|
(24,267
|
)
|
|
93
|
|
|
—
|
|
|
(28,508
|
)
|
||||||
Amounts reclassified from AOCI
|
(94,393
|
)
|
|
2,318
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
(92,063
|
)
|
||||||
Tax benefit (expense)
|
(2,213
|
)
|
|
(181
|
)
|
|
1,873
|
|
|
—
|
|
|
—
|
|
|
(521
|
)
|
||||||
Net current period OCI - net of tax
|
(100,940
|
)
|
|
2,137
|
|
|
(22,394
|
)
|
|
93
|
|
|
12
|
|
|
(121,092
|
)
|
||||||
Balance, end of period, net of tax
|
$
|
1,068,024
|
|
|
$
|
(62,477
|
)
|
|
$
|
(31,902
|
)
|
|
$
|
(21,050
|
)
|
|
$
|
2,487
|
|
|
$
|
955,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Nine months ended September 30, 2016
(U.S. dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance, beginning of period, net of tax
|
$
|
803,094
|
|
|
$
|
(57,502
|
)
|
|
$
|
(36,503
|
)
|
|
$
|
(24,641
|
)
|
|
$
|
2,168
|
|
|
$
|
686,616
|
|
OCI before reclassifications
|
1,171,094
|
|
|
—
|
|
|
101,687
|
|
|
3,088
|
|
|
—
|
|
|
1,275,869
|
|
||||||
Amounts reclassified from AOCI
|
(379,974
|
)
|
|
5,618
|
|
|
—
|
|
|
—
|
|
|
(134
|
)
|
|
(374,490
|
)
|
||||||
Tax benefit (expense)
|
(57,567
|
)
|
|
(38
|
)
|
|
(10,585
|
)
|
|
—
|
|
|
—
|
|
|
(68,190
|
)
|
||||||
Net current period OCI - net of tax
|
733,553
|
|
|
5,580
|
|
|
91,102
|
|
|
3,088
|
|
|
(134
|
)
|
|
833,189
|
|
||||||
Balance, end of period, net of tax
|
$
|
1,536,647
|
|
|
$
|
(51,922
|
)
|
|
$
|
54,599
|
|
|
$
|
(21,553
|
)
|
|
$
|
2,034
|
|
|
$
|
1,519,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Nine months ended September 30, 2015
(U.S. dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance, beginning of period, net of tax
|
$
|
1,590,114
|
|
|
$
|
(76,047
|
)
|
|
$
|
(11,188
|
)
|
|
$
|
(20,789
|
)
|
|
$
|
2,368
|
|
|
$
|
1,484,458
|
|
OCI before reclassifications
|
(294,341
|
)
|
|
—
|
|
|
(28,225
|
)
|
|
(261
|
)
|
|
—
|
|
|
(322,827
|
)
|
||||||
Amounts reclassified from AOCI
|
(256,731
|
)
|
|
13,916
|
|
|
—
|
|
|
—
|
|
|
119
|
|
|
(242,696
|
)
|
||||||
Tax benefit (expense)
|
28,982
|
|
|
(346
|
)
|
|
7,511
|
|
|
—
|
|
|
—
|
|
|
36,147
|
|
||||||
Net current period OCI - net of tax
|
(522,090
|
)
|
|
13,570
|
|
|
(20,714
|
)
|
|
(261
|
)
|
|
119
|
|
|
(529,376
|
)
|
||||||
Balance, end of period, net of tax
|
$
|
1,068,024
|
|
|
$
|
(62,477
|
)
|
|
$
|
(31,902
|
)
|
|
$
|
(21,050
|
)
|
|
$
|
2,487
|
|
|
$
|
955,082
|
|
(1)
|
For certain annuity contracts that are subject to the GreyCastle Life Retro Arrangements, policy benefit reserves were historically increased for the impact of changes in unrealized gains on investments supporting such contracts as if the gains had been realized, with a corresponding entry to other comprehensive income ("Shadow Adjustments"). Upon completion of the GreyCastle Life Retro Arrangements, no further Shadow Adjustments were recorded. As of December 31, 2015, the cumulative impact of the Shadow Adjustments was
$274.4 million
. During the
nine months ended September 30, 2016
, net movements of
$(27.8) million
were recorded, resulting in a total cumulative net impact of Shadow Adjustments on future policy benefit reserves of
$246.6 million
as of
September 30, 2016
.
|
Gross Amount Reclassified From AOCI
|
|||||||||||||||||
Details About AOCI Components
(U.S. dollars in thousands)
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
|
Affected Line Item in the Statement of Income
|
||||||||
Unrealized gains and losses on investments:
|
|
|
|
|
|
|
|
|
|
||||||||
|
$
|
(150,661
|
)
|
|
$
|
(97,761
|
)
|
|
$
|
(407,106
|
)
|
|
$
|
(247,339
|
)
|
|
Net realized gains (losses) on investments sold and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets
|
|
10,019
|
|
|
44,036
|
|
|
64,977
|
|
|
79,158
|
|
|
OTTI on investments
|
||||
|
(5,309
|
)
|
|
(40,668
|
)
|
|
(33,314
|
)
|
|
(88,550
|
)
|
|
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
||||
|
(4,531
|
)
|
|
—
|
|
|
(4,531
|
)
|
|
—
|
|
|
Income (loss) from investment fund affiliates
|
||||
|
$
|
(150,482
|
)
|
|
$
|
(94,393
|
)
|
|
$
|
(379,974
|
)
|
|
$
|
(256,731
|
)
|
|
Total before tax
|
|
5,291
|
|
|
1,253
|
|
|
8,501
|
|
|
5,034
|
|
|
Provision (benefit) for income tax
|
||||
|
$
|
(145,191
|
)
|
|
$
|
(93,140
|
)
|
|
$
|
(371,473
|
)
|
|
$
|
(251,697
|
)
|
|
Net of tax
|
OTTI losses recognized in OCI:
|
|
|
|
|
|
|
|
|
|
||||||||
|
$
|
1,497
|
|
|
$
|
1,617
|
|
|
$
|
5,876
|
|
|
$
|
13,086
|
|
|
Net realized gains (losses) on investments sold
|
|
—
|
|
|
701
|
|
|
(258
|
)
|
|
830
|
|
|
OTTI on investments transferred to (from) OCI
|
||||
|
$
|
1,497
|
|
|
$
|
2,318
|
|
|
$
|
5,618
|
|
|
$
|
13,916
|
|
|
Total before tax
|
|
(36
|
)
|
|
(10
|
)
|
|
(38
|
)
|
|
(25
|
)
|
|
Provision (benefit) for income tax
|
||||
|
$
|
1,461
|
|
|
$
|
2,308
|
|
|
$
|
5,580
|
|
|
$
|
13,891
|
|
|
Net of tax
|
Gains and losses on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate contracts
|
$
|
(47
|
)
|
|
$
|
12
|
|
|
$
|
(134
|
)
|
|
$
|
119
|
|
|
Interest Expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Provision (benefit) for income tax
|
||||
|
$
|
(47
|
)
|
|
$
|
12
|
|
|
$
|
(134
|
)
|
|
$
|
119
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total reclassifications for the period, gross of tax
|
$
|
(149,032
|
)
|
|
$
|
(92,063
|
)
|
|
$
|
(374,490
|
)
|
|
$
|
(242,696
|
)
|
|
|
Tax benefit (expense)
|
5,255
|
|
|
1,243
|
|
|
8,463
|
|
|
5,009
|
|
|
|
||||
Total reclassifications for the period, net of tax
|
$
|
(143,777
|
)
|
|
$
|
(90,820
|
)
|
|
$
|
(366,027
|
)
|
|
$
|
(237,687
|
)
|
|
|
(1)
|
Results for the period include XL-Ireland, which prior to the Redomestication was the ultimate parent and is now in liquidation proceedings as outlined in
Note 1, "Basis of Preparation and Consolidation
." The Company expects the net assets of XL-Ireland to ultimately be distributed to XL-Bermuda upon completion of the liquidation.
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
(U.S. dollars in thousands, except per share data)
|
XL- Bermuda (1)
|
|
XL-Cayman
|
|
Other XL-Bermuda Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Bermuda Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,434,037
|
|
|
$
|
—
|
|
|
$
|
2,434,037
|
|
Total net investment income
|
75
|
|
|
2,463
|
|
|
206,323
|
|
|
910
|
|
|
209,771
|
|
|||||
Total net realized gains (losses) on investments
|
—
|
|
|
370
|
|
|
143,257
|
|
|
49
|
|
|
143,676
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
—
|
|
|
—
|
|
|
5,490
|
|
|
—
|
|
|
5,490
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
—
|
|
|
—
|
|
|
(225,610
|
)
|
|
—
|
|
|
(225,610
|
)
|
|||||
Income (loss) from investment fund affiliates
|
—
|
|
|
—
|
|
|
12,156
|
|
|
—
|
|
|
12,156
|
|
|||||
Fee income and other
|
—
|
|
|
—
|
|
|
8,600
|
|
|
—
|
|
|
8,600
|
|
|||||
Total revenues
|
$
|
75
|
|
|
$
|
2,833
|
|
|
$
|
2,584,253
|
|
|
$
|
959
|
|
|
$
|
2,588,120
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net losses and loss expenses incurred
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,491,803
|
|
|
$
|
—
|
|
|
$
|
1,491,803
|
|
Claims and policy benefits
|
—
|
|
|
—
|
|
|
5,875
|
|
|
—
|
|
|
5,875
|
|
|||||
Acquisition costs
|
—
|
|
|
—
|
|
|
403,888
|
|
|
—
|
|
|
403,888
|
|
|||||
Operating expenses
|
19,979
|
|
|
5,625
|
|
|
482,854
|
|
|
—
|
|
|
508,458
|
|
|||||
Exchange (gains) losses
|
(180
|
)
|
|
32
|
|
|
(1,547
|
)
|
|
—
|
|
|
(1,695
|
)
|
|||||
Loss (Gain) on sale of subsidiary
|
—
|
|
|
—
|
|
|
(3,670
|
)
|
|
—
|
|
|
(3,670
|
)
|
|||||
Interest expense
|
10
|
|
|
35,320
|
|
|
14,115
|
|
|
—
|
|
|
49,445
|
|
|||||
Total expenses
|
$
|
19,809
|
|
|
$
|
40,977
|
|
|
$
|
2,393,318
|
|
|
$
|
—
|
|
|
$
|
2,454,104
|
|
Income (loss) before income tax and income (loss) from operating affiliates
|
$
|
(19,734
|
)
|
|
$
|
(38,144
|
)
|
|
$
|
190,935
|
|
|
$
|
959
|
|
|
$
|
134,016
|
|
Income (loss) from operating affiliates
|
—
|
|
|
—
|
|
|
12,410
|
|
|
—
|
|
|
12,410
|
|
|||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Equity in net earnings (losses) of subsidiaries
|
90,335
|
|
|
164,390
|
|
|
—
|
|
|
(254,725
|
)
|
|
—
|
|
|||||
Provision (benefit) for income tax
|
—
|
|
|
—
|
|
|
17,749
|
|
|
—
|
|
|
17,749
|
|
|||||
Net income (loss)
|
$
|
70,601
|
|
|
$
|
126,246
|
|
|
$
|
185,596
|
|
|
$
|
(253,766
|
)
|
|
$
|
128,677
|
|
Non-controlling interests
|
—
|
|
|
35,911
|
|
|
22,240
|
|
|
(75
|
)
|
|
58,076
|
|
|||||
Net income (loss) attributable to common shareholders
|
$
|
70,601
|
|
|
$
|
90,335
|
|
|
$
|
163,356
|
|
|
$
|
(253,691
|
)
|
|
$
|
70,601
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss)
|
$
|
181,819
|
|
|
$
|
201,553
|
|
|
$
|
274,574
|
|
|
$
|
(476,127
|
)
|
|
$
|
181,819
|
|
(1)
|
Results for the period include XL-Ireland, which prior to the Redomestication was the ultimate parent and is now in liquidation proceedings as outlined in
Note 1, "Basis of Preparation and Consolidation
." The Company expects the net assets of XL-Ireland to ultimately be distributed to XL-Bermuda upon completion of the liquidation.
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
(U.S. dollars in thousands, except per share data)
|
XL- Ireland
|
|
XL-Cayman
|
|
Other XL-Ireland Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Ireland Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,423,552
|
|
|
$
|
—
|
|
|
$
|
2,423,552
|
|
Total net investment income
|
20
|
|
|
2,522
|
|
|
222,006
|
|
|
598
|
|
|
225,146
|
|
|||||
Total net realized gains (losses) on investments
|
—
|
|
|
10,291
|
|
|
51,115
|
|
|
(9,999
|
)
|
|
51,407
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
—
|
|
|
—
|
|
|
(7,903
|
)
|
|
—
|
|
|
(7,903
|
)
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
—
|
|
|
—
|
|
|
(126,140
|
)
|
|
—
|
|
|
(126,140
|
)
|
|||||
Income (loss) from investment fund affiliates
|
—
|
|
|
—
|
|
|
(3,715
|
)
|
|
—
|
|
|
(3,715
|
)
|
|||||
Fee income and other
|
—
|
|
|
—
|
|
|
7,355
|
|
|
—
|
|
|
7,355
|
|
|||||
Total revenues
|
$
|
20
|
|
|
$
|
12,813
|
|
|
$
|
2,566,270
|
|
|
$
|
(9,401
|
)
|
|
$
|
2,569,702
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net losses and loss expenses incurred
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,464,285
|
|
|
$
|
—
|
|
|
$
|
1,464,285
|
|
Claims and policy benefits
|
—
|
|
|
—
|
|
|
22,579
|
|
|
—
|
|
|
22,579
|
|
|||||
Acquisition costs
|
—
|
|
|
—
|
|
|
409,173
|
|
|
—
|
|
|
409,173
|
|
|||||
Operating expenses
|
34,514
|
|
|
2,289
|
|
|
533,339
|
|
|
—
|
|
|
570,142
|
|
|||||
Exchange (gains) losses
|
(16
|
)
|
|
135
|
|
|
11,542
|
|
|
—
|
|
|
11,661
|
|
|||||
Interest expense
|
9
|
|
|
35,623
|
|
|
16,297
|
|
|
—
|
|
|
51,929
|
|
|||||
Total expenses
|
$
|
34,507
|
|
|
$
|
38,047
|
|
|
$
|
2,457,215
|
|
|
$
|
—
|
|
|
$
|
2,529,769
|
|
Income (loss) before income tax and income (loss) from operating affiliates
|
$
|
(34,487
|
)
|
|
$
|
(25,234
|
)
|
|
$
|
109,055
|
|
|
$
|
(9,401
|
)
|
|
$
|
39,933
|
|
Income (loss) from operating affiliates
|
—
|
|
|
—
|
|
|
8,196
|
|
|
—
|
|
|
8,196
|
|
|||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Equity in net earnings (losses) of subsidiaries
|
61,769
|
|
|
122,593
|
|
|
—
|
|
|
(184,362
|
)
|
|
—
|
|
|||||
Provision (benefit) for income tax
|
—
|
|
|
—
|
|
|
(37,042
|
)
|
|
—
|
|
|
(37,042
|
)
|
|||||
Net income (loss)
|
$
|
27,282
|
|
|
$
|
97,359
|
|
|
$
|
154,293
|
|
|
$
|
(193,763
|
)
|
|
$
|
85,171
|
|
Non-controlling interests
|
—
|
|
|
35,590
|
|
|
22,319
|
|
|
(20
|
)
|
|
57,889
|
|
|||||
Net income (loss) attributable to common shareholders
|
$
|
27,282
|
|
|
$
|
61,769
|
|
|
$
|
131,974
|
|
|
$
|
(193,743
|
)
|
|
$
|
27,282
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss)
|
$
|
(93,810
|
)
|
|
$
|
(59,323
|
)
|
|
$
|
10,882
|
|
|
$
|
48,441
|
|
|
$
|
(93,810
|
)
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
(U.S. dollars in thousands, except per share data)
|
XL- Bermuda (1)
|
|
XL-Cayman
|
|
Other XL-Bermuda Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Bermuda Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,320,859
|
|
|
$
|
—
|
|
|
$
|
7,320,859
|
|
Total net investment income
|
251
|
|
|
7,344
|
|
|
621,554
|
|
|
1,896
|
|
|
631,045
|
|
|||||
Total net realized gains (losses) on investments
|
—
|
|
|
1,623
|
|
|
337,471
|
|
|
1,949
|
|
|
341,043
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
—
|
|
|
—
|
|
|
2,774
|
|
|
—
|
|
|
2,774
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
—
|
|
|
—
|
|
|
(691,432
|
)
|
|
—
|
|
|
(691,432
|
)
|
|||||
Income (loss) from investment fund affiliates
|
—
|
|
|
—
|
|
|
20,756
|
|
|
—
|
|
|
20,756
|
|
|||||
Fee income and other
|
—
|
|
|
—
|
|
|
27,724
|
|
|
—
|
|
|
27,724
|
|
|||||
Total revenues
|
$
|
251
|
|
|
$
|
8,967
|
|
|
$
|
7,639,706
|
|
|
$
|
3,845
|
|
|
$
|
7,652,769
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net losses and loss expenses incurred
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,506,674
|
|
|
$
|
—
|
|
|
$
|
4,506,674
|
|
Claims and policy benefits
|
—
|
|
|
—
|
|
|
16,294
|
|
|
—
|
|
|
16,294
|
|
|||||
Acquisition costs
|
—
|
|
|
—
|
|
|
1,227,675
|
|
|
—
|
|
|
1,227,675
|
|
|||||
Operating expenses
|
22,753
|
|
|
8,191
|
|
|
1,515,416
|
|
|
—
|
|
|
1,546,360
|
|
|||||
Exchange (gains) losses
|
(633
|
)
|
|
(140
|
)
|
|
(53,841
|
)
|
|
—
|
|
|
(54,614
|
)
|
|||||
Loss (Gain) on sale of subsidiary
|
—
|
|
|
—
|
|
|
(3,670
|
)
|
|
—
|
|
|
(3,670
|
)
|
|||||
Interest expense
|
(5
|
)
|
|
105,666
|
|
|
51,825
|
|
|
—
|
|
|
157,486
|
|
|||||
Total expenses
|
$
|
22,115
|
|
|
$
|
113,717
|
|
|
$
|
7,260,373
|
|
|
$
|
—
|
|
|
$
|
7,396,205
|
|
Income (loss) before income tax and income (loss) from operating affiliates
|
$
|
(21,864
|
)
|
|
$
|
(104,750
|
)
|
|
$
|
379,333
|
|
|
$
|
3,845
|
|
|
$
|
256,564
|
|
Income (loss) from operating affiliates
|
—
|
|
|
—
|
|
|
46,478
|
|
|
—
|
|
|
46,478
|
|
|||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Equity in net earnings (losses) of subsidiaries
|
157,512
|
|
|
337,284
|
|
|
—
|
|
|
(494,796
|
)
|
|
—
|
|
|||||
Provision (benefit) for income tax
|
(620
|
)
|
|
—
|
|
|
43,131
|
|
|
—
|
|
|
42,511
|
|
|||||
Net income (loss)
|
$
|
136,268
|
|
|
$
|
232,534
|
|
|
$
|
382,680
|
|
|
$
|
(490,951
|
)
|
|
$
|
260,531
|
|
Non-controlling interests
|
—
|
|
|
75,022
|
|
|
49,492
|
|
|
(251
|
)
|
|
124,263
|
|
|||||
Net income (loss) attributable to common shareholders
|
$
|
136,268
|
|
|
$
|
157,512
|
|
|
$
|
333,188
|
|
|
$
|
(490,700
|
)
|
|
$
|
136,268
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss)
|
$
|
969,457
|
|
|
$
|
990,701
|
|
|
$
|
1,166,377
|
|
|
$
|
(2,157,078
|
)
|
|
$
|
969,457
|
|
(1)
|
Results for the period include XL-Ireland, which prior to the Redomestication was the ultimate parent and is now in liquidation proceedings as outlined in
Note 1, "Basis of Preparation and Consolidation
." The Company expects the net assets of XL-Ireland to ultimately be distributed to XL-Bermuda upon completion of the liquidation.
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
(U.S. dollars in thousands, except per share data)
|
XL- Ireland
|
|
XL-Cayman
|
|
Other XL-Ireland Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Ireland Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,839,605
|
|
|
$
|
—
|
|
|
$
|
5,839,605
|
|
Total net investment income
|
154
|
|
|
8,222
|
|
|
645,776
|
|
|
2,711
|
|
|
656,863
|
|
|||||
Total net realized gains (losses) on investments
|
—
|
|
|
14,092
|
|
|
148,908
|
|
|
(8,735
|
)
|
|
154,265
|
|
|||||
Net realized and unrealized gains (losses) on derivative instruments
|
—
|
|
|
12,365
|
|
|
44,762
|
|
|
—
|
|
|
57,127
|
|
|||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
—
|
|
|
—
|
|
|
(116,333
|
)
|
|
—
|
|
|
(116,333
|
)
|
|||||
Income (loss) from investment fund affiliates
|
—
|
|
|
—
|
|
|
62,991
|
|
|
—
|
|
|
62,991
|
|
|||||
Fee income and other
|
—
|
|
|
—
|
|
|
23,095
|
|
|
—
|
|
|
23,095
|
|
|||||
Total revenues
|
$
|
154
|
|
|
$
|
34,679
|
|
|
$
|
6,648,804
|
|
|
$
|
(6,024
|
)
|
|
$
|
6,677,613
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net losses and loss expenses incurred
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,385,307
|
|
|
$
|
—
|
|
|
$
|
3,385,307
|
|
Claims and policy benefits
|
—
|
|
|
—
|
|
|
64,047
|
|
|
—
|
|
|
64,047
|
|
|||||
Acquisition costs
|
—
|
|
|
—
|
|
|
904,486
|
|
|
—
|
|
|
904,486
|
|
|||||
Operating expenses
|
40,230
|
|
|
7,731
|
|
|
1,355,191
|
|
|
—
|
|
|
1,403,152
|
|
|||||
Exchange (gains) losses
|
(287
|
)
|
|
117
|
|
|
49,595
|
|
|
—
|
|
|
49,425
|
|
|||||
Interest expense
|
11
|
|
|
108,097
|
|
|
44,926
|
|
|
—
|
|
|
153,034
|
|
|||||
Total expenses
|
$
|
39,954
|
|
|
$
|
115,945
|
|
|
$
|
5,803,552
|
|
|
$
|
—
|
|
|
$
|
5,959,451
|
|
Income (loss) before income tax and income (loss) from operating affiliates
|
$
|
(39,800
|
)
|
|
$
|
(81,266
|
)
|
|
$
|
845,252
|
|
|
$
|
(6,024
|
)
|
|
$
|
718,162
|
|
Income (loss) from operating affiliates
|
—
|
|
|
—
|
|
|
40,326
|
|
|
—
|
|
|
40,326
|
|
|||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
340,407
|
|
|
—
|
|
|
340,407
|
|
|||||
Equity in net earnings (losses) of subsidiaries
|
1,018,186
|
|
|
1,173,783
|
|
|
—
|
|
|
(2,191,969
|
)
|
|
—
|
|
|||||
Provision (benefit) for income tax
|
(216
|
)
|
|
245
|
|
|
20,106
|
|
|
—
|
|
|
20,135
|
|
|||||
Net income (loss)
|
$
|
978,602
|
|
|
$
|
1,092,272
|
|
|
$
|
1,205,879
|
|
|
$
|
(2,197,993
|
)
|
|
$
|
1,078,760
|
|
Non-controlling interests
|
—
|
|
|
74,086
|
|
|
26,226
|
|
|
(154
|
)
|
|
100,158
|
|
|||||
Net income (loss) attributable to common shareholders
|
$
|
978,602
|
|
|
$
|
1,018,186
|
|
|
$
|
1,179,653
|
|
|
$
|
(2,197,839
|
)
|
|
$
|
978,602
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss)
|
$
|
449,226
|
|
|
$
|
488,810
|
|
|
$
|
650,277
|
|
|
$
|
(1,139,087
|
)
|
|
$
|
449,226
|
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||
Condensed Consolidating Statement of Cash Flows
(U.S. dollars in thousands)
|
XL- Bermuda (1)
|
|
XL-Cayman
|
|
Other XL-Bermuda Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Bermuda Consolidated
|
||||||||||
Cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
921,608
|
|
|
$
|
230,877
|
|
|
$
|
1,812,974
|
|
|
$
|
(2,315,848
|
)
|
|
$
|
649,611
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from sale of fixed maturities and short-term investments
|
$
|
—
|
|
|
$
|
300,452
|
|
|
$
|
9,864,257
|
|
|
$
|
(583,466
|
)
|
|
$
|
9,581,243
|
|
Proceeds from redemption of fixed maturities and short-term investments
|
—
|
|
|
65,881
|
|
|
2,944,277
|
|
|
—
|
|
|
3,010,158
|
|
|||||
Proceeds from sale of equity securities
|
—
|
|
|
—
|
|
|
411,330
|
|
|
—
|
|
|
411,330
|
|
|||||
Purchases of fixed maturities and short-term investments
|
—
|
|
|
(526,206
|
)
|
|
(11,614,305
|
)
|
|
583,466
|
|
|
(11,557,045
|
)
|
|||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(611,086
|
)
|
|
—
|
|
|
(611,086
|
)
|
|||||
Proceeds from sale of affiliates
|
—
|
|
|
—
|
|
|
325,050
|
|
|
—
|
|
|
325,050
|
|
|||||
Purchases of affiliates
|
—
|
|
|
—
|
|
|
(556,548
|
)
|
|
—
|
|
|
(556,548
|
)
|
|||||
Purchase of subsidiaries, net of acquired cash
|
—
|
|
|
—
|
|
|
(92,893
|
)
|
|
—
|
|
|
(92,893
|
)
|
|||||
Proceeds from sale of subsidiary, net of cash sold
|
—
|
|
|
—
|
|
|
19,144
|
|
|
—
|
|
|
19,144
|
|
|||||
Returns of capital from subsidiaries
|
149,458
|
|
|
465,203
|
|
|
—
|
|
|
(614,661
|
)
|
|
—
|
|
|||||
Change in restricted cash
|
—
|
|
|
—
|
|
|
4,874
|
|
|
—
|
|
|
4,874
|
|
|||||
Other, net
|
—
|
|
|
—
|
|
|
193,392
|
|
|
—
|
|
|
193,392
|
|
|||||
Net cash provided by (used in) investing activities
|
$
|
149,458
|
|
|
$
|
305,330
|
|
|
$
|
887,492
|
|
|
$
|
(614,661
|
)
|
|
$
|
727,619
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of common shares and exercise of stock options
|
$
|
5,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,735
|
|
Buybacks of common shares
|
(906,137
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(906,137
|
)
|
|||||
Dividends paid on common shares
|
(169,346
|
)
|
|
(700,063
|
)
|
|
(1,615,785
|
)
|
|
2,315,848
|
|
|
(169,346
|
)
|
|||||
Return of capital
|
—
|
|
|
(149,458
|
)
|
|
(465,203
|
)
|
|
614,661
|
|
|
—
|
|
|||||
Distributions to non-controlling interests
|
—
|
|
|
(42,188
|
)
|
|
(51,282
|
)
|
|
—
|
|
|
(93,470
|
)
|
|||||
Contributions from non-controlling interests
|
—
|
|
|
—
|
|
|
6,394
|
|
|
—
|
|
|
6,394
|
|
|||||
Repayment of debt
|
—
|
|
|
—
|
|
|
(8,248
|
)
|
|
—
|
|
|
(8,248
|
)
|
|||||
Deposit liabilities
|
—
|
|
|
—
|
|
|
(63,488
|
)
|
|
—
|
|
|
(63,488
|
)
|
|||||
Net cash provided by (used in) financing activities
|
$
|
(1,069,748
|
)
|
|
$
|
(891,709
|
)
|
|
$
|
(2,197,612
|
)
|
|
$
|
2,930,509
|
|
|
$
|
(1,228,560
|
)
|
Effects of exchange rate changes on foreign currency cash
|
—
|
|
|
—
|
|
|
(11,629
|
)
|
|
—
|
|
|
(11,629
|
)
|
|||||
Increase (decrease) in cash and cash equivalents
|
$
|
1,318
|
|
|
$
|
(355,502
|
)
|
|
$
|
491,225
|
|
|
$
|
—
|
|
|
$
|
137,041
|
|
Cash and cash equivalents – beginning of period
|
11,557
|
|
|
369,997
|
|
|
2,874,682
|
|
|
—
|
|
|
3,256,236
|
|
|||||
Cash and cash equivalents – end of period
|
$
|
12,875
|
|
|
$
|
14,495
|
|
|
$
|
3,365,907
|
|
|
$
|
—
|
|
|
$
|
3,393,277
|
|
(1)
|
Results for the period include XL-Ireland, which prior to the Redomestication was the ultimate parent and is now in liquidation proceedings as outlined in
Note 1, "Basis of Preparation and Consolidation
." The Company expects the net assets of XL-Ireland to ultimately be distributed to XL-Bermuda upon completion of the liquidation.
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
Condensed Consolidating Statement of Cash Flows
(U.S. dollars in thousands)
|
XL- Ireland
|
|
XL-Cayman
|
|
Other XL-Ireland Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
XL-Ireland Consolidated
|
||||||||||
Cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
319,352
|
|
|
$
|
1,422,263
|
|
|
$
|
(959,067
|
)
|
|
$
|
(273,048
|
)
|
|
$
|
509,500
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from sale of fixed maturities and short-term investments
|
$
|
—
|
|
|
$
|
1,461,428
|
|
|
$
|
9,467,177
|
|
|
$
|
(359,897
|
)
|
|
$
|
10,568,708
|
|
Proceeds from redemption of fixed maturities and short-term investments
|
—
|
|
|
161,989
|
|
|
2,625,881
|
|
|
—
|
|
|
2,787,870
|
|
|||||
Proceeds from sale of equity securities
|
—
|
|
|
—
|
|
|
443,941
|
|
|
—
|
|
|
443,941
|
|
|||||
Purchases of fixed maturities and short-term investments
|
—
|
|
|
(1,174,294
|
)
|
|
(11,906,540
|
)
|
|
359,897
|
|
|
(12,720,937
|
)
|
|||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(436,622
|
)
|
|
—
|
|
|
(436,622
|
)
|
|||||
Proceeds from sale of affiliates
|
—
|
|
|
—
|
|
|
724,382
|
|
|
—
|
|
|
724,382
|
|
|||||
Purchases of affiliates
|
—
|
|
|
—
|
|
|
(94,745
|
)
|
|
—
|
|
|
(94,745
|
)
|
|||||
Purchase of subsidiaries, net of acquired cash
|
(2,287,579
|
)
|
|
(2,317,699
|
)
|
|
1,267,564
|
|
|
2,317,699
|
|
|
(1,020,015
|
)
|
|||||
Proceeds from sale of subsidiary, net of cash sold
|
2,317,699
|
|
|
—
|
|
|
—
|
|
|
(2,317,699
|
)
|
|
—
|
|
|||||
Returns of capital from subsidiaries
|
65,037
|
|
|
—
|
|
|
—
|
|
|
(65,037
|
)
|
|
—
|
|
|||||
Change in restricted cash
|
—
|
|
|
—
|
|
|
(147,810
|
)
|
|
—
|
|
|
(147,810
|
)
|
|||||
Other, net
|
—
|
|
|
—
|
|
|
(138,168
|
)
|
|
—
|
|
|
(138,168
|
)
|
|||||
Net cash provided by (used in) investing activities
|
$
|
95,157
|
|
|
$
|
(1,868,576
|
)
|
|
$
|
1,805,060
|
|
|
$
|
(65,037
|
)
|
|
$
|
(33,396
|
)
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of common shares and exercise of stock options
|
$
|
7,904
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,904
|
|
Buybacks of common shares
|
(292,269
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(292,269
|
)
|
|||||
Dividends paid on common shares
|
(149,030
|
)
|
|
(273,048
|
)
|
|
—
|
|
|
273,048
|
|
|
(149,030
|
)
|
|||||
Return of capital
|
—
|
|
|
(65,037
|
)
|
|
—
|
|
|
65,037
|
|
|
—
|
|
|||||
Distributions to non-controlling interests
|
—
|
|
|
(41,490
|
)
|
|
(39,151
|
)
|
|
—
|
|
|
(80,641
|
)
|
|||||
Contributions from non-controlling interests
|
—
|
|
|
—
|
|
|
10,292
|
|
|
—
|
|
|
10,292
|
|
|||||
Proceeds from issuance of debt
|
—
|
|
|
980,600
|
|
|
—
|
|
|
—
|
|
|
980,600
|
|
|||||
Net proceeds from affiliated notional cash pooling programs (1)
|
—
|
|
|
(43,293
|
)
|
|
—
|
|
|
43,293
|
|
|
—
|
|
|||||
Deposit liabilities
|
—
|
|
|
—
|
|
|
(79,944
|
)
|
|
—
|
|
|
(79,944
|
)
|
|||||
Net cash provided by (used in) financing activities
|
$
|
(433,395
|
)
|
|
$
|
557,732
|
|
|
$
|
(108,803
|
)
|
|
$
|
381,378
|
|
|
$
|
396,912
|
|
Effects of exchange rate changes on foreign currency cash
|
—
|
|
|
—
|
|
|
(54,760
|
)
|
|
—
|
|
|
(54,760
|
)
|
|||||
Increase (decrease) in cash and cash equivalents
|
$
|
(18,886
|
)
|
|
$
|
111,419
|
|
|
$
|
682,430
|
|
|
$
|
43,293
|
|
|
$
|
818,256
|
|
Cash and cash equivalents – beginning of period
|
22,443
|
|
|
86,263
|
|
|
2,456,401
|
|
|
(43,293
|
)
|
|
2,521,814
|
|
|||||
Cash and cash equivalents – end of period
|
$
|
3,557
|
|
|
$
|
197,682
|
|
|
$
|
3,138,831
|
|
|
$
|
—
|
|
|
$
|
3,340,070
|
|
(1)
|
Net proceeds from affiliated notional cash pooling arrangements reflect the net impact of bank transfers to settle overdraft positions within the Company's multi-currency cash pool.
|
ITEM 2.
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
▪
|
the continuation of downward trends in rates for property and casualty insurance and reinsurance;
|
▪
|
changes in the size of our claims relating to unpredictable natural or man-made catastrophe losses, such as hurricanes, typhoons, floods, nuclear accidents or terrorism, due to the preliminary nature of some reports and estimates of loss and damage to date;
|
▪
|
changes in the number of insureds and ceding companies impacted or the ultimate number and value of individual claims related to 2016 natural catastrophe events due to the preliminary nature of reports and estimates of loss and damage to date;
|
▪
|
changes in the amount or type of business that we write, whether due to our actions, changes in market conditions or other factors, and the amount of premium attributable to those businesses;
|
▪
|
the availability, cost or quality of ceded reinsurance, and the timely and full recoverability of such reinsurance, or other amounts due to us, or changes to our projections relating to such recoverables;
|
▪
|
actual loss experience from insured or reinsured events and the timing of claims payments being faster or the receipt of reinsurance recoverables being slower than we anticipated;
|
▪
|
increased competition on the basis of pricing, capacity, coverage terms or other factors, such as the increased inflow of third-party capital into reinsurance markets, which could harm our ability to maintain or increase our business volumes or profitability;
|
▪
|
greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;
|
▪
|
the impact of changes in the global financial markets, such as the effects of inflation on our business including on pricing and reserving, changes in interest rates, credit spreads and foreign currency exchange rates and future volatility in the world's credit, financial and capital markets that adversely affect the performance and valuation of our investments, future financing activities and access to such markets, our ability to pay claims or our general financial condition;
|
▪
|
our ability to successfully implement our business strategy;
|
▪
|
our ability to successfully attract and raise additional third party capital for existing or new investment vehicles;
|
▪
|
changes in credit ratings or rating agency policies or practices, which could trigger cancellation provisions in our assumed reinsurance agreements or impact the availability of our credit facilities;
|
▪
|
the potential for changes to methodologies, estimations and assumptions that underlie the valuation of our financial instruments, that could result in changes to investment valuations;
|
▪
|
changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available-for-sale ("AFS") fixed maturity securities before their anticipated recovery;
|
▪
|
unanticipated constraints on our liquidity, including the availability of borrowings and letters of credit under our credit facilities, that may inhibit our ability to support our operations, including our ability to underwrite policies and pay claims;
|
▪
|
the ability of our subsidiaries to pay dividends to XL-Bermuda, XLIT Ltd. ("XL-Cayman") and Catlin Insurance Company Ltd;
|
▪
|
changes in regulators or regulations applicable to our brokers or customers or to us, such as changes in regulatory capital balances that our operating subsidiaries must maintain;
|
▪
|
the effects of business disruption, economic contraction or economic sanctions due to unpredictable global political and social conditions such as war, terrorism or other hostilities, cyber-attacks, or pandemics;
|
▪
|
the actual amount of new and renewal business and acceptance of our products and services, including new products and services and the materialization of risks related to such products and services;
|
▪
|
changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;
|
▪
|
bankruptcies or other financial concerns of companies insofar as they affect P&C insurance and reinsurance coverages or claims that we may have as a counterparty;
|
▪
|
the loss of key personnel;
|
▪
|
the effects of mergers, acquisitions and divestitures, including our ability to modify our internal control over financial reporting, changes to our risk appetite and our ability to realize the strategic value or financial benefits expected, in each case, as a result of such transactions;
|
▪
|
changes in general economic conditions, including the political, monetary, economic and operational impacts of the "Brexit" referendum held on June 23, 2016 in which the U.K. electorate voted to withdraw from the E.U., new or continued sovereign debt concerns in Euro-Zone countries or emerging markets such as Brazil or China, or governmental actions for the purpose of stabilizing financial markets;
|
▪
|
changes in applicable tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof;
|
▪
|
judicial decisions and rulings, new theories of liability or emerging claims coverage issues, legal tactics and settlement terms;
|
•
|
the effects of climate change (such as changes to weather patterns, sea levels or temperatures) on our business, which our modeling or risk management practices may not adequately address due to the uncertain nature of climate change; and
|
•
|
the other factors set forth in Item 1A, "Risk Factors," included in our Annual Report on Form 10-K for the year ended
December 31, 2015
and our other documents on file with the SEC.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
||||||||||||||||
(U.S. dollars in thousands, except ratios and per share amounts)
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
||||||||||||
Net income (loss) attributable to common shareholders
|
$
|
70,601
|
|
|
$
|
27,282
|
|
|
158.8
|
%
|
|
$
|
136,268
|
|
|
$
|
978,602
|
|
|
(86.1
|
)%
|
||
Earnings (loss) per common share – basic
|
$
|
0.26
|
|
|
$
|
0.09
|
|
|
188.9
|
%
|
|
$
|
0.48
|
|
|
$
|
3.46
|
|
|
(86.1
|
)%
|
||
Earnings (loss) per common share – diluted
|
$
|
0.25
|
|
|
$
|
0.09
|
|
|
177.8
|
%
|
|
$
|
0.48
|
|
|
$
|
3.40
|
|
|
(85.9
|
)%
|
||
Weighted average number of common shares and common share equivalents, in thousands – basic
|
273,660
|
|
|
301,867
|
|
|
(9.3
|
)%
|
|
282,442
|
|
|
282,506
|
|
|
—
|
%
|
||||||
Weighted average number of common shares and common share equivalents, in thousands – diluted
|
277,094
|
|
|
306,954
|
|
|
(9.7
|
)%
|
|
286,125
|
|
|
287,473
|
|
|
(0.5
|
)%
|
||||||
Underwriting profit (loss) - P&C operations
|
$
|
166,851
|
|
|
$
|
114,118
|
|
|
46.2
|
%
|
|
$
|
444,233
|
|
|
$
|
469,733
|
|
|
(5.4
|
)%
|
||
Combined ratio - P&C operations
|
93.1
|
%
|
|
95.3
|
%
|
|
(2.2)pts
|
|
|
93.9
|
%
|
|
91.9
|
%
|
|
2.0pts
|
|
||||||
Net investment income - P&C operations (1)
|
$
|
162,707
|
|
|
$
|
168,306
|
|
|
(3.3
|
)%
|
|
$
|
487,217
|
|
|
$
|
481,699
|
|
|
1.1
|
%
|
||
Operating net income (2)
|
$
|
122,454
|
|
|
$
|
70,792
|
|
|
73.0
|
%
|
|
$
|
332,289
|
|
|
$
|
510,965
|
|
|
(35.0
|
)%
|
||
Operating net income per common share (2)
|
$
|
0.44
|
|
|
$
|
0.23
|
|
|
$
|
0.21
|
|
|
$
|
1.16
|
|
|
$
|
1.78
|
|
|
$
|
(0.62
|
)
|
Annualized return on average common shareholders’ equity (2)
|
2.4
|
%
|
|
0.9
|
%
|
|
1.5pts
|
|
|
1.6
|
%
|
|
11.9
|
%
|
|
(10.3)pts
|
|
||||||
Annualized operating return on average common shareholders’ equity (2)
|
4.2
|
%
|
|
2.3
|
%
|
|
1.9pts
|
|
|
3.8
|
%
|
|
6.2
|
%
|
|
(2.4)pts
|
|
||||||
Annualized operating return on average common shareholders’ equity excluding unrealized gains and losses on investments (2)
|
4.8
|
%
|
|
2.6
|
%
|
|
2.2pts
|
|
|
4.2
|
%
|
|
7.0
|
%
|
|
(2.8)pts
|
|
||||||
Annualized operating return on common shareholders' equity excluding integration costs (2)
|
5.8
|
%
|
|
3.9
|
%
|
|
1.9pts
|
|
|
5.5
|
%
|
|
7.1
|
%
|
|
(1.6)pts
|
|
||||||
Annualized operating return on common shareholders' equity excluding integration costs and unrealized gains and losses on investments (2)
|
6.6
|
%
|
|
4.3
|
%
|
|
2.3pts
|
|
|
6.1
|
%
|
|
8.0
|
%
|
|
(1.9)pts
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(U.S. dollars)
|
September 30, 2016
|
|
June 30, 2016
|
|
Change
(Three Months)
|
|
September 30, 2016
|
|
December 31, 2015
|
|
Change
(Nine Months) |
||||||||||||
Book value per common share
|
$
|
42.94
|
|
|
$
|
42.22
|
|
|
$
|
0.72
|
|
|
$
|
42.94
|
|
|
$
|
39.61
|
|
|
$
|
3.33
|
|
Fully diluted tangible book value per common share (2)
|
$
|
34.22
|
|
|
$
|
33.79
|
|
|
$
|
0.43
|
|
|
$
|
34.22
|
|
|
$
|
31.52
|
|
|
$
|
2.70
|
|
(1)
|
Net investment income - P&C operations includes all net investment income related to the net results from structured products and excludes all net investment income from the assets supporting the Life Funds Withheld Assets, as defined in Item 1,
Note 1, "Basis of Preparation and Consolidation
," to the Unaudited Consolidated Financial Statements included herein.
|
(2)
|
Represents a non-GAAP financial measure as discussed further below. See "Reconciliation of Non-GAAP Measures" below.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
||||||||||||||
(U.S. dollars in thousands, except ratios and per share amounts)
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
||||||||||
Net income
|
$
|
70,601
|
|
|
$
|
27,282
|
|
|
158.8
|
%
|
|
$
|
136,268
|
|
|
$
|
978,602
|
|
|
(86.1
|
)%
|
EPS - basic
|
$
|
0.26
|
|
|
$
|
0.09
|
|
|
188.9
|
%
|
|
$
|
0.48
|
|
|
$
|
3.46
|
|
|
(86.1
|
)%
|
EPS - diluted
|
$
|
0.25
|
|
|
$
|
0.09
|
|
|
177.8
|
%
|
|
$
|
0.48
|
|
|
$
|
3.40
|
|
|
(85.9
|
)%
|
▪
|
The combined ratio related to the P&C operations is the sum of the loss and loss expense ratio and the underwriting expense ratio. A combined ratio under 100% represents an underwriting profit and over 100% represents an underwriting loss. In the P&C industry, the combined ratio is a widely used measure of underwriting profitability.
|
▪
|
The loss and loss expense ratio related to the P&C operations is calculated by dividing the losses and loss expenses incurred by the net premiums earned for the Insurance and Reinsurance segments.
|
▪
|
The underwriting expense ratio related to the P&C operations is the sum of acquisition costs and operating expenses for the Insurance and Reinsurance segments divided by net premiums earned for the Insurance and Reinsurance segments.
|
▪
|
The acquisition expense ratio related to the P&C operations is calculated by dividing the acquisition costs incurred by the net premiums earned for the Insurance and Reinsurance segments.
|
▪
|
The operating expense ratio related to the P&C operations is calculated by dividing the operating expenses incurred by the net premiums earned for the Insurance and Reinsurance segments.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
||||||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
||||||
Loss and loss expense ("loss") ratio
|
61.3
|
%
|
|
60.9
|
%
|
|
0.4
|
|
|
61.6
|
%
|
|
58.5
|
%
|
|
3.1
|
|
Acquisition expense ratio
|
16.6
|
%
|
|
16.8
|
%
|
|
(0.2
|
)
|
|
16.7
|
%
|
|
15.5
|
%
|
|
1.2
|
|
Operating expense ratio
|
15.2
|
%
|
|
17.6
|
%
|
|
(2.4
|
)
|
|
15.6
|
%
|
|
17.9
|
%
|
|
(2.3
|
)
|
Underwriting expense ratio
|
31.8
|
%
|
|
34.4
|
%
|
|
(2.6
|
)
|
|
32.3
|
%
|
|
33.4
|
%
|
|
(1.1
|
)
|
Combined ratio
|
93.1
|
%
|
|
95.3
|
%
|
|
(2.2
|
)
|
|
93.9
|
%
|
|
91.9
|
%
|
|
2.0
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
ROE
|
2.4
|
%
|
|
0.9
|
%
|
|
1.5pts
|
|
1.6
|
%
|
|
11.9
|
%
|
|
(10.3)pts
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Operating ROE
|
4.2
|
%
|
|
2.3
|
%
|
|
1.9pts
|
|
3.8
|
%
|
|
6.2
|
%
|
|
(2.4)pts
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
September 30,
|
|
Change
|
|
September 30,
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Operating ROE ex-UGL
|
4.8
|
%
|
|
2.6
|
%
|
|
2.2pts
|
|
4.2
|
%
|
|
7.0
|
%
|
|
(2.8)pts
|
|
Operating ROE ex-integration costs
|
5.8
|
%
|
|
3.9
|
%
|
|
1.9pts
|
|
5.5
|
%
|
|
7.1
|
%
|
|
(1.6)pts
|
|
Operating ROE ex-integration costs and UGL
|
6.6
|
%
|
|
4.3
|
%
|
|
2.3pts
|
|
6.1
|
%
|
|
8.0
|
%
|
|
(1.9)pts
|
|
(U.S. dollars)
|
September 30, 2016
|
|
June 30, 2016
|
|
Change
(Three Months) |
|
December 31, 2015
|
|
Change
(Nine Months) |
||||||||||
Book value per common share
|
$
|
42.94
|
|
|
$
|
42.22
|
|
|
$
|
0.72
|
|
|
$
|
39.61
|
|
|
$
|
3.33
|
|
(U.S. dollars)
|
September 30, 2016
|
|
June 30, 2016
|
|
Change
(Three Months) |
|
December 31, 2015
|
|
Change
(Nine Months) |
||||||||||
Fully diluted tangible book value per common share
|
$
|
34.22
|
|
|
$
|
33.79
|
|
|
$
|
0.43
|
|
|
$
|
31.52
|
|
|
$
|
2.70
|
|
(U.S. dollars in thousands, except ratios and per share amounts)
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
September 30,
|
|
September 30,
|
|||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Net income (loss) attributable to common shareholders
|
$
|
70,601
|
|
|
$
|
27,282
|
|
|
$
|
136,268
|
|
|
$
|
978,602
|
|
Net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets (1)
|
225,610
|
|
|
126,140
|
|
|
691,432
|
|
|
116,333
|
|
||||
Net realized (gains) losses on investments and net unrealized (gains) losses on investments, Trading - Life Funds Withheld Assets
|
(85,281
|
)
|
|
(51,608
|
)
|
|
(271,596
|
)
|
|
(145,513
|
)
|
||||
Net investment income - Life Funds Withheld Assets
|
(38,937
|
)
|
|
(46,586
|
)
|
|
(119,643
|
)
|
|
(143,869
|
)
|
||||
Foreign exchange revaluation (gains) losses on and other income and expense items related to Life Funds Withheld Assets
|
(1,535
|
)
|
|
(8,633
|
)
|
|
(5,729
|
)
|
|
3,578
|
|
||||
Net income (loss) attributable to common shareholders excluding Contribution from Life Retrocession Arrangements
|
$
|
170,458
|
|
|
$
|
46,595
|
|
|
$
|
430,732
|
|
|
$
|
809,131
|
|
Net realized (gains) losses and OTTI on investments - excluding Life Funds Withheld Assets
|
(58,395
|
)
|
|
201
|
|
|
(69,447
|
)
|
|
(8,752
|
)
|
||||
Net realized and unrealized (gains) losses on derivatives
|
(5,490
|
)
|
|
7,903
|
|
|
(2,774
|
)
|
|
(57,127
|
)
|
||||
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates
|
—
|
|
|
(14
|
)
|
|
2,231
|
|
|
1,239
|
|
||||
Exchange (gains) losses
|
(160
|
)
|
|
20,294
|
|
|
(48,885
|
)
|
|
45,847
|
|
||||
Expenses related to Catlin acquisition
|
—
|
|
|
1,245
|
|
|
—
|
|
|
63,048
|
|
||||
Loss (gain) on sale of subsidiary
|
(3,670
|
)
|
|
—
|
|
|
(3,670
|
)
|
|
—
|
|
||||
Gain on sale of operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
(340,407
|
)
|
||||
Provision (benefit) for income tax on items excluded from operating income
|
19,711
|
|
|
(5,432
|
)
|
|
24,102
|
|
|
(2,014
|
)
|
||||
Operating net income (loss)
|
$
|
122,454
|
|
|
$
|
70,792
|
|
|
$
|
332,289
|
|
|
$
|
510,965
|
|
Per common share results:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common shareholders
|
$
|
0.25
|
|
|
$
|
0.09
|
|
|
$
|
0.48
|
|
|
$
|
3.40
|
|
Operating net income (loss)
|
$
|
0.44
|
|
|
$
|
0.23
|
|
|
$
|
1.16
|
|
|
$
|
1.78
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
273,660
|
|
|
301,867
|
|
|
282,442
|
|
|
282,506
|
|
||||
Diluted - For Net income per share
|
277,094
|
|
|
306,954
|
|
|
286,125
|
|
|
287,473
|
|
||||
Diluted - For Operating net income per share
|
277,094
|
|
|
306,954
|
|
|
286,125
|
|
|
287,473
|
|
||||
Return on common shareholders' equity:
|
|
|
|
|
|
|
|
||||||||
Closing common shareholders' equity (at period end)
|
$
|
11,612,166
|
|
|
$
|
11,938,229
|
|
|
$
|
11,612,166
|
|
|
$
|
11,938,229
|
|
Unrealized (gain) loss on investments
|
$
|
(1,484,725
|
)
|
|
$
|
(1,005,547
|
)
|
|
$
|
(1,484,725
|
)
|
|
$
|
(1,005,547
|
)
|
Average common shareholders' equity for the period excluding unrealized gains and losses on investments
|
$
|
10,195,467
|
|
|
$
|
11,037,815
|
|
|
$
|
10,529,464
|
|
|
$
|
9,726,183
|
|
Average common shareholders' equity for the period
|
$
|
11,648,677
|
|
|
$
|
12,092,764
|
|
|
$
|
11,644,623
|
|
|
$
|
10,985,990
|
|
Operating net income (loss)
|
$
|
122,454
|
|
|
$
|
70,792
|
|
|
$
|
332,289
|
|
|
$
|
510,965
|
|
Annualized operating net income (loss)
|
$
|
489,816
|
|
|
$
|
283,168
|
|
|
$
|
443,052
|
|
|
$
|
681,287
|
|
Annualized operating net income (loss) (excluding integration costs)
|
$
|
689,143
|
|
|
$
|
385,638
|
|
|
$
|
640,156
|
|
|
$
|
783,155
|
|
Annualized operating return on average common shareholders' equity
|
4.2
|
%
|
|
2.3
|
%
|
|
3.8
|
%
|
|
6.2
|
%
|
||||
Annualized operating return on average common shareholders' equity excluding unrealized gains and losses on investments
|
4.8
|
%
|
|
2.6
|
%
|
|
4.2
|
%
|
|
7.0
|
%
|
||||
Annualized operating return on average common shareholders' equity excluding integration costs
|
5.8
|
%
|
|
3.9
|
%
|
|
5.5
|
%
|
|
7.1
|
%
|
||||
Annualized operating return on average common shareholders' equity excluding integration costs and unrealized gains and losses on investments
|
6.6
|
%
|
|
4.3
|
%
|
|
6.1
|
%
|
|
8.0
|
%
|
(1)
|
Investment results for the Life Funds Withheld Assets - including interest income, unrealized gains and losses, and gains and losses from sales - are passed directly to the reinsurer pursuant to a contractual arrangement which is accounted for as a derivative. Changes in the fair value of the embedded derivative associated with the GreyCastle Life Retrocession Arrangements are reflected within "Net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets" in the reconciliation.
|
|
Interest Rate Movement
for the three months ended September 30, 2016 (1) (‘+’/‘-’ represents increases / decreases in interest rates) |
|
Credit Spread Movement
for the three months ended September 30, 2016 (2) (‘+’/‘-’ represents widening / tightening of credit spreads) |
|
Equity Market Price Movement
for the three months ended September 30, 2016 (1) (‘+’/‘-’ represents increases / decreases in common equity market benchmarks) |
United States
|
+15 basis points (5 year Treasury)
|
|
-8 basis points (US Corporate A rated)
|
|
+4.79% (Global equity market)
|
|
|
|
-13 basis points (US Mortgage Master Index)
|
|
+3.31% (U.S. equity market)
|
United Kingdom
|
-13 basis points (5 year Gilt)
|
|
-30 basis points (UK Corporate, AA rated)
|
|
|
Euro-zone
|
-1 basis points (5 year Bund)
|
|
-12 basis points (Europe Corporate, A rated)
|
|
|
(1)
|
Source: Bloomberg Finance L.P.
|
(2)
|
Source: Merrill Lynch Global Indices.
|
|
Interest Rate Movement
for the nine months ended September 30, 2016 (1) (‘+’/‘-’ represents increases / decreases in interest rates) |
|
Credit Spread Movement
for the nine months ended September 30, 2016 (2) (‘+’/‘-’ represents widening / tightening of credit spreads) |
|
Equity Market Price Movement
for the nine months ended September 30, 2016 (1) (‘+’/‘-’ represents increases / decreases in common equity market benchmarks) |
United States
|
-61 basis points (5 year Treasury)
|
|
-10 basis points (US Corporate A rated)
|
|
+4.78% (Global equity market)
|
|
|
|
-10 basis points (US Mortgage Master Index)
|
|
+6.08% (U.S. equity market)
|
United Kingdom
|
-112 basis points (5 year Gilt)
|
|
-14 basis points (UK Corporate, AA rated)
|
|
|
Euro-zone
|
-53 basis points (5 year Bund)
|
|
-5 basis points (Europe Corporate, A rated)
|
|
|
(1)
|
Source: Bloomberg Finance L.P.
|
(2)
|
Source: Merrill Lynch Global Indices.
|
|
|
|
|
|
1-in-100 Event
|
|
1-in-250 Event
|
||||||||||
Geographical Zone
(U.S. dollars in millions)
|
Peril
|
|
Measurement
Date
of In-Force
Exposures (1)
|
|
Probable
Maximum
Loss (2)
|
|
Percentage of
Adjusted Tangible Capital at September 30, 2016 (3) |
|
Probable
Maximum
Loss (2)
|
|
Percentage of
Adjusted Tangible Capital at September 30, 2016 (3) |
||||||
North Atlantic
|
Windstorm
|
|
July 1, 2016
|
|
$
|
1,741
|
|
|
15.5
|
%
|
|
$
|
2,810
|
|
|
24.9
|
%
|
North America
|
Earthquake
|
|
July 1, 2016
|
|
1,022
|
|
|
9.1
|
%
|
|
1,914
|
|
|
17.0
|
%
|
||
Europe
|
Windstorm
|
|
July 1, 2016
|
|
740
|
|
|
6.6
|
%
|
|
866
|
|
|
7.7
|
%
|
||
Japan
|
Earthquake
|
|
July 1, 2016
|
|
704
|
|
|
6.2
|
%
|
|
967
|
|
|
8.6
|
%
|
||
Japan
|
Windstorm
|
|
July 1, 2016
|
|
527
|
|
|
4.7
|
%
|
|
662
|
|
|
5.9
|
%
|
(1)
|
Detailed analyses of aggregated in-force exposures and maximum loss levels are done periodically. The measurement dates represent the date of the last completed detailed analysis by geographical zone.
|
(2)
|
Probable maximum losses, which include secondary uncertainty that incorporates variability around the expected probable maximum loss for each event, do not represent our maximum potential exposures and are pre-tax.
|
(3)
|
Adjusted Tangible Capital, a non-GAAP measure, is defined as Total Shareholders’ Equity (
$13.6 billion
) plus (i) outstanding subordinated notes due 2025 (
$493.1 million
) and 2045 (
$488.7 million
) less (ii) Goodwill and Other Intangible Assets (
$2.2 billion
) and less (iii) Adjusted Accumulated Other Comprehensive Income (
$1.1 billion
), which is defined as Accumulated Other Comprehensive Income (
$1.5 billion
) plus Shadow Adjustments, as defined in Item 1,
Note 15, "Accumulated Other Comprehensive Income (Loss)
," to the Unaudited Consolidated Financial Statements included herein (
$246.6 million
) less gross unrealized gains resulting from Life Funds Withheld Assets (
$693.2 million
).
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Gross premiums written
|
$
|
2,153,379
|
|
|
$
|
2,200,196
|
|
|
(2.1
|
)%
|
Net premiums written
|
1,615,132
|
|
|
1,664,562
|
|
|
(3.0
|
)%
|
||
Net premiums earned
|
1,653,461
|
|
|
1,632,988
|
|
|
1.3
|
%
|
||
Net losses and loss expenses
|
1,068,268
|
|
|
1,037,727
|
|
|
2.9
|
%
|
||
Acquisition costs
|
221,137
|
|
|
214,773
|
|
|
3.0
|
%
|
||
Operating expenses
|
302,373
|
|
|
334,211
|
|
|
(9.5
|
)%
|
||
Underwriting profit (loss)
|
$
|
61,683
|
|
|
$
|
46,277
|
|
|
33.3
|
%
|
Net results – structured products
|
2,353
|
|
|
3,328
|
|
|
(29.3
|
)%
|
||
Net fee income and other (expense)
|
(4,486
|
)
|
|
(5,207
|
)
|
|
(13.8
|
)%
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Professional
|
$
|
432,236
|
|
|
$
|
444,891
|
|
|
(2.8
|
)%
|
Casualty
|
761,423
|
|
|
766,604
|
|
|
(0.7
|
)%
|
||
EPC
|
473,694
|
|
|
446,131
|
|
|
6.2
|
%
|
||
Specialty
|
486,026
|
|
|
542,570
|
|
|
(10.4
|
)%
|
||
Total
|
$
|
2,153,379
|
|
|
$
|
2,200,196
|
|
|
(2.1
|
)%
|
▪
|
Professional - decrease of
2.8%
is mainly driven by lower new and renewal business in design and commercial errors & omissions business lines, partially offset by an increase in cyber and international financial lines.
|
▪
|
Casualty - decrease of
0.7%
is attributable to lower retention in excess and surplus lines, and international casualty lines. This decrease was partially offset by increases in new and renewal business in global risk management, North America construction, and the Allied Specialty acquisition.
|
▪
|
EPC - increase of
6.2%
due to an increase in new business in property international open market and North American property open market business lines.
|
▪
|
Specialty - decrease of
10.4%
is driven by lower new business in aerospace and equine, livestock and aquaculture, and life, accident and health. These decreases were partially offset by higher new and renewal business in political risk and trade credit.
|
|
Three Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Point Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
64.6
|
%
|
|
63.5
|
%
|
|
1.1
|
|
Acquisition expense ratio
|
13.4
|
%
|
|
13.2
|
%
|
|
0.2
|
|
Operating expense ratio
|
18.3
|
%
|
|
20.5
|
%
|
|
(2.2
|
)
|
Underwriting expense ratio
|
31.7
|
%
|
|
33.7
|
%
|
|
(2.0
|
)
|
Combined ratio
|
96.3
|
%
|
|
97.2
|
%
|
|
(0.9
|
)
|
|
Three Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Point Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
64.6
|
%
|
|
63.5
|
%
|
|
1.1
|
|
Prior year reserve development
|
1.4
|
%
|
|
(0.4
|
)%
|
|
1.8
|
|
Loss ratio excluding prior year development
|
66.0
|
%
|
|
63.1
|
%
|
|
2.9
|
|
Net natural catastrophe losses
|
(4.3
|
)%
|
|
(0.4
|
)%
|
|
(3.9
|
)
|
Loss ratio excluding prior year development and net natural catastrophe losses
|
61.7
|
%
|
|
62.7
|
%
|
|
(1.0
|
)
|
|
Three Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Professional
|
$
|
(1,870
|
)
|
|
$
|
6,311
|
|
Casualty
|
431
|
|
|
(9,775
|
)
|
||
EPC
|
(16,339
|
)
|
|
14,587
|
|
||
Specialty
|
(4,907
|
)
|
|
(4,059
|
)
|
||
Total
|
$
|
(22,685
|
)
|
|
$
|
7,064
|
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Gross premiums written
|
$
|
565,541
|
|
|
$
|
458,946
|
|
|
23.2
|
%
|
Net premiums written
|
518,166
|
|
|
408,654
|
|
|
26.8
|
%
|
||
Net premiums earned
|
778,216
|
|
|
772,752
|
|
|
0.7
|
%
|
||
Net losses and loss expenses
|
423,535
|
|
|
426,558
|
|
|
(0.7
|
)%
|
||
Acquisition costs
|
181,749
|
|
|
189,671
|
|
|
(4.2
|
)%
|
||
Operating expenses
|
67,764
|
|
|
88,682
|
|
|
(23.6
|
)%
|
||
Underwriting profit (loss)
|
$
|
105,168
|
|
|
$
|
67,841
|
|
|
55.0
|
%
|
Net results – structured products
|
5,355
|
|
|
1,109
|
|
|
382.9
|
%
|
||
Net fee income and other
|
620
|
|
|
533
|
|
|
16.3
|
%
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Bermuda
|
$
|
72,687
|
|
|
$
|
83,608
|
|
|
(13.1
|
)%
|
North America
|
179,539
|
|
|
113,111
|
|
|
58.7
|
%
|
||
London
|
86,779
|
|
|
78,182
|
|
|
11.0
|
%
|
||
EMEA
|
42,611
|
|
|
50,175
|
|
|
(15.1
|
)%
|
||
LAC
|
183,925
|
|
|
133,870
|
|
|
37.4
|
%
|
||
Total
|
$
|
565,541
|
|
|
$
|
458,946
|
|
|
23.2
|
%
|
▪
|
Bermuda - decrease of
13.1%
is primarily due to non-renewed business in Property Catastrophe and prior year adjustments on whole account line of business.
|
▪
|
North America - increase of
58.7%
is largely attributable to new business in Casualty and Property Treaty lines of business and negative premium adjustment in Marine in the prior year.
|
▪
|
London - increase of
11.0%
is primarily due to new business in Property Catastrophe and Casualty lines of business. Additionally, Casualty share change contributed to the increase which is partially offset by foreign exchange loss.
|
▪
|
EMEA - decrease of
15.1%
is due to timing of a quota share renewal in Marine line of business in the prior year.
|
▪
|
LAC - increase of
37.4%
is driven predominantly by the new business in Property Treaty and Credit lines of business. Additionally, our Credit portfolio contributed positive prior year premium adjustment offset by negative premium adjustment in our Crop line of business.
|
|
Three Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Point Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
54.4
|
%
|
|
55.2
|
%
|
|
(0.8
|
)
|
Acquisition expense ratio
|
23.4
|
%
|
|
24.5
|
%
|
|
(1.1
|
)
|
Operating expense ratio
|
8.7
|
%
|
|
11.5
|
%
|
|
(2.8
|
)
|
Underwriting expense ratio
|
32.1
|
%
|
|
36.0
|
%
|
|
(3.9
|
)
|
Combined ratio
|
86.5
|
%
|
|
91.2
|
%
|
|
(4.7
|
)
|
|
Three Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Point Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
54.4
|
%
|
|
55.2
|
%
|
|
(0.8
|
)
|
Prior year reserve development
|
4.0
|
%
|
|
4.6
|
%
|
|
(0.6
|
)
|
Loss ratio excluding prior year development
|
58.4
|
%
|
|
59.8
|
%
|
|
(1.4
|
)
|
Net natural catastrophe losses
|
(3.5
|
)%
|
|
(3.1
|
)%
|
|
(0.4
|
)
|
Loss ratio excluding prior year development and net natural catastrophe losses
|
54.9
|
%
|
|
56.7
|
%
|
|
(1.8
|
)
|
|
Three Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Property and other short-tail lines
|
$
|
(30,607
|
)
|
|
$
|
(34,080
|
)
|
Casualty and other long-tail lines
|
(313
|
)
|
|
(1,102
|
)
|
||
Total
|
$
|
(30,920
|
)
|
|
$
|
(35,182
|
)
|
▪
|
Net favorable prior year development for the short-tail lines totaled
$30.6 million
. Details of the significant components are as follows:
|
▪
|
For property catastrophe lines, net prior year development was $31.1 million favorable, primarily due to favorable losses incurred but not reported ("IBNR") release on older catastrophe and large losses and due to better than expected experience.
|
▪
|
For property other lines, net prior year development was $1.8 million favorable mainly due to better than expected experience on attritional losses.
|
•
|
For specialty lines, net prior year development was $2.3 million unfavorable due to worse than expected development on large losses, primarily on the Marine book.
|
▪
|
Net favorable prior year development for the long-tail lines totaled
$0.3 million
and details of the significant components are as follows:
|
•
|
For casualty lines, net prior year development was $1.7 million unfavorable due to actual experience being worse than expected on older years for Casualty Treaty business.
|
•
|
For other lines, net prior year development was $2.0 million favorable largely due to actual experience being better than expected on the whole account book.
|
•
|
Operating expense ratio - decrease was attributable to synergies realized due to the Catlin Acquisition and driven by the adoption of a consistent segment approach to reclassifying expenses to unallocated loss adjustment expenses.
|
•
|
Acquisition expense ratio - decrease was driven by a different business mix and lower earnings than the prior year in the Bermuda and London regions.
|
|
Three Months Ended
|
||||
|
September 30,
|
||||
|
2016
|
|
2015
|
||
Total Return on Investments (1)
|
0.7
|
%
|
|
0.3
|
%
|
|
|
|
|
||
Other Portfolios (2)
|
|
|
|
||
Hedge fund portfolio (3)
|
0.3
|
%
|
|
(0.7
|
)%
|
Equity portfolio
|
4.4
|
%
|
|
(10.2
|
)%
|
(1)
|
The performance of investment portfolios is measured on a local currency basis. For the aggregate performance calculation, respective local currency balances are translated to U.S. dollars using quarter end rates to calculate composite portfolio results. Performance represents the P&C operations and run-off life operations for the
three months ended September 30, 2016 and 2015
.
|
(2)
|
Performance on Other Portfolios is included in the Total Return on Investments.
|
(3)
|
Performance on the hedge fund portfolio reflects the three months ended August 31, 2016 and 2015, respectively, for both equity and non-equity accounted hedge funds.
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net investment income - excluding Life Funds Withheld Assets
|
$
|
170,834
|
|
|
$
|
178,560
|
|
|
(4.3
|
)%
|
Net income (loss) from investment affiliates
|
12,156
|
|
|
(3,715
|
)
|
|
N/M
|
|
||
Net realized gains (losses) on investments
|
58,395
|
|
|
(201
|
)
|
|
N/M
|
|
||
Net realized and unrealized gains (losses) on derivative instruments (1)
|
5,490
|
|
|
(7,903
|
)
|
|
N/M
|
|
(1)
|
For a summary of realized and unrealized losses on all derivative instruments, see Item 1, Note 7, "Derivative Instruments," to the Unaudited Consolidated Financial Statements included herein.
|
*
|
N/M - Not Meaningful
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net income (loss) from operating affiliates
|
$
|
12,410
|
|
|
$
|
8,196
|
|
|
51.4
|
%
|
Exchange (gains) losses
|
(1,695
|
)
|
|
11,661
|
|
|
N/M
|
|
||
Corporate operating expenses
|
126,308
|
|
|
135,500
|
|
|
(6.8
|
)%
|
||
Loss (gain) on sale of subsidiary
|
(3,670
|
)
|
|
—
|
|
|
N/M
|
|
||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
(225,610
|
)
|
|
(126,140
|
)
|
|
78.9
|
%
|
||
Interest expense (1)
|
43,025
|
|
|
40,798
|
|
|
5.5
|
%
|
||
Income tax expense (benefit)
|
17,749
|
|
|
(37,042
|
)
|
|
N/M
|
|
(1)
|
Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products.
|
*
|
N/M - Not Meaningful
|
|
Three Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net income (loss) from investment manager affiliates
|
$
|
6,753
|
|
|
$
|
5,943
|
|
|
13.6
|
%
|
Net income (loss) from strategic operating affiliates
|
5,657
|
|
|
2,253
|
|
|
N/M
|
|
||
Net income (loss) from operating affiliates
|
$
|
12,410
|
|
|
$
|
8,196
|
|
|
51.4
|
%
|
*
|
N/M - Not Meaningful
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Professional
|
$
|
1,226,425
|
|
|
$
|
1,248,737
|
|
|
(1.8
|
)%
|
Casualty
|
2,373,698
|
|
|
2,174,318
|
|
|
9.2
|
%
|
||
EPC
|
1,855,647
|
|
|
1,423,479
|
|
|
30.4
|
%
|
||
Specialty
|
1,713,593
|
|
|
1,227,853
|
|
|
39.6
|
%
|
||
Total
|
$
|
7,169,363
|
|
|
$
|
6,074,387
|
|
|
18.0
|
%
|
▪
|
Professional - decrease of
1.8%
primarily in North America professional and commercial errors and omissions business lines, partially offset by modest growth in the cyber business line.
|
▪
|
Casualty - increase of
9.2%
is largely a result of the Catlin Acquisition and related to global risk management, North American construction, excess and surplus, and international casualty. Additionally, the Allied Acquisition contributed to the increase in premiums. Compared to the combined books in the prior year, premiums decreased due to rate pressures in several lines.
|
▪
|
EPC - increase of
30.4%
with increases across all lines of business following the Catlin Acquisition. Compared to the combined books in the prior year, and excluding the effects of foreign exchange, premiums increased slightly, generally in core property lines.
|
▪
|
Specialty - increase of
39.6%
with improvements across all lines of business following the Catlin Acquisition. Compared to the combined books in the prior year, and excluding the effects of foreign exchange, premiums decreased slightly most notably in the aerospace and marine business lines.
|
|
Nine Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
64.0
|
%
|
|
63.6
|
%
|
|
0.4
|
|
Acquisition expense ratio
|
13.7
|
%
|
|
11.9
|
%
|
|
1.8
|
|
Operating expense ratio
|
18.7
|
%
|
|
20.9
|
%
|
|
(2.2
|
)
|
Underwriting expense ratio
|
32.4
|
%
|
|
32.8
|
%
|
|
(0.4
|
)
|
Combined ratio
|
96.4
|
%
|
|
96.4
|
%
|
|
—
|
|
|
Nine Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
64.0
|
%
|
|
63.6
|
%
|
|
0.4
|
|
Prior year reserve development
|
1.4
|
%
|
|
1.0
|
%
|
|
0.4
|
|
Loss ratio excluding prior year development
|
65.4
|
%
|
|
64.6
|
%
|
|
0.8
|
|
Net natural catastrophe losses
|
(4.2
|
)%
|
|
(2.1
|
)%
|
|
(2.1
|
)
|
Loss ratio excluding prior year development and net natural catastrophe losses
|
61.2
|
%
|
|
62.5
|
%
|
|
(1.3
|
)
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Professional
|
$
|
(454
|
)
|
|
$
|
13,311
|
|
Casualty
|
(44,865
|
)
|
|
(16,334
|
)
|
||
EPC
|
(7,639
|
)
|
|
1,360
|
|
||
Specialty
|
(14,540
|
)
|
|
(35,405
|
)
|
||
Total
|
$
|
(67,498
|
)
|
|
$
|
(37,068
|
)
|
•
|
For casualty lines, net prior year development was
$44.9 million
favorable. This was driven by a release of $28.5 million in International Casualty, primarily to reflect better than expected loss experience reported on the general and professional liability books, and $21.5 million in discontinued casualty primarily due to our reassessment of the IBNR provision for a large risk U.S. Casualty portfolio, discontinued prior to 2008, following favorable claims resolutions in recent years.
|
•
|
For EPC lines, net prior year development was
$7.6 million
favorable driven by reflecting better than expected reported non-catastrophe loss experience.
|
•
|
For specialty lines, net prior year development was
$14.5 million
favorable driven by releases of $7.2 million in discontinued specialty relating to reserve releases following the expiration of a policy, and $9.1 million in marine due to better than expected reported loss experience on the cargo, hull and liability businesses. This was partially offset by modest strengthening in accident and health driven by deteriorations in the U.S. and Switzerland books, and in crisis management relating to deteriorations in large losses.
|
▪
|
Acquisition expense ratio - we experienced a slight increase over the prior year as a result of the Catlin Acquisition, which included a larger share of wholesale specialty business where the acquisition costs were higher than the legacy portfolio, combined with lower commissions received from the ceded business, largely resulting from a higher mix of facultative and other excess of loss protections carrying lower ceding commissions than quota share cessions.
|
▪
|
Operating expense ratio - decreased
2.2
percentage points due to synergies realized from the Catlin Acquisition.
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Gross premiums written
|
$
|
3,439,650
|
|
|
$
|
2,066,856
|
|
|
66.4
|
%
|
Net premiums written
|
3,018,246
|
|
|
1,854,590
|
|
|
62.7
|
%
|
||
Net premiums earned
|
2,367,772
|
|
|
1,780,829
|
|
|
33.0
|
%
|
||
Net losses and loss expenses
|
1,343,075
|
|
|
834,263
|
|
|
61.0
|
%
|
||
Acquisition costs
|
544,380
|
|
|
419,380
|
|
|
29.8
|
%
|
||
Operating expenses
|
215,258
|
|
|
202,904
|
|
|
6.1
|
%
|
||
Underwriting profit (loss)
|
$
|
265,059
|
|
|
$
|
324,282
|
|
|
(18.3
|
)%
|
Net results – structured products
|
5,397
|
|
|
5,085
|
|
|
6.1
|
%
|
||
Net fee income and other
|
2,705
|
|
|
1,981
|
|
|
36.5
|
%
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Bermuda
|
$
|
891,466
|
|
|
$
|
747,854
|
|
|
19.2
|
%
|
North America
|
686,306
|
|
|
466,097
|
|
|
47.2
|
%
|
||
London
|
575,352
|
|
|
235,341
|
|
|
144.5
|
%
|
||
EMEA
|
666,650
|
|
|
336,243
|
|
|
98.3
|
%
|
||
LAC
|
619,876
|
|
|
281,321
|
|
|
120.3
|
%
|
||
Total
|
$
|
3,439,650
|
|
|
$
|
2,066,856
|
|
|
66.4
|
%
|
▪
|
Bermuda - increase of
19.2%
is primarily in the Property Catastrophe line of business due to the Catlin Acquisition, plus prior year premium adjustments on the whole account line of business.
|
▪
|
North America - increase of
47.2%
is largely related to increases in Casualty, Property Treaty and Property Facultative lines of business due to the Catlin Acquisition.
|
▪
|
London - significant increase is driven from the Catlin Acquisition, producing a substantial Property Catastrophe portfolio, alongside growth in the Marine and Casualty lines of business.
|
▪
|
EMEA - increase is primarily related to substantial new business in Casualty line related to Large New Motors quota share treaties. Also contributing to the increase are Whole Account, which is a new initiative for 2016, and new business in Crop and Property Treaty businesses.
|
▪
|
LAC - increase is primarily related to growth in Credit, Crop and Property Catastrophe lines of business.
|
|
Nine Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
56.7
|
%
|
|
46.8
|
%
|
|
9.9
|
|
Acquisition expense ratio
|
23.0
|
%
|
|
23.5
|
%
|
|
(0.5
|
)
|
Operating expense ratio
|
9.1
|
%
|
|
11.5
|
%
|
|
(2.4
|
)
|
Underwriting expense ratio
|
32.1
|
%
|
|
35.0
|
%
|
|
(2.9
|
)
|
Combined ratio
|
88.8
|
%
|
|
81.8
|
%
|
|
7.0
|
|
|
Nine Months Ended
|
|
Percentage
|
|||||
|
September 30,
|
|
Change
|
|||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||
Loss and loss expense ratio
|
56.7
|
%
|
|
46.8
|
%
|
|
9.9
|
|
Prior year reserve development
|
5.4
|
%
|
|
8.4
|
%
|
|
(3.0
|
)
|
Loss ratio excluding prior year development
|
62.1
|
%
|
|
55.2
|
%
|
|
6.9
|
|
Net natural catastrophe losses
|
(8.2
|
)%
|
|
(1.4
|
)%
|
|
(6.8
|
)
|
Loss ratio excluding prior year development and net natural catastrophe losses
|
53.9
|
%
|
|
53.8
|
%
|
|
0.1
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
||||
Property and other short-tail lines
|
$
|
(69,028
|
)
|
|
$
|
(120,376
|
)
|
Casualty and other long-tail lines
|
(59,121
|
)
|
|
(28,032
|
)
|
||
Total
|
$
|
(128,149
|
)
|
|
$
|
(148,408
|
)
|
▪
|
Net favorable prior year development for the short-tail lines totaled
$69.0 million
. Details of the significant components are as follows:
|
•
|
For property catastrophe lines, net prior year development was $54.4 million favorable, primarily due to favorable IBNR release on older cat and large losses and due to better than expected experience.
|
•
|
For property other lines, net prior year development was $5.1 million favorable, mainly due to better than expected development on attritional losses on the property business being partially offset by unfavorable development on attritional losses for the crop business.
|
•
|
For specialty lines, net prior year development was $9.6 million favorable mainly due to better than expected development on attritional losses mainly on the Marine book.
|
▪
|
Net favorable prior year development for the long-tail lines totaled
$59.1 million
and details of the significant components are as follows:
|
▪
|
For casualty lines, net prior year development was $50.4 million favorable due to better than expected development on attritional losses for 2014 and prior underwriting years.
|
▪
|
For other lines, net prior year development was $8.7 million favorable largely due to better than expected development on attritional losses on the whole account book.
|
(1)
|
The performance of investment portfolios is measured on a local currency basis. For the aggregate performance calculation, respective local currency balances are translated to U.S. dollars using quarter end rates to calculate composite portfolio results.
|
(2)
|
Performance on Other Portfolios is included in the Total Return on Investments.
|
(3)
|
Performance on the hedge fund portfolio reflects the nine months ended August 31, 2016 and 2015, respectively, for both equity and non-equity accounted hedge funds.
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net investment income - excluding Life Funds Withheld Assets
|
$
|
511,402
|
|
|
$
|
512,994
|
|
|
(0.3
|
)%
|
Net income (loss) from investment fund affiliates
|
20,756
|
|
|
62,991
|
|
|
(67.0
|
)%
|
||
Net realized gains (losses) on investments
|
69,447
|
|
|
8,752
|
|
|
N/M
|
|
||
Net realized and unrealized gains (losses) on derivative instruments (1)
|
2,774
|
|
|
57,127
|
|
|
(95.1
|
)%
|
(1)
|
For a summary of realized and unrealized losses on all derivative instruments, see Item 1,
Note 7, "Derivative Instruments
," to the Unaudited Consolidated Financial Statements included herein.
|
*
|
N/M - Not Meaningful
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net income (loss) from operating affiliates
|
$
|
46,478
|
|
|
$
|
40,326
|
|
|
15.3
|
%
|
Gain on sale of operating affiliate
|
—
|
|
|
340,407
|
|
|
N/M
|
|
||
Exchange (gains) losses
|
(54,614
|
)
|
|
49,425
|
|
|
N/M
|
|
||
Loss (gain) on sale of subsidiary
|
(3,670
|
)
|
|
—
|
|
|
N/M
|
|
||
Corporate operating expenses
|
372,003
|
|
|
328,930
|
|
|
13.1
|
%
|
||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
|
(691,432
|
)
|
|
(116,333
|
)
|
|
N/M
|
|
||
Interest expense (1)
|
128,371
|
|
|
121,317
|
|
|
5.8
|
%
|
||
Income tax expense
|
42,511
|
|
|
20,135
|
|
|
N/M
|
|
(1)
|
Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products.
|
*
|
N/M - Not Meaningful
|
|
Nine Months Ended
|
|
Percentage
|
|||||||
|
September 30,
|
|
Change
|
|||||||
(U.S. dollars in thousands)
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Net income (loss) from investment manager affiliates
|
$
|
34,424
|
|
|
$
|
18,206
|
|
|
89.1
|
%
|
Net income (loss) from strategic and other operating affiliates
|
12,054
|
|
|
22,120
|
|
|
(45.5
|
)%
|
||
Net income (loss) from operating affiliates
|
$
|
46,478
|
|
|
$
|
40,326
|
|
|
15.3
|
%
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||
(U.S. dollars in thousands)
|
Carrying
Value
|
|
Percent
of Total
|
|
Carrying
Value
|
|
Percent
of Total
|
||||||
Cash and cash equivalents
|
$
|
3,393,277
|
|
|
9.0
|
%
|
|
$
|
3,256,236
|
|
|
8.7
|
%
|
Restricted cash
|
61,885
|
|
|
0.2
|
%
|
|
41,860
|
|
|
0.1
|
%
|
||
Net receivable/ (payable) for investments sold/ (purchased)
|
(255,624
|
)
|
|
(0.7
|
)%
|
|
101,098
|
|
|
0.3
|
%
|
||
Accrued investment income
|
220,663
|
|
|
0.6
|
%
|
|
243,409
|
|
|
0.7
|
%
|
||
Short-term investments
|
652,772
|
|
|
1.7
|
%
|
|
617,390
|
|
|
1.7
|
%
|
||
Fixed maturities - AFS (1):
|
|
|
|
|
|
|
|
||||||
U.S. Government and Government-Related/Supported
|
3,933,359
|
|
|
10.5
|
%
|
|
5,065,637
|
|
|
13.5
|
%
|
||
Corporate - Financials
|
3,778,344
|
|
|
10.0
|
%
|
|
3,561,909
|
|
|
9.5
|
%
|
||
Corporate - Non Financials
|
6,898,869
|
|
|
18.3
|
%
|
|
6,900,447
|
|
|
18.5
|
%
|
||
RMBS – Agency
|
4,591,774
|
|
|
12.2
|
%
|
|
3,757,971
|
|
|
10.1
|
%
|
||
RMBS – Non-Agency
|
285,927
|
|
|
0.8
|
%
|
|
328,540
|
|
|
0.9
|
%
|
||
CMBS
|
296,104
|
|
|
0.8
|
%
|
|
405,316
|
|
|
1.1
|
%
|
||
CDOs
|
141,281
|
|
|
0.4
|
%
|
|
32,410
|
|
|
0.1
|
%
|
||
Other asset-backed securities
|
973,170
|
|
|
2.6
|
%
|
|
1,168,572
|
|
|
3.1
|
%
|
||
U.S. States and political subdivisions of the States
|
2,598,854
|
|
|
6.9
|
%
|
|
2,632,070
|
|
|
7.0
|
%
|
||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported
|
5,642,141
|
|
|
15.0
|
%
|
|
5,251,614
|
|
|
14.0
|
%
|
||
Total fixed maturities - AFS
|
$
|
29,139,823
|
|
|
77.5
|
%
|
|
$
|
29,104,486
|
|
|
77.8
|
%
|
Equity securities
|
1,038,165
|
|
|
2.8
|
%
|
|
878,919
|
|
|
2.4
|
%
|
||
Investments in affiliates
|
2,118,489
|
|
|
5.6
|
%
|
|
1,708,899
|
|
|
4.6
|
%
|
||
Other investments
|
1,260,938
|
|
|
3.3
|
%
|
|
1,433,057
|
|
|
3.7
|
%
|
||
Total investments and cash and cash equivalents - excluding Life Funds Withheld Assets
|
$
|
37,630,388
|
|
|
100.0
|
%
|
|
$
|
37,385,354
|
|
|
100.0
|
%
|
(1)
|
Carrying value represents the fair value of AFS fixed maturities.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||
Investments by Credit Rating (1)
(U.S. dollars in millions)
|
Carrying
Value
|
|
Percent
of Total
|
|
Carrying
Value
|
|
Percent
of Total
|
||||||
AAA
|
$
|
14,267
|
|
|
45.1
|
%
|
|
$
|
14,242
|
|
|
45.1
|
%
|
AA
|
6,982
|
|
|
22.1
|
%
|
|
7,005
|
|
|
22.3
|
%
|
||
A
|
7,461
|
|
|
23.6
|
%
|
|
7,316
|
|
|
23.2
|
%
|
||
BBB
|
2,244
|
|
|
7.0
|
%
|
|
2,343
|
|
|
7.4
|
%
|
||
BB and below
|
629
|
|
|
2.0
|
%
|
|
577
|
|
|
1.8
|
%
|
||
Not rated
|
81
|
|
|
0.2
|
%
|
|
65
|
|
|
0.2
|
%
|
||
Total
|
$
|
31,664
|
|
|
100.0
|
%
|
|
$
|
31,548
|
|
|
100.0
|
%
|
(1)
|
The credit rating for each asset reflected above was principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (when available). U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflect the credit quality rating of the U.S. government for the purpose of these calculations.
|
•
|
gross unrealized losses of
$86.6 million
related to Government and Government-Related holdings. Securities in a gross unrealized loss position had a fair value of
$1.9 billion
as of
September 30, 2016
.
|
•
|
gross unrealized losses of
$64.8 million
related to Corporate holdings. Securities in a gross unrealized loss position had a fair value of
$1.4 billion
as of
September 30, 2016
.
|
•
|
gross unrealized losses of
$14.6 million
related to Non-Agency RMBS securities (which consists of our holdings of sub-prime Non-Agency RMBS, Alt-A and Prime RMBS). Securities in an unrealized loss position had a fair value of
$180.8 million
as of
September 30, 2016
.
|
(U.S. dollars in thousands)
|
September 30, 2016
|
||||||
Security Type and Length of Time in a Continual Unrealized Loss Position
|
Amount of
Unrealized
Loss
|
|
Fair Value
of Securities in
an Unrealized
Loss Position
|
||||
Fixed Maturities and Short-Term Investments
|
|
|
|
|
|
||
Less than 6 months
|
$
|
(35,706
|
)
|
|
$
|
2,931,902
|
|
At least 6 months but less than 12 months
|
(51,948
|
)
|
|
584,881
|
|
||
At least 12 months but less than 2 years
|
(31,472
|
)
|
|
522,712
|
|
||
2 years and over
|
(61,728
|
)
|
|
573,067
|
|
||
Total
|
$
|
(180,854
|
)
|
|
$
|
4,612,562
|
|
Equities
|
|
|
|
|
|
||
Less than 6 months
|
$
|
(8,121
|
)
|
|
$
|
297,284
|
|
At least 6 months but less than 12 months
|
(1,804
|
)
|
|
12,139
|
|
||
Total
|
$
|
(9,925
|
)
|
|
309,423
|
|
|
September 30, 2016
|
||||||
(U.S. dollars in thousands)
|
Amount of
Unrealized
Loss
|
|
Fair Value
of Securities in
an Unrealized
Loss Position
|
||||
Maturity profile in years of AFS fixed income securities in a gross unrealized loss position
|
|
||||||
Less than 1 year remaining
|
$
|
(25,808
|
)
|
|
$
|
570,799
|
|
At least 1 year but less than 5 years remaining
|
(87,223
|
)
|
|
1,688,965
|
|
||
At least 5 years but less than 10 years remaining
|
(32,307
|
)
|
|
899,624
|
|
||
At least 10 years but less than 20 years remaining
|
(3,605
|
)
|
|
99,683
|
|
||
At least 20 years or more remaining
|
(2,463
|
)
|
|
55,940
|
|
||
RMBS - Agency
|
(2,136
|
)
|
|
446,479
|
|
||
RMBS - Non-Agency
|
(14,584
|
)
|
|
180,791
|
|
||
CMBS
|
(2,666
|
)
|
|
103,546
|
|
||
CDOs
|
(2,677
|
)
|
|
7,220
|
|
||
Other asset-backed securities
|
(7,385
|
)
|
|
559,515
|
|
||
Total
|
$
|
(180,854
|
)
|
|
$
|
4,612,562
|
|
(U.S. dollars in thousands)
|
Total Assets
and Liabilities Carried at Fair Value at September 30, 2016 |
|
Fair Value
of Level 3
Assets and
Liabilities
|
|
Level 3 Assets
and Liabilities
as a Percentage
of Total Assets
and Liabilities
Carried at Fair
Value, by Class
|
|||||
Assets
|
|
|
|
|
|
|
|
|
||
Fixed maturities, at fair value
|
|
|
|
|
|
|
|
|
||
U.S. Government and Government Agency-Related/Supported
|
$
|
3,933,359
|
|
|
$
|
43,650
|
|
|
1.1
|
%
|
Corporate - Financials
|
3,778,344
|
|
|
10,207
|
|
|
0.3
|
%
|
||
Corporate - Non-Financials
|
6,898,869
|
|
|
79
|
|
|
—
|
%
|
||
RMBS – Agency
|
4,591,774
|
|
|
—
|
|
|
—
|
%
|
||
RMBS – Non-Agency
|
285,927
|
|
|
—
|
|
|
—
|
%
|
||
CMBS
|
296,104
|
|
|
101
|
|
|
—
|
%
|
||
CDOs
|
141,281
|
|
|
141,281
|
|
|
100.0
|
%
|
||
Other asset-backed securities
|
973,170
|
|
|
1,130
|
|
|
0.1
|
%
|
||
U.S. States and political subdivisions of the States
|
2,598,854
|
|
|
—
|
|
|
—
|
%
|
||
Non-U.S. Sovereign Government, Supranational and Government-Related
|
5,642,141
|
|
|
—
|
|
|
—
|
%
|
||
Total Fixed maturities, at fair value
|
$
|
29,139,823
|
|
|
$
|
196,448
|
|
|
0.7
|
%
|
Equity securities, at fair value
|
1,038,165
|
|
|
—
|
|
|
—
|
%
|
||
Short-term investments, at fair value
|
652,772
|
|
|
—
|
|
|
—
|
%
|
||
Total investments AFS
|
$
|
30,830,760
|
|
|
$
|
196,448
|
|
|
0.6
|
%
|
Cash equivalents (1)
|
1,730,661
|
|
|
—
|
|
|
—
|
%
|
||
Other investments (2)
|
740,556
|
|
|
212,754
|
|
|
28.7
|
%
|
||
Other assets (3)
|
55,494
|
|
|
18,683
|
|
|
33.7
|
%
|
||
Total assets carried at fair value
|
$
|
33,357,471
|
|
|
$
|
427,885
|
|
|
1.3
|
%
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Financial instruments sold, but not yet purchased (4)
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
Other liabilities (5)
|
43,114
|
|
|
18,640
|
|
|
43.2
|
%
|
||
Total liabilities carried at fair value
|
$
|
43,114
|
|
|
$
|
18,640
|
|
|
43.2
|
%
|
(1)
|
Cash equivalents balances subject to fair value measurements include certificates of deposit and money market funds.
|
(2)
|
Excluded from Other investments balances are
$378.4 million
at
September 30, 2016
measured using Net Asset Value. Based on new accounting guidance, these investments are excluded from the hierarchy table. In addition, the Other investments balance excludes certain structured transactions including certain investments in project finance transactions and a payment obligation that are carried at amortized cost, which totaled
$142.0 million
at
September 30, 2016
. For further information, see Item 8,
Note 8, "Other Investments
," to the Consolidated Financial Statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2015
|
(3)
|
Other assets include derivative instruments, reported on a gross basis.
|
(4)
|
Financial instruments sold, but not yet purchased, are included within "Payable for investments purchased" on the balance sheets.
|
(5)
|
Other liabilities include derivative instruments, reported on a gross basis.
|
(U.S. dollars in thousands)
|
Gross unpaid
losses and
loss
expenses
|
|
Unpaid
losses and
loss
expenses
recoverable
|
|
Net
unpaid losses
and loss
expenses
|
||||||
Balance at December 31, 2015
|
$
|
25,439,744
|
|
|
$
|
(5,248,905
|
)
|
|
$
|
20,190,839
|
|
Losses and loss expenses incurred
|
5,807,953
|
|
|
(1,303,464
|
)
|
|
4,504,489
|
|
|||
Losses and loss expenses (paid) / recovered
|
(4,958,103
|
)
|
|
1,126,457
|
|
|
(3,831,646
|
)
|
|||
Loss reserves acquired
|
139,621
|
|
|
(36,922
|
)
|
|
102,699
|
|
|||
Foreign exchange and other
|
(258,832
|
)
|
|
(7,314
|
)
|
|
(266,146
|
)
|
|||
Balance at September 30, 2016
|
$
|
26,170,383
|
|
|
$
|
(5,470,148
|
)
|
|
$
|
20,700,235
|
|
(U.S. dollars in thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Reinsurance balances receivable
|
$
|
545,264
|
|
|
$
|
439,934
|
|
Reinsurance recoverable on future policy benefits (excluding balances related to the GreyCastle Life Retro Arrangements)
|
11,734
|
|
|
13,801
|
|
||
Reinsurance recoverable on unpaid losses and loss expenses
|
5,526,259
|
|
|
5,309,782
|
|
||
Bad debt reserve on unpaid losses and loss expenses recoverable and reinsurance balances receivable
|
(77,032
|
)
|
|
(82,145
|
)
|
||
Net paid and unpaid losses and loss expenses recoverable and reinsurance balances receivable
|
$
|
6,006,225
|
|
|
$
|
5,681,372
|
|
(U.S. dollars in thousands)
|
September 30, 2016
|
|
September 30, 2015
|
||||
Operating activities
|
$
|
649,611
|
|
|
$
|
509,500
|
|
Investing activities
|
$
|
727,619
|
|
|
$
|
(33,396
|
)
|
Financing activities
|
$
|
(1,228,560
|
)
|
|
$
|
396,912
|
|
Effects of exchange rate changes on foreign currency cash
|
$
|
(11,629
|
)
|
|
$
|
(54,760
|
)
|
•
|
debt;
|
•
|
XL-Cayman and Catlin Insurance Company Ltd. ("Catlin-Bermuda") preference shares;
|
•
|
letter of credit facilities and other sources of collateral; and
|
•
|
revolving credit facilities.
|
▪
|
sufficient capital to maintain our financial strength and credit ratings, as issued by several ratings agencies, at levels considered necessary by management to enable our key operating subsidiaries to compete;
|
▪
|
sufficient capital to enable our regulated subsidiaries to meet the regulatory capital levels required in the United States, the U.K., Bermuda, Ireland, Switzerland and other key markets;
|
▪
|
letters of credit and other forms of collateral that are required to be posted or deposited, as the case may be, by our operating subsidiaries that are "non-admitted" under U.S. state insurance regulations in order for the U.S. cedant to receive statutory credit for reinsurance. We also use letters of credit to support our operations at Lloyd's; and
|
▪
|
revolving credit facilities to meet short-term liquidity needs.
|
▪
|
the credit available from banks may be reduced due to market conditions resulting in our need to pledge our investment portfolio to customers, which could result in a lower investment yield;
|
▪
|
we may be downgraded by one or more rating agencies, which could materially and negatively impact our business, financial condition, results of operations and/or liquidity; and
|
▪
|
the volume of business that our subsidiaries that are not admitted in the United States are able to transact could be reduced if we are unable to obtain letter of credit facilities at an appropriate amount.
|
(U.S. dollars in thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Non-controlling interests - Series D preference ordinary shares of XL-Cayman
|
$
|
345,000
|
|
|
$
|
345,000
|
|
Non-controlling interests - Series E preference ordinary shares of XL-Cayman
|
999,500
|
|
|
999,500
|
|
||
Non-controlling interests - preference shares of Catlin-Bermuda
|
562,285
|
|
|
562,285
|
|
||
Non-controlling interests - Other
|
73,929
|
|
|
70,599
|
|
||
Common share capital
|
11,612,166
|
|
|
11,677,079
|
|
||
Total ordinary shares and non-controlling interests
|
$
|
13,592,880
|
|
|
$
|
13,654,463
|
|
Notes payable and debt
|
2,647,000
|
|
|
2,644,970
|
|
||
Total
|
$
|
16,239,880
|
|
|
$
|
16,299,433
|
|
(U.S. dollars in thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Common shareholders’ equity – beginning of period
|
$
|
11,677,079
|
|
|
$
|
10,033,751
|
|
Net income (loss) attributable to common shareholders
|
136,268
|
|
|
1,207,152
|
|
||
Share buybacks
|
(906,137
|
)
|
|
(468,971
|
)
|
||
Share issuances
|
5,773
|
|
|
1,861,538
|
|
||
Common share dividends
|
(170,172
|
)
|
|
(211,814
|
)
|
||
Change in accumulated other comprehensive income
|
833,189
|
|
|
(797,842
|
)
|
||
Share-based compensation and other
|
36,166
|
|
|
53,265
|
|
||
Common shareholders’ equity – end of period
|
$
|
11,612,166
|
|
|
$
|
11,677,079
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
||||||||||||||||||
(U.S. dollars in thousands)
|
Commitment/
Debt (1)
|
|
In Use/
Outstanding (2)
|
|
Year of
Expiry
|
|
Less than
1 Year
|
|
1 to 3
Years
|
|
3 to 5
Years
|
|
After 5
Years
|
||||||||||||
2.30% Senior Notes
|
300,000
|
|
|
298,518
|
|
|
2018
|
|
—
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
||||||
5.75% Senior Notes
|
400,000
|
|
|
397,846
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400,000
|
|
||||||
6.375% Senior Notes
|
350,000
|
|
|
349,111
|
|
|
2024
|
|
—
|
|
|
—
|
|
|
—
|
|
|
350,000
|
|
||||||
4.45% Subordinated Notes
|
500,000
|
|
|
493,127
|
|
|
2025
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
||||||
6.25% Senior Notes
|
325,000
|
|
|
323,336
|
|
|
2027
|
|
—
|
|
|
—
|
|
|
—
|
|
|
325,000
|
|
||||||
5.25% Senior Notes
|
300,000
|
|
|
296,394
|
|
|
2043
|
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
||||||
5.5% Subordinated Notes
|
500,000
|
|
|
488,668
|
|
|
2045
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
||||||
Total
|
$
|
2,675,000
|
|
|
$
|
2,647,000
|
|
|
|
|
$
|
—
|
|
|
$
|
300,000
|
|
|
$
|
—
|
|
|
$
|
2,375,000
|
|
▪
|
$300 million senior notes due December 2018, with a fixed coupon of 2.30%. The notes are listed on the New York Stock Exchange and are guaranteed by XL-Bermuda. The notes were issued at 99.69% of the face amount and net proceeds were $296.6 million. Related expenses of the offering amounted to $2.5 million.
|
▪
|
$400 million senior notes due October 2021, with a fixed coupon of 5.75%. The notes are listed on the New York Stock Exchange and are guaranteed by XL-Bermuda. The notes were issued at 100.0% of the face amount and net proceeds were $395.7 million. Related expenses of the offering amounted to $4.3 million.
|
▪
|
$350 million senior notes due November 2024, with a fixed coupon of 6.375%. The notes are publicly traded. The notes were issued at 100.0% of the face amount and net proceeds were $347.8 million. Related expenses of the offering amounted to $2.2 million.
|
▪
|
$500 million subordinated notes due March 2025, with a fixed coupon of 4.45%. The notes are listed on the New York Stock Exchange and are guaranteed by XL-Bermuda. The notes were issued at
99.633%
of the face amount and net proceeds were
$492.2 million
. Related expenses of the offering amounted to
$5.9 million
.
|
▪
|
$325 million senior notes due May 2027, with a fixed coupon of 6.25%. The notes are publicly traded. The notes were issued at 99.805% of the face amount and net proceeds were $321.9 million. Related expenses of the offering amounted to $2.5 million.
|
▪
|
$300 million senior notes due December 2043, with a fixed coupon of 5.25%. The notes are listed on the New York Stock Exchange and are guaranteed by XL-Bermuda. The notes were issued at 99.77% of the face amount and net proceeds were $296.0 million. Related expenses of the offering amounted to $3.3 million.
|
▪
|
$500 million subordinated notes due March 2045, with a fixed coupon of 5.5%. The notes are listed on the New York Stock Exchange and are guaranteed by XL-Bermuda. The notes were issued at
99.115%
of the face amount and net proceeds were
$488.4 million
. Related expenses of the offering amounted to
$7.2 million
.
|
(U.S. dollars in thousands)
|
|
|
|
|
|
|
Amount of Commitment Expiration by Period
|
||||||||||||||||||
Facility Name (1)
|
Commitment/
Debt |
|
In Use/
Outstanding |
|
Year of
Expiry |
|
Less than
1 Year |
|
1 to 3
Years |
|
3 to 5
Years |
|
After 5
Years |
||||||||||||
2013 Citi Facility
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
2016
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2015 Citi Facility
|
250,000
|
|
|
245,000
|
|
|
2017
|
|
—
|
|
|
250,000
|
|
|
—
|
|
|
—
|
|
||||||
Goldman Facility
|
200,000
|
|
|
200,000
|
|
|
2017
|
|
—
|
|
|
200,000
|
|
|
—
|
|
|
—
|
|
||||||
FAL Facility I
|
125,000
|
|
|
125,000
|
|
|
2019
|
|
—
|
|
|
—
|
|
|
125,000
|
|
|
—
|
|
||||||
FAL Facility II
|
125,000
|
|
|
125,000
|
|
|
2019
|
|
—
|
|
|
—
|
|
|
125,000
|
|
|
—
|
|
||||||
FAL Facility III
|
125,000
|
|
|
125,000
|
|
|
2019
|
|
—
|
|
|
—
|
|
|
125,000
|
|
|
—
|
|
||||||
FAL Facility IV
|
125,000
|
|
|
125,000
|
|
|
2019
|
|
—
|
|
|
—
|
|
|
125,000
|
|
|
—
|
|
||||||
Syndicated Unsecured Facility
|
750,000
|
|
|
156,515
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
750,000
|
|
|
—
|
|
||||||
Syndicated Secured Facility
|
750,000
|
|
|
661,863
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
750,000
|
|
|
—
|
|
||||||
CICL Facility
|
230,000
|
|
|
158,231
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
230,000
|
|
||||||
Citi EU Facility
|
600,000
|
|
|
90,423
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
600,000
|
|
||||||
London Market Facility
|
250,000
|
|
|
118,551
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250,000
|
|
||||||
ING Facility
|
150,000
|
|
|
47,000
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
||||||
CRCH Facility
|
200,000
|
|
|
192,997
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
||||||
Syndicate 2003 Facility
|
11,806
|
|
|
11,806
|
|
|
Continuous
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,806
|
|
||||||
Total LOC facilities (2)
|
$
|
3,991,806
|
|
|
$
|
2,482,386
|
|
|
|
|
$
|
100,000
|
|
|
$
|
450,000
|
|
|
$
|
2,000,000
|
|
|
$
|
1,441,806
|
|
(1)
|
Terms used in this table are defined in the discussion below.
|
(2)
|
As of
September 30, 2016
, the portion of the total credit facilities permitted to be utilized for revolving loans was
$1.1 billion
. However,
$501.5 million
of this allowable portion was utilized to issue letters of credit, leaving
$598.5 million
available either to issue additional letters of credit or to support other operating or financing needs under these particular facilities.
|
•
|
A bilateral facility pursuant to a continuous credit agreement, available for utilization by Catlin-Bermuda, collateralized by pledged financial assets (the "CICL Facility"). As of
September 30, 2016
, $230 million of capacity was available under this facility.
|
•
|
A bilateral facility pursuant to a continuous credit agreement, available for utilization by Catlin Re Switzerland Ltd ("CRCH"), collateralized by pledged financial assets (the "CRCH Facility"). As of
September 30, 2016
,
$200 million
of capacity was available under this facility.
|
•
|
A facility managed by Lloyd's, acting for Catlin Syndicate 2003 (the "Syndicate 2003 Facility"). As of
September 30, 2016
,
$12 million
of letters of credit were issued under this facility.
|
ITEM 3.
|
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
(Foreign currency in millions)
|
September 30, 2016
|
|
December 31, 2015
|
||
Euro
|
81.4
|
|
|
25.6
|
|
British Pound Sterling
|
(23.3
|
)
|
|
(34.6
|
)
|
Swiss Franc
|
(3.7
|
)
|
|
(11.5
|
)
|
Canadian dollar
|
167.9
|
|
|
293.9
|
|
Top 5 Sector Exposures (1)
(U.S. dollars in millions)
|
|
Carrying Value
|
|
Percentage of
Aggregate
Fixed Income
Portfolio
|
|||
Financials
|
|
$
|
3,784.0
|
|
|
12.0
|
%
|
Consumer, non-Cyclical
|
|
1,819.0
|
|
|
5.7
|
%
|
|
Industrial
|
|
951.0
|
|
|
3.0
|
%
|
|
Consumer, Cyclical
|
|
923.0
|
|
|
2.9
|
%
|
|
Utilities
|
|
865.0
|
|
|
2.7
|
%
|
|
Total
|
|
$
|
8,342.0
|
|
|
26.3
|
%
|
(1)
|
Government-guaranteed securities and Covered Bonds have been excluded from the above figures.
|
(U.S. dollars in millions)
|
Carrying Value
|
|
Percentage of
Structured Portfolio
|
|||
RMBS - Agency
|
$
|
4,591.8
|
|
|
73.0
|
%
|
RMBS - Non-Agency
|
285.9
|
|
|
4.5
|
%
|
|
CMBS
|
296.1
|
|
|
4.7
|
%
|
|
Core CDOs (non-ABS CDOs and CLOs)
|
141.3
|
|
|
2.2
|
%
|
|
Other ABS (1)
|
973.2
|
|
|
15.6
|
%
|
|
Total
|
$
|
6,288.3
|
|
|
100.0
|
%
|
(1)
|
Includes Covered Bonds.
|
(U.S. dollars in millions)
|
Interest
Rate
Risk (1)
|
|
Equity
Risk
(2)
|
|
Absolute
Spread
Risk (3)
|
|
Relative
Spread
Risk (4)
|
|
VaR
(5) (6)
|
||||||||||
Total Investment Portfolio (7)
|
$
|
(1,164.8
|
)
|
|
$
|
(230.8
|
)
|
|
$
|
(1,013.2
|
)
|
|
$
|
(65.5
|
)
|
|
$
|
953.8
|
|
(I) Fixed Income Portfolio
|
(1,161.3
|
)
|
|
—
|
|
|
(1,009.6
|
)
|
|
(64.9
|
)
|
|
801.7
|
|
|||||
(a) Cash & Short Term Investments
|
(13.7
|
)
|
|
—
|
|
|
(9.0
|
)
|
|
(0.5
|
)
|
|
6.3
|
|
|||||
(b) Total Government Related
|
(536.2
|
)
|
|
—
|
|
|
(293.4
|
)
|
|
(7.9
|
)
|
|
371.7
|
|
|||||
(c) Total Corporate Credit
|
(400.0
|
)
|
|
—
|
|
|
(447.0
|
)
|
|
(42.9
|
)
|
|
304.0
|
|
|||||
(d) Total Structured Credit
|
(211.5
|
)
|
|
—
|
|
|
(260.2
|
)
|
|
(13.5
|
)
|
|
144.3
|
|
|||||
(II) Non-Fixed Income Portfolio
|
—
|
|
|
(230.8
|
)
|
|
—
|
|
|
—
|
|
|
435.1
|
|
|||||
(e) Equity Portfolio
|
—
|
|
|
(80.6
|
)
|
|
—
|
|
|
—
|
|
|
157.2
|
|
|||||
(f) Hedge Fund Portfolio
|
—
|
|
|
(60.5
|
)
|
|
—
|
|
|
—
|
|
|
153.6
|
|
|||||
(g) Private Investments
|
—
|
|
|
(89.6
|
)
|
|
—
|
|
|
—
|
|
|
135.8
|
|
(1)
|
The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 bps adverse parallel shift in global bond curves.
|
(2)
|
The estimated impact on the fair value of our investment portfolio of an immediate hypothetical -10% change in the value of equity exposures in our equity portfolio, certain equity-sensitive hedge fund investments and private equity investments. This includes our estimate of equity risk embedded in the hedge fund and private investment portfolios with such estimates utilizing market exposures provided to us by certain individual fund investments, internal statistical analyses, and/or various assumptions regarding illiquidity and concentrations.
|
(3)
|
The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 basis point increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our hedge fund investments, private investments and counterparty exposure.
|
(4)
|
The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +10% increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our hedge fund investments, private investments and counterparty exposure.
|
(5)
|
The VaR results are based on a 95% confidence interval, with a one-year holding period, excluding foreign exchange rate risk. Our investment portfolio VaR as of
September 30, 2016
is not necessarily indicative of future VaR levels as these are based on statistical estimates of possible price changes and, therefore, exclude other sources of investment return such as coupon and dividend income.
|
(6)
|
The VaR results are the standalone VaRs, based on the prescribed methodology, for each component of our Total Investment Portfolio. The standalone VaRs of the individual components are non-additive, with the difference between the summation of the individual component VaRs and their respective aggregations being due to diversification benefits across the individual components. In the case of the VaR results for our Total Investment Portfolio, the results also include the impact associated with our Business and Other investments.
|
(7)
|
Our Total Investment Portfolio also includes our Business and Other investments that do not form part of our Fixed Income Portfolio or Non-Fixed Income Portfolio. The individual results reported in the above table for our Total Investment Portfolio therefore represent the aggregate impact on our Fixed Income Portfolio, Non-Fixed Income Portfolio and the majority of our Other investments.
|
ITEM 4.
|
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
|
RISK FACTORS
|
•
|
Slow growth in the U.K., the E.U., or globally for the foreseeable future. Such slowing could exacerbate the pressure on pricing of our products, among other impacts.
|
•
|
Creation of a prolonged low interest rate environment, which may affect our profitability, cost structure, overall return on equity and solvency position.
|
•
|
Heightened and extended market volatility and currency exchange fluctuations, which could impact our mark to market exposure on net asset values or weaken returns in our investment portfolio due to spread tightening, weakness in equity markets, higher default rates and market illiquidity. Due to the interconnectedness of the E.U. and the global financial system in general, shocks from Brexit could spawn financial contagion across global markets.
|
•
|
Individual countries may not be incentivized to negotiate a solution for certain issues that will be as favorable to the U.K. as today’s arrangements, thereby adding to the uncertainty and reducing the profitability of our U.K. and European operations. Due to the potential for less cross country cooperation, our industry may be facing a less liberal trading regime in the future which could take the form of tariffs or other protectionist measures.
|
•
|
Potential longer term inflationary pressures in the U.K. arising from the devaluation of the British Pound Sterling after the vote, which could adversely affect the carrying value of certain of our liabilities.
|
•
|
Brexit exacerbates the potential for additional referendums within the U.K., such as Scotland, which could lead to a breakup of the U.K.
|
•
|
Increased costs of doing business in the U.K., which may include additional capital requirements, including as a result of new and/or additional laws and regulations across a wide variety of areas potentially including, but not limited to, labor laws, data privacy laws, taxation laws and, more generally, the terms of commercial activities between the U.K. and the E.U. Increased costs and capital requirements may also result from the U.K. no longer being part of the Solvency II regime.
|
•
|
The potential for further unwinding of the E.U., as other European countries may seek to conduct referenda with respect to their continuing membership with the E.U. A breakup of the E.U. would further reduce passporting benefits, potentially causing us to establish legal entities and/or branches in more countries in order to write business in those countries. This in turn may create the potential for more strained capital and reductions in capital surpluses and additional expense overhead, talent shortages, greater operational complexity and more onerous and duplicative requirements from individual country regulators. In connection with such an unwinding, exiting countries also may seek to redenominate their currencies, which could have a significant impact on our foreign exchange hedging activity and our results of operations and financial condition.
|
ITEM 2.
|
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number
of Shares
Purchased(1)
|
|
Average
Price Paid
per Share
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Approximate Dollar
Value of Shares
that May Yet Be
Purchased
Under the Plans or
Programs (1) (2)
|
||||||
July 1, 2016 to July 31, 2016
|
1,907,500
|
|
|
$
|
32.54
|
|
|
1,907,500
|
|
|
$
|
753.8
|
million
|
August 1, 2016 to August 31, 2016
|
2,023,139
|
|
|
33.69
|
|
|
2,023,139
|
|
|
685.6
|
million
|
||
September 1, 2016 to September 30, 2016
|
2,664,611
|
|
|
34.32
|
|
|
2,664,611
|
|
|
594.1
|
million
|
||
|
6,595,250
|
|
|
$
|
33.61
|
|
|
6,595,250
|
|
|
$
|
594.1
|
million
|
(1)
|
Shares purchased in connection with the vesting of restricted shares granted under our restricted stock plan do not represent shares purchased as part of publicly announced plans or programs. All such purchases were made in connection with satisfying tax withholding obligations of those employees.
|
(2)
|
For information regarding our share buyback activity see Part I, Item 1,
Note 9, "Share Capital
," to the Unaudited Consolidated Financial Statements included herein.
|
ITEM 5.
|
|
OTHER INFORMATION
|
4.3
|
|
Fourth Supplemental Indenture, dated as of August 3, 2016, among XL Group Ltd, (XL Group plc (In Solvent Member’s Voluntary Liquidation), XLIT Ltd. and Wells Fargo Bank, National Association, as Trustee, to the Senior Debt Securities Indenture dated as of September 30, 2011, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 9, 2016
|
|
|
|
4.4
|
|
Second Supplemental Indenture, dated as of July 25, 2016, among XL Group Ltd, XL Group plc, XLIT Ltd. and Wells Fargo Bank, National Association, as Trustee, to the Subordinated Debt Securities Indenture dated as of March 30, 2015, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K12B (No. 1-10804) filed on July 25, 2016
|
|
|
|
4.5
|
|
Third Supplemental Indenture, dated as of August 3, 2016, among XL Group Ltd, XL Group plc (In Solvent Member's Voluntary Liquidation), XLIT Ltd. and Wells Fargo Bank, National Association, as Trustee, to the Subordinated Debt Securities Indenture dated as of March 30, 2015, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (No. 1-10804), filed on August 9, 2016
|
|
|
|
10.1
|
|
Form of Bermuda Indemnification Agreement between XL Group Ltd and each of the directors of and the corporate secretary of XL Group Ltd, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K12B (No. 1-10804) filed on July 25, 2016
|
|
|
|
10.2
|
|
First Supplement to the Deed Poll of XLIT Ltd., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K12B (No. 1-10804) filed on July 25, 2016
|
|
|
|
10.3
|
|
Secured Credit Agreement, dated as of August 5, 2016, between XL Group Ltd, XLIT Ltd., X.L. America, Inc., XL Bermuda Ltd, XL Re Europe SE, XL Insurance Company SE, XL Life Ltd, Catlin Insurance Company (UK) Ltd., and Catlin Re Switzerland Ltd., as Account Parties, XL Group Ltd, XLIT Ltd., X.L. America, Inc., XL Bermuda Ltd and XL Life Ltd, as Guarantors, the Lenders party thereto, Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent, and the Bank of New York Mellon, as Collateral Agent, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 9, 2016
|
|
|
|
10.4
|
|
Unsecured Credit Agreement, dated as of August 5, 2016, between XL Group Ltd, XLIT Ltd., X.L. America, Inc., XL Bermuda Ltd, XL Re Europe SE, XL Insurance Company SE, XL Life Ltd, Catlin Insurance Company (UK) Ltd., Catlin Re Switzerland Ltd., and Catlin Underwriting Agencies Limited, as Account Parties, XL Group Ltd, XLIT Ltd., X.L. America, Inc., XL Bermuda Ltd and XL Life Ltd, as Guarantors, the Lenders party thereto, and Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 9, 2016
|
|
|
|
10.5
|
|
Pledge Agreement, dated as of August 5, 2016, between XL Group Ltd, XLIT Ltd., X.L. America, Inc., XL Bermuda Ltd, XL Re Europe SE, XL Insurance Company SE, XL Life Ltd, Catlin Insurance Company (UK) Ltd., and Catlin Re Switzerland Ltd., as Pledgors, Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent, and the Bank of New York Mellon, as Collateral Agent, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 9, 2016
|
|
|
|
10.6
|
|
Amendment to the XL Group plc 1991 Performance Incentive Program, effective July 25, 2016, incorporated by reference to Exhibit 4.6 to the Company’s Post-Effective Amendment No.2 to the Registration Statement on Form S-8 (No. 333-62137) filed on July 25, 2016
|
|
|
|
10.7
|
|
Amendment to the XL Group plc Directors Stock & Option Plan, effective July 25, 2016, incorporate by reference to Exhibit 4.7 to the Company’s Post-Effective Amendment No.2 to the Registration Statement on Form S-8 (No. 333-62137) filed on July 25, 2016
|
|
|
|
10.8*
|
|
Amendment to XL Group plc Supplemental Deferred Compensation Plan, effective August 3, 2016
|
|
|
|
10.9*
|
|
Amendment to XL Group plc Reinsurance Supplemental Long Term Cash Incentive Compensation Plan, effective August 3, 2016
|
|
|
|
10.10*
|
|
Amendment to XL Group plc Executive Severance Benefit Plan, effective August 3, 2016
|
|
|
|
12*
|
|
Statements regarding computation of ratios
|
|
|
|
31*
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
32*
|
|
Section 1350 Certification
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*
|
Filed herewith.
|
Date:
|
November 4, 2016
|
|
|
|
XL Group Ltd
|
|
|
(Registrant)
|
|
|
/s/ MICHAEL S. MCGAVICK
|
|
|
|
|
|
|
|
|
Name: Michael S. McGavick
|
|
|
Title: Chief Executive Officer and Director
|
|
|
XL Group Ltd
|
|
|
|
Date:
|
November 4, 2016
|
|
|
|
/s/ PETER R. PORRINO
|
|
|
|
|
|
|
|
|
Name: Peter R. Porrino
|
|
|
Title: Executive Vice President and Chief Financial Officer
|
|
|
XL Group Ltd
|
1.
|
THAT, the title of the Plan shall be the “XL Group Ltd Supplemental Deferred Compensation Plan.”
|
2.
|
THAT, the Plan shall be amended such that each occurrence of the term “XL Group plc” shall instead refer to “XL Group Ltd”.
|
3.
|
THAT, the definition of “Company” in Article I, Paragraph 10 of the Plan shall be amended to read in its entirety as follows:
|
4.
|
THAT, subsection (a) of the definition of “Change in Control” in Article I, Paragraph 8 of the Plan shall be amended to read in its entirety as follows:
|
5.
|
THAT, the definition of “Participating Employer” in Article I, Paragraph 22 of the Plan shall be amended to read in its entirety as follows:
|
6.
|
THAT, the foregoing amendments shall become effective, and shall be conditioned, upon the consummation of the Redomestication.
|
7.
|
THAT, except as expressly amended hereby, the Plan remains in full force and effect.
|
1.
|
THAT, the title of the Plan shall be the “XL Group Ltd Reinsurance Supplemental Long Term Cash Incentive Compensation Plan.”
|
2.
|
THAT, the Plan shall be amended such that each occurrence of the term “XL Group plc” shall instead refer to “XL Group Ltd”.
|
3.
|
THAT, the definition of “Company” in Section 2 of the Plan shall be amended to read in its entirety as follows:
|
4.
|
THAT, the definition of “Change in Control” in Section 2 of the Plan shall be amended to read in its entirety as follows:
|
5.
|
THAT, the foregoing amendments shall become effective, and shall be conditioned, upon the consummation of the Redomestication.
|
6.
|
THAT, except as expressly amended hereby, the Plan remains in full force and effect.
|
1.
|
THAT, the title of the Plan shall be the “XL Group Ltd Executive Severance Benefit Plan.”
|
2.
|
THAT, the Plan shall be amended such that each occurrence of the term “XL Group plc” shall instead refer to “XL Group Ltd”.
|
3.
|
THAT, the foregoing amendments shall become effective, and shall be conditioned, upon the consummation of the Redomestication.
|
4.
|
THAT, except as expressly amended hereby, the Plan remains in full force and effect.
|
|
Nine Months Ended
|
||||||
(U.S. dollars in thousands, except ratios)
|
2016
|
|
2015
|
||||
Earnings:
|
|
|
|
||||
Pre-tax income (loss) from continuing operations
|
$
|
235,808
|
|
|
$
|
995,578
|
|
Fixed charges
|
293,087
|
|
|
262,096
|
|
||
Distributed income of equity investees
|
74,133
|
|
|
647,079
|
|
||
Subtotal
|
$
|
603,028
|
|
|
$
|
1,904,753
|
|
Less: Non-controlling interests
|
5,916
|
|
|
4,482
|
|
||
Preference share dividends
|
118,347
|
|
|
95,676
|
|
||
Total earnings (loss)
|
$
|
478,765
|
|
|
$
|
1,804,595
|
|
|
|
|
|
||||
Fixed charges:
|
|
|
|
||||
Interest costs
|
$
|
128,371
|
|
|
$
|
121,317
|
|
Accretion of deposit liabilities
|
29,115
|
|
|
31,717
|
|
||
Rental expense at 30% (1)
|
17,254
|
|
|
13,386
|
|
||
Total fixed charges
|
$
|
174,740
|
|
|
$
|
166,420
|
|
Preference share dividends
|
118,347
|
|
|
95,676
|
|
||
Total fixed charges and preference dividends
|
$
|
293,087
|
|
|
$
|
262,096
|
|
|
|
|
|
||||
Ratio of earnings to fixed charges
|
2.7
|
|
|
10.8
|
|
||
|
|
|
|
||||
Ratio of earnings to combined fixed charges and preference dividends
|
1.6
|
|
|
6.9
|
|
||
|
|
|
|
||||
Deficiency - fixed charges only
|
N/A
|
|
|
N/A
|
|
||
|
|
|
|
||||
Deficiency - fixed charges and preference dividends
|
N/A
|
|
|
N/A
|
|
(1)
|
30% represents a reasonable approximation of the interest factor.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of XL Group Ltd;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated:
|
November 4, 2016
|
|
|
|
|
|
|
/s/ MICHAEL S. MCGAVICK
|
|
|
|
|
|
|
|
|
Michael S. McGavick
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of XL Group Ltd;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated:
|
November 4, 2016
|
|
|
|
|
|
|
/s/ PETER R. PORRINO
|
|
|
|
|
|
|
|
|
Peter R. Porrino
|
|
|
Executive Vice President and
|
|
|
Chief Financial Officer
|
|
Dated:
|
November 4, 2016
|
|
|
|
|
/s/ MICHAEL S. MCGAVICK
|
|
|
|
|
|
|
|
|
Michael S. McGavick
|
|
|
Chief Executive Officer
|
|
|
XL Group Ltd
|
|
|
|
|
|
Dated:
|
November 4, 2016
|
|
|
|
|
/s/ PETER R. PORRINO
|
|
|
|
|
|
|
|
|
Peter R. Porrino
|
|
|
Executive Vice President and
|
|
|
Chief Financial Officer
|
|
|
XL Group Ltd
|