x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the period ended June 30, 2013
|
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Large accelerated filer
x
|
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Page No.
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PART I. Financial Information
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Item 1 — Consolidated Financial Statements
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June 30, 2013 (unaudited) and December 31, 2012
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For the three and six month periods ended June 30, 2013 and 2012 (unaudited)
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For the three and six month periods ended June 30, 2013 and 2012 (unaudited)
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For the six month periods ended June 30, 2013 and 2012 (unaudited)
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For the six month periods ended June 30, 2013 and 2012 (unaudited)
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|||||||
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(Unaudited)
|
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|
||||
|
June 30,
2013 |
|
December 31,
2012 |
||||
Assets
|
|
|
|
|
|
||
Investments:
|
|
|
|
|
|
||
Fixed maturities available for sale, at fair value (amortized cost: $9,619,842 and $9,567,290)
|
$
|
9,570,583
|
|
|
$
|
9,839,988
|
|
Short-term investments available for sale, at fair value (amortized cost: $1,095,497 and $719,848)
|
1,091,032
|
|
|
722,121
|
|
||
Investment of funds received under securities lending, at fair value (amortized cost: $39,079 and $42,302)
|
41,062
|
|
|
42,531
|
|
||
Equity securities available for sale, at fair value (cost: $410,219 and $298,414)
|
438,038
|
|
|
312,749
|
|
||
Other investments available for sale, at fair value (cost: $555,422 and $519,955)
|
569,407
|
|
|
549,280
|
|
||
Investments accounted for using the fair value option
|
1,065,684
|
|
|
917,466
|
|
||
Investments accounted for using the equity method
|
208,796
|
|
|
307,105
|
|
||
Total investments
|
12,984,602
|
|
|
12,691,240
|
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||
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|
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|
||||
Cash
|
375,119
|
|
|
371,041
|
|
||
Accrued investment income
|
68,413
|
|
|
71,748
|
|
||
Investment in joint venture (cost: $100,000)
|
108,710
|
|
|
107,284
|
|
||
Fixed maturities and short-term investments pledged under securities lending, at fair value
|
47,763
|
|
|
50,848
|
|
||
Premiums receivable
|
876,989
|
|
|
688,873
|
|
||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
1,849,891
|
|
|
1,870,037
|
|
||
Contractholder receivables
|
947,887
|
|
|
865,728
|
|
||
Prepaid reinsurance premiums
|
330,854
|
|
|
298,484
|
|
||
Deferred acquisition costs, net
|
313,010
|
|
|
262,822
|
|
||
Receivable for securities sold
|
447,545
|
|
|
19,248
|
|
||
Other assets
|
566,900
|
|
|
519,409
|
|
||
Total Assets
|
$
|
18,917,683
|
|
|
$
|
17,816,762
|
|
|
|
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|
||||
Liabilities
|
|
|
|
|
|
||
Reserve for losses and loss adjustment expenses
|
$
|
8,808,594
|
|
|
$
|
8,933,292
|
|
Unearned premiums
|
1,921,849
|
|
|
1,647,978
|
|
||
Reinsurance balances payable
|
210,113
|
|
|
188,546
|
|
||
Contractholder payables
|
947,887
|
|
|
865,728
|
|
||
Senior notes
|
300,000
|
|
|
300,000
|
|
||
Revolving credit agreement borrowings
|
100,000
|
|
|
100,000
|
|
||
Securities lending payable
|
49,135
|
|
|
52,356
|
|
||
Payable for securities purchased
|
853,156
|
|
|
37,788
|
|
||
Other liabilities
|
492,631
|
|
|
522,196
|
|
||
Total Liabilities
|
13,683,365
|
|
|
12,647,884
|
|
||
|
|
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|
||||
Commitments and Contingencies
|
|
|
|
|
|
||
|
|
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|
||||
Shareholders’ Equity
|
|
|
|
|
|
||
Non-cumulative preferred shares
|
325,000
|
|
|
325,000
|
|
||
Common shares ($0.0033 par, shares issued: 169,245,371 and 168,255,572)
|
564
|
|
|
561
|
|
||
Additional paid-in capital
|
272,955
|
|
|
227,778
|
|
||
Retained earnings
|
5,776,808
|
|
|
5,354,361
|
|
||
Accumulated other comprehensive income (loss), net of deferred income tax
|
(49,322
|
)
|
|
287,017
|
|
||
Common shares held in treasury, at cost (shares: 35,828,952 and 34,412,959)
|
(1,091,687
|
)
|
|
(1,025,839
|
)
|
||
Total Shareholders' Equity
|
5,234,318
|
|
|
5,168,878
|
|
||
Total Liabilities and Shareholders' Equity
|
$
|
18,917,683
|
|
|
$
|
17,816,762
|
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data)
|
|||||||||||||||
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net premiums written
|
$
|
810,535
|
|
|
$
|
820,233
|
|
|
$
|
1,763,311
|
|
|
$
|
1,683,844
|
|
Change in unearned premiums
|
(51,719
|
)
|
|
(93,577
|
)
|
|
(251,725
|
)
|
|
(276,876
|
)
|
||||
Net premiums earned
|
758,816
|
|
|
726,656
|
|
|
1,511,586
|
|
|
1,406,968
|
|
||||
Net investment income
|
68,369
|
|
|
73,608
|
|
|
134,041
|
|
|
147,905
|
|
||||
Net realized gains
|
12,652
|
|
|
34,867
|
|
|
70,992
|
|
|
78,988
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other-than-temporary impairment losses
|
(724
|
)
|
|
(2,454
|
)
|
|
(2,972
|
)
|
|
(3,485
|
)
|
||||
Less investment impairments recognized in other comprehensive income, before taxes
|
—
|
|
|
503
|
|
|
2
|
|
|
511
|
|
||||
Net impairment losses recognized in earnings
|
(724
|
)
|
|
(1,951
|
)
|
|
(2,970
|
)
|
|
(2,974
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Fee income
|
902
|
|
|
806
|
|
|
1,440
|
|
|
1,349
|
|
||||
Equity in net income of investment funds accounted for using the equity method
|
10,941
|
|
|
7,787
|
|
|
24,764
|
|
|
32,613
|
|
||||
Other income (loss)
|
834
|
|
|
695
|
|
|
2,078
|
|
|
(7,373
|
)
|
||||
Total revenues
|
851,790
|
|
|
842,468
|
|
|
1,741,931
|
|
|
1,657,476
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and loss adjustment expenses
|
418,653
|
|
|
399,693
|
|
|
818,056
|
|
|
794,900
|
|
||||
Acquisition expenses
|
131,677
|
|
|
128,289
|
|
|
259,269
|
|
|
247,251
|
|
||||
Other operating expenses
|
127,408
|
|
|
117,701
|
|
|
247,591
|
|
|
224,173
|
|
||||
Interest expense
|
5,852
|
|
|
7,439
|
|
|
11,750
|
|
|
14,960
|
|
||||
Net foreign exchange gains
|
(13,811
|
)
|
|
(31,689
|
)
|
|
(38,075
|
)
|
|
(11,001
|
)
|
||||
Total expenses
|
669,779
|
|
|
621,433
|
|
|
1,298,591
|
|
|
1,270,283
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
182,011
|
|
|
221,035
|
|
|
443,340
|
|
|
387,193
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income tax expense
|
5,071
|
|
|
767
|
|
|
9,924
|
|
|
2,669
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income
|
176,940
|
|
|
220,268
|
|
|
433,416
|
|
|
384,524
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Preferred dividends
|
5,485
|
|
|
7,649
|
|
|
10,969
|
|
|
14,110
|
|
||||
Loss on repurchase of preferred shares
|
—
|
|
|
10,612
|
|
|
—
|
|
|
10,612
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income available to common shareholders
|
$
|
171,455
|
|
|
$
|
202,007
|
|
|
$
|
422,447
|
|
|
$
|
359,802
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
1.31
|
|
|
$
|
1.50
|
|
|
$
|
3.22
|
|
|
$
|
2.68
|
|
Diluted
|
$
|
1.26
|
|
|
$
|
1.46
|
|
|
$
|
3.11
|
|
|
$
|
2.61
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares and common share equivalents outstanding
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
131,377,274
|
|
|
134,529,129
|
|
|
131,143,885
|
|
|
134,241,876
|
|
||||
Diluted
|
135,849,050
|
|
|
138,211,736
|
|
|
135,624,226
|
|
|
138,017,490
|
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in thousands)
|
|||||||||||||||
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
||||||
Net income
|
$
|
176,940
|
|
|
$
|
220,268
|
|
|
$
|
433,416
|
|
|
$
|
384,524
|
|
Other comprehensive income, net of deferred income tax
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
(259,562
|
)
|
|
18,060
|
|
|
(250,091
|
)
|
|
112,923
|
|
||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax
|
—
|
|
|
(503
|
)
|
|
(2
|
)
|
|
(511
|
)
|
||||
Reclassification of net realized gains, net of income taxes, included in net income
|
(13,916
|
)
|
|
(43,792
|
)
|
|
(52,617
|
)
|
|
(71,303
|
)
|
||||
Foreign currency translation adjustments, net of deferred income tax
|
(5,407
|
)
|
|
(15,136
|
)
|
|
(33,629
|
)
|
|
(1,935
|
)
|
||||
Other comprehensive income (loss)
|
(278,885
|
)
|
|
(41,371
|
)
|
|
(336,339
|
)
|
|
39,174
|
|
||||
Comprehensive Income (Loss)
|
$
|
(101,945
|
)
|
|
$
|
178,897
|
|
|
$
|
97,077
|
|
|
$
|
423,698
|
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands)
|
|||||||
|
(Unaudited)
|
||||||
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2013
|
|
2012
|
||||
Non-Cumulative Preferred Shares
|
|
|
|
|
|
||
Balance at beginning of year
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Shares issued - Series C
|
—
|
|
|
325,000
|
|
||
Shares repurchased - Series A and B
|
—
|
|
|
(325,000
|
)
|
||
Balance at end of period
|
325,000
|
|
|
325,000
|
|
||
|
|
|
|
||||
Common Shares
|
|
|
|
|
|
||
Balance at beginning of year
|
561
|
|
|
549
|
|
||
Common shares issued, net
|
3
|
|
|
7
|
|
||
Balance at end of period
|
564
|
|
|
556
|
|
||
|
|
|
|
||||
Additional Paid-in Capital
|
|
|
|
|
|
||
Balance at beginning of year
|
227,778
|
|
|
161,419
|
|
||
Common shares issued, net
|
5,362
|
|
|
4,553
|
|
||
Issue costs on Series C preferred shares
|
—
|
|
|
(9,398
|
)
|
||
Reversal of issue costs on repurchase of preferred shares
|
—
|
|
|
10,612
|
|
||
Exercise of stock options
|
6,022
|
|
|
4,822
|
|
||
Amortization of share-based compensation
|
31,466
|
|
|
23,930
|
|
||
Other
|
2,327
|
|
|
1,687
|
|
||
Balance at end of period
|
272,955
|
|
|
197,625
|
|
||
|
|
|
|
||||
Retained Earnings
|
|
|
|
|
|
||
Balance at beginning of year
|
5,354,361
|
|
|
4,796,655
|
|
||
Net income
|
433,416
|
|
|
384,524
|
|
||
Dividends declared on preferred shares
|
(10,969
|
)
|
|
(14,110
|
)
|
||
Loss on repurchase of preferred shares
|
—
|
|
|
(10,612
|
)
|
||
Balance at end of period
|
5,776,808
|
|
|
5,156,457
|
|
||
|
|
|
|
||||
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
||
Balance at beginning of year
|
287,017
|
|
|
153,923
|
|
||
Change in unrealized appreciation (decline) in value of investments, net of deferred income tax
|
(302,708
|
)
|
|
41,620
|
|
||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax
|
(2
|
)
|
|
(511
|
)
|
||
Foreign currency translation adjustments, net of deferred income tax
|
(33,629
|
)
|
|
(1,935
|
)
|
||
Balance at end of period
|
(49,322
|
)
|
|
193,097
|
|
||
|
|
|
|
||||
Common Shares Held in Treasury, at Cost
|
|
|
|
|
|
||
Balance at beginning of year
|
(1,025,839
|
)
|
|
(845,472
|
)
|
||
Shares repurchased for treasury
|
(65,848
|
)
|
|
(6,947
|
)
|
||
Balance at end of period
|
(1,091,687
|
)
|
|
(852,419
|
)
|
||
|
|
|
|
||||
Total Shareholders’ Equity
|
$
|
5,234,318
|
|
|
$
|
5,020,316
|
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
|
|||||||
|
(Unaudited)
|
||||||
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2013
|
|
2012
|
||||
Operating Activities
|
|
|
|
|
|
||
Net income
|
$
|
433,416
|
|
|
$
|
384,524
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Net realized gains
|
(73,611
|
)
|
|
(80,753
|
)
|
||
Net impairment losses recognized in earnings
|
2,970
|
|
|
2,974
|
|
||
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss
|
37,493
|
|
|
(18,141
|
)
|
||
Share-based compensation
|
31,466
|
|
|
23,930
|
|
||
Changes in:
|
|
|
|
|
|
||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable
|
(33,163
|
)
|
|
107,670
|
|
||
Unearned premiums, net of prepaid reinsurance premiums
|
251,724
|
|
|
276,877
|
|
||
Premiums receivable
|
(205,044
|
)
|
|
(273,735
|
)
|
||
Deferred acquisition costs, net
|
(51,971
|
)
|
|
(45,390
|
)
|
||
Reinsurance balances payable
|
24,267
|
|
|
37,129
|
|
||
Other liabilities
|
(26,981
|
)
|
|
(2,526
|
)
|
||
Other items, net
|
(2,212
|
)
|
|
(15,291
|
)
|
||
Net Cash Provided By Operating Activities
|
388,354
|
|
|
397,268
|
|
||
|
|
|
|
||||
Investing Activities
|
|
|
|
|
|
||
Purchases of:
|
|
|
|
|
|
||
Fixed maturity investments
|
(8,599,697
|
)
|
|
(7,546,498
|
)
|
||
Equity securities
|
(272,323
|
)
|
|
(110,303
|
)
|
||
Other investments
|
(648,915
|
)
|
|
(386,243
|
)
|
||
Proceeds from the sales of:
|
|
|
|
|
|
||
Fixed maturity investments
|
8,468,641
|
|
|
6,887,186
|
|
||
Equity securities
|
194,212
|
|
|
198,485
|
|
||
Other investments
|
506,434
|
|
|
216,964
|
|
||
Proceeds from redemptions and maturities of fixed maturity investments
|
424,953
|
|
|
598,792
|
|
||
Net purchases of short-term investments
|
(375,146
|
)
|
|
(174,607
|
)
|
||
Change in investment of securities lending collateral
|
3,221
|
|
|
(17,837
|
)
|
||
Purchase of business, net of cash acquired
|
—
|
|
|
28,948
|
|
||
Purchases of furniture, equipment and other assets
|
(7,092
|
)
|
|
(10,208
|
)
|
||
Net Cash Used For Investing Activities
|
(305,712
|
)
|
|
(315,321
|
)
|
||
|
|
|
|
||||
Financing Activities
|
|
|
|
|
|
||
Proceeds from issuance of Series C preferred shares, net
|
—
|
|
|
315,789
|
|
||
Repurchase of Series A and B preferred shares
|
—
|
|
|
(325,000
|
)
|
||
Purchases of common shares under share repurchase program
|
(56,463
|
)
|
|
—
|
|
||
Proceeds from common shares issued, net
|
(517
|
)
|
|
348
|
|
||
Repayments of borrowings
|
—
|
|
|
(73,773
|
)
|
||
Change in securities lending collateral
|
(3,221
|
)
|
|
17,837
|
|
||
Other
|
5,042
|
|
|
3,464
|
|
||
Preferred dividends paid
|
(10,969
|
)
|
|
(17,412
|
)
|
||
Net Cash Used For Financing Activities
|
(66,128
|
)
|
|
(78,747
|
)
|
||
|
|
|
|
||||
Effects of exchange rate changes on foreign currency cash
|
(12,436
|
)
|
|
493
|
|
||
|
|
|
|
||||
Increase in cash
|
4,078
|
|
|
3,693
|
|
||
Cash beginning of year
|
371,041
|
|
|
351,699
|
|
||
Cash end of period
|
$
|
375,119
|
|
|
$
|
355,392
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
$
|
176,940
|
|
|
$
|
220,268
|
|
|
$
|
433,416
|
|
|
$
|
384,524
|
|
Preferred dividends
|
(5,485
|
)
|
|
(7,649
|
)
|
|
(10,969
|
)
|
|
(14,110
|
)
|
||||
Loss on repurchase of preferred shares
|
—
|
|
|
(10,612
|
)
|
|
—
|
|
|
(10,612
|
)
|
||||
Net income available to common shareholders
|
$
|
171,455
|
|
|
$
|
202,007
|
|
|
$
|
422,447
|
|
|
$
|
359,802
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding — basic
|
131,377,274
|
|
|
134,529,129
|
|
|
131,143,885
|
|
|
134,241,876
|
|
||||
Effect of dilutive common share equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nonvested restricted shares
|
1,088,030
|
|
|
800,455
|
|
|
1,181,947
|
|
|
909,524
|
|
||||
Stock options (1)
|
3,383,746
|
|
|
2,882,152
|
|
|
3,298,394
|
|
|
2,866,090
|
|
||||
Weighted average common shares and common share equivalents outstanding — diluted
|
135,849,050
|
|
|
138,211,736
|
|
|
135,624,226
|
|
|
138,017,490
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
1.31
|
|
|
$
|
1.50
|
|
|
$
|
3.22
|
|
|
$
|
2.68
|
|
Diluted
|
$
|
1.26
|
|
|
$
|
1.46
|
|
|
$
|
3.11
|
|
|
$
|
2.61
|
|
(1)
|
Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the
2013 second quarter
and
2012 second quarter
, the number of stock options excluded were
1,428,616
and
912,056
, respectively. For the
six months ended June 30, 2013
and
2012
, the number of stock options excluded were
1,730,313
and
688,634
, respectively.
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
|
June 30, 2013
|
|
June 30, 2012
|
||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Total
|
|
Insurance
|
|
Reinsurance
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross premiums written (1)
|
$
|
703,904
|
|
|
$
|
337,642
|
|
|
$
|
1,040,738
|
|
|
$
|
676,090
|
|
|
$
|
376,981
|
|
|
$
|
1,051,813
|
|
Net premiums written
|
501,568
|
|
|
308,967
|
|
|
810,535
|
|
|
464,584
|
|
|
355,649
|
|
|
820,233
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net premiums earned
|
$
|
458,656
|
|
|
$
|
300,160
|
|
|
$
|
758,816
|
|
|
$
|
446,594
|
|
|
$
|
280,062
|
|
|
$
|
726,656
|
|
Fee income
|
529
|
|
|
373
|
|
|
902
|
|
|
628
|
|
|
178
|
|
|
806
|
|
||||||
Losses and loss adjustment expenses
|
(291,192
|
)
|
|
(127,461
|
)
|
|
(418,653
|
)
|
|
(290,416
|
)
|
|
(109,277
|
)
|
|
(399,693
|
)
|
||||||
Acquisition expenses, net
|
(74,249
|
)
|
|
(57,428
|
)
|
|
(131,677
|
)
|
|
(76,058
|
)
|
|
(52,231
|
)
|
|
(128,289
|
)
|
||||||
Other operating expenses
|
(80,167
|
)
|
|
(33,192
|
)
|
|
(113,359
|
)
|
|
(76,617
|
)
|
|
(29,140
|
)
|
|
(105,757
|
)
|
||||||
Underwriting income
|
$
|
13,577
|
|
|
$
|
82,452
|
|
|
96,029
|
|
|
$
|
4,131
|
|
|
$
|
89,592
|
|
|
93,723
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
68,369
|
|
|
|
|
|
|
|
|
73,608
|
|
||||||
Net realized gains
|
|
|
|
|
|
|
12,652
|
|
|
|
|
|
|
|
|
34,867
|
|
||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(724
|
)
|
|
|
|
|
|
|
|
(1,951
|
)
|
||||||
Equity in net income of investment funds accounted for using the equity method
|
|
|
|
|
|
|
10,941
|
|
|
|
|
|
|
|
|
7,787
|
|
||||||
Other income (loss)
|
|
|
|
|
|
|
834
|
|
|
|
|
|
|
|
|
695
|
|
||||||
Other expenses
|
|
|
|
|
|
|
(14,049
|
)
|
|
|
|
|
|
|
|
(11,944
|
)
|
||||||
Interest expense
|
|
|
|
|
|
|
(5,852
|
)
|
|
|
|
|
|
|
|
(7,439
|
)
|
||||||
Net foreign exchange gains
|
|
|
|
|
|
|
13,811
|
|
|
|
|
|
|
|
|
31,689
|
|
||||||
Income before income taxes
|
|
|
|
|
|
|
182,011
|
|
|
|
|
|
|
|
|
221,035
|
|
||||||
Income tax expense
|
|
|
|
|
|
|
(5,071
|
)
|
|
|
|
|
|
|
|
(767
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income
|
|
|
|
|
|
|
176,940
|
|
|
|
|
|
|
|
|
220,268
|
|
||||||
Preferred dividends
|
|
|
|
|
|
|
(5,485
|
)
|
|
|
|
|
|
|
|
(7,649
|
)
|
||||||
Loss on repurchase of preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
|
(10,612
|
)
|
||||||||||
Net income available to common shareholders
|
|
|
|
|
|
|
$
|
171,455
|
|
|
|
|
|
|
|
|
$
|
202,007
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss ratio
|
63.5
|
%
|
|
42.5
|
%
|
|
55.2
|
%
|
|
65.0
|
%
|
|
39.0
|
%
|
|
55.0
|
%
|
||||||
Acquisition expense ratio (2)
|
16.1
|
%
|
|
19.1
|
%
|
|
17.3
|
%
|
|
16.9
|
%
|
|
18.6
|
%
|
|
17.6
|
%
|
||||||
Other operating expense ratio
|
17.5
|
%
|
|
11.1
|
%
|
|
14.9
|
%
|
|
17.2
|
%
|
|
10.4
|
%
|
|
14.6
|
%
|
||||||
Combined ratio
|
97.1
|
%
|
|
72.7
|
%
|
|
87.4
|
%
|
|
99.1
|
%
|
|
68.0
|
%
|
|
87.2
|
%
|
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||
|
June 30, 2013
|
|
June 30, 2012
|
||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Total
|
|
Insurance
|
|
Reinsurance
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross premiums written (1)
|
$
|
1,392,721
|
|
|
$
|
813,847
|
|
|
$
|
2,204,437
|
|
|
$
|
1,364,203
|
|
|
$
|
756,957
|
|
|
$
|
2,118,469
|
|
Net premiums written
|
1,006,118
|
|
|
757,193
|
|
|
1,763,311
|
|
|
955,264
|
|
|
728,580
|
|
|
1,683,844
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net premiums earned
|
$
|
903,621
|
|
|
$
|
607,965
|
|
|
$
|
1,511,586
|
|
|
$
|
888,334
|
|
|
$
|
518,634
|
|
|
$
|
1,406,968
|
|
Fee income
|
1,054
|
|
|
386
|
|
|
1,440
|
|
|
1,158
|
|
|
191
|
|
|
1,349
|
|
||||||
Losses and loss adjustment expenses
|
(574,659
|
)
|
|
(243,397
|
)
|
|
(818,056
|
)
|
|
(593,580
|
)
|
|
(201,320
|
)
|
|
(794,900
|
)
|
||||||
Acquisition expenses, net
|
(145,007
|
)
|
|
(114,262
|
)
|
|
(259,269
|
)
|
|
(149,928
|
)
|
|
(97,323
|
)
|
|
(247,251
|
)
|
||||||
Other operating expenses
|
(156,482
|
)
|
|
(66,792
|
)
|
|
(223,274
|
)
|
|
(149,987
|
)
|
|
(55,263
|
)
|
|
(205,250
|
)
|
||||||
Underwriting income (loss)
|
$
|
28,527
|
|
|
$
|
183,900
|
|
|
212,427
|
|
|
$
|
(4,003
|
)
|
|
$
|
164,919
|
|
|
160,916
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
134,041
|
|
|
|
|
|
|
|
|
147,905
|
|
||||||
Net realized gains
|
|
|
|
|
|
|
70,992
|
|
|
|
|
|
|
|
|
78,988
|
|
||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(2,970
|
)
|
|
|
|
|
|
|
|
(2,974
|
)
|
||||||
Equity in net income of investment funds accounted for using the equity method
|
|
|
|
|
|
|
24,764
|
|
|
|
|
|
|
|
|
32,613
|
|
||||||
Other income (loss)
|
|
|
|
|
|
|
2,078
|
|
|
|
|
|
|
|
|
(7,373
|
)
|
||||||
Other expenses
|
|
|
|
|
|
|
(24,317
|
)
|
|
|
|
|
|
|
|
(18,923
|
)
|
||||||
Interest expense
|
|
|
|
|
|
|
(11,750
|
)
|
|
|
|
|
|
|
|
(14,960
|
)
|
||||||
Net foreign exchange gains
|
|
|
|
|
|
|
38,075
|
|
|
|
|
|
|
|
|
11,001
|
|
||||||
Income before income taxes
|
|
|
|
|
|
|
443,340
|
|
|
|
|
|
|
|
|
387,193
|
|
||||||
Income tax expense
|
|
|
|
|
|
|
(9,924
|
)
|
|
|
|
|
|
|
|
(2,669
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income
|
|
|
|
|
|
|
433,416
|
|
|
|
|
|
|
|
|
384,524
|
|
||||||
Preferred dividends
|
|
|
|
|
|
|
(10,969
|
)
|
|
|
|
|
|
|
|
(14,110
|
)
|
||||||
Loss on repurchase of preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
|
(10,612
|
)
|
||||||||||
Net income available to common shareholders
|
|
|
|
|
|
|
$
|
422,447
|
|
|
|
|
|
|
|
|
$
|
359,802
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss ratio
|
63.6
|
%
|
|
40.0
|
%
|
|
54.1
|
%
|
|
66.8
|
%
|
|
38.8
|
%
|
|
56.5
|
%
|
||||||
Acquisition expense ratio (2)
|
15.9
|
%
|
|
18.8
|
%
|
|
17.1
|
%
|
|
16.7
|
%
|
|
18.8
|
%
|
|
17.5
|
%
|
||||||
Other operating expense ratio
|
17.3
|
%
|
|
11.0
|
%
|
|
14.8
|
%
|
|
16.9
|
%
|
|
10.7
|
%
|
|
14.6
|
%
|
||||||
Combined ratio
|
96.8
|
%
|
|
69.8
|
%
|
|
86.0
|
%
|
|
100.4
|
%
|
|
68.3
|
%
|
|
88.6
|
%
|
|
Fair
Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Cost or
Amortized
Cost
|
|
OTTI
Unrealized
Losses (2)
|
||||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate bonds
|
$
|
2,473,130
|
|
|
$
|
33,423
|
|
|
$
|
(60,264
|
)
|
|
$
|
2,499,971
|
|
|
$
|
—
|
|
Mortgage backed securities
|
1,592,207
|
|
|
16,874
|
|
|
(46,562
|
)
|
|
1,621,895
|
|
|
(9,330
|
)
|
|||||
Municipal bonds
|
1,507,924
|
|
|
35,880
|
|
|
(14,222
|
)
|
|
1,486,266
|
|
|
(17
|
)
|
|||||
Commercial mortgage backed securities
|
838,471
|
|
|
15,687
|
|
|
(13,340
|
)
|
|
836,124
|
|
|
(231
|
)
|
|||||
U.S. government and government agencies
|
975,345
|
|
|
8,744
|
|
|
(7,251
|
)
|
|
973,852
|
|
|
(19
|
)
|
|||||
Non-U.S. government securities
|
1,002,989
|
|
|
9,671
|
|
|
(27,927
|
)
|
|
1,021,245
|
|
|
—
|
|
|||||
Asset backed securities
|
1,225,183
|
|
|
17,677
|
|
|
(17,948
|
)
|
|
1,225,454
|
|
|
(3,348
|
)
|
|||||
Total
|
9,615,249
|
|
|
137,956
|
|
|
(187,514
|
)
|
|
9,664,807
|
|
|
(12,945
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity securities
|
438,038
|
|
|
44,653
|
|
|
(16,834
|
)
|
|
410,219
|
|
|
—
|
|
|||||
Other investments
|
569,407
|
|
|
32,313
|
|
|
(18,328
|
)
|
|
555,422
|
|
|
—
|
|
|||||
Short-term investments
|
1,094,129
|
|
|
174
|
|
|
(4,650
|
)
|
|
1,098,605
|
|
|
—
|
|
|||||
Total
|
$
|
11,716,823
|
|
|
$
|
215,096
|
|
|
$
|
(227,326
|
)
|
|
$
|
11,729,053
|
|
|
$
|
(12,945
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate bonds
|
$
|
2,857,513
|
|
|
$
|
105,798
|
|
|
$
|
(6,710
|
)
|
|
$
|
2,758,425
|
|
|
$
|
(62
|
)
|
Mortgage backed securities
|
1,532,736
|
|
|
24,809
|
|
|
(7,484
|
)
|
|
1,515,411
|
|
|
(9,329
|
)
|
|||||
Municipal bonds
|
1,463,586
|
|
|
62,322
|
|
|
(1,421
|
)
|
|
1,402,685
|
|
|
(17
|
)
|
|||||
Commercial mortgage backed securities
|
824,165
|
|
|
37,514
|
|
|
(4,468
|
)
|
|
791,119
|
|
|
(270
|
)
|
|||||
U.S. government and government agencies
|
1,131,688
|
|
|
20,178
|
|
|
(1,095
|
)
|
|
1,112,605
|
|
|
(19
|
)
|
|||||
Non-U.S. government securities
|
998,901
|
|
|
33,701
|
|
|
(8,860
|
)
|
|
974,060
|
|
|
—
|
|
|||||
Asset backed securities
|
1,073,999
|
|
|
25,528
|
|
|
(5,838
|
)
|
|
1,054,309
|
|
|
(3,346
|
)
|
|||||
Total
|
9,882,588
|
|
|
309,850
|
|
|
(35,876
|
)
|
|
9,608,614
|
|
|
(13,043
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity securities
|
312,749
|
|
|
26,625
|
|
|
(12,290
|
)
|
|
298,414
|
|
|
—
|
|
|||||
Other investments
|
549,280
|
|
|
32,582
|
|
|
(3,257
|
)
|
|
519,955
|
|
|
—
|
|
|||||
Short-term investments
|
730,369
|
|
|
3,521
|
|
|
(1,248
|
)
|
|
728,096
|
|
|
—
|
|
|||||
Total
|
$
|
11,474,986
|
|
|
$
|
372,578
|
|
|
$
|
(52,671
|
)
|
|
$
|
11,155,079
|
|
|
$
|
(13,043
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”
|
(2)
|
Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At
June 30, 2013
, the net unrealized
gain
related to securities for which a non-credit OTTI was recognized in AOCI was
$4.2 million
, compared to a net unrealized
gain
of
$2.0 million
at
December 31, 2012
.
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
||||||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds
|
$
|
1,737,631
|
|
|
$
|
(58,235
|
)
|
|
$
|
17,492
|
|
|
$
|
(2,029
|
)
|
|
$
|
1,755,123
|
|
|
$
|
(60,264
|
)
|
Mortgage backed securities
|
1,015,422
|
|
|
(45,242
|
)
|
|
22,558
|
|
|
(1,320
|
)
|
|
1,037,980
|
|
|
(46,562
|
)
|
||||||
Municipal bonds
|
578,711
|
|
|
(13,690
|
)
|
|
10,380
|
|
|
(532
|
)
|
|
589,091
|
|
|
(14,222
|
)
|
||||||
Commercial mortgage backed securities
|
450,164
|
|
|
(13,132
|
)
|
|
2,111
|
|
|
(208
|
)
|
|
452,275
|
|
|
(13,340
|
)
|
||||||
U.S. government and government agencies
|
621,953
|
|
|
(7,251
|
)
|
|
—
|
|
|
—
|
|
|
621,953
|
|
|
(7,251
|
)
|
||||||
Non-U.S. government securities
|
726,472
|
|
|
(25,265
|
)
|
|
23,796
|
|
|
(2,662
|
)
|
|
750,268
|
|
|
(27,927
|
)
|
||||||
Asset backed securities
|
815,150
|
|
|
(14,822
|
)
|
|
31,177
|
|
|
(3,126
|
)
|
|
846,327
|
|
|
(17,948
|
)
|
||||||
Total
|
5,945,503
|
|
|
(177,637
|
)
|
|
107,514
|
|
|
(9,877
|
)
|
|
6,053,017
|
|
|
(187,514
|
)
|
||||||
Equity securities
|
181,248
|
|
|
(16,499
|
)
|
|
2,996
|
|
|
(335
|
)
|
|
184,244
|
|
|
(16,834
|
)
|
||||||
Other investments
|
197,537
|
|
|
(15,113
|
)
|
|
23,195
|
|
|
(3,215
|
)
|
|
220,732
|
|
|
(18,328
|
)
|
||||||
Short-term investments
|
161,476
|
|
|
(4,650
|
)
|
|
—
|
|
|
—
|
|
|
161,476
|
|
|
(4,650
|
)
|
||||||
Total
|
$
|
6,485,764
|
|
|
$
|
(213,899
|
)
|
|
$
|
133,705
|
|
|
$
|
(13,427
|
)
|
|
$
|
6,619,469
|
|
|
$
|
(227,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds
|
$
|
490,784
|
|
|
$
|
(3,692
|
)
|
|
$
|
52,334
|
|
|
$
|
(3,018
|
)
|
|
$
|
543,118
|
|
|
$
|
(6,710
|
)
|
Mortgage backed securities
|
537,883
|
|
|
(4,290
|
)
|
|
60,574
|
|
|
(3,194
|
)
|
|
598,457
|
|
|
(7,484
|
)
|
||||||
Municipal bonds
|
147,766
|
|
|
(1,120
|
)
|
|
7,052
|
|
|
(301
|
)
|
|
154,818
|
|
|
(1,421
|
)
|
||||||
Commercial mortgage backed securities
|
36,649
|
|
|
(2,261
|
)
|
|
8,878
|
|
|
(2,207
|
)
|
|
45,527
|
|
|
(4,468
|
)
|
||||||
U.S. government and government agencies
|
146,526
|
|
|
(1,095
|
)
|
|
—
|
|
|
—
|
|
|
146,526
|
|
|
(1,095
|
)
|
||||||
Non-U.S. government securities
|
244,827
|
|
|
(1,070
|
)
|
|
135,564
|
|
|
(7,790
|
)
|
|
380,391
|
|
|
(8,860
|
)
|
||||||
Asset backed securities
|
234,584
|
|
|
(1,508
|
)
|
|
57,371
|
|
|
(4,330
|
)
|
|
291,955
|
|
|
(5,838
|
)
|
||||||
Total
|
1,839,019
|
|
|
(15,036
|
)
|
|
321,773
|
|
|
(20,840
|
)
|
|
2,160,792
|
|
|
(35,876
|
)
|
||||||
Equity securities
|
130,385
|
|
|
(10,200
|
)
|
|
16,469
|
|
|
(2,090
|
)
|
|
146,854
|
|
|
(12,290
|
)
|
||||||
Other investments
|
23,849
|
|
|
(2,474
|
)
|
|
35,083
|
|
|
(783
|
)
|
|
58,932
|
|
|
(3,257
|
)
|
||||||
Short-term investments
|
57,415
|
|
|
(1,248
|
)
|
|
—
|
|
|
—
|
|
|
57,415
|
|
|
(1,248
|
)
|
||||||
Total
|
$
|
2,050,668
|
|
|
$
|
(28,958
|
)
|
|
$
|
373,325
|
|
|
$
|
(23,713
|
)
|
|
$
|
2,423,993
|
|
|
$
|
(52,671
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||
Maturity
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
||||||||
Due in one year or less
|
|
$
|
281,901
|
|
|
$
|
276,338
|
|
|
$
|
446,402
|
|
|
$
|
436,376
|
|
Due after one year through five years
|
|
3,358,388
|
|
|
3,356,354
|
|
|
3,876,062
|
|
|
3,769,426
|
|
||||
Due after five years through 10 years
|
|
2,082,358
|
|
|
2,108,760
|
|
|
1,949,297
|
|
|
1,869,698
|
|
||||
Due after 10 years
|
|
236,741
|
|
|
239,882
|
|
|
179,927
|
|
|
172,275
|
|
||||
|
|
5,959,388
|
|
|
5,981,334
|
|
|
6,451,688
|
|
|
6,247,775
|
|
||||
Mortgage backed securities
|
|
1,592,207
|
|
|
1,621,895
|
|
|
1,532,736
|
|
|
1,515,411
|
|
||||
Commercial mortgage backed securities
|
|
838,471
|
|
|
836,124
|
|
|
824,165
|
|
|
791,119
|
|
||||
Asset backed securities
|
|
1,225,183
|
|
|
1,225,454
|
|
|
1,073,999
|
|
|
1,054,309
|
|
||||
Total
|
|
$
|
9,615,249
|
|
|
$
|
9,664,807
|
|
|
$
|
9,882,588
|
|
|
$
|
9,608,614
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Available for sale:
|
|
|
|
||||
Asian and emerging markets
|
$
|
343,535
|
|
|
$
|
316,860
|
|
Investment grade fixed income
|
219,068
|
|
|
220,410
|
|
||
Other
|
6,804
|
|
|
12,010
|
|
||
Total available for sale
|
569,407
|
|
|
549,280
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $475,397 and $307,016)
|
481,773
|
|
|
308,596
|
|
||
Asian and emerging markets
|
28,932
|
|
|
24,035
|
|
||
Investment grade fixed income
|
74,320
|
|
|
67,624
|
|
||
Non-investment grade fixed income
|
9,331
|
|
|
11,093
|
|
||
Other (1)
|
118,018
|
|
|
116,623
|
|
||
Total fair value option
|
$
|
712,374
|
|
|
$
|
527,971
|
|
Total
|
$
|
1,281,781
|
|
|
$
|
1,077,251
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Fixed maturities
|
$
|
353,310
|
|
|
$
|
363,541
|
|
Other investments
|
712,374
|
|
|
527,971
|
|
||
Equity securities
|
—
|
|
|
25,954
|
|
||
Investments accounted for using the fair value option
|
1,065,684
|
|
|
917,466
|
|
||
Securities sold but not yet purchased (1)
|
—
|
|
|
(6,924
|
)
|
||
Net assets accounted for using the fair value option
|
$
|
1,065,684
|
|
|
$
|
910,542
|
|
(1)
|
Represents the Company’s obligation to deliver equity securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Fixed maturities
|
$
|
62,004
|
|
|
$
|
70,290
|
|
|
$
|
124,010
|
|
|
$
|
143,740
|
|
Term loan investments (1)
|
6,026
|
|
|
3,557
|
|
|
10,243
|
|
|
5,856
|
|
||||
Equity securities
|
3,164
|
|
|
2,425
|
|
|
4,587
|
|
|
4,089
|
|
||||
Short-term investments
|
364
|
|
|
760
|
|
|
756
|
|
|
1,132
|
|
||||
Other (2)
|
4,734
|
|
|
2,980
|
|
|
11,033
|
|
|
6,173
|
|
||||
Gross investment income
|
76,292
|
|
|
80,012
|
|
|
150,629
|
|
|
160,990
|
|
||||
Investment expenses
|
(7,923
|
)
|
|
(6,404
|
)
|
|
(16,588
|
)
|
|
(13,085
|
)
|
||||
Net investment income
|
$
|
68,369
|
|
|
$
|
73,608
|
|
|
$
|
134,041
|
|
|
$
|
147,905
|
|
(1)
|
Included in “investments accounted for using the fair value option” on the Company’s consolidated balance sheets.
|
(2)
|
Amounts include dividends on investment funds and other items.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross gains on investment sales
|
$
|
68,853
|
|
|
$
|
67,936
|
|
|
$
|
135,873
|
|
|
$
|
115,948
|
|
Gross losses on investment sales
|
(54,783
|
)
|
|
(20,757
|
)
|
|
(79,839
|
)
|
|
(38,693
|
)
|
||||
Change in fair value of assets and liabilities accounted for using the fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities
|
(6,702
|
)
|
|
(4,810
|
)
|
|
(1,644
|
)
|
|
3,407
|
|
||||
Equity securities
|
5
|
|
|
(3,589
|
)
|
|
704
|
|
|
(202
|
)
|
||||
Other investments
|
(9,502
|
)
|
|
(1,744
|
)
|
|
449
|
|
|
2,009
|
|
||||
TALF investments
|
—
|
|
|
(1,274
|
)
|
|
—
|
|
|
(50
|
)
|
||||
TALF borrowings
|
—
|
|
|
(176
|
)
|
|
—
|
|
|
895
|
|
||||
Derivative instruments (1)
|
15,646
|
|
|
277
|
|
|
15,268
|
|
|
(4,392
|
)
|
||||
Other
|
(865
|
)
|
|
(996
|
)
|
|
181
|
|
|
66
|
|
||||
Net realized gains
|
$
|
12,652
|
|
|
$
|
34,867
|
|
|
$
|
70,992
|
|
|
$
|
78,988
|
|
(1)
|
See Note 9 for information on the Company’s derivative instruments.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage backed securities
|
$
|
—
|
|
|
$
|
(146
|
)
|
|
$
|
(15
|
)
|
|
$
|
(892
|
)
|
Corporate bonds
|
—
|
|
|
(1,166
|
)
|
|
—
|
|
|
(1,362
|
)
|
||||
Non-U.S. government securities
|
—
|
|
|
(261
|
)
|
|
—
|
|
|
(261
|
)
|
||||
Asset backed securities
|
—
|
|
|
(106
|
)
|
|
(20
|
)
|
|
(106
|
)
|
||||
U.S. government and government agencies
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
||||
Total
|
—
|
|
|
(1,689
|
)
|
|
(35
|
)
|
|
(2,631
|
)
|
||||
Investment of funds received under securities lending agreements
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(87
|
)
|
||||
Equity securities
|
(724
|
)
|
|
(256
|
)
|
|
(2,935
|
)
|
|
(256
|
)
|
||||
Net impairment losses recognized in earnings
|
$
|
(724
|
)
|
|
$
|
(1,951
|
)
|
|
$
|
(2,970
|
)
|
|
$
|
(2,974
|
)
|
•
|
Equity securities — the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. For certain equities which were in an unrealized loss position and where the Company determined that it did not have the intent or ability to hold such securities for a reasonable period of time by which the fair value of the securities would increase and the Company would recover its cost, the cost basis of such securities was adjusted down accordingly;
|
•
|
Mortgage backed and asset backed securities — the Company utilized underlying data provided by asset managers, cash flow projections and additional information from credit agencies in order to determine an expected recovery value for each security. The analysis includes expected cash flow projections under base case
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Balance at start of period
|
$
|
61,956
|
|
|
$
|
67,086
|
|
|
$
|
62,001
|
|
|
$
|
66,545
|
|
Credit loss impairments recognized on securities not previously impaired
|
—
|
|
|
1,693
|
|
|
33
|
|
|
1,905
|
|
||||
Credit loss impairments recognized on securities previously impaired
|
—
|
|
|
258
|
|
|
2
|
|
|
1,069
|
|
||||
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Reductions for securities sold during the period
|
(507
|
)
|
|
(6,511
|
)
|
|
(587
|
)
|
|
(6,993
|
)
|
||||
Balance at end of period
|
$
|
61,449
|
|
|
$
|
62,526
|
|
|
$
|
61,449
|
|
|
$
|
62,526
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Assets used for collateral or guarantees:
|
|
|
|
|
|
||
Affiliated transactions
|
$
|
4,226,334
|
|
|
$
|
4,062,097
|
|
Third party agreements
|
793,162
|
|
|
771,631
|
|
||
Deposits with U.S. regulatory authorities
|
302,572
|
|
|
290,441
|
|
||
Deposits with non-U.S. regulatory authorities
|
6,591
|
|
|
247,321
|
|
||
Trust funds
|
103,021
|
|
|
96,342
|
|
||
Total restricted assets
|
$
|
5,431,680
|
|
|
$
|
5,467,832
|
|
Level 1:
|
Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for
identical
assets or liabilities in
active markets
|
Level 2:
|
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument
|
Level 3:
|
Inputs to the valuation methodology are unobservable and significant to the fair value measurement
|
|
|
|
Fair Value Measurement Using:
|
||||||||||||
|
Fair
Value
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
2,473,130
|
|
|
$
|
—
|
|
|
$
|
2,470,770
|
|
|
$
|
2,360
|
|
Mortgage backed securities
|
1,592,207
|
|
|
—
|
|
|
1,592,207
|
|
|
—
|
|
||||
Municipal bonds
|
1,507,924
|
|
|
—
|
|
|
1,507,924
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
838,471
|
|
|
—
|
|
|
838,471
|
|
|
—
|
|
||||
U.S. government and government agencies
|
975,345
|
|
|
975,345
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. government securities
|
1,002,989
|
|
|
—
|
|
|
1,002,989
|
|
|
—
|
|
||||
Asset backed securities
|
1,225,183
|
|
|
—
|
|
|
1,225,183
|
|
|
—
|
|
||||
Total
|
9,615,249
|
|
|
975,345
|
|
|
8,637,544
|
|
|
2,360
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
438,038
|
|
|
437,278
|
|
|
760
|
|
|
—
|
|
||||
Other investments
|
569,407
|
|
|
—
|
|
|
379,514
|
|
|
189,893
|
|
||||
Short-term investments
|
1,094,129
|
|
|
1,062,472
|
|
|
31,657
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments accounted for using the fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
293,976
|
|
|
—
|
|
|
293,976
|
|
|
—
|
|
||||
Non-U.S. government bonds
|
59,334
|
|
|
—
|
|
|
59,334
|
|
|
—
|
|
||||
Other investments
|
712,374
|
|
|
—
|
|
|
422,185
|
|
|
290,189
|
|
||||
Equity securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
1,065,684
|
|
|
—
|
|
|
775,495
|
|
|
290,189
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total assets measured at fair value
|
$
|
12,782,507
|
|
|
$
|
2,475,095
|
|
|
$
|
9,824,970
|
|
|
$
|
482,442
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities sold but not yet purchased (2)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.
|
(2)
|
Represents the Company’s obligation to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.
|
|
|
|
Fair Value Measurement Using:
|
||||||||||||
|
Fair
Value
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
2,857,513
|
|
|
$
|
—
|
|
|
$
|
2,759,109
|
|
|
$
|
98,404
|
|
Mortgage backed securities
|
1,532,736
|
|
|
—
|
|
|
1,532,736
|
|
|
—
|
|
||||
Municipal bonds
|
1,463,586
|
|
|
—
|
|
|
1,463,586
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
824,165
|
|
|
—
|
|
|
824,165
|
|
|
—
|
|
||||
U.S. government and government agencies
|
1,131,688
|
|
|
1,131,688
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. government securities
|
998,901
|
|
|
—
|
|
|
998,901
|
|
|
—
|
|
||||
Asset backed securities
|
1,073,999
|
|
|
—
|
|
|
1,073,999
|
|
|
—
|
|
||||
Total
|
9,882,588
|
|
|
1,131,688
|
|
|
8,652,496
|
|
|
98,404
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
312,749
|
|
|
312,666
|
|
|
83
|
|
|
—
|
|
||||
Other investments
|
549,280
|
|
|
—
|
|
|
365,078
|
|
|
184,202
|
|
||||
Short-term investments
|
730,369
|
|
|
678,441
|
|
|
51,928
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments accounted for using the fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
275,132
|
|
|
—
|
|
|
275,132
|
|
|
—
|
|
||||
Non-U.S. government bonds
|
88,409
|
|
|
—
|
|
|
88,409
|
|
|
—
|
|
||||
Other investments
|
527,971
|
|
|
—
|
|
|
332,621
|
|
|
195,350
|
|
||||
Equity securities
|
25,954
|
|
|
25,954
|
|
|
—
|
|
|
—
|
|
||||
Total
|
917,466
|
|
|
25,954
|
|
|
696,162
|
|
|
195,350
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total assets measured at fair value
|
$
|
12,392,452
|
|
|
$
|
2,148,749
|
|
|
$
|
9,765,747
|
|
|
$
|
477,956
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities sold but not yet purchased (2)
|
$
|
6,924
|
|
|
$
|
6,924
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
6,924
|
|
|
$
|
6,924
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.
|
(2)
|
Represents the Company’s obligation to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.
|
|
Fair Value Measurements Using:
Significant Unobservable Inputs (Level 3)
|
||||||||||||||
s
|
Available-For-Sale
|
|
Fair Value Option
|
|
|
||||||||||
|
Corporate
Bonds
|
|
Other
Investments
|
|
Other
Investments
|
|
Total
|
||||||||
Three Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
$
|
97,298
|
|
|
$
|
185,934
|
|
|
$
|
179,370
|
|
|
$
|
462,602
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
|
|||||
Included in earnings (1)
|
3,187
|
|
|
—
|
|
|
(2,075
|
)
|
|
1,112
|
|
||||
Included in other comprehensive income
|
(1,363
|
)
|
|
3,959
|
|
|
—
|
|
|
2,596
|
|
||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases
|
—
|
|
|
—
|
|
|
118,916
|
|
|
118,916
|
|
||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
(96,655
|
)
|
|
—
|
|
|
—
|
|
|
(96,655
|
)
|
||||
Settlements
|
(107
|
)
|
|
—
|
|
|
(6,022
|
)
|
|
(6,129
|
)
|
||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at end of period
|
$
|
2,360
|
|
|
$
|
189,893
|
|
|
$
|
290,189
|
|
|
$
|
482,442
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended June 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
$
|
96,655
|
|
|
$
|
6,215
|
|
|
$
|
—
|
|
|
$
|
102,870
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
|
|||||
Included in earnings (1)
|
(548
|
)
|
|
—
|
|
|
—
|
|
|
(548
|
)
|
||||
Included in other comprehensive income
|
(4,032
|
)
|
|
171
|
|
|
—
|
|
|
(3,861
|
)
|
||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at end of period
|
$
|
92,036
|
|
|
$
|
6,386
|
|
|
$
|
—
|
|
|
$
|
98,422
|
|
(1)
|
Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were recorded in net realized gains (losses) or net investment income.
|
|
Fair Value Measurements Using:
Significant Unobservable Inputs (Level 3)
|
||||||||||||||
s
|
Available-For-Sale
|
|
Fair Value Option
|
|
|
||||||||||
|
Corporate
Bonds
|
|
Other
Investments
|
|
Other
Investments
|
|
Total
|
||||||||
Six Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
$
|
98,404
|
|
|
$
|
184,202
|
|
|
$
|
195,350
|
|
|
$
|
477,956
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
||||||||
Included in earnings (1)
|
4,679
|
|
|
4,762
|
|
|
(1,702
|
)
|
|
7,739
|
|
||||
Included in other comprehensive income
|
(3,051
|
)
|
|
5,871
|
|
|
—
|
|
|
2,820
|
|
||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
||||||||
Purchases
|
—
|
|
|
5,000
|
|
|
160,570
|
|
|
165,570
|
|
||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
(96,655
|
)
|
|
—
|
|
|
—
|
|
|
(96,655
|
)
|
||||
Settlements
|
(1,017
|
)
|
|
(9,942
|
)
|
|
(64,029
|
)
|
|
(74,988
|
)
|
||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at end of period
|
$
|
2,360
|
|
|
$
|
189,893
|
|
|
$
|
290,189
|
|
|
$
|
482,442
|
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
$
|
92,091
|
|
|
$
|
5,124
|
|
|
$
|
—
|
|
|
$
|
97,215
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
||||||||
Included in earnings (1)
|
1,783
|
|
|
81
|
|
|
—
|
|
|
1,864
|
|
||||
Included in other comprehensive income
|
(1,759
|
)
|
|
1,262
|
|
|
—
|
|
|
(497
|
)
|
||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
(79
|
)
|
|
(81
|
)
|
|
—
|
|
|
(160
|
)
|
||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at end of period
|
$
|
92,036
|
|
|
$
|
6,386
|
|
|
$
|
—
|
|
|
$
|
98,422
|
|
(1)
|
Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were recorded in net realized gains (losses) or net investment income.
|
|
Asset
Derivatives
|
|
Liability Derivatives
|
|
Net
Derivatives
|
||||||||||
|
Fair Value
|
|
Fair Value
|
|
Fair Value
|
|
Notional Value
|
||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
||||
Futures contracts
|
$
|
160
|
|
|
$
|
(54
|
)
|
|
$
|
106
|
|
|
$
|
303,286
|
|
Foreign currency forward contracts
|
15,779
|
|
|
(7,605
|
)
|
|
8,174
|
|
|
887,815
|
|
||||
TBAs
|
436,215
|
|
|
(270,629
|
)
|
|
165,586
|
|
|
687,560
|
|
||||
Other
|
670
|
|
|
(40
|
)
|
|
630
|
|
|
203,466
|
|
||||
Total
|
$
|
452,824
|
|
|
$
|
(278,328
|
)
|
|
$
|
174,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
||||
Futures contracts
|
$
|
52
|
|
|
$
|
(52
|
)
|
|
$
|
—
|
|
|
$
|
340,400
|
|
Foreign currency forward contracts
|
2,809
|
|
|
(2,678
|
)
|
|
131
|
|
|
396,468
|
|
||||
TBAs
|
23,599
|
|
|
(4,346
|
)
|
|
19,253
|
|
|
26,000
|
|
||||
Other
|
448
|
|
|
(676
|
)
|
|
(228
|
)
|
|
50,341
|
|
||||
Total
|
$
|
26,908
|
|
|
$
|
(7,752
|
)
|
|
$
|
19,156
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Derivatives not designated as
|
|
June 30,
|
|
June 30,
|
||||||||||||
hedging instruments
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Futures contracts
|
|
$
|
10,623
|
|
|
$
|
(2,322
|
)
|
|
$
|
9,794
|
|
|
$
|
(4,343
|
)
|
Foreign currency forward contracts
|
|
7,605
|
|
|
938
|
|
|
6,880
|
|
|
(943
|
)
|
||||
TBAs
|
|
(3,751
|
)
|
|
1,419
|
|
|
(3,210
|
)
|
|
1,742
|
|
||||
Other
|
|
1,169
|
|
|
242
|
|
|
1,804
|
|
|
(848
|
)
|
||||
Total
|
|
$
|
15,646
|
|
|
$
|
277
|
|
|
$
|
15,268
|
|
|
$
|
(4,392
|
)
|
|
Unrealized Gains on Available-For-Sale Securities
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||
Three Months Ended June 30, 2013
|
|
|
|
|
|
||||||
Beginning balance
|
$
|
260,725
|
|
|
$
|
(31,162
|
)
|
|
$
|
229,563
|
|
Other comprehensive income before reclassifications
|
(259,562
|
)
|
|
(5,407
|
)
|
|
(264,969
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
(13,916
|
)
|
|
—
|
|
|
(13,916
|
)
|
|||
Net current period other comprehensive income (loss)
|
(273,478
|
)
|
|
(5,407
|
)
|
|
(278,885
|
)
|
|||
Ending balance
|
$
|
(12,753
|
)
|
|
$
|
(36,569
|
)
|
|
$
|
(49,322
|
)
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2013
|
|
|
|
|
|
||||||
Beginning balance
|
$
|
289,957
|
|
|
$
|
(2,940
|
)
|
|
$
|
287,017
|
|
Other comprehensive income before reclassifications
|
(250,093
|
)
|
|
(33,629
|
)
|
|
(283,722
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
(52,617
|
)
|
|
—
|
|
|
(52,617
|
)
|
|||
Net current period other comprehensive income (loss)
|
(302,710
|
)
|
|
(33,629
|
)
|
|
$
|
(336,339
|
)
|
||
Ending balance
|
$
|
(12,753
|
)
|
|
$
|
(36,569
|
)
|
|
$
|
(49,322
|
)
|
|
|
|
|
Amounts Reclassed from AOCI
|
||||||
Details About AOCI Components
|
|
Consolidated Statement of Income Line Item That Includes Reclassification
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
June 30, 2013
|
|
June 30, 2013
|
||||||
|
|
|
|
|
|
|
||||
Unrealized Gains on Available-For-Sale Securities
|
|
|
|
|
|
|
||||
|
|
Net realized gains
|
|
$
|
14,634
|
|
|
$
|
58,999
|
|
|
|
Net impairment losses included in earnings
|
|
(724
|
)
|
|
(2,970
|
)
|
||
|
|
Total before tax
|
|
13,910
|
|
|
56,029
|
|
||
|
|
Income tax benefit (expense)
|
|
6
|
|
|
(3,412
|
)
|
||
|
|
Net of tax
|
|
$
|
13,916
|
|
|
$
|
52,617
|
|
|
Before Tax Amount
|
|
Tax Expense (Benefit)
|
|
Net of Tax Amount
|
||||||
Three Months Ended June 30, 2013
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during period
|
$
|
(281,388
|
)
|
|
$
|
(21,826
|
)
|
|
$
|
(259,562
|
)
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Less reclassification of net realized gains included in net income
|
13,910
|
|
|
(6
|
)
|
|
13,916
|
|
|||
Foreign currency translation adjustments
|
(5,407
|
)
|
|
—
|
|
|
(5,407
|
)
|
|||
Other comprehensive income (loss)
|
$
|
(300,705
|
)
|
|
$
|
(21,820
|
)
|
|
$
|
(278,885
|
)
|
|
|
|
|
|
|
||||||
Three Months Ended June 30, 2012
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during period
|
$
|
23,524
|
|
|
$
|
5,464
|
|
|
$
|
18,060
|
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(503
|
)
|
|
—
|
|
|
(503
|
)
|
|||
Less reclassification of net realized gains included in net income
|
45,384
|
|
|
1,592
|
|
|
43,792
|
|
|||
Foreign currency translation adjustments
|
(16,699
|
)
|
|
(1,563
|
)
|
|
(15,136
|
)
|
|||
Other comprehensive income (loss)
|
$
|
(39,062
|
)
|
|
$
|
2,309
|
|
|
$
|
(41,371
|
)
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2013
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during period
|
$
|
(271,043
|
)
|
|
$
|
(20,952
|
)
|
|
$
|
(250,091
|
)
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Less reclassification of net realized gains included in net income
|
56,029
|
|
|
3,412
|
|
|
52,617
|
|
|||
Foreign currency translation adjustments
|
(33,627
|
)
|
|
2
|
|
|
(33,629
|
)
|
|||
Other comprehensive income (loss)
|
$
|
(360,701
|
)
|
|
$
|
(24,362
|
)
|
|
$
|
(336,339
|
)
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2012
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during period
|
$
|
109,241
|
|
|
$
|
(3,682
|
)
|
|
$
|
112,923
|
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(511
|
)
|
|
—
|
|
|
(511
|
)
|
|||
Less reclassification of net realized gains included in net income
|
76,143
|
|
|
4,840
|
|
|
71,303
|
|
|||
Foreign currency translation adjustments
|
(2,830
|
)
|
|
(895
|
)
|
|
(1,935
|
)
|
|||
Other comprehensive income (loss)
|
$
|
29,757
|
|
|
$
|
(9,417
|
)
|
|
$
|
39,174
|
|
|
Weighting
|
|
The Bank of America Merrill Lynch 1-10 Year U.S. Treasury & Agency Index
|
30.875
|
%
|
The Bank of America Merrill Lynch 1-10 Year AA U.S. Corporate & Yankees Index
|
20.875
|
%
|
The Bank of America Merrill Lynch U.S. Mortgage Backed Securities Index
|
11.875
|
%
|
Barclays Capital CMBS, AAA Index
|
10.000
|
%
|
The Bank of America Merrill Lynch 1-10 Year U.S. Municipal Securities Index
|
7.125
|
%
|
MSCI World Free Index
|
5.000
|
%
|
The Bank of America Merrill Lynch 0-3 Month U.S. Treasury Bill Index
|
4.750
|
%
|
The Bank of America Merrill Lynch U.S. High Yield Constrained Index
|
2.375
|
%
|
Barclays Capital U.S. High-Yield Corporate Loan Index
|
2.375
|
%
|
The Bank of America Merrill Lynch 1-10 Year U.K. Gilt Index
|
2.375
|
%
|
The Bank of America Merrill Lynch 1-10 Year Euro Government Index
|
2.375
|
%
|
Total
|
100.000
|
%
|
|
Arch
Portfolio
|
|
Benchmark
Return
|
||
Pre-tax total return (before investment expenses):
|
|
|
|
|
|
2013 second quarter
|
(1.59
|
)%
|
|
(1.43
|
)%
|
2012 second quarter
|
0.63
|
%
|
|
0.86
|
%
|
|
|
|
|
||
Six Months Ended June 30, 2013
|
(1.11
|
)%
|
|
(0.97
|
)%
|
Six Months Ended June 30, 2012
|
2.53
|
%
|
|
2.43
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
After-tax operating income available to common shareholders
|
$
|
135,021
|
|
|
$
|
141,400
|
|
|
$
|
293,769
|
|
|
$
|
255,060
|
|
Net realized gains, net of tax
|
13,779
|
|
|
33,275
|
|
|
68,702
|
|
|
74,148
|
|
||||
Net impairment losses recognized in earnings, net of tax
|
(724
|
)
|
|
(1,951
|
)
|
|
(2,970
|
)
|
|
(2,974
|
)
|
||||
Equity in net income of investment funds accounted for using the equity method, net of tax
|
10,941
|
|
|
7,787
|
|
|
24,764
|
|
|
32,613
|
|
||||
Net foreign exchange gains, net of tax
|
12,438
|
|
|
32,108
|
|
|
38,182
|
|
|
11,567
|
|
||||
Loss on repurchase of preferred shares, net of tax
|
—
|
|
|
(10,612
|
)
|
|
—
|
|
|
(10,612
|
)
|
||||
Net income available to common shareholders
|
$
|
171,455
|
|
|
$
|
202,007
|
|
|
$
|
422,447
|
|
|
$
|
359,802
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
% Change
|
|
2013
|
|
2012
|
|
% Change
|
||||||||||
Gross premiums written
|
$
|
703,904
|
|
|
$
|
676,090
|
|
|
4.1
|
|
|
$
|
1,392,721
|
|
|
$
|
1,364,203
|
|
|
2.1
|
|
Net premiums written
|
501,568
|
|
|
464,584
|
|
|
8.0
|
|
|
1,006,118
|
|
|
955,264
|
|
|
5.3
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
458,656
|
|
|
$
|
446,594
|
|
|
2.7
|
|
|
$
|
903,621
|
|
|
$
|
888,334
|
|
|
1.7
|
|
Fee income
|
529
|
|
|
628
|
|
|
|
|
|
1,054
|
|
|
1,158
|
|
|
|
|
||||
Losses and loss adjustment expenses
|
(291,192
|
)
|
|
(290,416
|
)
|
|
|
|
|
(574,659
|
)
|
|
(593,580
|
)
|
|
|
|
||||
Acquisition expenses, net
|
(74,249
|
)
|
|
(76,058
|
)
|
|
|
|
|
(145,007
|
)
|
|
(149,928
|
)
|
|
|
|
||||
Other operating expenses
|
(80,167
|
)
|
|
(76,617
|
)
|
|
|
|
|
(156,482
|
)
|
|
(149,987
|
)
|
|
|
|
||||
Underwriting income (loss)
|
$
|
13,577
|
|
|
$
|
4,131
|
|
|
228.7
|
|
|
$
|
28,527
|
|
|
$
|
(4,003
|
)
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
% Point
Change |
|
|
|
|
|
|
|
% Point
Change |
||||||
Loss ratio
|
63.5
|
%
|
|
65.0
|
%
|
|
(1.5
|
)
|
|
63.6
|
%
|
|
66.8
|
%
|
|
(3.2
|
)
|
||||
Acquisition expense ratio (1)
|
16.1
|
%
|
|
16.9
|
%
|
|
(0.8
|
)
|
|
15.9
|
%
|
|
16.7
|
%
|
|
(0.8
|
)
|
||||
Other operating expense ratio
|
17.5
|
%
|
|
17.2
|
%
|
|
0.3
|
|
|
17.3
|
%
|
|
16.9
|
%
|
|
0.4
|
|
||||
Combined ratio
|
97.1
|
%
|
|
99.1
|
%
|
|
(2.0
|
)
|
|
96.8
|
%
|
|
100.4
|
%
|
|
(3.6
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Programs
|
$
|
122,981
|
|
|
25
|
|
|
$
|
92,998
|
|
|
20
|
|
|
$
|
223,496
|
|
|
22
|
|
|
$
|
174,614
|
|
|
18
|
|
Property, energy, marine and aviation
|
81,675
|
|
|
16
|
|
|
86,390
|
|
|
19
|
|
|
165,286
|
|
|
16
|
|
|
166,209
|
|
|
17
|
|
||||
Professional liability
|
66,148
|
|
|
13
|
|
|
65,198
|
|
|
14
|
|
|
121,922
|
|
|
12
|
|
|
135,759
|
|
|
14
|
|
||||
Executive assurance
|
43,721
|
|
|
9
|
|
|
60,205
|
|
|
13
|
|
|
104,073
|
|
|
10
|
|
|
128,583
|
|
|
13
|
|
||||
Construction
|
55,418
|
|
|
11
|
|
|
49,784
|
|
|
11
|
|
|
97,630
|
|
|
10
|
|
|
83,437
|
|
|
9
|
|
||||
National accounts
|
13,642
|
|
|
3
|
|
|
4,961
|
|
|
1
|
|
|
58,758
|
|
|
6
|
|
|
40,399
|
|
|
4
|
|
||||
Casualty
|
26,237
|
|
|
5
|
|
|
30,638
|
|
|
7
|
|
|
50,032
|
|
|
5
|
|
|
57,611
|
|
|
6
|
|
||||
Lenders products
|
22,840
|
|
|
5
|
|
|
20,477
|
|
|
4
|
|
|
44,513
|
|
|
4
|
|
|
42,892
|
|
|
4
|
|
||||
Travel and accident
|
16,758
|
|
|
3
|
|
|
20,294
|
|
|
4
|
|
|
33,215
|
|
|
3
|
|
|
43,130
|
|
|
5
|
|
||||
Surety
|
17,501
|
|
|
3
|
|
|
12,723
|
|
|
3
|
|
|
32,757
|
|
|
3
|
|
|
24,857
|
|
|
3
|
|
||||
Healthcare
|
10,374
|
|
|
2
|
|
|
7,959
|
|
|
2
|
|
|
20,020
|
|
|
2
|
|
|
18,594
|
|
|
2
|
|
||||
Other (1)
|
24,273
|
|
|
5
|
|
|
12,957
|
|
|
2
|
|
|
54,416
|
|
|
7
|
|
|
39,179
|
|
|
5
|
|
||||
Total
|
$
|
501,568
|
|
|
100
|
|
|
$
|
464,584
|
|
|
100
|
|
|
$
|
1,006,118
|
|
|
100
|
|
|
$
|
955,264
|
|
|
100
|
|
(1)
|
Includes alternative markets, contract binding, accident and health and excess workers’ compensation business.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Programs
|
$
|
99,721
|
|
|
22
|
|
|
$
|
80,589
|
|
|
18
|
|
|
$
|
189,644
|
|
|
21
|
|
|
$
|
154,587
|
|
|
17
|
|
Property, energy, marine and aviation
|
71,978
|
|
|
16
|
|
|
77,590
|
|
|
17
|
|
|
149,983
|
|
|
17
|
|
|
156,084
|
|
|
18
|
|
||||
Professional liability
|
59,397
|
|
|
13
|
|
|
68,017
|
|
|
15
|
|
|
118,054
|
|
|
13
|
|
|
131,273
|
|
|
15
|
|
||||
Executive assurance
|
55,540
|
|
|
12
|
|
|
60,856
|
|
|
14
|
|
|
113,694
|
|
|
13
|
|
|
119,622
|
|
|
13
|
|
||||
Construction
|
37,251
|
|
|
8
|
|
|
31,692
|
|
|
7
|
|
|
72,490
|
|
|
8
|
|
|
63,500
|
|
|
7
|
|
||||
National accounts
|
23,942
|
|
|
5
|
|
|
18,415
|
|
|
4
|
|
|
45,585
|
|
|
5
|
|
|
37,551
|
|
|
4
|
|
||||
Casualty
|
24,461
|
|
|
5
|
|
|
28,102
|
|
|
6
|
|
|
50,284
|
|
|
6
|
|
|
57,167
|
|
|
6
|
|
||||
Lenders products
|
20,855
|
|
|
5
|
|
|
21,411
|
|
|
5
|
|
|
41,812
|
|
|
5
|
|
|
53,564
|
|
|
6
|
|
||||
Travel and accident
|
17,893
|
|
|
4
|
|
|
20,661
|
|
|
5
|
|
|
30,798
|
|
|
3
|
|
|
37,374
|
|
|
4
|
|
||||
Surety
|
14,306
|
|
|
3
|
|
|
10,798
|
|
|
2
|
|
|
27,489
|
|
|
3
|
|
|
21,358
|
|
|
2
|
|
||||
Healthcare
|
9,442
|
|
|
2
|
|
|
9,077
|
|
|
2
|
|
|
18,449
|
|
|
2
|
|
|
17,975
|
|
|
2
|
|
||||
Other (1)
|
23,870
|
|
|
5
|
|
|
19,386
|
|
|
5
|
|
|
45,339
|
|
|
4
|
|
|
38,279
|
|
|
6
|
|
||||
Total
|
$
|
458,656
|
|
|
100
|
|
|
$
|
446,594
|
|
|
100
|
|
|
$
|
903,621
|
|
|
100
|
|
|
$
|
888,334
|
|
|
100
|
|
(1)
|
Includes alternative markets, contract binding, accident and health and excess workers’ compensation business.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Current year
|
67.0
|
%
|
|
68.9
|
%
|
|
65.9
|
%
|
|
68.8
|
%
|
Prior period reserve development
|
(3.5
|
)%
|
|
(3.9
|
)%
|
|
(2.3
|
)%
|
|
(2.0
|
)%
|
Loss ratio
|
63.5
|
%
|
|
65.0
|
%
|
|
63.6
|
%
|
|
66.8
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
% Change
|
|
2013
|
|
2012
|
|
% Change
|
||||||||||
Gross premiums written
|
$
|
337,642
|
|
|
$
|
376,981
|
|
|
(10.4
|
)
|
|
$
|
813,847
|
|
|
$
|
756,957
|
|
|
7.5
|
|
Net premiums written
|
308,967
|
|
|
355,649
|
|
|
(13.1
|
)
|
|
757,193
|
|
|
728,580
|
|
|
3.9
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
300,160
|
|
|
$
|
280,062
|
|
|
7.2
|
|
|
$
|
607,965
|
|
|
$
|
518,634
|
|
|
17.2
|
|
Fee income
|
373
|
|
|
178
|
|
|
|
|
|
386
|
|
|
191
|
|
|
|
|
||||
Losses and loss adjustment expenses
|
(127,461
|
)
|
|
(109,277
|
)
|
|
|
|
|
(243,397
|
)
|
|
(201,320
|
)
|
|
|
|
||||
Acquisition expenses, net
|
(57,428
|
)
|
|
(52,231
|
)
|
|
|
|
|
(114,262
|
)
|
|
(97,323
|
)
|
|
|
|
||||
Other operating expenses
|
(33,192
|
)
|
|
(29,140
|
)
|
|
|
|
|
(66,792
|
)
|
|
(55,263
|
)
|
|
|
|
||||
Underwriting income
|
$
|
82,452
|
|
|
$
|
89,592
|
|
|
(8.0
|
)
|
|
$
|
183,900
|
|
|
$
|
164,919
|
|
|
11.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
% Point
Change |
|
|
|
|
|
|
|
% Point
Change |
||||||
Loss ratio
|
42.5
|
%
|
|
39.0
|
%
|
|
3.5
|
|
|
40.0
|
%
|
|
38.8
|
%
|
|
1.2
|
|
||||
Acquisition expense ratio
|
19.1
|
%
|
|
18.6
|
%
|
|
0.5
|
|
|
18.8
|
%
|
|
18.8
|
%
|
|
—
|
|
||||
Other operating expense ratio
|
11.1
|
%
|
|
10.4
|
%
|
|
0.7
|
|
|
11.0
|
%
|
|
10.7
|
%
|
|
0.3
|
|
||||
Combined ratio
|
72.7
|
%
|
|
68.0
|
%
|
|
4.7
|
|
|
69.8
|
%
|
|
68.3
|
%
|
|
1.5
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Other specialty (1)
|
$
|
61,480
|
|
|
20
|
|
|
$
|
73,590
|
|
|
21
|
|
|
$
|
192,817
|
|
|
25
|
|
|
$
|
168,873
|
|
|
23
|
|
Property catastrophe
|
99,874
|
|
|
32
|
|
|
129,224
|
|
|
36
|
|
|
177,016
|
|
|
23
|
|
|
215,798
|
|
|
30
|
|
||||
Property excluding property catastrophe (2)
|
62,938
|
|
|
20
|
|
|
65,734
|
|
|
19
|
|
|
151,998
|
|
|
20
|
|
|
141,227
|
|
|
19
|
|
||||
Casualty (3)
|
51,502
|
|
|
17
|
|
|
42,373
|
|
|
12
|
|
|
148,747
|
|
|
20
|
|
|
126,512
|
|
|
17
|
|
||||
Marine and aviation
|
14,319
|
|
|
5
|
|
|
18,842
|
|
|
5
|
|
|
37,461
|
|
|
5
|
|
|
44,459
|
|
|
6
|
|
||||
Other (4)
|
18,854
|
|
|
6
|
|
|
25,886
|
|
|
7
|
|
|
49,154
|
|
|
7
|
|
|
31,711
|
|
|
5
|
|
||||
Total
|
$
|
308,967
|
|
|
100
|
|
|
$
|
355,649
|
|
|
100
|
|
|
$
|
757,193
|
|
|
100
|
|
|
$
|
728,580
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pro rata
|
$
|
115,105
|
|
|
37
|
|
|
$
|
144,133
|
|
|
41
|
|
|
$
|
302,956
|
|
|
40
|
|
|
$
|
268,879
|
|
|
37
|
|
Excess of loss
|
193,862
|
|
|
63
|
|
|
211,516
|
|
|
59
|
|
|
454,237
|
|
|
60
|
|
|
459,701
|
|
|
63
|
|
||||
Total
|
$
|
308,967
|
|
|
100
|
|
|
$
|
355,649
|
|
|
100
|
|
|
$
|
757,193
|
|
|
100
|
|
|
$
|
728,580
|
|
|
100
|
|
(1)
|
Includes U.K. motor, trade credit, surety, workers’ compensation catastrophe, accident and health and other.
|
(2)
|
Includes facultative business.
|
(3)
|
Includes professional liability, executive assurance and healthcare business.
|
(4)
|
Includes mortgage, life, casualty clash and other.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Other specialty (1)
|
$
|
79,508
|
|
|
26
|
|
|
$
|
79,855
|
|
|
29
|
|
|
$
|
169,101
|
|
|
28
|
|
|
$
|
126,052
|
|
|
24
|
|
Property catastrophe
|
63,332
|
|
|
21
|
|
|
68,992
|
|
|
25
|
|
|
127,565
|
|
|
21
|
|
|
130,855
|
|
|
25
|
|
||||
Property excluding property catastrophe (2)
|
66,980
|
|
|
22
|
|
|
58,720
|
|
|
21
|
|
|
131,882
|
|
|
22
|
|
|
120,352
|
|
|
23
|
|
||||
Casualty (3)
|
54,922
|
|
|
18
|
|
|
46,917
|
|
|
17
|
|
|
109,927
|
|
|
18
|
|
|
92,811
|
|
|
18
|
|
||||
Marine and aviation
|
20,392
|
|
|
7
|
|
|
19,200
|
|
|
7
|
|
|
40,496
|
|
|
7
|
|
|
40,649
|
|
|
8
|
|
||||
Other (4)
|
15,026
|
|
|
6
|
|
|
6,378
|
|
|
1
|
|
|
28,994
|
|
|
4
|
|
|
7,915
|
|
|
2
|
|
||||
Total
|
$
|
300,160
|
|
|
100
|
|
|
$
|
280,062
|
|
|
100
|
|
|
$
|
607,965
|
|
|
100
|
|
|
$
|
518,634
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pro rata
|
$
|
141,625
|
|
|
47
|
|
|
$
|
124,941
|
|
|
45
|
|
|
$
|
295,806
|
|
|
49
|
|
|
$
|
224,866
|
|
|
43
|
|
Excess of loss
|
158,535
|
|
|
53
|
|
|
155,121
|
|
|
55
|
|
|
312,159
|
|
|
51
|
|
|
293,768
|
|
|
57
|
|
||||
Total
|
$
|
300,160
|
|
|
100
|
|
|
$
|
280,062
|
|
|
100
|
|
|
$
|
607,965
|
|
|
100
|
|
|
$
|
518,634
|
|
|
100
|
|
(1)
|
Includes U.K. motor, trade credit, surety, workers’ compensation catastrophe, accident and health and other.
|
(2)
|
Includes facultative business.
|
(3)
|
Includes professional liability, executive assurance and healthcare business.
|
(4)
|
Includes mortgage, life, casualty clash and other.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Current year
|
60.3
|
%
|
|
55.6
|
%
|
|
56.9
|
%
|
|
58.0
|
%
|
Prior period reserve development
|
(17.8
|
)%
|
|
(16.6
|
)%
|
|
(16.9
|
)%
|
|
(19.2
|
)%
|
Loss ratio
|
42.5
|
%
|
|
39.0
|
%
|
|
40.0
|
%
|
|
38.8
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Fixed maturities
|
$
|
62,004
|
|
|
$
|
70,290
|
|
|
$
|
124,010
|
|
|
$
|
143,740
|
|
Term loan investments (1)
|
6,026
|
|
|
3,557
|
|
|
10,243
|
|
|
5,856
|
|
||||
Equity securities
|
3,164
|
|
|
2,425
|
|
|
4,587
|
|
|
4,089
|
|
||||
Short-term investments
|
364
|
|
|
760
|
|
|
756
|
|
|
1,132
|
|
||||
Other (2)
|
4,734
|
|
|
2,980
|
|
|
11,033
|
|
|
6,173
|
|
||||
Gross investment income
|
76,292
|
|
|
80,012
|
|
|
150,629
|
|
|
160,990
|
|
||||
Investment expenses (3)
|
(7,923
|
)
|
|
(6,404
|
)
|
|
(16,588
|
)
|
|
(13,085
|
)
|
||||
Net investment income
|
$
|
68,369
|
|
|
73,608
|
|
|
$
|
134,041
|
|
|
147,905
|
|
(1)
|
Included in “investments accounted for using the fair value option” on the consolidated balance sheets.
|
(2)
|
Amounts include dividends on investment funds and other items.
|
(3)
|
Investment expenses were approximately
0.26%
of average invested assets for the
2013 second quarter
, compared to
0.21%
for the
2012 second quarter
, and
0.28%
for the
six months ended June 30, 2013
, compared to
0.22%
for the
2012
period.
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
||||||
Fixed maturities available for sale, at fair value
|
$
|
9,570,583
|
|
|
73.8
|
|
|
$
|
9,839,988
|
|
|
75.4
|
|
Fixed maturities, at fair value (1)
|
353,310
|
|
|
2.7
|
|
|
363,541
|
|
|
2.8
|
|
||
Fixed maturities pledged under securities lending agreements, at fair value (2)
|
44,666
|
|
|
0.3
|
|
|
42,600
|
|
|
0.3
|
|
||
Total fixed maturities
|
9,968,559
|
|
|
76.9
|
|
|
10,246,129
|
|
|
78.5
|
|
||
Short-term investments available for sale, at fair value
|
1,091,032
|
|
|
8.4
|
|
|
722,121
|
|
|
5.5
|
|
||
Short-term investments pledged under securities lending agreements, at fair value (2)
|
3,097
|
|
|
—
|
|
|
8,248
|
|
|
0.1
|
|
||
Cash
|
375,119
|
|
|
2.9
|
|
|
371,041
|
|
|
2.8
|
|
||
Equity securities available for sale, at fair value
|
438,038
|
|
|
3.4
|
|
|
312,749
|
|
|
2.4
|
|
||
Equity securities, at fair value (1)
|
—
|
|
|
—
|
|
|
25,954
|
|
|
0.2
|
|
||
Other investments available for sale, at fair value
|
569,407
|
|
|
4.4
|
|
|
549,280
|
|
|
4.2
|
|
||
Other investments, at fair value (1)
|
712,374
|
|
|
5.5
|
|
|
527,971
|
|
|
4.0
|
|
||
Investments accounted for using the equity method (3)
|
208,796
|
|
|
1.6
|
|
|
307,105
|
|
|
2.4
|
|
||
Total cash and investments
|
13,366,422
|
|
|
103.1
|
|
|
13,070,598
|
|
|
100.2
|
|
||
Securities sold but not yet purchased (4)
|
—
|
|
|
—
|
|
|
(6,924
|
)
|
|
(0.1
|
)
|
||
Securities transactions entered into but not settled at the balance sheet date
|
(405,611
|
)
|
|
(3.1
|
)
|
|
(18,540
|
)
|
|
(0.1
|
)
|
||
Total investable assets
|
$
|
12,960,811
|
|
|
100.0
|
|
|
$
|
13,045,134
|
|
|
100.0
|
|
(1)
|
Represents securities which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on our balance sheet. Changes in the carrying value of such securities are recorded in net realized gains or losses.
|
(2)
|
This table excludes the collateral received and reinvested and includes the fixed maturities and short-term investments pledged under securities lending agreements, at fair value.
|
(3)
|
Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investments funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.
|
(4)
|
Represents our obligation to deliver equity securities that we did not own at the time of sale. Such amounts are included in “other liabilities” on our balance sheet.
|
|
Fair
Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Cost or
Amortized
Cost
|
||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
2,767,106
|
|
|
$
|
33,423
|
|
|
$
|
(60,264
|
)
|
|
$
|
2,793,947
|
|
Mortgage backed securities
|
1,592,207
|
|
|
16,874
|
|
|
(46,562
|
)
|
|
1,621,895
|
|
||||
Municipal bonds
|
1,507,924
|
|
|
35,880
|
|
|
(14,222
|
)
|
|
1,486,266
|
|
||||
Commercial mortgage backed securities
|
838,471
|
|
|
15,687
|
|
|
(13,340
|
)
|
|
836,124
|
|
||||
U.S. government and government agencies
|
975,345
|
|
|
8,744
|
|
|
(7,251
|
)
|
|
973,852
|
|
||||
Non-U.S. government securities
|
1,062,323
|
|
|
9,671
|
|
|
(27,927
|
)
|
|
1,080,579
|
|
||||
Asset backed securities
|
1,225,183
|
|
|
17,677
|
|
|
(17,948
|
)
|
|
1,225,454
|
|
||||
Total
|
$
|
9,968,559
|
|
|
$
|
137,956
|
|
|
$
|
(187,514
|
)
|
|
$
|
10,018,117
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
3,132,645
|
|
|
$
|
105,798
|
|
|
$
|
(6,710
|
)
|
|
$
|
3,033,557
|
|
Mortgage backed securities
|
1,532,736
|
|
|
24,809
|
|
|
(7,484
|
)
|
|
1,515,411
|
|
||||
Municipal bonds
|
1,463,586
|
|
|
62,322
|
|
|
(1,421
|
)
|
|
1,402,685
|
|
||||
Commercial mortgage backed securities
|
824,165
|
|
|
37,514
|
|
|
(4,468
|
)
|
|
791,119
|
|
||||
U.S. government and government agencies
|
1,131,688
|
|
|
20,178
|
|
|
(1,095
|
)
|
|
1,112,605
|
|
||||
Non-U.S. government securities
|
1,087,310
|
|
|
33,701
|
|
|
(8,860
|
)
|
|
1,062,469
|
|
||||
Asset backed securities
|
1,073,999
|
|
|
25,528
|
|
|
(5,838
|
)
|
|
1,054,309
|
|
||||
Total
|
$
|
10,246,129
|
|
|
$
|
309,850
|
|
|
$
|
(35,876
|
)
|
|
$
|
9,972,155
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||
Rating (1)
|
|
Fair Value
|
|
% of
Total
|
|
Fair Value
|
|
% of
Total
|
||||||
U.S. government and government agencies (2)
|
|
$
|
2,409,950
|
|
|
24.2
|
|
|
$
|
2,523,212
|
|
|
24.6
|
|
AAA
|
|
3,112,835
|
|
|
31.2
|
|
|
3,413,431
|
|
|
33.3
|
|
||
AA
|
|
1,921,194
|
|
|
19.3
|
|
|
1,563,846
|
|
|
15.3
|
|
||
A
|
|
1,392,488
|
|
|
14.0
|
|
|
1,501,156
|
|
|
14.7
|
|
||
BBB
|
|
414,100
|
|
|
4.2
|
|
|
538,140
|
|
|
5.3
|
|
||
BB
|
|
144,527
|
|
|
1.4
|
|
|
174,527
|
|
|
1.7
|
|
||
B
|
|
186,477
|
|
|
1.9
|
|
|
220,772
|
|
|
2.2
|
|
||
Lower than B
|
|
243,694
|
|
|
2.4
|
|
|
175,866
|
|
|
1.7
|
|
||
Not rated
|
|
143,294
|
|
|
1.4
|
|
|
135,179
|
|
|
1.2
|
|
||
Total
|
|
$
|
9,968,559
|
|
|
100.0
|
|
|
$
|
10,246,129
|
|
|
100.0
|
|
(1)
|
For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.
|
(2)
|
Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities.
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||
Severity of
Unrealized Loss
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
||||||||||
0-10%
|
|
$
|
5,912,225
|
|
|
$
|
(164,926
|
)
|
|
88.0
|
|
|
$
|
2,113,835
|
|
|
$
|
(28,439
|
)
|
|
79.3
|
|
10-20%
|
|
134,153
|
|
|
(20,917
|
)
|
|
11.1
|
|
|
43,871
|
|
|
(6,363
|
)
|
|
17.7
|
|
||||
20-30%
|
|
6,639
|
|
|
(1,671
|
)
|
|
0.9
|
|
|
3,086
|
|
|
(1,074
|
)
|
|
3.0
|
|
||||
Total
|
|
$
|
6,053,017
|
|
|
$
|
(187,514
|
)
|
|
100.0
|
|
|
$
|
2,160,792
|
|
|
$
|
(35,876
|
)
|
|
100.0
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||
Severity of
Unrealized Loss
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
||||||||||
0-10%
|
|
$
|
226,576
|
|
|
$
|
(8,422
|
)
|
|
4.5
|
|
|
$
|
87,223
|
|
|
$
|
(2,513
|
)
|
|
7.0
|
|
10-20%
|
|
6,293
|
|
|
(947
|
)
|
|
0.5
|
|
|
9,107
|
|
|
(1,529
|
)
|
|
4.3
|
|
||||
20-30%
|
|
1,134
|
|
|
(295
|
)
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
234,003
|
|
|
$
|
(9,664
|
)
|
|
5.2
|
|
|
$
|
96,330
|
|
|
$
|
(4,042
|
)
|
|
11.3
|
|
|
Fair Value
|
|
Credit
Rating (1)
|
||
Apple Inc.
|
$
|
66,797
|
|
|
AA+/Aa1
|
General Electric Co.
|
62,071
|
|
|
AA+/A1
|
|
Crown Castle Int'l Corp.
|
36,905
|
|
|
NR/A2
|
|
Caterpillar Inc.
|
35,719
|
|
|
A/A2
|
|
Chevron Corp.
|
34,827
|
|
|
AA/Aa1
|
|
Merck & Co Inc.
|
33,166
|
|
|
AA/A2
|
|
HSBC Holdings PLC
|
32,246
|
|
|
AA-/Aa3
|
|
United Parcel Service Inc.
|
31,041
|
|
|
A+/Aa3
|
|
International Business Machines Corp
|
30,417
|
|
|
AA-/Aa3
|
|
Anheuser-Busch Inbev NV
|
29,997
|
|
|
A/A3
|
|
Total
|
$
|
393,186
|
|
|
|
(1)
|
Ratings as assigned by S&P/Moody’s.
|
|
|
|
|
|
|
|
Fair Value
|
||||||||||
|
Issuance
Year
|
|
Amortized
Cost
|
|
Average
Credit
Quality
|
|
Total
|
|
% of
Amortized
Cost
|
|
% of
Investable
Assets
|
||||||
Non-agency MBS:
|
2003
|
|
$
|
1,882
|
|
|
AA-
|
|
$
|
1,978
|
|
|
105.1
|
%
|
|
—
|
%
|
|
2004
|
|
6,311
|
|
|
BB
|
|
6,041
|
|
|
95.7
|
%
|
|
—
|
%
|
||
|
2005
|
|
46,699
|
|
|
CCC+
|
|
49,021
|
|
|
105.0
|
%
|
|
0.4
|
%
|
||
|
2006
|
|
75,712
|
|
|
CCC
|
|
78,361
|
|
|
103.5
|
%
|
|
0.6
|
%
|
||
|
2007
|
|
70,431
|
|
|
C
|
|
73,985
|
|
|
105.0
|
%
|
|
0.6
|
%
|
||
|
2008
|
|
5,674
|
|
|
CC+
|
|
5,883
|
|
|
103.7
|
%
|
|
—
|
%
|
||
|
2009
|
|
1,798
|
|
|
AA-
|
|
1,841
|
|
|
102.4
|
%
|
|
—
|
%
|
||
|
2010
|
|
22,423
|
|
|
AA
|
|
22,679
|
|
|
101.1
|
%
|
|
0.2
|
%
|
||
|
2012
|
|
50,600
|
|
|
AA+
|
|
50,664
|
|
|
100.1
|
%
|
|
0.4
|
%
|
||
|
2013
|
|
116,053
|
|
|
AAA
|
|
110,521
|
|
|
95.2
|
%
|
|
0.9
|
%
|
||
Total non-agency MBS
|
|
|
$
|
397,583
|
|
|
BB+
|
|
$
|
400,974
|
|
|
100.9
|
%
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-agency CMBS:
|
2004
|
|
792
|
|
|
AAA
|
|
738
|
|
|
93.2
|
%
|
|
—
|
%
|
||
|
2005
|
|
30,090
|
|
|
AAA
|
|
29,883
|
|
|
99.3
|
%
|
|
0.2
|
%
|
||
|
2006
|
|
18,907
|
|
|
AA+
|
|
18,840
|
|
|
99.6
|
%
|
|
0.1
|
%
|
||
|
2007
|
|
28,233
|
|
|
A-
|
|
29,756
|
|
|
105.4
|
%
|
|
0.2
|
%
|
||
|
2008
|
|
295
|
|
|
AA+
|
|
310
|
|
|
105.1
|
%
|
|
—
|
%
|
||
|
2009
|
|
224
|
|
|
AAA
|
|
223
|
|
|
99.6
|
%
|
|
—
|
%
|
||
|
2010
|
|
114,220
|
|
|
AAA
|
|
120,122
|
|
|
105.2
|
%
|
|
0.9
|
%
|
||
|
2011
|
|
133,952
|
|
|
AAA
|
|
140,248
|
|
|
104.7
|
%
|
|
1.1
|
%
|
||
|
2012
|
|
145,731
|
|
|
AA+
|
|
143,664
|
|
|
98.6
|
%
|
|
1.1
|
%
|
||
|
2013
|
|
115,090
|
|
|
AAA
|
|
111,315
|
|
|
96.7
|
%
|
|
0.9
|
%
|
||
Total non-agency CMBS
|
|
|
$
|
587,534
|
|
|
AA+
|
|
$
|
595,099
|
|
|
101.3
|
%
|
|
4.6
|
%
|
|
|
Non-Agency MBS
|
|
Non-Agency
|
|||||
Additional Statistics:
|
|
Re-REMICs
|
|
All Other
|
|
CMBS (1)
|
|||
Weighted average loan age (months)
|
|
88
|
|
|
62
|
|
|
31
|
|
Weighted average life (months) (2)
|
|
23
|
|
|
53
|
|
|
51
|
|
Weighted average loan-to-value % (3)
|
|
69.3
|
%
|
|
68.1
|
%
|
|
60.9
|
%
|
Total delinquencies (4)
|
|
20.8
|
%
|
|
16.0
|
%
|
|
1.3
|
%
|
Current credit support % (5)
|
|
53.0
|
%
|
|
7.1
|
%
|
|
29.5
|
%
|
(1)
|
Loans defeased with government/agency obligations were not material to the collateral underlying our CMBS holdings.
|
(2)
|
The weighted average life for MBS is based on the interest rates in effect at
June 30, 2013
. The weighted average life for CMBS reflects the average life of the collateral underlying our CMBS holdings.
|
(3)
|
The range of loan-to-values is
26%
to
91%
on MBS and
7%
to
112%
on CMBS.
|
(4)
|
Total delinquencies includes 60 days and over.
|
(5)
|
Current credit support % represents the % for a collateralized mortgage obligation (“CMO”) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal.
|
|
|
|
|
|
|
|
Fair Value
|
|||||||||||
|
Amortized
Cost
|
|
Average
Credit
Quality
|
|
Weighted Average Credit Support
|
|
Total
|
|
% of
Amortized
Cost
|
|
% of
Investable
Assets
|
|||||||
Sector:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Equipment
|
$
|
343,398
|
|
|
A+
|
|
4
|
%
|
|
$
|
336,245
|
|
|
97.9
|
%
|
|
2.6
|
%
|
Credit cards
|
269,105
|
|
|
AAA
|
|
16
|
%
|
|
267,954
|
|
|
99.6
|
%
|
|
2.1
|
%
|
||
Loans
|
213,521
|
|
|
AA+
|
|
47
|
%
|
|
213,447
|
|
|
100.0
|
%
|
|
1.6
|
%
|
||
Autos
|
146,915
|
|
|
AAA
|
|
29
|
%
|
|
145,780
|
|
|
99.2
|
%
|
|
1.1
|
%
|
||
Rate reduction bonds
|
72,794
|
|
|
AAA
|
|
5
|
%
|
|
74,604
|
|
|
102.5
|
%
|
|
0.6
|
%
|
||
U.K. securitized
|
38,589
|
|
|
AAA
|
|
20
|
%
|
|
39,083
|
|
|
101.3
|
%
|
|
0.3
|
%
|
||
Commodities
|
23,000
|
|
|
AA+
|
|
7
|
%
|
|
23,450
|
|
|
102.0
|
%
|
|
0.2
|
%
|
||
Home equity
|
20,298
|
|
|
CCC+
|
|
19
|
%
|
|
26,832
|
|
|
132.2
|
%
|
|
0.2
|
%
|
||
Other
|
97,834
|
|
|
AA+
|
|
|
|
97,788
|
|
|
100.0
|
%
|
|
0.8
|
%
|
|||
Total ABS (1)
|
$
|
1,225,454
|
|
|
AA
|
|
|
|
$
|
1,225,183
|
|
|
100.0
|
%
|
|
9.5
|
%
|
(1)
|
The effective duration of the total ABS was
2.1
years at
June 30, 2013
.
|
|
Sovereign (2)
|
|
Financial
Corporates
|
|
Other
Corporates
|
|
Covered
Bonds (3)
|
|
Bank
Loans (4)
|
|
Equities and
Other
|
|
Total
|
||||||||||||||
Country (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Finland
|
$
|
132,593
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
789
|
|
|
$
|
133,382
|
|
Netherlands
|
10,489
|
|
|
263
|
|
|
36,686
|
|
|
—
|
|
|
5,803
|
|
|
7,741
|
|
|
60,982
|
|
|||||||
Germany
|
24,477
|
|
|
—
|
|
|
4,196
|
|
|
10,039
|
|
|
8,935
|
|
|
7,263
|
|
|
54,910
|
|
|||||||
France
|
—
|
|
|
5,524
|
|
|
3,495
|
|
|
—
|
|
|
5,719
|
|
|
12,677
|
|
|
27,415
|
|
|||||||
Supranational (5)
|
26,475
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,475
|
|
|||||||
Luxembourg
|
—
|
|
|
—
|
|
|
15,249
|
|
|
—
|
|
|
5,044
|
|
|
399
|
|
|
20,692
|
|
|||||||
Ireland
|
1,621
|
|
|
627
|
|
|
8,242
|
|
|
—
|
|
|
—
|
|
|
1,484
|
|
|
11,974
|
|
|||||||
Austria
|
—
|
|
|
3,467
|
|
|
470
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,937
|
|
|||||||
Spain
|
—
|
|
|
—
|
|
|
—
|
|
|
534
|
|
|
3,244
|
|
|
—
|
|
|
3,778
|
|
|||||||
Italy
|
827
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
594
|
|
|
—
|
|
|
1,421
|
|
|||||||
Belgium
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
770
|
|
|
770
|
|
|||||||
Cyprus
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
360
|
|
Total
|
$
|
196,482
|
|
|
$
|
9,881
|
|
|
$
|
68,698
|
|
|
$
|
10,573
|
|
|
$
|
29,339
|
|
|
$
|
31,123
|
|
|
$
|
346,096
|
|
(1)
|
The country allocations set forth in the table are based on various assumptions made by us in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, we do not believe that we have any Eurozone investments from Estonia, Greece, Malta, Portugal, Slovakia or Slovenia at
June 30, 2013
.
|
(2)
|
Sovereign includes securities issued and/or guaranteed by Eurozone governments.
|
(3)
|
Securities issued by Eurozone banks where the security is backed by a separate group of loans.
|
(4)
|
Included in "investments accounted for using the fair value option".
|
(5)
|
Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development.
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||||||||
Severity of
Unrealized Loss
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
||||||||||
0-10%
|
|
$
|
129,819
|
|
|
$
|
(5,485
|
)
|
|
32.6
|
|
|
$
|
114,670
|
|
|
$
|
(4,704
|
)
|
|
38.3
|
|
10-20%
|
|
26,764
|
|
|
(3,801
|
)
|
|
22.6
|
|
|
22,851
|
|
|
(3,612
|
)
|
|
29.4
|
|
||||
20-30%
|
|
26,629
|
|
|
(7,035
|
)
|
|
41.8
|
|
|
6,205
|
|
|
(1,973
|
)
|
|
16.1
|
|
||||
30-40%
|
|
996
|
|
|
(475
|
)
|
|
2.8
|
|
|
1,953
|
|
|
(981
|
)
|
|
8.0
|
|
||||
40-50%
|
|
22
|
|
|
(18
|
)
|
|
0.1
|
|
|
1,027
|
|
|
(829
|
)
|
|
6.7
|
|
||||
50-80%
|
|
14
|
|
|
(20
|
)
|
|
0.1
|
|
|
148
|
|
|
(191
|
)
|
|
1.5
|
|
||||
Total
|
|
$
|
184,244
|
|
|
$
|
(16,834
|
)
|
|
100.0
|
|
|
$
|
146,854
|
|
|
$
|
(12,290
|
)
|
|
100.0
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Available for sale:
|
|
|
|
||||
Asian and emerging markets
|
$
|
343,535
|
|
|
$
|
316,860
|
|
Investment grade fixed income
|
219,068
|
|
|
220,410
|
|
||
Other
|
6,804
|
|
|
12,010
|
|
||
Total available for sale
|
569,407
|
|
|
549,280
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $475,397 and $307,016)
|
481,773
|
|
|
308,596
|
|
||
Asian and emerging markets
|
28,932
|
|
|
24,035
|
|
||
Investment grade fixed income
|
74,320
|
|
|
67,624
|
|
||
Non-investment grade fixed income
|
9,331
|
|
|
11,093
|
|
||
Other (1)
|
118,018
|
|
|
116,623
|
|
||
Total fair value option
|
$
|
712,374
|
|
|
$
|
527,971
|
|
Total
|
$
|
1,281,781
|
|
|
$
|
1,077,251
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Premiums Written
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct
|
$
|
716,725
|
|
|
$
|
695,743
|
|
|
$
|
1,431,776
|
|
|
$
|
1,405,475
|
|
Assumed
|
324,014
|
|
|
356,070
|
|
|
772,661
|
|
|
712,994
|
|
||||
Ceded
|
(230,204
|
)
|
|
(231,580
|
)
|
|
(441,126
|
)
|
|
(434,625
|
)
|
||||
Net
|
$
|
810,535
|
|
|
$
|
820,233
|
|
|
$
|
1,763,311
|
|
|
$
|
1,683,844
|
|
|
|
|
|
|
|
|
|
||||||||
Premiums Earned
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct
|
$
|
656,700
|
|
|
$
|
633,341
|
|
|
$
|
1,304,222
|
|
|
$
|
1,247,352
|
|
Assumed
|
299,415
|
|
|
290,680
|
|
|
606,339
|
|
|
550,536
|
|
||||
Ceded
|
(197,299
|
)
|
|
(197,365
|
)
|
|
(398,975
|
)
|
|
(390,920
|
)
|
||||
Net
|
$
|
758,816
|
|
|
$
|
726,656
|
|
|
$
|
1,511,586
|
|
|
$
|
1,406,968
|
|
|
|
|
|
|
|
|
|
||||||||
Losses and Loss Adjustment Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct
|
$
|
415,766
|
|
|
$
|
386,050
|
|
|
$
|
767,533
|
|
|
$
|
739,832
|
|
Assumed
|
114,534
|
|
|
103,367
|
|
|
223,531
|
|
|
212,784
|
|
||||
Ceded
|
(111,647
|
)
|
|
(89,724
|
)
|
|
(173,008
|
)
|
|
(157,716
|
)
|
||||
Net
|
$
|
418,653
|
|
|
$
|
399,693
|
|
|
$
|
818,056
|
|
|
$
|
794,900
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Insurance:
|
|
|
|
|
|
||
Case reserves
|
$
|
1,420,742
|
|
|
$
|
1,438,575
|
|
IBNR reserves
|
2,986,066
|
|
|
2,979,344
|
|
||
Total net reserves
|
$
|
4,406,808
|
|
|
$
|
4,417,919
|
|
|
|
|
|
||||
Reinsurance:
|
|
|
|
|
|
||
Case reserves
|
$
|
738,363
|
|
|
$
|
781,894
|
|
Additional case reserves
|
143,839
|
|
|
195,033
|
|
||
IBNR reserves
|
1,712,974
|
|
|
1,709,376
|
|
||
Total net reserves
|
$
|
2,595,176
|
|
|
$
|
2,686,303
|
|
|
|
|
|
||||
Total:
|
|
|
|
|
|
||
Case reserves
|
$
|
2,159,105
|
|
|
$
|
2,220,469
|
|
Additional case reserves
|
143,839
|
|
|
195,033
|
|
||
IBNR reserves
|
4,699,040
|
|
|
4,688,720
|
|
||
Total net reserves
|
$
|
7,001,984
|
|
|
$
|
7,104,222
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Executive assurance
|
$
|
791,083
|
|
|
$
|
772,768
|
|
Casualty
|
686,637
|
|
|
663,703
|
|
||
Programs
|
597,231
|
|
|
592,235
|
|
||
Professional liability
|
584,551
|
|
|
598,638
|
|
||
Property, energy, marine and aviation
|
538,871
|
|
|
613,176
|
|
||
Construction
|
437,772
|
|
|
430,170
|
|
||
National accounts
|
219,322
|
|
|
207,551
|
|
||
Healthcare
|
131,845
|
|
|
135,227
|
|
||
Surety
|
91,475
|
|
|
95,139
|
|
||
Travel and accident
|
32,295
|
|
|
36,568
|
|
||
Lenders products
|
30,428
|
|
|
28,606
|
|
||
Other (1)
|
265,298
|
|
|
244,138
|
|
||
Total net reserves
|
$
|
4,406,808
|
|
|
$
|
4,417,919
|
|
(1)
|
Includes alternative markets, contract binding, accident and health and excess workers' compensation business.
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Casualty
|
$
|
1,549,964
|
|
|
$
|
1,570,165
|
|
Other specialty
|
328,564
|
|
|
288,797
|
|
||
Property excluding property catastrophe
|
259,743
|
|
|
323,727
|
|
||
Property catastrophe
|
233,741
|
|
|
277,817
|
|
||
Marine and aviation
|
163,689
|
|
|
169,190
|
|
||
Other
|
59,475
|
|
|
56,607
|
|
||
Total net reserves
|
$
|
2,595,176
|
|
|
$
|
2,686,303
|
|
(U.S. dollars in thousands, except share data)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Calculation of book value per common share:
|
|
|
|
|
|
||
Total shareholders’ equity
|
$
|
5,234,318
|
|
|
$
|
5,168,878
|
|
Less preferred shareholders’ equity
|
325,000
|
|
|
325,000
|
|
||
Common shareholders’ equity
|
$
|
4,909,318
|
|
|
$
|
4,843,878
|
|
Common shares outstanding (1)
|
133,416,419
|
|
|
133,842,613
|
|
||
Book value per common share
|
$
|
36.80
|
|
|
$
|
36.19
|
|
(1)
|
Excludes the effects of
8,612,453
and
8,221,444
stock options and
481,474
and
480,406
restricted stock units outstanding at
June 30, 2013
and
December 31, 2012
, respectively.
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2013
|
|
2012
|
||||
Total cash provided by (used for):
|
|
|
|
|
|
||
Operating activities
|
$
|
388,354
|
|
|
$
|
397,268
|
|
Investing activities
|
(305,712
|
)
|
|
(315,321
|
)
|
||
Financing activities
|
(66,128
|
)
|
|
(78,747
|
)
|
||
Effects of exchange rate changes on foreign currency cash
|
(12,436
|
)
|
|
493
|
|
||
Increase in cash
|
$
|
4,078
|
|
|
$
|
3,693
|
|
•
|
Cash provided by operating activities for the
six months ended June 30, 2013
was lower than in the
2012
period. The decrease in operating cash flows primarily resulted from higher paid losses for the
six months ended June 30, 2013
, including outflows on named catastrophic events and the maturation of our reserves, partially offset by an increase in premium receipts. Cash flows for the
six months ended June 30, 2013
also included an income distribution from an investment fund accounted for using the equity method upon the sale of such investment.
|
•
|
Cash used for investing activities for the
six months ended June 30, 2013
was lower than in the
2012
period. Activity for the
six months ended June 30, 2013
reflected a higher level of purchases and sales of fixed maturity investments and reflected a higher level of securities on loan through our securities lending program than in the
2012
period.
|
•
|
Cash used for financing activities for the
six months ended June 30, 2013
was lower than in the
2012
period. Activity for the
six months ended June 30, 2013
reflected $56.5 million of share repurchases under our share repurchase program while the
2012
period did not include any repurchase activity. The
2012
period reflected the repayment of $73.8 million of TALF borrowings. In addition, as noted above, cash flows for the
six months ended June 30, 2013
reflected a lower financing inflow for securities on loan through our securities lending program than in the
2012
period.
|
|
Interest Rate Shift in Basis Points
|
||||||||||||||||||
(U.S. dollars in millions)
|
-100
|
|
-50
|
|
—
|
|
+50
|
|
+100
|
||||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fair value
|
$
|
12,278.2
|
|
|
$
|
12,108.2
|
|
|
$
|
11,928.6
|
|
|
$
|
11,750.0
|
|
|
$
|
11,573.2
|
|
Change from base
|
2.93
|
%
|
|
1.51
|
%
|
|
—
|
|
|
(1.50
|
)%
|
|
(2.98
|
)%
|
|||||
Change in unrealized value
|
$
|
349.6
|
|
|
$
|
179.6
|
|
|
$
|
—
|
|
|
$
|
(178.6
|
)
|
|
$
|
(355.4
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fair value
|
$
|
12,463.4
|
|
|
$
|
12,303.5
|
|
|
$
|
12,121.9
|
|
|
$
|
11,937.4
|
|
|
$
|
11,751.6
|
|
Change from base
|
2.82
|
%
|
|
1.50
|
%
|
|
—
|
|
|
(1.52
|
)%
|
|
(3.05
|
)%
|
|||||
Change in unrealized value
|
$
|
341.5
|
|
|
$
|
181.6
|
|
|
$
|
—
|
|
|
$
|
(184.5
|
)
|
|
$
|
(370.3
|
)
|
|
Credit Spread Shift in Basis Points
|
||||||||||||||||||
(U.S. dollars in millions)
|
-100
|
|
-50
|
|
—
|
|
+50
|
|
+100
|
||||||||||
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fair value
|
$
|
12,145.6
|
|
|
$
|
12,052.2
|
|
|
$
|
11,928.6
|
|
|
$
|
11,816.3
|
|
|
$
|
11,703.1
|
|
Change from base
|
1.82
|
%
|
|
1.04
|
%
|
|
—
|
|
|
(0.94
|
)%
|
|
(1.89
|
)%
|
|||||
Change in unrealized value
|
$
|
217.0
|
|
|
$
|
123.6
|
|
|
$
|
—
|
|
|
$
|
(112.3
|
)
|
|
$
|
(225.5
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fair value
|
$
|
12,337.5
|
|
|
$
|
12,242.7
|
|
|
$
|
12,121.9
|
|
|
$
|
12,008.8
|
|
|
$
|
11,894.8
|
|
Change from base
|
1.78
|
%
|
|
1.00
|
%
|
|
—
|
|
|
(0.93
|
)%
|
|
(1.87
|
)%
|
|||||
Change in unrealized value
|
$
|
215.6
|
|
|
$
|
120.8
|
|
|
$
|
—
|
|
|
$
|
(113.1
|
)
|
|
$
|
(227.1
|
)
|
(U.S. dollars in thousands, except per share data)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Assets, net of insurance liabilities, denominated in foreign currencies, excluding shareholders’ equity and derivatives
|
$
|
12,957
|
|
|
$
|
146,227
|
|
Shareholders’ equity denominated in foreign currencies (1)
|
355,758
|
|
|
290,310
|
|
||
Net foreign currency forward contracts outstanding (2)
|
(80,466
|
)
|
|
(76,517
|
)
|
||
Net exposures denominated in foreign currencies
|
$
|
288,249
|
|
|
$
|
360,020
|
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
(28,825
|
)
|
|
$
|
(36,002
|
)
|
Book value per common share
|
$
|
(0.22
|
)
|
|
$
|
(0.27
|
)
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
28,825
|
|
|
$
|
36,002
|
|
Book value per common share
|
$
|
0.22
|
|
|
$
|
0.27
|
|
(1)
|
Represents capital contributions held in the foreign currencies of our operating units.
|
(2)
|
Notional value of the outstanding foreign currency forward contracts in U.S. Dollars.
|
•
|
our ability to successfully implement its business strategy during “soft” as well as “hard” markets;
|
•
|
acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds;
|
•
|
our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;
|
•
|
general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current “soft” market) in which we operate;
|
•
|
competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;
|
•
|
developments in the world’s financial and capital markets and our access to such markets;
|
•
|
our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our current and new business;
|
•
|
the loss of key personnel;
|
•
|
the integration of businesses we have acquired or may acquire into our existing operations;
|
•
|
accuracy of those estimates and judgments utilized in the preparation of our financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like our company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to us through
June 30, 2013
;
|
•
|
greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense liabilities related to business written by our insurance and reinsurance subsidiaries;
|
•
|
severity and/or frequency of losses;
|
•
|
claims for natural or man-made catastrophic events in our insurance or reinsurance business could cause large losses and substantial volatility in our results of operations;
|
•
|
acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;
|
•
|
availability to us of reinsurance to manage our gross and net exposures and the cost of such reinsurance;
|
•
|
the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;
|
•
|
the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
|
•
|
our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;
|
•
|
the impact of the continued weakness of the U.S., European countries or other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries and other governments by credit rating agencies, and the resulting effect on the value of securities in our investment portfolio as well as the uncertainty in the market generally;
|
•
|
losses relating to aviation business and business produced by a certain managing underwriting agency for which we may be liable to the purchaser of its prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in our periodic reports filed with the SEC;
|
•
|
changes in accounting principles or policies or in our application of such accounting principles or policies;
|
•
|
changes in the political environment of certain countries in which we operates, underwrites business or invests;
|
•
|
statutory or regulatory developments, including as to tax policy matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to us, our subsidiaries, brokers or customers; and
|
•
|
the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of our Annual Report on Form 10-K, as well as the other factors set forth in our other documents on file with the SEC, and management’s response to any of the aforementioned factors.
|
(U.S. dollars in thousands, except share data)
|
Issuer Purchases of Equity Securities
|
|
|
||||||||||
Period
|
Total Number of
Shares
Purchased (1)
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (2)
|
|
Approximate
Dollar Value
of Shares that
May Yet be
Purchased Under the Plan
or Programs
|
||||||
4/1/2013 - 4/30/2013
|
1,069
|
|
|
$
|
51.85
|
|
|
—
|
|
|
$
|
728,947
|
|
5/1/2013 - 5/31/2013
|
155,661
|
|
|
53.24
|
|
|
—
|
|
|
$
|
728,947
|
|
|
6/1/2013 - 6/30/2013
|
315,511
|
|
|
50.41
|
|
|
307,659
|
|
|
$
|
713,448
|
|
|
Total
|
472,241
|
|
|
$
|
51.35
|
|
|
307,659
|
|
|
$
|
713,448
|
|
(1)
|
Includes repurchases by ACGL of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares granted and the exercise of stock appreciation rights. We purchased these shares at their fair value, as determined by reference to the closing price of our common shares on the day the restricted shares vested or the stock appreciation rights were exercised.
|
(2)
|
The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Repurchases under the program may be effected from time to time in open market or privately negotiated transactions through December 2014. Since the inception of the share repurchase program, ACGL has repurchased
109.9 million
common shares for an aggregate purchase price of
$2.79 billion
. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations.
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by the Non-Employee Directors of Arch Capital Group Ltd. for May 9, 2013 grants
|
10.2
|
|
Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo for November 12, 2012 grants
|
10.3
|
|
Share Appreciation Right Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo for November 12, 2012 grants
|
10.4
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and David McElroy
|
10.5
|
|
Restricted Share Unit Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and David McElroy
|
10.6
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.7
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.8
|
|
Restricted Share Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.9
|
|
Restricted Share Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.10
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Constantine Iordanou
|
10.11
|
|
Amendment No. 1, dated as of May 31, 2013, to Asset Purchase Agreement, dated as of February 7, 2013, by and among the Receiver of PMI Mortgage Insurance Co. in Rehabilitation on behalf of PMI Mortgage Insurance Co., Arch U.S. MI Services, Inc. and Arch Capital Group (U.S.) Inc.*
|
10.12
|
|
Amendment No. 1, dated as of May 31, 2013, to Stock Purchase Agreement, dated as of February 7, 2013, by and among the Receiver of PMI Mortgage Insurance Co. in Rehabilitation on behalf of PMI Mortgage Insurance Co., CMFG Life Insurance Company, CMG Mortgage Insurance Company, Arch U.S. MI Services, Inc. and Arch Capital Group (U.S.) Inc.*
|
15
|
|
Accountants’ Awareness Letter (regarding unaudited interim financial information)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101
|
|
The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended June 30, 2013 formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2013 and December 31, 2012; (ii) Consolidated Statements of Income for the three and six month periods ended June 30, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2013 and 2012; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the six month periods ended June 30, 2013 and 2012; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2013 and 2012; and (vi) Notes to Consolidated Financial Statements.**
|
|
|
ARCH CAPITAL GROUP LTD.
|
|
|
(REGISTRANT)
|
|
|
|
|
|
/s/ Constantine Iordanou
|
Date: August 9, 2013
|
|
Constantine Iordanou
|
|
|
President and Chief Executive Officer
(Principal Executive Officer) and Chairman of the Board of Directors
|
|
|
|
|
|
/s/ Mark D. Lyons
|
Date: August 9, 2013
|
|
Mark D. Lyons
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by the Non-Employee Directors of Arch Capital Group Ltd. for May 9, 2013 grants
|
10.2
|
|
Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo for November 12, 2012 grants
|
10.3
|
|
Share Appreciation Right Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo for November 12, 2012 grants
|
10.4
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and David McElroy
|
10.5
|
|
Restricted Share Unit Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and David McElroy
|
10.6
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.7
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.8
|
|
Restricted Share Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.9
|
|
Restricted Share Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Mark D. Lyons
|
10.10
|
|
Share Appreciation Right Agreement, dated as of September 6, 2012, between Arch Capital Group Ltd. and Constantine Iordanou
|
10.11
|
|
Amendment No. 1, dated as of May 31, 2013, to Asset Purchase Agreement, dated as of February 7, 2013, by and among the Receiver of PMI Mortgage Insurance Co. in Rehabilitation on behalf of PMI Mortgage Insurance Co., Arch U.S. MI Services, Inc. and Arch Capital Group (U.S.) Inc.*
|
10.12
|
|
Amendment No. 1, dated as of May 31, 2013, to Stock Purchase Agreement, dated as of February 7, 2013, by and among the Receiver of PMI Mortgage Insurance Co. in Rehabilitation on behalf of PMI Mortgage Insurance Co., CMFG Life Insurance Company, CMG Mortgage Insurance Company, Arch U.S. MI Services, Inc. and Arch Capital Group (U.S.) Inc.*
|
15
|
|
Accountants’ Awareness Letter (regarding unaudited interim financial information)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101
|
|
The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended June 30, 2013 formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2013 and December 31, 2012; (ii) Consolidated Statements of Income for the three and six month periods ended June 30, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2013 and 2012; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the six month periods ended June 30, 2013 and 2012; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2013 and 2012; and (vi) Notes to Consolidated Financial Statements.**
|
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
By:
|
/s/ Dawna Ferguson
Dawna Ferguson |
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
By:
|
/s/ Dawna Ferguson
Name: Dawna Ferguson |
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
By:
|
/s/ Dawna Ferguson
Name: Dawna Ferguson |
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
By:
|
/s/ Dawna Ferguson
|
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
8.
|
“Redundancy” shall mean termination of employment by the Company due to its need to reduce the size of its workforce, including due to closure of a business or a particular workplace or change in business process. Whether a termination of employment is due to a "redundancy" shall be determined by the Committee in its sole and absolute discretion, such determination being final and binding on all parties hereto and all persons claiming through, in the name of or on behalf of such parties.
|
(A)
|
any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.
|
By:
|
/s/ Dawna Ferguson
|
(B)
|
the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets,
|
By:
|
/s/ Dawna Ferguson
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Arch Capital 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 the 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 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 to the audit committee of 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.
|
Date:
|
August 9, 2013
|
|
|
|
|
By:
|
/s/ Constantine Iordanou
|
|
Name:
|
Constantine Iordanou
|
|
Title:
|
President and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Arch Capital 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 the 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 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 to the audit committee of 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.
|
Date:
|
August 9, 2013
|
|
|
|
|
By:
|
/s/ Mark D. Lyons
|
|
Name:
|
Mark D. Lyons
|
|
Title:
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
(1)
|
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: August 9, 2013
|
|
|
|
/s/ Constantine Iordanou
|
|
Constantine Iordanou
|
|
President and Chief Executive Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: August 9, 2013
|
|
|
|
/s/ Mark D. Lyons
|
|
Mark D. Lyons
|
|
Executive Vice President,
|
|
Chief Financial Officer and Treasurer
|