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 quarterly period ended June 30, 2016
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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04-3106389
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(State or other jurisdiction of
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(IRS Employer Identification No.)
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incorporation or organization)
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59 Maiden Lane, 43rd Floor, New York, New York
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10038
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Page
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June 30,
2016 |
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December 31,
2015 |
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ASSETS
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(Unaudited)
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(Audited)
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Investments:
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Fixed maturities, available-for-sale, at fair value (amortized cost $6,617,396; $5,482,042)
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$
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6,838,968
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$
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5,433,797
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Equity securities, available-for-sale, at fair value (cost $171,492; $109,346)
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161,880
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104,497
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Equity securities, trading, at fair value (cost $26,232; $26,937)
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26,847
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27,271
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Short-term investments
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127,880
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84,266
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Equity investment in unconsolidated subsidiaries – related party
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149,573
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138,023
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Other investments (related party $68,186; $64,869; recorded at fair value $38,039; $30,309)
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129,414
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99,012
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Total investments
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7,434,562
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5,886,866
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Cash and cash equivalents
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1,009,534
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931,970
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Restricted cash and cash equivalents
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591,984
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380,699
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Accrued interest and dividends
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55,940
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51,487
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Premiums receivable, net
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2,562,165
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2,115,653
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Reinsurance recoverable (related party $2,236,292; $1,963,140)
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3,856,087
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3,008,670
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Prepaid reinsurance premium (related party $1,194,588; $1,066,961)
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1,924,747
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1,531,866
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Other assets (related party $205,320; $189,223; recorded at fair value $304,434; $264,001)
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1,371,771
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1,398,064
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Deferred policy acquisition costs
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873,641
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704,243
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Property and equipment, net
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327,311
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281,456
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Goodwill
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603,662
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432,700
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Intangible assets
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395,589
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367,345
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$
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21,006,993
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$
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17,091,019
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Liabilities:
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Loss and loss adjustment expense reserves
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$
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9,097,408
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$
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7,208,367
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Unearned premiums
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4,819,255
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4,014,728
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Ceded reinsurance premiums payable (related party $679,083; $379,988)
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843,473
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651,051
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Accrued expenses and other liabilities (related party $167,975; $167,975; recorded at fair value $462,537; $132,558)
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1,604,413
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1,140,830
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Debt
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1,229,599
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989,356
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Total liabilities
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17,594,148
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14,004,332
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Commitments and contingencies
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Redeemable non-controlling interest
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941
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1,172
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Stockholders’ equity:
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Common stock, $0.01 par value; 500,000 shares authorized; 196,455 issued in 2016 and 2015, respectively; 172,432 and 175,915 outstanding in 2016 and 2015, respectively
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1,965
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1,964
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Preferred stock, $0.01 par value; 10,000 shares authorized; 5,112 and 4,968 issued and outstanding; $626,250 and $482,500 aggregated liquidation preference in 2016 and 2015, respectively.
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626,250
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482,500
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Additional paid-in capital
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1,380,153
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1,383,492
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Treasury stock at cost; 24,023 and 20,540 shares in 2016 and 2015, respectively
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(262,984
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)
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(162,867
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)
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Accumulated other comprehensive loss, net of tax
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(31,791
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)
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(130,262
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Retained earnings
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1,517,092
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1,334,233
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Total AmTrust Financial Services, Inc. equity
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3,230,685
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2,909,060
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Non-controlling interest
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181,219
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176,455
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Total stockholders’ equity
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3,411,904
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3,085,515
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$
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21,006,993
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$
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17,091,019
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Three Months Ended June 30,
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Six Months Ended June 30,
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2016
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2015
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2016
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2015
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Revenues:
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Premium income:
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Net written premium
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$
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1,268,436
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$
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1,008,721
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$
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2,489,115
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$
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2,051,910
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Change in unearned premium
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(86,684
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)
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(39,751
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(233,081
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(133,563
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)
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Net earned premium
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1,181,752
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968,970
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2,256,034
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1,918,347
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Service and fee income (related parties - three months $21,608; $21,281 and six months $41,771; $38,685)
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138,270
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107,737
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282,471
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220,623
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Net investment income
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50,745
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36,283
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100,160
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70,856
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Net realized and unrealized gain (loss) on investments
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15,099
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(2,642
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23,074
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13,011
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Total revenues
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1,385,866
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1,110,348
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2,661,739
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2,222,837
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Expenses:
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Loss and loss adjustment expense
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784,393
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638,475
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1,499,466
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1,251,758
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Acquisition costs and other underwriting expenses (net of ceding commission - related party - three months $145,610; $129,222 and six months $284,001; $247,909)
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298,803
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238,710
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563,437
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470,386
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Other
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132,970
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98,130
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261,156
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196,587
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Total expenses
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1,216,166
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975,315
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2,324,059
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1,918,731
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||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
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169,700
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135,033
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337,680
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304,106
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Other income (loss):
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Interest expense (net of interest income - related party - three months $2,187; $2,211 and six months $4,375; $4,399)
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(19,738
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)
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(9,646
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)
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(37,438
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)
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(19,901
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)
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Loss on extinguishment of debt
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—
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—
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—
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(4,714
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)
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Gain on investment in life settlement contracts net of profit commission
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12,676
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3,096
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23,406
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14,469
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Foreign currency loss
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(26,435
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)
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(47,320
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)
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(62,108
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)
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(7,366
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)
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Acquisition gain on purchase
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39,097
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—
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48,775
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—
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Total other income (loss)
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5,600
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(53,870
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)
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(27,365
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)
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(17,512
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)
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Income before income taxes and equity in earnings of unconsolidated subsidiaries
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175,300
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81,163
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310,315
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286,594
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||||
Provision for income taxes
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27,918
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4,472
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55,644
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51,284
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Income before equity in earnings of unconsolidated subsidiaries
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147,382
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76,691
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254,671
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235,310
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||||
Equity in earnings of unconsolidated subsidiaries – related parties
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4,802
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4,042
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10,578
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9,571
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||||
Net income
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$
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152,184
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$
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80,733
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$
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265,249
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$
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244,881
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Net income attributable to redeemable non-controlling interest and non-controlling interest of subsidiaries
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|
(5,817
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)
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(1,346
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)
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(9,834
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)
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(5,429
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)
|
||||
Net income attributable to AmTrust Financial Services, Inc.
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$
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146,367
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$
|
79,387
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$
|
255,415
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$
|
239,452
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Dividends on preferred stock
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|
(11,576
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)
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(8,639
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)
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(20,367
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)
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(14,008
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)
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Net income attributable to AmTrust common stockholders
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$
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134,791
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$
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70,748
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$
|
235,048
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$
|
225,444
|
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Earnings per common share:
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Basic earnings per share
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$
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0.79
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$
|
0.43
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$
|
1.36
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|
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$
|
1.38
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Diluted earnings per share
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$
|
0.78
|
|
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$
|
0.42
|
|
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$
|
1.34
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|
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$
|
1.35
|
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Dividends declared per common share
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$
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0.15
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$
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0.125
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$
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0.30
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$
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0.25
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Net realized gain (loss) on investments:
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|
|
|
|
|
|
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||||
Total other-than-temporary impairment loss
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$
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(16,956
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)
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$
|
(1,466
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)
|
|
$
|
(16,956
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)
|
|
$
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(2,482
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)
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Portion of loss recognized in other comprehensive income
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—
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—
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—
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|
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—
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|
||||
Net impairment losses recognized in earnings
|
|
(16,956
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)
|
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(1,466
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)
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(16,956
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)
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(2,482
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)
|
||||
Net realized gain (loss) on available for sale securities
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33,391
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(856
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)
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38,663
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|
15,813
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|
||||
Net unrealized gain (loss) on trading securities and other investments
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(1,336
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)
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|
(320
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)
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|
1,367
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|
|
(320
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)
|
||||
Net realized investment gain (loss)
|
|
$
|
15,099
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|
|
$
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(2,642
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)
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|
$
|
23,074
|
|
|
$
|
13,011
|
|
|
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Three Months Ended June 30,
|
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Six Months Ended June 30,
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||||||||||||
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2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
|
$
|
152,184
|
|
|
$
|
80,733
|
|
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$
|
265,249
|
|
|
$
|
244,881
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
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|
||||
Foreign currency translation adjustments
|
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(36,820
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)
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|
14,021
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|
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(84,665
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)
|
|
(51,332
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)
|
||||
Change in fair value of interest rate swap
|
|
168
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|
|
163
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|
|
287
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|
|
190
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|
||||
Unrealized gain (loss) on securities:
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|
|
|
|
|
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||||||||
Gross unrealized holding gain (loss)
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|
168,963
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|
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(91,679
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)
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|
293,683
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|
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(80,494
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)
|
||||
Tax expense arising during period
|
|
59,137
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|
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(32,088
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)
|
|
102,789
|
|
|
(28,173
|
)
|
||||
Net unrealized holding gain (loss)
|
|
109,826
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|
|
(59,591
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)
|
|
190,894
|
|
|
(52,321
|
)
|
||||
Reclassification adjustments for investment gain (loss) included in net income, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Other-than-temporary impairment loss
|
|
(10,537
|
)
|
|
—
|
|
|
(10,537
|
)
|
|
—
|
|
||||
Other net realized gain (loss) on investments
|
|
2,920
|
|
|
(790
|
)
|
|
2,492
|
|
|
(1,205
|
)
|
||||
Reclassification adjustments for investment gain (loss) included in net income:
|
|
(7,617
|
)
|
|
(790
|
)
|
|
(8,045
|
)
|
|
(1,205
|
)
|
||||
Other comprehensive income (loss), net of tax
|
|
$
|
65,557
|
|
|
$
|
(46,197
|
)
|
|
$
|
98,471
|
|
|
$
|
(104,668
|
)
|
Comprehensive income
|
|
217,741
|
|
|
34,536
|
|
|
363,720
|
|
|
140,213
|
|
||||
Less: Comprehensive income attributable to redeemable non-controlling interest and non-controlling interest
|
|
5,817
|
|
|
1,346
|
|
|
9,834
|
|
|
5,429
|
|
||||
Comprehensive income attributable to AmTrust Financial Services, Inc.
|
|
$
|
211,924
|
|
|
$
|
33,190
|
|
|
$
|
353,886
|
|
|
$
|
134,784
|
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net income
|
$
|
265,249
|
|
|
$
|
244,881
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
54,842
|
|
|
38,519
|
|
||
Net amortization of bond premium or discount
|
9,707
|
|
|
6,537
|
|
||
Equity earnings on investment in unconsolidated subsidiaries
|
(10,578
|
)
|
|
(9,571
|
)
|
||
Gain on investment in life settlement contracts, net
|
(23,406
|
)
|
|
(14,469
|
)
|
||
Realized gain on available for sale securities and unrealized gain on trading securities
|
(40,030
|
)
|
|
(15,493
|
)
|
||
Non-cash write-down of available for sale securities
|
16,956
|
|
|
2,482
|
|
||
Discount on notes payable
|
2,910
|
|
|
2,769
|
|
||
Stock based compensation
|
11,542
|
|
|
10,436
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
4,714
|
|
||
Bad debt expense
|
8,241
|
|
|
7,724
|
|
||
Foreign currency loss
|
62,108
|
|
|
7,366
|
|
||
Acquisition gain on purchase
|
(48,775
|
)
|
|
—
|
|
||
Changes in assets - (increase) decrease:
|
|
|
|
|
|
||
Premiums and note receivables
|
(350,748
|
)
|
|
(536,715
|
)
|
||
Reinsurance recoverable
|
(172,948
|
)
|
|
(355,989
|
)
|
||
Deferred policy acquisition costs, net
|
(125,499
|
)
|
|
(66,026
|
)
|
||
Prepaid reinsurance premiums
|
(392,881
|
)
|
|
(280,712
|
)
|
||
Other assets
|
186,005
|
|
|
(124,061
|
)
|
||
Changes in liabilities - increase (decrease):
|
|
|
|
||||
Reinsurance premium payable
|
185,275
|
|
|
155,340
|
|
||
Loss and loss expense reserve
|
780,599
|
|
|
664,495
|
|
||
Unearned premiums
|
382,794
|
|
|
394,994
|
|
||
Funds held under reinsurance treaties
|
(28,041
|
)
|
|
13,525
|
|
||
Accrued expenses and other current liabilities
|
(202,549
|
)
|
|
174,391
|
|
||
Deferred taxes
|
47,989
|
|
|
(158,508
|
)
|
||
Net cash provided by operating activities
|
618,762
|
|
|
166,629
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Purchases of fixed maturities, available-for-sale
|
(1,299,160
|
)
|
|
(1,168,051
|
)
|
||
Purchases of equity securities, available-for-sale
|
(111,284
|
)
|
|
(14,923
|
)
|
||
Purchase of equity securities, trading
|
(100,101
|
)
|
|
(109,555
|
)
|
||
Purchase of other investments
|
(18,509
|
)
|
|
(27,234
|
)
|
||
Sales of fixed maturities, available-for-sale
|
910,939
|
|
|
560,386
|
|
||
Sales of equity securities, available-for-sale
|
89,348
|
|
|
12,184
|
|
||
Sales of equity securities, trading
|
102,261
|
|
|
108,325
|
|
||
Sales of other investments
|
1,242
|
|
|
13,337
|
|
||
Net (purchase) sale of short term investments
|
(43,614
|
)
|
|
42,501
|
|
||
Net (purchase) sale of securities sold but not purchased
|
(17,448
|
)
|
|
15,456
|
|
||
Receipt of life settlement contract proceeds
|
8,058
|
|
|
81,014
|
|
||
Acquisition of subsidiaries, net of cash obtained
|
(118,607
|
)
|
|
(121,401
|
)
|
||
Increase in restricted cash and cash equivalents
|
(211,285
|
)
|
|
(62,715
|
)
|
||
Purchase of property and equipment
|
(65,538
|
)
|
|
(44,386
|
)
|
||
Net cash used in investing activities
|
(873,698
|
)
|
|
(715,062
|
)
|
||
|
|
|
|
||||
|
|
|
|
||||
|
|
|
|
1.
|
Basis of Reporting
|
2.
|
Recent Accounting Pronouncements
|
3.
|
Investments
|
(Amounts in Thousands)
As of June 30, 2016 |
|
Cost or amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair Value
|
||||||||
Preferred stock
|
|
$
|
3,629
|
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
|
$
|
3,596
|
|
Common stock
|
|
150,907
|
|
|
14,895
|
|
|
(7,518
|
)
|
|
158,284
|
|
||||
U.S. treasury securities
|
|
272,547
|
|
|
4,778
|
|
|
(1
|
)
|
|
277,324
|
|
||||
U.S. government agencies
|
|
9,541
|
|
|
207
|
|
|
—
|
|
|
9,748
|
|
||||
Municipal bonds
|
|
838,930
|
|
|
40,406
|
|
|
(1,151
|
)
|
|
878,185
|
|
||||
Foreign government
|
|
122,470
|
|
|
8,314
|
|
|
(503
|
)
|
|
130,281
|
|
||||
Corporate bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance
|
|
1,389,171
|
|
|
60,930
|
|
|
(18,270
|
)
|
|
1,431,831
|
|
||||
Industrial
|
|
2,051,346
|
|
|
113,173
|
|
|
(25,306
|
)
|
|
2,139,213
|
|
||||
Utilities
|
|
183,995
|
|
|
7,155
|
|
|
(4,749
|
)
|
|
186,401
|
|
||||
Commercial mortgage backed securities
|
|
186,920
|
|
|
5,898
|
|
|
(1,731
|
)
|
|
191,087
|
|
||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency backed
|
|
1,117,536
|
|
|
37,748
|
|
|
(254
|
)
|
|
1,155,030
|
|
||||
Non-agency backed
|
|
51,932
|
|
|
1,495
|
|
|
(276
|
)
|
|
53,151
|
|
||||
Collateralized loan / debt obligations
|
|
367,228
|
|
|
2,968
|
|
|
(9,122
|
)
|
|
361,074
|
|
||||
Asset-backed securities
|
|
25,780
|
|
|
59
|
|
|
(196
|
)
|
|
25,643
|
|
||||
|
|
$
|
6,771,932
|
|
|
$
|
298,026
|
|
|
$
|
(69,110
|
)
|
|
$
|
7,000,848
|
|
(Amounts in Thousands)
As of December 31, 2015 |
|
Cost or amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair value
|
||||||||
Preferred stock
|
|
$
|
4,869
|
|
|
$
|
150
|
|
|
$
|
(30
|
)
|
|
$
|
4,989
|
|
Common stock
|
|
104,477
|
|
|
3,816
|
|
|
(8,785
|
)
|
|
99,508
|
|
||||
U.S. treasury securities
|
|
69,547
|
|
|
1,470
|
|
|
(258
|
)
|
|
70,759
|
|
||||
U.S. government agencies
|
|
45,586
|
|
|
235
|
|
|
(263
|
)
|
|
45,558
|
|
||||
Municipal bonds
|
|
530,004
|
|
|
11,952
|
|
|
(1,530
|
)
|
|
540,426
|
|
||||
Foreign government
|
|
109,645
|
|
|
4,912
|
|
|
(812
|
)
|
|
113,745
|
|
||||
Corporate bonds:
|
|
|
|
|
|
|
|
|
||||||||
Finance
|
|
1,358,765
|
|
|
38,058
|
|
|
(34,393
|
)
|
|
1,362,430
|
|
||||
Industrial
|
|
1,706,772
|
|
|
20,542
|
|
|
(80,251
|
)
|
|
1,647,063
|
|
||||
Utilities
|
|
157,067
|
|
|
1,548
|
|
|
(9,115
|
)
|
|
149,500
|
|
||||
Commercial mortgage backed securities
|
|
151,164
|
|
|
1,334
|
|
|
(1,180
|
)
|
|
151,318
|
|
||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
||||||||
Agency backed
|
|
964,059
|
|
|
14,912
|
|
|
(4,133
|
)
|
|
974,838
|
|
||||
Non-agency backed
|
|
124,046
|
|
|
322
|
|
|
(4,139
|
)
|
|
120,229
|
|
||||
Collateralized loan / debt obligation
|
|
232,245
|
|
|
10
|
|
|
(6,161
|
)
|
|
226,094
|
|
||||
Asset backed securities
|
|
33,142
|
|
|
4
|
|
|
(1,309
|
)
|
|
31,837
|
|
||||
|
|
$
|
5,591,388
|
|
|
$
|
99,265
|
|
|
$
|
(152,359
|
)
|
|
$
|
5,538,294
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
(Amounts in Thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
Due in one year or less
|
|
$
|
216,852
|
|
|
$
|
217,214
|
|
|
$
|
125,563
|
|
|
$
|
124,763
|
|
Due after one through five years
|
|
1,508,569
|
|
|
1,543,107
|
|
|
913,365
|
|
|
909,634
|
|
||||
Due after five through ten years
|
|
2,753,851
|
|
|
2,883,670
|
|
|
2,586,061
|
|
|
2,537,734
|
|
||||
Due after ten years
|
|
388,727
|
|
|
408,992
|
|
|
352,397
|
|
|
357,288
|
|
||||
Mortgage and asset backed securities
|
|
1,749,397
|
|
|
1,785,986
|
|
|
1,504,656
|
|
|
1,504,378
|
|
||||
Total fixed maturities
|
|
$
|
6,617,396
|
|
|
$
|
6,838,969
|
|
|
$
|
5,482,042
|
|
|
$
|
5,433,797
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Equity securities recognized in earnings
|
|
$
|
16,956
|
|
|
$
|
176
|
|
|
$
|
16,956
|
|
|
$
|
1,192
|
|
Fixed-maturity securities recognized in earnings
|
|
—
|
|
|
1,290
|
|
|
—
|
|
|
1,290
|
|
||||
|
|
$
|
16,956
|
|
|
$
|
1,466
|
|
|
$
|
16,956
|
|
|
$
|
2,482
|
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
(Amounts in Thousands)
As of June 30, 2016 |
|
Fair Market Value
|
|
Unrealized Losses
|
|
No. of Positions Held
|
|
Fair Market Value
|
|
Unrealized Losses
|
|
No. of Positions Held
|
|
Fair Market Value
|
|
Unrealized Losses
|
||||||||||||||
Common and preferred stock
|
|
$
|
19,282
|
|
|
$
|
(6,740
|
)
|
|
68
|
|
|
$
|
1,490
|
|
|
$
|
(812
|
)
|
|
28
|
|
|
$
|
20,772
|
|
|
$
|
(7,552
|
)
|
U.S. treasury securities
|
|
960
|
|
|
(1
|
)
|
|
5
|
|
|
651
|
|
|
—
|
|
|
1
|
|
|
1,611
|
|
|
(1
|
)
|
||||||
Municipal bonds
|
|
48,738
|
|
|
(456
|
)
|
|
36
|
|
|
15,391
|
|
|
(694
|
)
|
|
29
|
|
|
64,129
|
|
|
(1,150
|
)
|
||||||
Foreign government
|
|
13,405
|
|
|
(503
|
)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,405
|
|
|
(503
|
)
|
||||||
Corporate bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Finance
|
|
161,268
|
|
|
(17,068
|
)
|
|
109
|
|
|
42,783
|
|
|
(1,201
|
)
|
|
32
|
|
|
204,051
|
|
|
(18,269
|
)
|
||||||
Industrial
|
|
191,697
|
|
|
(20,201
|
)
|
|
162
|
|
|
119,185
|
|
|
(5,105
|
)
|
|
61
|
|
|
310,882
|
|
|
(25,306
|
)
|
||||||
Utilities
|
|
10,658
|
|
|
(1,702
|
)
|
|
17
|
|
|
20,747
|
|
|
(3,047
|
)
|
|
10
|
|
|
31,405
|
|
|
(4,749
|
)
|
||||||
Commercial mortgage backed securities
|
|
39,385
|
|
|
(547
|
)
|
|
16
|
|
|
47,712
|
|
|
(1,184
|
)
|
|
60
|
|
|
87,097
|
|
|
(1,731
|
)
|
||||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Agency backed
|
|
4,028
|
|
|
(13
|
)
|
|
28
|
|
|
26,573
|
|
|
(241
|
)
|
|
34
|
|
|
30,601
|
|
|
(254
|
)
|
||||||
Non-agency backed
|
|
18,001
|
|
|
(207
|
)
|
|
16
|
|
|
3,521
|
|
|
(70
|
)
|
|
5
|
|
|
21,522
|
|
|
(277
|
)
|
||||||
Collateralized loan / debt obligations
|
|
157,122
|
|
|
(6,105
|
)
|
|
61
|
|
|
58,079
|
|
|
(3,018
|
)
|
|
24
|
|
|
215,201
|
|
|
(9,123
|
)
|
||||||
Asset-backed securities
|
|
16,188
|
|
|
(187
|
)
|
|
23
|
|
|
1,041
|
|
|
(8
|
)
|
|
8
|
|
|
17,229
|
|
|
(195
|
)
|
||||||
Total temporarily impaired securities
|
|
$
|
680,732
|
|
|
$
|
(53,730
|
)
|
|
551
|
|
|
$
|
337,173
|
|
|
$
|
(15,380
|
)
|
|
292
|
|
|
$
|
1,017,905
|
|
|
$
|
(69,110
|
)
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
(Amounts in Thousands)
As of December 31, 2015 |
|
Fair Market Value
|
|
Unrealized Losses
|
|
No. of Positions Held
|
|
Fair Market Value
|
|
Unrealized Losses
|
|
No. of Positions Held
|
|
Fair Market Value
|
|
Unrealized Losses
|
||||||||||||||
Common and preferred stock
|
|
$
|
59,302
|
|
|
$
|
(8,711
|
)
|
|
67
|
|
|
$
|
402
|
|
|
$
|
(104
|
)
|
|
2
|
|
|
$
|
59,704
|
|
|
$
|
(8,815
|
)
|
U.S. treasury securities
|
|
31,658
|
|
|
(232
|
)
|
|
77
|
|
|
2,586
|
|
|
(26
|
)
|
|
8
|
|
|
34,244
|
|
|
(258
|
)
|
||||||
U.S. government agencies
|
|
22,412
|
|
|
(262
|
)
|
|
20
|
|
|
182
|
|
|
(1
|
)
|
|
2
|
|
|
22,594
|
|
|
(263
|
)
|
||||||
Municipal bonds
|
|
121,550
|
|
|
(867
|
)
|
|
111
|
|
|
17,163
|
|
|
(663
|
)
|
|
30
|
|
|
138,713
|
|
|
(1,530
|
)
|
||||||
Foreign government
|
|
18,598
|
|
|
(688
|
)
|
|
27
|
|
|
5,977
|
|
|
(124
|
)
|
|
1
|
|
|
24,575
|
|
|
(812
|
)
|
||||||
Corporate bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Finance
|
|
604,898
|
|
|
(33,068
|
)
|
|
349
|
|
|
59,020
|
|
|
(1,325
|
)
|
|
22
|
|
|
663,918
|
|
|
(34,393
|
)
|
||||||
Industrial
|
|
858,632
|
|
|
(65,887
|
)
|
|
633
|
|
|
82,495
|
|
|
(14,364
|
)
|
|
55
|
|
|
941,127
|
|
|
(80,251
|
)
|
||||||
Utilities
|
|
79,358
|
|
|
(5,305
|
)
|
|
113
|
|
|
7,712
|
|
|
(3,810
|
)
|
|
5
|
|
|
87,070
|
|
|
(9,115
|
)
|
||||||
Commercial mortgage backed securities
|
|
35,405
|
|
|
(1,079
|
)
|
|
100
|
|
|
2,870
|
|
|
(101
|
)
|
|
6
|
|
|
38,275
|
|
|
(1,180
|
)
|
||||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Agency backed
|
|
334,224
|
|
|
(2,788
|
)
|
|
163
|
|
|
35,446
|
|
|
(1,345
|
)
|
|
29
|
|
|
369,670
|
|
|
(4,133
|
)
|
||||||
Non-agency backed
|
|
95,001
|
|
|
(4,077
|
)
|
|
39
|
|
|
4,023
|
|
|
(62
|
)
|
|
4
|
|
|
99,024
|
|
|
(4,139
|
)
|
||||||
Collateralized loan / debt obligations
|
|
201,086
|
|
|
(6,161
|
)
|
|
78
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201,086
|
|
|
(6,161
|
)
|
||||||
Asset-backed securities
|
|
30,302
|
|
|
(1,309
|
)
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,302
|
|
|
(1,309
|
)
|
||||||
Total temporarily impaired securities
|
|
$
|
2,492,426
|
|
|
$
|
(130,434
|
)
|
|
1,847
|
|
|
$
|
217,876
|
|
|
$
|
(21,925
|
)
|
|
164
|
|
|
$
|
2,710,302
|
|
|
$
|
(152,359
|
)
|
(Amounts in Thousands)
As of June 30, 2016 |
|
Cost or amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Market value
|
||||||||
Common stock
|
|
$
|
26,232
|
|
|
$
|
1,215
|
|
|
$
|
(600
|
)
|
|
$
|
26,847
|
|
(Amounts in Thousands)
As of December 31, 2015 |
|
Cost or amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Market value
|
||||||||
Common stock
|
|
$
|
26,937
|
|
|
$
|
739
|
|
|
$
|
(405
|
)
|
|
$
|
27,271
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Fixed maturities, available-for-sale
|
|
$
|
46,235
|
|
|
$
|
35,199
|
|
|
$
|
92,428
|
|
|
$
|
67,952
|
|
Equity securities, available-for-sale
|
|
4,098
|
|
|
661
|
|
|
6,462
|
|
|
1,070
|
|
||||
Equity securities, trading
|
|
(125
|
)
|
|
32
|
|
|
(278
|
)
|
|
40
|
|
||||
Cash and short term investments
|
|
686
|
|
|
923
|
|
|
1,772
|
|
|
2,588
|
|
||||
|
|
50,894
|
|
|
36,815
|
|
|
100,384
|
|
|
71,650
|
|
||||
Investment expenses
|
|
(149
|
)
|
|
(532
|
)
|
|
(224
|
)
|
|
(794
|
)
|
||||
|
|
$
|
50,745
|
|
|
$
|
36,283
|
|
|
$
|
100,160
|
|
|
$
|
70,856
|
|
(Amounts in Thousands)
Three Months Ended June 30, 2016
|
|
Gross Gains
|
|
Gross Losses
|
|
Net Gains (Losses)
|
||||||
Fixed maturities, available-for-sale
|
|
$
|
35,008
|
|
|
$
|
(1,571
|
)
|
|
$
|
33,437
|
|
Equity securities, available-for-sale
|
|
608
|
|
|
(658
|
)
|
|
(50
|
)
|
|||
Equity securities, trading
|
|
5,315
|
|
|
(5,575
|
)
|
|
(260
|
)
|
|||
Other invested assets
|
|
4
|
|
|
(1,076
|
)
|
|
(1,072
|
)
|
|||
Write-down of equity securities, available-for-sale
|
|
—
|
|
|
(16,956
|
)
|
|
(16,956
|
)
|
|||
|
|
$
|
40,935
|
|
|
$
|
(25,836
|
)
|
|
$
|
15,099
|
|
|
|
|
|
|
|
|
||||||
(Amounts in Thousands)
Three Months Ended June 30, 2015
|
|
Gross Gains
|
|
Gross Losses
|
|
Net Gains (Losses)
|
||||||
Fixed maturities, available-for-sale
|
|
$
|
2,228
|
|
|
$
|
(3,653
|
)
|
|
$
|
(1,425
|
)
|
Equity securities, available-for-sale
|
|
102
|
|
|
(32
|
)
|
|
70
|
|
|||
Equity securities, trading
|
|
3,414
|
|
|
(2,025
|
)
|
|
1,389
|
|
|||
Other invested assets
|
|
—
|
|
|
(1,210
|
)
|
|
(1,210
|
)
|
|||
Write-down of fixed maturities, available-for-sale
|
|
—
|
|
|
(274
|
)
|
|
(274
|
)
|
|||
Write-down of equity securities, available-for-sale
|
|
—
|
|
|
(1,192
|
)
|
|
(1,192
|
)
|
|||
|
|
$
|
5,744
|
|
|
$
|
(8,386
|
)
|
|
$
|
(2,642
|
)
|
|
|
|
|
|
|
|
||||||
(Amounts in Thousands)
Six Months Ended June 30, 2016
|
|
Gross Gains
|
|
Gross Losses
|
|
Net Gains (Losses)
|
||||||
Fixed maturities, available-for-sale
|
|
$
|
39,811
|
|
|
$
|
(1,617
|
)
|
|
$
|
38,194
|
|
Equity securities, available-for-sale
|
|
1,268
|
|
|
(799
|
)
|
|
469
|
|
|||
Equity securities, trading
|
|
14,927
|
|
|
(12,431
|
)
|
|
2,496
|
|
|||
Other invested assets
|
|
4
|
|
|
(1,133
|
)
|
|
(1,129
|
)
|
|||
Write-down of equity securities, available-for-sale
|
|
—
|
|
|
(16,956
|
)
|
|
(16,956
|
)
|
|||
|
|
$
|
56,010
|
|
|
$
|
(32,936
|
)
|
|
$
|
23,074
|
|
|
|
|
|
|
|
|
||||||
(Amounts in Thousands)
Six Months Ended June 30, 2015
|
|
Gross Gains
|
|
Gross Losses
|
|
Net Gains (Losses)
|
||||||
Fixed maturities, available-for-sale
|
|
$
|
22,922
|
|
|
$
|
(7,843
|
)
|
|
$
|
15,079
|
|
Equity securities, available-for-sale
|
|
2,266
|
|
|
(1,711
|
)
|
|
555
|
|
|||
Equity securities, trading
|
|
6,737
|
|
|
(4,500
|
)
|
|
2,237
|
|
|||
Other invested assets
|
|
—
|
|
|
(2,378
|
)
|
|
(2,378
|
)
|
|||
Write-down of fixed securities, available-for-sale
|
|
—
|
|
|
(1,290
|
)
|
|
(1,290
|
)
|
|||
Write-down of equity securities, trading
|
|
—
|
|
|
(1,192
|
)
|
|
(1,192
|
)
|
|||
|
|
$
|
31,925
|
|
|
$
|
(18,914
|
)
|
|
$
|
13,011
|
|
|
|
Remaining Life of Notional Amount
(1)
|
||||||||||||||||||
(Amounts in Thousands)
|
|
One Year
|
|
Two Through Five Years
|
|
Six Through Ten Years
|
|
After Ten Years
|
|
Total
|
||||||||||
Interest rate swaps
|
|
$
|
70,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70,000
|
|
(1)
|
Notional amount is not representative of either market risk or credit risk and is not recorded in the consolidated balance sheet.
|
(Amounts in Thousands)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Restricted cash and cash equivalents
|
|
$
|
591,984
|
|
|
$
|
380,699
|
|
Restricted investments - fixed maturities at fair value
|
|
1,815,846
|
|
|
1,490,547
|
|
||
Total restricted cash, cash equivalents, and investments
|
|
$
|
2,407,830
|
|
|
$
|
1,871,246
|
|
4.
|
Fair Value of Financial Instruments
|
(Amounts in Thousands)
As of June 30, 2016 |
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities
|
|
$
|
277,324
|
|
|
$
|
277,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government agencies
|
|
9,748
|
|
|
—
|
|
|
9,748
|
|
|
—
|
|
||||
Municipal bonds
|
|
878,185
|
|
|
—
|
|
|
878,185
|
|
|
—
|
|
||||
Foreign government
|
|
130,281
|
|
|
—
|
|
|
130,281
|
|
|
—
|
|
||||
Corporate bonds and other bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance
|
|
1,431,831
|
|
|
—
|
|
|
1,431,831
|
|
|
—
|
|
||||
Industrial
|
|
2,139,213
|
|
|
—
|
|
|
2,139,213
|
|
|
—
|
|
||||
Utilities
|
|
186,401
|
|
|
—
|
|
|
186,401
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
|
191,087
|
|
|
—
|
|
|
191,087
|
|
|
—
|
|
||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency backed
|
|
1,155,030
|
|
|
—
|
|
|
1,155,030
|
|
|
—
|
|
||||
Non-agency backed
|
|
53,151
|
|
|
—
|
|
|
53,151
|
|
|
—
|
|
||||
Collateralized loan / debt obligations
|
|
361,074
|
|
|
—
|
|
|
361,074
|
|
|
—
|
|
||||
Asset-backed securities
|
|
25,644
|
|
|
—
|
|
|
25,644
|
|
|
—
|
|
||||
Equity securities, available-for-sale
|
|
161,879
|
|
|
129,994
|
|
|
7,121
|
|
|
24,764
|
|
||||
Equity securities, trading
|
|
26,847
|
|
|
26,847
|
|
|
—
|
|
|
—
|
|
||||
Short term investments
|
|
127,880
|
|
|
127,880
|
|
|
—
|
|
|
—
|
|
||||
Other investments
|
|
38,039
|
|
|
—
|
|
|
—
|
|
|
38,039
|
|
||||
Life settlement contracts
|
|
304,434
|
|
|
—
|
|
|
—
|
|
|
304,434
|
|
||||
|
|
$
|
7,498,048
|
|
|
$
|
562,045
|
|
|
$
|
6,568,766
|
|
|
$
|
367,237
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities sold but not yet purchased
|
|
$
|
21,170
|
|
|
$
|
21,170
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities sold under agreements to repurchase, at contract value
|
|
366,860
|
|
|
—
|
|
|
366,860
|
|
|
—
|
|
||||
Life settlement contract profit commission
|
|
9,054
|
|
|
—
|
|
|
—
|
|
|
9,054
|
|
||||
Contingent consideration
|
|
64,817
|
|
|
—
|
|
|
—
|
|
|
64,817
|
|
||||
Derivatives
|
|
636
|
|
|
—
|
|
|
636
|
|
|
—
|
|
||||
|
|
$
|
462,537
|
|
|
$
|
21,170
|
|
|
$
|
367,496
|
|
|
$
|
73,871
|
|
(Amounts in Thousands)
As of December 31, 2015 |
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
$
|
70,759
|
|
|
$
|
70,759
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government agencies
|
|
45,558
|
|
|
—
|
|
|
45,558
|
|
|
—
|
|
||||
Municipal bonds
|
|
540,426
|
|
|
—
|
|
|
540,426
|
|
|
—
|
|
||||
Foreign government
|
|
113,745
|
|
|
—
|
|
|
113,745
|
|
|
—
|
|
||||
Corporate bonds and other bonds:
|
|
|
|
|
|
|
|
|
||||||||
Finance
|
|
1,362,430
|
|
|
—
|
|
|
1,362,430
|
|
|
—
|
|
||||
Industrial
|
|
1,647,063
|
|
|
—
|
|
|
1,647,063
|
|
|
—
|
|
||||
Utilities
|
|
149,500
|
|
|
—
|
|
|
149,500
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
|
151,318
|
|
|
—
|
|
|
151,318
|
|
|
—
|
|
||||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
||||||||
Agency backed
|
|
974,838
|
|
|
—
|
|
|
974,838
|
|
|
—
|
|
||||
Non-agency backed
|
|
120,229
|
|
|
—
|
|
|
120,229
|
|
|
—
|
|
||||
Collateralized loan / debt obligations
|
|
226,094
|
|
|
—
|
|
|
226,094
|
|
|
—
|
|
||||
Asset-backed securities
|
|
31,837
|
|
|
—
|
|
|
31,837
|
|
|
—
|
|
||||
Equity securities, available-for-sale
|
|
104,497
|
|
|
38,563
|
|
|
28,723
|
|
|
37,211
|
|
||||
Equity securities, trading
|
|
27,271
|
|
|
27,271
|
|
|
—
|
|
|
—
|
|
||||
Short term investments
|
|
84,266
|
|
|
84,266
|
|
|
—
|
|
|
—
|
|
||||
Other investments
|
|
30,309
|
|
|
—
|
|
|
—
|
|
|
30,309
|
|
||||
Life settlement contracts
|
|
264,001
|
|
|
—
|
|
|
—
|
|
|
264,001
|
|
||||
|
|
$
|
5,944,141
|
|
|
$
|
220,859
|
|
|
$
|
5,391,761
|
|
|
$
|
331,521
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Equity securities sold but not yet purchased
|
|
$
|
18,163
|
|
|
$
|
18,163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fixed maturity securities sold but not yet purchased
|
|
20,455
|
|
|
—
|
|
|
20,455
|
|
|
—
|
|
||||
Life settlement contract profit commission
|
|
15,406
|
|
|
—
|
|
|
—
|
|
|
15,406
|
|
||||
Contingent consideration
|
|
77,457
|
|
|
—
|
|
|
—
|
|
|
77,457
|
|
||||
Derivatives
|
|
1,077
|
|
|
—
|
|
|
1,077
|
|
|
—
|
|
||||
|
|
$
|
132,558
|
|
|
$
|
18,163
|
|
|
$
|
21,532
|
|
|
$
|
92,863
|
|
•
|
Level 1 – Valuations are based on unadjusted quoted market prices in active markets for identical financial assets or liabilities.
|
•
|
Level 2 – Valuations of financial assets and liabilities are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets obtained from third party pricing services or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data. The fair value of securities in this category are determined by management after reviewing market prices obtained from independent pricing services and brokers.
|
•
|
Level 3 – Valuations are based on unobservable inputs for assets and liabilities where there is little or no market activity. Management’s assumptions are used in internal valuation pricing models to determine the fair value of financial assets or liabilities, which may include projected cash flows, collateral performance or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period.
|
(Amounts in Thousands)
|
|
Balance as of March 31, 2016
|
|
Net income
|
|
Other comprehensive income
|
|
Purchases and issuances
|
|
Sales and settlements
|
|
Net transfers into (out of) Level 3
|
|
Balance as of June 30,
2016 |
||||||||||||||
Other investments
|
|
$
|
42,322
|
|
|
$
|
(330
|
)
|
|
$
|
—
|
|
|
$
|
320
|
|
|
$
|
(97
|
)
|
|
$
|
(4,176
|
)
|
|
$
|
38,039
|
|
Equity securities, available-for-sale
|
|
25,556
|
|
|
—
|
|
|
(776
|
)
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
24,764
|
|
|||||||
Life settlement contracts
|
|
294,573
|
|
|
28,532
|
|
|
—
|
|
|
11,330
|
|
|
(30,001
|
)
|
|
—
|
|
|
304,434
|
|
|||||||
Life settlement contract profit commission
|
|
(7,168
|
)
|
|
(1,886
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,054
|
)
|
|||||||
Contingent consideration
|
|
(64,738
|
)
|
|
(1,761
|
)
|
|
—
|
|
|
(11,461
|
)
|
|
13,143
|
|
|
—
|
|
|
(64,817
|
)
|
|||||||
Total
|
|
$
|
290,545
|
|
|
$
|
24,555
|
|
|
$
|
(776
|
)
|
|
$
|
173
|
|
|
$
|
(16,955
|
)
|
|
$
|
(4,176
|
)
|
|
$
|
293,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
(Amounts in Thousands)
|
|
Balance as of January 1, 2016
|
|
Net income
|
|
Other comprehensive income
|
|
Purchases and issuances
|
|
Sales and settlements
|
|
Net transfers into (out of) Level 3
|
|
Balance as of June 30,
2016 |
||||||||||||||
Other investments
|
|
$
|
30,309
|
|
|
$
|
(1,486
|
)
|
|
$
|
—
|
|
|
$
|
695
|
|
|
$
|
(286
|
)
|
|
$
|
8,807
|
|
|
$
|
38,039
|
|
Equity securities, available-for-sale
|
|
37,211
|
|
|
—
|
|
|
(12,449
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
24,764
|
|
|||||||
Life settlement contracts
|
|
264,001
|
|
|
59,161
|
|
|
—
|
|
|
11,330
|
|
|
(30,058
|
)
|
|
—
|
|
|
304,434
|
|
|||||||
Life settlement contract profit commission
|
|
(15,406
|
)
|
|
(9,054
|
)
|
|
—
|
|
|
—
|
|
|
15,406
|
|
|
—
|
|
|
(9,054
|
)
|
|||||||
Contingent consideration
|
|
(77,457
|
)
|
|
(2,346
|
)
|
|
—
|
|
|
(8,460
|
)
|
|
23,446
|
|
|
—
|
|
|
(64,817
|
)
|
|||||||
Total
|
|
$
|
238,658
|
|
|
$
|
46,275
|
|
|
$
|
(12,449
|
)
|
|
$
|
3,567
|
|
|
$
|
8,508
|
|
|
$
|
8,807
|
|
|
$
|
293,366
|
|
(Amounts in Thousands)
|
|
Balance as of March 31, 2015
|
|
Net income
|
|
Other comprehensive income
|
|
Purchases and issuances
|
|
Sales and settlements
|
|
Net transfers into (out of) Level 3
|
|
Balance as of June 30, 2015
|
||||||||||||||
Other investments
|
|
$
|
14,496
|
|
|
$
|
(58
|
)
|
|
$
|
—
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,759
|
|
Equity securities, available-for-sale
|
|
37,765
|
|
|
—
|
|
|
2,467
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,232
|
|
|||||||
Life settlement contracts
|
|
259,785
|
|
|
17,640
|
|
|
—
|
|
|
—
|
|
|
(10,032
|
)
|
|
—
|
|
|
267,393
|
|
|||||||
Life settlement contract profit commission
|
|
(14,575
|
)
|
|
(2,419
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,994
|
)
|
|||||||
Contingent consideration
|
|
(82,514
|
)
|
|
—
|
|
|
—
|
|
|
28
|
|
|
5,696
|
|
|
—
|
|
|
(76,790
|
)
|
|||||||
Total
|
|
$
|
214,957
|
|
|
$
|
15,163
|
|
|
$
|
2,467
|
|
|
$
|
349
|
|
|
$
|
(4,336
|
)
|
|
$
|
—
|
|
|
$
|
228,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
(Amounts in Thousands)
|
|
Balance as of January 1, 2015
|
|
Net income
|
|
Other comprehensive income
|
|
Purchases and issuances
|
|
Sales and settlements
|
|
Net transfers into (out of) Level 3
|
|
Balance as of June 30, 2015
|
||||||||||||||
Other investments
|
|
$
|
13,315
|
|
|
$
|
414
|
|
|
$
|
—
|
|
|
$
|
1,367
|
|
|
$
|
(337
|
)
|
|
$
|
—
|
|
|
$
|
14,759
|
|
Equity securities, available-for-sale
|
|
34,886
|
|
|
—
|
|
|
5,392
|
|
|
—
|
|
|
(46
|
)
|
|
|
|
40,232
|
|
||||||||
Life settlement contracts
|
|
264,517
|
|
|
38,890
|
|
|
—
|
|
|
—
|
|
|
(36,014
|
)
|
|
—
|
|
|
267,393
|
|
|||||||
Life settlement contract profit commission
|
|
(16,534
|
)
|
|
(460
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,994
|
)
|
|||||||
Contingent consideration
|
|
(41,704
|
)
|
|
—
|
|
|
—
|
|
|
(44,960
|
)
|
|
9,874
|
|
|
—
|
|
|
(76,790
|
)
|
|||||||
Total
|
|
$
|
254,480
|
|
|
$
|
38,844
|
|
|
$
|
5,392
|
|
|
$
|
(43,593
|
)
|
|
$
|
(26,523
|
)
|
|
$
|
—
|
|
|
$
|
228,600
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
|
$
|
28,532
|
|
|
$
|
17,640
|
|
|
$
|
59,161
|
|
|
$
|
38,890
|
|
Premiums paid
|
|
(13,354
|
)
|
|
(11,158
|
)
|
|
(25,456
|
)
|
|
(22,288
|
)
|
||||
Profit commission
|
|
(1,886
|
)
|
|
(2,419
|
)
|
|
(9,054
|
)
|
|
(460
|
)
|
||||
Other expenses
|
|
(616
|
)
|
|
(967
|
)
|
|
(1,245
|
)
|
|
(1,673
|
)
|
||||
Gain on investment in life settlement contracts
|
|
$
|
12,676
|
|
|
$
|
3,096
|
|
|
$
|
23,406
|
|
|
$
|
14,469
|
|
•
|
Equity and Fixed Income Investments:
Fair value disclosures for these investments are disclosed above in this note. As of June 30, 2016, the Company's Level 3 equity securities consisted primarily of privately placed warrants of companies that have publicly traded common stock. The fair value of these equity securities as of June 30, 2016 was derived from the quoted price of the underlying common stock adjusted for other inputs that are not market observable.
|
•
|
Cash and cash equivalents, restricted cash and cash equivalents, and short term investments:
The carrying value of cash and cash equivalents, restricted cash and cash equivalents, and short term investments approximate their respective fair value and are classified as Level 1 in the fair value hierarchy.
|
•
|
Premiums Receivable:
The carrying values reported in the accompanying balance sheets for these financial instruments approximate their fair values due to the short term nature of the asset and are classified as Level 1 in the fair value hierarchy.
|
•
|
Other Investments:
Other investments that are reported at fair value consisted primarily of investments in private limited partnerships, certain foreign investments, and other. Other investments reported at fair value accounted for approximately
0.5%
of the Company's investment portfolio as of
June 30, 2016
, which the Company believes is immaterial to its overall financial position or its results of operations. The Company estimates the fair value based on significant unobservable inputs in the valuation process. As a result, the Company classified the fair value estimates as Level 3 in the fair value hierarchy.
|
•
|
Equity Investment in Unconsolidated Subsidiaries - Related Party:
The Company has an ownership percentage of approximately
12%
in National General Holdings Corp. ("NGHC"), a publicly held insurance holding company (Nasdaq: NGHC). The Company accounts for this investment under the equity method of accounting as it has the ability to exert significant influence on NGHC. The fair value and carrying value of the investment was approximately
$263,368
and
$149,573
, respectively, as of
June 30, 2016
.
|
•
|
Subordinated Debentures and Debt:
The fair value of the Company's material debt arrangements as of
June 30, 2016
was as follows:
|
|
Carrying Value
|
|
Fair Value
|
||||
7.25% Subordinated Notes due 2055
|
$
|
145,140
|
|
|
$
|
153,420
|
|
7.50% Subordinated Notes due 2055
|
130,628
|
|
|
139,914
|
|
||
2.75% Convertible senior notes due 2044
|
163,269
|
|
|
178,833
|
|
||
6.125% Notes due 2023
|
248,048
|
|
|
259,224
|
|
||
Junior subordinated debentures due 2035-2037
|
121,984
|
|
|
80,900
|
|
||
Trust preferred securities due 2033-2037
|
92,786
|
|
|
92,786
|
|
||
Revolving credit facility
|
130,000
|
|
|
130,000
|
|
||
Other
|
197,744
|
|
|
197,744
|
|
•
|
Derivatives:
The Company classifies interest rate swaps as Level 2 in the fair value hierarchy. The Company uses these interest rate swaps to hedge floating interest rates on its debt, thereby changing the variable rate exposure to a fixed rate exposure for interest on these obligations. The estimated fair value of the interest rate swaps, which is obtained from a third party pricing service, is measured using discounted cash flow analysis that incorporates significant observable inputs, including the LIBOR forward curve and a measurement of volatility.
|
•
|
Contingent consideration:
The fair value of contingent consideration is based on a discounted cash flow methodology and is classified as Level 3 in the fair value hierarchy. The range of discount rates used for contingent consideration was primarily between 8% and 14%.
|
•
|
Life settlement contracts and life settlement contract profit commission:
The fair value of life settlement contracts as well as life settlement profit commission liability is based on information available to the Company at the end of the reporting period. These financial instruments are classified as Level 3 in the fair value hierarchy. The Company considers the following factors in its fair value estimates: cost at date of purchase, recent purchases and sales of similar investments (if available and applicable), financial standing of the issuer, changes in economic conditions affecting the issuer, maintenance cost, premiums, benefits, standard actuarially developed mortality tables and life expectancy reports prepared by nationally recognized and independent third party medical underwriters. The Company estimates the fair value of a life insurance policy by applying an investment discount rate based on the cost of funding the Company's life settlement contracts as compared to returns on investments in asset classes with comparable credit quality, which the Company has determined to be
7.5%
, to the expected cash flow generated by the policies in the Company's life settlement portfolio (death benefits less premium payments), net of policy specific adjustments and reserves. In order to confirm the integrity of their calculation of fair value, the Company, quarterly, retains an independent third-party actuary to verify that the actuarial modeling used by the Company to determine fair value was performed correctly and that the valuation, as determined through the Company's actuarial modeling, is consistent with other methodologies. The Company considers this information in its assessment of the reasonableness of the life expectancy and discount rate inputs used in the valuation of these investments.
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
Average age of insured
|
|
82.5 years
|
|
|
82.0 years
|
|
|||
Average life expectancy, months
(1)
|
|
108
|
|
|
114
|
|
|||
Average face amount per policy (Amounts in thousands)
|
|
$
|
6,365
|
|
|
$
|
6,564
|
|
|
Effective discount rate
(2)
|
|
12.8
|
%
|
|
13.7
|
%
|
(1)
|
Standard life expectancy as adjusted for specific circumstances.
|
(2)
|
Effective discount rate ("EDR") is the Company's estimated internal rate of return on its life settlement contract portfolio and is determined from the gross expected cash flows and valuation of the portfolio. The valuation of the portfolio is calculated net of all reserves using a
7.5%
discount rate. The EDR is inclusive of the reserves and the gross expected cash flows of the portfolio. The Company anticipates that the EDR's range is between
12.5%
and
17.5%
and reflects the uncertainty that exists surrounding the information available as of the reporting date. As the accuracy and reliability of information improves (declines), the EDR will decrease (increase).
|
|
|
Change in life expectancy
|
||||||
(Amounts in Thousands)
|
|
Plus 4 Months
|
|
Minus 4 Months
|
||||
Investment in life policies:
|
|
|
|
|
|
|
||
June 30, 2016
|
|
$
|
(38,254
|
)
|
|
$
|
45,092
|
|
December 31, 2015
|
|
$
|
(37,697
|
)
|
|
$
|
40,997
|
|
|
|
|
Change in discount rate
(1)
|
||||||
(Amounts in Thousands)
|
|
Plus 1%
|
|
Minus 1%
|
|||||
Investment in life policies:
|
|
|
|
|
|
|
|||
June 30, 2016
|
|
$
|
(26,601
|
)
|
|
$
|
29,514
|
|
|
December 31, 2015
|
|
$
|
(26,558
|
)
|
|
$
|
29,644
|
|
|
|
|
|
|
|
|
(1)
|
Discount rate is a present value calculation that considers legal risk, credit risk and liquidity risk and is a component of EDR.
|
5.
|
Investment in Life Settlements
|
(Amounts in Thousands, except number of Life Settlement Contracts)
Expected Maturity Term in Years
|
|
Number of Life Settlement Contracts
|
|
Fair Value
(1)
|
|
Face Value
|
|||||
As of June 30, 2016
|
|
|
|
|
|
|
|||||
0-1
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
1-2
|
|
1
|
|
|
1,868
|
|
|
2,500
|
|
||
2-3
|
|
8
|
|
|
42,956
|
|
|
71,000
|
|
||
3-4
|
|
9
|
|
|
35,331
|
|
|
64,422
|
|
||
4-5
|
|
9
|
|
|
19,542
|
|
|
62,000
|
|
||
Thereafter
|
|
228
|
|
|
204,737
|
|
|
1,412,314
|
|
||
Total
|
|
255
|
|
|
$
|
304,434
|
|
|
$
|
1,612,236
|
|
(Amounts in Thousands, except number of Life Settlement Contracts)
Expected Maturity Term in Years
|
|
Number of Life Settlement Contracts
|
|
Fair Value
(1)
|
|
Face Value
|
||||||
As of December 31, 2015
|
|
|
|
|
|
|
||||||
0-1
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1-2
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
2-3
|
|
8
|
|
|
31,261
|
|
|
70,500
|
|
|||
3-4
|
|
8
|
|
|
20,117
|
|
|
46,500
|
|
|||
4-5
|
|
4
|
|
|
6,760
|
|
|
20,000
|
|
|||
Thereafter
|
|
235
|
|
|
205,863
|
|
|
1,481,313
|
|
|||
Total
|
|
255
|
|
|
$
|
264,001
|
|
|
$
|
1,618,313
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company determined the fair value as of
June 30, 2016
based on
215
policies out of
255
policies, as the Company assigned no value to
40
of the policies as of
June 30, 2016
. The Company determined the fair value as of
December 31, 2015
based on
213
policies out of
255
policies, as the Company assigned no value to
42
of the policies as of
December 31, 2015
. The Company estimated the fair value of a life insurance policy using a cash flow model with an appropriate discount rate. In some cases, the cash flow model calculates the value of an individual policy to be negative, and therefore the fair value of the policy is zero as no liability exists when a negative value is calculated. The Company is not contractually bound to pay the premium on its life settlement contracts and, therefore, would not pay a willing buyer to assume title of these contracts. Additionally, certain of the Company's acquired policies were structured to have low premium payments at inception of the policy term, which later escalate greatly towards the tail end of the policy term. At the current time, the Company expenses all premium paid, even on policies with zero fair value. Once the premium payments escalate, the Company may allow the policies to lapse. In the event that death benefits are realized in the time frame between initial acquisition and premium escalation, it is a benefit to cash flow.
|
(Amounts in Thousands, except number of Life Settlement Contracts)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Number of policies with a negative value from discounted cash flow model as of period end
|
|
40
|
|
|
42
|
|
||
Premiums paid for the preceding twelve month period for period ended
|
|
$
|
7,163
|
|
|
$
|
4,971
|
|
Death benefit received
|
|
$
|
—
|
|
|
$
|
—
|
|
(Amounts in Thousands)
|
|
Premiums Due on Life Settlement Contracts
|
||
2016
|
|
$
|
64,353
|
|
2017
|
|
42,020
|
|
|
2018
|
|
43,105
|
|
|
2019
|
|
41,350
|
|
|
2020
|
|
37,788
|
|
|
Thereafter
|
|
443,511
|
|
|
Total
|
|
$
|
672,127
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Balance, beginning of period
|
|
$
|
761,802
|
|
|
$
|
651,884
|
|
|
$
|
704,243
|
|
|
$
|
628,383
|
|
Acquisition costs deferred
|
|
298,981
|
|
|
211,760
|
|
|
530,364
|
|
|
391,459
|
|
||||
Amortization
|
|
(187,142
|
)
|
|
(168,494
|
)
|
|
(360,966
|
)
|
|
(324,692
|
)
|
||||
Balance, end of period
|
|
$
|
873,641
|
|
|
$
|
695,150
|
|
|
$
|
873,641
|
|
|
$
|
695,150
|
|
(Amounts in Thousands)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Revolving credit facility
|
|
$
|
130,000
|
|
|
$
|
130,000
|
|
5.5% Convertible senior notes due 2021 (the "2021 Notes")
|
|
5,166
|
|
|
5,103
|
|
||
2.75% Convertible senior notes due 2044 (the "2044 Notes")
|
|
163,269
|
|
|
160,258
|
|
||
6.125% Senior notes due 2023 (the "2023 Notes")
|
|
248,048
|
|
|
247,911
|
|
||
Junior subordinated debentures (the "2035-2037 Notes")
|
|
121,984
|
|
|
118,226
|
|
||
Trust preferred securities (the "2033-2037 TPS Notes")
|
|
92,786
|
|
|
—
|
|
||
7.25% Subordinated Notes due 2055 (the "7.25% 2055 Notes")
|
|
145,140
|
|
|
145,078
|
|
||
7.50% Subordinated Notes due 2055 (the "7.50% 2055 Notes")
|
|
130,628
|
|
|
130,572
|
|
||
Secured loan agreements
|
|
74,038
|
|
|
38,455
|
|
||
Promissory notes
|
|
118,540
|
|
|
13,753
|
|
||
|
|
$
|
1,229,599
|
|
|
$
|
989,356
|
|
(1)
|
Amount includes debt outstanding under the 2021 Notes and 2044 Notes, which is net of unamortized original issue discount of
$795
and
$48,352
, respectively.
|
(Amounts in Thousands)
|
|
Letters of Credit Limit
|
|
Letters of Credit Outstanding
|
|
Letters of Credit Available
|
||||||
Revolving credit facility
|
|
$
|
175,000
|
|
|
$
|
120,136
|
|
|
$
|
54,864
|
|
Funds at Lloyd's facility, in USD equivalent
|
|
399,420
|
|
|
390,405
|
|
|
9,015
|
|
|||
ING Bank N.V. and Deutsche Bank Netherlands N.V. facilities, in USD equivalent
|
|
87,300
|
|
|
67,976
|
|
|
19,324
|
|
|||
Comerica bank letters of credit
|
|
75,000
|
|
|
48,467
|
|
|
26,533
|
|
|||
Other letters of credit, in aggregate
|
|
1,675
|
|
|
1,675
|
|
|
—
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revolving credit facility
|
|
$
|
1,098
|
|
|
$
|
728
|
|
|
$
|
2,254
|
|
|
$
|
1,544
|
|
Funds at Lloyd's facility
|
|
1,123
|
|
|
634
|
|
|
2,322
|
|
|
1,681
|
|
||||
2021 Notes
|
|
114
|
|
|
245
|
|
|
229
|
|
|
594
|
|
||||
2023 Notes
|
|
3,896
|
|
|
3,896
|
|
|
7,793
|
|
|
7,793
|
|
||||
2035-2037 Notes
|
|
1,546
|
|
|
1,695
|
|
|
3,061
|
|
|
3,715
|
|
||||
2033-2037 TPS Notes
|
|
769
|
|
|
—
|
|
|
769
|
|
|
—
|
|
||||
2044 Notes
|
|
3,116
|
|
|
3,016
|
|
|
6,232
|
|
|
6,031
|
|
||||
7.25% 2055 Notes
|
|
2,750
|
|
|
368
|
|
|
5,500
|
|
|
368
|
|
||||
7.50% 2055 Notes
|
|
2,559
|
|
|
—
|
|
|
5,118
|
|
|
—
|
|
||||
Secured loan agreements
|
|
178
|
|
|
223
|
|
|
367
|
|
|
459
|
|
||||
Promissory notes
|
|
1,397
|
|
|
154
|
|
|
1,555
|
|
|
310
|
|
||||
Other, including interest income
|
|
1,192
|
|
|
(1,313
|
)
|
|
2,238
|
|
|
(2,594
|
)
|
||||
|
|
$
|
19,738
|
|
|
$
|
9,646
|
|
|
$
|
37,438
|
|
|
$
|
19,901
|
|
(Amounts in Thousands)
Name of Trust |
|
Aggregate
Liquidation Amount of Trust Preferred Securities |
|
Aggregate
Liquidation Amount of Common Securities |
|
Aggregate
Principal Amount of Notes |
|
Stated
Maturity of Notes |
|
Per Annum
Interest Rate of Notes |
||||||||
RIG Capital Trust I
|
|
$
|
10,000
|
|
|
$
|
310
|
|
|
$
|
10,310
|
|
|
9/30/2033
|
|
4.631
|
|
(1)
|
RIG Capital Statutory Trust II
|
|
20,000
|
|
|
619
|
|
|
20,619
|
|
|
10/29/2033
|
|
4.489
|
|
(2)
|
|||
RIG Capital Trust III
|
|
20,000
|
|
|
619
|
|
|
20,619
|
|
|
12/15/2036
|
|
3.853
|
|
(3)
|
|||
RIG Capital Trust IV
|
|
25,000
|
|
|
774
|
|
|
25,774
|
|
|
6/15/2037
|
|
3.853
|
|
(3)
|
|||
RIG Capital Trust V
|
|
15,000
|
|
|
464
|
|
|
15,464
|
|
|
9/15/2037
|
|
3.950
|
|
(4)
|
|||
Total trust preferred securities
|
|
$
|
90,000
|
|
|
$
|
2,786
|
|
|
$
|
92,786
|
|
|
|
|
|
|
|
|
(1)
|
The interest rate is three-month LIBOR plus
4.00%
.
|
(2)
|
The interest rate is three-month LIBOR plus
3.85%
.
|
(3)
|
The interest rate is three-month LIBOR plus
3.20%
.
|
(4)
|
The interest rate is three-month LIBOR plus
3.30%
.
|
8.
|
Acquisition Costs and Other Underwriting Expenses
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Policy acquisition expenses
|
|
$
|
115,597
|
|
|
$
|
94,927
|
|
|
$
|
249,370
|
|
|
$
|
205,894
|
|
Salaries and benefits
|
|
159,006
|
|
|
135,736
|
|
|
284,534
|
|
|
243,158
|
|
||||
Other insurance general and administrative expenses
|
|
24,200
|
|
|
8,047
|
|
|
29,533
|
|
|
21,334
|
|
||||
|
|
$
|
298,803
|
|
|
$
|
238,710
|
|
|
$
|
563,437
|
|
|
$
|
470,386
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands, except for earnings per share)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Basic earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to AmTrust common shareholders
|
|
$
|
134,791
|
|
|
$
|
70,748
|
|
|
$
|
235,048
|
|
|
$
|
225,444
|
|
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
|
—
|
|
|
173
|
|
|
—
|
|
|
561
|
|
||||
Net income allocated to AmTrust common shareholders
|
|
$
|
134,791
|
|
|
$
|
70,575
|
|
|
$
|
235,048
|
|
|
$
|
224,883
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding – basic
|
|
171,160
|
|
|
165,120
|
|
|
173,334
|
|
|
163,904
|
|
||||
Less: Weighted average participating shares outstanding
|
|
—
|
|
|
404
|
|
|
—
|
|
|
410
|
|
||||
Weighted average common shares outstanding - basic
|
|
171,160
|
|
|
164,716
|
|
|
173,334
|
|
|
163,494
|
|
||||
Net income per AmTrust common share - basic
|
|
$
|
0.79
|
|
|
$
|
0.43
|
|
|
$
|
1.36
|
|
|
$
|
1.38
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to AmTrust common shareholders
|
|
$
|
134,791
|
|
|
$
|
70,748
|
|
|
$
|
235,048
|
|
|
$
|
225,444
|
|
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
|
—
|
|
|
173
|
|
|
—
|
|
|
561
|
|
||||
Net income allocated to AmTrust common shareholders
|
|
$
|
134,791
|
|
|
$
|
70,575
|
|
|
$
|
235,048
|
|
|
$
|
224,883
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding – basic
|
|
171,160
|
|
|
164,716
|
|
|
173,334
|
|
|
163,494
|
|
||||
Plus: Dilutive effect of stock options, convertible debt, other
|
|
1,865
|
|
|
3,352
|
|
|
1,881
|
|
|
3,622
|
|
||||
Weighted average common shares outstanding – dilutive
|
|
173,025
|
|
|
168,068
|
|
|
175,215
|
|
|
167,116
|
|
||||
Net income per AmTrust common shares – diluted
|
|
$
|
0.78
|
|
|
$
|
0.42
|
|
|
$
|
1.34
|
|
|
$
|
1.35
|
|
|
2016
|
|
2015
|
||||||||||
|
Shares
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
Weighted Average Exercise Price
|
||||||
Outstanding at beginning of period
|
2,783,880
|
|
|
$
|
6.99
|
|
|
3,868,740
|
|
|
$
|
5.80
|
|
Granted
|
—
|
|
|
—
|
|
|
85,000
|
|
|
27.09
|
|
||
Exercised
|
(345,137
|
)
|
|
3.79
|
|
|
(907,086
|
)
|
|
4.40
|
|
||
Canceled or terminated
|
—
|
|
|
—
|
|
|
(47,650
|
)
|
|
5.09
|
|
||
Outstanding at end of period
|
2,438,743
|
|
|
7.44
|
|
|
2,999,004
|
|
|
6.84
|
|
|
|
2015
|
|
Volatility
|
|
40.95
|
%
|
Risk-free interest rate
|
|
1.95
|
%
|
Weighted average expected lives in years
|
|
6.25
|
|
Dividend rate
|
|
1.85
|
%
|
Forfeiture rate
|
|
0.50
|
%
|
|
2016
|
|
2015
|
||||||||||
|
Shares or
Units
|
|
Weighted Average Grant Date Fair Value
|
|
Shares or
Units
|
|
Weighted Average Grant Date Fair Value
|
||||||
Non-vested at beginning of period
|
1,853,516
|
|
|
$
|
20.54
|
|
|
2,611,022
|
|
|
$
|
16.71
|
|
Granted
|
846,180
|
|
|
26.03
|
|
|
462,856
|
|
|
29.16
|
|
||
Vested
|
(789,186
|
)
|
|
17.45
|
|
|
(811,422
|
)
|
|
14.40
|
|
||
Forfeited
|
(32,987
|
)
|
|
23.73
|
|
|
(20,136
|
)
|
|
20.35
|
|
||
Non-vested at end of period
|
1,877,523
|
|
|
24.26
|
|
|
2,242,320
|
|
|
20.08
|
|
|
2016
|
|
2015
|
||||||||||
|
Shares or
Units
|
|
Weighted Average Grant Date Fair Value
|
|
Shares or
Units
|
|
Weighted Average Grant Date Fair Value
|
||||||
Non-vested at beginning of period
|
752,466
|
|
|
$
|
24.58
|
|
|
549,670
|
|
|
$
|
19.42
|
|
Granted
|
198,881
|
|
|
26.16
|
|
|
373,628
|
|
|
29.93
|
|
||
Vested
|
(234,358
|
)
|
|
22.89
|
|
|
(155,842
|
)
|
|
18.86
|
|
||
Forfeited
|
(35,766
|
)
|
|
25.57
|
|
|
—
|
|
|
—
|
|
||
Non-vested at end of period
|
681,223
|
|
|
25.57
|
|
|
767,456
|
|
|
24.65
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Income before equity in earnings of unconsolidated subsidiaries
|
|
$
|
175,300
|
|
|
$
|
81,163
|
|
|
$
|
310,315
|
|
|
$
|
286,594
|
|
Tax at federal statutory rate of 35%
|
|
$
|
61,355
|
|
|
$
|
28,407
|
|
|
$
|
108,610
|
|
|
$
|
100,308
|
|
Tax effects resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tax rate differences
|
|
(32,420
|
)
|
|
(20,239
|
)
|
|
(50,636
|
)
|
|
(23,489
|
)
|
||||
Adjustment to prior year taxes
|
|
—
|
|
|
1,949
|
|
|
—
|
|
|
(27,659
|
)
|
||||
Permanent adjustments
|
|
4,744
|
|
|
(5,116
|
)
|
|
1,167
|
|
|
(2,817
|
)
|
||||
Valuation allowance
|
|
(9,425
|
)
|
|
—
|
|
|
(9,936
|
)
|
|
—
|
|
||||
Other, net
|
|
3,664
|
|
|
(529
|
)
|
|
6,439
|
|
|
4,941
|
|
||||
|
|
$
|
27,918
|
|
|
$
|
4,472
|
|
|
$
|
55,644
|
|
|
$
|
51,284
|
|
Effective tax rate
|
|
15.9
|
%
|
|
5.5
|
%
|
|
17.9
|
%
|
|
17.9
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Results of operations:
|
|
|
|
|
|
|
|
|
||||||||
Premium written – ceded
|
|
$
|
(529,267
|
)
|
|
$
|
(522,435
|
)
|
|
$
|
(1,072,955
|
)
|
|
$
|
(1,050,720
|
)
|
Change in unearned premium – ceded
|
|
40,704
|
|
|
89,077
|
|
|
127,402
|
|
|
217,692
|
|
||||
Earned premium - ceded
|
|
$
|
(488,563
|
)
|
|
$
|
(433,358
|
)
|
|
$
|
(945,553
|
)
|
|
$
|
(833,028
|
)
|
Ceding commission on premium written
|
|
$
|
155,204
|
|
|
$
|
160,082
|
|
|
$
|
329,538
|
|
|
$
|
328,855
|
|
Ceding commission – deferred
|
|
(9,594
|
)
|
|
(30,860
|
)
|
|
(45,537
|
)
|
|
(80,946
|
)
|
||||
Ceding commission – earned
|
|
$
|
145,610
|
|
|
$
|
129,222
|
|
|
$
|
284,001
|
|
|
$
|
247,909
|
|
Incurred loss and loss adjustment expense – ceded
|
|
$
|
304,480
|
|
|
$
|
336,540
|
|
|
$
|
659,334
|
|
|
$
|
585,930
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
229,607
|
|
|
Premium receivable
|
|
4,301
|
|
|
|
Accrued interest and dividends
|
|
83
|
|
|
|
Reinsurance recoverable
|
|
4,322
|
|
|
|
Other assets
|
|
8,414
|
|
|
|
Property and equipment
|
|
10,319
|
|
|
|
Goodwill and intangible assets
|
|
55,424
|
|
|
Total assets
|
|
$
|
312,470
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss adjustment expense reserves
|
|
$
|
78,909
|
|
|
Unearned premiums
|
|
24,782
|
|
|
|
Accrued expenses and other liabilities
|
|
29,196
|
|
|
Total liabilities
|
|
$
|
132,887
|
|
|
Acquisition price
|
|
$
|
179,583
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
239,695
|
|
|
Reinsurance recoverable
|
|
27,570
|
|
|
|
Other assets
|
|
8,422
|
|
|
|
Property and equipment
|
|
964
|
|
|
Total assets
|
|
$
|
276,651
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss adjustment expense reserves
|
|
$
|
84,463
|
|
|
Unearned premiums
|
|
76,308
|
|
|
|
Accrued expenses and other liabilities
|
|
13,060
|
|
|
Total liabilities
|
|
$
|
173,831
|
|
|
Acquisition price
|
|
$
|
54,500
|
|
|
Acquisition gain
|
|
$
|
48,320
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
621,068
|
|
|
Premium receivable, net
|
|
85,455
|
|
|
|
Accrued interest and dividends
|
|
4,779
|
|
|
|
Reinsurance recoverable
|
|
625,023
|
|
|
|
Deferred tax assets
|
|
41,743
|
|
|
|
Other assets
|
|
220,004
|
|
|
|
Property and equipment
|
|
435
|
|
|
|
Goodwill and intangible assets
|
|
128,714
|
|
|
Total assets
|
|
$
|
1,727,221
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss adjustment expense reserves
|
|
$
|
885,898
|
|
|
Unearned premiums
|
|
301,972
|
|
|
|
Trust Preferred Outstanding
|
|
93,106
|
|
|
|
Accrued expenses and other liabilities
|
|
130,221
|
|
|
|
Funds held under reinsurance treaties
|
|
83,331
|
|
|
Total liabilities
|
|
$
|
1,494,528
|
|
|
Acquisition price
|
|
$
|
232,693
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
53,917
|
|
|
Premium receivable, net
|
|
15,577
|
|
|
|
Accrued interest and dividends
|
|
375
|
|
|
|
Reinsurance recoverable
|
|
17,554
|
|
|
|
Other assets
|
|
2,116
|
|
|
|
Intangible assets
|
|
1,097
|
|
|
Total assets
|
|
$
|
90,636
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss adjustment expense reserves
|
|
$
|
59,723
|
|
|
Unearned premiums
|
|
18,672
|
|
|
|
Accrued expenses and other liabilities
|
|
7,968
|
|
|
Total liabilities
|
|
$
|
86,363
|
|
|
Acquisition price
|
|
$
|
3,819
|
|
|
Acquisition gain
|
|
$
|
454
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
93,837
|
|
|
Premium receivable, net
|
|
4,651
|
|
|
|
Accrued interest and dividends
|
|
470
|
|
|
|
Other assets
|
|
2,752
|
|
|
|
Deferred tax asset
|
|
1,905
|
|
|
|
Property and equipment
|
|
1,376
|
|
|
|
Goodwill and intangible assets
|
|
4,253
|
|
|
Total assets
|
|
$
|
109,244
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss adjustment expense reserves
|
|
$
|
65,725
|
|
|
Unearned premiums
|
|
7,006
|
|
|
|
Accrued expenses and other liabilities
|
|
4,199
|
|
|
|
Reinsurance payable on paid losses
|
|
740
|
|
|
Total liabilities
|
|
$
|
77,670
|
|
|
Acquisition price
|
|
$
|
31,574
|
|
(Amounts in Thousands)
|
|
|
|||
Assets
|
|
|
|||
|
Cash and investments
|
|
$
|
192,015
|
|
|
Prepaid reinsurance premium
|
|
77,777
|
|
|
|
Other assets
|
|
22,466
|
|
|
|
Deferred tax asset
|
|
50,399
|
|
|
|
Goodwill and Intangible assets
|
|
84,215
|
|
|
Total assets
|
|
$
|
426,872
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|||
|
Loss and loss expense reserves
|
|
$
|
3,013
|
|
|
Unearned premiums
|
|
182,441
|
|
|
|
Accrued expenses and other liabilities
|
|
85,171
|
|
|
Total liabilities
|
|
$
|
270,625
|
|
|
Acquisition price
|
|
$
|
156,247
|
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||||
(Amounts in Thousands)
|
|
AmTrust
|
|
Non-Controlling Interest
|
|
Total
|
|
AmTrust
|
|
Non-Controlling Interest
|
|
Total
|
||||||||||||
Balance, December 31,
|
|
$
|
2,909,060
|
|
|
$
|
176,455
|
|
|
$
|
3,085,515
|
|
|
$
|
2,037,020
|
|
|
$
|
159,181
|
|
|
$
|
2,196,201
|
|
Net income
|
|
255,415
|
|
|
9,493
|
|
|
264,908
|
|
|
239,452
|
|
|
4,771
|
|
|
244,223
|
|
||||||
Unrealized holding gain (loss)
|
|
190,894
|
|
|
—
|
|
|
190,894
|
|
|
(52,321
|
)
|
|
—
|
|
|
(52,321
|
)
|
||||||
Reclassification adjustment
|
|
(8,045
|
)
|
|
—
|
|
|
(8,045
|
)
|
|
(1,205
|
)
|
|
—
|
|
|
(1,205
|
)
|
||||||
Foreign currency translation
|
|
(84,665
|
)
|
|
—
|
|
|
(84,665
|
)
|
|
(51,332
|
)
|
|
14
|
|
|
(51,318
|
)
|
||||||
Unrealized gain on interest rate swap
|
|
287
|
|
|
—
|
|
|
287
|
|
|
190
|
|
|
—
|
|
|
190
|
|
||||||
Extinguishment of 2021 senior notes, equity component
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,345
|
)
|
|
|
|
|
(3,345
|
)
|
||||||
Share exercises, compensation and other
|
|
4,389
|
|
|
—
|
|
|
4,389
|
|
|
8,454
|
|
|
—
|
|
|
8,454
|
|
||||||
Common share (purchase) issuance, net
|
|
(103,164
|
)
|
|
—
|
|
|
(103,164
|
)
|
|
171,672
|
|
|
—
|
|
|
171,672
|
|
||||||
Common share dividends
|
|
(52,189
|
)
|
|
(10,229
|
)
|
|
(62,418
|
)
|
|
(41,249
|
)
|
|
—
|
|
|
(41,249
|
)
|
||||||
Preferred stock issuance, net of fees
|
|
139,070
|
|
|
—
|
|
|
139,070
|
|
|
176,529
|
|
|
—
|
|
|
176,529
|
|
||||||
Preferred stock dividends
|
|
(20,367
|
)
|
|
—
|
|
|
(20,367
|
)
|
|
(14,008
|
)
|
|
—
|
|
|
(14,008
|
)
|
||||||
Capital contribution (distribution), net
|
|
—
|
|
|
5,500
|
|
|
5,500
|
|
|
—
|
|
|
(1,478
|
)
|
|
(1,478
|
)
|
||||||
Balance, June 30,
|
|
$
|
3,230,685
|
|
|
$
|
181,219
|
|
|
$
|
3,411,904
|
|
|
$
|
2,469,857
|
|
|
$
|
162,488
|
|
|
$
|
2,632,345
|
|
(Amounts in Thousands)
|
|
Foreign Currency Items
|
|
Unrealized Gains (Losses) on Investments
|
|
Interest Rate Swap Hedge
|
|
Net Benefit Plan Assets and Obligations Recognized in Stockholders' Equity
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance, March 31, 2016
|
|
$
|
(140,058
|
)
|
|
$
|
43,398
|
|
|
$
|
(581
|
)
|
|
$
|
(107
|
)
|
|
$
|
(97,348
|
)
|
Other comprehensive income (loss) before reclassification
|
|
(73,559
|
)
|
|
157,427
|
|
|
258
|
|
|
—
|
|
|
84,126
|
|
|||||
Amounts reclassed from accumulated other comprehensive income
|
|
16,912
|
|
|
(3,920
|
)
|
|
—
|
|
|
—
|
|
|
12,992
|
|
|||||
Income tax benefit (expense)
|
|
19,827
|
|
|
(51,298
|
)
|
|
(90
|
)
|
|
—
|
|
|
(31,561
|
)
|
|||||
Net current-period other comprehensive (loss) income
|
|
(36,820
|
)
|
|
102,209
|
|
|
168
|
|
|
—
|
|
|
65,557
|
|
|||||
Balance, June 30, 2016
|
|
$
|
(176,878
|
)
|
|
$
|
145,607
|
|
|
$
|
(413
|
)
|
|
$
|
(107
|
)
|
|
$
|
(31,791
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, March 31, 2015
|
|
$
|
(80,129
|
)
|
|
$
|
81,868
|
|
|
$
|
(1,294
|
)
|
|
$
|
(2,793
|
)
|
|
$
|
(2,348
|
)
|
Other comprehensive income before reclassification
|
|
21,571
|
|
|
(91,679
|
)
|
|
251
|
|
|
—
|
|
|
(69,857
|
)
|
|||||
Amounts reclassed from accumulated other comprehensive income
|
|
—
|
|
|
(1,216
|
)
|
|
—
|
|
|
—
|
|
|
(1,216
|
)
|
|||||
Income tax benefit (expense)
|
|
(7,550
|
)
|
|
32,514
|
|
|
(88
|
)
|
|
—
|
|
|
24,876
|
|
|||||
Net current-period other comprehensive income
|
|
14,021
|
|
|
(60,381
|
)
|
|
163
|
|
|
—
|
|
|
(46,197
|
)
|
|||||
Balance, June 30, 2015
|
|
$
|
(66,108
|
)
|
|
$
|
21,487
|
|
|
$
|
(1,131
|
)
|
|
$
|
(2,793
|
)
|
|
$
|
(48,545
|
)
|
(Amounts in Thousands)
|
|
Foreign Currency Items
|
|
Unrealized Gains (Losses) on Investments
|
|
Interest Rate Swap Hedge
|
|
Net Benefit Plan Assets and Obligations Recognized in Stockholders' Equity
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance, December 31, 2015
|
|
$
|
(92,213
|
)
|
|
$
|
(37,242
|
)
|
|
$
|
(700
|
)
|
|
$
|
(107
|
)
|
|
$
|
(130,262
|
)
|
Other comprehensive income (loss) before reclassification
|
|
(147,167
|
)
|
|
282,147
|
|
|
441
|
|
|
—
|
|
|
135,421
|
|
|||||
Amounts reclassed from accumulated other comprehensive income
|
|
16,912
|
|
|
(4,578
|
)
|
|
—
|
|
|
—
|
|
|
12,334
|
|
|||||
Income tax benefit (expense)
|
|
45,590
|
|
|
(94,720
|
)
|
|
(154
|
)
|
|
—
|
|
|
(49,284
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
|
(84,665
|
)
|
|
182,849
|
|
|
287
|
|
|
—
|
|
|
98,471
|
|
|||||
Balance, June 30, 2016
|
|
$
|
(176,878
|
)
|
|
$
|
145,607
|
|
|
$
|
(413
|
)
|
|
$
|
(107
|
)
|
|
$
|
(31,791
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, December 31, 2014
|
|
$
|
(14,776
|
)
|
|
$
|
75,013
|
|
|
$
|
(1,321
|
)
|
|
$
|
(2,793
|
)
|
|
$
|
56,123
|
|
Other comprehensive income before reclassification
|
|
(78,972
|
)
|
|
(80,494
|
)
|
|
292
|
|
|
—
|
|
|
(159,174
|
)
|
|||||
Amounts reclassed from accumulated other comprehensive income
|
|
—
|
|
|
(1,854
|
)
|
|
—
|
|
|
—
|
|
|
(1,854
|
)
|
|||||
Income tax benefit (expense)
|
|
27,640
|
|
|
28,822
|
|
|
(102
|
)
|
|
—
|
|
|
56,360
|
|
|||||
Net current-period other comprehensive (loss) income
|
|
(51,332
|
)
|
|
(53,526
|
)
|
|
190
|
|
|
—
|
|
|
(104,668
|
)
|
|||||
Balance, June 30, 2015
|
|
$
|
(66,108
|
)
|
|
$
|
21,487
|
|
|
$
|
(1,131
|
)
|
|
$
|
(2,793
|
)
|
|
$
|
(48,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(Amounts in Thousands)
|
|
Small Commercial Business
|
|
Specialty Risk and Extended Warranty
|
|
Specialty Program
|
|
Corporate and Other
|
|
Total
|
||||||||||
Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross written premium
|
|
$
|
1,060,558
|
|
|
$
|
651,561
|
|
|
$
|
360,993
|
|
|
$
|
—
|
|
|
$
|
2,073,112
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net written premium
|
|
601,638
|
|
|
447,061
|
|
|
219,737
|
|
|
—
|
|
|
1,268,436
|
|
|||||
Change in unearned premium
|
|
(28,660
|
)
|
|
(89,177
|
)
|
|
31,153
|
|
|
—
|
|
|
(86,684
|
)
|
|||||
Net earned premium
|
|
572,978
|
|
|
357,884
|
|
|
250,890
|
|
|
—
|
|
|
1,181,752
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense
|
|
(382,950
|
)
|
|
(231,328
|
)
|
|
(170,115
|
)
|
|
—
|
|
|
(784,393
|
)
|
|||||
Acquisition costs and other underwriting expenses
|
|
(150,014
|
)
|
|
(78,842
|
)
|
|
(69,947
|
)
|
|
—
|
|
|
(298,803
|
)
|
|||||
|
|
(532,964
|
)
|
|
(310,170
|
)
|
|
(240,062
|
)
|
|
—
|
|
|
(1,083,196
|
)
|
|||||
Underwriting income
|
|
40,014
|
|
|
47,714
|
|
|
10,828
|
|
|
—
|
|
|
98,556
|
|
|||||
Service and fee income
|
|
25,745
|
|
|
83,120
|
|
|
1,228
|
|
|
28,177
|
|
|
138,270
|
|
|||||
Investment income and realized gain
|
|
28,193
|
|
|
19,506
|
|
|
18,211
|
|
|
(66
|
)
|
|
65,844
|
|
|||||
Other expenses
|
|
(67,938
|
)
|
|
(41,879
|
)
|
|
(23,153
|
)
|
|
—
|
|
|
(132,970
|
)
|
|||||
Interest expense
|
|
(10,112
|
)
|
|
(6,189
|
)
|
|
(3,437
|
)
|
|
—
|
|
|
(19,738
|
)
|
|||||
Foreign currency loss
|
|
—
|
|
|
(26,435
|
)
|
|
—
|
|
|
—
|
|
|
(26,435
|
)
|
|||||
Gain on life settlement contracts
|
|
6,507
|
|
|
3,961
|
|
|
2,208
|
|
|
—
|
|
|
12,676
|
|
|||||
Acquisition gain (reduction) on purchase
|
|
(9,223
|
)
|
|
48,320
|
|
|
—
|
|
|
—
|
|
|
39,097
|
|
|||||
Provision for income taxes
|
|
(1,451
|
)
|
|
(20,385
|
)
|
|
(1,020
|
)
|
|
(5,062
|
)
|
|
(27,918
|
)
|
|||||
Equity in earnings of unconsolidated subsidiary – related party
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,802
|
|
|
4,802
|
|
|||||
Net income
|
|
$
|
11,735
|
|
|
$
|
107,733
|
|
|
$
|
4,865
|
|
|
$
|
27,851
|
|
|
$
|
152,184
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(Amounts in Thousands)
|
|
Small Commercial Business
|
|
Specialty Risk and Extended Warranty
|
|
Specialty Program
|
|
Corporate and Other
|
|
Total
|
||||||||||
Three Months Ended June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross written premium
|
|
$
|
875,829
|
|
|
$
|
479,863
|
|
|
$
|
322,697
|
|
|
$
|
—
|
|
|
$
|
1,678,389
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net written premium
|
|
517,392
|
|
|
306,784
|
|
|
184,545
|
|
|
—
|
|
|
1,008,721
|
|
|||||
Change in unearned premium
|
|
(34,333
|
)
|
|
(22,816
|
)
|
|
17,398
|
|
|
—
|
|
|
(39,751
|
)
|
|||||
Net earned premium
|
|
483,059
|
|
|
283,968
|
|
|
201,943
|
|
|
—
|
|
|
968,970
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense
|
|
(314,344
|
)
|
|
(185,345
|
)
|
|
(138,786
|
)
|
|
—
|
|
|
(638,475
|
)
|
|||||
Acquisition costs and other underwriting expenses
|
|
(124,713
|
)
|
|
(57,309
|
)
|
|
(56,688
|
)
|
|
—
|
|
|
(238,710
|
)
|
|||||
|
|
(439,057
|
)
|
|
(242,654
|
)
|
|
(195,474
|
)
|
|
—
|
|
|
(877,185
|
)
|
|||||
Underwriting income
|
|
44,002
|
|
|
41,314
|
|
|
6,469
|
|
|
—
|
|
|
91,785
|
|
|||||
Service and fee income
|
|
25,043
|
|
|
61,770
|
|
|
31
|
|
|
20,893
|
|
|
107,737
|
|
|||||
Investment income and realized gain
|
|
15,604
|
|
|
11,807
|
|
|
6,216
|
|
|
14
|
|
|
33,641
|
|
|||||
Other expenses
|
|
(51,204
|
)
|
|
(28,038
|
)
|
|
(18,888
|
)
|
|
—
|
|
|
(98,130
|
)
|
|||||
Interest expense and loss on extinguishment of debt
|
|
(5,037
|
)
|
|
(2,792
|
)
|
|
(1,817
|
)
|
|
—
|
|
|
(9,646
|
)
|
|||||
Foreign currency loss
|
|
—
|
|
|
(47,320
|
)
|
|
—
|
|
|
—
|
|
|
(47,320
|
)
|
|||||
Gain on life settlement contracts
|
|
1,619
|
|
|
942
|
|
|
535
|
|
|
—
|
|
|
3,096
|
|
|||||
(Provision) benefit for income taxes
|
|
(3,409
|
)
|
|
636
|
|
|
1,463
|
|
|
(3,162
|
)
|
|
(4,472
|
)
|
|||||
Equity in earnings of unconsolidated subsidiary – related party
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,042
|
|
|
4,042
|
|
|||||
Net income
|
|
$
|
26,618
|
|
|
$
|
38,319
|
|
|
$
|
(5,991
|
)
|
|
$
|
21,787
|
|
|
$
|
80,733
|
|
(Amounts in Thousands)
|
|
Small Commercial Business
|
|
Specialty Risk and Extended Warranty
|
|
Specialty Program
|
|
Corporate and Other
|
|
Total
|
||||||||||
Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross written premium
|
|
$
|
2,126,690
|
|
|
$
|
1,181,007
|
|
|
$
|
698,489
|
|
|
$
|
—
|
|
|
$
|
4,006,186
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net written premium
|
|
1,226,166
|
|
|
784,894
|
|
|
478,055
|
|
|
—
|
|
|
2,489,115
|
|
|||||
Change in unearned premium
|
|
(149,094
|
)
|
|
(105,169
|
)
|
|
21,182
|
|
|
—
|
|
|
(233,081
|
)
|
|||||
Net earned premium
|
|
1,077,072
|
|
|
679,725
|
|
|
499,237
|
|
|
—
|
|
|
2,256,034
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense
|
|
(715,634
|
)
|
|
(442,264
|
)
|
|
(341,568
|
)
|
|
—
|
|
|
(1,499,466
|
)
|
|||||
Acquisition costs and other underwriting expenses
|
|
(280,442
|
)
|
|
(148,183
|
)
|
|
(134,812
|
)
|
|
—
|
|
|
(563,437
|
)
|
|||||
|
|
(996,076
|
)
|
|
(590,447
|
)
|
|
(476,380
|
)
|
|
—
|
|
|
(2,062,903
|
)
|
|||||
Underwriting income
|
|
80,996
|
|
|
89,278
|
|
|
22,857
|
|
|
—
|
|
|
193,131
|
|
|||||
Service and fee income
|
|
58,282
|
|
|
172,900
|
|
|
1,517
|
|
|
49,772
|
|
|
282,471
|
|
|||||
Investment income and realized gain
|
|
55,047
|
|
|
38,676
|
|
|
29,511
|
|
|
—
|
|
|
123,234
|
|
|||||
Other expenses
|
|
(138,635
|
)
|
|
(76,988
|
)
|
|
(45,533
|
)
|
|
—
|
|
|
(261,156
|
)
|
|||||
Interest expense
|
|
(19,874
|
)
|
|
(11,037
|
)
|
|
(6,527
|
)
|
|
—
|
|
|
(37,438
|
)
|
|||||
Foreign currency loss
|
|
—
|
|
|
(62,108
|
)
|
|
—
|
|
|
—
|
|
|
(62,108
|
)
|
|||||
Gain on life settlement contracts
|
|
12,425
|
|
|
6,900
|
|
|
4,081
|
|
|
—
|
|
|
23,406
|
|
|||||
Acquisition gain on purchase
|
|
455
|
|
|
48,320
|
|
|
—
|
|
|
—
|
|
|
48,775
|
|
|||||
(Provision) benefit for income taxes
|
|
(8,444
|
)
|
|
(35,711
|
)
|
|
(1,024
|
)
|
|
(10,465
|
)
|
|
(55,644
|
)
|
|||||
Equity in earnings of unconsolidated subsidiary – related party
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,578
|
|
|
10,578
|
|
|||||
Net income
|
|
$
|
40,252
|
|
|
$
|
170,230
|
|
|
$
|
4,882
|
|
|
$
|
49,885
|
|
|
$
|
265,249
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(Amounts in Thousands)
|
|
Small Commercial Business
|
|
Specialty Risk and Extended Warranty
|
|
Specialty Program
|
|
Corporate and Other
|
|
Total
|
||||||||||
Six Months Ended June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross written premium
|
|
$
|
1,776,948
|
|
|
$
|
950,733
|
|
|
$
|
681,844
|
|
|
$
|
—
|
|
|
$
|
3,409,525
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net written premium
|
|
1,040,632
|
|
|
594,473
|
|
|
416,805
|
|
|
—
|
|
|
2,051,910
|
|
|||||
Change in unearned premium
|
|
(133,582
|
)
|
|
18,626
|
|
|
(18,607
|
)
|
|
—
|
|
|
(133,563
|
)
|
|||||
Net earned premium
|
|
907,050
|
|
|
613,099
|
|
|
398,198
|
|
|
—
|
|
|
1,918,347
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense
|
|
(588,690
|
)
|
|
(393,985
|
)
|
|
(269,083
|
)
|
|
—
|
|
|
(1,251,758
|
)
|
|||||
Acquisition costs and other underwriting expenses
|
|
(234,392
|
)
|
|
(127,574
|
)
|
|
(108,420
|
)
|
|
—
|
|
|
(470,386
|
)
|
|||||
|
|
(823,082
|
)
|
|
(521,559
|
)
|
|
(377,503
|
)
|
|
—
|
|
|
(1,722,144
|
)
|
|||||
Underwriting income
|
|
83,968
|
|
|
91,540
|
|
|
20,695
|
|
|
—
|
|
|
196,203
|
|
|||||
Service and fee income
|
|
51,675
|
|
|
129,532
|
|
|
364
|
|
|
39,052
|
|
|
220,623
|
|
|||||
Investment income and realized gain
|
|
38,850
|
|
|
28,547
|
|
|
16,366
|
|
|
104
|
|
|
83,867
|
|
|||||
Other expenses
|
|
(102,455
|
)
|
|
(54,818
|
)
|
|
(39,314
|
)
|
|
—
|
|
|
(196,587
|
)
|
|||||
Interest expense and loss on extinguishment of debt
|
|
(12,828
|
)
|
|
(6,864
|
)
|
|
(4,923
|
)
|
|
—
|
|
|
(24,615
|
)
|
|||||
Foreign currency loss
|
|
—
|
|
|
(7,366
|
)
|
|
—
|
|
|
—
|
|
|
(7,366
|
)
|
|||||
Loss on life settlement contracts
|
|
7,540
|
|
|
4,035
|
|
|
2,894
|
|
|
—
|
|
|
14,469
|
|
|||||
(Provision) benefit for income taxes
|
|
(11,558
|
)
|
|
(31,966
|
)
|
|
678
|
|
|
(8,438
|
)
|
|
(51,284
|
)
|
|||||
Equity in earnings of unconsolidated subsidiary – related party
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,571
|
|
|
9,571
|
|
|||||
Net income
|
|
$
|
55,192
|
|
|
$
|
152,640
|
|
|
$
|
(3,240
|
)
|
|
$
|
40,289
|
|
|
$
|
244,881
|
|
(Amounts in Thousands)
|
|
Small
Commercial
Business
|
|
Specialty
Risk and
Extended
Warranty
|
|
Specialty
Program
|
|
Total
|
||||||||
Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Workers' compensation
|
|
$
|
358,894
|
|
|
$
|
—
|
|
|
$
|
199,704
|
|
|
$
|
558,598
|
|
Warranty
|
|
—
|
|
|
179,169
|
|
|
—
|
|
|
179,169
|
|
||||
Other liability
|
|
—
|
|
|
33,305
|
|
|
12,800
|
|
|
46,105
|
|
||||
Commercial auto and liability, physical damage
|
|
111,992
|
|
|
8,684
|
|
|
30,602
|
|
|
151,278
|
|
||||
Medical malpractice
|
|
—
|
|
|
62,733
|
|
|
—
|
|
|
62,733
|
|
||||
Other
|
|
102,092
|
|
|
73,993
|
|
|
7,784
|
|
|
183,869
|
|
||||
Total net earned premium
|
|
$
|
572,978
|
|
|
$
|
357,884
|
|
|
$
|
250,890
|
|
|
$
|
1,181,752
|
|
|
|
|
|
|
|
|
|
|
||||||||
(Amounts in Thousands)
|
|
Small
Commercial
Business
|
|
Specialty
Risk and
Extended
Warranty
|
|
Specialty
Program
|
|
Total
|
||||||||
Three Months Ended June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Workers' compensation
|
|
$
|
322,703
|
|
|
$
|
—
|
|
|
$
|
86,344
|
|
|
$
|
409,047
|
|
Warranty
|
|
—
|
|
|
144,316
|
|
|
—
|
|
|
144,316
|
|
||||
Other liability
|
|
14,425
|
|
|
32,485
|
|
|
35,333
|
|
|
82,243
|
|
||||
Commercial auto and liability, physical damage
|
|
67,491
|
|
|
8,714
|
|
|
34,465
|
|
|
110,670
|
|
||||
Medical malpractice
|
|
—
|
|
|
40,143
|
|
|
—
|
|
|
40,143
|
|
||||
Other
|
|
78,440
|
|
|
58,310
|
|
|
45,801
|
|
|
182,551
|
|
||||
Total net earned premium
|
|
$
|
483,059
|
|
|
$
|
283,968
|
|
|
$
|
201,943
|
|
|
$
|
968,970
|
|
|
|
|
|
|
|
|
|
|
||||||||
(Amounts in Thousands)
|
|
Small
Commercial
Business
|
|
Specialty
Risk and
Extended
Warranty
|
|
Specialty
Program
|
|
Total
|
||||||||
Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Workers' compensation
|
|
$
|
704,937
|
|
|
$
|
—
|
|
|
$
|
307,417
|
|
|
$
|
1,012,354
|
|
Warranty
|
|
—
|
|
|
347,502
|
|
|
—
|
|
|
347,502
|
|
||||
Other liability
|
|
5,249
|
|
|
74,018
|
|
|
83,381
|
|
|
162,648
|
|
||||
Commercial auto and liability, physical damage
|
|
197,896
|
|
|
17,176
|
|
|
65,745
|
|
|
280,817
|
|
||||
Medical malpractice
|
|
—
|
|
|
106,750
|
|
|
—
|
|
|
106,750
|
|
||||
Other
|
|
168,990
|
|
|
134,279
|
|
|
42,694
|
|
|
345,963
|
|
||||
Total net earned premium
|
|
$
|
1,077,072
|
|
|
$
|
679,725
|
|
|
$
|
499,237
|
|
|
$
|
2,256,034
|
|
|
|
|
|
|
|
|
|
|
||||||||
(Amounts in Thousands)
|
|
Small
Commercial
Business
|
|
Specialty
Risk and
Extended
Warranty
|
|
Specialty
Program
|
|
Total
|
||||||||
Six Months Ended June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Workers' compensation
|
|
$
|
614,768
|
|
|
$
|
—
|
|
|
$
|
163,946
|
|
|
$
|
778,714
|
|
Warranty
|
|
—
|
|
|
295,847
|
|
|
—
|
|
|
295,847
|
|
||||
Other liability
|
|
24,944
|
|
|
65,296
|
|
|
75,853
|
|
|
166,093
|
|
||||
Commercial auto and liability, physical damage
|
|
119,411
|
|
|
12,154
|
|
|
69,698
|
|
|
201,263
|
|
||||
Medical malpractice
|
|
—
|
|
|
76,454
|
|
|
—
|
|
|
76,454
|
|
||||
Other
|
|
147,927
|
|
|
163,348
|
|
|
88,701
|
|
|
399,976
|
|
||||
Total net earned premium
|
|
$
|
907,050
|
|
|
$
|
613,099
|
|
|
$
|
398,198
|
|
|
$
|
1,918,347
|
|
|
|
|
|
|
|
|
|
|
(Amounts in Thousands)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Small Commercial Business
|
|
$
|
9,860,406
|
|
|
$
|
7,781,045
|
|
Specialty Risk and Extended Warranty
|
|
6,974,608
|
|
|
6,370,861
|
|
||
Specialty Program
|
|
4,171,979
|
|
|
2,936,710
|
|
||
Corporate and Other
|
|
—
|
|
|
2,403
|
|
||
|
|
$
|
21,006,993
|
|
|
$
|
17,091,019
|
|
•
|
The borrower will become ACP Re Holdings, LLC, a Delaware limited liability company owned by the Trust;
|
•
|
The Trust will cause ACP Re Holdings, LLC to maintain assets having a value greater than
115%
of the value of the then outstanding loan balance, and if there is a shortfall, the Trust will make a contribution to ACP Re Holdings, LLC of assets having a market value of at least the shortfall (the “Maintenance Covenant”);
|
•
|
The amounts borrowed will be secured by equity interests, cash and cash equivalents, other investments held by ACP Re Holdings, LLC and proceeds of the foregoing in an amount equal to the requirements of the Maintenance Covenant;
|
•
|
The maturity date will change from September 15, 2021 to the twentieth anniversary of the date on which the restatement becomes effective;
|
•
|
Interest on the outstanding principal balance of
$250,000
will change from a fixed annual rate of
7%
(payable in cash, semi-annually in arrears) to a fixed annual rate of
3.7%
(payable in cash, semi-annually in arrears), provided that up to
1.2%
thereof may be paid in kind;
|
•
|
Commencing on the tenth anniversary of the date on which the restatement becomes effective, and for each year thereafter, two percent of the then outstanding principal balance of the loan (inclusive of any amounts previously paid in kind) will be due and payable;
|
•
|
At the Lenders’ discretion, ACP Re Holdings, LLC may repay the loan using cash or tradeable stock of an equivalent market value of any publicly traded company on the NYSE, NASDAQ or London stock exchange; and
|
•
|
A change of control of ACP Re Holdings, LLC of greater than
50%
and an uncured breach of the Maintenance Covenant are included as events of default.
|
•
|
Small Commercial Business. We provide workers’ compensation, commercial package and other commercial insurance lines produced by wholesale agents, retail agents and brokers in the United States.
|
•
|
Specialty Risk and Extended Warranty. We provide coverage for consumer and commercial goods and custom designed coverages, such as accidental damage plans and payment protection plans offered in connection with the sale of consumer and commercial goods, in the United States and Europe, and certain niche property, casualty and specialty liability risks in the United States and Europe, including general liability, employers’ liability and professional and medical liability.
|
•
|
Specialty Program. We write commercial insurance for narrowly defined classes of insureds, requiring an in-depth knowledge of the insured’s industry segment, through general and other wholesale agents.
|
•
|
N.V. Nationale Borg-Maatscappij and its affiliates (collectively, "Nationale Borg")
|
•
|
First Nationwide Title Agency and its subsidiaries (collectively, "First Nationwide")
|
•
|
Republic Underwriters Insurance Company, Republic-Vanguard Insurance Company, Southern Underwriters Insurance Company, Republic Fire & Casualty Insurance Company, Southern Insurance Company, Republic Diversified Services, Inc, Republic Lloyds, Republic Group No. Two Company, Southern County Mutual Insurance Company, Canyon State Auto Insurance Services, Inc., and Eagle General Agency, Inc. (collectively, "Republic ")
|
•
|
Genworth Financial Mortgage Insurance Limited and Genworth Financial Mortgage Services Limited (collectively, "Genworth")
|
•
|
ARI Insurance Company and ARI Casualty Company (collectively, "ARI")
|
•
|
Springfield Insurance Company, Springfield Insurance Company Limited, and Unified Grocers Insurance Services (collectively, "Springfield")
|
•
|
Heritage Indemnity Company, Warranty Solutions Management Corporation, Westlake Insurance Company (Bermuda), Ltd., Warranty Solutions Administrative Services, Inc., Heritage Mechanical Breakdown Corporation and WS Aftermarket Services Corporation (collectively, "Warranty Solutions")
|
•
|
Product warranty registration and service — Our Specialty Risk and Extended Warranty business generates fee revenue for product warranty registration and claims handling services provided to unaffiliated third party retailers, manufacturers and dealerships. Additionally, we provide credit monitoring services for a fee.
|
•
|
Servicing carrier — We act as a servicing carrier for workers’ compensation assigned risk plans in multiple states. In addition, we also offer claims adjusting and loss control services for fees to unaffiliated third parties.
|
•
|
Management services — We provide services to insurance consumers, traditional insurers and insurance producers by offering flexible and cost effective alternatives to traditional insurance tools in the form of various risk retention groups and captive management companies, as well as management of workers’ compensation and commercial property programs. We also offer programs and alternative funding options for non-profit and public sector organizations for the management of their state unemployment insurance obligations.
|
•
|
Insurance fees — We recognize fee income associated with the issuance of workers’ compensation policies for installment fees, in jurisdictions where it is permitted and approved, and reinstatement fees, which are fees charged to reinstate a policy after it has been canceled for non-payment, in jurisdictions where it is permitted and approved. Additionally, we recognize broker commissions and policy management fees associated with general liability policies placed by one of our managing general agencies.
|
•
|
Broker services — We provide brokerage services to Maiden Holdings Ltd. ("Maiden") in connection with our reinsurance agreement for which we receive a fee.
|
•
|
Asset management services — We currently manage the investment portfolios of certain subsidiaries of Maiden, National General Holdings Corp. ("NGHC") and ACP Re, Ltd. ("ACP Re") for which we receive a management fee.
|
•
|
Information technology services — We provide information technology and printing and mailing services to NGHC and its affiliates for a fee.
|
•
|
Policy acquisition expenses comprise commissions directly attributable to those agents, wholesalers or brokers that produce premiums written on our behalf. In most instances, we pay commissions based on collected premium, which reduces our credit risk exposure associated with producers in case a policyholder does not pay a premium. We pay state and local taxes, licenses and fees, assessments and contributions to various state guaranty funds based on our premiums or losses in each state. Surcharges that we may be required to charge and collect from insureds in certain jurisdictions are recorded as accrued liabilities, rather than expense. These expenses are offset by ceding commissions received.
|
•
|
Salaries and benefits expenses are those salaries and benefits expenses for employees that are directly involved in the origination, issuance and maintenance of policies, claims adjustment and accounting for insurance transactions that are associated with successful acquisition of insurance contracts. We classify salaries and benefits associated with employees that are involved in fee generating activities as other expenses.
|
•
|
General and administrative expenses are comprised of other costs associated with our insurance activities, such as federal excise tax, postage, telephones and internet access charges, as well as legal and auditing fees and board and bureau charges.
|
•
|
Ceding commission on reinsurance transactions is a commission we receive from ceding gross written premium to third party reinsurers, and is netted against acquisition costs and other underwriting expenses. In connection with the Maiden Quota Share, which is our primary source of ceding commissions, the amount we receive is a blended rate based on a contractual formula contained in the individual reinsurance agreements, and the rate may not correlate specifically to the cost structure of the individual segments. The ceding commissions we receive cover a portion of our capitalized direct acquisition costs and a portion of other underwriting expenses. Ceding commissions received from reinsurance transactions that represent recovery of capitalized direct acquisition costs are recorded as a reduction of capitalized unamortized deferred acquisition costs and the net amount is charged to expense in proportion to net premium revenue recognized. Ceding commissions received from reinsurance transactions that represent the recovery of other underwriting expenses are recognized in the income statement over the insurance contract period in proportion to the insurance protection provided and classified as a reduction of acquisition costs and other underwriting expenses. Ceding commissions received, but not yet earned, that represent the recovery of other underwriting expenses are classified as a component of accrued expenses and other current liabilities. We allocate earned ceding commissions to our segments based on each segment’s proportionate share of total acquisition costs and other underwriting expenses recognized during the period.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross written premium
|
|
$
|
2,073,112
|
|
|
$
|
1,678,389
|
|
|
$
|
4,006,186
|
|
|
$
|
3,409,525
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net written premium
|
|
$
|
1,268,436
|
|
|
$
|
1,008,721
|
|
|
$
|
2,489,115
|
|
|
$
|
2,051,910
|
|
Change in unearned premium
|
|
(86,684
|
)
|
|
(39,751
|
)
|
|
(233,081
|
)
|
|
(133,563
|
)
|
||||
Net earned premium
|
|
1,181,752
|
|
|
968,970
|
|
|
2,256,034
|
|
|
1,918,347
|
|
||||
Service and fee income (related parties - three months $21,608; $21,281 and six months $41,771; $38,685)
|
|
138,270
|
|
|
107,737
|
|
|
282,471
|
|
|
220,623
|
|
||||
Net investment income
|
|
50,745
|
|
|
36,283
|
|
|
100,160
|
|
|
70,856
|
|
||||
Net realized and unrealized gain (loss) on investments
|
|
15,099
|
|
|
(2,642
|
)
|
|
23,074
|
|
|
13,011
|
|
||||
Total revenues
|
|
1,385,866
|
|
|
1,110,348
|
|
|
2,661,739
|
|
|
2,222,837
|
|
||||
Loss and loss adjustment expense
|
|
784,393
|
|
|
638,475
|
|
|
1,499,466
|
|
|
1,251,758
|
|
||||
Acquisition costs and other underwriting expenses (net of ceding commission - related party - three months $145,610; $129,222 and six months $284,001; $247,909)
|
|
298,803
|
|
|
238,710
|
|
|
563,437
|
|
|
470,386
|
|
||||
Other
|
|
132,970
|
|
|
98,130
|
|
|
261,156
|
|
|
196,587
|
|
||||
Total expenses
|
|
1,216,166
|
|
|
975,315
|
|
|
2,324,059
|
|
|
1,918,731
|
|
||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
|
|
169,700
|
|
|
135,033
|
|
|
337,680
|
|
|
304,106
|
|
||||
Other income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense (net of interest income - related party - three months $2,187; $2,211 and six months $4,375; $4,399)
|
|
(19,738
|
)
|
|
(9,646
|
)
|
|
(37,438
|
)
|
|
(19,901
|
)
|
||||
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,714
|
)
|
||||
Net gain on investment in life settlement contracts net of profit commission
|
|
12,676
|
|
|
3,096
|
|
|
23,406
|
|
|
14,469
|
|
||||
Foreign currency loss
|
|
(26,435
|
)
|
|
(47,320
|
)
|
|
(62,108
|
)
|
|
(7,366
|
)
|
||||
Acquisition gain on purchase
|
|
39,097
|
|
|
—
|
|
|
48,775
|
|
|
—
|
|
||||
Total other (loss) income
|
|
5,600
|
|
|
(53,870
|
)
|
|
(27,365
|
)
|
|
(17,512
|
)
|
||||
Income before income taxes and equity in earnings (loss) of unconsolidated subsidiaries
|
|
175,300
|
|
|
81,163
|
|
|
310,315
|
|
|
286,594
|
|
||||
Provision for income taxes
|
|
27,918
|
|
|
4,472
|
|
|
55,644
|
|
|
51,284
|
|
||||
Income before equity in earnings of unconsolidated subsidiaries
|
|
147,382
|
|
|
76,691
|
|
|
254,671
|
|
|
235,310
|
|
||||
Equity in earnings of unconsolidated subsidiaries – related parties
|
|
4,802
|
|
|
4,042
|
|
|
10,578
|
|
|
9,571
|
|
||||
Net income
|
|
152,184
|
|
|
80,733
|
|
|
265,249
|
|
|
244,881
|
|
||||
Net income attributable to redeemable non-controlling interest and non-controlling interest of subsidiaries
|
|
(5,817
|
)
|
|
(1,346
|
)
|
|
(9,834
|
)
|
|
(5,429
|
)
|
||||
Net income attributable to AmTrust Financial Services, Inc.
|
|
146,367
|
|
|
79,387
|
|
|
255,415
|
|
|
239,452
|
|
||||
Dividends on preferred stock
|
|
(11,576
|
)
|
|
(8,639
|
)
|
|
(20,367
|
)
|
|
(14,008
|
)
|
||||
Net income attributable to AmTrust common shareholders
|
|
$
|
134,791
|
|
|
$
|
70,748
|
|
|
$
|
235,048
|
|
|
$
|
225,444
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net realized gain (loss) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other-than-temporary impairment loss
|
|
$
|
(16,956
|
)
|
|
$
|
(1,466
|
)
|
|
$
|
(16,956
|
)
|
|
$
|
(2,482
|
)
|
Portion of loss recognized in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net impairment losses recognized in earnings
|
|
(16,956
|
)
|
|
(1,466
|
)
|
|
(16,956
|
)
|
|
(2,482
|
)
|
||||
Net realized gain (loss) on available for sale securities
|
|
33,391
|
|
|
(856
|
)
|
|
38,663
|
|
|
15,813
|
|
||||
Net unrealized gain on trading securities
|
|
(1,336
|
)
|
|
(320
|
)
|
|
1,367
|
|
|
(320
|
)
|
||||
Net realized investment gain (loss)
|
|
$
|
15,099
|
|
|
$
|
(2,642
|
)
|
|
$
|
23,074
|
|
|
$
|
13,011
|
|
|
|
|
|
|
|
|
|
|
||||||||
Key measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss ratio
|
|
66.4
|
%
|
|
65.9
|
%
|
|
66.5
|
%
|
|
65.3
|
%
|
||||
Net expense ratio
|
|
25.3
|
%
|
|
24.6
|
%
|
|
24.9
|
%
|
|
24.5
|
%
|
||||
Net combined ratio
|
|
91.7
|
%
|
|
90.5
|
%
|
|
91.4
|
%
|
|
89.8
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross written premium
|
|
$
|
1,060,558
|
|
|
$
|
875,829
|
|
|
$
|
2,126,690
|
|
|
$
|
1,776,948
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net written premium
|
|
$
|
601,638
|
|
|
$
|
517,392
|
|
|
$
|
1,226,166
|
|
|
$
|
1,040,632
|
|
Change in unearned premium
|
|
(28,660
|
)
|
|
(34,333
|
)
|
|
(149,094
|
)
|
|
(133,582
|
)
|
||||
Net earned premium
|
|
572,978
|
|
|
483,059
|
|
|
1,077,072
|
|
|
907,050
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expense
|
|
(382,950
|
)
|
|
(314,344
|
)
|
|
(715,634
|
)
|
|
(588,690
|
)
|
||||
Acquisition costs and other underwriting expenses
|
|
(150,014
|
)
|
|
(124,713
|
)
|
|
(280,442
|
)
|
|
(234,392
|
)
|
||||
|
|
(532,964
|
)
|
|
(439,057
|
)
|
|
(996,076
|
)
|
|
(823,082
|
)
|
||||
Underwriting income
|
|
$
|
40,014
|
|
|
$
|
44,002
|
|
|
$
|
80,996
|
|
|
$
|
83,968
|
|
|
|
|
|
|
|
|
|
|
||||||||
Key measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss ratio
|
|
66.8
|
%
|
|
65.1
|
%
|
|
66.4
|
%
|
|
64.9
|
%
|
||||
Net expense ratio
|
|
26.2
|
%
|
|
25.8
|
%
|
|
26.1
|
%
|
|
25.8
|
%
|
||||
Net combined ratio
|
|
93.0
|
%
|
|
90.9
|
%
|
|
92.5
|
%
|
|
90.7
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross written premium
|
|
$
|
651,561
|
|
|
$
|
479,863
|
|
|
$
|
1,181,007
|
|
|
$
|
950,733
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net written premium
|
|
$
|
447,061
|
|
|
$
|
306,784
|
|
|
$
|
784,894
|
|
|
$
|
594,473
|
|
Change in unearned premium
|
|
(89,177
|
)
|
|
(22,816
|
)
|
|
(105,169
|
)
|
|
18,626
|
|
||||
Net earned premium
|
|
357,884
|
|
|
283,968
|
|
|
679,725
|
|
|
613,099
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expense
|
|
(231,328
|
)
|
|
(185,345
|
)
|
|
(442,264
|
)
|
|
(393,985
|
)
|
||||
Acquisition costs and other underwriting expenses
|
|
(78,842
|
)
|
|
(57,309
|
)
|
|
(148,183
|
)
|
|
(127,574
|
)
|
||||
|
|
(310,170
|
)
|
|
(242,654
|
)
|
|
(590,447
|
)
|
|
(521,559
|
)
|
||||
Underwriting income
|
|
$
|
47,714
|
|
|
$
|
41,314
|
|
|
$
|
89,278
|
|
|
$
|
91,540
|
|
|
|
|
|
|
|
|
|
|
||||||||
Key measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss ratio
|
|
64.6
|
%
|
|
65.3
|
%
|
|
65.1
|
%
|
|
64.3
|
%
|
||||
Net expense ratio
|
|
22.1
|
%
|
|
20.2
|
%
|
|
21.8
|
%
|
|
20.8
|
%
|
||||
Net combined ratio
|
|
86.7
|
%
|
|
85.5
|
%
|
|
86.9
|
%
|
|
85.1
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross written premium
|
|
$
|
360,993
|
|
|
$
|
322,697
|
|
|
$
|
698,489
|
|
|
$
|
681,844
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net written premium
|
|
$
|
219,737
|
|
|
$
|
184,545
|
|
|
$
|
478,055
|
|
|
$
|
416,805
|
|
Change in unearned premium
|
|
31,153
|
|
|
17,398
|
|
|
21,182
|
|
|
(18,607
|
)
|
||||
Net earned premium
|
|
250,890
|
|
|
201,943
|
|
|
499,237
|
|
|
398,198
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expense
|
|
(170,115
|
)
|
|
(138,786
|
)
|
|
(341,568
|
)
|
|
(269,083
|
)
|
||||
Acquisition costs and other underwriting expenses
|
|
(69,947
|
)
|
|
(56,688
|
)
|
|
(134,812
|
)
|
|
(108,420
|
)
|
||||
|
|
(240,062
|
)
|
|
(195,474
|
)
|
|
(476,380
|
)
|
|
(377,503
|
)
|
||||
Underwriting income
|
|
$
|
10,828
|
|
|
$
|
6,469
|
|
|
$
|
22,857
|
|
|
$
|
20,695
|
|
|
|
|
|
|
|
|
|
|
||||||||
Key measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss ratio
|
|
67.8
|
%
|
|
68.7
|
%
|
|
68.4
|
%
|
|
67.6
|
%
|
||||
Net expense ratio
|
|
27.9
|
%
|
|
28.1
|
%
|
|
27.0
|
%
|
|
27.2
|
%
|
||||
Net combined ratio
|
|
95.7
|
%
|
|
96.8
|
%
|
|
95.4
|
%
|
|
94.8
|
%
|
|
|
Six Months Ended June 30,
|
||||||
(Amounts in Thousands)
|
|
2016
|
|
2015
|
||||
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
618,762
|
|
|
$
|
166,629
|
|
Investing activities
|
|
(873,698
|
)
|
|
(715,062
|
)
|
||
Financing activities
|
|
353,113
|
|
|
494,014
|
|
(Amounts in thousands)
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Selected Assets:
|
|
|
|
|
||||
Fixed maturities, available-for-sale
|
|
$
|
6,838,968
|
|
|
$
|
5,433,797
|
|
Premium receivable, net
|
|
2,562,165
|
|
|
2,115,653
|
|
||
Reinsurance recoverable
|
|
3,856,087
|
|
|
3,008,670
|
|
||
|
|
|
|
|
||||
Selected Liabilities:
|
|
|
|
|
||||
Loss and loss expense reserve
|
|
9,097,408
|
|
|
7,208,367
|
|
||
Unearned premium
|
|
4,819,255
|
|
|
4,014,728
|
|
||
Debt
|
|
1,229,599
|
|
|
989,356
|
|
Series
|
|
Dividend rate per year %
|
|
Shares of Preferred Stock issued
|
|
Depositary shares issued
|
|
Liquidation preference amount per share of Preferred Stock $
|
|
Net proceeds ($ in thousands)
|
|
Dividend paid during the six months ended June 30, 2016 ($ in thousands)
|
||||||
A
|
|
6.75
|
|
4,600,000
|
|
N/A
|
|
$
|
25
|
|
|
$
|
111,130
|
|
|
$
|
1,941
|
|
B
|
|
7.25
|
|
105,000
|
|
4,200,000
|
|
1,000
|
|
|
101,702
|
|
|
1,903
|
|
|||
C
|
|
7.625
|
|
80,000
|
|
3,200,000
|
|
1,000
|
|
|
77,480
|
|
|
1,525
|
|
|||
D
|
|
7.50
|
|
182,500
|
|
7,300,000
|
|
1,000
|
|
|
176,529
|
|
|
3,422
|
|
|||
E
|
|
7.75
|
|
143,750
|
|
5,750,000
|
|
1,000
|
|
|
139,042
|
|
|
2,785
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||
(Amounts in Thousands)
|
|
Carrying Value
|
|
Percentage of Portfolio
|
|
Carrying Value
|
|
Percentage of Portfolio
|
||||||
Cash, cash equivalents and restricted cash
|
|
$
|
1,601,518
|
|
|
18.2
|
%
|
|
$
|
1,312,669
|
|
|
18.9
|
%
|
Short-term investments
|
|
127,880
|
|
|
1.5
|
|
|
84,266
|
|
|
1.2
|
|
||
U.S. treasury securities
|
|
277,324
|
|
|
3.2
|
|
|
70,759
|
|
|
1.0
|
|
||
U.S. government agencies
|
|
9,748
|
|
|
0.1
|
|
|
45,558
|
|
|
0.7
|
|
||
Municipals
|
|
878,185
|
|
|
10.0
|
|
|
540,426
|
|
|
7.8
|
|
||
Foreign government
|
|
130,281
|
|
|
1.5
|
|
|
113,745
|
|
|
1.6
|
|
||
Commercial mortgage back securities
|
|
191,087
|
|
|
2.2
|
|
|
151,318
|
|
|
2.2
|
|
||
Residential mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Agency backed
|
|
1,155,030
|
|
|
13.2
|
|
|
974,838
|
|
|
14.0
|
|
||
Non-agency backed
|
|
53,151
|
|
|
0.6
|
|
|
120,229
|
|
|
1.7
|
|
||
Collateralized loan / debt obligations
|
|
361,074
|
|
|
4.1
|
|
|
226,094
|
|
|
3.2
|
|
||
Asset-backed securities
|
|
25,643
|
|
|
0.3
|
|
|
31,837
|
|
|
0.5
|
|
||
Corporate bonds
|
|
3,757,445
|
|
|
43.0
|
|
|
3,158,993
|
|
|
45.3
|
|
||
Preferred stocks
|
|
3,596
|
|
|
—
|
|
|
4,989
|
|
|
0.1
|
|
||
Common stocks
|
|
185,131
|
|
|
2.1
|
|
|
126,779
|
|
|
1.8
|
|
||
|
|
$
|
8,757,093
|
|
|
100.0
|
%
|
|
$
|
6,962,500
|
|
|
100.0
|
%
|
|
June 30, 2016
|
|
December 31, 2015
|
||
U.S. Treasury
|
4.1
|
%
|
|
1.3
|
%
|
AAA
|
8.4
|
|
|
12.2
|
|
AA
|
31.3
|
|
|
29.0
|
|
A
|
28.8
|
|
|
28.8
|
|
BBB, BBB+, BBB-
|
23.7
|
|
|
25.8
|
|
BB, BB+, BB-
|
2.1
|
|
|
1.9
|
|
B, B+, B-
|
0.4
|
|
|
0.1
|
|
Other
|
1.2
|
|
|
0.9
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||
|
Average Yield %
|
|
Average Duration in Years
|
|
Average Yield %
|
|
Average Duration in Years
|
||
U.S. treasury securities
|
1.28
|
|
3.1
|
|
|
1.73
|
|
3.9
|
|
U.S. government agencies
|
2.29
|
|
4.4
|
|
|
2.63
|
|
4.2
|
|
Foreign government
|
2.16
|
|
5.2
|
|
|
2.27
|
|
5.7
|
|
Corporate bonds
|
3.67
|
|
5.9
|
|
|
3.33
|
|
6.1
|
|
Municipal bonds
|
3.20
|
|
7.2
|
|
|
3.33
|
|
6.9
|
|
Collateralized loan / debt obligations
|
4.77
|
|
0.5
|
|
|
4.22
|
|
1.1
|
|
Mortgage and asset backed securities
|
3.32
|
|
5.2
|
|
|
3.38
|
|
4.6
|
|
•
|
the current fair value compared to amortized cost;
|
•
|
the length of time the security’s fair value has been below its amortized cost;
|
•
|
specific credit issues related to the issuer such as changes in credit rating, reduction or elimination of dividends or non-payment of scheduled interest payments;
|
•
|
whether management intends to sell the security and, if not, whether it is not more than likely than not that we will be required to sell the security before recovery of its amortized cost basis;
|
•
|
the financial condition and near-term prospects of the issuer of the security, including any specific events that may affect its operations or earnings;
|
•
|
the occurrence of a discrete credit event resulting in the issuer defaulting on material outstanding obligations or the issuer seeking protection under bankruptcy laws; and
|
•
|
other items, including company management, media exposure, sponsors, marketing and advertising agreements, debt restructuring, regulatory changes, acquisitions and dispositions, pending litigation, distribution agreements and general industry trends.
|
(Amounts in Thousands)
|
|
2016
|
|
2015
|
||||
Equity securities
|
|
$
|
16,956
|
|
|
$
|
1,192
|
|
Fixed maturity securities
|
|
—
|
|
|
1,290
|
|
||
|
|
$
|
16,956
|
|
|
$
|
2,482
|
|
Hypothetical Change in Interest Rates
|
|
Fair Value
|
|
Estimated Change in Fair Value
|
|
Hypothetical Percentage (Increase)Decrease in Shareholders’ Equity
|
|||||
(Amounts in Thousands)
|
|||||||||||
200 basis point increase
|
|
$
|
6,210,277
|
|
|
$
|
(628,693
|
)
|
|
(18.4
|
)%
|
100 basis point increase
|
|
6,511,946
|
|
|
(327,022
|
)
|
|
(9.6
|
)%
|
||
No change
|
|
6,838,968
|
|
|
—
|
|
|
—
|
|
||
100 basis point decrease
|
|
7,176,583
|
|
|
337,615
|
|
|
9.9
|
%
|
||
200 basis point decrease
|
|
7,532,958
|
|
|
693,990
|
|
|
20.3
|
%
|
Hypothetical Change in S&P 500 Index
|
|
Fair Value
|
|
Estimated Change in Fair Value
|
|
Hypothetical Percentage (Increase) Decrease in Shareholders’ Equity
|
|||||
(Amounts in Thousands)
|
|||||||||||
25% increase
|
|
$
|
235,909
|
|
|
$
|
47,182
|
|
|
0.9
|
%
|
No change
|
|
188,727
|
|
|
—
|
|
|
|
|||
25% decrease
|
|
141,545
|
|
|
(47,182
|
)
|
|
(0.9
|
)%
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program
|
|
Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased Under Plan or Program (1)
|
||||||
April 1 - 30, 2016
|
|
2,096,017
|
|
|
24.79
|
|
|
2,096,017
|
|
|
$
|
223,680,225
|
|
|
May 1 - 31, 2016
|
|
448,506
|
|
|
25.93
|
|
|
448,506
|
|
|
212,050,450
|
|
||
June 1 - 30, 2016
|
|
1,031,337
|
|
|
24.57
|
|
|
1,031,337
|
|
|
186,707,462
|
|
||
Total
|
|
3,575,860
|
|
|
|
|
3,575,860
|
|
|
$
|
186,707,462
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AmTrust Financial Services, Inc.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
August 9, 2016
|
|
/s/ Barry D. Zyskind
|
|
|
|
Barry D. Zyskind
|
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
|
|
|
/s/ Ronald E. Pipoly, Jr.
|
|
|
|
Ronald E. Pipoly, Jr.
|
|
|
|
Chief Financial Officer
|
DATED 14 APRIL 2016
|
||
|
||
|
AMTRUST CORPORATE CAPITAL LIMITED
AMTRUST CORPORATE MEMBER LIMITED
AMTRUST CORPORATE MEMBER TWO LIMITED
as Corporate Members
|
|
|
|
|
|
- and -
|
|
|
|
|
|
AMTRUST INTERNATIONAL INSURANCE, LTD.
as Account Party
|
|
|
|
|
|
- and -
|
|
|
|
|
|
AMTRUST FINANCIAL SERVICES, INC.
as Guarantor
|
|
|
|
|
|
- and -
|
|
|
|
|
|
THE BANKS AND FINANCIAL INSTITUTIONS
LISTED IN SCHEDULE 1 OF THE AMENDED FACILITY AGREEMENT
as Original Banks
|
|
|
|
|
|
- and -
|
|
|
|
|
|
ING BANK N.V., LONDON BRANCH AND THE BANK OF NOVA SCOTIA, LONDON BRANCH
as Mandated Lead Arrangers
|
|
|
|
|
|
- and -
|
|
|
|
|
|
ING BANK N.V., LONDON BRANCH
as Bookrunner, Agent, Issuing Bank and Security Trustee
|
|
|
CLAUSE
|
|
PAGE
|
|
|
|
2.
|
DEFINITIONS AND INTERPRETATION
|
2
|
|
|
|
3.
|
AMENDMENT OF THE FACILITY AGREEMENT
|
2
|
|
|
|
4.
|
REPRESENTATIONS AND WARRANTIES
|
3
|
|
|
|
5.
|
CONTINUITY AND FURTHER ASSURANCE
|
3
|
|
|
|
6.
|
AMENDMENTS
|
4
|
|
|
|
7.
|
TRANSFERS
|
4
|
|
|
|
8.
|
INCORPORATION OF TERMS
|
4
|
|
|
|
SIGNATURES TO AMENDING AGREEMENT
|
5
|
(1)
|
AMTRUST CORPORATE CAPITAL LIMITED
a company incorporated in England under registered number 08128684 whose registered office is at 2 Minster Court, Mincing Lane, London EC3R 7BB ("
ACCL
");
|
(2)
|
AMTRUST CORPORATE MEMBER LIMITED
a company incorporated in England under registered number 03621278 whose registered office is at 1 Great Tower Street, London EC3R 5AA ("
ACML
");
|
(3)
|
AMTRUST CORPORATE MEMBER TWO LIMITED
a company incorporated in England under registered number 05264527 whose registered office is at 1 Great Tower Street, London EC3R 5AA ("
ACM2L
");
|
(4)
|
AMTRUST INTERNATIONAL INSURANCE, LTD.
, a company incorporated in Bermuda under registered number 9551 whose registered office is at 7 Reid Street, Suite 400, Hamilton HM11, Bermuda (the
"Account Party"
);
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(5)
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AMTRUST FINANCIAL SERVICES, INC.
, a corporation organised under the laws of Delaware whose registered office is at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 (the
"Guarantor"
);
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(6)
|
THE BANKS AND FINANCIAL INSTITUTIONS LISTED IN SCHEDULE 1 OF THE AMENDED FACILITY AGREEMENT
(the
"Original
Banks"
);
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(7)
|
ING BANK N.V., LONDON BRANCH
as Bookrunner;
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(8)
|
ING BANK N.V., LONDON BRANCH AND THE BANK OF NOVA SCOTIA, LONDON BRANCH
as Mandated Lead Arrangers
(the "
Lead Arrangers
");
|
(9)
|
ING BANK N.V., LONDON BRANCH
as Agent;
|
(11)
|
ING BANK N.V., LONDON BRANCH
as Security Trustee.
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(A)
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Under the Facility Agreement, the Banks (as defined therein) have made available to the Account Party, subject as provided therein, a letter of credit facility of up to £300,000,000 (or equivalent in other eligible currencies):
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(a)
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to provide Funds at Lloyd's on behalf of ACCL to support its underwriting at Lloyd's as a member of Syndicate 2526 as constituted for the 2016 and all prior open years of account;
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(b)
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to provide Funds at Lloyd's on behalf of ACML to support its underwriting at Lloyd's as a member of Syndicate 1206 as constituted for the 2016 and all prior open years of account; and
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(c)
|
to provide Funds at Lloyd's on behalf of ACM2L to support its underwriting at Lloyd's as a member of Syndicate 44 as constituted for the 2016 and all prior open years of account.
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(B)
|
The parties now wish to amend the Facility Agreement in accordance with this Agreement in order to enable the Account Party to hold cash in a sterling account and a dollar account with ING Bank N.V., London Branch as Eligible Collateral (as defined therein).
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1.
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DEFINITIONS AND INTERPRETATION
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1.1
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Definitions
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1.2
|
The provisions of clauses 1.2 to 1.9 of the Amended Facility Agreement shall apply to this Agreement as if references therein to "this Agreement" were references to this Agreement.
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2.
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AMENDMENT OF THE FACILITY AGREEMENT
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2.1
|
With effect on and from the Effective Date, and in accordance with clause 31.3 of the Facility Agreement, the following definitions will be amended so that they will read as follows:
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1.
|
the account security deeds dated 26 November 2013 and on or about 24 November 2015 between the Guarantor and the Security Trustee creating security in favour of the Security Trustee over an account of the Guarantor held on the books of ING Bank N.V., London Branch; and
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2.
|
the account security deed dated ___ April 2016 between the Account Party and the Security Trustee creating security in favour of the Security Trustee over a sterling account and a dollar account of the Account Party held on the books of ING Bank N.V., London Branch.
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2.2
|
With effect on and from the Effective Date, references to "the Deposit Account" shall be read as "the Deposit Accounts".
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2.3
|
With effect on and from the Effective Date, clause 12.33 of the Amended Facility Agreement shall read as follows:
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2.4
|
From the Effective Date, any reference in any Finance Document to the Facility Agreement shall be read and construed for all purposes as a reference to the Amended Facility Agreement.
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3.
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REPRESENTATIONS AND WARRANTIES
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3.1
|
Subject to Clause 3.2, each Obligor represents and warrants that each of the representations and warranties set out in clauses 12.2 to 12.33 of the Amended Facility Agreement, construed as if references therein to "this Agreement" were references to this Agreement, is true and correct in all material respects (or, to the extent any such representation or warranty is qualified as to "material", "Material Adverse Change" or similar wording, in all respects) as at the date of this Agreement and at the Effective Date.
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3.2
|
Each Obligor gives each representation and warranty under Clause 3.1 in respect of itself only, and only to the extent that the terms of the relevant clause make the relevant clause applicable in respect of it.
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4.
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CONTINUITY AND FURTHER ASSURANCE
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4.1
|
Continuing obligations
|
(a)
|
The rights and obligations of the parties under the Facility Agreement and the other Finance Documents shall continue in full force and effect, uninterrupted by the amendment and restatement hereunder, save insofar as they are amended hereby. In addition:
|
(i)
|
each Obligor that has granted Security pursuant to the Security Documents confirms that the Security created by the relevant Security Documents shall continue fully to secure the obligations of the relevant Obligors under the Amended Facility Agreement; and
|
(ii)
|
the Guarantor confirms that from the Effective Date the Guarantee given by it in clause 11 (
Guarantee and indemnity
) of the Facility Agreement will continue in full force and effect and will extend to all obligations of each other Obligor under the Amended Facility Agreement,
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4.2
|
Prospective effect only
|
4.3
|
Actions already taken
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4.4
|
Condition precedent
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4.5
|
Further assurance
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5.
|
AMENDMENTS
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6.
|
TRANSFERS
|
7.
|
INCORPORATION OF TERMS
|
8.
|
GOVERNING LAW
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
|
|
|
|
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SIGNED
for and on behalf of )
|
/s/ Ralph Booth
|
Signature
|
THE BANK OF NOVA SCOTIA, LONDON BRANCH
)
|
Ralph Booth
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ NCF Petherbridge
|
Signature
|
|
NCF Petherbridge
|
PRINT NAME
|
|
Managing Director
|
Job title
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
|
|
|
|
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SIGNED
for and on behalf of )
|
/s/ Ralph Booth
|
Signature
|
THE BANK OF NOVA SCOTIA, LONDON BRANCH
)
|
Ralph Booth
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ NCF Petherbridge
|
Signature
|
|
NCF Petherbridge
|
PRINT NAME
|
|
Managing Director
|
Job title
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
SIGNED
for and on behalf of )
|
/s/ Mike Sharman
|
Signature
|
ING BANK N.V., LONDON BRANCH
)
|
Mike Sharman
|
PRINT NAME
|
|
Managing Director
|
Job title
|
|
/s/ Nick Marchant
|
Signature
|
|
Nick Marchant
|
PRINT NAME
|
|
Director
|
Job title
|
1.
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The Account Party
|
1.1
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A copy of the constitutional documents of the Account Party or confirmation from an authorised officer of the Account Party that its constitutional documents a copy of which was provided to the Agent on or about 26 November 2013 remain in full force and effect and have not been amended since that date.
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1.2
|
A copy of a resolution of the board of directors of the Account Party:
|
(a)
|
approving the terms of, and the transactions contemplated by, the Amendment Documents to which it is a Party and resolving that the Account Party execute the Amendment Documents to which it is a Party;
|
(b)
|
authorising a specified person or persons to execute the Amendment Documents to which the Account Party is a Party on its behalf; and
|
(c)
|
authorising a specified person or persons, on the Account Party's behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by the Account Party under or in connection with the Amendment Documents to which it is a Party.
|
1.3
|
A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above or confirmation from an authorised officer of the Account Party that the specimen signatures provided to the Agent on or about 26 November 2013 remain in full force and effect and have not been amended since that date.
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1.4
|
A list of the directors and the secretary of the Account Party, signed by the secretary or a director of the Account Party or confirmation from an authorised officer of the Account Party that the list of the directors and company secretary provided to the Agent on or about 26 November 2013 remains in full force and effect and has not been amended since that date.
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1.5
|
A certificate of the Account Party (signed by a director or other duly authorised officer) confirming that entering into the Amendment Documents and performing its obligations under the Finance Documents would not cause any borrowing, guaranteeing or similar limit binding on the Account Party to be exceeded.
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1.6
|
A certificate of an authorised signatory of the Account Party certifying that each copy document relating to it specified in this paragraph 1 of Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
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1.7
|
Where any Amendment Document is executed under a power of attorney, the original or a certified copy of such power of attorney.
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1.8
|
If the Account Party is organised in or qualified to do business in a jurisdiction of the United States, copies of good standing certificates from the applicable Governmental Authority for the Account Party's jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the date hereof.
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2.
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Legal Opinions
|
2.1
|
A legal opinion of Hogan Lovells International LLP, legal advisers to the Agent in England, in form and substance satisfactory to the Agent.
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2.2
|
A legal opinion of Conyers Dill & Pearman Limited, legal advisers to the Agent in Bermuda, in form and substance satisfactory to the Agent.
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1.
|
The Reinsurer’s liability for the following lines of business shall be commuted:
|
a.
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AIIC US Non Program Excess & Surplus business;
|
b.
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SNIC US Non Program Excess & Surplus business;
|
c.
|
Domestic Specialty Risk business - Pet First 3003 Portfolio Transfer, Bentley 3087 Portfolio Transfer, AMTS 3005 Portfolio Transfer, Service Net 3006 Portfolio Transfer, BancInsure LSI 3066 Front and SNIC Warranty Reinsurance;
|
d.
|
SIGNAL – Domestic Specialty Risk Portfolio Transfer;
|
e.
|
AIUL – Ownerguard;
|
f.
|
AIUL - All Other Domestic Liability (other than AIUL - Open Lending Domestic Liability);
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g.
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AEL – Liability business including Professional Indemnity;
|
h.
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AEL – Accident & Health business;
|
i.
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AEL – Bonds business;
|
j.
|
AEL – Inwards reinsurance;
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k.
|
AIUL - Portfolio transfer business;
|
l.
|
AIUL Program 66015 – Advance E&S (ARI) Assessment Recovery;
|
m.
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AIUL Program 66020 – ETG Single Buyer Trade Credit Insurance Program;
|
n.
|
AIUL Program 66037 – DGU Equity Protection Program.
|
2.
|
In consideration for this commutation, the Reinsurer shall pay to the Company the sum of $107,000,000 (One Hundred Seven Million Dollars) (the “Commutation Amount”). The Commutation Amount was offset as a credit to the Company on the December 31, 2015 account between the Company and Reinsurer and paid on March 31, 2016. Notwithstanding the offset and payment of the Commutation Amount, in the event this Agreement is not duly executed by all Parties, such payment is subject to recovery by the Reinsurer.
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3.
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As of September 30, 2015, the Company and the Reinsurer, also hereinafter each individually a “Party” and together the “Parties,” (in such capacity, a “Releasor”) hereby releases and discharges the other Party, its parent, subsidiaries, predecessors and affiliates and their respective officers, directors, shareholders, partners, trustees, representatives, agents, attorneys, executors, administrators, successors and assigns (in such capacity, a “Releasee”) from any and all past, present and future claims, causes of action, liabilities and obligations arising out of, under or related directly or indirectly to the Subject Commutation Business in connection with the Agreement between them, whether known or unknown, reported or unreported, and whether presently existing or arising in the future, including but not limited to: any and all past, present and future payment obligations, adjustments, setoffs, actions, omissions, causes of action, suits, debts, sums of money, accounts,
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4.
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The rights, duties and obligations set forth herein shall inure to the benefit of and be binding upon any and all predecessors, successors, affiliates, officers, directors, employees, parents, subsidiaries, stockholders, liquidators and receivers of the Parties hereto.
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5.
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Each Party expressly represents and warrants to the other Party that: (a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation; (b) this commutation has been duly authorized, executed and delivered by and on behalf of it and constitutes its legal, valid and binding agreement; (c) no authorization, consent or approval of any third party or governmental authority is required in connection with the execution, delivery or performance by it of this commutation; (d) there are no pending agreements, transactions, or negotiations to which any of them are a party that would render this commutation or any part thereof void, voidable or unenforceable; (e) execution, delivery or performance by it of this commutation does not and shall not conflict with, or result in any material breach or violation of, its organizational documents or any agreement to which it is a party or by which it or any of its assets or bound; and (f) this commutation is the product of arm’s length negotiations and that its terms have been completely read and fully understood and voluntarily accepted by each of the Parties.
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6.
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The Parties hereby agree to execute promptly any and all supplemental agreements, releases, affidavits, waivers and other documents of any nature or kind which the other Party may reasonably require in order to implement the provisions or objectives of this commutation.
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1.
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I have reviewed this Quarterly Report on Form 10-Q of AmTrust Financial Services, Inc.;
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2.
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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;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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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;
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(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
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(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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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.
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Date:
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August 9, 2016
|
By:
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/s/ Barry Zyskind
|
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Barry Zyskind
|
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Chairman, President and Chief Executive Officer
|
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(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of AmTrust Financial Services, Inc.;
|
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;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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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;
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(b)
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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;
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(c)
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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
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(d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(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.
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Date:
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August 9, 2016
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By:
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/s/ Ronald Pipoly
|
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Ronald Pipoly
|
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Chief Financial Officer
|
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(Principal Financial and Accounting Officer)
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1.
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The Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
(the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
|
August 9, 2016
|
By:
|
/s/ Barry Zyskind
|
|
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Barry Zyskind
|
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Chairman, President and Chief Executive Officer
|
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(Principal Executive Officer)
|
1.
|
The Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
(the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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August 9, 2016
|
By:
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/s/ Ronald Pipoly
|
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Ronald Pipoly
|
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Chief Financial Officer
|
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(Principal Financial and Accounting Officer)
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