x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
CAYMAN ISLANDS
|
N/A
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. employer identification no.)
|
65 MARKET STREET
SUITE 1207, CAMANA BAY
P.O. BOX 31110
GRAND CAYMAN
CAYMAN ISLANDS
|
KY1-1205
|
(Address of principal executive offices)
|
(Zip code)
|
Class A Ordinary Shares, $0.10 par value
|
30,196,835
|
Class B Ordinary Shares, $0.10 par value
|
6,254,949
|
(Class)
|
(Outstanding as of July 30, 2010)
|
Page
|
|||||
PART I — FINANCIAL INFORMATION
|
|||||
Item 1.
|
|||||
3
|
|||||
4
|
|||||
5
|
|||||
6
|
|||||
7
|
|||||
Item 2.
|
19
|
||||
Item 3.
|
29
|
||||
Item 4.
|
30
|
||||
PART II — OTHER INFORMATION
|
|||||
Item 1.
|
31
|
||||
Item 1A.
|
31
|
||||
Item 2.
|
31
|
||||
Item 3.
|
31
|
||||
Item 4.
|
31
|
||||
Item 5.
|
31
|
||||
Item 6.
|
31
|
||||
|
June 30,
2010
(unaudited)
|
December 31,
2009
|
||||||||
Assets
|
|||||||||
Investments
|
|||||||||
Debt instruments, trading, at fair value
|
$ |
55,294
|
$
|
95,838
|
|||||
Equity securities, trading, at fair value
|
649,431
|
593,201
|
|||||||
Other investments, at fair value
|
169,665
|
141,561
|
|||||||
Total investments
|
874,390
|
830,600
|
|||||||
Cash and cash equivalents
|
16,033
|
31,717
|
|||||||
Restricted cash and cash equivalents
|
523,986
|
590,871
|
|||||||
Financial contracts receivable, at fair value
|
17,504
|
30,117
|
|||||||
Reinsurance balances receivable
|
137,920
|
82,748
|
|||||||
Loss and loss adjustment expense recoverables
|
8,950
|
7,270
|
|||||||
Deferred acquisition costs, net
|
45,338
|
34,401
|
|||||||
Unearned premiums ceded
|
5,510
|
6,478
|
|||||||
Notes receivable
|
15,434
|
15,424
|
|||||||
Other assets
|
6,537
|
4,754
|
|||||||
Total assets
|
$ |
1,651,602
|
$
|
1,634,380
|
|||||
Liabilities and shareholders’ equity
|
|||||||||
Liabilities
|
|||||||||
Securities sold, not yet purchased, at fair value
|
$ |
488,366
|
$
|
570,875
|
|||||
Financial contracts payable, at fair value
|
15,624
|
16,200
|
|||||||
Due to prime brokers
|
21,013
|
—
|
|||||||
Loss and loss adjustment expense reserves
|
164,747
|
137,360
|
|||||||
Unearned premium reserves
|
164,469
|
118,899
|
|||||||
Reinsurance balances payable
|
32,028
|
34,301
|
|||||||
Funds withheld
|
17,787
|
14,711
|
|||||||
Other liabilities
|
11,786
|
12,796
|
|||||||
Performance compensation payable to related party
|
518
|
—
|
|||||||
Total liabilities
|
916,338
|
905,142
|
|||||||
Shareholders’ equity
|
|||||||||
Preferred share capital (par value $0.10; authorized, 50,000,000; none issued)
|
—
|
—
|
|||||||
Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 30,196,835 (2009: 30,063,893); Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,949 (2009: 6,254,949)
|
3,645
|
3,632
|
|||||||
Additional paid-in capital
|
483,327
|
481,449
|
|||||||
Non-controlling interest in joint venture
|
29,471
|
30,597
|
|||||||
Retained earnings
|
218,821
|
213,560
|
|||||||
Total shareholders’ equity
|
735,264
|
729,238
|
|||||||
Total liabilities and shareholders’ equity
|
$ |
$1,651,602
|
$
|
1,634,380
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||
2010
|
2009
|
2010
|
2009
|
||||||
Revenues
|
|||||||||
Gross premiums written
|
$
|
88,956
|
$
|
70,047
|
$
|
155,843
|
$
|
141,918
|
|
Gross premiums ceded
|
(4,011
|
)
|
(6,611
|
)
|
(4,589
|
)
|
(7,831
|
)
|
|
Net premiums written
|
84,945
|
63,436
|
151,254
|
134,087
|
|||||
Change in net unearned premium reserves
|
(35,544
|
)
|
(14,089
|
)
|
(46,537
|
)
|
(38,547
|
)
|
|
Net premiums earned
|
49,401
|
49,347
|
104,717
|
95,540
|
|||||
Net investment income
|
22,632
|
88,323
|
5,801
|
116,040
|
|||||
Other income (expense), net
|
(374
|
)
|
(70
|
)
|
(528)
|
2,054
|
|||
Total revenues
|
71,659
|
137,600
|
109,990
|
213,634
|
|||||
Expenses
|
|||||||||
Loss and loss adjustment expenses incurred, net
|
35,544
|
23,547
|
64,679
|
53,743
|
|||||
Acquisition costs, net
|
14,465
|
15,578
|
31,376
|
28,823
|
|||||
General and administrative expenses
|
3,094
|
5,330
|
8,241
|
9,708
|
|||||
Total expenses
|
53,103
|
44,455
|
104,296
|
92,274
|
|||||
Net income before non-controlling interest and income tax expense
|
18,556
|
93,145
|
5,694
|
121,360
|
|||||
Non-controlling interest in income of joint venture
|
(854
|
)
|
(1,006
|
)
|
(375)
|
(1,337
|
)
|
||
Net income before income tax expense
|
17,702
|
92,139
|
5,319
|
120,023
|
|||||
Income tax benefit (expense)
|
(50
|
)
|
57
|
(58
|
)
|
(18
|
)
|
||
Net income
|
$
|
17,652
|
$
|
92,196
|
$
|
5,261
|
$
|
120,005
|
|
Earnings per share
|
|||||||||
Basic
|
$
|
0.48
|
$
|
2.54
|
$
|
0.14
|
$
|
3.32
|
|
Diluted
|
$
|
0.47
|
$
|
2.51
|
$
|
0.14
|
$
|
3.29
|
|
Weighted average number of ordinary shares used in the determination of
|
|||||||||
Basic
|
36,436,903
|
36,252,925
|
36,386,697
|
36,160,160
|
|||||
Diluted
|
37,218,783
|
36,689,711
|
37,155,475
|
36,503,890
|
Six months ended June 30, 2010
|
Six months ended June 30, 2009
|
|||||||
Ordinary share capital
|
||||||||
Balance – beginning of period
|
$
|
3,632
|
$
|
3,604
|
||||
Issue of Class A ordinary share capital, net of forfeitures
|
13
|
24
|
||||||
Balance – end of period
|
$
|
3,645
|
$
|
3,628
|
||||
Additional paid-in capital
|
||||||||
Balance – beginning of period
|
$
|
481,449
|
$
|
477,571
|
||||
Issue of Class A ordinary share capital
|
32
|
221
|
||||||
Share-based compensation expense, net of forfeitures
|
1,846
|
1,519
|
||||||
Balance – end of period
|
$
|
483,327
|
$
|
479,311
|
||||
Non-controlling interest
|
||||||||
Balance – beginning of period
|
$
|
30,597
|
$
|
6,058
|
||||
Non-controlling interest withdrawal from joint venture
|
(1,501
|
)
|
—
|
|||||
Non-controlling interest in income of joint venture
|
375
|
1,337
|
||||||
Balance – end of period
|
$
|
29,471
|
$
|
7,395
|
||||
Retained earnings
|
||||||||
Balance – beginning of period
|
$
|
213,560
|
$
|
4,207
|
||||
Net income
|
5,261
|
120,005
|
||||||
Balance – end of period
|
$
|
218,821
|
$
|
124,212
|
||||
Total shareholders’ equity
|
$
|
735,264
|
$
|
614,546
|
Six months ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash provided by (used in)
Operating activities
|
||||||||
Net income
|
$
|
5,261 |
$
|
120,005
|
||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities
|
||||||||
Net change in unrealized gains and losses on investments and financial contracts
|
18,842 |
(112,668
|
)
|
|||||
Net realized gains on investments and financial contracts
|
(13,049 | ) |
(18,272
|
)
|
||||
Foreign exchange gain on restricted cash and cash equivalents
|
(18,730 | ) |
(258
|
)
|
||||
Non-controlling interest in income of joint venture
|
375 |
1,337
|
||||||
Share-based compensation expense
|
1,859 |
1,543
|
||||||
Depreciation expense
|
112 |
20
|
||||||
Net change in
|
||||||||
Reinsurance balances receivable
|
(55,172 | ) |
(46,154
|
)
|
||||
Loss and loss adjustment expense recoverables
|
(1,680 | ) |
4,782
|
|||||
Deferred acquisition costs, net
|
(10,937 | ) |
(16,488
|
)
|
||||
Unearned premiums ceded
|
968 |
(2,446
|
)
|
|||||
Other assets
|
(1,895 | ) |
(1,671
|
)
|
||||
Loss and loss adjustment expense reserves
|
27,387 |
34,109
|
||||||
Unearned premium reserves
|
45,570 |
40,994
|
||||||
Reinsurance balances payable
|
(2,273 | ) |
10,134
|
|||||
Funds withheld
|
3,076 |
(645
|
)
|
|||||
Other liabilities
|
(1,010 | ) |
3,497
|
|||||
Performance compensation payable to related party
|
518 |
12,698
|
||||||
Net cash (used in) provided by operating activities
|
$
|
(778 | ) |
$
|
30,517
|
|||
Investing activities
|
||||||||
Purchases of investments and financial contracts
|
(719,281 | ) |
(618,825
|
)
|
||||
Sales of investments and financial contracts
|
599,226 |
781,182
|
||||||
Change in due to prime brokers
|
21,013 | — | ||||||
Change in restricted cash and cash equivalents, net
|
85,615 |
(138,584
|
)
|
|||||
Change in notes receivable, net
|
(10 | ) |
(15,183
|
)
|
||||
Non-controlling interest withdrawal from joint venture
|
(1,501 | ) |
—
|
|||||
Net cash (used in) provided by investing activities
|
$
|
(14,938 | ) |
$
|
8,590
|
|||
Financing activities
|
||||||||
Net proceeds from exercise of stock options
|
32 |
221
|
||||||
Net cash provided by financing activities
|
$
|
32 |
$
|
221
|
||||
Net (decrease) increase in cash and cash equivalents
|
(15,684 | ) |
39,328
|
|||||
Cash and cash equivalents at beginning of the period
|
31,717
|
94,144
|
||||||
Cash and cash equivalents at end of the period
|
$ | 16,033 |
$
|
133,472
|
||||
Supplementary information
|
||||||||
Interest paid in cash
|
$
|
5,504 |
$
|
2,610
|
||||
Interest received in cash
|
3,346 |
3,548
|
||||||
Income tax paid in cash
|
15 |
—
|
1.
|
GENERAL
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||
2010
|
2009
|
2010
|
2009
|
||||||
Weighted average shares outstanding
|
36,436,903
|
36,252,925
|
36,386,697
|
|
36,160,160
|
||||
Effect of dilutive service provider share-based awards
|
181,126
|
135,474
|
178,955
|
116,400
|
|||||
Effect of dilutive employee and director share-based awards
|
600,754
|
301,312
|
589,823
|
227,330
|
|||||
37,218,783
|
36,689,711
|
37,155,475
|
36,503,890
|
||||||
Anti-dilutive stock options outstanding
|
160,000
|
130,000
|
160,000
|
146,001
|
|||||
Participating securities excluded from calculation of loss per share
|
—
|
—
|
—
|
—
|
3.
|
FINANCIAL INSTRUMENTS
|
Fair value measurements as of June 30, 2010
|
||||||||||||||||
Description
|
Quoted prices in active markets (Level 1)
|
Significant other observable inputs
(Level 2)
|
Significant
unobservable inputs
(Level 3)
|
Total
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Debt instruments
|
$
|
—
|
$
|
54,204 |
|
$ | 1,090 |
$
|
55,294 | |||||||
Listed equity securities
|
649,298 | 133 |
—
|
649,431 | ||||||||||||
Commodities
|
116,097 |
—
|
—
|
116,097
|
||||||||||||
Private and unlisted equity securities
|
— | 1,702 | 36,924 | 38,626 | ||||||||||||
Put options
|
— | 8,473 |
—
|
8,473 | ||||||||||||
Call options
|
—
|
6,469 |
—
|
6,469 | ||||||||||||
Financial contracts receivable
|
—
|
16,863 |
641
|
17,504 | ||||||||||||
$
|
765,395 | $ | 87,844 | $ | 38,655 | $ | 891,894 | |||||||||
Liabilities:
|
||||||||||||||||
Debt instruments, sold not yet purchased
|
$
|
—
|
$
|
(1,620 | ) |
$
|
—
|
(1,620 | ) | |||||||
Listed equity securities, sold not yet purchased
|
|
|
(484,767 | ) |
|
—
|
|
—
|
$
|
(484,767 | ) | |||||
Put options |
—
|
(173 | ) |
—
|
(173 | ) | ||||||||||
Call options |
—
|
(1,806 | ) |
—
|
(1,806 | ) | ||||||||||
Financial contracts payable
|
—
|
(15,624 | ) |
—
|
(15,624 | ) | ||||||||||
$
|
(484,767 | ) | $ |
(19,223
|
) |
$
|
—
|
$
|
(503,990 | ) |
Fair value measurements using
significant unobservable inputs
(Level 3)
Three months ended June 30, 2010
|
Fair value measurements using
significant unobservable inputs
(Level 3)
Six months ended June 30, 2010
|
|||||||||||||||||||||||
Debt
instruments
|
Private
and unlisted equity
securities
|
Financial contracts receivable
|
Total
|
Debt
instruments
|
Private
and unlisted equity
securities
|
Financial contracts receivable
|
Total
|
|||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Beginning balance
|
$
|
1,201 | $ | 42,488 | $ | — | $ | 43,689 | $ | 1,537 | $ | 25,228 | $ |
—
|
$ | 26,765 | ||||||||
Purchases, sales, issuances, and settlements, net
|
(6 | ) | (5,949 | ) | 855 | (5,100 | ) | (12 | ) | 10,115 |
855
|
10,958 | ||||||||||||
Total realized and unrealized gains (losses) and amortization included in earnings, net
|
(105 | ) | 385 |
(214
|
) | 66 | (435 | ) | 1,581 |
(214
|
) | 932 |
|
|||||||||||
Transfers into (out of) Level 3, net
|
— |
—
|
—
|
—
|
—
|
—
|
—
|
— | ||||||||||||||||
Ending balance, June 30, 2010
|
$
|
1,090 | $ | 36,924 | $ | 641 | $ | 38,655 | $ | 1,090 | $ | 36,924 | $ | 641 | $ | 38,655 |
Fair value measurements using
significant unobservable inputs
(Level 3)
Three months ended June 30, 2009
|
Fair value measurements using
significant unobservable inputs
(Level 3)
Six months ended June 30, 2009
|
||||||||||||||||||||
Debt
instruments
|
Private
and unlisted equity
securities
|
Total
|
Debt
instruments
|
Private
and unlisted equity
securities
|
Total
|
||||||||||||||||
($ in thousands)
|
|||||||||||||||||||||
Beginning balance
|
$
|
9,352
|
$
|
9,807
|
$
|
19,159
|
$
|
4,115
|
$
|
11,776
|
$
|
15,891
|
|||||||||
Purchases, sales, issuances, and settlements, net
|
20
|
200
|
220
|
1,751
|
118
|
1,869
|
|||||||||||||||
Total realized and unrealized gains (losses) included in earnings, net
|
638
|
(477
|
)
|
161
|
(847
|
)
|
(2,364
|
)
|
(3,211
|
)
|
|||||||||||
Transfers into (out of) Level 3, net
|
(3,204
|
)
|
—
|
(3,204
|
)
|
1,787
|
—
|
1,787
|
|
||||||||||||
Ending balance, June 30, 2009
|
$
|
6,806
|
$
|
9,530
|
$
|
16,336
|
$
|
6,806
|
$
|
9,530
|
$
|
16,336
|
2010
|
Cost/amortized
cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Corporate debt – U.S.
|
$
|
40,632 | $ | 20,572 | $ | (5,916 | ) | $ | 55,288 | |||||||
Corporate debt – Non U.S.
|
16 |
—
|
(10 | ) | 6 | |||||||||||
Total debt instruments
|
$
|
40,648 | $ | 20,572 | $ | (5,926 | ) | $ | 55,294 |
2009
|
Cost/amortized
cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Corporate debt – U.S.
|
$
|
60,121
|
$
|
36,040
|
$
|
(5,555)
|
$
|
90,606
|
||||||||
Corporate debt – Non U.S.
|
2,961
|
2,274
|
(3)
|
5,232
|
||||||||||||
Total debt instruments
|
$
|
63,082
|
$
|
38,314
|
$
|
(5,558)
|
$
|
95,838
|
Cost/amortized
cost
|
Fair
value
|
|||||||
($ in thousands)
|
||||||||
Within one year
|
$
|
3,497 | $ | 4,573 | ||||
From one to five years
|
15,477 | 22,673 | ||||||
From five to ten years
|
19,191 | 26,746 | ||||||
More than ten years
|
2,483 | 1,302 | ||||||
$
|
40,648 | $ | 55,294 |
2010
|
Cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Equities – listed
|
$
|
638,750 | $ | 64,643 | $ | (72,231 | ) | $ | 631,162 | |||||||
Exchange traded funds
|
7,002 | 11,267 | — | 18,269 | ||||||||||||
$
|
645,752 | $ | 75,910 | $ | (72,231 | ) | $ | 649,431 |
2009
|
Cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Equities – listed
|
$
|
510,229
|
$ |
104,768
|
$
|
(40,040)
|
|
$ |
574,957
|
|||||||
Exchange traded funds
|
7,879
|
10,365
|
|
—
|
18,244
|
|||||||||||
$
|
518,108
|
$ |
115,133
|
$
|
(40,040)
|
|
$ |
593,201
|
2010
|
Cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
|||||||||
($ in thousands)
|
|||||||||||||
Commodities
|
$
|
96,553 | $ | 19,544 | $ | — | $ | 116,097 | |||||
Private and unlisted equity securities
|
40,121 | 1,817 | (3,312 | ) | 38,626 | ||||||||
Put options
|
15,034 |
—
|
(6,561 | ) | 8,473 | ||||||||
Call options
|
4,252 | 2,217 | — | 6,469 | |||||||||
$
|
155,960 | $ | 23,578 | $ | (9,873 | ) | $ | 169,665 |
2009
|
Cost
|
Unrealized
gains
|
Unrealized losses
|
Fair
value
|
||||||||||||
($ in thousands)
|
||||||||||||||||
Commodities
|
$
|
96,552
|
$
|
5,687
|
$
|
—
|
$
|
102,239
|
||||||||
Private and unlisted equity securities
|
27,636
|
1,430
|
(3,838
|
)
|
25,228
|
|||||||||||
Put options
|
6,269
|
2,540
|
—
|
8,809
|
||||||||||||
Call options
|
6,406
|
51
|
(1,172
|
)
|
5,285
|
|||||||||||
$
|
136,863
|
$
|
9,708
|
$
|
(5,010
|
)
|
$
|
141,561
|
|
Proceeds
|
Unrealized gains
|
Unrealized losses
|
Fair
value
|
||||||||
($ in thousands)
|
||||||||||||
Equities – listed
|
$
|
(498,652 | ) | $ | 93,961 | $ | (41,109 | ) | $ | (445,800 | ) | |
Warrants and rights on listed equities
|
—
|
—
|
(531 | ) | (531 | ) | ||||||
Exchange traded funds
|
(41,520 | ) | 3,084 |
—
|
(38,436 | ) | ||||||
Debt instruments
|
(1,573 | ) |
—
|
(47
|
) | (1,620 | ) | |||||
Put options | (1,392 | ) | 1,219 |
—
|
(173 | ) | ||||||
Call options | (826 | ) |
—
|
(980 | ) | (1,806 | ) | |||||
$
|
(543,963 | ) | $ | 98,264 | $ | (42,667 | ) | $ | (488,366 | ) |
|
Proceeds
|
Unrealized gains
|
Unrealized losses
|
Fair
value
|
||||||||||
($ in thousands)
|
||||||||||||||
Equities - listed
|
$
|
(536,895
|
)
|
$
|
62,278
|
$
|
(79,525
|
)
|
$
|
(554,142
|
)
|
|||
Warrants and rights on listed equities
|
—
|
—
|
(733
|
)
|
(733
|
)
|
||||||||
Exchange traded funds
|
(15,678
|
)
|
—
|
(322
|
)
|
(16,000
|
)
|
|||||||
$
|
(552,573
|
)
|
$
|
62,278
|
$
|
(80,580
|
)
|
$
|
(570,875
|
)
|
Financial contracts
|
Listing
currency
|
Notional amount of
underlying instruments
|
Fair value of net assets
(obligations)
on financial
contracts
|
|||||
($ in thousands)
|
||||||||
Financial contracts receivable
|
||||||||
Interest rate options
|
USD
|
1,723,954 |
$
|
7,022 | ||||
Credit default swaps, purchased – sovereign debt
|
USD
|
117,353 | 5,284 | |||||
Credit default swaps, purchased – corporate debt
|
USD
|
141,261 | 1,482 | |||||
Total return swaps – equities
|
USD
|
50,246 | 3,075 | |||||
Weather derivative swap
|
USD
|
10,000
|
641
|
|||||
Total financial contracts receivable, at fair value
|
|
$
|
17,504 | |||||
|
||||||||
Financial contracts payable
|
||||||||
Credit default swaps, purchased – sovereign debt
|
USD
|
189,898 |
|
$
|
(2,365 | ) | ||
Credit default swaps, purchased – corporate debt
|
USD
|
121,118 |
|
(3,885 | ) | |||
Credit default swaps, issued – corporate debt
|
USD
|
13,909 |
|
(8,322 | ) | |||
Total return swaps – equities
|
USD
|
20,898 |
|
(1,052 | ) | |||
Total financial contracts payable, at fair value
|
|
$
|
(15,624 | ) |
Financial contracts
|
Listing
currency
|
Notional amount of
underlying instruments
|
Fair value of net assets
(obligations)
on financial
contracts
|
||||
($ in thousands)
|
Financial contracts receivable
|
||||||||
Interest rate options
|
USD
|
1,723,954
|
$
|
20,325
|
||||
Credit default swaps, purchased – sovereign debt
|
USD
|
315,722
|
5,322
|
|||||
Total return swaps – equities
|
USD
|
45,516
|
4,470
|
|||||
Total financial contracts receivable, at fair value
|
$
|
30,117
|
||||||
Financial contract payable
|
||||||||
Credit default swaps, purchased – sovereign debt
|
USD
|
20,811
|
$
|
(128
|
)
|
|||
Credit default swaps, purchased – corporate debt
|
USD
|
121,118
|
(7,281
|
)
|
||||
Credit default swaps, issued – corporate debt
|
USD
|
13,909
|
(8,739
|
)
|
||||
Total return swaps – equities
|
USD
|
2,286
|
(52
|
)
|
||||
Total financial contracts payable, at fair value
|
$
|
(16,200
|
)
|
Derivatives not designated as hedging instruments
|
Location of gains and losses on derivatives recognized in income
|
Gain (loss) on derivatives recognized in
income for the three months ended June 30,
|
Gain (loss) on derivatives recognized in income for the six months ended June 30,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||
Interest rate options
|
Net investment income
|
$
|
(8,097 | ) |
$
|
4,838
|
(13,303 | ) |
$
|
5,808
|
||||||
Credit default swaps, purchased – corporate debt
|
Net investment income
|
2,531 |
(10,154
|
)
|
2,528 |
(6,237
|
) | |||||||||
Credit default swaps, purchased – sovereign debt
|
Net investment income
|
5,764 |
(7,559
|
)
|
7,922 |
(9,596
|
) | |||||||||
Total return swaps – equities
|
Net investment income
|
818 |
12,488
|
1,615 |
1,902
|
|||||||||||
Credit default swaps, issued – corporate debt
|
Net investment income
|
(618 | ) |
176
|
767 |
|
(1,810
|
) | ||||||||
Options, futures, warrants, and rights
|
Net investment income
|
(1,205 | ) |
(4,525
|
)
|
(8,490 | ) |
(6,913
|
)
|
|||||||
Weather derivative swap
|
Other income (expense)
|
(214
|
) |
—
|
(214
|
)
|
—
|
|||||||||
Total
|
$
|
(1,021 | ) |
$
|
(4,736
|
)
|
$
|
(9,175 | ) |
$
|
(16,846
|
)
|
Three months ended June 30, 2010
|
Six months ended June 30, 2010
|
||||||||||||
Derivatives not designated as hedging instruments
|
Entered
|
Exited
|
Entered
|
Exited
|
|||||||||
($ in thousands)
|
|||||||||||||
Credit default swaps
|
$
|
318,125
|
$
|
75,502 |
$
|
318,125 |
$
|
206,146 | |||||
Total return swaps
|
19,862 | 302 | 30,099 | 4,418 | |||||||||
Weather derivative swap
|
15,000
|
—
|
15,000
|
—
|
|||||||||
Futures | — |
—
|
44,436 | 41,762 | |||||||||
Options – equity
|
134,141 | 139,383 | 322,401 | 141,582 | |||||||||
Total
|
$
|
487,128 |
$
|
215,187 |
$
|
730,061 |
$
|
393,908
|
Three months ended June 30, 2009
|
Six months ended June 30, 2009
|
||||||||||||
Derivatives not designated as hedging instruments
|
Entered
|
Exited
|
Entered
|
Exited
|
|||||||||
($ in thousands)
|
|||||||||||||
Credit default swaps
|
$
|
131,078
|
$
|
—
|
$
|
164,421
|
$
|
20,850
|
|||||
Total return swaps
|
—
|
9,635
|
—
|
12,144
|
|||||||||
Interest rate options
|
875,400
|
—
|
903,170
|
—
|
|||||||||
Options – equity
|
120,205
|
14,426
|
127,800
|
22,028
|
|||||||||
Rights – equity
|
3,743
|
1,599
|
7,870
|
4,211
|
|||||||||
Total
|
$
|
1,130,426
|
$
|
25,660
|
$
|
1,203,261
|
$
|
59,233
|
4.
|
REINSURANCE BALANCES RECEIVABLE
|
5.
|
RETROCESSION
|
Number of non-vested
restricted shares
|
Weighted average
grant date fair value
|
|||||||
Balance at December 31, 2009
|
474,782
|
$
|
16.51
|
|||||
Granted
|
131,500
|
24.64
|
||||||
Vested
|
(140,285
|
)
|
16.02
|
|||||
Forfeited
|
(898
|
)
|
16.17
|
|||||
Balance at June 30, 2010
|
465,099
|
$
|
18.95
|
Number of options
|
Weighted average
exercise price
|
Weighted average
grant date fair value
|
||||||||||
Balance at December 31, 2009
|
1,281,340
|
14.24
|
6.33
|
|||||||||
Granted
|
—
|
—
|
—
|
|||||||||
Exercised
|
(2,340
|
)
|
13.85
|
7.13
|
||||||||
Forfeited
|
—
|
—
|
—
|
|||||||||
Expired
|
—
|
—
|
—
|
|||||||||
Balance at June 30, 2010
|
1,279,000
|
$
|
14.24
|
$
|
6.33
|
Six months ended
June 30, 2010
|
Six months ended
June 30, 2009
|
|||||||||||||||
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
Balance
–
beginning of period
|
30,063,893
|
6,254,949
|
29,781,736
|
6,254,949
|
||||||||||||
Issue of ordinary shares, net of forfeitures
|
132,942
|
—
|
239,657
|
—
|
||||||||||||
Balance – end of period
|
30,196,835
|
6,254,949
|
|
30,021,393
|
6,254,949
|
8.
|
COMMITMENTS AND CONTINGENCIES
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Operating lease obligations
|
$
|
138
|
$
|
276
|
$
|
276
|
$
|
276
|
$
|
276
|
$
|
967
|
$
|
2,209
|
||||||||||
Specialist service agreement
|
250
|
400
|
150
|
—
|
—
|
—
|
800
|
|||||||||||||||||
Private equity and limited partnerships
(1)
|
19,221 |
—
|
—
|
—
|
—
|
—
|
19,221 | |||||||||||||||||
$
|
19,609 |
$
|
676
|
$
|
426
|
$
|
276
|
$
|
276
|
$
|
967
|
$
|
22,230 |
(1)
|
Given the nature of these investments, the Company is unable to determine with any degree of accuracy when these commitments will be called. Therefore, for purposes of the above table, the Company has assumed that all commitments with no fixed payment schedules will be called during the year ending December 31, 2010.
|
Available
|
Termination Date
|
Notice period required for termination
|
||||||||
($ in thousands)
|
||||||||||
Citibank N.A
|
$
|
400,000
|
October 11, 2010
|
60 days prior to termination date
|
||||||
Butterfield Bank (Cayman) Limited
|
60,000
|
June 30, 2011
|
90 days prior to termination date
|
|||||||
Bank of America, N.A
|
50,000
|
July 20, 2011
|
90 days prior to termination date
|
|||||||
$
|
510,000
|
9.
|
SEGMENT REPORTING
|
Three months ended
June 30, 2010
|
Three months ended
June 30, 2009
|
Six months ended
June 30, 2010
|
Six months ended
June 30, 2009
|
|||||||||||||||||
($ in thousands)
|
($ in thousands)
|
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||
Property
|
||||||||||||||||||||
Commercial lines
|
$
|
2,250
|
2.5
|
%
|
$
|
2,250
|
4.3
|
%
|
$
|
9,416
|
6.0
|
%
|
$
|
8,563
|
6.0
|
%
|
||||
Personal lines
|
32,998
|
37.1
|
18,421
|
25.2
|
45,611
|
29.3
|
31,532
|
22.2
|
||||||||||||
Total Property
|
35,248
|
39.6
|
20,671
|
29.5
|
55,027
|
35.3
|
40,095
|
28.2
|
||||||||||||
Casualty
|
||||||||||||||||||||
General liability
|
11,988
|
13.5
|
10,928
|
|
15.6
|
15,099
|
9.7
|
14,203
|
10.0
|
|||||||||||
Marine liability
|
—
|
—
|
—
|
—
|
483
|
0.3
|
—
|
—
|
||||||||||||
Motor liability
|
18,556
|
20.9
|
24,429
|
34.9
|
29,649
|
19.0
|
41,947
|
29.7
|
||||||||||||
Motor physical damage
|
216
|
0.2
|
—
|
—
|
1,327
|
0.9
|
—
|
—
|
||||||||||||
Professional liability
|
287
|
0.3
|
—
|
—
|
1,307
|
0.8
|
4,545
|
3.2
|
||||||||||||
Total Casualty
|
31,047
|
34.9
|
35,357
|
50.5
|
47,865
|
30.7
|
60,695
|
42.9
|
||||||||||||
Specialty
|
||||||||||||||||||||
Financial
|
10,278
|
11.6
|
—
|
—
|
15,650
|
10.0
|
—
|
—
|
||||||||||||
Health
|
11,451
|
12.9
|
8,948
|
12.8
|
33,769
|
21.7
|
26,589
|
18.7
|
||||||||||||
Medical malpractice
|
(237
|
)
|
(0.3
|
)
|
—
|
—
|
(1,929
|
)
|
(1.2
|
)
|
1,033
|
0.7
|
||||||||
Workers’ compensation
|
1,169
|
1.3
|
5,071
|
7.2
|
5,461
|
3.5
|
13,506
|
9.5
|
||||||||||||
Total Specialty
|
22,661
|
25.5
|
14,019
|
20.0
|
52,951
|
34.0
|
41,128
|
28.9
|
||||||||||||
$
|
88,956
|
100.0
|
%
|
$
|
70,047
|
100.0
|
%
|
$
|
155,843
|
100
|
%
|
$
|
141,918
|
100.0
|
%
|
Three months ended
June 30, 2010
|
Three months ended
June 30, 2009
|
Six months ended
June 30, 2010
|
Six months ended
June 30, 2009
|
|||||||||||||||||
($ in thousands)
|
($ in thousands)
|
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||
USA
|
$
|
79,205
|
89.0
|
%
|
$
|
70,047
|
100
|
%
|
$
|
127,030
|
81.5
|
%
|
$
|
121,560
|
85.7
|
%
|
||||
Worldwide
(2)
|
9,751
|
11.0
|
—
|
—
|
28,813
|
18.5
|
20,358
|
14.3
|
||||||||||||
$
|
88,956
|
100.0
|
%
|
$
|
70,047
|
100.0
|
%
|
$
|
155,843
|
100.0
|
%
|
$
|
141,918
|
100.0
|
%
|
(1)
|
During the second quarter of 2010, the Company refined its method of presenting the lines of business and geographic area of risks insured within its one operating segment. The historical comparative balances presented above have been reclassified to conform to the current period presentation.
|
(2)
|
"Worldwide" risk is comprised of individual policies that insure risks on a worldwide basis.
|
June 30, 2010
|
March 31,
2010
|
December 31, 2009
|
September 30, 2009
|
June 30,
2009
|
||||||||||||
($ in thousands, except per share and share amounts) | ||||||||||||||||
Basic adjusted and fully diluted adjusted book value per share numerator:
|
||||||||||||||||
Total shareholders' equity (GAAP)
|
$
|
735,264
|
$
|
716,694
|
$
|
729,238
|
$
|
648,677
|
$
|
614,546
|
||||||
Less: Non-controlling interest in joint venture
|
(29,471
|
)
|
(29,517
|
)
|
(30,597
|
)
|
(8,111
|
)
|
(7,395
|
)
|
||||||
Basic adjusted book value per share numerator
|
$
|
705,793
|
$
|
687,177
|
$
|
698,641
|
$
|
640,566
|
$
|
607,151
|
||||||
Add: Proceeds from in-the-money options issued and outstanding
|
16,590
|
16,590
|
16,623
|
16,031
|
16,642
|
|||||||||||
Fully diluted adjusted book value per share numerator
|
$
|
722,383
|
$
|
703,767
|
$
|
715,264
|
$
|
656,597
|
$
|
623,793
|
||||||
Basic adjusted and fully diluted adjusted book value per share denominator:
|
||||||||||||||||
Ordinary shares issued and outstanding for basic adjusted book value per share denominator
|
36,451,784
|
36,415,902
|
36,318,842
|
36,308,842
|
36,276,342
|
|||||||||||
Add: In-the-money stock options issued and outstanding
|
1,419,000
|
1,419,000
|
|
1,421,340
|
1,406,340
|
1,460,840
|
||||||||||
Fully diluted adjusted book value per share denominator
|
37,870,784
|
37,834,902
|
37,740,182
|
37,715,182
|
37,737,182
|
|||||||||||
Basic adjusted book value per share
|
$
|
19.36
|
$
|
18.87
|
$
|
19.24
|
$
|
17.64
|
$
|
16.74
|
||||||
Fully diluted adjusted book value per share
|
$
|
19.07
|
$
|
18.60
|
$
|
18.95
|
$
|
17.41
|
$
|
16.53
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||
Frequency
|
$
|
86,720
|
97.5
|
%
|
$
|
67,047
|
95.7
|
%
|
$
|
139,061
|
89.2
|
%
|
$
|
113,846
|
80.2
|
%
|
||||||||
Severity
|
2,236
|
2.5
|
|
3,000
|
4.3
|
16,782
|
10.8
|
28,072
|
19.8
|
|||||||||||||||
Total
|
$
|
88,956
|
100.0
|
%
|
$
|
70,047
|
100.0
|
%
|
$
|
155,843
|
100.0
|
%
|
$
|
141,918
|
100.0
|
%
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||||
Frequency
|
$
|
82,709
|
97.4
|
%
|
$
|
60,716
|
95.7
|
%
|
$
|
134,472
|
88.9
|
%
|
$
|
106,769
|
79.6
|
%
|
||||||||||
Severity
|
2,236
|
2.6
|
2,720
|
4.3
|
16,782
|
11.1
|
27,318
|
20.4
|
||||||||||||||||||
Total
|
$
|
84,945
|
100.0
|
%
|
$
|
63,436
|
100.0
|
%
|
$
|
151,254
|
100.0
|
%
|
$
|
134,087
|
100.0
|
%
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||||
Frequency
|
$
|
42,751
|
86.5
|
%
|
$
|
38,154
|
77.3
|
%
|
$
|
88,612
|
84.6
|
%
|
$
|
70,032
|
73.3
|
%
|
||||||||||
Severity
|
6,650
|
13.5
|
|
11,193
|
22.7
|
16,105
|
15.4
|
25,508
|
26.7
|
|||||||||||||||||
Total
|
$
|
49,401
|
100.0
|
%
|
$
|
49,347
|
100.0
|
%
|
$
|
104,717
|
100.0
|
%
|
$
|
95,540
|
100.0
|
%
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||||
Frequency
|
$
|
32,397
|
91.1
|
%
|
$
|
23,800
|
101.0
|
%
|
$
|
61,113
|
94.5
|
%
|
$
|
40,777
|
75.9
|
%
|
||||||||||
Severity
|
3,147
|
8.9
|
(253
|
)
|
(1.0
|
)
|
3,566
|
5.5
|
12,966
|
24.1
|
||||||||||||||||
Total
|
$
|
35,544
|
100.0
|
%
|
$
|
23,547
|
100.0
|
%
|
$
|
64,679
|
100.0
|
%
|
$
|
53,743
|
100.0
|
%
|
Three months ended
June 30, 2010
|
Three months ended
June 30, 2009
|
|||||||||||||||||||||||
Gross
|
Ceded
|
Net
|
Gross
|
Ceded
|
Net
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Losses paid (recovered)
|
$
|
18,315
|
(528)
|
17,787
|
$
|
8,817
|
$
|
(1,156
|
)
|
$
|
7,661
|
|||||||||||||
Change in reserves
|
18,509
|
(752)
|
17,757
|
|
15,766
|
120
|
15,886
|
|||||||||||||||||
Total
|
$
|
36,824
|
(1,280)
|
35,544
|
$
|
24,583
|
$
|
(1,036
|
)
|
$
|
23,547
|
Six months ended
June 30, 2010
|
Six months ended
June 30, 2009
|
|||||||||||||||||||||||
Gross
|
Ceded
|
Net
|
Gross
|
Ceded
|
Net
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Losses paid (recovered)
|
$
|
39,881
|
(950)
|
38,931
|
$
|
17,189
|
$
|
(2,312
|
)
|
$
|
14,877
|
|||||||||||||
Change in reserves
|
27,429
|
(1,681)
|
25,748
|
34,083
|
4,783
|
38,866
|
||||||||||||||||||
Total
|
$
|
67,310
|
(2,631)
|
64,679
|
$
|
51,272
|
$
|
2,471
|
$
|
53,743
|
·
|
Adverse loss development of $5.1 million based on our quarterly reserve analysis, related to a motor liability contract currently in run-off;
|
·
|
Adverse loss development of $3.4 million based on data received from the client and our quarterly reserve analysis, related to California wildfires on a 2007 casualty clash contract, resulting in losses being reserved at the full contract limit;
|
·
|
Elimination of $1.9 million of reserves held on a medical malpractice contract based on our quarterly reserve analysis; and
|
·
|
Aggregate favorable loss development of $1.6 million on two catastrophe contracts based on data received from the client and our quarterly reserve analysis.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||||||||||||
($ in thousands)
|
($ in thousands)
|
|||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||||
Frequency
|
$
|
13,574
|
93.8
|
%
|
$
|
14,124
|
90.7
|
%
|
$
|
29,571
|
94.2
|
%
|
$
|
27,616
|
95.8
|
%
|
||||||||||
Severity
|
891
|
6.2
|
1,454
|
9.3
|
1,805
|
5.8
|
1,207
|
4.2
|
||||||||||||||||||
Total
|
$
|
14,465
|
100.0
|
%
|
$
|
15,578
|
100.0
|
%
|
$
|
31,376
|
100.0
|
%
|
$
|
28,823
|
100.0
|
%
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||
($ in thousands)
|
($ in thousands)
|
||||||||
2010
|
2009
|
2010
|
2009
|
||||||
Realized gains (losses) and movement in unrealized gains (losses), net
|
$
|
23,850
|
$
|
97,757
|
$
|
13,150
|
$
|
131,198
|
|
Interest, dividend and other investment income
|
8,422
|
6,683
|
10,812
|
9,729
|
|||||
Interest, dividend and other investment expenses
|
(5,943
|
)
|
(3,902
|
)
|
(11,203
|
)
|
(7,436
|
)
|
|
Investment advisor compensation
|
(3,697
|
)
|
(12,215
|
)
|
(6,958
|
)
|
(17,451
|
)
|
|
Net investment income
|
$
|
22,632
|
$
|
88,323
|
$
|
5,801
|
$
|
116,040
|
Six months ended
June 30, 2010
|
Six months ended
June 30, 2009
|
|||||||||||||||||||||||
Frequency
|
Severity
|
Total
|
Frequency
|
Severity
|
Total
|
|||||||||||||||||||
Loss ratio
|
69.0
|
%
|
22.1
|
%
|
61.7
|
%
|
58.2
|
%
|
50.8
|
%
|
56.3
|
%
|
||||||||||||
Acquisition cost ratio
|
33.4
|
% |
11.2
|
%
|
30.0
|
%
|
39.4
|
%
|
4.7
|
%
|
30.2
|
%
|
||||||||||||
Composite ratio
|
102.4
|
%
|
33.3
|
%
|
91.7
|
%
|
97.6
|
%
|
55.5
|
%
|
86.5
|
%
|
||||||||||||
Internal expense ratio
|
7.9
|
%
|
10.2
|
%
|
||||||||||||||||||||
Combined ratio
|
99.6
|
%
|
96.7
|
%
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
Case
Reserves
|
IBNR
|
Total
|
Case
Reserves
|
IBNR
|
Total
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Frequency
|
$
|
35,230
|
$ |
79,181
|
$ |
114,411
|
$
|
19,704
|
$
|
69,166
|
$
|
88,870
|
||||||||||||
Severity
|
19,266
|
31,070
|
50,336
|
20,472
|
28,018
|
48,490
|
||||||||||||||||||
Total
|
$
|
54,496
|
$ |
110,251
|
$ |
164,747
|
$
|
40,176
|
$
|
97,184
|
$
|
137,360
|
Zone
|
Single Event
Loss
|
Aggregate
Loss
|
||||||
($ in thousands)
|
||||||||
United States
(1)
|
$
|
89,091
|
$
|
110,053
|
||||
Europe
|
57,113
|
57,113
|
||||||
Japan
|
69,613
|
69,613
|
||||||
Rest of the world
|
49,613
|
49,613
|
||||||
Maximum Aggregate
|
89,091
|
110,053
|
(1)
|
Includes the Caribbean
|
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
Total
|
||||||||||||||||
($ in thousands)
|
||||||||||||||||||||
Operating lease obligations
(1)
|
$
|
276
|
552
|
552
|
829
|
2,209
|
||||||||||||||
Specialist service agreement
|
500
|
300
|
—
|
—
|
800
|
|||||||||||||||
Private equity investments
(2)
|
19,221 |
—
|
—
|
—
|
19,221 | |||||||||||||||
Loss and loss adjustment expense reserves
(3)
|
69,616
|
59,779
|
26,083
|
9,269
|
164,747
|
|||||||||||||||
$
|
89,613 |
60,631
|
26,635
|
10,098
|
186,977 |
(2)
|
As of June 30, 2010, we had made commitments to invest a total of
$40.4
million in private investments. As of June 30, 2010, we had invested
$21.2
million of this amount, and our remaining commitments to these investments were
$19.2
million. Given the nature of these investments, we are unable to determine with any degree of accuracy when the remaining commitment will be called. Therefore, for purposes of the above table, we have assumed that all commitments with no fixed payment schedules will be made within one year. Under our investment guidelines, in effect as of the date hereof, no more than 10% of the assets in the investment portfolio may be held in private equity securities without specific approval from the Board of Directors.
|
(3)
|
Due to the nature of our reinsurance operations the amount and timing of the cash flows associated with our reinsurance contractual liabilities will fluctuate, perhaps materially, and, therefore, are highly uncertain.
|
10% increase in U.S. dollar
|
10% decrease in U.S. dollar
|
||||||||||||||
Foreign Currency
|
Change in
fair value
|
Change in fair value as % of investment portfolio
|
Change in
fair value
|
Change in fair value as % of investment portfolio
|
|||||||||||
($ in thousands)
|
|||||||||||||||
British Pounds
|
$
|
(1,046 | ) | (0.1 |
)%
|
$
|
1,046 | 0.1 |
%
|
||||||
Euro
|
(2,762 | ) | (0.3 |
)
|
3,287 | 0.4 | |||||||||
Indian Rupee
|
1,082 | 0.1 | (1,082 |
)
|
(0.1 |
)
|
|||||||||
Japanese Yen
|
12,383 | 1.4 | (5,278 |
)
|
(0.6 |
)
|
|||||||||
Swiss Franc
|
(2,401 | ) | (0.3 |
)
|
2,401 | 0.3 | |||||||||
Other
|
(180 | ) | (0.0 |
)
|
180 | 0.0 | |||||||||
Total
|
$
|
7,076 | 0.8 |
%
|
$
|
554 | 0.1 |
%
|
100 basis point increase
in interest rates
|
100 basis point decrease
in interest rates
|
||||||||||||
Change in
fair value
|
Change in fair value as % of investment portfolio
|
Change in
fair value
|
Change in fair value as % of investment portfolio
|
||||||||||
($ in thousands)
|
|||||||||||||
Debt instruments
|
$
|
(1,460 |
)
|
(0.2 |
)%
|
|
$ | 1,543 | 0.2 | % |
|
||
Credit default swaps
|
(135 |
)
|
(0.0 |
)
|
135 | 0.0 | |||||||
Interest rate options
|
8,336 | 1.0 | (4,042 |
)
|
(0.5 |
)
|
|||||||
Net exposure to interest rate risk
|
$
|
6,741 | 0.8 | % |
|
$ | (2,364 |
)
|
(0.3 |
)%
|
|
10.1
|
Letter of understanding dated June 10, 2010 between Greenlight Reinsurance, Ltd. and Citibank, N.A.
|
10.2
|
Amended letter of credit agreement executed June 14, 2010 between Greenlight Reinsurance, Ltd. and Bank of America, N.A.
|
10.3
|
Amended and restated letter of credit agreement executed June 17, 2010 between Greenlight Reinsurance, Ltd. and Butterfield Bank (Cayman) Limited
|
10.4 | Greenlight Capital Re, Ltd. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 on Form 8-K filed on May 4, 2010) |
12.1
|
Ratio of Earnings to Fixed Charges and Preferred Share Dividends
|
31.1
|
Certification of the Chief Executive Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
31.2
|
Certification of the Chief Financial Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
32.1
|
Certification of the Chief Executive Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
32.2
|
Certification of the Chief Financial Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
GREENLIGHT CAPITAL RE, LTD.
|
||
(Registrant)
|
||
/s/ Leonard Goldberg
|
||
Name:
|
Leonard Goldberg
|
|
Title:
|
Chief Executive Officer
|
|
Date:
|
August 2, 2010
|
|
/s/ Tim Courtis
|
||
Name:
|
Tim Courtis
|
|
Title:
|
Chief Financial Officer
|
|
Date:
|
August 2, 2010
|
(1)
|
GREENLIGHT REINSURANCE, LTD.
, a company incorporated under the laws of the Cayman Islands (the “
Applicant
”); and
|
(2)
|
BUTTERFIELD BANK (CAYMAN) LIMITED
, as successor by novation to Unicredit Bank Cayman Islands Ltd. (f/k/a Bank Austria Cayman Islands Ltd.) (the "
Issuer
").
|
(A)
|
The Applicant and Unicredit Bank Cayman Islands Ltd. (f/k/a Bank Austria Cayman Islands Ltd.) (the “
Original Issuer
”) entered into the Letter of Credit Facility on June 6, 2007 (the “
Original Agreement
”).
|
(B)
|
Pursuant to the deed of novation, dated as of December 15, 2008 (the “
Deed of Novation
”), the Original Issuer transferred to the Issuer its rights and obligations under (i) the Original Agreement (as so novated by the Deed of Novation and heretofore amended, the “
Existing Letter of Credit Agreement
”,
and as amended herein and as may be further amended, supplemented or modified from time to time, this “
Agreement
”), (ii) the Security Agreement, dated as of June 6, 2007, between the Applicant and the Original Issuer (as so novated by the Deed of Novation and amended and restated by an amended and restated security agreement of even date herewith (the”
Amended and Restated Security Agreement
”) and as may be further amended, supplemented or modified from time to time, the “
Security Agreement
”), and (iii) the Control Agreement, dated as of June 6, 2007 (as so novated by a novation agreement dated December 15, 2008 (the “
Novation Agreement
”) and as may be amended, supplemented or modified from time to time, the "
Control Agreement
" and, together with this Agreement and the Security Agreement, the "
Finance Documents
"), among the Applicant, the Original Issuer and Goldman, Sachs & Co. (the "
Securities Intermediary
").
|
(C)
|
Each of the Applicant and the Issuer wishes to amend and restate the Existing Letter of Credit Agreement in its entirety on the terms set forth in this Agreement.
|
Section 1.
|
DEFINITIONS
|
The following terms, as used herein, have the following meanings:
|
Section 2.
|
TERMS AND AMOUNT OF LETTER OF CREDIT.
|
Section 3.
|
DRAWDOWN REIMBURSEMENT OBLIGATIONS.
|
Section 4.
|
LETTER OF CREDIT FEE.
|
Section 6.
|
OBLIGATIONS ABSOLUTE
|
Section 7.
|
COVENANTS
|
Section 8.
|
CONTINUING OBLIGATIONS.
|
Section 9.
|
LIABILITY OF THE ISSUER.
|
Section 10.
|
MODIFICATION OF DRAFTS AND CREDITS.
|
Section 11.
|
EVENTS OF DEFAULT
|
(a)
|
failure to pay on the due date the Letter of Credit Fee in accordance with clause 4(a) of this Agreement and continuance of such failure for a period of five (5) Business Days following the Issuer's notice thereof to the Applicant;
|
(b)
|
failure to pay or satisfy any Drawdown Reimbursement Obligation on the day any notification is received by the Applicant from the Issuer of a drawing made under a Letter of Credit and the continuance of such failure for a period of five (5) Business Days;
|
(c)
|
the Applicant shall fail to pay any other Outstanding Indebtedness (other than any payment obligations referenced to in clauses 11(a) and (b) above) when and as due and payable and such failure continues for a period of five (5) Business Days following the date the Issuer gives notice thereof to the Applicant;
|
(d)
|
the Applicant does not comply with Clause 4.1(b)(ii) of the Security Agreement and such non-compliance continues for a period two (2) Business Days following the date the Issuer gives notice thereof to the Applicant;
|
(e)
|
the Aggregate Adjusted Market Value (as defined in the Security Agreement) is an amount equal to or less than the Stated Amount and such deficiency continues for a period of one (1) Business Day following the date the Issuer gives notice thereof to the Applicant;
|
(f)
|
if the Applicant or any one or more of its Subsidiaries (such that, regardless of the size of such Subsidiary, the occurrence of any of the following could reasonably be expected to have a material adverse effect on the Applicant) shall voluntarily or involuntarily become the subject of any insolvency, bankruptcy, reorganization, merger or similar proceedings, or shall make an assignment for the benefit of its creditors or if a trustee, receiver or custodian is appointed in respect of all or a substantial part of the assets of the Applicant or any of its Subsidiaries and in the case of an involuntary insolvency, bankruptcy, reorganization or similar proceeding such proceeding remains undismissed, undischarged or unstayed for a period of sixty (60) days;
|
(g)
|
a representation or warranty made or deemed to be repeated by the Applicant to the Issuer under any of the Finance Documents, shall have been false or misleading in any material respect as of the date such representation or warranty is made or deemed to be repeated;
|
(h)
|
any attachment, execution or levy is made in respect of any part of the Collateral, the Collateral becomes subject to any lien, charge, assignment, encumbrance or security interest (other than any lien, charge, assignment, encumbrance or security interest created pursuant to or permitted by this Agreement or any other Finance Document) or the Issuer ceases for any reason to have a first priority perfected security interest in any Collateral;
|
(i)
|
the Applicant shall default in the payment when due (subject to any applicable grace period) of any other Debt if (i) the effect of such default is to accelerate the maturity of such indebtedness or obligation or to require the prepayment thereof or to permit the holder or obligee thereof (or a trustee on behalf of such holder or obligee) to cause any such Debt to become due prior to its stated maturity and (ii) the aggregate amount of Debt of the Applicant which is accelerated or becomes so due and payable, or which (subject to any applicable grace period) may be accelerated or otherwise become due and payable, by reason of such default or defaults is $500,000 or more;
|
(l)
|
the Applicant does not comply with any other term of this Agreement or any other Finance Document and such non-compliance continues for a period of ten (10) Business Days following the date the Issuer gives notice thereof to the Applicant or the date the Applicant becoming aware of the non-compliance; and
|
(m)
|
one or more final and non-appealable judgments or decrees is entered against the Applicant or any of its Subsidiaries involving in the aggregate a liability (not fully paid or covered by insurance) of $500,000 or more and all such judgments or decrees shall not have been vacated, discharged or stated or bonded pending appeal within sixty (60) days form the entry thereof.
|
Section 12.
|
GOVERNING LAW; JURISDICTION; APPOINTMENT OF AGENT; VENUE.
|
Section 13.
|
NOTICES.
|
Section 14.
|
AMENDMENTS AND WAIVERS
|
Section 15.
|
NO WAIVER; REMEDIES
|
Section 16.
|
SEVERABILITY
.
|
Section 17.
|
ENTIRE AGREEMENT.
|
Section 18.
|
COUNTERPARTS.
|
Section 19.
|
FURTHER ASSURANCES.
|
Letter of Credit Fee:
|
A non-refundable fee equal to (i) with respect to any Letter of Credit issued by the Issuer, 60 basis points (0.60%) per annum on the Stated Amount of each such Letter of Credit issued and outstanding during the relevant period and (ii) with respect to any Letter of Credit issued or confirmed by a Correspondent Bank, 75 basis points (0.75%) per annum on the Stated Amount of each such Letter of Credit issued and outstanding during the relevant period.
|
|
o |
Applicant of the Credit has been awarded a contract under an offer to bid and has failed to become a party to the contract related thereto (describe):
|
|
o |
It has become necessary for the Beneficiary bank or other financial entity to make payment under its undertaking issued on behalf of Applicant of this Credit, with an expiration date of
, at its counters, in favor of , in relation to
|
|
|
|
o |
Description of transaction if other than described above:
|
x |
Automatic extension available unless
30
-day notification of non-renewal or termination of the Amended and Restated Letter of Credit Agreement, with an initial expiration date of [
l
], 20xx
|
o |
All banking charges, other than charges of Butterfield Bank (Cayman) Limited,
|
GREENLIGHT REINSURANCE, LTD.
By:
Name:
Title:
|
________________
Date
|
By:
Name: Tim Courtis
Title: CFO
|
_______________
Date
|
Six Months Ended June 30, 2010
(2)
|
Six Months Ended June 30, 2009
(2)
|
||
Ratio of Earnings to Fixed Charges
(1)
|
1.9
|
44.49
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Greenlight Capital Re, Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Dated: August 2, 2010
|
/s/ Leonard Goldberg
|
|
Leonard Goldberg
|
||
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Greenlight Capital Re, Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Dated: August 2, 2010
|
/s/ Tim Courtis
|
|
Tim Courtis
|
||
Chief Financial Officer
|
Dated: August 2, 2010
|
/s/ Leonard Goldberg
|
|
Leonard Goldberg
|
Dated: August 2, 2010
|
/s/ Tim Courtis
|
|
Tim Courtis
|