x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended June 30, 2013 | ||
OR | ||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
XL GROUP |
Public Limited Company |
(Exact name of registrant as specified in its charter) |
Ireland | 98-0665416 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Page No. | ||
Unaudited Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 | ||
Unaudited Consolidated Statements of Income for the Three and Six Months Ended June 30, 2013 and 2012 | ||
Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2013 and 2012 | ||
Unaudited Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2013 and 2012 | ||
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 | ||
ITEM 1. | FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except share data) | June 30, 2013 | December 31, 2012 | |||||
ASSETS | |||||||
Investments: | |||||||
Fixed maturities, at fair value (amortized cost: 2013: $26,016,208; 2012: $26,544,806) | $ | 26,455,103 | $ | 27,846,920 | |||
Equity securities, at fair value (cost: 2013: $873,465; 2012: $617,486) | 916,008 | 649,359 | |||||
Short-term investments, at fair value (amortized cost: 2013: $234,775; 2012: $322,563) | 234,452 | 322,703 | |||||
Total investments available for sale | $ | 27,605,563 | $ | 28,818,982 | |||
Fixed maturities, held to maturity at amortized cost (fair value: 2013: $2,978,981; 2012:$3,262,804) | 2,686,994 | 2,814,447 | |||||
Investments in affiliates | 1,367,581 | 1,126,875 | |||||
Other investments | 1,135,794 | 1,219,879 | |||||
Total investments | $ | 32,795,932 | $ | 33,980,183 | |||
Cash and cash equivalents | 2,420,082 | 2,618,378 | |||||
Accrued investment income | 324,735 | 342,778 | |||||
Deferred acquisition costs | 737,804 | 675,653 | |||||
Ceded unearned premiums | 802,084 | 587,074 | |||||
Premiums receivable | 3,309,550 | 2,568,862 | |||||
Reinsurance balances receivable | 105,936 | 58,428 | |||||
Unpaid losses and loss expenses recoverable | 3,250,248 | 3,382,102 | |||||
Receivable from investments sold | 107,260 | 16,002 | |||||
Goodwill and other intangible assets | 407,379 | 408,527 | |||||
Deferred tax asset | 246,731 | 166,143 | |||||
Other assets | 597,396 | 582,765 | |||||
Total assets | $ | 45,105,137 | $ | 45,386,895 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Unpaid losses and loss expenses | $ | 19,990,710 | $ | 20,484,121 | |||
Deposit liabilities | 1,534,896 | 1,551,398 | |||||
Future policy benefit reserves | 4,584,029 | 4,812,046 | |||||
Unearned premiums | 4,472,108 | 3,755,086 | |||||
Notes payable and debt | 1,671,634 | 1,672,778 | |||||
Reinsurance balances payable | 614,012 | 143,112 | |||||
Payable for investments purchased | 122,568 | 102,113 | |||||
Deferred tax liability | 120,686 | 141,803 | |||||
Other liabilities | 757,424 | 868,036 | |||||
Total liabilities | $ | 33,868,067 | $ | 33,530,493 | |||
Commitments and Contingencies | |||||||
Shareholders’ Equity: | |||||||
Ordinary shares, 999,990,000 authorized, par value $0.01; issued and outstanding: (2013: 287,447,771; 2012: 298,681,573) | $ | 2,874 | $ | 2,987 | |||
Additional paid in capital | 8,250,564 | 8,584,752 | |||||
Accumulated other comprehensive income | 710,760 | 1,520,020 | |||||
Retained earnings (deficit) | 928,372 | 402,318 | |||||
Shareholders’ equity attributable to XL Group plc | $ | 9,892,570 | $ | 10,510,077 | |||
Non-controlling interest in equity of consolidated subsidiaries | 1,344,500 | 1,346,325 | |||||
Total shareholders’ equity | $ | 11,237,070 | $ | 11,856,402 | |||
Total liabilities and shareholders’ equity | $ | 45,105,137 | $ | 45,386,895 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(U.S. dollars in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenues: | |||||||||||||||
Net premiums earned | $ | 1,562,393 | $ | 1,486,593 | $ | 3,092,084 | $ | 2,923,010 | |||||||
Net investment income | 232,546 | 262,631 | 479,014 | 527,873 | |||||||||||
Realized investment gains (losses): | |||||||||||||||
Net realized gains (losses) on investments sold | 43,357 | 15,800 | 84,504 | 57,567 | |||||||||||
Other-than-temporary impairments on investments | (1,561 | ) | (16,168 | ) | (5,289 | ) | (34,733 | ) | |||||||
Other-than-temporary impairments on investments transferred to (from) other comprehensive income | (828 | ) | (12,025 | ) | (1,738 | ) | (14,425 | ) | |||||||
Total net realized gains (losses) on investments | $ | 40,968 | $ | (12,393 | ) | $ | 77,477 | $ | 8,409 | ||||||
Net realized and unrealized gains (losses) on derivative instruments | (5,105 | ) | (4,301 | ) | 2,780 | (3,598 | ) | ||||||||
Income (loss) from investment fund affiliates | 46,543 | 3,097 | 78,764 | 22,506 | |||||||||||
Fee income and other | 10,871 | 13,213 | 20,503 | 23,072 | |||||||||||
Total revenues | $ | 1,888,216 | $ | 1,748,840 | $ | 3,750,622 | $ | 3,501,272 | |||||||
Expenses: | |||||||||||||||
Net losses and loss expenses incurred | $ | 937,606 | $ | 826,354 | $ | 1,780,690 | $ | 1,680,420 | |||||||
Claims and policy benefits | 116,767 | 131,149 | 227,720 | 252,455 | |||||||||||
Acquisition costs | 231,886 | 218,937 | 452,145 | 443,087 | |||||||||||
Operating expenses | 303,159 | 299,053 | 586,992 | 581,465 | |||||||||||
Exchange (gains) losses | (11,331 | ) | (17,976 | ) | (44,766 | ) | (5,258 | ) | |||||||
Interest expense | 38,204 | 57,359 | 76,904 | 96,657 | |||||||||||
Total expenses | $ | 1,616,291 | $ | 1,514,876 | $ | 3,079,685 | $ | 3,048,826 | |||||||
Income (loss) before income tax and income (loss) from operating affiliates | $ | 271,925 | $ | 233,964 | $ | 670,937 | $ | 452,446 | |||||||
Income (loss) from operating affiliates | 32,825 | 20,457 | 63,823 | 36,710 | |||||||||||
Provision (benefit) for income tax | 28,872 | 29,812 | 72,351 | 51,362 | |||||||||||
Net income (loss) | $ | 275,878 | $ | 224,609 | $ | 662,409 | $ | 437,794 | |||||||
Non-controlling interests | (3,180 | ) | (3,455 | ) | (38,922 | ) | (40,012 | ) | |||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | |||||||
Weighted average ordinary shares and ordinary share equivalents outstanding, in thousands – basic | 289,513 | 309,765 | 292,277 | 312,442 | |||||||||||
Weighted average ordinary shares and ordinary share equivalents outstanding, in thousands – diluted | 294,333 | 312,435 | 297,044 | 315,010 | |||||||||||
Earnings (loss) per ordinary share and ordinary share equivalent – basic | $ | 0.94 | $ | 0.71 | $ | 2.13 | $ | 1.27 | |||||||
Earnings (loss) per ordinary share and ordinary share equivalent – diluted | $ | 0.93 | $ | 0.71 | $ | 2.10 | $ | 1.26 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | |||||||
Change in net unrealized gains (losses) on investments, net of tax | (715,179 | ) | 109,335 | (827,401 | ) | 321,658 | |||||||||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax | 30,076 | 1,332 | 25,642 | 16,383 | |||||||||||
Change in OTTI losses recognized in other comprehensive income, net of tax | 14,438 | 13,996 | 19,620 | 26,417 | |||||||||||
Change in underfunded pension liability | (90 | ) | 168 | 295 | (7 | ) | |||||||||
Change in value of cash flow hedge | 110 | 110 | 220 | 220 | |||||||||||
Foreign currency translation adjustments | (23,718 | ) | (45,700 | ) | (27,636 | ) | (36,966 | ) | |||||||
Comprehensive income (loss) | $ | (421,665 | ) | $ | 300,395 | $ | (185,773 | ) | $ | 725,487 |
Six Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Ordinary Shares: | |||||||
Balance - beginning of year | $ | 2,987 | $ | 3,156 | |||
Issuance of ordinary shares | 11 | 9 | |||||
Buybacks of ordinary shares | (129 | ) | (109 | ) | |||
Exercise of stock options | 5 | 1 | |||||
Balance - end of period | $ | 2,874 | $ | 3,057 | |||
Additional Paid in Capital: | |||||||
Balance - beginning of year | $ | 8,584,752 | $ | 8,938,679 | |||
Issuance of ordinary shares | 13 | 1,376 | |||||
Buybacks of ordinary shares | (360,201 | ) | (225,869 | ) | |||
Exercise of stock options | 8,380 | 1,349 | |||||
Share-based compensation expense | 17,620 | 22,669 | |||||
Balance - end of period | $ | 8,250,564 | $ | 8,738,204 | |||
Accumulated Other Comprehensive Income (Loss): | |||||||
Balance - beginning of year | $ | 1,520,020 | $ | 583,065 | |||
Change in net unrealized gains (losses) on investments, net of tax | (827,401 | ) | 321,658 | ||||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax | 25,642 | 16,383 | |||||
Change in OTTI losses recognized in other comprehensive income, net of tax | 19,620 | 26,417 | |||||
Change in underfunded pension liability | 295 | (7 | ) | ||||
Change in value of cash flow hedge | 220 | 220 | |||||
Foreign currency translation adjustments | (27,636 | ) | (36,966 | ) | |||
Balance - end of period | $ | 710,760 | $ | 910,770 | |||
Retained Earnings (Deficit): | |||||||
Balance - beginning of year | $ | 402,318 | $ | (113,241 | ) | ||
Net income (loss) attributable to ordinary shareholders | 623,487 | 397,782 | |||||
Dividends on ordinary shares | (82,341 | ) | (68,756 | ) | |||
Buybacks of ordinary shares | (15,092 | ) | — | ||||
Balance - end of period | $ | 928,372 | $ | 215,785 | |||
Non-controlling Interest in Equity of Consolidated Subsidiaries: | |||||||
Balance - beginning of year | $ | 1,346,325 | $ | 1,344,472 | |||
Non-controlling interests - contribution | — | 1,500 | |||||
Non-controlling interests - distribution | (37 | ) | — | ||||
Non-controlling interests | 82 | (12 | ) | ||||
Non-controlling interest share in change in accumulated other comprehensive income (loss) | (29 | ) | 33 | ||||
Non-controlling interests - deconsolidation | (1,841 | ) | — | ||||
Balance - end of period | $ | 1,344,500 | $ | 1,345,993 | |||
Total Shareholders’ Equity | $ | 11,237,070 | $ | 11,213,809 |
Six Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Cash flows provided by (used in) operating activities: | |||||||
Net income (loss) | $ | 662,409 | $ | 437,794 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Net realized (gains) losses on investments | (77,477 | ) | (8,409 | ) | |||
Net realized and unrealized (gains) losses on derivative instruments | (2,780 | ) | 3,598 | ||||
Amortization of premiums (discounts) on fixed maturities | 84,095 | 75,240 | |||||
(Income) loss from investment and operating affiliates | (142,587 | ) | (59,216 | ) | |||
Share-based compensation | 28,400 | 27,795 | |||||
Depreciation | 23,693 | 27,479 | |||||
Accretion of deposit liabilities | 25,467 | 49,852 | |||||
Changes in: | |||||||
Unpaid losses and loss expenses | (293,927 | ) | (531,503 | ) | |||
Future policy benefit reserves | (90,147 | ) | (88,679 | ) | |||
Unearned premiums | 751,455 | 718,750 | |||||
Premiums receivable | (779,737 | ) | (739,817 | ) | |||
Unpaid losses and loss expenses recoverable | 95,046 | 300,429 | |||||
Ceded unearned premiums | (222,467 | ) | (153,792 | ) | |||
Reinsurance balances receivable | (48,420 | ) | (4,959 | ) | |||
Deferred acquisition costs | (74,886 | ) | (60,901 | ) | |||
Reinsurance balances payable | 478,012 | 427,573 | |||||
Deferred tax asset - net | (9,476 | ) | 22,328 | ||||
Derivatives | 68,445 | 28,383 | |||||
Other assets | (58,729 | ) | 23,974 | ||||
Other liabilities | (60,531 | ) | 17,389 | ||||
Other | 3,794 | (29,712 | ) | ||||
Total adjustments | $ | (302,757 | ) | $ | 45,802 | ||
Net cash provided by (used in) operating activities | $ | 359,652 | $ | 483,596 | |||
Cash flows provided by (used in) investing activities: | |||||||
Proceeds from sale of fixed maturities and short-term investments | $ | 2,110,114 | $ | 1,972,342 | |||
Proceeds from redemption of fixed maturities and short-term investments | 2,266,692 | 2,280,398 | |||||
Proceeds from sale of equity securities | 74,310 | 123,181 | |||||
Purchases of fixed maturities and short-term investments | (4,108,180 | ) | (4,093,947 | ) | |||
Purchases of equity securities | (331,865 | ) | (197,653 | ) | |||
Investment affiliates, net | (163,642 | ) | 38,437 | ||||
Other investments, net | 110,134 | (128,281 | ) | ||||
Net cash provided by (used in) investing activities | $ | (42,437 | ) | $ | (5,523 | ) | |
Cash flows provided by (used in) financing activities: | |||||||
Proceeds from issuance of ordinary shares and exercise of stock options | $ | 8,385 | $ | 1,214 | |||
Buybacks of ordinary shares | (375,423 | ) | (225,978 | ) | |||
Dividends paid on ordinary shares | (41,975 | ) | (68,315 | ) | |||
Distributions to non-controlling interests | (39,020 | ) | (39,930 | ) | |||
Contributions from non-controlling interests | — | 1,500 | |||||
Repayment of debt | — | (600,000 | ) | ||||
Deposit liabilities | (44,117 | ) | (56,910 | ) | |||
Net cash provided by (used in) financing activities | $ | (492,150 | ) | $ | (988,419 | ) | |
Effects of exchange rate changes on foreign currency cash | (23,361 | ) | (3,633 | ) | |||
Increase (decrease) in cash and cash equivalents | $ | (198,296 | ) | $ | (513,979 | ) | |
Cash and cash equivalents - beginning of period | 2,618,378 | 3,825,125 | |||||
Cash and cash equivalents - end of period | $ | 2,420,082 | $ | 3,311,146 |
June 30, 2013 (U.S. dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Collateral and Counterparty Netting | Balance at June 30, 2013 | ||||||||||||||
Assets | |||||||||||||||||||
U.S. Government and Government - Related/Supported | $ | — | $ | 2,022,822 | $ | — | $ | — | $ | 2,022,822 | |||||||||
Corporate (1) | — | 10,047,302 | 32,173 | — | 10,079,475 | ||||||||||||||
Residential mortgage-backed securities – Agency (“RMBS - Agency”) | — | 4,428,511 | 18,214 | — | 4,446,725 | ||||||||||||||
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”) | — | 402,991 | 3,411 | — | 406,402 | ||||||||||||||
Commercial mortgage-backed securities (“CMBS”) | — | 1,104,649 | 24,423 | — | 1,129,072 | ||||||||||||||
Collateralized debt obligations (“CDO”) | — | 8,235 | 706,013 | — | 714,248 | ||||||||||||||
Other asset-backed securities (2) | — | 1,161,221 | 27,539 | — | 1,188,760 | ||||||||||||||
U.S. States and political subdivisions of the States | — | 1,798,267 | — | — | 1,798,267 | ||||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | — | 4,669,332 | — | — | 4,669,332 | ||||||||||||||
Total fixed maturities, at fair value | $ | — | $ | 25,643,330 | $ | 811,773 | $ | — | $ | 26,455,103 | |||||||||
Equity securities, at fair value (3) | 445,709 | 470,299 | — | 916,008 | |||||||||||||||
Short-term investments, at fair value (1)(4) | — | 232,453 | 1,999 | — | 234,452 | ||||||||||||||
Total investments available for sale | $ | 445,709 | $ | 26,346,082 | $ | 813,772 | $ | — | $ | 27,605,563 | |||||||||
Cash equivalents (5) | 1,375,683 | 287,690 | — | — | 1,663,373 | ||||||||||||||
Other investments (6) | 738,543 | 103,844 | 842,387 | ||||||||||||||||
Other assets (7) | 19,674 | (1,827 | ) | 17,847 | |||||||||||||||
Total assets accounted for at fair value | $ | 1,821,392 | $ | 27,391,989 | $ | 917,616 | $ | (1,827 | ) | $ | 30,129,170 | ||||||||
Liabilities | |||||||||||||||||||
Financial instruments sold, but not yet purchased (8) | $ | 375 | $ | 23,941 | $ | — | $ | 24,316 | |||||||||||
Other liabilities (7) | 9,774 | 29,374 | (1,827 | ) | 37,321 | ||||||||||||||
Total liabilities accounted for at fair value | $ | 375 | $ | 33,715 | $ | 29,374 | $ | (1,827 | ) | $ | 61,637 |
December 31, 2012 (U.S. dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Collateral and Counterparty Netting | Balance at December 31, 2012 | ||||||||||||||
Assets | |||||||||||||||||||
U.S. Government and Government - Related/Supported | $ | — | $ | 2,034,617 | $ | — | $ | — | $ | 2,034,617 | |||||||||
Corporate (1) | — | 10,451,902 | 30,098 | — | 10,482,000 | ||||||||||||||
RMBS – Agency | — | 5,223,488 | 32,005 | — | 5,255,493 | ||||||||||||||
RMBS – Non-Agency | — | 647,617 | 116 | — | 647,733 | ||||||||||||||
CMBS | — | 1,051,904 | 25,347 | — | 1,077,251 | ||||||||||||||
CDO | — | 8,080 | 701,736 | — | 709,816 | ||||||||||||||
Other asset-backed securities (2) | — | 1,452,583 | 18,128 | — | 1,470,711 | ||||||||||||||
U.S. States and political subdivisions of the States | — | 1,911,017 | — | — | 1,911,017 | ||||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | — | 4,258,282 | — | — | 4,258,282 | ||||||||||||||
Total fixed maturities, at fair value | $ | — | $ | 27,039,490 | $ | 807,430 | $ | — | $ | 27,846,920 | |||||||||
Equity securities, at fair value (3) | 253,957 | 395,402 | — | — | 649,359 | ||||||||||||||
Short-term investments, at fair value (1)(4) | — | 322,703 | — | — | 322,703 | ||||||||||||||
Total investments available for sale | $ | 253,957 | $ | 27,757,595 | $ | 807,430 | $ | — | $ | 28,818,982 | |||||||||
Cash equivalents (5) | 1,596,376 | 408,292 | — | — | 2,004,668 | ||||||||||||||
Other investments (6) | — | 792,483 | 115,272 | — | 907,755 | ||||||||||||||
Other assets (7) | — | 24,842 | — | (1,327 | ) | 23,515 | |||||||||||||
Total assets accounted for at fair value | $ | 1,850,333 | $ | 28,983,212 | $ | 922,702 | $ | (1,327 | ) | $ | 31,754,920 | ||||||||
Liabilities | |||||||||||||||||||
Financial instruments sold, but not yet purchased (8) | $ | — | $ | 26,235 | $ | — | $ | — | $ | 26,235 | |||||||||
Other liabilities (7) | — | 30,379 | 36,247 | (1,327 | ) | 65,299 | |||||||||||||
Total liabilities accounted for at fair value | $ | — | $ | 56,614 | $ | 36,247 | $ | (1,327 | ) | $ | 91,534 |
(1) | Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes had a fair value of $149.4 million and $194.3 million and an amortized cost of $150.2 million and $194.8 million at June 30, 2013 and December 31, 2012, respectively. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes. |
(2) | The Company invests in covered bonds (“Covered Bonds”). Covered Bonds are senior secured debt instruments issued by financial institutions and backed by over-collateralized pools of public sector or mortgage loans. At June 30, 2013 and December 31, 2012, Covered Bonds with a fair value of $550.9 million and $647.1 million, respectively, are included within Other asset-backed securities. |
(3) | Included within Equity securities are investments in fixed income funds with a fair value of $91.3 million and $101.9 million at June 30, 2013 and December 31, 2012, respectively. |
(4) | Short-term investments consist primarily of Corporate securities and U.S. and Non-U.S. Government and Government-Related/ Supported securities. |
(5) | Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to fair value measurement guidance. |
(6) | The Other investments balance excludes certain structured transactions including certain investments in project finance transactions, a payment obligation and liquidity financing provided to a structured credit vehicle as a part of a third party medium term note facility. These investments, which totaled $293.4 million at June 30, 2013 and $312.1 million at December 31, 2012, are carried at amortized cost. For further information, see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. |
(7) | Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported on a gross basis by level with a netting adjustment presented separately in the Collateral and Counterparty Netting column. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy. For further details regarding derivative fair values and associated collateral received or paid see Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements. |
(8) | Financial instruments sold, but not yet purchased, represent “short sales” and are included within “Payable for investments purchased” on the balance sheet. |
Level 3 Assets and Liabilities -Three Months Ended June 30, 2013 | |||||||||||||||||||
(U.S. dollars in thousands) | Corporate | RMBS - Agency | RMBS - Non Agency | CMBS | CDO | ||||||||||||||
Balance, beginning of period | $ | 40,815 | $ | 19,107 | $ | 103 | $ | 25,012 | $ | 702,904 | |||||||||
Realized gains (losses) | (69 | ) | (2 | ) | — | — | (55 | ) | |||||||||||
Movement in unrealized gains (losses) | 426 | (19 | ) | — | (19 | ) | 14,491 | ||||||||||||
Purchases and issuances | — | — | 3,326 | — | 5,362 | ||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||
Settlements | (7,139 | ) | (872 | ) | (18 | ) | (570 | ) | (16,689 | ) | |||||||||
Transfers into Level 3 | — | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | (1,860 | ) | — | — | — | — | |||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 32,173 | $ | 18,214 | $ | 3,411 | $ | 24,423 | $ | 706,013 | |||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 424 | $ | (22 | ) | $ | (1 | ) | $ | (19 | ) | $ | 13,804 | ||||||
Level 3 Assets and Liabilities -Three Months Ended June 30, 2013 | |||||||||||||||||||
(U.S. dollars in thousands) | Other asset- backed securities | Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported | Short-term investments | Other investments | Derivative Contracts - Net | ||||||||||||||
Balance, beginning of period | $ | 35,887 | $ | — | $ | 2,017 | $ | 113,322 | $ | (32,550 | ) | ||||||||
Realized gains (losses) | (13 | ) | — | (10 | ) | 2,872 | — | ||||||||||||
Movement in unrealized gains (losses) | (512 | ) | — | (8 | ) | 932 | 3,176 | ||||||||||||
Purchases and issuances | — | — | — | 1,002 | — | ||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||
Settlements | (1,317 | ) | — | — | (14,284 | ) | — | ||||||||||||
Transfers into Level 3 | — | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | (6,506 | ) | — | — | — | — | |||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 27,539 | $ | — | $ | 1,999 | $ | 103,844 | $ | (29,374 | ) | ||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | (525 | ) | $ | — | $ | (18 | ) | $ | 3,812 | $ | 3,176 |
Level 3 Assets and Liabilities -Three Months Ended June 30, 2012 | |||||||||||||||||||
(U.S. dollars in thousands) | Corporate | RMBS - Agency | RMBS - Non Agency | CMBS | CDO | ||||||||||||||
Balance, beginning of period | $ | 33,305 | $ | 39,795 | $ | — | $ | — | $ | 638,697 | |||||||||
Realized gains (losses) | 82 | (30 | ) | — | — | 57 | |||||||||||||
Movement in unrealized gains (losses) | 94 | 195 | — | — | 6,186 | ||||||||||||||
Purchases and issuances | — | 35 | — | — | — | ||||||||||||||
Sales | — | (3,050 | ) | — | — | — | |||||||||||||
Settlements | (213 | ) | (1,295 | ) | — | — | (1,488 | ) | |||||||||||
Transfers into Level 3 | 536 | 16,938 | 1,596 | — | — | ||||||||||||||
Transfers out of Level 3 | (293 | ) | — | — | — | (1,273 | ) | ||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 33,511 | $ | 52,588 | $ | 1,596 | $ | — | $ | 642,179 | |||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 94 | $ | 197 | $ | — | $ | — | $ | 6,186 | |||||||||
Level 3 Assets and Liabilities -Three Months Ended June 30, 2012 | |||||||||||||||||||
(U.S. dollars in thousands) | Other asset- backed securities | Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported | Short-term investments | Other investments | Derivative Contracts - Net | ||||||||||||||
Balance, beginning of period | $ | 16,410 | $ | — | $ | — | $ | 115,659 | $ | (40,630 | ) | ||||||||
Realized gains (losses) | (135 | ) | — | — | 510 | — | |||||||||||||
Movement in unrealized gains (losses) | 4,145 | — | — | 3,616 | 4,683 | ||||||||||||||
Purchases and issuances | — | — | — | 2,365 | — | ||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||
Settlements | (844 | ) | — | — | (4,080 | ) | — | ||||||||||||
Transfers into Level 3 | 5,672 | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | — | — | — | (305 | ) | — | |||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 25,248 | $ | — | $ | — | $ | 117,765 | $ | (35,947 | ) | ||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 3,918 | $ | — | $ | — | $ | 1,326 | $ | 4,683 |
Level 3 Assets and Liabilities - Six Months Ended June 30, 2013 | |||||||||||||||||||
(U.S. dollars in thousands) | Corporate | RMBS - Agency | RMBS - Non Agency | CMBS | CDO | ||||||||||||||
Balance, beginning of period | $ | 30,098 | $ | 32,005 | $ | 116 | $ | 25,347 | $ | 701,736 | |||||||||
Realized gains (losses) | (71 | ) | 11 | — | — | 301 | |||||||||||||
Movement in unrealized gains (losses) | 630 | (37 | ) | — | (18 | ) | 35,746 | ||||||||||||
Purchases and issuances | 10,621 | — | 3,326 | — | 5,362 | ||||||||||||||
Sales | — | (535 | ) | — | — | — | |||||||||||||
Settlements | (7,245 | ) | (1,765 | ) | (31 | ) | (906 | ) | (37,132 | ) | |||||||||
Transfers into Level 3 | — | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | (1,860 | ) | (11,465 | ) | — | — | — | ||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 32,173 | $ | 18,214 | $ | 3,411 | $ | 24,423 | $ | 706,013 | |||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 627 | $ | (40 | ) | $ | (1 | ) | $ | (18 | ) | $ | 34,278 | ||||||
Level 3 Assets and Liabilities - Six Months Ended June 30, 2013 | |||||||||||||||||||
(U.S. dollars in thousands) | Other asset- backed securities | Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported | Short-term investments | Other investments | Derivative Contracts - Net | ||||||||||||||
Balance, beginning of period | $ | 18,128 | $ | — | $ | — | $ | 115,272 | $ | (36,247 | ) | ||||||||
Realized gains (losses) | 38 | — | (10 | ) | 5,787 | — | |||||||||||||
Movement in unrealized gains (losses) | 963 | — | (8 | ) | (970 | ) | 6,873 | ||||||||||||
Purchases and issuances | 21,686 | — | 2,017 | 2,907 | — | ||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||
Settlements | (6,770 | ) | — | — | (19,152 | ) | — | ||||||||||||
Transfers into Level 3 | — | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | (6,506 | ) | — | — | — | — | |||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 27,539 | $ | — | $ | 1,999 | $ | 103,844 | $ | (29,374 | ) | ||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | (516 | ) | $ | — | $ | (18 | ) | $ | 4,808 | $ | 6,873 |
Level 3 Assets and Liabilities - Six Months Ended June 30, 2012 | |||||||||||||||||||
(U.S. dollars in thousands) | Corporate | RMBS - Agency | RMBS - Non Agency | CMBS | CDO | ||||||||||||||
Balance, beginning of period | $ | 23,818 | $ | 32,041 | $ | — | $ | — | $ | 650,851 | |||||||||
Realized gains (losses) | (42 | ) | (96 | ) | — | — | (1,612 | ) | |||||||||||
Movement in unrealized gains (losses) | 1,255 | (95 | ) | — | — | 39,379 | |||||||||||||
Purchases and issuances | 8,734 | 70 | — | — | — | ||||||||||||||
Sales | — | (4,384 | ) | — | — | (37,181 | ) | ||||||||||||
Settlements | (1,608 | ) | (1,877 | ) | — | — | (7,654 | ) | |||||||||||
Transfers into Level 3 | 1,647 | 26,929 | 1,596 | — | — | ||||||||||||||
Transfers out of Level 3 | (293 | ) | — | — | — | (1,604 | ) | ||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 33,511 | $ | 52,588 | $ | 1,596 | $ | — | $ | 642,179 | |||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 1,255 | $ | (95 | ) | $ | — | $ | — | $ | 35,379 | ||||||||
Level 3 Assets and Liabilities - Six Months Ended June 30, 2012 | |||||||||||||||||||
(U.S. dollars in thousands) | Other asset- backed securities | Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported | Short-term investments | Other investments | Derivative Contracts - Net | ||||||||||||||
Balance, beginning of period | $ | 16,552 | $ | — | $ | — | $ | 113,959 | $ | (42,644 | ) | ||||||||
Realized gains (losses) | (94 | ) | — | — | 2,438 | — | |||||||||||||
Movement in unrealized gains (losses) | 3,905 | — | — | 4,521 | 6,697 | ||||||||||||||
Purchases and issuances | — | — | — | 3,682 | — | ||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||
Settlements | (1,118 | ) | — | — | (6,520 | ) | — | ||||||||||||
Transfers into Level 3 | 6,003 | — | — | — | — | ||||||||||||||
Transfers out of Level 3 | — | — | — | (315 | ) | — | |||||||||||||
Fixed maturities to short-term investments classification change | — | — | — | — | — | ||||||||||||||
Balance, end of period | $ | 25,248 | $ | — | $ | — | $ | 117,765 | $ | (35,947 | ) | ||||||||
Movement in total gains (losses) above relating to instruments still held at the reporting date | $ | 3,681 | $ | — | $ | — | $ | 1,004 | $ | 6,697 |
June 30, 2013 | December 31, 2012 | ||||||||||||||
(U.S. dollars in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Fixed maturities, held to maturity | $ | 2,686,994 | $ | 2,978,981 | $ | 2,814,447 | $ | 3,262,804 | |||||||
Other investments - structured transactions | 293,407 | 291,608 | 312,122 | 293,813 | |||||||||||
Financial Assets | $ | 2,980,401 | $ | 3,270,589 | $ | 3,126,569 | $ | 3,556,617 | |||||||
Deposit liabilities | $ | 1,534,896 | $ | 1,789,375 | $ | 1,551,398 | $ | 1,878,499 | |||||||
Notes payable and debt | 1,671,634 | 1,834,624 | 1,672,778 | 1,918,134 | |||||||||||
Financial Liabilities | $ | 3,206,530 | $ | 3,623,999 | $ | 3,224,176 | $ | 3,796,633 |
Three Months Ended June 30, 2013 (U.S. dollars in thousands, except ratios) | Insurance | Reinsurance | Total P&C | Life Operations | Total | ||||||||||||||
Gross premiums written | $ | 1,472,388 | $ | 471,782 | $ | 1,944,170 | $ | 81,302 | $ | 2,025,472 | |||||||||
Net premiums written | 1,049,163 | 410,809 | 1,459,972 | 73,896 | 1,533,868 | ||||||||||||||
Net premiums earned | 1,058,542 | 429,955 | 1,488,497 | 73,896 | 1,562,393 | ||||||||||||||
Net losses and loss expenses | 721,323 | 216,283 | 937,606 | 116,767 | 1,054,373 | ||||||||||||||
Acquisition costs | 138,032 | 86,599 | 224,631 | 7,255 | 231,886 | ||||||||||||||
Operating expenses (1) | 194,514 | 39,622 | 234,136 | 2,206 | 236,342 | ||||||||||||||
Underwriting profit (loss) | $ | 4,673 | $ | 87,451 | $ | 92,124 | $ | (52,332 | ) | $ | 39,792 | ||||||||
Net investment income | 143,818 | 70,592 | 214,410 | ||||||||||||||||
Net results from structured products (2) | 3,532 | 2,521 | 6,053 | — | 6,053 | ||||||||||||||
Net fee income and other (3) | (1,355 | ) | 520 | (835 | ) | 44 | (791 | ) | |||||||||||
Net realized gains (losses) on investments | 29,369 | 11,599 | 40,968 | ||||||||||||||||
Contribution from P&C and Life Operations | $ | 270,529 | $ | 29,903 | $ | 300,432 | |||||||||||||
Corporate & other: | |||||||||||||||||||
Net realized & unrealized gains (losses) on derivative instruments | (5,105 | ) | |||||||||||||||||
Net income (loss) from investment fund affiliates and operating affiliates (4) | 79,368 | ||||||||||||||||||
Exchange (gains) losses | (11,331 | ) | |||||||||||||||||
Corporate operating expenses | 55,155 | ||||||||||||||||||
Interest expense (5) | 26,121 | ||||||||||||||||||
Non-controlling interests | 3,180 | ||||||||||||||||||
Income tax expense | 28,872 | ||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | |||||||||||||||||
Ratios – P&C operations: (6) | |||||||||||||||||||
Loss and loss expense ratio | 68.1 | % | 50.3 | % | 63.0 | % | |||||||||||||
Underwriting expense ratio | 31.5 | % | 29.4 | % | 30.8 | % | |||||||||||||
Combined ratio | 99.6 | % | 79.7 | % | 93.8 | % |
(1) | Operating expenses exclude Corporate operating expenses, shown separately. |
(2) | The net results from P&C structured products include net investment income and interest expense of $18.1 million and $12.1 million, respectively. |
(3) | Net fee income and other includes operating expenses from the Company's loss prevention consulting services business. |
(4) | The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively. |
(5) | Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments. |
(6) | Ratios are based on net premiums earned from P&C operations. |
Three Months Ended June 30, 2012 (U.S. dollars in thousands, except ratios) | Insurance | Reinsurance | Total P&C | Life Operations | Total | ||||||||||||||
Gross premiums written | $ | 1,311,035 | $ | 452,417 | $ | 1,763,452 | $ | 92,903 | $ | 1,856,355 | |||||||||
Net premiums written | 944,266 | 403,011 | 1,347,277 | 85,623 | 1,432,900 | ||||||||||||||
Net premiums earned | 959,293 | 441,677 | 1,400,970 | 85,623 | 1,486,593 | ||||||||||||||
Net losses and loss expenses | 635,282 | 191,072 | 826,354 | 131,149 | 957,503 | ||||||||||||||
Acquisition costs | 123,285 | 87,722 | 211,007 | 7,930 | 218,937 | ||||||||||||||
Operating expenses (1) | 192,246 | 41,991 | 234,237 | 2,829 | 237,066 | ||||||||||||||
Underwriting profit (loss) | $ | 8,480 | $ | 120,892 | $ | 129,372 | $ | (56,285 | ) | $ | 73,087 | ||||||||
Net investment income | 170,579 | 74,646 | 245,225 | ||||||||||||||||
Net results from structured products (2) | 9,047 | (22,806 | ) | (13,759 | ) | — | (13,759 | ) | |||||||||||
Net fee income and other (3) | 256 | 990 | 1,246 | 42 | 1,288 | ||||||||||||||
Net realized gains (losses) on investments | (2,154 | ) | (10,239 | ) | (12,393 | ) | |||||||||||||
Contribution from P&C and Life Operations | $ | 285,284 | $ | 8,164 | $ | 293,448 | |||||||||||||
Corporate & other: | |||||||||||||||||||
Net realized & unrealized gains (losses) on derivative instruments | (4,301 | ) | |||||||||||||||||
Net income (loss) from investment fund affiliates and operating affiliates (4) | 23,554 | ||||||||||||||||||
Exchange (gains) losses | (17,976 | ) | |||||||||||||||||
Corporate operating expenses | 50,062 | ||||||||||||||||||
Interest expense (5) | 26,194 | ||||||||||||||||||
Non-controlling interests | 3,455 | ||||||||||||||||||
Income tax expense | 29,812 | ||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 221,154 | |||||||||||||||||
Ratios – P&C operations: (6) | |||||||||||||||||||
Loss and loss expense ratio | 66.2 | % | 43.3 | % | 59.0 | % | |||||||||||||
Underwriting expense ratio | 32.9 | % | 29.3 | % | 31.8 | % | |||||||||||||
Combined ratio | 99.1 | % | 72.6 | % | 90.8 | % |
(1) | Operating expenses exclude Corporate operating expenses, shown separately. |
(2) | The net results from P&C structured products include net investment income and interest expense of $17.4 million and $31.2 million, respectively. |
(3) | Net fee income and other includes operating expenses from the Company's loss prevention consulting services business. |
(4) | The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively. |
(5) | Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments. |
(6) | Ratios are based on net premiums earned from P&C operations. |
Six Months Ended June 30, 2013 (U.S. dollars in thousands, except ratios) | Insurance | Reinsurance | Total P&C | Life Operations | Total | ||||||||||||||
Gross premiums written | $ | 2,970,175 | $ | 1,378,911 | $ | 4,349,086 | $ | 154,272 | $ | 4,503,358 | |||||||||
Net premiums written | 2,238,351 | 1,263,830 | 3,502,181 | 139,341 | 3,641,522 | ||||||||||||||
Net premiums earned | 2,097,634 | 855,109 | 2,952,743 | 139,341 | 3,092,084 | ||||||||||||||
Net losses and loss expenses | 1,371,840 | 408,850 | 1,780,690 | 227,720 | 2,008,410 | ||||||||||||||
Acquisition costs | 268,654 | 172,133 | 440,787 | 11,358 | 452,145 | ||||||||||||||
Operating expenses (1) | 378,511 | 80,043 | 458,554 | 4,801 | 463,355 | ||||||||||||||
Underwriting profit (loss) | $ | 78,629 | $ | 194,083 | $ | 272,712 | $ | (104,538 | ) | $ | 168,174 | ||||||||
Net investment income | 300,857 | 142,280 | 443,137 | ||||||||||||||||
Net results from structured products (2) | 7,717 | 3,512 | 11,229 | — | 11,229 | ||||||||||||||
Net fee income and other (3) | (3,294 | ) | 1,152 | (2,142 | ) | 1,087 | (1,055 | ) | |||||||||||
Net realized gains (losses) on investments | 74,947 | 2,530 | 77,477 | ||||||||||||||||
Contribution from P&C and Life Operations | $ | 657,603 | $ | 41,359 | $ | 698,962 | |||||||||||||
Corporate & other: | |||||||||||||||||||
Net realized & unrealized gains (losses) on derivative instruments | 2,780 | ||||||||||||||||||
Net income (loss) from investment fund affiliates and operating affiliates (4) | 142,587 | ||||||||||||||||||
Exchange (gains) losses | (44,766 | ) | |||||||||||||||||
Corporate operating expenses | 102,078 | ||||||||||||||||||
Interest expense (5) | 52,257 | ||||||||||||||||||
Non-controlling interests | 38,922 | ||||||||||||||||||
Income tax expense | 72,351 | ||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 623,487 | |||||||||||||||||
Ratios – P&C operations: (6) | |||||||||||||||||||
Loss and loss expense ratio | 65.4 | % | 47.8 | % | 60.3 | % | |||||||||||||
Underwriting expense ratio | 30.9 | % | 29.5 | % | 30.5 | % | |||||||||||||
Combined ratio | 96.3 | % | 77.3 | % | 90.8 | % |
(1) | Operating expenses exclude Corporate operating expenses, shown separately. |
(2) | The net results from P&C structured products include net investment income and interest expense of $35.9 million and $24.6 million, respectively. |
(3) | Net fee income and other includes operating expenses from the Company's loss prevention consulting services business. |
(4) | The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively. |
(5) | Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments. |
(6) | Ratios are based on net premiums earned from P&C operations. |
Six Months Ended June 30, 2012 (U.S. dollars in thousands, except ratios) | Insurance | Reinsurance | Total P&C | Life Operations | Total | ||||||||||||||
Gross premiums written | $ | 2,647,669 | $ | 1,432,767 | $ | 4,080,436 | $ | 179,586 | $ | 4,260,022 | |||||||||
Net premiums written | 1,980,792 | 1,329,713 | 3,310,505 | 164,119 | 3,474,624 | ||||||||||||||
Net premiums earned | 1,893,348 | 865,519 | 2,758,867 | 164,143 | 2,923,010 | ||||||||||||||
Net losses and loss expenses | 1,266,968 | 413,452 | 1,680,420 | 252,455 | 1,932,875 | ||||||||||||||
Acquisition costs | 251,540 | 175,966 | 427,506 | 15,581 | 443,087 | ||||||||||||||
Operating expenses (1) | 377,593 | 80,738 | 458,331 | 5,436 | 463,767 | ||||||||||||||
Underwriting profit (loss) | $ | (2,753 | ) | $ | 195,363 | $ | 192,610 | $ | (109,329 | ) | $ | 83,281 | |||||||
Net investment income | 343,547 | 149,672 | 493,219 | ||||||||||||||||
Net results from structured products (2) | 11,866 | (20,368 | ) | (8,502 | ) | — | (8,502 | ) | |||||||||||
Net fee income and other (3) | (1,764 | ) | 1,323 | (441 | ) | 90 | (351 | ) | |||||||||||
Net realized gains (losses) on investments | 22,812 | (14,403 | ) | 8,409 | |||||||||||||||
Contribution from P&C and Life Operations | $ | 550,026 | $ | 26,030 | $ | 576,056 | |||||||||||||
Corporate & other: | |||||||||||||||||||
Net realized & unrealized gains (losses) on derivative instruments | (3,598 | ) | |||||||||||||||||
Net income (loss) from investment fund affiliates and operating affiliates (4) | 59,216 | ||||||||||||||||||
Exchange (gains) losses | (5,258 | ) | |||||||||||||||||
Corporate operating expenses | 94,322 | ||||||||||||||||||
Interest expense (5) | 53,454 | ||||||||||||||||||
Non-controlling interests | 40,012 | ||||||||||||||||||
Income tax expense | 51,362 | ||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 397,782 | |||||||||||||||||
Ratios – P&C operations: (6) | |||||||||||||||||||
Loss and loss expense ratio | 66.9 | % | 47.8 | % | 60.9 | % | |||||||||||||
Underwriting expense ratio | 33.2 | % | 29.6 | % | 32.1 | % | |||||||||||||
Combined ratio | 100.1 | % | 77.4 | % | 93.0 | % |
(1) | Operating expenses exclude Corporate operating expenses, shown separately. |
(2) | The net results from P&C structured products include net investment income and interest expense of $34.7 million and $43.2 million, respectively. |
(3) | Net fee income and other includes operating expenses from the Company's loss prevention consulting services business. |
(4) | The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively. |
(5) | Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments. |
(6) | Ratios are based on net premiums earned from P&C operations. |
Three Months Ended June 30, 2013 (U.S. dollars in thousands) | Insurance | Reinsurance | Life Operations | Total | |||||||||||
P&C Operations: | |||||||||||||||
Professional | $ | 349,807 | $ | 50,977 | $ | — | $ | 400,784 | |||||||
Casualty | 333,393 | 76,546 | — | 409,939 | |||||||||||
Property catastrophe | — | 129,361 | — | 129,361 | |||||||||||
Property | 135,087 | 132,496 | — | 267,583 | |||||||||||
Marine, energy, aviation and satellite | — | 24,587 | — | 24,587 | |||||||||||
Specialty | 181,133 | — | — | 181,133 | |||||||||||
Other (1) | 59,122 | 15,988 | — | 75,110 | |||||||||||
Total P&C Operations | $ | 1,058,542 | $ | 429,955 | $ | — | $ | 1,488,497 | |||||||
Life Operations: | |||||||||||||||
Annuity | $ | — | $ | — | $ | 30,087 | $ | 30,087 | |||||||
Other Life | — | — | 43,809 | 43,809 | |||||||||||
Total Life Operations | $ | — | $ | — | $ | 73,896 | $ | 73,896 | |||||||
Total | $ | 1,058,542 | $ | 429,955 | $ | 73,896 | $ | 1,562,393 | |||||||
Three Months Ended June 30, 2012 (U.S. dollars in thousands) | Insurance | Reinsurance | Life Operations | Total | |||||||||||
P&C Operations: | |||||||||||||||
Professional | $ | 330,871 | $ | 53,303 | $ | — | $ | 384,174 | |||||||
Casualty | 269,534 | 76,836 | — | 346,370 | |||||||||||
Property catastrophe | — | 113,221 | — | 113,221 | |||||||||||
Property | 112,448 | 145,022 | — | 257,470 | |||||||||||
Marine, energy, aviation and satellite | — | 35,631 | — | 35,631 | |||||||||||
Specialty | 191,591 | — | — | 191,591 | |||||||||||
Other (1) | 54,849 | 17,664 | — | 72,513 | |||||||||||
Total P&C Operations | $ | 959,293 | $ | 441,677 | $ | — | $ | 1,400,970 | |||||||
Life Operations: | |||||||||||||||
Annuity | $ | — | $ | — | $ | 31,243 | $ | 31,243 | |||||||
Other Life | — | — | 54,380 | 54,380 | |||||||||||
Total Life Operations | $ | — | $ | — | $ | 85,623 | $ | 85,623 | |||||||
Total | $ | 959,293 | $ | 441,677 | $ | 85,623 | $ | 1,486,593 |
(1) | Other within the Insurance segment includes: excess and surplus, programs, surety, structured indemnity and certain other discontinued lines. Other within the Reinsurance segment includes: whole account contracts, surety and other lines. |
Six Months Ended June 30, 2013 (U.S. dollars in thousands) | Insurance | Reinsurance | Life Operations | Total | |||||||||||
P&C Operations: | |||||||||||||||
Professional | $ | 700,643 | $ | 96,413 | $ | — | $ | 797,056 | |||||||
Casualty | 656,328 | 153,528 | — | 809,856 | |||||||||||
Property catastrophe | — | 243,003 | — | 243,003 | |||||||||||
Property | 259,539 | 273,767 | — | 533,306 | |||||||||||
Marine, energy, aviation and satellite | — | 52,425 | — | 52,425 | |||||||||||
Specialty | 364,099 | — | — | 364,099 | |||||||||||
Other (1) | 117,025 | 35,973 | — | 152,998 | |||||||||||
Total P&C Operations | $ | 2,097,634 | $ | 855,109 | $ | — | $ | 2,952,743 | |||||||
Life Operations: | |||||||||||||||
Annuity | $ | — | $ | — | $ | 59,771 | $ | 59,771 | |||||||
Other Life | — | — | 79,570 | 79,570 | |||||||||||
Total Life Operations | $ | — | $ | — | $ | 139,341 | $ | 139,341 | |||||||
Total | $ | 2,097,634 | $ | 855,109 | $ | 139,341 | $ | 3,092,084 | |||||||
Six Months Ended June 30, 2012 (U.S. dollars in thousands) | Insurance | Reinsurance | Life Operations | Total | |||||||||||
P&C Operations: | |||||||||||||||
Professional | $ | 654,692 | $ | 108,211 | $ | — | $ | 762,903 | |||||||
Casualty | 531,103 | 150,085 | — | 681,188 | |||||||||||
Property catastrophe | — | 216,144 | — | 216,144 | |||||||||||
Property | 238,374 | 280,759 | — | 519,133 | |||||||||||
Marine, energy, aviation and satellite | — | 71,371 | — | 71,371 | |||||||||||
Specialty | 356,043 | — | — | 356,043 | |||||||||||
Other (1) | 113,136 | 38,949 | — | 152,085 | |||||||||||
Total P&C Operations | $ | 1,893,348 | $ | 865,519 | $ | — | $ | 2,758,867 | |||||||
Life Operations: | |||||||||||||||
Annuity | $ | — | $ | — | $ | 62,700 | $ | 62,700 | |||||||
Other Life | — | — | 101,443 | 101,443 | |||||||||||
Total Life Operations | $ | — | $ | — | $ | 164,143 | $ | 164,143 | |||||||
Total | $ | 1,893,348 | $ | 865,519 | $ | 164,143 | $ | 2,923,010 |
(1) | Other within the Insurance segment includes: excess and surplus, programs, surety, structured indemnity and certain other discontinued lines. Other within the Reinsurance segment includes: whole account contracts, surety and other lines. |
Included in AOCI | |||||||||||||||||||
June 30, 2013 (U.S. dollars in thousands) | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Non-credit Related OTTI (1) | ||||||||||||||
Fixed maturities - AFS | |||||||||||||||||||
U.S. Government and Government-Related/Supported (2) | $ | 1,971,139 | $ | 71,410 | $ | (19,727 | ) | $ | 2,022,822 | $ | — | ||||||||
Corporate (4) (5) | 9,752,465 | 451,524 | (124,514 | ) | 10,079,475 | (11,417 | ) | ||||||||||||
RMBS – Agency | 4,411,540 | 90,119 | (54,934 | ) | 4,446,725 | — | |||||||||||||
RMBS – Non-Agency | 418,458 | 28,161 | (40,217 | ) | 406,402 | (77,252 | ) | ||||||||||||
CMBS | 1,093,641 | 49,889 | (14,458 | ) | 1,129,072 | (2,911 | ) | ||||||||||||
CDO | 753,601 | 8,992 | (48,345 | ) | 714,248 | (4,840 | ) | ||||||||||||
Other asset-backed securities (3) | 1,165,383 | 36,557 | (13,180 | ) | 1,188,760 | (3,031 | ) | ||||||||||||
U.S. States and political subdivisions of the States | 1,758,251 | 64,741 | (24,725 | ) | 1,798,267 | — | |||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 4,691,730 | 76,147 | (98,545 | ) | 4,669,332 | — | |||||||||||||
Total fixed maturities - AFS | $ | 26,016,208 | $ | 877,540 | $ | (438,645 | ) | $ | 26,455,103 | $ | (99,451 | ) | |||||||
Total short-term investments (2) | $ | 234,775 | $ | 214 | $ | (537 | ) | $ | 234,452 | $ | — | ||||||||
Total equity securities (6) | $ | 873,465 | $ | 64,450 | $ | (21,907 | ) | $ | 916,008 | $ | — | ||||||||
Total investments - AFS | $ | 27,124,448 | $ | 942,204 | $ | (461,089 | ) | $ | 27,605,563 | $ | (99,451 | ) | |||||||
Fixed maturities - HTM | |||||||||||||||||||
U.S. Government and Government-Related/Supported (2) | $ | 10,241 | $ | 985 | $ | — | $ | 11,226 | $ | — | |||||||||
Corporate | 1,312,332 | 118,136 | (2,122 | ) | 1,428,346 | — | |||||||||||||
RMBS – Non-Agency | 62,925 | 4,824 | — | 67,749 | — | ||||||||||||||
CMBS | 136,193 | 14,739 | — | 150,932 | — | ||||||||||||||
Other asset-backed securities (3) | 100,551 | 8,225 | (214 | ) | 108,562 | — | |||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 1,064,752 | 148,339 | (925 | ) | 1,212,166 | — | |||||||||||||
Total investments - HTM | $ | 2,686,994 | $ | 295,248 | $ | (3,261 | ) | $ | 2,978,981 | $ | — |
(1) | Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date. |
(2) | U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $2,357.0 million and fair value of $2,374.5 million and U.S. Agencies with an amortized cost of $297.2 million and fair value of $321.6 million. |
(3) | Covered Bonds within Fixed maturities - AFS with an amortized cost of $523.5 million and a fair value of $550.9 million and Covered Bonds within Fixed maturities - HTM with an amortized cost of $8.0 million and a fair value of $8.2 million are included within Other asset-backed securities to align the Company's classification to market indices. |
(4) | Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $149.4 million and an amortized cost of $150.2 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes. |
(5) | Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $281.4 million and an amortized cost of $298.6 million at June 30, 2013. |
(6) | Included within Total equity securities are investments in fixed income funds with a fair value of $91.3 million and an amortized cost of $100.0 million at June 30, 2013. |
Included in AOCI | |||||||||||||||||||
December 31, 2012 (U.S. dollars in thousands) | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Non-credit Related OTTI (1) | ||||||||||||||
Fixed maturities - AFS | |||||||||||||||||||
U.S. Government and Government-Related/Supported (2) | $ | 1,906,044 | $ | 131,860 | $ | (3,287 | ) | $ | 2,034,617 | $ | — | ||||||||
Corporate (4) (5) | 9,837,962 | 723,028 | (78,990 | ) | 10,482,000 | (11,453 | ) | ||||||||||||
RMBS – Agency | 5,054,097 | 206,931 | (5,535 | ) | 5,255,493 | — | |||||||||||||
RMBS – Non-Agency | 678,469 | 46,132 | (76,868 | ) | 647,733 | (93,259 | ) | ||||||||||||
CMBS | 1,010,794 | 70,745 | (4,288 | ) | 1,077,251 | (2,962 | ) | ||||||||||||
CDO | 784,999 | 11,973 | (87,156 | ) | 709,816 | (4,872 | ) | ||||||||||||
Other asset-backed securities (3) | 1,426,483 | 59,663 | (15,435 | ) | 1,470,711 | (6,530 | ) | ||||||||||||
U.S. States and political subdivisions of the States | 1,767,669 | 146,294 | (2,946 | ) | 1,911,017 | — | |||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 4,078,289 | 188,186 | (8,193 | ) | 4,258,282 | — | |||||||||||||
Total fixed maturities - AFS | $ | 26,544,806 | $ | 1,584,812 | $ | (282,698 | ) | $ | 27,846,920 | $ | (119,076 | ) | |||||||
Total short-term investments (2) | $ | 322,563 | $ | 192 | $ | (52 | ) | $ | 322,703 | $ | — | ||||||||
Total equity securities (6) | $ | 617,486 | $ | 31,935 | $ | (62 | ) | $ | 649,359 | $ | — | ||||||||
Total investments - AFS | $ | 27,484,855 | $ | 1,616,939 | $ | (282,812 | ) | $ | 28,818,982 | $ | (119,076 | ) | |||||||
Fixed maturities - HTM | |||||||||||||||||||
U.S. Government and Government-Related/Supported (2) | $ | 10,788 | $ | 1,651 | $ | — | $ | 12,439 | $ | — | |||||||||
Corporate | 1,425,320 | 190,871 | (794 | ) | 1,615,397 | — | |||||||||||||
RMBS – Non-Agency | 83,205 | 10,502 | — | 93,707 | — | ||||||||||||||
CMBS | 12,751 | 2,048 | — | 14,799 | — | ||||||||||||||
Other asset-backed securities (3) | 222,340 | 29,287 | (167 | ) | 251,460 | — | |||||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 1,060,043 | 216,679 | (1,720 | ) | 1,275,002 | — | |||||||||||||
Total investments - HTM | $ | 2,814,447 | $ | 451,038 | $ | (2,681 | ) | $ | 3,262,804 | $ | — |
(1) | Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date. |
(2) | U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $1,912.7 million and fair value of $1,988.5 million and U.S. Agencies with an amortized cost of $404.3 million and fair value of $446.7 million. |
(3) | Covered Bonds within Fixed maturities - AFS with an amortized cost of $605.4 million and a fair value of $647.1 million and Covered Bonds within Fixed maturities - HTM with an amortized cost of $8.4 million and a fair value of $8.6 million are included within Other asset-backed securities to align the Company's classification to market indices. |
(4) | Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $194.3 million and an amortized cost of $194.8 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes. |
(5) | Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $308.5 million and an amortized cost of $327.6 million at December 31, 2012. |
(6) | Included within Total equity securities are investments in fixed income funds with a fair value of $101.9 million and an amortized cost of $100.0 million at December 31, 2012. |
June 30, 2013 (1) | December 31, 2012 (1) | ||||||||||||||
(U.S. dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||
Fixed maturities - AFS | |||||||||||||||
Due less than one year | $ | 2,134,578 | $ | 2,146,455 | $ | 1,939,803 | $ | 1,952,250 | |||||||
Due after 1 through 5 years | 8,323,556 | 8,536,843 | 8,521,090 | 8,877,512 | |||||||||||
Due after 5 through 10 years | 5,281,728 | 5,342,151 | 4,701,391 | 5,065,158 | |||||||||||
Due after 10 years | 2,433,723 | 2,544,447 | 2,427,680 | 2,790,996 | |||||||||||
$ | 18,173,585 | $ | 18,569,896 | $ | 17,589,964 | $ | 18,685,916 | ||||||||
RMBS – Agency | 4,411,540 | 4,446,725 | 5,054,097 | 5,255,493 | |||||||||||
RMBS – Non-Agency | 418,458 | 406,402 | 678,469 | 647,733 | |||||||||||
CMBS | 1,093,641 | 1,129,072 | 1,010,794 | 1,077,251 | |||||||||||
CDO | 753,601 | 714,248 | 784,999 | 709,816 | |||||||||||
Other asset-backed securities | 1,165,383 | 1,188,760 | 1,426,483 | 1,470,711 | |||||||||||
Total mortgage and asset-backed securities | $ | 7,842,623 | $ | 7,885,207 | $ | 8,954,842 | $ | 9,161,004 | |||||||
Total fixed maturities - AFS | $ | 26,016,208 | $ | 26,455,103 | $ | 26,544,806 | $ | 27,846,920 | |||||||
Fixed maturities - HTM | |||||||||||||||
Due less than one year | $ | 51,818 | $ | 53,135 | $ | 36,515 | $ | 37,580 | |||||||
Due after 1 through 5 years | 207,871 | 220,744 | 195,121 | 205,562 | |||||||||||
Due after 5 through 10 years | 325,119 | 352,538 | 377,541 | 420,008 | |||||||||||
Due after 10 years | 1,802,517 | 2,025,321 | 1,886,974 | 2,239,688 | |||||||||||
$ | 2,387,325 | $ | 2,651,738 | $ | 2,496,151 | $ | 2,902,838 | ||||||||
RMBS – Non-Agency | 62,925 | 67,749 | 83,205 | 93,707 | |||||||||||
CMBS | 136,193 | 150,932 | 12,751 | 14,799 | |||||||||||
Other asset-backed securities | 100,551 | 108,562 | 222,340 | 251,460 | |||||||||||
Total mortgage and asset-backed securities | $ | 299,669 | $ | 327,243 | $ | 318,296 | $ | 359,966 | |||||||
Total fixed maturities - HTM | $ | 2,686,994 | $ | 2,978,981 | $ | 2,814,447 | $ | 3,262,804 |
(1) | Included in the table above are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions, at their fair value of $281.4 million and $308.5 million at June 30, 2013 and December 31, 2012, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $17.2 million and $19.1 million at June 30, 2013 and December 31, 2012, respectively. |
Less than 12 months | Equal to or greater than 12 months | ||||||||||||||
June 30, 2013 (U.S. dollars in thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||
Fixed maturities and short-term investments - AFS | |||||||||||||||
U.S. Government and Government-Related/Supported | $ | 715,162 | $ | (19,021 | ) | $ | 12,062 | $ | (735 | ) | |||||
Corporate | 2,220,584 | (69,327 | ) | 457,493 | (55,194 | ) | |||||||||
RMBS – Agency | 1,879,061 | (53,263 | ) | 24,389 | (1,671 | ) | |||||||||
RMBS – Non-Agency | 24,369 | (1,199 | ) | 256,719 | (39,018 | ) | |||||||||
CMBS | 275,319 | (11,066 | ) | 18,786 | (3,392 | ) | |||||||||
CDO | — | — | 685,761 | (48,345 | ) | ||||||||||
Other asset-backed securities | 273,757 | (3,073 | ) | 92,997 | (10,107 | ) | |||||||||
U.S. States and political subdivisions of the States | 398,984 | (23,965 | ) | 11,241 | (760 | ) | |||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | 2,570,547 | (84,850 | ) | 121,072 | (14,196 | ) | |||||||||
Total fixed maturities and short-term investments - AFS | $ | 8,357,783 | $ | (265,764 | ) | $ | 1,680,520 | $ | (173,418 | ) | |||||
Total equity securities | $ | 282,531 | $ | (21,907 | ) | $ | — | $ | — | ||||||
Fixed maturities -HTM | |||||||||||||||
Corporate | $ | 51,060 | $ | (2,095 | ) | $ | 715 | $ | (27 | ) | |||||
Other asset-backed securities | — | — | 1,114 | (214 | ) | ||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | — | — | 10,717 | (925 | ) | ||||||||||
Total fixed maturities - HTM | $ | 51,060 | $ | (2,095 | ) | $ | 12,546 | $ | (1,166 | ) |
Less than 12 months | Equal to or greater than 12 months | ||||||||||||||
December 31, 2012 (U.S. dollars in thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||
Fixed maturities and short-term investments - AFS | |||||||||||||||
U.S. Government and Government-Related/Supported | $ | 307,879 | $ | (2,847 | ) | $ | 9,951 | $ | (471 | ) | |||||
Corporate | 476,454 | (10,603 | ) | 607,796 | (68,387 | ) | |||||||||
RMBS – Agency | 578,823 | (4,541 | ) | 11,135 | (994 | ) | |||||||||
RMBS – Non-Agency | 6,674 | (450 | ) | 448,555 | (76,418 | ) | |||||||||
CMBS | 92,899 | (666 | ) | 23,580 | (3,622 | ) | |||||||||
CDO | 243 | (1 | ) | 694,351 | (87,155 | ) | |||||||||
Other asset-backed securities | 111,431 | (531 | ) | 93,388 | (14,904 | ) | |||||||||
U.S. States and political subdivisions of the States | 77,273 | (1,407 | ) | 12,851 | (1,539 | ) | |||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | 355,409 | (1,378 | ) | 131,884 | (6,836 | ) | |||||||||
Total fixed maturities and short-term investments - AFS | $ | 2,007,085 | $ | (22,424 | ) | $ | 2,033,491 | $ | (260,326 | ) | |||||
Total equity securities | $ | 615 | $ | (62 | ) | $ | — | $ | — | ||||||
Fixed maturities -HTM | |||||||||||||||
Corporate | $ | 4,568 | $ | (31 | ) | $ | 23,005 | $ | (763 | ) | |||||
Other asset-backed securities | 1,239 | (167 | ) | — | — | ||||||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported | — | — | 10,518 | (1,720 | ) | ||||||||||
Total fixed maturities - HTM | $ | 5,807 | $ | (198 | ) | $ | 33,523 | $ | (2,483 | ) |
Net Realized Gains (Losses) on Investments | Three months ended June 30, | Six months ended June 30, | |||||||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Gross realized gains | $ | 64,865 | $ | 53,732 | $ | 138,038 | $ | 120,621 | |||||||
Gross realized losses on investments sold | (21,508 | ) | (37,932 | ) | (53,534 | ) | (63,054 | ) | |||||||
OTTI on investments, net of amounts transferred to other comprehensive income | (2,389 | ) | (28,193 | ) | (7,027 | ) | (49,158 | ) | |||||||
Net realized gains (losses) on investments | $ | 40,968 | $ | (12,393 | ) | $ | 77,477 | $ | 8,409 |
▪ | $2.0 million for structured securities, principally non-Agency RMBS, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities. |
▪ | $0.4 million related to currency losses. |
Credit Loss Impairments | Three months ended June 30, | Six months ended June 30, | |||||||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Opening balance at beginning of indicated period | $ | 260,066 | $ | 314,805 | $ | 268,707 | $ | 333,379 | |||||||
Credit loss impairment recognized in the current period on securities not previously impaired | 27 | 4,043 | 527 | 5,878 | |||||||||||
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period | (55,144 | ) | (36,783 | ) | (61,619 | ) | (53,978 | ) | |||||||
Credit loss impairments previously recognized on securities impaired to fair value during the period | — | — | — | (12,891 | ) | ||||||||||
Additional credit loss impairments recognized in the current period on securities previously impaired | 1,996 | 21,952 | 4,300 | 36,882 | |||||||||||
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected | (4,083 | ) | (4,297 | ) | (9,053 | ) | (9,550 | ) | |||||||
Balance at June 30, | $ | 202,862 | $ | 299,720 | $ | 202,862 | $ | 299,720 |
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||||
(U.S. dollars in thousands) | Asset Derivative Notional Amount | Asset Derivative Fair Value (1) | Liability Derivative Notional Amount | Liability Derivative Fair Value (1) | Asset Derivative Notional Amount | Asset Derivative Fair Value (1) | Liability Derivative Notional Amount | Liability Derivative Fair Value (1) | |||||||||||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||||||||||||||
Foreign exchange contracts | $ | 1,914,366 | $ | 14,563 | $ | 1,483,052 | $ | 3,336 | $ | 670,751 | $ | 12,511 | $ | 2,382,507 | $ | 23,715 | |||||||||||||||
Total derivatives designated as hedging instruments | $ | 1,914,366 | $ | 14,563 | $ | 1,483,052 | $ | 3,336 | $ | 670,751 | $ | 12,511 | $ | 2,382,507 | $ | 23,715 | |||||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||||||||||||||
Investment Related Derivatives: | |||||||||||||||||||||||||||||||
Interest rate exposure | $ | 380,930 | $ | 3,249 | $ | 5,417 | $ | — | $ | 45,604 | $ | 2,060 | $ | 26,139 | $ | 253 | |||||||||||||||
Foreign exchange exposure | 32,120 | 452 | 31,928 | 1,487 | 33,007 | 226 | 54,449 | 1,790 | |||||||||||||||||||||||
Credit exposure | 10,310 | 97 | 392,710 | 14,931 | 25,000 | 486 | 436,959 | 15,472 | |||||||||||||||||||||||
Financial market exposure | 56,687 | 1,313 | 14,882 | — | 72,597 | 9,559 | 16,910 | — | |||||||||||||||||||||||
Financial Operations Derivatives: (2) | |||||||||||||||||||||||||||||||
Credit exposure | — | — | 43,998 | — | — | — | 46,903 | — | |||||||||||||||||||||||
Other Non-Investment Derivatives: | |||||||||||||||||||||||||||||||
Guaranteed minimum income benefit contract | — | — | 57,432 | 19,394 | — | — | 69,051 | 25,396 | |||||||||||||||||||||||
Modified coinsurance funds withheld contract | 72,947 | — | — | — | 76,975 | — | — | — | |||||||||||||||||||||||
Total derivatives not designated as hedging instruments | $ | 552,994 | $ | 5,111 | $ | 546,367 | $ | 35,812 | $ | 253,183 | $ | 12,331 | $ | 650,411 | $ | 42,911 |
(1) | Derivative instruments in an asset or liability position are included within Other assets or Other liabilities, respectively, in the balance sheet on a net basis where the Company has both a legal right of offset and the intentions to settle the contracts on a net basis. |
(2) | Financial operations derivatives represent interests in variable interest entities as described in Note 10, “Variable Interest Entities". |
Gross Amounts Not Offset in the Balance Sheet | |||||||||||||||||||||||
June 30, 2013 (U.S. dollars in thousands) | Gross Amounts Recognized in Balance Sheet | Gross Amounts Offset in the Balance Sheet | Net Amounts in the Balance Sheet | Financial Instruments | Cash Collateral | Net Amounts | |||||||||||||||||
Derivative Assets | $ | 19,674 | $ | 1,827 | $ | 17,847 | $ | — | $ | — | $ | 17,847 | |||||||||||
Derivative Liabilities | $ | 39,148 | $ | 1,827 | $ | 37,321 | $ | — | $ | 1,730 | $ | 35,591 | |||||||||||
December 31, 2012 (U.S. dollars in thousands) | |||||||||||||||||||||||
Derivative Assets | $ | 24,842 | $ | 1,327 | $ | 23,515 | $ | — | $ | — | $ | 23,515 | |||||||||||
Derivative Liabilities | $ | 66,626 | $ | 1,327 | $ | 65,299 | $ | — | $ | 12,130 | $ | 53,169 |
Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk | |||||||||||||||
Derivatives Designated as Fair Value Hedges: Three Months Ended June 30, 2013 (U.S. dollars in thousands) | Gain/(Loss) Recognized in Income on Derivative | Deposit Liabilities | Fixed Maturity Investments | Ineffective Portion of Hedging Relationship - Gain/(Loss) | |||||||||||
Interest rate exposure | $ | — | |||||||||||||
Foreign exchange exposure | (5,002 | ) | |||||||||||||
Total | $ | (5,002 | ) | $ | — | $ | 4,496 | $ | (506 | ) | |||||
Three Months Ended June 30, 2012 | |||||||||||||||
(U.S. dollars in thousands) | |||||||||||||||
Interest rate exposure | $ | 7,270 | |||||||||||||
Foreign exchange exposure | 7,297 | ||||||||||||||
Total | $ | 14,567 | $ | (9,789 | ) | $ | (6,972 | ) | $ | (2,194 | ) | ||||
Six Months Ended June 30, 2013 | |||||||||||||||
(U.S. dollars in thousands) | |||||||||||||||
Interest rate exposure | $ | — | |||||||||||||
Foreign exchange exposure | 25,243 | ||||||||||||||
Total | $ | 25,243 | $ | — | $ | (24,274 | ) | $ | 969 | ||||||
Six Months Ended June 30, 2012 | |||||||||||||||
(U.S. dollars in thousands) | |||||||||||||||
Interest rate exposure | $ | 1,813 | |||||||||||||
Foreign exchange exposure | (7,803 | ) | |||||||||||||
Total | $ | (5,990 | ) | $ | (6,182 | ) | $ | 7,539 | $ | (4,633 | ) |
Settlement of Fair Value Hedges - Summary | Fair Value Hedges - Notes Payable and Debt June 30, | Fair Value Hedges - Deposit Liabilities June 30, | |||||||||||||
(U.S. dollars in thousands, except years) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Cumulative reduction to interest expense | $ | 16,903 | $ | 12,996 | $ | 29,257 | $ | 12,763 | |||||||
Remaining balance | $ | 4,721 | $ | 8,628 | $ | 203,938 | $ | 136,722 | |||||||
Weighted average years remaining to maturity | 1.2 | 2.2 | 24.2 | 32.4 |
Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation - Summary | Three months ended June 30, | Six months ended June 30, | |||||||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Weighted average of U.S. dollar equivalent of foreign denominated net assets | $ | 2,588,385 | $ | 1,872,407 | $ | 2,566,103 | $ | 1,882,904 | |||||||
Derivative gains (losses) (1) | $ | (6,135 | ) | $ | 56,777 | $ | 54,479 | $ | 18,905 |
(1) | Derivative gains (losses) from derivative instruments designated as hedges of the net investment in a foreign operation are recorded in the cumulative translation adjustment account within AOCI for each period. |
Net Realized and Unrealized Gains (Losses) on Derivative Instruments | Three months ended June 30, | Six months ended June 30, | |||||||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Investment Related Derivatives: | |||||||||||||||
Interest rate exposure | $ | 288 | $ | (83 | ) | $ | 488 | $ | 617 | ||||||
Foreign exchange exposure | (2,690 | ) | 683 | (4,288 | ) | 329 | |||||||||
Credit exposure | (1,178 | ) | 6,323 | (1,994 | ) | 2,624 | |||||||||
Financial market exposure | (2,736 | ) | (5,970 | ) | 2,617 | (2,025 | ) | ||||||||
Financial Operations Derivatives: | |||||||||||||||
Credit exposure | 1,087 | — | 1,329 | 143 | |||||||||||
Other Non-Investment Derivatives: | |||||||||||||||
Guaranteed minimum income benefit contract | 2,306 | (929 | ) | 6,003 | 1,086 | ||||||||||
Modified coinsurance funds withheld contract | (1,676 | ) | (2,131 | ) | (2,344 | ) | (1,739 | ) | |||||||
Total derivatives not designated as hedging instruments | $ | (4,599 | ) | $ | (2,107 | ) | $ | 1,811 | $ | 1,035 | |||||
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges | (506 | ) | (2,194 | ) | 969 | (4,633 | ) | ||||||||
Net realized and unrealized gains (losses) on derivative instruments | $ | (5,105 | ) | $ | (4,301 | ) | $ | 2,780 | $ | (3,598 | ) |
Financial Operations Derivatives - Credit Exposure Summary: (U.S. dollars in thousands, except term to maturity) | June 30, 2013 | December 31, 2012 | |||||
Principal outstanding | $ | 41,690 | $ | 44,281 | |||
Interest outstanding | 2,308 | 2,622 | |||||
Aggregate outstanding exposure | $ | 43,998 | $ | 46,903 | |||
Total liability recorded | $ | — | $ | — | |||
Weighted average contractual term to maturity | 4.3 years | 4.7 years | |||||
Underlying obligations credit rating | BB | BB |
Contingent Credit Features - Summary: (U.S. dollars in thousands) | June 30, 2013 | December 31, 2012 | |||||
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position | $ | 10,562 | $ | 20,366 | |||
Collateral posted to counterparty | $ | 80 | $ | 5,490 |
Dividend yield | 2.00 | % |
Risk free interest rate | 1.14 | % |
Volatility | 37.0 | % |
Expected lives | 6.0 years |
Letter of Credit Summary: (U.S. dollars in thousands except percentages) | June 30, 2013 (1) | December 31, 2012 (1) | |||||
Revolving credit facility (2) | $ | 1,000,000 | $ | 1,000,000 | |||
Available letter of credit facilities - commitments (3) | $ | 4,275,000 | $ | 4,000,000 | |||
Available letter of credit facilities - in use | $ | 1,891,969 | $ | 1,757,250 | |||
Collateralized by certain assets of the Company’s investment portfolio | 85.5 | % | 93.3 | % |
(1) | At June 30, 2013, there were six available letter of credit facilities; at December 31, 2012, there were five available letter of credit facilities. |
(2) | At June 30, 2013 and December 31, 2012, the revolving credit available under the December 2011 Credit Agreements (defined below) was unutilized. The credit agreement with Citicorp USA, Inc., as administrative agent and issuing lender, and the lenders party thereto, as amended (the "2013 Credit Agreement"), provides for issuance of letters of credit and revolving credit loans up to $275 million. At June 30, 2013, $275 million of letters of credit were issued under the 2013 Credit Agreement and therefore such amount is not included here. |
(3) | The Company has the option to increase the size of the March 2011 Credit Agreement by an additional $500 million, the size of the facilities under the December 2011 Credit Agreements by an additional $500 million across both such facilities and the maximum amount of the letters of credit and revolving credit loans available under the 2013 Credit Agreement, with the lender's and issuing lender's consent. |
(U.S. dollars in thousands) | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Reported net premiums written | $ | 11,420 | $ | 10,972 | $ | 24,007 | $ | 27,561 | |||||||
Net losses and loss expenses incurred | $ | 6,117 | $ | 7,728 | $ | 11,766 | $ | 15,851 | |||||||
Reported acquisition costs | $ | 5,355 | $ | 6,415 | $ | 10,685 | $ | 13,202 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(U.S. dollars in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Basic earnings per ordinary share & ordinary share equivalents outstanding: | |||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | |||||||
Weighted average ordinary shares outstanding - basic | 289,513 | 309,765 | 292,277 | 312,442 | |||||||||||
Basic earnings per ordinary share & ordinary share equivalents outstanding | $ | 0.94 | $ | 0.71 | $ | 2.13 | $ | 1.27 | |||||||
Diluted earnings per ordinary share & ordinary share equivalents outstanding: | |||||||||||||||
Weighted average ordinary shares outstanding - basic | 289,513 | 309,765 | 292,277 | 312,442 | |||||||||||
Impact of share-based compensation and certain conversion features | 4,820 | 2,670 | 4,767 | 2,568 | |||||||||||
Weighted average ordinary shares outstanding - diluted | 294,333 | 312,435 | 297,044 | 315,010 | |||||||||||
Diluted earnings per ordinary share & ordinary share equivalents outstanding | $ | 0.93 | $ | 0.71 | $ | 2.10 | $ | 1.26 | |||||||
Dividends per ordinary share | $ | 0.14 | $ | 0.11 | $ | 0.28 | $ | 0.22 |
Financial Guarantee Exposure Summary (U.S. dollars in thousands except number of contracts and term to maturity) | June 30, 2013 | December 31, 2012 | |||||
Opening number of financial guarantee contracts | 4 | 4 | |||||
Number of financial guarantee contracts matured, prepaid or commuted during the period | — | — | |||||
Closing number of financial guarantee contracts | 4 | 4 | |||||
Principal outstanding | $ | 115,464 | $ | 115,464 | |||
Interest outstanding | $ | — | $ | — | |||
Aggregate exposure outstanding | $ | 115,464 | $ | 115,464 | |||
Total gross claim liability recorded | $ | 1,399 | $ | 1,399 | |||
Total unearned premiums and fees recorded | $ | 206 | $ | 279 | |||
Weighted average contractual term to maturity in years | 24.9 | 25.4 |
Three months ended June 30, 2013 (U.S. dollars in thousands) | Unrealized Gains (Losses) on Investments (1) | OTTI Losses Recognized in AOCI | Foreign Currency Translation Adjustments | Underfunded Pension Liability | Cash Flow Hedge | Total | |||||||||||||||||
Balance, beginning of period, net of tax | $ | 1,481,175 | $ | (116,189 | ) | $ | 65,470 | $ | (27,121 | ) | $ | 1,784 | $ | 1,405,119 | |||||||||
OCI before reclassifications (1) | (701,365 | ) | — | (23,715 | ) | (90 | ) | — | (725,170 | ) | |||||||||||||
Amounts reclassified from AOCI | (55,408 | ) | 14,440 | — | — | 110 | (40,858 | ) | |||||||||||||||
Tax (benefit) expense | 71,671 | (2 | ) | — | — | — | 71,669 | ||||||||||||||||
Net current period OCI - net of tax | (685,102 | ) | 14,438 | (23,715 | ) | (90 | ) | 110 | (694,359 | ) | |||||||||||||
Balance, end of period, net of tax | $ | 796,073 | $ | (101,751 | ) | $ | 41,755 | $ | (27,211 | ) | $ | 1,894 | $ | 710,760 |
(1) | Amounts are net of cumulative adjustments recorded to the value of future policy benefit reserves of $32.9 million. These amounts were recorded during the three months ended June 30, 2013. |
Six months ended June 30, 2013 (U.S. dollars in thousands) | Unrealized Gains (Losses) on Investments (1) | OTTI Losses Recognized in AOCI | Foreign Currency Translation Adjustments | Underfunded Pension Liability | Cash Flow Hedge | Total | |||||||||||||||||
Balance, beginning of period, net of tax | $ | 1,597,832 | $ | (121,371 | ) | $ | 69,391 | $ | (27,506 | ) | $ | 1,674 | $ | 1,520,020 | |||||||||
OCI before reclassifications (1) | (789,053 | ) | — | (27,636 | ) | 295 | — | (816,394 | ) | ||||||||||||||
Amounts reclassified from AOCI | (97,103 | ) | 19,625 | — | — | 220 | (77,258 | ) | |||||||||||||||
Tax (benefit) expense | 84,397 | (5 | ) | — | — | — | 84,392 | ||||||||||||||||
Net current period OCI - net of tax | (801,759 | ) | 19,620 | (27,636 | ) | 295 | 220 | (809,260 | ) | ||||||||||||||
Balance, end of period, net of tax | $ | 796,073 | $ | (101,751 | ) | $ | 41,755 | $ | (27,211 | ) | $ | 1,894 | $ | 710,760 |
(1) | Amounts are net of cumulative adjustments recorded to the value of future policy benefit reserves of $32.9 million. These amounts were recorded during the three months ended June 30, 2013. |
Gross Amount Reclassified From AOCI | |||||||||
Details About AOCI Components (U.S. dollars in thousands) | Three months ended June 30, 2013 | Six months ended June 30, 2013 | Affected Line Item in the Statement of Income | ||||||
Unrealized gains and losses on investments: | |||||||||
$ | (56,969 | ) | $ | (102,391 | ) | Net realized gains (losses) on investments sold | |||
1,561 | 5,288 | OTTI on investments | |||||||
$ | (55,408 | ) | $ | (97,103 | ) | Total before tax | |||
(3,560 | ) | (3,286 | ) | Provision (benefit) for income tax | |||||
$ | (58,968 | ) | $ | (100,389 | ) | Net of tax | |||
OTTI losses recognized in OCI: | |||||||||
$ | 13,612 | $ | 17,887 | Net realized gains (losses) on investments sold | |||||
828 | 1,738 | OTTI on investments transferred to (from) OCI | |||||||
$ | 14,440 | $ | 19,625 | Total before tax | |||||
(2 | ) | (5 | ) | Provision (benefit) for income tax | |||||
$ | 14,438 | $ | 19,620 | Net of tax | |||||
Gains and losses on cash flow hedges: | |||||||||
Interest rate contracts | $ | 110 | $ | 220 | Interest Expense | ||||
— | — | Provision (benefit) for income tax | |||||||
$ | 110 | $ | 220 | Net of tax | |||||
Total reclassifications for the period, gross of tax | $ | (40,858 | ) | $ | (77,258 | ) | |||
Tax (benefit) expense | (3,562 | ) | (3,291 | ) | |||||
Total reclassifications for the period, net of tax | $ | (44,420 | ) | $ | (80,549 | ) |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
▪ | changes in the size of our claims relating to natural or man-made catastrophe losses due to the preliminary nature of some reports and estimates of loss and damage to date; |
▪ | trends in rates for property and casualty insurance and reinsurance; |
▪ | the timely and full recoverability of reinsurance placed by us with third parties, or other amounts due to us; |
▪ | changes in ratings or rating agency policies or practices; |
▪ | changes in the projected amount of ceded reinsurance recoverables and the ratings and creditworthiness of reinsurers; |
▪ | the timing of claims payments being faster or the receipt of reinsurance recoverables being slower than we anticipated; |
▪ | our ability to successfully implement our business strategy; |
▪ | increased competition on the basis of pricing, capacity, coverage terms or other factors, which could harm our ability to maintain or increase our business volumes or profitability; |
▪ | greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices anticipate based on historical experience or industry data; |
▪ | changes in general economic conditions, including the effects of inflation on our business, including on pricing and reserving, and changes in interest rates, credit spreads, foreign currency exchange rates and future volatility in the world's credit, financial and capital markets that adversely affect the performance and valuation of our investments or access to such markets; |
▪ | developments, including uncertainties related to the future of the Euro-zone, the ability of Euro-zone countries to service existing debt obligations and the strength of the Euro as a currency and to the financial condition of counterparties, reinsurers and other companies that are at risk of bankruptcy; |
▪ | the potential impact on us from government-mandated insurance coverage for acts of terrorism; |
▪ | the potential for changes to methodologies, estimations and assumptions that underlie the valuation of our financial instruments that could result in changes to investment valuations; |
▪ | changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale debt securities before their anticipated recovery; |
▪ | the availability of borrowings and letters of credit under our credit facilities; |
▪ | the ability of our subsidiaries to pay dividends to XL-Ireland and XLIT Ltd., an exempted company organized under the laws of the Cayman Islands ("XL-Cayman"); |
▪ | the potential effect of regulatory developments in the jurisdictions in which we operate, including those which could impact the financial markets or increase our business costs and required capital levels; |
▪ | changes in regulations or laws applicable to XL-Ireland or our subsidiaries, brokers or customers; |
▪ | acceptance of our products and services, including new products and services; |
▪ | changes in the availability, cost or quality of reinsurance; |
▪ | changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; |
▪ | loss of key personnel; |
▪ | changes in accounting policies or practices or the application thereof; |
▪ | legislative or regulatory developments including, but not limited to, changes in regulatory capital balances that must be maintained by our operating subsidiaries and governmental actions for the purpose of stabilizing the financial markets; |
▪ | the effects of mergers, acquisitions and divestitures; |
▪ | developments related to bankruptcies of companies insofar as they affect property and casualty insurance and reinsurance coverages or claims that we may have as a counterparty; |
▪ | changes in applicable tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof; |
▪ | the effects of business disruption or economic contraction due to war, terrorism or other hostilities; and |
▪ | the other factors set forth in Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2012 and our other documents on file with the SEC. |
(U.S. dollars in thousands, except share and per share amounts) | Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | |||||||
Earnings (loss) per ordinary share – basic | $ | 0.94 | $ | 0.71 | $ | 2.13 | $ | 1.27 | |||||||
Earnings (loss) per ordinary share – diluted | $ | 0.93 | $ | 0.71 | $ | 2.10 | $ | 1.26 | |||||||
Weighted average number of ordinary shares and ordinary share equivalents, in thousands – basic | 289,513 | 309,765 | 292,277 | 312,442 | |||||||||||
Weighted average number of ordinary shares and ordinary share equivalents, in thousands – diluted | 294,333 | 312,435 | 297,044 | 315,010 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | Change | June 30, | Change | ||||||||||||||||||||
(U.S. dollars in thousands, except ratios and per share amounts) | 2013 | 2012 | 2013 to 2012 | 2013 | 2012 | 2013 to 2012 | |||||||||||||||||
Underwriting profit (loss) - P&C operations | $ | 92,124 | $ | 129,372 | (28.8 | )% | $ | 272,712 | $ | 192,610 | 41.6 | % | |||||||||||
Combined ratio - P&C operations | 93.8 | % | 90.8 | % | 3.0pts | 90.8 | % | 93.0 | % | (2.2)pts | |||||||||||||
Net investment income - P&C operations | $ | 161,954 | $ | 187,985 | (13.8 | )% | $ | 336,734 | $ | 378,201 | (11.0 | )% | |||||||||||
Operating net income | $ | 221,591 | $ | 221,944 | (0.2 | )% | $ | 501,458 | $ | 387,175 | 29.5 | % | |||||||||||
Operating net income per share | $ | 0.75 | $ | 0.71 | $ | 0.04 | $ | 1.69 | $ | 1.23 | $ | 0.46 | |||||||||||
Annualized return on average ordinary shareholders’ equity | 10.7 | % | 9.0 | % | 1.7pts | 12.2 | % | 8.3 | % | 3.9pts | |||||||||||||
Annualized operating return on average ordinary shareholders’ equity | 8.7 | % | 9.1 | % | (0.4)pts | 9.8 | % | 8.0 | % | 1.8pts | |||||||||||||
Annualized operating return on average ordinary shareholders’ equity excluding unrealized gains and losses on investments | 9.7 | % | 9.9 | % | (0.2)pts | 11.0 | % | 8.7 | % | 2.3pts | |||||||||||||
(U.S. dollars) | June 30, 2013 | March 31, 2013 | Change (Three Months) | June 30, 2013 | December 31, 2012 | Change (Six Months) | |||||||||||||||||
Book value per ordinary share | $ | 34.41 | $ | 35.93 | $ | (1.52 | ) | $ | 34.41 | $ | 35.18 | $ | (0.77 | ) | |||||||||
Fully diluted tangible book value per ordinary share | $ | 32.45 | $ | 34.05 | $ | (1.60 | ) | $ | 32.45 | $ | 33.35 | $ | (0.90 | ) |
▪ | The combined ratio related to the P&C operations is the sum of the loss and loss expense ratio and the underwriting expense ratio. A combined ratio under 100% represents an underwriting profit and over 100% represents an underwriting loss. In the P&C industry, the combined ratio is a widely used measure of underwriting profitability. |
▪ | The loss and loss expense ratio related to the P&C operations is calculated by dividing the losses and loss expenses incurred by the net premiums earned for the Insurance and Reinsurance segments. |
▪ | The underwriting expense ratio related to the P&C operations is the sum of acquisition costs and operating expenses for the Insurance and Reinsurance segments divided by net premiums earned for the Insurance and Reinsurance segments. |
▪ | The acquisition expense ratio related to the P&C operations is calculated by dividing the acquisition costs incurred by the net premiums earned for the Insurance and Reinsurance segments. |
▪ | The operating expense ratio related to the P&C operations is calculated by dividing the operating expenses incurred by the net premiums earned for the Insurance and Reinsurance segments. |
(U.S. dollars in thousands, except share and per share amounts) | Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | |||||||
Net realized (gains) losses on investments, net of tax | (44,530 | ) | 11,420 | (80,768 | ) | (9,041 | ) | ||||||||
Net realized and unrealized (gains) losses on derivatives, net of tax | 5,105 | 4,300 | (2,780 | ) | 3,602 | ||||||||||
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates | (75 | ) | 4 | (255 | ) | (36 | ) | ||||||||
Foreign exchange (gains) losses, net of tax | (11,607 | ) | (14,934 | ) | (38,226 | ) | (5,132 | ) | |||||||
Operating net income (loss) | $ | 221,591 | $ | 221,944 | $ | 501,458 | $ | 387,175 | |||||||
Per ordinary share results: | |||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 0.93 | $ | 0.71 | $ | 2.10 | $ | 1.26 | |||||||
Operating net income (loss) | $ | 0.75 | $ | 0.71 | $ | 1.69 | $ | 1.23 | |||||||
Weighted average ordinary shares outstanding, in thousands: | |||||||||||||||
Basic | 289,513 | 309,765 | 292,277 | 312,442 | |||||||||||
Diluted - Net income | 294,333 | 312,435 | 297,044 | 315,010 | |||||||||||
Diluted - Operating net income | 294,333 | 312,435 | 297,044 | 315,010 | |||||||||||
Return on ordinary shareholders' equity: | |||||||||||||||
Closing ordinary shareholders' equity (at period end) | $ | 9,892,570 | $ | 9,867,816 | $ | 9,892,570 | $ | 9,867,816 | |||||||
Unrealized (gain) loss on investments, net of tax | $ | (727,116 | ) | $ | (886,254 | ) | $ | (727,116 | ) | $ | (886,254 | ) | |||
Average ordinary shareholders' equity for the period excluding unrealized gains and losses on investments | $ | 9,143,915 | $ | 8,965,003 | $ | 9,099,539 | $ | 8,935,713 | |||||||
Average ordinary shareholders' equity for the period | $ | 10,189,962 | $ | 9,788,925 | $ | 10,201,324 | $ | 9,639,738 | |||||||
Operating net income (loss) | $ | 221,591 | $ | 221,944 | $ | 501,458 | $ | 387,175 | |||||||
Annualized operating net income (loss) | $ | 886,364 | $ | 887,776 | $ | 1,002,916 | $ | 774,350 | |||||||
Operating ROE | 8.7 | % | 9.1 | % | 9.8 | % | 8.0 | % | |||||||
Operating ROE ex-UGL | 9.7 | % | 9.9 | % | 11.0 | % | 8.7 | % |
Interest Rate Movement for the three months ended June 30, 2013 (1) (‘+’/‘-’ represents increases / decreases in interest rates) | Credit Spread Movement for the three months ended June 30, 2013 (2) (‘+’/‘-’ represents widening / tightening of credit spreads) | ||
United States | +63 basis points (5 year Treasury) | +16 basis points (US Corporate A rated) | |
+8 basis points (US Mortgage Master Index) | |||
+19 basis points (US CMBS, AAA rated) | |||
United Kingdom | +68 basis points (10 year Gilt) | -3 basis points (UK Corporate, AA rated) | |
Euro-zone | +42 basis points (5 year Bund) | -10 basis points (Europe Corporate, A rated) |
(1) | Source: Bloomberg Finance L.P. |
(2) | Source: Merrill Lynch Global Indices. |
Interest Rate Movement for the six months ended June 30, 2013 (1) (‘+’/‘-’ represents increases / decreases in interest rates) | Credit Spread Movement for the six months ended June 30, 2013 (2) (‘+’/‘-’ represents widening / tightening of credit spreads) | ||
United States | +67 basis points (5 year Treasury) | +13 basis points (US Corporate A rated) | |
+30 basis points (US Mortgage Master Index) | |||
+34 basis points (US CMBS, AAA rated) | |||
United Kingdom | +62 basis points (10 year Gilt) | -10 basis points (UK Corporate, AA rated) | |
Euro-zone | +44 basis points (5 year Bund) | -13 basis points (Europe Corporate, A rated) |
(1) | Source: Bloomberg Finance L.P. |
(2) | Source: Merrill Lynch Global Indices. |
1-in-100 Event | 1-in-250 Event | ||||||||||||||||
(U.S. dollars in millions) | Peril | Measurement Date of In-Force Exposures (1) | Probable Maximum Loss (2) | Percentage of Tangible Shareholders’ Equity at June 30, 2013 | Probable Maximum Loss (2) | Percentage of Tangible Shareholders’ Equity at June 30, 2013 | |||||||||||
Geographical Zone | |||||||||||||||||
North Atlantic | Windstorm | April 1, 2013 | $ | 1,248 | 11.5 | % | $ | 1,723 | 15.9 | % | |||||||
North America | Earthquake | April 1, 2013 | 865 | 8.0 | % | 1,405 | 13.0 | % | |||||||||
Europe | Windstorm | April 1, 2013 | 518 | 4.8 | % | 725 | 6.7 | % | |||||||||
Japan | Earthquake | April 1, 2013 | 234 | 2.2 | % | 281 | 2.6 | % | |||||||||
Japan | Windstorm | April 1, 2013 | 120 | 1.1 | % | 226 | 2.1 | % |
(1) | Detailed analyses of aggregated in-force exposures and maximum loss levels are done periodically. The measurement dates represent the date of the last completed detailed analysis by geographical zone. |
(2) | Probable maximum losses, which include secondary uncertainty that incorporates variability around the expected probable maximum loss for each event, do not represent our maximum potential exposures and are pre-tax. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 1,472,388 | $ | 1,311,035 | 12.3 | % | ||||
Net premiums written | 1,049,163 | 944,266 | 11.1 | % | ||||||
Net premiums earned | 1,058,542 | 959,293 | 10.3 | % | ||||||
Net losses and loss expenses | 721,323 | 635,282 | 13.5 | % | ||||||
Acquisition costs | 138,032 | 123,285 | 12.0 | % | ||||||
Operating expenses | 194,514 | 192,246 | 1.2 | % | ||||||
Underwriting profit (loss) | $ | 4,673 | $ | 8,480 | (44.9 | )% | ||||
Net results – structured products | 3,532 | 9,047 | (61.0 | )% | ||||||
Net fee income and other (expense) | (1,355 | ) | 256 | N/M |
* | N/M - Not Meaningful |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
IPC | $ | 330,947 | $ | 283,168 | 16.9 | % | ||||
NAPC | 548,895 | 433,147 | 26.7 | % | ||||||
Professional | 370,833 | 375,881 | (1.3 | )% | ||||||
Specialty | 221,713 | 218,839 | 1.3 | % | ||||||
Total | $ | 1,472,388 | $ | 1,311,035 | 12.3 | % |
▪ | IPC - increase of 16.9% driven mainly by new business in property, higher renewed premiums in the property and primary casualty lines of business and favorable amendments to prior year premium estimates in primary casualty, partially offset by the unfavorable impact of foreign exchange. |
▪ | NAPC - increase of 26.7% largely driven by our new business lines, most notably in the primary casualty, programs and construction lines of business and strong renewed premiums in property and surplus lines. |
▪ | Professional - decrease of 1.3% driven primarily by lower levels of new premium, partially offset by improved pricing and larger renewable premium base in U.S. professional business and new business in select (which offers professional liability to small and mid-size firms in the U.S.). |
▪ | Specialty - increase of 1.3% due to improved renewed premiums in our fine art and specie and marine lines of businesses, partially offset by lower new business across most lines and weaker pricing in the aerospace business. |
Three Months Ended | Percentage | |||||||
June 30, | Point Change | |||||||
2013 | 2012 | 2013 to 2012 | ||||||
Loss and loss expense ratio | 68.1 | % | 66.2 | % | 1.9 | |||
Acquisition expense ratio | 13.0 | % | 12.9 | % | 0.1 | |||
Operating expense ratio | 18.5 | % | 20.0 | % | (1.5 | ) | ||
Underwriting expense ratio | 31.5 | % | 32.9 | % | (1.4 | ) | ||
Combined ratio | 99.6 | % | 99.1 | % | 0.5 |
Three Months Ended | Percentage | ||||||
June 30, | Point Change | ||||||
2013 | 2012 | 2013 to 2012 | |||||
Loss and loss expense ratio | 68.1 | % | 66.2 | % | 1.9 | ||
Prior year reserve development | 4.6 | % | 4.5 | % | 0.1 | ||
Loss ratio excluding prior year development | 72.7 | % | 70.7 | % | 2.0 |
Three Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Property | $ | (1,406 | ) | $ | (1,871 | ) | |
Casualty | (5,225 | ) | (51,334 | ) | |||
Professional | 16,494 | (28,364 | ) | ||||
Specialty | (75,472 | ) | (15,053 | ) | |||
Other (1) | 17,219 | 53,730 | |||||
Total | $ | (48,390 | ) | $ | (42,892 | ) |
▪ | For property, net prior year development was $1.4 million favorable. This was driven by a release of $5.2 million for the non-catastrophe exposures in the general property and construction books due to better than expected loss experience reported predominantly in the 2011 and 2012 accident years. This was partially offset by strengthening totaling $3.4 million for prior year catastrophe losses. |
▪ | For casualty, net prior year development was $5.2 million favorable. This was driven by a release of $24.3 million in excess casualty lines due to better than expected loss experience reported predominantly in the 2003 to 2006 accident years. This was partially offset by strengthening of $13.8 million and $6.6 million in the Lloyd's and U.S. middle market books, respectively, due to worse than expected loss experience reported predominantly in the 2010 to 2012 accident years. |
▪ | For professional, net prior year development was $16.5 million unfavorable. This included strengthening in the core International book and the select portfolio due to worse than expected loss experience reported predominantly in the 2009 to 2012 accident years. There was additional strengthening in the discontinued New York book as a result of a deterioration in a 2001 loss. It also included a release in the Bermuda core professional book due to better than expected loss experience reported predominantly in the 2002 and 2003 accident years. |
▪ | For specialty, net prior year development was $75.5 million favorable. This was driven by releases of $45.0 million, $13.0 million and $13.2 million for aerospace, specie and marine, respectively, due to better than expected loss experience reported predominantly in accident years 2005 and subsequent. |
▪ | Other net prior year development was $17.2 million unfavorable, driven primarily by strengthening in the discontinued surety book. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 471,782 | $ | 452,417 | 4.3 | % | ||||
Net premiums written | 410,809 | 403,011 | 1.9 | % | ||||||
Net premiums earned | 429,955 | 441,677 | (2.7 | )% | ||||||
Net losses and loss expenses | 216,283 | 191,072 | 13.2 | % | ||||||
Acquisition costs | 86,599 | 87,722 | (1.3 | )% | ||||||
Operating expenses | 39,622 | 41,991 | (5.6 | )% | ||||||
Underwriting profit (loss) | $ | 87,451 | $ | 120,892 | (27.7 | )% | ||||
Net results – structured products | 2,521 | (22,806 | ) | N/M | ||||||
Net fee income and other | 520 | 990 | (47.5 | )% |
* | N/M - Not Meaningful |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Bermuda | $ | 270,727 | $ | 250,517 | 8.1 | % | ||||
North America | 89,407 | 98,194 | (8.9 | )% | ||||||
International | 111,648 | 106,715 | 4.6 | % | ||||||
Other (1) | — | (3,009 | ) | N/M | ||||||
Total | $ | 471,782 | $ | 452,417 | 4.3 | % |
* | N/M - not meaningful. |
▪ | Bermuda - increase of 8.1%, due to new whole account business, the timing of certain renewals and positive premium adjustments to prior incepting policies. |
▪ | North America - decrease of 8.9% primarily from casualty treaty due to timing of certain renewals, reduction in renewals through lower volume and rates, and non-renewals of certain treaties. |
▪ | International - increase of 4.6%, attributable to new business written in Asia Pacific and reinstatement premiums in property treaty related to the European Floods, partially offset by lower renewals in aviation, and non-renewals in Latin America. |
Three Months Ended | Percentage | |||||||
June 30, | Point Change | |||||||
2013 | 2012 | 2013 to 2012 | ||||||
Loss and loss expense ratio | 50.3 | % | 43.3 | % | 7.0 | |||
Acquisition expense ratio | 20.1 | % | 19.9 | % | 0.2 | |||
Operating expense ratio | 9.3 | % | 9.4 | % | (0.1 | ) | ||
Underwriting expense ratio | 29.4 | % | 29.3 | % | 0.1 | |||
Combined ratio | 79.7 | % | 72.6 | % | 7.1 |
Three Months Ended | Percentage | ||||||
June 30, | Point Change | ||||||
2013 | 2012 | 2013 to 2012 | |||||
Loss and loss expense ratio | 50.3 | % | 43.3 | % | 7.0 | ||
Prior year reserve development | 16.3 | % | 13.2 | % | 3.1 | ||
Loss ratio excluding prior year development | 66.6 | % | 56.5 | % | 10.1 |
Three Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Property and other short-tail lines | $ | (24,739 | ) | $ | (11,490 | ) | |
Casualty and other long-tail lines | (45,513 | ) | (46,934 | ) | |||
Total | $ | (70,252 | ) | $ | (58,424 | ) |
▪ | Net favorable prior year development for the short-tailed lines totaled $24.7 million and details of the significant components are as follows: |
▪ | For property catastrophe lines, net prior year development was $16.3 million favorable comprising of $10.2 million favorable development on prior year catastrophe losses and $6.1 million favorable due to better than expected attritional loss development. |
▪ | For property other, marine and aviation lines, net prior year development was $8.4 million favorable due to more favorable than expected attritional loss development. |
▪ | Net favorable prior year development for the long-tailed lines totaled $45.5 million and details of the significant components are as follows: |
▪ | For casualty lines, net prior year development was $40.9 million favorable mainly driven by $30.1 million arising out of the North America book, due to more favorable than expected development on the 2004 and 2005 underwriting years for medical malpractice, D&O and E&O. In addition, net prior year development was $10.8 million favorable in the International and Bermuda books due to more favorable than expected development on attritional losses. |
▪ | For other lines, net prior year development was $4.6 million favorable mainly due to favorable than expected development in the discontinued surety book in North America. |
▪ | Acquisition expense ratio increase - largely from an increase in profit commissions in Bermuda on property treaty lines partially offset by a decrease in profit commissions on the North America property facultative business. |
▪ | Operating expense ratio decrease - the total operating expense amount decreased due to lower compensation expenses in the three months ended June 30, 2013 compared to the same period in 2012. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 81,302 | $ | 92,903 | (12.5 | )% | ||||
Net premiums written | 73,896 | 85,623 | (13.7 | )% | ||||||
Net premiums earned | 73,896 | 85,623 | (13.7 | )% | ||||||
Net losses and loss expenses | 116,767 | 131,149 | (11.0 | )% | ||||||
Acquisition costs | 7,255 | 7,930 | (8.5 | )% | ||||||
Operating expenses | 2,206 | 2,829 | (22.0 | )% | ||||||
Net investment income | 70,592 | 74,646 | (5.4 | )% | ||||||
Net fee income and other | 44 | 42 | 4.8 | % | ||||||
Realized gains (losses) on investments | 11,599 | (10,239 | ) | N/M | ||||||
Contribution from Life operations | $ | 29,903 | $ | 8,164 | N/M |
* | N/M - Not Meaningful |
Three Months Ended | |||||||||||||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||||||||||||
(U.S. dollars in thousands) | Gross Premiums Written | Net Premiums Written | Net Premiums Earned | Gross Premiums Written | Net Premiums Written | Net Premiums Earned | |||||||||||||||||
Annuity | $ | 36,792 | $ | 30,087 | $ | 30,087 | $ | 38,190 | $ | 31,243 | $ | 31,243 | |||||||||||
Other Life | 44,510 | 43,809 | 43,809 | 54,713 | 54,380 | 54,380 | |||||||||||||||||
Total | $ | 81,302 | $ | 73,896 | $ | 73,896 | $ | 92,903 | $ | 85,623 | $ | 85,623 |
Three Months Ended | |||||
June 30, | |||||
2013 | 2012 | ||||
Total Return on Investments (1) | |||||
P&C portfolio | (1.2 | )% | 1.0 | % | |
Life portfolio | (2.9 | )% | 2.8 | % | |
Other Portfolios (2) | |||||
Alternative portfolio (3) | 3.9 | % | (0.3 | )% | |
Equity portfolio | (0.6 | )% | (6.9 | )% |
(1) | The performance of investment portfolios is measured on a local currency basis and is not annualized. For aggregate performance calculation, respective local currency balances are translated to U.S. dollars at quarter end rates to calculate composite portfolio results. |
(2) | Performance on Other Portfolios is included in the Total Return on Investments. |
(3) | Performance on the alternative portfolio reflects the three months ended May 31, 2013 and 2012, respectively. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net investment income - P&C operations (1) | $ | 161,954 | $ | 187,985 | (13.8 | )% | ||||
Net income (loss) from investment fund affiliates (2) | 46,543 | 3,097 | N/M | |||||||
Net realized gains (losses) on investments | 40,968 | (12,393 | ) | N/M | ||||||
Net realized and unrealized gains (losses) on investment and other derivative instruments (3) | (5,105 | ) | (4,301 | ) | 18.7 | % |
(1) | Net investment income relating to P&C operations includes the net investment income related to the net results from structured products. |
(2) | We generally record the income related to alternative fund affiliates on a one-month lag and the private investment fund affiliates on a three-month lag based upon the availability of the information provided by the investees. |
(3) | For a summary of realized and unrealized gains and losses on all derivative instruments, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein. |
* | NM - Not Meaningful |
▪ | Net realized gains of $43.4 million resulted primarily from sales of non-Agency RMBS and non-U.S. Sovereign Government securities. |
▪ | Realized losses of approximately $2.4 million related to the write-down of certain of our AFS investments. The main components of the net impairment charges were: |
▪ | $2.0 million for structured securities, principally non-Agency RMBS, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities. |
▪ | $0.4 million related to currency losses. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net income (loss) from operating affiliates (1) | $ | 32,825 | $ | 20,457 | 60.5 | % | ||||
Exchange (gains) losses | (11,331 | ) | (17,976 | ) | (37.0 | )% | ||||
Corporate operating expenses | 55,155 | 50,062 | 10.2 | % | ||||||
Interest expense (2) | 26,121 | 26,194 | (0.3 | )% | ||||||
Income tax expense | 28,872 | 29,812 | (3.2 | )% |
(1) | The Company generally records the income related to certain operating affiliates on a three-month lag based upon the availability of the information provided by the investees. |
(2) | Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products. |
Three Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net income (loss) from investment manager affiliates | $ | 27,068 | $ | 14,052 | 92.6 | % | ||||
Net income (loss) from strategic operating affiliates | 5,757 | 6,405 | (10.1 | )% | ||||||
Total | $ | 32,825 | $ | 20,457 | 60.5 | % |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 2,970,175 | $ | 2,647,669 | 12.2 | % | ||||
Net premiums written | 2,238,351 | 1,980,792 | 13.0 | % | ||||||
Net premiums earned | 2,097,634 | 1,893,348 | 10.8 | % | ||||||
Net losses and loss expenses | 1,371,840 | 1,266,968 | 8.3 | % | ||||||
Acquisition costs | 268,654 | 251,540 | 6.8 | % | ||||||
Operating expenses | 378,511 | 377,593 | 0.2 | % | ||||||
Underwriting profit (loss) | $ | 78,629 | $ | (2,753 | ) | N/M | ||||
Net results – structured products | 7,717 | 11,866 | (35.0 | )% | ||||||
Net fee income and other | (3,294 | ) | (1,764 | ) | 86.7 | % |
* | N/M - Not Meaningful |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
IPC | $ | 916,427 | $ | 835,606 | 9.7 | % | ||||
NAPC | 907,311 | 714,278 | 27.0 | % | ||||||
Professional | 674,272 | 636,886 | 5.9 | % | ||||||
Specialty | 472,165 | 460,899 | 2.4 | % | ||||||
Total | $ | 2,970,175 | $ | 2,647,669 | 12.2 | % |
▪ | IPC - increase of 9.7% driven mainly by new business in property and primary casualty, higher renewed premiums in primary casualty and improved pricing across most lines of business. |
▪ | NAPC - increase of 27.0% largely driven by our new business lines, most notably in construction, programs and primary casualty lines of business and increased renewals in property and surplus lines. |
▪ | Professional - increase of 5.9% driven primarily by increases in new business and renewed premiums in the small and mid-size professional firms businesses, strong pricing across most lines most notably the U.S. and International businesses, partially offset by lower new business in the U.S. |
▪ | Specialty - increase of 2.4% due to favorable amendments to prior year premium estimates in marine, higher new business in Aerospace, partially offset by lower renewed premiums and exposures in our marine business. |
Six Months Ended | Percentage | |||||||
June 30, | Change | |||||||
2013 | 2012 | 2013 to 2012 | ||||||
Loss and loss expense ratio | 65.4 | % | 66.9 | % | (1.5 | ) | ||
Acquisition expense ratio | 12.8 | % | 13.3 | % | (0.5 | ) | ||
Operating expense ratio | 18.1 | % | 19.9 | % | (1.8 | ) | ||
Underwriting expense ratio | 30.9 | % | 33.2 | % | (2.3 | ) | ||
Combined ratio | 96.3 | % | 100.1 | % | (3.8 | ) |
Six Months Ended | Percentage | |||||||
June 30, | Point Change | |||||||
2013 | 2012 | 2013 to 2012 | ||||||
Loss and loss expense ratio | 65.4 | % | 66.9 | % | (1.5 | ) | ||
Prior year reserve development | 2.8 | % | 5.1 | % | (2.3 | ) | ||
Loss ratio excluding prior year development | 68.2 | % | 72.0 | % | (3.8 | ) |
Six Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Property | $ | (20,178 | ) | $ | (20,061 | ) | |
Casualty | (3,333 | ) | (57,557 | ) | |||
Professional | 16,620 | (52,620 | ) | ||||
Specialty | (70,708 | ) | (20,486 | ) | |||
Other (1) | 19,017 | 53,922 | |||||
Total | $ | (58,582 | ) | $ | (96,802 | ) |
(1) | Other includes excess and surplus, surety, structured indemnity and certain other discontinued lines. |
▪ | For property, net prior year development was $20.2 million favorable. This was driven by a release of $23.6 million for the non-catastrophe exposures in the general property, energy and construction books due to better than expected loss experience reported predominantly in the 2012 accident year. This was partially offset by strengthening totaling $3.4 million for prior year catastrophe losses. |
▪ | For casualty, net prior year development was $3.3 million favorable. This was driven by a release of $23.1 million in excess casualty lines due to better than expected loss experience reported predominantly in the 2003 to 2006 accident years. This was partially offset by strengthening of $13.4 million and $6.3 million in the Lloyd's and U.S. middle market books, respectively, due to worse than expected loss experience reported predominantly in the 2010 to 2012 accident years. |
▪ | For professional, net prior year development was $16.6 million unfavorable. This included strengthening in the core International book and the select portfolio, due to worse than expected loss experience reported predominantly in the 2009 to 2012 accident years. There was additional strengthening in the discontinued New York book as a result of a deterioration in a 2001 loss. It also included a release in the Bermuda core professional book due to better than expected loss experience reported predominantly in the 2002 and 2003 accident years. |
▪ | For specialty, net prior year development was $70.7 million favorable. This was primarily driven by releases of $45.1 million, $13.0 million and $8.2 million for aerospace, specie and marine, respectively, due to better than expected loss experience reported predominantly in accident years 2005 and subsequent. |
▪ | Other net prior year development was $19.0 million unfavorable, driven primarily by strengthening in the discontinued surety book. |
▪ | Acquisition expense ratio - decreased largely from adverse earned premium adjustments in 2012 and lower acquisition expenses in NAPC as compared to the prior year as well as the impact of marine reinstatement premiums in the first quarter of 2012. |
▪ | Operating expense ratio decreased although expenses were relatively flat year over year because net premiums earned increased 10.8% during the six months ended June 30, 2013 as compared to the same period of 2012. |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 1,378,911 | $ | 1,432,767 | (3.8 | )% | ||||
Net premiums written | 1,263,830 | 1,329,713 | (5.0 | )% | ||||||
Net premiums earned | 855,109 | 865,519 | (1.2 | )% | ||||||
Net losses and loss expenses | 408,850 | 413,452 | (1.1 | )% | ||||||
Acquisition costs | 172,133 | 175,966 | (2.2 | )% | ||||||
Operating expenses | 80,043 | 80,738 | (0.9 | )% | ||||||
Underwriting profit (loss) | $ | 194,083 | $ | 195,363 | (0.7 | )% | ||||
Net results – structured products | 3,512 | (20,368 | ) | N/M | ||||||
Net fee income and other | 1,152 | 1,323 | (12.9 | )% |
* | N/M - Not Meaningful |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Bermuda | $ | 515,905 | $ | 454,945 | 13.4 | % | ||||
North America | 230,905 | 257,755 | (10.4 | )% | ||||||
International | 632,060 | 723,076 | (12.6 | )% | ||||||
Other (1) | 41 | (3,009 | ) | N/M | ||||||
Total | $ | 1,378,911 | $ | 1,432,767 | (3.8 | )% |
* | N/M - Not Meaningful |
▪ | Bermuda - increase of 13.4%, due to new whole account business and favorable renewals. |
▪ | North America - decrease of 10.4%, primarily from reductions in rate and shares as well as non-renewals in casualty treaty and from non-renewals in property treaty, partially offset by a new agricultural program. |
▪ | International - decrease of 12.6%, attributable to the non-renewal of certain marine exposures as a result of the re-underwriting of this line to manage aggregate exposures; in casualty, from reduced and non-renewals and certain premium adjustments; and in Latin America from non-renewals. |
Six Months Ended | Percentage | |||||||
June 30, | Point Change | |||||||
2013 | 2012 | 2013 to 2012 | ||||||
Loss and loss expense ratio | 47.8 | % | 47.8 | % | — | |||
Acquisition expense ratio | 20.1 | % | 20.3 | % | (0.2 | ) | ||
Operating expense ratio | 9.4 | % | 9.3 | % | 0.1 | |||
Underwriting expense ratio | 29.5 | % | 29.6 | % | (0.1 | ) | ||
Combined ratio | 77.3 | % | 77.4 | % | (0.1 | ) |
Six Months Ended | Percentage | ||||||
June 30, | Point Change | ||||||
2013 | 2012 | 2013 to 2012 | |||||
Loss and loss expense ratio | 47.8 | % | 47.8 | % | — | ||
Prior year reserve development | 10.7 | % | 9.8 | % | 0.9 | ||
Loss ratio excluding prior year development | 58.5 | % | 57.6 | % | 0.9 |
Six Months Ended | |||||||
June 30, | |||||||
(U.S. dollars in thousands) | 2013 | 2012 | |||||
Property and other short-tail lines | $ | (46,517 | ) | $ | (40,613 | ) | |
Casualty and other long-tail lines | (44,765 | ) | (44,211 | ) | |||
Total | $ | (91,282 | ) | $ | (84,824 | ) |
▪ | Net favorable prior year development for the short-tailed lines totaled $46.5 million and details of the significant components are as follows: |
▪ | For property catastrophe lines, net prior year development was $29.6 million favorable comprised of $13.6 million favorable development for prior year catastrophe losses and $16.0 million due to more favorable than expected reported activity. |
▪ | For property other, marine and aviation lines, net prior year development was $16.9 million favorable due to more favorable than expected attritional loss development. |
▪ | Net favorable prior year development for the long-tailed lines totaled $44.8 million and details of the significant components are as follows: |
▪ | For casualty lines, net prior year development was $40.3 million favorable arising almost entirely out of the North America book, mainly due to more favorable than expected development on attritional losses, D&O, E&O and medical malpractice on underwriting years 2004 and 2005. |
▪ | For other lines, net prior year development was $4.5 million favorable mainly due to more favorable than expected development in the discontinued surety book in North America. |
▪ | Acquisition expense ratio decrease - largely from a decrease in profit commissions on the North America property facultative business, partially offset by an increase in profit commissions on property treaty lines. |
▪ | Operating expense ratio increase - the total operating expense amount remained constant, however, the operating expense ratio increase reflects the 1.2% decrease in net earned premiums for the six months ended June 30, 2013 compared to the same period of 2012. |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Gross premiums written | $ | 154,272 | $ | 179,586 | (14.1 | )% | ||||
Net premiums written | 139,341 | 164,119 | (15.1 | )% | ||||||
Net premiums earned | 139,341 | 164,143 | (15.1 | )% | ||||||
Net losses and loss expenses | 227,720 | 252,455 | (9.8 | )% | ||||||
Acquisition costs | 11,358 | 15,581 | (27.1 | )% | ||||||
Operating expenses | 4,801 | 5,436 | (11.7 | )% | ||||||
Net investment income | 142,280 | 149,672 | (4.9 | )% | ||||||
Net fee income and other | 1,087 | 90 | N/M | |||||||
Realized gains (losses) on investments | 2,530 | (14,403 | ) | N/M | ||||||
Contribution from Life operations | $ | 41,359 | $ | 26,030 | 58.9 | % |
* | N/M - Not Meaningful |
Six Months Ended | |||||||||||||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||||||||||||
(U.S. dollars in thousands) | Gross Premiums Written | Net Premiums Written | Net Premiums Earned | Gross Premiums Written | Net Premiums Written | Net Premiums Earned | |||||||||||||||||
Annuity | $ | 73,164 | $ | 59,771 | $ | 59,771 | $ | 76,819 | $ | 62,700 | $ | 62,700 | |||||||||||
Other Life | 81,108 | 79,570 | 79,570 | 102,767 | 101,419 | 101,443 | |||||||||||||||||
Total | $ | 154,272 | $ | 139,341 | $ | 139,341 | $ | 179,586 | $ | 164,119 | $ | 164,143 |
Six Months Ended | |||||
June 30, | |||||
2013 | 2012 | ||||
Total Return on Investments (1) | |||||
P&C portfolio | (0.5 | )% | 2.4 | % | |
Life portfolio | (1.8 | )% | 4.4 | % | |
Other Portfolios (2) | |||||
Alternative portfolio (3) | 8.1 | % | 1.9 | % | |
Equity portfolio | 5.4 | % | 4.3 | % |
(1) | The performance of investment portfolios is measured on a local currency basis and is not annualized. For aggregate performance calculation, respective local currency balances are translated to U.S. dollars at quarter end rates to calculate composite portfolio results. |
(2) | Performance on Other Portfolios is included in the Total Return on Investments. |
(3) | Performance on the alternative portfolio reflects the six months ended May 31, 2013 and 2012, respectively. |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net investment income - P&C operations (1) | $ | 336,734 | $ | 378,201 | (11.0 | )% | ||||
Net income (loss) from investment fund affiliates (2) | 78,764 | 22,506 | N/M | |||||||
Net realized gains (losses) on investments | 77,477 | 8,409 | N/M | |||||||
Net realized and unrealized gains (losses) on investment and other derivative instruments (3) | 2,780 | (3,598 | ) | N/M |
(1) | Net investment income relating to P&C operations includes the net investment income related to the net results from structured products. |
(2) | We generally record the income related to alternative fund affiliates on a one-month lag and the private investment fund affiliates on a three-month lag based upon the availability of the information provided by the investees. |
(3) | For a summary of realized and unrealized gains and losses on all derivative instruments, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein. |
* | NM - Not Meaningful |
▪ | Net realized gains of $84.5 million resulted primarily from redemptions of alternative investments and sales of non-Agency RMBS, equity and non-U.S. Sovereign Government securities. |
▪ | Realized losses of approximately $7.0 million related to the write-down of certain of our AFS investments. The main components of the net impairment charges were: |
▪ | $4.8 million for structured securities, principally non-Agency RMBS, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities. |
▪ | $2.2 million related to currency losses. |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net income (loss) from operating affiliates (1) | $ | 63,823 | $ | 36,710 | 73.9 | % | ||||
Exchange (gains) losses | (44,766 | ) | (5,258 | ) | N/M | |||||
Corporate operating expenses | 102,078 | 94,322 | 8.2 | % | ||||||
Interest expense (2) | 52,257 | 53,454 | (2.2 | )% | ||||||
Income tax expense | 72,351 | 51,362 | 40.9 | % |
(1) | The Company generally records the income related to certain operating affiliates on a three-month lag based upon the availability of the information provided by the investees. |
(2) | Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products. |
* | NM - Not Meaningful |
Six Months Ended | Percentage | |||||||||
June 30, | Change | |||||||||
(U.S. dollars in thousands) | 2013 | 2012 | 2013 to 2012 | |||||||
Net income (loss) from investment manager affiliates | $ | 45,524 | $ | 24,612 | 85.0 | % | ||||
Net income (loss) from strategic operating affiliates | 18,299 | 12,098 | 51.3 | % | ||||||
Total | $ | 63,823 | $ | 36,710 | 73.9 | % |
June 30, 2013 | December 31, 2012 | ||||||||||||
(U.S. dollars in thousands) | Carrying Value (1) | Percent of Total | Carrying Value (1) | Percent of Total | |||||||||
Cash and cash equivalents | $ | 2,420,082 | 6.8 | % | $ | 2,618,378 | 7.1 | % | |||||
Net receivable/ (payable) for investments sold/ (purchased) | (15,308 | ) | — | % | (86,110 | ) | (0.2 | )% | |||||
Accrued investment income | 324,735 | 0.9 | % | 342,778 | 0.9 | % | |||||||
Short-term investments | 234,452 | 0.7 | % | 322,703 | 0.9 | % | |||||||
Fixed maturities - AFS: | |||||||||||||
U.S. Government and Government-Related/Supported (2) | 2,022,822 | 5.7 | % | 2,034,617 | 5.5 | % | |||||||
Corporate - Financials (3) (4) | 3,105,190 | 8.7 | % | 3,240,399 | 8.8 | % | |||||||
Corporate - Non Financials (4) | 6,974,285 | 19.6 | % | 7,241,601 | 19.6 | % | |||||||
RMBS – Agency | 4,446,725 | 12.5 | % | 5,255,493 | 14.3 | % | |||||||
RMBS – Non-Agency | 406,402 | 1.1 | % | 647,733 | 1.8 | % | |||||||
CMBS | 1,129,072 | 3.2 | % | 1,077,251 | 2.9 | % | |||||||
CDO | 714,248 | 2.0 | % | 709,816 | 1.9 | % | |||||||
Other asset-backed securities (5) | 1,188,760 | 3.3 | % | 1,470,711 | 4.0 | % | |||||||
U.S. States and political subdivisions of the States | 1,798,267 | 5.2 | % | 1,911,017 | 5.2 | % | |||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 4,669,332 | 13.2 | % | 4,258,282 | 11.6 | % | |||||||
Total fixed maturities - AFS | $ | 26,455,103 | 74.5 | % | $ | 27,846,920 | 75.6 | % | |||||
Fixed maturities - HTM: | |||||||||||||
U.S. Government and Government-Related/Supported (2) | 10,241 | — | % | 10,788 | — | % | |||||||
Corporate - Financials (3) (4) | 259,532 | 0.7 | % | 266,565 | 0.7 | % | |||||||
Corporate - Non Financials (4) | 1,052,800 | 3.0 | % | 1,158,755 | 3.1 | % | |||||||
RMBS – Non-Agency | 62,925 | 0.2 | % | 83,205 | 0.2 | % | |||||||
CMBS | 136,193 | 0.4 | % | 12,751 | — | % | |||||||
Other asset-backed securities (5) | 100,551 | 0.3 | % | 222,340 | 0.6 | % | |||||||
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2) | 1,064,752 | 3.0 | % | 1,060,043 | 2.9 | % | |||||||
Total fixed maturities - HTM | $ | 2,686,994 | 7.6 | % | $ | 2,814,447 | 7.5 | % | |||||
Equity securities (6) | 916,008 | 2.6 | % | 649,359 | 1.8 | % | |||||||
Investments in affiliates | 1,367,581 | 3.8 | % | 1,126,875 | 3.1 | % | |||||||
Other investments | 1,135,794 | 3.1 | % | 1,219,879 | 3.3 | % | |||||||
Total investments and cash and cash equivalents | $ | 35,525,441 | 100.0 | % | $ | 36,855,229 | 100.0 | % |
(1) | Carrying values represents the fair value for AFS fixed maturities and amortized cost for held to maturity securities. |
(2) | U.S. Government and Government-Related/Supported and Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported include government-related securities with an amortized cost of $2,357.0 million and $1,912.7 million and carrying value of $2,359.6 million and $1,988.5 million at June 30, 2013 and December 31, 2012, respectively, and U.S. Agencies with an amortized cost of $297.2 million and $404.3 million and carrying value of $320.6 million and $446.7 million at June 30, 2013 and December 31, 2012, respectively. |
(3) | Included in Corporate - Financials are gross unrealized losses of $20.0 million and $23.7 million on Tier One and Upper Tier Two securities of financial institutions (“Hybrids”) with a carrying value of $181.6 million and $190.1 million at June 30, 2013 and December 31, 2012, respectively, as well as gross unrealized losses of $12.6 million and $11.8 million on subordinated debt (including lower Tier Two securities) with a carrying value of $117.0 million and $111.5 million at June 30, 2013 and December 31, 2012, respectively. |
(4) | Included within Corporate are certain floating rate medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a carrying value of $149.4 million and $194.3 million and an amortized cost of $150.2 million and |
(5) | Covered Bonds within Fixed maturities - AFS with a carrying value of $550.9 million and $647.1 million at June 30, 2013 and December 31, 2012, respectively, and Covered Bonds within Fixed maturities - HTM with a carrying value of $8.0 million and $8.6 million at June 30, 2013 and December 31, 2012, respectively, are included within Other asset-backed securities to align our classification to market indices. |
(6) | Included within Equity securities are investments in fixed income funds with a carrying value of $91.3 million and $101.9 million at June 30, 2013 and December 31, 2012, respectively. |
June 30, 2013 | December 31, 2012 | ||||||||||||
Investments by Credit Rating (1) (U.S. dollars in millions) | Carrying Value | Percent of Total | Carrying Value | Percent of Total | |||||||||
AAA | $ | 13,693 | 44.2 | % | $ | 15,631 | 47.0 | % | |||||
AA | 6,122 | 19.8 | % | 5,954 | 17.8 | % | |||||||
A | 6,908 | 22.4 | % | 7,436 | 22.3 | % | |||||||
BBB | 3,292 | 10.7 | % | 3,317 | 10.0 | % | |||||||
BB and below | 830 | 2.7 | % | 934 | 2.8 | % | |||||||
Not rated | 47 | 0.2 | % | 19 | 0.1 | % | |||||||
Total | $ | 30,892 | 100.0 | % | $ | 33,291 | 100.0 | % |
(1) | The credit rating for each asset reflected above was principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (when available). U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflect the credit quality rating of the U.S. government for the purpose of these calculations. |
• | gross unrealized losses of $48.3 million related to the P&C portfolio of Core CDO holdings (defined by the Company as investments in non-subprime CDOs), which consisted primarily of collateralized loan obligations (“CLOs”). Securities in a gross unrealized loss position had a fair value of $685.8 million at June 30, 2013. |
• | gross unrealized losses of $30.9 million related to the P&C portfolio of Non-Agency RMBS portfolio (which consists of our holdings of sub-prime Non-Agency RMBS, second liens, asset backed securities collateralized debt obligations ("ABS CDOs") with sub-prime collateral, Alt-A and Prime RMBS). Securities in an unrealized loss position had a fair value of $243.4 million at June 30, 2013. The Company has incurred realized losses, consisting of charges for OTTI and realized losses from sales, of approximately $1.4 billion since the beginning of 2007 through June 30, 2013 on these asset classes. |
• | gross unrealized losses of $102.9 million related to our Life operations investment portfolio. Securities in a gross unrealized loss position had a fair value of $1,220.0 million at June 30, 2013. Of these gross unrealized losses, $24.8 million related to $289.1 million of exposures to corporate financial institutions, including $13.8 million related to Tier One and Upper Tier Two securities. |
• | gross unrealized losses of $86.2 million related to the Corporate holdings within our P&C portfolio. Securities in a gross unrealized loss position had a fair value of $2,109.8 million at June 30, 2013. Of the gross unrealized losses, $31.5 million relate to financial institutions. In addition, $4.6 million relate to medium term notes primarily supported by pools of European investment grade credit with varying degrees of leverage. These had a fair value of $58.8 million at June 30, 2013. Management believes that expected cash flows from these bonds over the expected holding period will be sufficient to support the remaining reported amortized cost. |
(U.S. dollars in thousands) | June 30, 2013 | ||||||
Security Type and Length of Time in a Continual Unrealized Loss Position | Amount of Unrealized Loss | Fair Value of Securities in an Unrealized Loss Position | |||||
Fixed Maturities and Short-Term Investments | |||||||
Less than 6 months | $ | (198,023 | ) | $ | 7,377,211 | ||
At least 6 months but less than 12 months | (67,741 | ) | 980,572 | ||||
At least 12 months but less than 2 years | (5,816 | ) | 95,196 | ||||
2 years and over | (167,602 | ) | 1,585,324 | ||||
Total | $ | (439,182 | ) | $ | 10,038,303 | ||
Equities | |||||||
Less than 6 months | $ | (21,132 | ) | $ | 275,720 | ||
At least 6 months but less than 12 months | (775 | ) | 6,811 | ||||
Total | $ | (21,907 | ) | 282,531 |
June 30, 2013 | |||||||
(U.S. dollars in thousands) | Amount of Unrealized Loss | Fair Value of Securities in an Unrealized Loss Position | |||||
Maturity profile in years of AFS fixed income securities in a gross unrealized loss position | |||||||
Less than 1 year remaining | $ | (17,965 | ) | $ | 360,997 | ||
At least 1 year but less than 5 years remaining (1) | (78,229 | ) | 2,726,136 | ||||
At least 5 years but less than 10 years remaining (1) | (100,980 | ) | 2,543,754 | ||||
At least 10 years but less than 20 years remaining (1) | (45,893 | ) | 524,238 | ||||
At least 20 years or more remaining (1) | (24,981 | ) | 352,020 | ||||
RMBS - Agency | (54,934 | ) | 1,903,450 | ||||
RMBS - Non-Agency | (40,217 | ) | 281,088 | ||||
CMBS | (14,458 | ) | 294,105 | ||||
CDO | (48,345 | ) | 685,761 | ||||
Other asset-backed securities | (13,180 | ) | 366,754 | ||||
Total | $ | (439,182 | ) | $ | 10,038,303 |
(1) | Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments senior to the common and preferred equities of the financial institutions, are allocated based on the call date unless such security is not called on such date, in which case it is allocated the final or longest expected maturity. Medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage are allocated on contractual maturity. |
June 30, 2013 | |||||||
(U.S. dollars in thousands) | Amount of Unrealized Loss | Fair Value of Securities in an Unrealized Loss Position | |||||
Maturity profile in years of HTM fixed income securities in a gross unrealized loss position | |||||||
At least 1 year but less than 5 years remaining | $ | (20 | ) | $ | 4,814 | ||
At least 5 years but less than 10 years remaining | (27 | ) | 715 | ||||
At least 10 years but less than 20 years remaining | (636 | ) | 29,298 | ||||
At least 20 years or more remaining | (2,364 | ) | 27,665 | ||||
Other asset-backed securities | (214 | ) | 1,114 | ||||
Total | $ | (3,261 | ) | $ | 63,606 |
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
(U.S. dollars in thousands) | Carrying Value | Percent of Fixed Income Portfolio | Net Unrealized Gain (Loss) | Carrying Value | Percent of Fixed Income Portfolio | Net Unrealized Gain (Loss) | |||||||||||||||
RMBS - Non-Agency: | |||||||||||||||||||||
Sub-prime first lien mortgages | $ | 219,541 | 0.7 | % | $ | (19,390 | ) | $ | 306,795 | 1.0 | % | $ | (35,893 | ) | |||||||
Alt-A mortgages | 85,972 | 0.3 | % | 3,019 | 136,965 | 0.4 | % | (1,267 | ) | ||||||||||||
Second lien mortgages (including sub-prime second lien mortgages) | 22,091 | 0.1 | % | 2,887 | 28,661 | 0.1 | % | 2,912 | |||||||||||||
Prime RMBS | 65,894 | 0.2 | % | (407 | ) | 139,974 | 0.5 | % | 1,452 | ||||||||||||
Other assets | 75,829 | 0.3 | % | 1,835 | 118,543 | 0.4 | % | 2,060 | |||||||||||||
Total exposure to Non-Agency RMBS | $ | 469,327 | 1.6 | % | $ | (12,056 | ) | $ | 730,938 | 2.4 | % | $ | (30,736 | ) | |||||||
CMBS | 1,265,265 | 4.3 | % | 35,431 | 1,090,002 | 3.6 | % | 66,457 | |||||||||||||
Core CDOs (1) | 714,248 | 2.4 | % | (39,353 | ) | 709,816 | 2.3 | % | (75,183 | ) | |||||||||||
Other Structured | 1,289,311 | 4.4 | % | 23,377 | 1,693,051 | 5.5 | % | 44,228 | |||||||||||||
Total Non-Agency Structured Securities | $ | 3,738,151 | 12.7 | % | $ | 7,399 | $ | 4,223,807 | 13.8 | % | $ | 4,766 |
(1) | We define Core CDOs as investments in non-subprime collateralized debt obligations, which primarily consisted of CLOs. |
June 30, 2013 | December 31, 2012 | ||||||||||||||
(U.S. dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||
Fixed maturities European Periphery Nations - AFS: | |||||||||||||||
Government and government related – National Governments | $ | 5,289 | $ | 4,478 | $ | 5,350 | $ | 4,896 | |||||||
Government and government related – Local Governments | — | — | — | — | |||||||||||
Corporate investments – Financial Institutions | 759 | 757 | 372 | 374 | |||||||||||
Corporate investments – Non-Financial Institutions | 64,983 | 63,626 | 57,032 | 57,720 | |||||||||||
Structured Credit (1) | 7,226 | 8,833 | 7,942 | 9,618 | |||||||||||
Total | $ | 78,257 | $ | 77,694 | $ | 70,696 | $ | 72,608 | |||||||
Due less than one year | $ | 11,973 | $ | 11,144 | $ | 5,392 | $ | 5,431 | |||||||
Due after 1 through 5 years | 15,248 | 14,853 | 16,144 | 15,744 | |||||||||||
Due after 5 through 10 years | 17,411 | 16,538 | 14,924 | 15,111 | |||||||||||
Due after 10 years | 33,625 | 35,159 | 34,236 | 36,322 | |||||||||||
Total | $ | 78,257 | $ | 77,694 | $ | 70,696 | $ | 72,608 | |||||||
Fixed maturities European Periphery Nations - HTM: | |||||||||||||||
Government and government related – National Governments | $ | 11,642 | $ | 10,717 | $ | 12,237 | $ | 10,518 | |||||||
Government and government related – Local Governments | — | — | — | — | |||||||||||
Corporate investments – Non-Financial Institutions | 57,069 | 56,553 | 59,757 | 60,199 | |||||||||||
Structured Credit (1) | — | — | — | — | |||||||||||
Total | $ | 68,711 | $ | 67,270 | $ | 71,994 | $ | 70,717 | |||||||
Due less than one year | $ | 4,032 | $ | 4,073 | $ | — | $ | — | |||||||
Due after 1 through 5 years | 1,414 | 1,450 | 4,285 | 4,332 | |||||||||||
Due after 5 through 10 years | 10,301 | 10,768 | 12,372 | 12,937 | |||||||||||
Due after 10 years | 52,964 | 50,979 | 55,337 | 53,448 | |||||||||||
Total | $ | 68,711 | $ | 67,270 | $ | 71,994 | $ | 70,717 |
(1) | Covered Bonds are included within Other asset-backed securities under Structured Credit. |
June 30, 2013 | |||||||||||||||||||||||
(U.S. dollars in thousands) | Greece | Italy | Ireland | Portugal | Spain | TOTAL | |||||||||||||||||
Gross Unrealized (Losses) - European Periphery Nations | |||||||||||||||||||||||
Government and government related – National Governments | $ | — | $ | (1,737 | ) | $ | — | $ | — | $ | — | $ | (1,737 | ) | |||||||||
Government and government related – Local Governments | — | — | — | — | — | — | |||||||||||||||||
Corporate investments – Financial Institutions | — | — | (2 | ) | — | — | (2 | ) | |||||||||||||||
Corporate investments – Non-Financial Institutions | — | (3,700 | ) | (221 | ) | — | (751 | ) | (4,672 | ) | |||||||||||||
Structured Credit (1) | — | — | (17 | ) | — | — | (17 | ) | |||||||||||||||
Total gross unrealized gains (losses) relating to European Periphery Nations | $ | — | $ | (5,437 | ) | $ | (240 | ) | $ | — | $ | (751 | ) | $ | (6,428 | ) | |||||||
Net Unrealized Gains (Losses) - European Periphery Nations | |||||||||||||||||||||||
Government and government related – National Governments | $ | — | $ | (1,736 | ) | $ | — | $ | — | $ | — | $ | (1,736 | ) | |||||||||
Government and government related – Local Governments | — | — | — | — | — | — | |||||||||||||||||
Corporate investments – Financial Institutions | — | — | (2 | ) | — | — | (2 | ) | |||||||||||||||
Corporate investments – Non-Financial Institutions | 209 | (2,511 | ) | (221 | ) | — | 651 | (1,872 | ) | ||||||||||||||
Structured Credit (1) | — | — | 1,608 | — | — | 1,608 | |||||||||||||||||
Total net unrealized gains (losses) relating to European Periphery Nations | $ | 209 | $ | (4,247 | ) | $ | 1,385 | $ | — | $ | 651 | $ | (2,002 | ) |
(1) | Covered Bonds have been included within Other asset-backed securities under Structured Credit to align our classification to market indices. Prior periods have been reclassified to conform to current period presentation. |
(U.S. dollars in thousands) | Total Assets and Liabilities Carried at Fair Value at June 30, 2013 | Fair Value of Level 3 Assets and Liabilities | Level 3 Assets and Liabilities as a Percentage of Total Assets and Liabilities Carried at Fair Value, by Class | |||||||
Assets | ||||||||||
Fixed maturities, at fair value | ||||||||||
U.S. Government and Government Agency-Related/Supported | $ | 2,022,822 | $ | — | — | % | ||||
Corporate | 10,079,475 | 32,173 | 0.3 | % | ||||||
RMBS – Agency | 4,446,725 | 18,214 | 0.4 | % | ||||||
RMBS – Non-Agency | 406,402 | 3,411 | 0.8 | % | ||||||
CMBS | 1,129,072 | 24,423 | 2.2 | % | ||||||
CDO | 714,248 | 706,013 | 98.8 | % | ||||||
Other asset-backed securities (1) | 1,188,760 | 27,539 | 2.3 | % | ||||||
U.S. States and political subdivisions of the States | 1,798,267 | — | — | % | ||||||
Non-U.S. Sovereign Government, Supranational and Government-Related | 4,669,332 | — | — | % | ||||||
Total Fixed maturities, at fair value | $ | 26,455,103 | $ | 811,773 | 3.1 | % | ||||
Equity securities, at fair value | 916,008 | — | — | % | ||||||
Short-term investments, at fair value | 234,452 | 1,999 | 0.9 | % | ||||||
Total investments available for sale | $ | 27,605,563 | $ | 813,772 | 2.9 | % | ||||
Cash equivalents (2) | 1,663,373 | — | — | % | ||||||
Other investments (3) | 842,387 | 103,844 | 12.3 | % | ||||||
Other assets (4) | 17,847 | — | — | % | ||||||
Total assets carried at fair value | $ | 30,129,170 | $ | 917,616 | 3.0 | % | ||||
Liabilities | ||||||||||
Financial instruments sold, but not yet purchased (5) | $ | 24,316 | $ | — | — | % | ||||
Other liabilities (6) | 37,321 | 29,374 | 78.7 | % | ||||||
Total liabilities carried at fair value | $ | 61,637 | $ | 29,374 | 47.7 | % |
(1) | Covered Bonds with a fair value of $550.9 million are included within Other asset-backed securities. |
(2) | Cash equivalents balances subject to fair value measurements include certificates of deposit and money market funds. |
(3) | The Other investments balances exclude certain structured transactions including certain investments in project finance transactions and a payment obligation (for further information, see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012) that has provided liquidity financing to a structured credit vehicle as a part of a third party medium term note facility. These Other investments are carried at amortized cost which totaled $293.4 million at June 30, 2013. |
(4) | Other assets include derivative instruments, reported on a gross basis. |
(5) | Financial instruments sold, but not yet purchased are included within “Payable for investments purchased” on the balance sheet. |
(6) | Other liabilities include derivative instruments, reported on a gross basis. |
(U.S. dollars in thousands) | Gross unpaid losses and loss expenses | Unpaid losses and loss expenses recoverable | Net unpaid losses and loss expenses | ||||||||
Balance at December 31, 2012 | $ | 20,484,121 | $ | (3,361,703 | ) | $ | 17,122,418 | ||||
Losses and loss expenses incurred | 2,081,957 | (301,267 | ) | 1,780,690 | |||||||
Losses and loss expenses (paid) / recovered | (2,375,696 | ) | 411,628 | (1,964,068 | ) | ||||||
Foreign exchange and other | (199,672 | ) | 20,025 | (179,647 | ) | ||||||
Balance at June 30, 2013 | $ | 19,990,710 | $ | (3,231,317 | ) | $ | 16,759,393 |
(U.S. dollars in thousands) | June 30, 2013 | December 31, 2012 | |||||
Reinsurance balances receivable | $ | 129,419 | $ | 113,023 | |||
Reinsurance recoverable on future policy benefits | 18,930 | 20,394 | |||||
Reinsurance recoverable on unpaid losses and loss expenses | 3,284,507 | 3,415,043 | |||||
Bad debt reserve on unpaid losses and loss expenses recoverable and reinsurance balances receivable | (76,673 | ) | (107,930 | ) | |||
Net paid and unpaid losses and loss expenses recoverable and reinsurance balances receivable | $ | 3,356,183 | $ | 3,440,530 |
(U.S. dollars in thousands) | June 30, 2013 | June 30, 2012 | |||||
Operating activities | $ | 359,652 | $ | 483,596 | |||
Investing activities | $ | (42,437 | ) | $ | (5,523 | ) | |
Financing activities | $ | (492,150 | ) | $ | (988,419 | ) | |
Effects of exchange rate changes on foreign currency cash | $ | (23,361 | ) | $ | (3,633 | ) |
a. | debt; |
b. | preference shares; |
c. | letter of credit facilities and other sources of collateral; and |
d. | revolving credit facilities. |
▪ | sufficient capital to maintain our financial strength and credit ratings, as issued by several ratings agencies, at levels considered necessary by management to enable our key operating subsidiaries to compete; |
▪ | sufficient capital to enable our regulated subsidiaries to meet the regulatory capital levels required in the United States, the U.K., Bermuda, Ireland, Switzerland and other key markets; |
▪ | letters of credit and other forms of collateral that are required to be posted or deposited, as the case may be, by our operating subsidiaries that are “non-admitted” under U.S. state insurance regulations in order for the U.S. cedant to receive statutory credit for reinsurance. We also use letters of credit to support our operations at Lloyd's; and |
▪ | revolving credit to meet short-term liquidity needs. |
▪ | the credit available from banks may be reduced resulting in our need to pledge our investment portfolio to customers. This could result in a lower investment yield; |
▪ | we may be downgraded by one or more rating agencies, which could materially and negatively impact our business, financial condition, results of operations and/or liquidity; and |
▪ | the volume of business that our subsidiaries that are not admitted in the United States are able to transact could be reduced if we are unable to renew our letter of credit facilities at an appropriate amount. |
(U.S. dollars in thousands) | June 30, 2013 | December 31, 2012 | |||||
Series D preference ordinary shares | $ | 345,000 | $ | 345,000 | |||
Series E preference ordinary shares | 999,500 | 999,500 | |||||
Ordinary share capital | 9,892,570 | 10,510,077 | |||||
Total ordinary and non-controlling interests capital | $ | 11,237,070 | $ | 11,854,577 | |||
Notes payable and debt | 1,666,913 | 1,666,103 | |||||
Total capital | $ | 12,903,983 | $ | 13,520,680 |
(U.S. dollars in thousands) | June 30, 2013 | December 31, 2012 | |||||
Ordinary shareholders’ equity – beginning of period | $ | 10,510,077 | $ | 9,411,660 | |||
Net income (loss) attributable to ordinary shareholders | 623,487 | 651,128 | |||||
Share buybacks | (375,422 | ) | (402,931 | ) | |||
Share issues | 8,409 | 6,945 | |||||
Ordinary share dividends | (82,341 | ) | (135,572 | ) | |||
Change in accumulated other comprehensive income | (809,260 | ) | 936,955 | ||||
Share-based compensation and other | 17,620 | 41,892 | |||||
Ordinary shareholders’ equity – end of period | $ | 9,892,570 | $ | 10,510,077 |
Payments Due by Period | |||||||||||||||||||||||||
(U.S. dollars in thousands) | Commitment/ Debt | In Use/ Outstanding | Year of Expiry | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | After 5 Years | ||||||||||||||||||
4-year revolver | $ | 1,000,000 | $ | — | 2015 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
5.25% Senior Notes | 600,000 | 598,885 | 2014 | — | 600,000 | — | — | ||||||||||||||||||
5.75% Senior Notes | 400,000 | 396,446 | 2021 | — | — | — | 400,000 | ||||||||||||||||||
6.375% Senior Notes | 350,000 | 348,756 | 2024 | — | — | — | 350,000 | ||||||||||||||||||
6.25% Senior Notes | 325,000 | 322,826 | 2027 | — | — | — | 325,000 | ||||||||||||||||||
$ | 2,675,000 | $ | 1,666,913 | $ | — | $ | 600,000 | $ | — | $ | 1,075,000 | ||||||||||||||
Adjustment to carrying value - impact of fair value hedges | $ | 4,721 | |||||||||||||||||||||||
Total | $ | 1,671,634 |
▪ | a revolving credit facility of $1.0 billion; and |
▪ | senior unsecured notes of approximately $1.7 billion issued by XL-Cayman. These notes require XL-Cayman to pay a fixed rate of interest during their terms. At June 30, 2013, there were four outstanding issues of senior unsecured notes: |
▪ | $600 million senior notes due September 2014, with a fixed coupon of 5.25%. The security is publicly traded. The notes were issued in two tranches of $300 million aggregate principal amount each - one tranche at 99.432% and the other at 98.419% with aggregate net proceeds of $590.9 million. Related expenses of the offering amounted to $2.7 million. |
▪ | $400 million senior notes due October 2021, with a fixed coupon of 5.75%. The security is publicly traded. The notes were issued at 100.0% and net proceeds were $395.7 million. Related expenses of the offering amounted to $4.3 million. |
▪ | $350 million senior notes due November 2024, with a fixed coupon of 6.375%. The security is publicly traded. The notes were issued at 100.0% and net proceeds were $347.8 million. Related expenses of the offering amounted to $2.2 million. |
▪ | $325 million of senior notes due May 2027, with a fixed coupon of 6.25%. The security is publicly traded. The notes were issued at 99.805% and net proceeds were $321.9 million. Related expenses of the offering amounted to $2.5 million. |
Amount of Commitment Expiration by Period | |||||||||||||||||||||||||
(U.S. dollars in thousands) | Commitment/ Debt | In Use/ Outstanding | Year of Expiry | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | After 5 Years | ||||||||||||||||||
LOC Facility (1) | $ | 1,000,000 | $ | 837,620 | 2014 | $ | 837,620 | $ | — | $ | — | ||||||||||||||
LOC Facility (2) (3) | 1,350,000 | — | 2015 | — | — | — | — | ||||||||||||||||||
LOC Facility (3) | 650,000 | 370,003 | 2015 | — | 370,003 | — | |||||||||||||||||||
LOC Facility | 750,000 | 288,939 | Continuous | — | — | — | 288,939 | ||||||||||||||||||
LOC Facility | 250,000 | 120,407 | Continuous | — | — | — | 120,407 | ||||||||||||||||||
LOC Facility (4) | 275,000 | 275,000 | 2015 | — | 275,000 | — | |||||||||||||||||||
Six LOC facilities | $ | 4,275,000 | $ | 1,891,969 | $ | 837,620 | $ | 645,003 | $ | — | $ | 409,346 |
(1) | We have the option to increase the size of the March 2011 Credit Agreement by an additional $500 million. |
(2) | This letter of credit facility includes $1.0 billion that is also included in the “4-year revolver” listed under Debt. |
(3) | We have the option to increase the size of the facilities under the December 2011 Credit Agreements by an additional $500 million across both such facilities. |
(4) | We have the option to increase the maximum amount of letters of credit and revolving credit loans available under the 2013 Credit Agreement, as amended, with the lender's and issuing lender's consent. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
(Foreign currency in millions) | June 30, 2013 | December 31, 2012 | |||
Euro | 73.3 | 252.2 | |||
U.K. Sterling | 36.0 | 81.6 | |||
Swiss Franc | 152.9 | 117.0 | |||
Canadian Dollar | 148.2 | 129.2 |
Percentage of Aggregated Fixed Income Portfolio (1) | ||
AAA | 44.2 | % |
AA | 19.8 | % |
A | 22.4 | % |
BBB | 10.7 | % |
BB or Below | 2.7 | % |
NR | 0.2 | % |
Total | 100.0 | % |
(1) | The credit ratings above were principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (where available). The credit ratings for U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflects the credit quality rating of the U.S. government for the purpose of these calculations. |
June 30, 2013 | ||||||||||
Issuer (by Global Ultimate Parent) (1) (U.S. dollars in millions) | Weighted Average Credit Quality (2) | Amortized Cost | Unrealized Gain/ (Loss) | |||||||
JPMorgan Chase & Co. | A | $ | 195.2 | $ | (2.0 | ) | ||||
Citigroup Inc. | A- | 184.8 | 1.9 | |||||||
Rabobank Nederland Nv | AA- | 180.3 | 3.0 | |||||||
The Goldman Sachs Group, Inc. | BBB+ | 156.4 | 5.5 | |||||||
National Australia Bank Limited | AA- | 133.6 | 3.5 | |||||||
Lloyds Banking Group Plc | AA- | 130.6 | 5.0 | |||||||
HSBC Holdings Plc | A+ | 125.7 | (4.2 | ) | ||||||
Bank of America Corporation | BBB+ | 118.9 | 1.8 | |||||||
Morgan Stanley | A- | 111.9 | 0.9 | |||||||
UBS AG | A+ | 100.4 | 1.7 | |||||||
The Bank of Nova Scotia | AA- | 96.2 | 2.2 | |||||||
Wells Fargo & Company | A+ | 88.0 | 1.9 | |||||||
Credit Suisse Group Ag | A+ | 83.7 | 1.5 | |||||||
Commonwealth Bank Of Australia | AA- | 83.4 | 3.3 | |||||||
Standard Chartered Plc | A+ | 74.9 | 2.5 | |||||||
Westpac Banking Corporation | AA- | 71.1 | 4.5 | |||||||
Royal Bank of Canada | AA- | 68.9 | 1.0 | |||||||
Nordea Bank AB (Publ) | AA- | 65.3 | 1.3 | |||||||
ING Groep N.V. | AA | 63.6 | 1.2 | |||||||
The Bank Of New York Mellon Corporation | AA- | 58.7 | 1.9 | |||||||
Canadian Imperial Bank Of Commerce | AA | 56.6 | 1.5 | |||||||
Government of Netherlands (ABN Amro) | AAA | 53.6 | 5.5 | |||||||
Australia and New Zealand Banking Group Limited | AA- | 53.3 | 1.2 | |||||||
HM Government Cabinet Office (Northern Rock Plc) | AAA | 50.1 | 5.5 |
(1) | Includes Covered Bonds. |
(2) | The credit rating for each asset reflected above was principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings. U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflects the credit quality rating of the U.S. government for the purpose of these calculations |
June 30, 2013 | |||||||||||||||
Issuer (by Global Ultimate Parent) (U.S. dollars in millions) | Tier One Amortized Cost | Upper Tier Two Amortized Cost | Total Amortized Cost | Net Unrealized (Loss) | |||||||||||
Barclays Plc | $ | 5.0 | $ | 27.3 | $ | 32.3 | $ | (3.6 | ) | ||||||
Zurich Insurance Group Ltd. | — | 25.4 | 25.4 | 0.5 | |||||||||||
Nationwide Building Society | 20.3 | — | 20.3 | (3.0 | ) | ||||||||||
JPMorgan Chase & Co. | 20.2 | — | 20.2 | (4.3 | ) | ||||||||||
The British United Provident Association Limited | — | 19.8 | 19.8 | (0.2 | ) | ||||||||||
National Australia Bank Limited | 19.8 | — | 19.8 | (0.2 | ) | ||||||||||
Aviva Plc | 4.8 | 13.7 | 18.5 | (1.2 | ) | ||||||||||
The Goldman Sachs Group, Inc. | 18.5 | — | 18.5 | (0.6 | ) | ||||||||||
Mitsubishi UFJ Financial Group, Inc. | 18.4 | — | 18.4 | 1.0 | |||||||||||
Legal & General Group Plc | — | 18.0 | 18.0 | 0.2 | |||||||||||
Total | $ | 107.0 | $ | 104.2 | $ | 211.2 | $ | (11.4 | ) |
Top 10 Corporate Financial Holdings (1) | Percentage of Aggregate Fixed Income Portfolio | |
JPMorgan Chase & Co. | 0.6% | |
Citigroup Inc. | 0.6% | |
Rabobank Nederland NV | 0.6% | |
The Goldman Sachs Group, Inc. | 0.5% | |
National Australia Bank Limited | 0.4% | |
Lloyds Banking Group Plc | 0.4% | |
HSBC Holdings Plc | 0.4% | |
Bank Of America Corporation | 0.4% | |
Morgan Stanley | 0.4% | |
UBS AG | 0.3% |
(1) | Corporate issuers include Covered Bonds. |
Top 5 Sector Exposures (U.S. dollars in millions) | Carrying Value | Percentage of Aggregate Fixed Income Portfolio | |||||
Financials (1) | $ | 3,368.6 | 10.9 | % | |||
Consumer, Non-Cyclical | 2,236.7 | 7.2 | % | ||||
Utilities | 1,346.1 | 4.4 | % | ||||
Industrial | 1,030.1 | 3.3 | % | ||||
Communications | 991.9 | 3.2 | % | ||||
Total | $ | 8,973.4 | 29.0 | % |
(1) | Government-guaranteed securities and Covered Bonds have been excluded from the above figures. |
(U.S. dollars in millions) | Carrying Value | Percentage of Structured Portfolio | ||||
Agency RMBS | $ | 4,446.7 | 54.3 | % | ||
Other ABS (1) | 1,289.3 | 15.8 | % | |||
CMBS | 1,265.3 | 15.5 | % | |||
Core CDO (non-ABS CDOs and CLOs) | 714.2 | 8.7 | % | |||
Non-Agency RMBS | 469.3 | 5.7 | % | |||
Total | $ | 8,184.8 | 100.0 | % |
(1) | Includes Covered Bonds. |
(U.S. dollars in millions) | Interest Rate Risk (1) | Equity Risk (2) | Absolute Spread Risk (3) | Relative Spread Risk (4) | VaR (5), (6) | ||||||||||||||
Total Investment Portfolio (7) | $ | (1,456.7 | ) | $ | (153.6 | ) | $ | (1,323.6 | ) | $ | (153.6 | ) | $ | 2,396.2 | |||||
A. P&C Investment Portfolio | $ | (930.3 | ) | $ | (153.6 | ) | $ | (871.9 | ) | $ | (87.5 | ) | $ | 1,651.9 | |||||
(I) P&C Fixed Income Portfolio | (930.3 | ) | — | (871.9 | ) | (87.5 | ) | 1,448.5 | |||||||||||
(a) Cash & Short Term Investments | (28.6 | ) | — | (9.8 | ) | (0.4 | ) | 31.4 | |||||||||||
(b) Total Government Related | (362.4 | ) | — | (240.9 | ) | (11.6 | ) | 643.8 | |||||||||||
(c) Total Corporate Credit | (272.6 | ) | — | (300.8 | ) | (35.5 | ) | 399.8 | |||||||||||
(d) Total Structured Credit | (266.8 | ) | — | (320.3 | ) | (40.0 | ) | 408.3 | |||||||||||
(II) P&C Non-Fixed Income Portfolio | — | (153.6 | ) | — | — | 280.0 | |||||||||||||
(e) Equity Portfolio | — | (82.6 | ) | — | — | 147.2 | |||||||||||||
(f) Alternative Portfolio | — | (42.2 | ) | — | — | 109.3 | |||||||||||||
(g) Private Investments | — | (28.8 | ) | — | — | 63.5 | |||||||||||||
(h) Other | — | — | — | — | 9.5 | ||||||||||||||
B. Life Investment Portfolio | $ | (519.6 | ) | $ | — | $ | (418.8 | ) | $ | (62.5 | ) | $ | 770.6 | ||||||
(III) Life Fixed Income Portfolio | (519.6 | ) | — | (418.8 | ) | (62.5 | ) | 770.6 | |||||||||||
(i) Cash & Short Term Investments | (0.1 | ) | — | — | — | 0.1 | |||||||||||||
(j) Total Government Related | (211.7 | ) | — | (81.1 | ) | (4.3 | ) | 272.5 | |||||||||||
(k) Total Corporate Credit | (252.2 | ) | — | (274.4 | ) | (46.6 | ) | 421.2 | |||||||||||
(l) Total Structured Credit | (55.6 | ) | — | (63.4 | ) | (11.5 | ) | 86.1 | |||||||||||
(IV) Life Non-Fixed Income Portfolio | — | — | — | — | — |
(1) | The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 bps adverse parallel shift in global bond curves. |
(2) | The estimated impact on the fair value of our investment portfolio of an immediate hypothetical -10% change in the value of equity exposures in our equity portfolio, certain equity-sensitive alternative investments and private equity investments. This includes our estimate of equity risk embedded in the alternatives and private investment portfolio with such estimates utilizing market exposures provided to us by certain individual fund investments, internal statistical analyses, and/or various assumptions regarding illiquidity and concentrations. |
(3) | The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 basis point increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our alternative investments, private investments and counterparty exposure. |
(4) | The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +10% increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our alternative investments, private investments and counterparty exposure. |
(5) | The VaR results are based on a 95% confidence interval, with a one-year holding period, excluding foreign exchange rate risk. Our investment portfolio VaR at June 30, 2013 is not necessarily indicative of future VaR levels as these are based on statistical estimates of possible price changes and, therefore, exclude other sources of investment return such as coupon and dividend income. |
(6) | The VaR results are the standalone VaRs, based on the prescribed methodology, for each component of our Total Investment Portfolio. The standalone VaRs of the individual components are non-additive, with the difference between the summation of the individual component VaRs and their respective aggregations being due to diversification benefits across the individual components. In the case of the VaR results for our Total Investment Portfolio, the results also include the impact associated with our Business and Other investments. |
(7) | Our Total Investment Portfolio comprises our P&C Investment Portfolio and Life Operations Investment Portfolio as well as our Business and Other investments that do not form part of our P&C Investment Portfolio or Life Operations Investment Portfolio. The individual results reported in the above table for our Total Investment Portfolio therefore represent the aggregate impact on our P&C Investment Portfolio, Life Operations Investment Portfolio and the majority of our Other investments. |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (2) | ||||||||
April 1, 2013 to April 30, 2013 | 2,085,128 | $ | 30.68 | 2,084,255 | $661.1 million | ||||||
May 1, 2013 to May 31, 2013 | 1,231,043 | 31.50 | 1,218,701 | $622.7 million | |||||||
June 1, 2013 to June 30, 2013 | 1,540,691 | 30.94 | 1,540,691 | $575.0 million | |||||||
Total | 4,856,862 | $ | 30.97 | 4,843,647 | $575.0 million |
(1) | Shares purchased in connection with the vesting of restricted shares granted under our restricted stock plan do not represent shares purchased as part of publicly announced plans or programs. All such purchases were made in connection with satisfying tax withholding obligations of those employees. These shares were not purchased as part of our share buyback program noted below. |
(2) | For information regarding our share buyback activity see Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Key Focuses of Management - Buybacks of Ordinary Shares" included herein. |
ITEM 6. | EXHIBITS | |
The following exhibits are filed as exhibits to this Quarterly Report: | ||
10.1 | Second Amendment to Employment Agreement, dated April 26, 2013, between XL Group plc and Michael S. McGavick, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on April 29, 2013 | |
10.2 | Credit Agreement, dated as of May 7, 2013, between XLIT Ltd., Citicorp USA, Inc., as Administrative Agent and Issuing Lender, and the Lenders party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 7, 2013 | |
10.3 | Continuing Agreement for Standby Letters of Credit, dated as of May 7, 2013, between XLIT Ltd. and Citibank, N.A., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 7, 2013 | |
10.4 | Letter Agreement, dated as of May 7, 2013, between XLIT Ltd. and Citicorp USA, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 7, 2013 | |
10.5 | Credit Agreement First Amendment, dated as of May 13, 2013, to the Credit Agreement, dated as of May 7, 2013, between XLIT Ltd., Citicorp USA, Inc., as Administrative Agent and Issuing Lender, and the Lenders party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 13, 2013 | |
10.6 | Fee Letter Amendment No. 1, dated as of May 13, 2013, to the Letter Agreement, dated as of May 7, 2013, between XLIT Ltd. and Citicorp USA, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 13, 2013 | |
10.7 | Credit Agreement Second Amendment, dated as of May 15, 2013, to the Credit Agreement, dated as of May 7, 2013, between XLIT Ltd., Citicorp USA, Inc., as Administrative Agent and Issuing Lender, and the Lenders party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 15, 2013 | |
10.8 | Fee Letter Amendment No. 2, dated as of May 15, 2013, to the Letter Agreement, dated as of May 7, 2013, between XLIT Ltd. and Citicorp USA, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on May 15, 2013 | |
10.9* | Amendment to the Amended and Restated Directors Stock & Option Plan | |
12* | Statements regarding computation of ratios | |
31* | Rule 13a-14(a)/15d-14(a) Certifications | |
32* | Section 1350 Certification | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
* | Filed herewith. |
Date: | August 5, 2013 | |
XL Group plc | ||
(Registrant) | ||
/s/ MICHAEL S. MCGAVICK | ||
Name: Michael S. McGavick | ||
Title: Chief Executive Officer and Director | ||
XL Group plc | ||
Date: | August 5, 2013 | |
/s/ PETER R. PORRINO | ||
Name: Peter R. Porrino | ||
Title: Executive Vice President and Chief Financial Officer | ||
XL Group plc |
Six Months Ended June 30, | |||||||
(U.S. dollars in thousands, except ratios) | 2013 | 2012 | |||||
Earnings: | |||||||
Pre-tax income (loss) from continuing operations | $ | 592,173 | $ | 429,940 | |||
Fixed charges | 121,302 | 141,923 | |||||
Distributed income of equity investees | 86,606 | 54,609 | |||||
Subtotal | $ | 800,081 | $ | 626,472 | |||
Less: Non-controlling interests | 82 | (12 | ) | ||||
Preference share dividends | 38,840 | 40,024 | |||||
Total earnings (loss) | $ | 761,159 | $ | 586,460 | |||
Fixed charges: | |||||||
Interest costs | $ | 52,257 | $ | 53,454 | |||
Accretion of deposit liabilities | 24,647 | 43,203 | |||||
Rental expense at 30% (1) | 5,558 | 5,242 | |||||
Total fixed charges | $ | 82,462 | $ | 101,899 | |||
Preference share dividends | 38,840 | 40,024 | |||||
Total fixed charges and preference dividends | $ | 121,302 | $ | 141,923 | |||
Ratio of earnings to fixed charges | 9.2 | 5.8 | |||||
Ratio of earnings to combined fixed charges and preference dividends | 6.3 | 4.1 | |||||
Deficiency - fixed charges only | N/A | N/A | |||||
Deficiency - fixed charges and preference dividends | N/A | N/A |
(1) | 30% represents a reasonable approximation of the interest factor. |
1. | I have reviewed this Quarterly Report on Form 10-Q of XL Group plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | August 5, 2013 | |
/s/ MICHAEL S. MCGAVICK | ||
Michael S. McGavick | ||
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of XL Group plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | August 5, 2013 | |
/s/ PETER R. PORRINO | ||
Peter R. Porrino | ||
Executive Vice President and | ||
Chief Financial Officer |
Dated: August 5, 2013 | |
/s/ MICHAEL S. MCGAVICK | |
MICHAEL S. McGAVICK | |
CHIEF EXECUTIVE OFFICER | |
XL GROUP PLC | |
Dated: August 5, 2013 | |
/s/ PETER R. PORRINO | |
PETER R. PORRINO | |
EXECUTIVE VICE PRESIDENT, | |
CHIEF FINANCIAL OFFICER | |
XL GROUP PLC |
Variable Interest Entities
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Variable Interest Entities Disclosure [Abstract] | |
Variable Interest Entities | At times, the Company has utilized variable interest entities (“VIEs”) both indirectly and directly in the ordinary course of the Company's business. The Company invests in CDOs and other investment vehicles that are issued through VIEs as part of the Company's investment portfolio. The activities of these VIEs are generally limited to holding the underlying collateral used to service investments therein. The Company's involvement in these entities is passive in nature and we are not the arranger of these entities. In addition, the Company has not been involved in establishing these entities and is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance. The Company has a limited number of remaining outstanding credit enhancement exposures, including written financial guarantee and credit default swap contracts. The obligations related to these transactions are often securitized through VIEs. The Company is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance on the basis that management does not believe that the Company has the power to direct the activities, such as asset selection and collateral management, which most significantly impact each entity's economic performance. For further details on the nature of the obligations and the size of the Company's maximum exposure, see Note 6, “Derivative Instruments,” and Note 12 (a), “Commitments and Contingencies - Financial Guarantee Exposures.” |
Derivative Instruments Summary of contingent credit features (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Derivative [Line Items] | ||
Collateral posted to counterparty | $ 1,730 | $ 12,130 |
Contracts with downgrade provisions [Member]
|
||
Derivative [Line Items] | ||
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position | 10,562 | 20,366 |
Collateral posted to counterparty | $ 80 | $ 5,490 |
Fair Value Measurements
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair value is defined as the amount that would be received for the sale of an asset or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The fair values for available for sale investments are generally sourced from third parties. The fair value of fixed income securities is based upon quoted market values where available, “evaluated bid” prices provided by third party pricing services (“pricing services”) where quoted market values are not available, or by reference to broker quotes where pricing services do not provide coverage for a particular security. While the Company receives values for the majority of the investment securities it holds from pricing services, it is ultimately management’s responsibility to determine whether the values received and recorded in the financial statements are representative of appropriate fair value measurements. The Company performs regular reviews of the prices received from its third party valuation sources to assess if the prices represent a reasonable estimate of the fair value. This process is completed by investment and accounting personnel who are independent of those responsible for obtaining the valuations. The approaches taken by the Company include, but are not limited to, annual reviews of the controls of the external parties responsible for sourcing valuations, which are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, and monthly reconciliations between the valuations provided by our external parties and valuations provided by our third party investment managers at a portfolio level. Where broker quotes are the primary source of the valuations, sufficient information regarding the specific inputs utilized by the brokers is generally not available to support a Level 2 classification. The Company obtains the majority of broker quoted values from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value. For further information, see Item 8, Note 2(b), “Significant Accounting Policies - Fair Value Measurements,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. (a) Fair Value Summary The following tables set forth the Company’s assets and liabilities that were accounted for at fair value at June 30, 2013 and December 31, 2012 by level within the fair value hierarchy:
____________
(b) Level 3 Assets and Liabilities The tables below present additional information about assets and liabilities measured at fair value on a recurring basis and for which Level 3 inputs were utilized to determine fair value. The tables present a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2013 and 2012 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at June 30, 2013 and 2012, respectively. The tables do not include gains or losses that were reported in Level 3 in prior periods for assets that were transferred out of Level 3 prior to June 30, 2013 and 2012. Gains and losses for assets and liabilities classified within Level 3 in the table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Level 1 and 2 financial instruments entered into by the Company that are either economically hedged by certain exposures to the Level 3 positions or that hedge the exposures in Level 3 positions. In general, Level 3 assets include securities for which values were obtained from brokers where either significant inputs were utilized in determining the values that were difficult to corroborate with observable market data, or sufficient information regarding the specific inputs utilized by the broker was not available to support a Level 2 classification. Transfers into or out of Level 3 primarily arise as a result of the valuations utilized by the Company changing between those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3. There were no significant transfers between Level 1 and Level 2 during the three and six months ended June 30, 2013 and 2012.
(c) Fixed maturities and short-term investments The Company’s Level 3 assets consist primarily of CDOs, for which non-binding broker quotes are the primary source of the valuations. Sufficient information regarding the specific inputs utilized by the brokers was not available to support a Level 2 classification. The Company obtains the majority of broker quotes for these CDOs from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value. Although the Company does not have access to the specific unobservable inputs that may have been used in the fair value measurements of the CDO securities provided by brokers, we would expect that the significant inputs considered are prepayment rates, probability of default, loss severity in the event of default, recovery rates, liquidity premium and reinvestment rates. Significant increases (decreases) in any of those inputs in isolation could result in a significantly different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. The remainder of the Level 3 assets relate primarily to private equity investments and certain derivative positions as described below. (d) Other investments Included within the Other investments component of the Company’s Level 3 valuations are private investments and alternative fund investments where the Company is not deemed to have significant influence over the investee. The fair value of these investments is based upon net asset values received from the investment manager or general partner of the respective entity. The nature of the underlying investments held by the investee that form the basis of the net asset value include assets such as private business ventures and are such that significant Level 3 inputs are utilized in the determination of the individual underlying holding values and, accordingly, the fair value of the Company’s investment in each entity is classified within Level 3. The Company has not adjusted the net asset values received; however, management incorporates factors such as the most recent financial information received, annual audited financial statements and the values at which capital transactions with the investee take place when applying judgment regarding whether any adjustments should be made to the net asset value in recording the fair value of each position. Investments in alternative funds included in Other investments utilize strategies including arbitrage, directional, event driven and multi-style. These funds potentially have lockup and gate provisions which may limit redemption liquidity. For further details regarding the nature of Other investments and related features see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. (e) Derivative instruments Derivative instruments recorded within Other liabilities and classified within Level 3 include credit derivatives sold providing protection on senior tranches of structured finance transactions where the value is obtained directly from the investment bank counterparty and sufficient information regarding the inputs utilized in such valuation was not obtained to support a Level 2 classification and guaranteed minimum income benefits (“GMIB”) embedded within one reinsurance contract. The majority of inputs utilized in the valuations of these types of derivative contracts are considered Level 1 or Level 2; however, each valuation includes at least one Level 3 input that was significant to the valuation and, accordingly, the values are disclosed within Level 3. (f) Financial Instruments Not Carried at Fair Value Authoritative guidance over disclosures about the fair value of financial instruments requires additional disclosure of fair value information for financial instruments not carried at fair value in both interim and annual reporting periods. Certain financial instruments, particularly insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash and cash equivalents, accrued investment income, net receivable from investments sold, other assets, net payable for investments purchased, other liabilities and other financial instruments not included below approximated their fair values. The following table includes financial instruments for which the carrying value differs from the estimated fair values at June 30, 2013 and December 31, 2012. All of these fair values estimates are considered Level 2 fair value measurements. The fair values for fixed maturities held to maturity are provided by third party pricing vendors and significant valuation inputs for all other items included were based upon market data obtained from sources independent of the Company, and are subject to the same control environment previously described.
The Company historically participated in structured transactions. Remaining structured transactions include cash loans supporting project finance transactions, providing liquidity facility financing to structured project deals and an investment in a payment obligation with an insurance company. These transactions are carried at amortized cost. The fair value of these investments held by the Company is determined through use of internal models utilizing reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Deposit liabilities include obligations under structured insurance and reinsurance transactions. For purposes of fair value disclosures, the Company determined the estimated fair value of the deposit liabilities by assuming a discount rate equal to the appropriate U.S. Treasury rate plus 70.5 basis points at June 30, 2013 and the appropriate U.S. Treasury rate plus 100.3 basis points at December 31, 2012. The discount rate incorporates the Company’s own credit risk into the determination of estimated fair value. The fair values of the Company’s notes payable and debt outstanding were determined based on quoted market prices. There are no significant concentrations of credit risk within the Company’s financial instruments as defined in the authoritative guidance over disclosures of fair value of financial instruments not carried at fair value, which excludes certain financial instruments, particularly insurance contracts. |
Investments (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized cost and fair value summary | The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at June 30, 2013 and December 31, 2012 were as follows:
___________
____________
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contractual maturities summary | The contractual maturities of AFS and HTM fixed income securities at June 30, 2013 and December 31, 2012 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
____________
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of unrealized losses | The following is an analysis of how long the AFS and HTM securities at June 30, 2013 and December 31, 2012 had been in a continual unrealized loss position:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis of net realized gains (losses) on investments | The following represents an analysis of net realized gains (losses) on investments:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit loss impairments on fixed inmcome securities rollforward | The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates or the periods indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.
|
Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent | The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012:
For the three months ended June 30, 2013 and 2012, and for the six months ended June 30, 2013 and 2012, ordinary shares available for issuance under share-based compensation plans of 6.0 million and 8.8 million, and 6.3 million and 9.0 million, respectively, were not included in the calculation of diluted earnings per share because the assumed exercise or issuance of such shares would be anti-dilutive. |
Derivative Instruments - Derivatives Designated As Fair Value Hedges (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges | $ (506) | $ (2,194) | $ 969 | $ (4,633) |
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items - amount of gain (loss) recognized in income attributable to risk | (5,002) | 14,567 | 25,243 | (5,990) |
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges | (506) | (2,194) | 969 | (4,633) |
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Interest rate contracts
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items - amount of gain (loss) recognized in income attributable to risk | 0 | 7,270 | 0 | 1,813 |
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Foreign exchange contracts
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items - amount of gain (loss) recognized in income attributable to risk | (5,002) | 7,297 | 25,243 | (7,803) |
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Deposit liabilities
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items - amount of gain (loss) recognized in income attributable to risk | 0 | (9,789) | 0 | (6,182) |
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Fixed maturity investments
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items - amount of gain (loss) recognized in income attributable to risk | $ 4,496 | $ (6,972) | $ (24,274) | $ 7,539 |
Notes Payable and Debt and Financing Arrangements - Letter of Credit Summary (Details) (USD $)
|
Jun. 30, 2013
Credit_Facilities
|
Dec. 31, 2012
Credit_Facilities
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Line of Credit Facility [Line Items] | ||||||||||
Number Of Available Letter Of Credit | 6 | 5 | ||||||||
Revolving credit facility
|
||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Available letter of credit facilities - commitments | $ 1,000,000,000 | [1],[2] | $ 1,000,000,000 | [1],[2] | ||||||
Line Of Credit Facility Optional Increased Capacity | 275,000,000 | |||||||||
Letter of credit facilities
|
||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Available letter of credit facilities - commitments | 4,275,000,000 | [1],[3] | 4,000,000,000 | [1],[3] | ||||||
Available letter of credit facilities - in use | 1,891,969,000 | [1] | 1,757,250,000 | [1] | ||||||
Collateralized by certain assets of the Company’s investment portfolio | 85.50% | [1] | 93.30% | [1] | ||||||
March 2011 Credit Agreement
|
||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Line Of Credit Facility Optional Increased Capacity | 500,000,000 | |||||||||
December 2011 Credit Agreement
|
||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Line Of Credit Facility Optional Increased Capacity | $ 500,000,000 | |||||||||
|
Segment Information - Narrative (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
segments
|
Jun. 30, 2012
|
|||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Net results from structured products | $ 6,053 | [1] | $ (13,759) | [2] | $ 11,229 | [3] | $ (8,502) | [4] | ||||||||
Number of segments | 3 | |||||||||||||||
Total P&C
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Net results from structured products | 6,053 | [1] | (13,759) | [2] | 11,229 | [3] | (8,502) | [4] | ||||||||
Net investment income | Total P&C
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Net results from structured products | 18,100 | 17,400 | 35,900 | 34,700 | ||||||||||||
Interest expense | Total P&C
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Net results from structured products | $ (12,100) | $ (31,200) | $ (24,600) | $ (43,200) | ||||||||||||
Alternative funds
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Alternative investments, timelag for reporting | 1 month | 1 month | ||||||||||||||
Operating affiliates
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Alternative investments, timelag for reporting | 3 months | 3 months | ||||||||||||||
|
Notes Payable and Debt and Financing Arrangements (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Letter of Credit Summary | The Company's letter of credit facilities and revolving credit facilities at June 30, 2013 and December 31, 2012 were as follows:
____________
|
Share Capital (Tables)
|
6 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||
Schedule of Valuation Assumptions - Stock Options | The fair value of the options issued was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:
|
Derivative Instruments - Gross amounts of derivative fair values contained in the consolidated balance sheet (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
||||||
---|---|---|---|---|---|---|---|---|
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative fair value | $ 17,847 | $ 23,515 | ||||||
Liability derivative fair value | 37,321 | 65,299 | ||||||
Derivatives designated as hedging instruments
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 1,914,366 | 670,751 | ||||||
Asset derivative fair value | 14,563 | [1] | 12,511 | [1] | ||||
Liability derivative notional amount | 1,483,052 | 2,382,507 | ||||||
Liability derivative fair value | 3,336 | [1] | 23,715 | [1] | ||||
Derivatives designated as hedging instruments | Foreign exchange contracts
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 1,914,366 | 670,751 | ||||||
Asset derivative fair value | 14,563 | [1] | 12,511 | [1] | ||||
Liability derivative notional amount | 1,483,052 | 2,382,507 | ||||||
Liability derivative fair value | 3,336 | [1] | 23,715 | [1] | ||||
Derivatives not designated as hedging instruments
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 552,994 | 253,183 | ||||||
Asset derivative fair value | 5,111 | [1] | 12,331 | [1] | ||||
Liability derivative notional amount | 546,367 | 650,411 | ||||||
Liability derivative fair value | 35,812 | [1] | 42,911 | [1] | ||||
Derivatives not designated as hedging instruments | Investment related derivatives | Interest rate exposure
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 380,930 | 45,604 | ||||||
Asset derivative fair value | 3,249 | [1] | 2,060 | [1] | ||||
Liability derivative notional amount | 5,417 | 26,139 | ||||||
Liability derivative fair value | 0 | [1] | 253 | [1] | ||||
Derivatives not designated as hedging instruments | Investment related derivatives | Foreign exchange contracts
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 32,120 | 33,007 | ||||||
Asset derivative fair value | 452 | [1] | 226 | [1] | ||||
Liability derivative notional amount | 31,928 | 54,449 | ||||||
Liability derivative fair value | 1,487 | [1] | 1,790 | [1] | ||||
Derivatives not designated as hedging instruments | Investment related derivatives | Credit exposure
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 10,310 | 25,000 | ||||||
Asset derivative fair value | 97 | [1] | 486 | [1] | ||||
Liability derivative notional amount | 392,710 | 436,959 | ||||||
Liability derivative fair value | 14,931 | [1] | 15,472 | [1] | ||||
Derivatives not designated as hedging instruments | Investment related derivatives | Financial market exposure
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 56,687 | 72,597 | ||||||
Asset derivative fair value | 1,313 | [1] | 9,559 | [1] | ||||
Liability derivative notional amount | 14,882 | 16,910 | ||||||
Liability derivative fair value | 0 | [1] | 0 | [1] | ||||
Derivatives not designated as hedging instruments | Financial operations derivatives | Credit exposure
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 0 | [2] | 0 | [2] | ||||
Asset derivative fair value | 0 | [1],[2] | 0 | [1],[2] | ||||
Liability derivative notional amount | 43,998 | [2] | 46,903 | [2] | ||||
Liability derivative fair value | 0 | [1],[2] | 0 | [1],[2] | ||||
Derivatives not designated as hedging instruments | Other non-investment derivatives | Guaranteed minimum income benefit contract
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 0 | 0 | ||||||
Asset derivative fair value | 0 | [1] | 0 | [1] | ||||
Liability derivative notional amount | 57,432 | 69,051 | ||||||
Liability derivative fair value | 19,394 | [1] | 25,396 | [1] | ||||
Derivatives not designated as hedging instruments | Other non-investment derivatives | Modified coinsurance funds withheld contract
|
||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Asset derivative notional amount | 72,947 | 76,975 | ||||||
Asset derivative fair value | 0 | [1] | 0 | [1] | ||||
Liability derivative notional amount | 0 | 0 | ||||||
Liability derivative fair value | $ 0 | [1] | $ 0 | [1] | ||||
|
Investments - Contractual maturities of available for sale securities and held to maturity income securities (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
||||||
---|---|---|---|---|---|---|---|---|
Fixed Maturities - AFS | ||||||||
Due less than one year, amortized cost | $ 2,134,578 | [1] | $ 1,939,803 | [1] | ||||
Due less than one year, fair value | 2,146,455 | [1] | 1,952,250 | [1] | ||||
Due after 1 through 5 years, amortized cost | 8,323,556 | [1] | 8,521,090 | [1] | ||||
Due after 1 through 5 years, fair value | 8,536,843 | [1] | 8,877,512 | [1] | ||||
Due after 5 through 10 years, amortized cost | 5,281,728 | [1] | 4,701,391 | [1] | ||||
Due after 5 through 10 years, fair value | 5,342,151 | [1] | 5,065,158 | [1] | ||||
Due after 10 years, amortized cost | 2,433,723 | [1] | 2,427,680 | [1] | ||||
Due after 10 years, fair value | 2,544,447 | [1] | 2,790,996 | [1] | ||||
Subtotal - amortized cost | 18,173,585 | [1] | 17,589,964 | [1] | ||||
Subtotal - fair value | 18,569,896 | [1] | 18,685,916 | |||||
Mortgage and asset backed securities - amortized cost | 7,842,623 | [1] | 8,954,842 | [1] | ||||
Mortgage and asset backed securities - fair value | 7,885,207 | [1] | 9,161,004 | [1] | ||||
Amortized cost of Fixed maturities | 26,016,208 | 26,544,806 | ||||||
Fixed maturities, at fair value | 26,455,103 | 27,846,920 | ||||||
Fixed maturities - HTM | ||||||||
Due less than one year, amortized cost | 51,818 | [1] | 36,515 | [1] | ||||
Due less than one year, fair value | 53,135 | [1] | 37,580 | [1] | ||||
Due after 1 through 5 years, amortized cost | 207,871 | [1] | 195,121 | [1] | ||||
Due after 1 through 5 years, fair value | 220,744 | [1] | 205,562 | [1] | ||||
Due after 5 through 10 years, amortized cost | 325,119 | [1] | 377,541 | [1] | ||||
Due after 5 through 10 years, fair value | 352,538 | [1] | 420,008 | [1] | ||||
Due after 10 years, amortized cost | 1,802,517 | [1] | 1,886,974 | [1] | ||||
Due after 10 years, fair value | 2,025,321 | [1] | 2,239,688 | [1] | ||||
Subtotal - amortized cost | 2,387,325 | [1] | 2,496,151 | [1] | ||||
Subtotal - fair value | 2,651,738 | [1] | 2,902,838 | [1] | ||||
Mortgage and asset backed securities - amortized cost | 299,669 | [1] | 318,296 | [1] | ||||
Mortgage and asset backed securities - fair value | 327,243 | [1] | 359,966 | [1] | ||||
Fixed maturities, held to maturity | 2,686,994 | 2,814,447 | ||||||
Fair value of held to maturity securities | 2,978,981 | 3,262,804 | ||||||
RMBS - Agency
|
||||||||
Fixed Maturities - AFS | ||||||||
Mortgage and asset backed securities - amortized cost | 4,411,540 | [1] | 5,054,097 | [1] | ||||
Mortgage and asset backed securities - fair value | 4,446,725 | [1] | 5,255,493 | [1] | ||||
Fixed maturities, at fair value | 4,446,725 | 5,255,493 | ||||||
RMBS - Non-Agency
|
||||||||
Fixed Maturities - AFS | ||||||||
Mortgage and asset backed securities - amortized cost | 418,458 | [1] | 678,469 | [1] | ||||
Mortgage and asset backed securities - fair value | 406,402 | [1] | 647,733 | [1] | ||||
Fixed maturities, at fair value | 406,402 | 647,733 | ||||||
Fixed maturities - HTM | ||||||||
Mortgage and asset backed securities - amortized cost | 62,925 | [1] | 83,205 | [1] | ||||
Mortgage and asset backed securities - fair value | 67,749 | [1] | 93,707 | [1] | ||||
Fixed maturities, held to maturity | 62,925 | 83,205 | ||||||
Fair value of held to maturity securities | 67,749 | 93,707 | ||||||
CMBS
|
||||||||
Fixed Maturities - AFS | ||||||||
Mortgage and asset backed securities - amortized cost | 1,093,641 | [1] | 1,010,794 | [1] | ||||
Mortgage and asset backed securities - fair value | 1,129,072 | [1] | 1,077,251 | [1] | ||||
Fixed maturities, at fair value | 1,129,072 | 1,077,251 | ||||||
Fixed maturities - HTM | ||||||||
Mortgage and asset backed securities - amortized cost | 136,193 | [1] | 12,751 | [1] | ||||
Mortgage and asset backed securities - fair value | 150,932 | [1] | 14,799 | [1] | ||||
Fixed maturities, held to maturity | 136,193 | 12,751 | ||||||
Fair value of held to maturity securities | 150,932 | 14,799 | ||||||
CDO
|
||||||||
Fixed Maturities - AFS | ||||||||
Mortgage and asset backed securities - amortized cost | 753,601 | [1] | 784,999 | [1] | ||||
Mortgage and asset backed securities - fair value | 714,248 | [1] | 709,816 | [1] | ||||
Fixed maturities, at fair value | 714,248 | 709,816 | ||||||
Other asset-backed securities
|
||||||||
Fixed Maturities - AFS | ||||||||
Mortgage and asset backed securities - amortized cost | 1,165,383 | [1] | 1,426,483 | [1] | ||||
Mortgage and asset backed securities - fair value | 1,188,760 | [1] | 1,470,711 | [1] | ||||
Fixed maturities, at fair value | 1,188,760 | [2] | 1,470,711 | [2] | ||||
Fixed maturities - HTM | ||||||||
Mortgage and asset backed securities - amortized cost | 100,551 | [1] | 222,340 | [1] | ||||
Mortgage and asset backed securities - fair value | 108,562 | [1] | 251,460 | [1] | ||||
Fixed maturities, held to maturity | 100,551 | [2] | 222,340 | [2] | ||||
Fair value of held to maturity securities | $ 108,562 | [2] | $ 251,460 | [2] | ||||
|
Derivative Instruments - Schedule of settlement of fair value hedges (Details) (Fair value hedges, USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Notes payable and debt
|
||
Derivative [Line Items] | ||
Cumulative reduction to interest expense | $ 16,903 | $ 12,996 |
Remaining balance | 4,721 | 8,628 |
Weighted average years remaining to maturity | 1 year 2 months 12 days | 2 years 2 months 12 days |
Deposit liabilities
|
||
Derivative [Line Items] | ||
Cumulative reduction to interest expense | 29,257 | 12,763 |
Remaining balance | $ 203,938 | $ 136,722 |
Weighted average years remaining to maturity | 24 years 2 months 12 days | 32 years 4 months 24 days |
Accumulated Other Comprehensive Income (Loss) (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income Loss Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The changes in AOCI, net of tax, by component for the three months ended June 30, 2013 are as follows:
____________
The changes in AOCI, net of tax, by component for the six months ended June 30, 2013 are as follows:
____________
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification out of Accumulated Other Comprehensive Income | The reclassifications out of AOCI along with the associated income statement line items affected by component, and the total related tax (expense) benefit for the three and six months ended June 30, 2013 and 2012 are as follows:
|
Investments - Credit loss impairments on fixed income securities (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Investments, Debt and Equity Securities [Abstract] | ||||
Balance, beginning of period | $ 260,066 | $ 314,805 | $ 268,707 | $ 333,379 |
Credit loss impairment recognized in the current period on securities not previously impaired | 27 | 4,043 | 527 | 5,878 |
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period | (55,144) | (36,783) | (61,619) | (53,978) |
Credit loss impairments previously recognized on securities impaired to fair value during the period | 0 | 0 | 0 | (12,891) |
Additional credit loss impairments recognized in the current period on securities previously impaired | 1,996 | 21,952 | 4,300 | 36,882 |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected | (4,083) | (4,297) | (9,053) | (9,550) |
Balance, end of period | $ 202,862 | $ 299,720 | $ 202,862 | $ 299,720 |
Derivative Instruments (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of location and gross amounts of derivative fair values | The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheet at June 30, 2013 and December 31, 2012:
____________
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of gross and net amounts of derivative fair values and associated collateral received or paid | The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheet at June 30, 2013 and December 31, 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain (loss) recognized in income attributable to risk of hedged items | The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the three and six months ended June 30, 2013 and 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of fair value hedges that have been settled and their impact on results | A summary of the fair value hedges that have been settled and their impact on results during the three and six months ended June 30, 2013 and 2012 is shown below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of hedges of net investment in foreign operation | The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resultant gain (loss) that was recorded in the cumulative translation adjustment account within AOCI for the three and six months ended June 30, 2013 and 2012:
____________
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of net realized and unrealized gains (losses) on derivative instruments | The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the three and six months ended June 30, 2013 and 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of credit derivative exposures | An aggregate summary of the credit derivative exposure at June 30, 2013 and December 31, 2012 is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of contingent credit features | The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and the collateral posted under any of these agreements as of June 30, 2013 and December 31, 2012 were as follows:
|
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Thousands |
Total
|
Ordinary Shares
|
Additional Paid in Capital
|
Accumulated Other Comprehensive Income (Loss)
|
Retained Earnings (Deficit)
|
Non-controlling Interest in Equity of Consolidated Subsidiaries
|
---|---|---|---|---|---|---|
Balance, beginning of year at Dec. 31, 2011 | $ 3,156 | $ 8,938,679 | $ 583,065 | $ (113,241) | $ 1,344,472 | |
Issuance of ordinary shares | 9 | 1,376 | ||||
Buybacks of ordinary shares | (109) | (225,869) | 0 | |||
Exercise of stock options | 1 | |||||
Exercise of stock options | 1,349 | |||||
Share-based compensation expense | 22,669 | |||||
Change in net unrealized gains (losses) on investments, net of tax | 321,658 | 321,658 | ||||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax | 16,383 | 16,383 | ||||
Change in OTTI losses recognized in other comprehensive income, net of tax | 26,417 | 26,417 | ||||
Change in underfunded pension liability | (7) | (7) | ||||
Change in value of cash flow hedge | 220 | 220 | ||||
Foreign currency translation adjustments | (36,966) | (36,966) | ||||
Net income (loss) attributable to ordinary shareholders | 397,782 | 397,782 | ||||
Dividends on ordinary shares | (68,756) | |||||
Non-controlling interests - contribution | 1,500 | |||||
Non-controlling interests - distribution | 0 | |||||
Non-controlling interests | (12) | |||||
Non-controlling interest share in change in accumulated other comprehensive income (loss) | 33 | |||||
Non-controlling interests - deconsolidation | 0 | |||||
Balance, end of year at Jun. 30, 2012 | 11,213,809 | 3,057 | 8,738,204 | 910,770 | 215,785 | 1,345,993 |
Balance, beginning of year at Dec. 31, 2012 | 11,856,402 | 2,987 | 8,584,752 | 1,520,020 | 402,318 | 1,346,325 |
Issuance of ordinary shares | 11 | 13 | ||||
Buybacks of ordinary shares | (373,300) | (129) | (360,201) | (15,092) | ||
Exercise of stock options | 5 | |||||
Exercise of stock options | 8,380 | |||||
Share-based compensation expense | 17,620 | |||||
Change in net unrealized gains (losses) on investments, net of tax | (827,401) | (827,401) | ||||
Change in net unrealized gains (losses) on affiliate and other investments, net of tax | 25,642 | 25,642 | ||||
Change in OTTI losses recognized in other comprehensive income, net of tax | 19,620 | 19,620 | ||||
Change in underfunded pension liability | 295 | 295 | ||||
Change in value of cash flow hedge | 220 | 220 | ||||
Foreign currency translation adjustments | (27,636) | (27,636) | ||||
Net income (loss) attributable to ordinary shareholders | 623,487 | 623,487 | ||||
Dividends on ordinary shares | (82,341) | |||||
Non-controlling interests - contribution | 0 | |||||
Non-controlling interests - distribution | (37) | |||||
Non-controlling interests | 82 | |||||
Non-controlling interest share in change in accumulated other comprehensive income (loss) | (29) | |||||
Non-controlling interests - deconsolidation | (1,841) | |||||
Balance, end of year at Jun. 30, 2013 | $ 11,237,070 | $ 2,874 | $ 8,250,564 | $ 710,760 | $ 928,372 | $ 1,344,500 |
Basis of Preparation and Consolidation
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Preparation and Consolidation | Unless the context otherwise indicates, references herein to the “Company” include XL Group plc and its consolidated subsidiaries. These unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. In the opinion of management, these unaudited financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of financial position and results of operations at the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. For further information, see Item 8, Note 2(a), “Significant Accounting Policies – Basis of Preparation and Consolidation,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. To facilitate period-to-period comparisons, certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current period presentation. |
''+Y/+V2K"=8FI#NQ&D
M\B#YBR"^FD_`F;)*QX`JU'X$JSQ8>3[_5@@']/YZ[(ZZ8*@2R!:GH@.L;6L2
MQ*]Z_+Y/(\E/+1GJ2C^@(XQE#81HED=S9"^!MV:"M`!JV0U&=,JC,UU*U3X`
M7W4)G_Q&(T(;$`JR?NN7&$53WC>4$::&Z+&Y[]:DPS<:(YX@*64-A"X-W>[I
MS:82=H#<&^*4PNF;R?30K.W&)Z.IB,ONN(1+%OQ+I[::45RL4\L9_&?!2-;2
MRX9$#XJ&/QCWP%V1VP 2:GESKAI89%]@Q,3[4E+5N&RPXG85NV8V$7!M'./JCJ+HH8;
M9'49_+9MKM4$]&NULU?SX`_0[3'F-'Z7^&Q>`U(2340\ML>C\YO'5\C9'B+D
MFNU9WUSH@V&%^Z"[4Q;'\>,.NL@S)PXB43H='DG62!XXG*R?!+HQIJRA"'!@
M6:D,Y$ES:6O9$\3`6*HJG>18%4,J%!)&5O43"P98M15$-^.L^D@"PZU*1'%/
MN#3RD`%?K'M/U%MYQ?2IK(LAG\J`4=<.JBEF7`R^4%88@]5=.AB*U5T>W8K(
M:BL0#,PJD8@_HSF'-D.<:B0BL@LBN,RB2M;V$'7C0HMJP<>D0"6*P"P`2@6'
MG&\J!QQS'0B)7[#>Q@0^@;
M;JZB;[Z/^)\RR*7S-64+&?`N;PSSI[NQ<,,_I-@$#6WU?,KJ\=BFO!5T.4J_
M5=)WRWU8$O8`*[4O)5_?KBQ">?/#1M3XZWV+8GXI9M=T8UFG]8.,Y`71W"_X
M]]?Q7Y)JFL^I0=5O0]<@39=-40/$F,NT`,*5AFNZ)!PF8#E<6Q(! ``*+QVT+?NA
M-K$0&TV('2#GI$D0"+;.J984!Z0L+@<47!!0^S"V/8!2@'RO^(W%<))08O8X
M`<44AYYC9[X[<)<%U/O%S7_\M/CP[E-=S@Q;61_UY^+G=__]8+A'-Y 7X\730BT,:BQ5BL)YQ0P@E
MXV'D!FY#F6)/>?:TAC?$A!5`.X4!+:&:RLI=/-'VZX/7CJ`S'S?6CE:2>&>=
M+,`XX^L.UWL3S14!#^ID,^VS9ZZ?(&872W-JFMK]I>/T\6N-E6$^E[.Q^LG5
MRXJY)(I0(U,9JB2I9$F+_<#/MZ*WU:M]GHQ8BM<6O*,6NEDPUO$W'T][ICK+
M\FYL4/YY";2(\Z.[)%5ZK'&E$&CYH(KJE+XVMI'U/,"7G2L1J24?HFKI\(CS
MP4BSZ-/6AO^?_5',*0)R0W-5%$R$RIJF:G*SULJ^'\4+;_M[,L;4230UWW%>
MKK8T#6-ME">(MS$-^>O7?F-.9OVU=,WEAL1:ZFI`\3-QW=CR[W.R0BZ:@EG(
M21R5YK/5L@(TCI.RQ/7GH< 3;ECN"DYL/U&8W(%NVB!^+C I!YW*3PRV)ETI`+1YPJ,A-L
MH5YU15:H5ZA7J%>H5UV1%>H5ZA76WCQY[]VDD]JDE8UOI`70DL:R!D,N27+IO1K4F75>`
ML^P&(S]^GD=BGEHQMI0?0D<2R!D(N2W+IOC/8
MFG1=`
;!11-,"84AYC@;"A?2FJFX2M+=F[8Z8@)1J'4]A4V6X^&4Z-%,
M+RS9L7@6L;?COB01//SA/W_YZ?/MA\67BXRN8RC"+A%B3=Q;$^;:4BMNZ%`H+/8#+//@+8F3ZPXCG&/`IY_D$,_)"IO8.'J=H-2\V*^Z
M-%%6)A&\ZCSE)51S'G`_"!=2N`;G1!Z&\Z,.JK"P
M2SIQ0EM$X(6995*!K-G"-CUBVNM9<^Q79>WP(QH$8*K,=2`!H9$TG
("&&,[6>P@'$052%=,:POCPN.DE5Z_U4[6O0
M0M=7("3TC
3/Q98<-:H;!;+-*1L+DU\VR`/1K;E
MPTG'?/=JL'H^KI[>J&U[G['O%^[[OM9>7EB3#/$9`LQQEB?,[0RXN=*-67!A
M;N,1F,WGC6FGK)8F!"TLK&NG'M?WYFV3.`+Q86J788Y,Q=2>/=EL'(D$+!N8
MB]XSGF>M<..]]V5DX.;?FY^A.M%;%I:I'\+$DXEE)PT-$U%+R/Q&O5O0NXF7
M12;.51[=PR36U9KZ;<4\XYDT]#<%-VZ5K=5664T!YA'_2Y=*5<9?W(<%WRJ8
ME81L@VR#;%//B6Z9(NP]4-=+EEW7!%_/9&39C9(`;L-X4R>H*J(KC'WJ1#(M
M1>^VBR29JHQFV9X+.BC(!`?&!`6[&U49S3?Q*BHTL:F"N^'Z),Y5D@4G/\<^
M^3$M3;$ZQ6TNJ_KX8ZCE@#R9RFL;LLT\VW3;H@HBAEHPU+*Q"&>)C3+WKO\\
M38N?;!Z8R^V>)&AKW?=B)?^!<1E^(2)';Q!X;I!#]S:NG[7S+&S?2#3;S7;1
MQ%W+ZE>+>V8P4+&M>3]D!9W/3+@XJ>&0J&\5)'7%:C1';V3@;
M'GLVG27_<+3EWNXU"^X54P`!(NTG`2[(39JTBK$NW+9*[XKX[![2`TSB1LM@
M7$Y"!4M;PI:)\#9NY2(9C3I:B0:WZUL?8Q*K.`UQSP]'1^7A,=&8^6(C\VNU
M[?[=36]I:*H"K4=7DF2-8YE%%J5IXU!&V:I>VN#.L_SOG^K3@+=[A=@@(49&
MAD0;G