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Variable Interest Entities and Noncontrolling Interests (Tables) | 9 Months Ended
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Sep. 30, 2020
Noncontrolling Interest [Abstract] |
Carrying value of assets and liabilities of variable interest entity | The following table provides the carrying amount and balance sheet caption in which the assets and liabilities of Watford are reported:
| September 30, |  | December 31,
| 2020 |  | 2019
Assets |  |  |
Investments accounted for using the fair value option | $ | 1,937,037 |  |  | $ | 1,898,091 |
Fixed maturities available for sale, at fair value | 649,781 |  |  | 745,708 |
Equity securities, at fair value | 52,807 |  |  | 65,338 |
Cash | 195,333 |  |  | 102,437 |
Accrued investment income | 16,234 |  |  | 14,025 |
Premiums receivable | 263,748 |  |  | 273,657 |
Reinsurance recoverable on unpaid and paid losses and LAE | 263,293 |  |  | 170,973 |
Ceded unearned premiums | 131,885 |  |  | 132,577 |
Deferred acquisition costs | 58,583 |  |  | 64,044 |
Receivable for securities sold | 1,730 |  |  | 16,287 |
Goodwill and intangible assets | 7,650 |  |  | 7,650 |
Other assets | 75,139 |  |  | 60,070 |
Total assets of consolidated VIE | $ | 3,653,220 |  |  | $ | 3,550,857 |
Liabilities |  |  |
Reserve for losses and loss adjustment expenses | $ | 1,429,656 |  |  | $ | 1,263,628 |
Unearned premiums | 459,476 |  |  | 438,907 |
Reinsurance balances payable | 68,339 |  |  | 77,066 |
Revolving credit agreement borrowings | 210,687 |  |  | 484,287 |
Senior notes | 172,621 |  |  | 172,418 |
Payable for securities purchased | 76,567 |  |  | 18,180 |
Other liabilities (1) | 316,599 |  |  | 171,714 |
Total liabilities of consolidated VIE | $ | 2,733,945 |  |  | $ | 2,626,200 |
Redeemable noncontrolling interests | $ | 52,375 |  |  | $ | 52,305 |
(1) Includes certain borrowings related to investing activities.
Activity in non-redeemable noncontrolling interests | The following table sets forth activity in the non-redeemable noncontrolling interests:
| September 30,
| 2020 |  | 2019
Three Months Ended |  |  |
Balance, beginning of period | $ | 679,089 |  |  | $ | 855,347 |
Additional paid in capital attributable to noncontrolling interests | 243 |  |  | 205 |
Amounts attributable to noncontrolling interests | 67,768 |  |  | 136 |
Other comprehensive income (loss) attributable to noncontrolling interests | 10,820 |  |  | (764) |
Balance, end of period | $ | 757,920 |  |  | $ | 854,924 |
Nine Months Ended |  |  |
Balance, beginning of year | $ | 762,777 |  |  | $ | 791,560 |
Additional paid in capital attributable to noncontrolling interests | 715 |  |  | 2,279 |
Repurchases attributable to non-redeemable noncontrolling interests (1) | (2,867) |  |  | — |
Amounts attributable to noncontrolling interests | (578) |  |  | 54,819 |
Other comprehensive income (loss) attributable to noncontrolling interests | (2,127) |  |  | 6,266 |
Balance, end of period | $ | 757,920 |  |  | $ | 854,924 |
(1) During 2020, Watford’s board of directors authorized the investment in Watford’s common shares through a share repurchase program.
Activity in redeemable noncontrolling interests | The following table sets forth activity in the redeemable non-controlling interests:
| September 30,
| 2020 |  | 2019
Three Months Ended |  |  |
Balance, beginning of period | $ | 55,986 |  |  | $ | 206,475 |
Redemption of noncontrolling interests | — |  |  | (157,709) |
Accretion of preference share issuance costs | 23 |  |  | 23 |
Other | 1,826 |  |  | — |
Balance, end of period | $ | 57,835 |  |  | $ | 48,789 |
Nine Months Ended |  |  |
Balance, beginning of year | $ | 55,404 |  |  | $ | 206,292 |
Redemption of noncontrolling interests | — |  |  | (157,709) |
Accretion of preference share issuance costs | 70 |  |  | 206 |
Other | 2,361 |  |  | — |
Balance, end of period | $ | 57,835 |  |  | $ | 48,789 |
Portion of income or loss attributable to third party investors | The portion of income or loss attributable to third party investors, recorded in the Company’s consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests,’ are summarized in the table below:
| September 30,
| 2020 |  | 2019
Three Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | (67,768) |  |  | $ | (136) |
Amounts attributable to redeemable noncontrolling interests | (1,875) |  |  | (6,600) |
Net (income) loss attributable to noncontrolling interests | $ | (69,643) |  |  | $ | (6,736) |
Nine Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | 578 |  |  | $ | (54,819) |
Amounts attributable to redeemable noncontrolling interests | (4,998) |  |  | (15,778) |
Net (income) loss attributable to noncontrolling interests | $ | (4,420) |  |  | $ | (70,597) |
Total assets and maximum exposure to loss associated with VIEs | The following table presents the total assets of the Bellemeade entities, as well as the Company’s maximum exposure to loss associated with these VIEs, calculated as the maximum historical observable spread between the one month LIBOR, the basis for the contractual payments to bond holders, and short term invested trust asset yields.
|  |  | Maximum Exposure to Loss
Bellemeade Entities (Issue Date) | Total VIE Assets |  | On-Balance Sheet (Asset) Liability |  | Off-Balance Sheet |  | Total
Sep 30, 2020 |  |  |  |  |  |  |
Bellemeade 2017-1 Ltd. (Oct-17) | $ | 145,573 |  |  | $ | (432) |  |  | $ | 2,104 |  |  | $ | 1,672 |
Bellemeade 2018-1 Ltd. (Apr-18) | 250,095 |  |  | (1,592) |  |  | 4,821 |  |  | 3,229 |
Bellemeade 2018-2 Ltd. (Aug-18) | 187,362 |  |  | (641) |  |  | 1,695 |  |  | 1,054 |
Bellemeade 2018-3 Ltd. (Oct-18) | 302,563 |  |  | (2,477) |  |  | 7,261 |  |  | 4,784 |
Bellemeade 2019-1 Ltd. (Mar-19) | 219,256 |  |  | (1,062) |  |  | 8,944 |  |  | 7,882 |
Bellemeade 2019-2 Ltd. (Apr-19) | 398,316 |  |  | (1,090) |  |  | 11,369 |  |  | 10,279 |
Bellemeade 2019-3 Ltd. (Jul-19) | 528,084 |  |  | (975) |  |  | 9,156 |  |  | 8,181 |
Bellemeade 2019-4 Ltd. (Oct-19) | 468,737 |  |  | (1,179) |  |  | 12,722 |  |  | 11,543 |
Bellemeade 2020-1 Ltd. (Jun-20) (1) | 406,534 |  |  | (701) |  |  | 7,590 |  |  | 6,889 |
Bellemeade 2020-2 Ltd. (Sep-20) (2) | 423,420 |  |  | (322) |  |  | 9,081 |  |  | 8,759 |
Total | $ | 3,329,940 |  |  | $ | (10,471) |  |  | $ | 74,743 |  |  | $ | 64,272 |
Dec 31, 2019 |  |  |  |  |  |  |
Bellemeade 2017-1 Ltd. (Oct-17) | $ | 216,429 |  |  | $ | (442) |  |  | $ | 2,794 |  |  | $ | 2,352 |
Bellemeade 2018-1 Ltd. (Apr-18) | 328,482 |  |  | (1,574) |  |  | 5,757 |  |  | 4,183 |
Bellemeade 2018-2 Ltd. (Aug-18) | 437,009 |  |  | (877) |  |  | 2,524 |  |  | 1,647 |
Bellemeade 2018-3 Ltd. (Oct-18) | 426,806 |  |  | (1,113) |  |  | 3,937 |  |  | 2,824 |
Bellemeade 2019-1 Ltd. (Mar-19) | 257,358 |  |  | (226) |  |  | 3,027 |  |  | 2,801 |
Bellemeade 2019-2 Ltd. (Apr-19) | 525,959 |  |  | (78) |  |  | 2,579 |  |  | 2,501 |
Bellemeade 2019-3 Ltd. (Jul-19) | 656,523 |  |  | (585) |  |  | 9,273 |  |  | 8,688 |
Bellemeade 2019-4 Ltd. (Oct-19) | 577,267 |  |  | (302) |  |  | 12,193 |  |  | 11,891 |
Total | $ | 3,425,833 |  |  | $ | (5,197) |  |  | $ | 42,084 |  |  | $ | 36,887 |
(1) An additional $79 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table. (2) An additional $26 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table.

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