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Variable Interest Entities and Noncontrolling Interests (Tables) | 9 Months Ended
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Sep. 30, 2021
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 were reported at December 31, 2020:
|  |  | December 31,
|  |  | 2020
Assets |  |  |
Investments accounted for using the fair value option (1) |  |  | $ | 1,790,385 |
Fixed maturities available for sale, at fair value |  |  | 655,249 |
Equity securities, at fair value |  |  | 52,410 |
Cash |  |  | 211,451 |
Accrued investment income |  |  | 14,679 |
Premiums receivable |  |  | 224,377 |
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |  |  | 286,590 |
Ceded unearned premiums |  |  | 122,339 |
Deferred acquisition costs |  |  | 53,705 |
Receivable for securities sold |  |  | 37,423 |
Goodwill and intangible assets |  |  | 7,650 |
Other assets |  |  | 75,801 |
Total assets of consolidated VIE |  |  | $ | 3,532,059 |
Liabilities |  |  |
Reserve for losses and loss adjustment expenses |  |  | $ | 1,519,583 |
Unearned premiums |  |  | 407,714 |
Reinsurance balances payable |  |  | 63,269 |
Revolving credit agreement borrowings |  |  | 155,687 |
Senior notes |  |  | 172,689 |
Payable for securities purchased |  |  | 25,881 |
Other liabilities |  |  | 193,494 |
Total liabilities of consolidated VIE |  |  | $ | 2,538,317 |
Redeemable noncontrolling interests |  |  | $ | 52,398 |
(1) Included in “other investments” on the Company’s balance sheet.
Activity in non-redeemable noncontrolling interests | The following table sets forth activity in the non-redeemable noncontrolling interests:
| September 30,
| 2021 |  | 2020
Three Months Ended |  |  |
Balance, beginning of period | $ | 918,874 |  |  | $ | 679,089 |
Impact of deconsolidation of Watford | (918,874) |  |  | — |
Additional paid in capital attributable to noncontrolling interests | — |  |  | 243 |
Amounts attributable to noncontrolling interests | — |  |  | 67,768 |
Other comprehensive income (loss) attributable to noncontrolling interests | — |  |  | 10,820 |
Balance, end of period | $ | — |  |  | $ | 757,920 |
Nine Months Ended |  |  |
Balance, beginning of year | $ | 823,007 |  |  | $ | 762,777 |
Impact of deconsolidation of Watford | (918,874) |  |  |
Additional paid in capital attributable to noncontrolling interests | 22,113 |  |  | 715 |
Repurchases attributable to non-redeemable noncontrolling interests (1) | — |  |  | (2,867) |
Amounts attributable to noncontrolling interests | 78,314 |  |  | (578) |
Other comprehensive income (loss) attributable to noncontrolling interests | (4,560) |  |  | (2,127) |
Balance, end of period | $ | — |  |  | $ | 757,920 |
(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,
| 2021 |  | 2020
Three Months Ended |  |  |
Balance, beginning of period | $ | 57,533 |  |  | $ | 55,986 |
Impact of deconsolidation of Watford | (48,919) |  |  | — |
Accretion of preference share issuance costs | — |  |  | 23 |
Other | 1,623 |  |  | 1,826 |
Balance, end of period | $ | 10,237 |  |  | $ | 57,835 |
Nine Months Ended |  |  |
Balance, beginning of year | $ | 58,548 |  |  | $ | 55,404 |
Impact of deconsolidation of Watford | (48,919) |  |  | — |
Accretion of preference share issuance costs | — |  |  | 70 |
Other | 608 |  |  | 2,361 |
Balance, end of period | $ | 10,237 |  |  | $ | 57,835 |
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,
| 2021 |  | 2020
Three Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | — |  |  | $ | (67,768) |
Amounts attributable to redeemable noncontrolling interests | (1,473) |  |  | (1,875) |
Net (income) loss attributable to noncontrolling interests | $ | (1,473) |  |  | $ | (69,643) |
Nine Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | (78,314) |  |  | $ | 578 |
Amounts attributable to redeemable noncontrolling interests | (3,889) |  |  | (4,998) |
Net (income) loss attributable to noncontrolling interests | $ | (82,203) |  |  | $ | (4,420) |
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 benchmark index for each respective transaction and short term invested trust asset yields. The benchmark index for agreements effective prior to 2021 is based on one-month LIBOR, while the 2021 agreements benchmark index is based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions.
|  |  | September 30, 2021 |  |  |  | December 31, 2020
|  |  | Maximum Exposure to Loss |  |  |  | Maximum Exposure to Loss
Bellemeade Entities (Issue Date) | Total VIE Assets |  | On-Balance Sheet (Asset) Liability |  | Off-Balance Sheet |  | Total |  | Total VIE Assets |  | On-Balance Sheet (Asset) Liability |  | Off-Balance Sheet |  | Total
Bellemeade 2017-1 Ltd. (Oct-17) | $ | 145,573 |  |  | $ | (214) |  |  | $ | 585 |  |  | $ | 371 |  |  | $ | 145,573 |  |  | $ | (245) |  |  | $ | 844 |  |  | $ | 599 |
Bellemeade 2018-1 Ltd. (Apr-18) | 228,938 |  |  | (764) |  |  | 1,683 |  |  | 919 |  |  | 250,095 |  |  | (903) |  |  | 2,245 |  |  | 1,342 |
Bellemeade 2018-2 Ltd. (Aug-18) | — |  |  | — |  |  | — |  |  | — |  |  | 108,395 |  |  | (138) |  |  | 280 |  |  | 142 |
Bellemeade 2018-3 Ltd. (Oct-18) | 302,563 |  |  | (1,049) |  |  | 2,328 |  |  | 1,279 |  |  | 302,563 |  |  | (1,320) |  |  | 3,262 |  |  | 1,942 |
Bellemeade 2019-1 Ltd. (Mar-19) | 210,529 |  |  | (931) |  |  | 8,142 |  |  | 7,211 |  |  | 219,256 |  |  | (1,361) |  |  | 8,461 |  |  | 7,100 |
Bellemeade 2019-2 Ltd. (Apr-19) | 398,316 |  |  | (787) |  |  | 5,658 |  |  | 4,871 |  |  | 398,316 |  |  | (730) |  |  | 5,201 |  |  | 4,471 |
Bellemeade 2019-3 Ltd. (Jul-19) | 491,634 |  |  | (826) |  |  | 3,971 |  |  | 3,145 |  |  | 528,084 |  |  | (861) |  |  | 5,079 |  |  | 4,218 |
Bellemeade 2019-4 Ltd. (Oct-19) | 468,737 |  |  | (682) |  |  | 4,761 |  |  | 4,079 |  |  | 468,737 |  |  | (890) |  |  | 6,676 |  |  | 5,786 |
Bellemeade 2020-1 Ltd. (Jun-20) (1) | — |  |  | — |  |  | — |  |  | — |  |  | 275,068 |  |  | (178) |  |  | 1,012 |  |  | 834 |
Bellemeade 2020-2 Ltd. (Sep-20) (2) | 266,704 |  |  | (279) |  |  | 2,629 |  |  | 2,350 |  |  | 423,420 |  |  | (556) |  |  | 6,839 |  |  | 6,283 |
Bellemeade 2020-3 Ltd. (Nov-20) (3) | 381,410 |  |  | (395) |  |  | 6,646 |  |  | 6,251 |  |  | 418,158 |  |  | (631) |  |  | 9,605 |  |  | 8,974 |
Bellemeade 2020-4 Ltd. (Dec-20) (4) | 226,916 |  |  | (100) |  |  | 2,190 |  |  | 2,090 |  |  | 321,393 |  |  | (156) |  |  | 6,816 |  |  | 6,660 |
Bellemeade 2021-1 Ltd. (Mar-21) (5) | 579,717 |  |  | 229 |  |  | 4,217 |  |  | 4,446 |  |  | — |  |  | — |  |  | — |  |  | — |
Bellemeade 2021-2 Ltd. (Jun-21) (6) | 522,807 |  |  | 906 |  |  | 5,090 |  |  | 5,996 |  |  | — |  |  | — |  |  | — |  |  | — |
Bellemeade 2021-3 Ltd. (Sep-21) (7) | 507,873 |  |  | 182 |  |  | 4,561 |  |  | 4,743 |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 4,731,717 |  |  | $ | (4,710) |  |  | $ | 52,461 |  |  | $ | 47,751 |  |  | $ | 3,859,058 |  |  | $ | (7,969) |  |  | $ | 56,320 |  |  | $ | 48,351 |
(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. (3) An additional $34 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table. (4) An additional $16 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table. (5) An additional $64 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table. (6) An additional $93 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers and is not reflected in this table. (7) An additional $131 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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