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Variable Interest Entities and Noncontrolling Interests | 9 Months Ended
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Sep. 30, 2022
Noncontrolling Interest [Abstract] |
Variable Interest Entity and Noncontrolling Interests | Somers In March 2014, the Company invested $100.0 million and acquired approximately 11% of Somers’ outstanding common equity. Somers was considered a VIE and the Company concluded that it was the primary beneficiary of Somers, through June 30, 2021. As such, the results of Somers were included in the Company’s consolidated financial statements as of and for the periods ended June 30, 2021. In the 2020 fourth quarter, Arch Capital, Somers and Greysbridge, a wholly-owned subsidiary of Arch Capital, entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”). The merger contemplated by the Merger Agreement and the related Greysbridge equity financing closed on July 1, 2021. In connection therewith and effective July 1, 2021, Somers became wholly owned by Greysbridge, and Greysbridge is now owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certain investment funds managed by Warburg. Based on the governing documents of Greysbridge, the Company concluded that, while it retains significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, the Company no longer consolidates the results of Somers in its consolidated financial statements and footnotes. Beginning in the 2021 third quarter, the Company classifies its investment as ‘investments in operating affiliates’ on the Company’s balance sheets and is accounted for under the equity method. Through June 30, 2021, Somers generated $47.0 million of cash provided by operating activities, $96.3 million of cash provided by investing activities and $2.0 million of cash used for financing activities. Redeemable noncontrolling interests The following table sets forth activity in the redeemable non-controlling interests:
| September 30,
| 2022 |  | 2021
Three Months Ended |  |  |
Balance, beginning of period | $ | 8,459 |  |  | $ | 57,533 |
Impact of deconsolidation of Somers | — |  |  | (48,919) |
Other | 449 |  |  | 1,623 |
Balance, end of period | $ | 8,908 |  |  | $ | 10,237 |
Nine Months Ended |  |  |
Balance, beginning of year | $ | 9,233 |  |  | $ | 58,548 |
Impact of deconsolidation of Somers | — |  |  | (48,919) |
Other | (325) |  |  | 608 |
Balance, end of period | $ | 8,908 |  |  | $ | 10,237 |
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,
| 2022 |  | 2021
Three Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | — |  |  | $ | — |
Amounts attributable to redeemable noncontrolling interests | (1,157) |  |  | (1,473) |
Net (income) loss attributable to noncontrolling interests | $ | (1,157) |  |  | $ | (1,473) |
Nine Months Ended |  |  |
Amounts attributable to non-redeemable noncontrolling interests | $ | — |  |  | $ | (78,314) |
Amounts attributable to redeemable noncontrolling interests | (2,390) |  |  | (3,889) |
Net (income) loss attributable to noncontrolling interests | $ | (2,390) |  |  | $ | (82,203) |
Bellemeade Re The Company has entered into aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). At the time the Bellemeade Agreements were entered into, the applicability of the accounting guidance that addresses VIEs was evaluated. As a result of the evaluation of the Bellemeade Agreements, the Company concluded that these entities are VIEs. However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements. 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 and later 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, 2022 |  |  |  |  |  | December 31, 2021
|  |  |  | Maximum Exposure to Loss |  |  |  |  |  | Maximum Exposure to Loss
Bellemeade Entities (Issue Date) |  | Total VIE Assets |  | On-Balance Sheet (Asset) Liability |  | Off-Balance Sheet |  | Total |  | Coverage Remaining from Reinsurers (1) |  | Total VIE Assets |  | On-Balance Sheet (Asset) Liability |  | Off-Balance Sheet |  | Total
2017-1 Ltd. (Oct-17) |  | $ | 46,772 |  |  | $ | (23) |  |  | $ | 88 |  |  | $ | 65 |  |  | $ | — |  |  | $ | 108,368 |  |  | $ | (159) |  |  | $ | 424 |  |  | $ | 265 |
2018-1 Ltd. (Apr-18) |  | 103,131 |  |  | (220) |  |  | 644 |  |  | 424 |  |  | — |  |  | 181,136 |  |  | (528) |  |  | 1,268 |  |  | 740 |
2018-3 Ltd. (Oct-18) |  | 217,701 |  |  | (862) |  |  | 2,107 |  |  | 1,245 |  |  | — |  |  | 302,563 |  |  | (1,018) |  |  | 2,496 |  |  | 1,478 |
2019-1 Ltd. (Mar-19) |  | 119,193 |  |  | (496) |  |  | 2,704 |  |  | 2,208 |  |  | — |  |  | 181,324 |  |  | (380) |  |  | 5,807 |  |  | 5,427 |
2019-2 Ltd. (Apr-19) |  | 347,050 |  |  | (656) |  |  | 4,308 |  |  | 3,652 |  |  | — |  |  | 398,316 |  |  | (515) |  |  | 3,998 |  |  | 3,483 |
2019-3 Ltd. (Jul-19) |  | 257,663 |  |  | (192) |  |  | 1,492 |  |  | 1,300 |  |  | — |  |  | 409,859 |  |  | (584) |  |  | 3,190 |  |  | 2,606 |
2019-4 Ltd. (Oct-19) |  | 283,684 |  |  | (532) |  |  | 3,663 |  |  | 3,131 |  |  | — |  |  | 411,954 |  |  | (462) |  |  | 4,759 |  |  | 4,297 |
2020-2 Ltd. (Sep-20) |  | 122,897 |  |  | (20) |  |  | 595 |  |  | 575 |  |  | 153 |  |  | 217,766 |  |  | (177) |  |  | 1,984 |  |  | 1,807 |
2020-3 Ltd. (Nov-20) |  | 268,385 |  |  | (204) |  |  | 2,845 |  |  | 2,641 |  |  | 8,569 |  |  | 348,818 |  |  | (128) |  |  | 5,793 |  |  | 5,665 |
2020-4 Ltd. (Dec-20) |  | 107,396 |  |  | 10 |  |  | 707 |  |  | 717 |  |  | 4,795 |  |  | 176,826 |  |  | (50) |  |  | 1,630 |  |  | 1,580 |
2021-1 Ltd. (Mar-21) |  | 497,069 |  |  | (2,234) |  |  | 936 |  |  | (1,298) |  |  | 43,198 |  |  | 568,986 |  |  | (303) |  |  | 3,283 |  |  | 2,980 |
2021-2 Ltd. (Jun-21) |  | 471,039 |  |  | (2,047) |  |  | 984 |  |  | (1,063) |  |  | 80,268 |  |  | 522,807 |  |  | 281 |  |  | 4,124 |  |  | 4,405 |
2021-3 Ltd. (Sep-21) |  | 498,309 |  |  | (2,414) |  |  | 991 |  |  | (1,423) |  |  | 129,127 |  |  | 507,873 |  |  | (411) |  |  | 3,446 |  |  | 3,035 |
2022-1 Ltd. (Jan-22) |  | 283,500 |  |  | (1,326) |  |  | 627 |  |  | (699) |  |  | 33,260 |  |  |  |  |  |  |  |  |
2022-2 Ltd. (Sep-22) |  | 201,005 |  |  | — |  |  | 744 |  |  | 744 |  |  | 126,160 |  |  |  |  |  |  |  |  |
Total |  | $ | 3,824,794 |  |  | $ | (11,216) |  |  | $ | 23,435 |  |  | $ | 12,219 |  |  | $ | 425,530 |  |  | $ | 4,336,596 |  |  | $ | (4,434) |  |  | $ | 42,202 |  |  | $ | 37,768 |
(1) Coverage from a separate panel of reinsurers remaining at September 30, 2022.

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- Definition The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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- References No definition available. + Details
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