Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

Financial Assets Measured on Recurring Basis

The following tables present the level within the fair value hierarchy at which the Company’s financial assets and liabilities are measured on a recurring basis as at December 31, 2017 and December 31, 2016:



	As at December 31, 2017
	Level 1		Level 2			Level 3			Total
	($ in millions)
Available for sale financial assets, at fair value
U.S. government	$	1,159.4	$	—		$	—		$	1,159.4
U.S. agency	—		52.1			—			52.1
Municipal	—		54.9			—			54.9
Corporate	—		2,415.7			—			2,415.7
Non-U.S. government-backed corporate	—		91.3			—			91.3
Non-U.S. government	341.2		143.7			—			484.9
Asset-backed	—		26.2			—			26.2
Agency mortgage-backed	—		946.5			—			946.5
Total fixed income securities available for sale, at fair value	1,500.6		3,730.4			—			5,231.0
Short-term investments available for sale, at fair value	87.3		2.6			—			89.9
Held for trading financial assets, at fair value
U.S. government	161.9		—			—			161.9
Municipal	—		32.2			—			32.2
Corporate	—		1,046.3			—			1,046.3
Non-U.S. government-backed corporate	—		1.0			—			1.0
Non-U.S. government	24.5		178.0			—			202.5
Asset-backed	—		9.9			—			9.9
Agency Mortgage-Backed	—		195.5			—			195.5
Total fixed income securities trading, at fair value	186.4		1,462.9			—			1,649.3
Short-term investments trading, at fair value	73.0		—			—			73.0
Equity investments trading, at fair value	491.0		—			—			491.0
Catastrophe bonds trading, at fair value	—		32.4			—			32.4

Other financial assets and liabilities, at fair value
Derivatives at fair value — foreign exchange contracts	—		6.4			—			6.4
Liabilities under derivative contracts — foreign exchange contracts	—		(1.0		)	—			(1.0		)
Loan notes issued by variable interest entities, at fair value	—		—			(44.2		)	(44.2		)
Loan notes issued by variable interest entities, at fair value (included within accrued expenses and other payables)	—		—			(42.4		)	(42.4		)
Total	$	2,338.3	$	5,233.7		$	(86.6	)	$	7,485.4

Transfers of assets into or out of a particular level are recorded at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. During the twelve months ended December 31, 2017 there were no transfers between Level 1, 2 and 3.

The Company settled $115.6 million Level 3 liabilities in respect of the loan notes issued by the Silverton VIE for the twelve months ended December 31, 2017. As at December 31, 2017, there were no assets classified as Level 3 and the Company’s Level 3 liabilities consisted of the loan notes issued by the Silverton VIE.



	At December 31, 2016
	Level 1		Level 2			Level 3			Total
	($ in millions)
Available for sale financial assets, at fair value
U.S. government	$	1,206.1	$	—		$	—		$	1,206.1
U.S. agency	—		119.6			—			119.6
Municipal	—		24.4			—			24.4
Corporate	—		2,586.5			—			2,586.5
Non-U.S. government-backed corporate	—		89.8			—			89.8
Non-U.S. government	343.7		145.0			—			488.7
Asset-backed	—		63.0			—			63.0
Non-agency commercial mortgage-backed	—		12.6			—			12.6
Agency mortgage-backed	—		1,073.9			—			1,073.9
Total fixed income securities available for sale, at fair value	1,549.8		4,114.8			—			5,664.6
Short-term investments available for sale, at fair value	118.6		26.7			—			145.3
Held for trading financial assets, at fair value
U.S. government	82.4		—			—			82.4
Municipal	—		15.5			—			15.5
Corporate	—		820.6			—			820.6
Non-U.S. government	—		202.8			—			202.8
Asset-backed	—		14.5			—			14.5
Agency mortgage-backed	—		129.9			—			129.9
Total fixed income securities trading, at fair value	82.4		1,183.3			—			1,265.7
Short-term investments trading, at fair value	76.1		109.3			—			185.4
Equity investments trading, at fair value	584.7		—			—			584.7
Catastrophe bonds trading, at fair value	—		42.5			—			42.5

Other financial assets and liabilities, at fair value
Derivatives at fair value — foreign exchange contracts	—		7.2			—			7.2
Liabilities under derivative contracts — foreign exchange contracts	—		(18.4		)	—			(18.4		)
Loan notes issued by variable interest entities, at fair value	—		—			(115.0		)	(115.0		)
Loan notes issued by variable interest entities, at fair value (included within accrued expenses and other payables)	—		—			(108.4		)	(108.4		)
Total	$	2,411.6	$	5,465.4		$	(223.4	)	$	7,653.6

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents a reconciliation of the beginning and ending balances for all assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for the twelve months ended December 31, 2017:



Reconciliation of Liabilities Using Level 3 Inputs	Twelve Months Ended December 31, 2017			Twelve Months Ended December 31, 2016
	($ in millions)
Balance at the beginning of the period ⁽¹⁾	$	223.4		$	190.6
Distributed to third party	(115.6		)	(89.3		)
Loan notes issued during the period	—			105.0
Total change in fair value included in the statement of operations	(21.2		)	17.1
Balance at the end of the period ⁽¹⁾	$	86.6		$	223.4

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⁽¹⁾	The amount classified as other payables was $42.4 million and $108.4 million as at December 31, 2017 and December 31, 2016, respectively.

Pricing Sources Used in Pricing Fixed Income Investments

Pricing sources used in pricing fixed income investments as at December 31, 2017 and December 31, 2016 were as follows:



	As at December 31, 2017		At December 31, 2016
Index providers	84	%	87	%
Pricing services	11		7
Broker-dealers	5		6
Total	100	%	100	%

Summary of Securities Priced Using Pricing Information from Index Providers

A summary of securities priced using pricing information from index providers as at December 31, 2017 and December 31, 2016 is provided below:



	As at December 31, 2017			At December 31, 2016
	Fair Market Value Determined using Prices from Index Providers		% of Total Fair Value from Index Providers	Fair Market Value Determined using Prices from Index Providers		% of Total Fair Value from Index Providers
	($ in millions, except for percentages)
U.S. government	$	1,321.3	100%	$	1,288.2	100%
U.S. agency	43.4		83%	110.2		92%
Municipal	37.4		43%	28.8		72%
Corporate	3,299.6		83%	3,275.3		96%
Non-U.S. government-backed corporate	44.0		48%	44.8		50%
Non-U.S. government	399.4		58%	455.6		72%
Asset-backed	13.5		37%	32.1		41%
Non-agency commercial mortgage-backed	—		—%	12.5		98%
Agency mortgage-backed	605.0		53%	691.9		58%
Total fixed income securities	$	5,763.6	84%	$	5,939.4	87%

Equities	$	491.0	100%	$	584.7	100%
Total fixed income securities and equity investments	$	6,254.6	85%	$	6,524.1	88%

Fair Value Inputs, Assets, Quantitative Information

The observable and unobservable inputs used to determine the fair value of the Loan Notes as at December 31, 2017 and December 31, 2016, respectively, are presented in the tables below:



At December 31, 2017		Fair Value Level 3			Valuation Method	Observable (O) and Unobservable (U) inputs	Low		High
	($ in millions)						($ in millions)
Loan Notes		$	86.6	⁽¹⁾	Internal Valuation Model	Gross premiums written (O)	$	50.1	$	61.1
						Reserve for losses (U)	$	4.2	$	61.9
						Contract period (O)	N/A		365 days
						Initial value of issuance (O)	$	325.0	$	325.0



At December 31, 2016		Fair Value Level 3			Valuation Method	Observable (O) and Unobservable (U) inputs	Low		High
	($ in millions)						($ in millions)
Loan Notes		$	223.4	⁽¹⁾	Internal Valuation Model	Gross premiums written (O)	$	38.9	$	43.4
						Reserve for losses (U)	$	2.7	$	11.8
						Contract period (O)	N/A		365 days
						Initial value of issuance (O)	$	220.0	$	220.0

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⁽¹⁾	The amount classified as other payables was $42.4 million and $108.4 million as at December 31, 2017 and December 31, 2016, respectively.