Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30, 2018 and December 31, 2017:



	As at June 30, 2018
	Level 1		Level 2			Level 3			Total
	($ in millions)
Available for sale financial assets, at fair value
U.S. government	$	1,229.6	$	—		$	—		$	1,229.6
U.S. agency	—		46.6			—			46.6
Municipal	—		105.7			—			105.7
Corporate	—		2,267.1			—			2,267.1
Non-U.S. government-backed corporate	—		91.8			—			91.8
Non-U.S. government	291.6		138.6			—			430.2
Asset-backed	—		18.4			—			18.4
Agency mortgage-backed	—		890.6			—			890.6
Total fixed income securities available for sale, at fair value	1,521.2		3,558.8			—			5,080.0
Short-term investments available for sale, at fair value	69.4		2.8			—			72.2
Held for trading financial assets, at fair value
U.S. government	155.3		—			—			155.3
Municipal	—		77.8			—			77.8
Corporate	—		968.5			—			968.5
Non-U.S. government-backed corporate	—		—			—			—
Non-U.S. government	47.2		172.1			—			219.3
Asset-backed	—		7.2			—			7.2
Agency mortgage-backed	—		187.8			—			187.8
Total fixed income securities trading, at fair value	202.5		1,413.4			—			1,615.9
Short-term investments trading, at fair value	23.3		4.1			—			27.4
Equity investments trading, at fair value	—		—			—			—
Catastrophe bonds trading, at fair value	—		35.5			—			35.5
Other investments ⁽¹⁾	—		—			—			86.2

Other financial assets and liabilities, at fair value
Derivatives at fair value — foreign exchange contracts	—		14.1			—			14.1
Liabilities under derivative contracts — foreign exchange contracts	—		(49.3		)	—			(49.3		)
Loan notes issued by variable interest entities, at fair value	—		—			(20.3		)	(20.3		)
Loan notes issued by variable interest entities, at fair value (included within accrued expenses and other payables)	—		—			(5.0		)	(5.0		)
Total	$	1,816.4	$	4,979.4		$	(25.3	)	$	6,770.5

⁽¹⁾

Other investments represents our investment in a real estate fund and is measured at fair value using the net asset value per share practical expedient. As a result this has not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

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. There were no significant transfers between Level 1, Level 2 and Level 3 during the six months ended June 30, 2018.

The Company settled $63.7 million of Level 3 liabilities in respect of the Loan Notes issued by Silverton for the six months ended June 30, 2018. As at June 30, 2018, there were no the assets classified as Level 3 and the Company’s Level 3 liabilities consisted solely of the Loan Notes issued by Silverton.



	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

Reconciliation of Liabilities Using Level 3 Inputs

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 three and six months ended June 30, 2018 and 2017:



Reconciliation of Liabilities Using Level 3 Inputs	Three Months Ended June 30, 2018			Three Months Ended June 30, 2017
	($ in millions)
Balance at the beginning of the period	$	39.8		$	115.1
Distributed to third party	(17.9		)	(2.9		)
Total change in fair value included in the statement of operations	3.4			3.3
Balance at the end of the period ⁽¹⁾	$	25.3		$	115.5

Pricing Sources Used in Pricing Fixed Income Investments

Pricing sources used in pricing fixed income investments as at June 30, 2018 and December 31, 2017 were as follows:



	As at June 30, 2018		As at December 31, 2017
Index providers	84	%	84	%
Pricing services	14		11
Broker-dealers	2		5
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 June 30, 2018 and December 31, 2017 is provided below:



	As at June 30, 2018				As at December 31, 2017
	Fair Market Value Determined using Prices from Index Providers		% of Total Fair Value by Security Type		Fair Market Value Determined using Prices from Index Providers		% of Total Fair Value by Security Type
	($ in millions, except for percentages)
U.S. government	$	1,384.9	100	%	$	1,321.3	100	%
U.S. agency	44.8		96	%	43.4		83	%
Municipal	133.6		73	%	37.4		43	%
Corporate	3,075.1		95	%	3,299.6		83	%
Non-U.S. government-backed corporate	40.4		44	%	44.0		48	%
Non-U.S. government	342.9		53	%	399.4		58	%
Asset-backed	12.5		49	%	13.5		37	%
Agency mortgage-backed	570.3		53	%	605.0		53	%
Total fixed income securities	$	5,604.5	84	%	$	5,763.6	84	%
Equities	—		—	%	491.0		100	%
Total fixed income securities and equity investments	$	5,604.5	84	%	$	6,254.6	85	%

Fair Value Inputs, Assets, Quantitative Information

The observable and unobservable inputs used to determine the fair value of the Loan Notes as at June 30, 2018 and December 31, 2017 are presented in the tables below:



As at June 30, 2018		Fair Value Level 3			Valuation Method	Observable (O) and Unobservable (U) inputs	Low		High
	($ in millions)						($ in millions)
Loan Notes		$	25.3	⁽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



As 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

⁽¹⁾ The amounts classified within accrued expenses and other payables were $5.0 million and $42.4 million as at June 30, 2018 and December 31, 2017, respectively.