v3.21.2

Investments | 6 Months Ended
--- | ---
Jun. 30, 2021
Schedule of Investments [Abstract] |
Investments | Investments The Company holds: (i) AFS portfolios of fixed maturity and equity securities, carried at fair value; (ii) other investments, of which certain investments are carried at fair value and investments in direct lending entities are carried at cost less impairment; (iii) equity method investments; and (iv) funds held - directly managed. a)Fixed Maturities The amortized cost, gross unrealized gains and losses, and fair value of fixed maturities at June 30, 2021 and December 31, 2020 are as follows:
June 30, 2021 |  | Original or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
U.S. treasury bonds |  | $ | 78,481 |  |  | $ | — |  |  | $ | (27) |  |  | $ | 78,454 |
U.S. agency bonds – mortgage-backed |  | 148,520 |  |  | 5,028 |  |  | (95) |  |  | 153,453 |
Non-U.S. government bonds |  | 3,167 |  |  | 273 |  |  | — |  |  | 3,440 |
Asset-backed securities |  | 194,648 |  |  | 1,242 |  |  | (598) |  |  | 195,292 |
Corporate bonds |  | 486,731 |  |  | 25,657 |  |  | (4,342) |  |  | 508,046 |
Total fixed maturity investments |  | $ | 911,547 |  |  | $ | 32,200 |  |  | $ | (5,062) |  |  | $ | 938,685 |
December 31, 2020 |  | Original or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
U.S. treasury bonds |  | $ | 94,468 |  |  | $ | 34 |  |  | $ | — |  |  | $ | 94,502 |
U.S. agency bonds – mortgage-backed |  | 272,124 |  |  | 9,439 |  |  | (126) |  |  | 281,437 |
Non-U.S. government bonds |  | 8,641 |  |  | 1,067 |  |  | — |  |  | 9,708 |
Asset-backed securities |  | 184,227 |  |  | 1,611 |  |  | (406) |  |  | 185,432 |
Corporate bonds |  | 604,463 |  |  | 40,904 |  |  | (3,035) |  |  | 642,332 |
Total fixed maturity investments |  | $ | 1,163,923 |  |  | $ | 53,055 |  |  | $ | (3,567) |  |  | $ | 1,213,411 |
The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
June 30, 2021 |  | Amortized cost |  | Fair value |  |  |  |
Due in one year or less |  | $ | 60,592 |  |  | $ | 59,782 |  |  |  |  |
Due after one year through five years |  | 435,090 |  |  | 454,445 |  |  |  |  |
Due after five years through ten years |  | 65,363 |  |  | 68,361 |  |  |  |  |
Due after ten years |  | 7,334 |  |  | 7,352 |  |  |  |  |
|  | 568,379 |  |  | 589,940 |  |  |  |  |
U.S. agency bonds – mortgage-backed |  | 148,520 |  |  | 153,453 |  |  |  |  |
Asset-backed securities |  | 194,648 |  |  | 195,292 |  |  |  |  |
Total fixed maturity investments |  | $ | 911,547 |  |  | $ | 938,685 |  |  |  |  |
The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
|  | Less than 12 Months |  | 12 Months or More |  | Total
June 30, 2021 |  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses
U.S. treasury bonds |  | $ | 78,454 |  |  | $ | (27) |  |  | $ | — |  |  | $ | — |  |  | $ | 78,454 |  |  | $ | (27) |
U.S. agency bonds – mortgage-backed |  | 8,175 |  |  | (95) |  |  | — |  |  | — |  |  | 8,175 |  |  | (95) |
Asset-backed securities |  | 42,265 |  |  | (536) |  |  | 11,288 |  |  | (62) |  |  | 53,553 |  |  | (598) |
Corporate bonds |  | 36,244 |  |  | (1,311) |  |  | 53,475 |  |  | (3,031) |  |  | 89,719 |  |  | (4,342) |
Total temporarily impaired fixed maturities |  | $ | 165,138 |  |  | $ | (1,969) |  |  | $ | 64,763 |  |  | $ | (3,093) |  |  | $ | 229,901 |  |  | $ | (5,062) |
4. Investments (continued) At June 30, 2021, there were 45 securities in an unrealized loss position with a fair value of $229,901 and unrealized losses of $5,062. Of these securities, there were 18 securities that have been in an unrealized loss position for twelve months or greater with a fair value of $64,763 and unrealized losses of $3,093.
|  | Less than 12 Months |  | 12 Months or More |  | Total
December 31, 2020 |  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses
U.S. agency bonds – mortgage-backed |  | $ | 19,360 |  |  | $ | (85) |  |  | $ | 5,646 |  |  | $ | (41) |  |  | $ | 25,006 |  |  | $ | (126) |
Asset-backed securities |  | 13,371 |  |  | (217) |  |  | 31,052 |  |  | (189) |  |  | 44,423 |  |  | (406) |
Corporate bonds |  | 31,839 |  |  | (890) |  |  | 65,296 |  |  | (2,145) |  |  | 97,135 |  |  | (3,035) |
Total temporarily impaired fixed maturities |  | $ | 64,570 |  |  | $ | (1,192) |  |  | $ | 101,994 |  |  | $ | (2,375) |  |  | $ | 166,564 |  |  | $ | (3,567) |
At December 31, 2020, there were 53 securities in an unrealized loss position with a fair value of $166,564 and unrealized losses of $3,567. Of these securities, there were 35 securities that have been in an unrealized loss position for twelve months or greater with a fair value of $101,994 and unrealized losses of $2,375. Other-than-temporarily impaired The Company performs quarterly reviews of its fixed maturities in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. At June 30, 2021, we determined that unrealized losses on fixed maturities were primarily due to changes in interest rates as well as the impact of foreign exchange rate changes on certain foreign currency denominated fixed maturities since their date of purchase. All fixed maturity securities continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed maturity securities that the Company does not plan to sell and for which we are not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on analysis, our fixed maturity portfolio is of high credit quality and we believe the amortized cost basis of the securities will ultimately be recovered. The Company continually monitors the credit quality of the fixed maturity investments to assess if it is probable that it will receive contractual or estimated cash flows in the form of principal and interest. For the six months ended June 30, 2020, the Company recognized $1,506 in OTTI charges in earnings on two fixed maturity securities. There was no impairment recorded for the three and six months ended June 30, 2021 and the three months ended June 30, 2020. The following tables summarize the credit ratings of our fixed maturities as at June 30, 2021 and December 31, 2020:
June 30, 2021 |  | Amortized cost |  | Fair value |  | % of Total fair value
U.S. treasury bonds |  | $ | 78,481 |  |  | $ | 78,454 |  |  | 8.4 | %
U.S. agency bonds |  | 148,520 |  |  | 153,453 |  |  | 16.3 | %
AAA |  | 124,254 |  |  | 124,569 |  |  | 13.3 | %
AA+, AA, AA- |  | 72,130 |  |  | 73,304 |  |  | 7.8 | %
A+, A, A- |  | 220,396 |  |  | 227,914 |  |  | 24.3 | %
BBB+, BBB, BBB- |  | 225,475 |  |  | 236,805 |  |  | 25.2 | %
BB+ or lower |  | 42,291 |  |  | 44,186 |  |  | 4.7 | %
Total fixed maturities (1) |  | $ | 911,547 |  |  | $ | 938,685 |  |  | 100.0 | %
December 31, 2020 |  | Amortized cost |  | Fair value |  | % of Total fair value
U.S. treasury bonds |  | $ | 94,468 |  |  | $ | 94,502 |  |  | 7.8 | %
U.S. agency bonds |  | 272,124 |  |  | 281,437 |  |  | 23.2 | %
AAA |  | 96,453 |  |  | 97,515 |  |  | 8.0 | %
AA+, AA, AA- |  | 114,751 |  |  | 118,534 |  |  | 9.8 | %
A+, A, A- |  | 265,725 |  |  | 281,364 |  |  | 23.2 | %
BBB+, BBB, BBB- |  | 274,406 |  |  | 292,493 |  |  | 24.1 | %
BB+ or lower |  | 45,996 |  |  | 47,566 |  |  | 3.9 | %
Total fixed maturities(1) |  | $ | 1,163,923 |  |  | $ | 1,213,411 |  |  | 100.0 | %
(1)Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings. 4. Investments (continued) b)Other Investments and Equity Method Investments Certain of the Company's other investments and equity method investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which could limit our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request. Certain other investments and equity method investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments and equity method investments are not eligible for redemption or sales are restricted, the Company may still receive income distributions from those investments. Other investments The table shows the composition of the Company's other investments as at June 30, 2021 and December 31, 2020:
|  | June 30, 2021 |  | December 31, 2020
|  | Carrying value |  | % of Total |  | Carrying value |  | % of Total
Private equity investments |  | $ | 27,544 |  |  | 31.2 | % |  | $ | 23,294 |  |  | 34.8 | %
Private credit lending investments |  | 8,451 |  |  | 9.6 | % |  | 1,301 |  |  | 1.9 | %
Investment in limited partnerships |  | 13,957 |  |  | 15.8 | % |  | 3,044 |  |  | 4.5 | %
Other investments |  | 1,800 |  |  | 2.0 | % |  | 2,800 |  |  | 4.2 | %
Total other investments at fair value |  | 51,752 |  |  | 58.6 | % |  | 30,439 |  |  | 45.4 | %
Investments in direct lending entities (at cost) |  | 36,486 |  |  | 41.4 | % |  | 36,571 |  |  | 54.6 | %
Total other investments |  | $ | 88,238 |  |  | 100.0 | % |  | $ | 67,010 |  |  | 100.0 | %
Private equity investments consist of direct investments in privately held entities. Investments in limited partnerships consist of investments in private equity funds and private equity co-investments with sponsoring entities. The Company's investments in direct lending entities of $36,486 at June 30, 2021 (December 31, 2020 - $36,571) are carried at cost less impairment, if any, with any indication of impairment recognized in income when determined. Please see "Note 5(d) - Fair Value Measurements" for additional information regarding this investment. The Company's remaining unfunded commitments on other investments as at June 30, 2021 and December 31, 2020 were:
|  | June 30, 2021 |  | December 31, 2020
|  | Fair Value |  | % of Total |  | Fair Value |  | % of Total
Private equity investments |  | $ | 10,076 |  |  | 15.2 | % |  | $ | 9,580 |  |  | 15.2 | %
Private credit lending investments |  | 26,610 |  |  | 40.1 | % |  | 33,584 |  |  | 53.0 | %
Investments in direct lending entities |  | 19,823 |  |  | 29.9 | % |  | 19,823 |  |  | 31.3 | %
Investment in limited partnerships |  | 9,842 |  |  | 14.8 | % |  | 326 |  |  | 0.5 | %
Total unfunded commitments on other investments |  | $ | 66,351 |  |  | 100.0 | % |  | $ | 63,313 |  |  | 100.0 | %
Equity Method Investments The equity method investments include hedge funds and investments in limited partnerships such as direct lending funds and real estate funds. The table below shows the carrying value of the Company's equity method investments as at June 30, 2021 and December 31, 2020:
|  | June 30, 2021 |  | December 31, 2020
|  | Carrying Value |  | % of Total |  | Carrying Value |  | % of Total
Hedge fund investments |  | $ | 33,058 |  |  | 55.0 | % |  | $ | 29,435 |  |  | 73.8 | %
Investment in limited partnerships |  | 27,055 |  |  | 45.0 | % |  | 10,451 |  |  | 26.2 | %
Total equity method investments |  | $ | 60,113 |  |  | 100.0 | % |  | $ | 39,886 |  |  | 100.0 | %
Certain of the Company's investments include an interest in variable interest entities which are not consolidated limited partnerships, as it has been determined that the Company is not the primary beneficiary. However, there is deemed to be limited influence over the operating and financial policies of the investee and accordingly these investments are reported under the equity method of accounting. In applying the equity method of accounting, the investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the investee's net income or loss. 4. Investments (continued) Generally, the maximum exposure to loss on these interests is limited to the amount of commitment made by the Company. However, certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties su ch that it may be required to make payments now or in the future and are more fully described (as applicable) in "Note 11 - Commitments, Contingencies and Guarantees" in these financial statements. The Company's remaining unfunded commitments on equity method investments as at June 30, 2021 was $45,691. c)Net Investment Income Net investment income was derived from the following sources for the three and six months ended June 30, 2021 and 2020:
|  | For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Fixed maturities |  | $ | 4,395 |  |  | $ | 9,635 |  |  | $ | 11,086 |  |  | $ | 22,286 |
Income on funds withheld |  | 2,715 |  |  | 4,009 |  |  | 5,220 |  |  | 7,862 |
Interest income from loan to related party |  | 866 |  |  | 860 |  |  | 1,726 |  |  | 2,225 |
Cash and cash equivalents and other investments |  | 107 |  |  | 159 |  |  | 236 |  |  | 655 |
|  | 8,083 |  |  | 14,663 |  |  | 18,268 |  |  | 33,028 |
Investment expenses |  | (805) |  |  | (354) |  |  | (1,149) |  |  | (755) |
Net investment income |  | $ | 7,278 |  |  | $ | 14,309 |  |  | $ | 17,119 |  |  | $ | 32,273 |
d) Realized Gains (Losses) on Investment Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following tables show the net realized gains (losses) on investment included in the Condensed Consolidated Statements of Income:
For the Three Months Ended June 30, 2021 |  | Gross gains |  | Gross losses |  | Net
Fixed maturities |  | $ | 1,204 |  |  | $ | (95) |  |  | $ | 1,109 |
Equity securities |  | — |  |  | (611) |  |  | (611) |
Other investments |  | 351 |  |  | — |  |  | 351 |
Net realized gains (losses) on investment |  | $ | 1,555 |  |  | $ | (706) |  |  | $ | 849 |
For the Three Months Ended June 30, 2020 |  | Gross gains |  | Gross losses |  | Net
Fixed maturities |  | $ | 9,059 |  |  | $ | — |  |  | $ | 9,059 |
Other investments |  | — |  |  | (184) |  |  | (184) |
Net realized gains (losses) on investment |  | $ | 9,059 |  |  | $ | (184) |  |  | $ | 8,875 |
For the Six Months Ended June 30, 2021 |  | Gross gains |  | Gross losses |  | Net
AFS fixed maturities |  | $ | 4,247 |  |  | $ | (244) |  |  | $ | 4,003 |
Equity securities |  | 4,957 |  |  | (611) |  |  | 4,346 |
Other investments |  | 626 |  |  | (25) |  |  | 601 |
Net realized gains (losses) on investment |  | $ | 9,830 |  |  | $ | (880) |  |  | $ | 8,950 |
For the Six Months Ended June 30, 2020 |  | Gross gains |  | Gross losses |  | Net
AFS fixed maturities |  | $ | 19,991 |  |  | $ | (1) |  |  | $ | 19,990 |
Other investments |  | 107 |  |  | (184) |  |  | (77) |
Net realized gains (losses) on investment |  | $ | 20,098 |  |  | $ | (185) |  |  | $ | 19,913 |
4. Investments (continued) Realized gains and losses from equity securities detailed in the table above include both sales of securities and unrealized gains and losses from fair value changes. The portion of unrealized gains recognized in net income for the three and six months ended June 30, 2021 and 2020 for investments still held at the end of June 30, 2021 and 2020, respectively, were as follows:
|  | For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Net (losses) gains recognized for equity securities during the period |  | $ | (611) |  |  | $ | — |  |  | $ | 4,346 |  |  | $ | — |
Less: Net gains recognized for equity securities divested during the period |  | — |  |  | — |  |  | (441) |  |  | — |
Unrealized (losses) gains recognized for equity securities still held at reporting date |  | $ | (611) |  |  | $ | — |  |  | $ | 3,905 |  |  | $ | — |
Proceeds from sales of fixed maturities were $52,538 and $206,354 for the three and six months ended June 30, 2021, respectively (2020 - $181,030 and $405,501, respectively). Net unrealized gains on investments was as follows at June 30, 2021 and December 31, 2020, respectively:
|  | June 30, 2021 |  | December 31, 2020
Fixed maturities |  | $ | 27,138 |  |  | $ | 49,488 |
Equity method investments |  | (3,419) |  |  | — |
Total net unrealized gains |  | 23,719 |  |  | 49,488 |
Deferred income tax |  | (87) |  |  | (131) |
Net unrealized gains, net of deferred income tax |  | $ | 23,632 |  |  | $ | 49,357 |
Change, net of deferred income tax |  | $ | (25,725) |  |  | $ | 27,361 |
e)Restricted Cash and Cash Equivalents and Investments The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of these restricted assets were as follows at June 30, 2021 and December 31, 2020:
|  | June 30, 2021 |  | December 31, 2020
Restricted cash – third party agreements |  | $ | 20,425 |  |  | $ | 20,547 |
Restricted cash – related party agreements |  | 11,223 |  |  | 41,239 |
Total restricted cash |  | 31,648 |  |  | 61,786 |
Restricted investments – in trust for third party agreements at fair value (amortized cost: 2021 – $62,589; 2020 – $63,253) |  | 62,560 |  |  | 63,281 |
Restricted investments – in trust for related party agreements at fair value (amortized cost: 2021 – $742,157; 2020 – $913,466) |  | 765,144 |  |  | 954,988 |
Restricted investments – liability for investments purchased for related party agreements |  | (36,215) |  |  | — |
Total restricted investments |  | 791,489 |  |  | 1,018,269 |
Total restricted cash and investments |  | $ | 823,137 |  |  | $ | 1,080,055 |

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- Definition The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=122147990&loc=d3e611322-123010 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 3 -Subparagraph (SX 210.12-12B) -URI http://asc.fasb.org/extlink&oid=122147990&loc=d3e611197-123010 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 5D -Subparagraph (SX 210.12-13D) -URI http://asc.fasb.org/extlink&oid=122147990&loc=SL120429264-123010 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-12) -URI http://asc.fasb.org/extlink&oid=122147990&loc=d3e611133-123010 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 5 -Subparagraph (SX 210.12-13) -URI http://asc.fasb.org/extlink&oid=122147990&loc=d3e611282-123010 + Details
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