Luxembourg
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98-0481623
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o (Do not check if a smaller reporting company)
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Smaller reporting company o
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Page
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1
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2
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3
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5
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6
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23
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40
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44
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45
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45
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45
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45
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|||
45
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45
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45
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|||
45
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As at March 31,
|
As at December 31,
|
||||
2011
|
2010
|
||||
Investments:
|
|||||
Fixed maturities, at fair value (Amortized cost: 2011 - $1,299,689; 2010 - $1,433,868)
|
$
|
1,358,230
|
$
|
1,473,862
|
|
Short term investments, at fair value (Amortized cost: 2011 - $18,048; 2010 - $14,254)
|
18,046
|
14,251
|
|||
Equity investments, at fair value (Cost: 2011 - $264; 2010 - $7,931)
|
268
|
283
|
|||
Other investments
|
121,453
|
119,764
|
|||
Total investments
|
1,497,997
|
1,608,160
|
|||
Cash and cash equivalents
|
397,090
|
345,705
|
|||
Restricted cash
|
55,871
|
43,413
|
|||
Premium balances receivable
|
438,426
|
318,455
|
|||
Unearned premiums ceded
|
147,827
|
68,827
|
|||
Reinsurance recoverable
|
90,017
|
28,183
|
|||
Accrued interest receivable
|
14,139
|
15,599
|
|||
Receivable for investments sold
|
75,574
|
1,795
|
|||
Deferred acquisition costs
|
73,905
|
65,917
|
|||
Funds withheld
|
25,256
|
25,934
|
|||
Goodwill
|
16,474
|
16,381
|
|||
Intangible assets
|
32,256
|
31,549
|
|||
Asset held for sale
|
2,300
|
2,300
|
|||
Other assets
|
158,530
|
146,984
|
|||
Total assets
|
$
|
3,025,662
|
$
|
2,719,202
|
|
LIABILITIES
|
|||||
Loss and loss adjustment expense reserves
|
$
|
1,047,674
|
$
|
721,314
|
|
Unearned premiums
|
492,748
|
378,804
|
|||
Insurance and reinsurance balances payable
|
140,845
|
82,134
|
|||
Payable for investments purchased
|
18,919
|
3,106
|
|||
Long term debt
|
252,174
|
251,122
|
|||
Other liabilities
|
88,311
|
86,127
|
|||
Total liabilities
|
2,040,671
|
1,522,607
|
|||
EQUITY
|
|||||
Common voting shares, 300,000,000 authorized, $0.01 par value, issued (2011 - 84,502,542; 2010 - 84,474,758) and outstanding (2011 - 70,054,875; 2010 - 68,585,588)
|
845
|
845
|
|||
Common shares held in treasury, at cost (2011 - 14,447,667; 2010 - 15,889,170)
|
(162,146)
|
(178,718)
|
|||
Additional paid-in capital
|
880,066
|
904,235
|
|||
Accumulated other comprehensive loss
|
(3,301)
|
(6,178)
|
|||
Retained earnings
|
253,329
|
414,549
|
|||
Total Flagstone shareholders' equity
|
968,793
|
1,134,733
|
|||
Noncontrolling interest in subsidiaries
|
16,198
|
61,862
|
|||
Total equity
|
984,991
|
1,196,595
|
|||
Total liabilities and equity
|
$
|
3,025,662
|
$
|
2,719,202
|
|
For the three months ended March 31,
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||||
|
2011
|
2010
|
|||
|
|||||
Gross premiums written
|
$
|
422,151
|
$
|
400,202
|
|
Premiums ceded
|
(139,991)
|
(76,421)
|
|||
Net premiums written
|
282,160
|
323,781
|
|||
Change in net unearned premiums
|
(31,671)
|
(106,966)
|
|||
Net premiums earned
|
250,489
|
216,815
|
|||
Net investment income
|
9,432
|
7,285
|
|||
Net realized and unrealized gains - investments
|
10,904
|
9,811
|
|||
Net realized and unrealized (losses) gains - other
|
(690)
|
5,658
|
|||
Other income
|
4,611
|
11,041
|
|||
Total revenues
|
274,746
|
250,610
|
|||
|
|||||
EXPENSES
|
|||||
Loss and loss adjustment expenses
|
349,749
|
127,379
|
|||
Acquisition costs
|
51,756
|
42,837
|
|||
General and administrative expenses
|
25,093
|
41,175
|
|||
Interest expense
|
2,946
|
2,514
|
|||
Net foreign exchange losses (gains)
|
9,945
|
(3,956)
|
|||
Total expenses
|
439,489
|
209,949
|
|||
(Loss) income before income taxes and interest in earnings of equity investments
|
(164,743)
|
40,661
|
|||
Recovery (provision) for income tax
|
4,632
|
(2,852)
|
|||
Interest in earnings of equity investments
|
(285)
|
(259)
|
|||
Net (loss) income
|
(160,396)
|
37,550
|
|||
Less: (Income) attributable to noncontrolling interest
|
(824)
|
(6,046)
|
|||
NET (LOSS) INCOME ATTRIBUTABLE TO FLAGSTONE
|
$
|
(161,220)
|
$
|
31,504
|
|
|
|||||
Net (loss) income
|
$
|
(160,396)
|
$
|
37,550
|
|
Change in currency translation adjustment
|
2,877
|
(3,697)
|
|||
Change in defined benefit pension plan obligation
|
-
|
500
|
|||
Comprehensive (loss) income
|
(157,519)
|
34,353
|
|||
Less: Comprehensive (income) attributable to noncontrolling interest
|
(824)
|
(6,046)
|
|||
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO FLAGSTONE
|
$
|
(158,343)
|
$
|
28,307
|
|
|
|||||
Weighted average common shares outstanding—Basic
|
69,351,852
|
82,558,971
|
|||
Weighted average common shares outstanding—Diluted
|
69,351,852
|
82,741,580
|
|||
Net (loss) income attributable to Flagstone per common share—Basic
|
$
|
(2.32)
|
$
|
0.38
|
|
Net (loss) income attributable to Flagstone per common share—Diluted
|
$
|
(2.32)
|
$
|
0.38
|
|
Distributions declared per common share (1)
|
$
|
0.04
|
$
|
0.04
|
|
|
|||||
(1) Distributions declared per common share are in the form of a non-dividend return of capital. Prior to the Company's redomestication to Luxembourg on May 17, 2010, such distributions were in the form of dividends.
|
FLAGSTONE REINSURANCE HOLDINGS, S.A.
|
|||||||||||||||||||||||
(Expressed in thousands of U.S. dollars)
|
|||||||||||||||||||||||
|
|||||||||||||||||||||||
|
Flagstone Shareholders' Equity
|
||||||||||||||||||||||
For the three months ended March 31, 2011
|
Total equity
|
Comprehensive income
|
Retained earnings
|
Accumulated other comprehensive loss
|
Common voting shares
|
Treasury shares
|
Additional paid-in capital
|
Noncontrolling interest in subsidiaries
|
|||||||||||||||
|
|||||||||||||||||||||||
Beginning balance
|
$
|
1,196,595
|
$
|
-
|
$
|
414,549
|
$
|
(6,178)
|
$
|
845
|
$
|
(178,718)
|
$
|
904,235
|
$
|
61,862
|
|||||||
|
|||||||||||||||||||||||
Repurchase of preferred shares
|
(46,488)
|
(46,488)
|
|||||||||||||||||||||
Comprehensive income:
|
|||||||||||||||||||||||
Net income
|
(160,396)
|
(160,396)
|
(161,220)
|
824
|
|||||||||||||||||||
Other comprehensive income:
|
|||||||||||||||||||||||
Change in currency translation adjustment
|
2,877
|
2,877
|
2,877
|
||||||||||||||||||||
Comprehensive income
|
(157,519)
|
$
|
(157,519)
|
||||||||||||||||||||
Stock based compensation
|
(3,005)
|
(3,005)
|
|||||||||||||||||||||
Stock compensation exercised from treasury
|
-
|
16,572
|
(16,572)
|
||||||||||||||||||||
Distributions declared per common share (1)
|
(2,801)
|
(2,801)
|
|||||||||||||||||||||
Other
|
(1,791)
|
(1,791)
|
|||||||||||||||||||||
Ending balance
|
$
|
984,991
|
$
|
253,329
|
$
|
(3,301)
|
$
|
845
|
$
|
(162,146)
|
$
|
880,066
|
$
|
16,198
|
|||||||||
|
|||||||||||||||||||||||
(1) Distributions declared per common share are in the form of a non-dividend return of capital. Prior to the Company's redomestication to Luxembourg on May 17, 2010, such distributions were in the form of dividends.
|
FLAGSTONE REINSURANCE HOLDINGS, S.A.
|
|||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|||||||||||||||||||||||
(Expressed in thousands of U.S. dollars)
|
|||||||||||||||||||||||
|
|||||||||||||||||||||||
|
Flagstone Shareholders' Equity
|
||||||||||||||||||||||
For the three months ended March 31, 2010
|
Total equity
|
Comprehensive income
|
Retained earnings
|
Accumulated other comprehensive loss
|
Common voting shares
|
Treasury shares
|
Additional paid-in capital
|
Noncontrolling interest in subsidiaries
|
|||||||||||||||
|
|||||||||||||||||||||||
Beginning balance
|
$
|
1,365,814
|
$
|
-
|
$
|
324,347
|
$
|
(6,976)
|
$
|
850
|
$
|
(19,750)
|
$
|
912,547
|
$
|
154,796
|
|||||||
|
|||||||||||||||||||||||
Comprehensive income:
|
|||||||||||||||||||||||
Net income
|
37,550
|
37,550
|
31,504
|
6,046
|
|||||||||||||||||||
Other comprehensive income:
|
|||||||||||||||||||||||
Change in currency translation adjustment
|
(3,697)
|
(3,697)
|
(3,697)
|
||||||||||||||||||||
Defined benefit pension plan obligation
|
500
|
500
|
500
|
||||||||||||||||||||
Comprehensive income
|
34,353
|
$
|
34,353
|
||||||||||||||||||||
Stock based compensation
|
5,463
|
5,463
|
|||||||||||||||||||||
Subsidiary stock based compensation
|
4
|
4
|
|||||||||||||||||||||
Shares repurchased and held in treasury
|
(33,602)
|
(33,602)
|
|||||||||||||||||||||
Distributions declared per common share(1)
|
(3,585)
|
(3,585)
|
|||||||||||||||||||||
Ending balance
|
$
|
1,368,447
|
$
|
352,266
|
$
|
(10,173)
|
$
|
850
|
$
|
(53,352)
|
$
|
918,010
|
$
|
160,846
|
|||||||||
|
|||||||||||||||||||||||
(1) Distributions declared per common share are in the form of a non-dividend return of capital. Prior to the Company's redomestication to Luxembourg on May 17, 2010, such distributions were in the form of dividends.
|
FLAGSTONE REINSURANCE HOLDINGS, S.A.
|
|||||
(Expressed in thousands of U.S. dollars)
|
|||||
|
|||||
|
For the three months ended March 31,
|
||||
|
2011
|
2010
|
|||
|
|||||
Cash flows provided by (used in) operating activities:
|
|||||
Net (loss) income
|
$
|
(160,396)
|
$
|
37,550
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|||||
Net realized and unrealized gains
|
(10,214)
|
(15,469)
|
|||
Net unrealized foreign exchange losses
|
1,683
|
37
|
|||
Depreciation and amortization expense
|
1,637
|
2,164
|
|||
Share based compensation (recovery) expense
|
(3,005)
|
5,211
|
|||
Interest in earnings of equity investments
|
285
|
259
|
|||
Accretion/amortization on fixed maturity investments
|
1,110
|
695
|
|||
Changes in assets and liabilities, excluding net assets acquired:
|
|||||
Premium balances receivable
|
(120,238)
|
(109,074)
|
|||
Unearned premiums ceded
|
(78,795)
|
(30,567)
|
|||
Reinsurance recoverable
|
(61,430)
|
(3,563)
|
|||
Deferred acquisition costs
|
(8,061)
|
(11,525)
|
|||
Funds withheld
|
684
|
(1,693)
|
|||
Loss and loss adjustment expense reserves
|
324,560
|
63,134
|
|||
Unearned premiums
|
114,200
|
136,165
|
|||
Insurance and reinsurance balances payable
|
58,692
|
9,246
|
|||
Other changes in assets and liabilities, net
|
(18,744)
|
(15,069)
|
|||
Net cash provided by operating activities
|
41,968
|
67,501
|
|||
|
|||||
Cash flows (used in) provided by investing activities:
|
|||||
Purchases of fixed maturity investments
|
(308,812)
|
(753,021)
|
|||
Sales and maturities of fixed maturity investments
|
394,147
|
703,700
|
|||
Purchases of other investments
|
(3,486)
|
(202)
|
|||
Sales and maturities of other investments
|
(9,068)
|
22,596
|
|||
Purchases of fixed assets
|
(2,246)
|
(1,628)
|
|||
Change in restricted cash
|
(12,458)
|
61,623
|
|||
Net cash provided by investing activities
|
58,077
|
33,068
|
|||
|
|||||
Cash flows (used in) provided by financing activities:
|
|||||
Shares repurchased and held in treasury
|
-
|
(33,602)
|
|||
Repurchase of noncontrolling interest
|
(46,488)
|
-
|
|||
Distributions paid per common share (1)
|
(2,801)
|
(3,319)
|
|||
Repayment of long term debt
|
-
|
2
|
|||
Other
|
(361)
|
207
|
|||
Net cash used in financing activities
|
(49,650)
|
(36,712)
|
|||
|
|||||
Effect of foreign exchange rate on cash
|
990
|
(3,601)
|
|||
|
|||||
Increase in cash and cash equivalents
|
51,385
|
60,256
|
|||
Cash and cash equivalents - beginning of year
|
345,705
|
352,185
|
|||
Cash and cash equivalents - end of period
|
$
|
397,090
|
$
|
412,441
|
|
|
|||||
Supplemental cash flow information:
|
|||||
Receivable for investments sold
|
$
|
75,574
|
$
|
41,104
|
|
Payable for investments purchased
|
$
|
18,919
|
$
|
68,520
|
|
Interest paid
|
$
|
2,318
|
$
|
2,282
|
|
|
|||||
(1) Distributions paid per common share are in the form of a non-dividend return of capital. Prior to the Company's redomestication to Luxembourg on May 17, 2010, such distributions were in the form of dividends.
|
As at March 31, 2011
|
|||||||||||
Amortized cost or cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair value
|
||||||||
Fixed maturity investments
|
|||||||||||
U.S. government and agency securities
|
$
|
211,013
|
$
|
3,859
|
$
|
(124)
|
$
|
214,748
|
|||
U.S. states and political subdivisions
|
25
|
1
|
-
|
26
|
|||||||
Other foreign governments
|
303,453
|
19,686
|
(645)
|
322,494
|
|||||||
Corporates
|
504,214
|
24,506
|
(824)
|
527,896
|
|||||||
Mortgage-backed securities
|
187,333
|
9,645
|
(9)
|
196,969
|
|||||||
Asset-backed securities
|
93,651
|
2,490
|
(44)
|
96,097
|
|||||||
1,299,689
|
60,187
|
(1,646)
|
1,358,230
|
||||||||
Short term investments
|
|||||||||||
Other foreign governments
|
7,145
|
-
|
-
|
7,145
|
|||||||
Corporates
|
10,903
|
1
|
(3)
|
10,901
|
|||||||
18,048
|
1
|
(3)
|
18,046
|
||||||||
Equity investments
|
264
|
4
|
-
|
268
|
|||||||
264
|
4
|
-
|
268
|
||||||||
Other investments
|
|||||||||||
Investment funds
|
46,048
|
6,303
|
(6,020)
|
46,331
|
|||||||
Catastrophe bonds
|
71,494
|
928
|
(95)
|
72,327
|
|||||||
117,542
|
7,231
|
(6,115)
|
118,658
|
||||||||
Totals
|
$
|
1,435,543
|
$
|
67,423
|
$
|
(7,764)
|
$
|
1,495,202
|
As at December 31, 2010
|
|||||||||||
Amortized cost or cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair value
|
||||||||
Fixed maturity investments
|
|||||||||||
U.S. government and agency securities
|
$
|
266,329
|
$
|
5,882
|
$
|
(375)
|
$
|
271,836
|
|||
U.S. states and political subdivisions
|
90
|
2
|
-
|
92
|
|||||||
Other foreign governments
|
267,787
|
18,618
|
(480)
|
285,925
|
|||||||
Corporates
|
586,523
|
20,260
|
(4,239)
|
602,544
|
|||||||
Mortgage-backed securities
|
222,171
|
2,910
|
(2,224)
|
222,857
|
|||||||
Asset-backed securities
|
90,968
|
261
|
(621)
|
90,608
|
|||||||
1,433,868
|
47,933
|
(7,939)
|
1,473,862
|
||||||||
Short term investments
|
|||||||||||
U.S. government and agency securities
|
2,998
|
-
|
-
|
2,998
|
|||||||
Corporates
|
11,256
|
1
|
(4)
|
11,253
|
|||||||
14,254
|
1
|
(4)
|
14,251
|
||||||||
Equity investments
|
7,931
|
4
|
(7,652)
|
283
|
|||||||
7,931
|
4
|
(7,652)
|
283
|
||||||||
Other investments
|
|||||||||||
Investment funds
|
42,728
|
3,798
|
(6,533)
|
39,993
|
|||||||
Catastrophe bonds
|
75,484
|
1,226
|
(19)
|
76,691
|
|||||||
118,212
|
5,024
|
(6,552)
|
116,684
|
||||||||
Totals
|
$
|
1,574,265
|
$
|
52,962
|
$
|
(22,147)
|
$
|
1,605,080
|
The following table presents the contractual maturity dates of fixed maturity and short term investments and their respective amortized cost and fair value as at March 31, 2011 and December 31, 2010.
|
|||||||||||
As at March 31, 2011
|
As at December 31, 2010
|
||||||||||
Amortized cost
|
Fair value
|
Amortized cost
|
Fair value
|
||||||||
Due within one year
|
$
|
47,987
|
$
|
50,149
|
$
|
38,558
|
$
|
39,909
|
|||
Due after 1 through 5 years
|
666,912
|
697,135
|
808,954
|
836,825
|
|||||||
Due after 5 through 10 years
|
172,640
|
180,556
|
196,683
|
202,136
|
|||||||
Due after 10 years
|
149,214
|
155,370
|
90,788
|
95,778
|
|||||||
Mortgage and asset-backed securities
|
280,984
|
293,066
|
313,139
|
313,465
|
|||||||
Total
|
$
|
1,317,737
|
$
|
1,376,276
|
$
|
1,448,122
|
$
|
1,488,113
|
The following table presents a breakdown of the credit quality of the Company's fixed maturity and short term investments as at March 31, 2011 and December 31, 2010:
|
|||||||||||
As at March 31, 2011
|
As at December 31, 2010
|
||||||||||
Fair value
|
Percentage of total
|
Fair value
|
Percentage of total
|
||||||||
Rating Category
|
|||||||||||
AAA
|
$
|
832,871
|
60.5
|
%
|
$
|
903,230
|
60.7
|
%
|
|||
AA
|
197,275
|
14.3
|
%
|
193,302
|
13.0
|
%
|
|||||
A
|
223,549
|
16.3
|
%
|
262,086
|
17.6
|
%
|
|||||
BBB
|
122,581
|
8.9
|
%
|
129,495
|
8.7
|
%
|
|||||
Total
|
$
|
1,376,276
|
100.0
|
%
|
$
|
1,488,113
|
100.0
|
%
|
As at March 31, 2011 and December 31, 2010, the Company’s investments are allocated among fair value levels as follows:
|
|||||||||||
Fair Value Measurement at March 31, 2011 using:
|
|||||||||||
Quoted prices in
|
Significant other
|
Significant other
|
|||||||||
Fair value
|
active markets
|
observable inputs
|
unobservable inputs
|
||||||||
measurements
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||
Fixed maturity investments
|
|||||||||||
U.S. government and agency securities
|
$
|
214,748
|
$
|
131,263
|
$
|
83,485
|
$
|
-
|
|||
U.S. states and political subdivisions
|
26
|
-
|
26
|
-
|
|||||||
Other foreign governments
|
322,494
|
-
|
322,494
|
-
|
|||||||
Corporates
|
527,896
|
-
|
527,896
|
-
|
|||||||
Commercial mortgage-backed securities
|
243
|
-
|
243
|
-
|
|||||||
Residential mortgage-backed securities
|
196,726
|
-
|
196,726
|
-
|
|||||||
Asset-backed securities
|
96,097
|
-
|
96,097
|
-
|
|||||||
1,358,230
|
131,263
|
1,226,967
|
-
|
||||||||
Short term investments
|
|||||||||||
Other foreign governments
|
7,145
|
-
|
7,145
|
-
|
|||||||
Corporates
|
10,901
|
-
|
10,901
|
-
|
|||||||
18,046
|
-
|
18,046
|
-
|
||||||||
Equity investments
|
|||||||||||
Financial services
|
268
|
268
|
-
|
-
|
|||||||
268
|
268
|
-
|
-
|
||||||||
Other investments
|
|||||||||||
Investment funds
|
46,331
|
-
|
-
|
46,331
|
|||||||
Catastrophe bonds
|
72,327
|
-
|
72,327
|
-
|
|||||||
118,658
|
-
|
72,327
|
46,331
|
||||||||
Totals
|
$
|
1,495,202
|
$
|
131,531
|
$
|
1,317,340
|
$
|
46,331
|
Fair Value Measurement at December 31, 2010 using:
|
|||||||||||
Quoted prices in
|
Significant other
|
Significant other
|
|||||||||
Fair value
|
active markets
|
observable inputs
|
unobservable inputs
|
||||||||
measurements
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||
Fixed maturity investments
|
|||||||||||
U.S. government and agency securities
|
$
|
271,836
|
$
|
176,831
|
$
|
95,005
|
$
|
-
|
|||
U.S. states and political subdivisions
|
92
|
-
|
92
|
-
|
|||||||
Other foreign government
|
285,925
|
-
|
285,925
|
-
|
|||||||
Corporates
|
602,544
|
-
|
602,544
|
-
|
|||||||
Commercial mortgage-backed securities
|
1,064
|
-
|
1,064
|
-
|
|||||||
Residential mortgage-backed securities
|
221,793
|
-
|
221,793
|
-
|
|||||||
Asset-backed securities
|
90,608
|
-
|
90,608
|
-
|
|||||||
1,473,862
|
176,831
|
1,297,031
|
-
|
||||||||
Short term investments
|
|||||||||||
U.S. government and agency securities
|
2,998
|
2,998
|
-
|
-
|
|||||||
Corporates
|
11,253
|
-
|
11,253
|
-
|
|||||||
14,251
|
2,998
|
11,253
|
-
|
||||||||
Equity investments
|
|||||||||||
Financial services
|
283
|
283
|
-
|
-
|
|||||||
283
|
283
|
-
|
-
|
||||||||
Other investments
|
|||||||||||
Investment funds
|
39,993
|
-
|
-
|
39,993
|
|||||||
Catastrophe bonds
|
76,691
|
-
|
76,691
|
-
|
|||||||
116,684
|
-
|
76,691
|
39,993
|
||||||||
Totals
|
$
|
1,605,080
|
$
|
180,112
|
$
|
1,384,975
|
$
|
39,993
|
The reconciliation of the fair value for the Level 3 investments for the March 31, 2011, including purchases and sales and change in realized and unrealized gains (losses) in earnings, is set out below:
|
|||
For the three months ended
|
|||
March 31, 2011
|
|||
Fair value, December 31, 2010
|
$
|
39,993
|
|
Total unrealized gains included in earnings
|
3,018
|
||
Purchases
|
3,476
|
||
Sales
|
(156)
|
||
Fair value, March 31, 2011
|
$
|
46,331
|
As at
|
||||||
March 31, 2011
|
December 31, 2010
|
|||||
Private equity funds
|
$
|
8,575
|
$
|
8,143
|
||
Mortgage-backed investment fund
|
37,756
|
31,850
|
||||
Total
|
$
|
46,331
|
$
|
39,993
|
As at
|
||||||
March 31, 2011
|
December 31, 2010
|
|||||
Cash and cash equivalents
|
$
|
55,871
|
$
|
43,413
|
||
Fixed maturity investments
|
516,537
|
539,738
|
||||
Total
|
$
|
572,408
|
$
|
583,151
|
The details of the derivatives held by the Company as at March 31, 2011 and December 31, 2010 are as follows:
|
As at March 31, 2011
|
Asset derivatives
|
Liability derivatives
|
|||||||||||
record in
|
recorded in
|
|||||||||||
other assets
|
other liabilities
|
Total derivatives
|
||||||||||
Fair value
|
Fair value
|
Net notional exposure
|
Fair value
|
|||||||||
Derivatives designated as hedging instruments
|
||||||||||||
Foreign currency forward contracts (1)
|
$
|
-
|
$
|
522
|
$
|
45,792
|
$
|
(522)
|
||||
-
|
522
|
(522)
|
||||||||||
Derivatives not designated as hedging instruments
|
||||||||||||
Purpose - risk management
|
||||||||||||
Currency swaps
|
$
|
35
|
$
|
-
|
$
|
18,430
|
$
|
35
|
||||
Foreign currency forward contracts
|
12,161
|
33,228
|
955,490
|
(21,067)
|
||||||||
Futures contracts
|
4,145
|
2,463
|
1,511,742
|
1,682
|
||||||||
16,341
|
35,691
|
(19,350)
|
||||||||||
Purpose - exposure
|
||||||||||||
Futures contracts
|
$
|
3,378
|
$
|
21
|
$
|
139,112
|
$
|
3,357
|
||||
Mortgage-backed securities TBA
|
5
|
-
|
1,464
|
5
|
||||||||
3,383
|
21
|
3,362
|
||||||||||
19,724
|
35,712
|
(15,988)
|
||||||||||
Total derivatives
|
$
|
19,724
|
$
|
36,234
|
$
|
(16,510)
|
As at December 31, 2010
|
||||||||||||
Asset derivatives
recorded in
other assets
|
Liability derivatives
recorded in
other liabilities
|
Total derivatives
|
||||||||||
Fair value
|
Fair value
|
Net notional exposure
|
Fair value
|
|||||||||
Derivatives designated as hedging instruments
|
||||||||||||
Foreign currency forward contracts(1)
|
$
|
-
|
$
|
534
|
$
|
43,201
|
$
|
(534)
|
||||
-
|
534
|
(534)
|
||||||||||
Derivatives not designated as hedging instruments
|
||||||||||||
Purpose - risk management
|
||||||||||||
Currency swaps
|
$
|
-
|
$
|
1,020
|
$
|
17,375
|
$
|
(1,020)
|
||||
Foreign currency forward contracts
|
14,701
|
19,396
|
820,114
|
(4,695)
|
||||||||
Futures contracts
|
1,822
|
4,125
|
1,100,498
|
(2,303)
|
||||||||
16,523
|
24,541
|
(8,018)
|
||||||||||
Purpose - exposure
|
||||||||||||
Futures contracts
|
$
|
4,866
|
$
|
223
|
$
|
170,105
|
$
|
4,643
|
||||
Mortgage-backed securities TBA
|
4
|
17
|
4,275
|
(13)
|
||||||||
Other reinsurance derivatives
|
-
|
241
|
-
|
(241)
|
||||||||
4,870
|
481
|
4,389
|
||||||||||
21,393
|
25,022
|
(3,629)
|
||||||||||
Total derivatives
|
$
|
21,393
|
$
|
25,556
|
$
|
(4,163)
|
Designated
|
||||||||||||||
|
Amount of Gain or (Loss) on Derivatives Recognized in
|
|||||||||||||
|
Comprehensive income (loss)
|
Net income (loss)
|
||||||||||||
|
(Effective portion)
|
(Ineffective portion)
|
||||||||||||
Derivatives designated
as hedging instruments
|
For the three months ended March 31,
|
For the three months ended March 31,
|
||||||||||||
|
2011
|
2010
|
Location
|
2011
|
2010
|
|||||||||
Foreign currency forward contracts(1)
|
$
|
(1,209)
|
$
|
594
|
Net realized and unrealized (losses) - other
|
$
|
(225)
|
$
|
(25)
|
|||||
|
$
|
(1,209)
|
$
|
594
|
$
|
(225)
|
$
|
(25)
|
||||||
|
||||||||||||||
(1)Recognized as a foreign currency hedge under the Derivatives and Hedging Topic of the ASC.
|
Non-Designated
|
||||||||
Gain or (Loss) on Derivatives Recognized in Net Income
|
||||||||
Derivatives not designated
|
For the three months ended March 31,
|
|||||||
as hedging instruments
|
Location
|
2011
|
2010
|
|||||
Futures contracts
|
Net realized and unrealized gains - investments
|
$
|
7,742
|
$
|
396
|
|||
Total return swaps
|
Net realized and unrealized gains - investments
|
-
|
1,244
|
|||||
Currency swaps
|
Net realized and unrealized gains (losses) - other
|
1,080
|
(1,087)
|
|||||
Foreign currency forward contracts
|
Net realized and unrealized (losses) gains - investments
|
(33,976)
|
17,462
|
|||||
Foreign currency forward contracts
|
Net realized and unrealized (losses) gains - other
|
(1,786)
|
6,215
|
|||||
Mortgage-backed securities TBA
|
Net realized and unrealized gains - investments
|
5
|
654
|
|||||
Other reinsurance derivatives
|
Net realized and unrealized gains - other
|
241
|
555
|
|||||
$
|
(26,694)
|
$
|
25,439
|
Fair Value Measurement at March 31, 2011, using:
|
|||||||||||
Quoted prices
|
Significant other
|
Significant other
|
|||||||||
Fair value
|
in active markets
|
observable inputs
|
unobservable inputs
|
||||||||
measurements
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||
Description
|
|||||||||||
Futures contracts
|
$
|
5,039
|
$
|
5,039
|
$
|
-
|
$
|
-
|
|||
Swaps
|
35
|
-
|
35
|
-
|
|||||||
Foreign currency forward contracts
|
(21,589)
|
-
|
(21,589)
|
-
|
|||||||
Mortgage-backed securities TBA
|
5
|
-
|
5
|
-
|
|||||||
Total derivatives
|
$
|
(16,510)
|
$
|
5,039
|
$
|
(21,549)
|
$
|
-
|
Fair Value Measurement at December 31, 2010, using:
|
|||||||||||
Quoted prices
|
Significant other
|
Significant other
|
|||||||||
Fair value
|
in active markets
|
observable inputs
|
unobservable inputs
|
||||||||
measurements
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||
Description
|
|||||||||||
Futures contracts
|
$
|
2,340
|
$
|
2,340
|
$
|
-
|
$
|
-
|
|||
Swaps
|
(1,020)
|
-
|
(1,020)
|
-
|
|||||||
Foreign currency forward contracts
|
(5,229)
|
-
|
(5,229)
|
-
|
|||||||
Mortgage-backed securities TBA
|
(13)
|
-
|
(13)
|
-
|
|||||||
Other reinsurance derivatives
|
(241)
|
-
|
-
|
(241)
|
|||||||
Total derivatives
|
$
|
(4,163)
|
$
|
2,340
|
$
|
(6,262)
|
$
|
(241)
|
The reconciliation of the fair value for the Level 3 derivative instruments, including net purchases and sales, realized gains and changes in unrealized gains (losses), is as follows:
|
|||
For the three months ended
|
|||
March 31, 2011
|
|||
Other reinsurance derivatives
|
|||
Fair value, December 31, 2010
|
$
|
(241)
|
|
Total unrealized gains included in earnings
|
241
|
||
Fair value, March 31, 2011
|
$
|
-
|
|
Transfers between levels, if necessary, are done as of the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the three months ended March 31, 2011.
|
Goodwill relates to the following reportable segments:
|
Reinsurance
|
Lloyd's
|
Island Heritage
|
Total
|
|||||||||
Balance as at December 31, 2010
|
$
|
3,108
|
$
|
3,223
|
$
|
10,050
|
$
|
16,381
|
|||||
Impact of foreign exchange
|
-
|
93
|
-
|
93
|
|||||||||
Balance as at March 31, 2011
|
$
|
3,108
|
$
|
3,316
|
$
|
10,050
|
$
|
16,474
|
Carrying value
at beginning
of period
|
Accumulated amortization (1)
|
Impact of foreign exchange
|
Carrying value
at end
of period
|
|||||||||||
Finite life intangibles
|
||||||||||||||
Software
|
$
|
3,368
|
$
|
(133)
|
$
|
122
|
$
|
3,357
|
||||||
Distribution network
|
2,928
|
(94)
|
104
|
2,938
|
||||||||||
$
|
6,296
|
$
|
(227)
|
$
|
226
|
$
|
6,295
|
|||||||
Indefinite life intangibles
|
||||||||||||||
Lloyd's syndicate capacity
|
$
|
24,478
|
$
|
-
|
$
|
708
|
$
|
25,186
|
||||||
Licenses
|
775
|
-
|
-
|
775
|
||||||||||
$
|
25,253
|
$
|
-
|
$
|
708
|
$
|
25,961
|
|||||||
Total intangible assets
|
$
|
31,549
|
$
|
(227)
|
$
|
934
|
$
|
32,256
|
||||||
Aggregate amortization expenses (1)
|
||||||||||||||
For the three months ended March 31, 2011
|
$
|
185
|
Estimated amortization expense
|
For the years ending December 31,
|
Amount
|
||
2011
|
$
|
723
|
||
2012
|
695
|
|||
2013
|
670
|
|||
2014
|
647
|
|||
2015
|
627
|
|||
(1)Accumulated amortization is converted at the end of period foreign exchange rate and amortization expense is converted at an average foreign exchange rate for the period.
|
A summary of the activity under the PSU Plan as at March 31, 2011, and changes during the three months ended March 31, 2011, is as follows:
|
||||||
For the three months ended March 31, 2011
|
||||||
Number
|
Weighted average
|
Weighted average
|
||||
expected
|
grant date
|
remaining
|
||||
to vest
|
fair value
|
contractual term
|
||||
Outstanding at beginning of period
|
3,998,558
|
$
|
10.25
|
0.9
|
||
Granted
|
777,500
|
12.59
|
||||
Forfeited
|
(27,349)
|
11.07
|
||||
Performance factor changes
|
(1,411,109)
|
10.94
|
||||
Exercised
|
(1,372,509)
|
10.12
|
||||
Outstanding at end of period
|
1,965,091
|
10.77
|
1.4
|
A summary of the activity under the RSU Plan as at March 31, 2011, and changes during the three months ended March 31, 2011, is as follows:
|
||||||
For the three months ended March 31, 2011
|
||||||
Number
|
Weighted average
|
Weighted average
|
||||
expected to
|
grant date
|
remaining
|
||||
vest
|
fair value
|
contractual term
|
||||
Outstanding at beginning of period
|
577,213
|
$
|
11.08
|
0.3
|
||
Granted
|
207,614
|
12.60
|
||||
Forfeited
|
(10,500)
|
11.44
|
||||
Exercised
|
(159,400)
|
10.21
|
||||
Outstanding at end of period
|
614,927
|
11.81
|
0.6
|
For the three months ended March 31,
|
||||||
2011
|
2010
|
|||||
Basic earnings per common share
|
||||||
Net (loss) income attributable to Flagstone
|
$
|
(161,220)
|
$
|
31,504
|
||
Weighted average common shares outstanding
|
69,025,875
|
82,288,918
|
||||
Weighted average vested restricted share units
|
325,977
|
270,053
|
||||
Weighted average common shares outstanding—Basic
|
69,351,852
|
82,558,971
|
||||
Basic (loss) earnings per common share
|
$
|
(2.32)
|
$
|
0.38
|
||
Diluted earnings per common share
|
||||||
Net (loss) income attributable to Flagstone
|
$
|
(161,220)
|
$
|
31,504
|
||
Weighted average common shares outstanding
|
69,025,875
|
82,288,918
|
||||
Weighted average vested restricted share units outstanding
|
325,977
|
270,053
|
||||
69,351,852
|
82,558,971
|
|||||
Share equivalents:
|
||||||
Weighted average unvested restricted share units
|
-
|
182,609
|
||||
Weighted average common shares outstanding—Diluted
|
69,351,852
|
82,741,580
|
||||
Diluted (loss) earnings per common share
|
$
|
(2.32)
|
$
|
0.38
|
|
For the periods ended
|
||
|
March 31, 2011
|
December 31, 2010
|
|
Common voting shares:
|
|||
Balance at beginning of period
|
68,585,588
|
82,985,219
|
|
Conversion of performance share units (1)
|
1,339,379
|
-
|
|
Conversion of restricted share units (1)
|
129,908
|
10,499
|
|
Shares repurchased and cancelled
|
-
|
(520,960)
|
|
Shares repurchased and held in treasury
|
-
|
(13,889,170)
|
|
Balance at end of period
|
70,054,875
|
68,585,588
|
|
|
|||
(1)Conversion of performance share units and restricted share units are net of shares withheld for the payment of tax on the employee's behalf.
|
For the three months ended March 31, 2011
|
||||||||||||||||||
Reinsurance
|
Lloyd's
|
Island Heritage
|
Inter-segment Eliminations (1)
|
Total
|
||||||||||||||
Gross premiums written
|
$
|
366,702
|
$
|
48,530
|
$
|
20,946
|
$
|
(14,027)
|
$
|
422,151
|
||||||||
Premiums ceded
|
(118,761)
|
(20,526)
|
(14,731)
|
14,027
|
(139,991)
|
|||||||||||||
Net premiums written
|
247,941
|
28,004
|
6,215
|
-
|
282,160
|
|||||||||||||
Net premiums earned
|
$
|
212,292
|
$
|
37,827
|
$
|
370
|
$
|
-
|
$
|
250,489
|
||||||||
Other related income
|
469
|
948
|
7,303
|
(4,504)
|
4,216
|
|||||||||||||
Loss and loss adjustment expenses
|
(310,899)
|
(38,414)
|
(436)
|
-
|
(349,749)
|
|||||||||||||
Acquisition costs
|
(42,347)
|
(9,386)
|
(4,527)
|
4,504
|
(51,756)
|
|||||||||||||
General and administrative expenses
|
(17,170)
|
(5,715)
|
(2,208)
|
-
|
(25,093)
|
|||||||||||||
Underwriting (loss) income
|
$
|
(157,655)
|
$
|
(14,740)
|
$
|
502
|
$
|
-
|
$
|
(171,893)
|
||||||||
Loss ratio (2)
|
146.4
|
%
|
101.6
|
%
|
5.7
|
%
|
139.6
|
%
|
||||||||||
Acquisition cost ratio (2)
|
19.9
|
%
|
24.8
|
%
|
59.0
|
%
|
20.7
|
%
|
||||||||||
General and administrative expense ratio (2)
|
8.1
|
%
|
15.1
|
%
|
28.8
|
%
|
10.0
|
%
|
||||||||||
Combined ratio (2)
|
174.4
|
%
|
141.5
|
%
|
93.5
|
%
|
170.3
|
%
|
||||||||||
Total assets
|
$
|
2,604,508
|
$
|
319,545
|
$
|
101,609
|
$
|
3,025,662
|
||||||||||
Reconciliation:
|
||||||||||||||||||
Underwriting loss
|
$
|
(171,893)
|
||||||||||||||||
Net investment income
|
9,432
|
|||||||||||||||||
Net realized and unrealized gains - investments
|
10,904
|
|||||||||||||||||
Net realized and unrealized losses - other
|
(690)
|
|||||||||||||||||
Other income
|
395
|
|||||||||||||||||
Interest expense
|
(2,946)
|
|||||||||||||||||
Net foreign exchange losses
|
(9,945)
|
|||||||||||||||||
Loss before income taxes and interest in earnings of equity investments
|
$
|
(164,743)
|
|
For the three months ended March 31, 2010
|
|||||||||||||||||
|
Reinsurance
|
Lloyd's
|
Island Heritage
|
Inter-segment Eliminations (1)
|
Total
|
|||||||||||||
|
||||||||||||||||||
Gross premiums written
|
$
|
342,692
|
$
|
52,189
|
$
|
17,762
|
$
|
(12,441)
|
$
|
400,202
|
||||||||
Premiums ceded
|
(66,855)
|
(11,605)
|
(10,402)
|
12,441
|
(76,421)
|
|||||||||||||
Net premiums written
|
275,837
|
40,584
|
7,360
|
-
|
323,781
|
|||||||||||||
Net premiums earned
|
$
|
178,971
|
$
|
35,688
|
$
|
2,156
|
$
|
-
|
$
|
216,815
|
||||||||
Other related income
|
470
|
8,644
|
5,606
|
(3,884)
|
10,836
|
|||||||||||||
Loss and loss adjustment expenses
|
(97,558)
|
(29,428)
|
(393)
|
-
|
(127,379)
|
|||||||||||||
Acquisition costs
|
(33,735)
|
(8,994)
|
(3,992)
|
3,884
|
(42,837)
|
|||||||||||||
General and administrative expenses
|
(34,057)
|
(4,942)
|
(2,176)
|
-
|
(41,175)
|
|||||||||||||
Underwriting income
|
$
|
14,091
|
$
|
968
|
$
|
1,201
|
$
|
-
|
$
|
16,260
|
||||||||
|
||||||||||||||||||
Loss ratio (2)
|
54.5
|
%
|
82.5
|
%
|
5.1
|
%
|
58.8
|
%
|
||||||||||
Acquisition cost ratio (2)
|
18.8
|
%
|
25.2
|
%
|
51.4
|
%
|
19.8
|
%
|
||||||||||
General and administrative expense ratio (2)
|
19.0
|
%
|
13.8
|
%
|
28.0
|
%
|
19.0
|
%
|
||||||||||
Combined ratio (2)
|
92.3
|
%
|
121.5
|
%
|
84.5
|
%
|
97.6
|
%
|
||||||||||
Total assets
|
$
|
2,514,019
|
$
|
211,503
|
$
|
91,897
|
$
|
2,817,419
|
||||||||||
|
||||||||||||||||||
Reconciliation:
|
||||||||||||||||||
Underwriting income
|
$
|
16,260
|
||||||||||||||||
Net investment income
|
7,285
|
|||||||||||||||||
Net realized and unrealized gains - investments
|
9,811
|
|||||||||||||||||
Net realized and unrealized gains - other
|
5,658
|
|||||||||||||||||
Other income
|
205
|
|||||||||||||||||
Interest expense
|
(2,514)
|
|||||||||||||||||
Net foreign exchange gains
|
3,956
|
|||||||||||||||||
Income before income taxes and interest in earnings of equity investments
|
$
|
40,661
|
For the three months ended
|
|||
U.S. dollar (weakened) strengthened against:
|
March 31, 2011
|
||
Canadian dollar
|
(2.6)
|
%
|
|
Swiss franc
|
(1.8)
|
%
|
|
Euro
|
(6.1)
|
%
|
|
British pound sterling
|
(2.9)
|
%
|
|
Indian rupee
|
(0.3)
|
%
|
|
South African rand
|
2.6
|
%
|
The following table sets forth selected key financial information for the three months ended March 31, 2011 and 2010:
|
|||||||||||||
|
|||||||||||||
|
For the three months ended March 31,
|
||||||||||||
|
2011
|
2010
|
$ Change
|
% Change
|
|||||||||
|
|||||||||||||
Underwriting (loss) income
|
$
|
(171,893)
|
$
|
16,260
|
$
|
(188,153)
|
NM
|
(3)
|
|||||
Net investment income
|
$
|
9,432
|
$
|
7,285
|
$
|
2,147
|
29.5
|
%
|
|||||
Net realized and unrealized gains - investments
|
$
|
10,904
|
$
|
9,811
|
$
|
1,093
|
11.1
|
%
|
|||||
Net realized and unrealized (losses) gains - other
|
$
|
(690)
|
$
|
5,658
|
$
|
(6,348)
|
(112.2)
|
%
|
|||||
Net (loss) income attributable to Flagstone
|
$
|
(161,220)
|
$
|
31,504
|
$
|
(192,724)
|
NM
|
(3)
|
|||||
|
|||||||||||||
Net (loss) income attributable to Flagstone per common share - Basic
|
$
|
(2.32)
|
$
|
0.38
|
$
|
(2.70)
|
|||||||
Net (loss) income attributable to Flagstone per common share - Diluted(1)
|
$
|
(2.32)
|
$
|
0.38
|
$
|
(2.70)
|
|||||||
Loss ratio
|
139.6
|
%
|
58.8
|
%
|
|||||||||
Expense ratio
|
30.7
|
%
|
38.8
|
%
|
|||||||||
Combined ratio
|
170.3
|
%
|
97.6
|
%
|
|||||||||
|
|||||||||||||
|
|||||||||||||
|
As at
|
||||||||||||
|
March 31,
|
December 31,
|
|||||||||||
|
2011
|
2010
|
$ Change
|
% Change
|
|||||||||
Basic book value per common share
|
$
|
13.77
|
$
|
16.48
|
$
|
(2.71)
|
(16.4)
|
%
|
|||||
Diluted book value per common share
|
$
|
13.34
|
$
|
15.51
|
$
|
(2.17)
|
(14.0)
|
%
|
|||||
Diluted book value per common share plus accumulated distributions(2)
|
$
|
13.94
|
$
|
16.07
|
$
|
(2.13)
|
(13.3)
|
%
|
|||||
|
|||||||||||||
(1)Net (loss) income attributable to Flagstone per common share - Diluted for the three months ended March 31, 2011 does not contain the effect of:
|
|||||||||||||
a. a warrant conversion as this would be anti-dilutive for U.S. GAAP purposes
|
|||||||||||||
b. the PSU conversion until the end of the performance period, when the number of shares issuable under the PSU Plan will be known. There were 1,965,091 PSU's expected to vest under the PSU plan as at March 31, 2011.
|
|||||||||||||
(2)Distributions paid per common share are in the form of a non-dividend return of capital. Prior to the Redomestication, such distributions were in the form of dividends.
|
|||||||||||||
(3)NM - not meaningful.
|
·
|
Australian floods ($34.4 million; Reinsurance segment - $30.4 million, Lloyd’s segment - $4.0 million);
|
·
|
cyclone Yasi ($31.0 million; Reinsurance segment - $31.0 million, Lloyd’s segment - $ nil);
|
·
|
New Zealand earthquake ($81.5 million; Reinsurance segment - $79.8 million, Lloyd’s segment - $1.7 million): and
|
·
|
Japan earthquake and tsunami ($109.7 million; Reinsurance segment - $97.9 million, Lloyd’s segment - $11.8 million).
|