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Recent Acquisitions, Disposals & Other Transactions
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Recent Acquisitions, Disposals & Other Transactions Recent Acquisitions, Disposals & Other Transactions
Merger
On November 16, 2023, the Company completed the Merger, which resulted in a change to the Company’s ownership. The Company became an indirect wholly-owned subsidiary of Brookfield Reinsurance Ltd.
Pursuant to ASC 805, the total value of the consideration transferred was $1,058.9 million. This which consisted of $1,056.6 million for 35,221,291 shares of common stock issued and outstanding immediately prior to the Merger which were automatically canceled and converted into the right to receive an amount in cash equal to $30.00, without interest, and a $2.3 million settlement of unvested employee stock. There is no contingent consideration arrangement in connection with the Merger.
The Merger resulted in a $48.9 million bargain purchase since the value of the net assets acquired exceeded the purchase consideration. The bargain purchase determination is consistent with the fact that the Company’s shares traded at a discount to book value, and when considering the circumstances surrounding the Company at the time of sale, including those related to the strategic review.
As the Merger resulted in a bargain purchase, which is uncommon, the values of certain assets and liabilities are considered preliminary in nature that are subject to adjustment as additional information is obtained. The valuations will be finalized within the measurement period which cannot exceed 12 months from the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in retrospective adjustments to the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.
The following table is a summary of the purchase price and the fair value of assets acquired and liabilities assumed as part of the Merger as of November 16, 2023:
As of
(in millions)November 16, 2023
Consideration transferred settling 35,221,291 shares of outstanding common stock
$1,056.6 
Consideration transferred settling unvested employee stock2.3 
Total consideration
$1,058.9 
Assets
Investments:
Fixed maturities available-for-sale, at fair value$2,525.3 
Commercial mortgage loans144.9
Equity securities, at fair value11.7
Other investments327.8
Short-term investments, at fair value450.1
Total investments3,459.8 
Cash712.9
Accrued investment income17.1
Premiums receivable306.8
Reinsurance recoverables2,981.6
Other intangible assets186.1
Current income taxes receivable, net53.2
Deferred tax asset, net54.0
Ceded unearned premiums387.6
Operating lease right-of-use assets51.6
Other assets190.8
Value of business acquired176.3
Total assets (1)
$8,577.8 
Liabilities
Reserves for losses and loss adjustment expenses5,526.4
Unearned premiums986.2
Accrued underwriting expenses and other liabilities92.0
Ceded reinsurance payable, net257.4
Funds held49.9
Senior unsecured fixed rate notes127.9
Junior subordinated debentures241.0
Operating lease liabilities52.1
Total liabilities assumed (2)
$7,332.9 
Fair value of net assets acquired
$1,244.9 
Other claims on net assets:
Preferred stock
$137.1 
Bargain purchase recognized in Additional paid-in capital
$48.9 
(1) Reflects net fair value adjustments of $114.2 million to increase the total assets acquired, including value of business acquired and other intangible assets.
(2) Reflects net fair value adjustments of $80.9 million to reduce the total liabilities assumed.
Business Dispositions
Sale of Argo Underwriting Agency Limited
On September 8, 2022, Argo International Holdings Limited (the “Seller”), a wholly-owned subsidiary of the Company, and Ohio Farmers Insurance Company (the “Buyer”), part of the Westfield group of insurance companies, entered into a sale and purchase agreement (the “Transaction”) under which the Seller agreed to sell, and the Buyer agreed to purchase, the entire issued share capital of AUA, for which the financial results are reported in our International segment. This transaction simplifies our reporting structure and is intended to drive greater efficiencies.
The base cash consideration for the purchase is $125.0 million, which will be adjusted to reflect the extent by which AUA’s net assets as at completion are greater or lesser than AUA net assets as of March 31, 2022. In the third quarter of 2022, as a result of the sale, an impairment was recorded in the amount of $28.5 million, consisting of $17.3 million of indefinite lived intangible assets and $11.2 million of goodwill, representing the difference between the carrying value and implied fair value as determined by the consideration to be received. In addition, the Buyer will be obliged to replace certain funds provided by the Company to support the activities of AUA and certain of its subsidiaries at Lloyd’s of London, which would then be released to the Company.
As of December 31, 2022, the Company reported the assets and liabilities of this block of business as held-for-sale on Consolidated Balance Sheets with results continuing to be reported within the Consolidated Statements of Comprehensive Income (Loss) and the International Operations segment. The Company has determined that the Transaction does not represent a strategic shift, and therefore, does not meet the requirements for discontinued operations.
On February 2, 2023, the Seller completed the sale of the entire issued share capital of AUA. At the closing, the Company received total consideration of $155.7 million, which included cash proceeds of $125.1 million as base consideration and an additional $30.6 million which was placed in escrow by the Buyer related to certain reinsurance-related recoverables. The funds in escrow may be released to the Seller over a period of two years following the closing. At the end of the two-year escrow period, any remaining balance of the escrow will be returned to the Buyer.
As a result of the sale, we realized a loss of $20.3 million in the first quarter of 2023, which is included as a component of Net realized investment and other gains (losses) in our Consolidated Statements of Comprehensive Income (Loss). This loss is due to the realization of unrealized investment losses, which was previously a component of accumulated other comprehensive income.
The total consideration was adjusted to $161.3 million based on a mutually agreed final closing balance sheet, which resulted in an additional $5.6 million of cash proceeds received by the Company in July 2023.
Since the sale of AUA, $12.9 million of the consideration placed in escrow was released to the Company.
The table below reflects the carrying amounts of assets and liabilities held-for-sale related to the pending disposition described above:
As of
(in millions)December 31, 2022
Assets
Investments:
Fixed maturities available-for-sale, at fair value$490.6 
Other investments81.6
Short-term investments, at fair value114.1
Total investments686.4
Cash70.8
Accrued investment income2.1
Premiums receivable331.9
Reinsurance recoverables733.1
Current income taxes receivable, net6.3
Deferred tax asset, net28.1
Deferred acquisition costs, net69.4
Ceded unearned premiums76.1
Other assets62.0
Total assets$2,066.2 
Liabilities
Reserves for losses and loss adjustment expenses993.4
Unearned premiums335.6
Accrued underwriting expenses and other liabilities34.4
Ceded reinsurance payable, net323.5
Funds held172.9
Other indebtedness54.7
Total liabilities$1,914.5 
The pretax net income (loss) of our held-for-sale business was $15.6 million, $66.8 million, and $22.4 million for the period January 1, 2023 through November 15, 2023 (Predecessor), 2022, and 2021, respectively. These amounts include business that is assumed from Westfield post the sale of the Syndicate.
Sale of ArgoGlobal SE
On June 22, 2022, we completed the sale of our Malta operations, ArgoGlobal Holdings (Malta) Ltd. and its subsidiaries (“AGSE”) to RiverStone Holdings Limited (part of the RiverStone International Group) for €4.9 million (approximately $5.2 million), subject to the terms and conditions set forth in the purchase agreement. AGSE is one of the business units within our International Operations reporting segment. As a result, we realized a loss on the sale of AGSE of $21.3 million, which is included as a component of Net realized investment and other gains (losses) in our Consolidated Statements of Income (Loss). This amount includes $4.5 million of losses from the realization of historical foreign currency translation, which was previously a component of accumulated other comprehensive income.
Sale of Argo Seguros Brasil S.A.
On February 15, 2022, we completed the sale of our Brazilian operations, Argo Seguros Brasil S.A. (“Argo Seguros”), to Spice Private Equity Ltd., an investment company focused on global private equity investments, for a final purchase price of 140 million Brazilian Reais (approximately $26.9 million), subject to the terms and conditions set forth in the purchase agreement. Argo Seguros is one of the business units within our International Operations reporting segment. As a result, we realized a loss on the sale of Argo Seguros of $33.8 million in 2022, which is included as a component of Net realized investment and other gains (losses) in our Consolidated Statements of Income (Loss). This amount includes $27.3 million of losses from the realization of historical foreign currency translation, which was previously a component of accumulated other comprehensive income. We previously recognized a $6.3 million loss during 2021 as we adjusted the carrying value of Argo Seguros to its fair value.
Other Transactions
Loss Portfolio Transfer - U.S.
On August 8, 2022, the Company entered into a loss portfolio transfer agreement with a wholly-owned subsidiary of Enstar Group Limited (“Enstar”) covering a majority of the Company’s U.S. casualty insurance reserves, including construction, for accident years 2011 to 2019.
Enstar’s subsidiary will provide ground up cover of $746.0 million of reserves, and an additional $275.0 million of cover in excess of $821.0 million, up to a policy limit of $1,096.0 million effective January 1, 2022. The Company will retain a loss corridor of $75.0 million up to $821.0 million. For the year ended December 31, 2022, the Company recognized $75.0 million of losses that fall within the corridor and $188.6 million of the $275.0 million LPT limit remains available to the Company.
In addition, as a result of the anticipated loss portfolio transfer in the third quarter of 2022, the Company determined that it was more likely than not it would be required to sell certain securities before recovery of its amortized cost. As such, the Company recognized $34.2 million of realized losses related to the impairment of assets that were transferred at fair value to a third party at the close of the transaction. These losses were previously a component of accumulated other comprehensive income. In addition, in the fourth quarter of 2022, the Company recognized an additional $3.4 million loss at the close of the transaction. The realized losses are included as a component of Net realized investment and other gains (losses) in our Consolidated Statements of Income (Loss).
On November 9, 2022, the U.S. loss portfolio transaction with Enstar covering a majority of the Company’s U.S. casualty insurance reserves, including construction, for accident years 2011 to 2019 closed.
The estimated subject reserves transferred to Enstar on the closing date were $509.0 million, which represents the $746.0 million in loss reserves as of January 1, 2022, less estimated claims paid through October 31, 2022. On the closing date, the Company also transferred approximately $630.0 million of cash and investments to Enstar for which a portion was deposited into a Trust established to secure Enstar’s claim payment obligation to the Company. The financial statement impact of this transaction on the closing date, which was recorded in the fourth quarter of 2022, is a $509.0 million increase in Reinsurance recoverables, a reduction of $630.0 million in cash and investments, and an after-tax charge of approximately $100.0 million. The charge consists mainly of ceded premiums for a total of $121.0 million and is reflected in Earned premiums in our Consolidated Statements of Income (Loss). In 2023, the reserves ceded under the U.S. loss portfolio transfer exceeded the consideration paid by $82.4 million, and was reflected as a deferred gain liability included in Accrued underwriting expenses and other liabilities on the Consolidated Balance Sheets, net of amortization, prior to the Merger. The deferred gain was amortized to earnings using the recovery method over the estimated claims settlement period. At the time of the Merger, the deferred gain liability was eliminated as it has no future cash flows associated with it. In addition, any potential future adverse loss development covered under the loss portfolio transfer will not result in any deferred gains.
Loss Portfolio Transfer - Syndicate 1200
In April 2022, Argo Managing Agency Limited, for and on behalf of Lloyd’s Syndicate 1200, reached an agreement to enter into a loss portfolio transfer of the 2018 and 2019 years of account to Riverstone Managing Agency Limited, for and on behalf of Lloyd's Syndicate 3500, retrospectively from January 1, 2022. These years of account are included in a reinsurance to close transaction with Riverstone Managing Agency Limited entered into on January 1, 2023. As of December 31, 2022, these balances are classified as held-for-sale on our Consolidated Balance Sheets as described in Sale of Argo Underwriting Agency Limited above.