2.2.0.25falsefalse10201 - Disclosure - SIGNIFICANT ACCOUNTING POLICIEStruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($) / shares
USD ($)
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<tr valign="top"><td><b><font style="font-family: 'Times New Roman', Times;" class="_mt">2. </font></b> </td>
<td><b><font style="font-family: 'Times New Roman', Times;" class="_mt">SIGNIFICANT ACCOUNTING POLICIES</font></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">These consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates reflected in the Company's financial statements include, but are not limited to: </div>
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<td>• </td>
<td align="left">The premium estimates for certain reinsurance agreements, </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
<tr style="font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" valign="top"><td> </td>
<td>• </td>
<td align="left">Recoverability of deferred acquisition costs, </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
<tr style="font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" valign="top"><td> </td>
<td>• </td>
<td align="left">The reserve for outstanding losses and loss expenses, </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
<tr style="font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" valign="top"><td> </td>
<td>• </td>
<td align="left">Valuation of ceded reinsurance recoverables, </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
<tr style="font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" valign="top"><td> </td>
<td>• </td>
<td align="left">Determination of impairment of goodwill and other intangible assets, </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
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<td>• </td>
<td align="left">Valuation of financial instruments, and </td></tr>
<tr style="line-height: 6pt; font-size: 1pt;"><td> </td></tr>
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<td>• </td>
<td align="left">Determination of <font style="white-space: nowrap;" class="_mt">other-than-temporary</font> impairment of investments. </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Intercompany accounts and transactions have been eliminated on consolidation and all entities meeting consolidation requirements have been included in the consolidation. Certain immaterial reclassifications in the consolidated statements of operations and comprehensive income ("consolidated income statements"), consolidated statements of cash flows and notes to the consolidated financial statements have been made to prior years' amounts to conform to the current year's presentation. </div>
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<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The significant accounting policies are as follows: </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">a) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Premiums and Acquisition Costs</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Premiums are recorded as written on the inception date of the policy. For certain types of business written by the Company, notably reinsurance, premium income may not be known at the policy inception date. In the case of quota share reinsurance treaties assumed by the Company, the underwriter makes an estimate of premium income at inception. The underwriter's estimate is based on statistical data provided by reinsureds and the underwriter's judgment and experience. Such estimations are refined over the reporting period of each treaty as actual written premium information is reported by ceding companies and intermediaries. Premiums resulting from such adjustments are estimated and accrued based on available information. Certain insurance and reinsurance contracts may require that the premium be adjusted at the expiry of the contract to reflect the change in exposure or loss experience of the insured or reinsured. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Premiums are recognized as earned over the period of policy coverage in proportion to the risks to which they relate. Premiums relating to the unexpired periods of coverage are recorded on the balance sheets as "unearned premiums". Reinsurance premiums under a quota share reinsurance contract are typically earned over the same period as the underlying policies, or risks, covered by the contract. As a result, the earning pattern of a quota share reinsurance contract may extend up to 24 months, reflecting the inception dates of the underlying policies. </div>
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<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Where contract terms require the reinstatement of coverage after a ceding company's loss, the mandatory reinstatement premiums are calculated in accordance with the contract terms. The premium on the initial policy is then fully earned and the reinstatement of the premium is earned over the remaining exposure period. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Acquisition costs, comprised of commissions, brokerage fees and insurance taxes, are costs that are directly related to the successful acquisition of new and renewal business. While permitted under U.S. GAAP to defer certain internal costs that are directly related to the successful acquisition of new and renewal business, the Company does not defer such costs. Acquisition costs that are deferred are expensed as the premiums to which they relate are earned. Acquisition costs relating to the reserve for unearned premiums are deferred and carried on the balance sheets as an asset and are amortized over the period of coverage. Expected losses and loss expenses, other costs and anticipated investment income related to these unearned premiums are considered in determining the recoverability or deficiency of deferred acquisition costs. If it is determined that deferred acquisition costs are not recoverable, they are expensed. Further analysis is performed to determine if a liability is required to provide for losses which may exceed the related unearned premiums. </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">b) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Reserve for Losses and Loss Expenses</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The reserve for losses and loss expenses is comprised of two main elements: outstanding loss reserves ("OSLR," also known as case reserves) and reserves for losses incurred but not reported ("IBNR"). OSLR relate to known claims and represent management's best estimate of the likely loss payment. IBNR relates to reserves established by the Company for claims that have occurred but have not yet been reported to us as well as for changes in the values of claims that have been reported to us but are not yet settled. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The reserve for IBNR is estimated by management for each line of business based on various factors including underwriters' expectations about loss experience, actuarial analysis, comparisons with the results of industry benchmarks and loss experience to date. The Company's actuaries employ generally accepted actuarial methodologies to determine estimated ultimate loss reserves. The adequacy of the reserves is re-evaluated quarterly by the Company's actuaries. At the completion of each quarterly review of the reserves, a reserve analysis is prepared and reviewed with the Company's loss reserve committee. This committee determines management's best estimate for loss and loss expense reserves based upon the reserve analysis. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">While management believes that the reserves for OSLR and IBNR are sufficient to cover losses assumed by the Company, there can be no assurance that losses will not deviate from the Company's reserves, possibly by material amounts. The methodology of estimating loss reserves is periodically reviewed to ensure that the assumptions made continue to be appropriate. The Company recognizes any changes in its loss reserve estimates and the related reinsurance recoverables in the consolidated income statements in the periods in which they are determined and are recorded in "net losses and loss expenses". </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">c) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Ceded Reinsurance</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In the ordinary course of business, the Company uses both treaty and facultative reinsurance to minimize its net loss exposure to any one catastrophic loss event or to an accumulation of losses from a number of smaller events. Reinsurance premiums ceded are expensed and any commissions recorded thereon are earned over the period the reinsurance coverage is provided in proportion to the risks to which they relate. Any unearned ceding commission is included in "net deferred acquisitions costs" on the consolidated balance sheets and is recorded as a reduction to the overall net deferred acquisition cost balance. Prepaid reinsurance represents unearned premiums ceded to reinsurance companies. Reinsurance recoverable includes the balances due from those reinsurance companies under the terms of the Company's reinsurance agreements for unpaid losses and loss reserves, including IBNR. Amounts recoverable from reinsurers are estimated in a manner consistent with the estimated claim liability associated with the reinsured policy. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company determines the portion of the IBNR liability that will be recoverable under its reinsurance contracts by reference to the terms of the reinsurance protection purchased. This determination is necessarily based on the estimate of IBNR and accordingly, is subject to the same uncertainties as the estimate of IBNR. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company remains liable to the extent that its reinsurers do not meet their obligations under the reinsurance contracts; therefore, the Company regularly evaluates the financial condition of its reinsurers and monitors concentration of credit risk. No provision has been made for unrecoverable reinsurance as of December 31, 2010 and 2009, as the Company believes that all reinsurance balances will be recovered. </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">d) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Investments</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company holds certain fixed maturity investments that are classified as available for sale and carried at fair value with the difference between amortized cost and fair value, net of the effect of deferred taxes, included as a separate component of "accumulated other comprehensive income" on the consolidated balance sheets. These securities are included in "fixed maturity investments available for sale, at fair value" on the consolidated balance sheets. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Beginning in April 2009, the Company elected the fair value option for certain newly acquired fixed maturity investments. When the Company first acquires financial instruments, U.S. GAAP permits the Company to choose to measure the financial instruments at fair value, with changes in fair value recognized in earnings. The Company has elected the fair value option for certain newly acquired fixed maturity investments as the Company believes this approach provides more meaningful and relevant information about the overall performance of its fixed maturity investments as all gains or losses, whether realized or unrealized, are included in net income versus split between net income and accumulated other comprehensive income. As a result of electing the fair value option, any change in unrealized gains or losses is recognized in the consolidated income statements and included in "net realized investment gains (losses)" and those securities are included in "fixed maturity investments trading, at fair value" on the consolidated balance sheets. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In March 2010, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") <font style="white-space: nowrap;" class="_mt">2010-11</font> "Derivatives and Hedging: Scope Exception Related to Embedded Credit Derivatives" ("ASU <font style="white-space: nowrap;" class="_mt">2010-11").</font> ASU <font style="white-space: nowrap;" class="_mt">2010-11</font> clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements, specifically one that is related only to the subordination of one financial instrument to another. As permitted under the transitional provisions of ASU <font style="white-space: nowrap;" class="_mt">2010-11,</font> effective July 1, 2010 the Company elected the fair value option for any investment in a beneficial interest in a securitized asset. As a result, the Company elected the fair value option for all of its mortgage-backed and asset-backed securities held as of June 30, 2010. On July 1, 2010, the Company reclassified net unrealized gains of $41,889 from "accumulated other comprehensive income" to "retained earnings". As a result of the fair value election, any change in fair value of the mortgage-backed and asset-backed securities is recognized in "net realized investment gains (losses)" on the consolidated income statement. On July 1, 2010, these investments, which totaled $968,825, were classified as "fixed maturity investments trading, at fair value" on the consolidated balance sheets. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Also included in the Company's trading securities are to-be-announced mortgage-backed securities ("TBA MBS"), fixed maturity investments that the Company accounts for as derivatives in accordance with U.S. GAAP. As a result, these securities are included in "fixed maturity investments trading, at fair value" on the consolidated balance sheets and any change in unrealized gains or losses is recognized in the consolidated income statements and included in "net realized investment gains (losses)". </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">On January 1, 2008, the Company elected the fair value option under U.S. GAAP for its hedge fund investments, which are classified as "other invested assets trading, at fair value" on the consolidated balance sheets. At the time of election, the fair value and carrying value of the hedge fund investments were $241,435 and the net unrealized gain was $26,262. The Company elected the fair value option for its hedge fund investments as the Company believes that recognizing changes in the fair value of the hedge funds in the consolidated income statements each period better reflects the results of the Company's investment in the hedge funds rather than recognizing changes in fair value in "accumulated other comprehensive income". </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Upon election of the fair value option under U.S. GAAP, the Company reclassified the net unrealized gain related to the hedge funds of $26,262 from "accumulated other comprehensive income" and recorded a cumulative effect adjustment in "retained earnings". There was no net deferred tax liability associated with the net unrealized gain as the hedge fund investments are held by a Bermuda insurance subsidiary that pays no income tax. Any subsequent change in unrealized gain or loss of "other invested assets trading, at fair value" will be recognized in the consolidated income statements and included in "net realized investment gains or (losses)". Prior to the election of the fair value option, any change in unrealized gain or loss was included in "accumulated other comprehensive income" on the consolidated balance sheets. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Any alternative investments, including hedge funds, acquired subsequent to January 1, 2008 have been accounted for as trading securities with any change in unrealized gains or losses recognized in the consolidated income statements and included in "net realized investment gains (losses)". </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">At each measurement date the Company estimates the fair value of the financial instruments using various valuation techniques. The Company utilizes, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of financial instruments. When quoted market prices or observable market inputs are not available, the Company may utilize valuation techniques that rely on unobservable inputs to estimate the fair value of financial instruments. The Company bases its determination of whether a market is active or inactive on the spread between what a seller is asking for a security and what a buyer is bidding for that security. Spreads that are significantly above historical spreads are considered inactive markets. The Company also considers the volume of trading activity in the determination of whether a market is active or inactive. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company utilizes independent pricing sources to obtain market quotations for securities that have quoted prices in active markets. In general, the independent pricing sources use observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, reported trades and sector groupings to determine the fair value. For a majority of the portfolio, the Company obtained two or more prices per security as of December 31, 2010. When multiple prices are obtained, a price source hierarchy is utilized to determine which price source is the best estimate of the fair value of the security. The price source hierarchy emphasizes more weighting to significant observable inputs such as index pricing and less weighting towards non-binding broker-dealer quotes. In addition, to validate all prices obtained from these pricing sources including non-binding broker-dealer quotes, the Company also obtains prices from its investment portfolio managers and other sources (e.g., another pricing vendor), and compares the prices obtained from the independent pricing sources to those obtained from the Company's investment portfolio managers and other sources. The Company investigates any material differences between the multiple sources and determines which price best reflects the fair value of the individual security. There were no material differences between the prices from the independent pricing sources and the prices obtained from the Company's investment portfolio managers and other sources as of December 31, 2010 and 2009. </div>
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<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Investments are recorded on a trade date basis. Investment income is recognized when earned and includes the accrual of discount or amortization of premium on fixed maturity investments using the effective yield method and is net of related expenses. Interest income for debt securities where the Company has elected the fair value option is accrued and recognized based on the contractual terms of the debt securities and is included in "net investment income" in the consolidated income statements. Realized gains and losses on the disposition of investments, which are based upon the <font style="white-space: nowrap;" class="_mt">first-in</font> first-out method of identification, are included in "net realized investment gains (losses)" in the consolidated income statements. For mortgage-backed and asset-backed securities and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and revised on a regular basis. Revised prepayment assumptions are applied to securities on a retrospective basis to the date of acquisition. The cumulative adjustments to amortized cost required due to these changes in effective yields and maturities are recognized in net investment income in the same period as the revision of the assumptions. </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">e) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt"><font style="white-space: nowrap;" class="_mt">Other-Than-Temporary</font> Impairments on Available for Sale Securities</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company recognizes <font style="white-space: nowrap;" class="_mt">other-than-temporary</font> impairments ("OTTI") in the consolidated income statements if the Company intends to sell the debt security or if it is more likely than not that the Company will be required to sell a debt security before the recovery of its amortized cost basis. In addition, OTTI is recognized if the present value of the expected cash flows of a debt security is less than the amortized cost basis of the debt security ("credit loss"). </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company has applied the following policy to determine if OTTI exists at each reporting period for its available for sale securities: </div>
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<td>• </td>
<td align="left">The Company's debt securities are managed by external investment portfolio managers. The Company requires them to provide a list of debt securities they intend to sell at the end of the reporting period. Any impairment in these securities is recognized as OTTI as the difference between the amortized cost and fair value and is recognized in the consolidated income statements and included in "net impairment charges recognized in earnings". </td></tr>
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<tr style="font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" valign="top"><td> </td>
<td>• </td>
<td align="left">At each reporting period the Company determines if it is more likely than not that the Company will be required to sell a debt security before the recovery of its amortized cost basis. The Company analyzes its current and future contractual and non-contractual obligations and its expectation of future cash flows to determine if the Company will need to sell debt securities to fund its obligations. The Company considers factors such as trends in underwriting profitability, cash flows from operations, return on invested assets, For debt securities that are in an unrealized loss position that the Company does not intend to sell, the Company assesses whether a credit loss exists. The amount of the credit loss is recognized in the consolidated income statements and is included in "net impairment charges recognized in earnings". The assessment involves consideration of several factors including: (i) the significance of the decline in value and the resulting unrealized loss position, (ii) the time period for which there has been a significant decline in value and (iii) an analysis of the issuer of the investment, including its liquidity, business prospects and overall financial position. </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In accordance with guidance issued by the FASB on OTTI in 2009, the Company was required to recognize a cumulative effect adjustment to retained earnings for all debt securities for which the Company had previously recognized OTTI and for which no credit loss existed. The cumulative effect adjustment was based on those fixed maturity securities that the Company held at April 1, 2009. The amount of the cumulative effect adjustment was determined by comparing the present value of the expected cash flows of each security with the amortized cost basis of the security as of April 1, 2009. The discount rate used to calculate the present value of the cash flows of securities that have fixed interest and principal payments was the rate in effect at the acquisition date. The discount rate used to calculate the present value of the cash flows of securities that have variable interest and principal payments was the rate in effect immediately prior to recognizing OTTI. The cumulative effect adjustment had the effect of re-establishing unrealized losses that were previously recognized in the consolidated income statement as OTTI. On April 1, 2009, Company recognized a cumulative effect adjustment of $136,848, net of applicable deferred income taxes of $1,677, as an increase to "retained earnings" and a reduction to "accumulated other comprehensive income" on the consolidated balance sheet. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Prior to the adoption of the OTTI guidance issued by the FASB in 2009, the Company reviewed the carrying value of its investments to determine if a decline in value was considered to be <font style="white-space: nowrap;" class="_mt">other-than-temporary.</font> This review involved consideration of several factors including: (i) the significance of the decline in value and the resulting unrealized loss position; (ii) the time period for which there had been a significant decline in value; (iii) an analysis of the issuer of the investment, including its liquidity, business prospects and overall financial position; and (iv) the Company's intent and ability to hold the investment for a sufficient period of time for the value to recover. For certain investments, the Company's investment portfolio managers had the discretion to sell those investments at any time. The Company recognized OTTI for those securities in an unrealized loss position each quarter as the Company could not assert that it had the intent to hold those investments until anticipated recovery. The identification of potentially impaired investments involved significant management judgment that included the determination of their fair value and the assessment of whether any decline in value was <font style="white-space: nowrap;" class="_mt">other-than-temporary.</font> If the decline in value was determined to be <font style="white-space: nowrap;" class="_mt">other-than-temporary,</font> then the Company recorded a realized loss in the consolidated income statements in the period that it was determined, and the cost basis of that investment was reduced. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">f) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Translation of Foreign Currencies</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates in effect on the balance sheet date. Foreign currency revenues and expenses are translated at the average exchange rates prevailing during the period. Exchange gains and losses, including those arising from forward exchange contracts, are included in the consolidated income statements. The Company's functional currency, and that of its operating subsidiaries, is the U.S. dollar as it is the single largest currency in which the Company transacts its business and holds its invested assets. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">g) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Cash and Cash Equivalents</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Cash and cash equivalents include amounts held in banks, time deposits, commercial paper, discount notes and U.S. Treasury Bills with maturities of less than three months from the date of purchase. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">h) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Income Taxes</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Allied World Switzerland and certain of its subsidiaries operate in jurisdictions where they are subject to income taxation. Current and deferred income taxes are charged or credited to operations, or to accumulated other comprehensive income in certain cases, based upon enacted tax laws and rates applicable in the relevant jurisdiction in the period in which the tax becomes payable. Deferred income taxes are provided for all temporary differences between the bases of assets and liabilities used in the financial statements and those used in the various jurisdictional tax returns. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">It is the Company's policy to recognize interest accrued related to unrecognized tax benefits in "interest expense" and penalties in "general and administrative expenses" in the consolidated income statements. The Company has not recorded any interest or penalties during the years ended December 31, 2010, 2009 and 2008 and the Company has not accrued any payment of interest and penalties as of December 31, 2010 and 2009. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">i) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Employee Stock Option Compensation Plan</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company has an employee stock option plan in which the amount of Company shares received as compensation through the issuance of stock options is determined by reference to the value of the shares. Compensation expense for stock options granted to employees is recorded on a straight-line basis over the option vesting period and is based on the fair value of the stock options on the grant date. The fair value of each stock option on the grant date is determined by using the Black-Scholes option-pricing model. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">j) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Restricted Stock Units</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company has granted restricted stock units ("RSUs") to certain employees. These RSUs generally vest pro-rata over four years from the date of grant or vest in either the fourth or fifth year from the date of the original grant. The compensation expense for the RSUs is based on the market value of Allied World Switzerland's common shares on the grant date, and is recognized on a straight-line basis over the applicable vesting period. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">k) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Long-Term Incentive Plan Awards</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company implemented the Third Amended and Restated Long-Term Incentive Plan ("LTIP"), which provides for performance based equity awards to key employees in order to promote the long-term growth and profitability of the Company. Each award represents the right to receive a number of common shares in the future, based upon the achievement of established performance criteria during the applicable performance period, which is generally the ending of the third fiscal year from the date of grant or either the ending of the fourth or fifth fiscal year from the date of grant. The compensation expense for these awards is based on the market value of Allied World Switzerland's common shares on the grant date, and is recognized on a straight-line basis over the applicable performance and vesting period. </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">l) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Goodwill and Intangible Assets</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company classifies its intangible assets into three categories: (1) intangible assets with finite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization, and (3) goodwill. Intangible assets, other than goodwill, generally consist of trademarks, renewal rights, internally generated software, non-compete covenants and insurance licenses held by subsidiaries domiciled in the United States. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">For intangible assets with finite lives, the value of the assets is amortized over their useful lives and the expense is included in "amortization and impairment of intangible assets" in the consolidated income statements. The Company tests assets for impairment if conditions exist that indicate the carrying value may not be recoverable. If, as a result of the evaluation, the Company determines that the value of the intangible assets is impaired, then the value of the assets will be written-down in the period in which the determination of the impairment is made. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">For indefinite lived intangible assets the Company does not amortize the intangible asset but evaluates and compares the fair value of the assets to their carrying values on an annual basis or more frequently if circumstances warrant. If, as a result of the evaluation, the Company determines that the value of the intangible assets is impaired, then the value of the assets will be written-down in the period in which the determination of the impairment is made. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Goodwill represents the excess of the cost of acquisitions over the fair value of net assets acquired and is not amortized. Goodwill is assigned at acquisition to the applicable reporting unit(s) based on the expected benefit to be received by the reporting units from the business combination. The Company determines the expected benefit based on several factors including the purpose of the business combination, the strategy of the Company subsequent to the business combination and structure of the acquired company subsequent to the business combination. A reporting unit is a component of the Company's business that has discrete financial information which is reviewed by management. In determining the reporting unit, the Company analyzes the inputs, processes, outputs and overall operating performance of the reporting unit. The Company has determined that for purposes of the acquisition of Darwin Professional Underwriters, Inc. ("Darwin") the U.S. insurance segment is the reporting unit that is expected to receive the benefit of the business combination and as such all of the goodwill has been allocated to this reporting unit. During 2010, the Company changed the reporting unit from Darwin to the U.S. insurance segment. Since the acquisition, the Darwin operations have been fully integrated into the U.S. Insurance operations. Management no longer prepares or reviews discrete financial information of Darwin specific activities and as such the Company re-evaluated the reporting units analyzed for the goodwill impairment process. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">For goodwill, the Company performs a two-step impairment test on an annual basis or more frequently if circumstances warrant. The first step is to compare the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value then the second step of the goodwill impairment test is performed. In determining the fair value of the reporting units, the Company utilizes discounted cash flow models and market multiple models. The discounted cash flow models apply a discount to projected cash flows including a terminal value calculation. The market multiple models apply earnings and book value multiples of similar publicly-traded companies to the reporting unit's projected earnings or book value. The Company selects the weighting of the models utilized to determine the fair value of the reporting unit based on judgment, considering such factors as the reliability of the cash flow projections and the entities included in the market multiples. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill in order to determine the amount of impairment to be recognized. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit's identifiable assets and liabilities from the fair value of the reporting unit as a whole. The excess of the carrying value of goodwill above the implied goodwill, if any, would be recognized as an impairment charge in "amortization and impairment of intangible assets" in the consolidated income statements. </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="4%"> </td>
<td width="96%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">m) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Derivative Instruments</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">U.S. GAAP requires the recognition of all derivative financial instruments at fair value as either assets or liabilities on the consolidated balance sheets. The accounting for gains and losses associated with changes in the fair value of a derivative and the effect on the consolidated financial statements depends on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair value of the asset or liability hedged. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company uses currency forward contracts and foreign currency swaps to manage currency exposure. The U.S. dollar is the Company's reporting currency and the functional currency of its operating subsidiaries. The Company enters into insurance and reinsurance contracts where the premiums receivable and losses payable are denominated in currencies other than the U.S. dollar. In addition, the Company maintains a portion of its investments and liabilities in currencies other than the U.S. dollar, primarily the Canadian dollar, Euro and British Sterling. For liabilities incurred in currencies other than U.S. dollars, U.S. dollars are converted to the currency of the loss at the time of claim payment. As a result, the Company has an exposure to foreign currency risk resulting from fluctuations in exchange rates. The Company has developed a hedging strategy using currency forward contracts and foreign currency swaps to minimize the potential loss of value caused by currency fluctuations. These currency forward contracts and foreign currency swaps are not designated as hedges and accordingly are carried at fair value on the consolidated balance sheets as a part of "other assets" or "accounts payable and accrued liabilities," with the corresponding realized and unrealized gains and losses included in "foreign exchange loss (gain)" in the consolidated income statements. Since the derivatives held are not designated as hedges and form a part of operations, all cash receipts or payments and any changes in the derivative asset or liability are recorded as cash flows from operations rather than as a financing activity. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company occasionally purchases to TBA MBS. A TBA MBS is a forward contract to acquire a mortgage-backed security where the underlying pools of mortgages are not known until the actual settlement date. The TBA MBS have defined risk profiles at the time of purchase as determined by the Company taking into consideration factors such as credit ratings, maturity, discounted cash flows, underlying collateral and geographic location. Based on the risk profile of the TBA MBS, pricing is determined utilizing several observable inputs to determine fair value, which include among others, treasury yields, new issuance and secondary trades, information provided by broker-dealers, security cash flows and structures, sector and issuer level spreads, credit rating, underlying collateral and prepayment speeds. The Company accounts for the TBA MBS as a derivative contract as it is possible at the acquisition of the TBA MBS that the Company will settle on a net basis the TBA MBS by rolling it into another TBA MBS. The fair value of the TBA MBS was $320,983 as of December 31, 2010 and the Company recognized an unrealized loss of $559 during the year ended December 31, 2010 for the change in fair value of these securities. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The fair value of the currency forward contracts and foreign currency swaps as of December 31, 2010 and 2009 was a net payable of $632 and $1,650, respectively, and was included in "accounts payable and accrued liabilities" on the consolidated balance sheet. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="4%"> </td>
<td width="96%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">n) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Earnings Per Share</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Basic earnings per share is defined as net income available to common shareholders divided by the weighted average number of common shares outstanding for the period, giving no effect to dilutive securities. Diluted earnings per share is defined as net income available to common shareholders divided by the weighted average number of common and common share equivalents outstanding calculated using the treasury stock method for all potentially dilutive securities, including share warrants, employee stock options, employee share repurchase plan, RSUs and LTIP awards. When the effect of dilutive securities would be anti-dilutive, these securities are excluded from the calculation of diluted earnings per share. </div>
<table style="font-family: Arial, Helvetica; background: none transparent scroll repeat 0% 0%; color: #000000; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr><td width="3%"> </td>
<td width="97%"> </td></tr>
<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">o) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">New Accounting Pronouncements</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In January 2010, the FASB issued ASU <font style="white-space: nowrap;" class="_mt">2010-06</font> "Fair Value Measurements and Disclosures" ("ASU <font style="white-space: nowrap;" class="_mt">2010-06").</font> ASU <font style="white-space: nowrap;" class="_mt">2010-06</font> updated section ASC <font style="white-space: nowrap;" class="_mt">820-10</font> to require a greater level of disaggregated information and more robust disclosure about valuation techniques and inputs to fair value measurements. ASU <font style="white-space: nowrap;" class="_mt">2010-06</font> is effective for interim and annual reporting periods beginning after December 15, 2009, with the exception of the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measures which are effective for interim and annual reporting periods beginning after December 15, 2010. The Company adopted the disaggregated roll forward requirements related to Level 3 assets and liabilities for the year ended December 31, 2010. See Note 5 "Fair Value of Financial Instruments" for the Company's disclosures about the fair value of financial instruments. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In July 2010, the FASB issued ASU <font style="white-space: nowrap;" class="_mt">2010-20</font> "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses" ("ASU <font style="white-space: nowrap;" class="_mt">2010-20").</font> ASU <font style="white-space: nowrap;" class="_mt">2010-20</font> enhances disclosures about credit quality of financing receivables and the allowance of credit losses by requiring additional information regarding the Company's credit risk exposures and evaluating the adequacy of its allowance for credit losses. The balance sheet related disclosures for ASU <font style="white-space: nowrap;" class="_mt">2010-20</font> are effective for the year ended December 31, 2010 and the income statement related disclosures are effective for quarter ended March 31, 2011. The Company is currently assessing the income statement provisions of ASU <font style="white-space: nowrap;" class="_mt">2010-20</font> and its potential impact on future disclosures. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">In October 2010, the FASB issued ASU <font style="white-space: nowrap;" class="_mt">2010-26</font> "Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts" ("ASU <font style="white-space: nowrap;" class="_mt">2010-26").</font> ASU <font style="white-space: nowrap;" class="_mt">2010-26</font> clarifies what costs associated with acquiring or renewing insurance contracts can be deferred and amortized over the coverage period. Under the revised guidance of ASU <font style="white-space: nowrap;" class="_mt">2010-26,</font> incremental direct costs that result directly from and are essential to the insurance contract and would not have been incurred had the insurance contract not been written are costs that may be capitalized, including costs relating to activities specifically performed by the Company such as underwriting, policy issuance and processing. ASU <font style="white-space: nowrap;" class="_mt">2010-26</font> will be effective January 1, 2012 and early adoption is permitted. The Company is currently evaluating the provisions of ASU <font style="white-space: nowrap;" class="_mt">2010-26</font> and its potential impact on future financial statements, but it does not anticipate that this will have a material impact on future financial statements once adopted. </div> </div>2.
SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with U.S. GAAP. ThefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 22
-Paragraph 8
falsefalse12SIGNIFICANT ACCOUNTING POLICIESUnKnownUnKnownUnKnownUnKnownfalsetrue