0001267395-16-000157.txt : 20161107 0001267395-16-000157.hdr.sgml : 20161107 20161107124911 ACCESSION NUMBER: 0001267395-16-000157 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20160930 FILED AS OF DATE: 20161107 DATE AS OF CHANGE: 20161107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASPEN INSURANCE HOLDINGS LTD CENTRAL INDEX KEY: 0001267395 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31909 FILM NUMBER: 161977313 BUSINESS ADDRESS: STREET 1: 141 FRONT STREET CITY: HAMILTON STATE: D0 ZIP: HM 19 BUSINESS PHONE: 1 441 295 8201 MAIL ADDRESS: STREET 1: 141 FRONT STREET CITY: HAMILTON STATE: D0 ZIP: HM 19 10-Q 1 ahl10-qq32016doc.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 ____________________________________________________________
Form 10-Q
 ____________________________________________________________
 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2016
Or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-31909 
  ____________________________________________________________
ASPEN INSURANCE HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
 
  ____________________________________________________________
 
Bermuda
 
Not Applicable
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
141 Front Street
Hamilton, Bermuda
 
HM 19
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code
(441) 295-8201
____________________________________________________________
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨   No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 1, 2016, there were 60,217,228 outstanding ordinary shares, with a par value of 0.15144558¢ per ordinary share, outstanding.


INDEX
 
 
 
Page
 
Item 1.
 
Unaudited Condensed Consolidated Balance Sheets as at September 30, 2016 and December 31, 2015
 
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2016 and 2015
 
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
CERTIFICATIONS
 

2

PART I
FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As at September 30, 2016 and December 31, 2015
($ in millions, except share and per share amounts)  
 
As at September 30,
2016
 
As at December 31, 2015
ASSETS
 
 
 
Investments:
 
 
 
Fixed income securities, available for sale at fair value
(amortized cost — $5,777.2 and $5,867.5)
$
5,964.7

 
$
5,951.1

Fixed income securities, trading at fair value
(amortized cost — $960.6 and $794.2)
996.9

 
788.0

Equity securities, trading at fair value
(cost — $737.1 and $722.5)
797.7

 
736.4

Short-term investments, available for sale at fair value
(amortized cost — $169.1 and $162.9)
169.1

 
162.9

Short-term investments, trading at fair value
(amortized cost — $169.6 and $9.5)
169.6


9.5

Catastrophe bonds, trading at fair value (cost — $17.5 and $55.2)
17.8

 
55.4

Other investments, equity method
13.0

 
8.9

Total investments
8,128.8

 
7,712.2

Cash and cash equivalents (including $160.9 and $243.3 within consolidated variable interest entities)
1,183.3

 
1,099.5

Reinsurance recoverables
 
 
 
Unpaid losses
419.8

 
354.8

Ceded unearned premiums
229.5

 
168.9

Receivables
 
 
 
Underwriting premiums
1,437.7

 
1,115.6

Other
131.6

 
94.3

Funds withheld
51.6

 
36.0

Deferred policy acquisition costs
388.2

 
361.1

Derivatives at fair value
6.3

 
9.2

Receivables for securities sold
10.8

 
0.6

Office properties and equipment
84.0

 
70.6

Deferred taxation
—

 
3.7

Other assets
1.0

 
4.1

Intangible assets and goodwill
73.1

 
18.2

Total assets
$
12,145.7

 
$
11,048.8

See accompanying notes to unaudited condensed consolidated financial statements.



3


ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As at September 30, 2016 and December 31, 2015
($ in millions, except share and per share amounts)
 
 
As at September 30,
2016
 
As at December 31, 2015
LIABILITIES
 
 
 
Insurance reserves
 
 
 
Losses and loss adjustment expenses
$
5,246.6

 
$
4,938.2

Unearned premiums
1,781.2

 
1,587.2

Total insurance reserves
7,027.8

 
6,525.4

Payables
 
 
 
Reinsurance premiums
182.8

 
92.7

Current taxation
12.1

 
10.8

Deferred taxation
6.2

 
—

Accrued expenses and other payables
344.2

 
343.8

Liabilities under derivative contracts
6.5

 
4.0

Total payables
551.8

 
451.3

Loan notes issued by variable interest entities, at fair value
112.7

 
103.0

Long-term debt
549.3

 
549.2

Total liabilities
$
8,241.6

 
$
7,628.9

Commitments and contingent liabilities (see Note 16)
—

 
—

SHAREHOLDERS’ EQUITY
 
 
 
Ordinary shares:
 
 
 
60,210,770 shares of par value 0.15144558¢ each
(December 31, 2015 - 60,918,373)
$
0.1

 
$
0.1

Preference shares:
 
 
 
11,000,000 5.95% shares of par value 0.15144558¢ each
(December 31, 2015 — 11,000,000)
—

 
—

5,327,500 7.401% shares of par value 0.15144558¢ each
(December 31, 2015 — 5,327,500)
—

 
—

6,400,000 7.250% shares of par value 0.15144558¢ each
(December 31, 2015 — 6,400,000)
—

 
—

10,000,000 5.625% shares of par value 0.15144558¢ each
(December 31, 2015 — Nil)
—

 
—

Non-controlling interest
1.3

 
1.3

Additional paid-in capital
1,280.2

 
1,075.3

Retained earnings
2,490.6

 
2,283.6

Accumulated other comprehensive income, net of taxes
131.9

 
59.6

Total shareholders’ equity
3,904.1

 
3,419.9

Total liabilities and shareholders’ equity
$
12,145.7

 
$
11,048.8

See accompanying notes to unaudited condensed consolidated financial statements.

4

ASPEN INSURANCE HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME
($ in millions, except share and per share amounts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Net earned premium
$
681.0

 
$
640.6

 
$
2,024.9

 
$
1,843.6

Net investment income
46.4

 
45.0

 
143.9

 
139.1

Realized and unrealized investment gains
26.7

 
10.7

 
137.4

 
81.6

Other income
1.5

 
(2.3
)
 
2.4

 
0.4

Total revenues
755.6

 
694.0

 
2,308.6

 
2,064.7

Expenses
 
 
 
 
 
 
 
Losses and loss adjustment expenses
389.2

 
365.6

 
1,188.8

 
1,032.2

Amortization of deferred policy acquisition costs
130.9

 
132.0

 
387.8

 
365.4

General, administrative and corporate expenses
125.0

 
100.5

 
361.2

 
298.1

Interest on long-term debt
7.3

 
7.4

 
22.1

 
22.1

Change in fair value of derivatives
(0.6
)
 
(10.1
)
 
7.0

 
(4.3
)
Change in fair value of loan notes issued by variable interest entities
9.8

 
8.3

 
13.7

 
14.5

Realized and unrealized investment losses
5.2

 
51.9

 
34.1

 
95.2

Net realized and unrealized foreign exchange (gains)/losses
(10.8
)
 
8.4

 
10.2

 
26.4

Other expenses
(0.9
)
 
—

 
0.1

 
0.8

Total expenses
655.1

 
664.0

 
2,025.0

 
1,850.4

Income from operations before income tax
100.5

 
30.0

 
283.6

 
214.3

Income tax expense
(4.9
)
 
(1.8
)
 
(8.7
)
 
(9.1
)
Net income
$
95.6

 
$
28.2

 
$
274.9

 
$
205.2

Amount attributable to non-controlling interest
0.2

 
(0.3
)
 
—

 
(0.8
)
Net income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders
$
95.8

 
$
27.9

 
$
274.9

 
$
204.4

Other Comprehensive Income:
 
 
 
 
 
 
 
Available for sale investments:
 
 
 
 
 
 
 
Reclassification adjustment for net realized gains on investments included in net income
$
(4.4
)
 
$
(2.1
)
 
$
(9.7
)
 
$
(33.8
)
Change in net unrealized gains on available for sale securities held
(18.8
)
 
24.8

 
113.7

 
(21.0
)
Net change from current period hedged transactions
3.1

 
(0.2
)
 
(1.9
)
 
2.5

Change in foreign currency translation adjustment
(10.2
)
 
(29.0
)
 
(26.8
)
 
(72.4
)
Other comprehensive income, gross of tax
(30.3
)
 
(6.5
)
 
75.3

 
(124.7
)
Tax thereon:
 
 
 
 
 
 
 
Reclassification adjustment for net realized gains on investments included in net income
—

 
0.3

 
0.6

 
0.7

Change in net unrealized gains on available for sale securities held
2.0

 
0.5

 
(11.7
)
 
1.4

Net change from current period hedged transactions
(0.6
)
 
(0.3
)
 
0.6

 
(0.3
)
Change in foreign currency translation adjustment
3.7

 
1.1

 
7.5

 
2.2

Total tax on other comprehensive income
5.1

 
1.6

 
(3.0
)
 
4.0

Other comprehensive income/(loss) net of tax
(25.2
)
 
(4.9
)
 
72.3

 
(120.7
)
Total comprehensive income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders
$
70.6

 
$
23.0

 
$
347.2

 
$
83.7

Per Share Data
 
 
 
 
 
 
 
Weighted average number of ordinary share and share equivalents
 
 
 
 
 
 
 
Basic
60,225,705

 
60,779,295

 
60,588,307

 
61,442,033

Diluted
61,577,018

 
62,155,125

 
62,043,440

 
62,878,436

Basic earnings per ordinary share adjusted for preference share dividends
$
1.43

 
$
0.30

 
$
4.07

 
$
2.86

Diluted earnings per ordinary share adjusted for preference share dividends
$
1.40

 
$
0.30

 
$
3.97

 
$
2.80

See accompanying notes to unaudited condensed consolidated financial statements.

5


ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
($ in millions)
 
Nine Months Ended September 30,
 
2016
 
2015
Ordinary shares
 
 
 
Beginning and end of the period
$
0.1

 
$
0.1

Preference shares
 
 
 
Beginning and end of the period
—

 
—

Non-controlling interest
 
 
 
Beginning of the period
1.3

 
0.5

Net change attributable to non-controlling interest for the period
—

 
0.8

End of the period
1.3

 
1.3

Additional paid-in capital
 
 
 
Beginning of the period
1,075.3

 
1,134.3

New ordinary shares issued
2.0

 
4.4

Ordinary shares repurchased and cancelled
(50.0
)
 
(83.7
)
Preference shares issued
241.3

 
—

Share-based compensation
11.6

 
13.3

End of the period
1,280.2

 
1,068.3

Retained earnings
 
 
 
Beginning of the period
2,283.6

 
2,050.1

Net income for the period
274.9

 
205.2

Dividends on ordinary shares
(39.5
)
 
(38.1
)
Dividends on preference shares
(28.4
)
 
(28.4
)
Net change attributable to non-controlling interest for the period
—

 
(0.8
)
End of the period
2,490.6

 
2,188.0

Accumulated other comprehensive income:
 
 
 
Cumulative foreign currency translation adjustments, net of taxes:
 
 
 
Beginning of the period
0.6

 
72.7

Change for the period, net of income tax
(19.3
)
 
(70.2
)
End of the period
(18.7
)
 
2.5

Loss on derivatives, net of taxes:
 
 
 
Beginning of the period
(1.2
)
 
(3.8
)
Net change from current period hedged transactions
(1.3
)
 
2.2

End of the period
(2.5
)
 
(1.6
)
Unrealized appreciation on investments, net of taxes:
 
 
 
Beginning of the period
60.2

 
165.4

Change for the period, net of taxes
92.9

 
(52.7
)
End of the period
153.1

 
112.7

Total accumulated other comprehensive income, net of taxes
131.9

 
113.6

 
 
 
 
Total shareholders’ equity
$
3,904.1

 
$
3,371.3

 




See accompanying notes to unaudited condensed consolidated financial statements.


6

ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
 
 
Nine Months Ended September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
274.9

 
$
205.2

Proportion due to non-controlling interest
—

 
(0.8
)
Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
35.6

 
21.3

Share-based compensation
11.6

 
13.3

Realized and unrealized investment (gains)
(137.4
)
 
(81.6
)
Realized and unrealized investment losses
34.1

 
95.2

Change in fair value of loan notes issued by variable interest entities
13.7

 
14.5

Net realized and unrealized investment foreign exchange losses
(3.1
)
 
2.3

Net change from current period hedged transactions
(1.3
)
 
2.2

Changes in:
 
 
 
Insurance reserves:
 
 
 
Losses and loss adjustment expenses
349.7

 
202.2

Unearned premiums
181.4

 
219.1

Reinsurance recoverables:
 
 
 
Unpaid losses
(73.1
)
 
(1.0
)
Ceded unearned premiums
(62.0
)
 
(17.6
)
Other receivables
(34.0
)
 
(19.7
)
Deferred policy acquisition costs
(26.4
)
 
(47.4
)
Reinsurance premiums payable
76.4

 
44.3

Funds withheld
(15.6
)
 
7.9

Premiums receivable
(306.9
)
 
(209.9
)
Deferred taxes
9.5

 
2.8

Income tax payable
8.0

 
(7.0
)
Accrued expenses and other payables
26.4

 
(78.2
)
Fair value of derivatives and settlement of liabilities under derivatives
5.4

 
(13.6
)
Long-term debt and loan notes issued by variable interest entities
9.8

 
0.1

Other assets
3.1

 
10.1

Net cash generated from operating activities
$
379.8

 
$
363.7



See accompanying notes to unaudited condensed consolidated financial statements.

7

ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
 
 
Nine Months Ended September 30,
 
2016
 
2015
Cash flows (used in) investing activities:
 
 
 
(Purchases) of fixed income securities — Available for sale
$
(1,671.4
)
 
$
(1,368.2
)
(Purchases) of fixed income securities — Trading
(605.1
)
 
(387.0
)
Proceeds from sales and maturities of fixed income securities — Available for sale
1,668.7

 
1,211.9

Proceeds from sales and maturities of fixed income securities — Trading
481.0

 
354.4

(Purchases) of equity securities — Trading
(159.9
)
 
(335.2
)
Net proceeds of catastrophe bonds — Trading
37.6

 
(2.0
)
Proceeds from sales of equity securities — Available for sale
—

 
108.6

Proceeds from sales of equity securities — Trading
146.4

 
214.7

(Purchases) of short-term investments — Available for sale
(202.7
)
 
(118.6
)
Proceeds from sales of short-term investments — Available for sale
199.9

 
205.7

(Purchases) of short-term investments — Trading
(166.3
)
 
(38.2
)
Proceeds from sales of short-term investments — Trading
6.3

 
31.5

Net change in (payable)/receivable for securities (purchased)/sold
14.5

 
14.7

Net (purchases) of equipment
(15.7
)
 
(10.4
)
Other investments
(3.3
)
 
(0.8
)
Payments for acquisitions and investments, net of cash acquired
(52.7
)
 
—

Net cash (used in) investing activities
(322.7
)
 
(118.9
)
 
 
 
 
Cash flows from/(used in) financing activities:
 
 
 
Proceeds from the issuance of ordinary shares, net of issuance costs
2.0

 
4.4

Ordinary shares repurchased
(50.0
)
 
(83.7
)
Proceeds from the issuance of preference shares, net of issuance costs
241.3

 
—

Repayment of long-term debt issued by Silverton
(89.3
)
 
(67.8
)
Dividends paid on ordinary shares
(39.5
)
 
(38.1
)
Dividends paid on preference shares
(28.4
)
 
(28.4
)
Net cash from/(used in) financing activities
36.1

 
(213.6
)

 
 
 
Effect of exchange rate movements on cash and cash equivalents
(9.4
)
 
(13.0
)
 
 
 
 
Increase in cash and cash equivalents
83.8

 
18.2

Cash and cash equivalents at beginning of period
1,099.5

 
1,178.5

Cash and cash equivalents at end of period
$
1,183.3

 
$
1,196.7

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Net cash paid during the period for income tax
$
0.2

 
$
2.4

Cash paid during the period for interest
$
14.5

 
$
14.5

See accompanying notes to unaudited condensed consolidated financial statements.

8


ASPEN INSURANCE HOLDINGS LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.
History and Organization
Aspen Insurance Holdings Limited (“Aspen Holdings”) was incorporated on May 23, 2002 and holds subsidiaries that provide insurance and reinsurance on a worldwide basis. Its principal operating subsidiaries are Aspen Insurance UK Limited (“Aspen U.K.”), Aspen Bermuda Limited (“Aspen Bermuda”), Aspen Specialty Insurance Company (“Aspen Specialty”), Aspen American Insurance Company (“AAIC”) and Aspen Underwriting Limited (corporate member of Lloyd’s Syndicate 4711, “AUL”) (collectively, the “Operating Subsidiaries”). We also established Aspen Capital Management, Ltd and other related entities (collectively, “ACM”) to leverage our existing underwriting franchise, increase our operational flexibility in the capital markets and provide investors direct access to our underwriting expertise. Silverton Re Ltd. (“Silverton”), a sidecar, was established in 2013 to attract third-party capital and to provide additional collateralized capacity to support Aspen Re’s global reinsurance business. References to the “Company,” “we,” “us” or “our” refer to Aspen Holdings or Aspen Holdings and its subsidiaries.
2.
Basis of Preparation
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. The unaudited condensed consolidated financial statements include the accounts of Aspen Holdings and its subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.
The balance sheet as at December 31, 2015 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2015 contained in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on February 19, 2016 (File No. 001-31909). There have been no changes to significant accounting policies from those disclosed in the Company’s Annual Report on Form 10-K.
Assumptions and estimates made by management have a significant effect on the amounts reported within the unaudited condensed consolidated financial statements. The most significant of these relate to losses and loss adjustment expenses, the value of investments, reinsurance recoverables and the fair value of derivatives. All material assumptions and estimates are regularly reviewed and adjustments made as necessary, but actual results could be significantly different from those expected when the assumptions or estimates were made.
Accounting Pronouncements Adopted in 2016
On May 21, 2015, the Financial Accounting Standards Board (the “FASB”) issued ASU 2015-09, “Financial Services - Insurance (Topic 944) Disclosures About Short-Duration Contracts” which requires insurance entities to disclose additional information about the liability for unpaid claims and claim adjustment expenses, disclose information about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claim adjustment expenses and disclose a roll forward of the liability for unpaid claims and claims adjustment expenses. This ASU is effective for annual periods beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. The Company does not expect this ASU to have a material impact on its consolidated financial results but it will have an impact on the disclosures in the Company’s 2016 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q throughout 2017.
On September 25, 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805)” which requires an acquirer to adjust retrospectively to provisional amounts recognized in a business combination. This ASU is effective for annual periods beginning after December 15, 2015 and may impact the Company’s provisional amounts booked in respect to the acquisition of AG Logic Holdings LLC (“AgriLogic”).


9


Accounting Pronouncements Not Yet Adopted

On June 16, 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)” which introduces a new impairment model, known as the current expected credit loss model, which is based on expected losses rather than incurred losses. Under the new credit loss model, the Company would recognize an allowance for its estimate of expected credit losses and this would apply to most debt instruments (other than those measured at fair value), trade receivables, lease receivables, reinsurance receivables, financial guarantee contracts and loan commitments. Available-for-sale debt securities are outside the model’s scope and the ASU made limited amendments to the impairment model for available-for-sale debt securities. There are other amendments required as a result of this ASU that are effective for fiscal years beginning after December 15, 2019. The Company is currently assessing the impact the adoption of this ASU will have on future financial statements and disclosures.
Other accounting pronouncements were issued during the three months ended September 30, 2016 which were either not relevant to the Company or did not impact the Company’s consolidated financial statements.
3.
Reclassifications from Accumulated Other Comprehensive Income
The following tables set out the components of the Company’s accumulated other comprehensive income (“AOCI”) that are reclassified into the unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2016 and 2015:
 
 
Amount Reclassified from AOCI
 
 
Details about the AOCI Components
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
 
Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations
 
 
($ in millions)
 
 
Available for sale securities:
 
 
 
 
Realized gains on sale of securities
 
$
5.3

 
$
2.1

 
Realized and unrealized investment gains
Realized (losses) on sale of securities
 
(0.9
)
 
—

 
Realized and unrealized investment losses
 
 
4.4

 
2.1

 
Income from operations before income tax
Tax on net realized gains of securities
 
—

 
(0.3
)
 
Income tax expense
 
 
$
4.4

 
$
1.8

 
Net income
Foreign currency translation adjustments:
 
 
 
 
 
 
Foreign currency translation adjustments, before income tax
 
—

 
$
1.1

 
Net realized and unrealized foreign exchange gains/(losses)
Tax on foreign currency translation adjustments
 
—

 
—

 
Income tax expense
 
 
$
—

 
$
1.1

 
Net income
Realized derivatives:
 
 
 
 
 
 
Net realized (losses) on settled derivatives
 
$
(3.1
)
 
$
(0.8
)
 
General, administrative and corporate expenses
Tax on settled derivatives
 
1.1

 
—

 
Income tax expense
 
 
$
(2.0
)
 
$
(0.8
)
 
Net income
 
 
 
 
 
 
 
Total reclassifications from AOCI to the statement of operations, net of income tax
 
$
2.4

 
$
2.1

 
Net income



10


 
 
Amount Reclassified from AOCI
 
 
Details about the AOCI Components
 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations
 
 
($ in millions)
 
 
Available for sale securities:
 
 
 
 
Realized gains on sale of securities
 
$
14.8

 
$
37.7

 
Realized and unrealized investment gains
Realized (losses) on sale of securities
 
(5.1
)
 
(3.9
)
 
Realized and unrealized investment losses
 
 
9.7

 
33.8

 
Income from operations before income tax
Tax on net realized gains of securities
 
(0.6
)
 
(0.7
)
 
Income tax expense
 
 
$
9.1

 
$
33.1

 
Net income
Foreign currency translation adjustments:
 
 
 
 
 
 
Foreign currency translation adjustments, before income tax
 
—

 
$
2.2

 
Net realized and unrealized foreign exchange gains/(losses)
Tax on foreign currency translation adjustments
 
—

 
—

 
Income tax expense
 
 
$
—

 
$
2.2

 
Net income
Realized derivatives:
 
 
 
 
 
 
Net realized (losses) on settled derivatives
 
$
(5.6
)
 
$
(3.5
)
 
General, administrative and corporate expenses
Tax on settled derivatives
 
1.1

 
—

 
Income tax expense
 
 
$
(4.5
)
 
$
(3.5
)
 
Net income
 
 
 
 
 
 
 
Total reclassifications from AOCI to the statement of operations, net of income tax
 
$
4.6

 
$
31.8

 
Net income


11


4.
Earnings per Ordinary Share
Basic earnings per ordinary share are calculated by dividing net income available to holders of Aspen Holdings’ ordinary shares by the weighted average number of ordinary shares outstanding. Diluted earnings per ordinary share are based on the weighted average number of ordinary shares and dilutive potential ordinary shares outstanding during the period of calculation using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per ordinary share for the three and nine months ended September 30, 2016 and 2015, respectively:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
($ in millions, except share and per share amounts)
 
 
 
 
 
 
 
 
Net income
$
95.6

 
$
28.2

 
$
274.9

 
$
205.2

Preference share dividends
(9.5
)
 
(9.5
)
 
(28.4
)
 
(28.4
)
Net amount attributable to non-controlling interest
0.2

 
(0.3
)
 
—

 
(0.8
)
Basic and diluted net income available to ordinary shareholders
$
86.3

 
$
18.4

 
$
246.5

 
$
176.0

Ordinary shares:
 
 
 
 
 
 
 
Basic weighted average ordinary shares
60,225,705

 
60,779,295

 
60,588,307

 
61,442,033

Weighted average effect of dilutive securities(1)
1,351,313

 
1,375,830

 
1,455,133

 
1,436,403

Total diluted weighted average ordinary shares
61,577,018

 
62,155,125

 
62,043,440

 
62,878,436

Earnings per ordinary share:
 
 
 
 
 
 
 
Basic
$
1.43

 
$
0.30

 
$
4.07

 
$
2.86

Diluted
$
1.40

 
$
0.30

 
$
3.97

 
$
2.80

 
(1) 
Dilutive securities comprise: employee options, restricted share units and performance shares associated with the Company’s long-term incentive plan, employee share purchase plans and director restricted stock units and options as described in Note 14.
Dividends. On October 26, 2016, the Company’s Board of Directors (“the Board of Directors”) declared the following quarterly dividends:
 
Dividend
 
Payable on:
 
Record Date:
Ordinary shares
$
0.22

 
November 29, 2016
 
November 11, 2016
7.401% preference shares
$
0.462563

 
January 1, 2017
 
December 15, 2016
7.250% preference shares
$
0.4531

 
January 1, 2017
 
December 15, 2016
5.95% preference shares
$
0.3719

 
January 1, 2017
 
December 15, 2016
5.625% preference shares
$
0.3945

 
January 1, 2017
 
December 15, 2016
5.
Segment Reporting
The Company has two reporting business segments: Insurance and Reinsurance. In addition to the way the Company manages its business, the Company has considered similarities in economic characteristics, products, customers, distribution, the regulatory environment of the Company’s business segments and quantitative thresholds to determine the Company’s reportable segments. Segment profit or loss for each of the Company’s business segments is measured by underwriting profit or loss. Underwriting profit is the excess of net earned premiums over the sum of losses and loss expenses, amortization of deferred policy acquisition costs and general and administrative expenses. Underwriting profit or loss provides a basis for management to evaluate the business segment’s underwriting performance.
Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance (risk excess, pro rata and facultative), casualty reinsurance (U.S. treaty, international treaty and global facultative) and specialty reinsurance (credit and surety, agriculture insurance and reinsurance, marine, aviation, terrorism, engineering and other specialty lines). ACM forms part of our property catastrophe reinsurance line of business as it currently focuses on property catastrophe business through the use of alternative capital. For a more detailed description of this business segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” in the Company’s 2015 Annual Report on Form 10-K filed with the SEC.

12


Insurance Segment. The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance. For a more detailed description of this business segment, see Part I, Item 1 “Business — Business Segments — Insurance” in the Company’s 2015 Annual Report on Form 10-K filed with the SEC.
Non-underwriting Disclosures. The Company has provided additional disclosures for corporate and other (non-underwriting) income and expenses. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the group, certain strategic and non-recurring costs, changes in fair value of derivatives and changes in fair value of the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses and income taxes, none of which are allocated to the business segments. Corporate expenses are not allocated to the Company’s business segments as they typically do not fluctuate with the levels of premiums written and are not directly related to the Company’s business segment operations. The Company does not allocate its assets by business segment as it evaluates underwriting results of each business segment separately from the results of the Company’s investment portfolio.
The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the three months ended September 30, 2016 and 2015:
 
Three Months Ended September 30, 2016
 
 
Reinsurance
 
Insurance
 
Total
 
 
($ in millions)
 
Underwriting Revenues
 
 
 
 
 
 
Gross written premiums
$
365.9

 
$
397.6

 
$
763.5

 
Net written premiums
314.5

 
323.9

 
638.4

 
Gross earned premiums
364.3

 
445.5

 
809.8

 
Net earned premiums
316.3

 
364.7

 
681.0

 
Underwriting Expenses
 
 
 
 
 
 
Losses and loss adjustment expenses
178.7

 
210.5

 
389.2

 
Amortization of deferred policy acquisition costs
53.0

 
77.9

 
130.9

 
General and administrative expenses
47.4

 
57.9

 
105.3

 
Underwriting income
$
37.2

 
$
18.4

 
55.6

 
Corporate expenses
 
 
 
 
(13.4
)
 
Non-operating expenses
 
 
 
 
(6.3
)
 
Net investment income
 
 
 
 
46.4

 
Realized and unrealized investment gains
 
 
 
 
26.7

 
Realized and unrealized investment losses
 
 
 
 
(5.2
)
 
Change in fair value of loan notes issued by variable interest entities
 
 
 
 
(9.8
)
 
Change in fair value of derivatives
 
 
 
 
0.6

 
Interest expense on long term debt
 
 
 
 
(7.3
)
 
Net realized and unrealized foreign exchange gains
 
 
 
 
10.8

 
Net other income
 
 
 
 
2.4

 
Income before tax
 
 
 
 
$
100.5

 
 
 
 
 
 
 
 
Net reserves for loss and loss adjustment expenses
$
2,495.4

 
$
2,331.4

 
$
4,826.8

 
Ratios
 
 
 
 
 
 
Loss ratio
56.5
%
 
57.7
%
 
57.2
%
 
Policy acquisition expense ratio
16.8

 
21.4

 
19.2

 
General and administrative expense ratio
15.0

 
15.9

 
17.4

(1) 
Expense ratio
31.8

 
37.3

 
36.6

 
Combined ratio
88.3
%
 
95.0
%
 
93.8
%
 
 
(1) 
The general and administrative expense ratio in the total column includes corporate expenses.

13


 
Three Months Ended September 30, 2015
 
 
Reinsurance
 
Insurance
 
Total
 
 
( $ in millions)
 
Underwriting Revenues
 
 
 
 
 
 
Gross written premiums
$
316.6

 
$
403.9

 
$
720.5

 
Net written premiums
294.7

 
357.1

 
651.8

 
Gross earned premiums
304.6

 
429.0

 
733.6

 
Net earned premiums
284.6

 
356.0

 
640.6

 
Underwriting Expenses
 
 
 
 
 
 
Losses and loss adjustment expenses
169.9

 
195.7

 
365.6

 
Amortization of deferred policy acquisition costs
64.8

 
67.2

 
132.0

 
General and administrative expenses
34.7

 
51.3

 
86.0

 
Underwriting income
$
15.2

 
$
41.8

 
57.0

 
Corporate expenses
 
 
 
 
(14.5
)
 
Net investment income
 
 
 
 
45.0

 
Realized and unrealized investment gains
 
 
 
 
10.7

 
Realized and unrealized investment losses
 
 
 
 
(51.9
)
 
Change in fair value of loan notes issued by variable interest entities
 
 
 
 
(8.3
)
 
Change in fair value of derivatives
 
 
 
 
10.1

 
Interest expense on long term debt
 
 
 
 
(7.4
)
 
Net realized and unrealized foreign exchange (losses)
 
 
 
 
(8.4
)
 
Net other income
 
 
 
 
(2.3
)
 
Other expenses
 
 
 
 
—

 
Income before tax
 
 
 
 
$
30.0

 
 
 
 
 
 
 
 
Net reserves for loss and loss adjustment expenses
$
2,469.6

 
$
2,095.6

 
$
4,565.2

 
Ratios
 
 
 
 
 
 
Loss ratio
59.7
%
 
55.0
%
 
57.1
%
 
Policy acquisition expense ratio
22.8

 
18.9

 
20.6

 
General and administrative expense ratio
12.2

 
14.4

 
15.7

(1) 
Expense ratio
35.0

 
33.3

 
36.3

 
Combined ratio
94.7
%
 
88.3
%
 
93.4
%
 
 
(1) 
The general and administrative expense ratio in the total column includes corporate expenses.


14


The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the nine months ended September 30, 2016 and 2015:
 
Nine Months Ended September 30, 2016
 
 
Reinsurance
 
Insurance
 
Total
 
 
($ in millions)
 
Underwriting Revenues
 
 
 
 
 
 
Gross written premiums
$
1,216.1

 
$
1,324.8

 
$
2,540.9

 
Net written premiums
1,070.8

 
1,092.1

 
2,162.9

 
Gross earned premiums
1,000.9

 
1,345.8

 
2,346.7

 
Net earned premiums
896.0

 
1,128.9

 
2,024.9

 
Underwriting Expenses
 
 
 
 
 
 
Losses and loss adjustment expenses
494.3

 
694.5

 
1,188.8

 
Amortization of deferred policy acquisition costs
163.1

 
224.7

 
387.8

 
General and administrative expenses
130.6

 
173.7

 
304.3

 
Underwriting income
$
108.0

 
$
36.0

 
144.0

 
Corporate expenses
 
 
 
 
(50.6
)
 
Non-operating expenses
 
 
 
 
(6.3
)
 
Net investment income
 
 
 
 
143.9

 
Realized and unrealized investment gains
 
 
 
 
137.4

 
Realized and unrealized investment losses
 
 
 
 
(34.1
)
 
Change in fair value of loan notes issued by variable interest entities
 
 
 
 
(13.7
)
 
Change in fair value of derivatives
 
 
 
 
(7.0
)
 
Interest expense on long term debt
 
 
 
 
(22.1
)
 
Net realized and unrealized foreign exchange (losses)
 
 
 
 
(10.2
)
 
Other income
 
 
 
 
2.4

 
Other expenses
 
 
 
 
(0.1
)
 
Income before tax
 
 
 
 
$
283.6

 
 
 
 
 
 
 
 
Net reserves for loss and loss adjustment expenses
$
2,495.4

 
$
2,331.4

 
$
4,826.8

 
Ratios
 
 
 
 
 
 
Loss ratio
55.2
%
 
61.5
%
 
58.7
%
 
Policy acquisition expense ratio
18.2

 
19.9

 
19.2

 
General and administrative expense ratio
14.6

 
15.4

 
17.5

(1) 
Expense ratio
32.8

 
35.3

 
36.7

 
Combined ratio
88.0
%
 
96.8
%
 
95.4
%
 
 
(1) 
The general and administrative expense ratio in the total column includes corporate expenses.

15


 
Nine Months Ended September 30, 2015
 
 
Reinsurance
 
Insurance
 
Total
 
 
( $ in millions)
 
Underwriting Revenues
 
 
 
 
 
 
Gross written premiums
$
1,062.1

 
$
1,300.4

 
$
2,362.5

 
Net written premiums
975.0

 
1,084.4

 
2,059.4

 
Gross earned premiums
857.6

 
1,267.3

 
2,124.9

 
Net earned premiums
802.3

 
1,041.3

 
1,843.6

 
Underwriting Expenses
 
 
 
 
 
 
Losses and loss adjustment expenses
391.7

 
640.5

 
1,032.2

 
Amortization of deferred policy acquisition costs
168.6

 
196.8

 
365.4

 
General and administrative expenses
102.5

 
151.8

 
254.3

 
Underwriting income
$
139.5

 
$
52.2

 
191.7

 
Corporate expenses
 
 
 
 
(43.8
)
 
Net investment income
 
 
 
 
139.1

 
Realized and unrealized investment gains
 
 
 
 
81.6

 
Realized and unrealized investment losses
 
 
 
 
(95.2
)
 
Change in fair value of loan notes issued by variable interest entities
 
 
 
 
(14.5
)
 
Change in fair value of derivatives
 
 
 
 
4.3

 
Interest expense on long term debt
 
 
 
 
(22.1
)
 
Net realized and unrealized foreign exchange (losses)
 
 
 
 
(26.4
)
 
Other income
 
 
 
 
0.4

 
Other expenses
 
 
 
 
(0.8
)
 
Income before tax
 
 
 
 
$
214.3

 
 
 
 
 
 
 
 
Net reserves for loss and loss adjustment expenses
$
2,469.6

 
$
2,095.6

 
$
4,565.2

 
Ratios
 
 
 
 
 
 
Loss ratio
48.8
%
 
61.5
%
 
56.0
%
 
Policy acquisition expense ratio
21.0

 
18.9

 
19.8

 
General and administrative expense ratio
12.8

 
14.6

 
16.2

(1) 
Expense ratio
33.8

 
33.5

 
36.0

 
Combined ratio
82.6
%
 
95.0
%
 
92.0
%
 
 
(1) 
The general and administrative expense ratio in the total column includes corporate expenses.

The Company uses underwriting ratios as measures of performance. The loss ratio is the ratio of losses and loss adjustment expenses to net premiums earned. The policy acquisition expense ratio is the ratio of amortization of deferred policy acquisition costs to net premiums earned. The general and administrative expense ratio is the ratio of general, administrative and corporate expenses to net premiums earned. The combined ratio is the sum of the loss ratio, the policy acquisition expense ratio and the general and administrative expense ratio.


16


6.     Investments
Income Statement
Investment Income. The following table summarizes investment income for the three and nine months ended September 30, 2016 and 2015:
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
 
($ in millions)
 
($ in millions)
Fixed income securities — Available for sale
$
34.8

 
$
36.1

 
$
107.9

 
$
106.8

Fixed income securities — Trading
7.6

 
7.2

 
22.9

 
21.1

Short-term investments — Available for sale
0.2

 
0.3

 
0.5

 
0.9

Cash and cash equivalents
0.8

 
0.5

 
2.2

 
2.5

Equity securities — Available for sale
—

 
—

 
—

 
0.1

Equity securities — Trading
5.5

 
4.6

 
17.9

 
16.5

Catastrophe bonds — Trading
0.2

 
0.4

 
1.3

 
1.3

Total
$
49.1

 
$
49.1

 
$
152.7

 
$
149.2

Investment expenses
(2.7
)
 
(4.1
)
 
(8.8
)
 
(10.1
)
Net investment income
$
46.4

 
$
45.0

 
$
143.9

 
$
139.1


17


The following table summarizes the net realized and unrealized investment gains and losses recorded in the statement of operations and the change in unrealized gains and losses on investments recorded in other comprehensive income for the three and nine months ended September 30, 2016 and 2015:
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
 
($ in millions)
 
($ in millions)
Available for sale:
 
 
 
 
 
 
 
Fixed income securities — gross realized gains
$
5.5

 
$
2.4

 
$
14.7

 
$
9.7

Fixed income securities — gross realized (losses)
(0.9
)
 
(0.3
)
 
(4.6
)
 
(1.4
)
Equity securities — gross realized gains
—

 
—

 
—

 
31.9

Equity securities — gross realized (losses)
—

 
—

 
—

 
(3.0
)
Short-term investments — gross realized gains
0.1

 
—

 
—

 
—

Short-term investments — gross realized (losses)
(0.2
)
 
—

 
—

 
—

Cash and cash equivalents — gross realized gains
—

 
—

 
0.1

 
—

Cash and cash equivalents — gross realized (losses)
—

 
—

 
(0.5
)
 
—

Trading:
 
 
 
 
 
 
 
Fixed income securities — gross realized gains
4.3

 
0.5

 
9.5

 
3.8

Fixed income securities — gross realized (losses)
(0.5
)
 
(1.2
)
 
(6.9
)
 
(3.8
)
Equity securities — gross realized gains
8.1

 
7.8

 
23.3

 
36.2

Equity securities — gross realized (losses)
(4.2
)
 
(12.3
)
 
(22.2
)
 
(25.4
)
Catastrophe bonds
0.3

 
0.7

 
0.1

 
(0.1
)
Net change in gross unrealized gains
9.0

 
(38.8
)
 
89.8

 
(61.5
)
Total net realized and unrealized investment gains/(losses) recorded in the statement of operations
$
21.5

 
$
(41.2
)
 
$
103.3

 
$
(13.6
)
 
 
 
 
 
 
 
 
Change in available for sale net unrealized gains:
 
 
 
 
 
 
 
Fixed income securities
(23.2
)
 
22.7

 
104.0

 
(27.4
)
Equity securities
—

 
—

 
—

 
(27.4
)
Total change in pre-tax available for sale unrealized gains
(23.2
)
 
22.7

 
104.0

 
(54.8
)
Change in taxes
2.0

 
0.8

 
(11.1
)
 
2.1

Total change in net unrealized gains/(losses), net of taxes, recorded in other comprehensive income
$
(21.2
)
 
$
23.5

 
$
92.9

 
$
(52.7
)
Other-than-temporary Impairments. A security is potentially impaired when its fair value is below its amortized cost. The Company reviews its available for sale fixed income and equity portfolios on an individual security basis for potential other-than-temporary impairment (“OTTI”) each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions. For a more detailed description of OTTI, please refer to Note 2(c) of the “Notes to the Audited Consolidated Financial Statements” in the Company’s 2015 Annual Report on Form 10-K filed with the SEC. There was no OTTI charge recognized for the three and nine months ended September 30, 2016 (2015 — $Nil and $Nil, respectively).

18


Balance Sheet
Fixed Income Securities and Short-Term Investments — Available For Sale. The following tables present the cost or amortized cost, gross unrealized gains and losses and estimated fair market value of available for sale investments in fixed income securities and short-term investments as at September 30, 2016 and December 31, 2015:
 
As at September 30, 2016
 
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
 
($ in millions)
U.S. government
$
1,061.9

 
$
24.7

 
$
(0.2
)
 
$
1,086.4

U.S. agency
124.1

 
3.2

 
—

 
127.3

Municipal
23.1

 
3.2

 
(0.1
)
 
26.2

Corporate
2,695.5

 
97.1

 
(1.8
)
 
2,790.8

Non-U.S. government-backed corporate
81.2

 
1.2

 
—

 
82.4

Foreign government
566.0

 
17.2

 
(0.1
)
 
583.1

Asset-backed
68.1

 
1.0

 
—

 
69.1

Non-agency commercial mortgage-backed
14.9

 
0.6

 
—

 
15.5

Agency mortgage-backed
1,142.4

 
41.8

 
(0.3
)
 
1,183.9

Total fixed income securities — Available for sale
5,777.2

 
190.0

 
(2.5
)
 
5,964.7

Total short-term investments — Available for sale
169.1

 
—

 
—

 
169.1

Total
$
5,946.3

 
$
190.0

 
$
(2.5
)
 
$
6,133.8

 
There were non-cash transfers of securities from available for sale to trading of $41.7 million during the nine months ended September 30, 2016. The transfers were made following the decision by the North Dakota regulator to reduce the held capital requirement for the recognition of ceded reinsurance recoveries from Aspen Bermuda Limited from 100% to 20%. This decision resulted in a new reduced collateral Regulation 114 trust being established and funded by non-cash transfers of securities from available for sale portfolios.
 
As at December 31, 2015
 
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
 
($ in millions)
U.S. government
$
1,113.9

 
$
13.0

 
$
(3.8
)
 
$
1,123.1

U.S. agency
154.5

 
4.3

 
(0.1
)
 
158.7

Municipal
25.0

 
1.6

 
—

 
26.6

Corporate
2,626.2

 
49.5

 
(15.1
)
 
2,660.6

Non-U.S. government-backed corporate
81.6

 
0.6

 
(0.1
)
 
82.1

Foreign government
634.6

 
10.5

 
(0.9
)
 
644.2

Asset-backed
75.4

 
0.9

 
(0.3
)
 
76.0

Non-agency commercial mortgage-backed
25.5

 
1.2

 
—

 
26.7

Agency mortgage-backed
1,130.8

 
27.6

 
(5.3
)
 
1,153.1

Total fixed income securities — Available for sale
5,867.5

 
109.2

 
(25.6
)
 
5,951.1

Total short-term investments — Available for sale
162.9

 
—

 
—

 
162.9

Total
$
6,030.4

 
$
109.2

 
$
(25.6
)
 
$
6,114.0


19



Fixed Income Securities, Short-Term Investments, Equities and Catastrophe Bonds — Trading. The following tables present the cost or amortized cost, gross unrealized gains and losses, and estimated fair market value of trading investments in fixed income securities, short-term investments, equity securities and catastrophe bonds as at September 30, 2016 and December 31, 2015:
 
As at September 30, 2016
 
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
 
($ in millions)
U.S. government
$
43.5

 
$
0.9

 
$
—

 
$
44.4

Municipal
4.7

 
0.2

 
—

 
4.9

Corporate
655.0

 
22.3

 
(0.3
)
 
677.0

Foreign government
200.8

 
12.6

 
(0.3
)
 
213.1

Asset-backed
15.5

 
0.1

 
(0.1
)
 
15.5

Agency mortgage-backed
41.1

 
0.9

 
—

 
42.0

Total fixed income securities — Trading
960.6

 
37.0

 
(0.7
)
 
996.9

Total short-term investments — Trading
169.6

 
—

 
—

 
169.6

Total equity securities — Trading
737.1

 
91.6

 
(31.0
)
 
797.7

Total catastrophe bonds — Trading
17.5

 
0.3

 
—

 
17.8

Total
$
1,884.8

 
$
128.9

 
$
(31.7
)
 
$
1,982.0