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Restatement of Previously Issued Financial Statements (Tables)
9 Months Ended
Sep. 30, 2011
Restatement of Previously Issued Financial Statements 
Impact of the restatement on the balance sheet

 

 

 

As of December 31, 2010

 

 

 

As 
Previously Filed

 

(1) 
FG VIE 
Eliminations

 

(2) 
Other 
Adjustments

 

Restated

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Total investment portfolio

 

$

10,729.9

 

$

11.0

 

$

—

 

$

10,740.9

 

Cash

 

107.2

 

1.2

 

—

 

108.4

 

Premiums receivable, net of ceding commissions payable

 

1,167.6

 

—

 

—

 

1,167.6

 

Ceded unearned premium reserve

 

821.8

 

—

 

—

 

821.8

 

Deferred acquisition costs

 

239.8

 

—

 

—

 

239.8

 

Reinsurance recoverable on unpaid losses

 

22.3

 

—

 

—

 

22.3

 

Salvage and subrogation recoverable

 

1,032.4

 

—

 

—

 

1,032.4

 

Credit derivative assets

 

592.9

 

—

 

—

 

592.9

 

Deferred tax asset, net

 

1,224.0

 

32.1

 

3.0

 

1,259.1

 

Financial guaranty variable interest entities’ assets, at fair value

 

4,334.4

 

—

 

(676.9

)

3,657.5

 

Other assets

 

199.2

 

—

 

—

 

199.2

 

Total assets

 

$

20,471.5

 

$

44.3

 

$

(673.9

)

$

19,841.9

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

Unearned premium reserve

 

$

6,972.9

 

$

—

 

$

—

 

$

6,972.9

 

Loss and loss adjustment expense reserve

 

563.0

 

—

 

11.4

 

574.4

 

Reinsurance balances payable, net

 

274.4

 

—

 

—

 

274.4

 

Long-term debt

 

1,052.9

 

—

 

—

 

1,052.9

 

Credit derivative liabilities

 

2,465.5

 

—

 

(2.7

)

2,462.8

 

Current income tax payable

 

93.0

 

—

 

—

 

93.0

 

Financial guaranty variable interest entities’ liabilities with recourse, at fair value

 

2,927.0

 

103.9

 

—

 

3,030.9

 

Financial guaranty variable interest entities’ liabilities without recourse, at fair value

 

2,014.1

 

—

 

(676.9

)

1,337.2

 

Other liabilities

 

309.9

 

—

 

—

 

309.9

 

Total liabilities

 

16,672.7

 

103.9

 

(668.2

)

16,108.4

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Common stock

 

1.8

 

—

 

—

 

1.8

 

Additional paid-in capital

 

2,585.4

 

—

 

—

 

2,585.4

 

Retained earnings

 

1,098.9

 

(60.7

)

(5.7

)

1,032.5

 

Accumulated other comprehensive income, net of tax provision (benefit)

 

110.7

 

1.1

 

—

 

111.8

 

Deferred equity compensation

 

2.0

 

—

 

—

 

2.0

 

Total shareholders’ equity

 

3,798.8

 

(59.6

)

(5.7

)

3,733.5

 

Total liabilities and shareholders’ equity

 

$

20,471.5

 

$

44.3

 

$

(673.9

)

$

19,841.9

 

Impact of the restatement on the consolidated statements of operations

 

 

 

Three Months Ended September 30, 2010

 

 

 

As
Previously
Filed

 

Reclassifications

 

Subtotal

 

(1)
FG VIE
Eliminations

 

(2)
 Other
Adjustments

 

Restated

 

 

 

(in millions, except per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

288.7

 

$

—

 

$

288.7

 

$

—

 

$

—

 

$

288.7

 

Net investment income

 

85.6

 

—

 

85.6

 

—

 

—

 

85.6

 

Net realized investment gains (losses)

 

(2.4

)

—

 

(2.4

)

—

 

—

 

(2.4

)

Net change in fair value of credit derivatives

 

(232.5

)

—

 

(232.5

)

—

 

8.5

 

(224.0

)

Fair value gain (loss) on committed capital securities

 

(5.5

)

—

 

(5.5

)

—

 

—

 

(5.5

)

Net change in financial guaranty variable interest entities

 

76.5

 

126.7

 

203.2

 

(31.9

)

—

 

171.3

 

Other income

 

33.8

 

—

 

33.8

 

—

 

—

 

33.8

 

Total revenues

 

244.2

 

126.7

 

370.9

 

(31.9

)

8.5

 

347.5

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

109.1

 

—

 

109.1

 

1.3

 

0.4

 

110.8

 

Interest and other operating expenses

 

(41.6

)

126.7

 

85.1

 

—

 

—

 

85.1

 

Total expenses

 

67.5

 

126.7

 

194.2

 

1.3

 

0.4

 

195.9

 

Income (loss) before income taxes

 

176.7

 

—

 

176.7

 

(33.2

)

8.1

 

151.6

 

Provision (benefit) for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

(191.9

)

—

 

(191.9

)

—

 

—

 

(191.9

)

Deferred

 

187.7

 

—

 

187.7

 

(11.6

)

2.8

 

178.9

 

Total provision (benefit) for income taxes

 

(4.2

)

—

 

(4.2

)

(11.6

)

2.8

 

(13.0

)

Net income (loss)

 

$

180.9

 

$

—

 

$

180.9

 

$

(21.6

)

$

5.3

 

$

164.6

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

 

$

0.98

 

 

 

 

 

$

0.89

 

Diluted

 

$

0.96

 

 

 

$

0.96

 

 

 

 

 

$

0.88

 

 

 

 

Nine Months Ended September 30, 2010

 

 

 

As
Previously
Filed

 

Reclassifications

 

Subtotal

 

(1)
FG VIE
Eliminations

 

(2)
 Other
Adjustments

 

Restated

 

 

 

(in millions except per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

900.4

 

$

—

 

$

900.4

 

$

—

 

$

—

 

$

900.4

 

Net investment income

 

260.8

 

—

 

260.8

 

—

 

—

 

260.8

 

Net realized investment gains (losses)

 

(1.4

)

—

 

(1.4

)

—

 

—

 

(1.4

)

Net change in fair value of credit derivatives

 

119.8

 

—

 

119.8

 

—

 

8.5

 

128.3

 

Fair value gain (loss) on committed capital securities

 

5.8

 

—

 

5.8

 

—

 

—

 

5.8

 

Net change in financial guaranty variable interest entities

 

61.6

 

131.5

 

193.1

 

(58.1

)

—

 

135.0

 

Other income

 

7.4

 

—

 

7.4

 

—

 

—

 

7.4

 

Total revenues

 

1,354.4

 

131.5

 

1,485.9

 

(58.1

)

8.5

 

1,436.3

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

310.8

 

—

 

310.8

 

1.4

 

(4.8

)

307.4

 

Interest and other operating expenses

 

135.5

 

131.5

 

267.0

 

—

 

—

 

267.0

 

Total expenses

 

446.3

 

131.5

 

577.8

 

1.4

 

(4.8

)

574.4

 

Income (loss) before income taxes

 

908.1

 

—

 

908.1

 

(59.5

)

13.3

 

861.9

 

Provision (benefit) for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

(186.0

)

—

 

(186.0

)

—

 

—

 

(186.0

)

Deferred

 

387.7

 

—

 

387.7

 

(20.8

)

3.8

 

370.7

 

Total provision (benefit) for income taxes

 

201.7

 

—

 

201.7

 

(20.8

)

3.8

 

184.7

 

Net income (loss)

 

$

706.4

 

$

—

 

$

706.4

 

$

(38.7

)

$

9.5

 

$

677.2

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.83

 

 

 

$

3.83

 

 

 

 

 

$

3.67

 

Diluted

 

$

3.73

 

 

 

$

3.73

 

 

 

 

 

$

3.58

 

Impact of the restatement on the consolidated statements of comprehensive income

 

 

Three Months Ended September 30, 2010

 

 

 

As
Previously Filed

 

(1)
FG VIE
Eliminations

 

(2)
Other
Adjustments

 

Restated

 

 

 

(in millions)

 

Net income

 

$

180.9

 

$

(21.6

)

$

5.3

 

$

164.6

 

Unrealized holding gains (losses) arising during the period

 

139.6

 

—

 

—

 

139.6

 

Less: reclassification adjustment for gains (losses)

 

(1.3

)

—

 

—

 

(1.3

)

Change in net unrealized gains on investments

 

140.9

 

—

 

—

 

140.9

 

Change in cumulative translation adjustment

 

5.4

 

—

 

—

 

5.4

 

Change in cash flow hedge

 

(0.1

)

—

 

—

 

(0.1

)

Other comprehensive income(loss)

 

146.2

 

—

 

—

 

146.2

 

Comprehensive income (loss)

 

$

327.1

 

$

(21.6

)

$

5.3

 

$

310.8

 

 

 

 

Nine Months Ended September 30, 2010

 

 

 

As 
Previously Filed

 

(1) 
FG VIE 
Eliminations

 

(2) 
Other 
Adjustments

 

Restated

 

 

 

(in millions)

 

Net income

 

$

706.4

 

$

(38.7

)

$

9.5

 

$

677.2

 

Unrealized holding gains (losses) arising during the period

 

197.0

 

—

 

—

 

197.0

 

Less: reclassification adjustment for gains (losses)

 

1.2

 

—

 

—

 

1.2

 

Change in net unrealized gains on investments

 

195.8

 

—

 

—

 

195.8

 

Change in cumulative translation adjustment

 

0.2

 

—

 

—

 

0.2

 

Change in cash flow hedge

 

(0.3

)

—

 

—

 

(0.3

)

Other comprehensive income(loss)

 

195.7

 

—

 

—

 

195.7

 

Comprehensive income (loss)

 

$

902.1

 

$

(38.7

)

$

9.5

 

$

872.9

 

Impact of the restatement on the consolidated statements of cash flow

 

 

Nine Months Ended September 30, 2010

 

 

 

As 
Previously Filed

 

(1) 
FG VIE 
Eliminations

 

Restated

 

 

 

(in millions)

 

Net cash flows provided by (used in) operating activities

 

$

(140.0

)

$

35.7

 

$

(104.3

)

Investing activities

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

Purchases

 

(1,928.7

)

—

 

(1,928.7

)

Sales

 

835.7

 

—

 

835.7

 

Maturities

 

729.6

 

—

 

729.6

 

Net sales (purchases) of short-term investments

 

759.9

 

(28.7

)

731.2

 

Net proceeds from paydowns on financial guaranty variable interest entities’ assets

 

323.6

 

—

 

323.6

 

Other

 

15.7

 

—

 

15.7

 

Net cash flows provided by (used in) investing activities

 

735.8

 

(28.7

)

707.1

 

Financing activities

 

 

 

 

 

 

 

Dividends paid

 

(24.9

)

—

 

(24.9

)

Repurchases of common stock

 

(10.5

)

—

 

(10.5

)

Share activity under option and incentive plans

 

(2.2

)

—

 

(2.2

)

Net paydowns of financial guaranty variable interest entities’ liabilities

 

(497.3

)

—

 

(497.3

)

Repayment of long-term debt

 

(16.1

)

—

 

(16.1

)

Net cash flows provided by (used in) financing activities

 

(551.0

)

—

 

(551.0

)

Effect of exchange rate changes

 

(1.5

)

—

 

(1.5

)

Increase in cash

 

43.3

 

7.0

 

50.3

 

Cash at beginning of year

 

44.1

 

—

 

44.1

 

Cash at end of year

 

$

87.4

 

$

7.0

 

$

94.4

 

 

(1)                               Represents adjustments related to the correction of FG VIE intercompany eliminations.

 

(2)                               Represents other adjustments of immaterial errors. These corrections related to  (a) errors in expected losses that had previously been corrected by the Company in the period such errors were identified, but which are now being recorded in the period in which they arose, (b) an error related to one credit derivative contract that resulted from the use of an incorrect par outstanding balance in the pricing model and (c) the correction of an error related to the classification of FG VIE assets and liabilities that resulted from a misinterpretation of a trustee report.