Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Schedule of discontinued operations balance sheet statement of operations and other disclosures

As of March 31, 2014 and December 31, 2013, the Runoff Transaction met the criteria for held for sale accounting. As a result, the assets and liabilities associated with the businesses being sold, after effecting the various steps contemplated by the Stock Purchase Agreement, are presented separately as single line items in the asset and liability sections of the consolidated balance sheets as of March 31, 2014 and December 31, 2013, respectively. The following summarizes the major categories of assets and liabilities associated with the business classified as held for sale:



	March 31, 2014		December 31, 2013
	($ in millions)
Assets:
Investments	$	222.2	$	236.3
Premiums receivable	12.8		9.1
Reinsurance recoverable on unpaid losses⁽¹⁾	1,540.0		1,604.7
Reinsurance recoverable on paid losses	9.5		10.7
Net deferred tax asset	3.2		3.3
Other assets	15.4		16.0
Total assets held for sale	$	1,803.1	$	1,880.1

Liabilities:
Unpaid loss and loss adjustment expense reserves⁽¹⁾	$	1,717.3	$	1,793.1
Unearned premiums	0.2		0.2
Ceded reinsurance payable	12.1		12.3
Other liabilities⁽²⁾	73.5		74.5
Total liabilities held for sale	$	1,803.1	$	1,880.1

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⁽¹⁾

The March 31, 2014 and December 31, 2013 balances include the remaining purchase accounting fair value adjustments of $133.6 million and $136.9 million, respectively, relating to the OneBeacon Acquisition. As of March 31, 2014 and December 31, 2013, reinsurance recoverable on unpaid losses, gross of purchase accounting adjustments, were $1,673.6 million and $1,741.6 million, respectively, and unpaid loss and LAE reserves, gross of purchase accounting adjustments, were $1,850.9 million and $1,930.0 million for each period.


⁽²⁾	Other liabilities as of March 31, 2014 and December 31, 2013 include the accrual related to the pre-tax loss on sale of the Runoff Business of $69.0 million for both periods.

The following summarizes the results of operations, including related income taxes associated with the business classified as discontinued operations:



		Three months ended March 31,
		2014			2013
	($ in millions)
Net written premiums		$	(0.1	)	$	0.8
Revenues
Earned premiums		$	(0.1	)	$	0.9
Total revenues		(0.1		)	0.9
Expenses
Loss and loss adjustment expenses		—			—
Policy acquisition expenses		—			0.1
Other underwriting expenses		0.7			0.1
Total expenses		0.7			0.2
Pre-tax income (loss)		(0.8		)	0.7
Income tax benefit (expense)		0.3			(0.2		)
Income (loss) from discontinued operations, net of tax		$	(0.5	)	$	0.5

The following table outlines the computation of income (loss) per share for discontinued operations attributable to OneBeacon's common shareholders for the three months ended March 31, 2014 and 2013:



	Three months ended March 31,
	2014			2013
Income (loss) attributable to OneBeacon's common shareholders—basic and diluted (in millions):
Net income (loss) from discontinued operations attributable to OneBeacon's common shareholders	$	(0.5	)	$	0.5
Allocation of loss for participating unvested restricted common shares	—			—
Net income (loss) from discontinued operations attributable to OneBeacon's common shareholders, net of restricted common share amounts	$	(0.5	)	$	0.5

Income (loss) per share denominator—basic and diluted (in millions):
Total weighted average common shares outstanding	95.4			95.4
Weighted average unvested restricted common shares⁽¹⁾	(0.8		)	(0.9		)
Basic and diluted income (loss) per share denominator	94.6			94.5

Income (loss) per share attributable to OneBeacon's common shareholders—basic and diluted (in dollars):
Net income (loss) from discontinued operations attributable to OneBeacon's common shareholders per share	$	(0.01	)	$	—

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⁽¹⁾	Restricted shares outstanding vest in equal installments upon a stated date or upon the occurrence of a specified event.

Reinsurers

The following table summarizes Standard & Poor's Financial Services, LLC ("Standard & Poor's") ratings for OneBeacon's reinsurers for its continuing insurance operations, excluding industry pools and associations, based upon reinsurance recoverable amounts on paid and unpaid losses and LAE:



	Balance at March 31, 2014		% of total
Standard & Poor's Rating⁽¹⁾:	($ in millions)
AA	$	26.1	31	%
A	51.7		62	%
BBB+, Not Rated and Other	5.3		7	%
Total reinsurance recoverables	$	83.1	100	%

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⁽¹⁾Standard & Poor's ratings as detailed above are "AA" (Very strong), "A" (Strong) and "BBB+" (Adequate).

The following table provides a listing of the top reinsurers related to the Runoff Business reported in assets held for sale, excluding industry pools and associations, based on reinsurance recoverable amounts on paid and unpaid losses, the percentage of the total reported as held for sale (gross of the $133.6 million in purchase accounting adjustment), and the reinsurers' A.M. Best ratings.



($ in millions)	Balance at March 31, 2014		% of total		A.M. Best Rating⁽¹⁾
National Indemnity Company ("NICO") and General Reinsurance Corporation⁽²⁾	$	1,188.8	71	%	A++
Hanover Insurance Company	38.7		2	%	A
Tokio Marine and Nichido Fire⁽³⁾	26.1		2	%	A++
Munich Reinsurance America	14.1		1	%	A+
Tower Insurance Company	9.9		1	%	B⁽⁴⁾

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⁽¹⁾	A.M. Best ratings as detailed above are: “A++” (Superior, which is the highest of sixteen financial strength ratings), “A+” (Superior, which is the second highest of sixteen financial strength ratings), “A” (Excellent, which is the third highest of sixteen financial strength ratings) and “B” (Fair, which is the seventh highest of sixteen financial strength ratings).


⁽²⁾	Includes $198.3 million of Third Party Recoverables, which NICO would pay under the terms of the NICO Cover if they are unable to collect from third party reinsurers.


⁽³⁾	Excludes $21.4 million of reinsurance recoverables from the various reinsurers that are guaranteed by Tokio Marine and Nichido Fire.


⁽⁴⁾	Under review with developing implications.

- Definition

Tabular disclosure of disposal groups, which may include the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the classification and carrying value of the assets and liabilities comprising the disposal group, and the segment in which the disposal group was reported. Also may include the amount of adjustments to amounts previously reported in discontinued operations such as resolution of contingencies arising from the disposal transaction or the operations of the component prior to disposal.

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