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Fair value (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair value hierarchy
The following table presents the Company’s financial assets and liabilities measured at fair value by level as of June 30, 2020 and December 31, 2019:
 
 
 
Fair Value Measurement Using:
June 30, 2020
Estimated
Fair Value
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
($ in thousands)
Assets measured at fair value:
 
 
 
 
 
 
 
Term loans
$
875,560

 
$
—

 
$
846,907

 
$
28,653

Fixed maturities:
 
 
 
 
 
 
 
Corporate bonds
548,101

 
—

 
547,103

 
998

U.S. government and government agency bonds
217,459

 
217,347

 
112

 
—

Asset-backed securities
288,252

 
—

 
288,252

 
—

Mortgage-backed securities
31,182

 
—

 
31,182

 
—

Non-U.S. government and government agency bonds
151,124

 
—

 
151,124

 
—

Municipal government and government agency bonds
2,117

 
—

 
2,117

 
—

Short-term investments
370,066

 
368,384

 
1,682

 
—

Equities
121,342

 
12,402

 
1,096

 
107,844

Other underwriting derivative assets
6

 
—

 
6

 
—

Other investments measured at net asset value (1)
34,142

 
—

 
—

 
—

Total assets measured at fair value
$
2,639,351

 
$
598,133

 
$
1,869,581

 
$
137,495

 
 
 
 
 
 
 
 
Investment derivative liabilities (2)
$
6,935

 
$
—

 
$
6,935

 
$
—

Payable for securities sold short:
 
 
 
 
 
 
 
Corporate bonds
23,166

 
—

 
23,166

 
—

U.S. government and government agency bonds
6,123

 
6,123

 
—

 
—

Total liabilities measured at fair value
$
36,224

 
$
6,123

 
$
30,101

 
$
—

(1) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
(2) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets as of June 30, 2020.


 
 
 
Fair Value Measurement Using:
December 31, 2019
Estimated
Fair Value
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
($ in thousands)
Assets measured at fair value:
 
 
 
 
 
 
 
Term loans
$
1,061,934

 
$
—

 
$
1,025,886

 
$
36,048

Fixed maturities:
 
 
 
 
 
 
 
Corporate bonds
372,473

 
—

 
371,540

 
933

U.S. government and government agency bonds
285,609

 
285,500

 
109

 
—

Asset-backed securities
336,171

 
—

 
336,171

 
—

Mortgage-backed securities
32,456

 
—

 
32,456

 
—

Non-U.S. government and government agency bonds
133,409

 
—

 
133,409

 
—

Municipal government and government agency bonds
2,184

 
—

 
2,184

 
—

Short-term investments
329,303

 
318,012

 
11,291

 
—

Equities
125,137

 
13,548

 
2,998

 
108,591

Other underwriting derivative assets
148

 
—

 
148

 
—

Investment derivative assets (1)
1,667

 
—

 
1,667

 
—

Other investments measured at net asset value (2)
30,461

 
—

 
—

 
—

Total assets measured at fair value
$
2,710,952

 
$
617,060

 
$
1,917,859

 
$
145,572

 


 
 
 
 
 
 
Investment derivative liabilities (1)
257

 
—

 
257

 
—

Payable for securities sold short:
 
 
 
 
 
 
 
Corporate bonds
66,257

 
—

 
66,257

 
—

Total liabilities measured at fair value
$
66,514

 
$
—

 
$
66,514

 
$
—

(1) Investment derivative assets and liabilities represent the fair value of total return swaps, which are recorded in “other assets” and “other liabilities,” respectively, in the consolidated balance sheets as of December 31, 2019.
(2) In accordance with applicable accounting guidance, other investments that are measured at fair value using the net asset value practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
Rollforward of level 3 investments
The following table presents a reconciliation of the beginning and ending balances for all the financial assets measured at fair value on a recurring basis using Level 3 inputs for the three and six months ended June 30, 2020 and 2019:
Three Months Ended June 30, 2020
Beginning
Balance
 
Net Purchases (Sales)(1)
 
Net Unrealized Gains (Losses)(2)
 
Net Unrealized Foreign Exchange Gains (Losses)
 
Ending
Balance
 
($ in thousands)
Term loans
$
35,945

 
$
(7,184
)
 
$
(108
)
 
$
—

 
$
28,653

Corporate bonds
965

 
33

 
—

 
—

 
998

Equities
110,090

 
(15,449
)
 
13,203

 
—

 
107,844

Total
$
147,000

 
$
(22,600
)
 
$
13,095

 
$
—

 
$
137,495

Three Months Ended June 30, 2019
Beginning
Balance
 
Net Purchases (Sales)(1)
 
Net Unrealized Gains (Losses)(2)
 
Net Unrealized Foreign Exchange Gains (Losses)
 
Ending
Balance
 
($ in thousands)
Term loans
$
47,368

 
$
170

 
$
1,047

 
$
—

 
$
48,585

Corporate bonds
23,719

 
—

 
(110
)
 
311

 
23,920

Equities
100,651

 
—

 
1,555

 
—

 
102,206

Total
$
171,738

 
$
170

 
$
2,492

 
$
311

 
$
174,711


(1) For the three months ended June 30, 2020, the net purchases (sales) consisted of sales of equities of $25.1 million and sales, calls and redemptions of $7.2 million of term loans, offset by purchases of $9.6 million of equities and $33.0 thousand of corporate bonds. For the three months ended June 30, 2019, the net purchases (sales) consisted of purchases of $0.2 million of term loans, offset in part by calls and redemptions of $0.1 million.
(2) Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss).
Six Months Ended June 30, 2020
Beginning
Balance
 
Net Purchases (Sales)(2)
 
Net Unrealized Gains (Losses)(3)
 
Net Unrealized Foreign Exchange Gains (Losses)
 
Ending
Balance
 
($ in thousands)
Term loans
$
36,048

 
$
(7,258
)
 
$
(137
)
 
$
—

 
$
28,653

Corporate bonds
933

 
65

 
—

 
—

 
998

Equities
108,591

 
(12,172
)
 
11,425

 
—

 
107,844

Total
$
145,572

 
$
(19,365
)
 
$
11,288

 
$
—

 
$
137,495

Six Months Ended June 30, 2019
Beginning
Balance
 
Transfers in (out) of Level 3 (1)
 
Net Purchases (Sales)(2)
 
Net Unrealized Gains (Losses)(3)
 
Net Unrealized Foreign Exchange Gains (Losses)
 
Ending
Balance
 
($ in thousands)
Term loans
$
47,479

 
$
—

 
$
333

 
$
773

 
$
—

 
$
48,585

Corporate bonds
24,277

 
—

 
(90
)
 
(179
)
 
(88
)
 
23,920

Asset-backed securities
22,560

 
(22,560
)
 
—

 
—

 
—

 
—

Equities
70,451

 
—

 
30,534

 
1,221

 
—

 
102,206

Total
$
164,767

 
$
(22,560
)
 
$
30,777

 
$
1,815

 
$
(88
)
 
$
174,711

(1) During the six months ended June 30, 2019, the Company obtained pricing for an asset-backed security, for which pricing was not available as of December 31, 2018. As such, the security was transferred from Level 3 to Level 2 at its fair value as of December 31, 2018.
(2) For the six months ended June 30, 2020, the net purchases (sales) consisted of sales of $25.1 million of equities and $7.3 million of sales, calls and redemptions of term loans, offset by purchases of $12.9 million of equities and $65.0 thousand of corporate bonds. For the six months ended June 30, 2019, the net purchases (sales) consisted of purchases of $37.8 million of equities and $0.5 million of term loans, offset in part by the sale of $7.3 million of equities, $0.1 million of redemptions of term loans and $0.1 million of corporate bonds.
(3) Realized and unrealized gains or losses on Level 3 investments are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss).