Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2020

Summary of financial assets and liabilities measured at fair value

The following tables summarize Sirius Group's financial assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019 by level:



	June 30, 2020
(Millions)	Fair Value			Level 1 Inputs			Level 2 Inputs		Level 3 Inputs
Assets measured at fair value
Fixed maturity investments:
U.S. Government and government agency	$	104.5		$	103.5		$	1.0	$	—
Corporate debt securities	483.7			—			483.7		—
Residential mortgage-backed securities	428.2			—			428.2		—
Asset-backed securities	723.2			—			723.2		—
Commercial mortgage-backed securities	96.5			—			96.5		—
Non-U.S. government and government agency	50.1			28.5			21.6		—
Preferred stocks	16.8			—			14.2		2.6
U.S. States, municipalities, and political subdivision	1.7			—			1.7		—
Total fixed maturity investments	1,904.7			132.0			1,770.1		2.6
Equity securities:
Fixed income mutual funds	1.7			1.7			—		—
Common stocks	161.5			161.5			—		—
Other equity securities⁽¹⁾	(13.3		)	(16.3		)	3.0		—
Total equity securities	149.9			146.9			3.0		—
Short-term investments⁽²⁾	1,048.1			1,000.2			47.9		—
Other long-term investments⁽³⁾	78.2			—			—		78.2
Total investments	$	3,180.9		$	1,279.1		$	1,821.0	$	80.8
Loan participation	27.3			—			—		27.3
Derivative instruments	7.0			4.5			—		2.5
Total assets measured at fair value	$	3,215.2		$	1,283.6		$	1,821.0	$	110.6
Liabilities measured at fair value
Contingent consideration liabilities	$	22.9		$	—		$	—	$	22.9
Derivative instruments	1.4			0.4			—		1.0
Total liabilities measured at fair value	$	24.3		$	0.4		$	—	$	23.9

⁽¹⁾Sirius Group engaged in short selling of certain equity securities for which settlement was pending as of June 30, 2020.

⁽²⁾Balance includes $9.2 classified as held-for-sale as of June 30, 2020.

⁽³⁾Excludes fair value of $289.9 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.



	December 31, 2019
(Millions)	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets measured at fair value
Fixed maturity investments:
U.S. Government and government agency	$	110.5	$	109.1	$	1.4	$	—
Corporate debt securities	474.1		—		474.1		—
Asset-backed securities	486.8		—		486.8		—
Residential mortgage-backed securities	438.9		—		438.9		—
Commercial mortgage-backed securities	89.0		—		89.0		—
Non-U.S. government and government agency	63.0		31.7		31.3		—
Preferred stocks	17.0		—		—		17.0
U.S. States, municipalities, and political subdivision	1.7		—		1.7		—
Total fixed maturity investments	1,681.0		140.8		1,523.2		17.0
Equity securities:
Fixed income mutual funds	175.3		175.3		—		—
Common stocks	228.1		228.1		—		—
Other equity securities	1.8		—		1.8		—
Total equity securities	405.2		403.4		1.8		—
Short-term investments	1,085.2		1,073.7		11.5		—
Other long-term investments⁽¹⁾	77.8		—		—		77.8
Total investments	$	3,249.2	$	1,617.9	$	1,536.5	$	94.8
Loan participation	20.0		—		—		20.0
Derivative instruments	11.4		1.3		—		10.1
Total assets measured at fair value	$	3,280.6	$	1,619.2	$	1,536.5	$	124.9
Liabilities measured at fair value
Contingent consideration liabilities	$	28.2	$	—	$	—	$	28.2
Derivative instruments	9.5		0.2		—		9.3
Total liabilities measured at fair value	$	37.7	$	0.2	$	—	$	37.5

⁽¹⁾Excludes fair value of $269.0 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.

Rollforward of Level 3 fair value measurements

The following tables present changes in Level 3 for financial instruments measured at fair value for the three months ended June 30, 2020 and June 30, 2019:



	For the three months ended June 30, 2020
(Millions)	Fixed Maturities		Other long-term investments⁽¹⁾			Loan Participation		Derivative instruments assets & (liabilities)			Contingent consideration (liabilities)
Balance as of March 31, 2020	$	2.6	$	75.9		$	19.9	$	(8.9	)	$	(28.3	)
Total realized and unrealized gains (losses)	—		(4.2		)	—		(5.7		)	(0.1		)
Foreign currency gains (losses) through Other Comprehensive Income	—		1.0			—		—			—
Purchases	—		5.5			7.4		—			—
Sales/Settlements	—		—			—		16.1			5.5
Balance as of June 30, 2020	$	2.6	$	78.2		$	27.3	$	1.5		$	(22.9	)

⁽¹⁾Excludes fair value of $289.9 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.



	For the three months ended June 30, 2019
(Millions)	Fixed Maturities		Other long-term investments⁽¹⁾		Loan Participation		Derivative instruments assets & (liabilities)			Contingent consideration (liabilities)
Balance as of March 31, 2019	$	—	$	88.0	$	—	$	(4.8	)	$	(28.8	)
Total realized and unrealized gains (losses)	—		—		—		(0.6		)	(2.0		)
Foreign currency gains (losses) through Other Comprehensive Income	—		—		—		—			—
Purchases	—		—		—		—			—
Sales/Settlements	—		—		—		1.8			—
Balance as of June 30, 2019	$	—	$	88.0	$	—	$	(3.6	)	$	(30.8	)

⁽¹⁾Excludes fair value of $291.9 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.

The following tables present changes in Level 3 for financial instruments measured at fair value for the six months ended June 30, 2020 and June 30, 2019:



	For the six months ended June 30, 2020
(Millions)	Fixed Maturities			Other long-term investments⁽¹⁾			Loan Participation			Derivative instruments assets & (liabilities)			Contingent consideration (liabilities)
Balance as of January 1, 2020	$	17.0		$	77.8		$	20.0		$	0.8		$	(28.2	)
Total realized and unrealized gains (losses)	2.6			(5.1		)	—			(19.0		)	(0.2		)
Foreign currency gains (losses) through Other Comprehensive Income	—			—			—			—			—
Purchases	—			5.5			7.4			—			—
Sales/Settlements	(17.0		)	—			(0.1		)	19.7			5.5
Balance as of June 30, 2020	$	2.6		$	78.2		$	27.3		$	1.5		$	(22.9	)

⁽¹⁾Excludes fair value of $289.9 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.



	For the six months ended June 30, 2019
(Millions)	Fixed Maturities			Other long-term investments⁽¹⁾			Loan Participation		Derivative instruments assets & (liabilities)			Contingent consideration (liabilities)
Balance as of January 1, 2019	$	5.4		$	63.6		$	—	$	(0.5	)	$	(28.8	)
Total realized and unrealized gains (losses)	—			9.3			—		(5.8		)	(2.0		)
Foreign currency gains (losses) through Other Comprehensive Income	—			(0.7		)	—		—			—
Purchases	—			15.8			—		—			—
Sales/Settlements	(5.4		)	—			—		2.7			—
Balance as of June 30, 2019	$	—		$	88.0		$	—	$	(3.6	)	$	(30.8	)

⁽¹⁾Excludes fair value of $291.9 associated with hedge funds and private equity funds which fair value is measured using NAV practical expedient.

Schedule of significant unobservable inputs used for recurring fair value measurements for Level 3 instruments

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments as of June 30, 2020 and December 31, 2019, and includes only those instruments for which information about the inputs is reasonably available to Sirius Group, such as data from independent third-party valuation service providers and from internal valuation models.



(Millions, except share prices)	June 30, 2020
Description	Valuation Technique(s)	Fair value			Unobservable input
Private equity securities⁽¹⁾	Share price of recent transaction	$	32.5		Purchase share price	40.63
Loan participation⁽¹⁾	Purchase price of recent transaction	$	19.9		Comparable yields	Range - 4.46% - 7.82% Median - 5.58%
Preferred stock⁽¹⁾	Share price of recent transaction	$	19.9		Purchase price	7.74
Private equity securities⁽¹⁾	Multiple of GAAP book value	$	13.2		Book value multiple	Range - 0.73x-0.91x Median - 0.82x
Loan participation⁽¹⁾	Purchase price of recent transaction	$	7.4		Purchase price	$	7.4
Private debt instrument⁽¹⁾	Discounted cash flow	$	6.2		Discount yield	Range - 11.87% - 12.32% Median - 12.08%
Private equity securities⁽¹⁾	Purchase price of recent transaction	$	4.7		Purchase price	7.74
Preferred stock⁽¹⁾	Purchase price of recent transaction	$	1.9		Purchase price	$	1.9
Private convertible debt instrument⁽¹⁾	Unit price of recent transaction	$	1.4		Purchase price	7.74
Currency swaps⁽²⁾	Third party appraisal	$	1.2		Broker quote	$	1.2
Currency forwards⁽²⁾	Third party appraisal	$	0.7		Broker quote	$	0.7
Preferred stock⁽¹⁾	Purchase price of recent transaction	$	0.7		Purchase price	$	0.7
Equity warrants⁽²⁾	Option pricing model	$	0.6		Strike price	$	0.2
Private equity securities⁽¹⁾	Purchase price of recent transaction	$	0.3		Purchase price	$	0.3
Weather derivatives⁽²⁾	Third party appraisal	$	(1.0	)	Broker quote	$	(1.0	)
Contingent consideration	External valuation model	$	(22.9	)	Discounted future payments	$	(22.9	)

⁽¹⁾As of June 30, 2020, each asset type consists of one security.

⁽²⁾See Note 12 for discussion of derivative instruments.



(Millions, except share prices)	December 31, 2019
Description	Valuation Technique(s)	Fair value			Unobservable input
Private equity securities⁽¹⁾	Share price of recent transaction	$	32.5		Purchase share price	$	40.6
Loan participation⁽¹⁾	Purchase price of recent transaction	$	20.0		Purchase price	20.0
Preferred stock⁽¹⁾	Share price of recent transaction	$	17.5		Purchase price	$	7.74
Private equity securities⁽¹⁾	Multiple of GAAP book value	$	14.2		Book value multiple	0.9
Preferred stock⁽¹⁾	Purchase price of recent transaction	$	12.2		Purchase price	$	12.2
Private debt instrument⁽¹⁾	Purchase price of recent transaction	$	7.2		Purchase price	$	9.0
Weather derivatives⁽²⁾	Third party appraisal	$	7.0		Broker quote	$	7.0
Private equity securities⁽¹⁾	Purchase price of recent transaction	$	5.1		Purchase price	$	7.74
Preferred stock⁽¹⁾	Purchase price of recent transaction	$	4.8		Purchase price	$	4.80
Currency forwards⁽²⁾	Third party appraisal	$	2.7		Broker quote	$	2.7
Private equity securities⁽¹⁾	Purchase price of recent transaction	$	1.0		Purchase price	$	10.0
Equity warrants⁽²⁾	Option pricing model	$	0.4		Strike price	$	0.2
Private equity securities⁽¹⁾	Purchase price of recent transaction	$	0.3		Purchase price	$	0.3
Currency swaps⁽²⁾	Third party appraisal	$	(3.6	)	Broker quote	$	(3.6	)
Currency forwards⁽²⁾	Third party appraisal	$	(5.7	)	Broker quote	$	(5.7	)
Contingent consideration	External valuation model	$	(28.2	)	Discounted future payments	$	(28.2	)

⁽¹⁾As of December 31, 2019, each asset type consists of one security.

⁽²⁾See Note 12 for discussion of derivative instruments.

Schedule of financial instruments disclosed, but not carried at fair value

The following table includes financial instruments for which the carrying value differs from the estimated fair values at June 30, 2020 and December 31, 2019:



	June 30, 2020				December 31, 2019
(Millions)	Fair Value⁽¹⁾		Carrying Value		Fair Value⁽¹⁾		Carrying Value
Liabilities, Mezzanine equity, and Non-controlling interest:
2017 SEK Subordinated Notes	$	268.7	$	290.5	$	294.5	$	291.2
2016 SIG Senior Notes	$	367.4	$	394.4	$	394.5	$	394.0
Series B preference shares	$	179.5	$	206.2	$	186.4	$	223.0

⁽¹⁾Fair value estimated by internal pricing and considered a Level 3 measurement.