Enstar Group LTD - Annual Report: 2019 (Form 10-K)

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•	risks associated with implementing our business strategies and initiatives;

•	the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time;

•	risks relating to our acquisitions, including our ability to evaluate opportunities, successfully price acquisitions, address operational challenges, support our planned growth and assimilate acquired companies into our internal control system in order to maintain effective internal controls, provide reliable financial reports and prevent fraud;

•	risks relating to our active underwriting businesses, including unpredictability and severity of catastrophic and other major loss events, failure of risk management and loss limitation methods, the risk of a ratings downgrade or withdrawal, and cyclicality of demand and pricing in the insurance and reinsurance markets;

•	risks relating to the performance of our investment portfolio and our ability to structure our investments in a manner that recognizes our liquidity needs;

•	changes and uncertainty in economic conditions, including interest rates, inflation, currency exchange rates, equity markets and credit conditions, which could affect our investment portfolio, our ability to finance future acquisitions and our profitability;

•	the risk that ongoing or future industry regulatory developments will disrupt our business, affect the ability of our subsidiaries to operate in the ordinary course or to make distributions to us, or mandate changes in industry practices in ways that increase our costs, decrease our revenues or require us to alter aspects of the way we do business;

•	risks relating to the variability of statutory capital requirements and the risk that we may require additional capital in the future, which may not be available or may be available only on unfavorable terms;

•	risks relating to the availability and collectability of our reinsurance;

•	losses due to foreign currency exchange rate fluctuations;

•	increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;

•	emerging claim and coverage issues;

•	lengthy and unpredictable litigation affecting the assessment of losses and/or coverage issues;

•	loss of key personnel;

•	the ability of our subsidiaries to distribute funds to us and the resulting impact on our liquidity;

•	our ability to comply with covenants in our debt agreements;

•	changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at management’s discretion;

•	operational risks, including system, data security or human failures and external hazards;

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•	risks relating to our ability to obtain regulatory approvals, including the timing, terms and conditions of any such approvals, and to satisfy other closing conditions in connection with our acquisition agreements, which could affect our ability to complete acquisitions;

•	risks relating to our subsidiaries with liabilities arising from legacy manufacturing operations;

•	tax, regulatory or legal restrictions or limitations applicable to us or the insurance and reinsurance business generally;

•	changes in tax laws or regulations applicable to us or our subsidiaries, or the risk that we or one of our non-U.S. subsidiaries become subject to significant, or significantly increased, income taxes in the United States or elsewhere;

•	changes in Bermuda law or regulation or the political stability of Bermuda; and

•	changes in accounting policies or practices.

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•	Atrium Underwriting Group Limited and its subsidiaries ("Atrium"), which manage and underwrite specialist insurance and reinsurance business for Lloyd’s Syndicate 609; and

•	StarStone Insurance Bermuda Limited and its subsidiaries ("StarStone"), which is an A.M. Best A- rated global specialty insurance group with multiple underwriting platforms.

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•	engage in highly disciplined acquisition, management and (re)insurance practices across a diverse portfolio of loss reserves;

•	seek investment risk where it is adequately rewarded;

•	maintain reserving risk at low to moderate levels;

•	via active underwriting segments, take on underwriting risks across a balanced range of select specialty lines where the expected margins compensate for the risk and/or the costs of risk mitigation; and

•	maintain capital, liquidity, credit, operational and regulatory risks at low levels.

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•	Risks relating to the increased use of letters of credit by our subsidiaries to satisfy collateral obligations in our reinsurance and run-off transactions;

•	Risks relating to changes in Bermuda solvency capital eligibility requirements;

•	Risks relating to cybersecurity and data privacy;

•	Risks relating to the transition from LIBOR;

•	Risks relating to our claims management activities, including social inflation, increased litigation funding, and laws that impose absolute liability for certain types of claims;

•	Risks relating to climate change, including as a result of our investments in companies that may be exposed to "transition risk" and

•	Risks arising from global pandemics, such as coronavirus.

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•	Risks Relating to our Insurance Businesses

•	Risks Relating to our Acquisitions

•	Risks Relating to Liquidity and Capital Resources

•	Risks Relating to our Investments

•	Risks Relating to Laws and Regulations

•	Risks Relating to our Operations

•	Risks Relating to Taxation

•	Risks Relating to Ownership of our Shares

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•	exposure to claims arising out of unpredictable natural and man-made catastrophic events (including hurricanes, windstorms, tsunamis, severe weather, earthquakes, floods, fires, droughts, explosions, environmental contamination, acts of terrorism, cyber events and war or political unrest);

•	changing climate patterns and ocean temperature conditions that could increase the frequency and severity of catastrophe events and natural disasters to which we have loss exposure;

•	failure of our risk management and loss limitation methods (described in "Item 1. Business - Enterprise Risk Management") to adequately manage our loss exposure or provide sufficient protection against losses;

•	the intense competition for business in the insurance and reinsurance industries, including competition from major global insurance and reinsurance companies and underwriting syndicates that may have greater experience and resources than our companies or that may be more highly rated than our companies, or competition resulting from industry consolidation;

•	dependence on a limited number of brokers, managing general agents and other third parties to support our business, both in terms of the volume of business we rely on them to place and the credit risk we assume from them; and

•	susceptibility to the effects of inflation due to premiums being established before the ultimate amounts of losses and LAE are known.

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•	the value of liabilities assumed being greater than expected;

•	the value of assets or our anticipated return on assets being lower than expected or diminishing because of credit defaults, changes in interest rates, or delays in implementation of our intended investment strategies;

•	funding cash flow shortages that may occur if anticipated revenues are not realized or are delayed, or if expenses are greater than anticipated;

•	integrating financial and operational reporting systems and internal controls, including assurance of compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and our reporting requirements under the Exchange Act;

•	leveraging our existing capabilities and expertise into the business acquired and establishing synergies within our organization;

•	funding increased capital needs and overhead expenses;

•	integrating technology platforms and managing any increased cybersecurity risk;

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•	obtaining and retaining management personnel required for expanded operations;

•	fluctuating foreign currency exchange rates relating to the assets and liabilities we may acquire;

•	goodwill and intangible asset impairment charges; and

•	complying with applicable laws and regulations.

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•	announcements with respect to an acquisition or investment;

•	changes in the value of our assets;

•	our financial condition, performance and prospects, including our quarterly and annual operating results;

•	sales, or the possibility or perception of future sales, by our existing shareholders;

•	changes in general conditions in the economy and the insurance industry;

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•	economic, financial, geopolitical, regulatory or judicial events that affect us or the financial markets generally; and

•	adverse press or news announcements.

•	whether dividends have been declared and are likely to be declared on the preferred shares from time to time;

•	whether the ratings on the depositary shares representing our preferred shares provided by any ratings agency have changed;

•	changes in our credit ratings or the ratings of our insurance subsidiaries’ financial strength and claims paying ability published by major credit ratings agencies;

•	the amount of total indebtedness we have outstanding;

•	the level, direction and volatility of market interest rates generally; and

•	the market for similar securities.

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(1)	Includes shares withheld from employees in order to facilitate the payment of withholding taxes on restricted shares granted pursuant to our equity incentive plan. The shares are calculated at their fair market value, as determined by reference to the closing price of our ordinary shares on the vesting date.

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•	Atrium has been a consistent top-quartile performing Lloyd's business and is currently seeing market opportunities that are resulting in an increase to premiums written.

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StarStone, with the strong support from its shareholders, has undertaken a significant re-positioning of its underwriting portfolio, resulting in lower premiums written in 2019. StarStone's focus is to achieve consistent underwriting profitability from its core lines of business. We believe StarStone is better positioned for the future and we expect that StarStone will seek to write more premiums through selective growth opportunities.

•	Our significant strategic investments include Enhanzed Re, Monument Re, AmTrust, amongst others, more fully described in Note 21 - "Related Party Transactions" in the notes to our consolidated financial statements included within Item 8 of this Annual Report on Form 10-K.

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•	Consolidated net earnings of $902.2 million and basic and diluted earnings per share of $42.00 and $41.43, respectively;

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Non-GAAP operating income of $553.4 million and diluted non-GAAP operating income per ordinary share of $25.42. For a reconciliation of non-GAAP operating income to net earnings (loss) calculated in accordance with GAAP and diluted non-GAAP operating income per ordinary share to diluted net earnings (loss) per ordinary share calculated in accordance with GAAP, see "Non-GAAP Financial Measure" above;

•	Net earnings from Non-life Run-off segment of $1,059.8 million;

•	Combined ratio of 90.6% for our Atrium segment, with net premiums earned of $164.1 million.

•	Combined ratio of 103.4% for StarStone's core business lines, and 111.9% for StarStone Group after intragroup reinsurance cessions.

•	Net investment income of $321.3 million and net realized and unrealized gains of $1,031.4 million.

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•	Total cash and investments of $14,263.0 million;

•	Total reinsurance balances recoverable on paid and unpaid losses of $2,379.9 million;

•	Total assets of $19,363.3 million;

•	Total gross and net reserves for losses and LAE of $10,429.2 million and $8,047.1 million, respectively. In our Non-life Run-off operations during 2019, gross and net reserves acquired and assumed were $2,109.1 million and $1,587.0 million, respectively;

•	Total capital under management of $6,486.3 million, including common equity of $4,332.2 million, preferred equity of $510.0 million, noncontrolling interests of $453.0 million, and debt of $1,191.2 million; and

•	Diluted book value per ordinary share of $197.93, an annual increase of 26.9%.

•	Non-life Run-off Segment - Our Non-life Run-off segment is the predominant driver of our results, contributing $1,059.8 million of net income to our consolidated results in 2019, an increase of $1,034.6 million compared to 2018, primarily due to net realized and unrealized gains on both our fixed income portfolio and our other investments;

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Higher Net Investment Income - Total net investment income increased by $50.6 million in 2019, compared to 2018. The increase was primarily attributable to an increase in average invested assets and an increase in the book yield we obtained on our assets. The increase in average invested assets was primarily due to the new business we acquired by completing the Morse TEC, Zurich, Maiden Re Bermuda, Amerisure and AmTrust RITC transactions in 2019. The increase in the book yield was primarily due to the contractual yield received on the 2019 transactions and our asset allocation strategies;

•	Atrium - Net earnings attributable to the Atrium segment were $12.1 million in 2019, compared to $9.0 million in 2018. The combined ratio in 2019 was 90.6%, compared to 94.5% in 2018, and the improvement was primarily driven by a lower operating expense ratio;

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StarStone - The StarStone segment results improved by $57.8 million, with net losses of $100.7 million in 2019, compared to net losses of $158.6 million in 2018. The decrease in net losses was primarily due to net realized and unrealized gains on investments in 2019, compared to net realized and unrealized losses on investments in 2018. Included in the segment results, the combined ratio for the StarStone Group was 111.9% in 2019 compared to 125.3% in 2018. StarStone has been repositioning the underwriting portfolio, resulting in significant improvement in the profitability of the core lines to achieve a combined ratio of 103.4%. The segment's underwriting result was impacted by large current year loss activity predominantly related to exited lines, and prior year adverse loss development;

•	Other Activities - Net losses attributable to our other activities were $69.0 million in 2019, compared to $38.0 million in 2018. The increase in net losses was primarily driven by the dividends on our preferred shares and largely related to increased performance-based compensation due to higher net earnings.

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Net Realized and Unrealized Gains (Losses) - In 2019, net realized and unrealized gains were $1,031.4 million, compared to net losses of $412.9 million in 2018. The net realized and unrealized gains in 2019 were primarily attributable to an increase in the valuation of our fixed maturity investments due to declining interest rates and tighter credit spreads and gains on our other investments primarily due to strong performance in the global equity markets. Many insurance companies predominantly use available-for-sale accounting where unrealized amounts are recorded directly to shareholders’ equity and therefore do not impact earnings. Unrealized amounts would only become realizable in the event of a sale of the specific securities prior to maturity or a credit default. We have historically utilized trading accounting which is reflected

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Noncontrolling Interest - Net (earnings) losses attributable to noncontrolling interest is the share of results from those subsidiary companies in which there are either noncontrolling interests or redeemable noncontrolling interests. In 2019, the net loss attributable to noncontrolling interest was $9.9 million, compared to net loss attributable to noncontrolling interest of $62.1 million in 2018. The reduction in losses attributable to noncontrolling interest was primarily due to an improvement in StarStone, as discussed above;

•	Income Taxes - We recorded an income tax expense of $4.4 million in 2019, compared to an income tax benefit of $6.1 million in 2018, a change of $10.6 million. Our effective tax rate was 0.5% in 2019 compared with 2.8% in 2018, primarily relating to the geographic distribution of our pre-tax net earnings (losses) between our taxable and non-taxable jurisdictions in 2018; and

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Our non-GAAP operating income, which excludes the impact of unrealized losses on fixed maturity securities and other items, was $553.4 million for the year ended December 31, 2019, an increase of $491.8 million from non-GAAP operating income of $61.6 million for the year ended December 31, 2018. The increase was primarily attributable to our other investments results. For a reconciliation of non-GAAP operating income to net earnings (loss) calculated in accordance with GAAP, see "Non-GAAP Financial Measures" above.

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(1)	Net change in case and LAE reserves comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims.

(2)	Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

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(1)	Refer to "Underwriting Ratios" for a description of how these ratios are calculated.

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(1)	Refer to "Underwriting Ratios" for a description of how these ratios are calculated.

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•	Underwriting income was $3.6 million in 2019, compared to $4.3 million in 2018, a decrease of $0.7 million.

•	Investment results are separately discussed in the "Investments Results - Consolidated" section.

•	Corporate expenses were $45.9 million in 2019, compared to $28.1 million in 2018, an increase of $17.8 million, primarily due to an increase in performance-related compensation as a result of higher consolidated net earnings in 2019 compared to 2018.

•	Interest income was $10.0 million in 2019, compared to $5.0 million in 2018, an increase of $5.0 million. This represents the elimination of interest expense between our reportable segments.

•	In 2019, we paid $35.9 million of dividends on our Series D and Series E Preferred Shares compared to $12.1 million in 2018. On June 28, 2018, we issued 16,000 Series D Preferred Shares with an aggregate liquidation value of $400.0 million. On November 21, 2018, we issued 4,400 Series E Preferred Shares with an aggregate liquidation value of $110.0 million.

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•	To follow an investment strategy designed to emphasize the security and growth of our invested assets that also meet our credit quality and diversification objectives.

•	To provide sufficient liquidity for the prompt payment of claims and contract liabilities.

•	To seek superior risk-adjusted returns, by allocating a portion of our portfolio to non-investment grade securities in accordance with our investment guidelines.

•	To consider the duration characteristics of our liabilities in determining the extent to which we correlate with assets of comparable duration depending on our other investment strategies and to the extent practicable.

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net realized and unrealized gains on fixed income securities, including fixed income securities within our funds held portfolios, of $534.7 million in 2019, compared to net realized and unrealized losses of $243.1 million in 2018, an increase of $777.8 million, primarily driven by higher valuations due to declining interest rates and tighter credit spreads in the current period, compared to lower valuations in the comparative period due to higher interest rates and wider credit spreads;

•	net realized and unrealized gains on equity securities of $55.0 million in 2019, compared to net unrealized losses of $5.8 million in 2018, an increase of $60.8 million, primarily driven by a more favorable movement in global equity markets in 2019 compared to the comparative period; and

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net realized and unrealized gains on other investments of $441.6 million in 2019, compared to net realized and unrealized losses of $164.0 million in 2018, representing a change of $605.6 million. The unrealized gains in 2019 primarily comprised unrealized gains in our hedge funds, equity funds, fixed income funds and private equity funds, principally driven by declining interest rates, tighter credit spreads, and a more favorable movement in global equity markets in 2019. The unrealized losses in 2018 primarily comprised unrealized losses in our equity funds, call options on equity, hedge funds, fixed income funds and CLO equities, partially offset by unrealized gains on our private debt and private equities.

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(1)

The reserves for losses and LAE represent management’s estimate of the ultimate cost of settling losses. The estimation of losses is based on various complex and subjective judgments. Actual losses paid may differ, perhaps significantly, from the reserve estimates reflected in our financial statements. Similarly, the timing of payment of our estimated losses is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid in any such period can be significantly different from the amounts disclosed above. The amounts in the above table represent our estimates of known liabilities as of December 31, 2019 and do not take into account corresponding reinsurance recoverable amounts that would be due to us. Furthermore, certain of the reserves included in the audited consolidated financial statements as of December 31, 2019 were acquired by us and initially recorded at fair value with subsequent amortization, whereas the expected payments by period in the table above are the estimated payments at a future time and do not reflect the fair value adjustment in the amount payable.

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•	To the extent that the nature of the acquired loss reserves are conducive to commutation, our aim is to settle the majority of the acquired loss reserves within a time frame of approximately five to seven years from the date of acquisition.

•	To the extent that acquired reserves are not conducive to commutation, we will instead adopt a disciplined claims management approach to pay only valid claims on a timely basis and endeavor to reduce the level of acquired LAE provisions by streamlining claims handling procedures.

•	previous commutations completed by existing portfolio companies with policyholders of the newly-acquired company;

•	nature of liabilities;

•	size of incurred loss reserves;

•	recent loss development history; and

•	targets for claims audits.

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•	Large loss advices and cash calls are provided to us as soon as practicable after an individual loss or claim is made or settled by the insured.

•	The remaining broker advices are issued monthly, quarterly or annually depending on the provisions of the individual policies or the ceding company’s practice.

•	For certain direct insurance policies where the claims are managed by Third Party Administrators (TPAs) and Managing General Agents (MGAs), loss bordereaux are received either monthly or quarterly depending on the arrangement with the TPA and MGA. Loss advices for direct insurance policies may be received from the broker, agent or directly from the insured.

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We closely monitor cedant loss reporting and, for those cedants identified as providing inadequate, untimely or unusual reporting of losses, we conduct, in accordance with the provisions of the insurance and reinsurance contracts, detailed claims audits at the insured’s or reinsured’s premises. Such claims audits have the benefit of validating advised claims, determining whether the cedant’s loss reserving practices and reporting are adequate and identifying potential loss reserving issues of which our actuaries need to be made aware. Any required adjustments to advised claims reserves reported by cedants identified during the claims audits will be recorded as an adjustment to the advised case reserve.

•	Onsite claims audits are often supplemented by further reviews by our internal and external legal advisors to determine the reasonableness of advised case reserves and, if considered necessary, an adjustment to the reported case reserve will be recorded.

•	Our actuaries project expected paid and incurred loss development for each class of business, which is monitored on a quarterly basis. Should actual paid and incurred development differ significantly from the expected paid and incurred development, we will investigate the cause and, in conjunction with our actuaries, consider whether any adjustment to total loss reserves is required.

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•	Our actuaries consider the quality of ceding company data as part of their ongoing evaluation of the liability for ultimate losses and LAE, and the methodologies they select for estimating ultimate losses inherently compensate for potential weaknesses in this data, including weaknesses in loss reports provided by cedants.

•	Gross, ceded and net incurred loss report - This report provides, for each reporting period, the total (including commuted policies) gross, ceded and net incurred loss development for each company and a commentary on each company’s loss development. The report highlights the causes of any unusual or significant loss development activity (including commutations).

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Actual versus expected gross incurred loss development schedule - This schedule provides a summary, and commentary thereon, of each company’s (excluding companies or portfolios of business acquired in the current year) non-commuted incurred gross losses compared to the estimate of the development of non-commuted incurred gross losses provided by our actuaries at the beginning of the year as part of the prior year’s reserving process.

•	Commutations summary schedule - This schedule summarizes all commutations completed during the year for all companies, and identifies the policyholder with which we commuted, the incurred losses settled by the commutation (comprising outstanding unpaid losses and case reserves) and the amount of the commutation settlement.

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Analysis of paid, incurred and ultimate losses - This analysis for each company, and in the aggregate, provides a summary of the gross, ceded and net paid and incurred losses and the impact of applying our actuaries’ recommended loss reserves. This report, reviewed in conjunction with the previous reports, provides an analytical tool to review each company’s incurred loss or gain and reduction in IBNR reserves to assess whether the ultimate reduction in loss reserves appears reasonable in light of known developments within each company.

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•	For example, if it were found that large settlements were consistently leading to large negative, or favorable, incurred losses upon settlement, it might be an indication that reserves on remaining exposures are redundant.

•	Conversely, if it were found that large settlements were consistently leading to large positive, or adverse, incurred losses upon settlement, it might be an indication—particularly if the size of the losses were increasing—that certain loss reserves on remaining exposures are deficient.

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•	the mix of product types (e.g., primary insurance, excess insurance, reinsurance of primary, excess of loss reinsurance, retrocession)

•	the average attachment point and limit of coverages (e.g., first-dollar primary versus umbrella over primary versus high-excess)

•	payment and reporting lags related to the international domicile of our subsidiaries as well as the difference in lags between primary, excess and reinsurance policies

•	payment and reporting pattern acceleration due to large "wholesale" settlements (e.g., policy buy-backs and commutations) pursued by us, and

•	lists of individual risks remaining and general trends within the legal and tort environments.

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•	Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.

•	Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data

•	Level 3 - Valuations based on unobservable inputs where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values.

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The discounted cash flow approach uses (i) estimated nominal cash flows based upon an appropriate payment pattern developed in accordance with standard actuarial techniques and (ii) a discount rate based upon a high quality rated corporate bond plus a credit spread for non-performance risk. The model uses corporate bond rates across the yield curve depending on the estimated timing of the future cash flows and specific to the currency of the risk.

•	The risk margin was calculated using the present value of the cost of capital. The cost of capital approach uses (i) projected capital requirements, (ii) multiplied by the risk cost of capital representing the return required for non-hedgeable risk based upon the weighted average cost of capital less investment income, and (iii) discounted using the weighted average cost of capital.

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An increase in the corporate bond rate or credit spread for non-performance risk would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the corporate bond rate or credit spread for non-performance risk would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

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An increase in the weighted average cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the weighted average cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

•	An increase in the risk cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the risk cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

•	An acceleration of the estimated payment pattern would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a deceleration of the estimated payment pattern would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

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(1)	Assumes 10% change in U.S. dollar relative to other currencies.

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Transaction Risk: The functional currency for the majority of our subsidiaries is the U.S. dollar. Within these entities, any fluctuations in foreign currency exchange rates relative to the U.S. dollar has a direct impact on the valuation of our assets and liabilities denominated in other currencies. All changes in foreign exchange rates, with the exception of non-U.S. dollar available-for-sale investments, are recognized in our consolidated statements of earnings. Changes in foreign exchange rates relating to non-U.S. dollar available-for-sale investments are recorded accumulated other comprehensive income (loss) in shareholders’ equity. Our subsidiaries with non-U.S. dollar functional currencies are also exposed to fluctuations in foreign currency exchange rates relative to their own functional currency.

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Translation Risk: Our net investments in certain European, British, and Australian subsidiaries whose functional currencies are the Euro, British pound and Australian dollar, respectively. The foreign exchange gain or loss resulting from the translation of their financial statements from functional currency into U.S. dollars is recorded in the cumulative translation adjustment account, which is a component of accumulated other comprehensive income (loss) in shareholders’ equity.

•	Seeking to match our liabilities under insurance and reinsurance policies that are payable in foreign currencies with assets that are denominated in such currencies, subject to regulatory constraints.

•	Selectively utilizing foreign currency forward contracts to mitigate foreign currency risk.

•	We may borrow to hedge the foreign currency exposure on our net investment in certain of our subsidiaries whose functional currency is denominated in non-U.S. dollars. This is referred to as a non-derivative hedge.

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•	Comparing the methodologies and assumptions used by the Company in estimating loss reserves and asbestos and environmental liabilities with generally accepted actuarial methodologies;

•	Evaluating loss development factors, expected loss ratios, and expected trends in claim frequency and severity, by comparing them to historical results and industry trends used in the estimation process of loss reserves;

•	Evaluating expected trends in claim frequency and severity, by comparing them to historical results and industry trends used in the estimation process of asbestos and environmental liabilities;

•	Developing an independent actuarial estimate of loss reserves and asbestos and environmental liabilities for selected lines of business;

•	Examining the Company’s internal or independent external actuarial analyses for the remaining lines of business by 1) analyzing claims development in the current year; and 2) evaluating changes in methodologies and assumptions from the prior year;

•	Evaluating the Company’s overall recorded loss reserves by assessing the movement of the recorded loss reserves within the Company’s range of actuarially determined reserves; and

•	Evaluating the Company’s overall recorded asbestos and environmental liabilities by assessing the movement of the recorded asbestos and environmental liabilities within the Company’s range of actuarially determined reserves.

•	Comparing the methodologies and assumptions used by the Company in estimating the nominal loss reserves with generally accepted actuarial methodologies;

•	Evaluating loss development factors and expected trends in claim frequency and severity, by comparing them to historical results and industry trends;

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•	Developing an independent actuarial estimate of the nominal loss reserves for selected lines of business;

•	Examining the Company’s internal and independent external actuarial analyses for the remaining lines of business by 1) analyzing claims development in the current year; and 2) evaluating changes in methodologies and assumptions from the prior year;

•	Evaluating the Company’s overall nominal loss reserves and assessing the movement of the nominal loss reserves within the Company’s range of actuarially determined reserves; and

•	Evaluating the projected payout, including timing, and amount of the nominal cash flows used to develop the fair value, by comparing the assumptions used with the assumptions applied in developing the nominal loss reserves.

•	Comparing the methodologies and assumptions used by the Company in estimating the nominal asbestos liabilities with generally accepted actuarial methodologies;

•	Evaluating expected trends in claim frequency and severity, by comparing them to historical results and industry trends;

•	Developing an independent actuarial estimate of nominal asbestos liabilities for selected lines of - business;

•	Examining the Company’s internal actuarial analysis for the remaining lines of business by analyzing claims development in the current year;

•	Developing independent actuarial estimates of the projected payout, including timing, and amount of asbestos liabilities; and

•	Evaluating the methodologies and assumptions used by the Company in determining the risk margin used in the estimation of the fair value of the acquired asbestos liabilities.

•	Evaluating the discount rate used in the estimation of the fair value of the asbestos liabilities by assessing the inputs into the discount rate.

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(i)	Non-life Run-off: This segment comprises the operations of our subsidiaries that are running off their property and casualty and other non-life business. It also includes our management business, which manages the run-off portfolios of third parties through our service companies;

(ii)

Atrium: Atrium Underwriters Ltd. is a managing general agent at Lloyd’s of London ("Lloyd's"), which manages Syndicate 609. Through a corporate capital vehicle, Atrium 5 Ltd., we provide 25% of the syndicate’s underwriting capacity and capital (with the balance provided by traditional Lloyd’s Names). Atrium specializes in a wide range of industry classes, including marine, aviation and transit, property and casualty binding authorities, reinsurance, accident and health and non-marine direct and facultative; and

(iii)	StarStone: StarStone is a global specialty insurer that underwrites a diverse range of property, casualty and specialty insurance through its operations in Bermuda, the United States, the United Kingdom, and Continental Europe. Certain business of StarStone placed into run-off at the time of our acquisition of StarStone is recorded in our Non-life Run-off segment.

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•	liability for losses and loss adjustment expenses ("LAE");

•	reinsurance balances recoverable on paid and unpaid losses;

•	defendant asbestos and environmental liabilities and related insurance balances recoverable;

•	valuation allowances on reinsurance balances recoverable and deferred tax assets;

•	impairment charges, including other-than-temporary impairments on investment securities classified as available-for-sale, and impairments on goodwill, intangible assets and deferred charge assets;

•	gross and net premiums written and net premiums earned;

•	fair value measurements of investments;

•	fair value estimates associated with accounting for acquisitions;

•	fair value estimates associated with loss portfolio transfer reinsurance agreements for which we have elected the fair value option; and

•	redeemable noncontrolling interests.

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•	Net losses paid: paid losses and LAE, net of related reinsurance recoveries.

•	Net change in case and LAE reserves: the change in case reserves and associated LAE, net of related reinsurance recoveries.

•	Net change in IBNR reserves: the change in IBNR reserves, net of related reinsurance recoveries.

•	Increase (reduction) in estimates of net ultimate losses: the total of net losses paid, net change in case and LAE reserves and the net change in IBNR. This includes the net impact of commutations and policy buybacks on the liability for losses and LAE reserves and reinsurance recoveries.

•	Increase (reduction) in provisions for unallocated LAE: the net change in our provision for unallocated LAE.

•	Amortization of deferred charge assets: the amortization of the deferred charge assets associated with assumed retroactive reinsurance contracts, where the estimated ultimate losses assumed at the inception of the contracts is greater than the premium consideration received.

•	Amortization of fair value adjustments: the amortization of the fair value adjustments associated with acquired companies, where the assumed losses and LAE reserves and the acquired reinsurance recoveries are fair valued on acquisition.

•

Changes in fair value - fair value option: the changes in the fair value for reinsurance agreements where we have elected the fair value option. The change in fair value component includes the changes in the discounted cash flows and risk margin. The underlying net losses paid, net change in case and LAE reserves and the net change in IBNR reserves relating to these reinsurance agreements for which we have elected the fair value option are included within the appropriate line items described above.

•	Net incurred losses and LAE: the total of increase (reduction) in estimates of net ultimate losses, increase (reduction) in provisions for unallocated LAE, amortization of deferred charge assets, amortization of fair value adjustments and changes in fair value - fair value option.

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•	Hedge funds may invest in a wide range of instruments, including debt and equity securities, and utilize various sophisticated strategies to achieve their objectives. We invest in a mixture of fixed income, equity and multi-strategy hedge funds.

•	Fixed income funds comprise a number of positions in diversified fixed income funds that are managed by third-party managers. Underlying investments vary from high-grade corporate bonds to non-investment grade senior secured loans and bonds, but are generally invested in liquid fixed income markets. These funds have regularly published prices.

•	Equity funds invest in a diversified portfolio of U.S. and international publicly-traded equity securities.

•	Private equity funds invest primarily in the financial services industry.

•	CLO equity funds invest primarily in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.

•	CLO equities comprise investments in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.

•	Private credit funds invest in direct senior or collateralized loans.

•	Others comprise of various investments including a real estate debt fund that invests primarily in European commercial real estate equity, call options on equities and a fund that provides loans to educational institutions throughout the United States and its territories.

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•	Non-Life Run-off - Presented by acquisition year, if significant, and further disaggregated, if significant, by line of business within that acquisition year. The disaggregated lines of business include General Casualty, Workers’ Compensation, Marine, Aviation and Transportation, Professional Indemnity / Directors & Officers and Motor.

•	Atrium - The loss development disclosures for our Atrium segment have not been disaggregated further by line of business as the segment comprised approximately only 2% of our total consolidated liability for losses and LAE as of December 31, 2019 and was, therefore, not considered material for further disaggregation.

•	StarStone - All the lines of business related to the StarStone segment have been included within the loss development disclosures below, namely, Casualty, Marine, Property, Aerospace and Workers’ Compensation.

•	The incurred loss development tables include both reported case reserves and IBNR liabilities, as well as cumulative paid losses;

•	Both the incurred and cumulative paid loss development tables include allocated LAE (i.e. claims handling costs allocated to specific individual claims) but exclude unallocated LAE (i.e. the costs associated with internal claims staff and third party administrators as well as consultants that cannot be allocated to specific individual claims);

•	The fair value adjustments related to business acquisitions are excluded from the loss development tables, however the undiscounted incurred losses, cumulative paid losses and allocated LAE related to business acquisitions are included in the loss development tables;

•	The fair value adjustments related to retroactive reinsurance agreements for which we have elected the fair value option are excluded from the loss development tables, however the undiscounted incurred losses, cumulative paid losses and allocated LAE related to retroactive reinsurance agreements for which we have elected the fair value option are included in the loss development tables;

•	The amounts relating to the amortization of deferred charge assets are excluded from the loss development tables;

•	The amounts relating to the increase (reduction) in provisions for unallocated LAE are excluded from the loss development tables;

•

In the incurred loss development tables, the incurred effect of agreeing a commutation or policy buyback is included in the period in which the commutation or policy buyback is contractually agreed. We reflect the net incurred loss development arising from a commutation or policy buyback in the fiscal year in which a commutation or policy buyback is contractually agreed, and the net incurred loss development is allocated to the appropriate accident year. The claim will generally have been adjusted throughout its lifetime and the amounts recorded in prior years (supplementary information) remain unchanged in our tables, such that the incurred amount that we recognize in the year in which a commutation or policy buyback is contractually agreed represents the effect of the commutation or policy buyback settlement compared to the carried net loss and LAE reserve balance in the prior year. We do not recast prior years to remove commuted or bought back

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In the cumulative paid losses tables, we reflect the amount of the commutation or policy buyback settlements in the year in which they are actually paid or received, and the net payment is allocated to the appropriate accident year. The claim or recoverable may have recorded payments or receipts throughout its lifetime and amounts recorded in prior years (supplementary information) remain unchanged in our tables, such that the amounts paid or received that we recognize in the year in which a commutation or policy buyback is paid or received represents the amount actually paid or received. We do not recast prior years to remove payments or receipts related to commutations or policy buybacks, as we consider commutations and policy buybacks a key component of our business and reflective of our ability to effectively manage acquired losses and LAE liabilities. Payments relating to commutations and policy buybacks are not adjusted in future years but the payments remain in our total cumulative paid losses;

•	The amounts included within the loss development tables for the years ended December 31, 2010 through to December 31, 2018 (April 1, 2014 through to December 31, 2018 in the case of StarStone since its date of acquisition), as well as the historical average annual percentage payout ratios as of December 31, 2019, are presented as supplementary information and are therefore unaudited;

•	All data presented within the loss development tables is net of reinsurance recoveries, excluding provisions for uncollectible reinsurance recoverables;

•

All data presented within the loss development tables is net of intercompany activity, including the Intra-Group Cessions within the StarStone segment. On May 14, 2018, we completed the acquisition of KaylaRe and subsequently eliminated all the related intercompany balances. In the loss development disclosures provided in our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017, the StarStone loss triangles were presented net of the external reinsurance provided by KaylaRe since it was not a consolidated subsidiary at that time. However, after the acquisition of KaylaRe in May 2018, the reinsurance arrangement with StarStone became an intercompany transaction and was eliminated on consolidation. In addition, the StarStone loss development disclosures relating to the prior years (supplementary information) were retrospectively recast as if KaylaRe had always been a consolidated subsidiary, to allow for comparability between fiscal years;

•	The IBNR reserves included within each incurred loss development table by accident year, reflect the net IBNR recorded as of December 31, 2019, including expected development on reported losses;

•

For the Non-life Run-off segment loss development tables, all information for both acquisitions and retroactive reinsurance agreements is presented prospectively. As the reserves are effectively re-underwritten at the date the reserves are acquired or assumed, we believe that the historical loss development prior to being acquired is not relevant to our own experience managing these reserves. In addition, the information required to prepare the loss development disclosures on a retrospective basis is not always available to us and a mixed approach would result in loss development tables that are not entirely reflective of the actual loss development;

•

For the Non-life Run-off segment we have also presented the net incurred and paid losses and ALAE information by calendar year as well as IBNR and claim counts for accident years older than 10 years on a single row within the loss development tables. This presentation differs from the typical approach where only the net outstanding losses and LAE reserves are presented as a reconciling item at the bottom of the loss development tables. The additional detailed disclosures are provided on a voluntary basis and the inclusion of the disclosures is to provide additional information to the users of our financial statements and to also enable the reconciliation of our total loss reserves by acquisition year and by significant line of business.

•	For the StarStone segment loss development tables, all information has been presented on a prospective basis from the date of our acquisition of StarStone, which was effective on April 1, 2014. Providing pre-acquisition incurred and paid losses by accident year for years prior to 2014 was determined to be impracticable due to significant data limitations; and

•	For the Atrium segment loss development tables, all information has been presented on a retrospective basis.

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•

Non-Life Run-off - The claim frequency information for the exposures included within our Non-life Run-off lines of business includes direct and assumed open and closed claims by accident year at the claimant level. Reported claims that are closed without a payment are included within our cumulative number of reported claims because we typically incur claim adjustment expenses on them prior to their closure. The claim count numbers exclude counts related to claims within policy deductibles where the insured is responsible for the payment of losses within the deductible layer. Individual claim counts related to certain assumed reinsurance contracts such as excess-of-loss and quota share treaties are not available to us, and the losses arising from these treaties have been treated as single claims for the purposes of determining claim counts. Therefore, each treaty year within the reinsurance contract is deemed a single claim because the detailed underlying individual claim information is generally not reported to us by our cedents; and

•

StarStone and Atrium - The claim frequency information is determined at the claimant level for the exposures within the lines of business related to these segments. Our claims system assigns a unique claim identifier to each reported claim we receive. Each unique claim identifier is deemed to be a single claim, irrespective of whether the claim remains open or has been closed with or without payment. For certain insurance facilities and business produced or managed by managing general agents, coverholders and third party administrators where the underlying claims data is reported to us in an aggregated format, the information necessary to provide cumulative claims frequency is not available. In such cases, we typically record a “block” claim in our system. This also applies to a small amount of assumed reinsurance business that we write where, similarly, the underlying claims data is reported to us in an aggregated format. In such instances, each assumed reinsurance contract is deemed a single claim.

•

Claim counts are presented only on a reported and not on an ultimate basis. Therefore, reported claim counts include open claims which have outstanding reserves but exclude IBNR claims. As such the reported claims are consistent with reported losses, which can be calculated by subtracting IBNR losses from incurred losses. However, the reported claim counts are inconsistent with the losses in the incurred loss development tables, which include IBNR losses, and to losses in the paid loss development tables, which exclude outstanding reserves;

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•	Reported claim counts have not been adjusted for ceded reinsurance, which may distort any measures of frequency or severity;

•	For lines of business that have a mix of primary and excess layer exposures, such as our general casualty and workers’ compensation lines of business, the reported claim counts may fluctuate from period to period between exposure layers, thereby distorting any measure of frequency and severity; and

•	The use of our reported claim frequency information to project ultimate loss payouts by disaggregated disclosure category or line of business may not be as meaningful as claim count information related to individual contracts at a more granular level.

•

Non-life Run-off - The annual percentage payout disclosures for our Non-life Run-off segment are based on the payout of incurred claims by age, net of reinsurance. For our Non-life Run-off segment, claims aging reflects the number of years that have lapsed since the original acquisition of the related net liability for losses and LAE reserves to the date the claim is paid. There may be occasions where, due to our claims management strategies (including commutations and policy buy-backs) or due to the timing of claims payments relative to the associated recovery, the cash received from reinsurance recoveries is greater than the cash paid out to our claimants, (i.e. a net recovery rather than a net payout for a particular calendar year), thereby resulting in a negative annual percentage payout for that calendar year.

•	Atrium and StarStone - The average annual percentage payout disclosures for our Atrium and StarStone segments are based on the payout of incurred claims by age, net of reinsurance.

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•	Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.

•	Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•	Level 3 - Valuations based on unobservable inputs where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values.

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•

U.S. government and agency securities consist of securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Non-U.S. government securities consist of bonds issued by non-U.S. governments and agencies along with supranational organizations. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. These are considered to be observable market inputs and, therefore, the fair values of these securities are classified as Level 2.

•

Corporate securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark yields, and industry and market indicators. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2. Where pricing is unavailable from pricing services, such as in periods of low trading activity or when transactions are not orderly, we obtain non-binding quotes from broker-dealers. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.

•	Municipal securities consist primarily of bonds issued by U.S.-domiciled state and municipal entities. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes and benchmark yields. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2.

•

Asset-backed securities consist primarily of investment-grade bonds backed by pools of loans with a variety of underlying collateral. Residential and commercial mortgage-backed securities include both agency and non-agency originated securities. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades, benchmark yields, prepayment speeds and default rates. The fair values of these securities are classified as Level 2 if the significant inputs are

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•	For our investments in hedge funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

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Our investments in fixed income funds and equity funds are valued based on a combination of prices from independent pricing services, external fund managers or third-party administrators. For the publicly available prices we have classified the investments as Level 2. For the non-publicly available prices we are using NAV as a practical expedient and therefore these have not been categorized within the fair value hierarchy.

•	For our investments in private equity funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

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We measure the fair value of our direct investment in CLO equities based on valuations provided by independent pricing services, our external CLO equity manager, and valuations provided by the broker or lead underwriter of the investment (the "broker"). Our CLO equity investments have been classified as Level 3 due to the use of unobservable inputs in the valuation and the limited number of relevant trades in secondary markets.

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•	For our investments in the CLO equity funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third party administrator. The fair value of these investments is measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

•	For our investments in private credit funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

•	Included within other is an investment in a real estate debt fund, for which we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair value of this investment is measured using the NAV as a practical expedient and therefore has not been categorized within the fair value hierarchy.

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An increase in the corporate bond rate or credit spread for non-performance risk would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the corporate bond rate or credit spread for non-performance risk would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

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An increase in the weighted average cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the weighted average cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

•	An increase in the risk cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the risk cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

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The duration of the liability and recoverable is adjusted every period to reflect actual net payments during the period and expected future payments. An acceleration of the estimated payment pattern, a decrease in duration, would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a deceleration of the estimated payment pattern, an increase in duration, would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

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•	the Series A shares were canceled in June 2016 in an internal reorganization as described below.

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the Series C shares were originally issued in connection with investment transactions in April and December of 2011. In addition, there were 66,520 Series C Non-Voting Ordinary Shares issued in March 2017 in connection with the exercise of warrants as described below. The Series C shares: (i) have all of the economic rights (including dividend rights) attaching to Voting Ordinary Shares but are non-voting except in certain limited circumstances; (ii) will automatically convert at a one-for-one exchange ratio (subject to adjustment for share splits, dividends, recapitalizations, consolidations or similar transactions) into Voting Ordinary Shares if the registered holder transfers them in a widely dispersed offering; (iii) may only vote on certain limited matters that would constitute a variation of class rights and as required under Bermuda law, provided that the aggregate voting power of the Series C shares with respect to any merger, consolidation or amalgamation will not exceed 0.01% of the aggregate voting power of our issued share capital; and (iv) require the registered holders’ written consent in order to vary the rights of the shares in a significant and adverse manner. During the three months ended March 31, 2017, 192,485 Series C Non-Voting Ordinary Shares were converted into Voting Ordinary Shares in a widely dispersed offering by their registered holders.

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the Series B and Series D shares were created in connection with the 2011 investment transactions, but no shares in these series are issued and outstanding. Holders of the Series C shares have the right to convert such shares, on a share-for-share basis, subject to certain adjustments, into Series D shares at their option. There is no economic difference in Series B, C or D shares, but there are slight differences in the conversion rights and the limited voting rights of each series.

•

there were 910,010 Series E shares issued and outstanding as of December 31, 2019. On May 14, 2018, 505,239 Series E non-voting shares were issued as consideration for the acquisition of KaylaRe Holdings Ltd, as described in Note 3 - "Acquisitions". The Series E shares have substantially the same rights as the Series C shares, except that (i) they are convertible only into Voting Ordinary Shares and (ii) they may only vote as required under Bermuda law. The Series E shares include all other Non-Voting Ordinary Shares authorized under our bye-laws but not classified as Series A, B, C or D Non-Voting Ordinary Shares.

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•	Investments in funds (carried within other investments) managed by Stone Point, with respect to which we recognized net unrealized gains (losses);

•	Investments in registered investment companies affiliated with entities owned by Trident or otherwise affiliated with Stone Point, with respect to which we recognized net unrealized gains (losses) and interest income;

•	Separate accounts managed by Eagle Point Credit Management, PRIMA Capital Advisors and SKY Harbor Capital Management, which are affiliates of entities owned by Trident, with respect to which we incurred management fees;

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•	Investments in funds (carried within other investments) managed by Sound Point Capital, an entity in which Mr. Carey has an indirect minority ownership interest and serves as a director, with respect to which we recognized net unrealized gains (losses);

•	Sound Point Capital has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;

•	Marble Point Capital, which is an affiliate of an entity owned by Trident, has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;

•	A separate account managed by Sound Point Capital, with respect to which we incurred management fees in prior periods; and

•	In the fourth quarter of 2018, we invested $25.0 million in Mitchell TopCo Holdings, the parent company of Mitchell International and Genex Services, as a co-investor alongside certain Trident funds.

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(1)	Original cost of fixed maturity securities is reduced by repayments and adjusted for amortization of premiums or accretion of discounts.

(2)	The difference in the amount of fixed maturities shown at fair value and the fixed maturities shown in our consolidated balance sheet relates to the fair value of $15.1 million as of December 31, 2019 for our investment in fixed maturities issued by affiliates of Stone Point. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.

(3)

The difference in the amount of equities shown at fair value and the equities shown in our consolidated balance sheet relates to the fair value of $96.8 million as of December 31, 2019 for our investment in a registered investment company affiliated with entities owned by Trident, $25.0 million as a co-investor alongside Stone Point and a $240.1 million investment in AmTrust. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.

(4)

The difference in the amount of other investments shown at fair value and the other investments shown in our consolidated balance sheet relates to the fair value of $1,741.4 million as of December 31, 2019 for our other investments in funds or companies owned by or affiliated with certain related parties. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.

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(1)	Credited to the related asset account.

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(a)	Financial Statements and Financial Statement Schedules: see Item 8 in Part II of this report.

(b)	Exhibits: see accompanying exhibit index that precedes the signature page of this report.

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