Edgar Filing: RENAISSANCERE HOLDINGS LTD

RNR 2015 Q1 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-14428

RENAISSANCERE HOLDINGS LTD.

(Exact Name Of Registrant As Specified In Its Charter)



Bermuda	98-014-1974
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

Renaissance House, 12 Crow Lane, Pembroke HM 19 Bermuda

(Address of Principal Executive Offices)

(441) 295-4513

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Q No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Q No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, as defined in Rule 12b-2 of the Act. Large accelerated filer Q, Accelerated filer o, Non-accelerated filer o, Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No Q

The number of Common Shares, par value US $1.00 per share, outstanding at May 4, 2015 was 46,052,001.

RENAISSANCERE HOLDINGS LTD.

TABLE OF CONTENTS



		Page
	NOTE ON FORWARD-LOOKING STATEMENTS	3
PART I
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets at March 31, 2015 (unaudited) and December 31, 2014	6
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014	7
	Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014	8
	Unaudited Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2015 and 2014	9
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	10
	Notes to the Consolidated Financial Statements	11
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	61
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	104
ITEM 4.	CONTROLS AND PROCEDURES	105
PART II
ITEM 1.	LEGAL PROCEEDINGS	106
ITEM 1A.	RISK FACTORS	106
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	107
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	107
ITEM 4.	MINE SAFETY DISCLOSURES	107
ITEM 5.	OTHER INFORMATION	107
ITEM 6.	EXHIBITS	108
SIGNATURES - RENAISSANCERE HOLDINGS LTD.		110

NOTE ON FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us.

In particular, statements using words such as “may”, “should”, “estimate”, “expect”, “anticipate”, “intend”, “believe”, “predict”, “potential”, or words of similar import generally involve forward-looking statements. For example, we may include certain forward-looking statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with regard to trends in results, prices, volumes, operations, investment results, margins, combined ratios, fees, reserves, market conditions, risk management and exchange rates. This Form 10-Q also contains forward-looking statements with respect to our business and industry, such as those relating to our strategy and management objectives, market standing and product volumes, competition and new entrants in our industry, industry capital, insured losses from loss events, government initiatives and regulatory matters affecting the reinsurance and insurance industries.

In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be considered as a representation by us or any other person that our objectives or plans will be achieved. Numerous factors could cause our actual results to differ materially from those addressed by the forward-looking statements, including the following:


•	our exposure to significant losses from catastrophic events and other exposures that we cover, which we expect to cause significant volatility in our financial results from time to time;


•	the inherent uncertainties in our reserving process, particularly in regards to large catastrophic events and longer tail casualty lines, the uncertainties of which we expect to increase as our product and geographical diversity increases;


•	the frequency and severity of catastrophic and other events which we cover could exceed our estimates and cause losses greater than we expect;


•	the risk of the lowering or loss of any of the financial strength, claims-paying or enterprise-wide risk management ratings of RenaissanceRe Holdings Ltd. (“RenaissanceRe”) or of one or more of our subsidiaries or joint ventures or changes in the policies or practices of the rating agencies;

•

risks associated with appropriately modeling, pricing for, and contractually addressing new or potential factors in loss emergence, such as the trend toward potentially significant global warming and other aspects of climate change which have the potential to adversely affect our business, any of which could cause us to underestimate our exposures and potentially adversely impact our financial results;


•	the risk that we might be bound to policyholder obligations beyond our underwriting intent, or unable to enforce our own intent in respect of retrocessional arrangements, including in each case due to emerging claims and coverage issues;


•	risks due to our increasing reliance on a small and decreasing number of reinsurance brokers and other distribution services for the preponderance of our revenue;

•

risks relating to operating in a highly competitive environment, which we expect to continue to increase over time due to new competition from traditional and non-traditional participants, particularly as capital markets products provide alternatives and replacements for more traditional reinsurance and insurance products, as new entrants or existing competitors attempt to replicate our business model, and as a result of consolidation in the (re)insurance industry;


•	the risk that our customers may fail to make premium payments due to us, as well as the risk of failures of our reinsurers, brokers or other counterparties to honor their obligations to us, including in regards to large catastrophic events, and also including their obligations to make third party payments for which we might be liable;


•	risks relating to deteriorating market conditions, including the risks of decreasing revenues, margins, capital efficiency and returns;


•	a contention by the Internal Revenue Service that Renaissance Reinsurance Ltd. (“Renaissance Reinsurance”), or any of our other Bermuda subsidiaries, is subject to U.S. taxation;


•	other risks relating to potential adverse tax developments, including potential changes to the taxation of inter-company or related party transactions, or potential changes to the tax treatment of investors in RenaissanceRe or our joint ventures or other entities we manage;

•

risks relating to adverse legislative developments that could reduce the size of the private markets we serve, or impede their future growth, including proposals to shift United States (“U.S.”) catastrophe risks to federal mechanisms; similar proposals at the state level in the U.S., including the risk of legislation in Florida to expand the reinsurance coverage offered by the Florida Hurricane Catastrophe Fund (“FHCF”) and the insurance policies written by Citizens Property Insurance Corporation (“Citizens”), or failing to implement reforms to reduce such coverage; risks of adverse legislation in relation to U.S. flood insurance or the failure to implement reform legislation; and the risk that new legislation will be enacted in the international markets we serve which might reduce market opportunities in the private sector, weaken our customers or otherwise adversely impact us;


•	risks associated with our investment portfolio, including the risk that our investment assets may fail to yield attractive or even positive results; and the risk that investment managers may breach our investment guidelines, or the inability of such guidelines to mitigate investment risks;


•	risks associated with implementing our business strategies and initiatives, including risks related to strategic transactions, developing or enhancing the operations, controls and other infrastructure necessary in respect of our more recent, new or proposed initiatives, and the risk that we may fail to succeed in our business or financing plans for these initiatives;


•	risks that certain of our new or potentially expanding business lines could have a significant negative impact on our financial results or cause significant volatility in our results for any particular period;


•	risks associated with potential for loss of services of any one of our key senior officers, the risk that we fail to attract or retain the executives and employees necessary to manage our business, and difficulties associated with the transition of members of our senior management team for new or expanded roles necessary to execute our strategic and tactical plans;


•	risks relating to the inability, or delay, in the claims-paying ability of Citizens, FHCF or of private market participants in Florida, particularly following a large windstorm or multiple smaller storms, which we believe would weaken or destabilize the Florida market and give rise to an unpredictable range of impacts which might be adverse to us, perhaps materially so;


•	risks associated with the management of our operations as our product and geographical diversity increases, including the potential inability to allocate sufficient resources to our strategic and tactical plans or to address additional industry or regulatory developments and requirements;

•

changes in economic conditions, including interest rate, currency, equity and credit conditions which could affect our investment portfolio or declines in our investment returns for other reasons which could reduce our profitability and hinder our ability to pay claims promptly in accordance with our strategy, which risks we believe are currently enhanced in light of the current macroeconomic uncertainty and the recent period of economic uncertainty, both globally, particularly in respect of Eurozone countries and companies, and in the U.S.;


•	risks associated with highly subjective judgments, such as valuing our more illiquid assets, and determining the impairments taken on our investments, all of which impact our reported financial position and operating results;

•

risks associated with our retrocessional reinsurance protection, including the risks that the coverages and protections we seek may become unavailable or only available on unfavorable terms, that the forms of retrocessional protection available in the market on acceptable terms may give rise to more risk in our net portfolio than we find desirable or that we correctly identify, or that we are otherwise unable to cede our own assumed risk to third parties; and the risk that providers of protection do not meet their obligations to us or do not do so on a timely basis;


•	risks associated with inflation, which could cause loss costs to increase, and impact the performance of our investment portfolio, thereby adversely impacting our financial position or operating results;


•	operational risks, including system or human failures, which risks could result in our incurring material losses;


•	risks in connection with our management of capital on behalf of investors in joint ventures or other entities we manage, such as failing to comply with complex laws and regulations relating to the management of such capital or the potential rights of third party investors, which failure could result in our incurring significant liabilities, penalties or other losses;


•	risks that we may require additional capital in the future, particularly after a catastrophic event or to support potential growth opportunities in our business, which may not be available or may be available only on unfavorable terms;


•	risks relating to our potential failure to comply with covenants in our debt agreements, which failure could provide our lenders the right to accelerate our debt which would adversely impact us;


•	the risk of potential challenges to the claim of exemption from insurance regulation of RenaissanceRe and certain of our subsidiaries in certain jurisdictions under certain current laws and the risk of increased global regulation of the insurance and reinsurance industry;


•	risks relating to the inability of our operating subsidiaries to declare and pay dividends, which could cause us to be unable to pay dividends to our shareholders or to repay our indebtedness;


•	the risk that there could be regulatory or legislative changes adversely impacting us, as a Bermuda-based company, relative to our competitors, or actions taken by multinational organizations having such an impact;


•	risks arising out of possible changes in the distribution or placement of risks due to increased consolidation of customers or insurance and reinsurance brokers;


•	risks relating to changes in regulatory regimes and/or accounting rules, which could result in significant changes to our financial results, including but not limited to, the European Union (“EU”) directive concerning capital adequacy, risk management and regulatory reporting for insurers; and


•	risks relating to our acquisition of Platinum Underwriters Holdings, Ltd. (“Platinum”), including risks that our future financial performance may differ from projections, risks relating to integration challenges and costs, and other risks that we may not be able to effectively manage our expanded operations.

The factors listed above should not be construed as exhaustive. Certain of these risk factors and others are described in more detail from time to time in our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2014. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Balance Sheets

(in thousands of United States Dollars, except per share amounts)



	March 31, 2015		December 31, 2014
Assets	(Unaudited)		(Audited)
Fixed maturity investments trading, at fair value (Amortized cost $5,960,109 and $4,749,613 at March 31, 2015 and December 31, 2014, respectively)	$	5,982,843	$	4,756,685
Fixed maturity investments available for sale, at fair value (Amortized cost $22,156 and $23,772 at March 31, 2015 and December 31, 2014, respectively)	25,086		26,885
Short term investments, at fair value	1,775,819		1,013,222
Equity investments trading, at fair value	261,656		322,098
Other investments, at fair value	514,906		504,147
Investments in other ventures, under equity method	123,743		120,713
Total investments	8,684,053		6,743,750
Cash and cash equivalents	557,618		525,584
Premiums receivable	866,418		440,007
Prepaid reinsurance premiums	233,062		94,810
Reinsurance recoverable	82,696		66,694
Accrued investment income	40,583		26,509
Deferred acquisition costs	146,053		110,059
Receivable for investments sold	121,530		52,390
Other assets	273,851		135,845
Goodwill and other intangible assets	281,334		7,902
Total assets	$	11,287,198	$	8,203,550
Liabilities, Noncontrolling Interests and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses	$	2,781,568	$	1,412,510
Unearned premiums	983,137		512,386
Debt	826,774		249,522
Reinsurance balances payable	495,045		454,580
Payable for investments purchased	217,986		203,021
Other liabilities	231,968		374,108
Total liabilities	5,536,478		3,206,127
Commitments and Contingencies
Redeemable noncontrolling interest	968,431		1,131,708
Shareholders’ Equity
Preference shares: $1.00 par value – 16,000,000 shares issued and outstanding at March 31, 2015 (December 31, 2014 – 16,000,000)	400,000		400,000
Common shares: $1.00 par value – 46,025,698 shares issued and outstanding at March 31, 2015 (December 31, 2014 – 38,441,972)	46,026		38,442
Additional paid-in capital	754,941		—
Accumulated other comprehensive income	3,342		3,416
Retained earnings	3,577,980		3,423,857
Total shareholders’ equity attributable to RenaissanceRe	4,782,289		3,865,715
Total liabilities, noncontrolling interests and shareholders’ equity	$	11,287,198	$	8,203,550

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Operations

For the three months ended March 31, 2015 and 2014

(in thousands of United States Dollars, except per share amounts) (Unaudited)



	Three months ended
	March 31, 2015			March 31, 2014
Revenues
Gross premiums written	$	643,578		$	705,260
Net premiums written	$	404,035		$	450,347
Increase in unearned premiums	(107,275		)	(163,813		)
Net premiums earned	296,760			286,534
Net investment income	39,707			38,948
Net foreign exchange losses	(3,130		)	(1,061		)
Equity in earnings of other ventures	5,295			4,199
Other income	1,539			62
Net realized and unrealized gains on investments	41,749			14,927
Total revenues	381,920			343,609
Expenses
Net claims and claim expenses incurred	76,853			58,915
Acquisition expenses	43,401			33,700
Operational expenses	45,621			42,624
Corporate expenses	45,598			4,545
Interest expense	5,251			4,293
Total expenses	216,724			144,077
Income before taxes	165,196			199,532
Income tax benefit (expense)	47,904			(166		)
Net income	213,100			199,366
Net income attributable to noncontrolling interests	(39,662		)	(42,768		)
Net income attributable to RenaissanceRe	173,438			156,598
Dividends on preference shares	(5,595		)	(5,595		)
Net income available to RenaissanceRe common shareholders	$	167,843		$	151,003
Net income available to RenaissanceRe common shareholders per common share – basic	$	4.18		$	3.61
Net income available to RenaissanceRe common shareholders per common share – diluted	$	4.14		$	3.56
Dividends per common share	$	0.30		$	0.29

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2015 and 2014

(in thousands of United States Dollars) (Unaudited)



	Three months ended
	March 31, 2015			March 31, 2014
Comprehensive income
Net income	$	213,100		$	199,366
Change in net unrealized gains on investments	(74		)	(168		)
Comprehensive income	213,026			199,198
Net income attributable to noncontrolling interests	(39,662		)	(42,768		)
Comprehensive income attributable to noncontrolling interests	(39,662		)	(42,768		)
Comprehensive income attributable to RenaissanceRe	$	173,364		$	156,430
Disclosure regarding net unrealized gains
Total net realized and unrealized holding (gains) losses on investments and net other-than-temporary impairments	$	(23	)	$	(168	)
Net realized gains on fixed maturity investments available for sale	(51		)	—
Change in net unrealized gains on investments	$	(74	)	$	(168	)

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended March 31, 2015 and 2014

(in thousands of United States Dollars) (Unaudited)



	Three months ended
	March 31, 2015			March 31, 2014
Preference shares
Balance – January 1	$	400,000		$	400,000
Balance – March 31	400,000			400,000
Common shares
Balance – January 1	38,442			43,646
Issuance of shares	7,435			—
Repurchase of shares	—			(2,978		)
Exercise of options and issuance of restricted stock awards	149			188
Balance – March 31	46,026			40,856
Additional paid-in capital
Balance – January 1	—			—
Issuance of shares	754,384			—
Repurchase of shares	—			4,179
Change in noncontrolling interests	(260		)	(35		)
Exercise of options and issuance of restricted stock awards	817			(4,144		)
Balance – March 31	754,941			—
Accumulated other comprehensive income
Balance – January 1	3,416			4,131
Change in net unrealized gains on investments	(74		)	(168		)
Balance – March 31	3,342			3,963
Retained earnings
Balance – January 1	3,423,857			3,456,607
Net income	213,100			199,366
Net income attributable to noncontrolling interests	(39,662		)	(42,768		)
Repurchase of shares	—			(278,252		)
Dividends on common shares	(13,720		)	(11,899		)
Dividends on preference shares	(5,595		)	(5,595		)
Balance – March 31	3,577,980			3,317,459
Total shareholders’ equity	$	4,782,289		$	3,762,278

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

For the three months ended March 31, 2015 and 2014

(in thousands of United States Dollars) (Unaudited)



	Three months ended
	March 31, 2015			March 31, 2014
Cash flows provided by operating activities
Net income	$	213,100		$	199,366
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Amortization, accretion and depreciation	4,813			8,305
Equity in undistributed earnings of other ventures	(3,676		)	(1,204		)
Net realized and unrealized gains on investments	(41,749		)	(14,927		)
Net unrealized gains included in net investment income	(4,885		)	(4,980		)
Change in:
Premiums receivable	(193,690		)	(194,701		)
Prepaid reinsurance premiums	(130,801		)	(141,620		)
Reinsurance recoverable	(12,274		)	2,063
Deferred acquisition costs	(35,914		)	(40,206		)
Reserve for claims and claim expenses	(28,787		)	(30,847		)
Unearned premiums	238,075			305,433
Reinsurance balances payable	35,995			175,622
Other	(158,812		)	(215,665		)
Net cash (used in) provided by operating activities	(118,605		)	46,639
Cash flows provided by investing activities
Proceeds from sales and maturities of fixed maturity investments trading	2,075,678			1,996,035
Purchases of fixed maturity investments trading	(1,490,123		)	(1,768,996		)
Proceeds from sales and maturities of fixed maturity investments available for sale	1,757			4,090
Net sales (purchases) of equity investments trading	50,627			(279		)
Net sales of short term investments	112,795			67,313
Net (purchases) sales of other investments	(7,952		)	2,116
Net (purchases) sales of investments in other ventures	(126		)	915
Net purchases of other assets	(2,500		)	—
Net purchase of Platinum	(678,152		)	—
Net cash provided by investing activities	62,004			301,194
Cash flows provided by (used in) financing activities
Dividends paid – RenaissanceRe common shares	(13,720		)	(11,899		)
Dividends paid – preference shares	(5,595		)	(5,595		)
RenaissanceRe common share repurchases	(446		)	(262,736		)
Issuance of debt, net of expenses	297,823			—
Net third party redeemable noncontrolling interest share transactions	(180,285		)	(147,943		)
Net cash provided by (used in) financing activities	97,777			(428,173		)
Effect of exchange rate changes on foreign currency cash	(9,142		)	(529		)
Net increase (decrease) in cash and cash equivalents	32,034			(80,869		)
Cash and cash equivalents, beginning of period	525,584			408,032
Cash and cash equivalents, end of period	$	557,618		$	327,163

See accompanying notes to the consolidated financial statements

RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(unless otherwise noted, amounts in tables expressed in thousands of United States (“U.S.”) dollars, except shares, per share amounts and percentages) (Unaudited)

NOTE 1. ORGANIZATION

This report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended December 31, 2014.

RenaissanceRe was formed under the laws of Bermuda on June 7, 1993. Together with its wholly owned and majority-owned subsidiaries and DaVinciRe (as defined below), which are collectively referred to herein as the “Company”, RenaissanceRe provides reinsurance and insurance coverages and related services to a broad range of customers.

•

On March 2, 2015, RenaissanceRe completed its acquisition of Platinum. As a result of the acquisition, Platinum and its subsidiaries became wholly owned subsidiaries of RenaissanceRe, including Platinum Underwriters Bermuda, Ltd. ("Platinum Bermuda") and Renaissance Reinsurance U.S. Inc., formerly known as Platinum Underwriters Reinsurance, Inc. ("Renaissance Reinsurance U.S."). The Company accounted for the acquisition of Platinum under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic Business Combinations and the Company's consolidated results of operations include those of Platinum from March 2, 2015. Refer to “Note 3. Acquisition of Platinum” for additional information with respect to the acquisition of Platinum.


•	Renaissance Reinsurance Ltd. (“Renaissance Reinsurance”), the Company’s principal reinsurance subsidiary, provides property catastrophe and specialty reinsurance coverages to insurers and reinsurers on a worldwide basis.

•

The Company also manages property catastrophe and specialty reinsurance business written on behalf of joint ventures, which principally include Top Layer Reinsurance Ltd. (“Top Layer Re”), recorded under the equity method of accounting, and DaVinci Reinsurance Ltd. (“DaVinci”). Because the Company owns a noncontrolling equity interest in, but controls a majority of the outstanding voting power of DaVinci’s parent, DaVinciRe Holdings Ltd. (“DaVinciRe”), the results of DaVinci and DaVinciRe are consolidated in the Company’s financial statements. Redeemable noncontrolling interest - DaVinciRe represents the interests of external parties with respect to the net income and shareholders’ equity of DaVinciRe. Renaissance Underwriting Managers, Ltd. (“RUM”), a wholly owned subsidiary, acts as exclusive underwriting manager for these joint ventures in return for fee-based income and profit participation.


•	RenaissanceRe Syndicate 1458 (“Syndicate 1458”) is the Company’s Lloyd’s syndicate. RenaissanceRe Corporate Capital (UK) Limited (“RenaissanceRe CCL”), a wholly owned subsidiary of RenaissanceRe, is Syndicate 1458’s sole corporate member and RenaissanceRe Syndicate Management Ltd. (“RSML”), a wholly owned subsidiary of RenaissanceRe, is the managing agent for Syndicate 1458.

•

RenaissanceRe Specialty Risks Ltd. (“RenaissanceRe Specialty Risks”), is a Bermuda-domiciled excess and surplus lines insurance company that is listed on the National Association of Insurance Commissioners’ International Insurance Department’s Quarterly List of Alien Insurers as an eligible surplus lines insurer. RenaissanceRe Underwriting Managers U.S. LLC, a specialty reinsurance agency domiciled in Connecticut, provides specialty treaty reinsurance solutions on both a quota share and excess of loss basis; and writes business on behalf of RenaissanceRe Specialty U.S. Ltd. (“RenaissanceRe Specialty U.S.”), a Bermuda-domiciled reinsurer launched in June 2013 which operates subject to U.S. federal income tax, and Syndicate 1458.


•	Effective January 1, 2013, the Company formed and launched a managed joint venture, Upsilon Reinsurance Fund Opportunities Ltd., formerly known as Upsilon Reinsurance II Ltd. (“Upsilon RFO”), a Bermuda domiciled special purpose insurer (“SPI”), to provide additional capacity to the worldwide aggregate and per-occurrence primary and retrocessional property catastrophe excess of loss

market. Upsilon RFO is considered a variable interest entity (“VIE”) and the Company is considered the primary beneficiary. As a result, Upsilon RFO is consolidated by the Company and all significant inter-company transactions have been eliminated.

•

Effective November 13, 2014, the Company incorporated RenaissanceRe Upsilon Fund Ltd. (“Upsilon Fund”), an exempted Bermuda limited segregated accounts company. Upsilon Fund was formed to provide a fund structure through which third party investors can invest in reinsurance risk managed by the Company. As a segregated accounts company, Upsilon Fund is permitted to establish segregated accounts to invest in and hold identified pools of assets and liabilities. Each pool of assets and liabilities in each segregated account is structured to be ring-fenced from any claims from the creditors of Upsilon Fund’s general account and from the creditors of other segregated accounts within Upsilon Fund. Third party investors purchase redeemable, non-voting preference shares linked to specific segregated accounts of Upsilon Fund and own 100% of these shares. Upsilon Fund is an investment company and is considered a VIE. The Company is not considered the primary beneficiary of Upsilon Fund and as a result Upsilon Fund is not consolidated by the Company.

•

RenaissanceRe Medici Fund Ltd. (“Medici”) is an exempted fund, incorporated under the laws of Bermuda. Medici’s objective is to seek to invest substantially all of its assets in various insurance-based investment instruments that have returns primarily tied to property catastrophe risk. Third-party investors have subscribed for a portion of the participating, non-voting common shares of Medici. Because the Company owns a noncontrolling equity interest in, but controls a majority of the outstanding voting power of Medici’s parent, RenaissanceRe Fund Holdings Ltd. (“Fund Holdings”), the results of Medici and Fund Holdings are consolidated in the Company’s financial statements. Redeemable noncontrolling interest - Medici represents the interests of external parties with respect to the net income and shareholders’ equity of Medici.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Company’s significant accounting policies as described in its Form 10-K for the year ended December 31, 2014, except as noted below.

BASIS OF PRESENTATION

These consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented. All significant intercompany accounts and transactions have been eliminated from these statements.

Certain comparative information has been reclassified to conform to the current presentation. Because of the seasonality of the Company’s business, the results of operations and cash flows for any interim period will not necessarily be indicative of the results of operations and cash flows for the full fiscal year or subsequent quarters.

USE OF ESTIMATES IN FINANCIAL STATEMENTS

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The major estimates reflected in the Company’s consolidated financial statements include, but are not limited to, the reserve for claims and claim expenses; reinsurance recoverables, including allowances for reinsurance recoverables deemed uncollectible; estimates of written and earned premiums; fair value, including the fair value of investments, financial instruments and derivatives; impairment charges and the Company’s deferred tax valuation allowance.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

In June 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”). The objective of ASU 2014-12 is to resolve the diverse accounting treatment of share-based payment awards in situations where an employee would be eligible to vest in the award regardless of whether the employee is rendering service on the date the performance target is achieved. For example, whether an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award. ASU 2014-12 will resolve if and when the performance target is achieved. ASU 2014-12 is effective for all entities in annual and interim periods beginning after December 15, 2015. Entities may apply the amendments in ASU 2014-12 either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The Company is currently evaluating the impact of this guidance; however, it is not expected to have a material impact on the Company’s consolidated statements of operations and financial position.

Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The objective of ASU 2015-03 is to simplify the presentation of debt issuance costs by requiring debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 is effective for public business entities in annual and interim periods beginning after December 15, 2015. Early adoption is permitted. ASU 2015-03 should be applied retrospectively, and upon transition, applicable disclosures for a change in an accounting principle shall be provided, including the transition method, a description of the prior period information that has been retroactively adjusted, and the effect of the change on the applicable financial statement line items. The Company is currently evaluating the impact of this guidance; however, it is not expected to have a material impact on the Company’s consolidated statements of operations and financial position.

NOTE 3. ACQUISITION OF PLATINUM

Overview

On November 23, 2014, RenaissanceRe entered into a definitive merger agreement with Platinum to acquire 100% of the outstanding common shares of Platinum for $76 per Platinum common share, or aggregate consideration of $1.93 billion. The transaction was completed on March 2, 2015.

Prior to the closing of the acquisition of Platinum, Platinum was a publicly traded company listed on the New York Stock Exchange and headquartered in Bermuda. Platinum, through its wholly owned subsidiaries, provides property and casualty reinsurance coverage through reinsurance brokers to insurers and select reinsurers on a worldwide basis. The acquisition of Platinum is expected to benefit the combined companies’ clients through an expanded product offering and enhanced broker relationships and it is also expected to accelerate the growth of the Company’s U.S. specialty and casualty reinsurance platform.

The aggregate consideration for the transaction consisted of the issuance of 7.435 million RenaissanceRe common shares valued at $761.8 million and $1.16 billion of cash. The cash consideration was partially funded through a pre-closing dividend from Platinum of $10 per share, or $253.2 million (the “Special Dividend”), RenaissanceRe available funds of $604.4 million and a short term bridge loan of $300.0 million. On March 24, 2015, RenaissanceRe Finance Inc. (“RenaissanceRe Finance”), a wholly owned subsidiary of RenaissanceRe, issued $300.0 million of its 3.700% Senior Notes due 2025 (together with cash on hand) to replace the short term bridge loan used to fund part of the cash consideration. Refer

to “Note 7. Debt and Credit Facilities” for additional information related to the 3.700% Senior Notes due 2025.

In connection with the acquisition of Platinum, RenaissanceRe incurred transaction-related expenses of $40.4 million in the three months ended March 31, 2015, which includes $11.5 million related to transaction costs, including due diligence, legal, accounting and investment banking fees and expenses, $0.9 million of costs related to the integration of Platinum within the RenaissanceRe organization, and $28.0 million of compensation-related costs associated with terminating employees of Platinum. In the fourth quarter of 2014, RenaissanceRe also incurred $6.7 million of transaction-related expenses. These expenses have all been reported as a component of corporate expenses.

Purchase Price

The Company's total purchase price for Platinum at March 2, 2015 was calculated as follows:




Special Dividend
Number of Platinum common shares and Platinum equity awards canceled in the acquisition of Platinum	25,320,312
Special Dividend per outstanding common share of Platinum and Platinum equity award	$	10.00
Special Dividend paid to common shareholders of Platinum and holders of Platinum equity awards				$	253,203
RenaissanceRe common shares
Common shares issued by RenaissanceRe	7,434,561
Common share price of RenaissanceRe as of March 2, 2015	$	102.47
Market value of RenaissanceRe common shares issued by RenaissanceRe to common shareholders of Platinum and holders of Platinum equity awards				761,819
Platinum common shares
Fair value of Platinum common shares owned by RenaissanceRe and canceled in connection with the acquisition of Platinum				12,950
Cash consideration
Number of Platinum common shares and Platinum equity awards canceled in the acquisition of Platinum	25,320,312
Platinum common shares owned by RenaissanceRe and canceled in connection with the acquisition of Platinum	(169,220		)
Number of Platinum common shares and Platinum equity awards canceled in the acquisition of Platinum excluding those owned by RenaissanceRe and canceled in connection with the acquisition of Platinum	25,151,092
Agreed cash price paid to common shareholders of Platinum and holders of Platinum equity awards	$	35.96
Cash consideration paid by RenaissanceRe to common shareholders of Platinum and holders of Platinum equity awards				904,433
Total purchase price				1,932,405
Less: Special Dividend paid by Platinum				(253,203		)
Net purchase price				$	1,679,202

Fair Value of Net Assets Acquired and Liabilities Assumed

The purchase price was allocated to the acquired assets and liabilities of Platinum based on estimated fair values on March 2, 2015, the date the transaction closed, as detailed below. The Company recognized goodwill of $191.7 million primarily attributable to Platinum’s assembled workforce and synergies expected to result upon integration of Platinum into the Company’s operations. There were no other adjustments to carried goodwill during the period ended March 31, 2015 reflected on the Company’s consolidated balance

sheet at March 31, 2015. The Company recognized identifiable finite lived intangible assets of $75.2 million, which will be amortized over a weighted average period of 8 years, identifiable indefinite lived intangible assets of $8.4 million, and certain other adjustments to the fair values of the assets acquired, liabilities assumed and shareholders’ equity of Platinum at March 2, 2015 as summarized in the table below:




Shareholders’ equity of Platinum prior to Special Dividend	$	1,737,278
Cash and cash equivalents (Special Dividend on Platinum common shares and Platinum equity awards)	(253,203		)
Adjusted shareholders’ equity of Platinum at March 2, 2015	1,484,075
Adjustments for fair value, by applicable balance sheet caption:
Deferred acquisition costs	(44,486		)
Debt	(28,899		)
Reserve for claims and claim expenses	(21,725		)
Other assets - deferred debt issuance costs	(1,046		)
Total adjustments for fair value by applicable balance sheet caption before tax impact	(96,156		)
Other assets - net deferred tax asset related to fair value adjustments	29,069
Total adjustments for fair value by applicable balance sheet caption	(67,087		)
Adjustments for fair value of the identifiable intangible assets:
Identifiable indefinite lived intangible assets (insurance licenses)	8,400
Identifiable finite lived intangible assets (non-contractual relationships, renewal rights, value of business acquired, trade name, internally developed and used computer software and covenants not to compete)	75,200
Identifiable intangible assets before tax impact	83,600
Other liabilities - deferred tax liability on identifiable intangible assets	(13,115		)
Total adjustments for fair value of the identifiable intangible assets	70,485
Total adjustments for fair value by applicable balance sheet caption and identifiable intangible assets	3,398
Shareholders’ equity of Platinum at fair value	1,487,473
Total net purchase price paid by RenaissanceRe	1,679,202
Excess purchase price over the fair value of net assets acquired assigned to goodwill	$	191,729

An explanation of the significant fair value adjustments is as follows:


•	Deferred acquisition costs - To eliminate Platinum’s deferred acquisition costs;


•	Debt - To reflect Platinum’s existing senior notes at fair value using indicative market pricing obtained from third-party service providers;

•

Reserve for claims and claim expenses - To reflect an increase in net claims and claim expenses due to the addition of a market based risk margin which represents the cost of capital required by a market participant to assume the net claims and claim expenses of Platinum, partially offset by a deduction which represents the discount due to the present value calculation of the unpaid claims and claim expenses based on the expected payout of the net unpaid claims and claim expenses;


•	Other assets - To eliminate deferred debt issuance costs related to Platinum’s existing senior notes and to reflect net deferred tax assets related to fair value adjustments;


•	Identifiable indefinite lived and finite lived intangible assets - To establish the fair value of identifiable intangible assets related to the acquisition of Platinum described in detail below; and


•	Other liabilities - To reflect the deferred tax liability on identifiable intangible assets.

Identifiable intangible assets at March 2, 2015 and at March 31, 2015, consisted of the following, and are included in goodwill and other intangible assets on the Company’s consolidated balance sheet:




	Amount			Economic Useful Life
Key non-contractual relationships	$	30,400		10 years
Value of business acquired	20,200			2 years
Renewal rights	15,800			15 years
Insurance licenses	8,400			Indefinite
Internally developed and used computer software	3,500			2 years
Other non-contractual relationships	2,300			3 years
Non-compete agreements	1,900			2.5 years
Trade name	1,100			6 months
Identifiable intangible assets, before amortization, at March 2, 2015	83,600
Amortization (from March 2, 2015 through March 31, 2015)	(1,846		)
Net identifiable intangible assets at March 31, 2015 related to the acquisition of Platinum	$	81,754

An explanation of the identifiable intangible assets is as follows:


•	Key non-contractual relationships - these relationships included Platinum’s top four brokers (Aon plc, Marsh & McLennan Companies, Inc., Willis Group Holdings Public Limited Company and Jardine Lloyd Thompson Group plc.) and consideration was given to the expectation of the renewal of these relationships and the associated expenses;

•

Value of business acquired (“VOBA”) - the expected future losses and expenses associated with the policies that were in-force as of the closing date of the transaction were estimated and compared to the future premium remaining expected to be earned. The difference between the risk-adjusted future loss and expenses, discounted to present value and the unearned premium reserve, was estimated to be the VOBA;


•	Renewal rights - the value of policy renewal rights taking into consideration written premium on assumed retention ratios and the insurance cash flows and the associated equity cash flows from these renewal policies over the expected life of the renewals;


•	Insurance licenses - the value of insurance licenses acquired providing the ability to write reinsurance in all 50 states of the U.S. and the District of Columbia;


•	Internally developed and used computer software - represents the value of internally developed and used computer software to be utilized by the Company;


•	Other non-contractual relationships - these relationships consisted of Platinum’s brokers with the exception of those previously listed above as key non-contractual relationships and consideration was given to the expectation of the renewal of these relationships and the associated expenses;


•	Non-compete agreements - represent non-compete agreements with key employees of Platinum; and


•	Trade name - represents the value of the Platinum brand acquired.

As part of the allocation of the purchase price, included in the adjustment to other assets in the table above is a deferred tax asset of $29.1 million related to certain other adjustments to the fair values of the assets acquired, liabilities assumed and shareholders’ equity, summarized in the table above, which was partially offset by a deferred tax liability of $13.1 million related to the estimated fair value of the intangible assets recorded. Other net deferred tax assets recorded primarily relate to differences between financial reporting and tax bases of the acquired assets and liabilities as of the acquisition date, March 2, 2015. The Company estimates that none of the goodwill that was recorded will be deductible for income tax purposes.

Financial Results

The following table summarizes the results of Platinum since March 2, 2015 that have been included in the Company's consolidated statements of operations and comprehensive income.




	For the period from March 2, 2015 to March 31, 2015
Total revenues	$	40,139
Net loss attributable to RenaissanceRe common shareholders (1)	$	(19,439	)


(1)	Includes $28.0 million of compensation-related costs associated with terminating employees of Platinum.

Taxation

During the first quarter of 2015, the income tax benefit recorded by the Company was primarily the result of a reduction in the Company’s U.S. deferred tax asset valuation allowance of $47.4 million. A valuation allowance was previously provided against the Company’s U.S. deferred tax assets as in the opinion of management, it was more likely than not that a portion of the deferred tax asset would not be realized. However, with the acquisition of Platinum and the expected profits to be experienced in its U.S.-based operations, the Company believes that it is more likely than not that the U.S. deferred tax asset will be realized and has reduced its valuation allowance against such asset.

A valuation allowance continues to be provided against deferred tax assets in Ireland, the U.K., and Singapore. These deferred tax assets relate primarily to net operating loss carryforwards and deferred underwriting results.

Supplemental Pro Forma Information

Platinum’s results have been included in the Company's consolidated financial statements from March 2, 2015 to March 31, 2015. The following table presents unaudited pro forma consolidated financial information for the three months ended March 31, 2015 and 2014 and assumes the acquisition of Platinum occurred on January 1, 2014. The unaudited pro forma consolidated financial information is provided for informational purposes only and is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of January 1, 2014 or that may be achieved in the future. The unaudited pro forma consolidated financial information does not give consideration to the impact of possible revenue enhancements, expense efficiencies, synergies or asset dispositions that may result from the acquisition of Platinum. In addition, unaudited pro forma consolidated financial information does not include the effects of costs associated with any restructuring or integration activities resulting from the acquisition of Platinum, as they are nonrecurring.




	Three months ended
	March 31, 2015		March 31, 2014
Total revenues	$	460,553	$	514,017
Net income available to RenaissanceRe common shareholders	182,806		199,094

Among other adjustments, and in addition to the fair value adjustments and recognition of goodwill and identifiable intangible assets noted above, other material nonrecurring pro forma adjustments directly attributable to the acquisition of Platinum principally included certain adjustments to recognize transaction related costs, align accounting policies, amortize fair value adjustments, amortize identifiable indefinite lived intangible assets and recognize related tax impacts.

NOTE 4. INVESTMENTS

Fixed Maturity Investments Trading

The following table summarizes the fair value of fixed maturity investments trading:




	March 31, 2015		December 31, 2014
U.S. treasuries	$	1,535,746	$	1,671,471
Agencies	152,272		96,208
Municipals	1,220,206		—
Non-U.S. government (Sovereign debt)	329,626		280,651
Non-U.S. government-backed corporate	151,446		146,467
Corporate	1,603,024		1,610,442
Agency mortgage-backed	339,279		312,333
Non-agency mortgage-backed	257,114		241,590
Commercial mortgage-backed	353,944		373,117
Asset-backed	40,186		24,406
Total fixed maturity investments trading	$	5,982,843	$	4,756,685

Fixed Maturity Investments Available For Sale

The following table summarizes the amortized cost, fair value and related unrealized gains and losses and non-credit other-than-temporary impairments of fixed maturity investments available for sale:




			Included in Accumulated Other Comprehensive Income
March 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Agency mortgage-backed	$	2,877	$	305	$	—		$	3,182	$	—
Non-agency mortgage-backed	9,054		1,937		(3		)	10,988		640
Commercial mortgage-backed	7,287		581		—			7,868		—
Asset-backed	2,938		110		—			3,048		—
Total fixed maturity investments available for sale	$	22,156	$	2,933	$	(3	)	$	25,086	$	640




			Included in Accumulated Other Comprehensive Income
December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Agency mortgage-backed	$	3,928	$	359	$	—		$	4,287	$	—
Non-agency mortgage-backed	9,478		1,985		(3		)	11,460		656
Commercial mortgage-backed	7,291		643		—			7,934		—
Asset-backed	3,075		129		—			3,204		—
Total fixed maturity investments available for sale	$	23,772	$	3,116	$	(3	)	$	26,885	$	656


(1)	Represents the non-credit component of other-than-temporary impairments recognized in accumulated other comprehensive income adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.

Contractual maturities of fixed maturity investments are described in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.




	Trading				Available for Sale				Total Fixed Maturity Investments
March 31, 2015	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	211,238	$	209,392	$	—	$	—	$	211,238	$	209,392
Due after one through five years	3,219,374		3,220,154		—		—		3,219,374		3,220,154
Due after five through ten years	1,018,158		1,018,252		—		—		1,018,158		1,018,252
Due after ten years	538,096		544,522		—		—		538,096		544,522
Mortgage-backed	933,152		950,337		19,218		22,038		952,370		972,375
Asset-backed	40,091		40,186		2,938		3,048		43,029		43,234
Total	$	5,960,109	$	5,982,843	$	22,156	$	25,086	$	5,982,265	$	6,007,929

Equity Investments Trading

The following table summarizes the fair value of equity investments trading:




	March 31, 2015		December 31, 2014
Financials	$	204,540	$	222,190
Communications and technology	17,905		31,376
Industrial, utilities and energy	15,735		28,859
Consumer	11,346		19,522
Healthcare	10,042		16,582
Basic materials	2,088		3,569
Total	$	261,656	$	322,098

Pledged Investments

At March 31, 2015, $2,549.8 million of cash and investments at fair value were on deposit with, or in trust accounts for the benefit of various counterparties, including with respect to the Company’s standby letter of credit facility and bilateral letter of credit facility (December 31, 2014 - $2,379.4 million). Of this amount, $700.4 million is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities (December 31, 2014 - $691.9 million).

Reverse Repurchase Agreements

At March 31, 2015, the Company held $116.1 million (December 31, 2014 - $49.3 million) of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of short term investments on the Company’s consolidated balance sheets. The required collateral for these loans typically include high-quality, readily marketable instruments at a minimum amount of 102% of the loan principal. Upon maturity, the Company receives principal and interest income.

Net Investment Income, Net Realized and Unrealized Gains on Investments and Net Other-Than-Temporary Impairments

The components of net investment income are as follows:




	Three months ended
	March 31, 2015			March 31, 2014
Fixed maturity investments	$	25,939		$	23,860
Short term investments	197			190
Equity investments	2,604			796
Other investments
Hedge funds and private equity investments	10,413			12,317
Other	3,508			4,528
Cash and cash equivalents	148			91
	42,809			41,782
Investment expenses	(3,102		)	(2,834		)
Net investment income	$	39,707		$	38,948

Net realized and unrealized gains on investments are as follows:




	Three months ended
	March 31, 2015			March 31, 2014
Gross realized gains	$	21,532		$	13,467
Gross realized losses	(4,871		)	(5,564		)
Net realized gains on fixed maturity investments	16,661			7,903
Net unrealized gains on fixed maturity investments trading	25,972			27,882
Net realized and unrealized losses on investments-related derivatives	(4,208		)	(10,899		)
Net realized gains (losses) on equity investments trading	7,481			(79		)
Net unrealized gains (losses) on equity investments trading	(4,157		)	(9,880		)
Net realized and unrealized gains on investments	$	41,749		$	14,927

The following tables provide an analysis of the components of other comprehensive income and reclassifications out of accumulated other comprehensive income.




	Three months ended March 31, 2015
	Investments in other ventures		Fixed maturity investments available for sale			Total
Beginning balance	$	303	$	3,113		$	3,416
Other comprehensive income (loss) before reclassifications	109		(132		)	(23		)
Amounts reclassified from accumulated other comprehensive income by statement of operations line item:
Realized gains reclassified from accumulated other comprehensive income to net realized and unrealized gains on investments	—		(51		)	(51		)
Net current-period other comprehensive income (loss)	109		(183		)	(74		)
Ending balance	$	412	$	2,930		$	3,342




	Three months ended March 31, 2014
	Investments in other ventures			Fixed maturity investments available for sale			Total
Beginning balance	$	163		$	3,968		$	4,131
Other comprehensive loss before reclassifications	(3		)	(165		)	(168		)
Ending balance	$	160		$	3,803		$	3,963

The following tables provide an analysis of the length of time the Company’s fixed maturity investments available for sale in an unrealized loss have been in a continual unrealized loss position.




	Less than 12 Months				12 Months or Greater					Total
At March 31, 2015	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Non-agency mortgage-backed	$	—	$	—	$	68	$	(3	)	$	68	$	(3	)
Total	$	—	$	—	$	68	$	(3	)	$	68	$	(3	)




	Less than 12 Months				12 Months or Greater					Total
December 31, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Non-agency mortgage-backed	$	—	$	—	$	69	$	(3	)	$	69	$	(3	)
Total	$	—	$	—	$	69	$	(3	)	$	69	$	(3	)

At March 31, 2015, the Company held two fixed maturity investments available for sale securities that were in an unrealized loss position (December 31, 2014 - two), including two fixed maturity investments available for sale securities that were in an unrealized loss position for twelve months or greater (December 31, 2014 - two). The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before the anticipated recovery of the remaining amortized cost basis. The Company performed reviews of its fixed maturity investments available for sale for the three months ended March 31, 2015 and 2014, respectively, in order to determine whether declines in the fair value below the amortized cost basis were considered other-than-temporary in accordance with the applicable guidance, as discussed below.

Other-Than-Temporary Impairment Process

The Company’s process for assessing whether declines in the fair value of its fixed maturity investments available for sale represent impairments that are other-than-temporary includes reviewing each fixed maturity investment available for sale that is impaired and determining: (i) if the Company has the intent to sell the debt security or (ii) if it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery; and (iii) whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security.

For the three months ended March 31, 2015, the Company recognized $Nil of other-than-temporary impairments which were recognized in earnings and $Nil related to other factors which were recognized in other comprehensive income (2014 – $Nil and $Nil, respectively).

The following table provides a rollforward of the amount of other-than-temporary impairments related to credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income:




	Three months ended
	March 31, 2015			March 31, 2014
Beginning balance	$	498		$	561
Reductions:
Securities sold during the period	(13		)	(16		)
Ending balance	$	485		$	545

NOTE 5. FAIR VALUE MEASUREMENTS

The use of fair value to measure certain assets and liabilities with resulting unrealized gains or losses is pervasive within the Company’s consolidated financial statements. Fair value is defined under accounting guidance currently applicable to the Company to be the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. The Company recognizes the change in unrealized gains and losses arising from changes in fair value in its consolidated statements of operations, with the exception of changes in unrealized gains and losses on its fixed maturity investments available for sale, which are recognized as a component of accumulated other comprehensive income in shareholders’ equity.

FASB ASC Topic Fair Value Measurements and Disclosures prescribes a fair value hierarchy that prioritizes the inputs to the respective valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to valuation techniques that use at least one significant input that is unobservable (Level 3). The three levels of the fair value hierarchy are described below:


•	Fair values determined by Level 1 inputs utilize unadjusted quoted prices obtained from active markets for identical assets or liabilities for which the Company has access. The fair value is determined by multiplying the quoted price by the quantity held by the Company;

•

Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals, broker quotes and certain pricing indices; and

•

Level 3 inputs are based all or in part on significant unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In these cases, significant management assumptions can be used to establish management’s best estimate of the assumptions used by other market participants in determining the fair value of the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement of the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the asset or liability.

In order to determine if a market is active or inactive for a security, the Company considers a number of factors, including, but not limited to, the spread between what a seller is asking for a security and what a buyer is bidding for the same security, the volume of trading activity for the security in question, the price of the security compared to its par value (for fixed maturity investments), and other factors that may be indicative of market activity.

There have been no material changes in the Company’s valuation techniques, nor have there been any transfers between Level 1 and Level 2, or Level 2 and 3 during the period represented by these consolidated financial statements.

Below is a summary of the assets and liabilities that are measured at fair value on a recurring basis and also represents the carrying amount on the Company’s consolidated balance sheets:




At March 31, 2015	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Fixed maturity investments
U.S. treasuries	$	1,535,746		$	1,535,746		$	—		$	—
Agencies	152,272			—			152,272			—
Municipal	1,220,206			—			1,220,206			—
Non-U.S. government (Sovereign debt)	329,626			—			329,626			—
Non-U.S. government-backed corporate	151,446			—			151,446			—
Corporate	1,603,024			—			1,587,550			15,474
Agency mortgage-backed	342,461			—			342,461			—
Non-agency mortgage-backed	268,102			—			268,102			—
Commercial mortgage-backed	361,812			—			361,812			—
Asset-backed	43,234			—			43,234			—
Total fixed maturity investments	6,007,929			1,535,746			4,456,709			15,474
Short term investments	1,775,819			—			1,775,819			—
Equity investments trading	261,656			261,656			—			—
Other investments
Private equity partnerships	271,074			—			—			271,074
Catastrophe bonds	221,780			—			221,780			—
Senior secured bank loan fund	19,679			—			—			19,679
Hedge funds	2,373			—			—			2,373
Total other investments	514,906			—			221,780			293,126
Other assets and (liabilities)
Assumed and ceded (re)insurance contracts	72,993			—			—			72,993
Derivatives (1)	7,376			(492		)	7,892			(24		)
Other	(1,547		)	—			(1,547		)	—
Total other assets and (liabilities)	78,822			(492		)	6,345			72,969
	$	8,639,132		$	1,796,910		$	6,460,653		$	381,569

(1) See “Note 13. Derivative Instruments” for additional information related to the fair value by type of contract, of derivatives entered into by the Company.




At December 31, 2014	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Fixed maturity investments
U.S. treasuries	$	1,671,471		$	1,671,471		$	—		$	—
Agencies	96,208			—			96,208			—
Non-U.S. government (Sovereign debt)	280,651			—			280,651			—
Non-U.S. government-backed corporate	146,467			—			146,467			—
Corporate	1,610,442			—			1,594,782			15,660
Agency mortgage-backed	316,620			—			316,620			—
Non-agency mortgage-backed	253,050			—			253,050			—
Commercial mortgage-backed	381,051			—			381,051			—
Asset-backed	27,610			—			27,610			—
Total fixed maturity investments	4,783,570			1,671,471			3,096,439			15,660
Short term investments	1,013,222			—			1,013,222			—
Equity investments trading	322,098			322,098			—			—
Other investments
Private equity partnerships	281,932			—			—			281,932
Catastrophe bonds	200,329			—			200,329			—
Senior secured bank loan funds	19,316			—			—			19,316
Hedge funds	2,570			—			—			2,570
Total other investments	504,147			—			200,329			303,818
Other assets and (liabilities)
Assumed and ceded (re)insurance contracts	(8,744		)	—			—			(8,744		)
Derivatives (1)	6,345			(569		)	7,104			(190		)
Other	(11,509		)	—			(11,509		)	—
Total other assets and (liabilities)	(13,908		)	(569		)	(4,405		)	(8,934		)
	$	6,609,129		$	1,993,000		$	4,305,585		$	310,544

(1) See “Note 13. Derivative Instruments” for additional information related to the fair value by type of contract, of derivatives entered into by the Company.

Level 1 and Level 2 Assets and Liabilities Measured at Fair Value

Fixed Maturity Investments

Fixed maturity investments included in Level 1 consist of the Company’s investments in U.S. treasuries. Fixed maturity investments included in Level 2 are agencies, municipal, non-U.S. government, non-U.S. government-backed corporate, corporate, agency mortgage-backed, non-agency mortgage-backed, commercial mortgage-backed and asset-backed.

The Company’s fixed maturity investments are primarily priced using pricing services, such as index providers and pricing vendors, as well as broker quotations. In general, the pricing vendors provide pricing for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, bids, offers, reference data and industry and economic events. Index pricing generally relies on market traders as the primary source for pricing, however models are also utilized to provide prices for all index eligible securities. The models use a variety of observable inputs such as

benchmark yields, transactional data, dealer runs, broker-dealer quotes and corporate actions. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index.

In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets.

The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company’s fixed maturity investments are detailed below by asset class.

U.S. treasuries

Level 1 - At March 31, 2015, the Company’s U.S. treasuries fixed maturity investments were primarily priced by pricing services and had a weighted average effective yield of 0.8% and a weighted average credit quality of AA (December 31, 2014 - 1.0% and AA, respectively). When pricing these securities, the pricing services utilize daily data from many real time market sources, including active broker dealers. Certain data sources are regularly reviewed for accuracy to attempt to ensure the most reliable price source is used for each issue and maturity date.

Agencies

Level 2 - At March 31, 2015, the Company’s agency fixed maturity investments had a weighted average effective yield of 1.6% and a weighted average credit quality of AA (December 31, 2014 - 1.2% and AA, respectively). The issuers of the Company’s agency fixed maturity investments primarily consist of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Fixed maturity investments included in agencies are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data.

Municipal

Level 2 - In connection with the acquisition of Platinum, the Company acquired a portfolio of municipal fixed maturity investments. At March 31, 2015, the Company’s municipal fixed maturity investments had a weighted average effective yield of 2.4% and a weighted average credit quality of AA. The Company’s municipal fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information regarding the security from third party sources such as trustees, paying agents or issuers. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread over widely accepted market benchmarks.

Non-U.S. government (Sovereign debt)

Level 2 - Non-U.S. government fixed maturity investments held by the Company at March 31, 2015 had a weighted average effective yield of 1.0% and a weighted average credit quality of AA (December 31, 2014 - 1.1% and AA, respectively). The issuers of securities in this sector are non-U.S. governments and their respective agencies as well as supranational organizations. Securities held in these sectors are primarily priced by pricing services that employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services

utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

Non-U.S. government-backed corporate

Level 2 - Non-U.S. government-backed corporate fixed maturity investments had a weighted average effective yield of 0.9% and a weighted average credit quality of AA at March 31, 2015 (December 31, 2014 - 1.1% and AAA, respectively). Non-U.S. government-backed fixed maturity investments are primarily priced by pricing services that employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread to the respective curve for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

Corporate

Level 2 - At March 31, 2015, the Company’s corporate fixed maturity investments principally consist of U.S. and international corporations and had a weighted average effective yield of 3.0% and a weighted average credit quality of BBB (December 31, 2014 - 3.2% and BBB, respectively). The Company’s corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate.

Agency mortgage-backed

Level 2 - At March 31, 2015, the Company’s agency mortgage-backed fixed maturity investments included agency residential mortgage-backed securities with a weighted average effective yield of 1.7%, a weighted average credit quality of AA and a weighted average life of 5.4 years (December 31, 2014 - 2.3%, AA and 5.6 years, respectively). The Company’s agency mortgage-backed fixed maturity investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes.

Non-agency mortgage-backed

Level 2 - The Company’s non-agency mortgage-backed fixed maturity investments include non-agency prime residential mortgage-backed and non-agency Alt-A fixed maturity investments. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. At March 31, 2015, the Company’s non-agency prime residential mortgage-backed fixed maturity investments had a weighted average effective yield of 3.4%, a weighted average credit quality of non-investment grade, and a weighted average life of 4.0 years (December 31, 2014 - 3.4%, non-investment grade and 4.1 years, respectively). The Company’s non-agency Alt-A fixed maturity investments held at March 31, 2015 had a weighted average effective yield of 4.0%, a weighted average credit quality of BBB and a weighted average life of 5.0 years (December 31, 2014 - 4.3%, BBB and 5.0 years, respectively). Securities held in these sectors are primarily priced by pricing services using an option adjusted spread model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable.

Commercial mortgage-backed

Level 2 - The Company’s commercial mortgage-backed fixed maturity investments held at March 31, 2015 had a weighted average effective yield of 1.9%, a weighted average credit quality of AA, and a weighted average life of 3.1 years (December 31, 2014 - 2.1%, AAA and 3.5 years, respectively). Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services discount the expected cash flows for each security held in this sector using a spread adjusted benchmark yield based on the characteristics of the security.

Asset-backed

Level 2 - At March 31, 2015, the Company’s asset-backed fixed maturity investments had a weighted average effective yield of 1.3%, a weighted average credit quality of AAA and a weighted average life of 2.6 years (December 31, 2014 - 1.5%, AAA and 2.5 years, respectively). The underlying collateral for the Company’s asset-backed fixed maturity investments primarily consists of student loans, credit card receivables, auto loans and other receivables. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Short Term Investments

Level 2 - The fair value of the Company’s portfolio of short term investments is generally determined using amortized cost which approximates fair value and, in certain cases, in a manner similar to the Company’s fixed maturity investments noted above.

Equity Investments, Classified as Trading

Level 1 - The fair value of the Company’s portfolio of equity investments, classified as trading is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. When pricing these securities, the pricing services utilize daily data from many real time market sources, including applicable securities exchanges. All data sources are regularly reviewed for accuracy to attempt to ensure the most reliable price source was used for each security.

Other investments

Catastrophe bonds

Level 2 - The Company’s other investments include investments in catastrophe bonds which are recorded at fair value based on broker or underwriter bid indications.

Other assets and liabilities

Derivatives

Level 1 and Level 2 - Other assets and liabilities include certain derivatives entered into by the Company. The fair value of these transactions includes certain exchange traded foreign currency forward contracts which are considered Level 1, and certain credit derivatives, determined using standard industry valuation models and considered Level 2, as the inputs to the valuation model are based on observable market inputs, including credit spreads, credit ratings of the underlying referenced security, the risk free rate and the contract term.

Other

Level 2 - The liabilities measured at fair value and included in Level 2 at March 31, 2015 of $1.5 million were principally comprised of cash settled restricted stock units (“CSRSU”) that form part of the Company’s compensation program. The fair value of the Company’s CSRSUs is determined using observable exchange traded prices for the Company’s common shares.

Level 3 Assets and Liabilities Measured at Fair Value

Below is a summary of quantitative information regarding the significant observable and unobservable inputs (Level 3) used in determining the fair value of assets and liabilities measured at fair value on a recurring basis:

At March 31, 2015

Fair Value

(Level 3)

Valuation Technique

Unobservable (U)

and Observable (O)

Inputs

Low

High

Weighted Average or Actual

Fixed maturity investments

Corporate

15,474

Discounted cash flow (“DCF”)

Credit spread (U)

n/a

1.2

Liquidity discount (U)

n/a

1.0