Company: KG
Filing Date: 2025-08-15
Form Type: 10-Q
Source: 0002055116-25-000018
Chunk: 131

Company: Kestrel Group Ltd
Filing Date: 2025-08-15
Form: 10-Q
Item: Item 1
Chunk 131
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 may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely affected.

At June 30, 2025, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the unaudited Condensed Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI.

Net foreign exchange losses of $5.1 million were generated during the three and six months ended June 30, 2025, compared to net foreign exchange losses of $0.0 million for the three and six months ended June 30, 2024. The foreign exchange losses for the three and six months ended June 30, 2025 were caused by significant depreciation in the value of the U.S. dollar relative to the euro and the British pound due to uncertainty around international trade and associated U.S. tariff policy. These losses were primarily unrealized and resulted from the effects of revaluation of our net insurance liabilities that are required to be settled in foreign currencies at each balance sheet date.

At June 30, 2025, the increase in foreign currency translation adjustments of $0.1 million for the six months ended June 30, 2025 was primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2025 included reserve for net loss and LAE on our Legacy Reinsurance segment of $341.3 million. Our foreign currency asset exposures at June 30, 2025 include $139.4 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $33.2 million of real estate investments denominated in Canadian dollars