The majority of the assumed life reinsurance premium earned is related to term life products issued between 2005 and 2008. Similar to products directly written by Pavonia, premiums are guaranteed to remain level for a specified period of time. Approximately 25% of policies have a guaranteed level term period of 15 years and approximately 55% offer a 30-year guaranteed level premium.
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 approximately 25% of the syndicate’s underwriting capacity and capital (with the balance provided by traditional Lloyd’s Names). Atrium underwrites specialist marine, energy, aerospace, non-marine and liability classes.
Prior to going into run-off, our life and annuities subsidiaries wrote life insurance, including credit life and disability insurance, term life insurance, assumed life reinsurance and annuities. We will continue to recognize premiums on term life insurance, assumed life reinsurance and credit life and disability insurance. These premiums are generally recognized as revenue when due from policyholders. The policies include contracts with fixed and guaranteed premiums and benefits. Benefits and expenses are matched with such revenue to result in the recognition of profit over the life of the contracts.
We have primarily used three types of share-based compensation: restricted shares, cash-settled stock appreciation rights ("SARs") and shares issued under our employee share purchase plans. With the exception of SARs and the incentive plan awards issued to certain employees of Atrium, our share-based compensation awards qualify for equity classification. The fair value of the compensation cost is measured at the grant date and is expensed over the service period of the award. The SARs and the Atrium incentive plan awards are classified as liability awards. Liability classified awards are recorded at fair value within other liabilities in the consolidated balance sheet with changes in fair value relating to the vested portion of the award recorded within salaries and benefits in the consolidated statements of earnings.
The total consideration for the transaction was $173.1 million, payable in two installments. The first installment of $89.1 million was paid on closing. The second installment of $83.9 million, due on the first anniversary of closing, is expected to be funded from cash on hand. The companies are operating as part of the Life and Annuities segment.
As a shareholder of StarStone, FR XI Offshore AIV, L.P., First Reserve Fund XII, L.P., FR XII A Parallel Vehicle L.P. and FR Torus Co-Investment, L.P. (collectively, "First Reserve") received 1,501,211 Voting Ordinary Shares, 714,015 Non-Voting Preferred Shares and cash consideration in the transaction. Following the approval of our shareholders of an amendment to our bye-laws on June 10, 2014, First Reserve’s Non-Voting Preferred Shares converted on a share-for-share basis into 714,015 shares of newly created Series E Non-Voting Convertible Common Shares (the "Series E Non-Voting Ordinary Shares"). Corsair Specialty Investors, L.P. ("Corsair") received 397,115 Voting Ordinary Shares and cash consideration in the transaction. The remaining StarStone shareholders received all cash. Following the amalgamation, First Reserve owned approximately 9.5% and 11.5%, respectively, of our Voting Ordinary Shares and outstanding share capital (which it subsequently sold pursuant to the CPPIB-First Reserve Transaction, as described in Note 19 - "Related Party Transactions").
The fair values of our fixed maturity investments, short-term investments and equities classified as trading were as follows:
Our investments in equities are predominantly traded on the major exchanges and are primarily managed by our external advisors. We use an internationally recognized pricing service, to estimate the fair value of our equities. Our equities are widely diversified and there is no significant concentration in any specific industry.
The following table shows our reinsurance balances recoverable by rating of reinsurer and our provisions for uncollectible reinsurance balances recoverable ("provisions for bad debt") as at December 31, 2015 and 2014. The provisions for bad debt all relate to the Non-life Run-off segment.
The net reduction in incurred losses and LAE for the year ended December 31, 2015 of $270.8 million included net incurred losses and LAE of $39.9 million related to current period net earned premium of $43.3 million (primarily
The reduction in provisions for bad debt of $25.3 million was a result of the collection of certain reinsurance recoverables against which bad debt provisions had been provided in earlier periods, and the reduction in bad debt provisions for insolvent reinsurers as a result of dividends received, partially offset by additional provisions for contractual disputes with reinsurers.
Interest is payable at least every 6 months at a rate of LIBOR plus a margin ranging from 2.50% to 3.25%. The margin, initially set at 2.75%, could vary based upon any change in our long term senior unsecured debt rating assigned by Standard & Poor’s Ratings Services or Fitch Ratings Ltd. We also pay a commitment fee of 35% of the margin for any unutilized portion of the facility. In the event of default, the interest rate increases by an additional 1.0% and the agent may cancel lender commitments and may demand early repayment.
As of December 31, 2015, there were warrants outstanding to acquire 340,820 Series C Non-Voting Ordinary Shares for an exercise price of $115.00 per share, subject to certain adjustments (the "Warrants"). The Warrants were issued in April 2011 and expire in April 2021. The Warrant holder may, at its election, satisfy the exercise price of the Warrants on a cashless basis by surrender of shares otherwise issuable upon exercise of the Warrants in accordance with a formula set forth in the Warrants.
During 2014, 11,749 restricted share units previously credited to the accounts of two directors under the Deferred Compensation Plan were converted into ordinary shares following their end of service as directors. Also in 2014, 14,922 restricted stock units previously credited to one of the retiring director's account under a previous deferred compensation plan were converted into the same number of our ordinary shares.
As of December 31, 2015, we had net operating loss carry forwards that could be available to offset future taxable income, as follows:
We are required to maintain available group statutory capital and surplus in an amount that is at least equal to the group enhanced capital requirement ("Group ECR"). The BMA has also established a group target capital level equal to 120% of the Group ECR.
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 $21.0 million as of December 31, 2015 for our investment in a registered investment company affiliated with entities owned by Trident. Refer to Note 19 of the notes to the consolidated financial statements.