We lease office space at 13403 N. Government Way, Suite 212, in Hayden, Idaho, 50 Cedar Avenue, Hamilton HM11, Bermuda, and 34 King Street East, Suite 1200, Toronto, Ontario, Canada. In addition, see Part I, Item 1, “Business-Investment Strategy” of this Report for a description of certain properties owned by Till and our controlled subsidiary, SPD.
Till is an insurance holding company domiciled in Bermuda. Through two of Till’s wholly-owned subsidiaries, Resource Re Ltd. ("RRL") and Omega General Insurance Company ("Omega"), we provide property and casualty insurance and reinsurance. Till operates in a single segment, specifically insurance.
RRL, a Bermuda domiciled company, was organized to offer reinsurance coverage to a select group of insurance companies, e.g., captive insurers, privately-held insurers, and other global insurers and reinsurers. RRL entered into its initial reinsurance contracts effective December 31, 2014. Those initial reinsurance contracts were novated in September 2015. RRL currently does not have any active reinsurance contracts in force. RRL may participate in reinsurance contracts using the Multi-Strat Re platform to underwrite medium- to long-term property and casualty business, as acceptable opportunities are identified. RRL’s primary sources of income are reinsurance premiums and investment income. RRL also owns 64% of the outstanding shares of Silver Predator Corp., a Canadian-based junior mineral exploration company that has historically been engaged in exploring for and developing economically viable silver, gold, and tungsten deposits in Canada and the United States, with a focus on Nevada and Idaho. SPD is not currently engaged in any mining or exploration activities, however a drill program for its Copper King property is being considered for 2018.
Omega underwrites direct insurance and reinsurance business through its wholly-owned subsidiary Omega. As a reinsurer, Omega provides assumption reinsurance to insurance companies that want to exit the Canadian market, and to insurance companies that want to transfer all of their remaining claim liabilities on particular books of business; those arrangements are commonly referred to as “run-off” or “loss portfolio transfer” assumption business. Omega also is a primary insurer, direct writer, for insurance companies looking to write Canadian business, but lacking the appropriate Canadian insurance licenses. In that capacity, Omega acts as the direct writer, or fronting company, for a specific insurance company and typically will cede most or all of that fronted business to that insurer. Omega has three sources of revenue, namely, (i) premiums on portfolio transfer transactions and fees related to managing Canadian branch offices in “run-off”, (ii) assumption reinsurance, including servicing fees in certain transactions, and (iii) premiums on direct business.
Till’s other subsidiaries include Till Management Company (“TMC”), Golden Predator US Holding Corp. (“GPUS”), Omega Insurance Holdings, Inc. ("Holdings"), and Focus Group Inc. ("Focus"). TMC provides investment advisory and investment management services, GPUS provides personnel services, financial accounting, corporate and compliance, and other back-office support to Till and its subsidiaries, Holdings is the holding company for Omega and Focus, and Focus provides management services to Omega and consulting and management services to third-party insurers and others.
The discussion of Till's financial condition and results of operations that follows is intended to provide summarized information to assist the reader in understanding Till's condensed consolidated financial statements as of and for the year ended December 31, 2017, as well as to provide explanations as regards the primary factors for financial statement changes from year to year. This discussion should be read in conjunction with Till's audited consolidated financial statements that appear in Part II, Item 8. Financial Statements and Supplementary Data of this Report.
In the third quarter of 2017, Till initiated a plan to sell its wholly-owned subsidiary Holdings, including its wholly-owned subsidiaries, Omega and Focus. Holdings was acquired by Till on May 15, 2015. Till's management and Board of Directors believe the sale of Holdings will better position Till's operations for the benefit of its shareholders including through the possible financing of reinsurance contracts at RRL and other investments.
Financial Highlights as of and for the Year Ended December 31, 2017 (rounded)
Investment income (loss), inclusive of net realized investment gains and losses, decreased from income of $2.4 million for 2016 to loss of $0.3 million for 2017. That decrease in net investment income (loss) was primarily due to losses related to futures trading during 2017, and large gains in natural resource investments during 2016 that did not occur during 2017.
Gain on sale of mineral interests and PP&E increased from $0.4 million in 2016 to $1.2 million in 2017. That increase in gain on sale of mineral interests and PP&E was due mostly to the completion of an option agreement that resulted in the sale of a mineral property during 2017 compared to smaller sales of mineral interests and PP&E during 2016.
The decrease in salaries and benefits from $0.7 million in 2016 to $0.4 million in 2017 relates principally to a 2016 one-time payment to Till's former chief financial officer.
The increase in loss from discontinued operations from $0.2 million in 2016 to $2.2 million in 2017 was primarily due to a $1.0 million valuation loss resulting from measuring Holdings at its fair value less costs to sell at December 31, 2017, increased net insurance losses and loss adjustment expenses of $1.5 million in 2017 compared to $0.3 million in 2016, and an income tax expense of $0.6 million in 2017 primarily relating to the valuation of Holding's deferred tax assets at December 31, 2017.
Cash and cash equivalents ($5.9 million) and investments ($1.9 million) totaled $7.8 million at December 31 30, 2017 as compared to cash and cash equivalents ($2.0 million) and investments ($4.1 million) that totaled $6.1 million at December 31, 2016. That increase in cash and cash equivalents resulted from the receipt of payments on a note receivable and net sales of investments. The decrease in investments resulted mostly from sales of investments in the normal course of business.
The increase in assets held for sale from $32.8 million at December 31, 2016 to $62.3 million at December 31, 2017 relates to a new specialty insurance program underwritten by Omega during 2017, growth in other Omega insurance programs, and premiums written related to program renewals occurring during 2017.
The decrease in goodwill from $3.0 million at December 31, 2016 to $2.2 million at December 31, 2017 is primarily due to the loss realized as a result of Till's valuation of Holdings as assets and liabilities held for sale during 2017. Goodwill was reduced $1.0 million as part of the Holdings held for sale valuation, partially offset by foreign currency adjustment to goodwill in 2017.
The decrease in net cash used in operating activities from $6.7 million in 2016 to $3.9 million in 2017 is primarily due to Omega's new specialty insurance program that did not exist in 2016.
The increase in net cash provided by financing activities from $0.3 million in 2016 to $3.0 million in 2017 is primarily due to the receipt of $2.9 million and $0.5 million on notes receivable during 2017 and 2016, respectively.
The information contained in Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Report includes a description of critical accounting estimates that is incorporated herein by reference.
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Years Ended December 31, 2017 and 2016
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2017 and 2016
Note 7 - Unpaid Losses, Loss Adjustment Expenses, and Amounts Ceded
Till was formed to respond to the market need for more capacity for certain types of insurance and reinsurance. Till conducts its reinsurance business through Resource Re Ltd. (“RRL”), a wholly-owned subsidiary of Till that was incorporated in Bermuda in August 2012 and licensed as a Class 3A insurance company in Bermuda by the Bermuda Monetary Authority (“BMA”) in August 2013. RRL intends to offer property and casualty reinsurance coverage to a select group of insurance companies, e.g., captive insurers, privately-held insurers, other global insurers and reinsurers with capital constraints, and insurers and reinsurers that are under regulatory, capital, or ratings stress. RRL assumption reinsurance business has been, and expects to be, written through the MultiStrat Re Ltd. ("MSRE") platform. The insurance business assumed from MultiStrat Re is anticipated to be primarily medium- and long-tail coverage under customized reinsurance contracts with capped liabilities and diversification in specialty property and casualty lines of business. MSRE is a Bermuda based privately-held reinsurance company.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, the accompanying consolidated financial statements contain all normal and recurring adjustments necessary to fairly present the consolidated financial position of Till and its subsidiaries at December 31, 2017 and 2016 and the results of operations and cash flows for the years then ended. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes thereto. Actual results could differ from those estimates.
The consolidated financial statements have been prepared in U.S. dollars. The functional currency for Till is the U.S. dollar. The exchange rates used in converting Canadian dollars to U.S. dollars were as follows:
Basic and diluted income (loss) per restricted voting share are calculated on Till's income (loss) attributed to Till's shareholders divided by the weighted average number of Till shares outstanding during the year.
In the third quarter of 2017, Till initiated a plan to sell its wholly-owned subsidiary Omega Insurance Holdings, Inc. ("Holdings") including its subsidiaries Omega General Insurance Company ("Omega") and Focus Group, Inc. ("Focus"), all of which are based in Canada. As a result of that decision, pursuant to U.S. GAAP, Holdings is required to be classified as held for sale and is also required to be considered a discontinued operation. However, during the potential sale process, Holdings, Omega, and Focus each continues to operate as a normal operation of Till.
Where necessary, adjustments are made to the financial statements of the subsidiaries and controlled subsidiaries to conform their accounting policies with those used by Till.
Till's major subsidiaries and ownership interests as of December 31, 2017 and 2016 were as follows:
• Level 1 - Assets and liabilities with values based on unadjusted quoted prices for identical assets or liabilities in an active market that Till is able to access.
Till’s non-financial assets, such as goodwill and property, plant, and equipment, are carried at cost or depreciated cost unless there are indicators of impairment, and are reported at fair value only when an impairment charge has been recognized.
Transactions denominated in currencies other than the functional currency are recorded using the exchange rates prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Exchange differences that occur on the settlement of monetary items, and on the translation of monetary items, are recognized in the period in which they occur.
Purchases of investments in trading securities and available for sale investments are initially recorded at the purchase price on the trade date and are subsequently carried at fair value. Sales of investments are recorded at the sales price on the trade date. Realized gains and losses are included in income or loss in the period in which they occur. Unrealized gains and losses from changes in fair value of held for trading investments are included in income or loss. Unrealized gains and losses from changes in fair value of available for sale investments are included in accumulated other comprehensive income (loss) in shareholders’ equity. On disposal or sale of an available for sale investment, previously recorded unrealized gains and losses are removed from accumulated other comprehensive income (loss) in shareholders’ equity and included in current period income or loss.
If Till were to determine that an equity investment has incurred an “other-than-temporary” impairment, Till would permanently reduce the cost of that investment to fair value and recognize an impairment charge in its consolidated statements of comprehensive income (loss). If an investment in a debt security was impaired, and Till either intends to sell the security or it is more-likely-than-not that Till will have to sell that security before it is able to recover the amortized cost, then Till would record the full amount of the impairment in its consolidated statements of comprehensive income (loss).
During the period that the underlying insurance coverage of the assumed reinsurance business is in effect, the unearned premiums are reported as revenue on a pro rata basis over the term of the remaining underlying insurance policies. The impact of any reinsurance ceded on the portfolio is reported as an expense at the time that the reinsurance contract is entered into.
Commissions, premium taxes, and other expenses that relate directly to the acquisition of premiums written are deferred and amortized over the terms of the related policies to the extent they are considered recoverable from unearned premiums.
A liability is established for the estimated unpaid losses and loss adjustment expenses under the terms of Till’s insurance subsidiaries’ policies and reinsurance agreements. The reserve for unpaid losses and loss adjustment expenses represents the estimated ultimate cost of settling all reported unpaid losses and related loss adjustment expenses, and losses that have been incurred but net yet reported ("IBNR").
Till's insurance subsidiaries estimate the reserve for unpaid losses and loss adjustment expenses using individual case-based estimates for reported claims and actuarial estimates for IBNR losses. Till, through its insurance subsidiaries, continually reviews and adjusts its estimated losses as necessary based on industry development trends, Till’s evolving claims experience, and new information obtained. If Till’s unpaid losses and loss adjustment expenses are considered to be deficient or redundant, Till increases or decreases the liability in the period in which Till identifies the difference and reports the change in its current period results of operations. Because Till’s estimate of the ultimate cost of settling all reported and unreported claims may change at any point in the future, a possibility exists that the ultimate cost may vary significantly from the estimated amounts included in Till’s consolidated financial statements.
Property, plant, and equipment are carried at cost less accumulated depreciation and any impairment charges. Depreciation is recorded on a straight-line basis over the estimated useful life of the asset. Residual values and useful lives are reviewed annually. Impairment losses and gains and losses on disposals of property, plant, and equipment are included in the consolidated statements of comprehensive income (loss).
Significant payments related to the acquisition of land and mineral rights are capitalized. Costs incurred before technical and commercial viability of a mineral property has been demonstrated are expensed and classified as exploration expense. Capitalization of mine development costs begins once all operating permits have been secured, technical feasibility has been determined, and a decision to develop has been made.
Till measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite vesting period. Determining the fair value of stock option awards requires judgment, including estimates of stock price volatility, forfeiture rates, and expected option life.
Income tax expense represents the sum of the tax currently payable and deferred. The tax currently payable is based on taxable earnings for the period. Taxable income differs from income as reported in the consolidated statements of comprehensive income (loss) because it excludes items of income or expense that are taxable or deductible in non-current periods and it further excludes items that are never taxable or deductible. Till’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Till recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Till measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences. Should a change in tax rates occur, Till recognizes the effect on deferred tax assets and liabilities in operations in the period that includes the enactment date of the related change. Realization of Till’s deferred income tax assets depends on Till having sufficient projected future taxable income. A valuation allowance is recognized if it is more-likely-than-not that some portion or the entire deferred tax asset will not be recognized.
Till recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position based on its technical merits following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized at the time of an ultimate settlement with the relevant taxing authority.
Income tax assets and liabilities are offset when there is a legally enforceable right to offset the assets and liabilities and when they relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entities where there is an intention to settle the balance on a net basis.
The recent accounting pronouncements described below have had or may have a significant effect on Till's consolidated financial statements or on its disclosures on future adoption. Till does not discuss recent pronouncements that (i) are not anticipated to have an impact on Till or (ii) are unrelated to Till's financial condition, results of operations, or related disclosures.
In September 2015, the FASB issued ASU Topic 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, that allows an entity to recognize adjustments to provisional amounts in a business combination in the reporting period in which the adjustment amounts are determined. Topic 805 is effective for fiscal year 2017. Till adopted this guidance beginning in the first quarter of 2017 with no impact on its consolidated financial statements.
In January 2017, the FASB issued ASU Topic 2017-04, Intangibles-Goodwill and Other, that provides updated guidance on goodwill impairment testing requiring entities to calculate the implied fair value of goodwill through a hypothetical purchase price allocation. Under the updated guidance, impairment will have to be recognized as the amount by which a reporting unit’s carrying value exceeds its fair value. The standard is effective for Till in the first quarter of 2020 on a prospective basis with early adoption permitted. Till is evaluating the impact of this guidance.
No other new accounting pronouncement issued or effective during 2017 had or is expected to have a material impact on Till's consolidated financial statements or disclosures.
In January 2017, SPD, in exchange for the release of a related party debt owed to RRL, gave 100% of its full ownership of SMC to RRL. Ownership of SMC was, in turn, transferred to Till's wholly-owned subsidiary, Golden Predator US Holding Corp. ("GPUS"). The approximately $1.5 million impact of that transaction is included within the decrease in non-controlling interests with no other impact on consolidation. Till's Board of Directors and management are committed to a plan to sell SMC. Assets and liabilities of SMC held for sale as of December 31, 2017 and 2016 are as follows:
SPD's Taylor Mill assets had a book value of $-0- at December 31, 2017 and 2016.
The first installment of Cdn$717,450 (US$546,545) was received on May 25, 2016, the second installment of Cdn$1,216,373 (US$913,879) was received on March 31, 2017, and the final payment of Cdn$2,230,016 (US$1,651,374) was received on June 2, 2017.
That promissory note was initially recognized at fair value, and was subsequently carried at amortized cost using the effective interest rate method.
The following tables summarize the differences between cost or amortized cost and fair value, by major investment category, at December 31, 2017 and 2016:
Available for sale investments (including available for sale investments included in assets held for sale)
The following table presents information about Till’s investments measured at fair value on a recurring basis, excluding assets held for sale.
Unrealized investment losses on available for sale investments included in assets held for sale
The following table presents an aging of Till’s unrealized investment losses on available for sale investments included in assets held for sale by investment class as of December 31, 2017 and 2016.
On December 17, 2016, Till, through RRL, entered into an unsecured loan agreement with IGC. Under that loan agreement, the principal amount loaned by RRL was $400,000, the annual interest rate was 15%, and the loan and accrued interest were due in August 2017. In 2017, $40,000 in interest was received from IGC and the loan was repaid with $300,000 cash and $100,000 converted to IGC membership units and warrants. At December 31, 2017 and December 31, 2016, the loan and accrued interest totaled $-0- and $401,973, respectively, and is included in other assets.
The following table is a summary of changes in outstanding losses and loss adjustment expenses ("LAE") and amounts ceded included in assets and liabilities held for sale (Note 4).
Incurred loss and allocated loss adjustment expenses, net of reinsurance and excluding portfolio transfer transactions:
Loss portfolio transfer transactions were excluded from the preceding tables due to their distortion of insurance losses from Omega's property and casualty insurance programs. The cumulative number of reported claims is not determinable and impracticable due to the majority of the business written by Omega is reinsurance assumed contract business; as such claim count information is not available or comparable between contracts.
The unaudited average annual percentage payout of incurred losses by duration, net of reinsurance, as of December 31, 2017:
The following table is a summary of changes in unearned premiums and unearned premiums ceded included in assets and liabilities held for sale (Note 4).
A summary of the changes in deferred policy acquisition costs included in assets held for sale (Note 4) is as follows:
The following tables are a summary of royalty and mineral interests:
On April 10, 2017, GPUS, Till's wholly-owned subsidiary, completed an option agreement with an unrelated party whereby a mineral interest located in Nevada, USA was sold. The final payment of $1,156,090 was received by GPUS and a gain of $1,055,835 was recorded on the sale of that mineral interest.
Under the terms of the Taylor Agreement, Montego can acquire the Taylor Property in consideration for the completion of a series of cash payments totaling $1,200,000, issuing 2,500,000 common shares to SPD, and incurring expenditures of at least $700,000 on the Taylor Property. Upon completion of the payments, share issuances, and expenditures, Montego will hold a 100% interest in the Taylor Property, subject to a 2% net smelter returns royalty ("NSR") and a 1% net profit royalty that will be retained by SPD.
The payments, share issuances, and expenditures must be completed in accordance with the following schedule:
• 12 months from Closing: $200,000 cash and 400,000 common shares and expenditures of $100,000
The closing occurred on April 20, 2017 on which date SPD had received $200,000 cash and 500,000 common shares of Montego initially valued at $156,309. By October 20, 2017, SPD had also received $100,000 cash and 300,000 common shares of Montego initially valued at $45,655.
In June 2017, GPUS, Till’s wholly-owned subsidiary, entered into an option agreement (the “Carlin Vanadium Agreement”) with a privately-held unrelated company (“Optionee”) pursuant to which Optionee has the right to acquire from GPUS certain mining claims located in Idaho, USA commonly referred to as the Carlin Vanadium/Black Kettle Property (the “Carlin Vanadium Property”).
• On or before December 15, 2020: Expenditures of an additional $250,000
The closing occurred on June 14, 2017 by which date GPUS had received $15,000.
A summary of accounts payable and accrued liabilities is as follows:
Till's income (loss) from continuing operations before income taxes and loss on equity method investment consisted of:
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
In December 2017, the United States Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a modified territorial tax system, and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. Proposed changes to the U.S. Federal corporate income tax rate to reduce the rate from 34% to 21% effective January 1, 2018 and onwards was enacted on December 22, 2017. The relevant net deferred tax asset balances have been reduced by approximately $6.1 million to reflect the decrease in Till's U.S. Federal income tax rate from 34% to 21% applicable to Till's U.S. subsidiaries. A corresponding valuation allowance in the amount of approximately $6.1 million was previously applied to Till's deferred tax asset balance in the prior year and as such the change in U.S. tax rate in the current year resulted in a $nil impact to Till's consolidated balance sheet and consolidated statement of loss and comprehensive loss.
In September 2017, the British Columbia (BC) Provincial Government of Canada proposed changes to the provincial general corporate income tax rate to increase the rate from 11% to 12% effective January 1, 2018 and onwards. That change in tax rate was enacted on November 2, 2017. The relevant deferred tax balances have been remeasured to reflect the increase in Till's combined Canadian Federal and Provincial (BC) general corporate income tax rate from 26% to 27%.
Till’s Board of Directors may, from time to time and in its sole discretion, award options to acquire shares of the restricted voting stock of Till to directors, employees, and consultants. During 2017, Till recognized stock-based compensation related to options of $28,096 (2016 - $28,839), which amounts are included in the consolidated statements of comprehensive income (loss). At December 31, 2017, Till has 117,500 stock options outstanding with a weighted average exercise price of Cdn$9.55 (US$7.61) and a weighted average remaining term of 1.89 years. Till recognized stock-based compensation of $20,323 in 2017 and $16,446 in 2016 as a result of consolidating SPD, and those amounts are included in the consolidated statements of comprehensive income (loss).
The intrinsic value of outstanding Till warrants and stock options at December 31, 2017 is zero.
Stock options to purchase 117,500 restricted voting shares were outstanding at December 31, 2017 (December 31, 2016 - 119,952). Warrants to purchase 179,500 restricted voting shares were outstanding at December 31, 2017 and 2016. Those stock options and warrants were excluded in the calculation of diluted earnings per share because the exercise prices of the options and warrants were greater than the weighted average market value of the restricted voting shares in the years ended December 31, 2017 and 2016.
As a result of Till's decision in the third quarter 2017 to sell Holdings, as described in Note 2, pursuant to U.S. GAAP, Holdings is required to be classified as a discontinued operation and is presented as such on Till's Statements of Income (Loss). The summary of the losses presented on the basis of discontinued operations is summarized as follows:
Other comprehensive income (loss) attributed to Holdings includes a change in cumulative foreign exchange translation adjustment of $590,235 and $340,387 for the years ended December 31, 2017 and 2016, respectively. Other comprehensive income (loss) attributed to Holdings also includes changes in net unrealized gains and reclassification adjustment for net realized gain on available for sale investments of $(337,657) and $(313,506) for the years ended December 31, 2017 and 2016, respectively.
Till Management Company ("TMC") pays a performance bonus to certain TMC members based on a formal method approved by the Till Board of Directors. Based on that performance bonus plan, $-0- and $-162,182 was paid related to the respective 2017 and 2016 investment results. The 2016 bonus was paid in 2017.
Till manages capital on an aggregate basis, as well as individually for each regulated entity. Till's insurance subsidiaries are subject to the regulatory capital requirements defined by the Bermuda Monetary Authority (“BMA”) for RRL and by the Office of Superintendent of Financial Institutions (Canada) (“OSFI”) for Omega.
• Ensuring that policyholders in the insurance and reinsurance subsidiaries are protected while complying with regulatory capital requirements.
RRL is registered under The Bermuda Insurance Act 1978 and related regulations (the “Act”) that require RRL to file a statutory financial return and maintain certain measures of solvency and liquidity. The required Minimum General Business Solvency Margin at December 31, 2017 was $1 million. The Minimum Liquidity Ratio is the ratio of the insurer’s relevant assets to its relevant liabilities. The minimum allowable ratio is 75%. RRL’s relevant assets at December 31, 2017 were $8.4 million (December 31, 2016 - $8.98 million) and 75% of its relevant liabilities as of December 31, 2017 was $169,692 (December 31, 2016 - $141,003). As of December 31, 2017 and 2016, RRL is in compliance with those requirements.
OSFI has set out expectations of a 100% MCT as the minimum and have also set out 150% MCT as the supervisory target for Canadian property and casualty insurance companies. As of December 31, 2017, Omega had total capital available of Cdn$8.4 (US$6.7) million (December 31, 2016 - Cdn$9.4 (US$7.0) million) and a total capital required of Cdn$2.5 (US$2.0) million (December 31, 2016 - Cdn$1.9 (US$1.4) million) resulting in a MCT of 331% (December 31, 2016 - 499%). As of December 31, 2017 and 2016, Omega is in compliance with OSFI's MCT requirement.
• Require the expensing of policy acquisition costs as incurred, i.e., does not allow for the deferral and amortization of policy acquisition costs, i.e., DPAC.
As of and for the years ended December 31, 2017 and 2016, the equity and net income (loss) on a statutory basis and a U.S. GAAP basis for RRL and Omega were as follows:
In addition to underwriting general insurance contracts, Omega also assumes portfolios of existing business that are in run-off from other insurers through assumption reinsurance transactions. Those portfolios could be from any line of business that the transferring insurer underwrote up through the assumption. Under those assumption reinsurance transactions, Omega is exposed to certain risks defined in the underlying insurance contracts that were originally written by the transferring insurer.
The principal risk that Omega faces under both general insurance contracts and assumption reinsurance transactions is that the actual claims and benefit payments, or the timing thereof, differs from the assumptions and/or expectations used to price the general insurance contracts or assumption reinsurance transactions. That insurance risk is influenced by the frequency of claims, severity of claims, emergence of unknown claims, actual benefits paid, and subsequent development of claims, in particular long-tail claims. For long-tail claims that take years to settle, Till is also exposed to inflation risk. Till's objective is to ascertain based on the business insured and other factors that sufficient reserves are available to cover known and unknown liabilities related to the business written and assumed.
The following tables summarize the terms to maturity of Till's investments and liabilities included in discontinued operations as of December 31, 2017:
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its obligations. Till's credit risk is primarily attributable to cash and cash equivalents, investments, premiums receivable, and reinsurance recoverables. Till has policies in place to limit and monitor its exposure to individual issuers and classes of issuers of investments. Till's insurance and reinsurance policies are distributed by brokers and agents who manage cash collection on its behalf and Till monitors its exposure as regards of the activities of those brokers and agents. Till has policies in place that limit its exposure to individual reinsurers, and Till conducts regular review processes to assess the creditworthiness of reinsurers with whom it transacts business. In addition, Till holds collateral for certain of its reinsurance arrangements.