We believe that our existing properties are adequate to meet current needs and that suitable additional space will be available as needed to accommodate any expansion of operations and additional offices on commercially acceptable terms.
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 intends to 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.
Omega, a Canada domiciled company, underwrites direct and reinsurance business. 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”), and Focus. TMC provides investment advisory and investment management services, and GPUS provides personnel services, financial accounting, corporate and compliance, and other back-office support to Till and its subsidiaries, and Focus provides management services to Omega and consulting and management services to third-party insurers.
The discussion of our financial condition and results of operations that follows is intended to provide summarized information to assist the reader in understating our consolidated financial statements, as well as to provide explanations as regards the primary factors that accounted for those financial statement changes between 2015 and 2016. This discussion should be read in conjunction with Till’s consolidated financial statements that appear in Item 8 of this Report.
Financial Highlights as of and for the Year Ended December 31, 2016 (rounded)
Consolidated Results of Operations for the Years Ended December 31, 2016 and 2015
Insurance premiums ceded to reinsurers increased from $20.8 million in 2015 to $39.6 million in 2016. The increase in premiums ceded was due to the inclusion of Omega for all of 2016 as compared to 7.5 months in 2015.
General and administrative expenses decreased from $2.6 million in 2015 to $2.0 million in 2016. The decrease in general and administrative expenses was primarily the result of reduced legal and professional fees and travel-related costs during 2016.
Salaries and benefits decreased from $2.2 million in 2015 to $1.4 million in 2016. The decrease was due to staff reductions, partially offset by the inclusion of salaries and benefits at Holdings for all of 2016 as compared to 7.5 months in 2015. The 2016 salaries and benefit expenses also included a non-repetitive severance payment to Till’s former CFO who had been a former AMB senior officer. Salaries and benefits in 2015 also included non-repetitive severance payments to two former AMB senior officers after the Arrangement became effective in 2014.
Stock-based compensation decreased from $309,044 in 2015 to $28,839 in 2016. The decrease in stock-based compensation is due mostly to forfeited options during the year ended December 31, 2015 that resulted from certain changes in Till’s management and board of directors.
Mining related expenses and property impairment decreased from $0.3 million in 2015 to $0.2 million in 2016. That decrease results from reduced mining related expenses and property impairment at SPD in 2016 and the loss of control of GPY in 2015.
Interest and other (income) expense increased from an expense of $0.1 million in 2015 to income of $26,000 in 2016. That increase was due to non-recurring expenses incurred in 2015 related to Till’s reorganization in 2014.
Cash and cash equivalents ($5.3 million) and investments ($16.8 million) totaled $22.1 million at December 31, 2016 as compared to cash and cash equivalents ($1.5 million) and investments ($25.3 million) that totaled $26.8 million at December 31, 2015. The decline in investments resulted from maturities in investments in the normal course of business and sales of natural resource investments.
The $4.5 million of assets held for sale at December 31, 2016 and 2015 principally represents the valuation related to SPD’s announced intention to realize value from those assets by initiating a process to sell all or part of the tangible and mineral property assets for some of its properties.
The changes in certain asset balances, e.g., Promissory note receivable and Goodwill, are primarily indicative of foreign currency changes at December 31, 2016 as compared to December 31, 2015.
The $3.2 million of reinsurance payables at December 31, 2016 represents a decrease of $1.8 million as compared to the $5.0 million balance at December 31, 2015. Those payables related to amounts due to reinsurers.
Net cash from financing activities amounted to $0.3 million in 2016 as compared to cash used of $1.0 million in 2015. The primary use of cash in 2016 and 2015 was for the purchases of Till Shares. In 2016, cash receipts included $0.5 million on a note receivable from GPY.
The preparation of Till’s consolidated financial statements requires judgments and estimates that may have a significant impact on its financial results. Note 3, under Item 8, Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, of this Annual Report contains a summary of Till’s significant accounting policies, most of which require the use of estimates and assumptions.
As of December 31, 2016, Till did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Note 6 - Promissory Note Receivable and Investment in Golden Predator Mining Corp.
Note 8 - Unpaid Losses, Loss Adjustment Expenses, and Amounts Ceded
We have audited the accompanying consolidated balance sheet of Till Capital Ltd. (a Bermuda corporation) and subsidiaries (the “Company”) as of December 31, 2016, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Till Capital Ltd. and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
We have audited the accompanying consolidated balance sheet of Till Capital Ltd (a Bermuda corporation) and subsidiaries (the “Company”) as of December 31, 2015, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
Till Capital Ltd. ("Till") was incorporated under the laws of Bermuda in August 2012 under the name Resource Holdings Ltd. In March 2014, Resource Holdings Ltd. changed its name to Till Capital Ltd. in accordance with Till's bye-laws and Section 10 of the Bermuda Companies Act 1981, as amended (the "Companies Act"). Till is an exempted holding company with its principal place of business at Continental Building, 25 Church Street, Hamilton HM12, Bermuda. Till's registered office is Crawford House, 50 Cedar Avenue, Hamilton HM 11, Bermuda and its registered agent is Compass Administration Services Ltd.
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 Multi-Strat Re Ltd. ("MSRE") platform. The insurance business assumed from Multi-Strat 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.
On May 15, 2015, Till acquired all of the issued and outstanding shares of Omega Insurance Holdings, Inc. (“Holdings”), a privately-held Toronto, Canada based holding company, including its subsidiaries, Omega General Insurance Company ("Omega"), a fully licensed insurance company, and Focus Group, Inc. ("Focus"), an insurance consulting and services company. Holdings offers innovative and customized solutions in a cost effective manner for insurers/reinsurers exiting the market and organizations with unique insurance needs.
Prior to 2016, Till prepared its financial statements under International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"), for reporting as required by securities regulators in Canada, and as permitted in the United States ("U.S.") based on Till's status as a foreign private issuer as defined by the U.S. Securities and Exchange Commission (the "SEC") for foreign private issuers. During 2016, Till determined that it no longer qualified as a foreign private issuer under the SEC rules. As a result, beginning with Till's annual report on Form 10-K for the year ended December 31, 2016, Till is required to comply with all of the periodic disclosure and current reporting requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, applicable to U.S. domestic issuers. Under the Toronto Securities Exchange - Venture ("TSX-V") regulations,Till is permitted in Canada to prepare its consolidated financial statements in accordance with GAAP. The transition to GAAP was made retrospectively for all periods presented in Till's 2016 Form 10-K, including the consolidated financial statements.
Basic and diluted income (loss) per restricted voting share are calculated on Till's income (loss) expressed in U.S. dollars attributed to Till's shareholders divided by the weighted average number of Till shares outstanding during the year.
The accompanying consolidated financial statements include the accounts of Till, its wholly-owned subsidiaries, and other entities in which Till has, or had, a controlling interest (a "controlled subsidiary"). None of Till's controlled subsidiaries are variable interest entities. Non-controlled minority interests in the consolidated financial statements are separately identified in the consolidated balance sheets and statements of income (loss) and comprehensive income (loss). All intercompany accounts and transactions have been eliminated in consolidation.
Till's major subsidiaries and ownership interests as of December 31, 2016 and 2015 were as follows:
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Amounts in the accompanying consolidated financial statements represent Till’s best estimates and assumptions; however, the actual amounts could differ materially from those estimates. Till’s principal use of estimates and assumptions include fair value determination of certain investments and other than temporary impairment, valuation of derivative instruments, valuation of mineral rights and mining properties, valuation of purchased intangibles, assessment of goodwill impairment, projection of unpaid loss and loss expense adjustment reserves, assessment of reinsurance recoverable including any provision for uncollectible reinsurance, and valuation of deferred tax assets.
The application of the purchase method of accounting for business combinations requires the use of significant estimates and assumptions in determining the fair value of assets acquired and liabilities assumed to properly allocate the purchase price. The estimates of the fair value of the assets acquired and liabilities assumed are based on assumptions believed to be reasonable using established valuation techniques that consider a number of factors. Assets acquired and liabilities assumed in connection with business combinations are recorded based on their respective fair values at the date of acquisition. The identifiable intangible assets that Till has acquired are customer relationships and trade names. Goodwill is calculated as the excess of the cost of the acquired entity over the net fair value of the assets acquired and the liabilities assumed.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of Till’s financial instruments, Till prioritizes those fair value measurements into one of three levels based on the nature of the inputs, as follows:
• Level 2 - Assets and liabilities with values based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or valuation models with inputs that are observable, directly or indirectly, for substantially the term of the asset or liability.
• Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs represent Till’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances.
Till assesses the levels for the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer.
Transactions in shareholders' equity are translated at the rates prevailing at the date of the transactions. Income and expenses transactions are translated at the average exchange rates for the period. Where those rates approximate the rates on the dates of transactions, and, where exchange differences occur, those differences are recognized as a component of equity.
Cash and cash equivalents include cash on deposit with banks and highly liquid short-term interest-bearing investments with a maturity of three months or less at origination. Carrying amounts approximate fair value due to the short-term nature and high liquidity of the instruments.
Interest income earned on cash and cash equivalents is recognized on the effective interest rate method.
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).
Derivative financial instruments include exchange-traded future and option contracts. They derive their value from the underlying instrument and are subject to the same risks as that underlying instrument, including liquidity, credit, and market risk. Till does not hold any derivatives classified as hedging instruments.
Derivative financial assets and liabilities are offset and the net amount is reported in the balance sheet only to the extent there is a legally enforceable right of offset and there is an intention to settle on a net basis, or to realize the assets and liabilities simultaneously. Derivative financial assets and liabilities are derecognized when Till has transferred substantially all of the risks and rewards of ownership or the liability is discharged, canceled, or expired.
An insurance policy is a contract where the insurer has accepted insurance risk from the policyholder(s) by agreeing to compensate the policyholders if one or more specified uncertain future events (the insured event) adversely affects the policyholder.
Once a policy, or reinsurance agreement, has been classified as an insurance contract, it remains classified as an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during that period.
Insurance premiums are generally recorded as written on the date that coverage begins. Those written premiums, for both insurance and reinsurance products, are primarily earned on a pro rata basis over the term of the policies to which they relate. Unearned premiums represent the portion of the premiums written applicable to the unexpired portion of the policies in force.
Till reports its reserves for unpaid losses and loss adjustment expenses gross of the amounts related to unpaid losses recoverable from reinsurers and reports losses net of amounts ceded to reinsurers. Till does not discount its loss reserves for financial statement purposes.
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 loss.
From time to time, Till acquires or disposes of properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the optionee and, accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. After all costs relating to a property have been recovered, further payments received are reported as a gain on option or disposition of mineral property.
Reclamation bonds include bonds that have been pledged for mining-related reclamation and closure activities and that are not available for immediate disbursement.
Other revenue primarily represents consulting and service fees earned by Focus.
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 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.
In May 2014, the Financial Accounting and Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 provides guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that represents the consideration that the entity expects to be entitled to in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Till is continuing to evaluate the impact of the new guidance on its consolidated financial statements. Till believes the new guidance will be less complex and will not have a significant impact on its financial statements.
In January 2016, the FASB issued ASU Topic 2016-01, Financial Statements - Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that requires equity investments to be measured at fair value with changes in fair value recognized in income, use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes, separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements, present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, and eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Topic 825-10 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted for certain requirements. Till is assessing the impact of adopting this accounting standard on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued guidance that affects the recognition, measurement, presentation and disclosure of leases. The new guidance requires substantially all leases to be reported on the balance sheet as right-to-use assets and lease liabilities, as well as additional disclosures. The standard is effective as of January 1, 2019, and early adoption is permitted. While Till has limited leasing activities, Till is in the early stages of evaluating the impact of the new guidance on its consolidated financial statements.
On May 15, 2015, Till completed the acquisition of Holdings, including its subsidiaries, Omega and Focus. That acquisition enabled Till to write direct insurance and to provide those insurers wishing to access the Canadian market an ability to do so in an efficient manner, through reinsurance, and to provide those insurers wishing to exit the Canadian market, through a company with experience in handling "run-off" business, an ability to facilitate such an exit so that their financial and legal obligations are met on a continuing basis, while being able to repatriate surplus capital in a more timely fashion.
Till completed the identification and valuation of all identifiable assets and liabilities related to the acquisition in 2015. A summary of the allocation of the purchase price of Holdings to the fair value of the assets acquired and liabilities assumed at the date of acquisition is as follows:
Till attributed $3,368,321 of the Holdings' purchase price to goodwill. Holdings' results of operations have been included in Till's consolidated financial statements from the date of acquisition.
The amount of goodwill related to the acquisition of Holdings is subsequently adjusted for the foreign exchange translation. The goodwill on Till's consolidated balance sheets is summarized as follows:
With the loss of control, Till derecognized the assets and liabilities of GPY, the former subsidiary, along with the non-controlling interests, and the cumulative translation amount related to the cumulative foreign exchange adjustments that had been reported in equity. The resulting gain was recognized in 2015.
As part of the separation agreement between Till and Mr. Sheriff, Till granted Mr. Sheriff two assignable options, each with a term of 18 months, to purchase the balance of Till’s ownership of 11,812,154 GPY shares. The initial derivative liability associated with those options was $163,868 and was included in the 2015 gain from loss of control. Thereafter, the financial derivative has been reported at fair value until the options were exercised at which time the carrying amount became $-0-. If an option were to be exercised prior to that date, the carrying amount of the financial derivative would be included in the sale proceeds of the investment. At December 31, 2015, that derivative liability was $337,684.
a) if exercised by September 30, 2015, at CDN$0.11 per share
b) if exercised by October 31, 2015, at CDN$0.12 per share
d) if exercised by December 23, 2015, at CDN$0.14 per share, and
The second option was for Mr. Sheriff to purchase up to 6,312,154 of Till’s GPY shares before March 1, 2017 at CDN$0.15 per share. Till could accelerate the expiry of either option to a date 45 days after Till gives notice to the holder at any time after the ten-day volume-weighted average price (“VWAP”) of the GPY shares is at or above CDN$0.25 per share. On May 12, 2016, Till gave notice to Mr. Sheriff that Till had elected to accelerate the expiry of both options to June 26, 2016 due to the VWAP criteria being met.
Till holds a promissory note receivable from GPY with a face amount of CDN$3,753,332 (US$2,570,950). That promissory note bears interest at 6% per annum to June 1, 2016, 8% per annum to June 1, 2017, and 12% thereafter. That promissory note was eliminated in consolidation until such time as GPY was no longer a controlled subsidiary.
Till calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Till determines the cost or amortized cost of the bonds sold using the specific-identification method and all other securities sold using the average cost method.
The net realized gain from sales of held for trading investments was $1,408,337 for the year ended December 31, 2016 and a loss of $86,901 in 2015.
Till, through RRL, has an investment in a limited liability company (“LLC”) that is accounted for under the equity method of accounting that is summarized as follows:
On December 17, 2016, Till, through RRL, entered in to an unsecured loan agreement with that LLC. Under that loan agreement, the principal amount loaned by RRL was $400,000, the annual interest rate is 15%, and the loan and accrued interest are due August 19, 2017. At the sole discretion of RRL, RRL can elect for interest on the loan to be paid in membership interests in that LLC at $7 per membership interest. As of December 31, 2016, the loan and accrued interest totaled $401,973 and is included in other assets.
Till acquired Omega on May 15, 2015. The Omega unpaid losses, LAE, and amounts ceded at acquisition in the foregoing schedule are related to business written or assumed by Omega at the date of acquisition on business written prior to the date of acquisition. Claim frequency information is not available, nor deemed informative, for the Omega business due to the varied, and specialized, nature of the business that Omega writes and assumes.
In September 2015, RRL novated two reinsurance contracts that had been assumed in December 2014 form Multi-Strat Re. As a result of those novations, RRL paid a novation-related premium of $5,246,208 and released its reserve for unpaid losses and LAE of $5,113,010.
Omega’s reinsurance business includes assumption reinsurance for loss portfolio transfers. In the assumption of some of those loss portfolio transfers, Omega may receive funds from the reinsured for adverse loss development. In the event that that fund is not applied to expected losses and LAE, all or a portion of that adverse development fund may subsequently be remitted to the reinsured. Based on the history of Omega’s loss portfolio business, and the unusual patterns particularly related to loss and LAE pattern that distort the non-loss portfolio business, the following loss development triangles exclude that loss portfolio business. The summary of changes in outstanding losses, LAE, and amounts ceded include amounts that relate to the loss portfolio business.
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.
Reconciliation of net to gross reserve for unpaid loss and loss adjustment expenses:
The components of Till's deferred income tax items are as follows:
The deferred tax asset relates primarily to Omega's operations whereby the timing of insurance deductions for tax purposes is different than for financial accounting purposes.
In assessing the net carrying amount of the deferred tax asset, Till considers whether it is more-likely-than-not that Till will not realize some portion or all of the deferred tax asset. The ultimate realization of the deferred tax asset depends on the availability of future taxable income during the periods in which those temporary differences become deductible. Till considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making that assessment.
Till is authorized to issue 12,000,000 shares of restricted voting stock at a par value of $0.001. Those Till shares have restricted voting rights whereby no single shareholder of Till is able to exercise voting rights for more than 9.9% of the voting rights of the total issued and outstanding Till shares. However, if any one shareholder of Till beneficially owns, or exercises control or direction over more than 50% of the issued and outstanding Till shares, the 9.9% restriction will no longer apply to the Till shares. At December 31, 2016 and 2015, there were 3,350,284, and 3,429,284, respectively, issued Till shares.
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 the year ended December 31, 2016, Till recognized stock-based compensation related to options of $28,839 (year ended December 31, 2015 - $309,044), which amounts are included in the consolidated statements of comprehensive loss. At December 31, 2016, Till has 119,952 stock options outstanding with a weighted average exercise price of CDN$10.38 (U.S.$7.73) and a weighted average remaining term of 2.85 years. Till recognized stock-based compensation of $16,446 in 2016 and $40,911 in 2015 as a result of consolidating SPD, and those amounts are included in the consolidated statements of comprehensive loss.
The fair value of all compensatory options granted is estimated on the grant date using the Black-Scholes-Merton option pricing model. The weighted average assumptions used in calculating the fair values are as follows:
Pursuant to an NCIB program approved by Till's directors in September 2014, treasury shares are canceled at cost through retained earnings (deficit).
Till uses the treasury stock method to calculate diluted income (loss) per share. Following the treasury stock method, the numerator for Till’s diluted income (loss) per share calculation remains unchanged from the basic income (loss) per share calculation, as the assumed exercise of Till’s stock options and warrants does not result in an adjustment to net income or loss.
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, 2016 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, 2016 were $8.98 million (December 31, 2015 - $5.66 million) and 75% of its relevant liabilities as of December 31, 2016 was $141,003 (December 31, 2015 - $28,671). As of December 31, 2016 and 2015, RRL is in compliance with those requirements.
RRL and Omega follow accounting practices prescribed or permitted by their respective regulators, Bermuda and Canada, respectively. Statutory accounting practices differ from GAAP in certain areas, the most significant being that statutory accounting practices:
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 expectations used to price the general insurance contracts or assumption reinsurance transactions. That risk is influenced by the frequency of claims, severity of claims, emergence of unknown claims, actual benefits paid, and subsequent development of long-tail claims. For long-tail claims that take years to settle, Till is also exposed to inflation risk. Till's objective is to ensure that sufficient reserves are available to cover those known and unknown liabilities.
The key assumption underlying the valuation of the reserve for unpaid losses and LAE is that the future loss development will follow a similar pattern to past loss development experience, including average claim costs, claim handling costs, and other claim factors for each accident year. Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future. Judgment is further used to assess the extent to which external factors, such as inflation, court decisions, and government legislation, may affect the estimates. Other factors that may affect the reliability of loss and LAE assumptions include any variation in interest rates, claim settlement delays, and changes in foreign exchange rates.
The following tables summarize the terms to maturity of Till's investments and liabilities as of December 31, 2016:
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, reinsurance recoverables, and a promissory note receivable. 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.
At December 31, 2016, RRL owned approximately 64% of the issued and outstanding common shares of Silver Predator Corp. (“SPD”). SPD 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. Until January 2017, SPD’s two core properties were the Springer tungsten mine and mill in Pershing County, Nevada (the “Springer Property”) and the Taylor mine and mill near Ely, Nevada (the “Taylor Property”). SPD also owns the Copper King property near Coeur d’Alene, Idaho, the Cornucopia property in Elko County, Nevada, and several additional properties in Nevada.
Neither RRL nor Till currently intends to allocate additional capital to restart mining and production at the Springer Property.