UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 ____________________________________________________________
Form 10-Q
 ____________________________________________________________
  
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended SeptemberJune 30, 20172018
Or 
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-31909 
  ____________________________________________________________
gemimagea01.jpg
ASPEN INSURANCE HOLDINGS LIMITED
(Exact Name of Registrant as Specified in its Charter) 
  ____________________________________________________________
 
Bermuda Not Applicable
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
   
141 Front Street
Hamilton, Bermuda
 HM 19
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code
(441) 295-8201

  
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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
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  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý Accelerated filer ¨
       
Non-accelerated filer 
¨ (Do not check if a smaller reporting company)
 Smaller reporting company ¨
       
    Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨   No  ý
As at SeptemberJune 30, 2017,2018, there were 59,407,32359,687,717 outstanding ordinary shares, with a par value of 0.15144558¢ per ordinary share, outstanding.

INDEX
 
  Page
PART I. FINANCIAL INFORMATION
 
Item 1.
Unaudited Condensed Consolidated Financial Statements
3
 Unaudited Condensed Consolidated Balance Sheets as at SeptemberJune 30, 20172018 and December 31, 20162017
3
 Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income for the Three and NineSix Months Ended SeptemberJune 30, 20172018 and 20162017
5
 Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the NineSix Months Ended SeptemberJune 30, 20172018 and 20162017
6
 Unaudited Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20172018 and 20162017
7
 
Notes to the Unaudited Condensed Consolidated Financial Statements
9
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
4647
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
72
Item 4.
Controls and Procedures
73
PART II. OTHER INFORMATION
 
Item 1.
Legal Proceedings
74
Item 1A.
Risk Factors
74
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
7674
Item 3.
Defaults Upon Senior Securities
7774
Item 4.
Mine Safety Disclosures
7774
Item 5.
Other Information
7774
Item 6.
Exhibits
7875
SIGNATURES
7976
CERTIFICATIONS 

PART I
FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As at SeptemberJune 30, 20172018 and December 31, 20162017
($ in millions, except share and per share amounts)
As at September 30,
2017		 As at December 31, 2016As at June 30,
2018		 As at December 31, 2017
ASSETS      
Investments:      
Fixed income securities, available for sale at fair value
(amortized cost — $5,305.7 and $5,620.1)		$5,365.4
 $5,664.6
Fixed income securities, trading at fair value
(amortized cost — $1,642.4 and $1,264.8)		1,665.0
 1,265.7
Equity securities, trading at fair value
(cost — $407.2 and $554.3)		468.6
 584.7
Short-term investments, available for sale at fair value
(amortized cost — $34.4 and $145.3)		34.4
 145.3
Short-term investments, trading at fair value
(amortized cost — $90.3 and $185.4)		90.3

185.4
Catastrophe bonds, trading at fair value (cost — $33.5 and $42.5)30.3
 42.5
Other investments, equity method4.0
 12.1
Fixed income securities, available for sale at fair value
(amortized cost — $5,155.9 and $5,201.2)		$5,080.0
 $5,231.0
Fixed income securities, trading at fair value
(amortized cost — $1,644.6 and $1,634.9)		1,615.9
 1,649.3
Equity securities, trading at fair value
(cost — $0 and $414.8)		—
 491.0
Short-term investments, available for sale at fair value
(amortized cost — $72.2 and $90.0)		72.2
 89.9
Short-term investments, trading at fair value
(amortized cost — $27.4 and $73.0)		27.4

73.0
Catastrophe bonds, trading at fair value (cost — $35.8 and $33.5)35.5
 32.4
Investments, equity method67.1
 66.4
Other investments86.2
 —
Total investments7,658.0
 7,900.3
6,984.3
 7,633.0
Cash and cash equivalents (including $164.2 and $291.3 within consolidated variable interest entities)1,209.3
 1,273.8
Cash and cash equivalents (including $74.5 and $166.6 within consolidated variable interest entities)1,070.7
 1,054.8
Reinsurance recoverables      
Unpaid losses1,369.5
 560.7
1,656.4
 1,515.2
Ceded unearned premiums446.4
 255.2
724.8
 515.5
Receivables      
Underwriting premiums1,529.0
 1,399.4
1,725.2
 1,496.5
Other175.8
 95.5
175.5
 151.1
Funds withheld100.1
 73.1
89.3
 99.8
Deferred policy acquisition costs354.1
 358.4
298.6
 294.3
Derivatives at fair value8.4
 7.2
14.1
 6.4
Receivables for securities sold19.0
 1.6
2.6
 5.3
Office properties and equipment89.8
 83.8
73.0
 75.5
Tax recoverable13.1
 0.5
5.8
 2.3
Deferred tax assets26.9
 28.3
Other assets1.0
 1.0
0.5
 0.5
Intangible assets and goodwill78.1
 79.6
27.0
 27.9
Total assets$13,051.6
 $12,090.1
$12,874.7
 $12,906.4
See accompanying notes to unaudited condensed consolidated financial statements.




ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As at SeptemberJune 30, 20172018 and December 31, 20162017
($ in millions, except share and per share amounts)
 
As at September 30,
2017		 As at December 31, 2016As at June 30,
2018		 As at December 31, 2017
LIABILITIES      
Insurance reserves      
Losses and loss adjustment expenses$6,490.6
 $5,319.9
$6,532.8
 $6,749.5
Unearned premiums1,926.5
 1,618.6
2,087.2
 1,820.8
Total insurance reserves8,417.1
 6,938.5
8,620.0
 8,570.3
Payables      
Reinsurance premiums439.4
 345.3
596.0
 357.5
Deferred taxation0.5
 6.1
Accrued expenses and other payables377.9
 469.2
336.5
 455.4
Liabilities under derivative contracts2.9
 18.4
49.3
 1.0
Total payables820.7
 839.0
981.8
 813.9
Loan notes issued by variable interest entities, at fair value101.5
 115.0
20.3
 44.2
Long-term debt549.4
 549.3
424.6
 549.5
Total liabilities$9,888.7
 $8,441.8
$10,046.7
 $9,977.9
Commitments and contingent liabilities (see Note 16)—
 —
—
 —
SHAREHOLDERS’ EQUITY      
Ordinary shares:      
59,407,323 shares of par value 0.15144558¢ each
(December 31, 2016 - 59,774,464)		$0.1
 $0.1
59,687,717 shares of par value 0.15144558¢ each
(December 31, 2017 - 59,474,085)		$0.1
 $0.1
Preference shares:      
11,000,000 5.95% shares of par value 0.15144558¢ each
(December 31, 2016 — 11,000,000)		—
 —
Nil 7.401% shares of par value 0.15144558¢ each
(December 31, 2016 — 5,327,500)		—
 —
Nil 7.250% shares of par value 0.15144558¢ each
(December 31, 2016 — 6,400,000)		—
 —
10,000,000 5.625% shares of par value 0.15144558¢ each
(December 31, 2016 — 10,000,000)		—
 —
11,000,000 5.95% shares of par value 0.15144558¢ each
(December 31, 2017 — 11,000,000)		—
 —
10,000,000 5.625% shares of par value 0.15144558¢ each
(December 31, 2017 — 10,000,000)		—
 —
Non-controlling interest2.2
 1.4
3.0
 2.7
Additional paid-in capital951.8
 1,259.6
965.4
 954.7
Retained earnings2,234.1
 2,392.3
1,998.9
 2,026.9
Accumulated other comprehensive income, net of taxes(25.3) (5.1)(139.4) (55.9)
Total shareholders’ equity3,162.9
 3,648.3
2,828.0
 2,928.5
Total liabilities and shareholders’ equity$13,051.6
 $12,090.1
$12,874.7
 $12,906.4
See accompanying notes to unaudited condensed consolidated financial statements.

ASPEN INSURANCE HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME
($ in millions, except share and per share amounts)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues       
Net earned premium$652.5
 $681.0
 $1,795.6
 $2,024.9
Net investment income46.4
 46.4
 141.5
 143.9
Realized and unrealized investment gains29.9
 26.7
 130.1
 137.4
Other income(2.2) 1.5
 5.0
 2.4
Total revenues726.6
 755.6
 2,072.2
 2,308.6
Expenses       
Losses and loss adjustment expenses776.2
 389.2
 1,450.5
 1,188.8
Amortization of deferred policy acquisition costs105.4
 130.9
 315.4
 387.8
General, administrative and corporate expenses110.9
 125.0
 352.1
 361.2
Interest on long-term debt7.4
 7.3
 22.2
 22.1
Change in fair value of derivatives(4.5) (0.6) (25.2) 7.0
Change in fair value of loan notes issued by variable interest entities(9.8) 9.8
 (3.6) 13.7
Realized and unrealized investment losses12.4
 5.2
 24.4
 34.1
Net realized and unrealized foreign exchange (gains)/losses(8.4) (10.8) 21.1
 10.2
Other (income)/expenses—
 (0.9) 2.0
 0.1
Total expenses989.6
 655.1
 2,158.9
 2,025.0
(Loss)/income from operations before income tax(263.0) 100.5
 (86.7) 283.6
Income tax credit/(expense)9.2
 (4.9) 5.2
 (8.7)
Net (loss)/income$(253.8) $95.6
 $(81.5) $274.9
Amount attributable to non-controlling interest(0.6) 0.2
 (0.8) —
Net (loss)/income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders$(254.4) $95.8
 $(82.3) $274.9
Other Comprehensive (Loss)/Income:       
Available for sale investments:       
Reclassification adjustment for net realized gains on investments included in net income$(1.0) $(4.4) $(2.8) $(9.7)
Change in net unrealized gains/losses on available for sale securities held1.3
 (18.8) 18.0
 113.7
Net change from current period hedged transactions(0.4) 3.1
 3.3
 (1.9)
Change in foreign currency translation adjustment(4.9) (10.2) (49.7) (26.8)
Other comprehensive (loss)/income, gross of tax(5.0) (30.3) (31.2) 75.3
Tax thereon:       
Reclassification adjustment for net realized gains on investments included in net income0.2
 —
 0.4
 0.6
Change in net unrealized gains on available for sale securities held(0.6) 2.0
 (1.8) (11.7)
Net change from current period hedged transactions—
 (0.6) (0.5) 0.6
Change in foreign currency translation adjustment2.3
 3.7
 12.9
 7.5
Total tax on other comprehensive income1.9
 5.1
 11.0
 (3.0)
Other comprehensive (loss)/income net of tax(3.1) (25.2) (20.2) 72.3
Total comprehensive (loss)/income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders$(257.5) $70.6
 $(102.5) $347.2
Per Share Data       
Weighted average number of ordinary share and share equivalents (1)
       
Basic59,759,730
 60,225,705
 59,862,540
 60,588,307
Diluted59,759,730
 61,577,018
 59,862,540
 62,043,440
Basic (loss)/earnings per ordinary share adjusted for preference share dividends$(4.48) $1.43
 $(1.99) $4.07
Diluted (loss)/earnings per ordinary share adjusted for preference share dividends$(4.48) $1.40
 $(1.99) $3.97
(1) The basic and diluted number of ordinary shares for the three and nine months ended September 30, 2017 is the same as the inclusion of dilutive securities in a loss making period would be anti-dilutive.
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Revenues       
Net earned premium$519.5
 $562.0
 $1,053.0
 $1,143.1
Net investment income50.4
 47.4
 97.7
 95.1
Realized and unrealized investment gains3.5
 49.0
 104.1
 100.2
Other income2.1
 3.6
 4.2
 7.2
Total revenues575.5
 662.0
 1,259.0
 1,345.6
Expenses       
Losses and loss adjustment expenses310.4
 346.1
 620.6
 674.3
Amortization of deferred policy acquisition costs85.9
 96.3
 176.7
 210.0
General, administrative and corporate expenses110.2
 119.9
 231.2
 241.2
Interest on long-term debt7.6
 7.4
 15.0
 14.8
Change in fair value of derivatives46.1
 (17.6) 22.6
 (20.7)
Change in fair value of loan notes issued by variable interest entities3.4
 3.3
 2.4
 6.2
Realized and unrealized investment losses24.2
 7.0
 162.5
 12.0
Realized loss on the debt extinguishment8.6
 —
 8.6
 —
Net realized and unrealized foreign exchange (gains)/losses(5.2) 20.6
 (0.5) 29.5
Other expenses0.5
 2.0
 1.7
 2.0
Total expenses591.7
 585.0
 1,240.8
 1,169.3
(Loss)/income from operations before income tax(16.2) 77.0
 18.2
 176.3
Income tax credit/(expense)1.5
 (1.2) (2.1) (4.0)
Net (loss)/income$(14.7) $75.8
 $16.1
 $172.3
Amount attributable to non-controlling interest(0.1) (0.1) (0.3) (0.2)
Net (loss)/income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders$(14.8) $75.7
 $15.8
 $172.1
Other Comprehensive Income/(Loss):       
Available for sale investments:       
Reclassification adjustment for net realized gains on investments included in net income$3.3
 $(0.8) $3.2
 $(1.8)
Change in net unrealized (losses)/gains on available for sale securities held(26.1) 13.7
 (108.9) 16.7
Net change from current period hedged transactions(2.6) 2.4
 (1.7) 3.7
Change in foreign currency translation adjustment33.0
 (27.6) 24.9
 (44.8)
Other comprehensive income/(loss), gross of tax7.6
 (12.3) (82.5) (26.2)
Tax thereon:       
Reclassification adjustment for net realized gains on investments included in net income(0.4) —
 (0.3) 0.2
Change in net unrealized gains/(losses) on available for sale securities held1.6
 (1.1) 7.0
 (1.2)
Net change from current period hedged transactions0.5
 (0.4) 0.3
 (0.5)
Change in foreign currency translation adjustment(9.6) 6.3
 (8.0) 10.6
Total tax on other comprehensive income(7.9) 4.8
 (1.0) 9.1
Other comprehensive (loss), net of tax(0.3) (7.5) (83.5) (17.1)
Total comprehensive (loss)/income attributable to Aspen Insurance Holdings Limited’s ordinary shareholders$(15.1) $68.2
 $(67.7) $155.0
Per Share Data       
Weighted average number of ordinary share and share equivalents 
       
Basic59,671,684
 59,966,358
 59,609,271
 59,914,797
Diluted59,671,684
 61,022,981
 60,528,136
 61,095,817
Basic (loss)/earnings per ordinary share adjusted for preference share dividends$(0.38) $1.09
 $0.01
 $2.48
Diluted (loss)/earnings per ordinary share adjusted for preference share dividends$(0.38) $1.07
 $0.01
 $2.43
See accompanying notes to unaudited condensed consolidated financial statements.


ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
($ in millions)
Nine Months Ended September 30,Six Months Ended June 30,
2017 20162018 2017
Ordinary shares      
Beginning and end of the period$0.1
 $0.1
$0.1
 $0.1
Preference shares      
Beginning and end of the period—
 —
—
 —
Non-controlling interest      
Beginning of the period1.4
 1.3
2.7
 1.4
Net change attributable to non-controlling interest for the period0.8
 —
0.3
 0.2
End of the period2.2
 1.3
3.0
 1.6
Additional paid-in capital      
Beginning of the period1,259.6
 1,075.3
954.7
 1,259.6
New ordinary shares issued0.4
 2.0
2.5
 0.4
Ordinary shares repurchased and cancelled(30.0) (50.0)—
 (10.0)
Preference shares issued—
 241.3
Preference shares redeemed and cancelled(293.2) —
—
 (133.2)
Preference shares redemption costs (1)
8.0
 —
—
 2.4
Share-based compensation (2)
7.0
 11.6
8.2
 6.0
End of the period951.8
 1,280.2
965.4
 1,125.2
Retained earnings      
Beginning of the period2,392.3
 2,283.6
2,026.9
 2,392.3
Net (loss)/income for the period(81.5) 274.9
Net income for the period16.1
 172.3
Dividends on ordinary shares(42.0) (39.5)(28.6) (27.6)
Dividends on preference shares(28.7) (28.4)(15.2) (21.0)
Preference shares redemption costs (1)
(8.0) —
—
 (2.4)
Net change attributable to non-controlling interest for the period(0.8) —
(0.3) (0.2)
Share-based payment (3)
2.8
 —
—
 2.8
End of the period2,234.1
 2,490.6
1,998.9
 2,516.2
Accumulated other comprehensive income:      
Cumulative foreign currency translation adjustments, net of taxes:      
Beginning of the period(27.1) 0.6
(67.7) (27.1)
Change for the period, net of income tax(36.8) (19.3)16.9
 (34.2)
End of the period(63.9) (18.7)(50.8) (61.3)
Loss on derivatives, net of taxes:      
Beginning of the period(0.5) (1.2)2.1
 (0.5)
Net change from current period hedged transactions2.8
 (1.3)(1.4) 3.2
End of the period2.3
 (2.5)0.7
 2.7
Unrealized appreciation on investments, net of taxes:      
Beginning of the period22.5
 60.2
9.7
 22.5
Change for the period, net of taxes13.8
 92.9
(99.0) 13.9
End of the period36.3
 153.1
(89.3) 36.4
Total accumulated other comprehensive (loss)/income, net of taxes(25.3) 131.9
Total accumulated other comprehensive (loss), net of taxes(139.4) (22.2)
      
Total shareholders’ equity$3,162.9
 $3,904.1
$2,828.0
 $3,620.9
 

(1) The $8.0$2.4 million deduction from net income in 2017 is attributable to the reclassification from additional paid-in capital to retained earnings isrepresenting the difference between the capital raised upon issuance of the 7.401% and the 7.250% Perpetual Non-Cumulative Preference Shares, net of issuance costs, and the totalfinal redemption costs of $293.2$133.2 million.
(2) The balance in 2017 includes $7.9 million reclassification from accrued expenses and other payable as a result of the classification of restricted share units as equity following the adoption of ASU 2016-09.
(3) The $2.8 million relates to the cumulative effect-adjustment to opening retained earnings as a result of the classification of restricted share units as equity following the adoption of ASU 2016-09. The adjustment has been applied using a modified retrospective approach.
See accompanying notes to unaudited condensed consolidated financial statements.

ASPEN INSURANCE HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
 
Nine Months Ended September 30,Six Months Ended June 30,
2017 20162018 2017
Cash flows from/(used in) operating activities:   
Net (loss)/income$(81.5) $274.9
Cash flows (used in) operating activities:   
Net income$16.1
 $172.3
Proportion due to non-controlling interest(0.8) —
(0.3) (0.2)
Adjustments to reconcile net income to net cash flows from operating activities:      
Depreciation and amortization39.7
 35.6
23.0
 27.4
Share-based compensation7.0
 11.6
8.2
 6.0
Realized and unrealized investment (gains)(130.1) (137.4)
Realized and unrealized investment gains(104.1) (100.2)
Realized and unrealized investment losses24.4
 34.1
162.5
 12.0
Deferred taxes1.3
 (1.7)
Change in fair value of loan notes issued by variable interest entities(3.6) 13.7
2.4
 6.2
Net realized and unrealized investment foreign exchange losses(10.7) (3.1)
Net realized and unrealized investment foreign exchange (gains)(10.0) (8.7)
Net change from current period hedged transactions2.8
 (1.3)(1.4) 3.2
Changes in:      
Insurance reserves:      
Losses and loss adjustment expenses1,045.5
 349.7
(171.0) 166.4
Unearned premiums278.1
 181.4
283.1
 339.5
Reinsurance recoverables:      
Unpaid losses(797.9) (73.1)(146.7) (212.6)
Ceded unearned premiums(188.9) (62.0)(210.7) (207.5)
Other receivables(70.1) (34.0)(23.5) (9.3)
Deferred policy acquisition costs9.6
 (26.4)(7.6) (2.2)
Reinsurance premiums payable108.3
 76.4
241.7
 (18.5)
Funds withheld(27.0) (15.6)10.5
 (16.8)
Premiums receivable(133.3) (306.9)(229.5) (213.3)
Deferred taxes(5.6) 9.5
Income tax payable(1.0) 8.0
(4.2) 4.3
Accrued expenses and other payables13.0
 26.4
(51.9) (22.0)
Fair value of derivatives and settlement of liabilities under derivatives(16.7) 5.4
40.6
 (24.7)
Long-term debt and loan notes issued by variable interest entities(13.4) 9.8
(23.9) (4.1)
Other assets—
 3.1
Net cash from operating activities$47.8
 $379.8
Net cash (used in) operating activities$(195.4) $(104.5)
See accompanying notes to unaudited condensed consolidated financial statements.


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
 
Nine Months Ended September 30,Six Months Ended June 30,
2017 20162018 2017
Cash flows from/(used in) investing activities:   
Cash flows from investing activities:   
(Purchases) of fixed income securities — Available for sale$(1,239.4) $(1,671.4)$(1,021.3) $(847.6)
(Purchases) of fixed income securities — Trading(1,125.1) (605.1)(847.2) (556.0)
Proceeds from sales and maturities of fixed income securities — Available for sale1,581.9
 1,668.7
1,037.5
 1,039.9
Proceeds from sales and maturities of fixed income securities — Trading763.9
 481.0
825.5
 497.3
(Purchases) of equity securities — Trading(111.5) (159.9)(16.5) (70.1)
Net proceeds from sales of catastrophe bonds — Trading8.7
 37.6
Net (purchases)/sales of catastrophe bonds — Trading(2.2) 13.8
Proceeds from sales of equity securities — Trading301.2
 146.4
505.6
 58.9
(Purchases) of short-term investments — Available for sale(42.7) (202.7)(32.0) (33.2)
Proceeds from sales of short-term investments — Available for sale156.4
 199.9
49.1
 138.4
(Purchases) of short-term investments — Trading(68.7) (166.3)(7.3) (21.3)
Proceeds from sales of short-term investments — Trading167.8
 6.3
51.9
 135.2
Net change in (payable)/receivable for securities (purchased)/sold20.6
 14.5
19.5
 20.9
Net (purchases) of other investments(86.2) —
Net (purchases) of equipment(26.7) (15.7)(12.9) (17.6)
Sale of investment9.3
 —
—
 9.3
Equity investment(0.1) (3.3)
Net (purchases) of investments, equity method(1.2) —
Payments for acquisitions and investments, net of cash acquired(2.3) (52.7)—
 (2.3)
Net cash from/(used in) investing activities393.3
 (322.7)
Net cash from investing activities462.3
 365.6
      
Cash flows (used in)/from financing activities:   
Cash flows (used in) financing activities:   
Proceeds from the issuance of ordinary shares, net of issuance costs0.4
 2.0
2.5
 0.4
Ordinary shares repurchased(30.0) (50.0)—
 (10.0)
Proceeds from the issuance of preference shares, net of issuance costs—
 241.3
Preference share redemption(293.2) —
—
 (133.2)
Repayment of long-term debt issued by Silverton(115.9) (89.3)(63.7) (114.1)
Dividends paid on ordinary shares(42.0) (39.5)(28.6) (27.6)
Dividends paid on preference shares(28.7) (28.4)(15.2) (21.0)
Cash paid for tax withholding purposes (1)
(9.5) —
(4.4) (9.1)
Net cash (used in)/from financing activities(518.9) 36.1
Long-term debt redeemed(125.0) —
Make-whole payment(8.6) —
Net cash (used in) financing activities(243.0) (314.6)

      
Effect of exchange rate movements on cash and cash equivalents13.3
 (9.4)(8.0) 8.1
      
Decrease in cash and cash equivalents(64.5) 83.8
Increase/(decrease) in cash and cash equivalents15.9
 (45.4)
Cash and cash equivalents at beginning of period1,273.8
 1,099.5
1,054.8
 1,273.8
Cash and cash equivalents at end of period$1,209.3
 $1,183.3
$1,070.7
 $1,228.4
      
Supplemental disclosure of cash flow information:      
Net cash paid (received) during the period for income tax$(0.2) $0.2
$5.2
 $(2.6)
Cash paid during the period for interest$22.2
 $14.5
$15.0
 $14.8

(1) The cash paid to the tax authority when withholding shares from employees’ awards for tax-withholding purposes has been reclassified from operating activity to financing activity following the adoption of ASU 2016-09.
See accompanying notes to unaudited condensed consolidated financial statements.


ASPEN INSURANCE HOLDINGS LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.History and Organization
Aspen Insurance Holdings Limited (“Aspen Holdings”) was incorporated on May 23, 2002 as a holding company headquartered in Bermuda. We underwrite specialty insurance and reinsurance on a global basis through our Operating Subsidiaries (as defined below) based in Bermuda, the United States and the United Kingdom: Aspen Insurance UK Limited (“Aspen U.K.”) and Aspen Underwriting Limited (corporate member of Lloyd’s Syndicate 4711, “AUL” and managed by Aspen Managing Agency Limited (“AMAL”)) (United Kingdom), Aspen Bermuda Limited (“Aspen Bermuda”) (Bermuda), Aspen Specialty Insurance Company (“Aspen Specialty”) and Aspen American Insurance Company (“AAIC”) (United States) (collectively, the “Operating Subsidiaries”). We also have branches in Australia, Canada, France, Germany, Ireland, Singapore, Switzerland and the United Arab Emirates. We established Aspen Capital Management, LtdLtd. and other related entities (collectively, “ACM”) to leverage our existing underwriting franchise, increase our operational flexibility in the capital markets and provide investors direct access to our underwriting expertise. References to the “Company,” the “Group,” “we,” “us” or “our” refer to Aspen Holdings or Aspen Holdings and its subsidiaries.
2.Basis of Preparation
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and in accordance 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 U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Results for the three and ninesix months ended SeptemberJune 30, 20172018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.2018. The unaudited condensed consolidated financial statements include the accounts of Aspen Holdings and its subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.
The balance sheet as at December 31, 20162017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 20162017 contained in the Company��sCompany’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on February 22, 20172018 (File No. 001-31909). Except for the changes associated with ASU 2016-09, “Compensation — Stock Compensation” listed below, there have been no changes to significant accounting policies from those disclosed in the Company’s 2016 Annual Report on Form 10-K.
Assumptions and estimates made by management have a significant effect on the amounts reported within the unaudited condensed consolidated financial statements. The most significant of these assumptions and estimates relate to losses and loss adjustment expenses, reinsurance recoverables, gross written premiums and commissions which have not been reported to the Company such as those relating to proportional treaty reinsurance contracts, unrecognized tax benefits, the fair value of derivatives and the fair value of other investments. All material assumptions and estimates are regularly reviewed and adjustments made as necessary, but actual results could turn outdiffer significantly different from those expected when the assumptions or estimates were made.
Accounting Pronouncements Adopted in 20172018
On March 30, 2016,August 12, 2015, the Financial Standards Accounting Standards Board (“FASB”) issued ASU 2016-09,2015-14, “Compensation — Stock CompensationRevenue from Contracts with Customers (Topic 606)”” which provides guidance on several aspectsdelayed the effective date of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.ASU 2014-09 by one year. This ASU is effective for annual periods beginning after December 15, 2017. Adoption of this ASU during the three and six months ended June 30, 2018 did not have a material impact on the Company’s consolidated financial statements because insurance contracts accounted for within the scope of Topic 944, Financial Services are exempt from this ASU and the Company has immaterial other revenue.
On January 5, 2016, the FASB issued ASU 2016-1, “Financial Instruments - Overall (Subtopic 825-10)” which enhances the reporting model for financial instruments. Included within the requirements of this ASU are the following: a) equity investments to be measured at fair value with changes in fair value recognized in net income; b) a simplification of the impairment assessment of equity investments without readily determinable fair values; c) public business entities to use the exit price concept when measuring the fair value of financial instruments for disclosure purposes; and d) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments required as a result of this ASU are effective for fiscal years beginning after December 15, 2016 and interim periods beginning after December 15, 2016. Following the adoption2017. Adoption of this ASU all excessduring the three and six months ended June 30, 2018 did not have a material impact on the Company’s consolidated financial statements because the Company’s equity portfolio, prior to being sold, was classified as held for trading with changes in fair value recognized through net income and no valuation allowance was required in relation to deferred tax benefits or expenseasset related to stock-based compensation transactions are recognized prospectively as income tax benefits or expense in the Consolidated Income Statement and the excess tax benefits or expense from stock-based compensation transactions previously included in “Financing activities” on the Consolidated Statements of Cash Flows are prospectively included on that statement as “Operating activities.” The cash paid to the tax authority for tax withholding purposes has also been reclassified from operating to financing activity in the Consolidated Statement of Cash Flows and the comparative period has been restated. This ASU also allows share withholding up to the maximum statutory withholding requirement while still avoiding liability accounting. As a result, the Company has applied the equity accounting method for its restricted share units retrospectively and has recorded a cumulative effect adjustment of $2.8 million through opening retained earnings and $7.9 million through additional paid-in capital.available-for-sale securities.



2018 Accounting Pronouncements Not Yet Adopted

On March 10, 2017,February 14, 2018, the FASB issued ASU 2017-7,2018-02, “ImprovingIncome Statement - Reporting Comprehensive Income (Topic 220)” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Presentation of Net Periodic Pension CostTax Cuts and Net Periodic Post Retirement Benefit Cost” which changes how employers report defined benefit pension and/or other post-retirement benefit costs in their financial statements.Jobs Act. This ASU iswill be effective for fiscal years beginning after December 15, 20172018 and interim periods beginning after December 15, 2017.within those fiscal years. The Company has assessedis currently evaluating the impact from the adoptionprovisions of ASU 2017-7 and2018-02 to determine how it will be affected, but no material impact is expected on the consolidated financial statements.

On AugustFebruary 28, 2017,2018, the FASB issued ASU 2017-12, 2018-03, ““DerivativesTechnical Corrections and Hedging (Topic 815)Improvements to Financial Instruments - Overall (Subtopic 825-10)” enabling entitieswhich amends multiple areas in Subtopic 825-10 via improvements to better align their hedge accounting and risk management activities, while also simplifyingclarify the Codification or to correct unintended application of hedge accounting in certain situations.guidance. This ASU is effective for fiscal years beginning after December 15, December, 2018 using a modified retrospective approach2017 and for cash flow and net investment hedge relationships that exist on the date of adoption.interim periods within those fiscal years beginning after June 15, 2018. The Company is currently evaluating the provisions of ASU 2017-122018-03 to determine how it will be affected, but no material impact is expected on the consolidated financial statements.

On June 20, 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718)” which amends the scope of Topic 718 via improvements to non-employee share-based payment accounting. Amendments include allowing companies to account for share-based payment transactions with non-employees in the same way as share-based payment transactions with employees and includes elections that offer relief to non-public companies when measuring non-employee equity share options. This ASU will be effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company is currently evaluating the provisions of ASU 2018-07 to determine how it will be affected, but no material impact is expected on the consolidated financial statements.
Other accounting pronouncements were issued during the three and six months ended SeptemberJune 30, 20172018 which were either not relevant to the Company or did not impact the Company’s consolidated financial statements.


3.Reclassifications from Accumulated Other Comprehensive Income
The following tables set out the components of the Company’s accumulated other comprehensive income (“AOCI”) that are reclassified into the unaudited condensed consolidated statement of operations for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
 Amount Reclassified from AOCI   Amount Reclassified from AOCI  
Details about the AOCI Components Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations		 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations
 ($ in millions)   ($ in millions)  
Available for sale securities:        
Realized gains on sale of securities $2.6
 $5.3
 Realized and unrealized investment gains $2.6
 $3.3
 Realized and unrealized investment gains
Realized (losses) on sale of securities (1.6) (0.9) Realized and unrealized investment losses (5.9) (2.5) Realized and unrealized investment losses
 1.0
 4.4
 Income from operations before income tax (3.3) 0.8
 Income from operations before income tax
Tax on net realized gains of securities (0.2) —
 Income tax expense
Tax on net realized (losses)/gains on securities 0.4
 —
 Income tax credit/(expense)
 $0.8
 $4.4
 Net (loss)/income $(2.9) $0.8
 Net (loss)/income
Realized derivatives:          
Net realized gains/(losses) on settled derivatives $1.2
 $(3.1) General, administrative and corporate expenses
Net realized gains on settled derivatives $1.3
 $0.9
 General, administrative and corporate expenses
Tax on settled derivatives (0.2) 1.1
 Income tax expense (0.3) (0.2) Income tax credit/(expense)
 $1.0
 $(2.0) Net (loss)/income $1.0
 $0.7
 Net (loss)/income
          
Total reclassifications from AOCI to the statement of operations, net of income tax $1.8
 $2.4
 Net (loss)/income $(1.9) $1.5
 Net (loss)/income

 Amount Reclassified from AOCI   Amount Reclassified from AOCI  
Details about the AOCI Components Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations		 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 
Affected Line Item in the Unaudited
Condensed Consolidated Statement
of Operations
 ($ in millions)   ($ in millions)  
Available for sale securities:        
Realized gains on sale of securities $8.2
 $14.8
 Realized and unrealized investment gains $4.6
 $5.6
 Realized and unrealized investment gains
Realized (losses) on sale of securities (5.4) (5.1) Realized and unrealized investment losses (7.8) (3.8) Realized and unrealized investment losses
 2.8
 9.7
 Income from operations before income tax (3.2) 1.8
 Income from operations before income tax
Tax on net realized gains of securities (0.4) (0.6) Income tax expense
Tax on net realized (losses)/gains on securities 0.3
 (0.2) Income tax credit/(expense)
 $2.4
 $9.1
 Net (loss)/income $(2.9) $1.6
 Net (loss)/income
Realized derivatives:          
Net realized gains/(losses) on settled derivatives $2.4
 $(5.6) General, administrative and corporate expenses
Net realized gains on settled derivatives $3.0
 $1.2
 General, administrative and corporate expenses
Tax on settled derivatives (0.5) 1.1
 Income tax expense (0.6) (0.2) Income tax credit/(expense)
 $1.9
 $(4.5) Net (loss)/income $2.4
 $1.0
 Net (loss)/income
          
Total reclassifications from AOCI to the statement of operations, net of income tax $4.3
 $4.6
 Net (loss)/income $(0.5) $2.6
 Net (loss)/income



4.Earnings per Ordinary Share
Basic earnings per ordinary share are calculated by dividing net income available to holders of Aspen Holdings’ ordinary shares by the weighted average number of ordinary shares outstanding. Net income available to ordinary shareholders is calculated by deducting preference share dividends and net income/(loss) attributable to non-controlling interest from net income/ (loss) after tax for the period. Diluted earnings per ordinary share are based on the weighted average number of ordinary shares and dilutive potential ordinary shares outstanding during the period of calculation using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per ordinary share for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, respectively:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 20162018 2017 2018 2017
($ in millions, except share and per share amounts)($ in millions, except share and per share amounts)
              
Net (loss) income$(253.8) $95.6
 $(81.5) $274.9
Net (loss)/income$(14.7) $75.8
 $16.1
 $172.3
Preference share dividends(7.7) (9.5) (28.7) (28.4)(7.6) (10.5) (15.2) (21.0)
Preference share redemption costs (1)
(5.6) —
 (8.0) —
—
 —
 —
 (2.4)
Net amount attributable to non-controlling interest(0.6) 0.2
 (0.8) —
(0.1) (0.1) (0.3) (0.2)
Basic and diluted net (loss) income available to ordinary shareholders$(267.7) $86.3
 $(119.0) $246.5
Basic and diluted net (loss)/income available to ordinary shareholders (2)
$(22.4) $65.2
 $0.6
 $148.7
Ordinary shares:              
Basic weighted average ordinary shares59,759,730
 60,225,705
 59,862,540
 60,588,307
59,671,684
 59,966,358
 59,609,271
 59,914,797
Weighted average effect of dilutive securities (2) (3)
—
 1,351,313
 —
 1,455,133
—
 1,056,623
 918,865
 1,181,020
Total diluted weighted average ordinary shares59,759,730
 61,577,018
 59,862,540
 62,043,440
59,671,684
 61,022,981
 60,528,136
 61,095,817
(Loss) earnings per ordinary share:       
(Loss)/earnings per ordinary share:       
Basic$(4.48) $1.43
 $(1.99) $4.07
$(0.38) $1.09
 $0.01
 $2.48
Diluted (3)(2)
$(4.48) $1.40
 $(1.99) $3.97
$(0.38) $1.07
 $0.01
 $2.43
 
(1) 
The $8.0$2.4 million deduction from net income in 2017 is attributable to the reclassification from additional paid-in capital to retained earnings representing the difference between the capital raised upon issuance of the 7.401% and 7.250% Perpetual Non-Cumulative Preference Shares, net of issuance costs, and the totalfinal redemption costs of $293.2$133.2 million.
(2)
The basic and diluted number of ordinary shares for the three months ended June 30, 2018 was the same, as the inclusion of dilutive securities in a loss-making period would be anti-dilutive.
(3) 
Dilutive securities consist of employee restricted share units and performance shares associated with the Company’s long-term incentive plan, employee share purchase plans and director restricted share units as described in Note 14.
(3)


The basic and diluted number of ordinary shares for the three and nine months ended September 30, 2017 is the same as the inclusion of dilutive securities in a loss making period would be anti-dilutive.
Dividends. On October 25, 2017,August 1, 2018, the Company’s Board of Directors (the “Board of Directors”) declared the following quarterly dividends:
Dividend Payable on: Record Date:Dividend Payable on: Record Date:
Ordinary shares$0.24
 November 28, 2017 November 10, 2017$0.24
 September 4, 2018 August 17, 2018
5.95% preference shares$0.3719
 January 1, 2018 December 15, 2017$0.3719
 October 1, 2018 September 15, 2018
5.625% preference shares$0.3516
 January 1, 2018 December 15, 2017$0.3516
 October 1, 2018 September 15, 2018


5.Segment Reporting
The Company has two reporting business segments: Insurance and Reinsurance. In addition to the way the Company manages its business, theThe Company has considered similaritiesdetermined its reportable segments, Aspen Insurance and Aspen Reinsurance, by taking into account the manner in economic characteristics, products, customers, distribution, the regulatory environment of the Company’s business segmentswhich management makes operating decisions and quantitative thresholds to determine the Company’s reportable segments. Segment profitassesses operating performance. Profit or loss for each of the Company’s business segments is measured by underwriting profit or loss. Underwriting profit is the excess of net earned premiums over the sum of losses and loss expenses, amortization of deferred policy acquisition costs and general and administrative expenses. Underwriting profit or loss provides a basis for management to evaluate the business segment’s underwriting performance.
The Company uses underwriting ratios as measures of performance. The loss ratio is the ratio of losses and loss adjustment expenses to net earned premiums. The policy acquisition expense ratio is the ratio of amortization of deferred policy acquisition costs to net earned premiums. The general and administrative expense ratio is the ratio of general, administrative and corporate expenses to net earned premiums. The combined ratio is the sum of the loss ratio, the policy acquisition expense ratio and the general and administrative expense ratio.
Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, (risk excess, pro rata and facultative), casualty reinsurance (U.S. treaty, international treaty and global facultative) and specialty insurance and reinsurance (credit and surety, mortgage reinsurance and insurance, agriculture insurance and reinsurance, marine, aviation, terrorism, engineering, cyber and other specialty lines).reinsurance. ACM forms part of our property catastrophe reinsurance line of


business as it focuses primarily on property catastrophe business through the use of alternative capital. For a more detailed description of this business segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” in the Company’s 20162017 Annual Report on Form 10-K filed with the SEC.
Insurance Segment. The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance. For a more detailed description of this business segment, see Part I, Item 1 “Business — Business Segments — Insurance” in the Company’s 20162017 Annual Report on Form 10-K filed with the SEC.
Non-underwriting Disclosures. The Company has provided additional disclosures for corporate and other (non-operating) income and expenses. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the Group, certain strategic and non-recurring costs, changes in fair value of derivatives and changes in fair value of the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses, and income taxes, none of which are allocated to the business segments. Corporate expenses are not allocated to the Company’s business segments as they typically do not fluctuate with the levels of premiums written and are not directly related to the Company’s business segment operations. The Company does not allocate its assets by business segment as it evaluates underwriting results of each business segment separately from the results of the Company’s investment portfolio.


The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the three months ended SeptemberJune 30, 20172018 and 2016:2017:
Three Months Ended September 30, 2017 Three Months Ended June 30, 2018 
Reinsurance Insurance Total Reinsurance Insurance Total 
($ in millions) ($ in millions) 
Underwriting Revenues            
Gross written premiums$431.5
 $421.0
 $852.5
 $326.0
 $527.8
 $853.8
 
Net written premiums363.6
 243.8
 607.4
 266.9
 219.1
 486.0
 
Gross earned premiums464.0
 449.3
 913.3
 366.2
 479.3
 845.5
 
Net earned premiums382.0
 270.5
 652.5
 289.0
 230.5
 519.5
 
Underwriting Expenses            
Losses and loss adjustment expenses502.2
 274.0
 776.2
 167.0
 143.4
 310.4
 
Amortization of deferred policy acquisition costs61.5
 43.9
 105.4
 62.8
 23.1
 85.9
 
General and administrative expenses32.8
 59.4
 92.2
 27.9
 57.2
 85.1
 
Underwriting loss$(214.5) $(106.8) (321.3) 
Underwriting income$31.3
 $6.8
 38.1
 
Corporate expenses    (13.5)     (16.0) 
Non-operating expenses(1)    (5.2)     (9.1) 
Net investment income    46.4
     50.4
 
Realized and unrealized investment gains    29.9
     3.5
 
Realized and unrealized investment losses    (12.4)     (24.2) 
Realized loss on the debt extinguishment    (8.6) 
Change in fair value of loan notes issued by variable interest entities    9.8
     (3.4) 
Change in fair value of derivatives    4.5
     (46.1) 
Interest expense on long term debt    (7.4)     (7.6) 
Net realized and unrealized foreign exchange gains    8.4
     5.2
 
Net other expense    (2.2) 
Other income    2.1
 
Other expenses    (0.5) 
Loss before tax    $(263.0)     $(16.2) 
            
Net reserves for loss and loss adjustment expenses$2,865.8
 $2,255.3
 $5,121.1
 $2,744.1
 $2,132.3
 $4,876.4
 
Ratios            
Loss ratio131.5% 101.3% 119.0% 57.8% 62.2% 59.7% 
Policy acquisition expense ratio16.1
 16.2
 16.2
 21.7
 10.0
 16.5
 
General and administrative expense ratio8.6
 22.0
 17.0
(1) 
9.7
 24.8
 21.2
(2) 
Expense ratio24.7
 38.2
 33.2
 31.4
 34.8
 37.7
 
Combined ratio156.2% 139.5% 152.2% 89.2% 97.0% 97.4% 
(1)
Non-operating expenses includes $8.6 million of expenses related to the Company’s Effectiveness and Efficiency Program.
(2)
The general and administrative expense ratio in the “Total” column includes corporate and non-operating expenses.


 Three Months Ended June 30, 2017 
 Reinsurance Insurance Total 
 ( $ in millions) 
Underwriting Revenues      
Gross written premiums$335.6
 $486.5
 $822.1
 
Net written premiums285.5
 293.2
 578.7
 
Gross earned premiums320.6
 429.1
 749.7
 
Net earned premiums272.7
 289.3
 562.0
 
Underwriting Expenses      
Losses and loss adjustment expenses152.6
 193.5
 346.1
 
Amortization of deferred policy acquisition costs53.4
 42.9
 96.3
 
General and administrative expenses40.7
 65.7
 106.4
 
Underwriting income/(loss)$26.0
 $(12.8) 13.2
 
Corporate expenses    (11.4) 
Non-operating expenses    (2.1) 
Net investment income    47.4
 
Realized and unrealized investment gains    49.0
 
Realized and unrealized investment losses    (7.0) 
Change in fair value of loan notes issued by variable interest entities    (3.3) 
Change in fair value of derivatives    17.6
 
Interest expense on long term debt    (7.4) 
Net realized and unrealized foreign exchange (losses)    (20.6) 
Other income    3.6
 
Other expenses    (2.0) 
Income before tax    $77.0
 
       
Net reserves for loss and loss adjustment expenses$2,445.0
 $2,347.0
 $4,792.0
 
Ratios      
Loss ratio56.0% 66.9% 61.6% 
Policy acquisition expense ratio19.6
 14.8
 17.1
 
General and administrative expense ratio14.9
 22.7
 21.3
(1) 
Expense ratio34.5
 37.5
 38.4
 
Combined ratio90.5% 104.4% 100.0% 
 
(1) 
The general and administrative expense ratio in the total“Total” column includes corporate and non-operating expenses.


 Three Months Ended September 30, 2016 
 Reinsurance Insurance Total 
 ( $ in millions) 
Underwriting Revenues      
Gross written premiums$365.9
 $397.6
 $763.5
 
Net written premiums314.5
 323.9
 638.4
 
Gross earned premiums364.3
 445.5
 809.8
 
Net earned premiums316.3
 364.7
 681.0
 
Underwriting Expenses      
Losses and loss adjustment expenses178.7
 210.5
 389.2
 
Amortization of deferred policy acquisition costs53.0
 77.9
 130.9
 
General and administrative expenses47.4
 57.9
 105.3
 
Underwriting income$37.2
 $18.4
 55.6
 
Corporate expenses    (13.4) 
Non-operating expenses    (6.3) 
Net investment income    46.4
 
Realized and unrealized investment gains    26.7
 
Realized and unrealized investment losses    (5.2) 
Change in fair value of loan notes issued by variable interest entities    (9.8) 
Change in fair value of derivatives    0.6
 
Interest expense on long term debt    (7.3) 
Net realized and unrealized foreign exchange gains    10.8
 
Net other income    2.4
 
Income before tax    $100.5
 
       
Net reserves for loss and loss adjustment expenses$2,495.4
 $2,331.4
 $4,826.8
 
Ratios      
Loss ratio56.5% 57.7% 57.2% 
Policy acquisition expense ratio16.8
 21.4
 19.2
 
General and administrative expense ratio15.0
 15.9
 18.4
(1) 
Expense ratio31.8
 37.3
 37.6
 
Combined ratio88.3% 95.0% 94.8% 
(1)
The general and administrative expense ratio in the total column includes corporate and non-operating expenses.




The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
Nine Months Ended September 30, 2017 Six Months Ended June 30, 2018 
Reinsurance Insurance Total Reinsurance Insurance Total 
($ in millions) ($ in millions) 
Underwriting Revenues            
Gross written premiums$1,332.4
 $1,340.2
 $2,672.6
 $949.5
 $1,021.1
 $1,970.6
 
Net written premiums1,097.3
 775.0
 1,872.3
 691.9
 429.6
 1,121.5
 
Gross earned premiums1,112.2
 1,302.1
 2,414.3
 741.2
 946.9
 1,688.1
 
Net earned premiums932.2
 863.4
 1,795.6
 571.5
 481.5
 1,053.0
 
Underwriting Expenses            
Losses and loss adjustment expenses797.9
 652.6
 1,450.5
 333.9
 286.7
 620.6
 
Amortization of deferred policy acquisition costs174.4
 141.0
 315.4
 118.7
 58.0
 176.7
 
General and administrative expenses117.4
 186.9
 304.3
 59.5
 120.8
 180.3
 
Underwriting loss$(157.5) $(117.1) (274.6) 
Underwriting income$59.4
 $16.0
 75.4
 
Corporate expenses    (38.3)     (29.7) 
Non-operating expenses(1)    (9.5)     (21.2) 
Net investment income    141.5
     97.7
 
Realized and unrealized investment gains    130.1
     104.1
 
Realized and unrealized investment losses    (24.4)     (162.5) 
Realized loss on the debt extinguishment    (8.6) 
Change in fair value of loan notes issued by variable interest entities    3.6
     (2.4) 
Change in fair value of derivatives    25.2
     (22.6) 
Interest expense on long term debt    (22.2)     (15.0) 
Net realized and unrealized foreign exchange losses    (21.1) 
Net realized and unrealized foreign exchange gains    0.5
 
Other income    5.0
     4.2
 
Other expense    (2.0) 
Loss before tax    $(86.7) 
Other expenses    (1.7) 
Income before tax    $18.2
 
            
Net reserves for loss and loss adjustment expenses$2,865.8
 $2,255.3
 $5,121.1
 $2,744.1
 $2,132.3
 $4,876.4
 
Ratios            
Loss ratio85.6% 75.6% 80.8% 58.4% 59.5% 58.9% 
Policy acquisition expense ratio18.7
 16.3
 17.6
 20.8
 12.0
 16.8
 
General and administrative expense ratio12.6
 21.6
 19.6
(1) 
10.4
 25.1
 22.0
(2) 
Expense ratio31.3
 37.9
 37.2
 31.2
 37.1
 38.8
 
Combined ratio116.9% 113.5% 118.0% 89.6% 96.6% 97.7% 
(1)
Non-operating expenses includes $20.4 million of expenses related to the Company’s Effectiveness and Efficiency Program.
(2)
The general and administrative expense ratio in the “Total” column includes corporate and non-operating expenses.


 Six Months Ended June 30, 2017 
 Reinsurance Insurance Total 
 ( $ in millions) 
Underwriting Revenues      
Gross written premiums$900.9
 $919.2
 $1,820.1
 
Net written premiums733.7
 531.2
 1,264.9
 
Gross earned premiums648.2
 852.8
 1,501.0
 
Net earned premiums550.2
 592.9
 1,143.1
 
Underwriting Expenses      
Losses and loss adjustment expenses295.7
 378.6
 674.3
 
Amortization of deferred policy acquisition costs112.9
 97.1
 210.0
 
General and administrative expenses84.6
 127.5
 212.1
 
Underwriting income/(loss)$57.0
 $(10.3) 46.7
 
Corporate expenses    (24.8) 
Non-operating expenses    (4.3) 
Net investment income    95.1
 
Realized and unrealized investment gains    100.2
 
Realized and unrealized investment losses    (12.0) 
Change in fair value of loan notes issued by variable interest entities    (6.2) 
Change in fair value of derivatives    20.7
 
Interest expense on long term debt    (14.8) 
Net realized and unrealized foreign exchange (losses)    (29.5) 
Other income    7.2
 
Other expenses    (2.0) 
Income before tax    $176.3
 
       
Net reserves for loss and loss adjustment expenses$2,445.0
 $2,347.0
 $4,792.0
 
Ratios      
Loss ratio53.7% 63.9% 59.0% 
Policy acquisition expense ratio20.5
 16.4
 18.4
 
General and administrative expense ratio15.4
 21.5
 21.1
(1) 
Expense ratio35.9
 37.9
 39.5
 
Combined ratio89.6% 101.8% 98.5% 
(1) 
The general and administrative expense ratio in the total“Total” column includes corporate and non-operating expenses.


 Nine Months Ended September 30, 2016 
 Reinsurance Insurance Total 
 ( $ in millions) 
Underwriting Revenues      
Gross written premiums$1,216.1
 $1,324.8
 $2,540.9
 
Net written premiums1,070.8
 1,092.1
 2,162.9
 
Gross earned premiums1,000.9
 1,345.8
 2,346.7
 
Net earned premiums896.0
 1,128.9
 2,024.9
 
Underwriting Expenses      
Losses and loss adjustment expenses494.3
 694.5
 1,188.8
 
Amortization of deferred policy acquisition costs163.1
 224.7
 387.8
 
General and administrative expenses130.6
 173.7
 304.3
 
Underwriting income$108.0
 $36.0
 144.0
 
Corporate expenses    (50.6) 
Non-operating expenses    (6.3) 
Net investment income    143.9
 
Realized and unrealized investment gains    137.4
 
Realized and unrealized investment losses    (34.1) 
Change in fair value of loan notes issued by variable interest entities    (13.7) 
Change in fair value of derivatives    (7.0) 
Interest expense on long term debt    (22.1) 
Net realized and unrealized foreign exchange losses    (10.2) 
Other income    2.4
 
Other expenses    (0.1) 
Income before tax    $283.6
 
       
Net reserves for loss and loss adjustment expenses$2,495.4
 $2,331.4
 $4,826.8
 
Ratios      
Loss ratio55.2% 61.5% 58.7% 
Policy acquisition expense ratio18.2
 19.9
 19.2
 
General and administrative expense ratio14.6
 15.4
 17.8
(1) 
Expense ratio32.8
 35.3
 37.0
 
Combined ratio88.0% 96.8% 95.7% 

(1)
The general and administrative expense ratio in the total column includes corporate and non-operating expenses.
The Company uses underwriting ratios as measures of performance. The loss ratio is the ratio of losses and loss adjustment expenses to net earned premiums. The policy acquisition expense ratio is the ratio of amortization of deferred policy acquisition costs to net earned premiums. The general and administrative expense ratio is the ratio of general, administrative and corporate expenses to net earned premiums. The combined ratio is the sum of the loss ratio, the policy acquisition expense ratio and the general and administrative expense ratio.



6.     Investments
Statements of Operations and Other Comprehensive Income Statement
Investment Income. The following table summarizes investment income for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended For the Six Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
($ in millions) ($ in millions)($ in millions) ($ in millions)
Fixed income securities — Available for sale$32.9
 $34.8
 $100.7
 $107.9
$33.5
 $33.9
 $66.8
 $67.8
Fixed income securities — Trading11.1
 7.6
 31.6
 22.9
13.2
 10.4
 25.2
 20.5
Short-term investments — Available for sale0.1
 0.2
 0.4
 0.5
0.3
 0.2
 0.5
 0.3
Short-term investments — Trading—
 —
 0.5
 —
0.1
 0.3
 0.3
 0.5
Cash and cash equivalents2.1
 0.8
 4.1
 2.2
Fixed term deposits (included in cash and cash equivalents)4.2
 1.3
 6.6
 2.0
Equity securities — Trading2.8
 5.5
 11.7
 17.9
0.7
 3.7
 1.9
 8.9
Catastrophe bonds — Trading0.5
 0.2
 1.3
 1.3
0.7
 0.4
 1.3
 0.8
Total$49.5
 $49.1
 $150.3
 $152.7
$52.7
 $50.2
 $102.6
 $100.8
Investment expenses(3.1) (2.7) (8.8) (8.8)(2.3) (2.8) (4.9) (5.7)
Net investment income$46.4
 $46.4
 $141.5
 $143.9
$50.4
 $47.4
 $97.7
 $95.1


The following table summarizes the net realized and unrealized investment gains and losses recorded in the statement of operations and the change in unrealized gains and losses on investments recorded in other comprehensive income for the three and ninesix months ended SeptemberJune 30, 20172018 and 20162017:

For the Three Months Ended For the Nine Months EndedFor the Three Months Ended For the Six Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
($ in millions) ($ in millions)($ in millions) ($ in millions)
Available for sale:              
Fixed income securities — gross realized gains$2.3
 $5.5
 $7.8
 $14.7
$2.6
 $3.3
 $4.4
 $5.5
Fixed income securities — gross realized (losses)(1.6) (0.9) (5.3) (4.6)(5.6) (2.4) (7.4) (3.7)
Short-term investments — gross realized gains—
 0.1
 0.1
 —
—
 —
 —
 0.1
Short-term investments — gross realized (losses)—
 (0.2) —
 —
Cash and cash equivalents — gross realized gains0.3
 —
 0.3
 0.1
—
 —
 0.2
 —
Cash and cash equivalents — gross realized (losses)—
 —
 (0.1) (0.5)(0.3) (0.1) (0.4) (0.1)
Other-than-temporary impairments(0.1) —
 (0.5) —
—
 (0.1) —
 (0.4)
Trading:              
Fixed income securities — gross realized gains3.0
 4.3
 8.3
 9.5
1.0
 3.5
 2.6
 5.3
Fixed income securities — gross realized (losses)(0.2) (0.5) (2.6) (6.9)(3.4) (0.4) (10.4) (2.4)
Short-term investments — gross realized gains1.9
 —
 2.0
 —
—
 0.1
 —
 0.1
Cash and cash equivalents — gross realized gains1.3
 —
 1.3
 —
Cash and cash equivalents — gross realized (losses) gains(0.1) —
 1.5
 —
Equity securities — gross realized gains46.1
 8.1
 55.0
 23.3
—
 4.4
 94.5
 8.9
Equity securities — gross realized (losses)(7.4) (4.2) (12.4) (22.2)0.2
 (3.6) (20.1) (5.0)
Catastrophe bonds — net unrealized (losses)/gains(3.1) 0.3
 (3.2) 0.1
Net change in gross unrealized (losses)/gains(25.0) 8.0
 54.4
 88.8
Other investments:       
Catastrophe bonds — net unrealized (losses) gains—
 (0.1) 0.9
 (0.1)
Net change in gross unrealized (losses) gains(14.9) 38.5
 (123.7) 79.4
Investments — equity method:       
Gross realized and unrealized (loss) in MVI—
 —
 (0.1) —
(0.1) (0.1) (0.2) (0.1)
Gross realized (loss)/gain in Chaspark—
 1.0
 0.9
 1.0
—
 (0.8) —
 0.9
Gross realized and unrealized (loss) in Bene—
 —
 (0.2) —
(0.1) (0.2) (0.3) (0.2)
Total net realized and unrealized investment gains recorded in the statement of operations$17.5
 $21.5
 $105.7
 $103.3
Total net realized and unrealized investment (losses) gains recorded in the statement of operations$(20.7) $42.0
 $(58.4) $88.2
              
Change in available for sale net unrealized gains:       
Change in available for sale net unrealized (losses) gains:       
Fixed income securities0.3
 (23.2) 15.2
 104.0
(22.8) 12.9
 (105.7) 14.9
Total change in pre-tax available for sale unrealized gains0.3
 (23.2) 15.2
 104.0
Total change in pre-tax available for sale unrealized (losses) gains(22.8) 12.9
 (105.7) 14.9
Change in taxes(0.4) 2.0
 (1.4) (11.1)1.2
 (1.1) 6.7
 (1.0)
Total change in net unrealized gains, net of taxes, recorded in other comprehensive income$(0.1) $(21.2) $13.8
 $92.9
$(21.6) $11.8
 $(99.0) $13.9

Other-Than-Temporary Impairments. A security is potentially impaired when its fair value is below its amortized cost. The Company reviews its available for sale fixed income portfolios on an individual security basis for potential other-than-temporary impairment (“OTTI”) each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions. The total OTTI charge for the three and nine months ended September 30, 2017 was $0.1 million and $0.5 million, respectively (2016 — $Nil and $Nil). For a more detailed description of accounting policies for OTTI, please refer to Note 2(c) of the “Notes to the Audited Consolidated Financial Statements” in the Company’s 2016 Annual Report on Form 10-K filed with the SEC.


Balance Sheet
Fixed Income Securities and Short-Term Investments — Available For Sale. The following tables present the cost or amortized cost, gross unrealized gains and losses and estimated fair market value of available for sale investments in fixed income securities and short-term investments as at SeptemberJune 30, 20172018 and December 31, 20162017:
As at September 30, 2017As at June 30, 2018
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
($ in millions)($ in millions)
U.S. government$1,171.3
 $7.6
 $(6.2) $1,172.7
$1,253.5
 $1.6
 $(25.5) $1,229.6
U.S. agency61.3
 0.9
 (0.1) 62.1
47.1
 0.1
 (0.6) 46.6
Municipal47.9
 2.2
 —
 50.1
105.1
 1.7
 (1.1) 105.7
Corporate2,431.5
 45.4
 (8.6) 2,468.3
2,304.2
 10.2
 (47.3) 2,267.1
Non-U.S. government-backed corporate94.0
 0.4
 (0.4) 94.0
92.2
 0.1
 (0.5) 91.8
Non-U.S. government525.3
 7.9
 (1.5) 531.7
427.5
 4.0
 (1.3) 430.2
Asset-backed33.6
 0.1
 —
 33.7
18.7
 —
 (0.3) 18.4
Agency mortgage-backed940.8
 17.4
 (5.4) 952.8
907.6
 5.8
 (22.8) 890.6
Total fixed income securities — Available for sale5,305.7
 81.9
 (22.2) 5,365.4
5,155.9
 23.5
 (99.4) 5,080.0
Total short-term investments — Available for sale34.4
 —
 —
 34.4
72.2
 —
 —
 72.2
Total$5,340.1
 $81.9
 $(22.2) $5,399.8
$5,228.1
 $23.5
 $(99.4) $5,152.2
 
As at December 31, 2016As at December 31, 2017
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
($ in millions)($ in millions)
U.S. government$1,207.9
 $9.4
 $(11.2) $1,206.1
$1,166.5
 $4.5
 $(11.6) $1,159.4
U.S. agency117.7
 1.9
 —
 119.6
51.8
 0.5
 (0.2) 52.1
Municipal23.2
 1.6
 (0.4) 24.4
53.0
 2.1
 (0.2) 54.9
Corporate2,566.9
 39.6
 (20.0) 2,586.5
2,391.4
 36.1
 (11.8) 2,415.7
Non-U.S. government-backed corporate89.2
 0.7
 (0.1) 89.8
91.5
 0.3
 (0.5) 91.3
Non-U.S. government477.7
 11.8
 (0.8) 488.7
479.7
 6.4
 (1.2) 484.9
Asset-backed62.6
 0.4
 —
 63.0
26.3
 —
 (0.1) 26.2
Non-agency commercial mortgage-backed12.3
 0.3
 —
 12.6
Agency mortgage-backed1,062.6
 19.6
 (8.3) 1,073.9
941.0
 13.7
 (8.2) 946.5
Total fixed income securities — Available for sale5,620.1
 85.3
 (40.8) 5,664.6
5,201.2
 63.6
 (33.8) 5,231.0
Total short-term investments — Available for sale145.3
 —
 —
 145.3
90.0
 —
 (0.1) 89.9
Total$5,765.4
 $85.3
 $(40.8) $5,809.9
$5,291.2
 $63.6
 $(33.9) $5,320.9



Fixed Income Securities, Short-Term Investments, Equities and Catastrophe Bonds — Trading. The following tables present the cost or amortized cost, gross unrealized gains and losses, and estimated fair market value of trading investments in fixed income securities, short-term investments, equity securities and catastrophe bonds as at SeptemberJune 30, 20172018 and December 31, 20162017:
As at September 30, 2017As at June 30, 2018
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
($ in millions)($ in millions)
U.S. government$160.6
 $0.6
 $(0.6) $160.6
$155.6
 $0.5
 $(0.8) $155.3
Municipal32.4
 —
 (0.1) 32.3
78.6
 —
 (0.8) 77.8
Corporate1,029.8
 17.9
 (2.7) 1,045.0
988.2
 3.1
 (22.8) 968.5
Non-U.S government-backed corporate2.0
 —
 —
 2.0
—
 —
 —
 —
Non-U.S. government203.5
 7.8
 (0.4) 210.9
222.3
 2.0
 (5.0) 219.3
Asset-backed11.0
 0.1
 —
 11.1
7.3
 —
 (0.1) 7.2
Agency mortgage-backed203.1
 0.7
 (0.7) 203.1
192.6
 —
 (4.8) 187.8
Total fixed income securities — Trading1,642.4
 27.1
 (4.5) 1,665.0
1,644.6
 5.6
 (34.3) 1,615.9
Total short-term investments — Trading90.3
 —
 —
 90.3
27.4
 —
 —
 27.4
Total equity securities — Trading407.2
 68.7
 (7.3) 468.6
Total catastrophe bonds — Trading33.5
 —
 (3.2) 30.3
35.8
 0.1
 (0.4) 35.5
Total$2,173.4
 $95.8
 $(15.0) $2,254.2
$1,707.8
 $5.7
 $(34.7) $1,678.8
 
As at December 31, 2016As at December 31, 2017
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
Cost or
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Market
Value
($ in millions)($ in millions)
U.S. government$82.8
 $0.4
 $(0.8) $82.4
$162.3
 $0.4
 $(0.8) $161.9
Municipal15.7
 —
 (0.2) 15.5
32.4
 —
 (0.2) 32.2
Corporate817.8
 9.9
 (7.1) 820.6
1,036.5
 14.0
 (4.2) 1,046.3
Non-U.S. government-backed corporate1.0
 —
 —
 1.0
Non-U.S. government203.4
 3.5
 (4.1) 202.8
196.1
 6.9
 (0.5) 202.5
Asset-backed14.5
 —
 —
 14.5
9.9
 —
 —
 9.9
Agency mortgage-backed130.6
 0.2
 (0.9) 129.9
196.7
 0.2
 (1.4) 195.5
Total fixed income securities — Trading1,264.8
 14.0
 (13.1) 1,265.7
1,634.9
 21.5
 (7.1) 1,649.3
Total short-term investments — Trading185.4
 —
 —
 185.4
73.0
 —
 —
 73.0
Total equity securities — Trading554.3
 55.4
 (25.0) 584.7
414.8
 83.5
 (7.3) 491.0
Total catastrophe bonds — Trading42.5
 —
 —
 42.5
33.5
 —
 (1.1) 32.4
Total$2,047.0
 $69.4
 $(38.1) $2,078.3
$2,156.2
 $105.0
 $(15.5) $2,245.7
The Company classifies the financial instruments presented in the tables above as held for trading as this most closely reflects the facts and circumstances of the investments held.
Catastrophe Bonds. The Company has invested in catastrophe bonds with a total value of $30.3$35.5 million as at SeptemberJune 30, 2017.2018.  The bonds receive quarterly interest payments based on variable interest rates with scheduled maturities ranging from 20172018 to 2021.  The redemption value of the bonds will adjust based on the occurrence of a covered event, such as windstorms and earthquakes in the United States, Canada, the North Atlantic, Japan or Australia.
Other Investments.Investments — Equity Method. In January 2015, the Company established, along with seven other insurance companies, a micro-insurance venture consortium and micro-insurance incubator (“MVI”) domiciled in Bermuda. The MVI is a social impact organization that provides micro-insurance products to assist global emerging consumers. The Company’s initial investment in the MVI was $0.8 million. The Company made an additional investment of $0.1 million in the quartertwelve months ended September 30,December 31, 2017.


On October 2, 2012, the Company established a subsidiary, Aspen Recoveries Limited, to take ownership of a 58.5% shareholding in Chaspark Maritime Holdings Ltd., a Singaporean registered company (“Chaspark”), with the remaining shareholding owned by other insurers. The shareholding in Chaspark was received as a settlement for subrogation rights associated with a contract frustration claim settlement. In the three and nine months ended September 30, 2017, the change in the value of the Company’s investment in Chaspark was a realized loss of $Nil and a realized gain of $0.9 million, respectively (September 30, 2016 — $1.0 million unrealized gain and $1.0 million unrealized gain). On March 10, 2017, Aspen Recoveries Limited received cash of $9.3 million as settlement of its share of subrogation assets held by Chaspark.
On July 26, 2016, the Company purchased through its wholly-owned subsidiary, Acorn Limited, a 20% share of Bene Assicurazioni (“Bene”), an Italian-based motor insurer for a total consideration of $3.3 million. The investment is accounted for under the equity method and adjustments to the carrying value of this investment are made based on the Company’s share of capital, including share of income and expenses. The Company made an additional investment of $1.2 million in the three months ended June 30, 2018.
On January 1, 2017, the Company purchased through its wholly-owned subsidiary, Aspen U.S. Holdings, Inc. (“Aspen U.S. Holdings”), a 49% share of Digital Risk Resources, LLC (“Digital Re”), a U.S.-based enterprise engaged in the business of developing, marketing and servicing turnkey information security and privacy liability insurance products, for a total consideration of $2.3 million. The investment is accounted for under the equity method and adjustments to the carrying value of this investment are made based on the Company’s share of capital, including share of income and expenses.
On December 18, 2017, the Company acquired through its wholly-owned subsidiary, Aspen U.S. Holdings, a 23.2% share of Crop Re Services LLC (“Crop Re”), a newly formed U.S.-based subsidiary of CGB Diversified Services, Inc (“CGB DS”) in exchange for the sale of AG Logic Holdings, LLC (“AgriLogic”), the Company’s former U.S. crop insurance business. Total consideration for the sale of AgriLogic consisted of the 23.2% share of Crop Re valued at $62.5 million and cash in the amount of $5.9 million. Crop Re is responsible for directing the placement of reinsurance on behalf of CGB DS and CGB Insurance Company (“CGBIC”), an Indiana insurance company affiliate of CGB DS and an RMA licensed crop insurer. The remaining 76.8% of Crop Re is owned by CGB DS. AAIC’s primary crop insurance coverage will be run-off and AAIC, or an affiliate of AAIC, will provide quota share reinsurance to CGBIC for both federal and state regulated crop insurance as part of Aspen’s ownership in Crop Re. The investment in Crop Re represents the Company’s share of the net assets of Crop Re plus the difference between the cost of the investment and the amount of underlying equity in net assets, the basis difference. The Company has determined that this basis difference of $62.5 million represents the value attributable to the ability of Crop Re to direct the placement of reinsurance business under the reinsurance commitment contained within the operating agreement between Crop Re and the Company. The investment in Crop Re is accounted for under the equity method and adjustments to the carrying value of this investment are made based on the Company’s share of capital, including share of income and expenses.
The tables below show the Company’s investments in the MVI, Chaspark, Bene, Digital Re and DigitalCrop Re for the three and ninesix months ended SeptemberJune 30, 2017 and September 30, 2016:2018:
For the Three Months Ended September 30, 2017For the Three Months Ended June 30, 2018
MVI Chaspark Bene Digital Re TotalMVI Bene Digital Re Crop Re Total
($ in millions)($ in millions)
Opening undistributed value of investment$0.4
 $—
 $3.0
 $0.5
 $3.9
$0.4
 $2.7
 $0.5
 $62.5
 $66.1
Additional investment0.1
 —
 —
 —
 0.1
Investment in the period—
 1.2
 —
 —
 1.2
Realized/unrealized losses for the three months to June 30, 2018(0.1) (0.1) —
 —
 (0.2)
Closing undistributed value of investment$0.5
 $—
 $3.0
 $0.5
 $4.0
$0.3
 $3.8
 $0.5
 $62.5
 $67.1

 For the Three Months Ended September 30, 2016
 MVI Chaspark Bene Total
 ($ in millions)
Opening undistributed value of investment$0.6
 $8.1
 $—
 $8.7
Initial investment—
 —
 3.3
 3.3
Realized/unrealized gain for the three months to September 30, 2016—
 1.0
 —
 1.0
Closing value of investment$0.6
 $9.1
 $3.3
 $13.0
 Six Months Ended June 30, 2018
 MVI Bene Digital Re Crop Re Total
 ($ in millions)
Opening undistributed value of investment$0.5
 $2.9
 $0.5
 $62.5
 $66.4
Investment in the period—
 1.2
 —
 —
 1.2
Realized/unrealized losses for the six months to June 30, 2018(0.2) (0.3) —
 —
 (0.5)
Closing undistributed value of investment$0.3
 $3.8
 $0.5
 $62.5
 $67.1

 For the Nine Months Ended September 30, 2017
 MVI Chaspark Bene Digital Re Total
 ($ in millions)
Opening undistributed value of investment$0.5
 $8.4
 $3.2
 $—
 $12.1
Initial investment—
 —
 —
 2.3
 2.3
Goodwill—
 —
 —
 (1.8) (1.8)
Additional investment0.1
 —
 —
 —
 0.1
Distribution received—
 (9.3) —
 —
 (9.3)
Realized/unrealized gain/(losses) for the nine months to September 30, 2017(0.1) 0.9
 (0.2) —
 0.6
Closing undistributed value of investment$0.5
 $—
 $3.0
 $0.5
 $4.0
Other Investments. On December 20, 2017, the Company committed $100.0 million as a limited partner to a real estate fund. The investment objective of the fund is to achieve attractive risk-adjusted returns through the acquisition of income producing, high quality assets in gateway cities located in the U.S. and Canada in the office, retail, industrial and multifamily sectors of the real estate market. On May 1, 2018, the Company received a demand for an initial capital call of $86.2 million and paid the capital call on May 10, 2018. For further information, refer to Note 16 in these unaudited condensed consolidated financial statements.



 For the Nine Months Ended September 30, 2016
 MVI Chaspark Bene Total
 ($ in millions)
Opening undistributed value of investment$0.8
 $8.1
 $—
 $8.9
Initial investment—
 —
 3.3
 3.3
Realized/unrealized gain for the nine months to September 30, 2016(0.2) 1.0
 —
 0.8
Closing value of investment$0.6
 $9.1
 $3.3
 $13.0
Fixed Income Securities. The scheduled maturity distribution of available for sale fixed income securities as at SeptemberJune 30, 20172018 and December 31, 20162017 is set forth in the tables below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.
As at September 30, 2017As at June 30, 2018
Amortized
Cost or Cost
 
Fair Market
Value
 
Average
S&P Ratings by
Maturity
Amortized
Cost or Cost
 
Fair Market
Value
 
Average
S&P Ratings by
Maturity
($ in millions)($ in millions)
Due one year or less$577.8
 $579.2
 AA$437.0
 $437.4
 AA-
Due after one year through five years2,597.3
 2,623.2
 AA-2,627.0
 2,593.2
 AA-
Due after five years through ten years1,060.6
 1,070.1
 AA-1,062.2
 1,031.1
 AA-
Due after ten years95.6
 106.4
 A+103.4
 109.3
 A+
Subtotal4,331.3
 4,378.9
 4,229.6
 4,171.0
 
Agency mortgage-backed940.8
 952.8
 AA+907.6
 890.6
 AA+
Asset-backed33.6
 33.7
 AAA18.7
 18.4
 AAA
Total fixed income securities — Available for sale$5,305.7
 $5,365.4
 $5,155.9
 $5,080.0
 
 
As at December 31, 2016As at December 31, 2017
Amortized
Cost or Cost
 
Fair Market
Value
 
Average
S&P Ratings by
Maturity
Amortized
Cost or Cost
 
Fair Market
Value
 
Average
S&P Ratings by
Maturity
($ in millions)($ in millions)
Due one year or less$567.2
 $570.0
 AA$561.7
 $562.4
 AA
Due after one year through five years2,643.7
 2,671.9
 AA-2,486.7
 2,492.2
 AA-
Due after five years through ten years1,172.3
 1,168.1
 A+1,092.2
 1,097.4
 A+
Due after ten years99.4
 105.1
 A+93.3
 106.3
 A
Subtotal4,482.6
 4,515.1
 4,233.9
 4,258.3
 
Non-agency commercial mortgage-backed12.3
 12.6
 AAA
Agency mortgage-backed1,062.6
 1,073.9
 AA+941.0
 946.5
 AA+
Asset-backed62.6
 63.0
 AAA26.3
 26.2
 AAA
Total fixed income securities — Available for sale$5,620.1
 $5,664.6
 $5,201.2
 $5,231.0
 
Guaranteed Investments. As at September 30, 2017, theThe Company held no investments which arewere guaranteed by mono-line insurers, excluding those with explicit government guarantees. As atguarantees as June 30, 2018 and December 31, 2016, the Company held one municipal bond security guaranteed by a mono-line insurer with fair value less than $0.1 million rated CC or higher. The standalone rating (rating without guarantee) is determined as the senior unsecured debt rating of the issuer. Where the credit ratings were split between the two main rating agencies, Standard & Poor’s Financial Services LLC (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), the lowest rating was used.2017. The Company’s exposure to other third-party guaranteed debt iswas primarily to investments backed by non-U.S. government guaranteed issuers.


Gross Unrealized Loss. The following tables summarize, by type of security, the aggregate fair value and gross unrealized loss by length of time the security has been in an unrealized loss position in the Company’s available for sale portfolio as at SeptemberJune 30, 20172018 and December 31, 2016:2017:
As at September 30, 2017As at June 30, 2018
0-12 months Over 12 months Total0-12 months Over 12 months Total
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Number of
Securities
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Number of
Securities
($ in millions)($ in millions)
U.S. government$617.5
 $(5.0) $62.5
 $(1.2) $680.0
 $(6.2) 80
$808.1
 $(15.8) $256.1
 $(9.7) $1,064.2
 $(25.5) 123
U.S. agency19.6
 (0.1) —
 —
 19.6
 (0.1) 7
32.9
 (0.6) —
 —
 32.9
 (0.6) 13
Municipal19.2
 —
 —
 —
 19.2
 —
 6
90.0
 (1.1) 0.7
 —
 90.7
 (1.1) 13
Corporate483.9
 (4.6) 154.1
 (4.0) 638.0
 (8.6) 255
1,556.6
 (31.9) 285.3
 (15.4) 1,841.9
 (47.3) 682
Non-U.S. government-backed corporate63.4
 (0.4) 0.4
 —
 63.8
 (0.4) 15
42.9
 (0.2) 20.9
 (0.3) 63.8
 (0.5) 14
Non-U.S. government211.5
 (1.2) 36.8
 (0.3) 248.3
 (1.5) 43
188.9
 (0.8) 59.3
 (0.5) 248.2
 (1.3) 57
Asset-backed12.2
 —
 —
 —
 12.2
 —
 9
13.4
 (0.2) 5.0
 (0.1) 18.4
 (0.3) 7
Agency mortgage-backed426.0
 (4.5) 33.9
 (0.9) 459.9
 (5.4) 133
407.0
 (9.7) 289.4
 (13.1) 696.4
 (22.8) 240
Total fixed income securities — Available for sale1,853.3
 (15.8) 287.7
 (6.4) 2,141.0
 (22.2) 548
3,139.8
 (60.3) 916.7
 (39.1) 4,056.5
 (99.4) 1,149
Total short-term investments — Available for sale25.7
 —
 —
 —
 25.7
 —
 10
41.5
 —
 —
 —
 41.5
 —
 8
Total$1,879.0
 $(15.8) $287.7
 $(6.4) $2,166.7
 $(22.2) 558
$3,181.3
 $(60.3) $916.7
 $(39.1) $4,098.0
 $(99.4) 1,157
 
As at December 31, 2016As at December 31, 2017
0-12 months Over 12 months Total0-12 months Over 12 months Total
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Number of
Securities
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Fair
Market
Value
 
Gross
Unrealized
Loss
 
Number of
Securities
($ in millions)($ in millions)
U.S. government$724.4
 $(11.2) $—
 $—
 $724.4
 $(11.2) 78$652.1
 $(5.1) $259.8
 $(6.5) $911.9
 $(11.6) 101
U.S. agency14.1
 —
 —
 —
 14.1
 —
 420.1
 (0.2) 6.1
 —
 26.2
 (0.2) 10
Municipal7.7
 (0.2) 0.8
 (0.2) 8.5
 (0.4) 628.5
 (0.2) —
 —
 28.5
 (0.2) 9
Corporate1,044.4
 (19.4) 6.6
 (0.6) 1,051.0
 (20.0) 386699.3
 (3.4) 360.7
 (8.4) 1,060.0
 (11.8) 412
Non-U.S. government-backed corporate29.6
 (0.1) —
 —
 29.6
 (0.1) 1143.5
 (0.3) 13.3
 (0.2) 56.8
 (0.5) 15
Non-U.S. government143.5
 (0.8) 1.0
 —
 144.5
 (0.8) 29206.2
 (0.8) 32.0
 (0.4) 238.2
 (1.2) 47
Asset-backed25.8
 —
 1.4
 —
 27.2
 —
 1511.1
 —
 10.5
 (0.1) 21.6
 (0.1) 11
Agency mortgage-backed527.6
 (7.6) 27.2
 (0.7) 554.8
 (8.3) 148257.6
 (1.9) 301.9
 (6.3) 559.5
 (8.2) 156
Total fixed income securities — Available for sale2,517.1
 (39.3) 37.0
 (1.5) 2,554.1
 (40.8) 6771,918.4
 (11.9) 984.3
 (21.9) 2,902.7
 (33.8) 761
Total short-term investments — Available for sale1.1
 —
 —
 —
 1.1
 —
 246.9
 (0.1) —
 —
 46.9
 (0.1) 8
Total$2,518.2
 $(39.3) $37.0
 $(1.5) $2,555.2
 $(40.8) 679$1,965.3
 $(12.0) $984.3
 $(21.9) $2,949.6
 $(33.9) 769

Other-Than-Temporary Impairments. A security is potentially impaired when its fair value is below its amortized cost. The Company reviews its available for sale fixed income portfolios on an individual security basis for potential other-than-temporary impairment (“OTTI”) each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions. The total OTTI charge for the three and six months ended June 30, 2018 was $Nil (2017 —$0.1 million and $0.4 million). For a more detailed description of accounting policies for OTTI, please refer to Note 2(c) of the “Notes to the Audited Consolidated Financial Statements” in the Company’s 2017 Annual Report on Form 10-K filed with the SEC.



7.Variable Interest Entities
As at SeptemberJune 30, 20172018, the Company had investments in threetwo variable interest entities (“VIE”): Chaspark, Peregrine Reinsurance Ltd (“Peregrine”) and Silverton Re Ltd (“Silverton”).
Chaspark. The Company has determined that Chaspark has the characteristics of a VIE as addressed by the guidance in ASC 810, Consolidation. For more information on Chaspark, refer to Note 6 of these unaudited condensed consolidated financial statements.


Peregrine. In November 2016, Peregrine, a subsidiary of the Company, was registered Peregrine as a segregated accounts company under the Segregated Accounts Companies Act 2000, as amended. As at SeptemberJune 30, 2017,2018, Peregrine had threefour segregated accounts which were funded by a third party investor. The segregated accounts have not been consolidated as part of the Company’s consolidated financial statements. The Company has, however, determined that Peregrine has the characteristics of a VIE as addressed by the guidance in ASC 810, Consolidation. The Company concluded that it is not the primary beneficiary of the threefour segregated accounts of Peregrine but is the primary beneficiary of the Peregrine general fund and, similar to prior reporting periods, the Company has included the results of the Peregrine general fund in its consolidated financial statements. The Company’s exposure to Peregrine’s general fund is not material.
Silverton. On September 10, 2013, the Company established Silverton, a Bermuda domiciled special purpose insurer formed to provide additional collateralized capacity to support Aspen Re’s business through retrocession agreements which are collateralized and funded by Silverton through the issuance of one or more series of participating loan notes (collectively, the “Loan Notes”). Silverton is a non-rated insurer and the risks are fully collateralized by way of funds held in trust for the benefit of Aspen Bermuda and Aspen U.K., the ceding reinsurers. Silverton was not renewed in 2017 and has not issued any Loan Notes since, in the future, any such quota share support for Aspen Re will be provided by a separate cell of Peregrine.
All proceeds from the issuance of the Loan Notes were deposited into separate collateral accounts for each series of Loan Notes to fund Silverton’s obligations under a retrocession property quota share agreement entered into with Aspen Bermuda or Aspen Bermuda and Aspen U.K, as the case may be. The holders of the Loan Notes participate in any profit or loss generated by Silverton attributable to the operations of the respective Silverton segregated account. Any existing value of the Loan Notes will be returned to the noteholders in installments after the expiration of the risk period of the retrocession agreement issued by Silverton for the related series of Loan Notes with the final payment being contractually due on the respective maturity dates.
The following tables show the total liability balance of the Loan Notes for the ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
 For the Nine Months Ended September 30, 2017 For the Six Months Ended June 30, 2018
 Third Party Aspen Holdings Total Third Party Aspen Holdings Total
 ($ in millions) ($ in millions)
Opening balance $223.4
 $54.5
 $277.9
 $86.6
 $20.6
 $107.2
Total change in fair value for the period (3.6) (0.9) (4.5) 2.4
 0.6
 3.0
Total distributed in the period (115.9) (28.8) (144.7) (63.7) (14.7) (78.4)
Closing balance as at September 30, 2017 $103.9
 $24.8
 $128.7
Closing balance as at June 30, 2018 $25.3
 $6.5
 $31.8
            
Liability            
Loan notes (long-term liabilities) $101.5
 $24.2
 $125.7
 $20.3
 $5.2
 $25.5
Accrued expenses (current liabilities) 2.4
 0.6
 3.0
 5.0
 1.3
 6.3
Total aggregate unpaid balance as at September 30, 2017 $103.9
 $24.8
 $128.7
Total aggregate unpaid balance as at June 30, 2018 $25.3
 $6.5
 $31.8
 For the Nine Months Ended September 30, 2016 For the Six Months Ended June 30, 2017
 Third Party Aspen Holdings Total Third Party Aspen Holdings Total
 ($ in millions) ($ in millions)
Opening balance $190.6
 $44.4
 $235.0
 $223.4
 $54.5
 $277.9
Total change in fair value for the period 13.7
 3.4
 17.1
 6.2
 1.6
 7.8
Total distributed in the period (89.3) (19.4) (108.7) (114.1) (28.6) (142.7)
Closing balance as at September 30, 2016 $115.0
 $28.4
 $143.4
Closing balance as at June 30, 2017 $115.5
 $27.5
 $143.0
            
Liability            
Loan notes (long-term liabilities) $112.7
 $27.9
 $140.6
 $110.8
 $26.4
 $137.2
Accrued expenses (current liabilities) 2.3
 0.5
 2.8
 4.7
 1.1
 5.8
Total aggregate unpaid balance as at September 30, 2016 $115.0
 $28.4
 $143.4
Total aggregate unpaid balance as at June 30, 2017 $115.5
 $27.5
 $143.0


The Company has determined that Silverton has the characteristics of a VIE that are addressed by the guidance in ASC 810, Consolidation. The Company concluded that it is the primary beneficiary of Silverton as it owns all of Silverton’s voting shares and issued share capital, and has a significant financial interest and the power to control Silverton. As a result, the Company


consolidated Silverton upon its formation. The Company has no other obligation to provide financial support to Silverton and neither the creditors nor beneficial interest holders of Silverton have recourse to the Company’s general credit.
In the event of an extreme catastrophic property reinsurance event or severe credit-related event, there is a risk that Aspen Bermuda and Aspen U.K. would be unable to recover losses from Silverton. These two risks are mitigated as follows:
i.Silverton has collateralized the aggregate limit provided to Aspen Bermuda and Aspen U.K. by way of a trust in favor of Aspen Bermuda and Aspen U.K. as beneficiaries;
ii.the trustee is a large, well-established regulated entity; and
iii.all funds within the trust account are bound by investment guidelines restricting investments to one of the institutional class money market funds run by large international investment managers.
For further information regarding the Loan Notes attributable to the third-party investments in Silverton, refer to Note 8 of these unaudited condensed consolidated financial statements.
8.Fair Value Measurements
The Company’s estimates of fair value for financial assets and liabilities are based on the framework established in the fair value accounting guidance included in ASC 820, Fair Value Measurements and Disclosures. The framework prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels.
The Company considers prices for actively traded securities to be derived based on quoted prices in an active market for identical assets, which are Level 1 inputs in the fair value hierarchy. The majority of these securities are valued using prices supplied by index providers.
The Company considers prices for other securities that may not be as actively traded which are priced via pricing services, index providers, vendors and broker-dealers, or with reference to interest rates and yield curves, to be derived based on inputs that are observable for the asset, either directly or indirectly, which are Level 2 inputs in the fair value hierarchy. The majority of these securities are also valued using prices supplied by index providers.
The Company considers securities, other financial instruments and derivative insurance contracts subject to fair value measurement whose valuation is derived by internal valuation models to be based largely on unobservable inputs, which are Level 3 inputs in the fair value hierarchy.


The following tables present the level within the fair value hierarchy at which the Company’s financial assets and liabilities are measured on a recurring basis as at SeptemberJune 30, 20172018 and December 31, 20162017:
As at September 30, 2017As at June 30, 2018
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
($ in millions)($ in millions)
Available for sale financial assets, at fair value              
U.S. government$1,172.6
 $—
 $—
 $1,172.6
$1,229.6
 $—
 $—
 $1,229.6
U.S. agency—
 62.1
 —
 62.1
—
 46.6
 —
 46.6
Municipal—
 50.1
 —
 50.1
—
 105.7
 —
 105.7
Corporate—
 2,468.4
 —
 2,468.4
—
 2,267.1
 —
 2,267.1
Non-U.S. government-backed corporate—
 94.0
 —
 94.0
—
 91.8
 —
 91.8
Non-U.S. government375.2
 156.5
 —
 531.7
291.6
 138.6
 —
 430.2
Asset-backed—
 33.7
 —
 33.7
—
 18.4
 —
 18.4
Agency mortgage-backed—
 952.8
 —
 952.8
—
 890.6
 —
 890.6
Total fixed income securities available for sale, at fair value1,547.8
 3,817.6
 —
 5,365.4
1,521.2
 3,558.8
 —
 5,080.0
Short-term investments available for sale, at fair value27.4
 7.0
 —
 34.4
69.4
 2.8
 —
 72.2
Held for trading financial assets, at fair value              
U.S. government160.6
 —
 —
 160.6
155.3
 —
 —
 155.3
U.S. agency—
 —
 —
 —
Municipal—
 32.3
 —
 32.3
—
 77.8
 —
 77.8
Corporate—
 1,045.0
 —
 1,045.0
—
 968.5
 —
 968.5
Non-U.S. government-backed corporate—
 2.0
 —
 2.0
—
 —
 —
 —
Non-U.S. government24.5
 186.4
 —
 210.9
47.2
 172.1
 —
 219.3
Asset-backed—
 11.1
 —
 11.1
—
 7.2
 —
 7.2
Agency mortgage-backed—
 203.1
 —
 203.1
—
 187.8
 —
 187.8
Total fixed income securities trading, at fair value185.1
 1,479.9
 —
 1,665.0
202.5
 1,413.4
 —
 1,615.9
Short-term investments trading, at fair value90.0
 0.3
 —
 90.3
23.3
 4.1
 —
 27.4
Equity investments trading, at fair value468.6
 —
 —
 468.6
—
 —
 —
 —
Catastrophe bonds trading, at fair value—
 30.3
 —
 30.3
—
 35.5
 —
 35.5
Other investments (1)
—
 —
 —
 86.2
              
Other financial assets and liabilities, at fair value              
Derivatives at fair value — foreign exchange contracts—
 8.4
 —
 8.4
—
 14.1
 —
 14.1
Liabilities under derivative contracts — foreign exchange contracts—
 (2.9) —
 (2.9)—
 (49.3) —
 (49.3)
Loan notes issued by variable interest entities, at fair value—
 —
 (101.5) (101.5)—
 —
 (20.3) (20.3)
Loan notes issued by variable interest entities, at fair value (included within accrued expenses and other payables)—
 —
 (2.4) (2.4)—
 —
 (5.0) (5.0)
Total$2,318.9
 $5,340.6
 $(103.9) $7,555.6
$1,816.4
 $4,979.4
 $(25.3) $6,770.5

(1)
Other investments represents our investment in a real estate fund and is measured at fair value using the net asset value per share practical expedient. As a result this has not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.
Transfers of assets into or out of a particular level are recorded at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. There were no significant transfers between Level 1, Level 2 and Level 3 during the three and ninesix months ended SeptemberJune 30, 2017. 2018.
The Company settled $1.4 million and $115.9$63.7 million of Level 3 liabilities in respect of the Loan Notes issued by Silverton for the three and ninesix months ended SeptemberJune 30, 2017, respectively.2018. As at SeptemberJune 30, 2017,2018, there were no the assets classified as Level 3 and the Company’s Level 3 liabilities consisted solely of the Loan Notes issued by Silverton.


As at December 31, 2016As at December 31, 2017
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
($ in millions)($ in millions)
Available for sale financial assets, at fair value              
U.S. government$1,206.1
 $—
 $—
 $1,206.1
$1,159.4
 $—
 $—
 $1,159.4
U.S. agency—
 119.6
 —
 119.6
—
 52.1
 —
 52.1
Municipal—
 24.4
 —
 24.4
—
 54.9
 —
 54.9
Corporate—
 2,586.5
 —
 2,586.5
—
 2,415.7
 —
 2,415.7
Non-U.S. government-backed corporate—
 89.8
 —
 89.8
—
 91.3
 —
 91.3
Non-U.S. government343.7
 145.0
 —
 488.7
341.2
 143.7
 —
 484.9
Asset-backed—
 63.0
 —
 63.0
—
 26.2
 —
 26.2
Non-agency commercial mortgage-backed—
 12.6
 —
 12.6
Agency mortgage-backed—
 1,073.9
 —
 1,073.9
—
 946.5
 —
 946.5
Total fixed income securities available for sale, at fair value1,549.8
 4,114.8
 —
 5,664.6
1,500.6
 3,730.4
 —
 5,231.0
Short-term investments available for sale, at fair value118.6
 26.7
 —
 145.3
87.3
 2.6
 —
 89.9
Held for trading financial assets, at fair value              
U.S. government82.4
 —
 —
 82.4
161.9
 —
 —
 161.9
Municipal—
 15.5
 —
 15.5
—
 32.2
 —
 32.2
Corporate—
 820.6
 —
 820.6
—
 1,046.3
 —
 1,046.3
Non-U.S. government-backed corporate—
 1.0
 —
 1.0
Non-U.S. government—
 202.8
 —
 202.8
24.5
 178.0
 —
 202.5
Asset-backed—
 14.5
 —
 14.5
—
 9.9
 —
 9.9
Agency mortgage-backed—
 129.9
 —
 129.9
—
 195.5
 —
 195.5
Total fixed income securities trading, at fair value82.4
 1,183.3
 —
 1,265.7
186.4
 1,462.9
 —
 1,649.3
Short-term investments trading, at fair value76.1
 109.3
 —
 185.4
73.0
 —
 —
 73.0
Equity investments trading, at fair value584.7
 —
 —
 584.7
491.0
 —
 —
 491.0
Catastrophe bonds trading, at fair value—
 42.5
 —
 42.5
—
 32.4
 —
 32.4
              
Other financial assets and liabilities, at fair value              
Derivatives at fair value – foreign exchange contracts—
 7.2
 —
 7.2
—
 6.4
 —
 6.4
Liabilities under derivative contracts – foreign exchange contracts—
 (18.4) —
 (18.4)—
 (1.0) —
 (1.0)
Loan notes issued by variable interest entities, at fair value—
 —
 (115.0) (115.0)—
 —
 (44.2) (44.2)
Loan notes issued by variable interest entities, at fair value (included within accrued expenses and other payables)—
 —
 (108.4) (108.4)—
 —
 (42.4) (42.4)
Total$2,411.6
 $5,465.4
 $(223.4) $7,653.6
$2,338.3
 $5,233.7
 $(86.6) $7,485.4
Transfers of assets into or out of a particular level are recorded at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. During the twelve months ended December 31, 2016, the Company transferred $83.9 million of non-U.S. government securities from2017, there were no transfers between Level 1, to Level 2.2 and 3.
The Company settled $89.3$115.6 million of Level 3 liabilities in respect of the Loan Notes issued by Silverton for the twelve months ended December 31, 2016.2017. As at December 31, 2016,2017, there were no assets classified as Level 3 and the Company’s Level 3 liabilities consisted solely of the Loan Notes issued by Silverton.



The following table presents a reconciliation of the beginning and ending balances for all assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
Reconciliation of Liabilities Using Level 3 Inputs Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
 ($ in millions) ($ in millions)
Balance at the beginning of the period $115.1
 $105.5
 $39.8
 $115.1
Distributed to third party (1.4) (0.3) (17.9) (2.9)
Total change in fair value included in the statement of operationsTotal change in fair value included in the statement of operations (9.8) 9.8
Total change in fair value included in the statement of operations 3.4
 3.3
Balance at the end of the period (1)
 $103.9
 $115.0
 $25.3
 $115.5

Reconciliation of Liabilities Using Level 3 Inputs Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 ($ in millions) ($ in millions)
Balance at the beginning of the period 223.4
 190.6
 $86.6
 $223.4
Distributed to third party (115.9) (89.3) (63.7) (114.1)
Total change in fair value included in the statement of operationsTotal change in fair value included in the statement of operations (3.6) 13.7
Total change in fair value included in the statement of operations 2.4
 6.2
Balance at the end of the period (1)
 103.9
 115.0
 $25.3
 $115.5
(1) The amount classified within accrued expenses and other payables was $2.4$5.0 million and $2.3$4.7 million as at SeptemberJune 30, 20172018 and SeptemberJune 30, 2016,2017, respectively.
Valuation of Fixed Income Securities. The Company’s fixed income securities are classified as either available for sale or trading and carried at fair value. As at SeptemberJune 30, 20172018 and December 31, 2016,2017, the Company’s fixed income securities were valued by pricing services, index providers or broker-dealers using standard market conventions. The market conventions utilize market quotations, market transactions in comparable instruments and various relationships between instruments including, but not limited to, yield to maturity, dollar prices and spread prices in determining value.
Independent Pricing Services and Index Providers. The underlying methodology used to determine the fair value of securities in the Company’s available for sale and trading portfolios by the pricing services and index providers the Company uses is very similar. Pricing services will gather observable pricing inputs from multiple external sources, including buy and sell-side contacts and broker-dealers, in order to develop their internal prices. Index providers are those firms which provide prices for a range of securities within one or more asset classes, typically using their own in-house market makers (traders) as the primary pricing source for the indices, although ultimate valuations may also rely on other observable data inputs to derive a dollar price for all index-eligible securities. Index providers without in-house trading desks will function similarly to a pricing service in that they will gather their observable pricing inputs from multiple external sources. All prices for the Company’s securities attributed to index providers are for an individual security within the respective indices.
Pricing services and index providers provide pricing for less complex, liquid securities based on market quotations in active markets. Pricing services and index providers supply prices for a broad range of securities including those for actively traded securities, such as Treasury and other Government securities, in addition to those that trade less frequently or where valuation includes reference to credit spreads, pay down and pre-pay features and other observable inputs. These securities include Government Agency, Municipals, Corporate and Asset-Backed Securities.
For securities that may trade less frequently or do not trade on a listed exchange, these pricing services and index providers may use matrix pricing consisting of observable market inputs to estimate the fair value of a security. These observable market inputs include: reported trades, benchmark yields, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic factors. Additionally, pricing services and index providers may use a valuation model such as an option adjusted spread model commonly used for estimating fair values of mortgage-backed and asset-backed securities. Neither the Company, nor its index providers, derives dollar prices using an index as a pricing input for any individual security.
Broker-Dealers. The Company obtains quotes from broker-dealers who are active in the corresponding markets when prices are unavailable from independent pricing services or index providers. Generally, broker-dealers value securities through their trading desks based on observable market inputs. Their pricing methodologies include mapping securities based on trade data, bids or offers, observed spreads and performance of newly issued securities. They may also establish pricing through observing secondary trading of similar securities.


The Company obtains prices for all of its fixed income investment securities via its third-party accounting service provider, and in the majority of cases receiving a number of quotes so as to obtain the most comprehensive information available to determine a security’s fair value. A single valuation is applied to each security based on the vendor hierarchy maintained by the Company’s third-party accounting service provider.
As at SeptemberJune 30, 2017,2018 the Company obtained an average of 2.02.1 quotes per fixed income investment compared to 2.12.0 quotes as at December 31, 2016.2017. Pricing sources used in pricing fixed income investments as at SeptemberJune 30, 20172018 and December 31, 20162017 were as follows:
As at September 30, 2017 As at December 31, 2016As at June 30, 2018 As at December 31, 2017
Index providers84% 87%84% 84%
Pricing services10
 7
14
 11
Broker-dealers6
 6
2
 5
Total100% 100%100% 100%
Summary Pricing Information Table. A summary of securities priced using pricing information from index providers as at SeptemberJune 30, 20172018 and December 31, 20162017 is provided below:
As at September 30, 2017 As at December 31, 2016As at June 30, 2018 As at December 31, 2017
Fair Market
Value Determined
using Prices from
Index Providers
 
% of Total
Fair Value by
Security Type
 
Fair Market
Value Determined
using Prices from
Index Providers
 
% of Total
Fair Value by
Security Type
Fair Market
Value Determined
using Prices from
Index Providers
 
% of Total
Fair Value by
Security Type
 
Fair Market
Value Determined
using Prices from
Index Providers
 
% of Total
Fair Value by
Security Type
($ in millions, except for percentages)($ in millions, except for percentages)
U.S. government$1,333.2
 100% $1,288.2
 100%$1,384.9
 100% $1,321.3
 100%
U.S. agency53.2
 86% 110.2
 92%44.8
 96% 43.4
 83%
Municipal31.2
 38% 28.8
 72%133.6
 73% 37.4
 43%
Corporate3,346.0
 95% 3,275.3
 96%3,075.1
 95% 3,299.6
 83%
Non-U.S. government-backed corporate47.8
 50% 44.8
 50%40.4
 44% 44.0
 48%
Non-U.S. government425.6
 61% 455.6
 72%342.9
 53% 399.4
 58%
Asset-backed14.2
 32% 32.1
 41%12.5
 49% 13.5
 37%
Non-agency commercial mortgage-backed—
 —% 12.5
 98%
Agency mortgage-backed618.2
 54% 691.9
 58%570.3
 53% 605.0
 53%
Total fixed income securities$5,869.4
 84% $5,939.4
 87%$5,604.5
 84% $5,763.6
 84%
Equities468.6
 100% 584.7
 100%—
 —% 491.0
 100%
Total fixed income securities and equity investments$6,338.0
 85% $6,524.1
 88%$5,604.5
 84% $6,254.6
 85%
The Company, in conjunction with its third-party accounting service provider, obtains an understanding of the methods, models and inputs used by the third-party pricing service and index providers to assess the ongoing appropriateness of vendors’ prices. The Company and its third-party accounting service provider also have controls in place to validate that amounts provided represent fair values. Processes to validate and review pricing include, but are not limited to:
quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated);
comparison of market values obtained from pricing services, index providers and broker-dealers against alternative price sources for each security where further investigation is completed when significant differences exist for pricing of individual securities between pricing sources;
initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; and
comparison of the fair value estimates to the Company’s knowledge of the current market.
Prices obtained from pricing services, index providers and broker-dealers are not adjusted by us; however, prices provided by a pricing service, index provider or broker-dealer in certain instances may be challenged based on information available from market or internal sources, including those available to the Company’s third-party investment accounting service provider. Subsequent to any challenge, revisions made by the pricing service, index provider or broker-dealer to the quotes are supplied to the Company’s investment accounting service provider.


Management reviews the vendor hierarchy maintained by the Company’s third-party accounting service provider in order to determine which price source provides the most appropriate fair value (i.e., a price obtained from a pricing service with more seniority in the hierarchy will be used over a less senior one in all cases). The hierarchy level assigned to each security in the Company’s available for sale and trading portfolios is based upon its assessment of the transparency and reliability of the inputs used in the valuation as of the measurement date. The hierarchy of index providers and pricing services is determined using various qualitative and quantitative points arising from reviews of the vendors conducted by the Company’s third-party accounting service provider. Vendor reviews include annual onsite due diligence meetings with index providers and pricing services vendors covering valuation methodology, operational walkthroughs and legal and compliance updates. Index providers are assigned the highest priority in the pricing hierarchy due primarily to availability and reliability of pricing information.
Fixed Income Securities. The Company’s fixed income securities are traded on the over-the-counter (“OTC”) market based on prices provided by one or more market makers in each security. Securities such as U.S. Government, U.S. Agency, Non-U.S. Government and investment grade corporate bonds have multiple market makers in addition to readily observable market value indicators such as expected credit spread, except for Treasury securities, over the yield curve. The Company uses a variety of pricing sources to value fixed income securities including those securities that have pay down/prepay features such as mortgage-backed securities and asset-backed securities in order to ensure fair and accurate pricing. The fair value estimates for the investment grade securities in the Company’s portfolio do not use significant unobservable inputs or modeling techniques.
U.S. Government and Agency. U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and corporate debt issued by agencies such as the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank. As the fair values of U.S. Treasury securities are based on unadjusted market prices in active markets, they are classified within Level 1. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.
Municipals. The Company’s municipal portfolio comprises bonds issued by U.S. domiciled state and municipality entities. The fair value of these securities is determined using spreads obtained from broker-dealers, trade prices and the new issue market which are Level 2 inputs in the fair value hierarchy. Consequently, these securities are classified within Level 2.
Foreign Government. The issuers for securities in this category are non-U.S. governments and their agencies. The fair values of certain non-U.S. government bonds, primarily sourced from international indices, are based on unadjusted market prices in active markets and are therefore classified within Level 1. The remaining non-U.S government bonds are classified within Level 2 as they are not as actively traded. The fair values of the non-U.S. agency securities, again primarily sourced from international indices, are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of non-U.S. agency securities are classified within Level 2. In addition, foreign government securities include a portion of the Emerging Market Debt (“EMD”) portfolio which is also classified within Level 2.
Corporate. Corporate securities consist primarily of U.S. and foreign corporations covering a variety of industries and are for the most part priced by index providers and pricing vendors. Some issuers may participate in government programs which guarantee timely payment of principal and interest in the event of a default. The fair values of these securities are generally determined using the spread above the risk-free yield curve. Inputs used in the evaluation of these securities include credit data, interest rate data, market observations and sector news, broker-dealer quotes and trade volumes. In addition, corporate securities include a portion of the EMD portfolio. The Company classifies all of these securities within Level 2.
Mortgage-backed Securities. The Company’s residential and commercial mortgage-backed securities consist of bonds issued by the Government National Mortgage Association, the FNMA and the FHLMC as well as private non-agency issuers. The fair values of these securities are determined through the use of a pricing model (including Option Adjusted Spread) which uses prepayment speeds and spreads to determine the appropriate average life of the mortgage-backed security. These spreads are generally obtained from broker-dealers, trade prices and the new issue market. As the significant inputs used to price mortgage-backed securities are observable market inputs, these securities are classified within Level 2.
Asset-backed Securities. The underlying collateral for the Company’s asset-backed securities consists mainly of student loans, automobile loans and credit card receivables. These securities are primarily priced by index providers and pricing vendors. Inputs to the valuation process include broker-dealer quotes and other available trade information, prepayment speeds, interest rate data and credit spreads. The Company classifies these securities within Level 2.
Short-term Investments. Short-term investments comprise highly liquid debt securities with a maturity greater than three months but less than one year from the date of purchase. Short-term investments are valued in a manner similar to the Company’s fixed income investments and are classified within Levels 1 and 2.
Equity Securities. Equity securities include U.S. and foreign common stocks and are classified as trading and carried at fair value. These securities are classified within Level 1 as their fair values are based on quoted market prices in active markets from independent pricing sources. As at September 30, 2017, the Company obtained an average of 4.0 quotes per equity investment,


compared to 3.9 quotes as at December 31, 2016. Pricing sources used in pricing equities as at September 30, 2017 and December 31, 2016 were substantially all provided by index providers.
Catastrophe Bonds. Catastrophe bonds held by the Company are variable rate fixed income instruments with redemption values adjusted based on the occurrence of a covered event, usually windstorms and earthquakes.  These bonds have been classified


as trading and carried at fair value.  Bonds are priced using an average of multiple broker-dealer quotes and, as such, are classified as Level 2. 
Foreign Exchange Contracts. The foreign exchange contracts which the Company uses to mitigate currency risk are characterized as OTC due to their customized nature and the fact that they do not trade on a major exchange. These instruments trade globally in a deep, liquid market, providing substantial price transparency and accordingly are classified as Level 2.
Other investments. The Company’s other investments represent our investment in a real estate fund. Adjustments to the fair value are made based on the net asset value of the investment. The net valuation criteria established by the manager of such investments are established in accordance with the governing documents and the asset manager's valuation guidelines, which consider a two part approach: the discounted cash flows approach; and return relative to benchmarks (the performance multiple approach). Alternative valuation methodologies may be employed for investments with unusual characteristics.
Loan Notes Issued by Silverton. Silverton, a licensed special purpose insurer, is consolidated into the Company’s accounts as a VIE. In the fourth quarter of 2014, Silverton issued an additional $85.0 million ($70.0 million third-party funded) of Loan Notes with a maturity date of September 18, 2017. In the fourth quarter of 2015, Silverton issued an additional $125.0 million ($100.0 million third-party funded) of Loan Notes with a maturity date of September 17, 2018. In the fourth quarter of 2016, Silverton issued an additional $130.0 million ($105.0 million third-party funded) of Loan Notes with a maturity date of September 16, 2019. Silverton was not renewed in 2017 and has not issued any Loan Notes since, in the future, any such quota share support for Aspen Re will be provided by a separate cell of Peregrine. The Company elected to account for the Loan Notes at fair value using the guidance as prescribed under ASC 825, Financial Instruments as the Company believes it represents the most meaningful measurement basis for these liabilities. The Loan Notes are recorded at fair value at each reporting period and, as they are not quoted on an active market and contain significant unobservable inputs, they have been classified as a Level 3 instrument in the Company’s fair value hierarchy. The Loan Notes are unique because they are linked to the specific risks of the Company’s property catastrophe book.
To determine the fair value of the Loan Notes the Company runs an internal model which considers the seasonality of the risk assumed under the retrocessional agreement between Aspen Bermuda or a combination of Aspen Bermuda and Aspen U.K., as ceding reinsurers, and Silverton. The seasonality used in the model is initially determined by applying the percentage of property catastrophe losses planned by the Company’s actuaries to the estimated written premium to determine earned premium for each quarter. The inputs to the internal model are based on Company specific data due to the lack of observable market inputs. Reserves for losses are the most significant unobservable input. An increase in reserves for losses would normally result in a decrease in the fair value of the Loan Notes while a decrease in reserves would normally result in an increase in the fair value of the Loan Notes. The observable and unobservable inputs used to determine the fair value of the Loan Notes as at SeptemberJune 30, 20172018 and December 31, 20162017 are presented in the tables below:
As at September 30, 2017 
Fair Value
Level 3
 Valuation Method 
Observable (O) and
 Unobservable (U) inputs
 Low High
As at June 30, 2018 
Fair Value
Level 3
 Valuation Method 
Observable (O) and
 Unobservable (U) inputs
 Low High
($ in millions) ($ in millions)($ in millions) ($ in millions)
Loan Notes $103.9
(1) 
Internal Valuation Model Gross premiums written (O) $50.1
 $57.6
 $25.3
(1) 
Internal Valuation Model Gross premiums written (O) $50.1
 $61.1
   Reserve for losses (U) $4.2
 $37.5
   Reserve for losses (U) $4.2
 $61.9
   Contract period (O) N/A
 365 days
   Contract period (O) N/A
 365 days
   Initial value of issuance (O) $325.0
 $325.0
   Initial value of issuance (O) $325.0
 $325.0
As at December 31, 2016 
Fair Value
Level 3
 Valuation Method 
Observable (O) and
 Unobservable (U) inputs
 Low High
As at December 31, 2017 
Fair Value
Level 3
 Valuation Method 
Observable (O) and
 Unobservable (U) inputs
 Low High
($ in millions) ($ in millions)($ in millions) ($ in millions)
Loan Notes $223.4
(1) 
Internal Valuation Model Gross premiums written (O) $38.9
 $43.4
 $86.6
(1) 
Internal Valuation Model Gross premiums written (O) $50.1
 $61.1
   Reserve for losses (U) $2.7
 $11.8
   Reserve for losses (U) $4.2
 $61.9
   Contract period (O) N/A
 365 days
   Contract period (O) N/A
 365 days
   Initial value of issuance (O) $220.0
 $220.0
   Initial value of issuance (O) $325.0
 $325.0
(1) The amounts classified within accrued expenses and other payables were $2.4$5.0 million and $108.4$42.4 million as at SeptemberJune 30, 20172018 and December 31, 2016,2017, respectively.
The observable and unobservable inputs represent the potential variation around the inputs used in the internal model. The contract period is defined in the respective Loan Notes agreements and the initial value represents the funds received from third parties. For further information regarding Silverton, refer to Note 7 of these unaudited condensed consolidated financial statements.


9.Reinsurance
The Company purchases retrocession and reinsurance to limit and diversify the Company’s risk exposure and increase its own insurancereinsurance and reinsuranceinsurance underwriting capacity. These agreements provide for recovery of a portion of losses and loss adjustment expenses from reinsurers. As is the case with most reinsurance contracts, the Company remains liable to the extent that reinsurers do not meet their obligations under these agreements and therefore, in line with its risk management objectives, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. The largest concentrationstotal amount recoverable by the Company from reinsurers as at June 30, 2018 was $1,656.4 million (December 31, 2017 — $1,515.2 million) of un-collateralizedwhich $1,126.5 million was uncollateralized (December 31, 2017 — $1,001.9 million). As at June 30, 2018 16.7% (December 31, 2017 — 17.0%) of the Company’s uncollateralized reinsurance recoverables for unpaid losses as at September 30, 2017 were 9.4% (December 31, 2016 — 16.8%) with Munich Re which is rated A+ by A.M Best and AA- by S&P, 6.6%12.1% (December 31, 20162017 — 12.8%13.8%) with Lloyd’s Syndicates which are rated A by A.M Best and A+ by S&P and 2.5%8.6% (December 31, 20162017 — 4.6%7.6%) with AxisAioi Nissay Dowa Insurance Co which is rated A+ by A.M best and S&P. These are the Company’s largest exposures to individual reinsurers. The Company has made no provision for doubtful debts from any of its reinsurers as at June 30, 2018.
10.Derivative Contracts
The following tables summarize information on the location and amounts of derivative fair values on the consolidated balance sheet as at SeptemberJune 30, 20172018 and December 31, 20162017:
   As at September 30, 2017 As at December 31, 2016    As at June 30, 2018 As at December 31, 2017 
Derivatives Not Designated as Hedging Instruments
Under ASC 815
 Balance Sheet Location 
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
  Balance Sheet Location 
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
 
   ($ in millions) ($ in millions)    ($ in millions) ($ in millions) 
Foreign Exchange Contracts Derivatives at Fair Value $521.5
 $6.0
(1)  
$240.2
 $5.0
   Derivatives at Fair Value $340.9
 $14.2
(1)  
$577.7
 $5.0
  
Foreign Exchange Contracts Liabilities under Derivative Contracts $238.7
 $(2.9) $425.4
 $(17.7)  Liabilities under Derivative Contracts $812.4
 $(49.3) $173.9
 $(1.0) 
 
(1) 
Net of $0.6$2.3 million cash collateral (December 31, 20162017 — $Nil)$0.6 million).

   As at September 30, 2017 As at December 31, 2016    As at June 30, 2018 As at December 31, 2017 
Derivatives Designated as Hedging Instruments Under ASC 815 Balance Sheet Location 
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
  Balance Sheet Location 
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
 
   ($ in millions) ($ in millions)    ($ in millions) ($ in millions) 
Foreign Exchange Contracts Derivatives at Fair Value $27.3
 $2.4
(1)  
$—
 $2.2
  Derivatives at Fair Value $114.3
 $(0.1) $60.6
 $1.4
 
Foreign Exchange Contracts Liabilities under Derivative Contracts $—
 $—
  
$108.6
 $(0.7) 

(1)
Net of $Nil cash collateral (December 31, 2016 — $2.2 million).

The following table provides the unrealized and realized gains/(losses)gains recorded in the statements of operations and other comprehensive income for derivatives that are not designated or designated as hedging instruments under ASC 815 - "Derivatives and Hedging" for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016.2017.
 Amount of Gain/(Loss) Recognized on Derivatives Amount of Gain Recognized on Derivatives
 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
 
Location of Gain/(Loss)
Recognized on Derivatives
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 
Location of Gain
Recognized on Derivatives
 June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
Derivatives not designated as hedgesDerivatives not designated as hedges ($ in millions) ($in millions)Derivatives not designated as hedges ($ in millions) ($in millions)
Foreign Exchange ContractsForeign Exchange Contracts Change in Fair Value of Derivatives 4.5
 0.6
 25.2
 (3.7)Foreign Exchange Contracts Change in Fair Value of Derivatives (46.1) 17.6
 (22.6) 20.7
Interest Rate Swaps Change in Fair Value of Derivatives —
 —
 —
 (3.3)
                
Derivatives designated as hedgesDerivatives designated as hedges        Derivatives designated as hedges        
Foreign Exchange ContractsForeign Exchange Contracts General, administrative and corporate expenses 1.2
 (3.1) 2.4
 (5.6)Foreign Exchange Contracts General, administrative and corporate expenses 1.3
 0.9
 3.0
 1.2
Foreign Exchange ContractsForeign Exchange Contracts Net change from current period hedged transactions (0.4) 3.1
 3.3
 (1.9)Foreign Exchange Contracts Net change from current period hedged transactions (2.6) 2.4
 (1.7) 3.7




Foreign Exchange Contracts. The Company uses foreign exchange contracts to manage foreign currency risk.risk associated with our operating expenses but also foreign exchange risk associated with net assets or liabilities in currencies other than the U.S. dollar. A foreign exchange contract involves an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Foreign exchange contracts will not eliminate fluctuations in the value of the Company’s assets and liabilities denominated in foreign currencies but rather allow it to establish a rate of exchange for a future point in time.
As at SeptemberJune 30, 2017,2018, the Company held foreign exchange contracts that were not designated as hedging under ASC 815 with an aggregate notional value of $760.2$1,153.3 million (December 31, 20162017 — $665.6$751.6 million). The foreign exchange contracts are recorded as derivatives at fair value with changes recorded as a change in fair value of derivatives in the statement of operations. For the three and ninesix months ended SeptemberJune 30, 2017,2018, the impact of foreign exchange contracts on net income was a gainloss of $4.5$46.1 million (September(June 30, 20162017 — gain of $0.6$17.6 million) and a loss of $22.6 million (June 30, 2017 — gain of $25.2 million (September 30, 2016 — loss of $3.7$20.7 million), respectively.
As at SeptemberJune 30, 2017,2018, the Company held foreign exchange contracts that were designated as hedging under ASC 815 with an aggregate nominal amount of $27.3$114.3 million (December 31, 20162017 — $108.6$60.6 million). The foreign exchange contracts are recorded as derivatives at fair value in the balance sheet with the effective portion recorded in other comprehensive income and the ineffective portion recorded as a change in fair value of derivatives in the statement of operations. The contracts are considered to be effective and therefore the movement in other comprehensive income representing the effective portion for the three and ninesix months ended SeptemberJune 30, 20172018 was a net unrealized loss of $0.4$2.6 million (September(June 30, 20162017 — gain of $3.1$2.4 million) and a net unrealized gain of $3.3 million (September 30, 2016 — loss of $1.9$1.7 million (June 30, 2017 —gain of $3.7 million), respectively.
As the foreign exchange contracts settle, the realized gain or loss is reclassified from other comprehensive income into general, administration and corporate expenses of the statement of operations and other comprehensive income. For the three and ninesix months ended SeptemberJune 30, 2017,2018, the amount recognized within general, administrative and corporate expenses for settled foreign exchange contracts was a realized gain of $1.2$1.3 million (September(June 30, 20162017 — lossgain of $3.1$0.9 million) and a net realized gain of $2.4$3.0 million (September 30, 2016 — loss of $5.6 million), respectively.
Interest Rate Swaps. In 2014, the Company decided to let its interest rate program roll-off and not renew maturing positions. This decision was made after an extensive reassessment of the costs of maintaining an interest rate swap program in a steep yield curve environment. In addition, the continued uncertainty in the global economy and low inflation make it difficult to gauge the timing and speed of interest rate rises by the Federal Reserve. On May 9, 2016, the Company terminated all remaining outstanding interest rate swaps (notional value of $256.3 million) under its International Swap Dealers Association agreement.
As at September(June 30, 2017 and December 31, 2016, the Company no longer had outstanding interest rate swaps. There was no charge in respect— gain of the interest rate swaps for the three and nine months ended September 30, 2017 (September 30, 2016 — no charge and a charge of $3.3$1.2 million), respectively.
11.     Deferred Policy Acquisition Costs
The following table represents a reconciliation of beginning and ending deferred policy acquisition costs for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended June 30, Six Months Ended June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
($ in millions) ($ in millions) ($ in millions) ($ in millions)
Balance at the beginning of the periodBalance at the beginning of the period$364.6
 $409.1
 $358.4
 $361.1
Balance at the beginning of the period$319.9
 $367.5
 $294.3
 $358.4
Acquisition costs deferred94.9
 110.0
 311.1
 414.9
Acquisition costs deferred64.6
 93.4
 181.0
 216.2
Amortization of deferred policy acquisition costs(105.4) (130.9) (315.4) (387.8)Amortization of deferred policy acquisition costs(85.9) (96.3) (176.7) (210.0)
Balance at the end of the periodBalance at the end of the period$354.1
 $388.2
 $354.1
 $388.2
Balance at the end of the period$298.6
 $364.6
 $298.6
 $364.6


12.Reserves for Losses and Loss Adjustment Expenses
The following table represents a reconciliation of beginning and ending consolidated loss and loss adjustment expenses (“LAE”) reserves for the ninesix months ended SeptemberJune 30, 20172018 and 20162017 and the twelve months ended December 31, 20162017:
Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Twelve Months Ended December 31, 2016Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 Twelve Months Ended December 31, 2017
($ in millions)($ in millions)
Provision for losses and LAE at the start of the year$5,319.9
 $4,938.2
 $4,938.2
$6,749.5
 $5,319.9
 $5,319.9
Less reinsurance recoverable(560.7) (354.8) (354.8)(1,515.2) (560.7) (560.7)
Net loss and LAE at the start of the year4,759.2
 4,583.4
 4,583.4
5,234.3
 4,759.2
 4,759.2
          
Net loss and LAE expenses assumed(125.7) 5.7
 (80.1)
Net loss and LAE expenses (disposed)—
 —
 (125.5)
          
Provision for losses and LAE for claims incurred:          
Current year1,543.3
 1,267.0
 1,705.4
700.8
 749.2
 2,100.1
Prior years(92.8) (78.2) (129.3)(80.2) (74.9) (105.4)
Total incurred1,450.5
 1,188.8
 1,576.1
620.6
 674.3
 1,994.7
Losses and LAE payments for claims incurred:          
Current year(150.4) (62.1) (241.0)(49.7) (54.4) (397.5)
Prior years(947.7) (853.1) (981.8)(874.7) (686.7) (1,157.6)
Total paid(1,098.1) (915.2) (1,222.8)(924.4) (741.1) (1,555.1)
          
Foreign exchange losses/(gains)135.2
 (35.9) (97.4)(54.1) 99.6
 161.0
          
Net losses and LAE reserves at period end5,121.1
 4,826.8
 4,759.2
4,876.4
 4,792.0
 5,234.3
Plus reinsurance recoverable on unpaid losses at period end1,369.5
 419.8
 560.7
1,656.4
 779.4
 1,515.2
Provision for losses and LAE at the end of the relevant period$6,490.6
 $5,246.6
 $5,319.9
$6,532.8
 $5,571.4
 $6,749.5
For the ninesix months ended SeptemberJune 30, 2017,2018, there was a reduction of $92.8$80.2 million in the Company’s estimate of the ultimate claims to be paid in respect of prior accident years compared to a reduction of $78.2$74.9 million for the ninesix months ended SeptemberJune 30, 2016.2017. The Company ceded $125.7 million of reserves as part of an adverse development cover purchased in the third quarter of 2017. In the nine months ended September 30, 2016, the Company assumed $5.7 million of additional loss reserves as a result of its acquisition of AG Logic Holdings, LLC and its subsidiaries (“AgriLogic”), a wholly owned specialist U.S. admitted crop intermediary with an integrated agricultural consultancy. The Company ceded $85.8$125.5 million of reserves as part of an adverse development cover purchased during the twelve months ended December 31, 2016.2017. For additional information on the reserve releases, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reserves for Losses and Loss Adjustment Expenses” below.


The following tables show an analysis of incurred claims and allocated loss adjustment expenses, net of reinsurance and cumulative paid claims and allocated claim adjustment expenses, net of reinsurance as at SeptemberJune 30, 2017,2018, December 31, 2017, 2016, 2015, 2014, 2013 and 2012. The loss development triangles are derived from all business written by the Company. AlthoughCompany as although a limited number of contracts are written which have durations of greater than one year the contracts do not meet the definition of a long duration contract.
  Insurance    
  Incurred Claims, IBNR and Allocated Loss Adjustment Expenses, Net of Reinsurance As at September 30, 2017
              Total of IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
  
For the Years Ended December 31, 
    
  Unaudited Prior Years      
Accident
 Year
 2012 2013 2014 2015 2016 Q3 2017  
  $ (in millions)    
2012 606.9
 628.4
 657.6
 671.8
 656.7
 637.0
 47.2
 15,825
2013   691.9
 669.9
 681.0
 662.4
 668.9
 74.6
 14,728
2014     758.1
 732.7
 704.8
 686.2
 109.7
 18,848
2015       919.5
 909.4
 859.6
 206.4
 21,142
2016         912.7
 876.3
 316.0
 20,538
2017  
  
  
     675.8
 426.5
 10,694
   
  
  
 Total
   $4,403.8
    
                 
 The triangles should be reviewed in conjunction with the loss development triangles included in “Note 12 — Reserves for Losses and Loss Adjustment Expenses” in our 2017 Annual Report on Form 10-K filed with the SEC.

 Insurance Insurance    
 Cumulative Paid Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Incurred Claims, IBNR and Allocated Loss Adjustment Expenses, Net of Reinsurance As at June 30, 2018
                           Total of IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
 
For the Years Ended December 31, 
   
For the Years Ended December 31, 
   
       Unaudited Prior Years       
Accident Year 2012 2013 2014 2015 2016 Q3 2017 2012 2013 2014 2015 2016 2017 Q2 2018 
 ($ in millions)   $ (in millions)    
2012 117.6
 308.6
 379.5
 454.1
 504.3
 519.2
 605.0
 626.8
 655.9
 669.9
 654.7
 638.2
 647.2
 45.9
 15,682
2013   91.1
 255.3
 365.9
 456.2
 503.1
   689.6
 667.9
 679.0
 660.4
 650.6
 651.1
 32.4
 14,631
2014     99.8
 248.2
 390.7
 448.9
     755.6
 730.1
 702.4
 695.1
 699.5
 68.0
 18,836
2015       119.5
 328.0
 459.5
       916.0
 905.9
 855.1
 858.1
 154.4
 21,132
2016         117.7
 332.1
         909.3
 881.6
 873.6
 284.6
 21,052
2017           59.9
  
  
  
     896.1
 847.7
 175.9
 20,622
2018             307.0
 192.9
 6,929
  
  
  
   Total
 $2,322.7
           Total
 $4,884.2
    
                              
 All outstanding liabilities for 2012 and subsequent years, net of reinsurance  $2,081.1
   All outstanding liabilities before 2012, net of reinsurance  140.3
   Liabilities for claims and claim adjustment expenses, net of reinsurance  $2,221.4

  Insurance
  Cumulative Paid Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
               
  
For the Years Ended December 31, 
  
  Unaudited Prior Years      
Accident Year 2012 2013 2014 2015 2016 2017 Q2 2018
  ($ in millions)    
2012 117.3
 307.9
 378.5
 452.9
 502.8
 524.7
 531.7
2013   90.7
 254.5
 364.9
 455.0
 502.8
 532.7
2014     99.5
 247.5
 389.8
 465.9
 481.0
2015       119.2
 326.9
 471.9
 523.4
2016         117.3
 346.1
 415.4
2017           167.8
 369.5
2018             32.2
   
  
  
   Total
   $2,885.9
               
  All outstanding liabilities for 2012 and subsequent years, net of reinsurance  $1,998.3
    All outstanding liabilities before 2012, net of reinsurance  114.0
    Liabilities for claims and claim adjustment expenses, net of reinsurance  $2,112.3



 Reinsurance     Reinsurance    
 Incurred Claims, IBNR and Allocated Loss Adjustment Expenses, Net of Reinsurance As at September 30, 2017 Incurred Claims, IBNR and Allocated Loss Adjustment Expenses, Net of Reinsurance As at June 30, 2018
             Total of IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims               Total of IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
 
For the Years Ended December 31, 
    
For the Years Ended December 31, 
   
 Unaudited Prior Years      Unaudited Prior Years       
Accident
Year
 2012 2013 2014 2015 2016 Q3 2017  2012 2013 2014 2015 2016 2017 Q2 2018 
 $ (in millions)     $ (in millions)    
2012 695.5
 740.0
 723.7
 694.2
 692.8
 683.8
 93.4
 3,660
 692.8
 737.3
 720.9
 690.6
 689.4
 687.9
 686.7
 71.2
 3,838
2013   583.2
 575.9
 554.8
 528.6
 519.5
 92.9
 3,524
   579.6
 572.2
 550.2
 524.3
 504.9
 499.7
 66.2
 3,689
2014     553.5
 533.8
 517.9
 496.7
 116.8
 3,440
     550.6
 529.9
 514.2
 487.1
 477.5
 82.8
 3,696
2015       584.8
 568.6
 553.5
 166.5
 3,450
       580.3
 564.5
 558.2
 536.9
 117.6
 3,899
2016         756.5
 763.8
 290.4
 3,032
         749.1
 762.8
 768.9
 218.1
 3,709
2017  
  
  
     887.4
 636.9
 1,704
  
  
  
     1,190.2
 1,189.0
 420.5
 3,746
2018             362.5
 289.9
 1,415
  
  
  
 Total
   $3,904.7
      
  
  
 Total
     $4,521.2
    
                                  

 Reinsurance Reinsurance
 Cumulative Paid Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance Cumulative Paid Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
                          
 
For the Years Ended December 31, 
   
For the Years Ended December 31, 
  
       Unaudited Prior Years      
Accident Year 2012 2013 2014 2015 2016 Q3 2017 2012 2013 2014 2015 2016 2017 Q2 2018
 ($ in millions)   ($ in millions)    
2012 63.6
 249.3
 362.2
 416.3
 460.6
 491.0
 63.2
 248.2
 360.9
 414.8
 458.7
 496.5
 511.4
2013   63.6
 188.2
 280.7
 322.6
 354.7
   63.2
 186.8
 278.4
 320.1
 359.9
 371.6
2014     57.2
 173.5
 249.6
 281.8
     57.0
 172.6
 248.5
 289.2
 308.1
2015       57.7
 172.8
 254.1
       57.5
 171.4
 272.1
 306.2
2016         127.0
 297.4
         125.5
 350.7
 400.0
2017  
  
  
     90.5
  
  
  
     227.9
 508.1
2018             17.5
  
  
  
   Total
 $1,769.5
  
  
  
   Total
   $2,422.9
                          
 All outstanding liabilities for 2012 and subsequent years, net of reinsurance  2,135.2
 All outstanding liabilities for 2012 and subsequent years, net of reinsurance    2,098.3
   All outstanding liabilities before 2012, net of reinsurance  718.9
   All outstanding liabilities before 2012, net of reinsurance    619.9
   Liabilities for claims and claim adjustment expenses, net of reinsurance  $2,854.1
   Liabilities for claims and claim adjustment expenses, net of reinsurance    $2,718.2



 Nine Months Ended September 30, 2017
 ($ in millions)
Net outstanding liabilities: 
Insurance lines$2,221.4
Reinsurance lines2,854.1
Net loss and LAE5,075.5
  
Reinsurance recoverable on unpaid losses: 
Insurance lines1,115.3
Reinsurance lines254.2
Total reinsurance recoverable on unpaid losses1,369.5
  
Insurance lines other than short-duration—
Unallocated claims incurred49.4
Other(3.8)
 $45.6
  
Provision for losses and LAE at the end of the period$6,490.6

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance

Years 1 2 3 4 5
           
Insurance 14.4% 24.5% 15.9% 12.5% 7.6%
           
Reinsurance 11.8% 23.3% 16.2% 7.9% 6.4%
Six Months Ended June 30, 2018
($ in millions)
Net outstanding liabilities:
Insurance lines2,112.3
Reinsurance lines2,718.2
Net loss and LAE4,830.5
Reinsurance recoverable on unpaid losses:
Insurance lines1,382.8
Reinsurance lines273.6
Total reinsurance recoverable on unpaid losses1,656.4
Insurance lines other than short-duration—
Unallocated claims incurred49.7
Other(3.8)
45.9
Provision for losses and LAE at the end of the period6,532.8

13.Capital Structure
The following table provides a summary of the Company’s authorized and issued share capital as at SeptemberJune 30, 20172018 and December 31, 20162017:
As at September 30, 2017 As at December 31, 2016As at June 30, 2018 As at December 31, 2017
Number 
$ in
Thousands
 Number 
$ in
Thousands
Number 
$ in
Thousands
 Number 
$ in
Thousands
Authorized share capital:              
Ordinary Shares 0.15144558¢ per share969,629,030
 1,469
 969,629,030
 1,469
969,629,030
 1,469
 969,629,030
 1,469
Non-Voting Shares 0.15144558¢ per share6,787,880
 10
 6,787,880
 10
6,787,880
 10
 6,787,880
 10
Preference Shares 0.15144558¢ per share100,000,000
 152
 100,000,000
 152
100,000,000
 152
 100,000,000
 152
Total authorized share capital  1,631
   1,631
  1,631
   1,631
Issued share capital:              
Issued ordinary shares of 0.15144558¢ per share59,407,323
 90
 59,774,464
 91
59,687,717
 90
 59,474,085
 90
Issued 7.401% preference shares of 0.15144558¢ each with a liquidation preference of $25 per share—
 —
 5,327,500
 8
Issued 7.250% preference shares of 0.15144558¢ each with a liquidation preference of $25 per share—
 —
 6,400,000
 10
Issued 5.95% preference shares of 0.15144558¢ each with a liquidation preference of $25 per share11,000,000
 17
 11,000,000
 17
11,000,000
 17
 11,000,000
 17
Issued 5.625% preference shares of 0.15144558¢ each with a liquidation preference of $25 per share10,000,000
 15
 10,000,000
 15
10,000,000
 15
 10,000,000
 15
Total issued share capital  122
   140
  122
   122
Additional paid-in capital as at SeptemberJune 30, 20172018 was $951.8$965.4 million (December 31, 20162017 — $1,259.6$954.7 million). Additional paid-in capital includes the aggregate liquidation preferences of the Company’s preference shares of $525.0 million (December 31, 20162017 — $818.2$525.0 million) less issue costs of $13.1 million (December 31, 20162017 — $21.1$13.1 million).


Ordinary Shares. The following table summarizes transactions in the Company’s ordinary shares during the ninesix months ended SeptemberJune 30, 2017:2018:
 Number of Ordinary Shares
Ordinary shares in issue as at December 31, 2016201759,774,46459,474,085
Ordinary share transactions in the ninesix months ended SeptemberJune 30, 20172018 
Ordinary shares issued to employees under the 2013 share incentive plan and/or
2008 share purchase plan
272,296208,954
Ordinary shares issued to non-employee directors9,5044,678
Ordinary shares repurchased(648,941)
Ordinary shares in issue as at SeptemberJune 30, 2017201859,407,32359,687,717
Share Repurchase Authorization Program. On February 8, 2017, the Company’s Board of Directors approved a new share repurchase authorization program of $250.0 million. The new share repurchase authorization program, which was effective immediately and expires on February 8, 2019, permits the Company to effect the repurchases of its ordinary shares from time to time through a combination of transactions, including open market purchases, privately negotiated transactions and accelerated share repurchase transactions.
The Company acquired and canceled 451,268 and 648,941did not acquire or cancel any ordinary shares for the three and ninesix months ended SeptemberJune 30, 2017, respectively. The total consideration paid for2018. For the three and ninesix months ended SeptemberJune 30, 2017, was $20.0 million and $30.0 million, respectively, and the average price per ordinary share for the three and nine months ended September 30, 2017 was $44.32 and $46.23, respectively. The Company acquired and canceled 144,289 and 1,122,328197,673 ordinary shares for a total consideration of $10.0 million.
Preference Share Issuance. The Company did not issue any preference shares for the three and ninesix months ended SeptemberJune 30, 2016, respectively. The total consideration paid for the three and nine months ended September 30, 2016 was $6.5 million and $50.0 million, respectively, and the average price per ordinary share for the three and nine months ended September 30, 2016 was $45.17 and $44.55, respectively.
Preference Share Issuance and Redemption. On September 20, 2016, the Company issued 10,000,000 shares of 5.625% Perpetual Non-Cumulative Preference Shares (the “5.625% Preference Shares”). The 5.625% Preference Shares have a liquidation preference of $25 per share. Net proceeds were $241.3 million, comprising $250.0 million of total liquidation preference less $8.7 million of issuance expenses. The Company used a portion of the net proceeds from the offering to redeem the Company’s outstanding 7.401% Perpetual Non-Cumulative Preference Shares on January 3, 2017 and used a portion of the net proceeds from the offering to redeem the 7.250% Perpetual Non-Cumulative Preference Shares on July 3, 2017. The 5.625% Preference Shares rank equally with preference shares previously issued by the Company and have no fixed maturity date. The Company may redeem all or a portion of the 5.625% Preference Shares at a redemption price of $25 per share on or after January 1, 2027. The 5.625% Preference Shares are listed on the NYSE under the symbol “AHLPRD”.2018.
14.Share-Based Payments
The Company has issued options and other equity incentives under three arrangements: the employee share incentive plans, a non-employee director plan, andthe employee share purchase plans.plans and the non-employee director stock incentive plan. When options are exercised or other equity awards (excluding phantom shares) vest, new ordinary shares are issued becauseas the Company does not currently hold treasury shares. Phantom shares are settled in cash in lieu of ordinary shares upon vesting.
Employee and Non-Employee Director Awards. Employee options and other stock awards were granted under the Aspen 2003 Share Incentive Plan, as amended (the “2003 Share Incentive Plan”), prior to April 24, 2013 and thereafter under the 2013 Share Incentive Plan, as amended (the “2013 Share Incentive Plan”).
(a)Employee Equity Incentives
The total number of ordinary shares that may be issued under the Company’s 2013 Share Incentive Plan is 2,845,683 ordinary shares, which includes 595,683 ordinary shares available to grant under the 2003shares.
Restricted Share Incentive Plan as of February 25, 2013. The number of ordinary shares that may be issued under the 2013 Share Incentive Plan is adjusted per the number of awards that may be forfeited under the 2003 Share Incentive Plan. The non-employee director awards were granted under the 2006 Stock Option Plan for Non-Employee Directors prior to April 21, 2016 and thereafter under the 2016 Stock Option Plan for Non-Employee Directors, as amended (the “2016 Non-Employee Director Plan”). The total number of ordinary shares that may be issued under the 2016 Non-Employee Director Plan is 263,695.Units.
Employee stock options are granted with an exercise price equivalent to the fair value of the ordinary share on the grant date. The weighted average value at grant date is determined using the Black-Scholes option pricing model. Stock options typically vest over a three-year period with a ten-year exercise period with vesting dependent on time and performance conditions established at the time of grant. No stock options were granted or exercised during the nine months ended September 30, 2017 (2016 — Nil)


and no ordinary shares were issued in the nine months ended September 30, 2017 (2016 — 29,222 ordinary shares). No charges against income were made in respect of stock options for the nine months ended September 30, 2017 (2016 — $Nil).
Restricted share units (“RSUs”) granted to employees typically vest over a two or three-year period subject to the employee'semployee’s continued service. Some of the RSUs vest at year-end, while othersgranted to employees vest on the anniversary of the date of grant or when the Compensation Committee of the Board of Directors agrees to deliver them. Holders of RSUs will be paid one ordinary share for each RSU that vests as soon as practicable following the RSUs. vesting date. Holders of RSUs generally will not be entitled to any rights of a holder of ordinary shares, including the right to vote, unless and until their RSUs vest and ordinary shares are issued but they are entitled to receive dividend equivalents. Dividend equivalents are denominated in cash and paid in cash if and when the underlying RSUs vest.
The fair value of the RSUs is based on the closing price on the date of the grant less a deduction for illiquidity, and is expensed through the income statement evenly over the vesting period. In the ninesix months ended SeptemberJune 30, 2017,2018, the Company granted 200,021230,766 RSUs (2016(2017 — 328,551)174,489) to its employees. Compensation costs charged against income in respect of RSUs granted to employees for the ninesix months ended SeptemberJune 30, 20172018 were $7.2$4.6 million (2016(2017 —$7.25.0 million).
In the case of non-employee directors, generally one-twelfth of the RSUs vest on each one month anniversary of the date of grant, with 100% of the RSUs vesting on the first anniversary of the date of grant, or on the date of departure of a director for the amount vested through such date. On February 8, 2017 (with a grant date of February 10, 2017), the Board of Directors approved a total of 22,230 RSUs for non-employee directors (February 8, 2016 — 24,456 RSUs) and 8,892 RSUs for the Chairman of the Board of Directors (February 8, 2016 — 10,952 RSUs). Compensation costs charged against income in respect of RSUs granted to non-employee directors for the nine months ended September 30, 2017 were $1.1 million (2016 — $1.1 million).
The total fair value adjustment for all RSUs for the nine months ended September 30, 2017 was $Nil due to the introduction of a new accounting standard which removed the requirement to fair value the RSU grants. The total fair value adjustment for all RSUs for the nine months ended September 30, 2016 was $0.6 million. The total tax credit recognized by the Company in relation to RSUs in the ninesix months ended SeptemberJune 30, 20172018 was $1.7$1.1 million (2016(2017 — $1.7$1.2 million).
Performance Shares. During the nine months ended September 30, 2017, the Company granted 216,878 performance shares to its employees (2016 — 278,477). The performance sharesPerformance share awards are subject to a three-year service vesting period with a separate annual growth in diluted book value per share (“BVPS”) growth test for each year, adjusted to add back ordinary dividends. One-thirdshares and movements in AOCI to shareholders' equity. Accordingly, one-third of the grant is eligible for vestingaward may be earned in each year based on a formulacalendar year. Performance share awards are not entitled to dividends before they vest and are subject to the employee’s continued employment. If performance goals are achieved, the performance shares are only issuable at the endwill vest up to a maximum of the three-year period.200% of target.

If the diluted BVPS growth achieved in 2017 is:
less than 5.00%, then the portion of the performance shares subject to the vesting conditions in such year will be forfeited (i.e., one-third of the initial grant);
between 5.00% and 10.00%, then the percentage of the performance shares eligible for vesting in such year will be between 10% and 100% on a straight-line basis; or
between 10.00% and 20.00%, then the percentage of the performance shares eligible for vesting in such year will be between 100% and 200% on a straight-line basis.

In calculating BVPS for 2017, the entire movement in AOCI will be excluded. Interest rate movements and credit spread movements in AOCI can be fairly significant and impact growth in BVPS which management does not have any control over. The Compensation Committee will review the impact of any capital management actions undertaken during 2017, including share repurchases and special dividends, and consider whether any further adjustments to growth in BVPS should be made in the context of such actions. The calculation of BVPS for 2017 will likewise exclude all transactional expenses incurred in connection with any transaction which, if consummated, would result in a change in control, including without limitation the cost of defending against any such transaction and any third-party legal and advisory costs. The calculation of BVPS for 2017 will likewise exclude the impact of amortization of goodwill/intangibles resulting from any corporate acquisitions. The Compensation Committee believes that it would not be appropriate for employees’ performance-related remuneration to be impacted by these costs.
The Compensation Committee will determine the vesting conditions for the 2018 and 2019 portions of the grant in such years taking into consideration the market conditions and the Company’s business plans at the commencement of the years concerned. Notwithstanding the vesting criteria for each given year, if in any given year the shares eligible for vesting in 2018 and 2019 are greater than 100% foror the portion of such year’s grant and the average diluted BVPS growth over such year and the preceding year is less than the average of the minimum vesting thresholds for such year and the preceding year, then only 100% (and no more) of the ordinary shares that are eligible for vesting in such year shall vest. Notwithstanding the foregoing, if in the judgment of the Compensation Committee the main reason for the BVPS metric in the earlier year falling below the minimum threshold is due to the impact of rising interest rates and bond yields, then the Compensation Committee may, in its discretion, disapply thisthe limitation on 100% vesting.
During the six months ended June 30, 2018, the Company granted 215,273 performance shares to its employees (2017 — 206,076).


The fair value of performance share awards is based on the value of the closing ordinary share price on the date of the grant less a deduction for illiquidity and expected dividends which would not accrue during the vesting period. CompensationNet compensation costs charged against income in the ninesix months ended SeptemberJune 30, 20172018 in respect of performance shares were $0.4$2.7 million (2016(2017 —


$2.5 $1.2 million). This reduction is due to a decrease in the expected vesting for 2017. The total tax recognized by the Company in relation to performance shares in the ninesix months ended SeptemberJune 30, 20172018 was a tax credit of $0.1$0.6 million (2016(2017 — $0.5 million).$0.3 million credit), excluding excess tax benefits.
Phantom Shares. During the nine months ended September 30, 2017, the Compensation Committee approved the grant of 173,619 phantom shares to its employees (2016 — 147,513). The phantom sharesPhantom share awards are subject to a three-year service vesting period with a separate annual growth in diluted BVPS growth test for each year, adjusted to add back ordinary shares and movements in accordanceAOCI to shareholders' equity. One-third of the award may be earned in each calendar year with the test described above for the 2017 performance shares, with the difference being that any vested amount isbeing paid in cash in lieu of ordinary shares. As ordinary shares are not issued, the phantom shares have no dilutive effect.
During the six months ended June 30, 2018, the Company granted 150,185 phantom shares to its employees (2017 — 173,619).
The fair value of the phantom shares is based on the closing ordinary share price on the date of the grant less a deduction for illiquidity. The fair value is expensed through the consolidated income statement evenly over the vesting period, but asperiod. As the payment to beneficiaries will ultimately be in cash rather than ordinary shares, an adjustment is required each quarter to revalue the accumulated liability to the balance sheet date fair value.
Compensation costs charged against income in the ninesix months ended SeptemberJune 30, 20172018 in respect of phantom shares were $0.7$1.6 million (2016(2017 — $0.8 million) with a fair value reduction for the nine months ended September 30, 2017 of $1.8 million (2016 — increase of $3.8$2.1 million). The total tax credit recognized by the Company in relation to phantom shares in the ninesix months ended SeptemberJune 30, 20172018 was $0.2$0.6 million (2016(2017 — $0.6$0.1 million)., excluding excess tax benefits.

(b)Employee Share Purchase Plans
Employee Share Purchase Plans. On April 30, 2008, the shareholders of the Company approved the Employee Share Purchase Plan, the 2008 Sharesave Scheme and the International Employee Share Purchase Plan (collectively, the “ESPP”), which are implemented by a series of consecutive offering periods as determined by the Board of Directors. In respect of the Employee Share Purchase Plan and the International Employee Share Purchase Plan,ESPP, employees can save up to $500 per month over a two-year period, at the end of which they are eligible to purchase the Company’s ordinary shares at a discounted price. In respect of the 2008 Sharesave Scheme, employees can save up to £500 per month over a three-year period, at the end of which they are eligible to purchase the Company’s ordinary shares at a discounted price. Employees can purchase the Company’s ordinary shares at a discounted price equivalent to eighty-five percent (85%) of the fair market value of the ordinary shares on the offering date which may be adjusted upon changes in capitalization of the Company. Under the ESPP, 10,54531,684 ordinary shares were exercised and issued during the ninesix months ended SeptemberJune 30, 2017 (20162018 (2017 — 13,342)9,979). No ESPP options were granted in 2018. Compensation costs charged against income in the ninesix months ended SeptemberJune 30, 20172018 in respect of the ESPP were $0.3$0.1 million (2016(2017 — $0.3$0.2 million). The total tax credit recognized by the Company in relation to the ESPP in the six months ended June 30, 2018 was $Nil (2017 — $Nil).
(c)Non-Employee Director Plan
On April 21, 2016, the shareholders of the Company approved the 2016 Stock Incentive Plan for Non-Employee Directors which provides for the granting of options, restricted share units or other share-based awards. The total number of ordinary shares that may be issued under the 2016 Non-Employee Director Plan is 263,695.

Restricted Share Units. RSUs granted to non-employee directors, including the Chairman, vest one-twelfth on each one month anniversary of the date of grant with 100% of the restricted share units becoming vested and issued on the first anniversary of the grant date or on the date of departure of a director for the amount vested through such date. The shares that are eligible to vest following final vesting date in the calendar year of the date of grant is delivered as soon as practical thereafter and the remaining shares under the RSUs are delivered on the first anniversary of the grant date. If a director leaves the Board of Directors for any reason other than “cause” (as defined in the award agreement), then the director would receive shares under the restricted share units that had vested through the date the director leaves the Board.
RSUs entitle the holder to receive one ordinary share unit for each unit that vests. Holders of RSUs are not entitled to any of the rights of a holder of ordinary shares, including the right to vote, unless and until their units vest and ordinary shares are issued but they are entitled to receive dividend equivalents with respect to their units. Dividend equivalents will be denominated in cash and paid in cash if and when the underlying units vest.


The following table summarizes information about RSUs issued to non-employee directors as at June 30, 2018:
  Restricted Share Units
  As at June 30, 2018 As at June 30, 2017
RSU Holder Amount Granted Amount Granted
Non-Employee Directors 29,025
 22,230
Chairman 12,900
 8,892

Compensation costs charged against income in respect of RSUs granted to non-employee directors for the six months ended June 30, 2018 were $0.8 million (2017 — $0.7 million). The total tax charge recognized by the Company in relation to non-employee RSUs in the six months ended June 30, 2018 was $Nil (2017 — $Nil).
15.Intangible Assets and Goodwill
The following table provides a summary of the Company’s intangible assets for the three and ninesix months ended SeptemberJune 30, 20172018 and 20162017:
Three Months Ended September 30, 2017 Three Months Ended September 30, 2016Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
Beginning of the Period Additions Amortization End of the Period Beginning of the Period Additions Amortization End of the PeriodBeginning of the Period Additions Amortization End of the Period Beginning of the Period Additions Amortization End of the Period
($ in millions) ($ in millions)($ in millions) ($ in millions)
Intangible Assets                              
Trade Mark$6.3
 $—
 $(0.3) $6.0
 $5.4
 $—
 $(0.1) $5.3
Trademarks$2.8
 $—
 $(0.1) $2.7
 $6.4
 $—
 $(0.1) $6.3
Insurance Licenses16.7
 —
 —
 16.7
 16.6
 —
 —
 16.6
16.7
 —
 —
 16.7
 16.7
 —
 —
 16.7
Agency Relationships25.1
 —
 (0.5) 24.6
 24.2
 —
 (0.4) 23.8
2.2
 —
 (0.2) 2.0
 25.8
 —
 (0.7) 25.1
Non-compete Agreements3.0
 —
 (0.3) 2.7
 2.6
 —
 (0.1) 2.5
0.6
 —
 (0.1) 0.5
 3.1
 —
 (0.1) 3.0
Value of Business Acquired—
 —
 —
 —
 0.2
 —
 (0.2) —
Consulting Relationships0.8
 —
 (0.1) 0.7
 0.9
 —
 —
 0.9
—
 —
 —
 —
 0.9
 —
 (0.1) 0.8
Goodwill26.0
 —
 —
 26.0
 22.1
 —
 —
 22.1
3.9
 —
 —
 3.9
 26.0
 —
 —
 26.0
Renewal Rights1.5
 —
 (0.1) 1.4
 —
 1.9
 —
 1.9
1.3
 —
 (0.1) 1.2
 1.6
 —
 (0.1) 1.5
Total$79.4
 $—
 $(1.3) $78.1
 $72.0
 $1.9
 $(0.8) $73.1
$27.5
 $—
 $(0.5) $27.0
 $80.5
 $—
 $(1.1) $79.4

Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
Beginning of the Period Additions Amortization End of the Period Beginning of the Period Additions Amortization End of the PeriodBeginning of the Period Additions Amortization End of the Period Beginning of the Period Additions Amortization End of the Period
($ in millions) ($ in millions)($ in millions) ($ in millions)
Intangible Assets                              
Trade Mark$6.6
 $—
 $(0.6) $6.0
 $1.6
 $4.0
 $(0.3) $5.3
Trademarks$2.9
 $—
 $(0.2) $2.7
 $6.6
 $—
 $(0.3) $6.3
Insurance Licenses16.7
 —
 —
 16.7
 16.6
 —
 —
 16.6
16.7
 —
 —
 16.7
 16.7
 —
 —
 16.7
Agency Relationships26.2
 —
 (1.6) 24.6
 —
 25.0
 (1.2) 23.8
2.3
 —
 (0.3) 2.0
 26.2
 —
 (1.1) 25.1
Non-compete Agreements3.3
 —
 (0.6) 2.7
 —
 2.9
 (0.4) 2.5
0.7
 —
 (0.2) 0.5
 3.3
 —
 (0.3) 3.0
Value of Business Acquired—
 —
 —
 —
 —
 1.8
 (1.8) —
Consulting Relationships0.9
 —
 (0.2) 0.7
 —
 1.0
 (0.1) 0.9
—
 —
 —
 —
 0.9
 —
 (0.1) 0.8
Goodwill24.2
 1.8
 —
 26.0
 —
 22.1
 —
 22.1
3.9
 —
 —
 3.9
 24.2
 1.8
 —
 26.0
Renewal Rights1.7
 —
 (0.3) 1.4
 —
 1.9
 —
 1.9
1.4
 —
 (0.2) 1.2
 1.7
 —
 (0.2) 1.5
Total$79.6
 $1.8
 $(3.3) $78.1
 $18.2
 $58.7
 $(3.8) $73.1
$27.9
 $—
 $(0.9) $27.0
 $79.6
 $1.8
 $(2.0) $79.4

Crop Re and AgriLogic
On January 19, 2016, Aspen U.S. Holdings acquired 100% of the equity voting interest of AgriLogic, a specialist U.S. crop managing general agency business with an integrated agricultural consultancy, for an initial purchase price of $53.0 million. In addition, the Company recognized $14.1 million of contingent consideration, with a total maximum payable of $22.8 million, subject to the future performance of the business and $2.0 million of ceding commission. The total consideration for the acquisition was $69.1 million.


A significant proportion of the acquired business was represented by intangible assets, specifically $25.0 million for agency relationships, $4.0 million for the right to use the AgriLogic trademark, $2.9 million for non-compete agreements, $1.8 million for the value of business acquired and $1.0 million for consultancy relationships. In addition, $12.0 million of software was acquired and iswas recognized in the balance sheet under office properties and equipment along with $0.3 million of residual net assets. The total net assets acquired of $47.0 million resulted in the Company recognizing a total of $22.1 million in goodwill for the acquisition of AgriLogic,AgriLogic. In total, $34.0 million of intangible assets and $21.0 million of goodwill arewas eligible for tax deduction over the nextfollowing 15 years.


License to use the “AgriLogic” Trademark. The Company acquired the right to use the AgriLogic trademark in the United States. The Company valued the trademark at $4.0 million with an estimated economic useful life of 10 years. The Company willplanned to amortize the estimated value of the trademark over its estimated useful life.
Agency Relationships. The Company valued the agency relationships at $25.0 million with an estimated economic useful life of 15 years. The Company willplanned to amortize the estimated value of the agency relationships over theirits estimated useful life.
Non-compete Agreements. The Company valued the non-compete agreements at $2.9 million with an estimated economic useful life of 5 years. The Company willplanned to amortize the estimated value of the non-compete agreements over theirits estimated useful life.
Value of Business Acquired. The Company recognized a $1.8 million asset for value of business acquired (“VOBA”) consisting of the inforce unearned premium reserve and claims reserves at fair value.  The Company will amortizeamortized the VOBA in line with the unwinding of the acquired unearned premium balances and loss reserves.  Given the short tail nature of AgriLogic’s business, the VOBA was fully amortized in 2016.
Consulting Relationships. The Company valued the consulting relationships at $1.0 million with an estimated economic useful life of 10 years. The Company willplanned to amortize the estimated value of the consulting relationships over theirits estimated useful life.
Goodwill. The Company valued the goodwill at $22.1 million. The goodwill iswas deemed to have an indefinite useful life and will bewas assessed for impairment annually.
On December 18, 2017, Aspen U.S. Holdings sold its interest in AgriLogic to CGB Diversified Service, Inc (“CGB DS”) in exchange for a 23.2% equity interest in Crop Re Services LLC. Aspen U.S. Holdings retained the agricultural consulting business previously integrated within AgriLogic. Intangible assets disposed of as part of the AgriLogic sale included $21.8 million of agency relationships, $3.1 million for the right to use the AgriLogic trademark, $0.9 million of non-compete agreements and $20.6 million of goodwill.
Following the sale the Company performed its annual qualitative assessment on the residual intangible assets of the agricultural consulting business and determined that it was more likely than not that the intangible assets were impaired. The Company therefore recognized an impairment charge of $3.4 million in the year ended December 31, 2017.
Blue Waters
On October 31, 2016, Acorn acquired 100% of the equity voting interest of Blue Waters, a specialist marine insurance agency. The total consideration for the acquisition was $8.0 million.
A significant proportion of the acquired business was represented by intangible assets, specifically $3.1 million for agency relationships, $1.5 million for the right to use the Blue Waters trademark, $1.0 million for non-compete agreements and $0.05 million for the value of trading licenses. In addition, $0.3 million of residual net assets were acquired. The total net assets acquired of $5.75 million resulted in the Company recognizing a total of $2.1 million in goodwill for the acquisition of Blue Waters.
Agency Relationships. The Company valued the agency relationships at $3.1 million with an estimated economic useful life of 5 years. The Company will amortize the estimated value of the agency relationships over their estimated useful life.
License to use the “Blue Waters” Trademark. The Company acquired the right to use the Blue Waters trademark in the United States. The Company valued the trademark at $1.5 million with an estimated economic useful life of 5 years. The Company will amortize the estimated value of the trademark over its estimated useful life.
Non-compete Agreements. The Company valued the non-compete agreements at $1.0 million with an estimated economic useful life of 5 years. The Company will amortize the estimated value of the non-compete agreements over their estimated useful life.
Insurance Licenses. The Company valued the insurance licenses at $0.05 million. The insurance licenses are considered to have an indefinite useful life and are not amortized. The licenses are tested annually for impairment.
Goodwill. The Company valued the goodwill at $2.1 million. The goodwill is deemed to have an indefinite useful life and will be assessed for impairment annually.


Other Intangible Assets
Renewal Rights. On September 22, 2016, the Company entered into a renewal rights agreement with Liberty Specialty Markets Limited (“LSML”). The Company valued the renewal rights at $1.9 million with an estimated economic useful life of 5 years. The Company will amortize the estimated value of the renewal rights over the estimated useful life.
In addition to the intangible assets and goodwill associated with the AgriLogic and Blue Waters acquisitions and the renewal rights agreement with LSML, the Company has the following intangible assets from prior transactions:
License to use the “Aspen” Trademark. On April 5, 2005, the Company entered into an agreement with Aspen (Actuaries and Pension Consultants) Plc to acquire the right to use the Aspen trademark in the United Kingdom. The consideration paid was approximately $1.6 million. As at SeptemberJune 30, 2017,2018, the value of the license to use the Aspen trademark was $1.6 million (December 31, 20162017 — $1.6 million). The trademark has an indefinite useful life and is tested for impairment annually or when events or changes in circumstances indicate that the asset might be impaired.
Insurance Licenses. The total value of the Company’s licenses as at SeptemberJune 30, 20172018 was $16.6 million (December 31, 20162017 — $16.6 million). This includes $10.0 million of acquired licenses held by AAIC, $4.5 million of acquired licenses held by Aspen Specialty and $2.1 million of acquired licenses held by Aspen U.K. The insurance licenses are considered to have an


indefinite life and are not amortized. The licenses are tested for impairment annually or when events or changes in circumstances indicate that the asset might be impaired.
Goodwill. On January 1, 2017, the Company purchased through its wholly-owned subsidiary, Aspen U.S. Holdings, a 49% share of Digital Re. The Company valued the goodwill at $1.8 million. The goodwill is deemed to have an indefinite useful life and will be assessed for impairment annually under the provisions of ASC 323-10-35.annually.
16.Commitments and Contingent Liabilities
(a)Restricted assets
The Company is obliged by the terms of its contractual obligations to specific policyholders and by obligations to certain regulatory authorities to facilitate issue of letters of credit or maintain certain balances in deposits and trust funds for the benefit of policyholders. The following table details the forms and value of the Company’s restricted assets as at SeptemberJune 30, 20172018 and December 31, 20162017:
As at September 30, 2017 As at December 31, 2016As at June 30, 2018 As at December 31, 2017
($ in millions, except percentages)($ in millions, except percentages)
Regulatory trusts and deposits:      
Affiliated transactions$1,438.7
 $1,482.8
$1,154.5
 $1,455.0
Third party2,404.3
 2,380.8
2,431.1
 2,425.3
Letters of credit / guarantees(1)694.6
 672.1
840.3
 658.5
Investment commitment — real estate fund13.8
 100.0
Other investments — real estate fund86.2
 —
Total restricted assets$4,537.6
 $4,535.7
$4,525.9
 $4,638.8
Total as percent of investable assets(1)
51.9% 49.3%
Total as percent of investable assets(2)
56.0% 53.4%
 
(1)
As at June 30, 2018, the Company had pledged funds in the amount of $840.3 million (December 31, 2017 — $658.5 million) as collateral for the secured letters of credit.

(2) 
Investable assets comprise total investments, cash and cash equivalents, accrued interest, receivables for securities sold and payables for securities purchased.

Real Estate Fund. On December 20, 2017, the Company committed $100.0 million as a limited partner to a real estate fund. The investment objective of the fund is to achieve attractive risk-adjusted returns through the acquisition of income producing, high quality assets in gateway cities located in the U.S. and Canada in the office, retail, industrial and multifamily sectors of the real estate market. On May 1, 2018, the Company received a demand for an initial capital call of $86.2 million and paid the capital call on May 10, 2018. As of June 30, 2018, the Company had a remaining capital call of $13.8 million outstanding.


Investments in this real estate fund may be redeemed on a quarterly basis with 90 days’ notice subject to available cash in the fund once the lock-up period ends two years after the capital call. If sufficient cash is not available then all requested redemptions will be made on a pro rata basis. If a redemption request has not been met in full, as of such calendar quarter, the remaining portion of the request will be redeemed in subsequent quarters. There are no assurances as to when the Company may be able to withdraw, in whole or in part, its redemption request from the fund. A lock-up period is the initial amount of time an investor is contractually required to remain invested before having the ability to redeem.
Funds at Lloyd’s. AUL operates at Lloyd’s as the corporate member for Syndicate 4711. Lloyd’s determines Syndicate 4711’s required regulatory capital principally through the syndicate’s annual business plan. Such capital, called Funds at Lloyd’s, consists of investable assets as at SeptemberJune 30, 20172018 in the amount of $458.0$494.2 million (December 31, 20162017 — $447.3$458.7 million).
The amounts provided as Funds at Lloyd’s are drawn upon and become a liability of the Company in the event Syndicate 4711 declares a loss at a level that cannot be funded from other resources, or if Syndicate 4711 requires funds to cover a short term liquidity gap. The amount which the Company provides as Funds at Lloyd’s is not available for distribution to the Company for the payment of dividends. Aspen Managing Agency Limited, the managing agent to Syndicate 4711, is also required by Lloyd’s to maintain a minimum level of capital which as at SeptemberJune 30, 20172018 was £0.4 million (December 31, 20162017 — £0.4 million). This is not available for distribution by the Company for the payment of dividends.
Credit Agreement. On March 27, 2017, Aspen Holdings and certain of its direct or indirect subsidiaries (collectively, the “Borrowers”) entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with various lenders and Barclays Bank plc, as administrative agent. The Credit Agreement will be used by the Borrowers to finance the working capital needs of the Company and its subsidiaries, for letters of credit in connection with the insurance and reinsurance businesses of the Company and its subsidiaries and for other general corporate purposes. Initial availability under the Credit Agreement is $200,000,000$200 million and the Company has the option (subject to obtaining commitments from acceptable lenders) to increase the Credit Agreement by up to $100,000,000.$100 million. The Credit Agreement will expire on March 27, 2022.
As at SeptemberJune 30, 2017,2018, no borrowings were outstanding under the Credit Agreement. The fees and interest rates on the loans and the fees on the letters of credit payable by the Borrowers under the Credit Agreement are based upon the credit ratings for the Company’s long-term unsecured senior debt by S&P and Moody’s. In addition, the fees for a letter of credit vary based upon whether the applicable Borrower has provided collateral (in the form of cash or qualifying debt securities) to secure its reimbursement obligations with respect to such letter of credit.
Under the Credit Agreement, the Company must not permit (a) consolidated tangible net worth to be less than approximately $2,323,100,000 plus 25% of consolidated net income plus 25% of aggregate net cash proceeds from the issuance by the Company of its capital stock, in each case after January 1, 2017, (b) the ratio of its total consolidated debt to the sum of such debt plus its consolidated tangible net worth to exceed 35% or (c) any material insurance subsidiary to have a financial strength rating of less than B++ from A.M. Best. The Credit Agreement contains other customary affirmative and negative covenants, including (subject to various exceptions) restrictions on the ability of the Company and its subsidiaries to incur indebtedness, create or permit liens on their assets, engage in mergers or consolidations, dispose of assets, pay dividends or other distributions, purchase or redeem the Company’s equity securities, make investments and enter into transactions with affiliates. In addition, the Credit Agreement has customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure


to comply with covenants, material inaccuracy of representation or warranty, bankruptcy or insolvency proceedings, change of control and cross-default to other debt agreements.
Other Credit Facilities. On June 30, 2016,29, 2018, Aspen Bermuda and Citibank Europe plc (“Citi Europe”) amended the committed letter of credit facility, dated June 30, 2012, as amended on June 30, 2014 and June 30, 2016, (the “LOC Facility”). The amendment to the LOC facility extends the term of the LOC Facility to June 30, 20182020 and provides a maximum aggregate amount of up to $550.0 million. Under the LOC Facility, Aspen Bermuda will pay to Citi Europe (a) a letter of credit fee based on the available amounts of each letter of credit and (b) a commitment fee, which varies based upon usage, on the unutilized portion of the LOC Facility. Aspen Bermuda will also pay interest on the amount drawn by any beneficiary under the LOC Facility at a rate per annum of LIBOR plus 1% (plus reserve asset costs, if any) from the date of drawing until the date of reimbursement by Aspen Bermuda. In addition, Aspen Bermuda and Citi Europe entered into an uncommitted letter of credit facility whereby Aspen Bermuda has the ability to request letters of credit under this facility subject to the prior approval of Citi Europe. The fee associated with the uncommitted facility is a letter of credit fee based on the available amounts of each letter of credit issued under the uncommitted facility. Both the LOC Facility and the uncommitted facility are used to secure obligations of Aspen Bermuda to its policyholders. In addition to these facilities, we also use regulatory trusts to secure our obligations to policyholders. 
The terms of a pledge agreement between Aspen Bermuda and Citi Europe (pursuant to an assignment agreement dated October 11, 2006) dated January 17, 2006, as amended, were also amended on June 30, 2014 to change the types of securities or other assets that are acceptable as collateral under the New LOC Facility. All other agreements relating to Aspen Bermuda’s LOC Facility, which now apply to the New LOC Facility with Citi Europe, as previously filed with the SEC, remain in full force and effect. As at SeptemberJune 30, 2017,2018, we had $444.2 million of outstanding collateralized letters of credit under the New LOC Facility (December 31, 20162017 — $449.4 million under the LOC Facility).


 
(b)Operating leases
Amounts outstanding under operating leases net of subleases as at SeptemberJune 30, 20172018 were:
 2017 2018 2019 2020 2021 Later
Years		 Total
 ($ in millions)
Operating Lease Obligations$9.8
 $16.2
 $15.6
 $14.7
 $10.0
 $80.8
 $147.1
 2018 2019 2020 2021 2022 Later
Years		 Total
 ($ in millions)
Operating Lease Obligations$9.1
 $15.9
 $15.4
 $10.9
 $8.9
 $74.6
 $134.8
    
(c)Contingent liabilities
In common with the rest of the insurance and reinsurance industry, the Company is subject to litigation and arbitration in the ordinary course of business. The Company’s Operating Subsidiaries are regularly engaged in the investigation, conduct and defense of disputes, or potential disputes, resulting from questions of insurance or reinsurance coverage or claims activities. Pursuant to insurance and reinsurance arrangements, many of these disputes are resolved by arbitration or other forms of alternative dispute resolution. Such legal proceedings are considered in connection with estimating the Company’s Insurance Reserves — Loss and Loss Adjustment Expenses, as provided on the Company’s consolidated balance sheet.
In some jurisdictions, noticeably the U.S., a failure to deal with such disputes or potential disputes in an appropriate manner could result in an award of “bad faith” punitive damages against the Company’s Operating Subsidiaries. In accordance with ASC 450-20-50-4b, for (a) reasonably possible losses for which no accrual is made because any of the conditions for accrual in ASC 450-20-25-2 are not met and (b) reasonably possible losses in excess of the amounts accrued pursuant to ASC 450-20-30-1, the Company will provide an estimate of the possible loss or range of possible loss or state that such an estimate cannot be made.
As at SeptemberJune 30, 20172018 and December 31, 2016,2017, based on available information, it was the opinion of the Company’s management that the probability of the ultimate resolution of pending or threatened litigation or arbitrations having a material effect on the Company’s financial condition, results of operations or liquidity would be remote.


17.Subsequent Events
On August 2, 2018 we announced our decision to cease underwriting international professional indemnity, marine hull and aviation on the Lloyd’s platform.




                                                                                          
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of our financial condition and results of operations for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016.2017. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes contained in this report and the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2016,2017, as well as the discussions of critical accounting policies, contained in our Audited Consolidated Financial Statements in our 20162017 Annual Report on Form 10-K filed with the SEC.
Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and in “Outlook and Trends” below, includes forward-looking statements that involve risks and uncertainties. Please see the section captioned “Cautionary Statement Regarding Forward-Looking Statements” in this report and the “Risk Factors” in this report and in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017 for more information on factors that could cause actual results to differ materially from the results described in, or implied by, any forward-looking statements contained in this discussion and analysis.
Overview
We are a Bermuda holding company and write insurance and reinsurance business through our subsidiaries principally in Bermuda, the United Kingdom and the United States.
Key results for the three and nine months ended SeptemberJune 30, 20172018 include:
Gross written premiums of $852.5$853.8 million for the thirdsecond quarter of 2017,2018, an increase of 11.7%3.9% from the thirdsecond quarter of 2016.2017. Gross written premiums in reinsurance increaseddecreased by 17.9%2.9% mainly due to an increasea reduction in property catastrophe reinsurance, specialty reinsurance and other property reinsurance lines.reinsurance. Gross written premiums in insurance increased by 5.9%8.5% due to growth in financial and professionalacross all lines and growth in property and casualty insurance, offsetting reductions in our marine, aviation and energy insurance lines;of business;
There were $360.3$18.2 million, or 55.9 combined ratio points, of pre-tax catastrophe losses net of reinsurance recoveries and reinstatement premiums in the third quarter of 2017 compared with $24.9 million, or 3.73.5 combined ratio points, of pre-tax catastrophe losses net of reinsurance recoveries in the thirdsecond quarter of 2016;2018 compared with $37.4 million, or 6.7 combined ratio points, of pre-tax catastrophe losses net of reinsurance recoveries in the second quarter of 2017;
Net favorable development on prior year loss reserves of $17.9$42.5 million for the thirdsecond quarter of 20172018 had a favorable impact of 2.88.2 percentage points on the combined ratio, compared with a net favorable development on prior year loss reserves of $35.4$48.7 million in the thirdsecond quarter of 2016,2017, which had a favorable impact of 5.28.7 percentage points on the combined ratio;
Combined ratio of 152.2%97.4% for the thirdsecond quarter of 20172018 compared with a combined ratio of 94.8%100.0% for the thirdsecond quarter of 2016. The increase in the combined ratio was mainly due to a $335.4 million increase in catastrophe losses net of reinsurance recoveries and reinstatement premiums, a $17.5 million decrease in net favorable reserve development and a $132.0 million increase in ceded earned reinsurance which reduced net earned premiums and increased the expense ratio by 1.9 percentage points;2017;
Realized and unrealized foreign exchange gains of $8.45.2 million for the thirdsecond quarter of 2018 compared with losses of $20.6 million in the second quarter of 2017 compared with gains;
A loss of $10.8$46.1 million in the thirdsecond quarter of 2016 predominantly2018 compared with a gain of $17.6 million in the second quarter of 2017 in respect of foreign exchange contracts not designated as hedging instruments primarily due to changes in exchange rates between the U.S. Dollar and the Euro and British Pound;
An unrealized translation gain, net of taxes recognized in accumulated other comprehensive income, of $23.4 million in the second quarter of 2018 compared with a loss of $21.3 million in the second quarter of 2017, due predominantly to changes in exchange rates between the U.S. Dollar and the Euro and British Pound;
Realized and unrealized investment gainslosses of $17.520.7 million for the thirdsecond quarter of 20172018 compared with gains of $21.5$42.0 million in the thirdsecond quarter of 20162017 due to mark to market changes in the valuation of our equity and fixed income trading portfolios;
Realized loss on debt extinguishment of $8.6 million associated with the redemption of $125.0 million of our 6.00% senior notes;
•
Diluted net loss(loss) per ordinary share of $4.48$(0.38) for the quarter ended SeptemberJune 30, 20172018 compared with diluted net income per ordinary share of $1.40$1.07 for the thirdsecond quarter of 2016;2017;
Annualized net (loss)/income return on average ordinary shareholders’ equity of (37.6)(4.0)% for the thirdsecond quarter of 20172018 compared with 11.2%8.8% for the thirdsecond quarter of 2016;2017; and
•
Diluted book value per ordinary share(1) of $44.00$38.21 as at SeptemberJune 30, 2017,2018, a 5.8%4.7% reduction from December 31, 2016. The decrease was primarily2017, mainly due to third quarter catastrophes losses and a $36.8$100.5 million net lossreduction in foreign currency translation, partially offset by $13.8 million of net unrealized gains on investments, net of taxes, recognized through accumulated other comprehensive income.shareholders’ equity.
(1) Diluted book value per ordinary share is based on total shareholders’ equity less preference shares (liquidation preference less issue expenses) and non-controlling interest, divided by the total number of issued and potentially dilutive ordinary shares at the end of the period.


Total shareholders’ equity decreased by $458.0$31.0 million to $3,162.9$2,828.0 million during the three months ended SeptemberJune 30, 2017.2018. The most significant movements were:
a $282.1$36.7 million decrease in retained earnings for the period primarily duerelated to a $14.7 million net loss, the underwriting loss incurred in the period;payment of $14.3 million of ordinary share dividends and $7.6 million of preference share dividends; and
a $12.7$0.3 million reduction in accumulated other comprehensive income which included a $2.6$21.6 million net unrealized loss on investments, a $23.4 million net gain in foreign currency translation and a $2.1 million net loss in the value of hedged foreign currency translation;
the repurchase of 451,268 ordinary shares for $20.0 million; and
a $160.0 million charge to redeem 6,400,000 7.250% Perpetual Non-Cumulative Preference Shares, with a liquidation preference of $25 per share.
exchange contracts
Ordinary shareholders’ equity as at SeptemberJune 30, 20172018 and December 31, 20162017 were:
 As at September 30, 2017 As at December 31, 2016 As at June 30, 2018 As at December 31, 2017
 ($ in millions, except for share amounts) ($ in millions, except for share amounts)
Total shareholders’ equity $3,162.9
 $3,648.3
 $2,828.0
 $2,928.5
Preference shares less issue expenses (511.9) (797.1) (511.9) (511.9)
Non-controlling interests (2.2) (1.4) (3.0) (2.7)
Net assets attributable to ordinary shareholders $2,648.8
 $2,849.8
 $2,313.1
 $2,413.9
Issued ordinary shares 59,407,323
 59,774,464
 59,687,717
 59,474,085
Issued and potentially dilutive ordinary shares 60,200,021
 61,001,071
 60,533,602
 60,202,409
Outlook and Trends
FollowingGross written premiums in reinsurance decreased by approximately 3% compared to the thirdsecond quarter catastrophe lossesof 2017 due to lower gross written premiums in our specialty reinsurance sub-segment where we have reduced exposure to areas, such as engineering and a prolonged periodtrade credit, where we believe ceding commissions are too high. Rates in reinsurance were positive but narrowing in the first half of rate reductions, we expect that2018 and flat on average at the July 1 renewals.  
Gross written premiums in insurance and reinsurance markets will undergo a periodincreased by approximately 8% compared to the second quarter of repricing, particularly in short tail lines. We expect that the vast majority of property and casualty lines in both insurance and reinsurance will experience rate increases. As2017 as a result of growth in all sub-segments. Rates increased on average by 4.8% at the expected repricing,July 1 renewals. The U.S. property business that we will reallocate capitalhave renewed so far in 2018 had an average rate increase of approximately 12.1%. The current U.S. property book is subject to areas whicha 61% quota share although we believe offeranticipate retaining more of it as the best return expectations.book improves. As we continue to reposition the insurance segment, we have decided to no longer underwrite international professional indemnity, marine hull and aviation on the Lloyd’s platform.  
In both segments we have reduced our net retentions through the purchase of additional reinsurance as part of our strategy to reduce volatility and our exposures to 1-in-100 and 1-in-250 cat events relative to total shareholders’ equity.
We recently launched a comprehensive programcontinue to enhance operating effectivenessbe on track to achieve our targeted savings of $30.0 million in 2018 from our operational and efficiency across our organization and enhance our market position (the “Program”). The Program is the result of a rigorous bottom-up operational review of our organization and is intended to allow us to be a more nimble organization with faster decision-making ability, a competitive expense ratio and the ability to serve our clients even better than we do today.
We expect the Program to deliver cumulative total expense savings of approximately $160 million over the next three years. We expect to achieve approximately $30 million of the savings in 2018, $55 million in 2019 and $75 million in 2020, after which run-rate savings are expected to be approximately $80 million per year. We expect approximately 70% of the total expected savings to benefit our Insurance segment. We likewise expect to incur pre-tax charges of approximately $95 million to implement the Program and achieve the expected savings, the majority of which we expect will be incurred in 2018 and 2019. Approximately $50 million of this charge is for employee severance, benefits and related expenses, $30 million for business transformation and Program costs, and $15 million for outsourcing and premises. We also expect to spend a total of approximately $55 million in incremental capital expenditure, primarily information technology, in 2018 and 2019 that we expect to be amortized over a period of three to five years from the start of 2020.program.
See “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included in this report.












Application of Critical Accounting Policies
Our unaudited condensed consolidated financial statements are based on the selection of accounting policies and require management to make significant estimates and assumptions. Some of the more critical judgments in the areas of accounting estimates and assumptions that affect our financial condition and results of operations are related to insurance reserves, premiums receivable in respect of assumed reinsurance, the fair value of derivatives and the value of investments, including the extent of any other-than-temporary impairment. There have been no changes to significant accounting policies from those disclosed in the Company’s 20162017 Annual Report on Form 10-K filed with the SEC. For a detailed discussion of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our 20162017 Annual Report on Form 10-K filed with the SEC and the notes to the unaudited condensed consolidated financial statements contained in this report.
Results of Operations for the Three Months Ended SeptemberJune 30, 20172018 Compared to the Three Months Ended SeptemberJune 30, 20162017
The following is a discussion and analysis of our consolidated results of operations for the three months ended SeptemberJune 30, 20172018 and 2016,2017, starting with a summary of our consolidated results and followed by a segmental analysis.
Total Income Statement
Our statements of operations consolidate the underwriting results of our two business segments and include certain other revenue and expense items that are not allocated to business segments.
Gross written premiums. Gross written premiums increased by $89.0$31.7 million, or 11.7%3.9%, in the thirdsecond quarter of 20172018 compared to the thirdsecond quarter of 2016.2017. Gross written premiums from our reinsurance segment increaseddecreased by $65.6$9.6 million, or 17.9%2.9%, in the thirdsecond quarter of 2018 compared to the second quarter of 2017 compared to the third quarter of 2016 largely due to the recognition of reinstatement premiumsa reduction in property catastrophe reinsurance and growth in agriculture insurance business written within specialty reinsurance. Gross written premiums from our insurance segment increased by $23.4$41.3 million, or 5.9%8.5%, in the thirdsecond quarter of 2018 compared to the second quarter of 2017 compared to the third quarter of 2016 largely due to growth in financial and professional lines combined with growth in property and casualtyacross all insurance offsetting reductions in marine, aviation and energy insurancebusiness lines.
The table below shows our gross written premiums and the percentage change in gross written premiums for each business segment for the three months ended SeptemberJune 30, 20172018 and 2016:2017:
Business Segment Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 % increase/(decrease) Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 % increase/(decrease)
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Reinsurance $431.5
 $365.9
 17.9% $326.0
 $335.6
 (2.9)%
Insurance 421.0
 397.6
 5.9% 527.8
 486.5
 8.5 %
Total $852.5
 $763.5
 11.7% $853.8
 $822.1
 3.9 %
Ceded reinsurance. Total reinsurance ceded in the thirdsecond quarter of 20172018 was $245.1$367.8 million, an increase of $120.0$124.4 million from the thirdsecond quarter of 2016.2017. Ceded reinsurance costs increased by $103.5$115.4 million in our insurance segment primarily due to the restructuring of our ceded reinsurance arrangements as we aim to reduce earnings volatility and benefit the expense ratio through an increase in over-rider commissions. Ceded reinsurance costs also increased in the insurance segment dueproportion of business ceded to the recognition of ceded costs to reinstate cover following third quarter catastrophe losses.our casualty, financial institutions and property quota share programs. Ceded reinsurance costs increased by $16.5$9.0 million in our reinsurance segment due predominantly to increased ceded reinsurance for our property catastrophe and other property business lines where business previously ceded to Silverton, a consolidated entity, is now ceded to Peregrine, a non-consolidated entity, as well as due to new business opportunities which were written in conjunction with an increase in retrocession.ceded reinsurance premiums following the sale of AgriLogic in December 2017. The changes in our reinsurance program reduced our retention ratio (defined as net written premium as a percentage of gross written premium) by 12.413.5 percentage points to 71.2%56.9% in the thirdsecond quarter of 20172018 compared to 83.6%70.4% in the thirdsecond quarter of 2016.2017.
Net premiums earned. Net premiums earned in the thirdsecond quarter of 2018 decreased by 7.6% from the second quarter of 2017 decreased by 4.2% fromprimarily due to changes to the third quarter of 2016. Net premiums earned increased by 20.8% and decreased by 25.8% in ourceded reinsurance and insurance segments, respectively.program listed above. The reduction in net premiums earned was due to a $132.0result of a $138.3 million increase in ceded earned reinsurance premiums partially offset by a $103.5$95.8 million increase in gross earned premiums.
Losses and loss adjustment expenses. The loss ratio for the quarter increased 61.8decreased by 1.9 percentage points from 57.2%61.6% in the thirdsecond quarter of 20162017 to 119.0%59.7% in the thirdsecond quarter of 2017.2018. The increase in the loss ratio was largely due to a $347.9$42.5 million increasereduction in catastrophe lossesnet earned premiums and a $17.5$6.2 million decrease in net favorable development on prior year loss reserves.reserves partially offset by a $19.9 million decrease in large losses and a $19.2 million decrease in catastrophe losses.
In the reinsurance segment, the loss ratio for the three months ended SeptemberJune 30, 20172018 was 131.5%57.8% compared to 56.5%56.0% in the equivalent period in 2016.2017. The increase in the loss ratio for the quarter was largely due to a $281.4$29.3 million increase in


catastrophe losses ceded earned premiums and a $2.9$1.1 million decrease in prior year reserve releases.releases partially offset by a $3.3 million decrease in large losses and a $0.2 million decrease in catastrophe losses. In the thirdsecond quarter of 2017,2018, we experienced $296.2$10.1 million of catastrophe losses,


net of reinsurance recoveries, including $90.5 million from Hurricane Harvey, $121.3 million from Hurricane Irma, $50.8 million from Hurricane Maria, $19.5 million from the earthquakes in Mexico and $14.1 million fromU.S. weather-related events in the U.S., Australia and Asia.events. We The equivalent quarter of 2016 experienced $14.8$10.3 million of natural catastrophe losses from weather-related events in the equivalent quarter of 2017, primarily from U.S. and Australian weather-related events.In the second quarter of 2018, we experienced a hailstorm$7.6 million loss from a dam construction project and a $5.6 million fire-related loss compared with $16.5 million of fire-related losses in the Netherlands.comparative period in 2017. Reserve releases for the current quarter andwere predominantly from our property reinsurance lines, while reserve releases in the comparative periodquarter in 20162017 were a result of favorable development across all of reinsurance business lines.lines and included a $13.1 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa.
In the insurance segment, the loss ratio increaseddecreased to 101.3%62.2% in the thirdsecond quarter of 20172018 from 57.7%66.9% in the thirdsecond quarter of 20162017 largely due to a $66.5$19.0 million increasedecrease in catastrophe losses and a $14.6$16.6 million decrease in large losses partially offset by a $5.1 million decrease in prior year reserve releases and a $32.3$109.0 millionincrease in ceded earned premiums. The increase in lossesceded earned premiums was primarily due to an increase in short-tail insurance lines, primarily property.the proportion of business ceded to our quota share programs which produced a proportionate increase in ceded reinsurance recoveries. In the thirdsecond quarter of 2017,2018, we experienced $76.6$8.1 million of natural catastrophe losses, net of reinsurance recoveries, including $23.4 million from Hurricane Harvey, $21.1 million from Hurricane Irma, $15.2 million from Hurricane Maria and $16.9 million from weather-related events in the U.S. and the U.K. We experienced $10.1$27.1 million of natural catastrophe losses due to U.S. weather-related events in the equivalent quarter of 2016.2017. In the second quarter of 2018, we experienced no large losses, while in the comparative period in 2017 we experienced a $6.8 million surety loss and a $9.8 million U.S. fire-related loss. Prior year reserve releases decreased from $15.3$16.1 million in the thirdsecond quarter of 20162017 to $0.7$11.0 million in the current period. Reserve releases in the current quarter were from ourproperty, casualty and marine, aviation and energy business lines partially offset by reserveoffsetting strengthening in financial and professional lines and strengthening in property and casualty lines following the purchase of an adverse development cover. Reserve releaseslines. Releases in the comparative quarter in 2017 were principally from our marine, aviation and energy and financial and professional business lines.lines which included a $15.4 million of reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa. Further information relating to the movement of prior year reserves is found below under “Reserves for Losses and Loss Adjustment Expenses.”
We monitor the ratio of losses and LAE to net earned premium (the “loss ratio”) as a measure of relative underwriting performance where a lower ratio represents a better result than a higher ratio. The loss ratios for our two business segments for the three months ended September 30, 2017 and 2016 were as follows:
Business Segment Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
Reinsurance 131.5% 56.5%
Insurance 101.3% 57.7%
Total Loss Ratio 119.0% 57.2%
The tables below show our loss ratios including and excluding the impact from natural catastrophe losses to aid in the analysis of the underlying performance of our business segments. For this purpose, we have defined thirdsecond quarter 20172018 catastrophe losses as losses associated with Hurricanes Harvey, IrmaU.S. and Maria, the earthquakes in Mexico and U.S., Australian and AsianU.K weather-related events. We defined catastrophe losses in the thirdsecond quarter of 20162017 as losses associated with weather-related events in the U.S. and a hailstorm in the Netherlands.Australian weather-related events. The total loss ratio represents the calendar year U.S. GAAP loss ratio. The current year adjustments represent the effect on the loss ratio of net losses and reinstatement premiums, if any, from catastrophe loss events.
For the Three Months Ended September 30, 2017 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
For the Three Months Ended June 30, 2018 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
Reinsurance 131.5% (74.6)% 56.9% 57.8% (3.5)% 54.3%
Insurance 101.3% (30.3)% 71.0% 62.2% (3.5)% 58.7%
Total 119.0% (55.9)% 63.1% 59.7% (3.5)% 56.2%
For the Three Months Ended September 30, 2016 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
For the Three Months Ended June 30, 2017 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
Reinsurance 56.5% (4.7)% 51.8% 56.0% (3.8)% 52.2%
Insurance 57.7% (2.8)% 54.9% 66.9% (9.4)% 57.5%
Total 57.2% (3.7)% 53.5% 61.6% (6.7)% 54.9%



Expense ratio. We monitor the ratio of expenses to net earned premium (the “expense ratio”) as a measure of the cost effectiveness of our amortization of deferred policy acquisition costs and general, administrative and corporate expenses. The table below splits the net expense ratio between the amortized deferred policy acquisition costs, general, administrative and corporate expenses and the effect of reinsurance for the three months ended SeptemberJune 30, 20172018 and 2016:2017:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
Ratios Based on Gross Earned Premium Reinsurance Insurance Total Reinsurance Insurance Total Reinsurance Insurance Total Reinsurance Insurance Total
Gross policy acquisition expense ratio 15.0% 17.9 % 16.2% 16.5% 20.6% 18.1% 20.5% 19.5 % 19.9 % 19.8 % 19.6 % 18.9 %
Effect of ceded reinsurance 1.1
 (1.7) —
 0.3
 0.8
 1.1
 1.2
 (9.5) (3.4) (0.2) (4.8) (1.8)
Net policy acquisition expense ratio 16.1% 16.2 % 16.2% 16.8% 21.4% 19.2% 21.7% 10.0 % 16.5 % 19.6 % 14.8 % 17.1 %
                        
Gross general, administrative and corporate expense ratio (1)
 7.1
 13.2
 12.1
 13.0
 13.0
 15.4
 7.6
 11.9
 13.0
 12.7
 15.3
 16.0
Effect of ceded reinsurance premiums 1.5
 8.8
 4.9
 2.0
 2.9
 3.0
 2.1
 12.9
 8.2
 2.2
 7.4
 5.3
Net general and administrative expense ratio 8.6% 22.0 % 17.0% 15.0% 15.9% 18.4% 9.7% 24.8 % 21.2 % 14.9 % 22.7 % 21.3 %
                        
Total net expense ratio 24.7% 38.2 % 33.2% 31.8% 37.3% 37.6% 31.4% 34.8 % 37.7 % 34.5 % 37.5 % 38.4 %
 
(1) 
The total group general and administrative expense ratio includes corporate and non-operating expenses. Comparative ratios have been re-presented to include corporate and non-operating expenses.
The totalnet policy acquisition expense ratio for the thirdsecond quarter of 20172018 decreased compared to the thirdsecond quarter of 20162017 as a result of an increase in over-rider commissions associated with increased ceded reinsurance and a reduction in the gross policy acquisition ratio due to a change in business mix in the reinsurance segment.segment, partially offset by a shift in expenses for crop business from operating expenses to acquisition expenses following the sale of AgriLogic.
General, administrative and corporate expenses decreased by $14.1$9.7 million from $125.0$119.9 million in the thirdsecond quarter of 20162017 to $110.9$110.2 million in the thirdsecond quarter of 2017.2018. The total general, administrative and corporate expense ratio, before the effect of reinsurance, for the thirdsecond quarter of 20172018 decreased by 3.33.0 percentage points from the thirdsecond quarter 20162017 due predominantly due to a reduction in provisions for performance-related remuneration, most significantlyadministration costs in the reinsurance segment.segment following the sale of AgriLogic, a reduction in the operating expenses in the insurance segment and a reduction in accruals for performance-related pay.
Net investment income. Net investment income for the thirdsecond quarter of 2018 was $50.4 million, a 6.3% increase compared to $47.4 million in the second quarter of 2017, was $46.4 million, unchangeddue to an increase in income from the third quarter of 2016.our fixed income portfolios.
Change in fair value of derivatives. In the three months ended SeptemberJune 30, 2017,2018, we experienced a gainloss of $4.5$46.1 million (2016(2017 — gain of $0.6$17.6 million) in respect of foreign exchange contracts not designated as hedging instruments due predominantly to changes in exchange rates between the U.S. Dollar and the Euro and British Poundand a gain of $1.2$1.3 million (2016(2017 — lossgain of $3.1$0.9 million) in respect of foreign exchange contracts designated as hedging instruments.


(Loss)/ Incomeincome before tax. In the thirdsecond quarter of 20172018, loss before tax was $263.0$16.2 million (20162017 — income of $100.577.0 million) consisting of the amounts set out in the table below:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
 ($ in millions) ($ in millions)
Underwriting (loss) income $(321.3) $55.6
Underwriting income $38.1
 $13.2
Corporate expenses (13.5) (13.4) (16.0) (11.4)
Amortization and non-recurring expenses (5.2) (6.3) (9.1) (2.1)
Net other (expense)/income (2.2) 2.4
Net other income 1.6
 1.6
Net investment income 46.4
 46.4
 50.4
 47.4
Change in fair value of derivatives 4.5
 0.6
 (46.1) 17.6
Change in fair value of loan notes issued by variable interest entities 9.8
 (9.8) (3.4) (3.3)
Realized and unrealized investment gains 29.9
 26.7
 3.5
 49.0
Realized and unrealized investment (losses) (12.4) (5.2) (24.2) (7.0)
Net realized and unrealized foreign exchange gains 8.4
 10.8
Realized (loss) on the debt extinguishment (8.6) —
Net realized and unrealized foreign exchange gains/(losses) 5.2
 (20.6)
Interest expense (7.4) (7.3) (7.6) (7.4)
(Loss) income before tax $(263.0) $100.5
(Loss)/income before tax $(16.2) $77.0

Realized and unrealized investment (losses)/gains. Total realized and unrealized investment losses recorded in the statement of operations for the three months ended June 30, 2018 were $20.7 million (2017 — $42.0 million gain). For more detail, please refer to Note 6 of the unaudited condensed consolidated financial statements contained in this report.

Realized loss on debt extinguishment. On June 18, 2018, we redeemed $125.0 million of our 6.00% senior notes. The redemption resulted in a realized loss, or make-whole payment, of $8.6 million.
Taxes. Income tax credit for the three months ended SeptemberJune 30, 20172018 was $9.2$1.5 million (2016(2017 — $4.9$1.2 million expense) equating to an estimated effective tax rate of 3.5% (20169.3% (2017 — 4.9%1.6%). The increase in the tax rate for the three months ended SeptemberJune 30, 20162018 was due to the introduction of the U.S. Base Erosion Anti-abuse Tax (“BEAT”) on premium ceded from U.S. subsidiaries to non-U.S. related parties. In addition, the tax rate for the three months ended June 30, 2017 benefited from an agreementa tax credit associated with HMRC regarding deductions available for certain interest paymentsthe adoption of ASU 2016-09, “Compensation - Stock Compensation.” For further information, refer to Part I, Item 1A, “Risk Factors” in prior periods. our 2017 Annual Report on Form 10-K filed with the SEC.
The effective tax rate for the year is subject to revision in future periods if circumstances change and depends on the relative profitability of those parts of business underwritten in Bermuda (where the rate of tax on corporate profits is zero), the United Kingdom (where the corporation tax rate is 19% and will be reduced to 17% effective April 1, 2020) and the United States (where the federal income tax rate is 35%)21% effective January 1, 2018).
Net (loss)/income after tax. Net loss after tax for the three months ended SeptemberJune 30, 20172018 was $253.8$14.7 million, equivalent to a basic loss per ordinary share of $4.48$0.38 adjusted for the $7.7$7.6 million preference share dividends $5.6 million of costs in relation to the redemption of our 7.250% Preference Shares and $0.6$0.1 million non-controlling interest. Basic and fully diluted loss per ordinary share was $4.48$0.38 for the three months ended SeptemberJune 30, 2017.2018. Net income after tax for the three months ended SeptemberJune 30, 20162017 was $95.6$75.8 million, equivalent to basic earnings per ordinary share of $1.43$1.09 after deducting $9.5$10.5 million preference share dividends and $0.2$0.1 million non-controlling interest. Fully diluted earnings per ordinary share were $1.40$1.07 for the three months ended SeptemberJune 30, 2016.
Realized and unrealized investment gains. Total realized and unrealized investment gains for the three months ended September 30, 2017 were $17.5 million (2016 — $21.5 million). For more detail, please refer to Note 6 of the unaudited condensed consolidated financial statements contained in this report.2017.
Other comprehensive income. We recorded a $3.1$0.3 million reduction in our total other comprehensive income for the three months ended SeptemberJune 30, 2017 (20162018 (2017 — reduction of $25.2$7.5 million), net of taxes. The reduction was mainly due to a $2.6$21.6 million net unrealized loss in foreign currency translation (2016 — $6.5 million net unrealized loss), a $0.1 million net realized/unrealized loss in the available for sale investment portfolio (2016(2017 — $21.2$11.8 million net unrealized gain), a $23.4 million net unrealized gain in foreign currency translation (2017 — $21.3 million net unrealized loss), and a $0.4$2.1 million net reductionloss in the value of hedged foreign exchange contracts (2016(2017 — $2.5$2.0 million net change)increase).
Non-controlling interest. In the three months ended SeptemberJune 30, 2017,2018, we recorded an increase of $0.6$0.1 million (2016(2017 — $0.2$0.1 million decrease)increase) in the amount owed to the non-controlling interest in respect of Aspen Risk Management Limited.
Dividends. Dividends paid on our ordinary shares and preference shares in the three months ended SeptemberJune 30, 20172018 were $22.1$21.9 million (2016(2017 — $22.8$24.9 million). The quarterly dividend on our ordinaryreduction in dividends paid during the second quarter of 2018 was due to a decrease in the number of preference shares increased from $0.22 per ordinary share to $0.24 per ordinary share on April 26, 2017.in issue.


Underwriting Results by Business Segments — ThirdSecond Quarter
We are organized into two business segments: Reinsurance and Insurance. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, casualty reinsurance and specialty reinsurance. The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance.
We have provided additional disclosures for corporate and other (non-operating) income and expenses in Note 5 of our unaudited condensed consolidated financial statements included in this report. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the group, certain strategic and non-recurring costs, changes in fair value of derivatives and changes in fair value of the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses and income taxes, none of which are allocated to the business segments.
Please refer to the tables in Note 5 in our unaudited condensed consolidated financial statements ofincluded in this report for a summary of gross and net written and earned premiums, underwriting results and combined ratios and reserves for our two business segments for the three months ended SeptemberJune 30, 20172018 and 2016.2017. The contributions of each business segment to gross written premiums in the three months ended SeptemberJune 30, 20172018 and 20162017 were as follows:
 Gross Written Premiums Gross Written Premiums
Business Segment Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
 ($ in millions) (% of total) ($ in millions) (% of total) ($ in millions) (% of total) ($ in millions) (% of total)
Reinsurance $431.5
 50.6% $365.9
 47.9% $326.0
 38.2% $335.6
 40.8%
Insurance 421.0
 49.4
 397.6
 52.1
 527.8
 61.8
 486.5
 59.2
Total $852.5
 100.0% $763.5
 100.0% $853.8
 100.0% $822.1
 100.0%


Reinsurance
The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, (risk excess, pro rata and facultative), casualty reinsurance (U.S. treaty, international treaty and global facultative) and specialty insurance and reinsurance


(credit and surety, mortgage reinsurance and insurance, agriculture insurance and reinsurance, marine, aviation, terrorism, engineering, cyber and other specialty lines).reinsurance. For a more detailed description of this segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” in the Company’s 20162017 Annual Report on Form 10-K filed with the SEC.
Gross written premiums. Gross written premiums in our reinsurance segment increaseddecreased by 17.9%2.9% in the third quarter of 2017three months ended June 30, 2018 compared to the three months ended SeptemberJune 30, 2016.2017. The table below shows the gross written premiums and the percentage change in gross written premiums for each line of business for the three months ended SeptemberJune 30, 20172018 and 2016:2017: 
Lines of Business Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 % increase/(decrease) Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 % increase/(decrease)
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Property catastrophe reinsurance $63.3
 $47.3
 33.8 % $77.2
 $72.4
 6.6 %
Other property reinsurance 88.1
 77.4
 13.8 % 86.6
 79.7
 8.7 %
Casualty reinsurance 75.8
 79.3
 (4.4)% 58.4
 53.1
 10.0 %
Specialty reinsurance 204.3
 161.9
 26.2 % 103.8
 130.4
 (20.4)%
Total $431.5
 $365.9
 17.9 % $326.0
 $335.6
 (2.9)%
The increase in property catastrophe reinsurance gross written premiums was primarily due to the recognition of $19.9 million of reinstatement premiums associated witha stronger rate environment following the catastrophe events which occurred in the third quarter.second half of 2017. The increase in other property reinsurance and casualty reinsurance gross written premiums was largely due to adverse contractfavorable adjustments in the comparative period. Gross written premiums in casualty reinsurance reduced slightly due to favorable contract adjustments in the comparative period.prior year premium estimates. The increasedecrease in gross written premiums in specialty reinsurance was largely due to growththe planned reduction in agriculture insuranceengineering and mortgage business.
Losses and loss adjustment expenses. The loss ratio for the three months ended SeptemberJune 30, 20172018 was 131.5%57.8% compared to 56.5%56.0% in the equivalent period in 2016.2017. The increase in the loss ratio was mainly attributable to a $281.4$29.3 million increase in catastrophe losses in the quarterceded earned premiums (which is predominantly excess of loss cover) and a $2.9$1.1 million decrease in prior year reserve releases.
releases partially offset by a $3.3 million decrease in large losses and a $0.2 million decrease in catastrophe losses. In the thirdsecond quarter of 2017,2018, we experienced $296.2a $7.6 million loss from a dam construction project and a $5.6 million fire-related loss, compared with $16.5 million of fire-related losses in the comparative period in 2017.
In the second quarter of 2018, we experienced $10.1 million of catastrophe losses, net of reinsurance recoveries, including $90.5from U.S. weather-related events compared to $10.3 million from Hurricane Harvey, $121.3 million from Hurricane Irma, $50.8 million from Hurricane Maria, $19.5 million from the earthquakes in Mexicoof catastrophe losses due to U.S. and $14.1 million fromAustralian weather-related events in the U.S., Australia and Asia.The equivalent quarter of 2016 experienced $14.82017.
Prior year reserve releases decreased from $32.6 million of catastrophe losses from weather-related events in the U.S. and a hailstormsecond quarter of 2017 to $31.5 million in the Netherlands.
current period. Prior year reserve releases for the current quarter andwere predominantly from our property reinsurance lines, while in the comparative period in 20162017 releases were a result of favorable development across all of our reinsurance business lines.lines and included a $13.1 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa. Further information relating to the movement of prior year reserves is found below under “Reserves for Losses and Loss Adjustment Expenses.”
Policy acquisition, general and administrative expenses. Amortization of deferred policy acquisition costs was $61.5$62.8 million for the three months ended SeptemberJune 30, 2017,2018, equivalent to 16.1%21.7% of net earned premiums, compared to $53.0$53.4 million, or 16.8%19.6% of net earned premiums, for the equivalent period in 2016.2017. The reductionincrease in the acquisition expense ratio was largely duemainly attributable to ana $29.3 million increase in ceded earned premiums as well as a shift in expenses for crop business from operating expenses to acquisition expenses following the proportionsale of agriculture business written, which has a lower average commission rate, and a decrease in property, casualty and specialty business written on a pro rata basis which have higher average commission rates. GeneralAgriLogic. In the three months ended June 30, 2018, general and administrative expenses reduced to $32.8$27.9 million compared with $47.4$40.7 million in the equivalent period in 20162017 primarily due to a reduction in headcount and associated administration costs following the provisionssale of AgriLogic and a reduction in accruals for performance-related remuneration.pay. The general and administrative expense ratio decreased to 8.6%9.7% in the second quarter of 2018 from 15.0%14.9% in the equivalent period in 20162017 due to the reduction in provisions for performance-related remunerationexpenses partially offset by the impact on net earned premiums from ceding a greater proportion of written premiums to third parties.


Insurance
The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance. For a more detailed description of this segment, see Part I, Item 1 “Business — Business Segments — Insurance” in our 20162017 Annual Report on Form 10-K filed with the SEC.


Gross written premiums. Gross written premiums in our insurance segment increased by 5.9%8.5% in the second quarter of 20172018 compared to the three months ended SeptemberJune 30, 2016.2017. The table below shows our gross written premiums and the percentage change in gross written premiums for each line of business for the three months ended SeptemberJune 30, 20172018 and 2016:2017:
Lines of Business Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 % increase/(decrease) Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 % increase/(decrease)
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Property and casualty insurance $194.6
 $184.9
 5.2 % $263.2
 $249.3
 5.6%
Marine, aviation and energy insurance 86.0
 96.3
 (10.7)% 109.6
 92.7
 18.2%
Financial and professional lines insurance 140.4
 116.4
 20.6 % 155.0
 144.5
 7.3%
Total $421.0
 $397.6
 5.9 % $527.8
 $486.5
 8.5%

The increase in property and casualty insurance gross written premiums was largely attributable to increasesan increase in U.K. regional and excess casualty business lines partially offset by plannedoffsetting reductions in programs business.U.S. regional lines. The decreaseincrease in gross written premiums in marine, aviation and energy insurance was largely attributable to reductionsgrowth in U.S. inland marine, marine and energy liability business.and aviation business lines. The increase in gross written premiums in financial and professional lines insurance was largely attributable to growth in U.S. professional lines with smaller increase in crisis management liability, credit and political risks, accident and health suretyoffsetting reductions in cyber and cyber businessmanagement liability lines.
Losses and loss adjustment expenses. The loss ratio increaseddecreased to 101.3%62.2% in the thirdsecond quarter of 20172018 from 57.7%66.9% in the thirdsecond quarter of 20162017 largely due to a $66.5$19.0 million increasedecrease in catastrophe losses and a $14.6$16.6 million reduction in large losses partially offset by a $5.1 million decrease in prior year reserve releases and a $32.3$109.0 million increase in losses primarily in short-tail property insurance lines.ceded earned premiums.
In the thirdsecond quarter of 20172018, we experienced $76.6$8.1 million of catastrophe losses, net of reinsurance recoveries, including $23.4 million from Hurricane Harvey, $21.1 million from Hurricane Irma, $15.2 million from Hurricane Maria and $16.9 million from weather-related events in the U.S. We experienced $10.1and the U.K. compared to $27.1 million of catastrophe losses due to U.S. weather-related events in the equivalent quarter of 2016 due to2017. In the second quarter of 2018, we experienced no large losses while in the comparative period we experienced a $6.8 million surety loss and a $9.8 million U.S. weather-related events.fire-related loss.
Prior year reserve releases decreased from $15.3$16.1 million in the thirdsecond quarter of 20162017 to $0.7$11.0 million in the current period. Reserve releases in the current quarter were from property, casualty and marine, aviation and energy business lines which offset reserveoffsetting strengthening in financial and professional lines insurance business and strengthening in property and casualty lines associated with the purchase of an adverse development cover. Reserve releases inlines. In the comparative quarter of 2016in 2017, releases were principally from our marine, aviation and energy and financial and professional lines insurance business.which included an additional $15.4 million of reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa. Further information relating to the movement of prior year reserves is found below under “Reserves for Losses and Loss Adjustment Expenses.”
Policy acquisition, general and administrative expenses. Amortization of deferred policy acquisition costs was $23.1 million for the three months ended SeptemberJune 30, 2017 decreased2018 equivalent to 16.2%10.0% of net earned premiums compared to 21.4%$42.9 million, or 14.8% of net earned premiums in the thirdsecond quarter of 2016 mainly2017. The reduction in acquisition ratio was largely due to an increase in over-rider commissions associated with an increase in ceded reinsurance. Our generalGeneral and administrative expenses increaseddecreased by $1.5$8.5 million from $57.9$65.7 million in the thirdsecond quarter of 20162017 to $59.4$57.2 million in the current quarter due to costs associated with growth in our insurance business partially offset by a reduction in provisionsaccruals for performance-related remuneration.pay and lower consulting costs.


Results of Operations for the NineSix Months Ended SeptemberJune 30, 20172018 Compared to the NineSix Months Ended SeptemberJune 30, 20162017
The following is a discussion and analysis of our consolidated results of operations for the ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, starting with a summary of our consolidated results and followed by a segmental analysis.
Total Income Statement
Our statements of operations consolidate the underwriting results of our two business segments and include certain other revenue and expense items that are not allocated to our business segments.
Gross written premiums. Gross written premiums increased by $131.7$150.5 million, or 5.2%8.3%, in the first nine monthshalf of 20172018 compared to the equivalent period in 2016.2017. Gross written premiums from our reinsurance segment increased by 9.6%5.4% in the first nine monthshalf of 20172018 compared to the equivalent period in 20162017 mainly due to growth in property catastrophe reinsurance and agriculture insurance business written within specialty reinsurance. Gross written premiums from our insurance segment increased by 1.2%11.1% in the first nine monthshalf of 20172018 compared to the equivalent period in 2016 mainly2017 due to growth across all insurance business lines with the most significant increase in financial and professional lines partially offset by reductions in marine, aviation and energy lines where we continue to experience challenging market conditions and in property and casualty lines as a result of a change in our appetite for this type of business.lines.
The table below shows our gross written premiums for each business segment and the percentage change in gross written premiums for each business segment for the ninesix months ended SeptemberJune 30, 20172018 and 2016: 2017:
 
Business Segment Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 % increase Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 % increase
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Reinsurance $1,332.4
 $1,216.1
 9.6% $949.5
 $900.9
 5.4%
Insurance 1,340.2
 1,324.8
 1.2% 1,021.1
 919.2
 11.1%
Total $2,672.6
 $2,540.9
 5.2% $1,970.6
 $1,820.1
 8.3%
Ceded reinsurance. Total reinsurance ceded for the first nine monthshalf of 20172018 increased by $422.3$293.9 million to $800.3$849.1 million compared to the first nine monthshalf of 2016.2017. Ceded reinsurance costs increased by $332.5$203.5 million for our insurance segment because we restructured our ceded reinsurance arrangements as we aimprimarily due to reduce earnings volatility and benefit the expense ratio through an increase in over-rider commissions.the proportion of business ceded to our casualty, financial institutions and property quota share programs. Ceded reinsurance costs increased by $89.8$90.4 million forin our reinsurance segment due to increased ceded reinsurance for our property catastrophe and other property business lines where business previously ceded to Silverton, a consolidated entity, is now ceded to Peregrine, a non-consolidated entity, as well as due to new business opportunities which were written in conjunction with an increase in retrocession. Ourceded reinsurance premiums following the sale of AgriLogic in December 2017. The changes in our reinsurance program reduced our retention ratio decreased(defined as net written premium as a percentage of gross written premium) by 15.0%12.6% to 70.1%56.9% in the first nine monthshalf of 20172018 compared to 85.1%69.5% in the first nine monthshalf of 2016.2017.
Net earned premiums. Net earned premiums in the first ninesix months of 20172018 decreased by 11.3%7.9% compared to the first ninesix months of 20162017 due to the increase in ceded reinsurance listed above. The reduction in net earned premiums was largely due to a $296.9$277.2 million increase in ceded earned reinsurance premiums partially offset by a $67.6$187.1 million increase in gross earned premiums.
Losses and loss adjustment expenses. The loss ratio increaseddecreased by 22.10.1 percentage points from 58.7%59.0% in the first ninesix months of 20162017 to 80.8%58.9% in the first ninesix months of 2017.2018. The increase in the loss ratio was largely due to a $325.1$90.1 million increasereduction in catastrophe losses partially offset bynet earned premiums and a $14.6$5.3 million increasereduction in prior year reserve releases andpartially offset by a $24.1 million decrease in net earned premiums. The increase in reserves releases included an additional $28.5 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa.catastrophe losses.
In the reinsurance segment, the loss ratio for the ninesix months ended SeptemberJune 30, 20172018 was 85.6%58.4% compared to 55.2%53.7% in the equivalent period in 20162017 largely due to a $252.6$71.7 million increase in catastrophe losses,ceded earned premiums and a $14.9 million decrease in reserve releases partially offset by an $18.9a $10.0 million increasedecrease in reserve releases.catastrophe losses. In the first nine monthshalf of 2017,2018, we experienced $329.824.9 million of catastrophe losses, net of reinsurance recoveries, including $90.5 million from Hurricane Harvey, $121.3 million from Hurricane Irma, $50.8 million from Hurricane Maria, $19.5 million from the earthquakes in Mexico, $7.23.9 million from a tornado in Mississippi,Storm Friederike,and $5.2 millionfrom Cyclone Debbie in Australia and $32.921.0 million from U.S. weather relatedweather-related events. In the comparable period in 2016,2017, we experienced $77.2$34.9 million of natural catastrophe losses, net of reinsurance recoveries, including $36.0 million associated with the wildfires in Canada, $26.0 million from weather-related events in the U.S., $7.5 million from an earthquakea tornado in Japan, $3.4Mississippi, $5.4 million from a hailstormCyclone Debbie in the NetherlandsAustralia and $2.2$19.5 million from an earthquake in Taiwan.other weather-related events. Reserve releases increaseddecreased from $52.1$53.8 million in the first nine monthshalf of 20162017 to $71.0$38.9 million in the current period. For the ninesix months ended SeptemberJune 30, 2018, reserve releases were across our property reinsurance and specialty lines. The comparative period in 2017 we experienced favorable development across all of our reinsurance business lines including an additional $13.1 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa and despite $12.8 million of adverse development in our casualty reinsurance lines due to the U.K. Ministry of Justice decision to increase the discount rate used to calculate lump sum awards in U.K. bodily


injury cases, known as the Ogden rate. The comparative period in 2016 benefited from favorable reserve development in other property, casualty and specialty reinsurance business lines.


In the insurance segment, the loss ratio for the first nine monthshalf of 20172018 was 75.6%59.5% compared to 61.5%63.9% in the comparative period in 2016.2017. The increasedecrease in the loss ratio was mainlylargely due to the impact from higher ceded reinsurance costs on net earned premiums$20.2 million increase in prior year reserve releases, a $20.0 million decrease in large losses and an increasea $14.1 million decrease in catastrophe losses which more than offset the favorable impact from fewer large losses and higher reserve releases.a $205.5 million increase in ceded earned premiums. In the first ninesix months of 2017,2018, there were $107.0$17.5 million of catastrophe losses including $23.4 million from Hurricane Harvey, $21.1 million from Hurricane Irma, $15.2 million from Hurricane Maria and $47.3 million from U.S. weather-related events compared to $34.6$31.6 million associated with U.S. weather-related events in the first nine monthshalf of 2016.2017. In the first nine monthshalf of 2017,2018, we experienced a $6.6 million trade credit loss and a $4.8 million fire-related loss while large losses in the comparative period in 2017 included a $4.8 million loss from a refinery explosion, a $6.8 million surety loss and $19.8 million of losses from several fires while large losses in the comparative period in 2016 included $29.6 million of energy-related losses, $11.8 million of fire-related losses and a $4.2 million aviation loss.fires. Prior year reserve releases decreasedincreased by $4.3$20.2 million from $26.1$21.1 million in the first nine monthshalf of 20162017 to $21.8$41.3 million in the equivalent period in 2017.2018. The reserve releases in the nine-monthsix-month period ended June 30, 2018 were from property, casualty and marine, aviation and energy lines offsetting strengthening in financial and professional lines while releases in the comparative period in 2017 were principally from our marine, aviation and energy business line and included an additional $15.4 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa which offset adverse development in our casualty lines due to a change in the Ogden rate. The release in the comparative period in 2016 was due primarily from our marine, aviation and energy lines and financial and professional lines offsetting adverse development in our property and casualty lines of business.
We monitor the loss ratio as a measure of relative underwriting performance where a lower ratio represents a better result than a higher ratio. The loss ratios for our two business segments for the nine months ended September 30, 2017 and 2016 were as follows:
Business Segment Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Reinsurance 85.6% 55.2%
Insurance 75.6% 61.5%
Total Loss Ratio 80.8% 58.7%
We also present in the tables below show the loss ratios including and excluding the impact from natural catastrophe losses to aid in the analysis of the underlying performance of our business segments. For this purpose, we defined the 2018 catastrophe losses in the first six months of 2018 as losses associated with Storm Friederike and U.K. and U.S. weather-related events. We defined major 2017 catastrophe losses in the first ninesix months of 2017 as losses associated with Hurricanes Harvey, Irma and Maria, the earthquakes in Mexico, a tornado in Mississippi, Cyclone Debbie in Australia and other U.S. weather relatedweather-related events. We defined major 2016 catastrophe losses as losses associated with the wildfires in Canada, weather-related events in the U.S., a hailstorm in the Netherlands and several earthquakes.
The underlying changes in loss ratios by business segment are shown in the tables below for the ninesix months ended SeptemberJune 30, 20172018 and 2016.2017. The total loss ratio represents the calendar year U.S. GAAP loss ratio. The current year adjustments represent the effect on the loss ratio of net claims and reinstatement premiums, if applicable, from catastrophe loss events.
For the Nine Months Ended September 30, 2017 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
For the Six Months Ended June 30, 2018 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
Reinsurance 85.6% (34.3)% 51.3% 58.4% (4.4)% 54.0%
Insurance 75.6% (12.9)% 62.7% 59.5% (3.6)% 55.9%
Total 80.8% (23.9)% 56.9% 58.9% (4.0)% 54.9%
 
For the Nine Months Ended September 30, 2016 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
For the Six Months Ended June 30, 2017 
Total Loss
Ratio
 
Current Year
Adjustments
 
Loss
Ratio Excluding
Current Year
Adjustments
Reinsurance 55.2% (8.3)% 46.9% 53.7% (6.3)% 47.4%
Insurance 61.5% (3.1)% 58.4% 63.9% (5.3)% 58.6%
Total 58.7% (5.4)% 53.3% 59.0% (5.8)% 53.2%
Reserve releases in our reinsurance segment increaseddecreased from $52.1$53.8 million in the first nine monthshalf of 20162017 to $71.0$38.9 million in the equivalent period in 2017.2018. Reserve releases in the insurance segment decreasedincreased from $26.1$21.1 million in the first nine monthshalf of 20162017 to $21.8$41.3 million in the first nine monthshalf of 2017.2018. Refer to “Reserves for Losses and Loss Adjustment Expenses” below for a description of the key elements giving rise to these reserve releases.


Expense ratio. We monitor the expense ratio as a measure of the cost effectiveness of our amortization of deferred policy acquisition costs and, general, administrative and corporate expenses. The table below splits the net expense ratio between the amortized deferred policy acquisition costs, general, administrative and corporate expenses and the effect of reinsurance for each of the ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
Ratios Based on Gross Earned Premium Reinsurance Insurance Total Reinsurance Insurance Total Reinsurance Insurance Total Reinsurance Insurance Total
Gross policy acquisition expense ratio 18.1% 18.3 % 18.2 % 17.3% 18.9% 18.2% 19.2% 18.9 % 19.0 % 20.1% 18.7 % 19.3 %
Effect of ceded reinsurance 0.6
 (2.0) (0.6) 0.9
 1.0
 1.0
 1.6
 (6.9) (2.2) 0.4
 (2.3) (0.9)
Net policy acquisition expense ratio 18.7% 16.3 % 17.6 % 18.2% 19.9% 19.2% 20.8% 12.0 % 16.8 % 20.5% 16.4 % 18.4 %
                        
Gross general, administrative and corporate expense ratio (1)
 10.6
 14.4
 14.6
 13.0
 12.9
 15.4
 8.0
 12.8
 13.7
 13.1
 15.0
 16.1
Effect of ceded reinsurance premiums 2.0
 7.2
 5.0
 1.6
 2.5
 2.4
 2.4
 12.3
 8.3
 2.3
 6.5
 5.0
Net general and administrative expense ratio 12.6% 21.6 % 19.6 % 14.6% 15.4% 17.8% 10.4% 25.1 % 22.0 % 15.4% 21.5 % 21.1 %
                        
Total net expense ratio 31.3% 37.9 % 37.2 % 32.8% 35.3% 37.0% 31.2% 37.1 % 38.8 % 35.9% 37.9 % 39.5 %

(1) 
The total group general and administrative expense ratio includes corporate and non-operating expenses. Comparative ratios have been re-presented to include corporate and non-operating expenses.
Policy acquisition expenses decreased by $72.4$33.3 million in the first nine monthshalf of 20172018 compared with the equivalent period in 20162017 due to an increase in overriderover-rider commissions associated with the increase in ceded reinsurance. The increasedecrease in the policy acquisition expense ratio, before the effect of reinsurance, iswas due to a change in the mix of business written.written in the reinsurance segment partially offset by a shift in expenses for crop business from operating expenses to acquisition expenses following the sale of AgriLogic.
General, administrative and corporate expenses decreased by $9.1$10.0 million in the first nine monthshalf of 20172018 compared to the first nine monthshalf of 2016.2017. The general, administrative and corporate expense ratio, before the effect of ceded reinsurance, decreased by 0.82.4 percentage points compared to the prior period in 2016. The increase2017 due predominantly to a reduction in administration costs in the reinsurance segment following the sale of AgriLogic, a reduction in the operating expenses in the insurance segment ratio is largely due to costs associated with growthand a reduction in our insurance business, while in the reinsurance segment the reduction is due to lower provisionsaccruals for performance-related remuneration.pay in both segments.
Net investment income. Net investment income for the first nine monthshalf of 20172018 was $141.5$97.7 million, a decreasean increase of 1.7%2.7% compared to $143.9$95.1 million in the first nine monthshalf of 20162017 due to a reduction in dividendincreased income following the sale of a portion offrom our equity portfolio in the fourth quarter of 2016.fixed income portfolios.
Change in fair value of derivatives. In the ninesix months ended SeptemberJune 30, 2017,2018, we experienced a loss of $22.6 million (2017 — gain of $25.2 million (2016 — loss of $3.7$20.7 million) in respect of foreign exchange contracts not designated as hedging instruments and a gain of $2.4$3.0 million (2016(2017 — lossgain of $5.6$1.2 million) in respect of foreign exchange contracts designated as hedging instruments. In the first nine months of 2016, we recorded a charge of $3.3 million in respect of our terminated interest rate swaps. There was no charge in the first nine months of 2017 because we terminated our interest rate swaps on May 9, 2016.



Income before tax. In the ninesix months ended SeptemberJune 30, 2017, loss2018, income before tax was $86.7$18.2 million (2016(2017 — income of$283.6$176.3 million) consisting of the amounts set out in the table below:
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 ($ in millions) ($ in millions)
Underwriting (loss) income $(274.6) $144.0
Underwriting income $75.4
 $46.7
Corporate expenses (38.3) (50.6) (29.7) (24.8)
Non-operating expenses (9.5) (6.3) (21.2) (4.3)
Other income/(expenses) 3.0
 2.3
Other income 2.5
 5.2
Net investment income 141.5
 143.9
 97.7
 95.1
Change in fair value of derivatives 25.2
 (7.0) (22.6) 20.7
Change in fair value of loan notes issued by variable interest entities 3.6
 (13.7) (2.4) (6.2)
Realized and unrealized investment gains 130.1
 137.4
 104.1
 100.2
Realized and unrealized investment losses (24.4) (34.1) (162.5) (12.0)
Net realized and unrealized foreign exchange losses (21.1) (10.2)
Realized loss on the debt extinguishment (8.6) —
Net realized and unrealized foreign exchange gains/(losses) 0.5
 (29.5)
Interest expense (22.2) (22.1) (15.0) (14.8)
(Loss) income before tax $(86.7) $283.6
Income before tax $18.2
 $176.3
Realized and unrealized investment (losses)/gains. In the six months ended June 30, 2018, we recorded a net change in gross realized and unrealized losses in the statement of operations of $58.4 million (2017 — $88.2 million gains) driven primarily by mark to market losses in our fixed income portfolios. For more detail, refer to Note 6 of the unaudited condensed consolidated financial statements included in this report.
Realized loss on debt extinguishment. On June 18, 2018, we redeemed $125.0 million of our 6.00% senior notes. The redemption resulted in a realized loss, or make-whole payment, of $8.6 million.
Taxes. Income tax creditcharge for the ninesix months ended SeptemberJune 30, 20172018 was $5.2$2.1 million (2016(2017 — $8.7$4.0 million expense) equating to an estimated effective tax rate of 6.0% (201611.5% (2017 — 3.1%2.3%). The incomeincrease in the tax creditrate for the ninesix months ended SeptemberJune 30, 2018 was due to the introduction of the BEAT on premium ceded from U.S. subsidiaries to non-U.S. related parties. In addition, the tax rate for the six months ended June 30, 2017 takes into accountbenefited from a tax credit associated with the adoption of ASU 2016-09, “Compensation - Stock Compensation” and a tax credit regarding deductions available for certain research and development expenditure. The tax rate for the nine months ended September 30, 2016 benefited from an agreement with HMRC regarding deductions available for certain interest payments in prior periods.
The effective tax rate for the year is subject to revision in future periods if circumstances change and depends on the relative profitability of thethose parts of business underwritten in Bermuda (where the rate of tax on corporate profits is zero), the United Kingdom (where the corporation tax rate is 19% and will be reduced to 17% effective April 1, 2020) and the United States (where the federal income tax rate is 35%)21% effective January 1, 2018).
Net income after tax. Net lossincome after tax for the ninesix months ended SeptemberJune 30, 20172018 was $81.5$16.1 million, equivalent to basic loss per share of $1.99$0.01 adjusted for the $28.7$15.2 million preference share dividends $8.0 million of preference share redemption costs and $0.8$0.3 million non-controlling interest. FullyBasic and fully diluted loss per ordinary share was $1.99$0.01 for the ninesix months ended SeptemberJune 30, 2017.2018. Net income after tax for the ninesix months ended SeptemberJune 30, 20162017 was $274.9$172.3 million, equivalent to basic earnings per ordinary share of $4.07,$2.48, adjusted for the $28.4$21.0 million preference share dividends, $2.4 million of preference share redemption costs and $Nil$0.2 million of non-controlling interest. Fully diluted earnings per ordinary share were $3.97$2.43 for the ninesix months ended SeptemberJune 30, 2016.2017.
Realized and unrealized investment gains. In the nine months ended September 30, 2017, we recorded a net change in gross realized and unrealized gains of $105.7 million (2016 — $103.3 million) driven primarily by mark to market gains in both our fixed income and equity portfolios. For more detail, refer to Note 6 of these unaudited condensed consolidated financial statements.
Other-than-temporary impairments. A security is impaired when its fair value is below its amortized cost. We review our aggregate investment portfolio, including equities, on an individual security basis for potential OTTI each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions. The total OTTI charge for the ninesix months ended SeptemberJune 30, 2018 and 2017 was $Nil and 2016 was $0.5$0.4 million, and $Nil, respectively. For a more detailed description of OTTI, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20162017 Annual Report on Form 10-K filed with the SEC.
Other comprehensive income.(loss). We recorded a reduction in our total other comprehensive income for the ninesix months ended SeptemberJune 30, 20172018 of $20.2$83.5 million (2016(2017 — increasereduction of $72.3$17.1 million), net of taxes. This consisted of a $16.2$101.9 million net unrealized gainloss on the available for sale investment portfolio (2016(2017 — $102.0$15.5 million net unrealized gain), a $2.4$2.9 million reclassification of net realized gainsloss to net income (2016(2017 — $9.1$1.6 million reclassified net realized loss), a net unrealized lossgain in foreign currency translation of $36.8$16.9 million (2016(2017 — $19.3$34.2 million net unrealized loss) and a net unrealized gainloss on hedged derivative contracts of $2.8$1.4 million (2016(2017 — lossgains of $1.3$3.2 million).


Non-controlling interest. In the ninesix months ended SeptemberJune 30, 2017,2018, we recorded an increase of $0.8$0.3 million (2016(2017 — $Nil)$0.2 million) in the amount owed to the non-controlling interest in respect of Aspen Risk Management Limited.
Dividends. The quarterly dividend on our ordinary shares increased from $0.22 per ordinary share to $0.24 per ordinary share on April 26, 2017. The quarterly dividend on our ordinary shares increased from $0.21 per ordinary share to $0.22 per ordinary


share on April 21, 2016. Dividends paid on our ordinary and preference shares in the ninesix months ended SeptemberJune 30, 20172018 were $42.0$28.6 million and $28.7$15.2 million, respectively (2016(2017 — $39.5$27.6 million and $28.4$21.0 million).
Underwriting Results by Business Segments —For the NineSix Months Ended SeptemberJune 30, 20172018
Please refer to the tables in Note 5 in our unaudited condensed consolidated financial statements of this report for a summary of gross and net written and earned premiums, underwriting results and combined ratios and reserves for our two business segments for the ninesix months ended SeptemberJune 30, 20172018 and 2016.2017. The contributions of each business segment to gross written premiums in the ninesix months ended SeptemberJune 30, 20172018 and 20162017 were as follows:
 Gross Written Premiums Gross Written Premiums
Business Segment Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 ($ in millions) (% of gross written premiums) ($ in millions) (% of gross written premiums) ($ in millions) (% of gross written premiums) ($ in millions) (% of gross written premiums)
Reinsurance $1,332.4
 49.9% $1,216.1
 47.9% $949.5
 48.2% $900.9
 49.5%
Insurance 1,340.2
 50.1
 1,324.8
 52.1
 1,021.1
 51.8
 919.2
 50.5
Total $2,672.6
 100.0% $2,540.9
 100.0% $1,970.6
 100.0% $1,820.1
 100.0%
Reinsurance
Gross written premiums. Gross written premiums in our reinsurance segment for the ninesix months ended SeptemberJune 30, 20172018 increased by 9.6%5.4% compared to the ninesix months ended SeptemberJune 30, 2016.2017. The table below shows our gross written premiums for each line of business and the percentage change in gross written premiums for each line of business for the ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
Lines of Business Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 
% increase/
(decrease)
 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 
% increase/
(decrease)
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Property catastrophe reinsurance $266.4
 $272.6
 (2.3)% $228.4
 $203.1
 12.5 %
Other property reinsurance 286.7
 264.7
 8.3 % 191.4
 198.6
 (3.6)%
Casualty reinsurance 272.6
 263.7
 3.4 % 201.7
 196.8
 2.5 %
Specialty reinsurance 506.7
 415.1
 22.1 % 328.0
 302.4
 8.5 %
Total $1,332.4
 $1,216.1
 9.6 % $949.5
 $900.9
 5.4 %
The decreaseincrease in property catastrophe gross written premiums was primarily due to challenging market conditionsa stronger rate environment following the catastrophe events which occurred in the second half of 2017 and downward revisions on premium estimates offsetting an increase in premiums duea decision to the recognition of reinstatement premiums associated with third quarter catastrophe losses.write more European business. The increasedecrease in other property reinsurance gross written premiums was largely due to favorable revisions on premium estimates whereasa reduction in the comparative period there were reductionsrisk excess and pro rata premiums. The increase in premium estimates for proportional contracts. Grossgross written premiums in casualty reinsurance increasedwas largely due to growth in U.S. casualty treaty and international casualty business lines.favorable adjustments to prior year premium estimates. The increase in gross written premiums in specialty reinsurance was largely due to growth in agriculture insurancebusiness which included a fronting arrangement written as part of the sale of AgriLogic which offset reductions in engineering and mortgage business.
Losses and loss adjustment expenses. The loss ratio for the ninesix months ended SeptemberJune 30, 20172018 was 85.6%58.4% compared to 55.2%53.7% in the equivalent period in 2016 largely2017 due to a $252.6$71.7 million increase in ceded earned premiums (which is predominantly excess of loss cover) and a $14.9 million decrease in reserve releases partially offset by a $10.0 million decrease in catastrophe losses and a $1.1 million decrease in large losses.
In the first half of 2018, we experienced $24.2 million of large losses compared to $25.3 million of mid-sized fire relatedfire-related losses in the first nine monthshalf of 2017, the largest of which was a fire in a chemical plant, compared with no significant mid-sized losses in the first nine months of 2016, partially offset by an $18.9 million increase in reserve releases.2017. In the first nine monthshalf of 2017,2018, we experienced $329.8$24.9 million of catastrophe losses, net of reinsurance recoveries, including $90.5 million from Hurricane Harvey, $121.3 million from Hurricane Irma, $50.8 million from Hurricane Maria, $19.5 million from earthquakes in Mexico, $7.23.9 million from a tornado in Mississippi,Storm Friederike and $5.2 millionfrom Cyclone Debbie in Australia and $32.921.0 million from U.S. weather relatedweather-related events. In the comparable period in 2016,2017, we experienced $77.2$34.9 million of catastrophe losses, net of reinsurance recoveries, including $36.0 million associated with the wildfires in Canada, $26.0 million from weather-related events in the U.S., $7.5 million from an earthquakea tornado in Japan, $3.4Mississippi, $5.4 million from a hailstormCyclone Debbie in the NetherlandsAustralia and $2.2$19.5 million from an earthquake in Taiwan.other weather-related events. Reserve releases increaseddecreased from $52.1$53.8 million in the first nine monthshalf of 20162017 to $71.0$38.9 million in the current period. The comparative period which included an additional $13.1 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa.
Further information relating to the movement of prior year reserves is found below under “Reserves for Losses and Loss Adjustment Expenses.”


Policy acquisition, general and administrative expenses. Amortization of deferred policy acquisition costs was $174.4$118.7 million for the ninesix months ended SeptemberJune 30, 20172018 equivalent to 18.7%20.8% of net premiums earned compared to $163.1$112.9 million, or 18.2%20.5% of net


premiums earned, in the equivalent period in 2016.2017. The increase in the acquisition ratio iswas due predominantly to the prior period benefiting from the receipt of FET refunds.
The general and administrative expense ratio of 12.6% for the nine months ended September 30, 2017 decreased from 14.6% for the comparative period in 2016 due to a reduction in provisions for performance-related remuneration partially offset by the impact on net earned premiums from ceding a greater proportion of written premiums to third parties.parties as well as a shift in expenses for crop business from operating expenses to acquisition expenses following the sale of AgriLogic.
The general and administrative expense ratio of 10.4% for the six months ended June 30, 2018 decreased from 15.4% for the comparative period in 2017 due predominantly to a reduction in administration costs following the sale of AgriLogic.
Insurance
Gross written premiums. Gross written premiums in our insurance segment for the ninesix months ended SeptemberJune 30, 20172018 increased by 1.2%11.1% compared to the ninesix months ended SeptemberJune 30, 2016.2017. The table below shows our gross written premiums for each line of business and the percentage change in gross written premiums for each line for the ninesix months ended SeptemberJune 30, 20172018 and 2016:2017:
Lines of Business Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 
% increase/
(decrease)
 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 
% increase/
(decrease)
 ($ in millions) ($ in millions)   ($ in millions) ($ in millions)  
Property and casualty insurance $655.0
 $668.8
 (2.1)% $494.5
 $460.4
 7.4%
Marine, aviation and energy insurance 284.5
 307.8
 (7.6)% 211.1
 198.5
 6.3%
Financial and professional lines insurance 400.7
 348.2
 15.1 % 315.5
 260.3
 21.2%
Total $1,340.2
 $1,324.8
 1.2 % $1,021.1
 $919.2
 11.1%

The decreaseincrease in property and casualty gross written premiums was largely attributable to reductionsan increase in primary global casualty and program business as a result of a change in our appetite for this type of business, partially offset by growth in our U.K. regional and excess casualty business lines. The decreaseincrease in gross written premiums in marine, aviation and energy insurance was largely attributable to continued challenging market conditionsgrowth in U.S. inland marine, marine and energy liability and aviation business lines. The increase in gross written premiums in financial and professional insurance was largely attributable to growth in our management liability, surety, cyber andU.S. professional lines, accident and health, crisis management and credit and political risk business lines.
Losses and loss adjustment expenses. The loss ratio of 75.6%59.5% for the first nine monthshalf of 2017 increased2018 decreased from 61.5%63.9% for the comparable period in 20162017 due to a $72.4$20.2 million increase in prior year reserve releases, a $14.1 million decrease in catastrophe losses and a $4.3$20.0 million reduction in prior year reserve releases being more significant than a reductiondecrease in large losses.losses partially offset by a $205.5 million increase in ceded earned premiums. In the first nine monthshalf of 2017, there were $107.02018, we experienced $17.5 million of catastrophe losses, including $23.4 million from Hurricane Harvey, $21.1 million from Hurricane Irma, $15.2 million from Hurricane Maria and $47.3 million fromnet of reinsurance recoverables, due to U.S. weather-related events compared to $34.6$31.6 million associated withdue to U.S. weather-related events in the first nine monthshalf of 2016.2017. Large losses in the current period included a $6.6 million trade credit loss and a $4.8 million lossfire-related loss. In the comparative period of 2017, large losses included a $4.8 million from a refinery explosion, a $6.8 million surety loss and $19.8 million of losses from several fires and a $32.3 million increase in third quarter losses in our property and programs business lines. In the comparative period of 2016, large losses included $29.6 million of energy-related losses, $11.8 million of fire-related losses and a $4.2 million aviation loss.fires.
Prior year reserve releases decreasedincreased by $4.3$20.2 million from $26.1$21.1 million in the first nine monthshalf of 20162017 to $21.8$41.3 million in the current period. The reserveReserve releases in the nine-monthcurrent period were as a result of favorable developmentfrom property, casualty and marine, aviation and energy lines offsetting strengthening in financial and professional lines, while releases in the comparative period in 2017 were principally from our marine, aviation and energy business lines whichand included an additional $15.4 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa partiallywhich offset by adverse development in our financial and professional lines. The reserve releasecasualty lines due to a change in the comparative period in 2016 came principally from our marine, aviation and energy lines and financial and professional lines offsetting adverse development in our property and casualty lines of business.Ogden rate. Further information relating to the movement of prior year reserves is found below under “Reserves for Losses and Loss Adjustment Expenses.”
Policy acquisition, general and administrative expenses. Amortization of deferred policy acquisition costs for the ninesix months ended SeptemberJune 30, 20172018 decreased to 16.3%12.0% of net premiums earned compared to 19.9%16.4% in the comparable period of 20162017 largely due to an increase in over-rider commissions.commissions associated with an increase in ceded reinsurance. Our general and administrative expenses in the first nine monthshalf of 2017 increased2018 decreased by $13.2$6.7 million to $186.9$120.8 million from $173.7$127.5 million in the comparable period of 2016 predominantly2017 due to reductions in direct costs associated with growth in our insurance business.and accruals for performance-related pay and lower consulting costs.


Cash and Investments
As at SeptemberJune 30, 20172018 and December 31, 20162017, total cash and investments were $8.98.1 billion and $9.28.7 billion, respectively. The composition of our investment portfolio is summarized below:
 As at September 30, 2017 As at December 31, 2016 As at June 30, 2018 As at December 31, 2017
 
Estimated
Fair Value
 
Percentage of
Total Cash and
Investments
 
Estimated
Fair Value
 
Percentage of
Total Cash and
Investments
 
Estimated
Fair Value
 
Percentage of
Total Cash and
Investments
 
Estimated
Fair Value
 
Percentage of
Total Cash and
Investments
 ($ in millions except for percentages) ($ in millions except for percentages)
Fixed income securities — available for sale                
U.S. government $1,172.7
 13.2% $1,206.1
 13.1% $1,229.6
 15.3% $1,159.4
 13.3%
U.S. agency 62.1
 0.7
 119.6
 1.3
 46.6
 0.6
 52.1
 0.6
Municipal 50.1
 0.6
 24.4
 0.3
 105.7
 1.3
 54.9
 0.6
Corporate 2,468.3
 27.9
 2,586.5
 28.2
 2,267.1
 28.1
 2,415.7
 27.8
Non-U.S. government-backed corporate 94.0
 1.1
 89.8
 1.0
 91.8
 1.1
 91.3
 1.1
Non-U.S. government 531.7
 6.0
 488.7
 5.3
 430.2
 5.3
 484.9
 5.6
Asset-backed 33.7
 0.4
 63.0
 0.7
 18.4
 0.2
 26.2
 0.3
Non-agency commercial mortgage-backed —
 —
 12.6
 0.1
Agency mortgage-backed 952.8
 10.7
 1,073.9
 11.7
 890.6
 11.1
 946.5
 10.9
Total fixed income securities — available for sale $5,365.4
 60.6% $5,664.6
 61.7% $5,080.0
 63.0% $5,231.0
 60.2%
Fixed income securities — trading                
U.S. government 160.6
 1.8
 82.4
 0.9
 155.3
 1.9
 161.9
 1.9
Municipal 32.3
 0.4
 15.5
 0.2
 77.8
 1.0
 32.2
 0.4
Corporate 1,045.0
 11.7
 820.6
 8.9
 968.5
 12.1
 1,046.3
 12.0
Non-U.S. government-back corporate —
 —
 1.0
 —
Non-U.S. government 210.9
 2.4
 202.8
 2.2
 219.3
 2.7
 202.5
 2.3
Asset-backed 11.1
 0.1
 14.5
 0.2
 7.2
 0.1
 9.9
 0.1
Mortgage-backed securities 203.1
 2.3
 129.9
 1.4
Bonds backed by foreign government 2.0
 —
 —
 —
Agency mortgage-backed 187.8
 2.3
 195.5
 2.3
Total fixed income securities — trading $1,665.0
 18.7% $1,265.7
 13.8% $1,615.9
 20.1% $1,649.3
 19.0%
Total investments, equity method 67.1
 0.8
 66.4
 0.8
Total other investments(1) 4.0
 —
 12.1
 0.1
 86.2
 1.1
 —
 —
Total catastrophe bonds — trading 30.3
 0.3
 42.5
 0.5
 35.5
 0.4
 32.4
 0.4
Total equity securities — trading 468.6
 5.4
 584.7
 6.4
 —
 —
 491.0
 5.7
Total short-term investments — available for sale 34.4
 0.4
 145.3
 1.6
 72.2
 1.0
 89.9
 1.0
Total short-term investments — trading 90.3
 1.0
 185.4
 2.0
 27.4
 0.3
 73.0
 0.8
Total cash and cash equivalents 1,209.3
 13.6
 1,273.8
 13.9
 1,070.7
 13.3
 1,054.8
 12.1
Total cash and investments $8,867.3
 100.0% $9,174.1
 100.0% $8,055.0
 100.0% $8,687.8
 100.0%

(1)
Total other investments represents our investment in a real estate fund. For further information, refer to Note 6 of the unaudited condensed consolidated financial statements contained in this report.
Fixed Income Securities. As at SeptemberJune 30, 2018, the average credit quality of our fixed income portfolio was “AA-,” with 89.2% of the portfolio rated “A” or higher. As at December 31, 2017, the average credit quality of our fixed income portfolio was “AA-,” with 88.6% of the portfolio rated “A” or higher. As at December 31, 2016, the average credit quality of our fixed income portfolio was “AA-,” with 89.3%88.9% of the portfolio rated “A” or higher. Where the credit ratings were split between the two main rating agencies, S&P and Moody’s, the lower rating was used. Our fixed income portfolio duration was 3.913.88 years as at SeptemberJune 30, 20172018 compared to 3.893.90 years as at December 31, 2016.2017.
Mortgage-Backed Securities. The following table summarizes theAs at June 30, 2018, our mortgage-backed portfolio contained agency mortgage-backed securities rated “AA+” with a fair value of our mortgage-backed securities by rating and class as at September 30, 2017. Our mortgage-backed portfolio is supported by loans diversified across a number of geographic and economic sectors.$1.1 billion.
  AAA AA and Below Total
  ($ in millions)
Agency $—
 $1,155.9
 $1,155.9
Non-agency commercial —
 —
 —
Total mortgage-backed securities $—
 $1,155.9
 $1,155.9


Equity Securities. Equity securities compriseconsisted of U.S. and foreign equity securities and arewere held in the trading portfolio. In the thirdfirst quarter of 20172018 we took advantage of rising equity markets and sold $208.1 million of our remaining equity portfolio. The total investment return from the trading equity portfolios for the three and ninesix months ended SeptemberJune 30, 20172018 and 20162017 was as follows:
  For the Three Months Ended For the Nine Months Ended
Trading Equity Portfolio September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
  ($ in millions) ($ in millions)
Dividend income $2.8
 $5.5
 $11.7
 $17.9
Net realized investment gains 38.4
 6.5
 43.7
 9.9
Net unrealized (losses)/gains, gross of tax (34.4) 4.0
 8.2
 37.6
Net realized foreign exchange gains (losses) 0.1
 (2.8) (1.3) (9.0)
Net unrealized foreign exchange gains 6.6
 2.1
 22.9
 9.4
Total investment return from the trading equity portfolio $13.5
 $15.3
 $85.2
 $65.8
European Fixed Income and Equity Exposures. As at September 30, 2017, we had $853.6 million, or 9.6% of our total cash and investments, invested in securities issued by European issuers, including the United Kingdom. Our European exposures consisted of sovereigns, agencies, government guaranteed bonds, covered bonds, corporate bonds and equities. We have no exposure to the sovereign debt of Greece, Ireland, Italy, Portugal or Spain (“GIIPS”).
We manage our European fixed income exposures by proactively adapting our investment guidelines to our views on the European markets. We continue to prohibit purchases of GIIPS, Belgian sovereign and guaranteed debt, peripheral European bank debt and corporate bonds issued by companies domiciled in GIIPS countries. We may purchase bonds issued by U.K and non-peripheral European select corporate financial issuers.
The tables below summarize our European holdings by country (Eurozone and non-Eurozone), rating and sector as at September 30, 2017. Equity investments included in the table below are not rated (“NR”). Where the credit ratings were split between the two main rating agencies, S&P and Moody’s, the lowest rating was used.
  As at September 30, 2017 by Rating
Country AAA AA A BBB NR 
Market
Value
 
Market
Value
%
  ($ in millions except percentages)
Austria $—
 $8.7
 $—
 $—
 $—
 $8.7
 1.0%
Belgium —
 —
 16.6
 —
 5.2
 21.8
 2.5
Denmark 3.5
 —
 —
 2.8
 —
 6.3
 0.7
Finland —
 10.4
 —
 —
 9.4
 19.8
 2.3
France —
 16.1
 33.4
 4.5
 15.3
 69.4
 8.1
Germany 40.3
 13.8
 77.2
 12.6
 13.0
 157.0
 18.5
Hungary —
 —
 —
 1.7
 —
 1.7
 0.2
Luxembourg —
 —
 —
 0.3
 —
 0.3
 —
Netherlands 20.8
 —
 31.5
 8.5
 5.6
 66.4
 7.8
Norway 3.8
 —
 10.5
 0.4
 —
 14.7
 1.7
Poland —
 —
 —
 6.3
 —
 6.3
 0.7
Romania —
 —
 —
 3.2
 —
 3.2
 0.4
Sweden 1.0
 14.5
 —
 1.0
 —
 16.4
 1.9
Switzerland 3.5
 26.5
 23.7
 9.8
 49.7
 113.2
 13.3
United Kingdom —
 165.2
 69.8
 36.2
 77.3
 348.4
 40.9
Total European Exposures $72.9
 $255.2
 $262.7
 $87.3
 $175.5
 $853.6
 100.0%
  For the Three Months Ended For the Six Months Ended
Trading Equity Portfolio June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
  ($ in millions) ($ in millions)
Dividend income (1)
 $0.7
 $3.7
 $1.9
 $8.9
Net realized investment gains 0.1
 1.6
 69.5
 5.3
Net unrealized (losses) gains, gross of tax —
 18.9
 (75.7) 42.6
Net realized foreign exchange gains (losses) 0.1
 (0.8) 4.9
 (1.4)
Net unrealized foreign exchange (losses) gains (0.1) 9.8
 (0.6) 16.3
Total investment return from the trading equity portfolio $0.8
 $33.2
 $—
 $71.7


  As at September 30, 2017 by Sector
Country Sovereign ABS 
Government
Guaranteed
Bonds
 Agency 
Local
Government
 
Corporate
Financial
Issuers
 
Corporate
Non-
Financial
Issuers
 Equity 
Market
Value
 
Unrealized
Pre-tax
Gain/(Loss)
  ($ in millions except percentages)
Austria $1.3
 $—
 $7.4
 $—
 $—
 $—
 $—
 $—
 $8.7
 $0.1
Belgium —
 —
 —
 —
 —
 —
 16.6
 5.2
 21.8
 0.8
Denmark —
 —
 —
 —
 3.5
 —
 2.8
 —
 6.3
 —
Finland 5.8
 —
 —
 —
 4.5
 —
 —
 9.4
 19.8
 0.8
France 1.5
 —
 —
 23.7
 —
 6.2
 22.7
 15.3
 69.4
 2.1
Germany 0.6
 —
 33.0
 5.9
 14.7
 —
 89.8
 13.0
 157.0
 5.2
Hungary 1.7
 —
 —
 —
 —
 —
 —
 —
 1.7
 0.1
Luxembourg —
 —
 —
 —
 —
 —
 0.3
 —
 0.3
 —
Netherlands —
 —
 —
 21.1
 —
 16.3
 23.4
 5.6
 66.4
 1.7
Norway —
 —
 —
 14.3
 —
 —
 0.4
 —
 14.7
 0.4
Poland 6.3
 —
 —
 —
 —
 —
 —
 —
 6.3
 0.1
Romania 3.2
 —
 —
 —
 —
 —
 —
 —
 3.2
 0.1
Sweden 0.7
 —
 —
 4.8
 0.3
 10.7
 —
 —
 16.4
 0.2
Switzerland 3.5
 —
 —
 —
 —
 10.8
 49.3
 49.7
 113.2
 5.4
United Kingdom 164.5
 0.5
 0.7
 —
 —
 16.1
 89.3
 77.3
 348.4
 13.0
Total European Exposures $189.1
 $0.5
 $41.1
 $69.8
 $23.0
 $60.1
 $294.6
 $175.5
 $853.6
 $30.0
(1)
The dividend income is due to a withholding tax refund received during the three months ended June 30, 2018.

Reserves for Losses and Loss Adjustment Expenses
As at SeptemberJune 30, 2017,2018, we had total net loss and loss adjustment expense reserves of $5,121.1$4,876.4 million (December 31, 20162017 — $4,759.2$5,234.3 million). This amount represented our selected reserves for the ultimate liability for payment of losses and loss adjustment expenses. The following tables analyze gross and net loss and loss adjustment expense reserves by business segment as at SeptemberJune 30, 20172018 and December 31, 2016,2017, respectively:
 As at September 30, 2017 As at June 30, 2018
Business Segment Gross 
Reinsurance
Recoverable
 Net Gross 
Reinsurance
Recoverable
 Net
 ($ in millions) ($ in millions)
Reinsurance $3,120.0
 $(254.2) $2,865.8
 $3,017.7
 $(273.6) $2,744.1
Insurance 3,370.6
 (1,115.3) 2,255.3
 3,515.1
 (1,382.8) 2,132.3
Total losses and loss expense reserves $6,490.6
 $(1,369.5) $5,121.1
 $6,532.8
 $(1,656.4) $4,876.4
 
 As at December 31, 2016 As at December 31, 2017
Business Segment Gross 
Reinsurance
Recoverable
 Net Gross 
Reinsurance
Recoverable
 Net
 ($ in millions) ($ in millions)
Reinsurance $2,536.1
 $(74.0) $2,462.1
 $3,186.4
 $(269.3) $2,917.1
Insurance 2,783.8
 (486.7) 2,297.1
 3,563.1
 (1,245.9) 2,317.2
Total losses and loss expense reserves $5,319.9
 $(560.7) $4,759.2
 $6,749.5
 $(1,515.2) $5,234.3
For the ninesix months ended SeptemberJune 30, 2017,2018, there was a $92.8an $80.2 million reduction of our estimate of the ultimate net claims to be paid in respect of prior accident years. AnBelow is an analysis of this reduction by business segment for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016 is as follows:2017:
 For the Three Months Ended For the Nine Months Ended For the Three Months Ended For the Six Months Ended
Business Segment September 30, 2017 September 30, 2016 September 30, 2017
 September 30, 2016
 June 30, 2018 June 30, 2017 June 30, 2018
 June 30, 2017
 ($ in millions) ($ in millions) ($ in millions) ($ in millions)
Reinsurance $17.2
 $20.1
 $71.0
 $52.1
 $31.5
 $32.6
 $38.9
 $53.8
Insurance 0.7
 15.3
 21.8
 26.1
 11.0
 16.1
 41.3
 21.1
Total losses and loss expense reserves reductions $17.9
 $35.4
 $92.8
 $78.2
 $42.5
 $48.7
 $80.2
 $74.9


The key elements which gave rise to the net favorable development during the three months ended SeptemberJune 30, 20172018 were as follows:
Reinsurance. Net reserve releases were $17.2$31.5 million in the current quarter as a result of favorable development across all business lines, the most significant of which was from specialtyin property reinsurance and other property reinsurance lines.
Insurance. Net reserve releases were $0.7$11.0 million in the current quarter mainly as a result of favorable development acrossin property and casualty and marine, aviation and energy business lines offsetting adverse development from the management liability account within ourstrengthening in financial and professional business line and strengthening in our property and casualty lines due to increases in loss reserves associated with the purchase of an adverse development cover.lines.
The key elements which gave rise to the net favorable development during the ninesix months ended SeptemberJune 30, 20172018 were as follows:
Reinsurance. Net reserve releases were $71.0$38.9 million in the period as a result of favorable development in property reinsurance, other property reinsurance and specialty reinsurance lines.
Insurance. Net reserve releases were $41.3 million in the period mainly as a result of favorable development across ourin property catastrophe and other property reinsurance lines. The specialty reinsurance business lines reported favorable developmentcasualty and the recognition of additional prior year ceded recoveries in respect of an offshore energy-related loss that occurred in Africa. The casualty reinsurance business line reported a net reserve release due to favorable development despite our exposure to the Ogden rate change from reinsurance of U.K. employer’s liability and U.K. public liability business and, to a lesser degree, U.K. motor liability reinsurance.
Insurance. Net reserve releases were $21.8 million in the period mainly as a result of favorable development and the recognition of additional prior year ceded recoveries in our marine, aviation and energy business line in respect of an offshore energy-related loss that occurred in Africa,lines offsetting strengthening in property and casualty lines was due to adverse development in our casualty lines due to the change in the Ogden rate which impacted our U.K. employer’s liability and U.K. public liability business and increases in loss reserves associated with the purchase of an adverse development cover. Financialfinancial and professional lines reported a small increase in prior year reserves due to adverse development in the management liability account.lines.
For a more detailed description see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reserves for Losses and Loss Adjustment Expenses” included in our 20162017 Annual Report on Form 10-K filed with the SEC.

Capital Management
The following table shows our capital structure as at SeptemberJune 30, 20172018 compared to December 31, 2016:2017:
  As at September 30, 2017 As at December 31, 2016
  ($ in millions)
Share capital, additional paid-in capital, retained income and accumulated other comprehensive income attributable to ordinary shareholders $2,651.0
 $2,851.2
Preference shares (liquidation preferences net of issue costs) 511.9
 797.1
Long-term debt 549.4
 549.3
Loan Notes issued by Silverton(1)
 103.9
 223.4
Total capital $3,816.2
 $4,421.0
(1) We do not consider the Loan Notes issued by Silverton to be part of our permanent capital as the noteholders have no recourse to the other assets of the Company.
  As at June 30, 2018 As at December 31, 2017
  ($ in millions)
Share capital, additional paid-in capital, retained income and accumulated other comprehensive income attributable to ordinary shareholders $2,316.1
 $2,416.6
Preference shares (liquidation preferences net of issue costs) 511.9
 511.9
Long-term debt 424.6
 549.5
Loan Notes issued by Silverton(1)
 25.3
 86.6
Total capital $3,277.9
 $3,564.6


(1)
We do not consider the Loan Notes issued by Silverton to be part of our permanent capital as the noteholders have no recourse to the other assets of the Company.
As at SeptemberJune 30, 2017,2018, total shareholders’ equity was $3,162.9$2,828.0 million compared to $3,648.3$2,928.5 million as at December 31, 2016.2017. Our total shareholders’ equity as at SeptemberJune 30, 20172018 included two classes of preference shares with a total value as measured by their respective liquidation preferences of $511.9 million net of share issuance costs (December 31, 20162017 — $797.1$511.9 million, fourtwo classes of preference shares).
On January 3, 2017, we elected to redeem all of the outstanding 7.401% Perpetual Non-Cumulative Preference Shares (the “7.401% Preference Shares”). Each holder of a 7.401% Preference Share received $25 per 7.401% Preference Share, plus any declared and unpaid dividends.
On February 8, 2017, we replaced our existingthe Board of Directors approved a share repurchase authorization with a new authorizationprogram of $250 million. The share repurchase authorization, which is effective through February 8, 2019, permits us to effect repurchases from time to time through a combination of transactions, including open market repurchases, privately negotiated transactions and accelerated share repurchase transactions.
On April 26, 2017, we announced a 9% increase in our quarterly dividend to our ordinary shareholders from $0.22 per ordinary share to $0.24 per ordinary share. On April 21, 2016, we announced a 5% increase in our quarterly dividend to our ordinary shareholders from $0.21 per ordinary share to $0.22 per ordinary share.
On July 3, 2017, we elected to mandatorily redeem all of the outstanding 7.250% Perpetual Non-Cumulative Preference Shares (the “7.250% Preference Shares”). Each holder of a 7.250% Preference Share received $25 per 7.250% Preference Share, plus any declared and unpaid dividends.
Our preference shares are classified in our balance sheet as equity but may receive a different treatment in some cases under the capital adequacy assessments made by certain rating agencies. Preference shares are often referred to as “hybrids” because they have certain attributes of both debt and equity. We monitor the ratio of the total of debt and hybrids to total capital, with total capital being defined as shareholders’ equity plus outstanding debt and excluding Loan Notes issued by Silverton. As at SeptemberJune 30, 2017,2018, this ratio was 28.6%28.8% (December 31, 20162017 — 32.1%30.5%).
Our senior notes are the only material debt issued by Aspen Holdings currently outstanding. As at SeptemberJune 30, 20172018 and December 31, 2016,2017, the value of the debt less amortization expenses was $549.4$424.6 million and $549.3$549.5 million, respectively. The reduction in debt was due to the redemption of $125.0 million of our senior notes on June 18, 2018. The redemption resulted in a realized loss, or make-whole payment of $8.6 million. Management monitors the ratio of debt to total capital which was 14.8%13.1% as at SeptemberJune 30, 20172018 (December 31, 20162017 — 13.1%15.8%).


In addition, we have also reported Loan Notes issued by Silverton. The fair value of the Loan Notes issued by Silverton as at SeptemberJune 30, 20172018 was $103.9$25.3 million (December 31, 20162017 — $223.4$86.6 million). For further information relating to Silverton, refer to Note 7 of the “Notes to the Audited Consolidated Financial Statements” in the Company’s 20162017 Annual Report on Form 10-K filed with the SEC and Note 7 of the unaudited condensed consolidated financial statements contained in this report.
Access to Capital. Our business operations are in part dependent on our financial strength and the market’s perception thereof, as measured by total shareholders’ equity, which was $3,162.9$2,828.0 million as at SeptemberJune 30, 20172018 (December 31, 20162017 — $3,648.3$2,928.5 million). We believe our financial strength provides us with the flexibility and capacity to obtain funds through debt or equity financing. Our continuing ability to access the capital markets is dependent on, among other things, our operating results, market conditions and our perceived financial strength. We regularly monitor our capital and financial position, as well as investment and securities market conditions, both in general and with respect to Aspen Holdings’ securities. Our ordinary shares and preference shares are listed on the New York Stock Exchange.


Liquidity
Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet short-term and long-term cash requirements of its business operations. Management monitors the liquidity of Aspen Holdings and of each of its Operating Subsidiaries and arranges credit facilities to enhance short-term liquidity resources on a stand-by basis.
Holding Company. We monitor the ability of Aspen Holdings to service debt, finance dividend payments to ordinary and preference shareholders and provide financial support to the Operating Subsidiaries. As at SeptemberJune 30, 2017,2018, Aspen Holdings held $115.2$112.4 million of cash, cash equivalents and investments (December 31, 20162017 — $327.1$111.4 million) with the reduction largely due to the costs associated with the redemption of the 7.401% Preference Shares on January 3, 2017 and the redemption of the 7.250% Preference Shares on July 3, 2017.. Management considers the current cash, cash equivalents and investments taken together with dividends declared or expected to be declared by subsidiary companies and our credit facilities to be sufficient to appropriately satisfy the liquidity requirements of Aspen Holdings. Aspen Holdings’ liquidity depends on dividends, capital distributions and interest payments from our Operating Subsidiaries. Aspen Holdings also has recourse to the credit facility described under “Letter of Credit Facilities” below.
The ability of our Operating Subsidiaries to pay us dividends or other distributions is subject to the laws and regulations applicable to each jurisdiction, as well as the Operating Subsidiaries’ need to maintain adequate capital requirements to maintain their insurance and reinsurance operations and their financial strength ratings issued by independent rating agencies. On October 21, 2013, and inIn line with usual market practice for regulated institutions, the Prudential Regulation Authority (the “PRA”), the


regulatory agency which oversees the prudential regulation of insurance companies in the U.K. such as Aspen U.K., previously requested that it be afforded the opportunity to provide a prior “non-objection” to all future dividend payments made by Aspen U.K. In 2017, the PRA stated that they no longer routinely require Aspen U.K. to apply for a non-objection to dividends provided such dividend payment and Aspen U.K.’s resulting capital position are within Aspen U.K.’s board-approved solvency capital risk appetite.
For a further discussion of the various restrictions on our ability and our Operating Subsidiaries’ ability to pay dividends, see Part I, Item 1 “Business — Regulatory Matters” in our 20162017 Annual Report on Form 10-K filed with the SEC. For a more detailed discussion of our Operating Subsidiaries’ ability to pay dividends, see Note 15 of the “Notes to the Audited Consolidated Financial Statements” in our 20162017 Annual Report on Form 10-K filed with the SEC.
Operating Subsidiaries. As at SeptemberJune 30, 2017,2018, the Operating Subsidiaries held $1,005.9$903.7 million (December 31, 20162017 — $1,409.3$821.7 million) in cash and short-term investments that are readily realizable securities. Management monitors the value, currency and duration of cash and investments held by the Operating Subsidiaries to ensure that they are able to meet their insurance and other liabilities as they become due and was satisfied that there was a comfortable margin of liquidity as at SeptemberJune 30, 20172018 and for the foreseeable future.
On an ongoing basis, our Operating Subsidiaries’ sources of funds primarily consist of premiums written, investment income and proceeds from sales and redemptions of investments. Cash is used primarily to pay reinsurance premiums, losses and loss adjustment expenses, brokerage commissions, general and administrative expenses, taxes, interest and dividends and to purchase new investments. The potential for individual large claims and for accumulations of claims from single events means that substantial and unpredictable payments may need to be made within relatively short periods of time.
We manage these risks by making regular forecasts of the timing and amount of expected cash outflows and ensuring that we maintain sufficient balances in cash and short-term investments to meet these estimates. Notwithstanding this policy, if our cash flow forecast is incorrect, we could be forced to liquidate investments prior to maturity, potentially at a significant loss. Historically, we have not had to liquidate investments at a significant loss to maintain sufficient levels of liquidity.
The liquidity of our Operating Subsidiaries is also affected by the terms of our contractual obligations to policyholders and by undertakings to certain regulatory authorities to facilitate the issue of letters of credit or maintain certain balances in trust funds for the benefit of policyholders. For more information on these arrangements, including a table showing the forms of collateral or other security provided in respect of these obligations and undertakings, see Note 19(a) of the “Notes to the Audited Consolidated Financial Statements” in our 20162017 Annual Report on Form 10-K filed with the SEC.
Consolidated Cash Flows for the NineSix Months Ended SeptemberJune 30, 2017.2018. Total net cash flow generated fromused in operations for the ninesix months ended SeptemberJune 30, 20172018 was $47.8$195.4 million, a $332.0$90.9 million reductionincrease from the cash flow used in the comparative period in 2016.2017. The reductionincrease in cash flow is mainly attributable to increases in ceded reinsurance activities and an increase in paid claims. For the ninesix months ended SeptemberJune 30, 2017,2018, the cash flow used in operations required funds to be realized from operations had no adverse effect on the sufficiency of liquidity to meet our operating requirements.investment portfolio.
Letter of Credit Facilities. For information relating to our credit facilities, refer to Note 16 of the unaudited condensed consolidated financial statements contained in this report.


Contractual Obligations and Commitments
The following table summarizes our contractual obligations under long-term debt, operating leases (net of subleases) and reserves relating to insurance and reinsurance contracts as at SeptemberJune 30, 2017:2018:
2017 2018 2019 2020 2021 Later
Years		 Total2018 2019 2020 2021 2022 Later
Years		 Total
($ in millions)($ in millions)
Operating Lease Obligations$9.8
 $16.2
 $15.6
 $14.7
 $10.0
 $80.8
 $147.1
$9.1
 $15.9
 $15.4
 $10.9
 $8.9
 $74.6
 $134.8
Long-Term Debt Obligations(1)
—
 —
 —
 250.0
 —
 300.0
 550.0
—
 —
 125.0
 —
 —
 300.0
 425.0
Reserves for losses and LAE(2)
464.3
 1,683.0
 1,196.2
 756.0
 464.5
 1,926.6
 6,490.6
1,206.7
 1,747.8
 975.5
 632.7
 421.3
 1,548.8
 6,532.8
Total$474.1
 $1,699.2
 $1,211.8
 $1,020.7
 $474.5
 $2,307.4
 $7,187.7
$1,215.8
 $1,763.7
 $1,115.9
 $643.6
 $430.2
 $1,923.4
 $7,092.6

(1) 
The long-term debt obligations disclosed above do not include $29.0$21.5 million of annual interest payments on our outstanding senior notes or dividends payable to holders of our preference shares or the Loan Notes issued by Silverton in the amount of $103.9$25.3 million.
(2) 
In estimating the time intervals into which payments of our reserves for losses and loss adjustment expenses fall, as set out above, we utilized actuarially assessed payment patterns. By the nature of the insurance and reinsurance contracts under which these liabilities are assumed, there can be no certainty that actual payments will fall in the periods shown above and there could be a material acceleration or deceleration of claims payments depending on factors outside our control. The total amount of payments in respect of our reserves, as well as the timing of such payments, may differ materially from our current estimates for the reasons set out in our 20162017 Annual Report on Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Reserves for Losses and Loss Expenses” filed with the SEC and due to the factors set out in this report under “Cautionary Statement Regarding Forward-Looking Statements” below.
Further information on operating leases is given in Item 2, “Properties” in our 20162017 Annual Report on Form 10-K filed with the SEC.
For a discussion of our derivative instruments, refer to Note 10 to our unaudited condensed consolidated financial statements included in this report.
Effects of Inflation
Inflation may have a material effect on our consolidated results of operations by its effect on interest rates and on the cost of settling claims. The potential exists, after a catastrophe or other large property loss, for the development of inflationary pressures in a local economy as the demand for services such as construction typically surges. The cost of settling claims may also be increased by global commodity price inflation. We seek to take both these factors into account when setting reserves for any events where we think they may be material.
Our calculation of reserves for losses and loss expenses in respect of casualty business includes assumptions about future payments for settlement of claims and claims-handling expenses, such as medical treatments and litigation costs. We write casualty business in the United States, the United Kingdom and Australia and certain other territories, where claims inflation has in many years run at higher rates than general inflation. To the extent inflation causes these costs to increase above reserves established for these claims, we will be required to increase our loss reserves with a corresponding reduction in earnings. The actual effects of inflation on our results cannot be accurately known until claims are ultimately settled.
In addition to general price inflation we are exposed to a persisting long-term upwards trend in the cost of judicial awards for damages. We seek to take this into account in our pricing and reserving of casualty business.
We also seek to take into account the projected impact of inflation on the likely actions of central banks in the setting of short-term interest rates and consequent effects on the yields and prices of fixed income securities. As at SeptemberJune 30, 2017,2018, we consider that although inflation is currently low, in the medium-term there is a risk that inflation, interest rates and bond yields may rise, resulting in a decrease in the market value of certain of our fixed interest investments.


Cautionary Statement Regarding Forward-Looking Statements
This report contains written and we may from time to time make other verbal, 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”), that involve risks and uncertainties, including statements regardingreflect our capital needs, business strategy, expectations and intentions.current views with respect to future events. Statements that use the terms “believe,” “do not believe,” “anticipate,” “expect,” “assume,” “objective,” “target,” “could,” “would,” “should,” “plan,” “estimate,” “project,” “outlook,” “trends,” “future,” “seek,” “will,” “may,” “aim,” “likely,” “continue,” “intend,” “guidance,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “on track,” and similar expressions of a future or forward-looking nature are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and because our business is subject to numerous risks, uncertainties and other factors, our actual results could differ materially from those anticipated in the forward-looking statements. The risks, uncertainties and other factors set forth in our 2016 Annual Report on Form 10-K filed with the SEC and other cautionary statements made in this report, including in Part II, Item 1A “Risk Factors” below, as well as the factors set forth below, should be read and understood as being applicable to all relatedWe intend these forward-looking statements wherever they appear in this report.to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
All forward-looking statements rely on a number of assumptions, estimates and data concerning future results and events and are subject to a number of risks, uncertainties, assumptions and other factors, many of which are outside ourAspen's control, that could cause actual results to differ materially from such statements.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicatedanticipated in thesethe forward-looking statements. We believe that these factors include, but are not limited to, those set forth under “Risk Factors” in Item 1A of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the quartersyear ended MarchDecember 31, 2017 and June 30, 2017 as filed with the United States SECSecurities and Exchange Commission, including, but not limited to, the following:
the actual development of losses and expenses impacting estimates for Hurricanes Harvey, Irma and Maria, wildfires in California and the earthquakes in Mexico that occurred in the third quarter of 2017;
the impact of complex and unique causation and coverage issues associated with the attribution of losses to wind or flood damage or other perils such as fire or business interruption relating to such events;
potential uncertainties relating to reinsurance recoveries, reinstatement premiums and other factors inherent in loss estimation;
the reliability of, and changes in assumptions to, natural and man-made catastrophe pricing, accumulation and estimated loss models;
our ability to implement successfully develop and execute our operating effectiveness and efficiency initiative to optimize processes and support future growth;program;
our ability to successfully implement steps to further optimize the business portfolio, ensure capital efficiency and enhance investment returns;
the possibility of greater frequency or severity of claims and loss activity, including as a result of natural or man-made (including economic and political risks) catastrophic or material loss events, than our underwriting, reserving, reinsurance purchasing or investment practices have anticipated;
the assumptions and uncertainties underlying reserve levels that may be impacted by future payments for settlements of claims and expenses or by other factors causing adverse or favorable development, including our assumptions on inflation costs associated with long-tail casualty business which could differ materially from actual experience;
the political, regulatory and economic effects arisingUnited Kingdom’s decision to withdraw from the vote by the U.K. electorateEuropean Union;
a decline in favorour Operating Subsidiaries’ ratings with S&P, A.M. Best or Moody’s;
loss of a U.K. exit from the E.U. in the referendum held in June 2016 and resulting negotiations;one or more of our senior underwriters or key personnel;
the reliability of, and changes in assumptions to, natural and man-made catastrophe pricing, accumulation and estimated loss models;
decreased demand for our insurance or reinsurance products;
cyclical changes in the insurance and reinsurance industry;
the models we use to assess our exposure to losses from future natural catastrophes ("catastrophes"(“catastrophes”) contain inherent uncertainties and our actual losses may differ significantly from expectations;
our capital models may provide materially different indications than actual results;
increased competition from existing (re)insurers and from alternative capital providers and insurance-linked funds and collateralized special purpose insurers on the basis of pricing, capacity, coverage terms, new capital, binding authorities to brokers or other factors and the related demand and supply dynamics as contracts come up for renewal;
our ability to execute our business plan to enter new markets, introduce new products and teams and develop new distribution channels, including their integration into our existing operations;

our acquisition strategy;

our acquisition strategy;
changes in market conditions in the agriculture industry, which may vary depending upon demand for agricultural products, weather, commodity prices, natural disasters, and changes in legislation and policies related to agricultural products and producers;
termination of, or changes in, the terms of the U.S. Federal Multiple Peril Crop Insurance Program or the U.S. Farm Bill, including modifications to the Standard Reinsurance Agreement put in place by the Risk Management Agency of the U.S. Department of Agriculture;
the recent consolidation in the insurance and reinsurance industry;
loss of one or more of our senior underwriters or key personnel;
our ability to exercise capital management initiatives, including capital available to pursue our share repurchase program at various levels or to declare dividends, or to arrange banking facilities as a result of prevailing market conditions, the level of catastrophes or other losses or changes in our financial results;
changes in general economic conditions, including inflation, deflation, foreign currency exchange rates, interest rates and other factors that could affect our financial results;
the risk of a material decline in the value or liquidity of all or parts of our investment portfolio;
the risks associated with the management of capital on behalf of investors;
a failure in our operational systems or infrastructure or those of third parties, including those caused by security breaches or cyber attacks;attacks, or data protection failures;
evolving issues with respect to interpretation of coverage after major loss events;
our ability to adequately model and price the effects of climate cycles and climate change;
any intervening legislative or governmental action and changing judicial interpretation and judgments on insurers’ liability to various risks;
the risks related to litigation;
the effectiveness of our risk management loss limitation methods, including our reinsurance purchasing;
changes in the availability, cost or quality of reinsurance or retrocessional coverage;
changes in the total industry losses or our share of total industry losses resulting from events, such as catastrophes, that have occurred in prior years or may occur and, with respect to such events, our reliance on loss reports received from cedants and loss adjustors, our reliance on industry loss estimates and those generated by modeling techniques, changes in rulings on flood damage or other exclusions as a result of prevailing lawsuits and case law;
the impact of one or more large losses from events other than natural catastrophes or by an unexpected accumulation of attritional losses and deterioration in loss estimates;
the impact of acts of terrorism, acts of war and related legislation;
any changes in our reinsurers’ credit quality and the amount and timing of reinsurance recoverables;
the continuing and uncertain impact of the current depressed lower growth economic environment in many of the countries in which we operate;
our reliance on information and technology and third-party service providers for our operations and systems;
the level of inflation in repair costs due to limited availability of labor and materials after catastrophes;
a decline in our Operating Subsidiaries’ ratings with S&P, A.M. Best or Moody’s;
the failure of our reinsurers, policyholders, brokers or other intermediaries to honor their payment obligations;
our reliance on the assessment and pricing of individual risks by third parties;
our dependence on a few brokers for a large portion of our revenues;
the persistence of heightened financial risks, including excess sovereign debt and risks in the banking system and the Eurozone crisis;system;
changes in government regulations or tax laws in jurisdictions where we conduct business;
changes in accounting principles or policies or in the application of such accounting principles or policies;
increased counterparty risk due to the credit impairment of financial institutions; and
Aspen Holdings or Aspen Bermuda becoming subject to income taxes in the United States or the United Kingdom.


In addition, any estimates relating to loss events involve the exercise of considerable judgment in the setting of reserves and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market intelligence, initial tentative loss reports and other sources. The actuarial range of reserves provided, if any, is based on our then current state of knowledge and explicit and implicit assumptions relating to the incurred pattern of claims, the expected ultimate settlement amount, inflation, and dependencies between lines of business. Due to the complexity of factors contributing to losses and the preliminary nature of the information used to prepare estimates, there can be no assurance that our ultimate losses will remain within stated amounts.
Furthermore, seismic events, such as the Mexico earthquakes, generally have longer development periods than windstorm events, which may be amplified in this instance by dynamics such as the risk of geological liquefaction and the potential for uncertainty in claims adjudication. In respect of Hurricane Maria, recovery efforts are ongoing, with power outages, infrastructure damage, communications disruptions and other issues complicating loss mitigation and estimation. Accordingly, our actual net negative impact from all events noted above, both individually and in the aggregate, will vary from these preliminary estimates, perhaps materially.
The rate changes described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Outlook and Trends” reflect management’s assessment of changes in exposure-adjusted rates on renewals only. This does not include contracts with fundamental changes to terms and conditions. The calculation involves a degree of judgment in relation to comparability of contracts in the different business lines. Due to changes in assumptions underlying the pricing of contracts, the trends in premium rates reflected in our outlook and trends may not be comparable over time. The future profitability of each business line is dependent upon many factors besides the trends in premium rates.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, or to disclose any difference between our actual results and those reflected in such statements.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. All forward-looking statements in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by the points made above. You should specifically consider the factors identified in this report which could cause actual results to differ before making an investment decision.



Reconciliation of Non-U.S. GAAP Financial Measures
Adjusted diluted book value per ordinary share, a non-U.S. GAAP measure, is calculated by deducting from total shareholders’ equity the total of: accumulated other comprehensive income; the value of preference shares less issue expenses; the share of equity due to non-controlling interests; and adding back ordinary dividends. The resulting balance is then divided by the diluted number of ordinary shares as at the year end. We believe that adding back ordinary dividends provides a more consistent and useful measurement of total shareholder value, which supplements U.S. GAAP information. We have excluded accumulated other comprehensive income, net of taxes, as unrealized appreciation (depreciation) on investments is primarily the result of interest rate movements and the resultant impact on fixed income securities, and unrealized appreciation (depreciation) on foreign exchange is the result of exchange rate movements between the U.S. Dollar and the functional currencies of our Operating Subsidiaries. Therefore, we believe that excluding these unrealized appreciations (depreciations) provides a more consistent and useful measurement of operating performance, which supplements U.S. GAAP information.
  As at September 30, 2017 As at December 31, 2016
  ($ in millions, except for share amounts)
Total shareholders’ equity $3,162.9
 $3,648.3
Accumulated other comprehensive income, net of taxes 25.3
 5.1
Preference shares less issue expenses (511.9) (797.1)
Non-controlling interest (2.2) (1.4)
Ordinary dividends 42.0
 52.7
Adjusted total shareholders’ equity $2,716.1
 $2,907.6
     
Ordinary shares 59,407,323
 59,774,464
Diluted ordinary shares 60,200,021
 61,001,071
     
Book Value Per Share    
Basic $44.59
 $48.79
Diluted $44.00
 $47.89
Adjusted Diluted $45.12
 $47.67
Average equity, a non-U.S. GAAP financial measure, is used in calculating ordinary shareholdersshareholders’ return on average equity. ItAverage equity is calculated by taking the arithmetic average of total shareholders’ equity on a monthly basis for the stated periods excluding (i) the average share of equity due to non-controlling interests and (ii) the average value of preference shares less issue expenses.
 As at September 30, 2017 As at December 31, 2016 As at June 30, 2018 As at December 31, 2017
 ($ in millions) ($ in millions)
Total shareholders' equity $3,162.9
 $3,648.3
 $2,828.0
 $2,928.5
Total non-controlling interest (2.2) (1.4) (3.0) (2.7)
Total preference shares (511.9) (797.1) (511.9) (511.9)
Average adjustment 190.7
 144.2
 15.5
 386.0
Average equity $2,839.5
 $2,994.0
 $2,328.6
 $2,799.9

Operating income, a non-U.S. GAAP financial measure, is an internal performance measure used by us in the management of our operations andoperations. It represents after-tax operational results excluding, as applicable, after-taxafter-tax: net realized and unrealized gains or losses includingon investments, net realized and unrealized gains and losses on interest rate swaps, after-tax net foreign exchange gains or losses, including net realizedchanges to the fair value of derivatives and unrealized gains and losses from foreign exchange contracts, net realized gains or losses on investments, amortization of intangible assets and certainother non-recurring income or expenses. We exclude after-tax net realized and unrealized capital gains or losses, after-tax net foreign exchange gains or losses and changes in the fair value of derivativesthese amounts from our calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. We believe these amounts are largely independent of our business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with U.S. GAAP, we believe that showing operating income enables investors, analysts, rating agencies and other users of our


financial information to more easily analyze our results of operations in a manner similar to how management analyzes our underlying business performance. Operating income should not be viewed as a substitute for U.S. GAAP net income.
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 ($ in millions) ($ in millions)
Net (loss) income $(81.5) $274.9
Net income $16.1
 $172.3
Add (deduct) after tax income:        
Net realized and unrealized investment (gains) (121.5) (92.3)
Net realized and unrealized investment losses/(gains) 58.1
 (101.7)
Net realized and unrealized exchange (gains)/losses (2.5) 10.7
 (0.5) 8.1
Changes to the fair value of derivatives 19.7
 (5.8) 17.7
 16.5
Realized loss on the debt extinguishment 8.6
 —
Amortization and other non-recurring expenses 8.2
 5.8
 19.3
 3.8
Proportion due to non-controlling interest (0.8) —
 (0.3) (0.2)
Operating (loss) income after tax and non-controlling interest (178.4) 193.3
Preference Shares dividends (28.7) (28.4)
Net (loss) income available to ordinary shareholders $(207.1) $164.9
Operating income after tax and non-controlling interest 119.0
 98.8
Preference shares dividends (15.2) (21.0)
Net income available to ordinary shareholders $103.8
 $77.8


 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
We believe we are principally exposed to fourthree types of market risk: interest rate risk, equity risk, foreign currency risk and credit risk.
Interest rates risk. Our investment portfolio consists primarily of fixed income securities. Accordingly, our primary market risk exposure is to changes in interest rates. Fluctuations in interest rates have a direct impact on the market valuation of these securities. As interest rates rise, the market value of our fixed income portfolio falls, and the converse is also true. We manage interest rate risk by maintaining a short to medium duration portfolio to reduce the effect of interest rate changes on book value. On May 9, 2016, we terminated our interest rate swap program which aimed to partially mitigate our exposure to interest rate. For more information on the terminated interest rate swaps, refer to Item 2 “Cash and Investments — Interest rate swaps” above.
As at SeptemberJune 30, 2017,2018, our fixed income portfolio (including cash and accrued interest within the managed portfolios) had an approximate duration of 3.913.88 years. The table below depicts interest rates change scenarios and the effects on our interest rate sensitive invested assets:
Effect of Changes in Interest Rates on Portfolio Given a Parallel Shift in the Yield Curve
Movement in Rates in Basis Points -100 -50 — 50 100
  ($ in millions, except percentages)
Market value 7,608.2
 7,465.0
 7,321.9
 7,178.7
 7,035.6
Gain/(loss) 286.3
 143.1
 —
 (143.1) (286.3)
Percentage of portfolio 3.9% 2.0% —% (2.0)% (3.9)%
Equity risk. We have invested in equity securities which had a fair market value of $468.6 million, equivalent to 5.4% of the total of investments, cash and cash equivalents, excluding catastrophe bonds and funds held by variable interest entities (the “Managed Portfolio”), as at September 30, 2017 (December 31, 2016 — $584.7 million, 6.8%). These equity investments are exposed to equity price risk, defined as the potential for loss in market value due to a decline in equity prices. We believe that the effects of diversification and the relatively small size of our investments in equities relative to total invested assets mitigate our exposure to equity price risk.
Effect of Changes in Interest Rates on Portfolio Given a Parallel Shift in the Yield Curve
Movement in Rates in Basis Points -100 -50 — 50 100
  ($ in millions, except percentages)
Market value 7,304.1
 7,167.6
 7,031.2
 6,894.8
 6,758.4
Gain/(loss) 272.8
 136.4
 —
 (136.4) (272.8)
Percentage of portfolio 3.9% 1.9% —% (1.9)% (3.9)%
Foreign currency risk. Our reporting currency is the U.S. Dollar. The functional currencies of our operations include U.S. Dollars, British Pounds, Euros, Canadian Dollars, Swiss Francs, Australian Dollars and Singaporean Dollars. As at SeptemberJune 30, 2017, 88.7%2018, 88.6% (December 31, 20162017 — 89.3%88.5%) of our cash, cash equivalents and investments were held in U.S. Dollars, 5.6%5.2% (December 31, 20162017 — 4.7%5.7%) were in British Pounds and 5.7%6.2% (December 31, 20162017 — 6.0%5.9%) were in other currencies. For the ninesix months ended SeptemberJune 30, 2017, 17.2%2018, 18.1% (December 31, 20162017 — 17.0%17.3%) of our gross premiums were written in currencies other than the U.S. Dollar and the British Pound and we expect that a similar proportion will be written in currencies other than the U.S. Dollar and the British Pound in the remainder of 2017.2018.
Other foreign currency amounts are re-measured to the appropriate functional currency and the resulting foreign exchange gains or losses are reflected in the statement of operations. Functional currency amounts of assets and liabilities are then translated into U.S. Dollars. The unrealized gain or loss from this translation, net of tax, is recorded as part of shareholders’ equity. The change in unrealized foreign currency translation gain or loss during the period, net of tax, is a component of comprehensive income. Both the re-measurement and translation are calculated using appropriate historic or current exchange rates for the balance sheets and average exchange rates for the statement of operations. We may experience exchange losses to the extent our foreign currency exposure is not properly managed or otherwise hedged, which in turn would adversely affect our results of operations and financial condition. ManagementTaking into account the impact from foreign exchange contracts to manage foreign currency risk, management estimates that a 10% change in the exchange rate between British Pounds and U.S. Dollars as at SeptemberJune 30, 20172018 would have impacted our net reportable British Pound net assets by approximately $9.2$12.8 million for the ninesix months ended SeptemberJune 30, 2018 (December 31, 2017 (September 30, 2016 — approximately $12.7$3.6 million).
We manage our foreign currency risk by seeking to match our liabilities under insurance and reinsurance policies that are payable in foreign currencies with investments that are denominated in these currencies. This may involve the use of foreign exchange contracts from time to time. A foreign exchange contract involves an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Foreign exchange contracts will not eliminate fluctuations in the value of our assets and liabilities denominated in foreign currencies, but rather allow us to establish a rate of exchange for a future point in time. For a discussion of our derivative instruments including foreign exchange contracts, refer to Note 10 to our unaudited condensed consolidated financial statements included in this report.
Credit risk. We have exposure to credit risk primarily as a holder of fixed income securities. Our risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories, business sectors and any one issuer. As at SeptemberJune 30, 2017,2018, the average rating of fixed income securities in our investment portfolio was “AA-” (December 31, 20162017 — “AA-”).


In addition, we are exposed to the credit risk of our insurance and reinsurance brokers to whom we make claims payments for our policyholders, as well as to the credit risk of our reinsurers and retrocessionaires who assume business from us. Other than fully collateralized reinsurance, the substantial majority of our reinsurers have a rating of “A” (Excellent), the third highest of fifteen rating levels, or better by A.M. Best and the minimum rating of any of our material reinsurers is “A-” (Excellent), the fourth highest of fifteen rating levels, by A.M. Best.


Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the design and operation of the Company’s disclosure controls and procedures as of the end of the period of this report. Our management does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. As a result of the inherent limitations in a cost-effective control system, misstatement due to error or fraud may occur and not be detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the disclosure requirements are met. Based on the evaluation of the disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed in the reports filed or submitted to the SEC under the Exchange Act by the Company is recorded, processed, summarized and reported in a timely fashion, and is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the Company’s internal control over financial reporting that occurred during the three and ninesix months ended SeptemberJune 30, 2017.2018. Based upon that evaluation, the Company’s management is not aware of any change in its internal control over financial reporting that occurred during the three and ninesix months ended SeptemberJune 30, 20172018 that has materially affected, or is reasonably likely to materially affect, the effectiveness of the Company’s internal control over financial reporting. In 2016, the scope of our assessment of the effectiveness of our internal control over financial reporting did not include the internal control over financial reporting at AgriLogic due to the size of the acquired company and the date of acquisition, January 19, 2016. Beginning in 2017, AgriLogic has been included in the scope of our assessment of the effectiveness of our internal control over financial reporting.


PART II
OTHER INFORMATION 
Item 1. Legal Proceedings
Similar to the rest of the insurance and reinsurance industry, we are subject to litigation and arbitration in the ordinary course of our business. Our Operating Subsidiaries are regularly engaged in the investigation, conduct and defense of disputes, or potential disputes, resulting from questions of insurance or reinsurance coverage or claims activities. Pursuant to our insurance and reinsurance arrangements, many of these disputes are resolved by arbitration or other forms of alternative dispute resolution. In some jurisdictions, noticeably the U.S., a failure to deal with such disputes or potential disputes in an appropriate manner could result in an award of “bad faith” punitive damages against our Operating Subsidiaries. In addition, we may be subject to lawsuits and regulatory actions in the normal course of business that do not arise from, or directly relate to, insurance and reinsurance coverage or claims. This category of litigation typically involves, among other things, allegations of underwriting errors or omissions, employment claims or regulatory activity.
While any legal or arbitration proceedings contain an element of uncertainty, we do not believe that the eventual outcome of any specific litigation, arbitration or alternative dispute resolution proceedings to which we are currently a party will have a material adverse effect on the financial condition of our business as a whole.

Item 1A. Risk Factors
You should carefully consider theThere have been no significant changes to our risk factors and all other informationas set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017 as filed with the SEC and as supplemented by the following risk factors and other information in this report. These risks could materially affect our business, results of operations or financial condition.SEC. Please refer to the “Cautionary Statement Regarding Forward-Looking Statements” provided above in this report.

Our operating effectiveness and efficiency initiative aimed at optimizing our business processes is subject to execution risk, may subject our business to other risks and may not realize the intended benefits.
We have launched, and plan to continue to implement, our program to enhance operating effectiveness and efficiency and to enhance our market position (the “Program”). The Program presents potential uncertainties and risks that may impact our ability to achieve anticipated operating enhancements and/or cost reductions, or otherwise impact our business including:
our ability to successfully develop and execute the Program to create operating and cost efficiencies through focus on improving several operational levers;
charges relating to the Program being different from those initially estimated, including changes in the size and components of different aspects;
changes in the planned timing of the Program;
the result and timing of employee consultation processes and related regulations in certain jurisdictions where we operate;
disruption in our business associated with the Program and related activities;
whether the Program provides a sufficient return on our capital expenditure investment over time; and
whether new IT and data tools enable intended results.
In addition, as part of the Program we may reduce employee headcount and these actions may adversely disrupt operating activities, may negatively affect employee morale and loyalty and may make it more difficult to retain or rehire key personnel. Additionally, a lower headcount may result in a decrease in gross written premiums across particular insurance and reinsurance lines due to lower production in our accounts.
If we are not successful in developing and executing the Program, we may not be able to achieve targeted expense savings within the expected time frame, which could adversely impact our business, results of operations and financial condition. Our failure to achieve targeted operating enhancements and/or cost reductions could also result in the implementation of additional restructuring related activities, which may be dilutive to our earnings in the short term. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Outlook and Trends.”
Changes in U.S. federal income tax law or the manner in which it is interpreted could materially adversely affect the non-U.S. insurance industry and our results of operations.
Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have legal domiciles outside the United States but have certain U.S. connections. It is possible that legislation could be introduced in and enacted by the current Congress or future Congresses that could have an adverse impact on us. For example, legislation based on the Tax Reform Task Force Blueprint dated June 24, 2016, which recommends moving to a consumption or destination-based tax system and provides for border adjustments taxing imports to raise revenue to offset


lost revenue from a reduction in the U.S. corporate income tax rate to 20 percent, may be introduced and enacted. The application of a destination-based tax with border adjustments to the cross-border insurance and reinsurance markets would be complex, and the manner in which it would be implemented and enforced is uncertain. If a destination-based tax with border adjustments is enacted and made applicable to across-border insurance and reinsurance, its impact on the insurance industry may adversely impact the results of our operations.
In April 2017, the Trump Administration released a statement of principles relating to personal and corporate tax reform. In respect of business taxation, the principles document called for, among other things, the adoption of a 15% business tax rate, the imposition of a territorial U.S. tax system, a one-time tax on U.S. assets held in other jurisdictions, and the elimination of tax breaks for special interests. The principles document did not address the border adjustment proposals reflected in the Tax Reform Task Force Blueprint.
There are many other comprehensive tax reform proposals being discussed in Congress and by the Trump Administration. For example, it is possible that past proposals could return that would limit or deny U.S. insurers and reinsurers the deduction for reinsurance placed with non-U.S. affiliates. Such changes, if adopted, could increase taxation of certain activities and structures in our industry. Tax reform proposals, including those being discussed among members of Congress and the Trump Administration at the time of this report, may be announced in the fourth quarter of 2017 although such proposals remain subject to significant uncertainty as to their final form or if they will be adopted. Accordingly, material uncertainty remains as to the possibility, terms, likelihood and timing of any U.S. tax law change. In addition, existing interpretations of U.S. federal income tax laws could change also resulting in an adverse impact on us.
A failure in our operational systems or infrastructure or those of third parties, including those caused by security breaches, cyber-attacks or data protection failures, could disrupt our business, damage our reputation and causes losses.
Our operations rely on the secure processing, storage, and transmission of confidential and other information and assets, including in our computer systems and networks. Our business, including our ability to adequately price products and services, establish reserves, provide an effective and secure service to our customers, value our investments and report our financial results in a timely and accurate manner, depends significantly on the integrity, availability and timeliness of the data we maintain, as well as the data and assets held through third party outsourcers, service providers and systems.
In an effort to ensure the integrity of such data, we implement new security measures and systems and improve or upgrade our existing security measures and systems on a continuing basis. Although we have implemented administrative and technical controls and take protective actions to reduce the risk of cyber incidents and to protect our information technology and assets, and we endeavor to modify such procedures as circumstances warrant and negotiate agreements with third party providers to protect our assets, such measures may be insufficient to prevent, among other things, unauthorized access, computer viruses, malware or other malicious code or cyber-attack, catastrophic events, system failures and disruptions (including in relation to new security measures and systems), employee errors or malfeasance, third party (including outsourced service providers) errors or malfeasance, loss of assets and other security events (each, a “Security Event”). Like other global companies, we have from time to time experienced, and are likely to continue to be subject to, Security Events, none of which to date have had a material adverse impact on our business, results of operations or financial condition. As the breadth and complexity of our security infrastructure continues to grow, the potential risk of a Security Event increases. If additional Security Events occur, these events may jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored with us, and transmitted through our computer systems and networks, or otherwise cause interruptions, delays, or malfunctions in our, our clients’, counterparties’ or third parties’ operations, or result in data loss or loss of assets which could result in significant losses and/or fines, reputational damage or a material adverse effect on our business, financial condition or operating results. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures and to pursue recovery of lost data or assets and we may be subject to litigation and financial losses. We currently maintain cyber liability insurance that provides third party or first party liability coverages to protect us, subject to policy limits and coverages, against certain events that could be a Security Event. However, a Security Event could nonetheless have a material adverse effect on our operating results or financial condition.
We outsource certain technology and business process functions to third parties and may increasingly do so in the future. If we do not effectively develop, implement and monitor our outsourcing strategy, third party providers do not perform as anticipated or we experience technological or other problems with a transition, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and loss of business. Our outsourcing of certain technology and business processes functions to third parties may expose us to enhanced risks related to data security, which could result in monetary and reputational damages. In addition, our ability to receive services from third party providers may be impacted by cultural differences, political instability, unanticipated regulatory requirements or policies. As a result, our ability to conduct our business may be adversely affected.
The regulatory environment surrounding information security and privacy is increasingly demanding. We are subject to numerous U.S. federal and state laws and non-U.S. regulations governing the protection of personal and confidential information of our clients or employees, including in relation to medical records, credit card data and financial information. On May 25, 2016,


the European General Data Protection Regulation (the “GDPR”) also entered into force following four years of negotiation. The GDPR repeals the Data Protection Directive (95/46/EC) and will be directly applicable in all E.U. member states from May 25, 2018. We will be subject to the GDPR when offering goods and services to E.U. based data subjects (regardless of whether involving our E.U. based subsidiary or operations). The GDPR sets out a number of requirements that must be complied with when handling the personal data of such E.U. based data subjects including: the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability; the principal of accountability and the obligation to make public notification of significant data breaches. These laws and regulations are increasing in complexity and number, change frequently and sometimes conflict. In particular, as the E.U. states reframe their national legislation to prepare for and harmonize with the GDPR, we will need to monitor compliance with all relevant E.U. member states' laws and regulations, including where permitted derogations from the GDPR are introduced.
The introduction of the GDPR, and any resultant changes in E.U. member states’ national laws and regulations, may increase our compliance obligations and may necessitate the review and implementation of policies and processes relating to our collection and use of data. This increase in compliance obligations could also lead to an increase in compliance costs which may have an adverse impact on our business, financial condition or results of operations.
If any person, including any of our employees or those with whom we share such information, negligently disregards or intentionally breaches our established controls with respect to our client or employee data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions. For example, under the GDPR there are significant new punishments for non-compliance which could result in a penalty of up to 4% of a firm’s global annual revenue. In addition, a data breach could result in negative publicity which could damage our reputation and have an adverse effect on our business, financial condition or results of operations.
On March 1, 2017, new cybersecurity rules took effect for financial institutions, insurers and certain other companies supervised by the New York Department of Financial Services (the “NYDFS Cybersecurity Regulation”). The NYDFS Cybersecurity Regulation impose significant new regulatory burdens intended to protect the confidentiality, integrity and availability of information systems.
In addition, at the NAIC Summer 2017 National Meeting, the Cybersecurity (EX) Working Group and the Innovation and Technology (EX) Task Force of the NAIC approved the Insurance Data Security Model Law (“Model Law”), which would require insurers, insurance producers and other entities required to be licensed under state insurance laws to comply with certain requirements under state insurance laws, such as developing and maintaining a written information security program, conducting risk and overseeing the data security practices of third-party vendors. The Model Law closely resembles the NYDFS Cybersecurity Regulation, and therefore we would be compliant with the Model Law if we were also compliant with the NYDFS Cybersecurity Regulation. The Model Law will be considered by the NAIC Executive Committee and, if approved, the Joint Meeting of the Executive Committee and Plenary. We cannot predict whether any such proposed laws or regulatory changes will be adopted by the NAIC or individual states, but the impact on our business, financial condition or results of operations is likely to be minimal provided that we are already compliant with the NYDFS Cybersecurity Regulation.
Despite the contingency plans and facilities we have in place and our efforts to observe the regulatory requirements surrounding information security, our ability to conduct business may be adversely affected by a disruption of the infrastructure that supports our business in the communities in which we are located, or of outsourced services or functions, including a disruption involving electrical, communications, transportation, or other services we use. If a disruption occurs in one location and our employees in that location are unable to occupy our offices and conduct business or communicate with or travel to other locations, our ability to service and interact with clients may suffer and we may not be able to successfully implement contingency plans that depend on communication or travel. If sustained or repeated, such business interruption, system failure, service denial or data loss and/or damage could result in a deterioration of our ability to write and process business, provide customer service, pay claims in a timely fashion or perform other necessary business functions.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding purchases by the Company duringDuring the quarter ended SeptemberJune 30, 20172018, the Company did not repurchase any of the Company’sits ordinary shares.


 Total
Number of
Shares (or Units)
Purchased		 Weighted
Average
Price Paid
per Share
(or Unit)		 Total
Number of
Shares (or Units)
Purchased as
Part of
Publicly Announced
Plans or
Programs		 Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) That
May Yet Be
Purchased
Under the Plans
or Programs
($ in millions)
July 1, 2017 to July 31, 2017—
 $—
 —
 $—
August 1, 2017 to August 31, 2017201,294
 $45.15
 201,294
 $—
September 1, 2017 to September 30, 2017249,974
 $43.65
 249,974
 $—
Total (1)
451,268
  $44.32
 451,268
 $220.0
(1)
During the third quarter of 2017, the Company repurchased 451,268 ordinary shares. The Company had $220.0 million remaining under its current share buyback authorization as at September 30, 2017.
Item 3. Defaults Upon Senior Securities
None. 
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
Disclosure of Certain Activities Relating to Iran
Section 13(r) of the Securities Exchange Act of 1934, as amended (“Section 13(r)”), requires all issuers that file annual or quarterly reports with the SEC to disclose certain activities, transactions or dealings with Iran. Many of the activities, transactions and dealings that Section 13(r) requires to be reported were previously subject to U.S. sanctions or prohibited by applicable local law. On January 16, 2016, the United States and the E.U. eased sanctions against Iran pursuant to the Joint Comprehensive Plan of Action, and many of the reportable activities, transactions and dealings under Section 13(r) are no longer subject to U.S. sanctions and no longer prohibited by applicable local law.
Certain of our operations located outside the United States underwrite marine and energy treaties on a worldwide basis and, as a result, the underlying insurance and reinsurance portfolios may have exposure to the Iranian petroleum resources, refined petroleum, and petrochemical industries. For example, certain of our operations underwrite global marine hull and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. We do not believe that any coverage we have provided has directly or significantly facilitated or contributed to the Iranian petroleum resources, refined petroleum, or petrochemical industry.
For the quarter ended SeptemberJune 30, 2017,2018, we are not aware of any premium apportionment with respect to underwriting insurance or reinsurance activities reportable under Section 13(r). Should any such risks have entered into the stream of commerce covered by the insurance and reinsurance portfolios underlying our treaties, we believe that the premiums associated with such business would be immaterial.




Item 6. Exhibits
(a) The following sets forth those exhibits filed pursuant to Item 601 of Regulation S-K:
Exhibit
Number
 Description
10.1
Outsourcing Agreement, dated April 20, 2018, between Aspen Insurance UK Services Limited, Aspen Insurance U.S. Services, Inc., Aspen Bermuda Limited and Genpact International, Inc. (incorporated herein by reference to exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on April 26, 2018)
10.2
International Assignment Letter, executed on June 6, 2018, between Mr. Christopher O’Kane and Aspen Insurance Holdings Limited (incorporated herein by reference to exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on June 8, 2018)
10.3
Settlement Agreement, dated May 9, 2018, between Mr. Stephen Postlewhite and Aspen Insurance UK Services Limited (incorporated herein by reference to exhibit 10.1 of the Current Report on Form 8-K/A filed with the SEC on July 5, 2018)
31.1
 
Officer Certification of Christopher O’Kane, Chief Executive Officer of Aspen Insurance Holdings Limited, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed with this report.
31.2
 
Officer Certification of Scott Kirk, Chief Financial Officer of Aspen Insurance Holdings Limited, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed with this report.
32.1
 
Officer Certification of Christopher O’Kane, Chief Executive Officer of Aspen Insurance Holdings Limited, and Scott Kirk, Chief Financial Officer of Aspen Insurance Holdings Limited, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, submitted with this report.
101
 The following financial information from Aspen Insurance Holdings Limited’s quarterly report on Form 10-Q for the quarter and nine months ended SeptemberJune 30, 20172018 formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets at SeptemberJune 30, 20172018 and December 31, 2016;2017; (ii) Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016;2017; (iii) Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the ninesix months ended SeptemberJune 30, 21072018 and 2016;2017; (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172018 and 2016;2017; and (v) Notes to Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.*
 
* As provided in Rule 406T of Regulation S-T, this information is “furnished” herewith and not “filed” for purposes of Sections 11 and 12 of the Securities Act and Section 18 of the Exchange Act. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act unless Aspen Holdings specifically incorporates it by reference.




SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
    ASPEN INSURANCE HOLDINGS LIMITED
    (Registrant)
     
Date:October 31, 2017August 8, 2018By: /s/  Christopher O’Kane
    Christopher O’Kane
    Chief Executive Officer
     
Date:October 31, 2017August 8, 2018By: /s/  Grahame Dawe
    Grahame Dawe
    Chief Accounting Officer

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