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Among SILP’s holdings are equity securities, the carrying values of which are based primarily on quoted market prices.
−Removed: Generally, market prices of common equity securities are subject to fluctuation, which could cause the amount to be realized upon the closing of a position to differ significantly from its current reported value.
+Added: Generally, market prices of common equity securities are subject to fluctuation, which could cause the amount to be realized upon closing a position to differ significantly from its current reported value.
This risk is partly mitigated by the presence of both long and short equity securities as part of our investment strategy.
−Removed: At December 31, 2021, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a $8.8 million loss to our Investment Portfolio.
+Added: At December 31, 2022, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in an $8.1 million loss to our Investment Portfolio.
Computations of the prospective effects of hypothetical equity price changes are based on numerous assumptions, including the maintenance of the current composition of SILP’s portfolio.
3 unchanged sentences
SILP’s investments periodically include long or short investments in commodities or derivatives directly impacted by fluctuations in the prices of commodities.
−Removed: At December 31, 2021, SILP’s investments incorporate unhedged exposure to changes in gold, silver, and crude oil prices.
+Added: At December 31, 2022, SILP’s investments incorporate unhedged exposure to changes in gold, silver, uranium, and crude oil prices.
The following table summarizes the net impact that a 10% increase and decrease in commodity prices would have on the value of our Investment Portfolio at December 31, 2022.
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Silver 0.3 (0.3)
+Added: Uranium 0.3 (0.3)
Crude oil 0.2 (0.2)
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Foreign currency exchange rate risk exists to the extent that our foreign currency reinsurance balances are more than (or less than) the corresponding foreign currency cash balances, and there is an increase (or decrease) in the exchange rate of that foreign currency.
−Removed: Link to Table of Contents
While we do not seek to precisely match our liabilities under reinsurance policies that are payable in foreign currencies with investments denominated in such currencies, we continually monitor our exposure to potential foreign currency losses and may use foreign currency cash and cash equivalents or forward foreign currency exchange contracts to mitigate against adverse foreign currency movements.
−Removed: At December 31, 2021, our exposure to GBP denominated net reinsurance asset balance was £6.4 million.
+Added: Link to Table of Contents
+Added: Certain cedents, particularly the Lloyd’s syndicates, report to us in foreign currencies even though some or all of the underlying exposure is denominated in U.S.
+Added: Our consolidated statements of operations may report a foreign exchange gain or loss associated with this exposure when reported by the cedents.
+Added: Additionally, we may report foreign exchange gains or losses due to the mismatch between the currency exchange rates applied to foreign-denominated (i) monetary balances and (ii) non-monetary balances under U.S.
+Added: See Note 2 of the accompanying consolidated financial statements for further information regarding our accounting treatment of foreign currency transactions.
+Added: We monitor our foreign currency-denominated assets and liabilities on an “underlying exposure” basis without distinguishing between monetary and non-monetary balances.
+Added: At December 31, 2022, our underlying exposure to GBP-denominated net reinsurance asset balance was £5.2 million.
At December 31, 2022, a 10% decrease in the U.S.
dollar against the GBP (all else constant) would result in an estimated $0.6 million foreign exchange gain.
−Removed: Alternatively, a 10% increase in the U.S dollar against the GBP would result in an estimated $0.9 million foreign exchange loss.
−Removed: Similarly, at December 31, 2021, our net exposure to Euro-denominated reinsurance liability balances was €5.7 million.
+Added: Alternatively, a 10% increase in the U.S.
+Added: dollar against the GBP would result in an estimated $0.6 million foreign exchange loss.
+Added: Similarly, at December 31, 2022, our net underlying exposure to Euro-denominated reinsurance liability balances was €10.5 million.
At December 31, 2022, a 10% decrease in the U.S.
dollar against the Euro (all else constant) would result in an estimated $1.1 million foreign exchange loss.
−Removed: Alternatively, a 10% increase in the U.S dollar against the Euro would result in an estimated $0.7 million foreign exchange gain.
+Added: Alternatively, a 10% increase in the U.S.
+Added: dollar against the Euro would result in an estimated $1.1 million foreign exchange gain.
We may also be exposed to foreign currency risk through SILP’s underlying cash, forwards, options, and investments in securities denominated in foreign currencies.
−Removed: At December 31, 2021, most of our currency exposures resulting from foreign denominated securities (longs and shorts) were reduced by offsetting cash balances denominated in the corresponding foreign currencies.
+Added: At December 31, 2022, most of SILP’s currency exposures resulting from foreign-denominated securities (longs and shorts) were reduced by offsetting cash balances denominated in the corresponding foreign currencies.
At December 31, 2022, a 10% increase or decrease in the value of the U.S.
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Interest Rate Risk
−Removed: Our investment in SILP includes interest-rate sensitive securities, such as corporate and sovereign debt instruments and interest rate options.
The primary market risk exposure for any debt instrument is interest rate risk.
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Additionally, some derivative investments may be sensitive to interest rates, and their value may indirectly fluctuate with changes in interest rates.
−Removed: At December 31, 2021, a 100 basis points increase or decrease in interest rates would have no meaningful impact on the value of our Investment Portfolio.
+Added: The caption “Reinsurance balances receivable” in our consolidated balance sheets incorporates amounts held by cedents, including the Lloyd’s syndicates in which we participate.
+Added: These syndicates invest a portion of the premiums withheld in fixed-income and variable-yield securities, which expose us to interest rate risk.
+Added: At December 31, 2022, a 100 basis points increase or decrease in interest rates would result in an estimated $2.2 million loss or gain, respectively, which would be recorded in our consolidated statements of operations under the captions “Other income (expense).”
+Added: Our restricted cash and cash equivalents earn interest at rates that generally follow the movements of the short-term U.S.
+Added: Treasury rates.
+Added: At December 31, 2022, a 100 basis points increase or decrease in U.S.
+Added: Federal Funds Rate would result in approximately a $5.7 million increase or decrease, respectively, in our interest income on an annualized basis.
+Added: Our investment in SILP includes interest-rate sensitive securities, such as corporate and sovereign debt instruments and interest-rate options.
+Added: At December 31, 2022, a 100 basis points increase or decrease in interest rates would result in a $4.4 million gain or a $4.9 million loss, respectively, to our Investment Portfolio.
We, along with DME Advisors, monitor the net exposure to interest rate risk and generally do not expect changes in interest rates to have a materially adverse impact on our operations.
−Removed: Credit risk relates to the uncertainty of a counterparty’s ability to make timely payments in accordance with terms of the instrument or contract.
+Added: Credit risk relates to the uncertainty of a counterparty’s ability to make timely payments in accordance with the terms of the instrument or contract.
Our maximum exposure to credit risk is the carrying value of our financial assets.
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See Note 2 of the accompanying consolidated financial statements for further details on allowance for credit loss on reinsurance assets.
+Added: Link to Table of Contents
In addition, the securities, commodities, and cash in SILP’s investment portfolio are held with several prime brokers and derivative counterparties, subjecting SILP, and indirectly us, to a significant concentration of credit risk.
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Risk Factors - We could face unanticipated losses from political instability, which could have a material adverse effect on our financial condition and results of operations.”
−Removed: Link to Table of Contents
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.