Attached files
| file | filename |
|---|---|
| EX-99.9 - EXHIBIT 99.9 - Till Capital Ltd. | exh_999.htm |
| EX-99.8 - EXHIBIT 99.8 - Till Capital Ltd. | exh_998.htm |
| EX-99.6 - EXHIBIT 99.6 - Till Capital Ltd. | exh_996.htm |
| EX-99.5 - EXHIBIT 99.5 - Till Capital Ltd. | exh_995.htm |
| EX-99.4 - EXHIBIT 99.4 - Till Capital Ltd. | exh_994.htm |
| EX-99.3 - EXHIBIT 99.3 - Till Capital Ltd. | exh_993.htm |
| EX-99.2 - EXHIBIT 99.2 - Till Capital Ltd. | exh_992.htm |
| EX-99.1 - EXHIBIT 99.1 - Till Capital Ltd. | exh_991.htm |
| 8-K - FORM 8-K - Till Capital Ltd. | f8k_042817.htm |
Exhibit 99.7
TILL CAPITAL LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
| 1 |
TILL CAPITAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2016 | December 31, 2015 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 6,493,470 | $ | 1,519,881 | ||||
| Investments (Note 5) | 15,652,833 | 24,183,191 | ||||||
| Investment, equity method (Note 5) | 1,070,100 | 1,089,570 | ||||||
| Unpaid losses and loss adjustment expenses ceded (Note 6) | 7,746,733 | 7,304,975 | ||||||
| Unearned premiums ceded (Note 7) | 2,329,612 | 1,615,977 | ||||||
| Reinsurance recoverables | 2,308,907 | 1,994,350 | ||||||
| Deferred policy acquisition costs (Note 8) | 620,178 | 465,472 | ||||||
| Assets held for sale (Note 3) | 4,542,639 | 4,542,639 | ||||||
| Promissory note receivable (Note 4) | 2,395,534 | 2,463,262 | ||||||
| Property, plant, and equipment | 57,889 | 77,244 | ||||||
| Royalty and mineral interests | 981,275 | 1,077,827 | ||||||
| Deferred income tax asset | 567,603 | 479,136 | ||||||
| Goodwill (Note 9) | 3,045,230 | 2,913,110 | ||||||
| Other assets (Note 11) | 579,010 | 619,169 | ||||||
| Total Assets | $ | 48,391,013 | $ | 50,345,803 | ||||
| Liabilities | ||||||||
| Reserve for unpaid losses and loss adjustment expenses (Note 6) | $ | 14,744,441 | $ | 14,539,623 | ||||
| Unearned premiums (Note 7) | 3,079,109 | 2,432,468 | ||||||
| Reinsurance payables | 2,484,139 | 5,031,132 | ||||||
| Accounts payable and accrued liabilities (Note 12) | 976,279 | 1,994,899 | ||||||
| Other liabilities | 512,025 | 400,752 | ||||||
| 21,795,993 | 24,398,874 | |||||||
| Contingencies (Note 18) | ||||||||
| Shareholders' equity (Note 13) | ||||||||
| Common stock | 3,429 | 3,429 | ||||||
| Additional paid in capital | 31,530,709 | 31,519,775 | ||||||
| Treasury stock | (314,678 | ) | — | |||||
| Accumulated other comprehensive income loss | (2,107,635 | ) | (1,216,461 | ) | ||||
| Deficit (excluding $105,305,060 reclassified to additional paid in capital in the December 31, 2014 quasi-reorganization) | (4,404,019 | ) | (5,760,374 | ) | ||||
| Equity attributable to shareholders of Till Capital Ltd. | 24,707,806 | 24,546,369 | ||||||
| Non-controlling interests in Silver Predator Corp. | 1,887,214 | 1,400,560 | ||||||
| Total shareholders’ equity | 26,595,020 | 25,946,929 | ||||||
| Total liabilities and shareholders' equity | $ | 48,391,013 | $ | 50,345,803 | ||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 2 |
TILL CAPITAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||
| Revenue | ||||||||||||||||
| Insurance premiums written (Note 6) | $ | 9,983,193 | $ | 8,997,841 | $ | 29,278,101 | $ | 13,090,333 | ||||||||
| Insurance premiums ceded to reinsurers | (9,751,123 | ) | (8,096,686 | ) | (28,683,823 | ) | (12,149,256 | ) | ||||||||
| Net premiums earned | 232,070 | 901,155 | 594,278 | 941,077 | ||||||||||||
| Consulting and management fee income | 121,356 | — | 415,485 | — | ||||||||||||
| Insurance contract novations (Note 6) | — | (5,246,208 | ) | — | (5,246,208 | ) | ||||||||||
| Investment income (loss), net (Note 5) | 1,609,051 | 299,312 | 2,857,443 | (490,725 | ) | |||||||||||
| Gain (loss) on sale of equipment and mineral properties | 48,958 | (7,840 | ) | 91,958 | (7,840 | ) | ||||||||||
| Loss from loss of control of subsidiary | — | (291,641 | ) | — | (291,641 | ) | ||||||||||
| Other revenue | — | 80,866 | — | 312,373 | ||||||||||||
| 2,011,435 | (4,264,356 | ) | 3,959,164 | (4,782,964 | ) | |||||||||||
| Expenses | ||||||||||||||||
| Losses and loss adjustment expenses, net (Note 6) | 248,787 | 156,546 | 637,591 | 268,122 | ||||||||||||
| Insurance contract novations (Note 6) | — | (5,113,010 | ) | — | (5,113,010 | ) | ||||||||||
| General and administrative expenses | 439,379 | 436,699 | 1,435,445 | 1,180,519 | ||||||||||||
| Salaries and benefits | 275,888 | 1,078,162 | 1,120,914 | 2,816,387 | ||||||||||||
| Stock-based compensation (Note 13) | 1,834 | 39,725 | 26,941 | 453,642 | ||||||||||||
| Mining related expenses | 51,935 | 134,524 | 76,456 | 288,921 | ||||||||||||
| Property, plant, and equipment write-off | — | — | — | 103,405 | ||||||||||||
| Foreign exchange (gain) loss | 36,167 | 858,428 | (195,517 | ) | 2,514,159 | |||||||||||
| Interest and other (income) expense | (8 | ) | 10,623 | (26,247 | ) | 122,047 | ||||||||||
| 1,053,982 | (2,398,303 | ) | 3,075,583 | 2,634,192 | ||||||||||||
| Income (loss) before income taxes and loss on equity method investment | 957,453 | (1,866,053 | ) | 883,581 | (7,417,156 | ) | ||||||||||
| Current income tax benefit (expense) (Note 10) | 16,447 | (158,900 | ) | (41,088 | ) | (138,603 | ) | |||||||||
| Loss on equity method investment (Note 5) | (7,042 | ) | (9,107 | ) | (19,470 | ) | (43,555 | ) | ||||||||
| Net income (loss) | $ | 966,858 | $ | (2,034,060 | ) | $ | 823,023 | $ | (7,599,314 | ) | ||||||
| Net income (loss) attributable to: | ||||||||||||||||
| Shareholders of Till Capital Ltd. | 1,016,955 | (1,780,884 | ) | 854,249 | (7,346,650 | ) | ||||||||||
| Non-controlling interests | (50,097 | ) | (253,176 | ) | (31,226 | ) | (252,664 | ) | ||||||||
| Net income (loss) | $ | 966,858 | $ | (2,034,060 | ) | $ | 823,023 | $ | (7,599,314 | ) | ||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in cumulative foreign exchange translation adjustment | (273,888 | ) | (769,077 | ) | 263,054 | 119,363 | ||||||||||
| Change in net unrealized gains on available for sale investments | (367,600 | ) | (34,943 | ) | 1,387,646 | 73,612 | ||||||||||
| Reclassification adjustment for net realized gain (loss) on available for sale investments | (239,055 | ) | (32,829 | ) | (1,412,454 | ) | (30,728 | ) | ||||||||
| Other comprehensive income (loss) | (880,543 | ) | (836,849 | ) | 238,246 | 162,247 | ||||||||||
| Net comprehensive income (loss) | $ | 86,315 | $ | (2,870,909 | ) | $ | 1,061,269 | $ | (7,437,067 | ) | ||||||
| Basic and diluted income (loss) per share of Till Capital Ltd. | $ | 0.30 | $ | (0.52 | ) | $ | 0.25 | $ | (2.12 | ) | ||||||
| Weighted average number of shares outstanding | 3,399,922 | 3,429,284 | 3,418,526 | 3,462,606 | ||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 3 |
TILL CAPITAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, 2016 | September 30, 2015 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 823,023 | $ | (7,599,314 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 175,895 | 70,932 | ||||||
| Stock-based compensation | 10,934 | 453,642 | ||||||
| Gain on sale of property, plant, and equipment | (80,458 | ) | — | |||||
| Gain on investments | (2,868,943 | ) | (254,673 | ) | ||||
| Loss on equity method investment | 19,470 | 43,555 | ||||||
| Impairment losses and write-offs | — | 111,245 | ||||||
| Other non-cash items, net | 41,088 | 430,244 | ||||||
| (1,878,991 | ) | (6,744,369 | ) | |||||
| Changes in non-cash working capital items: | ||||||||
| (Increase) decrease in reinsurance recoverables | (314,557 | ) | 420,015 | |||||
| Increase in unpaid losses, loss adjustment expenses, and amounts ceded | (236,940 | ) | (779,395 | ) | ||||
| Increase (decrease) in reinsurance payables | (2,546,993 | ) | 5,316,634 | |||||
| Increase in deferred policy acquisition costs | (154,706 | ) | (427,049 | ) | ||||
| Increase in deferred income tax asset | (129,555 | ) | — | |||||
| Increase (decrease) in unearned premiums | (66,994 | ) | 213,738 | |||||
| Increase (decrease) in accounts payable and accrued liabilities | (907,347 | ) | (403,395 | ) | ||||
| Other working capital changes | 30,536 | 336,826 | ||||||
| (6,205,547 | ) | (2,066,995 | ) | |||||
| Cash flows from investing activities | ||||||||
| Proceeds from sales of available for sale investments | 5,068,084 | 55,225 | ||||||
| Sales of held for trading investments, net | 4,932,699 | 4,656,585 | ||||||
| Sales of mineral properties | 215,235 | — | ||||||
| Sales of property, plant, and equipment | 43,000 | 15,646 | ||||||
| Purchase of Omega Insurance Holdings, Inc. net of cash received | — | (12,326,571 | ) | |||||
| Development costs capitalization | (202,081 | ) | — | |||||
| Increase in mineral properties | — | (24,697 | ) | |||||
| 10,056,937 | (7,623,812 | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds received from private placement | 574,498 | — | ||||||
| Purchase of Till Capital Ltd. shares (Note 13) | (314,678 | ) | (841,520 | ) | ||||
| Proceeds from promissory note receivable (Note 4) | 546,545 | — | ||||||
| Other items, net | — | (49,883 | ) | |||||
| 806,365 | (891,403 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 4,657,755 | (10,582,210 | ) | |||||
| Effects of foreign exchange rate changes on cash | 315,834 | 2,514,160 | ||||||
| Cash and cash equivalents, beginning of the period | 1,519,881 | 17,034,451 | ||||||
| Cash and cash equivalents, end of the period | $ | 6,493,470 | $ | 8,966,401 | ||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 4 |
TILL CAPITAL LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2016 and 2015
(Unaudited)
1. BASIS OF PRESENTATION AND CHANGE IN PRESENTATION CURRENCY
Basis of presentation and measurement
The interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to fairly present the consolidated financial position of Till and its subsidiaries at September 30, 2016 and December 31, 2015 and the results of operations and comprehensive income (loss) for the three months and nine months ended September 30, 2016 and 2015 and cash flows for the nine months ended September 30, 2016 and 2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes thereto. Actual results could differ from those estimates.
The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Till's latest annual report on Form 10-K for the year ended December 31, 2016.
Prior to 2016, Till prepared its financial statements under International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"), for reporting as required by securities regulators in Canada, and as permitted in the United States ("U.S.") based on Till's status as a foreign private issuer as defined by the U.S. Securities and Exchange Commission (the "SEC") for foreign private issuers. During 2016, Till determined that it no longer qualified as a foreign private issuer under the SEC rules. As a result, beginning with Till's annual report on Form 10-K for the year ended December 31, 2016, Till is required to comply with all of the periodic disclosure and current reporting requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, applicable to U.S. domestic issuers. Under the Toronto Securities Exchange - Venture ("TSX-V") regulations,Till is permitted in Canada to prepare its consolidated financial statements in accordance with GAAP. The transition to GAAP was made retrospectively for all periods presented in Till's 2016 Form 10-K, including the consolidated financial statements.
The consolidated financial statements have been prepared in U.S. dollars as if the U.S. dollar had been the presentation currency since January 1, 2015. The functional currency for Till is the U.S. dollar. The exchange rates used in converting Canadian dollars to U.S. dollars were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2016 | 2015 | 2016 | 2015 | ||||
| Exchange rate comparisons at period end | US$1 = CDN$1.3143 | US$1 = CDN$1.3410 | US$1 = CDN$1.3143 | US$1 = CDN$1.3410 | |||
|
Average exchange rate for the period |
US$1 = CDN$1.3041 | US$1 = CDN$1.3068 | US$1 = CDN$1.3221 | US$1 = CDN$1.2587 | |||
The exchange rate comparison at December 31, 2015 was US$1 = CDN$1.3870.
Basic and diluted income (loss) per restricted voting share are calculated on Till's loss expressed in U.S. dollars attributable to Till's shareholders divided by the weighted average number of Till shares outstanding during the year.
Exchange listing
In May 2015, Till completed a U.S. exchange listing to broaden its access to capital markets. Till’s restricted voting shares commenced trading on the NASDAQ Market Exchange ("NASDAQ") on May 26, 2015. Till’s Board of Directors also made a decision to change the currency presentation in Till's financial statements from Canadian dollars to U.S. dollars so that (i) investors in the U.S. can more easily understand Till’s financial results of operations and financial position, and (ii) Till's financial statements are more comparable to other companies in the U.S. market.
| 5 |
2. SIGNIFICANT ACCOUNTING POLICIES
There have been no changes to Till's significant accounting policies as described in Till's annual report on Form 10-K for the year ended December 31, 2016.
Accounting pronouncements
The recent accounting pronouncements described below have had or may have a significant effect on Till's consolidated financial statements or on its disclosures on future adoption. Till does not discuss recent pronouncements that (i) are not anticipated to have an impact on Till or (ii) are unrelated to Till's financial condition, results of operations, or related disclosures.
In May 2014, the Financial Accounting and Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 provides guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that represents the consideration that the entity expects to be entitled to in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Till is continuing to evaluate the impact of the new guidance on its consolidated financial statements. Till believes the new guidance will be less complex and will not have a significant impact on its financial statements.
In May 2015, the FASB issued ASU No. 2015-09, Financial Services - Insurance (Topic 944), that requires additional disclosures for short-duration insurance contracts. Till adopted those disclosures as of December 31, 2016, and has included, in Note 7 of the audited consolidated financial statements for the year ended December 31, 2016, disclosures that provide more information about initial claim estimates and subsequent adjustments to those estimates, the methodologies and judgments used to estimate claims, and, if available, the timing, frequency, and severity of claims. This guidance requires a change in disclosure only and adoption of this guidance did not have any effect on Till's financial condition or results of operations.
In September 2015, the FASB issued ASU Topic 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, that allows an entity to recognize adjustments to provisional amounts in a business combination in the reporting period in which the adjustment amounts are determined. Topic 805 is effective for fiscal year 2017 and is expected to be adopted by Till in 2017. Till does not expect the adoption of this standard to have a material impact on its financial statements.
In January 2016, the FASB issued ASU Topic 2016-01, Financial Statements - Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that requires equity investments to be measured at fair value with changes in fair value recognized in income, use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes, separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements, present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument- specific credit risk, and eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Topic 825-10 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted for certain requirements. Till is assessing the impact of adopting this accounting standard on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued guidance that affects the recognition, measurement, presentation and disclosure of leases. The new guidance requires substantially all leases to be reported on the balance sheet as right-to-use assets and lease liabilities, as well as additional disclosures. The standard is effective as of January 1, 2019, and early adoption is permitted. While Till has limited leasing activities, Till is in the early stages of evaluating the impact of the new guidance on its consolidated financial statements.
| 6 |
In March 2016, the FASB issued ASU Topic 2016-09, Compensation-Stock Compensation (Topic718), that requires recognition of the excess tax benefits or deficiencies of share-based awards through net income rather than through additional paid in capital. Additionally, the guidance allows for an election to account for forfeitures related to share-based payments either as they occur or through an estimation method. Till expects to adopt this guidance beginning in the first quarter of 2017.
No other new accounting pronouncement issued or effective during 2016 had or is expected to have a material impact on Till's consolidated financial statements or disclosures.
3. ASSETS HELD FOR SALE
In the second quarter of 2015, Till's controlled subsidiary, Silver Predator Corp. ("SPD"), of which Till, through its 100% owned subsidiary Resource Re Ltd. ("RRL"), owns 64% of the outstanding shares, announced its intention to realize value from some of its assets by initiating a process to sell all, or part, of the tangible and mineral property assets at some of its properties in Nevada. SPD’s Board of Directors and management committed to a plan to sell Springer Mining Company ("SMC") and the Taylor mill. Since initiating that process, active negotiations have been held related to the sale of those assets.
SPD informed Till that SPD considers it probable that (i) the sale of SMC will be completed in one year; therefore, those assets are classified as assets held for sale and are measured at the lower of carrying amount and fair value less the cost to sell at September 30, 2016 and (ii) the sale of the remaining Taylor mill assets is expected to be complete within one year; therefore, those assets are classified as assets held for sale and are measured at the lower of carrying amount and fair value less cost to sell at September 30, 2016. Assets held for sale at September 30, 2016 and December 31, 2015 are as follows:
| September 30, 2016 | December 31, 2015 | |||||||
| Assets: | ||||||||
| Mineral properties - Springer | $ | 544,071 | $ | 544,071 | ||||
| Property, plant, and equipment - Springer | 3,998,568 | 3,998,568 | ||||||
| $ | 4,542,639 | $ | 4,542,639 | |||||
Taylor Mill assets had a book value of $-0-.
4. PROMISSORY NOTE RECEIVABLE
Till holds a promissory receivable from Golden Predator Mining Corp. ("GPY") with a face amount of CDN$3,753,332 (US$2,570,950). That promissory note bears interest at 6% per annum to June 1, 2016, 8% per annum through to June 1, 2017, 10% per annum through to June 1, 2018, and 12% thereafter.
The first installment of CDN$717,450 (US$546,546) was received on May 25, 2016. The note is repayable in amounts, including interest, of CDN$721,769 on June 1, 2016, CDN$1,256,000 on June 1, 2017, CDN$1,320,000 on June 1, 2018, and CDN$1,232,000 on June 1, 2019. All amounts are to be paid in cash. That promissory note is secured by the shares of GPY's 100% owned subsidiary, Golden Predator Exploration, Ltd., and by GPY's interests in the Brewery Creek and 3 Aces properties.
The promissory note was initially recognized at fair value, and is subsequently being carried at amortized cost using the effective interest rate method.
| Fair value of note at December 31, 2015 | $ | 2,463,262 | ||
| Principal payment on May 25, 2016 | (421,522 | ) | ||
| Accrued Interest | 203,617 | |||
| Foreign exchange gain | 150,177 | |||
| Carrying value, September 30, 2016 | $ | 2,395,534 |
| 7 |
5. INVESTMENTS
The following tables summarize the differences between amortized cost and fair value, by major investment category, at September 30, 2016 and December 31, 2015:
Trading investments
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| September 30, 2016: | ||||||||||||||||
| Equity securities - natural resource sector | $ | 1,371,344 | $ | 44,594 | $ | 110,605 | $ | 1,305,333 | ||||||||
| Equity securities - all other sectors | 1,120,076 | — | 406,645 | 713,431 | ||||||||||||
| $ | 2,491,420 | $ | 44,594 | $ | 517,250 | $ | 2,018,764 | |||||||||
| December 31, 2015: | ||||||||||||||||
| Equity securities - natural resource sector | $ | 2,084,927 | $ | 410,850 | $ | 324,920 | $ | 2,170,857 | ||||||||
| Equity securities - all other sectors | 800,924 | 730,443 | 2,155 | 1,529,212 | ||||||||||||
| $ | 2,885,851 | $ | 1,141,293 | $ | 327,075 | $ | 3,700,069 | |||||||||
Available for sale investments
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| September 30, 2016: | ||||||||||||||||
| Canadian government bonds and provincial bonds | $ | 8,150,171 | $ | 220,042 | $ | — | $ | 8,370,213 | ||||||||
| Equity securities - bond funds | 4,564,330 | 3,646 | 8,263 | 4,559,713 | ||||||||||||
| Equity securities - natural resource sector | 337,573 | 368,554 | 1,984 | 704,143 | ||||||||||||
| $ | 13,052,074 | $ | 592,242 | $ | 10,247 | $ | 13,634,069 | |||||||||
| December 31, 2015: | ||||||||||||||||
| Canadian government bonds and provincial bonds | $ | 14,478,099 | $ | 155,086 | $ | — | $ | 14,633,185 | ||||||||
| Equity securities - bond funds | 4,325,877 | 12,257 | — | 4,338,134 | ||||||||||||
| Equity securities - natural resource sector | 1,072,342 | 657,151 | 217,690 | 1,511,803 | ||||||||||||
| $ | 19,876,318 | $ | 824,494 | $ | 217,690 | $ | 20,483,122 | |||||||||
Total Investments
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| September 30, 2016: | ||||||||||||||||
| Held for trading | $ | 2,491,420 | $ | 44,594 | $ | 517,250 | $ | 2,018,764 | ||||||||
| Available for sale | 13,052,074 | 592,242 | 10,247 | 13,634,069 | ||||||||||||
| $ | 15,543,494 | $ | 636,836 | $ | 527,497 | $ | 15,652,833 | |||||||||
| December 31, 2015: | ||||||||||||||||
| Held for trading | $ | 2,885,851 | $ | 1,141,293 | $ | 327,075 | $ | 3,700,069 | ||||||||
| Available for sale | 19,876,318 | 824,494 | 217,690 | 20,483,122 | ||||||||||||
| $ | 22,762,169 | $ | 1,965,787 | $ | 544,765 | $ | 24,183,191 | |||||||||
Realized gain (loss) on investments, net:
Till calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. Till determines the cost or amortized cost of the bonds sold using the specific-identification method and all other securities sold using the average cost method.
Held for trading investments
The net realized gain from sales of held for trading investments was $1,178,511 for the nine months ended September 30, 2016 and $332,475 for the nine months ended September 30, 2015.
| 8 |
Available for sale investments
| 2016 | 2015 | |||||||||||||||
| Gains (Losses) | Fair Value at Sale | Gains (Losses) | Fair Value at Sale | |||||||||||||
| Nine months ended September 30, | ||||||||||||||||
| Equities | $ | 1,429,623 | $ | 2,077,635 | $ | 30,728 | $ | 55,225 | ||||||||
| Total realized gains | 1,429,623 | 2,077,635 | 30,728 | 55,225 | ||||||||||||
| Equities | (16,958 | ) | 116,864 | — | — | |||||||||||
| Canadian provincial bonds | (211 | ) | 2,873,586 | — | — | |||||||||||
| Total realized losses | (17,169 | ) | 2,990,450 | — | — | |||||||||||
| Net realized gains (losses) | $ | 1,412,454 | $ | 5,068,085 | $ | 30,728 | $ | 55,225 | ||||||||
The following tables summarize Till's fixed maturities by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of those obligations.
| September 30, 2016 | ||||||||||||||||
| Amortized Cost | Percent of Total | Fair Value | Percent of Total | |||||||||||||
| Due in one year or less | $ | 51,211 | 1 | % | $ | 51,854 | 1 | % | ||||||||
| Due after one year through five years | 10,239,645 | 80 | % | 10,382,738 | 80 | % | ||||||||||
| Due after five years through 10 years | 2,423,645 | 19 | % | 2,495,334 | 19 | % | ||||||||||
| Due after ten years | — | — | % | — | — | % | ||||||||||
| $ | 12,714,501 | 100 | % | $ | 12,929,926 | 100 | % | |||||||||
| December 31, 2015 | ||||||||||||||||
| Amortized Cost | Percent of Total | Fair Value | Percent of Total | |||||||||||||
| Due in one year or less | $ | 3,952,149 | 21 | % | $ | 3,951,504 | 21 | % | ||||||||
| Due after one year through five years | 10,870,885 | 58 | 11,008,803 | 58 | ||||||||||||
| Due after five years through 10 years | 3,980,942 | 21 | 4,011,012 | 21 | ||||||||||||
| Due after ten years | — | — | — | — | ||||||||||||
| Total | $ | 18,803,976 | 100 | % | $ | 18,971,319 | 100 | % | ||||||||
Net change in unrealized gain (loss) on investments:
Available for sale investments
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Canadian government and provincial bonds | $ | 58,230 | $ | 5,144 | $ | 64,956 | $ | 191,416 | ||||||||
| Bond funds | (4,612 | ) | — | (16,874 | ) | — | ||||||||||
| Equities | (660,273 | ) | (72,916 | ) | (72,890 | ) | (148,532 | ) | ||||||||
| Included in accumulated other comprehensive income | $ | (606,655 | ) | $ | (67,772 | ) | $ | (24,808 | ) | $ | 42,884 | |||||
Investment income (expense):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net interest and dividends | $ | 149,353 | $ | 56,411 | $ | 446,488 | $ | 130,338 | ||||||||
| Investment related expenses | (185,204 | ) | (247,918 | ) | (517,694 | ) | (984,266 | ) | ||||||||
| $ | (35,851 | ) | $ | (191,507 | ) | $ | (71,206 | ) | $ | (853,928 | ) | |||||
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Investment income (loss), net:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net gain (loss) on held for trading securities | $ | 907,806 | $ | 457,990 | $ | 1,178,511 | $ | 332,475 | ||||||||
| Net realized gain (loss) on available for sale securities | 239,055 | 32,829 | 1,412,454 | 30,728 | ||||||||||||
| Change in unrealized loss on derivative liability | 498,041 | — | 337,684 | — | ||||||||||||
| Net investment expense | (35,851 | ) | (191,507 | ) | (71,206 | ) | (853,928 | ) | ||||||||
| $ | 1,609,051 | $ | 299,312 | $ | 2,857,443 | $ | (490,725 | ) | ||||||||
The following table presents information about Till’s assets stated at fair value:
| September 30, 2016 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Canadian government bonds and provincial bonds | $ | 12,929,926 | $ | 4,559,713 | $ | 8,370,213 | $ | — | ||||||||
| Equity securities | 2,722,907 | 2,452,116 | 270,791 | — | ||||||||||||
| Total investments | $ | 15,652,833 | $ | 7,011,829 | $ | 8,641,004 | $ | — | ||||||||
| December 31, 2015 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Canadian government bonds and provincial bonds | $ | 18,971,320 | $ | 4,410,233 | $ | 14,561,087 | $ | — | ||||||||
| Equity securities | 5,211,871 | 4,585,122 | 626,749 | — | ||||||||||||
| Total investments | $ | 24,183,191 | $ | 8,995,355 | $ | 15,187,836 | $ | — | ||||||||
The following table presents an aging of Till’s unrealized investment losses on available for sale investments by investment class as of September 30, 2016 and December 31, 2015:
| Less than Twelve Months | Twelve Months or More | |||||||||||||||||||||||
| Number of Securities | Gross Unrealized Losses | Fair Value | Number of Securities | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| September 30, 2016 | ||||||||||||||||||||||||
| Equity security - bond fund | 1 | 8,263 | 2,274,320 | — | — | — | ||||||||||||||||||
| Equity security - natural resource sector | — | — | — | 1 | 1,984 | 15,217 | ||||||||||||||||||
| Total | 1 | $ | 8,263 | $ | 2,274,320 | 1 | $ | 1,984 | $ | 15,217 | ||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||
| Equity securities - natural resource sector | 1 | $ | 15,567 | $ | 72,098 | 3 | $ | 202,123 | $ | 440,007 | ||||||||||||||
Equity Investment in Limited Liability Company
Till, through RRL, has an investment in a limited liability company (“LLC”) that is accounted for under the equity method of accounting that is summarized as follows:
| September 30, 2016 | December 31, 2015 | |||||||
| Beginning of year | $ | 1,089,570 | $ | 1,080,000 | ||||
| Additional investments | — | 70,000 | ||||||
| Share of accumulated equity method losses | (19,470 | ) | (60,430 | ) | ||||
| End of period | $ | 1,070,100 | $ | 1,089,570 | ||||
| Till's ownership percentage | 3.20 | % | 3.21 | % | ||||
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6. UNPAID LOSSES, LOSS ADJUSTMENT EXPENSES, AND AMOUNTS CEDED
Summary of changes in outstanding losses and loss adjustment expenses ("LAE") and amounts ceded
| Nine Months Ended September 30, 2016 | Year Ended December 31, 2015 | |||||||||||||||||||||||
| Unpaid Losses and LAE | Amounts Ceded | Net | Unpaid Losses and LAE | Amounts Ceded | Net | |||||||||||||||||||
| Balance, beginning of year | $ | 14,539,623 | $ | 7,304,975 | $ | 7,234,648 | $ | 6,771,623 | $ | — | $ | 6,771,623 | ||||||||||||
| Omega unpaid losses, LAE and ceded amounts at acquisition | — | — | — | 12,296,850 | 4,233,462 | 8,063,388 | ||||||||||||||||||
| Assumed through assumption reinsurance transactions | — | — | — | 7,880,165 | 6,384,944 | 1,495,221 | ||||||||||||||||||
| Losses and LAE incurred for insured events related to: | ||||||||||||||||||||||||
| Current year | 18,213,398 | 18,071,636 | 141,762 | 14,592,727 | 14,187,692 | 405,035 | ||||||||||||||||||
| Prior years | 831,324 | 335,495 | 495,829 | (2,954,302 | ) | (3,037,977 | ) | 83,675 | ||||||||||||||||
| Total incurred | 19,044,722 | 18,407,131 | 637,591 | 11,638,425 | 11,149,715 | 488,710 | ||||||||||||||||||
| Losses and LAE paid: | ||||||||||||||||||||||||
| Current year events | (16,432,761 | ) | (16,431,769 | ) | (992 | ) | (12,865,963 | ) | (12,850,596 | ) | (15,367 | ) | ||||||||||||
| Prior year events | (3,334,479 | ) | (1,969,585 | ) | (1,364,894 | ) | (3,684,433 | ) | (417,788 | ) | (3,266,645 | ) | ||||||||||||
| Total paid | (19,767,240 | ) | (18,401,354 | ) | (1,365,886 | ) | (16,550,396 | ) | (13,268,384 | ) | (3,282,012 | ) | ||||||||||||
| Unpaid losses and LAE related to RRL novated reinsurance contracts | — | — | — | (5,113,010 | ) | — | (5,113,010 | ) | ||||||||||||||||
| Adjustment due to currency conversion | 927,336 | 435,981 | 491,355 | (2,384,034 | ) | (1,194,762 | ) | (1,189,272 | ) | |||||||||||||||
| Balance, end of period | $ | 14,744,441 | $ | 7,746,733 | $ | 6,997,708 | $ | 14,539,623 | $ | 7,304,975 | $ | 7,234,648 | ||||||||||||
Till acquired Omega Insurance Holdings, Inc. ("Holdings"), including its subsidiaries, Omega General insurance Company ("Omega"), a fully licensed insurance company, and Focus Group, Inc. on May 15, 2015. The Omega unpaid losses, LAE, and amounts ceded at acquisition in the foregoing schedule are related to business written or assumed by Omega at the date of acquisition on business written prior to the date of acquisition.
In September 2015, RRL novated two reinsurance contracts that had been assumed in December 2014 from Multi-Strat Re. As a result of those novations, RRL paid a novation-related premium of $5,246,208 and released its reserve for unpaid losses and LAE of $5,113,010.
The following table depicts written premiums and earned premiums, showing the effects of these components on the Company’s consolidated statements of income (loss) and comprehensive income (loss):
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||
| Premiums written: | ||||||||||||||||
| Direct | $ | 9,983,186 | $ | 8,145,431 | $ | 29,278,095 | $ | 12,237,923 | ||||||||
| Assumed | 6 | 852,410 | 6 | 852,410 | ||||||||||||
| Ceded | (9,780,273 | ) | (7,947,134 | ) | (28,579,610 | ) | (11,938,160 | ) | ||||||||
| Net premiums written | $ | 202,919 | $ | 1,050,707 | $ | 698,491 | $ | 1,152,173 | ||||||||
| Change in unearned premiums: | ||||||||||||||||
| Direct | $ | 196,296 | $ | (270,257 | ) | $ | (867,816 | ) | $ | (1,694,718 | ) | |||||
| Assumed | — | — | — | — | ||||||||||||
| Ceded | (167,145 | ) | 120,705 | 763,603 | 1,483,622 | |||||||||||
| Net decrease (increase) | $ | 29,151 | $ | (149,552 | ) | $ | (104,213 | ) | $ | (211,096 | ) | |||||
| Premiums earned: | ||||||||||||||||
| Direct | $ | 10,179,482 | $ | 7,875,174 | $ | 28,410,279 | $ | 10,543,205 | ||||||||
| Assumed | 6 | 852,410 | 6 | 852,410 | ||||||||||||
| Ceded | (9,947,418 | ) | (7,826,429 | ) | (27,816,007 | ) | (10,454,538 | ) | ||||||||
| Net premiums earned | $ | 232,070 | $ | 901,155 | $ | 594,278 | $ | 941,077 | ||||||||
7. UNEARNED PREMIUMS
Summary of changes in unearned premiums and unearned premiums ceded
| Nine Months Ended September 30, 2016 | Year Ended December 31, 2015 | |||||||||||||||||||||||
| Unearned Premiums | Unearned Premiums Ceded | Net | Unearned Premiums | Unearned Premiums Ceded | Net | |||||||||||||||||||
| Balance, beginning of year | $ | 2,432,468 | $ | 1,615,977 | $ | 816,491 | $ | — | $ | — | $ | — | ||||||||||||
| Omega acquisition | — | — | — | 3,792,978 | 2,531,853 | 1,261,125 | ||||||||||||||||||
| Premiums written | 29,278,101 | 28,579,610 | 698,491 | 20,693,110 | 20,764,179 | (71,069 | ) | |||||||||||||||||
| Premiums earned | (28,625,083 | ) | (27,959,046 | ) | (666,037 | ) | (18,506,822 | ) | (18,648,114 | ) | 141,292 | |||||||||||||
| Amortization of unearned premiums | (325,123 | ) | (136,345 | ) | (188,778 | ) | (3,146,630 | ) | (2,395,508 | ) | (751,122 | ) | ||||||||||||
| Adjustment due to currency conversion | 318,746 | 229,416 | 89,330 | (400,168 | ) | (636,433 | ) | 236,265 | ||||||||||||||||
| Balance, end of period | $ | 3,079,109 | $ | 2,329,612 | $ | 749,497 | $ | 2,432,468 | $ | 1,615,977 | $ | 816,491 | ||||||||||||
8. DEFERRED POLICY ACQUISITION COSTS
Summary of changes in deferred policy acquisition costs
| Nine Months Ended | Year Ended | |||||||
| September 30, 2016 | December 31, 2016 | |||||||
| Balance, beginning of year | $ | 465,472 | $ | — | ||||
| Acquisition costs deferred | 8,050,743 | 5,609,635 | ||||||
| Amortization of deferred policy acquisition costs | (7,896,037 | ) | (5,144,163 | ) | ||||
| Balance, end of period | $ | 620,178 | $ | 465,472 | ||||
9. GOODWILL
Till attributed $3,368,321 of the Holdings purchase price to goodwill. The amount of goodwill related to the acquisition of Holdings is subsequently adjusted for the foreign exchange translation. The goodwill on Till's balance sheet is summarized as follows:
| 12 |
| Nine Months Ended | Year Ended | |||||||
| September 30, 2016 | December 31, 2015 | |||||||
| Balance, beginning of year | $ | 2,913,110 | $ | — | ||||
| Acquired goodwill | — | 3,368,321 | ||||||
| Foreign exchange translation | 132,120 | (455,211 | ) | |||||
| Balance, end of period | $ | 3,045,230 | $ | 2,913,110 | ||||
10. INCOME TAXES
Till's income tax benefit (expense) consisted of Canadian current income tax benefit of $16,447 for the three months ended September 30, 2016 (three months ended September 30, 2015 - $158,900 income tax expense) and income tax expense of $41,088 for the nine months ended September 30, 2016 (nine months ended September 30, 2015 - $138,603 income tax benefit).
11. OTHER ASSETS
Summary of other assets
| September 30, 2016 | December 31, 2015 | |||||||
| Other receivables | $ | 92,773 | $ | 96,293 | ||||
| Prepaid expenses and deposits | 218,809 | 179,252 | ||||||
| Reclamation bonds | 124,468 | 124,468 | ||||||
| Other | 142,960 | 219,156 | ||||||
| $ | 579,010 | $ | 619,169 | |||||
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Summary of accounts payable and accrued liabilities
| September 30, 2016 | December 31, 2015 | |||||||
| Accounts payable | $ | 867,090 | $ | 1,622,068 | ||||
| Accrued payroll | 46,469 | 33,159 | ||||||
| Securities sold short | 62,720 | 1,988 | ||||||
| Financial derivatives | — | 337,684 | ||||||
| $ | 976,279 | $ | 1,994,899 | |||||
13. SHAREHOLDER'S EQUITY
Common stock
Till is authorized to issue 12,000,000 shares of restricted voting stock at a par value of $0.001. Shares of Till have restricted voting rights, whereby no single shareholder of Till is able to exercise voting rights for more than 9.9% of the voting rights of the total issued and outstanding Till shares. However, if any one shareholder of Till beneficially owns, or exercises control or direction over, more than 50% of the issued and outstanding Till shares, the 9.9% restriction will no longer apply to the Till shares. At September 30, 2016 and December 31, 2015, there were 3,429,284 issued Till shares.
Stock options and warrants
Till’s Board of Directors may, from time to time and in its sole discretion, award options to acquire shares of the restricted voting stock of Till to directors, employees, and consultants. During the nine months ended September 30, 2016, Till recognized stock-based compensation related to options of $10,934, (nine months ended September 30, 2015 - $412,674), which amounts are included in the consolidated statement of income (loss) and comprehensive income (loss). At September 30, 2016, Till has 110,704 stock options outstanding with a weighted average exercise price of CDN$11.35 ($8.64) and a weighted average remaining term of 2.8 years. During the nine months ended September 30, 2016, Till also recognized stock-based compensation of $16,007 as a result of consolidating SPD (nine months ended September 30, 2015 - $40,968) which amounts are also included in the consolidated statement of income (loss) and comprehensive income (loss).
| 13 |
Till's Board of Directors may, from time to time and in its sole discretion, issue warrants to acquire shares of the restricted voting stock of Till. At September 30, 2016, Till has 179,500 warrants outstanding with a weighted average exercise price of CDN$9.92 ($7.55) and a weighted average remaining term of 3.2 years.
Normal course issuer bid
On September 25, 2015, Till announced that it has initiated a normal course issuer bid ("NCIB"). Under the NCIB, Till has approval to bid for up to 265,502 common shares, representing 10% of the 2,655,025 shares forming Till's public float. All purchased shares will be returned to treasury and canceled. During the nine months ended September 30, 2016, Till purchased 79,000 common shares for $314,678 through the NCIB.
14. INCOME (LOSS) PER SHARE
Till uses the treasury stock method to calculate diluted income (loss) per share. Following the treasury stock method, the numerator for Till’s diluted income (loss) per share calculation remains unchanged from the basic income (loss) per share calculation, as the assumed exercise of Till’s stock options and warrants does not result in an adjustment to net income or loss.
Stock options to purchase 110,704 restricted voting shares were outstanding at September 30, 2016 (December 31, 2015 – 167,641). Warrants to purchase 179,500 restricted voting shares were outstanding at September 30, 2016 and December 31, 2015. Those stock options and warrants were excluded in the calculation of diluted earnings per share because the exercise price of the awards was greater than the weighted average market value of the restricted voting shares in the nine months ended September 30, 2016.
15. SEGMENT INFORMATION
Till operates in a single segment, which is insurance.
Till's revenue is attributed to the following geographical areas:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue | ||||||||||||||||
| Canada | $ | 1,292,508 | $ | 1,198,147 | $ | 2,109,588 | $ | 1,339,425 | ||||||||
| Bermuda | 157,989 | (5,080,247 | ) | 1,704,264 | (5,441,722 | ) | ||||||||||
| United States | 560,938 | (382,256 | ) | 145,312 | (680,667 | ) | ||||||||||
| $ | 2,011,435 | $ | (4,264,356 | ) | $ | 3,959,164 | $ | (4,782,964 | ) | |||||||
16. RELATED PARTY DISCLOSURES
Service agreements
Till is party to service agreements with SPD whereby Till provides accounting, corporate communications, technical services, and other management services on a cost-plus recovery basis, and ay September 30, 2015 was party to service agreements with GPY whereby Till provided similar services to SPD on a cost-plus recovery basis. The agreements with GPY were terminated on July 31, 2015. The technical service agreement with SPD was terminated on January 1, 2016, leaving only the accounting and corporate communications service agreements in effect. During the nine months ended September 30, 2016, Till charged SPD a total of $27,000 (nine months ended September 30, 2015 - $192,836) and GPY a total of $-0- (nine months ended September 30, 2015 - $79,376) for those services.
17. CAPITAL MANAGEMENT
Regulatory capital
| 14 |
Till manages capital on an aggregate basis, as well as individually for each regulated entity. Till's insurance subsidiaries are subject to the regulatory capital requirements defined by the Bermuda Monetary Authority (“BMA”) for RRL and by the Office of Superintendent of Financial Institutions (Canada) (“OSFI”) for Omega.
Till’s objectives when managing capital consist of:
| • | Ensuring policyholders in the insurance and reinsurance subsidiaries are well protected while maintaining strong regulatory capital levels. |
| • | Maximizing long-term shareholder value by optimizing capital used to operate and grow Till. |
Till views capital as a scarce and strategic resource. This resource protects the financial well-being of the organization, and is also critical in enabling Till to pursue strategic business opportunities. Adequate capital also acts as a safeguard against possible unexpected losses, and as a basis for confidence in Till by shareholders, policyholders, creditors, and others. For the purpose of capital management, Till has defined capital as shareholders’ equity, excluding accumulated other comprehensive income ("AOCI"). Capital is monitored by Till's Board of Directors.Till's insurance subsidiaries are subject to minimum capital requirements that, in the case of RRL, is $1 million, and, in the case of Omega, the Minimum Capital Test (“MCT”) is calculated based on guidelines established by OSFI. Those amounts are not available to satisfy liabilities of Till or other subsidiaries. Both RRL and Omega are in compliance with those requirements.
RRL
RRL is registered under The Bermuda Insurance Act 1978 and related regulations (the “Act”) that require RRL to file a statutory financial return and maintain certain measures of solvency and liquidity. The required Minimum General Business Solvency Margin at September 30, 2016 was $1 million. The Minimum Liquidity Ratio is the ratio of the insurer’s relevant assets to its relevant liabilities. The minimum allowable ratio is 75%. RRL’s relevant assets at September 30, 2016 were $6.9 million (December 31, 2015 - $5.66 million) and 75% of its relevant liabilities as of September 30, 2016 was $62,277 (December 31, 2015 - $28,671). As of September 30, 2016 and December 31, 2015, RRL is in compliance with those requirements.
Omega
OSFI has set out expectation of a 100% MCT as the minimum and have also set out 150% MCT as the supervisory target for Canadian property and casualty insurance companies. As of September 30, 2016, Omega had total capital available of CDN$8.94 (U.S.$6.8) million (December 31, 2015 - CDN$9.29 (U.S.$6.70) million) and a total capital required of CDN$2.16 (U.S.$1.64) million (December 31, 2015 - CDN$2.27 (U.S.$1.64) million) resulting in a MCT of 414% (December 31, 2015 - 410%) of the required amount. As of September 30, 2016 and December 31, 2015, Omega is in compliance with OSFI's MCT requirement.
Statutory Accounting Practices for RRL and Omega
RRL and Omega follow accounting practices prescribed or permitted by their respective regulators, Bermuda and Canada, respectively. Statutory accounting practices differ from GAAP in certain areas, the most significant being that statutory accounting practices:
| • | Require the expensing of policy acquisition costs as incurred, i.e., does not allow for the deferral and amortization of policy acquisition costs, i.e., DPAC. |
| • | Require that certain investments be recorded at cost or amortized cost and allows bonds to be carried at amortized cost or fair value based on an independent rating. |
| • | Specify how much, if any, of a deferred income tax asset is reportable as an admitted asset. |
18. CONTINGENCIES
Till and its subsidiaries are party to various litigation-related matters in the ordinary course of our business. Till cannot estimate with certainty the ultimate legal and financial liability with respect to those pending litigation matters. However, Till believes, based on its knowledge of such matters, that Till's ultimate liability with respect to those matters will not have a material adverse effect on Till's financial position, results of operations, or cash flows.
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