| Derivatives |
The following tables identify the listing currency, fair value and notional amounts of derivative instruments included in the condensed consolidated balance sheets, categorized by primary underlying risk. Balances are presented on a gross basis. | | | | | | | | | | | | As of September 30, 2017 | | Listing currency (1) | | Fair Value | | Notional Amounts (2) | Derivative Assets by Primary Underlying Risk | ($ in thousands) | Credit | | | | | | Credit Default Swaps - Protection Purchased | USD | | $ | 9,336 |
| | $ | 51,827 |
| Total Return Swaps - Long Contracts | EGP | | 24,714 |
| | 24,714 |
| Equity Price | | | | | | Contracts for Differences - Long Contracts | BRL/CHF/DKK/EUR/GBP/USD | | 23,257 |
| | 178,049 |
| Contracts for Differences - Short Contracts | DKK/EUR/SEK/USD | | 1,252 |
| | 29,555 |
| Total Return Swaps - Long Contracts | BRL/USD | | 13,503 |
| | 148,591 |
| Interest Rates | | | | | | Interest Rate Swaptions | JPY/USD | | 1,420 |
| | 93,834 |
| Sovereign Debt Futures - Short Contracts | EUR | | 1,295 |
| | 155,191 |
| Foreign Currency Exchange Rates | | | | | | Foreign Currency Forward Contracts | EUR/HKD | | 1,004 |
| | 194,851 |
| Total Derivative Assets | | | $ | 75,781 |
| | $ | 876,612 |
| | | | | | | | Listing currency (1) | | Fair Value | | Notional Amounts (2) | Derivative Liabilities by Primary Underlying Risk | ($ in thousands) | Credit | | | | | | Credit Default Swaps - Protection Purchased | EUR/USD | | $ | 3,196 |
| | $ | 57,512 |
| Credit Default Swaps - Protection Sold | JPY/USD | | 2,828 |
| | 7,031 |
| Equity Price | | | | | | Contracts for Differences - Long Contracts | BRL/EUR/GBP/USD | | 857 |
| | 27,511 |
| Contracts for Differences - Short Contracts | EUR/NOK/SEK | | 632 |
| | 16,022 |
| Total Return Swaps - Long Contracts | BRL/USD | | 559 |
| | 27,433 |
| Total Return Swaps - Short Contracts | USD | | 4,852 |
| | 72,645 |
| Interest Rates | | | | | | Interest Rate Swaptions | JPY | | 120 |
| | 64,600 |
| Foreign Currency Exchange Rates | | | | | | Foreign Currency Forward Contracts | CHF/CNH/HKD/SAR | | 4,236 |
| | 503,808 |
| Total Derivative Liabilities (free standing) | | | $ | 17,280 |
| | $ | 776,562 |
| | | | | | | Embedded derivative liabilities in reinsurance contracts (3) | USD | | $ | 180 |
| | $ | 20,000 |
| Total Derivative Liabilities (embedded) | | | $ | 180 |
| | $ | 20,000 |
|
| | (1) | BRL = Brazilian Real, CHF = Swiss Franc, CNH = Chinese Yuan, DKK = Danish Krone, EGP = Egyptian Pound, EUR = Euro, GBP = British Pound, HKD = Hong Kong Dollar, JPY = Japanese Yen, NOK = Norwegian Krone, SAR = Saudi Arabian Riyal, SEK = Swedish Krona, USD = US Dollar |
| | (2) | The absolute notional exposure represents the Company’s derivative activity as of September 30, 2017, which is representative of the volume of derivatives held during the period. |
| | (3) | The fair value of embedded derivatives in reinsurance contracts is included in reinsurance balances payable in the condensed consolidated balance sheets. |
| | | | | | | | | | | | As of December 31, 2016 | | Listing currency (1) | | Fair Value | | Notional Amounts (2) | Derivative Assets by Primary Underlying Risk | ($ in thousands) | Credit | | | | | | Credit Default Swaps - Protection Purchased | EUR/ USD | | $ | 10,905 |
| | $ | 84,327 |
| Equity Price | | | | | | Contracts for Differences - Long Contracts | EUR/ GBP | | 1,765 |
| | 36,879 |
| Total Return Swaps - Long Contracts | BRL/ USD | | 617 |
| | 19,140 |
| Total Return Swaps - Short Contracts | JPY | | 183 |
| | 8,696 |
| Interest Rates | | | | | | Interest Rate Swaps | GBP/USD | | 2,462 |
| | 195,571 |
| Interest Rate Swaptions | JPY / USD | | 5,354 |
| | 424,816 |
| Sovereign Debt Futures - Short Contracts | USD | | 961 |
| | 107,591 |
| Foreign Currency Exchange Rates | | | | | | Foreign Currency Forward Contracts | CAD/ CNH/ GBP/ MXN | | 653 |
| | 47,754 |
| Foreign Currency Options - Purchased | CNH/EUR/HKD/JPY/SAR | | 4,532 |
| | 501,465 |
| Total Derivative Assets | | | $ | 27,432 |
| | $ | 1,426,239 |
| | | | | | | | | | | | | | Listing currency (1) | | Fair Value | | Notional Amounts (2) | Derivative Liabilities by Primary Underlying Risk | ($ in thousands) | Credit | | | | | | Credit Default Swaps - Protection Purchased | USD | | $ | 3,286 |
| | $ | 43,184 |
| Credit Default Swaps - Protection Sold | USD | | 1,952 |
| | 3,943 |
| Equity Price | | | | | | Contracts for Differences - Long Contracts | GBP | | — |
| | 67 |
| Contracts for Differences - Short Contracts | EUR / ZAR | | 1,106 |
| | 11,424 |
| Total Return Swaps - Long Contracts | USD | | 1,675 |
| | 26,800 |
| Total Return Swaps - Short Contracts | JPY / USD | | 1,302 |
| | 10,095 |
| Interest Rates | | | | | | Interest Rate Swaps | GBP | | 722 |
| | 59,115 |
| Interest Rate Swaptions | JPY/USD | | 1,056 |
| | 417,052 |
| Sovereign Debt Futures - Short Contracts | EUR / GBP | | 1,608 |
| | 159,923 |
| Foreign Currency Exchange Rates | | | | | | Foreign Currency Forward Contracts | EUR /JPY /SAR | | 2,009 |
| | 214,854 |
| Foreign Currency Options - Sold | CNH/JPY | | 1,334 |
| | 363,840 |
| Total Derivative Liabilities (free standing) | | | $ | 16,050 |
| | $ | 1,310,297 |
| | | | | | | Embedded derivative liabilities in reinsurance contracts (3) | USD | | $ | 92 |
| | $ | 20,000 |
| Total Derivative Liabilities (embedded) | | | $ | 92 |
| | $ | 20,000 |
|
| | (1) | BRL = Brazilian Real, CAD = Canadian Dollar, CNH = Chinese Yuan, EUR = Euro, GBP = British Pound, HKD = Hong Kong Dollar, JPY = Japanese Yen, MXN = Mexican Peso, SAR = Saudi Arabian Riyal, USD = US Dollar, ZAR = South African Rand |
| | (2) | The absolute notional exposure represents the Company’s derivative activity as of December 31, 2016, which is representative of the volume of derivatives held during the period. |
| | (3) | The fair value of embedded derivatives in reinsurance contracts is included in reinsurance balances payable in the condensed consolidated balance sheets. |
The following table sets forth, by major risk type, the Company’s realized and unrealized gains (losses) relating to derivatives for the three and nine months ended September 30, 2017 and 2016. Realized and unrealized gains (losses) related to free standing derivatives are included in net investment income in the condensed consolidated statements of income. Realized and unrealized gains (losses) related to embedded derivatives are included in other expenses in the condensed consolidated statements of income. | | | | | | | | | | | | | | | | | | Three months ended | | September 30, 2017 | | September 30, 2016 | Free standing Derivatives - Primary Underlying Risk | Realized Gain (Loss) | | Unrealized Gain (Loss)* | | Realized Gain (Loss) | | Unrealized Gain (Loss)* | Credit | ($ in thousands) | Commodity Future Options - Purchased | $ | — |
| | $ | — |
| | $ | (475 | ) | | $ | (1,310 | ) | Credit | | | | | | | | Credit Default Swaps - Protection Purchased | 2,824 |
| | (4,059 | ) | | (887 | ) | | (433 | ) | Credit Default Swaps - Protection Sold | (26 | ) | | (288 | ) | | 38 |
| | (7 | ) | Total Return Swaps - Long Contracts | — |
| | 1,506 |
| | — |
| | — |
| Equity Price | | | | | | | | Contracts for Differences - Long Contracts | 5,021 |
| | 13,949 |
| | 1,666 |
| | 791 |
| Contracts for Differences - Short Contracts | (511 | ) | | (1,219 | ) | | (3,767 | ) | | (2,166 | ) | Total Return Swaps - Long Contracts | 4,655 |
| | 5,455 |
| | 2,172 |
| | 3,174 |
| Total Return Swaps - Short Contracts | (2,732 | ) | | (4,519 | ) | | (4,392 | ) | | 831 |
| Interest Rates | | | | | | | | Commodity Futures - Short Contracts | — |
| | — |
| | 870 |
| | — |
| Interest Rate Swaps | (7 | ) | | — |
| | — |
| | — |
| Interest Rate Swaptions | — |
| | (512 | ) | | (244 | ) | | 216 |
| Sovereign Debt Futures - Short Contracts | (139 | ) | | 1,284 |
| | — |
| | — |
| Total Return Swaps - Long Contracts | — |
| | — |
| | 268 |
| | (261 | ) | Total Return Swaps - Short Contracts | — |
| | — |
| | (100 | ) | | 65 |
| Treasury Futures - Short Contracts | — |
| | — |
| | 14 |
| | 1,191 |
| Foreign Currency Exchange Rates | | | | | | | | Foreign Currency Forward Contracts | (1,863 | ) | | (609 | ) | | (4,110 | ) | | 2,838 |
| Foreign Currency Options - Purchased | (529 | ) | | 3 |
| | — |
| | (384 | ) | Foreign Currency Options - Sold | 1 |
| | (2 | ) | | — |
| | (1 | ) | | $ | 6,694 |
| | $ | 10,989 |
| | $ | (8,947 | ) | | $ | 4,544 |
| Embedded Derivatives | | | | | | | | Embedded derivatives in reinsurance contracts | $ | — |
| | $ | — |
| | $ | — |
| | $ | 39 |
| Total Derivative Liabilities (embedded) | $ | — |
| | $ | — |
| | $ | — |
| | $ | 39 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Nine months ended | | September 30, 2017 | | September 30, 2016 | Free standing Derivatives - Primary Underlying Risk | Realized Gain (Loss) | | Unrealized Gain (Loss)* | | Realized Gain (Loss) | | Unrealized Gain (Loss)* | Commodity Price | ($ in thousands) | Commodity Future Options - Purchased | $ | — |
| | $ | — |
| | $ | 106 |
| | $ | 490 |
| Credit | | | | | | | | Credit Default Swaps - Protection Purchased | 359 |
| | (4,029 | ) | | 5,520 |
| | (5,420 | ) | Credit Default Swaps - Protection Sold | 11 |
| | (347 | ) | | (4,129 | ) | | 4,245 |
| Total Return Swaps - Long Contracts
| (29 | ) | | 1,469 |
| | — |
| | — |
| Equity Price | | | | | | | | Contracts for Differences - Long Contracts | 51,946 |
| | 20,636 |
| | (756 | ) | | 412 |
| Contracts for Differences - Short Contracts | (4,716 | ) | | 1,726 |
| | 803 |
| | (1,888 | ) | Total Return Swaps - Long Contracts | 8,517 |
| | 14,002 |
| | (2,654 | ) | | 3,974 |
| Total Return Swaps - Short Contracts | (6,475 | ) | | (3,731 | ) | | (3,701 | ) | | (931 | ) | Interest Rates | | | | | | | | Commodities Futures - Short Contracts | — |
| | — |
| | (281 | ) | | (52 | ) | Fixed Income Swap - Short Contracts | — |
| | — |
| | (94 | ) | | — |
| Interest Rate Swaps | (3,104 | ) | | (1,740 | ) | | — |
| | — |
| Interest Rate Swaptions | 522 |
| | (2,854 | ) | | (356 | ) | | 171 |
| Sovereign Debt Futures - Short Contracts | (8,795 | ) | | 1,942 |
| | — |
| | — |
| Treasury Futures - Short Contracts | — |
| | — |
| | 14 |
| | 1,191 |
| Foreign Currency Exchange Rates | | | | | | | | Foreign Currency Forward Contracts | (11,898 | ) | | (1,877 | ) | | (13,014 | ) | | (1,913 | ) | Foreign Currency Options - Purchased | (6,716 | ) | | 1,165 |
| | (2,040 | ) | | (2,001 | ) | Foreign Currency Options - Sold | 2,185 |
| | (82 | ) | | 617 |
| | (183 | ) | | $ | 21,807 |
| | $ | 26,280 |
| | $ | (19,965 | ) | | $ | (1,905 | ) | Embedded Derivatives | | | | | | | | Embedded derivatives in reinsurance contracts | $ | — |
| | $ | (88 | ) | | $ | — |
| | $ | 128 |
| Total Derivative Liabilities (embedded) | $ | — |
| | $ | (88 | ) | | $ | — |
| | $ | 128 |
|
*Unrealized gain (loss) relates to derivatives still held at reporting date. The Company’s derivative contracts are generally subject to International Swaps and Derivatives Association (“ISDA”) Master Agreements or other similar agreements that contain provisions setting forth events of default and/or termination events (“credit-risk-related contingent features”), including but not limited to provisions setting forth maximum permissible declines in the Company’s net asset value. Upon the occurrence of a termination event with respect to an ISDA Agreement, the Company’s counterparty could elect to terminate the derivative contracts governed by such agreement, resulting in the realization of any net gains or losses with respect to such derivative contracts and the return of collateral held by such party. The Company obtains/provides collateral from/to various counterparties for OTC derivative and futures contracts in accordance with bilateral collateral agreements. As of September 30, 2017, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $4.3 million (December 31, 2016 - $6.1 million) for which the Company posted collateral in the form of cash of $117.7 million (December 31, 2016 - $48.8 million) in the normal course of business. Similarly, the Company held collateral (approximately $2.8 million) in cash from certain counterparties as of September 30, 2017. If the credit-risk-related contingent features underlying these instruments had been triggered as of September 30, 2017 and the Company had to settle these instruments immediately, no additional amounts would be required to be posted that would exceed the settlement amounts of open derivative contracts or in the case of cross margining relationships, the assets in the Company’s prime brokerage accounts are sufficient to offset the derivative liabilities. The Company’s derivatives do not qualify as hedges for financial reporting purposes and are recorded in the condensed consolidated financial statements on a gross basis and not offset against any collateral pledged or received. Pursuant to ISDA master agreements and other counterparty agreements, the Company and its counterparties typically have the ability to net certain payments owed to each other in specified circumstances. In addition, in the event a party to one of the ISDA master agreements or other derivatives agreements defaults, or a transaction is otherwise subject to termination, the non-defaulting party generally has the right to offset against payments owed to the defaulting party or collateral held by the non-defaulting party. The Company has pledged cash collateral to counterparties to support the current value of amounts due to the counterparties based on the value of the underlying security. As of September 30, 2017 and December 31, 2016, the gross and net amounts of derivative instruments and repurchase and reverse repurchase agreements that are subject to enforceable master netting arrangements or similar agreements were as follows: | | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Condensed Consolidated Balance Sheet | September 30, 2017
Derivative Contracts | Gross Amount (1) | | Financial Instruments | | Cash Collateral Received | | Net Amount | Financial assets, derivative assets and collateral received | ($ in thousands) | Counterparty 1 | $ | 1,174 |
| | $ | 1,174 |
| | $ | — |
| | $ | — |
| Counterparty 2 | 3,279 |
| | 300 |
| | — |
| | 2,979 |
| Counterparty 3 | 38,429 |
| | 5,408 |
| | — |
| | 33,021 |
| Counterparty 4 | 5,041 |
| | 4,290 |
| | — |
| | 751 |
| Counterparty 5 | 12,275 |
| | 3,515 |
| | — |
| | 8,760 |
| Counterparty 6 | 3,625 |
| | 8 |
| | 2,806 |
| | 811 |
| Counterparty 8 | 13,969 |
| | 3,889 |
| | — |
| | 10,080 |
| Counterparty 9 | 965 |
| | 965 |
| | — |
| | — |
| | $ | 78,757 |
| | $ | 19,549 |
| | $ | 2,806 |
| | $ | 56,402 |
| | | | | | | | | | Gross Amounts not Offset in the Condensed Consolidated Balance Sheet | September 30, 2017
Derivative Contracts | Gross Amount (2) | | Financial Instruments | | Cash Collateral Pledged | | Net Amount | Financial liabilities, derivative liabilities and collateral pledged | ($ in thousands) | Counterparty 1 | $ | 3,825 |
| | $ | 1,174 |
| | $ | 2,651 |
| | $ | — |
| Counterparty 2 | 300 |
| | 300 |
| | — |
| | — |
| Counterparty 3 | 5,408 |
| | 5,408 |
| | — |
| | — |
| Counterparty 4 | 4,290 |
| | 4,290 |
| | — |
| | — |
| Counterparty 5 | 3,515 |
| | 3,515 |
| | — |
| | — |
| Counterparty 6 | 8 |
| | 8 |
| | — |
| | — |
| Counterparty 8 | 3,889 |
| | 3,889 |
| | — |
| | — |
| Counterparty 9 | 2,215 |
| | 965 |
| | 1,250 |
| | — |
| Counterparty 15 | 410 |
| | — |
| | 359 |
| | 51 |
| | $ | 23,860 |
| | $ | 19,549 |
| | $ | 4,260 |
| | $ | 51 |
|
| | (1) | The gross amounts of assets presented in the condensed consolidated balance sheets presented above includes the fair value of derivative contract assets as well as gross OTC option contract assets of $3.0 million included in other investments in the condensed consolidated balance sheets. |
| | (2) | The gross amounts of liabilities presented in the condensed consolidated balance sheets presented above includes the fair value of derivative contract liabilities as well as gross OTC option contract liabilities of $6.6 million included in securities sold, not yet purchased in the condensed consolidated balance sheets. |
| | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Condensed Consolidated Balance Sheet | December 31, 2016 Derivative Contracts | Gross Amount (1) | | Financial Instruments | | Cash Collateral Received | | Net Amount | Financial assets, derivative assets and collateral received | ($ in thousands) | Counterparty 1 | $ | 535 |
| | $ | 535 |
| | $ | — |
| | $ | — |
| Counterparty 2 | 3,147 |
| | 607 |
| | — |
| | 2,540 |
| Counterparty 3 | 8,652 |
| | 4,760 |
| | — |
| | 3,892 |
| Counterparty 4 | 1,639 |
| | 1,639 |
| | — |
| | — |
| Counterparty 5 | 7,336 |
| | 3,027 |
| | — |
| | 4,309 |
| Counterparty 6 | 6,262 |
| | 2,599 |
| | 3,383 |
| | 280 |
| Counterparty 7 | 227 |
| | — |
| | 197 |
| | 30 |
| Counterparty 8 | 277 |
| | 277 |
| | — |
| | — |
| Counterparty 9 | 37 |
| | 37 |
| | — |
| | — |
| | $ | 28,112 |
| | $ | 13,481 |
| | $ | 3,580 |
| | $ | 11,051 |
| | | | | | | | | | Gross Amounts not Offset in the Condensed Consolidated Balance Sheet | December 31, 2016 Derivative Contracts | Gross Amount (2) | | Financial Instruments | | Cash Collateral Pledged | | Net Amount | Financial liabilities, derivative liabilities and collateral pledged | ($ in thousands) | Counterparty 1 | $ | 2,959 |
| | $ | 535 |
| | $ | 2,424 |
| | $ | — |
| Counterparty 2 | 607 |
| | 607 |
| | — |
| | — |
| Counterparty 3 | 4,760 |
| | 4,760 |
| | — |
| | — |
| Counterparty 4 | 3,827 |
| | 1,639 |
| | 2,188 |
| | — |
| Counterparty 5 | 3,027 |
| | 3,027 |
| | — |
| | — |
| Counterparty 6 | 2,599 |
| | 2,599 |
| | — |
| | — |
| Counterparty 8 | 977 |
| | 277 |
| | — |
| | 700 |
| Counterparty 9 | 822 |
| | 37 |
| | 785 |
| | — |
| | $ | 19,578 |
| | $ | 13,481 |
| | $ | 5,397 |
| | $ | 700 |
| | | | | | | | | Securities lending transactions | | | | | | | | Counterparty 3 | $ | 302 |
| | $ | 302 |
| | $ | — |
| | $ | — |
| | $ | 302 |
| | $ | 302 |
| | $ | — |
| | $ | — |
|
| | (1) | The gross amounts of assets presented in the condensed consolidated balance sheets presented above includes the fair value of derivative contract assets as well as gross OTC option contract assets of $0.7 million included in other investments in the condensed consolidated balance sheets. |
| | (2) | The gross amounts of liabilities presented in the condensed consolidated balance sheets presented above includes the fair value of derivative contract liabilities as well as gross OTC option contract liabilities of $3.5 million included in securities sold, not yet purchased in the condensed consolidated balance sheets. |
|