Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Hierarchy

The following tables set forth the Company’s assets and liabilities that were accounted for at fair value at September 30, 2013 and December 31, 2012 by level within the fair value hierarchy:

September 30, 2013 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at September 30, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,175,989	$	—	$	—		$	2,175,989
Corporate (1)	—		10,726,705		32,627		—			10,759,332
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,051,793		17,289		—			4,069,082
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		399,390		9		—			399,399
Commercial mortgage-backed securities (“CMBS”)	—		1,177,921		19,960		—			1,197,881
Collateralized debt obligations (“CDO”)	—		7,597		704,551		—			712,148
Other asset-backed securities (2)	—		1,138,681		12,454		—			1,151,135
U.S. States and political subdivisions of the States	—		1,818,098		—		—			1,818,098
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,999,378		—		—			4,999,378
Total fixed maturities, at fair value	$	—	$	26,495,552	$	786,890	$	—		$	27,282,442
Equity securities, at fair value (3)	469,857		504,876		—		—			974,733
Short-term investments, at fair value (1)(4)	—		270,647		2,058		—			272,705
Total investments available for sale	$	469,857	$	27,271,075	$	788,948	$	—		$	28,529,880
Cash equivalents (5)	1,141,559		285,318		—		—			1,426,877
Other investments (6)	—		727,289		103,856		—			831,145
Other assets (7)	—		30,579		—		(2,600		)	27,979
Total assets accounted for at fair value	$	1,611,416	$	28,314,261	$	892,804	$	(2,600	)	$	30,815,881
Liabilities
Financial instruments sold, but not yet purchased (8)	$	3,995	$	23,051	$	—	$	—		$	27,046
Other liabilities (7)	—		168,012		33,389		(2,600		)	198,801
Total liabilities accounted for at fair value	$	3,995	$	191,063	$	33,389	$	(2,600	)	$	225,847

December 31, 2012 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2012
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,034,617	$	—	$	—		$	2,034,617
Corporate (1)	—		10,451,902		30,098		—			10,482,000
RMBS – Agency	—		5,223,488		32,005		—			5,255,493
RMBS – Non-Agency	—		647,617		116		—			647,733
CMBS	—		1,051,904		25,347		—			1,077,251
CDO	—		8,080		701,736		—			709,816
Other asset-backed securities (2)	—		1,452,583		18,128		—			1,470,711
U.S. States and political subdivisions of the States	—		1,911,017		—		—			1,911,017
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,258,282		—		—			4,258,282
Total fixed maturities, at fair value	$	—	$	27,039,490	$	807,430	$	—		$	27,846,920
Equity securities, at fair value (3)	253,957		395,402		—		—			649,359
Short-term investments, at fair value (1)(4)	—		322,703		—		—			322,703
Total investments available for sale	$	253,957	$	27,757,595	$	807,430	$	—		$	28,818,982
Cash equivalents (5)	1,596,376		408,292		—		—			2,004,668
Other investments (6)	—		792,483		115,272		—			907,755
Other assets (7)	—		24,842		—		(1,327		)	23,515
Total assets accounted for at fair value	$	1,850,333	$	28,983,212	$	922,702	$	(1,327	)	$	31,754,920
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	26,235	$	—	$	—		$	26,235
Other liabilities (7)	—		30,379		36,247		(1,327		)	65,299
Total liabilities accounted for at fair value	$	—	$	56,614	$	36,247	$	(1,327	)	$	91,534

____________

(1) Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes had a fair value of $150.9 million and $194.3 million and an amortized cost of $150.6 million and $194.8 million at September 30, 2013 and December 31, 2012, respectively. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.

(2) The Company invests in covered bonds (“Covered Bonds”). Covered Bonds are senior secured debt instruments issued by financial institutions and backed by over-collateralized pools of public sector or mortgage loans. At September 30, 2013 and December 31, 2012, Covered Bonds with a fair value of $560.7 million and $647.1 million, respectively, are included within Other asset-backed securities.

(3) Included within Equity securities are investments in fixed income funds with a fair value of $89.7 million and $101.9 million at September 30, 2013 and December 31, 2012, respectively.

(4) Short-term investments consist primarily of Corporate securities and U.S. and Non-U.S. Government and Government-Related/ Supported securities.

(5) Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to fair value measurement guidance.

(6) The Other investments balance excludes certain structured transactions including certain investments in project finance transactions, a payment obligation and liquidity financing provided to a structured credit vehicle as a part of a third party medium term note facility. These investments, which totaled $293.9 million at September 30, 2013 and $312.1 million at December 31, 2012, are carried at amortized cost. For further information, see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

(7) Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported on a gross basis by level with a netting adjustment presented separately in the Collateral and Counterparty Netting column. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy. For further details regarding derivative fair values and associated collateral received or paid see Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements.

(8) Financial instruments sold, but not yet purchased, represent “short sales” and are included within “Payable for investments purchased” on the balance sheet.

Level 3 Roll Forward

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Realized gains (losses)	32			(1		)	(1		)	1			584
Movement in unrealized gains (losses)	352			(11		)	(1		)	(58		)	(3,405		)
Purchases and issuances	70			—			—			—			70,552
Sales	—			—			—			—			—
Settlements	—			(913		)	(74		)	(4,406		)	(69,193		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	385		$	(12	)	$	—		$	(57	)	$	(3,681	)
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Realized gains (losses)	810			—			(5		)	1,082			—
Movement in unrealized gains (losses)	722			—			64			1,974			(4,015		)
Purchases and issuances	—			—			—			2,333			—
Sales	(15,711		)	—			—			—			—
Settlements	(906		)	—			—			(5,377		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(4	)	$	—		$	59		$	3,057		$	(4,015	)

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	33,511		$	52,588		$	1,596		$	—		$	642,179
Realized gains (losses)	20			4			(22		)	—			913
Movement in unrealized gains (losses)	673			106			(424		)	—			35,886
Purchases and issuances	—			34			6,821			33,369			—
Sales	(555		)	—			—			—			—
Settlements	—			(4,645		)	(59		)	—			(5,347		)
Transfers into Level 3	—			—			—			—			1,162
Transfers out of Level 3	(4,514		)	(14,230		)	(73		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	674		$	110		$	(447	)	$	—		$	35,806
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	25,248		$	—		$	—		$	117,765		$	(35,947	)
Realized gains (losses)	7,017			—			—			343			—
Movement in unrealized gains (losses)	(6,552		)	—			—			1,686			885
Purchases and issuances	8,753			—			—			982			—
Sales	—			—			—			—			—
Settlements	(16,141		)	—			—			(807		)	—
Transfers into Level 3	—			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	456		$	—		$	—		$	1,334		$	885

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	30,098		$	32,005		$	116		$	25,347		$	701,736
Realized gains (losses)	(39		)	10			(1		)	1			885
Movement in unrealized gains (losses)	982			(48		)	(1		)	(76		)	32,341
Purchases and issuances	10,691			—			3,326			—			75,914
Sales	—			(535		)	—			—			—
Settlements	(7,245		)	(2,678		)	(105		)	(5,312		)	(106,325		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	(11,465		)	(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,012		$	(52	)	$	(1	)	$	(75	)	$	30,597
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	18,128		$	—		$	—		$	115,272		$	(36,247	)
Realized gains (losses)	848			—			(15		)	6,869			—
Movement in unrealized gains (losses)	1,685			—			56			1,004			2,858
Purchases and issuances	21,686			—			2,017			5,240			—
Sales	(15,711		)	—			—			—			—
Settlements	(7,676		)	—			—			(24,529		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(520	)	$	—		$	41		$	7,865		$	2,858

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	23,818		$	32,041		$	—		$	—		$	650,851
Realized gains (losses)	4			(23		)	—			—			(523		)
Movement in unrealized gains (losses)	346			58			—			—			75,489
Purchases and issuances	8,949			103			6,821			33,369			—
Sales	(555		)	—			—			—			(32,495		)
Settlements	(181		)	(6,233		)	—			—			(18,529		)
Transfers into Level 3	1,393			22,141			1,091			—			1,162
Transfers out of Level 3	(4,639		)	(14,230		)	(73		)	—			(1,162		)
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	351		$	35		$	—		$	—		$	71,738
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	16,552		$	—		$	—		$	113,959		$	(42,644	)
Realized gains (losses)	6,748			—			—			2,782			—
Movement in unrealized gains (losses)	(2,873		)	—			—			6,206			7,582
Purchases and issuances	8,753			—			—			4,664			—
Sales	—			—			—			(7,327		)	—
Settlements	(15,867		)	—			—			—			—
Transfers into Level 3	5,012			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			(315		)	—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,652		$	—		$	—		$	2,385		$	7,582

Financial Instruments Not Carried at Fair Value

	September 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804
Other investments - structured transactions	293,898		291,924		312,122		293,813
Financial Assets	$	3,096,009	$	3,408,864	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,505,180	$	1,755,877	$	1,551,398	$	1,878,499
Notes payable and debt	1,671,062		1,842,597		1,672,778		1,918,134
Financial Liabilities	$	3,176,242	$	3,598,474	$	3,224,176	$	3,796,633