Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and December 31, 2013 by level within the fair value hierarchy:

March 31, 2014 (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 March 31, 2014
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,319,052	$	—	$	—	$	2,319,052
Corporate (1)	—		11,104,123		4,382		—		11,108,505
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		3,213,555		8,928		—		3,222,483
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		401,382		11		—		401,393
Commercial mortgage-backed securities (“CMBS”)	—		1,192,386		5,926		—		1,198,312
Collateralized debt obligations (“CDO”)	—		6,233		718,827		—		725,060
Other asset-backed securities (2)	—		1,185,639		10,673		—		1,196,312
U.S. States and political subdivisions of the States	—		1,902,451		—		—		1,902,451
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		5,066,256		—		—		5,066,256
Total fixed maturities, at fair value	$	—	$	26,391,077	$	748,747	$	—	$	27,139,824
Equity securities, at fair value (3)	549,454		505,939		—		—		1,055,393
Short-term investments, at fair value (1)(4)	—		382,113		—		—		382,113
Total investments available for sale	$	549,454	$	27,279,129	$	748,747	$	—	$	28,577,330
Cash equivalents (5)	1,270,563		485,486		—		—		1,756,049
Other investments (6)	—		813,757		116,418		—		930,175
Other assets (7)	—		8,858		—		—		8,858
Total assets accounted for at fair value	$	1,820,017	$	28,587,230	$	865,165	$	—	$	31,272,412
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	30,896	$	—	$	—	$	30,896
Other liabilities (7)	—		28,871		32,496		—		61,367
Total liabilities accounted for at fair value	$	—	$	59,767	$	32,496	$	—	$	92,263

December 31, 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 December 31, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,501,851	$	—	$	—		$	2,501,851
Corporate (1)	—		11,094,257		31,573		—			11,125,830
RMBS – Agency	—		3,535,649		10,473		—			3,546,122
RMBS – Non-Agency	—		398,759		9		—			398,768
CMBS	—		1,234,262		12,533		—			1,246,795
CDO	—		7,060		710,253		—			717,313
Other asset-backed securities (2)	—		1,230,227		11,877		—			1,242,104
U.S. States and political subdivisions of the States	—		1,845,812		—		—			1,845,812
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,875,541		—		—			4,875,541
Total fixed maturities, at fair value	$	—	$	26,723,418	$	776,718	$	—		$	27,500,136
Equity securities, at fair value (3)	540,331		499,906		—		—			1,040,237
Short-term investments, at fair value (1)(4)	—		454,273		2,015		—			456,288
Total investments available for sale	$	540,331	$	27,677,597	$	778,733	$	—		$	28,996,661
Cash equivalents (5)	834,514		226,636		—		—			1,061,150
Other investments (6)	—		757,110		113,472		—			870,582
Other assets (7)	—		27,487		—		(1,342		)	26,145
Total assets accounted for at fair value	$	1,374,845	$	28,688,830	$	892,205	$	(1,342	)	$	30,954,538
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	28,861	$	—	$	—		$	28,861
Other liabilities (7)	—		76,375		29,110		(1,342		)	104,143
Total liabilities accounted for at fair value	$	—	$	105,236	$	29,110	$	(1,342	)	$	133,004

____________

(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 $154.7 million and $154.6 million and an amortized cost of $146.2 million and $147.7 million at March 31, 2014 and December 31, 2013, 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 March 31, 2014 and December 31, 2013, Covered Bonds with a fair value of $537.5 million and $553.1 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 $89.1 million and $87.4 million at March 31, 2014 and December 31, 2013, 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 recurring 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 $288.0 million at March 31, 2014 and $294.0 million at December 31, 2013, 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, 2013.

(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 March 31, 2014
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	31,573		$	10,473		$	9		$	12,533		$	710,253
Realized gains (losses)	120			(1		)	—			2			1,581
Movement in unrealized gains (losses)	(2		)	1			2			(3		)	3,681
Purchases and issuances	1,434			—			—			—			27,814
Sales	—			—			—			—			(9,931		)
Settlements	(5,114		)	(573		)	—			(6,606		)	(14,571		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(23,629		)	(972		)	—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	4,382		$	8,928		$	11		$	5,926		$	718,827
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	148		$	—		$	2		$	—		$	4,969
	Level 3 Assets and Liabilities -Three Months Ended March 31, 2014
(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	$	11,877		$	—		$	2,015		$	113,472		$	(29,110	)
Realized gains (losses)	(15		)	—			—			3,566			—
Movement in unrealized gains (losses)	62			—			(15		)	1,494			(3,386		)
Purchases and issuances	—			—			—			11,089			—
Sales	—			—			—			—			—
Settlements	(1,251		)	—			(2,000		)	(13,203		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	10,673		$	—		$	—		$	116,418		$	(32,496	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	46		$	—		$	—		$	5,061		$	(3,386	)

	Level 3 Assets and Liabilities -Three Months Ended March 31, 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)	(2		)	13			—			—			356
Movement in unrealized gains (losses)	204			(18		)	—			1			21,255
Purchases and issuances	10,621			—			—			—			—
Sales	—			(535		)	—			—			—
Settlements	(106		)	(893		)	(13		)	(336		)	(20,443		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			(11,465		)	—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	40,815		$	19,107		$	103		$	25,012		$	702,904
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	202		$	(5	)	$	—		$	1		$	20,892
	Level 3 Assets and Liabilities -Three Months Ended March 31, 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)	51			—			—			2,915			—
Movement in unrealized gains (losses)	1,475			—			—			(1,902		)	3,697
Purchases and issuances	21,686			—			2,017			1,905			—
Sales	—			—			—			—			—
Settlements	(5,453		)	—			—			(4,868		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	35,887		$	—		$	2,017		$	113,322		$	(32,550	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	7		$	—		$	—		$	1,013		$	3,697

Financial Instruments Not Carried at Fair Value

	March 31, 2014				December 31, 2013
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,854,487	$	3,209,175	$	2,858,695	$	3,131,235
Other investments - structured transactions	288,047		306,989		294,048		296,799
Financial Assets	$	3,142,534	$	3,516,164	$	3,152,743	$	3,428,034
Deposit liabilities	$	1,497,599	$	1,739,163	$	1,509,243	$	1,718,394
Notes payable and debt	2,262,824		2,483,414		2,263,203		2,429,412
Financial Liabilities	$	3,760,423	$	4,222,577	$	3,772,446	$	4,147,806