Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of location and gross amounts of derivative fair values in the consolidated balance sheets

The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheets at December 31, 2014 and 2013:

(U.S. dollars in thousands)	2014								2013
	Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)		Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	2,300,609	$	121,862	$	302,211	$	2,936	$	1,005,610	$	26,098	$	2,572,227	$	70,462
Total derivatives designated as hedging instruments	$	2,300,609	$	121,862	$	302,211	$	2,936	$	1,005,610	$	26,098	$	2,572,227	$	70,462
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	394,597	$	206	$	20,782	$	51	$	30,702	$	266	$	10,259	$	8
Foreign exchange exposure	7,385		403		288,376		4,724		17,497		12		50,614		680
Credit exposure	2,408		165		14,270		9,836		—		—		340,020		15,128
Financial market exposure	46,145		360		33,670		34		58,232		1,111		14,821		77
Financial Operations Derivatives: (2)
Credit exposure	—		—		—		—		—		—		44,234		4,190
Other Non-Investment Derivatives:
Credit exposure	31,060		60		—		—		—		—		—		—
Guaranteed minimum income benefit contract	46,249		13,603		46,249		13,603		—		—		53,564		14,940
Modified coinsurance funds withheld contract (3)	64,947		—		5,401,278		—		66,369		—		—		—
Total derivatives not designated as hedging instruments	$	592,791	$	14,797	$	5,804,625	$	28,248	$	172,800	$	1,389	$	513,512	$	35,023

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(1) Derivative instruments in an asset or liability position are included within Other assets or Other liabilities, respectively, in the balance sheets on a net basis where the Company has both a legal right of offset and the intention to settle the contracts on a net basis.

(2) Financial operations derivatives represent interests in variable interest entities as described in Note 18, “Variable Interest Entities".

(3) The fair value movements in derivative assets and liabilities relating to modified coinsurance funds withheld contracts are included within the associated asset or liability at each period end on the face of the balance sheets. Notional amounts associated with reinsurance agreements under which the Company assumes reinsurance risk are recorded as asset derivative notional amounts. Notional amounts associated with the Life Retro Arrangements under which the Company cedes reinsurance risk are recorded as liability derivative notional amounts. Included in the liability derivative notional amount at December 31, 2014 is the cumulative net realized and unrealized loss on life retrocession embedded derivative of $450.8 million.

Summary of gross and net amounts of derivative fair values and associated collateral

The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheets at December 31, 2014 and 2013:

							Gross Amounts Not Offset in the Balance Sheets
December 31, 2014 (U.S. dollars in thousands)	Gross Amounts Recognized in the Balance Sheets		Gross Amounts Offset in the Balance Sheets		Net Amounts in the Balance Sheets		Financial Instruments		Cash Collateral		Net Amounts
Derivative Assets	$	136,659	$	696	$	135,963	$	—	$	78,580	$	57,383
Derivative Liabilities	$	31,184	$	696	$	30,488	$	—	$	—	$	30,488
December 31, 2013 (U.S. dollars in thousands)
Derivative Assets	$	27,487	$	1,342	$	26,145	$	—	$	—	$	26,145
Derivative Liabilities	$	105,485	$	1,342	$	104,143	$	—	$	19,847	$	84,296

Total impact on earnings related to derivative instruments

The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the years indicated:

Derivatives Designated as Fair Value Hedges (U.S. dollars in thousands)	Hedged Items – Amount of Gain/(Loss) Recognized in Income Attributable to Risk
	Gain/(Loss) Recognized in Income on Derivative			Deposit Liabilities			Fixed Maturity Investments		Ineffective Portion of Hedging Relationship – Gain/(Loss)
Year Ended December 31, 2014
Interest rate exposure	$	—
Foreign exchange exposure	(15,663		)
Total	$	(15,663	)	$	—		$	15,407	$	(256	)
Year Ended December 31, 2013
Interest rate exposure	$	—
Foreign exchange exposure	(22,568		)
Total	$	(22,568	)	$	—		$	23,065	$	497
Year Ended December 31, 2012
Interest rate exposure	$	1,813
Foreign exchange exposure	(24,183		)
Total	$	(22,370	)	$	(6,182	)	$	23,967	$	(4,585	)

Summary of fair value hedges that have been settled and their impact on results during the year

A summary of the fair value hedges that have been settled and their impact on results during the indicated years ended December 31 as well as the remaining balance of fair value hedges and average years remaining to maturity are shown below:

Settlement of Fair Value Hedges – Summary (U.S. dollars in thousands, except years)	Fair Value Hedges – Notes Payable and Debt December 31,				Fair Value Hedges – Deposit Liabilities December 31,
	2014		2013		2014		2013
Cumulative reduction to interest expense	$	21,624	$	18,856	$	95,333	$	37,382
Remaining balance	$	—	$	2,767	$	137,862	$	195,814
Weighted average years remaining to maturity	0.0		0.7		23.2		22.7

Weighted average US dollar equivalent of foreign denominated net assets that were hedge and resultant gain (loss)

The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resulting derivative gain (loss) that was recorded in the foreign currency translation adjustment, net of tax, account within AOCI for the year ended December 31, 2014 and 2013.

Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation – Summary (U.S. dollars in thousands)	2014		2013
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$	2,384,508	$	2,648,137
Derivative gains (losses) (1)	$	120,643	$	(27,392	)

____________

(1) Derivative gains (losses) from derivative instruments designated as hedges of the net investment in a foreign operation are recorded in the cumulative translation adjustment account within AOCI for each period.

Total impact on earnings relating to derivative instruments not formally designated as hedging

The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the years ended December 31, 2014, 2013 and 2012:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments (U.S. dollars in thousands)	2014			2013			2012
Investment Related Derivatives:
Interest rate exposure	$	15,959		$	5,065		$	4,394
Foreign exchange exposure	3,351			(948		)	(1,084		)
Credit exposure	400			(4,052		)	(7,611		)
Financial market exposure	411			6,302			3,073
Financial Operations Derivatives:
Credit exposure	5,023			(2,437		)	10,511
Other Non-Investment Derivatives:
Credit exposure	—			—			—
Guaranteed minimum income benefit contract	2,257			10,457			(2,906		)
Modified coinsurance funds withheld contract	2,741			(7,086		)	3,429
Total derivatives not designated as hedging instruments	$	30,142		$	7,301		$	9,806
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(256		)	497			(4,585		)
Net realized and unrealized gains (losses) on derivative instruments	$	29,886		$	7,798		$	5,221
Net realized and unrealized gains (losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	$	(488,222	)	$	—		$	—

Components of life retrocession embedded derivatives

The value of the life retrocession embedded derivative includes the interest income, realized and unrealized gains and losses on Life Funds Withheld Assets and certain related expenses subsequent to May 30, 2014 as follows:

Components of Life Retrocession Embedded Derivative and Derivative Instruments - Life Funds Withheld Assets:
(U.S. dollars in thousands)	2014
Interest income	$	(134,634	)
Realized and unrealized gains (losses) on Life Funds Withheld Assets	(318,065		)
Other	1,868
Net realized and unrealized gains (losses) on life retrocession embedded derivative	$	(450,831	)
Net adjustments related to future policy benefit reserves, net of tax	$	(21,786	)
Net realized and unrealized gains (losses) on derivative instruments - Life Funds Withheld Assets	$	(15,605	)
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	$	(488,222	)

Summary of contingent credit features

The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and any collateral posted under these agreements at December 31 for the years indicated were as follows:

Contingent Credit Features - Summary: (U.S. dollars in thousands)	2014		2013
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	5,770	$	47,703
Collateral posted to counterparty	$	—	$	13,260