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Derivative Instruments (Tables)
 6 Months Ended
Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of location and gross amounts of derivative fair values
The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheets as of June 30, 2015 and December 31, 2014:
 
June 30, 2015
 
December 31, 2014
(U.S. dollars in thousands)
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
$
1,834,298

 
$
209,675

 
$
720,027

 
$
52,188

 
$
2,300,609

 
$
121,862

 
$
302,211

 
$
2,936

Total derivatives designated as hedging instruments
$
1,834,298

 
$
209,675

 
$
720,027

 
$
52,188

 
$
2,300,609

 
$
121,862

 
$
302,211

 
$
2,936

Derivatives not designated as hedging instruments:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Investment Related Derivatives:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate exposure
$
10,684

 
$
194

 
$
33,934

 
$
44

 
$
394,597

 
$
206

 
$
20,782

 
$
51

Foreign exchange exposure
301,260

 
1,628

 
139,215

 
3,786

 
7,385

 
403

 
207,182

 
4,442

Credit exposure
8,963

 
814

 
51,614

 
12,613

 
2,408

 
165

 
14,270

 
9,836

Financial market exposure
58,875

 
2,608

 
34,794

 
405

 
46,145

 
360

 
33,670

 
34

Other Non-Investment Derivatives:
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
79,101

 
164

 
8,517

 
527

 
—

 
—

 
81,194

 
282

Credit exposure
30,281

 
71

 
—

 
—

 
31,060

 
60

 
—

 
—

Guaranteed minimum income benefit contract
45,006

 
13,321

 
45,006

 
13,321

 
46,249

 
13,603

 
46,249

 
13,603

Modified coinsurance funds withheld contracts (2)
65,663

 
—

 
4,954,481

 
—

 
64,947

 
—

 
5,401,278

 
—

Total derivatives not designated as hedging instruments
$
599,833

 
$
18,800

 
$
5,267,561

 
$
30,696

 
$
592,791

 
$
14,797

 
$
5,804,625

 
$
28,248

____________
(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)
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 as of June 30, 2015 is the cumulative net realized and unrealized loss on life retrocession embedded derivative of $381.3 million.
Summary of gross and net amounts of derivative fair values and associated collateral received or paid
The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets, or collateral provided related to derivative liabilities, reported in other assets and or other liabilities within our consolidated balance sheets as of June 30, 2015 and December 31, 2014:
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheets
 
 
June 30, 2015
(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
$
228,475

 
$
3,239

 
$
225,236

 
$
—

 
$
132,050

 
$
93,186

Derivative Liabilities
$
82,884

 
$
3,239

 
$
79,645

 
$
—

 
$
—

 
$
79,645

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
(U.S. dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets
$
136,659

 
$
696

 
$
135,963

 
$
—

 
$
78,580

 
$
57,383

Derivative Liabilities
$
31,184

 
$
696

 
$
30,488

 
$
—

 
$
—

 
$
30,488
Gain (loss) recognized in income attributable to risk of hedged items
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 three and six months ended June 30, 2015 and 2014:
 
 
Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk
 
Derivatives Designated as Fair Value Hedges:
Three Months Ended June 30, 2015
(U.S. dollars in thousands)
Gain/(Loss)
Recognized
in Income on
Derivative
 
Fixed Maturity
Investments
 
Ineffective
Portion of
Hedging
Relationship -
Gain/(Loss)
Interest rate exposure
$
—

 
 

 
 

Foreign exchange exposure
—

 
 

 
 

Total
$
—

 
$
—

 
$
—

 
 

 
 

 
 

Three Months Ended June 30, 2014
 

 
 

 
 

(U.S. dollars in thousands)
 

 
 

 
 

Interest rate exposure
$
—

 
 

 
 

Foreign exchange exposure
(9,132
)
 
 

 
 

Total
$
(9,132
)
 
$
7,082

 
$
(2,050
)
 
 
 
 
 
 
Six Months Ended June 30, 2015
 

 
 

 
 

(U.S. dollars in thousands)
 

 
 

 
 

Interest rate exposure
$
—

 
 

 
 

Foreign exchange exposure
—

 
 

 
 

Total
$
—

 
$
—

 
$
—

 
 
 
 
 
 
Six Months Ended June 30, 2014
 

 
 

 
 

(U.S. dollars in thousands)
 

 
 

 
 

Interest rate exposure
$
—

 
 

 
 

Foreign exchange exposure
(15,663
)
 
 

 
 

Total
$
(15,663
)
 
$
15,407

 
$
(256
)
Summary of fair value hedges that have been settled and their impact on results
A summary of the fair value hedges that have been settled and their impact on results during the indicated periods as well as the remaining balance of fair value hedges and average years remaining to maturity as of June 30, 2015 and 2014 are shown below:
Settlement of Fair Value Hedges - Summary
Fair Value Hedges - Notes
Payable and Debt
June 30,
 
Fair Value Hedges -
Deposit Liabilities
June 30,
(U.S. dollars in thousands, except years)
2015
 
2014
 
2015
 
2014
Cumulative reduction to interest expense
$
—

 
$
20,810

 
$
99,141

 
$
90,615

Remaining balance
$
—

 
$
814

 
$
134,054

 
$
142,580

Weighted average years remaining to maturity
0.0

 
0.2

 
22.4

 
24.0
Summary of hedges of net investment in foreign operation
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 three and six months ended June 30, 2015 and 2014:
Derivative Instruments Designated as Hedges of the
Net Investment in a Foreign Operation - Summary
Three months ended June 30,
 
Six months ended June 30,
(U.S. dollars in thousands)
2015
 
2014
 
2015
 
2014
Weighted average of U.S. dollar equivalent of foreign denominated net assets
$
1,815,593

 
$
2,270,090

 
$
1,222,267

 
$
2,478,772

Derivative gains (losses) (1)
$
(30,498
)
 
$
(2,170
)
 
$
36,272

 
$
(1,210
)

____________
(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.    
Summary of net realized and unrealized gains (losses) on derivative instruments
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 three and six months ended June 30, 2015 and 2014:
Net Realized and Unrealized Gains (Losses) on Derivative Instruments
Three months ended June 30,
 
Six months ended June 30,
(U.S. dollars in thousands)
2015
 
2014
 
2015
 
2014
Investment Related Derivatives:
 

 
 

 
 

 
 

Interest rate exposure
$
(6,563
)
 
$
8,978

 
$
3,073

 
$
9,326

Foreign exchange exposure
482

 
(1,490
)
 
(880
)
 
1,798

Credit exposure
(386
)
 
411

 
(305
)
 
7

Financial market exposure
(1,645
)
 
2,508

 
1,398

 
3,378

Financial Operations Derivatives:
 

 
 
 
 

 
 
Credit exposure
—

 
447

 
—

 
(4,353
)
Other Non-Investment Derivatives:
 

 
 
 
 

 
 
Foreign exchange contracts
55,372

 
—

 
57,431

 
—

Credit exposure
132

 
—

 
1,478

 
—

Guaranteed minimum income benefit contract
—

 
633

 
—

 
2,257

Modified coinsurance funds withheld contract
1,117

 
2,162

 
2,835

 
1,252

Total gain (loss) recognized in income from derivatives not designated as hedging instruments
$
48,509

 
$
13,649

 
$
65,030

 
$
13,665

Amount of gain (loss) recognized in income from ineffective
portion of fair value hedges
—

 
(2,050
)
 
—

 
(256
)
Net realized and unrealized gains (losses) on derivative instruments
$
48,509

 
$
11,599

 
$
65,030

 
$
13,409

 
 
 
 
 
 
 
 
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
$
239,174

 
$
(17,546
)
 
$
9,807

 
$
(17,546
)
Components of life retrocession embedded derivatives
The change in 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:
Three months ended June 30,
 
Six Months Ended June 30,
(U.S. dollars in thousands)
2015
 
2014
 
2015
 
2014
Interest income - Life Funds Withheld Assets
$
(47,873
)
 
(19,944
)
 
(98,869
)
 
(19,944
)
Realized and unrealized gains (losses) - Life Funds Withheld Assets
321,038

 
1,893

 
168,208

 
1,893

Other
59

 
505

 
155

 
505

Net realized and unrealized gains (losses) on life retrocession embedded derivative
$
273,224

 
$
(17,546
)
 
$
69,494

 
$
(17,546
)
Net adjustments related to future policy benefit reserves, net of tax
$
(35,929
)
 
$
—

 
$
(47,883
)
 
$
—

Net realized and unrealized gains (losses) on derivative instruments - Life Funds Withheld Assets
$
1,879

 
$
—

 
$
(11,804
)
 
$
—

Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets
$
239,174

 
$
(17,546
)
 
$
9,807

 
$
(17,546
)
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 as of June 30, 2015 and December 31, 2014 were as follows:
Contingent Credit Features - Summary:
(U.S. dollars in thousands)
June 30, 2015
 
December 31, 2014
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position
$
21,545

 
$
5,770

Collateral posted to counterparty
$
12,390

 
$
—