Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 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 March 31, 2013 and December 31, 2012 by level within the fair value hierarchy:

March 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 March 31, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	1,978,000	$	—	$	—		$	1,978,000
Corporate (1) (2)	—		10,264,509		40,815		—			10,305,324
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,821,601		19,107		—			4,840,708
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		593,288		103		—			593,391
Commercial mortgage-backed securities (“CMBS”)	—		1,128,329		25,012		—			1,153,341
Collateralized debt obligations (“CDO”)	—		8,163		702,904		—			711,067
Other asset-backed securities (2)	—		1,244,792		35,887		—			1,280,679
U.S. States and political subdivisions of the States	—		1,889,269		—		—			1,889,269
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,597,406		—		—			4,597,406
Total fixed maturities, at fair value	$	—	$	26,525,357	$	823,828	$	—		$	27,349,185
Equity securities, at fair value (3)	369,864		481,106		—		—			850,970
Short-term investments, at fair value (1)(4)	—		256,252		2,017		—			258,269
Total investments available for sale	$	369,864	$	27,262,715	$	825,845	$	—		$	28,458,424
Cash equivalents (5)	1,347,072		343,554		—		—			1,690,626
Other investments (6)			717,214		113,322		—			830,536
Other assets (7)	—		108,745		—		(680		)	108,065
Total assets accounted for at fair value	$	1,716,936	$	28,432,228	$	939,167	$	(680	)	$	31,087,651
Liabilities
Financial instruments sold, but not yet purchased (8)	$	165	$	30,105	$	—	$	—		$	30,270
Other liabilities (7)	—		28,844		32,550		(680		)	60,714
Total liabilities accounted for at fair value	$	165	$	58,949	$	32,550	$	(680	)	$	90,984

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) (2)	—		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 $193.7 million and $194.3 million and an amortized cost of $192.4 million and $194.8 million at March 31, 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 March 31, 2013 and December 31, 2012, Covered Bonds with a fair value of $521.0 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 $101.0 million and $101.9 million at March 31, 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 $311.7 million at March 31, 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 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

	Level 3 Assets and Liabilities - Three Months Ended March 31, 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)	(18		)	13			—		—			(1,649		)
Movement in unrealized gains (losses)	(315		)	(79		)	—		—			33,116
Purchases and issuances	9,076			36			—		—			—
Sales	—			(1,334		)	—		—			(37,181		)
Settlements	(137		)	(1,014		)	—		—			(6,440		)
Transfers into Level 3	881			10,132			—		—			—
Transfers out of Level 3	—			—			—		—			—
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	33,305		$	39,795		$	—	$	—		$	638,697
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(332	)	$	(54	)	$	—	$	—		$	29,202
	Level 3 Assets and Liabilities - Three Months Ended March 31, 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)	21			—			—		1,925			—
Movement in unrealized gains (losses)	(163		)	—			—		899			2,014
Purchases and issuances	—			—			—		1,317			—
Sales	—			—			—		—			—
Settlements	—			—			—		(2,441		)	—
Transfers into Level 3	—			—			—		—			—
Transfers out of Level 3	—			—			—		—			—
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	16,410		$	—		$	—	$	115,659		$	(40,630	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(431	)	$	—		$	—	$	(313	)	$	2,014

Financial Instruments Not Carried at Fair Value

	March 31, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,661,821	$	3,086,378	$	2,814,447	$	3,262,804
Other investments - structured transactions	311,651		304,439		312,122		293,813
Financial Assets	$	2,973,472	$	3,390,817	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,527,323	$	1,855,009	$	1,551,398	$	1,878,499
Notes payable and debt	1,672,206		1,908,871		1,672,778		1,918,134
Financial Liabilities	$	3,199,529	$	3,763,880	$	3,224,176	$	3,796,633