Fair Value Measurements (Tables)

6 Months Ended

Jun. 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 June 30, 2013 and December 31, 2012 by level within the fair value hierarchy:

June 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 June 30, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,022,822	$	—	$	—		$	2,022,822
Corporate (1)	—		10,047,302		32,173		—			10,079,475
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,428,511		18,214		—			4,446,725
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		402,991		3,411		—			406,402
Commercial mortgage-backed securities (“CMBS”)	—		1,104,649		24,423		—			1,129,072
Collateralized debt obligations (“CDO”)	—		8,235		706,013		—			714,248
Other asset-backed securities (2)	—		1,161,221		27,539		—			1,188,760
U.S. States and political subdivisions of the States	—		1,798,267		—		—			1,798,267
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,669,332		—		—			4,669,332
Total fixed maturities, at fair value	$	—	$	25,643,330	$	811,773	$	—		$	26,455,103
Equity securities, at fair value (3)	445,709		470,299		—					916,008
Short-term investments, at fair value (1)(4)	—		232,453		1,999		—			234,452
Total investments available for sale	$	445,709	$	26,346,082	$	813,772	$	—		$	27,605,563
Cash equivalents (5)	1,375,683		287,690		—		—			1,663,373
Other investments (6)			738,543		103,844					842,387
Other assets (7)			19,674				(1,827		)	17,847
Total assets accounted for at fair value	$	1,821,392	$	27,391,989	$	917,616	$	(1,827	)	$	30,129,170
Liabilities
Financial instruments sold, but not yet purchased (8)	$	375	$	23,941	$	—				$	24,316
Other liabilities (7)			9,774		29,374		(1,827		)	37,321
Total liabilities accounted for at fair value	$	375	$	33,715	$	29,374	$	(1,827	)	$	61,637

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 $149.4 million and $194.3 million and an amortized cost of $150.2 million and $194.8 million at June 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 June 30, 2013 and December 31, 2012, Covered Bonds with a fair value of $550.9 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 $91.3 million and $101.9 million at June 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 $293.4 million at June 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 June 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	40,815		$	19,107		$	103		$	25,012		$	702,904
Realized gains (losses)	(69		)	(2		)	—			—			(55		)
Movement in unrealized gains (losses)	426			(19		)	—			(19		)	14,491
Purchases and issuances	—			—			3,326			—			5,362
Sales	—			—			—			—			—
Settlements	(7,139		)	(872		)	(18		)	(570		)	(16,689		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	424		$	(22	)	$	(1	)	$	(19	)	$	13,804
	Level 3 Assets and Liabilities -Three Months Ended June 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	$	35,887		$	—		$	2,017		$	113,322		$	(32,550	)
Realized gains (losses)	(13		)	—			(10		)	2,872			—
Movement in unrealized gains (losses)	(512		)	—			(8		)	932			3,176
Purchases and issuances	—			—			—			1,002			—
Sales	—			—			—			—			—
Settlements	(1,317		)	—			—			(14,284		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(525	)	$	—		$	(18	)	$	3,812		$	3,176

	Level 3 Assets and Liabilities -Three Months Ended June 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency		CMBS			CDO
Balance, beginning of period	$	33,305		$	39,795		$	—	$	—		$	638,697
Realized gains (losses)	82			(30		)	—		—			57
Movement in unrealized gains (losses)	94			195			—		—			6,186
Purchases and issuances	—			35			—		—			—
Sales	—			(3,050		)	—		—			—
Settlements	(213		)	(1,295		)	—		—			(1,488		)
Transfers into Level 3	536			16,938			1,596		—			—
Transfers out of Level 3	(293		)	—			—		—			(1,273		)
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	33,511		$	52,588		$	1,596	$	—		$	642,179
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	94		$	197		$	—	$	—		$	6,186
	Level 3 Assets and Liabilities -Three Months Ended June 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	$	16,410		$	—		$	—	$	115,659		$	(40,630	)
Realized gains (losses)	(135		)	—			—		510			—
Movement in unrealized gains (losses)	4,145			—			—		3,616			4,683
Purchases and issuances	—			—			—		2,365			—
Sales	—			—			—		—			—
Settlements	(844		)	—			—		(4,080		)	—
Transfers into Level 3	5,672			—			—		—			—
Transfers out of Level 3	—			—			—		(305		)	—
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	25,248		$	—		$	—	$	117,765		$	(35,947	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,918		$	—		$	—	$	1,326		$	4,683

	Level 3 Assets and Liabilities - Six Months Ended June 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)	(71		)	11			—			—			301
Movement in unrealized gains (losses)	630			(37		)	—			(18		)	35,746
Purchases and issuances	10,621			—			3,326			—			5,362
Sales	—			(535		)	—			—			—
Settlements	(7,245		)	(1,765		)	(31		)	(906		)	(37,132		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	(11,465		)	—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	627		$	(40	)	$	(1	)	$	(18	)	$	34,278
	Level 3 Assets and Liabilities - Six Months Ended June 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)	38			—			(10		)	5,787			—
Movement in unrealized gains (losses)	963			—			(8		)	(970		)	6,873
Purchases and issuances	21,686			—			2,017			2,907			—
Sales	—			—			—			—			—
Settlements	(6,770		)	—			—			(19,152		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(516	)	$	—		$	(18	)	$	4,808		$	6,873

	Level 3 Assets and Liabilities - Six Months Ended June 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)	(42		)	(96		)	—		—			(1,612		)
Movement in unrealized gains (losses)	1,255			(95		)	—		—			39,379
Purchases and issuances	8,734			70			—		—			—
Sales	—			(4,384		)	—		—			(37,181		)
Settlements	(1,608		)	(1,877		)	—		—			(7,654		)
Transfers into Level 3	1,647			26,929			1,596		—			—
Transfers out of Level 3	(293		)	—			—		—			(1,604		)
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	33,511		$	52,588		$	1,596	$	—		$	642,179
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,255		$	(95	)	$	—	$	—		$	35,379
	Level 3 Assets and Liabilities - Six Months Ended June 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)	(94		)	—			—		2,438			—
Movement in unrealized gains (losses)	3,905			—			—		4,521			6,697
Purchases and issuances	—			—			—		3,682			—
Sales	—			—			—		—			—
Settlements	(1,118		)	—			—		(6,520		)	—
Transfers into Level 3	6,003			—			—		—			—
Transfers out of Level 3	—			—			—		(315		)	—
Fixed maturities to short-term investments classification change	—			—			—		—			—
Balance, end of period	$	25,248		$	—		$	—	$	117,765		$	(35,947	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,681		$	—		$	—	$	1,004		$	6,697

Financial Instruments Not Carried at Fair Value

	June 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,686,994	$	2,978,981	$	2,814,447	$	3,262,804
Other investments - structured transactions	293,407		291,608		312,122		293,813
Financial Assets	$	2,980,401	$	3,270,589	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,534,896	$	1,789,375	$	1,551,398	$	1,878,499
Notes payable and debt	1,671,634		1,834,624		1,672,778		1,918,134
Financial Liabilities	$	3,206,530	$	3,623,999	$	3,224,176	$	3,796,633