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FAIR VALUE MEASUREMENTS | 6 Months Ended
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Jun. 30, 2015
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | Fair Value Hierarchy Fair value is defined as the price to sell an asset or transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The hierarchy is broken down into three levels as follows:
• | Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.
• | Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
• | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own judgments about assumptions that market participants might use.
The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy. We used the following valuation techniques and assumptions in estimating the fair value of our financial instruments as well as the general classification of such financial instruments pursuant to the above fair value hierarchy. Fixed Maturities At each valuation date, we use the market approach valuation technique to estimate the fair value of our fixed maturities portfolio, when possible. This market approach includes, but is not limited to, prices obtained from third party pricing services for identical or comparable securities and the use of “pricing matrix models” using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third party pricing services is sourced from multiple vendors, when available, and we maintain a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. When prices are unavailable from pricing services, we obtain non-binding quotes from broker-dealers who are active in the corresponding markets. The following describes the significant inputs generally used to determine the fair value of our fixed maturities by asset class. U.S. government and agency U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of our U.S. Treasury securities are based on unadjusted market prices in active markets, they are classified within Level 1. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2. Non-U.S. government Non-U.S. government securities comprise bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair value of these securities is based on prices obtained from international indices or a valuation model that includes the following inputs: interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs are observable market inputs, the fair value of non-U.S. government securities are classified within Level 2. Corporate debt Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of our corporate debt securities are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, securities are classified within Level 3. MBS Our portfolio of RMBS and CMBS are originated by both agencies and non-agencies. The fair values of these securities are determined through the use of a pricing model (including Option Adjusted Spread) which uses prepayment speeds and spreads to determine the appropriate average life of the MBS. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the significant inputs used to price MBS are observable market inputs, the fair values of the MBS are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3. ABS ABS include mostly investment-grade bonds backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and CLO Debt originated by a variety of financial institutions. Similarly to MBS, the fair values of ABS are priced through the use of a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price ABS are observable market inputs, the fair values of ABS are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. These securities are classified within Level 3. Municipals Our municipal portfolio comprises revenue and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair value of these securities is determined using spreads obtained from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the municipals are observable market inputs, municipals are classified within Level 2. Equity Securities Equity securities include exchange-traded funds and bond mutual funds. For exchange-traded funds, we classified these within Level 1 as their fair values are based on unadjusted quoted market prices in active markets. Our investments in bond mutual funds have daily liquidity, with redemption based on the net asset value ("NAV") of the funds. Accordingly, we have classified these investments as Level 2. Other Investments As a practical expedient, we estimate fair values for hedge funds, direct lending funds and the CLO fund using NAVs as advised by external fund managers or third party administrators. For each of these funds, the NAV is based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP. For any funds for which we have not yet received a NAV concurrent with our period end date, we record an estimate of the change in fair value for the period subsequent to the most recent NAV. Such estimates are based on return estimates for the period between the most recently issued NAV and the period end date; these estimates are obtained from the relevant fund managers. Accordingly, we do not typically have a reporting lag in our fair value measurements for these funds. Historically, our valuation estimates incorporating these return estimates have not significantly diverged from the subsequent NAVs. Within the hedge fund, direct lending fund and CLO fund industries, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of our fair value estimates against subsequently received NAVs. Backtesting involves comparing our previously reported values for each individual fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values). For our hedge fund investments with liquidity terms allowing us to fully redeem our holdings at the applicable NAV in the near term, we have classified these investments as Level 2. Certain investments in hedge funds, all of our direct lending funds and our CLO fund have redemption restrictions (see Note 4(c) for further details) that prevent us from redeeming in the near term and therefore we have classified these investments as Level 3. At June 30, 2015, our direct investments in CLO - Equities were classified within Level 3 as we estimated the fair value for these securities using an income approach valuation technique (discounted cash flow model) due to the lack of observable and relevant trades in the secondary markets. Short-Term Investments Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value. Derivative Instruments Our foreign currency forward contracts, interest rate swaps and commodity contracts are customized to our economic hedging strategies and trade in the over-the-counter derivative market. We use the market approach valuation technique to estimate the fair value for these derivatives based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. Accordingly, we classified these derivatives within Level 2. We also participate in non-exchange traded derivative-based risk management products addressing weather risks. We use observable market inputs and unobservable inputs in combination with industry or internally-developed valuation and forecasting techniques to determine fair value. We classify these instruments within Level 3. Insurance-linked Securities Insurance-linked securities comprise investment in a catastrophe bond. We obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3. Cash Settled Awards Cash settled awards comprise restricted stock units that form part of our compensation program. Although the fair value of these awards is determined using observable quoted market prices in active markets, the stock units themselves are not actively traded. Accordingly, we have classified these liabilities within Level 2. The table below presents the financial instruments measured at fair value on a recurring basis:
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value |
| At June 30, 2015 |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 1,613,649 |  |  | $ | 69,460 |  |  | $ | — |  |  | $ | 1,683,109 |  |
| Non-U.S. government | — |  |  | 900,535 |  |  | — |  |  | 900,535 |  |
| Corporate debt | — |  |  | 4,360,944 |  |  | 43,008 |  |  | 4,403,952 |  |
| Agency RMBS | — |  |  | 2,134,976 |  |  | — |  |  | 2,134,976 |  |
| CMBS | — |  |  | 1,077,670 |  |  | 21,900 |  |  | 1,099,570 |  |
| Non-Agency RMBS | — |  |  | 101,274 |  |  | — |  |  | 101,274 |  |
| ABS | — |  |  | 1,426,951 |  |  | 110 |  |  | 1,427,061 |  |
| Municipals | — |  |  | 255,259 |  |  | — |  |  | 255,259 |  |
|  | 1,613,649 |  |  | 10,327,069 |  |  | 65,018 |  |  | 12,005,736 |  |
| Equity securities |  |  |  |  |  |  |  |
| Exchange-traded funds | 535,980 |  |  | — |  |  | — |  |  | 535,980 |  |
| Bond mutual funds | — |  |  | 123,201 |  |  | — |  |  | 123,201 |  |
|  | 535,980 |  |  | 123,201 |  |  | — |  |  | 659,181 |  |
| Other investments |  |  |  |  |  |  |  |
| Hedge funds | — |  |  | 160,923 |  |  | 524,736 |  |  | 685,659 |  |
| Direct lending funds | — |  |  | — |  |  | 73,628 |  |  | 73,628 |  |
| Real estate funds | — |  |  | — |  |  | 3,000 |  |  | 3,000 |  |
| CLO - Equities | — |  |  | — |  |  | 90,814 |  |  | 90,814 |  |
|  | — |  |  | 160,923 |  |  | 692,178 |  |  | 853,101 |  |
| Short-term investments | — |  |  | 30,618 |  |  | — |  |  | 30,618 |  |
| Derivative instruments (see Note 6) | — |  |  | 578 |  |  | 240 |  |  | 818 |  |
| Insurance-linked securities | — |  |  | — |  |  | 24,837 |  |  | 24,837 |  |
| Total Assets | $ | 2,149,629 |  |  | $ | 10,642,389 |  |  | $ | 782,273 |  |  | $ | 13,574,291 |  |
| Liabilities |  |  |  |  |  |  |  |
| Derivative instruments (see Note 6) | $ | — |  |  | $ | 5,921 |  |  | $ | 818 |  |  | $ | 6,739 |  |
| Cash settled awards (see Note 8) | — |  |  | 19,939 |  |  | — |  |  | 19,939 |  |
| Total Liabilities | $ | — |  |  | $ | 25,860 |  |  | $ | 818 |  |  | $ | 26,678 |  |
| At December 31, 2014 |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 1,497,922 |  |  | $ | 122,155 |  |  | $ | — |  |  | $ | 1,620,077 |  |
| Non-U.S. government | — |  |  | 1,033,543 |  |  | — |  |  | 1,033,543 |  |
| Corporate debt | — |  |  | 4,345,287 |  |  | 15,837 |  |  | 4,361,124 |  |
| Agency RMBS | — |  |  | 2,278,108 |  |  | — |  |  | 2,278,108 |  |
| CMBS | — |  |  | 1,079,125 |  |  | 17,763 |  |  | 1,096,888 |  |
| Non-Agency RMBS | — |  |  | 73,086 |  |  | — |  |  | 73,086 |  |
| ABS | — |  |  | 1,421,555 |  |  | 40,031 |  |  | 1,461,586 |  |
| Municipals | — |  |  | 204,861 |  |  | — |  |  | 204,861 |  |
|  | 1,497,922 |  |  | 10,557,720 |  |  | 73,631 |  |  | 12,129,273 |  |
| Equity securities |  |  |  |  |  |  |  |
| Exchange-traded funds | 454,890 |  |  | — |  |  | — |  |  | 454,890 |  |
| Bond mutual funds | — |  |  | 112,817 |  |  | — |  |  | 112,817 |  |
|  | 454,890 |  |  | 112,817 |  |  | — |  |  | 567,707 |  |
| Other investments |  |  |  |  |  |  |  |
| Hedge funds | — |  |  | 347,621 |  |  | 470,918 |  |  | 818,539 |  |
| Direct lending funds | — |  |  | — |  |  | 54,438 |  |  | 54,438 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | — |  |
| CLO - Equities | — |  |  | — |  |  | 92,488 |  |  | 92,488 |  |
|  | — |  |  | 347,621 |  |  | 617,844 |  |  | 965,465 |  |
| Short-term investments | — |  |  | 107,534 |  |  | — |  |  | 107,534 |  |
| Derivative instruments (see Note 6) | — |  |  | 7,153 |  |  | 111 |  |  | 7,264 |  |
| Insurance-linked securities | — |  |  | — |  |  | — |  |  | — |  |
| Total Assets | $ | 1,952,812 |  |  | $ | 11,132,845 |  |  | $ | 691,586 |  |  | $ | 13,777,243 |  |
| Liabilities |  |  |  |  |  |  |  |
| Derivative instruments (see Note 6) | $ | — |  |  | $ | 3,041 |  |  | $ | 15,288 |  |  | $ | 18,329 |  |
| Cash settled awards (see Note 8) | — |  |  | 20,518 |  |  | — |  |  | 20,518 |  |
| Total Liabilities | $ | — |  |  | $ | 23,559 |  |  | $ | 15,288 |  |  | $ | 38,847 |  |
During 2015 and 2014, we had no transfers between Levels 1 and 2. Level 3 Fair Value Measurements Except for hedge funds, direct lending funds and our CLO fund priced using NAV as a practical expedient and certain fixed maturities and insurance-linked securities priced using broker-dealer quotes (underlying inputs are not available), the following table quantifies the significant unobservable inputs we have used in estimating fair value at June 30, 2015 for our investments classified as Level 3 in the fair value hierarchy. These significant unobservable inputs have not changed significantly from December 31, 2014.
|  | Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average |
| Other investments - CLO - Equities | $ | 36,920 |  | Discounted cash flow | Default rates | 4.0% - 5.0% | 4.3% |
|  |  |  | Loss severity rate | 53.5% | 53.5% |
|  |  |  | Collateral spreads | 3.0% - 3.5% | 3.3% |
|  |  |  | Estimated maturity dates | 2.7 - 4.1 years | 3.4 years |
| Derivatives - Weather derivatives, net | $ | (578 | ) | Simulation model | Weather curve | 20 - 2830(1) | n/a (2) |
|  |  |  | Weather standard deviation | 15 - 240(1) | n/a (2) |
(1) Measured in Heating Degree Days ("HDD") which is the number of degrees the daily temperature is below a reference temperature. The cumulative HDD for the duration of the derivatives contract is compared to the strike value to determine the necessary settlement.
(2) | Due to the diversity of the portfolio, the range of unobservable inputs can be widespread; therefore, presentation of a weighted average is not useful. Weather parameters may include various temperature and/or precipitation measures that will naturally vary by geographic location of each counterparty's operations.
The CLO - Equities market continues to be mostly inactive with only a small number of transactions being observed in the market and fewer still involving transactions in our CLO - Equities. Accordingly, we continue to rely on the use of our internal discounted cash flow model (income approach) to estimate fair value of our direct investments in CLO - Equities. Of the significant inputs into this model, the default and loss severity rates are the most judgmental unobservable market inputs to which the valuation of CLO - Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in lower (higher) fair value estimates for direct investments in our CLO - Equities and, in general, a change in default rate assumptions will be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in higher (lower) fair value estimates for direct investments in our CLO - Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates. On a quarterly basis, our valuation processes for CLO - Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. We review and update the above significant unobservable inputs based on information obtained from secondary markets, including from the managers of the CLOs we hold. These inputs are the responsibility of management and, in order to ensure fair value measurement is applied consistently and in accordance with U.S. GAAP, we update our assumptions through regular communication with industry participants and ongoing monitoring of the deals in which we participate (e.g. default and loss severity rate trends), we maintain a current understanding of the market conditions, historical results, as well as emerging trends that may impact future cash flows. By maintaining this current understanding, we are able to assess the reasonableness of the inputs we ultimately use in our model. Weather derivatives relate to non-exchange traded risk management products addressing weather risks. We use observable market inputs and unobservable inputs in combination with industry or internally-developed simulation models to determine fair value; these models may reference market price information for similar instruments. The pricing models are internally reviewed by Risk Management personnel prior to implementation and are reviewed periodically thereafter. Observable and unobservable inputs to these models vary by contract type and would typically include the following:
• | Observable inputs: market prices for similar instruments, notional, option strike, term to expiry, contractual limits;
• | Unobservable inputs: correlation; and
• | Both observable and unobservable inputs: weather curves, weather standard deviation.
In general, weather curves are the most significant contributing input to fair value determination; changes in this variable can result in higher or lower fair value depending on the underlying position. In addition, changes in any or all of the unobservable inputs identified above may contribute positively or negatively to overall portfolio value. The correlation input will quantify the interrelationship, if any, amongst the other variables. The following tables present changes in Level 3 for financial instruments measured at fair value on a recurring basis for the periods indicated:
|  | Opening Balance |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Included in earnings (1) |  | Included in OCI (2) |  | Purchases |  | Sales |  | Settlements/ Distributions |  | Closing Balance |  | Change in unrealized investment gain/(loss) (3) |
| Three months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 26,857 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 244 |  |  | $ | 20,714 |  |  | $ | — |  |  | $ | (4,807 | ) |  | $ | 43,008 |  |  | $ | — |  |
| CMBS | 17,061 |  |  | 5,072 |  |  | — |  |  | — |  |  | (120 | ) |  | — |  |  | — |  |  | (113 | ) |  | 21,900 |  |  | — |  |
| ABS | 39,921 |  |  | — |  |  | (39,851 | ) |  | — |  |  | 43 |  |  | — |  |  | — |  |  | (3 | ) |  | 110 |  |  | — |  |
|  | 83,839 |  |  | 5,072 |  |  | (39,851 | ) |  | — |  |  | 167 |  |  | 20,714 |  |  | — |  |  | (4,923 | ) |  | 65,018 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Hedge funds | 495,849 |  |  | — |  |  | — |  |  | 8,363 |  |  | — |  |  | 26,000 |  |  | — |  |  | (5,476 | ) |  | 524,736 |  |  | 8,363 |  |
| Direct lending funds | 69,682 |  |  | — |  |  | — |  |  | 840 |  |  | — |  |  | 4,063 |  |  | — |  |  | (957 | ) |  | 73,628 |  |  | 840 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,000 |  |  | — |  |  | — |  |  | 3,000 |  |  | — |  |
| CLO - Equities | 92,058 |  |  | — |  |  | — |  |  | 5,110 |  |  | — |  |  | — |  |  | — |  |  | (6,354 | ) |  | 90,814 |  |  | 5,110 |  |
|  | 657,589 |  |  | — |  |  | — |  |  | 14,313 |  |  | — |  |  | 33,063 |  |  | — |  |  | (12,787 | ) |  | 692,178 |  |  | 14,313 |  |
| Other assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | — |  |  | — |  |  | — |  |  | 240 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 240 |  |  | 240 |  |
| Insurance-linked securities | 25,000 |  |  | — |  |  | — |  |  | (163 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | 24,837 |  |  | (163 | ) |
|  | 25,000 |  |  | — |  |  | — |  |  | 77 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,077 |  |  | 77 |  |
| Total assets | $ | 766,428 |  |  | $ | 5,072 |  |  | $ | (39,851 | ) |  | $ | 14,390 |  |  | $ | 167 |  |  | $ | 53,777 |  |  | $ | — |  |  | $ | (17,710 | ) |  | $ | 782,273 |  |  | $ | 14,390 |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 7,308 |  |  | $ | — |  |  | $ | — |  |  | $ | (3,171 | ) |  | $ | — |  |  | $ | 1,141 |  |  | $ | — |  |  | $ | (4,460 | ) |  | $ | 818 |  |  | $ | 13 |  |
| Total liabilities | $ | 7,308 |  |  | $ | — |  |  | $ | — |  |  | $ | (3,171 | ) |  | $ | — |  |  | $ | 1,141 |  |  | $ | — |  |  | $ | (4,460 | ) |  | $ | 818 |  |  | $ | 13 |  |
| Six months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 15,837 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 424 |  |  | $ | 31,624 |  |  | $ | — |  |  | $ | (4,877 | ) |  | $ | 43,008 |  |  | $ | — |  |
| CMBS | 17,763 |  |  | 5,072 |  |  | — |  |  | — |  |  | (324 | ) |  | — |  |  | — |  |  | (611 | ) |  | 21,900 |  |  | — |  |
| ABS | 40,031 |  |  | — |  |  | (39,851 | ) |  | — |  |  | 105 |  |  | — |  |  | — |  |  | (175 | ) |  | 110 |  |  | — |  |
|  | 73,631 |  |  | 5,072 |  |  | (39,851 | ) |  | — |  |  | 205 |  |  | 31,624 |  |  | — |  |  | (5,663 | ) |  | 65,018 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Hedge funds | 470,918 |  |  | — |  |  | — |  |  | 27,294 |  |  | — |  |  | 32,000 |  |  | — |  |  | (5,476 | ) |  | 524,736 |  |  | 27,294 |  |
| Direct lending funds | 54,438 |  |  | — |  |  | — |  |  | 1,507 |  |  | — |  |  | 19,481 |  |  | — |  |  | (1,798 | ) |  | 73,628 |  |  | 1,507 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,000 |  |  | — |  |  | — |  |  | 3,000 |  |  | — |  |
| CLO - Equities | 92,488 |  |  | — |  |  | — |  |  | 11,197 |  |  | — |  |  | — |  |  | — |  |  | (12,871 | ) |  | 90,814 |  |  | 11,197 |  |
|  | 617,844 |  |  | — |  |  | — |  |  | 39,998 |  |  | — |  |  | 54,481 |  |  | — |  |  | (20,145 | ) |  | 692,178 |  |  | 39,998 |  |
| Other assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | 111 |  |  | — |  |  | — |  |  | (827 | ) |  | — |  |  | — |  |  | — |  |  | 956 |  |  | 240 |  |  | 240 |  |
| Insurance-linked securities | — |  |  | — |  |  | — |  |  | (163 | ) |  | — |  |  | 25,000 |  |  | — |  |  | — |  |  | 24,837 |  |  | (163 | ) |
|  | 111 |  |  | — |  |  | — |  |  | (990 | ) |  | — |  |  | 25,000 |  |  | — |  |  | 956 |  |  | 25,077 |  |  | 77 |  |
| Total assets | $ | 691,586 |  |  | $ | 5,072 |  |  | $ | (39,851 | ) |  | $ | 39,008 |  |  | $ | 205 |  |  | $ | 111,105 |  |  | $ | — |  |  | $ | (24,852 | ) |  | $ | 782,273 |  |  | $ | 40,075 |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 15,288 |  |  | $ | — |  |  | $ | — |  |  | $ | (11,722 | ) |  | $ | — |  |  | $ | 2,223 |  |  | $ | — |  |  | $ | (4,971 | ) |  | $ | 818 |  |  | $ | 13 |  |
| Total liabilities | $ | 15,288 |  |  | $ | — |  |  | $ | — |  |  | $ | (11,722 | ) |  | $ | — |  |  | $ | 2,223 |  |  | $ | — |  |  | $ | (4,971 | ) |  | $ | 818 |  |  | $ | 13 |  |
|  | Opening Balance |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Included in earnings (1) |  | Included in OCI (2) |  | Purchases |  | Sales |  | Settlements/ Distributions |  | Closing Balance |  | Change in unrealized investment gain/(loss) (3) |
| Three months ended June 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
| CMBS | 3,969 |  |  | — |  |  | — |  |  | — |  |  | (23 | ) |  | — |  |  | — |  |  | (13 | ) |  | 3,933 |  |  | — |  |
| ABS | 30,724 |  |  | — |  |  | — |  |  | — |  |  | 273 |  |  | — |  |  | — |  |  | (114 | ) |  | 30,883 |  |  | — |  |
|  | 34,693 |  |  | — |  |  | — |  |  | — |  |  | 250 |  |  | — |  |  | — |  |  | (127 | ) |  | 34,816 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Hedge funds | 464,666 |  |  | — |  |  | — |  |  | 12,746 |  |  | — |  |  | 3,000 |  |  | — |  |  | (3,604 | ) |  | 476,808 |  |  | 12,746 |  |
| Direct lending funds | 26,003 |  |  | — |  |  | — |  |  | 367 |  |  | — |  |  | 7,300 |  |  | — |  |  | (203 | ) |  | 33,467 |  |  | 367 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
| CLO - Equities | 86,179 |  |  | — |  |  | — |  |  | 5,181 |  |  | — |  |  | 6,422 |  |  | — |  |  | (6,676 | ) |  | 91,106 |  |  | 5,181 |  |
|  | 576,848 |  |  | — |  |  | — |  |  | 18,294 |  |  | — |  |  | 16,722 |  |  | — |  |  | (10,483 | ) |  | 601,381 |  |  | 18,294 |  |
| Other assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | 1,707 |  |  | — |  |  | — |  |  | 293 |  |  | — |  |  | — |  |  | — |  |  | (2,000 | ) |  | — |  |  | — |  |
| Insurance-linked securities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
|  | 1,707 |  |  | — |  |  | — |  |  | 293 |  |  | — |  |  | — |  |  | — |  |  | (2,000 | ) |  | — |  |  | — |  |
| Total assets | $ | 613,248 |  |  | $ | — |  |  | $ | — |  |  | $ | 18,587 |  |  | $ | 250 |  |  | $ | 16,722 |  |  | $ | — |  |  | $ | (12,610 | ) |  | $ | 636,197 |  |  | $ | 18,294 |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | — |  |  | — |  |  | — |  |  | (90 | ) |  | — |  |  | 840 |  |  | — |  |  | — |  |  | 750 |  |  | (90 | ) |
| Total liabilities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (90 | ) |  | $ | — |  |  | $ | 840 |  |  | $ | — |  |  | $ | — |  |  | $ | 750 |  |  | $ | (90 | ) |
| Six months ended June 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
| CMBS | 4,018 |  |  | — |  |  | — |  |  | — |  |  | (43 | ) |  | — |  |  | — |  |  | (42 | ) |  | 3,933 |  |  | — |  |
| ABS | 30,799 |  |  | 128 |  |  | — |  |  | — |  |  | 178 |  |  | — |  |  | — |  |  | (222 | ) |  | 30,883 |  |  | — |  |
|  | 34,817 |  |  | 128 |  |  | — |  |  | — |  |  | 135 |  |  | — |  |  | — |  |  | (264 | ) |  | 34,816 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Hedge funds | 461,055 |  |  | — |  |  | — |  |  | 20,923 |  |  | — |  |  | 7,500 |  |  | — |  |  | (12,670 | ) |  | 476,808 |  |  | 20,923 |  |
| Direct lending funds | 22,134 |  |  | — |  |  | — |  |  | 919 |  |  | — |  |  | 10,745 |  |  | — |  |  | (331 | ) |  | 33,467 |  |  | 919 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
| CLO - Equities | 73,866 |  |  | — |  |  | — |  |  | 11,331 |  |  | — |  |  | 19,267 |  |  | — |  |  | (13,358 | ) |  | 91,106 |  |  | 11,331 |  |
|  | 557,055 |  |  | — |  |  | — |  |  | 33,173 |  |  | — |  |  | 37,512 |  |  | — |  |  | (26,359 | ) |  | 601,381 |  |  | 33,173 |  |
| Other assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | 984 |  |  | — |  |  | — |  |  | 5,011 |  |  | — |  |  | — |  |  | — |  |  | (5,995 | ) |  | — |  |  | — |  |
| Insurance-linked securities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
|  | 984 |  |  | — |  |  | — |  |  | 5,011 |  |  | — |  |  | — |  |  | — |  |  | (5,995 | ) |  | — |  |  | — |  |
| Total assets | $ | 592,856 |  |  | $ | 128 |  |  | $ | — |  |  | $ | 38,184 |  |  | $ | 135 |  |  | $ | 37,512 |  |  | $ | — |  |  | $ | (32,618 | ) |  | $ | 636,197 |  |  | $ | 33,173 |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 815 |  |  | $ | — |  |  | $ | — |  |  | $ | 896 |  |  | $ | — |  |  | $ | 840 |  |  | $ | — |  |  | $ | (1,801 | ) |  | $ | 750 |  |  | $ | (90 | ) |
| Total liabilities | $ | 815 |  |  | $ | — |  |  | $ | — |  |  | $ | 896 |  |  | $ | — |  |  | $ | 840 |  |  | $ | — |  |  | $ | (1,801 | ) |  | $ | 750 |  |  | $ | (90 | ) |
(1) | Gains and losses included in earnings on fixed maturities are included in net realized investment gains (losses). Gains and (losses) included in earnings on other investments are included in net investment income. Gains (losses) on weather derivatives included in earnings are included in other insurance-related income.
(2) | Gains and losses included in other comprehensive income (“OCI”) on fixed maturities are included in unrealized gains (losses) arising during the period.
(3) | Change in unrealized investment gain (loss) relating to assets held at the reporting date.
The transfers into and out of fair value hierarchy levels reflect the fair value of the securities at the end of the reporting period. Transfers into Level 3 from Level 2 The transfers to Level 3 from Level 2 made during the three and six months ended June 30, 2015 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities. There were no transfers to Level 3 from Level 2 made during the three months ended June 30, 2014. The transfers to Level 3 from Level 2 made during the six months ended June 30, 2014 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities. Transfers out of Level 3 into Level 2 The transfers to Level 2 from Level 3 made during the three and six months ended June 30, 2015 were primarily due to the availability of observable market inputs and quotes from pricing vendors on CLO Debt securities. There were no transfers to Level 2 from Level 3 made during the three and six months ended June 30, 2014. Financial Instruments Not Carried at Fair Value U.S. GAAP guidance over disclosures about the fair value of financial instruments are also applicable to financial instruments not carried at fair value, except for certain financial instruments, including insurance contracts. The carrying values of cash equivalents (including restricted amounts), accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated their fair values at June 30, 2015, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2. The carrying value of mortgage loans held-for-investment approximated their fair value at June 30, 2015, due to the fact that the loans were issued during the quarter. The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans. Mortgage loans are not actively traded, their respective fair values are classified within Level 3. At June 30, 2015, our senior notes are recorded at amortized cost with a carrying value of $991 million (2014: $991 million) and have a fair value of $1,074 million (2014: $1,089 million). The fair values of these securities were obtained from a third party pricing service and pricing was based on the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of our senior notes are classified within Level 2.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 + Details
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