v2.4.1.9

Financial Derivatives | 12 Months Ended
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Dec. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Derivatives | Financial Derivatives Gains and losses on the Company's derivative contracts for the years ended December 31, 2014, 2013, and 2012 are summarized in the tables below: December 31, 2014:
Derivative Type |  | Primary Risk Exposure |  | Net Realized Gain/(Loss) for the Year Ended December 31, 2014 |  | Change in Net Unrealized Gain/(Loss) for the Year Ended December 31, 2014
(In thousands) |  |  |  |  |  |
Financial derivatives–assets |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | $ | (4,596 | ) |  | $ | 4,547 |
Credit default swaps on asset-backed indices |  | Credit |  | (4,662 | ) |  | 2,059 |
Credit default swaps on corporate bond indices |  | Credit |  | 1,938 |  |  | (2,589 | )
Total return swaps |  | Equity Market |  | 12,975 |  |  | 3 |
Interest rate swaps |  | Interest Rates |  | 10,610 |  |  | 5,101 |
Futures |  | Interest Rates/Equity Market |  | 4,841 |  |  | 261 |
Forwards |  | Currency |  | 3,845 |  |  | 884 |
Other |  | Credit/ Interest Rates |  | 1,147 |  |  | (928 | )
|  |  |  | 26,098 |  |  | 9,338 |
Financial derivatives–liabilities |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | (78 | ) |  | 111 |
Credit default swaps on asset-backed indices |  | Credit |  | 3,111 |  |  | (1,743 | )
Credit default swaps on corporate bond indices |  | Credit |  | (6,242 | ) |  | 6,926 |
Credit default swaps on corporate bonds |  | Credit |  | 270 |  |  | (782 | )
Total return swaps |  | Equity Market |  | (5,671 | ) |  | 46 |
Interest rate swaps |  | Interest Rates |  | (23,939 | ) |  | (24,318 | )
Futures |  | Interest Rates/Equity Market |  | (252 | ) |  | 2,291 |
Forwards |  | Currency |  | (2,215 | ) |  | (98 | )
Other |  | Credit/ Interest Rates/Equity Market |  | (2,293 | ) |  | (43 | )
|  |  |  | (37,309 | ) |  | (17,610 | )
Total |  |  |  | $ | (11,211 | ) |  | $ | (8,272 | )
December 31, 2013:
Derivative Type |  | Primary Risk Exposure |  | Net Realized Gain/(Loss) for the Year Ended December 31, 2013 |  | Change in Net Unrealized Gain/(Loss) for the Year Ended December 31, 2013
(In thousands) |  |  |  |  |  |
Financial derivatives–assets |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | $ | (2,826 | ) |  | $ | 1,070 |
Credit default swaps on asset-backed indices |  | Credit |  | (5,954 | ) |  | 1,082 |
Credit default swaps on corporate bond indices |  | Credit |  | 626 |  |  | 1,026 |
Total return swaps |  | Equity Market |  | 2,992 |  |  | 4 |
Interest rate swaps |  | Interest Rates |  | (2,829 | ) |  | 23,548 |
Other |  | Credit/ Interest Rates |  | 115 |  |  | (244 | )
|  |  |  | (7,876 | ) |  | 26,486 |
Financial derivatives–liabilities |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | (78 | ) |  | (349 | )
Credit default swaps on asset-backed indices |  | Credit |  | 1,870 |  |  | 2,869 |
Credit default swaps on corporate bond indices |  | Credit |  | (9,573 | ) |  | (9,157 | )
Total return swaps |  | Equity Market |  | (5,260 | ) |  | (3 | )
Interest rate swaps |  | Interest Rates |  | 319 |  |  | (3,940 | )
Futures |  | Interest Rates |  | (795 | ) |  | (2,302 | )
Forwards |  | Currency |  | — |  |  | (38 | )
Other |  | Interest Rates/ Equity Market |  | (86 | ) |  | (84 | )
|  |  |  | (13,603 | ) |  | (13,004 | )
Total |  |  |  | $ | (21,479 | ) |  | $ | 13,482 |
December 31, 2012:
Derivative Type |  | Primary Risk Exposure |  | Net Realized Gain/(Loss) for the Year Ended December 31, 2012 |  | Change in Net Unrealized Gain/(Loss) for the Year Ended December 31, 2012
(In thousands) |  |  |  |  |  |
Financial derivatives–assets |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | $ | (1,164 | ) |  | $ | 3,218 |
Credit default swaps on asset-backed indices |  | Credit |  | (14,870 | ) |  | (5,887 | )
Credit default swaps on corporate bond indices |  | Credit |  | (1,548 | ) |  | 570 |
Interest rate swaps |  | Interest Rates |  | 169 |  |  | (91 | )
Futures |  | Interest Rates |  | (51 | ) |  | (11 | )
|  |  |  | (17,464 | ) |  | (2,201 | )
Financial derivatives–liabilities |  |  |  |  |  |
Credit default swaps on asset-backed securities |  | Credit |  | (79 | ) |  | (1 | )
Credit default swaps on asset-backed indices |  | Credit |  | 9,665 |  |  | (491 | )
Credit default swaps on corporate bond indices |  | Credit |  | (579 | ) |  | (122 | )
Total return swaps |  | Equity Market |  | (3,563 | ) |  | 209 |
Interest rate swaps |  | Interest Rates |  | (22,777 | ) |  | 16,094 |
Futures |  | Interest Rates |  | — |  |  | (71 | )
|  |  |  | (17,333 | ) |  | 15,618 |
Total |  |  |  | $ | (34,797 | ) |  | $ | 13,417 |
The tables below detail the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the years ended December 31, 2014 and 2013:
Derivative Type |  | Year Ended December 31, 2014 |  | Year Ended December 31, 2013
|  | (In thousands)
Interest rate swaps |  | $ | 2,227,315 |  |  | $ | 828,442 |
Credit default swaps |  | 552,411 |  |  | 319,603 |
Total return swaps |  | 55,108 |  |  | 29,212 |
Futures |  | 738,830 |  |  | 134,831 |
Options |  | 926,369 |  |  | 10,736 |
Forwards |  | 42,143 |  |  | 369 |
Warrants |  | 120 |  |  | — |
From time to time the Company enters into credit derivative contracts for which the Company sells credit protection ("written credit derivatives"). As of December 31, 2014 and December 31, 2013, all of the Company's open written credit derivatives were credit default swaps on either mortgage/asset-backed indices (ABX and CMBX indices) or corporate bond indices (CDX), collectively referred to as credit indices, or on individual corporate bonds, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets. Written credit derivatives held by the Company at December 31, 2014 and 2013, are summarized below:
Credit Derivatives |  | Amount at December 31, 2014 |  | Amount at December 31, 2013
(In thousands) |  |  |  |
Fair Value of Written Credit Derivatives, Net |  | $ | 27,741 |  |  | $ | 1,421 |
Fair Value of Purchased Credit Derivatives Offsetting Written Credit Derivatives with Third Parties (1) |  | $ | (3,287 | ) |  | $ | 57 |
Notional Amount of Written Credit Derivatives (2) |  | $ | (341,014 | ) |  | $ | (120,497 | )
Notional Amount of Purchased Credit Derivatives Offsetting Written Credit Derivatives with Third Parties (1) |  | $ | 54,874 |  |  | $ | 249 |
(1) | Offsetting transactions with third parties include purchased credit derivatives which have the same reference obligation.
(2) | The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association, or "ISDA," counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional amount of written credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional amount of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.
A credit default swap on a credit index or a corporate bond typically terminates at the stated maturity date in the case of corporate indices or bonds, or, in the case of ABX and CMBX indices, the date that all of the reference assets underlying the index are paid off in full, retired, or otherwise cease to exist. Implied credit spreads may be used to determine the market value of such contracts and are reflective of the cost of buying/selling credit protection. Higher spreads would indicate a greater likelihood that a seller will be obligated to perform (i.e., make payment) under the contract. In situations where the credit quality of the underlying reference assets has deteriorated, the percentage of notional values paid up front ("points up front") is frequently used as an indication of credit risk. Credit protection sellers entering the market would expect to be paid points up front corresponding to the approximate fair value of the contract. For the Company's written credit derivatives that were outstanding at December 31, 2014, periodic payment rates ranged between 15 and 500 basis points. For the Company's written credit derivatives that were outstanding at December 31, 2013, periodic payment rates ranged between 25 and 500 basis points. Total net up-front payments received relating to written credit derivatives outstanding at December 31, 2014 and 2013 were $28.9 million and $2.5 million, respectively.

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