Derivative Instruments

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

As of March 31, 2015 and December 31, 2014, none of the Company’s derivatives were designated as hedges for accounting purposes. The following table summarizes information on the location and amounts of derivative fair values on the unaudited condensed consolidated balance sheets (“consolidated balance sheets”):

	March 31, 2015								December 31, 2014
	Asset Derivative  Notional Amount		Asset Derivative  Fair Value		Liability Derivative  Notional Amount		Liability Derivative  Fair Value		Asset Derivative  Notional Amount		Asset Derivative  Fair Value		Liability Derivative  Notional Amount		Liability Derivative Fair Value
Foreign exchange contracts	$	32,833	$	123	$	24,857	$	203	$	33,875	$	1,274	$	167,376	$	991
Interest rate swaps	—		—		662,200		1,119		—		—		571,500		683
Total derivatives	$	32,833	$	123	$	687,057	$	1,322	$	33,875	$	1,274	$	738,876	$	1,674

Derivative assets and derivative liabilities are classified within “other assets” or “accounts payable and accrued liabilities” on the consolidated balance sheets.

The following table provides the net realized and unrealized gains (losses) on derivatives not designated as hedges recorded on the consolidated income statements:

	Three Months Ended   March 31,
	2015			2014
Foreign exchange contracts	$	(7,352	)	$	(868	)
Total included in foreign exchange loss	(7,352		)	(868		)
Foreign exchange contracts	1,050			(558		)
Interest rate futures	(12,682		)	(12,362		)
Total included in net realized investment gains	(11,632		)	(12,920		)
Total realized and unrealized losses on derivatives	$	(18,984	)	$	(13,788	)

Derivative Instruments Not Designated as Hedging Instruments

The Company is exposed to foreign currency risk in its investment portfolio. Accordingly, the fair values of the Company’s investment portfolio are partially influenced by the change in foreign exchange rates. These foreign currency hedging activities have not been designated as specific hedges for financial reporting purposes.

The Company’s insurance and reinsurance subsidiaries and branches operate in various foreign countries and consequently the Company’s underwriting portfolio is exposed to foreign currency risk. The Company manages foreign currency risk by seeking to match liabilities under the insurance policies and reinsurance contracts that it writes and that are payable in foreign currencies with cash and investments that are denominated in such currencies. When necessary, the Company may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts and currency options. For example, the Company purchased a forward contract to hedge a portion of its foreign currency exposure related to the consideration that was paid for the Hong Kong and Singapore operations of RSA.

The Company also purchases and sells interest rate future and interest rate swap contracts to actively manage the duration and yield curve positioning of its fixed income portfolio. Interest rate futures and interest rate swaps can efficiently increase or decrease the overall duration of the portfolio. Additionally, interest rate future and interest rate swap contracts can be utilized to obtain the desired position along the yield curve in order to protect against certain future yield curve shapes.

The Company also purchases options to actively manage its equity portfolio.