DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS [Text Block]

5.     DERIVATIVE INSTRUMENTS

The following table summarizes the balance sheet classification of derivatives recorded at fair values. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of our derivative activities. Notional amounts are not reflective of credit risk.

	June 30, 2012						December 31, 2011
	Derivative Notional Amount		Asset Derivative Fair Value(1)		Liability Derivative Fair Value(1)		Derivative Notional Amount		Asset Derivative Fair Value(1)		Liability Derivative Fair Value(1)
Derivatives designated as hedging instruments
Foreign exchange forward contracts	$	189,201	$	—	$	3,313	$	540,176	$	16,519	$	—
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange forward contracts	288,802		39		4,706		287,711		7,012		1,783
Relating to underwriting portfolio:
Foreign exchange forward contracts	$	462,712	6,107		1,552		$	955,728	14,644		252
Total derivatives			$	6,146	$	9,571			$	38,175	$	2,035

(1) Asset and liability derivatives are classified within other assets and other liabilities on the Consolidated Balance Sheets.

Fair Value Hedges

We entered into foreign exchange forward contracts to hedge the foreign currency exposure of certain available for sale fixed maturity portfolios denominated in euros. The hedges were designated and qualified as fair value hedges, resulting in the net impact of the hedges recognized in net realized investment gains (losses).

The following table provides the total impact on earnings relating to foreign exchange forward contracts designated as fair value hedges along with the impact of the related hedged investment portfolio for the periods indicated:

	Three months ended and at June 30,						Six months ended and at June 30,
	2012			2011			2012		2011
Foreign exchange forward contracts	$	16,131		$	(14,695	)	$	5,563	$	(45,176	)
Hedged investment portfolio	(10,572		)	11,641			1,943		45,387
Hedge ineffectiveness recognized in earnings	$	5,559		$	(3,054	)	$	7,506	$	211

Derivative Instruments not Designated as Hedging Instruments

a) Relating to Investment Portfolio

Within our investment portfolio we are exposed to foreign currency risk. Accordingly, the fair values for our investment portfolio are partially influenced by the change in foreign exchange rates. We may enter into foreign exchange forward contracts to manage the effect of this currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.

In addition, our external equity investment managers have the discretion to hold foreign currency exposures as part of their total return strategy.

b) Relating to Underwriting Portfolio

Our (re)insurance subsidiaries and branches operate in various foreign countries and consequently our underwriting portfolio is exposed to significant foreign currency risk. We manage foreign currency risk by seeking to match our liabilities under (re)insurance contracts that are payable in foreign currencies with cash and investments that are denominated in such currencies. When necessary, we may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts and currency options.

The decrease in the notional amount of underwriting related derivatives since December 31,2011, was primarily due to settlement of certain foreign denominated liabilities relating to the catastrophe losses incurred from the New Zealand and Japanese earthquakes.

The total unrealized and realized gains (losses) recognized in earnings for derivatives not designated as hedges were as follows:

	Location of Gain (Loss) Recognized	Three months ended June 30,					Six months ended June 30,
	in Income on Derivative	2012		2011			2012		2011
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange forward contracts	Net realized investment gains (losses)	$	6,697	$	(4,361	)	$	815	$	(13,461	)
Relating to underwriting portfolio:
Currency collar options	Foreign exchange gains (losses)	—		2,630			—		3,327
Foreign exchange forward contracts	Foreign exchange gains (losses)	201		24,605			13,655		21,601
Total		$	6,898	$	22,874		$	14,470	$	11,467