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Derivatives
 3 Months Ended
Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Derivatives
The following tables identify the listing currency, fair value and notional amounts of derivative instruments included in the condensed consolidated balance sheets, categorized by primary underlying risk. Balances are presented on a gross basis.
 
As of March 31, 2014
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Assets by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
USD
 
$
11,539

 
$
96,791

Credit Default Swaps - Protection Sold
USD
 
924

 
10,870

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
CHF/EUR/GBP/USD
 
7,941

 
71,514

Contracts for Differences - Short Contracts
NOK
 
36

 
862

Total Return Swaps - Long Contracts
BRL/JPY/USD
 
4,311

 
44,848

Interest Rates
 
 
 
 
 
Bond Futures - Short Contracts
JPY
 
42

 
43,440

Interest Rate Swaps
EUR
 
38

 
212,357

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward
JPY/EUR
 
921

 
110,242

Foreign Currency Options - Purchased
HKD/JPY/SAR
 
2,382

 
102,818

Total Derivative Assets
 
 
$
28,134

 
$
693,742

 
 
 
 
 
 
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Liabilities by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
EUR/USD
 
$
2,716

 
$
71,360

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
EUR
 
29

 
2,323

Contracts for Differences - Short Contracts
EUR/NOK
 
115

 
5,058

Total Return Swaps - Long Contracts
BRL/USD
 
2,007

 
35,455

Total Return Swaps - Short Contracts
USD
 
371

 
6,793

Interest Rates
 
 
 
 
 
Interest Rate Swaps
EUR
 
383

 
381,454

Treasury Futures - Short Contracts
USD
 
19

 
5,062

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward
AUD/BRL/CAD/GBP/TRY
 
1,212

 
50,697

Foreign Currency Options - Sold
JPY
 
717

 
24,344

Total Derivative Liabilities (free standing)
 
 
$
7,569

 
$
582,546

 
 
 
 
 
 
Embedded derivative liabilities in reinsurance contracts (3)
USD
 
$
846

 
$
15,000

Embedded derivative liabilities in deposit contracts (4)
USD
 
4,510

 
75,000

Total Derivative Liabilities (embedded)
 
 
$
5,356

 
$
90,000

(1) USD = US dollar, JPY = Japanese yen, EUR = Euro, GBP = British pound, BRL = Brazilian real, NOK = Norwegian krone, AUD = Australian dollar, CAD = Canadian dollar, CHF = Swiss franc, TRY = Turkish lira, SAR= Saudi Arabian Riyal, HKD = Hong Kong
(2) The absolute notional exposure represents the Company's derivative activity as of March 31, 2014, which is representative of the volume of derivatives held during the period.
(3) The fair value of embedded derivatives in reinsurance contracts is included in reinsurance balances payable in the condensed consolidated balance sheet.
(4) The fair value of embedded derivatives in deposit contracts is included in deposit liabilities in the condensed consolidated balance sheet.
 
As of December 31, 2013
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Assets by Primary Underlying Risk
 ($ in thousands)
Commodity Price
 
 
 
 
 
Commodity Future Options - Purchased
USD
 
$
256

 
$
12,325

Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
USD
 
15,397

 
109,520

Credit Default Swaps - Protection Sold
USD
 
1,157

 
9,557

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
CHF/EUR/GBP/USD
 
10,549

 
62,847

Contracts for Differences - Short Contracts
NOK
 
67

 
2,758

Total Return Swaps - Long Contracts
BRL/JPY/USD
 
2,950

 
68,044

Total Return Swaps - Short Contracts
USD
 
3

 
290

Interest Rates
 
 
 
 
 
Bond Futures - Short Contracts
JPY
 
212

 
40,847

Interest Rate Swaps
EUR
 
182

 
212,594

Interest Rate Swaptions
EUR/JPY/USD
 
1,269

 
54,884

Treasury Futures - Short Contracts
USD
 
108

 
6,544

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward
AUD/CAD/JPY/TRY
 
1,332

 
59,925

Foreign Currency Options - Purchased
HKD/JPY/SAR
 
5,563

 
240,062

Total Derivative Assets
 
 
$
39,045

 
$
880,197

 
 
 
 
 
 
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Liabilities by Primary Underlying Risk
 ($ in thousands)
Commodity Price
 
 
 
 
 
Commodity Future Options - Sold
 USD
 
$
148

 
$
35,484

Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
 EUR/USD
 
2,634

 
59,446

Credit Default Swaps - Protection Sold
 USD
 
348

 
875

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
 EUR
 
66

 
14,607

Contracts for Differences - Short Contracts
 DKK
 
425

 
7,253

Total Return Swaps - Long Contracts
 BRL/JPY/USD
 
1,385

 
24,807

Total Return Swaps - Short Contracts
 USD
 
140

 
5,037

Index
 
 
 
 
 
Index Futures - Short Contracts
USD
 
441

 
8,888

Interest Rates
 
 
 
 
 
Interest Rate Swaps
EUR/USD
 
821

 
465,560

Interest Rate Swaptions
USD/JPY
 
174

 
99,587

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward
EUR/GBP
 
709

 
189,030

Foreign Currency Options - Sold
JPY
 
1,528

 
178,476

Total Derivative Liabilities
 
 
$
8,819

 
$
1,089,050

 
 
 
 
 
 
Embedded derivative liabilities in deposit contracts (3)
USD
 
$
4,430

 
$
75,000

Total Derivative Liabilities (embedded)
 
 
$
4,430

 
$
75,000

(1) USD = US dollar, JPY = Japanese yen, EUR = Euro, GBP = British pound, BRL = Brazilian real, HKD = Hong Kong dollar, NOK = Norwegian krone, AUD = Australian dollar, DKK = Danish krone, CAD = Canadian dollar, CHF = Swiss franc, SAR= Saudi Arabian Riyal
(2) The absolute notional exposure represents the Company's derivative activity as of December 31, 2013, which is representative of the volume of derivatives held during the period.
(3) The fair value of embedded derivatives in deposit contracts is included in deposit liabilities in the condensed consolidated balance sheet.
The following table sets forth, by major risk type, the Company’s realized and unrealized gains (losses) relating to derivatives for the three months ended March 31, 2014 and 2013. Realized and unrealized gains (losses) related to free standing derivatives are included in net investment income in the condensed consolidated statements of income. Realized and unrealized gains (losses) related to embedded derivatives are included in other expenses in the condensed consolidated statements of income.
 
March 31, 2014
 
March 31, 2013
Free standing Derivatives - Primary Underlying Risk
Realized Gain (Loss)
 
Unrealized Gain (Loss)*
 
Realized Gain (Loss)
 
Unrealized Gain (Loss)*
Commodity Price
($ in thousands)
Commodities Futures - Short Contracts
$
—

 
$
—

 
$
387

 
$
(182
)
Commodity Future Options - Purchased
(271
)
 
(5
)
 
(64
)
 
1

Commodity Future Options - Sold
316

 
(168
)
 
—

 
—

Credit
 
 
 
 
 
 
 
Credit Default Swaps - Protection Purchased
(803
)
 
(2,906
)
 
715

 
(2,205
)
Credit Default Swaps - Protection Sold
81

 
(119
)
 
—

 
1

Equity Price
 
 
 
 
 
 
 
Contracts for Differences - Long Contracts
276

 
(2,569
)
 
6,114

 
(316
)
Contracts for Differences - Short Contracts
(1,820
)
 
279

 
135

 
687

Total Return Swaps - Long Contracts
4,690

 
740

 
964

 
334

Total Return Swaps - Short Contracts
187

 
(233
)
 
(205
)
 
648

Index
 
 
 
 
 
 
 
Index Futures - Short Contracts
(139
)
 
441

 
19

 
—

Interest Rates
 
 
 
 
 
 
 
Bond Futures - Short Contracts
(320
)
 
(170
)
 
(142
)
 
(347
)
Interest Rate Swaps
(624
)
 
293

 
(6
)
 
964

Interest Rate Swaptions
530

 
(919
)
 
(156
)
 
91

Treasury Futures - Short Contracts
(256
)
 
(127
)
 
348

 
(587
)
Foreign Currency Exchange Rates
 
 
 
 
 
 
 
Foreign Currency Forward
534

 
(915
)
 
8,094

 
(1,528
)
Foreign Currency Options - Purchased
(1,266
)
 
(1,847
)
 
4,507

 
(1,224
)
Foreign Currency Options - Sold
686

 
171

 
(1,652
)
 
682

Catastrophe Risk Derivatives
—

 
—

 
—

 
767

 
$
1,801

 
$
(8,054
)
 
$
19,058

 
$
(2,214
)
Embedded Derivatives
 
 
 
 
 
 
 
Embedded derivatives in reinsurance contracts
$
—

 
$
(63
)
 
$
—

 
$
—

Embedded derivatives in deposit contracts
—

 
(80
)
 
—

 
(170
)
 
$
—

 
$
(143
)
 
$
—

 
$
(170
)
*Unrealized gain (loss) relates to derivatives still held at reporting date.
The Company’s ISDA agreements with its counterparties provide for various termination events including decline in the NAV of the Company’s investments over a certain period, key-man provisions, document delivery schedules, and Employment Retirement Income Security Act and bankruptcy provisions. Upon the triggering of a termination event, a counterparty may avail itself of various remedies including, but not limited to, waiver of the termination event, request for additional collateral, renegotiation of the ISDA agreement, or immediate settlement of positions.
The Company obtains/provides collateral from/to various counterparties for OTC derivative contracts in accordance with bilateral collateral agreements. As of March 31, 2014, the Company posted collateral in the form of cash of $32.5 million (December 31, 2013 - $35.4 million) to certain counterparties to cover collateral requirements for open OTC derivatives.
The Company does not offset its derivative instruments and presents all amounts in the condensed consolidated balance sheets on a gross basis. The Company has pledged cash collateral to counterparties to support the current value of amounts due to the counterparties based on the value of the underlying security. As of March 31, 2014 and December 31, 2013, the gross and net amounts of derivative instruments that are subject to enforceable master netting arrangements or similar agreements were as follows:
 
 
Gross Amounts not offset in the condensed consolidated balance sheet
March 31, 2014 Counterparty
 
Gross Amounts of Assets Presented in the condensed consolidated balance sheet
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
($ in thousands)
Counterparty 1
 
$
881

 
$
881

 
$
—

 
$
—

Counterparty 2
 
3,396

 
188

 
—

 
3,208

Counterparty 3
 
12,715

 
2,457

 
—

 
10,258

Counterparty 4
 
378

 
378

 
—

 
—

Counterparty 5
 
1,498

 
915

 
—

 
583

Counterparty 6
 
8,505

 
432

 
6,006

 
2,067

Counterparty 7
 
52

 
52

 
—

 
—

Counterparty 8
 
709

 
383

 
—

 
326

 
 
 
 
 
 
 
 
 
Total
 
$
28,134

 
$
5,686

 
$
6,006

 
$
16,442

 
 
 
 
 
 
 
 
 
 
 
Gross Amounts not offset in the condensed consolidated balance sheet
March 31, 2014 Counterparty
 
Gross Amounts of Liabilities Presented in the condensed consolidated balance sheet
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
 
 
($ in thousands)
Counterparty 1
 
$
1,292

 
$
881

 
$
411

 
$
—

Counterparty 2
 
188

 
188

 
—

 
—

Counterparty 3
 
2,457

 
2,457

 
—

 
—

Counterparty 4
 
1,636

 
378

 
1,258

 
—

Counterparty 5
 
915

 
915

 
—

 
—

Counterparty 6
 
432

 
432

 
—

 
—

Counterparty 7
 
266

 
52

 
214

 
—

Counterparty 8
 
383

 
383

 
—

 
—

 
 
 
 
 
 
 
 
 
Total
 
$
7,569

 
$
5,686

 
$
1,883

 
$
—

 
 
Gross Amounts not offset in the condensed consolidated balance sheet
December 31, 2013
Counterparty
 
Gross Amounts of Assets Presented in the condensed consolidated balance sheet
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
($ in thousands)
Counterparty 1
 
$
1,128

 
$
1,041

 
$
—

 
$
87

Counterparty 2
 
4,998

 
400

 
1,629

 
2,969

Counterparty 3
 
16,066

 
3,509

 
—

 
12,557

Counterparty 4
 
1,351

 
1,351

 
—

 
—

Counterparty 5
 
3,198

 
1,054

 
—

 
2,144

Counterparty 6
 
12,234

 
492

 
10,465

 
1,277

Counterparty 7
 
2

 
2

 
—

 
—

Counterparty 8
 
—

 
—

 
—

 
—

Counterparty 9
 
68

 
68

 
—

 
—

Total
 
$
39,045

 
$
7,917

 
$
12,094

 
$
19,034

 
 
 
 
 
 
 
 
 
 
 
Gross Amounts not offset in the condensed consolidated balance sheet
December 31, 2013
Counterparty
 
Gross Amounts of Liabilities Presented in the condensed consolidated balance sheet
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
 
 
($ in thousands)
Counterparty 1
 
$
1,041

 
$
1,041

 
$
—

 
$
—

Counterparty 2
 
400

 
400

 
—

 
—

Counterparty 3
 
3,509

 
3,509

 
—

 
—

Counterparty 4
 
1,360

 
1,351

 
9

 
—

Counterparty 5
 
1,054

 
1,054

 
—

 
—

Counterparty 6
 
492

 
492

 
—

 
—

Counterparty 7
 
59

 
2

 
57

 
—

Counterparty 8
 
—

 
—

 
—

 
—

Counterparty 9
 
904

 
68

 
836

 
—

Total
 
$
8,819

 
$
7,917

 
$
902

 
$
—