Fair Value (Tables)

3 Months Ended

Mar. 31, 2015

Financial instruments measured at fair value and categorized between Levels 1, 2 and 3

At March 31, 2015 and December 31, 2014, the Company’s financial instruments measured at fair value were classified between Levels 1, 2 and 3 as follows (in thousands of U.S. dollars):



March 31, 2015	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Fixed maturities
U.S. government and government sponsored enterprises	$	—		$	2,299,063		$	—		$	2,299,063
U.S. states, territories and municipalities	—			473,388			147,683			621,071
Non-U.S. sovereign government, supranational and government related	—			1,557,126			—			1,557,126
Corporate	—			5,494,967			—			5,494,967
Asset-backed securities	—			670,115			451,583			1,121,698
Residential mortgage-backed securities	—			2,263,463			—			2,263,463
Other mortgage-backed securities	—			54,623			—			54,623
Fixed maturities	$	—		$	12,812,745		$	599,266		$	13,412,011
Short-term investments	$	—		$	20,055		$	—		$	20,055
Equities
Real estate investment trusts	$	177,130		$	—		$	—		$	177,130
Insurance	123,839			4,682			—			128,521
Consumer noncyclical	113,740			—			—			113,740
Energy	108,648			—			—			108,648
Finance	75,760			8,086			20,532			104,378
Technology	56,709			—			8,602			65,311
Consumer cyclical	59,747			—			—			59,747
Industrials	58,435			—			—			58,435
Communications	50,665			—			2,723			53,388
Utilities	28,946			—			—			28,946
Other	21,959			—			—			21,959
Mutual funds and exchange traded funds	142,104			—			257,977			400,081
Equities	$	1,017,682		$	12,768		$	289,834		$	1,320,284
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—		$	15,414		$	—		$	15,414
Foreign currency option contracts	—			1,848			—			1,848
Insurance-linked securities	—			—			23			23
Total return swaps	—			—			1,061			1,061
TBAs	—			1,409			—			1,409
Other
Notes and loan receivables and notes securitization	—			—			51,103			51,103
Annuities and residuals	—			—			12,155			12,155
Private equities	—			—			64,642			64,642
Derivative liabilities
Foreign exchange forward contracts	—			(7,623		)	—			(7,623		)
Futures contracts	(21,382		)	—			—			(21,382		)
Insurance-linked securities	—			—			(343		)	(343		)
Total return swaps	—			—			(2,118		)	(2,118		)
Interest rate swaps	—			(21,074		)	—			(21,074		)
Other invested assets	$	(21,382	)	$	(10,026	)	$	126,523		$	95,115
Funds held – directly managed
U.S. government and government sponsored enterprises	$	—		$	155,341		$	—		$	155,341
U.S. states, territories and municipalities	—			—			132			132
Non-U.S. sovereign government, supranational and government related	—			111,021			—			111,021
Corporate	—			145,062			—			145,062
Short-term investments	—			10,984			—			10,984
Other invested assets	—			—			12,008			12,008
Funds held – directly managed	$	—		$	422,408		$	12,140		$	434,548
Total	$	996,300		$	13,257,950		$	1,027,763		$	15,282,013



December 31, 2014	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Fixed maturities
U.S. government and government sponsored enterprises	$	—		$	2,315,422		$	—		$	2,315,422
U.S. states, territories and municipalities	—			380,875			149,728			530,603
Non-U.S. sovereign government, supranational and government related	—			1,976,202			—			1,976,202
Corporate	—			5,604,160			—			5,604,160
Asset-backed securities	—			681,502			449,918			1,131,420
Residential mortgage-backed securities	—			2,306,476			—			2,306,476
Other mortgage-backed securities	—			54,462			—			54,462
Fixed maturities	$	—		$	13,319,099		$	599,646		$	13,918,745
Short-term investments	$	—		$	25,678		$	—		$	25,678
Equities
Real estate investment trusts	$	213,770		$	—		$	—		$	213,770
Insurance	140,916			4,521			—			145,437
Energy	123,978			—			—			123,978
Consumer noncyclical	100,134			—			—			100,134
Finance	70,621			7,354			20,353			98,328
Technology	52,707			—			8,555			61,262
Communications	51,829			—			2,640			54,469
Industrials	49,983			—			—			49,983
Consumer cyclical	39,002			—			—			39,002
Utilities	31,748			—			—			31,748
Other	11,571			—			—			11,571
Mutual funds and exchange traded funds	118,246			—			8,586			126,832
Equities	$	1,004,505		$	11,875		$	40,134		$	1,056,514
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—		$	20,033		$	—		$	20,033
Futures contracts	846			—			—			846
Insurance-linked securities	—			—			3			3
Total return swaps	—			—			485			485
TBAs	—			154			—			154
Other
Notes and loan receivables and notes securitization	—			—			44,817			44,817
Annuities and residuals	—			—			13,243			13,243
Private equities	—			—			59,872			59,872
Derivative liabilities
Foreign exchange forward contracts	—			(7,446		)	—			(7,446		)
Foreign currency option contracts	—			(1,196		)	—			(1,196		)
Futures contracts	(467		)	—			—			(467		)
Insurance-linked securities	—			—			(339		)	(339		)
Total return swaps	—			—			(2,007		)	(2,007		)
Interest rate swaps	—			(16,282		)	—			(16,282		)
TBAs	—			(240		)	—			(240		)
Other invested assets	$	379		$	(4,977	)	$	116,074		$	111,476
Funds held – directly managed
U.S. government and government sponsored enterprises	$	—		$	153,483		$	—		$	153,483
U.S. states, territories and municipalities	—			—			132			132
Non-U.S. sovereign government, supranational and government related	—			128,233			—			128,233
Corporate	—			177,347			—			177,347
Other invested assets	—			—			13,398			13,398
Funds held – directly managed	$	—		$	459,063		$	13,530		$	472,593
Total	$	1,004,884		$	13,810,738		$	769,384		$	15,585,006

Reconciliation of beginning and ending balances for all financial instruments measured at fair value using Level 3 inputs

The reconciliations of the beginning and ending balances for all financial instruments measured at fair value using Level 3 inputs for the three months ended March 31, 2015 and 2014, were as follows (in thousands of U.S. dollars):



For the three months ended March 31, 2015	Balance at beginning of period			Realized and unrealized investment (losses) gains included in net income			Purchases and issuances ⁽¹⁾		Settlements and sales ⁽¹⁾			Net transfers into/ (out of) Level 3		Balance at end of period			Change in unrealized investment (losses) gains relating to assets held at end of period
Fixed maturities
U.S. states, territories and municipalities	$	149,728		$	(1,861	)	$	—	$	(184	)	$	—	$	147,683		$	(1,863	)
Asset-backed securities	449,918			1,261			43,422		(43,018		)	—		451,583			1,293
Fixed maturities	$	599,646		$	(600	)	$	43,422	$	(43,202	)	$	—	$	599,266		$	(570	)
Equities
Finance	$	20,353		$	179		$	—	$	—		$	—	$	20,532		$	179
Technology	8,555			47			—		—			—		8,602			47
Communications	2,640			83			—		—			—		2,723			83
Mutual funds and exchange traded funds	8,586			51			249,340		—			—		257,977			51
Equities	$	40,134		$	360		$	249,340	$	—		$	—	$	289,834		$	360
Other invested assets
Derivatives, net	$	(1,858	)	$	481		$	—	$	—		$	—	$	(1,377	)	$	481
Notes and loan receivables and notes securitization	44,817			1,104			6,411		(1,229		)	—		51,103			2,623
Annuities and residuals	13,243			231			—		(1,319		)	—		12,155			231
Private equities	59,872			497			5,184		(911		)	—		64,642			497
Other invested assets	$	116,074		$	2,313		$	11,595	$	(3,459	)	$	—	$	126,523		$	3,832
Funds held – directly managed
U.S. states, territories and municipalities	$	132		$	—		$	—	$	—		$	—	$	132		$	—
Other invested assets	13,398			(1,390		)	—		—			—		12,008			(1,390		)
Funds held – directly managed	$	13,530		$	(1,390	)	$	—	$	—		$	—	$	12,140		$	(1,390	)
Total	$	769,384		$	683		$	304,357	$	(46,661	)	$	—	$	1,027,763		$	2,232


(1)	There were no issuances or sales for the three months ended March 31, 2015.



For the three months ended March 31, 2014	Balance at beginning of period			Realized and unrealized investment gains (losses) included in net income			Purchases and issuances ⁽¹⁾			Settlements and sales⁽²⁾			Net transfers into/(out of) Level 3		Balance at end of period			Change in unrealized investment gains (losses) relating to assets held at end of period
Fixed maturities
U.S. states, territories and municipalities	$	108,380		$	892		$	4,265		$	(70	)	$	—	$	113,467		$	890
Asset-backed securities	446,577			5,996			59,418			(64,290		)	—		447,701			6,259
Fixed maturities	$	554,957		$	6,888		$	63,683		$	(64,360	)	$	—	$	561,168		$	7,149
Equities
Finance	$	20,207		$	2,499		$	—		$	—		$	—	$	22,706		$	2,499
Communications	2,199			(88		)	—			—			—		2,111			(88		)
Technology	7,752			(352		)	—			—			—		7,400			(352		)
Mutual funds and exchange traded funds	7,887			166			—			—			—		8,053			166
Equities	$	38,045		$	2,225		$	—		$	—		$	—	$	40,270		$	2,225
Other invested assets
Derivatives, net	$	(788	)	$	466		$	(720	)	$	—		$	—	$	(1,042	)	$	466
Notes and loan receivables and notes securitization	41,446			600			720			(523		)	—		42,243			600
Annuities and residuals	24,064			89			—			(5,208		)	—		18,945			128
Private equities	39,131			433			5,066			(1,975		)	—		42,655			401
Other invested assets	$	103,853		$	1,588		$	5,066		$	(7,706	)	$	—	$	102,801		$	1,595
Funds held – directly managed
U.S. states, territories and municipalities	$	286		$	15		$	—		$	—		$	—	$	301		$	15
Other invested assets	15,165			(197		)	255			—			—		15,223			(197		)
Funds held – directly managed	$	15,451		$	(182	)	$	255		$	—		$	—	$	15,524		$	(182	)
Total	$	712,306		$	10,519		$	69,004		$	(72,066	)	$	—	$	719,763		$	10,787


(1)	Purchases and issuances of derivatives include issuances of $0.7 million.


(2)	There were no sales for the three months ended March 31, 2014.

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

The significant unobservable inputs used in the valuation of financial instruments measured at fair value using Level 3 inputs at March 31, 2015 and December 31, 2014 were as follows (fair value in thousands of U.S. dollars):



March 31, 2015	Fair value			Valuation techniques	Unobservable inputs	Range (Weighted average)
Fixed maturities
U.S. states, territories and municipalities	$	147,683		Discounted cash flow	Credit spreads	2.6% -10.5% (6.0%)
Asset-backed securities – other	451,583			Discounted cash flow	Credit spreads	4.0% – 12.0% (7.2%)
Equities
Finance	14,748			Weighted market comparables	Net income multiple	19.0 (19.0)
				Weighted market comparables	Tangible book value multiple	1.3 (1.3)
					Liquidity discount	25.0% (25.0%)
					Comparable return	1.4% (1.4%)
Finance	5,784			Profitability analysis	Projected return on equity	14.0% (14.0%)
Technology	8,602			Weighted market comparables	Revenue multiple	1.6 (1.6)
				Weighted market comparables	Adjusted earnings multiple	10.6 (10.6)
Communications	2,723			Weighted market comparables	Adjusted earnings multiple	9.4 (9.4)
				Weighted market comparables	Comparable return	3.2% (3.2%)
Other invested assets
Total return swaps	(1,057		)	Discounted cash flow	Credit spreads	3.8% – 19.9% (14.6%)
Notes and loan receivables	11,607			Discounted cash flow	Credit spreads	6.1% - 10.6% (9.1%)
Notes and loan receivables	13,209			Discounted cash flow	Credit spreads	17.5% (17.5%)
Notes and loan receivables				Discounted cash flow	Gross revenue/fair value	1.4 – 1.6 (1.6)
Notes securitization	26,287			Discounted cash flow	Credit spreads	3.9% – 6.5% (6.4%)
Annuities and residuals	12,155			Discounted cash flow	Credit spreads	5.2% – 9.1% (7.8%)
					Prepayment speed	0% – 15.0% (3.6%)
					Constant default rate	0.3% – 17.5% (5.6%)
Private equity – direct	9,035			Discounted cash flow and weighted market comparables	Net income multiple	9.2 (9.2)
					Tangible book value multiple	2.0 (2.0)
					Recoverability of intangible assets	0% (0%)
Private equity funds	23,676			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-2.5% – 3.2% (0.0%)
Private equity – other	31,931			Discounted cash flow	Effective yield	5.8% (5.8%)
Funds held – directly managed
Other invested assets	12,008			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-19.2% – 0% (-11.1%)



December 31, 2014	Fair value			Valuation techniques	Unobservable inputs	Range (Weighted average)
Fixed maturities
U.S. states, territories and municipalities	$	149,728		Discounted cash flow	Credit spreads	2.2% – 10.1% (4.6%)
Asset-backed securities – other	449,918			Discounted cash flow	Credit spreads	4.0% – 12.1% (7.1%)
Equities
Finance	14,561			Weighted market comparables	Net income multiple	19.0 (19.0)
				Weighted market comparables	Tangible book value multiple	1.3 (1.3)
					Liquidity discount	25.0% (25.0%)
					Comparable return	7.3% (7.3%)
Finance	5,792			Profitability analysis	Projected return on equity	14.0% (14.0%)
Technology	8,555			Weighted market comparables	Revenue multiple	1.6 (1.6)
				Weighted market comparables	Adjusted earnings multiple	10.2 (10.2)
Communications	2,640			Weighted market comparables	Adjusted earnings multiple	9.4 (9.4)
				Weighted market comparables	Comparable return	-10.6% (-10.6%)
Other invested assets
Total return swaps	(1,522		)	Discounted cash flow	Credit spreads	3.6% – 19.3% (16.3%)
Notes and loan receivables	8,068			Discounted cash flow	Credit spreads	12.6% (12.6%)
Notes and loan receivables	13,237			Discounted cash flow	Credit spreads	17.5% (17.5%)
Notes and loan receivables				Discounted cash flow	Gross revenue/fair value	1.5 – 1.7 (1.7)
Notes securitization	23,512			Discounted cash flow	Credit spreads	3.5% – 6.6% (6.4%)
Annuities and residuals	13,243			Discounted cash flow	Credit spreads	4.9% – 9.6% (7.8%)
					Prepayment speed	0% – 15.0% (4.3%)
					Constant default rate	0.3% – 17.5% (6.3%)
Private equity – direct	8,536			Discounted cash flow and weighted market comparables	Net income multiple	9.0 (9.0)
					Tangible book value multiple	2.0 (2.0)
					Recoverability of intangible assets	0% (0%)
Private equity funds	18,494			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-7.6% – 11.0% (-1.6%)
Private equity – other	32,842			Discounted cash flow	Effective yield	5.8% (5.8%)
Funds held – directly managed
Other invested assets	13,398			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-15.4% – 0% (-14.5%)

Change in fair value of financial instruments subject to fair value option

Changes in the fair value of the Company’s financial instruments subject to the fair value option during the three months ended March 31, 2015 and 2014 were as follows (in thousands of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Fixed maturities and short-term investments	$	76,971		$	119,799
Equities	(7,016		)	10,325
Other invested assets	1,833			1,042
Funds held – directly managed	2,540			736
Total	$	74,328		$	131,902

Carrying values and fair values of financial instrument liabilities

The carrying values and fair values of the Senior Notes and CENts at March 31, 2015 and December 31, 2014 were as follows (in thousands of U.S. dollars):



	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt related to Senior Notes ⁽¹⁾	$	750,000	$	870,609	$	750,000	$	853,792
Debt related to CENts ⁽²⁾	63,384		63,547		63,384		62,309


(1)	PartnerRe Finance A LLC and PartnerRe Finance B LLC, the issuers of the Senior Notes, do not meet consolidation requirements under U.S. GAAP. Accordingly, the Company shows the related intercompany debt of $750 million in its Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014.


(2)	PartnerRe Finance II Inc., the issuer of the CENts, does not meet consolidation requirements under U.S. GAAP. Accordingly, the Company shows the related intercompany debt of $71 million in its Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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