Fair Value (Tables)

6 Months Ended

Jun. 30, 2015

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

At June 30, 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):



June 30, 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	$	—		$	2,335,450		$	—		$	2,335,450
U.S. states, territories and municipalities	—			569,848			112,221			682,069
Non-U.S. sovereign government, supranational and government related	—			1,491,495			—			1,491,495
Corporate	—			5,510,022			—			5,510,022
Asset-backed securities	—			678,594			411,649			1,090,243
Residential mortgage-backed securities	—			2,186,376			—			2,186,376
Other mortgage-backed securities	—			54,117			—			54,117
Fixed maturities	$	—		$	12,825,902		$	523,870		$	13,349,772
Short-term investments	$	—		$	19,244		$	—		$	19,244
Equities
Real estate investment trusts	$	189,202		$	—		$	—		$	189,202
Insurance	119,690			5,175			—			124,865
Consumer noncyclical	121,091			—			—			121,091
Finance	79,914			7,809			20,964			108,687
Energy	94,517			—			—			94,517
Industrials	60,073			9,219			—			69,292
Technology	48,775			—			9,215			57,990
Consumer cyclical	48,034			—			—			48,034
Communications	43,976			—			2,580			46,556
Utilities	25,966			—			—			25,966
Other	19,031			—			—			19,031
Mutual funds and exchange traded funds	92,397			—			8,923			101,320
Equities	$	942,666		$	22,203		$	41,682		$	1,006,551
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—		$	17,643		$	—		$	17,643
Insurance-linked securities	—			—			14			14
Total return swaps	—			—			233			233
TBAs	—			11			—			11
Other
Notes and loan receivables and notes securitization	—			—			65,450			65,450
Annuities and residuals	—			—			11,096			11,096
Private equities	—			—			71,543			71,543
Derivative liabilities
Foreign exchange forward contracts	—			(5,927		)	—			(5,927		)
Foreign currency option contracts	—			(946		)	—			(946		)
Futures contracts	(7,811		)	—			—			(7,811		)
Insurance-linked securities	—			—			(359		)	(359		)
Total return swaps	—			—			(2,298		)	(2,298		)
Interest rate swaps	—			(15,912		)	—			(15,912		)
TBAs	—			(1,609		)	—			(1,609		)
Other invested assets	$	(7,811	)	$	(6,740	)	$	145,679		$	131,128
Funds held – directly managed
U.S. government and government sponsored enterprises	$	—		$	157,909		$	—		$	157,909
Non-U.S. sovereign government, supranational and government related	—			109,934			—			109,934
Corporate	—			137,451			—			137,451
Short-term investments	—			7,047			—			7,047
Other invested assets	—			—			12,348			12,348
Funds held – directly managed	$	—		$	412,341		$	12,348		$	424,689
Total	$	934,855		$	13,272,950		$	723,579		$	14,931,384



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 June 30, 2015 and 2014, were as follows (in thousands of U.S. dollars):



For the three months ended June 30, 2015	Balance at beginning of period			Realized and unrealized investment (losses) gains included in net loss			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	$	147,683		$	(8,390	)	$	16,440	$	(43,512	)	$	—	$	112,221		$	(8,392	)
Asset-backed securities	451,583			(7,711		)	17,280		(49,503		)	—		411,649			(7,566		)
Fixed maturities	$	599,266		$	(16,101	)	$	33,720	$	(93,015	)	$	—	$	523,870		$	(15,958	)
Equities
Finance	$	20,532		$	564		$	—	$	(132	)	$	—	$	20,964		$	564
Technology	8,602			613			—		—			—		9,215			613
Communications	2,723			(143		)	—		—			—		2,580			(143		)
Mutual funds and exchange traded funds	257,977			286			—		(249,340		)	—		8,923			286
Equities	$	289,834		$	1,320		$	—	$	(249,472	)	$	—	$	41,682		$	1,320
Other invested assets
Derivatives, net	$	(1,377	)	$	(1,033	)	$	—	$	—		$	—	$	(2,410	)	$	(1,033	)
Notes and loan receivables and notes securitization	51,103			(540		)	16,271		(1,384		)	—		65,450			(541		)
Annuities and residuals	12,155			90			—		(1,149		)	—		11,096			91
Private equities	64,642			1,055			6,754		(908		)	—		71,543			906
Other invested assets	$	126,523		$	(428	)	$	23,025	$	(3,441	)	$	—	$	145,679		$	(577	)
Funds held – directly managed
U.S. states, territories and municipalities	$	132		$	68		$	—	$	(200	)	$	—	$	—		$	—
Other invested assets	12,008			340			—		—			—		12,348			340
Funds held – directly managed	$	12,140		$	408		$	—	$	(200	)	$	—	$	12,348		$	340
Total	$	1,027,763		$	(14,801	)	$	56,745	$	(346,128	)	$	—	$	723,579		$	(14,875	)


(1)	There were no issuances or sales for the three months ended June 30, 2015.



For the three months ended June 30, 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	$	113,467		$	5,960		$	4,260		$	(70	)	$	—	$	123,617		$	5,959
Asset-backed securities	447,701			3,141			68,035			(29,771		)	—		489,106			3,184
Fixed maturities	$	561,168		$	9,101		$	72,295		$	(29,841	)	$	—	$	612,723		$	9,143
Equities
Finance	$	22,706		$	(3,142	)	$	—		$	—		$	—	$	19,564		$	(3,142	)
Communications	2,111			(44		)	—			—			—		2,067			(44		)
Technology	7,400			245			—			—			—		7,645			245
Other	—			(1		)	8			—			—		7			(1		)
Mutual funds and exchange traded funds	8,053			193			—			—			—		8,246			193
Equities	$	40,270		$	(2,749	)	$	8		$	—		$	—	$	37,529		$	(2,749	)
Other invested assets
Derivatives, net	$	(1,042	)	$	398		$	(208	)	$	—		$	—	$	(852	)	$	398
Notes and loan receivables and notes securitization	42,243			2,967			2,196			(8,803		)	—		38,603			4,486
Annuities and residuals	18,945			302			—			(2,113		)	—		17,134			303
Private equities	42,655			(2,264		)	15,478			(941		)	—		54,928			(2,264		)
Other invested assets	$	102,801		$	1,403		$	17,466		$	(11,857	)	$	—	$	109,813		$	2,923
Funds held – directly managed
U.S. states, territories and municipalities	$	301		$	4		$	—		$	—		$	—	$	305		$	4
Other invested assets	15,223			577			—			—			—		15,800			577
Funds held – directly managed	$	15,524		$	581		$	—		$	—		$	—	$	16,105		$	581
Total	$	719,763		$	8,336		$	89,769		$	(41,698	)	$	—	$	776,170		$	9,898


(1)	Purchases and issuances of derivatives include issuances of $0.2 million.


(2)	There were no sales for the three months ended June 30, 2014.

The reconciliations of the beginning and ending balances for all financial instruments measured at fair value using Level 3 inputs for the six months ended June 30, 2015 and 2014, were as follows (in thousands of U.S. dollars):



For the six months ended June 30, 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		$	(10,251	)	$	16,440	$	(43,696	)	$	—	$	112,221		$	(10,258	)
Asset-backed securities	449,918			(6,450		)	60,702		(92,521		)	—		411,649			(6,187		)
Fixed maturities	$	599,646		$	(16,701	)	$	77,142	$	(136,217	)	$	—	$	523,870		$	(16,445	)
Equities
Finance	$	20,353		$	743		$	—	$	(132	)	$	—	$	20,964		$	743
Technology	8,555			660			—		—			—		9,215			660
Communications	2,640			(60		)	—		—			—		2,580			(60		)
Mutual funds and exchange traded funds	8,586			337			249,340		(249,340		)	—		8,923			337
Equities	$	40,134		$	1,680		$	249,340	$	(249,472	)	$	—	$	41,682		$	1,680
Other invested assets
Derivatives, net	$	(1,858	)	$	(552	)	$	—	$	—		$	—	$	(2,410	)	$	(552	)
Notes and loan receivables and notes securitization	44,817			564			22,682		(2,613		)	—		65,450			2,082
Annuities and residuals	13,243			321			—		(2,468		)	—		11,096			321
Private equities	59,872			1,552			11,938		(1,819		)	—		71,543			1,404
Other invested assets	$	116,074		$	1,885		$	34,620	$	(6,900	)	$	—	$	145,679		$	3,255
Funds held – directly managed
U.S. states, territories and municipalities	$	132		$	68		$	—	$	(200	)	$	—	$	—		$	—
Other invested assets	13,398			(1,050		)	—		—			—		12,348			(1,050		)
Funds held – directly managed	$	13,530		$	(982	)	$	—	$	(200	)	$	—	$	12,348		$	(1,050	)
Total	$	769,384		$	(14,118	)	$	361,102	$	(392,789	)	$	—	$	723,579		$	(12,560	)


(1)	There were no issuances or sales for the six months ended June 30, 2015.



For the six months ended June 30, 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		$	6,852		$	8,525		$	(140	)	$	—	$	123,617		$	6,849
Asset-backed securities	446,577			9,137			127,453			(94,061		)	—		489,106			9,444
Fixed maturities	$	554,957		$	15,989		$	135,978		$	(94,201	)	$	—	$	612,723		$	16,293
Equities
Finance	20,207			(643		)	—			—			—		19,564			(643		)
Communications	2,199			(132		)	—			—			—		2,067			(132		)
Technology	7,752			(107		)	—			—			—		7,645			(107		)
Other	—			(1		)	8			—			—		7			(1		)
Mutual funds and exchange traded funds	7,887			359			—			—			—		8,246			359
Equities	$	38,045		$	(524	)	$	8		$	—		$	—	$	37,529		$	(524	)
Other invested assets
Derivatives, net	$	(788	)	$	864		$	(928	)	$	—		$	—	$	(852	)	$	864
Notes and loan receivables and notes securitization	41,446			3,567			2,916			(9,326		)	—		38,603			5,086
Annuities and residuals	24,064			391			—			(7,321		)	—		17,134			431
Private equities	39,131			(1,831		)	20,544			(2,916		)	—		54,928			(1,863		)
Other invested assets	$	103,853		$	2,991		$	22,532		$	(19,563	)	$	—	$	109,813		$	4,518
Funds held – directly managed
U.S. states, territories and municipalities	$	286		$	19		$	—		$	—		$	—	$	305		$	19
Other invested assets	15,165			380			255			—			—		15,800			380
Funds held – directly managed	$	15,451		$	399		$	255		$	—		$	—	$	16,105		$	399
Total	$	712,306		$	18,855		$	158,773		$	(113,764	)	$	—	$	776,170		$	20,686

(1) Purchases and issuances of derivatives include issuances of $0.9 million.

(2) There were no sales for the six months ended June 30, 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 June 30, 2015 and December 31, 2014 were as follows (fair value in thousands of U.S. dollars):



June 30, 2015	Fair value			Valuation techniques	Unobservable inputs	Range (Weighted average)
Fixed maturities
U.S. states, territories and municipalities	$	112,221		Discounted cash flow	Credit spreads	2.5% – 11.5% (7.2%)
Asset-backed securities – other	411,649			Discounted cash flow	Credit spreads	4.0% – 12.1% (7.6%)
Equities
Finance	14,570			Weighted market comparables	Net income multiple	14.4 (14.4)
				Weighted market comparables	Tangible book value multiple	1.5 (1.5)
					Liquidity discount	25.0% (25.0%)
					Comparable return	0% (0%)
Finance	6,394			Profitability analysis	Projected return on equity	14.0% (14.0%)
Technology	9,215			Weighted market comparables	Revenue multiple	1.8 (1.8)
				Weighted market comparables	Adjusted earnings multiple	10.7 (10.7)
Communications	2,580			Weighted market comparables	Adjusted earnings multiple	9.4 (9.4)
				Weighted market comparables	Comparable return	-2.2% (-2.2%)
Other invested assets
Total return swaps	(2,065		)	Discounted cash flow	Credit spreads	4.0% – 21.7% (20.0%)
Notes and loan receivables	21,296			Discounted cash flow	Credit spreads	6.4% – 13.4% (8.9%)
Notes and loan receivables	12,599			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	31,555			Discounted cash flow	Credit spreads	4.3% – 6.7% (6.6%)
Annuities and residuals	11,096			Discounted cash flow	Credit spreads	5.1% – 8.8% (7.7%)
					Prepayment speed	0% – 15.0% (2.9%)
					Constant default rate	0.3% – 17.5% (5.0%)
Private equity – direct	9,552			Discounted cash flow and weighted market comparables	Net income multiple	9.6 (9.6)
					Tangible book value multiple	2.1 (2.1)
					Recoverability of intangible assets	0% (0%)
Private equity funds	26,704			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-10.1% – 1.1% (-0.8%)
Private equity – other	35,287			Discounted cash flow	Effective yield	5.8% (5.8%)
Funds held – directly managed
Other invested assets	12,348			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-7.0% – 0% (-6.1%)



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 and six months ended June 30, 2015 and 2014 were as follows (in thousands of U.S. dollars):



	For the three months ended					For the six months ended
	June 30, 2015			June 30, 2014		June 30, 2015			June 30, 2014
Fixed maturities and short-term investments	$	(253,918	)	$	123,434	$	(176,947	)	$	243,233
Equities	(45,523		)	6,322		(52,539		)	16,647
Other invested assets	880			2,515		2,713			3,558
Funds held – directly managed	(6,298		)	741		(3,758		)	1,477
Total	$	(304,859	)	$	133,012	$	(230,531	)	$	264,915

Carrying values and fair values of financial instrument liabilities

The carrying values and fair values of the Senior Notes and CENts at June 30, 2015 and December 31, 2014 were as follows (in thousands of U.S. dollars):



	June 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt related to Senior Notes ⁽¹⁾	$	750,000	$	839,877	$	750,000	$	853,792
Debt related to CENts ⁽²⁾	63,384		62,515		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 June 30, 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 June 30, 2015 and December 31, 2014.

- 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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