Fair Value (Tables)

9 Months Ended

Sep. 30, 2015

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

At September 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):



September 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	$	—		$	2,195,753		$	—		$	2,195,753
U.S. states, territories and municipalities	—			634,874			125,480			760,354
Non-U.S. sovereign government, supranational and government related	—			1,288,188			—			1,288,188
Corporate	—			5,366,280			—			5,366,280
Asset-backed securities	—			681,758			400,831			1,082,589
Residential mortgage-backed securities	—			2,281,275			—			2,281,275
Other mortgage-backed securities	—			51,810			—			51,810
Fixed maturities	$	—		$	12,499,938		$	526,311		$	13,026,249
Short-term investments	$	—		$	100,365		$	—		$	100,365
Equities
Real estate investment trusts	$	180,387		$	—		$	—		$	180,387
Consumer noncyclical	115,462			—			—			115,462
Finance	74,552			4,698			21,861			101,111
Insurance	94,523			5,250			—			99,773
Energy	72,880			—			—			72,880
Industrials	55,322			8,751			—			64,073
Technology	45,364			—			8,416			53,780
Communications	43,024			—			2,568			45,592
Consumer cyclical	44,401			—			—			44,401
Utilities	24,616			—			—			24,616
Other	16,005			—			—			16,005
Mutual funds and exchange traded funds	179,195			—			6,841			186,036
Equities	$	945,731		$	18,699		$	39,686		$	1,004,116
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—		$	12,880		$	—		$	12,880
Insurance-linked securities	—			—			8,523			8,523
Total return swaps	—			—			1,487			1,487
TBAs	—			2,159			—			2,159
Other
Notes and loan receivables and notes securitization	—			—			91,386			91,386
Annuities and residuals	—			—			10,044			10,044
Private equities	—			—			70,070			70,070
Derivative liabilities
Foreign exchange forward contracts	—			(2,939		)	—			(2,939		)
Foreign currency option contracts	—			(4,614		)	—			(4,614		)
Futures contracts	(16,382		)	—			—			(16,382		)
Total return swaps	—			—			(2,609		)	(2,609		)
Interest rate swaps	—			(25,518		)	—			(25,518		)
Other invested assets	$	(16,382	)	$	(18,032	)	$	178,901		$	144,487
Funds held – directly managed
U.S. government and government sponsored enterprises	$	—		$	165,297		$	—		$	165,297
Non-U.S. sovereign government, supranational and government related	—			124,294			—			124,294
Corporate	—			107,826			—			107,826
Short-term investments	—			6,063			—			6,063
Other invested assets	—			—			11,877			11,877
Funds held – directly managed	$	—		$	403,480		$	11,877		$	415,357
Total	$	929,349		$	13,004,450		$	756,775		$	14,690,574



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



For the three months ended September 30, 2015	Balance at beginning of period			Realized and unrealized investment gains (losses) included in net loss			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	$	112,221		$	13,399		$	—	$	(140	)	$	—	$	125,480	$	13,398
Asset-backed securities	411,649			30			78,244		(89,092		)	—		400,831		552
Fixed maturities	$	523,870		$	13,429		$	78,244	$	(89,232	)	$	—	$	526,311	$	13,950
Equities
Finance	$	20,964		$	897		$	—	$	—		$	—	$	21,861	$	897
Technology	9,215			(799		)	—		—			—		8,416		(799		)
Communications	2,580			(12		)	—		—			—		2,568		(12		)
Mutual funds and exchange traded funds	8,923			136			—		(2,218		)	—		6,841		(595		)
Equities	$	41,682		$	222		$	—	$	(2,218	)	$	—	$	39,686	$	(509	)
Other invested assets
Derivatives, net	$	(2,410	)	$	9,811		$	—	$	—		$	—	$	7,401	$	9,811
Notes and loan receivables and notes securitization	65,450			(1,594		)	28,893		(1,363		)	—		91,386		(3,112		)
Annuities and residuals	11,096			(226		)	—		(826		)	—		10,044		148
Private equities	71,543			(2,015		)	1,553		(1,011		)	—		70,070		(2,015		)
Other invested assets	$	145,679		$	5,976		$	30,446	$	(3,200	)	$	—	$	178,901	$	4,832
Funds held – directly managed
Other invested assets	$	12,348		$	(471	)	$	—	$	—		$	—	$	11,877	$	(471	)
Funds held – directly managed	$	12,348		$	(471	)	$	—	$	—		$	—	$	11,877	$	(471	)
Total	$	723,579		$	19,156		$	108,690	$	(94,650	)	$	—	$	756,775	$	17,802


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


(2)	Settlements and sales of mutual funds and exchange traded funds and private equities include sales of $2.2 million and $0.2 million, respectively.



For the three months ended September 30, 2014	Balance at beginning of period			Realized and unrealized investment gains (losses) 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 gains (losses) relating to assets held at end of period
Fixed maturities
U.S. states, territories and municipalities	$	123,617		$	3,636		$	5,695	$	(2,205	)	$	—	$	130,743		$	3,747
Asset-backed securities	489,106			(4,439		)	11,085		(37,577		)	—		458,175			(4,403		)
Fixed maturities	$	612,723		$	(803	)	$	16,780	$	(39,782	)	$	—	$	588,918		$	(656	)
Equities
Finance	$	19,564		$	(428	)	$	—	$	—		$	—	$	19,136		$	(428	)
Communications	2,067			(101		)	—		—			—		1,966			(101		)
Technology	7,645			(327		)	—		—			—		7,318			(327		)
Other	7			—			—		—			—		7			—
Mutual funds and exchange traded funds	8,246			129			—		—			—		8,375			129
Equities	$	37,529		$	(727	)	$	—	$	—		$	—	$	36,802		$	(727	)
Other invested assets
Derivatives, net	$	(852	)	$	(1,255	)	$	57	$	560		$	—	$	(1,490	)	$	(1,255	)
Notes and loan receivables and notes securitization	38,603			(1,379		)	29,286		(21,114		)	—		45,396			(1,379		)
Annuities and residuals	17,134			(475		)	—		(1,779		)	—		14,880			(474		)
Private equities	54,928			(1,348		)	248		(809		)	—		53,019			(1,348		)
Other invested assets	$	109,813		$	(4,457	)	$	29,591	$	(23,142	)	$	—	$	111,805		$	(4,456	)
Funds held – directly managed
U.S. states, territories and municipalities	$	305		$	6		$	—	$	—		$	—	$	311		$	6
Other invested assets	15,800			(1,467		)	220		—			—		14,553			(1,467		)
Funds held – directly managed	$	16,105		$	(1,461	)	$	220	$	—		$	—	$	14,864		$	(1,461	)
Total	$	776,170		$	(7,448	)	$	46,591	$	(62,924	)	$	—	$	752,389		$	(7,300	)


(1)	There were no issuances or sales for the three months ended September 30, 2014.

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



For the nine months ended September 30, 2015	Balance at beginning of period			Realized and unrealized investment gains (losses) included in net loss			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	$	149,728		$	3,148		$	16,440	$	(43,836	)	$	—	$	125,480	$	3,140
Asset-backed securities	449,918			(6,420		)	138,946		(181,613		)	—		400,831		(6,094		)
Fixed maturities	$	599,646		$	(3,272	)	$	155,386	$	(225,449	)	$	—	$	526,311	$	(2,954	)
Equities
Finance	$	20,353		$	1,640		$	—	$	(132	)	$	—	$	21,861	$	1,640
Technology	8,555			(139		)	—		—			—		8,416		(139		)
Communications	2,640			(72		)	—		—			—		2,568		(72		)
Mutual funds and exchange traded funds	8,586			473			249,340		(251,558		)	—		6,841		(259		)
Equities	$	40,134		$	1,902		$	249,340	$	(251,690	)	$	—	$	39,686	$	1,170
Other invested assets
Derivatives, net	$	(1,858	)	$	9,259		$	—	$	—		$	—	$	7,401	$	9,259
Notes and loan receivables and notes securitization	44,817			(1,030		)	51,575		(3,976		)	—		91,386		(1,030		)
Annuities and residuals	13,243			95			—		(3,294		)	—		10,044		469
Private equities	59,872			(463		)	13,491		(2,830		)	—		70,070		(611		)
Other invested assets	$	116,074		$	7,861		$	65,066	$	(10,100	)	$	—	$	178,901	$	8,087
Funds held – directly managed
U.S. states, territories and municipalities	$	132		$	68		$	—	$	(200	)	$	—	$	—	$	—
Other invested assets	13,398			(1,521		)	—		—			—		11,877		(1,521		)
Funds held – directly managed	$	13,530		$	(1,453	)	$	—	$	(200	)	$	—	$	11,877	$	(1,521	)
Total	$	769,384		$	5,038		$	469,792	$	(487,439	)	$	—	$	756,775	$	4,782


(1)	There were no issuances for the nine months ended September 30, 2015.


(2)	Settlements and sales of mutual funds and exchange traded funds and private equities include sales of $2.2 million and $0.2 million, respectively.



For the nine months ended September 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		$	10,488		$	14,220		$	(2,345	)	$	—	$	130,743		$	10,483
Asset-backed securities	446,577			4,698			138,538			(131,638		)	—		458,175			4,993
Fixed maturities	$	554,957		$	15,186		$	152,758		$	(133,983	)	$	—	$	588,918		$	15,476
Equities
Finance	$	20,207		$	(1,071	)	$	—		$	—		$	—	$	19,136		$	(1,071	)
Communications	2,199			(233		)	—			—			—		1,966			(233		)
Technology	7,752			(434		)	—			—			—		7,318			(434		)
Other	—			(1		)	8			—			—		7			(1		)
Mutual funds and exchange traded funds	7,887			488			—			—			—		8,375			488
Equities	$	38,045		$	(1,251	)	$	8		$	—		$	—	$	36,802		$	(1,251	)
Other invested assets
Derivatives, net	$	(788	)	$	(391	)	$	(871	)	$	560		$	—	$	(1,490	)	$	(391	)
Notes and loan receivables and notes securitization	41,446			2,188			32,202			(30,440		)	—		45,396			3,707
Annuities and residuals	24,064			(84		)	—			(9,100		)	—		14,880			(44		)
Private equities	39,131			(3,179		)	20,792			(3,725		)	—		53,019			(3,210		)
Other invested assets	$	103,853		$	(1,466	)	$	52,123		$	(42,705	)	$	—	$	111,805		$	62
Funds held – directly managed
U.S. states, territories and municipalities	$	286		$	25		$	—		$	—		$	—	$	311		$	25
Other invested assets	15,165			(1,087		)	475			—			—		14,553			(1,087		)
Funds held – directly managed	$	15,451		$	(1,062	)	$	475		$	—		$	—	$	14,864		$	(1,062	)
Total	$	712,306		$	11,407		$	205,364		$	(176,688	)	$	—	$	752,389		$	13,225

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

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



September 30, 2015	Fair value			Valuation techniques	Unobservable inputs	Range (Weighted average)
Fixed maturities
U.S. states, territories and municipalities	$	125,480		Discounted cash flow	Credit spreads	2.5% – 11.1% (5.8%)
Asset-backed securities	400,831			Discounted cash flow	Credit spreads	4.1% – 11.2% (7.5%)
Equities
Finance	15,426			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	5.9% (5.9%)
Finance	6,435			Profitability analysis	Projected return on equity	14.0% (14.0%)
Technology	8,416			Weighted market comparables	Revenue multiple	1.2 (1.2)
				Weighted market comparables	Adjusted earnings multiple	10.7 (10.7)
Communications	2,568			Weighted market comparables	Adjusted earnings multiple	9.4 (9.4)
				Weighted market comparables	Comparable return	0% (0%)
Other invested assets
Total return swaps, net	(1,122		)	Discounted cash flow	Credit spreads	3.8% – 24.7% (17.2%)
Longevity swaps	8,413			Discounted cash flow	Credit spreads	2.6% (2.6%)
Notes and loan receivables	47,870			Discounted cash flow	Credit spreads	6.1% – 27.6% (8.7%)
Notes and loan receivables	12,140			Discounted cash flow	Credit spreads	17.5% (17.5%)
Notes and loan receivables				Discounted cash flow	Gross revenue/fair value	1.3 – 1.6 (1.6)
Notes securitization	31,376			Discounted cash flow	Credit spreads	3.7% – 7.1% (6.9%)
Annuities and residuals	10,044			Discounted cash flow	Credit spreads	5.8% – 11.6% (10.1%)
					Prepayment speed	0% – 15.0% (2.4%)
					Constant default rate	0.3% – 17.5% (4.5%)
Private equity – direct	9,323			Discounted cash flow and weighted market comparables	Net income multiple	9.4 (9.4)
					Tangible book value multiple	2.2 (2.2)
					Recoverability of intangible assets	0% (0%)
Private equity funds	26,321			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-17.9% – -0.5% (-10.1%)
Private equity – other	34,426			Discounted cash flow	Effective yield	5.8% (5.8%)
Funds held – directly managed
Other invested assets	11,877			Reported market value	Net asset value, as reported	100.0% (100.0%)
				Reported market value	Market adjustments	-15.3% – 0% (-13.4%)



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



	For the three months ended						For the nine months ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Fixed maturities and short-term investments	$	(19,375	)	$	(75,537	)	$	(196,322	)	$	167,696
Equities	(94,869		)	(31,093		)	(147,408		)	(14,447		)
Other invested assets	(4,072		)	(3,497		)	(1,359		)	60
Funds held – directly managed	1,674			(540		)	(2,084		)	937
Total	$	(116,642	)	$	(110,667	)	$	(347,173	)	$	154,246

Carrying values and fair values of financial instrument liabilities

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



	September 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt related to Senior Notes ⁽¹⁾	$	750,000	$	849,887	$	750,000	$	853,792
Debt related to CENts ⁽²⁾	63,384		63,999		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 September 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 September 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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