Fair Value (Tables)

12 Months Ended

Dec. 31, 2020

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

At December 31, 2020 and 2019, 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):


December 31, 2020	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	$	—	$	2,409,540	$	—	$	2,409,540
U.S. states, territories and municipalities	—		17,491		120,477		137,968
Non-U.S. sovereign government, supranational and government related	—		2,180,762		—		2,180,762
Corporate bonds	—		3,325,324		16,530		3,341,854
Asset-backed securities	—		—		17,528		17,528
Residential mortgage-backed securities	—		4,698,728		—		4,698,728

Fixed maturities	$	—	$	12,631,845	$	154,535	$	12,786,380
Short-term investments	$	—	$	416,350	$	—	$	416,350
Equities
Energy	$	—	$	—	$	34,448	$	34,448
Consumer cyclical	13,312		—		475		13,787
Consumer non-cyclical	—		—		6,886		6,886
Insurance	—		117		4,000		4,117
Finance	3,508		—		138		3,646
Real estate	—		—		2,338		2,338
Industrials	—		—		39		39

Diversified	2		—		3,098		3,100
Mutual funds	—		—		1,428,080		1,428,080
Equities	$	16,822	$	117	$	1,479,502	$	1,496,441
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—	$	7,309	$	—	$	7,309
Total return swaps	—		—		797		797

Insurance-linked securities	—		—		3,074		3,074
Other	—		—		419		419

Other
Corporate loans (1)	—		—		1,326,143		1,326,143
Notes and loans receivable and notes securitization	—		—		7,121		7,121
Private equities	—		—		756,731		756,731
Derivative liabilities
Foreign exchange forward contracts	—		(10,698)		—		(10,698)
Total return swaps	—		—		(3,152)		(3,152)
Interest rate swaps	—		(17,509)		—		(17,509)
Insurance-linked securities	—		—		(2,000)		(2,000)
Other invested assets	$	—	$	(20,898)	$	2,089,133	$	2,068,235
Total	$	16,822	$	13,027,414	$	3,723,170	$	16,767,406

(1)Corporate loans includes a portfolio of third-party, individually managed privately issued corporate loans that are managed under an externally managed mandate with a fair value of $0.9 billion and $1.4 billion at December 31, 2020 and 2019, respectively. The mandate primarily invests in U.S. floating rate, first lien, senior secured broadly syndicated loans with a focus on facility sizes greater than $300 million. Corporate loans also includes $0.4 billion and $0.5 billion of other privately issued corporate loans at December 31, 2020 and 2019 respectively.


December 31, 2019	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	$	—	$	1,421,716	$	—	$	1,421,716
U.S. states, territories and municipalities	—		13,807		143,427		157,234
Non-U.S. sovereign government, supranational and government related	—		3,255,154		—		3,255,154
Corporate bonds	—		2,643,402		18,687		2,662,089
Asset-backed securities	—		—		18,228		18,228
Residential mortgage-backed securities	—		3,166,290		—		3,166,290
Other mortgage-backed securities	—		3		—		3
Fixed maturities	$	—	$	10,500,372	$	180,342	$	10,680,714
Short-term investments	$	—	$	1,003,421	$	—	$	1,003,421
Equities
Finance	$	31,315	$	2	$	126	$	31,443
Consumer cyclical	20,117		—		—		20,117
Insurance	5,284		273		9,403		14,960
Consumer noncyclical	13,126		—		—		13,126
Basic materials	5,295		—		—		5,295
Industrials	4,042		—		—		4,042
Technology	3,027		—		—		3,027
Real estate	—		—		2,385		2,385
Communications	922		—		—		922
Mutual funds	—		—		1,199,847		1,199,847
Equities	$	83,128	$	275	$	1,211,761	$	1,295,164
Other invested assets
Derivative assets
Foreign exchange forward contracts	$	—	$	4,363	$	—	$	4,363
Total return swaps	—		—		1,448		1,448
Insurance-linked securities	—		—		2,728		2,728
Foreign currency option contracts	—		266		—		266
Other
Corporate loans	—		—		1,879,105		1,879,105
Notes and loans receivable and notes securitization	—		—		3,085		3,085
Private equities	—		—		533,744		533,744
Derivative liabilities
Foreign exchange forward contracts	—		(5,643)		—		(5,643)
Total return swaps	—		—		(2,962)		(2,962)
Interest rate swaps	—		(12,378)		—		(12,378)
Insurance-linked securities	—		—		(3,871)		(3,871)
Other invested assets	$	—	$	(13,392)	$	2,413,277	$	2,399,885
Total	$	83,128	$	11,490,676	$	3,805,380	$	15,379,184

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 financial instruments measured at fair value using Level 3 inputs for the years ended December 31, 2020 and 2019, were as follows (in thousands of U.S. dollars):


For the year ended December 31, 2020	Balance at beginning of year		Realized and unrealized investment (losses) gains included in net income		Purchases		Settlements and sales (1)		Net transfers into (out of) Level 3		Balance at end of year		Change in unrealized investment (losses) gains relating to assets held at end of year
Fixed maturities
U.S. states, territories and municipalities	$	143,427	$	(5,785)	$	—	$	(17,165)	$	—	$	120,477	$	(5,780)
Asset-backed securities	18,228		—		—		(700)		—		17,528		—
Corporate bonds	18,687		(128)		—		(2,029)		—		16,530		(128)
Fixed maturities	$	180,342	$	(5,913)	$	—	$	(19,894)	$	—	$	154,535	$	(5,908)
Equities
Energy	$	—	$	3,419	$	31,128	$	(99)	$	—	$	34,448	$	3,320
Consumer noncyclical	—		(3,168)		5,560		—		4,494		6,886		278
Insurance	9,403		(5,403)		—		—		—		4,000		4,000
Real estate	2,385		(416)		369		—		—		2,338		(416)
Consumer cyclical	—		—		475		—		—		475		—
Finance	126		12		—		—		—		138		12
Industrials	—		(491)		530		—		—		39		(491)
Diversified	—		(706)		3,804		—		—		3,098		(706)
Mutual funds	1,199,847		206,654		47,391		(25,812)		—		1,428,080		198,911
Equities	$	1,211,761	$	199,901	$	89,257	$	(25,911)	$	4,494	$	1,479,502	$	204,908
Other invested assets
Derivatives, net	$	(2,657)	$	(8,217)	$	5,008	$	5,004	$	—	$	(862)	$	(5,085)
Corporate loans	1,879,105		(10,980)		555,780		(1,097,762)		—		1,326,143		31,980
Notes and loan receivables and notes securitization	3,085		124		4,448		(536)		—		7,121		(979)
Private equities	533,744		105,627		260,096		(140,074)		(2,662)		756,731		93,903
Other invested assets	$	2,413,277	$	86,554	$	825,332	$	(1,233,368)	$	(2,662)	$	2,089,133	$	119,819

Total	$	3,805,380	$	280,542	$	914,589	$	(1,279,173)	$	1,832	$	3,723,170	$	318,819

(1)Settlements and sales of Equities and Other invested assets included sales of $26 million and $1.1 billion, respectively. Sales of Other invested assets of $1.1 billion included sales of corporate loans of $981 million and private equities of $137 million.


For the year ended December 31, 2019	Balance at beginning of year		Realized and unrealized investment gains (losses) included in net income		Purchases		Settlements and sales (1)		Net transfers (out of) into Level 3		Balance at end of year		Change in unrealized investment gains (losses) relating to assets held at end of year
Fixed maturities
U.S. states, territories and municipalities	$	120,898	$	12,959	$	10,455	$	(885)	$	—	$	143,427	$	12,951
Asset-backed securities	17,596		1,274		—		(642)		—		18,228		1,274
Corporate	21,470		157		—		(2,940)		—		18,687		157
Fixed maturities	$	159,964	$	14,390	$	10,455	$	(4,467)	$	—	$	180,342	$	14,382
Equities
Finance	$	13,710	$	100	$	—	$	—	$	(13,684)	$	126	$	(3)
Technology	12,256		(1,538)		—		(10,718)		—		—		—
Mutual funds	621,759		388,024		206,685		(16,621)		—		1,199,847		385,317
Insurance	—		7,514		1,889		—		—		9,403		7,514
Real estate	—		—		2,385		—		—		2,385		—
Equities	$	647,725	$	394,100	$	210,959	$	(27,339)	$	(13,684)	$	1,211,761	$	392,828
Other invested assets
Derivatives, net	$	(1,279)	$	115	$	(2,000)	$	507	$	—	$	(2,657)	$	(111)
Corporate loans	401,702		9,237		1,828,802		(360,636)		—		1,879,105		9,940
Notes and loan receivables and notes securitization	6,507		(717)		—		(2,705)		—		3,085		139
Private equities	372,710		49,759		132,256		(20,981)		—		533,744		37,159
Other invested assets	$	779,640	$	58,394	$	1,959,058	$	(383,815)	$	—	$	2,413,277	$	47,127
Total	$	1,587,329	$	466,884	$	2,180,472	$	(415,621)	$	(13,684)	$	3,805,380	$	454,337

(1)Settlements and sales of Equities and Other invested assets included sales of $27 million and $289 million, respectively. Sales of Other invested assets of $289 million included sales of corporate loans of $270 million, notes and loan receivables and notes securitization of $2 million, and private equities of $17 million.

Summary of significant unobservable inputs used in the valuation of financial instruments

The significant unobservable inputs used in the valuation of financial instruments measured at fair value using Level 3 inputs at December 31, 2020 and 2019 were as follows (fair value in thousands of U.S. dollars):

December 31, 2020

Fair value

Valuation techniques

Unobservable inputs

Range

(Weighted average (1))

Fixed maturities

U.S. states, territories and municipalities

120,477

Discounted cash flow

Credit spreads

2.5% – 283.2% (14.8%)

Asset backed securities

17,528

Discounted cash flow

Credit spreads

4.7% (4.7%)

Other invested assets

Total return swaps, net

(2,355)

Discounted cash flow

Credit spreads

2.7% – 36.7% (29.8%)

Insurance-linked securities – longevity swaps

3,074

Discounted cash flow

Credit Spreads

1.8% (1.8%)

Notes and loans receivables

6,446

Discounted cash flow

Credit spread

17.5% (17.5%)

Gross revenue/fair value

1.1 (1.1)

Note securitization

675

Discounted cash flow

Credit spreads

2.5% (2.5%)

Private equity – other

30,067

Discounted cash flow

Effective yield

3.9% (3.9%)

Private equity – funds

188,533

Lag reported market value

Net asset value, as reported

100.0% (100.0%)

Market adjustments

15.7% – 16.0% (15.9%)

December 31, 2019

Fair value

Valuation techniques

Unobservable inputs

Range

(Weighted average (1))

Fixed maturities

U.S. states, territories and municipalities

143,427

Discounted cash flow

Credit spreads

(0.1)% – 9.6% (3.5%)

Asset backed securities

18,228

Discounted cash flow

Credit spreads

4.7% (4.7%)

Equities

Insurance

9,403

Weighted market comparables

Revenue multiple

2.6x (2.6x)

Adjusted earnings multiple

7.7x (7.7x)

Liquidity discount

30.0% (30.0%)

Other invested assets

Total return swaps, net

(1,514)

Discounted cash flow

Credit spreads

2.3% – 24.0% (16.9%)

Insurance-linked securities – longevity swaps

2,728

Discounted cash flow

Credit spreads

1.9% (1.9%)

Insurance-linked securities – pandemic swaps

(1,871)

Discounted cash flow

Credit spreads

56.2% (56.2%)

Notes and loans receivables

2,153

Discounted cash flow

Credit spreads

17.5% (17.5%)

Gross revenue/fair value ratios

1.1 (1.1)

Note securitization

932

Discounted cash flow

Credit spreads

1.2% (1.2%)

Private equity – other

15,800

Discounted cash flow

Effective yield

3.0% (3.0%)

Private equity – funds

167,804

Lag reported market value

Net asset value, as reported

100.0% (100.0%)

Market adjustments

1.9% – 15.0% (9.7%)

(1)Unobservable inputs were weighted by the relative fair value of the instruments.

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 years ended December 31, 2020, 2019 and 2018 were as follows (in thousands of U.S. dollars):


	2020		2019		2018
Fixed maturities and short-term investments	$	219,946	$	190,343	$	(150,926)
Equities	167,456		403,011		2,791
Other invested assets	63,669		50,857		(12,987)
Funds held–directly managed (1)	—		—		(6,484)
Total	$	451,071	$	644,211	$	(167,606)

(1) The funds held–directly managed account was settled in 2018 upon commutation of the related Paris Re Reserve Agreement. See Note 7(a).