Edgar Filing: PARTNERRE LTD

Q1 2015 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-14536

PartnerRe Ltd.

(Exact name of registrant as specified in its charter)



Bermuda		Not Applicable
(State of incorporation)		(I.R.S. Employer Identification No.)

90 Pitts Bay Road, Pembroke, HM08, Bermuda

(Address of principal executive offices) (Zip Code)

(441) 292-0888

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of the registrant’s common shares (par value $1.00 per share) outstanding, net of treasury shares, as of April 27, 2015 was 47,734,606.

PartnerRe Ltd.

INDEX TO FORM 10-Q



		Page
PART I—FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3

	Report of Independent Registered Public Accounting Firm	3

	Condensed Consolidated Balance Sheets—March 31, 2015 (Unaudited) and December 31, 2014 (Audited)	4

	Condensed Consolidated Statements of Operations and Comprehensive Income—Three Months Ended March 31, 2015 and 2014 (Unaudited)	5

	Condensed Consolidated Statements of Shareholders’ Equity—Three Months Ended March 31, 2015 and 2014 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2015 and 2014 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	70

ITEM 4.	Controls and Procedures	75

PART II—OTHER INFORMATION

ITEM 1.	Legal Proceedings	76

ITEM 1A.	Risk Factors	76

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

ITEM 3.	Defaults Upon Senior Securities	77

ITEM 4.	Mine Safety Disclosures	77

ITEM 5.	Other Information	77

ITEM 6.	Exhibits	77

	Signatures	78

	Exhibit Index	79

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of PartnerRe Ltd.

We have reviewed the accompanying condensed consolidated balance sheet of PartnerRe Ltd. and subsidiaries (the “Company”) as of March 31, 2015, and the related condensed consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for the three-month periods ended March 31, 2015 and 2014. These condensed consolidated interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of PartnerRe Ltd. and subsidiaries as of December 31, 2014, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and of cash flows for the year then ended (not presented herein); and in our report dated February 26, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2014 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte Ltd.

Deloitte Ltd.

Hamilton, Bermuda

May 4, 2015

PartnerRe Ltd.

Condensed Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars, except parenthetical share and per share data)



	March 31, 2015			December 31, 2014
	(Unaudited)			(Audited)
Assets
Investments:
Fixed maturities, at fair value (amortized cost: 2015, $12,920,945; 2014, $13,489,633)	$	13,412,011		$	13,918,745
Short-term investments, at fair value (amortized cost: 2015, $20,054; 2014, $25,699)	20,055			25,678
Equities, at fair value (cost: 2015, $1,115,408; 2014, $843,429)	1,320,284			1,056,514
Other invested assets	286,596			298,827
Total investments	15,038,946			15,299,764
Funds held – directly managed (cost: 2015, $581,850; 2014, $600,379)	592,609			608,853
Cash and cash equivalents	1,413,799			1,313,468
Accrued investment income	150,255			158,737
Reinsurance balances receivable	2,899,821			2,454,850
Reinsurance recoverable on paid and unpaid losses	290,018			246,158
Funds held by reinsured companies	659,058			765,905
Deferred acquisition costs	706,779			661,186
Deposit assets	75,692			92,973
Net tax assets	10,600			6,876
Goodwill	456,380			456,380
Intangible assets	152,836			159,604
Other assets	41,802			45,603
Total assets	$	22,488,595		$	22,270,357
Liabilities
Unpaid losses and loss expenses	$	9,401,397		$	9,745,806
Policy benefits for life and annuity contracts	1,996,519			2,050,107
Unearned premiums	2,159,446			1,750,607
Other reinsurance balances payable	188,941			182,395
Deposit liabilities	52,638			70,325
Net tax liabilities	275,700			240,989
Accounts payable, accrued expenses and other	338,137			304,728
Debt related to senior notes	750,000			750,000
Debt related to capital efficient notes	70,989			70,989
Total liabilities	15,233,767			15,165,946
Shareholders’ Equity
Common shares (par value $1.00; issued: 2015 and 2014, 87,237,220 shares)	87,237			87,237
Preferred shares (par value $1.00; issued and outstanding: 2015 and 2014, 34,150,000 shares; aggregate liquidation value: 2015 and 2014, $853,750)	34,150			34,150
Additional paid-in capital	3,959,465			3,949,665
Accumulated other comprehensive loss	(37,240		)	(34,083		)
Retained earnings	6,442,442			6,270,811
Common shares held in treasury, at cost (2015, 39,572,572 shares; 2014, 39,400,936 shares)	(3,288,909		)	(3,258,870		)
Total shareholders’ equity attributable to PartnerRe Ltd.	7,197,145			7,048,910
Noncontrolling interests	57,683			55,501
Total shareholders’ equity	7,254,828			7,104,411
Total liabilities and shareholders’ equity	$	22,488,595		$	22,270,357

See accompanying Notes to Condensed Consolidated Financial Statements.

PartnerRe Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Expressed in thousands of U.S. dollars, except share and per share data)

(Unaudited)



	For the three months ended
	March 31, 2015			March 31, 2014
Revenues
Gross premiums written	$	1,748,933		$	1,871,740
Net premiums written	$	1,653,215		$	1,738,494
Increase in unearned premiums	(418,493		)	(484,712		)
Net premiums earned	1,234,722			1,253,782
Net investment income	104,631			116,867
Net realized and unrealized investment gains	115,645			142,172
Other income	4,292			404
Total revenues	1,459,290			1,513,225
Expenses
Losses and loss expenses and life policy benefits	721,281			749,457
Acquisition costs	275,791			264,608
Other expenses	124,750			111,462
Interest expense	12,245			12,238
Amortization of intangible assets	6,768			7,002
Net foreign exchange gains	(13,147		)	(670		)
Total expenses	1,127,688			1,144,097
Income before taxes and interest in (losses) earnings of equity method investments	331,602			369,128
Income tax expense	79,665			62,305
Interest in (losses) earnings of equity method investments	(3,838		)	6,064
Net income	248,099			312,887
Net income attributable to noncontrolling interests	(2,182		)	(3,044		)
Net income attributable to PartnerRe Ltd.	245,917			309,843
Preferred dividends	14,184			14,184
Net income attributable to PartnerRe Ltd. common shareholders	$	231,733		$	295,659
Comprehensive income
Net income attributable to PartnerRe Ltd.	$	245,917		$	309,843
Change in currency translation adjustment	(2,504		)	(15,223		)
Change in unfunded pension obligation, net of tax	(436		)	(1		)
Change in unrealized losses on investments, net of tax	(217		)	(225		)
Total other comprehensive loss, net of tax	(3,157		)	(15,449		)
Comprehensive income attributable to PartnerRe Ltd.	$	242,760		$	294,394
Per share data attributable to PartnerRe Ltd. common shareholders
Net income per common share:
Basic net income	$	4.88		$	5.72
Diluted net income	$	4.76		$	5.61
Weighted average number of common shares outstanding	47,525,344			51,652,177
Weighted average number of common shares and common share equivalents outstanding	48,710,228			52,727,573
Dividends declared per common share	$	0.70		$	0.67

See accompanying Notes to Condensed Consolidated Financial Statements.

PartnerRe Ltd.

Condensed Consolidated Statements of Shareholders’ Equity

(Expressed in thousands of U.S. dollars)

(Unaudited)



	For the three months ended
	March 31, 2015			March 31, 2014
Common shares
Balance at beginning of period	$	87,237		$	86,657
Issuance of common shares	—			222
Balance at end of period	87,237			86,879
Preferred shares
Balance at beginning and end of period	34,150			34,150
Additional paid-in capital
Balance at beginning of period	3,949,665			3,901,627
Stock compensation expense, net of taxes paid	9,800			4,619
Issuance of common shares	—			1,101
Balance at end of period	3,959,465			3,907,347
Accumulated other comprehensive loss
Balance at beginning of period	(34,083		)	(12,238		)
Currency translation adjustment
Balance at beginning of period	(7,915		)	977
Change in foreign currency translation adjustment	(5,063		)	(15,223		)
Change in net unrealized gain on designated net investment hedges	2,559			—
Balance at end of period	(10,419		)	(14,246		)
Unfunded pension obligation
Balance at beginning of period	(29,576		)	(17,509		)
Change in unfunded pension obligation, net of tax	(436		)	(1		)
Balance at end of period (net of tax: 2015, $8,432; 2014, $5,023)	(30,012		)	(17,510		)
Unrealized gain on investments
Balance at beginning of period	3,408			4,294
Change in unrealized losses on investments, net of tax	(217		)	(225		)
Balance at end of period (net of tax: 2015 and 2014: $nil)	3,191			4,069
Balance at end of period	(37,240		)	(27,687		)
Retained earnings
Balance at beginning of period	6,270,811			5,406,797
Net income	248,099			312,887
Net income attributable to noncontrolling interests	(2,182		)	(3,044		)
Reissuance of common shares	(26,917		)	—
Dividends on common shares	(33,185		)	(34,588		)
Dividends on preferred shares	(14,184		)	(14,184		)
Balance at end of period	6,442,442			5,667,868
Common shares held in treasury
Balance at beginning of period	(3,258,870		)	(2,707,461		)
Repurchase of common shares	(59,266		)	(180,168		)
Reissuance of common shares	29,227			—
Balance at end of period	(3,288,909		)	(2,887,629		)
Total shareholders’ equity attributable to PartnerRe Ltd.	$	7,197,145		$	6,780,928
Noncontrolling interests	57,683			59,671
Total shareholders’ equity	$	7,254,828		$	6,840,599

See accompanying Notes to Condensed Consolidated Financial Statements.

PartnerRe Ltd.

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)



	For the three months ended
	March 31, 2015			March 31, 2014
Cash flows from operating activities
Net income	$	248,099		$	312,887
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of net premium on investments	29,911			29,366
Amortization of intangible assets	6,768			7,002
Net realized and unrealized investment gains	(115,645		)	(142,172		)
Changes in:
Reinsurance balances, net	(572,301		)	(581,275		)
Reinsurance recoverable on paid and unpaid losses, net of ceded premiums payable	45,691			86,002
Funds held by reinsured companies and funds held – directly managed	71,350			17,627
Deferred acquisition costs	(76,800		)	(79,315		)
Net tax assets and liabilities	37,445			(33,973		)
Unpaid losses and loss expenses including life policy benefits	80,728			13,732
Unearned premiums	418,493			484,712
Other net changes in operating assets and liabilities	(34,992		)	(35,852		)
Net cash provided by operating activities	138,747			78,741
Cash flows from investing activities
Sales of fixed maturities	2,495,633			1,734,246
Redemptions of fixed maturities	161,229			180,311
Purchases of fixed maturities	(2,293,577		)	(1,963,428		)
Sales and redemptions of short-term investments	12,692			15,830
Purchases of short-term investments	(7,391		)	(31,141		)
Sales of equities	120,973			9,094
Purchases of equities	(374,211		)	(29,421		)
Other, net	(573		)	13,295
Net cash provided by (used in) investing activities	114,775			(71,214		)
Cash flows from financing activities
Dividends paid to common and preferred shareholders	(47,369		)	(48,772		)
Repurchase of common shares	(71,376		)	(180,383		)
Reissuance of treasury shares and issuance of common shares, net of taxes paid	(4,084		)	(2,581		)
Net cash used in financing activities	(122,829		)	(231,736		)
Effect of foreign exchange rate changes on cash	(30,362		)	(3,239		)
Increase (decrease) in cash and cash equivalents	100,331			(227,448		)
Cash and cash equivalents—beginning of period	1,313,468			1,496,485
Cash and cash equivalents—end of period	$	1,413,799		$	1,269,037


Supplemental cash flow information:
Taxes paid	$	42,257		$	95,871
Interest paid	$	—		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

PartnerRe Ltd. (PartnerRe or the Company) predominantly provides reinsurance and certain specialty insurance lines on a worldwide basis through its principal wholly-owned subsidiaries, including Partner Reinsurance Company Ltd., Partner Reinsurance Europe SE, Partner Reinsurance Company of the U.S. and, effective April 1, 2015, Partner Reinsurance Asia Pte. Ltd (PartnerRe Asia). Risks reinsured include, but are not limited to, property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy, marine, specialty property, specialty casualty, multiline and other lines, mortality, longevity, accident and health and alternative risk products. The Company’s alternative risk products include weather and credit protection to financial, industrial and service companies on a worldwide basis.

In January 2015, the Company announced that PartnerRe Asia was licensed by the Monetary Authority of Singapore (MAS) to operate as a non-life and life reinsurer in Singapore. As of April 1, 2015, PartnerRe Asia became the principal reinsurance carrier for the Company’s business underwritten in the Asia Pacific region. The establishment of PartnerRe Asia will enable the Company's Asian reinsurance operations to be consolidated into one regional, well-capitalized entity and will support its growing underwriting presence in the region.

On January 25, 2015, the Company entered into an Agreement and Plan of Amalgamation (the Amalgamation Agreement) with Axis Capital Holdings Limited, a Bermuda exempted company (AXIS), pursuant to which the Company would amalgamate with AXIS (Amalgamation), and the two companies would continue as a single Bermuda exempted company (Amalgamated Company). The transaction, which is structured as a merger of equals, has been unanimously approved by the Boards of Directors of both companies. Under the terms of the Amalgamation Agreement, the Company’s shareholders would receive 2.18 shares of the Amalgamated Company’s common shares for each share of the Company’s common shares they own and AXIS’ shareholders would receive one share of the Amalgamated Company’s common shares for each share of AXIS’ common shares they own. Upon completion of the transaction, shareholders of the Company and shareholders of AXIS would own approximately 51.5% and 48.5% of the Amalgamated Company, respectively. The Amalgamated Company's headquarters would be located in Bermuda. The transaction is subject to approval by the shareholders of both companies, regulatory clearance and other customary closing conditions. Both companies will continue to operate as two independent entities until the closing of the transaction and such conditions are met.

On May 3, 2015, the Company and AXIS amended the Amalgamation Agreement (the Amendment to the Amalgamation Agreement) to allow the Company to pay a one-time special dividend of $11.50 per share to PartnerRe common shareholders in connection with the closing of the Amalgamation. See Notes 8 (b) and 10 for further details.

2. Significant Accounting Policies

The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While Management believes that the amounts included in the Condensed Consolidated Financial Statements reflect its best estimates and assumptions, actual results could differ from those estimates. The Company’s principal estimates include:


•	Unpaid losses and loss expenses;


•	Policy benefits for life and annuity contracts;


•	Gross and net premiums written and net premiums earned;


•	Recoverability of deferred acquisition costs;


•	Recoverability of deferred tax assets;


•	Valuation of goodwill and intangible assets; and


•	Valuation of certain assets and derivative financial instruments that are measured using significant unobservable inputs.

In the opinion of Management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. As the Company’s reinsurance operations are exposed to low-frequency, high-severity risk events, some of which are seasonal, results for certain interim periods may include unusually low loss experience, while results for other interim periods may include significant catastrophic losses. Consequently, the Company’s results for interim periods are not necessarily indicative of results for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

3. Recent Accounting Pronouncements

In February 2015, the FASB issued updated guidance on the consolidation of voting interest entities and variable interest entities. The guidance is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its Consolidated Financial Statements and disclosures.

4. Fair Value

(a) Fair Value of Financial Instrument Assets

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement.

The Company determines the appropriate level in the hierarchy for each financial instrument that it measures at fair value. In determining fair value, the Company uses various valuation approaches, including market, income and cost approaches. The hierarchy is broken down into three levels based on the observability of inputs as follows:


•	Level 1 inputs—Unadjusted, quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

The Company’s financial instruments that it measures at fair value using Level 1 inputs generally include: equities and real estate investment trusts listed on a major exchange, exchange traded funds and exchange traded derivatives, including futures that are actively traded.


•	Level 2 inputs—Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets and significant directly or indirectly observable inputs, other than quoted prices, used in industry accepted models.

The Company’s financial instruments that it measures at fair value using Level 2 inputs generally include: U.S. government issued bonds; U.S. government sponsored enterprises bonds; U.S. state, territory and municipal entities bonds; non-U.S. sovereign government, supranational and government related bonds consisting primarily of bonds issued by non-U.S. national governments and their agencies, non-U.S. regional governments and supranational organizations; investment grade and high yield corporate bonds; asset-backed securities; mortgage-backed securities; short-term investments; certain equities traded on foreign exchanges; certain fixed income mutual funds; foreign exchange forward contracts and over-the-counter derivatives such as foreign currency option contracts, credit default swaps, interest rate swaps and to-be-announced mortgage-backed securities (TBAs).


•	Level 3 inputs—Unobservable inputs.

The Company’s financial instruments that it measures at fair value using Level 3 inputs generally include: inactively traded fixed maturities including U.S. state, territory and municipal bonds; special purpose financing asset-backed bonds; unlisted equities; real estate and certain other mutual fund investments; inactively traded weather derivatives; notes and loan receivables, notes securitizations, annuities and residuals, private equities and longevity and other total return swaps.

The Company’s policy is to recognize transfers between the hierarchy levels at the beginning of the period.

The Company’s financial instruments measured at fair value include investments and the segregated investment portfolio underlying the funds held – directly managed account. 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

At March 31, 2015 and December 31, 2014, the aggregate carrying amounts of items included in Other invested assets that the Company did not measure at fair value were $191.5 million and $187.3 million, respectively, which related to the Company’s investments that are accounted for using the cost method of accounting or equity method of accounting.

In addition to the investments underlying the funds held – directly managed account held at fair value of $434.5 million and $472.6 million at March 31, 2015 and December 31, 2014, respectively, the funds held – directly managed account also included cash and cash equivalents, carried at fair value, of $53.9 million and $42.3 million, respectively, and accrued investment income of $4.9 million and $5.7 million, respectively. At March 31, 2015 and December 31, 2014, the aggregate carrying amounts of items included in the funds held – directly managed account that the Company did not measure at fair value were $99.3 million and $88.3 million, respectively, which primarily related to other assets and liabilities held by Colisée Re related to the underlying business, which are carried at cost (see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014).

At March 31, 2015 and December 31, 2014, substantially all of the accrued investment income in the Condensed Consolidated Balance Sheets relate to the Company’s investments and the investments underlying the funds held – directly managed account for which the fair value option was elected.

During the three months ended March 31, 2015 and 2014, there were no transfers between Level 1 and Level 2.

Disclosures about the fair value of financial instruments that the Company does not measure at fair value exclude insurance contracts and certain other financial instruments. At March 31, 2015 and December 31, 2014, the fair values of financial instrument assets recorded in the Condensed Consolidated Balance Sheets not described above, approximate their carrying values.

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.

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%)

The tables above do not include financial instruments that are measured using unobservable inputs (Level 3) where the unobservable inputs were obtained from external sources and used without adjustment. These financial instruments include mutual fund investments (included within equities) and certain derivatives.

The Company has established a Valuation Committee which is responsible for determining the Company’s invested asset valuation policy and related procedures, for reviewing significant changes in the fair value measurements of securities classified as Level 3 from period to period, and for reviewing in accordance with the invested asset valuation policy an independent internal peer analysis that is performed on the fair value measurements of significant securities that are classified as Level 3. The Valuation Committee is comprised of members of the Company’s senior management team and meets on a quarterly basis. The Company’s invested asset valuation policy is monitored by the Company’s Audit Committee of the Board of Directors (Board) and approved annually by the Company’s Risk and Finance Committee of the Board.

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

Substantially all of the above changes in fair value are included in the Condensed Consolidated Statements of Operations under the caption Net realized and unrealized investment gains.

The following methods and assumptions were used by the Company in estimating the fair value of each class of financial instrument recorded in the Condensed Consolidated Balance Sheets. There have been no material changes in the Company’s valuation techniques during the periods presented.

Fixed maturities

•

U.S. government and government sponsored enterprises—U.S. government and government sponsored enterprises securities consist primarily of bonds issued by the U.S. Treasury and corporate debt securities issued by government sponsored enterprises and federally owned or established corporations. These securities are generally priced by independent pricing services. The independent pricing services may use actual transaction prices for securities that have been actively traded. For securities that have not been actively traded, each pricing source has its own proprietary method to determine the fair value, which may incorporate option adjusted spreads (OAS), interest rate data and market news. The Company generally classifies these securities in Level 2.

•

U.S. states, territories and municipalities—U.S. states, territories and municipalities securities consist primarily of bonds issued by U.S. states, territories and municipalities and the Federal Home Loan Mortgage Corporation. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government sponsored enterprises above. The Company generally classifies these securities in Level 2. Certain of the bonds that are issued by municipal housing authorities and the Federal Home Loan Mortgage Corporation are not actively traded and are priced based on internal models using unobservable inputs. Accordingly, the Company classifies these securities in Level 3. The significant unobservable input used in the fair value measurement of these U.S. states, territories and municipalities securities classified as Level 3 is credit spreads. A significant increase (decrease) in credit spreads in isolation could result in a significantly lower (higher) fair value measurement.

•

Non-U.S. sovereign government, supranational and government related—Non-U.S. sovereign government, supranational and government related securities consist primarily of bonds issued by non-U.S. national governments and their agencies, non-U.S. regional governments and supranational organizations. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government sponsored enterprises above. The Company generally classifies these securities in Level 2.

•

Corporate—Corporate securities consist primarily of bonds issued by U.S. and foreign corporations covering a variety of industries and issuing countries. These securities are generally priced by independent pricing services and brokers. The pricing provider incorporates information including credit spreads, interest rate data and market news into the valuation of each security. The Company generally classifies these securities in Level 2. When a corporate security is inactively traded or the valuation model uses unobservable inputs, the Company classifies the security in Level 3.

•

Asset-backed securities—Asset-backed securities primarily consist of bonds issued by U.S. and foreign corporations that are predominantly backed by student loans, automobile loans, credit card receivables, equipment leases, and special purpose financing. With the exception of special purpose financing, these asset-backed securities are generally priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. The Company generally classifies these securities in Level 2. Special purpose financing securities are generally inactively traded and are priced based on valuation models using unobservable inputs. The Company generally classifies these securities in Level 3. The significant unobservable input used in the fair value measurement of these asset-backed securities classified as Level 3 is credit spreads. A significant increase (decrease) in credit spreads in isolation could result in a significantly lower (higher) fair value measurement.

•

Residential mortgage-backed securities—Residential mortgage-backed securities primarily consist of bonds issued by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, as well as private, non-agency issuers. These residential mortgage-backed securities are generally priced by independent pricing services and brokers. When current market trades are not available, the pricing provider or the Company will employ proprietary models with observable inputs including other trade information, prepayment speeds, yield curves and credit spreads. The Company generally classifies these securities in Level 2.

•

Other mortgage-backed securities—Other mortgage-backed securities primarily consist of commercial mortgage-backed securities. These securities are generally priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. The Company generally classifies these securities in Level 2.

In general, the methods employed by the independent pricing services to determine the fair value of the securities that have not been actively traded primarily involve the use of “matrix pricing” in which the independent pricing source applies the credit spread for a comparable security that has traded recently to the current yield curve to determine a reasonable fair value. The Company generally uses one pricing source per security and uses a pricing service ranking to consistently select the most appropriate pricing service in instances where it receives multiple quotes on the same security. When fair values are unavailable from these independent pricing sources, quotes are obtained directly from broker-dealers who are active in the corresponding markets. Most of the Company’s fixed maturities are priced from the pricing services or dealer quotes. The Company will typically not make adjustments to prices received from pricing services or dealer quotes; however, in instances where the quoted external price for a security uses significant unobservable inputs, the Company will classify that security as Level 3. The methods used to develop and substantiate the unobservable inputs used are based on the Company’s valuation policy and are dependent upon the facts and circumstances surrounding the individual investments which are generally transaction specific. The Company’s inactively traded fixed maturities are classified as Level 3. For all fixed maturity investments, the bid price is used for estimating fair value.

To validate prices, the Company compares the fair value estimates to its knowledge of the current market and will investigate prices that it considers not to be representative of fair value. The Company also reviews an internally generated fixed maturity price validation report which converts prices received for fixed maturity investments from the independent pricing sources and from broker-dealers quotes and plots OAS and duration on a sector and rating basis. The OAS is calculated using established algorithms developed by an independent risk analytics platform vendor. The OAS on the fixed maturity price validation report are compared for securities in a similar sector and having a similar rating, and outliers are identified and investigated for price reasonableness. In addition, the Company completes quantitative analyses to compare the performance of each fixed maturity investment portfolio to the performance of an appropriate benchmark, with significant differences identified and investigated.

Short-term investments

Short-term investments are valued in a manner similar to the Company’s fixed maturity investments and are generally classified in Level 2.

Equities

Equity securities include U.S. and foreign common and preferred stocks, real estate investment trusts, mutual funds and exchange traded funds. Equities, real estate investment trusts and exchange traded funds are generally classified in Level 1 as the Company uses prices received from independent pricing sources based on quoted prices in active markets. Equities classified as Level 2 are generally mutual funds invested in fixed income securities, where the net asset value of the fund is provided on a daily basis, and common stocks traded in inactive markets. Equities classified as Level 3 are generally mutual funds invested in securities other than the common stock of publicly traded companies, where the net asset value is not provided on a daily basis, and inactively traded common stocks. The significant unobservable inputs used in the fair value measurement of inactively traded common stocks classified as Level 3 include market return information, weighted using management’s judgment, from comparable selected publicly traded companies in the same industry, in a similar region and of a similar size, including net income multiples, tangible book value multiples, comparable returns, revenue multiples, adjusted earnings multiples and projected return on equity ratios. Significant increases (decreases) in any of these inputs could result in a significantly higher (lower) fair value measurement. Significant unobservable inputs used in measuring the fair value measurement of inactively traded common stocks also include a liquidity discount. A significant increase (decrease) in the liquidity discount could result in a significantly lower (higher) fair value measurement.

To validate prices, the Company completes quantitative analyses to compare the performance of each equity investment portfolio to the performance of an appropriate benchmark, with significant differences identified and investigated.

Other invested assets

The Company’s exchange traded derivatives, such as futures, are generally classified as Level 1 as their fair values are quoted prices in active markets. The Company’s foreign exchange forward contracts, foreign currency option contracts, credit default swaps, interest rate swaps and TBAs are generally classified as Level 2 within the fair value hierarchy and are priced by independent pricing services.

Included in the Company’s Level 3 classification, in general, are certain inactively traded weather derivatives, notes and loan receivables, notes securitizations, annuities and residuals, private equities and longevity and other total return swaps. For Level 3 instruments, the Company will generally (i) receive a price based on a manager’s or trustee’s valuation for the asset; (ii) develop an internal discounted cash flow model to measure fair value; or (iii) use market return information, adjusted if necessary and weighted using management’s judgment, from comparable selected publicly traded equity funds in a similar region and of a similar size. Where the Company receives prices from the manager or trustee, these prices are based on the manager’s or trustee’s estimate of fair value for the assets and are generally audited on an annual basis. Where the Company develops its own discounted cash flow models, the inputs will be specific to the asset in question, based on appropriate historical information, adjusted as necessary, and using appropriate discount rates. The significant unobservable inputs used in the fair value measurement of other invested assets classified as Level 3 include credit spreads, prepayment speeds, constant default rates, gross revenue to fair value ratios, net income multiples, effective yields, tangible book value multiples and other valuation ratios. Significant increases (decreases) in any of these inputs in isolation could result in a significantly lower (higher) fair value measurement. Significant unobservable inputs used in the fair value measurement of other invested assets classified as Level 3 also include an assessment of the recoverability of intangible assets and market return information, weighted using management’s judgment, from comparable selected publicly traded companies in the same industry, in a similar region and of a similar size. Significant increases (decreases) in these inputs in isolation could result in a significantly higher (lower) fair value measurement. As part of the Company’s modeling to determine the fair value of an investment, the Company considers counterparty credit risk as an input to the model, however, the majority of the Company’s counterparties are investment grade rated institutions and the failure of any one counterparty would not have a significant impact on the Company’s consolidated financial statements.

To validate prices, the Company will compare them to benchmarks, where appropriate, or to the business results generally within that asset class and specifically to those particular assets.

Funds held – directly managed

The segregated investment portfolio underlying the funds held – directly managed account is comprised of fixed maturities, short-term investments and other invested assets which are fair valued on a basis consistent with the methods described above. Substantially all fixed maturities and short-term investments within the funds held – directly managed account are classified as Level 2 within the fair value hierarchy.

The other invested assets within the segregated investment portfolio underlying the funds held – directly managed account, which are classified as Level 3 investments, are primarily real estate mutual fund investments carried at fair value. For the real estate mutual fund investments, the Company receives a price based on the real estate fund manager’s valuation for the asset and further adjusts the price, if necessary, based on appropriate current information on the real estate market. A significant increase (decrease) to the adjustment to the real estate fund manager’s valuation could result in a significantly lower (higher) fair value measurement.

To validate prices within the segregated investment portfolio underlying the funds held – directly managed account, the Company utilizes the methods described above.

(b) Fair Value of Financial Instrument Liabilities

At March 31, 2015 and December 31, 2014, the fair values of financial instrument liabilities recorded in the Condensed Consolidated Balance Sheets approximate their carrying values, with the exception of the debt related to senior notes (Senior Notes) and the debt related to capital efficient notes (CENts).

The methods and assumptions used by the Company in estimating the fair value of each class of financial instrument liability recorded in the Condensed Consolidated Balance Sheets for which the Company does not measure that instrument at fair value were as follows:


•	the fair value of the Senior Notes was calculated based on discounted cash flow models using observable market yields and contractual cash flows based on the aggregate principal amount outstanding of $250 million from PartnerRe Finance A LLC and $500 million from PartnerRe Finance B LLC at March 31, 2015 and December 31, 2014; and


•	the fair value of the CENts was calculated based on discounted cash flow models using observable market yields and contractual cash flows based on the aggregate principal amount outstanding of $63 million from PartnerRe Finance II Inc. at March 31, 2015 and December 31, 2014.

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.

At March 31, 2015 and December 31, 2014, the Company’s debt related to the Senior Notes and CENts was classified as Level 2 in the fair value hierarchy.

Disclosures about the fair value of financial instrument liabilities exclude insurance contracts and certain other financial instruments.

5. Derivatives

The Company’s derivative instruments are recorded in the Condensed Consolidated Balance Sheets at fair value, with changes in fair value recognized in either net foreign exchange gains and losses or net realized and unrealized investment gains and losses in the Condensed Consolidated Statements of Operations or accumulated other comprehensive income or loss in the Condensed Consolidated Balance Sheets, depending on the nature of the derivative instrument. The Company’s objectives for holding or issuing these derivatives are as follows:

Foreign Exchange Forward Contracts

The Company utilizes foreign exchange forward contracts as part of its overall currency risk management and investment strategies. From time to time, the Company also utilizes foreign exchange forward contracts to hedge a portion of its net investment exposure resulting from the translation of its foreign subsidiaries and branches whose functional currency is other than the U.S. dollar.

Foreign Currency Option Contracts and Futures Contracts

The Company utilizes foreign currency option contracts to mitigate foreign currency risk. The Company uses exchange traded treasury note futures contracts to manage portfolio duration and equity futures to hedge certain investments.

Credit Default Swaps

The Company purchases protection through credit default swaps to mitigate the risk associated with its underwriting operations, most notably in the credit/surety line, and to manage market exposures.

The Company also assumes credit risk through credit default swaps to replicate investment positions. The original term of these credit default swaps is generally five years or less and there are no recourse provisions associated with these swaps. The counterparties on the Company’s assumed credit default swaps are all investment grade rated financial institutions, however, the Company would be required to perform in the event of a default by the underlying issuer.

Insurance-Linked Securities

The Company enters into various weather derivatives and longevity total return swaps for which the underlying risks reference parametric weather risks for the weather derivatives and longevity risk for the longevity total return swaps.

Total Return and Interest Rate Swaps and Interest Rate Derivatives

The Company enters into total return swaps referencing various project, investments and principal finance obligations. The Company enters into interest rate swaps to mitigate the interest rate risk on certain of the total return swaps and certain fixed maturity investments. The Company also uses other interest rate derivatives to mitigate exposure to interest rate volatility.

To-Be-Announced Mortgage-Backed Securities

The Company utilizes TBAs as part of its overall investment strategy and to enhance investment performance.

The net fair values and the related net notional values of derivatives included in the Company’s Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014 were as follows (in thousands of U.S. dollars):



	Asset derivatives at fair value		Liability derivatives at fair value			Net derivatives
March 31, 2015	Asset derivatives at fair value		Liability derivatives at fair value			Net notional exposure		Fair value
Derivatives designated as hedges
Foreign exchange forward contracts (net investment hedges)	$	2,559	$	—		$	271,250	$	2,559
Total derivatives designated as hedges	$	2,559	$	—				$	2,559

Derivatives not designated as hedges
Foreign exchange forward contracts	$	12,855	$	(7,623	)	$	2,079,250	$	5,232
Foreign currency option contracts	1,848		—			70,062		1,848
Futures contracts	—		(21,382		)	2,741,323		(21,382		)
Insurance-linked securities ⁽¹⁾	23		(343		)	144,780		(320		)
Total return swaps	1,061		(2,118		)	42,504		(1,057		)
Interest rate swaps ⁽²⁾	—		(21,074		)	200,643		(21,074		)
TBAs	1,409		—			280,625		1,409
Total derivatives not designated as hedges	$	17,196	$	(52,540	)			$	(35,344	)

Total derivatives	$	19,755	$	(52,540	)			$	(32,785	)



	Asset derivatives at fair value		Liability derivatives at fair value			Net derivatives
December 31, 2014	Asset derivatives at fair value		Liability derivatives at fair value			Net notional exposure		Fair value
Derivatives not designated as hedges
Foreign exchange forward contracts	$	20,033	$	(7,446	)	$	2,080,276	$	12,587
Foreign currency option contracts	—		(1,196		)	43,380		(1,196		)
Futures contracts	846		(467		)	2,348,735		379
Insurance-linked securities ⁽¹⁾	3		(339		)	145,481		(336		)
Total return swaps	485		(2,007		)	42,524		(1,522		)
Interest rate swaps ⁽²⁾	—		(16,282		)	201,160		(16,282		)
TBAs	154		(240		)	235,105		(86		)
Total derivatives	$	21,521	$	(27,977	)			$	(6,456	)


(1)	At March 31, 2015 and December 31, 2014, insurance-linked securities include a longevity swap for which the notional amount is not reflective of the overall potential exposure of the swap. As such, the Company has included the probable maximum loss under the swap within the net notional exposure as an approximation of the notional amount.


(2)	The Company enters into interest rate swaps to mitigate notional exposures on certain total return swaps and certain fixed maturities. Only the notional value of interest rate swaps on fixed maturities is presented separately in the table.

The fair value of all derivatives at March 31, 2015 and December 31, 2014 is recorded in Other invested assets in the Company’s Condensed Consolidated Balance Sheets. On March 31, 2015, the Company entered into foreign exchange forward contracts (with notional amounts of €250 million) to hedge a portion of its net investment exposure to the euro against the U.S. dollar. The effective portion of the net investment hedging derivatives recognized in accumulated other comprehensive income at March 31, 2015 was $2.6 million. There were no derivatives designated as hedges at December 31, 2014.

The gains and losses in the Condensed Consolidated Statements of Operations for derivatives not designated as hedges 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			March 31, 2014
Foreign exchange forward contracts	$	(4,636	)	$	8,255
Foreign currency option contracts	2,028			395
Total included in net foreign exchange gains and losses	$	(2,608	)	$	8,650
Futures contracts	$	(34,539	)	$	(16,073	)
Credit default swaps (protection purchased)	—			(3		)
Insurance-linked securities	2			243
Total return swaps	465			218
Interest rate swaps	(4,791		)	(5,385		)
TBAs	3,671			3,747
Other	2,493			—
Total included in net realized and unrealized investment gains and losses	$	(32,699	)	$	(17,253	)
Total derivatives not designated as hedges	$	(35,307	)	$	(8,603	)

Offsetting of Derivatives

The gross and net fair values of derivatives that are subject to offsetting in the Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014 were as follows (in thousands of U.S. dollars):



				Gross amounts offset in the balance sheet		Net amounts of assets/liabilities presented in the balance sheet			Gross amounts not offset in the balance sheet
March 31, 2015	Gross amounts recognized ⁽¹⁾			Gross amounts offset in the balance sheet					Financial instruments			Cash collateral received/pledged			Net amount
Total derivative assets	$	19,755		$	—	$	19,755		$	(385	)	$	(17,112	)	$	2,258
Total derivative liabilities	$	(52,540	)	$	—	$	(52,540	)	$	385		$	45,734		$	(6,421	)

December 31, 2014
Total derivative assets	$	21,521		$	—	$	21,521		$	(766	)	$	(8,536	)	$	12,219
Total derivative liabilities	$	(27,977	)	$	—	$	(27,977	)	$	766		$	14,858		$	(12,353	)


(1)	Amounts include all derivative instruments, irrespective of whether there is a legally enforceable master netting arrangement in place.

6. Net Income per Share

The reconciliation of basic and diluted net income per share for the three months ended March 31, 2015 and 2014 is as follows (in thousands of U.S. dollars, except share and per share data):



	For the three months ended
	March 31, 2015		March 31, 2014
Numerator:
Net income attributable to PartnerRe Ltd.	$	245,917	$	309,843
Less: preferred dividends	14,184		14,184
Net income attributable to PartnerRe Ltd. common shareholders	$	231,733	$	295,659
Denominator:
Weighted number of common shares outstanding – basic	47,525,344		51,652,177
Share options and other ⁽¹⁾	1,184,884		1,075,396
Weighted average number of common shares and common share equivalents outstanding – diluted	48,710,228		52,727,573
Basic net income per share	$	4.88	$	5.72
Diluted net income per share ⁽¹⁾	$	4.76	$	5.61

Anti-dilutive common shares excluded from weighted average number of common shares and common share equivalents outstanding - diluted ⁽¹⁾	119,202		69,144


(1)	Where the exercise price of share based awards is greater than the average market price of the common shares, the common shares are considered anti-dilutive and are excluded from the calculation of weighted average number of common shares and common share equivalents outstanding - diluted.

7. Noncontrolling Interests

In March 2013, the Company formed with other third party investors, Lorenz Re Ltd. (Lorenz Re), a Bermuda domiciled special purpose insurer to provide additional capacity to the Company for a diversified portfolio of catastrophe reinsurance treaties over a multi-year period on a fully collateralized reinsurance basis. Lorenz Re is a segregated cell company under the laws of Bermuda. The original business was written by the Company and was ceded to Lorenz Re effective April 1, 2013.

Within Lorenz Re, distinct segregated accounts are formed, and capitalized, in order to enter into reinsurance agreements with the Company on a fully collateralized basis. In 2013, Lorenz Re issued non-voting redeemable preferred share capital on behalf of two segregated accounts that is redeemable at the option of the Company and is expected to be redeemed following the commutation of the portfolio back to the Company on or before June 1, 2016.

At March 31, 2015 and December 31, 2014, the total assets of Lorenz Re were $99.8 million and $100.8 million, respectively, primarily consisting of cash and investments. At March 31, 2015, the total liabilities were $8.5 million primarily consisting of unpaid losses and loss expenses and other reinsurance balances payable. At December 31, 2014, the total liabilities were $13.1 million primarily consisting of unearned premiums, unpaid losses and loss expenses and other reinsurance balances payable. The assets of Lorenz Re can only be used to settle the liabilities of Lorenz Re and there is no recourse to the Company for any liabilities of Lorenz Re.

The reconciliation of the beginning and ending balance of the noncontrolling interests in Lorenz Re for the three months ended March 31, 2015 and 2014 was as follows (in thousands of U.S. dollars):



	For the three months ended
	March 31, 2015		March 31, 2014
Balance at beginning of period	$	55,501	$	56,627
Net income attributable to noncontrolling interests	2,182		3,044
Balance at end of period	$	57,683	$	59,671

8. Commitments and Contingencies

(a) Legal Proceedings

There has been no significant change in legal proceedings at March 31, 2015 compared to December 31, 2014. See Note 18(f) to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

(b) Amalgamation related charges

In connection with the Amalgamation Agreement, the Company expects to incur further charges between $30 million and $35 million related to professional costs. The Company expects to incur these costs primarily in 2015.

In accordance with the terms of the Amalgamation Agreement and the Amendment to the Amalgamation Agreement, the Company would be obligated to pay AXIS a no approval fee of $55 million if the Company’s shareholders do not approve the transaction. If the Amalgamation Agreement is terminated for certain other reasons described in the Amalgamation Agreement or in certain circumstances the Company enters into a similar transaction with a third party in the 12 months following termination of the Amalgamation Agreement, the Company would be obligated to pay AXIS an aggregate termination fee of $280 million (less any termination fee already paid). In all such cases, the Company would be obligated to reimburse AXIS for costs and expenses incurred in connection with the Amalgamation Agreement and the transactions contemplated thereby in an amount not to exceed $35 million.

Following the signing of the Amalgamation Agreement, the Company has entered into agreements with certain employees that provide for the payment of a cash retention award payable if the employee maintains an active employee status through a pre-determined future date and fulfills certain conduct and performance-related conditions. The award payments are contingent on the successful closing of the proposed Amalgamation.

9. Segment Information

The Company monitors the performance of its operations in three segments, Non-life, Life and Health and Corporate and Other as described in Note 21 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The Non-life segment is further divided into four sub-segments: North America, Global (Non-U.S.) P&C, Global Specialty and Catastrophe.

The North America sub-segment includes agriculture, casualty, credit/surety, motor, multiline, property and other risks generally originating in the United States. The Global (Non-U.S.) P&C sub-segment includes casualty, motor and property business generally originating outside of the United States. The Global Specialty sub-segment is comprised of business that is generally considered to be specialized due to the sophisticated technical underwriting required to analyze risks, and is global in nature. This sub-segment consists of several lines of business for which the Company believes it has developed specialized knowledge and underwriting capabilities. These lines of business include agriculture, aviation/space, credit/surety, energy, engineering, marine, specialty casualty, specialty property and other lines. The Catastrophe sub-segment is comprised of the Company’s catastrophe line of business. The Life and Health segment includes mortality, longevity and accident and health lines of business. Corporate and Other is comprised of the capital markets and investment related activities of the Company, including principal finance transactions, insurance-linked securities and strategic investments, and its corporate activities, including other expenses.

Since the Company does not manage its assets by segment, net investment income is not allocated to the Non-life segment. However, because of the interest-sensitive nature of some of the Company’s Life and Health products, net investment income is considered in Management’s assessment of the profitability of the Life and Health segment. The following items are not considered in evaluating the results of the Non-life and Life and Health segments: net realized and unrealized investment gains and losses, interest expense, amortization of intangible assets, net foreign exchange gains and losses, income tax expense or benefit and interest in earnings and losses of equity method investments. Segment results are shown before consideration of intercompany transactions.

Management measures results for the Non-life segment on the basis of the loss ratio, acquisition ratio, technical ratio, other expense ratio and combined ratio (all defined below). Management measures results for the Non-life sub-segments on the basis of the loss ratio, acquisition ratio and technical ratio. Management measures results for the Life and Health segment on the basis of the allocated underwriting result, which includes revenues from net premiums earned, other income or loss and allocated net investment income for Life and Health, and expenses from life policy benefits, acquisition costs and other expenses.

The segment results for the three months ended March 31, 2015 and 2014, were as follows (in millions of U.S. dollars, except ratios):

Segment Information

For the three months ended March 31, 2015



	North America			Global (Non-U.S.) P&C			Global Specialty			Catastrophe			Total Non-life segment			Life and Health segment			Corporate and Other			Total
Gross premiums written	$	473		$	334		$	427		$	191		$	1,425		$	324		$	—		$	1,749
Net premiums written	$	471		$	331		$	362		$	176		$	1,340		$	313		$	—		$	1,653
(Increase) decrease in unearned premiums	(132		)	(157		)	3			(118		)	(404		)	(14		)	—			(418		)
Net premiums earned	$	339		$	174		$	365		$	58		$	936		$	299		$	—		$	1,235
Losses and loss expenses and life policy benefits	(172		)	(119		)	(170		)	(20		)	(481		)	(240		)	—			(721		)
Acquisition costs	(93		)	(52		)	(93		)	(4		)	(242		)	(34		)	—			(276		)
Technical result	$	74		$	3		$	102		$	34		$	213		$	25		$	—		$	238
Other income													—			1			3			4
Other expenses													(52		)	(15		)	(58		)	(125		)
Underwriting result													$	161		$	11		n/a			$	117
Net investment income																14			91			105
Allocated underwriting result ⁽¹⁾																$	25		n/a			n/a
Net realized and unrealized investment gains																			116			116
Interest expense																			(12		)	(12		)
Amortization of intangible assets																			(7		)	(7		)
Net foreign exchange gains																			13			13
Income tax expense																			(80		)	(80		)
Interest in losses of equity method investments																			(4		)	(4		)
Net income																			n/a			$	248
Loss ratio ⁽²⁾	50.7		%	68.4		%	46.7		%	33.7		%	51.4		%
Acquisition ratio ⁽³⁾	27.5			30.1			25.4			7.0			25.9
Technical ratio ⁽⁴⁾	78.2		%	98.5		%	72.1		%	40.7		%	77.3		%
Other expense ratio ⁽⁵⁾													5.5
Combined ratio ⁽⁶⁾													82.8		%


(1)	Allocated underwriting result is defined as net premiums earned, other income or loss and allocated net investment income less life policy benefits, acquisition costs and other expenses.


(2)	Loss ratio is obtained by dividing losses and loss expenses by net premiums earned.


(3)	Acquisition ratio is obtained by dividing acquisition costs by net premiums earned.


(4)	Technical ratio is defined as the sum of the loss ratio and the acquisition ratio.


(5)	Other expense ratio is obtained by dividing other expenses by net premiums earned.


(6)	Combined ratio is defined as the sum of the technical ratio and the other expense ratio.

n/a Not applicable

Segment Information

For the three months ended March 31, 2014



	North America			Global (Non-U.S.) P&C			Global Specialty			Catastrophe			Total Non-life segment			Life and Health segment			Corporate and Other			Total
Gross premiums written	$	530		$	364		$	479		$	210		$	1,583		$	289		$	—		$	1,872
Net premiums written	$	527		$	361		$	389		$	179		$	1,456		$	282		$	—		$	1,738
Increase in unearned premiums	(148		)	(182		)	(34		)	(100		)	(464		)	(20		)	—			(484		)
Net premiums earned	$	379		$	179		$	355		$	79		$	992		$	262		$	—		$	1,254
Losses and loss expenses and life policy benefits	(260		)	(94		)	(201		)	21			(534		)	(215		)	—			(749		)
Acquisition costs	(92		)	(54		)	(79		)	(8		)	(233		)	(32		)	—			(265		)
Technical result	$	27		$	31		$	75		$	92		$	225		$	15		$	—		$	240
Other income (loss)													1			1			(2		)	—
Other expenses													(65		)	(17		)	(29		)	(111		)
Underwriting result													$	161		$	(1	)	n/a			$	129
Net investment income																15			102			117
Allocated underwriting result																$	14		n/a			n/a
Net realized and unrealized investment gains																			142			142
Interest expense																			(12		)	(12		)
Amortization of intangible assets																			(7		)	(7		)
Net foreign exchange gains																			—			—
Income tax expense																			(62		)	(62		)
Interest in earnings of equity method investments																			6			6
Net income																			n/a			$	313
Loss ratio	68.6		%	52.4		%	56.6		%	(26.5		)%	53.8		%
Acquisition ratio	24.3			30.1			22.4			10.1			23.6
Technical ratio	92.9		%	82.5		%	79.0		%	(16.4		)%	77.4		%
Other expense ratio													6.5
Combined ratio													83.9		%

10. Subsequent Events

On April 14, 2015, the Company announced receipt of an unsolicited proposal from EXOR S.p.A. (EXOR), a European investment company controlled by the Agnelli family, to acquire 100% of the common shares of the Company for $130.00 per share in cash.

On May 3, 2015, the Company and AXIS amended the Amalgamation Agreement to allow the Company to pay a one-time special dividend of $11.50 per share to PartnerRe common shareholders in connection with the closing of the Amalgamation and to increase the termination fee from $250 million to $280 million.

On May 4, 2015, the Company’s Board announced that it had terminated discussions with EXOR regarding its $130 per share offer.



ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

The Company is a leading global reinsurer and insurer, with a broadly diversified and balanced portfolio of traditional reinsurance and insurance risks and capital markets risks.

Successful risk management is the foundation of the Company’s value proposition, with diversification of risks at the core of its risk management strategy. The Company’s ability to succeed in the risk assumption and management business is dependent on its ability to accurately analyze and quantify risk, to understand volatility and how risks aggregate or correlate, and to establish the appropriate capital requirements and limits for the risks assumed. All risks, whether they are reinsurance related risks or capital market risks, are managed by the Company within an integrated framework of policies and processes to ensure the intelligent and consistent evaluation and valuation of risk, and to ultimately provide an appropriate return to shareholders. The Company’s Risk Management framework is discussed below and in Risk Management in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

For a discussion of the Company’s long-term objective and annualized growth in Diluted Tangible Book Value per Share plus dividends, the metric that Management uses to measure its success in achieving its long-term objective, see below in Key Financial Measures.

Overview of the Results of Operations for the Three Months Ended March 31, 2015

The Company measures its performance in several ways. Among the performance measures accepted under U.S. GAAP is diluted net income or loss per share, a measure that focuses on the return provided to the Company’s common shareholders. Diluted net income or loss per share is obtained by dividing net income or loss attributable to PartnerRe Ltd. common shareholders by the weighted average number of common shares and common share equivalents outstanding. Net income or loss attributable to PartnerRe Ltd. common shareholders is defined as net income or loss less preferred dividends and loss on redemption of preferred shares. The Company's net income, net income attributable to PartnerRe Ltd. and net income and diluted net income per share attributable to PartnerRe Ltd. common shareholders are discussed below in Review of Net Income.

The Company also utilizes certain non-GAAP measures to assess performance (see the discussion of these non-GAAP measures and the reconciliation to the most directly comparable GAAP measures in Key Financial Measures below).

Key Factors Affecting Period over Period Comparability

The following key factors affected the period over period comparison of the Company’s results for the three months ended March 31, 2015 and 2014 and may continue to affect our results of operations and financial condition in the future.

Proposed Amalgamation with AXIS

During the three months ended March 31, 2015, the Company recorded $31 million, pre-tax, of costs related to the Amalgamation within other expenses, which was primarily related to Costas Miranthis' stepping down as the Chief Executive Officer of the Company and as a member of the Company's Board.

Foreign Exchange Movements

During the three months ended March 31, 2015, the U.S. dollar strengthened significantly against other currencies, in particular the euro. The strengthening of the U.S. dollar had a significant impact on individual line items of the Company's Condensed Consolidated Financial Statements, primarily on the value of the investments, unpaid losses and loss expenses and

policy benefits for life and annuity contracts and gross and net premiums written and earned. However, the overall net impact is not significant due to the matching of assets and liabilities by currency, resulting in foreign exchange movements offsetting, and due to hedging of the foreign exchange exposures.

Volatility in Capital Markets

The results for the three months ended March 31, 2015 and 2014 were significantly impacted by the volatility in the capital markets. Modest decreases in U.S. and European risk-free rates impacted the three months ended March 31, 2015 and modest decreases in longer-term risk-free interest rates and a slight narrowing of credit spreads impacted the same period of 2014.

Large Catastrophic and Large Loss Events

As the Company’s reinsurance operations are exposed to low frequency and high severity risk events, some of which are seasonal, results for certain periods may include unusually low loss experience, while results for other periods may include significant catastrophic losses. Consequently, the Company’s results for interim periods may be volatile from period to period and are not necessarily indicative of results for the full year. The results for the three months ended March 31, 2015 and 2014 include no significant catastrophic losses.

Overview of Net Income

Net income, net income attributable to noncontrolling interests, net income attributable to ParterRe Ltd., preferred dividends and net income and diluted net income per share attributable to PartnerRe Ltd. common shareholders for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars, except per share data):



	For the three months ended
	March 31, 2015			March 31, 2014
Net income	$	248		$	313
Net income attributable to noncontrolling interests	(2		)	(3		)
Net income attributable to PartnerRe Ltd.	246			310
Less: Preferred dividends	14			14
Net income attributable to PartnerRe Ltd. common shareholders	$	232		$	296
Diluted net income per share attributable to PartnerRe Ltd. common shareholders	$	4.76		$	5.61

The decrease in net income, net income attributable to PartnerRe Ltd., and net income and diluted net income attributable to PartnerRe Ltd. common shareholders in the three months ended March 31, 2015 compared to the same period of 2014 was primarily due to:


•	an increase in other expenses included in Corporate and Other of $29 million;


•	a decrease in pre-tax net realized and unrealized investment gains of $26 million; and


•	an increase in income tax expense of $18 million; partially offset by


•	an increase in foreign exchange gains of $13 million.

The factors driving these increases and decreases are described in more detail in Review of Net Income below.

Subsequent Events

On May 4, 2015, the Company’s Board announced that it had terminated discussions with EXOR regarding its $130 per share offer.

On April 17, 2015, PartnerRe U.S. Corporation (PRUS), a subsidiary of the Company, signed a settlement agreement with the former shareholders of Presidio Reinsurance Group, Inc. whereby PRUS paid $29 million in consideration for terminating all obligations of PRUS to pay earn-out consideration pursuant to an earn-out agreement (Earn-out Agreement) dated December 31, 2012. The Company has previously accrued $4 million in connection with the Earn-out Agreement through December 31, 2014, and the remaining $25 million will be expensed during the three months ended June 30, 2015.

Key Financial Measures

In addition to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and Comprehensive Income, Management uses certain other key measures, some of which are non-GAAP financial measures within the meaning of Regulation G (see below), to evaluate its financial performance and the overall growth in value generated for the Company’s common shareholders.

The Company’s long-term objective is to manage a portfolio of diversified risks that will create total shareholder value. The Company measures its success in achieving its long-term objective by targeting a return, which is variable and can be adjusted by Management, in excess of a referenced risk-free rate over the reinsurance cycle. The return, which is currently targeted to exceed 700 basis points in excess of the referenced risk-free rate, is calculated using compound annual growth in diluted tangible book value per common share and common share equivalents outstanding plus dividends per common share (annualized growth in Diluted Tangible Book Value per Share plus dividends). Management uses annualized growth in Diluted Tangible Book Value per Share plus dividends as its prime measure of long-term financial performance and believes this measure aligns the Company’s stated long-term objective with the measure most investors use to evaluate total shareholder value creation given that it focuses on the tangible value of total shareholder returns, excluding the impact of goodwill and intangibles. Given the Company’s profitability in any particular quarterly or annual period can be significantly affected by the level of large catastrophic losses, Management assesses this long-term objective over the reinsurance cycle as the Company’s performance during any particular quarterly or annual period is not necessarily indicative of its performance over the longer-term reinsurance cycle.

While annualized growth in Diluted Tangible Book Value per Share plus dividends is the Company’s prime financial measure, Management also uses other key financial measures to monitor performance. At March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014 these were as follows:



	March 31, 2015			December 31, 2014
Diluted tangible book value per common share and common share equivalents outstanding⁽¹⁾	$	118.40		$	114.76
Annualized growth in diluted tangible book value per common share and common share equivalents outstanding plus dividends⁽²⁾	15.1		%

	For the three months ended
	March 31, 2015			March 31, 2014
Operating earnings attributable to PartnerRe Ltd. common shareholders (in millions of U.S. dollars) ⁽³⁾	$	151		$	177
Diluted operating earnings per common share and common share equivalents outstanding attributable to PartnerRe Ltd. common shareholders⁽³⁾	$	3.09		$	3.36
Annualized operating return on beginning diluted book value per common share and common share equivalents outstanding ⁽⁴⁾	9.8		%	12.3		%
Combined ratio ⁽⁵⁾	82.8		%	83.9		%

(1)

Diluted tangible book value per common share and common share equivalents outstanding (Diluted Tangible Book Value per Share) is calculated using common shareholders’ equity attributable to PartnerRe Ltd. (total shareholders’ equity less noncontrolling interests and the aggregate liquidation value of preferred shares) less goodwill and intangible assets, net of tax, divided by the number of common shares and common share equivalents outstanding (assuming exercise of all stock-based awards and other dilutive securities). The presentation of Diluted Tangible Book Value per Share is a non-GAAP financial measure within the meaning of Regulation G (see Comment on Non-GAAP Measures below) and is reconciled to the most directly comparable GAAP financial measure below.

(2)

Annualized growth in diluted tangible book value per common share and common share equivalents outstanding plus dividends (annualized growth in Diluted Tangible Book Value per Share plus dividends) is calculated using Diluted Tangible Book Value per Share plus dividends per common share divided by Diluted Tangible Book Value per Share at the beginning of the year and annualizing. The presentation of annualized growth in Diluted Tangible Book Value per Share plus dividends is a non-GAAP financial measure within the meaning of Regulation G (see Comment on Non-GAAP Measures below) and is reconciled to the most directly comparable GAAP financial measure below.

(3)

Operating earnings or loss attributable to PartnerRe Ltd. common shareholders (operating earnings or loss) is calculated as net income or loss attributable to PartnerRe Ltd. common shareholders excluding net realized and unrealized gains or losses on investments, net of tax (except where the Company has made a strategic investment in an insurance or reinsurance related investee), net foreign exchange gains or losses, net of tax, loss on redemption of preferred shares, the interest in earnings or losses of equity method investments, net of tax (except where the Company has made a strategic investment in an insurance or reinsurance related investee and where the Company does not control the investee’s activities) and certain withholding taxes on inter-company dividends (included in other expenses), net of tax, and is calculated after preferred dividends. Operating earnings or loss per common share and common share equivalent outstanding (diluted operating earnings or loss per share) are calculated using operating earnings or loss for the period divided by the weighted average number of common shares and common share equivalents outstanding. The presentation of operating earnings or loss and diluted operating earnings or loss per share are non-GAAP financial measures within the meaning of Regulation G (see Comment on Non-GAAP Measures below) and are reconciled to the most directly comparable GAAP financial measure below.

(4)

Annualized operating return on beginning diluted book value per common share and common share equivalents outstanding (Operating ROE) is calculated using annualized operating earnings or loss, as defined above, per diluted common share and common share equivalents outstanding, divided by diluted book value per common share and common share equivalents outstanding as of the beginning of the year, as defined above. The presentation of Operating ROE is a non-GAAP financial measure within the meaning of Regulation G (see Comment on Non-GAAP Measures below) and is reconciled to the most directly comparable GAAP financial measure below.


(5)	The combined ratio of the Non-life segment is calculated as the sum of the technical ratio (losses and loss expenses and acquisition costs divided by net premiums earned) and the other expense ratio (other expenses divided by net premiums earned).

Diluted Tangible Book Value per Share: Diluted Tangible Book Value per Share focuses on the underlying fundamentals of the Company’s financial position and performance without the impact of goodwill or intangible assets. As discussed above, the Company uses this measure as the basis for its prime measure of long-term shareholder value creation, growth in Diluted Tangible Book Value per Share plus dividends. Management believes that Diluted Tangible Book Value per Share aligns the Company’s stated long-term objectives with the measure most investors use to evaluate total shareholder value creation and that it focuses on the tangible value of shareholder returns, excluding the impact of goodwill and intangibles. Diluted Tangible Book Value per Share is impacted by the Company’s net income or loss, capital resources management and external factors such as foreign exchange, interest rates, credit spreads and equity markets, which can drive changes in realized and unrealized gains or losses on its investment portfolio.

Diluted Tangible Book Value per Share at March 31, 2015 and December 31, 2014 and the calculation of the annualized growth in Diluted Tangible Book Value per Share plus dividends for the three months ended March 31, 2015 were as follows. As described above, this metric is a long-term performance measure, however, the below table shows the annualized total shareholder value creation for the current period in order for the shareholders to monitor performance.



	March 31, 2015			December 31, 2014
Diluted tangible book value per share	$	118.40		$	114.76
Dividends declared per common share for the three months ended March 31, 2015	0.70
Diluted tangible book value per share plus dividends	$	119.10
Annualized growth in diluted tangible book value per share plus dividends	15.1		%

The Company’s Diluted Tangible Book Value per Share increased by 3.2%, from $114.76 at December 31, 2014 to $118.40 at March 31, 2015, primarily due to net income attributable to PartnerRe Ltd., which was partially offset by dividends on the common and preferred shares. The annualized growth in Diluted Tangible Book Value per Share plus dividends was 15.1% during the three months ended March 31, 2015. This growth was driven by net income attributable to PartnerRe Ltd. and dividends on the common shares.

Over the past five years, since March 31, 2010, the Company has generated a compound annualized growth in Diluted Tangible Book Value per Share plus dividends in excess of 11%.

The presentation of Diluted Tangible Book Value per Share is a non-GAAP financial measure within the meaning of Regulation G and should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP (see Comment on Non-GAAP Measures). The reconciliation of Diluted Tangible Book Value per Share to the most directly comparable GAAP financial measure, diluted book value per common share and common share equivalents outstanding, at March 31, 2015 and December 31, 2014 was as follows:



	March 31, 2015		December 31, 2014
Diluted book value per common share and common share equivalents outstanding⁽¹⁾	$	129.86	$	126.21
Less: goodwill and other intangible assets, net of tax, per share	11.46		11.45
Diluted tangible book value per share	$	118.40	$	114.76

(1)

Diluted book value per common share and common share equivalents outstanding (Diluted Book Value per Share) is calculated using common shareholders’ equity attributable to PartnerRe Ltd. (total shareholders’ equity less noncontrolling interests and the aggregate liquidation value of preferred shares) divided by the number of common shares and common share equivalents outstanding (assuming exercise of all stock-based awards and other dilutive securities).

Operating earnings or loss attributable to PartnerRe Ltd. common shareholders (operating earnings or loss) and operating earnings or loss per common share and common share equivalent outstanding (diluted operating earnings or loss per share): Management uses operating earnings or loss and diluted operating earnings or loss per share to measure its financial performance as these measures focus on the underlying fundamentals of the Company’s operations by excluding net realized and unrealized gains or losses on investments (except where the Company has made a strategic investment in an investee whose operations are insurance or reinsurance related and where the Company does not control the investee’s activities), net foreign exchange gains or losses, loss on redemption of preferred shares, certain interest in earnings or losses of equity method investments (except where the Company has made a strategic investment in an investee whose operations are insurance or reinsurance related and where the Company does not control the investee’s activities) and certain withholding taxes on inter-company dividends. Net realized and unrealized gains or losses on investments in any particular period are not indicative of the performance of, and distort trends in, the Company’s business as they predominantly result from general economic and financial market conditions, and the timing of realized gains or losses on investments is largely opportunistic. Net foreign exchange gains or losses are not indicative of the performance of, and distort trends in, the Company’s business as they predominantly result from general economic and foreign exchange market conditions. Loss on the redemption of preferred shares is not indicative of the performance of, and distorts trends in, the Company’s business as it resulted from general economic and financial market conditions, and the timing of the loss on redemption was largely opportunistic. Interest in earnings or losses of equity method investments are also not indicative of the performance of, or trends in, the Company’s business where the investee’s operations are not insurance or reinsurance related and where the Company does not control the investee companies’ activities. Withholding taxes on inter-company dividends are not indicative of the performance of, and distort trends in, the Company’s business as they relate to an inter-company transaction rather than the Company's core operating performance. Management believes that the use of operating earnings or loss and diluted operating earnings or loss per share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how Management analyzes performance. Management also believes that these measures follow industry practice and, therefore, allow the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons.

Operating earnings decreased by $26 million, from $177 million in the three months ended March 31, 2014 to $151 million in the same period of 2015. The decrease in operating earnings was primarily due to an increase of $29 million in other expenses, driven by the costs of $31 million related to the Amalgamation, as discussed above.

Diluted operating earnings per share decreased by $0.27, from $3.36 in the three months ended March 31, 2014 to $3.09 in the same period of 2015, primarily due to the decrease in operating earnings.

The other lesser factors contributing to the increases or decreases in operating earnings and diluted operating earnings per share in the three months ended March 31, 2015 compared to the same period of 2014 are further described in Review of Net Income below.

Operating earnings or loss attributable to PartnerRe Ltd. common shareholders and diluted operating earnings or loss per share are non-GAAP financial measures within the meaning of Regulation G and should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP (see Comment on Non-GAAP Measures). The reconciliation of operating earnings and diluted operating earnings per share to the most directly comparable GAAP financial measure for the three months ended March 31, 2015 and 2014 was as follows (in millions of U.S. dollars, except per share data):



	For the three months ended
	March 31, 2015			March 31, 2014
Net income attributable to PartnerRe Ltd.	$	246		$	310
Less:
Net realized and unrealized investment gains, net of tax	100			116
Net foreign exchange losses, net of tax	(16		)	(1		)
Interest in (losses) earnings of equity method investments, net of tax	(3		)	4
Dividends to preferred shareholders	14			14
Operating earnings attributable to PartnerRe Ltd. common shareholders	$	151		$	177

Per diluted share:
Net income attributable to PartnerRe Ltd. common shareholders	$	4.76		$	5.61
Less:
Net realized and unrealized investment gains, net of tax	2.06			2.20
Net foreign exchange losses, net of tax	(0.32		)	(0.02		)
Interest in (losses) earnings of equity method investments, net of tax	(0.07		)	0.07
Operating earnings attributable to PartnerRe Ltd. common shareholders	$	3.09		$	3.36

Operating ROE: Management uses annualized Operating ROE as a measure of profitability that focuses on the return to common shareholders on an annual basis. To support the Company’s growth objectives, most economic decisions, including capital attribution and underwriting pricing decisions, incorporate an Operating ROE impact analysis. For the purpose of that analysis, an appropriate amount of capital (equity) is attributed to each transaction for determining the transaction’s priced return on attributed capital. Subject to an adequate return for the risk level as well as other factors, such as the contribution of each risk to the overall risk level and risk diversification, capital is attributed to the transactions generating the highest priced return on deployed capital. Management’s challenge consists of (i) attributing an appropriate amount of capital to each transaction based on the risk created by the transaction, (ii) properly estimating the Company’s overall risk level and the impact of each transaction on the overall risk level, (iii) assessing the diversification benefit, if any, of each transaction, and (iv) deploying available capital. The risk for the Company lies in misestimating any one of these factors, which are critical in calculating a meaningful priced return on deployed capital, and entering into transactions that do not contribute to the Company’s growth objectives. The Company’s Operating ROE’s for quarterly periods are annualized.

Annualized Operating ROE decreased from 12.3% in the three months ended March 31, 2014 to 9.8% in the same period of 2015. The decrease in annualized Operating ROE was due to lower diluted operating earnings per share, as described above, and a higher beginning diluted book value per share at January 1, 2015 compared to January 1, 2014. The other factors contributing to increases or decreases in operating earnings are described further in Review of Net Income below.

The presentation of Operating ROE is a non-GAAP financial measure within the meaning of Regulation G and should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP (see Comment on Non-GAAP Measures). The reconciliation of Operating ROE to the most directly comparable GAAP financial measure for the three months ended March 31, 2015 and 2014 was as follows:



	For the three months ended
	March 31, 2015		March 31, 2014
Annualized return on beginning diluted book value per common share calculated with net income per share attributable to common shareholders	15.1	%	20.5	%
Less:
Annualized net realized and unrealized investment gains, net of tax, on beginning diluted book value per common share	6.5		8.0
Annualized net foreign exchange losses, net of tax, on beginning diluted book value per common share	(1.0	)	(0.1	)
Annualized net interest in (losses) earnings of equity method investments, net of tax, on beginning diluted book value per common share	(0.2	)	0.3
Annualized operating return on beginning diluted book value per common share	9.8	%	12.3	%

Combined ratio: The combined ratio is used industry-wide as a measure of underwriting profitability for Non-life business. A combined ratio under 100% indicates underwriting profitability, as the total losses and loss expenses, acquisition costs and other expenses are less than the premiums earned on that business. While an important metric of underwriting profitability, the combined ratio does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately made to clients. The key challenges in managing the combined ratio metric consist of (i) focusing on underwriting profitable business even in the weaker part of the reinsurance cycle, as opposed to growing the book of business at the cost of profitability, (ii) diversifying the portfolio to achieve a good balance of business, with the expectation that underwriting losses in certain lines or markets may potentially be offset by underwriting profits in other lines or markets, and (iii) maintaining control over expenses.

The Non-life combined ratio decreased by 1.1 points, from 83.9% in the three months ended March 31, 2014 to 82.8% in the same period of 2015. The decrease in the combined ratio for the three months ended March 31, 2015 compared to the same period of 2014 was mainly driven by a decrease in other expenses allocated to the Non-life segment, which was due to lower information technology, facility and personnel costs, as well as the impact of foreign exchange. Additional detail of the Non-life underwriting result is provided in the discussion of individual sub-segments in Results by Segment and Review of Net Income below.

The other lesser factors contributing to increases or decreases in the combined ratio are described further in Review of Net Income below.

The Company uses the combined ratio to measure its overall underwriting profitability for its Non-life segment as a whole. Given the Company does not allocate other expenses to its Non-life sub-segments, Management measures the underwriting profitability of the Non-life sub-segments by using the technical result and technical ratio as described in Results by Segment below.

Other Key Financial Measures

In addition to using the annualized growth in Diluted Tangible Book Value per Share plus dividends as the Company’s prime financial long-term measure, and diluted tangible book value per common share and common share equivalents outstanding (Diluted Tangible Book Value per Share) as the basis for this measure, the Company uses other metrics to monitor its financial performance and to measure total shareholder value. Other such metrics used by Management include, but are not limited to, diluted book value per common share and common share equivalents outstanding (Diluted Book Value per Share) and Diluted Tangible Book Value per Share plus the discount in Non-life loss reserves per common share and common share equivalents outstanding (Diluted Tangible Book Value plus the discount in Non-life reserves). Diluted Book Value per Share is a similar metric to Diluted Tangible Book Value per Share, except that it includes the impact on book value of goodwill and intangible assets. Diluted Tangible Book Value plus the discount in Non-life loss reserves is a shorter-term metric that adjusts the Company’s Diluted Tangible Book Value per Share for the impact that changes in interest rates have on the time value of money that is embedded in the Company’s Non-life loss reserves.

Comment on Non-GAAP Measures

Throughout this filing, the Company’s results of operations have been presented in the way that Management believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use financial information in evaluating the performance of the Company. This presentation includes the use of Diluted Tangible Book Value per Share, Diluted Tangible Book Value per Share plus dividends, operating earnings or loss, diluted operating earnings or loss per share and Operating ROE that are not calculated under standards or rules that comprise U.S. GAAP. These measures are referred to as non-GAAP financial measures within the meaning of Regulation G. Management believes that these non-GAAP financial measures are important to investors, analysts, rating agencies and others who use the Company’s financial information and will help provide a consistent basis for comparison between years and for comparison with the Company’s peer group, although non-GAAP measures may be defined or calculated differently by other companies. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable U.S. GAAP financial measures, diluted book value per share, net income or loss and return on beginning common shareholders’ equity calculated with net income or loss attributable to common shareholders, is presented above.

Risk Management

In the insurance and reinsurance industry, the core of the business model is the assumption and management of risk. A key challenge is to create total shareholder value through the intelligent and optimal assumption and management of reinsurance, insurance and investment risks while limiting and mitigating those risks that can destroy tangible as well as intangible value, those risks for which the organization is not sufficiently compensated, and those risks that could threaten the ability of the Company to achieve its objectives. While many companies start with a return goal, the Company starts with a capital-based risk appetite and then looks for risks that meet its return targets within that framework. Management believes that this construct allows the Company to balance the cedants’ need for certainty of claims payment with the shareholders’ need for an adequate total return.

All business decisions entail a risk/return trade-off, and these decisions are applicable to the Company’s risks. In the context of assumed business risks, this requires an accurate evaluation of risks to be assumed, and a determination of the appropriate economic returns required as fair compensation for such risks.

The Company’s results are primarily determined by how well the Company understands, prices and manages assumed risk. Management also believes that every organization faces numerous risks that could threaten the successful achievement of a company’s goals and objectives. These include all factors which can be viewed as either strategic, financial, or operational risks that are common to any industry, such as choice of strategy and markets, economic and business cycles, competition, changes in regulation, data quality and security, fraud, business interruption and management continuity. See Risk Factors in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

For additional information related to the Company’s risk management approach, see Business—Risk Management in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Assumed Risks

Central to the Company’s assumed risk framework is its risk appetite. The Company’s risk appetite is a statement of how much and how often the Company will tolerate economic losses during an annual period. The Company’s risk appetite is expressed as the maximum economic loss that the Board of Directors (Board) is willing to incur. The Company’s risk appetite is approved by the Board on an annual basis.

The Company manages exposure levels from multiple risk sources to provide reasonable assurance that modeled economic losses are contained within the risk appetite approved by the Board. Definitions for economic losses in the context of the Company’s risk management framework are included in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Company establishes key risk limits for any risk source deemed by Management to have the potential to cause operating losses or economic losses greater than the Company’s risk appetite. The Company may also establish risk limits for any risk source deemed to have the possibility of causing reputational damage. The Risk and Finance Committee of the Board (Risk and Finance Committee) approves the key risk limits. Executive and Business and Support Unit Management may set additional specific and aggregate risk limits within the key risk limits approved by the Risk and Finance Committee. The actual level of risk is dependent on current market conditions and the need for balance in the Company’s portfolio of risks. On a quarterly basis, Management reviews and reports to the Risk and Finance Committee the actual limits deployed against the approved limits.

Management established key risk limits that are approved by the Risk and Finance Committee for ten risk sources at March 31, 2015. For a detailed discussion of these ten risk sources see Business—Risk Management in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The limits approved by the Risk and Finance Committee and the actual limits deployed at March 31, 2015 and December 31, 2014 were as follows (in billions of U.S. dollars, except interest rate risk data):



	March 31, 2015				December 31, 2014
	Limit approved⁽²⁾		Actual deployed⁽²⁾		Limit approved⁽²⁾		Actual deployed⁽²⁾
Natural Catastrophe Risk	$	2.3	$	1.5	$	2.3	$	1.5
Long Tail Reinsurance Risk	1.2		0.9		1.2		0.9
Market Risk	3.4		2.6		3.4		2.6
Equity and equity-like sublimit	2.8		2.0		2.8		2.0
Interest Rate Risk (duration)—excess fixed income investment portfolio⁽¹⁾	6.0 years		2.4 years		6.0 years		2.7 years
Default and Credit Spread Risk	$	9.5	$	6.0	$	9.5	$	6.3
Trade Credit Underwriting Risk	0.9		0.6		0.9		0.7
Longevity Risk	2.0		1.4		2.0		1.4
Pandemic Risk	1.3		0.7		1.3		0.7
Agriculture Risk	0.3		0.1		0.3		0.1
Mortgage Reinsurance Risk	1.0		0.5		1.0		0.4
Any one country sub-limit	0.8		0.4		0.8		0.4


(1)	The excess fixed income investment portfolio relates to fixed income securities included in the Company’s capital funds, which are in excess of those included in the Company’s liability funds that support the net reinsurance liabilities.


(2)	The limits approved and the actual limits deployed in the table above are shown net of retrocession.

Natural Catastrophe Probable Maximum Loss (PML)

The following discussion of the Company’s natural catastrophe probable maximum loss (PML) information contains forward-looking statements based upon assumptions and expectations concerning the potential effect of future events that are subject to uncertainties. See Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a list of the Company’s risk factors. Any of these risk factors could result in actual losses that are materially different from the Company’s PML estimates below.

Natural catastrophe risk is a source of significant aggregate exposure for the Company and is managed by setting risk appetite and limits, as discussed above. The peril zones in the disclosure below are major peril zones for the industry.

The Company has exposures in other peril zones that can potentially generate losses greater than the PML estimates below. The Company’s PMLs represent an estimate of loss for a single event for a given return period. The table below discloses the Company’s 1-in-250 and 1-in-500 year return period estimated loss for a single occurrence of a natural catastrophe event in a one-year period. In other words, the 1-in-250 and 1-in-500 year return period PMLs mean that there is a 0.4% and 0.2% chance, respectively, in any given year that an occurrence of a natural catastrophe in a specific peril zone will lead to losses exceeding the stated estimate.

The PML estimates below include all significant exposure from our Non-life and Life and Health business operations. This includes coverage for property, marine, energy, engineering, workers’ compensation and mortality and exposure to catastrophe from insurance-linked securities. The PML estimates do not include casualty coverage that could be exposed as a result of a catastrophic event. In addition, they do not include estimates for contingent losses to insureds that are not directly impacted by the event (e.g. loss of earnings due to disruption in supply lines).

For additional information related to the Company’s natural catastrophe PML information and definitions, see Business—Natural Catastrophe Probable Maximum Loss (PML) in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Company’s single occurrence estimated net PML exposures (pre-tax and net of retrocession and reinstatement premiums) for certain selected peak industry natural catastrophe perils at January 1, 2015 were as follows (in millions of U.S. dollars):



			Single Occurrence Estimated Net PML Exposure
Zone	Peril	1-in-250 year PML			1-in-500 year PML (Earthquake Perils Only)
U.S. Southeast	Hurricane		$	765		—
U.S. Northeast	Hurricane		963			—
U.S. Gulf Coast	Hurricane		850			—
Caribbean	Hurricane		179			—
Europe	Windstorm		606			—
Japan	Typhoon		145			—
California	Earthquake		609			$	730
British Columbia	Earthquake		223			414
Japan	Earthquake		393			440
Australia	Earthquake		305			415
New Zealand	Earthquake		194			229

Critical Accounting Policies and Estimates

Critical Accounting Policies and Estimates of the Company at March 31, 2015 have not changed materially compared to December 31, 2014. The following discussion updates specific information related to the Company’s estimates for losses and loss expenses and life policy benefits and valuation of investments and funds held – directly managed, including certain derivative financial instruments. See Critical Accounting Policies and Estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Company’s other critical accounting policies which are not specifically updated in this report given they have not changed materially compared to December 31, 2014.

Unpaid Losses and Loss Expenses

Because a significant amount of time can elapse between the assumption of risk, occurrence of a loss event, the reporting of the event to an insurance company (the primary company or the cedant), the subsequent reporting to the reinsurance company (the reinsurer) and the ultimate payment of the claim on the loss event by the reinsurer, the Company’s liability for unpaid losses and loss expenses (loss reserves) is based largely upon estimates. The Company categorizes loss reserves into three types of reserves: reported outstanding loss reserves (case reserves), additional case reserves (ACRs) and incurred but not reported (IBNR) reserves. The Company updates its estimates for each of the aforementioned categories on a quarterly basis using information received from its cedants. The Company also estimates the future unallocated loss adjustment expenses (ULAE) associated with the loss reserves and these form part of the Company’s loss adjustment expense reserves. The Company’s Non-life loss reserves for each category and sub-segment are reported in the table included later in this section.

The amount of time that elapses before a claim is reported to the cedant and then subsequently reported to the reinsurer is commonly referred to in the industry as the reporting tail. For all lines, the Company’s objective is to estimate ultimate losses and loss expenses. Total loss reserves are then calculated by subtracting losses paid. Similarly, IBNR reserves are calculated by subtraction of case reserves and ACRs from total loss reserves.

The Company analyzes its ultimate losses and loss expenses after consideration of the loss experience of various reserving cells. The Company assigns treaties to reserving cells and allocates losses from the treaty to the reserving cell. The reserving cells are selected in order to ensure that the underlying treaties have homogeneous loss development characteristics (e.g., reporting tail) but are large enough to make estimation of trends credible. The selection of reserving cells is reviewed annually and changes over time as the business of the Company evolves. For each reserving cell, the Company’s estimates of loss reserves are reached after a review of the results of several commonly accepted actuarial projection methodologies. In selecting its best estimate, the Company considers the appropriateness of each methodology to the individual circumstances of the reserving cell and underwriting year for which the projection is made.

See Critical Accounting Policies and Estimates—Unpaid Losses and Loss Expenses in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for additional information on the reserving methodologies employed by the Company, the principal reserving methods used for the reserving lines, the principal parameter assumptions underlying the methods and the main underlying factors upon which the estimates of reserving parameters are predicated.

The Company’s best estimate of total loss reserves is typically in excess of the midpoint of the actuarial ultimate liability estimate. The Company believes that there is potentially significant risk in estimating loss reserves for long-tail lines of business and for immature underwriting years that may not be adequately captured through traditional actuarial projection methodologies as these methodologies usually rely heavily on projections of prior year trends into the future. In selecting its best estimate of future liabilities, the Company considers both the results of actuarial point estimates of loss reserves as well as the potential variability of these estimates as captured by a reasonable range of actuarial liability estimates. The selected best estimates of reserves are always within the reasonable range of estimates indicated by the Company’s actuaries.

During the three months ended March 31, 2015 and 2014, the Company reviewed its estimate for prior year losses for the Non-life segment (defined below in Results by Segment) and, in light of developing data, adjusted its ultimate loss ratios for prior accident years. The net prior year favorable loss development for each sub-segment of the Company’s Non-life segment for the three months ended March 31, 2015 and 2014 was as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015		March 31, 2014
Net Non-life prior year favorable loss development:
North America	$	82	$	24
Global (Non-U.S.) P&C	18		47
Global Specialty	110		59
Catastrophe	14		34
Total net Non-life prior year favorable loss development	$	224	$	164

The net Non-life prior year favorable loss development for the three months ended March 31, 2015 and 2014 was driven by the following factors (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Net Non-life prior year (adverse) favorable loss development:
Net prior year loss development due to changes in premiums⁽¹⁾	$	(4	)	$	(10	)
Net prior year loss development due to all other factors⁽²⁾	228			174
Total net Non-life prior year favorable loss development	$	224		$	164


(1)	Net prior year loss development due to changes in premiums includes, but it is not limited to, the impact to prior years’ reserves associated with (increases) decreases in the estimated or actual premium exposure reported by cedants.


(2)	Net prior year loss development due to all other factors includes, but is not limited to, loss experience, changes in assumptions and changes in methodology.

For a discussion of net prior year favorable loss development by Non-life sub-segment, see Results by Segment below. See Critical Accounting Policies and Estimates—Unpaid Losses and Loss Expenses in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for additional information by reserving lines.

The gross reserves reported by cedants (case reserves), those estimated by the Company (ACRs and IBNR reserves) and the total gross, ceded and net loss reserves recorded at March 31, 2015 for each Non-life sub-segment were as follows (in millions of U.S. dollars):



	Case reserves		ACRs		IBNR reserves		Total gross loss reserves		Ceded loss reserves			Total net loss reserves
North America	$	936	$	118	$	2,264	$	3,318	$	(19	)	$	3,299
Global (Non-U.S.) P&C	1,162		8		851		2,021		(16		)	2,005
Global Specialty	1,600		52		1,968		3,620		(130		)	3,490
Catastrophe	277		51		114		442		(32		)	410
Total Non-life reserves	$	3,975	$	229	$	5,197	$	9,401	$	(197	)	$	9,204

The net loss reserves represent the Company’s best estimate of future losses and loss expense amounts based on the information available at March 31, 2015. Loss reserves rely upon estimates involving actuarial and statistical projections at a given time that reflect the Company’s expectations of the costs of the ultimate settlement and administration of claims. Estimates of ultimate liabilities are contingent on many future events and the eventual outcome of these events may be different from the assumptions underlying the reserve estimates. In the event that the business environment and social trends diverge from historical trends, the Company may have to adjust its loss reserves to amounts falling significantly outside its current estimate. These estimates are regularly reviewed and the ultimate liability may be in excess of, or less than, the amounts provided, for which any adjustments will be reflected in the period in which the need for an adjustment is determined.

The Company’s best estimates are point estimates within a reasonable range of actuarial liability estimates. These ranges are developed using stochastic simulations and techniques and provide an indication as to the degree of variability of the loss reserves. The Company interprets the ranges produced by these techniques as confidence intervals around the point estimates for each Non-life sub-segment. However, due to the inherent volatility in the business written by the Company, there can be no assurance that the final settlement of the loss reserves will fall within these ranges.

The point estimates related to net loss reserves recorded by the Company and the range of actuarial estimates at March 31, 2015 for each Non-life sub-segment were as follows (in millions of U.S. dollars):



	Recorded Point Estimate		High		Low
Net Non-life sub-segment loss reserves:
North America	$	3,299	$	3,632	$	2,648
Global (Non-U.S.) P&C	2,005		2,283		1,645
Global Specialty	3,490		3,956		2,810
Catastrophe	410		454		362

It is not appropriate to add together the ranges of each sub-segment in an effort to determine a high and low range around the Company’s total Non-life carried loss reserves.

Of the Company’s $9,204 million of net Non-life loss reserves at March 31, 2015, net loss reserves for accident years 2005 and prior of $551 million are guaranteed by Colisée Re, pursuant to the Reserve Agreement. The Company is not subject to any loss reserve variability associated with the guaranteed reserves. See Business—Reserves in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Reserve Agreement.

A significant amount of judgment was used to estimate the range of potential losses related to the earthquakes that occurred in New Zealand in September 2010, February 2011 and June 2011 (New Zealand Earthquakes) and the Japan earthquake and resulting tsunami (Japan Earthquake), and there remains a considerable degree of uncertainty related to the range of possible ultimate losses associated with these events, and, in particular, the New Zealand Earthquakes. Loss estimates arising from earthquakes are inherently more uncertain than those from other catastrophic events and the Company believes the ultimate losses arising from the New Zealand Earthquakes and the Japan Earthquake may be materially in excess of, or less than, the amounts provided for in the Condensed Consolidated Balance Sheet at March 31, 2015.

The remaining significant risks and uncertainties related to the New Zealand Earthquakes include the ongoing cedant revisions of loss estimates for each of these events, the degree to which inflation impacts construction materials required to rebuild affected properties, the characteristics of the Company’s program participation for certain affected cedants and potentially affected cedants, and the expected length of the claims settlement period. In addition, there is further complexity related to the New Zealand Earthquakes given multiple earthquakes occurred in the same region in a relatively short period of time, resulting in cedants continuing to revise their allocation of losses between the various events and between different treaties, under which the Company may provide different amounts of coverage.

While the Company remains cautious regarding the estimated ultimate losses from the Japan Earthquake, as time has passed the estimates received from the Company’s cedants have stabilized, paid losses have increased and the remaining complexities have been reduced.

Policy Benefits for Life and Annuity Contracts

Policy benefits for life and annuity contracts relate to the Company’s Life and Health segment, which predominantly includes:


•	reinsurance of longevity, subdivided into standard and non-standard annuities;


•	mortality business, which includes death and disability covers (with various riders) primarily written in Continental Europe, term assurance and critical illness primarily written in the United Kingdom and Ireland, and guaranteed minimum death benefit (GMDB) business primarily written in Continental Europe; and


•	specialty accident and health business written by PartnerRe Health, including Health Maintenance Organizations (HMO) reinsurance, medical reinsurance and provider and employer excess of loss programs.

The Company categorizes life reserves into three types of reserves: case reserves, IBNR reserves and reserves for future policy benefits. Such liabilities are established based on methods and underlying assumptions in accordance with U.S. GAAP and applicable actuarial standards. Principal assumptions used in the establishment of reserves for future policy benefits have been determined based upon information reported by ceding companies, supplemented by the Company’s actuarial estimates of mortality, critical illness, persistency and future investment income, with appropriate provision to reflect uncertainty. Case reserves, IBNR reserves and reserves for future policy benefits are generally calculated at the treaty level. The Company updates its estimates for each of the aforementioned categories on a periodic basis using information received from its cedants.

The Company’s reserving practices begin with the categorization of the contracts written as short duration, long duration, or universal life business for U.S. GAAP reserving purposes. This categorization determines the Company’s reserving methodology. See Critical Accounting Policies and Estimates—Policy Benefits for Life and Annuity Contracts in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for additional information on the reserving methodologies employed by the Company for its longevity, mortality and accident and health lines.

The Company’s gross and net reserves for life and health contracts by reserving line at March 31, 2015 were as follows (in millions of U.S. dollars):



	Case reserves		IBNR reserves		Reserves for future policy benefits		Total gross Life and Health reserves		Ceded reserves			Total net Life and Health reserves
Accident and Health	$	7	$	228	$	—	$	235	$	(26	)	$	209
Longevity	1		138		370		509		(4		)	505
Mortality	229		514		510		1,253		—			1,253
Total	$	237	$	880	$	880	$	1,997	$	(30	)	$	1,967

Valuation of Investments and Funds Held – Directly Managed, including certain Derivative Financial Instruments

The Company defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures the fair value of its financial instruments according to a fair value hierarchy that prioritizes the information used to measure fair value into three broad levels.

Under the fair value hierarchy, Management uses certain assumptions and judgments to derive the fair value of its investments, particularly for those assets with significant unobservable inputs, commonly referred to as Level 3 assets. At March 31, 2015, the Company’s financial instruments that were measured at fair value and categorized as Level 3 were as follows (in millions of U.S. dollars):



	March 31, 2015
Fixed maturities	$	599
Equities	290
Other invested assets (including certain derivatives)	127
Funds held – directly managed account	12
Total	$	1,028

For additional information on the valuation techniques, methods and assumptions that were used by the Company to estimate the fair value of its fixed maturities, short-term investments, equities, other invested assets and investments underlying the funds held – directly managed account, see Note 4 to Condensed Consolidated Financial Statements included in Item 1 of Part I of this report. For information on the Company’s use of derivative financial instruments, see Note 5 to Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Results of Operations—for the Three Months Ended March 31, 2015 and 2014

The following discussion of Results of Operations contains forward-looking statements based upon assumptions and expectations concerning the potential effect of future events that are subject to uncertainties. See Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a complete list of the Company’s risk factors. Any of these risk factors could cause actual results to differ materially from those reflected in such forward-looking statements.

The Company’s reporting currency is the U.S. dollar. The Company’s significant subsidiaries and branches have one of the following functional currencies: U.S. dollar, euro or Canadian dollar. As a significant portion of the Company’s operations is transacted in foreign currencies, fluctuations in foreign exchange rates may affect year over year comparisons. To the extent that fluctuations in foreign exchange rates affect comparisons, their impact has been quantified, when possible, and discussed in each of the relevant sections. See Note 2(m) to Consolidated Financial Statements in Item 8 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of translation of foreign currencies.

The foreign exchange fluctuations for the principal currencies in which the Company transacts business were as follows:


•	the U.S. dollar average exchange rate was stronger against most currencies in the three months ended March 31, 2015 compared to the same period of 2014; and


•	the U.S. dollar ending exchange rate strengthened against most currencies, except the Swiss franc and Japanese yen, at March 31, 2015 compared to December 31, 2014.

Review of Net Income

Management analyzes the Company’s net income or loss in three parts: underwriting result, investment result and other components of net income or loss. Underwriting result consists of net premiums earned and other income or loss less losses and loss expenses and life policy benefits, acquisition costs and other expenses. Investment result consists of net investment income, net realized and unrealized investment gains or losses and interest in earnings or losses of equity method investments. Net investment income includes interest, dividends and amortization, net of investment expenses, generated by the Company’s investment activities, as well as interest income generated on funds held assets. Net realized and unrealized investment gains or losses include sales of the Company’s fixed income, equity and other invested assets and investments underlying the funds held – directly managed account and changes in net unrealized gains or losses. Interest in earnings or losses of equity method investments includes the Company’s strategic investments. Other components of net income or loss include technical result and other income or loss, other expenses, interest expense, amortization of intangible assets, net foreign exchange gains or losses and income tax expense or benefit.

The components of net income for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Underwriting result:
Non-life	$	161		$	161
Life and Health	11			(1		)
Investment result:
Net investment income	105			117
Net realized and unrealized investment gains	116			142
Interest in (losses) earnings of equity method investments⁽¹⁾	(4		)	6
Corporate and Other:
Other income (loss) ⁽²⁾	3			(2		)
Other expenses	(58		)	(29		)
Interest expense	(12		)	(12		)
Amortization of intangible assets⁽³⁾	(7		)	(7		)
Net foreign exchange gains	13			—
Income tax expense	(80		)	(62		)
Net income	$	248		$	313


(1)	Interest in earnings or losses of equity method investments represents the Company’s aggregate share of earnings or losses related to several private placement investments and limited partnerships within the Corporate and Other segment.


(2)	Other income primarily relates to income on principal finance transactions within the Corporate and Other segment.


(3)	Amortization of intangible assets relates to intangible assets acquired in the acquisition of Paris Re in 2009 and PartnerRe Health in 2012.

Underwriting result is a measurement that the Company uses to manage and evaluate its Non-life and Life and Health segments, as it is a primary measure of underlying profitability for the Company’s core reinsurance operations, separate from the investment results. The Company believes that in order to enhance the understanding of its profitability, it is useful for investors to evaluate the components of net income or loss separately and in the aggregate. Underwriting result should not be considered a substitute for net income or loss and does not reflect the overall profitability of the business, which is also impacted by investment results and other items.

The components of the underwriting result and combined ratio for the Non-life segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015					March 31, 2014
Current accident year technical result and ratio	$	(11	)	101.3	%	$	61		94.0	%
Prior accident years technical result and ratio
Net favorable prior year loss development	224			(24.0	)	164			(16.6	)
Technical result and ratio, as reported	$	213		77.3	%	$	225		77.4	%
Other income	—			—		1			—
Other expenses	(52		)	5.5		(65		)	6.5
Underwriting result and combined ratio, as reported	$	161		82.8	%	$	161		83.9	%

The underwriting result for the Non-life segment in the three months ended March 31, 2015 was comparable to the same period of 2014 primarily due to:

•

The current accident year technical result—a decrease in the technical result (and corresponding increase in the technical ratio) which was primarily related to a modestly higher level of mid-sized loss activity in the Catastrophe and Global Specialty sub-segments, deterioration in the acquisition cost ratio in the Global Specialty and North America sub-segments, primarily driven by increasing competitive market conditions, and lower net premiums earned in the Catastrophe sub-segment.

This factor was offset by:

•

Net favorable prior year loss development—an increase of $60 million (a decrease of 7.4 points in the technical ratio) from $164 million (16.6 points on the technical ratio) in the three months ended March 31, 2014 to $224 million (24.0 points on the technical ratio) in the same period of 2015. The increase in net favorable prior year loss development was due to increases in the North America and Global Specialty sub-segments, partially offset by decreases in the Global (Non-U.S.) P&C and Catastrophe sub-segments. The components of the net favorable prior year loss development are described in more detail in the discussion of individual sub-segments in Results by Segment below.

•

Other expenses—a decrease of $13 million (a decrease of 1.0 points in the combined ratio) from $65 million (6.5 points on the combined ratio) in the three months ended March 31, 2014 to $52 million (5.5 points on the combined ratio) in the same period of 2015, primarily as a result of lower information technology, facility and lower personnel costs, as well as the impact of the foreign exchange.

The combined ratio decreased by 1.1 percentage points, from 83.9% in the three months ended March 31, 2014 to 82.8% in the same period of 2015 primarily due to the same offsetting factors described above, partially reduced by the impact of lower net premiums earned.

The underwriting result for the Life and Health segment, which does not include allocated investment income, increased by $12 million, from a loss of $1 million in the three months March 31, 2014 to a gain of $11 million in the same period of 2015. The underwriting result primarily reflected a higher level of net favorable prior year loss development. See Results by Segment below.

Net investment income decreased by $12 million, from $117 million in the three months ended March 31, 2014 to $105 million in the same period of 2015. The decrease in net investment income was primarily attributable to lower reinvestment rates and the strengthening of the U.S. dollar against most major currencies. See Corporate and Other – Net Investment Income below for more details.

Net realized and unrealized investment gains decreased by $26 million, from $142 million in the three months ended March 31, 2014 to $116 million in the same period of 2015. The net realized and unrealized investment gains of $116 million in the three months ended March 31, 2015 were primarily due to decreases in U.S. and European risk-free interest rates and modest improvements in equity markets, which were partially offset by realized and unrealized losses on treasury note futures. See Corporate and Other – Net Realized and Unrealized Investment Gains below for more details.

Other expenses included in Corporate and Other increased from $29 million in the three months ended March 31, 2014 to $58 million in the same period of 2015, primarily due to the costs related to the Amalgamation.

Interest expense in the three months ended March 31, 2015 was comparable to the same period of 2014.

Net foreign exchange gains increased by $13 million, from breakeven in the three months ended March 31, 2014 to $13 million in the same period of 2015. The net foreign exchange gains of $13 million in the three months ended March 31, 2015 resulted primarily from the gains related to the timing of our hedging activities, differences in forward points embedded in our purchases of higher yielding foreign currency hedges and the impact of certain unhedged investment portfolios. The Company hedges a significant portion of its currency risk exposure as discussed in Quantitative and Qualitative Disclosures about Market Risk in Item 3 of Part I of this report.

Income tax expense increased by $18 million, from $62 million in the three months ended March 31, 2014 to $80 million in the same period of 2015, primarily reflecting the geographical distribution of the Company’s pre-tax net income between its taxable and non-taxable jurisdictions. See Corporate and Other—Income Taxes below for more details.

Results by Segment

The Company monitors the performance of its operations in three segments, Non-life, Life and Health and Corporate and Other. The Non-life segment is further divided into four sub-segments, North America, Global (Non-U.S.) Property and Casualty (Global (Non-U.S.) P&C), Global Specialty and Catastrophe. Segments and sub-segments represent markets that are reasonably homogeneous in terms of geography, client types, buying patterns, underlying risk patterns and approach to risk management. See the description of the Company’s segments and sub-segments as well as a discussion of how the Company measures its segment results in Note 21 to Consolidated Financial Statements included in Item 8 of Part II of Form 10-K for the year ended December 31, 2014 and in Note 9 to Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Non-life Segment

North America

The North America sub-segment is comprised of lines of business that are considered to be either short, medium or long-tail. The short-tail lines consist primarily of agriculture, property and motor business. Casualty is considered to be long-tail, while credit/surety and multiline are considered to have a medium tail. The casualty line typically tends to have a higher loss ratio and a lower technical result due to the long-tail nature of the risks involved. Casualty treaties typically provide for investment income on premiums invested over a longer period as losses are typically paid later than for other lines. Investment income, however, is not considered in the calculation of technical result.

The components of the technical result and the corresponding ratios for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Gross premiums written	$	473		$	530
Net premiums written	471			527
Net premiums earned	$	339		$	379
Losses and loss expenses	(172		)	(260		)
Acquisition costs	(93		)	(92		)
Technical result ⁽¹⁾	$	74		$	27
Loss ratio ⁽²⁾	50.7		%	68.6		%
Acquisition ratio ⁽³⁾	27.5			24.3
Technical ratio⁽⁴⁾	78.2		%	92.9		%


(1)	Technical result is defined as net premiums earned less losses and loss expenses and acquisition costs.


(2)	Loss ratio is obtained by dividing losses and loss expenses by net premiums earned.


(3)	Acquisition ratio is obtained by dividing acquisition costs by net premiums earned.


(4)	Technical ratio is defined as the sum of the loss ratio and the acquisition ratio.

Premiums

The North America sub-segment represented 28% and 30% of total net premiums written in the three months ended March 31, 2015 and 2014, respectively. The net premiums written and net premiums earned by line of business for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015								For the three months ended March 31, 2014
	Net premiums written				Net premiums earned				Net premiums written				Net premiums earned
Agriculture	$	141	30	%	$	65	19	%	$	162	31	%	$	104	28	%
Casualty	163		35		143		42		179		34		148		39
Credit/Surety	30		7		25		8		37		7		27		7
Motor	20		4		20		6		22		4		19		5
Multiline	49		10		31		9		46		9		24		6
Property	62		13		51		15		72		14		48		13
Other	6		1		4		1		9		1		9		2
Total	$	471	100	%	$	339	100	%	$	527	100	%	$	379	100	%

Business reported in this sub-segment is, to an extent, originally denominated in foreign currencies and is reported in U.S. dollars. The U.S. dollar can fluctuate significantly against other currencies and this should be considered when making period to period comparisons. The effect of foreign exchange fluctuations, described in the Results of Operations above, on gross and net premiums written and net premiums earned in the three months ended March 31, 2015 compared to the same period of 2014 was as follows:



	Gross premiums written		Net premiums written		Net premiums earned
Decrease in original currency	(10	)%	(10	)%	(10	)%
Foreign exchange effect	(1	)	(1	)	—
Decrease as reported in U.S. dollars	(11	)%	(11	)%	(10	)%

Gross and net premiums written and net premiums earned decreased by 10% on a constant foreign exchange basis in the three months ended March 31, 2015 compared to the same period of 2014. The decreases in gross and net premiums written were primarily driven by cancellations, non-renewals and decreased participations across various lines and lower premiums bound in the agriculture line of business, primarily due to the delayed renewal of certain significant treaties. These decreases were partially offset by new business written during 2014 and at the January 1, 2015 renewals in the property and casualty lines. Notwithstanding the competitive conditions prevailing in various markets within this sub-segment, the Company was able to write business that met its portfolio objectives.

Technical result and technical ratio

The components of the technical result and ratio for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015					March 31, 2014
Current accident year technical result and ratio	$	(8	)	102.5	%	$	3	99.4	%
Prior accident years technical result and ratio
Net favorable prior year loss development	82			(24.3	)	24		(6.5	)
Technical result and ratio, as reported	$	74		78.2	%	$	27	92.9	%

The increase of $47 million in the technical result (and the corresponding decrease of 14.7 points in the technical ratio) in the three months ended March 31, 2015 compared to the same period of 2014 was primarily attributable to:

•

Net favorable prior year loss development—an increase of $58 million (decrease of 17.8 points in the technical ratio) from $24 million (6.5 points on the technical ratio) in the three months ended March 31, 2014 to $82 million (24.3 points on the technical ratio) in the same period of 2015. The net favorable loss development for prior accident years in the three months ended March 31, 2015 was driven by most lines of business, predominantly the casualty line. The net favorable loss development for prior accident years in the three months ended March 31, 2014 was driven primarily by the casualty line, while the multiline, motor and agriculture lines experienced combined adverse loss development for prior accident years of $17 million.

This factor driving the increase in the technical result in the three months ended March 31, 2015 compared to the same period of 2014 was partially offset by:


•	The current accident year technical result—a decline in the technical result (and corresponding increase in the technical ratio) primarily due to an increase in the acquisition cost ratio, driven mainly by continued pricing pressure and competitive conditions in the casualty and property lines of business and normal fluctuations in profitability between periods.

Global (Non-U.S.) P&C

The Global (Non-U.S.) P&C sub-segment is composed of short-tail business, in the form of property and proportional motor business, that represented approximately 77% of net premiums written in the three months ended March 31, 2015 and 2014 and long-tail business, in the form of casualty and non-proportional motor business, that represented the balance of net premiums written.

The components of the technical result and the corresponding ratios for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Gross premiums written	$	334		$	364
Net premiums written	331			361
Net premiums earned	$	174		$	179
Losses and loss expenses	(119		)	(94		)
Acquisition costs	(52		)	(54		)
Technical result	$	3		$	31
Loss ratio	68.4		%	52.4		%
Acquisition ratio	30.1			30.1
Technical ratio	98.5		%	82.5		%

Premiums

The Global (Non-U.S.) P&C sub-segment represented 20% and 21% of total net premiums written in the three months ended March 31, 2015 and 2014, respectively. The net premiums written and net premiums earned by line of business for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015								For the three months ended March 31, 2014
	Net premiums written				Net premiums earned				Net premiums written				Net premiums earned
Casualty	$	33	10	%	$	15	9	%	$	35	10	%	$	15	9	%
Motor	120		36		70		40		133		37		74		41
Property	178		54		89		51		193		53		90		50
Total	$	331	100	%	$	174	100	%	$	361	100	%	$	179	100	%

Business reported in this sub-segment is, to a significant extent, originally denominated in foreign currencies and is reported in U.S. dollars. The U.S. dollar can fluctuate significantly against other currencies and this should be considered when making period to period comparisons. The effect of foreign exchange fluctuations, described in the Results of Operations above, on gross and net premiums written and net premiums earned in the three months ended March 31, 2015 compared to the same period of 2014 was as follows:



	Gross premiums written		Net premiums written		Net premiums earned
Increase in original currency	1	%	1	%	5	%
Foreign exchange effect	(9	)	(9	)	(8	)
Decrease as reported in U.S. dollars	(8	)%	(8	)%	(3	)%

Gross and net premiums written increased by 1% and net premiums earned increased by 5% on a constant foreign exchange basis in the three months ended March 31, 2015 compared to the same period of 2014. The increases in gross and net premiums written resulted primarily from new business and increased participations in the property and motor lines of business, and were partially offset by the cancellation of a large contract in the motor line of business. The increase in net premiums earned was driven by the same factors and, to a greater extent, by the earning of new motor and property business written in 2014. Notwithstanding the continued competitive conditions in most markets, the Company was able to write business that met its portfolio objectives.

Technical result and technical ratio

The components of the technical result and ratio for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015					March 31, 2014

Current accident year technical result and ratio	$	(15	)	108.9	%	$	(16	)	108.5	%
Prior accident years technical result and ratio
Net favorable prior year loss development	18			(10.4	)	47			(26.0	)
Technical result and ratio, as reported	$	3		98.5	%	$	31		82.5	%

The decrease of $28 million in the technical result (and the corresponding increase of 16.0 points in the technical ratio) in the three months ended March 31, 2015 compared to the same period of 2014 was primarily attributable to a decrease in net favorable prior year loss development of $29 million (increase of 15.6 points in the technical ratio) from $47 million (26.0 points on the technical ratio) in the three months ended March 31, 2014 to $18 million (10.4 points on the technical ratio) in the same period of 2015. The net favorable loss development for prior accident years in the three months ended March 31, 2015 and 2014 was driven by most lines of business, with the property line being the most pronounced.

The current accident year technical result and ratio in the three months ended March 31, 2015 were comparable to the same period of 2014, with both periods including a relatively high level of mid-sized loss activity.

Global Specialty

The Global Specialty sub-segment is primarily comprised of lines of business that are considered to be either short, medium or long-tail. The short-tail lines consist of agriculture, energy and specialty property. Aviation/space, credit/surety, engineering, marine and multiline are considered to have a medium tail, while specialty casualty is considered to be long-tail.

The components of the technical result and the corresponding ratios for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Gross premiums written	$	427		$	479
Net premiums written	362			389
Net premiums earned	$	365		$	355
Losses and loss expenses	(170		)	(201		)
Acquisition costs	(93		)	(79		)
Technical result	$	102		$	75
Loss ratio	46.7		%	56.6		%
Acquisition ratio	25.4			22.4
Technical ratio	72.1		%	79.0		%

Premiums

The Global Specialty sub-segment represented 22% and 23% of total net premiums written in the three months ended March 31, 2015 and 2014, respectively. The net premiums written and net premiums earned by line of business for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015								For the three months ended March 31, 2014
	Net premiums written				Net premiums earned				Net premiums written				Net premiums earned
Agriculture	$	53	15	%	$	32	9	%	$	49	13	%	$	26	8	%
Aviation / Space	39		11		51		14		32		8		46		13
Credit / Surety	53		14		54		15		76		19		69		19
Energy	17		4		20		5		11		3		19		5
Engineering	39		11		42		12		40		10		46		13
Marine	40		11		50		14		63		16		67		19
Multiline	44		12		34		9		38		10		15		4
Specialty casualty	40		11		36		10		52		14		31		9
Specialty property	31		9		45		12		24		6		36		10
Other	6		2		1		—		4		1		—		—
Total	$	362	100	%	$	365	100	%	$	389	100	%	$	355	100	%



	Gross premiums written		Net premiums written		Net premiums earned
(Decrease) increase in original currency	(5	)%	—	%	8	%
Foreign exchange effect	(6	)	(7	)	(5	)
(Decrease) increase as reported in U.S. dollars	(11	)%	(7	)%	3	%

Gross premiums written decreased by 5%, net premiums written were flat and net premiums earned increased by 8% on a constant foreign exchange basis in the three months ended March 31, 2015 compared to the same period of 2014. The decrease in gross premiums written was driven mainly by cancellations, downward premium adjustments and reduced participations following the January 1, 2015 renewals in the marine, credit/surety and specialty casualty lines of business and was partially offset by new business written in the agriculture and multiline lines of business. Net premiums written were flat, reflecting the same factors driving the decrease in gross premiums written, which were entirely offset by lower premiums ceded under the 2015 retrocessional programs as a result of coverage optimization and improved retrocessional pricing. The increase in net premiums earned compared to flat net premiums written was mainly as a result of the earning of new business that was written in 2014 and the earning of the lower premiums ceded under the 2015 retrocessional program. Notwithstanding the diverse conditions prevailing in various markets within this sub-segment, the Company was able to write business that met its portfolio objectives.

Technical result and technical ratio

The components of the technical result and ratio for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015					March 31, 2014
Current accident year technical result and ratio	$	(8	)	102.1	%	$	16	95.7	%
Prior accident years technical result and ratio
Net favorable prior year loss development	110			(30.0	)	59		(16.7	)
Technical result and ratio, as reported	$	102		72.1	%	$	75	79.0	%

The increase of $27 million in the technical result (and the corresponding decrease of 6.9 points in the technical ratio) in the three months ended March 31, 2015 compared to the same period of 2014 was primarily attributable to:

•

Net favorable prior year loss development—an increase of $51 million (decrease of 13.3 points in the technical ratio) from $59 million (16.7 points on the technical ratio) in the three months ended March 31, 2014 to $110 million (30.0 points on the technical ratio) in the same period of 2015. The net favorable loss development for prior accident years in the three months ended March 31, 2015 was driven by most lines of business, primarily the marine, specialty casualty, aviation/space and credit surety lines. The net favorable loss development for prior accident years in the three months ended March 31, 2014 was driven by most lines of business, predominantly the marine and aviation/space lines, while the credit/surety line experienced adverse loss development of $15 million.

This factor driving the increase in the technical result in the three months ended March 31, 2015 compared to the same period of 2014 was partially offset by:

•

The current accident year technical result—a deterioration in the technical result (and a corresponding increase in the technical ratio) mainly due to a higher level of mid-sized loss activity and an increase in the acquisition cost ratio. The increase in the acquisition cost ratio was driven by an unfavorable adjustment recorded in the aviation/space line of business, higher commissions in certain other lines of business in the three months ended March 31, 2015, favorable profit commission adjustments in the same period of 2014 and normal fluctuations in profitability between periods.

Catastrophe

The Catastrophe sub-segment writes business predominantly on a non-proportional basis and is exposed to volatility resulting from catastrophic losses. The varying amounts of catastrophic losses from period to period can significantly impact the technical result and ratio of this sub-segment and affect period over period comparisons and, as a result, profitability in any one quarter is not necessarily predictive of future profitability. The sub-segment’s results for both the three months ended March 31, 2015 and 2014 included no catastrophic loss activity.

The Catastrophe sub-segment results are presented before the inter-company quota share of a diversified portfolio of catastrophe treaties to the Company’s fully collateralized reinsurance vehicle, Lorenz Re Ltd. (see Note 7 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report).

The components of the technical result and the corresponding ratios for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Gross premiums written	$	191		$	210
Net premiums written	176			179
Net premiums earned	$	58		$	79
Losses and loss expenses	(20		)	21
Acquisition costs	(4		)	(8		)
Technical result	$	34		$	92
Loss ratio	33.7		%	(26.5		)%
Acquisition ratio	7.0			10.1
Technical ratio	40.7		%	(16.4		)%

Premiums

The Catastrophe sub-segment represented 11% and 10% of total net premiums written in the three months ended March 31, 2015 and 2014, respectively.



	Gross premiums written		Net premiums written		Net premiums earned
(Decrease) increase in original currency	(3	)%	5	%	(17	)%
Foreign exchange effect	(6	)	(7	)	(9	)
Decrease as reported in U.S. dollars	(9	)%	(2	)%	(26	)%

Gross premiums written decreased by 3%, net premiums written increased by 5% and net premiums earned decreased by 17% on a constant foreign exchange basis in the three months ended March 31, 2015 compared to the same period of 2014. The decrease in gross premiums written was primarily due to cancellations, non-renewals and reduced participations and was partially offset by new business written. The increase in net premiums written was primarily driven by the extension of the 2014 proportional retrocessional program by one quarter to March 31, 2015, and was partially offset by the same factors driving the decrease in gross premiums written. Net premiums earned decreased primarily due to the cancellations, non-renewals, reduced participations and the lower level of premiums ceded that did not have an impact on net premiums earned, as the first quarters of 2015 and 2014 both had a full quarter of ceded premiums earned.

Technical result and technical ratio

The components of the technical result and ratio for this sub-segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015				March 31, 2014
Current accident year technical result and ratio	$	20	65.0	%	$	58	26.6	%
Prior accident years technical result and ratio
Net favorable prior year loss development	14		(24.3	)	34		(43.0	)
Technical result and ratio, as reported	$	34	40.7	%	$	92	(16.4	)%

The decrease of $58 million in the technical result (and the corresponding increase of 57.1 points in the technical ratio) in the three months ended March 31, 2015 compared to the same period of 2014 was primarily attributable to:

•

The current accident year technical result—a decrease in the technical result (and corresponding increase in the technical ratio) primarily due to a modestly higher level of mid-sized loss activity and the impact of lower net premiums earned, which in the absence of catastrophic losses directly impacts the technical result, in the three months ended March 31, 2015 compared to the same period of 2014. The decrease in net premiums earned was driven by rate reductions and modest reductions in exposure as a result of profitability concerns.

•

Net favorable prior year loss development—a decrease of $20 million (increase of 18.7 points in the technical ratio) from $34 million (43.0 points on the technical ratio) in the three months ended March 31, 2014 to $14 million (24.3 points on the technical ratio) in the same period of 2015. The net favorable loss development for prior accident years in the three months ended March 31, 2015 and 2014 was primarily due to net favorable loss emergence.

Life and Health Segment

The Company’s Life and Health segment includes the mortality, longevity and health lines of business written primarily in the U.K., Ireland and France and accident and health business written in the U.S.

At the time of the acquisition of PartnerRe Health in December 2012, PartnerRe Health operated as a Managing General Agent (MGA), writing all of its business on behalf of third-party insurance companies and earning a fee for producing the business, as well as participating in a portion of the original business that was ceded to PartnerRe Health by these third parties based on quota share agreements. During 2013, the Company obtained the necessary licenses and approvals and as of January 1, 2014, virtually all of the PartnerRe Health business was originated directly, without the use of third-party insurance companies. This transition continues to affect the period over period comparability with increased gross and net premiums written, net premiums earned, losses and loss expenses and acquisition costs in the three months ended March 31, 2015 compared to the same period of 2014.

The components of the allocated underwriting result for this segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Gross premiums written	$	324		$	289
Net premiums written	313			282
Net premiums earned	$	299		$	262
Life policy benefits	(240		)	(215		)
Acquisition costs	(34		)	(32		)
Technical result	$	25		$	15
Other income	1			1
Other expenses	(15		)	(17		)
Net investment income	14			15
Allocated underwriting result ⁽¹⁾	$	25		$	14

(1) Allocated underwriting result is defined as net premiums earned, other income or loss and allocated net investment income less life policy benefits, acquisition costs and other operating expenses.

Premiums

The Life and Health segment represented 19% and 16% of total net premiums written in the three months ended March 31, 2015 and 2014, respectively. The net premiums written and net premiums earned by line of business for this segment for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015								For the three months ended March 31, 2014
	Net premiums written				Net premiums earned				Net premiums written				Net premiums earned
Accident and Health	$	84	27	%	$	85	28	%	$	46	16	%	$	45	17	%
Longevity	69		22		69		23		69		25		70		27
Mortality	160		51		145		49		167		59		147		56
Total	$	313	100	%	$	299	100	%	$	282	100	%	$	262	100	%

Business reported in this segment is, to a significant extent, originally denominated in foreign currencies and is reported in U.S. dollars. The U.S. dollar can fluctuate significantly against other currencies and this should be considered when making period to period comparisons. The effect of foreign exchange fluctuations, described in the Results of Operations above, on gross and net premiums written and net premiums earned in the three months ended March 31, 2015 compared to the same period of 2014 was as follows:



	Gross premiums written		Net premiums written		Net premiums earned
Increase in original currency	20	%	19	%	21	%
Foreign exchange effect	(8	)	(8	)	(7	)
Increase as reported in U.S. dollars	12	%	11	%	14	%

Gross and net premiums written and net premiums earned increased by 20%, 19% and 21% on a constant foreign exchange basis, respectively, in the three months ended March 31, 2015 compared to the same period of 2014. The increases in gross and net premiums written and net premiums earned were driven by PartnerRe Health's accident and health business and, to a lesser extent, new short-term business written in the mortality line and new business written in the longevity line. The increase in the accident and health line was primarily driven by PartnerRe Health’s continuing transition from an MGA to a carrier, timing differences that affect comparability and continued growth arising primarily from the Patient Protection and Affordable Care Act. These increases were partially offset by non-renewals driven by increased cedant retentions and increased market competition.

Allocated underwriting result

The allocated underwriting result increased by $11 million, from $14 million in the three months ended March 31, 2014 to $25 million in the same period of 2015, primarily due to a higher level of net favorable prior year loss development from both the mortality and accident and health lines of business.

The increase in net favorable prior year loss development of $11 million resulted from net favorable loss development of $14 million in the three months ended March 31, 2015 compared to $3 million in the same period of 2014. The net favorable prior year loss development of $14 million during the three months ended March 31, 2015 was primarily related to the PartnerRe Health business, improvements in the capital markets which had a positive impact on the GMDB business, and the short-term mortality business. The net favorable prior year loss development of $3 million during the three months ended March 31, 2014 was primarily related to the GMDB business, driven by improvements in the capital markets and favorable actual versus expected claims paid experience, and PartnerRe Health’s business, which was partially offset by increased claims activity reported by cedants related to certain short-term mortality business.

Premium Distribution by Line of Business

The distribution of net premiums written by line of business for the three months ended March 31, 2015 and 2014 was as follows:



	For the three months ended
	March 31, 2015		March 31, 2014
Non-life
Property and casualty
Casualty	12	%	12	%
Motor	8		9
Multiline and other	6		5
Property	15		15
Specialty
Agriculture	12		12
Aviation / Space	2		2
Catastrophe	11		10
Credit / Surety	5		7
Energy	1		1
Engineering	2		2
Marine	2		4
Specialty casualty	3		3
Specialty property	2		2
Life and Health	19		16
Total	100	%	100	%

The changes in the distribution of net premiums written by line of business between the three months ended March 31, 2015 and the same period of 2014 reflected the Company’s response to existing market conditions and may also be affected by the timing of renewals of treaties, a change in treaty structure, premium adjustments reported by cedants and significant increases or decreases in other lines of business. In addition, foreign exchange fluctuations affected the comparison for all lines.


•	Credit / Surety: the decrease in the distribution of net premiums written in the three months ended March 31, 2015 compared to the same period of 2014 was primarily driven by decreased participations and downward premium adjustments in the Global Specialty and North America sub-segments.


•	Marine: the decrease in the distribution of net premiums written in the three months ended March 31, 2015 compared to the same period of 2014 was primarily driven by cancellations, downward premium adjustments and decreased participations in the Global Specialty sub-segment.


•	Life and Health: the increase in the distribution of net premiums written in the three months ended March 31, 2015 compared to the same period of 2014 was driven by increases in the accident and health line due to PartnerRe Health’s business and, to a lesser extent, increases in the mortality line, as described in the Life and Health segment above.

Premium Distribution by Reinsurance Type

The Company typically writes business on either a proportional or non-proportional basis. On proportional business, the Company shares proportionally in both the premiums and losses of the cedant. On non-proportional business, the Company is typically exposed to loss events in excess of a predetermined dollar amount or loss ratio. In both proportional and non-proportional business, the Company typically reinsures a large group of primary insurance contracts written by the ceding company. In addition, the Company writes business on a facultative basis. Facultative arrangements are generally specific to an individual risk and can be written on either a proportional or non-proportional basis. Generally, the Company has more influence over pricing, as well as terms and conditions, in non-proportional and facultative arrangements.

The distribution of gross premiums written by reinsurance type for the three months ended March 31, 2015 and 2014 was as follows:



	For the three months ended
	March 31, 2015		March 31, 2014
Non-life segment
Proportional	47	%	50	%
Non-proportional	28		30
Facultative	6		5
Life and Health segment
Proportional	17		12
Non-proportional	2		3
Total	100	%	100	%

The distribution of gross premiums written by reinsurance type is affected by changes in the allocation of capacity among lines of business, the timing of receipt by the Company of cedant accounts and premium adjustments reported by cedants. In addition, foreign exchange fluctuations affected the comparison for all treaty types. The changes in distribution of gross premiums written by reinsurance type for the three months ended March 31, 2015 compared to the same period of 2014 primarily related to a relative increase in the proportional gross premiums written in the Life and Health segment, as described above, which reduced the distribution of gross premiums written by type of business in the Non-life segment.

Premium Distribution by Geographic Region

The geographic distribution of gross premiums written based on the location of the underlying risk for the three months ended March 31, 2015 and 2014 was as follows:



	For the three months ended
	March 31, 2015		March 31, 2014
Asia, Australia and New Zealand	10	%	9	%
Europe	43		45
Latin America, Caribbean and Africa	9		8
North America	38		38
Total	100	%	100	%

The modest decrease in the relative distribution of gross premiums written in Europe during the three months ended March 31, 2015 compared to the same period of 2014 was primarily due to the impact of the strengthening of the U.S. dollar against the euro, which also impacted the relative distribution for other geographic regions.

Premium Distribution by Production Source

The Company generates its gross premiums written both through brokers and through direct relationships with cedants. The percentage of gross premiums written by production source for the three months ended March 31, 2015 and 2014 was as follows:



	For the three months ended
	March 31, 2015		March 31, 2014
Broker	69	%	71	%
Direct	31		29
Total	100	%	100	%

The percentage of gross premiums written through brokers in the three months ended March 31, 2015 decreased compared to the same period of 2014 due to the impact of foreign exchange, which decreased gross premiums written in Europe. Premiums written in Europe are primarily written through brokers.

Corporate and Other

Corporate and Other is comprised of the Company’s investment related activities, including principal finance transactions, insurance-linked securities and strategic investments, and its corporate activities, including other expenses.

Net Investment Income

Net investment income by asset source for the three months ended March 31, 2015 and 2014 was as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Fixed maturities	$	103		$	111
Equities	6			7
Funds held and other	5			8
Funds held – directly managed	3			4
Investment expenses	(12		)	(13		)
Net investment income	$	105		$	117

Because of the interest-sensitive nature of some of the Company’s life products, net investment income is considered in Management’s assessment of the profitability of the Life and Health segment (see Life and Health segment above). The following discussion includes net investment income from all investment activities, including the net investment income allocated to the Life and Health segment.

Net investment income decreased in the three months ended March 31, 2015 compared to the same period of 2014 due to:


•	a decrease in net investment income from fixed maturities primarily due to lower reinvestment rates;


•	the strengthening of the U.S. dollar against most major currencies; and


•	a decrease in investment income from funds held, primarily due to a one-time adjustment on a non-standard annuity contract.

Net Realized and Unrealized Investment Gains

The Company’s portfolio managers have dual investment objectives of optimizing current investment income and achieving capital appreciation. To meet these objectives, it is often desirable to buy and sell securities to take advantage of changing market conditions and to reposition the investment portfolios. Accordingly, recognition of realized gains and losses is considered by the Company to be a normal consequence of its ongoing investment management activities. In addition, the Company records changes in fair value for substantially all of its investments as unrealized investment gains or losses in its Condensed Consolidated Statements of Operations. Realized and unrealized investment gains and losses are generally a function of multiple factors, with the most significant being prevailing interest rates, credit spreads, and equity market conditions.

The components of net realized and unrealized investment gains for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Net realized investment gains on fixed maturities and short-term investments	$	52		$	25
Net realized investment gains on equities	20			1
Net realized investment (losses) gains on other invested assets	(8		)	10
Change in net unrealized investment losses on other invested assets	(21		)	(26		)
Change in net unrealized investment gains on fixed maturities and short-term investments	77			120
Change in net unrealized investment losses (gains) on equities	(7		)	10
Net other realized and unrealized investment gains	—			1
Net realized and unrealized investment gains on funds held – directly managed	3			1
Net realized and unrealized investment gains	$	116		$	142

Net realized and unrealized investment gains decreased by $26 million, from $142 million in the three months ended March 31, 2014 to $116 million in the same period of 2015. The net realized and unrealized investment gains of $116 million in the three months ended March 31, 2015 were primarily due to decreases in U.S. and European risk-free interest rates and modest improvements in equity markets, which were partially offset by realized and unrealized losses on treasury note futures. Net realized and unrealized investment gains of $142 million in the three months ended March 31, 2014 were primarily due to modest decreases in longer-term risk-free interest rates, slightly narrowing credit spreads and modest improvements in worldwide equity markets, which were partially offset by unrealized losses on treasury note futures.

Net realized losses and the change in net unrealized investment losses on other invested assets were a combined loss of $29 million and $16 million in the three months ended March 31, 2015 and 2014, respectively, and primarily related to treasury note futures.

Other Expenses

The Company’s total other expenses for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Other expenses	$	125		$	111
Other expenses as a % of total net premiums earned (Non-life and Life and Health)	10.1		%	8.9		%

Other expenses increased by $14 million, or 12%, from $111 million in the three months ended March 31, 2014 to $125 million in the same period of 2015 primarily due to costs related to the Amalgamation of $31 million in the three months ended March 31, 2015, partially offset by lower information technology, facility and lower personnel costs, as well as the impact of foreign exchange in the three months ended March 31, 2015 compared to the same period of 2014.

Income Taxes

The effective income tax rate, which the Company calculates as income tax expense or benefit divided by net income or loss before taxes, may fluctuate significantly from period to period depending on the geographic distribution of pre-tax net income or loss in any given period between different jurisdictions with comparatively higher tax rates and those with comparatively lower tax rates. The geographic distribution of pre-tax net income or loss can vary significantly between periods due to, but not limited to, the following factors: the business mix of net premiums written and earned, the geographic location, quantum and nature of net losses and loss expenses incurred, the quantum and geographic location of other expenses, net investment income, net realized and changes in unrealized investment gains and losses and the quantum of specific adjustments to determine the income tax basis in each of the Company’s operating jurisdictions. In addition, a significant portion of the Company’s gross and net premiums are currently written and earned in Bermuda, a non-taxable jurisdiction, including the majority of the Company’s catastrophe business, which can result in significant volatility in the Company’s pre-tax net income or loss from period to period.

The Company’s income tax expense and effective income tax rate for the three months ended March 31, 2015 and 2014 were as follows (in millions of U.S. dollars):



	For the three months ended
	March 31, 2015			March 31, 2014
Income tax expense	$	80		$	62
Effective income tax rate	24.3		%	16.6		%

Income tax expense and the effective income tax rate during the three months ended March 31, 2015 were $80 million and 24.3%, respectively. Income tax expense and the effective income tax rate during the three months ended March 31, 2015 were primarily driven by the geographic distribution of the Company’s pre-tax net income between its various taxable and non-taxable jurisdictions. Specifically, the income tax expense and the effective income tax rate reflect approximately half of the Company’s pre-tax net income being recorded in its taxable jurisdictions. The Company’s pre-tax net income recorded in taxable jurisdictions was driven by net realized and unrealized investment gains, foreign exchange gains and strong net favorable prior year loss development. The Company's pre-tax net income recorded in non-taxable jurisdictions and jurisdictions with comparatively lower tax rates was driven by the absence of catastrophic losses, strong net favorable prior year loss development and costs related to the Amalgamation.

Income tax expense and the effective income tax rate during the three months ended March 31, 2014 were $62 million and 16.6%, respectively. Income tax expense and the effective income tax rate during the three months ended March 31, 2014 were primarily driven by the geographic distribution of the Company’s pre-tax net income between its various taxable and non-taxable jurisdictions. Specifically, the income tax expense and the effective income tax rate included a relatively even distribution of the Company’s pre-tax net income between its various jurisdictions. The Company’s pre-tax net income recorded in jurisdictions with comparatively higher tax rates was driven by net favorable prior year loss development and net realized and unrealized investment gains. The Company’s pre-tax net income recorded in non-taxable jurisdictions and jurisdictions with comparatively lower tax rates was driven by the absence of catastrophe losses, net favorable prior year loss development and net realized and unrealized investment gains.

Financial Condition, Liquidity and Capital Resources

The Company purchased, as part of its acquisition of Paris Re in 2009, an investment portfolio and a funds held – directly managed account. The discussion of the acquired Paris Re investment portfolio is included in the discussion of Investments below. The discussion of the segregated investment portfolio underlying the funds held – directly managed account is included separately in Funds Held – Directly Managed below.

Investments

Investment philosophy

The Company employs a prudent investment philosophy. It maintains a high quality, well balanced and liquid portfolio having the dual objectives of optimizing current investment income and achieving capital appreciation. The Company’s invested assets are comprised of total investments, cash and cash equivalents and accrued investment income. From a risk management perspective, the Company allocates its invested assets into two categories: liability funds and capital funds. For additional information on the Company’s capital and liability funds, see Financial Condition, Liquidity and Capital Resources—Investments in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Company’s total invested assets (including funds held – directly managed and net payable for securities purchased) at March 31, 2015 and December 31, 2014 were split between liability and capital funds as follows (in millions of U.S. dollars):



	March 31, 2015		% of Total Invested Assets		December 31, 2014		% of Total Invested Assets
Liability funds	$	9,212	54	%	$	9,723	56	%
Capital funds	7,772		46		7,570		44
Total invested assets	$	16,984	100	%	$	17,293	100	%

The decrease of $197 million in total invested assets at March 31, 2015 compared to December 31, 2014 was primarily related to a decrease in fixed maturities, which was partially offset by increases in equities. The decrease in fixed maturities was primarily related to the impact of the strengthening of the U.S. dollar against most major currencies, partially offset by decreases in U.S. and European risk-free interest rates. The increase in equities was primarily related to the purchase of preferred shares in two large closed-end mutual funds holding municipal bonds.

The liability funds were comprised of cash and cash equivalents, accrued investment income and high quality fixed income securities. The decrease in the liability funds at March 31, 2015 compared to December 31, 2014 was primarily driven by the impact of the strengthening of the U.S. dollar, resulting in the U.S. dollar translated balances for unpaid losses and loss expenses and policy benefits for life and annuity contracts being lower, which was partially offset by an increase in net reinsurance assets related to new business written during the three months ended March 31, 2015.

The capital funds were generally comprised of accrued investment income, investment grade and below investment grade fixed maturity securities, preferred and common stocks, private placement equity and bond investments, emerging markets and high-yield fixed income securities and certain other specialty asset classes. The increase in the capital funds at March 31, 2015 compared to December 31, 2014 was primarily driven by the decrease in liability funds as described above. At March 31, 2015, approximately 62% of the capital funds were invested in cash and cash equivalents and investment grade fixed income securities.

Overview

Total investments and cash and cash equivalents (excluding the funds held – directly managed account) were $16.5 billion at March 31, 2015 compared to $16.6 billion at December 31, 2014. The major factors contributing to the decrease in the three months ended March 31, 2015 were:


•	the impact of foreign exchange of $365 million due to the strengthening of the U.S. dollar against most major currencies;


•	dividend payments on common and preferred shares totaling $47 million;


•	net decrease of $47 million, due to the repurchase of common shares of $59 million under the Company’s share repurchase program, partially offset by the reissuance of common shares from treasury under the Company’s employee equity plans of $12 million; and


•	various other factors which net to approximately $53 million, the largest being the amortization of net premium on investments; partially offset by


•	net cash provided by operating activities of $139 million;

•

net realized and unrealized gains related to the investment portfolio of $113 million, primarily resulting from an increase in the fixed maturity and short-term investment portfolios of $129 million, reflecting decreases in U.S. and European risk-free interest rates, and an increase in the equity portfolio of $13 million. These factors were partially offset by a decrease in other invested assets of $29 million, primarily driven by losses on treasury note futures (see discussion related to duration below); and


•	an increase in net payable for securities purchased of $100 million.

Trading securities

The following discussion relates to the composition of the Company’s trading securities. The Company’s other invested assets and the investments underlying the funds held – directly managed account are discussed separately below. Trading securities are carried at fair value with changes in fair value included in net realized and unrealized investment gains and losses in the Condensed Consolidated Statements of Operations.

At March 31, 2015, approximately 95% of the Company’s fixed maturity and short-term investments, which includes fixed income type mutual funds, were publicly traded and approximately 89% were rated investment grade (BBB- or higher) by Standard & Poor’s (or estimated equivalent).

The average credit quality, the average yield to maturity and the expected average duration of the Company’s fixed maturities and short-term investments (which includes fixed income type mutual funds) at March 31, 2015 and December 31, 2014 were as follows:



	March 31, 2015		December 31, 2014
Average credit quality	A		A
Average yield to maturity	2.3	%	2.4	%
Expected average duration	3.5	years	3.7	years

The average credit quality and yield to maturity of fixed maturities and short-term investments at March 31, 2015 were comparable to December 31, 2014.

The expected average duration of fixed maturities and short-term investments decreased to 3.5 years at March 31, 2015 compared to 3.7 years at December 31, 2014, primarily due to a decrease in the measured duration of the underlying reinsurance liabilities and a decrease in U.S. and European risk-free interest rates. For the purposes of managing portfolio duration, the Company uses exchange traded treasury note futures. The use of treasury note futures reduced the expected average duration of the investment portfolio from 4.2 years to 3.5 years at March 31, 2015, and reflects the Company’s decision to continue to hedge against potential further rises in risk-free interest rates.

The Company’s investment portfolio generated a total accounting return (calculated based on the carrying value of all investments in local currency) of 1.4% in the three months ended March 31, 2015, compared to 1.7% in the same period of 2014. The total accounting return in the three months ended March 31, 2015 was primarily due to decreases in U.S. and European risk-free interest rates, while the same period of 2014 mainly reflects modest decreases in longer-term risk-free interest rates, narrowing credit spreads and modest improvements in equity markets.

The cost, fair value and credit ratings of the Company’s fixed maturities, short-term investments and equities classified as trading at March 31, 2015 were as follows (in millions of U.S. dollars):



					Credit Rating ⁽²⁾
March 31, 2015	Cost ⁽¹⁾		Fair Value		AAA			AA			A			BBB			Below investment grade/ Unrated
Fixed maturities
U.S. government	$	2,212	$	2,241	$	—		$	2,241		$	—		$	—		$	—
U.S. government sponsored enterprises	57		58		—			58			—			—			—
U.S. states, territories and municipalities	602		621		131			310			—			—			180
Non-U.S. sovereign government, supranational and government related	1,453		1,557		470			784			183			96			24
Corporate	5,221		5,495		149			487			2,177			2,184			498
Asset-backed securities	1,099		1,122		273			195			145			21			488
Residential mortgage-backed securities	2,223		2,263		269			1,927			52			—			15
Other mortgage-backed securities	54		55		15			16			19			3			2
Fixed maturities	$	12,921	$	13,412	$	1,307		$	6,018		$	2,576		$	2,304		$	1,207
Short-term investments	20		20		1			17			1			—			1
Total fixed maturities and short-term investments	$	12,941	$	13,432	$	1,308		$	6,035		$	2,577		$	2,304		$	1,208
Equities	1,115		1,320
Total	$	14,056	$	14,752
% of Total fixed maturities and short-term investments					10		%	45		%	19		%	17		%	9		%


(1)	Cost is amortized cost for fixed maturities and short-term investments and cost for equity securities.


(2)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent). Investment grade reflects a rating of BBB- or above.

The decrease of $0.5 billion in the fair value of the Company’s fixed maturities from $13.9 billion at December 31, 2014 to $13.4 billion at March 31, 2015 primarily reflects strengthening of the U.S. dollar against most major currencies and cash flows due to asset allocation movements, which were partially offset by the impact of the decreases in U.S. and European risk-free interest rates and net investment income. At March 31, 2015, there has been a modest shift in the distribution of the fixed maturity portfolio compared to December 31, 2014 as the Company decreased its holdings of non-U.S. government bonds (primarily due to better matching of reinsurance liabilities) and increased its holdings of U.S. states, territories and municipalities securities.

The U.S. government category includes U.S. treasuries which are not rated, however, they are generally considered to have a credit quality equivalent to or greater than AA+ corporate issues.

The U.S. government sponsored enterprises (GSEs) category includes securities that carry the implicit backing of the U.S. government and securities issued by U.S. government agencies (such as the Federal Home Loan Mortgage Corporation, or Freddie Mac as it is commonly known, and the Federal National Mortgage Association, or Fannie Mae as it is commonly known, and other federally owned or established corporations). At March 31, 2015, 66% of this category was rated AA with the remaining 34%, although not specifically rated, generally considered to have a credit quality equivalent to AA+ corporate issues.

The U.S. states, territories and municipalities category includes obligations of U.S. states, territories or counties.

The non-U.S. sovereign government, supranational and government related category includes obligations of non-U.S. sovereign governments, political subdivisions, agencies and supranational debt. The fair value and credit ratings of non-U.S. sovereign government, supranational and government related obligations at March 31, 2015 were as follows (in millions of U.S. dollars):



	Non-U.S. Sovereign Government			Supranational Debt			Non-U.S. Government Related			Fair Value			Credit Rating ⁽¹⁾
March 31, 2015	Non-U.S. Sovereign Government			Supranational Debt			Non-U.S. Government Related			Fair Value			AAA			AA			A			BBB			Below investment grade /Unrated
Non-European Union
Canada	$	116		$	—		$	329		$	445		$	155		$	188		$	102		$	—		$	—
Singapore	91			—			—			91			91			—			—			—			—
New Zealand	73			—			—			73			—			73			—			—			—
All Other	202			—			—			202			—			34			60			96			12
Total Non-European Union	$	482		$	—		$	329		$	811		$	246		$	295		$	162		$	96		$	12
European Union
France	$	166		$	—		$	22		$	188		$	—		$	188		$	—		$	—		$	—
Germany	117			—			—			117			117			—			—			—			—
Austria	106			—			—			106			—			106			—			—			—
Belgium	97			—			—			97			—			97			—			—			—
Supranational	—			95			—			95			3			92			—			—			—
Netherlands	95			—			—			95			95			—			—			—			—
All Other	48			—			—			48			9			6			21			—			12
Total European Union	$	629		$	95		$	22		$	746		$	224		$	489		$	21		$	—		$	12
Total	$	1,111		$	95		$	351		$	1,557		$	470		$	784		$	183		$	96		$	24
% of Total	71		%	6		%	23		%	100		%	30		%	50		%	12		%	6		%	2		%


(1)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent).

At March 31, 2015, the Company did not have any investments in securities issued by peripheral European Union (EU) sovereign governments (Portugal, Italy, Ireland, Greece and Spain) or in securities issued by the Russian Federation.

Corporate bonds are comprised of obligations of U.S. and foreign corporations. The fair values of corporate bonds issued by U.S. and foreign corporations by economic sector at March 31, 2015 were as follows (in millions of U.S. dollars):



March 31, 2015	U.S.			Foreign			Fair Value			Percentage to Total Fair Value of Corporate Bonds
Sector
Finance	$	836		$	388		$	1,224		22	%
Consumer noncyclical	561			213			774			14
Communications	357			263			620			11
Utilities	276			327			603			11
Energy	275			204			479			9
Consumer cyclical	335			114			449			8
Industrials	334			115			449			8
Insurance	232			54			286			5
Basic materials	69			95			164			3
Real estate investment trusts	109			11			120			2
Technology	118			—			118			2
Catastrophe bonds	—			87			87			2
Government guaranteed corporate debt	—			63			63			1
All Other	36			23			59			2
Total	$	3,538		$	1,957		$	5,495		100	%
% of Total	64		%	36		%	100		%

At March 31, 2015, other than the U.S., no other country accounted for more than 10% of the Company’s corporate bonds.

At March 31, 2015, the ten largest issuers accounted for 16% of the corporate bonds held by the Company (5% of total investments and cash) and no single issuer accounted for more than 3% of total corporate bonds (1% of total investments and cash).

Within the finance sector, 97% of corporate bonds were rated investment grade and 76% were rated A- or better at March 31, 2015.

At March 31, 2015, the fair value of the Company’s corporate bond portfolio issued by companies in the European Union was as follows (in millions of U.S. dollars):



March 31, 2015	Government Guaranteed Corporate Debt			Finance Sector Corporate Bonds			Non-Finance Sector Corporate Bonds			Fair Value
European Union
United Kingdom	$	—		$	106		$	362		$	468
Netherlands	—			104			183			287
France	—			27			156			183
Italy	—			17			73			90
Germany	63			6			16			85
Spain	—			15			68			83
Luxembourg	—			—			59			59
Ireland	—			11			34			45
All Other	—			5			55			60
Total	$	63		$	291		$	1,006		$	1,360
% of Total	5		%	21		%	74		%	100		%

At March 31, 2015, the Company did not hold any government guaranteed corporate debt issued in peripheral EU countries (Portugal, Italy, Ireland, Greece and Spain) or the Russian Federation and held less than $44 million in total finance sector corporate bonds issued by companies in those countries.

Asset-backed securities, residential mortgage-backed securities and other mortgage-backed securities include U.S. and non-U.S. originations. The fair value and credit ratings of asset-backed securities, residential mortgage-backed securities and other mortgage-backed securities at March 31, 2015 were as follows (in millions of U.S. dollars):



	Credit Rating ⁽¹⁾
March 31, 2015	GNMA ⁽²⁾			GSEs ⁽³⁾			AAA			AA			A			BBB			Below investment grade / Unrated			Fair Value
Asset-backed securities
U.S.	$	—		$	—		$	137		$	133		$	87		$	—		$	467		$	824
Non-U.S.	—			—			136			62			58			21			21			298
Asset-backed securities	$	—		$	—		$	273		$	195		$	145		$	21		$	488		$	1,122
Residential mortgage-backed securities
U.S.	$	419		$	1,462		$	7		$	—		$	—		$	—		$	15		$	1,903
Non-U.S.	—			—			262			46			52			—			—			360
Residential mortgage-backed securities	$	419		$	1,462		$	269		$	46		$	52		$	—		$	15		$	2,263
Other mortgage-backed securities
U.S.	$	5		$	—		$	8		$	11		$	19		$	3		$	2		$	48
Non-U.S.	—			—			7			—			—			—			—			7
Other mortgage-backed securities	$	5		$	—		$	15		$	11		$	19		$	3		$	2		$	55
Total	$	424		$	1,462		$	557		$	252		$	216		$	24		$	505		$	3,440
% of Total	12		%	43		%	16		%	7		%	6		%	1		%	15		%	100		%


(1)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent).


(2)	GNMA represents the Government National Mortgage Association. The GNMA, or Ginnie Mae as it is commonly known, is a wholly owned U.S. government corporation within the Department of Housing and Urban Development which guarantees mortgage loans of qualifying first-time home buyers and low-income borrowers.


(3)	GSEs, or government sponsored enterprises, includes securities that are issued by U.S. government agencies, such as Freddie Mac and Fannie Mae.

Residential mortgage-backed securities includes U.S. residential mortgage-backed securities, which generally have a low risk of default and carry the implicit backing of the U.S. government. The issuers of these securities are U.S. government agencies or GSEs, which set standards on the mortgages before accepting them into the program. Although these U.S. government backed securities do not carry a formal rating, they are generally considered to have a credit quality equivalent to or greater than AA+ corporate issues. They are considered prime mortgages and the major risk is uncertainty of the timing of prepayments. While there have been market concerns regarding sub-prime mortgages, the Company did not have direct exposure to these types of securities in its own investment portfolio at March 31, 2015, other than $21 million of investments in distressed asset vehicles (included in Other invested assets). At March 31, 2015, the Company’s U.S. residential mortgage-backed securities included approximately $6 million (less than 1% of U.S. residential mortgage-backed securities) of collateralized mortgage obligations, where the Company deemed the entry point and price of the investment to be attractive.

Other mortgage-backed securities includes U.S. and non-U.S. commercial mortgage-backed securities.

Short-term investments consisted of U.S. and non-U.S. government obligations and foreign corporate bonds. At March 31, 2015, the fair value and credit ratings of short-term investments were as follows (in millions of U.S. dollars):



													Credit Rating ⁽¹⁾
March 31, 2015	U.S. Government			Non-U.S. Government			Corporate			Fair Value			AAA			AA			A			BBB			Below investment grade / Unrated
Country
U.S.	$	17		$	—		$	—		$	17		$	—		$	17		$	—		$	—		$	—
All Other	—			2			1			3			1			—			1			—			1
Total	$	17		$	2		$	1		$	20		$	1		$	17		$	1		$	—		$	1
% of Total	87		%	7		%	6		%	100		%	5		%	87		%	2		%	—		%	6		%


(1)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent). Investment grade reflects a rating of BBB- or above.

Equities are comprised of publicly traded common stocks, public exchange traded funds (ETFs), real estate investment trusts (REITs) and funds holding fixed income securities. The fair value of equities (including equities held in ETFs, REITs and funds holding fixed income securities) at March 31, 2015 were as follows (in millions of U.S. dollars):



March 31, 2015	Fair Value		Percentage to Total Fair Value of Equities
Sector
Real estate investment trusts	$	177	19	%
Insurance	129		14
Consumer noncyclical	114		12
Energy	109		12
Finance	104		11
Technology	65		7
Consumer cyclical	60		7
Industrials	58		6
Communications	53		6
All Other	51		6
Total	$	920	100	%
Mutual funds and exchange traded funds
Funds and ETFs holding equities	142
Funds holding fixed income securities	258
Total equities	$	1,320

At March 31, 2015, the Company’s “insurance sector” equities included an investment of $98 million in Essent Group Ltd. (Essent), the U.S. mortgage guaranty insurance company that conducted an initial public offering in the fourth quarter of 2013.

At March 31, 2015, U.S. issuers represented 62% of the publicly traded common stocks and ETFs. At March 31, 2015, the ten largest common stocks accounted for 26% of equities (excluding equities held in ETFs and funds holding fixed income securities). At March 31, 2015, other than the Company’s investment in Essent, no single common stock issuer accounted for more than 4% of total equities (excluding equities held in ETFs and funds holding fixed income securities) or more than 1% of the Company’s total investments and cash and cash equivalents. At March 31, 2015, approximately 18% (or $73 million) of funds and ETFs holding equities were emerging markets funds. At March 31, 2015, the Company did not hold any emerging markets funds within the funds holding fixed income securities category. At March 31, 2015, the Company did not hold any equities (excluding equities held in ETFs and funds holding fixed income securities) issued by finance sector institutions based in peripheral EU countries (Portugal, Ireland, Italy, Greece and Spain).

Maturity Distribution

The distribution of fixed maturities and short-term investments at March 31, 2015 by contractual maturity date was as follows (in millions of U.S. dollars):



March 31, 2015	Cost		Fair Value
One year or less	$	257	$	257
More than one year through five years	4,556		4,694
More than five years through ten years	3,524		3,669
More than ten years	1,228		1,372
Subtotal	$	9,565	$	9,992
Mortgage/asset-backed securities	3,376		3,440
Total	$	12,941	$	13,432

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

Other Invested Assets

At March 31, 2015, the Company’s other invested assets consisted primarily of investments in non-publicly traded companies, asset-backed securities, notes and loan receivables, note securitizations, annuities and residuals and other specialty asset classes. These assets, together with the Company’s derivative financial instruments that were in a net unrealized gain or loss position are reported within Other invested assets in the Company’s Condensed Consolidated Balance Sheets. The fair value and notional value (if applicable) of other invested assets at March 31, 2015 were as follows (in millions of U.S. dollars):



March 31, 2015	Carrying Value ⁽¹⁾			Notional Value of Derivatives
Strategic investments	$	210		$	n/a
Asset-backed securities (including annuities and residuals)	12				n/a
Notes and loan receivables and notes securitizations	51				n/a
Total return swaps	(1		)		43
Interest rate swaps ⁽²⁾	(21		)		201
Insurance-linked securities ⁽³⁾	—				145
Futures contracts	(21		)		2,741
Foreign exchange forward contracts	8				2,079
Foreign currency option contracts	2				70
To-be-announced mortgage-backed securities (TBAs)	1				281
Other	46				n/a
Total	$	287

n/a: Not applicable


(1)	Included in Other invested assets are investments that are accounted for using the cost method of accounting, equity method of accounting or fair value accounting.


(2)	The Company enters into interest rate swaps to mitigate notional exposures on certain total return swaps and certain fixed maturities. Only the notional value of interest rate swaps on fixed maturities is presented separately in the table.


(3)	Insurance-linked securities include a longevity swap for which the notional amount is not reflective of the overall potential exposure of the swap. As such, the Company has included the probable maximum loss under the swap within the net notional exposure as an approximation of the notional amount.

At March 31, 2015, the Company’s strategic investments included $210 million of investments classified in Other invested assets. These strategic investments include investments in non-publicly traded companies, private placement equity and bond investments, other specialty asset classes and the investments in distressed asset vehicles comprised of sub-prime mortgages, which were discussed above in the residential mortgage-backed securities category of Investments—Trading Securities. In addition to the Company’s strategic investments that are classified in Other invested assets, strategic investments of $137 million are recorded in equities and other assets at March 31, 2015.

At March 31, 2015, the Company’s principal finance activities included $78 million of investments classified in Other invested assets, which were comprised primarily of asset-backed securities, notes and loan receivables, notes securitizations, annuities and residuals, private placement equity investments and total return and interest rate swaps related to principal finance activities.

For total return swaps within the principal finance portfolio, the Company uses internal valuation models to estimate the fair value of these derivatives and develops assumptions that require significant judgment, such as the timing of future cash flows, credit spreads and the general level of interest rates. For interest rate swaps, the Company uses externally modeled quoted prices that use observable market inputs. At March 31, 2015, all of the Company’s principal finance total return and interest rate swap portfolio was related to tax advantaged real estate backed transactions.

Although the Company has not entered into any credit default swaps at March 31, 2015, from time to time the Company also utilizes credit default swaps to mitigate the risk associated with certain of its underwriting obligations, most notably in the credit/surety line, to replicate investment positions or to manage market exposures and to reduce the credit risk for specific fixed maturities in its investment portfolio. The Company uses externally modeled quoted prices that use observable market inputs to estimate the fair value of these swaps.

The Company has entered into various weather derivatives and longevity total return swaps for which the underlying risks reference parametric weather risks and longevity risks, respectively. The Company uses internal valuation models to estimate the fair value of these derivatives and develops assumptions that require significant judgment, except for exchange traded weather derivatives. In determining the fair value of exchange traded weather derivatives, the Company uses quoted market prices.

The Company uses exchange traded treasury note futures for the purposes of managing portfolio duration. The Company also uses equity futures to replicate equity investment positions.

The Company utilizes foreign exchange forward contracts and foreign currency option contracts as part of its overall currency risk management and investment strategies.

The Company utilizes TBAs as part of its overall investment strategy and to enhance investment performance. TBAs represent commitments to purchase future issuances of U.S. government agency mortgage-backed securities. For the period between purchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company’s policy is to maintain designated cash balances at least equal to the amount of outstanding TBA purchases.

At March 31, 2015, the Company’s Other invested assets did not include any exposure to peripheral EU countries (Portugal, Italy, Ireland, Greece and Spain) and included direct exposure to mutual fund investments in other EU countries of less than $2 million. The counterparties to the Company’s foreign exchange forward contracts and foreign currency option contracts include European finance sector institutions rated A- or better by Standard & Poor’s and the Company manages its exposure to individual institutions. The Company also has exposure to the euro related to the utilization of foreign exchange forward contracts and other derivative financial instruments in its hedging strategy (see Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk in Item 3 below).

Funds Held – Directly Managed

For a discussion of the funds held – directly managed account and the related quota share retrocession agreement, see Business—Reserves—Reserve Agreement in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. See also Quantitative and Qualitative Disclosures about Market Risk—Counterparty Credit Risk in Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and in Item 3 below. The composition of the investments underlying the funds held – directly managed account at March 31, 2015 is discussed below.

At March 31, 2015, substantially all (more than 99%) of the fixed income investments underlying the funds held – directly managed account were publicly traded and were rated investment grade (BBB- or higher) by Standard & Poor’s (or estimated equivalent).

The average credit quality, the average yield to maturity and the expected average duration of the fixed maturities underlying the funds held – directly managed account at March 31, 2015 and December 31, 2014 were as follows:



	March 31, 2015		December 31, 2014
Average credit quality	AA		AA
Average yield to maturity	0.8	%	1.0	%
Expected average duration	3.3	years	3.4	years

The average credit quality and expected average duration of the fixed maturities underlying the funds held – directly managed account at March 31, 2015 were comparable to December 31, 2014.

The decrease in the average yield to maturity of fixed maturities underlying the funds held – directly managed account at March 31, 2015 compared to December 31, 2014 was primarily due to the sale and maturity of higher yielding investments (which were used to pay losses related to the run-off of the underlying reserves) and decreases in U.S. and European risk-free interest rates.

The cost, fair value and credit rating of the investments underlying the funds held – directly managed account at March 31, 2015 were as follows (in millions of U.S. dollars):



					Credit Rating ⁽²⁾
March 31, 2015	Cost ⁽¹⁾		Fair Value		AAA			AA			A			BBB
Fixed maturities
U.S. government	$	104	$	107	$	—		$	107		$	—		$	—
U.S. government sponsored enterprises	47		49		—			49			—			—
Non-U.S. sovereign government, supranational and government related	102		111		28			68			15			—
Corporate	137		145		17			45			54			29
Fixed maturities	$	390	$	412	$	45		$	269		$	69		$	29
Short-term investments	11		11		—			11			—			—
Total fixed maturities and short-term investments	$	401	$	423	$	45		$	280		$	69		$	29
Other invested assets	23		12
Total ⁽³⁾	$	424	$	435
% of Total fixed maturities					11		%	66		%	16		%	7		%


(1)	Cost is amortized cost for fixed maturities.


(2)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent).

(3)

In addition to the fair value of $435 million of investments underlying the funds held – directly managed account at March 31, 2015, the funds held – directly managed account also includes cash and cash equivalents of $54 million, accrued investment income of $5 million and other assets and liabilities related to the underlying business of $99 million. Accordingly, the total balance in the funds held – directly managed account was $593 million at March 31, 2015.

The decrease in the fair value of the investment portfolio underlying the funds held – directly managed account from $473 million at December 31, 2014 to $435 million at March 31, 2015 was primarily related to the impact of the strengthening of the U.S. dollar against most major currencies and the run-off of the underlying liabilities associated with this account.

The U.S. government category includes U.S. treasuries which are not rated, however, they are generally considered to have a credit quality equivalent to or greater than AA+ corporate issues.

The U.S. government sponsored enterprises (GSEs) category includes securities that carry the implicit backing of the U.S. government and securities issued by U.S. government agencies (such as Freddie Mac and Fannie Mae). At March 31, 2015, 83% of this category was rated AA with the remaining 17%, although not specifically rated, generally considered to have a credit quality equivalent to AA+ corporate issues.

The non-U.S. sovereign government, supranational and government related category includes obligations of non-U.S. sovereign governments, political subdivisions, agencies and supranational debt. The fair value and credit ratings of non-U.S. sovereign government, supranational and government related obligations underlying the funds held – directly managed account at March 31, 2015 were as follows (in millions of U.S. dollars):



													Credit Rating ⁽¹⁾
March 31, 2015	Non-U.S. Sovereign Government			Supranational Debt			Non-U.S. Government Related			Fair Value			AAA			AA			A
Non-European Union
Canada	$	3		$	—		$	17		$	20		$	5		$	4		$	11
All Other	—			3			—			3			3			—			—
Total Non-European Union	$	3		$	3		$	17		$	23		$	8		$	4		$	11
European Union										—
France	$	19		$	—		$	21		$	40		$	1		39			$	—
Belgium	17			—			—			17			—			17			—
All Other	9			21			1			31			19			8			4
Total European Union	$	45		$	21		$	22		$	88		$	20		$	64		$	4
Total	$	48		$	24		$	39		$	111		$	28		$	68		$	15
% of Total	43		%	22		%	35		%	100		%	25		%	61		%	14		%


(1)	All references to credit rating reflect Standard & Poor’s (or estimated equivalent).

At March 31, 2015, the investments underlying the funds held – directly managed account included less than $1 million of securities issued by peripheral European Union (EU) sovereign governments (Portugal, Italy, Ireland, Greece and Spain).

Corporate bonds underlying the funds held – directly managed account are comprised of obligations of U.S. and foreign corporations. The fair value of corporate bonds issued by U.S. and foreign corporations underlying funds held – directly managed account by economic sector at March 31, 2015 were as follows (in millions of U.S. dollars):



March 31, 2015	U.S.			Foreign			Fair Value			Percentage to Total Fair Value of Corporate Bonds
Sector
Finance	$	9		$	29		$	38		27	%
Consumer noncyclical	18			6			24			16
Energy	6			16			22			15
Utilities	4			13			17			11
Communications	5			6			11			8
Basic materials	5			5			10			7
Consumer cyclical	7			1			8			6
Industrials	3			1			4			3
All Other	7			4			11			7
Total	$	64		$	81		$	145		100	%
% of Total	44		%	56		%	100		%

At March 31, 2015, other than the U.S., Netherlands and France, which accounted for 44%, 15% and 11%, respectively, no other country accounted for more than 10% of the Company’s corporate bonds underlying the funds held – directly managed account.

At March 31, 2015, the ten largest issuers accounted for 41% of the corporate bonds underlying the funds held – directly managed account and no single issuer accounted for more than 7% of corporate bonds underlying the funds held – directly managed account (or more than 2% of the investments and cash underlying the funds held – directly managed account). At March 31, 2015, all of the finance sector corporate bonds held were rated investment grade (BBB- or higher) by Standard & Poor’s (or estimated equivalent) and 96% were rated A- or better.

At March 31, 2015, the fair value of corporate bonds underlying the funds held – directly managed account that were issued by companies in the European Union were as follows (in millions of U.S. dollars):



March 31, 2015	Government Guaranteed Corporate Debt			Finance Sector Corporate Bonds			Non-Finance Sector Corporate Bonds			Fair Value
European Union
Netherlands	$	—		$	8		$	13		$	21
France	—			5			11			16
United Kingdom	1			5			2			8
Germany	3			—			2			5
All Other	—			5			5			10
Total	$	4		$	23		$	33		$	60
% of Total	6		%	39		%	55		%	100		%

At March 31, 2015, corporate bonds underlying the funds held – directly managed account included less than $5 million of finance sector corporate bonds issued by companies in peripheral EU countries (Portugal, Italy, Ireland, Greece and Spain).

Other invested assets underlying the funds held – directly managed account primarily consists of real estate fund investments.

Maturity Distribution

The distribution of fixed maturities and short-term investments underlying the funds held – directly managed account at March 31, 2015 by contractual maturity date was as follows (in millions of U.S. dollars):



March 31, 2015	Cost		Fair Value
One year or less	$	71	$	71
More than one year through five years	199		210
More than five years through ten years	131		142
Total	$	401	$	423

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

European Exposures

For a discussion of the Company’s management of the recent uncertainties related to European sovereign debt exposures, the uncertainties surrounding Europe in general and the Company’s responses to them, see Financial Condition, Liquidity and Capital Resources—Investments—European exposures in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

There have not been any significant changes to the Company’s guidelines adopted in response to the European crisis during the three months ended March 31, 2015.

The Company’s exposures to European sovereign governments and other European related investment risks are discussed above within each category of the Company’s investment portfolio and the investments underlying the funds held – directly managed account. In addition, the Company’s other investment and derivative exposures to European counterparties are discussed in Other Invested Assets above. See Risk Factors in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for further discussion of the Company’s exposure to the European sovereign debt crisis.

Funds Held by Reinsured Companies (Cedants)

In addition to the funds held – directly managed account described above, the Company writes certain business on a funds held basis. Funds held by reinsured companies at March 31, 2015 have not changed significantly since December 31, 2014. See Funds Held by Reinsured Companies (Cedants) in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Unpaid Losses and Loss Expenses

The Company establishes loss reserves to cover the estimated liability for the payment of all losses and loss expenses incurred with respect to premiums earned on the contracts that the Company writes. Loss reserves do not represent an exact calculation of the liability. Estimates of ultimate liabilities are contingent on many future events and the eventual outcome of these events may be different from the assumptions underlying the reserve estimates. The Company believes that the recorded unpaid losses and loss expenses represent Management’s best estimate of the cost to settle the ultimate liabilities based on information available at March 31, 2015.

At March 31, 2015 and December 31, 2014, the Company recorded gross and net Non-life reserves for unpaid losses and loss expenses as follows (in millions of U.S. dollars):



	March 31, 2015		December 31, 2014
Gross Non-life reserves for unpaid losses and loss expenses	$	9,401	$	9,746
Net Non-life reserves for unpaid losses and loss expenses	9,204		9,531
Net reserves guaranteed by Colisée Re	551		575

The net Non-life reserves for unpaid losses and loss expenses at March 31, 2015 and December 31, 2014 include $551 million and $575 million, respectively, of reserves guaranteed by Colisée Re (see Item 1 of Part I and Note 8 to Consolidated Financial Statements included in Item 8 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Reserve Agreement).

The net Non-life reserves for unpaid losses and loss expenses for the three months ended March 31, 2015 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015
Net liability at December 31, 2014	$	9,531
Net incurred losses related to:
Current year	705
Prior years	(224		)
	481
Change in Colisée Re Reserve Agreement	13
Net paid losses	(472		)
Effects of foreign exchange rate changes	(349		)
Net liability at March 31, 2015	$	9,204

The decrease in net Non-life reserves for unpaid losses and loss expenses from $9,531 million at December 31, 2014 to $9,204 million at March 31, 2015 primarily reflects the impact of the strengthening of the U.S. dollar against most major currencies, with net incurred losses being partially offset by net paid losses during the three months ended March 31, 2015.

See Critical Accounting Policies and Estimates—Losses and Loss Expenses and Life Policy Benefits and Results by Segment above for a discussion of losses and loss expenses and prior year loss developments. See also Business—Reserves in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the impact of foreign exchange on unpaid losses and loss expenses.

Policy Benefits for Life and Annuity Contracts

At March 31, 2015 and December 31, 2014, the Company recorded gross and net policy benefits for life and annuity contracts as follows (in millions of U.S. dollars):



	March 31, 2015		December 31, 2014
Gross policy benefits for life and annuity contracts	$	1,997	$	2,050
Net policy benefits for life and annuity contracts	1,967		2,021

The net policy benefits for life and annuity contracts for the three months ended March 31, 2015 were as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015
Net liability at December 31, 2014	$	2,021
Net incurred losses related to:
Current year	254
Prior years	(14		)
	240
Net paid losses	(166		)
Effects of foreign exchange rate changes	(128		)
Net liability at March 31, 2015	$	1,967

The decrease in net policy benefits for life and annuity contracts from $2,021 million at December 31, 2014 to $1,967 million at March 31, 2015 was primarily due to paid losses and the impact of the strengthening of the U.S. dollar against most major currencies, which were partially offset by net incurred losses. The net incurred losses for the Company’s Life and Health reserves will generally exceed net paid losses in any one given year due to the long-term nature of the liabilities and the growth in the book of business.

See Critical Accounting Policies and Estimates—Losses and Loss Expenses and Life Policy Benefits and Results by Segment above for a discussion of life policy benefits and prior year loss developments. See also Business—Reserves in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Reinsurance Recoverable on Paid and Unpaid Losses

The Company has exposure to credit risk related to reinsurance recoverable on paid and unpaid losses. See Note 9 to Consolidated Financial Statements and Quantitative and Qualitative Disclosures about Market Risk—Counterparty Credit Risk in Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Company’s risk related to reinsurance recoverable on paid and unpaid losses and the Company’s process to evaluate the financial condition of its reinsurers.

Contractual Obligations and Commitments

In the normal course of its business, the Company is a party to a variety of contractual obligations, which are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. These contractual obligations are considered by the Company when assessing its liquidity requirements and the Company is confident in its ability to meet all of its obligations.

Other than the items discussed below, the Company’s contractual obligations at March 31, 2015 have not changed materially compared to December 31, 2014.

In accordance with the terms of the Amalgamation Agreement and Amendment to the Amalgamation Agreement, the Company would be obligated to pay AXIS a no approval fee of $55 million if the Company’s shareholders do not approve the transaction. If the Amalgamation Agreement is terminated for certain other reasons described in the Amalgamation Agreement or in certain circumstances the Company enters into a similar transaction with a third party in the 12 months following termination of the Amalgamation Agreement, the Company would be obligated to pay AXIS an aggregate termination fee of $280 million (less any termination fee already paid). In all such cases, the Company would be obligated to reimburse AXIS for costs and expenses incurred in connection with the Amalgamation Agreement and the transactions contemplated thereby in an amount not to exceed $35 million.

Following the signing of the Amalgamation Agreement, the Company has entered into agreements with certain employees that provide for the payment of a cash retention award payable if the employee maintains an active employee status through a pre-determined future date and fulfills certain conduct and performance-related conditions. The award payments are payable on the successful closing of the proposed Amalgamation.

Shareholders’ Equity and Capital Resources Management

Shareholders’ equity attributable to PartnerRe Ltd. common shareholders was $7.2 billion at March 31, 2015, a 2% increase compared to $7.0 billion at December 31, 2014. The major factors contributing to the increase in shareholders’ equity during the three months ended March 31, 2015 were:


•	comprehensive income of $243 million, which was primarily related to net income; partially offset by


•	a net decrease of $47 million, due to the repurchase of common shares of $59 million under the Company’s share repurchase program, partially offset by the reissuance of common shares from treasury under the Company’s employee equity plans of $12 million; and


•	dividend payments of $47 million related to the Company’s common and preferred shares.

See Results of Operations and Review of Net Income above for a discussion of the Company’s net income for the three months ended March 31, 2015.

As part of its long-term strategy, the Company will continue to actively manage capital resources to support its operations throughout the reinsurance cycle and for the benefit of its shareholders, subject to the ability to maintain strong ratings from the major rating agencies and the unquestioned ability to pay claims as they arise. Generally, the Company seeks to increase its capital when its current capital position is not sufficient to support the volume of attractive business opportunities available. Conversely, the Company will seek to reduce its capital, through the payment of dividends on its common shares or share repurchases, when available business opportunities are insufficient or unattractive to fully utilize the Company’s capital at adequate returns. The Company may also seek to reduce or restructure its capital through the repayment or purchase of debt obligations, or increase or restructure its capital through the issuance of debt, when opportunities arise.

Management uses certain key measures to evaluate its financial performance and the overall growth in value generated for the Company’s common shareholders. For a discussion related to growth in Diluted Tangible Book Value per Share plus dividends see Key Financial Measures above.

The capital structure of the Company at March 31, 2015 and December 31, 2014 was as follows (in millions of U.S. dollars):



	March 31, 2015				December 31, 2014
Capital Structure:
Senior notes⁽¹⁾	$	750	9	%	$	750	9	%
Capital efficient notes⁽²⁾	63		1		63		1
Preferred shares, aggregate liquidation value	854		11		854		11
Common shareholders’ equity attributable to PartnerRe Ltd.	6,344		79		6,195		79
Total Capital	$	8,011	100	%	$	7,862	100	%


(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.

The increase in total capital during the three months ended March 31, 2015 was related to the same factors above describing the increase in shareholders’ equity attributable to PartnerRe Ltd.

Indebtedness

There was no change in the Company’s indebtedness at March 31, 2015 compared to December 31, 2014 and the Company did not enter into any short-term borrowing arrangements during the three months ended March 31, 2015. See Note 10 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Company’s indebtedness.

Shareholders’ Equity

Share Repurchases

In September 2014, the Board approved a new share repurchase authorization of up to a total of 5 million common shares. Unless terminated earlier by resolution of the Board, the program will expire when the Company has repurchased all shares authorized for repurchase thereunder. At March 31, 2015, the Company had approximately 2.9 million common shares remaining under its current share repurchase authorization and approximately 39.6 million common shares were held in treasury and are available for reissuance. Following the announcement of the Amalgamation Agreement, the Company suspended its repurchase activities.

During the period from January 1, 2015 to the announcement of the Amalgamation on January 25, 2015, the Company repurchased 0.5 million common shares at a total cost of $59 million, representing an average cost of $112.89 per share. These shares were repurchased at a discount to diluted book value per share at December 31, 2014 of approximately 11%. See Shareholders’ Equity and Capital Resources Management—Shareholders' Equity in Item 7 of Part II and Note 11 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for further information related to the shareholders' equity.

Liquidity

Liquidity is a measure of the Company’s ability to access sufficient cash flows to meet the short-term and long-term cash requirements of its business operations. Management believes that its significant cash flows from operations and high quality liquid investment portfolio will provide sufficient liquidity for the foreseeable future. At March 31, 2015 and December 31, 2014, cash and cash equivalents were $1.4 billion and $1.3 billion, respectively. The increase in cash and cash equivalents was primarily due to net investment income and cash provided by underwriting activities, which was partially offset by the Company’s share repurchases, dividend payments and taxes paid.

Net cash provided by operating activities was $139 million in the three months ended March 31, 2015 compared to $79 million in same period of 2014. The increase in net cash provided by operating activities in the three months ended March 31, 2015 was mainly due to lower taxes paid compared to the same period of 2014.

Net cash provided by investing activities was $115 million in the three months ended March 31, 2015 compared to net cash used in investing activities of $71 million in the same period of 2014. The net cash provided by investing activities in the three months ended March 31, 2015 primarily reflects the timing of activity, with investment purchases executed at quarter end settling after quarter end.

Net cash used in financing activities was $123 million in the three months ended March 31, 2015 compared to $232 million in the same period of 2014. Net cash used in financing activities in the three months ended March 31, 2015 and 2014 was primarily related to the Company’s share repurchases and dividend payments on common and preferred shares.

At March 31, 2015, there were no restrictions on the Company’s ability to pay common and preferred shareholders’ dividends from retained earnings.

The Company believes that annual positive cash flows from operating activities will be sufficient to cover claims payments, absent a series of additional large catastrophic loss activity. In the event that paid losses accelerate beyond the Company's ability to fund such payments from operating cash flows, the Company would use its cash and cash equivalents balances available, liquidate a portion of its high quality and liquid investment portfolio or access certain uncommitted credit facilities. As discussed in Investments above, the Company’s investments and cash and cash equivalents (excluding the funds held - directly managed account) totaled $16.5 billion at March 31, 2015, the main components of which were investment grade fixed maturities, short-term investments and cash and cash equivalents totaling $13.6 billion.

Financial strength ratings and senior unsecured debt ratings represent the opinions of rating agencies on the Company’s capacity to meet its obligations. During the three months ended March 31, 2015 and following the announcement of the Company's proposed Amalgamation, Moody's affirmed the Company's rating with a stable outlook. Standard & Poor's, A.M. Best and Fitch placed the Company’s rating on credit watch negative, under review with negative implications and ratings watch negative, respectively. All three agencies cited concerns over the transaction, including the risks associated with the execution and integration, along with management retention risk in light of the complexity and scale of the Amalgamation. Standard & Poor’s Rating services subsequently affirmed its A- long-term counterparty credit ratings on the Company, including its A+ long-term counterparty credit and financial strength ratings on the operating companies and removed them from CreditWatch with negative implications. The Company is in dialogue with A.M. Best and Fitch to address their rating concerns. The status of any further changes to ratings or outlooks will depend on various factors, including the timing of the closing, if and when it occurs, and success of the integration.

There were no other changes in the Company’s current financial strength ratings at March 31, 2015 compared to December 31, 2014. See also Shareholders’ Equity and Capital Resources Management—Liquidity in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Credit Agreements

In the normal course of its operations, the Company enters into agreements with financial institutions to obtain unsecured and secured credit facilities. These facilities are used primarily for the issuance of letters of credit, although a portion of these facilities may also be used for liquidity purposes. The Company’s credit facilities have not changed significantly since December 31, 2014. See Credit Agreements in Item 7 of Part II and Note 19 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for further information related to the credit facilities available to the Company.

Currency

See Results of Operations and Review of Net Income above for a discussion of the impact of foreign exchange and net foreign exchange gains and losses during the three months ended March 31, 2015.

The foreign exchange gain or loss resulting from the translation of the Company’s subsidiaries’ and branches’ financial statements (expressed in euro or Canadian dollar functional currency) into U.S. dollars is classified in the currency translation adjustment account, which is a component of accumulated other comprehensive income or loss in shareholders’ equity. The currency translation adjustment account modestly decreased during the three months ended March 31, 2015 primarily due to the translation of the Company’s branches with a Canadian dollar functional currency, which was partially offset by a gain on a designated net investment hedge as described below.

The reconciliation of the currency translation adjustment for the three months ended March 31, 2015 was as follows (in millions of U.S. dollars):



	For the three months ended March 31, 2015
Currency translation adjustment at December 31, 2014	$	(8	)
Change in foreign currency translation adjustment included in accumulated other comprehensive income	(5		)
Change in net unrealized gain on designated net investment hedges included in accumulated other comprehensive income	3
Currency translation adjustment at March 31, 2015	$	(10	)

From time to time, the Company enters into net investment hedges. On March 31, 2015, the Company entered into foreign exchange forward contracts (with notional amounts of €250 million) to hedge a portion of its net investment exposure to the euro against the U.S. dollar.

See Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk in Item 3 of Part I below for a discussion of the Company’s risk related to changes in foreign currency movements.

New Accounting Pronouncements

See Note 3 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

Management believes that the Company is principally exposed to five types of market related risk: interest rate risk, credit spread risk, foreign currency risk, counterparty credit risk and equity price risk. How these risks relate to the Company, and the process used to manage them, is discussed in Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The following discussion of market risks at March 31, 2015 focuses only on material changes from December 31, 2014 in the Company’s market risk exposures, or how those exposures are managed.

Interest Rate Risk

The Company’s fixed maturity portfolio and the fixed maturity securities in the investment portfolio underlying the funds held – directly managed account are exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these securities. The Company manages interest rate risk on liability funds by constructing bond portfolios in which the economic impact of a general interest rate shift is comparable to the impact on the related liabilities. The Company believes that this process of matching the duration mitigates the overall interest rate risk on an economic basis. The Company manages the exposure to interest rate volatility on capital funds by choosing a duration profile that it believes will optimize the risk-reward relationship. For additional information on liability funds and capital funds, see Financial Condition, Liquidity and Capital Resources in Item 7 of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

At March 31, 2015, the Company estimates that the hypothetical case of an immediate 100 basis points or 200 basis points parallel shift in global bond curves would result in a change in the fair value of investments exposed to interest rate risk, the fair value of funds held – directly managed account exposed to interest rate risk, total invested assets, and shareholders’ equity attributable to PartnerRe Ltd. as follows (in millions of U.S. dollars):



	-200 Basis Points		% Change		-100 Basis Points		% Change		March 31, 2015		+100 Basis Points		% Change		+200 Basis Points		% Change
Fair value of investments exposed to interest rate risk ⁽¹⁾⁽²⁾	$	15,670	7	%	$	15,155	4	%	$	14,640	$	14,125	(4	)%	$	13,610	(7	)%
Fair value of funds held – directly managed account exposed to interest rate risk ⁽²⁾	508		7		492		3		476		460		(3	)	444		(7	)
Total invested assets ⁽³⁾	18,158		6		17,627		3		17,096		16,565		(3	)	16,034		(6	)
Shareholders’ equity attributable to PartnerRe Ltd.	8,259		15		7,728		7		7,197		6,666		(7	)	6,135		(15	)


(1)	Includes certain other invested assets, certain cash and cash equivalents and funds holding fixed income securities.


(2)	Excludes accrued interest.


(3)	Includes total investments, cash and cash equivalents, the investment portfolio underlying the funds held – directly managed account and accrued interest.

The changes do not take into account any potential mitigating impact from the equity market, taxes or the corresponding change in the economic value of the Company’s reinsurance liabilities, which, as noted above, would substantially offset the economic impact on invested assets, although the offset would not be reflected in the Condensed Consolidated Balance Sheet.

As discussed above, the Company strives to match the foreign currency exposure in its fixed income portfolio to its multicurrency liabilities. The Company believes that this matching process creates a diversification benefit. Consequently, the exact market value effect of a change in interest rates will depend on which countries experience interest rate changes and the foreign currency mix of the Company’s fixed maturity portfolio at the time of the interest rate changes. See Foreign Currency Risk below.

The impact of an immediate change in interest rates on the fair value of investments and funds held – directly managed exposed to interest rate risk, the Company’s total invested assets and shareholders’ equity attributable to PartnerRe Ltd., in both absolute terms and as a percentage of total invested assets and shareholders’ equity attributable to PartnerRe Ltd., has not changed significantly at March 31, 2015 compared to December 31, 2014.

For additional information related to the Company’s debt obligations and preferred securities, see Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. For additional information related to the Company’s debt obligations also see Note 4 to the Condensed Consolidated Financial Statements in Item 1 of Part I of this report.

Credit Spread Risk

The Company’s fixed maturity portfolio and the fixed maturity securities in the investment portfolio underlying the funds held – directly managed account are exposed to credit spread risk. Fluctuations in market credit spreads have a direct impact on the market valuation of these securities. The Company manages credit spread risk by the selection of securities within its fixed maturity portfolio. Changes in credit spreads directly affect the market value of certain fixed maturity securities, but do not necessarily result in a change in the future expected cash flows associated with holding individual securities. Other factors, including liquidity, supply and demand, and changing risk preferences of investors, may affect market credit spreads without any change in the underlying credit quality of the security.

At March 31, 2015, the Company estimates that the hypothetical case of an immediate 100 basis points or 200 basis points parallel shift in global credit spreads would result in a change in the fair value of investments and the fair value of funds held –directly managed account exposed to credit spread risk, total invested assets and shareholders’ equity attributable to PartnerRe Ltd. as follows (in millions of U.S. dollars):



	-200 Basis Points		% Change		-100 Basis Points		% Change		March 31, 2015		+100 Basis Points		% Change		+200 Basis Points		% Change
Fair value of investments exposed to credit spread risk ⁽¹⁾⁽²⁾	$	15,530	6	%	$	15,085	3	%	$	14,640	$	14,195	(3	)%	$	13,750	(6	)%
Fair value of funds held – directly managed account exposed to credit spread risk ⁽²⁾	490		3		483		1		476		469		(1	)	462		(3	)
Total invested assets ⁽³⁾	18,000		5		17,548		3		17,096		16,644		(3	)	16,192		(5	)
Shareholders’ equity attributable to PartnerRe Ltd.	8,101		13		7,649		6		7,197		6,745		(6	)	6,293		(13	)


(1)	Includes certain other invested assets, certain cash and cash equivalents and funds holding fixed income securities.


(2)	Excludes accrued interest.


(3)	Includes total investments, cash and cash equivalents, the investment portfolio underlying the funds held – directly managed account and accrued interest.

The changes above also do not take into account any potential mitigating impact from the equity market, taxes, and the change in the economic value of the Company’s reinsurance liabilities, which may offset the economic impact on invested assets.

The impact of an immediate change in credit spreads on the fair value of investments and funds held – directly managed exposed to credit spread risk, the Company’s total invested assets and shareholders’ equity attributable to PartnerRe Ltd., in both absolute terms and as a percentage of total invested assets and shareholders’ equity attributable to PartnerRe Ltd., has not changed significantly at March 31, 2015 compared to December 31, 2014.

Foreign Currency Risk

Through its multinational reinsurance operations, the Company conducts business in a variety of non-U.S. currencies, with the principal exposures being the euro, British pound, Canadian dollar, Singapore dollar and New Zealand dollar. As the Company’s reporting currency is the U.S. dollar, foreign exchange rate fluctuations may materially impact the Company’s Condensed Consolidated Financial Statements.

The Company’s gross and net exposure in its Condensed Consolidated Balance Sheet at March 31, 2015 to foreign currency, as well as the associated foreign currency derivatives the Company has entered into to manage this exposure, was as follows (in millions of U.S. dollars):



	euro			GBP			CAD			SGD			NZD			Other			Total ⁽¹⁾
Total assets	$	3,038		$	1,828		$	883		$	155		$	97		$	855		$	6,856
Total liabilities	(3,560		)	(1,274		)	(409		)	(22		)	(202		)	(1,504		)	(6,971		)
Total gross foreign currency exposure	(522		)	554			474			133			(105		)	(649		)	(115		)
Total derivative amount	116			(536		)	(22		)	(18		)	117			778			435
Net foreign currency exposure	$	(406	)	$	18		$	452		$	115		$	12		$	129		$	320


(1)	As the U.S. dollar is the Company’s reporting currency, there is no currency risk attached to the U.S. dollar and it is excluded from this table. The U.S. dollar accounted for the difference between the Company’s total foreign currency exposure in this table and the total assets and total liabilities in the Company’s Condensed Consolidated Balance Sheet at March 31, 2015.

The above numbers include the Company’s investment in certain of its subsidiaries and branches, whose functional currencies are the euro or Canadian dollar, and the foreign exchange forward contracts that the Company entered into during the three months ended March 31, 2015 to hedge a portion of its translation exposure in light of the significant volatility in foreign exchange markets.

At March 31, 2015, assuming all other variables remain constant and disregarding any tax effects, a change in the U.S. dollar of 10% or 20% relative to all of the other currencies held by the Company simultaneously would result in a change in the Company’s net foreign currency exposure of $32 million and $64 million, respectively, inclusive of the effect of foreign exchange forward contracts and other derivative financial instruments.

Counterparty Credit Risk

The Company has exposure to credit risk primarily as a holder of fixed maturity securities. The Company controls this exposure by emphasizing investment grade credit quality in the fixed maturity securities it purchases. At March 31, 2015, approximately 74% the Company’s fixed maturity and short-term investments (including funds holding fixed maturity securities and excluding the funds held – directly managed account) were rated A- or better and 9% were rated below investment grade or not rated. The Company believes this high quality concentration reduces its exposure to credit risk on fixed maturity investments to an acceptable level.

At March 31, 2015, the Company was not exposed to any significant credit concentration risk on its investments, excluding securities issued by the U.S. government which are rated AA+. The single largest non-U.S. sovereign government issuer accounted for less than 11% of the Company’s total non-U.S. sovereign government, supranational and government related category (excluding the funds held – directly managed account) and less than 2% of total investments and cash (excluding the funds held – directly managed account) at March 31, 2015. In addition, the single largest corporate issuer and the top 10 corporate issuers accounted for less than 3% and 17% of the Company’s total corporate fixed maturity securities (excluding the funds held – directly managed account), respectively, at March 31, 2015. Within the segregated investment portfolio underlying the funds held – directly managed account, the single largest corporate issuer and the top 10 corporate issuers accounted for less than 7% and 42% of total corporate fixed maturity securities underlying the funds held – directly managed account at March 31, 2015, respectively.

The Company keeps cash and cash equivalents in several banks and ensures that there are no significant concentrations at any point in time, in any one bank.

To a lesser extent, the Company is also exposed to the following credit risks:


•	as a party to foreign exchange forward contracts and other derivative contracts;


•	in its underwriting operations, most notably in the credit/surety line and for alternative risk products;


•	the credit risk of its cedants in the event of their insolvency or their failure to honor the value of the funds held balances due to the Company;


•	the credit risk of Colisée Re in the event of insolvency or Colisée Re’s failure to honor the value of the funds held balances for any other reason;


•	the credit risk of AXA or its affiliates in the event of their insolvency or their failure to honor their obligations under the Acquisition Agreements (see Business—Reserves—Reserve Agreement in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014);


•	as it relates to its business written through brokers if any of the Company’s brokers are unable to fulfill their contractual obligations with respect to payments to the Company;


•	as it relates to its reinsurance balances receivable and reinsurance recoverable on paid and unpaid losses; and


•	under its retrocessional reinsurance contracts.

The concentrations of the Company’s counterparty credit risk exposures have not changed materially at March 31, 2015, compared to December 31, 2014. See Counterparty Credit Risk in Item 7A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for additional discussion of credit risks.

Equity Price Risk

The Company invests a portion of its capital funds in equity securities (fair market value of $1,062 million, excluding funds holding fixed income securities of $258 million) at March 31, 2015. These equity investments are exposed to equity price risk, defined as the potential for loss in market value due to a decline in equity prices. The Company believes that the effects of diversification and the relatively small size of its investments in equities relative to total invested assets mitigate its exposure to equity price risk. The Company estimates that its equity investment portfolio has a beta versus the S&P 500 Index of approximately 0.92 on average. Portfolio beta measures the response of a portfolio’s performance relative to a market return, where a beta of 1 would be an equivalent return to the index. Given the estimated beta for the Company’s equity portfolio, a 10% and 20% movement in the S&P 500 Index would result in a change in the fair value of the Company’s equity portfolio, total invested assets and shareholders’ equity attributable to PartnerRe Ltd. at March 31, 2015 as follows (in millions of U.S. dollars):



	20% Decrease		% Change		10% Decrease		% Change		March 31, 2015		10% Increase		% Change		20% Increase		% Change
Equities ⁽¹⁾	$	866	(19	)%	$	964	(9	)%	$	1,062	$	1,160	9	%	$	1,258	18	%
Total invested assets ⁽²⁾	16,900		(1	)	16,998		(1	)	17,096		17,194		1		17,292		1
Shareholders’ equity attributable to PartnerRe Ltd.	7,001		(3	)	7,099		(1	)	7,197		7,295		1		7,393		3


(1)	Excludes funds holding fixed income securities of $258 million.


(2)	Includes total investments, cash and cash equivalents, the investment portfolio underlying the funds held – directly managed account and accrued interest.

This change does not take into account any potential mitigating impact from the fixed maturity securities or taxes.

There was no material change in the absolute or percentage impact of an immediate change of 10% in the S&P 500 Index on the Company’s equity portfolio, total invested assets and shareholders’ equity attributable to PartnerRe Ltd. at March 31, 2015 compared to December 31, 2014.



ITEM 4.	CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of Management, including the Chief Executive Officer and Chief Financial Officer, as of March 31, 2015, of the effectiveness of the design and operation of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2015, the disclosure controls and procedures are effective such that information required to be disclosed by the Company in reports that it files or submits pursuant to the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and is accumulated and communicated to Management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.

There have been no changes in the Company’s internal control over financial reporting identified in connection with such evaluation that occurred during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II—OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS



ITEM 1A.	RISK FACTORS

Cautionary Note Concerning Forward-Looking Statements

Certain statements contained in this document, including Management’s Discussion and Analysis, may be considered forward-looking statements as defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements are based on the Company’s assumptions and expectations concerning future events and financial performance of the Company and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements, including our expectations regarding the restructuring of our business support operations and the related expected savings, are subject to significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. The Company’s forward-looking statements could be affected by numerous foreseeable and unforeseeable events and developments such as exposure to catastrophe, or other large property and casualty losses, adequacy of reserves, risks associated with implementing business strategies and integrating new acquisitions, levels and pricing of new and renewal business achieved, credit, interest, currency and other risks associated with the Company’s investment portfolio, changes in accounting policies, and other factors identified in the Company’s filings with the Securities and Exchange Commission.

The words believe, anticipate, estimate, project, plan, expect, intend, hope, forecast, evaluate, will likely result or will continue or words of similar impact generally involve forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

See Risk Factors in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a complete review of important risk factors.



ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by the Company during the three months ended March 31, 2015 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.



	Issuer Purchases of Equity Securities
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of a publicly announced program ⁽¹⁾⁽²⁾	Maximum number of shares that may yet be purchased under the program ⁽¹⁾
01/01/2015-01/31/2015	525,000	$	112.89	525,000	2,853,675
02/01/2015-02/28/2015	—	—		—	2,853,675
03/01/2015-03/31/2015	—	—		—	2,853,675
Total	525,000	$	112.89	525,000

(1)

On September 4, 2014, the Company’s Board of Directors approved and announced a new share repurchase authorization up to a total of 5 million common shares. Unless terminated earlier by resolution of the Company’s Board of Directors, the program will expire when the Company has repurchased all shares authorized for repurchase thereunder. Under the terms of the Amalgamation Agreement, the Company suspended its share repurchase program until completion of the Amalgamation (see Business in Item 1 of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2014).


(2)	At March 31, 2015, approximately 39.6 million common shares were held in treasury and available for reissuance.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5.	OTHER INFORMATION

None.



ITEM 6.	EXHIBITS

Exhibits—Included on page 79.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		PartnerRe Ltd. (Registrant)

		By:	/S/ DAVID ZWIENER
		Name:	David Zwiener
		Title:	President and Chief Executive Officer and Director (Principal Executive Officer)

Date:	May 4, 2015

		By:	/S/ WILLIAM BABCOCK
		Name:	William Babcock
		Title:	Executive Vice President & Chief Financial Officer (Principal Financial Officer)
Date:	May 4, 2015

EXHIBIT INDEX



Exhibit Number		Exhibit
10.1		Employment Agreement between PartnerRe Ltd. and David Zwiener, effective as of January 25, 2015.
10.2		Separation Agreement between PartnerRe Ltd. and Constantinos Miranthis, effective as of January 25, 2015.
10.3		PartnerRe Ltd. CEO Restricted Share Unit Award Agreement, effective as of January 26, 2015, between PartnerRe Ltd. and David Zwiener, and Notice of Restricted Share Units.
10.4		PartnerRe Ltd. Non-Employee Director Restricted Share Unit Award Agreement, effective as of January 26, 2015, between PartnerRe Ltd. and Roberto Mendoza, and Notice of Restricted Share Units.
10.5		PartnerRe Ltd. Non-Employee Director Restricted Share Unit Award Agreement, effective as of January 26, 2015, between PartnerRe Ltd. and Jean-Paul Montupet, and Notice of Restricted Share Units.
15		Letter Regarding Unaudited Interim Financial Information.
31.1		Section 302 Certification of David Zwiener.
31.2		Section 302 Certification of William Babcock.
32		Section 906 Certifications.
101.1		The following financial information from PartnerRe Ltd.’s Quarterly Report on Form 10–Q for the quarter ended March 31, 2015 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2015 and December 31, 2014; (ii) Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2015 and 2014; (iii) Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2015 and 2014; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 and (v) Notes to Consolidated Financial Statements.