INVESTMENTS

Fixed Maturity Investments Trading

The following table summarizes the fair value of fixed maturity investments trading:




	March 31, 2012		December 31, 2011
U.S. treasuries	$	1,309,243	$	885,152
Agencies	343,575		158,561
Non-U.S. government (Sovereign debt)	122,875		216,916
FDIC guaranteed corporate	103,554		423,630
Non-U.S. government-backed corporate	500,835		640,757
Corporate	1,131,255		1,187,437
Agency mortgage-backed	307,134		428,042
Non-agency mortgage-backed	85,095		82,096
Commercial mortgage-backed	267,250		255,885
Asset-backed	6,011		12,989
Total fixed maturity investments trading	$	4,176,827	$	4,291,465

Fixed Maturity Investments Available For Sale

The following table summarizes the amortized cost, fair value and related unrealized gains and losses and non-credit other-than-temporary impairments of fixed maturity investments available for sale:




			Included in Accumulated Other Comprehensive Income
At March 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Non-U.S. government (Sovereign debt)	$	7,448	$	578	$	(2	)	$	8,024	$	—
Non-U.S. government-backed corporate	310		15		—			325		—
Corporate	13,923		1,276		(243		)	14,956		(165		)
Agency mortgage-backed	11,135		946		—			12,081		—
Non-agency mortgage-backed	20,319		2,665		(32		)	22,952		(1,784		)
Commercial mortgage-backed	55,346		6,747		—			62,093		—
Asset-backed	4,650		211		—			4,861		—
Total fixed maturity investments available for sale	$	113,131	$	12,438	$	(277	)	$	125,292	$	(1,949	)




			Included in Accumulated Other Comprehensive Income
At December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Non-U.S. government (Sovereign debt)	$	10,087	$	921	$	(12	)	$	10,996	$	—
Non-U.S. government-backed corporate	312		13		—			325		—
Corporate	18,449		1,535		(517		)	19,467		(176		)
Agency mortgage-backed	12,636		1,071		—			13,707		—
Non-agency mortgage-backed	21,097		1,862		(284		)	22,675		(1,837		)
Commercial mortgage-backed	63,269		6,576		(1		)	69,844		—
Asset-backed	4,819		219		—			5,038		—
Total fixed maturity investments available for sale	$	130,669	$	12,197	$	(814	)	$	142,052	$	(2,013	)

(1)

Represents the non-credit component of other-than-temporary impairments recognized in accumulated other comprehensive income since the adoption of guidance related to the recognition and presentation of other-than-temporary impairments under FASB ASC Topic Financial Instruments – Debt and Equity Securities, during the second quarter of 2009, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.

Contractual maturities of fixed maturity investments are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.




	Trading				Available for Sale				Total Fixed Maturity Investments
At March 31, 2012	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	385,039	$	385,831	$	437	$	428	$	385,476	$	386,259
Due after one through five years	2,348,627		2,357,996		8,861		9,348		2,357,488		2,367,344
Due after five through ten years	619,557		636,756		8,658		9,335		628,215		646,091
Due after ten years	120,767		130,754		3,725		4,194		124,492		134,948
Mortgage-backed	649,942		659,479		86,800		97,126		736,742		756,605
Asset-backed	6,010		6,011		4,650		4,861		10,660		10,872
Total	$	4,129,942	$	4,176,827	$	113,131	$	125,292	$	4,243,073	$	4,302,119

Equity Investments Trading

The following table summarizes the fair value of equity investments trading:




	March 31, 2012		December 31, 2011
Financial institution securities	$	53,080	$	50,560

Pledged Investments

At March 31, 2012, $1,252.1 million of cash and investments at fair value were on deposit with, or in trust accounts for the benefit of various counterparties, including with respect to the Company's principal letter of credit facility. Of this amount, $483.0 million is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities.

Net Investment Income, Net Realized and Unrealized Gains (Losses) on Investments and Net Other-Than-Temporary Impairments

The components of net investment income are as follows:




Three months ended March 31,	2012			2011
Fixed maturity investments	$	26,333		$	27,913
Short term investments	500			595
Equity investments	170			14
Other investments
Hedge funds and private equity investments	28,473			23,507
Other	14,170			10,827
Cash and cash equivalents	26			41
	69,672			62,897
Investment expenses	(2,701		)	(2,616		)
Net investment income	$	66,971		$	60,281

Net realized and unrealized gains (losses) on investments and net other-than-temporary impairments are as follows:




Three months ended March 31,	2012			2011
Gross realized gains	$	36,286		$	10,562
Gross realized losses	(6,950		)	(12,617		)
Net realized gains (losses) on fixed maturity investments	29,336			(2,055		)
Net unrealized gains (losses) on fixed maturity investments trading	14,257			(3,758		)
Net unrealized gains on equity investments trading	2,520			599
Net realized and unrealized gains (losses) on investments	$	46,113		$	(5,214	)
Total other-than-temporary impairments	$	(161	)	$	—
Portion recognized in other comprehensive income, before taxes	27			—
Net other-than-temporary impairments	$	(134	)	$	—

The following table provides an analysis of the length of time the Company’s fixed maturity investments available for sale in an unrealized loss have been in a continual unrealized loss position.




	Less than 12 Months					12 Months or Greater					Total
At March 31, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Non-U.S. government (Sovereign debt)	$	240	$	(2	)	$	—	$	—		$	240	$	(2	)
Corporate	1,838		(101		)	513		(142		)	2,351		(243		)
Non-agency mortgage-backed	555		(6		)	813		(26		)	1,368		(32		)
Total	$	2,633	$	(109	)	$	1,326	$	(168	)	$	3,959	$	(277	)




	Less than 12 Months					12 Months or Greater					Total
At December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Non-U.S. government (Sovereign debt)	$	915	$	(9	)	$	42	$	(3	)	$	957	$	(12	)
Corporate	3,935		(385		)	412		(132		)	4,347		(517		)
Non-agency mortgage-backed	8,024		(224		)	798		(60		)	8,822		(284		)
Commercial mortgage-backed	—		—			455		(1		)	455		(1		)
Total	$	12,874	$	(618	)	$	1,707	$	(196	)	$	14,581	$	(814	)

At March 31, 2012, the Company held 15 fixed maturity investments available for sale securities that were in an unrealized loss position for twelve months or greater. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before the anticipated recovery of the remaining amortized cost basis. The Company performed reviews of its fixed maturity investments available for sale for the three months ended March 31, 2012 and 2011, respectively, in order to determine whether declines in the fair value below the amortized cost basis were considered other-than-temporary in accordance with the applicable guidance, as discussed below.

Other-Than-Temporary Impairment Process

The Company's process for assessing whether declines in the fair value of its fixed maturity investments available for sale represent impairments that are other-than-temporary includes reviewing each fixed maturity investment available for sale that is impaired and determining: (i) if the Company has the intent to sell the debt security or (ii) if it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery; and (iii) whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the security are less than the amortized cost basis of the security.

In assessing the Company’s intent to sell securities, the Company’s procedures may include actions such as discussing planned sales with its third party investment managers, reviewing sales that have occurred shortly after the balance sheet date, and consideration of other qualitative factors that may be indicative of the Company’s intent to sell or hold the relevant securities. For the three months ended March 31, 2012, the Company recognized $Nil other-than-temporary impairments due to the Company’s intent to sell these securities as of March 31, 2012 (2011 – $Nil).

In assessing whether it is more likely than not that the Company will be required to sell a security before its anticipated recovery, the Company considers various factors including its future cash flow forecasts and requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term investments, fixed maturity investments trading and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the three months ended March 31, 2012, the Company recognized $Nil of other-than-temporary impairments due to required sales (2011 – $Nil).

In evaluating credit losses, the Company considers a variety of factors in the assessment of a security including: (i) the time period during which there has been a significant decline below cost; (ii) the extent of the decline below cost and par; (iii) the potential for the security to recover in value; (iv) an analysis of the financial condition of the issuer; (v) the rating of the issuer; (vi) the implied rating of the issuer based on an analysis of option adjusted spreads; (vii) the absolute level of the option adjusted spread for the issuer; and (viii) an analysis of the collateral structure and credit support of the security, if applicable.

Once the Company determines that it is possible that a credit loss may exist for a security, the Company performs a detailed review of the cash flows expected to be collected from the issuer. The Company estimates expected cash flows by applying estimated default probabilities and recovery rates to the contractual cash flows of the issuer, with such default and recovery rates reflecting long-term historical averages adjusted to reflect current credit, economic and market conditions, giving due consideration to collateral and credit support, if applicable, and discounting the expected cash flows at the purchase yield on the security. In instances in which a determination is made that an impairment exists but the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, the impairment is separated into: (i) the amount of the total other-than-temporary impairment related to the credit loss; and (ii) the amount of the total other-than-temporary impairment related to all other factors. The amount of the other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the other-than-temporary impairment related to all other factors is recognized in other comprehensive income. For the three months ended March 31, 2012, the Company recognized $0.1 million of other-than-temporary impairments which were recognized in earnings and $27 thousand related to other factors which were recognized in other comprehensive income (2011 – $Nil and $Nil, respectively).

The following table provides a rollforward of the amount of other-than-temporary impairments related to credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income:




	2012			2011
Balance – January 1	$	564		$	3,098
Additions:
Amount related to credit loss for which an other-than-temporary impairment was not previously recognized	—			—
Amount related to credit loss for which an other-than-temporary impairment was previously recognized	9			—
Reductions:
Securities sold during the period	(53		)	(223		)
Securities for which the amount previously recognized in other comprehensive income was recognized in earnings, because the Company intends to sell the security or is more likely than not the Company will be required to sell the security	—			—
Increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—
Balance – March 31	$	520		$	2,875