INVESTMENTS

Fixed Maturity Investments Trading

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




	September 30, 2014		December 31, 2013
U.S. treasuries	$	1,636,326	$	1,352,413
Agencies	120,025		186,050
Non-U.S. government (Sovereign debt)	282,326		334,580
Non-U.S. government-backed corporate	141,159		237,479
Corporate	1,572,168		1,803,415
Agency mortgage-backed	320,584		336,661
Non-agency mortgage-backed	252,241		243,795
Commercial mortgage-backed	397,685		303,214
Asset-backed	28,252		11,429
Total fixed maturity investments trading	$	4,750,766	$	4,809,036

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
September 30, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Agency mortgage-backed	$	4,174	$	380	$	—		$	4,554	$	—
Non-agency mortgage-backed	9,999		2,218		(3		)	12,214		(677		)
Commercial mortgage-backed	7,294		656		—			7,950		—
Asset-backed	3,197		154		—			3,351		—
Total fixed maturity investments available for sale	$	24,664	$	3,408	$	(3	)	$	28,069	$	(677	)




			Included in Accumulated Other Comprehensive Income
December 31, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Agency mortgage-backed	$	4,880	$	378	$	(11	)	$	5,247	$	—
Non-agency mortgage-backed	11,735		2,414		(6		)	14,143		(742		)
Commercial mortgage-backed	10,052		970		—			11,022		—
Asset-backed	3,606		223		—			3,829		—
Total fixed maturity investments available for sale	$	30,273	$	3,985	$	(17	)	$	34,241	$	(742	)


(1)	Represents the non-credit component of other-than-temporary impairments recognized in accumulated other comprehensive income 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
September 30, 2014	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	97,830	$	97,868	$	—	$	—	$	97,830	$	97,868
Due after one through five years	2,951,631		2,949,329		—		—		2,951,631		2,949,329
Due after five through ten years	595,874		593,633		—		—		595,874		593,633
Due after ten years	108,080		111,174		—		—		108,080		111,174
Mortgage-backed	953,480		970,510		21,467		24,718		974,947		995,228
Asset-backed	28,166		28,252		3,197		3,351		31,363		31,603
Total	$	4,735,061	$	4,750,766	$	24,664	$	28,069	$	4,759,725	$	4,778,835

Equity Investments Trading

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




	September 30, 2014		December 31, 2013
Financials	$	199,798	$	152,905
Communications and technology	32,377		4,300
Industrial, utilities and energy	30,347		25,350
Consumer	18,796		44,115
Healthcare	16,396		15,340
Basic materials	4,000		12,766
Total	$	301,714	$	254,776

Pledged Investments

At September 30, 2014, $2,115.6 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 syndicated letter of credit facility and bilateral letter of credit facility (December 31, 2013 - $2,081.1 million). Of this amount, $685.8 million is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities (December 31, 2013 - $652.8 million).

Reverse Repurchase Agreements

At September 30, 2014, the Company held $18.6 million (December 31, 2013 - $37.3 million) of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of short term investments on the Company’s consolidated balance sheets. The required collateral for these loans typically include high-quality, readily marketable instruments at a minimum rate of 102% of the loan principal. Upon maturity, the Company receives principal and interest income.

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

The components of net investment income are as follows:




	Three months ended						Nine months ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Fixed maturity investments	$	24,519		$	24,423		$	74,751		$	71,148
Short term investments	251			563			727			1,318
Equity investments	736			706			2,311			1,050
Other investments
Hedge funds and private equity investments	(3,320		)	14,179			17,337			31,296
Other	5,547			22,735			11,558			32,874
Cash and cash equivalents	116			47			300			108
	27,849			62,653			106,984			137,794
Investment expenses	(2,908		)	(2,722		)	(8,554		)	(8,498		)
Net investment income	$	24,941		$	59,931		$	98,430		$	129,296

The following table provides an analysis of the components of net realized and unrealized gains on investments.




	Three months ended						Nine months ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Gross realized gains	$	7,962		$	8,813		$	33,595		$	60,437
Gross realized losses	(2,720		)	(22,241		)	(10,871		)	(41,396		)
Net realized gains on fixed maturity investments	5,242			(13,428		)	22,724			19,041
Net unrealized (losses) gains on fixed maturity investments trading	(36,600		)	33,405			21,200			(85,338		)
Net realized and unrealized (losses) gains on investments-related derivatives	(1,868		)	3,557			(19,651		)	24,488
Net realized gains on equity investments trading	3,523			560			8,578			18,195
Net unrealized (losses) gains on equity investments trading	(1,394		)	4,378			(21,893		)	(3,174		)
Net realized and unrealized (losses) gains on investments	$	(31,097	)	$	28,472		$	10,958		$	(26,788	)

The following tables provide an analysis of the components of other comprehensive income and reclassifications out of accumulated other comprehensive income.




	Three months ended September 30, 2014
	Investments in other ventures		Fixed maturity investments available for sale			Total
Beginning balance	$	211	$	3,707		$	3,918
Other comprehensive income (loss) before reclassifications	213		(302		)	(89		)
Ending balance	$	424	$	3,405		$	3,829




	Nine months ended September 30, 2014
	Investments in other ventures		Fixed maturity investments available for sale			Total
Beginning balance	$	163	$	3,968		$	4,131
Other comprehensive income (loss) before reclassifications	261		(563		)	(302		)
Ending balance	$	424	$	3,405		$	3,829




	Three months ended September 30, 2013
	Investments in other ventures			Fixed maturity investments available for sale			Total
Beginning balance	$	218		$	4,691		$	4,909
Other comprehensive (loss) income before reclassifications	(91		)	116			25
Amounts reclassified from accumulated other comprehensive income by statement of operations line item:
Realized gains reclassified from accumulated other comprehensive income to net realized and unrealized gains (losses) on investments	—			(368		)	(368		)
Net current-period other comprehensive loss	(91		)	(252		)	(343		)
Ending balance	$	127		$	4,439		$	4,566




	Nine months ended September 30, 2013
	Investments in other ventures			Fixed maturity investments available for sale			Total
Beginning balance	$	1,625		$	11,997		$	13,622
Other comprehensive loss before reclassifications	(1,498		)	(10		)	(1,508		)
Amounts reclassified from accumulated other comprehensive income by statement of operations line item:
Realized gains reclassified from accumulated other comprehensive income to net realized and unrealized gains (losses) on investments	—			(7,548		)	(7,548		)
Net current-period other comprehensive loss	(1,498		)	(7,558		)	(9,056		)
Ending balance	$	127		$	4,439		$	4,566

The following tables provide 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 September 30, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Non-agency mortgage-backed	$	—	$	—	$	73	$	(3	)	$	73	$	(3	)
Total	$	—	$	—	$	73	$	(3	)	$	73	$	(3	)




	Less than 12 Months					12 Months or Greater					Total
December 31, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Agency mortgage-backed	$	726	$	(11	)	$	—	$	—		$	726	$	(11	)
Non-agency mortgage-backed	—		—			89		(6		)	89		(6		)
Commercial mortgage-backed	39		—			—		—			39		—
Total	$	765	$	(11	)	$	89	$	(6	)	$	854	$	(17	)

At September 30, 2014, the Company held two fixed maturity investments available for sale securities that were in an unrealized loss position (December 31, 2013 - four), including two fixed maturity investments available for sale securities that were in an unrealized loss position for twelve months or greater (December 31, 2013 - two). 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 nine months ended September 30, 2014 and 2013, 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 is less than the amortized cost basis of the security.

For the nine months ended September 30, 2014, the Company recognized $Nil of other-than-temporary impairments which were recognized in earnings and $Nil related to other factors which were recognized in other comprehensive income (2013 – $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:




	Three months ended						Nine months ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Beginning balance	$	529		$	791		$	561		$	838
Reductions:
Securities sold during the period	(15		)	(38		)	(47		)	(85		)
Ending balance	$	514		$	753		$	514		$	753