v2.4.0.8
INVESTMENTS
 12 Months Ended
Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS [Text Block]
a)
Fixed Maturities and Equities
The amortized cost or cost and fair values of our fixed maturities and equities were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized
Cost or
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Non-credit
OTTI
in AOCI(5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
1,421,245

 
$
1,405

 
$
(33,952
)
 
$
1,388,698

 
$
—

 
 
Non-U.S. government
1,208,384

 
17,990

 
(49,992
)
 
1,176,382

 
—

 
 
Corporate debt
3,533,585

 
84,881

 
(10,228
)
 
3,608,238

 
—

 
 
Agency RMBS(1)
2,485,139

 
21,979

 
(58,291
)
 
2,448,827

 
—

 
 
CMBS(2)
790,095

 
11,285

 
(3,966
)
 
797,414

 
—

 
 
Non-Agency RMBS
65,590

 
2,375

 
(398
)
 
67,567

 
(868
)
 
 
ABS(3)
955,274

 
6,871

 
(8,694
)
 
953,451

 
—

 
 
Municipals(4)
1,527,834

 
32,432

 
(14,516
)
 
1,545,750

 
—

 
 
Total fixed maturities
$
11,987,146

 
$
179,218

 
$
(180,037
)
 
$
11,986,327

 
$
(868
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
Common stocks
345,759

 
98,742

 
(6,183
)
 
438,318

 
 
 
 
Exchange-traded funds
106,762

 
32,085

 
—

 
138,847

 
 
 
 
Non-U.S. bond mutual funds
113,698

 
11,124

 
—

 
124,822

 
 
 
 
Total equity securities
$
566,219

 
$
141,951

 
$
(6,183
)
 
$
701,987

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
1,413,520

 
$
9,484

 
$
(119
)
 
$
1,422,885

 
$
—

 
 
Non-U.S. government
1,076,501

 
30,276

 
(2,201
)
 
1,104,576

 
—

 
 
Corporate debt
3,746,616

 
135,658

 
(5,892
)
 
3,876,382

 
—

 
 
Agency RMBS(1)
2,594,180

 
67,398

 
(1,670
)
 
2,659,908

 
—

 
 
CMBS(2)
814,211

 
25,999

 
(126
)
 
840,084

 
—

 
 
Non-Agency RMBS
93,266

 
2,503

 
(570
)
 
95,199

 
(884
)
 
 
ABS(3)
639,614

 
10,774

 
(7,182
)
 
643,206

 
—

 
 
Municipals(4)
1,227,764

 
58,770

 
(725
)
 
1,285,809

 
—

 
 
Total fixed maturities
$
11,605,672

 
$
340,862

 
$
(18,485
)
 
$
11,928,049

 
$
(884
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
Common stocks
398,975

 
51,821

 
(7,398
)
 
443,398

 
 
 
 
Exchange-traded funds
109,434

 
9,727

 
—

 
119,161

 
 
 
 
Non-U.S. bond mutual funds
99,897

 
4,092

 
—

 
103,989

 
 
 
 
Total equity securities
$
608,306

 
$
65,640

 
$
(7,398
)
 
$
666,548

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Residential mortgage-backed securities (RMBS) originated by U.S. agencies.
(2)
Commercial mortgage-backed securities (CMBS).
(3)
Asset-backed securities (ABS) include debt tranched securities collateralized primarily by auto loans, student loans, credit cards, and other asset types. This asset class also includes collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs).
(4)
Municipals include bonds issued by states, municipalities and political subdivisions.
(5)
Represents the non-credit component of the other-than-temporary impairment (OTTI) losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.
 
In the normal course of investing activities, we actively manage allocations to non-controlling tranches of structured securities (variable interests) issued by VIEs. These structured securities include RMBS, CMBS and ABS and are included in the above table. Additionally, within our other investments portfolio, we also invest in limited partnerships (hedge funds) and CLO equity tranched securities, which are all variable interests issued by VIEs (see Note 5(b)). For these variable interests, we do not have the power to direct the activities that are most significant to the economic performance of the VIEs and accordingly we are not the primary beneficiary for any of these VIEs. Our maximum exposure to loss on these interests is limited to the amount of our investment. We have not provided financial or other support with respect to these structured securities other than our original investment.
Contractual Maturities
The contractual maturities of fixed maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
 
 
 
 
 
 
 
 
Amortized
Cost
 
Fair
Value
 
% of Total
Fair Value
 
 
 
 
 
 
 
 
 
 
At December 31, 2013
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
710,079

 
$
717,052

 
5.9
%
 
 
Due after one year through five years
5,030,728

 
5,116,060

 
42.7
%
 
 
Due after five years through ten years
1,852,877

 
1,791,835

 
14.9
%
 
 
Due after ten years
97,364

 
94,121

 
0.8
%
 
 
 
7,691,048

 
7,719,068

 
64.3
%
 
 
Agency RMBS
2,485,139

 
2,448,827

 
20.4
%
 
 
CMBS
790,095

 
797,414

 
6.7
%
 
 
Non-Agency RMBS
65,590

 
67,567

 
0.6
%
 
 
ABS
955,274

 
953,451

 
8.0
%
 
 
Total
$
11,987,146

 
$
11,986,327

 
100.0
%
 
 
 
 
 
 
 
 
 
 
At December 31, 2012
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
651,111

 
$
657,045

 
5.5
%
 
 
Due after one year through five years
4,880,039

 
4,989,151

 
41.8
%
 
 
Due after five years through ten years
1,847,295

 
1,951,569

 
16.4
%
 
 
Due after ten years
85,956

 
91,887

 
0.8
%
 
 
 
7,464,401

 
7,689,652

 
64.5
%
 
 
Agency RMBS
2,594,180

 
2,659,908

 
22.3
%
 
 
CMBS
814,211

 
840,084

 
7.0
%
 
 
Non-Agency RMBS
93,266

 
95,199

 
0.8
%
 
 
ABS
639,614

 
643,206

 
5.4
%
 
 
Total
$
11,605,672

 
$
11,928,049

 
100.0
%
 
 
 
 
 
 
 
 
 

 
Gross Unrealized Losses
The following table summarizes fixed maturities and equities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
12 months or greater
 
Less than 12 months
 
Total
 
 
  
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
—

 
$
—

 
$
982,307

 
$
(33,952
)
 
$
982,307

 
$
(33,952
)
 
 
Non-U.S. government
35,577

 
(3,430
)
 
420,622

 
(46,562
)
 
456,199

 
(49,992
)
 
 
Corporate debt
27,696

 
(802
)
 
606,592

 
(9,426
)
 
634,288

 
(10,228
)
 
 
Agency RMBS
144,468

 
(5,247
)
 
1,478,527

 
(53,044
)
 
1,622,995

 
(58,291
)
 
 
CMBS
13,319

 
(116
)
 
298,863

 
(3,850
)
 
312,182

 
(3,966
)
 
 
Non-Agency RMBS
4,287

 
(315
)
 
5,319

 
(83
)
 
9,606

 
(398
)
 
 
ABS
37,765

 
(2,941
)
 
553,803

 
(5,753
)
 
591,568

 
(8,694
)
 
 
Municipals
8,408

 
(615
)
 
543,474

 
(13,901
)
 
551,882

 
(14,516
)
 
 
Total fixed maturities
$
271,520

 
$
(13,466
)
 
$
4,889,507

 
$
(166,571
)
 
$
5,161,027

 
$
(180,037
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
$
3,499

 
$
(398
)
 
$
48,828

 
$
(5,785
)
 
$
52,327

 
$
(6,183
)
 
 
Total equity securities
$
3,499

 
$
(398
)
 
$
48,828

 
$
(5,785
)
 
$
52,327

 
$
(6,183
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
—

 
$
—

 
$
119,730

 
$
(119
)
 
$
119,730

 
$
(119
)
 
 
Non-U.S. government
44,568

 
(1,453
)
 
153,134

 
(748
)
 
197,702

 
(2,201
)
 
 
Corporate debt
95,511

 
(2,947
)
 
451,651

 
(2,945
)
 
547,162

 
(5,892
)
 
 
Agency RMBS
9,557

 
(148
)
 
521,400

 
(1,522
)
 
530,957

 
(1,670
)
 
 
CMBS
1,749

 
(16
)
 
69,615

 
(110
)
 
71,364

 
(126
)
 
 
Non-Agency RMBS
11,026

 
(537
)
 
115

 
(33
)
 
11,141

 
(570
)
 
 
ABS
99,514

 
(7,034
)
 
39,296

 
(148
)
 
138,810

 
(7,182
)
 
 
Municipals
6,386

 
(270
)
 
77,766

 
(455
)
 
84,152

 
(725
)
 
 
Total fixed maturities
$
268,311

 
$
(12,405
)
 
$
1,432,707

 
$
(6,080
)
 
$
1,701,018

 
$
(18,485
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
$
11,554

 
$
(1,793
)
 
$
95,697

 
$
(5,605
)
 
$
107,251

 
$
(7,398
)
 
 
Total equity securities
$
11,554

 
$
(1,793
)
 
$
95,697

 
$
(5,605
)
 
$
107,251

 
$
(7,398
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Fixed Maturities
At December 31, 2013, 1,127 fixed maturities (2012: 478) were in an unrealized loss position of $180 million (2012: $18 million) of which $2 million (2012: $3 million) was related to securities below investment grade or not rated.
 
At December 31, 2013, 99 securities (2012: 146) had been in a continuous unrealized loss position for 12 months or greater and had a fair value of $272 million (2012: $268 million). Following our credit impairment review, we concluded that these securities as well as the remaining securities in an unrealized loss position in the above table were temporarily depressed at December 31, 2013, and were expected to recover in value as the securities approach maturity. Further, at December 31, 2013, we did not intend to sell these securities in an unrealized loss position and it is more likely than not that we will not be required to sell these securities before the anticipated recovery of their amortized costs.
Equity Securities
At December 31, 2013, 63 securities (2012: 106) were in an unrealized loss position of $6 million (2012: $7 million).
At December 31, 2013, 9 (2012: 17) securities had been in a continuous unrealized loss position for 12 months or greater and had a fair value of $3 million (2012: $12 million). Based on our impairment review process and our ability and intent to hold these securities for a reasonable period of time sufficient for a full recovery, we concluded that the above equities in an unrealized loss position were temporarily impaired at December 31, 2013 and 2012.
 
b)
Other Investments
The following tables provide a breakdown of our investments in hedge funds, direct lending funds and CLO Equities, together with additional information relating to the liquidity of each category:
 
 
 
 
 
 
 
 
 
 
 
  
Fair Value
 
Redemption Frequency
(if currently eligible)
 
Redemption
Notice Period
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2013
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
425,444

 
41
%
 
Monthly, Quarterly, Semi-annually
 
30-60 days
 
 
Multi-strategy funds
285,155

 
27
%
 
Quarterly, Semi-annually
 
60-95 days
 
 
Event-driven funds
190,458

 
18
%
 
Quarterly, Annually
 
45-60 days
 
 
Leveraged bank loan funds
48,753

 
5
%
 
Quarterly
 
65 days
 
 
Direct lending funds
22,134

 
2
%
 
n/a
 
n/a
 
 
CLO - Equities
73,866

 
7
%
 
n/a
 
n/a
 
 
Total other investments
$
1,045,810

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2012
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
302,680

 
36
%
 
Monthly, Quarterly, Semi-annually
 
30-60 days
 
 
Multi-strategy funds
244,075

 
29
%
 
Quarterly, Semi-annually
 
60-95 days
 
 
Event-driven funds
171,479

 
20
%
 
Quarterly, Annually
 
45-95 days
 
 
Leveraged bank loan funds
62,768

 
8
%
 
Quarterly
 
65 days
 
 
Direct lending funds
—

 
—
%
 
n/a
 
n/a
 
 
CLO - Equities
62,435

 
7
%
 
n/a
 
n/a
 
 
Total other investments
$
843,437

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
n/a – not applicable
 
The investment strategies for the above funds are as follows:
 
•
Long/short equity funds: Seek to achieve attractive returns by executing an equity trading strategy involving both long and short investments in publicly-traded equities.
•
Multi-strategy funds: Seek to achieve above-market returns by pursuing multiple investment strategies to diversify risks and reduce volatility. This category includes funds of hedge funds which invest in a large pool of hedge funds across a diversified range of hedge fund strategies.
•
Event-driven funds: Seek to achieve attractive returns by exploiting situations where announced or anticipated events create opportunities.
•
Leveraged bank loan funds: Seek to achieve attractive returns by investing primarily in bank loan collateral that has limited interest rate risk exposure.
•
Direct lending funds: Seek to achieve attractive risk-adjusted returns, including current income generation, by investing in funds which provide financing directly to borrowers.
Two common redemption restrictions which may impact our ability to redeem our hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During 2013 and 2012, neither of these restrictions impacted our redemption requests. At December 31, 2013, $99 million (2012: $38 million), representing 10% (2012: 5%) of our total hedge funds, relate to holdings where we are still within the lockup period. The expiry of this lockup periods range from April, 2014 to April, 2016.
At December 31, 2013, $11 million (2012: $29 million) was invested in hedge funds that are not accepting redemption requests. Of this amount, substantially all relates to a leveraged bank loan fund in a period of planned principal distributions. Based on market conditions and payments made to date, management's current expectation is that the distribution process will be completed in 2014. The remainder primarily relates to funds that entered liquidation or had their assets side pocketed as a result of the global financial crisis which began in late 2008. For these funds, management is currently unable to estimate when those funds will be distributed.
At December 31, 2013, we have $88 million (2012: $40 million) of unfunded commitments within our other investments portfolio relating to our future investments in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from 5-10 years and the General Partners of certain funds have the option to extend the term by up to three years.
During 2013, we made a $60 million commitment as a limited partner in a multi-strategy hedge fund. Once the full amount of committed capital has been called by the General Partner, the assets will not be fully returned until the completion of the fund's investment term which ends in December, 2018. The General Partner then has the option to extend the term by up to three years. At December 31, 2013, $54 million of our commitment remains unfunded and the current fair value of the funds called to date are included in the multi-strategy funds line of the table above.
During 2013, we made a $60 million commitment as a limited partner in a fund that invests primarily in CLO equities ("CLO fund").  We will not be eligible to redeem our investment until December, 2017 but expect to receive interest distributions on a quarterly basis. At December 31, 2013, $27 million of our commitment remains unfunded and the current fair value of the funds called to date are included in the CLO - Equities line of the table above.  The CLO - Equities line also includes direct investment in the equity tranches of CLOs.
c)
Net Investment Income
Net investment income was derived from the following sources:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2013
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Fixed maturities
$
293,609

 
$
304,400

 
$
337,616

 
 
Other investments
128,814

 
87,660

 
31,856

 
 
Equity securities
10,897

 
11,904

 
11,186

 
 
Cash and cash equivalents
6,337

 
4,528

 
5,697

 
 
Short-term investments
1,181

 
596

 
1,592

 
 
Gross investment income
440,838

 
409,088

 
387,947

 
 
Investment expenses
(31,526
)
 
(28,131
)
 
(25,517
)
 
 
Net investment income
$
409,312

 
$
380,957

 
$
362,430

 
 
 
 
 
 
 
 
 

 
d)
Net Realized Investment Gains
The following table provides an analysis of net realized investment gains:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2013
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Gross realized gains
 
 
 
 
 
 
 
Fixed maturities and short-term investments(1)
$
120,932

 
$
242,082

 
$
243,296

 
 
Equities
54,564

 
36,411

 
16,992

 
 
Gross realized gains
175,496

 
278,493

 
260,288

 
 
Gross realized losses
 
 
 
 
 
 
 
Fixed maturities and short-term investments(1)
(87,894
)
 
(101,844
)
 
(108,490
)
 
 
Equities
(10,407
)
 
(23,530
)
 
(14,526
)
 
 
Gross realized losses
(98,301
)
 
(125,374
)
 
(123,016
)
 
 
Net OTTI recognized in earnings
(9,362
)
 
(24,234
)
 
(15,861
)
 
 
Change in fair value of investment derivatives(2)
7,731

 
(9,170
)
 
4,431

 
 
Fair value hedges(2)
—

 
7,754

 
(4,403
)
 
 
Net realized investment gains
$
75,564

 
$
127,469

 
$
121,439

 
 
 
 
 
 
 
 
 
(1)
Includes $37 million of gains in 2012 and $11 million of losses in 2011 relating to previously unrealized foreign exchange currency amounts on the hedged fixed maturity portfolios. The hedged portfolio was sold and all associated foreign exchange contracts were fully settled during 2012 so there is no impact on the 2013 figures.
(2)
Refer to Note 7 – Derivative Instruments
The following table summarizes the OTTI recognized in earnings by asset class:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2013
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Non-U.S. government
$
120

 
$
3,281

 
$
—

 
 
Corporate debt
5,802

 
1,821

 
1,954

 
 
Non-Agency RMBS
57

 
2,016

 
717

 
 
ABS
129

 
795

 
61

 
 
Municipals
639

 
—

 
483

 
 
 
6,747

 
7,913

 
3,215

 
 
Equity Securities
 
 
 
 
 
 
 
Common stocks
2,092

 
7,318

 
12,646

 
 
Exchange-traded funds
523

 
9,003

 
—

 
 
 
2,615

 
16,321

 
12,646

 
 
Total OTTI recognized in earnings
$
9,362

 
$
24,234

 
$
15,861

 
 
 
 
 
 
 
 
 


Fixed Maturities
The following table provides a roll forward of the credit losses (“credit loss table”), before income taxes, for which a portion of the OTTI was recognized in AOCI:
 
 
 
 
 
 
 
Year ended December 31,
2013
 
2012
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,809

 
$
2,061

 
 
Credit impairments recognized on securities not previously impaired
—

 
—

 
 
Additional credit impairments recognized on securities previously impaired
—

 
—

 
 
Change in timing of future cash flows on securities previously impaired
—

 
—

 
 
Intent to sell of securities previously impaired
—

 
—

 
 
Securities sold/redeemed/matured
(215
)
 
(252
)
 
 
Balance at end of period
$
1,594

 
$
1,809

 
 
 
 
 
 
 
Credit losses are calculated based on the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to the impairment. The following provides a summary of the credit loss activities by asset class for the above table as well as the significant inputs and the methodology used to estimate these credit losses.
U.S. Government, U.S. Agency and U.S. Agency RMBS:
Unrealized losses on securities issued or backed (either explicitly or implicitly) by the U.S. government are generally not analyzed for OTTI. We have concluded that the possibility of any credit losses on these securities is highly unlikely due to the explicit U.S. government guarantee on certain securities (e.g. GNMA issuances) and, on others, the implicit guarantee that has been validated by past actions (e.g. U.S. government bailout of FNMA and FHLMC during the 2008 credit crisis). Although not generally analyzed for credit losses, the securities are still evaluated for intention to sell at a loss.

Non-U.S. Government:
Non-U.S. government obligations are evaluated for credit loss primarily through qualitative assessments of the likelihood of credit loss using information such as duration and severity of unrealized losses, as well as credit ratings and price volatility. At December 31, 2013, our holdings in sovereign debt, including $161 million (2012: $217 million) relating to the eurozone countries, were substantially all investment-grade securities. The gross unrealized losses of $50 million at December 31, 2013 were mainly due to pricing and foreign exchange losses on emerging market debt. Based on our analysis, we do not anticipate any credit losses on our non-U.S. government fixed maturities at December 31, 2013.
Corporate Debt:
To estimate credit losses for corporate debt securities, our projected cash flows are primarily driven by our assumptions regarding the probability of default and the severity associated with those defaults. Our default and loss severity rates are based on credit rating, credit analysis, industry analyst reports and forecasts, Moody’s historical default data and any other data relevant to the recoverability of the security. In 2013, the OTTI charges on corporate debt securities were related to our intent to sell, as well as unrealized foreign exchange losses on certain securities where forecasted recovery was uncertain.
 
CMBS:
Our investments in CMBS are diversified and highly rated, with a weighted average estimated subordination percentage of 30% at December 31, 2013 (2012: 30%). Based on discounted cash flows at December 31, 2013, the current level of subordination is sufficient to cover the estimated loan losses on the underlying collateral of the CMBS.
Non-agency RMBS:
For non-agency RMBS, our projected cash flows incorporated underlying data from widely accepted third-party data sources along with certain internal assumptions and judgments regarding the future performance of the security. These assumptions included the following: default, delinquency, loss severity and prepayment rates. The assumptions used to calculate the credit losses in 2013 have not changed significantly since December 31, 2012. At December 31, 2013, the fair value of our non-agency RMBS was $68 million (2012: $95 million), consisting primarily of $41 million (2012: $65 million) of Prime and $19 million (2012: $22 million) of Alt-A MBS. We have concluded there are no credit losses anticipated for any of our non-agency RMBS at December 31, 2013, other than those already recorded.
ABS:
A significant portion of the unrealized losses on ABS at December 31, 2013, and 2012, were related to CLO debt tranched securities (“CLO Debt”) purchased prior to the credit crisis with a current carrying value of $30 million (2012: $53 million). We used the following significant inputs to estimate the credit loss for these securities:
 
 
 
 
 
 
 
At December 31,
2013
 
2012
 
 
 
 
 
 
 
 
Default rate
4.0%
 
4.0%
 
 
Loss severity rate
53.5%
 
53.5%
 
 
Collateral spreads
2.7% - 3.5%
 
2.5% - 3.7%
 
 
 
 
 
 
 
Our assumptions on default and loss severity rates are established based on an assessment of actual experience to date for each CLO Debt and review of recent credit rating agencies’ default and loss severity forecasts. Based on the underlying collateral values and our projected cash flows at December 31, 2013, we do not expect any credit losses on our CLO Debt as the current unrealized loss is reflective of the securities' low coupon relative to the higher market yields available for similar securities.
Equity Securities
The OTTI losses on common stocks in 2013 and 2012 are primarily due to the severity and duration of their unrealized loss positions, for which we concluded the forecasted recovery period was uncertain. The recognition of such losses does not necessarily indicate that sales will occur or that sales are imminent or planned. During 2013, we recorded $1 million (2012: $9 million) of OTTI losses on our exchange-traded funds as we no longer had the intent to hold these underwater securities through full recovery of cost. At December 31, 2013, the fair value of our equities was $702 million (2012: $667 million), which included $6 million (2012: $7 million) of gross unrealized losses.
 
e)
Restricted Investments
In order to support our obligations in regulatory jurisdictions where we operate as a non-admitted carrier, we provide collateral in the form of assets held in trust and, to a lesser extent, letters of credit. Refer to Note 10(b) for further information on our collateral requirements upon issuance of certain letters of credit. The fair value of our restricted investments primarily relates to these items, as noted in the table below. Our restricted investments primarily consist of high-quality fixed maturity and short-term investment securities.
 
 
 
 
 
 
 
 
At December 31,
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Collateral in Trust for inter-company agreements
 
$
2,261,081

 
$
2,134,931

 
 
Collateral for secured letter of credit facility
 
777,828

 
470,062

 
 
Collateral in Trust for third party agreements
 
276,839

 
245,539

 
 
Securities on deposit with regulatory authorities
 
58,327

 
59,456

 
 
Total restricted investments
 
$
3,374,075

 
$
2,909,988

 
 
 
 
 
 
 
 

f)
Reverse Repurchase Agreements

At December 31, 2013, we held $34 million (2012: $39 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 cash and cash equivalents on our consolidated balance sheet. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of 102% of the loan principal. Upon maturity, we receive principal and interest income.