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 June 30, 2016
Fixed maturities
U.S. government and agency	$	1,484,802	$	32,471	$	(1,895	)	$	1,515,378	$	—
Non-U.S. government	691,649		5,178		(54,012		)	642,815		—
Corporate debt	4,366,370		83,692		(47,771		)	4,402,291		—
Agency RMBS⁽¹⁾	2,328,647		55,587		(652		)	2,383,582		—
CMBS⁽²⁾	1,060,897		22,727		(2,589		)	1,081,035		—
Non-Agency RMBS	85,450		1,594		(1,686		)	85,358		(831		)
ABS⁽³⁾	1,307,495		2,590		(12,195		)	1,297,890		—
Municipals⁽⁴⁾	149,983		5,371		(487		)	154,867		—
Total fixed maturities	$	11,475,293	$	209,210	$	(121,287	)	$	11,563,216	$	(831	)

Equity securities
Common stocks	$	379	$	26	$	(318	)	$	87
Exchange-traded funds	467,032		28,412		(4,125		)	491,319
Bond mutual funds	133,909		1,056		—			134,965
Total equity securities	$	601,320	$	29,494	$	(4,443	)	$	626,371

At December 31, 2015
Fixed maturities
U.S. government and agency	$	1,673,617	$	1,545	$	(23,213	)	$	1,651,949	$	—
Non-U.S. government	809,025		2,312		(72,332		)	739,005		—
Corporate debt	4,442,315		16,740		(96,286		)	4,362,769		—
Agency RMBS⁽¹⁾	2,236,138		22,773		(9,675		)	2,249,236		—
CMBS⁽²⁾	1,088,595		3,885		(9,182		)	1,083,298		—
Non-Agency RMBS	99,989		1,992		(973		)	101,008		(875		)
ABS⁽³⁾	1,387,919		952		(17,601		)	1,371,270		—
Municipals⁽⁴⁾	160,041		2,319		(1,146		)	161,214		—
Total fixed maturities	$	11,897,639	$	52,518	$	(230,408	)	$	11,719,749	$	(875	)

Equity securities
Common stocks	$	—	$	—	$	—		$	—
Exchange-traded funds	447,524		31,211		(4,762		)	473,973
Bond mutual funds	128,252		—		(4,227		)	124,025
Total equity securities	$	575,776	$	31,211	$	(8,989	)	$	597,998


(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, direct lending funds, real estate funds and private equity funds) and CLO equity tranched securities, which are all variable interests issued by VIEs (see Note 3(c)). 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 June 30, 2016
Maturity
Due in one year or less	$	328,830	$	320,923	2.9	%
Due after one year through five years	3,778,226		3,773,989		32.6	%
Due after five years through ten years	2,260,438		2,286,068		19.8	%
Due after ten years	325,310		334,371		2.9	%
	6,692,804		6,715,351		58.2	%
Agency RMBS	2,328,647		2,383,582		20.6	%
CMBS	1,060,897		1,081,035		9.3	%
Non-Agency RMBS	85,450		85,358		0.7	%
ABS	1,307,495		1,297,890		11.2	%
Total	$	11,475,293	$	11,563,216	100.0	%

At December 31, 2015
Maturity
Due in one year or less	$	291,368	$	289,571	2.5	%
Due after one year through five years	4,217,515		4,142,802		35.3	%
Due after five years through ten years	2,263,684		2,181,525		18.6	%
Due after ten years	312,431		301,039		2.6	%
	7,084,998		6,914,937		59.0	%
Agency RMBS	2,236,138		2,249,236		19.2	%
CMBS	1,088,595		1,083,298		9.2	%
Non-Agency RMBS	99,989		101,008		0.9	%
ABS	1,387,919		1,371,270		11.7	%
Total	$	11,897,639	$	11,719,749	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 June 30, 2016
Fixed maturities
U.S. government and agency	$	66,551	$	(1,864	)	$	80,664	$	(31	)	$	147,215	$	(1,895	)
Non-U.S. government	127,388		(36,001		)	271,036		(18,011		)	398,424		(54,012		)
Corporate debt	342,184		(28,316		)	673,041		(19,455		)	1,015,225		(47,771		)
Agency RMBS	74,590		(449		)	54,383		(203		)	128,973		(652		)
CMBS	113,021		(1,573		)	230,571		(1,016		)	343,592		(2,589		)
Non-Agency RMBS	10,366		(331		)	11,773		(1,355		)	22,139		(1,686		)
ABS	765,201		(10,568		)	215,552		(1,627		)	980,753		(12,195		)
Municipals	14,954		(479		)	2,402		(8		)	17,356		(487		)
Total fixed maturities	$	1,514,255	$	(79,581	)	$	1,539,422	$	(41,706	)	$	3,053,677	$	(121,287	)

Equity securities
Common stocks	$	—	$	—		$	61	$	(318	)	$	61	$	(318	)
Exchange-traded funds	5,337		(327		)	86,292		(3,798		)	91,629		(4,125		)
Bond mutual funds	—		—			—		—			—		—
Total equity securities	$	5,337	$	(327	)	$	86,353	$	(4,116	)	$	91,690	$	(4,443	)

At December 31, 2015
Fixed maturities
U.S. government and agency	$	84,179	$	(7,622	)	$	1,474,202	$	(15,591	)	$	1,558,381	$	(23,213	)
Non-U.S. government	170,269		(50,841		)	317,693		(21,491		)	487,962		(72,332		)
Corporate debt	340,831		(33,441		)	2,845,375		(62,845		)	3,186,206		(96,286		)
Agency RMBS	64,792		(1,609		)	1,073,566		(8,066		)	1,138,358		(9,675		)
CMBS	75,627		(1,579		)	659,480		(7,603		)	735,107		(9,182		)
Non-Agency RMBS	5,283		(210		)	43,199		(763		)	48,482		(973		)
ABS	562,599		(11,158		)	667,448		(6,443		)	1,230,047		(17,601		)
Municipals	14,214		(310		)	64,104		(836		)	78,318		(1,146		)
Total fixed maturities	$	1,317,794	$	(106,770	)	$	7,145,067	$	(123,638	)	$	8,462,861	$	(230,408	)

Equity securities
Common stocks	$	—	$	—		$	—	$	—		$	—	$	—
Exchange-traded funds	2,331		(313		)	110,972		(4,449		)	113,303		(4,762		)
Bond mutual funds	—		—			124,025		(4,227		)	124,025		(4,227		)
Total equity securities	$	2,331	$	(313	)	$	234,997	$	(8,676	)	$	237,328	$	(8,989	)

Fixed Maturities

At June 30, 2016, 1,115 fixed maturities (2015: 2,314) were in an unrealized loss position of $121 million (2015: $230 million), of which $21 million (2015: $39 million) was related to securities below investment grade or not rated.

At June 30, 2016, 429 (2015: 383) securities had been in a continuous unrealized loss position for 12 months or greater and had a fair value of $1,514 million (2015: $1,318 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 impaired at June 30, 2016, and were expected to recover in value as the securities approach maturity. Further, at June 30, 2016, 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 June 30, 2016, 29 securities (2015: 35) were in an unrealized loss position of $4 million (2015: $9 million).

At June 30, 2016, 11 securities (2015: 1) were in a continuous unrealized loss position for 12 months or greater. 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 June 30, 2016.

b) Mortgage Loans

The following table provides a breakdown of our mortgage loans held-for-investment:



	June 30, 2016				December 31, 2015
	Carrying Value		% of Total		Carrying Value		% of Total

Mortgage Loans held-for-investment:
Commercial	$	327,315	100	%	$	206,277	100	%
	327,315		100	%	206,277		100	%
Valuation allowances	—		—	%	—		—	%
Total Mortgage Loans held-for-investment	$	327,315	100	%	$	206,277	100	%

For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio (which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan, generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio (loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral, generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis.

We have a high quality mortgage portfolio with debt service coverage ratios in excess of 1.3x and loan-to-value ratios of less than 65%; there are no credit losses associated with the commercial mortgage loans that we hold at June 30, 2016.

There are no past due amounts at June 30, 2016.

c) Other Investments

The following table provides a breakdown of our investments in hedge funds, direct lending funds, private equity funds, real estate funds, CLO Equities and other privately held investments, together with additional information relating to the liquidity of each category:



	Fair Value				Redemption Frequency (if currently eligible)	Redemption Notice Period

At June 30, 2016
Long/short equity funds	$	126,579	15	%	Quarterly, Semi-annually, Annually	45-60 days
Multi-strategy funds	314,687		36	%	Quarterly, Semi-annually	60-95 days
Event-driven funds	90,902		11	%	Quarterly, Annually	45-60 days
Leveraged bank loan funds	65		—	%	n/a	n/a
Direct lending funds	120,962		14	%	n/a	n/a
Private equity funds	93,722		11	%	n/a	n/a
Real estate funds	10,851		1	%	n/a	n/a
CLO - Equities	65,883		7	%	n/a	n/a
Other privately held investments	41,755		5	%	n/a	n/a
Total other investments	$	865,406	100	%

At December 31, 2015
Long/short equity funds	$	154,348	19	%	Quarterly, Semi-annually, Annually	45-60 days
Multi-strategy funds	355,073		43	%	Quarterly, Semi-annually	60-95 days
Event-driven funds	147,287		18	%	Quarterly, Annually	45-60 days
Leveraged bank loan funds	65		—	%	n/a	n/a
Direct lending funds	90,120		11	%	n/a	n/a
Private equity funds	—		—	%	n/a	n/a
Real estate funds	4,929		1	%	n/a	n/a
CLO - Equities	64,934		8	%	n/a	n/a
Other privately held investments	—		—	%	n/a	n/a
Total other investments	$	816,756	100	%

n/a - not applicable

The investment strategies for the above funds are as follows:


•	Long/short equity funds: Seek to achieve attractive returns primarily 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.


•	Real estate funds: Seek to achieve attractive risk-adjusted returns by making and managing investments in real estate and real estate securities and businesses.


•	Private equity funds: Seek to achieve attractive risk-adjusted returns by investing in private transactions over the course of several years.

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 2016 and 2015, neither of these restrictions impacted our redemption requests. At June 30, 2016, $82 million (2015: $66 million), representing 15% (2015: 10%) of our total hedge funds, relate to holdings where we are still within the lockup period. The expiration of these lockup periods range from September 2016 to March 2019.

At June 30, 2016, we have $192 million (2015: $222 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.

At June 30, 2016, we have $12 million (2015: $12 million) of unfunded commitments 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 March, 2019. The General Partner then has the option to extend the term by up to three years.

At June 30, 2016, we have $90 million (2015: $95 million) of unfunded commitments as a limited partner in a fund which invests in real estate and real estate securities and businesses. The fund is subject to a three year commitment period and a total fund life of eight years during which time we are not eligible to redeem our investment.

During 2016, we made a $135 million commitment as a limited partner in a private equity fund. At June 30, 2016, $41 million of our commitment remains unfunded and the current fair value of the funds called to date are included in the private equity funds line of the table above. The fund invests in underlying private equity funds and the life of the fund is subject to the dissolution of the underlying funds. We expect the overall holding period to be over ten years.

During 2015, we made a $50 million commitment as a limited partner of a bank revolver opportunity fund. The fund is subject to an investment term of seven years and the General Partners have the option to extend the term by up to two years. At June 30, 2016, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.

d) Equity Method Investments

During 2016, we paid $104 million including direct transaction costs to acquire 18% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, AXIS Capital will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, we expect to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, we have entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally. Harrington is not a variable interest entity and given that we have significant influence we account for our ownership in Harrington under the equity method of accounting.

The Company also has investments in other equity method investments with a carrying value of $10 million.

e) Net Investment Income

Net investment income was derived from the following sources:



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015

Fixed maturities	$	77,621		$	77,998		$	153,596		$	144,086
Other investments	14,401			14,102			(12,477		)	45,037
Equity securities	3,065			2,674			8,210			4,350
Mortgage loans	1,807			281			3,492			294
Cash and cash equivalents	1,868			1,678			3,303			2,777
Short-term investments	165			125			371			194
Gross investment income	98,927			96,858			156,495			196,738
Investment expenses	(7,197		)	(8,314		)	(15,599		)	(16,087		)
Net investment income	$	91,730		$	88,544		$	140,896		$	180,651

f) Net Realized Investment Losses

The following table provides an analysis of net realized investment losses:



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015

Gross realized gains
Fixed maturities and short-term investments	$	25,458		$	17,066		$	41,622		$	32,727
Equities	9,693			177			13,234			215
Gross realized gains	35,151			17,243			54,856			32,942
Gross realized losses
Fixed maturities and short-term investments	(9,617		)	(13,474		)	(68,794		)	(56,565		)
Equities	(559		)	(270		)	(15,347		)	(394		)
Gross realized losses	(10,176		)	(13,744		)	(84,141		)	(56,959		)
Net OTTI recognized in earnings	(6,369		)	(12,893		)	(16,099		)	(30,461		)
Change in fair value of investment derivatives⁽¹⁾	2,404			(1,716		)	(116		)	816
Net realized investment gains (losses)	$	21,010		$	(11,110	)	$	(45,500	)	$	(53,662	)

(1) Refer to Note 5 – Derivative Instruments

The following table summarizes the OTTI recognized in earnings by asset class:



	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015

Fixed maturities:
Non-U.S. government	$	497	$	—	$	497	$	1,422
Corporate debt	5,872		1,689		13,042		17,808
Non-Agency RMBS	—		—		—		4
ABS	—		18		—		41
	6,369		1,707		13,539		19,275
Equity Securities
Exchange-traded funds	—		—		2,560		—
Bond mutual funds	—		11,186		—		11,186
	—		11,186		2,560		11,186
Total OTTI recognized in earnings	$	6,369	$	12,893	$	16,099	$	30,461

The following table provides a roll forward of the credit losses, before income taxes, for which a portion of the OTTI was recognized in AOCI:



	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015

Balance at beginning of period	$	1,506	$	1,541	$	1,506	$	1,531
Credit impairments recognized on securities not previously impaired	—		—		—		—
Additional credit impairments recognized on securities previously impaired	7		23		7		33
Change in timing of future cash flows on securities previously impaired	—		—		—		—
Intent to sell of securities previously impaired	—		—		—		—
Securities sold/redeemed/matured	—		—		—		—
Balance at end of period	$	1,513	$	1,564	$	1,513	$	1,564

g) Reverse Repurchase Agreements

At June 30, 2016, we held no reverse repurchase agreements (2015: $30 million). 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. We monitor the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.