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INVESTMENTS
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS
a)    Fixed Maturities and Equity Securities

Fixed Maturities
The following table provides the amortized cost and fair values of the Company's fixed maturities classified as available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Fair
value
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2019
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
2,102,849

 
$
16,345

 
$
(6,313
)
 
$
2,112,881

 
 
Non-U.S. government
564,505

 
14,535

 
(2,448
)
 
576,592

 
 
Corporate debt
4,797,384

 
140,426

 
(7,556
)
 
4,930,254

 
 
Agency RMBS(1)
1,570,823

 
25,215

 
(3,454
)
 
1,592,584

 
 
CMBS(2)
1,340,156

 
29,838

 
(4,942
)
 
1,365,052

 
 
Non-Agency RMBS
84,381

 
1,393

 
(852
)
 
84,922

 
 
ABS(3)
1,599,867

 
4,706

 
(5,880
)
 
1,598,693

 
 
Municipals(4)
203,275

 
4,359

 
(407
)
 
207,227

 
 
Total fixed maturities
$
12,263,240

 
$
236,817

 
$
(31,852
)
 
$
12,468,205

 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2018
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
1,520,142

 
$
4,232

 
$
(8,677
)
 
$
1,515,697

 
 
Non-U.S. government
507,550

 
1,586

 
(16,120
)
 
493,016

 
 
Corporate debt
4,990,279

 
15,086

 
(128,444
)
 
4,876,921

 
 
Agency RMBS(1)
1,666,684

 
6,508

 
(29,884
)
 
1,643,308

 
 
CMBS(2)
1,103,507

 
2,818

 
(13,795
)
 
1,092,530

 
 
Non-Agency RMBS
40,732

 
1,237

 
(1,282
)
 
40,687

 
 
ABS(3)
1,651,350

 
1,493

 
(15,240
)
 
1,637,603

 
 
Municipals(4)
136,068

 
914

 
(1,397
)
 
135,585

 
 
Total fixed maturities
$
11,616,312

 
$
33,874

 
$
(214,839
)
 
$
11,435,347

 
 
 
 
 
 
 
 
 
 
 
(1)
Residential mortgage-backed securities ("RMBS") originated by U.S. government-sponsored agencies.
(2)
Commercial mortgage-backed securities ("CMBS").
(3)
Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs").
(4)
Municipals include bonds issued by states, municipalities and political subdivisions.
 
Equity Securities

The following table provides the cost and fair values of the Company's equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
Cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Fair
value
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2019
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
Common stocks
$
504

 
$
77

 
$
(388
)
 
$
193

 
 
Exchange-traded funds
215,986

 
81,444

 
(105
)
 
297,325

 
 
Bond mutual funds
182,466

 
—

 
(5,777
)
 
176,689

 
 
Total equity securities
$
398,956

 
$
81,521

 
$
(6,270
)
 
$
474,207

 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2018
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
Common stocks
$
790

 
$
112

 
$
(375
)
 
$
527

 
 
Exchange-traded funds
213,420

 
33,498

 
(10,079
)
 
236,839

 
 
Bond mutual funds
151,695

 
—

 
(7,428
)
 
144,267

 
 
Total equity securities
$
365,905

 
$
33,610

 
$
(17,882
)
 
$
381,633

 
 
 
 
 
 
 
 
 
 
 


In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.

The Company also invests in limited partnerships which represent 55% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds as well as CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 5(c) 'Other Investments'). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs.

The maximum exposure to loss on these interests is limited to the amount of investment made by the Company. The
Company has not provided financial or other support to these structured securities other than the original investment.
Contractual Maturities
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. The table below provides the contractual maturities of fixed maturities:
 
 
 
 
 
 
 
 
 
 
Amortized
cost
 
Fair
value
 
% of Total
fair value
 
 
 
 
 
 
 
 
 
 
At December 31, 2019
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
438,881

 
$
443,228

 
3.6
%
 
 
Due after one year through five years
4,810,202

 
4,884,837

 
39.2
%
 
 
Due after five years through ten years
2,091,486

 
2,157,157

 
17.3
%
 
 
Due after ten years
327,444

 
341,732

 
2.7
%
 
 
 
7,668,013

 
7,826,954

 
62.8
%
 
 
Agency RMBS
1,570,823

 
1,592,584

 
12.8
%
 
 
CMBS
1,340,156

 
1,365,052

 
10.9
%
 
 
Non-Agency RMBS
84,381

 
84,922

 
0.7
%
 
 
ABS
1,599,867

 
1,598,693

 
12.8
%
 
 
Total
$
12,263,240

 
$
12,468,205

 
100.0
%
 
 
 
 
 
 
 
 
 
 
At December 31, 2018
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
430,390

 
$
426,142

 
3.7
%
 
 
Due after one year through five years
4,751,064

 
4,691,263

 
41.0
%
 
 
Due after five years through ten years
1,762,452

 
1,697,737

 
14.8
%
 
 
Due after ten years
210,133

 
206,077

 
1.8
%
 
 
 
7,154,039

 
7,021,219

 
61.3
%
 
 
Agency RMBS
1,666,684

 
1,643,308

 
14.4
%
 
 
CMBS
1,103,507

 
1,092,530

 
9.6
%
 
 
Non-Agency RMBS
40,732

 
40,687

 
0.4
%
 
 
ABS
1,651,350

 
1,637,603

 
14.3
%
 
 
Total
$
11,616,312

 
$
11,435,347

 
100.0
%
 
 
 
 
 
 
 
 
 

 
Gross Unrealized Losses
The following table summarizes fixed maturities and equity securities 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, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
9,536

 
$
(67
)
 
$
614,705

 
$
(6,246
)
 
$
624,241

 
$
(6,313
)
 
 
Non-U.S. government
99,466

 
(2,036
)
 
18,361

 
(412
)
 
117,827

 
(2,448
)
 
 
Corporate debt
121,635

 
(3,847
)
 
375,858

 
(3,709
)
 
497,493

 
(7,556
)
 
 
Agency RMBS
195,395

 
(1,816
)
 
326,402

 
(1,638
)
 
521,797

 
(3,454
)
 
 
CMBS
24,281

 
(64
)
 
364,641

 
(4,878
)
 
388,922

 
(4,942
)
 
 
Non-Agency RMBS
6,345

 
(792
)
 
25,816

 
(60
)
 
32,161

 
(852
)
 
 
ABS
535,780

 
(4,667
)
 
404,641

 
(1,213
)
 
940,421

 
(5,880
)
 
 
Municipals
5,418

 
(34
)
 
46,684

 
(373
)
 
52,102

 
(407
)
 
 
Total fixed maturities
$
997,856

 
$
(13,323
)
 
$
2,177,108

 
$
(18,529
)
 
$
3,174,964

 
$
(31,852
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
374,030

 
$
(7,659
)
 
$
424,439

 
$
(1,018
)
 
$
798,469

 
$
(8,677
)
 
 
Non-U.S. government
44,339

 
(2,004
)
 
303,376

 
(14,116
)
 
347,715

 
(16,120
)
 
 
Corporate debt
1,439,378

 
(58,915
)
 
2,547,135

 
(69,529
)
 
3,986,513

 
(128,444
)
 
 
Agency RMBS
940,645

 
(29,255
)
 
117,181

 
(629
)
 
1,057,826

 
(29,884
)
 
 
CMBS
455,582

 
(11,430
)
 
353,802

 
(2,365
)
 
809,384

 
(13,795
)
 
 
Non-Agency RMBS
9,494

 
(1,170
)
 
11,432

 
(112
)
 
20,926

 
(1,282
)
 
 
ABS
237,237

 
(2,755
)
 
1,150,692

 
(12,485
)
 
1,387,929

 
(15,240
)
 
 
Municipals
68,814

 
(1,373
)
 
9,894

 
(24
)
 
78,708

 
(1,397
)
 
 
Total fixed maturities
$
3,569,519

 
$
(114,561
)
 
$
4,917,951

 
$
(100,278
)
 
$
8,487,470

 
$
(214,839
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Fixed Maturities

At December 31, 2019, 1,190 fixed maturities (2018: 3,599) were in an unrealized loss position of $32 million (2018: $215 million) of which $5 million (2018: $49 million) was related to securities below investment grade or not rated.

At December 31, 2019, 497 fixed maturities (2018: 1,656) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $998 million (2018: $3,570 million). Following a credit impairment review, it was concluded that these securities as well as the remaining securities in an unrealized loss position were temporarily impaired at December 31, 2019, and were expected to recover in value as the securities approach maturity. At December 31, 2019, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.


b)
Mortgage Loans

The following table provides details of the Company's mortgage loans held-for-investment:
 
  
December 31, 2019
 
December 31, 2018
 
 
  
Carrying value
 
% of Total
 
Carrying value
 
% of Total
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Loans held-for-investment:
 
 
 
 
 
 
 
 
 
Commercial
$
432,748

 
100
%
 
$
298,650

 
100
%
 
 
Total Mortgage Loans held-for-investment
$
432,748

 
100
%
 
$
298,650

 
100
%
 
 
 
 
 
 
 
 
 
 
 


The primary credit quality indicator for commercial mortgage loans 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 which compares 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.

The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage ratio of 2.1x and a weighted average loan-to-value ratio of 57%. At December 31, 2019 and 2018, there were no credit losses or past due amounts associated with the commercial mortgage loans held by the Company.



c)
Other Investments
The following table provides a summary of the Company's other investments, together with additional information relating to the liquidity of each category:
 
 
 
 
 
 
 
 
 
 
 
  
Fair value
 
Redemption frequency
(if currently eligible)
 
Redemption
notice period
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2019
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
31,248

 
4
%
 
Annually
 
60 days
 
 
Multi-strategy funds
136,542

 
18
%
 
Quarterly, Semi-annually
 
60-90 days
 
 
Direct lending funds
277,395

 
36
%
 
n/a
 
n/a
 
 
Private equity funds
80,412

 
10
%
 
n/a
 
n/a
 
 
Real estate funds
130,112

 
17
%
 
n/a
 
n/a
 
 
CLO-Equities
14,328

 
2
%
 
n/a
 
n/a
 
 
Other privately held investments
36,934

 
5
%
 
n/a
 
n/a
 
 
Overseas deposits
63,952

 
8
%
 
n/a
 
n/a
 
 
Total other investments
$
770,923

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2018
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
26,779

 
3
%
 
Annually
 
60 days
 
 
Multi-strategy funds
167,819

 
22
%
 
Quarterly, Semi-annually, Annually
 
45-95 days
 
 
Direct lending funds
274,478

 
35
%
 
n/a
 
n/a
 
 
Private equity funds
64,566

 
8
%
 
n/a
 
n/a
 
 
Real estate funds
84,202

 
11
%
 
n/a
 
n/a
 
 
CLO-Equities
21,271

 
2
%
 
n/a
 
n/a
 
 
Other privately held investments
44,518

 
6
%
 
n/a
 
n/a
 
 
Overseas deposits
104,154

 
13
%
 
n/a
 
n/a
 
 
Total other investments
$
787,787

 
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 long and short investments in publicly-traded equity securities.
•
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.
•
Direct lending funds: Seek to achieve attractive risk-adjusted returns, including current income generation, by investing in funds which provide financing directly to borrowers.
•
Private equity funds: Seek to achieve attractive risk-adjusted returns by investing in private transactions over the course of several years.
•
Real estate funds: Seek to achieve attractive risk-adjusted returns by making and managing investments in real estate and real estate securities and businesses.
Two common redemption restrictions which may impact the Company's ability to redeem 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 2019 and 2018, neither of these restrictions impacted the Company's redemption requests. At December 31, 2019, $69 million (2018: $27 million), representing 41% (2018: 14%) of total hedge funds, relate to holdings where the Company is still within the lockup period. The expiration of these lockup periods range from October 2020 to March 2022.
At December 31, 2019, the Company had $170 million (2018: $210 million) of unfunded commitments as a limited partner 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 five to ten years and the General Partners of certain funds have the option to extend the term by up to three years.
At December 31, 2019, the Company had $24 million (2018: $84 million) of unfunded commitments as a limited partner in multi-strategy hedge 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 after the completion of the funds' investment term. These funds have investment terms ranging from two years to the dissolution of the underlying fund.
At December 31, 2019, the Company had $82 million (2018: $147 million) of unfunded commitments as a limited partner in funds which invest in real estate and real estate securities and businesses. These funds include an open-ended fund and funds with investment terms ranging from seven years to the dissolution of the underlying fund.

At December 31, 2019, the Company had $261 million (2018: $16 million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over five years.

During 2015, the Company made a $50 million commitment as a limited partner of a bank revolver opportunity fund. The fund has an investment term of seven years and the General Partners have the option to extend the term by up to two years. At December 31, 2019, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.

Syndicate 2007 holds overseas deposits which include investments in private funds where the underlying investments are primarily U.S. government, non-U.S. government and corporate debt securities. The funds do not trade on an exchange and therefore are not included within available for sale investments.

d)
Equity Method Investments

During 2016, the Company paid $108 million including direct transaction costs to acquire 19% 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 the Company and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, the Company will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects 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, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally. Harrington is not a VIE that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $5 million which represents initial transactions costs.

For the year ended December 31, 2017, the Company recorded an impairment charge of $9 million, related to a U.S. based insurance company, which reduced the carrying value of the investment to $nil. This charge was included in interest in income (loss) of equity method investments in the consolidated statement of operations.

e)    Net Investment Income
Net investment income was derived from the following sources:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2019
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed maturities
$
384,053

 
$
356,273

 
$
312,662

 
 
Other investments
60,038

 
48,959

 
76,858

 
 
Equity securities
10,434

 
10,077

 
14,919

 
 
Mortgage loans
14,712

 
13,566

 
10,780

 
 
Cash and cash equivalents
26,882

 
27,566

 
10,057

 
 
Short-term investments
7,053

 
9,365

 
2,718

 
 
Gross investment income
503,172

 
465,806

 
427,994

 
 
Investment expenses
(24,600
)
 
(27,299
)
 
(27,189
)
 
 
Net investment income
$
478,572

 
$
438,507

 
$
400,805

 
 
 
 
 
 
 
 
 

 
f)
Net Investment Gains (Losses)
The following table provides an analysis of net investment gains (losses):
 
 
 
 
 
 
 
 
 
Year ended December 31,
2019
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Gross realized investment gains
 
 
 
 
 
 
 
Fixed maturities and short-term investments
$
93,160

 
$
46,067

 
$
72,046

 
 
Equity securities
3,449

 
20,435

 
78,343

 
 
Gross realized investment gains
96,609

 
66,502

 
150,389

 
 
Gross realized investment losses
 
 
 
 
 
 
 
Fixed maturities and short-term investments
(56,515
)
 
(142,153
)
 
(98,442
)
 
 
Equity securities
(323
)
 
(3,389
)
 
(959
)
 
 
Gross realized investment losses
(56,838
)
 
(145,542
)
 
(99,401
)
 
 
Net OTTI charge recognized in net income
(6,984
)
 
(9,733
)
 
(14,493
)
 
 
Change in fair value of investment derivatives(1)
(1,823
)
 
5,445

 
(8,269
)
 
 
Net unrealized gains (losses) on equity securities(2)
60,269

 
(66,890
)
 
—

 
 
Net investment gains (losses)
$
91,233

 
$
(150,218
)
 
$
28,226

 
 
 
 
 
 
 
 
 
(1)
Refer to Note 7 'Derivative Instruments'
(2)
Effective January 1, 2018, the Company adopted ASU No. 2016-01 which requires the change in fair value of equity securities to be recognized in net income.
The following table summarizes the OTTI charge recognized in net income by asset class:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2019
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Non-U.S. government
$
90

 
$
4,697

 
$
8,187

 
 
Corporate debt
6,894

 
4,995

 
6,306

 
 
Non-Agency CMBS
—

 
41

 
—

 
 
Total OTTI recognized in net income
$
6,984

 
$
9,733

 
$
14,493

 
 
 
 
 
 
 
 
 

Fixed Maturities
The credit loss component of an OTTI charge recognized in net income is calculated based on the difference between the amortized cost of the security and the net present value of its projected future cash flows. A summary of credit loss activity by asset class, the significant inputs and the methodology used to estimate credit losses are described below.
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 not analyzed for OTTI. The Company has concluded that the possibility of a credit loss on these securities is highly unlikely due to the explicit U.S. government guarantee related to certain securities (e.g. Government National Mortgage Association issuances) and the implicit guarantee related to other securities that has been validated by past actions (e.g. U.S. government bailout of Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the 2008 credit crisis). Although these securities are not analyzed for credit losses, they are evaluated for intention to sell and likely requirement to sell.
Non-U.S. Government:
Non-U.S. government securities are evaluated for credit losses primarily through qualitative assessments of the likelihood of credit losses using information such as duration, severity of unrealized losses, credit ratings and price volatility. At December 31, 2019, the Company's holdings of non-U.S. government securities, including $37 million (2018: $29 million) relating to the eurozone countries, were substantially all investment-grade securities. At December 31, 2019, the gross unrealized losses of $2 million (2018: $16 million) were mainly due to foreign exchange losses. At December 31, 2019, the Company does not anticipate any credit losses on its non-U.S. government fixed maturities. In 2019, the OTTI charge on non-U.S. government fixed maturities mainly related to unrealized foreign exchange losses on certain securities where the forecasted recovery of the amortized cost of these securities was uncertain.
Corporate Debt:
To estimate credit losses for corporate debt securities, the Company's projected cash flows are primarily driven by assumptions regarding the probability of default and the severity associated with those defaults. The Company's 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 2019, the OTTI charge on corporate debt securities mainly related to loss severity, unrealized foreign exchange losses on certain securities where the forecasted recovery of the amortized cost of these securities was uncertain, and instances where the Company intended to sell securities before the forecasted recovery of the amortized cost of these securities.
 
CMBS:
The Company's investments in CMBS are diversified and primarily rated AA or better. At December 31, 2019, CMBS had a weighted average estimated subordination percentage of 29% (2018: 31%). Based on discounted cash flows at December 31, 2019, the current level of subordination is sufficient to cover the estimated loan losses on the underlying collateral of the CMBS.
Non-agency RMBS:
To estimate credit losses for non-agency RMBS, the Company's 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 default, delinquency, loss severity and prepayment rates. The assumptions used to calculate credit losses in 2019 have not changed significantly since December 31, 2018.
At December 31, 2019, the fair value of the Company's non-agency RMBS was $85 million (2018: $41 million), consisting primarily of $54 million (2018: $31 million) of Prime and $11 million (2018: $5 million) of Alt-A MBS. At December 31, 2019, the Company does not anticipate any credit losses on its non-agency RMBS.
ABS:

The Company's investments in ABS consist mainly of CLO debt tranched securities ("CLO Debt") purchased primarily as new issues during 2017 and 2018. Substantially all of these new issues had credit ratings of AA or better. The Company utilizes a scenario-based approach to review its CLO Debt portfolio based on the current asset market price. The Company also reviews subordination levels of these securities to determine their ability to absorb credit losses of underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to be impaired. At December 31, 2019, the Company does not anticipate any credit losses on its CLO Debt. 

g)
Restricted Assets
In order to support the Company's obligations in regulatory jurisdictions where it operates as a non-admitted carrier, the Company provides collateral in the form of assets held in trust and, to a lesser extent, letters of credit (refer to Note 10(b) 'Debt and Financing Arrangements').
In addition, the Company operates in the Lloyd’s market through its corporate members, AXIS Corporate Capital UK Limited and AXIS Corporate Capital UK II Limited, which provide 70% and 30%, respectively of Syndicate 1686's capital support. AXIS Corporate Capital UK II Limited is the sole corporate member of Syndicate 2007. Lloyd’s sets capital requirements for corporate members annually through the application of a capital model that is based on regulatory rules pursuant to Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking up and pursuit of business of Insurance and Reinsurance (Solvency II) ("Solvency II").
The capital provided to support underwriting, or Funds at Lloyd’s ("FAL"), may be satisfied by cash, certain investments and letters of credit provided by approved banks (refer to Note 11 'Commitments and Contingencies' and Note 21 'Statutory Financial Information').
At December 31, 2019 collateral held in trust for third-party agreements of $1,856 million included $365 million (2018: $403 million) of fixed maturities and equity securities, and cash of $16 million (2018: $39 million) held on deposit to support the underwriting activities of Syndicate 2007, and also included $169 million (2018: $nil) of fixed maturities and equity securities, and cash of $181 million (2018: $154 million) held on deposit to support the underwriting activities of Syndicate 1686.
The Company's restricted investments and cash primarily consist of high-quality fixed maturity and short-term investment securities.
The table below provides the fair values of the Company's restricted investments and cash:
 
 
 
 
 
 
 
 
At December 31,
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Collateral in Trust for inter-company agreements
 
$
1,580,689

 
$
2,121,522

 
 
Collateral for secured letter of credit facility
 
473,187

 
470,051

 
 
Funds at Lloyd's
 
1,314,345

 
1,307,945

 
 
Collateral in Trust for third-party agreements
 
1,856,327

 
1,510,416

 
 
Securities on deposit with regulatory authorities
 
76,229

 
64,360

 
 
Total restricted investments
 
$
5,300,777

 
$
5,474,294

 
 
 
 
 
 
 
 

h)
Reverse Repurchase Agreements

At December 31, 2019, the Company held no (2018: $189 million) 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 in the Company's consolidated balance sheets. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of 102% of the loan principal. At maturity, the Company receives principal and interest income. The Company monitors 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.