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INVESTMENTS

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

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		Allowance for expected credit losses		Gross unrealized gains		Gross unrealized losses		Fair value

At March 31, 2021
Available for sale
U.S. government and agency	$	2,181,808	$	—	$	20,184	$	(14,899)	$	2,187,093
Non-U.S. government	689,358		—		28,789		(3,426)		714,721
Corporate debt	4,364,800		(164)		157,099		(26,457)		4,495,278
Agency RMBS(1)	1,186,277		—		29,602		(7,385)		1,208,494
CMBS(2)	1,227,004		—		50,586		(3,541)		1,274,049
Non-agency RMBS	163,617		(70)		4,505		(883)		167,169
ABS(3)	1,396,130		—		9,693		(2,862)		1,402,961
Municipals(4)	271,513		—		8,872		(1,539)		278,846
Total fixed maturities, available for sale	$	11,480,507	$	(234)	$	309,330	$	(60,992)	$	11,728,611







At December 31, 2020
Available for sale
U.S. government and agency	$	1,881,489	$	—	$	38,969	$	(1,759)	$	1,918,699
Non-U.S. government	632,875		—		38,826		(428)		671,273
Corporate debt	4,408,351		(303)		254,261		(6,358)		4,655,951
Agency RMBS(1)	1,244,727		—		42,170		(688)		1,286,209
CMBS(2)	1,268,273		—		87,598		(2,284)		1,353,587
Non-agency RMBS	136,198		(20)		4,604		(678)		140,104
ABS(3)	1,712,236		—		14,527		(6,685)		1,720,078
Municipals(4)	282,781		—		13,148		(31)		295,898
Total fixed maturities, available for sale	$	11,566,930	$	(323)	$	494,103	$	(18,911)	$	12,041,799

(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.

The following table provides the amortized cost and fair values of the Company's fixed maturities classified as held to maturity:


	Amortized cost		Allowance for expected credit losses		Net carrying value		Gross unrealized gains		Gross unrealized losses		Fair value

At March 31, 2021
Held to maturity
ABS(1)	$	404,690	$	—	$	404,690	$	46	$	(214)	$	404,522
Total fixed maturities, held to maturity	$	404,690	$	—	$	404,690	$	46	$	(214)	$	404,522

(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").

On March 1, 2021, the Company transferred securities with total fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity. These securities, which the Company has the intent and ability to hold to maturity, were transferred in order to better align the accounting classification with their management strategy. The net unrealized gain at the date of the transfer, March 1, 2021, continues to be reported in the carrying value of the transferred securities and is amortized over the remaining life of the securities using the effective yield method.

Fixed maturities, held to maturity of $405 million at March 31, 2021 were presented net of an allowance for expected credit losses. The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses of the 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 have a credit loss. At March 31, 2021, the allowance for credit losses expected to be recognized over the life of our ABS, held to maturity was $nil.

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 March 31, 2021
Equity securities
Common stocks	$	8,470	$	1,682	$	(435)	$	9,717
Preferred stocks	5,519		1,430		—		6,949
Exchange-traded funds	182,544		87,184		(342)		269,386
Bond mutual funds	257,918		3,706		—		261,624
Total equity securities	$	454,451	$	94,002	$	(777)	$	547,676

At December 31, 2020
Equity securities
Common stocks	$	10,810	$	689	$	(557)	$	10,942
Preferred stocks	6,301		1,767		—		8,068
Exchange-traded funds	147,794		74,314		(390)		221,718
Bond mutual funds	256,839		20,878		—		277,717
Total equity securities	$	421,744	$	97,648	$	(947)	$	518,445

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 64% 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 3(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 commitment made by the Company. The Company has not provided financial or other support to these structured securities other than the original investment.

Contractual Maturities of Fixed 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 classified as available for sale:


	Amortized cost		Fair value		% of Total fair value

At March 31, 2021
Maturity
Due in one year or less	$	584,411	$	593,485	5.0	%
Due after one year through five years	4,361,986		4,482,143		38.2	%
Due after five years through ten years	2,324,428		2,363,912		20.2	%
Due after ten years	236,654		236,398		2.0	%
	7,507,479		7,675,938		65.4	%
Agency RMBS	1,186,277		1,208,494		10.3	%
CMBS	1,227,004		1,274,049		10.9	%
Non-agency RMBS	163,617		167,169		1.4	%
ABS	1,396,130		1,402,961		12.0	%
Total	$	11,480,507	$	11,728,611	100.0	%

At December 31, 2020
Maturity
Due in one year or less	$	436,287	$	444,527	3.6	%
Due after one year through five years	4,165,696		4,335,219		36.0	%
Due after five years through ten years	2,344,859		2,489,050		20.7	%
Due after ten years	258,654		273,025		2.3	%
	7,205,496		7,541,821		62.6	%
Agency RMBS	1,244,727		1,286,209		10.7	%
CMBS	1,268,273		1,353,587		11.2	%
Non-agency RMBS	136,198		140,104		1.2	%
ABS	1,712,236		1,720,078		14.3	%
Total	$	11,566,930	$	12,041,799	100.0	%

ABS classified as held to maturity with a net carrying value of $405 million (2020: $nil) do not have a single maturity date and cannot be allocated over several maturity groupings.

Gross Unrealized Losses

The following table summarizes fixed maturities available for sale 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 March 31, 2021
Fixed maturities, available for sale
U.S. government and agency	$	—	$	—	$	973,758	$	(14,899)	$	973,758	$	(14,899)
Non-U.S. government	2,257		(485)		156,529		(2,941)		158,786		(3,426)
Corporate debt	62,713		(1,576)		1,036,713		(24,881)		1,099,426		(26,457)
Agency RMBS	154		(4)		447,303		(7,381)		447,457		(7,385)
CMBS	18,422		(140)		133,199		(3,401)		151,621		(3,541)
Non-agency RMBS	6,153		(478)		59,008		(405)		65,161		(883)
ABS	95,782		(1,537)		241,242		(1,325)		337,024		(2,862)
Municipals	—		—		80,414		(1,539)		80,414		(1,539)
Total fixed maturities, available for sale	$	185,481	$	(4,220)	$	3,128,166	$	(56,772)	$	3,313,647	$	(60,992)







At December 31, 2020
Fixed maturities, available for sale
U.S. government and agency	$	—	$	—	$	251,606	$	(1,759)	$	251,606	$	(1,759)
Non-U.S. government	16,115		(262)		3,652		(166)		19,767		(428)
Corporate debt	63,640		(2,244)		233,970		(4,114)		297,610		(6,358)
Agency RMBS	6,580		(20)		78,672		(668)		85,252		(688)
CMBS	19,736		(1,012)		70,656		(1,272)		90,392		(2,284)
Non-agency RMBS	5,109		(598)		9,558		(80)		14,667		(678)
ABS	325,436		(4,011)		360,402		(2,674)		685,838		(6,685)
Municipals	—		—		11,881		(31)		11,881		(31)
Total fixed maturities, available for sale	$	436,616	$	(8,147)	$	1,020,397	$	(10,764)	$	1,457,013	$	(18,911)

Fixed Maturities

At March 31, 2021, 1,553 fixed maturities (2020: 719) were in an unrealized loss position of $61 million (2020: $19 million), of which $5 million (2020: $7 million) was related to securities below investment grade or not rated.

At March 31, 2021, 205 fixed maturities (2020: 249) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $185 million (2020: $437 million).

The unrealized losses of $61 million (2020: $19 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.

At March 31, 2021, 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:


	March 31, 2021				December 31, 2020
	Carrying value		% of Total		Carrying value		% of Total

Mortgage loans, held for investment:
Commercial	$	629,576	100	%	$	593,290	100	%


Total mortgage loans, held for investment	$	629,576	100	%	$	593,290	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 2.4x (2020: 2.4x) and a weighted average loan-to-value ratio of 60% (2020: 60%). At March 31, 2021, there are no credit losses or past due amounts associated with the commercial mortgage loans held by the Company.

c) Other Investments

The following tables provide 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 March 31, 2021
Long/short equity funds	$	19,033	2	%	Annually	60 days
Multi-strategy funds	106,971		14	%	Quarterly, Semi-annually	60-95 days


Direct lending funds	279,324		35	%	Quarterly(1)	90 days
Private equity funds	153,515		19	%	n/a	n/a
Real estate funds	163,635		21	%	Quarterly(2)	45 days
CLO-Equities	6,269		1	%	n/a	n/a
Other privately held investments	61,783		8	%	n/a	n/a
Overseas deposits	—		—	%	n/a	n/a
Total other investments	$	790,530	100	%

At December 31, 2020
Long/short equity funds	$	25,300	3	%	Annually	60 days
Multi-strategy funds	121,420		15	%	Quarterly, Semi-annually	60-95 days


Direct lending funds	272,131		33	%	Quarterly(1)	90 days
Private equity funds	124,706		15	%	n/a	n/a
Real estate funds	164,250		20	%	Quarterly(2)	45 days
CLO-Equities	6,173		1	%	n/a	n/a
Other privately held investments	70,011		8	%	n/a	n/a
Overseas deposits	45,165		5	%	n/a	n/a
Total other investments	$	829,156	100	%

n/a - not applicable

(1) Applies to one fund with a fair value of $38 million (2020: $38 million).

(2) Applies to one fund with a fair value of $66 million (2020: $61 million).

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 the three months ended March 31, 2021 and 2020, neither of these restrictions impacted the Company's redemption requests. At March 31, 2021, $19 million (2020: $25 million), representing 15% (2020: 17%) of total hedge funds, relate to holdings where the Company is still within the lockup period. The expiration of these lockup periods range from April 2021 to March 2022.

At March 31, 2021, the Company had $187 million (2020: $151 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 fifteen years and the General Partners of certain funds have the option to extend the term by up to three years.

At March 31, 2021, the Company had $20 million (2020: $20 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 March 31, 2021, the Company had $191 million (2020: $201 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 March 31, 2021, the Company had $137 million (2020: $166 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 March 31, 2021, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.

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 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, 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.

e) Net Investment Income

Net investment income was derived from the following sources:


	Three months ended March 31,
	2021		2020

Fixed maturities	$	69,470	$	89,943
Other investments	41,833		(2,120)
Equity securities	2,498		2,125
Mortgage loans	4,187		4,053
Cash and cash equivalents	2,336		4,930
Short-term investments	133		1,498
Gross investment income	120,457		100,429
Investment expenses	(6,292)		(7,328)
Net investment income	$	114,165	$	93,101

f) Net Investment Gains (Losses)

The following table provides an analysis of net investment gains (losses):


	Three months ended March 31,
	2021		2020

Gross realized investment gains
Fixed maturities and short-term investments	$	50,170	$	39,931
Equity securities	569		1,920
Gross realized investment gains	50,739		41,851
Gross realized investment losses
Fixed maturities and short-term investments	(19,368)		(22,766)
Equity securities	(89)		(2,682)
Gross realized investment losses	(19,457)		(25,448)
Allowance for expected credit losses	89		(20,019)
Impairment losses(1)	—		(1,190)

Change in fair value of investment derivatives(2)	1,749		3,162
Net unrealized gains (losses) on equity securities	(3,475)		(61,233)

Net investment gains (losses)	$	29,645	$	(62,877)

(1) Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.

(2) Refer to Note 5 'Derivative Instruments'.

The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:


	Three months ended March 31,
	2021		2020

Balance at beginning of period	$	323	$	—
Expected credit losses on securities where credit losses were not previously recognized	63		20,019
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized	(105)		—
Impairments of securities which the Company intends to sell or more likely than not will be required to sell	—		—
Securities sold/redeemed/matured	(47)		—
Balance at end of period	$	234	$	20,019

g) Reverse Repurchase Agreements

At March 31, 2021, the Company held $46 million (2020: $91 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 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. Upon 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.