Investments (Tables)

9 Months Ended

Sep. 30, 2013

Original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale and other investments

The original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale fixed maturities and other investments as of September 30, 2013 and December 31, 2012 are as follows:



September 30, 2013	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale fixed maturities:
U.S. treasury bonds	$	16,629	$	745	$	—		$	17,374
U.S. agency bonds – mortgage-backed	1,138,860		16,083		(24,230		)	1,130,713
U.S. agency bonds – other	7,205		1,093		—			8,298
Non-U.S. government bonds	64,992		2,734		(444		)	67,282
Other mortgage-backed bonds	22,624		97		(59		)	22,662
Corporate bonds	1,324,209		81,247		(23,810		)	1,381,646
Municipal bonds	45,588		743		(1		)	46,330
Total available-for-sale fixed maturities	2,620,107		102,742		(48,544		)	2,674,305
Other investments	4,500		506		—			5,006
Total investments	$	2,624,607	$	103,248	$	(48,544	)	$	2,679,311



December 31, 2012	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale fixed maturities:
U.S. treasury bonds	$	42,671	$	1,260	$	—		$	43,931
U.S. agency bonds – mortgage-backed	962,649		30,998		(1,473		)	992,174
U.S. agency bonds – other	11,682		1,407		—			13,089
Non-U.S. government bonds	55,169		2,264		—			57,433
Other mortgage-backed bonds	23,167		901		—			24,068
Corporate bonds	1,247,260		113,386		(6,492		)	1,354,154
Municipal bonds	132,604		1,244		—			133,848
Total available-for-sale fixed maturities	2,475,202		151,460		(7,965		)	2,618,697
Other investments	2,599		353		(51		)	2,901
Total investments	$	2,477,801	$	151,813	$	(8,016	)	$	2,621,598

Contractual maturities of fixed maturities, available-for-sale

The contractual maturities of our fixed maturities, available-for-sale as of September 30, 2013 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations prior to contractual maturity.

4. Investments (continued)



September 30, 2013	Amortized cost		Fair value		% of Total fair value
Maturity
Due in one year or less	$	95,601	$	97,385	3.7	%
Due after one year through five years	398,953		428,246		16.0	%
Due after five years through ten years	888,970		917,690		34.3	%
Due after ten years	75,099		77,609		2.9	%
	1,458,623		1,520,930		56.9	%
U.S. agency bonds – mortgage-backed	1,138,860		1,130,713		42.3	%
Other mortgage-backed bonds	22,624		22,662		0.8	%
Total	$	2,620,107	$	2,674,305	100.0	%

Summary of available-for-sale securities and other investments in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the securities have continuously been in an unrealized loss position

The following tables summarize our available-for-sale fixed maturities and other investments in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the securities have continuously been in an unrealized loss position:



	Less than 12 Months					12 Months or more					Total
September 30, 2013	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale fixed maturities
U.S. agency bonds – mortgage-backed	$	601,779	$	(23,199	)	$	39,548	$	(1,031	)	$	641,327	$	(24,230	)
Non–U.S. government bonds	10,234		(444		)	—		—			10,234		(444		)
Other mortgage-backed bonds	13,152		(59		)	—		—			13,152		(59		)
Corporate bonds	354,698		(21,689		)	123,226		(2,121		)	477,924		(23,810		)
Municipal bonds	2,500		(1		)	—		—			2,500		(1		)
Total temporarily impaired available-for-sale fixed maturities	$	982,363	$	(45,392	)	$	162,774	$	(3,152	)	$	1,145,137	$	(48,544	)

As of September 30, 2013, there were approximately 109 securities in an unrealized loss position with a fair value of $1,145,137 and unrealized losses of $48,544. Of these securities, there are 11 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $162,774 and unrealized losses of $3,152.



	Less than 12 Months					12 Months or more					Total
December 31, 2012	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale fixed maturities
U.S. agency bonds – mortgage-backed	$	158,591	$	(1,473	)	$	—	$	—		$	158,591	$	(1,473	)
Corporate bonds	94,742		(1,098		)	141,842		(5,394		)	236,584		(6,492		)
	253,333		(2,571		)	141,842		(5,394		)	395,175		(7,965		)
Other investments	—		—			2,011		(51		)	2,011		(51		)
Total temporarily impaired available-for-sale fixed maturities and other investments	$	253,333	$	(2,571	)	$	143,853	$	(5,445	)	$	397,186	$	(8,016	)

Summary of the credit ratings of fixed maturities

The following summarizes the credit ratings of our fixed maturities:



Rating* as of September 30, 2013	Amortized cost		Fair value		% of Total fair value
U.S. treasury bonds	$	16,629	$	17,374	0.7	%
U.S. agency bonds	1,146,065		1,139,011		42.6	%
AAA	153,544		165,945		6.2	%
AA+, AA, AA-	114,209		121,167		4.5	%
A+, A, A-	487,189		517,408		19.3	%
BBB+, BBB, BBB-	646,396		658,567		24.6	%
BB+ or lower	56,075		54,833		2.1	%
Total	$	2,620,107	$	2,674,305	100.0	%



Rating* as of December 31, 2012	Amortized cost		Fair value		% of Total fair value
U.S. treasury bonds	$	42,671	$	43,931	1.7	%
U.S. agency bonds	974,331		1,005,263		38.4	%
AAA	171,136		183,950		7.0	%
AA+, AA, AA-	186,495		196,797		7.5	%
A+, A, A-	477,236		515,383		19.7	%
BBB+, BBB, BBB-	587,858		637,089		24.3	%
BB+ or lower	35,475		36,284		1.4	%
Total	$	2,475,202	$	2,618,697	100.0	%

*Ratings as assigned by Standard & Poor’s ("S&P")

Portfolio of other investments

The table below shows our portfolio of other investments:



	September 30, 2013				December 31, 2012
Investments in limited partnerships	$	4,006	80.0	%	$	2,901	100.0	%
Other	1,000		20.0	%	—		—	%
Total other investments	$	5,006	100.0	%	$	2,901	100.0	%

Analysis of realized and unrealized gains on investment

The following provides an analysis of realized gains (losses) on investment for the three and nine months ended September 30, 2013 and 2012:



For the Three Months Ended September 30, 2013	Gross gains		Gross losses		Net
Available-for-sale fixed maturities	$	448	$	—	$	448
Other investments	29		—		29
Net realized gains on investment	$	477	$	—	$	477



For the Three Months Ended September 30, 2012	Gross gains		Gross losses		Net
Available-for-sale fixed maturities	$	2,374	$	—	$	2,374
Other investments	36		—		36
Net realized gains on investment	$	2,410	$	—	$	2,410



For the Nine Months Ended September 30, 2013	Gross gains		Gross losses			Net
Available-for-sale fixed maturities	$	3,560	$	—		$	3,560
Other investments	200		(53		)	147
Net realized gains on investment	$	3,760	$	(53	)	$	3,707



For the Nine Months Ended September 30, 2012	Gross gains		Gross losses			Net
Available-for-sale fixed maturities	$	2,374	$	—		$	2,374
Trading securities and short sales	—		(1,593		)	(1,593		)
Other investments	56		(1		)	55
Net realized gains on investment	$	2,430	$	(1,594	)	$	836

Net unrealized gains on available-for-sale securities and other investments

Net unrealized gains on available-for-sale fixed maturities and other investments was as follows:



	September 30, 2013			December 31, 2012
Available-for-sale fixed maturities	$	54,198		$	143,495
Other investments	506			302
Total net unrealized gains	54,704			143,797
Deferred income tax expense	(111		)	(132		)
Net unrealized gains, net of deferred income tax	$	54,593		$	143,665
Change in net unrealized gains, net of deferred income tax	$	(89,072	)	$	79,928

Fair value of restricted assets

The fair value of our restricted assets was as follows:



	September 30, 2013		December 31, 2012
Restricted cash and cash equivalents – third party agreements	$	92,783	$	97,695
Restricted cash and cash equivalents – related party agreements	176,596		33,882
Restricted cash and cash equivalents – U.S. state regulatory authorities	565		750
Total restricted cash and cash equivalents	269,944		132,327
Restricted investments – in trust for third party agreements at fair value (Amortized cost: 2013 – $977,880; 2012 – $1,048,827)	997,105		1,101,971
Restricted investments – in trust for related party agreements at fair value (Amortized cost: 2013 – $996,096; 2012 – $851,873)	1,024,446		919,557
Restricted investments – in trust for U.S. state regulatory authorities (Amortized cost: 2013 – $12,733; 2012 – $12,744)	13,174		13,463
Total restricted investments	2,034,725		2,034,991
Total restricted cash and cash equivalents and investments	$	2,304,669	$	2,167,318

- Definition

Tabular disclosure of the realized and unrealized gains and losses reported in the statement of income which have resulted from the sale and holding of marketable securities, respectively, as well as the sale or disposal of cost method investments. Such amounts would include realized gains and losses on the sale or disposal of trading, available-for-sale, and held-to-maturity securities, unrealized gains and losses on trading securities, unrealized gains and losses on available-for-sale and held-to-maturity securities transferred to the trading securities category, realized gains and losses on the sale or disposal of cost method investments, and losses recognized for other than temporary impairments (OTTI) of such investments.

+ References+ Details