Investments

(a) Fixed Maturities 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 March 31, 2014 and December 31, 2013, are as follows:



March 31, 2014	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale fixed maturities:
U.S. treasury bonds	$	16,616	$	519	$	—		$	17,135
U.S. agency bonds – mortgage-backed	1,257,045		12,632		(34,207		)	1,235,470
U.S. agency bonds – other	7,208		988		—			8,196
Non-U.S. government bonds	70,806		3,490		(331		)	73,965
Other mortgage-backed securities	43,952		416		—			44,368
Corporate bonds	1,638,912		98,508		(11,652		)	1,725,768
Municipal bonds – other	62,136		1,781		—			63,917
Total available-for-sale fixed maturities	3,096,675		118,334		(46,190		)	3,168,819
Other investments	5,083		690		—			5,773
Total investments	$	3,101,758	$	119,024	$	(46,190	)	$	3,174,592



December 31, 2013	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale fixed maturities:
U.S. treasury bonds	$	16,622	$	587	$	—		$	17,209
U.S. agency bonds – mortgage-backed	1,292,032		11,727		(41,104		)	1,262,655
U.S. agency bonds – other	7,207		901		—			8,108
Non-U.S. government bonds	70,377		3,547		(712		)	73,212
Other mortgage-backed securities	33,676		—		(232		)	33,444
Corporate bonds	1,546,578		82,952		(22,830		)	1,606,700
Municipal bonds – auction rate	99,170		—		—			99,170
Municipal bonds – other	62,130		934		(1,495		)	61,569
Total available-for-sale fixed maturities	3,127,792		100,648		(66,373		)	3,162,067
Other investments	4,522		570		—			5,092
Total investments	$	3,132,314	$	101,218	$	(66,373	)	$	3,167,159

The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without prepayment penalties.

4. Investments (continued)



March 31, 2014	Amortized cost		Fair value		% of Total fair value
Maturity
Due in one year or less	$	54,893	$	56,249	1.8	%
Due after one year through five years	422,796		459,480		14.5	%
Due after five years through ten years	1,226,383		1,277,651		40.3	%
Due after ten years	91,606		95,601		3.0	%
	1,795,678		1,888,981		59.6	%
U.S. agency bonds – mortgage-backed	1,257,045		1,235,470		39.0	%
Other mortgage-backed securities	43,952		44,368		1.4	%
Total available-for-sale fixed maturities	$	3,096,675	$	3,168,819	100.0	%

The following tables summarize fixed maturities and other investments 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:



	Less than 12 Months					12 Months or more					Total
March 31, 2014	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale fixed maturities
U.S. agency bonds – mortgage-backed	$	743,882	$	(30,320	)	$	109,169	$	(3,887	)	$	853,051	$	(34,207	)
Non–U.S. government bonds	7,968		(331		)	—		—			7,968		(331		)
Corporate bonds	183,710		(6,590		)	168,371		(5,062		)	352,081		(11,652		)
Total temporarily impaired available-for-sale fixed maturities	$	935,560	$	(37,241	)	$	277,540	$	(8,949	)	$	1,213,100	$	(46,190	)

As of March 31, 2014, there were approximately 103 securities in an unrealized loss position with a fair value of $1,213,100 and unrealized losses of $46,190. Of these securities, there are 24 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $277,540 and unrealized losses of $8,949.



	Less than 12 Months					12 Months or more					Total
December 31, 2013	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale fixed maturities
U.S. agency bonds – mortgage-backed	$	795,439	$	(38,421	)	$	60,602	$	(2,683	)	$	856,041	$	(41,104	)
Non–U.S. government bonds	9,946		(712		)	—		—			9,946		(712		)
Other mortgage-backed securities	33,444		(232		)	—		—			33,444		(232		)
Corporate bonds	463,469		(16,687		)	169,294		(6,143		)	632,763		(22,830		)
Municipal bonds – other	50,545		(1,495		)	—		—			50,545		(1,495		)
Total temporarily impaired available-for-sale fixed maturities	$	1,352,843	$	(57,547	)	$	229,896	$	(8,826	)	$	1,582,739	$	(66,373	)

As of December 31, 2013, there were approximately 140 securities in an unrealized loss position with a fair value of $1,582,739 and unrealized losses of $66,373. Of these securities, there are 19 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $229,896 and unrealized losses of $8,826.

4. Investments (continued)

Other-Than-Temporary Impairments ("OTTI")

We review our investment portfolio for impairment on a quarterly basis. Impairment of investments results in a charge to operations when a fair value decline below cost is deemed to be other-than-temporary. As of March 31, 2014, we reviewed our portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. During the three months ended March 31, 2014 and 2013, the Company recognized no OTTI. Based on our qualitative and quantitative OTTI review of each asset class within our fixed maturity portfolio, the unrealized losses on fixed maturities at March 31, 2014 were primarily due to widening of credit spreads since their date of purchase. Because we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities until a recovery of fair value to amortized cost, we currently believe it is probable that we will collect all amounts due according to their respective contractual terms. Therefore, we do not consider these fixed maturities to be other-than-temporarily impaired at March 31, 2014.

The following summarizes the credit ratings of our available-for-sale fixed maturities:



Rating* as of March 31, 2014	Amortized cost		Fair value		% of Total fair value
U.S. treasury bonds	$	16,616	$	17,135	0.5	%
U.S. agency bonds	1,264,253		1,243,666		39.2	%
AAA	216,123		231,871		7.3	%
AA+, AA, AA-	138,743		147,363		4.7	%
A+, A, A-	688,926		729,160		23.0	%
BBB+, BBB, BBB-	716,179		742,241		23.5	%
BB+ or lower	55,835		57,383		1.8	%
Total	$	3,096,675	$	3,168,819	100.0	%



Rating* as of December 31, 2013	Amortized cost		Fair value		% of Total fair value
U.S. treasury bonds	$	16,622	$	17,209	0.5	%
U.S. agency bonds	1,299,239		1,270,763		40.2	%
AAA	210,872		222,417		7.0	%
AA+, AA, AA-	236,424		242,986		7.7	%
A+, A, A-	619,148		651,248		20.6	%
BBB+, BBB, BBB-	689,532		701,529		22.2	%
BB+ or lower	55,955		55,915		1.8	%
Total	$	3,127,792	$	3,162,067	100.0	%

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

(b) Other Investments

The table below shows our portfolio of other investments:



	March 31, 2014				December 31, 2013
	Fair value		% of Total fair value		Fair value		% of Total fair value
Investments in limited partnerships	$	4,773	82.7	%	$	4,092	80.4	%
Other	1,000		17.3	%	1,000		19.6	%
Total other investments	$	5,773	100.0	%	$	5,092	100.0	%

The Company has an unfunded commitment on its investments in limited partnerships of approximately $1,380 as of March 31, 2014.

4. Investments (continued)

Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following provides an analysis of net realized gains on investment included in the Condensed Consolidated Statements of Income for the three months ended March 31, 2014 and 2013:



For the Three Months Ended March 31, 2014	Gross gains		Gross losses		Net
Available-for-sale fixed maturities	$	1	$	—	$	1
Other investments	87		—		87
Net realized gains on investment	$	88	$	—	$	88



For the Three Months Ended March 31, 2013	Gross gains		Gross losses		Net
Available-for-sale fixed maturities	$	3,112	$	—	$	3,112
Other investments	171		—		171
Net realized gains on investment	$	3,283	$	—	$	3,283

Proceeds from sales of fixed maturities classified as available-for-sale were $105,334 and $45,379 for the three months ended March 31, 2014 and 2013, respectively. Net unrealized gains were as follows:



	March 31, 2014			December 31, 2013
Available-for-sale fixed maturities	$	72,144		$	34,275
Other investments	690			570
Total net unrealized gains	72,834			34,845
Deferred income tax expense	(146		)	(117		)
Net unrealized gains, net of deferred income tax	$	72,688		$	34,728
Change in net unrealized gains, net of deferred income tax	$	37,960		$	(108,937	)

(d) Restricted Cash and Cash Equivalents and Investments

We are required to maintain assets on deposit to support our reinsurance operations and to serve as collateral for our reinsurance liabilities under various reinsurance agreements. The assets on deposit are available to settle reinsurance liabilities. We also utilize trust accounts to collateralize business with our reinsurance counterparties. These trust accounts generally take the place of letter of credit requirements. The assets in trust as collateral are primarily cash and highly rated fixed maturity securities. The fair value of our restricted assets was as follows:



	March 31, 2014		December 31, 2013
Restricted cash and cash equivalents – third party agreements	$	64,326	$	72,877
Restricted cash and cash equivalents – related party agreements	86,866		4,429
Restricted cash and cash equivalents – U.S. state regulatory authorities	20		54
Total restricted cash and cash equivalents	151,212		77,360
Restricted investments – in trust for third party agreements at fair value (Amortized cost: 2014 – $934,906; 2013 – $933,897)	952,147		939,800
Restricted investments – in trust for related party agreements at fair value (Amortized cost: 2014 – $1,211,944; 2013 – $1,183,156)	1,244,654		1,201,473
Restricted investments – in trust for U.S. state regulatory authorities (Amortized cost: 2014 – $12,216; 2013 – $12,730)	12,498		13,065
Total restricted investments	2,209,299		2,154,338
Total restricted cash and cash equivalents and investments	$	2,360,511	$	2,231,698