3.	Investments

Composition of Invested Assets

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investments were as follows:

March 31, 2015
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities
USD denominated:
U.S. Governments	$	181.3	$	1.6	$	0.1	$	182.8
Non-U.S. Governments		81.3		0.7		0.5		81.5
Obligations of states and political subdivisions		457.7		22.7		0.4		480.0
Credit-Financial		472.7		13.0		1.0		484.7
Credit-Industrial		460.5		11.0		1.6		469.9
Credit-Utility		146.2		3.8		2.8		147.2
Structured securities:
CMO/MBS-agency ⁽¹⁾		160.8		8.2		0.3		168.7
CMO/MBS-non agency		12.6		0.8		—		13.4
CMBS ⁽²⁾		184.4		1.7		0.1		186.0
ABS ⁽³⁾		223.2		1.0		0.8		223.4
Foreign denominated:
Governments		157.1		1.5		17.0		141.6
Credit		240.8		3.6		35.0		209.4
Total fixed maturities		2,778.6		69.6		59.6		2,788.6
Equity securities		315.3		177.2		9.1		483.4
Other investments		501.8		19.2		0.1		520.9
Short-term investments		271.8		—		0.3		271.5
Total investments	$	3,867.5	$	266.0	$	69.1	$	4,064.4

⁽¹⁾	Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”).

⁽²⁾	Commercial mortgage-backed securities (“CMBS”).

⁽³⁾	Asset-backed securities (“ABS”).

December 31, 2014
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities
USD denominated:
U.S. Governments	$	184.0	$	1.3	$	0.3	$	185.0
Non-U.S. Governments		79.9		0.6		0.6		79.9
Obligations of states and political subdivisions		468.1		22.9		0.3		490.7
Credit-Financial		508.1		12.3		2.3		518.1
Credit-Industrial		493.7		9.4		3.5		499.6
Credit-Utility		142.7		3.2		3.9		142.0
Structured securities:
CMO/MBS-agency ⁽¹⁾		168.0		8.0		0.7		175.3
CMO/MBS-non agency		13.2		0.8		—		14.0
CMBS ⁽²⁾		178.6		1.6		0.2		180.0
ABS ⁽³⁾		221.4		0.6		1.0		221.0
Foreign denominated:
Governments		148.4		1.2		9.4		140.2
Credit		211.1		2.7		18.9		194.9
Total fixed maturities		2,817.2		64.6		41.1		2,840.7
Equity securities		307.3		184.1		5.1		486.3
Other investments		488.9		7.5		1.3		495.1
Short-term investments		275.8		—		—		275.8
Total investments	$	3,889.2	$	256.2	$	47.5	$	4,097.9

⁽¹⁾	Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”).

⁽²⁾	Commercial mortgage-backed securities (“CMBS”).

⁽³⁾	Asset-backed securities (“ABS”).

Included in “Total investments” in our Consolidated Balance Sheets at March 31, 2015 and December 31, 2014 is $70.9 million and $75.2 million, respectively, of assets managed on behalf of the trade capital providers, who are third-party participants that provide underwriting capital to our Syndicate 1200 segment.

Contractual Maturity

The amortized cost and fair values of fixed maturity investments as of March 31, 2015, by contractual maturity, were as follows:

(in millions)	Amortized Cost		Fair Value
Due in one year or less	$	258.8	$	252.6
Due after one year through five years		1,171.1		1,166.9
Due after five years through ten years		582.5		589.5
Thereafter		185.2		188.1
Structured securities		581.0		591.5
Total	$	2,778.6	$	2,788.6

The expected maturities may differ from the contractual maturities because debtors may have the right to call or prepay obligations.

Other Invested Assets

Details regarding the carrying value and unfunded investment commitments of the other invested assets portfolio as of March 31, 2015 and December 31, 2014 were as follows:

March 31, 2015
(in millions)	Carrying Value		Unfunded Commitments
Investment Type
Hedge funds	$	145.5	$	—
Private equity		139.6		60.6
Long only funds		115.0		—
Other investments		120.8		—
Total other invested assets	$	520.9	$	60.6

December 31, 2014
(in millions)	Carrying Value		Unfunded Commitments
Investment Type
Hedge funds	$	153.2	$	—
Private equity		123.6		72.9
Long only funds		104.4		—
Other investments		113.9		—
Total other invested assets	$	495.1	$	72.9

The following describes each investment type:

·	Hedge funds: Hedge funds include equity long/short, multi-strategy credit, relative value credit and distressed event credit funds.

Private equity: Private equity includes buyout funds, real asset/infrastructure funds, credit special situations funds, mezzanine lending funds and direct investments and strategic non-controlling minority investments in private companies that are principally accounted for using the equity method of accounting.

·	Long only funds: These funds include a long-only fund that invest in high yield fixed income securities and funds that primarily invest in distressed debt.

Other investments: Other investments include assets on deposit with various regulatory authorities to support Syndicate 1200 segment’s insurance and reinsurance operations and foreign exchange currency forward contracts to manage exposure on losses related to global catastrophic events, our Canadian dollar investment portfolio and certain Euro denominated investments.

Unrealized Losses and Other-than-temporary Impairments

An aging of unrealized losses on our investments in fixed maturities, equity securities, other investments and short-term investments is presented below:

March 31, 2015	Less Than One Year				One Year or Greater				Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities
USD denominated:
U.S. Governments ⁽²⁾	$	18.6	$	0.1	$	4.1	$	—	$	22.7	$	0.1
Non-U.S. Governments		9.0		0.3		3.4		0.2		12.4		0.5
Obligations of states and political subdivisions		21.1		0.1		9.2		0.3		30.3		0.4
Credit-Financial		103.2		0.9		8.4		0.1		111.6		1.0
Credit-Industrial ⁽²⁾		85.0		1.6		8.2		—		93.2		1.6
Credit-Utility ⁽²⁾		44.3		2.8		1.5		—		45.8		2.8
Structured securities:
CMO/MBS-agency ⁽¹⁾		5.2		—		8.1		0.3		13.3		0.3
CMBS ⁽²⁾		28.4		0.1		3.5		—		31.9		0.1
ABS		74.9		0.5		8.5		0.3		83.4		0.8
Foreign denominated:
Governments		125.5		17.0		—		—		125.5		17.0
Credit		199.2		34.8		0.9		0.2		200.1		35.0
Total fixed maturities		714.4		58.2		55.8		1.4		770.2		59.6
Equity securities		73.3		9.1		—		—		73.3		9.1
Other investments		0.2		0.1		—		—		0.2		0.1
Short-term investments		20.7		0.3		—		—		20.7		0.3
Total	$	808.6	$	67.7	$	55.8	$	1.4	$	864.4	$	69.1

⁽¹⁾ Unrealized losses less than one year are less than $0.1 million.

⁽²⁾ Unrealized losses one year or greater are less than $0.1 million.

December 31, 2014	Less Than One Year					One Year or Greater				Total
(in millions)	Fair Value			Unrealized Losses		Fair Value		Unrealized Losses		Fair Value			Unrealized Losses
Fixed maturities
USD denominated:
U.S. Governments	$	55.0		$	0.2	$	15.7	$	0.1	$	70.7		$	0.3
Non-U.S. Governments		36.5			0.4		5.2		0.2		41.7			0.6
Obligations of states and political subdivisions		10.4			0.1		16.6		0.2		27.0			0.3
Credit-Financial		195.7			2.2		11.1		0.1		206.8			2.3
Credit-Industrial		240.8			3.3		12.2		0.2		253.0			3.5
Credit-Utility		63.1			3.8		1.9		0.1		65.0			3.9
Structured securities:
CMO/MBS-agency		10.1			0.1		19.2		0.6		29.3			0.7
CMBS		49.3			0.1		6.0		0.1		55.3			0.2
ABS		129.2			0.7		8.1		0.3		137.3			1.0
Foreign denominated:
Governments		123.7			9.3		11.2		0.1		134.9			9.4
Credit		190.8			18.7		0.9		0.2		191.7			18.9
Total fixed maturities		1,104.6			38.9		108.1		2.2		1,212.7			41.1
Equity securities		53.6			5.1		—		—		53.6			5.1
Other investments		(0.9	)		1.3		—		—		(0.9	)		1.3
Short-term investments		—			—		—		—		—			—
Total	$	1,157.3		$	45.3	$	108.1	$	2.2	$	1,265.4		$	47.5

We regularly evaluate our investments for other than temporary impairment. For fixed maturity securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized book value. For structured securities, frequency and severity of loss inputs are used in projecting future cash flows of the securities. Loss frequency is measured as the credit default rate, which includes such factors as loan-to-value ratios and credit scores of borrowers. For equity securities and other investments, the length of time and the amount of decline in fair value are the principal factors in determining other-than-temporary impairment. We also recognize other-than-temporary losses on fixed maturity securities that we intend to sell.

We hold a total of 6,406 securities, of which 1,830 were in an unrealized loss position for less than one year and 90 were in an unrealized loss position for a period one year or greater as of March 31, 2015. Unrealized losses greater than twelve months on fixed maturities were the result of a number of factors, including increased credit spreads, foreign currency fluctuations and higher market yields relative to the date the securities were purchased, and for structured securities, by the performance of the underlying collateral, as well. In considering whether an investment is other-then-temporarily impaired or not, we also considered that we do not intend to sell the investments and it is unlikely that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. In situations where we did not recognize other-than-temporary losses on investments in our equity portfolio, we have evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and based on that evaluation, have the ability and intent to hold these investments until a recovery of the cost basis. We do not consider these investments to be other-than-temporarily impaired at March 31, 2015.

We recognized other-than-temporary losses on our fixed maturities portfolio of $0.4 million for the three months ended March 31, 2015. We recognized other-than-temporary losses on our equity portfolio of $0.1 million for the three months ended March 31, 2015. We did not recognize any other-than-temporary losses on our fixed maturities or equity portfolios for the three months ended March 31, 2014.

Realized Gains and Losses

The following table presents our gross realized investment gains (losses) and other:

	For the Three Months Ended March 31,
(in millions)	2015			2014
Realized gains
Fixed maturities	$	4.1		$	4.6
Equity securities		3.8			6.5
Other investments		20.9			12.7
Gain on sale of real estate holdings		0.3			—
Gross realized investment gains		29.1			23.8
Realized losses
Fixed maturities		(3.7	)		(3.5	)
Equity securities		(0.7	)		(0.1	)
Other investments		(7.1	)		(4.9	)
Short-term investments		(1.1	)		(0.2	)
Other assets		—			(4.0	)
Other-than-temporary impairment losses on fixed maturities		(0.4	)		—
Other-than-temporary impairment losses on equity securities		(0.1	)		—
Gross realized investment and other losses		(13.1	)		(12.7	)
Net realized investment gains and other	$	16.0		$	11.1

Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows:

(in millions)	Fixed Maturities			Equity Maturities			Other Investments		Other			Real Estate Holdings		Tax Effects			Total
Three Months Ended March 31, 2015
Realized before impairments	$	0.4		$	3.1		$	13.8	$	(1.1	)	$	0.3	$	(6.1	)	$	10.4
Realized - impairments		(0.4	)		(0.1	)		—		—			—		0.2			(0.3	)
Change in unrealized		(12.3	)		(10.8	)		1.6		(0.3	)		—		2.9			(18.9	)
Three Months Ended March 31, 2014
Realized before impairments	$	1.1		$	6.4		$	7.8	$	(4.2	)	$	—	$	(3.5	)	$	7.6
Realized - impairments		—			—			—		—			—		—			—
Change in unrealized		8.1			(3.1	)		—		—			—		3.7			8.7

We enter into foreign currency exchange forward contracts to manage currency exposure on losses related to certain global catastrophe events. These currency forward contracts are carried at fair value in our Consolidated Balance Sheets in “Other investments.” The realized and unrealized gains and losses on these contracts are included in “Net realized investment and other gains” in our Consolidated Statements of Income. The notional amount of these currency forward contracts was $8.7 million and $46.6 million at March 31, 2015 and 2014, respectively. The fair value of these currency forward contracts was a gain of $0.1 million and $1.2 million at March 31, 2015 and 2014, respectively. For the three months ended March 31, 2015 and 2014, we recognized $0.3 million and $2.3 million in realized gains and $1.2 million and $1.3 million in realized losses, respectively, from these currency forward contracts.

In the third quarter of 2014, we entered into foreign currency exchange forward contracts to manage currency exposure on our Canadian dollar (“CAD”) investment portfolio. The currency forward contracts are carried at fair value in our Consolidated Balance Sheets in “Other investments.” The realized and unrealized gains and losses are included in “Net realized investment and other gains” in our Consolidated Statements of Income. The notional amount of the currency forward contracts was CAD 141.8 million (USD $112.1 million) as of March 31, 2015. The fair value of the currency forward contracts was a gain of $6.4 million as of March 31, 2015. For the three months ended March 31, 2015, we recognized $7.5 million in realized gains and $2.0 million in realized losses, respectively, from the CAD currency forward contracts.

We also enter into foreign currency exchange forward contracts to manage currency exposure on certain Euro denominated investments. The currency forward contracts are carried at fair value in our Consolidated Balance Sheets in “Other investments.” The realized and unrealized gains and losses are included in “Net realized investment and other gains” in our Consolidated Statements of Income. The fair value of the currency forward contracts was $5.8 million as of March 31, 2015. For the three months ended March 31, 2015, we recognized $6.3 million in realized gains from the currency forward contracts. The fair value of the currency forward contracts at March 31, 2014 and the amounts recognized in realized gains for the three months ended March 31, 2014 were not significant.

Regulatory Deposits, Pledged Securities and Letters of Credit

At March 31, 2015, the amortized cost and fair value of investments on deposit with U.S., Canadian and various agencies for regulatory purposes were $184.3 million and $191.8 million, respectively. At December 31, 2014, the amortized cost and fair value of investments on deposit with U.S., Canadian and various agencies for regulatory purposes were $186.6 million and $194.2 million, respectively.

At March 31, 2015, investments with an amortized cost of $48.9 million and fair value of $49.2 million were pledged as collateral in support of irrevocable letters of credit (“LOCs”) in the amount of $36.2 million issued under the terms of certain reinsurance agreements in respect of reported loss and loss expense reserves. At December 31, 2014, investments with an amortized cost of $55.0 million and fair value of $55.3 million were pledged as collateral in support of irrevocable LOCs in the amount of $43.6 million issued under the terms of certain reinsurance agreements in respect of reported loss and loss expense reserves.

Our Corporate member’s capital supporting our Lloyd’s business was $209.3 million and $217.9 million at March 31, 2015 and December 31, 2014, respectively.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market. Market participants are buyers and sellers in the principal (or most advantageous) market that are independent, knowledgeable, able to transact for the asset or liability and willing to transfer the asset or liability.

Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. The inputs of these valuation techniques are categorized into three levels.

—	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the reporting date. We define actively traded as a security that has traded in the past seven days. We receive one quote per instrument for Level 1 inputs.

—	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. We receive one quote per instrument for Level 2 inputs.

—	Level 3 inputs are unobservable inputs. Unobservable inputs reflect our own judgments about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

We receive fair value prices from third-party pricing services and our outside investment managers. These prices are determined using observable market information such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. We have reviewed the processes used by the third-party providers for pricing the securities, and have determined that these processes result in fair values consistent with GAAP requirements. In addition, we review these prices for reasonableness, and have not adjusted any prices received from the third-party providers as of March 31, 2015. A description of the valuation techniques we use to measure assets at fair value is as follows:

Fixed Maturities (Available-for-Sale) Levels 1 and 2:

—	United States Treasury securities are typically valued using Level 1 inputs. For these securities, we obtain fair value measurements from third-party pricing services using quoted prices (unadjusted) in active markets at the reporting date.

—

United States Government agencies, non-U.S. Government securities, obligations of states and political subdivisions, credit securities and foreign denominated securities are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, yield curves, live trading levels, trade execution data, credit information and the security’s terms and conditions, among other things.

—

CMO/MBS agency, CMO/MBS non-agency, CMBS, ABS residential and ABS non-residential securities are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

Equity Securities Level 1: Equity securities are principally reported at fair value using Level 1 inputs. For these securities, we obtain fair value measurements from a third-party pricing service using quoted prices (unadjusted) in active markets at the reporting date.

Equity Securities Level 2: We own interests in equity and mutual funds that are reported at fair value using Level 2 inputs. The valuations are based on the funds’ net asset value per share, determined weekly or at the end of each month. The underlying assets in the funds are valued primarily on the basis of closing market quotations or official closing prices on each valuation day.

Equity Securities Level 3: We own certain equity securities that are reported at fair value using Level 3 inputs. The valuation techniques for these securities include the following:

—	Fair value measurements are obtained from the National Association of Insurance Commissioners’ Security Valuation Office at the reporting date.

—	Fair value measurements for an investment in an equity fund obtained by applying final prices provided by the administrator of the fund, which is based upon certain estimates and assumptions.

Other Investments Level 2: Foreign regulatory deposits are assets held in trust in jurisdictions where there is a legal and regulatory requirement to maintain funds locally in order to protect policyholders. Lloyd’s is the appointed investment manager for the funds. These assets are invested in short-term government securities, agency securities and corporate bonds and are valued using Level 2 inputs based upon values obtained from Lloyd’s. Foreign currency future contracts are valued by our counterparty using market driven foreign currency exchange rates and are considered Level 2 investments.

Short-term Investments: Short-term investments are principally reported at fair value using Level 1 inputs, with the exception of short-term corporate bonds reported at fair value using Level 2 inputs as described in the fixed maturities section above. Values for the investments categorized as Level 1 are obtained from various financial institutions as of the reporting date.

Transfers Between Level 1 and Level 2 Securities: There were no transfers between Level 1 and Level 2 securities during the three months ended March 31, 2015.

Based on an analysis of the inputs, our financial assets measured at fair value on a recurring basis have been categorized as follows:

			Fair Value Measurements at Reporting Date Using
(in millions)	March 31, 2015		Level 1 ^(a)		Level 2 ^(b)		Level 3 ^(c)
Fixed maturities
USD denominated:
U.S. Governments	$	182.8	$	102.0	$	80.8	$	—
Non-U.S. Governments		81.5		—		81.5		—
Obligations of states and political subdivisions		480.0		—		480.0		—
Credit-Financial		484.7		—		484.7		—
Credit-Industrial		469.9		—		469.9		—
Credit-Utility		147.2		—		147.2		—
Structured securities:
CMO/MBS-agency		168.7		—		168.7		—
CMO/MBS-non agency		13.4		—		13.4		—
CMBS		186.0		—		186.0		—
ABS		223.4		—		223.4		—
Foreign denominated:
Governments		141.6		—		141.6		—
Credit		209.4		—		209.4		—
Total fixed maturities		2,788.6		102.0		2,686.6		—
Equity securities		483.4		482.6		—		0.8
Other investments		104.9		—		104.9		—
Short-term investments		271.5		271.1		0.4		—
	$	3,648.4	$	855.7	$	2,791.9	$	0.8

^(a)	Quoted prices in active markets for identical assets

^(b)	Significant other observable inputs

^(c)	Significant unobservable inputs

			Fair Value Measurements at Reporting Date Using
(in millions)	December 31, 2014		Level 1 ^(a)		Level 2 ^(b)		Level 3 ^(c)
Fixed maturities
USD denominated:
U.S. Governments	$	185.0	$	99.2	$	85.8	$	—
Non-U.S. Governments		79.9		—		79.9		—
Obligations of states and political subdivisions		490.7		—		490.7		—
Credit-Financial		518.1		—		518.1		—
Credit-Industrial		499.6		—		499.6		—
Credit-Utility		142.0		—		142.0		—
Structured securities:
CMO/MBS-agency		175.3		—		175.3		—
CMO/MBS-non agency		14.0		—		14.0		—
CMBS		180.0		—		180.0		—
ABS		221.0		—		221.0		—
Foreign denominated:
Governments		140.2		—		140.2		—
Credit		194.9		—		194.9		—
Total fixed maturities		2,840.7		99.2		2,741.5		—
Equity securities		486.3		485.4		—		0.9
Other investments		97.3		—		97.3		—
Short-term investments		275.8		273.9		1.9		—
	$	3,700.1	$	858.5	$	2,840.7	$	0.9

^(a)	Quoted prices in active markets for identical assets

^(b)	Significant other observable inputs

^(c)	Significant unobservable inputs

The fair value measurements in the tables above do not equal “Total investments” on our Consolidated Balance Sheets as they exclude certain other investments that are accounted for under the equity-method of accounting.

A reconciliation of the beginning and ending balances for the investments categorized as Level 3 are as follows:

Fair Value Measurements Using Observable Inputs (Level 3)

(in millions)	Equity Securities			Total
Beginning balance, January 1, 2015	$	0.9		$	0.9
Transfers into Level 3		—			—
Transfers out of Level 3		—			—
Total gains or losses (realized/unrealized):
Included in net income (loss)		—			—
Included in other comprehensive income (loss)		—			—
Purchases, issuances, sales, and settlements
Purchases		—			—
Issuances		—			—
Sales		(0.1	)		(0.1	)
Settlements		—			—
Ending balance, March 31, 2015	$	0.8		$	0.8
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2015	$	—		$	—

(in millions)	Equity Securities			Other Assets			Total
Beginning balance, January 1, 2014	$	1.3		$	2.6		$	3.9
Transfers into Level 3		—			—			—
Transfers out of Level 3		—			—			—
Total gains or losses (realized/unrealized):
Included in net income (loss)		—			—			—
Included in other comprehensive income (loss)		0.1			—			0.1
Purchases, issuances, sales, and settlements
Purchases		—			—			—
Issuances		—			—			—
Sales		(0.5	)		—			(0.5	)
Settlements		—			(2.6	)		(2.6	)
Ending balance, December 31, 2014	$	0.9		$	—		$	0.9
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2014	$	—		$	—		$	—

At March 31, 2015 and December 31, 2014, we did not have any financial assets or financial liabilities measured at fair value on a nonrecurring basis or any financial liabilities on a recurring basis.