INVESTMENTS

a) Trading Securities

Securities accounted for at fair value with changes in fair value recognized in the unaudited condensed consolidated statements of operations and comprehensive income (“consolidated income statements”) by category are as follows:



	September 30, 2014				December 31, 2013
	Fair Value		Amortized Cost		Fair Value		Amortized Cost
U.S. Government and Government agencies	$	1,184,115	$	1,186,185	$	1,676,788	$	1,684,832
Non-U.S. Government and Government agencies	219,287		229,792		191,776		197,082
States, municipalities and political subdivisions	260,690		251,628		231,555		234,406
Corporate debt:
Financial institutions	1,194,949		1,185,637		958,794		943,518
Industrials	1,202,906		1,201,341		1,174,047		1,165,448
Utilities	125,513		125,202		69,426		69,658
Mortgage-backed	1,240,362		1,196,683		1,292,502		1,267,863
Asset-backed	700,415		698,284		505,910		502,543
Total fixed maturity investments	$	6,128,237	$	6,074,752	$	6,100,798	$	6,065,350



	September 30, 2014				December 31, 2013
	Fair Value		Original Cost		Fair Value		Original Cost
Equity securities	$	945,076	$	901,300	$	699,846	$	647,301
Other invested assets	806,124		701,794		764,081		658,683
	$	1,751,200	$	1,603,094	$	1,463,927	$	1,305,984

Other invested assets, included in the table above, include investments in private equity funds, hedge funds and a high yield loan fund that are accounted for at fair value, but excludes other private securities described below in Note 4(b) that are accounted for using the equity method of accounting.

b) Other Invested Assets

Details regarding the carrying value, redemption characteristics and unfunded investment commitments of the other invested assets portfolio as of September 30, 2014 and December 31, 2013 were as follows:



Investment Type	Carrying Value as of September 30, 2014		Investments with Redemption Restrictions		Estimated Remaining Restriction Period	Investments without Redemption Restrictions		Redemption Frequency(1)	Redemption Notice Period(1)	Unfunded Commitments
Private equity	$	179,196	$	179,196	2 - 9 Years	$	—			$	223,030
Mezzanine debt	114,399		114,399		5 - 9 Years	—				251,486
Distressed	9,516		9,516		4 Years	—				5,119
Total private equity	303,111		303,111			—				479,635
Distressed	173,111		173,111		1 Year	—				—
Equity long/short	111,627		86,721		1 Year	24,906		Quarterly	30 -60 Days	—
Multi-strategy	81,576		—			81,576		Quarterly	45 -90 Days	—
Relative value credit	105,155		—			105,155		Quarterly	60 Days	—
Total hedge funds	471,469		259,832			211,637				—
High yield loan fund	31,544		—			31,544		Monthly	30 days	—
Total other invested assets at fair value	806,124		562,943			243,181				479,635
Other private securities	123,077		—			123,077				—
Total other invested assets	$	929,201	$	562,943		$	366,258			$	479,635



Investment Type	Carrying Value as of December 31, 2013		Investments with Redemption Restrictions		Estimated Remaining Restriction Period	Investments without Redemption Restrictions		Redemption Frequency(1)	Redemption Notice Period(1)	Unfunded Commitments
Private equity	$	144,422	$	144,422	2 - 9 Years	$	—			$	263,519
Mezzanine debt	64,627		64,627		8 - 9 Years	—				198,756
Distressed	7,776		7,776		4 Years	—				5,249
Total private equity	216,825		216,825			—				467,524
Distressed	151,227		151,227		1 - 2 Years	—				—
Equity long/short	99,365		—			99,365		Quarterly	30 -60 Days	—
Multi-strategy	136,958		—			136,958		Quarterly	45 -90 Days	—
Event driven	14,018		—			14,018		Annual	60 Days	—
Relative value credit	113,730		—			113,730		Quarterly	60 Days	—
Total hedge funds	515,298		151,227			364,071				—
High yield loan fund	31,958		—			31,958		Monthly	30 days	—
Total other invested assets at fair value	764,081		368,052			396,029				467,524
Other private securities	147,311		—			147,311				—
Total other invested assets	$	911,392	$	368,052		$	543,340			$	467,524

_______________________


(1)	The redemption frequency and notice periods only apply to the investments without redemption restrictions. Some or all of these investments may be subject to a gate as described below.

In general, the Company has invested in hedge funds that require at least 30 days’ notice of redemption and may be redeemed on a monthly, quarterly, semi-annual, annual or longer basis, depending on the fund. Certain hedge funds have lock-up periods ranging from one to three years from initial investment. A lock-up period refers to the initial amount of time an investor is contractually required to invest before having the ability to redeem. Funds that provide for periodic redemptions may, depending on the funds’ governing documents, have the ability to deny or delay a redemption request, called a “gate.” The fund may implement this restriction because the aggregate amount of redemption requests as of a particular date exceeds a specified level, generally ranging from 15% to 25% of the fund’s net assets. The gate is a method for executing an orderly redemption process to reduce the possibility of adversely affecting investors in the fund. Typically, the imposition of a gate delays a portion of the requested redemption, with the remaining portion settled in cash sometime after the redemption date. Certain funds may impose a redemption fee on early redemptions. Interests in private equity funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund.

The following describes each investment type:

•

Private equity funds: Primary funds may invest in companies and general partnership interests. Secondary funds buy limited partnership interests from existing limited partners of primary private equity funds. As owners of private equity funds seek liquidity, they can sell their existing investments, plus any remaining commitment, to secondary market participants. These funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund.

•

Mezzanine debt funds: Mezzanine debt funds primarily focus on providing capital to upper middle market and middle market companies and private equity sponsors, in connection with leveraged buyouts, mergers and acquisitions, recapitalizations, growth financings and other corporate transactions. The most common position in the capital structure will be between the senior secured debt holder and the equity; however, the funds will utilize a flexible approach when structuring investments, which may include secured debt, subordinated debt, preferred stock and/or private equity. These funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund.

•

Distressed funds: In distressed debt investing, managers take positions in the debt of companies experiencing significant financial difficulties, including bankruptcy, or in certain positions of the capital structure of structured securities. The manager relies on the fundamental analysis of these securities, including the claims on the assets and the likely return to bondholders. Certain funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund.


•	Equity long/short funds: In equity long/short funds, managers take long positions in companies they deem to be undervalued and short positions in companies they deem to be overvalued. Long/short managers may invest in countries, regions or sectors and vary by their use of leverage and by their targeted net long position.


•	Multi-strategy funds: These funds may utilize many strategies employed by specialized funds including distressed investing, equity long/short, merger arbitrage, convertible arbitrage, fixed income arbitrage and macro trading.

•

Event driven funds: Event driven strategies seek to deploy capital into specific securities whose returns are affected by a specific event that affects the value of one or more securities of a company. Returns for such securities are linked primarily to the specific outcome of the events and not by the overall direction of the bond or stock markets. Examples could include mergers and acquisitions (arbitrage), corporate restructurings and spin-offs, and capital structure arbitrage.


•	Relative value credit funds: These funds seek to take exposure to credit-sensitive securities, long and/or short, based upon credit analysis of issuers and securities and credit market views.


•	High yield loan fund: A long-only private mutual fund that invests in high yield fixed income securities.


•	Other private securities: These securities include strategic non-controlling minority investments in private asset management companies and other insurance related investments that are accounted for using the equity method of accounting.

c) Net Investment Income



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Fixed maturity investments	$	38,762		$	31,179		$	110,998		$	96,366
Equity securities	3,711			6,110			12,876			13,718
Other invested assets: hedge funds and private equity	2,249			3,812			8,767			6,001
Other invested assets: other private securities	3,292			1,997			7,291			5,115
Cash and cash equivalents	552			302			1,562			1,319
Expenses	(5,154		)	(4,129		)	(13,670		)	(12,225		)
Net investment income	$	43,412		$	39,271		$	127,824		$	110,294

Net investment income from other invested assets: other private securities included the distributed and undistributed net income from investments accounted for using the equity method of accounting. The income reported for other invested assets: other private securities for the nine months ended September 30, 2014 included a loss of $9,348 recorded for an equity method investment due to impairment charges that it recorded.

d) Components of Realized Gains and Losses



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Gross realized gains on sale of invested assets	$	28,773		$	51,915		$	146,780		$	154,387
Gross realized losses on sale of invested assets	(9,955		)	(40,770		)	(26,228		)	(82,812		)
Net realized and unrealized gains (losses) on derivatives	2,171			(4,169		)	(24,469		)	3,392
Mark-to-market (losses) gains:
Fixed maturity investments, trading	(40,843		)	30,383			18,039			(101,205		)
Equity securities, trading	(8,479		)	(17,198		)	(8,768		)	(18,555		)
Other invested assets, trading	(6,803		)	7,326			(1,068		)	36,719
Net realized investment (losses) gains	$	(35,136	)	$	27,487		$	104,286		$	(8,074	)

e) Pledged Assets

As of September 30, 2014 and December 31, 2013, $3,082,601 and $2,894,401, respectively, of cash and cash equivalents and investments were deposited, pledged or held in trust accounts in favor of ceding companies and other counterparties or government authorities to comply with reinsurance contract provisions, insurance laws and other contract provisions.

In addition, as of September 30, 2014 and December 31, 2013, a further $543,828 and $1,053,632, respectively, of cash and cash equivalents and investments were pledged as collateral for the Company’s letter of credit facilities. See Note 10(d) to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for details on the Company’s credit facilities.