INVESTMENTS

a) Trading Securities

Securities accounted for at fair value with changes in fair value recognized in the consolidated income statements by category are as follows:



	December 31, 2014				December 31, 2013
	Fair Value		Amortized Cost		Fair Value		Amortized Cost
U.S. government and government agencies	$	1,610,502	$	1,610,880	$	1,676,788	$	1,684,832
Non-U.S. government and government agencies	188,199		196,332		191,776		197,082
States, municipalities and political subdivisions	170,567		165,615		231,555		234,406
Corporate debt:
Financial institutions	1,024,667		1,018,777		958,794		943,518
Industrials	1,029,729		1,037,820		1,174,047		1,165,448
Utilities	110,997		111,599		69,426		69,658
Mortgage-backed	1,263,517		1,219,712		1,292,502		1,267,863
Asset-backed	670,832		674,505		505,910		502,543
Total fixed maturity investments, trading	$	6,069,010	$	6,035,240	$	6,100,798	$	6,065,350



	December 31, 2014				December 31, 2013
	Fair Value		Cost		Fair Value		Cost
Equity securities	$	844,163	$	791,206	$	699,846	$	647,301
Other invested assets	812,543		725,069		764,081		658,683
	$	1,656,706	$	1,516,275	$	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 3(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 December 31, 2014 and 2013 were as follows:



Fund Type	Carrying Value as of December 31, 2014		Investments with Redemption Restrictions		Estimated Remaining Restriction Period	Investments without Redemption Restrictions		Redemption Frequency(1)	Redemption Notice Period(1)	Unfunded Commitments
Private equity (primary and secondary)	$	184,576	$	184,576	2 - 8 Years	$	—			$	223,802
Mezzanine debt	166,905		166,905		5 - 9 Years	—				204,232
Distressed	5,869		5,869		3 Years	—				5,180
Real estate	—		—		9 Years	—				50,000
Total private equity	357,350		357,350			—				483,214
Distressed	170,169		170,169			—		Based on net asset value	60 Days	—
Equity long/short	84,198		—			84,198		Quarterly	30 -60 Days	—
Multi-strategy	51,507		—			51,507		Quarterly	45 -90 Days	—
Relative value credit	119,156		—			119,156		Quarterly	60 Days	—
Total hedge funds	425,030		170,169			254,861				—
High yield loan fund	30,163		—			30,163		Monthly	30 days	—
Total other invested assets at fair value	812,543		527,519			285,024				483,214
Other private securities	142,966		—			142,966				—
Total other invested assets	$	955,509	$	527,519		$	427,990			$	483,214



Fund 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 (primary and secondary)	$	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.

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 is a summary of each investment type:

•

Private equity funds: Primary equity funds may invest in companies and general partnership interests. Secondary equity 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.

•

Real estate funds: Private real estate funds invest directly in commercial real estate (multifamily units, industrial buildings, office spaces, and retail stores) and some residential property. Real estate managers have diversified portfolios that generally follow core, core-plus, value-added, or opportunistic strategies. These 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.


•	Other private securities: These securities include strategic non-controlling minority investments in private asset management companies, claims handling companies and other service companies related to the insurance industry.

c) Net Investment Income



	Year Ended December 31,
	2014			2013			2012
Fixed maturity investments	$	149,449		$	130,380		$	157,437
Equity securities	17,581			19,076			17,080
Other invested assets: hedge funds and private equity	12,564			8,226			6,772
Other invested assets: other private securities	13,305			14,711			—
Cash and cash equivalents	2,134			2,010			2,319
Expenses	(18,159		)	(16,839		)	(16,467		)
Net investment income	$	176,874		$	157,564		$	167,141

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 year ended December 31, 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



	Year Ended December 31,
	2014			2013			2012
Gross realized gains on sale of invested assets	$	195,390		$	213,618		$	183,592
Gross realized losses on sale of invested assets	(48,239		)	(106,321		)	(51,702		)
Net realized and unrealized gains (losses) on derivatives	(39,007		)	9,485			(3,608		)
Mark-to-market gains (losses):
Debt securities, trading	(1,675		)	(117,577		)	106,328
Equity securities, trading	413			4,288			33,018
Other invested assets, trading	(17,925		)	56,032			38,808
Net realized investment gains	$	88,957		$	59,525		$	306,436
Proceeds from sale of available for sale securities	$	—		$	—		$	236,336

e) Pledged Assets

As of December 31, 2014 and 2013, $3,585,792 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 and insurance laws.

In addition, as of December 31, 2014 and 2013, a further $571,750 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(f) for details on the Company’s credit facilities.