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 (the “consolidated income statements”) by category are as follows:



	June 30, 2016				December 31, 2015
	Fair Value		Amortized Cost		Fair Value		Amortized Cost
U.S. government and government agencies	$	1,805.5	$	1,792.2	$	1,434.0	$	1,437.9
Non-U.S. government and government agencies	469.6		479.8		556.8		579.2
States, municipalities and political subdivisions	504.6		476.4		413.5		396.0
Corporate debt:
Financial institutions	1,223.6		1,205.8		1,275.4		1,277.3
Industrials	1,476.8		1,461.5		1,308.1		1,345.6
Utilities	140.4		140.3		118.9		125.4
Mortgage-backed
Agency mortgage-backed	757.0		742.1		751.8		745.4
Non-agency residential mortgage-backed	24.0		23.1		34.0		32.4
Commercial mortgage-backed	604.2		637.0		582.8		600.1
Asset-backed	788.5		810.8		726.2		751.1
Total fixed maturity investments	$	7,794.2	$	7,769.0	$	7,201.5	$	7,290.6



	June 30, 2016				December 31, 2015
	Fair Value		Original Cost		Fair Value		Original Cost
Equity securities	$	202.3	$	205.3	$	403.0	$	395.3
Other invested assets	820.0		767.0		840.2		770.9
	$	1,022.3	$	972.3	$	1,243.2	$	1,166.2

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 June 30, 2016 and December 31, 2015 were as follows:



Investment Type	Carrying Value as of June 30, 2016		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)	$	248.8	$	248.8	1 - 7 Years	$	—			$	245.7
Levered credit	218.4		218.4		4 - 8 Years	—				200.6
Real estate	25.3		25.3		7 - 9 Years	—				189.3
Distressed	5.1		5.1		2 Years	—				3.8
Total private equity	497.6		497.6			—				639.4
Distressed	168.5		0.1		2 Years	168.4		Monthly	90 Days	—
Relative value credit	81.8		—			81.8		Quarterly	60 Days	—
Equity long/short	62.2		—			62.2		Quarterly	45 Days	—
Fund of funds	9.9		—			9.9		Annual	60 Days	—
Total hedge funds	322.4		0.1			322.3				—
Total other invested assets at fair value	820.0		497.7			322.3				639.4
Other private securities	119.8		—			119.8				—
Total other invested assets	$	939.8	$	497.7		$	442.1			$	639.4



Investment Type	Carrying Value as of December 31, 2015		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)	$	236.4	$	236.4	1 - 7 Years	$	—			$	231.0
Levered credit	205.9		205.9		4 - 8 Years	—				179.0
Distressed	5.1		5.1		2 Years	—				3.8
Real estate	—		—		7 - 9 Years	—				200.0
Total private equity	447.4		447.4			—				613.8
Distressed	215.6		54.6		2 Years	161.0		Monthly	90 Days	—
Equity long/short	58.0		—			58.0		Quarterly	45 Days	—
Relative value credit	105.4		—			105.4		Quarterly	60 Days	—
Total hedge funds	379.0		54.6			324.4				—
High yield loan fund	13.8		—			13.8		Monthly	30 days	—
Total other invested assets at fair value	840.2		502.0			338.2				613.8
Other private securities	126.5		—			126.5				—
Total other invested assets	$	966.7	$	502.0		$	464.7			$	613.8

_______________________


⁽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 if 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 (primary and secondary): Primary equity funds includes funds that may invest in companies and general partnership interests, as well as direct investments. Secondary funds buy limited partnership interests from existing limited partners of primary private equity funds. As owners of private equity, funds may seek liquidity by selling their existing interests, 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 funds.

•

Levered credit (including mezzanine debt): Levered credit funds invest across the capital structures of upper middle market and middle market companies in connection with leveraged buyouts, mergers and acquisitions, recapitalizations, growth financings, refinancings and other corporate purposes. The most common position in the capital structure of mezzanine funds will be between the senior secured debt holder and the equity; however, the funds in which we are invested 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 funds.

•

Real estate funds: Private real estate funds invest directly (through debt and equity) in commercial real estate (multifamily, industrial, office, student housing and retail) as well as 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 funds.

•

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 funds.


•	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.


•	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.


•	Fund of funds: Fund of funds allocate assets among multiple investment managers unaffiliated with the fund of funds sponsor employing a variety of proprietary investment strategies. Fund of funds strategies will invest in a portfolio of funds that primarily pursue the following investment strategies: equity, macro, event driven and credit.


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


•	Other private securities: These securities mostly 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.

Unconsolidated Variable Interest Entities

As a result of the adoption of Accounting Standards Update 2015-02, “Amendments to the Consolidation Analysis”, which became effective January 1, 2016, certain limited partnership investments and similar legal entity investments were considered variable interest entities (“VIEs”) as there were no substantive kick-out or other participating rights. These VIEs will not be consolidated because the Company has determined it is not considered the primary beneficiary, as it does not have both the power to direct the activities that most significantly impact the economic performance of the entity and the obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. As such, the Company continues to record its interests in these entities at fair value, with changes in fair value recorded in the consolidated income statements. The Company's interests in these entities are recorded in “other invested assets” in the unaudited condensed consolidated balance sheets (“consolidated balance sheets”). The Company's maximum exposure to loss in these entities, which is the sum of the carrying value and the unfunded commitment, was $984.8 million as of June 30, 2016.

c) Net Investment Income



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Fixed maturity investments	$	48.9		$	41.2		$	96.9		$	77.4
Equity securities	1.4			4.9			3.3			8.4
Other invested assets: hedge funds and private equity	7.6			4.6			12.3			13.0
Other invested assets: other private securities	1.7			(3.8		)	4.7			(2.9		)
Cash and cash equivalents	0.8			0.4			1.3			0.9
Expenses	(4.6		)	(4.5		)	(9.4		)	(9.5		)
Net investment income	$	55.8		$	42.8		$	109.1		$	87.3

The loss from “other invested assets: other private securities” for the three and six months ended June 30, 2015 included an other-than-temporary impairment of $6.3 million related to one of the Company's equity method investments. The Company recorded the other-than-temporary impairment as the fair value of this investment was below its carrying value.

d) Components of Realized Gains and Losses



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Gross realized gains on sale of invested assets	$	46.1		$	36.1		$	100.2		$	81.4
Gross realized losses on sale of invested assets	(26.9		)	(10.1		)	(68.7		)	(23.1		)
Net realized and unrealized gains (losses) on derivatives	0.1			13.9			(22.9		)	2.3
Mark-to-market gains (losses):
Fixed maturity investments, trading	55.4			(52.7		)	117.7			(27.2		)
Equity securities, trading	0.9			(0.3		)	(14.2		)	5.1
Other invested assets, trading	(1.1		)	(7.1		)	(18.7		)	(13.7		)
Net realized investment gains (losses)	$	74.5		$	(20.2	)	$	93.4		$	24.8

e) Pledged Assets

As of June 30, 2016 and December 31, 2015, $2,873.4 million and $2,748.9 million, 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 June 30, 2016 and December 31, 2015, a further $587.1 million and $579.3 million, respectively, of cash and cash equivalents and investments were pledged as collateral for the Company’s letter of credit facilities.

In June 2016, the Company entered into a $200.0 million committed unsecured credit facility with a syndication of lenders (the “Credit Agreement”). The Credit Agreement provides for a $200.0 million five-year senior unsecured revolving credit facility (the “Facility”) for the making of revolving loans and short-term swingline loans. The aggregate commitment of $200.0 million under the Facility may be increased by up to $150.0 million upon the Company's request and upon the agreement of one or more lenders or additional lenders. The Facility replaces the four-year senior secured credit facility under the Amended and Restated Credit Agreement, dated as of June 7, 2012.

In addition, see Note 11(g) to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for further details on the Company’s credit facilities.