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:



	March 31, 2017				December 31, 2016
	Fair Value		Amortized Cost		Fair Value		Amortized Cost
U.S. government and government agencies	$	1,410.5	$	1,433.9	$	1,426.0	$	1,454.5
Non-U.S. government and government agencies	543.2		554.2		469.9		496.5
States, municipalities and political subdivisions	41.7		40.7		354.1		355.8
Corporate debt:
Financial institutions	1,046.4		1,043.2		1,032.7		1,033.6
Industrials	1,379.2		1,375.8		1,321.3		1,322.3
Utilities	153.2		153.3		140.0		140.7
Mortgage-backed:
Agency mortgage-backed	595.6		593.9		614.5		612.5
Non-agency residential mortgage-backed	23.4		22.0		23.9		22.7
Commercial mortgage-backed	467.1		491.5		598.0		636.1
Asset-backed	812.8		827.3		757.3		772.6
Total fixed maturity investments, trading	$	6,473.1	$	6,535.6	$	6,737.7	$	6,847.4



	March 31, 2017				December 31, 2016
	Fair Value		Original Cost		Fair Value		Original Cost
Equity securities	$	255.2	$	237.7	$	243.9	$	235.0
Other invested assets	902.7		842.6		897.8		831.2
	$	1,157.9	$	1,080.3	$	1,141.7	$	1,066.2

Other invested assets, included in the table above, include investments in private equity funds and hedge funds 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 March 31, 2017 and December 31, 2016 were as follows:



Investment Type	Carrying Value as of March 31, 2017		Investments with Redemption Restrictions		Estimated Remaining Restriction Period	Investments without Redemption Restrictions		Redemption Frequency⁽¹⁾	Redemption Notice Period⁽¹⁾	Unfunded Commitments
Private equity	$	281.5	$	281.5	1 - 15 Years	$	—			$	208.8
Levered credit	211.2		211.2		3 - 9 Years	—				189.2
Real estate	68.9		68.9		6 - 8 Years	—				191.6
Distressed	4.8		4.8		1 Year	—				3.8
Total private equity	566.4		566.4			—				593.4
Distressed	173.3		—			173.3		Quarterly	60 Days	—
Relative value credit	87.4		—			87.4		Quarterly	60 Days	—
Equity long/short	65.1		—			65.1		Quarterly	45 Days	—
Fund of funds	10.5		—			10.5		Quarterly	60 Days	—
Total hedge funds	336.3		—			336.3				—
Total other invested assets at fair value	902.7		566.4			336.3				593.4
Other private securities	63.9		—			63.9				—
Total other invested assets	$	966.6	$	566.4		$	400.2			$	593.4



Investment Type	Carrying Value as of December 31, 2016		Investments with Redemption Restrictions		Estimated Remaining Restriction Period	Investments without Redemption Restrictions		Redemption Frequency⁽¹⁾	Redemption Notice Period⁽¹⁾	Unfunded Commitments
Private equity	$	281.0	$	281.0	1 - 15 Years	$	—			$	219.3
Levered credit	204.9		204.9		3 - 9 Years	—				190.8
Real estate	68.9		68.9		6 - 8 Years	—				191.6
Distressed	5.0		5.0		1 Year	—				3.8
Total private equity	559.8		559.8			—				605.5
Distressed	175.3		—			175.3		Quarterly	60 Days	—
Relative value credit	84.8		—			84.8		Quarterly	60 Days	—
Equity long/short	67.9		—			67.9		Quarterly	45 Days	—
Fund of Funds	10.0		—			10.0		Quarterly	60 Days	—
Total hedge funds	338.0		—			338.0				—
Total other invested assets at fair value	897.8		559.8			338.0				605.5
Other private securities	62.9		—			62.9				—
Total other invested assets	$	960.7	$	559.8		$	400.9			$	605.5

_______________________


⁽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 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 include 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.


•	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.

c) Net Investment Income



	Three Months Ended March 31,
	2017			2016
Fixed maturity investments	$	44.9		$	48.0
Equity securities	2.9			1.8
Other invested assets: hedge funds and private equity	7.0			4.7
Other invested assets: other private securities	1.0			3.1
Cash and cash equivalents	0.9			0.5
Expenses	(4.4		)	(4.8		)
Net investment income	$	52.3		$	53.3

d) Components of Realized Gains and Losses



	Three Months Ended March 31,
	2017			2016
Gross realized gains on sale of invested assets	$	23.8		$	54.0
Gross realized losses on sale of invested assets	(32.3		)	(41.9		)
Net realized and unrealized losses on derivatives	(4.0		)	(22.9		)
Mark-to-market gains (losses):
Fixed maturity investments, trading	46.7			62.3
Equity securities, trading	12.9			(15.1		)
Other invested assets, trading	(6.4		)	(17.5		)
Net realized investment gains	$	40.7		$	18.9

e) Pledged Assets

As of March 31, 2017 and December 31, 2016, $2,719.8 million and $2,687.7 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 March 31, 2017 and December 31, 2016, a further $575.3 million and $587.6 million, respectively, of cash and cash equivalents and investments were pledged as collateral for the Company’s letter of credit facilities. 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, 2016 for details on the Company’s credit facilities.