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INVESTMENTS (TABLES)
 12 Months Ended
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
AMORTIZED COST/COST AND FAIR VALUES OF FIXED MATURITIES AND EQUITIES
The amortized cost or cost and fair values of our fixed maturities and equities were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized
Cost or
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Non-credit
OTTI
in AOCI(5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
1,681,425

 
$
1,648

 
$
(27,004
)
 
$
1,656,069

 
$
—

 
 
Non-U.S. government
613,282

 
2,206

 
(49,654
)
 
565,834

 
—

 
 
Corporate debt
4,633,834

 
42,049

 
(75,140
)
 
4,600,743

 
—

 
 
Agency RMBS(1)
2,487,837

 
13,275

 
(35,977
)
 
2,465,135

 
—

 
 
CMBS(2)
664,368

 
5,433

 
(3,564
)
 
666,237

 
—

 
 
Non-Agency RMBS
57,316

 
1,628

 
(2,023
)
 
56,921

 
(823
)
 
 
ABS(3)
1,221,813

 
3,244

 
(2,843
)
 
1,222,214

 
—

 
 
Municipals(4)
163,441

 
1,510

 
(990
)
 
163,961

 
—

 
 
Total fixed maturities
$
11,523,316

 
$
70,993

 
$
(197,195
)
 
$
11,397,114

 
$
(823
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
Common stocks
379

 
41

 
(342
)
 
78

 
 
 
 
Exchange-traded funds
$
463,936

 
$
53,405

 
$
(2,634
)
 
$
514,707

 
 
 
 
Bond mutual funds
133,051

 
—

 
(9,092
)
 
123,959

 
 
 
 
Total equity securities
$
597,366

 
$
53,446

 
$
(12,068
)
 
$
638,744

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
1,673,617

 
$
1,545

 
$
(23,213
)
 
$
1,651,949

 
$
—

 
 
Non-U.S. government
809,025

 
2,312

 
(72,332
)
 
739,005

 
—

 
 
Corporate debt
4,442,315

 
16,740

 
(96,286
)
 
4,362,769

 
—

 
 
Agency RMBS(1)
2,236,138

 
22,773

 
(9,675
)
 
2,249,236

 
—

 
 
CMBS(2)
1,088,595

 
3,885

 
(9,182
)
 
1,083,298

 
—

 
 
Non-Agency RMBS
99,989

 
1,992

 
(973
)
 
101,008

 
(875
)
 
 
ABS(3)
1,387,919

 
952

 
(17,601
)
 
1,371,270

 
—

 
 
Municipals(4)
160,041

 
2,319

 
(1,146
)
 
161,214

 
—

 
 
Total fixed maturities
$
11,897,639

 
$
52,518

 
$
(230,408
)
 
$
11,719,749

 
$
(875
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
Common stocks
—

 
—

 
—

 
—

 
 
 
 
Exchange-traded funds
$
447,524

 
$
31,211

 
$
(4,762
)
 
$
473,973

 
 
 
 
Bond mutual funds
128,252

 
—

 
(4,227
)
 
124,025

 
 
 
 
Total equity securities
$
575,776

 
$
31,211

 
$
(8,989
)
 
$
597,998

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Residential mortgage-backed securities (RMBS) originated by U.S. government-sponsored agencies.
(2)
Commercial mortgage-backed securities (CMBS).
(3)
Asset-backed securities (ABS) include debt tranched securities collateralized primarily by auto loans, student loans, credit cards, and other asset types. This asset class also includes collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs).
(4)
Municipals include bonds issued by states, municipalities and political subdivisions.
(5)
Represents the non-credit component of the other-than-temporary impairment (OTTI) losses, adjusted for subsequent sales, maturities and redemptions. It does not include the change in fair value subsequent to the impairment measurement date.
CONTRACTUAL MATURITIES OF FIXED MATURITIES
The contractual maturities of fixed maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
 
 
 
 
 
 
 
 
Amortized
Cost
 
Fair
Value
 
% of Total
Fair Value
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
313,287

 
$
305,972

 
2.8
%
 
 
Due after one year through five years
3,906,190

 
3,850,149

 
33.8
%
 
 
Due after five years through ten years
2,546,299

 
2,510,975

 
22.0
%
 
 
Due after ten years
326,206

 
319,511

 
2.8
%
 
 
 
7,091,982

 
6,986,607

 
61.4
%
 
 
Agency RMBS
2,487,837

 
2,465,135

 
21.6
%
 
 
CMBS
664,368

 
666,237

 
5.8
%
 
 
Non-Agency RMBS
57,316

 
56,921

 
0.5
%
 
 
ABS
1,221,813

 
1,222,214

 
10.7
%
 
 
Total
$
11,523,316

 
$
11,397,114

 
100.0
%
 
 
 
 
 
 
 
 
 
 
At December 31, 2015
 
 
 
 
 
 
 
Maturity
 
 
 
 
 
 
 
Due in one year or less
$
291,368

 
$
289,571

 
2.5
%
 
 
Due after one year through five years
4,217,515

 
4,142,802

 
35.3
%
 
 
Due after five years through ten years
2,263,684

 
2,181,525

 
18.6
%
 
 
Due after ten years
312,431

 
301,039

 
2.6
%
 
 
 
7,084,998

 
6,914,937

 
59.0
%
 
 
Agency RMBS
2,236,138

 
2,249,236

 
19.2
%
 
 
CMBS
1,088,595

 
1,083,298

 
9.2
%
 
 
Non-Agency RMBS
99,989

 
101,008

 
0.9
%
 
 
ABS
1,387,919

 
1,371,270

 
11.7
%
 
 
Total
$
11,897,639

 
$
11,719,749

 
100.0
%
 
 
 
 
 
 
 
 
 
FIXED MATURITIES AND EQUITIES IN AN UNREALIZED LOSS POSITION
The following table summarizes fixed maturities and equities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
12 months or greater
 
Less than 12 months
 
Total
 
 
  
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
54,051

 
$
(2,729
)
 
$
1,340,719

 
$
(24,275
)
 
$
1,394,770

 
$
(27,004
)
 
 
Non-U.S. government
149,360

 
(38,683
)
 
283,796

 
(10,971
)
 
433,156

 
(49,654
)
 
 
Corporate debt
230,218

 
(30,652
)
 
1,948,976

 
(44,488
)
 
2,179,194

 
(75,140
)
 
 
Agency RMBS
76,694

 
(1,101
)
 
1,724,170

 
(34,876
)
 
1,800,864

 
(35,977
)
 
 
CMBS
84,640

 
(749
)
 
193,499

 
(2,815
)
 
278,139

 
(3,564
)
 
 
Non-Agency RMBS
13,642

 
(1,752
)
 
7,194

 
(271
)
 
20,836

 
(2,023
)
 
 
ABS
362,110

 
(1,950
)
 
266,763

 
(893
)
 
628,873

 
(2,843
)
 
 
Municipals
774

 
(29
)
 
68,598

 
(961
)
 
69,372

 
(990
)
 
 
Total fixed maturities
$
971,489

 
$
(77,645
)
 
$
5,833,715

 
$
(119,550
)
 
$
6,805,204

 
$
(197,195
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
$
—

 
$
—

 
$
37

 
$
(342
)
 
$
37

 
$
(342
)
 
 
Exchange-traded funds
4,959

 
(461
)
 
87,760

 
(2,173
)
 
92,719

 
(2,634
)
 
 
Bond mutual funds
—

 
—

 
123,954

 
(9,092
)
 
123,954

 
(9,092
)
 
 
Total equity securities
$
4,959

 
$
(461
)
 
$
211,751

 
$
(11,607
)
 
$
216,710

 
$
(12,068
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency
$
84,179

 
$
(7,622
)
 
$
1,474,202

 
$
(15,591
)
 
$
1,558,381

 
$
(23,213
)
 
 
Non-U.S. government
170,269

 
(50,841
)
 
317,693

 
(21,491
)
 
487,962

 
(72,332
)
 
 
Corporate debt
340,831

 
(33,441
)
 
2,845,375

 
(62,845
)
 
3,186,206

 
(96,286
)
 
 
Agency RMBS
64,792

 
(1,609
)
 
1,073,566

 
(8,066
)
 
1,138,358

 
(9,675
)
 
 
CMBS
75,627

 
(1,579
)
 
659,480

 
(7,603
)
 
735,107

 
(9,182
)
 
 
Non-Agency RMBS
5,283

 
(210
)
 
43,199

 
(763
)
 
48,482

 
(973
)
 
 
ABS
562,599

 
(11,158
)
 
667,448

 
(6,443
)
 
1,230,047

 
(17,601
)
 
 
Municipals
14,214

 
(310
)
 
64,104

 
(836
)
 
78,318

 
(1,146
)
 
 
Total fixed maturities
$
1,317,794

 
$
(106,770
)
 
$
7,145,067

 
$
(123,638
)
 
$
8,462,861

 
$
(230,408
)
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
Exchange-traded funds
2,331

 
(313
)
 
110,972

 
(4,449
)
 
113,303

 
(4,762
)
 
 
Bond mutual funds
—

 
—

 
124,025

 
(4,227
)
 
124,025

 
(4,227
)
 
 
Total equity securities
$
2,331

 
$
(313
)
 
$
234,997

 
$
(8,676
)
 
$
237,328

 
$
(8,989
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MORTGAGE LOANS NET OF VALUATION ALLOWANCE
The following table provides a breakdown of our mortgage loans held-for-investment:
 
  
December 31, 2016
 
December 31, 2015
 
 
  
Carrying Value
 
% of Total
 
Carrying Value
 
% of Total
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Loans held-for-investment:
 
 
 
 
 
 
 
 
 
Commercial
$
349,969

 
100
%
 
$
206,277

 
100
%
 
 
 
349,969

 
100
%
 
206,277

 
100
%
 
 
Valuation allowances
—

 
—
%
 
—

 
—
%
 
 
Total Mortgage Loans held-for-investment
$
349,969

 
100
%
 
$
206,277

 
100
%
 
 
 
 
 
 
 
 
 
 
 
PORTFOLIO OF OTHER INVESTMENTS
The following tables provide a breakdown of our investments in hedge funds, direct lending funds, private equity funds, real estate funds, CLO-Equities and other privately held investments, together with additional information relating to the liquidity of each category:
 
 
 
 
 
 
 
 
 
 
 
  
Fair Value
 
Redemption Frequency
(if currently eligible)
 
Redemption
Notice Period
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
118,619

 
14
%
 
Semi-annually, Annually
 
45-60 days
 
 
Multi-strategy funds
285,992

 
34
%
 
Quarterly, Semi-annually
 
60-95 days
 
 
Event-driven funds
93,539

 
11
%
 
Annually
 
45 days
 
 
Leveraged bank loan funds
—

 
—
%
 
n/a
 
n/a
 
 
Direct lending funds
134,650

 
16
%
 
n/a
 
n/a
 
 
Private equity funds
81,223

 
10
%
 
n/a
 
n/a
 
 
Real estate funds
13,354

 
2
%
 
n/a
 
n/a
 
 
CLO-Equities
60,700

 
8
%
 
n/a
 
n/a
 
 
Other privately held investments
42,142

 
5
%
 
n/a
 
n/a
 
 
Total other investments
$
830,219

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2015
 
 
 
 
 
 
 
 
 
Long/short equity funds
$
154,348

 
19
%
 
Quarterly, Semi-annually, Annually
 
45-60 days
 
 
Multi-strategy funds
355,073

 
43
%
 
Quarterly, Semi-annually
 
60-95 days
 
 
Event-driven funds
147,287

 
18
%
 
Quarterly, Annually
 
45-60 days
 
 
Leveraged bank loan funds
65

 
—
%
 
n/a
 
n/a
 
 
Direct lending funds
90,120

 
11
%
 
n/a
 
n/a
 
 
Private equity funds
—

 
—
%
 
n/a
 
n/a
 
 
Real estate funds
4,929

 
1
%
 
n/a
 
n/a
 
 
CLO-Equities
64,934

 
8
%
 
n/a
 
n/a
 
 
Other privately held investments
—

 
—
%
 
n/a
 
n/a
 
 
Total other investments
$
816,756

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
n/a – not applicable
NET INVESTMENT INCOME
Net investment income was derived from the following sources:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2016
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
Fixed maturities
$
305,459

 
$
294,725

 
$
296,663

 
 
Other investments
42,514

 
20,148

 
57,621

 
 
Equity securities
16,306

 
11,289

 
11,832

 
 
Mortgage loans
7,996

 
1,861

 
—

 
 
Cash and cash equivalents
9,209

 
8,572

 
11,536

 
 
Short-term investments
2,060

 
439

 
725

 
 
Gross investment income
383,544

 
337,034

 
378,377

 
 
Investment expenses
(30,209
)
 
(31,698
)
 
(35,611
)
 
 
Net investment income
$
353,335

 
$
305,336

 
$
342,766

 
 
 
 
 
 
 
 
 
NET REALIZED INVESTMENT GAINS (LOSSES)
The following table provides an analysis of net realized investment gains (losses):
 
 
 
 
 
 
 
 
 
Year ended December 31,
2016
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
Gross realized gains
 
 
 
 
 
 
 
Fixed maturities and short-term investments
$
86,267

 
$
60,102

 
$
126,023

 
 
Equities
19,104

 
19,113

 
149,783

 
 
Gross realized gains
105,371

 
79,215

 
275,806

 
 
Gross realized losses
 
 
 
 
 
 
 
Fixed maturities and short-term investments
(134,460
)
 
(143,702
)
 
(86,943
)
 
 
Equities
(16,155
)
 
(8,543
)
 
(15,925
)
 
 
Gross realized losses
(150,615
)
 
(152,245
)
 
(102,868
)
 
 
Net OTTI recognized in earnings
(26,210
)
 
(72,720
)
 
(31,227
)
 
 
Change in fair value of investment derivatives(1)
10,929

 
7,259

 
(9,603
)
 
 
Net realized investment gains (losses)
$
(60,525
)
 
$
(138,491
)
 
$
132,108

 
 
 
 
 
 
 
 
 
(1)
Refer to Note 7 'Derivative Instruments'
OTTI RECOGNIZED IN EARNINGS BY ASSET CLASS
The following table summarizes the OTTI recognized in earnings by asset class:
 
 
 
 
 
 
 
 
 
Year ended December 31,
2016
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Non-U.S. government
$
3,557

 
$
3,538

 
$
17,291

 
 
Corporate debt
20,093

 
47,029

 
8,107

 
 
Non-Agency RMBS
—

 
111

 
7

 
 
ABS
—

 
124

 
61

 
 
Municipals
—

 
—

 
418

 
 
 
23,650

 
50,802

 
25,884

 
 
Equity Securities
 
 
 
 
 
 
 
Common stocks
—

 
—

 
741

 
 
Exchange-traded funds
2,560

 
10,732

 
4,602

 
 
Bond mutual funds
—

 
11,186

 
—

 
 
 
2,560

 
21,918

 
5,343

 
 
Total OTTI recognized in earnings
$
26,210

 
$
72,720

 
$
31,227

 
 
 
 
 
 
 
 
 
ROLL FORWARD OF CREDIT LOSSES FOR WHICH A PORTION OF OTTI RECOGNIZED IN AOCI
The following table provides a roll forward of credit losses (“credit loss table”), before income taxes, for which a portion of the OTTI charge was recognized in AOCI:
 
 
 
 
 
 
 
Year ended December 31,
2016
 
2015
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,506

 
$
1,531

 
 
Credit impairments recognized on securities not previously impaired
—

 
—

 
 
Additional credit impairments recognized on securities previously impaired
20

 
33

 
 
Change in timing of future cash flows on securities previously impaired
—

 
—

 
 
Intent to sell of securities previously impaired
—

 
—

 
 
Securities sold/redeemed/matured
(33
)
 
(58
)
 
 
Balance at end of period
$
1,493

 
$
1,506

 
 
 
 
 
 
 
RESTRICTED INVESTMENTS
The fair value of our restricted investments primarily relates to these items, as noted in the table below. Our restricted investments primarily consist of high-quality fixed maturity and short-term investment securities.
 
 
 
 
 
 
 
 
At December 31,
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Collateral in Trust for inter-company agreements
 
$
2,792,776

 
$
2,766,453

 
 
Collateral for secured letter of credit facility
 
445,482

 
481,023

 
 
Collateral in Trust for third party agreements (1)
 
777,076

 
551,985

 
 
Securities on deposit with regulatory authorities
 
50,005

 
57,597

 
 
Total restricted investments
 
$
4,065,339

 
$
3,857,058

 
 
 
 
 
 
 
 
(1)
Includes $376 million (2015: $232 million) of fixed income securities and equities deposited directly with Lloyd's to support the underwriting capacity of the Company's Lloyd's Syndicate, AXIS Syndicate 1686.