INVESTMENTS

We hold: (i) trading portfolios of fixed maturity investments, short-term investments and equities, carried at fair value; (ii) a held-to-maturity portfolio of fixed maturity investments carried at amortized cost; (iii) available-for-sale portfolios of short-term and fixed maturity investments carried at fair value; and (iv) other investments carried at either fair value or cost.

Trading

The fair values of our fixed maturity investments, short-term investments and equities classified as trading were as follows:



	December 31, 2015		December 31, 2014
U.S. government and agency	$	750,957	$	744,660
Non-U.S. government	359,002		368,945
Corporate	2,631,682		1,986,873
Municipal	22,247		25,607
Residential mortgage-backed	391,247		308,621
Commercial mortgage-backed	284,575		139,907
Asset-backed	638,434		388,194
Total fixed maturity and short-term investments	5,078,144		3,962,807
Equities — U.S.	108,793		106,895
Equities — International	7,148		43,235
	$	5,194,085	$	4,112,937

Included within residential and commercial mortgage-backed securities as at December 31, 2015 were securities issued by U.S. governmental agencies with a fair value of $359.4 million (as at December 31, 2014: $263.4 million). Included within corporate securities as at December 31, 2015 were senior secured loans of $94.4 million (as at December 31, 2014: $33.5 million).

The contractual maturities of our fixed maturity and short-term investments classified as trading are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



As at December 31, 2015	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	633,011	$	620,887	12.2	%
More than one year through two years	957,838		948,734		18.7	%
More than two years through five years	1,538,344		1,525,009		30.0	%
More than five years through ten years	510,271		503,108		9.9	%
More than ten years	169,589		166,150		3.3	%
Residential mortgage-backed	394,010		391,247		7.7	%
Commercial mortgage-backed	286,373		284,575		5.6	%
Asset-backed	659,396		638,434		12.6	%
	$	5,148,832	$	5,078,144	100.0	%

Held-to-maturity

We hold a portfolio of held-to-maturity securities to support our annuity business. The amortized cost and fair values of our fixed maturity investments classified as held-to-maturity were as follows:



As at December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	19,771	$	8	$	(458	)	$	19,321
Non-U.S. government	40,503		48		(1,493		)	39,058
Corporate	730,592		3,398		(23,298		)	710,692
	$	790,866	$	3,454	$	(25,249	)	$	769,071



As at December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	20,257	$	322	$	(20	)	$	20,559
Non-U.S. government	38,613		325		(249		)	38,689
Corporate	754,363		16,182		(3,421		)	767,124
	$	813,233	$	16,829	$	(3,690	)	$	826,372

The contractual maturities of the our fixed maturity investments classified as held-to-maturity are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



As at December 31, 2015	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	19,240	$	19,228	2.5	%
More than one year through two years	8,011		7,988		1.0	%
More than two years through five years	67,270		67,386		8.8	%
More than five years through ten years	107,632		105,642		13.7	%
More than ten years	588,713		568,827		74.0	%
	$	790,866	$	769,071	100.0	%

Available-for-sale

The amortized cost and fair values of our short-term and fixed maturity investments classified as available-for-sale were as follows:



As at December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	25,102	$	80	$	(341	)	$	24,841
Non-U.S. government	89,631		42		(3,889		)	85,784
Corporate	182,773		1,040		(3,429		)	180,384
Municipal	5,959		4		(36		)	5,927
Residential mortgage-backed	665		51		(1		)	715
Asset-backed	4,660		—		(10		)	4,650
	$	308,790	$	1,217	$	(7,706	)	$	302,301



As at December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	24,167	$	182	$	(7	)	$	24,342
Non-U.S. government	72,913		386		(2,805		)	70,494
Corporate	101,745		964		(1,653		)	101,056
Residential mortgage-backed	3,305		76		(138		)	3,243
Asset-backed	41,980		15		(19		)	41,976
	$	244,110	$	1,623	$	(4,622	)	$	241,111

The contractual maturities of our short-term and fixed maturity investments classified as available-for-sale are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



As at December 31, 2015	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	45,814	$	43,567	14.4	%
More than one year through two years	68,066		66,565		22.0	%
More than two years through five years	115,824		112,928		37.4	%
More than five years through ten years	37,189		36,895		12.2	%
More than ten years	36,572		36,981		12.2	%
Residential mortgage-backed	665		715		0.2	%
Asset-backed	4,660		4,650		1.6	%
	$	308,790	$	302,301	100.0	%

Gross Unrealized Losses

The following tables summarize our fixed maturity and short-term investments in a gross unrealized loss position:



		12 Months or Greater					Less Than 12 Months					Total
As at December 31, 2015		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturity and short-term investments, at fair value
	U.S. government and agency	$	523	$	(2	)	$	21,694	$	(339	)	$	22,217	$	(341	)
	Non-U.S. government	18,995		(2,633		)	50,080		(1,256		)	69,075		(3,889		)
	Corporate	54,295		(2,394		)	81,047		(1,035		)	135,342		(3,429		)
	Municipal	—		—			4,609		(36		)	4,609		(36		)
	Residential mortgage-backed	71		(1		)	—		—			71		(1		)
	Asset-backed	4,649		(10		)	—		—			4,649		(10		)
Total		$	78,533	$	(5,040	)	$	157,430	$	(2,666	)	$	235,963	$	(7,706	)
Fixed maturity investments, at amortized cost
	U.S. government and agency	$	7,221	$	(48	)	$	12,024	$	(410	)	$	19,245	$	(458	)
	Non-U.S. government	24,424		(1,255		)	8,885		(238		)	33,309		(1,493		)
	Corporate	209,000		(9,038		)	330,833		(14,260		)	539,833		(23,298		)
Total		240,645		(10,341		)	351,742		(14,908		)	592,387		(25,249		)
Total fixed maturity and short-term investments		$	319,178	$	(15,381	)	$	509,172	$	(17,574	)	$	828,350	$	(32,955	)



		12 Months or Greater					Less Than 12 Months					Total
As at December 31, 2014		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturity and short-term investments, at fair value
	U.S. government and agency	$	528	$	(1	)	$	3,678	$	(6	)	$	4,206	$	(7	)
	Non-U.S. government	17,051		(1,534		)	20,300		(1,271		)	37,351		(2,805		)
	Corporate	39,964		(1,003		)	40,072		(650		)	80,036		(1,653		)
	Residential mortgage-backed	2,073		(138		)	—		—			2,073		(138		)
	Asset-backed	11,215		(12		)	14,720		(7		)	25,935		(19		)
Total		$	70,831	$	(2,688	)	$	78,770	$	(1,934	)	$	149,601	$	(4,622	)
Fixed maturity investments, at amortized cost
	U.S. government and agency	$	7,312	$	(19	)	$	245	$	(1	)	$	7,557	$	(20	)
	Non-U.S. government	25,960		(249		)	—		—			25,960		(249		)
	Corporate	243,908		(3,377		)	6,030		(44		)	249,938		(3,421		)
Total		277,180		(3,645		)	6,275		(45		)	283,455		(3,690		)
Total fixed maturity and short-term investments		$	348,011	$	(6,333	)	$	85,045	$	(1,979	)	$	433,056	$	(8,312	)

As at December 31, 2015 and December 31, 2014, the number of securities classified as available-for-sale in an unrealized loss position was 332 and 212, respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 124 and 120, respectively.

As at December 31, 2015 and December 31, 2014, the number of securities classified as held-to-maturity in an unrealized loss position was 109 and 61, respectively. Of these securities, the number of securities that had been in unrealized loss position for twelve months or longer was 53 and 57, respectively.

Other-Than-Temporary Impairment

For the year ended December 31, 2015, we did not recognize any other-than-temporary impairment losses on either our available-for-sale or held-to-maturity securities. We determined that no credit losses existed as at December 31, 2015. A description of our other-than-temporary impairment process is included in Note 2 - "Significant Accounting Policies." There were no changes to our process during the year ended December 31, 2015.

Credit Ratings

The following table sets forth the credit ratings of our fixed maturity and short-term investments as of December 31, 2015:



	Amortized Cost		Fair Value		% of Total Investments		AAA Rated			AA Rated			A Rated			BBB Rated			Non- Investment Grade			Not Rated
Fixed maturity and short-term investments, at fair value
U.S. government and agency	$	776,614	$	775,798	12.6	%	$	760,063		$	8,588		$	7,147		$	—		$	—		$	—
Non-U.S. government	457,518		444,786		7.2	%	135,419			212,238			48,450			19,888			28,791			—
Corporate	2,850,063		2,812,066		45.7	%	157,809			451,247			1,360,378			703,877			135,051			3,704
Municipal	28,323		28,174		0.5	%	4,671			10,815			12,688			—			—			—
Residential mortgage-backed	394,675		391,962		6.4	%	377,011			992			7,369			5,437			1,149			4
Commercial mortgage-backed	286,373		284,575		4.6	%	114,380			39,976			61,679			25,173			3,357			40,010
Asset-backed	664,056		643,084		10.5	%	240,033			150,936			139,357			46,954			65,620			184
Total	$	5,457,622	5,380,445		87.5	%	1,789,386			874,792			1,637,068			801,329			233,968			43,902
% of total fair value							33.3		%	16.3		%	30.4		%	14.9		%	4.3		%	0.8		%
Fixed maturity investments, at amortized cost
U.S. government and agency	19,771		19,321		0.3	%	19,288			—			—			—			—			33
Non-U.S. government	40,503		39,058		0.6	%	—			31,743			7,315			—			—			—
Corporate	730,592		710,692		11.6	%	46,294			127,800			456,778			79,674			—			146
Total	790,866		769,071		12.5	%	65,582			159,543			464,093			79,674			—			179
% of total fair value							8.5		%	20.7		%	60.3		%	10.4		%	—		%	0.1		%
Total fixed maturity and short-term investments	$	6,248,488	$	6,149,516	100.0	%	$	1,854,968		$	1,034,335		$	2,101,161		$	881,003		$	233,968		$	44,081
% of total fair value							30.2		%	16.8		%	34.2		%	14.3		%	3.8		%	0.7		%

Other Investments, at fair value

The following table summarizes our other investments carried at fair value:



	December 31, 2015		December 31, 2014
Private equities and private equity funds	$	254,883	$	197,269
Fixed income funds	291,736		335,026
Fixed income hedge funds	109,400		59,627
Equity funds	147,390		150,053
Multi-strategy hedge fund	99,020		—
Real estate debt fund	54,829		33,902
CLO equities	61,702		41,271
CLO equity funds	13,928		16,022
Other	1,144		3,698
	$	1,034,032	$	836,868

The valuation of our other investments is described in Note 6 - "Fair Value Measurements." Due to a lag in the valuations of certain funds reported by the managers, we may record changes in valuation with up to a three-month lag. We regularly review and discuss fund performance with the fund managers to corroborate the reasonableness of the reported net asset values and to assess whether any events have occurred within the lag period that would affect the valuation of the investments. The following is a description of the nature of each of these investment categories:


•	Private equities and private equity funds invest primarily in the financial services industry. All of our investments in private equities and private equity funds are subject to restrictions on redemptions and sales that are determined by the governing documents and limit our ability to liquidate those investments. These restrictions have been in place since the dates of our initial investments.

•

Fixed income funds comprise a number of positions in diversified fixed income funds that are managed by third-party managers. Underlying investments vary from high-grade corporate bonds to non-investment grade senior secured loans and bonds, but are generally invested in liquid fixed income markets. These funds have regularly published prices. The funds have liquidity terms that vary from daily up to quarterly.


•	Fixed income hedge funds invest in a diversified portfolio of debt securities. The hedge funds have imposed lock-up periods of up to three years from the time of initial investment. Once eligible, redemptions will be permitted quarterly with 90 days’ notice.


•	Equity funds invest in a diversified portfolio of international publicly-traded equity securities. The funds are eligible for bi-monthly redemption.


•	Multi-strategy hedge fund comprises an investment in a hedge fund that invests in a variety of asset classes including funds, fixed income, equity securities and other investments. The fund is eligible for redemption after July 1, 2016.


•	Real estate debt fund invests primarily in U.S. commercial real estate loans and securities. A redemption request for this fund can be made 10 days after the date of any monthly valuation; the fund states that it will make commercially reasonable efforts to redeem the investment within the next monthly period.


•	CLO equities comprise investments in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans. CLO equities denote direct investments by us in these securities.


•	CLO equity funds comprise two funds that invest primarily in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans. One of the funds has a fair value of $4.4 million, part of a self-liquidating structure which is expected to pay out over two to six years. The other fund has a fair value of $9.5 million and is eligible for redemption in 2018.


•	Other primarily comprises a fund that provides loans to educational institutions throughout the United States and its territories. These are not eligible for redemption.

Investments of $1.1 million in fixed income hedge funds were subject to gates or side-pockets, where redemptions are subject to sale of underlying investments. A gate is the ability to deny or delay a redemption request, whereby a side-pocket is a designated account for which the investor loses it redemption rights. As at December 31, 2015, we had unfunded commitments to private equity funds of $140.2 million.

Other Investments, at cost

Our other investments carried at cost of $133.1 million as of December 31, 2015 consist of life settlement contracts acquired during the year. Refer to Note 3 - "Acquisitions" for information about this transaction, and Note 2 - "Significant Accounting Policies" for a description of our accounting policies. In 2013 and 2014, we did not have an investment in life settlements. During the year ended December 31, 2015, net investment income included $20.1 million related to investments in life settlements. There were no impairment charges recognized during the period since acquisition. The following table presents further information regarding our investments in life settlements as of December 31, 2015.



	Number of Contracts	Carrying Value		Face Value (Death Benefits)
Remaining Life Expectancy of Insureds:
0 – 1 year	2	$	417	$	700
1 – 2 years	4	3,032		5,000
2 – 3 years	19	24,072		39,123
3 – 4 years	14	9,695		20,932
4 – 5 years	16	9,025		22,457
Thereafter	221	86,830		491,499
Total	276	$	133,071	$	579,711

Remaining life expectancy for year 0-1 in the table above references policies whose current life expectancy is less than 12 months as of the reporting date. Remaining life expectancy is not an indication of expected maturity. Actual maturity in any category above may vary significantly (either earlier or later) from the remaining life expectancies reported.

At December 31, 2015, our best estimate of the life insurance premiums required to keep the policies in force, payable in the 12 months ending December 31, 2016 and the four succeeding years ending December 31, 2020 is $17.9 million, $17.9 million, $17.9 million, $18.1 million, and $17.0 million, respectively.

Net Realized and Unrealized Gains (Losses)

Components of net realized and unrealized gains (losses) for the years ended December 31, 2015, 2014 and 2013 were as follows:



	2015			2014			2013
Net realized gains on sale:
Gross realized gains on fixed maturity securities, available-for-sale	$	396		$	196		$	705
Gross realized (losses) on fixed maturity securities, available-for-sale securities	(130		)	(138		)	(214		)
Net realized investment gains (losses) on fixed maturity securities, trading	(4,240		)	5,143			(2,425		)
Net realized investment gains on equity securities, trading	19,884			18,738			15,913
Total net realized gains on sale	15,910			23,939			13,979
Net unrealized gains (losses):
Fixed maturity securities, trading	(53,193		)	17,283			(26,384		)
Equity securities, trading	(22,269		)	(8,571		)	12,593
Other investments	18,300			29,968			70,463
Total net unrealized gains (losses)	(57,162		)	38,680			56,672
Net realized and unrealized gains (losses)	$	(41,252	)	$	62,619		$	70,651

The gross realized gains and losses on available-for-sale securities included in the table above resulted from sales of $95.1 million, $90.7 million and $20.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Net Investment Income

Major categories of net investment income for the years ended December 31, 2015, 2014 and 2013 are summarized as follows:



	2015			2014			2013
Fixed maturity investments	$	123,118		$	95,911		$	72,050
Short-term investments and cash and cash equivalents	6,163			6,682			13,705
Equity securities	5,827			5,854			4,923
Other investments	11,712			1,335			652
Life settlements and other	21,105			1,968			5,275
Gross investment income	167,925			111,750			96,605
Investment expenses	(10,271		)	(10,344		)	(6,685		)
Net investment income	$	157,654		$	101,406		$	89,920

Restricted Assets

We are required to maintain investments and cash and cash equivalents on deposit to support our insurance and reinsurance operations. The investments and cash and cash equivalents on deposit are available to settle insurance and reinsurance liabilities. We also utilize trust accounts to collateralize business with our insurance and reinsurance counterparties. These trust accounts generally take the place of letter of credit requirements. The assets in trusts as collateral are primarily highly rated fixed maturity securities. The carrying value of our restricted assets, including restricted cash of $511.3 million, as of December 31, 2015 was as follows:



Collateral in trust for third party agreements	$	3,053,692
Assets on deposit with regulatory authorities	915,346
Collateral for secured letter of credit facilities	212,544
Funds at Lloyd's ⁽¹⁾	382,624
	$	4,564,206

⁽¹⁾Our underwriting businesses include three Lloyd's syndicates. Lloyd's determines the required capital principally through the annual business plan of each syndicate. This capital is referred to as "Funds at Lloyd's" and will be drawn upon in the event that a syndicate has a loss that cannot be funded from other sources. As at December 31, 2015, our combined Funds at Lloyd's were comprised of cash and investments of $345.6 million and letters of credit supported by collateral of $37.0 million.