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:



	March 31, 2016		December 31, 2015
U.S. government and agency	$	806,426	$	750,957
Non-U.S. government	349,935		359,002
Corporate	2,685,453		2,631,682
Municipal	11,416		22,247
Residential mortgage-backed	450,720		391,247
Commercial mortgage-backed	276,134		284,575
Asset-backed	620,844		638,434
Total fixed maturity and short-term investments	5,200,928		5,078,144
Equities — U.S.	110,987		108,793
Equities — International	7,273		7,148
	$	5,319,188	$	5,194,085

Included within residential and commercial mortgage-backed securities as at March 31, 2016 were securities issued by U.S. governmental agencies with a fair value of $421.1 million (as at December 31, 2015: $359.4 million). Included within corporate securities as at March 31, 2016 were senior secured loans of $91.8 million (as at December 31, 2015: $94.4 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 March 31, 2016	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	752,003	$	743,560	14.3	%
More than one year through two years	941,118		940,001		18.1	%
More than two years through five years	1,392,710		1,403,136		27.0	%
More than five years through ten years	563,722		568,004		10.9	%
More than ten years	196,207		198,529		3.8	%
Residential mortgage-backed	450,055		450,720		8.7	%
Commercial mortgage-backed	278,868		276,134		5.3	%
Asset-backed	646,907		620,844		11.9	%
	$	5,221,590	$	5,200,928	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 March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	19,955	$	324	$	(50	)	$	20,229
Non-U.S. government	40,338		186		(574		)	39,950
Corporate	727,897		17,160		(7,594		)	737,463
	$	788,190	$	17,670	$	(8,218	)	$	797,642



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

The contractual maturities of 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 March 31, 2016	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	20,271	$	20,281	2.5	%
More than one year through two years	13,348		13,376		1.7	%
More than two years through five years	69,041		70,127		8.8	%
More than five years through ten years	115,637		115,896		14.5	%
More than ten years	569,893		577,962		72.5	%
	$	788,190	$	797,642	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 March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses Non-OTTI			Fair Value
U.S. government and agency	$	12,651	$	127	$	—		$	12,778
Non-U.S. government	90,610		1,609		(2,276		)	89,943
Corporate	175,621		2,819		(1,950		)	176,490
Municipal	5,946		59		—			6,005
Residential mortgage-backed	590		51		—			641
Asset-backed	4,616		14		—			4,630
	$	290,034	$	4,679	$	(4,226	)	$	290,487



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

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 March 31, 2016	Amortized Cost		Fair Value		% of Total Fair Value
One year or less	$	56,628	$	55,194	19.0	%
More than one year through two years	65,181		64,237		22.1	%
More than two years through five years	88,747		88,172		30.3	%
More than five years through ten years	38,113		39,088		13.5	%
More than ten years	36,159		38,525		13.3	%
Residential mortgage-backed	590		641		0.2	%
Asset-backed	4,616		4,630		1.6	%
	$	290,034	$	290,487	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 March 31, 2016	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturity and short-term investments, at fair value
Non-U.S. government	$	14,821	$	(1,995	)	$	10,222	$	(281	)	$	25,043	$	(2,276	)
Corporate	28,331		(1,737		)	21,342		(213		)	49,673		(1,950		)
Total	$	43,152	$	(3,732	)	$	31,564	$	(494	)	$	74,716	$	(4,226	)
Fixed maturity investments, at amortized cost
U.S. government and agency	$	—	$	—		$	458	$	(50	)	$	458	$	(50	)
Non-U.S. government	6,323		(248		)	14,706		(326		)	21,029		(574		)
Corporate	33,646		(2,327		)	140,928		(5,267		)	174,574		(7,594		)
Total	39,969		(2,575		)	156,092		(5,643		)	196,061		(8,218		)
Total fixed maturity and short-term investments	$	83,121	$	(6,307	)	$	187,656	$	(6,137	)	$	270,777	$	(12,444	)



	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	)

As at March 31, 2016 and December 31, 2015, the number of securities classified as available-for-sale in an unrealized loss position was 136 and 332, respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 79 and 124, respectively.

As at March 31, 2016 and December 31, 2015, the number of securities classified as held-to-maturity in an unrealized loss position was 36 and 109, respectively. Of these securities, the number of securities that had been in unrealized loss position for twelve months or longer was 11 and 53, respectively.

Other-Than-Temporary Impairment

For the three months ended March 31, 2016, 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 March 31, 2016. A description of our other-than-temporary impairment process is included in Note 2 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015. There were no changes to our process during the three months ended March 31, 2016.

Credit Ratings

The following table sets forth the credit ratings of our fixed maturity and short-term investments as of March 31, 2016:



	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	$	809,975	$	819,204	13.0	%	$	812,731		$	6,473		$	—		$	—		$	—		$	—
Non-U.S. government	444,600		439,878		7.0	%	132,415			198,483			65,524			21,926			21,530			—
Corporate	2,858,804		2,861,943		45.6	%	182,580			443,654			1,345,139			733,329			155,018			2,223
Municipal	17,209		17,421		0.3	%	5,117			8,835			3,469			—			—			—
Residential mortgage-backed	450,645		451,361		7.2	%	438,487			471			8,916			2,443			1,040			4
Commercial mortgage-backed	278,868		276,134		4.4	%	119,984			34,359			61,460			18,866			3,266			38,199
Asset-backed	651,523		625,474		9.9	%	237,526			135,991			145,566			49,652			56,553			186
Total	5,511,624		5,491,415		87.4	%	1,928,840			828,266			1,630,074			826,216			237,407			40,612
% of total fair value							35.1		%	15.1		%	29.7		%	15.1		%	4.3		%	0.7		%
Fixed maturity investments, at amortized cost
U.S. government and agency	19,955		20,229		0.3	%	18,826			1,376			—			—			—			27
Non-U.S. government	40,338		39,950		0.6	%	—			11,320			28,630			—			—			—
Corporate	727,897		737,463		11.7	%	47,698			109,845			488,176			91,624			—			120
Total	788,190		797,642		12.6	%	66,524			122,541			516,806			91,624			—			147
% of total fair value							8.3		%	15.4		%	64.7		%	11.5		%	—		%	0.1		%
Total fixed maturity and short-term investments	$	6,299,814	$	6,289,057	100.0	%	$	1,995,364		$	950,807		$	2,146,880		$	917,840		$	237,407		$	40,759
% of total fair value							31.7		%	15.1		%	34.1		%	14.6		%	3.8		%	0.7		%

Other Investments, at fair value

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



	March 31, 2016		December 31, 2015
Private equities and private equity funds	$	249,398	$	254,883
Fixed income funds	267,839		291,736
Fixed income hedge funds	109,636		109,400
Equity funds	150,348		147,390
Multi-strategy hedge fund	98,432		99,020
Real estate debt fund	—		54,829
CLO equities	58,975		61,702
CLO equity funds	12,167		13,928
Call options on equities	6,060		—
Other	1,136		1,144
	$	953,991	$	1,034,032

The valuation of our other investments is described in Note 4 - "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 was redeemed during the three months ended March 31, 2016.


•	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 $3.7 million, part of a self-liquidating structure that is expected to pay out over two to six years. The other fund has a fair value of $8.5 million and is eligible for redemption in 2018.


•	Call options on equities comprise directly held options to purchase the common equity of publicly traded corporations.


•	Other primarily comprises a fund that provides loans to educational institutions throughout the United States and its territories.

Investments of $1.0 million in fixed income hedge funds were subject to gates or side-pockets, where redemptions are subject to the sale of underlying investments. A gate is the ability to deny or delay a redemption request, whereas a side-pocket is a designated account for which the investor loses its redemption rights.

As at March 31, 2016, we had unfunded commitments to private equity funds of $140.0 million.

Other Investments, at cost

Our other investments carried at cost of $131.2 million as of March 31, 2016 consist of life settlement contracts acquired during 2015. In the period ended March 31, 2015, we did not have an investment in life settlements. During the three months ended March 31, 2016, net investment income included $8.8 million related to investments in life settlements. There were no impairment charges recognized during the period ended March 31, 2016. The following table presents further information regarding our investments in life settlements as of March 31, 2016 and December 31, 2015.



	March 31, 2016					December 31, 2015
	Number of Contracts	Carrying Value		Face Value (Death Benefits)		Number of Contracts	Carrying Value		Face Value (Death Benefits)
Remaining Life Expectancy of Insureds:
0 – 1 year	2	$	425	$	700	2	$	417	$	700
1 – 2 years	3	2,601		4,500		4	3,032		5,000
2 – 3 years	16	24,226		50,407		19	24,072		39,123
3 – 4 years	17	13,306		29,960		14	9,695		20,932
4 – 5 years	17	8,126		20,348		16	9,025		22,457
Thereafter	205	82,484		451,305		221	86,830		491,499
Total	260	$	131,168	$	557,220	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 March 31, 2016, our best estimate of the life insurance premiums required to keep the policies in force, payable in the 12 months ending March 31, 2017 and the four succeeding years ending March 31, 2021 is $17.3 million, $17.1 million, $17.3 million, $17.4 million and $16.0 million, respectively.

Net Realized and Unrealized Gains (Losses)

Components of net realized and unrealized gains (losses) for the three months ended March 31, 2016 and 2015 are summarized as follows:



	Three Months Ended March 31,
	2016			2015
Net realized gains (losses) on sale:
Gross realized gains on fixed maturity securities, available-for-sale	$	265		$	114
Gross realized (losses) on fixed maturity securities, available-for-sale	(243		)	(8		)
Net realized investment gains (losses) on fixed maturity securities, trading	(1,912		)	1,866
Net realized investment gains on equity securities, trading	473			10,717
Total net realized gains (losses) on sale	(1,417		)	12,689
Net unrealized gains (losses):
Fixed maturity securities, trading	41,740			13,888
Equity securities, trading	1,606			(7,119		)
Other investments	(3,965		)	23,562
Total net unrealized gains	39,381			30,331
Net realized and unrealized gains	$	37,964		$	43,020

The gross realized gains and losses on available-for-sale securities included in the table above resulted from sales of $15.4 million and $43.3 million for the three months ended March 31, 2016 and 2015, respectively.

Net Investment Income

Major categories of net investment income for the three months ended March 31, 2016 and 2015 are summarized as follows:



	Three Months Ended March 31,
	2016			2015
Fixed maturity investments	$	36,578		$	26,249
Short-term investments and cash and cash equivalents	1,179			2,719
Equity securities	1,122			1,681
Other investments	6,034			882
Funds held	7,604			174
Life settlements and other	8,826			305
Gross investment income	61,343			32,010
Investment expenses	(1,280		)	(1,595		)
Net investment income	$	60,063		$	30,415

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 $506.9 million and $511.3 million, as of March 31, 2016 and December 31, 2015, respectively, was as follows:



	March 31, 2016		December 31, 2015
Collateral in trust for third party agreements	$	2,896,984	$	3,053,692
Assets on deposit with regulatory authorities	956,879		915,346
Collateral for secured letter of credit facilities	202,923		212,544
Funds at Lloyd's ⁽¹⁾	318,525		382,624
	$	4,375,311	$	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 March 31, 2016, our combined Funds at Lloyd's were comprised of cash and investments of $279.4 million and letters of credit supported by collateral of $39.2 million.