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Investment Securities (Tables)
 6 Months Ended
Jun. 30, 2015
Investment Holdings [Line Items]  
Other Investments Not Readily Marketable [Table Text Block]
($ in millions)
 
June 30,
2015
 
December 31,
2014
Hedge funds(1)
 
$
27.2

 
$
42.3

Private equity funds(2)
 
51.3

 
60.1

Total hedge funds and private equity funds
 
78.5

 
102.4

Surplus notes (par value $101.0)(3)
 
66.3

 
65.1

Investment in community reinvestment vehicle
 
14.2

 
14.3

Trust certificates
 
0.1

 
0.2

Total other investments(4)
 
$
159.1

 
$
182.0

_______________________________________________________________________________
(1) 
Consists of 7 hedge funds as of both June 30, 2015 and December 31, 2014.
(2) 
Consists of 17 private equity funds as of both June 30, 2015 and December 31, 2014.
(3) 
The change in the fair value of the surplus notes during the six months ended June 30, 2015 was due to accretion of the discount and changes in credit spreads and U.S. Treasury rates.
(4) 
Excludes the carrying value of $15.8 million and $16.8 million as of June 30, 2015 and December 31, 2014, respectively, associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
Net investment income, pre-tax
Net investment income for the three and six months ended June 30, 2015 and 2014 consisted of the following:
 
 
Three months ended
June 30,
 
Six months ended
June 30,
($ in millions)
 
2015
 
2014
 
2015
 
2014
Fixed maturity investments
 
$
10.3

 
$
10.6

 
$
20.5

 
$
20.9

Common equity securities
 
1.5

 
2.0

 
3.1

 
3.7

Convertible fixed maturity investments
 
—

 
0.1

 
—

 
0.1

Other investments
 
(0.1
)
 
1.1

 
—

 
1.2

Gross investment income
 
11.7

 
13.8

 
23.6

 
25.9

Less investment expenses
 
(1.6
)
 
(1.6
)
 
(3.0
)
 
(3.3
)
Net investment income, pre-tax
 
$
10.1

 
$
12.2

 
$
20.6

 
$
22.6
Net realized and unrealized investment gains (losses), pre-tax
The composition of net realized investment gains consisted of the following:
 
 
Three months ended
June 30,
 
Six months ended
June 30,
($ in millions)
 
2015
 
2014
 
2015
 
2014
Fixed maturity investments
 
$
1.2

 
$
1.6

 
$
1.9

 
$
2.4

Common equity securities
 
24.6

 
6.5

 
34.4

 
11.9

Convertible fixed maturity investments
 
0.3

 
1.2

 
0.3

 
2.3

Other investments
 
9.1

 
—

 
8.1

 
—

Net realized investment gains, pre-tax
 
$
35.2

 
$
9.3

 
$
44.7

 
$
16.6
Net unrealized investment gains (losses)
The net changes in fair value for the three and six months ended June 30, 2015 and 2014 are as follows:
 
 
Three months ended June 30, 2015
 
Six months ended June 30, 2015
($ in millions)
 
Changes in net
unrealized investment
gains
 
Changes in net
foreign currency
gains (losses)
 
Total net changes
in fair value reflected
in revenues
 
Changes in net
unrealized investment
gains
 
Changes in net
foreign currency
gains (losses)
 
Total net changes
in fair value reflected
in revenues
Fixed maturity investments
 
$
(9.1
)
 
$
—

 
$
(9.1
)
 
$
(2.5
)
 
$
—

 
$
(2.5
)
Short-term investments
 
—

 
—

 
—

 
—

 
—

 
—

Common equity securities
 
(26.5
)
 
0.3

 
(26.2
)
 
(30.9
)
 
0.2

 
(30.7
)
Convertible fixed maturity investments
 
(0.3
)
 
—

 
(0.3
)
 
0.1

 
—

 
0.1

Other investments
 
(13.6
)
 
—

 
(13.6
)
 
(11.4
)
 
—

 
(11.4
)
Net change, pre-tax
 
$
(49.5
)
 
$
0.3

 
$
(49.2
)
 
$
(44.7
)
 
$
0.2

 
$
(44.5
)

 
 
Three months ended June 30, 2014
 
Six months ended June 30, 2014
($ in millions)
 
Changes in net
unrealized investment
gains
 
Changes in net
foreign currency
gains (losses)
 
Total net changes
in fair value reflected
in revenues
 
Changes in net
unrealized investment
gains
 
Changes in net
foreign currency
gains (losses)
 
Total net changes
in fair value reflected
in revenues
Fixed maturity investments
 
$
7.3

 
$
—

 
$
7.3

 
$
12.0

 
$
—

 
$
12.0

Common equity securities
 
6.6

 
—

 
6.6

 
9.7

 
—

 
9.7

Convertible fixed maturity investments
 
(3.0
)
 
—

 
(3.0
)
 
(2.3
)
 
—

 
(2.3
)
Other investments
 
1.7

 
—

 
1.7

 
4.8

 
—

 
4.8

Net change, pre-tax
 
$
12.6

 
$
—

 
$
12.6

 
$
24.2

 
$
—

 
$
24.2
Gross unrealized investment gains or losses
The components of OneBeacon's ending net unrealized investment gains and losses, excluding the impact of net unrealized foreign currency translation gains and losses, on its investment portfolio as of June 30, 2015 and December 31, 2014 were as follows:
($ in millions)
 
June 30,
2015
 
December 31,
2014
Investment securities:
 
 
 
 
Gross unrealized investment gains
 
$
62.3

 
$
104.7

Gross unrealized investment losses
 
(11.2
)
 
(8.9
)
Total net unrealized investment gains, pre-tax
 
51.1

 
95.8

Income taxes
 
(18.7
)
 
(26.9
)
Total net unrealized investment gains, after tax
 
$
32.4

 
$
68.9
Investment holdings, fixed maturity investments
The cost or amortized cost, gross unrealized pre-tax investment gains and losses, net foreign currency losses and carrying values of OneBeacon's fixed maturity investments as of June 30, 2015 and December 31, 2014 were as follows:
 
 
June 30, 2015
($ in millions)
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net unrealized foreign
currency
gains (losses)
 
Carrying
value
U.S. Government and agency obligations
 
$
43.8

 
$
0.1

 
$
—

 
$
—

 
$
43.9

Debt securities issued by industrial corporations
 
813.2

 
8.7

 
(0.6
)
 
—

 
821.3

Municipal obligations
 
66.8

 
0.7

 
(0.5
)
 
—

 
67.0

Asset-backed securities
 
922.5

 
2.7

 
(1.9
)
 
—

 
923.3

Foreign government obligations
 
1.0

 
0.2

 
—

 
—

 
1.2

Preferred stocks
 
78.3

 
6.1

 
—

 
—

 
84.4

Total fixed maturity investments
 
$
1,925.6

 
$
18.5

 
$
(3.0
)
 
$
—

 
$
1,941.1


 
 
December 31, 2014
($ in millions)
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net unrealized foreign
currency
gains (losses)
 
Carrying
value
U.S. Government and agency obligations
 
$
38.0

 
$
—

 
$
—

 
$
—

 
$
38.0

Debt securities issued by industrial corporations
 
787.7

 
11.5

 
(1.0
)
 
—

 
798.2

Municipal obligations
 
62.4

 
1.4

 
(0.1
)
 
—

 
63.7

Asset-backed securities
 
814.4

 
1.5

 
(1.5
)
 
—

 
814.4

Foreign government obligations
 
1.0

 
0.3

 
—

 
—

 
1.3

Preferred stocks
 
78.3

 
5.9

 
—

 
—

 
84.2

Total fixed maturity investments
 
$
1,781.8

 
$
20.6

 
$
(2.6
)
 
$
—

 
$
1,799.8
Investment holdings, common equity securities, convertible fixed maturity investments and other investments
The cost or amortized cost, gross unrealized pre-tax investment gains and losses, net unrealized pre-tax foreign currency losses and carrying values of common equity securities, convertible fixed maturity investments and other investments as of June 30, 2015 and December 31, 2014 were as follows:
 
 
June 30, 2015
($ in millions)
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net unrealized foreign
currency
gains (losses)
 
Carrying
value
Common equity securities
 
$
298.4

 
$
12.4

 
$
(6.5
)
 
$
—

 
$
304.3

Convertible fixed maturity investments
 
—

 
—

 
—

 
—

 
—

Other investments
 
145.2

 
31.4

 
(1.7
)
 
—

 
174.9

Total common equity securities, convertible fixed maturity investments and other investments
 
$
443.6

 
$
43.8

 
$
(8.2
)
 
$
—

 
$
479.2

 
 
December 31, 2014
($ in millions)
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net unrealized foreign
currency
gains (losses)
 
Carrying
value
Common equity securities
 
$
283.2

 
$
39.3

 
$
(2.4
)
 
$
(0.1
)
 
$
320.0

Convertible fixed maturity investments
 
5.2

 
—

 
(0.2
)
 
—

 
5.0

Other investments
 
157.7

 
44.8

 
(3.7
)
 
—

 
198.8

Total common equity securities, convertible fixed maturity investments and other investments
 
$
446.1

 
$
84.1

 
$
(6.3
)
 
$
(0.1
)
 
$
523.8
Fair value measurements by level, investment securities
The following tables summarize the Company's fair value measurements for investments as of June 30, 2015 and December 31, 2014 by level. The major security types were based on the legal form of the securities, with a separate break-out for convertible fixed maturity investments as they may react similar to either debt securities or equity securities, depending on prevailing market conditions. OneBeacon has disaggregated its fixed maturity investments based on the issuing entity type, which impacts credit quality, with debt securities issued by U.S. government entities carrying minimal credit risk, while the credit and other risks associated with other issuers, such as corporations, foreign governments, municipalities or entities issuing asset-backed securities vary depending on the nature of the issuing entity type. OneBeacon further disaggregates debt securities issued by corporations and equity securities by industry sector because investors often reference commonly used benchmarks and their subsectors to monitor risk and performance. Accordingly, OneBeacon has further disaggregated these asset classes into subclasses based on the similar sectors and industry classifications the Company uses to evaluate investment risk and performance against commonly used benchmarks, such as the Barclays Intermediate Aggregate and S&P 500 indices.
($ in millions)
 
Fair value at
June 30, 2015
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 
 
 
 
 
 
 
U.S. Government and agency obligations
 
$
43.9

 
$
43.9

 
$
—

 
$
—

Debt securities issued by corporations:
 
 

 
 
 
 
 
 
Consumer
 
346.4

 
—

 
346.4

 
—

Financial
 
133.1

 
—

 
133.1

 
—

Industrial
 
120.1

 
—

 
120.1

 
—

Communications
 
56.3

 
—

 
56.3

 
—

Energy
 
54.0

 
—

 
54.0

 
—

Utilities
 
43.4

 
—

 
43.4

 
—

Basic materials
 
39.0

 
—

 
39.0

 
—

Technology
 
29.0

 
—

 
29.0

 
—

Debt securities issued by corporations
 
821.3

 
—

 
821.3

 
—

Asset-backed securities
 
923.3

 
—

 
917.7

 
5.6

Preferred stocks
 
84.4

 
—

 
13.2

 
71.2

Municipal obligations
 
67.0

 
—

 
67.0

 
—

Foreign government obligations
 
1.2

 
0.6

 
0.6

 
—

Fixed maturity investments
 
1,941.1

 
44.5

 
1,819.8

 
76.8

Short-term investments
 
157.9

 
157.9

 
—

 
—

Common equity securities:
 
 
 
 
 
 
 
 
Exchange traded funds(2)
 
186.2

 
164.7

 
21.5

 
—

Consumer
 
41.0

 
41.0

 
—

 
—

Financials
 
24.3

 
24.3

 
—

 
—

Energy
 
0.6

 
0.6

 
—

 
—

Basic Materials
 
1.8

 
1.8

 
—

 
—

Utilities
 
1.0

 
1.0

 
—

 
—

Other
 
49.4

 
49.4

 
—

 
—

Common equity securities
 
304.3

 
282.8

 
21.5

 
—

Convertible fixed maturity investments
 
—

 
—

 
—

 
—

Other investments(1)
 
159.1

 
—

 
—

 
159.1

Total(1)
 
$
2,562.4

 
$
485.2

 
$
1,841.3

 
$
235.9

_______________________________________________________________________________
(1)
Excludes the carrying value of $15.8 million associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method as of June 30, 2015.
(2) 
EFTs traded on foreign exchanges are priced with an adjusted NAV and are therefore included within level 2 measurements.
($ in millions)
 
Fair value at
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 
 
 
 
 
 
 
U.S. Government and agency obligations
 
$
38.0

 
$
38.0

 
$
—

 
$
—

Debt securities issued by corporations:
 
 

 
 
 
 
 
 
Consumer
 
286.8

 
—

 
286.8

 
—

Financial
 
148.6

 
—

 
148.6

 
—

Industrial
 
104.8

 
—

 
104.8

 
—

Communications
 
74.9

 
—

 
74.9

 
—

Basic materials
 
56.4

 
—

 
53.5

 
2.9

Energy
 
53.5

 
—

 
53.5

 
—

Utilities
 
44.2

 
—

 
44.2

 
—

Technology
 
29.0

 
—

 
29.0

 
—

Debt securities issued by corporations
 
798.2

 
—

 
795.3

 
2.9

Asset-backed securities
 
814.4

 
—

 
814.4

 
—

Preferred stocks
 
84.2

 
—

 
13.1

 
71.1

Municipal obligations
 
63.7

 
—

 
63.7

 
—

Foreign government obligations
 
1.3

 
0.7

 
0.6

 
—

Fixed maturity investments
 
1,799.8

 
38.7

 
1,687.1

 
74.0

Short-term investments
 
202.2

 
201.7

 
0.5

 
—

Common equity securities:
 
 
 
 
 
 
 
 
Consumer
 
121.7

 
121.7

 
—

 
—

Financials
 
72.4

 
72.4

 
—

 
—

Energy
 
15.6

 
15.6

 
—

 
—

Basic Materials
 
9.9

 
9.9

 
—

 
—

Utilities
 
5.1

 
5.1

 
—

 
—

Other
 
95.3

 
95.3

 
—

 
—

Common equity securities
 
320.0

 
320.0

 
—

 
—

Convertible fixed maturity investments
 
5.0

 
—

 
5.0

 
—

Other investments(1)
 
182.0

 
—

 
—

 
182.0

Total(1)
 
$
2,509.0

 
$
560.4

 
$
1,692.6

 
$
256.0


_______________________________________________________________________________
(1)
Excludes the carrying value of $16.8 million associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method as of December 31, 2014.
Debt securities, credit ratings
Fair Value Assets Measured on Recurring Basis Measurement Input Reconciliation
The following tables summarize the changes in OneBeacon’s fair value measurements by level for the three and six months ended June 30, 2015 and 2014:
 
 
 
 
 
 
Level 3 Investments
 
 
($ in millions)
 
Level 1 Investments
 
Level 2 Investments
 
Fixed
maturity
investments
 
Common
equity
securities
 
Convertible
fixed
maturity
investments
 
Other
investments(1)
 
Total(1)(2)
Balance at January 1, 2015
 
$
358.7

 
$
1,692.1

 
$
74.0

 
$
—

 
$
—

 
$
182.0

 
$
2,306.8

Amortization/accretion
 
—

 
(2.9
)
 
—

 
—

 
—

 
—

 
(2.9
)
Net realized and unrealized gains
 
5.5

 
7.3

 
0.3

 
—

 
—

 
1.2

 
14.3

Purchases
 
62.4

 
208.7

 
28.4

 
—

 
—

 
1.4

 
300.9

Sales
 
(75.2
)
 
(175.4
)
 
—

 
—

 
—

 
(3.0
)
 
(253.6
)
Transfers in
 
—

 
2.9

 
—

 
—

 
—

 
—

 
2.9

Transfers out
 
—

 
—

 
(2.9
)
 
—

 
—

 
—

 
(2.9
)
Balance at March 31, 2015
 
$
351.4

 
$
1,732.7

 
$
99.8

 
$
—

 
$
—

 
$
181.6

 
$
2,365.5

Amortization/accretion
 
—

 
(3.5
)
 
—

 
—

 
—

 
—

 
(3.5
)
Net realized and unrealized gains
 
(1.0
)
 
(8.2
)
 
(0.2
)
 
—

 
—

 
(4.5
)
 
(13.9
)
Purchases
 
350.8

 
307.4

 
5.6

 
—

 
—

 
1.1

 
664.9

Sales
 
(373.9
)
 
(215.5
)
 
—

 
—

 
—

 
(19.1
)
 
(608.5
)
Transfers in
 
—

 
28.4

 
—

 
—

 
—

 
—

 
28.4

Transfers out
 
—

 
—

 
(28.4
)
 
—

 
—

 
—

 
(28.4
)
Balance at June 30, 2015
 
$
327.3

 
$
1,841.3

 
$
76.8

 
$
—

 
$
—

 
$
159.1

 
$
2,404.5

_______________________________________________________________________________
(1) 
Excludes the carrying value of $15.8 million associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method as of June 30, 2015.
(2) 
Excludes short-term investments.


 
 
 
 
 
 
Level 3 Investments
 
 
($ in millions)
 
Level 1 Investments
 
Level 2 Investments
 
Fixed
maturity
investments
 
Common
equity
securities
 
Convertible
fixed
maturity
investments
 
Other
investments(1)
 
Total(1)(2)
Balance at January 1, 2014
 
$
469.5

 
$
1,753.1

 
$
81.9

 
$
0.1

 
$
—

 
$
119.9

 
$
2,424.5

Amortization/accretion
 
—

 
(2.7
)
 
—

 
—

 
—

 
—

 
(2.7
)
Net realized and unrealized gains
 
8.6

 
6.9

 
0.3

 
—

 
—

 
3.1

 
18.9

Purchases
 
140.6

 
347.8

 
7.5

 
—

 
—

 
2.3

 
498.2

Sales
 
(60.0
)
 
(411.4
)
 
—

 
—

 
—

 
(1.6
)
 
(473.0
)
Transfers in
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Transfers out
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Balance at March 31, 2014
 
$
558.7

 
$
1,693.7

 
$
89.7

 
$
0.1

 
$
—

 
$
123.7

 
$
2,465.9

Amortization/accretion
 
—

 
(2.8
)
 
—

 
—

 
—

 
—

 
(2.8
)
Net realized and unrealized gains
 
14.1

 
5.5

 
0.3

 
0.4

 
—

 
1.7

 
22.0

Purchases
 
279.2

 
349.8

 
34.2

 
—

 
—

 
1.0

 
664.2

Sales
 
(332.7
)
 
(292.1
)
 
—

 
—

 
—

 
(1.5
)
 
(626.3
)
Transfers in
 
—

 
7.5

 
—

 
—

 
—

 
—

 
7.5

Transfers out
 
—

 
—

 
(7.5
)
 
—

 
—

 
—

 
(7.5
)
Balance at June 30, 2014
 
$
519.3

 
$
1,761.6

 
$
116.7

 
$
0.5

 
$
—

 
$
124.9

 
$
2,523.0

_______________________________________________________________________________
(1) 
Excludes the carrying value of $18.0 million associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method as of June 30, 2014.
(2) 
Excludes short-term investments.
Fair value, significant unobservable inputs
The following summarizes significant unobservable inputs used in estimating the fair value of fixed maturity investments classified within Level 3, other than hedge funds and private equities, as of June 30, 2015. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.
Description
 
Fair Value
(in millions)
 
Rating(2)
 
Valuation Technique
 
Unobservable Inputs
 
Input
Preferred stock(1)
 
$
71.2

 
N/R
 
Discounted cash flow
 
Discount yield
 
7.065%
Surplus notes:
 
 
 
N/R
 
 
 
 
 
12.3%
- Seller priority note
 
$
45.4

 
 
 
Discounted cash flow
 
Discount rate(3)
 
10.2%
 
 
 
 
 
 
 
 
Timing of interest payments(4)
 
5 years
 
 
 
 
 
 
 
 
Timing of principal payments(4)
 
10 years
- Pari passu note
 
$
20.9

 
 
 
Discounted cash flow
 
Discount rate(5)
 
15.5%
 
 
 
 
 
 
 
 
Timing of interest payments(4)
 
5 years
 
 
 
 
 
 
 
 
Timing of principal payments(4)
 
15 years
Asset-backed securities(1)
 
$
5.6

 
A
 
Broker pricing
 
Broker quote
 
N/A
_________________________________________________________________________
(1) 
As of June 30, 2015, each asset type consists of one security.
(2) 
Credit ratings, if rated, are assigned based on the following hierarchy: 1) Standard & Poor's and 2) Moody's
(3) 
Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the seller priority note is roughly equivalent to that of a conventional debt security with a credit rating of ‘B’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, which was added to the treasury rate to determine the discount rate for the seller priority note.
(4) 
For estimated value purposes, the assumption has been made that interest payouts begin in year five and principal repayments begin on a graduated basis in year ten for the seller priority note and year fifteen for the pari passu note.
(5) 
Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the pari passu note is roughly equivalent to that of a conventional debt security with a credit rating of ‘CCC’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, which was added to the treasury rate to determine the discount rate for the pari passu note.
Net unrealized gains or losses for Level 3 investments
The following summarizes significant unobservable inputs used in estimating the fair value of fixed maturity investments classified within Level 3, other than hedge funds and private equities, as of June 30, 2015. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.
Description
 
Fair Value
(in millions)
 
Rating(2)
 
Valuation Technique
 
Unobservable Inputs
 
Input
Preferred stock(1)
 
$
71.2

 
N/R
 
Discounted cash flow
 
Discount yield
 
7.065%
Surplus notes:
 
 
 
N/R
 
 
 
 
 
12.3%
- Seller priority note
 
$
45.4

 
 
 
Discounted cash flow
 
Discount rate(3)
 
10.2%
 
 
 
 
 
 
 
 
Timing of interest payments(4)
 
5 years
 
 
 
 
 
 
 
 
Timing of principal payments(4)
 
10 years
- Pari passu note
 
$
20.9

 
 
 
Discounted cash flow
 
Discount rate(5)
 
15.5%
 
 
 
 
 
 
 
 
Timing of interest payments(4)
 
5 years
 
 
 
 
 
 
 
 
Timing of principal payments(4)
 
15 years
Asset-backed securities(1)
 
$
5.6

 
A
 
Broker pricing
 
Broker quote
 
N/A
_________________________________________________________________________
(1) 
As of June 30, 2015, each asset type consists of one security.
(2) 
Credit ratings, if rated, are assigned based on the following hierarchy: 1) Standard & Poor's and 2) Moody's
(3) 
Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the seller priority note is roughly equivalent to that of a conventional debt security with a credit rating of ‘B’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, which was added to the treasury rate to determine the discount rate for the seller priority note.
(4) 
For estimated value purposes, the assumption has been made that interest payouts begin in year five and principal repayments begin on a graduated basis in year ten for the seller priority note and year fifteen for the pari passu note.
(5) 
Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the pari passu note is roughly equivalent to that of a conventional debt security with a credit rating of ‘CCC’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, which was added to the treasury rate to determine the discount rate for the pari passu note.
Mortgage-backed and asset-backed securities
The following table summarizes the carrying value of OneBeacon's asset-backed securities as of June 30, 2015 and December 31, 2014:
 
 
June 30, 2015
 
December 31, 2014
($ in millions)
 
Fair Value
 
Level 2
 
Level 3
 
Fair Value
 
Level 2
 
Level 3
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency:
 
 
 
 
 
 
 
 
 
 
 
 
GNMA
 
$
235.0

 
$
235.0

 
$
—

 
$
259.2

 
$
259.2

 
$
—

FNMA
 
1.7

 
1.7

 
—

 
1.9

 
1.9

 
—

FHLMC
 
—

 
—

 
—

 
—

 
—

 
—

Total agency(1)
 
236.7

 
236.7

 
—

 
261.1

 
261.1

 
—

Non-agency:
 
 
 
 
 
 
 
 
 
 
 
 
Residential
 
100.0

 
100.0

 
—

 
67.4

 
67.4

 
—

Commercial
 
126.1

 
126.1

 
—

 
96.7

 
96.7

 
—

Total Non-agency
 
226.1

 
226.1

 
—

 
164.1

 
164.1

 
—

Total mortgage-backed securities
 
462.8

 
462.8

 
—

 
425.2

 
425.2

 
—

Other asset-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Credit card receivables
 
210.9

 
210.9

 
—

 
197.6

 
197.6

 
—

Vehicle receivables
 
191.1

 
191.1

 
—

 
145.8

 
145.8

 
—

Other
 
58.5

 
52.9

 
5.6

 
45.8

 
45.8

 
—

Total other asset-backed securities
 
460.5

 
454.9

 
5.6

 
389.2

 
389.2

 
—

Total mortgage-backed and asset-backed securities
 
$
923.3

 
$
917.7

 
$
5.6

 
$
814.4

 
$
814.4

 
$
—

_______________________________________________________________________________
(1)
Represents publicly traded mortgage-backed securities which carry the full faith and credit guarantee of the U.S. government (i.e., GNMA) or are guaranteed by a government sponsored entity (i.e., FNMA, FHLMC).
Schedule of security issuance years of investments in non-agency RMBS and non-agency CMBS securities
The security issuance years of OneBeacon's investments in non-agency RMBS and non-agency CMBS securities as of June 30, 2015 are as follows:
 
 
Fair Value
 
Security Issuance Year
($ in millions)
 
2004
 
2005
 
2006
 
2008
 
2010
 
2011
 
2012
 
2013
 
2014
 
2015
Total non-agency RMBS
 
$
100.0

 
$
16.3

 
$
3.3

 
$
4.4

 
$
4.7

 
$
19.5

 
$
16.1

 
$
1.5

 
$
13.9

 
$
20.3

 
$
—

Total non-agency CMBS
 
126.1

 
—

 
—

 
—

 
—

 
6.0

 
—

 
8.5

 
23.5

 
53.3

 
34.8

Total non-agency
 
$
226.1

 
$
16.3

 
$
3.3

 
$
4.4

 
$
4.7

 
$
25.5

 
$
16.1

 
$
10.0

 
$
37.4

 
$
73.6

 
$
34.8
Non-agency RMBS, collateral quality and tranche levels
The classification of the underlying collateral quality and the tranche levels of OneBeacon's non-agency RMBS securities are as follows as of June 30, 2015:
($ in millions)
 
Fair Value
 
Super Senior(1)
 
Senior(2)
 
Subordinate(3)
Prime
 
$
99.3

 
$
32.8

 
$
66.5

 
$
—

Non-prime
 
0.7

 
—

 
0.7

 
—

Total non-agency RMBS
 
$
100.0

 
$
32.8

 
$
67.2

 
$
—

_______________________________________________________________________________
(1)
At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated AAA by Standard & Poor's, Aaa by Moody's, or AAA by Fitch Ratings ("Fitch") and were senior to other AAA or Aaa securities.
(2)
At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated AAA by Standard & Poor's, Aaa by Moody's, or AAA by Fitch and were senior to non-AAA or non-Aaa securities.
(3)
At issuance, Subordinate were not rated AAA by Standard & Poor's, Aaa by Moody's, or AAA by Fitch and were junior to other AAA or Aaa securities.
Non-agency CMBS, type of interest rate and tranche levels
The amount of fixed and floating rate securities and their tranche levels of OneBeacon's non-agency CMBS securities are as follows as of June 30, 2015:
($ in millions)
 
Fair Value
 
Super Senior(1)
 
Senior(2)
 
Subordinate(3)
Fixed rate CMBS
 
$
85.0

 
$
6.1

 
$
32.8

 
$
46.1

Floating rate CMBS
 
41.1

 
—

 
—

 
41.1

Total non-agency CMBS
 
$
126.1

 
$
6.1

 
$
32.8

 
$
87.2

_______________________________________________________________________________
(1)
At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated AAA by Standard & Poor's, Aaa by Moody's or AAA by Fitch and were senior to other AAA or Aaa securities.
(2)
At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated AAA by Standard & Poor's, Aaa by Moody's, or AAA by Fitch and were senior to non-AAA or non-Aaa securities.
(3)
At issuance, Subordinate were not rated AAA by Standard & Poor's, Aaa by Moody's, or AAA by Fitch and were junior to other AAA or Aaa securities.
Other investments
The following table summarizes investments in hedge funds and private equity funds as of June 30, 2015 and December 31, 2014:
 
 
June 30, 2015
 
December 31, 2014
($ in millions)
 
Fair
Value(1)
 
Unfunded
Commitments
 
Fair
Value
 
Unfunded
Commitments
Hedge funds
 
 
 
 
 
 
 
 
Long/short equity banks and financial
 
$
12.8

 
$
—

 
$
28.5

 
$
—

Long/short credit and distressed
 
8.4

 
—

 
8.4

 
—

Other
 
6.0

 
—

 
5.4

 
—

Total hedge funds
 
27.2

 
—

 
42.3

 
—

Private equity funds
 
 
 
 
 
 
 
 
Energy infrastructure and services
 
25.7

 
4.3

 
33.1

 
4.8

Multi-sector
 
14.4

 
2.1

 
14.5

 
2.2

Private equity secondaries
 
5.0

 
2.1

 
5.6

 
2.0

Healthcare
 
3.2

 
0.4

 
3.1

 
1.4

Insurance
 
2.1

 
0.1

 
2.1

 
0.1

Real estate
 
0.9

 
0.1

 
1.7

 
0.1

Distressed residential real estate
 
—

 
—

 
—

 
—

Total private equity funds
 
51.3

 
9.1

 
60.1

 
10.6

Total hedge funds and private equity funds
 
$
78.5

 
$
9.1

 
$
102.4

 
$
10.6
Fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds
The following summarizes the June 30, 2015 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:
 
 
Hedge Funds Notice Period
($ in millions)
 
30 - 59 days
notice
 
60 - 89 days
notice
 
90 - 119 days
notice
 
120+ days
notice
 
Total
Redemption frequency
 
 
 
 
 
 
 
 
 
 
Monthly
 
$
2.1

 
$
—

 
$
—

 
$
—

 
$
2.1

Quarterly
 
13.8

 
8.4

 
—

 
—

 
22.2

Annual
 
—

 
—

 
2.9

 
—

 
2.9

Total hedge funds
 
$
15.9

 
$
8.4

 
$
2.9

 
$
—

 
$
27.2
Fair Value of private equity funds subject to lock-up periods
As of June 30, 2015, investments in private equity funds were subject to lock-up periods as follows:
($ in millions)
 
1 - 3 years
 
3 - 5 years
 
5 - 10 years
 
>10 years
 
Total
Private Equity Funds—expected lock-up period remaining
 
$
19.9

 
$
15.8

 
$
15.6

 
$
—

 
$
51.3

See Note 15—"Discontinued Operations" for further disclosures regarding the valuation of the surplus notes provided in conjunction with the financing of the Runoff Transaction.