XML 30 R14.htm IDEA: XBRL DOCUMENT v3.20.2
Investment information
 6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Investment information
Available for Sale Investments
The following tables summarize the fair value of the Company’s securities classified as available for sale as of June 30, 2020 and December 31, 2019:
 
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses (1)
 
Fair Value
 
($ in thousands)
June 30, 2020
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
U.S. government and government agency bonds
$
215,127

 
$
1,741

 
$
(4
)
 
$
216,864

Non-U.S. government and government agency bonds
151,335

 
4,998

 
(6,591
)
 
149,742

Corporate bonds
164,417

 
7,215

 
(2,224
)
 
169,408

Asset-backed securities
141,760

 
134

 
(11,567
)
 
130,327

Mortgage-backed securities
24,498

 
17

 
(2,497
)
 
22,018

Municipal government and government agency bonds
1,760

 
106

 
—

 
1,866

Total investments, available for sale
$
698,897

 
$
14,211

 
$
(22,883
)
 
$
690,225

(1) Effective January 1, 2020, the Company adopted ASU 2016-13, and as a result any credit impairment losses on the Company’s available for sale securities are recorded as an allowance, subject to reversal. See Note 2. “Basis of presentation and significant accounting policies-(b) Recent accounting pronouncements-Issued and effective as of June 30, 2020 - Credit Losses” above for more information about ASU 2016-13. Included within the gross unrealized losses for corporate bonds is a credit allowance of $0.4 million for securities with an unrealized loss of $2.6 million as of June 30, 2020.
 
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
($ in thousands)
December 31, 2019
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
U.S. government and government agency bonds
$
282,076

 
$
1,708

 
$
(137
)
 
$
283,647

Corporate bonds
155,834

 
2,326

 
(41
)
 
158,119

Asset-backed securities
145,555

 
614

 
(735
)
 
145,434

Non-U.S. government and government agency bonds
129,456

 
3,530

 
(1,033
)
 
131,953

Mortgage-backed securities
24,776

 
18

 
(44
)
 
24,750

Municipal government and government agency bonds
1,759

 
46

 
—

 
1,805

Total investments, available for sale
$
739,456

 
$
8,242

 
$
(1,990
)
 
$
745,708







The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized losses by length of time the security has been in a continual unrealized loss position:
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
($ in thousands)
June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government and government agency bonds
$
28,550

 
$
(4
)
 
$
—

 
$
—

 
$
28,550

 
$
(4
)
Non-U.S. government and government agency bonds
121,648

 
(6,591
)
 
—

 
—

 
121,648

 
(6,591
)
Corporate bonds
24,696

 
(2,224
)
 
—

 
—

 
24,696

 
(2,224
)
Asset-backed securities
105,868

 
(9,343
)
 
16,135

 
(2,224
)
 
122,003

 
(11,567
)
Mortgage-backed securities
21,415

 
(2,497
)
 
—

 
—

 
21,415

 
(2,497
)
Total
$
302,177

 
$
(20,659
)
 
$
16,135

 
$
(2,224
)
 
$
318,312

 
$
(22,883
)
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government and government agency bonds
$
36,540

 
$
(137
)
 
$
—

 
$
—

 
$
36,540

 
$
(137
)
Non-U.S. government and government agency bonds
51,779

 
(1,027
)
 
5,410

 
(6
)
 
57,189

 
(1,033
)
Corporate bonds
9,854

 
(41
)
 
—

 
—

 
9,854

 
(41
)
Asset-backed securities
55,194

 
(504
)
 
19,430

 
(231
)
 
74,624

 
(735
)
Mortgage-backed securities
14,481

 
(44
)
 
—

 
—

 
14,481

 
(44
)
Total
$
167,848

 
$
(1,753
)
 
$
24,840

 
$
(237
)
 
$
192,688

 
$
(1,990
)

At June 30, 2020, 72 positions out of a total of 158 positions were in an unrealized loss position. The unrealized loss position increased during the six-month period from $2.0 million to $22.9 million. The decrease in value can be attributed to the market movements resulting from the COVID-19 global pandemic, which primarily impacted the asset-backed securities, and unfavorable foreign exchange rates impacting the non-U.S. government agency bonds during the period.
At December 31, 2019, 48 positions out of a total of 146 positions were in an unrealized loss position; however, the unrealized loss was less than 10% of the fair value for all 48 positions. The decrease in value can be attributed to movement in foreign exchange rates for the non-U.S. government agency bonds since purchase and the decrease in value for the asset-backed securities, primarily driven by market movements during the period. The Company believes that such securities were temporarily impaired at December 31, 2019.
Allowance for expected credit losses
The Company recognized changes in the allowance for expected credit losses on available for sale securities of $(0.2) million and $0.4 million for the three and six months ended June 30, 2020. The credit allowance as of June 30, 2020 and March 31, 2020 was $0.4 million and $0.6 million, respectively. No credit losses were previously recognized and there were no write-offs charged against the allowance. The change in allowance is recognized in “realized and unrealized gains (losses) on investments” in the Company’s consolidated statements of income (loss). There were no impairments of securities which the Company intends to sell or more likely than not will be required to sell.
The amortized cost and fair value of our fixed maturities classified as available for sale, summarized by contractual maturity as of June 30, 2020 and December 31, 2019 are shown in the following tables.
 
June 30, 2020
 
Amortized Cost
 
Estimated Fair Value
 
% of Fair Value
 
($ in thousands)
Due in one year or less
$
19,500

 
$
19,525

 
2.8
%
Due after one year through five years
345,922

 
349,444

 
50.6
%
Due after five years through ten years
152,830

 
155,652

 
22.6
%
Due after ten years
14,387

 
13,259

 
1.9
%
Asset-backed securities
141,760

 
130,327

 
18.9
%
Mortgage-backed securities
24,498

 
22,018

 
3.2
%
Total investments, available for sale
$
698,897

 
$
690,225

 
100.0
%
 
December 31, 2019
 
Amortized Cost
 
Estimated Fair Value
 
% of Fair Value
 
($ in thousands)
Due in one year or less
$
9,235

 
$
9,248

 
1.3
%
Due after one year through five years
414,235

 
417,921

 
56.0
%
Due after five years through ten years
133,822

 
136,329

 
18.3
%
Due after ten years
11,833

 
12,026

 
1.6
%
Asset-backed securities
145,555

 
145,434

 
19.5
%
Mortgage-backed securities
24,776

 
24,750

 
3.3
%
Total investments, available for sale
$
739,456

 
$
745,708

 
100.0
%

Fair Value Option and Fair Value Through Net Income
The following table summarizes the fair value of the Company’s securities held as of June 30, 2020 and December 31, 2019, classified as fair value through net income or for which the fair value option was elected:
 
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
($ in thousands)
June 30, 2020
 
 
 
 
 
 
 
Term loan investments
$
991,130

 
$
1,959

 
$
(117,529
)
 
$
875,560

Fixed maturities:
 
 
 
 
 
 
 
Corporate bonds
403,424

 
11,858

 
(36,589
)
 
378,693

U.S. government and government agency bonds
584

 
11

 
—

 
595

Asset-backed securities
198,619

 
2,229

 
(42,923
)
 
157,925

Mortgage-backed securities
6,950

 
2,257

 
(43
)
 
9,164

Non-U.S. government and government agency bonds
1,437

 
52

 
(107
)
 
1,382

Municipal government and government agency bonds
251

 
—

 
—

 
251

Short-term investments
370,976

 
597

 
(1,507
)
 
370,066

Other investments
28,673

 
5,469

 
—

 
34,142

Equities
50,863

 
13,524

 
(5,489
)
 
58,898

Investments, fair value option
$
2,052,907

 
$
37,956

 
$
(204,187
)
 
$
1,886,676

Fair Value Through Net Income:
 
 
 
 
 
 
 
Equities, fair value through net income
$
72,892

 
$
6,956

 
$
(17,404
)
 
$
62,444

 
Cost or Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
($ in thousands)
December 31, 2019
 
 
 
 
 
 
 
Term loan investments
$
1,113,212

 
$
7,340

 
$
(58,618
)
 
$
1,061,934

Fixed maturities:
 
 
 
 
 
 
 
Corporate bonds
221,024

 
8,430

 
(15,100
)
 
214,354

U.S. government and government agency bonds
1,963

 
1

 
(2
)
 
1,962

Asset-backed securities
200,361

 
3,329

 
(12,953
)
 
190,737

Mortgage-backed securities
7,399

 
712

 
(405
)
 
7,706

Non-U.S. government and government agency bonds
1,449

 
18

 
(11
)
 
1,456

Municipal government and government agency bonds
380

 
—

 
(1
)
 
379

Short-term investments
325,542

 
3,817

 
(56
)
 
329,303

Other investments
28,672

 
2,264

 
(475
)
 
30,461

Equities
54,893

 
10,690

 
(5,784
)
 
59,799

Investments, fair value option
$
1,954,895

 
$
36,601

 
$
(93,405
)
 
$
1,898,091

Fair Value Through Net Income:
 
 
 
 
 
 
 
Equities, fair value through net income
$
78,031

 
$
2,360

 
$
(15,053
)
 
$
65,338



The amortized cost and fair value of our term loans, fixed maturities and short-term investments, excluding securities classified as available for sale, summarized by contractual maturity as of June 30, 2020 and December 31, 2019 are shown in the following tables.
 
June 30, 2020
 
Amortized Cost
 
Estimated Fair Value
 
% of Fair Value
 
($ in thousands)
Due in one year or less
$
423,881

 
$
415,624

 
23.2
%
Due after one year through five years
797,528

 
708,229

 
39.5
%
Due after five years through ten years
538,257

 
495,214

 
27.6
%
Due after ten years
8,136

 
7,480

 
0.4
%
Asset-backed securities
198,619

 
157,925

 
8.8
%
Mortgage-backed securities
6,950

 
9,164

 
0.5
%
Total
$
1,973,371

 
$
1,793,636

 
100.0
%
 
December 31, 2019
 
Amortized Cost
 
Estimated Fair Value
 
% of Fair Value
 
($ in thousands)
Due in one year or less
$
368,452

 
$
370,479

 
20.5
%
Due after one year through five years
779,643

 
742,960

 
41.1
%
Due after five years through ten years
514,961

 
495,416

 
27.4
%
Due after ten years
514

 
533

 
—
%
Asset-backed securities
200,361

 
190,737

 
10.6
%
Mortgage-backed securities
7,399

 
7,706

 
0.4
%
Total
$
1,871,330

 
$
1,807,831

 
100.0
%

Variable Interest Entities
In the normal course of its investing activities, the Company invests in limited partnerships, limited liability companies and other investment securities. Due to the legal forms of the entities and the fact that the investors lack the ability, through voting rights or similar rights, to make decisions that have a significant effect on the entities, such investments are considered variable interest entities. Since the Company lacks the ability to control the activities that most significantly impact the economic performance of these variable interest entities, the Company is not considered the primary beneficiary and does not consolidate these investments.
The activities of these entities are generally limited to holding and managing the underlying investments. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported as “other investments” in the Company’s consolidated balance sheet and any unfunded commitments. Realized and unrealized gains and losses from such investments are included in “realized and unrealized gains (losses) on investments” in the Company’s consolidated statements of income (loss).
The table below summarizes the credit quality of our total investments as of June 30, 2020 and December 31, 2019, as rated by Standard & Poor’s Financial Services, LLC, or Standard & Poor’s, Moody’s Investors Service, or Moody’s, Fitch Ratings Inc., or Fitch, Kroll Bond Rating Agency, or KBRA, or DBRS Morningstar, or DBRS, as applicable:
 
Credit Rating (1)
June 30, 2020
Fair Value
 
AAA
 
AA
 
A
 
BBB
 
BB
 
B
 
CCC
 
CC
 
C
 
D
 
Not Rated
 
($ in thousands)
Term loan investments
$
875,560

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23,218

 
$
530,118

 
$
247,478

 
$
15,191

 
$
2,192

 
$
28,046

 
$
29,317

Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate bonds
548,101

 
—

 
16,032

 
90,087

 
96,231

 
55,066

 
152,648

 
113,723

 
6,268

 
5,585

 
3,956

 
8,505

U.S. government and government agency bonds
217,459

 
—

 
217,459

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Asset-backed securities
288,252

 
1,377

 
—

 
23,475

 
207,617

 
23,675

 
8,767

 
1,663

 
—

 
—

 
—

 
21,678

Mortgage-backed securities
31,182

 
—

 
602

 
4,794

 
16,622

 
1,292

 
—

 
—

 
—

 
—

 
3,224

 
4,648

Non-U.S. government and government agency bonds
151,124

 
—

 
151,124

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Municipal government and government agency bonds
2,117

 
1,039

 
586

 
492

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total fixed income instruments
2,113,795

 
2,416

 
385,803

 
118,848

 
320,470

 
103,251

 
691,533

 
362,864

 
21,459

 
7,777

 
35,226

 
64,148

Short-term investments
370,066

 
38,307

 
194,822

 
60,880

 
73,874

 
502

 
—

 
—

 
—

 
—

 
—

 
1,681

Total fixed income instruments and short-term investments
2,483,861

 
40,723

 
580,625

 
179,728

 
394,344

 
103,753

 
691,533

 
362,864

 
21,459

 
7,777

 
35,226

 
65,829

Other Investments
34,142

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
121,342

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
2,639,345

 
$
40,723

 
$
580,625

 
$
179,728

 
$
394,344

 
$
103,753

 
$
691,533

 
$
362,864

 
$
21,459

 
$
7,777

 
$
35,226

 
$
65,829

(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.
 
Credit Rating (1)
December 31, 2019
Fair Value
 
AAA
 
AA
 
A
 
BBB
 
BB
 
B
 
CCC
 
CC
 
C
 
D
 
Not Rated
 
($ in thousands)
Term loan investments
$
1,061,934

 
$
—

 
$
—

 
$
—

 
$
—

 
$
9,617

 
$
761,168

 
$
215,909

 
$
6,823

 
$
2,119

 
$
—

 
$
66,298

Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Corporate bonds
372,473

 
—

 
36,128

 
81,401

 
41,103

 
9,003

 
58,345

 
135,613

 
—

 
—

 
—

 
10,880

U.S. government and government agency bonds
285,609

 
—

 
285,609

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Asset-backed securities
336,171

 
2,006

 
—

 
29,179

 
223,956

 
29,695

 
18,381

 
—

 
—

 
—

 
—

 
32,954

Mortgage-backed securities
32,456

 
—

 
—

 
1,100

 
23,650

 
976

 
—

 
—

 
—

 
—

 
2,497

 
4,233

Non-U.S. government and government agency bonds
133,409

 
—

 
132,460

 
—

 
949

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Municipal government and government agency bonds
2,184

 
1,135

 
573

 
476

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total fixed income instruments
2,224,236

 
3,141

 
454,770

 
112,156

 
289,658

 
49,291

 
837,894

 
351,522

 
6,823

 
2,119

 
2,497

 
114,365

Short-term investments
329,303

 
25,783

 
136,842

 
34,903

 
115,155

 
—

 
—

 
8,359

 
—

 
—

 
—

 
8,261

Total fixed income instruments and short-term investments
2,553,539

 
28,924

 
591,612

 
147,059

 
404,813

 
49,291

 
837,894

 
359,881

 
6,823

 
2,119

 
2,497

 
122,626

Other Investments
30,461

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
125,137

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
2,709,137

 
$
28,924

 
$
591,612

 
$
147,059

 
$
404,813

 
$
49,291

 
$
837,894

 
$
359,881

 
$
6,823

 
$
2,119

 
$
2,497

 
$
122,626

(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.
Fair value option
The Company elected to carry the majority of fixed maturity securities and other investments at fair value under the fair value option afforded by accounting guidance regarding the fair value option for financial assets and liabilities. Changes in fair value of investments accounted for using the fair value option are included in “realized and unrealized gain (loss) on investments” in the Company’s consolidated statements of income (loss). The Company elected to use this option as investments are not necessarily held to maturity, and in order to address simplification and cost-benefit considerations.
Net investment income (loss)
The components of net investment income (loss) for the three and six months ended June 30, 2020 and 2019 were derived from the following sources:
 
Three Months Ended June 30, 2020
 
Net Interest Income
 
Net Unrealized Gains (Losses)
 
Net Realized Gains (Losses)
 
Net Investment Income (Loss)
 
($ in thousands)
Net investment income (loss) by asset class:
 
 
 
 
 
 
 
Term loan investments
$
18,022

 
$
90,951

 
$
(6,142
)
 
$
102,831

Fixed maturities - Fair value option
10,887

 
45,781

 
230

 
56,898

Fixed maturities - Available for sale (1)
3,648

 
—

 
8,911

 
12,559

Short-term investments
2,881

 
3,513

 
38

 
6,432

Equities (2)
—

 
5,792

 
(3,156
)
 
2,636

Equities, fair value through net income (2)
196

 
11,781

 
(6,085
)
 
5,892

Other investments
819

 
3,463

 
—

 
4,282

Other (3)
—

 
16,783

 
203

 
16,986

Investment management fees - related parties
(4,262
)
 
—

 
—

 
(4,262
)
Borrowing and miscellaneous other investment expenses
(4,763
)
 
—

 
—

 
(4,763
)
 
$
27,428

 
$
178,064

 
$
(6,001
)
 
$
199,491

(1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $9.5 million and $0.6 million, respectively. Realized gains include a reversal of the allowance for expected credit losses on available for sale securities of $0.2 million for the three months ended June 30, 2020.
(2) Net interest income includes dividends for securities held in long and short positions.
(3) Other includes unrealized gains and unrealized losses for total return swaps.
 
Three Months Ended June 30, 2019
 
Net Interest Income
 
Net Unrealized Gains (Losses)
 
Net Realized Gains (Losses)
 
Net Investment Income (Loss)
 
($ in thousands)
Net investment income (loss) by asset class:
 
 
 
 
 
 
 
Term loan investments
$
22,665

 
$
(11,437
)
 
$
148

 
$
11,376

Fixed maturities - Fair value option
9,592

 
8,995

 
1,655

 
20,242

Fixed maturities - Available for sale (1)
4,411

 
—

 
1,816

 
6,227

Short-term investments
1,055

 
(48
)
 
25

 
1,032

Equities (2)
80

 
(1,096
)
 
—

 
(1,016
)
Equities, fair value through net income (2)
793

 
3,687

 
(3,599
)
 
881

Other investments
—

 
(2,213
)
 
(202
)
 
(2,415
)
Other (3)
—

 
387

 
946

 
1,333

Investment management fees - related parties
(4,570
)
 
—

 
—

 
(4,570
)
Borrowing and miscellaneous other investment expenses
(7,611
)
 
—

 
—

 
(7,611
)
Investment performance fees - related parties
—

 
—

 
—

 
(1,692
)
 
$
26,415

 
$
(1,725
)
 
$
789

 
$
23,787

(1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $1.9 million and $0.1 million, respectively.
(2) Net interest income includes dividends for securities held in long and short positions.
(3) Other includes unrealized gains and unrealized losses for total return swaps.
 
Six Months Ended June 30, 2020
 
Net Interest Income
 
Net Unrealized Gains (Losses)
 
Net Realized Gains (Losses)
 
Net Investment Income (Loss)
Net investment income (loss) by asset class:
($ in thousands)
Term loan investments
$
39,040

 
$
(64,282
)
 
$
(14,287
)
 
$
(39,529
)
Fixed maturities - Fair value option
19,955

 
(43,894
)
 
(1,014
)
 
(24,953
)
Fixed maturities - Available for sale (1)
8,308

 
—

 
11,091

 
19,399

Short-term investments
4,731

 
73

 
125

 
4,929

Equities (2)
—

 
5,868

 
(3,195
)
 
2,673

Equities, fair value through net income (2)
573

 
(494
)
 
(5,217
)
 
(5,138
)
Other investments
1,670

 
3,683

 
—

 
5,353

Other (3)
—

 
(8,346
)
 
1,450

 
(6,896
)
Investment management fees - related parties
(8,614
)
 
—

 
—

 
(8,614
)
Borrowing and miscellaneous other investment expenses
(10,432
)
 
—

 
—

 
(10,432
)
 
$
55,231

 
$
(107,392
)
 
$
(11,047
)
 
$
(63,208
)
(1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $12.8 million and $1.7 million, respectively. Realized losses include an allowance for expected credit losses on available for sale securities of $0.4 million for the six months ended June 30, 2020.
(2) Net interest income includes dividends for securities held in long and short positions.
(3) Other includes unrealized gains and unrealized losses for total return swaps.
 
Six Months Ended June 30, 2019
 
Net Interest Income
 
Net Unrealized Gains (Losses)
 
Net Realized Gains (Losses)
 
Net Investment Income (Loss)
 
($ in thousands)
Net investment income (loss) by asset class:
 
 
 
 
 
 
 
Term loan investments
$
45,075

 
$
(2,071
)
 
$
212

 
$
43,216

Fixed maturities - Fair value option
25,635

 
28,970

 
906

 
55,511

Fixed maturities - Available for sale (1)
7,833

 
—

 
2,211

 
10,044

Short-term investments
1,579

 
(496
)
 
25

 
1,108

Equities (2)
200

 
1,062

 
—

 
1,262

Equities, fair value through net income (2)
1,415

 
1,698

 
(2,027
)
 
1,086

Other investments
—

 
(419
)
 
(202
)
 
(621
)
Other (3)
—

 
1,969

 
946

 
2,915

Investment management fees - related parties
(8,979
)
 
—

 
—

 
(8,979
)
Borrowing and miscellaneous other investment expenses
(15,909
)
 
—

 
—

 
(15,909
)
Investment performance fees - related parties
—

 
—

 
—

 
(7,492
)
 
$
56,849

 
$
30,713

 
$
2,071

 
$
82,141

(1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $2.4 million and $0.2 million, respectively.
(2) Net interest income includes dividends for securities held in long and short positions.
(3) Other includes unrealized gains and unrealized losses for total return swaps.
Pledged and restricted assets
For the benefit of certain Arch entities and other third parties that cede business to the Company, the Company is required to post and maintain collateral to support its potential obligations under reinsurance contracts written. This collateral can be in the form of either investment assets held in collateral trust accounts or letters of credit. Under its secured credit facilities, in order for the Company to have the bank issue a letter of credit to the Company’s reinsurance contract counterparty, the Company must post investment assets or cash as collateral to the bank. In either case, the amounts remain restricted for the duration of the term of the trust or letter of credit, as applicable.
At June 30, 2020 and December 31, 2019, the Company held $2.2 billion and $2.1 billion, respectively, in pledged assets in support of insurance and reinsurance liabilities as well as to collateralize the Company’s secured credit facilities and investment derivatives. Included within total pledged assets, the Company held $6.7 million and $6.4 million, respectively, in deposits with U.S. regulatory authorities.
Non-cash investing activities
During the first half of 2020, $33.2 million of investments converted or exchanged in non-cash transactions from fixed maturities or preferred equity positions to short term investments, fixed maturities or common stock equity positions, as presented on the consolidated statement of cash flows.
During 2019, the Company exchanged a preference share position of $28.7 million, which was held within “equity securities, fair value through net income,” for a limited partnership interest of $28.7 million, held under “other investments, fair value option.” HPS acts as the general partner and manager of the limited partnership.
During 2019, as a result of the restructuring of an investment position held by the Company, $16.9 million of term loans were converted to $23.0 million of common and preferred stock held within “equity securities, fair value through net income,” along with cash funding from short-term investments of $6.5 million.