Investment securities

Sirius Group's invested assets consist of investment securities and other long-term investments held for general investment purposes. The portfolio of investment securities includes fixed maturity investments, short-term investments, equity securities, and other-long term investments which are all classified as trading securities. Realized and unrealized investment gains and losses on trading securities are reported in pre-tax revenues.

Net Investment Income

Sirius Group's net investment income is comprised primarily of interest income along with associated amortization of premium and accretion of discount on Sirius Group's fixed maturity investments, dividend income from its equity investments, and interest income from its short-term investments.

Net investment income for the three months ended March 31, 2020 and 2019 consisted of the following:



	For the three months ended March 31,
(Millions)	2020			2019
Fixed maturity investments	$	10.3		$	16.8
Short-term investments	3.3			0.4
Equity securities	2.6			2.7
Other long-term investments	0.2			3.9
Total investment income	16.4			23.8
Investment expenses	(2.9		)	(3.7		)
Net investment income	$	13.5		$	20.1

Net Realized and Unrealized Investment Gains (Losses)

Net realized and unrealized investment gains (losses) for the three months ended March 31, 2020 and 2019 consisted of the following:



	For the three months ended March 31,
(Millions)	2020			2019
Gross realized gains	$	42.0		$	14.1
Gross realized (losses)	(21.7		)	(5.1		)
Net realized gains on investments⁽¹⁾	20.3			9.0
Net unrealized gains (losses) on investments⁽²⁾	(43.8		)	74.0
Net realized and unrealized gains (losses) on investments	$	(23.5	)	$	83.0

⁽¹⁾Includes $11.1 and $10.9 of realized gains due to foreign currency for the three months ended March 31, 2020 and 2019, respectively.

⁽²⁾Includes $52.7 and $25.0 of unrealized gains due to foreign currency for the three months ended March 31, 2020 and 2019, respectively.

Net realized investment gains

Net realized investment gains for the three months ended March 31, 2020 and 2019 consisted of the following:



	For the three months ended March 31,
(Millions)	2020		2019
Fixed maturity investments	$	7.8	$	6.8
Equity securities	0.5		(0.6		)
Short-term investments	2.8		0.1
Derivative instruments	8.3		(0.6		)
Other long-term investments	0.9		3.3
Net realized investment gains	$	20.3	$	9.0

Net unrealized investment gains (losses)

Net unrealized investment gains (losses) for the three months ended March 31, 2020 and 2019 consisted of the following:



	For the three months ended March 31,
(Millions)	2020			2019
Fixed maturity investments	$	7.9		$	29.7
Equity securities	(69.1		)	25.1
Short-term investments	15.7			2.7
Derivative instruments	0.1			(0.6		)
Other long-term investments	1.6			17.1
Net unrealized investment gains (losses)	$	(43.8	)	$	74.0

The following table summarizes the amount of total gains (losses) included in earnings attributable to unrealized investment gains (losses) for Level 3 investments for the three months ended March 31, 2020 and 2019:



	For the three months ended March 31,
(Millions)	2020			2019
Fixed maturity investments	$	0.3		$	—
Equity securities	—			—
Other long-term investments	(0.9		)	8.8
Total unrealized investment (losses) gains – Level 3 investments	$	(0.6	)	$	8.8

Investment Holdings

Fixed maturity investments

The cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses), and fair value of Sirius Group's fixed maturity investments as of March 31, 2020 and December 31, 2019, were as follows:



	March 31, 2020
(Millions)	Cost or amortized cost		Gross unrealized gains		Gross unrealized (losses)			Net foreign currency gains (losses)		Fair value
Corporate debt securities	$	424.5	$	2.8	$	(5.0	)	$	22.0	$	444.3
Asset-backed securities	551.9		1.9		(30.1		)	0.7		524.4
Residential mortgage-backed securities	443.5		23.1		(1.2		)	6.5		471.9
U.S. government and government agency	119.9		6.8		(0.1		)	1.6		128.2
Commercial mortgage-backed securities	97.4		1.6		(5.0		)	0.3		94.3
Non-U.S. government and government agency	60.4		0.4		(0.4		)	0.4		60.8
Preferred stocks	5.8		0.9		(0.2		)	—		6.5
U.S. States, municipalities and political subdivision	1.6		—		—			0.1		1.7
Total fixed maturity investments	$	1,705.0	$	37.5	$	(42.0	)	$	31.6	$	1,732.1



	December 31, 2019
(Millions)	Cost or amortized cost		Gross unrealized gains		Gross unrealized (losses)			Net foreign currency gains (losses)			Fair value
Corporate debt securities	$	458.6	$	5.2	$	(1.2	)	$	11.5		$	474.1
Asset-backed securities	489.4		1.4		(3.9		)	(0.1		)	486.8
Residential mortgage-backed securities	426.2		10.5		(1.4		)	3.6			438.9
U.S. government and government agency	111.5		0.7		(0.4		)	(1.3		)	110.5
Commercial mortgage-backed securities	88.5		0.9		(0.6		)	0.2			89.0
Non-U.S. government and government agency	63.7		—		(0.7		)	—			63.0
Preferred stocks	17.0		—		—			—			17.0
U.S. States, municipalities and political subdivision	1.7		—		—			—			1.7
Total fixed maturity investments	$	1,656.6	$	18.7	$	(8.2	)	$	13.9		$	1,681.0

The weighted average duration of Sirius Group's fixed income portfolio as of March 31, 2020 was approximately 1.5 years, including short-term investments, and approximately 2.3 years excluding short-term investments.

The cost or amortized cost and fair value of Sirius Group's fixed maturity investments as of March 31, 2020 and December 31, 2019 are presented below by contractual maturity. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.



	March 31, 2020				December 31, 2019
(Millions)	Cost or amortized cost		Fair value		Cost or amortized cost		Fair value
Due in one year or less	$	106.2	$	112.9	$	85.0	$	88.4
Due after one year through five years	429.1		446.3		479.1		490.3
Due after five years through ten years	45.9		47.0		46.3		46.0
Due after ten years	25.2		28.8		25.1		24.6
Mortgage-backed and asset-backed securities	1,092.8		1,090.6		1,004.1		1,014.7
Preferred stocks	5.8		6.5		17.0		17.0
Total	$	1,705.0	$	1,732.1	$	1,656.6	$	1,681.0

The following table summarizes the ratings and fair value of fixed maturity investments held in Sirius Group's investment portfolio as of March 31, 2020 and December 31, 2019:



(Millions)	March 31, 2020		December 31, 2019
AAA	$	588.4	$	559.8
AA	786.8		724.3
A	208.5		219.0
BBB	88.0		95.8
Other	60.4		82.1
Total fixed maturity investments⁽¹⁾	$	1,732.1	$	1,681.0

⁽¹⁾Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor's ("S&P") and 2) Moody's Investors Service ("Moody's").

At March 31, 2020, the above totals included $37.8 million of sub-prime securities. Of this total, $18.3 million was rated AAA, $17.2 million rated AA, $2.2 million rated A and $0.1 million classified as Other. At December 31, 2019, the above totals included $43.3 million of sub-prime securities. Of this total, $21.7 million was rated AAA, $18.4 million rated AA, $3.1 million rated A and $0.1 million classified as Other.

Equity securities and Other long-term investments

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains, and fair values of Sirius Group's equity securities and other long-term investments as of March 31, 2020 and December 31, 2019, were as follows:



	March 31, 2020
(Millions)	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains		Fair value
Equity securities	$	409.5	$	37.4	$	(98.4	)	$	18.1	$	366.6
Other long-term investments	$	323.2	$	50.3	$	(31.7	)	$	13.7	$	355.5



	December 31, 2019
(Millions)	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains		Fair value
Equity securities	$	379.2	$	55.6	$	(37.3	)	$	7.7	$	405.2
Other long-term investments	$	315.4	$	49.9	$	(29.3	)	$	10.8	$	346.8

Equity securities at fair value consisted of the following as of March 31, 2020 and December 31, 2019:



(Millions)	March 31, 2020			December 31, 2019
Fixed income mutual funds	$	192.1		$	175.3
Common stocks	184.4			228.1
Other equity securities⁽¹⁾	(9.9		)	1.8
Total Equity securities	$	366.6		$	405.2

⁽¹⁾Sirius Group engaged in short selling of certain equity securities for which settlement was pending as of March 31, 2020.

Other long-term investments at fair value consisted of the following as of March 31, 2020 and December 31, 2019:



(Millions)	March 31, 2020		December 31, 2019
Hedge funds and private equity funds	$	279.6	$	269.0
Limited liability companies and private equity securities	75.9		77.8
Total other long-term investments	$	355.5	$	346.8

Hedge Funds and Private Equity Funds

Sirius Group holds investments in hedge funds and private equity funds, which are included in other long-term investments. The fair value of these investments has been estimated using the net asset value of the funds. As of March 31, 2020, Sirius Group held investments in 9 hedge funds and 33 private equity funds. The largest investment in a single fund was $59.4 million as of March 31, 2020 and $51.6 million as of December 31, 2019.

The following table summarizes investments in hedge funds and private equity interests by investment objective and sector as of March 31, 2020 and December 31, 2019:



	March 31, 2020				December 31, 2019
(Millions)	Fair value		Unfunded commitments		Fair value		Unfunded commitments
Hedge funds:
Long/short multi-sector	$	49.5	$	—	$	53.0	$	—
Distressed mortgage credit	59.4		—		51.6		—
Private credit	21.8		—		21.5		—
Other	1.1		—		1.4		—
Total hedge funds	131.8		—		127.5		—
Private equity funds:
Energy infrastructure & services	51.5		34.1		53.6		34.6
Multi-sector	16.0		7.8		8.7		7.8
Healthcare	28.2		6.8		25.9		10.4
Life settlement	22.9		—		23.9		—
Manufacturing/Industrial	26.3		—		27.6		3.9
Private equity secondaries	0.6		0.8		0.6		0.8
Other	2.3		1.8		1.2		2.6
Total private equity funds	147.8		51.3		141.5		60.1
Total hedge and private equity funds included in Other long-term investments	$	279.6	$	51.3	$	269.0	$	60.1

Redemption of investments in certain hedge funds is subject to restrictions including lock-up periods where no redemptions or withdrawals are allowed, restrictions on redemption frequency, and advance notice periods for redemptions. Amounts requested for redemptions remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period.

The following summarizes the March 31, 2020 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:



	Notice Period
Redemption Frequency (Millions)	30-59 days notice		60-89 days notice		90-119 days notice		120+ days notice		Total
Monthly	$	—	$	33.5	$	—	$	—	$	33.5
Quarterly	0.6		—		—		—		0.6
Semi-annual	—		0.2		—		—		0.2
Annual	—		16.0		59.6		21.9		97.5
Total	$	0.6	$	49.7	$	59.6	$	21.9	$	131.8

Certain of the hedge fund and private equity fund investments in which Sirius Group is invested are no longer active and are in the process of disposing of their underlying investments. Distributions from such funds are remitted to investors as the fund's underlying investments are liquidated. As of March 31, 2020, no distributions were outstanding from these investments.

Investments in private equity funds are generally subject to a "lock-up" period during which investors may not request a redemption. Distributions prior to the expected termination date of the fund may be limited to dividends or proceeds arising from the liquidation of the fund's underlying investments. In addition, certain private equity funds provide an option to extend the lock-up period at either the sole discretion of the fund manager or upon agreement between the fund and the investors.

As of March 31, 2020, investments in private equity funds were subject to lock-up periods as follows:



(Millions)	1 - 3 years		3 – 5 years		5 – 10 years		Total
Private Equity Funds – expected lock up period remaining	$	9.1	$	2.1	$	136.6	$	147.8

Investments Held on Deposit or as Collateral

As of March 31, 2020 and December 31, 2019 investments of $971.1 million and $1,309.5 million, respectively, were held in trusts required to be maintained in relation to various reinsurance agreements. Sirius Group's reinsurance operations are required to maintain deposits with certain insurance regulatory agencies in order to maintain their insurance licenses. The fair value of such deposits that are included within total investments totaled $1,002.8 million and $1,315.5 million as of March 31, 2020 and December 31, 2019, respectively.

As of March 31, 2020, Sirius Group held $0.2 million of collateral in the form of short-term investments associated with Interest Rate Cap agreements. (See Note 12.)

Unsettled investment purchases and sales

As of March 31, 2020 and December 31, 2019 Sirius Group reported $53.0 million and $2.3 million, respectively, in Accounts payable on unsettled investment purchases.

As of March 31, 2020 and December 31, 2019, Sirius Group reported $35.2 million and $6.7 million, respectively, in Accounts receivable on unsettled investment sales.