Investments

9 Months Ended

Sep. 30, 2011

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

5. Investments

          (a) Fixed Maturities, Short-Term Investments and Equity Securities

          Amortized Cost and Fair Value Summary

          The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at September 30, 2011 and December 31, 2010 were as follows:

			Included in Accumulated Other Comprehensive Income (“AOCI”)
					Gross Unrealized Losses
September 30, 2011 (U.S. dollars in thousands) (Unaudited)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes In Estimated Fair Value			OTTI Included In Other Comprehensive Income (Loss)(1)			Fair Value
Fixed maturities – AFS
U.S. Government and Government- Related/Supported (2)	$	1,972,718	$	141,521	$	(5,398	)	$	—		$	2,108,841
Corporate (3) (4)		10,622,568		505,910		(306,574	)		(63,996	)		10,757,908
Residential mortgage-backed securities –Agency		5,385,140		214,790		(4,791	)		—			5,595,139
Residential mortgage-backed securities – Non-Agency		889,949		19,689		(113,495	)		(113,162	)		682,981
Commercial mortgage-backed securities		978,131		50,171		(4,095	)		(7,321	)		1,016,886
Collateralized debt obligations		871,407		7,380		(198,340	)		(6,872	)		673,575
Other asset-backed securities		1,082,513		20,318		(19,393	)		(6,613	)		1,076,825
U.S. States and political subdivisions of the States		1,648,706		76,982		(2,134	)		—			1,723,554
Non-U.S. Sovereign Government, Supranational and Government- Related/Supported (2)		3,299,110		105,747		(35,216	)		—			3,369,641
Total fixed maturities – AFS	$	26,750,242	$	1,142,508	$	(689,436	)	$	(197,964	)	$	27,005,350
Total short-term investments (2) (3)	$	367,878	$	191	$	(1,390	)	$	—		$	366,679
Total equity securities (5)	$	437,668	$	27,324	$	(55,829	)	$	—		$	409,163
Total investments – AFS	$	27,555,788	$	1,170,023	$	(746,655	)	$	(197,964	)	$	27,781,192
Fixed maturities – HTM
U.S. Government and Government- Related/Supported (2)	$	10,494	$	1,300	$	—		$	—		$	11,794
Corporate		1,318,854		54,862		(18,122	)		—			1,355,594
Residential mortgage-backed securities – Non-Agency		81,923		4,898		(282	)		—			86,539
Other asset-backed securities		284,095		14,447		(16	)		—			298,526
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		1,030,257		120,974		(2,250	)		—			1,148,981
Total fixed maturities – HTM	$	2,725,623	$	196,481	$	(20,670	)	$	—		$	2,901,434

(1)	Represents the amount of OTTI losses in AOCI, which from April 1, 2009 was not included in earnings under authoritative accounting guidance.
(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $2,022.7 million and fair value of $2,058.5 million and U.S. Agencies with an amortized cost of $531.0 million and fair value of $581.5 million.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European credit with varying degrees of leverage. The notes have a fair value of $429.2 million and an amortized cost of $460.0 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $485.6 million and an amortized cost of $653.2 million at September 30, 2011.
(5)	Included within equity securities are investments in fixed income funds with a fair value of $91.1 million and an amortized cost of $100.0 million at September 30, 2011.

			Included in Accumulated Other Comprehensive Income (“AOCI”)
					Gross Unrealized Losses
December 31, 2010 (U.S. dollars in thousands) (Unaudited)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes In Estimated Fair Value			OTTI Included In Other Comprehensive Income (Loss)(1)			Fair Value
Fixed maturities – AFS
U.S. Government and Government- Related/Supported (2)	$	2,499,079	$	102,685	$	(36,320	)	$	—		$	2,565,444
Corporate (3) (4)		10,962,804		361,154		(281,849	)		(73,138	)		10,968,971
Residential mortgage-backed securities –Agency		5,059,249		153,106		(8,644	)		—			5,203,711
Residential mortgage-backed securities – Non-Agency		1,257,474		26,361		(133,761	)		(128,251	)		1,021,823
Commercial mortgage-backed securities		1,135,075		55,852		(7,960	)		(10,460	)		1,172,507
Collateralized debt obligations		920,501		11,014		(188,563	)		(8,814	)		734,138
Other asset-backed securities		979,539		16,111		(26,954	)		(8,164	)		960,532
U.S. States and political subdivisions of the States		1,379,150		16,755		(35,449	)		—			1,360,456
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		3,129,971		70,499		(45,947	)		—			3,154,523
Total fixed maturities – AFS	$	27,322,842	$	813,537	$	(765,447	)	$	(228,827	)	$	27,142,105
Total short-term investments (2) (3)	$	450,491	$	680	$	(490	)	$	—		$	450,681
Total equity securities	$	56,737	$	28,083	$	(53	)	$	—		$	84,767
Total investments – AFS	$	27,830,070	$	842,300	$	(765,990	)	$	(228,827	)	$	27,677,553
Fixed maturities – HTM
U.S. Government and Government- Related/Supported (2)	$	10,541	$	164	$	(9	)	$	—		$	10,696
Corporate		1,337,797		6,370		(16,325	)		—			1,327,842
Residential mortgage-backed securities – Non-Agency		82,763		634		(546	)		—			82,851
Other asset-backed securities		287,109		1,134		(1,410	)		—			286,833
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		1,010,125		30,680		(6,401	)		—			1,034,404
Total fixed maturities – HTM	$	2,728,335	$	38,982	$	(24,691	)	$	—		$	2,742,626

(1)	Represents the amount of OTTI losses in AOCI, which from April 1, 2009 was not included in earnings under authoritative accounting guidance.
(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $2,101.0 million and fair value of $2,131.2 million and U.S. Agencies with an amortized cost of $1,019.2 million and fair value of $1,072.6 million.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European credit with varying degrees of leverage. The notes have a fair value of $454.8 million and an amortized cost of $504.6 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $757.8 million and an amortized cost of $883.0 million at December 31, 2010.

          At September 30, 2011 and December 31, 2010, approximately 2.7% and 3.5%, respectively, of the Company’s fixed income investment portfolio at fair value was invested in securities which were below investment grade or not rated. Approximately 27.9% and 29.4% of the gross unrealized losses in the Company’s fixed income securities portfolio at September 30, 2011 and December 31, 2010, respectively, related to securities that were below investment grade or not rated.

          Classification of Fixed Income Securities

          During the third quarter of 2011, the Company changed the manner in which it classifies fixed income securities between Fixed maturities and Short-term investments on the balance sheet and related note disclosures. Short-term investments under the Company’s previous classification comprised investments with a remaining maturity of less than one year from the reporting date. Under this prior presentation, longer term securities were reclassified from Fixed maturities to Short-term investments as they neared maturity. Under the Company’s new classification, Short-term investments include investments due to mature within one year from the date of purchase and are valued using the same external factors and in the same manner as Fixed maturities. No reclassifications will be made between Fixed maturities and Short-term investments subsequent to the initial date of purchase. The Company’s new accounting classification aligns its presentation with that of its peer companies.

          This change in classification did not have an impact the total value of investments available for sale on the balance sheet, nor did it impact the consolidated statements of income, comprehensive income, shareholders’ equity or cash flows. The only impact, other than the changes in the balance sheet line items, are changes required within the detailed tables included within this note as well as Note 3, “Fair Value Measurements,” to allocate securities previously classified as Short-term investments under the former practice into the appropriate categories of Fixed maturities within each table to conform to the new accounting presentation for current and comparative periods.

          During 2009 and 2010, the Company elected to hold certain fixed income securities to maturity. Consistent with this intention, the Company reclassified these securities from AFS to HTM in the consolidated financial statements. As a result of this classification, these fixed income securities are reflected in the HTM portfolio and recorded at amortized cost in the consolidated balance sheets and not fair value. The HTM portfolio is comprised of long duration non-U.S. securities, which are Euro and U.K. sterling denominated. The Company believes this HTM strategy is achievable due to the relatively stable and predictable cash flows of the Company’s long-term liabilities within its Life operations segment, along with its ability to substitute other assets at a future date in the event that liquidity was required due to changes in expected cash flows or other transactions entered into related to the long-term liabilities supported by the HTM portfolio. At September 30, 2011, 98.1% of the HTM securities were rated A or higher. The unrealized appreciation at the dates of these reclassifications continues to be reported as a separate component of shareholders’ equity and is being amortized over the remaining lives of the securities as an adjustment to yield in a manner consistent with the amortization of any premium or discount. At the time of the reclassifications, the unrealized U.S. dollar equivalent appreciation related to securities reclassified was $127.4 million in total, with $113.9 million and $119.0 million unamortized at September 30, 2011 and December 31, 2010, respectively.

          Contractual Maturities Summary

          The contractual maturities of AFS and HTM fixed income securities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(Unaudited) September 30, 2011 (1)				December 31, 2010 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	1,920,273	$	1,918,659	$	1,552,612	$	1,546,050
Due after 1 through 5 years		8,392,810		8,582,509		8,807,515		8,936,246
Due after 5 through 10 years		3,471,196		3,653,936		3,733,842		3,857,055
Due after 10 years		3,758,823		3,804,840		3,877,035		3,710,043
		17,543,102		17,959,944		17,971,004		18,049,394
Residential mortgage-backed securities – Agency		5,385,140		5,595,139		5,059,249		5,203,711
Residential mortgage-backed securities – Non-Agency		889,949		682,981		1,257,474		1,021,823
Commercial mortgage-backed securities		978,131		1,016,886		1,135,075		1,172,507
Collateralized debt obligations		871,407		673,575		920,501		734,138
Other asset-backed securities		1,082,513		1,076,825		979,539		960,532
Total mortgage and asset-backed securities		9,207,140		9,045,406		9,351,838		9,092,711
Total fixed maturities - AFS	$	26,750,242	$	27,005,350	$	27,322,842	$	27,142,105
Fixed maturities - HTM
Due less than one year	$	11,263	$	11,237	$	—	$	—
Due after 1 through 5 years		124,921		125,889		125,449		125,416
Due after 5 through 10 years		393,059		400,583		348,797		346,494
Due after 10 years		1,830,362		1,978,660		1,884,217		1,901,032
		2,359,605		2,516,369		2,358,463		2,372,942
Residential mortgage-backed securities – Non-Agency		81,923		86,539		82,763		82,851
Other asset-backed securities		284,095		298,526		287,109		286,833
Total mortgage and asset-backed securities		366,018		385,065		369,872		369,684
Total fixed maturities - HTM	$	2,725,623	$	2,901,434	$	2,728,335	$	2,742,626

(1) Included in the table above are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions, at their fair value of $485.6 million and $757.8 million at September 30, 2011 and December 31, 2010, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $167.6 million and $143.7 million at September 30, 2011 and December 31, 2010, respectively.

          OTTI Considerations

          Under final authoritative accounting guidance, a debt security for which amortized cost exceeds fair value is deemed to be other-than-temporarily impaired if it meets either of the following conditions: (a) the Company intends to sell, or it is more likely than not that the Company will be required to sell, the security before a recovery in value, or (b) the Company does not expect to recover the entire amortized cost basis of the security.Other than in a situation in which the Company has the intent to sell a debt security or more likely than not will be required to sell a debt security, the amount of the OTTI related to a credit loss on the security is recognized in earnings, and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of OCI. The net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment (“NPV”). The remaining difference between the security’s NPV and its fair value is recognized in OCI. Subsequent changes in the fair value of these securities are included in OCI unless a further impairment is deemed to have occurred.

          In the scenario where the Company has the intent to sell a security in which its amortized cost exceeds its fair value, or it is more likely than not it will be required to sell such a security, the entire difference between the security’s amortized cost and its fair value is recognized in earnings.

          The determination of credit losses is based on detailed analyses of underlying cash flows. Such analyses require the use of certain assumptions to develop the estimated performance of underlying collateral. Key assumptions used include, but are not limited to, items such as RMBS default rates based on collateral duration in arrears, severity of losses on default by collateral class, collateral reinvestment rates and expected future general corporate default rates.

          Factors considered in determining that a gross unrealized loss is not other-than-temporarily impaired include management’s consideration of current and near term liquidity needs and other available sources of funds, an evaluation of the factors and time necessary for recovery and an assessment of whether the Company has the intention to sell or considers it more likely than not that it will be forced to sell a security.

          (b) Gross Unrealized Losses

          The following is an analysis of how long the AFS and HTM securities at September 30, 2011 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
September 30, 2011 (U.S. dollars in thousands) (Unaudited)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses (1)
Fixed maturities and short-term investments - AFS:
U.S. Government and Government-Related/Supported	$	344,783	$	(1,977	)	$	47,632	$	(4,203	)
Corporate (2) (3)		1,566,237		(71,007	)		1,307,126		(299,904	)
Residential mortgage-backed securities – Agency		267,693		(1,362	)		32,129		(3,429	)
Residential mortgage-backed securities – Non-Agency		112,395		(31,710	)		481,732		(194,947	)
Commercial mortgage-backed securities		103,931		(4,297	)		38,618		(7,119	)
Collateralized debt obligations		3,407		(2,330	)		657,586		(202,882	)
Other asset-backed securities		105,127		(2,075	)		168,434		(23,931	)
U.S. States and political subdivisions of the States		46,831		(288	)		48,906		(1,855	)
Non-U.S. Sovereign Government, Supranational and Government-Related		298,381		(5,338	)		369,254		(30,136	)
Total fixed maturities and short-term investments - AFS	$	2,848,785	$	(120,384	)	$	3,151,417	$	(768,406	)
Total equity securities (4)	$	370,535	$	(55,829	)	$	—	$	—
Fixed maturities – HTM:
U.S. Government and Government-Related/Supported	$	—	$	—		$	—	$	—
Corporate		236,991		(16,006	)		26,861		(2,116	)
Residential mortgage-backed securities – Non-Agency		11,411		(282	)		—		—
Other asset-backed securities		1,118		(16	)		—		—
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported		22,868		(2,250	)		—		—
Total fixed maturities – HTM	$	272,388	$	(18,554	)	$	26,861	$	(2,116	)

(1)	On securities impacted by the April 1, 2009 changes to OTTI values, length of time of impairment is measured from the point at which securities returned to a net unrealized loss position (i.e., from April 1, 2009).
(2)	Included within Corporate are certain medium term notes supported primarily by pools of European credit with varying degrees of leverage. The notes, which are in a gross unrealized loss position, have a fair value of $429.2 million and an amortized cost of $460.0 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(3)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities, which are in a gross unrealized loss position, have a fair value of $485.6 million and an amortized cost of $653.2 million at September 30, 2011.
(4)	Included within equity securities are investments in fixed income funds with a fair value of $91.1 million and an amortized cost of $100.0 million at September 30, 2011.

          The following is an analysis of how long the AFS and HTM securities at December 31, 2010 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
December 31, 2010 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses (1)			Fair Value		Gross Unrealized Losses (1)
Fixed maturities and short-term investments - AFS:
U.S. Government and Government-Related/Supported	$	307,082	$	(25,482	)	$	117,394	$	(10,417	)
Corporate (2) (3)		2,271,887		(80,276	)		1,627,083		(275,023	)
Residential mortgage-backed securities – Agency		280,390		(6,736	)		34,186		(1,913	)
Residential mortgage-backed securities – Non-Agency		40,052		(2,574	)		843,168		(259,715	)
Commercial mortgage-backed securities		46,419		(2,472	)		69,475		(15,967	)
Collateralized debt obligations		2,500		(51	)		715,295		(197,535	)
Other asset-backed securities		122,548		(1,619	)		226,946		(33,546	)
U.S. States and political subdivisions of the States		734,893		(30,033	)		40,907		(5,452	)
Non-U.S. Sovereign Government, Supranational and Government-Related		459,686		(5,116	)		418,322		(40,837	)
Total fixed maturities and short-term investments - AFS	$	4,265,457	$	(154,359	)	$	4,092,776	$	(840,405	)
Total equity securities	$	158	$	(53	)	$	—	$	—
Fixed maturities – HTM:
U.S. Government and Government-Related/Supported	$	1,755	$	(9	)	$	—	$	—
Corporate		764,397		(16,325	)		—		—
Residential mortgage-backed securities – Non-Agency		37,899		(546	)		—		—
Other asset-backed securities		232,673		(1,410	)		—		—
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported		175,382		(6,401	)		—		—
Total fixed maturities – HTM	$	1,212,106	$	(24,691	)	$	—	$	—

(1)	On securities impacted by the April 1, 2009 changes to OTTI values, length of time of impairment is measured from the point at which securities returned to a net unrealized loss position (i.e., from April 1, 2009).
(2)	Included within Corporate are certain medium term notes supported primarily by pools of European credit with varying degrees of leverage. The notes have a fair value of $370.8 million and an amortized cost of $423.9 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(3)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments senior to the common and preferred equities of the financial institutions. These securities have a fair value of $757.8 million and an amortized cost of $883.0 million at December 31, 2010.

          The Company had gross unrealized losses totaling $944.7 million on 1,996 securities out of a total of 7,197 held at September 30, 2011 on its available for sale portfolio and $20.7 million on 43 securities out of a total of 213 held on its held-to-maturity portfolio, which it considers to be temporarily impaired or includes non-credit losses on other-than-temporary impairments. Individual security positions comprising this balance have been evaluated by management to determine the severity of these impairments and whether they should be considered other-than-temporary.

          Gross unrealized losses of $944.7 million on available for sale and $20.7 million on HTM assets at September 30, 2011 can be attributed to the following significant drivers:

• gross unrealized losses of $226.9 million related to the Non-Agency residential mortgage-backed securities (“RMBS”) portfolio (which consists of the Company’s holdings of sub-prime Non-Agency securities, second liens, asset-backed securities (“ABS”) CDOs with sub-prime collateral, Alt-A mortgage exposures and Prime RMBS), which had a fair value of $764.9 million at September 30, 2011. The Company, in conjunction with its investment manager service providers, undertook a security level review of these securities and recognized charges to the extent it believed the discounted cash flow value of any security was below its amortized cost. The Company has recognized realized losses, consisting of charges for OTTI and realized losses from sales, of approximately $1.4 billion since the beginning of 2007 through September 30, 2011 on these asset classes.

• gross unrealized losses of $297.9 million related to the Company’s Life operations investment portfolio, which had a fair value of $6.6 billion at September 30, 2011. Of these gross unrealized losses, $193.9 million related to $1.3 billion of exposures to corporate financial institutions, including $358.7 million Tier One and Upper Tier Two securities. At September 30, 2011, this portfolio had an average interest rate duration of 8.5 years, primarily denominated in U.K. sterling and Euros. As a result of the long duration, significant gross losses have arisen as the fair values of these securities are more sensitive to prevailing government interest rates and credit spreads. This portfolio is generally matched to corresponding long duration liabilities. A hypothetical parallel increase in interest rates and credit spreads of 50 and 25 basis points, respectively, would increase the unrealized losses related to this portfolio at September 30, 2011 by approximately $270.0 million and $102.5 million, respectively, on both the available for sale and HTM portfolios. Given the long term nature of this portfolio, the level of credit spreads on financial institutions at September 30, 2011 relative to historical averages within the U.K. and Euro-zone, and the Company’s liquidity needs at September 30, 2011, the Company believes that these assets will continue to be held until such time as they mature, or credit spreads on financial institutions revert to levels more consistent with historical averages.

• gross unrealized losses of $205.1 million related to the non-life portfolio of Core CDO holdings (defined by the Company as investments in non-subprime CDOs), which consisted primarily of collateral loan obligations (“CLOs”) and had a fair value of $671.9 million at September 30, 2011. The Company evaluated each of these securities in conjunction with its investment manager service providers and recognized charges to the extent it believed the discounted cash flow value of the security was below the amortized cost. The Company believes that the level of impairment is primarily a function of continually wide spreads in the CDO market, driven by the level of illiquidity in this market. The Company believes it is likely these securities will be held until either maturity or a recovery of value.

• gross unrealized losses of $163.3 million related to the corporate holdings within the Company’s non-life fixed income portfolios, which had a fair value of $8.6 billion at September 30, 2011. During the nine months ended September 30, 2011, as a result of declining credit spreads, the gross unrealized losses on these holdings has decreased. Of the gross unrealized losses noted above, $91.5 million relate to financial institutions. In addition, $34.9 million relate to medium term notes primarily supported by pools of investment grade European credit with varying degrees of leverage. These had a fair value of $398.6 million at September 30, 2011. Management believes that expected cash flows from these bonds over the expected holding period will be sufficient to support the remaining reported amortized cost.

          Management, in its assessment of whether securities in a gross unrealized loss position are temporarily impaired, considers the significance of the impairments. The Company had structured credit securities with gross unrealized losses of $80.4 million, with a fair value of $41.0 million, which at September 30, 2011 had cumulative fair value declines of greater than 50% of amortized costs. All of these are mortgage and asset-backed securities. The Company, in conjunction with its investment manager service providers, undertook a security level review of these securities and recognized charges to the extent it believed the discounted cash flow value of any security was below its amortized cost. These securities include gross unrealized losses of $57.1 million on non-Agency RMBS, $22.5 million on Core CDOs and $0.7 million of commercial mortgage-backed security (“CMBS”) holdings.

          (c) Net Realized Gains (Losses)

          The following represents an analysis of net realized gains (losses) on investments:

	Three Months Ended September 30,						Nine Months Ended September 30,
(U.S. dollars in thousands) (Unaudited)	2011			2010			2011			2010
Gross realized gains	$	55,625		$	55,572		$	143,804		$	118,714
Gross realized losses on investments sold		(51,164	)		(86,365	)		(150,703	)		(149,465	)
OTTI on investments, net of amounts transferred to other comprehensive income		(66,815	)		(37,962	)		(131,436	)		(135,566	)
Net realized (losses) on investments	$	(62,354	)	$	(68,755	)	$	(138,335	)	$	(166,317	)

          The Company recorded net impairment charges of $66.8 million for the three months ended September 30, 2011. The components of the impairments include:

• For structured credit securities, the Company recorded net impairments of $32.8 million principally on non-Agency RMBS. The Company determined that the likely recovery on these securities was below the carrying value, and, accordingly, recorded an impairment on the securities to the discounted value of the cash flows of these securities.

• For corporate securities, excluding medium term notes, the Company recorded net impairments totaling $6.5 million, principally on hybrid securities.

• For medium term notes backed primarily by investment grade European credit, the Company recorded net impairments of $6.1 million. The Company adjusted the estimated remaining holding period of certain notes resulting in a shorter reinvestment spectrum.

• The Company recorded impairments of $21.4 million related to foreign exchange losses arising on U.S. Dollar denominated securities held in a Swiss franc functional currency entity. These foreign exchange losses are recorded as part of the foreign currency revaluation process; however, because the Company’s consolidated reporting currency is U.S. dollars, the foreign exchange impairment recorded on these securities is fully offset by a cumulative foreign currency translation adjustment gain recorded upon the consolidation of the foreign currency entity.

          The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

	OTTI related to Credit Losses recognized in earnings
	Three Months Ended September 30,						Nine Months Ended September 30,
(U.S. dollars in thousands) (Unaudited)	2011			2010			2011			2010
Opening balance	$	315,844		$	423,041		$	426,372		$	537,121
Credit loss impairment recognized in the current period on securities not previously impaired		10,478			5,342			26,384			24,800
Credit loss impairments previously recognized on securities that matured, paid down, prepaid or were sold during the period		(16,448	)		(36,046	)		(180,475	)		(74,024	)
Credit loss impairments previously recognized on securities impaired to fair value during the period		—			—			—			(130,891	)
Additional credit loss impairments recognized in the current period on securities previously impaired		35,574			26,280			74,372			76,498
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected		(2,173	)		(6,361	)		(3,378	)		(21,248	)
Balance, September 30	$	343,275		$	412,256		$	343,275		$	412,256

          The $16.4 million and $180.5 million of credit loss impairment previously recognized on securities that matured, or were paid down, prepaid or sold during the three and nine months ended September 30, 2011 includes $8.3 million and $120.9 million, respectively, of non-Agency RMBS.

        (d) Affiliate Investments

          During the third quarter, the Company sold its interests in an investment manager affiliate for total proceeds of $35.0 million and a gain of $25.3 million. In addition, this transaction includes the potential for additional amounts to be paid to the Company during 2013 and 2014 subject to the investment manager meeting certain performance targets. These amounts, if any, will be recorded when known with certainty.