Investments

3 Months Ended

Mar. 31, 2012

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 March 31, 2012 and December 31, 2011 were as follows:

			Included in AOCI
					Gross Unrealized Losses
March 31, 2012 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes in Estimated Fair Value			Non-credit Related OTTI			Fair Value
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (1)	$	2,130,093	$	110,804	$	(7,077	)	$	-		$	2,233,820
Corporate (2) (3) (4)		9,854,093		557,350		(148,569	)		(42,882	)		10,219,992
RMBS – Agency		5,238,075		163,999		(8,683	)		-			5,393,391
RMBS – Non-Agency		792,800		23,227		(71,292	)		(112,681	)		632,054
CMBS		882,762		66,416		(1,407	)		(3,618	)		944,153
CDO		798,313		8,262		(155,123	)		(4,887	)		646,565
Other asset-backed securities (2)		1,423,283		36,312		(23,474	)		(9,979	)		1,426,142
U.S. States and political subdivisions of the States		1,663,058		106,968		(1,844	)		-			1,768,182
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (1)		3,912,982		127,717		(13,336	)		-			4,027,363
Total fixed maturities - AFS	$	26,695,459	$	1,201,055	$	(430,805	)	$	(174,047	)	$	27,291,662
Total short-term investments (1)	$	212,393	$	263	$	(329	)	$	-		$	212,327
Total equity securities	$	593,168	$	44,609	$	(6,709	)	$	-		$	631,068
Total investments - AFS	$	27,501,020	$	1,245,927	$	(437,843	)	$	(174,047	)	$	28,135,057
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (1)	$	10,683	$	1,174	$	-		$	-		$	11,857
Corporate (2)		1,374,617		94,905		(4,164	)		-			1,465,358
RMBS – Non-Agency		83,023		4,259		(147	)		-			87,135
CMBS		12,912		1,211		-			-			14,123
Other asset-backed securities (2)		222,157		14,004		(573	)		-			235,588
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (1)		1,066,408		118,273		(4,313	)		-			1,180,368
Total investments - HTM	$	2,769,800	$	233,826	$	(9,197	)	$	-		$	2,994,429

(1)	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 $2,272.1 million and fair value of $2,313.4 million and U.S. Agencies with an amortized cost of $461.2 million and fair value of $499.4 million.
(2)	During the three months ended March 31, 2012, Covered Bonds within Fixed maturities – AFS with an amortized cost of $398.6 million and a fair value of $415.5 million and Covered Bonds within Fixed maturities – HTM with an amortized cost of $8.3 million and a fair value of $7.7 million have been included within Other asset-backed securities to align the Company’s classification to market indices. Covered Bonds were previously included in Corporate.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $198.7 million and an amortized cost of $220.0 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 $411.2 million and an amortized cost of $489.3 million at March 31, 2012.

			Included in AOCI
					Gross Unrealized Losses
December 31, 2011 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes in Estimated Fair Value			Non-credit Related OTTI			Fair Value
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (1)	$	1,864,354	$	130,874	$	(4,245	)	$	-		$	1,990,983
Corporate (2) (3) (4)		9,866,677		527,192		(233,581	)		(51,666	)		10,108,622
RMBS – Agency		5,189,473		193,782		(3,849	)		-			5,379,406
RMBS – Non-Agency		851,557		19,667		(112,867	)		(116,542	)		641,815
CMBS		927,684		56,704		(2,405	)		(7,148	)		974,835
CDO		843,553		6,624		(186,578	)		(4,997	)		658,602
Other asset-backed securities (2)		1,341,309		30,731		(25,486	)		(6,305	)		1,340,249
U.S. States and political subdivisions of the States		1,698,573		101,025		(2,220	)		-			1,797,378
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (1)		3,188,535		127,439		(17,839	)		-			3,298,135
Total fixed maturities - AFS	$	25,771,715	$	1,194,038	$	(589,070	)	$	(186,658	)	$	26,190,025
Total short-term investments (1)	$	359,378	$	519	$	(834	)	$	-		$	359,063
Total equity securities	$	480,685	$	27,947	$	(40,435	)	$	-		$	468,197
Total investments - AFS	$	26,611,778	$	1,222,504	$	(630,339	)	$	(186,658	)	$	27,017,285
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,399	$	1,510	$	-		$	-		$	11,909
Corporate (2)		1,290,209		91,313		(14,433	)		-			1,367,089
RMBS – Non-Agency		80,955		6,520		(32	)		-			87,443
Other asset-backed securities (2)		288,741		20,875		(320	)		-			309,296
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (1)		998,674		127,227		(5,950	)		-			1,119,951
Total investments - HTM	$	2,668,978	$	247,445	$	(20,735	)	$	-		$	2,895,688

(1)	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 $1,878.3 million and fair value of $1,915.6 million and U.S. Agencies with an amortized cost of $494.0 million and fair value of $541.2 million.
(2)	Covered Bonds within Fixed maturities – AFS with an amortized cost of $345.4 million and a fair value of $353.9 million and Covered Bonds within Fixed maturities – HTM with an amortized cost of $8.1 million and a fair value of $7.7 million at December 31, 2011 have been reclassified from Corporate to Other asset-backed securities to align the Company’s classification to market indices and conform to current period presentation.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $266.0 million and an amortized cost of $297.7 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 $386.1 million and an amortized cost of $494.9 million at December 31, 2011.

          At March 31, 2012 and December 31, 2011, approximately 2.8% and 2.4%, respectively, of the Company’s fixed income investment portfolio at fair value was invested in securities that were below investment grade or not rated. Approximately 33.6% and 31.4% of the gross unrealized losses in the Company’s fixed income securities portfolio at March 31, 2012 and December 31, 2011, 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 the related note disclosure. 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.

          This change in classification did not have an impact on 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.

          The Company has 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, 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 March 31, 2012, 97.8% 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 $128.9 million in total, with $110.5 million and $108.4 million unamortized at March 31, 2012 and December 31, 2011, respectively.

          Covered Bonds were previously included within Corporate securities. They are now classified as Other asset-backed securities to align the Company’s classification to market indices. At December 31, 2011, Covered Bonds with a fair value of $353.9 million have been reclassified from Corporate to Other asset-backed securities to conform to current period presentation.

          Contractual Maturities Summary

          The contractual maturities of AFS and HTM fixed income securities at March 31, 2012 and December 31, 2011 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.

	March 31, 2012 (1)				December 31, 2011 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	1,888,009	$	1,902,217	$	2,004,395	$	2,020,361
Due after 1 through 5 years		8,510,647		8,768,164		7,736,717		7,909,354
Due after 5 through 10 years		3,745,093		3,930,750		3,619,141		3,777,073
Due after 10 years		3,416,477		3,648,226		3,257,886		3,488,330
	$	17,560,226	$	18,249,357	$	16,618,139	$	17,195,118
RMBS – Agency		5,238,075		5,393,391		5,189,473		5,379,406
RMBS – Non-Agency		792,800		632,054		851,557		641,815
CMBS		882,762		944,153		927,684		974,835
CDO		798,313		646,565		843,553		658,602
Other asset-backed securities		1,423,283		1,426,142		1,341,309		1,340,249
Total mortgage and asset-backed securities	$	9,135,233	$	9,042,305	$	9,153,576	$	8,994,907
Total fixed maturities - AFS	$	26,695,459	$	27,291,662	$	25,771,715	$	26,190,025
Fixed maturities - HTM
Due less than one year	$	35,696	$	35,831	$	11,796	$	11,768
Due after 1 through 5 years		134,543		138,274		122,091		123,871
Due after 5 through 10 years		398,290		418,132		393,865		402,424
Due after 10 years		1,883,179		2,065,346		1,771,530		1,960,886
	$	2,451,708	$	2,657,583	$	2,299,282	$	2,498,949
RMBS – Non-Agency		83,023		87,135		80,955		87,443
CMBS		12,912		14,123		-		-
Other asset-backed securities		222,157		235,588		288,741		309,296
Total mortgage and asset-backed securities	$	318,092	$	336,846	$	369,696	$	396,739
Total fixed maturities - HTM	$	2,769,800	$	2,994,429	$	2,668,978	$	2,895,688

(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 $411.2 million and $386.1 million at March 31, 2012 and December 31, 2011, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $78.1 million and $108.8 million at March 31, 2012 and December 31, 2011, 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.

          Pledged Assets

          Certain of the Company’s invested assets are held in trust and pledged in support of insurance and reinsurance liabilities. Such pledges are largely required by the Company’s operating subsidiaries that are “non-admitted” under U.S. state insurance regulations, in order for the U.S. cedant to receive statutory credit for reinsurance. Also, certain deposit liabilities and annuity contracts require the use of pledged assets. At March 31, 2012 and December 31, 2011, the Company had $17.6 billion and $17.2 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

          The following is an analysis of how long the AFS and HTM securities at March 31, 2012 and December 31, 2011 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
March 31, 2012 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	478,076	$	(3,042	)	$	31,499	$	(4,183	)
Corporate (1) (2) (3)		638,803		(14,193	)		1,084,471		(177,433	)
RMBS – Agency		1,081,932		(5,053	)		34,328		(3,630	)
RMBS – Non-Agency		36,572		(3,466	)		489,071		(180,507	)
CMBS		41,017		(618	)		32,415		(4,407	)
CDO		13,501		(2,643	)		622,684		(157,367	)
Other asset-backed securities (3)		145,767		(3,683	)		163,694		(29,770	)
U.S. States and political subdivisions of the States		8,475		(40	)		16,045		(1,804	)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related		572,425		(5,802	)		166,060		(7,540	)
Total fixed maturities and short-term investments - AFS	$	3,016,568	$	(38,540	)	$	2,640,267	$	(566,641	)
Total equity securities (4)	$	228,847	$	(6,709	)	$	-	$	-
Fixed maturities -HTM
Corporate (3)	$	61,497	$	(2,652	)	$	54,404	$	(1,512	)
RMBS – Non-Agency		9,521		(147	)		-		-
Other asset-backed securities (3)		7,709		(573	)		-		-
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related		74,668		(655	)		20,064		(3,658	)
Total fixed maturities - HTM	$	153,395	$	(4,027	)	$	74,468	$	(5,170	)

(1)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes, which are in a gross unrealized loss position, have a fair value of $198.7 million and an amortized cost of $220.0 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.
(2)	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 $411.2 million and an amortized cost of $489.3 million at March 31, 2012.
(3)	Covered Bonds within Fixed maturities and short-term investments – AFS with a fair value of $33.9 million and Covered Bonds within Fixed Maturities – HTM with a fair value of $7.7 million have been included within Other asset-backed securities to align the Company’s classification to market indices. Covered Bonds were previously included in Corporate.
(4)	Included within equity securities are investments in fixed income funds with a fair value of $98.0 million and an amortized cost of $100.0 million at March 31, 2012.

	Less than 12 months					Equal to or greater than 12 months
December 31, 2011 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	289,260	$	(332	)	$	43,622	$	(3,984	)
Corporate (1) (2) (3)		1,078,664		(42,151	)		1,185,535		(243,683	)
RMBS – Agency		310,318		(849	)		36,960		(3,000	)
RMBS – Non-Agency		106,294		(31,714	)		449,138		(197,695	)
CMBS		69,109		(2,716	)		39,444		(6,837	)
CDO		3,357		(2,261	)		636,362		(189,456	)
Other asset-backed securities (3)		227,098		(3,324	)		161,312		(28,467	)
U.S. States and political subdivisions of the States		25,309		(199	)		27,646		(2,021	)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related		265,766		(4,707	)		202,890		(13,166	)
Total fixed maturities and short-term investments - AFS	$	2,375,175	$	(88,253	)	$	2,782,909	$	(688,309	)
Total equity securities (4)	$	361,585	$	(40,435	)	$	-	$	-
Fixed maturities -HTM
Corporate (3)	$	147,836	$	(7,770	)	$	62,343	$	(6,663	)
RMBS – Non-Agency		9,372		(32	)		-		-
Other asset-backed securities (3)		7,743		(314	)		1,106		(6	)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related		79,242		(1,206	)		18,330		(4,744	)
Total fixed maturities - HTM	$	244,193	$	(9,322	)	$	81,779	$	(11,413	)

(1)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes, which are in a gross unrealized loss position, have a fair value of $266.0 million and an amortized cost of $297.7 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.
(2)	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 $386.1 million and an amortized cost of $494.9 million at December 31, 2011.
(3)	Covered Bonds within Fixed maturities and short-term investments – AFS with a fair value of $44.7 million and Covered Bonds within Fixed Maturities – HTM with a fair value of $7.7 million have been included within Other asset-backed securities to align the Company’s classification to market indices and to conform to current period presentation. Covered Bonds were previously included in Corporate.
(4)	Included within equity securities are investments in fixed income funds with a fair value of $91.6 million and an amortized cost of $100.0 million at December 31, 2011.

          The Company had gross unrealized losses totaling $611.9 million on 1,543 securities out of a total of 7,349 held at March 31, 2012 on its AFS portfolio and $9.2 million on 23 securities out of a total of 210 held on its HTM portfolio, which it considers to be temporarily impaired or includes non-credit losses on OTTI. 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 $611.9 million on AFS assets and $9.2 million on HTM assets at March 31, 2012 can be attributed to the following significant drivers:

• gross unrealized losses of $184.1 million related to the Non-Agency RMBS portfolio (which consists of the Company’s holdings of sub-prime Non-Agency securities, second liens, ABS CDOs with sub-prime collateral, Alt-A and Prime RMBS), which had a fair value of $535.2 million at March 31, 2012. 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 incurred realized losses, consisting of charges for OTTI and realized losses from sales, of approximately $1.4 billion since the beginning of 2007 through March 31, 2012 on these asset classes.

• gross unrealized losses of $160.7 million related to the Company’s Life operations investment portfolio, which had a fair value of $6.6 billion at March 31, 2012. Of these gross unrealized losses, $89.2 million related to $1.2 billion of exposures to corporate financial institutions, including $323.6 million Tier One and Upper Tier Two securities. At March 31, 2012, 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 March 31, 2012 by approximately $280.4 million and $108.6 million, respectively, on both the AFS and HTM portfolios. Given the long term nature of this portfolio, the level of credit spreads on financial institutions at March 31, 2012 relative to historical averages within the U.K. and Euro-zone, and the Company’s liquidity needs at March 31, 2012, 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 $160.0 million related to the P&C portfolios 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 $636.2 million at March 31, 2012. 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 continuing wide spreads in the CDO market, driven by low liquidity 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 $96.6 million related to the corporate holdings within the Company’s non-life fixed income portfolios, which had a fair value of $7.9 billion at March 31, 2012. During the three months ended March 31, 2012, as a result of declining credit spreads, the gross unrealized losses on these holdings has decreased. Of the gross unrealized losses noted above, $45.7 million relate to financial institutions. In addition, $22.1 million relate to medium term notes primarily supported by pools of investment grade European investment grade credit with varying degrees of leverage. These had a fair value of $198.7 million at March 31, 2012. 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 $65.5 million, with a fair value of $32.5 million, which at March 31, 2012 had cumulative fair value decline of greater than 50% of amortized cost. 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 $183.1 million on non-Agency RMBS, $160.0 million on Core CDOs and $5.1 million of CMBS holdings.

(c) Net Realized Gains (Losses)

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

Net Realized Gains (Losses) on Investments (U.S. dollars in thousands)	Three Months Ended March 31,
	2012			2011
Gross realized gains	$	66,889		$	27,142
Gross realized losses on investments sold		(25,121	)		(56,134	)
OTTI on investments, net of amounts transferred to other comprehensive income		(20,965	)		(37,445	)
Net realized gains (losses) on investments	$	20,803		$	(66,437	)

          The significant components of the net impairment charges of $21.0 million for the three months ended March 31, 2012 were:

• $17.0 million for structured securities where the Company determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities. Also included was a $3.3 million charge related to a change in intent to hold on 14 securities that the Company had decided to sell.

• $3.0 million related to medium term notes backed primarily by European investment grade credit. On certain notes, management concluded that future returns on the underlying assets were not sufficient to support the previously reported amortized cost.

• $1.0 million for corporate securities, excluding medium term notes, principally on hybrid securities that had not been called on the first call date during the quarter.

          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.

Credit Loss Impairments (U.S. dollars in thousands)	Three Months Ended March 31,
	2012			2011
Balance at January 1,	$	333,379		$	426,372
Credit loss impairment recognized in the current period on securities not previously impaired		1,835			4,573
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period		(18,940	)		(125,711	)
Credit loss impairments previously recognized on securities impaired to fair value during the period		(16,384	)		-
Additional credit loss impairments recognized in the current period on securities previously impaired		14,930			25,459
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected		(15	)		(523	)
Balance at March 31,	$	314,805		$	330,170

          During the three months ended March 31, 2012 and 2011, the $18.9 million and $125.7 million, respectively, of credit loss impairments previously recognized on securities that matured, or were paid down, prepaid or sold, includes $9.9 million and $91.7 million, respectively, of non-Agency RMBS.

(d) Other Investments

          Structured Transactions - Project Finance Loans

          The Company historically participated in structured transactions in project finance related areas under which the Company provided a cash loan supporting project finance transactions. These transactions are accounted for in accordance with guidance governing accounting by certain entities (including entities with trade receivables) that lend to or finance the activities of others under which the loans are considered held for investment as the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff. Accordingly, these funded loan participations are reported in the balance sheet at outstanding principal adjusted for any allowance for loan losses as considered necessary by management.

          The following table shows a summary of the structured project finance loans:

Project Finance Loans (U.S. dollars in thousands)	March 31, 2012			December 31, 2011
Aggregate loan value	$	39,786		$	49,650
Aggregate loan net carrying value	$	33,886		$	40,483
Opening allowance for loan losses	$	(9,167	)	$	(9,167	)
Amounts charged off during the period		3,267			-
Closing allowance for loan losses	$	(5,900	)	$	(9,167	)
Number of individual loan participations		5			6
Number of individual loan participations relating to the allowance for loan losses		2			2
Weighted average contractual term to maturity	1.41 years			2.12 years
Weighted average credit rating	BB			BB-
Range of individual credit ratings	BB+ to B+			BB+ to CCC

          Surveillance procedures are conducted over each structured project finance loan on an ongoing basis with current expectations of future collections of contractual interest and principal used to determine whether any allowance for loan losses may be required at each period end. If it is determined that a future credit loss on a specific contract is reasonably possible and an amount can be estimated, an allowance is recorded. The contractual receivable is only charged off when the final outcome is known and the Company has exhausted all commercial efforts to try and collect any outstanding balances.

          During the three months ended March 31, 2012 and year ended December 31, 2011, management conducted separate reviews of each loan participation and determined loss allowance estimates, as shown in the table above, using a recovery value concept. Management considers recovery value to be the percentage of all future contractual interest and principal that the Company expects to receive from the borrower through any combination of regular debt service, other payments, salvage and recovery. The allowances for loan losses are made when it is probable that a loss will be incurred based upon current information received from the borrower.