4. Investments

(a) Fixed Maturities, Short-Term Investments and Equities

The cost, gross unrealized gains, gross unrealized losses and fair value of investments classified as trading securities at December 31, 2014 and 2013 were as follows (in thousands of U.S. dollars):



December 31, 2014	Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed maturities
U.S. government and government sponsored enterprises	$	2,308,264	$	13,350	$	(6,192	)	$	2,315,422
U.S. states, territories and municipalities	511,228		21,058		(1,683		)	530,603
Non-U.S. sovereign government, supranational and government related	1,866,915		112,029		(2,742		)	1,976,202
Corporate	5,363,006		263,349		(22,195		)	5,604,160
Asset-backed securities	1,110,393		23,131		(2,104		)	1,131,420
Residential mortgage-backed securities	2,276,200		56,875		(26,599		)	2,306,476
Other mortgage-backed securities	53,627		1,487		(652		)	54,462
Fixed maturities	$	13,489,633	$	491,279	$	(62,167	)	$	13,918,745
Short-term investments	25,699		4		(25		)	25,678
Equities	843,429		240,667		(27,582		)	1,056,514
Total	$	14,358,761	$	731,950	$	(89,774	)	$	15,000,937



December 31, 2013	Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed maturities
U.S. government and government sponsored enterprises	$	1,635,578	$	7,211	$	(18,930	)	$	1,623,859
U.S. states, territories and municipalities	121,697		4,395		(1,505		)	124,587
Non-U.S. sovereign government, supranational and government related	2,295,608		67,453		(9,362		)	2,353,699
Corporate	5,866,991		243,522		(61,850		)	6,048,663
Asset-backed securities	1,126,812		15,232		(3,813		)	1,138,231
Residential mortgage-backed securities	2,294,870		31,810		(58,163		)	2,268,517
Other mortgage-backed securities	34,899		1,590		(742		)	35,747
Fixed maturities	$	13,376,455	$	371,213	$	(154,365	)	$	13,593,303
Short-term investments	13,543		4		(1		)	13,546
Equities	1,009,286		250,288		(38,521		)	1,221,053
Total	$	14,399,284	$	621,505	$	(192,887	)	$	14,827,902


(1)	Cost is amortized cost for fixed maturities and short-term investments and cost for equity securities.

(b) Maturity Distribution of Fixed Maturities and Short-Term Investments

The distribution of fixed maturities and short-term investments at December 31, 2014, by contractual maturity date, is shown below (in thousands of U.S. dollars). Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.



	Cost		Fair Value
One year or less	$	312,599	$	313,261
More than one year through five years	5,042,314		5,168,357
More than five years through ten years	3,592,725		3,719,234
More than ten years	1,127,474		1,251,213
Subtotal	$	10,075,112	$	10,452,065
Mortgage/asset-backed securities	3,440,220		3,492,358
Total	$	13,515,332	$	13,944,423

The components of the net realized and unrealized investment gains (losses) for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands of U.S. dollars):



	2014			2013			2012
Net realized investment gains on fixed maturities and short-term investments	$	120,734		$	118,575		$	172,987
Net realized investment gains on equities	98,733			75,217			72,155
Net realized investment (losses) gains on other invested assets	(20,686		)	20,497			(16,691		)
Change in net unrealized investment (losses) gains on other invested assets	(58,180		)	56,652			(9,568		)
Change in net unrealized investment gains (losses) on fixed maturities and short-term investments	228,781			(525,787		)	186,063
Change in net unrealized investment gains on equities	2,605			118,010			66,253
Net other realized and unrealized investment (losses) gains	(3,624		)	(2,107		)	5,843
Net realized and unrealized investment gains (losses) on funds held – directly managed	3,433			(21,792		)	16,367
Total net realized and unrealized investment gains (losses)	$	371,796		$	(160,735	)	$	493,409

(d) Net Investment Income

The components of net investment income for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands of U.S. dollars):



	2014			2013			2012
Fixed maturities	$	443,414		$	446,299		$	512,833
Short-term investments, cash and cash equivalents	868			1,886			2,905
Equities	40,326			32,989			26,207
Funds held and other	33,192			34,215			44,109
Funds held – directly managed	13,841			20,502			29,031
Investment expenses	(51,945		)	(51,524		)	(43,747		)
Net investment income	$	479,696		$	484,367		$	571,338

Other than the funds held – directly managed account, the Company generally earns investment income on funds held by reinsured companies based upon a predetermined interest rate, either fixed contractually at the inception of the contract or based upon a recognized index (e.g., LIBOR). Interest rates ranged from 2.1% to 5.4% for the year ended December 31, 2014, from 1.8% to 4.3% for the year ended December 31, 2013 and from 2.0% to 5.0% for the year ended December 31, 2012. See Note 5 for additional information on the funds held – directly managed account.

(e) Pledged and Restricted Assets

At December 31, 2014 and 2013, approximately $172.3 million and $200.6 million, respectively, of cash and cash equivalents and approximately $2,455.6 million and $2,477.8 million, respectively, of securities were deposited, pledged or held in escrow accounts in favor of ceding companies and other counterparties or government authorities to comply with reinsurance contract provisions and insurance laws.

The Company has agreed, subject to certain exceptions, not to dispose of or hedge any of the common shares in an investment with a fair value of $120 million, which is included in equities. As of February 19, 2015, this restriction no longer exists.

(f) Net (Payable) Receivable for Securities Purchased/Sold

Included within Accounts payable, accrued expenses and other in the Consolidated Balance Sheet at December 31, 2014 and within Other assets in the Consolidated Balance Sheet at December 31, 2013 were amounts of gross receivable balances for securities sold and gross payable balances for securities purchased as follows (in thousands of U.S. dollars):



	2014			2013
Receivable for securities sold	$	51,586		$	150,816
Payable for securities purchased	(63,779		)	(60,153		)
Net (payable) receivable for securities purchased/sold	$	(12,193	)	$	90,663