Following Paris Re's acquisition of substantially all of the reinsurance operations of Colisée Re (previously known as AXA RE), a subsidiary of AXA SA (AXA), in 2006, Paris Re and its subsidiaries entered into an issuance agreement and a quota share retrocession agreement to assume business written by Colisée Re from January 1, 2006 to September 30, 2007 as well as the in-force business at December 31, 2005. The agreements provided that the premium related to the transferred business was retained by Colisée Re and credited to a funds held account. During the year ended December 31, 2011, the Company and Colisée Re entered into an endorsement to the quota share retrocession agreement, which resulted in a release of assets of approximately $358 million from the funds held – directly managed account to the Company.

The assets underlying the funds held – directly managed account are maintained by Colisée Re in a segregated investment portfolio and managed by the Company. The segregated investment portfolio underlying the funds held – directly managed account is carried at fair value. Realized and unrealized investment gains and losses and net investment income related to the underlying investment portfolio in the funds held – directly managed account inure to the benefit of the Company.

(a) Fixed Maturities, Short-Term Investments, Other Invested Assets and Other Assets and Liabilities

The cost, gross unrealized gains, gross unrealized losses and fair value of investments underlying the funds held – directly managed account at December 31, 2011 and 2010 were as follows (in thousands of U.S. dollars):

						Gross		Gross
						Unrealized		Unrealized		Fair
December 31, 2011			Cost ⁽¹⁾			Gains		Losses		Value

Fixed maturities
	U.S. government and government sponsored enterprises		$	255,573	$	12,966	$	—	$	268,539
	U.S. states, territories and municipalities			373		—		(39)		334
	Non-U.S. sovereign government, supranational
		and government related		260,695		14,024		(54)		274,665
	Corporate			470,546		12,889		(2,950)		480,485

Total fixed maturities				987,187		39,879		(3,043)		1,024,023
Short-term investments				18,097		—		—		18,097
Other invested assets				25,628		—		(10,063)		15,565

Total			$	1,030,912	$	39,879	$	(13,106)	$	1,057,685


						Gross		Gross
						Unrealized		Unrealized		Fair
December 31, 2010			Cost ⁽¹⁾			Gains		Losses		Value

Fixed maturities
	U.S. government and government sponsored enterprises		$	280,414	$	7,969	$	(219)	$	288,164
	U.S. states, territories and municipalities			373		8		(13)		368
	Non-U.S. sovereign government, supranational
		and government related		377,591		7,052		(90)		384,553
	Corporate			787,804		13,501		(2,718)		798,587
	Mortgage/asset-backed securities			12,269		2,337		(2,488)		12,118

Total fixed maturities				1,458,451		30,867		(5,528)		1,483,790
Short-term investments				38,613		—		—		38,613
Other invested assets				25,133		238		(4,741)		20,630

Total			$	1,522,197	$	31,105	$	(10,269)	$	1,543,033
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(1) Cost is based on the fair value at the date of the acquisition of Paris Re and subsequently adjusted for amortization of fixed maturities and short-term investments.

In addition to the investments underlying the funds held – directly managed account in the above table at December 31, 2011 and 2010, were cash and cash equivalents of $176.3 million and $129.2 million, respectively, other assets and liabilities of $20.3 million and $80.0 million, respectively, and accrued investment income of $13.7 million and $19.9 million, respectively. The other assets and liabilities represent working capital assets held by Colisée Re related to the underlying business.

The distribution of fixed maturities and short-term investments underlying the funds held – directly managed account at December 31, 2011, 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.

The components of the net realized and unrealized investment gains (losses) on the funds held – directly managed account for the years ended December 31, 2011 and 2010 and for the period from October 2, 2009 to December 31, 2009 were as follows (in thousands of U.S. dollars):

		2011		2010		2009

Net realized investment gains (losses) on fixed maturities and short term investments	$	5,369	$	1,041	$	(2,200)
Net realized investment (losses) gains on other invested assets		(42)		1,635		—
Change in net unrealized investment gains on fixed maturities and short-term investments		12,314		27,568		1,920
Change in net unrealized investment losses on other invested assets		(6,430)		(2,892)		(1,420)

Net realized and unrealized investment gains (losses) on funds held – directly managed	$	11,211	$	27,352	$	(1,700)

The components of net investment income underlying the funds held – directly managed account for the years ended December 31, 2011 and 2010 and for the period from October 2, 2009 to December 31, 2009 were as follows (in thousands of U.S. dollars):

		2011		2010		2009

Fixed maturities	$	31,542	$	46,200	$	10,956
Short-term investments, cash and cash equivalents		1,906		1,607		287
Other		5,402		6,078		6,934
Investment expenses		(931)		(2,110)		(411)

Net investment income on funds held – directly managed	$	37,919	$	51,775	$	17,766