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. The decrease from December 31, 2012 to December 31, 2013 in the fair value of the investment portfolio underlying the funds held – directly managed account from $833 million to $561 million was primarily related to the run-off of the underlying loss reserves associated with this account and increases in U.S. and European risk-free interest rates.

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, 2013 and 2012 were as follows (in thousands of U.S. dollars):

						Gross		Gross
						Unrealized		Unrealized		Fair
December 31, 2013			Cost ⁽¹⁾			Gains		Losses		Value

Fixed maturities
	U.S. government and government sponsored enterprises		$	153,951	$	3,789	$	(444)	$	157,296
	U.S. states, territories and municipalities			372		0		(86)		286
	Non-U.S. sovereign government, supranational
		and government related		131,488		6,708		(1,010)		137,186
	Corporate			237,947		11,000		0		248,947

Fixed maturities				523,758		21,497		(1,540)		543,715
Short -term investments				2,426		0		0		2,426
Other invested assets				28,091		0		(12,787)		15,304

Total			$	554,275	$	21,497	$	(14,327)	$	561,445


						Gross		Gross
						Unrealized		Unrealized		Fair
December 31, 2012			Cost ⁽¹⁾			Gains		Losses		Value

Fixed maturities
	U.S. government and government sponsored enterprises		$	211,104	$	7,669	$	(77)	$	218,696
	U.S. states, territories and municipalities			373		0		(28)		345
	Non-U.S. sovereign government, supranational
		and government related		217,961		16,039		(13)		233,987
	Corporate			341,705		20,555		(17)		362,243

Fixed maturities				771,143		44,263		(135)		815,271
Other invested assets				26,777		619		(9,297)		18,099

Total			$	797,920	$	44,882	$	(9,432)	$	833,370
____________

In addition to the investments underlying the funds held – directly managed account in the above table at December 31, 2013 and 2012, were cash and cash equivalents of $84.8 million and $53.7 million, respectively, other assets and liabilities of $132.9 million and $33.4 million, respectively, and accrued investment income of $6.7 million and $10.2 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 underlying the funds held – directly managed account at December 31, 2013, 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 (losses) gains on the funds held – directly managed account for the years ended December 31, 2013, 2012 and 2011 were as follows (in thousands of U.S. dollars):

		2013		2012		2011

Net realized investment gains on fixed maturities and short-term investments	$	6,021	$	8,405	$	5,369
Net realized investment gains (losses) on other invested assets		19		0		(42)
Change in net unrealized investment (losses) gains on fixed maturities and short-term investments		(24,176)		6,583		12,314
Change in net unrealized investment (losses) gains on other invested assets		(3,656)		1,379		(6,430)

Net realized and unrealized investment (losses) gains on funds held – directly managed	$	(21,792)	$	16,367	$	11,211

The components of net investment income underlying the funds held – directly managed account for the years ended December 31, 2013, 2012 and 2011 were as follows (in thousands of U.S. dollars):

		2013		2012		2011

Fixed maturities	$	18,804	$	27,760	$	31,542
Short-term investments, cash and cash equivalents		1,246		1,046		1,906
Other		1,287		1,647		5,402
Investment expenses		(835)		(1,422)		(931)

Net investment income on funds held – directly managed	$	20,502	$	29,031	$	37,919