INVESTMENTS

Fixed Maturity Investments Trading

The following table summarizes the fair value of fixed maturity investments trading:




	December 31, 2016		December 31, 2015
U.S. treasuries	$	2,617,894	$	2,064,944
Agencies	90,972		137,976
Municipal	519,069		583,282
Non-U.S. government (Sovereign debt)	333,224		334,981
Non-U.S. government-backed corporate	133,300		138,994
Corporate	1,877,243		2,055,323
Agency mortgage-backed	462,493		504,368
Non-agency mortgage-backed	258,944		262,235
Commercial mortgage-backed	409,747		554,625
Asset-backed	188,358		128,277
Total fixed maturity investments trading	$	6,891,244	$	6,765,005

Contractual maturities of fixed maturity investments trading are described in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.




At December 31, 2016	Amortized Cost		Fair Value
Due in less than one year	$	485,939	$	483,642
Due after one through five years	3,927,373		3,900,915
Due after five through ten years	1,024,285		1,028,249
Due after ten years	161,405		158,896
Mortgage-backed	1,133,746		1,131,184
Asset-backed	187,942		188,358
Total	$	6,920,690	$	6,891,244

Fixed Maturity Investments Available For Sale

The Company did not have any fixed maturity investments available for sale at December 31, 2016 and at December 31, 2015, the Company did not have any fixed maturity investments available for sale in an unrealized loss position.

The following table summarizes the amortized cost, fair value and related unrealized gains and losses and non-credit other-than-temporary impairments of fixed maturity investments available for sale at December 31, 2015:




			Included in Accumulated Other Comprehensive Income
At December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
Agency mortgage-backed	$	143	$	7	$	—	$	150	$	—
Non-agency mortgage-backed	7,005		1,523		—		8,528		550
Commercial mortgage-backed	6,578		293		—		6,871		—
Asset-backed	2,217		47		—		2,264		—
Total fixed maturity investments available for sale	$	15,943	$	1,870	$	—	$	17,813	$	550


(1)	Represents the non-credit component of other-than-temporary impairments recognized in accumulated other comprehensive income adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.

Equity Investments Trading

The following table summarizes the fair value of equity investments trading:




	December 31, 2016		December 31, 2015

Financials	$	275,065	$	193,716
Communications and technology	36,770		65,833
Industrial, utilities and energy	30,303		51,168
Consumer	20,501		40,918
Healthcare	17,245		36,148
Basic materials	3,429		6,094
Total	$	383,313	$	393,877

Pledged Investments

At December 31, 2016, $2.7 billion of cash and investments at fair value were on deposit with, or in trust accounts for the benefit of, various counterparties, including with respect to the Company’s standby letter of credit facility and bilateral letter of credit facility (2015 - $2.5 billion). Of this amount, $842.6 million is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities (2015 - $664.6 million).

Reverse Repurchase Agreements

At December 31, 2016, the Company held $78.7 million (2015 - $26.2 million) of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of short term investments on the Company’s consolidated balance sheets. The required collateral for these loans typically include high-quality, readily marketable instruments at a minimum amount of 102% of the loan principal. Upon maturity, the Company receives principal and interest income.

Net Investment Income

The components of net investment income are as follows:




Year ended December 31,	2016			2015			2014
Fixed maturity investments	$	160,661		$	134,800		$	100,855
Short term investments	5,127			1,227			944
Equity investments	4,235			8,346			3,450
Other investments
Private equity investments	6,155			9,455			18,974
Other	20,181			12,472			11,037
Cash and cash equivalents	788			467			395
	197,147			166,767			135,655
Investment expenses	(15,421		)	(14,200		)	(11,339		)
Net investment income	$	181,726		$	152,567		$	124,316

Net Realized and Unrealized Gains (Losses) on Investments

Net realized and unrealized gains (losses) on investments are as follows:




Year ended December 31,	2016			2015			2014
Gross realized gains	$	72,739		$	50,488		$	45,568
Gross realized losses	(38,315		)	(53,630		)	(14,868		)
Net realized gains (losses) on fixed maturity investments	34,424			(3,142		)	30,700
Net unrealized gains (losses) on fixed maturity investments trading	26,954			(64,908		)	19,680
Net realized and unrealized (losses) gains on investments-related derivatives	(15,414		)	5,443			(30,931		)
Net realized gains on equity investments trading	14,190			16,348			10,908
Net unrealized gains (losses) on equity investments trading	81,174			(22,659		)	11,076
Net realized and unrealized gains (losses) on investments	$	141,328		$	(68,918	)	$	41,433

Other Investments

The table below shows the fair value of the Company’s portfolio of other investments:




At December 31,	2016		2015
Catastrophe bonds	$	335,209	$	241,253
Private equity partnerships	191,061		214,848
Senior secured bank loan funds	22,040		23,231
Hedge funds	1,495		2,289
Total other investments	$	549,805	$	481,621

Interest income, income distributions and net realized and unrealized gains on other investments are included in net investment income and totaled $26.3 million (2015 – $21.9 million, 2014 – $30.0 million) of which $11.5 million related to net unrealized gains (2015 – gains of $10.4 million, 2014 – gains of $17.7 million). Included in net investment income for 2016 is a loss of $3.4 million (2015 - $2.5 million, 2014 - $0.6 million) representing the change in estimate during the period related to the difference between the Company’s estimated fair value due to the lag in reporting, as discussed in “Note 2. Significant Accounting Policies,” and the actual amount as reported in the final net asset values provided by the Company’s fund managers.

The Company has committed capital to private equity partnerships and other entities of $794.2 million, of which $554.7 million has been contributed at December 31, 2016. The Company’s remaining commitments to these funds at December 31, 2016 totaled $249.4 million. In the future, the Company may enter into additional commitments in respect of private equity partnerships or individual portfolio company investment opportunities.

Investments in Other Ventures, under Equity Method

The table below shows the Company’s portfolio of investments in other ventures, under equity method:




	2016						2015
At December 31,	Investment		Ownership %		Carrying Value		Investment		Ownership %		Carrying Value
THIG	$	50,000	25.0	%	$	19,286	$	50,000	25.0	%	$	19,155
Tower Hill	10,000		32.3	%	21,590		10,000		31.3	%	19,981
Tower Hill Re	4,250		25.0	%	2,903		4,250		25.0	%	4,136
Tower Hill Signature	500		25.0	%	9,085		500		25.0	%	7,315
Total Tower Hill Companies	64,750				52,864		64,750				50,587
Top Layer Re	65,375		50.0	%	60,360		65,375		50.0	%	68,936
Other	23,923		41.8	%	11,003		23,607		43.5	%	12,828
Total investments in other ventures, under equity method	$	154,048			$	124,227	$	153,732			$	132,351

On July 1, 2008, the Company invested $50.0 million in Tower Hill Insurance Group, LLC (“THIG”) representing a 25.0% equity ownership. Included in the purchase price was $40.0 million of other intangibles and $7.8 million of goodwill, which, in accordance with generally accepted accounting principles, are recorded as “Investments in other ventures, under equity method” rather than “Goodwill and other intangibles” on the Company’s consolidated balance sheet.

The Company originally invested $13.1 million in Top Layer Re, representing a 50.0% ownership. In December 2010, March 2011 and December 2011, primarily as a result of net claims and claim expenses incurred by Top Layer Re with respect to the September 2010 New Zealand Earthquake, the February 2011 New Zealand Earthquake and the Tohoku Earthquake and Tsunami, respectively, the Company invested an additional $13.8 million, $20.5 million and $18.0 million, respectively, in Top Layer Re, maintaining the Company’s 50.0% ownership interest.

The table below shows the Company’s equity in earnings of other ventures, under equity method:




Year ended December 31,	2016			2015			2014
Tower Hill Companies	$	10,379		$	13,116		$	18,376
Top Layer Re	(8,576		)	8,026			10,411
Other	(840		)	(661		)	(2,712		)
Total equity in earnings of other ventures	$	963		$	20,481		$	26,075

During 2016, the Company received $9.4 million of dividends from its investments in other ventures, under equity method (2015 – $13.3 million, 2014 – $10.3 million). Losses from the Company’s investments in other ventures, under equity method, net of dividends and distributions received, were $5.5 million at December 31, 2016 (2015 - earnings of $10.1 million). Except for Top Layer Re, the equity in earnings of the Company’s investments in other ventures are reported one quarter in arrears.