INVESTMENTS

Fixed Maturity Investments Trading

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




	December 31, 2018		December 31, 2017
U.S. treasuries	$	3,331,411	$	3,168,763
Agencies	174,883		47,646
Municipal	6,854		509,802
Non-U.S. government	279,818		287,660
Non-U.S. government-backed corporate	160,063		163,651
Corporate	2,450,244		2,063,459
Agency mortgage-backed	817,880		500,456
Non-agency mortgage-backed	278,680		300,331
Commercial mortgage-backed	282,294		202,062
Asset-backed	306,743		182,725
Total fixed maturity investments trading	$	8,088,870	$	7,426,555

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, 2018	Amortized Cost		Fair Value
Due in less than one year	$	511,932	$	507,728
Due after one through five years	4,799,196		4,762,712
Due after five through ten years	1,086,697		1,056,087
Due after ten years	79,084		76,746
Mortgage-backed	1,376,565		1,378,854
Asset-backed	310,488		306,743
Total	$	8,163,962	$	8,088,870

Equity Investments Trading

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




	December 31, 2018		December 31, 2017

Financials	$	200,357	$	253,543
Communications and technology	42,333		49,526
Industrial, utilities and energy	24,520		34,325
Consumer	20,639		24,779
Healthcare	18,925		21,364
Basic materials	3,478		4,717
Total	$	310,252	$	388,254

Pledged Investments

At December 31, 2018, $5.7 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 letter of credit facilities (2017 - $4.4 billion). Of this amount, $2.0 billion is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities (2017 - $1.7 billion).

Reverse Repurchase Agreements

At December 31, 2018, the Company held $3.7 million (2017 - $30.0 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 includes 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,	2018			2017			2016
Fixed maturity investments	$	211,973		$	179,624		$	160,661
Short term investments	33,571			11,082			5,127
Equity investments	4,474			3,628			4,235
Other investments
Private equity investments	477			33,999			6,155
Other	22,475			8,067			20,181
Cash and cash equivalents	3,810			1,196			788
	276,780			237,596			197,147
Investment expenses	(14,914		)	(15,387		)	(15,421		)
Net investment income	$	261,866		$	222,209		$	181,726

Net Realized and Unrealized (Losses) Gains on Investments

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




Year ended December 31,	2018			2017			2016
Gross realized gains	$	21,284		$	49,121		$	72,739
Gross realized losses	(91,098		)	(38,832		)	(38,315		)
Net realized (losses) gains on fixed maturity investments	(69,814		)	10,289			34,424
Net unrealized (losses) gains on fixed maturity investments trading	(57,310		)	8,479			26,954
Net realized and unrealized losses on investments-related derivatives	(8,784		)	(2,490		)	(15,414		)
Net realized gains on equity investments trading sold during the period	27,739			80,027			14,190
Net unrealized (losses) gains on equity investments trading still held at reporting date	(66,900		)	39,517			81,174
Net realized and unrealized (losses) gains on equity investments trading	(39,161		)	119,544			95,364
Net realized and unrealized (losses) gains on investments	$	(175,069	)	$	135,822		$	141,328

Other Investments

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




At December 31,	2018		2017
Catastrophe bonds	$	516,571	$	380,475
Private equity investments	242,647		196,220
Senior secured bank loan funds	14,482		17,574
Hedge funds	11,233		524
Total other investments	$	784,933	$	594,793

Interest income, income distributions and net realized and unrealized gains on other investments are included in net investment income and totaled $23.0 million (2017 – $42.1 million, 2016 – $26.3 million) of which $8.3 million related to net unrealized losses (2017 – gains of $24.7 million, 2016 – gains of $11.5 million). Included in net investment income for 2018 is income of $0.3 million (2017 - $1.9 million, 2016 - $3.4 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 investments, other investments and investments in other ventures of $1.2 billion, of which $686.4 million has been contributed at December 31, 2018. The Company’s remaining commitments to these investments at December 31, 2018 totaled $470.8 million. In the future, the Company may enter into additional commitments in respect of private equity investments 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:




	2018						2017
At December 31,	Investment		Ownership %		Carrying Value		Investment		Ownership %		Carrying Value
Tower Hill Companies	64,750		24.9	%	38,241		64,750		26.3	%	42,167
Top Layer Re	65,375		50.0	%	46,562		65,375		50.0	%	50,211
Other	35,862		30.6	%	30,369		13,650		40.4	%	9,596
Total investments in other ventures, under equity method	$	165,987			$	115,172	$	143,775			$	101,974

On July 1, 2008, the Company invested $50.0 million in Tower Hill Insurance Group, LLC (included in the Tower Hill Companies in the table above) 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,	2018		2017			2016
Tower Hill Companies	$	9,605	$	(1,647	)	$	10,379
Top Layer Re	8,852		9,851			(8,576		)
Other	17		(174		)	(840		)
Total equity in earnings of other ventures	$	18,474	$	8,030		$	963

During 2018, the Company received $26.1 million of distributions from its investments in other ventures, under equity method (2017 – $29.7 million, 2016 – $9.4 million). Earnings from the Company’s investments in other ventures, under equity method, net of distributions received, were $3.8 million at December 31, 2018 (2017 - losses of $6.3 million). Except for Top Layer Re, the equity in earnings of the Company’s investments in other ventures are reported one quarter in arrears.