INVESTMENTS

Fixed Maturity Investments Trading

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




	December 31, 2017		December 31, 2016
U.S. treasuries	$	3,168,763	$	2,617,894
Agencies	47,646		90,972
Municipal	509,802		519,069
Non-U.S. government (Sovereign debt)	287,660		333,224
Non-U.S. government-backed corporate	163,651		133,300
Corporate	2,063,459		1,877,243
Agency mortgage-backed	500,456		462,493
Non-agency mortgage-backed	300,331		258,944
Commercial mortgage-backed	202,062		409,747
Asset-backed	182,725		188,358
Total fixed maturity investments trading	$	7,426,555	$	6,891,244

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, 2017	Amortized Cost		Fair Value
Due in less than one year	$	547,468	$	546,255
Due after one through five years	4,551,757		4,521,930
Due after five through ten years	997,163		1,007,656
Due after ten years	163,188		165,140
Mortgage-backed	993,005		1,002,849
Asset-backed	182,289		182,725
Total	$	7,434,870	$	7,426,555

Equity Investments Trading

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




	December 31, 2017		December 31, 2016

Financials	$	253,543	$	275,065
Communications and technology	49,526		36,770
Industrial, utilities and energy	34,325		30,303
Consumer	24,779		20,501
Healthcare	21,364		17,245
Basic materials	4,717		3,429
Total	$	388,254	$	383,313

Pledged Investments

At December 31, 2017, $4.4 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 (2016 - $2.7 billion). Of this amount, $1.7 billion is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities (2016 - $842.6 million).

Reverse Repurchase Agreements

At December 31, 2017, the Company held $30.0 million (2016 - $78.7 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,	2017			2016			2015
Fixed maturity investments	$	179,624		$	160,661		$	134,800
Short term investments	11,082			5,127			1,227
Equity investments	3,628			4,235			8,346
Other investments
Private equity investments	33,999			6,155			9,455
Other	8,067			20,181			12,472
Cash and cash equivalents	1,196			788			467
	237,596			197,147			166,767
Investment expenses	(15,387		)	(15,421		)	(14,200		)
Net investment income	$	222,209		$	181,726		$	152,567

Net Realized and Unrealized Gains (Losses) on Investments

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




Year ended December 31,	2017			2016			2015
Gross realized gains	$	49,121		$	72,739		$	50,488
Gross realized losses	(38,832		)	(38,315		)	(53,630		)
Net realized gains (losses) on fixed maturity investments	10,289			34,424			(3,142		)
Net unrealized gains (losses) on fixed maturity investments trading	8,479			26,954			(64,908		)
Net realized and unrealized (losses) gains on investments-related derivatives	(2,490		)	(15,414		)	5,443
Net realized gains on equity investments trading	80,027			14,190			16,348
Net unrealized gains (losses) on equity investments trading	39,517			81,174			(22,659		)
Net realized and unrealized gains (losses) on investments	$	135,822		$	141,328		$	(68,918	)

Other Investments

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




At December 31,	2017		2016
Catastrophe bonds	$	380,475	$	335,209
Private equity partnerships	196,220		191,061
Senior secured bank loan funds	17,574		22,040
Hedge funds	524		1,495
Total other investments	$	594,793	$	549,805

Interest income, income distributions and net realized and unrealized gains on other investments are included in net investment income and totaled $42.1 million (2016 – $26.3 million, 2015 – $21.9 million) of which $24.7 million related to net unrealized gains (2016 – gains of $11.5 million, 2015 – gains of $10.4 million). Included in net investment income for 2017 is income of $1.9 million (2016 - $3.4 million, 2015 - $2.5 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 $1.0 billion, of which $585.2 million has been contributed at December 31, 2017. The Company’s remaining commitments to these funds at December 31, 2017 totaled $429.9 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:




	2017						2016
At December 31,	Investment		Ownership %		Carrying Value		Investment		Ownership %		Carrying Value
THIG	$	50,000	25.0	%	$	20,856	$	50,000	25.0	%	$	19,286
Tower Hill	10,000		33.3	%	14,917		10,000		32.3	%	21,590
Tower Hill Re	4,250		25.0	%	—		4,250		25.0	%	2,903
Tower Hill Signature	500		25.0	%	6,394		500		25.0	%	9,085
Total Tower Hill Companies	64,750				42,167		64,750				52,864
Top Layer Re	65,375		50.0	%	50,211		65,375		50.0	%	60,360
Other	13,650		40.4	%	9,596		23,923		41.8	%	11,003
Total investments in other ventures, under equity method	$	143,775			$	101,974	$	154,048			$	124,227

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,	2017			2016			2015
Top Layer Re	$	9,851		$	(8,576	)	$	8,026
Tower Hill Companies	(1,647		)	10,379			13,116
Other	(174		)	(840		)	(661		)
Total equity in earnings of other ventures	$	8,030		$	963		$	20,481

During 2017, the Company received $29.7 million of dividends from its investments in other ventures, under equity method (2016 – $9.4 million, 2015 – $13.3 million). Losses from the Company’s investments in other ventures, under equity method, net of dividends and distributions received, were $6.3 million at December 31, 2017 (2016 - losses of $5.5 million). Except for Top Layer Re, the equity in earnings of the Company’s investments in other ventures are reported one quarter in arrears.