Equity Securities, at Fair Value

At September 30, 2022, the Company held $0.8 billion of equity securities, at fair value, compared to $1.8 billion at December 31, 2021. Such holdings include publicly traded common stocks primarily in the consumer cyclical and non-cyclical, technology, communication and financial sectors and exchange-traded funds in fixed income, equity and other sectors.

Other Investments, at Fair Value

The following table summarizes the Company’s other investments and other investable assets:


	September 30, 2022		December 31, 2021
Fixed maturities	$	530,303	$	416,698
Other investments	1,005,929		1,432,553
Short-term investments	28,614		97,806
Equity securities	13,905		26,493



Total	$	1,578,751	$	1,973,550

The following table summarizes the Company’s other investments, as detailed in the previous table, by strategy:


	September 30, 2022		December 31, 2021
Lending	$	398,789	$	536,345
Investment grade fixed income	229,262		147,810
Term loan investments	151,649		484,950
Private equity	117,856		91,126
Energy	55,250		81,692
Credit related funds	53,123		70,278
Infrastructure	—		20,352

Total	$	1,005,929	$	1,432,553

Investments Accounted For Using the Equity Method

The following table summarizes the Company’s investments accounted for using the equity method, by strategy:


	September 30, 2022		December 31, 2021
Credit related funds	$	1,135,623	$	1,022,334
Private equity	761,997		436,042
Real estate	474,666		396,395
Lending	454,196		376,649
Equities	261,650		395,090
Infrastructure	236,920		230,070
Energy	113,778		119,141
Fixed income	127,116		101,890
Total	$	3,565,946	$	3,077,611

Certain of the Company’s other investments are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact the Company’s ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If the investment funds are eligible to be

redeemed, the time to redeem such fund can take weeks or months following the notification.

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy. Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company has determined that it is not required to consolidate these investments because it is not the primary beneficiary of the funds. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:


	September 30, 2022		December 31, 2021
Investments accounted for using the equity method (1)	$	3,565,946	$	3,077,611
Investments accounted for using the fair value option (2)	120,498		170,595
Total	$	3,686,444	$	3,248,206

(1) Aggregate unfunded commitments were $2.8 billion at September 30, 2022, compared to $2.6 billion at December 31, 2021.

(2) Aggregate unfunded commitments were $21.5 million at September 30, 2022, compared to $18.8 million at December 31, 2021.

Net Investment Income

The components of net investment income were derived from the following sources:


	September 30,
	2022		2021
Three Months Ended
Fixed maturities	$	123,568	$	75,964
Term loans	88		1,736
Equity securities	4,261		9,867
Short-term investments	9,304		1,858
Other (1)	8,556		17,378
Gross investment income	145,777		106,803
Investment expenses	(17,137)		(18,608)
Net investment income	$	128,640	$	88,195

Nine Months Ended
Fixed maturities	$	310,963	$	255,215
Term loans	2,106		33,343
Equity securities	16,620		24,101
Short-term investments	15,999		3,603
Other (1)	26,598		51,683
Gross investment income	372,286		367,945
Investment expenses	(56,818)		(69,281)
Net investment income	$	315,468	$	298,664

(1) Includes income distributions from investment funds and other items.

Net Realized Gains (Losses)

Net realized gains (losses), which include changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings were as follows:


	September 30,
	2022		2021
Three Months Ended
Available for sale securities:
Gross gains on investment sales	$	18,030	$	86,819
Gross losses on investment sales	(73,970)		(18,446)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(19,304)		(7,492)
Other investments	(17,882)		3,811
Equity securities	(584)		3,042
Short-term investments	(975)		16
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	(6,401)		14,736
Net unrealized gains (losses) on equity securities still held at reporting date	(36,162)		(40,155)
Allowance for credit losses:
Investments related	8,652		(456)
Underwriting related	(4,232)		(3,985)

Derivative instruments (1)	(48,196)		(21,435)
Other	(2,649)		(41,495)
Net realized gains (losses)	$	(183,673)	$	(25,040)

Nine Months Ended
Available for sale securities:
Gross gains on investment sales	$	52,923	$	267,362
Gross losses on investment sales	(239,493)		(132,071)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(89,148)		19,973
Other investments	(35,203)		111,550
Equity securities	(6,021)		10,599
Short-term investments	(3,132)		648
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	75,689		86,155
Net unrealized gains (losses) on equity securities still held at reporting date	(318,732)		45,400
Allowance for credit losses:
Investments related	(48,096)		(1,208)
Underwriting related	(7,676)		2,664

Derivative instruments (1)	(117,591)		(36,428)
Other	(6,186)		(54,316)
Net realized gains (losses)	$	(742,666)	$	320,328

(1) See note 9 for information on the Company’s derivative instruments.

Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method

The Company recorded a loss of $18.9 million related to investment funds accounted for using the equity method in the 2022 third quarter, compared to income of $105.4 million for the 2021 third quarter and an income of $75.5 million for the nine months ended September 30, 2022, compared to income of $299.3 million for nine months ended September 30, 2021. In applying the equity method, investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds.

Investments in Operating Affiliates

Investments in which the Company has significant influence over the operating and financial policies are classified as ‘investments in operating affiliates’ on the Company’s balance sheets and are accounted for under the equity method. Such investments primarily include the Company’s investment in Coface SA (“Coface”), Greysbridge and Premia. Investments in Coface and Premia are generally recorded on a three month lag, while the Company’s investment in Greysbridge is not recorded on a lag.

In 2021, the Company completed the share purchase agreement with Natixis to purchase 29.5% of the common equity of Coface, a France-based leader in the global trade credit insurance market. The consideration paid was €9.95 per share, or an aggregate €453 million (approximately

$546 million) including related fees. Income (loss) from operating affiliates reflected a one-time gain of $74.5 million realized from the acquisition. As of September 30, 2022, the Company owned approximately 29.86% of the issued shares of Coface, or 30.05% excluding treasury shares, with a carrying value of $506.7 million, compared to $630.5 million at December 31, 2021.

In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge for a cash purchase price of $35.00 per common share.

Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certain investment funds managed by Warburg. At September 30, 2022 the Company’s carrying value in Greysbridge was $277.6 million, compared to $375.7 million at December 31, 2021, which reflected the Company’s aggregate purchase price of $278.9 million along with income (loss) from operating affiliates, which included a one-time gain of $95.7 million recognized from the acquisition.

Income from operating affiliates for the 2022 third quarter was income of $8.5 million, compared to an income of $124.1 million, for the 2021 third quarter and income of $37.7 million for the nine months ended September 30, 2022, compared to income of $224.1 million for nine months ended September 30, 2021.

Allowance for Expected Credit Losses

The following table provides a roll forward of the allowance for expected credit losses of the Company’s securities classified as available for sale:


	Structured Securities (1)		Municipal Bonds		Corporate Bonds		Total
Three Months Ended September 30, 2022
Balance at beginning of period	$	18,283	$	298	$	39,829	$	58,410

Additions for current-period provision for expected credit losses	1,782		12		1,986		3,780
Additions (reductions) for previously recognized expected credit losses	(9,767)		(211)		(2,552)		(12,530)
Reductions due to disposals	(1,780)		—		(1,887)		(3,667)

Balance at end of period	$	8,518	$	99	$	37,376	$	45,993

Three Months Ended September 30, 2021
Balance at beginning of period	$	759	$	6	$	1,359	$	2,124

Additions for current-period provision for expected credit losses	48		—		—		48
Additions (reductions) for previously recognized expected credit losses	14		(4)		395		405
Reductions due to disposals	(234)		—		(232)		(466)

Balance at end of period	$	587	$	2	$	1,522	$	2,111

Nine Months Ended September 30, 2022
Balance at beginning of period	$	802	$	2	$	2,079	$	2,883

Additions for current-period provision for expected credit losses	12,560		359		40,602		53,521
Additions (reductions) for previously recognized expected credit losses	(2,575)		(262)		(2,772)		(5,609)
Reductions due to disposals	(2,269)		—		(2,533)		(4,802)

Balance at end of period	$	8,518	$	99	$	37,376	$	45,993

Nine Months Ended September 30, 2021
Balance at beginning of period	$	1,490	$	11	$	896	$	2,397

Additions for current-period provision for expected credit losses	282		—		2,428		2,710
Additions (reductions) for previously recognized expected credit losses	(751)		(9)		(557)		(1,317)
Reductions due to disposals	(434)		—		(1,245)		(1,679)

Balance at end of period	$	587	$	2	$	1,522	$	2,111

(1) Includes asset backed securities, residential mortgage backed securities and commercial mortgage backed securities.

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its underwriting operations. The Company’s subsidiaries maintain assets in trust accounts as collateral for transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. See note 18, “Commitments and Contingencies,” of the notes to consolidated financial statements in the Company’s 2021 Form 10-K.

The following table details the value of the Company’s restricted assets:


	September 30, 2022		December 31, 2021
Assets used for collateral or guarantees:
Affiliated transactions	$	4,212,521	$	4,223,955
Third party agreements	2,847,814		2,721,160
Deposits with U.S. regulatory authorities	756,368		798,100
Deposits with non-U.S. regulatory authorities	519,254		506,517

Total restricted assets	$	8,335,957	$	8,249,732

Reconciliation of Cash and Restricted Cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:


	September 30, 2022		December 31, 2021
Cash	$	813,583	$	858,668
Restricted cash (included in ‘other assets’)	444,741		456,103
Cash and restricted cash	$	1,258,324	$	1,314,771