Equity Securities, at Fair Value

At December 31, 2022, the Company held $860.0 million of equity securities, at fair value, compared to $1.8 billion at December 31, 2021.

Net Investment Income

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


	Year Ended December 31,
	2022		2021		2020
Fixed maturities	$	468,659	$	330,061	$	412,481
Term loans	2,038		34,843		84,149
Equity securities	22,497		42,396		28,958
Short-term investments	29,519		6,928		10,840
Other (1)	44,609		62,895		72,395
Gross investment income	567,322		477,123		608,823
Investment expenses	(70,775)		(88,005)		(89,215)
Net investment income	$	496,547	$	389,118	$	519,608

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

Net Realized Gains (Losses)

Net realized gains (losses) were as follows:


	Year Ended December 31,
	2022		2021		2020
Available for sale securities:
Gross gains on investment sales	$	81,161	$	313,886	$	595,941
Gross losses on investment sales	(317,150)		(156,791)		(117,282)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(70,951)		7,953		15,881
Other investments	(19,498)		116,781		13,656
Equity securities	(4,520)		13,028		14,629
Short-term investments	(3,012)		601		2,279
Equity securities, at fair value :
Net realized gains (losses) on securities sold	74,922		122,606		26,849
Net unrealized gains (losses) on equity securities still held at reporting date	(267,927)		48,746		102,394
Allowance for credit losses:
Investments related	(43,909)		(2,100)		(3,597)
Underwriting related	(13,274)		1,062		(10,007)
Net impairment losses	—		—		(533)
Derivative instruments (1)	(75,023)		(32,390)		179,675
Other (2)	(3,553)		(53,537)		3,575
Net realized gains (losses)	$	(662,734)	$	379,845	$	823,460

(1) See n ote 11 , “Derivative Instruments ” for information on the Company’s derivative instruments.

(2) 2021 period reflected $33.1 million of losses related to the Company’s

deconsolidation of Somers.

Other Investments

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


	December 31,
	2022		2021
Fixed maturities	$	554,120	$	416,698
Other investments	1,043,184		1,432,553
Short-term investments	33,101		97,806
Equity securities	13,792		26,493



Total other investments	$	1,644,197	$	1,973,550

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


	December 31,
	2022		2021
Lending	405,871		536,345
Investment grade fixed income	271,143		147,810
Term loan investments	163,941		484,950
Private equity	123,266		91,126
Energy	22,627		81,692
Credit related funds	56,336		70,278
Infrastructure	—		20,352

Total	$	1,043,184	$	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:


	December 31,
	2022		2021
Credit related funds	$	1,135,818	$	1,022,334
Private equity	916,534		436,042
Real estate	535,238		396,395
Lending	531,339		376,649
Infrastructure	245,246		230,070
Equities	169,156		395,090
Fixed income	130,062		101,890
Energy	110,917		119,141
Total	$	3,774,310	$	3,077,611

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 fair 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.

Equity in Net Income (Loss) of Investments Accounted For Using the Equity Method

The Company recorded equity in net income related to investments accounted for using the equity method of $115.9 million for 2022, compared to $366.4 million for 2021 and $146.7 million for 2020. 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).

A summary of financial information for the Company’s investment funds and operating affiliates accounted for using the equity method is as follows:


	December 31,
	2022		2021
Invested assets	$	74,960,738	$	58,508,009
Total assets	88,062,991		69,648,905
Total liabilities	27,553,307		17,944,325
Net assets	$	60,509,684	$	51,704,580


	Year Ended December 31,
	2022		2021		2020
Total revenues	$	12,305,082	$	11,785,949	$	5,762,098
Total expenses	5,374,047		3,238,606		1,656,029
Net income (loss)	$	6,931,035	$	8,547,343	$	4,106,069

Certain of the Company’s other investments and investments accounted for using the equity method 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 determined that these limited partnership interests represented variable interests in 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 item:


	December 31,
	2022		2021
Investments accounted for using the equity method (1)	$	3,774,310	$	3,077,611
Investments accounted for using the fair value option (2)	130,466		170,595
Total	$	3,904,776	$	3,248,206

(1) Aggregate unfunded commitments were $2.6 billion at December 31, 2022, consistent with $2.6 billion at December 31, 2021.

(2) Aggregate unfunded commitments were $16.7 million at December 31, 2022, compared to $18.8 million at December 31, 2021.

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 a result of equity method accounting rules, approximately $36 million of additional gain was deferred and will generally be recognized over the next five years. As of December 31, 2022, the Company owned approximately 29.9% of the issued shares of Coface, or 30.1% excluding treasury shares, with a carrying value of $562.9 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 December 31, 2022 the Company’s carrying value in Greysbridge was $305.6 million, compared to $375.7 million at December 31, 2021. The Company’s carrying value in Greysbridge at December 31, 2021 reflected 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. In addition, the ‘net realized gains (losses)’ line on the Company’s consolidated statements of income included a $33.1 million loss as a result of deconsolidation of Somers in the Company’s financial statements following the close of the transaction. See note 12, “Variable Interest Entity and Noncontrolling Interests.”

The Company recorded income from operating affiliates of $73.9 million for 2022, compared to income of $264.7 million for 2021 and $16.8 million for 2020.

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:


Year Ended December 31, 2022	Structured Securities (1)		Municipal Bonds		Non-U.S. Government Securities		Corporate Bonds		Total
Balance at beginning of period	$	802	$	2	$	82	$	1,997	$	2,883

Additions for current-period provision for expected credit losses	14,184		359		1,616		39,477		55,636
Additions (reductions) for previously recognized expected credit losses	(3,184)		(261)		275		(8,619)		(11,789)
Reductions due to disposals	(2,379)		—		(91)		(2,905)		(5,375)

Balance at end of period	$	9,423	$	100	$	1,882	$	29,950	$	41,355

Year Ended December 31, 2021
Balance at beginning of period	$	1,490	$	11	$	—	$	896	$	2,397

Additions for current-period provision for expected credit losses	602		—		82		2,858		3,542
Additions (reductions) for previously recognized expected credit losses	(847)		(9)		—		(402)		(1,258)
Reductions due to disposals (2)	(443)		—		—		(1,355)		(1,798)

Balance at end of period	$	802	$	2	$	82	$	1,997	$	2,883

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

(2) Reduction for the 2021 periods primarily related to the Company’s deconsolidation of Somers.

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

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


	December 31,
	2022		2021
Assets used for collateral or guarantees:
Affiliated transactions	$	4,254,398	$	4,223,955
Third party agreements	2,632,892		2,289,631
Deposits with U.S. regulatory authorities	776,342		798,100
Other (1)	1,037,848		938,046
Total restricted assets	$	8,701,480	$	8,249,732

(1) Primarily includes Funds at Lloyds, deposits with non-U.S. regulatory authorities and other restricted assets.

Reconciliation of Cash and Restricted Cash

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


	December 31,
	2022		2021		2020
Cash	$	855,118	$	858,668	$	906,448
Restricted cash (included in ‘other assets’)	418,210		456,103		384,096
Cash and restricted cash	$	1,273,328	$	1,314,771	$	1,290,544