| Investments |
Investments The original or amortized cost, estimated fair value and gross unrealized gains and losses of fixed maturities at June 30, 2020 and December 31, 2019 are as follows: | | | | | | | | | | | | | | | | | | June 30, 2020 | | Original or amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value | U.S. treasury bonds | | $ | 210,512 |
| | $ | 673 |
| | $ | (2 | ) | | $ | 211,183 |
| U.S. agency bonds – mortgage-backed | | 421,150 |
| | 14,608 |
| | (375 | ) | | 435,383 |
| Non-U.S. government and supranational bonds | | 7,284 |
| | 327 |
| | (46 | ) | | 7,565 |
| Asset-backed securities | | 186,908 |
| | 935 |
| | (3,833 | ) | | 184,010 |
| Corporate bonds | | 596,444 |
| | 22,360 |
| | (17,382 | ) | | 601,422 |
| Total fixed maturity investments | | $ | 1,422,298 |
| | $ | 38,903 |
| | $ | (21,638 | ) | | $ | 1,439,563 |
|
| | | | | | | | | | | | | | | | | | December 31, 2019 | | Original or amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value | U.S. treasury bonds | | $ | 94,921 |
| | $ | 704 |
| | $ | — |
| | $ | 95,625 |
| U.S. agency bonds – mortgage-backed | | 533,296 |
| | 6,717 |
| | (1,291 | ) | | 538,722 |
| Non-U.S. government and supranational bonds | | 11,796 |
| | 294 |
| | (91 | ) | | 11,999 |
| Asset-backed securities | | 187,881 |
| | 821 |
| | (532 | ) | | 188,170 |
| Corporate bonds | | 981,441 |
| | 31,140 |
| | (15,725 | ) | | 996,856 |
| Municipal bonds | | 4,091 |
| | 55 |
| | — |
| | 4,146 |
| Total fixed maturity investments | | $ | 1,813,426 |
| | $ | 39,731 |
| | $ | (17,639 | ) | | $ | 1,835,518 |
|
4. Investments (continued) The contractual maturities of our fixed maturities are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. | | | | | | | | | | June 30, 2020 | | Amortized cost | | Fair value | Due in one year or less | | $ | 238,418 |
| | $ | 237,728 |
| Due after one year through five years | | 476,319 |
| | 479,611 |
| Due after five years through ten years | | 99,503 |
| | 102,831 |
| | | 814,240 |
| | 820,170 |
| U.S. agency bonds – mortgage-backed | | 421,150 |
| | 435,383 |
| Asset-backed securities | | 186,908 |
| | 184,010 |
| Total fixed maturity investments | | $ | 1,422,298 |
| | $ | 1,439,563 |
|
The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less than 12 Months | | 12 Months or More | | Total | June 30, 2020 | | Fair
value | | Unrealized
losses | | Fair
value | | Unrealized
losses | | Fair
value | | Unrealized
losses | U.S. treasury bonds | | $ | 60,586 |
| | $ | (2 | ) | | $ | — |
| | $ | — |
| | $ | 60,586 |
| | $ | (2 | ) | U.S. agency bonds – mortgage-backed | | 39,380 |
| | (280 | ) | | 14,104 |
| | (95 | ) | | 53,484 |
| | (375 | ) | Non-U.S. government and supranational bonds | | 116 |
| | (6 | ) | | 578 |
| | (40 | ) | | 694 |
| | (46 | ) | Asset-backed securities | | 102,486 |
| | (2,398 | ) | | 52,170 |
| | (1,435 | ) | | 154,656 |
| | (3,833 | ) | Corporate bonds | | 51,660 |
| | (5,094 | ) | | 114,729 |
| | (12,288 | ) | | 166,389 |
| | (17,382 | ) | Total temporarily impaired fixed maturities | | $ | 254,228 |
| | $ | (7,780 | ) | | $ | 181,581 |
| | $ | (13,858 | ) | | $ | 435,809 |
| | $ | (21,638 | ) |
At June 30, 2020, there were 134 securities in an unrealized loss position with a fair value of $435,809 and unrealized losses of $21,638. Of these securities, there were 65 securities that have been in an unrealized loss position for twelve months or greater with a fair value of $181,581 and unrealized losses of $13,858. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less than 12 Months | | 12 Months or More | | Total | December 31, 2019 | | Fair
value | | Unrealized
losses | | Fair
value | | Unrealized
losses | | Fair
value | | Unrealized
losses | U.S. agency bonds – mortgage-backed | | $ | 31,401 |
| | $ | (257 | ) | | $ | 85,008 |
| | $ | (1,034 | ) | | $ | 116,409 |
| | $ | (1,291 | ) | Non-U.S. government and supranational bonds | | 1,824 |
| | (22 | ) | | 701 |
| | (69 | ) | | 2,525 |
| | (91 | ) | Asset-backed securities | | 60,863 |
| | (240 | ) | | 17,594 |
| | (292 | ) | | 78,457 |
| | (532 | ) | Corporate bonds | | 29,692 |
| | (305 | ) | | 159,216 |
| | (15,420 | ) | | 188,908 |
| | (15,725 | ) | Total temporarily impaired fixed maturities | | $ | 123,780 |
| | $ | (824 | ) | | $ | 262,519 |
| | $ | (16,815 | ) | | $ | 386,299 |
| | $ | (17,639 | ) |
At December 31, 2019, there were 104 securities in an unrealized loss position with a fair value of $386,299 and unrealized losses of $17,639. Of these securities, there were 67 securities that have been in an unrealized loss position for twelve months or greater with a fair value of $262,519 and unrealized losses of $16,815. Other-than-temporarily impaired The Company performs quarterly reviews of its fixed maturities in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. At June 30, 2020, we determined that unrealized losses on fixed maturities were primarily due to changes in interest rates as well as the impact of foreign exchange rate changes on certain foreign currency denominated fixed maturities since their date of purchase. All fixed maturity securities continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed maturity securities that the Company does not plan to sell and for which the Company is not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed maturity portfolio is of high credit quality and we believe the amortized cost basis of the securities will ultimately be recovered. The Company continually monitors the credit quality of the fixed maturity investments to assess if it is probable that it will receive contractual or estimated cash flows in the form of principal and interest. For the six months ended June 30, 2020, $1,506 of OTTI charges were recognized in earnings on two fixed maturity securities. There were no OTTI losses recognized in the three months ended June 30, 2020 and in the three and six months ended June 30, 2019. 4. Investments (continued) The following tables summarize the credit ratings of our fixed maturities as at June 30, 2020 and December 31, 2019: | | | | | | | | | | | | | June 30, 2020 | | Amortized cost | | Fair value | | % of Total
fair value | U.S. treasury bonds | | $ | 210,512 |
| | $ | 211,183 |
| | 14.7 | % | U.S. agency bonds | | 421,150 |
| | 435,383 |
| | 30.2 | % | AAA | | 97,579 |
| | 96,314 |
| | 6.7 | % | AA+, AA, AA- | | 111,053 |
| | 110,763 |
| | 7.7 | % | A+, A, A- | | 233,775 |
| | 236,501 |
| | 16.4 | % | BBB+, BBB, BBB- | | 311,877 |
| | 315,567 |
| | 21.9 | % | BB+ or lower | | 36,352 |
| | 33,852 |
| | 2.4 | % | Total fixed maturities (1) | | $ | 1,422,298 |
| | $ | 1,439,563 |
| | 100.0 | % |
| | | | | | | | | | | | | December 31, 2019 | | Amortized cost | | Fair value | | % of Total
fair value | U.S. treasury bonds | | $ | 94,921 |
| | $ | 95,625 |
| | 5.2 | % | U.S. agency bonds | | 533,296 |
| | 538,722 |
| | 29.4 | % | AAA | | 99,212 |
| | 99,542 |
| | 5.4 | % | AA+, AA, AA- | | 101,491 |
| | 101,467 |
| | 5.5 | % | A+, A, A- | | 540,002 |
| | 549,479 |
| | 29.9 | % | BBB+, BBB, BBB- | | 438,731 |
| | 445,202 |
| | 24.3 | % | BB+ or lower | | 5,773 |
| | 5,481 |
| | 0.3 | % | Total fixed maturities(1) | | $ | 1,813,426 |
| | $ | 1,835,518 |
| | 100.0 | % |
| | (1) | Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings. |
The table below shows the fair value of the Company's other investments as at June 30, 2020 and December 31, 2019: | | | | | | | | | | | | | | | | | | June 30, 2020 | | December 31, 2019 | | | Fair value | | % of Total
fair value | | Fair value | | % of Total
fair value | Investment in limited partnerships | | $ | 2,908 |
| | 50.9 | % | | $ | 3,077 |
| | 63.1 | % | Other | | 2,800 |
| | 49.1 | % | | 1,800 |
| | 36.9 | % | Total other investments | | $ | 5,708 |
| | 100.0 | % | | $ | 4,877 |
| | 100.0 | % |
The Company also holds other investments made by special purpose vehicles ("SPV") related to lending activities of $30,346 at June 30, 2020 (December 31, 2019 - $26,871). These investments are carried at cost less impairment, if any, with any indication of impairment recognized in income when determined. Because these investments are carried at cost, they are not included in the table above. Please see "Note 5 - Fair Value Measurements" for additional information. The Company has remaining unfunded commitments on its investment in limited partnerships of $333 at June 30, 2020 (December 31, 2019 - $340). The Company also has a remaining unfunded commitment on its investment in special purpose vehicles focused on lending activities of $215 at June 30, 2020 (December 31, 2019 - $767). 4. Investments (continued) Net investment income was derived from the following sources: | | | | | | | | | | | | | | | | | | | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | | 2020 | | 2019 | | 2020 | | 2019 | Fixed maturities | | $ | 9,635 |
| | $ | 23,522 |
| | $ | 22,286 |
| | $ | 49,742 |
| Funds withheld interest | | 4,009 |
| | 5,169 |
| | 7,862 |
| | 9,706 |
| Loan to related party | | 860 |
| | 1,842 |
| | 2,225 |
| | 3,664 |
| Cash and cash equivalents and other | | 159 |
| | 1,316 |
| | 655 |
| | 1,591 |
| | | 14,663 |
| | 31,849 |
| | 33,028 |
| | 64,703 |
| Investment expenses | | (354 | ) | | (727 | ) | | (755 | ) | | (1,559 | ) | Net investment income | | $ | 14,309 |
| | $ | 31,122 |
| | $ | 32,273 |
| | $ | 63,144 |
|
| | d) | Realized Gains (Losses) on Investment |
Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following tables show the net realized gains (losses) on investment included in the Condensed Consolidated Statements of Income: | | | | | | | | | | | | | | For the Three Months Ended June 30, 2020 | | Gross gains | | Gross losses | | Net | Fixed maturities | | $ | 9,059 |
| | $ | — |
| | $ | 9,059 |
| Other investments | | — |
| | (184 | ) | | (184 | ) | Net realized gains (losses) on investment | | $ | 9,059 |
| | $ | (184 | ) | | $ | 8,875 |
| | | | | | | | For the Three Months Ended June 30, 2019 | | Gross gains | | Gross losses | | Net | Fixed maturities | | $ | 25,436 |
| | $ | (1,501 | ) | | $ | 23,935 |
| Other investments | | 151 |
| | — |
| | 151 |
| Net realized gains (losses) on investment | | $ | 25,587 |
| | $ | (1,501 | ) | | $ | 24,086 |
| | | | | | | | For the Six Months Ended June 30, 2020 | | Gross gains | | Gross losses | | Net | AFS fixed maturities | | $ | 19,991 |
| | $ | (1 | ) | | $ | 19,990 |
| Other investments | | 107 |
| | (184 | ) | | (77 | ) | Net realized gains (losses) on investment | | $ | 20,098 |
| | $ | (185 | ) | | $ | 19,913 |
| | | | | | | | For the Six Months Ended June 30, 2019 | | Gross gains | | Gross losses | | Net | AFS fixed maturities | | $ | 27,860 |
| | $ | (14,881 | ) | | $ | 12,979 |
| Other investments | | 151 |
| | (145 | ) | | 6 |
| Net realized gains (losses) on investment | | $ | 28,011 |
| | $ | (15,026 | ) | | $ | 12,985 |
|
Proceeds from sales of fixed maturities were $181,030 and $405,501 for the three and six months ended June 30, 2020, respectively (2019 - $625,254 and $709,615, respectively). Net unrealized gains on investments were as follows at June 30, 2020 and December 31, 2019, respectively: | | | | | | | | | | | | June 30, 2020 | | December 31, 2019 | Fixed maturities | | $ | 17,266 |
| | $ | 22,092 |
| Deferred income tax | | (82 | ) | | (96 | ) | Net unrealized gains, net of deferred income tax | | $ | 17,184 |
| | $ | 21,996 |
| Change, net of deferred income tax | | $ | (4,812 | ) | | $ | 81,758 |
|
4. Investments (continued) | | e) | Restricted Cash and Cash Equivalents and Investments |
The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of these restricted assets were as follows at June 30, 2020 and December 31, 2019: | | | | | | | | | | | | June 30, 2020 | | December 31, 2019 | Restricted cash – third party agreements | | $ | 22,652 |
| | $ | 21,447 |
| Restricted cash – related party agreements | | 58,218 |
| | 37,634 |
| Total restricted cash | | 80,870 |
| | 59,081 |
| Restricted investments – in trust for third party agreements at fair value (amortized cost: 2020 – $59,951; 2019 – $65,539) | | 60,082 |
| | 65,678 |
| Restricted investments – in trust for related party agreements at fair value (amortized cost: 2020 – $1,050,781; 2019 – $1,366,873) | | 1,066,310 |
| | 1,382,994 |
| Restricted investments – liability for investments purchased for related party agreements(1) | | (31,997 | ) | | — |
| Total restricted investments | | 1,094,395 |
| | 1,448,672 |
| Total restricted cash and investments | | $ | 1,175,265 |
| | $ | 1,507,753 |
|
(1) $31,997 of the restricted cash held for related party agreements as of June 30, 2020 was used to settle the liability for investments purchased of $44,996 as of June 30, 2020 subsequent to the quarter end.
|