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Investments
 6 Months Ended
Jun. 30, 2020
Schedule of Investments [Abstract]  
Investments Investments
a)
Fixed Maturities
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.
b)
Other Investments
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)
c)
Net Investment Income
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.