Investments

(a) Fixed Maturities, Short-Term Investments and Equity Securities

Amortized Cost and Fair Value Summary

The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including non-credit related OTTI recorded in AOCI, of the Company’s AFS investments as of June 30, 2016 and December 31, 2015 were as follows:



			Included in AOCI
June 30, 2016 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government	$	4,006,824	$	130,453	$	(3,189	)	$	4,134,088	$	—
Corporate - Financials	3,657,989		95,287		(27,305		)	3,725,971		—
Corporate - Non Financials	6,619,610		263,286		(54,539		)	6,828,357		(187		)
RMBS – Agency	4,330,183		127,847		(2,400		)	4,455,630		—
RMBS – Non-Agency	287,736		19,145		(18,066		)	288,815		(50,013		)
CMBS	270,546		10,878		(3,110		)	278,314		(1,231		)
CDO	21,437		3		(3,640		)	17,800		(1,208		)
Other asset-backed securities	1,030,209		22,669		(9,400		)	1,043,478		(974		)
U.S. States and political subdivisions of the States	2,452,935		183,357		(1,258		)	2,635,034		—
Non-U.S. Governments	5,481,374		200,030		(73,973		)	5,607,431		—
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	28,158,843	$	1,052,955	$	(196,880	)	$	29,014,918	$	(53,613	)
Total short-term investments - Excluding Life Funds Withheld Assets	446,469		1,347		(3,515		)	444,301		—
Total equity securities	955,231		104,985		(20,423		)	1,039,793		—
Total investments - AFS - Excluding Life Funds Withheld Assets	$	29,560,543	$	1,159,287	$	(220,818	)	$	30,499,012	$	(53,613	)
Fixed maturities - AFS - Life Funds Withheld Assets
U.S. Government	$	9,691	$	2,808	$	—		$	12,499	$	—
Corporate - Financials	441,261		63,203		—			504,464		—
Corporate - Non Financials	976,385		252,111		—			1,228,496		—
RMBS – Agency	545		141		—			686		—
RMBS – Non-Agency	21,384		2,868		—			24,252		—
CMBS	86,373		18,646		—			105,019		—
Other asset-backed securities	98,736		19,061		—			117,797		—
Non-U.S. Governments	596,382		254,211		—			850,593		—
Total fixed maturities - AFS - Life Funds Withheld Assets	$	2,230,757	$	613,049	$	—		$	2,843,806	$	—
Total investments - AFS	$	31,791,300	$	1,772,336	$	(220,818	)	$	33,342,818	$	(53,613	)

____________


(1)	Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.



December 31, 2015 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
U.S. Government	$	5,047,621	$	52,355	$	(34,339	)	$	5,065,637	$	—
Corporate - Financials	3,535,830		49,535		(23,456		)	3,561,909		—
Corporate - Non Financials	6,867,525		130,568		(97,646		)	6,900,447		—
RMBS – Agency	3,697,756		77,776		(17,561		)	3,757,971		—
RMBS – Non-Agency	319,876		25,644		(16,980		)	328,540		(54,200		)
CMBS	401,713		7,933		(4,330		)	405,316		(1,182		)
CDOs	41,679		4		(9,273		)	32,410		(1,208		)
Other asset-backed securities	1,164,426		17,665		(13,519		)	1,168,572		(1,144		)
U.S. States and political subdivisions of the States	2,514,048		125,395		(7,373		)	2,632,070		—
Non-U.S. Government	5,249,148		100,383		(97,917		)	5,251,614		—
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	28,839,622	$	587,258	$	(322,394	)	$	29,104,486	$	(57,734	)
Total short-term investments - Excluding Life Funds Withheld Assets	618,851		967		(2,428		)	617,390		—
Total equity securities - Excluding Life Funds Withheld Assets	834,079		89,993		(45,153		)	878,919		—
Total investments - AFS - Excluding Life Funds Withheld Assets	$	30,292,552	$	678,218	$	(369,975	)	$	30,600,795	$	(57,734	)
Fixed maturities - AFS - Life Funds Withheld Assets
U.S. Government	$	10,721	$	2,021	$	—		$	12,742	$	—
Corporate - Financials	531,016		67,220		—			598,236		—
Corporate - Non Financials	1,132,926		175,702		—			1,308,628		—
RMBS – Agency	591		161		—			752		—
RMBS – Non-Agency	24,401		2,552		—			26,953		—
CMBS	107,968		14,513		—			122,481		—
Other asset-backed securities	132,674		17,121		—			149,795		—
Non-U.S. Governments	737,735		195,781		—			933,516		—
Total fixed maturities - AFS - Life Funds Withheld Assets	$	2,678,032	$	475,071	$	—		$	3,153,103	$	—
Total investments - AFS	$	32,970,584	$	1,153,289	$	(369,975	)	$	33,753,898	$	(57,734	)

____________


(1)	Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.

The cost (amortized cost for fixed maturities and short-term investments) and fair value of the Company’s Trading investments at December 31, 2016 and 2015 were as follows:



June 30, 2016 (U.S. dollars in thousands)	Amortized Cost		Fair Value
Fixed maturities - Trading - Life Funds Withheld Assets
U.S. Government	$	17,827	$	18,570
Corporate - Financials	400,872		416,325
Corporate - Non Financials	558,059		592,848
RMBS – Agency	1,844		1,868
RMBS – Non-Agency	190		197
CMBS	4,970		5,223
CDO	—		—
Other asset-backed securities	24,858		25,965
U.S. States and political subdivisions of the States	—		—
Non-U.S. Governments	376,968		417,411
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,385,588	$	1,478,407
Total short-term investments - Trading - Life Funds Withheld Assets	$	18,495	$	18,499
Total investments - Trading - Life Funds Withheld Assets	$	1,404,083	$	1,496,906



December 31, 2015 (U.S. dollars in thousands)	Amortized Cost		Fair Value
Fixed maturities - Trading - Life Funds Withheld Assets
U.S. Government	$	4,957	$	4,990
Corporate - Financials	344,070		335,956
Corporate - Non Financials	509,441		493,621
RMBS – Agency	370		368
CMBS	4,874		4,803
Other asset-backed securities	26,405		25,700
Non-U.S. Governments	373,492		370,261
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,263,609	$	1,235,699
Total short-term investments - Trading - Life Funds Withheld Assets	$	60,176	$	60,330
Total investments - Trading - Life Funds Withheld Assets	$	1,323,785	$	1,296,029

As of June 30, 2016 and December 31, 2015, approximately 2.3% and 2.0%, respectively, of the Company's fixed income investment portfolio at fair value, excluding Life Funds Withheld Assets, was invested in securities that were below investment grade or not rated. Approximately 14.2% and 14.7% of the gross unrealized losses in the Company's fixed income investment portfolio, excluding Life Funds Withheld Assets, as of June 30, 2016 and December 31, 2015, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS fixed income securities as of June 30, 2016 and December 31, 2015 are shown 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, 2016				December 31, 2015
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
Due less than one year	$	1,971,202	$	1,960,971	$	2,106,851	$	2,104,106
Due after 1 through 5 years	12,992,741		13,266,292		14,051,494		14,143,461
Due after 5 through 10 years	5,733,195		6,008,825		5,680,830		5,740,954
Due after 10 years	1,521,594		1,694,793		1,374,997		1,423,156
	$	22,218,732	$	22,930,881	$	23,214,172	$	23,411,677
RMBS – Agency	4,330,183		4,455,630		3,697,756		3,757,971
RMBS – Non-Agency	287,736		288,815		319,876		328,540
CMBS	270,546		278,314		401,713		405,316
CDOs	21,437		17,800		41,679		32,410
Other asset-backed securities	1,030,209		1,043,478		1,164,426		1,168,572
Total mortgage and asset-backed securities	$	5,940,111	$	6,084,037	$	5,625,450	$	5,692,809
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	28,158,843	$	29,014,918	$	28,839,622	$	29,104,486
Fixed maturities - AFS - Life Funds Withheld Assets
Due less than one year	$	87,483	$	97,965	$	81,700	$	92,921
Due after 1 through 5 years	327,255		357,289		386,810		416,743
Due after 5 through 10 years	427,845		509,997		491,621		558,805
Due after 10 years	1,181,136		1,630,801		1,452,267		1,784,653
	$	2,023,719	$	2,596,052	$	2,412,398	$	2,853,122
RMBS – Agency	545		686		591		752
RMBS – Non-Agency	21,384		24,252		24,401		26,953
CMBS	86,373		105,019		107,968		122,481
Other asset-backed securities	98,736		117,797		132,674		149,795
Total mortgage and asset-backed securities	$	207,038	$	247,754	$	265,634	$	299,981
Total fixed maturities - AFS - Life Funds Withheld Assets	$	2,230,757	$	2,843,806	$	2,678,032	$	3,153,103
Total fixed maturities - AFS	$	30,389,600	$	31,858,724	$	31,517,654	$	32,257,589



	June 30, 2016				December 31, 2015
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - Trading - Life Funds Withheld Assets
Due less than one year	$	15,713	$	16,587	$	4,573	$	5,096
Due after 1 through 5 years	335,915		339,896		278,163		272,220
Due after 5 through 10 years	336,150		350,397		280,487		277,920
Due after 10 years	665,949		738,274		668,737		649,592
	$	1,353,727	$	1,445,154	$	1,231,960	$	1,204,828
RMBS – Agency	1,844		1,868		370		368
RMBS – Non-Agency	190		197		—		—
CMBS	4,970		5,223		4,874		4,803
Other asset-backed securities	24,858		25,965		26,405		25,700
Total mortgage and asset-backed securities	$	31,862	$	33,253	$	31,649	$	30,871
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,385,589	$	1,478,407	$	1,263,609	$	1,235,699

Pledged Assets

Certain of the Company's invested assets are held in trust and pledged in support of insurance and reinsurance liabilities as well as credit facilities. Such pledges are largely required by the Company's operating subsidiaries that are "non-admitted" under U.S. state insurance regulations, in order for the U.S. cedant to receive statutory credit for reinsurance. Also included are Life Funds Withheld Assets as noted in Note 1, "Basis of Preparation and Consolidation." Additionally, certain deposit liabilities and annuity contracts require the use of pledged assets. As of June 30, 2016 and December 31, 2015, the Company had $19.0 billion and $18.3 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

The following is an analysis of how long the AFS securities as of June 30, 2016 and December 31, 2015 had been in a continual unrealized loss position:



	Less than 12 months					Equal to or greater than 12 months
June 30, 2016 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government	$	223,236	$	(1,711	)	$	49,239	$	(1,541	)
Corporate – Financials	350,614		(19,762		)	115,843		(7,573		)
Corporate – Non Financials	432,713		(27,422		)	269,682		(27,207		)
RMBS – Agency	249,152		(742		)	211,310		(1,658		)
RMBS – Non-Agency	30,747		(995		)	172,556		(17,071		)
CMBS	19,125		(789		)	38,044		(2,321		)
CDOs	12,476		(440		)	5,317		(3,200		)
Other asset-backed securities	285,791		(1,296		)	93,287		(8,164		)
U.S. States and political subdivisions of the States	38,476		(1,157		)	10,152		(101		)
Non-U.S. Governments	856,460		(43,696		)	328,900		(33,549		)
Total fixed maturities and short-term investments - AFS	$	2,498,790	$	(98,010	)	$	1,294,330	$	(102,385	)
Total equity securities	$	293,337	$	(20,423	)	$	—	$	—



	Less than 12 months					Equal to or greater than 12 months
December 31, 2015 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government	$	3,762,869	$	(29,339	)	$	89,113	$	(5,044	)
Corporate – Financials	1,641,021		(13,280		)	102,022		(10,192		)
Corporate – Non Financials	3,275,270		(73,069		)	227,527		(24,706		)
RMBS – Agency	1,065,055		(10,046		)	221,211		(7,515		)
RMBS – Non-Agency	19,614		(1,104		)	180,146		(15,876		)
CMBS	118,605		(1,561		)	78,651		(2,769		)
CDOs	12,311		(516		)	20,096		(8,757		)
Other asset-backed securities	572,671		(5,252		)	57,563		(8,268		)
U.S. States and political subdivisions of the States	565,055		(6,609		)	12,259		(765		)
Non-U.S. Governments	1,921,286		(53,440		)	474,929		(46,714		)
Total fixed maturities and short-term investments - AFS	$	12,953,757	$	(194,216	)	$	1,463,517	$	(130,606	)
Total equity securities	$	356,742	$	(45,153	)	$	—	$	—

The Company had gross unrealized losses totaling $220.8 million on 1,643 securities out of a total of 8,773 held as of June 30, 2016 in its AFS - Excluding Life Funds Withheld Assets portfolio, which either it considers to be temporarily impaired or with respect to which it reflects non-credit losses on other-than-temporarily impaired assets. Individual security positions comprising this balance have been evaluated by management, in conjunction with our investment managers to determine the severity of these impairments and whether they should be considered other-than-temporary. Management believes it is more likely than not that the issuer will be able to fund sufficient principal and interest payments to support the current amortized cost.

The following represents an analysis of net realized gains (losses) on investments:



Net Realized Gains (Losses) on Investments	Three months ended June 30,						Six months ended June 30,
(U.S. dollars in thousands)	2016			2015			2016			2015
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets:
Gross realized gains	$	82,177		$	48,547		$	143,404		$	110,845
Gross realized losses on investments sold	(30,187		)	(27,608		)	(80,250		)	(74,728		)
OTTI on investments, net of amounts transferred to other comprehensive income	(32,522		)	(16,588		)	(52,102		)	(27,164		)
	$	19,468		$	4,351		$	11,052		$	8,953
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets:
Gross realized gains	$	33,670		$	84,641		$	96,520		$	137,769
Gross realized losses on investments sold	(3,556		)	(16,604		)	(31,990		)	(16,994		)
OTTI on investments, net of amounts transferred to other comprehensive income	(252		)	(2,878		)	(2,598		)	(8,087		)
Net unrealized gains (losses) on trading securities	$	55,287		$	(19,543	)	$	124,383		$	(18,783	)
	$	85,149		$	45,616		$	186,315		$	93,905
Total net realized gains (losses) on investments	$	104,617		$	49,967		$	197,367		$	102,858

The components of the net impairment charges of $32.5 million for investments excluding Life Funds Withheld Assets for the three months ended June 30, 2016 were:


▪	$15.0 million related to certain equities that we no longer intend to hold for a period sufficient to recover their fair value to cost.


▪	$8.3 million related to certain equities that were in a loss position for more than 11 months or impaired by more than 50% of their amortized cost.


▪	$1.0 million for structured securities, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities.


▪	$0.9 million related to certain hedge funds that were in a loss position for more than 11 months.


▪	$0.5 million related to certain high yield securities where we determined that the likely recovery on these securities was below the carrying value.


▪	$6.8 million related to foreign exchange losses.

The following table sets forth the amount of credit loss impairments on fixed income securities for which a portion of the OTTI loss was recognized in OCI and that were held by the Company as of the dates or for the periods indicated and the corresponding changes in such amounts.



Credit Loss Impairments	Three months ended June 30,						Six months ended June 30,
(U.S. dollars in thousands)	2016			2015			2016			2015
Opening balance as of beginning of indicated period	$	76,979		$	108,458		$	73,469		$	131,942
Credit loss impairment recognized in the current period on securities not previously impaired	668			—			11,237			7,560
Credit loss impairments previously recognized on securities that matured or were paid down, prepaid or sold during the period	(2,938		)	(8,495		)	(7,818		)	(37,034		)
Credit loss impairments previously recognized on securities impaired to fair value during the period	—			(2,629		)	—			(2,629		)
Additional credit loss impairments recognized in the current period on securities previously impaired	873			246			1,103			387
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(2,191		)	(3,361		)	(4,600		)	(6,007		)
Balance as of June 30,	$	73,391		$	94,219		$	73,391		$	94,219