Investments

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Investments

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 at December 31, 2016 and 2015 were as follows:

			Included in AOCI
December 31, 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 - Available for Sale ("AFS") - Excluding Life Funds Withheld Assets
U.S. Government and Government-Related/Supported ("U.S. Government")	$	3,874,038	$	53,172	$	(32,822	)	$	3,894,388	$	—
Corporate - Financials	3,587,557		59,968		(25,235		)	3,622,290		—
Corporate - Non Financials	6,468,200		138,114		(93,875		)	6,512,439		(36		)
Residential mortgage-backed securities - Agency ("RMBS – Agency")	4,213,845		49,913		(45,391		)	4,218,367		—
Residential mortgage-backed securities - Non-Agency ("RMBS – Non-Agency")	265,877		21,132		(12,751		)	274,258		(47,879		)
Commercial mortgage-backed securities ("CMBS")	670,005		5,955		(10,774		)	665,186		(1,191		)
Collateralized debt obligations ("CDO")	379,532		498		(2,539		)	377,491		(1,208		)
Other asset-backed securities	872,903		12,697		(9,703		)	875,897		(821		)
U.S. States and political subdivisions of the States	2,399,490		86,041		(7,419		)	2,478,112		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported ("Non-U.S. Government")	5,037,482		112,772		(120,122		)	5,030,132		—
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	27,768,929	$	540,262	$	(360,631	)	$	27,948,560	$	(51,135	)
Total short-term investments - Excluding Life Funds Withheld Assets	626,142		227		(1,176		)	625,193		—
Total equity securities - Excluding Life Funds Withheld Assets	996,610		48,931		(8,210		)	1,037,331		—
Total investments - AFS - Excluding Life Funds Withheld Assets	$	29,391,681	$	589,420	$	(370,017	)	$	29,611,084	$	(51,135	)

			Included in AOCI
December 31, 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 - Life Funds Withheld Assets
U.S. Government	$	8,468	$	2,109	$	—		$	10,577	$	—
Corporate - Financials	376,018		63,249		—			439,267		—
Corporate - Non Financials	797,652		217,689		—			1,015,341		—
RMBS – Agency	470		143		—			613		—
RMBS – Non-Agency	19,121		2,646		—			21,767		—
CMBS	77,762		16,478		—			94,240		—
Other asset-backed securities	84,541		17,019		—			101,560		—
Non--U.S. Government	454,695		169,982		—			624,677		—
Total fixed maturities - AFS - Life Funds Withheld Assets	$	1,818,727	$	489,315	$	—		$	2,308,042	$	—
Total investments - AFS	$	31,210,408	$	1,078,735	$	(370,017	)	$	31,919,126	$	(51,135	)

____________

(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. Government	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 trading investments at December 31, 2016 and 2015 were as follows:

December 31, 2016 (U.S. dollars in thousands)	Amortized Cost		Fair Value
Fixed maturities - Trading - Life Funds Withheld Assets
U.S. Government	$	14,361	$	14,708
Corporate - Financials	450,990		468,175
Corporate - Non Financials	611,863		643,030
RMBS – Agency	835		852
RMBS – Non-Agency	101		109
CMBS	5,242		5,526
Other asset-backed securities	38,342		39,446
U.S. States and political subdivisions of the States	219		224
Non-U.S. Government	426,225		444,944
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,548,178	$	1,617,014
Total short-term investments - Trading - Life Funds Withheld Assets	$	9,536	$	9,563
Total investments - Trading - Life Funds Withheld Assets	$	1,557,714	$	1,626,577

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. Government	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

At December 31, 2016 and 2015, approximately 2.4% 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 4.1% and 14.7% of the gross unrealized losses in the Company's fixed income investment portfolio, excluding Life Funds Withheld Assets, at December 31, 2016 and 2015, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS and Trading fixed income securities at December 31, 2016 and 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.

(U.S. dollars in thousands)	December 31, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
Due less than one year	$	2,121,088	$	2,135,262	$	2,106,851	$	2,104,106
Due after 1 through 5 years	12,400,798		12,463,844		14,051,494		14,143,461
Due after 5 through 10 years	5,509,194		5,531,402		5,680,830		5,740,954
Due after 10 years	1,335,687		1,406,853		1,374,997		1,423,156
	$	21,366,767	$	21,537,361	$	23,214,172	$	23,411,677

(U.S. dollars in thousands)	December 31, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
RMBS – Agency	$	4,213,845	$	4,218,367	$	3,697,756	$	3,757,971
RMBS – Non-Agency	265,877		274,258		319,876		328,540
CMBS	670,005		665,186		401,713		405,316
CDO	379,532		377,491		41,679		32,410
Other asset-backed securities	872,903		875,897		1,164,426		1,168,572
Total mortgage and asset-backed securities	$	6,402,162	$	6,411,199	$	5,625,450	$	5,692,809
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	27,768,929	$	27,948,560	$	28,839,622	$	29,104,486
Fixed maturities - AFS - Life Funds Withheld Assets
Due less than one year	$	71,207	$	80,749	$	81,700	$	92,921
Due after 1 through 5 years	289,710		318,605		386,810		416,743
Due after 5 through 10 years	274,727		324,759		491,621		558,805
Due after 10 years	1,001,189		1,365,749		1,452,267		1,784,653
	$	1,636,833	$	2,089,862	$	2,412,398	$	2,853,122
RMBS – Agency	$	470	$	613	$	591	$	752
RMBS – Non-Agency	19,121		21,767		24,401		26,953
CMBS	77,762		94,240		107,968		122,481
Other asset-backed securities	84,541		101,560		132,674		149,795
Total mortgage and asset-backed securities	$	181,894	$	218,180	$	265,634	$	299,981
Total fixed maturities - AFS - Life Funds Withheld Assets	$	1,818,727	$	2,308,042	$	2,678,032	$	3,153,103
Total fixed maturities - AFS	$	29,587,656	$	30,256,602	$	31,517,654	$	32,257,589
Fixed maturities - Trading - Life Funds Withheld Assets
Due less than one year	$	59,138	$	59,553	$	4,573	$	5,096
Due after 1 through 5 years	322,574		328,997		278,163		272,220
Due after 5 through 10 years	507,631		521,505		280,487		277,920
Due after 10 years	614,315		661,026		668,737		649,592
	$	1,503,658	$	1,571,081	$	1,231,960	$	1,204,828
RMBS – Agency	835		852		370		368
RMBS – Non-Agency	101		109		—		—
CMBS	5,242		5,526		4,874		4,803
Other asset-backed securities	38,342		39,446		26,405		25,700
Total mortgage and asset-backed securities	44,520		45,933		31,649		30,871
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,548,178	$	1,617,014	$	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 to collateralize our 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 in pledged assets are Life Funds Withheld Assets as noted in Note 2(g), "Acquisitions and Disposals - Sale of Life Reinsurance Subsidiary." Additionally, certain deposit liabilities and annuity contracts require the use of pledged assets. As of December 31, 2016 and December 31, 2015, the Company had $17.1 billion and $18.3 billion in pledged assets, respectively.

Classification of Fixed Income Securities

On May 1, 2014, fixed maturities with a carrying value of $2.8 billion were reclassified from held to maturity ("HTM") to AFS in conjunction with the sale of XLLR as discussed in Note 2(g), "Acquisitions and Disposals - Sale of Life Reinsurance Subsidiary." Gross unrealized gains and gross unrealized losses, net of tax, of $424.9 million and nil, respectively, related to these securities were recognized in other comprehensive income on the date of transfer. For certain annuity contracts that are subject to the GreyCastle Life Retro Arrangements, policy benefit reserves were historically increased for the impact of changes in unrealized gains on investments supporting such contracts as if the gains had been realized, with a corresponding entry to other comprehensive income ("Shadow Adjustments"). In conjunction with the sale of XLLR and the related reclassification of securities from HTM to AFS, the Company recorded an additional gross charge of $440.5 million, net of tax, as a reduction of comprehensive income for such Shadow Adjustments on the date of the transfer. See Note 22, "Accumulated Other Comprehensive Income (Loss)," for further information.

All of the reclassified securities are included within the Life Funds Withheld Assets, along with certain other available for sale securities, as defined in the sale and purchase agreement. The Life Funds Withheld Assets are managed pursuant to agreed-upon investment guidelines that meet the contractual commitments of the XL ceding companies and applicable laws and regulations. All of the investment results associated with the Life Funds Withheld Assets ultimately accrue to GCLR. Because the Company no longer shares in the risks and rewards of the underlying performance of the Life Funds Withheld Assets, disclosures within the financial statements and accompanying notes included herein separate the Life Funds Withheld Assets from the rest of the Company's investments.

(b) Gross Unrealized Losses

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

December 31, 2016 (U.S. dollars in thousands)	Less than 12 months					Equal to or greater than 12 months
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government	$	2,456,685	$	(30,640	)	$	43,873	$	(2,237	)
Corporate - Financials	1,111,700		(19,010		)	59,091		(6,227		)
Corporate - Non Financials	2,302,552		(62,584		)	205,829		(31,368		)
RMBS – Agency	2,456,028		(40,989		)	136,014		(4,402		)
RMBS – Non-Agency	3,517		(205		)	166,796		(12,546		)
CMBS	467,757		(9,470		)	9,665		(1,304		)
CDO	105,653		(58		)	2,752		(2,481		)
Other asset-backed securities	671,782		(3,830		)	34,783		(5,960		)
U.S. States and political subdivisions of the States	457,288		(6,983		)	4,287		(437		)
Non-U.S. Government	1,797,405		(75,596		)	288,490		(45,480		)
Total fixed maturities and short-term investments - AFS	$	11,830,367	$	(249,365	)	$	951,580	$	(112,442	)
Total equity securities	$	130,487	$	(8,210	)	$	—	$	—

	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. Government	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 $370.0 million on 3,037 securities out of a total of 8,495 held at December 31, 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.

(c) Net Investment Income

Net investment income for the years ended December 31 is derived from the following sources:

(U.S. dollars in thousands)	2016			2015			2014
Fixed maturities, short term investments and cash equivalents - Excluding Life Funds Withheld Assets	$	713,237		$	726,161		$	809,964
Fixed maturities, short term investments and cash equivalents - Life Funds Withheld Assets	154,751			187,489			129,575
Equity securities and other investments	34,620			28,200			42,252
Interest on funds withheld	10,276			10,835			14,583
Total gross investment income	$	912,884		$	952,685		$	996,374
Investment expenses	(85,751		)	(80,315		)	(77,749		)
Total net investment income	$	827,133		$	872,370		$	918,625

(d) Net Realized and Unrealized Gains (Losses)

The following represents an analysis of net realized gains (losses), the change in unrealized gains (losses) on trading securities and net realized and unrealized gains (losses) on investment related derivative instruments for the years ended December 31:

(U.S. dollars in thousands)	2016			2015			2014
Fixed maturities, short term investments, cash and cash equivalents - Excluding Life Funds Withheld Assets:
Gross realized gains	$	192,119		$	187,523		$	119,817
Gross realized losses on investments sold	(151,013		)	(134,441		)	(66,892		)
OTTI on investments, net of amounts transferred to other comprehensive income	(48,432		)	(54,346		)	(12,341		)
Net realized gains (losses)	$	(7,326	)	$	(1,264	)	$	40,584
Equity securities:
Gross realized gains	$	140,864		$	79,556		$	96,260
Gross realized losses on investments sold	(11,882		)	(49,223		)	(12,270		)
OTTI on investments, net of amounts transferred to other comprehensive income	(30,126		)	(15,954		)	(10,944		)
Net realized gains (losses)	$	98,856		$	14,379		$	73,046
Other investments:
Gross realized gains	$	37,596		$	39,198		$	31,830
Gross realized losses on investments sold	(16,437		)	(19,656		)	(10,011		)
OTTI on investments, net of amounts transferred to other comprehensive income	—			(12,660		)	(12,458		)
Net realized gains (losses)	$	21,159		$	6,882		$	9,361
Net realized gains (losses) on investments - Excluding Life Funds Withheld Assets	$	112,689		$	19,997		$	122,991
Fixed maturities, short term investments, cash and cash equivalents - Life Funds Withheld Assets:
Gross realized gains	$	185,487		$	259,798		$	7,926
Gross realized losses on investments sold	(32,898		)	(36,526		)	(2,859		)
Net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets	109,458			(27,734		)	(9		)
OTTI on investments, net of amounts transferred to other comprehensive income	(2,598		)	(13,357		)	(20,587		)
Net realized gains (losses) on investments - Life Funds Withheld Assets	$	259,449		$	182,181		$	(15,529	)
Net realized gains (losses) on investments	$	372,138		$	202,178		$	107,462
Net realized and unrealized gains (losses) on investment related derivative instruments	$	2,521		$	(8,616	)	$	20,121
Net realized gains (losses) on investments and net realized and unrealized gains (losses) on investment related derivative instruments	$	374,659		$	193,562		$	127,583

(U.S. dollars in thousands)	2016			2015			2014
Change in unrealized gains (losses):
Fixed maturities – AFS - Excluding Life Funds Withheld Assets	$	(84,721	)	$	(486,140	)	$	360,463
Fixed maturities - AFS - Life Funds Withheld Assets	14,244			(405,155		)	880,226
Fixed maturities – HTM	—			—			(272,540		)
Equity securities	(4,119		)	(59,619		)	(32,577		)
Other investments	(63,096		)	(6,072		)	35,143
Net change in unrealized gains (losses) on investments	$	(137,692	)	$	(956,986	)	$	970,715
Total net realized gains (losses) on investments, net realized and unrealized gains (losses) on investment related derivative instruments, and net change in unrealized gains (losses) on investments	$	236,967		$	(763,424	)	$	1,098,298

The components of OTTI charges of $78.6 million for the year ended December 31, 2016, compared to $83.0 million and $35.7 million for the years ended December 31, 2015 and December 31, 2014, respectively, as defined in Note 1(g), "Significant Accounting Policies - Other-Than-Temporary Impairments of Available for Sale," for investments excluding Life Funds Withheld Assets were:

▪ $29.3 million related to investments that we no longer intend to hold for a period sufficient to recover their fair value to cost, compared to $29.4 million and $3.7 million for the years ended December 31, 2015 and December 31, 2014, respectively.

▪ $16.4 million related to equity investments that were in a loss position for more than 11 months or impaired by more than 50%, compared to $20.0 million and $10.9 million for the years ended December 31, 2015 and December 31, 2014, respectively.

▪ $3.0 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. The charges for the years ended December 31, 2015 and December 31, 2014 were $1.3 million and $4.3 million, respectively.

▪ Nil related to other investments, compared to $8.7 million and $12.5 million for the years ended December 31, 2015 and December 31, 2014, respectively.

▪ $29.9 million related to foreign exchange losses, compared to $23.6 million and $4.3 million for the years ended December 31, 2015 and December 31, 2014, respectively.

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, held by the Company as of years ended December 31, 2016 and 2015 and the corresponding changes in such amounts.

Credit Loss Impairments (U.S. dollars in thousands)	2016			2015
Opening balance at beginning of indicated period	$	73,469		$	131,942
Credit loss impairment recognized in the current period on securities not previously impaired	12,867			9,698
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(18,178		)	(54,648		)
Credit loss impairments previously recognized on securities impaired to fair value during the period	—			(2,629		)
Additional credit loss impairments recognized in the current period on securities previously impaired	2,233			2,230
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(8,796		)	(13,124		)
Closing balance at end of indicated period	$	61,595		$	73,469