Investments

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

Classification of Fixed Maturity Securities

In an effort to improve operational efficiency, the Company has undergone an initiative to transform its investment operations and related reporting. As a result of this initiative, the Company has simplified the classification of its fixed maturity securities by investment type to align its internal and external reporting processes. Corporate securities previously separated into two classifications have been merged into one. Residential mortgage-backed securities have also been merged into a single classification. Collateralized debt obligations are now reported under Other asset-backed securities. Comparative period amounts have been re-presented to conform to the new classification system.

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 Other-Than-Temporary Impairments ("OTTI") recorded in accumulated other comprehensive income ("AOCI"), of the Company's Available for Sale ("AFS") investments at June 30, 2017 and December 31, 2016 were as follows:



			Included in AOCI
June 30, 2017 (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 and Government Agencies ("U.S. Government")	$	4,338,450	$	44,745	$	(27,794	)	$	4,355,401	$	—
U.S. States, municipalities and political subdivisions	2,180,145		105,214		(2,087		)	2,283,272		—
Non-U.S. Governments	5,087,942		109,100		(73,518		)	5,123,524		—
Corporate	10,391,238		219,988		(68,311		)	10,542,915		(18		)
Residential mortgage-backed securities ("RMBS")	3,937,837		51,724		(35,243		)	3,954,318		(10,475		)
Commercial mortgage-backed securities ("CMBS")	794,364		8,356		(7,267		)	795,453		(1,169		)
Other asset-backed securities	1,570,359		26,334		(9,637		)	1,587,056		(36,556		)
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	28,300,335	$	565,461	$	(223,857	)	$	28,641,939	$	(48,218	)
Total short-term investments - Excluding Life Funds Withheld Assets	617,866		287		(259		)	617,894		—
Total equity securities - Excluding Life Funds Withheld Assets	1,094,494		84,108		(4,102		)	1,174,500		—
Total investments - AFS - Excluding Life Funds Withheld Assets	$	30,012,695	$	649,856	$	(228,218	)	$	30,434,333	$	(48,218	)
Fixed maturities - AFS - Life Funds Withheld Assets
U.S. Government	$	8,872	$	2,051	$	—		$	10,923	$	—
Non-U.S. Governments	445,541		150,195		—			595,736		—
Corporate	1,004,706		242,621		—			1,247,327		—
RMBS	516		111		—			627		—
CMBS	96,055		25,039		—			121,094		—
Other asset-backed securities	156,072		37,006		—			193,078		—
Total fixed maturities - AFS - Life Funds Withheld Assets	$	1,711,762	$	457,023	$	—		$	2,168,785	$	—
Total investments - AFS	$	31,724,457	$	1,106,879	$	(228,218	)	$	32,603,118	$	(48,218	)

____________


(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.



			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 - Excluding Life Funds Withheld Assets
U.S. Government	$	3,874,038	$	53,172	$	(32,822	)	$	3,894,388	$	—
U.S. States, municipalities and political subdivisions	2,399,490		86,041		(7,419		)	2,478,112		—
Non-U.S. Governments	5,037,482		112,772		(120,122		)	5,030,132		—
Corporate	10,055,757		198,082		(119,110		)	10,134,729		(36		)
RMBS	4,479,722		71,045		(58,142		)	4,492,625		(47,879		)
CMBS	670,005		5,955		(10,774		)	665,186		(1,191		)
Other asset-backed securities	1,252,435		13,195		(12,242		)	1,253,388		(2,029		)
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	)
Fixed maturities - AFS - Life Funds Withheld Assets
U.S. Government	$	8,468	$	2,109	$	—		$	10,577	$	—
Non-U.S. Governments	454,695		169,982		—			624,677		—
Corporate	1,173,670		280,938		—			1,454,608		—
RMBS	19,591		2,789		—			22,380		—
CMBS	77,762		16,478		—			94,240		—
Other asset-backed securities	84,541		17,019		—			101,560		—
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.

The cost (amortized cost for fixed maturities and short-term investments) and fair value of the trading investments at June 30, 2017 and December 31, 2016 were as follows:



June 30, 2017 (U.S. dollars in thousands)	Amortized Cost		Fair Value
Fixed maturities - trading securities ("Trading") - Life Funds Withheld Assets
U.S. Government	$	16,922	$	16,308
U.S. States, municipalities and political subdivisions	74		70
Non-U.S. Governments	455,646		463,489
Corporate	1,203,351		1,243,221
RMBS	880		838
CMBS	7,101		7,318
Other asset-backed securities	40,276		41,633
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,724,250	$	1,772,877
Total short-term investments - Trading - Life Funds Withheld Assets	$	—	$	—
Total investments - Trading - Life Funds Withheld Assets	$	1,724,250	$	1,772,877



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
U.S. States, municipalities and political subdivisions	219		224
Non-U.S. Governments	426,225		444,944
Corporate	1,062,853		1,111,205
RMBS	936		961
CMBS	5,242		5,526
Other asset-backed securities	38,342		39,446
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

At June 30, 2017 and December 31, 2016, approximately 2.7% and 2.5%, respectively, of the Company's fixed income investment portfolio at fair value, excluding cash and Life Funds Withheld Assets, was invested in securities that were below investment grade or not rated. Approximately 3.5% and 4.1% of the gross unrealized losses in the Company's fixed income investment portfolio, excluding cash and Life Funds Withheld Assets, at June 30, 2017 and December 31, 2016, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS fixed income securities at June 30, 2017 and December 31, 2016 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, 2017				December 31, 2016
(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	$	1,605,068	$	1,621,615	$	2,121,088	$	2,135,262
Due after 1 through 5 years	12,991,237		13,087,897		12,400,798		12,463,844
Due after 5 through 10 years	6,178,863		6,262,475		5,509,194		5,531,402
Due after 10 years	1,222,607		1,333,125		1,335,687		1,406,853
	$	21,997,775	$	22,305,112	$	21,366,767	$	21,537,361
RMBS	3,937,837		3,954,318		4,479,722		4,492,625
CMBS	794,364		795,453		670,005		665,186
Other asset-backed securities	1,570,359		1,587,056		1,252,435		1,253,388
Total mortgage and asset-backed securities	$	6,302,560	$	6,336,827	$	6,402,162	$	6,411,199
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	28,300,335	$	28,641,939	$	27,768,929	$	27,948,560
Fixed maturities - AFS - Life Funds Withheld Assets
Due less than one year	$	38,157	$	40,665	$	71,207	$	80,749
Due after 1 through 5 years	269,121		294,782		289,710		318,605
Due after 5 through 10 years	241,742		287,171		274,727		324,759
Due after 10 years	910,099		1,231,368		1,001,189		1,365,749
	$	1,459,119	$	1,853,986	$	1,636,833	$	2,089,862
RMBS	516		627		19,591		22,380
CMBS	96,055		121,094		77,762		94,240
Other asset-backed securities	156,072		193,078		84,541		101,560
Total mortgage and asset-backed securities	$	252,643	$	314,799	$	181,894	$	218,180
Total fixed maturities - AFS - Life Funds Withheld Assets	$	1,711,762	$	2,168,785	$	1,818,727	$	2,308,042
Total fixed maturities - AFS	$	30,012,097	$	30,810,724	$	29,587,656	$	30,256,602



	June 30, 2017				December 31, 2016
(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	$	60,164	$	60,176	$	59,138	$	59,553
Due after 1 through 5 years	428,723		435,199		322,574		328,997
Due after 5 through 10 years	569,290		578,479		507,631		521,505
Due after 10 years	617,816		649,234		614,315		661,026
	$	1,675,993	$	1,723,088	$	1,503,658	$	1,571,081
RMBS	880		838		936		961
CMBS	7,101		7,318		5,242		5,526
Other asset-backed securities	40,276		41,633		38,342		39,446
Total mortgage and asset-backed securities	$	48,257	$	49,789	$	44,520	$	45,933
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,724,250	$	1,772,877	$	1,548,178	$	1,617,014

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, "Significant Accounting Policies." Additionally, certain deposit liabilities and annuity contracts require the use of pledged assets. At June 30, 2017 and December 31, 2016, the Company had $18.0 billion and $17.1 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

The following is an analysis of how long the AFS securities at June 30, 2017 and December 31, 2016 had been in a continual unrealized loss position:



	Less than 12 months					Equal to or greater than 12 months
June 30, 2017 (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	$	3,238,406	$	(25,062	)	$	117,994	$	(2,873	)
U.S. States, municipalities and political subdivisions	222,105		(1,769		)	5,089		(318		)
Non-U.S. Governments	1,570,103		(18,461		)	515,918		(55,096		)
Corporate	2,552,535		(28,827		)	341,346		(39,488		)
RMBS	2,088,713		(28,887		)	197,613		(6,356		)
CMBS	276,383		(5,218		)	25,570		(2,049		)
Other asset-backed securities	432,329		(1,707		)	126,965		(8,005		)
Total fixed maturities and short-term investments - AFS	$	10,380,574	$	(109,931	)	$	1,330,495	$	(114,185	)
Total equity securities	$	240,138	$	(4,102	)	$	—	$	—



	Less than 12 months					Equal to or greater than 12 months
December 31, 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	$	2,456,685	$	(30,640	)	$	43,873	$	(2,237	)
U.S. States, municipalities and political subdivisions	457,288		(6,983		)	4,287		(437		)
Non-U.S. Governments	1,797,405		(75,596		)	288,490		(45,480		)
Corporate	3,414,252		(81,594		)	264,920		(37,595		)
RMBS	2,459,545		(41,194		)	302,810		(16,948		)
CMBS	467,757		(9,470		)	9,665		(1,304		)
Other asset-backed securities	777,435		(3,888		)	37,535		(8,441		)
Total fixed maturities and short-term investments - AFS	$	11,830,367	$	(249,365	)	$	951,580	$	(112,442	)
Total equity securities	$	130,487	$	(8,210	)	$	—	$	—

The Company had gross unrealized losses totaling $228.2 million on 2,526 securities out of a total of 7,715 held at June 30, 2017 in its AFS - Excluding Life Funds Withheld Assets portfolio, which either it considers to be temporarily impaired or 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 and unrealized 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)	2017			2016			2017			2016
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets:
Gross realized gains	$	91,771		$	82,177		$	131,168		$	143,404
Gross realized losses on investments sold	(41,392		)	(30,187		)	(69,697		)	(80,250		)
OTTI on investments, net of amounts transferred to other comprehensive income	(1,210		)	(32,522		)	(8,084		)	(52,102		)
	$	49,169		$	19,468		$	53,387		$	11,052
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets:
Gross realized gains	$	30,100		$	33,670		$	65,251		$	96,520
Gross realized losses on investments sold	(322		)	(3,556		)	(999		)	(31,990		)
OTTI on investments, net of amounts transferred to other comprehensive income	—			(252		)	—			(2,598		)
Net unrealized gains (losses) on trading securities	$	(22,319	)	$	55,287		$	(23,725	)	$	124,383
	$	7,459		$	85,149		$	40,527		$	186,315
Total net realized gains (losses) on investments	$	56,628		$	104,617		$	93,914		$	197,367

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 Other Comprehensive Income ("OCI"), held by the Company at 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)	2017			2016			2017			2016
Opening balance at beginning of indicated period	$	58,628		$	76,979		$	61,595		$	73,469
Credit loss impairment recognized in the current period on securities not previously impaired	—			668			124			11,237
Credit loss impairments previously recognized on securities that matured or were paid down, prepaid or sold during the period	(3,071		)	(2,938		)	(3,907		)	(7,818		)
Additional credit loss impairments recognized in the current period on securities previously impaired	162			873			264			1,103
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(1,282		)	(2,191		)	(3,639		)	(4,600		)
Closing balance at end of indicated period	$	54,437		$	73,391		$	54,437		$	73,391