INVESTMENTS

12 Months Ended

Dec. 31, 2011

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

5. 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, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at December 31, 2011 and 2010 were as follows:

			Included in Accumulated Other Comprehensive Income (“AOCI”)
					Gross Unrealized Losses
December 31, 2011 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes In Estimated Fair Value			OTTI Included In Other Comprehensive Income (Loss)(1)			Fair Value
Fixed maturities – AFS
U.S. Government and Government- Related/Supported (2)	$	1,864,354	$	130,874	$	(4,245	)	$	—		$	1,990,983
Corporate (3) (4)		10,212,083		539,389		(237,291	)		(51,666	)		10,462,515
Residential mortgage-backed securities – Agency		5,189,473		193,782		(3,849	)		—			5,379,406
Residential mortgage-backed securities – Non-Agency		851,557		19,667		(112,867	)		(116,542	)		641,815
Commercial mortgage-backed securities		927,684		56,704		(2,405	)		(7,148	)		974,835
Collateralized debt obligations		843,553		6,624		(186,578	)		(4,997	)		658,602
Other asset-backed securities		995,903		18,534		(21,776	)		(6,305	)		986,356
U.S. States and political subdivisions of the States		1,698,573		101,025		(2,220	)		—			1,797,378
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		3,188,535		127,439		(17,839	)		—			3,298,135
Total fixed maturities – AFS	$	25,771,715	$	1,194,038	$	(589,070	)	$	(186,658	)	$	26,190,025
Total short-term investments (2) (3)	$	359,378	$	519	$	(834	)	$	—		$	359,063
Total equity securities	$	480,685	$	27,947	$	(40,435	)	$	—		$	468,197
Total investments – AFS	$	26,611,778	$	1,222,504	$	(630,339	)	$	(186,658	)	$	27,017,285
Fixed maturities – HTM
U.S. Government and Government- Related/Supported (2)	$	10,399	$	1,510	$	—		$	—		$	11,909
Corporate		1,298,266		91,313		(14,747	)		—			1,374,832
Residential mortgage-backed securities – Non-Agency		80,955		6,520		(32	)		—			87,443
Other asset-backed securities		280,684		20,875		(6	)		—			301,553
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		998,674		127,227		(5,950	)		—			1,119,951
Total fixed maturities – HTM	$	2,668,978	$	247,445	$	(20,735	)	$	—		$	2,895,688

(1)	Represents the amount of OTTI losses in AOCI, which from April 1, 2009 was not included in earnings following authoritative accounting guidance.
(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $1,878.3 million and fair value of $1,915.6 million and U.S. Agencies with an amortized cost of $494.0 million and fair value of $541.2 million.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $266.0 million and an amortized cost of $297.7 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $386.1 million and an amortized cost of $494.9 million at December 31, 2011.

			Included in Accumulated Other Comprehensive Income (“AOCI”)
					Gross Unrealized Losses
December 31, 2010 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Related to Changes In Estimated Fair Value			OTTI Included In Other Comprehensive Income (Loss)(1)			Fair Value
Fixed maturities – AFS
U.S. Government and Government-Related/Supported (2)	$	2,499,079	$	102,685	$	(36,320	)	$	—		$	2,565,444
Corporate (3) (4)		10,962,804		361,154		(281,849	)		(73,138	)		10,968,971
Residential mortgage-backed securities – Agency		5,059,249		153,106		(8,644	)		—			5,203,711
Residential mortgage-backed securities – Non-Agency		1,257,474		26,361		(133,761	)		(128,251	)		1,021,823
Commercial mortgage-backed securities		1,135,075		55,852		(7,960	)		(10,460	)		1,172,507
Collateralized debt obligations		920,501		11,014		(188,563	)		(8,814	)		734,138
Other asset-backed securities		979,539		16,111		(26,954	)		(8,164	)		960,532
U.S. States and political subdivisions of the States		1,379,150		16,755		(35,449	)		—			1,360,456
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		3,129,971		70,499		(45,947	)		—			3,154,523
Total fixed maturities – AFS	$	27,322,842	$	813,537	$	(765,447	)	$	(228,827	)	$	27,142,105
Total short-term investments (2) (3)	$	450,491	$	680	$	(490	)	$	—		$	450,681
Total equity securities	$	56,737	$	28,083	$	(53	)	$	—		$	84,767
Total investments – AFS	$	27,830,070	$	842,300	$	(765,990	)	$	(228,827	)	$	27,677,553
Fixed maturities – HTM
U.S. Government and Government- Related/Supported (2)	$	10,541	$	164	$	(9	)	$	—		$	10,696
Corporate		1,337,797		6,370		(16,325	)		—			1,327,842
Residential mortgage-backed securities – Non-Agency		82,763		634		(546	)		—			82,851
Other asset-backed securities		287,109		1,134		(1,410	)		—			286,833
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported (2)		1,010,125		30,680		(6,401	)		—			1,034,404
Total fixed maturities – HTM	$	2,728,335	$	38,982	$	(24,691	)	$	—		$	2,742,626

(1)	Represents the amount of OTTI losses in AOCI, which from April 1, 2009 was not included in earnings following authoritative accounting guidance.
(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $2,101.0 million and fair value of $2,131.2 million and U.S. Agencies with an amortized cost of $1,019.2 million and fair value of $1,072.6 million.
(3)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $454.8 million and an amortized cost of $504.6 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $757.8 million and an amortized cost of $883.0 million at December 31, 2010.

          At December 31, 2011 and 2010, approximately 2.4% and 3.5%, respectively, of the Company’s fixed income investment portfolio at fair value was invested in securities which were below investment grade or not rated. Approximately 31.4% and 29.4% of the gross unrealized losses in the Company’s fixed income securities portfolio at December 31, 2011 and 2010, respectively, related to securities that were below investment grade or not rated.

          Classification of Fixed Income Securities

          During the third quarter of 2011, the Company changed the manner in which it classifies fixed income securities between Fixed maturities and Short-term investments on the balance sheet and related note disclosures. Short-term investments under the Company’s previous classification comprised investments with a remaining maturity of less than one year from the reporting date. Under this prior presentation, longer term securities were reclassified from Fixed maturities to Short-term investments as they neared maturity. Under the Company’s new classification, Short-term investments include investments due to mature within one year from the date of purchase and are valued using the same external factors and in the same manner as Fixed maturities. No reclassifications will be made between Fixed maturities and Short-term investments subsequent to the initial date of purchase. The Company’s new accounting classification aligns its presentation with that of its peer companies.

          This change in classification did not have an impact on the total value of investments available for sale on the balance sheet, nor did it impact the consolidated statements of income, comprehensive income, shareholders’ equity or cash flows. The only impact, other than the changes in the balance sheet line items, are changes required within the detailed tables included within this note as well as Note 3, “Fair Value Measurements,” to allocate securities previously classified as Short-term investments under the former practice into the appropriate categories of Fixed maturities within each table to conform to the new accounting presentation for current and comparative periods.

          During 2009 and 2010, the Company elected to hold certain fixed income securities to maturity. Consistent with this intention, the Company reclassified these securities from AFS to HTM in the consolidated financial statements. As a result of this classification, these fixed income securities are reflected in the HTM portfolio and recorded at amortized cost in the consolidated balance sheets and not fair value. The HTM portfolio is comprised of long duration non-U.S. securities, which are Euro and U.K. sterling denominated. The Company believes this HTM strategy is achievable due to the relatively stable and predictable cash flows of the Company’s long-term liabilities within its Life operations, along with its ability to substitute other assets at a future date in the event that liquidity was required due to changes in expected cash flows or other transactions entered into related to the long-term liabilities supported by the HTM portfolio. At December 31, 2011, 98.1% of the HTM securities were rated A or higher. The unrealized appreciation at the dates of these reclassifications continues to be reported as a separate component of shareholders’ equity and is being amortized over the remaining lives of the securities as an adjustment to yield in a manner consistent with the amortization of any premium or discount. At the time of the reclassifications, the unrealized U.S. dollar equivalent appreciation related to securities reclassified was $127.4 million in total, with $108.4 million and $119.0 million unamortized at December 31, 2011 and December 31, 2010, respectively.

          Contractual Maturities Summary

          The contractual maturities of AFS and HTM fixed income securities at December 31, 2011 and 2010 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.

	2011 (1)				2010 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	2,025,446	$	2,041,814	$	1,583,265	$	1,570,909
Due after 1 through 5 years		7,874,145		8,049,150		9,021,926		9,118,229
Due after 5 through 10 years		3,788,673		3,953,496		4,137,260		4,198,362
Due after 10 years		3,275,281		3,504,551		3,228,553		3,161,894
		16,963,545		17,549,011		17,971,004		18,049,394
Residential mortgage-backed securities – Agency		5,189,473		5,379,406		5,059,249		5,203,711
Residential mortgage-backed securities – Non-Agency		851,557		641,815		1,257,474		1,021,823
Commercial mortgage-backed securities		927,684		974,835		1,135,075		1,172,507
Collateralized debt obligations		843,553		658,602		920,501		734,138
Other asset-backed securities		995,903		986,356		979,539		960,532
Total mortgage and asset-backed securities		8,808,170		8,641,014		9,351,838		9,092,711
Total fixed maturities - AFS	$	25,771,715	$	26,190,025	$	27,322,842	$	27,142,105
Fixed maturities - HTM
Due less than one year	$	11,796	$	11,768	$	—	$	—
Due after 1 through 5 years		122,091		123,871		125,449		125,416
Due after 5 through 10 years		393,865		402,424		348,797		346,494
Due after 10 years		1,779,587		1,968,629		1,884,217		1,901,032
		2,307,339		2,506,692		2,358,463		2,372,942
Residential mortgage-backed securities – Non-Agency		80,955		87,443		82,763		82,851
Other asset-backed securities		280,684		301,553		287,109		286,833
Total mortgage and asset-backed securities		361,639		388,996		369,872		369,684
Total fixed maturities - HTM	$	2,668,978	$	2,895,688	$	2,728,335	$	2,742,626

(1) Included in the table above are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions, at their fair value of $386.1 million and $757.8 million at December 31, 2011 and 2010, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $108.8 million and $143.7 million at December 31, 2011 and 2010, respectively.

          OTTI Considerations

          Under final authoritative accounting guidance, a debt security for which amortized cost exceeds fair value is deemed to be other-than-temporarily impaired if it meets either of the following conditions: (a) the Company intends to sell, or it is more likely than not that the Company will be required to sell, the security before a recovery in value, or (b) the Company does not expect to recover the entire amortized cost basis of the security. Other than in a situation in which the Company has the intent to sell a debt security or more likely than not will be required to sell a debt security, the amount of the OTTI related to a credit loss on the security is recognized in earnings, and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of OCI. The net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment (“NPV”). The remaining difference between the security’s NPV and its fair value is recognized in OCI. Subsequent changes in the fair value of these securities are included in OCI unless a further impairment is deemed to have occurred.

          In the scenario where the Company has the intent to sell a security in which its amortized cost exceeds its fair value, or it is more likely than not it will be required to sell such a security, the entire difference between the security’s amortized cost and its fair value is recognized in earnings.

          The determination of credit losses is based on detailed analyses of underlying cash flows. Such analyses require the use of certain assumptions to develop the estimated performance of underlying collateral. Key assumptions used include, but are not limited to, items such as RMBS default rates based on collateral duration in arrears, severity of losses on default by collateral class, collateral reinvestment rates and expected future general corporate default rates.

          Factors considered in determining that a gross unrealized loss is not other-than-temporarily impaired include management’s consideration of current and near term liquidity needs and other available sources of funds, an evaluation of the factors and time necessary for recovery and an assessment of whether the Company has the intention to sell or considers it more likely than not that it will be forced to sell a security.

          Pledged Assets

          Certain of the Company’s invested assets are held in trust and pledged in support of insurance and reinsurance liabilities. 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, certain deposit liabilities and annuity contracts require the use of pledged assets. As further outlined in Note 17(f) “Commitments and Contingencies – Letters of Credit,” certain assets of the investment portfolio are collateralized for the Company’s letter of credit facilities. At December 31, 2011 and 2010, the Company had $17.2 billion and $16.1 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

          The following is an analysis of how long the AFS and HTM securities at December 31, 2011 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
December 31, 2011 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses (1)
Fixed maturities and short-term investments - AFS:
U.S. Government and Government-Related/Supported	$	289,260	$	(332	)	$	43,622	$	(3,984	)
Corporate (2) (3)		1,108,177		(42,978	)		1,200,717		(246,566	)
Residential mortgage-backed securities – Agency		310,318		(849	)		36,960		(3,000	)
Residential mortgage-backed securities – Non-Agency		106,294		(31,714	)		449,138		(197,695	)
Commercial mortgage-backed securities		69,109		(2,716	)		39,444		(6,837	)
Collateralized debt obligations		3,357		(2,261	)		636,362		(189,456	)
Other asset-backed securities		197,585		(2,497	)		146,130		(25,584	)
U.S. States and political subdivisions of the States		25,309		(199	)		27,646		(2,021	)
Non-U.S. Sovereign Government, Supranational and Government-Related		265,766		(4,707	)		202,890		(13,166	)
Total fixed maturities and short-term investments - AFS	$	2,375,175	$	(88,253	)	$	2,782,909	$	(688,309	)
Total equity securities (4)	$	361,585	$	(40,435	)	$	—	$	—
Fixed maturities – HTM:
U.S. Government and Government-Related/Supported	$	—	$	—		$	—	$	—
Corporate		155,579		(8,084	)		62,343		(6,663	)
Residential mortgage-backed securities – Non-Agency		9,372		(32	)		—		—
Other asset-backed securities		—		—			1,106		(6	)
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported		79,242		(1,206	)		18,330		(4,744	)
Total fixed maturities – HTM	$	244,193	$	(9,322	)	$	81,779	$	(11,413	)

(1)	On securities impacted by the April 1, 2009 changes to OTTI values, length of time of impairment is measured from the point at which securities returned to a net unrealized loss position (i.e., from April 1, 2009).
(2)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes, which are in a gross unrealized loss position, have a fair value of $266.0 million and an amortized cost of $297.7 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(3)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities, which are in a gross unrealized loss position, have a fair value of $386.1 million and an amortized cost of $494.9 million at December 31, 2011.
(4)	Included within equity securities are investments in fixed income funds with a fair value of $91.6 million and an amortized cost of $100.0 million at December 31, 2011.

(b) Gross Unrealized Losses

          The following is an analysis of how long the AFS and HTM securities at December 31, 2010 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
December 31, 2010 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses (1)			Fair Value		Gross Unrealized Losses (1)
Fixed maturities and short-term investments - AFS:
U.S. Government and Government-Related/Supported	$	307,082	$	(25,482	)	$	117,394	$	(10,417	)
Corporate (2) (3)		2,271,887		(80,276	)		1,627,083		(275,023	)
Residential mortgage-backed securities – Agency		280,390		(6,736	)		34,186		(1,913	)
Residential mortgage-backed securities – Non-Agency		40,052		(2,574	)		843,168		(259,715	)
Commercial mortgage-backed securities		46,419		(2,472	)		69,475		(15,967	)
Collateralized debt obligations		2,500		(51	)		715,295		(197,535	)
Other asset-backed securities		122,548		(1,619	)		226,946		(33,546	)
U.S. States and political subdivisions of the States		734,893		(30,033	)		40,907		(5,452	)
Non-U.S. Sovereign Government, Supranational and Government-Related		459,686		(5,116	)		418,322		(40,837	)
Total fixed maturities and short-term investments - AFS	$	4,265,457	$	(154,359	)	$	4,092,776	$	(840,405	)
Total equity securities	$	158	$	(53	)	$	—	$	—
Fixed maturities – HTM:
U.S. Government and Government-Related/Supported	$	1,755	$	(9	)	$	—	$	—
Corporate		764,397		(16,325	)		—		—
Residential mortgage-backed securities – Non-Agency		37,899		(546	)		—		—
Other asset-backed securities		232,673		(1,410	)		—		—
Non-U.S. Sovereign Government, Supranational and Government-Related/Supported		175,382		(6,401	)		—		—
Total fixed maturities – HTM	$	1,212,106	$	(24,691	)	$	—	$	—

(1)	On securities impacted by the April 1, 2009 changes to OTTI values, length of time of impairment is measured from the point at which securities returned to a net unrealized loss position (i.e., from April 1, 2009).
(2)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $370.8 million and an amortized cost of $423.9 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(3)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments senior to the common and preferred equities of the financial institutions. These securities have a fair value of $757.8 million and an amortized cost of $883.0 million at December 31, 2010.
The Company had gross unrealized losses totaling $817.0 million on 1,890 securities out of a total of 7,146 held at December 31, 2011 on its available for sale portfolio and $20.7 million on 36 securities out of a total of 213 held on its held-to-maturity portfolio, which it considers to be temporarily impaired or includes non-credit losses on OTTI. Individual security positions comprising this balance have been evaluated by management to determine the severity of these impairments and whether they should be considered other-than-temporary.

          Gross unrealized losses of $817.0 million on available for sale and $20.7 million on HTM assets at December 31, 2011 can be attributed to the following significant drivers:

• gross unrealized losses of $229.4 million related to the Non-Agency residential mortgage-backed securities (“RMBS”) portfolio (which consists of the Company’s holdings of sub-prime Non-Agency securities, second liens, asset-backed securities (“ABS”) CDOs with sub-prime collateral, Alt-A mortgage exposures and Prime RMBS), which had a fair value of $722.8 million at December 31, 2011. The Company, in conjunction with its investment manager service providers, undertook a security level review of these securities and recognized charges to the extent it believed the discounted cash flow value of any security was below its amortized cost. The Company has recognized realized losses, consisting of charges for OTTI and realized losses from sales, of approximately $1.4 billion since the beginning of 2007 through December 31, 2011 on these asset classes.

• gross unrealized losses of $244.3 million related to the Company’s Life operations investment portfolio, which had a fair value of $6.5 billion at December 31, 2011. Of these gross unrealized losses, $144.9 million related to $1.2 billion of exposures to corporate financial institutions, including $301.0 million Tier One and Upper Tier Two securities. At December 31, 2011, this portfolio had an average interest rate duration of 8.6 years, primarily denominated in U.K. sterling and Euros. As a result of the long duration, significant gross losses have arisen as the fair values of these securities are more sensitive to prevailing government interest rates and credit spreads. This portfolio is generally matched to corresponding long duration liabilities. A hypothetical parallel increase in interest rates and credit spreads of 50 and 25 basis points, respectively, would increase the unrealized losses related to this portfolio at December 31, 2011 by approximately $274.5 million and $104.0 million, respectively, on both the available for sale and HTM portfolios. Given the long term nature of this portfolio, the level of credit spreads on financial institutions at December 31, 2011 relative to historical averages within the U.K. and Euro-zone, and the Company’s liquidity needs at December 31, 2011, the Company believes that these assets will continue to be held until such time as they mature, or credit spreads on financial institutions revert to levels more consistent with historical averages.

• gross unrealized losses of $191.7 million related to the non-life portfolio of Core CDO holdings (defined by the Company as investments in non-subprime CDOs), which consisted primarily of collateral loan obligations (“CLOs”) and had a fair value of $662.9 million at December 31, 2011. The Company evaluated each of these securities in conjunction with its investment manager service providers and recognized charges to the extent it believed the discounted cash flow value of the security was below the amortized cost. The Company believes that the level of impairment is primarily a function of continually wide spreads in the CDO market, driven by the level of illiquidity in this market. The Company believes it is likely these securities will be held until either maturity or a recovery of value.

• gross unrealized losses of $133.2 million related to the corporate holdings within the Company’s non-life fixed income portfolios, which had a fair value of $8.3 billion at December 31, 2011. During the year ended December 31, 2011, as a result of declining credit spreads, the gross unrealized losses on these holdings has decreased. Of the gross unrealized losses noted above, $72.9 million relate to financial institutions. In addition, $33.3 million relate to medium term notes primarily supported by pools of investment grade European investment grade credit with varying degrees of leverage. These had a fair value of $237.4 million at December 31, 2011. Management believes that expected cash flows from these bonds over the expected holding period will be sufficient to support the remaining reported amortized cost.

          Management, in its assessment of whether securities in a gross unrealized loss position are temporarily impaired, considers the significance of the impairments. The Company had structured credit securities with gross unrealized losses of $84.4 million, with a fair value of $39.6 million, which at December 31, 2011 had cumulative fair value declines of greater than 50% of amortized costs. All of these are mortgage and asset-backed securities. The Company, in conjunction with its investment manager service providers, undertook a security level review of these securities and recognized charges to the extent it believed the discounted cash flow value of any security was below its amortized cost. These securities include gross unrealized losses of $61.2 million on non-Agency RMBS, $22.6 million on Core CDOs and $0.7 million of commercial mortgage-backed security (“CMBS”) holdings.

(c) Net Investment Income

          Net investment income is derived from the following sources:

Year ended December 31
(U.S. dollars in thousands)	2011			2010			2009
Fixed maturities, short-term investments and cash equivalents	$	1,178,038		$	1,245,185		$	1,369,503
Equity securities and other investments		17,804			20,693			13,753
Funds withheld		12,240			12,738			14,649
Total gross investment income		1,208,082			1,278,616			1,397,905
Investment expenses		(70,313	)		(80,578	)		(78,082	)
Net investment income	$	1,137,769		$	1,198,038		$	1,319,823

(d) Net Realized Gains (Losses)

          The following represents an analysis of net realized gains (losses) and the change in unrealized (losses) gains on investments:

Year ended December 31
(U.S. dollars in thousands)	2011			2010			2009
Net realized gains (losses):
Fixed maturities, short-term investments, cash and cash equivalents:
Gross realized gains	$	185,530		$	133,521		$	349,629
Gross realized losses on investments sold		(225,360	)		(193,396	)		(405,342	)
OTTI on investments, net of amounts transferred to other comprehensive income		(159,435	)		(197,377	)		(811,572	)
Net realized (losses)		(199,265	)		(257,252	)		(867,285	)
Equity securities:
Gross realized gains		2,194			11,605			65,289
Gross realized losses on investments sold		(4,264	)		(11,195	)		(129,516	)
OTTI on investments, net of amounts transferred to other comprehensive income		—			—			—
Net realized gains (losses)		(2,070	)		410			(64,227	)
Other investments:
Gross realized gains		18,505			4,889			27,647
Gross realized losses on investments sold		(4,792	)		(11,094	)		(5,763	)
OTTI on investments, net of amounts transferred to other comprehensive income		(737	)		(7,756	)		(886	)
Net realized gains (losses)		12,976			(13,961	)		20,998
Realized loss on sale of U.S. life reinsurance business		—			—			(10,923	)
Net realized (losses) on investments		(188,359	)		(270,803	)		(921,437	)
Net realized and unrealized (losses) on investment related derivative instruments		(22,981	)		(16,321	)		(29,709	)
Net realized (losses) on investments and net realized and unrealized (losses) on investment related derivative instruments		(211,340	)		(287,124	)		(951,146	)
Change in unrealized gains (losses):
Fixed maturities and short-term investments, available for sale		598,542			1,095,762			2,112,244
Fixed maturities, held to maturity		212,419			30,039			(15,748	)
Equity securities		(40,518	)		22,595			(18,619	)
Affiliates and other investments		25,268			44,314			14,464
Net change in unrealized gains (losses) on investments		795,711			1,192,710			2,092,341
Total net realized (losses) on investments, net realized and unrealized (losses) on investment related derivative instruments, and net change in unrealized gains (losses) on investments	$	584,371		$	905,586		$	1,141,195

          The Company recorded net impairment charges of $160.2 million for the year ended December 31, 2011. The components of the impairments include:

• For structured credit securities, the Company recorded net impairments of $78.7 million principally on non-Agency RMBS. The Company determined that the likely recovery on these securities was below the carrying value, and, accordingly, recorded an impairment on the securities to the discounted value of the cash flows of these securities.

• For medium term notes backed primarily by investment grade European investment grade credit, the Company recorded net impairments of $31.0 million. The Company adjusted the estimated remaining holding period of certain notes resulting in a shorter reinvestment spectrum.

• For corporate securities, excluding medium term notes, the Company recorded net impairments totaling $6.5 million, principally on hybrid securities.

• The Company recorded impairments of $44.0 million primarily related to foreign exchange losses arising on U.S. dollar denominated securities held in a Swiss franc functional currency entity. These foreign exchange losses are recorded as part of the foreign currency revaluation process; however, because the Company’s consolidated reporting currency is U.S. dollars, the foreign exchange impairment recorded on these securities is fully offset by a cumulative foreign currency translation adjustment gain recorded upon the consolidation of the foreign currency entity.

          As discussed in Note 2, a portion of certain OTTI losses on fixed income securities and short-term investments are recognized in “Other comprehensive income (loss)” (“OCI”). Under final authoritative accounting guidance effective April 1, 2009, other than in a situation in which the Company has the intent to sell a security or more likely than not will be required to sell a security, the amount of the OTTI related to a credit loss is recognized in earnings, and the amount of the OTTI related to other factors (i.e., interest rates, market conditions, etc.) is recorded as a component of other comprehensive income (loss). The net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in OCI. The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

	OTTI related to credit losses recognized in earnings
Year Ended December 31,
(U.S. dollars in thousands)	2011			2010
Balance, January 1	$	426,372		$	537,121
Credit loss impairment recognized in the current period on securities not previously impaired		28,910			55,515
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period		(209,187	)		(125,653	)
Credit loss impairments previously recognized on securities impaired to fair value during the period		—			(130,891	)
Additional credit loss impairments recognized in the current period on securities previously impaired		88,016			113,292
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected		(732	)		(23,012	)
Balance, December 31	$	333,379		$	426,372

          During the years ended December 31, 2011 and 2010, the $209.2 million and $125.7 million, respectively, of credit loss impairment previously recognized on securities that matured, or were paid down, prepaid or sold, includes $128.9 million and $100.2 million, respectively, of non-Agency RMBS.